American Chemistry Council endorses call for GAO study on impact of Precision Scheduled Railroading

Late last week, on the heels of the House Transportation and Infrastructure Committee signed off on the Investing in a New Vision for the Environment and Surface Transportation in America (INVEST in America) Act, the American Chemistry Council (ACC) threw its support behind a provision in the legislation that calls for a Government Accountability Office (GAO) study focusing on the impacts of Precision Scheduled Railroading (PSR).

PSR was created by late railroading legend E. Hunter Harrison whom passed away in December 2017, when he was running CSX. PSR requires cargo to be ready when rail cars arrive for loading or risk being left behind, a practice that served also both CP and CN well under his leadership, with both companies seeing multiple positive results in the form of lower operating ratios, improved service, record amounts of reinvestment into networks, as well as creating significant shareholder value.

ACC’s rationale for endorsing this PSR study by the GAO stems from its contention that over the last few years major railroads have instituted significant changes to their respective operations (through PSR), which it said were “poorly communicated and disrupted the production of essential products.” 

“During several hearings, Congress and the Surface Transportation Board (STB) heard testimony from large and small businesses across America, including many of our members that have been hurt by the drastic operational changes adopted by the major railroads as part of their pursuit to implement Precision Scheduled Railroading (PSR),” said ACC President and CEO Chris John in a statement. “Changes were often made with little advance notice or consultation with customers and resulted in harmful service reductions and higher shipping costs. We commend the STB for its recent actions to address some of the problems that have been a direct result of PSR, including the Board’s new policies regarding demurrage charges. We also applaud Congressman DeFazio for his efforts to help stop unfair freight rail policies and his call for an objective and thorough examination of the impacts of PSR. The results of the study should help guide the STB as the Board continues to pursue additional freight rail policy reforms.” 

North American-based Class I railroads have a decidedly different take on the ACC’s views of PSR.

Key themes of PSR benefits, according to the Class Is, have come in the form of car handling, terminal fluidity, and improved train velocity.

“Higher velocity serves as a catalyst for multi-faceted improvement,” he wrote,” wrote CSX CEO James Foote in a January 2018 letter to leadership at the United States Surface Transportation Board (STB). “As trains speed up on the network and reach their destinations sooner, there are fewer total trains running at any given time. This improved line-of-road fluidity, in concert with terminals processing cars more efficiently, leads to a higher level of on-time originations. When trains are operating in their scheduled windows and executing in timely coordination on meets and passes, movements further accelerate freight across the network. As a result, fewer locomotives and crews are needed to handle the same amount of freight, and our cars are able to cycle more quickly, such that total cars online decline. The end of this virtuous cycle is faster transit, better service, markedly improved asset utilization, and greater efficiency at lower cost.”

In the recently published LM Rail/Intermodal Roundtable, Larry Gross, president of Gross Transportation Consulting, noted that when viewing PSR, the practitioners have more than fulfilled the first chapter of the revolution, improving railroad efficiency and profitability.

“A portion of this success story has been that the railroads have become more selective in the business they solicit and as a byproduct volume has declined,” he said. “The second chapter of the PSR revolution playbook calls for railroad management to then utilize the newly efficient and competitive network to convert volume back from truck to rail. The U.S. railroads have not yet demonstrated this capability and any such trend will likely now be postponed until the immediate [COVID-19] crisis abates.”

Tony Hatch, principal of New York-based ABH Consulting, pulled no punches in his opinion of the provision, in the INVEST in America Act, to study PSR.

“I think this proposed GAO study of PSR and Railroading—the government investigation into a private industry’s operating methodology is….crazy not to mention the fact that it is like counting the horses that left the barn two years ago, admittedly in a rather disruptive manner—and given the (high) service levels of the industry today—have long since returned to the barn, fed and watered themselves and shut the stall doors behind them,” he said.