1 00:00:06,840 --> 00:00:10,400 Speaker 1: Hi everyone, and welcome to Bloomberg Intelligence Talking Transports podcast. 2 00:00:10,480 --> 00:00:13,720 Speaker 1: I'm your host Lee Clasgow, Senior Freight transportation logistics Analysts 3 00:00:13,720 --> 00:00:17,680 Speaker 1: at Bloomberg Intelligence, Bloomberg's in house research arm. We're delighted 4 00:00:17,720 --> 00:00:21,040 Speaker 1: to have Chairman Martin Oberman of the Surface Transportation Board 5 00:00:21,079 --> 00:00:24,000 Speaker 1: as our guest on the podcast today. He was designated 6 00:00:24,040 --> 00:00:27,720 Speaker 1: chairman of the SDB by President Biden in January twenty 7 00:00:27,760 --> 00:00:30,040 Speaker 1: twenty one and has been on the board since January 8 00:00:30,080 --> 00:00:35,199 Speaker 1: twenty nineteen. Chairman Overman served on the Chicago City Council 9 00:00:35,360 --> 00:00:39,520 Speaker 1: as an alderman of the city's forty third ward from 10 00:00:39,600 --> 00:00:42,879 Speaker 1: nineteen seventy five to nineteen eighty seven. He earned a 11 00:00:42,880 --> 00:00:47,760 Speaker 1: reputation as a reform leader committed to promoting transparency and 12 00:00:47,880 --> 00:00:52,000 Speaker 1: key governing processes while also working to reduce government corruption 13 00:00:52,560 --> 00:00:57,840 Speaker 1: and waste. Since nineteen seventy five, he has also maintained 14 00:00:57,840 --> 00:01:01,360 Speaker 1: a successful practice in Chicago as both a trial and 15 00:01:01,440 --> 00:01:05,880 Speaker 1: a palate lawyer. His unique combination of litigation experience, elected 16 00:01:05,920 --> 00:01:10,600 Speaker 1: public service, and exposure to significant complexities of the rail infrastructure, 17 00:01:10,600 --> 00:01:13,920 Speaker 1: of finance, and operations has informed his work as a 18 00:01:13,920 --> 00:01:18,120 Speaker 1: member of the STB. He graduated from Yale University in 19 00:01:18,160 --> 00:01:22,200 Speaker 1: the University of Wisconsin Law School cum Laudie and served 20 00:01:22,280 --> 00:01:26,760 Speaker 1: as a note editor of the Wisconsin Law Review. So 21 00:01:27,000 --> 00:01:29,720 Speaker 1: are you more of a Badger fan or a Bulldog fan? 22 00:01:32,400 --> 00:01:36,200 Speaker 2: Last night I was a Wolverine fan. 23 00:01:37,720 --> 00:01:40,880 Speaker 1: Okay, great, well, thank you Chairman Overman for joining us 24 00:01:40,959 --> 00:01:43,000 Speaker 1: today on the podcast. It's great to have you. 25 00:01:43,600 --> 00:01:44,320 Speaker 2: Good to be here. 26 00:01:44,959 --> 00:01:47,200 Speaker 1: So, you know, a lot of our listeners they might 27 00:01:47,319 --> 00:01:50,400 Speaker 1: end up be very familiar with the Service Transportation Board 28 00:01:50,480 --> 00:01:53,720 Speaker 1: or the STB. Can you talk about what the mission 29 00:01:53,760 --> 00:01:56,480 Speaker 1: of the SDB is and what its priorities are? 30 00:01:58,080 --> 00:02:00,680 Speaker 2: Of course, put a little bit up perspective. 31 00:02:01,160 --> 00:02:06,480 Speaker 3: I suspect most listeners were familiar with the Interstate Commerce Commission, 32 00:02:07,000 --> 00:02:11,080 Speaker 3: the old ICC, which had jurisdiction not only over freight 33 00:02:11,160 --> 00:02:15,800 Speaker 3: but all sorts of transportation. In nineteen ninety five, the 34 00:02:15,880 --> 00:02:20,560 Speaker 3: Congress abolished the ICC and replaced it with the Service 35 00:02:20,560 --> 00:02:26,120 Speaker 3: Transportation Board and assigned all of the remaining jurisdiction of 36 00:02:26,160 --> 00:02:30,120 Speaker 3: the ICC to our board. So historically, we've actually been 37 00:02:30,120 --> 00:02:33,399 Speaker 3: in existence since the eighteen eighties. We were the first 38 00:02:33,480 --> 00:02:38,400 Speaker 3: administrative agency created, and our current mission is the economic 39 00:02:38,560 --> 00:02:42,280 Speaker 3: regulation of the freight rail industry. We have a little 40 00:02:42,320 --> 00:02:46,840 Speaker 3: bit to do and very little with bus company acquisitions, 41 00:02:47,440 --> 00:02:51,720 Speaker 3: moving company, moving van kinds of issues, but they take 42 00:02:51,840 --> 00:02:56,600 Speaker 3: up less than half a percent of our time. Really, 43 00:02:56,919 --> 00:03:00,839 Speaker 3: our job is the economic regulation of the freight rail 44 00:03:00,880 --> 00:03:07,639 Speaker 3: industry and the oversight of the relationship between Amtrak's operations 45 00:03:07,760 --> 00:03:11,840 Speaker 3: and the freight rail railroads on which Amtrak operates. So 46 00:03:11,880 --> 00:03:14,960 Speaker 3: that's a little bit of an oversimplification, but that's the 47 00:03:15,000 --> 00:03:17,760 Speaker 3: broad description, all right. 48 00:03:17,960 --> 00:03:20,360 Speaker 1: And what's the makeup of the board? How many members 49 00:03:20,400 --> 00:03:24,480 Speaker 1: are there are? They all like, how do you get 50 00:03:24,480 --> 00:03:25,880 Speaker 1: to be on the board? Because you know, I might 51 00:03:25,919 --> 00:03:27,720 Speaker 1: be looking for a job in a couple of years. 52 00:03:28,000 --> 00:03:30,600 Speaker 2: Yeah, be my guest, there's going to be an opening, Serdent. 53 00:03:30,760 --> 00:03:35,400 Speaker 3: There are five members of the board. We are an 54 00:03:35,440 --> 00:03:41,160 Speaker 3: independent agency, meaning like the Federal Communications Commission the Security 55 00:03:41,160 --> 00:03:46,080 Speaker 3: and Exchange Commission, so we're not technically accountable to any 56 00:03:46,800 --> 00:03:53,520 Speaker 3: Cabinet secretaries or any executive departments. Our members are appointed 57 00:03:53,560 --> 00:03:56,480 Speaker 3: by the President and must be confirmed by the Senate, 58 00:03:57,280 --> 00:04:01,440 Speaker 3: and like most regulatory agents in Washington, no more than 59 00:04:01,480 --> 00:04:04,600 Speaker 3: a majority can be from the same party. So currently 60 00:04:04,640 --> 00:04:10,440 Speaker 3: there are three Democrats and two Republicans, and the President 61 00:04:10,880 --> 00:04:13,720 Speaker 3: designates one of the members to be chairman, who is 62 00:04:13,760 --> 00:04:18,599 Speaker 3: also as a one vote the same as anybody else 63 00:04:18,640 --> 00:04:21,440 Speaker 3: does on the board, but also serves as the CEO 64 00:04:21,480 --> 00:04:22,200 Speaker 3: of the agency. 65 00:04:22,640 --> 00:04:27,159 Speaker 1: So that's okay, super And you know what are the 66 00:04:27,279 --> 00:04:30,720 Speaker 1: regulatory priorities for the STB this year? 67 00:04:32,680 --> 00:04:37,960 Speaker 2: Oh my gosh, there are the myriad ways to describe that. 68 00:04:39,080 --> 00:04:42,000 Speaker 3: First of all, we have to keep in mind that 69 00:04:42,200 --> 00:04:44,919 Speaker 3: much of our work depends on cases that are brought 70 00:04:45,000 --> 00:04:51,279 Speaker 3: to us. So we are the sole authority regulating railroad 71 00:04:51,320 --> 00:04:59,279 Speaker 3: company acquisitions. Mergers, acquisitions of existing railroads all must all 72 00:04:59,320 --> 00:05:04,920 Speaker 3: require our review and approval. So those cases come in. 73 00:05:05,040 --> 00:05:10,359 Speaker 3: We have one significant one pending. Now we have a 74 00:05:10,400 --> 00:05:15,440 Speaker 3: couple of others on the agenda. I can't predict what 75 00:05:15,680 --> 00:05:18,000 Speaker 3: more of those matters may come in, but they can 76 00:05:18,080 --> 00:05:24,960 Speaker 3: be very time consuming. We also hear challenges by railroad 77 00:05:25,000 --> 00:05:27,840 Speaker 3: customers to the rates they are being charged, and there 78 00:05:27,880 --> 00:05:32,680 Speaker 3: is a very elaborate, detailed statutory scheme setting forth the 79 00:05:32,680 --> 00:05:37,000 Speaker 3: criteria by which we review challenges to freight rates. But 80 00:05:37,040 --> 00:05:41,480 Speaker 3: that is a very important function that we serve as 81 00:05:41,560 --> 00:05:45,919 Speaker 3: as a check on potential check on rates that railroads 82 00:05:46,000 --> 00:05:47,040 Speaker 3: charge their customers. 83 00:05:48,760 --> 00:05:52,760 Speaker 1: We also exactly that is that the most common type 84 00:05:52,760 --> 00:05:56,560 Speaker 1: of case that the stbc's are rate cases. 85 00:05:57,080 --> 00:06:01,400 Speaker 3: Yeah, interestingly enough, it's the significant part I think of 86 00:06:01,440 --> 00:06:02,280 Speaker 3: our jurisdiction. 87 00:06:02,640 --> 00:06:06,960 Speaker 2: We rarely get rate cases. We stand there as a backstop. 88 00:06:07,080 --> 00:06:12,599 Speaker 3: So I think in most cases railroads and shippers reach 89 00:06:12,640 --> 00:06:15,920 Speaker 3: agreement on rates because they know they're subject to review 90 00:06:16,000 --> 00:06:20,600 Speaker 3: by US, And that's my inference. Rate cases are extraordinarily 91 00:06:20,600 --> 00:06:25,200 Speaker 3: complicated and expensive at time consuming, and they very infrequently 92 00:06:25,240 --> 00:06:29,600 Speaker 3: get brought, So in terms of number of cases, it's 93 00:06:29,680 --> 00:06:34,640 Speaker 3: very uncommon. In terms of the importance of our regulatory position, 94 00:06:34,760 --> 00:06:38,799 Speaker 3: I think it's perhaps the most important role that we serve. 95 00:06:39,520 --> 00:06:40,360 Speaker 2: We also. 96 00:06:41,560 --> 00:06:46,480 Speaker 3: Consider matters dealing with competition or lack of competition in 97 00:06:46,520 --> 00:06:52,560 Speaker 3: the freight rail industry, and we have a general rule 98 00:06:52,600 --> 00:06:55,920 Speaker 3: making authority from the Congress, and so we issue regulations 99 00:06:56,320 --> 00:06:59,920 Speaker 3: from time to time governing how the freight industry operates 100 00:07:00,040 --> 00:07:04,840 Speaker 3: and its relationships with its with it with with its customers. 101 00:07:06,080 --> 00:07:08,840 Speaker 3: One of the things that I have initiated since becoming 102 00:07:08,960 --> 00:07:15,880 Speaker 3: chairman is more active ongoing oversight, often through public hearings, 103 00:07:16,600 --> 00:07:19,680 Speaker 3: of the conditions of freight rail service. 104 00:07:19,400 --> 00:07:20,000 Speaker 2: In the country. 105 00:07:20,000 --> 00:07:23,560 Speaker 3: There's been a over the last few years a real 106 00:07:23,840 --> 00:07:28,160 Speaker 3: decline in freight rail service, which caused us to have 107 00:07:28,280 --> 00:07:31,120 Speaker 3: some very significant hearings over the last. 108 00:07:30,880 --> 00:07:36,200 Speaker 2: Year or so. Things have significantly improved since those hearings, 109 00:07:36,240 --> 00:07:38,200 Speaker 2: although they still have a long way to go in 110 00:07:38,240 --> 00:07:38,720 Speaker 2: my view. 111 00:07:39,280 --> 00:07:43,720 Speaker 3: So that's that's an over overview. I think we can 112 00:07:43,800 --> 00:07:45,760 Speaker 3: get into more specifics if you want. 113 00:07:46,160 --> 00:07:50,360 Speaker 1: Sure, So what would be the most common kind of 114 00:07:50,440 --> 00:07:53,040 Speaker 1: case that's brought before the STB if it's not the 115 00:07:53,120 --> 00:07:57,480 Speaker 1: rate case And obviously you guys aren't dealing with You know, 116 00:07:57,520 --> 00:08:00,280 Speaker 1: there are some mergers, but I'm assuming there's not a 117 00:08:00,360 --> 00:08:03,080 Speaker 1: lot of them. Is there something that kind of takes 118 00:08:03,160 --> 00:08:04,520 Speaker 1: up most of the board's time? 119 00:08:06,440 --> 00:08:06,760 Speaker 2: You know it? 120 00:08:06,920 --> 00:08:09,800 Speaker 3: It'd be hard to pinpoint it out because it's varied 121 00:08:09,840 --> 00:08:11,640 Speaker 3: so much over at least the three years that I've 122 00:08:11,640 --> 00:08:16,240 Speaker 3: been chairman. The significant major merger, the first one in 123 00:08:16,280 --> 00:08:20,320 Speaker 3: the last twenty five years that was approved a year 124 00:08:20,320 --> 00:08:24,119 Speaker 3: and a half ago, was oh, no, this year, I'm sorry, 125 00:08:24,680 --> 00:08:27,360 Speaker 3: I've lost track of the years earlier in twenty twenty 126 00:08:27,360 --> 00:08:32,199 Speaker 3: three was the merger between Canadian Pacific and Kansas City Southern, 127 00:08:32,840 --> 00:08:36,520 Speaker 3: and that dominated a great deal of time of the 128 00:08:36,559 --> 00:08:40,680 Speaker 3: board's staff and the board members. So one case was 129 00:08:40,679 --> 00:08:49,679 Speaker 3: a significant use of the Board's resources, a great deal 130 00:08:49,720 --> 00:08:55,840 Speaker 3: of routine. Smaller matters that do in terms of sheer 131 00:08:55,880 --> 00:09:00,600 Speaker 3: numbers are probably the most common cases. You can't railroad 132 00:09:01,000 --> 00:09:04,240 Speaker 3: or anybody who owns the railroad track that is part 133 00:09:04,280 --> 00:09:07,960 Speaker 3: of the interstate network cannot abandon or discontinue use of 134 00:09:08,000 --> 00:09:15,800 Speaker 3: those tracks without our approval, And oftentimes those discontinuous requests 135 00:09:15,840 --> 00:09:21,280 Speaker 3: will involve request to utilize the railroad ride away for 136 00:09:22,360 --> 00:09:26,160 Speaker 3: recreational trail, and by sheer numbers, those are probably the 137 00:09:26,160 --> 00:09:31,480 Speaker 3: most common that come in. Most of them are routined. 138 00:09:31,559 --> 00:09:37,640 Speaker 3: Occasionally ones get very complicated. Construction of new rail is 139 00:09:37,720 --> 00:09:43,600 Speaker 3: under our jurisdiction, requires our approval in detailed environmental and 140 00:09:43,679 --> 00:09:50,000 Speaker 3: historic reviews before we could grant permission. One case that 141 00:09:50,280 --> 00:09:53,120 Speaker 3: occupied a great deal of our time, still pending in 142 00:09:53,160 --> 00:09:57,439 Speaker 3: the courts was the proposal to build a new eighty 143 00:09:57,440 --> 00:10:00,880 Speaker 3: eight mile long railroad through some wilderness area in Utah 144 00:10:01,240 --> 00:10:03,920 Speaker 3: to serve some potential oil fields. 145 00:10:04,920 --> 00:10:06,840 Speaker 2: So we get cases of that. 146 00:10:06,840 --> 00:10:09,320 Speaker 3: Nature, But there's such a variety lead it'd be hard 147 00:10:09,360 --> 00:10:12,920 Speaker 3: to say there's any one kind that dominates our work. 148 00:10:13,120 --> 00:10:15,679 Speaker 1: Right, you know, you alluded to that rail service has 149 00:10:15,720 --> 00:10:19,720 Speaker 1: improved and that improvement has been since the onset of 150 00:10:19,720 --> 00:10:23,679 Speaker 1: the pandemic, when rails just did a bad job at 151 00:10:23,720 --> 00:10:26,719 Speaker 1: fur lowering folks and people didn't want to come back 152 00:10:26,720 --> 00:10:28,720 Speaker 1: to work, so they were kind of caught flat footed. 153 00:10:29,280 --> 00:10:31,240 Speaker 1: What do you think that some of the lessons from 154 00:10:31,360 --> 00:10:35,720 Speaker 1: the StB's point of view are from the service issues 155 00:10:35,760 --> 00:10:38,480 Speaker 1: that we went through during the pandemic up until now. 156 00:10:40,200 --> 00:10:42,720 Speaker 3: Well, I can say what lessons the STV has learned, 157 00:10:43,160 --> 00:10:45,320 Speaker 3: and I can only hope that the large railroads have 158 00:10:45,320 --> 00:10:49,360 Speaker 3: earned learned the same lessons. I think that I'll reserve 159 00:10:49,440 --> 00:10:53,719 Speaker 3: judgment on that as time unfolds. We have to put 160 00:10:53,760 --> 00:10:59,679 Speaker 3: it in context prior to the pandemic, in the seven 161 00:10:59,720 --> 00:11:04,319 Speaker 3: eight years just prior to the pandemic. The large railroads 162 00:11:04,320 --> 00:11:06,679 Speaker 3: that were seven prior to the merger, now there are six. 163 00:11:06,840 --> 00:11:10,360 Speaker 3: They're called Class ones because of their size, and people 164 00:11:10,400 --> 00:11:16,640 Speaker 3: are definitely familiar with the Union Pacific, Burlington Northern CSX, 165 00:11:16,720 --> 00:11:22,360 Speaker 3: and the Norfolk Southern in the US, those railroads together 166 00:11:23,720 --> 00:11:29,840 Speaker 3: decreased their workforce by about thirty percent, really in a 167 00:11:29,960 --> 00:11:35,880 Speaker 3: really severe cost cutting measure which had already compromise service. 168 00:11:36,600 --> 00:11:40,520 Speaker 2: You just can't provide good on time rail service. 169 00:11:40,240 --> 00:11:44,640 Speaker 3: With too few crew and too few mechanics to keep 170 00:11:44,679 --> 00:11:47,400 Speaker 3: locomotives running and all the other things that railroads need. 171 00:11:48,360 --> 00:11:52,079 Speaker 3: And when the pandemic hit in the spring of twenty twenty, 172 00:11:52,520 --> 00:11:59,119 Speaker 3: these railroads decreased their workforce by another significant number thousands 173 00:11:59,160 --> 00:12:02,079 Speaker 3: more load. And as you say that, many of them 174 00:12:02,120 --> 00:12:04,840 Speaker 3: did not come back, and they did not come. 175 00:12:04,720 --> 00:12:07,080 Speaker 2: Back to a workforce which was already too low. 176 00:12:07,640 --> 00:12:13,480 Speaker 3: And this led to during twenty twenty one and early 177 00:12:13,520 --> 00:12:16,720 Speaker 3: twenty twenty two, a real service crisis in this country, 178 00:12:16,720 --> 00:12:21,120 Speaker 3: a moving freight. It was part of the whole supply 179 00:12:21,280 --> 00:12:26,800 Speaker 3: chain problem, combined with the problem at the ports that 180 00:12:27,400 --> 00:12:32,200 Speaker 3: got so much attention in the media. Subsecquent to the 181 00:12:32,240 --> 00:12:34,640 Speaker 3: hearings that we held in the spring of twenty twenty two, 182 00:12:35,720 --> 00:12:42,880 Speaker 3: we initiated some detailed accountability reporting requirements from the railroads 183 00:12:42,920 --> 00:12:47,359 Speaker 3: to US which are public about their progress in rehiring 184 00:12:47,400 --> 00:12:51,160 Speaker 3: and trying to staff up. And the railroads have added 185 00:12:51,200 --> 00:12:55,480 Speaker 3: about nine thousand people across the boards since the spring 186 00:12:55,520 --> 00:13:00,360 Speaker 3: of twenty twenty two. They still have fifteen thousand fewer 187 00:13:00,480 --> 00:13:04,680 Speaker 3: workers than they had just before the pandemic. Right now 188 00:13:04,760 --> 00:13:07,720 Speaker 3: as we speak, where at a relatively low EBB in 189 00:13:07,760 --> 00:13:10,480 Speaker 3: the volume of car loads that are on the freight network. 190 00:13:11,000 --> 00:13:15,600 Speaker 3: So it's just like a freeway in non rush hour times, 191 00:13:15,640 --> 00:13:20,480 Speaker 3: traffic moves pretty well. And that is what's happening right 192 00:13:20,559 --> 00:13:24,160 Speaker 3: now in the freight rail network. As the industrial part 193 00:13:24,200 --> 00:13:27,800 Speaker 3: of the economy recovers, and everybody says it will, nobody 194 00:13:27,840 --> 00:13:30,720 Speaker 3: knows exactly when, but certainly during the course of this year, 195 00:13:31,400 --> 00:13:35,160 Speaker 3: the demand for freight rail is likely to increase. There's 196 00:13:35,200 --> 00:13:38,120 Speaker 3: a significant question in my mind as to whether the 197 00:13:38,200 --> 00:13:42,600 Speaker 3: railroads will have enough staff to handle a return to 198 00:13:43,000 --> 00:13:46,000 Speaker 3: more normal levels on the network, so that needs to 199 00:13:46,000 --> 00:13:50,800 Speaker 3: be watched very carefully. There are many of the CEOs 200 00:13:50,840 --> 00:13:54,120 Speaker 3: and there are several new CEOs among the Class one 201 00:13:54,240 --> 00:13:58,520 Speaker 3: railroads have said that their railroads have learned their lesson, 202 00:13:58,559 --> 00:14:02,280 Speaker 3: that they're not going to keep reducing their workforce and 203 00:14:02,320 --> 00:14:07,120 Speaker 3: that they're gearing up to hire as needed. It remains 204 00:14:07,160 --> 00:14:09,000 Speaker 3: to be seen because there's still a great deal of 205 00:14:09,000 --> 00:14:12,080 Speaker 3: pressure from Wall Street to keep costs. 206 00:14:11,760 --> 00:14:18,520 Speaker 2: As low as possible, to allow for as large as 207 00:14:18,559 --> 00:14:21,160 Speaker 2: stock buybacks and dividends as possible, and keep the stock 208 00:14:21,200 --> 00:14:21,800 Speaker 2: prices up. 209 00:14:21,840 --> 00:14:26,200 Speaker 3: That's a dominant force among the Class one railroads, and that's. 210 00:14:25,880 --> 00:14:30,760 Speaker 1: Still there right, and so is your concern that they 211 00:14:30,800 --> 00:14:36,240 Speaker 1: haven't hired enough. But service is okay right now, just 212 00:14:36,320 --> 00:14:43,240 Speaker 1: because as you mentioned, volumes are not, you know, very high. 213 00:14:43,320 --> 00:14:47,680 Speaker 3: Yes, that's my concern. They all say they're on the 214 00:14:47,800 --> 00:14:52,320 Speaker 3: right path and it just remains to be seen. So 215 00:14:52,840 --> 00:14:56,240 Speaker 3: things are definitely better. But I think that you know, 216 00:14:56,320 --> 00:14:59,960 Speaker 3: these large railroads, for many of their customers are monopoly 217 00:15:00,160 --> 00:15:04,640 Speaker 3: are at best doopolies, which is why the regulatory agency exists. 218 00:15:04,680 --> 00:15:09,400 Speaker 3: There's not really a free market for freight rail service 219 00:15:09,440 --> 00:15:16,000 Speaker 3: in this country, and monopolies will generally, if I'm restrained, 220 00:15:16,040 --> 00:15:17,560 Speaker 3: will behave the way monopolists do. 221 00:15:17,680 --> 00:15:20,040 Speaker 2: They'll lower output and raise prices. 222 00:15:20,600 --> 00:15:25,360 Speaker 1: And how does the STB make these Class one railroads accountable? 223 00:15:26,840 --> 00:15:31,800 Speaker 3: You know, it's quite a challenge because during the deregulatory 224 00:15:32,000 --> 00:15:36,400 Speaker 3: move in the nineteen seventies and eighties, the Congress significantly 225 00:15:36,480 --> 00:15:38,000 Speaker 3: cut back on the authority of the. 226 00:15:38,160 --> 00:15:40,720 Speaker 2: ICC and therefore the authority of the STV. 227 00:15:41,840 --> 00:15:46,800 Speaker 3: And one of the ways, one of the few tools 228 00:15:47,600 --> 00:15:51,680 Speaker 3: we have, which I think has brought about some benefits, 229 00:15:51,800 --> 00:15:56,200 Speaker 3: has been to hold railroads publicly accountable. People in the 230 00:15:56,240 --> 00:15:59,840 Speaker 3: industry tell me that the board's hearings in which we 231 00:16:00,040 --> 00:16:02,320 Speaker 3: required the railroads that come in and answer for these 232 00:16:03,720 --> 00:16:06,160 Speaker 3: worker cuts and the levels of their service, and then 233 00:16:06,240 --> 00:16:09,640 Speaker 3: requiring them to provide us with targets for improvement have 234 00:16:09,760 --> 00:16:12,520 Speaker 3: resulted in improvement. I don't know that we could take 235 00:16:12,560 --> 00:16:16,240 Speaker 3: all the credit, but certainly we're part of the picture. 236 00:16:17,960 --> 00:16:21,120 Speaker 3: As I said, we stand there ready to hear complaints 237 00:16:21,160 --> 00:16:26,240 Speaker 3: about rates if rates are big charged at unreasonable levels. 238 00:16:26,840 --> 00:16:30,240 Speaker 3: We have rules pending which I hope will have the 239 00:16:30,320 --> 00:16:34,560 Speaker 3: impact of increasing competitive options for shippers. 240 00:16:34,560 --> 00:16:37,760 Speaker 2: And the more competition we can build into the system, 241 00:16:37,840 --> 00:16:38,560 Speaker 2: the less. 242 00:16:38,800 --> 00:16:42,320 Speaker 3: Overt regulation is necessary by us and the market can 243 00:16:42,920 --> 00:16:47,200 Speaker 3: improve service and rates. 244 00:16:47,800 --> 00:16:53,680 Speaker 2: So we have some limited tools, and you know. 245 00:16:53,640 --> 00:16:56,560 Speaker 3: We haven't historically, the board has not used all the 246 00:16:56,640 --> 00:16:57,680 Speaker 3: tools available. 247 00:16:58,200 --> 00:17:01,360 Speaker 2: We're starting to be a little more active in that area. 248 00:17:01,440 --> 00:17:04,200 Speaker 3: But it is a slow and should be a slow 249 00:17:04,200 --> 00:17:05,760 Speaker 3: and deliberate process. 250 00:17:05,720 --> 00:17:09,480 Speaker 1: Right And so what would you like to see the 251 00:17:09,560 --> 00:17:13,560 Speaker 1: railroads do besides maybe hiring more people to improve service 252 00:17:13,840 --> 00:17:17,280 Speaker 1: or maybe make them more accountable, Like, do you think 253 00:17:17,280 --> 00:17:19,560 Speaker 1: they should have certain standards that they need to meet. 254 00:17:20,960 --> 00:17:24,640 Speaker 3: Well, setting precise standards is a challenge because there's such 255 00:17:24,680 --> 00:17:28,320 Speaker 3: a variation in the kinds of service that freight rail provides. 256 00:17:28,400 --> 00:17:32,320 Speaker 3: Different commodities need different kinds of service, so it is 257 00:17:32,359 --> 00:17:35,240 Speaker 3: a challenge to set service standards. 258 00:17:35,720 --> 00:17:36,880 Speaker 2: I would like to see. 259 00:17:36,640 --> 00:17:41,640 Speaker 3: The railroads not only higher more labor, but invest more 260 00:17:41,800 --> 00:17:45,240 Speaker 3: in capital. I mean railroads are already a very capital 261 00:17:45,320 --> 00:17:51,360 Speaker 3: heavy industry because simply maintaining the system does require billions 262 00:17:51,400 --> 00:17:54,360 Speaker 3: of dollars a year to replace ties and rails and switches. 263 00:17:56,160 --> 00:18:01,440 Speaker 3: It's remarkable the quantity tonnage that goes over this infrastructure 264 00:18:01,480 --> 00:18:04,600 Speaker 3: that just wears out. It has to be regularly replaced. 265 00:18:05,280 --> 00:18:08,880 Speaker 3: But the railroads have spent very small proportion of their 266 00:18:09,359 --> 00:18:14,160 Speaker 3: earnings and their whole capital programs on expanding their networks 267 00:18:14,160 --> 00:18:18,080 Speaker 3: and providing service now where it's not provided. That is 268 00:18:18,200 --> 00:18:20,840 Speaker 3: what I really think is needed to benefit the economy, 269 00:18:20,920 --> 00:18:25,960 Speaker 3: and perhaps even more importantly, the climate. Railroads are by 270 00:18:26,080 --> 00:18:29,439 Speaker 3: far the most climate friendly way to move freight, and 271 00:18:29,520 --> 00:18:31,800 Speaker 3: the more freight we can get off the highways and 272 00:18:31,840 --> 00:18:36,280 Speaker 3: onto the rails will make a significant contribution to reducing 273 00:18:36,359 --> 00:18:40,000 Speaker 3: the carbon output of our country. 274 00:18:40,240 --> 00:18:44,120 Speaker 1: Right, and that expansion is that expansion? Are you talking 275 00:18:44,119 --> 00:18:47,840 Speaker 1: about double track triple tracking routes or are you talking 276 00:18:47,880 --> 00:18:51,040 Speaker 1: about them going into areas that they might not have 277 00:18:51,080 --> 00:18:54,080 Speaker 1: any their network it doesn't touch yet. 278 00:18:54,520 --> 00:18:57,560 Speaker 3: Well, Challenging the railroads to build new right of ways 279 00:18:57,560 --> 00:19:00,840 Speaker 3: and areas where they're not currently served is a pretty 280 00:19:00,840 --> 00:19:01,520 Speaker 3: big assignment. 281 00:19:02,400 --> 00:19:03,800 Speaker 2: Acquiring land and. 282 00:19:03,760 --> 00:19:06,960 Speaker 3: Building a new rail right of way is an enormous, 283 00:19:08,040 --> 00:19:16,520 Speaker 3: enormously cost costly adventure. But triple tracking, double tracking, improving 284 00:19:16,560 --> 00:19:22,840 Speaker 3: the operations in yards is necessary if because there's a 285 00:19:22,880 --> 00:19:26,280 Speaker 3: great amount of potential freight that used to be moved 286 00:19:26,280 --> 00:19:29,280 Speaker 3: on rail that has moved over to a truck, which 287 00:19:29,320 --> 00:19:32,800 Speaker 3: can be one back. The railroads all talk about they 288 00:19:32,840 --> 00:19:35,320 Speaker 3: have this phrase they've been using for several years now 289 00:19:35,359 --> 00:19:39,120 Speaker 3: called pivoting to growth. Not everybody's actually doing it, even 290 00:19:39,160 --> 00:19:44,400 Speaker 3: though they're talking about it, but all the railroads say 291 00:19:44,560 --> 00:19:49,760 Speaker 3: in order to win freight back from trucks to rail, 292 00:19:50,040 --> 00:19:55,440 Speaker 3: they have to provide dependable and reliable service. If you're 293 00:19:55,560 --> 00:19:59,960 Speaker 3: operating a major industry which relies on moving heavy amount 294 00:20:00,240 --> 00:20:04,560 Speaker 3: of freight around to make your products, you can't operate 295 00:20:04,600 --> 00:20:07,360 Speaker 3: a plant if you don't know when your raw materials 296 00:20:07,400 --> 00:20:09,280 Speaker 3: are going to get there or when your finished products 297 00:20:09,320 --> 00:20:12,160 Speaker 3: going to go out to your customers in any reliable way. 298 00:20:12,280 --> 00:20:16,199 Speaker 3: Trucks historically have been much more dependable about getting there 299 00:20:16,240 --> 00:20:20,119 Speaker 3: when they say they're going to get there. The railroads, 300 00:20:20,440 --> 00:20:25,160 Speaker 3: in order to provide that kind of long term reliability 301 00:20:25,280 --> 00:20:33,000 Speaker 3: and dependability, need to have more infrastructure. They need double tracking, 302 00:20:33,080 --> 00:20:36,040 Speaker 3: they need more sightings, they need improvements in their yards. 303 00:20:37,760 --> 00:20:41,080 Speaker 3: What we hear from shippers most often, our complaints are 304 00:20:41,920 --> 00:20:44,000 Speaker 3: is that it's not so much that the railroads aren't 305 00:20:44,000 --> 00:20:44,919 Speaker 3: fast enough. 306 00:20:44,760 --> 00:20:46,880 Speaker 2: It's just that they're not reliable enough. 307 00:20:49,119 --> 00:20:51,520 Speaker 3: And so I don't think you can do that without 308 00:20:51,720 --> 00:20:55,440 Speaker 3: both sufficient labor and sufficient infrastructure. 309 00:20:56,160 --> 00:21:01,360 Speaker 1: Gotcha, you mentioned you know, railroads in their capital expenditures 310 00:21:01,400 --> 00:21:04,280 Speaker 1: and how much they spend for those. Listening, you know, 311 00:21:04,320 --> 00:21:07,240 Speaker 1: a railroad will spend anywhere between fifteen and twenty percent 312 00:21:07,280 --> 00:21:10,640 Speaker 1: of their revenues on capex, and anywhere between seventy five 313 00:21:10,680 --> 00:21:13,600 Speaker 1: and eighty percent of that is just maintenance to maintain 314 00:21:13,640 --> 00:21:16,439 Speaker 1: the right way in the other twenty twenty five percent 315 00:21:16,560 --> 00:21:20,280 Speaker 1: or for growth projects, and that can be anything from 316 00:21:20,320 --> 00:21:27,119 Speaker 1: new equipment to technology to building out you know, double 317 00:21:27,160 --> 00:21:29,639 Speaker 1: tracking or triple tracking. If they have those kind of 318 00:21:30,200 --> 00:21:32,879 Speaker 1: projects in place, so they do spend a lot of 319 00:21:32,920 --> 00:21:33,480 Speaker 1: their own. 320 00:21:34,359 --> 00:21:38,080 Speaker 3: I'm not sure that that twenty five percent figure of 321 00:21:38,119 --> 00:21:42,959 Speaker 3: their overall capital on growth is the right number. We 322 00:21:43,040 --> 00:21:45,480 Speaker 3: collect a great deal of financial data, but we don't 323 00:21:45,480 --> 00:21:50,800 Speaker 3: have a breakdown between so called expansion capital and maintenance capital, right. 324 00:21:50,880 --> 00:21:54,200 Speaker 3: But the numbers I have seen is that the percentage 325 00:21:54,200 --> 00:21:58,560 Speaker 3: on expansion capital are far lower than twenty five percent. 326 00:22:00,119 --> 00:22:02,440 Speaker 3: What the number is, but whatever it is, it's too low. 327 00:22:03,240 --> 00:22:08,359 Speaker 1: There's been something in the transportation press for quite some time. 328 00:22:08,720 --> 00:22:12,080 Speaker 1: It's something called reciprocal switching. Can you talk to our 329 00:22:12,160 --> 00:22:16,000 Speaker 1: listeners about what reciprocal switching is and why the STB 330 00:22:16,520 --> 00:22:17,480 Speaker 1: has an interest in it. 331 00:22:18,880 --> 00:22:21,480 Speaker 3: I could only give you a very limited discussion of 332 00:22:21,520 --> 00:22:26,320 Speaker 3: that because you have a proposed rule pending before us now, 333 00:22:26,400 --> 00:22:30,040 Speaker 3: so I can't discuss the merits or the sub you know, 334 00:22:30,119 --> 00:22:31,720 Speaker 3: the subset of arguments. 335 00:22:31,320 --> 00:22:32,560 Speaker 2: About the proposed rule. 336 00:22:32,800 --> 00:22:37,679 Speaker 3: Okay, But the concept is this that there are many 337 00:22:37,800 --> 00:22:41,560 Speaker 3: many businesses in this country who use freight rail who 338 00:22:41,600 --> 00:22:45,920 Speaker 3: are served by only one railroad, and therefore they're subject 339 00:22:45,920 --> 00:22:49,560 Speaker 3: to the kind of monopoly pressures that monopolies can exercise 340 00:22:49,680 --> 00:22:55,000 Speaker 3: over over their customers. There are many places where there's 341 00:22:55,080 --> 00:23:01,760 Speaker 3: another railroad nearby or feasibly available to the industries, but 342 00:23:02,680 --> 00:23:07,080 Speaker 3: typically the incumbent railroad will not allow another railroad to 343 00:23:07,119 --> 00:23:09,679 Speaker 3: go over its tracks to serve a customer that it 344 00:23:09,760 --> 00:23:17,680 Speaker 3: holds captive. The statutes that establish the STB provide for 345 00:23:17,720 --> 00:23:23,679 Speaker 3: the STB to issue orders requiring railroads, under certain circumstances 346 00:23:23,720 --> 00:23:27,399 Speaker 3: to allow a competitive what's called, for lack of a 347 00:23:27,440 --> 00:23:30,240 Speaker 3: better term, competitive access from another railroad. 348 00:23:31,840 --> 00:23:34,560 Speaker 2: The railroads don't like it. It's very controversial. 349 00:23:35,880 --> 00:23:39,040 Speaker 3: It's been the statute has been of almost no use 350 00:23:39,080 --> 00:23:43,360 Speaker 3: for the last forty years. There have been pending rules 351 00:23:43,400 --> 00:23:47,959 Speaker 3: before the STV since twenty ten, pending requests for rules 352 00:23:48,640 --> 00:23:51,520 Speaker 3: to loosen up the standards by which the board can 353 00:23:51,640 --> 00:23:57,760 Speaker 3: order this competitive access from runway road to another. It's 354 00:23:58,200 --> 00:24:01,080 Speaker 3: sort of laying dormant by the time I became chairman, 355 00:24:01,240 --> 00:24:04,800 Speaker 3: and in my view, increased competition is one of the 356 00:24:04,800 --> 00:24:07,639 Speaker 3: best things we can do for the country's economy and 357 00:24:07,680 --> 00:24:11,159 Speaker 3: for the shippers that rely on railroads. So we have 358 00:24:12,119 --> 00:24:17,000 Speaker 3: initiated a sort of reinvigoration of the consideration of how 359 00:24:17,000 --> 00:24:19,240 Speaker 3: to deal with reciprocal switching. 360 00:24:19,440 --> 00:24:21,760 Speaker 2: The Board proposed a new. 361 00:24:21,920 --> 00:24:25,320 Speaker 3: Rule and a new approach last September, and we're in 362 00:24:25,359 --> 00:24:27,960 Speaker 3: the comment period now. Actually, I think the comments on 363 00:24:28,080 --> 00:24:32,640 Speaker 3: the proposal have just concluded, and so the Board will 364 00:24:32,640 --> 00:24:36,639 Speaker 3: be grappling with those comments and the arguments back and forth, 365 00:24:37,200 --> 00:24:39,959 Speaker 3: and hopefully come up with a final rule in the 366 00:24:40,000 --> 00:24:45,800 Speaker 3: foreseeable future. The idea is to make it more feasible 367 00:24:45,920 --> 00:24:51,080 Speaker 3: for reciprocal switching to be implemented. But beyond that general concept, 368 00:24:51,119 --> 00:24:53,040 Speaker 3: I really can't go at this point. 369 00:24:52,840 --> 00:24:53,800 Speaker 2: Because it is pending. 370 00:24:55,960 --> 00:25:00,400 Speaker 1: Gotcha, I guess we'll change gears that you can talk 371 00:25:00,400 --> 00:25:06,320 Speaker 1: about something else. Can you talk about, you know, percisions, scheduling, 372 00:25:06,440 --> 00:25:11,359 Speaker 1: railroading bradly speaking, Wall Street loves it, shippers not so much. 373 00:25:12,040 --> 00:25:16,320 Speaker 1: Can you talk about, you know, the StB's view on 374 00:25:17,400 --> 00:25:20,160 Speaker 1: ps R if you have one, and do you think 375 00:25:20,200 --> 00:25:23,280 Speaker 1: the industry has been better off or worse off since 376 00:25:23,440 --> 00:25:26,480 Speaker 1: most of the rails have implemented some sort of ps 377 00:25:26,640 --> 00:25:29,879 Speaker 1: R operating philosophy. 378 00:25:30,920 --> 00:25:35,159 Speaker 3: Well several points one, the Board has never taken a 379 00:25:35,200 --> 00:25:39,480 Speaker 3: position over PSR as a phenomenon pro or con or 380 00:25:40,640 --> 00:25:45,160 Speaker 3: have even considered it solely by itself. I rarely talk 381 00:25:45,240 --> 00:25:49,080 Speaker 3: about PSR or talk about whether I like it. 382 00:25:49,160 --> 00:25:52,199 Speaker 2: Or don't like it, because I don't really know what 383 00:25:52,240 --> 00:25:52,560 Speaker 2: it is. 384 00:25:52,760 --> 00:25:56,199 Speaker 3: Every time you ask the railroad what is PSR, you 385 00:25:56,200 --> 00:26:00,240 Speaker 3: got a different answer between railroads. Sometimes different answer is 386 00:26:00,280 --> 00:26:06,200 Speaker 3: from the same railroad. The concept of scheduling when trains 387 00:26:06,240 --> 00:26:09,760 Speaker 3: are supposed to move is hardly new. It's been around 388 00:26:09,800 --> 00:26:13,920 Speaker 3: since the industry began. Part of it is a matter 389 00:26:14,000 --> 00:26:20,240 Speaker 3: of emphasis, but what really, in my view, describes the 390 00:26:20,280 --> 00:26:24,520 Speaker 3: phenomenon of PSR is it was really an excuse by 391 00:26:24,560 --> 00:26:29,640 Speaker 3: the large railroads to cut their resources. But the only 392 00:26:29,720 --> 00:26:32,480 Speaker 3: common factor I can see is that generally speaking, it 393 00:26:32,520 --> 00:26:36,320 Speaker 3: has made for longer and fewer trains, thereby reducing the 394 00:26:36,400 --> 00:26:40,400 Speaker 3: number of crew which led to this thirty percent reduction. 395 00:26:40,520 --> 00:26:43,399 Speaker 3: About forty five thousand railroad workers have left the scene 396 00:26:43,400 --> 00:26:44,480 Speaker 3: in the last ten years. 397 00:26:44,840 --> 00:26:45,960 Speaker 2: That's a huge reduction. 398 00:26:49,440 --> 00:26:53,280 Speaker 3: But longer trains don't always run efficiently. They often have 399 00:26:53,440 --> 00:26:56,680 Speaker 3: to there are no sidings long enough for one train 400 00:26:56,760 --> 00:26:59,000 Speaker 3: to pass another that can slow down service. 401 00:26:59,280 --> 00:27:01,480 Speaker 2: It's it's a very mixed bag. 402 00:27:02,480 --> 00:27:05,480 Speaker 3: I don't really care what they call it or how 403 00:27:05,560 --> 00:27:07,920 Speaker 3: many crew members they have, but it has not led 404 00:27:08,560 --> 00:27:12,920 Speaker 3: for many Many shippers have done most to improve service. 405 00:27:13,080 --> 00:27:15,120 Speaker 2: It's one of the phenomena that's led. 406 00:27:14,920 --> 00:27:18,320 Speaker 3: To all the cries about for service, which led to 407 00:27:18,359 --> 00:27:19,400 Speaker 3: our hearings. 408 00:27:20,600 --> 00:27:23,959 Speaker 2: So some railroads are now not even talking about it anymore. 409 00:27:24,000 --> 00:27:27,959 Speaker 3: They're just talking about improving their on time performance, which is, 410 00:27:28,160 --> 00:27:31,280 Speaker 3: in my view, you know what the game should be about. 411 00:27:34,040 --> 00:27:36,000 Speaker 2: Gotcha. Yeah. 412 00:27:36,040 --> 00:27:41,040 Speaker 1: Someone argue that before PSR, a lot of the railroads 413 00:27:41,080 --> 00:27:45,159 Speaker 1: would just build long, heavy trains and that created a 414 00:27:45,160 --> 00:27:49,440 Speaker 1: lot of inefficiencies in the network. And PSR is kind 415 00:27:49,480 --> 00:27:53,280 Speaker 1: of like a six sigma from operations for manufacturing that 416 00:27:53,440 --> 00:27:57,720 Speaker 1: was brought to the rail industry at Canadian National or 417 00:27:57,720 --> 00:28:02,399 Speaker 1: Illinois Central before that, and most of the rails have 418 00:28:02,480 --> 00:28:06,000 Speaker 1: kind of embraced, maybe not the whole philosophy, but have 419 00:28:06,240 --> 00:28:09,119 Speaker 1: embraced parts of it to try to be more efficient. 420 00:28:09,280 --> 00:28:11,919 Speaker 1: And there's a lot of debate about whether or not 421 00:28:12,480 --> 00:28:15,879 Speaker 1: it's been good or bad for shippers, but it's certainly 422 00:28:15,920 --> 00:28:19,440 Speaker 1: been good for rail operations and profitabilitation. 423 00:28:21,160 --> 00:28:23,280 Speaker 2: It depends what one means by efficiency. 424 00:28:24,080 --> 00:28:27,320 Speaker 3: If it means moving more tons of freight with fewer people, 425 00:28:27,920 --> 00:28:32,200 Speaker 3: that's probably the case. If it means moving that freight 426 00:28:33,440 --> 00:28:37,280 Speaker 3: in a timely way that's useful to the customers, that's 427 00:28:37,320 --> 00:28:40,960 Speaker 3: not happened as a result of PSR in my view. 428 00:28:41,800 --> 00:28:47,080 Speaker 2: So I'm always amused. 429 00:28:48,320 --> 00:28:52,120 Speaker 3: Lee by the Wall Street analysts who put out their 430 00:28:52,160 --> 00:28:55,480 Speaker 3: weekly reports about what's going on in the rail industry, 431 00:28:56,400 --> 00:29:00,840 Speaker 3: and when the number of workers goes down, they marked 432 00:29:00,880 --> 00:29:03,840 Speaker 3: that as a plus for that stock, and when the 433 00:29:03,920 --> 00:29:06,680 Speaker 3: number of workers goes up, they mark it as a minus, 434 00:29:06,920 --> 00:29:10,560 Speaker 3: which is exactly the opposite of what I think should 435 00:29:10,640 --> 00:29:13,480 Speaker 3: be the measure of whether a railroad is a good business. 436 00:29:13,080 --> 00:29:15,920 Speaker 2: To invest it. But I'm not in the investment business. 437 00:29:16,000 --> 00:29:19,959 Speaker 3: I could just see the results of poor rail service 438 00:29:20,000 --> 00:29:21,360 Speaker 3: from having too few workers. 439 00:29:21,760 --> 00:29:24,560 Speaker 2: But if you look at efficiency. 440 00:29:24,120 --> 00:29:27,040 Speaker 3: Or what the analysts called productivity, yes, the number of 441 00:29:27,080 --> 00:29:30,120 Speaker 3: tons for employee could go up if a number of 442 00:29:30,160 --> 00:29:33,240 Speaker 3: employees goes down, but that doesn't mean they're getting there right. 443 00:29:33,600 --> 00:29:35,120 Speaker 1: And I think you have to bring a bunch of 444 00:29:35,160 --> 00:29:37,400 Speaker 1: metrics to bear when you're looking at that. It's not 445 00:29:37,600 --> 00:29:40,280 Speaker 1: just the number of employees that you're looking at, it's 446 00:29:40,320 --> 00:29:42,959 Speaker 1: the number of employees per revenue. But then are they 447 00:29:43,000 --> 00:29:46,320 Speaker 1: also is there on time performance better? Is their dwell 448 00:29:46,400 --> 00:29:50,200 Speaker 1: time better? Is their velocity better? So I think you 449 00:29:50,240 --> 00:29:52,640 Speaker 1: have to look at from my perspective at least, you know, 450 00:29:52,680 --> 00:29:56,120 Speaker 1: when I'm looking at a railroad from from a financial standpoint, 451 00:29:56,400 --> 00:29:58,160 Speaker 1: you have to take all the metrics that they have 452 00:29:58,200 --> 00:30:03,480 Speaker 1: holistically versus just narrow on on heads. Because to your point, 453 00:30:03,680 --> 00:30:07,360 Speaker 1: you know, lower head count doesn't necessarily always mean good 454 00:30:08,160 --> 00:30:12,440 Speaker 1: for the company, for investors and for shippers, because we 455 00:30:12,520 --> 00:30:15,920 Speaker 1: really found that out on when the pandemic kind of 456 00:30:16,240 --> 00:30:20,280 Speaker 1: started and the railroads, like we mentioned earlier, really caught 457 00:30:21,000 --> 00:30:23,840 Speaker 1: flat footed and really struggled for a long time. And 458 00:30:24,240 --> 00:30:26,200 Speaker 1: they still have work to do, that's for sure, to 459 00:30:26,720 --> 00:30:30,280 Speaker 1: get service levels back to where they were before the pandemic. 460 00:30:30,320 --> 00:30:33,720 Speaker 1: But you know, from our vantage, I think what. 461 00:30:33,760 --> 00:30:38,920 Speaker 3: Gets overlooked by Wall Street analysts and observers often in general, 462 00:30:39,640 --> 00:30:42,440 Speaker 3: is that the health of the railroads is that something 463 00:30:42,480 --> 00:30:45,840 Speaker 3: that's important to the country in a vacuum. Somewhere around 464 00:30:45,840 --> 00:30:51,200 Speaker 3: thirty to forty of the economy depends on freight railroads people. 465 00:30:51,400 --> 00:30:54,080 Speaker 3: I think the average person would have no reason to 466 00:30:54,280 --> 00:30:56,560 Speaker 3: think about it or understand it. I didn't before I 467 00:30:56,600 --> 00:31:02,560 Speaker 3: got into this business. And oh, looking at what might 468 00:31:02,600 --> 00:31:05,280 Speaker 3: be good for rail stock doesn't tell you a thing 469 00:31:05,320 --> 00:31:10,000 Speaker 3: about what's good for the overall GDP and productivity. And 470 00:31:10,720 --> 00:31:14,120 Speaker 3: it's really a short sighted as a national policy, and 471 00:31:14,200 --> 00:31:16,560 Speaker 3: for anybody who's interested in the wellbeing of the country 472 00:31:17,400 --> 00:31:19,480 Speaker 3: just say, oh, well, look at the railroads. They're cutting 473 00:31:19,560 --> 00:31:23,200 Speaker 3: their workforce. Their stock price should go up, and I'm happy. 474 00:31:23,400 --> 00:31:26,520 Speaker 3: That's a very myopic view of what's good for the country. 475 00:31:27,920 --> 00:31:30,720 Speaker 3: I don't fault the stockholders. They're in the business of 476 00:31:30,800 --> 00:31:33,280 Speaker 3: trying to make money on their stock. But I do 477 00:31:33,440 --> 00:31:37,080 Speaker 3: fault people who should have more of an overview of 478 00:31:37,080 --> 00:31:40,240 Speaker 3: what's going on. And I do fault the rail management 479 00:31:40,280 --> 00:31:42,520 Speaker 3: because I think they have an obligation to the public 480 00:31:43,120 --> 00:31:45,120 Speaker 3: and the Congress has said so. 481 00:31:45,120 --> 00:31:47,560 Speaker 2: So it's not something that I made up. 482 00:31:49,240 --> 00:31:52,840 Speaker 1: Okay, you know, just to switch gears a little bit. 483 00:31:52,840 --> 00:31:55,880 Speaker 1: You mentioned the merger that you were I guess you 484 00:31:56,120 --> 00:32:00,440 Speaker 1: were fortunate enough to be at the STB know when 485 00:32:00,720 --> 00:32:03,040 Speaker 1: it was approved, because it might very well be the 486 00:32:03,120 --> 00:32:07,160 Speaker 1: last Class one merger between Canadian Pacific and Kansas City Southern. 487 00:32:08,200 --> 00:32:09,840 Speaker 1: Maybe I'm leading the way. 488 00:32:10,360 --> 00:32:12,600 Speaker 2: By fortunate, you mean it was an interesting challenge. 489 00:32:12,640 --> 00:32:16,600 Speaker 1: I agree, yes, yes, yeah, and it might be. You know, 490 00:32:16,880 --> 00:32:19,719 Speaker 1: so I might have been leading the witness here. But 491 00:32:20,520 --> 00:32:24,800 Speaker 1: do you think that another two Class one rails could 492 00:32:24,880 --> 00:32:27,880 Speaker 1: merge today the ones that are left, or it's just 493 00:32:28,160 --> 00:32:31,280 Speaker 1: from a regulatory standpoint, the hurdle is just way too high. 494 00:32:31,920 --> 00:32:37,640 Speaker 3: Well, let me comment somewhat indirectly, because it's theoretically possible 495 00:32:37,720 --> 00:32:41,640 Speaker 3: that such a merger could come before the Board, although 496 00:32:41,680 --> 00:32:45,280 Speaker 3: I probably wouldn't be while I'm on the board. In 497 00:32:45,360 --> 00:32:50,080 Speaker 3: two thousand or thereabouts, after all of the previous mergers 498 00:32:50,080 --> 00:32:53,080 Speaker 3: that reduced the number of Class one railroads down to seven, 499 00:32:53,920 --> 00:32:57,520 Speaker 3: the Board adopted a new set of regulations governing mergers 500 00:32:57,520 --> 00:33:02,880 Speaker 3: of Class one railroads, and they do present significant hurdles, 501 00:33:03,480 --> 00:33:06,840 Speaker 3: and I think it would be extremely difficult for any 502 00:33:06,920 --> 00:33:10,040 Speaker 3: two Class ones to meet those hurdles, but I can't 503 00:33:10,080 --> 00:33:12,360 Speaker 3: say whether they would try, or how the Board might 504 00:33:12,400 --> 00:33:15,880 Speaker 3: deal with it if that happened. But there are significant 505 00:33:16,840 --> 00:33:20,360 Speaker 3: regulatory hurdles for any further Class one mergers. 506 00:33:20,360 --> 00:33:22,040 Speaker 2: That's about as far as I think I can go. 507 00:33:24,160 --> 00:33:27,560 Speaker 1: Okay, and you mentioned maybe not while you're there. I 508 00:33:27,680 --> 00:33:30,680 Speaker 1: recently read that you're not seeking a second term at 509 00:33:30,720 --> 00:33:31,280 Speaker 1: the STB. 510 00:33:31,520 --> 00:33:33,120 Speaker 2: Is that correct? Yes? 511 00:33:33,360 --> 00:33:37,760 Speaker 3: My five year term expired on de Summer thirty one, 512 00:33:38,000 --> 00:33:41,720 Speaker 3: and by statute I can serve an additional year without 513 00:33:41,720 --> 00:33:46,440 Speaker 3: getting reappointed, and I intend to serve through the spring 514 00:33:46,520 --> 00:33:49,960 Speaker 3: and finish up some significant work that's pending there and 515 00:33:50,600 --> 00:33:54,760 Speaker 3: retire for the second time. I thought i'd retired before 516 00:33:54,760 --> 00:33:56,000 Speaker 3: I joined the board, but that. 517 00:33:55,880 --> 00:33:58,520 Speaker 1: Didn't work out right so this question might be a 518 00:33:58,560 --> 00:34:01,480 Speaker 1: little premature then, but is is there anything that you 519 00:34:01,560 --> 00:34:04,160 Speaker 1: kind of wish that you you did at the STB 520 00:34:04,320 --> 00:34:06,720 Speaker 1: that maybe you didn't have time or it was just 521 00:34:06,880 --> 00:34:11,480 Speaker 1: too hard to get done From a I don't know 522 00:34:11,520 --> 00:34:16,840 Speaker 1: if it's a bureaucratic standpoint or regulatory standpoint, or just 523 00:34:17,360 --> 00:34:20,560 Speaker 1: economic pressure standpoint that just it's just not in the 524 00:34:20,600 --> 00:34:22,480 Speaker 1: cards of getting getting done. 525 00:34:23,280 --> 00:34:25,839 Speaker 2: It's a good it's a good question. I would say 526 00:34:25,880 --> 00:34:26,720 Speaker 2: a couple of things. 527 00:34:27,760 --> 00:34:34,200 Speaker 3: First of all, people should understand that the regulatory agency 528 00:34:34,360 --> 00:34:39,680 Speaker 3: process is, by law one that is cumbersome and time consuming, 529 00:34:40,640 --> 00:34:44,839 Speaker 3: and I think that's appropriate. The industries that are regulated 530 00:34:44,880 --> 00:34:49,120 Speaker 3: by various agencies, certainly the rail industry, are extremely complex, 531 00:34:49,160 --> 00:34:53,480 Speaker 3: the economics are complex. There are a number of problems 532 00:34:53,480 --> 00:34:58,200 Speaker 3: in those industries that I think weren't regulatory activity. But 533 00:34:59,360 --> 00:35:03,759 Speaker 3: regulatory activity should be very carefully and incrementally parsed, in 534 00:35:03,840 --> 00:35:07,680 Speaker 3: my view. So the fact that the process is slow 535 00:35:08,440 --> 00:35:12,480 Speaker 3: can be frustrating, but has built in protections, I think 536 00:35:12,480 --> 00:35:15,960 Speaker 3: for the benefit of the public. So in that sense, 537 00:35:16,080 --> 00:35:20,640 Speaker 3: I'm not really frustrated by it. I would say Lee 538 00:35:20,640 --> 00:35:23,239 Speaker 3: that the longer I have been at the board, the 539 00:35:23,280 --> 00:35:28,040 Speaker 3: more I have understood and appreciated the difficulties in the 540 00:35:28,040 --> 00:35:32,080 Speaker 3: industry and the potential for the board the regulatory activity 541 00:35:32,120 --> 00:35:34,719 Speaker 3: to perhaps improve the lot of the. 542 00:35:35,400 --> 00:35:37,600 Speaker 2: Really of the economy as a whole. That is what 543 00:35:37,640 --> 00:35:38,920 Speaker 2: I think our mandate is. 544 00:35:39,719 --> 00:35:43,759 Speaker 3: And so yes, there's a lot more that I would 545 00:35:43,800 --> 00:35:48,080 Speaker 3: have liked to have tackled. But you know, I could 546 00:35:48,080 --> 00:35:50,920 Speaker 3: be there fifteen years, which wouldn't be legal because you 547 00:35:50,920 --> 00:35:53,600 Speaker 3: can only serve two five year terms and still not 548 00:35:53,719 --> 00:35:57,760 Speaker 3: finish all the regulatory work that potentially could be done. 549 00:35:59,360 --> 00:36:02,239 Speaker 3: And I trust the people on the board will be 550 00:36:02,280 --> 00:36:05,520 Speaker 3: there after I go on, will continue the effort. I 551 00:36:05,520 --> 00:36:09,040 Speaker 3: think we all see that there are issues in the industry. 552 00:36:09,080 --> 00:36:12,560 Speaker 3: We have our own views, but I think there will 553 00:36:12,560 --> 00:36:17,280 Speaker 3: be continued efforts to improve the way freight rail serves 554 00:36:17,280 --> 00:36:17,920 Speaker 3: the economy. 555 00:36:19,560 --> 00:36:24,120 Speaker 1: Okay, and so what's what's next for you after the STB? 556 00:36:24,280 --> 00:36:29,120 Speaker 3: Might ask, Well, I am truly one of those people 557 00:36:29,120 --> 00:36:31,360 Speaker 3: who says I'm going to spend more time with my family. 558 00:36:31,400 --> 00:36:34,879 Speaker 3: I have a wonderful wife, I have three spectacular grandchildren, 559 00:36:34,960 --> 00:36:37,400 Speaker 3: and I have a lightly use set of golf clubs. 560 00:36:37,920 --> 00:36:41,080 Speaker 2: All of those things are in my future. 561 00:36:41,120 --> 00:36:43,960 Speaker 1: I hope, well, I hope you're able to lower your 562 00:36:43,960 --> 00:36:48,200 Speaker 1: handicap while you're while you're in retirement, and you know, 563 00:36:48,320 --> 00:36:51,760 Speaker 1: thank you for all you've done in public and private 564 00:36:51,800 --> 00:36:55,839 Speaker 1: markets for that matter. You know, appreciate hearing you over 565 00:36:55,840 --> 00:36:58,680 Speaker 1: the years during your time with the STV, especially some 566 00:36:58,760 --> 00:37:06,520 Speaker 1: of those contentious hearings that that you watched over well. 567 00:37:06,560 --> 00:37:09,759 Speaker 3: I enjoy the challenge and it's been very fulfilling and 568 00:37:09,920 --> 00:37:10,560 Speaker 3: very enlightening. 569 00:37:10,680 --> 00:37:11,800 Speaker 2: You know. It's a whole new. 570 00:37:13,239 --> 00:37:16,920 Speaker 3: World that opened up to me over the last five years, 571 00:37:17,960 --> 00:37:20,759 Speaker 3: and I am impressed with the value, the benefit and 572 00:37:20,800 --> 00:37:23,000 Speaker 3: the important so freight rail to the country. 573 00:37:23,040 --> 00:37:24,439 Speaker 2: I am a big fan of freight rail. 574 00:37:24,520 --> 00:37:27,560 Speaker 3: I think most of the CEOs don't see it that way, 575 00:37:27,600 --> 00:37:29,400 Speaker 3: but I am. 576 00:37:29,760 --> 00:37:30,120 Speaker 2: Okay. 577 00:37:30,120 --> 00:37:33,879 Speaker 1: Great well, Chairman Orman, thank you very much for being 578 00:37:33,920 --> 00:37:39,120 Speaker 1: on the podcast. I much enjoyed it least all right, Well, 579 00:37:39,120 --> 00:37:41,760 Speaker 1: thanks and thanks for tuning in. If you liked the episode, 580 00:37:41,840 --> 00:37:44,759 Speaker 1: please subscribe and leave a review. We've lined up a 581 00:37:44,840 --> 00:37:47,520 Speaker 1: number of great guests for the podcast. Check back to 582 00:37:47,640 --> 00:37:52,640 Speaker 1: hear conversations with c suit executives, shippers, regulators, and decision 583 00:37:52,719 --> 00:37:56,160 Speaker 1: makers within the freight transportation markets. Please follow me on 584 00:37:56,200 --> 00:37:58,799 Speaker 1: LinkedIn and Twitter. Also, if you have any ideas for 585 00:37:58,880 --> 00:38:02,000 Speaker 1: future episodes, hit me up on the terminal or on 586 00:38:02,040 --> 00:38:05,360 Speaker 1: Twitter at logistics Lee. Thanks a lot, and be safe 587 00:38:05,400 --> 00:38:05,799 Speaker 1: out there.