As the one-year mark of the infamous Norfolk Southern 38-car train derailment, subsequent toxic fire, and temporary evacuation of East Palestine, Ohio, rolled around, President Joe Biden still hadn’t visited the small town. But he was coming down the tracks.
“There is no date yet, but obviously, we’re working with community leaders. We’re working with the mayor, elected officials, to find the exact time and day to go in February,” White House press secretary Karine Jean-Pierre said in a late January press conference.
Norfolk Southern has reported the total bill thus far for the Feb. 3, 2023, derailment at about $1.1 billion. It has shed some of its workforce to help afford the continuing environmental and legal costs. Other freight railroads have faced increased technology costs to avoid future East Palestine-like disasters, though their profits appeared healthy.
Norfolk was the only one of five North American railroads tracked by the trade publication Railroad Weekly with a slight decrease in stock price year-over-year in early February, and even it was down by only .4%. Other railroads’ stock performance ran from a 5.2% increase for Canadian Pacific Kansas City at the low end to an 18.1% increase for Union Pacific shares.
One reason for the overall good performance of railroads is that the legislation they fear most, the Railway Safety Act of 2023, was still stalled in the Democratic-controlled Senate and considered a dead letter in the Republican-majority House.
Many Republicans see the bill not primarily as a safety bill but instead as a sop to railroad unions. Crew size had nothing to do with the East Palestine accident, but the bill would lock in a two-man crew requirement, for instance.
The proposal would also give immense power to Transportation Secretary Pete Buttigieg. Perhaps not coincidentally, he has been lobbying for the bill’s passage.
Amtrak Joe no more
However, the business forecast does not necessarily call for clear locomoting because the politics of rail are tricky, and this is an election year.
Just after the anniversary of the derailment, the Association of American Railroads issued a warning to the Biden administration. This shot across the bow was in the form of a letter by AAR President Ian Jefferies to Buttigieg.
The railroads’ letter to the head of the Department of Transportation called it “disheartening to hear those who know better misrepresent the industry’s safety record — and its continuing efforts to become even safer — in furtherance of their own agendas.”
Though he was not called out by name, it was crystal clear Buttigieg was one of “those who know better.”
To wit: “There was a time when this country tolerated multiple thousands of derailments per year,” Buttigieg said in an NPR interview that ran Feb. 3. “Now, even after all the reforms that have happened over the years, we’re still standing at roughly a thousand a year. That means every single day, on average, more than one derailment takes place. … And yet [the railroads] are incredibly profitable, almost ridiculously profitable, which means that the only pressure they’re going to get from shareholders is to keep it up.”
Jefferies shot back: “Some like to cite figures such as ‘1,000 derailments per year’ because it sounds alarming. But the reality, which you well know, is that more than three-quarters of those derailments are in rail yards or other low-speed tracks, akin to fender benders, not on the main rail lines that carry freight around the country.”
He added, “It is hard to see how the public interest is served by allowing the false notion that there are 1,000 East Palestine-type derailments a year to pervade public understanding.”
The railroads were optimistic about the Biden administration at the outset — with some reason. The president was known as Amtrak Joe due to his frequent trips to and from Delaware by rail when he was a senator for 36 years. He supported the Staggers Rail Act of 1980, which made modern, highly competitive freight rail possible, and had been generally supportive of rail.
“President Biden’s made it clear he’s a big rail fan, front and center,” Jefferies told the Washington Examiner in a March 2021 interview. “He’s an Amtrak fan, but he’s also said very supportive things of freight rail in general. … When we look at the kind of the macrolevel goals of the administration, whether it’s infrastructure investment, environmental performance, good-paying jobs, safe transportation, rail’s right there at the front and center of all those priorities.”
As for Buttigieg, the AAR president said at the time, “We’ve had the opportunity to sit down with him in an introductory fashion, and I think we have a lot of similar shared goals.” He believed that Buttigieg was likely to “operate in that same vein [as the president].”
Conflict coming down the tracks?
It wasn’t only the East Palestine disaster that seemingly soured the president on rail and the railroads on the Biden administration, though that didn’t help matters. Various players appointed by the president have been making things extremely difficult for the railroads.
Most famously, two Biden appointees to the National Mediation Board worked to declare an “impasse” at an early point in negotiations between the railroads and the railroad unions in June 2022 that was, historically, unprecedented. This led to the serious threat of a national rail strike, an eleventh-hour deal with record-high pay for workers that several unions rejected anyway, and further threats of a strike that had to be put down by an act of Congress.
There have been many more conflicts between various agencies of the Biden administration and the railroads. A draft paper with the ungainly title “The Ascertainable Standards That Guide and Limit the Surface Transportation Board’s Authority Over the Railroads” looks at several of these conflicts and argues they could spell trouble … for the regulators.
Authored by Bernard Sharfman, a research fellow at George Mason University’s law school, the paper looks at four complex matters taken up by the Surface Transportation Board. Those matters are a proposed rule on “mandatory reciprocal switching,” added “revenue adequacy constraints” for rate setting, a recent decision on “common carrier” obligations, and regulatory meddling in stock buybacks.
The paper finds in the Surface Transportation Board’s actions “a tendency by the current Board to prefer regulation over private contracting,” which could be “in direct conflict with the [Staggers] Act’s primary objective of minimizing regulation.”
Biden appointees ignoring this objective of the main law governing railroads could incline a “reviewing court” to determine that the STB “has acted in an ‘arbitrary and capricious’ manner or has crossed the boundaries of its statutory authority under the Administrative Procedures Act,” Sharfman warns.
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Normally, one legal researcher’s opinion would be just that. But these are highly polarized times for business as well as politics. The study could be a cudgel if the railroads decide to litigate.
To counter Biden administration regulators’ tendency to push the envelope, some firms have started pushing back in court. Rulings by the National Labor Relations Board, for instance, have prompted some businesses to challenge the basic constitutional structure of their regulator. The railroads could follow that same track.
