Whither the railroads in 2017?

It’s not all gloom and doom for the railroads in 2017. Whether you come at it from the point of view of a railfan, or from the point of view of the railroad business itself, there is plenty about which to be optimistic. Let’s take a look at a few gloomy areas and find the bright spots.

In 2017, reciprocal switching and/or open access will be heard from again . . . and again. The freight railroads will tell you that this is the beginning of railroad Armageddon, that reciprocal switching will result in service interruptions, an increase in complexity of operations, safety concerns, and the letting of the proverbial horse out of the barn.

Darkness looms over anything that the freight railroads see as limiting the freedom given to them by deregulation. I’m not so sure that this point of view is a good thing for the railroads to have. Reciprocal switching will make them work harder to find economies and remain competitive. Captive shippers will get the opportunity to have more than one railroad bid on loads. The reduced cost of shipments could result in more goods traveling by rail, and this would be a good thing for railfans who like to see lots of freight cars on their merchandise trains. For the general public, this could mean fewer trucks on the Interstates and better training for the remaining truck drivers.

The proverbial horse running loose on the property, according to the railroads, leads to re-regulation of certain commodities and/or price caps on certain commodities. There is no doubt in my mind that some serious consideration will be given to price caps or schedules in 2017. The railroads brought this on themselves when they decided that the best response to a downturn in loads is an upturn in rates. The bright side is that I don’t think the Surface Transportation Board will abide renewing the draconian methods by which the old Interstate Commerce Commission kept a stranglehold on the railroads. Adjunct to this bright spot is the reluctance of the STB and the Justice Department to view any new big railroad mergers in a positive light.

Will the second and third quarter 2016 intermodal decline continue in 2017? Intermodal is a strange beast with a lot of components depending on a lot of players: Truckers, ocean shipping, ports, the success of the revamped Panama Canal, Asian politics, the price of fuel, and the availability of suitable containers, to name a few. The traditional model of box containers with volume measured on the twenty-foot equivalent may be passé, and I expect we’ll see a few proposals to change this. More short-haul intermodal is certainly a likelihood in 2017, if the railroads can figure out how to turn a profit from it. If not, the truckers get the gravy and the American public gets the shaft in terms of more short-haul trucks on the roads, particularly in the East where the canal will allow more ships from the Pacific Rim to unload.

(Soon to be) President Trump is a bright spot. He’s a friend of commerce, and commerce in America means railroads. He’s also a friend of jobs and infrastructure improvements, and of spending private money to get where traditional politicians think only the government can take us. It can only mean an upturn in rail and an improvement in the regulatory atmosphere for rail infrastructure improvements. It would not surprise if, in 2017, Positive Train Control gets another kick down the road so that the system can be done right instead of done fast, Chuck Schumer and Nancy Pelosi be damned.

We’ll probably see a continued decline in rail shipments of coal and other energy commodities in 2017. Until Trump gets new energy policies in place, the momentum is toward renewables and natural gas, neither of which get shipped by rail. Fear not, however, as it will be decades before we can run this country on solar or wind power unless a holy war throws us back into the stone age. In which case we won’t need railroad, either.

Oil will probably not boom again in 2017, but that’s okay. Pipelines are a better and more efficient way to carry petro products. I think that the recession gave the greenies a taste of what happens when pipelines can’t get built. And like coal for electricity, it will be decades before we can run this country without oil, even if that is determined the best way to go. The bright spot here? As electric cars come into vogue, the safe shipment of batteries to assembly plants and the movement of the chemicals needed for battery manufacture, themselves mined commodities in some cases, will be added to railroads’ traffic bases.

Environmental? We should all like that Tier 4 and 4-final locomotive emissions have come upon us while the railroads are profitable, while they have a large backlog of non-compliant but upgrade-ready units, and while traffic is slowing. In 2017, look for the EPA under President Trump to relax some standards and deadlines, much in the same way I expect the deadline for PTC to be moved back. It’ll happen eventually, benefit us all, and keep trains moving for years to come; but 100 percent compliance won’t come in 2017.

I don’t expect labor to be a big problem for the railroads in 2017. During the traffic downturn, many operating employees have been furloughed, but this is a cyclical given in the railroad business. The railroads are still flush, despite the downturn, and the railroads are one of the few remaining big=ticket industries where the labor unions can still demonstrate some muscle. I expect any disputes to be settled with both sides coming away satisfied, if not happy, and any negotiations to be of short order and settled well in advance of any strike deadlines.

That about covers it for freight rail. I’m planning to discuss the new year for passenger rail in my next blog, which is scheduled to appear January 18, 2017, in the NARP Hotline Midweek Brief. (See link on main page.)

Optimism: Railway volume turned up at the end of calendar 2016. Happy New Year.

©2017 – C. A. Turek – mistertrains@gmail.com

(Charles A. Turek is a writer and novelist based in Albuquerque, NM. After four decades working in areas of the insurance industry related to transportation, he now writes on all aspects of American railroading. Charles is a political conservative but believes in public funding of passenger rail as a part of the federal government’s constitutionally conservative obligation to provide for defense and public infrastructure so that private enterprise may flourish.)