Top Five Freight Stories, July 18, 2016

For those of us in the freight world, the tragic murder of so many innocents in Nice was especially heartbreaking as a tractor-trailer was transformed into a weapon in the hands of a madman. No doubt, pilots around the world felt the same way seeing the planes diving into the World Trade Center 15 years ago.  Freight is a dangerous business, but shouldn’t be a danger to others; so we have special reason to be mindful of the grieving among so many families in so many places.  For us, we can pay heed to the admonition of the fictional Sergeant Esterhaus of Hill Street Blues: “Hey, let's be careful out there.”

Memorial Bridge, ports among projects slated to get transportation grants (The Hill.com, July 6, 2016).  You may remember that the FAST Act created two new funding programs for freight projects—a formula program and discretionary grant program.  The discretionary grant program, the Nationally Significant Freight and Highway Projects program (which of course the USDOT named the Fostering Advancements in Shipping and Transportation for the Long-term Achievement of National Efficiencies, or FASTLANE grants) received 212 applications totaling $9.8 billion (only $800 million was available).  Last week, House and Senate authorizing committees received the required 60 day notice of grant awards from USDOT, and they triumphantly issued a press release about the projects, linking to the list of awards.  Notable about the list:  nothing awarded to Pennsylvania (House Chairman Shuster’s state), Texas or Illinois; a project awarded to San Diego rather something around the San Pedro Bay ports of Los Angeles and Long Beach.  You can find stories about some of the winning projects in these states:  Virginia, Louisiana, Oregon, Georgia, Maine, and Iowa.

Regulators, Industry Debate How Many It Takes to Run a Train (Wall Street Journal, July 14, 2016) Friday, the Federal Railroad Administration (one of my many former employers) held a formal public hearing on a rule they proposed back in March 2016 to require two crew members on all freight and passenger trains (with some provisions for keeping current one-man crew operations in place).  The railroads oppose the rule, believing that they should be able to decide on crew size through collective bargaining agreements.  Those labor agreements have reduced train crews from five in the 1960s to two: an engineer who operates the locomotive and a conductor who keeps track of the freight being carried and keeping track of dispatching instructions.  Some longer trains (up to 200 cars or two miles in length) can be difficult to manage with a one person crew, taking a long walk to check on problems or to “cut” the train when blocking a crossing.  Groups concerned about hazmat safety contend that two person crews can help secure hazmat crash scenes and work with emergency responders.  Frank Wilner, a rail expert with experience from the AAR, STB and the United Transportation Union (now the Transportation Division of the International Association of Sheet Metal, Air, Rail and Transportation Workers or SMART-TD), warns in Railway Age that limiting the possible productivity improvements of railroads through this rule may not be wise in light of the long term threat of driverless trucks, court challenges, congressional interference or a change in FRA Administrators.  SMART-TD leader John Babler led negotiations with BNSF to permit one person crews on routes with Positive Train Control (PTC) in exchange for higher wages and long term income protection for displaced workers, but the agreement was voted down by the rank and file.  Long term, Babler says, “It would be foolish to think railroads are going to spend $10 billion on PTC and not get some sort of crew-consist relief.”  Years from now, two-man crews may be a nostalgic memory, “the same way nobody still thinks we need cabooses on the backs of trains,” as put by long-time FRA Safety Office official Grady Cothen.

Upgrades to unsafe tank cars could take 15 years, board says (Associated Press, July 12, 2016).  In advance of a day-long workshop/roundtable discussion on rail tank car safety, National Transportation Safety Board Chairman Christopher Hart sent a letter to PHMSA regarding the pace of replacing rail tank cars used for crude oil transport by rail (CBR) as required by new PHMSA/FRA rules and provisions of the FAST Act.  Chairman Hart asked that railroads and tank car owners should be required to report on progress in retrofitting and replacing the older tank cars in favor of newer designs, otherwise, upgrading the cars "is left entirely to tank car fleet owners, and may be driven by market factor influences, not safety improvements."  Tom Simpson, with the Railway Supply Institute, noted that the demand for tank car replacements (thought to be in excess of manufacturing capacity) has abated due to reduced oil prices and pipeline expansions. “The need to modify or install new cars isn't as urgent as when the rule was issued," Simpson said.  The recent crash and fire of CBR tank cars in Mosier OR has returned the issue to the forefront.  Also this week, PHMSA issued proposed rules for Oil Spill response plans and information sharing for high-hazard flammable trains to mitigate effects of CBR crashes with hazmat releases.  USDOT Secretary Anthony Foxx said the proposed rule would “hold industry accountable to plan and prepare for the worst-case scenario."  The proposed rule would require railroads to position teams that can respond to oil train derailments within 12 hours, and the rule also includes a new testing method for determining the volatility of oil shipments (a particular issue with Bakken crude oil).

Hyundai Merchant Marine to Join 2M Alliance (Wall Street Journal, July 14, 2016) South Korean shipping line Hyundai Merchant Marine (HMM), seeking to stave off bankruptcy, joined the 2M shipping alliance, the world’s biggest container shipping group by capacity, led by Maersk Line and Mediterranean Shipping Co.  2M controls a third of the very valuable Asia-Europe trade route.   The move, accompanied by agreements from other carriers to reduce charter rates of ships HMM is leasing, was demanded by the Korean Development Bank and other creditors.  Korean competitor Hanjin Shipping Co. had joined “THE Alliance” in May, along with Japanese carriers Nippon Yusen K.K.,  Kawasaki Kisen Kaisha Ltd. and Mitsui O.S.K. Lines Ltd.; Germany’s  Hapag-Lloyd AG; and Taiwan’s  Yang Ming Marine Transport Corp.

Amid weak demand, trucking hits hiring roadblock (Journal of Commerce, July 11, 2016) Overall hiring in the trucking industry is just a bit off its all-time high (January 2016), and still above pre-recession levels, but the seasonally adjusted JOC For-Hire Trucking Employment fell to 100.4 in June, down from 100.9 in May.  Seasonally adjusted hiring is off 12,300 since this January.  Responding to weak freight demand, major firms are operating fewer trucks, and Class 8 truck orders were down in June 34% year over year, the worst June since 2009.  All this gloomy economic news for freight carriers is causing weaker trucking firms to go out of business.  Avondale Partners LLC estimates that 120 trucking companies went out of business in the second quarter of 2016, compared to 70 firms a year ago.  Low diesel prices in 2015 allowed many firms to stay in business, as only 310 ceased operations last year, the lowest number of failures since 1986.  Railroads are also reducing headcounts, with 1,600 fewer jobs in June and 29,600 less over the past twelve months.   The Bureau of Labor Statistics reported that overall June job growth was higher than expected, a welcome change after a weak May report.  However, most of the job growth came from the service sector, including retail and hospitality.  Scott Paul, President of the Alliance for American Manufacturing, said, “This month’s job figures come as a mild relief after May’s dismal numbers. But while the overall economy grew, manufacturing and import-sensitive sectors in particular are still lagging behind,” which will offer little help for the transportation sector.