Railroads Accused of ‘Runaway Greed by ‘Liberal’ Watchdog

Written by William C. Vantuono, Editor-in-Chief for railwayage.com

On the same day that the House Transportation and Infrastructure Committee is holding a hearing on supply chain problems, while rail labor is in the midst of contentious contract negotiations, and while the Surface Transportation Board is conducting hearings on controversial subjects like reciprocal switching and Amtrak access, Accountable.US, described by general media outlets including NBC News as a “liberal watchdog” group, has a released a blistering 40-page attack on Class I railroads accusing them of unchecked greed and profiteering from the COVID-19 pandemic. Some industry observers are inferring the report has “labor’s fingerprints all over it.”

“The rail industry, which carries about 40% of U.S. freight, is dominated by just seven major railways [that] collected a record $1.18 billion in fees for freight stuck in supply chain bottlenecks in the first nine months of 2021 and has seen ‘a flurry of lawsuits’ over these charges,” Accountable.us writes in the report’s (downloadable below) summary. “Yet before the rail industry’s fees set a record during the pandemic, they had already increased by [more than] 30% since 2000, all while railroads’ costs have only increased by 3%.”

The report claims a 2021 Executive Order issued by President Joe Biden specifically targets railroads. It also points to Surface Transportation Board Chairman Martin Oberman’s activist stance on railroad service: 

“A key culprit for railroad profiteering has been the industry’s power to limit competition on the nation’s privately owned freight railroads while enjoying a unique exemption from antitrust laws. A July 2021 executive order from President Biden sought to confront the industry’s ‘aggressive pricing’ and anticompetitive behavior, enabled by its ‘monopoly power over sections of the country.’

“One of the most notable criticisms of railroads abusing their market power at the expense of American consumers and shippers has come from a key federal rail regulator, Surface Transportation Board Chairman Martin Oberman. In September 2021, Oberman condemned the industry’s ‘pursuit of the almighty OR’— referring to railroads’ efforts to slash their operating ratios by cutting costs. Oberman estimated that since 2010, the industry spent $46 billion more on stock buybacks and dividends than on maintenance and equipment investments, which would have increased the rail system’s resilience against the kind of supply chain shocks that are currently straining consumers’ wallets and access to everyday necessities. 

“An Accountable.US review has found that nearly all of the seven Class I railroads have enjoyed high profits amid the supply chain crisis while cutting costs, increasing shareholder handouts, and disclosing at least $9.37 million on lobbying related to competition, mergers, and Biden’s July 2021 executive order: 

  • “BNSF—Which Raised Its Freight Rates And Cut Its Operating Ratio In Q3 2021—Saw Its Net Income Jump By Double Digits As It Spent $80,000 Lobbying On ‘Rail Competition Issues’ In 2021 While Its Parent Company Spent $12.6 Billion On Stock Buybacks In The First Six Months Of 2021. 
  • “Union Pacific—Whose Increased Fees ‘More Than Offset’ Lower Freight Volume And Which Touted ‘Records’ For Cutting Operating Ratio In 2021—Had Its ‘Most Profitable Year Ever’ In 2021 Due In Part To Price Increases, Spent Over $10 Billion On Shareholder Handouts, And Nearly $3.8 Million Lobbying On Competition issues That Year, Including Biden’s Executive Order. 
  • “Canadian National—Which Touted Gains From Demurrage Fees And A Record Low For Its Operating Ratio In Q4 2021—Increased Its Net Income By 37%, Boosted Its Stock Buybacks By 317%, And Spent Over $1 Million While Lobbying On Merger Issues In 2021. 
  • “CSX—Which Credited Higher Fees For Its Profits And Cut Its Operating Ratio In 2021—Saw A 37% Jump In Net Earnings, Increased Stock Buybacks By 233%, And Spent Over $2.3 Million While Lobbying On ‘Rail Economic Regulation’ And Biden’s Executive Order. 
  • “Norfolk Southern—Which Increased Freight Rates While Touting An ‘All-Time Record’ Low For Its Operating Ratio In 2021—Saw Net Income Surge 27%, Increased Stock Buybacks By 143%, And Spent $1.8 Million While Lobbying On Antitrust Issues In 2021. 
  • “Canadian Pacific Railway—Which Has Been Subject To A Federal Inquiry Into Demurrage Fees And Is Trying To Acquire Another Class I Railway For $25 Billion—Saw Net Income Climb 17% To About $2.2 Billion While Spending $270,000 While Lobbying On Merger Issues In 2021.
  • Kansas City Southern—Which Has Claimed That Demurrage Fees Are “‘Not A Revenue Source That We Seek To Increase’” While Subject To A Federal Inquiry About Fees—Saw Q4 2021 Net Income Jump 258%, Spent $188 Million On Shareholder Dividends In FY 2021, And Spent $120,000 While Lobbying On Mergers In 2021. 

2021-02-01-Research-on-Railway-Pandemic-Profiteering-FINAL-1Download

Capital Research Center, which describes itself as “America’s Investigative Think Tank,” in a January 2020 article titled Accountable.US’s Unaccountable “Dark Money” Roots, said Accountable.U.S., formed by three “progressive watchdog groups,” is connected to Arabella Advisors, which claims to be a philanthropic organization but is actually a “dark money network”:

“Against a backdrop of corruption allegations and partisanship, three ‘progressive’ watchdog groups have formed Accountable.US to push back against corruption in the U.S government. This new ‘nonpartisan’ nonprofit will focus on preserving accountability and transparency ‘in the Trump era and beyond,’ according to the Huffington Post. But Accountable.US’s formation by Allied Progress, Restore Public Trust, and Western Values Project demonstrates anything but accountability and transparency, much less nonpartisanship, given their connections to Arabella Advisors’ ‘dark money’ network.”

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