Norfolk Southern President and CEO Alan Shaw didn’t start out working for the railroads. Shaw graduated from college with a degree in aerospace engineering and one of his first jobs was working in shipbuilding in Newport News, Virginia.
In late fall 1989, about the time of the fall of the Berlin Wall, Shaw had gotten a job supporting the U.S. Navy in its effort to install nuclear reactors on the USS George Washington. It was there that Shaw said he learned about what it means to have zero tolerance for operational failures.
The Nuclear Navy program for propulsion that was overseen by former Adm. Hyman Rickover “set an incredibly high standard. [Rickover] knew that if there was a reactor release, it would be the end of the Nuclear Navy. So, the Nuclear Navy just celebrated 75 years and there has been no reactor release that’s harmed the environment or harmed the personnel,” Shaw said at the North American Rail Shippers annual conference in Chicago last week.
That experience working for the Navy informed Shaw — who has gotten flak for the Feb. 3 derailment of an NS train in East Palestine, Ohio — of how he wants to treat operational safety at NS, especially since the Navy and the rail industry share some similarities: both are decentralized operations that run 24/7 with about 80% of employees involved in working with heavy machinery.
NS (NYSE: NSC) announced last week that it has appointed Atkins Nuclear Secured, a member of the SNC-Lavalin Group, to conduct a review of the railroad’s safety culture.
“They’re going to spend about two or three years at Norfolk Southern reporting directly to me on advancing safety at NS. That’s how seriously I’ve taken it. I’m taking it personal. We’re going to be the gold standard in safety in the rail industry,” Shaw told conference attendees.
The topic of rail safety was one of the dominant themes expressed by presenters at the conference, in part because of the assumed likelihood that rail industry stakeholders will need to comply with new safety regulations brought forth in response to East Palestine. The rail industry has also been subject to broader public scrutiny over how the industry handles operations and train derailments.
One federal action has been congressional efforts to pass rail safety legislation. The Senate Commerce Committee recently passed a bill introduced by Ohio Sens. J.D. Vance and Sherrod Brown and others on rail safety. That bill is awaiting debate on the Senate floor.
Conference speakers, including Shaw, noted that the industry stakeholders, including the railroads, rail equipment manufacturers and rail shippers, have been working with Senate staff on the bill, such that the bill that passed the committee contains more language than the legislation that was first introduced.
While there are elements of the bill that the railroads don’t agree with, such as language calling for train crew sizes of at least two people, “a lot of the [bill’s provisions] make a whole lot of sense. They really do. And I don’t think they’re going to be that onerous for the rail industry and for our customers,” Shaw said.
Union Pacific (NYSE: UNP) President and CEO Lance Fritz also mentioned the industry’s involvement in crafting the rail safety bills before Congress. For Fritz, the rail safety bill needs to allow the industry some flexibility and opportunity to utilize developing technologies that could modify or enhance rail operations or inspections.
“We’re working very hard as a company and as an industry to help our regulators understand where they can help and where they can hurt,” Fritz said. “And in regulating, understanding the cost benefit really is important, [as well as] allowing us the flexibility to solve the problem differently 10 years from now than how we’re going to solve it today.”
BNSF (NYSE: BRK-B) President and CEO Katie Farmer said: “What I can tell you is that we have been working as an industry collaboratively with Congress. We have the same goal. The same goal is to continue to improve rail safety, to continue to do things that make the rail industry safer. … What I would ask you all is to educate yourself about the proposed rail safety legislation and ensure that we’re doing things that are achieving that goal, which is around continuing to show a demonstrable impact to safety, science based and data driven.”
Rail safety and last fall’s showdown between the railroads and the labor unions as collective bargaining concluded may have put the rail industry into the national spotlight, but efforts to change railroading culture still may take time, according to CSX (NASDAQ: CSX) President and CEO Joe Hinrichs, who himself began his tenure at CSX last fall after working in the automotive industry for decades.
“I believe the industry will be better off coming out of this. It’s forcing us out to have to talk to each other about sharing best practices and doing things, which frankly our industry doesn’t do a very good job of in my opinion,” Hinrichs said. “And we have an opportunity to learn from this as well. A flowing yard that is not all backed up and a yard that you can move around in is a safer yard, and a safer yard is when the trains are moving and they’re not all jammed up.
“So all these things fit together. It sounds really easy. But it’s 196 years of history and lots of change over the last less than a decade.”
Other rail safety issues the industry is keeping tabs on
Tank car owners and manufacturers are watching how the rail safety bill addresses the transport of hazardous materials.
So far, the Vance-Brown bill in the Senate calls for Class 3 flammable liquids to be transported in DOT-117 tank cars by Dec. 31, 2027, instead of the 2029 deadline set in existing regulation.
Rail car lessor and manufacturer Trinity Industries (NYSE: TRN) expects to meet the deadline set forth in the Senate bill, according to Jean Savage, Trinity president and CEO.
“When you look at the overall fleet left to be converted in North America, there’s about 30,000 cars that have to be converted. In my own fleet, I’ve got just under 3,000, so 84% of my fleet is already converted,” Savage said.
“You know the car owners have to make a decision. You can either replace those cars with new cars or you can go through a modification and update those cars. I think that if they keep the timing to mid-’28 or the end of ’27, there should be enough capacity in the industry to address those cars. … When you look at the performance of the cars that have gone through different incidents, they performed very, very well with this update. I think the designs on increasing the head and the double jacket are paying off. And I think [the tank cars] will continue to be a safe way to move.”
Meanwhile, short-line operators are watching a supply chain bill that includes provisions to increase truck weight limits under certain conditions. That bill passed the U.S. House Transportation and Infrastructure Committee last week. Short lines argue that increasing truck weights could have detrimental effects on the short-line railroads.
“It will have a devastating impact on our business, our competitiveness, on road conditions, on the environment. We’re obviously much more environmentally friendly [and safer than] trucks … so we’re going to put up a good fight to prevent that from happening. We don’t think it’s the right thing for America — certainly not the right thing for our business,” said Dean Piacente, CEO of Omnitrax, a North American short-line operator.
“I know as buyers of transportation you’re looking for the best economic equation. But I think you also have to look at the holistic picture of what’s the best thing for America as well. And so we want to remain as competitive as we can and do the right thing.”
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