A Little Carrot, A Little Stick

By Jim Mathews / President & CEO

I’ve done a few press interviews this week with reporters working on stories about the Justice Dept.’s recent civil enforcement action against Norfolk Southern accusing the railroad of violating Amtrak’s legal right to preferential dispatching. They all ask some variation of the same question: why this railroad, and this route, and why now?

Trains are late everywhere, often, so why single out Norfolk Southern and the Crescent? Especially when you consider that as Amtrak was deciding how they’d pursue their first late-trains action at the Surface Transportation Board, they landed on going after Union Pacific -- not Norfolk Southern -- and the Sunset Limited, not the Crescent.

The simple answer is that even among the many Class I railroads to choose from, Norfolk Southern stuck out far enough to attract attention. In the second quarter of Fiscal 2024, Union Pacific and Norfolk Southern notched the highest number of host-responsible delay minutes per 10,000 train miles among the Class I railroads. UP faces scrutiny at the STB, and now N-S faces a DOJ action in a D.C. Federal District Court. UP and N-S were both well over 1,100 delay minutes per 10,000 train miles during the most recently reported fiscal quarter; compare that with CPKC at just a shade over 500.

During that same quarter, Norfolk Southern’s rate of freight train interference delays was four and a half times larger than CPKC’s. At 486 minutes, N-S has more freight train interference minutes per 10,000 train miles in the second fiscal quarter than any other Class I carrier, and about 20 percent more than the railroad with the next-highest rate of freight train interference (BNSF).

Despite the worries of some folks, I don’t think this is a portent of a whole wave of STB or DOJ actions against the Class I railroads. DOJ has only done this once before in Amtrak’s entire history, in 1979. A DOJ enforcement action is clearly a last resort and not a first or even a fifth or sixth step in getting trains running more closely to on time.

Moreover, a look at how the beleaguered Sunset Limited has behaved since the STB action began is instructive. It got dramatically better in the first fiscal quarter of 2024 – in fact, the westbound Sunset came within four percentage points of meeting the Federal customer on-time performance (OTP) standard. And in the second quarter, the Sunset stayed high up in the table, making the FRA’s “most improved” list for a second quarter in a row.

When the worst offender finds their legal team responding to months of interrogatories from Federal regulators with the power to impose fines and penalties, not only does the Sunset get better, it climbs to the very top of the Federal Railroad Administration’s “most-improved” list. This is not a coincidence.

So, what happens next with the Norfolk Southern case? Well, this week the Justice Dept.’s lead litigator for the action filed her paperwork with the District Court affirming that she would be leading this effort. We’re waiting to see some more preliminary information find its way into the docket.

But in the meantime, we’ve also heard from some dismayed N-S shareholders who tried to get the Norfolk Southern board of directors in 2020 to “assess our Company’s compliance” with the preference clause. The N-S legal team went to the Securities and Exchange Commission and secured a ruling that permitted them to block that shareholder initiative from consideration at the annual meeting. Some of the shareholders were -- and are -- members of this Association.

It's hard not to wonder what might have happened if the shareholders had gotten their way and the N-S Board really did assess their preference-clause compliance. Now Judge Amy Berman Jackson may get the chance to assess Norfolk Southern’s compliance in a venue that I would guess N-S leadership would prefer not to have chosen. I say “may” because I think there’s a high likelihood that N-S settles this case, enters into some kind of agreement with DOJ, and promises to run a tighter railroad.