Washington — Plastics materials companies and their lobbyists urged federal regulators in an Oct. 11 hearing to take a tougher line with railroad CSX Corp., and said they continue to be plagued by severe problems at the rail carrier.
Executives with Chemours Co., DowDuPont Inc., Occidental Chemical Corp. and the American Chemistry Council paraded before an unusual hearing at the Surface Transportation Board, called to look at service problems since E. Hunter Harrison was named CEO by CSX in March after a boardroom fight.
STB is an independent federal agency charged with regulating rail rate and service disputes, and reviewing rail mergers.
They were joined by representatives from many industries, including carmakers, mining companies, paper and fertilizer makers and farming and agriculture firms.
"The events over the last five months have cost Chemours dearly," said Kevin Akers, category manager for rail at Chemours.
He said, for example, that 53 percent of the rail shipments to the company's factory in New Johnsonville, Tenn. — its largest rail service point — were delayed between May 1 and Aug. 31.
STB officials seemed familiar with the complaints. Acting Chairwoman Ann Begeman told the hearing she had been at the New Johnsonville plant the previous week.
Akers said Chemours has spent more than $1.3 million on rerouting and shipping by truck alone, in addition to other workaround strategies.
"We altered production schedules to compensate for lack of delivery," Akers said. "We reduced run rates and changed formulations to keep our plant running."
PVC maker Occidental Chemical Corp. said its problems with CSX shipments increased dramatically in the last few months, with service issue reports tripling to more than 30 a month.
"Over the past several months OxyChem has experienced significant CSX service disruptions at multiple locations," said Robin Burns, vice president of supply chain at the Houston-based company.
A major problem for the resin companies is that, in many cases, their factories are captive to only one railroad, drastically limiting shipping options, the executives said. Chemours, for example, said 96 percent of its facilities are served by one rail carrier.
The industry seeks other choices when it can. Having access to two rail carriers was a factor for Shell Chemical LP's decision about where to build a massive new $5 billion petrochemical and plastics complex, near Pittsburgh, according to Cal Dooley, CEO of the Washington-based American Chemistry Council.
"One of their determinations on where to locate... [was] it had to be served by more than one rail line and had to have access to barge traffic in order to try to overcome some of the vulnerabilities to being captive to one rail line, which has had a significant adverse impact on the bottom line of our companies," Dooley said.
Several resin company officials said problems began when CSX pushed too fast on implementing a new operating system, or what CSX CEO Harrison described as "precision scheduled railroading."
Harrison, a 72-year-old industry veteran who engineered financial turnarounds at other large railroads before joining CSX, told the board that precision scheduling will, over time, help turn the railroad around and lead to greater efficiency and better service.
But he also told STB that this year's boardroom fight at Jacksonville, Fla.-based CSX, which saw Harrison installed as CEO by activist investors, created difficult conditions. The company had laid off 1,000 employees shortly before his arrival, he said.
"Just to be bluntly honest about it, I didn't walk into CSX with a red carpet waiting," he said. "I was there clearly, I think it was one reason, that was shareholders. Right or wrong, it was shareholders.
"A week before I got there 1,000 people were taken out," he said. "So it wasn't the best place to start from."
Harrison apologized several times during the hearing for the service problems, and said the railroad was working very hard to improve service and communication.
Harrison and CSX maintained that conditions have improved in the last 30 days, a point that some chemical industry executives acknowledged. But the resin executives generally said they were small improvements and service was not back to 2016 or pre-crisis levels.
An executive with DowDuPont told STB that "the company remains very concerned with the effectiveness and the resiliency of the CSX precision service model."
The chemical industry also said it believed similar problems could happen again in the rail industry unless STB takes a tougher line, including formally investigating the problems at CSX, the country's third-largest railroad.
Dooley said the shale-gas-fueled boom in chemical industry investment will put more strain on the transportation system.
Dooley and others urged STB to change how it regulates railroads, including putting in place rules that allow companies like ACC members easier access to other rail carriers. He said Congress gave STB those instructions in its last reauthorization of the agency, in 2015.
"The reality is most ACC members that ship or receive materials on CSX have no competitive transportation options available to them," he said. "One of the best ways for the STB to head off future service problems would be for STB to enact overdue reforms and promote greater rail to rail competition."
