California Propeller Clubs’ meeting focuses on railroads’ impact on California ports

The Propeller Clubs of Northern California and of Los Angeles and Long Beach convened a joint forum to discuss the impact of U.S. railroads on California ports.

On September 14^th, maritime stakeholders from Northern and Southern California attended the virtual event where they heard the following reports:

Jessica Alvarenga, government affairs director Pacific Merchant Shipping Association (PMSA), reported that average rail dwell time for containers moving on rail destined for Midwest destinations from the Ports of Los Angeles and Long Beach averaged “11.8 days in June.”

However, on September 17^th, PMSA reported the rail dwell time had declined to 8.2 days:

“Dwell time in August for containers leaving via rail was down compared to the month before. The railroads worked hard to drop the average dwell time for containers leaving via rail to 8.2 days, down from 11.3 days in July. 42.7% of containers leaving on rail remained on terminals for more than 5 days, also down from 53.4% the month before.”

In January of 2021 the average rail dwell time at the two Southern California ports was “7.9 days,” Alvarenga said.

She explained that the rail dwell time is measured from the time the container “leaves the terminal once it’s been offloaded from the vessel” until the container departs by rail for Midwest destinations.

Port of Oakland

Ron Brown, maritime marketing representative for the Port of Oakland said the Port is not congested and can handle more rail freight so as to relieve congestion at the Ports of Long Beach and Los Angeles: “We really can handle quite a bit more IPI [Rail] cargo through Oakland. Right now, Oakland is not congested either by rail or at the terminals. We don’t have any vessels at anchor or any drifting… The two Class 1 railroads have their facilities right at the Port.”

Brown said that the Port will be able to handle more ships in the future thanks to recent initiatives to hire and train more longshore labor. He cited the following:

• 300 longshore workers have been elevated to A & B status.
  
• 150 more skilled workers are being trained.
  
• 950 casual workers are being hired.
  

The Port of Oakland reported on September 17th that import cargo volume edged up in August while the number of vessel services has been reduced. The Port said it “received the equivalent of 97,850 20-foot import containers in August. That was up 1.6 percent from August 2020.”

The Port “contrasted rising imports with a 40% drop in the number of container ships calling at Oakland … 68 ships arrived in August, compared to 113 a year ago.”

The Port attributed “declining vessel calls to ship diversions earlier this year. Several carriers rerouted vessels to avoid congestion at West Coast ports that resulted from surging import volume.”

Dave Arsenault, president of both GSC Logistics and the Propeller Club of Los Angeles and Long Beach, said: “We felt that this event was a clear sign of collaboration between the Propeller Club of Los Angeles and Long Beach and the Propeller Club of Northern California and that really falls into my theme for today: cooperation and collaboration.”

He said that there has been “a lot of finger-pointing about who is responsible for breaking the supply chain that caused the congestion. The truth is that it has been a perfect storm of what’s happened and all the supply chain partners need to work together to solve the congestion problem.”

Arsenault added: “it would be a tragedy for us to go through this pandemic and not take any lessons learned to change behaviors that improve the overall system.”

Domino effect

Weston LaBar, head of strategy at Cargomatic, cited how rail service restrictions by the Burlington Northern Santa Fe (BNSF) and the Union Pacific (UP) railroads, had a domino effect on the ability to move cargo out of the two ports:

“The BNSF put an embargo on the number of containers that could be taken in so that if I have 100 containers to move but only ingate 10 containers I have a math problem. At a certain point in time, you get overflow. Then we have yard shortages. We have chassis shortages… When the rail head’s not accepting then you’re draying your containers to a holding yard until the yard’s full or you’re leaving the containers on the terminal which creates congestion at the terminal and the inability to return empty containers or to accept more imports at certain times.”

LaBar noted that Union Pacific suspended rail service from Los Angeles and Long Beach in July: “Right before the UP decided to shut down for seven days from West Coast ports to Chicago, I spoke with one terminal operator that had 5,000 on-dock containers on his terminal and many of the containers had been there in excess of four weeks. That tells you about the spot crisis and the (rail dwell time) issue that Jessica (Alvarenga) was talking about.”

Ramon Ponce de Leon, president of International Longshore and Warehouse Union (ILWU) Local 13, represents harbor workers at the Ports of Los Angeles and Long Beach. He said the union was working with terminals to do whatever was possible to address congestion issues. He said additional hiring and training of longshore workers was ongoing. De Leon said he was supportive of efforts to move blocks of rail bound containers to rail yards to speed up rail departures.

De Leon agreed with LaBar that space has been part of the problem during the current congestion period. He says that expanded cargo storage areas outside the two Ports is an option: “I’m working with terminals to find landing spots in local areas where they’re willing to invest in some property and relieve the congestion.”

Limitations of Rail Investment

Michael Sussman, CEO, Strategic Rail Finance and chairman of OnTrackNorthAmerica, a transportation think tank, argues that U.S. railroads are not entirely to blame for the dislocations that have impacted rail operations in the U.S. today:

“There has been a conscious effort by the federal government to build up the highways and to, in effect, subsidize trucking while the railroads finance their infrastructure out of their own pockets. The result is that as [railroad] companies became bigger and as they depended on shareholders and investors for future investment the horizon for carrying freight became more focused on bigger shippers, longer consists [trains] and less service to destinations that generated smaller loads.”

Precision Scheduled Railroading (PSR) has been used by the railroads to focus on profitable routes and was the logical extension of this finance driven system: “PSR became a natural outgrowth of this and the accelerated cutbacks in the last five years have been huge. PSR strategies succeed by decreasing overhead expense and increasing asset utilization. Overhead reductions inevitably impact staffing of marketing support and industrial development. The Class 1s presently meet profit goals by reducing operating and capital expenses rather than through top-line revenue growth from new customers…. This has gotten to the point where you see the Surface Transportation Board now calling for some regulation to encourage competition and more service.”

Sussman says: “The railroads would like to be able to regain market share, but they cannot do this with a total reliance on private finance. There needs to be public investment and in exchange for those public investments there needs to be an expansion of services to smaller markets and more services to exporters who may not have access to rail heads.”

Sussman says that a National Freight Strategy is necessary to rationalize and improve rail and other transportation resources and better direct infrastructure investments.