Q&A: Chris Jahn, President & Chief Executive Officer, American Chemistry Council

Logistics Management Group News Editor Jeff Berman spoke with Chris Jahn, President & Chief Executive Officer, at the Washington, D.D.-based American Chemistry Council (ACC). Topics covered included: the proposed Union Pacific-Norfolk Southern merger; railroad service and pricing; and the regulatory environment, among others. Their conversation follows below.  

Logistics Management (LM): When the proposed UP-NS merger was initially announced in late July, the ACC said there is not any evidence that the deal would enhance competition or deliver real benefits to your members. Does the ACC’s position remain the same?  

Chris Jahn: We want to urge regulators, the STB (Surface Transportation Board), to reject this deal unless it clearly enhances freight rail competition and improves service, which, as you know, is the standard they're required to meet under the, you know, quote, unquote “new merger rules” that have never been tested based on the last rounds of massive consolidation 20-to-25, years ago. That's a very steep hill to climb, given that basically every merger we've seen over the last 40 years, going from 23 railroads down to six, with four of them controlling 90% of the traffic. Every single time there's a merger, there's a degradation of service. And now we're to the point where, again, in which you have the four Class I railroads comprising 90% of traffic that now, as we lose railroads, three-quarters of our members’ facilities are captive. And the rates in non-competitive situations for our members over the last 15 years have gone up 240%, with the other 25% that are not captive, that are competitive, their rates have gone up 24%. Why is that? It is because they don't have to compete for the business. It's literally 10 times as much, well past the rate of inflation. So that's why we're so concerned about this. Number one, every time we get a merger, service gets worse. Number two, we're going to make a situation where we have less competition going forward, which has been such a terrible detriment to our members. We're [the chemicals sector] at the beginning of the manufacturing supply chain. The President wants to make more in this country. Literally, everything that's manufactured starts with our industry, from the clothes you're wearing, the chair you're sitting in, the computer, our phone, everything starts with our industry. And that flows through the entire manufacturing economy. We're responsible in supporting 25% of U.S. GDP. So, if you screw up our service and cause it to cost more, that will ripple through the entire manufacturing economy and ultimately to the consumer. I don't think that's what we're trying to do here. We're trying to make more air, not make less.

LM: You noted that when a large merger of this scale occurs that there is a subsequent service degradation. That said, the current service level metrics that have been issued by the STB have been solid. How do you view that?

Jahn: The reason that the rules that the STB has to use for this merger are different than they've ever been before is because how poorly the previous mergers went. But there's a larger point here that I don't want to miss, and that's the resiliency of the current freight rail network is incredibly fragile. We see that when there are weather events, freezing, ice storms, hurricanes, those kinds of things. We saw that in Covid, when a surge of goods overwhelmed the system, where UP in particular, really struggled post-Covid to get back on track. Those metrics that the STB put in place that you can easily find on its site is something we asked for, and we got that, and we're appreciative that it's continuing. It shows that service is OK, but why is that the case? It is because there's actually less traffic than there was before, not because service got better. [Freight rail] is the only industry in the country that doesn't want to grow, and isn't trying to get more service. By our projections, it's our hope that our industry continues to grow, and by the mid 2030s we can potentially have another 100,000 rail cars on the network, but they can't even handle the rail cars they have now, right. How are they going to handle that extra 100,000?

LM: What is different in this proposed merger between UP and NS and the one between CP and KCS? Are there things about this deal that are different or are for better, for better or worse?

Jahn: I think the most important difference, and this is really where the bulk of the concern is, is the massive scale. This would create a transcontinental rail giant that would control almost half of the rail traffic in the U.S. Don't take my word for it. Look what [CPKC CEO] Keith Creel said about it. He specifically stated in their earnings call that a transcontinental merger poses huge risks to customers, to employees, and to the broader supply chain, given the way that mega-mergers have historically produced integration-related service problems, and he actually called them meltdowns. That's from a railroad guy. It's the scale and the scope, this is the biggest [rail] deal literally ever, and that's what's most concerning, and that's what's different.

LM: What do you think this merger would mean from a rates and pricing perspective? What has the feedback been like from your membership as it relates to pricing?

Jahn: Yes, it's a huge issue. I was talking to a CEO last week about this, and he said one of the biggest competitive disadvantages we have competing globally is the cost of our transportation here in the United States. So, the United States is the number two producer of chemistry and plastics in the world. China is number one, and it is three-to-four times larger than we are. There's a lot of different reasons that go into that, but the lack of competitiveness in our freight rail network is a significant factor. In terms of rates, yes, we advocate for a better deal for our members, but it's not just rates. There are three quarters of our members that don't have a competitive option, but you add on top of that all the different fees that they've [railroads] put in place, like fuel surcharges, demurrage, and empty freight diversion charges. For example, in 2021 railroads charged shippers nearly $3 billion in storage fees. So, it's not just rates, it's not just service, it's these fees on top of that—they charge it because they can. the rate. The railroads say, here is the rate and you can either ship it with us or not.’ There's a public interest to do this. This is the shape of this, excuse me, the safest way to move our products. Rail is safer than truck. There's one rail car for every four trucks. We'd much rather move it by rail, but it's, it's a big challenge for us when they're trying to cut their way to prosperity. They've cut 45,000 jobs there, or 30% of their workforce, and we've had the commensurate service declines to prove it.

LM: What are the next steps now for your organization, regarding this deal?

Jahn: From our point of view, we're going to lead a full scale, comprehensive advocacy campaign, to educate lawmakers, to educate folks at the White House, and to make sure that they understand the impacts of what the merger would have, not just on our members, but on the whole manufacturing economy, on the ag economy, and on the energy economy, and what the impacts of that will be. We have launched a seven-figure campaign to do that, education and, again, making sure that we're focused on Main Street rather than Wall Street. Wall Street is what's driving this deal. You've seen the pressure it is putting on CSX and BNSF, because that's the thing is, if this [UP-NS] deal goes through, they almost have to do the other deal. Everybody understands that. We are going to the point where you have two railroads, which doesn't make any sense. There's a better way to do this.

LM: A Surface Transportation Board member, Robert Primus, was dismissed from his position by President Trump. How do you view that development?

Jahn: Mr. Primus was, I think, a champion for, a strong freight rail network, and protecting our supply chains. One thing we always appreciated is he pushed the Board to act faster. Everybody agrees that that needs to happen. But perhaps most importantly, he fought for rules that gave shippers real choices in the face of these growing freight rail monopolies. We will miss his dedication to solving freight rail service problems, in terms of the go forward. We'd urge the President to fill those vacancies with people who are committed to fulfilling their mission and their congressional mandate, which is to provide greater access to competitive and reliable rail service. And I know it sounds trite, but that's what the law actually sets. So, we'd be looking for appointees there to follow the law, and follow the process, and if we do that, then I think we'll end up in a better situation than we are today.

LM: In April 2024, the STB announced the adoption of its reciprocal switching rules, which were subsequently vacated by an appeals court this past July. How do you think things have progressed on that front since then?

Jahn: It is a complete missed opportunity or a kind of a half measure. I know [former STB Chairman] Marty Oberman worked really hard to get there, but it hasn't had any significant impact. What we were asking for is like what they do in Canada. That is true, reciprocal switching. The railroads are fine with it. There haven't been any surface issues, and it's created more competition. It has actually been a good thing for shippers. And as we look to build that freight rail network of the future, we should avoid these mergers and we should have real, honest to goodness, reciprocal switching. There are a number of things we can do to improve things. It's just it was a missed opportunity, and it's unfortunate, it really hasn't had any significant impact.