December 3, 2022 - U.S. President Biden signed into law on Dec. 2 legislation that averted a nationwide rail strike slated for Dec. 9 following a months-long dispute between railroad companies and unions. The legislation means the economy will be spared some of the commodity price impacts that were expected if a strike had occurred.

A rail strike would have interrupted coal deliveries to power plants and put upward pressure on natural gas and electricity prices as coal plants conserve supplies to meet peak winter demand. To the extent power prices had been bid up in anticipation of an extended work stoppage, there could be some downward pressure now, according to Morris Greenberg, senior manager of North America power analytics at S&P Global Commodity Insights.

A rail shutdown could have boosted gasoline prices because most gasoline includes ethanol, and ethanol is shipped by rail. And a strike would have impacted farmers, who are already grappling with an increase in input costs and barge rates.

But officials from the coal and chemical sectors still say more needs to be done to fix the rail service issues that have plagued commodity shippers in recent years.

"To get to the heart of the matter and prevent the next crisis, Congress and the Surface Transportation Board must address the root causes of rail service problems that continue to put the brakes on US manufacturing," Chris Jahn, president and CEO of the American Chemistry Council said in a statement.

Wage Increase

The bill, passed by Congress on Dec. 1, effectively forces the adoption of the terms of a tentative deal struck between unions and railroads in September that was facilitated by Biden but later rejected by some unions.

That deal included a 24% wage increase over a five-year period between 2020 and 2024, with a 14.1% wage increase effective immediately. The deal did not, however, include the changes to workers' paid sick leave requested by unions, leading four of the 12 major railroad unions to reject the September agreement, setting the stage for a national strike.

"The bill... ends a difficult rail dispute and helps our nation avoid what without a doubt would have been an economic catastrophe at a very bad time in the calendar," Biden said at the signing ceremony.

Railroads are a critical transportation network for the movement of coal and other goods around the country. The Association of American Railroads, or AAR, estimated that in 2021, 3.3 million carloads of coal moved across national railways.

The AAR projected that a strike could cost the U.S. at least $2 billion per day in overall lost economic output. In a statement about the potential strike made prior to the new legislation's introduction, Biden had estimated that a two-week national rail closure could result in the loss of 765,000 jobs.

The coal industry has already been facing logistical problems, with railroad employment down 20.7% since November 2018, putting a cap on railroads' ability to ramp up shipments even as the U.S. coal sector experiences a brief resurgence in response to high energy prices.

The new resolution passed both chambers of Congress with bipartisan support.

Sick Leave Concerns

A companion resolution introduced in the House by Rep. Peter DeFazio, Democrat-Oregon, who chairs the House Committee on Transportation and Infrastructure, would have also provided for seven days of annual paid sick leave for union members. The sick leave provision passed the House but failed to clear the 60-vote threshold needed to pass the Senate.

Biden promised to work toward obtaining sick leave for all workers.

"We still have more work to do in my view in terms of getting all of them paid sick leave — not only for rail workers but for every worker in America," Biden said.

"It is shocking and appalling that any member of Congress would cast a vote against any sort of provision that raises the standard of living for hard-working Americans," rail union leader Tony Cardwell, who is the national division president of the Brotherhood of Maintenance Way Employees Division of the Teamsters union, said in a statement. "In fact, such a vote is nothing less than anti-American, an abdication of their oath of office and you are deemed, in my eyes, unworthy of holding office."

A spokesperson for Rep. Donald Payne Jr., Democrat-New Jersey, who chairs the House Subcommittee on Railroads, Pipelines, and Hazardous Materials, said Payne is working on railroad priorities for the next Congress, but did not specify if renewed efforts on paid sick leave for rail workers would be included. Rep. DeFazio's office did not immediately respond to a request for comment.