WASHINGTON — Union Pacific has soaked up all the complaints leveled at its soaring use of embargoes and will evaluate customer suggestions before coming back to the Surface Transportation Board with steps it may take to ease the burden on shippers.
“First and foremost, I do want to assure the board that we have listened. We’re heard feedback. We’ve heard concerns. And we are going to work through that feedback diligently,” Bradley Moore, UP’s vice president of customer care and support, told the STB on Wednesday, the second day of hearings on why the railroad has increasingly relied on embargoes to limit congestion in its serving yards.
Regulators last month ordered UP to explain why it has issued more than 1,000 embargoes so far this year in response to congestion, compared with just 27 in 2017 — the year before it adopted a lean Precision Scheduled Railroading operating model.
UP has experienced congestion across its system this year amid an ongoing shortage of train crews. The other three big U.S. Class I railroads have faced crew shortages, too, but UP has imposed the vast majority of congestion-related embargoes this year.
Shippers told regulators that they have been forced to bear the costs related to the limits UP has placed on their shipping volume, from higher truck transportation costs and railcar storage fees to curtailed production and lost sales.
“Businesses cannot operate successfully under threat of embargo every few weeks,” Rob Benedict, vice president of petrochemicals and midstream at the American Fuel & Petrochemical Manufacturers trade group, told the board. “UP’s embargoes have become far too frequent and are often open-ended.”
UP executives have said that the embargoes are necessary to keep its yards fluid as customers use more freight cars as the railroad slows down, which only further contributes to congestion that affects all customers.
But Michael Seyfert, president of the National Feed and Grain Association, says that if UP were providing reliable service there would be no need for shippers to use additional freight cars.
Gregory Twist, senior vice president of transportation at Ag Processing Inc., which ships grain and soybean oil, noted that UP says embargoes are a last resort and shippers were responsible for problems with excess car inventory.
Shippers with more than three days of inventory in a UP serving yard face embargo, he says. “There seems to be a double standard between our performance and theirs,” Twist says. “We’re allowed three days’ allowance in the yard. Meanwhile, UP cars that we count on to run our plants are three weeks behind.”
UP reduced the number of railroad-owned cars available to AGP by 45% compared to a year ago, Twist says, leaving the company with two options: Use more privately owned freight cars or shut down facilities, like it has been forced to do at a plant in Iowa due to a UP embargo.
Board Member Patrick Fuchs said the cost of poor service is disproportionately borne by shippers and that railroads lack the incentives necessary to ensure they have adequate resources available to serve customers and grow the business. “This isn’t working,” he says.
Moore said growth is UP’s priority and its primary incentive. The railroad wants customers to ship more so that it can haul more, he says.
“UP is reducing normal levels of business through embargoes,” says Jeffrey Sloan, who leads the American Chemistry Council, the trade group representing chemical manufacturers.
One ACC member company reduced its car volume as UP requested, Sloan says. That, however, lowered the shipper’s 14-day average car volume, so UP further limited the number of cars the company could ship per day.
The chemistry council asked the STB to find that embargoes are unreasonable if they are a result of railroad decisions to boost profitability. The group, which often has sparred with railroads and sought regulatory reforms, also asked the board to permanently require detailed railroad performance metric reporting, adopt minimum rail service standards, and expand reciprocal switching so sole-served facilities can access a second railroad.
The board is currently considering whether to expand reciprocal switching as a way to boost railroad competition.
STB Chairman Martin J. Oberman wondered aloud if UP would boost train and engine crew staffing levels if the board expanded reciprocal switching — or if it would simply let the traffic flow to rival BNSF Railway.
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