Shippers called on the U.S. railroad regulator to create more competition in the industry during hearings in which Union Pacific Corp. was asked to explain an increase in service restrictions.
Univar Solutions Inc., a chemicals distributor, deals with all modes of transportation from air to barges, and railroads stand out as “notoriously difficult businesses to do business with,” Rob McRae, vice president of transportation, told the Surface Transportation Board on Dec. 13 .
“There are no negotiations. ‘Here’s your number and you’ll get the service we’re providing,'” McRae said, describing the relationship shippers had with major railroad companies during the hearing. The big “railways must have some crash barriers”.
Shippers used the public forum to voice grievances about an industry structure they say gives railroads the power to raise prices and bolster profits even as service suffers. Companies including Cargill Inc. and Ag Processing Inc. pointed to reduced labor as a leading cause of rail vehicle cutbacks.
The testimony, which continues Dec. 14, is the second series of hearings convened by the STB in 2022 to discuss rail issues. The board, which was full in January for the first time since 2015 with five members, is considering rule changes including streamlining tariff challenges and empowering shippers to tranship their cargo from one rail to another.
Lance Fritz, Union Pacific’s chief executive officer, said service has suffered because the railroad ran out of train staff earlier in the year and hired 1,400 train and shunting workers to address the problem.
As service deteriorated, customers added railcars to the network to transport goods. That exacerbated the traffic jams and forced the railways to clear marshalling yards and tracks from railcars with embargoes, said Fritz.
“Excess stock of freight cars disrupts the alignment of our network resources,” he said. “It requires us to use more crews and more locomotives to handle the same amount of business, and it creates congestion on our roads and in our terminals.”
Limited railcars
Union Pacific has limited Univar Solutions to three cars per day from its Northern California facility, and if the chemical distributor needs to send an additional car, they must scramble to find four trucks for $3,000 each to match the volume of that one car to transport. said McRae.
“We have to find a way to get the railroads to expand their systems or operations to handle the traffic that is fully available to them,” McRae said. Railroads have this incentive “because of the pricing power they are afforded with captive customers who have no choice but to pay”.
Cargill was caught by surprise in early November when Union Pacific warned the agribusiness that it might have to reduce railcar count or face a traffic embargo, said Brock Lautenschlager, head of Cargill’s North American Railroad. There were no weather issues and the network seemed to run smoother. According to the STB, Union Pacific has imposed nearly 900 service embargoes through October, up from 662 for all of 2021 and just 27 in 2017.
“We believe embargoes should be the exception, not the rule,” Lautenschlager said at the hearing.
