Union Pacific’s Embargoes Generate Complaints From Shippers

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OMAHA, Neb. — Federal regulators and shippers are questioning Union Pacific’s resolution to quickly restrict some companies’ shipments as a part of its effort to clear up congestion throughout the railroad.

The top of the U.S. Floor Transportation Board, Martin Oberman, mentioned Dec. 14 he’s involved about Union Pacific’s growing use of the embargoes as a result of they disrupt operations of the companies that depend on the railroad, and so they haven’t appeared to assist its efficiency considerably.

Union Pacific has ordered corporations to take away a few of their railcars from the community greater than 1,000 instances this 12 months, up from 140 instances in 2018, in response to the transportation board.

An embargo can pressure a enterprise to think about chopping manufacturing or resorting to dearer delivery choices, like trucking, if that’s even an possibility. They usually could make it more durable for different companies to get the important thing merchandise, corresponding to shipments of chlorine used to deal with water, or grain for feeding animals.

“The client is bearing the brunt of the ache. You guys are nonetheless earning profits,” Floor Transportation Board member Robert Primus mentioned, addressing Union Pacific executives throughout two days of board hearings.

For a lot of this 12 months, Union Pacific and the opposite main freight railroads have struggled to ship merchandise on time and deal with all of the shipments corporations need to transfer as a result of they have been brief on crews popping out of the pandemic. The railroads have been bettering all year long as they employed extra staff, however regulators say they’re nonetheless lagging behind the place they need to be. Union Pacific is utilizing considerably extra embargoes than another railroad.

On the hearings, Union Pacific executives defended their practices, arguing that their embargoes are wanted to assist get the railroad operating higher. CEO Lance Fritz mentioned the embargoes are focused and non permanent measures that shouldn’t place an undue burden on particular person companies.

 

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“We solely use embargoes when crucial and when now not crucial, we finish them,” Fritz mentioned.

However a number of shippers and commerce teams testified that the embargoes are hurting their companies.

Cargill govt Brock Lautenschlager mentioned Union Pacific’s actions make it arduous to plan. In November, the railroad instructed Cargill it wanted to tug 130 railcars it owns from the community inside every week or face cargo limits at 5 of its vegetation. The agribusiness big complied as a result of it nervous that an embargo might pressure it to close down a plant.

“We imagine embargoes needs to be the exception not the norm,” Lautenschlager mentioned.

It’s accepted apply for railroads to quickly place limits on shipments in excessive situations when one thing exterior their management, like a flood or bridge hearth, hurts their skill to haul freight. Enterprise teams, nonetheless, say they imagine deep cuts in UP’s workforce are a serious cause the Omaha, Neb.-based railroad is having a lot bother assembly buyer expectations.

Oberman mentioned there appears to be a direct correlation between the sharp drop in Union Pacific staff since 2018, because it overhauled its operations, and the elevated use of embargoes. The variety of prepare crews the railroad employed went from roughly 18,000 in 2018 to about 13,000 at the moment and that features all of the hiring the railroad has performed because the financial system began to rebound from the pandemic.

Greg Twist with grain processor Ag Processing Inc. in contrast the state of affairs to going purchasing at a grocery retailer and discovering that the shop refuses to rent multiple clerk, after which the shop’s supervisor tells him he should come again at a sure time of day if he needs service. And in contrast to with groceries, his firm usually can’t store round to ship its items as a result of Union Pacific is the one railroad that serves a number of of its vegetation.

Twist mentioned Ag Processing ought to have “the liberty to resolve how we function our amenities” with out having the railroad dictate how a lot they will produce with its delivery limits.

Union Pacific Railroad ranks No. 18 on the Transport Matters High 50 record of the most important international freight corporations.

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