Regulators and shippers complain about UP’s shipping limits

OMAHA, Neb. (AP) — Federal regulators and shippers are questioning Union Pacific’s decision to temporarily restrict shipments by some companies as part of its efforts to clear railroad congestion.

The head of the US Surface Transportation Board, Martin Oberman, said Wednesday he was concerned about UP’s increasing use of the embargoes because they disrupt the operations of the companies that rely on the railroad and they don’t appear to be affecting UP’s performance have improved significantly.

Union Pacific has ordered companies to unplug some of its railcars more than 1,000 times this year, up from 140 times in 2018, the transportation agency said.

An embargo can force a company to consider cutting production or resorting to more expensive shipping options like trucks, if that’s an option at all. And they can make it difficult for other companies to get the most important products, such as B. Deliveries of chlorine for water treatment or grain for animal feed.

“The client bears the brunt of the pain. Y’all are still making money,” said Robert Primus, a member of the Surface Transportation Board, speaking to Union Pacific executives during the two-day board hearings this week.

For much of that year, Union Pacific and the other major freight railroads struggled to deliver Deliver products on time and handle all shipments that companies want to relocate because they ran out of crews after the pandemic. The railroads have improved over the year as they hired more workers, but regulators say they’re still falling short of where they should be. Union Pacific applies significantly more embargoes than any other railroad.

At the hearings, Union Pacific executives defended their practices, arguing that their embargoes were necessary to get the railroad running better. CEO Lance Fritz said the embargoes are targeted and temporary measures that shouldn’t place an undue burden on individual companies.

“We only use embargoes when it’s necessary, and when it’s no longer necessary we end them,” Fritz said.

But several shippers and trade groups said the embargoes are hurting their businesses.

Cargill chief executive Brock Lautenschlager said Union Pacific’s actions are making planning more difficult. Last month, the railroad told Cargill it would have to phase out 130 of its own cars within a week or face delivery restrictions at five of its plants. The agribusiness giant complied because it feared an embargo could force it to close a facility.

“We believe that embargoes should be the exception and not the rule,” said Lautenschlager.

It is common practice for railroads to temporarily limit transportation in extreme conditions when something beyond their control, such as a flood or bridge fire, affects their ability to carry freight. But business groups say they believe the deep layoffs at UP is a key reason the Omaha, Nebraska-based railroad is struggling to meet customer expectations.

Oberman said there appears to be a direct correlation between the sharp decline in UP employees since 2018, when the company overhauled its operations, and the increased use of embargoes. The number of train attendants employed by UP increased from about 18,000 in 2018 to about 13,000 today, and that includes all of the hires the railroad has made since the economy began to recover from the pandemic.

Greg Twist of grain processor Ag Processing Inc. compared the situation to going into a grocery store and finding that the store refuses to hire more than one employee, and then the store manager tells him to come back at a certain time of the day, if he wants service. And unlike groceries, his company generally can’t buy his goods since UP is the only railroad serving several of his plants.

Twist said Ag Processing should have “the freedom to choose how we operate our facilities” without the railroad dictating how much they can produce with their shipping restrictions.

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