ACC seeks smoother rail shipments through policy changes

In the wake of a hearing in Washington to examine embargo-related service problems on the Union Pacific Railroad Co., the American Chemistry Council is urging rail regulators to look at policy changes.

The Surface Transportation Board held a two-day hearing Dec. 13-14 to examine what it said are reports from shippers of supply chain problems stemming from the railroad's substantial increase in embargoes—a method of controlling traffic movements that when, in the railroad's judgment, there is a threat of congestion or other issues affecting travel warrant temporary changes to planned shipping in the area.

The STB said Union Pacific has declared more than 1,000 embargoes this year, compared with five in 2017.

Testimony at the hearing indicated a steep increase in embargoes throughout the larger Class 1 railroads, with a heavy focus on Union Pacific.

During the first day of the hearing, for example, maps showed embargoes in effect on Nov. 14, and then five days later, a large increase in embargoes.

During the hearing, STB board members questioned how the embargoes were impacting the supply chain, while the railroad claimed it was suffering from labor shortages.

Lance Fritz, UP's chairman, president and CEO, addressed the hearing.

"Union Pacific understands the vital role we play in the economy, we provide a critical service for our customers, and we take these responsibilities seriously," Fritz said. "We continuously monitor the health of our network. We strive to engage with our customers to understand their perspective before taking steps that affect them."

ACC officials testified at the hearing and released a statement urging broader policy changes to address problems and said railroad issues are causing problems moving critical products through the economy.

"Embargoes disrupt operations, impose significant costs on rail customers, and prolong the nation's supply chain problems," said Jeff Sloan, senior director of regulatory affairs at ACC, in a statement. "And they are yet another manifestation of the chronic service failures that have plagued the U.S. rail network for more than two years."

ACC wants the board to establish permanent requirements to track how major railroads are performing, institute minimum standards for delivery and finalize rules to improve access to competitive railroad services through reciprocal switching.

Reciprocal switching has been being discussed since 2016. It's a policy that would allow certain rail customers to change their freight to another major railroad. Advocates say it would help rail customers that usually lack transportation options to seek competitive bids.

After the hearings concluded, media reported that UP announced a pause in the use of embargoes. CNBC reported that STB Chairman Martin Oberman received a letter from Fritz Dec. 16 that said UP is "taking a hard look at our use of congestion-related embargoes."

"To facilitate that hard look, we are immediately pausing any additional embargoes under the pipeline inventory management program we began in November," it said.