Last year's merger between the Union Pacific and Southern Pacific railroads was supposed to create a 35,000-mile transportation system with greatly improved service west of the Mississippi River (HCN, 8/5/96).
But shippers are
complaining that they're losing millions of dollars because of bad
service from UP, now the nation's largest railroad. Service is so
bad that some customers have sued. Others have taken their
complaints to the federal Surface Transportation Board, the
three-member regulatory body which approved the UP-SP merger in
1996 and retains oversight.
The board responded
with an Oct. 27 hearing and a decision set for Dec. 3. Actions
could range from letting UP come up with its own solutions to
ordering the railroad to divest some of the trackage it has
acquired in the past 15 years of mergers.
complaints dominated the hearing. Charles Matthews, president of
the Texas Railroad Commission, said UP's poor service - further
marred by a spate of fatal accidents - had cost his state's
enterprises $400 million in the preceding three
In an interview before the hearing,
Matthews said rail service in Texas was so poor that "even the
hoboes won't ride the trains."
Riviana Foods, a
Texas-based rice producer, tried to ship a carload of rice from
Missouri to Tennessee in August - a shipment that took less than a
week before the merger. A month after leaving Missouri, the car was
spotted on a siding in Utah, and after that, it was rumored to be
sitting somewhere in Texas.
In September and
October, the Texas snarl spread throughout the West, Pacific Coast,
Gulf Coast and Midwest. Two Arkansas electric plants, unable to get
coal by rail, had to burn more expensive natural gas, and have sued
UP for the difference. UP admits that on a given day, 10,000 rail
cars are stalled on its system.
Ports on the West
Coast, where containerized goods from Asia are transferred to rail,
are so backed up that serious consideration was given to loading
the containers back on ocean-going ships for transport through the
Panama Canal to East Coast ports.
Sawmills in the
Pacific Northwest usually ship lumber to Southern California by
rail - but with UP's service problems, they've had to rent barges.
Grain elevators in the Midwest are overflowing, and feedlot
operators in Nebraska worry because UP hasn't delivered tank cars
of molasses, which makes cows eat more when it's added to their
UP tries to
UP's response includes apology, promises
The apology came in late
September, after UP President Dick Davidson went to Houston to meet
with 200 angry chemical-company executives. "I never imagined in my
wildest dreams I'd be down here apologizing for our service," he
said after the meeting.
The promises come from a
"Service Recovery Plan" announced on Oct. 1. UP said it will
temporarily shift some customers to other railroads, primarily its
biggest rival in the West, the Burlington Northern Santa
UP will also temporarily eliminate some
service, such as coal deliveries to Texas from the Powder River
Basin of Wyoming and to West Coast ports from mines in
The railroad also will reduce the number of
locomotives on most trains. Trains will run more slowly, but
engines will be available for trains that haven't been running at
all. And UP plans to hire more train crews and buy or lease more
As for the prevarication, Davidson
claimed UP's service problems are not related to the merger, since
the merger really hadn't been implemented in Texas, where the
problems supposedly originated.
plans had been fully implemented, such as in Colorado, Davidson
told the board that the railroad had "instituted shorter, faster
routings for Utah and Colorado coal traffic." UP's third-quarter
merger status report to the STB said "coal shipments from Utah and
Colorado ... had experienced improved service after the merger and
were strong in September."
service" is news to ARCO Coal, which operates the West Elk Mine
near Paonia, Colo. Terry O'Connor, ARCO vice president for external
affairs, said, "We've seen a serious deterioration in rail service
during the past few months at the West Elk Mine."
Before the merger, the mine generally shipped
two 100-car trains each day. After the merger, the trains quit
arriving regularly, O'Connor said, "and there are only so many
places you can store the coal. When we ran out of space, we had to
shortages, beer shortages
Matters got worse on
Oct. 30, when UP derailed 23 cars of a 100-car train, blocking the
line ARCO's coal trains use. The accident took place along the
Gunnison River, between Delta and Grand Junction. It was only an
hour after a UP freight train loaded with chemicals rear-ended rail
cars in a small east Texas town. That latest Texas accident led
Barry Williamson of the Texas Railroad Commission to say,
"Obviously, Union Pacific is breaking apart at the seams."
Greg Berwick is fuel supply manager for the
Colorado Springs Utility Department, which operates two
electric-generating plants with coal hauled in 105-car trains from
the Craig area in northwestern Colorado. "We were contracted for 12
trainloads a month, and we were getting only eight or nine last
summer," he said. "At one point I was down to a 10-day supply, and
normally we like to have 30 to 45 days."
said his frequent complaints have gotten action. "The squeaky wheel
gets the grease, and I've been squeaking like crazy."
Other squeaking wheels were in Grand Junction,
largest city on the Western Slope of Colorado. Most of its gasoline
- the supply for 21 counties in western Colorado and eastern Utah -
arrives by rail from the Conoco refinery in
Before UP took over the Denver-Grand
Junction line in the merger, the tank cars made the trip in less
than 24 hours, according to Conoco spokesman John Bennitt. After
the merger and UP's abandonment of one rail line across the state,
"it took two or three days for the tank cars to reach Grand
The shortage pushed prices up to
$1.50 a gallon and more.
Another vital liquid was
also in short supply. Central Distributing in Grand Junction
normally kept its coolers full with beer shipped from the
Anheuser-Busch brewery near Fort Collins. But the UP failed to make
deliveries and the distributor was forced to switch to trucks -
adding thousands of dollars in shipping costs and Interstate 70
"Sometimes government must
intervene," said Linda Morgan, chairwoman of the Surface
Transportation Board. "And the extent of the rail service problems
that are the subject of this hearing suggest that this may be one
of those times."
Ed Quillen writes from
Salida, Colorado. His lead article, in the Aug. 5, 1996, issue was
headlined: "Disappearing railroad blues: Merger may leave a working
region high and dry."