WASHINGTON—Federal regulators and a key U.S. senator are suggesting for the first time that they may step into the Union Pacific rail crisis, but also cautioned that they may hold off and give the railroad's recovery effort time to work.
Union Pacific officials maintain the problems are being solved and service will return to normal in 30-60 days because the railroad stepped up its recovery effort to end rail problems that developed after its merger with Southern Pacific, particularly in the plastics-heavy Gulf Coast corridor.
Linda Morgan, chairwoman of the Washington-based Surface Transportation Board, on Monday kicked off an STB hearing on rail problems by saying, ``It may be that we can no longer wait for the private sector to resolve this matter.''
STB officials said after the hearing that they expect to make an announcement by week's end.
Sen. Kay Bailey Hutchison, R-Texas, who heads the Senate Commerce Transportation and Merchant Marine Subcommittee, said she would hold hearings in January if STB and Union Pacific are not able to solve the problem, but said she prefers that the private sector solve the problem without ``infringing on the rights of UP permanently.''
Seven plastics and chemical producers and the Society of the Plastics Industry Inc. of Washington testified at the hearing, but offered differing opinions on whether immediate STB action is needed.
``We cannot ship with confidence on the Union Pacific anymore,'' said Don Olsen, senior vice president of public affairs for Huntsman Corp. in Salt Lake City. ``Right now we are in a crisis situation and need some help.''
Huntsman had two cars of styrene sit in rail cars for eight weeks; the styrene began to polymerize and leak hazardous gas. In another case the firm had a car of styrene on the road for 40 days, including 25 days within sight of the customer's plant, he said.
Several firms detailed specific losses from higher transportation costs and plant shutdowns: Huntsman, $7.5 million; Dow Chemical Co., $18 million, including 16 Dow facilities and 13 customer plants shut down for some period of time because of rail problems; DuPont Co., $16 million; and Formosa Plastics, $1 million.
A Dow official said the company experienced an ``alarming deterioration of service'' starting in July and requested that other railroads be allowed over UP track to serve some key plants. Hugh Fisher, DuPont Sourcing's distribution operations manager said no future railroad consolidations should be permitted unless service and safety will be maintained.
The Chemical Manufacturers Association said shipment problems are costing chemical companies $60 million a month, and three-fourths of shippers surveyed by the National Industrial Transportation League contradicted Union Pacific assertions that conditions are improving and said service is getting worse.
STB officials said not all of the shippers that have contacted them want government action —a point echoed by one chemical company — at least right now.
``In general, we would like to give [the UP recovery plan] a chance to work, but our patience is wearing thin,'' said Joseph Alderman, director of marketing services for Texas Petrochemicals Corp. in Houston.
SPI, CMA and NITL on Oct. 21 asked STB to take emergency action. STB Vice Chairman Gus Owen said that while regulators are listening, they are struggling to decide what to do.
``I keep waiting for suggestions and solutions,'' he said. ``We've got thousands of horror stories, but we need some recommendations.''
Rep. Peter DeFazio, D-Ore., said UP was trying to coerce shippers to send supportive letters to STB, or face even less rail service. UP officials strongly denied that.
Texas Rail Commission Chairman Charles Matthews, in prepared testimony, renewed his request that STB expand neutral switching — a small railroad that would handle local traffic and deliver it to other rail yards, similar to the small rail firm serving the Port of Houston—as a way to bring competition into the rail system.
Plastics officials and other shippers have been critical of STB for waiting to schedule the hearing, but Morgan said the petition for emergency action in mid-October indicates STB is acting at the same time as other groups.
SPI President Larry Thomas said shippers do not know what solution would work but want stronger government involvement: ``I'm not a rail expert, but it seems to me that [STB] has a responsibility in this level of crisis to step in and find out'' what will solve the problems.
Union Pacific Chairman Dick Davidson apologized for the service problems, and said conditions in the railroad's northern lines are almost back to normal. The southern section, including the Houston rail yards where the problems began, should return to normal by the year-end, possibly just after Thanksgiving, he said.
``Our need for help is greatly diminished,'' he said. ``We are very close to the goal line.''
Contrary to testimony from government officials, shippers and some union members, Davidson said the problems were not caused by UP's merger with Southern Pacific. SP did not have enough equipment, UP was hurt by a hurricane that washed out key track and the company did not attack the problems aggressively enough, he said.
But the head of the Federal Railroad Administration, Jolene Molitoris, said the service and safety problems happened because UP did not take into account the difficulties of merging the two railroads.