WASHINGTON — Federal regulators said they may force Union Pacific Railroad Co. to sell parts of its rail network in the Houston area, as they begin an unprecedented look at broader changes that shippers say could increase rail competition.
The Surface Transportation Board said March 31 it is looking at whether Union Pacific's market power contributed to service problems.
That announcement came as STB held contentious hearings April 2 and 3 in Washington to hear from shippers that want to make major changes in how all railroads are regulated.
``Few issues have such a fundamental importance to the plastics industry in its ability to compete in the market,'' said H. Patrick Jack, senior vice president of chemicals for Dallas-based Fina Oil and Chemical Co. ``If competition existed, the service crisis ... would be more of an inconvenience than a multimillion-dollar debacle.''
Jack, chairman of the Washington-based Society of the Plastics Industry Inc., told STB that about 80 percent of plastic resin is shipped by rail, and about 75 percent of that production is served by one railroad. Transportation accounts for 20 percent of resin costs.
Arguing that firms captive to a monopoly railroad pay 15-60 percent more for comparable trips, shippers want STB to allow railroads to use each others' tracks for a fee, remove rail's antitrust exemption and require railroads to offer competitive rates for bottleneck segments.
An Amoco Corp. study of its shipping costs found rates on competitive routes are 25-45 percent less than on monopoly routes, and that captive rail shipping costs the company, conservatively, $10 million a year.
Jack said competitive access would force service improvements. UP's service to Fina's Baytown, Texas, high-density polyethylene plant is ``lousy,'' but the railroad only will allow Fina to seek alternate carriers for 30 days, not enough to entice rivals to come, Jack said.
Average transit time on UP remains 21-28 days, four times the normal rate, and the problems are costing Fina as much as $300,000 a month.
Rail officials, however, told STB that competitive access would make service worse.
``The problems we have in the West are operational — it's a capacity problem,'' said Robert Krebs, chairman of the Burlington Northern Santa Fe Corp. in Fort Worth, Texas. ``We need investment to improve capacity ... [but] the specter of open access would kill off the access to capital.''