Union Pacific Railroad Co. isn't making a lot of friends in Houston or Washington these days.
In Houston, plastic resin makers say the railroad is attempting to charge them for storage of empty rail cars on UP lines. Resin makers in turn are claiming that those cars are there only because massive rail congestion in the UP system forced them to lease more cars to store resin that was stuck in the Houston area.
Meanwhile in Washington, railroad officials are drawing criticism from the Society of the Plastics Industry Inc. by claiming that several Gulf Coast plastics producers are storing ``excessive numbers of surplus cars'' on UP lines.
UP, the nation's largest railroad, has experienced massive rail congestion in the past 18 months as it has struggled to incorporate the Southern Pacific railroad, which it merged with in 1996.
A coalition that includes the SPI is asking the federal Surface Transportation Board to improve service by forcing UP to sell part of its network and restore third-party switching in Houston, a vital hub for both the plastics and railroad industries. STB is reviewing that plan, which UP officials have described as ``absolutely unnecessary.''
Officials at both Phillips Petroleum Co. and Equistar Chemicals LP confirmed that UP has informed them of the storage fee for empty rail cars. UP, however denies it is taking such action.
``We wanted to lease the extra cars for six months or so but we had to lease them for a year,'' said Ron Mick, logistics manager for Phillips Petroleum's Pasadena, Texas, polyethylene plant. ``We had to lease the cars rather than shut down. Union Pacific's problems caused that to happen and now they're charging us for the extra cars.''
Mick added that Phillips planned to challenge the extra fee. An Equistar spokesman said the firm had not yet been billed by UP and would decide what it would do if and when it was asked to pay.
``It was always implied that there was a rental fee [for storage], but it was never collected,'' the Equistar spokesman said. ``Now the railroad is saying they have to start enforcing it.''
The uproar comes as a surprise to UP spokesman John Bromley, who said rail car storage fees are included in each contract UP signs with plastic producers who use the UP system for that purpose.
``We have no such plan,'' Bromley said of the alleged additional fees. ``I don't know what would lead to that sort of story.''
SPI members have asked UP for several years to increase storage space available for resin rail cars, but UP has declined to take any such action, SPI President Larry Thomas said in an Oct. 20 statement filed with the STB.
Bromley could not confirm those requests, but said UP will open a new storage yard north of Houston for resin cars next spring.
Thomas also said the increase in the number of resin storage cars can be traced back to UP.
``Any storage problems being experienced by the Union Pacific from the increase in rail cars is clearly the consequence of its own service meltdown,'' Thomas said in his statement.
Thomas' statement — which was part of a larger filing the coalition sent to STB — was intended to respond to recent testimony given to the STB by Dennis Duffy, UP's executive vice president of operations.
In an August UP filing, Duffy told the STB that plastics producers in UP's southern region are storing almost 2,000 surplus cars on UP lines. UP defines ``surplus'' as any cars beyond the number it needs to meet each customer's demand for one week.
Duffy also said that one unidentified customer saw its transit times improve significantly after it removed from the UP lines 500 cars that UP had identified as surplus.
In his statement, Thomas also faulted UP for its failure to substantially improve its shipping times.
Breaking rail gridlock ``does not equate to a resolution ... unless the UP and the [STB] are willing to accept a permanently degraded quality of railroad service,'' Thomas said.
UP's current average of 12-13 shipping days has improved since the first part of the year, but it is still well below averages before the UP-SP merger. UP's 1996 average was around eight days, while its average was under seven days for most of 1995.
The railroad's average rail speed has improved in recent months to 15.5 mph — a number that's still 1 mph slower than its pre-merger rate. Bromley said UP has set a target speed of 19 mph.
The plastics industry is especially vulnerable to rail problems, Thomas added, because it ships 85 percent of its raw materials by rail and also uses rail cars to store raw materials.
Along with SPI, the Chemical Manufacturers Association, Texas Mexican Railway, Kansas City Southern Railway Co., the Texas Chemical Council and the Texas Rail Commission also support the plan to split up UP.
Texas Mexican and Kansas City Southern are rival railroads that each would make more than $50 million from a UP divestiture, said officials at those companies.