Coalition Files Rail Plan in Effort To Restructure Gulf Coast Operations

Aug. 1, 1998
A consensu plan to restructure rail operations in the Gulf Coast area has been filed with the Surface Transportation Board (STB) by members of a coalition

A consensu plan to restructure rail operations in the Gulf Coast area has been filed with the Surface Transportation Board (STB) by members of a coalition representing chemical and plastics shippers, a Texas railroad authority, and two railroads. The STB is expected to consider the proposal and take action sometime this fall.

The plan calls for granting Texas Mexican Railway (Tex-Mex) and Kansas City Southern (KCS) certain privileges in the area and establishment of neutral dispatching and switching where needed.

Involved in the coalition are the Chemical Manufacturers Association, Society of the Plastics Industry Inc, Texas Chemical Council, Railroad Commission of Texas, Texas Mexican Railway, and Kansas City Southern Railway Company. The plan was filed July 8.

"The Chemical Manufacturers Association (CMA) believes there is a clear relationship between the Union Pacific-Southern Pacific merger and rail service failures, not only in the Gulf Coast area, but throughout the UP System," says Fred Webber, CMA president and chief executive officer. "The consensus plan represents a lot of hard work by many people and the STB should adopt all of the remedial conditions as quickly as possible."

Chemical industry facilities in Texas account for $57.4 billion in product shipments out of a total annual US amount of $366.6 billion. "The chemical industry spends more than $4.5 billion a year on rail freight charges, accounting for 14% of US railroads' total revenues," says Webber.

Restructuring Plan The plan asks the STB to: - lift current northbound restriction on Tex-Mex and permit it to maintain additional trackage rights granted earlier by the STB in an emergency order. - restore neutral switching in Houston, Texas, to the Port Terminal Railway Authority as neutral switcher. - expand neutral switching to include all customers on the former Southern Pacific Galveston, Texas, Subdivision. - require the neutral switching area to have neutral dispatching. - require Union Pacific Railroad (UP) and Burlington Northern Santa Fe (BNSF) to acknowledge Tex-Mex's full voting membership on Houston's Port Terminal Railway Authority Board. - require UP to sell its rights to a line between Rosenberg and Victoria, Texas, that UP acquired in the Southern Pacific merger. Tex-Mex would be granted rights to operate and construct on the line. - require UP to sell or lease an existing Houston yard to Tex-Mex. - allow Tex-Mex and Kansas City Southern to construct a new rail line adjacent to UP's Lafayette Subdivision between Houston and Beaumont, Texas. This would be in exchange for UP's Beaumont Subdivision line between Houston and Beaumont.

"This consensus plan represents our best effort to find common ground toward providing a permanent solution to the ongoing rail service crisis in the Houston-Gulf Coast area," says Maureen Healey, director of the Society of the Plastics Industry (SPI).

The plan was developed after meetings in which railroad companies were represented. "Railroads and shippers got together in a united front," says James Pasierb of the Chemical Manufacturers Association. Although Tex-Mex and Kansas City Southern joined in endorsing the plan, UP and Burlington Northern Santa Fe have chosen to file separate plans, he says.

Returning the area to near-normal operations may be long in coming, says Lindil Fowler of the Railroad Commission of Texas. He predicts further snarls during August when peak shipping occurs.

The crisis is moving into its second year, prompted by the UP-SP merger that meshed two companies with diverse computer systems and labor unions. As UP wrestled with conversions, rail service deteriorated in the Gulf Coast region, bringing with it frustration from shippers who criticized UP's area dominance.

"Consolidation in Houston from six to two Class I railroads over the last several years has resulted in an 80% market dominance by one railroad," according to information from the Greater Houston Partnership, an association that participated in coalition discussions.

Largest Railroad UP claims to be the largest railroad in North America. It operates in the western two-thirds of the United States, serves 23 states, links major West Coast and Gulf Coast ports, and serves four gateways to the east: Chicago, St Louis, Memphis, and New Orleans. It is a primary rail connection between the United States and Mexico and interchanges traffic with the Canadian rail system.

In the fall of 1997, the STB issued an emergency service order allowing shippers temporary access to Tex-Mex and Burlington Northern Santa Fe railroads. That order expires in August of this year. The board is expected to hear oral presentations in September and issue its decisions thereafter.

The rail situation has been called a multibillion-dollar national disaster and the worst rail crisis of the century. Losses of about $35 million per month are being reported by the petrochemical industry. In Texas alone, the economic derailment to date is calculated at $1 billion. The United States faces more than $2 billion in missed industry revenue, according to industry officials.

Although rail service may be improving, it remains well outside accepted standards, according to the Greater Houston Partnership. "Beyond the immediate Houston area, the Union Pacific system still operates beyond its own 'benchmarks' for service for trains held for power, crews and congestion and blocked sidings."