Texas-Gulf Coast Rail Congestion Afflicts Shippers, Truck Fleets

April 1, 1998
THE CHAIRMAN and chief executive officer of Union Pacific Railroad (UP), Richard K Davidson, said that the rail congestion afflicting numerous petrochemical

THE CHAIRMAN and chief executive officer of Union Pacific Railroad (UP), Richard K Davidson, said that the rail congestion afflicting numerous petrochemical shippers and truck fleets along the Texas-Gulf Coast is unlikely to end soon. He spoke at a February 13 railroad conference sponsored by The National Industrial Transportation League (NITL) in Houston, Texas.

Davidson offered no immediate solutions despite an agreement between UP and The Burlington Northern and Santa Fe Railway Company (BNSF) to set up a joint regional dispatching center and share track between Houston and New Orleans, Louisiana.

"It is not operating at all well," Davidson admitted to the audience filled with disgruntled shippers who voiced their concerns. "It has proven much harder to fix than I ever dreamed it would be."

According to criticisms from shippers, the new agreement is not likely to improve service and the crisis is expected to accelerate because spring months traditionally bring heavy rail traffic.

Harry J Ignatowski, a transportation manager for The Dow Chemical Com-pany, said, "All I want is my service back. It's not improving and hasn't since the first of the year."

He added that UP's acceptable service performance has deteriorated every week since January. Ignatowski was part of a shippers' panel participating at the meeting.

Railcars Jeopardized A Dow facility at Freeport, Texas, borders on shutdown and company railcars are snarled throughout the area, he said. Trucking has relieved some of the shipping crisis and can be expected to retain part of the windfall at plants that have installed truck-compatible equipment for loading and unloading.

Robert D Krebs, president and CEO of BNSF, said when railroad traffic slows down, rail companies put more cars on track, which complicates the situation. "We've got to get the terminals cleaned out. Joint operations can work. The problems in the Gulf Coast area can be straightened out. We can get the freight back on to rail and out of trucks."

Davidson said the congestion from an excess of 45,000 railcars is a result of coordinating UP's $3.9 billion merger with Southern Pacific. He described the merger of two different union contracts and computer systems as a "quantum leap" for the consolidation efforts.

"This is a very, very complex and huge area," he said of the Texas-Gulf Coast. Union Pacific has contracted with a consulting firm for a short- and long-term study of the situation and set aside $570 million to improve the Texas-Louisiana network in the next two years."

Davidson took issue with Larry Fields, chief executive officer of Texas Mexican Railway Company, who argued that UP is using the situation to reduce competition. Davidson said UP is concentrating on providing and maintaining service and is not attempting to manipulate competitors.

Slow Traffic Fields said that in the 1950s, there were more than 1,000 Class I railroad companies while today there are five to six. "You are going to hear that two railroads are enough," he said.

In one instance, traffic was so slow that Tex-Mex had to use nine crews to cover 520 miles, he said. "Tex-Mex cannot do the service we were granted to do."

Fritz Kahn, former general counsel with the Interstate Commerce Commission, called the congestion "absolutely devastating" for the petrochemical industry in the Texas-Gulf Coast region. Production lines are slow or idle, plants have closed, and financial losses have been high, some as high as millions of dollars. "Chemical companies have turned to trucking just to make deliveries to customers," he said.

Ronald C Babin, transportation administrator for Pennzoil Products Company, said his company has increased truck shipments by 50%.

GH Jelly, senior transportation representative for Shell Chemical Com-pany, said he is keeping trucking companies up to date on the company's shipping status and estimates a 20% increase in shipments over the road.

Edward M Emmett, president of NITL, said that shippers' frustration is growing daily and members have little confidence that UP can solve the issue alone. Even the agreement between UP and BNSF brings slim hope for resolution. "None of the proposals make shippers jump up and down," he said.

Fundamental Flaw Because UP owns all major lines in and out of Houston, a fundamental flaw exists in the system, Emmett said. "Most shippers are served by one railroad. They have no choice. If they don't like a trucking company, they can call someone else, but that's not possible with the railroad."

However, he noted that shippers exacerbated the problem by continuing to ship products in an attempt to fill the gap between plant and customer.

Before the UP/BNSF agreement in February, UP dispatched and operated 148 miles between Houston and Iowa Junction, near Lake Charles, Louisiana. BNSF dispatched and operated 194 miles from Iowa Junction to New Orleans. Both railroads operated through trains across the entire route. The latest proposal will restore the route's transportation capacity and provide for service improvements by managing the line's dispatch as a single through corridor.

At the end of last year, UP was ordered by the Surface Transportation Board (STB) to show tangible improvements by the end of 1997. UP responded by establishing a four-part region and promised to decentralize management.