Originally created 08/01/98

No new action new action against Union Pacific



WASHINGTON -- Federal regulators today refused to impose new short-term corrective measures against Union Pacific Railroad, the nation's largest, despite shipper concern over congestion on tracks in Texas and the Gulf Coast.

Industry trade associations representing aggrieved shippers had urged the Surface Transportation Board to extend emergency measures that it ordered against Union Pacific nine months ago. Those corrective actions expire Sunday.

But the board said congestion in the Houston-Gulf Coast area has been reduced to the point that federal intervention no longer is necessary.

"Given the significant improvements in Houston area rail service, there is no longer any basis on which we could issue an emergency service order requiring UP to give up traffic to other carriers in that region," the board wrote.

Under the emergency service order imposed last Oct. 31, Union Pacific was directed to share some Texas track with two competitors, Texas Mexican Railway Co. and Burlington Northern Santa Fe.

Today, the board provided a 45-day "wind-down period" in which Tex-Mex and BNSF would gradually return to their former, pre-service order operations.

Union Pacific officials said they respect the STB's decision.

"While we hoped the emergency service order would expire on schedule, today's decision by the STB certainly confirms that there is no longer a service crisis in the Houston-Gulf area," said Dick Davidson, chief executive of Union Pacific Corp.

But a member of the Texas Railroad Commission, which has criticized the railroad's response to the service meltdown, expressed surprise at the STB's decision. "Can you believe this?" said Commissioner Charles Matthews, calling the decision an "Alice in Wonderland kind of ruling."

"Basically, they say `We recognize that .... probably for the last year and a half that service has been dreadful, but on the other hand Union Pacific has told us that in the last two weeks things are better, so we believe things are going to continue to be better," Matthews said.

The congestion began last summer in Houston and quickly rippled throughout Union Pacific's 36,000-mile network. Union Pacific, which absorbed Southern Pacific in 1996, was hampered by lack of equipment and crews, a rash of wrecks, and difficulties in integrating Southern Pacific's aging equipment into its own, more modern infrastructure.

At its worst, the gridlock clogged California ports, stranded bumper grain crops in the Midwest, and forced the temporary idling of some Gulf Coast petrochemical plants. Lumber and steel producers in the Northwest also felt the pinch.

Officials at the railroad, a division of Dallas-based Union Pacific Corp., maintain the worst of the congestion troubles are behind them. But, said Davidson: "Our job of restoring Union Pacific Railroad service to its traditionally high levels is far from finished."

By some estimates, the rail service meltdown has cost the U.S. economy $4 billion. The Texas Railroad Commission pegs the losses in Texas alone at more than $2 billion.

Union Pacific officials have rejected charges that the troubles are solely the result of the merger. The $5.4 billion union was approved by the STB despite significant opposition from federal agencies, the state of Texas, and many shippers worried that service would suffer and prices rise in the face of reduced competition.

Separate from the issue of new short-term corrective measures, the STB is considering whether to reopen the terms of the 1996 merger and impose new permanent remedies.