OMAHA, Neb. – Union Pacific dramatically reduced its use of temporary limits on some businesses' shipments over the past year after its customers complained, but regulators said Wednesday the railroad must go further to be in line with the other major freight railroads that rarely use such embargoes.
Even though Union Pacific went from imposing 1,081 embargoes in 2022 to just 181 last year, the Surface Transportation Board said that was still more than all the other major freight railroads combined. The board did note, however, that the drop “is a positive and welcome step.”
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The limits have been traditionally used only in extreme circumstances when something outside a railroad's control, like a flood or bridge fire, makes it hard for them to keep up. But over the past few years, Union Pacific had gotten in the habit of imposing embargoes whenever their railroad got congested to force businesses to temporarily limit their shipments and pull some of their railcars off of UP’s network.
An embargo can force a business to consider cutting production or resorting to more expensive shipping options, like trucking, if that’s even an option. And they can make it harder for other businesses to get the key products, such as shipments of chlorine used to treat water, or grain for feeding animals.
Many businesses are served by only one railroad. Their bulk products may not be well suited to being delivered by trucks, so they don’t have many options when Union Pacific imposes limits.
Regulators had to twice order the railroad to deliver emergency shipments to livestock producer Foster Farms to ensure that company wouldn’t run out of feed for the millions of chickens it raises.
Jeff Sloan, senior director of regulatory affairs at the American Chemistry Council trade group, said he was glad to see UP reducing its use of embargoes along with the STB's promise to continue monitoring the railroad.
“We definitely support strong board oversight of railroads’ use of embargoes to make sure they’re not being misused,” Sloan said.
Business groups and members of the STB contended at a hearing on the embargoes that the main reason Union Pacific couldn't keep up with all the shipments was because the Omaha, Nebraska-based railroad had failed to hire enough train crews.
Union Pacific and the other major freight railroads have all been hiring aggressively over the past two years to help them improve service. The railroads have acknowledged that they cut their workforce too deep during the pandemic and had a hard time hiring enough workers to handle the rebound in the economy. So customer service suffered, particularly in 2022 when the board held a hearing on the industrywide problems.
At the time the STB held a hearing on Union Pacific's embargoes in December 2022 the railroad's executives argued the limits were necessary to help improve the performance of the railroad.
It wasn't immediately clear how much Union Pacific has changed its policy since Jim Vena became CEO last summer because the railroad didn't address that in its response to Wednesday's decision.
As part of its order, the Surface Transportation Board scolded Union Pacific for taking months to produce documents and answer questions throughout the proceeding.
“UP’s conduct in this regard bordered on the contumacious and cannot be viewed as acceptable conduct by a railroad subject to the Board’s statutory authority,” the board wrote.
The railroad defended the way it replied to the STB and its use of embargoes in a statement.
“Union Pacific responded to the STB’s inquires with thousands of documents and through many meetings and touchpoints,” the railroad said. “The STB’s ruling is a positive step forward and our service performance indicators have improved significantly over the past year. As a common carrier, embargoes are an important tool to maintain fluidity for all customers.”
UP is one of the nation's largest railroads with more than 30,000 miles of track crisscrossing 23 western states.