Railroad Gets U.S. Warning

The federal government Friday raised the possibility of forcing Union Pacific to divest some of its rail lines if service does not improve by the end of the year.

In a submission to the Surface Transportation Board, the Transportation Department said it does not support allowing the railroad an indefinite amount of time to restore service to the levels seen prior to its 1996 merger with Southern Pacific.

The Transportation Department noted some improvement in service but expressed concern that Union Pacific’s performance would deteriorate in the coming months as grain and other shipments increased.

“The STB should make clear that repeated service failures or a reversal in the trend of improving service may warrant corrective actions,” the Transportation Department said in its submission.

An STB emergency order last year against Union Pacific that allowed other railroads to compete for customers on UP tracks expired on Thursday.

The Transportation Department said the lifting of that order, announced in July, was possibly premature, since many customers were still denied the level of service to which they were entitled.

“DOT believes that the STB should consider divestiture, as well as any other measures that may be appropriate, if pre-merger levels of service and competition in the Houston area cannot otherwise be restored in the near future,” the submission said.

Two summers ago, the 36,000-mile Union Pacific network experienced huge delays as freight traffic became gridlocked from Texas to the West Coast. But in its own 1,000-page filing, Union Pacific called on the STB to reject forced changes in the western rail network.

Railroad spokesman John Bromley said the emergency order had run the full length allowable by law and service had improved, particularly in the congested Houston area.

“Our operations on the Texas Gulf Coast are fluid and, in some cases, are better than they have been historically,” Bromley said.

Dallas-based Union Pacific, in a separate filing with the STB, said that ordered changes in its rail network would cost the company $775 million in annual revenue and skew competition in the industry.

Union Pacific sharply rebuked the calls from its rivals for the forced divestiture of some of its rail lines and yards as “blatant attempts to grab UP traffic and assets.”

The company said it already has been weakened by $1.1 billion in added costs and a 10% loss of business.

As part of its filing with the STB, Union Pacific included statements from more than 150 shipping customers, 23 states served by its lines and 340 public officials, including seven governors, that support its opposition to the changes.