Cash Market Moves

The Surface Transportation Board (STB) said it has "received numerous reports that shippers are suffering supply chain problems as a result of Union Pacific (UP) embargoes that are hampering their operations."

In response, STB announced on Nov. 22 that it will hold an in-person public hearing with the UP CEO on Dec. 13 and 14, 2022, pertaining to the substantial increase in its use of embargoes as a method of reducing rail traffic congestion. "UP's use of embargoes to control congestion has increased from a total of five in 2017 to more than 1,000 to date in 2022," said the STB.

The STB noted in the Nov. 22 press release that UP carries nearly 27% of freight served by rail and nearly 11% of all long-distance freight volume. "Therefore, disruptions in UP's service levels have a significant detrimental impact on the supply chain and the nation's economy," said the STB. The STB said they have been closely monitoring UP's usage of embargoes and have noticed a disturbing upward trend in their usage in recent years.

For those reasons, the STB directed UP CEO Lance Fritz, and other top executive level officials of UP, to appear at the hearing, and expects to hear testimony on topics including, but not limited to, the railroad's decision-making process in determining whether to issue an embargo, data inputs, its consideration of shippers' operational needs and explanations for the dramatic increase in embargoes since 2017, noted the press release.

On Dec. 8, STB Chairman Martin Oberman sent a letter to UP in response to UP's Dec. 6 filing, noting "serious concerns" regarding the UP response to the STB's Nov. 22, 2022, order.

"In that order, the Board set forth a list of eight different topics related to the significant increase in UP's institution of embargoes aimed at network congestion since 2017. UP was directed to be prepared to address those topics at the public hearing. In addition, the Board directed UP to file with the Board by Dec. 6, 2022, information and documents in support of those topics so that the Board may understand UP's processes for deciding when and how to use embargoes," said Oberman in the letter.

"Unfortunately, UP's failure to fully respond to the order has hindered the Board in its efforts to understand this increase in the use of embargoes, and their causes and impacts. Because of the limited time before the hearing, UP will not be required to provide additional information or documents prior to the hearing, although UP remains obligated to respond to the Board's order.

"More importantly, it is expected that UP will be prepared to discuss, in detail, the topics identified in the Board's order at the hearing and to provide the Board with documents responsive to all of the topics listed in the order at the earliest possible date," added Oberman.

The STB invited testimony from shippers and other stakeholders who can contribute to the STB's understanding of the cause and/or impact of the embargoes.

NGFA President and CEO Mike Seyfert will participate on a Dec. 14 panel, along with representatives from The Fertilizer Institute and National Mining Association. Cargill and Ag Processing Inc. are among the many rail shippers testifying at the hearing.

In addition, the rail unions will be represented jointly by Richard S. Edelman, Mooney, Green, Saindon, Murphy and Welch, P.C. Additional speakers can be found in the link below under Filings.

The public hearing will begin at 9:30 a.m. ET on Dec. 13 and 14 in the Hearing Room of the STB's headquarters, located at 395 E Street, S.W. Washington, D.C. 20423. The hearings will be live streamed starting at 9:30 a.m. EST each day on the STB's YouTube page.

Link to STB Chairman Dec. 8 Letter in Response to UP Filing on Dec. 6: https://www.stb.gov/…

Link to Dec. 6 UP filing #305746 to the STB on their Customer Inventory Management System and embargoes. https://www.stb.gov/…

Link to watch the live hearing: https://www.stb.gov/…

Mary Kennedy can be reached at mary.kennedy@dtn.com

Follow her on Twitter @MaryCKenn

(c) Copyright 2022 DTN, LLC. All rights reserved.