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A kick start for UP?
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November 3, 1997: 7:43 a.m. ET
Regulators open corridor to competition, but customers struggle
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NEW YORK (CNNfn) - Businesses all along Union Pacific Corp.'s network are hoping a move by federal regulators will get railroad traffic moving again.
But many shippers are wondering whether government intervention alone will be enough to save their businesses and stop price increases attributed to the delays.
The federal Surface Transportation Board Friday took the unprecedented step of ordering Union Pacific to open a section of its network near Houston to competitor Texas Mexican Railway for 30 days to ease congestion along the corridor that handles $10 billion in goods annually. The section is also responsible for $300 million to $400 million of the annual freight revenue generated by its Houston hub.
The agency could extend that order for another 240 days when it meets again Dec. 3.
Service disruptions along Union Pacific's 36,000-mile network have delayed shipments of grain, plastics, coal, chemicals and automobiles throughout the nation. The delays are even blamed for a 50 percent hike in natural gas prices in some areas, according to published reports.
Delays have plagued Union Pacific since its $3.9 billion acquisition of Southern Pacific Rail Corp. earlier this year.
Those disruptions have many now questioning whether it was a good idea to locate industries 300 miles from any major city.
Some economists have blamed the delays on a decrease in the number of competitors, suggesting that small companies are getting squeezed out. They also say if congestion is easing along the corridor, it's likely because Union Pacific isn't taking any more orders, a claim that the railroad denies.
UP officials told The Wall Street Journal they felt normal service should be restored by the end of the year, if not sooner. However, they said they understood the government's need to take action.
The Federal Railroad Administration is sending 85 investigators to monitor operations along the corridor over the next two weeks, although experts say that may only worsen the situation.
While the company is optimistic it will overcome the situation, it faces more uphill battles. In the coming weeks, huge grain shipments will begin their journey to Gulf Coast ports in Texas.
Meanwhile, UP said it has hired hundreds of additional crew members and ordered 300 new locomotives to handle the traffic. It is also leasing 60 locomotives from Amtrak which have been in storage for the last few years.
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