Maureen Healey of the Society of the Plastics Industry blames railroad company mergers for the shipment grief suffered by chemical distributors in the past two years, and predicts more of the same for the future. She called for a fundamental change in laws governing the rail industry to ease the problems.
The relationship between rail companies and chemical shippers has eroded because of "pandemic problems," said Healey, citing lack of competition, service, and efficiencies. Healey spoke at the 4th annual Chemical Transportation and Distribution Conference January 11-13 in Houston, Texas.
She referred to a two-year crisis prompted by the Union Pacific-Southern Pacific (UP-SP) merger that meshed two companies with diverse cultures, computer systems, and labor unions. As the UP wrestled with consolidation and integration, rail service deteriorated in the Gulf Coast region, bringing with it frustration from shippers who criticized UP's area dominance.
However, Henri F Rush, counsel for the Surface Transportation Board (STB), told the Houston audience that the situation is now improved and gave credit to the STB for its intervention. "We got in and got out as fast as possible, using an appropriate amount of intrusiveness," he said.
He also explained that the STB is limited by law in its ability to interfere in a merger after it has been approved. At the same time, he agreed that UP failed to understand the condition of the SP system and that the company was "held together with bailing wire."
Healey recommended that shippers take an active role in lobbying members of Congress for a legislative remedy. She specified contacting Senator Kay Bailey Hutchison (R-Texas), who earlier had agreed to ask for an investigation into the controversy. Hutchison sits on the Science and Transportation Committee.
Healey noted that 85% of goods from the plastics industry are shipped by rail and that 75% of the 85% are captive to one railroad company. Captive shippers pay the highest price, because they have no alternative, she said.
Eric Tibbets, Chevron Chemical Company US chemical division rail center manager, said the focus for railroad companies is not necessarily customer satisfaction. In addition, the transitions called for new contracts and shipment forms, and relationships with the new railroad personnel had to be established. "The issue remains that the mergers have put an additional load on the customer," he said.
Furthermore, service by the railroad is difficult to measure because of the integrated infrastructures, accounting systems, and other changes that came about as a result of mergers. He argued that the STB should define "service" so that a standard can be addressed across all railroads.
Another perspective was presented by Terry Litchfield, CXY Chemicals transportation logistics manager. He noted that CXY managers had developed a working relationship with other railroad carriers, which helped in the UP-SP crisis. "We really mean it when we talk about carrier partnerships," he said. "We talked to Union Pacific during the meltdown and treated them like partners."
At the same time, it was necessary for CXY to increase its rail car fleet by 20%. "That caused more problems, but it was our self-defense," Litchfield said. "It was the only way we could do it."
Jerry Martin, director of rail programs for the Texas Rail Council, predicted that mergers may eventually result in two rail systems commanding the market throughout the United States. "If you're not a captive now, you will be," he said.
On the other hand, he argued for reduction in truck transport and called for the chemical industry to work with the railroads in attempting to reduce truck traffic and expand rail service. "It seems to me that the chemical industry would want to see millions of loads taken off the highways," he said, citing the abundance of hazardous materials.
On another subject, he agreed that for shippers to have any clout in future rail service, the issue will have to be addressed by Congress. Moreover, he recommended that the chemical associations and industry join public groups to argue for rail infrastructure improvements so that rail service can be improved and public safety insured.
The public grows more impatient with what it considers environmental infringements by railroad companies. "Their complaints frequently seem legitimate to me," he said. Public backlash, if it is successful in gaining legislative relief, can negatively impact rail service and raise rates, he added.