Union Pacific suspends deployment of controversial freight embargoes

A Union Pacific freight train carries goods east near Palm Springs, California, a vital link of the roads and railroads that connect Southern California’s metropolitan areas and the nation’s busiest port complex to the rest of the United States

David Mcnew | News from Getty Images | Getty Images

Union Pacific is suspending the application of embargoes on its freight network, a practice that had increased significantly this year and led to the Surface Transportation Board earlier this week summoning Union Pacific CEO Lance Fritz and other top railroad executives hearing in Washington, DC.

In a letter addressed to STB Chairman Martin Oberman and sent to the STB by Fritz on Friday, the Union Pacific CEO stated, “We are closely reviewing our use of congestion-related embargoes. To facilitate this close look, we are immediately suspending any additional embargoes under the pipeline inventory management program that we began in November.”

According to STB data, the railroad’s use of embargoes to control congestion has increased from a total of five in 2017 to more than 1,000 so far in 2022. Reports that the embargoes are hampering shipper operations and contributing to supply chain problems for the national economy, were among the reasons that led STB to convene the hearing.

Union Pacific carries nearly 27% of the freight served by rail and nearly 11% of all long-distance freight.

The railway has claimed that because of its geographic scope, number of yards, customer facilities and mix of goods, embargoes are one of the few tools it has to manage and measure customer-driven inventory of wagons and reduce network congestion. It has also referred to embargoes as a “last resort”.

The STB has been vocal about its frustrations with Union Pacific, stating before the 12/13-14 hearings that Union Pacific “did not provide details” in response to an order from the STB to declare a “dramatic increase in embargoes since 2017.” including whether UP had sufficient resources during that period.

The STB was interested in how UP’s staffing and service levels have affected the supply chain and whether a shortage of labor is one of the reasons for the embargoes. Unions have said that the data provided to STB on recruitment masks a longer-term trend in turnover, even as large rail freight companies recruit new workers. An employment attorney who testified at this week’s hearing said the Class I railroads are hiring but not retaining any existing workers, so there is no net gain.

“Instead, instead of hiring workers to improve service, they are lengthening trains to sizes that exceed the capacity of the infrastructure, adding to the congestion,” said Richard Edelman, one of the railroad unions’ advocates.

A CNBC review of Union Pacific labor data provided to the STB from January 2019 through October describes the history of labor turnover, a time frame that includes the combination of the introduction of the company’s precision rail strategy, dubbed the Unified Plan 2020 , which was introduced in October 2018 and is being phased out across the Union Pacific rail network. The effects of the Covid pandemic can also be seen in the decline in the workforce.

A total of 27,753 boats were registered in October 2022, compared to 32,315 in October 2019, according to a Union Pacific spokesman.

Union membership data shows that employment on all Class I rails, including Union Pacific, has actually declined since just before the pandemic began and between October 2021 and October 2022.

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