BEFORE THE 

SURFACE TRANSPORTATION BOARD 

STB EX PARTE NO. 573 

RAIL SERVICE IN THE WESTERN UNITED STATES 

COMMENTS OF THE 

UNITED STATES DEPARTMENT OF AGRICULTURE 

Date: February 20, 1998 

Michael V. Durm 

Assistant Secretary 

Marketing and Regulatory Programs 

U.S. Depanment of Agriculture 

Washingron, D.C. 20250 
BEFORE THE 

SURF ACE TRANSPORTATION BOARD 

STB EX PARTE NO. 573 

RAIL SERVICE IN THE 'NESTER. 'I UNITED STATES 

COMMENTS OF THE 

UNITED STATES DEPARTMENT OF AGRJCULTURE 

AUTHORITY AND INTEREST 

These comments are filed on behalf of the Secretary of Agriculture in response to 

the Surface Transportation Board's (STB) decision served January 13, 1998, requesting 

information from shipper groups on the quality of rail servic:= they are receiving. The 

Secretary is charged with the responsibility Wlder the Agricultural Adjustment Act of 

:_933 and the Agricultural Marketing Act of 1946 to represent the interests of agricultural shippers and producers in improving transportation services and facilities by, 

among other things, lnitiatb1g and participating in STB proceedings involving rates, 

charges, tariffs, practices, and seffices. 

The United States Department of Agriculture (USDA) is a purchaser and shippe~ 

of substantial volumes of food products for supply to domestic and foreign food programs. We believe our experience as a shipper and observer of the Western rail service 

l 
crisis will be helpful to STB as it considers the possibility of furrher action in trJs 

proceeding. 

GRAIN STORAGE UPDATE 

Much has changed since the December 3, 1997, public hearbg in the Service 

Order 1518 proceeding. At that time service to grain shippers was inadequate and 

USDA's Farm Service Agency (FSA) had approved requests for emergency storage 

totaling 77.5 million bushels. In Supplement No.1 to Service Order 1518, STB acknowledged service to :rv1idwest agricultural shippers as one of its. four basic service concerns. 

Since then, agricultural service on the Burlington Northern Santa Fe Railway (BNSF) has 

recovered and is now nmning ahead of year-ago levels. And while we believe the 

quality of service being pro,ided by Union Pacific Railroad and the Southern Pacific 

Transportation Company (UP /SP) remains inadequate, tl1ere has been some improvement in UP /SP's service. 

The improvements on both BNSF and UP /SP have greatly relieved the problem of 

grain storage. Vutually all of the FSA-approved requests for emergency storage expired 

on January 31, 1998. At present, FSA has approved only six requests for an extension of 

emergency storage totaling 1.6 million bushels. Thus, for the most part, the grain 

storage crisis has passed. USDA would l..E<e to express its appreciation to both BNSF and 

UP!SP for the hard work needed to move those mountains of grain. We would also like 

to thank STB for its clear focus on the grain issue. 

2 
MEASURABLE PROGRESS ON BOTH BNSF A.l'lD UP/SP 

Since public hearings held December 3, 1997, the weekly reports submitted by both 

UP!SP and BNSF show that both caniers have made progress towards restoring ''normal" 

service levels. This progress is particularly evident on the BNSF. In December, USDA 

suggested that BNSF had given priority to serving UP/SP's intermodal customers rather 

30 

20 

BNSF Percentage Changes in Carloadings 

Changes from Year-Ago Levels 

f\.. • 

~ • < • • • • 

• • • • • • • • ••• 

• • • • • • • • • • • • • 

,, s 

•• ,. • .... ,., ! [!l, 

:; 10 

- ~----- --.// I - / I 

\ / 

"'-.. / 

~ 

(j 

• il' 0 

" • e 

• a.. -10 

-20 

-30 

i - Non-grain ' 

• • • • • , lntermo.dal 

-40L_--------------------------------------------~ 

10/11 11/1 11122 12113 113 1124 

5-Week Moving Average 

Source: AAR 

Chan No.1 

J 
than their own agricultural shippers. As Chart No. 1 shows, BNSF is now moving more 

grain t.lan it did a year ago and there is no longer any reason to suspect that they are 

shifting system capacity away from graln shippers. Service to graln shippers began to 

improve shortly after STB's December public hearing and that volume today exceeds its 

year-ago levels. Moreover, the disparity benveen the BNSF's service to grain shippers 

30 

20 

UP/SP Percentage Changes in Carloadings 

Changes from Year-Ago Levels 

Grain 

- Non-grain 

• • • • • lntermodal 

1\ 

\ 

, , . .\ _,..._ 

I 

-

·20 i 

' ' ' 

• I 

I 

""" 10/11 

Sour:::e: AAR 

Chart No.2 

• 

/ 

• / • •• • • . . . ' . . . . • • • • • . . . . . --

• • - ~ • ... • • • • • • • • • 

\ / 

/" 

'-.. / 

1111 11/22 12/13 113 1/24 

5-Week Moving Average 

4 
and their service to other shippers no lange- exists. By contrast, as Chart No. 2 shows, 

service leveis on the L'P/SP still lag their year-ago levels quite badly However, grain 

shipments have increased and the disparirt between grain and non-grain shippers has 

improved markedly. 

While the volume of UP /SP's service to grain shippers still lags its year-ago levels, 

there are several reasons to believe that grain shippers are not being systematically 

discriminated against. First, market spreads are currently encouraging storage rather 

than shipment of various grains. That is, grain prices today are lower than the expected 

present value of grain to be delivered later this year. Second, BNSF's recent increases in 

grain shipments may represent an increase in its market share relative to UP/SP rather 

than an overall increase in the dema•·1d for grain transportation services. 

CONTINUING DIFFICULTIES FOR UP/SP 

Although the immediate problem of grain storage has been resolved, USDA is still 

concerned that congestion continues to plague the UP/SPin the Texas-Louisiana Gulf 

Coast region. February has seen some further degradation in many key measures of 

UP/SP's operational capabilities. USDA is directly affected by the Western railroad 

service crisis. 1Ne have the responsibility to procure and ship food products for a number 

of dcmestic and foreign food assistance programs. These programs include the National 

School Lunch Program, the Women Infant Children Special Feeding Program, the Food 

Distribution Program for lndian Reservations, and the Commodity Supplemental Feeding 

Program. USDA is also responsible to purchase and deliver commodities to foreign 

5 
countries under the Food for Peace Program (Title II and III), Food for Progress Program, 

Section 416 donations, and the World Food Program. USDA uses rail transportation for 

movement of food products under all of the domestic and foreign feeding ?To grams. We 

ship by rail both to domestic destinations and to pons for subsequent export. USDA also 

is responsible for domestic movements of dairy products purchased under the price 

support programs. 

We believe that there has been little, if any, improvement in \Vestern railroad 

service in the Gulf Coast area (Houston, Texas-Lake Charles, Louisiana). This lack of 

improvement in rail service in the Gulf Coast area has resulted in delays of food shipments under USDA export programs. Some shipments have not reached port in time to 

be lifted onto a vessel. In order to meet our program needs, USDA has been forced to 

move commodities from one port to another by truck. Naturally, this has increased our 

casts significantly. 

The rail yards in the Gulf Coast area are still heavily congested, resulting in 

extreme delays in placement of rail cars into pore operations. For instance, it is estimated that Union Pacific rail yards in Lake Charles contain about 1,500 rail cars, causing 

a back log of traffic moving into the Port of Lake Charles. It appears that UP /SP is 

utilizing an overflow yard for rail cars in Lake Charles. Cars moving into this overflow 

yard must ilien be moved back into the main yard before they can enter the port. 

A recent example of the delays experienced in the Gulf Coast area may be a useful 

illustration of these continuing difficulties. On January 29, 1998, USDA contacted 

UP /SP customer service in an attempt to expedite the movement of s.ome rail cars into 

6 
the Port of Lake Charles in order to meet a vessel which was due in port on February 5, 

1998. These rail cars (KCS 749004 ar.d KCS 749191) had been sitting in UP/SP's rail 

yards in Lake Charles since January 7, and January 12, 1998, respectively. This is far 

longer than the normal dwell time for a car in a rail yard. 

To deal with these difficulties and delays, USDA has undertaken a number of 

initiatives. For example, in conjrmction with the Agency for International Development 

(AID), we have established a pilot project to pre· position cargo at U.S. ports. Also, 

USDA has added 5 days to th.e schedule for vessel bookings to allow for delays in rail 

movements to pons. In addition USDA and .A.ID have requested steamship lines to set 

back the time period for vessels to call at U.S. ports for cargo in USDA export program. 

These initiatives notwithstanding, USDA is still experiencing problems because of poor 

rail service in the Gulf Coast region. The inadequate level of rail service :.S hampering 

USDA's management of criti-cal foreign food assistance programs. 

CONCLUSIONS 

The service provided by BNSF and UP !SP to grai.'1 shippers has improved since 

the December public hearing in this proceeding. In BNSF's case that progress has been 

substantial and USDA believes BNSF is clearly providing an adequate level of rail service 

to its customers. In UP /SP's case, however, despite progress in handling grain traffic, 

USDA believes that the congestion of traffic on the UP/SP has created an emergency 

situation of such magnitude as to have substantial adverse effects on shippers and on rail 

service in the Gulf Coast region of the United States. We believe that this emergency 

7 
constitutes a situation requiring immediate action to serve the public and that STB, using 

its powers set out in 49 U.S.C. 11123, must modify and extend Service Order 1518 yet 

again. We believe that a 90-day extension would be appropriate and, as part of that 

order, UP /SP and BNSF should continue to report weekly information on grain shipments. 

Current market prices for grain have created substantial incentives. to store grain 

through much of the remainder of the current crop marketing year. USDA is concerned 

thac as we move into the next crop year, UP/SP's congestion problems will affect its 

ability to handle the increased volume of grain traffic that will occur as the harvest 

season begins. The new crop year for wheat begins June 1, 1998, as the harvest of hard 

red winter wheat begins in Texas and contnues northward through Oklahoma and 

Kansas through mid-summer. Much of this Lower Plains wheat typically moves. to the 

export facilities located along the Gulf Coast. Therefore it is essential that the congestion problem be cle-8red by early swnmer c-r we \'Vill once again be reading news 

accounts of grain on the gronnd. 

Finally, although this proceeding is separate from the UP /SP oversight hearings, it 

is our belief that at some level they are inextricably linked. The UP /SP congestion 

problems highlight what we believe is the prJicipal failure of the UP/SP merger: An 

inadequate competitive balance in Texas a.'Tecting both the Gulf Coast and the Mexican 

gateway. We believe that for the public to fully enjoy the benefits of an efficient and 

competitive railway network, the UP /SP oversight hearings will have to be reopened and 

STB will have .to examine the competitive problems in Texas. 

8 
9 

Respectfully submitted, 

Assistant Secretary 

Marketing and RewJ.!atory Programs 

U.S. Department of Agriculture 

Washington, DC 20250