STB Eyes Emergency Service Order for UP (UPDATED)

The Surface Transportation Board (STB) on Dec. 30 directed Union Pacific (UP) to deliver certain unit trains of corn from origins in the Midwest to California on behalf of Foster Poultry Farms (Foster Farms) to alleviate “immediate service issues” while it further considers the chicken and feed producer’s exparte petition for an emergency service order. UPDATE: Foster Farms on Jan. 4 replied to UP’s daily service status updates, required by STB to start Dec. 31 and end Jan. 3. The updates will continue through Jan. 17, the railroad reported, to assist the Board with its determination.

According to Livingston, Calif.-based Foster Farms’ Dec. 29 petition, the emergency service order is necessary because of the “substantial, measurable deterioration of [UP] rail service” to its Traver, Turlock and Delhi, Calif., facilities beginning October 2022, according to STB’s Dec. 30 decision (download below). The corn that UP delivers, Foster Farms told STB, is used to feed hundreds of thousands of cattle and millions of chickens, which are raised for the purpose of providing food supplies. “The lack of sufficient deliveries of unit trains in October and November resulted in feed stocks dwindling to critically low levels,” and inventory levels have continued to dwindle in December, STB summarized Foster Farms’ as saying. “Foster Farms states that it has supplemented UP deliveries with corn shipped on BNSF Railway Company (BNSF), which was transloaded onto trucks at locations within driving distance to Foster Farms’ facilities, and purchased extra unit trains on the secondary market. Foster Farms further states that it has cut off feed to the dairy cattle to preserve corn for feeding the chickens, which are more susceptible to starvation; however, it believes that those efforts will be exhausted by January 7, 2023,” STB reported.

According to STB, UP on Dec. 30 filed a reply “arguing that the Board should deny or hold in abeyance Foster Farms’ petition. According to UP, Foster Farms’ current crisis is largely the result of extreme winter weather that has affected many rail shippers. UP asserts that there are currently five loaded trains destined to Foster Farms’ facilities in Traver, Turlock, and Delhi that will arrive between December 31, 2022, and January 3, 2023. UP argues that delivery of these trains will resolve Foster Farms’ immediate issue, and the Board, therefore, should monitor UP’s efforts to deliver the trains before deciding whether to impose a service order.” In its own Dec. 30 filing, Foster Farms “informed the Board that delivery of these five trains on the schedule listed in UP’s reply would ‘alleviate the immediate feed crisis,’” STB reported.

To “alleviate Foster Farms’ immediate service issues” while STB further considers its petition for an emergency service order, the agency has directed UP to:

• “[D]eliver the five loaded trains currently destined for Foster Farms’ Traver, Turlock, and Delhi facilities on the schedule provided by UP in its pleading, to the greatest extent possible” and “[s]hould UP need to deviate from its proposed schedule for those five trains, UP is directed to immediately advise the Board and Foster Farms in writing.”
• File daily updates with STB regarding the location of these trains starting Dec. 31, 2022 through Jan. 3, 2023.
• Provide on Jan. 3, 2023 an update to STB on the “status of the five deliveries and inform the Board of its plans to continue to provide service to Foster Farms over the next 30 days,” and state “its position on whether it is willing to grant or consider granting BNSF access for any period of time to serve Foster Farms directly via switch or trackage rights to avoid continued or future service disruptions.”

Additionally, STB directed Foster Farms to reply to UP’s status update no later than Jan. 4, 2023.

Though all five STB Members concurred, Republican Member Patrick Fuchs concurred in a separate expression and Republican Member and Vice Chairman Michelle Schultz dissented in part in a separate expression. Schultz noted that “[d]espite UP’s public commitment to the Board that it would provide the service detailed in its reply, the Board unnecessarily orders UP to provide the service without citation to any statutory or regulatory authority to issue such an order. I cannot agree with the Board’s decision to order service in a situation where such an order is not necessary at this time and appears to be without legal authority. Accordingly, I respectfully dissent from that portion of the Board’s decision.”

Foster Farms, UP Updates

On Jan. 4, Foster Farms submitted to STB a reply to UP’s status updates (Dec. 31-Jan. 3). “With the exception of one train, UP did not deliver the five trains on the schedule it represented to the Board and to Foster Farms [on Dec. 31],” the chicken and feed producer wrote. “Train HS74, which was loaded on December 21, 2022, purportedly arrived at the Traver facility per UP’s tracking program at around 9:00 PM Pacific Time on December 31, 2022. However, UP did not provide notice of its arrival until 4:00 AM Pacific Time on January 1, 2023. Train FR11 was loaded on December 21, 2022. UP represented in its [Dec. 30] Reply [to the Foster Farms Dec. 29 petition] that this train would be delivered on January 1, 2023, but it did not arrive at the Turlock facility until January 3, 2023 at 11:26 AM Pacific Time. Trains AG04 and BR04, which UP represented would arrive on January 2, 2023, did not arrive on that date, but rather on January 4, 2023. Train FR12, which UP represented would arrive on January 3, 2023, did not arrive on that date and UP now says it expects to deliver it on January 5, 2023.

“Prior to the filing date of Foster Farms’ … ex parte Petition, the last train UP delivered to Foster Farms arrived at its Traver facility on December 22, 2022. The Petition explains the impact this had on Foster Farms and its customers, namely that on December 16 Foster Farms shut down feed processing at its Turlock facility and on December 29, 2022 Foster Farms shut down rolling corn at its Traver facility. Foster Farms also stopped selling feed to dairy cows and incurred significant costs to try to obtain and truck corn for feed from other sources to supply to chickens. The delivery of HS74 at the end of the day on December 31, 2022 (or early morning January 1, 2023) enabled Foster Farms to unload the train on January 1, 2023, restart rolling corn feed that night, and to deliver 79 truckloads of feed to some customers on January 2, 2023.

“In anticipation of train FR11 arriving at Turlock on January 1, Foster Farms’ crews began prepping for the train’s arrival. However, the failure of this train to arrive on January 1 meant that the Turlock mill was down to one weeks’ worth of corn safety stock for all three facilities (1,900 tons). The failure of AG04 and BR04 to arrive on January 2 meant that Foster Farms had to try to replace the 24,000 tons of corn in those trains with corn from other sources that was trucked primarily to Foster Farms’ facility in Delhi. This effort resulted in only 2,000 tons of corn being on hand (one and a half days’ supply at Delhi), which was reserved exclusively to feed chickens.

“The lack of deliveries on January 1 and January 2 meant that 46 potential feed truckloads to dairy cattle—approximately 1,100 tons—were not available and that the millions of chickens owned and supplied by Foster Farms were only fed because Foster Farms was able to obtain corn from alternative sources that was trucked to its facilities. The arrival of train FR11 on January 3, 2023 at the Turlock facility allowed Foster Farms to restart cattle feeding immediately. The arrival of trains AG04 and BR04 on January 4, 2023 meant that Foster Farms could cease locating and trucking corn to Delhi, and begin building back inventory at Traver.

“If UP completes the delivery of the five trains discussed above by its new deadline of January 5, 2023, then this will mean that the Traver facility will be fully operational; the Turlock facility will be fully operational, and the Delhi facility will be fully operational. However, these deliveries will only cover Foster Farms’ needs for a week. In the rest of the month of January Foster Farms will require UP to deliver eight to nine additional trains to enable Foster Farms to continue to supply the ongoing demand of its customers and livestock, and to rebuild its stocks to typical minimum inventory levels.”

According to Foster Farms’ Jan. 4 filing, UP’s daily reports and status updates have “placed great emphasis on the occurrence of weather events as the reason it did not timely deliver trains to Foster Farms in December and so far in January. UP has also qualified its intentions to serve the next 30 days on the occurrence of ‘weather-related events.’ Foster Farms does not question UP’s position that recent weather events have affected its operations and that its locomotives break down in cold weather. However, Foster Farms notes that all five trains were routed or are being routed to its facilities via UP’s tracks in Nevada despite the fact that severe weather was predicted there well in advance of the movements. Foster Farms has suggested to UP personnel on several occasions that it appeared UP could potentially mitigate the delays and other weather-related problems by utilizing its southern routes through the Tehachapi Mountains in California. … Foster Farms reiterates that UP should consider such alternative routings, especially when it has advance notice of impending severe weather conditions.”

Foster Farms also told STB that “the events of the past few weeks concerning UP’s lack of service to Foster Farms’ facilities should leave no doubt that alternative access to service from BNSF in emergency service situations is necessary and appropriate.”

In UP’s Jan. 3 status report to STB, the Class I railroad said it “is always willing to consider granting other railroads temporary access to customers affected by service disruptions when such access would mitigate the impacts of the disruption without impairing service to other customers.” However, UP said it “does not believe granting BNSF access to Foster Farms would resolve any issues Foster Farms might face over the next 30 days. BNSF trains moving from Midwest loading sites to Foster Farms’ facilities in California would presumably operate primarily on trackage rights over UP. As a result they would [be] subject to any weather-related delays that might affect UP service. In addition, BNSF has no crews certified to operate over UP’s Fresno Subdivision, which serves Traver and Turlock.”

UP concluded that it is “actively managing its resources and materials to mitigate weather-related disruptions to its service, while continuing to take all reasonable steps to ensure power and crews are available to haul Foster Farms’ trains.”

BACKGROUND

STB on June 17, 2022 issued an emergency order to UP, following Foster Farms’ first petition due to similar service issues. The agency directed the Class I railroad to deliver on its commitment to Foster Farms to move unit trains of corn from the Midwest to California, after the chicken and feed producer filed an exparte petition for such an order. On July 1, 2022, STB extended the emergency service oversight period through July 17, 2022, and on July 20, 2022, it determined that the docket would be left open through Jan. 20, 2023, “in the event that further action is necessary.”

STB explained in its June 17 decision that it may issue an emergency service order “under 49 U.S.C. § 11123 when it determines that circumstances, such as the unauthorized cessation of operations or other failure of traffic movement exists that creates ‘an emergency situation of such magnitude as to have substantial adverse effects on shippers, or on rail service in a region of the United States or that a rail carrier providing transportation subject to the jurisdiction of the Board … cannot transport the traffic offered to it in a manner that properly serves the public.” STB found that the order was “warranted” in the June case. Railway Age will follow the new case to see if STB finds an emergency service order warranted a second time.

Wilner Weighs In

On Dec. 30, Railway Age Capitol Hill contributing editor Frank N. Wilner, a former White House-appointed STB chief of staff and author of numerous books on railroad economic regulation, commented:

“Curiously, there is no legal authority specified, as all STB administrative law orders should provide. Rather, this Board order appears only to hold UP to previous promises to deliver feed to Foster Farms by Jan. 3. Is it lawful? It is doubtful UP will carry it to a federal court for testing. UP Chairman, President and CEO Lance Fritz already has enough egg on his face without being an accomplice to the starvation of 500,000 hungry chickens and tens of thousands of equally hungry cows. Once upon a time, railroads boasted of service ‘on the advertised.’ These days, the service standard seems anything better than Southwest Airlines.”

(STB in November ordered Lance Fritz and other top UP executives to appear at a Dec. 13-14 public hearing on what it called a “substantial increase” in the Class I railroad’s use of embargoes as a method of reducing rail traffic congestion. Following that hearing, Fritz on Dec. 16 advised STB that his railroad was immediately “pausing any additional embargoes under the pipeline inventory management program we began in November.”)