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Looming railroad strike could be devastating to economy in Nebraska and Iowa

3 News Now reporters break down the complex details
Posted at 7:47 PM, Sep 14, 2022

Impact of possible railroad worker strike

With a possible rail strike Friday, consumers are likely wondering: how could this impact them?

Rail moves about 30% of the country's freight — more than any other mode of transportation — from televisions and cars to food and agriculture products.

If our rail system shuts down for five days, one expert says it could take a year to recover.

Which industries feel the impact the quickest?

Iowa State Associate Professor Bobby Martens says we could see impacts in agriculture right away. Local cooperatives and grain elevator systems would not have capacity throughout the harvest season.

"This is not a small disruption we're talking about. In some sense, a strike that lasts five days or longer, for some sectors of the economy, could be as big as a disruption as COVID was to the global supply chain," Martens said.

One industry that's already getting hit is fuel. The Association of American Railroads reports that railroads account for 60% to 70% of ethanol transportation.

"If the ethanol plant has to shut down, when they could be operating profitably otherwise, that certainly has an impact on the Iowa economy and it certainly has an impact on being able to produce ethanol as fuel," Martens said.

Southwest Iowa Renewable Energy CEO Mike Jerke says his team has been making contingency plans in the case a strike comes into fruition and the company's ethanol can't be shipped out.

"As soon as we get empty cars, we're filling them and sending them back out. That's a stance we've taken in the last couple of weeks," Jerke said.

Each day, Southwest Iowa Renewable Energy makes approximately 375,000 gallons of ethanol — equivalent to 13 rail cars. Time is of the essence to get ethanol transported.

"If we can't ship the product, that means we have to slow down. If we have to slow down, that means we use less corn from the farmers, so our market isn't as robust as it normally is if that happens," Jerke said.

As for the rest of us, gas prices could go up again.

"Nobody likes higher gas prices," Council Bluffs resident Don Rolfe said.

"It's hard for families — hard economy right now, where people are already struggling and trying to get back and now this too," Council Bluffs resident Alicia Campbell said.

If the trains stop moving it puts the brakes on almost every part of our economy, emphasizing what union member Pat Pfeifer said.

"It shows how important we are," Pfeifer said.

One oil and refined products analyst estimates gas prices could jump 35 to 75 cents if a railroad strike lasts more than a few days, according to a national fuel analyst.

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two trains pass under an overpass
A pair of trains are seen through heat rises off the rails on May 27, 2022 near downtown Omaha, Nebraska.

Omaha rail industry by the numbers

If you see a freight train in Nebraska, chances are very high that the train is run by either Burlington Northern Santa Fe or Union Pacific with almost 80% of all freight traffic coming from the two major companies.

Both companies bring in products like coal and consumer items we buy in stores. They also ship agricultural products from Nebraska to the western two-thirds of the country.

Union Pacific is, of course, headquartered in Omaha, and is listed as a top-eight employer in the entire city. Statewide it reports nearly 6,000 employees.

Union Pacific details

While BNSF is headquartered in Fort Worth, Texas, it's owned by Berkshire Hathaway, which is controlled by the ‘Oracle of Omaha’ Warren Buffett. It also has a strong Nebraska presence with 4,300 employees spread out across the state.

FS Railroads 12.jpg

While UP has more employees in Nebraska, BNSF ships more annually — last year it shipped two million more carloads than Union Pacific.

With labor strife, it’s unclear when the railroad giants could slow down.

RELATED:Nebraska railroad workers prepare for Friday strike causing supply chain worries: 'Might just finally break'

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Possibility of ‘major impact’ in ‘most industries’

Scott Swenseth, an associate professor of supply chain analytics at the University of Nebraska-Lincoln, said “most industries” could be impacted in the event of a strike or lockout. It would worsen the inflation problem, he said.

“When it's containers, it's got all kinds of different merchandise potentially in those containers, which is going to affect most industries,” he said.

A 3 News Now report from January showed consumer packages, like Amazon packages, often travel by train. Packages had been pictured littered around trains in mass after being rummaged through by thieves in the Los Angeles area.

“We have oil that we move by rail since we haven't been building pipelines,” said Swenseth. “We've got a harvest going on in the Midwest and we've got product that needs move to market. We've got the holiday season coming up and now is the time that merchandise is being accumulated at the different distribution centers.”

the union pacific harriman dispatch center at street level view
The Union Pacific Harriman Dispatch Center is seen in downtown Omaha, Neb. on March 1, 2022. It is located at 850 Jones Street.

Impacts before the deadline

Swenseth said impacts are being felt even before Thursday’s deadline, including passenger trains that might not make their final destinations in the event of a strike.

“Anything perishable that would be going on or that has any kind of a shelf life, if it gets stuck someplace, that shelf life is going to expire,” he said. “So those are the kinds of things that they're already having to plan for or actually take action on.”

Congress can intervene

Because the impacts would be so significant, there’s a law allowing Congress to intervene in railway strikes.

Under the Railway Labor Act, Congress can block strikes and lockouts in railroad and airline labor disputes. For example, Congress could put in place an agreement or extend the period where strikes and lockouts cannot be authorized: the cooldown period.

The U.S. House and Senate are in session. Any action would require more than a majority — 60 votes — in the Senate.

There was no plan to be on standby before tomorrow’s 11 p.m. CDT deadline, a spokesperson for Congressman Don Bacon said Wednesday afternoon.

The local representatives 3 News Now reached gave us statements, but they didn’t appear ready to answer what if any interventions they’d support.

Bacon said, “We want a win-win not only for the railroad workers and the company, but also the country. A strike would be detrimental for America’s farmers, manufacturers, fuel producers, and my constituents as our shipping lines are already suffering from crippling fuel prices and it would shut the country down. I hope that Congress does not have to intervene and that the two sides can come to an amicable agreement in order to avoid a disruption in deliveries across our nation.”

Congressman Mike Flood said, “Railroads are a critical part of Nebraska’s economy, helping move everything from ag products to manufactured goods. A rail strike in the midst of harvest would exacerbate supply chain challenges. I hope that resolution can be reached that’s in the best interest of everyone involved, so we can keep Nebraska’s economy moving.”

Senator Deb Fischer spoke about a potential rail strike on the Senate floor on Tuesday. She said, in part, “It’s critical that the remaining labor unions and the rail industry use those recommendations to reach an agreement as soon as possible…Our entire agricultural system is at stake here. The economic welfare of the American people is at stake here. And global food security is at stake here.”

Her full comments are here.

Spokespeople for Senators Fischer and Ben Sasse, and Congresswoman Cindy Axne of Iowa didn’t respond to questions Wednesday about what, if any, interventions they’d support.

The last rail strike

The most recent railway strike was in 1992 and lasted a couple of days.

“It's something that that does come up periodically,” said Swenseth. “This has been going on for a couple of years now, where they've been trying to work out these issues. It really came to a head this summer when they had a deadline, we got the cooling off period, which is what's now coming to an end … making this a big issue this week.”

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