Mikkel Pates, Forum News Service, Published February 18 2014
Rail delays put historic pinch on agriculture; officials want solutionsFARGO – Elevator operators are perennial critics of railroad service for hauling grain, but many say delays are worse than ever this winter.
After a meeting Sen. John Hoeven organized last week with other industry leaders and BNSF Railway, the CEO of American Crystal Sugar Co. said BNSF’s top executive credited delays to a surge in all sectors – intermodal freight, crops, coal and oil.
Matt Rose, BNSF executive chairman, said things will improve when temperatures stay steady above 10 below zero.
“With the weather forecast in the 20s in the next few weeks, it should help a lot,” said David Berg, CEO of American Crystal, the Moorhead-based sugar processor. “That’s great to hear. But we don’t want to hear plans and projections; we want performance.”
American Crystal has had to slow deliveries at its Ardoch facility. Berg said the coal movements have been “sufficient but not adequate.” The company is getting coal that is then trucked to its five plants, but inventory is low.
American Crystal lowered the rate at which it was slicing sugar beets because it wasn’t able to ship sugar out fast enough to customers. It has since resumed the normal rate at all locations, but has “no breathing space” for storage, Berg says.
He adds that the company has contingency plans to pile sugar in flat storage, which would require that the sugar be put back through the factory process before it’s sold.
The region’s sugar beet companies aren’t the only ones in agriculture to feel the pain of delays that some say are the worst in decades.
More than sugar
On Feb. 5, Daniel R. Elliott III, chairman of the Surface Transportation Board, and Ann D. Begemann, vice chairman, wrote a letter to Carl Ice, president and CEO of BNSF in Fort Worth, Texas, to say they’ve been monitoring BNSF service data and are growing “increasingly concerned about the deterioration in service that is now occurring over significant areas” of the railway’s system.
“These service issues appear to be negatively affecting agricultural, coal, passenger and other traffic, therefore, we request that BNSF review with the board the scope of these service problems and their severity, the underlying causes, and why BNSF has had such difficulty managing the increase in traffic it predicted it could handle in its August 22, 2013 letter to the board,” Elliott and Begemann wrote.
“Most importantly, we need to understand how BNSF plans to return to appropriate service levels and its timeframe for doing so.”
The transportation board officials say they’re hearing about delayed cars and lack of sufficient locomotive power.
They say it appears BNSF service problems are “unusual and already have had a serious impact on customers,” noting that “as a Class I carrier, BNSF has the experience and ability to improve this situation.”
Just a few years ago, railroads across North Dakota and the rest of the Midwest were an afterthought for shipping crude oil pumped out of the Bakken region in western North Dakota.
By last November, rail shipped 71 percent – nearly 800,000 barrels of oil a day – of the basin’s oil, according to estimates from the North Dakota Pipeline Authority. The state’s top oil regulator has guessed 90 percent of Bakken crude will move by rail in 2014.
When asked about oil’s contribution to the problem, Amy Casas, BNSF director of corporate communications, said the railroad “experienced growth on our network in 2013 in places we didn’t anticipate, some of which we forecast and, frankly, some we did not.
“To put this growth in perspective, BNSF absorbed half of all the volume growth in the rail industry driven by domestic Intermodal, automotive and industrial products traffic, more coal volumes than had been forecast to BNSF, more crude by rail volumes driven by widened benchmark crude spreads, and a grain traffic surge in late 2013 driven by compressed and overlapping crop harvests,” Casas said. “The number of grain shuttle trains in service on BNSF’s network has also doubled in recent months. Crude volumes on BNSF increased in 2013, but so did every other sector of volume on our network.”
Service was also impacted in the short term when BNSF invested more capital dollars to improve and expand track capacity on the northern corridor than any other part of its network.
“There was incremental service improvement in late 2013, as our 2013 capacity expansion projects were completed,” she said. “The continuation of those improvements has been limited by an extremely cold winter in the north-central region of our network.”
Extreme cold creates air brake problems for train movement and frozen switches that must be cleared manually, requires lower speeds as a safety precaution and limits how long rail workers can work in the extreme cold before warming up to protect their safety, Casas said.
The nation’s passenger railroads have also complained about long delays worsened by increases in oil and other freight traffic.
Amtrak’s Empire Builder route, which passes through North Dakota’s oil country to connect Chicago with the West Coast, has suffered hours-long delays.
BNSF officials dispute the role oil traffic has played in holding up Amtrak traffic. Amtrak’s monthly reports show “freight train interference” has been an increasing factor in Empire Builder delays in the past several months.
1,000 cars behind
Brad Haugeberg, general manager of SunPrairie Grain in Minot, N.D., a CHS Inc. affiliate, said delays are the worst he’s seen since starting in the business in 1975. His company works with both the Canadian Pacific Railway and BNSF.
SunPrairie typically averages 600 to 700 cars of freight a month in all of its locations but now is about 1,000 cars behind. He said farmers ask why the elevator doesn’t simply order more in advance, but it would have to decide in August to “double-down” on orders for October.
Now, trains are generally six to eight weeks late and long-haul “shuttle” trains, point-to-point trains often 110 cars or longer, are taking priority.
“The only answer is moving this crude (oil from the Bakken fields) in a different fashion, other than rail,” Haugeberg says. “You know the politics behind that.”
Delane Thom, regional manager for CHS-Southwest Grain, says the Taylor, N.D.-based company typically puts rail car orders in several months ahead of the anticipated need. Southwest Grain has three shuttle loaders that together handle 35 million to 40 million bushels of grain.
Southwest Grain has historically been within a few days of its placement dates.
“Now, we’re experiencing delays of 30 days or more beyond that date,” Thom says.