‘Patience is wearing thin’ as rail problems persist – EnergyWire

‘Patience is wearing thin’ as rail problems persist

North Dakota’s agricultural industry is in a bind, with field peas, soybeans, corn and wheat stuffed in overflowing bins or grain elevators. Thousands of rail cars are overdue to whisk last year’s crop to market. As regulators and politicians weigh how to handle the crisis, farmers in the region have pointed fingers at railroad companies and fast-growing crude-by-rail traffic from the booming Bakken Shale play.

“It’s rush hour all the time on the railroad,” said Roger Zetocha, president of the North Dakota Farmers Union’s Sargent County chapter. “But this Bakken just didn’t happen yesterday. Yes, [oil infrastructure] takes time and money, but golly sakes — why do we always have to be on the hind end of things here?”

Zetocha aired his concerns at a field meeting in Fargo, N.D., convened by the federal Surface Transportation Board, which mediates rail disputes.

It’s not the first time the STB has tackled rail service problems in the state. The regulator held a hearing on the subject in April after last year’s brutal winter kept much of the 2013 harvest in storage.

But pent-up demand for rail cars hasn’t cleared since then, and the STB may be pushed toward more action, such as requiring railroads to share information about how they handle energy industry shipments vis-à-vis agriculture.

“Patience is wearing thin as [farmers] see the ’14 crop coming,” North Dakota Sen. Heidi Heitkamp (D) said at yesterday’s hearing. “We need a better idea — not this ‘he said, she said’ — but a better idea of where we are right now.”

North Dakota’s two biggest freight carriers, Canadian Pacific Railway Ltd. and BNSF Railway Co., have denied prioritizing crude over grain (EnergyWire, Sept. 2). Representatives from both companies attended yesterday’s hearing to get an earful from farmers and people representing ethanol producers, grain elevators, coal companies and utilities, who all complained of service problems.

Gov. Jack Dalrymple (R) even appeared to urge the STB to take emergency action on an “impossible situation” for grain shippers.

“On a longer-term basis, we need more capacity — we’re not only producing over a million barrels of oil per day; we’re a huge producer of many agricultural commodities,” Dalrymple said. “We need a bigger railroad, we need more track.”

Crude constraints

Nearly 60 percent of oil production leaves North Dakota by rail, according to state data. But oil producers were notably absent from yesterday’s meeting.

Kari Cutting, vice president of the North Dakota Petroleum Council, said in an interview that she had heard anecdotal cases of oil companies facing rail issues, but that the office didn’t collect data on the subject.

“We understand the capacity in North Dakota, particularly on the railroads here in the state, has become quite constrained because of all the demand,” she said. “We are concerned, too, that at this point, will the oil industry start to see slowdowns in their service, as well?”

BNSF said yesterday that its oil customers have already been seeing problems.

Stevan Bobb, executive vice president and chief marketing officer of the Fort Worth-based railroad, told the STB panel that he was “not proud” of the fact that shippers across all industries in the region were facing delays.

“Both agricultural and crude fleet velocities are down the same amount, year over year,” he said, rebuffing allegations that more lucrative oil shipments are favored over grains.

Farmers aren’t yet convinced and want the STB to press railroads into coughing up more data. The board has already acted to require that BNSF and Canadian Pacific post weekly updates on the number of grain shipments awaiting fulfilment.

While several agricultural industry representatives credited BNSF’s efforts at reducing the backlog in recent months, others at the hearing weren’t satisfied.

Farmers often wonder how many oil cars are being held up compared to those transporting grains, according to Bryan Klabunde, a member of the Minnesota Farmers Union who grows corn and soybeans not far from Minnesota’s border with North Dakota. Slow service has already cost regional farmers and grain elevators upward of $100 million, based on industry groups’ claims and a rough estimate that North Dakota State University produced in May.

“If it’s just grain cars [being delayed], it seems like the farmers and the grain producers are basically subsidizing oil, on their dime,” he said.

While acknowledging delays, BNSF has pointed out its projected capital investment of $1 billion in its Northern Corridor this year. Canadian Pacific has similarly pumped hundreds of millions of dollars into the network, although the company placed part of the blame on interconnections outside its direct control.

“Whether we go east through the Twin Cities, or whether we’re going west, we have a dependency on interchange connections to reach those marketplaces,” said John Brooks, Canadian Pacific’s vice president for market and bulk sales. “It’s critical to understand this: Whether we’re moving grain, crude, crude-related products, frac sand, you name it — these products and their origins and destinations require interchange fluidity for our products.”

Canadian Pacific is still struggling to clear about 6,200 open orders for grain shipments in North Dakota.

Speakers at the hearing floated various solutions for the backlog, from opening Canadian Pacific and BNSF tracks to competition from other railroads to calls for the STB to open a field office in North Dakota to handle day-to-day disputes.

STB Vice Chairwoman Deb Miller indicated that she may prefer publicizing more railroad data so that shippers can better understand the nature of the backlog and competition for cars and track space.

“In my view, those being impacted need and deserve greater transparency as to how that rail network is being shared,” she said. “Assumptions, conjecture and rumor have often taken the place of facts — both against the shippers as well as the railroads.”

Twitter: @BlakeSobczak | Email: bsobczak@eenews.net

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