Mon May 19, 2014
Oil Industry Blamed For Freight Rail Delays
Originally published on Tue May 20, 2014 7:46 am
DAVID GREENE, HOST:
And here in the U.S., in the upper Midwest and Northern Plains, many grain bins and silos are still full, long after last fall's harvest. This is because the railroads are months behind in shipping.
A huge slowdown in rail service is delaying deliveries of grain and other commodities as well, like corn, coal and cars. Many of those affected are blaming the booming domestic oil industry for tying up the rails.
NPR's David Schaper reports.
DAVID SCHAPER, BYLINE: The Red River Valley of northwestern Minnesota and eastern North Dakota is fertile ground for growing sugar beets, some 11 million tons of sugar beets each year, according to the president of the American Crystal Sugar Company, David Berg.
DAVID BERG: We harvest all those sugar beets and then we put them in piles and we freeze them with the, you know, beautiful cold air that Mother Nature gives us.
SCHAPER: It's actually one of the coldest places in the country and this unusually brutal winter has been followed by a colder than normal spring, which Berg says has actually helped preserve his sugar beet crop longer.
BERG: We can run our factories much longer than anybody else in the sugar beet industry because we've these naturally preserved sugar beets, and so here we are the middle of May and we're still processing last year's crop.
SCHAPER: Berg is fortunate because if it had been warmer, some of that beet crop would have rotted while waiting to be processed into sugar, because American Crystal's factories ran out of places to store it.
BERG: Shipments of empty rail cars back to our factories began to slow down. What happened was, you know, that the bins just filled up, and so at that point we did slow some factories down.
SCHAPER: Lacking enough trains to ship sugar, Berg turned to trucks and storing sugar in huge tote boxes and 50-pound bags, but both of those were limited options that also raised costs.
Berg figures the huge slowdown in rail service has cost his company hundreds of thousands of dollars and it could soar into the millions if the delays continue into next fall. And he's not alone.
BOB DINNEEN: Our industry has experienced uncharacteristic poor service from the rail.
SCHAPER: Bob Dinneen is with the Renewable Fuels Association, which represents ethanol producers.
DINNEEN: And as a consequence, the ethanol industry has had to cut back production because we don't have anywhere else to put the product because the railroads can't come and clear our inventory.
SCHAPER: In addition to the sugar and ethanol delays, power plants are waiting for trainloads of coal, cereal makers wait on shipments of oats, some farmers are delaying spring planting as they wait for shipments of fertilizer and even dealerships have to wait for deliveries of new cars.
A new North Dakota State University study says that freight rail delays have already cost that state's agricultural producers more than $66 million and the economic losses are mounting in sectors and other states, too, as just about everything hauled by train across the northern tier of the country continues to face delays; everything, Bob Dinneen says, except one especially hot commodity.
DINNEEN: The only industry it would appear that is receiving top notch service is the oil industry itself.
SCHAPER: The oil fields in the Bakken region of North Dakota and Montana are now producing close to a million barrels of oil a day, 75 percent of which is shipped by rail. That's more than 400,000 tankcar loads of crude oil by rail last year, up from fewer than 10,000 tankcar loads in 2008.
But the railroads deny that they're favoring oil over other products. Industry representatives declined to be interviewed for this story but said in a statement that extremely harsh winter conditions slowed trains.
At the same time, there's been increased shipping demand - from a record grain crop, as well as higher volumes of coal, lumber and consumer goods. The railroads say that they're investing billions to improve their infrastructure as the increased rail traffic leads to congestion and exposes choke points.
(SOUNDBITE OF TRAIN BELL RINGING)
SCHAPER: I'm standing along side a set of railroad tracks on Chicago's West Side and two very long freight trains that had just been standing still for quite some time, as they wait for freight traffic down the tracks to clear.
RANDY BLANKENHORN: I like to tell people that when Chicago gets the sniffles, the freight system gets a cold.
SCHAPER: Randy Blankenhorn is executive director of the Chicago Metropolitan Agency for Planning. He notes that a third of the nation's freight moving by rail comes to, from, or through Chicago, as all six of the nation's class one railroads link up here.
BLANKENHORN: This is how food gets on people's table, this is how TV sets get delivered, this is how America lives and works, and the freight system is such an integral part of that that we can't allow it to get worse, we have to figure out a way to invest in it.
SCHAPER: Blankenhorn is one of several transportation planners across the country calling for dedicated federal funding to eliminate bottlenecks and improve the movement of freight nationwide.
David Schaper, NPR News, Chicago. Transcript provided by NPR, Copyright NPR.