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Crude Oil is Displacing Other Commodities on Trains, Critics Charge

McClatchy Washington Bureau
April 10, 2014
Oil train in Minneapolis
A train carrying tanker cars filled with crude oil passes through St. Paul, Minnesota, on February 27, 2013. The crude oil is loaded in at terminals in North Dakota and Canada and taken to refineries in the east.  JIM GEHRZ — Minneapolis Star Tribune/MCT

WASHINGTON — Grain producers, manufacturers and coal shippers told federal regulators Thursday that rail service has deteriorated drastically in the nation’s midsection in recent months, leaving crops in piles on the ground and fuel stocks low at electric power plants as resources go undelivered.

Railroad representatives told the federal Surface Transportation Board that a brutal winter, combined with a record grain harvest, was to blame for the delays, but the industry’s critics charge that their shipments are taking a side track to crude oil.

Railroads moved virtually no crude oil just a few years ago, but a surge in production in North Dakota’s Bakken shale region has strained rail capacity in the Midwest.

It’s putting the squeeze on farmers who rely on rail to turn their crops into cash and delaying passengers on Amtrak’s Empire Builder between Chicago and the Northwest, several witnesses testified.

“The extreme delays to Amtrak and other users of the network are a symptom of a fragile network that is strained and struggling to react,” Federal Railroad Administrator Joseph Szabo told the board, which mediates disputes between railroads and their customers.

Bob Wisness, the president of the North Dakota Grain Growers Association, said the rail snarls had put his state’s farmers in jeopardy. Millions of bushels of wheat, barley and corn are “unmarketable” because of rail deliveries that are weeks and months late.

“We have had big crops before,” he testified, “but we have never had service this poor from the railroads.”

Bob Kahn, the general manager of the Texas Municipal Power Agency, testified that the service problems began almost a year ago. The state depends on coal deliveries by rail to generate a third of its electricity, and lately railroads have not kept up, Kahn said.

Despite reassurances from BNSF, the railroad that supplies the coal from Wyoming’s Powder River Basin, Kahn said, some Texas plants only have a 10-day supply and could run out by the summer, when electricity demand reaches its peak in the state.

“They keep saying, ‘Don’t worry, you’re not going to run out of coal,’ ” he testified. “We don’t see it getting any better.”

While railroad officials acknowledged the problems and the shippers’ frustrations, they said they weren’t shoving other commodities aside for crude oil.

“I make more money hauling grain than I do hauling crude,” said Keith Creel, the president and operating chief at Canadian Pacific Railway.

Much of the shippers’ ire was directed at BNSF. The railroad, based in Fort Worth, Texas, has become the nation’s largest hauler of crude oil in trains, mostly from North Dakota.

BNSF said that it alone had absorbed half the growth in U.S. rail volumes last year. Traffic spiked late last year amid a record grain harvest, the railroad said, and the onset of one of the worst winters in memory.

The railroad said it was hiring thousands of new workers, ordering new locomotives and expanding track capacity.

“We’re not 100 percent there yet, and it’s something we continue to work on week by week,” testified Stevan Bobb, the executive vice president and marketing chief for BNSF.

One particular problem spot has been Chicago, the nation’s leading rail hub, where 1,300 freight and passenger trains intersect every day. A snowfall total of 80 inches made this winter the city’s third worst on record.

Chicago is where BNSF and Canadian Pacific hand off crude oil shipments to CSX and Norfolk Southern for delivery to East Coast refineries. That traffic continues to increase.

Canadian Pacific’s Creel testified that he expects things to improve in four to six weeks.

“I think it’s a very abnormal situation,” he said. “We’ve just got a big hole to dig out of.”

Email: ctate@mcclatchydc.com; Twitter: @tatecurtis

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