Tag Archives: North Dakota Senator Heidi Heitkamp

Rail Logjams Are Putting The Whole US Economic Recovery At Risk

Repost from Business Insider
[Editor: Significant quote: “Many experts blame an incomplete recovery from last winter’s freight backlogs, coupled with record crops and rising competition with crude oil tankers for track space amid an economic recovery.”  – RS] 

Rail Logjams Are Putting The Whole US Economic Recovery At Risk

Susan Taylor and Solarina Ho, Reuters, Aug. 15, 2014

TORONTO (Reuters) – More than eight months after an extreme winter began snarling North American rail traffic, a Reuters analysis of industry data shows delays lingering, raising the risk of a second winter of chaos on the rails.

Across the continent’s seven largest operators, trains ran almost 8 percent slower on average and sat idle at key terminals for nearly three hours longer in the second quarter than a year earlier, data from the main railroads, known as Class 1, show.

While Canada’s rail operators have nearly recovered, many U.S. operators lag far behind.

The concerns are sharpest in the U.S. Farm Belt, with lawmakers fearful that the biggest crops on record may be slow to reach markets or could even rot.

Rail logjams contributed to the economic slowdown early in the year, rippling across corporate America and affecting everything from car makers to ethanol producers.

Many experts blame an incomplete recovery from last winter’s freight backlogs, coupled with record crops and rising competition with crude oil tankers for track space amid an economic recovery.

“It’s like a sinking ship – you’re bailing out at one end, but it’s coming in the other end just as fast, if not faster,” said Citigroup Global Markets transportation analyst Christian Wetherbee.

Performance fell behind as loads grew: between April and June, U.S. rail carload volumes grew 5.4 percent and intermodal traffic, which include shipments partly by rail, rose 8 percent, Association of American Railroads (AAR) data shows.

At the same time, the industry is producing “tremendous” margins, profit and cash flow, with some companies setting records, said rail analyst Tony Hatch.

The largest operators plan to spend about 18 to 20 percent of annual revenue this year on new terminals, track, sidings and equipment to help boost capacity and efficiency, according to Thomson Reuters data. That is slightly higher than recent average annual spending.

Some shippers complain that spending hasn’t been sufficient to meet demand, especially in bad weather. Still, many investment projects are multi-year improvements that can’t quickly fix traffic jams.

“We’re criticized … because we haven’t put infrastructure in to handle the growth. But then when you try to put infrastructure in, the not-in-my-backyard lobby kicks in and says: We don’t want you here,” Canadian Pacific Railway Ltd Chief Executive Hunter Harrison said on a recent earnings conference call.

Over the four decades to 2000, the nation’s major track system shrank by about half, in terms of miles of rails, according to the U.S. Federal Highway Administration.

Although Berkshire Hathaway’s BNSF Railway Co is spending a record $5 billion this year, its performance lagged those of competitors last quarter.  BNSF trains traveled 11 percent slower than year-ago speeds, and stayed at terminals for 18 percent longer.

Fadi Chamoun, an analyst at BMO Capital Markets, said BNSF is unlikely to recover until mid- to late-2015 due to the amount of work it must do.

In recent years, BNSF accounted for some 50 percent of the entire rail industry’s volume growth, analysts said. The company says it handles up to 15 percent of U.S. intercity freight.

BNSF declined to respond to Reuters’ questions about its performance metrics. The Fort Worth, Texas-based railway has said it is working closely with shippers to clear backlogs and adding track, locomotives and crews.

The other four U.S. Class 1 railroads are CSX Corp, Kansas City Southern, Norfolk Southern Corp and Union Pacific Corp.

Kansas City Southern and Norfolk Southern did not respond to requests for comment. CSX said it was investing in strategic capacity additions and was adding train crews and locomotives to restore performance and support growth. Union Pacific CEO Jack Koraleski told Reuters that the railroad’s performance has been improving even as volumes have been increasing, adding that it has worked hard to address disruptions and customer issues.

Cowen & Co analyst Jason Seidl said winter exacerbated problems for the industry. “As they were trying to dig out, the volumes took off,” he said.

ECONOMIC FALLOUT

In the United States, more than 40 percent of goods, valued at more than $550 billion, are shipped by railroad each year on some 140,000 miles of track. Canada’s 30,100 miles of track carry half of the country’s export goods.

Frozen transportation links contributed to a nearly 3 percent contraction in the U.S. economy during the first quarter, the New York Federal Reserve said last week.

Lawmakers and the $395 billion agricultural industry fear that trains may fail to clear last year’s record-breaking crops in the Midwestern U.S. Farm Belt, which could strand part of this summer’s grain harvest.

“We’re sounding the alarms right now,” North Dakota Senator Heidi Heitkamp told Reuters. “We believe the 2014 crop could be taken off the fields and there won’t be any place to store it, because of the lack of ability to move product by rail.”

BNSF and Canada’s CP Rail operate the main rail networks in North Dakota, where farmers vie for space with some 700,000 barrels per day of crude oil shipped by rail from the state’s Bakken Shale.

“You can’t see these massive increases in crude-by-rail and not appreciate that they are creating problems for moving agricultural products,” Heitkamp said.

Members of Congress, utility companies, the United States Department of Agriculture and others are asking the U.S. rail regulator, the Surface Transportation Board, for help.

“With remaining grain in storage due to the backlog, grain elevators in some locations, such as South Dakota and Minnesota, could run out of storage capacity during the upcoming harvest, requiring grain be stored on the ground and running the risk of spoiling. The projected size of the upcoming harvest creates a high potential for loss,” USDA Under Secretary Edward Avalos wrote to the regulator this month.

Utility Xcel Energy said coal deliveries to a key Midwest facility were behind schedule.

“When we run out of coal, the plant can’t produce electricity. We are right in the middle of summer when air-conditioning load creates our highest levels of electric demand,” Xcel Chief Executive Ben Fowke wrote in a letter to the STB at the end of July.

Since an April 10 hearing on rail service, the STB has issued several orders, primarily involving CP and BNSF. The most recent directive, issued in June, required the two railways to publicly file their plans to resolve their backlog on grain orders and provide a weekly update on grain car service. It declined to comment on complaints or its plans.

Earlier this month, the Canadian government ordered Canadian National Railway Co and CP to further boost regulated grain shipments, in an effort to prevent a repeat of last season’s backlog.

Recent University of Minnesota data showed that transportation bottlenecks cost the state’s soybean, corn and spring wheat farmers nearly $100 million between March and May.

United Parcel Service Inc, the world’s largest courier company, said that “very poor” railroad performance last quarter raised its costs. Even passenger service Amtrak has been affected, with some of the trains it runs on Class 1 tracks falling far behind schedule.

Canada’s biggest rails, CN and CP, operated their trains at speeds 4.7 percent and 3 percent slower in the second quarter than year-ago levels respectively, better than most U.S. rivals.

CN said its ability to avoid Chicago, a hub notorious for bottlenecks, helped its sector-leading recovery. In 2009, CN bought a rail network that encircles Chicago, the Elgin, Joliet and Eastern Railway Co.

CHICAGO BLUES

Chicago’s third-snowiest winter on record severely tangled traffic at a hub that handles one quarter of the nation’s freight-by-rail and has recently become a major conduit for Bakken crude.

Data from Union Pacific shows its trains idled in Chicago for an average 65 hours in February, around double the typical time for much of 2013.

Following a severe 1999 blizzard that paralyzed trains for days, government and railroads launched a $3.8 billion plan to improve the Chicago system.

That’s not a quick solution for the industry’s woes.

“It takes a long time for new lines and new terminals to get built, and additional locomotives to be delivered and additional crews to be trained,” said Steve Ditmeyer, an adjunct professor at Michigan State University’s Railway Management Program.

“There’s a time lag that the railroads cannot snap their finger and, all of a sudden, get out of the current problem.”

(With additional reporting by Joshua Schneyer and Jonathan Leff in New York, and Sagarika Jaisinghani in Bangalore; editing by Joshua Schneyer and Peter Henderson)
Share...

    U.S. Senators urge stiff oversite and a “Safe Transportation of Energy Products Fund”

    Repost from BringMeTheNews.com, Minneapolis, MN
    [Editor: note the Minnesota “Traffic of Crude Oil” map at end of this story.  – RS]

    Franken wants more oversight of crude oil shipped by rail

    April 6, 2014 By Melanie Sommer

    In the wake of recent accidents involving trains carrying crude oil from North Dakota’s Bakken oil fields, U.S. Sen. Al Franken is calling for more federal oversight of oil transport by rail.

    Franken, D-Minnesota, and Sen. Heidi Heitkamp, D-N.D., sent a letter to the Senate Appropriations Committee — which takes a lead role in writing the federal budget each year — urging the creation of a Safe Transportation of Energy Products Fund.

    The new program would look at ways to improve the safety of transporting crude oil by train and oil tankers, the Northland News Center reports. The fund would pay for more safety inspections, disaster response training, studies and community outreach, among other things.

    The senators also are asking for funding to hire more inspectors.

    Lawmakers on the federal and state levels stepped up their scrutiny of oil shipments by rail after a train carrying crude oil collided with another train near Casselton, N.D. in late December, causing an oil spill and a spectacular fire which required the town to evacuate.  Congressional committees held hearings on rail safety, and several bills increasing oversight of oil transportation are in committee in the Minnesota House.

    The growth in rail transport of crude oil has increased dramatically in just the past few years, according to Franken’s office.  About 800,000 barrels of crude per day are shipped via rail, which is a 6,000 percent increase since 2007.

    Experts are also concerned about the safety of Bakken crude, specifically. Federal officials issued a safety alert in January warning that the crude oil pumped in that region may be more flammable — and therefore, more dangerous — than other forms of oil.

    This map, produced by Minnesota 2020, shows the rail routes that go through Minnesota carrying crude oil.

    crude-oil-minnesota

    Share...

      Marathon Petroleum questions volatility of Bakken crude, but much remains unknown

      Repost from

      New lab test shows Bakken crude may be less dangerous than earlier data suggest

      By Cezary Podkul NEW YORK  Feb 26, 2014

      Feb 26 (Reuters) – A study of a fresh sample of crude oil from the Bakken shale in North Dakota published this week showed sharply lower levels of volatile vapors compared to previous tests, potentially raising new questions about the danger of shipping it by rail.

      The latest data from Marathon Petroleum’s Capline Pipeline unit, which publishes so-called “assays” on the quality of over 100 types of crude on its website, showed a sharp fall in the oil’s vapor pressure, a common measure of a fuel’s ability to evaporate and give off combustible gases.

      While the data offers only a single snapshot of the properties for a batch of so-called “North Dakota Sweet”, a term for Bakken crude, it may raise more questions about the combustibility of the oil, which has been cited in several fiery derailments in recent months.

      The data emerges just as U.S. regulators impose new rules requiring more testing of Bakken crude for fear it is prone to explosion during accidents. Industry officials are appearing before a House committee in Washington on Wednesday to discuss the issue.

      Capline’s latest Bakken assay, dated 14 January, was posted on its website this week, shortly after a Wall Street Journal story on Monday used older Capline data to show Bakken crude carries more combustible gases than other varieties. While Bakken’s ultra-light properties are generally well known, hard data is rarely made public.

      Regulators are seeking more information on Bakken crude from oil shippers and are also conducting their own data collection and sampling. It is not clear when or if those results will be released.

      Capline’s newest test showed a vapor pressure reading of 5.94 pounds per square inch (psi). The reading compares with a psi of 8.75 for a test done in February 2013 and is nearly 4 pounds per square inch lower than the highest reading, 9.7 psi, recorded by Capline in December 2010. A higher psi reading generally indicates a liquid fuel is more prone to give off combustible gases.

      It was not clear why the rate had declined so sharply, or whether that decline is broadly reflective of the region as a whole. One expert who reviewed the data said the wide fluctuation appeared unusual, but not conclusive of any trend.

      “I would expect it to go up and down, it’s going to vary, but that’s a big drop,” Connie M. Hendrickson, chemist with Arkon Consultants in Dallas, Texas, told Reuters. “Without extra sampling and extra testing, we just don’t know.”

      A spokesman for Marathon declined to comment on the decrease, other than to say the firm has “a process in place to test crude oil for quality oversight purposes”. The samples are generally taken at the same spot on the pipeline, the spokesman said.

      It is not clear how much Bakken runs through the Capline, a 1.3 million barrels-per-day (bpd) pipeline running north from St. James, Louisiana, to Illinois. The Marathon spokesman declined to provide operating rates for the pipeline.

      To be sure, Capline’s latest data still show Bakken crude ranks higher in volatility than most other crudes, based on vapor pressure tests conducted by the company. At the 5.94 psi, for example, Capline’s latest Bakken sample still ranks more than double that of Light Louisiana Sweet crude, which tested at 2.38 psi in May 2013.

      Still, the wider range of readings and the infrequency of the testing suggests there remains much uncertainty about the quality of Bakken crude.

      Other data sets have suggested not only that the crude is light by its nature – Bakken reserves are rich in so-called “light ends” like butane, propane and other byproducts of petroleum – but that it is also growing lighter.

      Refiner Tesoro Corp. said in a 2013 presentation that its purchases of crude sourced from North Dakota’s Bakken region have increased in volatility, topping readings of 12 psi in 2013.

      Some lawmakers have asked for more data to aid regulatory efforts on this issue.

      “It is not in anyone’s best interest to knee-jerk a response without data,” North Dakota Senator Heidi Heitkamp said in an interview this week.

      Share...