Repost from National Farmers Union [Editor: This media alert does not name the massive expansion of crude by rail shipments in the upper Midwest as the cause for lack of rail cars for shipping farm commodities, but there is little doubt this is the problem. – RS]
August 6, 2014
Contact: David Thews, 202-554-1600, dthews@nfudc.org
NFU Calls Ability to Deliver Grain Shipments by Rail at Harvest ‘Substantially Inadequate’
Warns Surface Transportation Board Farmers May Be Forced to Dump Grain
WASHINGTON (August 6, 2014) – National Farmers Union (NFU) President Roger Johnson warned the Surface Transportation Board (STB) that BNSF Railway (BNSF) and Canadian Pacific (CP)’s ability to deliver grain and ethanol at harvest are “substantially inadequate” and are resulting in farmers piling grain on the ground because of lack of transportation options.
“We are especially concerned regarding wheat, since harvest has already started and grain remains in the bin from last year’s harvest,” noted Johnson in a letter today to the STB chairman and vice chairman. “While BNSF claims that the total number of late shipments of wheat has declined nationwide, 95.42 percent of all past due cars are concentrated in Montana, North Dakota, South Dakota and Minnesota. BNSF has promised to improve their performance, but we are still subject to delays and Average Train Speed at year-long lows,” the letter notes.
“Grain shipments in North Dakota are critical,” said Johnson. BNSF reported in its latest weekly update that there have been 2,399 delayed rail cars with an average delay of 23.6 days. CP reported 22,457 open requests with an average of 11.71 weeks. The letter cites anecdotal evidence from four different grain elevators indicating that their oldest orders are from early March and shuttle orders are up to 2,000 cars behind. “These numbers are staggering and simply unacceptable,” he said.
Johnson notes that in South Dakota, NFU members are hearing about significant delays directly from local grain elevators across the state. At one particular elevator that handles 15 million bushels of grain per year, 3 million of those bushels will not move before this year’s harvest. “Due to the backlog, farmers are now dumping wheat on the ground because the elevators will not take on the increased liability,” he said.
Johnson also voiced his concern about the ethanol industry, which relies heavily on rail for transportation. “While the June 20 decision rightfully addressed grain shipments, we encourage STB to consider shipments of ethanol as a priority as well,” he said. “Failure to bring ethanol to market will hurt consumers because of higher gasoline prices, and will work against our efforts to offset imports of foreign oil.”
National Farmers Union has been working since 1902 to protect and enhance the economic well-being and quality of life for family farmers, ranchers and rural communities through advocating grassroots-driven policy positions adopted by its membership.
Surge in Rail Shipments of Oil Sidetracks Other Industries
Pileups at BNSF Railway Is Causing Delays for Shippers of Goods Ranging From Coal to Sugar
By Betsy Morris, Jacob Bunge and John W. Miller, March 13, 2014
A train carrying crude oil heads west through the small town of Shelby, Mont., in November. A major snarl in railroad traffic is ricocheting through the supply chains of businesses across the U.S. AP
A major snarl in railroad traffic is ricocheting through the supply chains of businesses across the U.S., causing delays and losses for shippers of goods ranging from coal to sugar.
Many of the problems stem from pileups at BNSF Railway Co. in a critical northern stretch of the country where it is shipping crude oil from North Dakota’s booming Bakken Shale region. The railroad, one of the biggest in North America, was already taxed by the heavy demand for oil transport. But its difficulties multiplied when it ran out of locomotives and crew, as a bitter winter forced it to use smaller trains.
That has caused a ripple effect across the country as shipments have been delayed. Deliveries of empty grain cars to farmers and grain elevators in the Midwest and Great Plains are running about two to three weeks late, the railroad says. The chief of a major sugar producer said he likes to load 50 railcars a day this time of year, but BNSF sometimes brings more than 50 and sometimes 30.
An executive close to big utility companies says coal-fired power plant inventories are running much lower than the usual 30 days. “The railroads tell us they aren’t serving power plants until their inventories are in single-digit days,” he said.
BNSF isn’t the only railroad with capacity problems, but its woes have been aggravated by a big grain harvest and its surging crude business.
The railroad knew it was in trouble when winter hit. “We found ourselves behind the curve,” said Bob Lease, vice president, service design and performance, for BNSF. “Now, we are finding we can’t fill all of the demand” as quickly as usual.
The backlogs could wind up costing shippers hundreds of millions of dollars, says Steve Sharp, president of Consumers United for Rail Equity, a group representing agriculture companies, manufacturers and utilities. His group has been pushing for tougher railroad regulation.
Andrew Walmsley, director of congressional relations for the American Farm Bureau Federation, a trade group for farmers, worries that continued capacity problems could hurt U.S. competitiveness in the world arena. “Our reliability as a trading partner comes into question anytime we can’t provide the most cost-competitive price in a predictable and timely manner,” he said.
BNSF is scrambling. The railroad is leasing and buying locomotives by the hundreds and hiring new crews. In mid-February it began building new track on top of frozen snow-covered ground along its main oil-patch route. It normally wouldn’t have attempted such a project until spring.
Mr. Lease says traffic should become more “normalized” by April 1, but he concedes that the railroad’s challenges will extend through 2014. “It takes a while to unravel,” he said.
BNSF, a unit of Warren Buffett’s Berkshire Hathaway Inc., BRKB +1.19% invented the business of carrying crude oil by rail when it launched its first long oil train, essentially a rolling pipeline, in 2009. The business has sharply exceeded its expectations. Shipments of crude by rail from North Dakota rocketed to a peak of 800,000 barrels a day last October from fewer than 100,000 barrels a day in 2010.
The surge has contributed to a tangle with potentially widespread impact. Larry Stranghoener, chief financial officer of fertilizer maker Mosaic Co. MOS +0.73% , says that transport problems, including the crunch in railroad capacity, could spell “a slower season.”
“The primary preoccupation of our sales force, our supply chain and our customers frankly is getting product to them in time for the spring season,” he told the Minneapolis-area company’s investors Wednesday. Any delays transporting Mosaic’s fertilizer to dealers could cause them to defer additional orders, he said.
Some shippers, eager to move their products, have opted to use trucks. Trucking rates compare with rail costs within a 500-mile radius, but beyond that companies can wind up paying four to five times as much on a per-ton basis, says one shipping official.
At Black Gold Farms, based in Grand Forks, N.D., Chief Executive Gregg Halverson says his company has had to pay more to hire trucks to transport its potatoes, which it sells to chip makers.
“There’s more demand for truck transportation, and that hits us between the eyes,” Mr. Halverson said. “It’s not only the actual availability of the trucks, but trucking firms having trouble getting drivers, because of demand from the oil patch.” He declined to estimate how much more he is paying for trucks.
American Crystal Sugar Co., which says it supplies about 15% of the nation’s sugar, had to slow production at three of its five plants for 11 days in mid-February because it was running out of storage space while waiting for trains to ship its sugar to food companies. That has disrupted the Moorhead, Minn.-based cooperative’s just-in-time delivery system, said David Berg, its chief executive. “The railroad just threw that into complete chaos,” he said.
He said delays in outbound shipments of sugar have interfered with the production schedules of American Crystal’s customers, many of them major food manufacturers.
While he said he wasn’t aware of any food companies that have had to halt production, “They’ve been running on fumes for weeks,” he said. “We’ve been humping trucks all over the U.S. to keep people in supply.” American Crystal supplies General Mills Inc., GIS +1.27% Kraft Foods Group Inc., KRFT +1.30% Nestlé SA, Mars Inc. and Kellogg Co. K +1.09% , among others.
Mr. Berg and Perry Cerminara, director of global sweetener and energy-risk management at Hershey Co. HSY +0.07% , called the problems caused by BNSF “serious” in a March 4 letter to regulators and stressed the “urgent” need to fix them. Mr. Cerminara wrote on behalf of the Sweetener Users Association, representing food manufacturers.
A spokesman for BNSF said it is working with customers individually to address their most critical issues and plans record spending on expansion this year.
Utilities are hoping railroads can improve their capacity before the busy summer season. “We try to build up inventories to around 40 days, so we’re counting on spring,” said one official at a coal-fired power plant. But, he added, “We’re not counting on a magic bullet.”
—Tony C. Dreibus, Annie Gasparro, Chester Dawson, David George-Cosh and Laura Stevens contributed to this article.
BNSF’s Proposal For One-Person Train Crews Concerns Rail Workers
By Ashley Gross, July 29, 2014
FILE – In this Nov. 6, 2013, file photo, a BNSF Railway train hauls crude oil near Wolf Point, Montana. | Matthew Brown AP Photo
Railroad workers are speaking out against a proposal by Burlington Northern Santa Fe Railway to have single-employee freight train crews. They say the idea is unsafe, especially in light of the increasing transportation of crude oil by rail.
The controversy stems from a tentative contract agreement BNSF has reached with one of its unions, the Sheet Metal, Air, Rail and Transportation Union. If union members approve that deal, BNSF could operate freight trains with just an engineer onboard. That engineer would have help from a so-called master conductor who would not be on the train.
The company says it would only use single-person crews on trains that have a computerized collision-avoidance system, and not on trains carrying crude oil or other hazardous materials. But some workers say the proposal is still too risky.
“To be safe in the communities that we’re running these trains through, you need to remove as many hazards as possible, not add one giant one, which is essentially what this is doing,” said Jen Wallis, a BNSF conductor who is not part of the union that will vote on the deal.
Wallis says there’s nothing in the contract that prevents BNSF from using one-person crews to haul hazardous materials.
People have been paying close attention to rail safety in the wake of the deadly rail disaster in Quebec last year that killed 47 people. That train had one employee on duty who left it unmanned when the accident occurred.
The Federal Railroad Administration in the U.S. has said it plans to issue a rule requiring two-person crews on crude oil trains. Union officials did not return calls for comment.
Delta sources Bakken crude for Pennsylvania refinery
Deal accounts for one third of refinery’s capacity.
By Daniel J. Graeber | July 21, 2014
ATLANTA, July 21 (UPI) —A subsidiary of Delta Air Lines said Monday it signed a five-year deal to send 65,000 barrels of Bakken crude oil per day to its refinery in Trainer, Pa.
Delta subsidiary Monroe Energy signed the deal with midstream energy company Bridger LLC to supply about 30 percent of the crude oil refined daily at the Trainer facility. The crude oil would be sourced primarily from the Bakken reserve area in North Dakota, which the company says is cheaper than oil imported from overseas markets.
“Supplying a third of the crude refined at Trainer from the Bakken further reduces the overall cost of fuel for Delta,” Graeme Burnett, a senior vice president for fuel optimization for Delta and chairman of Monroe, said in a statement.
Bridger is a midstream company that recently invested $200 million on railcars, which are said to exceed current safety standards for crude oil transportation.
There’s not enough pipeline capacity in the United States to handle the glut of oil, forcing some companies to rely on rail as an alternative transit method.
A federal warning in early 2014 said Bakken crude oil may be more prone to explosion than other grades if involved in a derailment. The 2013 derailment of a train carrying Bakken oil in Lac-Megantic, Quebec, left more than 40 people dead.
Increased crude oil production has sparked calls for U.S. exports, though Burnett told U.S. lawmakers more exports of U.S. crude would mean more imports for some markets, which would lead to higher global oil prices.
