Rail execs deny any preference for crude

  • Article by: JIM SPENCER , Star Tribune
  • Updated: April 10, 2014 - 9:23 PM

Farmers have complained of shipping delays, but rail executives say the underlying problems are complex.

– With agricultural shipments running weeks, if not months behind schedule in the Upper Midwest, executives from two major railroads insisted Thursday that they are not giving preferential treatment to burgeoning crude oil shipments out of North Dakota.

But officials from BNSF Railway Co. and Canadian Pacific Railway offered few assurances of when they can solve problems that could cost farmers in Minnesota and neighboring states hundreds of millions of dollars.

In a hearing before the U.S. Surface Transportation Board, the executives blamed bad weather and poor forecasting for agricultural shipping problems. Yet Steven Bobb, BNSF’s chief marketing officer, admitted that astronomical growth in oil shipments out of North Dakota’s Bakken field has combined with record harvests, increased containerized shipping and surging coal demand to create delays that will not end anytime soon.

“I do not see a return to pre-2013 [shipping speeds],” Bobb testified, speaking of a “new normal.”

Farmers have been pressing the Obama administration to help them get grain trains moving again, partly so that fertilizer supplies can reach needed areas in time for spring planting. Thursday’s hearing included a pair of Minnesota soybean farmers who traveled to Washington to explain how train troubles cost them money.

Lance Peterson of Underwood told the transportation board that an inability to ship will lead to a loss of $40,000 on his current crop of soybeans and a loss of more than $100,000 on next year’s crop if adjustments are not made.

“We want to make sure there isn’t an undue preference in [railroads’] shipping,” Peterson, president of the American Soybean Association, said in an interview with the Star Trib­une.

Minnesota Soybean Association President Bill Gordon of Worthington joined Peterson at the witness table and noted that the Chinese, who buy a large percentage of America’s soybeans, have turned to South American producers because U.S. farmers cannot get their crops to market.

Rail service disruptions have put the U.S.’s reputation as a grain exporter at risk as well, said Kevin Thompson of Minnetonka-based agribusiness giant Cargill Inc. Thompson spoke on behalf of the National Grain and Feed Association.

Based on Thursday’s testimony, Minnesota’s agricultural community will be vulnerable at least until BNSF completes construction of 116 miles of rail lines, a process that some experts say could extend into 2015.

That means commodities likely will continue to sit in storage bins or be loaded into rail cars that stay parked on tracks for days or weeks while locomotives are used to pull oil trains.

Meanwhile, shipping problems have driven up the cost of ethanol, and utilities that depend on train-delivered coal to produce electricity must worry as their stockpiles ­dwindle.

Delayed rail shipments at the end of 2013 kept Minnesota Power from generating enough electricity to serve its customers. The company had to buy electricity from other utilities to fill the gap, said David McMillan, a vice president with Minnesota Power’s parent company, Allete Inc.

Railroad companies have been willing to discuss the supply issue, McMillan added, but their “performance has been lagging.”

Bobb said BNSF is now talking to some utilities about letting them get coal shipments from other carriers.

The president of Canadian Pacific, which also operates in Minnesota, offered a more optimistic view. Like Bobb, Canadian Pacific’s Keith Creel denied playing favorites with crude oil.

One of the coldest, snowiest winters on record forced his company to cut train lengths in half and to drive the shortened trains more slowly, Creel said. The result was a traffic jam in Chicago, a main railroad hub.

As the spring thaw takes hold and if shippers will agree to take routes around Chicago, Creel predicted that Canadian Pacific’s woes could end in “four to six weeks.”

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