'The whole system is suffering': Words of frustration, caution at hearing on rail delays

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Posted: Friday, September 5, 2014 2:15 am

FARGO, N.D. — Farmers and grain shippers in Iowa and Nebraska, states little affected by rail delays so far, should be paying attention to the shipping problems that have plagued North Dakota, said one of the nation’s top advocates for train customers.

“The whole system is suffering,” said Terry Whiteside, chairman for the Alliance for Rail Competition, speaking in an interview Thursday at a federal hearing on rail delays in Fargo, North Dakota. “Rail speeds are falling nationwide and that should be of concern for all producers.”

Whiteside was one dozens of people to speak Thursday at the Surface Transportation Board hearing attended by about 150 people to address persistent delays in railcars showing up to transport ag products in the upper Midwest.

BNSF Railway said Thursday that late rail cars for North Dakota grain shippers have fallen to fewer than 1,000, down from a high of 8,164 in March. BNSF was late on 49 cars in Nebraska in last week’s report. Iowa had zero late cars.

The railroad is owned by Omaha’s Berkshire Hathaway Inc. and employs about 5,000 in Nebraska.

U.S. rail delays worsened this year with a harsh winter that slowed train speeds and caused backups at major interchanges such as Chicago and Minneapolis. Spring flooding and high volumes of other goods have contributed to the delays. In addition, recently tapped North Dakota formations are now producing about one million barrels of crude oil a day, up from next to none a few years ago.

As train speeds have fallen, BNSF and Canadian Pacific Railway this year were ordered by the Surface Transportation Board to share plans to remedy the delays and to provide weekly updates on late rail cars.

Now, the nation is looking at projected record harvests for corn and soybeans, just as BNSF’s average train speed for ag products has fallen 22 percent from a year ago, according to company filings with the board. An average train speed’s worst enemy is congestion, with idle time part of the calculation.

Such delays and the customer service standards of BNSF, purchased by Berkshire Hathaway in 2009, were savaged by frustrated freight shippers at the hearing Thursday.

Mark Adkins, vice president for NextGen Coal Services, said BNSF has routinely left his cars sitting around, without the crews and locomotives required to get coal to the electric plants that hire his company to get it there. Train cars owned by NextGen and contracted to be pulled by BNSF have sat idle for as long as nine days, Adkins told the board commissioners.

“That can only be described as horrific service, if it can be described as service at all,” Adkins said. “And there was no voicemail, no email, no text message.”

BNSF is working on improvements with all the gusto it has, company marketing chief Stevan Bobb said.

“We know our service has not met your needs,” said Bobb, addressing the room full of farmers, grain cooperative officials and other shippers.

Bobb noted the the company’s shipments from North Dakota — a state bulging with wheat, corn, barley, crude oil, soybeans and many other commodities — are at a record. Grain shipments from North Dakota this year, Bobb said, are still higher than a year ago, delays or not.

BNSF, he told commissioners, is shifting railcars to the region and counting on track improvements scheduled to wrap up in October.

“We should have the capability to move record volumes. Note that I said should,” Bobb said. “If all the bushels want to move in the same month, your railroad could be running like a sewing machine and you are still going to be late.”

Both Bobb and Canadian Pacific Railway, which is late on 9,000 cars, said they are not favoring crude oil shipments over grain. Surging production from North Dakota has led crude-by-rail shipments to rise from 9,500 carloads in 2008 to 407,761 carloads last year.

Dave Frederickson, Minnesota’s agriculture commissioner, told the commissioners his farmers have lost $109 million from recent rail delays. He said the tab is similar or higher when North Dakota and South Dakota are accounted for.

“Triple it or quadruple it,” he said.

Several ag product associations addressed the board and said lost farm income from shipping delays can easily reach $100,000 for a big operation.

The shipping delays have led to discounted grain prices in the north-central United States. Commercial silos in North Dakota are offering farmers $2.70 a bushel for corn — about $1 less than benchmark prices — due mainly to the costs of securing capacity on adjacent tracks, traders and agricultural groups told the Financial Times.

BNSF also attracted the ire of North Dakota Public Service Commissioner Julie Fedorchak. She told the commission Thursday that farmers in her state are “captive shippers with a perishable product and no other rail options” who are being harmed by delays on the BNSF network.

Particularly galling, Fedorchak said, is that BNSF owner Berkshire Hathaway bragged about the railway’s profits and foresight in the 2013 annual investor letter penned by Chief Executive Warren Buffett.

“I do not think our shippers would agree,” Fedorchak said.

BNSF, with $22 billion in 2013 operating revenue, has allocated $5 billion this year for capital improvements, including almost $1 billion to expand its network and the addition of 500 locomotives.

“I applaud BNSF for the mammoth investment they are making,” said Heidi Heitkamp , U.S. senator for North Dakota, speaking to the STB commissioners. “But I fear that in a couple of years it will be inadequate for what we need to move.”

The Omaha World-Herald is owned by Berkshire Hathaway Inc.

Contact the writer: 402-444-3133, russell.hubbard@owh.com

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