Regulators urged to pressure railroads on grain bottlenecks

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Officials from North Dakota and other upper Midwestern states Thursday urged U.S. regulators to pressure railroads to fix the logjams that are blocking grain shipments as harvest season approaches.

Congestion on the rail lines operated by Canadian Pacific Railway Ltd. and Berkshire Hathaway Inc.’s BNSF railroad, caused by a harsh winter and growing demand for railcars to accommodate North Dakota’s oil boom, is already costing farmers millions of dollars, Sen. John Hoeven, R-N.D., told the Surface Transportation Board at a Fargo, N.D., hearing.

As grain produced last year sits in storage, waiting for trains to carry the crops to market, the bottlenecks may get worse without immediate steps as an anticipated record grain harvest begins, officials warned.

“There’s great apprehension in how things will go this fall,” said Republican Gov. Governor Jack Dalrymple.

The board ordered the rail lines in June to provide weekly updates as to how they were working to address the bottlenecks. Regulators have the power to order railroads to prioritize certain shipments over others, although that power is rarely used. Dennis Watson, a spokesman, said the board only intervenes to avoid substantial adverse affects.

Rail executives said they were investing hundreds of millions of dollars to improve the system, and extreme measures by regulators weren’t necessary. The railroads disputed criticism that they were favoring crude oil over agricultural products.

Many of the complaints and questions were directed at CP, which officials said had done a poor job communicating with its customers.

John Brooks, a CP vice president, told regulators that a “perfect storm” of bad weather and growing demand created congestion on the line that the railroad was working through. The especially cold winter meant trains couldn’t operate as efficiently as normal, and backlogs at hubs in Chicago and the Twin Cities rippled throughout the system, he said.

BNSF is “much more capable of handling demand this year than past,” he said. Brooks also said CP was investing millions to improve operations in North Dakota.

Steve Bobb, BNSF chief marketing officer, said the company was adding workers and rail cars to improve operations. It’s shipped more grain in the first half of 2014 than it did in 2013, he said.

CP and BNSF are trying to convince customers to use more trains dedicated only to hauling grain instead of mixing grain cars with other commodities to improve speed. BNSF said it expects 51 percent of its cars to be used in dedicated trains by October and they will haul 70 percent of grain.

The railroads are also working with shippers to find alternative routes to avoid congestion between St. Paul, Minn., and Chicago. BNSF expects grain shipments will rise as much as 15 percent from a year ago over the next four to six months, Bobb said.

Hoeven told regulators that railroads needed to urgently add workers, tank cars and locomotives. Longer term, they need to build new tracks.

“This is an acute, critical problem for our farmers,” Hoeven said.

Farmers and agricultural groups have complained for months that bottlenecks were delaying shipments, including the delivery of fertilizer for spring planting.

In the June order requiring weekly plans from the two rail lines, the Surface Transportation Board criticized CP for not clearly articulating how it would handle the backlog.

The complaints reflect a downside to an oil boom that’s created thousands of jobs in the state and millions of dollars in revenue for North Dakota, home to the Bakken formation.

Dalrymple urged regulators to examine whether railroads were favoring oil shipments over grain and other agricultural products.

Oil production now exceeding 1 million barrels a day has outpaced pipeline construction. About 60 percent of the crude produced in North Dakota in August left by rail, according to the North Dakota Pipeline Authority.