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Port to rent rail cars in deal with N. Dakota

Leased cars will move agricultural goods that will be shipped to Asia, Latin America

By Aaron Corvin, Columbian Port & Economy Reporter
Published: August 27, 2014, 5:00pm

Aiming to boost trade between North Dakota and the Pacific Rim, the Port of Vancouver has launched a new venture of leasing rail cars to move agricultural products to the West Coast.

The port’s executive director, Todd Coleman, traveled to Fargo, N.D., on Wednesday to sign a memorandum of understanding with the North Dakota Department of Agriculture to move the program forward.

Coleman’s signature followed a unanimous vote Tuesday by port Commissioners Nancy Baker, Jerry Oliver and Brian Wolfe on a resolution authorizing the port to enter into the arrangement. “This means more (rail cars) are available, reliability is increased and North Dakota farmers remain competitive in the global market,” Coleman said in a news release.

Rail cars carrying steel pipe, aluminum ore and other oil-industry equipment from the port to North Dakota now often return to the port empty. Under the agreement, rail cars leased by the port will return west filled with wheat, corn, soybeans and other crops. The rail cars would then be offloaded and put into ships bound for Asia and Latin America.

The idea is to help customers in the agricultural industry access rail facilities in a more efficient and timely manner, in light of demand for capacity on the mainline. Curtis Shuck, senior sales director for the port, told port commissioners Tuesday the agreement would open opportunities “to develop synergies” between the energy and agricultural sectors. It also hands the port the ability “to maintain control of supply chain reliability,” he said.

The agreement marks the port’s first attempt to provide what it calls “dedicated rail service,” according to Abbi Russell, a spokeswoman for the port. Russell said the port worked with BNSF Railway for two years to prepare to launch the service. “They’ve been a partner at the table,” she said.

However, the port’s decision didn’t come without controversy. During the port’s public hearing Tuesday, John Karpinksi, attorney for the Clark County Natural Resources Council, urged port commissioners to postpone voting on the North Dakota rail-service resolution. That’s because the port, as part of the agenda packet it issues before its public hearings, did not make copies of the resolution available to the public, Karpinski said.

“So how can we meaningfully testify on something that we can’t see,” he said. He also questioned the legality of the resolution itself, which was passed under a state law concerning the provision of “extraterritorial rail services.” He added, “If we all had the actual resolution in front of us, we would know what (the dedicated rail service proposal) means.”

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“Actually, the resolution wouldn’t help you, John,” Commissioner Wolfe replied. “Sorry.”

“Well, then I think the problem is more yours than mine,” Karpinski said.

Wolfe replied that Karpinski needed “to stick around and listen to what the staff has to say.”

‘Absolutely true’

On Monday, The Columbian requested a copy of the proposed dedicated rail service resolution. The port denied the request, citing an exemption under the state’s Public Records Act. In a phone interview Monday, Russell, the port spokeswoman, said there were two draft resolutions that commissioners were to consider during Tuesday’s hearing. In an email Monday, she confirmed that commissioners were in possession of both draft resolutions.

Copies of the proposed resolutions were available when commissioners took up the dedicated rail service matter during Tuesday’s hearing. It was one of five action items. Port administrators presented the resolutions to commissioners. Commissioners made positive remarks. Wolfe asked about risks and rail capacity. At one point, Lisa Lowe, the port’s legal counsel, told commissioners they have the authority, under state law, to approve the resolution.

“And you’ll defend us if we get sued?” Wolfe asked.

“That’s absolutely true,” Lowe replied.

Two people testified about the resolution. One of them said the port was taking on significant insurance and financial risks by jumping into the business of leasing rail cars. Port administrators said they’re accounting for financial and risk issues. Eventually, commissioners voted unanimously to approve one of the resolutions.

Under the action, the port will be able to lease up to 180 rail cars at up to $625 per car, said Russell, the port spokeswoman. Leases will be signed in one-year increments. Leasing the maximum 180 cars for a year would cost the port an estimated $1.35 million. However, the port will likely start by leasing some 50 rail cars, Russell said. The port has analyzed the deal and expects it to eventually turn a profit, according to port officials.

The port will not lease the rail cars from BNSF Railway, Russell said, and will instead lease them from other companies. The port expects to begin moving the first full rail cars from North Dakota back to Vancouver as early as mid-September.

The program could be expanded to include other cargo, Russell said, including products made in the Pacific Northwest.

The port’s responsibilities under the agreement include managing railcars and providing monthly service reports.

The North Dakota Department of Agriculture’s responsibilities include collection of product and production data, and communicating with small to mid-size shippers.

Columbian Port & Economy Reporter