Legislation, hearing aim to alleviate rail delays

By Erin Voegele | September 12, 2014

As the 2014 harvest season kicks off, members of the U.S. Senate are taking action to ensure the Surface Transportation Board has the authority necessary to help mitigate the rail backlog currently plaguing the Midwest.

On Sept. 8, Ranking Member of the Senate Committee on Commerce, Science and Transportation John Thune, R-S.D., and Commerce Committee Chairman John D. Rockefeller IV, D-W.V.,  introduced legislation that aims to increase the efficiency of the STB by changing internal processes and increasing the timeliness of STB decisions to improve U.S. rail service. Introduction of the legislation was followed by a Sept. 10 hearing of the Senate Committee on Commerce, Science and Transportation that focused on improving performance of America’s rail system.

The legislation, titled the “STB Reauthorization Act of 2014,” or S. 2777, would allow STB members to work together in a more streamlined approach, while also making it easier for railroads and shippers to discuss important issues with multiple board members at once. The bill would expand STB membership from three to five members, eliminate the holdover limitation, and allow for limited board meetings without initial public meeting notice, but with later public disclosure. The bill would also allow the board to initiate some investigations on its own, rather than just respond to complaints, and would require the STB to establish a database of complaints and prepare quarterly reports on them. In addition, the bill would alter the cast review process by requiring the board to establish timelines for stand-alone rate cases and a report on rate cast methodology. According to information released by Thune, the bill would also require a proceeding on the impact of contract bundling on shippers and would codify an arbitration process for certain rate disputes and carrier complaints.

The Sept. 10 hearing opened with comments from Sens. John Hoeven, R-N.D., and Heidi Heitkamp, D-N.D. North Dakota’s economy tops the nation in terms of growth, and is a significant factor leading to recent rail delays and issues.

“The railroads need to bring more resource to meet the needs in North Dakota,” Hoeven said. With growth in energy, agriculture, and manufacturing, the state needs more rail capacity, he continued, noting the railroads need to bring more cars, more locomotives, more people and more track into the state.

While all sectors of the economy are suffering from the lack of adequate rail service, Hoven said the current time period is particularly critical for ag shippers. Many farmers in the area are still having trouble moving 2013 crops as they begin the 2014 harvest.

The region is primarily served by two rail lines, the BNSF and Canadian Pacific. While BNSF has been responsive to the state’s needs, Hoven said the state needs to see more commitment from CP.

“Our producers are in dire straits,” Heitkamp said, noting she recently spoke to six farmers who collectively have suffered a $500,000 loss to their bottom line because they haven’t been able to move crops in a timely manner. While area producers have been tremendously patient with delays caused by infrastructure demand, Heitkamp said that patience is wearing thin.

If the issue isn’t addressed adequately, Heitkamp said she is concerned that they delays will persist. “[I am concerned] that we will be back here in another year having the exact same discussion, only we’ll have three years of crop that will be either on the ground or in bins in my state with producers struggling to try to figure out how they are going to get the money to put in next year’s crop. This isn’t make believe. This real, and it’s a very real problem,” she said.

In her experience engaging with the STB, Heitkamp said she has learned that the STB does not have sufficient tools at its disposal for addressing shipping delays. “I believe the STB could use more authority and use more power to resolve the issues beyond demanding reports and more data,” she said. Heitkamp also praised BNSF for recognizing increased traffic on North Dakota railroads is likely to be a permanent problem unless capacity issues are resolved. The state is going to continue to ship crude oil, she said, noting that it will also continue to produce bumper crops.

Bob Dinneen, president and CEO of the Renewable Fuels Association, submitted written testimony to the hearing, highlighting the impact rail delays have had on ethanol producers. Dinnen noted that trains have historically served as a virtual pipeline for ethanol, moving product from plants in the Midwest to population centers on the coasts.

“The recent crisis of congestion that has seemingly overtaken the rail industry has become a huge and costly problem … This crisis is one that is causing significant harm to the economic health and well-being of our nation’s economy, as well as driving up costs for a wide array of commodities that rely on the rail for transportation,” Dinneen wrote in his testimony.

Grain shipments are expected to increase this fall as America is on course to harvest a record corn crop.  With the increase in grain shipments this fall and the current rail congestion, Dinneen stressed that “...rail operators must respond in a way that treats the vast array of other goods and commodities competing with crude oil on the rails fairly and equitably.”

His testimony points to two critical components of alleviating rail congestion and ensuring equality in the rail system, noting that “…greater transparency is needed to help regulators oversee and monitor how logistics and contracting decisions are being made by rail operators.” It also notes, “…it is critical that regulators have the ability to oversee what new shipping contracts are being negotiated while the rail operators continue to try to catch up with current customers.”

On Sept. 4, the STB held a separate hearing in North Dakota to discuss rail issues and delays. Two South Dakota ethanol producers were among those that offered testimony.