STB hearing features testimony from S.D. ethanol producers

By Erin Voegele | September 05, 2014

On Sept. 4, the Surface Transportation Board held a hearing to discuss rail service issues and delays. Among those offering testimony were two Midwest ethanol producers.

James Seurer of Glacial Lakes Energy LLC delivered testimony on how rail delays have impacted his company’s business. Dana Siefkes-Lewis of Redfield Energy LLC was also scheduled to testify. She was unable to attend the hearing, but Seurer delivered written testimony on her behalf.

Redfield Energy’s plant in South Dakota is served by the BNSF railroad. For most of 2014, the facility has been running at a lower than planned production rate due to slow rail turns on ethanol tankers. According to Siefkes-Lewis’ testimony, the company produced only 53.9 million gallons of ethanol during its recent fiscal year, which ended Aug. 31. That production rate is down nearly 6 percent from the 57.1 million gallons produced during the prior fiscal year.

Longer return times for ethanol tankers and dried distiller grain hopper cars caused us to buy some spot product at higher market prices to fulfill commitments made prior to the rail service deterioration, this in turn had a negative impact to profit margins, Siefkes-Lewis said in her statement.

Managing logistics for the company’s feed products has been a nightmare, she added. Truck sales are impacted because less product was produced. In addition, when hopper cars don’t show up in the summer, the company is forced to sell distillers grains to local markets at deep discounts to keep the plant running.

According to Siefkes-Lewis, Redfield Energy leased 198 tanker cars last winter. At normal production, the plant will fill 40 of those cars per week. Historically, rail turns for those tankers were about four weeks. Current rail turns are averaging seven weeks. Within the next few months she said the company will increase its tank car fleet to 233 cars, which adds financial burden to the plant. The BNSF is has also reduced the number of days it services the plant. Historically, the facility received service from BNSF three days a week. That is now down to an average of two days.

Siefkes-Lewis indicated her plant is filling returned cars as soon as they are received. However, during the past 31 weeks, the facility has only been able to fill an average of 33 cars per week. Under normal conditions, the plant would be capable of filling 40 cars each week.

In the first quarter of 2014, Redfield loaded a total of 454 tanker cars, down 9 percent from the same quarter of the prior year. During the second quarter, only 415 tanker cars were shipped, a 20 percent decrease over the same period of 2013.

To help mitigate problems associated with delays, Redfield is adding 2 million gallons of storage to its existing 1.5 million gallon storage capacity. However, Siefkes-Lewis warned that if that storage proves to be insufficient and the plant has to shut down for an extended period of time over winter in sub-freezing temperatures, severe damage could occur.

Seurer echoed Siefkes-Lewis’ concerns over winter shutdowns. He also noted that both of Glacial Lakes’ ethanol plants are also captive to BNSF service. “The level of service that we have received from the BNSF has been in a downward spiral since last fall,” he said. “Like many others …we have suffered slowdowns and shutdowns, we have lost revenue, we have missed opportunities and we have incurred higher costs because of the BNSF mismanagement of its monopolistic workload.”

Seurer noted that BNSF has suggested shippers move towards unit train capabilities to help improve efficiencies and lower costs. While the company’s Mina, South Dakota, plant already has unit train capabilities, its Watertown, South Dakota, plant does not.

Seurer estimated it would cost at least $15 million to add unit train capability to the Watertown facility and stressed that his company remains concerned that the level of service would not improve sufficiently to justify that investment. Explaining why, he said that the company recently had two fully loaded ethanol units trains parked for four and five days in route to their California and Texas destinations.

“This caused us a four day shutdown at our Minot plant,” he said, adding that the delay came at a significant cost to the company.

Speaking on behalf of the entire ethanol industry, Seurer noted that majority of producers do not have the capability to store production for more than several days. “We are a very real time business and our production must be carried away in a timely and efficient manner,” he