Rail backlogs in upper Midwest described in Senate hearing

WASHINGTON, Sept. 11, 2014 – Rail availability continues to be a hot topic on Capitol Hill as the Senate Commerce, Science, and Transportation Committee held a two-paneled hearing Wednesday to look at the issue.

The hearing focused on rail problems involving several sectors: the grain, automotive and chemical industry all had representatives on hand. Also there was Ed Hamberger, the president and CEO of the Association of American Railroads, who told the lawmakers rail companies have been making investments in infrastructure, but mostly in the Powder River Basin of Wyoming, a region that supplies much of the country’s coal.

“It takes time to build the capacity where the marketplace says we need it,” Hamberger said, adding that rail companies can’t just pick up and move the improved infrastructure to North Dakota, where the need seems to now be the greatest.

Others at the hearing were much less sympathetic to the cause of the railroads. Committee Chairman Jay Rockefeller, D-W.V., made a point of saying he hoped he didn’t hear that rail companies needed more money. American Chemistry Council CEO Cal Dooley expanded on that thought, saying investor Warren Buffett
“does not invest $44 billion in a company that is not revenue adequate.” He was referring to Buffett’s purchase of BNFS (Burlington Northern Santa Fe) Railway in 2009.

“You’re doing an excellent job for your shareholders, but what about these folks?” Rockefeller asked Hamberger, referring to the customer groups represented by the witnesses.

Dooley also said the federal Surface Transportation Board needs to change the revenue adequacy provisions created under the Staggers act in 1980, saying it is an outdated system established during a time when the rail companies were struggling. Now, he said, times have changed and the current provisions are not adequate for the current marketplace.

The first panel at the hearing comprised North Dakota’s two U.S. senators, Democrat Heidi Heitkamp and Republican John Hoeven, who described the problems caused by rail backlogs in their state and called for a more transparent reporting process from rail companies. Both were complimentary of Burlington Northern Santa Fe for the company’s data reporting efforts – Heitkemp went as far as to say the company “gets it” - but called for more transparency in the data reports from Canadian Pacific.

BNSF and CP have been issuing weekly reports to the STB on their progress in attacking railcar shortages and backlogs. Both companies have generally been reducing their amount of past-due orders. On Friday, BNSF reported 2,231 past due orders nationally with an average of almost nine days late. North Dakota, where the rail backlog has hit the hardest, accounts for 936 of those open requests.

Friday’s submission was the first time BNSF reported North Dakota having less than 1,000 open requests. The next closest state is Montana, which has 599 open requests from BNSF.

Numbers from CP have been called into question because of new method of requesting rail cars that some say distorts open requests when customers cancel their previous orders. CP’s report on Friday said customers had removed 23,968 open requests, but 6,762 open requests remain in their system. Some 5,866 of those open requests originated in North Dakota, where the requests have been open for an average of about 12 1/2 weeks.

Earlier this week, Rockefeller and Sen. John Thune, R-S.D., the Commerce Committee’s ranking member, introduced the STB Reauthorization Act of 2014 (S. 2777), which would give more regulatory authority to the Surface Transportation Board. Thune said the rail backlog crisis “has highlighted some of the inefficiencies that currently exist at the STB.” In his opening statement, Rockefeller reiterated his support for the bill and issued a warning to those unwilling to be a part of the rail solution.

“It is going to take a collaborative effort by Congress, the STB, the railroads, and the shippers to achieve a meaningful solution,” Rockefeller said. “If the railroads or anyone refuses to work collaboratively to solve these real world delays that are damaging lives and businesses, then they are going to get a stronger reaction than they expect.”

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