RFA, AAR disagree on root causes of recent rail service issues

Renewable Fuels Association (RFA) President and Chief Executive Officer Bob Dinneen recently sent a letter to Association of American Railroads (AAR) President and CEO Ed Hamberger requesting answers to a list of questions pertaining to what RFA characterizes as "lackluster" rail service.

Rail system "disarray" in the first quarter has forced ethanol producers to significantly curtail output, Dinneen claims. Onsite storage tanks were full and, in many cases, the rail cars and/or locomotives needed to ship ethanol weren't available, he said in a press release.

"As a result, ethanol stocks in key regions have been depleted and prices have increased," Dinneen said. "All of this is due to … dislocated rail cars and locomotives, increased terminal dwell times, slower train speeds, an insufficient number of crews, and a shortage of spare rail cars and locomotives."

Although railroads attribute their performance issues to harsh winter weather, winter comes every year, he said, adding that a "more plausible explanation" is the explosive growth in rail-car shipments of Bakken and Canadian crude oil. The surge in crude-oil production has reshuffled the existing fleet of rail cars and locomotives, pressured lease rates, changed normal rail-traffic patterns and exerted significant stress on the rail system, Dinneen said.

To better understand the root causes and learn railroads' resolution strategies, RFA has asked the AAR to explain:
• what role crude production growth has played in rail inefficiencies;
• what short-term steps are being taken to alleviate the current rail system logjam;
• when service on each Class I will return to more normal operating conditions;
• how the ethanol industry and other rail-reliant industries can be assured that crude shipments aren't being prioritized over other goods and commodities; and
• what the ethanol industry can do to help ensure similar situations are avoided in the future.

Recent rail service challenges have occurred in certain parts of the country and railroads are working around the clock to mitigate them, said Hamberger in a prepared statement, adding that the rail industry's goal is to restore service to the high levels that customer expect. But those challenges are the result of a confluence of events that were concentrated in particular regions, he said.

"These events include a winter that, contrary to the RFA’s claim, was far worse than usual and forced railroads to dramatically shorten train lengths and crew exposure to the elements; a record grain harvest and unexpected surge in grain exports; and higher coal volumes as utilities sought to replenish stockpiles they consumed when they generated additional electricity to keep all of America warm this winter," said Hamberger.

Despite the select regional service issues, railroads continue to move vast volumes of goods safely and efficiently, he said. In March, U.S. railroads originated nearly 39,000 more carloads and nearly 93,000 more containers and trailers than in March 2013.

"They transported higher average weekly intermodal volume than any in March in history and the fourth highest of any month in history," said Hamberger. "Average weekly U.S. rail carloads of coal in March were the highest in six months; carloads of chemicals (the category that includes ethanol) were the highest in 23 months; motor vehicles were the highest in 12 months; lumber was the highest in 67 months; and nonmetallic minerals were the highest in six months."