Everything that goes by rail is being impacted by the shortages of container cars available now. Double Crown's new TransLock system is an excellent solution to this very widespread problem. There are news stories every day. Here is another:
2014 will be remembered by many types and kinds of businesses as a year when delivery of products by rail became a huge challenge.
The rail delivery issue is a significant challenge for rural America because of the types of commodities shipped by rail.
Shortfalls in available rail capacity and deliveries are likely to result in higher rural electric prices, reduced profits from the sale of agricultural products and increased costs for inputs like fertilizer.
Ultimately all consumers are affected by rail costs, however, so it is an important issue across the board.
Rail is a vital part of our nation’s transportation system, and an especially useful way to ship bulk products like fertilizer, grain, timber and coal.
In 1980, Congress passed legislation called the Staggers Act, a bill that largely deregulated the nation’s entire rail system.
Only one agency in the federal government, the Surface Transportation Board (STB), has retained some oversight and adjudicatory responsibilities.
The railroads have touted the benefits of the Staggers Act, which did succeed in originally lowering rail prices. But in the last decade, costs have started to escalate much faster than the rate of inflation, and debilitating service problems have developed.
Shippers and the rail companies alike are united in the desire for a strong and financially healthy rail system, one where transportation needs can be met in a timely and affordable fashion.
Where we differ is when the current system fails to provide economical or reliable service.
Dairyland Power Cooperative has experienced significant shortfalls in delivery of coal to our plants at Genoa and Alma for more than a year.
These two power plants are Dairyland’s largest baseload generating facilities and are therefore critically important for reliable power supply.
Dairyland is a generation and transmission cooperative, creating power and supplying it to 18 distribution cooperatives in Wisconsin and seven cooperatives in Iowa, Minnesota and Illinois.
We serve almost 600,000 residents throughout this region.
Starting last fall, we experienced shortfalls in our routine rail coal delivery schedule. By winter, we saw significant delays in rail service to the point that we were forced to reduce the generation of electricity at our plants and deliver additional coal by truck, which is a very expensive and inefficient way to move fuel.
Some of the winter delay was a justifiable result of the terrible weather but as we moved into spring and summer, the pattern of delivery shortfalls continued. We estimate a $5 to $8 million negative impact on our business because of the coal shortfalls.
All of the coal used at our power plants begins its journey from mines to Wisconsin by rail with the majority of our coal comes from Wyoming.
In the case of our Alma plant, all delivered coal arrives by rail. Our plant located in Genoa is served by barge only, the coal first travels by rail from mines, then transfers to barge service at a terminal on the Mississippi River and finally travels upriver to Genoa.
As it became clear this summer that we would not get enough coal deliveries to meet our needs, especially at the barge-only plant in Genoa, we raised our voices to the STB and our elected officials. We notified them about our concerns for the availability of our Genoa plant through the winter months and the risks it would pose to electric reliability.
Thanks to many efforts by a lot of people, we have seen some improvement in shipment levels mid-summer into fall, but we remain well below our needs as we move into the winter season.
If we and other utilities do not have enough coal to burn to make electricity, we are forced to go to the market to buy available electric supplies and are therefore at the mercy of market prices.
One of our major concerns is that other Midwest utilities are experiencing very similar shortfall situations, which will put additional price pressure on available electricity supplies as many buyers go to the market at the same time to buy the same limited supply of electricity.
If we have extended periods of abnormally cold weather as we did last year, we could see significant cost increases and even threats to system reliability.
As utilities have struggled to deal with this issue, poor rail service also became a significant issue for agriculture this summer and fall.
A bumper crop season in the Midwest has led to rail delivery issues of the same sort that confronted utilities.
At a public hearing in Fargo, N.D., the STB heard from a host of agricultural interests concerned about the ability to ship crops to market given the shortage of available rail cars and engines.
Typical delays of up to 60 days for those seeking to ship grain, ethanol and other goods by rail were reported. At the hearing, testimony indicated that costs to find rail cars were also going up rapidly.
The railroads have admitted that they have faced shipping issues throughout this whole period. They have urged patience, saying they need time to build additional tracks, hire more people and put more equipment to work.
Many observers point to the vast expansion of rail shipments from the North Dakota Bakken oil fields and for frac sand shipped from our region as other factors in reducing available rail equipment to meet needs in more traditional industries.
In response to the many concerns from a variety of shippers, on Oct. 8, the STB issued an order requiring all Class I railroads to publicly file weekly data reports, to promote industry-wide transparency, accountability and improvements in rail service.
While this information is helpful, we believe the STB should do more, requiring the railroads to submit publicly-available service recovery plans and weekly reports on implementation progress.
Next year, we expect the U.S. Congress to take up the subject of STB reauthorization. Dairyland supports S. 2777, legislation developed to enhance the authority of the STB to deal with extreme situations like we have faced this year.
The bill would address the following.
• Give the STB the authority to be proactive in investigating rail delivery shortfalls, without the need for filed complaints from aggrieved shippers.
• Create a voluntary alternative dispute resolution process.
• Expand the number of STB commissioners from three to five and give them the ability to talk to each other so long as they disclose discussions within 2 days of their meeting, currently, commissioners may not communicate among themselves.
• Require publishing more information about complaints filed, including regular reports of unfinished proceedings.
• Streamline rate cases.
Additionally, Dairyland supports legislation introduced by Sen. Amy Klobuchar (D-MN) and Sen. Tammy Baldwin (D-WI), to remove the broad anti-trust protection railroads currently enjoy.
Railroads should be treated like other for-profit businesses in having scrutiny by the Justice Department for actions taken. This legislation was introduced, in the past, by Sen. Herb Kohl (D-WI) and Rep. Mark Green (R-WI).
The rail industry routinely opposes legislative efforts to address the issues shippers see in rail transportation.
Typically, rail representatives say any new legislative efforts would lead to re-regulation of the railroads.
We do not believe this is the case with S. 2777, nor is it the intent. Utilities and other shippers need a healthy rail system, and we do not want to burden the railroads with unnecessary regulations of all aspects of their business.
But the events of this year have shown that there needs to be much more transparency about rail shipping so we can all work together to solve situations that put rural Americans in economic harm’s way.
When the rail industry points to the need for competition, not regulation, they also need to support efforts to truly open up competition in an industry that has quickly evolved into a near monopoly.
There were more than 40 Class I railroads competing for business when the railroads were deregulated in 1980.
Due to a series of mergers, today there are only seven Class I railroads left in North America, four of them control more than 90 percent of rail shipments, and only two of those railroads operate in the Powder River Basin, from which the nation gets 40 percent of its coal for electricity.
A number of state and national organizations are working on the rail reform issue.
The Consumers United for Rail Equity (CURE) is a national organization focusing on rail concerns. Another is the Alliance for Rail Competition.
In Wisconsin, a group of several dozen groups and industries came together to form BadgerCURE.
We are grateful to see elected officials expressing bipartisan concern on this issue. Just this week Sen. Tammy Baldwin and Reps. Ron Kind, Tom Petri, Sean Duffy, Reid Ribble and Paul Ryan joined together with a letter to the STB expressing their concern about the impact of rail delivery on electric utilities.
Gov. Scott Walker’s Administration also has been helpful, sharing concerns with the STB and directly with the rail lines.
I am hopeful that new legislation, attention from our elected officials, an outcry from affected industries and citizens can make a difference.
The last year has been a very difficult one for any industry that depends on rail to ship commodities. We need much improvement in rail service if our rural economy is to grow and prosper.
Brian Rude is vice president of external and member relations for Dairyland Power Cooperative, based in La Crosse. Rude joined Dairyland in 2000. He served in the Wisconsin Legislature representing the La Crosse area from 1983 to 2000, including 3 years as president of the Wisconsin Senate. Rude serves on the Executive Committee of the Consumers United for Rail Equity (CURE) organization.
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