19 July 2007 16:54 [Source: ICIS news]
By Joe Kamalick
President George Bush has set a goal of 35bn gal/year of domestic
Those technical breakthroughs may be realized. But even if the
US Energy Secretary Samuel Bodman said this week that constraints on
Earlier this week the US Surface Transportation Board (STB) announced creation of a its Rail Energy Transportation Advisory Committee (RETAC), a panel made up of yet to be named rail executives, coal and ethanol producers and electric utility and automotive officials.
The new advisory committee is to help regulators at the STB figure out how to shape policy to ensure that abundant
It is a huge challenge, according to many across multiple industries and including rail operators.
The Bush administration’s ambitious goals for ethanol production are a major part of the country’s bid to reduce its reliance on foreign energy sources, but without adequate rail capacity we could be awash in ethanol but unable to use it.
In a new energy infrastructure study by the US Government Accountability Office (GAO), federal researchers found that “the ability of the rail industry to meet growing [ethanol] demand is uncertain”.
“Rail industry representatives with whom we spoke indicated that there is currently no spare capacity in the rail system to transport higher levels of biofuels,” the GAO study said.
“As a result, achieving even relatively small increases in biofuel use may be difficult with the current transportation infrastructure,” the report concluded.
The rail capacity crunch also poses problems and costs for chemical companies and a broad range of other manufacturers and companies that rely heavily on rail freight.
Tom Schick, senior director for distribution at the American Chemistry Council (ACC), notes that many chemical producers, who typically own or lease the tank cars and hopper cars that move their products downstream, have to buy more cars than they really need because so many of them get stranded for weeks on the clogged rail system.
In addition, when electric utilities can’t get enough coal they often increase power output from their gas-fired generators. That in turn puts more demand and pricing pressure on natural gas, the principal feedstock for the
And, too, Schick notes that because his industry is one of the largest industrial users of electric power, anything that increases power costs puts added pressure on chemical producers’ margins.
Rail operators want federal legislation for tax incentives to enable still more capital investment. Chemical companies and other manufacturers and members of CURE are not necessarily opposed to tax incentives for the railroads, but they also want Congress to restore antitrust rules to rail carriers and make them more competitive.
The GAO study faulted the Department of Energy for failing to develop a comprehensive approach to advance biofuel infrastructure - including rail capacity - to match its aggressive pursuit of ethanol production.
Energy legislation pending in Congress would require the Energy Department to determine whether there is enough track, locomotives, tank and other cars and rail crews to deliver the fruits of greatly expanded ethanol production to consumers.
The department also would be required to determine if the costs of rail delivery might impair the marketability of biofuels and whether there is adequate rail competition to ensure fair freight pricing. In addition, the legislation would seek to determine whether the costs of rail infrastructure improvements should be shared by producers and distributors of biofuels.
However, those legislative directives are part of an energy bill that to many in industry would rollback hard-won energy development incentives in the 2005 Energy Policy Act, and more than likely there is sufficient opposition to that and other aspects of the pending energy bill that will keep it bottled up in Congress.
So the rail capacity crisis is likely to get worse before it gets better.
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