US RFA raises alarm as oil railcar shipments crowd out ethanol
Stefan Baumgarten
11-Apr-2014
HOUSTON
(ICIS)–US ethanol producers want rail carriers and
authorities to take action as rising crude oil railcar
shipments crowd out ethanol, contributing to “sheer chaos” on
the country’s freight rail system, an industry group said on
Friday.
However, railroads were quick to reject the claims made by
the Renewable Fuels Association (RFA), which represent US
ethanol producers.
Ethanol cannot be easily pipelined. The industry
therefore relies heavily on rail as a “virtual pipeline” to
bring its product to market.
The RFA said that “explosive growth” in railcar shipments of
Bakken crude from North Dakota and of Canadian crude has
“reshuffled the existing fleet of railcars and locomotives,
pressured lease rates, changed normal rail traffic patterns,
and generally exerted significant stress on the rail
system”.
The resulting “disarray on the rail system” forced ethanol
firms to curtail production, with onsite storage tanks
“brimming full”.
As a result, ethanol stocks in key regions have been depleted
while ethanol and gasoline prices have increased, the RFA
said in a letter to the American Association of Railroads
(AAR) and
in testimony to the US Surface Transportation Board this
week.
The group acknowledged that recent harsh winter weather
was a factor in the rail service problems.
However, “winter comes every year”, and thus the sharp rise
in crude oil shipments was a “more plausible explanation for
the severity of the current epidemic” on the rail system, it
said.
The RFA urged the rail industry to examine the role growing
crude oil shipments play in rail service problems, and
it wants to know what steps are being taken in the short term
by the rail industry to address the logjam in the system, it
said.
The group added that the ethanol industry will continue
to be a loyal customer for the railroads, while crude
shipments by rail “likely will go bust just as quickly as
they went boom” as pipelines are being developed to move
crude oil out of the Bakken region and Canada.
The AAR acknowledged “recent rail service challenges in
certain parts of the country”, but it insisted that harsh
winter weather, a record grain harvest, high grain exports,
and higher coal shipments were the causes.
Contrary to RFA’s claim, the 2013/2014 winter was far worse
than usual, forcing railroads to “dramatically shorten train
lengths and crew exposure to the elements,” the
AAR said in a statement to ICIS.
“RFA’s claim that the rail system is in ‘sheer chaos’ is
preposterous and unhelpful,” the AAR added.
In fact, despite regional service problems, US railroads in
March 2014 originated nearly 39,000 more carloads and nearly
93,000 more containers and trailers than in March 2013, the
group said. Chemical carloads – which include ethanol – were
at their highest level in 23 months in March, it said.
Meanwhile, railroads were working around the clock to address
any issues, it added.
US crude oil railcar shipments
increased from around 9,500 carloads in 2008 to more than
400,000 carloads in 2013, and they continue to rise this
year.
For the first 14 weeks of 2014 ended 5 April, oil railcar
shipments were up 7.3% year on year to 201,744 carloads,
according to the AAR’s latest
rail traffic report this week. Chemical railcar
loadings were up 0.8% year on year to 421,822 for the first
14 weeks.
Additional reporting by Jeremy Pafford and Bobbie
Clark
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