On April 10, representatives of the Renewable Fuels Association and Growth Energy presented testimony at a Surface Transportation Board hearing. The testimony focused on the negative impact that rail congestion is having on the ethanol industry.

Chris Bliley, director of regulatory affairs for Growth Energy, explained that insufficient rail service has resulted in ethanol price spikes and plants having to halt production. “Make no mistake, these price spikes have not been caused by a lack of ethanol production or supply, but purely because of an inability to get timely rail transportation. In fact, many plants have reduced or even halted production because their storage capacity is fully utilized. There have been numerous examples of our producers having to wait and wait on trains to deliver their product,” he said.

Bliley also spoke about increased tariff rates on certain routes that were implemented on April 1. “Not only did one railroad give our producers very little notice of the increases, but I dare say, few, if any industries would have the audacity or ability to increase shipping rates while their service has been so poor,” he said.

“The bottom line is that the railroad industry has failed in its sole responsibility to transport goods in a timely and effective manner. This failure in service has had a ripple effect on American consumers by increasing the cost of goods and services, and has directly impacted our industry by causing a de facto shut down in production as there is simply no more space to store product,” Bliley said. “For our industry and many others that are captive to the nation’s railroads to efficiently transport their products, we hope the rail industry will take steps to immediately improve its service record and take this situation as a wake-up call that they need to make the necessary infrastructure investments to fulfill their obligations as a common carrier.”

Bliley noted that recent ethanol price spikes and reduced production fall squarely on the shoulders of the rail industry and called for the rail industry to improve its service.

Ed Hubbard, general counsel at the Renewable Fuels Association, also testified at the hearing, noting that crude oil shipments from the Bakken have reduced the flexibility of the rail system in dealing with adverse conditions, such as challenging winter weather.

“Due to an uncharacteristic winter, rail shipments of all commodities have been significantly delayed across the country. For ethanol, the congestion has led to a dramatic delay in ethanol shipments to fuel terminals, and caused shutdowns of operations at ethanol plants because they can’t continue to store product while awaiting rail carriers to move their product,” Hubbard said.

Hubbard pointed out, however, that weather alone hasn’t caused the delays. He said that the railroads failed to adequately prepare for increased oil shipments and harsh winter. He also noted that increased shipments of crude oil are causing a redistribution of railcars, leading to shortfalls available for other commodities, including ethanol.

“The growth in crude oil shipments 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. And with this congestion crisis, it is becoming more and more apparent that surging crude oil shipments are coming at the expense of other goods and commodities, like ethanol,” Hubbard said, calling for the rail industry to solve the congestion problem quickly, in a way that does not priority the shipment of oil.

Earlier this month, Bob Dinneen, president and CEO of the RFA, issued a list of questions to Ed Hamberger, president and CEO of the Association of American Railroads. The questions focused on the “abject failure of the rail system to adequately address the needs of all of its customers.” Additional information is available here.