Economy

Poor rail service threatens economy, shippers tell lawmakers

BNSF crude oil trains meet at Galesburg, Ill., on Aug. 31, 2014. BNSF and other railroads have struggled to keep up with freight shipments, including record grain volumes and a growing amount of crude oil from North Dakota's Bakken region. Federal regulators and lawmakers are monitoring the railroads' performance, while the industry is buying new locomotives, laying new track and hiring new employees to meet the increased demand. (Curtis Tate/McClatchy)
BNSF crude oil trains meet at Galesburg, Ill., on Aug. 31, 2014. BNSF and other railroads have struggled to keep up with freight shipments, including record grain volumes and a growing amount of crude oil from North Dakota's Bakken region. Federal regulators and lawmakers are monitoring the railroads' performance, while the industry is buying new locomotives, laying new track and hiring new employees to meet the increased demand. (Curtis Tate/McClatchy) McClatchy

Rail service backups from Chicago to the Pacific Northwest have the potential to slow the entire economy, several train-reliant industries told lawmakers Wednesday.

Representatives from grain producers and chemical and automobile manufacturers testified before a Senate panel that poor rail service has cost them business because they can’t get enough rail cars to move their products and then can’t get the trains to move fast enough.

They also can’t just put it in trucks, which are more expensive for moving large quantities of goods.

“Rail is an essential component of my industry’s supply chain,” testified Shane Karr, vice president of federal government affairs for the Alliance of Automobile Manufacturers. “Auto manufacturers are encountering the same persistent rail service issues you’re hearing about.”

The rail industry’s leading advocacy group admitted that the industry’s performance was less than adequate and that railroads are spending billions of dollars to lay new track, hire new employees and buy new locomotives to meet the increasing demands.

“We did not see the surge in traffic coming,” said Ed Hamberger, president and CEO of the Association of American Railroads. “Many of our customers did not, either.”

The hearing before the Senate Commerce, Science and Transportation Committee was indicative of just how reliant the economy is on reliable rail service. Shippers have expressed frustration for months about rail service issues, and lawmakers from both parties agreed to work with federal regulators to better address the complaints.

Things began unraveling late last year with a record Midwest grain harvest on top of an increasing volume of crude oil from North Dakota’s Bakken region. A severe and prolonged winter compounded the problem. Midwest grain producers are still working through last year’s backlog ahead of what they expect to be another robust fall crop.

Jerry Cope, testifying on behalf of the National Grain and Feed Association, said it costs farmers twice as much to ship grain by rail from South Dakota to Washington state ports as the rest of the trip by ocean to South Korea.

Still, Cope, president of the South Dakota Grain and Feed Association, said that rail is a vital link to export markets, and without reliable service, overseas customers may turn to other countries.

“That’s in real jeopardy right now,” he said. “We’ve lost some of that business.”

Karr, of the auto manufacturers, said that the snarls have stranded 140,000 to 200,000 new vehicles “on an ongoing basis.” About 70 percent of finished automobiles are shipped by rail, and Karr said that trucking them not only costs more, but producers also can’t find enough truck drivers to do it.

Karr said the extra costs ultimately are passed on to consumers.

Hamberger said that railroads carried more freight last month than at any time since October 2007, before the recession. He said the industry had invested $25 billion each year in 2012 and 2013 on capacity improvements, and it planned to spend $26 billion this year.

“We are committed to putting money back into the infrastructure,” he said.

But lawmakers in affected states questioned whether it was enough.

Sen. Maria Cantwell, D-Wash., said that poor service on the BNSF rail line in Washington state had shut down a company that shipped apples, carrots, potatoes and cherries, costing 80 jobs.

“The bottom line is, we’re losing jobs and product is not being delivered,” she said.

Sen. Bill Nelson, D-Fla., asked Hamberger whether railroads would be ready for the Panama Canal expansion, which could shift more goods from West Coast to East Coast ports. Hamberger said he couldn’t say for sure whether the industry should anticipate the shift, which some believe may already have occurred.

“That’s one of the challenges in the industry,” he said.

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