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Re: American Farms are in Jeopardy—Because of Inefficient Rail Service
Author: SP5103
Date: 09-10-2014 - 09:59
A friend of mine and former RR boss recently moderated an oil and transportation industry panel discussing rail traffic in the North. Some of the important points that came out:
1. Most industrial customers have no clue how railroads work or what their operating and capacity limitations are.
2. A barge operator stated that a substantial portion of their capacity is now being used for frac sand instead of grain due to the lack of rail capacity. The barges are dependent on river conditions, and a long cold winter, spring flooding creating sandbars or low water levels will impact their capacity.
3. Most attendees were unaware that that when temperatures drop below zero and stay there railroads are forced to limit train speeds and cut trains in half. Online delays due to the cold and doubling the number of trains quickly deplete the available crews.
4. Many power plants have only 30 days of coal in reserve due to general train delays over the last year.
5. Any available hopper car capable of carrying frac sand is being leased, often at 3 times the going rate and for 5 years.
This winter might be a "perfect storm" for BNSF across the HiLine, the Dakotas and for CP/Soo. Follow the money - and the oil companies are willing to spend it due to the demand for their product. If demand is 110% of your capacity, what traffic do you give priority to? Intermodal, coal, grain or oil? Too many times, I have seen railroads lose sight of operating the entire system and it has resulted in a complete meltdown. The railroads have to maintain velocity and limit car/yard inventories or they will quickly run out of track, engines and crews. With the rationalization of the physical plant due to mergers, reduced crew size and additional safety rules, regulations, and training requirements, railroads do not have the capability to quickly respond to the substantial increase in traffic that has happened.
Remember also that the trucking industry has a chronic driver shortage and is dealing with their own reliability issues with mandated diesel emissions systems, which has created additional intermodal traffic demand.
We have a dysfunctional political system, and other than a few tweaks to create better shortline access and competition, I don't see any advantage of any more government intervention. But - let the lights go out, fuel prices skyrocket (we're already passed the moon trying for Mars) or face empty store shelves and the citizenry will demand political intervention. Be prepared -I think the railroad industry will soon be facing a "new normal" on several fronts.
1. Most industrial customers have no clue how railroads work or what their operating and capacity limitations are.
2. A barge operator stated that a substantial portion of their capacity is now being used for frac sand instead of grain due to the lack of rail capacity. The barges are dependent on river conditions, and a long cold winter, spring flooding creating sandbars or low water levels will impact their capacity.
3. Most attendees were unaware that that when temperatures drop below zero and stay there railroads are forced to limit train speeds and cut trains in half. Online delays due to the cold and doubling the number of trains quickly deplete the available crews.
4. Many power plants have only 30 days of coal in reserve due to general train delays over the last year.
5. Any available hopper car capable of carrying frac sand is being leased, often at 3 times the going rate and for 5 years.
This winter might be a "perfect storm" for BNSF across the HiLine, the Dakotas and for CP/Soo. Follow the money - and the oil companies are willing to spend it due to the demand for their product. If demand is 110% of your capacity, what traffic do you give priority to? Intermodal, coal, grain or oil? Too many times, I have seen railroads lose sight of operating the entire system and it has resulted in a complete meltdown. The railroads have to maintain velocity and limit car/yard inventories or they will quickly run out of track, engines and crews. With the rationalization of the physical plant due to mergers, reduced crew size and additional safety rules, regulations, and training requirements, railroads do not have the capability to quickly respond to the substantial increase in traffic that has happened.
Remember also that the trucking industry has a chronic driver shortage and is dealing with their own reliability issues with mandated diesel emissions systems, which has created additional intermodal traffic demand.
We have a dysfunctional political system, and other than a few tweaks to create better shortline access and competition, I don't see any advantage of any more government intervention. But - let the lights go out, fuel prices skyrocket (we're already passed the moon trying for Mars) or face empty store shelves and the citizenry will demand political intervention. Be prepared -I think the railroad industry will soon be facing a "new normal" on several fronts.
