Oil-by-rail traffic hurts farmers, travelers, U.S. officials told

WASHINGTON, April 10 Thu Apr 10, 2014 5:59pm EDT

WASHINGTON, April 10 (Reuters) - Midwestern farmers and Amtrak passengers are among those being hurt by rail congestion caused in part by an energy boom that has spurred the massive movement of oil by rail, U.S. officials were told on Thursday.

Rail shipments of oil have been on the rise in regions that lack sufficient pipelines as alternatives, such as North Dakota's Bakken energy patch, where production is nearing 1 million barrels per day and roughly 72 percent of that fuel moves on the tracks.

Rail lines clogged with 100-car trains carrying oil heading to refineries, as well as coal hoppers bound for export terminals, help explain why passengers are often delayed and farm commodities are late to market, witnesses told the Surface Transportation Board, a regulatory agency that arbitrates rail disputes.

"Increased volumes of oil and coal shipments have displaced grain shippers leading to long, expensive delays," said Roger Johnson, president of the National Farmers Union.

Weeks can pass before trains reach grain farmers in Montana and the Dakotas, Johnson said, easily leading to thousands of dollars of losses per farm family.

BNSF Railway Co. and Canadian Pacific Railway Company came in for particular criticism and the carriers acknowledged that they have sometimes failed to provide a reliable link between farmers and markets.

"Let me say we know we have created supply-chain risk for you and fell short of providing the level of service that you expect from BNSF," Steve Bobb, the train operator's marketing chief, told regulators.

An uncommonly severe winter slowed service across much of the Midwest, rail executives said, and some of those problems will be alleviated with the change of seasons.

But Bobb said BNSF must lay more track to serve existing agricultural customers and answer rising demands from the energy sector.

BNSF, operator of one of the nation's largest rail networks, will spend nearly $400 million between 2012 and 2016 to improve track between North Dakota and Montana that is used by grain and oil-by-rail cargo.

It will take years before the rail sector evolves to a "new normal" of expanded capacity fit for greater volumes of farm and energy shipments, Bobb said.

But farm and passenger advocates said that regulators must see that rail operators smooth out disruptions now, not years from now.

"There is great concern that the problem is not going to get better. It is going to get worse," said DJ Stadtler, head of operators for Amtrak, the principal provider for intercity passenger rail service.

Federal law gives Amtrak preference on the rails, but on-time service has slipped with the increase in oil-by-rail shipments in recent years, he said, citing Albany to New York City and Chicago to Seattle as corridors that have been affected.

The STB has the power to issue emergency orders to settle disputes between rail operators and their customers, but officials may opt to mediate without a formal intervention.

On Thursday, Johnson of the National Farmers Union urged the STB to "hold railroads responsible for losses due to delayed delivery."

But BNSF's Bobb said officials would be wrong to take drastic steps such as allocating specific shares of rail traffic for different industries. (Reporting by Patrick Rucker; Editing by Ros Krasny and Ken Wills)