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Published April 28, 2014, 04:28 PM

ND PSC ponders legal action on slow rail service for ag

The North Dakota Public Service Commission is jumping into the fray about whether it can or should take legal action on behalf of farmers and grain elevators who allege railways are favoring oil transportation.

By: Mikkel Pates, Agweek

BISMARCK, N.D. — The North Dakota Public Service Commission is jumping into the fray about whether it can or should take legal action on behalf of farmers and grain elevators who allege railways are favoring oil transportation.

The PSC held a discussion on April 28 with members of the North Dakota Grain Dealers Association, the North Dakota Grain Growers Association and the North Dakota Ag Rail Business Council about how rail delays are affecting their business.

PSC held a corresponding discussion with railroad officials in the afternoon. Burlington Northern Santa Fe Railway said it’s planning to spend $900 million in the coming year to improve the system in the state, while Canadian Pacific Railway officials said they would spend $70 million.

Jon Long, an ombudsman for BNSF based in Fargo, said grain shipments will be caught up in mid-July and promised reporting daily on progress. Herb Jones, U.S. director for state and local government affairs for CP Railway, said the company’s system of ordering cars doesn’t provide the same level of reporting. He said CP’s companywide investments of 20 percent of revenues is sufficient and the real problem is traffic congestion going through Chicago, which is being handled with a group that includes six of the nation’s Class I railroads.

PSC member Julie Fedorchak, who called for the discussions, said state laws allow the PSC to take action to protect farmers and elevators, and noted that a $900,000 fund can be used to do that. She said the fund is designed to be used for rate disputes but “no service is perhaps the ultimate high rate.” She said the anecdotal reports of service problems need to be backed up by facts.

Commissioners gave no timetable for considering legal action.

Comparing delays

Jon Mielke, program administrator for Fargo-based Upper Great Plains Transportation Institute, suggested that the PSC look at delay times for grain cars versus oil or other energy cars. Commissioner Randy Christmann asked for that reporting from BNSF and CP. BNSF agreed to provide the data, and CP’s Jones said he’d see if it is available.

Elevator and ag experts said 25 to 30 percent of North Dakota’s grain traffic is handled on CP Railway, while 70 to 75 percent is on BNSF Railway. About 80 percent of the state’s grain is shipped via rail, making it one of the most dependent on rail service.

Elevator operators said BNSF pays penalties of $200 per single car for being 30 days late, but no such penalties on shuttle trains. Those rates are set by BNSF, not by a regulatory agency. Meanwhile, CP pays no such penalties.

Christmann, who holds the portfolio for grain elevator licensure, said there has been an “enormous amount of complaints” in the past few months. He says BNSF has presented some “good-sounding plans,” but the PSC wants to know how to judge results. He says logistically, the agriculture industry needs more shipping capacity.

In the meeting with the railroads, Christmann chastised the rail companies for failing to communicate with elevators, imposing time-related penalties on the elevators — sometimes during blizzards — only to leave the filled trains idle.

Both BNSF’s Long and Dave Wood of CP said they work with the elevators on the penalties so those costs aren’t incurred. Christmann acknowledged he didn’t have specific cases, except recent ones involving CP.

Moving crops, fertilizer

Jim Broten, a Cooperstown area farmer and president of the North Dakota Ag Rail Business Council, said farmers are worried about the basis levels that discount the amount farmers must absorb. Elevators “don’t really want grain in our country right now, and the reason they don’t want grain is they can’t get rail service.”

He said farmers are concerned about whether they can get the bulk of 2013 crop grain moved before the next harvest comes in, and they’re concerned about getting fertilizer in for producing the 2014 crop.

Dan Wogsland, executive director of the North Dakota Grain Growers Association, said in a normal shipping year, elevators and farmers might have 30 to 40 percent of a year’s crop in bins, depending on prices. He said some areas now have a full year’s crop waiting to be shipped.

Wogsland said BNSF officials have declined to say whether they’re prioritizing shipping to oil cars, which are handled under more privately negotiated contracts, versus the agricultural shipping, which is mostly done through “common carrier” rules. He said BNSF told him it is “cognizant that we don’t slow down oil shipments,” and noted that there have been no reports of oil refineries having to shut down production because of rail car delays.

BNSF and CP officials both denied that their companies are giving preference to oil cars, saying oil officials sometimes complain the railroads are giving preference to agricultural customers.