NDSU economist explains rail study and its withdrawal

A North Dakota State University economist who prepared a rail study that was later withdrawn says he stands by the process he used and the numbers he came up with.


A North Dakota State University economist who prepared a rail study that was later withdrawn says he stands by the process he used and the numbers he came up with.

He also tells Agweek that the issue is complicated and that other methods can be used to analyze it.

Frayne Olson, assistant professor and crop economist in NDSU's Department of Agribusiness and Applied Economics, was asked this spring by the office of Sen. Heidi Heitkamp, D-N.D., to identify the amount of money that farmers in the state have lost to rail delays.

The request, which came with "some urgency," was for an initial estimate, he says.

The study, which estimates that farmers lost $67 million in revenue from January to April, was released in May but later withdrawn. His department decided, as a group, "not to send it out anymore," he says.


Olson says his concern was that the study was reported in the national news media as an official NDSU report, when it fact it was only a preliminary estimate.

A number of North Dakota political figures cited the report in recent months, even after it was withdrawn. The withdrawal became an issue publicly after the report was cited at a Surface Transportation Board hearing Sept. 4 in Fargo.

William Wilson, also a professor in the NDSU Department of Agribusiness and Applied Economics, told the news media late in the week of Sept. 8 that the report was withdrawn because it was based on a preliminary set of results.

A Sept. 16 entry on the Say Anything blog says Wilson is a consultant for Burlington Northern Santa Fe, the state's dominant rail shipper. Wilson tells Agweek that the BNSF case in which he's involved has no link to what's happening in North Dakota. He describes his relationship with BNSF as an "expert," not as a consultant, but says he was compensated by the railroad.

The blog entry also says Wilson made the decision to withdraw the study. Wilson says he wasn't involved with the decision.

Olson's study compared historical basis levels and a proxy year, 2009 to 2010. Basis is the difference between the local cash price and the futures prices. The cash market is where grain is handled physically by county elevators and terminals; the futures market contracts grain for future delivery.

Olson analyzed the difference between historical basis and the proxy year and estimated how much of the difference can be attributed to issues with rail.

He describes his approach as "relatively straightforward and simple." He also says "there are alternative approaches that can be used. They're much more complex, and they require a lot more information and a lot more analysis. There's always a trade-off."


In retrospect, Olson says, "I would have done a much better job (in the preliminary estimate) of identifying my core assumptions, clarifying what assumptions were made and what are the advantages and disadvantages of the approach I took."

Olson says his department is evaluating whether to undertake a new, bigger study on the impact of rail delays and, if so, what approach to take. He's uncertain when a decision might be made.

Deciding on the "appropriate methodology" is a challenge. The bigger issue is whether enough information is available for a full, detailed analysis, he says.

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