Midwest Shippers Association calls for STB to change regulatory “Exemptions”; more oversight of inland rail intermodal service

The Midwest Shippers Association (MSA) has filed a statement with the U.S. Surface Transportation Board (STB) calling for changes in current STB policies to establish increased oversight of intermodal rail service and other rail freight now unregulated under the agency’s “Exemptions” categories.

MSA filed written comments for the hearing the STB will officially hold on February 24 in Washington, D.C. The hearing had earlier been set for December 9, 2010 but was postponed at the request of stakeholders, including railroad trade associations to give them time to respond. January 31 was the deadline for filing written comments.

Midwest Shippers called for changes in the current regulatory exemptions policies for certain commodities, certain box car service and essentially for all intermodal container rail service.

MSA made several measured recommendations, according to Bruce Abbe, MSA executive director, including:
- Establishing reporting and increased transparency in rail intermodal shipping rates and services;
- Reasonable repositioning rates for moving containers to areas where they are needed;
- A closer relationship of intermodal rates to distances and actual costs;
- And maximizing short line railroads’ ability to contribute to the intermodal system, to improve hub and spoke systems for assembling larger volume trains.

“Midwest Shippers Association fully understands and supports that both the railroads and the ocean carriers need to be profitable enterprises. We depend upon them to deliver our products worldwide, and we know they need to make money – just as our member grain exporters’ businesses must be profitable to continue to provide the valuable service they provide,” Abbe said.

“We do not believe, however, this should mean extreme profits that comes at the expense of shippers and our customers to the extent that it threatens the sustainability or existence of our supply chain businesses.”

Effort needs to be made to mitigate trade competitiveness problems caused by increasing rate disparities between the one or two favored North America inland large population areas, compared to other large and moderate population areas the intermodal rail lines now run through. Abbe cited growing rate disparities for shippers using the Upper Midwest Twin Cities and Omaha area container rail yards, compared to the large Chicago and Toronto, Canada intermodal rail served areas, noting the disparities threaten the competitiveness and sustainability of many Upper Midwest agricultural premium grain and soybean exporters.

Key inland rail container yards, notably the Twin Cities yards, often experience shortages of equipment for exports, sometimes desperately so, Abbe noted.

“Intermodal container shipping is a critical factor for America’s export competitiveness. Yet the system’s interdependent rail and ocean carrier partners now gear their operations largely to serving importers. If we are not using it as it is capable of being used to serve our exports, then we are figuratively and literally missing the boat,” Abbe said.

“We urge the Surface Transportation Board to take steps to change the current blanket exemption from any regulation of intermodal rails service, and to establish reasonable oversight practices and procedures that will lead the rail intermodal industry to adopt fairer, more appropriate rates and services to serve America’s exporters and importers,” Abbe said.

The place to start is to “lift the veil the industry maintains over its real intermodal rates and service practices” through their current strict confidentiality requirements.
To view the full Midwest Shippers Association comments to the STB hearing, contact: info@mnshippers.org to request a copy.

The Midwest Shippers Association is a regional trade association cooperative made up of producers, processors, interntional traders and exporters of grain, oilssed and food ingredient products based in the Upper Midwest states of Minnesota, North and South Dakota, Iowa and Wisconsin. MSA’s membership also includes shipping logistics and grain industrsy service suppliers. MSA’s members export premium value grains and oilseeds to international customers worldwide.

Source: Midwest Shippers Association, February 5, 2011

Growth continues in railroad movements of ethanol, distillers grains — USDA

Rising crude oil prices and continued demand for renewable fuels and distillers grain has kept ethanol production profitable in 2010. Railroads remain the primary mode for moving ethanol and distillers grains, with increased movements consistent with growth in production of ethanol and distillers grains.

According to the U.S. Energy Information Administration monthly and weekly data, U.S. ethanol production in 2010 reached 13.4 billion gallons with plant capacity utilization rates above 95 percent for most of the year. This production level now approaches the 15-billion gallon per year (bgy) cap set by the 2007 Energy Law (EISA/RFS2) for corn starch ethanol by 2015.

Despite the recent announcement by the Environmental Protection Agency (EPA) that automobile models newer than 2001 are now able to use E-15, the 15-bgy corn starch ethanol cap and the slow pace of commercialization of the next generation biofuels, are the primary reasons for the projected slower growth rate of ethanol production in 2011.

During the first three quarters of 2010, U.S. ethanol production reached 9.7 billion gallons, up 23 percent from the same period last year. During that period, the major railroads in the United States moved 274,486 rail carloads of ethanol, up 26 percent from the previous year. Higher utilization of unit trains (trains with 80-100 railcars) and more rail-accessible blending terminals may be the primary factors for this increase.

For most of 2010, shippers of distillers grains continued to increase their reliance on rail service. During the first three quarters of 2010, railroads moved 65,909 carloads of distillers grain, up 32 percent from the same period last year.

The growth in movement of distillers grains by rail has been faster than that for ethanol, possibly due to the growing export market, which relies on rail transportation to deliver the product to port from the ethanol production regions in the Midwest.

During the first 11 months of 2010, exports of distillers grains totaled 8.2 million metric tons, up 47 percent from the previous year.

The outlook for ethanol in 2011 is mixed. Profitability of ethanol production is threatened by rising grain prices due to tighter global supplies. However, EISA/RFS2 mandates and the rising petroleum prices could mitigate price risk, enabling ethanol producers to maintain capacity utilization rates and keep moving the product to market via rail.

Source: USDA Grain Transportation Report, February 10, 2010