Moving Bio-fuels: Rail and Terminal Capacity

There's a very interesting article available at Progressive Railroading.com  regarding the impact of rising ethanol production on US railroads and Shippers.  The Bush administration has mandated that the United States increase its production of alternative fuels in order to lessen the impact of foreign oil.  Both shippers and railroads however are concerned about the impact of that increased traffic on US railroads.

Shippers are concerned that railroads will not have available capacity to move the extra freight. Further they are also concerned that the railroads won't charge a rate that shippers are willing to pay.   The Shipper groups like Consumers United for Rail Equity (CURE) claim that the Class 1 railroads will take advantage of plant locations that are only serviced by single railroads and charge very high rates.   The truth is though that that concern is probably true regardless of commodity if the plant location is ill suited.

The railroads argue that the problem is that ethanol processing plants historically have been serviced by pipeline or water transport and were therefore improperly located for service by rail.   Few have the capacity to handle full unit trains or high numbers of bulk cars.  In order to solve the problem,  some industry observers contend that new site locations should be served by short line railroads that connect to multiple long haul class 1 rail lines.  In the medium term, that's probably correct.

In the meantime, the federal government will need to support creation of rail - truck terminal transfer points in order to help alleviate congestion until plant logistics infrastructure is put in place.  Ultimately it comes down to the evolution of transportation to serve the markets.    In between, the government will likely have to help industry make the shift.   Single rail cars jam up the rail transport system, so until unit trains can be accepted by new ethanol plants, some sort of trucking infrastructure is going to be needed to take some capacity off the railroads.

Eric

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