Senators John Thune (R–SD) and Amy Klobuchar (D–MN) are calling on the U.S. Department of Agriculture to conduct an economic analysis of how domestic railcar service challenges may be hurting the agriculture industry. Regardless of whether an economic analysis by the federal government is necessary, one thing is clear: To prevent unnecessary bottlenecks in transportation services, Congress should remove bureaucratic obstacles to infrastructure development.
Railcar delays have put a significant strain on many grain producers and are causing them to lose money. The inability to move their product is resulting in spoiling grain piles and an inability to make room for a growing amount of new product. Some farmers have sought to use trucks when available, but at a cost premium.
A number of factors have contributed to the delays, but it is difficult to tease out the main cause of the problem. The agricultural community cites the increased demand for rail shipments of crude oil and coal. With the abundance of crude oil coming out of Canada and the Bakken formation in North Dakota, railcar shipment of crude has increased 400 percent since 2005.
The rail community is singing a different tune. The harsh winter reduced the number of railcars and the speed at which they could travel, and the industry has been playing catch-up ever since. A bountiful 2013 harvest also means that the rail industry has more to move. Keith Creel, president and chief operating officer with Canadian Pacific contends that no preference is being given to the oil industry, saying, “We understand how important grain is. If you know the facts of the business and the economics, I make more money hauling grain than I do hauling crude.”
One culprit that has curiously received a pass is the federal government. While there may be a combination of variables causing railcar delays, federal red tape in the energy sector, which has stressed demand on freight infrastructure, is also a critical factor.
The Keystone XL pipeline, in particular, would help carry significant amounts of crude oil. According to the North Dakota Pipeline Authority, “Bakken rail outflow capacity totaled 965,000 barrels per day (bbl/d) at the end of 2013, compared to 515,000 bbl/d of pipeline capacity.” Keystone XL would help to minimize this problem.
America recently celebrated a disappointing anniversary—the 6th year of TransCanada’s original application to build Keystone XL. When the U.S. Department of State originally concluded that the pipeline would pose no environmental risk, President Obama could have given the green light to the project but failed to do so. If he had, Keystone XL would already be in operation.
Keystone XL would transport up to 830,000 barrels of crude oil each day to Gulf Coast refineries, much of it from Canada where railcar shipments to the U.S. have increased substantially. Furthermore, TransCanada has said that Keystone XL could accept up to 100,000 barrels of Bakken oil for transport.
Expanding pipeline capacity without needless delays from the Administration would provide a huge boost to market efficiency. Delays and lags in infrastructure exist in the free market, but the Administration should not exacerbate them by catering to environmental activists’ demands, especially since the Administration’s own State Department concluded multiple times that Keystone XL is environmentally safe.
Congress should identify the regulatory roadblocks to energy infrastructure development and create an efficient environmental review and permitting process for both pipeline and rail expansion. Doing so will allow companies to invest in and plan a transportation network that meets America’s fuel and food needs.
