Threatened rail stoppage looms; shippers worry


Issue Date: October 21, 2015
By Christine Souza

In an action that could disrupt shipment of agricultural commodities in California and around the U.S., national railroad companies have indicated they will start shutting down rail freight systems at the end of this month unless Congress extends a deadline to implement new safety technology.

"The Association of American Railroads has indicated that the railroads are going to start ramping down operations as early as Nov. 1 and that the letters about this have already gone out to railroad customers. It is very serious," said Andrea Fox, California Farm Bureau Federation legislative policy analyst. "A shutdown of freight railroad companies would greatly impact the movement of agricultural commodities as well as other goods moving into and out of California."

Class I, large freight railroad companies, such as the Union Pacific Railroad and Burlington-Northern Santa Fe Railway Co., are required to meet a Dec. 31 deadline to have installed safety technology known as Positive Train Control, or PTC. The systems, for both freight and passenger railroads, are designed to automatically prevent train collisions and derailments in the event of operator error.

While railroad companies report they have already invested several billion dollars to design, install and test the safety technology, they say they will not be able to meet the deadline due to the cost and complexity of installing PTC. Rail operators are asking for a delay beyond the 2015 deadline. As a result of legal concerns about operating without the PTC technology in violation of the law, railroad companies announced that if the deadline is not extended, they will cease rail traffic.

For agricultural shippers in California that rely on railroads to ship products in and out of the state, a shutdown of rail service "would have broad and long-lasting consequences," according to a coalition letter to members of Congress signed by CFBF, the American Farm Bureau Federation and about 100 organizations from across the U.S.

"As rail customers, we rely on railroads to deliver farm products, automobiles, coal, heating oil, propane, road salt, chemicals, consumer goods, building materials and many other essential products. A major disruption of freight service would have cascading impacts on food, energy and water supplies, as well as transportation, construction and nearly every sector of the U.S. economy," the letter states.

Chris Zanobini, chief executive officer of the California Grain and Feed Association, called the potential rail shutdown "a big deal," noting that California imports 85 percent of its feed.

"All our corn and other bulk commodities come by rail," Zanobini said. "This would be a big problem."

In 2013, Class I railroads originated 1.3 million carloads of grain, according to the Association of American Railroads. Grain is also a key commodity for short-line and regional freight railroads. Railroads also carry smaller amounts of oats, rice, barley, rye and sorghum. For California, Union Pacific reports that grain ranked No. 3 in volume among commodities received in 2014, and corn ranked No. 4.

Rob Neenan, president and CEO of the California League of Food Processors, noted the disruptions agricultural shippers faced earlier this year from a work slowdown at West Coast maritime ports, and said the country "cannot take a protracted reduction or shutdown" of train service.

"If they can't resolve this, it would certainly affect my members," he said. "For some heavier processed foods, it makes better sense to ship them by rail than by truck."

Neenan said food processors also use railroads to bring in ingredients, packaging material and equipment.

Union Pacific, in a letter to U.S. Sen. John Thune, R-S.D., who chairs the Senate Committee on Commerce, Science and Transportation, indicated that shipments of anhydrous ammonia used on the farm would be affected by a rail service shutdown. But Bob Brown, president and CEO of California Ammonia Co., which manufactures and sells anhydrous ammonia, suggested that California has a plentiful supply.

"We probably are not going to be impacted very much because most of our customers are serviced by truck," Brown said. "We do receive some product in by rail, but it's a small quantity compared to what we get by ship. We have sufficient inventory so that we don't need to worry about the railcars for quite a while."

But he added that although California plants "will still be able to produce their products," some manufacturers of monoammonium phosphate and diammonium phosphate products in other Western states could be at risk "for not having the ammonia when they need it for manufacturing." Chlorine shipments used by municipalities to chlorinate water systems could also be affected, he said.

To address the issue, members of Congress are cosponsoring H.R. 3651, the Positive Train Control Enforcement and Implementation Act of 2015. The bill, introduced Sept. 30, would result in a three-year extension of the safety deadline.

Rep. Jim Costa, D-Fresno, a cosponsor of the measure, said there's a "good likelihood" the bill would be incorporated into some form of "must-pass" legislation that the president would sign.

"The administration has acknowledged that the Jan. 1 deadline, given where we are with the efforts to implement positive train safety, cannot be met," Costa said. "No one believes shutting down our rail system is an acceptable alternative."

This week, the House Transportation and Infrastructure Committee is expected to mark up legislation that could include a provision to provide for the three-year safety extension.

"Everybody is trying to put the squeeze on Congress to (extend the deadline) sooner than later. The fear that we all have is: We know how fast Congress moves these days and we're just fearful that they won't move fast enough to prevent the shutdown," Brown said.

(Christine Souza is an assistant editor of Ag Alert. She may be contacted at csouza@cfbf.com.)

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.