The U.S. Surface Transportation Board (STB) this week held two days of emergency public hearings to address rail service delays, which included testimony submitted by The Fertilizer Institute (TFI). The STB recently announced it can take emergency authority to address the service delays, and the board is now taking public comments on that issue.
The “Urgent Issues in Freight Rail Service” hearing came less than two weeks after CF Industries Holdings Inc. informed customers it serves by Union Pacific (UP) rail lines that railroad-mandated shipping reductions would result in nitrogen fertilizer shipment delays during the spring application season, and that it would be unable to accept new rail sales involving UP for the foreseeable future (GM April 15, p. 1).
CF Industries ships to customers via Union Pacific rail lines primarily from its Donaldsonville Complex in Louisiana and its Port Neal Complex in Iowa, serving key agricultural areas such as Iowa, Illinois, Kansas, Nebraska, Texas, and California. CF said the products that will be affected include urea, UAN, and diesel exhaust fluid (DEF).
“In recent weeks the board has received communications from a broad range of stakeholders of serious problems affecting the freight rail network, namely inconsistent and unreliable service, which has had serious impacts on rail users, particularly those shipping agriculture and energy products,” STB Chairman Martin Oberman said at the start of the hearing on April 26.
In submitted testimony, TFI cited several issues that it claims have led to reduced rail service, high shipping rates, and poor cycle times, including the implementation of precision scheduled railroading (PSR), a lack of competition, and a lack of structural and market-based incentives to be customer-oriented.
Union officials who testified at the hearing also blamed staffing cuts and the implementation of PSR efficiencies for the rail delays. The STB heard additional testimony from Department of Transportation Secretary Pete Buttigieg and Department of Agriculture Deputy Secretary Dr. Jewel Bronaugh, both of whom mentioned the challenges facing fertilizer shippers, as well as other agriculture groups such as the American Farm Bureau Federation and the National Grain and Feed Association.
“Railroads are critical to the on-time delivery of fertilizer to farmers exactly where and when they need it,” said TFI President and CEO Corey Rosenbusch. “The ag economy relies heavily on dependable rail service to get inputs to farmers. The inclusion of so many other groups experiencing the same challenges as the fertilizer industry shows that these issues are felt broadly, are having negative impacts, and must be addressed through modern reforms.”
The Agricultural Retailers Association (ARA) also issued a statement on April 24 addressing UP’s decision to “selectively reduce service to certain customers … without apparent regard for existing contracts or the essential nature of timely fertilizer deliveries.” ARA said it believes UP has “subsequently negotiated some flexibility back for fertilizer suppliers during the spring season,” though it cautioned that there are still likely to be impacts to fertilizer customers.
ARA said it would be submitting testimony to the STB urging federal action on “three urgent matters.” These include rail reforms to restrain the monopolistic behavior of railroads; the suspension of import duties on UAN from Trinidad and Tobago “at least until the market returns to more normal conditions;” and expanding biofuel usage and increasing the supply of domestically produced fuel, especially natural gas, which ARA said “would reduce the cost of a critical input in the nitrogen fertilizer production process.”
ARA said the import duties on UAN “have priced those supplies out of the market” when imported product typically accounts for 85 percent of the UAN used on the East and West Coasts. “By preventing access to imports, these duties make domestic users totally dependent on domestic producers and domestic logistics to secure their supplies of fertilizer,” ARA said “UP’s decision to cut back available logistics in an already-tight supply situation underscores the cost and risk of leaving these duties in place.”