Ethanol\'s rail jam - 500 Beiträge pro Seite

[FRANKET1000]

http://www.nwitimes.com/articles/2006/06/11/business/busines…





Ethanol's rail jam

Major concern for booming business: Can trains move alternative fuel without getting clogged in Chicago?

BY JASON SPARAPANI
Medill News Service

This story ran on nwitimes.com on Sunday, June 11, 2006 12:04 AM CDT



ADVERTISEMENT





CHICAGO | Ethanol and railroads. They may not seem the perfect match, but consider this: ethanol, a Midwest-grown, cleaner-burning alternative fuel that can't travel in petroleum pipes because it picks up impurities, faces ever-climbing demand. And railroads are investing record amounts in infrastructure to better serve customers and bolster a booming business.

So, perfect. Except for one thing: all the other stuff that needs moving these days.

Railroads "have seen a revitalization of demand for their product," said DePaul University professor Kenneth Thompson, pointing to the upturn in railroads' shipments of coal and containerized freight over the past few years, in part from the surge of Asian electronics, clothing and other goods received in West Coast ports.

"But demand is a two-edged sword. They can't handle a huge surge in volume," Thompson stated.

And when it comes to corn-based ethanol, that could spell bad news -- in corn-producing states such as Illinois and Indiana, and especially in Chicago, the railway hub that stands to reap huge gains from a brisk trade in the alternative fuel.

The city, through which one-third of the country's rail cargo passes, is already coping each day with horrendous congestion along its warren of track that may delay freight trains for up to two days.

According to Ron V. Lamberty, of the American Coalition for Ethanol, approximately one-third to one-half of the nation's total ethanol production -- 4 billion gallons in 2005 -- goes through Chicago to markets on the East Coast.

"In terms of Chicago being a choke point, there will be a price to pay in terms of jobs and economic activity," said Jim LaBelle, deputy director of civic group Chicago Metropolis 2020, which is backing a massive rail improvement project estimated to cost a staggering $1.5 billion. It has yet to be fully funded, but officials say they're seeking "additional funding sources."

Jim Redding, spokesman for Aventine Renewable Energy Inc., an ethanol plant in Pekin, in central Illinois, said the problem of Chicago bottlenecks presents an easy solution to ethanol-carrying freight trains: Go around it.

"You could probably move the product quicker if you bypass Chicago," he said.

The problem, in Chicago and elsewhere, boils down to capacity, Thompson said. For years, the railroad industry was in decline. It laid off workers, freight cars aged, and little was done to enhance the sprawling network.

Capacity to transport liquids is further limited by a shortage of tank cars, which hold 30,000 gallons each. Car makers have a backlog of a year and a half, according to Dave Maechling of tank car manufacturer American Railcar Industries Inc.

Yet, rail transport is at an all-time high, amounting to 1.9 billion tons last year, up 9 percent from 2000, according to the Association of American Railroads.

Fueling the rise is intermodal transport, which allows cargo containers to move smoothly from ship to train to truck. Last year the industry moved nearly 12 million containers, a 27 percent jump from 2000. Shipments of coal, enjoying rising demand, also have risen, to 804 million tons in 2005 from 758 million five years ago, a 6 percent gain.

Rail transport is attractive because it's relatively cheap. The cost to move ethanol by rail averages 4 to 5 cents per gallon for shorter distances, say, Chicago to Cleveland, and 12 to 14 cents for longer trips like Iowa to New York.

Racing to take advantage of their opportunities, railroads are investing an estimated $8.3 billion in capital projects, though Thompson said that even that large amount won't go far in such a capital-intensive industry.

For its part, CSX Corp. is improving its Chicago-to-Florida line by constructing sidings, short stretches of track that enable trains on the same line to pass, according to spokeswoman Meg Scheu. The company also is hiring more people, including 3,000 additional conductors and engineers, and purchasing more locomotives.

Ethanol transport at CSX is up more than 50 percent, Scheu noted. But overall the industry's ethanol business, though growing, is still relatively modest.

According to Tom White of the AAR, in 2004 railroads transported only 6 million tons of ethanol, just one-third of 1 percent of total rail shipments that year. Statistics for 2005 aren't yet compiled.

"At this point in time there isn't much ethanol moving," he said. But White pointed out that railroads are working with developers of ethanol plants to ensure that future facilities have easy access to rail lines.

Indiana now has one ethanol plant, operated by New Energy Corp., in South Bend. Nine ethanol plants and three biofuel plants are under development in the state, including the Iroquois Bio-Energy plant outside Rensselaer.

White cautioned that the challenge of adding several billion gallons to total capacity poses some uncertainty, because ethanol is a relatively new commodity, and thus funding sources may determine how much ethanol ultimately will move by rail.

"We get our investment capital from Wall Street, just like everybody else," he said.

Another limitation may be the capacity of local railroad yards, because some ethanol is beginning to move in long unit trains -- trains that carry just one commodity from origin to destination, eliminating the hassle of dropping off or picking up cars at railyards.

Suann Lundsberg of Burlington Northern Santa Fe Corp. said the railroad is sending unit trains stocked with ethanol to California, calling the mode "an efficient, cost-effective and safe way of moving ethanol long distances."

DePaul's Thompson said unit trains can indeed be efficient, "But capacity is a problem," he added, especially in terms of yard space. Unit trains can comprise 75 to 100 cars stretching for more than a mile, requiring that amount of yard space plus the crews and equipment to receive and process them.

[donnerpower]

EBOF