FARGO, N.D.—Deregulation has been a popular theme in U.S. politics for decades, but a Surface Transportation Board hearing here last week on railcar shortages and service delays provided an example of how dependent rural America still is on a federal regulatory agency to push the railroads to provide vital services.
The BNSF Railway Company and the Canadian Pacific Railway Company move commodities from the northern tier of states stretching from Minnesota through the Dakotas and Montana to the ports in Washington state and to processing facilities elsewhere. But if the carriers do not provide cars to ship wheat, corn, soybeans, and other commodities this fall, farmers and agribusiness risk losing billions of dollars and the U.S. reputation as a reliable supplier of agricultural products will be tarnished, a wide range of witnesses testified at Thursday's hearing.
Citing a study showing that North Dakotans have already lost almost $67 million due to rail delays and could lose another $95.4 million, North Dakota Republican Gov. Jack Dalrymple told the board the situation "is about the individual elevators and farmers out there who have no place to go—they have no power, no influence over the situation except for you."
The problems began last winter when BNSF (formerly the Burlington Northern Santa Fe) and Canadian Pacific fell way behind schedule in providing railcars to ship the 2013 crop and there were fears that the rails would not provide fertilizer before spring planting. The railroad executives have blamed last winter's severe weather and congestion at rail yards in Minneapolis-St. Paul and Chicago, but the farm leaders say the railroads are favoring the growing energy industry in the Bakken area of western North Dakota or at least have made more promises of service than they can deliver.
On April 15, the STB ordered the two railroads to report within three days their plans to ensure the delivery of fertilizer and to provide weekly status reports on those deliveries. On June 20, amid continuing complaints about negative effects from backlogged grain-car orders and delayed shipments of loaded grain cars, the STB gave the railroads one week to submit plans to resolve their service problems and ordered them to provide weekly reports on the outstanding grain-car orders and the average number of days late for all outstanding orders until each carrier resolves its backlog.
The reports showed that the fertilizer did arrive when it was needed and that there has been some progress in reducing the backlogs of grain-car orders, but with analysts predicting a huge crop this year, the STB decided to hold the field hearing. The board required rail executives to testify and to stay through the day to listen to the agriculture industry and public officials explain the economic impact of elevators running out of storage capacity, risks of stored grain spoiling, and penalties incurred by farmers and other shippers for products that are not delivered on time.
The STB's actions occurred amid considerable pressure from Sens. Heidi Heitkamp, D-N.D., John Hoeven, R-N.D., and John Thune, R-S.D., and Rep. Kevin Cramer, R-N.D., who have been impressing on the railroad officials the gravity of the situation. The role has been an odd one for the legislators because they have not proposed legislation. Heitkamp explained in an interview on the sidelines of the hearing that "legislation wouldn't happen fast enough" and that the only place to which the ag community could turn is the STB, the agency that was established in 1995 when the old Interstate Commerce Commission was terminated. The ICC's heavy regulatory hand didn't work but there is still a role for government to help "captive shippers"—people and companies with few or no transportation alternatives—when they have complaints, Heitkamp said.
STB Chairman Daniel Elliott, a former transportation union lawyer appointed by President Obama, had obviously gotten the message.
"Ag in the Upper Plains is in dire straits," Elliott said in an opening statement.
He and the other commissioners—Deb Miller, a Democrat and former Kansas transportation secretary, and Ann Begeman, a former Republican congressional aide who noted she came from a farm background in South Dakota—proved to be aggressive questioners, especially of Canadian Pacific, which lawmakers and the STB have previously criticized for being particularly lax in making plans to improve service.
At the end of the nine-hour hearing, BNSF and Canadian Pacific officials promised to provide more cars and speedier service, but it was unclear whether the STB would take any further action. Elliott noted that the STB has broad powers to act in the case of emergency, but said he does not want to take actions that could make the situation worse. He said in a brief interview that the STB will continue to require the reports on commodity rail shipments and the backlog "until we get significant improvement."
Cities are changing fast. Keep up with the CityLab Daily newsletter.
Heitkamp, a lawyer and former North Dakota attorney general, said she has been discussing Elliott's powers with him and that she believes that "some things can be tweaked" at the STB to force the railroads to improve.
The harvest months should determine whether the combination of congressional pressure and regulatory action can indeed force the railroads to move the commodities to ports and processing—or whether the hearing was only an opportunity for the farmers and others to get their complaints off their chests.
Jerry Hagstrom is a columnist for National Journal. He writes and publishes The Hagstrom Report, a daily email newsletter on agriculture and for DTN, an Omaha-based agricultural news service, Agweek, which is published in Grand Forks, N.D., and for the Capital Press, a West Coast agricultural newspaper.
Prior to his role as a columnist, Hagstrom covered agriculture and politics for National Journal. In the 1980s he pioneered the magazine's coverage of the political consulting industry. He is the author of Beyond Reagan: The New Landscape of American Politics; To Be, Not To Be Seen: The Mystery of Swedish Business; and, with Neal R. Peirce, of The Book of America: Inside 50 States Today.
Hagstrom grew up on a North Dakota farm homesteaded by his grandparents. He is a graduate of the University of Denver and has been a Loeb Fellow at Harvard University and a research fellow at the Freedom Forum Media Studies Center at Columbia University. He lectures frequent