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Threatened by a strike by rail workers, the biofuels industry is preparing for another collapse, while memories of the disruptions of the Covid-19 pandemic are still fresh.
Most crop-based fuels, such as corn ethanol, are shipped by rail freight, and much of the grain or soybeans are also used to move on trains, according to the industry. The potential impact on biofuels is one of the more significant impacts on American agriculture.
“Our nation’s ethanol producers rely heavily on railroads to get their products to market, and if the nation’s trains stop running, so do the nation’s ethanol biorefineries,” said Jeff Cooper, executive director of the Ethanol Association trade group. renewable fuels. statement on Tuesday praising President Joe Biden for pushing Congress to prevent the walkout.
On Monday, Biden called on Congress to intervene, ratifying a labor agreement drafted this fall that was rejected by some of the unions representing railroad workers. House Speaker Nancy Pelosi (D-Calif.) responded that the House would vote on the issue this week (E&E Daily,No V. 29).
The industry relies on rail for 70 percent of ethanol shipments, with 20 percent moving by truck and 10 percent by barge, according to RFA. A strike would be a “disaster,” Cooper said, adding that biofuels support 400,000 jobs in the country.
The association urged railroad companies and unions to quickly ratify the long-term deal, and joined other farm and business groups Monday in a letter to key lawmakers asking Congress to intervene to prevent a work stoppage — a move Congress has made in the past in disputes.
“The American agricultural community could see disruptions to the 6,300 carloads of food and agricultural products that are transported by rail every day,” the groups said in a letter to top Democrats and Republicans in the House and Senate.
According to the Association of American Railroads, ethanol mostly moves by rail because its alcohol content prevents it from being pumped through pipelines. And fuel depends on a wide network of trains; as much as one-fifth of ethanol shipments originate via short-haul or regional rail, AAR said, thanks to biofuel plant locations in rural areas.
U.S. railroads have moved about 395,000 carloads of ethanol annually over the past five years, according to the Renewable Fuels Association.
For biofuels companies, the rail strike would be the second blow in two years, after travel slowdowns due to the pandemic took a toll on demand for the fuel and halted operations at many facilities. Congress later provided relief through the Pandemic Relief Act.
The biofuels industry — and ethanol in particular — is already facing a rough ride because of its reliance on government programs like renewable fuel standards that have been prioritized by one administration or another. This week is likely to bring more news, welcome to companies or not, when the EPA announces proposed minimum amounts of biofuels to be blended into gasoline in 2023.
The impending departure of railway workers also contributed to the uncertainty. Railroad companies and four unions that did not sign a proposed deal from the Biden administration averted a strike with interim agreements that delayed any stoppage until Dec. 9. Negotiations over the past two years have dealt with issues such as wages, while outstanding points include paid sick leave.
Other agricultural products, such as soybeans and fertilizer, are also at risk. A train carrying soybeans — used in fuels such as biodiesel in addition to livestock feed and other uses — is a “sophisticated transaction” involving distance, volume and cost, said Mike Steenhoek, executive director of the Soybean Transportation Coalition, an industry group based in Ankeny, Iowa. Those transactions are less likely in an uncertain rail environment, he said.
“Obviously an actual rail shutdown is the least desirable option, but even a scenario where negotiation deadlines and potential strike dates continue to be temporarily extended into the future would increase uncertainty and impose difficulties,” Steenhoek said in an email. “Agriculture will struggle to succeed in such an environment.”
Farming groups say a strike doesn’t have to happen to cause disruption. Preparations before the shutdown would require a reduction in production, which would disrupt the delivery of many goods. Fertilizer, for example, may not be fully available for fall application, likely leading to lower crop production, said the Fertilizer Institute, an industry group.
Like other potentially hazardous chemicals, fertilizer is considered a sensitive cargo that would be offline for as long as five days before an anticipated strike, the organization said. This prevents it from resting on the rails during downtime.
A rail strike would make that problem worse, the group said, forcing manufacturing plants to shut down if they don’t have adequate storage, in an already tight global market.
“Rail is absolutely critical for farmers to get the fertilizer they need across the country,” said Chris Glenn, director of advocacy and public relations for the Fertilizer Institute.
Other modes of transportation don’t offer much relief, Glenn said, adding that historically low water on the Mississippi River has disrupted barge deliveries for the industry. “There is currently no elasticity in transport. We continue to struggle with enough trucks, drivers and, more recently, barges.”
In St. Louis, an economic development group called the St. Louis Regional Rail Road praises the variety of modes of transportation in the area, but worries that the temporary loss of any of them could halt trade during the peak season for moving agricultural products. “They all depend on each other,” said Mary Lammy, the organization’s executive vice president for multimodal enterprises.
Although barges and trucks are key parts of the network, they cannot make up for the loss of rail links, Lammy said.
While Lamie said she hoped a strike would be averted quickly, she added that attention to the potential crisis could have a bright side – highlighting the value of transport infrastructure from roads to railways to waterways. Region of St. Louisa has the advantages of being in the middle of the country near rivers, but continued public investment is a top priority to maintain a flexible transportation system, she said. “For us, it’s just sustainable funding.”
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