GLENDIVE — The rail yard in this Eastern Montana train town is teeming with boxcars bound for the Midwest and West Coast. There are more than 300 cars of coal, 200 cars of grain. Black, jellybean-shaped tankers of Bakken crude linked end to end for more than a mile.
They are all waiting for a turn on the only two parallel steel lines between here and the ports of the Pacific Northwest. The only railroad making that run from start to finish is Burlington Northern Santa Fe, which is laying new track at a breathless pace to catch up with demand, but is still far from its goal. The wait for service lately has been longer than the journey for some.
Shipping might be the biggest challenge for the largest cogs in Montana’s economy. Energy, mining and agriculture make up 32 percent of basic industry earnings in Montana, according to state data. The state’s economy has always run on rails, annually shipping more than $1 billion in farm commodities, $600 million in minerals and chemicals and roughly 40 million tons of coal.
But it’s been tough sledding for BNSF and its customers lately, with thousands of grain cars delayed for weeks at a time, and coal shipments so backed up that energy companies worry aloud about dwindling coal stockpiles and the challenges of keeping the lights on.
The reasons for the congestion are complex. So are the solutions, as BNSF spends $5 billion this year to get service back on track, including $1.4 billion in Montana and North Dakota.
To understand how service got so backed up, one has to understand how quickly demand for rail service mushroomed in the past few years, particularly in oil-rich, farm-rich North Dakota. BNSF’s northern line between Chicago and Portland links Montana and North Dakota like siamese twins.
Oil leads the pack. A U.S. Government Accountability Office report issued Friday cited a sixfold increase in rail shipments of Bakken crude between 2007 and 2012. During that time, the number of crude oil carloads originating in Montana increased by more than 10,000, according to GAO. The number of carloads originating in North Dakota increased by more than 172,000.
Grain shipments also exploded, particularly in North Dakota, where wheat fields converted to corn and soybeans were suddenly yielding more than twice as many bushels as they were when farmers were raising wheat. Corn production went from 104 million grain bushels in 200 to 396 million bushels in 2013. Soybeans harvested went from 59 million bushels to 136 million in the same time period. Wheat production dipped slightly to 276 million bushels, but not enough offset the production gains of crops that replaced it in the field.
By BNSF’s own account, the amount of farm commodities it shipped from North Dakota increased 50 percent from 2009 to 2013. Much of that increase was shipped across Montana bound for grain ports in Washington and Oregon.
Montana shipments also increased, wheat production climbed from 134 million bushels in 2000 to 201 million bushels last year, but the gains paled in comparison to North Dakota’s and ultimately meant the Treasure State had more grain to ship at a time when service was hard to come by.
“Montana was pretty stable, but corn and soybean acres in North Dakota and Minnesota really expanded,” said Lochiel Edwards, who tracks issues for the Montana Grain Growers Association and is a partner in TTMSGroup, which provides shipping analysis.
TTMSGroup concurs that BNSF overlooked the tsunami of the service demand in Northern Tier states and that shippers are now paying the price. But group member Kevin Kaufman, who previously headed up agriculture services for BNSF, recently blogged that just like other companies, the railroad doesn’t always get the future right. The railroad’s planning to meet demand also is complicated by the secrecy of the businesses it serves. Companies don’t like to tip their hand to competitors by sharing their growth projections. That lack of disclosure makes it difficult for the railroad to know exactly how much shipping demand may change.
After more than a year of delays, BNSF, the nation’s largest railroad, is required by the federal government to submit weekly progress reports on moving its grain backlog. Energy companies, with winter around the corner, are champing at the bit for deliveries of Montana and Wyoming coal, while shipments of Bakken crude continue to skyrocket.
Bakken oil shipments are expected to jump another 48 percent by 2019 and remain high through 2040, according to the GAO.
That steady growth has other rail-dependent industries nervous. Energy companies this month warned the rail-regulating U.S. Surface Transportation Board that coal stockpiles at power plants are uncomfortably low as a result of delayed rail service. Rail service has been slowed by construction as BNSF builds its way out of its current jam. Customers seem to acknowledge the construction-related delays are necessary, but there’s worry that unpredictable delays like the extremely cold, snowy winter that compounded shipping problems this year could return.
No one wants to relive the winter of 2014, which left some coal-dependent power companies scrambling to alternatives at the worst possible time.
“Last December, our Leland Olds Station near Stanton, North Dakota, was 19 days from shutting down due to our dwindling stockpile,” said Mary Miller of Basin Electric, a North Dakota-based cooperative that provides electricity to roughly half of Montana’s homes. “To return the stockpile to an acceptable level, we spent 30 days trucking coal to the plant in January and February, hauling up to 250 truckloads of coal per day.”
Basin would like to have 650,000 tons of coal stockpiled at the power plant just to be safe. It’s facing similar concerns at its Laramie River Station power plant in Wheatland, Wyo., which is also dependent on rail shipments. The power plant normally relies on a steady coal supply from 136-car trains. BNSF has assured Basin normal service will return and that service will ramp up this fall to keep Basin power plants supplied.
But coal reserves at power plants around the country are at their lowest levels in 12 years and 21 percent lower than a year ago, according to the U.S. Energy Information Administration. EIA reports that power companies have not only been forced to truck coal, but have also had to shut power plants down because of rail delivery problems. Companies are nervous about another bad winter slowing down rail service.
“We are hopeful this winter will not be a repeat of the last,” Miller said.
Montana has a lot riding on BNSF’s rails, perhaps more than any other state in the Northern Tier because it lacks another full-service railroad. BNSF controls nearly all of the shipping lines through Big Sky Country, with the exception of a short Butte-to-Idaho line run by Union Pacific, and a slight presence by Canadian Rail on the Hi-Line. There is also a Billings-to-Sandpoint, Idaho, line operated by Montana Rail Link, though the independent short-line railroad leases its track from BNSF.
Rail service is so concentrated in Montana that its businesses lacking economically viable alternatives to BNSF are known as “captive shippers” in the parlance of the federal government. Not only are their options limited, but they typically pay a higher rate than customers in states with more rail options, which includes every state Montana borders.
The dependence on the only true long-distance iron horse in the state hasn’t discouraged businesses from saddling up. East of Billings, developers are working on Trialhead Commerce Park, a more than one-mile long rail industrial complex with all the BNSF trimmings. The Big Sky Economic Authority, which services Yellowstone County, expects an announcement about the industrial park’s progress within the week.
In Kalispell, the Flathead Economic Development Corp. is pursuing a funds for a $14.5-million rail park, which organizers are hopeful will spur development along 340 acres of rail-serviced real estate. Great Falls has been developing its Agri-Tech Park rail industrial complex for several years.
Shelby may have the state’s biggest railroad buy of any community, with $17 million in federal grants to provide the infrastructure for a rail park with $254 million in pledged private investments.
Foreign investors have also built eight mega-size grain elevators in Montana in the past four years, each with the ability to rapidly load 110-car grain shuttles in a matter of hours. Each elevator, capable of holding a million bushels of wheat or more, is an investment of roughly $20 million, all predicated on a railroad that delivers grain to Pacific Northwest seaports on time.
That’s a lot of investors with wagers on BNSF’s iron horse to not only show, but win. No community has more on the line than Shelby, which launched its rail industrial park a few years ago after turbines for North Central Montana’s wind farms began rolling into town. Shelby gets 45 to 55 trains a day, according to Mayor Larry Bonderud. The mayor would like to see the number of trains increase to 65, where it was before the Great Recession.
“We’re seeing more agriculture commodities, more value-added ag commodities,” Bonderud said. “We’re seeing coal come up from the south and being interchanged to the Canadian Pacific,” which crossed the border and picks up loads in Shelby.
Bonderud said you could see the rail traffic picking up if you knew what to look for. Not only because oil tankers and grain cars were rolling down the track, but also because recession-idled shipping container cars began leaving the seldom-used side tracks across Montana, which were lousy with the specialty cars used to move shipping containers between Chicago and the West Coast.
Bonderud said BNSF is making the necessary track improvements, none bigger than a 60-mile double-track stretch between Glasgow and Minot, N.D., that allows incoming and outgoing oil and agriculture trains to travel more freely.
On the southern line across Montana, BNSF is expanding rail yards and extending sidings to accommodate more shipments. The sidings allow trains to pull off the main line to let each other pass. Longer ones shorten passing times by as much as 15 minutes, which adds up to hours saved between Montana and Pacific ports.
“There is a lot going on down here on the eastern side of the state with our expansion to help use be more efficient with our meet-pass capabilities,” said Dan Fransen, BNSF’s general manager in Montana.
BNSF is spending $160 million in Montana this year to expand rail capacity, and is also hiring 450 people in the state. The swelling workforce shows in Forsyth, where outside Fransen’s depot office, the company parking lot is full and the pay is well above average for the area. Starting pay for BNSF conductors is $60,000 a year after 13 weeks of training. The only prerequisite is a high school diploma. It doesn’t take too many workers with that size salary to stimulate the economy of a small town like Terry where rail construction is underway.
“It’s been (a) boost with the construction. It started at the beginning of spring, all the way from Glenora on to the Custer County line,” said Jason Smith, Prairie County sheriff. “In the next couple years they’re actually going to be bringing people to town. We’ve had a few BNSF people moving here and buying homes.”
Towns like Terry have centered on the railroad since their creation. This was once a two-depot town with an active grain elevator. In August, BNSF was laying a new siding through town, using a one of a kind track-laying machine to roll out new track at a pace of one tie every seven seconds.
It was August and the combines racing through the wheat fields of this southeast Montana town were breathing down the necks of the local railroad construction crew, which lurched toward the finish line.