Come to the west side of Chicago to find out why a power plant in Michigan is short of coal and a biodiesel maker in Brewster, Minnesota, can’t get enough grain.
The answer is found near Western Avenue, where rail cars from Archer-Daniels-Midland Co., the largest U.S. publicly traded ethanol producer, rest idle on the track above the Dwight D. Eisenhower Expressway. A short drive away a burnt orange, yellow and black locomotive from Warren Buffett’s BNSF railway sits on an overpass as motor traffic is snarled below.
They can’t move because increasing oil production from North Dakota’s Bakken field, a record grain crop and unprecedented cold weather overwhelmed the U.S. railroad system. In part because of transport delays, coal inventories were down 26 percent in January from a year ago. A quarter of all U.S. freight rail traffic passes through Chicago, or 37,500 rail cars each day. The trip through the city can take more than 30 hours.
"Utilities are having a tough time getting the coal that they already purchased," Ted O’Brien, vice president at Doyle Trading Consultants LLC, a Grand Junction, Colorado-based coal analytics company, said in a March 14 interview. "It would be a feeding frenzy if they had the transportation to get it."
Transport snarls are one reason coal on the New York Mercantile Exchange has risen 5.5 percent in the past year to $60.48 a ton as of yesterday. Wyoming’s Powder River Basin coal has jumped 26 percent to $13.05 a ton. Power-plant demand for the fuel is forecast to increase 4.9 percent to the highest level since 2011. Utilities had about 132 million tons of coal in inventory in January, the lowest since 2006, data from the Energy Department’s analytical arm show.
Coal producers including the Western Coal Traffic League, whose members are shippers of coal mined west of the Mississippi River, point at inconsistent rail service as the primary culprit and railroads put the blame on Chicago. The group asked on March 24 that the U.S. Surface Transportation Board institute a proceeding to address BNSF’s coal service in the region.
BNSF said in a response to the agency that it plans to spend $5 billion this year on service. "As these resources come on line, service will gradually improve," it said in a March 25 letter.