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Growth in Crops, Oil Production Pressuring Waterways

19:39PM Jan 09, 2015

inland_navigation_map_informa( Courtesy Informa Economics ( )

Informa Economics researchers say barges, rail cars, and crews all being spread thin as U.S. freight shipments reach record levels even in a “subdued economy.”

Talk about a traffic jam waiting to happen.

In North Dakota, the Bakken is generating 1.2 million barrels of oil daily, which is the equivalent of 1,714 tanker cars. Between the U.S. and Canada, farmers are producing more than 500 million metric tons of agricultural products annually, many of which travel by barge on the country's rivers. Meanwhile, consumers, more confident than they have been since 2008, are opening up their wallets and pocketbooks for Asia-made electronics and other goods that travel across the country in containers. 

“We tend to think about freight and transportation as somewhat of a leading indicator, and the most recent numbers show--yet again—higher volumes of freight moving in the country,” said Ken A. Eriksen, senior vice president for transportation, industrials, and energy services at Informa Economics, said during a recent webinar on the state of the inland navigation industry.

It also speaks to the growing demand for space on the nation’s waterways and railroads, where farmers are finding more and more competition for their shipments. Here are the reasons why.

Growing Yields

Crops are getting bigger—fast. “It took us 25 years to be able to grow production [in the U.S. and Canada] from 400 million to 500 million [metric tons] but it took us less than a decade to go the next 100 million,” said Eriksen during the webinar. “And quite frankly, when you look at this, it took us less than a year to really go another 100 million; if you take the drought year to 2013, we increased our crop production by another 100 million tons. What this really yells and screams about is when you’ve got high prices, everyone is incentivized to find ways to plant better, use new technologies, and find way to eke out more yields per acre.”

Oil and Gas Exploration

Oil and gas production is expanding. “A lot of these areas are non-traditional areas for there to be supplies of natural gas and crude oil,” noted Alan Barrett, a senior consultant, during the Informa presentation.  As energy companies expand their oil and gas operations, they are also placing new transportation pressures on those communities and their agricultural producers. In the Northeast, for example, the growth in gas and oil production is spurring the construction of new pipelines, new chemical plants, and other facilities, including fertilizer plants. “This is changing the flow of products and how they move throughout the system,” Barrett explained, who said logistics throughout the United States are being affected by these trends.

Fracking Sand

As oil and gas production ramp up, its fracking sand is vying for the same space that grain needs on the rails and rivers. “It takes 4,000 to 5,000 tons of sand per well,” which is typically transported from Minnesota and Wisconsin, according to Eriksen. “The railroads are unable to keep with that volume,” he said, so they’re turning to barges, floating the sand to the Northeast or all the way down the Mississippi to the Eagle Ford fields in Texas. “Those are very long-haul moves,” Eriksen stressed. “Those are essentially starting to move more into your covered hopper fleet, and that’s going to be competition with the grain side of things as we move forward.”

Overloaded System?

The existing barge and river infrastructure may not be up to the demands being placed upon it. While Congress recently approved a barge tax increase that will generate $30 million to $36 million for locks and dams next year, that amount is a fraction of what the 12,000-mile system needs to reliably and effectively move goods by barge. “Our infrastructure is very aged, (with) a lot of deferred maintenance,” Eriksen said. “There are also a lot of construction projects that are underway and have been woefully underfunded for appropriations.” The same goes for operations and maintenance.  In Illinois alone, the state’s locks and dams need an estimated $600 million in deferred maintenance, according to Eriksen. The price tag for construction and major rehabilitation is even more pricey; he estimated that could require as much as $18 billion to finish those projects across the system.

What’s the status of the locks and dams in your area? Let us know on the AgWeb discussion boards.