Monday, October 02, 2006

Gutknecht explains DM&E loan rational – Questions to Ponder

At Monday, October 2nd, Gutknecht-Walz debate, the subject of the DM&E expansion was discussed.

For anyone that is not familiar with DM&E, the stated reason for the legislation is to move coal from Powder Basin Wyoming eastward. Despite the fact that two Class I railroads currently move coal out of the Powder Basin, Senator John Thune – a former employee of DM&E – included funding in the 2005 Transportation Bill to provide billions in federal loans so that DM&E can upgrade track (including through the southern portion of Minnesota.)

At the debate, Gutknecht defended his support for the DM&E loan (which has been denounced by fiscal hawks as inappropriate use of taxpayers monies) – but the logic Gutknecht used was not based on coal, but based on ethanol.

KEYC-TV was there and reported : “Gutknecht not only says he stands behind ethanol production, but, unlike his opponent, he says he also agrees with the Dm & E railroad expansion, saying it's cheaper to loan the money, then to keep up with concrete repairs on the roads. We will be producing about a billion gallons of ethanol within 5 years, here in southern Minnesota if we don't have rail service to move that ethanol it will mean we will have to use 252, 000 trucks to move ethanol that's not safe either.” See the film footage at http://www.keyc.tv/article/view/108187/

Gutknecht has a point that America is increasing its production of ethanol. There are over 100 ethanol facilities currently operating in America … and more planned. Oh sure, Minnesota has existing and planned facilities but so do other states. Iowa has 25 ethanol refineries in production and have three dozen ethanol and bio-diesel projects in various phases of completion. Last month, Missouri Ethanol LLC in Laddonia MO ( about 100 miles NW of St. Louis) began production. It seems as if these facilities are popping up wherever corn can be grown – in towns many of us have never heard of – Portland Indiana, Leipsaic Ohio, just to name two.

So a few questions for Congressman Gutknecht : How large of a rail loan program do you envision to support the logistics for the hundreds of production facilities located throughout America’s countryside? How many ethanol facilities will be serviced by DM&E ? How will ethanol producing facilities in Winnebago, Fairmont, Granite Falls, Little Falls, etc. link up with the DM&E tracks? Why are the taxpayers being used for a program that will largely benefit one company ? U.S. railroads are slated to invest a record $8 billion in capital expenditures this year. How will BN, Norfolk Southern, Union Pacific, etc respond when the government sets up a program that benefits one competitor? Isn’t a railroad a capative mode of transportation (it goes one way and only one train can be on that section of track at a time) but roads can be used by passenger vehicles as well as trucks, so why not invest in better roads?

Gutknecht is correct that rail can be part of the solution, but not to the advantage of one company. Congressman Jim Oberstar has offered a broader solution in H.R. 5965 which was introduced into the House on July 28, 2006 and already has 126 cosponsors. H.R. 5965 is the Railroad Track Modernization Act of 2006 and Transit Rail Accommodation Improvement and Needs Act which would promote Transit Use & Develop a Rail Infrastructure Program that would create a stimulus package of infrastructure investment that upgrades the pipeline for biofuels – the freight rail system – in order to get an affordable and reliable supply of biofuels to market.

Gutknecht has identified a problem, but is trying to justify constituents’ complaints concerning DM&E by aligning it to an entirely different problem.

19 comments:

Anonymous said...

Here's more about ethanol than you ever wanted to know. The main point being if every drop of ethanol and ethanol byproduct made in southern MN was put on a train it would only equal 270 trains of 100 cars each per year. I think Gutknecht is maybe asking for a limousine when taking your minivan to the repair shop is the answer.

Here's the paper trail:
1. MN produces 550 million gallons per year of ethanol, aprox 374 of those in southern MN.
2. To produce 1 million gallons of ethanol you need 468 trucks of corn or 374,532 bushels.
3. 1 million gallons of ethanol equal 125 trucks of ethanol or 33 ethanol rail cars and 103 trucks of DDGS(byproduct) or 39 railcars of DDGS. Railcars ave. 30,000 gallons per car. 1 unit train equals 100 cars.
4. If you put all ethanol and DDGS from ethanol plants in southern MN on rail, you get 26,928 rail cars of ethanol and DDGS. Which equals about 270 unit trains a year.

Of course, this is only an excercise because 50% of ethanol produced in MN is used in MN and thus trucked to refinery for mixing. Only a small fraction of DDGS is shipped by rail out of state, likely to the Southwest. So in reality, there are probably only 1/4th of the 270 trains per year out there. If ethanol production doubles in MN we're looking at about 180 trains per year from southern MN.

Other notes:
-Less than 200-300 miles is considered a short distance and better transported by truck than rail.
-Major rail transporter is VeraSun Energy in South Dakota who sends about 100 trains of ethanol/year on DME/ICE lines to Chicago. If they're doing it now, how much more do they need to upgrade lines?
-Sources:Kansas Ethanol Plant Feasibility Study, MN Dept. of Ag., RFA 2006,

Anonymous said...

Can't believe I missed these two points on dme/ethanol in my first comment:
1. Best ethanol market is California. DME doesn't go there, but UP and BNSF go to west coast.
2. Ultimate solution for all this ethanol is more E85 pumps and Flexible Fuel Vehicles so we don't have to export from MN.

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