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Agriculture relies on affordable energy to stay competitive. The cost of crude oil and natural gas directly impacts farmers’ ability to maintain a healthy bottom line, driving the costs of necessary expenditures like diesel fuel, irrigation, fertilizer, lubricants and more.

In the past five years, crude oil production in the U.S. has skyrocketed, bringing a surge of economic activity. Our country will surpass Saudi Arabia and Russia as the world’s most prolific producer of fossil energy in 2015. For the first time in decades, the once vaporous concept of American “energy independence” is within reach.

The boom has been good news for farmers, helping to keep energy prices and operating costs under control. But it has also brought some growing pains — especially in the Midwest — due in large part to the strain that greater production has placed on the region’s freight transportation infrastructure. The increase in crude oil trains has reduced the freight capacity available to transport grain and other commodities. Without action, the future of shipping agricultural goods will be defined by delays, price spikes and uncertainty.

I recently partnered with the American Farm Bureau Federation to attempt to quantify the financial impact of regional transportation strain on farmers in the Midwest. We found that the surge in crude oil traffic — combined with other factors — caused millions of dollars of losses to farmers, elevators and end users. The Agriculture Department confirms that $570 million were lost from Upper Midwest farmers’ profits during the 2014 harvest season alone. In North Dakota, the insufficient freight environment could be expected to reduce the average corn farmer’s income by $10,000 relative to a “normal” year.

Grain producers are uniquely dependent on efficient rail systems, especially in crude oil traffic “hot spots.” The nature of grain production and use renders the industry inflexible with regard to the freight methods that it must use. Grain farmers simply must have access to efficient rail in order to manage shipping costs, minimize delay and get their products to market in an economically competitive manner.

Fortunately, a clear path forward does exist.

Modern pipelines servicing the Bakken region can help provide a solution by channeling hundreds of thousands of barrels of crude oil per day off of the rails and roadways.

The merits of expanding our pipeline infrastructure are many. Pipelines significantly reduce transportation costs, are more efficient, and are impervious to weather or traffic related delays. If other industries were physically able to send their products through a pipeline, they would be delighted to do so.

Comprehensive improvements to the freight network in the Upper Midwest are needed. Rail carriers have responded well to the recent breakdown in service, devoting ample resources and energy to improving capacity and reducing delay. But in order to make the most of our newfound energy resources without compromising the competitiveness of our agricultural sector, improved transportation infrastructure devoted to energy is essential. Pipelines are an essential part of that equation.

It is with great interest I’ve been reading the coverage of a recent press conference on the benefits of the Dakota Access Pipeline in this newspaper. The people who oppose the pipeline would have you believe that Iowans would never benefit from using the pipeline as a utility. In fact, one guy from Cherokee County even said, “We’re not building a library or roads that I’ll use, we’re not building anything I’m going to use.”

Nothing could be further from the truth. The fact is, this pipeline would ship a product and serve a purpose that every Iowan relies on. Our state is reliant on crude oil, refined into gasoline, diesel and other petroleum products to drive our agriculture industry. Everything from combines to pickup trucks relies on a steady stream of oil, and we have the choice to either produce that oil right here at home or continue to import it from unstable foreign nations.

We have to have petroleum or carbon-based energy to grow food in the area we live in, which is the largest breadbasket in the world between the Appalachians and the Rocky Mountains.

Our agricultural products represent a homegrown safety net providing for hundreds of millions of people all over the world. Today, those agricultural products rely on our rail system, which has been commandeered by our oil and gas needs.

The dollars and cents that go into shipping those agricultural products by truck decreases the value to every farmer and rancher and agricultural enterprise in this area. So, when we look at rail in relationship to a pipeline, in my estimation, pipelines are the best way to move crude oil and the best way to keep the freight system efficiently moving agricultural products.

We have another alternative. DAPL will help alleviate transportation strains in the U.S. and facilitate safer, more efficient shipment of crude oil. The 1,100-mile pipeline will traverse four states and run adjacent to existing pipelines, power lines and roads. It will have the capacity to transport half of Bakken’s current daily crude production — ensuring that the resources we’re producing here at home are able to efficiently make it to market and into our economy.

Additionally, the pipeline, as proposed, will alleviate four to seven unit trains per day, helping ease railcar transportation shortages for agriculture and other products, especially in the upper Midwest. The American Farm Bureau Federation released a paper showing that congestion on our railways cost Midwest farmers hundreds of millions of dollars in 2014 alone; anything we can do to tackle this challenge will make a big impact on our farmers’ bottom lines.

I’m 110 percent in favor of this pipeline. It is the safest, most efficient way to get crude oil to market. The more crude we get to market, the cheaper our products will be on the purchasing end of those petroleum dollars.

So, to say that there is no benefit from this pipeline directly relating to our own uses in Iowa is just plain wrong. We should support this project because all of us rely on the product that it will ship to consumers in Iowa and across the nation.

JASON COPPLE

Business Manager, Operating Engineers Local No. 234

Iowa farmers and our nation’s economic productivity rely on access to essential natural resources like crude oil. For everything from filling the tank of a tractor to America’ strategic interests abroad, safe access to oil is essential to our state’s and country’s continued economic growth and competitiveness.

The Dakota Access Pipeline would help transport crude oil from the Bakken region of North Dakota through Iowa as well as other upper Midwest states. It would be safer and more efficient than using rail cars, which are being used today to carry the load.

Opponents to the project forget Iowa is still an agricultural state, and we rely on petroleum and diesel to run our businesses.

But the recent oil boom in North Dakota also has placed our farmers at a disadvantage. Too many rail cars are allocated for oil transport, leaving farmers high and dry with shipments sitting in elevators and rail yards. The cars we rely on to transport grain are being taken up by Bakken oil.

The Dakota Access Pipeline would allow for farmers to transport commodities with less expense by opening up more rail cars. The pipeline, as proposed, will alleviate four to seven unit trains per day, helping ease railcar transportation shortages for agriculture and other products, especially in the upper Midwest. And this is no small challenge to address; in 2014 alone, Midwest farmers lost $570 million in shipments, according to a American Farm Bureau Federation study.

I strongly believe this pipeline is in the country’s best interest as a whole.

A study released by the American Farm Bureau Federation reveals that expanding pipeline infrastructure would relieve the nation’s overburdened freight rail network. South Dakota Farm Bureau President Scott Vanderwal says by doing that it will help farmers and ranchers get their commodities to market and provide a safer system for transporting oil.

Vanderwal says if pipeline infrastructure can be expanded it will help prevent the recent logjam that led to the backlog of rail cars.

Vanderwal says his group also backs the Keystone XL pipeline project and this study helps support that.

Farm Bureau’s study indicates expansion of pipeline infrastructure will take the burden off of freight, which could increase the annual volume of grain moved by as much as 14-percent.

Hear the audio here:

http://wnax.com/?powerpress_pinw=28998-podcast

An agricultural group is betting pipelines can keep grain flowing in the Upper Midwest.

The American Farm Bureau Federation doesn’t expect farmers to pump lentils through steel pipes, although a recent study commissioned by the nonprofit said “they would be delighted to do so” were it physically possible.

Instead, the study published last week concludes oil pipelines would ease pressure on congested rail networks that corn and soybean shippers now share with milelong trains hauling crude.

Though railroads move more coal and intermodal shipments than crude, “you can’t take them off the rail — you can’t put those into pipelines,” noted Elaine Kub, an independent grain market analyst who assembled the white paper for AFBF. “That’s why the biggest part of relieving rail congestion has to come from the oil.”

Despite increasing nearly 20-fold since 2010, railbound petroleum products account for a fraction of overall U.S. freight traffic. But based on Kub’s findings, crude oil’s relatively tiny stake of rail traffic “is the most problematic for agriculture,” both because of safety concerns and because “oil’s rail routes directly pull resources, like locomotives, personnel, and track capacity, away from grain service.”

In states such as North Dakota, with its booming crude oil production and limited access to waterways, farmers are especially dependent on railroads to move products to market, according to AFBF chief economist Bob Young.

“The surge in rail transportation of crude oil has affected that ability and timing in recent years,” he said last week. “Construction of new pipelines would certainly be a more effective way to move that product to market.”

In statements and in meetings with surface transportation authorities, railroads such as Warren Buffett’s BNSF Railway Co. have denied putting crude oil on the fast track over grains. Executives attributed the slow service through much of last year to icy weather, the record fall 2013 harvest and a recovering economy that boosted demand for freight transport across a range of industries. BNSF is on track to invest a record $6 billion in its domestic track network this year to help relieve the stress, and other railroads have followed suit with their own multibillion-dollar pledges.

Pipelines ‘the most logical solution’

A few refiners complained of poor rail service in late 2014, seemingly backing railroads’ claims that they weren’t giving the oil industry special treatment (EnergyWire, Oct. 30, 2014).

Kub sought to downplay the traffic disputes that left energy and agricultural representatives trading barbs through much of last year (EnergyWire, Sept. 4, 2014).

“It’s not the railroads’ fault, and it’s not the crude oil industry’s fault,” she said of congestion that cost the average North Dakota corn farmer roughly $10,000 in lost profit, according to her study. “It’s just that going forward, taking [oil] off the rails and putting it into pipelines is the most logical solution.”

Pipeline companies have seized on rail problems as a reason to get their projects up and running. Energy Transfer Partners, which is proposing a 450,000-barrel-per-day pipeline to ferry oil from the Bakken Shale play in North Dakota to Patoka, Ill., has said the connection “will reduce the current use of rail and truck transportation to move Bakken crude oil to major U.S. markets.”

“The Dakota Access Pipeline will free up rail capacity for the transportation of crops and other commodities currently held up by crude oil cargos,” Energy Transfer claims.

Efforts to attach dollars to all of the holdups have fallen flat due in part to data limitations. When a North Dakota State University economist slapped a $67 million price tag on farmers’ losses during the first four months of 2014, he faced scrutiny from outside experts and the study containing the estimate was eventually withdrawn (EnergyWire, Sept. 23, 2014).

For her own report, Kub modeled what would happen to grain shipping capacity under different scenarios, such as building out pipelines, improving rail and barge infrastructure, or investing across multiple freight methods. Her study cites data from the U.S. Department of Agriculture suggesting Upper Midwest farmers may have earned $570 million less for their products in 2014, compared to what they would have earned in a season without rail bottlenecks.

“The value of this study is in putting the numbers on the pain and being able to document that expanding freight can be a solution,” Kub said.

The agricultural sector relies heavily on affordable energy — especially petroleum-based energy — to stay competitive. The cost of crude oil and natural gas directly impact a farmer’s ability to maintain a healthy bottom line, driving the price of necessary expenditures like diesel fuel, irrigation, fertilizer and lubricants.

In addition to these direct ties, the agricultural sector — especially in the Upper Midwest — has perhaps an even stronger financial interest in the policies that determine the path forward for our nation’s energy sector: shipping costs.

Over the last half decade, crude oil production in the United States, and especially in the Bakken oil fields, has skyrocketed. The boom brought with it an unmistakable surge of economic activity. North Dakota now boasts the nation’s lowest unemployment rate (not to mention real estate prices that would make a Manhattanite gasp). The nation as a whole will surpass Saudi Arabia and Russia as the world’s most prolific producer of fossil energy resources in 2015. And for the first time in decades, the once vaporous concept of American “energy independence” is within grasp.

But the rapid uptick in production has caused serious growing pains for the regions at or even near the heart of production. Among those growing pains is the simple fact that transportation infrastructure — especially energy pipelines — has not grown or improved with the increase in production. The lack of pipeline infrastructure has forced the region’s energy producers to turn to other avenues to transport their product.

The result for farmers has not been pretty, as the increase in crude oil trains has reduced the freight capacity available to transport grain and other commodities. Without action, the future of ag shipping is uncertain and will be defined by delays, price spikes and poor access to railcars.

I recently partnered with the American Farm Bureau Federation to attempt to quantify the financial impact of regional transportation strain on farmers in the Midwest. We found that the surge in crude oil traffic — combined with other factors that reduced access to rail — caused millions of dollars of losses to farmers, elevators and end users. The United States Department of Agriculture confirms that $570 million were lost just from Upper Midwest farmers’ profits during the 2014 harvest season alone. In North Dakota, the insufficient freight environment could be expected to reduce the average farmer’s income by $10,000 just from one crop, relative to what could be expected in a “normal” year.

Grain producers are uniquely dependent on efficient rail systems, especially in the “hot spots” most heavily affected by the increase in crude oil traffic. Due to the nature of grain production and use, the industry is fairly inflexible with regard to the freight methods that it must use. Simply put, grain farmers must have access to efficient rail in order to manage shipping costs, minimize delay and get their products to market in an economically competitive manner.

Therefore, improvements to the regional freight capacity must come from other products. And fortunately for farmers (and for our nation’s energy sector), crude oil is an ideal candidate for such improvement.

Modern pipelines servicing the Bakken region can, if approved in a timely manner, channel hundreds of thousands of barrels of crude oil per day off of the rails and roadways. That’s hundreds of thousands of barrels of crude oil that don’t have to move by rail, and that means hundreds of rail cars freed to move agricultural products and other commodities in a more timely, more affordable manner.

As noted in our study, crude oil is one of the only commodities capable of being moved by this cheaper, safer form of transportation, and pipelines are the one form of transportation that is best suited to expansion in the U.S. without crowding already overstressed rail terminals and highways.

There are many reasons to expand our pipeline infrastructure. As a freight alternative, pipelines are cheaper and more efficient than above-ground freight methods, because they have no weather-related delays, or congestion caused by multiple categories of commodities all trying to crowd through one route. If grain shippers or lumber shippers or scrap metal shippers were physically able to send their products through a pipeline, they would be delighted to do so.

Comprehensive improvements to the freight network in the Upper Midwest are needed. And indeed, rail carriers have responded well to the recent breakdown in service, devoting ample resources and energy to improving capacity and reducing delay. But in order to make the most of our newfound energy resources without compromising the competitiveness of the economically and culturally vital agricultural sector, transportation infrastructure devoted to energy is essential.

The former president of the Iowa Farm Bureau is now backing the controversial Bakken crude oil pipeline that’s proposed to pass through 18 Iowa counties. Ed Wiederstein of Audubon is chairman of a group called MAIN, or the Midwest Alliance for Infrastructure Now.

Wiederstein says the pipeline project would bring several direct benefits to Iowa. “There’s going to be quite a bit of employment for a while with the construction of the project,” Wiederstein says. “There’s going to be a lot of sales tax paid, a lot of property tax that will be ongoing for however long the pipeline will be in use. That’s going to be significant for those counties that it goes through.”

The proposed pipeline would cut diagonally across Iowa from the northwest to the southeast, carrying crude from oil fields in the Dakotas to Illinois. While a long list of environmental groups oppose the project, Wiederstein says the pipeline offers a safer, smoother way of transporting oil than most other methods.

“The safety and the efficiency of moving oil through a pipeline compared to a highway or a rail structure,” he says, “even though there’s enough oil being pumped up there that the pipeline will never be able to handle the whole thing, so rail is still going to be an important part of it.”

Wiederstein says the so-called Dakota Access pipeline will be built with state-of-the-art materials and will use the latest technology to avoid any environmental problems. “There’s nothing that’s fool-proof and to say there’s never going to be any kind of an accident or anything like that, nobody can say that,” Wiederstein says. “It’s a matter of risk. When you compare it to other forms of transportation, it’s pretty low risk.” Public hearings will be held late this year to determine whether the pipeline will move forward.

At least 20 different groups have joined forces in Iowa to block the pipeline project, calling themselves the Bakken Pipeline Resistance Coalition. Member groups in the coalition include: the Iowa Audubon Society, Iowa Citizens for Community Improvement, Iowa Climate Advocates, Iowa Farmers Union, 1,000 Friends of Iowa, the Iowa Renewable Energy Association and the Iowa chapter of the Sierra Club.

Expanding America’s pipeline infrastructure would relieve the nation’s overburdened freight rail network and improve service for farmers nationwide, according to a new study from the American Farm Bureau Federation.

The booming energy business in the Upper Midwest spiked rail congestion and freight costs for farmers in the region and cut their profits by $570 million during the 2014 harvest. The AFBF study found that the average North Dakota corn farmer may have received $10,000 less than the traditional market rate for the crop. Increasing U.S. pipeline capacity – particularly in the Bakken region – is a prime solution for adding freight system capacity overall and relieving rail congestion, according to AFBF.

“American farmers depend upon rail freight to move their products to market. The surge in rail transportation of crude oil has affected that ability and timing in recent years,” AFBF Chief Economist Bob Young said. “Construction of new pipelines would certainly be a more effective way to move that product to market. It would take crude oil off the rails and, in doing so, improve the overall efficiency of the transportation system. Improved pipeline infrastructure will also help enhance American energy security for everyone.”

Study author Elaine Kub said farmers face challenges in getting their goods to market that others do not.

“Due to the nature of grain production and use, the industry is fairly inflexible about which freight methods it can use, so any time one of those methods is unavailable, crops are lost or cost more to transport,” she said. “This leads to more expensive food for families and less profitable incomes for farmers. Crude oil, however, can be more efficiently and affordably shipped through pipelines, and can be done without crowding already overstressed railways.”

The AFBF study also featured mathematically simulated scenarios showing how expansion of any freight method – truck, rail, barge, or pipeline – can reduce overall congestion and, in certain scenarios, could increase the annual volume of grain moved by as much as 14 percent.

To read the study, click here.

About Elaine Kub
Elaine Kub is the author of Mastering the Grain Markets: How Profits Are Really Made – a 360-degree look at all aspects of grain trading, which draws on her experiences as a futures broker, market analyst, grain merchandiser, and farmer. She grew up on a family farm in South Dakota and holds an engineering degree and an MBA.