(The following article by Marv Balousek was posted on the Wisconsin State Journal website on May 12.)
MADISON, Wisc. — When Jim Sutter and Warren Loofboro started Bullseye Ag Service four years ago on Highway N near Edgerton, they waited a year for construction of a rail spur before receiving shipments of fertilizer and other agricultural products that they sell to farmers.
Sutter said they chose the site in southeastern Dane County specifically for its access to a Wisconsin and Southern Railroad line.
Freight rail is in the midst of a national resurgence and Wisconsin is in the thick of it. Ethanol from the state is shipped to both coasts especially now that it’s replacing another gasoline additive. Canadian wheat comes from Alberta to make pizza flour in Kenosha or beer in Milwaukee.
Container cars of Chinese and Japanese goods like television sets and furniture come through Wisconsin headed for the East Coast from the busy port of Vancouver, British Columbia, which is upgrading its container capacity from 1.7 million to 5 million by 2010.
But the increase in rail activity has caused problems as the aging system strains to meet more demand. National railroads have angered customers such as Wisconsin’s paper mills and utilities by raising rates and cutting service. More rail traffic has highlighted choke points at certain Wisconsin locations where long delays occur.
“The rates are going up and, in many cases, the service has gotten weaker,” said state Railroad Commissioner Rodney Kruenen. “We’re starting to find that (the national railroads’) thinking is reverting to the 1890s and the public trust is being violated.”
The booming shipping business has boosted railroad profits. Union Pacific, the nation’s largest railroad, reported that its first-quarter 2006 profits doubled to $311 million over the first quarter a year earlier. BNSF Railway reported record first-quarter revenues of $3.37 billion, a 16 percent increase over the same period in 2005.
Like the national railroads, regional railroads also are cashing in on the rail shipping boom, said Ken Lucht of Wisconsin and Southern, which serves Madison and southern Wisconsin.
“We’re attracting new businesses to our rail corridor,” he said. “We’re being approached left and right by these companies.”
Lucht said some companies that stopped shipping by rail over a decade ago now are cleaning up their sidings and using rail again.
“We also are being confronted by capacity and access issues,” he said. “There are places where we have one line and would like to have a double line. We don’t have areas where we can store trains.”
He said there’s a shortage of grain hopper cars and that the railroad’s Janesville roundhouse terminal is getting congested and needs upgrading.
A tight window for trains going to Chicago also sometimes causes problems because Wisconsin and Southern uses commuter tracks to Chicago and is limited to six hours overnight when the commuter trains don’t run, Lucht said.
Some companies, such as paper mills and ethanol producers, are captive customers of the railroads, which means they have no viable shipping alternative. Their supplies or products are too large or it’s not economically feasible to ship them on trucks.
National railroads also don’t often compete with each other for customers because usually only one railroad runs on a line.
“Essentially our companies are paying more for less service,” said Pat Schillinger, president of the Wisconsin Paper Council.
Paper companies recently joined with utilities such as Alliant Energy to form Badger Cure, a coalition of rail consumers. The coalition is lobbying for federal legislation to strip the railroads of their antitrust exemption, which Schillinger said would enhance competition among them.
He said legislation has been introduced by Rep. Mark Green, R-Green Bay, and that U.S. Sen. Herb Kohl, D-Wis., plans to introduce a similar bill.
Regional railroads like Wisconsin and Southern aren’t viewed in the same light as the national railroads, Schillinger said, adding that they attend coalition meetings because some are paying higher rates for the tracks they lease from national railroads.
Stripping railroads of the antitrust exemption won’t do much to improve rates and service because the exemption is very limited, said Tom White of the Association of American Railroads.
He said rate increases have come after a quarter century of declining railroad shipping rates. Between 1980 and 2004, he said, average inflation- adjusted rail shipping rates were down 60 percent and non-adjusted rates were down 24 percent.
Upgrading tracks or buying locomotives is very expensive, he said. The association estimates that the nation’s major freight railroads will invest $8.2 billion this year in new track and equipment.
“We have surging demand and we need to increase our capacity,” White said. “We don’t have a money tree that we can go and shake.”