Is the USDA relying on faulty data to support DM&E?

Karla Johnson from Rochester writes:

This is a letter that Rochester PB [Post-Bulletin] refused to publish this week — "we get too many anti-dme letters." I spent a lot of time on this issue in '99, plus a little recent research, and this is what I found:

September 6, 2006

The DM&E Railroad’s lobbying front GOTRAC and the Farm Bureau, in their speeches and interviews, used the USDA “letter of support” for DM&E as their central point to link the DM&E coal project to an increase in agriculture prices. Indeed, on page four of the 1998 letter it does state “...some estimates suggest increases as high as 20 cents per bushel for both corn and wheat.”

In April 1999, I called the author of the USDA “letter of support”, William Brennan, in Washington, DC. I asked him about the estimate. He said he didn’t know much because DM&E gave him the estimate with no documentation. Two weeks later I called again. This time Mr. Brennan claimed ranchers in South Dakota gave him the estimate, again with no documentation.

[...]

There were other problems with the USDA “letter of support”. It claimed the 20 cents increase was due to “the ability to ship to three major markets (river, processors, and Pacific Northwest).” DM&E is denying increased barge shipments. The DM&E proposed expansion only goes to eastern Wyoming, not the Pacific Northwest. As far as the processors go, in a Star Tribune article, March 2003, J. Powell wrote, “on average about 125 trucks go in and out of most (ethanol) plants daily.” Ethanol refineries are located in farm country so the corn can be easily trucked in. As farms become larger, more have semi-trucks.

The market for the processors is more interesting. Today Minnesota uses one half to two thirds of the ethanol it produces. Trucks are typically the choice for hauls less than 200-300 miles. The USDA’s 2002 Ethanol Cost of Production Survey said the average truck with ethanol went 93 miles, while the train with ethanol went 1163 miles. The preferred long distance market for ethanol is California and for the ethanol byproduct, the Southwest. While DM&E plans an expansion into Wyoming, the Minnesota lines of the BNSF and UP Railroads go to the Pacific Northwest and Southwest.

Increasing agriculture prices is desirable, but it needs to be weighed against the costs involved. The STB typically mandates railroads to pay only 20 cents on the dollar for the cost of upgrades; this covers closing the crossings, the safest option. When Wichita had an increase of five trains per day due to a rail merger, the state of Kansas paid 50 million, or 50% of the cost, and the federal government paid 24 million, for the required grade separations. The city of Reno paid for a majority of its $282 million railroad trench through various local tax increases: sales, hotel, property, and business. In February '99, DM&E engineers told MN DNR that they were planning for 75 million tons of coal, or 27 trains, to come through southeast MN to Winona. If the number has changed, DM&E should contractually agree to the lower number so cities can plan ahead.

Is it in the best financial interest of the state of Minnesota to spend what may end up being hundreds of millions of dollars on mitigation when the benefits to the state are questionable? Will DM&E even ship agriculture products? DM&E showed no increase in non-coal traffic in its’ initial federal application when they charted type and number of trains per day as coal shipments increases. Neither do railroads need to haul coal to upgrade; besides the RRIF loans, dozens of railroads have recently upgraded their line with the federal Section 45G tax credit program. The state also has many options when it comes to spending money to expand agriculture marketing. Mower County, MN, lost the Absolute Energy Ethanol plant that is under construction in Mitchell County, Iowa, because Minnesota didn’t have “Enterprise Zone Tax Credits” according to a Mower County Supervisor in the Mitchell County Press-News. With all the ethanol plants soon coming on line, expanded grants for gas stations to install E85 pumps and for Minnesota tax rebates for purchasers of E85 FFV vehicles would also be worth looking into. Minnesotans should take a hard look at whether coal trains are the most efficient way, the biggest bang for the dollar, to improve agriculture prices.

Karla Johnson