Wednesday, January 16, 2008

Railroad Renaissance

7.6 billion gallons is a large volume to try and distribute throughout the United States. As the ethanol industry continues to grow, allowing product to be efficiently transported will allow prices to come down and more people access to ethanol. In the absence of a dedicated pipeline, ethanol has relied on the railroads to load large 'unit trains' capable of hauling up to 3.25 million gallons of ethanol at a time in the 100-plus rail cars. According to Reuters, nearly 75% of the ethanol plants currently producing ethanol in the United States have the ability to load these large trains at their site. However, very few rail terminals at major hubs (such as in California or Florida) have the ability to unload these massive trains. The benchmark seems to be that for efficient transportation, all 100 cars should be unloaded in approximately 24 hours so that the train can remain active. Years of neglect have resulted in an outdated railroad that has a much smaller capacity than it had even in the 1980's.

Ethanol may be the kick that the railroads need to boost profits and update their services. Since the latest RFS passed the Congress mandating increased use of ethanol, industries such as the rail industry have been able to plan more investments because of the guaranteed increase in ethanol production. Union Pacific's vice president Paul Hammes was quoted by Reuters as saying that they will move to significantly increase the ability of terminals to accept unit trains full of ethanol in the next few years. Hopefully this will allow for a general renewal of the freight-railroad market in the United States and maybe even, with a lot of investment, the ability for railroads to provide better stand-alone passenger rail service that won't be affected by freight cars tying up the lines.

Here is a neat picture of an ethanol unit train entering Kansas City:

Below you will find a link to the original article by Reuters:

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