Washington Insider - Friday

Growing Pressure on Transportation Infrastructure

Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.

More Fallout from Russian Ban on Food Imports

With exports of its fruit and vegetables to Russia banned by a Russian decree, Poland is suggesting that the United States would make a good alternative destination.

On Wednesday, Poland's economy minister (and deputy prime minister), Janusz Piechocinski, called on USDA authorities to certify selected Polish food producers, which would allow them to avoid long phytosanitary controls and reduce surpluses quickly.

USDA told Bloomberg News that it currently accepts imports of more than 30 types of Polish fruit and vegetables, and that it is reviewing a request from the Polish ambassador to ease restrictions on apple imports. Whether imports of more fruit from Poland will cause economic repercussions in this country remains to be seen. But the ripples that were set off by Russia's decision to involve itself in Crimea and Ukraine continue to reverberate, with no end in sight.

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Commerce Grants Petitioners' Request to Extend Sugar Dumping Deadline Ruling

At the request of the petitioners, the deadline for a preliminary dumping determination on sugar imports from Mexico has been extended from Sept. 4 to Oct. 24, the Department of Commerce said yesterday.

The department is investigating dumping and countervailing duty petitions on sugar imports from Mexico filed by the American Sugar Coalition and its individual members. The petitioners asked for the extension, citing the "complexity of this investigation" and the respondents' questionnaire responses. Among other things, says the coalition, is that questions remain regarding the possible affiliation of several sugar mills. This is a key component in the investigation inasmuch as the petitioners have charged that a number of mills are operated by the government of Mexico.

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Earlier press reports noted that U.S. sugar producer interests were in close negotiations with their counterparts in Mexico in an attempt to resolve the ongoing cross-border dispute regarding trade in sugar and high fructose corn syrup. This has led some to speculate that another reason the petitioners requested an extension of the investigation is to give the negotiators more time to find a solution on their own.

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Washington Insider: Growing Pressure on Transportation Infrastructure

One of the little known aspects of the surge in U.S. energy production is the increasing need to move enormous amounts of petroleum and other energy products long distances across the country. The increase in traffic is exerting growing pressures on the aging and creaky systems, especially rail, but others as well. Just now, producers are fretting at the slow pace of moving last year's crop to market as another bin-buster is maturing in the fields. Observers suggest this may be just a hint of things to come.

One particular problem now in the press cross-hairs is the danger oil shipments pose for urban areas. In response to recent incidents, the administration recently ordered railroads to start providing information to state emergency officials about their shipments of crude so local facilities could be alerted.

To no one's surprise, the railroads did not welcome that additional scrutiny and quickly moved to press states to implement nondisclosure agreements to prevent details on movements of oil from falling into the hands of terrorists. Some states agreed to sign the documents, including Arkansas, Kansas and Louisiana, but many others did not, including Washington, California and Wisconsin. The reason given was state "sunshine" laws that prohibit them from keeping public data secret. So, the press is attempting to provide estimates of movement from private as well as public sources.

Some things we already knew, these stories suggest. Almost all the crude oil trains originate in North Dakota and much of that oil goes east to refiners in the Mid-Atlantic region which have become dependent on cheaper U.S. crude rather than higher priced imports.

One environmental group, Forest Ethics, attempted to figure out how many people are in the "blast zone" calculated for potential oil train explosions. The group's guess is some 25 million.

This week, Genscape, an oil surveillance business that collects intelligence on oil movements, released a white paper detailing the volumes of crude being hauled through some of the most crowded corridors, especially the movement east and west from North Dakota.

The company tracks oil trains through 32 of North Dakota's 53 counties each week on selected railroads. For example, CSX runs as many as 45 trains a week through Cass County, in the southeastern part of the state.

In addition, 18 terminals load crude onto trains in North Dakota, and Genscape calculates that 522,383 barrels of oil were loaded each day on North Dakota trains during the third week of July — a reduction from the nearly 600,000 bpd that loaded there last January.

The study also tracks oil leaving North Dakota for Albany where trains are diverted south down the east coast. CSX, for example moves two to five trains of North Dakota crude weekly through 20 counties in Virginia with most destined for Yorktown, where an old refinery was recently restarted. In early June, Genscape calculates that 61,643 barrels of oil were unloaded daily at the Yorktown facility.

The picture is less clear on the West Coast, Genscape says, where moving crude by rail has faced more resistance from local and state governments. Washington State is seen as the main destination for westbound North Dakota crude and BNSF typically sends about a dozen oil trains a week through 16 counties in the state, Genscape estimates. Some of that finds its way south to California, where BNSF typically sends a train a week through nine counties, starting in the northwestern part of the state and often ending up in Contra Costa County, on the east side of San Francisco Bay, where pipeline giant Kinder Morgan owns a loading facility.

There are several lessons to be learned from this recent snapshot of crude oil movements — the first being that no one really knows how much oil is being moved around the country, let along the safety implications of this for the hundreds of communities affected.

The second implication is the huge and growing competition this new movement holds for agriculture and agribusiness which depends heavily on efficient movement of ag products and inputs to keep U.S. products competitive — and which is finding that task increasingly difficult as oil bids resources away.

The third lesson is that much of the transportation system, including rail, highways and waterways is already in bad shape from neglect as private and public budgets have tightened. So while a larger, more efficient energy system is good news for producers, it also increases the need for attention to essential investments in infrastructure — which now seem to be steadily falling behind as the need grows, Washington Insider believes.


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