Ethanol production is an important part of Nebraska agriculture. Spring flooding across the state hit agriculture hard, and the state’s ethanol plants were no exception. However, it was more of an indirect impact as significant damage to the state’s railroad infrastructure made it difficult for the plants to move their products.
“With the aftermath of the flooding, I’d say the biggest challenge for our ethanol plants is rail service,” said Troy Bredenkamp, executive director of Renewable Fuels Nebraska. “We had five plants that were knocked offline. A couple of the plants were hit directly by flooding, but most of the impact came from a lack of rail service.”
Megan Grimes, program manager at the Nebraska Ethanol Board, agrees. “The main issue facing our ethanol plants is rail service that was knocked out by the flooding,” she said. “Ethanol plants have to send their product out to customers, and 24 of our 25 ethanol plants use railroads. Several ethanol plants had to reduce their capacity while the railroads were being repaired.”
A large portion of Nebraska’s railroad infrastructure was hit hard by flooding; to repair and rebuilt takes time. Plants that could do so continued to produce ethanol, but the damage had an impact on overall production numbers. Without rail service, the plants eventually ran out of places to put their product.
“If you don’t have rail service, you can’t keep working if there’s nowhere else to put it,” Bredenkamp said. “That’s what we’ve seen over the past 2-3 weeks. Some of the plants that had their rail service restored are coming back online, which is great. It’s still a work in progress when it comes to United Pacific and Burlington Northern, the two main carriers in Nebraska.”
A number of ethanol plants turned to trucking when railroad service wasn’t available, but Grimes said that’s just not as efficient as rail service. “It’s expensive and you can’t move nearly as much product,” she said. “In most cases, if plants got full of ethanol and they couldn’t move it, they had to shut down.”
Bredenkamp said Union Pacific and Burlington Northern Santa Fe are working “as fast as they can,” but also says it takes time to fix that much damage.”
Every day, things are getting closer to normal, including shipments resuming to the coasts. What Bredenkamp is not happy with is ethanol being used as a scapegoat for the rise in gasoline prices.
“I’ve seen several articles in California that say, ‘we have $4 gas because of the flooding in Nebraska and a lack of ethanol,’” he said. “I would argue that ethanol futures are dropping by the day as production comes back online, so we’re almost down to break-even again. We’re sitting on more ethanol than we know what to do with.
“I’ve been told there’s about a 50-cent bump per gallon of ethanol to get that out to California,” Bredenkamp added. “When you put that over an E10 blend perspective, that’s five cents a gallon. I’m thinking that’s not the cause of $4 gas in California.”
Things are slowly returning to normal but challenges remain.
“Railroads are still warning ethanol plants of rerouting and extended shipping time through certain areas because they’re focused on moving traffic that’s been staged for an extended period due to service outages,” Grimes said. “I would say this week, we’re getting back on track with rail service and some plants are running at full capacity again.”
Some plants are still recovering from direct flooding. “I know the ADM Plant in Columbus had direct flooding of its rail loop and they’re having to replace the axles on a couple of unit trains, about 250 cars impacted,” Bredenkamp said. “Getting rail service back is huge, now it’s a matter of locating cars and getting them in position. There was a lot of congestion because things got backed up.
“It’s actually not just ethanol,” he added. “I’ve heard things like coal trains suffered some backup as well. Ethanol plants that were able to keep running wound up with storage that was stuffed to the gills. We had several plants without rail service that were trucking product to other plants that still had their rail service. You can only do that so long before it doesn’t make sense economically to keep doing that.
“If they aren’t already there, I think the railroad is close to being back on a regular schedule,” Bredenkamp added.
Chad Smith can be reached at firstname.lastname@example.org.