Transport a Problem for Ethanol Producers

Washington DC February 1, 2007; The AIADA newsletter reported that Ethanol producers are straining America's railroad system in an effort to get the increasingly popular bio-fuel from the Midwest towns where it is produced to the cities where consumers demand it.

Producers worry that slow transport could make it difficult for ethanol, despite its supporters in Washington, to compete with energy rivals.

Ethanol must be transported by rail, because unlike fossil fuels ethanol attracts chemicals, making it unsuitable for pipe-lines. As a result, the ethanol industry has been forced to employ already overburdened railroads.

"It's supply and demand," Walt Wendland, president and CEO of Golden Grain Energy LLC told the Wall Street Journal. "We're a captive market for them."

Railroad executives say ethanol could be a real growth opportunity. Shipments of ethanol have nearly tripled since 2001 to about 106,000 rail carloads last year and are projected to increase to at least 140,000 in 2007.

However, some railroads question the durability of the ethanol boom. Oil prices could drop, corn supplies could dwindle, and alternatives could crop up. "We are going to do what it takes to move it," said Dennis Miller, president and CEO of Iowa Interstate Railroad Ltd. in Cedar Rapids, Iowa. "But you just don't bet the farm on something that is volatile and controlled by many different forces."