Small railroads see big ethanol future

The Twin Cities and Western Railroad runs from the metro area across southern Minnesota to the eastern fringe of South Dakota. It's small: roughly 200 miles of track. It's tiny compared to the thousands of miles of lines operated by the big railroad companies.

Chief operating officer Mark Wegner says his trains carry mainly corn and soybeans. But ethanol is gaining importance.

"It has gotten everybody's attention and it is seen as a huge opportunity," says Wegner.

Besides the Twin Cities and Western, Wegner also helps manages a second company, the 94 mile long Minnesota Prairie Line. He says ethanol accounts for almost a quarter of the business on the two railroads. An ethanol plant in Granite Falls is one customer.

"Granite Falls, which opened in December of 2005, we do a good program of bringing corn into it as well as bringing ethanol and DDG's out," says Wegner.

DDG stands for distillers dried grain, an ethanol by-product used for livestock feed.

Wegner says the company had a bumpy entry into the ethanol business.

"It has gotten everybody's attention and it is seen as a huge opportunity."

Initially ethanol hurt more than it helped. It cost the railroad corn shipments. Farmers began trucking grain to local ethanol plants instead of sending it hundreds or even thousands of miles by rail to ocean ports.

And too often when the ethanol plant did call the railroad, there were problems. Wegner remembers the headaches one shipment of distillers dried grain caused when it reached its final destination.

"They couldn't get the product out of the car, it had set up like concrete," says Wegner. "And when we got the cars back they looked like they were in a hailstorm due to the sledgehammers applied to the cars to get the product out."

Another time a carload caught fire, spontaneously combusting like green hay in a barn loft.

Despite the early problems Wegner persisted. He saw the ethanol industry and shortline railroads as natural partners. The shortlines handle the small town business too tiny to interest the big cross country carriers.

Some of the small towns have ethanol plants. One example is the community of Winthrop. Wegner sends trains on the Minnesota Prairie Line to the Heartland Corn Products plant in Winthrop. Heartland CEO Ben Brown says it's a historic moment. He says trains have helped the country's midsection change a century old energy equation.

"The midwest typically has been a consumer and user of fuel, we are now becoming an exporter of fuel," says Brown.

Brown says the ethanol exported from Minnesota goes mainly to the east or west coasts. Heartland's production travels first from Winthrop to the Twin Cities. Brown says there it's transferred to a trans-continental carrier for final delivery.

"We have no pipelines that go there, from the midwest to the coast," says Brown. "So what the industry is looking at is rail and I think in the future we'll look more at water. But in the short-term rail is probably the quickest fix to get there."

Brown says the rail link was an important factor in a recent decision by Heartland officials to more than double ethanol production. He says the expanded production means the plant will have enough ethanol to fill what are known as unit trains. These trains can be up to one hundred cars long. A train that long can transport about three million gallons of ethanol, roughly two weeks production.

"What we surmised was that in order to move our product to market efficiently we needed to be able to do that with unit trains in the foreseeable future," says Brown. "And if you don't have a large enough plant to load unit trains you're not going to get unit trains."

And those unit trains will start their journey from Winthrop on a shortline railroad. Twin Cities and Western manager Mark Wegner says employees nicknamed that section of rails the Phoenix line, after the mythical bird. Given up for dead, ethanol has resurrected the tracks.

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