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Railroad shutdown could be 'disaster' for South Dakota's ag industry, wider economy

Friday, Sept. 16, is the end of a cooling period in negotiations between railroad unions and the nation's major carriers. If no contract is reached by then, a strike halting a key artery of commerce could begin, barring congressional action.

A BNSF worker inspects one of the freight trains at the rail yard in Grand Forks on Thursday, June 8, 2017. Joshua Komer / Forum News Service
A BNSF worker inspects one of the freight trains at the rail yard in Grand Forks on Thursday, June 8, 2017.
Joshua Komer / Forum News Service
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SIOUX FALLS, S.D. — Agricultural producers in South Dakota are closely monitoring negotiations between unions representing railroad workers and some of the nation’s largest railroad companies, which could result in a strike that shuts down key freight lines in the state as early as Friday, Sept. 16.

The Association of American Railroads, whose membership includes the nation’s major private rail carriers, estimates the shutdown would cost the economy $2 billion in lost output each day. BNSF Railroad, one of the firms that would be shut down by a potential strike, operates just under half of the 1,964 miles of track in South Dakota.

“Most of our commodities that get shipped out go to the West Coast on the BNSF,” said Doug Noem, a farmer who represents the South Dakota Corn Growers Association on the national Rail Energy Transportation Advisory Committee . “So first and foremost, what we're going to look at is, holy cow, how are we going to get rid of our grain?”

Railroad Map of South Dakota
A map of railroad track in South Dakota. In green is the BNSF railroad, which operates 900 miles of rail in the state, representing just under half of all track in the state.
Courtesy of South Dakota Department of Transportation

Outside of getting the year’s harvest to market, a rail shutdown would quickly affect the value-added side of production. Tom Kersting, the CEO of the South Dakota Soybean Processors, told Forum News Service the strike would be a "disaster," saying his company’s plant in Volga, a major buyer of soybeans in the eastern part of the state, “may be able to operate but only for a limited time.” The plant relies on the BNSF to move some of its soybean meal and oil.

A stoppage would also make inputs for producers harder to acquire, adding strain to products that had already been difficult to find due to supply shortages in the past year.

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“People struggled this year making sure they got what they needed for crop protection, and a lot of that stuff gets shipped in by rail,” Noem said. “It's just a whole ripple effect. Not only shortages, but I'm sure there'll be price increases too which just puts another burden on rural agriculture.”

This week, the major railroads began halting shipments of ammonia, a major component of chemical fertilizers, writing in a statement that the move is to “ensure that no such cargo is left on an unattended or unsecured train in the event of a work stoppage” as the hazardous material could be dangerous if stranded.

So far, more than half of the 12 major rail unions have agreed to a new contract.

However, two of the holdouts — the Brotherhood of Locomotive Engineers and Trainmen and the International Association of Sheet Metal, Air, Rail and Transportation Workers (SMART) — represent over half of railcar workers. In a joint statement , the two unions called the rail carrier’s negotiation tactics “corporate terrorism,” adding they are “further harming the supply chain in an effort to provoke congressional action.”

Contract negotiations have trudged along for the better part of two years, leading to the creation of a Presidential Emergency Board by executive order in July, an independent body that provided its recommendations for a new contract between the rail unions and carriers on Aug. 18. The release of that report then set off a 30-day cooldown period, during which strikes are prohibited. That period ends on Sept. 16.

The board recommended an immediate wage increase of 14.1%, which would culminate in a 24% increase by 2024, and an additional day of paid leave. A major point of contention between the parties has been policies that rail unions say penalize workers for taking sick leave. After the release of the recommendations, SMART released a statement saying “the recommendations do not go far enough to provide our members with the quality of life that they have earned.”

Rep. Dusty Johnson encouraged the two sides to come to an agreement without government intervention.

"It’s hard to overstate the importance of a functioning rail system for our agriculture producers and manufacturers," Johnson told Forum News Service in a statement. "Even a short-term disruption could cause massive problems in the supply chain. Both sides need to quit posturing, stay at the table, and cut a deal without congressional involvement."

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Still, with the instant impact the strike could have on the nation’s economy, Congress has several options to delay a strike or end negotiations. For example, a proposed joint resolution introduced by Sen. Richard Burr, R-N.C., on Sept. 12 would bind both parties to the recommendations of the emergency board if no agreement is reached by Friday.

It is unclear if Senate Democrats will support the proposal.

“They’ve been working on this for a long time, you’d think they could get this figured out and bring all the sides together,” Noem said.

MORE BY JASON HARWARD
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Jason Harward is a Report for America corps reporter who writes about state politics in South Dakota. Contact him at 605-301-0496 or jharward@forumcomm.com.

Related Topics: AGRICULTURERAILROADS
Jason Harward covers South Dakota news for Forum News Service. Email him at jharward@forumcomm.com.
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