MONTEVIDEO -- A development now under way in Montevideo could change the way western Minnesota ships its products to overseas markets.
The rail terminal under construction for North Star Rail Intermodal LLC of Edina will bring the advantages of containerized shipping to a rural market served by a short-line rail connection. It's a market that, at least currently, lacks the volume of traffic that would interest a much larger Class I railroad in developing an intermodal container terminal -- intermodal referring to the use of more than one form of transportation to reach the final destination.
"Breakthrough territory'' is how Robert Gale of the Minnesota Department of Transportation's Rail Division describes this extension of intermodal container shipping to a short-line railway. Gale said it's believed the terminal near Montevideo would be the first located on a short-line railroad in the country, and is certainly the first in the state.
It is slated to begin operations in March.
The North Star terminal will be located on the Twin Cities & Western rail line. It will connect to the Canadian Pacific Rail's Shoreham Yard in the Twin Cities, which is also an intermodal container terminal. The connection will give farmers and manufacturers in western Minnesota and eastern South Dakota access to overseas markets through Canadian port connections in Vancouver, British Columbia, and Montreal, Quebec.
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It will provide access to the West Coast at lower freight rates than now offered for bulk shipments, according to William Dankbar, vice president and chief operating officer of North Star. He acknowledges that the company's claims are disputed by rail freight haulers. But he said his company's computations indicate that containerized shipping could reduce bulk shipping costs by as much as $9 a ton for grain. That would represent a difference of 29 cents a bushel on corn, he said.
Dankbar said the terminal's advantage is due to the development of RailRunner technology. The intermodal container terminals now operating in the country all required a large capital investment for the cranes and overhead structures that lift the containers from trucks to rail cars, and vice versa. The RailRunner system instead uses a rail chassis design that eliminates the need to lift the containers.
The technology greatly reduces the capital costs required for a terminal, said Dankbar. The Montevideo terminal represents the first rollout of this technology, he added.
Dankbar said that since the U.S. imports more than it exports, there is an incentive to fill the large numbers of containers that must otherwise be returned empty. Agricultural products can fill the containers, and benefit by it.
Containers make it possible for farmers to ship identity-preserved grains and other products with unique attributes to Asian markets, Dankbar said. There is no need to comingle the product with other grain, as is now the case for bulk shipments.
The economic lifeblood of the Montevideo terminal will be a byproduct of the area's fast growing ethanol industry: dried distillers grains. There are seven ethanol plants operating within a 70- to 80-mile radius of Montevideo.
Dankbar said the terminal will give ethanol plants affordable access to the growing market for dried distillers grains in Asia.
There is growing interest in shipping dried distillers grains by container for other reasons as well. The containers serve to protect the quality of the product. Also, ethanol producers have resisted the "commodization'' of dried distillers grains, said Scott Marquart, economic development director for Montevideo. Containers allow them to continue to segregate their product and market their product for its own attributes.
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The city of Montevideo is assisting the terminal's development by offering 10 of its Job Opportunity Building Zone acres to Sparta Township, where the terminal is located. The Job Opportunity Building Zone is a state program that gives qualifying businesses certain tax breaks until 2015.
The site is the former rail yard for the Milwaukee Railroad. It offers all the space needed for the terminal as well as direct access to U.S. Highway 212 and nearby Minnesota Highway 7 and U.S. Highway 59.
Marquart said the city's interest in this project is easy to understand. It will initially create five to six jobs, as well as the related business that comes with attracting more truck activity to the area.
Marquart predicts the biggest advantages will come later. He sees the potential for many "spinoff'' businesses in the future, especially for area manufacturers. They will enjoy the advantage of affordable and timely access to overseas markets.
Timeliness is essential, according to Dankbar. He said one of the major factors in the decision to open the terminal in Montevideo is the Twin Cities & Western Rail line. He said the company has a reputation for excellent management and reliability in meeting shipping time requirements.
Twin Cities & Western sees the terminal as an opportunity to grow its business. There are growing markets for both dried distillers grains and identity-preserved grains, noted Mark Wegner, executive vice president and chief operation officer of Twin Cities & Western.
The railroad is investing upward of $500,000 on its part to accommodate the terminal, and is budgeting for an extra locomotive and more workers to serve it next year. The railroad expects shipping to increase by about one train a week next year, but to grow in volume to require six train runs a week in just a few years' time.
Dankbar declined to disclose the company's investment in the terminal or its projections for shipping volume. He said the company is already receiving lots of interest by potential shippers.
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Shippers are paying attention, according to Scott Dubbelde, manager of the Hanley Falls Elevator. The cooperative uses the Twin Cities & Western short line to move grain to the Granite Falls Energy ethanol plant, but also has a unit-train loading facility on the BNSF line in Hanley Falls for bulk shipments.
Dubbelde said he believes that the container terminal will find lots of interest from producers of dried distillers grains.
Whether the terminal can compete for bulk freight will remain to be seen, but Dubbelde said shippers are certainly going to consider it. Pointing out that his responsibility is to find the best price for his customers, Dubbelde said: "Our eyes and ears are open.''
