Introduction

Throughout agricultural history North Dakota has been known for supplying high quality raw agricultural commodities. Throughout the agricultural history of the area, and more recently on a larger scale, economic forces have encouraged North Dakota producers to add value to their commodities either through processing or producing a commodity to fit the specifications of a customer.

The challenge facing value-added and identity-preserved producers is distance to markets. Producers and suppliers in the region must transport products long distances and most have few options. In today's competitive business environment, getting the product to the right place when the customer needs it is increasingly important. Producers must deliver high quality product at a competitive price when the competition often is located closer to the source of final demand.

Value-added agriculture has been an economic development tool used to diversify the economic base of rural communities. One of the greatest challenges communities face is limited transportation options. The primary means for freight transportation in the rural regions is truck and rail. Many small companies do not produce quantities sufficient to ship in full truckload or unit trains, nor do their customers demand these large quantities.

Rural agricultural communities' inbound procurement and outbound distribution options are limited to local trucking companies and rail. Few communities generate enough truck traffic through existing businesses to offer evidence of excess or available truck capacity. Where rail is available, Class I carriers are reluctant to make short, less-than unit train movements, and offer limited options for products other than grain originating or terminating in rural areas.

North Dakota's rail service is made up of two Class 1 railroads, a regional railroad and two short lines. The ideal intermodal freight for Class 1 railroads is a large unit train loaded at one facility and shipped to another and off loaded. This provides the most economical and profitable scenario for Class 1 railroads. Smaller less than trainload traffic generated is viewed by the Class1 railroad as a train of way and the rate charged is more and service is less than that of a designated train.

The purpose of container on flat car (COFC) or trailer on flat car (TOFC) intermodal shipping is to take advantage of the economics of each different mode used. Intermodal provides for truck trailer and container convenience while taking advantage of the lower costs provided by rail shipping.

Currently in North Dakota there is no intermodal facility. Shippers desiring intermodal shipping either have to use all truck, or dray the container or trailer to an intermodal facility. Depending on distance, this may provide a distinct disadvantage for North Dakota shippers. The closest existing intermodal facilities are located in Dilworth, MN.; Minneapolis/St. Paul, MN.; and Billings, MT. Possibilities for siting intermodal facilities on short lines in rural areas may provide rural communities with an opportunity to diversify their infrastructure, transportation rates, and transportation equipment resource base for attracting and growing value-added ventures. Cooperation from Class I railroads and the short line carriers systems may provide opportunities for an intermodal shipping alternative to rural areas of the state.

Intermodal facilities usually are operated by a third party and the railroads serve only as the transportation provider. At present, large intermodal freight volumes are necessary for an economically viable facility. An intermodal facility can range from a simple and relatively inexpensive loading facility using circus ramps, to a sophisticated high cost operation involving gantry or overhead cranes allowing for fast train loading and offloading. The cost of the facility is in direct proportion to the equipment needed, trackage, amount of land, and labor associated with the size and volume of the facility. Another advantage to intermodal is removing some truck traffic from the state highway system. Increased truck traffic may impact the road system to and from the facility, but overall impact on state highways may be lessened.

Objective

The main objective of this project was to evaluate the current truck/rail container intermodal transportation system in North Dakota. This included traffic, rates, and service and facilities. The secondary objective was to determine costs associated with start-up and operating an intermodal facility.

Methodology

This report describes truck/rail intermodal, short line railroads, motor carriers, and the Class I railroads. A survey of shippers was performed to determine the intermodal traffic in the state. Analysis of the Commodity Flow Survey (CFS) also was performed, along with an examination of BNSF's rates out of North Dakota. Cost comparisons were made among modes to determine least cost mode.

Implications

Container intermodal shipping is not an option for many businesses in North Dakota. Many shippers may not know the total landed cost. Landed costs include all logistics costs including transportation to the final customer. This cost may be complicated with multi-modal and or international shipments. There are markets for many North Dakota products, but many times transportation options and costs are the barrier. Intermodal shipping should reduce shipping costs and provide opportunity for competition in domestic and international markets.

Without competitive truck/rail container intermodal service North Dakota shippers remain at a logistical disadvantage. Many industries are affected by lack of intermodal service including: agricultural processors; manufacturers; identity-preserved commodity producers; building suppliers; and retailers, negatively impacting the entire state economy through higher shipping costs.

Container truck/rail intermodal implications to the North Dakota trucking industry would be evident in the case of a modal shift. Diverting freight volume away from truck to rail may be advantageous to shippers, but may be negative to the trucking industry. Where the rail system seems reluctant to accept low volume freight it may be the backbone of many trucking firms.

Report Organization

This report is organized into four sections. The first section is the introduction and background and the next section is the literature review. The report discusses short line railroads, Class I railroads, truck/rail container intermodal, shipping methods or procedures. A shipper survey also is discussed and analyzed. Shipping modes and costs are compared, and finally the conclusions of the report finding.