Pilot fears rail crisis will cut US DEF, biofuel supply

Refined products retailer Pilot Travel Centers fears a move to cut rail traffic by western US railroad Union Pacific (UP) will drive a shortage of diesel exhaust fluid (DEF) and ethanol in the US.

UP this month ordered Pilot to cut rail shipments by 50pc or face embargoes on shipments of DEF — an important solution used to cut NOx emissions from diesel engines without hurting fuel efficiency — as well as ethanol, biodiesel and renewable diesel, Pilot chief executive Shameek Konar told the US Surface Transportation Board (STB) yesterday .

UP's "restrictions will prevent Pilot from keeping many markets adequately supplied with DEF, likely causing shortages that will sideline trucks and reduce trucking capacity," Konar said on the second of STB's two-day hearing on the rail service crisis.

Pilot has not cut volumes so far but UP also hasn't implemented an embargo. But Konar said he worries about the effect on Pilot and the trucking industry.

UP this month told some of its largest shippers that it will start limiting their rail volume if the carrier is unable to clear railcar congestion from its system.

UP told Pilot one day this month it had shipped about 160 cars during the prior week and wanted the shipper to reduce that by about 46 cars/week, or 6 cars/day.

"We have not reduced the cars because we would be in deep trouble," he said, adding that UP has not responded. Each railcar of DEF translates to about 5mn miles of trucking.

"If you lose 100mn USG of DEF, it would be absolutely catastrophic because we do not just supply ourselves," Konar said. He estimated the cuts would equate to removing 10pc of the trucks on the road today.

Pilot estimates it supplies 30pc of the DEF in the US. The company provides more than 300mn USG of DEF to the trucking industry annually, with about 74pc of that shipped by rail. Pilot also provides roughly 20pc of the nation's highway diesel, renewable diesel and biodiesel.

Cutting Pilot's renewable diesel volume, with about 50pc being shipped by rail, would increase fuel prices in certain states and potentially dry up supply, he said.

Cutting ethanol shipments from Pilot's plant in Nebraska to Arizona, Nevada and a few other regions is also expected to remove the amount of ethanol available to blend with gasoline, potentially raising prices.

By Abby Caplan