WASHINGTON – The ethanol and railroad industries are battling over bottlenecks plaguing the country’s freight network that have sent prices for the corn-based fuel soaring.

Bob Dinneen, president of the Renewable Fuels Association, said in a letter to the head of the Association of American Railroads this week that the “sheer chaos that is today’s rail system” is driving up the price of ethanol, forcing consumers to pay more for the fuel. The shipping delays also have affected ethanol producers who have curtailed output because they can’t ship the product quickly enough.

“The ethanol industry is dealing with a public perception problem at the hands of the rail industry, which failed miserably to prepare for increased demands on the system and inclement winter weather,” Dinneen said. “While rail-reliant industries are accustomed to temporary weather-induced interruptions in service, winter weather alone is not a legitimate excuse for the protracted fiasco the rail system finds itself in today.”

Dinneen said a more likely explanation was the surge in crude production in North Dakota’s Bakken oil field that has reshuffled the existing fleet of rail cars and locomotives, pressured lease rates, changed normal rail traffic patterns, and “exerted significant stress on the rail system.”

The rail industry said movement of rail cars and engines has been slowed by a host of factors: a plentiful agricultural harvest last year, higher coal volumes and the long, cold winter that has reduced the size and speed of the trains that operate. The bottleneck has left ethanol shippers waiting for cars — boosting prices in far-flung areas where the fuel is shipped.

Iowa is the country’s largest ethanol producer with 42 refineries capable of producing over 3.8 billion gallons annually.

The Energy Department’s statistical arm said Thursday the price premium of ethanol in New York compared with Chicago, close to where the fuel is produced, widened to $1 per gallon early last month from 25 cents in January.

“Logistical constraints in and around ethanol production centers in the Midwest, mainly involving railroads on which approximately 70 percent of ethanol is shipped, appear to be a key factor driving recent prices,” the agency said.

Ethanol for May delivery was about $1.80 a gallon in the beginning of February before spiking to close to $3 earlier this week on the Chicago Board of Trade, its highest level in eight years. Prices retreated to $2.40 a gallon Friday.

The trade group representing the rail industry said it is working to restore service to levels that its customers expect, but objected to the criticism being levied by the ethanol industry.

“RFA’s claim that the rail system today is in ‘sheer chaos’ is preposterous and unhelpful,” said Ed Hamberger, president of the Association of American Railroads. “There have been recent rail service challenges in certain parts of the country, and railroads are working around the clock to mitigate them.”

Hamberger noted that despite regional service issues, railroads hauled about 39,000 more carloads and nearly 93,000 more containers and trailers in March compared with the same month a year ago.

The Surface Transportation Board, a regulatory body charged with overseeing the rail industry, said this week it will hold a hearing on Thursday to discuss the recent rail challenges and find ways to improve service. The agency said in a statement it is “concerned about service problems across the nation’s railroad network, particularly on the Canadian Pacific Railway Company (CP) and BNSF Railway Company (BNSF) systems.”

At Absolute Energy, a 115-million-gallon-a-year ethanol plant in St. Ansgar, the company has been forced to cut production by up to 20 percent because of the delays in getting its cars picked up by the railroads. The facility’s bottom line has beenshielded by high ethanol prices, despite the drop in output.

Rick Schwarck, Absolute’s president, said he has 2.3 million gallons of ethanol worth nearly $6 million loaded onto 80 tank cars that have been sitting outside his plant for a week waiting for Canadian Pacific to pick them up. In the past, the cars would usually get hauled away within two days of calling the railroad. He’s still uncertain when the cars will finally get taken away.

Schwarck said railroads need to invest more money in crews, engines and other equipment to prevent problems next winter. His concern is that as weather conditions improve and the congestion eases, people will forget about the current bottleneck — anissue the railroads say is based on operational problems and is not systemic.

“It’s very easy, out of sight out of mind. We’ve got another winter coming and we need to take this time … to address the shortcomings that we’ve had this winter to make sure we do what we can to not repeat it again,” he said. “These constraints (on the rail system) have not changed.”

Chris Fischbach, a farmer and director with the South Dakota Soybean Association, said some local grain elevators are waiting for a month after loading a train for another one to arrive, compared with about seven to 10 days in the past. “It’s hard to say if we’re at the bottom until we’ve hit the bottom,” he said. “I have every reason to believe the railroad will get through the majority of this backlog. The more commodities and material they turn, the more money they make, too.”