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Why Did A Train Carrying Biofuel Cross The Border 24 Times And Never Unload?

Tyler Durden's picture


Wondering why rail traffic has been somewhat surprisingly consistent despite uncertainty? Concerned at government's tenticular reach into each and every aspect of our lives? This somewhat stunning anecdotal report from OilPrice.com might shed some light:

A cargo train filled with biofuels crossed the border between the US and Canada 24 times between the 15th of June and the 28th of June 2010; not once did it unload its cargo, yet it still earned millions of dollars... The companies “made several million dollars importing and exporting the fuel to exploit a loophole in a U.S. green energy program.” Each time the loaded train crossed the border the cargo earned its owner a certain amount of Renewable Identification Numbers (RINs), which were awarded by the US EPA to “promote and track production and importation of renewable fuels such as ethanol and biodiesel.”

We suggest this is merely yet another unintended consequence (just as we noted here) and perverted incentive of central planning and an all encroaching government.


Via James Burgess of OilPrice.com,

A cargo train filled with biofuels crossed the border between the US and Canada 24 times between the 15th of June and the 28th of June 2010; not once did it unload its cargo, yet it still earned millions of dollars. CBC News of Canada was the first to pick up on this story on the 3rd of December 2012, and began their own investigation into the possible explanations behind this odd behaviour.

CN Rail, the operator of the train, stated their innocence in the matter as they had only “received shipping directions from the customer, which, under law, it has an obligation to meet. CN discharged its obligations with respect to those movements in strict compliance with its obligations as a common carrier, and was compensated accordingly.” Even so, they still managed to earn C$2.6 million in shipping fees.

During their investigation CBC managed to obtain an internal email which stated that the cars of the train were all reconfigured between each trip but that the cargo was never actually unloaded, because “each move per car across the border is revenue generated”, the sale of the cargo itself was inconsequential.

The cargo of the train was owned by Bioversal Trading Inc., or its US partner Verdero, depending on what stage of the trip it was at. The companies “made several million dollars importing and exporting the fuel to exploit a loophole in a U.S. green energy program.” Each time the loaded train crossed the border the cargo earned its owner a certain amount of Renewable Identification Numbers (RINs), which were awarded by the US EPA to “promote and track production and importation of renewable fuels such as ethanol and biodiesel.” The RINs were supposed to be retired each time the shipment passed the border, but due to a glitch not all of them were. This enabled Bioversal to accumulate over 12 million RINs from the 24 trips, worth between 50 cents and $1 each, which they can then sell on to oil companies that haven’t met the EPA’s renewable fuel requirements.

Both the Canada Border Services Agency and the US EPA have launched investigations into the possibility of fraud, although the companies claim that the practice was totally legal.

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Wed, 01/02/2013 - 17:51 | 3116364 Muppet Pimp
Muppet Pimp's picture

You can't make this stuff up! LO f'n L

Wed, 01/02/2013 - 17:58 | 3116399 ParkAveFlasher
ParkAveFlasher's picture

All aboard the capital misallocation express!

Can Banzai do a Thomas the Train pshop with Barack and Benny as Thomas and Percy?  I know he doesn't take requests but ... this is special. 

Wed, 01/02/2013 - 18:13 | 3116485 Leopold B. Scotch
Leopold B. Scotch's picture

Choo Fuckin' Choo.

Wed, 01/02/2013 - 18:29 | 3116553 Michaelwiseguy
Michaelwiseguy's picture

I don't see anything wrong with this. It's like the TBTF banks getting free interest money payments on the free Fed money they have stored for the Fed in their banks.

Wed, 01/02/2013 - 18:31 | 3116560 CH1
CH1's picture

Yeah, that central control is SOOO efficient.

Only government can do some things!

Wed, 01/02/2013 - 18:32 | 3116564 Serfs Up
Serfs Up's picture

Why did it cross 24 times...um...to get to the other side?

Wed, 01/02/2013 - 18:47 | 3116617 Divided States ...
Divided States of America's picture

Effin like these HFT algos punting the same fuckin shares back and forth for the sole purpose of collecting the fuckin rebates with no benefit to society whatsoever....theres always a loser to every story that doesnt make sense.

Wed, 01/02/2013 - 18:55 | 3116646 Michaelwiseguy
Michaelwiseguy's picture

I had a model Lionel railroad that was much more efficient. It was set up in a figure 8. Where's my free money for that?

Wed, 01/02/2013 - 18:59 | 3116658 SafelyGraze
Wed, 01/02/2013 - 19:37 | 3116799 Stackers
Stackers's picture

If it aint broke - fix it till it is

Wed, 01/02/2013 - 20:11 | 3116912 TwoShortPlanks
TwoShortPlanks's picture

John Tuld: "There are three ways to make a living in this business: be first, be smarter, or cheat"

The antics of a once decadent but now declining nation is to.....CHEAT!


Wed, 01/02/2013 - 20:28 | 3116975 ZerOhead
ZerOhead's picture

Actually they chose first(?) and smarter...

YeeeHaw. The CRazY Train is going GREEN... now PAY the boys for a job well done!

Thu, 01/03/2013 - 01:17 | 3117769 TwoShortPlanks
TwoShortPlanks's picture

What I'm saying is that 'First' and 'Smarter' have been used up and there's only one option left....so expect it to ratchet up....a-fuck-of-a-lot.

Wed, 01/02/2013 - 19:36 | 3116797 combatsnoopy
combatsnoopy's picture

I was waiting to read a metaphor for the algos, it's perfect. 

Wed, 01/02/2013 - 18:51 | 3116630 smlbizman
smlbizman's picture

please expose the principals in these companies...than lets talk...

Wed, 01/02/2013 - 20:32 | 3116989 klockwerks
klockwerks's picture

Great idea and what I thought of 1st. See if Buffet owns any part of that

Wed, 01/02/2013 - 18:58 | 3116659 Bicycle Repairman
Bicycle Repairman's picture

LOL.  New riddle for the 21st century.

Wed, 01/02/2013 - 19:48 | 3116844 SafelyGraze
SafelyGraze's picture

Why Did A Train Carrying Biofuel Cross The Border 24 Times And Never Unload?

and why did a truck carrying $10m in ag veer off the road and spill all its shiny cargo?

truck accident is the new boating accident 

Wed, 01/02/2013 - 21:51 | 3117258 Shizzmoney
Shizzmoney's picture

That cocaine doesn't snort itself

Wed, 01/02/2013 - 20:39 | 3117012 Muddy1
Muddy1's picture

You're missing the point.  Who's Mr. Railroad, and who stands to gain the most from this?  Warren E. Buffet, FOB

Wed, 01/02/2013 - 18:20 | 3116522 ZDRuX
ZDRuX's picture

Really people, how is government forcefully stealing your money and giving it away to people it thinks are worth it consdiered capitalism?

If you're going to make yourself look uninformed, at least put some effort into it.

Wed, 01/02/2013 - 18:28 | 3116546 cougar_w
cougar_w's picture

It's not like they are paying out in gold or anything valuable. And as for Bennie Bucks, he prints $180B a month worth, they gotta go somewhere you know. Takes a lot of creativity to move that much coin out the door every month. Try it some time and see how well you do.

Wed, 01/02/2013 - 18:42 | 3116592 Poor Grogman
Poor Grogman's picture

In the UK the govt just gives it to the illegal immigrants.

This kills two birds, it keeps the illegals coming in, thus enabling expansion of the spending programs.

Karl Marx was right, destroy the money and you destroy capitalism...

Wed, 01/02/2013 - 20:39 | 3116995 Sancho Ponzi
Sancho Ponzi's picture


Wed, 01/02/2013 - 21:34 | 3117193 AldousHuxley
AldousHuxley's picture

what kind of idiot immigrates to a country with shitty food, shitty weather, shitty architecture, shitty economy with all their eggs in finance?


Wed, 01/02/2013 - 21:40 | 3117219 Poor Grogman
Poor Grogman's picture

You forgot the free money part...

Wed, 01/02/2013 - 21:56 | 3117272 Cojock
Cojock's picture

If it weren't for 'all their eggs in finance', I'd guess Mexicans in Texas.

Wed, 01/02/2013 - 19:13 | 3116727 JohnG
JohnG's picture



No problem.  I'll take a check, then order some gold.  That will just sit in a box in the safe, and I can always get another safe if I need too.

Sure would like to need another safe though.

Wed, 01/02/2013 - 18:01 | 3116404 CrockettAlmanac.com
CrockettAlmanac.com's picture

Such is always the case when government subsidizes industry. Here's another story about trains from 150 years ago which shows the difference between government subsidized industry and real entrepreneurs like J.J. Hill who was the model for Nat Taggart in Rand's Atlas Shrugged.


By the summer of 1861, after the Battle of First Manassas, it was apparent to all that the War Between the States was going to be a long drawn-out campaign. Nevertheless, in 1862 Congress, with the southern Democrats gone, diverted millions of dollars from the war effort to begin building a subsidized railroad. The Pacific Railroad Act of 1862 created the Union Pacific (UP) and the Central Pacific (CP) railroads, the latter to commence building in Sacramento, California, and the former in Omaha, Nebraska. For each mile of track built Congress gave these companies a section of land — most of which would be sold — as well as a sizable loan: $16,000 per mile for track built on flat prairie land; $32,000 for hilly terrain; and $48,000 in the mountains. As was the case with Jay Cooke's Northern Pacific, these railroads tried to build as quickly and as cheaply as possible in order to take advantage of the governmental largesse.


Where James J. Hill would be obsessed with finding the shortest route for his railroad, these government-subsidized companies, knowing they were paid by the mile, "sometimes built winding, circuitous roads to collect for more mileage," as Burton Folsom recounts. Union Pacific vice president and general manager Thomas Durant "stressed speed, not workmanship," writes Folsom, which meant that he and his chief engineer, former Union Army general Grenville Dodge, often used whatever kind of wood was available for railroad ties, including fragile cottonwood. This, of course, is in stark contrast to James J. Hill's insistence on using only the best-quality materials, even if they were more expensive. Durant paid so many lumberjacks to cut trees for rails that farmers were forced to use rifles to defend their land from the subsidized railroad builders; not for him was the Hill motto, "We have got to prosper with you or we have got to be poor with you."



Wed, 01/02/2013 - 18:13 | 3116482 NoDebt
NoDebt's picture

Yeah, but at least they had a railroad when they were done!  OK, not a very good one, but something that could potentially be productive in the future.  Shipping the same containers back and forth 24 times you end up with nothing to show for it, production-wise, 23 of those times.

Now, if we could build a railroad whose layout zig-zags back and forth 24 times across the border before arriving at it's final destination that would be OK.  Much more productive.  Then everyone wins.


Wed, 01/02/2013 - 18:14 | 3116498 Leopold B. Scotch
Leopold B. Scotch's picture

According to the Krugmeister's calculations, this is all good. Stop your bellyaching.

Wed, 01/02/2013 - 19:26 | 3116771 Bunga Bunga
Bunga Bunga's picture

The Krug should propose EPA for the nobel prize in economics.

Wed, 01/02/2013 - 18:16 | 3116504 CrockettAlmanac.com
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Once I built a railroad, I made it run, made it race against time.
Once I built a railroad; now it's done. Brother, can you spare a dime?
Wed, 01/02/2013 - 19:17 | 3116748 JohnG
JohnG's picture



Simon Black would love it.

Wed, 01/02/2013 - 18:19 | 3116517 TahoeBilly2012
TahoeBilly2012's picture

Yea, but now those "windy" sections are great touring spectacles ;)

Wed, 01/02/2013 - 20:06 | 3116914 Uber Vandal
Uber Vandal's picture

Though James J Hill has been immortalized as being "The Empire Builder", keep in mind he was in the company of some great friends, such as E H Harriman, J P Morgan, and J D Rockefeller.

With the backing of the above people, the Northern Securites Company was created in 1901.

That company controlled the Great Northern Ry, Northern Pacific Ry, and the Chicago, Burlington & Quincy RR (AKA Burlington Route).

What is interesting about this, is the supreme court dissolved the Northern Securites Co with an anti-trust suit in 1904.

Also of note, broken up in 1904 was the Union Pacific and Southern Pacific Railroad holdings of E H Harriman.

Most likely, one is wondering just what does any of this have to do with anything?

A great question.

in 1970, a mere 66 years after the antitrust lawsuit, the Great Northern, Northern Pacific, and Burlington Route mergerd to form the Burlington Northern Railroad.

In 1995, the Burlington Northern merged with the Santa Fe Railroad to form the current Burlington Northern Santa Fe Railway, or BNSF.

Finally, in 2010, "Uncle Warren" added this railroad to his holdings of Berkshire, Hathaway.

Another note about the BNSF, in 1999, it has intended to merge with the Canadian National which the article mentioned was the line that this train operated on, and I would not be surprised if the biofuel cars originated from the BNSF.

Finally, about the Union Pacific and Southern Pacific... The two railroads involved in the building of the Union Pacific were the Union Pacific and Central Pacific.

The Southern Pacific leased the Central Pacific in 1885 and officially merged it into its system in 1959. Then, in 1996, the Union Paicific merged with the Southern Pacific.

Thus, the systems that these men wanted, ultimately happened, only it took place decades later.


Wed, 01/02/2013 - 21:15 | 3117131 CrockettAlmanac.com
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Thank goodness the government busts the trusts so that folks can pay higher prices!


Recognizing a market in the American Midwest for timber from the Northwest, Hill convinced his next-door neighbor, Frederick Weyerhauser, to get into the timber business with him. He cut his freight charges from ninety to forty cents per hundred pounds, and he and Weyerhauser prospered by selling Northwest timber to other parts of the country.[20]


Despite the quality services and reduced costs that Hill brought to Americans, he would be unfairly lumped in with the political entrepreneurs who were fleecing the taxpayers and consumers. The public eventually began complaining of the monopoly pricing and corruption that were inherent features of the government-created and -subsidized railroads.


The federal government responded to the complaints with the Interstate Commerce Act of 1887, which was supposed to ban rail rate discrimination, and later with the Hepburn Act of 1906 which made it illegal to charge different rates to different customers. What these two federal laws did was to outlaw Hill's price cutting by forcing railroads to charge everyone the same high rates.[21] This was all done in the name of consumer protection, giving it an Orwellian aura.


This new round of government regulation benefited the government-subsidized railroads at Hill's expense, for he was the most vigorous price cutter. His trade to the Orient was severely damaged since he could no longer legally offer discounts on exports in order to induce American exporters to join with him in entering as foreign markets. He eventually got out of the steamship business altogether, and as a result untold opportunities to export American products abroad were lost forever.



Wed, 01/02/2013 - 21:13 | 3117125 max2205
max2205's picture

I am glad an agency other than the sec will get right on this.....right?

Fri, 01/04/2013 - 07:21 | 3121423 S.N.A.F.U.
S.N.A.F.U.'s picture


sometimes built winding, circuitous roads to collect for more mileage," as Burton Folsom recounts. Union Pacific vice president and general manager Thomas Durant "stressed speed, not workmanship

Cool.  I didn't know that the Hell on Wheels character http://www.amctv.com/shows/hell-on-wheels/cast/thomas-durant who builds circuitous rail-roads to collect government dough in the show was based on a real person of the same name who did that very thing.  (And here I thought they were creatively showing off how stupid laws lead to unintended consequences when all they were really doing was reading their history books.)

Wed, 01/02/2013 - 18:18 | 3116509 Ignatius
Ignatius's picture

A reasonable and honest tax code could be written on three sheets of 8 1/2 x 11 paper.  Instead we have some 74,000 pages of THIS shit.  Congress in session is the problem. They fix nothing, but put 'the fix' in everything.

Wed, 01/02/2013 - 18:42 | 3116580 CH1
CH1's picture

They fix nothing, but put 'the fix' in everything.

Yes, that's what rulers do. Always.

You cannot give one group of men the power to tax and punish everyone else, and have it turn out well.

Wed, 01/02/2013 - 19:57 | 3116884 grid-b-gone
grid-b-gone's picture

They managed to pass a $700 billion bailout bill from three 8-1/2 X 11 sheets. It seems they can conjure up the magic only with outside help. 


Wed, 01/02/2013 - 18:18 | 3116510 Dingleberry
Dingleberry's picture

Reminds me of those reverse energy trades that Enron used to do, and the HFT boys still do on Wall street.

Wed, 01/02/2013 - 20:40 | 3117015 Winston Churchill
Winston Churchill's picture

More like the scams the Russian mafia was pulling on the EC agricultural export  subsidys.

That grain was exported,re imported,exported etc in a pertetual motion machine.

Thu, 01/03/2013 - 04:35 | 3117969 IBelieveInMagic
IBelieveInMagic's picture

So did Enron with energy trading. The best cons are the ones which have already been tried. 

Wed, 01/02/2013 - 19:08 | 3116700 Grinder74
Grinder74's picture

All I want to know is if I can do this with my car and driving back and forth a bunch of times.

Wed, 01/02/2013 - 21:21 | 3117159 espirit
espirit's picture

Methane can be considered a fuel.  Eat moar beans.

Wed, 01/02/2013 - 19:28 | 3116779 myptofvu
myptofvu's picture

Brilliant...they just figured out how to save Amtrak

Wed, 01/02/2013 - 17:51 | 3116366 Mad Mohel
Mad Mohel's picture

Biofuel? You mean like shit?

Wed, 01/02/2013 - 18:11 | 3116481 Spider
Spider's picture

Oh I thought it was a bunch of bankers.  Wait - is that what you mean?

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