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January 2013



Short Lines & Regionals Article
Carload Express creates Ohio short line to tap two eastern shales



Short Lines & Regionals
By Jeff Stagl, Managing Editor

Burgeoning natural gas drilling operations in the Northeast prompted Carload Express Inc. last year to seek a railroad that could access gas producers in the Marcellus and Utica shales. The search ended in late 2012.

The "foothold railroad," as Carload Express Chief Executive Officer Russell Peterson characterizes it? A former Omal Railway line that now will be operated as the Ohio Terminal Railway Co. — Carload Express' fourth short line.

In December, Carload Express reached an agreement with Hannibal Real Estate L.L.C. to operate a 12.2-mile line between Hannibal and Powhatan Point, Ohio, which the real estate firm acquired in 2007. Originally built by the Pennsylvania Railroad to serve an aluminum plant in Hannibal, the line later was sold by Conrail to the Ormet Railroad Corp. The route — which Carload Express tried to purchase from Conrail in 1996 — provides rail access to a Hannibal Real Estate-owned industrial park and an adjacent steel rolling mill.

The line has been dormant since 2000, but is being upgraded so the Ohio Terminal Railway can serve the steel mill and "wet" gas producing portions of the Marcellus and Utica shales, which cover portions of Ohio, New York, Pennsylvania and West Virginia. A wet gas, such as ethane, propane or butane, refers to a higher percentage of natural gas liquids versus a "dry" gas.

Carload Express plans to spend about $1.8 million to improve and upgrade the line, with work slated for completion in early April, says Peterson.

"We'll commence operations by mid-April," he says.

The Ohio Terminal Railway will interchange with Norfolk Southern Railway in Powhatan Point. The short line will move pipe, frac sand, drilling lubricants and crane mats for shale customers, and haul steel for the mill. Initially, traffic will be split 50/50 between shale-related and steel carloads, but eventually — perhaps in three years — "shale traffic will account for 75 percent," says Peterson.

Founded in 1992, Carload Express also operates the Allegheny Valley, Southwest Pennsylvania and Camp Chase railroads in Pennsylvania and Ohio. In addition, the company provides warehousing, transloading, rail-car-storage, industrial switching and side track engineering services.

Carload Express' three short lines move about 42,000 carloads annually. In two years, the Ohio Terminal Railway is projected to move about 3,000 carloads annually and the other short lines are forecasted to grow traffic by about 2,000 to 3,000 units. So, the company's yearly traffic should reach 47,000 to 48,000 carloads by 2015, says Peterson.

Carload Express' last expansion involved the addition of 43 miles of track for the Allegheny Valley Railroad in 2003. The latest addition not only offers the company a prime traffic-growth opportunity, but restores freight-rail service to a long-dormant line.

"The combination of the new rail service and property available at the industrial park is a natural fit to service the emerging shale gas drilling industry in the region," as Carload Express officials put it in a Dec. 12 press release about the Ohio Terminal Railway.

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