Crude oil key to Watco short lines' traffic growth
But here’s one that isn’t in the Top 10: crude oil. That’s not a surprise because the United States isn’t a major oil producer. Yet, one large underground oil deposit beckons traffic growth for four Watco Cos. Inc. short lines.
The Bakken Oil Formation stretches across Montana, North Dakota and the southeastern portion of Canada’s Saskatchewan province. The 200,000-square-mile formation could sustain the United States’ oil needs for the next two decades.
But pumping the oil out of the reserve has been a major sticking point since the formation was discovered more than 50 years ago because of horizontal drilling limitations. During the past year or so, horizontal drilling advances have made it feasible and more affordable to extract oil from the formation by drilling down and parallel to the underground reservoir.
But it didn’t take long for pipelines used to transport extracted oil southward to become congested, prompting shippers to move most of the oil by rail.
That’s opened the door for Watco’s Yellowstone Valley (YSVR), Kansas & Oklahoma (KO), South Kansas & Oklahoma (SKOL), and Stillwater Central (SLWC) railroads, which are situated along the oil’s supply-chain route. In summer, the four short lines began moving crude oil to points in Kansas, Oklahoma and Texas. SLWC started to handle non-Watco-originated carloads in July. Later, YSVR and SKOL began to handle Watco-originated traffic in August, and YSVR and KO did likewise in September.
In addition, Watco’s Reload Division began to transload oil to trucks at several terminals for delivery to nearby refineries, and the company’s mechanical shop obtained certification to repair crude-oil-carrying tank cars. The number of cars needing to be inspected and repaired is projected to increase by more than 1,000 in the next five years.
The United States, which is seeking ways to reduce its reliance on foreign oil, is heading for an “oil boom” because of the formation’s potential, Watco officials said in the short-line holding company’s September/October newsletter. The company’s four short lines are anticipating a traffic boom as crude oil shipments increase.
With waning lumber/forest products, intermodal and paper products traffic, carloads of motor vehicles/equipment and chemicals barely holding their own, and a number of new ethanol plants on hold because of economic turmoil, short lines can use all the traffic-growth opportunities they can get.
Posted by: 
Jeff Stagl | Date posted: 11/25/2008
Comments
Posted by Mike Drelicharz on 11/26/2008 1:25:35 PM
I think you meant to write that the US is a major oil producer. I believe we rank 3rd behing Saudia Arabia and Russia.
Posted by ted lane on 11/26/2008 3:48:02 PM
Obviously the RR industry is the transportaion choice for the future. Lokk at Warren Buffets investmates as well as others. With corn and other grain being pulled as well as record tonages of coal according o mny sources, the latest being "Extreme Trains" on the Nature Channel programmed at (9:00 each Tuesday evening) here in Chicago the RRindustry will move ahead dramicatly regardless of thge doom and gloom trqnsportaion analysts, (The car and Truck guys from Detroit). Do you have any reference to any of your articles that relates directly to the ShortLIne RR growth. I sure would like to get a good read from your professional reports. Thanks in adavance. Ted
Posted by Peter Cooper on 11/27/2008 2:02:14 PM
Why would any shippers want to ship any thing by rail let along by short line only to have their freight sit at the interchange points for some times weeks. If the short lines want to grow their business they should unite to eliminate paper barriers.
Posted by ted lane on 12/1/2008 10:45:34 AM
Great article, but due to your spce limitaions this is just the tip of the tip of the iceburg. I googled on to the Shortlines Websire and found easily 10,000 pages plus on why the shortlines are the future starting now, min the Railroad transportaion industry. There uis also a ton of legislation being passed as well as tax considerations, loans and so on to help ratched the Shortlines up to speed to accomodate the "Rush" The basic products being transportaed as we speak by the S/Lines are coal, grain, and anything else thast there short track requires to help partnership with some of the Class !'s. Try these Websites and you will be truly amazed and overwelmed at the positive information you find for the SHort Line Train transportation markets. I did not find anything negetive, and with prices going through the roof for other modes of transportaion did not expect to. These are a real good read and vision into the future of the Shortline Industry. Ted Chicago
Posted by Larry Kaufman on 12/1/2008 11:00:29 AM
Ah, "paper barriers." The person who brought this one up neglected to inform readers what so-called paper barriers are. Here's a simple explanation: when selling or leasing a branch line to a short line operator, it is a common practice of the Class 1 doing the selling or leasing to require as part of the sale or lease contract that the short line operator interchange all traffic with it - a paper barrier, if you will. There is nothing wrong with a railroad wanting to retain the long haul on traffic it always has handled. If paper barriers are banned -- STB now is considering paper barriers on a case by case basis -- the result will be many more lines abandoned. These lines are not profitable for the Class 1s and if the Class 1 cannot be assured of the long haul traffic, it will demand a higher price in the sale or lease, most likely higher than the short line operator can afford. Many of these lines will not be sold or leased, but will be abandoned instead. Perhaps, by not explaining the issue the original participant at this blog was serving an agenda of his own?
Posted by michael willis on 12/1/2008 11:32:10 AM
An AMTRAK ACELA HIGH-SPEED NETWORK powered by an updated national electric-grid would be an impressive system. According to the HISTORY CHANNEL documentary the ACELA ARTICULATED TRAINSET could attain speeds of close to 200 miles per hour on improved HIGH-RAIL and total grade seperation on the wide open spaces between cities- that would give the airlines a little case of the 'jitters' and finalize a divorce from the influence of OPEC and its petrostate dictators, kings, sultans & crown princes.
Posted by Joseph Tovey on 12/1/2008 1:22:51 PM
It might be more profitable for all parties for the rail lines to permit (for a fee, of course) the use of their right-of-way for oil pipelines hauling the crude, while also making money hauling solid freight (drilling rigs, pipe, pumps, storage-tank sections, etc.) to the well operators. In general, the rule-of-thums is that the cost of moving large quantities of oil via rail vs. appropriately-sized pipeline is about 5 to 1 or more. 'Twould be a pity to undermine potentially important production by loading on unnecessary costs, when all US parties could do well by each sticking to its economically advantaged specialty.
Posted by Larry Kaufman on 12/2/2008 9:40:29 AM
Joseph Tovey is sort of right about the possibilities of using rail rights of way to move non-rail traffic, but not entirely. Many U.S. rail rights of way have fiber optic cables buried along them and the telecommunications companies that own the cables pay an appropriate negotiated fee. Would-be tenants are not always willing to pay that appropriate rate, however. I can remember back in the 1970s when the coal slurry pipeline developers came to BN asking to bury their pipeline along the right of way. BN was willing to consider that and studied the proposal, finally coming to the conclusion that the pipeline developer would not pay a fee sufficiently high enough to make up for the traffic BN would lose. BN and now BNSF have prospered by their ability to move hundreds of millions of tons of coal in a virtual pipeline on wheels. Railroad managements are not inherently stupid. Give them an opportunity to make a profit - and a reasonable return on investment - and they usually are smart enough to recognize it.
A victory for high-speed rail
I still remember the interviews I conducted for that article — not everything that was said, but the tone of the conversations. High-speed proponents from across the United States were hopeful, optimistic, excited about their high-speed possibilities — even though they had been lobbying for federal funds for years and still had seen nothing in the way of dedicated high-speed dollars ... and despite getting their hopes up time and time again when high-speed legislation was discussed, then dismissed by Congress.
The message was the same when I did a follow-up story in 2006. These folks were certain that, despite the slow road getting there, high-speed rail eventually would be seen as a desired transportation option and funded as such.
So, when California voters passed an almost $10 billion bond measure last week to provide financing for the initial segment of a statewide high-speed rail system, it wasn't just the California High Speed Rail Authority's victory; it was a victory for everyone in the high-speed rail circle.
"It's going to make it a lot easier to do high-speed rail because it's another indication that the public wants to have good, high-quality transportation," says Rick Harnish, executive director of the Midwest High Speed Rail Association. "This changes the scope of what we're going to be doing and what we can talk about doing in the United States — we've finally got somebody putting real money into building new, electrified track."
Presumably, dedicated federal dollars will follow. Hopefully, growing public support will, too, and enable other high-speed rail projects throughout the country advance in the near future.
Posted by: 
Angela Cotey | Date posted: 11/13/2008
Comments
Posted by Steve Morrell on 11/13/2008 3:27:13 PM
A comment on the Extreme Train segment featuring the NS coal train. Being a NS retiree, I likewise was proud of the manner in which the engineers handled themselves in the face of such "stupid" questions as "Are you scared?". Mr. Brown does know a lot about the railroad, but he came across as a complete idiot. I am proud of the industry, NS in particular, and would like the public to get the most favorable and informational portrayals as possible. In this time of increasing importance of rail traffic, both transit and freight, we need all the support we can get.
Posted by Lee K. Johnson on 11/14/2008 11:23:53 AM
Proposition 1A was certainly a victory for the firms that will participate in the studies that the $10 billion of additional debt will fund but there is still little if any funding to actually build any infrastructure. 1A ran without much opposition and the California public generally perceives that it is going to have a first segment for $10 billion. They are clueless that the network contemplated will cost a large multiple of that amount even if you can get a right-of-way. Based upon the realities on the ground in California, it is an overstatement to say that the passing of 1A was a victory for anyone other that the consultants, engineering firms and suppliers that may benefit from this low probability of success initiative.
Posted by James Swidergal on 11/14/2008 1:56:50 PM
I most certainly agree that even though $10 billion seems like a lot it barely is the tip of that iceberg. Is that $10 billion part of a matching fund? And, by time actual construction starts and cost overruns (it is still some sort of government project) and the simple fact that it'll cost more by attrition. The previous blogger is right on saying the only victory is for those committee members, speculative engineers,and all the rest (mostly bureaucrats) involved in just getting this far in the process.
Posted by carl on 11/19/2008 2:33:31 PM
I worked on the railrod for 500 thats 500 hundred years and we can do it as i slung mud and snow (SNOW?- CSX guY?) we can do it you betcha (Palin), where is the top gun , (GUNN?) get Conway, A or W- both fired,,,we need to fix these ROADS, or Fire people, lets go guys , get off the couch, and you can any will/ gonnna do,choo chooooooo LOL suggest privatization and P3, LOL
Posted by Mark Dysart on 11/21/2008 11:51:37 AM
Having served as a board member (20) years and CEO of the High Speed Rail Association (6 years) I figure I have some grounds on which to weigh in here. I don't know the genesis of the previous writers' discontent but they miss the point completely. Its not a question of whether the public understands the magnitude of the project or that it may take more money. The important result is that the public has seen the value of high speed rail and that they have clearly indicated they are willing to pay for it. On the point of engineers, consultants et al, they are not a choice, they are necessary. Without them, nothing gets built. I don't want to sound too hackneyed but this was a great victory in what has been and will continue to be a long war. California's high speed rail commission leadership have worked long and hard for what they have achieved and deserve a great deal of credit for moving high speed rail in the US forward.
Posted by Lee K. Johnson on 11/21/2008 2:00:21 PM
The point is that had the California voters understood how much the proposed network will actually cost to build and subsidize, the time that it will take to complete, the expected eminent domain battles to obtain right-of-way and ultimate limited utility of the project, even California voters would likely take a pass. The proponents are to be congratulated for the tiny advance made at eating this elephant, but the elephant's survival is more likely than is this project's ultimate success.
Posted by James Swidergal on 11/21/2008 4:19:57 PM
Lee says it best...well done! If the General public knew the in depth of the where-with-all of it they'd be taking a big pass. By the way ...where's Larry's take on this?
Posted by Michael Willis on 11/22/2008 4:56:48 PM
THE BIG 3 EXECS COULD HAVE TAKEN AMTRAK TO Washington... Quotation from:"GM-THE FIRST 75 YEARS OF TRANSPORTATION PRODUCTS" GENERAL MOTORS,-presently on the verge of extinction-proudly built: "The train that earned the title "THE SINGLE GREATEST LOCOMOTIVE OF THE 20TH CENTURY"! "At the GM Science and Technology exhibit at the 1933 Century of Progress World''s Fair in Chicago, one of the most dramatic exhibits was the Chevrolet assembly line powered by 2 experimental 600 hp, 8 cyl. Diesel engines. These engines, the result of several years of development by Charles Kettering at GM''s Research Laboratories, marked the beginning of America''s Diesel-powered trains. Ralph Budd, president of Burlington Railroad, challanged GM to build 2 Diesel engines for his streamliner. On the 1st test run the BURLINGTON''S ZEPHYR STREAMLINER exceeded 100mph! Other railroads began ordering Diesels from GM''s ELECTRO-MOTIVE DIVISION. Today the stainless steel Zephyr is exhibited at Chicago''s Museum of Science & Industry. The future economic prosperity of the USA can be assured by conversion of substantial automobile production into railway locomotives,freight,passenger cars,stations & infrastructure development.
Posted by Larry Kaufman on 11/24/2008 12:39:38 PM
James asked where my "take" was on all this. I have not posted on this subject because the rest of you seem to be doing just fine without my help, and also because I am freight-oriented and don't really have any strong views on high-speed passenger service. But, you asked, so here is another view for your consideration. I'm not so sure, as Lee Johnson is, that the public would pass if it knew the real cost of a high-speed system. Perhaps. But perhaps the public would say it wants high-speed rail even at a high cost because it sure beats being stuffed, sardine-like, into aircraft only to sit on the tarmac and to be abused by the airlines that no longer know what service is. Or, if the public knew the real cost of highways it might accept the real cost of a high-speed system. My point, now that I've probably caused some people's blood to boil, is that there is no single answer and no simple solutions. Given sufficient traffic density and a big dose of honesty that rail passenger service doesn't really make money anywhere in the world, this will be a decision that citizens will make. Beyond that, my crystal ball is cloudy.
Posted by Mark on 11/25/2008 9:47:07 AM
I like Larry's comments and also think we don't give the "public" enough credit for their intelligence.
Posted by Vincent B. Mottola on 11/25/2008 11:09:15 AM
I was excited that the country is finally awken to the fact that high speed trains are becoming a reality. President elect Obama should be made aware of this important idea, and it could become one of his pet projects for the country's infrastructure program...putting people to work...money well spent on both accounts!
Posted by Mohammad Abdullah on 11/25/2008 10:35:38 PM
Thanks to people who voted for having high speed trains in california.Being a track engineer I find no reason why USA remained so behind in having high speed train so long when Shinkansen and TGV have proven their testimony long back?Even country like South Korea & Taiwan followed them quite sometime back.MAGLEV Techlogy may be a better proposition for further higher speed as it has been found to be proven.
Posted by James Mancuso on 11/26/2008 11:38:00 AM
It is high time we finally got a President who relized how essential trains and tracks are essential to our transportation infrastructure, especially with the airlines going to hell in a a handbasket and that peabrained moron from Texas on his way out of the White House. Barack Obama represents the best hope for rebuilding our rail passenger network and high speed trains. John McCain would have destroyed what we have now in order to subsidize what I call Hitler's war in the Middle East. We need more passenger trains, not more war.
Posted by James Swidergal on 11/26/2008 2:27:15 PM
Thanks Larry! I thought that your interlude was needed. And...I do agree with so many of you...but being a bit sinister and maybe to just get more ordinary insight who should be responsible for the creation of coast to coast,or interstate high speed routing. Does the Corporation known as the USA own the land rights and track rights and labor management contracts or do we incorporate passenger high speed with freight high speed, and than open it up to the major carriers' to operate and profit? Is there some way the taxpayer can fund this and eliminate the tax structure that this type of system could produce and therefore actually in time pay all legal US citizens' a dividend? And I know it sounds like pie in the sky but how does one finance or create the kind of financing to take it to the next level? All comments are appreciated!
Posted by BruceMcF on 11/29/2008 1:09:11 PM
"Does the Corporation known as the USA own the land rights and track rights and labor management contracts or do we incorporate passenger high speed with freight high speed, and than open it up to the major carriers' to operate and profit?" For a true HSR system as in California, it will share substantial parts of existing rail right of way, but the track will be completely grade-separated. For a semi-HSR (eg, 110mph tilt-train) system, such as proposed for the higher speed options for the Midwest Hub and Ohio Hub, there are more opportunities for sharing the higher speed sections of track with some high speed freight, offering better opportunities in the higher speed and reliability ends of the market when the next oil price spike hits.
Posted by Larry Kaufman on 11/29/2008 1:32:00 PM
Well, James poses a lot of questions. As I understand it, Amtrak has the legal right to offer intercity passenger service in the U.S., so I would imagine it would be Amtrak that would undertake a high-speed operation if one were to be started. As for rights of way, the answer is all of the above. The federal government owns those that would cross public lands, through the National Parks Service, Bureau of Land Management, National Forest Service, etc. To the best of knowledge, the government could not exercise eminent domain to take the rights of way used by freight railroads, although they are required to provide access to Amtrak as long as Amtrak pays the formula rent. Some of you passenger mavens may have better, more accurate information.
Posted by BruceMcF on 11/30/2008 10:56:55 PM
"And...I do agree with so many of you...but being a bit sinister and maybe to just get more ordinary insight who should be responsible for the creation of coast to coast,or interstate high speed routing." The model in the Kerry bill would be publicly funded capital works, infrastructure owned by a public authority, and user fees for access covering regular and major maintenance. The coverage I have seen does not specify, but I presume that existing freight lines would continue under existing ownership unless some other result came out of a specific negotiation over right of way in a particular project. It also continues the division of HSR between the semi-HSR that can share regular rail rights of way ... and which could, indeed, offer additional high speed freight paths to properly equipped high speed freight rolling stock, for better penetration of time and reliability sensitive freight markets ... and the fully grade separated, dedicated true HSR lines, such as are planned by the California HSRA, with specific shares of the proposed bonding allocated to each class of HSR. Although I have not seen it in any of coverage of the Kerry bill, having a public authority for the semi-HSR express lines would relieve railroads of substantial capital risks, as well as, indirectly, avoiding the annual overheads of local property taxes on the new infrastructure. It appears to be part of the intent to reduce the tilt in the playing field so that railroads have a easier time penetrating markets currently dominated by truck freight at a substantial crude oil consumption penalty.
The votes are in... and transit comes out a winner
Turns out, they would. The Center for Transportation Excellence tracked the transit ballot initiatives — all 32 of them — and when the site was updated mid-Wednesday morning, I was pleasantly surprised to see that of the 11 measures that had transit-rail implications, all but three were approved (and one of those — a Santa Clara Valley sales tax increase that would help fund a BART extension to the Silicon Valley — still was too close to call as of Nov. 6).
Among the "yeas": a half-cent sales tax in Los Angeles County that will provide $40 billion over 30 years for transit and road projects; a sales tax increase in the Seattle region to fund $17.8 billion worth of transit projects over the next 20 years; and a $10 billion statewide bond measure in California to provide initial financing for a high-speed rail system (my personal favorite ... more on that next week).
Maybe the insanely high gas prices earlier this year brought more attention to the need for transit alternatives. Maybe more voters are seeing transit as a solution to climate change. They might even have become more aware that investing in transit means investing in our economy. Whatever the reason, it's encouraging to see that, at a time when many people are pinching pennies and analyzing every dollar they spend, transit is a priority. I'm sure the significance isn't lost on transit officials. Let's hope it's not lost on members of Congress, either, as they begin discussions next year about a new surface transportation authorization bill.
Posted by: Angela Cotey | Date posted: 11/6/2008
Comments
Posted by Dodger in PDX on 11/7/2008 11:56:11 AM
Just today, the train kicked me out in town 25 blocks from the office cuz 2 cars had a head-on fender bender in a intersection ahead, blocking the train and putting me out on the sidewalk. No problemo....just walk 5 blocks and catch a bus. I got to work 10 minutes late. A meeting was already started, but they were not even done with the preliminary election gushing yet. The point is, multi-modal transportation is what our cities need and people are beginning to vote that way.
Posted by James Mancuso on 11/11/2008 11:32:07 AM
Investment in transit and rail passenger service is long overdue and it is about time we had an administration that has come to its senses, especially about rail. The outgoing administration sure has not, neither has John McCain who is clearly as hostile to Amtrak as the moronic Bush Administration has been.The insane gas prices are turning out to be a blessing in disguise. However, more needs to be done to get transit service, especially interurban to rural areas, too, especially in light of service cuts made by Greyhound which has been trying to become like the airlines lately.They seem to forget that you have to have branch lines to feed traffic to the mains. Why not take the laide off autoworkers and train them to build rail passenger cars and related equipment?
Posted by David Shorey on 11/11/2008 12:05:15 PM
We are a manufacturer of compenents for the rail industry and are very pleased to see the results of the elections have strongly supported rail. Public transportation and les urban sprawl in indeed the answer to decreasing environmental stress to our world and we wanr to be a strong part of this industry.
Posted by MICHAEL WILLIS on 11/12/2008 7:43:06 PM
"EXTREME TRAINS" hosted by Matt Bown on the ''History Channel''was absolutely the greatest TV show ever produced for the railroads, and there''s more on the way! The scene from ''HORSESHOE CURVE'' is an example of railway engineering of the highest degree. If politicians want to talk about re-building infrastructure & economic prosperity, the first place they need to look is the railroad industry.
Posted by Mike Wikman on 11/13/2008 12:36:09 PM
Saw Extreme trains the other night and I was suprised at the action in it. For a change they has som eone ( Brown)that knew what a railroad is and what it does. I liked the show because it showed the railroad as it is. The engineers for a change didn't make a fool of them selves They knew what they were talking about. They don't drive trains they operate locomotives that pull trains. Riding the cabs of the locomotives,watching what an engineer does, what grades are and the dynamic brake explaination was excellent. The Altoona shop and the Horseshoe curve was done well. I know they only had 40 minutes or so to do the whole show this is where the problem with me is. From Altoona to the Washington generating station zip too fast I would like to see a 2hour show about our facinating industry that I have been a part of for 54 years now
