Short lines prove they’re long on industrial development
The company, which operates an aggregate distribution facility in Metter, Ga., found both in Statesboro. The city is a hotbed of aggregates demand and the site is adjacent to Georgia Midland Railroad’s (GMR) line.
On Sept. 1, Southeast Aggregates opened the distribution facility, which features track with unloading capacity for 15 cars.
Owner and Manager Jerry Brown believes the location “would not have been logical without the GMR available to serve our material transportation needs by rail,” according to a posting on GMR owner Atlantic Western Transportation Inc.’s Web site.
When it comes to industrial development, short lines are doing a better job of convincing shippers they can be the rail provider of choice for a new plant. How? By being a “we’re there when you need us” transportation provider.
I often hear short-line operators say they can provide more “personalized” service than a Class I. Need cars once or up to seven days a week? You got ‘em, the operators say.
But they’re not just talking the talk. Although short lines might not have a Class I’s long-haul reach or marketing power, they know how to sell — and excel at — their niche as a local service provider. Especially in the already ripe ethanol/biodiesel market.
Witness Atlantic Western’s other short line, the Heart of Georgia Railroad (HOG). Alterra Bioenergy Resources Corp. is building a plant in Plains, Ga., on HOG’s line that will produce biodiesel from crude soybean, peanut and other oils.
To open in November, the 30 million-gallon capacity facility is located in the Heart — make that heart — of Georgia’s soybean, peanut and cotton crops. But the short line’s ability to move thousands of carloads of inbound raw materials and outbound biodiesel to and from the plant when needed certainly had Alterra Bioenergy officials going, well, HOG-wild for the site, as well.
Posted by: 
Jeff Stagl | Date posted: 9/19/2007
Merging and emerging — Kevin Schieffer talks about the CPR/DM&E marriage and PRB project
The DM&E’s president and CEO chuckled about the about-face during a phone call I received from him a few hours after the press summit. With a potential Class I parent eager to advance his Holy Grail, the decade-in-the-making Powder River Basin project, Schieffer can afford to laugh these days.
He believes the DM&E hooked up with the best possible large-road merger candidate in CPR, which won out with a $1.5 billion acquisition deal over upwards of 10 suitors — including, as widely reported, rival Canadian National Railway Co. and, as widely rumored, Union Pacific Railroad.
Long before the DM&E and CPR began discussing a merger in April, the two railroads had talked about joint marketing and operational opportunities, says Schieffer. Now and then, they also chatted about the PRB project, of which CPR knew more about than the other bidders, he says.
“We also had been desirous of buying part of their U.S. rail operations or coordinating with them,” says Schieffer.
Instead, CPR will be the buyer and the DM&E, the purchased commodity, if the Surface Transportation Board approves the merger. The board’s review process could take four to 10 months, says Schieffer, who isn’t anticipating any major oversight snags because the two railroad’s networks would create an end-to-end system.
“We believe they’ll look at this as a pro-competitive transaction,” he says.
Many DM&E customers already are pro-merger. In a press release, Farmers Cooperative General Manager Randy Rieke said the “combined and extended rail system provided by the DM&E and CPR will create new opportunities and extend market reach for many shippers.”
A key group of PRB project onlookers — basin mines and coal users, or CPR/DM&E’s potential customers — also are viewing the merger in a positive light, says Schieffer. Because of CPR’s resources and knowledge of the PRB project, the merger “adds credibility in the marketplace,” he says. And, ultimately, it’s the marketplace that will determine if the $6 billion project proceeds.
So, too, might BNSF Railway Co. and UP, which could voice merger objections to the STB at some point or work behind the scenes to keep a third competitor out of the basin.
In the meantime, CPR and the DM&E will determine what happens to the identities of the regional and its Iowa, Chicago & Eastern Railroad Corp. subsidiary after the merger. If CPR’s handling of the Soo Line, a U.S. railroad the Class I acquired in 1992, is any indication, the two regionals stand a chance to retain their namesakes — at least for a while.
Posted by: Jeff Stagl | Date posted: 9/7/2007
Comments
Posted by Dave Smith on 9/7/2007 8:03:28 PM
I think BNSF management blew it big time regarding the DM&E PRB project. They had a chance to actually gain from the potential new trackage — they could have helped finance part of the project in return for trackage rights over the new line from the current Orin line east to Edgemont. New coal hauling capacity for BNSF all at the minor cost of having a small regional line providing minimal competition. Instead, BNSF goes out of it's way to try and stop the project, even to the point of aligning itself with the anti-railroad Mayo Clinic. Now, it looks as though BNSF will have to deal with a formidable Class I as a third player in the basin, and they got nothing out of it. If I was a BNSF stockholder, I'd be asking BNSF management some hard questions right now!
Posted by Jenson on 9/10/2007 11:51:08 AM
It would be excellent if the site had an RSS feed so we can subscribe to your comments via a blog reader such as Bloglines or Google Reader. Glad to see the blog!
Posted by E. D. Motis on 9/10/2007 2:43:28 PM
The merger announcement was a great "shot in the arm" for CPR. In my opinion, this action was a preemtive move to stay independent and not become another part of the Union Pacific. In the long term, the stage is set to access the Powder River coal fields and set the stage for a possible merger with KCS. With the latter, the industry would truly have a NAFTA railway. Whatever occurs, it will be interesting...
Posted by Oakie G Ford on 9/10/2007 5:41:29 PM
I love "the law of unintended consequences". Having been beaten in a life and death sturggle with our small niche company that resulted in the industry leader seeing the "fit" we had created (vis a vi PRB)and within hours of closing we became an unstoppable force. The capital clout made possible the "PRB dream" and resulted in a 20% gross return. Nintheenth century greed and its government monopolism mindset is very much alive. As a life time student of transportation and its historic foundation this will be a great read for years.
Posted by Ed Feege on 9/12/2007 1:07:50 PM
I keep waiting for the other shoe to drop — government imposed carbon restrictions. The EIA says that under some cap-and-trade legislation now in the hopper, coal could fall from around 52% of US energy generation to anywhere from 11% to 35%. Under those circumstances, might even the ongoing capacity investments in the PRB become superfluous, let alone a new CP/DM&E build-in? But I guess the railroads' investments demonstrate their assessment of the political risk. Moreover, the CP/DM&E arrangement seems to hedge future coal-related developments. And of course, the EIA has a history of less-than-precise predictions.
This does compute! The rail industry is a good fit for IT grads
The Class Is are hunting for more computer science grads. Major universities that used to provide railroads a steady pool of IT-savvy candidates now churn out graduating classes less than half the size of those several years ago.
Jeff Campbell is concerned. During a recent chat in Fort Worth, BNSF Railway Co.’s vice president of technology services and CIO told me the railroad — the one with a “technological bent” as CEO Rose likes to describe it — will need to replace 40 percent of its aging workforce by 2015, and that includes hundreds of IT folk.
Problem No. 1: There’s an outsourcing stigma about IT, says Campbell. Meaning many college students believe companies reach out to India, China or some other far-off land to handle the majority of their information technology needs. That’s true to a certain degree, but there’s plenty of IT work states-side, he says.
Problem No. 2: “Railroads and technology is an oxymoron to most young people,” says Campbell.
So, what to do? For Campbell, get the word out that railroads employ oodles of technology and there are plenty of IT opportunities — especially at BNSF. Campbell works with fellow CIOs to conduct a “Technology Awareness Day” at universities, offers a management trainee program to college juniors and introduces computer science to at-risk kids — those who believe a college education is as unattainable as grasping IT principles.
“We’re making the changing workforce in IT an issue,” says Campbell. “And we’re trying to infuse a business perspective.”
A business that can pay off for the open-minded and IT-minded graduate.
Posted by: Jeff Stagl | Date posted: 9/5/2007
Comments
Posted by Jenson on 9/10/2007 1:07:08 PM
What do you think makes Railroaders hestiate to integrate technology into their daily operations? Money? Lack of Understanding?
Posted by L Reed on 10/29/2007 10:45:26 AM
BNSF is going backwards TOWARDS experience as far as management employees (trainmen-engineers). The old way is still the best way. You had to have 4 years of ACTUAL working experience BEFORE being promoted to conductor. Same with engineers. NOW you go to a 16-week SCHOOL. You're automatically a conductor. NO on-the-job experience. We've got a trainmaster right now that has NO TRAIN EXPERIENCE. NEVER been on a train. How can a company justify professionalism with programs like these! (Let alone the Safety factor which is a different subject!) This guy hasn't even been alive as long as I've worked out here, and HE'S MY SUPERVISER??? Experience....Bottom line.
Posted by J.A. on 12/3/2007 11:16:29 AM
It's not a lack of money. Definitely! It's a lack of foresight, a lack of ambition, it's a lack of simple-minded CEOs, and complacent board of directors, in their infinite wisdom counting their money instead of building their respective railroads. These are the same carriers that cry poor mouth but won't help themselves by re-investing in themselves, without enourmous tax breaks, failing to hire and train inexperienced new hires. They (carriers) are content with their 16 mph system averages,and their ability to tell their customers to hurry up and wait, while they overcharge and thumb their noses at the federal administration.
Posted by Adron on 12/4/2007 12:23:52 PM
That's a pretty harsh judgement there J.A. Seems your more anti-rail than anything. America has one of the, if not THE most efficient freight rail system in the world. It might not be the fastest but it provides the most bang for the buck. It's one of the only freight systems that is accountable to customers, shareholders, and actually staying afloat financially. That is pretty darn impressive. Not to say it couldn't be more efficient, but they are smart to play it conservatively. Considering how mistreated the freight rail industry has been at the hands of the federal government and special interest groups, it isnt' much of a surprise. I say keep up the moderate progress, no reason to threaten the livelihood of thousands (regardless of some people's ungrateful attitudes) and the cost savings to millions across the country. ...and just out of curiosity, what technology would the other commenters suggest be integrated that isn't being worked on already?
Posted by Mark on 12/7/2007 2:27:10 PM
Its all fine and good to talk about training people for management positions, but it's the hourly workers who keep things running. The need for "hundreds" if IT people hardly compares to the industry's need to replace thousands of people retiring who have high-level mechanical skills. That is where many of the maintenance problems that reduce speeds and customer service will occur. It is where the industry will falter mightily with out a stable recruiting and training program. Transit faces the exact same predicament; retirements, expansion of service and introduction of more technologically complicated equipment. I might add that railroads have historically been on the cutting edge of technological change. Remember SPRINT phone service began.
Posted by J.A.Swidergal on 12/11/2007 11:13:25 AM
It's not harsh judgement, it's fact. The carriers' complain about capacity, then why don't they add another rail. (Where there is one set of tracks, put in a second set of tracks. Where there is two, put in three, etc.) And, actually I am not anti-rail. I might be anti-union but not anti-rail. But the reason it takes longer for the railroads to incorporate technology is too many of the union leadership are stuck in an antiquated existence. They continue to battle non-existent battles, they're slow to take a stance, e.g. just like remote control. The BLE rejected it so as the engineer would lose his seat on the engine, through the BLE's primadonna attitude they lost that position, the conductors latch on to it as another position. It just seems that complacency gets in the way of good ideas, and it's not just the complacency of the agreement side but of the non-agreement side as well.
Posted by BradyRS on 12/14/2007 10:18:36 AM
My company sells "high tech" train control equipment & systems to the North American freight railroads, and it appears to me as if at least the big freights (technology ain't cheap) are trying to adopt technology as fast as they can. However, in the train control part of the industry there's such a huge installed base of older electro-mechanical equipment spread out over thousands of miles of trackage that "wholesale" replacement of some subsystem takes a LONG time to install & commission. In addition, while such replacement is being performed the railroad still has to operate. As most everyone who keeps an eye on the industry knows, parts of many railroads are operating at or near capacity and "track time" for maintenance or upgrades is very difficult to come by. JA — I respectfully disagree with your statement implying how easy it is to "add a rail". While some roads east of the Mississippi took up trackage in the 60's & 70's (Penn Central/Conrail's main lines in Pennsylvania, for example), there are MANY places in the eastern U.S. where addition of another track next to existing trackage is virtually impossible. Large parts of all the main lines in an around the Appalachian Mountains, such as former Southern, Clinchfield, L&N, C&O, B&O, N&W and Virginian come to mind. Quite often lines of these roads are either on a mountainside bench or a river bank bench and all sorts of environmental concerns would have to be overcome to build new tracks, notwithstanding the $2MM per mile to buy & install the new track (per Jan '08 Trains magazine, page 42), WHICH DOES NOT INCLUDE THE COST OF BUYING THE REQUIRED PROPERTY (if there's any for CSX to buy in the New River gorge, for instance). Where property is available and traffic requires it, UP & BNSF are adding trackage (on the Sunset Route, the Transcon & the Powder River Basin) as fast as their wallets and operational constraints allow. The problem is that once the track is added, if traffic decreases due to business conditions (like the depreciation of the US dollar over the past 6 months), YOU STILL HAVE TO MAINTAIN IT. Its not like a new highway, which seems to be clogged with autos pretty quickly after opening and the traffic then NEVER seems to decrease. It's like adding a 1-bedroom-with-bath addition to your house when the 3rd kid comes along — you still have to maintain & clean it after the kids are gone! The freights must spend their own money to add track — and then they pay additional real estate taxes on it in most areas, to my knowledge. Regarding the quality of new recruits, I must agree with the gentlemen who complains about "new hires" with little or no on-the-ground experience becoming supervisors. I was such a person when I hired on with a busy switching & terminal railroad in 1974 as a management trainee (yes, I'm a child of the '40's). I already had a degree and 3 years of experience as a manager/supervisor in the Army, and I had been a USW member while working several summers in a steel mill near home so I knew what working in a union environment was like — but I had to tread very carefully when I finished my 5-month training and was assigned to a particular yard as an ass't trainmaster. At the time I had kind of a photographic memory for maps. So, I got my hands on a detailed map of my yard area to learn how it operated. Of course, this was a virtually useless effort, because once I went out into the yard to give a crew their orders, ALL THE TRACKS LOOKED ALIKE — especially at night! It took me about 6 months (3 each on daylight, 4-12 and night turn), to KIND of learn where I was in the yard at any given time. This is because the tracks looked different to me depending on weather, time of day, and if you were riding a train, how far above the rail you were. The locomotive cab, the caboose platform, the bottom step on a hopper — all had a slightly different view for me because of their elevation. It took a LOT of riding just in my yard to learn this. I don't believe you can pick this kind of knowledge up in a classroom or in a simulator — you have to experience it. On the other hand, there was a huge amount of featherbedding due to restrictive union agreement work rules at the road where I worked. In the summer of '76 our yard clerks threatened to strike. Our road's response was to use "scabs" — substitute workers — in such situations, as the customers still had to be switched. Thus all the management people in the Transportation Department were trained or re-trained as conductors, or if they had were promoted enginemen, re-trained as engineers. Once this training was finished and the strike loomed, the managers were given their crew assignments. I was shocked when I saw the assignments for my division of the railroad — my area, which used 12 engines with crews per shift (36 CREWS PER DAY), only had THREE scab crews per shift assigned to do the same work. I called my boss and asked how this could possibly be done — his response was "NO RESTRICTIVE WORK RULES" — and we would still get two 45-minute breaks in our 12-hour shifts. It's no wonder my road, which used 200 CREWS PER DAY in the summer of 1976, today only employs 20 on a busy day — or why 5 large customer facilities have been shut down since then and have been leveled, with both the good rail and customer jobs gone....never to return.
