ASLRRA's Baker assesses short lines' growth potential, pressing issues in 2023

Chuck Baker has served as president of the American Short Line and Regional Railroad Association since February 2019. He previously was president of the National Railroad Construction & Maintenance Association. American Short Line and Regional Railroad Association

Compiled by Jeff Stagl, Managing Editor 

In the December issue of Progressive Railroading, we shared outlook-on-the-coming-year comments from Class I CEOs, transit agency executives and rail contracting industry leaders. What might be in store for regionals and short lines in 2023? 

For answers, I turned to American Short Line and Regional Railroad Association President Chuck Baker. He provided responses to the following questions via email.  

How would the ASLRRA characterize or forecast short lines' potential for volume growth in 2023? Which commodities/business groups are looking good and which ones are struggling for now? What, predominantly, will drive business growth for short lines in 2023? 

While the big picture of the macro economy and question of what commodities are growing the fastest is always of interest, the reality for individual short lines is that they are and must be hyper-focused on their individual local customers. 

What drives business and growth for them is:  

1) being prepared to grow and change with customers as their needs dictate, whether that’s a new unit-train operation or one new carload a month;  

2) partnering with customers and potential customers to solve logistics problems — that can be via car storage, warehousing, new transload facilities or serving new business parks, etc.; and  

3) working on the long game with customers, such as adding sidings or spurs to serve new developments or partnering with local economic development entities to advance new industrial developments or to land new major shippers. 

There is demand out there, and our members are working every day to generate more carloads. If Class I service continues to improve, there’s a huge opportunity for all of us, regardless of what the macro-economy is doing. That’s both from new development and from taking market share back from our trucking competitors. 

On the specific commodity question, one area I will note is the huge opportunity in the burgeoning renewable diesel market. There is an opportunity to move the feedstocks for the renewable diesel, the renewable diesel itself and the byproducts of the renewable diesel. And then there’s an opportunity to use the renewable diesel in locomotives, too, since it’s essentially a drop-in replacement for traditional diesel. The rare win-win-win-win opportunity.  

What are the ASLRRA's biggest concerns in terms of any potential obstacles to short lines' business growth in 2023? And what pressing issues currently are top of mind for the short-line industry? 

Fortunately, as of Dec. 1, one big threat to positive growth has been avoided for now, as President Biden signed a bipartisan bill from Congress to avoid a rail strike. Although short lines are mostly not part of that national bargaining process and are generally blessed to have very collaborative relationships with their employees, a shutdown of Class Is would have effectively led to a shutdown of short lines within a few days. Given all of the service struggles of the network over the past few years, a shutdown — even a temporary one — would have been another very unwelcome disruption for our collective customers. 

The regulatory environment is a key focus for ASLRRA on behalf of our members, and there are some troubling regulations being debated right now. One is the Federal Railroad Administration’s potential crew size mandate, which is in the notice of proposed rulemaking stage right now.  

The rule would mandate two people in the cab of locomotive in many circumstances, even though there is no viable safety justification to mandate that. Mandating that, when it isn’t needed for safety or business purposes, would add an unnecessary cost burden to short lines.  

Short lines already operate on very thin margins in most cases and have survived and thrived over the decades by being flexible, nimble and responsive to customers, and innovative in their operations and business practices. Adding this heavy-handed, unnecessary and prescriptive regulation would go the wrong way and would threaten the success of short lines moving forward. We will be attempting to have the rule altered to be more sensible and realistic. 

transloading industrial park New transload facilities and state funding are crucial for short lines, Baker says. The New Orleans Public Belt Railroad recently learned it will receive $1.5 million from the Louisiana Department of Transportation and Development to help fund a new transloading industrial park. Port of New Orleans

Another troubling regulation on the horizon is the California Air Resource Board’s (CARB) draft rule on reducing locomotive emissions. While short lines are aggressively committed to environmental sustainability — including by reducing locomotive emissions through higher-tier locomotives, using biodiesel and renewable diesel, trying out new fuel additives and reducing idling — the CARB’s draft rule is draconian and unrealistic, both in financial impact and timing. 

Beginning in 2023, CARB proposes to start collecting money from railroads that have anything other than zero-emission locomotives and sequestering that money until a railroad can buy a zero-emission locomotive. This rule is legally pre-empted by federal rules in our opinion, but even if it weren’t it just isn’t viable for short lines in the immediate future. Short lines in California will be working to alter the rule and we will need to keep our eye on any similar developments in other states or at the national level. 

There are a lot of bright spots for short lines in 2023, in addition to all of the traffic that is ready to come back to rail as soon as service is reliably back to good. We will be competing aggressively for the host of grant opportunities at the federal level through the Infrastructure Investment and Jobs Act, as well as through state grant programs. There’s no shortage of short-line projects that will drive volume and opportunity for our customers, especially in rural and smalltown America. 

We are looking forward to the results of this year’s Consolidated Rail Infrastructure and Safety Improvements (CRISI) Program notice of funding opportunity (the application deadline was Dec. 1). We are now focused on the FY2023 appropriations levels and even the FY2024 budget to ensure that federal grant programs — and not just CRISI, but also the Rebuilding American Infrastructure with Sustainability and Equity (RAISE), Nationally Significant Multimodal Freight & Highway Projects (INFRA), Port Infrastructure Development Program (PIDP) and grade crossing elimination program — are robustly available for our members over the next few years. 

Another initiative that has made great progress is RailPulse, the industry telematics initiative to make rail movements more transparent to our customers and help us all better manage our rolling inventory. In addition, the Short Line Safety Institute continues to create opportunities for short lines to level up their safety culture, leadership skills and hazardous-materials handling skills.