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Rail News Home Short Lines & Regionals

June 2010

Rail News: Short Lines & Regionals

Are happier days here again for short lines? - by Tony Hatch

Last month, I attended the American Short Line and Regional Railroad Association's (ASLRRA) 97th Annual Convention & Conference in Orlando, Fla. (May 1-4), where record numbers of exhibitors and a near-record number of attendees suggest a return to happy, or at least, happier days. Also: A number of private-equity types were seen re-emerging from hibernation.

Recent short-line traffic totals (see RMI's RailConnect Index) continue to follow the Class I trend line toward a clear recovery, with strong year-over-year gains posted through the year's first five months. Traffic totals coming from the largest short-line holding companies, RailAmerica Inc. and Genesee & Wyoming Inc. (GWI), also have looked good. Shippers in attendance echoed the overall spring theme: a shift away from capacity in abundance to worrying about shortages.

But all is not entirely well in Short-Line Land. There are some themes that are beginning to emerge out of D.C., and the increased retail emphasis we may see out of the major rails combine to threaten short lines' revenue growth rate (not to mention the status of their Class I partnerships). There's also been a lack of transactions in the sector, although that likely is due more to the lack of sellers than buyer interest.

Lingering Legislative Concerns

During the event, I was able to spend time with some of the Washington scene's sharper minds, some of whom expressed more concern than I've heard in a while. There were rumblings of a possible leadership change in the House (Rep. Jerry Costello to replace Rep. Corrine Brown as chair of the House Transportation and Infrastructure Committee's Railroad Subcommittee?), while all were waiting on the Senate and S. 2889 (the "balanced competition" bill). In short, the three main legislative concerns:

1. The belief that the passage of the short-line tax credits in 2010 (retroactive) appears to be slipping a bit, from "sure thing" status to "likely." (One observer said the odds dropped from 90 percent to 75 percent.)

2. Although there has been silence on S. 2889, it remains a major personal issue for the key chairmen in the House (James Oberstar) and Senate (Jay Rockefeller), and the smaller rails weren't as confident as their much bigger brothers that the rails have the votes to beat what they perceive to be a bad bill.

3. Truck size and weight is a growing concern — and not from a national perspective, where the rails lead a widespread consortium against it, but from the states. Talk about unintended consequences! States that cannot finance road maintenance now are proposing larger trucks, and would get larger potholes and headaches in return. By regionalizing it, it becomes less of a concern to the large, long-haul rails, but it can hurt the short lines in the manifest area. (Heard at the hotel bar — "That'd really hurt GWI.")

Meanwhile, positive train control (PTC) remains on the front burner for railroads large and small. During his May 3 morning keynote, BNSF Railway Co. Chief Executive Officer Matt Rose told the ASLRRA hordes that his railroad would make the 2015 deadline — but at what cost? Budgets are rising (see CSX Transportation) and its not clear if the federal government will help out (despite its clear and evident public safety benefits) — although FRA Administrator Joseph Szabo, who also spoke on May 3, seemed to acknowledge that.

PTC: A Front-Burner Issue

The 2015 deadline has some wondering whether the technology will be ready and whether they aren't rushing to a less-vibrant model. Already one major defense technology leader (the one with a system up and running in Australia) has dropped out of the U.S. story, saying the timeframe has forced the carriers to use Wabtec rather than promote a tech arms race. The cost-benefit seems stacked against them — even more so when you take out benefits from separate technologies GPS, "precision dispatching," etc. One more worry note: In European trials, rails actually lost capacity upon Incremental Train Control System implementation. A terrific summary of the issue can be seen in an Oliver Wyman study that was commissioned by the Association of American Railroads.

In sum, the conference was a boisterous success, another indication that the recovery's real ... but even in the celebratory din, ominous pockets of concern remain.

Tony Hatch is an independent transportation industry analyst and consultant, and program consultant for Progressive Railroading's annual RailTrends conference. He can be reached via email at


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