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wanderer53 Sir Nigel Gresley

Location: front left seat EE set now departed

Freight carload traffic keeps gaining: AAR

Thursday, November 18, 2010  

U.S. freight carload traffic advanced 5.8% for the week ending November 13, measured against the comparable week one year ago, the Association of American Railroads reported Thursday. U.S. intermodal traffic also gained, up 11.9%, compared with the same week a year ago.

Sixteen of the 19 carload commodity groups measured by AAR increased from the comparable week in 2009. Big gainers included: metallic ores, up 164.7%; coke, up 30.1%; and metals and products, up 23.9%. The three commodity groups posting declines were nonmetallic minerals, down 19.2%, motor vehicles and equipment, down 14.8%, and primary forest products, down 6.2%.

Canadian freight carload traffic rose 8.0% from the same week one year ago, while intermodal advanced a stellar 19.1%. Mexican freight carload volume rose 10.1% from last year, while intermodal rose a nearly identical 10.0%.

Combined North American rail volume for the first 45 weeks of 2010 on 13 reporting U.S., Canadian, and Mexican railroads was up 9.6% from last year, while intermodal traffic was up 14.9%.

Tonymercury Sir Nigel Gresley

Location: Botany NSW

Work can begin on construction of two intermodal freight facilities in Memphis and Birmingham thanks to a signed grant agreement with the Alabama and Tennessee DOTs for $105 million in ARRA funds.

December 30, 2010

U.S. Transportation Secretary Ray LaHood today announced that work can begin on construction of two intermodal freight facilities in Memphis and Birmingham thanks to a signed grant agreement with the Alabama and Tennessee Departments of Transportation for $105 million in American Recovery and Reinvestment Act funds. The facilities are a key part of a larger effort to increase rail capacity and relieve traffic congestion along the 2,500-mile Crescent Corridor from the Gulf Coast to the Mid-Atlantic.

“President Obama’s efforts to create jobs and improve our nation’s transportation infrastructure depend on investments like these,” said Secretary LaHood. “The new facilities in Birmingham and Memphis will create jobs, help increase rail capacity, reduce highway traffic congestion and improve air quality for area residents.”

Of the $105 million, Alabama will use half – $52.5 million – to build the 261-acre Birmingham Regional Intermodal Facility (BRIMF) near McCalla, about 20 miles southwest of Birmingham. The remainder of this $97.5 million project’s funding will come from Norfolk Southern Railway Company (Norfolk Southern) and other sources.

Tennessee will use its half – $52.5 million – to build the 380-acre Memphis Regional Intermodal Facility (MRIMF) immediately west of Rossville, about 27 miles east of downtown Memphis. The remainder of this $105.1 million project’s funding is expected to come from Norfolk Southern and other sources.

The existing Crescent Corridor passes through 13 states, from Louisiana to New Jersey. The planned upgrades to facilities and rail capacity will allow freight to move faster and more reliably. By diverting 1.3 million commercial trucks from interstates, the Crescent Corridor will greatly improve air quality along the route, reduce traffic congestion and generate significant fuel savings.

“These two new facilities will play key roles in keeping our economy strong,” said Federal Highway Administrator Victor Mendez. “The jobs they will create for hundreds of workers will keep our highways safe and ensure that this important rail corridor is ready to meet the demands of the 21st century.”

The grant is part of the Transportation Investment Generating Economic Recovery (TIGER) program included in the Recovery Act to promote innovative, multi-modal and multi-jurisdictional transportation projects that provide significant economic and environmental benefits to an entire metropolitan area, region or the nation.

The U.S. Department of Transportation announced the selection of $1.5 billion worth of TIGER grants for 51 projects as part of the first anniversary of the Recovery Act on February 17.

wanderer53 Sir Nigel Gresley

Location: front left seat EE set now departed

Rail traffic being up 7.3% YoY is a good gauge of economic expansion. In last month’s analysis, EconIntersect suggested that rail transport YoY improvement would narrow further in December – and happily we were wrong as the YoY percentage gain widened. Rail traffic historically declines MoM between October through December.

Here are the headlines from the AAR (Association of American Railroads) for the period ending December 2010:

Way better than 2009, but still lots of room to grow. That sentiment sums up U.S. rail traffic in 2010. Total carloads for the year were 14.8 million, up 7.3% over the 13.8 million in 2009. Total intermodal volume in 2010 was 11.3 million trailers and containers, up 14.2% over 2009’s 9.9 million units

 for the full article http://seekingalpha.com/article/246101-rail-traffic-increase-a-good-gauge-of-economic-expansion

wanderer53 Sir Nigel Gresley

Location: front left seat EE set now departed

Railroads boast fuel advantage

Trucks struggle as diesel costs rise

DETROIT – U.S. railroads’ fuel-efficiency advantage over trucking companies may expand as they boost investments in technology while truckers must put more of their money into personnel.

Freight railroads such as Union Pacific Corp. are investing in systems that automatically shut off engines under certain conditions and software that coordinates trains’ movements more efficiently. The trucking industry, working to meet its first-ever fuel-efficiency standards, is being forced to divert more spending to attract workers and battle increased competition as more trucks fill the highways.

“Railroads by far are leading the pack in terms of investing in fuel-saving initiatives,” Walter Spracklin, an analyst with RBC Capital Markets in Toronto, said in an interview. “Driving fuel costs down through lower consumption rates is the focus in every operator I talk to.”

Railroads can move a ton of freight 156 miles to 512 miles on a gallon of fuel, compared with 68 miles to 133 miles for truckers, according to the Federal Railroad Administration. That edge has become even more crucial as a gallon of diesel fuel has risen to more than $3.50 today from 10 cents in 1970.

The six largest publicly traded U.S. railroads may have an average profit margin of 14 percent in their current fiscal years, up from 12 percent a year earlier, according to analysts’ estimates compiled by Bloomberg. The average profit margin of 20 publicly traded U.S. trucking companies is estimated to widen to 3 percent in 2011 from 0.6 percent in 2010.

Union Pacific has equipped 70 percent of its 8,350 locomotives with technology that turns off the engine after varying idle times, said Mike Iden, general director of car and locomotive engineering. The process conserves about 167,000 gallons of fuel a day, he said. With diesel at $3.53 a gallon, the daily savings equal $589,500.

Railroads also use software that coordinates trains on a network, showing conductors and dispatchers where they can run routes more effectively.

Union Pacific, based in Omaha, Neb., last year sped the adoption of staggering engines throughout a train to spread the locomotive power, moving 62 percent of its gross ton miles that way, up from 35 percent in 2008. Distributing power improves trains’ fuel efficiency as much as 6 percent, Iden said.

General Electric, which makes locomotives, has developed air-traffic-control-style software that manages the 2,500 engines on Norfolk Southern Corp.’s network. CSX Corp. uses a program that tells conductors and dispatchers when, where and how to speed up trains.

“The rails by and large have been investing in more fuel-efficient technology, and also have pricing power,” said Joel Levington, who covers railroads for Brookfield Investment Management Inc. “We expect they will be more profitable than trucking fleets.”

On a scale one to five, where five is a “strong buy” and one is a “strong sell,” the average of analysts’ recommendations for the six largest publicly traded U.S. railroads is 4.22, according to estimates compiled by Bloomberg. The average for 20 publicly traded U.S. trucking companies is 3.8.

Tonymercury Sir Nigel Gresley

Location: Botany NSW

Industry Report Shows Rail Private Capital Investments Enable Economic Growth, Sustain Jobs

WASHINGTON, March 9, 2011 /PRNewswire-USNewswire/ -- The Association of American Railroads today announced the nation's freight railroads in 2011 are planning to spend a record $12 billion on capital expenditures, after setting a record with$10.7 billion in capital spending in 2010. According to the Great Expectations 2011, Railroads and Continued U.S. Economic Recovery report, these investments are potentially threatened by regulatory and legislative policies being considered inWashington, D.C.

"Even during the worst recession in a generation, freight railroads have been plowing record amounts of private capital back into the rail network each and every year, achieving one of the highest capital investment rates of any U.S. industry," said AAR President and CEO Edward R. Hamberger. "A regulatory framework that provides certainty will foster continued economic recovery and job creation."

While President Obama and other leaders have called upon private companies to increase capital spending and rev up hiring, the nation's freight railroads have been spending record sums of private capital on the rail network and bringing people back to work. Railroad hiring at the end of 2010 was up 5.2 percent over the year before, according to the report, and railroads are positioned to hire more workers in the coming years.

"The President has issued a clear call to American businesses, urging them to get off the sidelines and get back in the game by investing capital and hiring," Hamberger said.  "Freight railroads have been in the game for the past 30 years, investing more than $480 billion to build and maintain America's freight rail network with private capital, and supporting jobs all across the country. Freight railroads have a great track record and are ready to continue investing in the national rail network so U.S. taxpayers don't have to. But, we must have a regulatory framework that supports, and does not hinder, private investment."

"President Obama recognizes the role businesses play in putting our economy back on track, and his Executive Order pledging to review and eliminate onerous regulations that stymie growth and economic competitiveness is a significant step in the right direction," Hamberger said, noting that AAR and the Federal Railroad Administration (FRA) recently agreed to undertake a review of the most expensive federal mandate in U.S. railroad history – the agency's final regulations for implementing positive train control.  Under a settlement between the railroads and FRA, the agency will issue a new notice of proposed rulemaking addressing areas within the final PTC rule.

"Ultimately, the regulatory environment in Washington, D.C., must be aligned to support freight rail's continued investments in the national rail network," Hamberger said. "Now is the time to revisit what regulations stand in the way of reaching our goals, while preserving those that help ensure continued success and growth."

To read the full report, visit: http://www.aar.org/greatexpectations.

Tonymercury Sir Nigel Gresley

Location: Botany NSW


3/8/2011 Intermodal

N.Y./N.J. port authority's cargo volumes climbed in 2010

The Port Authority of New York and New Jersey's (PANYNJ) cargo volumes rose 16 percent in 2010, an "encouraging sign" of economic growth, PANYNJ officials said in a prepared statement.

Total container traffic in the port reached 5,292,020 loaded and empty 20-foot equivalent units (TEUs) compared with 4,561,527 TEUs in 2009. Last year's volume just missed surpassing the annual record of 5,299,105 TEUs set in 2007.

Loaded TEUs totaled 4,097,420 in 2010, while loaded imports and exports totaled 2,579,093 and 1,518,327 TEUs, respectively, according to terminal operator data. Imports increased 14.9 percent and exports rose 9 percent compared with 2009.

The port's ExpressRail system handled 376,770 containers, up 22.3 percent compared with 2009.

Total general cargo volume increased to 32.2 million metric tons in 2010 compared with 28.2 million metric tons the previous year, according to U.S. Census Bureau data. General cargo imports rose 14.3 percent to 21 million metric tons, while general exports increased 13.9 percent to 11.2 million metric tons.

Total annual bulk cargo fell 1 percent to 49.2 million metric tons compared with 49.7 million metric tons in 2009. Total cargo volume by weight (bulk and general cargo combined) grew 4.5 percent to 81.4 million metric tons compared with 77.9 million the previous year.

To support what's projected to be "modest" annual cargo growth over the long term, the port plans to undergo $283 million worth of improvements this year, including upgrading the port road network and enhancing the ExpressRail system, as well as continuing a program to deepen the port's channels to 50 feet.

"In this economic environment, the competition for port business is fierce," said PANYNJ Executive Director Chris Ward. "That is why we continue to take steps with our industry partners to improve our port infrastructure to ensure we remain a national and global leader in port commerce."

Tonymercury Sir Nigel Gresley

Location: Botany NSW

There's a noticeable number of longer trains rolling through central Montana, but instead of grain and manufactured goods, the 110-car-plus loads are hauling coal.

Such sightings are likely to increase.

There is an increased demand for coal imports in Pacific Rim countries such as China, India and South Korea.

Coal exports from the U.S. to Asia increased by almost 240 percent during the first nine months of 2010, compared with what was shipped during the same time in 2009. According to the U.S. Energy Information Administration, the U.S. exported 13 million tons of coal to Asia during the first nine months of 2010, compared with 3.85 million tons during the same months in 2009.

"Everybody is talking about moving coal to the Eastern Rim," said Evan Barrett, Montana's chief business officer.

That movement of coal from mines in Montana and Wyoming to destinations such as China currently is made through Canada.

Coal is shipped by rail to the Westshore Terminal near Vancouver, B.C., or to the Canadian Crown Corp. Ridley Terminals in Prince Rupert, B.C., and loaded onto ships for delivery to Asia.

However, that could change.

Two coal export facilities, which if built will be the first on the U.S. West Coast, have been announced for Washington state sites, one near Longview, and another near the Canadian border at Cherry Point.

The Longview developer, Millennium Bulk Logistics, faces permit challenges led by a coalition of environmental groups. Those groups, including Seattle-based Climate Solutions, say officials should consider the potential environmental harm when U.S. coal is burned in China.

Last week, Millennium offered to delay coal exports from the facility for at least a year and to conduct a full environmental review to try to settle an appeal of its permit. The move is intended to allow Millennium to begin cleanup of an old aluminum smelter on the 416-acre site and to start work on the dock on the Columbia River — work that has a construction window of October to December.

In January, Montana Gov. Brian Schweitzer went to Seattle to tour the Longview terminal and expressed support for the facility.

Arch Coal, a major player in the Powder River Basin of Montana and Wyoming, bought a 38 percent stake in the proposed Longview coal terminal last month.

Peabody Energy, which also has substantial operations in the Powder River Basin, announced an agreement with SSA Marine, which hopes to build the Gateway Pacific Terminal at Cherry Point, Wash., to export up to 24 million metric tons of coal a year through that facility.

If the terminals are permitted, they could be a benefit for Montana's coal industry, said Bud Clinch, executive director of the Montana Coal Council.

"It could substantially increase the export markets for Montana's coal," he said. "Last year, Montana produced 44 million tons of coal. If those facilities open, I've been told we could see a 10-12 million ton increase in production a year. There are some Montana mines that have the ability to increase capacity, and there are possibilities for new mines."

The Asian coal demand is being driven by growth in countries such as South Korea and China, Clinch said.

"They are making coal import decisions on a number of factors, including the type of coal needed and shipping costs," he said.

Demand in the Pacific Rim for sub-bituminous coal — the type of coal produced in the Powder River Basin — is expected to grow from about 140 million metric tons a year to about 250 million metric tons annually by 2015, according to Peabody Energy. Indonesia and Australia are major coal suppliers for the area, but there is opportunity for the U.S. to increase its market share, Clinch said.

It's an opportunity companies such as Arch Coal are ready capitalize on. The company announced a five-year agreement in January to ship 2 million tons of coal this year and 2.5 million tons annually through 2015 from the terminal in Prince Rupert, B.C.

"This transaction is another important step in accomplishing our strategic objective of expanding Powder River Basin coal sales into the Asia-Pacific region," wrote Steven F. Leer, Arch's chairman and chief executive officer, in a news release. "This throughput agreement gives us direct, immediate access to the growing seaborne thermal market. It also complements our recently announced investment in the Millennium Bulk Terminal in Longview, Wash."

BNSF Railway Co. also is making plans to capitalize on opportunities created by coal demand trends.

It's premature to speculate on any work that may need to be done to handle additional coal trains headed to the West Coast, said BNSF spokeswoman Suann Lundsberg.

However, the company did announced a $3.5 billion capital program in February for this year that will focus on the company's mid-continent and coal routes to improve velocity and throughput capacity. More than 90 percent of the coal BNSF hauls is from the Powder River Basin, with the bulk headed to plants in the upper Midwest.

"Of the 44 million tons of coal mined in Montana last year, about 13 million tons were burned in state, 3 million were exported out of the country and the rest was sent to other states, with the majority going to plants in Minnesota, Wisconsin and Michigan," Clinch said.

The railroad company, which has almost 1,700 employees in Montana, is eyeing coal export opportunities.

"Although still a very small segment of our coal business, export coal will continue to grow," wrote BNSF Executive Vice President Law and Secretary Robert Nober in the winter 2011 edition of the company's publication, Railway. "Working with Operations, we will make sure that BNSF is well-positioned to take advantage of these opportunities and others as they arise."

Some of those opportunities lie west of Great Falls.

"There are two plants, Boardman, Oregon, and TransAlta Power Plant in Centralia, Washington, that use Powder River Basin coal," Clinch said. "Both those plants are set to go offline in 2025, but the coal to Centralia is shipped through Great Falls now."

If the Longview plant is permitted for coal exports, those shipments will likely be routed through Helena, but Cherry Point-destined coal probably would go through Great Falls, he said.

Coal trains, which can be anywhere from 110 to 150 cars long, hold about 10,000 tons to 12,000 tons of coal.

"Just remember, every one of those trains that leaves Montana represents about $22,000 in taxes paid by the coal industry to the state," Clinch said.

Tonymercury Sir Nigel Gresley

Location: Botany NSW

Trinity Industries, Inc. and GATX Corp. announced Tuesday an agreement where Trinity Rail Group, LLC will supply GATX with 12,500 railcars in the next five years. The order will include both tank cars and freight cars.

Tonymercury Sir Nigel Gresley

Location: Botany NSW

Trinity Industries and GATX announce five-year wagon deal

16 March 2011

USA: Leasing firm GATX Corp has agreed to order 12 500 tank and other wagons from Trinity Industries over the next five years, the companies announced on March 15.

TrinityRail Group President D Stephen Menzies said the long-term deal would provide the manufacturer with 'production continuity', while GATX President & CEO Brian A Kenney said the 'attractive' order gives GATX 'clear visibility into its new railcar delivery schedule' in conjunction with secondary market acquisitions and spot orders.

Tonymercury Sir Nigel Gresley

Location: Botany NSW

2011-2015 projection: 48,450 new cars a year

Friday, March 25, 2011

Trinity Industries issued a new projection Thursday calling for the production by all builders of an average of 48,450 new freight cars a year over the next five years. The range is from roughly 30,000 in 2011 rising to around 60,000 in 2015.

In the final hour of trading on the New York Stock exchange Friday, Trinity shares were at 34.26, more than double the 12-month low of 16.11 reached last July. TRN shares closed Thursday at 34.61.  

The Trinity projection is further evidence of the rising momentum of freight car buying that was noted earlier by Peter Toja, president of the freight car analysis firm of Economic Planning Associates. Railway Age magazine last month reported EPA’s forecast for 27,000 new freight car builds in 2011, rising to 33,500 in 2012, 42,800 in 2013, and 58,000 by 2016.

In mid-March, Trinity announced that its subsidiary, Trinity Rail Group, had entered into an agreement with GATX Corp. to deliver 12,500 railcars over a period of five years. D. Stephen Menzies, Trinity Rail Group president, said "the agreement provides us with a level of production continuity for the next five years."

In a presentation to investors Thursday, Trinity noted that the carbuilding industry as a whole shipped 16,500 railcars in Trinity's fiscal 2010, of which 4,750 were from Trinity. The company collected new orders for 8,380 cars during the period, 28% of the industry total. As of Dec. 31, 2010, Trinity's backlog was approximately 5,960 railcars.

Trinity said it has "significant manufacturing capacity" in Mexico that continues to grow. Trinity built 39% of its railcars in Mexico in 2010.

The company also noted rapid growth in its railcar lease fleet, from 8,700 cars in 2000 to 51,910 in 2010. Cars valued at $180 million were added in2010.

In addition to its Rail Group and its Railcar Leasing and Management Services Group, Trinity operates a Construction Products Group, an Energy Equipment Group, and an Inland Barge Group.

wanderer53 Sir Nigel Gresley

Location: front left seat EE set now departed

Rail + Intermodal:

Short Lines

> Short Line Railroads See 9 Percent Traffic Gain

Short Line Railroads See 9 Percent Traffic Gain

Apr 21, 2011 4:06PM GMT

The Journal of Commerce Online - News Story

Short Lines
Intermodal Shipping
Rail Commodities
Rail + Intermodal
North America
United States

Chemicals, auto, intermodal loads show sharp volume increases

North America’s small and regional railroads are enjoying a surge in traffic so far in 2011, with overall volume up 9 percent and some important cargoes growing by double digits.

RMI’s RailConnect Index, which compiles freight levels for 338 short lines in the U.S. and Canada, said reporting carriers handled 1.56 million carloads and intermodal shipments in the 15 weeks through April 16, up from 1.43 million a year earlier. Since there are an estimated 550 short lines in the two countries, the RMI report captures most of them.

The traffic counts include an 11.5 percent gain in the largest short line category -- chemical loadings -- to 262,902 railcar loads. Chemicals include a broad range of products from feedstocks for plastics and pharmaceutical producers to fertilizers and ethanol. When chemical shipments are on the rise, it usually means factories are increasing demand for raw materials to make products and packaging.

By The Numbers:

U.S. Rail Cargo

Short lines’ grain loadings, their second-largest cargo type, rose nearly 9 percent in the first 15 weeks to 219,692 carloads. Construction base materials – stone, clay and aggregates – jumped 15 percent to 160,924. Intermediate metals and product shipments climbed 10 percent to 130,970. And while coal has lagged other groups, short lines loaded 181,615 railcars with it so far this year, up 4 percent.

Although the small railroads focus on bulk commodities, their higher-value intermodal container and trailer volume has surged 21 percent to 116,476 boxes. And motor vehicle and equipment loadings have soared by 49 percent to 22,941 carloads.

wanderer53 Sir Nigel Gresley

Location: front left seat EE set now departed

ARG Trans to Operate Coos Bay Oregon Rail Line

COOS BAY, Ore., April 27, 2011

COOS BAY, Ore., April 27, 2011 /PRNewswire/ -- ARG Trans has been selected by the Oregon International Port of Coos Bay as the preferred operator for the 133-mile Coos Bay rail line, following interviews with five final candidates in January 2011.

The Port has begun negotiating a contract or lease agreement with ARG Trans to operate trains and maintain the rail line.

The former Central Oregon and Pacific track has been closed since 2007 and was purchased by the Port in 2009. The line will operate as the Coos Bay Rail Link (CBRL) and is undergoing nearly $24 million in repairs to upgrade the line from 10 mph to between 25 and 40 mph. Partial service is expected to resume this summer with full operation this fall.

"ARG Trans is excited to work with the Port to bring rail service back to the region," said ARG Trans President Scott Parkinson. "Restoring rail access to businesses in Lane, Douglas and Coos counties will provide business development opportunities that will result in local jobs and economic improvement. We will work with all stakeholders to ensure that the Coos Bay Rail Link is a positive addition to the community."

ARG Trans is an experienced rail-related transportation enterprise founded in 2003 when it acquired its principal subsidiary, San Pedro & Southwestern Railroad (SPSR), from RailAmerica. The railroad's chief sources of traffic are agricultural chemicals, feed grains and building products. In addition, SPSR operates a transload facility serving southeast Arizona.

Parkinson said, "Partnering with the Port is in keeping with ARG Trans' strategy of focusing management attention on business opportunities that have significant growth potential. Our team of rail experts will work with the Port to develop a railroad that is safe, efficient and environmentally responsible."

Tonymercury Sir Nigel Gresley

Location: Botany NSW

Published: 26 April 2011

Kinder Morgan to export coal from Houston

Houston, Texas-based energy company Kinder Morgan Energy Partners has signed a deal to export up to 2.2 mtpa of Colorado coal from its bulk terminal at the Port of Houston.

The company declined to name the mining company but did confirm it was a large Western U.S. coal producer.

The deal is being driven by "a tremendous increase in the demand for coal export," said Richard Kinder, Kinder Morgan’s chief executive.

“This will be the first time that Western coal has been exported from the Port of Houston, and again, we see great opportunities to further expand our handling of export coal on both the East Coast and the Gulf Coast," he said.

Kinder Morgan plans to invest US$18M in expanding the Houston terminal to handle the new export stream, which is a first for the port of Houston, company spokesman Joe Hollier said.

Tonymercury Sir Nigel Gresley

Location: Botany NSW

Builders’ backlogged orders: 51,913 cars

Friday, April 29, 2011

The feast-or-famine pattern of freight car orders has made a sharp turn inthe builders' favor. The American Railway Car Institute released figuresThursday showing that the manufacturers' backlog of cars on order andundelivered reached 51,913 on April 1. That compares with 22,658 on Dec. 31,2010; 19,267 on Nov. 1, 2010; and 14,930 on July 1, 2010.

New-car orders climbed to 36,903 in this year's first quarter vs. 5,078 inthe first quarter of 2010. Deliveries in this year's first quarter totaled7,648 vs. 2,550 in the year-ago quarter.

Twelve-month year-end comparisons show 29,992 new orders in 2010, 8,336 in2009, 33,235 in 2008, and 53,584 in 2007.

Tonymercury Sir Nigel Gresley

Location: Botany NSW

EPA: 37,000 new freight cars this year

Monday, May 02, 2011

The “explosion of orders in this year's first quarter” has led Economic Planning Associates to increase its projection of freight car deliveries this year from 22,000 to a “conservative” 37,000. EPA expects deliveries to rise to 43,000 in 2012, 48,000 in 2113, 53,000 in 2014, 59,000 in 2015, and 62,500 in 2016.

EPA President Peter Toja (pictured) says first-quarter orders for 36,903 cars and intermodal platforms was the highest quarterly total since fourth-quarter 1997. Builders' backlogs increased from 22,658 on Dec.31 to 51,913 on March 31.

“At current production levels, this backlog represents 6.8 quarters of assemblies, the highest level since we began calculating this ratio in 1992,” said Toja in EPA’s latest Railcar Review. “[A] rapid escalation in assemblies in the past two quarters, along with a continuation of this trend, could strain the availability of parts and components [and] has turned us somewhat cautious with regard to assemblies in 2011 and 2012.”

Toja noted that “some of the current backlog contains cars that, as part of a multiyear agreement, will be delivered 3-5 years from now. While we will closely monitor assemblies and parts availability during the second quarter, we view our 2011 and 2012 deliveries estimates as conservative and will raise this forecast as conditions continue to improve.”

Tonymercury Sir Nigel Gresley

Location: Botany NSW

The Agriculture Transportation Coalition (AgTC) reports that the railroads now have plans to spend millions of dollars to expand rail and port capacity to handle agricultural exports in addition to their existing capacity to handle increasing Asia-sourced intermodal import traffic.

In their most recent newsletter, AgTC officials reported the following developments: 1) Union Pacific (UP) railroad announced a major transload facility in Yermo, about 100 miles outside of the Ports of Los Angeles and Long Beach that is designed to haul dried distillers grains and eventually other products in large volume from the Midwest, then transload into empty ocean containers at Yermo, to be brought to the ports; 2) Burlington Northern Santa Fe (BNSF) and UP will be investing in a facility at the Hanjin terminal in Long Beach, which apparently has room for on-dock rail transload capacity; 3) Shafter, Calif., which for years has been discussed as a place to consolidate and aggregate import and export shipments, will have additional transload capacity due to plans by UP and BNSF; and 4) BNSF may be building a large transload facility in Amarillo, Texas, which could handle a number of cargos, including grains, cotton, etc.

The AgTC officials say that while these plans are unconfirmed, just the fact that there is talk reflects what that organization has been saying for some time: “with imports being largely steady, and demand for U.S. agriculture and forest product exports growing, capacity will have to be built to handle the exports. The railroads are doing it and making major commitments; are the ocean carriers ready to ‘change directions’?”

Tonymercury Sir Nigel Gresley

Location: Botany NSW

GREENWICH, Conn. — Short line and regional freight railroad operator Genesee & Wyoming Inc. said Thursday that traffic on its lines climbed 12.3 percent in April, driven by an increase in shipments of coal and coke and pulp and paper.

The company, which operates 63 railroads in nine regions around the world, hauled 82,190 carloads compared with 73,208 carloads in the prior-year period.

Shipments of coal and coke rose 11.3 percent, while pulp and paper shipments gained 11.9 percent.

Shipments that declined from a year earlier included metals and lumber and forest products.

Genesee & Wyoming is based in Greenwich, Conn.

wanderer53 Sir Nigel Gresley

Location: front left seat EE set now departed

on May 10, 2011 in North America

The “explosion of orders in this year’s first quarter” has led Economic Planning Associates (EPA) to increase its projection of freight wagon deliveries this year from 22,000 to a “conservative” 37,000. EPA expects deliveries to rise to 43,000 in 2012, 48,000 in 2113, 53,000 in 2014, 59,000 in 2015, and 62,500 in 2016.

EPA President Peter Toja says first-quarter orders for 36,903 wagons and intermodal platforms was the highest quarterly total since fourth-quarter 1997. Builders’ backlogs increased from 22,658 on 31 December to 51,913 on 31 March

Tonymercury Sir Nigel Gresley

Location: Botany NSW

Railroads aim to tap Bakken Shale's vast traffic potential

— by Jeff Stagl, Managing Editor

The lyrics to the theme song from vintage television series "The Beverly Hillbillies" included "black gold, Texas tea," which described the Lone Star State's lucrative crude-oil production. For several North American railroads, the lyrics could be updated to "black gold, North Dakota tea" or "black gold, Saskatchewan tea" to describe the traffic-generating and moneymaking potential of crude-oil production in the Bakken Formation.

More commonly called the Bakken Shale, the 200,000-square-mile formation covering parts of Montana, North Dakota and Saskatchewan contains large oil reserves, which only a few years ago became more economical to tap because of horizontal drilling and other modern extraction techniques. Today's historically high foreign oil prices also help make crude produced from a shale more competitive to produce and sell domestically.

As more oil companies establish wells in the Bakken, railroads stand to transport more inbound carloads of frac sand, drilling pipe and other materials used to build wells or horizontally drill. And as more crude oil is extracted, the roads figure to transport lots of it to refineries and other end users thousands of miles away in the Gulf Coast, California, Oklahoma or points in Canada. Rail transport is significantly cheaper than truck and more flexible than pipelines to move crude long distances, and an economical way to deliver inbound materials, so it's starting to become oil producers' mode of choice.

By 2011's end, about 1,800 new wells — each requiring 23 carloads of rail-delivered materials during construction — are projected to join the thousands already operating in the Bakken. At 2010's end, daily production had exceeded 300,000 barrels, outstripping available transportation capacity and hastening the need for more rail infrastructure.

Oil companies are expediting plans to build or expand terminals that can load or transload 95- to 118-car unit trains, which can transport 60,000 to 68,000 barrels per trip.

Daily oil production might reach 700,000 barrels by 2013 and 1 million barrels by 2015. BNSF Railway Co. and Canadian Pacific could collectively capture 20 percent to 25 percent of outbound traffic because of their extensive Bakken-area networks and market reach, says BNSF Vice President of Industrial Products Marketing Denis Smith.

"The Bakken is a big play for us. It's an opportunity to do something similar to what we did in grain, in coal and in intermodal," he says. "It's new, and it needs to be moved in unit trains."

Now and Then

BNSF already is moving several unit trains per week from the Bakken to Stroud, Okla.; Bakersfield, Calif.; St. James, La. (via a Union Pacific Railroad interchange in Kansas City, Mo.); and points in New Mexico and Texas. BNSF also is moving a number of inbound trains carrying frac sand, clays and pipe.

To prepare for traffic growth, the Class I is constructing sidings and turnouts, and performing some work in yards, says Smith. BNSF won't need to acquire more tank cars because most of them are owned by oil companies.

CP is prepping for additional Bakken traffic, too. In March, the Class I announced plans to invest $100 million in North Dakota infrastructure the next two years.

This year, crews will extend yard track in Max and Flaxton; install a new runaround track in New Town; and replace more than 17 miles of rail between Drake and Max, including upgrades to 41 grade crossings. In addition, CP plans to hire 70 workers to expand its North Dakota train crew base by 18 percent and create a superintendent of operations territory that will focus on traffic between Enderlin and Portal.

The Class I currently is moving some unit trains from the Bakken, primarily to the Gulf Coast. The Class I serves a major Western Petroleum Co.-owned terminal near New Town.

"We have the flexibility to move crude to other markets," says CP Vice President of Marketing Steve Whitney. "Some [crude] could go north. Saskatchewan is an opportunity, and there will be others as the market develops."

Moving crude by rail is a relatively new concept for oil companies, which usually use pipelines, he says. However, pipelines take a long time to build, and require long-term commitments and volume targets, says Whitney.

"Rail can be complementary to pipeline," he says. "We can sign up business on shorter and less onerous terms."

As CP sales and marketing executives work to convince oil producers about rail's advantages — including flexibility and scalability — they're also targeting business from terminal operators, oil buyers and others, says Whitney.

"It's not a short-term horizon for driving profitability," he says. "We're thinking about it in terms of decades."

Northern Exposure

CN also is anticipating long-term growth opportunities, including Bakken crude that might flow into Canada. Although many Canadian refineries currently lack the rail infrastructure necessary to accommodate unit trains, that could change soon as oil companies find it cheaper to process Bakken crude north of the U.S. border and seek access to more markets, says Randy Meyer, sales director for CN's petroleum and chemicals business.

"They haven't used rail before. They have a pipeline mind-set," he says. "But rail is newer, better and faster. We're starting to get that breakthrough."

CN sales and marketing execs now are engaging discussions with large oil companies — such as EOG Resources Inc., which operates a large production facility in Stanley, N.D. — in addition to the mid-size and small companies they have been approaching, says Meyer.

Since October 2010, CN has provided truck-to-rail services in Willmar, Saskatchewan, for Bakken crude destined for points in eastern or western Canada, or in the U.S. Midwest and Gulf Coast. Some Bakken crude is being used as a diluent for bitumen in Alberta's Athabasca oilsands. So far, CN has moved more than 600 single cars of crude, as well as some large blocks of cars.

In addition, the Class I has provided a rail-to-truck frac sand service at Lampman, Saskatchewan, since 2009 through on-site transloader Sand Source Services. Currently, the railroad moves about 1,000 to 1,500 cars of frac sand annually and "we can get that to 2,400," Meyer believes.

CN also plans to gain unit-train capabilities in Willmar in about one year, he says. For now, CN employs mobile transload or rapid deployment train-loading units in Willmar that are "portable and scalable," says Meyer.

UP also can provide oil companies "instant capacity" to transport Bakken crude, says Business Manager-Chemicals Trevin Hogg. Although it can take one to five years to obtain permits, clear regulatory hurdles and establish infrastructure for a pipeline, UP can start up a crude move "in a couple of months," he says.

"The challenge is finding rail-sufficient terminals," says Hogg.

UP currently moves several unit trains per week from facilities in New Town and Columbus, N.D., he says, adding that crude can be trucked from North Dakota's southern regions to the north for long-haul transportation. The Class I, which also can deliver inbound frac sand and drilling pipe, expects to more than triple its Bakken traffic compared with 2010 volume.

"We can provide transportation to various markets and alternate markets," says Hogg. "[The Bakken] is more of an opportunity for us because UP has direct access to key trading hubs like the Gulf Coast, California and St. James."

Meanwhile, Kansas City Southern managers expect a Texas market to develop into a major Bakken crude destination point by next year. Last month, the Class I announced it entered into a joint development agreement with Savage Cos. to build, own and operate a multi-user rail terminal in Port Arthur.

To be operated by Savage and served by KCS, the Port Arthur Crude Terminal (PACT) will handle unit trains from the Bakken and other crude-oil supplies for distribution to refineries and pipeline companies in Texas. To open in second-quarter 2012, the terminal also will feature crude-oil storage tanks.

"Currently, there is no viable option for crude oil to move from the Bakken to the Port Arthur area," said KCS Executive Vice President of Sales and Marketing Patrick Ottensmeyer in an e-mail.

The primary destination point for the crude service will be Port Arthur, but KCS is exploring other destinations, such as Corpus Christi, Texas, and points in Mexico, he said. KCS and Savage plan to jointly call on producers, refiners and mid-stream oil companies to secure business for the PACT and for KCS line-haul service over the Kansas City gateway, said Ottensmeyer.

At the Epicenter

In addition to knocking on potential customers' doors, Watco Cos. L.L.C. sales execs have been contacted by numerous oil producers and others who are interested in learning how moving crude by rail works and how long it would take to get a facility up and running, says Watco Senior VP of Business Development Allan Roach.

For the past few years, two Watco short lines — the Stillwater Central and Yellowstone Valley railroads — have helped move crude from the Bakken in conjunction with BNSF.

The 275-mile Stillwater Central works with the Class I to transport crude from Stanley, N.D., to Stroud, Okla., which is near Cushing, Okla., a crude-oil epicenter that features a pipeline network tied to many major U.S. markets. During the past two years, the 171-mile Yellowstone Valley has been moving crude in manifest trains with BNSF.

Watco execs have analyzed the potential for destination facilities in Houston, St. James and Patoka, Ill., and have held discussions with BNSF, UP and KCS officials about unit-train movements, says Roach.

"Quickness to market seems to be the primary driver as demand for Bakken and other shale oils continues to grow," he says. "Since Watco first got involved with discussions about unit-train movements of crude in 2008, the size of the shale field has doubled, depending on which report you read. When we started, we thought there were one to two unit train terminals possible, but that number may be closer to six to eight."

Between unit-train and manifest traffic, Watco last year moved 20 million barrels of crude.

"I think we will double that by 2012," says Roach. "We are moving one unit train per day now and will move two starting in the fourth quarter."

An agreement Watco reached with Kinder Morgan Energy Partners L.P. in March will help spur traffic growth. The parties agreed to jointly build and operate several rail transload facilities in key markets — including Dore and Stanley, N.D., Stroud and Houston — to provide loading and unloading services for crude-carrying unit trains, as well as trains moving frac sand, pipe and drilling supplies. The Dore facility is slated to open in September, followed by the Stroud facility in October and other two facilities in first-quarter 2012.

'Carve their own destiny'

The Kinder Morgan joint venture has helped Watco gain additional expertise and resources to manage multiple projects simultaneously, including an increase in the number of design and build companies used for facilities and infrastructure work, says Roach.

Offering complete turn-key services — including rail logistics, locomotive repairs, and rail-car sourcing, repairs, switching and tracing — will help convince first-time rail users to conduct business with Watco, he says.

"Oil producers have not had a lot of exposure to rail," says Roach. "We take the time to explain each step of the process, and develop timelines and cost estimates in terms they can understand."

As railroads continue to work with oil companies to exploit what's considered a once-in-a-lifetime opportunity in the petroleum arena, both parties are learning each other's needs and desires, and trying to best match capabilities and resources.

"With rail, the oil companies are finding they can carve their own destiny," says UP's Hogg.

When it comes to tapping the Bakken's potential, railroads are coming to that realization, too.

wanderer53 Sir Nigel Gresley

Location: front left seat EE set now departed

USDA says floods are disrupting grain barge traffic, though rails are picking up some slack

The number of grain barges unloading at New Orleans in recent weeks has dropped 14 percent from average levels for this time of year, the U.S. Department of Agriculture said, because of river flooding.

In its latest weekly transportation report, the USDA also said that the flow of grain barges on the river system has been running 20 percent below average, although rail hauls of grain shipments have increased.

It was one of several new reports indicating the supply chain for bulk shipments is suffering from the floods.

Flooding may drive up fuel prices by hampering refinery operations at the Gulf of Mexico, and tank barge operator Kirby warned that worsening flood conditions could take a bigger bite out of the quarterly profit it expected.

“With sporadic river shutdowns and traffic restrictions, barge movements have been adversely impacted by the unprecedented flooding,” it said.

For the week of May 7, the USDA said grain barge moves were down 66 percent from the same week in 2010.

“The railroads have absorbed some of the excess grain movements,” with above-average rail grain deliveries at all port areas, and deliveries up 161 percent to the Mississippi River-Gulf of Mexico area, the USDA said. But it said rail shipment delays of 12 to 36 hours continue across a flood region that has extended from North Dakota down to Mississippi.

The transportation impact could be affecting ocean traffic as well. While the first week of May saw a mild increase in the number of grain ships loading at U.S. Gulf terminals, the USDA said the number of ships — 45 — expected to load in the next 10 days was down 14 percent from the same time last year.

And then there is the impact on rates. For the week ending May 6, the cost of shipping grain to Japan from the Pacific Northwest was stable with the week earlier rate, but the rate to load in the U.S. Gulf had increased 4 percent in that same week.

wanderer53 Sir Nigel Gresley

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5/17/2011 9:30:00 AM    Employment

U.S. Class Is ramped up employment levels last month

The U.S. Class I workforce continued to grow last month. As of mid-April, the large roads employed 156,777 people, a 0.6 percent increase compared with March’s level and 3.8 percent gain compared with April 2010’s workforce, according to Surface Transportation Board (STB) data.

The only segment that declined on a month-over-month basis was professional and administrative staff, which fell 0.5 percent from March’s level to 13,577. However, the sector increased 2.2 percent on a year-over year basis.

All other workforce categories posted gains vs. April 2010 levels. The transportation (train and engine) workforce of 62,872 swelled 6 percent; transportation (other than T&E) workforce of 6,665 grew 2.6 percent; maintenance-of-way and structures workforce of 35,573 rose 2.5 percent; executives/officials/staff assistants ranks totaling 9,238 increased 2.4 percent; and maintenance of equipment and stores ranks totaling 35,573 grew 2 percent.

Compared with March levels, the workforce segments posted these gains: transportation (T&E), 0.4 percent; transportation (other than T&E), 0.9 percent; maintenance-of-way and structures, 1.7 percent; executives/officials/staff assistants, 0.6 percent; and maintenance of equipment and stores, 0.2 percent.

wanderer53 Sir Nigel Gresley

Location: front left seat EE set now departed

The digital revolution is coming to freight rail. Major railroads are installing digital communications, global positioning receivers, sensors and computerized controls on their trains and tracks. New systems can gather intelligence on locations, size and speeds of trains and make automated decisions about when the trains should stop or go. Digital cameras and microphones on the tracks are working on monitoring train conditions to determine when equipment needs to enter a shop for maintenance.

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Read the complete Tomorrow's Transport report .

.Some of these high-tech tools are already in limited use; others are still being tested. But in the next 10 to 15 years, freight-rail executives hope to put together the best solutions available and to transform one of the earliest network businesses, the railroad, into an integrated digital network that carries more trains and more freight at faster speeds and lower cost.

"This could be the biggest surge in railroad technology since diesel locomotives replaced steam engines a half century ago," says Robert Gallamore, a transportation consultant in Rehoboth Beach, Del. "Technology will soon be able to produce a railroad that doesn't derail, collide, break down or fall off schedule."

Central Commands

The biggest change is a traffic system known as positive train control, or PTC. Using on-board computers, digital communications and Global Positioning System gear, PTC lets central control stations at the railroads see where their trains are and stop them by remote control if an engineer fails to obey a signal.

View Full Image

Beena Vision Systems Inc. and Transportation Technology Center

An automated inspection system being tested in Colorado provides a 360-degree view of rolling stock to detect problems early.

.After deadly train crashes in Graniteville, S.C., and Chatsworth, Calif., the federal government in 2008 mandated that PTC be installed by the end of 2015 on major rail lines that carry passenger trains or highly toxic chemicals. The railroads are still far from finishing. The industry says it will cost $13 billion to install and maintain the system over the next 20 years.

But some in the railroad community think the industry has missed an opportunity. For instance, Steven R. Ditmeyer, an adjunct professor of railway management at Michigan State University, believes that with additional computer power at the control centers and aboard locomotives, PTC can allow the railroads to drop their longstanding light-signal systems.

The type of system that Mr. Ditmeyer and others favor, referred to as stand-alone PTC, would in theory increase the capacity of the rail network by making it safe for trains to operate closer together.

"The railroads are implementing PTC in a way that produces minimal business benefits" for themselves, says Mr. Ditmeyer.

In stand-alone PTC, the control centers would project an electronic safety zone ahead of and behind trains. The size of a train's buffer would be set by its length, weight and braking capabilities. If one train were to encroach on another's buffer zone, the electronic gear on the following train would be tripped and its brakes would kick in.

In addition to making it safer for trains to operate closer together, such a system would also allow the railroads to retire their light signals. However, there is one advantage to keeping a portion of the signal system. The signals are connected to an electrical circuit that runs through the rails; if a break in a rail occurs, the circuit is broken, too, causing the nearest signal to turn red. Proponents of stand-alone PTC haven't identified how the system would detect rail breaks without the track circuits.

Big Brake Job

Meanwhile, a new kind of brake, the electronically controlled pneumatic, or ECP, brake, poses the biggest change in braking systems since air brakes arrived in the late 19th century. Because they are controlled by electronic signals instead of air pressure, they apply and release immediately and uniformly. This improves handling, shortens braking distance, causes less wear and tear on cars and lowers the risk of derailment.

."The day will come when the standard will be ECP brakes," says Gerhard Thelen, vice president of operations planning and support for Norfolk Southern Corp. "It's a technology that is going to bring great advances to train operations." Norfolk Southern runs eight coal trains with ECP brakes and plans to gradually phase in the brakes on all of its locomotives and freight cars.

Such a shift poses a huge challenge for the industry as a whole, however. Christopher Barkan, director of the railroad engineering program at the University of Illinois in Urbana-Champaign, Ill., says the cost and technical challenges are likely to prevent rapid widespread adoption of ECP brakes for the foreseeable future.

For starters, trains can't mix cars with the two different kinds of brakes, so replacing the brakes on only some of the nation's 1.6 million freight cars could create logistical nightmares for train operators. Meanwhile, railroads are already getting shorter braking distances by placing additional locomotives in the middle or rear of freight trains—a work-around solution, to be sure, but one that some railroads favor for now.

Looking, Listening

The industry is also working on ways of predicting rather than reacting to equipment problems. Current devices like hot-box detectors measure temperatures as trains go past and spot wheel bearings that have overheated. But then the trains have to stop to fix the problem or set out the car, blocking trains behind them.

Newer systems can measure stress levels on wheels and other components before serious problems develop. Microphones pick up and evaluate sounds of axle bearings, for example; software and algorithms then interpret the sounds. CSX Corp. and other major railroads are setting up clusters of detectors. A rail-industry central database receives information from the detectors, identifies trends in equipment conditions and sends out alerts to railroads.

Beena Vision Systems Inc., of Roswell, Ga., is working on a system to inspect trains visually while they're in service. It's being tested at the Transportation Technology Center, which researches railroad efficiency and safety in Pueblo, Colo. A fully loaded coal train on a 2.7 mile loop passes repeatedly under an aluminum arch mounted with lights and cameras. Other cameras in the tracks take pictures from beneath.

The result: a 360-degree picture of every car on the train, revealing wear and tear in parts and running gear from brake pipes and couplers to axles.

"One of my colleagues calls it taking a CAT scan of a freight car," says Roy Allen, president of the center, a subsidiary of the Association of American Railroads in Washington.

Smart Cars

Some manufacturers are putting tiny sensors directly on the railcars. IONX LLC, a unit of closely held Amsted Rail Co., a Chicago-based rail-component supplier, says its sensors monitor things like whether the dome lids on chemical tank cars are open or closed. Chemical companies want to know if the lids are closed during transit to guard against vandals and to detect any breach of the cars.

"This could explode into all kinds of sensors on all kinds of cars," says John Samuels, president of Revenue Variable Engineering LLC, a railroad-engineering consulting firm in Palm Beach Gardens, Fla.

Says Mr. Samuels, "Someday rail cars will monitor their own safety conditions and report when they have a problem."

wanderer53 Sir Nigel Gresley

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Once a dying industry, railroads have made a strong comeback and are poised to become busier places in the years ahead. Forecasts for freight growth are substantial, prompting railroads to plan capacity additions. At the same time, the federal government is looking to railroads to handle more and faster passenger trains and install an extensive anticollision system known as positive train control.

The Wall Street Journal recently held an email discussion about the future of rail with panelists from the private and public sides of the business. Participating were Jim McClellan, vice president of railroad consulting firm Woodside Consulting in Virginia Beach, Va.; Bill Rennicke, a consultant at Oliver Wyman Group in Boston; Francis P. Mulvey, a commissioner of the Surface Transportation Board in Washington; and Joseph C. Szabo, head of the Federal Railroad Administration in Washington. Here are edited excerpts of the conversation:

Bright Prospects

WSJ: What's ahead for railroads?

MR. MCCLELLAN: I am moderately bullish on the freight railroads. The mainline network is in great shape, as good as I have seen it in my 40-plus years in the business. Railroad finances are in good order.

.Railroads showed remarkable ability to weather the great recession, and they now seem able to deal with wide swings in traffic volumes in an efficient manner, which is in marked contrast to what I saw in the '60s and '70s.

MR. RENNICKE: If the traffic-level trajectories are correct, then ton-mile [one ton of paying freight shipped one mile] growth could be in the 80% range by 2035 to 2040, and on this basis, industry prospects are bright. Rail activity could possibly even double by the midpoint of the century. North American rail-freight rates would continue to be the lowest or one of the lowest in the world, and the industry would finance most or all of its capital requirements without public support.

The possible dark cloud could be changes in a regulatory structure that has fueled industry growth and profitability.

MR. MULVEY: Many factors determine rail traffic levels and market share. Since Staggers [the 1980 law that partly deregulated railroads], the rail share of intercity ton miles has grown from just over 30% to over 43%. But much of that has been due to declining shares of barge, Great Lakes and pipeline traffic—as opposed to shifts from truck to rail.

Whether the railroads can increase their share of truck-competitive traffic will depend on railroad pricing and service policies, and on the railroads' willingness to invest in capacity. Capacity investment, in turn, will depend on perceived profitability of those investments. If new rail capacity is dedicated to higher-speed passenger operations or commuter-rail services, the railroads might not be able to handle much more freight business.

MR. SZABO: By 2050, our country's population is expected to grow by more than 100 million people. Right now, on average, the freight system must move 40 tons of freight per person, per year. So do the math: 40 tons times another 100 million people is another four billion tons of freight. Without planning and action, that's an unsustainable rate of growth.

Given rail's efficiencies—and our challenges with congestion, air quality and fuel consumption—freight rail will need to grow market share.

WSJ: What advantages do the railroads have?

MR. MCCLELLAN: The best thing railroads have going for them is their inherent efficiency, be it in land usage or energy consumption or cost of moving a ton mile of whatever needs to be moved. Railroads suffered in the past because they were, and remain, relatively less convenient than trucks. But in an era of scarcity and pressure on costs, there has been and will be a growing focus on efficiency. That plays into railroads' strength.

The public-sector financial situation will actually be an advantage for freight rail: Highways are not being funded, and the prospects are dim in that arena unless taxes are increased [which in turn raises the cost of trucking, which also helps the rails].

WSJ: What challenges do they face?

MR. MCCLELLAN: The biggest challenge for the railroads will be to build the needed capacity in a timely fashion and at a cost that the market prices can support.

MR. RENNICKE: Future investments must also be considered in the context of the unfunded mandate for the railroads to spend billions on installing anticollision technology and potentially accept the operation of increasing numbers of passenger trains over their lines. Both have the potential to further limit the existing capacity of the network and the ability to meet future growth.

Improved transit times and consistent reliability are key to long-term rail-industry viability. Both measures have steadily improved over the last several decades but still have a way to go.

MR. MULVEY: One challenge is service issues. Some shippers fear retaliation for making service complaints, and that perception may silence railroad critics. Top railroad managements, especially the current crop of younger CEOs, all seem dedicated to good customer service, and they assure us that retaliation for service complaints won't be tolerated.

Railroading is a complicated, network business that lacks the flexibility to be as responsive to sudden changes as trucks or planes can be. That said, some railroad decisions, such as focusing on some types of traffic and ignoring or eschewing others, can make railroads appear arrogant.

WSJ: How will railroads fund capacity additions?

MR. RENNICKE: Railroads provide essentially all of the required maintenance and growth capital from the private sector. Private-sector investors provide capital at market prices based on their perception of the future earnings of the railroads.

Government investment in rail infrastructure is unlikely. In the U.S., we have an outdated air-traffic control system, crumbling highways and deteriorating locks in the river network, which are all dependent on government funding, so how can the public take on funding another mode?

Push for Passenger Rail

WSJ: Why do the French, Chinese and Germans have such wonderful high-speed passenger trains and we don't?

MR. MULVEY: Every nation must make decisions on how it will organize and invest in its transportation infrastructure. The U.S. has long had the most developed aviation and highway systems; significant public and private funds have supported and developed them.

Moreover, the U.S. has historically had much higher rates of car ownership, and we have pursued a policy of low gas prices, at least by European standards.

MR. SZABO: Step by step, we are building an innovative rail network to compete in the global environment. The French and German systems did not appear overnight. They are the result of several decades of careful, intelligent planning and targeted investments—the very steps we are taking today.

In Europe and Asia, many of these investments began with incremental upgrades to existing services. It was understood that there must be a comprehensive network. Not every train goes 200 miles an hour, nor should it. It's more prudent to have local and regional service for smaller markets that feeds the true high-speed express service. And it takes time to build out these complicated projects.

MR. MCCLELLAN: Passenger service can literally drive freight traffic off the railroad; look no further than the Northeast Corridor for an example. What was a vital and busy north-south freight line has essentially been eliminated.

The amount of money being proposed for passenger rail is far short of what is needed for a first-rate, European-type passenger network. We are trying to do high-speed rail on the cheap and run a real risk, by ducking very real capacity issues, of doing serious harm to the rail freight system.

To get the job done, the country would have to embrace higher gas taxes and higher airport fees, just as Europe and Canada have done, and a long-term investment in infrastructure many times that which has been proposed.

More Competition?

WSJ: Some shippers are complaining to the government that they pay high rail rates and suffer poor service because they are captive to a single railroad. Should regulators open the rail system to more competition?

MR. MULVEY: That is up to Congress, and there is currently legislation pending that would address these very questions.

As far as the Surface Transportation Board goes, during my tenure, the STB has responded to shipper concerns in the areas of fuel surcharges, cost of capital and the Uniform Rail Costing System [a method for calculating railroad costs for regulatory purposes].

We also have streamlined the procedures by which shippers can challenge rail rates, and we are holding a public hearing on June 22 to look at the state of competition in the rail industry.

MR. RENNICKE: Since the passing of the Staggers Act in 1980, there has been an almost continuous attempt, primarily by the subset of shippers who pay higher prices, to curb or cap some of the rail rates that are required to earn a sufficient return. There have been proposals to cap rates for "captive" shippers, and currently there is a formal proceeding at the Surface Transportation Board that would force competition at points where there is only one railroad.

The net result of these actions, if enacted, would be to increase investor risk in railroads and would likely curtail or severely limit the ability of the rail carriers to fund the massive capacity needed over the coming decades.

wanderer53 Sir Nigel Gresley

Location: front left seat EE set now departed

Yesterday, the Wall Street Journal’s Daniel Machalaba held an online round-table discussion on the future of the freight rail industry with a small group of consultants, lobbyists and federal administrators. They predicted that freight rail will experience spectacular growth over the next 30-50 years, largely because of population expansion and the industry’s reliably cheap shipping rates. Which is excellent news—from an environmental perspective, rail replaces trucks, airplanes, river barges and other highly-polluting modes of freight transport. Meanwhile, a freight train moves 435 tons one mile on a single gallon of fuel, making it one of the greener methods of moving a large amount of product over vast distances.

Freight rail is growing (Oliver Wyman consultant Bill Rennicke predicted that shipping volume could double by mid-century), but it still faces some grave infrastructural challenges. Crucially, rail has taken less out of the trucking market than one might expect, partly because the United States simply has much greater highway than rail capacity. Because of this, road transport is far more reliable than rail transport—a truck that has five days to make it cross-country will be on time more often than a train that’s required to make an identical trip. As Surface Transportation Board commissioner Francis Mulvey explains,

Many factors determine rail traffic levels and market share. Since Staggers [the 1980 law that partly deregulated railroads], the rail share of intercity ton miles has grown from just over 30% to over 43%. But much of that has been due to declining shares of barge, Great Lakes and pipeline traffic—as opposed to shifts from truck to rail.

Whether the railroads can increase their share of truck-competitive traffic will depend on railroad pricing and service policies, and on the railroads’ willingness to invest in capacity.

There won’t be a significant shift from road to rail shipping if existing rail systems are overloaded. Without infrastructural upgrades and expansions, American rail lines will be clogged and chronically inefficient, especially if they’re being saddled with the kind of government regulations that could stifle industry growth and innovation (the “pricing and service policies” bit).

Which isn’t to say that government should just step aside. Railroad consultant Jim McClellan notes that passenger traffic has all but supplanted freight traffic on the Northeast Corridor, meaning that all major shipping between Washington, DC and Boston must be done by truck, plane or boat. If the government were serious about building a world-class rail system, it would raise taxes and invest heavily in common-sense infrastructural improvements, like the building of higher freight capacity in the most densely-populated section of the country:

Passenger service can literally drive freight traffic off the railroad; look no further than the Northeast Corridor for an example. What was a vital and busy north-south freight line has essentially been eliminated.

The amount of money being proposed for passenger rail is far short of what is needed for a first-rate, European-type passenger network. We are trying to do high-speed rail on the cheap and run a real risk, by ducking very real capacity issues, of doing serious harm to the rail freight system.

To get the job done, the country would have to embrace higher gas taxes and higher airport fees, just as Europe and Canada have done, and a long-term investment in infrastructure many times that which has been proposed.

The rail industry wants the government to give it enough regulatory leeway to keep current incentives in place—which in turn keeps shipping prices low and encourages rail companies to innovate and upgrade. But it also wants the government to pursue as many rail-friendly policies as possible, including the taxation of other modes of shipping. This seems like a hard sell, with gas prices increasing and the cost of basic goods potentially increasingly along with them. And the rail industry’s challenges are relatively far in the future. It’s self-serving to ask everyone to pay taxes in order to ensure the rail industry’s long-term profitability. But the alternative—namely an outmoded freight rail system in a time when railroads will carrying twice as much freight as they currently do—could be even worse.

wanderer53 Sir Nigel Gresley

Location: front left seat EE set now departed

NEW YORK — Rail-car orders have risen to the highest level in more than 13 years, showing a strengthening economic recovery and confirming the "all-in wager" by Warren Buffett in buying Burlington Northern Santa Fe.

Orders surged more than sevenfold in the first quarter from a year earlier, with leasing company GATX Corp. accounting for more than a third of the tally, according to data from the Railway Supply Institute. The total of 36,903 was the most since 1997 and the biggest quarter-to-quarter gain since 1993.

The demand is buoying shares of GATX and companies such as Trinity Industries Inc. that build and lease cars as rail shipments rise. Private-equity firms also may enter the market, with General Electric shopping its leasing business and Perella Weinberg Partners agreeing to buy a similar American International Group Inc. unit in April.

"The industry is strong and is attracting investment dollars in both rail operations and rolling stock," said Charles Clowdis, managing director of transportation advisory services at forecaster IHS Global Insight in Lexington, Mass. "Investment in railroads and rail equipment as well is validated by the new rail-car orders."

Leasing companies own about 55 percent of North America's 1.6 million rail cars, which are used to haul everything from chemicals to farm goods to petroleum, according to Chicago-based GATX. They provide cars to railroads and industrial users, both of which also buy their own equipment.

"We're seeing fairly broad demand" for leased cars, GATX Chief Financial Officer Robert Lyons said in an interview. He said the first-quarter order is "a reflection of our optimism about our market."

The utilization rate for GATX's North American fleet rose to 97.8 percent at the end of the first quarter from 96 percent a year earlier. GATX owns 132,000 cars worldwide.

Orders are "something you don't do in the initial stages of the recovery," said Paul Bingham, economics practice leader at consultant Wilbur Smith Associates in Arlington, Va. Rail-car buyers "needed to have a recovery that worked through that backlog and strengthened enough that they believe it would continue to be the source of continued traffic."

Rail-car deliveries from 2012 to 2015 will exceed the average of the 16-year period through 2010, according to industry forecaster FTR Associates in Nashville, Ind.

That makes the orders an indicator of the economic growth that Buffett, 80, sought to tap when his Berkshire Hathaway Inc. spent $26.5 billion in February 2010 to buy the 77.4 percent of Burlington Northern that he didn't already own.

Buffett "stole that company. He paid a 31 percent premium for it. Our stock in that year was up 35 percent with no buyout premium," CSX Corp. Chief Executive Officer Michael Ward said in an interview last month. "He really knows railroads are going to play even a more important part of the future."

U.S. rail volumes excluding grain and coal shipments rose 7.9 percent to 4.6 million carloads in the three months ended in March, according to data compiled by the Association of American Railroads in Washington. That was the second-highest increase in a first quarter, following last year's 9.3 percent gain.

Rail-car orders are "a sign that first of all, there's confidence in the commodities that are hauled in rail cars," Clowdis said.

Confidence was in short supply on Nov. 3, 2009, when Buffett agreed to buy Fort Worth, Texas-based Burlington Northern. Grain carloads were down 18 percent for the year as of that week, chemicals were off 13 percent, autos had fallen 39 percent and the U.S. was poised to log its 22nd straight month of job losses. Burlington was Buffett's biggest deal.

"It's an all-in wager on the economic future of the United States," the chairman and CEO of Omaha, Neb.-based Berkshire said at the time. "I love those bets."

Since then, the Standard & Poor's 500 Railroads Index surged 64 percent through Wednesday, more than twice the S&P 500's 26 percent advance. GATX rose 38 percent, and Trinity soared 77 percent. Greenbrier Cos., another maker and lessor of rail cars, more than doubled. CSX increased 67 percent.


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