Railway Age January 2018 by Railway Age

J ANUARY 2 01 8

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AILWAY GE S e r v i n g t h e r a i lway i n d u s t r y s i n c e 1 8 5 6

Expanding Genesee & Wyoming’s Global Reach

Congratulations 2018 Railroader of the Year

John “Jack” C. Hellmann Chairman, President & CEO, Genesee & Wyoming Save The Date

Railway Interchange 2019

September 22-25, 2019 Minneapolis Convention Center Minneapolis, Minnesota, USA

JACK HELLMANN RAILROADER OF THE YEAR

PASSENGER CAR MARKET AT-A-GLANCE RailwayInterchange.org

Orders, backlogs, deliveries and forecasts railwayage.com

August 2017 // Railway Age 2

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AILWAY GE

AUGUST 2017 JANUARY 2018

FEATURES

Railroader of the Year

Passenger Rail Outlook

Jack Hellmann, G&W CEO

An expensive waiting game

Passenger Car Market Railway Age’s exclusive report

DEPARTMENTS 4 6 8 50 50 50 52 54 55 55

Industry Indicators Industry Outlook Market People 100 Years Ago Meetings

NEWS/COLUMNS 2 10 18 56

From the Editor Update Watching Washington Financial Edge

Products Advertising Index Professional Directory Classified

On the Cover: 2018 Railroader of the Year John C. “Jack” Hellmann. Photo: Genesee & Wyoming

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January 2018 // Railway Age 1

FROM THE EDITOR

AILWAY GE Subscriptions: 800-895-4389

Three Generations of Railroader

ames J. Hill, the legendary Canadian-American railroad magnate who built the Great Northern, Northern Pacific and Spokane, Portland & Seattle— today a significant chunk of BNSF Railway—learned to appreciate, of all things, Greek food, thanks to Kostandinos “Gust” Melonas, a Greek immigrant who in 1906, at 18 years old, hired on with a track gang to build the SP&S in Washington State. Gust was the first of three generations of Melonas men who have worked for the railroads that over time merged to become BNSF. Sam, Gust’s son, hired on in 1937 at 16 as a track laborer, rose to Assistant Superintendent of Roadway Maintenance for Burlington Northern’s Seattle Region before retiring in 1986. Grandson Gus Melonas, who joined BN in 1976 as a track laborer, is today BNSF’s Director of Public Affairs covering Washington, Oregon, Idaho, and British Columbia. Gus’s brother Louis, who hired on at BN in 1977 on the Astoria Section Track Department, is today a welding foreman for BNSF’s PortlandVancouver terminal. The Melonas men now have their family surname on a 9,800-foot siding not far from where Gust laid track more than 100 years ago. Contributing Editor Bruce Kelly tells the story of Hill and his encounter with authentic Greek cuisine: “James J. Hill, the legendary ‘Empire

Builder’ of the Great Northern, was said to have visited the Melonas construction camp on two occasions, commenting favorably about the Greek food he was served there. Gust was present alongside various railway and government dignitaries when the last spike in the Pasco, Wash., to Portland, Ore., segment of the SP&S was driven at Sheridan’s Point on March 11, 1908, just a few hundred yards from the west switch of today’s Melonas Siding. “Gust was also assigned as Track Foreman for construction of the SP&S yard at Wishram, Wash., and portions of the Oregon Trunk Railway southward into Oregon along the Deschutes River. He broadened his talents to include Melonas Track Construction Co., which built industry spur tracks and connections in Portland, Longview, and Olympia, as well as Melonas Brothers Dairy, which was alongside the Columbia River in Stevenson, Wash. Four types of Greek cheese from that dairy were marketed as far away as Canada and Los Angeles.” The story of the Melonas family is just one of countless examples of railroading passed on through the generations. In that sense, knowledge is much more than institutional. It’s in the DNA. Thus the often-used expression, “railroading gets into your blood.”

WILLIAM C. VANTUONO Editor-in-Chief

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Industry Indicators In 2017, Modest Gains for U.S. Carloads as Trailers Surprise Class I railroads continued to adjust to a new reality in 2017 as far as commodities were concerned, while seeing good signs in what was an otherwise stagnant market for some segments. Coal seemed to arrest its long decline in what may or may not reflect confidence in policies of the Trump Administration as well as increasing export volumes. Crude oil stopped its slide as global prices ticked upward and renewed activity in drilling helped pump up sand shipments by rail. Intermodal picked up some of the slack, although surging trailer traffic more than doubled the gains of containers for the year.

Railroad employment, Class I linehaul carriers, DEC. 2017 (% change from DEC. 2016)

Total employees: 145,416 % change from DEC. 2016: -3.19%

Transportation (train and engine) 60,466 (1.66%)

TRAFFIC ORIGINATED CARLOADS

Four WEEKS ENDING DEC. 30, 2017

MAJOR U.S. RAILROADS by Commodity

DEC. ’17

DEC. ’16

% CHANGE

Grain Farm Products ex. Grain Grain Mill Products Food products Chemicals Petroleum & Petroleum Products Coal Primary Forest Products Lumber and Wood Products Pulp and Paper Products Metallic Ores Coke Primary Metal Products Iron and Steel Scrap Motor Vehicles and Parts Crushed Stone, Sand, and Gravel Nonmetallic Minerals Stone, Clay & Glass Products Waste & Nonferrous Scrap All Other Carloads

85,444 3,401 35,649 23,353 125,705 40,996 329,996 4,535 12,135 23,688 26,426 16,708 33,916 13,342 61,902 83,424 14,665 27,680 13,696 21,507

90,986 3,620 36,583 22,968 121,428 40,724 328,680 4,524 11,361 23,422 19,551 16,559 32,962 12,499 64,527 67,792 107,999 24,118 18,945 20,155

-6.1% 6.0% -2.6% 1.7% 3.5% 0.7% 0.4% 0.2% 6.8% 1.1% 35.2% 0.9% 2.9% 6.7% -4.1% 23.1% 16.5% 14.8% 1.9% 6.7%

Total U.S. CarLoadS

998,168

973,562

2.5%

307,774

292,323

9.3%

1,305,942

1,265,885

3.2%

Executives, Officials, and Staff Assistants 8,124 (-9.59%)

CANADIAN RAILROADS

Professional and Administrative 12,151 (-7.41%)

COMBINED U.S./CANADA RR

total carloads

Maintenance-of-Way and Structures 32,454 (-5.67%) Maintenance of Equipment and Stores 26,596 (-6.01%) Transportation (other than train & engine)

5,625 (-5.02%)

Source: Surface Transportation Board

CLASS 1 railroads CONTINUE PURGE OF EXECUTIVE RANKS Do railroad executives have a target on their backs? While linehaul trains continue to get longer, so did the list of those employees in the corner office getting pink slips in December, as the biggest railroads continue to pursue a lean and mean strategy on and off the tracks. The other job categories weren’t far behind in a mostly yearlong downward trend, save for TransportationTrain & Engine. Total rail employment declined by just over 3% for the year.

4 Railway Age // February 2018

Intermodal

FOUR WEEKS ENDING DEC. 30, 2017

MAJOR U.S. RAILROADS by Commodity

DEC. ’17

DEC. ’16

% CHANGE

112,829 953,136 1,065,965

101,126 910,859 1,011,985

11.6% 4.6% 5.3%

3,791 253,664 347,914

3,556 215,738 303,015

6.6% 17.6% 14.8%

Trailers Containers

116,620 1,206,800

104,682 1,126,597

11.4% 7.1%

TOTAL COMBINED UNITS

1,323,420

1,231,279

7.5%

Trailers Containers TOTAL UNITS

CANADIAN RAILROADS Trailers Containers TOTAL UNITS

COMBINED U.S./CANADA RR

Source: Monthly Railroad Traffic, Association of American Railroads

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AILWAY GE

TOTAL U.S. AND CANADIAN CARLOADS, NOV. 2017 VS. 2016

1,712,726

1,720,864

NOV. 2017

NOV. 2016

Short Line And Regional Traffic Index CARLOADS

by Commodity Chemicals Coal Crushed Stone / Sand / Gravel Food & Kindred Products Grain Grain Mill Products Lumber & Wood Products Metallic Ores Metals & Products Motor Vehicles & Equipment Nonmetallic Minerals Petroleum Products Pulp, Paper & Allied Products Trailers / Containers Waste & Nonferrous Scrap All Other Carloads

ORIGINATED NOV. ’17

ORIGINATED NOV. ’16

% CHANGE

46,168 25,267 29,252 11,758 25,704 6,326 9,121 2,100 15,159 8,090 1,680 2,300 16,447 40,075 9,340 83,563

42,372 21,458 23,032 10,717 30,026 5,929 8,432 2,884 14,889 8,982 1,460 1,965 15,645 54,400 8,652 82,740

1.0% 17.8% 27.0% 9.7% -14.4% 6.7% 8.2% -27.2% 1.8% -9.9% 15.1% 17.0% 5.1% -26.3% 8.0% 1.0%

average weekly U.S. Rail Carloads: all commodities (not seasonally adjusted) 360,000 340,000

320,000

2006 (peak year) 2015

300,000

ARE YOU A RAILROAD OR SUPPLIER SEARCHING FOR JOB CANDIDATES?

2017

280,000 260,000

Visit http://bit.ly/railjobs

240,000 220,000

2016

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Data are average weekly originations for each month, are not seasonally adjusted, do not include intermodal, and do not include the U.S. operations of CN and CP. Source: AAR

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To place a job posting, contact: Jeanine Acquart 212-620-7211 jacquart@sbpub.com January 2018 // Railway Age 5 RA_JobBoard_1/3Vertical.indd 1

8/17/17 10:59 AM

Industry Outlook Transparency Sought at NTSB

Cowen Analysis: CSX Post-Hunter The late Hunter Harrison’s body of work “will likely be talked about in railroad circles for decades to come,” says Cowen and Company Managing Director and Railway Age Wall Street Contributing Editor Jason Seidl. “CSX’s Board of Directors will be under significant pressure to find a replacement with an operating background quickly.” Following is Seidl’s analysis of CSX’s post-Hunter future. “It is difficult to overstate the role Hunter Harrison played in the North American railroad industry. The gaping hole he has left at CSX is even wider as the company’s Precision Scheduled Railroading (PSR) makeover was not yet completed. In our opinion, the management and field operations bench is very limited after six months of what some industry insiders describe as a ‘scorched earth’ policy. And even though Jim Foote is a capable leader, we do not see him as the long-term solution as the company’s CEO given his strength is marketing and the company is embarking on an operationsfocused turnaround. “We expect the Board to hire current industry executives, especially those that have a background in the PSR model. Given the changes that have already been made, we expect the company to continue down the PSR path and not revert its business to the 6 Railway Age // January 2018

prior operating model. We do not expect to see recently departed executives back at CSX. “The Board was clearly hesitant to bring in Hunter as CEO because of the potential for something like this to occur. However, the market forced their hand, in our view, given the surge in the stock price once speculation about the move arose. What the Board has not done, as far as we can tell, is mandate that a viable long-term succession plan be put in place. The departure of several C-level executives that were highly respected by the company’s rank-and-file will be sorely missed given these circumstances. “We believe prior management felt the railroad still had too many people working in it and that the PSR model would alleviate the need for many positions. Given the speed at which changes were being made, we would not be surprised if further layoffs were scheduled. The recent sad events should at the very least delay these plans until new senior management hires are made. We still would not be surprised to see further layoffs and divestitures early in 2018. “Investors in CSX should continue to see their shares continue to come under pressure in the near term as we believe the overwhelming majority of active managers that held the stock did so because the famed Hunter Harrison was at the helm.”

A bill reauthorizing the National Transportation Safety Board (NTSB) was introduced last month in the Senate and aims to enhance the board’s safety investigations through added transparency. U.S. Sens. John Thune (R-S.D.) and Bill Nelson (D-Fla.), who serve respectively as the Chairman and Ranking Member of the Senate Committee on Commerce, Science, and Transportation, and three other committee members introduced S. 2202, the National Transportation Safety Board Reauthorization Act, on Dec. 6, 2017. The legislation reauthorizes the NTSB at an average level of $113.4 million through fiscal year 2023 and, according to the senators, offers several key reforms to modernize and improve transparency in the safety agency’s investigations, recommendations and board member discussions. The legislation would add still images to items the NTSB may disclose during the course of an investigation in order to increase transparency to the public about the circumstances of accidents. The senators also say the bill improves information sharing by closing loopholes that allowed for the release of confidential information by other federal agencies obtained during the course of NTSB investigations. The bill would also require the NTSB to publish a report on the process used to prioritize and select safety recommendations included in the agency’s “Most Wanted List.” The senators say this requires the NTSB to better-document data collection and its evaluation process underlying safety recommendations. The bill would also allow a majority of National Transportation Safety Board members to meet privately and discuss official business with what the senators call “robust disclosure requirements,” in a bid to promote better collaboration and communication among all parties. railwayage.com

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Market CN Places Major Power Order With GE Transportation CN will acquire 200 new ET44AC locomotives over the next three years from GE Transportation “to accommodate growth opportunities.” The order is the largest by a Class I since 2014. It includes Tier 4 and Tier 3 (Tier 4 certified) Evolution™ Series units equipped with GE’s GoLINC™ Platform, Trip Optimizer™ System and Distributed Power LOCOTROL® eXpanded Architecture. The locomotives will be produced at GE’s Manufacturing Solutions facility in Fort Worth, Tex., beginning in 2018. The first units are expected to be delivered in 2018, with the balance delivered in 2019 and 2020.

North america Amtrak has selected Penn Station Partners to negotiate a master development deal for Baltimore Penn Station. The team is comprised of Beatty Development Group, Armada Hoffler Properties, Cross Street Partners, Gensler, WSP USA, Network Rail Consulting and Mace Group, among others. Negotiations are under way with the team proposing a multi-phased, mixed-use development that could develop as much as 1.6 million square feet in the area. Preliminary concepts include a hotel in the historic station headhouse, as well as office and

residential space to the north along Lanvale Street connected by an expanded concourse with new retail opportunities. Specific details regarding the development’s scope, design and phasing will be the focus of future discussions between Amtrak, the selected developer, stakeholders and the public. The long-standing dispute involving Ontario, Canada transit agency Metrolinx and railcar supplier Bombardier over delivery of 182 light rail vehicles has been resolved, after six months of negotiations. A new agreement calls for Bombardier to construct 76 Flexity Freedom LRVs, rather than the 182 contained in the original order. The contract’s value has thus been reduced to C$392 million from $770 million, and the new agreement contains severe financial penalties if deliveries are not on time. The original order was placed in 2010, with the LRVs designated for the Eglinton Crosstown, Finch West and Mississauga Hurontario Street projects. The 76 LRVs in the revised contract will see service on the Crosstown, planned to open in 2021. Confirming a change by its contract partner, Caltrans amended its $317 million

8 Railway Age // January 2018

contract for new passenger cars, replacing Nippon Sharyo with Siemens, which will join with Sumitomo Corp. of America to fulfill the delayed multistate order. The newly finalized contract will supply 137 single-level passenger railcars, 49 to Caltrans and 88 to the Illinois Department of Transportation. Under the original terms, Sumitomo had subcontracted construction of bi-level cars to Nippon Sharyo. The revised pact substitutes Siemens as a subcontractor, changes specifications to single-level cars, and accelerates delivery from five years to 24-34 months.

Worldwide Alstom is running dynamic testing at the Velim test track in the Czech Republic of the first Coradia Polyvalent dual-power (diesel and 25kV electric) trains for Algerian State Railways (SNTF). During the tests, the Coradia train will cover close to 20,000 miles, representing about 400 hours of dynamic testing. The tests will cover traction, braking, safety and acoustics. A team of 14 Alstom engineers and technicians, six of whom will be based permanently at Velim, is conducting the tests. railwayage.com

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Update

E. Hunter Harrison,

1944-2017

Hunter Harrison, Railway Age’s twice-honored Railroader of the Year (2002 and 2015) died on Saturday, Dec. 16, in Wellington, Fla., from what CSX, the railroad that ultimately became the last stop in a long and distinguished career, attributed to “unexpectedly severe complications from a recent illness.” He was 73.

Only the day before his death had the surprise announcement come from CSX that Hunter had been placed on medical leave. He had indeed been ill for quite some time, requiring supplemental oxygen, as he was suffering from emphysema. But few probably knew the extent of just how ill he was. Hunter leaves behind his wife Jeannie, two daughters, and a railroading legacy that will endure, despite that the last year of his career was not the best of his years. No matter. One does not measure a life solely in terms of “what have you done for me lately,” which I believe is the approach of the activist investors who positioned Hunter as their means to an end. “Personally, I lost a friend and a mentor, said Canadian Pacific Chief Executive Keith Creel. “I spent most of the past 25 years working closely with Hunter. Over that time, he taught me how to railroad, but more than 10 Railway Age // January 2018

that, he taught me how to be a leader. Professionally, Hunter was unmatched in this industry. He will go down as the best railroader ever, plain and simple. What he has done at multiple railroads and for our industry the past 50-plus years is incredible, which includes bringing CP back to its rightful place among leaders in the Class I space. His legacy will be felt at our company forever, not only by shareholders, but by employees and customers, who have all benefited from his leadership, foresight and tenacity. The foundation he built at CP, and at all the other railroads he led, serves us, and the industry, well for the future.” As for my own recollections, I will remember the Hunter Harrison who was moved to tears in front of a large crowd at Chicago’s Union League Club when speaking about his wife and family the first time he was honored as Railroader of the Year nearly 20 years ago. I will remember the man who invited me to ride his vintage business train from Memphis to Chicago along the Illinois Central main line. I will think of the CEO who always took the time to talk with me candidly and openly, who told me not long ago, “Any time you want to ask me something or talk to me, just call.” In what may have been his final media

interview, for the October 2017 issue, I asked Hunter if he thought he had been moving too fast at CSX to implement change, what he called Precision Scheduled Railroading. He acknowledged that, at least in some areas, he had. I feel a sense of loss that I am no longer able to contact Hunter and ask him these questions. The now-legendary railroader who started his career in 1963 as a carman-oiler on the Frisco was no different than you or I. He was just Hunter. I’m sure that’s how he would like us to think of him. —William C. Vantuono

hunter’s legacy will be felt at our company forever.” —Keith Creel railwayage.com

RAILWAY AGE PRESENTS

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Keynote Address JJ RUEST Executive Vice-President & Chief Marketing Officer CN

Update Amtrak Cascades Wreck Kills Three Three people were killed and more than 70 were injured as an Amtrak Cascades train derailed early Dec. 18 while traversing a curve leading into an overpass at Interstate 5 southwest of Tacoma, Wash., sending a locomotive and passenger cars crashing onto the highway below. The NTSB, in preliminary findings based upon event recorder data, identified the cause of the wreck as an overspeed condition. NTSB also cited a lapse in situational awareness on the part of the engineer as a possible contributing factor, as there was a second person in the cab. Southbound Amtrak Cascades no. 501, bound for Portland, Ore., from Seattle, Wash., was operating at 81 mph on a track segment with a civil speed restriction of 30 mph, according to event recorder data. The derailment came on the first day of Amtrak service via the new Port Defiance Bypass south of Tacoma. The lead locomotive, a Siemens Charger diesel-electric, also new to

12 Railway Age // January 2018

the service, and a P42 Genesis were providing push-pull power from opposite ends of the 12-car Talgo train. All of the passenger cars derailed, and five vehicles on the highway were hit by the train. There were five crew and one technician aboard the train, and 80 passengers. At least 50 people were hospitalized, more than a dozen with critical or serious injuries. No one on the highway was killed. The NTSB investigators are looking into whether the Amtrak engineer was distracted by the presence of a conductor-in-training in the locomotive cab, a federal official said. The official, who was not authorized to discuss the matter publicly and spoke on condition of anonymity, said investigators want to know whether the engineer lost situational awareness because of the second person in the cab. Preliminary information indicated that the emergency brakes deployed automatically and were not manually activated by the

engineer, NTSB member Bella Dinh-Zarr said, citing data from the event recorder. Positive Train Control had been installed on the right-of-way, but wasnâ&#x20AC;&#x2122;t operational, said Geoff Patrick, spokesman for Sound Transit, which owns the right-of-way. The target date for having PTC up and running for the segment of the track where the derailment occurred is the second quarter of 2018. Locomotives and cab-control cars also need to be equipped with PTC. To date, Amtrak has equipped 49% of its locomotives and control cars, according to Federal Railroad Administration data from the second quarter of 2017. The Bypass, the former BNSF Lakewood Subdivision now owned by Sound Transit, was rebuilt to route Amtrak Cascades and other long-distance trains around the former, slower route along Puget Sound on BNSF-owned tracks. The project includes a stop at the new Tacoma station at Freighthouse Square, and 20 passenger rail improvements administered by WSDOT and paid for with nearly $800 million in federal funds. It was to support two additional daily Amtrak Cascades roundtrips between Seattle and Portland, cut travel time between the cities by 10 minutes and improve on-time reliability by avoiding shared operations with freight trains. A WSDOT track chart shows the maximum operating speed drops from 79 mph to 30 mph for passenger trains just before the tracks curve to cross Interstate 5. The chart, dated Feb. 7, 2017, was submitted to the FRA in anticipation of the start of passenger service on the Bypass.

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Update NS Opens New Southern Tier Bridge Norfolk Southern has inaugurated service on the new Portageville Bridge crossing the 235-foot-deep river gorge in New York’s Letchworth State Park. The first train on the Southern Tier span capped two years of construction to replace the original iron truss bridge built in 1875 by the Erie Railroad over the Genesee River Gorge. Known regionally as Portage Bridge, the 963-foot-long steel arch structure in the state’s southwestern region connects the east-west Buffalo to Albany line. The $75 million project will speed up train traffic and permit heavier railcar loads, eliminating a major rail bottleneck for shippers. The bridge was funded through a publicprivate partnership among Norfolk Southern, the New York State Department of Transportation, and the Federal Highway Administration. In addition to enhancing rail safety and operating efficiencies, the new bridge expands freight capacity and business opportunities for shippers from the Midwest to New England. With the new bridge, Norfolk Southern can now transport railcars over the Southern Tier Line loaded to the industry standard 286,000 pounds, a key benefit for customers. The old bridge limited car weights to 13,000 pounds below the standard, while train speed was restricted to 10 mph. Trains crossing the new bridge will operate at up to 30 mph.

Among those benefitting are 10 short line railroads that service and connect local industries to Norfolk Southern’s network. The Class I hauls freight over the Southern Tier Line for about 1,100 customers in more than 20 states. The line also serves as a gateway for trade with Canada and provides a connection to New York City and New England markets. The design and construction budget for the bridge project included $15.5 million

provided through New York State, including a $2-million grant from the Finger Lakes Regional Economic Development Council and $13.5 million in state and federal funds through the New York State Department of Transportation, and $59.5 million from Norfolk Southern. The bridge’s arch design minimizes the railroad’s environmental footprint in the Genesee River Gorge and complements the scenic vistas found in Letchworth State Park.

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Update Keolis, MBTA Driving Toward Drones Drones (formally called UAS, for “Unmanned Aerial Systems”) are becoming an important tool in railroad engineering and maintenance. Keolis Commuter Services, which operates regional/commuter rail for the Massachusetts Bay Transportation Authority, is among the latest to adopt the technology. Why drones? For Keolis, the greater Boston region is packed with dense forests. In 2015, there were six collisions with fallen trees, and 319 trains encountered slippery conditions due to fallen leaves over a 69-day span. A drone equipped with a high-resolution camera and providing a live data feed can scan a right-of-way for these problems much faster than an inspector in a hi-rail vehicle. A drone can also collect data to inspect inaccessible areas on bridges and buildings. Operating a drone is not as simple as it might appear. The Federal Aviation Administration has some rather strict regulations. A drone

must weigh no more than 55 pounds. It must stay within the operator’s line of sight. It cannot fly higher than 400 feet. And it must be flown at least five miles away from an airport. Commercial operation of a drone requires an FAA drone pilot’s license. Currently, Keolis has two certified pilots; five more will be added in 2018. Chief Engineering Officer Pascal Baran is developing Keolis’s drone program. The company is partnered with four firms: GPI (civil engineering), Pix4D (advanced photogrammetry), QuadcopterDigital LLC (aerial mapping and photography) and DelaireTech Airborne Sensoring. Keolis has been testing one drone, a $1,500 off-the-shelf unit with a two-mile range. Funding is expected to become available for acquiring a much larger, multiple-camera unit that will cost in the neighborhood of $25,000. Keolis’s vegetation management initiative is designed to collect, with a drone, precise information rapidly and without disrupting

rail operations. It will track vegetation growth, utilizing periodic data collection, analyze the cost and volume of work, and measure operational efficiency, through offthe-shelf solutions. In the summer of 2016, tests were conducted with two companies over a one-mile territory. The system generated a two-dimensional ortho mosaic and a three-dimensional model of the MBTA right-of-way. It took one hour for each company to fly the zone and one day for the data processing. With this data, Keolis was able to estimate the volume of vegetation that would need to be cut back to keep the right-of-way clear, and protected from falling trees and excessive leaf buildup. The company also conducted a wetlands survey that required only one day with a drone, compared to one week with a surveyor. Keolis is investigating several other uses for drones. A drone can be piloted to take high-resolution photos of specific features or possible failures in hard-to-access areas on

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Update railroad bridges. It can reduce the duration of data acquisition, and be used to prepare digital information layers. A drone can also provide a live video feed from the field, on a private channel that anybody with a web connection can watch. The objective would be real-time information sharing with crisis centers in various locations to improve the decision-making process during an incident affecting rail operations. “Our drone tests so far have been successful in proving that their use is a low-cost solution for information gathering,” says Pascal Baran. “A drone allows us to collect precise information rapidly, safely and without disrupting operations. It is a booming technology currently in experimental stage. Our longterm plan is to implement an industrial program for all vegetation management functions. The next steps are to obtain a waiver for out-of-sight flights, fly infrared and or multispectrum sensors, compile data collected through different configurations (LIDAR, for example), and develop in-house competencies with our drones and certified pilots.”

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Update TTC Line 1 Extension Opens On Dec. 15, Canadian Prime Minister Justin Trudeau joined Ontario Premier Kathleen Wynne, Toronto Mayor John Tory, Ontario Minister of Transportation, Steven Del Duca, Toronto Transit Commission CEO Andy Byford and other officials to open the TTC’s 8.6-km (5.3-mile) Toronto York Spadina Subway Extension (TYSSE) of the Line 1 Yonge-University subway to the new Vaughan Metropolitan Centre. The extension opened to the public on Dec. 17. The C$3.2-billion extension is the first on Toronto’s subway since the Sheppard line opened in 2002. It adds about 13 minutes of travel time along Line 1. Total travel time from Vaughan Metropolitan Centre to Union Station downtown is 42 minutes. There are six new stations: Downsview Park, Finch West, York University, Pioneer Village, Highway 407 and Vaughan Metropolitan Centre. The stations are all fully accessible; Wi-Fi-, cell- and Presto farecard-enabled, and have amenities such as bike facilities.

TTC says the extension will add an estimated 36 million transit trips and eliminate 30 million car trips per year. That includes the first-ever subway trips to York University. Another TYSSE first: A radio-based communications-based train control (CBTC) system utilizing ATO (automatic train operation)—the first such system in revenue service on a metro line in Canada. Alstom supplied its Urbalis 400 technology. The complete project scope includes replacement of the relay-based interlocking on Line 1, and deployment of CBTC across all of Line 1, including the TYSSE green field extension area, as well as control center updates. Project activities include replacing the current track circuit system with an axle counter-based detection system, and installing CBTC equipment on more than 80 Bombardier Toronto Rocket subway cars. Alstom says Urbalis 400 “will help TTC not only reduce headways and provide for 25% additional line capacity, but also

increase operational performance and reliability.” The entire line is expected to be fitted with CBTC by 2019.

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Congratulations 2018 Railroader of the Year

John â&#x20AC;&#x153;Jackâ&#x20AC;? C. Hellmann Chairman, President & CEO, Genesee & Wyoming Save The Date

Railway Interchange 2019

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Watching Washington

To Mend the SAC, STB Must Act

magine if we all just got along. Maybe, someday. For now, countervailing power—labor unions checking managerial authority; shippers challenging rail market muscle—results in personality-charged regulatory proceedings and litigation. The process is soured by unacceptable delay, excessive cost, confrontation and third-party decision making that wrests control from parties of interest. Recently retired National Mediation Board (NMB) Chief of Staff Dan Rainey forged an international reputation teaching and refining alternative dispute resolution practices to guide disputants into non-confrontational, fact-based dialogue emphasizing shared interests and joint problem solving rather than arguing opposing positions. With a doctorate in rhetorical communication, Rainey taught at George Mason University; designed conflict resolution programs in the public and private sectors; and was recruited by the NMB to help apply alternative dispute resolution theories that helped avoid collective bargaining failures and national railroad strikes. “With strong support from NMB members, we created a new environment for parties in a dispute to communicate with each other,” Rainey says. “Alternative dispute resolution re-channels and re-orientates the parties toward finding common ground by defining shared interests and engaging in problem-solving behavior.” Application of alternative dispute resolution theory has earned Rainey numerous

THE URCS HASN’T BEEN MEANINGFULLY REVISED

SINCE THE

1980s 18 Railway Age // January 2018

professional awards and invitations to lecture globally. Such success commends alternative dispute resolution’s expansion to rate reasonableness cases before the Surface Transportation Board (STB) as a substitute for the long-maligned, tortuous and intimidating Stand-Alone-Cost (SAC) process requiring design of an elaborate hypothetical railroad for cost comparison purposes. Few captive shippers can afford the multi-million-dollar cost and three-year or longer process of hiring a squad of specialists in a range of disciplines to do battle with railroads—first before the STB; often afterward in federal court if the regulatory decision is challenged. While data show shippers prevail as often as railroads, shippers allege the “wins” deliver meaningfully less rate relief than justified by the costs of litigation. Chemicals and coal shippers have lost confidence in the process; grain shippers haven’t filed a major rate case since 1981. In recognition, Congress in 2015 instructed the STB to develop a more simplified and expedited method than the SAC process to determine rate reasonableness where railroads are market-dominant. Yet there hasn’t been progress beyond a stalled, limitedfocus rulemaking; a controversial consultant’s report endorsing the SAC process, and a National Academy of Sciences study recommending final offer arbitration—an alternative dispute resolution process used in Canada. As final offer arbitration means selecting just one of the offers, it encourages parties to converge toward a more conciliatory outcome than conventional arbitration, where the arbitrator designs a compromise based on more extreme positions. Compared with the SAC process, say advocates, final offer arbitration is sounder, more transparent and more economical. While the STB offers voluntary conventional arbitration, it repeatedly has been shunned by at least one side. Shippers may be dissuaded by its cap on awards; railroads understandably prefer the status quo of the SAC process. Impeding a simplified and expedited substitute for the SAC process are the

The stb lacks the authority to mandate final offer arbitration.” STB’s outdated regulatory devices. While identification and assignment of joint and common costs has been described as “finding a black cat in a dark room,” the STB’s Uniform Rail Costing System (URCS)—used to estimate variable and total unit costs—hasn’t been meaningfully revised since created in the early 1980s, before substantial advancements in analytical tools that could add illumination. Admittedly, the STB lacks authority to mandate final offer arbitration as a substitute for the SAC process, and with three of five authorized seats unfilled, Acting Chairman Ann Begeman and Vice Chairman Deb Miller may be hesitant to approach Congress or take other initiatives. Yet Congress spoke clearly about mending the problematic SAC process, of which both also are critical. What the two could do while awaiting the empty seats to be filled, is to develop a policy statement or draft a legislative recommendation on a range of alternative dispute resolution methods, including mandated final offer arbitration; set staff to work fashioning new analytical tools, including a reconstruction of URCS, and hold a public hearing—all of which would improve the body of knowledge and reduce delay when reinforcements arrive.

FRANK N. WILNER Contributing Editor railwayage.com

Congratulations

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Chairman, President and Chief Executive Officer Genesee & Wyoming Inc.

2018 Railroader of the Year

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Jack Hellmann RAILROADER OF THE YEAR

By William C. Vantuono

20 Railway Age // January 2018

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Railroader of the Year Genesee & Wyoming’s young chief executive leads a 119-year-old company that’s going—and growing—places.

All Photos Courtesy Genesee & Wyoming

he 55th annual recipient of Railway Age’s Railroader of the Year Award is Genesee & Wyoming Inc. Chairman, President and CEO John C. “Jack” Hellmann, leader of the world’s largest short line and regional railroad holding company, with 122 properties in five countries operating more than 15,000 miles of rail lines. At 47, he is among the industry’s youngest chief executives. Yet, he is a long-time railroader, with international experience as well as expertise in finance and business development. Hellmann oversees a growing company that in recent years has invested more than $2 billion in acquisitions and operating agreements. He has also been expanding the company into related transportation markets. Jack Hellmann joined Genesee & Wyoming in January 2000 and served as Chief Financial Officer through April 2005. He was named President in May 2005, joined the Board of Directors in 2006, and became CEO in June 2007, succeeding Mortimer B. Fuller III. Hellmann was appointed Chairman of the Board of Directors in May 2017 following the retirement of Fuller, who had served as Chairman since 1977. Fuller is a great-grandson of Edward L. Fuller, who founded the 14.5-mile Genesee &Wyoming Railroad Co. in 1899. Previously, Hellman worked in investment banking at Lehman Brothers, Inc., in the Emerging Communications Group, and at Schroder & Co. Inc., in the Transportation Group. He also worked for Weyerhaeuser Co. in Japan and the People’s Republic of China. Hellmann is a graduate of Princeton University and received an MBA from The Wharton School of the University of Pennsylvania and a master’s degree in International Relations from Johns Hopkins School

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of Advanced International Studies. Hellmann is a devoted family man. With his wife Betsy, an attorney, he is the father of three young children. An engaging, downto-earth personality, Hellmann combines boundless energy and genuine enthusiasm for railroading with a love of learning and a natural curiosity shaped by years of world travel and exposure to different cultures. For this article, I spoke with him at G&W’s offices in Connecticut. RAILWAY AGE: We’ve been presenting this award since 1964, and you’re the youngest person to be so-honored. JACK HELLMANN: Thank you very much. It’s an honor, and on behalf of the G&W team, I look forward to talking to you more about what we do here. RA: The demographics in our industry are changing. You’re one of the younger CEOs. Let’s talk about your background. HELLMANN: I’m originally from Seattle, Washington, so I’m a West Coast boy. I met my wife, Betsy, in college, and through graduate school we eventually found our way to New York. She’s from Ohio, I’m from Seattle, and we finally settled here in Connecticut. RA: Where did you go to school? HELLMANN: Princeton University. Betsy and I met when I was a junior, and she was a sophomore. We came to New York City simply because it was a place where we

could both find our first jobs out of graduate school. She went to work in a large New York law firm called Skadden Arps, where she’s in international arbitration, and I took a job at a British investment bank, Schroder & Co. Schroder had a transportation banking practice that led the initial public offering of Genesee & Wyoming. So serendipitously, I got to know G&W through the world of corporate finance. RA: So your background is in finance? HELLMANN: My graduate degree was finance. Prior to that, I worked in Japan, as a Seattle guy, for Weyerhaeuser in its Tokyo office, and its Beijing office. And I’m a maps guy, so studying commodities at Weyerhaeuser whetted my appetite for what ultimately became a passion for railroading. RA: Maps guy? Please expand on that. HELLMANN: It’s probably a byproduct of my father, a professor of Japanese politics at the University of Washington. He’s still teaching there at the age of 84. As a baby, I was on a 747 from Seattle to Tokyo when I was about three months old. My brother went to a Japanese kindergarten; my sister was at the American School in Japan. I grew up looking at world maps, and have always enjoyed the study of maps. Coincidentally, my mom had the same gene. She had a master’s in geography from Berkeley. Maps are a natural transition to railroads, where you get to study the local economy, the local politics of everywhere where we

January 2018 // Railway Age 21

Railroader of the Year from that due diligence trip and described it in elaborate detail to my wife, so she knew I had a unique bug. That was subsequently followed up by working on a transaction with the Union Pacific, back during the time of the UP-SP merger, when there were some challenges with the congestion on the network, and they needed to raise some equity capital. I participated on one of the underwriting teams to do that. And so then I also got the humbling experience of the operational complexities of a railroad. RA: So that really primed you, then, for coming on board with Genesee & Wyoming, which has grown into a global company. So you’ve got all the pieces or components to run this company. HELLMANN: Well, my arrival at G&W was purely serendipitous. And following Schroder, I briefly took a job in the tech world, doing emerging telecom finance, for a short interval. And then the phone rang, and it was someone who I had met in the world of finance asking me if I was interested in being the CFO of a dot-com company out in San Francisco. That actually had immediate appeal to me, because I was from the West Coast, and it seemed like a good ticket back there. But my wife had a great job in New York, and so I said, “Well, now is not the right time.” And then as a throwaway comment, I said, “But you know, there’s a great little railroad out in Connecticut, where if they ever had an opportunity, I would be interested.” And the response back was, “Really?” Because G&W at the time was very small—the market cap of the company was about $45 million—and this was during the dot-com boom. do business. When I got into the world of finance and got exposure to railroads, it was just a very natural fit. RA: So your interest in railroads, then, goes back almost to your youth? HELLMANN: Everybody likes railroads. I’ve always enjoyed railroads as an industry. I would say the intensity of the interest took place when I got to work closely with railroads on Wall Street, and I got to go see them. The first thing I did with a railroad was to go to Mexico City for what was then going to be the initial public offering of Kansas City Southern when I was 22 Railway Age // January 2018

at Schroder. As part of that due diligence team, I first got the deep-seated flavor of what railroads were all about. As you know from the KCS network, if you like studying maps and commodity flows, that’s a great railroad to be looking at. RA: In the ’90s, I spent a lot of time in Mexico with the KCS, when the railroad— what became TFM and is now Kansas City Southern de México—was privatized. You were part of the investment side of that? HELLMANN: It was the first time I had taken a deep dive on railroads and was intrinsically interested in it. I came home

RA: Late 1990s? HELLMANN: Yeah, that was late ’99 when that conversation took place. And after the “Really?” comment, I got a phone call from the chairman, Mort Fuller, saying that they were indeed looking for a CFO. I was 29 at the time, so I was quite young. And so I’ve literally grown up with G&W. RA: How large was the company at that time, in terms of holdings? HELLMANN: We had probably 18 railroads or so at that time. Our revenue base was probably about $175 million. In terms of how I’ve grown into the position I have railwayage.com

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Railroader of the Year

today, it’s literally because I and the team at G&W have put together all the building blocks that have turned G&W into what we are today. And so I know, and our team knows, all of the decisions that have been made organizationally. If they don’t make sense, we change them, and if they do make sense, we keep doing them. RA: So today, G&W is 122 railroads? HELLMANN: 122 railroads around the world, with about $2 billion of revenue. RA: But it’s more than Class II and Class III railroads, at least from a North American viewpoint. The company has other operations. HELLMANN: The way to think about G&W is, in North America, we’re the little guy. We’re the Class IIs and IIIs. And then patiently, over time, we’ve put together contiguous railroads, to extend into regional footprints. For example, the original G&W is 14 miles. Our now-Northeast Region of contiguous lines in that geography is roughly 700 miles. So that’s who we are. We’re the little guy; we’re the feeder lines to the Class I networks. Think of us as the last mile, in most cases. Sometimes the 24 Railway Age // January 2018

last mile is four miles, sometimes the last mile is 600 miles. It depends. RA: And the first mile as well? HELLMANN: Yes. It’s close enough to 50-50, in terms of origination vs. terminating shipments. Outside the U.S., we’re the bigger guy. We do long-haul, transcontinental moves within Australia. We handle about 80% of all containers that move by rail in the United Kingdom, and we have higher horsepower locomotives that look more like the Class I railroads outside the United States. In Australia that means lots of commodities, and in the U.K., that means lots of containers. RA: The operation in the U.K. is Freightliner. HELLMANN: That’s right. We’ve owned it coming up on three years now. It’s a little bit different, because it’s a different regulatory environment. We own the above-rail equipment, and a lot of real estate in the ports and in the interior of the U.K., the Midlands, which is where many of the shipments that move by rail go. The short-haul moves to the south around London are all going to be trucked, because of the length of

haul. We ship to the interior, which is where most of the population of England is; it goes to our terminals. So for example, we have a terminal that sits next to where Manchester United plays, it’s called Trafford Yard, next to Old Trafford. The TV shots typically don’t show the rail yard, but it is there, next to the soccer facility. And so it’s about real estate and rolling stock in the U.K. RA: Let’s talk about the U.K., and Europe in general. As you well know, the rail network is more oriented toward passenger transportation, higher-speed operations. What are some of the operational challenges that you deal with in the U.K., where freight rail’s role, it’s not nearly as large as it is in North America? HELLMANN: There’s no question the freight railroads are second-fiddle in the U.K. to passenger. The way to think about our movements in the U.K. is, we’re running short trains—average lengths of about 30 cars, and the trains are probably moving at 70 mph, in windows on the passenger network. So we’re interspersed with the passenger trains. Some of the differentiators: You can’t afford to make a mistake, and have a breakdown, because if you do, you’re railwayage.com

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Railroader of the Year charged a very high penalty by the track owner for any kind of mechanical failure, for example. And so there’s a ticking toll that kicks in by the minute for any form of delay you have. It means mechanical perfection is at a premium in that market. But for North America, there’s real lessons in that, because that perfection yields really high on-time delivery and performance, and a great deal of customer satisfaction, which is something that I think can be brought to bear on the North American market.

RA: Has the freight traffic increased for you in the U.K.? HELLMANN: The U.K. has been a tale of two stories. The coal traffic has collapsed completely, which we expected to happen. When we acquired Freightliner, we expected the local traffic to fade over about a seven-year period. And for a whole host of reasons, including cheap gas worldwide, and the carbon tax and the like, that happened very quickly. And so the coal went away. That is quickly being replaced

by aggregate shipments, and we’re going to be starting next year to run construction trains for some of the huge passenger projects that are under way, such as the London to Birmingham HS2 project. Coal cars are being transitioned from hauling coal to hauling aggregate or spoils out from the construction sites. The main part of the business is the intermodal franchise, and that has continued to grow. That has had its challenges as well, because the shipping industry has gone through some huge changes in the past couple of years. Most of the majors have been acquired or merged, with the advent of larger container ships, resulting in congestion that’s manifested itself in the ports. We’ve been getting the supply chain running from that congested state, to hitting our train slots, which is like running a conveyor belt. And we’ve also made additional investments to enhance our position. For example, acquiring real estate to store containers in the port. We’ve also added a trucking capability, for if the container misses a train, we’re in the customer service business, not just the railroading business. And we’ll put that box onto a truck, and get it where the customer needs it on time. RA: How about financially, how does that work out? Basically, you’re a tenant operator on state-owned, maintained and dispatched infrastructure, correct? HELLMANN: It’s interesting, I’ll revert to my finance jargon, but at the end of the day, railroads are a capital-intensive business. It’s all about return on capital. The operating ratio is academically interesting, but it’s all about, are you getting a sustainable return on the capital that you deploy? And that equation, in an open-access environment, is getting a return on equipment and terminals. And it doesn’t have the track part of the equation to it, which is the dominant part here in North America. I would say that the returns on capital, and the cash flow generation of that business, looks almost identical to a short line railroad. The margins themselves are thinner, but the CapEx requirements are lower because railroad track drinks capital. So proportionally, actually, the CapEx requirements are less. And so CapEx as a percentage of cash flow is lower, and it looks exactly like a short line railroad.

26 Railway Age // January 2018

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Railroader of the Year

Thirty percent of CapEx to EBITDA is the ratio that I always look at on average, across G&W. We’ve got more capital-intense railroads that are closer to 50%. We have others that look more like a Class I that give you 10%, but on average, we’re at 30%, and that’s what the U.K. looks like as well. RA: Let’s take a trip halfway around the world, to Australia. Totally different operating environment there—closer to North America, heavy haul, high horsepower. HELLMANN: Heavy haul, commodities—similar, really, to regional railroads, because a lot of what you’re doing is gathering commodities from the interior and pulling them to port for export to Asia. So in that sense, it’s actually a little closer to the regional railroading model than the Class I model, except for the transcontinental intermodal traffic. Most of the bulk commodities’ average length of haul is quite a bit shorter in Australia. There are gathering systems in each of the states in which we do business. It’s iron ore, copper, manganese, coal—the last coal burning on earth, cheap coal, really high-quality, going to Japan, to China, to Taiwan. And higherhorsepower locomotives. 28 Railway Age // January 2018

Track ownership there is different. We were the first foreign investor in the Australian market back in 1997. Our approach when we entered was to own both the track and the above-rail equipment. It was a model that we understood. Under that regulatory regime, there’s theoretically the ability to compete away our above-rail business, and be left as a toll road, just owning the track. But generally speaking, each of our investments from ’97, when we made a big investment in South Australia, to 2000, when we invested in Western Australia— these are all privatizations, by the way— we’ve retained ownership of the track. And where we are today is a joint venture in Australia. The world’s largest infrastructure fund, Macquarie Infrastructure, is our 49% partner. We own 51% of it. We have Northern Territory, South Australia and New South Wales as our primary operations. RA: You spend a lot of time Down Under? HELLMANN: I do. It’s been whittled back over the years. Having kids tends to affect one’s appetite for international travel. And I was very fortunate, in my time at G&W, that I was young enough that I was able to get a ton of travel in before I had

kids. Back in 2000, Australia represented more than 50% of G&W’s earnings. And that meant being in Australia was really important, so our then-CEO, Mort Fuller, myself as CFO, as well as some independent directors at G&W, were making probably six trips per year to Australia. That’s a long way, 27 hours. As time has progressed, Australia now represents about 10% of G&W overall. Although I’m on the phone a lot in the middle of the night, I only take two trips to Australia per year now, unless circumstances warrant a separate one. Each of our operations truly is autonomous. We have great people running each one of them in every geography. The daytime is North America. At night, before you go to bed, you’re talking to Australia, and when you wake up in the morning, you’re talking to Europe. RA: What does your typical day look like, being that you’re responsible for the world, pretty much? HELLMANN: Ultimately it’s what our team does during the day. The scalability of our model is purely derivative of the quality of people we have running each of our regions. We have nine autonomous regions railwayage.com

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Railroader of the Year HELLMANN: Ray Goss is Chief Engineer. Rich Regan is Chief Mechanical Officer. The model at G&W is, there’s regional autonomy, but we also have what I call the “consiglieri,” and they sit in Jacksonville. These are people with 35, 40 years of experience. Our guy on the ground, Roger Cross, overseeing the track engineering work, has 47 years of industry experience. We have people with a tremendous amount of experience overseeing standards and best practices across each autonomous region. It’s like an internal consulting group that does the “trust but verify,” worldwide. So Rich, for example, in the mechanical area, oversees the global fleet.

around the world. My job as CEO is to be replaceable at any point in time. If I go away, the operations still run. For me, from a succession planning standpoint, that’s the number one thing I should be doing, having great people who can run the operation without any oversight. That’s why we’ve been able to scale up, because each region is a discrete, standalone business that can incorporate additional acquisitions, effortlessly in most cases. For the international subsidiaries, we have boards of directors on each. Even if we’re not there physically in-person, we’re there telephonically, with formal meetings 30 Railway Age // January 2018

that include local directors in that market. We have a Canadian board, an Australian board, a U.K. board, and then of course the G&W corporate board that sits on top. I chair the boards of all the international subsidiaries. And then I have the experts within G&W who sit on those boards. So for example, Dave Brown, Chief Operating Officer, sits on the boards of each of those entities. Chief Commercial Officer Michael Miller sits on the Australian board. I’ve got subject-matter experts for those meetings. RA: Some of the other disciplines, like mechanical and track, for example?

RA: And he’s from CSX. HELLMANN: Yes. He was someone who had retired, and joined G&W and transportation in our Southern Region. He decided working for a regional or short line was an enjoyable thing to do, and his wife was happy in Jacksonville. That’s important. And then when we acquired RailAmerica, and we suddenly doubled the size of our domestic locomotive fleet, it suddenly became very logical to have someone with the depth of his knowledge to oversee: first of all to play chess with all the locomotives that we have around the country, which are now 92% EMD, so that we’re saving on inventory, parts and the like. But also to oversee what we do on a global basis, because we do have some global purchasing power. We do build some new equipment, in places like China. And even though that new equipment may be used in Australia, the specs are being reviewed in the U.S. by Rich, and he plays close attention to the high horsepower fleet overseas, as well as domestically. Every discipline within G&W is that way. Ray Goss, our head of track, has hi-railed the entire north-south corridor in Australia, probably twice, I think. He’s in charge of track and bridge standards globally. We’ve been doing a lot of our track capital work in-house, as of about three years ago. That’s been a new development. RA: What prompted the change to do more engineering work in-house? HELLMANN: You know, that’s an interesting story, because it’s the spirit of the short line model. When we acquired RailAmerica, embedded in it was a construction railwayage.com

CONGRATULATIONS, JACK. Progress Rail congratulates G&W’s President and CEO, Jack Hellmann, on being named Railway Age’s

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company called Atlas Construction. And that business wasn’t performing particularly well. When we took it over, it continued to not perform particularly well. We had to sit down and ask ourselves, what are we going to do with this business? And the logical answer that emerged, from our operating guys, was, “Well, we should be using this exclusively ourselves. We’re not going to do third-party work; we’re not doing municipal work. Let’s look at this huge footprint of 12,000 miles of track, and let’s apply it. When it’s cold in the Northeast, let’s put our track gangs down south. And when it’s warm in the Northeast, our track gangs will rotate to the north.” There was high turnover in that business—it was just very difficult. We brought onboard the team that was long-term for G&W, and over time, the productivity that we assumed, we’ve doubled it. The morale is great, turnover is low. It’s reduced our U.S. track capital spending actually by 10%, which is dramatically successful. But it was literally making lemonade out of lemons. Business not performing, what are you going to do with it? You can shut it down. That’s always one possibility. But instead we creatively figured out a way to do it, 32 Railway Age // January 2018

and turned it from being a liability into a tremendous asset. RA: Your relationships with Class I’s, your interchange partners: In general terms, how would you describe those? HELLMANN: In general terms, our relationships with the Class I’s are very strong. Our philosophy as short lines is pretty simple. Number one, we try to run the safest railroads in the world, so our Class I partners aren’t having to worry about the condition of our track, whether any of our people are getting hurt, and whether we’re running a world-class operation. We like to be low-profile, under the radar screen, with no one worrying about us. Second, we spend all of our time in the commercial function hustling new traffic. That’s our job. We view ourselves as the retail part of the network. The fact that we even exist today, if you look back to Staggers and deregulation to where we are now, is a deeply reinvigorated industry overall, including the short line component. One of the key elements of that success has been derivative of our ability to attract new carloads to our railroads. We’ve got guys that are out hustling the last carload on

every single one of our railroads. Even as we’ve gotten to be a global company, we’ve never lost track of our roots, taking care of the customer first and foremost. With those two components with the Class I’s, hustling carloads for customers— and most Class I’s will tell you that short lines can drive a higher internal growth rate across their networks—it’s just a question of providing seamless service to interchange. And I think as we’ve gotten bigger, the relationship with Class I’s has progressively gotten better, every single year. RA: So business development—and here I’m referring more to the U.S., and probably Canada as well—is a very important function at G&W. Can you describe some of your activities in that? Is a lot of it converting truck to rail? HELLMANN: Other than getting our people home safely to their family and loved ones after each shift, our next priority on the list is driving new traffic across the railroads, and we attack that in many ways. One is the localized sales and marketing function, which resides in each of our operating regions, but ultimately resides at the front line, at the general manager of railwayage.com

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from

Railroader of the Year Mike Peters, whose job is the long-lead-time projects for the major new auto plant, steel plant, whatever it may be. He spends a lot of time with economic development authorities, seeking to attract new business investment along our railroads. And then frankly, some of our customers, like Georgia-Pacific, where we touch on more than a dozen railroads, like to talk— both at the local and national level—with someone who can see the big picture, across all of the things that they do with G&W, and all the different commodity groups. It’s a huge part of what we do, a huge part of the value that short lines bring to Class I’s.

the short line railroad level. And we tell our employees, every one of us is responsible for the commercial function. In addition to that localized approach, we have a national support function out of

34 Railway Age // January 2018

Jacksonville led by our Chief Commercial Officer, Michael Miller. He’s got a transload team, trying to pull traffic off the roads into yards, onto our railroads. We’ve got an industrial development team, led by

RA: Are P3s, public-private partnerships, working with municipalities and government, whether at the local or state level, a significant component? HELLMANN: Yes. Government policy overall, whether it’s federal or state, has been an important ingredient of the story of taking short line railroads that were never supposed to make it, if you look

railwayage.com

Railroader of the Year back 30 years, and breathing capital into them. Although the vast proportion of the investment has been private-sector dollars, in certain instances, state funds, state programs married to federal programs, have helped elevate our rail infrastructure. What we operate over today at G&W—and I couldn’t have said this 20 years ago—is going to be there for the next 50 years, for the next generation to come, because of the success of the industry, the investment in the plant. By virtue of our own efforts as well as those of local and federal governments, we’ve simply elevated the caliber of our infrastructure in a meaningful way. Our plant has never been in better condition than it is today. It’s very gratifying. RA: Has the 45G program, the infrastructure tax credit program, been helpful? HELLMANN: Absolutely. 45G is one of the component parts of the public-private partnership that’s led us to tackle some of the longer lead-time projects—the big bridges, the big tunnel projects, the ones that

you can defer for a while that are eventually going to have to come. With the support of things like 45G, our confidence and our ability to invest in those projects now rather than later has been accelerated, and you can see that in the condition of our plant today. It remains a priority. A lot of G&W now is 286-compliant. But we continue to have lines that require upgrades. 45G will be an important part of that prospectively. So we do spend a lot of time in Washington, D.C., talking about the merits of what has happened up until now, as well as what we see that can happen going forward, as we continue to upgrade track. RA: In North America, what does your annual CapEx look like? HELLMANN: In North America, we’re at about $160 million of CapEx, all in, across G&W, annually. Worldwide, it depends on the year. Our core CapEx, on a worldwide basis, is probably $225 million, roughly. But then there’s another layer of capital that’s subjected to an investment

analysis, and that’s new-project capital for a new customer, for an upgrade that’s tied to a new customer. And in some years, when the world is depressed, that may be a low number. And when things are booming, like the global commodity boom, that number could approach even $100 million. In the past probably seven years or so, $1.5 billion has gone into G&W’s plant, worldwide. RA: Growth has been a hallmark of G&W. You’re in nine regions now; there are 122 operations. Where do you see the company going in terms of growth? What markets or regions are you looking at? HELLMANN: The company has grown a great deal. Our revenue growth for almost three decades now has grown at a compound annual rate of 20%. The first thing I say about growth is that growth for its own sake is a great way to make a mistake and blow up a company. We don’t believe in growth for its own sake. We are opportunistic about what we acquire, what we fold in, and making sure that we’re culturally ready

ASLRRA Congratulates Jack Hellmann

Chairman, President and CEO, Genesee & Wyoming

Railroader of the Year

railwayage.com

January 2018 // Railway Age 35

Railroader of the Year to fold in any given acquisition, or we have the capabilities to do it. Don’t get me wrong, we’re built to grow, and our M&A team, under the leadership of Matt Walsh and Tom Savage, is a tremendous group. Our legal team’s capacity to handle all the multiple transactions we’re looking at simultaneously is tremendous. But we’re very disciplined in our approach, and I always tell our people, if we never did an acquisition again, we would be fully content operating the world-class railroads we own today. Now, having said that, we do have a capability, which is to look, to study, and acquire railroads. And we look at hundreds of railroads all over the world. Our preference typically is for our existing footprint, where we’ve got good management talent. We understand the regulatory regime and government risk, things of that nature. Our priority: We are a U.S. company; 75% of our business is from the U.S. If you look at the footprint of our railroads across the country, we own or lease about 25% of

all short lines. That means there’s an awful lot of contiguous railroad track of our own. Our long-term philosophy, over time, is that we’ll have a good opportunity to add to one of G&W’s regions. Our regional structures are such that our capacity to add short line railroads and fold them into the regions can be a very seamless one. So I would say our number one priority is where our existing footprint is, and that includes the U.S. and Australia. Now, under open access, in a place like Australia or the U.K., you’re thinking less about acquisitions, and more about adding train sets. And given that a train set can be $50 million, that’s the equivalent of buying a little short line railroad. So what we’re looking for internationally, often, are long-term contracts. You can have 20-year contracts, for example, in Australia, where you deploy capital, and provide service over the government-owned track. But again, from a capital deployment standpoint, that’s just like an acquisition, and we are looking at many of those opportunities right now in

the markets we serve. Further afield, we have made investments in other places, and we have looked in other places. What’s different today—so if you look back historically, a place like South America, for example, if you look back 10, 15, even 20 years—I guess I’m getting old—most of those opportunities were privatizations. They were 30-year concessions, whether you’re in Argentina, Brazil, Bolivia or Chile. A lot of those concessions are now expiring, and the governments are now having to ask themselves, “Well, what next?” What I see as being different, today, is rather than bidding on concessions in those political environments where we’re comfortable having capital invested in the ground, most of our opportunities are with global customers. G&W has gotten big enough that, typically, big companies like doing business with big companies, and there’s very few companies who do what we do on a global scale. We now get the inbound phone calls from all over the world asking, “We have a rail

your North American rail service provider, would like to

congratulate

jack hellmann from genesse & wyoming, railroader of the year! 36 Railway Age // January 2018

railwayage.com

Railroader of the Year service issue here, can you come here and help us?” Long-term contracts with those customers, in multiple countries: I think that’s most likely, as you see us reach outside of our existing footprint. It’ll be arm-inarm with our global customers. RA: Any particular markets where you feel there’s good potential? HELLMANN: It’s really a case-by-case basis. I always joke that, well, first of all, you have to define where you won’t go. When you look at an insurance policy, there’s something called special situations insurance, otherwise known as kidnapping insurance. There’s a little asterisk in the policy that says, “You won’t be covered if you go there.” And so we don’t go there. That’s a long list. For other places that we go, we look at political risk, and it has to be long-term political risk, because things might look rosy now, but as you know, there are many countries that have had their ups and downs over time. Railroads are long-lived assets, and you’re making multi-decade investment

decisions if you’re getting involved with the track. You have to be awfully comfortable with that country before you’re going to put money in the ground as an investment. We’ll look at certain countries as being

ones where, if we think the politics are more challenging but there’s a good business opportunity, we may invest no capital, and just do a management contract. There are others that are maybe a little more

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January 2018 // Railway Age 37

Railroader of the Year comfortable in terms of political dynamics, and we’ll own the locomotives, and perhaps the railcars, because those are fungible assets that you could take somewhere else, if things became uncomfortable. You’ve got to be really comfortable with the political environment when you start investing your capital in the ground, in the track, which you can’t just pick up and take home. And that’s generally going to be the developed world. RA: The future of the rail industry: You are probably mid-career, where you have a lot of experience, but you have a lot of years to go. Where do you see this industry headed? What challenges does this industry need to address? HELLMANN: First of all, it’s easy to conceive of a Blade Runner-type scenario, with ships coming across the ocean, handing it off to an autonomous train that’s got a beehive of drones above it, delivering stuff for Amazon all over the country. I’m much more pragmatic. There are certain

38 RT&S-MOW-AD-Full-page-horizontal-09-18-17-A.indd Railway Age // January 2018

components that probably are realistic, over time. I think about it pretty simply, and I just focus on the customer. I think the rail industry could be a lot more commercially user-friendly than it is today. The application of technology to the interface between the customers and the railroads could be enhanced in a way that makes us easier to do business with. Going forward, the future of the railroad industry requires being as close to the customers as we can be. That happens to be what short lines are pretty good at. In that regard, we can be leaders in fostering the customer relationships, the application of technology, in order to help the customers meet their long-term needs. And yes, that could mean, for a company like G&W, getting involved with autonomous vehicles as an opportunity to extend our supply chain. I view all technology as an opportunity, not as a threat. There’s a reason we’ve been around since the 1800s. The intrinsic economics of why rail works isn’t going to go away just because things become autonomous. Obviously, if

you own your right-of-way, that’s the morelogical place to be autonomous. I view it as, how do we extend out the supply chain, how do we drive more traffic over our existing railroads? We are looking at projects, to find ways to do just that right now. Some of it may be investments in earlier-stage technology that help make us more attractive as a place for commodities to ship. RA: In terms of technology, are you looking at things like using drones, for example, in bridge inspection, or track inspection? HELLMANN: Yes, we’re using technology in a whole host of ways. One, we have some pilot projects looking to enhance the customer experience, and the ease of doing business with rail. That’s on the customer side. On the operating side, we’ve had a big project that we just rolled out, and is up and running today, which is an electronic notebook system for our track maintenance, where we’ve basically got iPads in all our hi-rail trucks. We’re using GPS technology to identify where

railwayage.com

Railroader of the Year the flaws are, the places that are going to need repair, and that’s visible both at the corporate level and the regional level. That’s really helping us enhance our longterm track integrity, and to be able to trust and verify that the repairs to our track that need to be made are made. That’s been a huge rollout across the company over the past couple of years, and it’s been very, very effective, in our efforts to eliminate all track-caused derailments. We’re doing some interesting stuff with drones. Our track guys are going to be purchasing a couple of drones. We’re mostly going to be using them initially for bridge inspections. GW has 8,000 bridges; I like to say that each of our employees has their own bridge. There are parts of those bridges that are hard to get to. Having a camera mounted on top of a drone, and getting underneath, seeing what’s really going on, can be very, very valuable in terms of our bridge maintenance program. There are a whole host of areas where the application of technology is

increasingly relevant, and it’s happening on a real-time basis that’s very exciting. RA: An issue the railroads face is recruiting fresh talent, young people, getting them interested, and keeping them interested, where they make careers out of this industry. HELLMANN: G&W is a company that was built on young people. If you look across every major position in the company, including myself, someone was willing to take a chance on someone, probably 10 or 20 years sooner than a big company would have been willing to take that chance. If you look at all of the key positions at G&W, you’ll see that pattern. We’re a very young team. With that youth comes a culture, and an openness. I’ll call it lack of hierarchy, in terms of decisionmaking. We’re very open to ideas that can come to the senior leadership from any part of the company. People know that we listen. And I think if you can foster that kind of environment at the corporate level, and at the front line level, the railroad

level, you’ve created a work environment in which people want to work, whatever their functional discipline might be, mechanical, or track, or conductors, or engineers. If you foster the right culture, you’re going to attract good people. It does require very special individuals to want to work on a railroad. Railroading is a lifestyle job, it’s not just a job. And that attracted me to it. I was a volunteer fireman in college. There’s something about the adrenaline rush of constantly being connected to the real world that’s a natural affinity to me on the railroads. There’s a good subset of humanity who is going to feel that same way that I do. If we foster the right corporate culture across G&W, and reach out into the communities, and show them what we do, we’re going to get the people. And we don’t have shortages of people. We do a good job of hiring, and we get a lot of inbound interest from all across the industry, and from other industries as well. They’re good, well-paying jobs in a very exciting industry.

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9/18/17 9:11 PM January 2018 // Railway Age 39

Railroader of the Year.ai

12/21/17

8:59 AM

Railway Age’s

Railroader of the year Award

Recipients under Modern Railroads 1964: D. W. Brosnan, Southern Railway System 1965: Stuart T. Saunders, Pennsylvania Railroad Co. 1966: Stuart T. Saunders, Pennsylvania Railroad Co. 1967: Louis W. Menk, Northern Pacific Railway 1968: William B. Johnson, Illinois Central Railroad 1969: John W. Barriger, Missouri-Kansas-Texas Railroad 1970: John S. Reed, Atchison, Topeka & Santa Fe Railway 1971: Jervis Langdon, Jr., Penn Central Transportation Co.

1972: Charles Luna, United Transportation Union

1973: James B. Germany, Southern Pacific Transportation Co.

1974: L. Stanley Crane, Southern Railway System

1975: Frank E. Barnett, Union Pacific Railroad

CMY

1976: Dr. William J. Harris, Jr., Association of American Railroads

1977: Edward G. Jordan, Conrail 1978: Robert M. Brown, Union Pacific Railroad

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1979: Theodore C. Lutz, Washington Metropolitan Area Transit Authority 1980: John G. German, Missouri Pacific Railroad Co. 1981: Lawrence Cena, Atchison, Topeka & Santa Fe Railway 1982: A. Paul Funkhouser, Family Lines Rail System 1983: L. Stanley Crane, Conrail 1984: Hays T. Watkins, CSX Corp.

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1985: John L. Cann, Canadian National

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1988: Darius W. Gaskins, Jr., Burlington Northern

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1986: Raymond C. Burton, Jr., Trailer Train Co. 1987: Willis B. Kyle, Kyle Railways

1989: W. Graham Claytor, Jr., Amtrak 1990: Arnold B. McKinnon, Norfolk Southern Corp. 1991: Mike Walsh, Union Pacific Railroad

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The Railroader of the Year Award was started by Modern Railroads magazine in 1964 as the “Man of the Year” award. Railway Age acquired Modern Railroads in 1991 and has presented the award annually since then.

Recipients under Railway Age 1992: William H. Dempsey, Association of American Railroads 1993: Raymond C. Burton, Jr., TTX Co. 1994: L. S. “Jake” Jacobson, Copper Basin Railway 1995: Edwin Moyers, Southern Pacific Transportation Co. 1996: Robert D. Krebs, AT&SF, and Gerald Grinstein, Burlington Northern 1997: Paul M. Tellier, Canadian National 1998: David R. Goode, Norfolk Southern 1999: Edward A. Burkhardt, Wisconsin Central Transportation Co.

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2008: Stephen C. Tobias, Norfolk Southern 2009: Michael J. Ward, CSX

Third Rail Applications—Mag Cranes—Tie Cranes Track Boom—Attachments

2010: Matthew K. Rose, BNSF 2011: Wick Moorman, Norfolk Southern 2012: David L. Starling, Kansas City Southern 2013: James R. Young, Union Pacific 2014: Joseph H. Boardman, Amtrak 2015: E. Hunter Harrison, Canadian Pacific 2016: Carl R. Ice, BNSF Railway 2017: Thomas F. Prendergast, New York MTA 2018: John C. Hellmann, Genesee & Wyoming

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January 2018 // Railway Age 41

PASSENGER RAIL OUTLOOK

playing an expensive

waiting game By STUART CHIRLS, SENIOR EDITOR

Production delays and quality issues among carbuilders are giving new meaning to the phrase, “long range plans.”

ow that Congress has passed tax reform legislation, the railroad industry is eyeing an equally massive infrastructure bill that could help to fund passenger and transit projects planned or proposed by operators around the country. But a critical issue is looming almost as large as perennial funding questions: Carbuilders are struggling to fulfill orders, for a variety of reasons, in some cases with 42 Railway Age // January 2018

such lengthy delays that funding for some transit projects might be jeopardized. The decline and fall of U.S. passenger rail services and supporting industry—and the rise of foreign-based lower-cost carbuilders in the global economy—pushed the legendary names that once supplied the industry—Pullman-Standard, Budd, St. Louis Car—into merger or extinction. In their place are a variety of companies with headquarters from Asia to Europe. To be sure, the new generation of

builders long ago established their bona fides in the U.S. market, including longdistance passenger cars and intercity trainsets, as well as commuter, rapid transit, streetcar and light rail equipment that have stood the test of time in the most demanding operating environments. They include Brookville Equipment Corp. of Pennsylvania; Canada’s Bombardier; Alstom of France; Kawasaki, Kinkisharyo International, Sumitomo and Nippon Sharyo of Japan; Spain’s Construcciones y Auxiliar railwayage.com

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Sponsorships & exhibits available. Contact Jon Chalon at 212.620.7224, jchalon@sbpub.com railwayage.com

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January 2018 // Railway Age 43

PASSENGER RAIL OUTLOOK

de Ferrocarriles (CAF); Stadler of Switzerland; Hitachi Rail Italy, Hyundai-Rotem of South Korea, and CRRC of China. And, many of those foreign companies operate U.S.-based subsidiaries. But have builders bitten off more than they can chew? In 2010, CAF USA won an order worth $343 million from Amtrak for 130 cars for long-distance services. The order included

General wrote in an audit published in February 2016. “Our analysis indicates that cost increases and benefit deferrals will continue as the project falls further behind its original schedule. For example, because CAF unilaterally reduced its rate of production, the delivery of all the cars is currently scheduled for completion in March 2017— more than two years beyond the original due date.” In Philadelphia, the Southeastern Pennsylvania Transportation Authority (SEPTA) found itself facing a similar dilemma. After awarding a $274 million contract for 120 Silverliner V electric multiple-unit (EMU) cars to Hyundai-Rotem in 2006, it didn’t take long for problems to crop up. Delivery of the order was completed three years late in 2013 due to workmanship issues, including faulty welds. Then, in 2016, cracks were discovered in equalizer bars in 115 of the cars, or a third of the regional fleet. Under a liquidated damages provision in the contract, Hyundai was liable

25 sleepers, 25 dining cars, 55 baggage cars and 25 dorm-baggage cars (left). Delivery of the single-level cars was scheduled to begin in November 2014, to replace aging baggage and diners, and augmenting sleeper car capacity. (On some trains, Amtrak is operating cars inherited from predecessor railroads.) But CAF soon faced production issues that substantially delayed delivery of the cars. According to Amtrak, there were a variety of defects in the baggage cars— considered the easiest to build—and quality issues with the initial construction of the diner, dorm-baggage and sleepers. As of 2016, Amtrak said 70 baggage cars had been delivered while a renegotiated contract called for delivery of all cars in the order by March 2017. “Through December 2015, the delays have resulted in an estimated $7 million increase in overall project costs and a deferral of about $3.7 million in benefits the company expected to accrue from having the cars in revenue service,” Amtrak’s Inspector

We supply new and relay rail & OTM as well as turnouts and switch material for new track construction, maintenance, and emergency repairs. We manufacture 5/8” x 6” track spikes. Our locomotive division performs routine inspections and maintenance along with major repairs and complete rebuilds for modern and older locomotives. We will always work to find the best material to meet your demands and budget.

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44 Railway Age // January 2018

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Congratulations 2018 Railroader of the Year

John â&#x20AC;&#x153;Jackâ&#x20AC;? C. Hellmann Chairman, President & CEO, Genesee & Wyoming Save The Date

Railway Interchange 2019

September 22-25, 2019 Minneapolis Convention Center Minneapolis, Minnesota, USA

RailwayInterchange.org

PASSENGER RAIL OUTLOOK for about 65,000 late days, at a cost of $13 million. SEPTA’s board in March 2016 used that payout to approve a $6.28 million contract—also with Hyundai—to overhaul 11 push-pull cars built by Bombardier. The work is taking place in Hyundai’s South Philadelphia facility built to handle Silverliner final assembly. The company had earlier rehabbed 22 Bombardier cars. The New York MTA has been dealing with delays on at least two large orders. In mid-2012, MTA Long Island Rail Road issued a joint procurement request for itself and Metro-North for up to 676 M9 EMU (electric multiple-unit) cars. In September 2013, Kawasaki Rail Car, the builder of Metro-North’s M8 railcars, was awarded a nearly $1.8 billion contract for a base order of 92 M9 cars for the LIRR, with options for 584 cars—304 to LIRR and 280 to MetroNorth. The NYMTA’s 2010-14 Capital Plan provided funding for the base order. The M9A procurement for equipment intended to provide East Side Access service was deferred due to delays in the opening date

for the ESA project. The LIRR portion of the M9 order is currently structured as follows: 92 base order cars and 110 Option 1 cars. Six pilot cars have been delivered to TTCI in Pueblo,

The New York MTA has been dealing with long delays on at least two large railcar orders. Colo., for testing, with an additional two cars to be delivered to Pueblo early this year. Pilot car testing at LIRR will commence in April. Production cars are scheduled to be delivered starting in July at the rate of

12 cars/month. NYMTA expects pilot car testing in Pueblo to continue through April, pilot car testing at LIRR to take place from April through June, and acceptance of the 92 base order cars and 110 Option 1 cars to take place from July 2018 through November 2019. In December LIRR issued an RFP to prequalify firms for a minimum of 60 and up to 160 M9A married-pair (A Car/B Car) railcars, structured as a base order with options. These cars are tied to the FFGA (full funding grant agreement) between the LIRR and the Federal Transit Administration for ESA, and as such fall under a separate procurement from the contract NYMTA awarded to Kawasaki in 2013. Proposals for this Phase I/Prequalification RFP process were due by Jan. 10. The M9As are intended to supplement LIRR’s EMU fleet for ESA service. Meanwhile, New York City Transit’s 300 R179 subway cars, built by Bombardier, are two years late, mainly due to manufacturing problems.

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RAIL

From Railway Age, GROUP RT&S and IRJ NEWS

ROUND-UP of NEWS STORIES

RAILWAY AGE,

www.railwayage.com/rgn

46 Railway Age // January 2018

railwayage.com RA_RailGroupNews_1/6Vertical_InGear.indd 1

10/26/17 9:06 AM

PASSENGER CAR MARKET THESE NEW AND REBUILT CARS WERE DELIVERED IN 2017 Purchaser

# of Cars

Type

Builder

Amtrak

Intercity

CAF USA

Austin (Capital Metro)

Light Rail

Stadler

Brightline (Florida)

Intercity

Siemens

Buffalo (NFTA)

Rebuilt Light Rail

Hitachi

Detroit

Streetcar

Brookville

Los Angeles (LACTMA)

Light Rail

Kinkisharyo

Miami-Dade

Rapid Transit

Hitachi

Newark (NJ Transit)

Rebuilt Light Rail

Kinkisharyo

New York (NYC Transit)

Rapid Transit

Bombardier

Ontario (Kitchener-Waterloo)

Light Rail

Bombardier

Toronto (TTC)

Streetcar

Bombardier

Philadelphia (PATCO)

Rebuilt Rapid Transit

Alstom

Sonoma-Marin (SMART)

DMU Commuter

Sumitomo/Nippon Sharyo

ORDERS LIKELY TO DEVELOP IN 2018 Purchaser

# of Cars

Type

Chicago (METRA)

113

EMU Bilevel Commuter

Houston

Light Rail

Los Angeles (Metro)

Light Rail

Newark (NJ Transit)

133

EMU Multilevel Commuter

New York (LIRR)

160

EMU Commuter

New York (NYC Transit)

1,537

Rapid Transit

Sonoma-Marin (SMART)

TBD

Vancouver (TransLink)

Rapid Transit

NEW CAR DELIVERIES BY MODE, 11-YEAR TRACKING

railwayage.com

Year

Regional/intercity

Rapid Transit

LRT/Streetcar

Total

2007

139

402

121

662

2008

227

272

596

2009

187

752

202

1,141

2010

199

782

148

1,129

2011

235

113

149

497

2012

343

243

645

2013

531

337

166

1,034

2014

251

484

116

851

2015

251

462

258

971

2016

424

188

706

2017

140

169

January 2018 // Railway Age 47

PASSENGER CAR MARKET WORK PROGRESSES ON THIS UNDELIVERED BACKLOG Purchaser

# of Cars

Type

Builder

Amtrak

Intercity

CAF USA

Amtrak

168

HSR Intercity

Alstom

Boston

Rebuilt Light Rail

Alstom

Boston (MBTA)

284

Rapid Transit

CRRC

Boston (MBTA)

Light Rail

CAF USA

Buffalo (NFTA)

Rebuilt Light Rail

Hitachi

California (Caltrain)

EMU Commuter

Stadler

California (Caltrans)

Intercity

Siemens/Sumitomo

Chicago (CTA)

400

Rapid Transit

CRRC

Chicago (IDOT)

Intercity

Siemens/Sumitomo

Chicago (METRA)

Bilevel Commuter

Siemens

Cincnnati

Streetcar

CAF USA

El Paso

Vintage Trolley

Brookville

Kansas City

Streetcar

CAF USA

Los Angeles (LACMTA)

Light Rail

Kinkisharyo

Maryland Transit

Rapid Transit

Hitachi

Miami-Dade

Rapid Transit

Hitachi

Milwaukee

Streetcar

Brookville

Montreal (Societe de Transport)

432

Rapid Transit

Alstom/Bombardier

Montreal (AMT)

Bilevel Commuter

CRRC

New York/New Jersey (PATH)

Rapid Transit

Kawasaki

New York (LIRR)

202

EMU Commuter

Kawasaki

New York (Metro-North)

EMU Commuter

Kawasaki

New York (NYC Transit)

266

Rapid Transit

Bombardier

Newark (NJ Transit)

Light Rail

Kinkisharyo

Oklahoma City (Embark)

Streetcar

Brookville

Ontario (Kitchener-Waterloo)

Light Rail

Bombardier

Ottawa

Light Rail

Alstom

Philadelphia (PATCO)

Rebuilt Rapid Transit

Alstom

Phoenix (Valley Metro)

Streetcar

Brookville

San Bernardino (SANBAG)

DMU Light Rail

Stadler

San Francisco (BART)

EMU Commuter

Bombardier

San Francisco (BART)

775

Rapid Transit

Bombardier

San Francisco (MUNI)

Light Rail

Siemens

Sonoma-Marin (SMART)

DMU Commuter

Nippon Sharyo

Toronto (Metrolinx)

Light Rail

Bombardier

Toronto (Metrolinx)

Light Rail

Alstom

Toronto (TTC)

145

Streetcar

Bombardier

Vancouver (TransitLink)

Rapid Transit

Bombardier

Washington D.C. (WMATA)

348

Rapid Transit 7000 Series

Kawasaki

48 Railway Age // January 2018

railwayage.com

PASSENGER CAR MARKET THE FIVE-YEAR (2019-2023) OUTLOOK Purchaser

railwayage.com

# of Cars

Type

Amtrak

1,046

Intercity

Boston

404

Rapid Transit

California (CHSRA)

70-86

HSR Intercity

California (Caltrain)

EMU Commuter

California (Caltrans)

30-60

Bilevel Intercity

Chicago (CTA)

446

Rapid Transit 7000 Series

Chicago (Metra)

40-60

Rebuilt Commuter

Chicago (Metra)

139

Multilevel EMU

Dallas (Trinity)

TBD

Multilevel Commuter

Dallas (DART)

TBD

Light Rail

Florida (DOT)

Bilevel Commuter

Fort Worth

DMU Commuter

Hamilton, Ont. (Metrolinx)

TBD

Light Rail

Kansas City

Streetcar

Los Angeles (LACTMA)

186

Rapid Transit

Milwaukee

0-3

Streetcar

Minneapolis/St. Paul

0-22

Light Rail

Montreal (AMT)

Bilevel Commuter

Newark (NJ Transit)

211

Multilevel Commuter

New York (LIRR)

EMU M-9 Commuter

New York (Metro-North)

0-170

EMU M-9 Commuter

New York (Metro-North)

0-200

Bilevel Commuter

New York (NYC Transit)

1,870-2,110

Rapid Transit

New York/New Jersey (PATH)

0-72

Rebuilt Rapid Tranist

North Carolina (Triangle)

TBD

Light Rail

Oklahoma City (Embark)

Streetcar

Orlando (Sunrail)

Light Rail

Philadelphia (SEPTA)

Bilevel Commuter

Phoenix (Valley Metro)

Light Rail

San Bernardino (SBCTA)

1-2

Light Rail

San Francisco (BART)

306

EMU Commuter

San Francisco (MUNI)

Light Rail

San Mateo (SMCTA)

EMU Commuter

Seattle (DOT)

4-8

Streetcar

Sonoma-Marin

TBD

DMU Commuter

South Florida (SFRTA)

Streetcar

January 2018 // Railway Age 49

People / 100 years / Meetings March 7, 2018

Railroad Day on Capitol Hill

Clark hopp Alaskan Railroad

High profile: The Alaska Railroad named Vice President of

Engineering Clark Hopp as Chief Operating Officer (COO), effective Jan. 1, 2018, when current COO Doug Engebretson retires. Hopp has led the railroad’s Engineering Department since February 2013. He joined ARRC in 2001 as a capital projects manager, and in 2003, he became Manager, Civil Projects. In 2011, Hopp was promoted to Director of Special Projects, overseeing two major expansion projects—the Port MacKenzie Rail Extension and Northern Rail Extension, Phase One. Before joining ARRC, Hopp worked for Transystems Corp., a nationwide engineering consulting firm based in Nebraska. From 1995 to 2001, he provided project management services to BNSF and Union Pacific. Hopp earned a degree in Construction Engineering Technology from Iowa Western College.

mtrak has appointed Caroline Decker as Vice President, Northeast Corridor Service Line. Decker, a winner of Railway Age’s inaugural Women in Rail award, succeeds Mark Yachmetz, who remains with the group as Vice President, Acela 2021 Program, where he will be exclusively focused on delivering the next-generation of Acela Express service, including the new high-speed trainsets. Anacostia Rail Holdings named Kathleen Sackett Director, Marketing and Sales for the Louisville & Indiana Railroad, based in Jeffersonville, Ind. She joins LIRC from Watco’s Wisconsin & Southern Railroad. Matthew Coduti has joined Chicago South Shore & South Bend Railroad, Michigan City, Ind., as Manager of Marketing and Sales. He was formerly Planner, Maritime and Raw Material Logistics at ArcelorMittal.

Mike Janke retired after 43 years working for Hotstart and the railroad industry. Janke joined the company in October 1974 after serving in the Coast Guard. As the company grew and expanded its offerings to the railroad industry, his role moved from assembling product in the plant to field and customer service roles that connected him with short line mechanical crews all over the United States. TranSystems has promoted Matthew Santeford, of the firm’s Schaumburg, Ill., office, to Assistant Vice President and Senior Professional Partner. The Chicagobased firm said Santeford has 15 years of extensive professional structural experience in design and management of concrete and steel structures for highway, railroad and mass transit projects across the Midwest, including working on Chicago’s Jane Byrne (Circle) Interchange.

100 years ago in railway age gazette JANUARY 1918 Store-door Delivery of Freight In theory the railroad ought to allow each merchant a day or two in which to take away his freight; it is a time-honored right. But the granting of this right is now wasting thousands of dollars every day. Conditions are so chaotic that there seems to be no premise of relief except as they (with the co-operation of the government) step in and boldly reorganize the draying business on radical lines.

50 Railway Age // January 2018

Marriott Marquis Washington, D.C. American Short Line and Regional Railroad Association (202) 628-4500

March 12 - 16, 2018

Railroad Track Inspection & Safety Standards University of Tennessee Center for Transportation Research Tennessee Valley Railroad Museum 4121 Cromwell Road Chattanooga, TN 37421 http://ctr.utk.edu/CTRrailcourses/ railclass.php?id=492&loc=

March 13, 2018

Railway Age RAIL FREIGHT BUSINESS DEVELOPMENT Conference Union League Club of Chicago Information: http://www.railwayage. com; conferences@sbpub.com.

April 7-10, 2018

AMERICAN SHORT LINE AND REGIONAL RAILROAD ASSOCIATION 2018 CONNECTIONS CONFERENCE Gaylord Opryland Nashville, Tenn. https://www.aslrra.org/ aslrra2018connections

APRIL 26-27, 2018

Railway Age third annual LIGHT RAIL Conference Baltimore Marriott Waterfront Information: http://www.railwayage. com; conferences@sbpub.com.

June 6-7, 2018

Railway Age Fourth Annual Rail Insights Conference Union League Club of Chicago Information: http://www.railwayage. com; conferences@sbpub.com.

railwayage.com

Congratulations 2018 Railroader of the Year

John â&#x20AC;&#x153;Jackâ&#x20AC;? C. Hellmann Chairman, President & CEO, Genesee & Wyoming Save The Date

Railway Interchange 2019

September 22-25, 2019 Minneapolis Convention Center Minneapolis, Minnesota, USA

RailwayInterchange.org

Products DON’T FREEZE UP IN THE COLD

ONT Turns to Delta for Portable CNC Wheel Truing Ontario Northland Railway has adopted CNC (Computer Numerical Control) portable wheel truing machines for maintaining and repairing locomotive wheelsets. The machines are from Delta Manufacturing, Escanaba, Mich.. “Previously, if we had a locomotive wheel defect in our Cochrane terminal, we shipped the locomotive to our larger North Bay facility, which took it out of service,” says ONT Manager of Training and Continuous Improvement Chris Wilson. ONT considered purchasing an in-track wheel truing machine for Cochrane, to service its 24 locomotives. The $2 million price was prohibitively expensive. Delta’s CNC wheel lathe provided a viable alternative. “Since such equipment is portable, it can quickly be brought to a disabled locomotive to re-profile wheels onsite,” Delta says. “Our Wheel Hog, for example, can be utilized at the remote site, with the locomotive raised on mechanically locking jacks, so the wheels can be quickly and precisely re-trued. This approach can dramatically reduce the cost of service downtime and eliminate the expense of moving a locomotive or shipping wheelsets to a reconditioning facility.” “With the old hand-cranked wheel lathes, you worked up close to the wheel,” says Wilson. “With our portable CNC machine, 52 Railway Age // January 2018

you stand at a safe distance and control the operation with a handheld pendant. We’ve had no injuries with it.” According to Wilson, ONT chose the CNC portable wheel lathe because it “is very safe, precise, and fully automatic” and “provides the correct AAR wheel profile every time. After you determine the X and Y axis during setup, there’s no more wheel profile measuring required. It’s monitored automatically and keeps a running total of how much material you’ve removed” Delta says its CNC unit can true a single wheelset in four to six hours, depending on wheel condition, “a relatively short time to recondition an entire locomotive.” “If we have a wheel defect, we can put the locomotive back in service in about 24 hours,” says Wilson. “The lathe paid for itself in the first six months, just in reduced downtime.” He adds that the CNC lathe “allows us to eliminate wheel defects that can increase wheel impact loads and also lead to electric traction motor failures. Since we’ve had the CNC machine, we’ve experienced an 80% reduction in traction motor failures on the locomotives in that terminal. We’ve saved at least $300,000 in about two years.” Information: 906-233-1500; Fax: 906-2331555; email j.malueg@deltamfg.net; www. deltamfg.net.

assenger cars operating in colder climates run the risk of their potable water systems freezing when the car heat is turned off for switching locomotives or even during brief layovers. Damage can occur from pipes bursting when the water tanks freeze up, and repairing the damage can be costly and keep a passenger car out of commission for days, if not weeks. Designed to prevent passenger car water tank damage from freezing, ThermOmegaTech’s GURU PC® Valve line consists of self-actuated, thermostatic drain valves that automatically monitor ambient temperatures. When the set temperature is reached, the thermal actuator opens the valve, automatically letting the water drain out of the system before it can freeze. The valve is completely mechanical, requiring no electrical or air connections. An optional plug-in heater is available for refilling the water system, to get a car back into service quickly after a valve activation. The heater assembly causes the valve to heat up and close quickly to reduce downtime and maintenance costs. Previously, ThermOmegaTech®’s GURU® technology was only available for freeze protection in locomotive engines. It can be installed by an OEM or retrofitted by a rail company’s maintenance department. It is NSF 61/372 certified and has been shock and vibration tested by a third party.

railwayage.com

RAIL NEWS DELIVERED TO YOU AT HIGH SPEED RAIL GROUP NEWS brings you a daily round-up of news stories from Railway Age, RT&S, and IRJ. This email newsletter offers North American and global news and analysis of the freight and passenger markets. From developments in rail technology, operations, and strategic planning to legislative issues and engineering news, weâ&#x20AC;&#x2122;ve got you covered.

RAIL From Railway Age, RT&S and IRJ GROUP www.railwayage.com/rgn NEWS

ROUND-UP

RAILW

Ad Index Company

Phone #

Fax #

URL/Email Address Page #

312-922-4516

312-922-4597

kskibinski@amstedrail.com

ASLRRA

202-628-4500

202-628-6430

www.Aslrra.org

Birmingham Rail & Locomotive

205-424-7245

205-424-7436

bhamrail@aol.com

816-241-4888

816-241-3710

bboehm@cte-equipment.com

danella rental systems

610-828-6200

610-828-2260

pbarents@danella.com

dixie precast

770-944-1930

770-944-9136

fbrown142@aol.com

encore

303-956-3796

gs@encorers.com

Freightcar america

312-928-0850

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tbaun@freightcar.net

georgetown rail equipment

512-869-1542

512-863-0405

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Harsco Rail

803 822-9160

803 822-8107

railinfo@harsco.com

AMSTED RAIL GROUP

cte

herzog rail road services inc

816-385-8233

jhansen@hrsi.com

holland lp

708-367-2987

708-672-0119

ptenhoven@hollandco.com

Loram

763-478-6014

763-478-2221

sales@loram.com

miner enterprises

630-232-3000

630-232-3055

sales@minerent.com

okonite company

201-825-0300

201-825-3521

info@okonite.com

plasser American

757-543-3526

757-494-7186

plasseramerican@plausa.com

progress rail a caterpillar co

256-505-6402

256-505-6051

info@progressrail.com

R J Corman Railroad Group

800-611-7245

859-885-7804

www.rjcorman.com

Rail freight Business

212-620-7208

conferences@sbpub.com

railquip inc

770-458-4157

770-458-5365

sales@railquip.com

rails company

800-21-RAILS

973-763-2585

gburwell@railsco.com

RCE Equipment Solutions Inc

866-472-4510

630-355-7173

dennishanke@rcequip.com

railway educational bureau

402-346-4300

402-346-1783

bbrundige@sb-reb.com

45,51

RailWorks Corp

866-905-7245

240-397-4849

efeliz@railworks.com

38-39

softrail inc

888-872-4612

sales@signalcc.com

star headlight & Lantern co

585-226-9500

chrisjacobs@star1889.com

585-226-2029

STV Inc

212-777-4400

212-529-5237

info@stvinc.com

town & country crossing

636-227-8226

636-686-9194

jnewman@tccortho.com

cra2@zooninternet.com

44 14

trainyard tech llc Western-Cullen-Hayes Inc

724-443-888 773-254-9600

773-254-1110

cp@wch.com

wi-tronix

888-948-7664

630-679-9954

cjasmin@wi-tronix.com

zmax

704-455-3270

cajohnson@zmax.com

The Advertisers Index is an editorial feature maintained for the convenience of readers. It is not part of the advertiser contract and Railway Age assumes no responsibility for the correctness.

AILWAY GE

54 Railway Age // January 2018

railwayage.com

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RAILWAY AGE A4.indd 1

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Metro-North Railroad REQUEST FOR EXPRESSIONS OF INTERESTS (RFEI) MTA Metro-North (MNR) is requesting that qualified parties submit information outlining their interest, capacity, and ability to provide the following program. The information must be submitted on the forms included in MNR’s solicitation documents by the specified date and Time. These documents can be obtained by contacting, via e-mail, the individual mentioned below. RFEI#: 191245 DUE DATE & TIME: February 10, 2018 at 3:00 PM EST DESCRIPTION: Injury and Illness Prevention Programs for Metro-North Railroad’s Personnel. CONTACT: Edward Genao genao@mnr.org

RailwayAge.com

The News Destination for the Rail Industry January 2018 // Railway Age 55

Financial Edge

USDOT Slams the Brakes on ECP

n Dec. 4, the USDOT repealed the FRA rule requiring DOT 117 tank railcars to be equipped with electronically controlled pneumatic (ECP) brakes. The repeal, more than nearly three years after new tank railcar regulations, caps a long and tumultuous dialogue among the United States Department of Transportation (USDOT), the Association of American Railroads (AAR) and the railroads about whether adding ECP brakes into HHFUT (highhazard flammable unit train) service made any measurable improvement in crash avoidance over today’s braking methods. Kevin Sheys is an attorney at Washington, D.C.-based Nossaman LLP who closely follows many issues affecting the railroad industry, both freight and passenger, for numerous stakeholders. Among these are tank car regulatory issues. I asked Kevin if repeal of the ECP brake rule represented the last design hurdle for the DOT-117. Kevin told me, “The two tank car elements of greatest concern to railroads and other tank car owners were the enhanced top fitting protection and ECP brakes. USDOT eliminated the top fitting protection in the final rule, and now with rescission of the ECP brake requirement, the last major issue regarding the cars themselves has been resolved favorably for the industry.” The USDOT decision was never on firm footing. The Government Accountability Office, the Class I’s, the AAR and voices from the Senate, including Sen. John Thune, a long-time railroad supporter, going back

the rail industry cannot

put a price on

safety 56 Railway Age // January 2018

to his days with the Dakota, Minnesota & Eastern (now Canadian Pacific) in the mid2000s, weakened the USDOT’s position on keeping ECP in the 2015 rule. The August 2016 “Financial Edge” discussed a dispute involving the Federal Railroad Administration (FRA), the AAR and Union Pacific following a crude oil tank railcar derailment in Oregon. A year and a half later, the argument is the same. The evidence for derailment prevention is thin and the cost extraordinary. How costly? Every car in an ECP-equipped train must be equipped for ECP service. The cost is two-fold. One, non-HHFT railcars (highhazard flammable train, tank or otherwise) would need ECP brakes. Two, rail efficiency is based around fluidity. To maintain that fluidity and deploy ECP brakes, almost all of the railcars (and locomotives) in North America would need to be outfitted with ECP brakes. That spend would dwarf the $10 billion being spent to implement PTC. The railroad industry cannot put a price on safety. However, the science does not support the emotion. The FRA and its supporters point to a 2004 Booz Allen Hamilton study commissioned by the FRA to determine the benefits of ECP brake implementation. The result of that study heavily favored ECP brakes. However, this study was run by Robert C. Lauby, P.E., currently the Associate Administrator for Railroad Safety & Chief Safety Officer at the FRA. That appears somewhat political. Jason Kuehn, Vice President at Oliver Wyman and perennial Rail Equipment Finance speaker, offered his take on the ECP rule repeal: “If you don’t know the details, ECP looks wonderful. The technology has an application, but this is not the time for ECP to get implemented in general service use in rail.“ In further affirmation of the benefits of ECP alternatives, Jason said, “There have been advances in air braking—two-way EOTs (end of train devices), distributed power—so the performance gap between airbrakes and ECP has narrowed considerably. If a train is running front-loaded power with an EOT, the gap between airbrakes and ECP brakes is more significant, but very few trains are operating that way today.”

Here’s to more correct regulatory decisions in fewer than 30 months.” I asked Jason if other aspects of ECP braking make it unattractive to the railroads. Jason told me, “In our (Oliver Wyman) studies, corrosion and damage to the ECP system impact reliability. ECP braking is newer technology. The electrical connectors were not sturdy. The repairs are manual and time-consuming. It is not a robust system. It is tailored to special service, not general freight. When a car gets set out and needs to be moved to a repair shop, it is challenging. That car needs to be dual (airbrake and ECP) equipped. It complicates the service, operation and repair of cars in that specialty service. Getting those cars running again becomes highly problematic.” Starting from zero with limitless funds and infinite time, perhaps ECP would be the brake of choice. In this case, the issue has never been whether ECP brakes are “better” than airbrakes. The issue is whether a marginal benefit outweighs the impact on business. Two and a half years after the USDOT tank railcar regulation, the agency finally got this one right. Here’s to correct decisions in fewer than 30 months in 2018. Got questions? Set them free at dnahass@railfin.com.

DAVID NAHASS President Railroad Financial Corp. railwayage.com