December 2013 Railway Age Magazine

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December 2013 | www.railwayage.com

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RailwayAge

DECEMBER 2013

visit us at www.railwayage.com Features a capital year for suppliers gotham’s rail growth Precision placement

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Departments industry indicators industry Outlook Market People 100 years ago Meetings Products advertising index Classified

4 6 8 37 37 37 38 40 41

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News/Columns From the editor Update watching washington Short line & Regional Perspective Perspective Financial edge

2 10 16 18 43 44

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On the COver Continued traffic growth on Class i railroads calls for continued robust capital investment.

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December 2013 Railway age 1

RailwayAge

From the Editor William C. Vantuono

Editorial and ExEcutivE officEs Simmons-Boardman Publishing Corp.

55 Broad Street, 26th Fl. New York, NY 10004 212-620-7200; Fax: 212-633-1863 Website: www.railwayage.com

“But is it railroading?”

F

ifty years ago, when Railway Age was a weekly publication with four or five issues per month, the editors and publisher decided to take a bold step and devote one issue per month to rail transit.

Our first transit issue, Feb. 18, 1963 (below), vividly described “cities in chaos” choked with motor vehicle traffic: “Cities that once went along with the everybodydrives-his-car philosophy have decided, finally, that it won’t work. The automobile, they’ve found, is everyman’s magic carpet for off-peak-hour trips or for weekend driving.

For rush-hour travel—even, or especially, on fine new expressways—the automobile can become a sort of rubber-tired jail cell. Traffic is chaos; and chaos, traffic. . . . Mass transport is a social as well as an economic problem—comparable in importance to the way people live with facilities for education, public health, fire protection, and water supply.

Mass transport’s cost will be high—but not so high as the cost of trying to do without it.”

Railway Age was ahead of its time in 1963. As Publisher Robert G. Lewis pointed out in 1982, “No other publication recognized the growth potential for rail transit until many years later. Modern

Railroads added “Rail Transit” to its logo about 1971. Metro has been around by one name or another since 1904 but has little standing in the rail transit sector of transit.”

However, we struggled for a while with the idea of covering rail transit, which Mechanical Editor Fred Houser called “that greasy streetcar stuff ” (paraphrasing advertising that extolled Vitalis, a popular hair tonic of the day).

“But is it railroading?” This was the question we posed in our debut transit issue, pointing out that “providing passenger transit service within cities is certainly not the job that belongs to the standard railroads (those that used to be called ‘steam railways’).” Yet, we said, “there are at least four reasons why railroads’ interests are interwoven with the efficiency and health of urban transit.”

Reason No. 2 may be taken for granted today, but it’s worth repeating: “Urban transit, where it uses flanged wheels on steel rails, is technologically the ‘next of kin’ of the standard railroads. There is no sharp line of demarcation, technologically, between urban and line-haul railways. A healthy transit industry is, thus, a highly valuable ally in progressing the technological advancements of the standard railroad industry, and in maintaining a dependable railroad supply industry.”

“A dependable railroad supply industry.”

Indeed. These days, there are only a handful of major suppliers that don’t have a stake in rail transit. As many have discovered, a healthy book of rail transit business can make up for a lull in freight rail business. That’s not much of a concern today, with robust railroad spending on capital expansion and state-of-good-repair projects continuing for the foreseeable future.

So is rail transit “real” railroading? There are probably a few who say no, but they are most definitely in the minority. This magazine will continue to serve the majority.

ARTHUR J. McGINNIS, Jr., President and Chairman JONATHAN CHALON, Publisher jchalon@sbpub.com WILLIAM C. VANTUONO, Editor-in-Chief wvantuono@sbpub.com DOUGLAS JOHN BOWEN, Managing Editor dbowen@sbpub.com LUTHER S. MILLER, Senior Consulting Editor lmiller@sbpub.com CONTRIBUTING EDITORS: Alex Binkley, Roy H. Blanchard, Lawrence H Kaufman, Bruce E. Kelly, Anthony D. Kruglinski, Ron Lindsey, Ryan McWilliams, Jason H. Seidl, Frank N. Wilner Creative Director: Wendy Williams Art Director: Sarah Vogwill Corporate Production Director: Mary Conyers Production Manager: Jessica Cajas Production Director: Eduardo Castaner Marketing Director: Erica Hayes Conference Director: Jane Poterala Circulation Director: Maureen Cooney WEstErn officEs 20 South Clark Street, Suite 1910, Chicago, IL 60603 312-683-0130; Fax: 312-683-0131 Engineering Editor: Mischa Wanek-Libman mischa@sbpub.com Assistant Editor: Jennifer Nunez jnunez@sbpub.com George Sokulski, Associate Publisher Emeritus gsokulski@sbpub.com intErnational officEs 46 Killigrew Street, Falmouth, Cornwall TR11 3PP, United Kingdom Telephone: 011-44-1326-313945 Fax: 011-44-1326-211576 International Editors: David Briginshaw, Keith Barrow, Kevin Smith customEr sErvicE: 800-895-4389 Reprints: PARS International Corp.

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Railway age

December 2013

SIMMONS-BOARDMAN PUBLISHING CORPORATION

Railroad people take an unusual sense of pride in being the only transportation industry in the country with the responsibility to maintain its “highways.” The trucking industry does not have to maintain the roads. The airlines don’t have to fix the runways. Sure, we might rather have someone else do the job for us, but wouldn’tt do as good ut they probably wouldn a job as we do. If you run a railroad, you understand.

boatrightcompanies.com RAILROAD CROSSTIES | RAILCAR REPAIR | RAILROAD VEGETATION MANAGEMENT | RAILROADS | HIRAIL RAILROAD ROAD EQU EQUIPMENT QUIPM IPMENT ENT | RAI RAILRO RAILROAD LROAD AD SAF SAFETY ETY AP APPAR APPAREL PAREE L

Industry Indicators SHORT LINE AND REGIONAL TRAFFIC INDEX

TRAFFIC ORIGINATED

FIVE WEEKS ENDING NOVEMBER 2, 2013

CARLOADS

mAJOR U.S. RAILROADS

BY COmmODITY 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 Waste & Nonferrous Scrap All Other Carloads TOTAL U.S. CARLOADS

OCT. ’13 111,506 4,355 49,077 33,695 149,500 67,726 537,499 8,270 16,862 29,602 36,494 14,234 50,867 20,797 88,767 113,893 22,683 43,704 19,032 21,299 1,443,609

OCT. ’12 102,056 8,093 48,325 33,808 145,159 59,300 567,927 7,513 15,861 28,129 35,809 13,505 48,428 17,771 81,361 106,229 23,609 39,464 15,224 21,835 1,422,550

% CHANGE 9.3% -46.2% 1.6% -0.3% 3.0% 14.2% -5.4% 10.1% 6.3% 5.2% 12.7% 1.9% 5.0% 17.0% 9.1% 7.2% -3.9% 10.7% 25.0% -2.5% 1.5%

394,500

5.1%

1,817,050

2.3%

CARLOADS

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 Stone, Clay & Glass Products Trailers / Containers Waste & Nonferrous Scrap All Other Carloads

414,591

COmBINED U.S./CANADA RR

1,858,200

FIVE WEEKS ENDING NOVEMBER 2, 2013

INTERMODAL

mAJOR U.S. RAILROADS

BY COmmODITY TRAILERS CONTAINERS TOTAL UNITS

OCT. ’13 152,184 1,165,417 1,317,601

OCT. ’12 146,714 1,086,767 1,233,481

% CHANGE 3.7% 7.2% 6.8%

7,825 275,806 283,631

7,253 261,847 269,100

7.9% 5.3% 5.4%

160,009 1,441,223 1,601,232

153,967 1,348,614 1,502,581

3.9% 6.9% 6.6%

COmBINED U.S./CANADA RR TRAILERS CONTAINERS TOTAL COmBINED UNITS

Source: Monthly Railroad Traffic, Association of American Railroads

AVERAGE WEEKLY U.S. RAIL CARLOADS: ALL COmmODITIES (not seasonally adjusted)

% CHANGE 28.0% -18.2% 53.9% -0.4% 11.3% 5.8% 4.5% 92.2% 10.6% 3.6% 82.2% 44.5% 10.2% 15.7% -6.4% 11.9% -19.5%

OCTOBER 2013 - 390,703 OCTOBER 2012 - 382,303 310,000 320,000 330,000 340,000 350,000

360,000 370,000 380,000 390,000 400,000

Copyright © 2013 All rights reserved.

RAILROAD EmpLOYmENT, CLASS I LINEHAUL CARRIERS, SEpTEmBER 2013 (% ChANGE FROM SEPTEMBER 2012)

CANADIAN RAILROADS TRAILERS CONTAINERS TOTAL UNITS

ORIGINATED OCT. ’12 35,846 22,778 20,450 13,215 26,913 6,530 10,160 4,519 20,002 10,504 1,356 1,540 18,848 12,363 49,963 10,484 116,832

TOTAL CARLOADS, OCTOBER 2013 VS. 2012

CANADIAN RAILROADS ALL COmmODITIES

ORIGINATED OCT. ’13 45,896 18,629 31,464 13,168 29,957 6,912 10,622 8,686 22,118 10,887 2,470 2,225 20,778 14,306 46,769 11,734 94,082

BY COmmODITY

Transportation (train and engine) 66,184 (3.08%)

Executives, Officials, and Staff Assistants 9,752 (0.37%)

Professional and Administrative 13,764 (0.40%)

TOTAL EmpLOYEES: 163,237 % CHANGE FROm SEpT. 2012: 1.23% Transportation (other than train & engine) 6,715 (-1.57%)

Maintenance of Equipment and Stores 29,498 (-0.49%)

Maintenanceof-Way and Structures 37,324 (0.45%)

Source: Surface Transportation Board

EmpLOYmENT Up YEAR-OVER-YEAR, SLIpS FROm AUGUST Figures released by the Surface Transportation Board show Class I railroads employed 160,523 people in mid-September, up 1.23% from September 2011, though down 0.11% from August 2013.

Transportation (train and engine0 led the pack year-over-year, up 3.08%. Maintenance of equipment and stores rose the most from mid-August, with a modest 0.58% gain. Professional and administrative slipped most from mid-August, down 2.04%.

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Railway age

December 2013

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Perfecting Railcar Performance

Industry Outlook NS marks “best ever” CDP score

AAR to DOT: Upgrade tank car regs The association of american Railroads last month urged the U.S. Department of Transportation “to press for improved federal tank car regulations by requiring all tank cars used to transport flammable liquids to be retrofitted or phased out, and new cars built to more stringent standards.” in comments filed with the Pipeline and Hazardous Materials Safety administration (PHMSa), aaR said the safety upgrades it recommends will substantially decrease the likelihood of a release if a tank car is involved in an accident. aaR’s recommendations follow high-profile incidents involving tank cars in lac-Megantic, Quebec, and in western alabama. aaR estimates that roughly 92,000 tank cars are currently moving flammable liquids, with approximately 78,000 of those requiring retrofit or phaseout, based on its proposal. Some 14,000 newer tank cars that comply with the latest industry safety standards will also require certain retrofit modifications under aaR’s proposal. The tank cars affected by the aaR’s recommended safety enhancements include those used to transport crude oil and ethanol.

Skytrain Mark I rehab under way

Railcar backlog climbs to 73,800 The backlog of ordered and undelivered new freight cars stands at 73,800 units, “a relatively high level from an historical perspective,” according to economic Planning associates. That high number is expected to push deliveries to the 57,800-unit mark in 2014, a 13% improvement over the 50,400 deliveries expected for 2013.

Beginning in 2015, assemblies are projected to expand to 64,000 railcars in 2018. (See p. 10 for further details.)

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British Columbia’s Translink has begun returning to service the first of 114 Skytrain Mark i cars to be refurbished under an overhaul program. The cars have been in service since late 1985.

The C$37.9 million rehabilitation is expected to add 15 years to the life of the fleet, which sports automated advanced Rapid Transit technology, powered by linear induction motors, supplied by Bombardier. Canada’s federal government is supplying C$28.5 million for the effort. The fleet should be totally refurbished by December 2016. work includes upgrading the electrical system, expanding interior passenger capacity, refurbishing passenger doors, replacing interior amenities, and repainting the vehicles’ exterior.

Norfolk Southern reported last month that it has achieved its best-ever score in CDP (Carbon Disclosure Project) reports that grade large U.S. and global companies on how well they measure and manage their corporate carbon footprint. in CDP’s 2013 S&P 500 and global 500 climate change reports, Norfolk Southern scored a 90 for its carbon disclosure, on a scale of 0-100, a 2% improvement over its 2012 score of 88 and the company’s highest in the six years it has participated in the voluntary CDP survey.

Of 44 U.S. industrial-sector corporations in the CDP’s S&P 500 report, NS was among 14 that scored 90 or higher on carbon disclosure. in addition to scoring companies on their disclosure level, CDP awards performance grades of e to a to measure a company’s efforts to mitigate climate change and reduce greenhouse gas emissions. NS’s 2013 performance grade is B, matching its 2012 and 2011 grade.

By year-end 2012, NS had accomplished nearly 69% of its goal to reduce greenhouse gas emissions by 10% per revenue ton-mile between 2009 and 2014. The company has invested in locomotive fuel-saving technologies, more efficient lighting and energy systems in rail facilities, and network improvements that increase the capacity and fluidity of rail routes. “as a responsible corporate citizen, Norfolk Southern strives to continuously improve the way we manage potential environmental impacts of our business operations, and we are pleased that this year’s disclosure score reflects those efforts,” said Norfolk Southern Vice President Real estate and Corporate Sustainability Officer Blair wimbush CDP is an independent not-for-profit organization that supports reduction of greenhouse gas emissions, as well as the sustainable use of water and forest resources.

Š 2013 Siemens Industry, Inc.

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Safety and efficiency for Mass Transit Railways Rail Automation from the world market leader

Siemens Rail Automation offers an extended portfolio of optimal and innovative metro and light rail solutions for the benefit of customers and passengers.

Customers throughout the world profit from our many years of experience with customized railway signaling, safety and rail automation systems for mass transit railways.

Siemens has set itself the goal of creating green solutions for rail automation using resources efficiently and making rail attractive as an environmentally friendly, safe means of transport.

A state-of-the-art, performance-oriented rail automation system enhances network capacity, availability and safety and thus leads to greater attractiveness and more convenience for passengers, at the same time reducing the environmental impact.

Answers for infrastructure and cities.

Market

GE, CSX partner to advance LNG locomotives

CSX Corp. and ge Transportation announced an agreement last month to explore emissions-cutting and efficiency breakthroughs in liquefied natural gas (lNg) technology for locomotives, beginning with a pilot program next year. ge and CSX field tests are expected to begin in 2014. CSX will be working during the next few months to develop a test plan and secure regulatory concurrence.

North America BART: exercised a $638.9 million option for an additional 365 cars from Bombardier Transportation for its “fleet of the future” program, which now brings the total car number on order to 775. BaRT said the decision will save around $128 million because it includes an agreement with Bombardier to accelerate delivery by 21 months and provide five vehicles free of charge.

DENVER RTD: awarded a $343 million contract to an engineering consortium led by graham Contracting ltd. for design and construction of RTD’s FasTracks North Metro project.

MBTA: Placed the first of 20 MotivePower HSP-46 regional/ commuter rail locomotive for testing at TTCi in Pueblo, Colo.

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Railway age

December 2013

METROLINX: awarded a C$177 million (US$169 million) tunneling contract to aecon group, inc. and joint venture partner aCS Dragados Canada, inc., for Toronto’s eglinton Crosstown light Rail Transit project, much of which will involve underground right-of-way.

METROPOLITAN TRANSPORTATION AUTHORITY: awarded a $428 million contract to a consortium of Siemens Rail automation and Bombardier Transportation Rail Control Solutions to install Positive Train Control (PTC) on both MTa Metro-North Railroad and sister agency MTa long island Rail Road. (See p. 12.)

OREGON DOT: accepted delivery of the second of two new Talgo Series 8 13-car trainsets the State of Oregon purchased with federal stimulus funds administered in 2009.

PORTLAND STREETCAR: Received its fifth and final streetcar from United Streetcar, llC.

Worldwide SWISS FEDERAL RAILWAYS (SBB) : Signed an initial contract with Harsco Corp. for major railway track and infrastructure maintenance equipment, worth more than $100 million, with provisions for future options. also, SBB tapped Starbucks as a café car vendor for service between geneva airport and St. gallen.

TASRAIL (AUSTRALIA) : will acquire two Harsco Rail heavy-duty track surfacing machines—a Mark Vi Production/Switch Tamper and a Ballast Regulator—for deployment, with the purchase to be funded by the state of Tasmania.

Update Alstom, Bombardier unveil Montreal metro cars a nine-car train has been presented to the government of Quebec, the city of Montreal, and other high-profile guests Bombardier’s plant in la Pocatiere, Quebec. The alstom-Bombardier consortium is completing trials on the prototype train at the plant and expects to ship the cars to Montreal in early 2014, where it will begin qualification testing, with the STM, at metro facilities. STM has ordered 468 of the new-generation cars, with deliveries expected to continue until 2018. They include: panoramic windows and indirect lighting, for greater visual comfort; communicating passageways throughout the nine-car train; doors that are 27% larger, to ensure passenger flow; optimized air suspension to deliver a more cushioned ride; 8% more passenger capacity; and state-ofthe-art information and safety systems.

u.S. suppliers to expand innoTrans presence The U.S. railway supply industry will be increasing its presence at innoTrans 2014, with a goal of increasing export business. at innoTrans 2014, which takes place at Berlin expoCenter City from Sept. 23 to 26 in germany, the U.S. rail supply industry will be participating in even larger numbers. They will be represented

by ReMSa, RSi, RSSi, and aReMa, and will be hosting their displays at a USa Pavilion organized by ReMSa. For the first time, senior executives from these organizations will be holding a joint press conference on the latest developments and the outlook for the U.S. rail industry.

10

Railway age December 2013

Freight car market expected to rebound in 2014

T

he backlog of ordered and undelivered new freight cars stands at 73,800 units, “a relatively high level from an historical perspective,” according to Economic Planning Associates (EPA). That high number is expected to push deliveries to the 57,800-unit mark in 2014, a 13% improvement over the 50,400 deliveries expected for 2013. The 2013 projected figure is a 14.5% drop from 2012’s 57,700 units. Beginning in 2015, annual railcar assemblies are projected to expand gradually from 60,000 units to 64,000 cars and intermodal platforms in 2018.

“Based on assemblies through the first nine months and end-ofSeptember backlogs, we expect deliveries of 50,400 units this year,” said EPA’s Peter Toja. “Next year, we look for a rebound to 57,800 cars as tank car demand continues to expand at a rapid clip, mid-sized and smallcube covered hoppers advance, and some very modest improvements in intermodal platforms and coal cars.

Longer term, we are hopeful that

stronger economic activities will provide support for certain railcar assemblies while an improvement in the financial environment, high gasoline prices, and strong government backing stimulate greater demand for ethanol and DDG cars.

Replacement pressures and technological advances as well as legislative measures will also play a role in promoting the demand for a variety of railcars.

“From this point on, we look for some stabilizing in demand for boxcars and grain cars, along with a pickup in demand for small-cube covered hoppers and mill gondolas, and continued rapid expansion in tank car demand.

“At the same time, coal cars continue to be plagued by stringent EPA standards and are certain to experience a weak 2013 and 2014 before showing signs of a modest improvement in 2015. After 6,492 coal cars were assembled last year, we look for deliveries of only 1,100 units this year and 2,500 cars in 2014.”

William C. Vantuono

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Update Siemens, Bombardier pair on PTC in New York

12

Railway age December 2013

MTA Long Island Rail Road (pictured) and MTA Metro-North Railroad are expected to be equipped with a vital PTC overlay by the Dec. 31, 2015 deadline.

design, delivery, provisioning, and supervision of testing and commissioning of the onboard component, much of which utilizes PHW cab signal

equipment. (Invensys Rail acquired PHW prior to Siemens acquiring Invensys Rail. The former PHW division is now known as Siemens Rail Automation Carborne Systems.) The scope also includes modifications and revision to the railroads’ existing wayside signal system in order to upgrade and add ACSES (Advanced Civil Speed Enforcement System) II-related hardware for the two complete PTC systems, one configured for Metro-North and one configured for the LIRR. Siemens will deliver the WIUs (wayside interface units), which will based on its VIU (Vital Interface Unit) equipment.

Siemens Rail Automation President John Paljug told Railway Age that installation “is not a redesign. Essentially, we’ll be bringing new functions into the existing platforms—for example, grabbing indications from interlockings and bringing them into the PTC pipeline.”

Bombardier will lead system integration, project management, and design, as well as deliver the operational control center sub-systems. In addition to the temporary speed restriction (TSR) and user interface (UIS) systems, communications systems, and wayside transponders, Bombardier’s scope will also include the roadway worker

Joseph M. Calisi

The New York Metropolitan Transportation Authority has awarded a contract to a consortium of Siemens Rail Automation and Bombardier Transportation Rail Control Solutions to install Positive Train Control (PTC) on MTA Metro-North Railroad and MTA Long Island Rail Road, the two largest regional/commuter rail systems in the U.S. The maximum value of the contract is $428 million, including all phases and options.

Siemens and Bombardier will develop, test, and commission a new overlay PTC system, which will be delivered in phases on approximately 700 miles of track and 1,500 vehicles across the two railroads.

Siemens’ work scope for the project includes development, modification,

protection system (RWPS), a key element of PTC. The total LIRR contract for phase one delivery is valued at $105 million, with Bombardier’s share valued at approximately $57 million and Siemens’ share valued at $48 million.

If all LIRR phases and options are exercised, the total value to the consortium would be $218 million, with Bombardier’s share valued at approximately $107 million and Siemens’ at $111 million.

The total Metro-North contract for phase one delivery is valued at $86 million, with Bombardier’s share valued at approximately $44 million and Siemens’ at $42 million.

If all Metro-North phases and options are exercised, the total value to the consortium would be $210 million, with Bombardier’s share valued at approximately $129 million and Siemens’ at $81 million.

“This is the first major signaling

contract for Siemens Rail Automation in the U.S. since its acquisition of Invensys Rail, which expanded the company’s presence in the North American rail automation market and also strengthened the company’s Positive Train Control solution,” said Paljug. “Siemens is a leading provider of rail automation technologies worldwide, and we are excited to bring this global expertise to advance rail efficiency on these highly traveled commuter lines. We look forward to continuing Siemens’ strong relationship with the NYMTA and delivering technology that will make rail travel increasingly efficient for the more than 80 million passengers that travel these lines each year.”

“The schedule for this project is rather aggressive, in terms of meeting the government’s December 2015 PTC deadline, but we feel confident that we can get it done,” Paljug told Railway Age. “Siemens and Bombardier have very

Railonomics

complementary technologies, and we feel very good about our partnership.”

“These orders further strengthen our commitment to the North American signaling market and reflect our successful long-term partnership with the NYMTA and its rail agencies,” said Bombardier Transportation Rail Control Solutions President Peter Cedervall. “Our experience in delivering the most advanced rail control solutions around the world, together with the focus of our U.S.-based team, will ensure the successful delivery of the project.

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Update NCS’s Aziz indicted on fraud National Steel Car chief executive Gregory Aziz has been indicted on 10 counts of securities fraud by an Alabama grand jury and faces up to 10 years in prison on each count if convicted.

Aziz is accused along with his brother Warren Aziz by the Alabama Securities Commission of defrauding Retirement Systems of Alabama (RSA), manager of pension funds for the state’s employees and teachers, out of $650 million to finance a railcar manufacturing plant in the state.

In the indictment, the Alabama Securities Commission alleges Aziz used false and misleading financial statements between September 2006 and July 2009 to convince RSA to put up to $625 million into the plant.

Through a company called National Alabama Corp., Aziz promised to build a new freight car manufacturing plant in the state that would provide up to 1,800 jobs and produce 12,000 cars a year. The entire project, he allegedly told RSA officials, would cost just under $297 million. The indictment alleges Aziz knew that constructing just the shell of his proposed plant would cost more than $319.4 million, and that significantly more would be needed to equip the facility—far more than the original $350 million loan that RSA had agreed to provide for construction. The project involved hundreds of millions of dollars, including a revised agreement where RSA was going to loan National Alabama Corp. $625 million to complete the plant.

Between 2006 and December of 2008, costs of the plant ballooned to more than $700 million. When Aziz admitted to the overruns, he allegedly told officials he didn’t understand why that had occurred. In 2010, RSA obtained total equity in the plant. In 2011, Navistar leased the facility from RSA, but by early 2013 only 180 workers were on site. By February, FreightCar America had subleased a quarter of the plant from Navistar, and is now building new cars there.

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Watching Washington FRank n. wilneR

STB chairman seeks delicate balance

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elf-proclaimed captive shippers are a cranky lot, convinced of being overcharged and discriminated against by the Surface Transportation Board (STB), employed by Congress to referee their litany of complaints.

Perceptions of discrimination are fueled by a caravan of former regulators who subsequently gained railroad employment (insinuating to shippers a reward for rail-favorable decision making), an STB staff sprinkled with former railroad economists and attorneys, grumpiness that not since the Eisenhower administration has a regulator with a shipper background served on the STB or its Interstate Commerce Commission predecessor, and a view that the STB places excessive emphasis on improving railroad profitability.

Captive shippers quote President Rutherford B. Hayes: “Shall the railroads govern the country, or shall the people govern the railroads?” Rail executives cite outgoing New York City Mayor Michael Bloomberg, “In God we trust. All others bring data.” The data does not favor shipper perceptions.

Of 45 rate cases decided by the STB since 1996, rail rates were found unreasonable in 11, and reasonable in eight; the other cases were settled voluntarily or withdrawn. Of the most recent six rate cases before the STB, captive shippers won five.

Current STB Chairman Dan Elliott, neither deaf to captive shipper perceptions nor blind to the data, has sought to bridge the divide by injecting greater transparency in decision making, moving to lower shipper hurdles in presenting evidence, and raising ceilings that previously limited dollar recoveries where shippers prevail.

During Elliott’s first four-year term, which began in 2009 (he is seeking 16

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renomination), four cases stand out as defining his tenure.

Ex Parte 715, Rate Regulation Reforms, acknowledged that bringing rate cases before the STB can be overly expensive for chemicals, farm, and other non-coal shippers. The ruling introduced “a simplified, expedited, and practical way to bring smaller rate complaints.”

Evidentiary thresholds were eased for smaller shipment complaints, and raised significantly was a ceiling on maximum rate relief for such cases, ensuring potential reparations would exceed the cost of filing such cases.

Of the most recent six rate cases before the STB, captive shippers have won five.

In a rate complaint proceeding— M&G Polymers v. CSX—Elliott advocated a new method for evaluating market dominance (no effective transportation alternatives).

Absent market dominance, the STB has no jurisdiction over rail rates. For commodities such as chemicals, the Board observed that railroads typically challenge assertions of market dominance on dozens of routes, requiring shippers to make expensive changes to their logistics patterns to prove trucks, or a combination of truck and rail, are not effective alternatives.

Now, data on truck rates, over each route, is compared against a railroad’s variable costs of hauling the commodity to determine if modal competition

restrains rail rates. The new method permits shippers to challenge rates that may not have previously been found market dominant — especially where there is rail-to-rail competition.

In a third Board action, Ex Parte 699, Assessment of Mediation and Arbitration Procedures, the STB chairman advocated greater use of alternative dispute resolution methods to reduce the number and cost of formal rate challenges.

While the new rules currently apply to minor grievances such as demurrage, accessorial charges, misrouting, and mishandling, the Surface Transporation Board sees the rules as “baby steps” toward extending less expensive and less combative arbitration and mediation to formal rate challenges, whose cost to shippers can be in the millions of dollars.

Finally, Elliott led the board to reject a railroad petition to require that an electric utility’s ability to substitute natural gas for coal (product competition), or coal sourced from alternative locations (geographic competition), be considered by the Board when hearing complaints that coal transportation rates are unreasonable.

This rejection spoke directly to a shipper grievance that the Board “historically has indulged railroads in every complication they seek to introduce in rate reasonableness cases.”

Only experience under these four decisions will speak to shipper criticisms that “rate cases have continued to be more difficult and expensive to bring before the STB.” One shipper attorney did offer, however, that Elliott “may be wellintentioned and may genuinely care about shipper problems.”

Given the decades of shipper animosity toward the STB, this should be considered high praise.

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Perspective: Short Line & Regional RICHARD F. TIMMONS

Hoping for the best

I

n December I am often called upon by Railway Age to wrap up the legislative activity for the year. With 2012’s Presidential election finally behind us and a newly elected Congress in town, I began 2013 full of optimism about what might be achieved. I was so hopeful that in January I drafted a version of this column as I hoped things would be and stuck it in my desk drawer for use at year’s end.

In my January draft, the short line rehabilitation tax credit, which expires at the end of 2013, was extended in plenty of time for short lines to plan their capital budgets for 2014. That extension was made possible when a bipartisan majority of Congress realized that allowing small businesses to invest more of their own earnings in their infrastructure is the best way to generate economic growth and create new jobs.

In my draft, the Congress finally concluded that the 2015 Positive Train Control mandate was unrealistic and enacted a three-year delay. They also saw that imposing that mandate on short line railroads would have no impact on short line railroad safety and exempted them from the mandate altogether.

In my draft, the USDOT two-year study on truck size and weights was published one year early, when DOT concluded the preponderance of evidence was so overwhelmingly in favor of disallowing bigger trucks that there was no need to delay publication.

And finally, in my draft column, the federal government approved a short line RRIF loan.

Alas, my January 2013 draft column had to be edited ever so slightly.

The short line rehabilitation tax credit expires at the end of 2013, and the short line industry has worked very hard on our extension legislation. In the House, we have secured 191 co-sponsors; in the Senate, 37 co-sponsors. Of the 782 18

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December 2013

individual tax bills that have been referred to the House tax writing committee this year, the short line bill has the sixth-highest number of House co-sponsors. That is a good showing, considering that there is growing sentiment in Congress for a comprehensive tax reform package that has made many Congressmen more hesitant to co-sponsor individual tax bills. Notwithstanding this good showing, Congress will not pass any tax legislation this year, and our effort will have to continue in 2014, when we will hope to get a two-year extension with retroactivity for 2014.

January’s optimism was soon tempered by political reality.

Most everyone in and out of government seems to agree that the 2015 PTC mandate cannot be met, yet the deadline remains. Part of the problem involves the way Congress currently operates. Very few standalone bills ever pass. Every piece of legislation seems to require a larger bill that contains many provisions related to one subject area. There was no rail-related legislative vehicle in 2013 and, thus, no action on the PTC issue.

The USDOT is in the middle of its two-year truck size and weight study and it is working to meet its October 2014 deadline. The railroad industry is attempting to provide as much input as possible. It is unlikely Congress would consider any legislation on truck size and weights until they see the results.

But those supporting bigger trucks are working this issue hard, so it is imperative that we follow this issue closely.

A new threat not considered in my January draft is legislation introduced by

Rep. Mike Michaud (D-Me.) to require a minimum two-person crew on board freight trains, introduced in response to Lac Mégantic. As tragic as this accident was, mandating crew size should not be the job of Congress. This approach was exactly what brought us the unrealistic and unfunded PTC mandate. The FRA is engaged on this subject and is using its Railroad Safety Advisory Committee (RSAC) procedure to study and consider operating changes associated with this accident. That process should run its course.

My January draft column contemplated a newly elected President and a new Congress working together on important issues affecting our industry. Regretfully, Congress’ bitter partisan differences have resulted in gridlock on most everything.

It is discouraging, but I think it worth noting that there is a ray of hope emanating from a corner of Congress that has much say over transportation. This year the new Chairman of the House Transportation & Infrastructure Committee, Rep. Bill Shuster (R-Pa.) and the Committee’s ranking Democrat, Congressman Nick Rahall (D-W.Va.), came together to write a bipartisan Water Resources Reauthorization bill. The bill, which authorizes $8 billion in flood control, navigation, and aquatic restoration projects, passed the House T&I Committee unanimously, and just recently passed the full House of Representatives 417 to 3. In today’s Washington, that is a remarkable accomplishment. We should all hope that Congress and the Administration could follow the lead of these two legislators.

If they do, my 2014 year-end column could be a lot more upbeat.

Richard F.Timmons is President of the American Sbort Line and Regional Railroad Association (ASLRRA).

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tRaffiC anD spenDing outlook

By william C. Vantuono, editor-in-Chief

A cApitAl yeAr for suppliers Another record year for capital investment appears to be shaping up as railroads head for improved revenues and profits in 2014.

has been a record year for the railroads, 2013 “a very robust and challenging year for growth and re-investment,” in the words of BNSF chief

executive Matt Rose. The indications are that 2014 could be even better—from a shareholder’s standpoint, “a profile of continued steady earnings growth, stock repurchases, and increasing dividends,” in the words of Jason Seidl, Railway Age’s Wall Street contributing editor (sidebar, p. 24).

All this translates into opportunities for suppliers, particularly those on the engineering side, where roughly 80% of capital dollars are spent. (For additional perspective, see RSI President Tom Simpson’s predictions, p. 22.)

Matt Rose’s outlook for 2014 pretty much defines the cautious optimism expressed by those railroads that responded to Railway Age’s inquiries about the year to come.

“Our traffic volumes have been growing faster than the economy overall at the same time we were investing a single-year record $4.3 billion in capital on our network,” he says. “And we expect 2014 to present similar opportunities for growth and investment.”

“BNSF is on course to potentially surpass in 2014 the record volumes carried on our railroad in 2006, which means it will have taken eight years from peak to peak to have regained the volumes lost to the Great Recession,” Rose says. “Yet the traffic mix leading us back to that point is very different from the record traffic year of 2006, further reinforcement of the value of a diverse traffic base that touches so many different parts of the broader economy.”

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In 2006, volume growth on BNSF was led by international intermodal, coal, and agricultural products. Now the growth is being led by domestic intermodal, crude by rail (CBR), “which was not even on our radar screen in 2006,” several other industrial products segments, and automotive. BNSF expects those trends to continue in 2014. In addition, strong harvests for corn, wheat, and soybeans in late 2013 should enable those volumes to continue to improve into 2014.

BNSF experienced a stabilization of its domestic coal volumes in 2013. “However, the long-term trend for coal is down,” says Rose, “due to low-priced natural gas and increasingly stringent emissions regulation.”

CBR “is the biggest game-changer for railroads and energy since the development of the Powder River Basin,” notes Rose. “BNSF didn’t deliver its first unit train of crude oil out of North Dakota until January 2010, yet we will finish 2013 moving 700,000 barrels per day. In 2006, no one envisioned the possibility of North American energy independence, let alone the vital role rail would play in enabling that to happen.

But as we’ve seen following the tragic incident in Lac Mégantic, Quebec, there will be a move toward more regulatory oversight of operational practices and equipment.”

BNSF will also continue to invest in capacity expansion, including parts of the network “that have not experienced this kind of traffic growth before,” says Rose. “That was particularly the case on our Northern Corridor. We intend to invest record levels of capital again in 2014 to support the growth opportunities we see ahead of us. Those investments will

benefit all of the traffic growth and service improvements on our network and are also a critical part of our efforts to continue to improve the safety of our railroad for our customers, our employees and the communities we serve.”

CSX continues to adapt to a changing traffic base “by managing the things we control the most—relentlessly focusing on safety, service to our customers, and efficiency,” says chief executive Michael Ward. “This foundation for long-term profitable growth gives us the ability to capitalize on modest growth in the economy and overcome significant headwinds as the energy markets evolve. To accomplish that, we are leveraging opportunities in our merchandise and intermodal businesses, which now make up more than 80% of our volume. Those businesses should continue to grow at a rate above the general economy, with agriculture and chemicals among the markets that currently are favorable, along with intermodal, which now represents 40% of overall volume.

We expect intermodal to increase further, reflecting the attractive economic value of converting freight from highway to rail. Well-documented headwinds in domestic coal consumption are likely to persist, the result of increased availability of natural gas, regulations, and high stockpiles at many of the U.S. utilities that we serve. On the flip side, we are capturing opportunities created by the expanding domestic oil and gas industries, which also are supporting the potential for more manufacturing in this country.

“This historic transition in traditional rail markets leverages the new diversity and vibrancy of our product portfolio,

especially when paired with an underlying business that is strong, highly focused, and able to capitalize on opportunities in the near- and long-term.”

CSX anticipates that its 2014 capital investment program will represent 16%-to-17% of revenue during the next few years. “Our planned 2013 investment of $2.3 billion is part of $14 billion invested since 2005 in our network and equipment,” says Ward. “These investments are designed to ensure that CSX continues to deliver safe, reliable, and efficient transportation to the customers and communities that rely on us by, among other things, expanding track and terminal capacity, purchasing new locomotives, and leasing or purchasing railcars. As always, current levels of capital investment hinge on a balanced regulatory environment. New and unnecessary regulations would reduce capital investments, job creation, and contributions to much-needed economic development and environmental benefits.”

CSX’s capital program will continue to be focused on infrastructure including projects to support growth such as the intermodal market. “The high service levels and available capacity that our customers have come to expect is a result of the efforts of our 32,000 employees combined with targeted capital investment,” Ward says. “The addressable intermodal market in the East has the potential for 9 million loads that move more than 550 miles that could be converted from the highway to rail. That is driving a significant portion of our capital investment. We are evaluating the potential expansion of our Northwest Ohio Intermodal Terminal as a December 2013 Railway age 21

Photo courtesy of Norfolk Southern

An economy that is still sputtering has not put the brakes on railroad growth and profitablity.

tRaffiC anD spenDing outlook

result of increasing demand in that region. In addition, we completed expansions of the intermodal terminals in Worcester, Mass.; Columbus, Ohio; Atlanta; and Louisville, Ky., earlier in 2013. New terminal construction is in progress at Winter Haven, Fla., and Salaberry-de-Valleyfield, Quebec, to create additional capacity.”

Investment will continue in the National Gateway, the CSX-led $850 million public-private partnership designed to enhance the flow of freight between Mid-Atlantic ports and 2014 outlook: A crowded AgendA

Midwestern consumption hubs. CSX and its state and federal partners have completed clearances to operate doublestack trains between Northwest Ohio and Chambersburg, Pa., the project’s first phase. Part of the second phase involves upgrading the Virginia Avenue Tunnel in Washington, D.C., a single-track, single-stack historic tunnel. In conjunction with the other Phase II clearances, expanding the tunnel will allow for CSX’s doublestack service to run unimpeded to Northwest Ohio from Mid-Atlantic ports after the Panama By tom simpson, president, Railway supply institute

WhAt Will 2014 bring for the railway supply industry and its railroad customers? a look ahead shows an increased focus on tank car safety and a range of legislative issues to watch. the July 6, 2013 accident at lac-mégantic, Quebec, focused federal safety officials on the role the Dot111 tank car plays in the movement of hazardous materials by rail. as an integral part of today’s north american tank car fleet, the Dot111 has been operated safely for more than 40 years. of the roughly 334,869 tank cars operating in north america, 272,102 are Dot111s; of those, 172,147 operate in hazardous materials service. since the 1970s, the Rsi/aaR tank Car safety Research project has analyzed incidents and identified improvements to tank cars that have been incorporated into design enhancements. in 2011, working with Rsi and shipper organizations, the aaR tank Car Committee (aaRtCC) came up with a proposed new standard for Dot111 tank cars that included enhanced end-of-tank protection, thicker steel or jackets, and top fittings protection. the industry has been using this design standard for new cars ordered after oct. 1, 2011. in a petition filed with the pipeline and Hazardous materials safety administration (pHmsa), Rsi joined the aaR and others in asking that the new standard be adopted as a federal requirement for cars carrying crude oil and ethanol. even before lac-mégantic, the Rsi Committee on tank Cars (RsiCtC) had been looking at steps that could be taken to continue to remove risk from the Dot111 tank car. in its reply to a pHmsa advanced notice of proposed rulemaking on tank cars and the movement of hazardous materials by rail, RsiCtC asked that the agency adopt the standards contained in the aaR petition for new cars. in addition, the RsiCtC suggested several modifications to the existing fleet, including addition of half-height head shields, improved pressure relief valves, better top fittings protection, and removal of bottom outlet handles. such modifications must be implemented in a manner that reflects the complexity of the modification, the capacity of the repair network, and the technical and economic feasibility of such modifications. in addition to following the ongoing regulatory developments with tank cars, Rsi is actively pursuing its legislative priorities on Capitol Hill. Rail issues will be an important part of the Congressional agenda in 2014.

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Congress will once again confront the need to reauthorize or extend surface transportation legislation, since moving ahead for progress in the 21st Century (map 21) expires in 2014. the fundamental question of how to pay for transportation infrastructure has yet to be answered. the passenger Rail investment and improvement act of 2008 (pRiia) and the Rail safety improvement act of 2008 (Rsia) both expired on sept. 30, 2013 and are also up for reauthorization. expect Congress to debate intercity and high speed passenger rail, the Railroad Rehabilitation and improvement financing (RRif) program, rail safety, and the impending deadline for positive train Control.

Rsi is following all of these issues for its members, but two specific issues are of primary concern: intercity passenger rail, and truck size and weight. pRiia required states to share costs with amtrak under a consistent formula for all routes of less than 750 miles, excluding the northeast Corridor. House Republicans may use that funding template and apply it to amtrak’s long distance trains—a plan that proved to be unworkable in the 1980s. we will see if states and localities served by these trains can accept this type of proposal to fund the service. there is a business case as well as a public necessity case to continue to operate these trains—points that Rsi will make in its Capitol Hill visits.

Rsi is also continuing to work closely with the Coalition against Bigger trucks and industry partners on combating attempts to increase the weight and length of trucks. with the pending expiration of map-21, the battle over truck size and weight has already begun. map-21 required usDot to conduct a two-year study of truck sizes and weights; Rsi has been advocating that members of Congress refrain from cosponsoring any legislation that would increase truck size and weight until the study has been completed. what lies ahead? given the political atmosphere in washington, D.C. and the fact that 2014 is an election year, it seems a daunting task for Congress to pass major transportation legislation.

However, the railway supply industry and its customers need to be vigilant. Rsi will use every tool available to us to be heard on these and other issues.

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Canal expansion in 2015. CSX also recently announced plans to build a $50 million intermodal terminal in McKee’s Rock, Pa., near Pittsburgh, as part of the National Gateway.

Other key capital investments include capacity expansion on the River Line between Selkirk, N.Y., and northern New Jersey to support overall traffic growth and to facilitate deliveries of crude oil to eastern refineries. In addition, CSX is prepared to make investments in partner Louisville & Indiana Railroad’s corridor between Indianapolis and Louisville. If the alliance is approved by the STB, that investment will improve track for higher speeds and increased capacity and flexibility of freight movement to Louisville, Cincinnati, and Sidney, Ohio, via Indianapolis.

CSX expects to spend $1.7 billion on PTC. It has spent more than $700 million so far, including technology development, signal replacements, and locomotive upgrades. With other railroads, “we are seeking a much-needed extension to A better yeAr thAn 2013?

By Jason seidl, Contributing editor

2014 promises to be another good year for the railroads, possibly even better than its predecessor.

Coal and agricultural products woes continued throughout 2013 in the railroad industry, as the two commodity groups fell 3.4% and 5.8%, respectively, through the first nine months. However, someone forgot to tell the railroads. through the third quarter, publicly traded railroads posted a 24% gain in earnings, with a similar gain mirrored by the stocks over the same period. the rails have managed to put up the good earnings results through a combination of pricing gains, productivity enhancements, and modest volume gains.

Heading into 4Q 2013 and the beginning of 2014, we foresee rails doing well despite coal still being a modest (but diminishing) drag. the industry has clearly shown that intermodal is not only growing in size (carriers continued to expand intermodal hubs and ramps in 2013) but growing in profitability, as much of the traffic coming on board is largely being added to existing trainsets, thus enabling carriers to post strong incremental margins. this has been done in an era when intermodal pricing has been subdued by softness in the truckload space. if the economy picks up, truckload carriers should be in a good position to raise rates given that capacity is not expected to expand in that market. this should enable intermodal rates to rise, particularly in areas that are more truck-competitive.

Crude by rail is also expected to grow, but the pace of growth is likely to be partially tied to crude spreads. that said, traffic headed to the west and east Coasts should continue to grow, as there is limited competition for the industry as well as more terminals being constructed. we remain somewhat cautious about pending regulations to the tank car industry (in both scope and tank car repair shop capacity). if onerous regulations are forced upon manufacturers, we could see a shortage of tank cars in 2014.

24

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implement PTC safely and without jeopardizing the hardwon gains in service reliability and efficiency,” says Ward.

Norfolk Southern “sees ongoing opportunity in the intermodal and merchandise markets, while coal continues to face challenges from natural gas substitution and global oversupply,” according to chief executive Wick Moorman. “Our outlook for intermodal remains bright as we complete new facilities and launch new services such as the South Carolina inland port project at Greer, S.C. We will open a new intermodal terminal in Charlotte, N.C., which will be the last major Crescent Corridor terminal. Highway conversion and international growth represent continued opportunity.”

“We continue to see growth in crude by rail as well as natural gas liquids and plastics,” says Moorman. “Frac sand shipments should increase as hydraulic fracturing technology requires higher volumes of sand. In our metals markets, domestic steel production is projected to expand modestly,

after being a drag in 2013, agricultural carloadings are looking up for the last quarter of 2013 and the full year of 2014. a better (but late) harvest and easy year-over-year comps are expected to rule the proverbial day. the outlook for coal is neither bullish nor bearish in our view. in fact, coal could be somewhat of a wildcard in the coming year. while year-over-year comparisons should ease greatly in 4Q 2013 (the industry saw traffic drop nearly 15% in 4Q 2012), there are signs that we may be nearing a bottom in the domestic thermal market. like the agricultural market, mother nature may have a hand in determining the outcome, and so will natural gas prices. what has become clear in recent months is that there is a basin shift occurring. more volume is being sourced from the illinois Basin, which is currently displacing Central appalachian output. according to Cowen & Company coal analyst Dan scott, illinois Basin coal could stunt the spread of powder River Basin coal into the southeast. on the export side, cheaper australian product will continue to hamper volumes for the eastern carriers even given their willingness to be more flexible on pricing with producers. speaking of pricing, we expect the railroad industry to continue to price above rail cost inflation in 2014. more specifically, our most recent Cowen & Company Quarterly Railroad shipper survey noted that industry pricing is expected to be up 3.6% over the next 6-to-12 months, up modestly from the prior quarter’s results. we should note that our survey does not include much impact from the coal markets as well as RCaf pricing, both of which are likely to act as a visual drag on yields in the coming quarters. it is our view that the rail industry continues to be a good investment for fund managers in 2014. while the year may not be as much “risk on” as 2013 was, a profile of continued steady earnings growth, stock repurchases, and increasing dividends should make the industry an attractive option for many.

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tRaffiC anD spenDing outlook

while automotive production continues at a steady pace.

“We expect capital spending in 2014 to be roughly comparable to spending in 2013. The majority of our 2014 capital budget will go toward core investments in track and infrastructure. We will continue a program to replace aging coal cars and other essential equipment. As in 2013, we will spend more than $200 million on Positive Train Control.”

CN, according to chief executive Claude Mongeau, “is anticipating strength in a number of markets. CN has the largest forest products franchise in the industry and we expect lumber and panel shipments to benefit from the continued recovery in the U.S. housing market. An improving U.S. housing market will also support growth in intermodal as well as various other commodities.

“Commodities tied to North American oil and gas development will also be strong. We see strength in oil and gas consumables, including frac sand and drilling pipe as well as crude oil. Intermodal will continue to be a key growth driver as we continue to benefit from the recovering economy, truck-to-rail conversions, and market share gains.

Automotive traffic will grow with rising vehicle sales in Canada and the U.S. Grain is expected to be strong, with the Canadian crop expected to be near an all-time record. Coal markets, however, are expected to continue to be soft in both thermal and metallurgical segments.”

CN continues to expect capital expenditures to be in the range of 18%-to-20% of revenue. “For 2013, we’ve targeted C$2 billion,” says Mongeau. “Our capital spending is directed at supporting the company’s strategic agenda,at low incremental cost.”

Kansas City Southern “sees exciting growth opportunities for our business next year,” says chief executive Dave Starling. “In Mexico, we are looking forward to serving the new auto plants that will come on line over the next several months. Also in Mexico, the outlook for our intermodal business is positive as we continue to execute on our strategy to convert cross-border truck traffic to rail. In the U.S., the changing energy market offers both opportunity and risk. Strength in crude oil and frac sand should offset the downside risk that we have in coal, as a couple of plants in our service region still struggle to compete against low natural gas prices. Finally, as the Midwest recovers from one of the worst droughts in U.S. history, our export grain shipments should be stronger in the first half of next year.”

In 2014, KCS expects capex to come down from 2013 levels, “but remain above the industry average in order to capitalize on growth opportunities that we see on our network,” notes Starling. “Additionally, in 2014 we will continue to evaluate opportunities to convert some of our leased equipment to ownership. We will continue to invest in our growth through the acquisition of locomotives and rolling stock, strategic upgrades to intermodal facilities, and capacity enhancements in high-volume areas of our network.

A key project for next year is intermodal expansion at Wylie, Tex., to help consolidate Dallas-area operations into one 26

Railway age

December 2013

it’s wh

location, improving efficiencies. We will exit 2013 with 35 new high-horsepower line-of road-locomotives, which will position us well to handle the carload growth. We have also earmarked dollars in 2014 for additional new locomotives as well as the option to perform repowers, as the business dictates. For rolling stock, we have targeted funds to acquire new equipment in support of key growth lanes. This aligns with our strategy to increase the ownership vs. lease ratio more in line with the industry.”

“Nobody knows what the economy is going to do next year,” says Canadian Pacific chief executive Hunter Harrison.

“Our job is to respond to the needs of our customers based on how much demand there is for their products. But at CP, we’re looking to the following areas: “Since summer 2012, we’ve been working to rethink our intermodal network in an effort to capture domestic business that’s currently moving on rubber tires. That’s included notably shortened transit times in the Vancouver-Chicago, Vancover-Toronto, and Toronto-Calgary corridors. In the fourth quarter of 2013, we shaved time off another route, a total of 10.5 hours in the Vancouver-Calgary corridor.

“We had a record grain harvest in Canada in 2013. We expect to continue hauling that grain through the winter, giving us a good start for 2014. That should include strong Western Canada-St. Lawrence Seaway volumes, as well as strong Canada-U.S. movements. Our industrial products segment has seen strong growth for several years. We expect that will continue. [Overall], we’re targeting 4%-7% revenue growth over a multi-year window.

“We expect our capital spend to stay consistent with 2013, in the $1 billion to 1.2 billion range. Our focus on asset utilization has generated over 450 surplus locomotives, so we definitely will not be purchasing locomotives in 2014.

The majority of our capital in any given year goes into the replacement of our core infrastructure: track, roadway, etc.”

For Union Pacific, growth in grain traffic has proved particularly lucrative, and is expected to carry over into 2014. UP shipped an all-time-high number of grain trains to the Pacific Northwest in October, and is poised to help its customers take advantage of a record grain harvest.

Following the 2012 drought, which significantly reduced crop production during 2012-2013, this year’s corn crop has set a new national record. Increased production, combined with robust grain export markets, “will create stronger demand for transportation during the 2013-2014 crop year, compared to the previous year. Customer commitments for UP trains have increased accordingly.

UP also is offering a six-month shuttle commitment program, which allows qualifying customers to exclusively use railcars for a pre-determined amount of time, providing them with guaranteed capacity. Traditionally, shuttle commitment programs have required customers to commit annually. UP says its six-month option offers customers the opportunity to use the cars for a shorter time, allowing for greater flexibility during peak periods. rA

at ’s

tRaffiC anD spenDing outlook

in

de si

that COun ts

Keeping railway operations running smoothly takes reliable equipment – right down to the gears that keep locomotives moving. We’ve spent more than 50 years producing precision engine and traction gearing for locomotives. OEMs keep coming back to OCG, because they know it’s what’s on the inside that counts.

Chicago • Addison • Lombard 125 years of precision gears for the most demanding gear applications.

(630) 543-9570 www.oc-gear.com sales@oc-gear.com December 2013 Railway age 27

Gotham’s robust rail Growth

By douglas John BowEn, managing Editor

R

ail suppliers, more than ever, want to be a part of it: New York, New York.

True, New York City and its metropolitan surroundings were the dominant North American rail passenger market even during the dark days of the 1970s, symbolized in New York by graffiti, crime, train fires, and derailments. The supplier market got better during the 1980s as the Metropolitan Transportation Authority (MTA) initiated successive five-year capital plans to repair and replace ailing equipment and infrastructure.

But in the new century, repair and replacement is joined by upgrades and expansion, with suppliers eager to provide support. Companies such as Thales and Siemens are busy applying Communications-Based Train Control (CBTC), slowly but surely, to portions of New York City’s huge subway system, a lucrative potential opportunity for literally decades to come.

Damage inflicted by Superstorm Sandy to many MTA properties, but particularly MTA New York City Subways, resulted in approval of $5.7 billion in capital spending for repair work, resulting in an adjusted MTA 2010-2014 Capital Plan of $34.8 billion.

MTA also must cooperate and coordinate with other players in a larger transit mix. That includes an extensive underground pedestrian network in downtown Manhattan, where MTA and partner Port Authority of New York & New Jersey are linking the new buildings of the World Trade Center and the PATH interstate rail network with 11 MTA

28

Railway age

December 2013

New York City Transit (NYCT) subway lines and ferry connections spanning roughly half lower Manhattan’s width.

In Queens, East Side Access must take into account not only MTA Long Island Rail Road’s needs, but coordinate with Amtrak’s ongoing Harold Interlocking work at Sunnyside Yards, and ensure NJ Transit train movements continue unimpeded. (RA, Oct. 2010, p. 32.)

EquipmEnt nEEds grow

Layered over both the routine and the unexpected capital expenditures is the huge order of 584 M-9 electric multipleunit (EMU) cars for both LIRR and Metro-North, a $1.8 billion contract awarded to Kawasaki Rail Car, and a reflection of the complexity and ambitiousness of New York’s rail growth. (Kawasaki still is delivering the last of roughly 430 M-8 EMU cars to Metro-North and the Connecticut Department of Transportation.) The design will include “reversible” third rail shoes to allow for potential future operations involving both LIRR and Metro-North. LIRR operates with overrunning third rail shoes, while MetroNorth utilizes shoes running underneath the third rail.

The effort to mix and marry Metro-North and LIRR needs also is reflected by a $428 million contract MTA has awarded to a consortium of Siemens Rail Automation and Bombardier Transportation Rail Control Solutions. The consortium will install Positive Train Control (PTC) for both railroads, the two largest regional passenger operations in North America.

The first segment of the long-awaited Second Avenue Subway is taking shape beneath Manhattan’s East Side.

MTA is readying infrastructure additions; continuing to repair, upgrade, and harden existing facilities; and acquiring new rolling stock, all in order to meet increasing passenger demand.

On the subways, 110 new R188 cars produced by Kawasaki Rail Car at its Yonkers, N.Y., plant will come equipped to handle CBTC. Testing began last month on the No. 7 (Flushing) Line. Kawasaki also will convert at least 370 existing R142 A Division (numbered lines) cars, also with CBTC capability, for use on the existing No. 7 Line linking Queens with Times Square—and for what’s to come farther west.

Bombardier Transportation is building 300 R179 cars for NYCT’s B Division (lettered) lines at the company’s Plattsburgh, N.Y. site, allowing MTA to retire R32 and R42 cars. Delivery is set to begin in July 2015.

MTA/Patrick Cashin

Expanding infrastructure’s reach

In the five boroughs alone, nicknames and acronyms abound for huge rail infrastructure projects overseen by MTA Capital Construction: The No. 7 extension. Fulton (Street Transit) Center. SAS (Second Avenue Subway). ESA (East Side Access).

The 1.5-mile, $1.14 billion No. 7 extension likely will debut first, probably by June 2014, extending subway service from Times Square west to the Hudson Yards Redevelopment Project on Manhattan’s West Side. Much of the redevelopment site sits literally atop the Northeast Corridor and LIRR’s West Side Yards. With large-scale skyscrapers (even by Manhattan standards) planned atop the site (see image, p. 28), developers don’t hesitate to note rail service is a key part of making the site economically viable. The project is a favorite

of outgoing Mayor Michael Bloomberg. S3, a joint venture of J.F. Shea, Skanska USA Civil, and Schiavone, has managed the project. The extension will include CBTC, also being installed along the rest of the No. 7 line.

Racing to meet or beat that June 2014 opening date is the $1.4 billion Fulton Center, designed to streamline and unify six disparate subway stations serving 11 existing subway lines into a cohesive unit. MTA Capital Construction President Michael Horodniceanu tells Railway Age the project’s pedestrian east-west passageway, running underneath Dey Street from the Fulton Center to the World Trade Center, essentially has been completed, with MTA and the Port Authority discussing ways to open the passageway for at least partial access to the WTC site, PATH train service, and nearby ferry connections even while construction activity continues.

Eventually, the underground pedestrian route will offer transit access and protective shelter from the elements, spanning roughly half of lower Manhattan’s east-west width.

Fulton Center itself, says Horodniceanu, “will be spectacular,” with its oculus structure a focal point counterbalancing the more high-profile winged Calatrava sculpture designating the formal PATH World Trade Center entrance on Church Street.

MTA’s two regional railroads are finally coordinating investment efforts not just for railcars, but for a rail terminal—literally MTA’s grandest, Grand Central Terminal. Long home for just Metro-North, Grand Central will welcome December 2013 Railway Age 29

New York MTA proposed CApiTAL CoMMiTMeNTs 2013 ANd BeYoNd (in millions of dollars) project

post-2014

Total

0.0 1,168.1 271.9 17.1 215.0 296.0 78.8 123.1 54.4 237.6 45.7

0.0 145.2 0.0 19.5 0.0 243.8 20.7 7.6 0.0 0.0 0.0

12.8 1,774.7 547.5 204.0 288.0 1,522.0 142.4 175.3 82.0 469.9 84.9

2,359.0

2,507.7

436.8

5,305.5

Rolling Stock Stations Track line Structures Communications and Signals Shops and yards Power Miscellaneous

351.3 59.5 87.1 19.7 194.1 9.4 12.0 24.1

37.2 55.5 333.6 49.8 97.0 18.8 37.0 61.5

0.0 0.0 180.1 0.0 4.3 77.5 22.1 4.3

388.5 115.0 600.8 69.5 296.4 105.7 71.1 89.9

ToTAL MTA Long island rail road

757.2

690.4

288.3

1,735.9

0.1 44.7 60.4 71.0 49.5 3.5 20.5

17.3 139.7 70.7 126.5 8.2 278.6 14.7

0.0 0.0 3.0 0.0 0.0 0.0 0.0

17.4 184.4 134.1 197.5 57.4 282.1 35.2

249.7

655.7

3.0

908.4

105.6 4.0 302.5 65.0 275.0 58.0 576.5 325.0 260.0 15.0 230.0 0.0 12.2 15.9 12.0 18.2 5.7 3.3 20.0 12.7 22.4 9.4 1.5

50.0 0.0 124.5 140.0 510.0 138.0 327.5 815.0 565.0 65.0 30.0 35.0 6.8 16.1 40.5 45.8 0.0 0.0 1.5 64.4 92.2 31.3 21.7

64.0 0.0 37.0 0.0 345.0 1,793.4 600.0 0.0 250.0 87.7 0.0 285.0 60.6 24.4 97.4 0.2 0.3 0.0 23.5 105.0 54.0 0.0 0.0

219.6 4.0 464.0 205.0 1,130.0 1,989.4 1,504.0 1,140.0 1,075.0 167.7 260.0 320.0 79.6 56.4 149.9 64.1 6.0 3.3 45.0 183.0 168.6 40.7 23.2

2,349.9

3,120.3

3,824.5

9,294.7

east Side access Full-length Second avenue Subway Regional investments east Side access RS/liability Reserve Miscellaneous

1,404.5 674.2 242.5 50.2 39.6

907.2 160.0 183.7 502.7 30.0

0.0 0.0 0.0 39.6 30.0

2,311.7 834.2 426.2 592.5 99.6

ToTAL MTA Capital Construction Co.

2,408.0

1,783.6

69.6

4,261.2

grANd ToTAL

8,123.8

8,757.7

4,622.2

21,503.7

MTA New York CiTY TrANsiT

103 “B” Division Cars Passenger Station improvements Track Switches line equipment line Structures Communications and Signals Traction Power Shops and yards M/w Vehicles Miscellaneous/emergency MTa Staten island Railway ToTAL MTA NYCT MTA LoNg isLANd rAiL roAd

MTA MeTro-NorTh rAiLroAd

Rolling Stock Stations Track and Structures Communications and Signals Power Shops and yards Miscellaneous

ToTAL MTA Metro-North railroad seCuriTY/disAsTer reCoverY

MTa-wide Security NyCT Subway Cars NyCT Passenger Stations NyCT Track NyCT line equipment NyCT line Structures NyCT Communications and Signals NyCT Traction Power NyCT Shops and yards NyCT Miscellaneous/emergency Staten island Railway liRR Track liRR line Structures liRR Communications and Signals liRR Shops and yards liRR Power liRR Miscellaneous Metro-North Rolling Stock Metro-North Track and Structures Metro-North Communications and Signals Metro-North Power Metro-North Miscellaneous MTa Capital Construction Co. ToTAL security/disaster recovery MTA CApiTAL CoNsTruCTioN CoMpANY

30

Railway age

December 2013

2013

2014

12.8 461.4 275.6 167.4 73.0 982.2 42.9 44.6 27.6 232.3 39.2

MTA/Patrick Cashin

goThaM’S RoBuST Rail gRowTh

Long Island Rail Road trackwork on the no. 7 line extension is well under way. pictured service, with predicare crossovers at 34th street. tions of serving 80,000 LIRR riders per weekday, when MTA’s $8.2 billion East Side Access project is completed in 2019. LIRR’s own GCT terminal platforms, well under way, lie 90 feet below street level, to be served by 22 elevators and 47 escalators.

ESA tunnels run north roughly 120 feet under Manhattan’s surface, turning east under 63rd Street and joining a tunnel segment built during the 1970s and running just underneath

F Line subway tunnels built at that time. The tunnel route surfaces at Sunnyside Yards in Queens, where extensive track rerouting involving LIRR, Amtrak, and NJ Transit has taken place to streamline operations and reduce movement conflicts. LIRR plans to operate 24 trains per hour on the new route during peak periods.

ESA’s projected deadline slipped from 2012 to 2014 to 2016 and now is targeted for 2019, with the complexity of tunnel work at Sunnyside contributing to the delays and driving up anticipated costs.

Somewhat linked to ESA’s future passenger delivery loads to and from Manhattan’s East Side—the No. 1 jobs center in the U.S.—is Phase 1 of the Second Avenue Subway (SAS), first proposed in 1929 and finally taking form between 63rd Street and 96th Street, with three new stations. With ESA likely delayed, the two-mile, Phase 1 portion of SAS likely will open first, in December 2016, offering East Siders an alternative to the crowded No. 4, 5, and 6 lines underneath Lexington Avenue, which combined carry more riders than the next three U.S. subway systems combined.

Rider diversion to the SAS may ease the load on those numbered lines, allowing potential capacity for some ESA riders boarding at Grand Central. (Planners note many other LIRR riders using ESA will walk to jobs or events, ameliorating the “crush subway loads” anticipated by other observers.)

Wishing you happy holidays and safe travels in the year ahead.

December 2013 Railway age 31

goThaM’S RoBuST Rail gRowTh undoing sandy’s damagE

Other tunnel repair and upgrade projects, largely prompted by damage resulting from Superstorm Sandy in October 2012, will keep New York’s role as proverbial 800-pound gorilla among North American rail transit players secure for some time to come.

One year to the day after Sandy savaged the Northeast, New York Gov. Andrew M. Cuomo and MTA Chairman and CEO Thomas F. Prendergast, along with other officials, inspected some potential technological fixes MTA is weighing for flood protection and storm hardening for 600 “entry points” in lower Manhattan’s transportation grid, mostly railrelated. Among the items: a prototype entrance cover at the Whitehall St. subway station, developed by RSA Protective Technologies to protect at least 13 vulnerable stairwells downtown, able to be installed quickly without the need for mechanized equipment.

The governor’s touring party also visited MTA’s major loss, the new South Ferry subway station, which was overwhelmed by 14 million gallons of corrosive salt water. There, the party inspected a tunnel plug under development by ILC Dover, a Department of Homeland Security vendor and supplier to NASA, to protect subway portals where grade level tracks transition to underground subways. The tunnel plug is similar to ILC Dover’s “Tensioned Curtain” being eyed

HALF PAGE fog.indd 1

32

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December 2013

for the 207th Street Station in upper Manhattan. An alternate prototype is being developed for a typical street stairwell entry for other subway stations. A third vendor, FloodBreak, is producing a permanently implantable device beneath sidewalk ventilation gratings that can be immediately and easily closed manually, sealing the vent from flood waters. A prototype is in place under a grating at Rector Street.

Meanwhile, under the streets and rivers nearby, MTA New York City Transit has begun repair work on the first two of six storm-damaged subway tubes, including work on signals, pump rooms, power and communications, tunnel lighting, and ducts. NYCT also is building two new pump trains that will reduce the time needed to pump water out of the subway system when the next major storm occurs—something MTA brass regard as inevitable.

Above ground, work is under way to repair and elevate two of three damaged substations along LIRR’s Long Beach Branch, close to the Atlantic Ocean. Back in Manhattan, design is under way for resiliency work that will protect Penn Station, which is likely to include flood barriers at the Northeast Corridor tunnel portals leading to New Jersey.

North of Manhattan in the Bronx and in Westchester County, Metro-North has begun design work for new power and communications components along 30 miles of the Hudson Line, skirting its namesake river and prone to flooding. ra

13-11-11 8:46 AM

Plasser American’s BDS-100 can accompany high-speed 09-3X tampers for final track dressing or work independently.

Precision Placement Today’s ballast distribution technology ensures aggregate is perfectly placed.

By MiSchA WAnEk-LiBMAn, Engineering Editor

T

rack maintainers are aware of the role well-placed ballast has on track structure. Having too much can be just as detrimental as too little, which is why companies that perform ballast distribution rely on state-of-the-art technology to unload ballast with precision.

GREX

Georgetown Rail Equipment Company’s ballast distribution technology employs three primary components. The first is mechanical delivery, which is comprised of the physical components that provide the means for dumping ballast. The second is quantification and placement. The final component is GateSync®, which connects the mechanical delivery mechanism to the “on the ground” ballast requirements. GateSync® takes the survey data produced from BallastSaver® and uses it to perform ballast delivery with integrated Solaris® kits. Lynn Turner, vice president marketing and sales at GREX, says these synchronized technologies provide a total solution in ballast delivery by achieiving maximum accuracy and high-speed performance.

The mechanical aspect is comprised of Solaris® kits, which convert a manually operated ballast car into a powered solution with hydraulically controlled ballast gates and self-contained power.

“With far more than 1,000 Solaris® kits in service, they have proven to be highly reliable,” said Turner.

BallastSaver® acts as the eyes of the GREX solution, utilizing the latest LIDAR technology to measure and record the ballast profile. Since each railroad has its own ideal profile for ballast cross-section, BallastSaver® utilizes each customer’s accepted standard profile to calculate ballast deficiencies. Turner says this allows BallastSaver® to consistently inspect the track bed with the same customerdefined criteria mile after mile, providing railroads an unbiased inspection across their territory and eliminating human interjection.

“A BallastSaver® inspection reduces the possibility of delivering excess ballast by more accurately directing ballast exactly where it is needed most,” said Turner. “Extensive repeatability tests have been performed at TTCI to validate and ensure that BallastSaver® continues to offer the most efficient and accurate

means of assessing ballast profiles.”

GateSync® functions as the brain of the solution by taking the precise location and amount of ballast needed, which is provided by BallastSaver®, and executing a ballast delivery unloading using Solaris® equipped ballast cars. Turner says GateSync® continues to see software changes and improvements that enhance its ability to deliver the best results possible and mentions that the improvements realized for BallastSaver® have also benefited GateSync’s performance, providing customers with the most efficient ballast delivery process in the industry.

“These combined technologies provide a state-of-the-art ballast delivery solution with industry leading efficiency and safety,” said Turner.

“GREX is committed to continued refinement and support of these technologies to maintain state-of-the-art industry position. With Solaris®, BallastSaver®, and GateSync® in combination, GREX offers a complete ballast delivery solution that can accurately define the volume of ballast needed, the location where it should be placed, and can execute an efficient and exact unloading.”

December 2013 Railway age 33

Ballast DistRiBution hRSi

Herzog Railroad Services Inc. (HRSI) is now integrating its new P.L.U.S./ SMART Inertial System into its Programmable Linear Unloading System (P.L.U.S.) and SMART Train fleet. The Inertial System is a decadelong R&D effort that provides a backup to GPS-guided ballast unloading by

allowing precise ballast distribution in areas that are prone to GPS outages, such as tunnels and mountainous areas.

HRSI notes that pre-dump surveys, which are performed prior to ballast distribution to confirm the position of switches, crossings, and other fixed locations, can be challenging during surveys, in areas where GPS outages

Accurate Assessment of the Ballast Profile

occur. That challenge remains when the train arrives to dump the ballast.

According to HRSI, some areas could take longer than others to complete a thorough survey due to a weak or complete lack of GPS signal. The company says the new system drastically reduces the survey time while dramatically improving the accuracy of both the survey and the ballast dump.

HRSI’s new system uses GPS and a variety of other sensors to maintain accuracy in areas of poor GPS. “GPS outages will no longer be a concern when dumping ballast, and the same can be said of the pre-dump survey when utilizing the Herzog ProScan LIDAR Truck to replace the manual survey,” said Tim Francis, HRSI vice president of marketing.

MinER

Miner Enterprises Inc. AggreGate ballast discharge outlets are available in manual, air-operated, electric, or remote control models. The company says the system provides a safe, durable, and maintenance-free ballast discharge system that can be easily applied to new or existing cars. The AggreGate’s design features, such as the large guillotine door openings designed to stop ballast flow with minimum effort, easy-to-operate toggle-type linkage systems and tapered doors for easy ballast shutoff at switches, crossovers, and bridges, allow it to effectively deliver ballast inside, outside, or to both sides of the rail simultaneously.

“Miner is always working on continuous improvement projects with the railroads and track crews to improve ballast unloading and efficiency,” the company said.

Take the guesswork out of maintaining optimal track conditions by easily determining your exact ballast needs.

BallastSaver® enhances the performance of GREX’s GateSync® Ballast Delivery System by greatly improving the accuracy and efficiency of ballast placement. Utilizing state of the art LIDAR technology, an encoder wheel and videography, the system measures the existing profile for comparison with the Railroad’s “ideal” profile. Once the required amount of ballast is determined, the data is fed directly into the GateSync® System for automated delivery.

PLASSER AMERicAn

• Remove the subjectivity from ballast management • Dump only the amount of ballast needed • Plan your Annual Ballast Program using BallastSaver® Data • Optimize the annual spend on ballast • Compliments and enhances GREX’s GateSync® Services

GEORGETOWN RAIL EQUIPMENT COMPANY

A Better Way to Work.

1.512.869.1542 www.georgetownrail.com

34

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December 2013

Plasser American Corp. says that only with sufficient ballast can tracks be correctly maintained and adequately tamped. Plasser has developed two tools: a ballast profile measuring system and a ballast distribution system.

Plasser has developed a ballast measuring system based on data recorded by a high-speed 360-degree clearance scanner. The scanner, installed

Ballast DistRiBution GREX’s ballast delivery system is comprised of Solaris® kits, of which more than 1,000 are in service.

on one end of a measuring vehicle, records crosscuts of the track and its surroundings up to 200 times per second with up to 10,000 measurements per crosscut. The data recorded by the system are primarily used for clearance evaluation, but are also suited for obtaining information about the state of the ballast and its distribution.

The ballast measuring system analyzes the recorded data against three user-definable ballast profiles simultaneously to obtain accurate information

about areas with ballast excess or deficit. The data recorded by the system is then used to guide ballast dump trains.

Plasser’s Ballast Distribution System is performed as a “one pass” operation and consists of two units that can either work completely independent of one another or together as one machine.

The BDS-100 is equipped with a hopper, for ballast storage, four conveyors, for ballast distribution, and Plasser’s well-proven shoulder and X-type plows, for ballast profiling. The

BDS-200 is equipped with two ballast brooms. The “pick-up” broom sweeps the excess ballast from the track onto a conveyor, which loads the ballast into the BDS 100 or into a Plasser MFS-type Conveyor and Hopper Car. The “finishing” broom provides the final track dressing. The ballast handling capacity of the Plasser Ballast Distribution System can be increased by coupling Plasser MFS-type Conveyor and Hopper Cars between the two units.

The BDS 100/200 can accompany high-speed 09-3X tampers for final track dressing or work as an independent machine to distribute ballast.

When working as an independent machine it may be used to pick up excess ballast from the track shoulders for distribution at any location, including switches. ra

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December 2013 Railway age 35

Do you have the most up-to-date FRA Regulations?

Reb Says...

Use this handy index to verify that you have the most up-to-date version of the FRA regulations. The left-hand column lists the FRA Part number and the right-hand column list the latest revision date. Items highlighted in red denotes recent changes. (IFR = Interim Final Rule) FRA Part #

Last Update Effective:

FRA Part #

Last Update Effective:

40 . . . . . . . . .10-3-12 209 . . . . . . . .2-12-13 210 . . . . . . . .8-14-89 211 . . . . . . . .7-20-09 213 A-F . . . . .7-11-13 213 G . . . . . .7-11-13 214 . . . . . . . .6-25-12 215 . . . . . . . .6-25-12 216 . . . . . . . .6-25-12 217 . . . . . . . .6-25-12 218 . . . . . . . .6-25-12

219 220 221 222 223 224 225 228 229 230 231

. . . . . . . . .5-6-13 . . . . . . . .6-25-12 . . . . . . . .6-25-12 . . . . . . . .6-25-12 . . . . . . . .6-25-12 . . . . . . . .6-25-12 . . . . . . . . .1-1-13 . . . . . . . .6-25-12 . . . . . . .12-19-12 . . . . . . . .6-25-12 . . . . . . . .6-25-12

FRA Part #

232 233 234 235 236 237 238 239 240 242

Last Update Effective:

Mechanical Department Regulations

. . . . . . . .6-25-12 . . . . . . . .6-25-12 . . . . . . . .5-14-13 . . . . . . . .6-25-12 . . . . . . . .7-13-12 . . . . . . . .6-25-12 . . . . . . . .7-11-13 . . . . . . . .6-25-12 . . . . . . . .6-25-12 . . . . . . . .6-25-12

The following is a list of booklets reprinted from the Department of Transportation Code of Federal Regulations 49 CFR Parts 200 to 399 that apply to the rail industry. They are printed in a convenient format and are kept current with updates from the Federal Register which may be supplied in supplement form.

Item Code

FRA Part #

209 211 BKTSSAF 213 BKTSSG 213 BKWRK 214 BKFSS 215 BKROR 217 218 BKRRC 220 BKEND 221 BKSEP

Railroad Safety Enforcement Procedures & Rules of Practice Track Safety Standards (Subpart A-F) Track Safety Standards (Subpart G) Railroad Workplace Safety Railroad Freight Car Safety Standards Railroad Operating Rules and Practices Railroad Communications Rear End Marking Device, Passenger, Commuter & Freight Trains BKHORN 222 Use of Locomotive Horns BKRFRS 224 Reflectorization of Rail Freight Rolling Stock BKHS 228 Hours of Service BKLSS 229 Locomotive Safety Standards BKSLI 230 Steam Locomotive Inspection BKSAS 231 Railroad Safety Appliance Standards BKBRIDGE 237 Bridge Safety Standards BKLER 240 Qualification and Certification of Locomotive BKCONDC 242 Conductor Certification BKBSS

232

Brake System Safety Standards

Each

27.50

50 or more

9.95 8.55 9.50 7.25 9.50

8.95 7.85 8.55 6.55 8.55

5.50 5.00

4.95 4.50

13.25

11.95

6.25 10.50 11.00 22.95 9.35 6.25 12.75

5.60

11.00 Each

14.75

Technical Manual for Signal and Train Control Rules.

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49 Part 213, Subparts A-F. Classes of Track 1 through 5: Applies to track required to support passenger and freight equipment at lower speed ranges. Includes Defect Codes and Appendices A, B, and C to Part 213. Softcover. Spiral bound. 114 pages. Updated 7-11-13.

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Part Title 210 Railroad Noise Emission Compliance Regulations 215 Freight Car Safety Standards 216 Emergency Order Procedures: Railroad Track, Locomotive and Equipment 217 Railroad Operating Rules 218 Railroad Operating Practices - Blue Flag Rule 221 Rear End Marking Device-passenger, commuter/freight trains 223 Safety Glazing Standards 225 Railroad Accidents/Incidents 229 Locomotive Safety Standards 231 Safety Appliance Standards 232 Brake System Safety Standards

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People

Meetings

HigH Profile Bill O’Leary has been named President and CeO of the alaska Railroad, succeeding Chris aadnesen.

O’leary joined the alaska Railroad in 2001 as Vice President and CFO, tasked with overseeing financial activities as well as human resources and supply management functions. He was promoted to Chief Operating Officer in March 2013. O’leary also served as interim CeO from april 1 to Sept. 22, 2010.

Born and raised in Fairbanks, O’leary earned a Ba in accounting from the University of alaska Fairbanks. Chief Mechanical O’leary Officer Doug Engebretson replaces O’leary as COO. He Alaska Railroad joined the alaska Railroad in 1984, and has extensive expertise with the mechanical aspect of rail operations, beginning with his certification as a carman in 1980 following a three-year apprenticeship at the Burlington Northern. after five years with BN (1977-1982), he joined the alaska Railroad as a journeyman carman. in 2006, engebretson joined the senior management team as Director of Mechanical Maintenance, and in 2010 was named CMO.

December 10-11, 2013

METRO-NORTH—John Kesich formally named Senior Vice President Operations.

MONTANA RAIL LINK—Van Blakely promoted to Chief Procurement and Real estate Officer. Jim Lewis promoted to Chief Sales and Marketing Officer.

SUPPLIERS Atlantic Track promoted Charles A. Killeen to executive Vice President.

David R. Francis promoted to Vice President-Midwest Region. Jeffrey H. Grissom promoted to Vice Presidentengineering and Operations.

Georgetown Rail Equipment Co. named Christopher Aadnesen executive Chairman.

Holland LP promoted Dick Morris to Senior Director Operations-U.S. & Mexico welding group. Jeff Hajkowicz promoted to Senior Director-welding equipment, Technology, and Training.

Kevin Piefer promoted to Senior Director Operations-Canada welding group. Mike Hakenjos promoted to Continuous improvement ManagerMOw Product group.

LTK appointed Lloyd Mack Seattle area Manager. Paul Novak appointed Chicago Office Manager.

Parsons Brinckerhoff named Gunay

Gun a Project Manager based in washington, D.C. RailComm LLC appointed Joe Forgione President and CeO, succeeding founder Joe Denny.

Railinc Corp. named Greg Smith aVP, Customer experience.

SYSTRA USA named Susannah Kerr Adler executive Vice President, Marketing & Business Development.

Voith Turbo named Dr. Frank Gropenglesser CeO, Rail Division.

100 YEARS AGO in

(DECEMBER 1913) HIGHER-SPEED RAIL On the night of November 25 a special train consisting of a locomotive and two cars was run from Washington, D.C., to Jersey City, N.J., 226 miles, in four hours, the fastest trip ever made between the two cities. The route was over the Baltimore & Ohio, the Philadelphia & Reading, and the Central of New Jersey. The train was run for a New York newspaper, to carry photographs taken at the marriage of the President’s daughter. The previous best run between these cities, of which we find record, was 4 hours 11 minutes, over the Pennsylvania.

ASLRRA Track Safety Standards Training Seminar Four Points by Sheraton Bwi airport Hotel, Baltimore, Md. Tom Streicher, Tel.: 202-628-4500; email: tstreicher@aslrra.org; website: www.aslrra.org.

January 5-8, 2014 NRC Conference & NRCREMSA Exhibition Palm Desert, Calif. ashley Bosch, Tel.: 202-715-1247; email: abosch@nrcma.org; website: www.mrcma.org/go/conference.

January 15-16, 2014 Midwest Association of Rail Shippers (MARS) 2014 winter Meeting Oak Brook Hill Marriott Resort, Oak Brook, ill.

Bill Schauer, email: wrschauer@sbcglobal.net; website: www.railshippers.com/ regional/midwest.

January 23-24, 2014 10th Annual Southwestern Rail Conference Dallas, Tex. Bernie Rodriguez, Tel.: 469-569-0136; email: bernie@texasrailadvocates.org; website: texasrailadvocates.org/ conference/?confiD=6

March 2-5, 2014 Rail Equipment Finance 2014 la Quinta Resort & Club la Quinta, Calif. email: msilverman@railfin.com; website: www. railequipmentfinance/com

April 1-2, 2014 19th Annual AAR Research Review Colorado Springs, Colo.

Tel.: 719-584-0544; email: annual review@aar.com; website: www.regonline.com/19thannual

December 2013 Railway age 37

Products Portable electric jacks from Whiting Corp.

Portable electro-mechanical jacks are being produced by whiting Corp. to lift and lower heavy diesel power units and generators on diverse and remote inland and coastal sites. The 25-ton

specially modified portable electric jacks, first deployed in a set of four to lift truck-length power generators, are based on whiting’s proven and reliable Ma locomotive jacks, used to hoist rail

freight and passenger cars for building, maintenance and overhaul.

The customized low-maintenance transportable jacks, each weighing about 3,000 pounds, feature an effective lifting height of six feet, and built-in safety and versatility features, including: modified lifting brackets to suit the particular lift; front bearing pad extensions to enhance stability; connecting pins to interface with customer-supplied lifting components; and upper over-travel limit switches.

The jacks are powder coated for enhanced corrosion protection, and have a massive structural steel column assembly welded to the base and housing an alloy steel jackscrew containing a worm and worm gear.

Contact Marketing Manager Melissa Markiewicz, Tel.: 708-587-2222; email mmarkiewicz@whitingcorp.com; website: www.whitingcorp.com.

W o r l d ’s L a r g e s t C r a n k s h a f t M a n u f a c t u r e r a n d R e - M a n u f a c t u r e r

H e r m i t a g e , PA U S A 1 6 1 4 8 Te l e p h o n e 1 - 7 2 4 - 3 4 7 - 0 2 5 0 w w w . E l l w o o d C r a n k s h a f t G r o u p . c o m 38

Railway age

December 2013

RA1_2pgVertMaps2_2013_TrainingDVDs 11/20/13 3:37 PM Page 1

SturdiLED from Phoenix

Railroads of the Continental United States Wall Map

Phoenix Products Co., inc. announces the SturdileD™ Series, a mid-level leD floodlight offering an aC or DC driver with multiple output options ranging from 1,600 to 2,900 lumens. The two optical packages, 28° and 45°, accommodate a variety of applications including gantry lights, maintenance platforms, straddle carriers, and various other demanding terminal applications.

Phoenix utilizes marine-grade die cast aluminum housing with a powder coat finish for additional protection against corrosion. The rugged shock mount base delivers durability that can stand up to even the harshest applications. The SturdileD also utilizes a replaceable, impact-resistant, and UV-stable lens, as well as a conformal coated circuit board and fully potted driver.

Designed, engineered, and manufactured in the U.S.a., the SturdileD carries a five-year limited warranty. The fixture is eTl listed to Ul 1598 and 1598a, iP67 rated, and is pending for Ce Certification. The SturdileD comes in six finish options including black, gray, white, bronze, silver, and green. Numerous repair parts are also available.

For more information visit the company website, www.phoenixproducts.com.

ZTR low-profile axle generators The new ZTR locomotive axle generator is designed for the rigors of the railroad and features a modern, low-profile design. it is field-configurable, easy to install, and fits on all Timken bearings. it mounts on the locomotive journal box with a versatile ring bracket and uses an easy-to-route flexible cable. it also affixes to axles without splines.

The pulse per revolution (PPR) signal is programmable, so it can replace virtually any older unit. The low profile of the axle generator means it is less likely to get damaged from impact. The iP69K rating prevents water and oil from getting inside and freezing, increasing reliability. Contact ZTR, Tel.: 952-233-4340; email: railinfo@ztr.com; website: www.ztr.com/axle.

Transportation professionals and railroad enthusiasts around the world use ''Railroads of the Continental United States'' as an indispensable reference guide for North American railroads. This map features complete U.S. rail system as well as southern Canada and northern Mexico are displayed in this 36'' x 48'' map. Printed in full-colors, the highly detailed map shows more than 7,000 cities, towns, and station points. 2007.

MPWML07

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Railroads of Canada Wall Map The full color 36'' x 60'' map of the Railroads of Canada includes eight individual cities insets, color coded Class I railroads, major lakes, provincial boundaries, connections to the northern United States and over 1,350 station points. The insets include: Edmonton, Montreal, Quebec City, Regina, Saskatoon, Toronto, Vancouver and Winnipeg. 2007.

MPRRCAN

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Professional Railroad Atlas of North America From Alaska and the Yukon to the Yucatan in southern Mexico, its all here. The atlas includes a listing of approximately 650 railroad companies and reporting marks in North America.

This atlas has been designed for the railroad professional and transportation consultant. Nine major lines are color coded for enhanced readability. A great reference tool. Great care has been taken to provide the most accurate and current information available. Over 40 insets displaying highly detailed maps of metropolitan areas. Softcover. 112 pages.

BKATLAS

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December 2013 Railway age 39

Ad Index Company

Phone #

Fax

Email address

Amsted Rail Group

312-922-4516

312-922-4597

kskibinski@amstedrail.com

Page # C2

Ansaldo STS USA Inc.

800-652-7276

sales@ansaldo-sts.us

23

Boatright Enterprises, Inc.

800-873-2020

205-298-9483

info@boatrightcompanies.com

CIT

212-461-5713

212-461-5694

abby.cohn@cit.com

Danella Rental Systems, Inc.

610-828-6200

610-828-2260

pbarents@danella.com

26

Dixie Precast

770-944-1930

770-944-9136

fbrown142@aol.com

26

Ellwood Crankshaft & Machine

724-347-0250

724-347-0254

ecgsales@elwd.com

38

3 13

Flagship Rail SVCS, LLC

312-559-4800

312-559-4829

eileen.oneill@flagshiprail.com

25

Georgetown Rail

512-869-1542 ext 228

512-863-0405

karen@georgetownrail.com

34

Helm Financial Corp.

415-398-4510 ext 1610 415-398-4816

bwind@hlmx.com

35

Herzog Railroad Services, Inc.

816-233-9002

816-233-7757

tfrancis@hrsi.com

15

Holland Co.

708-672-2300 ext.382

708-672-0119

gpodgorski@hollandco.com

17

LTK Engineering Services

215-641-8826

215-542-7676

tfurmaniak@ltk.com

12

Miner Enterprises

630-232-3000

630-232-3055

sales@minerent.com

ORX

814-684-8484

5

glenn@orxrail.com

C4 27

Overton Chicago Gear

630-543-9570

630-543-7400

sales@oc-gear.com

Progress Rail Services PRL

256-505-6402

256-505-6051

info@progressrail.com

9

Progress Rail Services LRS

256-505-6402

256-505-6051

info@progressrail.com

32

Railquip, Inc.

770-458-4157

770-458-5365

sales@railquip.com

25

Railroad Financial Corp.

312-222-1383

312-222-1470

tkruglinski@railfin.com

14

RailWorks

866-905-7245

952-469-1926 jrhansen@railworks.com

31

Railway Educational Bureau, The 402-346-4300

402-346-1783

bbrundige@sb-reb.com

Regions Bank

404-832-3408

646-264-9535

matthew.chamberlin@mindshareworld.com 11

S & C Distribution, Co.

708-396-1755

708-396-1754

Siemens

800-SIEMENS

www.usa.siemens.com.transportation 7

Vossloh Group

00 49 239 252 273

info@vossloh-north-america.com

00 49 239 252 274

36,39

info@sandcco.com

35 19

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.

Advertising Sales MAIN OFFICE Jonathan Chalon, Publisher 55 Broad St., 26th Floor New York, NY 10004 (212) 620-7224 Fax: (212) 633-1863 jchalon@sbpub.com AL, AR, IN, KY, LA, MI, MS, OH, OK, TN, TX Emily Guill 20 South Clark Street, Suite 1910 Chicago, IL 60603 (312) 683-5021 eguill@sbpub.com CT, DE, DC, FL, GA, ME, MD, MA, NH, NJ, NY, NC, PA, RI, SC, VT, VA, WV, Canada – Quebec and East, Ontario Mark Connolly 55 Broad St., 26th Floor New York, NY 10004 (212) 620-7260 Fax: (212) 633-1863 mconnolly@sbpub.com

40

Railway Age

December 2013

AK, AZ, CA, CO, IA, ID, IL, KS, MN, MO, MT, NE, NM, ND, NV, OR, SD, UT, WA, WI, WY, Canada – AB, BC, MB, SK Heather Disabato 20 South Clark Street, Suite 1910 Chicago, IL 60603 (312) 683-5026 Fax: (312) 683-0131 hdisabato@sbpub.com BELGIUM, PORTUGAL, SWITZERLAND, GERMANY, EASTERN EUROPE, BALTIC STATES, MIDDLE EAST, SOUTH AMERICA, AFRICA (except South africa), far east (except Korea, china, hong kong, india), all others, tenders Louise Cooper International Area Sales Manager The Priory, Syresham Gardens Haywards Heath, RH16 3LB United Kingdom +44-1444-416917 Fax: +44-(0)-1444-458185 lc@railjournal.co.uk

SCANDINAVIA, THE NETHERLANDS, SPAIN, GERMANY, AUSTRIA, KOREA, HONG KONG, CHINA, AUSTRALIA, NEW ZEALAND, SOUTH AFRICA, RUSSIA, RECRUITMENT ADVERTISING Steve Barnes International Area Sales Manager The Priory, Syresham Gardens Haywards Heath, RH16 3LB United Kingdom +44-1444-416375 Fax: +44-(0)-1444-458185 sb@railjournal.co.uk Italy, Italian-speaking Switzerland Dr. Fabio Potesta Media Point & Communications SRL Corte Lambruschini Corso Buenos Aires 8 V Piano, Genoa, Italy 16129 +39-10-570-4948 Fax: +39-10-553-0088 info@mediapointsrl.it

Japan Katsuhiro Ishii Ace Media Service, Inc. 12-6 4-Chome, Nishiiko, Adachi-Ku Tokyo 121-0824 Japan +81-3-5691-3335 Fax: +81-3-5691-3336 amkatsu@dream.com CLASSIFIED, PROFESSIONAL & EMPLOYMENT Jeanine Acquart 55 Broad St., 26th Floor New York, NY 10004 (212) 620-7211 Fax: (212) 633-1325 jacquart@sbpub.com

pRoducTs & seRvIces

pRoFessIoNAL dIRecToRY

Reidler Decal Corporation St. Clair, PA 17970 Fax: 570-429-1528 marketing@reidlerdecal.com The Federal Railroad Administration's proposed new delineator configuration

strAteGic PLANNiNG: • Commuter rail tranSitionS • fra ComplianCe programS • operationS auditing

Kansas City Office (913) 661-2424 oPerAtioNs trAiNiNG & coNsULtiNG: www.tcsrailservices.com • engineer training & CertifiCation other services: • exCellent HiStory witH fra, ntSB • Staffing • meCHaniCal & part 238(Qmp) • interim management

Locomotive repair shop with a pit available for sale in Monroe, GA (1 hr. east of Atlanta). 7,200 sq. ft. bldg. on over 17 acres of land with 727 feet of rail frontage.

Contact Kyle Chong at kyle@railtrusts.com or (904) 241-4176. equIpmeNT sALe/LeAsING

Available For Lease

◆ Mill Gondolas - 65’ 6” interior length with 5’ sides and 52’6 interior length with 4’6” to 5’ sides. ◆ 4600, 4650 & 4750 cu. ft. covered hoppers – Trough hatches & gravity outlet gates. ◆ 3,600 cu. ft. Open Top Hoppers. 45 degree slopes for aggregate, coke, coal, etc. ◆ 4,240 cu. ft. tub bottom rotary gondolas Interior bracing still in place.

For additional information and pricing, please contact John Goodwin phone (605) 582-8318 fax (605) 582-8304 www.carmathinc.com e-mail jgoodwin@mwrail.com

Reidler can help you comply with the FRA ruling by offering prismatic reflective yellow delineators that meet their specifications.

• 4" x 150 fl Rolls (kiss-cut available) • 400 candlepower retroreflection • Application instructions provided

Give us a call at 800-628-7770 for more information The Leader in Railroad Markings since 1926

TRAINING

Part 243 Training & Certification Part 242 Conductor Training Part 240 Engineer Training and re-certification -------------------------------------------------------Modoc Railroad Academy 916-965-5515 info@modocrail.com

Trainers and Training Developers The Railway Educational Bureau is in the process of creating a training and development database to be used as a resource for the railroad industry.

If you have experience training in an instructor-led environment and/or developing training materials for the rail industry, and are interested in becoming a part of our group, please send your resume to:

Brian Brundige The Railway Educational Bureau 1809 Capitol Avenue Omaha, NE 68102

December 2013 Railway age 41

equIpmeNT sALe/LeAsING

RecRuITmeNT

empLoYmeNT

EDNA A. RICE, EXECUTIVE RECRUITER, INC (713) 667-0406 FAX (713) 667-1651 Web address: www.ednarice.com Email: resume@ednarice.com

EDNA A. RICE, President 6750 West Loop South Suite 735 Bellaire, Texas 77401-4111

Independent Sales Representative Transportation Technology, Inc. SEE THE FULL JOB POSTING AT RAILWAYAGE.COM JOB BOARD

Railway Age classified section Jeanine Acquart 212-620-7211

empLoYmeNT

Director of Equipment Services Brandt Rail Services Inc.

jacquart@sbpub.com s r

r

TM

SEE THE FULL JOB POSTING AT RAILWAYAGE.COM JOB BOARD

Are you a railroad or supplier searching for job candidates? visit http://bit.ly/railjobs THE RAILWAY AGE JOB BOARD connects candidates and opportunities in the rail industry.

To place a job posting, contact: Jeanine Acquart • 212 620-7211 • jacquart@sbpub.com 42

Railway age

December 2013

Perspective Ken Grantham, Crompion international

Tank car safety: One size does not fit all

T

he July 6, 2013 tank car derailment in Lac-Mégantic, Quebec was a tragedy, a nightmare-cometrue for all those linked to the rail industry, from the owners and operators to the suppliers and fabricators to the citizens living along railroad rights-of-way. An even bigger tragedy is that it could have been avoided. It is imperative that we begin to harness the power of technological and logistical advances and marry them to modern standards and regulations in order to ensure the safety, not only of the precious cargo we transport, but, more important, of the people who are the core of this industry.

Dozens of innocent people perished as a result of punctured tank cars that Canadian Transportation Safety Board investigators have determined, according to shipping records, were carrying misidentified fuel resources at the time of the derailment. As an industry, as stewards of the community, and as human beings, we must ask ourselves, “What could we have done differently to prevent such tragedy?”

The discussion regarding the recent string of tank car derailments has shifted from containment and cleanup to prevention and regulation, and we must challenge ourselves to collaborate and ensure that a similar disaster will not occur again. In order to innovate and make technological advances to reduce abrasion, corrosion, and deterioration in tank cars, we must be made aware of the elements that are harming these vessels that carry resources harmful to both the environment and our fellow citizens.

The American Petroleum Institute (API) has extraordinary standards for inert tanks. If the world’s most recognized association for oil and gas sets forth standards for static tanks that are consistently held to a higher standard than

many government regulations, why are we not using them to improve railway vessels transporting crude oil, petrochemicals, or other potential hazardous materials? By defining which energy resources are entering motionless tanks, we should consider the same requirements that materials be defined before entering tank cars.

As we request the information on each agent transported via tank car, we also need to strongly consider building tank cars to fit their application. The agents in ethanol that are the source of

What could have been done differently to prevent the Lac Mégantic tragedy? tank car lining corrosion will not necessarily be the same agents in crude oil.

With innovation comes adaptation.

The materials traditionally used to construct DOT-111 tank cars have been in use for well over 100 years and are considered ancient to those of us who have spent years working to strengthen metals, not only in the freight and tank car industry, but in various applications.

Whether an increased thickness in the tank car shell or head shield would have prevented a puncture that caused such mass destruction at Lac-Mégantic remains to be seen, but using metals that have a reputation for not truly being resistant enough to counter the corrosion of multiple resources is simply negligent.

We are now living in a technologically advanced period where cellular phones are deemed obsolete no less than one year, sometimes months, after coming to market. The same applies to metallurgy

and fabrication, which will have been researched and developed to prevent mass tragedies similar to Lac-Mégantic.

The U.S. Energy Information Administration (EIA) says it “expects U.S. crude oil production to rise from an average of 6.5 million bbl/d in 2012 to 7.5 million bbl/d in 2013 and 8.5 million bbl/d in 2014.” At current production rates, rail transport is not only the immediate future of energy movement, it is the only practical method of transportation, as projects such as the Keystone XL pipeline have been habitually delayed. So where do we go from here as rail resource transportation is necessary to fuel our energy needs?

In serving as the Executive Vice President and Director of Technical Sales & Services for Crompion International, I regularly travel the globe to visit various conferences and companies—both in the metals and rail industry—and have seen exceptional advances in engineering and metallurgy. We do not have to stand for subpar tank car composition materials, nor do we have to tolerate a “one-sizefits-all” standards approach.

Will we push our own industry’s safety standards above regulators to ensure we are here to transport energy in the next generation?

Ken Grantham is Executive Vice President and Director of Technical Sales & Services at Crompion International, a leading producer and distributor of Cromgard high-performance stainless steels. In his five years with Crompion International, Grantham has managed internal and external quality and process controls while maintaining the company’s ISO 9000:2008 accreditation, expanded scope of sales to include many new product offerings, expanded value-added products and services, and also added advanced 3D modeling and simulation capabilities.

December 2013 railway aGe 43

Financial edge DaViD NaHaSS

Small-cube hopper market still has legs

I

nvestors in railcars and locomotives look at several factors when making a determination on investing in an asset.

Utility: No investor wants to take a significant residual position in an asset that has limited opportunities to be released. Durability/longevity: Investors often retreat from railcars built with new designs or out of new materials that do not have a track record of a long useful life or successful implementation for hauling a designated commodity. Overbuilding of a particular car type: Few investors want to get lost in a deluge of railcars built to serve an overheated market. Certain investors, especially financial investors (as opposed to operating lessors), can get uncomfortable when assets are not earning, in storage, or when these investors must take extraordinarily low lease rates to keep assets deployed.

There is a lot of chatter today about overbuilding; much of it is centered upon two particular car types: tank cars (primarily for crude by rail moves) and small-cube covered hopper cars used to haul cement (construction) or sand for hydraulic fracking. The small-cube covered hopper car for this service, roughly 3,250-cubic-foot capacity, went through a period of extraordinary high demand in 2011 and 2012 but has come under scrutiny as a car type that might be overbuilt or is likely to become overbuilt as the fracking boom matures and stabilizes. In 2011 there were fewer than 12,000 railcars of less than 3,500 cubic feet manufactured in North America. In 2012, there were approximately 14,000 built.

By almost any railcar manufacturing standard, 26,000 cars of any one variety built over a 24-month period is a lot of railcars. But the momentum seems to be decreasing. In the most recent story by Railway Age of the Railway Supply Institute’s projections

44

Railway age

December 2013

of railcar orders and backlogs, covered hopper cars have the second largest backlog after tank cars for a total backlog of 4,154. That number is for covered hopper cars of all cubic capacities and commodities. Obviously, there is a slowdown from the peak in 20112012. What’s the real story on small-cube covered hopper cars: overbuilt or ongoing demand?

Here are a few reasons why cars for hauling sand might be considered overbuilt: The small-cube covered hopper fleet has an average age that is lower than many other car types. The majority of covered hoppers cars of less than 4,000 cubic-foot-capacity are 286K GRL (gross rail load) and built in the past 10 years. (At the end of 2012,

Current fears about overbuilding seem exaggerated today. there were 69,000 covered hopper cars of 4,000 cubic feet or less in the national fleet.) While 25% of the fleet is more than 30 years old, recent production has steadily decreased the average age of the small-cube covered hopper fleet. Lessors interviewed for this article indicate that fair-marketvalue operating lease rates for small-cube hoppers could be interpreted as suggesting a weakening market. Full service lease rates today are off their highs from 2011/2012 by 30% (think from $700 per car per month to maybe $500 today). Market data may indicate that with natural gas pricing still at fairly low levels ($3.50/ BTU recently), demand for sand—a key requirement in hydraulic fracking—may be tapering.

On the other side, here are a few reasons why the market for small-cube covered hoppers still has legs.

Replacement opportunities exist anywhere there is a group of cars older than 30 years. There are 15,000-plus cars of less than 4,000 cubic-foot capacity 30 years or older. Recently the number of drilling rigs for oil and natural gas in the U.S. and in the Gulf of Mexico has decreased slightly.

However, the number of wells per rig and the number of wells being drilled per month are increasing.

While I won’t claim to be an expert on horizontal drilling, I do know that more wells mean more demand for sand that is integral to the fracking process. More sand is being used at the well head to promote improved fracking conductivity.

Demand for sand and the supply of natural gas are projected to grow for at least the next five years. Demand for sand will not be impacted by the installation of pipelines for moving crude.

This separates sand from the concerns of many CBR investors regarding tank cars. Sand hauls are not short hauls.

Most fracking sand is sourced from the upper Midwest. Other than for Bakken drill sites, one-way sand hauls often exceed 1,000 miles. Last, cement pricing is improving, adding demand for cars. All these factors support longterm car demand.

The bottom line? Ongoing fracking opportunities should continue to foster demand for small-cube covered hoppers. Current fears about overbuilding seem exaggerated today. While a 24-month/26,000-car build is not likely and not on the horizon, parties looking at investment in this asset type today can take comfort from the longterm positive trends that support investment and growth in this market.

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He’ll tell you that he simply saved the best for last.

Lee Barrington’s past thirteen years with ORX may pale in comparison to a lifetime of professional excellence and personal growth. But he’d say different.

There’s over a half-century of metallurgical experience driving this car – thirty years of which have been spent as a Quality Assurance expert seeing to it the exacting specifications of customers meet and exceed industry certification standards. For every one of those years and more, she’s been by his side – since 1957, in fact. That’s five states, two professional degrees, four children, twelve grandchildren and ten great grandchildren, if you’re keeping score.

ORXpertise

Lee Barrington Quality Assurance Director

www.ORXrail.com | 814.684.8484