January 2016 Railway Age

RailwayAge

January 2016 | www.railwayage.com

Serving the railway industry since 1856

BNSF’s Carl Ice

Railroader of the Year PASSENGER RAILCAR MARKET AT-A-GLANCE

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RailwayAge

january 2016

visit us at www.railwayage.com Features Railroader of the Year

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Passenger Rail Outlook

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News/Columns From the Editor

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Update

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Watching Washington

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Financial Edge

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Departments Industry Indicators

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Industry Outlook

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Market

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People

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100 Years Ago

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Meetings

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Products

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Advertising Index

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Classified

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On the Cover BNSF President and CEO Carl Ice is Railway Age’s 53rd Railroader of the Year.

Photo: BNSF

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January 2016 Railway Age 1

From the Editor William C. Vantuono

Editorial and Executive Offices Simmons-Boardman Publishing Corp.

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The best job in railroading

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arl Ice, BNSF Railway President and CEO and our 53rd Railroader of the Year (cover story, p. 24), is an engineer by education and training and brings to his position what BNSF Executive Chairman Matt Rose (our 47th Railroader of the Year) calls “a rigid, disciplined approach that engineers tend to bring to problem-solving.”

Rose’s comments on his successor came during an interview with Railway Age Contributing Editor Larry Kaufman for this issue (p. 36). “We worked so closely that we began to complete each others’ sentences,” Rose told Kaufman. In the symbiotic relationship that Ice and Rose cultivated, “Carl was a right hand for six of the 13 years we worked together,” Rose said.

Carl Ice, a 1979 graduate of Kansas State University College of Engineering, began his railroading career with Santa Fe Railway in the Industrial Engineering department immediately after college, following summer stints as an intern. He’s done a variety of things at Santa Fe and BNSF, in various departments—Operations, Finance, Mechanical and Information Systems, to name a few.

Matt Rose has called chief operations officers “the key to this industry. Every morning, they get up and see what they’re facing, in terms of the day-to-day operation, but longer-term, they have the incredible responsibility of the capital plan, which is really the lifeblood of the railroad. Being able to marry those two, dealing with the short-term reality, as well as setting the agenda for the longer term, isn’t easy.”

This is what Ice does very well at BNSF. Blending his operating experience with his engineering mindset has worked well to propel him to what is really an enviable position.

The presidency of BNSF is indeed an enviable position, probably the best job in railroading. Think of it this way: BNSF is a private company with one shareholder— Warren Buffett—who doesn’t meddle in day-to-day operations and who genuinely

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appreciates and believes in the company and the industry in which he has invested. Carl Ice doesn’t have to stand in front of financial analysts four times a year and justify every capital dollar, answering questions from people who all too often can’t see beyond the next quarter’s projections.

Matt Rose knew this when he enthusiastically embraced Warren Buffett’s offer to become BNSF’s sole shareholder. Carl Ice and his management team—indeed, every BNSF employee—is reaping the rewards of this landmark transaction. In terms of capital investment, BNSF has been boldly and confidently going where no railroad has gone before. One need only look at the results.

It has often been said in jest that Warren Buffett visits BNSF once a year, sits down with senior management, pulls out his checkbook, and asks, “How much do you folks need this year?” An exaggeration, of course, but probably not too far from the truth. What probably occurs is something more like this: Buffett says, “OK, you people know what you’re doing. You know how and where to invest capital where it will have the most impact. You know the business environment. Let’s talk about what you want to do, and how much it will take to accomplish your goals.”

Like I said, probably the best job in railroading.

Can you say the same about hedge fund kings whose principal motivation is acquiring wealth? Probably not. That’s all I’ll say on that subject, for now. In the meantime, I suggest that people of this persuasion read Leo Tolstoy’s insightful short story, “How Much Land Does a Man Need?”

How much railroad does a shipper need?

How about a 70-mph double-track speedway stretching from Chicago to L.A., more than 2,000 miles all the way? Or a northern corridor that just got more than $1 billion in capacity expansion? Thanks, Warren. Thanks, Matt. And oh yes, thanks, Carl. Keep up the good work.

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Industry Indicators TRAFFIC ORIGINATED CARLOADS

SHORT LINE AND REGIONAL TRAFFIC INDEX FOUR WEEKS ENDING NOV. 28, 2015

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 Products Waste & Nonferrous Scrap All Other Carloads Total U.S. CarLoadS

NOV. ’15 85,482 3,331 36,969 24,767 115,805 49,973 369,459 5,502 11,897 22,614 21,647 14,667 31,591 9,972 70,265 86,222 17,638 28,351 13,175 22,278 1,041,605

NOV. ’14 88,586 3,911 39,323 24,734 115,780 62,543 448,257 6,211 12,479 25,524 31,703 15,217 40,140 15,174 67,123 89,874 16,495 31,020 13,007 16,763 1,161,864

% CHANGE -3.5% -14.8% -6.0% 0.1% 0.0% -20.1% -17.6% -11.4% -4.7% -3.9% -31.7% -3.6% -21.3% -34.3% 4.7% -4.1% 6.9% -8.6% 1.3% 32.9% -10.4%

297,617

332,450

-10.5%

1,339,222

1,494,314

-10.4%

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

COMBINED U.S./CANADA RR INTERMODAL

FOUR WEEKS ENDING NOV. 28, 2015

MAJOR U.S. RAILROADS

by Commodity TRAILERS CONTAINERS TOTAL UNITS

NOV. ’15 100,694 923,468 1,024,162

NOV. ’14 119,580 915,410 1,034,990

% CHANGE -15.8% 0.9% -1.0%

4,736 231,652 236,388

7,187 216,032 223,219

-34.1% 7.2% 5.9%

105,430 1,155,120 1,260,550

126,767 1,131,442 1,258,209

-16.8% 2.1% 0.2%

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 9.1% -11.5% 1.2% 2.7% -1.0% 13.7% 9.7% -31.3% -24.6% -10.9% 1.5% 15.0% 12.5% 3.0% 7.0% -9.5% -7.1%

NOV. 2015 - 326,535 NOV. 2014 - 331,740 300,000 310,000 320,000 330,000 340,000 350,000 360,000 370,000 380,000 390,000 Copyright © 2015 All rights reserved.

Railroad employment, Class I linehaul carriers, november 2015 (% change from november 2014)

CANADIAN RAILROADS TRAILERS CONTAINERS TOTAL UNITS

ORIGINATED NOV. ’14 39,767 21,995 27,233 10,289 25,954 5,677 8,039 4,726 18,048 8,636 2,403 1,629 15,635 11,801 39,328 9,108 81,472

TOTAL CARLOADS, MONTH 2015 vs. 2014

CANADIAN RAILROADS ALL Commodities

ORIGINATED NOV. ’15 43,374 19,473 27,565 10,563 25,693 6,454 8,821 3,246 13,607 7,698 2,439 1,873 17,597 12,154 42,081 8,247 75,650

BY Commodity

Transportation (train and engine) 65,526 (-7.83%)

Executives, Officials, and Staff Assistants 9,609 (-3.90%)

Professional and Administrative 14,280 0.22%

Total employees: 164,241 % change from nov. 2014: (-3.30%) Transportation (other than train & engine) 6,613 (-1.28%)

Maintenance of Equipment and Stores 30,585 0.36%

Maintenanceof-Way and Structures 37,628 0.79%

Source: Surface Transportation Board

class I employment shows no real sign of growth Figures released by the STB show Class I total railroad employment dropped 3.30% in November 2015, measured against November 2014.

Three categories out of six showed signs of very mild growth, with Maintenance-of-Way and Structures rising the most at a mere 0.79%.

The remaining three categories all took a hit, with Transportation (train and engine) dropping the most at 7.83%, followed by Transportation (other than train & engine), which dropped 1.28%, compared to 2014.

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Industry Outlook Greenbrier thinks outside the tank; drums up business

The Greenbrier Companies, Inc. recently announced that, since Sept. 1, 2015, the beginning of its fiscal year, it has received orders for approximately 1,800 railcar units valued at nearly $170 million.

The orders cover a range of railcar types, including motor vehicle-carrying railcars, boxcars, hi-cube covered hoppers, and non-energy tank cars for the North American and European markets. Of the 1,800 units ordered, 500 units were received during the first quarter ended Nov. 30, 2015 and 1,300 units were received subsequent to the quarter’s end. In addition, 200 units represent a change in the car-

type mix of a previously announced large order for which the overall value of the entire order remains unchanged. “Certain orders are subject to customary documentation and completion of terms. A portion of the orders reflect an assumed product mix; the exact product mix will be determined in the future, which may impact the dollar amount of backlog,” Greenbrier said.

Additionally, Greenbrier reaffirmed guidance for FY2016, including deliveries of 20,000 to 22,500 units, revenue exceeding $2.8 billion, and diluted EPS in the range of $5.65 to $6.15.

Wall Street analyst Cowen and Company on Dec. 14, 2015 initiated research coverage of Greenbrier with an Outperform rating and a $41 share price target. Cown and Cowen and Company’s Matt Elkott expects Greenbrier (GBX) “to make strategic adjustments to position itself well amidst changing railcar dynamics, potentially through acquisitions.”

Elkott, a colleague of Cowen Managing Director and Railway Age Wall Street Contributing Editor Jason Seidl, says that Cowen’s backlog forecast is “pillared on an extensive demand study and collaboration with Cowen research teams” and “calls for a prolonged but not precipitous contraction, to which GBX shares have been oversold, in our opinion.”

“We are initiating research coverage of GBX with an Outperform rating and a $41 target,” said Elkott. “The company’s 2009 entry into the tank car market earned it a ticket on the crude-by-rail (CBR) train, and we now expect GBX to shift some lines toward boxcars, where replacement demand is on the rise, and to establish presence in plastic pellet [covered hoppers], an effort that could be boosted by a potential acquisition.”

Survey: Lack of support for potential CP-NS merger About 71% of rail shippers surveyed by Cowen and Company do not support a merger between Canadian Pacific (CP) and Norfolk Southern (NS), even though opposition to a Class I merger per se has dropped, the company reported.

“With CP remaining committed to a deal despite NS’s rejection, we believe CP shares could come under pressure in the near-to-intermediate term, while shares of NS, CSX, and Kansas City Southern (KCS) could outperform peers,” said Cowen and Company Managing Director and Railway Age Wall Street Contributing Editor Jason Seidl.

In this special-edition, mergerspecific rail shipper survey, about 59% 6

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of shippers said they are opposed to a Class I merger, compared to 58% in the 3Q15 Rail Shipper Survey, which in turn represented a decline in the number of opponents from the 70% recorded in the 2Q15 survey and the 76% in the 1Q15 survey. However, when it came to a specific CP-NS merger, a strong 71% majority of shippers said they would not support a CP-NS merger; 16% of shippers appear to be open to considering such a deal; while 13% noted they would support the combination. “As such, a sizable minority of shippers may be in support of a Class I merger, just not between CP and NS,” Seidl said. “A combination between a western U.S Class I and an

eastern U.S. Class I may make more sense to some.”

Of the shippers who said they would not support a CP-NS merger, 35% attributed their stance to a belief that pricing would go higher as a result.

About 31% said they feared this would lead to other mergers/fewer options, and 25% believed service would be negatively impacted. The remaining 9% cited “other” reasons. Of the shippers who said they would support a CP-NS merger, 38% attributed their stance to the potential of more open access that could come with such a merger. Another 38% said they believed service would improve, and 25% cited “other” reasons.

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Congratulations to the Railway Measurement Systems and Services team on

Market

First MP54AC testing on GO Transit GO Transit’s first MP54AC Tier 4-compliant diesel-electric locomotive from the MotivePower Inc. (MPI) Division of Wabtec has been delivered and underwent testing on the weekend of Dec. 12-13, 2015. No. 47 is part of a $4 million order for 11 MP54ACs announced in 2012. In 2013, GO Transit sent one locomotive from its existing MPI-built MP40PH-3C fleet of 67 units to Boise, Idaho to be repowered, replacing the existing 16-cylinder EMD 710GB engine with a pair of Cummins 16-cylinder QSK60 engines rated at 2,700 hp each (5,400 hp total).

Worldwide:

Amsted Rail: Has secured a longterm contract with Canadian National Railway (CN) to produce one million wheels for use at its Transcona mechanical facility. The new wheels will be produced over the next 10 years at Griffin Wheel Company in Winnipeg.

B Logistics (Belgium): Has signed a 10-year full-service lease agreement with Railpool for 26 Bombardier Traxx MS multisystem electric locomotives to support its international operations.

Duos Technologies Group, Inc.: Has been awarded a new contract from a major railroad operator for a complete train imaging system. The system’s design in based on Duos Technologies’ latest innovation, the proprietary Railcar Inspection Portal (rip™) technology.

Central Suburban Passenger Company (Russia): Has awarded Transmashholding subsidiary Demikhovsky Machine Building Plant (DMZ) a contract to supply 35 class ED4M-500 EMUs, which are being procured as part of a Rubles 72 billion ($US 1 billion) project to introduce passenger services on Moscow’s Ring Line.

Wabtec Corporation: Has signed contracts worth about $45 million to provide equipment and services for a Positive Train Control (PTC) system for Metra, the Northeast Illinois commuter rail system. The contracts are with Metra and Parsons Transportation Group (PTG).

Dedicated Freight Corridor Corporation of India Limited: Has awarded two Hitachi-led consortia design-build contracts worth a total of Rs 23.9 billion ($US 450.9 million) to supply signaling and telecommunications systems for the Western Dedicated Freight Corridor (DFC).

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Railway Age January 2016

Eversholt Rail: Has awarded Vossloh Kiepe a contract to equip 30 fourcar class 321 regional EMUs dating from the late 1980s with AC traction motors, new auxiliary systems and new braking systems.

Exim Bank (China): Has agreed to provide $1.5 billion to fund 85% of the cost of extending the 609-km Mombasa–Nairobi standard-gauge line currently under construction 120 km north to Naivasha, while the Kenya government will fund the remaining 15%.

Indian Railways: Has issued a call for domestic tenders for the supply of a fleet of 14,777 freight cars of six different types.

Newag: Has been awarded a five-year framework contract by Italian regional operator South East Railways (FSE) for up to 15 standard gauge EMUs, with an initial €20.2 million order for five trains.

Stephen C. Host

North America

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Update Supply Briefs Jacobs Engineering acquires J.L. Patterson JLP is a consulting and professional services engineering firm specializing in rail planning, environmental permitting, design and construction management.

It provides services to numerous public transit agencies and is a major provider of professional consulting services to Class I railroads across the U.S. Jacqueline Patterson, president of JLP, founded the company in 1990 as a certified Women Business Enterprise/Disadvantaged Business Enterprise.

Jacobs offers full -service rail consulting, providing all aspects of rail planning, environmental, design and construction services to most of the public and private railroads in the U.S.

Hatch Mott MacDonald to be split in two The Hatch Mott MacDonald (HMM) joint venture between Hatch and Mott MacDonald will be separated and integrated into the parent companies by early 2016.

HMM’s Canada business will become part of Hatch, while its U.S. business and Pipelines business will join Mott MacDonald.

Hatch says the move to integrate HMM’s Canadian operation will add nearly 1,000 new engineers and infrastructure professionals to Hatch’s Canadian and U.S. offices.

Nick DeNichilo, HMM’s CEO, will continue to lead the HMM business until the separation is concluded. At that point, DeNichilo will become President and CEO of Mott MacDonald in North America; Hatch Infrastructure in North America will be led by Michael Schatz, Managing Director of Infrastructure; and Hatch Board Director Martin Doble will remain global lead for Hatch Infrastructure.

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Railway Age January 2016

Canada’s Trudeau may have final say on CP-NS merger

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ail industry cogitation focuses so far on Canadian Pacific’s prospects for securing STB approval for its attempt to take over Norfolk Southern. Unremarked has been the less predictable, but equally essential, attitude of Canada’s regulators to a deal that would see one of the country’s two Class I’s disappear into the alphabet soup of American megamergers.

Just how would Canada react to the notion of an NSCP reporting mark on the flanks of locomotives running over tracks largely financed by public funds back in the 1800s and still revered as the “National Dream”? Railway Age asked the office of Canadian Minister of Transport Marc Garneau to spell out the regulatory hurdles the merger proposal would have to clear, since CP is a Canadian company subject to Canadian law governing business combinations generally, and those in the transportation sector particularly.

Garneau’s Media Officer, Julie-Anne Codaire, responded with the process a CP-NS merger application would face in Canada: “Under the Competition Act, mergers of all sizes and in all sectors of the economy are potentially subject to review by the Commissioner of Competition. Before proceeding with a merger, parties are also required to notify the Commissioner if the target’s assets in Canada or revenues from sales in or from Canada exceed C$86 million, and the combined Canadian assets or revenues of the parties, from or into Canada, exceed C$400 million. If the Competition Act’s thresholds are met, the parties must also notify the Minister of Transport of the proposed transaction under the Canada Transportation Act. They must provide information regarding the public interest as it relates to national transportation (for example, an assessment of the impacts on communities and users of the transportation system). If the Minister of

Transport believes that the proposed transaction raises issues with respect to the public interest as it relates to transportation, he may direct the Canadian Transportation Agency or another person to examine those issues, and the transaction cannot proceed without Governor in Council approval. Given that the proposal is in its early stages, we are not in a position to comment on whether a review of this merger will take place under the Canada Transportation Act.” The key phrase is that no transaction could proceed “without Governor in Council approval.” The Governor in Council is Canada’ supreme authority, albeit an entirely fictitious one, the titular representative of Queen Elizabeth in Canada, which, maddeningly to some, is still constitutionally a monarchy under the British crown.

The Governor-General is in truth merely Canada’s ceremonial head of state and never, ever meets with his “council” to decide anything. Governor in Council is a euphemism for the federal cabinet, composed of elected members of parliament chosen and tightly managed by the Prime Minister.

The reality is that a CP-NS merger would need the personal approval of Prime Minister Justin Trudeau. CP believes that regulatory authorities in both countries would bless the union because of its business sense.

—David Thomas, Canadian Contributing Editor

Congratulations

Carl Ice

BNSF President and CEO

2016 Railroader of the Year

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Update S. 808 substantially changes Surface Transportation Board

Senators John Thune (R-S.D) (pictured above) and Bill Nelson (D-Fla.) co-sponsored S. 808.

The U.S. House of Representatives on Dec. 10, 2015 passed S. 808, the Surface Transportation Board (STB) Reauthorization Act of 2015, which among other provisions, will increase the number of STB members from three to five, improving STB’s structure and decision-making processes by allowing, with proper disclosure, STB members to speak with one another about cases on which the Board is ruling. President Obama has signed the legislation into law.

Sen. John Thune (R-S.D.), Chairman of the Senate Commerce, Science and Transportation Committee and Sen. Bill Nelson (D-Fla.), the ranking member of the Commerce Committee, introduced the bill in early 2015. The Commerce Committee approved the bill by voice vote on March 25, 2015; the full Senate passed it by unanimous consent on June 19, 2015.

S. 808 improves the STB’s current dispute resolution process by setting timelines for rate reviews and expanding voluntary arbitration procedures to address both rate and service disputes.

It also ensures that the STB has the authority to proactively resolve problems before they escalate into larger disputes by providing the STB with the ability to initiate investiga12

Railway Age January 2016

tions on matters other than rate cases.

The Association of American Railroads (AAR) issued a statement in support of S. 808’s passage: “In reauthorizing the Surface Transportation Board for the first time since the agency was created, Congress has clearly stated the critical need for railroads to be able to earn the revenues to build, maintain and further modernize the nation’s 140,000-mile privately owned rail network. These investments are needed to meet current and future freight transportation demands,” said AAR President and CEO Ed Hamberger. “This legislation strikes the right balance of preserving a market-based structure for shippers and railroads, while also providing commonsense process improvements that will allow the STB to work more efficiently.”

“The industry invests revenue it earns, not government funding, to grow the nation’s rail system and respond to the shipping needs of customers, large and small,” added

resolving them when they do occur, is at the heart of this effort to make the STB work better.”

What could happen next, in terms of having five STB members? “Our sitting Democrat President will have opportunity to make three nominations to the five-member STB in his final year of office—Republican Ann Begeman’s renomination or her successor, plus one Democrat and one Republican to fill the new seats,” observed Railway Age Capitol Hill Contributing Editor Frank Wilner.

“Perhaps, as two will be Republicans, the Senate will confirm them. Yet, I wonder if we are going to see three vacant seats pending a new White House occupant in 2017. Another possibility: If there are no nominations/confirmations, and a Republican is elected President, that President would have the ability to nominate three Republicans along with naming a new chairperson. Still another possibility: If there are no nominations/ confirmation, no matter the party

Most significant is that the legislation increases the number of STB members from three to five.

Hamberger. “Congress has reaffirmed balanced economic regulations that allow market-based competition to establish rate and service standards, with a regulatory safety net available to rail customers.”

Hamberger noted that since partial deregulation under the Staggers Rail Act in 1980, the freight rail industry has invested more than $600 billion of capital in infrastructure and equipment.

“Enacting this legislation will make the Surface Transportation Board more accountable and effective in addressing rail service and other disputes,” said Sen. Thune. “Heading off problems between rail customers and carriers whenever possible, and quickly

of the new President, that President would have the ability to nominate all five STB members—two new seats and successors to all three current STB members—plus name a chairman.

The STB is the federal regulatory body responsible for economic oversight of the nation’s freight rail system. Run by a three-member bipartisan board, the STB has regulatory jurisdiction over railroad rates, mergers, line acquisitions, new railline construction, line abandonment, and other rail issues. The STB was created by Congress in 1996 as the successor to the Interstate Commerce Commission. Since that time, the STB had not been reauthorized or substantively reformed.

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Update Canadian Pacific, TCRC reach arbitrated agreement

The CP, TCRC agreement will expire on Dec. 31, 2017.

our labor relations team,” said CP President and Chief Operating Officer Keith Creel. “This is a great deal for CP,

its employees, customers and shareholders, and a step in the right direction for all stakeholders.”

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Railway Age January 2016

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After months of negotiations, Canadian Pacific (CP) last month reached an arbitration decision and agreement with the Teamsters Canada Rail Conference (TCRC), the union representing CP’s Canadian conductors and locomotive engineers.

CP and the TCRC went into government mandated arbitration on May 15, 2015 and had been “working diligently to come to a mutually beneficial agreement ever since.” The agreement will expire Dec. 31, 2017.

CP said it “will continue to push TCRC leadership on a model that allows it to properly schedule crews, provide mandatory rest options and maintain the highest standards of safe railroading.”

“I’d like to thank the honorable George W. Adams for his hard work in arbitrating this agreement and recognize the dedication and tireless hours of

AAR certifies Vertex Railcar Corp. Wilmington facility Vertex Railcar Corp. of Wilmington, N.C., has achieved two certifications from the Association of American Railroads (AAR). Following official site audits this fall, AAR representatives certified that the Vertex facility in Wilmington meets AAR Quality Assurance (M-1003) specification and awarded the S-2034 Car Builder Certification.

The M-1003 Quality Assurance Specification is required for all suppliers to the rail industry. “M-1003 certification indicates that Vertex has the appropriate quality management system in place to massproduce quality railcars,” Vertex said.

Additionally, all freight car manufacturers must receive the S-2034 Car Builder Certification, “which indicates that Vertex construction processes and practices meet the appropriate specifications,” the company said.

In the past 12 months, Vertex has entered into a joint partnership with China South Locomotive & Rolling Stock Corporation Limited (CSR), one of the largest railcar manufacturers in the world; completed one of three production bays at its Wilmington facility; received the two AAR certifications; hired nearly 200 people; built its first hopper cars; and completed a rail spur to move completed cars out of the facility.

“This year was a big year for Vertex, one of growth and opportunity,” said Vertex CEO Donald Croteau. “We transformed an abandoned manufacturing facility into a state-of-the-art railcar manufacturing operation, and produced our first railcars in North Carolina. We achieved our most critical goal for 2015—certification to proceed with mass production of freight cars at Vertex in Wilmington.”

Vertex said it “continues to scale operations and outfit its facility as the company pursues certifications to build additional types of railcars. With current orders totaling more than 3,000 cars, the Vertex team is optimizing its hopper car manufacturing operation with the goal of producing three to four cars per day in early 2016. Hiring will continue at Vertex throughout 2016 as the company takes orders and works toward its overall goal of producing 8,000 cars per year.”

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WWW.GBWSERVICES.COM January 2016 Railway Age 15

Update Jason Seidl: “A tepid macroeconomic climate” for freight Citing a “tepid macroeconomic climate that is impacting all freight transport providers, including truckers,” Cowen and Co. Managing Director and Railway Age Wall Street Contributing Editor Jason Seidl is lowering estimates and reducing price targets well before the railroads report fourth-quarter and full-year 2015 financials. Cowen revised fourth-quarter 2015 and full-year 2016 earnings estimates downwards for most railroads, truckers and 3PLs (thirdparty logistics providers).

“Our changes reflect lower volumes than we had previously expected for the railroads,” Seidl said. “We are lowering our estimates and revising our price targets for railroads largely due to weakness in traffic volumes quarter-to-date. Total North American Class I traffic is down 6% through Week 50.The key culprits include coal (15% of traffic), down 15% QTD;

16

Railway Age January 2016

metallic ores and minerals (4% of traffic), down 28%; non-metallic minerals (6% of traffic), down 13%; chemicals (11% of traffic, including crude oil), down 6%; and intermodal (45% of traffic), down 2%.”

Seidl said he expects railroad results and outlooks “to be broadly weaker than previously expected when they report 4Q earnings. Hence, stocks could come under pressure. However, we would be buyers of higher quality names like Canadian Pacific, CN and Genesee & Wyoming. Additionally, we expect Norfolk Southern to hold in better than its peers given the acquisition premium built into the stock that is unlikely to go away in the near future.”

“The Canadian carriers have half the exposure to coal relative to U.S. carriers and could continue to benefit from currency translations,” Seidl noted.

“GWR’s external growth prospects could be boosted by an active acquisition environment, including at the international level, while the new share repurchase program should support the stock, absent significant acquisitions.”

“We believe most railroads will again temper expectations, due in part to the current energy environment and its effects on shipments of coal and petroleum products as well as the impact of a strong U.S. dollar on exports and industrial products demand,” Seidl said. “On the bright side, we expect relatively positive commentary on consumer demand, automotive shipments, and housing products. All in all, we expect Wall Street earnings expectations for 2016 Class I railroad EPS growth should come down slightly from 8% vs. our new 7% estimate.”

Stadler Rail to start U.S. manufacturing in Utah New Jersey-based Stadler U.S. Inc., a subsidiary of Bussnang, Switzerlandbased Stadler Rail Group, will open a temporary manufacturing and assembly facility in Utah as part of the first phase of its 15-year plan to expand North American manufacturing. Stadler Rail is currently selecting a U.S. manufacturing location. Utah, is in the running for the permanent location.

Stadler U.S. will be manufacturing DMU (diesel multiple-unit) vehicles for the Fort Worth Transportation Authority TEXRail project at the Utah

location. Stadler Rail has indicated that if it chooses Utah as a permanent location for its North American manufacturing, the company’s expansion would create up to 1,000 jobs over the next 15 years. The total wages in aggregate are required to exceed 110% of the county average wage.

The projected new state wages over the life of the agreement are then expected to be approximately $576 million.

Projected new state tax revenues, as a result of corporate, payroll and sales taxes, would be an estimated $40.3

million over 15 years. The project could generate up to $30 million in capital investment.

If Stadler Rail selects Utah for its permanent location, the company may earn up to 25% of the new state taxes it will pay over the 15-year life of the agreement in the form of a post-performance incentive. As part of the proposed contract with Stadler Rail, the Utah Governor’s Office of Economic Development (GOED) Board of Directors has approved a postperformance incentive of up to $10.1

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Update million. This amount includes both an Economic Development Tax Increment Finance (EDTIF) tax credit rebate and an Industrial Assistance Fund (IAF) grant of $500,000. The first half of the IAF grant is for necessary rail-related upgrades, with the other half of the funding available for facility upgrades upon permanent selection of the Utah

location. Once Stadler Rail enters a contract with the state, it will be able to earn a portion of the total tax credit rebate each year that it meets the criteria of the contract.

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Railway Age January 2016

Director of the Utah GOED. “Stadler Rail is a leading company in global manufacturing, and I believe they’ll quickly see that Utah has everything they need to effectively serve the North American market. I applaud the GOED Board of Directors. for their proactive decisions on this project and look forward to building a strong relationship with this impressive company.”

“We are delighted that Utah is able to provide such a great location for the final assembly of our trains for the TEXRail order,” said Peter Spuhler, owner and CEO of Stadler Rail Group.

“Conditions here are ideal, and we are confident that this represents important progress in our U.S. business. The two-phase plan enables us to manufacture trains for the TEXRail order under optimum conditions and, based on orders received, to extend and further expand our activities in the U.S.” “The Utah facilities meet our requirements for fulfilling the TEXRail order and any further options,” said Martin Ritter, CEO of Stadler U.S. “I am delighted to have the chance to establish Stadler’s initial U.S. site here. In our cooperation with the authorities I have witnessed what is, in my view, exemplary promotion of economic development. This really makes the entry into the U.S. market much easier for us.”

“I’m very excited to see Utah selected as the temporary location for Stadler’s new manufacturing operation,” said Jeff Edwards, president and CEO of the Economic Development Corporation of Utah. “From our initial conversation with the company more than a year ago, it was obvious they are a special organization. I’d like to commend all of ‘Team Utah’ for working together to make this announcement possible.”

Stadler Rail Group has manufacturing locations in Switzerland Germany, Poland, Hungary, the Czech Republic, Italy, Austria, the Netherlands, Belarus, Algeria and the U.S. Its best-known vehicles are the GTW, Regio-Shuttle RS1, FLIRT, KISS and EC250 in the main line railway segment, and the Variobahn and Tango in the streetcar segment.

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Watching Washington Frank n. wilner

Centrist approach may quiet STB debate

T

he critical takeaway from enactment in December of the Surface Transportation Board Reauthorization Act, S.808, is that, absent headline-capturing abuse of captive shippers by railroads, it is unlikely Congress will refocus anytime soon on diluting railroad market power.

PAC-rich railroads could have stopped this legislation as they blocked for more than three decades all previous attempts by captive shippers to tilt the regulatory playing field.

It was the centrist approach by Senate Commerce Committee Chairman John Thune (R-S.Dak.) and the committee’s senior Democrat, Florida’s Bill Nelson, that made it propitious for railroads to take this deal and leave for the dustbin of history more draconian expeditions

by Thune’s Commerce Committee predecessor, Jay Rockefeller (D-W. Va.), and similarly now-retired Senate Antitrust Subcommittee Chairman Herb Kohl (D-Wis.), both of whom sourly embraced a sock-it-to-therailroads brashness.

Thune, formerly South Dakota’s railroad director and a lobbyist for Dakota, Minnesota & Eastern Railroad, possesses a keen perception of what is palatable to railroads. That he represents the home state of the STB’s lone Republican, Ann Begeman, was of notable coincidence as railroads stood aside to permit the bill to pass the Senate by unanimous consent in June and then the House by voice vote.

Hardly a railroad lackey, Thune vocalized that the acquisition premium paid

by Berkshire Hathaway for BNSF not qualify for a return on investment financed by higher freight rates; that no other regulated industry is permitted to glom onto acquisition premiums as a motive to raise rates.

Moreover, Thune’s constituency

20

Railway Age

January 2016

teems with rail-captive grain shippers, ethanol producers and coal-using electric utilities to whom he said, “We’ve got to provide an expedited way for shippers to have their grievances heard and settled … in a less expensive way [with] an empowered, more robust STB.” The legislation delivers on the advertised.

Politics rarely drives rail regulatory decisions. The backgrounds, experience and perceptions of regulators does.

Unlike Rockefeller, Thune avoided outcome-determinative provisions such as elevating shipper priorities to an equivalent level in the statute as rail revenue adequacy; shifting to railroads the burden of proof in rate challenges; or urging the STB consider tworailroad competition at sole-served terminals (open access). Unlike Kohl, Thune avoided language handing the Justice Department overlapping antitrust authority over railroads or eliminating such immunity for collective ratemaking.

The most consequential provision of the new law is enlargement of the STB from three to five members, creating significant uncertainty. While politics rarely drives rail regulatory decisions, the backgrounds, experience and perceptions of regulators does. There hasn’t been a regulator with robust shipper bonds in generations. The

addition of regulators with chemicals, coal or grain ties could inject, in a historically rail-friendly regulatory agency, a viciousness even Rockefeller hadn’t envisioned.

Adding to this trepidation is that the new law permits a majority of STB members to converse privately without violating Government in Sunshine laws.

So even a single captive-shipper partisan could influence peers.

The STB now consists of two Democrats (Chairman Dan Elliott and Deb Miller) and Republican Begeman, whose term expired Dec. 31. By statute, if not renominated and reconfirmed, she may remain up to 12 more months or until a successor is confirmed. Thus, the Senate soon could be confirming two new Republicans and one new Democrat. But if the seats remain open through November, and a Republican is elected President, three of the five seats would be Republican.

This is a powerful reason for Senate Republicans to avoid a confirmation vote in 2016.

Another significant provision requires establishment of expedited methods for determining rate reasonableness, which some shippers say is problematic “so long as the STB adheres to its view that the incredibly complex stand-alone cost methodology is the only economically appropriate method.” Congress, meanwhile, remains stingy with funding, boosting the current STB budget by only $1.4 million to $32.75 million for fiscal 2016, barely covering the costs associated with two new board members.

In press releases, captive shippers loudly applauded the new law, yet railroads are displaying an Alfred E. Neuman “What, me worry?” smile. Said one railroad captive-shipper attorney, “If railroads didn’t fight this bill, they must have good reason.”

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SUPPorTING orGANIzATIoN:

Railroader of the Year

By CAROLINA WORRELL, Managing Editor

Carl Ice (right) greets Major General Lee Tafanelli, Adjutant General of Kansas, during BNSF’s Holiday Express train excursion, which honors military families.

bnsf’s Carl Ice

R

ailway Age’s 53rd Railroader of the Year, BNSF Railway President and CEO Carl Ice, is a career railroader who leads a Class I railroad that has had the industry’s largest capital expenditure program for several years running. In 2015, BNSF invested more than $6 billion in its network.

Under Ice’s leadership, BNSF continues to make significant investments in four key areas—capacity, locomotives, people and equipment—to ensure future capacity to meet its customer needs. BNSF in 2015 devoted $1.5 billion alone in terminal, line and intermodal expansion and efficiency projects. It can proudly say it operates the industry’s fastest, most reliable intermodal service, the centerpiece of which is the

24 Railway Age January 2016

Chicago-Los Angeles Transcon. Other key capital programs included the completion of more than 65 miles of new second main track on the busiest segments of the railroad’s Northern Corridor. The single-largest component of the capital plan was $2.9 billion for maintaining BNSF’s 33,000 track-miles.

Ice has been CEO and President at Burlington Northern Santa Fe LLC since January 2014. He has been President of BNSF Railway Company since Nov. 1, 2010 and its CEO since Jan. 1, 2014. Prior to that, he served as Chief Operations Officer of BNSF Railway, Senior Vice President of Operations, Vice President-Operations North, and Vice President-Chief Mechanical Officer.

Ice received a degree in engineering in 1979 from Kansas

BNSF/Todd Rundstrom

BNSF’s President and CEO leads a railroad that continuously sets high standards for investment, service quality, profitability and safety.

By William C. Vantuono, Editor-in-Chief

railroader of the year

State University College of Engineering, and began his career in the railroad industry with Santa Fe Railway in the Industrial Engineering department that same year. He later held positions in Operations, Finance and Information Systems. BNSF Executive Chairman and 2010 Railroader of the Year Matt Rose (the subject of an interview with Contributing Editor Larry Kaufman on p. 34), who preceded Ice as CEO, has called chief operations officers “the key to this industry. Every morning, they get up and see what they’re facing, in terms of the day-to-day operation, but longer-term, they have the incredible responsibility of the capital plan, which is really the lifeblood of the railroad. Being able to marry those two, dealing with the short-term reality, as well as setting the agenda for the longer term, isn’t easy.”

Carl Ice took over Matt Rose’s position as CEO when Rose was named Executive Chairman at the end of 2013. In a wide-ranging interview with Railway Age Editor-in-Chief William C. Vantuono, he talked about his career, the railroad he runs and the future of the industry. on behalf of Railway Age. You are our 53rd Railroader of the Year. This award has been given out since 1964, so you’re one of a long line of distinguished people in the industry.

Carl Ice: Well, thank you very much. I’m humbled by the honor and accept on behalf of everyone at BNSF. Railway Age: Carl, congratulations

RA: You’ve been with BNSF and predecessor Santa Fe since the beginning of your career.

CI: That’s correct. I worked as a summer intern while I was still in college at one of our predecessors at Santa Fe. It was about 37 years ago.

RA: What prompted you to join the rail industry?

CI: I was an engineering undergraduate and I thought

it was important to get work experience in jobs related to engineering. Before that, I’d done things like construction and factories during the summertime. That summer, I thought it was important to get that experience. And then I wound up at the railroad. It was an exciting place. It was at a time when things were starting to change. It was 1979 so it was before deregulation, and I saw lots of opportunities for ownership, projects to work on that were mine to solve and mine to do.

I had a great summer and was excited about being able to come back full time once I graduated.

RA: You seem to me to be a real hands-on type of person. At one point in your career, you were chief mechanical officer?

CI: That’s true. I was privileged to lead the mechanical team in 1995. I do enjoy being out on the railroad and spending time with the people. The people that do what they do on the railroad are what makes BNSF the great place that it is, and being out with them and hearing what they’re doing and talking about their challenges is something I really enjoy.

The details matter. There are thousands and thousands of

decisions that get made every day, and all of us work together. So I think all of us have a responsibility to know what’s happening, what’s going on out on the railroad.

After all, we’re in an operating company. We take things from where they are and move them to where they need to be, and to do that you need to have a strong operation.

RA: Let’s talk about the operating side, which I’m sure is a passion of yours. You have 28,000 track-miles. What is the most challenging part of operating a railroad that size?

CI: It’s 28,000 that we own and 33,000 we operate on. It’s hard to pick any one thing. It runs 24 hours a day, every day of the year. There’s no time to reset, so we have to run well and we have to be able to recover, be flexible. We try hard to make sure we plan in a way that we manage both long-term and short-term variables. We have resources in place for our customers and for our growth as we project the future. Then there are still variations from day to day, and having a group of people who know how to attack that who have a plan that can be flexible and make adjustments is very important.

RA: BNSF

has a remarkable intermodal operation. It’s regarded as the fastest, most reliable, most efficient, especially with that jewel of a line, the Transcon between Los Angeles and Chicago. Would you say that seems to be the real growth area for the industry in general, not only for BNSF? CI: Intermodal is a huge growth area; it has been for some time. We have a very powerful intermodal franchise serving the western United States, the central part of the country and going to the Atlantic as well, and we’re proud of that franchise. We think it’s important to fulfill our value of listening to our customers and doing what it takes to meet their expectations, and we do that every day in intermodal.

We have routes that have let us offer service that’s competitive. It’s a growth opportunity because it’s a chance to work on getting trucks off the highway onto the railroad.

We have huge relationships with many large trucking companies where they handle the moves in and out of intermodal facilities. We make the long haul that lets us both do what we do well. Intermodal is, economically, definitely a powerful opportunity for our customers. We can give strong service that’s good for highway congestion.

It works really well for everybody.

RA: That started of course on the Santa Fe, the relationship with J.B. Hunt that got things off the ground.

CI: [Mike] Haverty and Mr. Hunt did of course make that landmark deal. I wasn’t on the train trip, but I was fortunate enough to be involved right after that so I was actually a part of the discussions and the formalizing of all that. It has been a great opportunity to work together to jointly serve his customers, and it has worked very well.

RA: One thing we’ve seen with intermodal is that there seems to be a lot of growth in the domestic area.

January 2016 Railway Age 25

railroader of the year

CI: We have had growth in domestic intermodal. It’s at record levels and is a big growth opportunity. I mentioned our working with Hunt, but we also work with Schneider and Swift. We have a relationship with many large trucking companies. It’s important that we provide a product that works for our customers. That comes back to knowing customers’ expectations, making sure that we get shipments across our railroad consistently and reliably. The trucking companies then do the pickups and deliveries. That gives a good product for our joint customers.

CI: Yes, they have. [For example,] our facility near Kansas City, in Edgerton, was a public/private partnership where we worked with the state of Kansas, which made a contribution that really put us in a position to make the investment faster than we would have otherwise made it. We would have made a significant-enough investment in the facility, but the state was helpful and had foresight for how the facility being built sooner could be helpful. We started it actually during the previous [economic] downturn. It’s come on line and it’s a great facility.

RA: A big part of this has been the terminals constructed within the past 10 or 15 years. BNSF has done a lot of that.

CI: We have opened a number of new intermodal facilities or added to ones we have. That kind of investment is something we think is important. We invest significantly in our railroad to be there for the growth of all of our customers. Railroad capacity is based on how many people we have, how many locomotives, the rolling stock and the infrastructure, our lines and our terminals, and we make investments in all of those to make sure we’re positioned for growth.

RA: There are a lot of public benefits. That’s why you see a lot of public investment in facilities like this.

CI: They create what we call a logistics park that attracts business to the area—large warehouses and other companies.

We see that growing. That’s beneficial for the state, a magnet that can also help with the road structure being built around the facilities. So yes, I believe public policy makers would say it’s a great thing.

RA: Some of the programs are public/private partnerships, the Alameda Corridor, for example. Those have worked well.

26 Railway Age January 2016

RA: Let’s talk a little bit about some of the other commodities. As you well know coal has been soft, but it seems to have been not so soft on BNSF compared to some of the other carriers. Why is that?

BNSF

“It’s important that we provide an intermodal product that works for our customers. That comes back to knowing customers’ expectations, making sure that we get shipments across our railroad consistently and reliably.”

railroader of the year

“That’s the great thing about a railroad network: As we make an investment it benefits the entire railroad. It benefits our whole customer base. So we don’t usually talk about one piece of business to justify investment. They all do.”

RA: The crude oil boom seems to have settled down. Where do you see that going?

28 Railway Age January 2016

CI: A lot of it depends on the price of crude. You are absolutely right—we are down off our highs. Crude oil grew to where it was almost 4% to 5% of our franchise. That was significant: There aren’t that many things that go literally from nothing to 4% or 5 % in five years. At the same time, it’s important to remember that it’s one part of our balanced portfolio business. That’s one of the things that we think is a strength at BNSF, that we have a number of different kinds of businesses that all perform well in different economic conditions. Crude oil has come off of its high by probably in the 30% range, maybe even a little more if you compare peak to peak. That has been because of commodity prices, and that has made it a little-steadier sort of business, but we continue to see a strong future for crude oil. We think over time commodity prices will change, and it’s an opportunity for North American energy independence. That’s an exciting concept to think about. It solves problems of generations.

And we’re proud of our role in moving oil to where it can be refined. We still see it as a strong opportunity.

RA: I recall talking a number of years ago with Matt Rose about crude oil and energy independence. It’s good to see that those things are still in play.

CI: They remain at the forefront of our thinking and planning.

BNSF

CI: Well, for everybody, coal is in a changing time. You know, we see coal for BNSF down from our highs from about 2004 or 2005, when the mines expanded. From that time to now the range of tonnage for years has been 255 to 260 million tons to just short of 300 million tons on our railroad, but most of the time it’s been 270 and 285 million. So last year, we were at about 270 million tons, so we were 10% off our all-time high. But the coal that comes from the Powder River Basin continues to be coal that the utilities prefer. That helps us not be as soft. Last year we believe there was more coal tonnage that we could have moved, so I think that set us up this year for positioning to move near-records again if need be. We do see coal falling for us over the next few years.

Coal, you know, once upon a time was 25% of the revenue for railroads in total. So it can fall by a lot but remain a significant, important commodity. We’re planning and positioning for that. We expect to have parts of our coal franchise that will continue to be strong. We need to be a low-cost provider for that to be the case. As we move forward and have less volume, we’ll figure out other ways to use the facilities that are on the coal routes.

railroader of the year RA: One of the truly impressive aspects of BNSF is the amount of capital investment. It’s unprecedented. We’ve never seen anything like this past few years. 2015’s was about $6 billion. What do you see the next two or three years? Will we continue to see those levels, or maybe a little bit less as more capacity is now in place?

CI: We can see that 2016 will need to be another large year.

We started some projects early so that we get the benefits sooner. We won’t need to continue at that level. The growth of our customer is important to us. You know our business model: Safety is the most important thing we do. After safety, it’s service, and our financials really based on being productive, getting value for what we do, and growing. We need all three of those things. So as we plan our capital, we plan for how much work we have. We take our various lines of business, and the business units work with our operating teams to project what we believe our volume levels will be.

But we also approach it from what I call top down, where we look at our routes, so we know what potential they have.

Our operations team and our business units work together to know the capacity of every part of our railroad, and then we can evaluate what we think the potential is in needing more capacity. That led us to make the $5.5 billion and $6 billion investments.

In fairness to our customers, I have to say we thought we

were behind on a building season, so we worked hard to do a lot to help our customers, to be committed to their growth.

Once we’ve done that, we won’t need to make that level of investment going forward. I would see us falling off in 2016, but it will still be a historically high number. Think about the first time railroads spent $4 billion dollars, and us having exceeded five and six billon. It will still be a strong effort.

Our railroad is in the best shape ever. We often talk about capital and we talk about expansion, and we think expansion is the way to have capacity, but it’s vitally important that the railroad itself is in good shape and that we have good utility.

We could never build enough new railroad to make up for not having the railroad in the best condition it can be.

Our maintenance teams do a great job working with our transportation teams to get windows to work on the railroad, and again, it’s in the best shape it’s ever been. We can see that in our metrics, we can see that being on the railroad.

We go out every month and ride for at least a couple days, somewhere around the railroad. We’ve been doing that for years and years. We’ve been over the whole railroad multiple times, and so when we talk about the condition of the railroad, we know we have credibility, and we’re proud of that.

RA: You’ve invested a lot, for example, in the northern corridor. What are your targeted investments for 2016?

BUILDING EXPECTATIONS Production | Field Welding | Track Geometry Testing | Ground Penetrating Radar | Rail Grinding | Undercutting 30 Railway Age January 2016

railroader of the year CI: We’ll be finishing projects similar to what you’ve seen the past couple of years. We will complete some projects on the northern tier. We also did a tremendous amount of centralized traffic control. As we work through steps of capacity, sidings become longer; then we double-track and enhance the signal system. We did a lot of that across the north. We had three significant segments left on the Chicago/L.A. [Transcon] route. We completed one of those; we’re working on a second one that we’ll finish up this year. Across Nebraska, what would traditionally be thought of as our coal route, there’s a lot of maintenance, as you could imagine, with coal tonnage, and we finished one of those. We’ll be completing the second one this year. It’s really all around the railroad. That’s the great thing about a railroad and its network: As we make an investment it benefits the entire railroad. It benefits our whole customer base. So we don’t usually talk about one piece of business to justify investment. They all do. We plan our work and how much capacity we need, and that benefits everybody. And then we have a railroad that’s better, which is certainly what has happened with BNSF over the past couple of years.

RA: Which leads me to Positive Train Control: Huge task, huge investment, unfunded mandate. You now have the

extension, you have three years to complete it. BNSF has really been a leader in terms of PTC, working diligently even before it was a mandate.

CI: We have worked on PTC for a long time. You could talk about multiple forms of technology we would use that were forerunners to PTC. So it is something we’ve worked on a long time. The whole industry’s worked very hard on PTC, but despite all that hard work it wasn’t something that could get done in the time frame. It’s a “system of systems,” so even as you get the infrastructure done, which is a massive effort, you have to make a significant number of runs to discover the various conditions. We’re in the

“Our maintenance teams do a great job working with transportation to get windows to work on the railroad.” midst of doing that. We have a lot of our infrastructure work done. There is some more still to complete. We look forward to that being done in the relative near term, but the extension is necessary, to make sure that we shake the system out, that we learn what we need to learn. It will remain a difficult task to have everything done, even with the new deadline, but we’re up to it.

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railroader of the year

machine vision technology. This new initiative that seems to be very promising is UAV (Unmanned Aerial Vehicles), which you’re using for looking past the line of sight for track inspections, bridge inspections, things like that. It’s a brand new tool.

CI: We do put a tremendous effort in our technology. We believe technology is something that you deploy for a specific reason and outcome. You mentioned several that we’ve done. Whether those are for performance of our mechanical components or the way we use our detection system around the railroad, we’ve made great advances there.

RA: Predictive maintenance is tied in with CI: Absolutely, and that relates to safety as

that? well. The UAVs are an example of the ways we can enhance inspection of our track condition. What we’ve worked on covers the whole spectrum, whether it’s training or ways we can enhance our training, all the way through things like ground-penetrating radar. With the UAVs, we can gather more data. We can be there without track time. We can enhance processing with computer support, if nothing else to make sure that we present data in a more-consistent and centralized way.

RA: Beyond safety, which is the primary intent of PTC, what other benefits do you envision once the technology is in place, once the network is up and running. What else can you do with PTC? CI: At this point, safety is the [sole] benefit of PTC. Railroads are very safe operations and we already have tremendously high levels of compliance. Things like switch position: We all have lots of processes to make sure we do those things right.

Having said that, what else can we do with PTC? I think that’s yet to be discovered. The ongoing march of technology is, once you have a system, then you work on how you try to use it and what you might do. We will look for things along those lines. Maybe we can do something to tie it in with our fuel conservation technologies, and so forth. At the moment it’s a significant expense. But we don’t do cost-benefit ratios on PTC because safety is the most important thing we do. If you look at the other benefits, there aren’t any that really flow from this big investment.

RA: Some of the technology that’s out in the field has proven quite beneficial, things like trending on hot bearings, or 32 Railway Age January 2016

RA: Let’s talk about the safety culture at BNSF. The industry as you well know has a terrific safety record, but specifically, what things have you done to achieve your safety goals?

CI: It’s something we’ve all done together to drive safety at BNSF, and we have seen strong improvement in our safety. We’re in our 6th consecutive year of being the lowest frequency ratio for our employees. It’s important to look at those numbers not for the sake of the numbers, but to be sure that the things we’re doing are having a positive impact.

We’ve long believed that safety is about behaviors, that it’s about people. When we say that, we mean all of our people—all of us from the environment we set up, the approach we have, the expectations we have, and certainly the front-line people doing the job. So we’ve talked about and put in place what we would say is a culture of compliance, meaning it’s important to follow all of our rules all of the time, but we have an emphasis on rules that have the most significant consequences.

To accomplish all of our safety goals, our vision to realize a

BNSF

“Technology is something you deploy for a specific reason and outcome.

We put a tremendous effort into it.”

RA: I would think using a UAV for something like bridge inspections would increase the safety factor for the people that actually inspect the bridges. That has to be a dangerous job.

CI: You’re absolutely right. One of the things we do with UAVs is go under a bridge to inspect. We can see more things. The quality of the pictures that you get from the UAVs is incredible. But to your point, to get completely under a bridge is hard to do, and you’re often high in the air.

We would use fall protection, of course, but it’s still hard to be able to get all the places you need so it definitely enhances the safety of the bridge inspectors and presents some data they can handle in a more effective way.

railroader of the year

workplace free of accidents and injuries, we need all of us pulling together with what we’d call a culture of commitment. We often describe that as meaning we take responsibility for our own safety, but also for the safety of our co-workers. That’s the shift in culture we’ve had. We have an important initiative that we call “Approaching Others About Safety” to set up an environment of interacting with co-workers about safe processes. It’s a very straightforward concept to say we want to interact with each other about safety, but you have to recognize that before an interaction needs to happen, you have to be prepared to do that, which isn’t always easy. You have to deliver the dialog and the interaction in a way that’s actionable, and the person hearing it has to take it and be prepared to hear it and take it and act on it. So one of the things we did with Approaching Others is arm people with the tools they needed.

But certainly as important, it began setting up an expectation. The first time it might be hard, and somebody might say, “Why are you bringing that up to me?” The second time is a little easier, and the third time’s a little easier. Eventually we get to the point where everybody’s expecting that to happen, so it’s not about why did someone say something but about what they said. What behavior are we addressing? That has shifted our safety culture. That’s why you’re seeing the kind of safety environment we have today. We’ve continued to enhance that every year. We’ll be doing it again in 2016.

What sort of initiatives is BNSF engaged in to bring in new talent and keep talented people working for the railway?

CI: We have development programs for everyone—people who have been here for more than 35 years to people who started in the past year or so. We put a tremendous effort around that. We do leadership training every year. Having a good place to work goes a long way. People like coming to work every day. They’re proud of their company, and we do see people working longer and retiring at later points in their life. There’s nothing better than, when you’re talking to somebody, hearing them saying “I love my job, I love coming to work every day. There’s a psychology of success around that.

When I started my career a long time ago somebody might have said to me, “Why are you going to go work for a railroad?” Now, lots of people talk about railroads as preferred employers. That helps with retention, and helps us get people who come to the railroad with great talent and skills. We create development plans. We do have a tremendous number of railroaders who have acquired a lifetime of knowledge, and we want to make sure that we pass on as much as we can.

We have a significant recruiting program, and it does [cover] college campuses. Railroads are a preferred sort of employment. It’s certainly true for people graduating from college today. They want to do something they know is important, that has an impact, and railroads have a tremendous positive impact on our country, on our commerce, as well as sustainability. That gives us a good chance. Lots of young people think railroads are cool. You know? Who doesn’t love a train? As opportunities arise, we believe in promoting from within, and often that’s the way it works, but occasionally it’s helpful to bring in someone with a certain set of skills or talents or add to those skills and talents. That works great when we pick the right people. If you look around our leadership team we have a lot of people who’ve come from other industries and other companies and make great impacts.

RA: Sustainability. It goes beyond fuel conservation or Tier 4 locomotives. Can you describe some of BNSF’s sustainability initiatives?

CI: In terms of impact on the environment, emissions from locomotives have the most significant impact. That’s why we’ve worked to make improvements. Everything we do with fuel conservation helps with emissions because we’re burning less fuel. Our fuel programs range from simple things like turning the locomotive off if you’re not using it all the way to trying a hydrogen fuel cell locomotive all fit with that. But it’s really more than that as we fulfill our value of being good corporate citizens. Our sustainability efforts have three prongs. One is better fuel efficiency that helps the environment and reduces our dependency on oil. Then there’s locomotive emissions. We’re purchasing Tier 4 locomotives, which are at about a 1.6 in terms of NOx,compared to something that was probably in the 12 to 15 range when Tier 1 came out. Then there’s highway congestion: getting trucks off the highway to reduce the impact on our nation’s infrastructure. Our employees get involved in many ways additionally. We have a sustainability report each year to evaluate the impact on the environment. Things ranging from recycling to our locomotives are all things that we focus on at BNSF.

RA: During your career, is there anyone in particular who was an influence, who helped you develop your skills and talents?

CI: I don’t want to pick one person because I’d leave somebody out. I’ve been very blessed. Lots of people helped with my career and my development and helped put me in a position to succeed. I was lucky enough to be in a lot of different roles. That’s something we do thoughtfully now. We move people across functions and give them a chance to see and learn different things. I got to do that early on. Then there’s certainly the role I have today, where Matt’s role as Executive Chairman is definitely helpful to me. There’s been somebody in every step of my career at the two railroads I’ve been part of. All helped me learn things.

RA: I wanted to talk a bit about the future of the industry in terms of talent. There has been a transition over the past few years. You have a lot of people reaching retirement age.

RA: Carl, again, congratulations. We will see you in Chicago on March 15th at the Union League Club.

CI: It’s a great honor and I look forward to it. RA

34 Railway Age January 2016

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railroader of the year

Matt Rose: “A disciplined approach”

By Lawrence H Kaufman, Contributing Editor

Carl Ice and Matt Rose worked so closely for 13 years that Rose, who then was chief executive of BNSF Railway, finally promoted Ice to chief executive of the nation’s largest railroad.

Ice and Rose are different temperaments. Ice is an engineer by training and brings to the position what Rose calls a rigid, disciplined approach that engineers tend to bring to problem-solving.

“We worked so closely that we began to complete each others’ sentences,” Rose said in a recent conversation. By turning the day-to-day management of BNSF to Ice, Rose felt free to undertake a new and different role, one that no other railroad chief has.

“I had time to create a public policy role,” Rose said.

He clearly believes that he serves BNSF better in his new role than if he had stuck with the traditional railroad managerial format. He has accepted positions on other company’s boards of directors and spends considerable time in Washington meeting with government officials.

Few corporate executives even try to be a presence in Washington, opting to leave government relations in the

hands of Washington lobbyists, some of whom are retained consultants, not even employees. Railroad public affairs practitioners also tend to be limited in effectiveness because they don’t know the industry nor the company that retains them.

Most executives are quite content to have their government affairs people represent them. That way the government affairs function is diminished and senior executives feel justified in complaining that government pays little attention to their needs.

Over the years, BNSF was like other railroads. With encouragement from Warren Buffett, who owns BNSF through his Berkshire Hathaway conglomerate, Rose has changed the railroad’s position in Washington.

Railroads have tried to carve out a public policy personna in the past, but “we were ignored,” Rose says.

When key legislation is under consideration in Congress, it takes more than a drop-by office visit by a lobbyist to persuade a member of Congress to vote for or otherwise support a pending bill. Rarely does a corporation score a major success. But when a chief executive officer makes

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150113

THE RAILROADER OF THE YEAR AWARD.

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railroader of the year

the rounds of congressional offices, the results can be considerably different. Just the presence of a high-ranking executive is impressive to a member. Few members know much about the process of moving American production about the country. Rose does not claim specific successes, but he is getting known as an executive who has learned how to play the Washington game, and he plays it well.

Bring up the subject of Buffett, and Rose is unabashedly enthusiastic. “Warren Buffett is the smartest man I ever met,” he says. “Warren loves the railroad,” he adds, but absolutely does not meddle in the operation of the railroad.

Berkshire Hathaway is large enough to guarantee BNSF’s capital allocation for execution of its business plan.

In the relatively unique relationship that Ice and Rose developed, “Carl was a right hand for six of the 13 years we worked together,” Rose says. When he decided to give Ice the CEO title and position, there were some observers who thought Rose was stepping back, perhaps in preparation for an early retirement. Nothing could be farther from the truth; Rose is just as busy as ever, just focusing on different issues than before.

Of the seven Class I railroads (as the federal government defines them) in the U.S. and Canada, BNSF is the only one

FINALLY!

reporting earnings growth in a difficult 2015. Other carriers are having to cope with sharp declines in their coal business and have not yet figured out how to adjust.

BNSF has main line access to the Powder River Basin of Wyoming, which allows it to move extremely-low-sulfur coal to utilities to the south and east of the PRB. As utilities switch from coal to natural gas and other non-carbon-emitting fuels, it is Norfolk Southern and CSX that are losing once-lucrative carloads. BNSF also had a significant business moving crude oil from the shale oil deposits of the Bakken in North Dakota. The current oil glut has hit BNSF, but traffic has held up so far, and just about everyone who follows such things is convinced that demand for CBR (crude by rail) will return as the oil glut is contained.

A Bloomberg writer recently spoke with Rose and came away with a story that Rose would do a deal of his own if Canadian Pacific and Norfolk Southern were to merge.

Rose says he was misquoted, and that what he did say was that railroad mergers don’t happen in a vacuum. If CP and NS were to get together, BNSF would have to view the new venture very carefully. He chooses not to say how BNSF might react, but did tell Railway Age that he doesn’t think there is a need for any mergers among the Big 7.

CONGRATULATIONS CARL ICE

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

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Recipients under Modern Railroads 1964: D. W. Brosnan, Southern Railway System 1965: Stuart T. Saunders, Pennsylvania Railroad Co. 1966: Stuart T. Saunders, Pennsylvania Railroad Co. 1967: Louis W. Menk, Northern Pacific Railway 1968: William B. Johnson, Illinois Central Railroad 1969: John W. Barriger, Missouri-KansasTexas Railroad 1970: John S. Reed, Atchison, Topeka & Santa Fe Railway 1971: Jervis Langdon, Jr., Penn Central Transportation Co. 1972: Charles Luna, United Transportation Union 1973: James B. Germany, Southern Pacific Transp ortation Co. 1974: L. Stanley Crane, Southern Railway System 1975: Frank E. Barnett, Union Pacific Railroad 1976: Dr. William J. Harris, Jr., Association of American Railroads 1977: Edward G. Jordan, Conrail 1978: Robert M. Brown, Union Pacific Railroad 1979: Theodore C. Lutz, Washington Metropolitan Area Transit Authority 1980: John G. German, Missouri Pacific Railroad Co. 1981: Lawrence Cena, Atchison, Topeka & Santa Fe Railway 1982: A. Paul Funkhouser, Family Lines Rail System 1983: L. Stanley Crane, Conrail 1984: Hays T. Watkins, CSX Corp.

1985: John L. Cann, Canadian National 1986: Raymond C. Burton, Jr., Trailer Train Co. 1987: Willis B. Kyle, Kyle Railways 1988: Darius W. Gaskins, Jr., Burlington Northern 1989: W. Graham Claytor, Jr., Amtrak 1990: Arnold B. McKinnon, Norfolk Southern Corp.

1991: Mike Walsh, Union Pacific Railroad Recipients under Railway Age 1992: William H. Dempsey, Association of American Railroads 1993: Raymond C. Burton, Jr., TTX Co. 1994: L. S. “Jake” Jacobson, Copper Basin Railway

40 Railway Age January 2016

Ra’s Railroader of the Year Award (cont’d) 1995: Edwin Moyers, Southern Pacific Transportation Co. 1996: Robert D. Krebs, AT&SF, and Gerald Grinstein, Burlington Northern 1997: Paul M. Tellier, Canadian National 1998: David R. Goode, Norfolk Southern 1999: Edward A. Burkhardt, Wisconsin Central Transportation Co. 2000: The Railroad Worker (“Railroader of the Century”) 2001: Michael R. Haverty, Kansas City Southern Railway 2002: E. Hunter Harrison, Canadian National/ Illinois Central 2003: Richard K. Davidson, Union Pacific Railroad 2004: Robert J. Ritchie, Canadian Pacific Railway 2005: David R. Goode, Norfolk Southern 2006: Richard F. Timmons, American Short Line & Regional Railroad Association 2007: William E. Wimmer, Union Pacific Railroad 2008: Stephen C. Tobias, Norfolk Southern 2009: Michael J. Ward, CSX 2010: Matthew K. Rose, BNSF

sit idle without idling

2011: Wick Moorman, Norfolk Southern 2012: David L. Starling, Kansas City Southern 2013: James R. Young, Union Pacific 2014: Joseph H. Boardman, Amtrak 2015: E. Hunter Harrison, Canadian Pacific 2016: Carl R. Ice, BNSF Railway

2015 Railroader of the Year Hunter Harrison, CEO of Canadian Pacific, also received the award in 2002, when he was running newly combined CN and Illinois Central.

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Congratulations to Carl Ice, BNSF President & CEO, for being named Railroader of the Year from

A Special Thank You to BNSF for hosting Railway Interchange 2015 at the BNSF Northtown Yard in Minneapolis, MN.

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Will FAST Act bring fast results?

After years of delays and extensions, a multi-year surface transportation bill is finally in place. Will it deliver on the advertised?

O

n Dec. 4, 2015, President Barack Obama signed the Fixing America’s Surface Transportation (FAST) Act, a five-year federal transportation bill, into law. The FAST Act authorizes $305 billion in funding for federal surface transportation programs for fiscal year (FY) 2016 through FY 2020 and provides funding to improve highways, bridges and transit systems.

Rail provisions in the FAST Act promise to improve rail infrastructure and safety by “consolidating rail grant programs, cutting red tape and dedicating resources for best use. It also establishes a federal-state partnership to bring passenger rail assets into a state of good repair.

Additionally, the bill will accelerate the delivery of rail projects by significantly reforming environmental and historic preservation review processes, and applying existing exemptions already used for highways to make critical rail investments go further.”

By carolina Worrell, Managing Editor

“The new bill includes several provisions that should be good for the U.S. transit industry and, therefore, for Wabtec,” says Richard Betler, Wabtec President and CEO. “For example, this is the first multi-year bill passed in a decade, and that means transit agencies should have a longer-term planning horizon for potential projects. In addition, the bill calls for a 10.2% funding increase in year one and further increases in future years. When coupled with our strong backlog of transit projects around the world, the new bill is another reason to be optimistic about Wabtec’s long-term growth opportunities in the transit market.”

Suppliers certainly have cause to celebrate as companies like Alstom Transport, Bombardier Transit Corp., Brookville Equipment, CAF USA, Kawasaki Railcar USA, Kinkisharyo, Siemens, and a new entry into the North American market, China’s CNR Changchun, are busy filling equipment orders for several public transportation agencies across the U.S., January 2016 Railway Age 47

2016 passenger rail outlook

Passenger railCar Market at a glance Figures compiled by Carolina Worrell, Managing Editor

These new and rebuilt cars were delivered in 2015 Purchaser

# of cars

Type

Builder

Amtrak

70

Intercity

CAF USA

Charlotte (CATS)

4

Light Rail

Siemens

Chicago (CTA)

120

Rapid Transit

Bombardier

Chicago (Metra)

57

EMU Bilevel Commuter

Sumitomo/Nippon Sharyo

2

Streetcars

CAF USA

Dallas (DART)

163

Light Rail

Kinkisharyo

Dallas (DART)

2

Streetcars

Brookville Equipment

Denver (RTA)

52

EMU Commuter

Hyundai-Rotem

Houston (MTA)

32

Light Rail

CAF USA

Cincinnati

Kansas City

2

Streetcar

CAF USA

Montreal (Societe de Transport)

11

Rapid Transit

Alstom/Bombardier

New York/New Jersey (PATH)

10

Rapid Transit

Kawasaki

New York (Metro-North)

29

M-8 EMU Commuter

Kawasaki

New York (New York City Transit)

8

R-188 Rapid Transit

Kawasaki

Philadelphia (PATCO)

6

Rebuilt Rapid Transit

Alstom

Portland (TriMet)

18

Light Rail

Siemens

Seattle (DOT)

7

Streetcars

Inekon

Sonoma-Marin (SMART)

1

DMU Commuter

Sumitomo/Nippon Sharyo

Toronto (Metrolinx/GO Transit/UPX)

16

Bilevel Commuter

Bombardier

18

DMU Commuter

Sumitomo/Nippon Sharyo

Toronto (TTC)

72

Rapid Transit

Bombardier

10

Streetcar

Bombardier

Vancouver

4

Rapid Transit

Bombardier

Virginia Railway Express

8

Bilevel Commuter

Sumitomo/Nippon Sharyo

Washington D.C. (WMATA)

78

7000 Series Rapid Transit

Kawasaki

New-car deliveries by mode, 10-year tracking

Orders likely to develop in 2016 Purchaser Amtrak

Total

Type

168

HSR Intercity

2006 358 250 130 738 2007 139 402 121 662

California (CHSRA)

TBD

HSR Intercity

Newark (NJ Transit)

113

Mulitilevel EMU

Oklahoma City

Year Regional/Intercity Rapid Transit LRT/Streetcar

# of cars

5

Streetcar

Phoenix (Valley Metro)

11

Light Rail

Washington, D.C. (WMATA)

220

7000 Series Rapid Transit

2008 227 272 97 596 2009 187

752

202

1,141

2010 199

782

148

1,129

2011 235 113 149 497 2012 343 243 59 645 2013 531

337

166

1,034

2014 251 484 116 851 2015 251 462 258 971 Total 2,721 4,097 1,446 8,264 2015% of Total 9.2% 11.3% 17.8% 11.7%

48

Railway Age

January 2016

Work progresses on this undelivered backlog (as of Jan. 1) Purchaser

# of cars

Type

The five-year (2017-2021) outlook Builder

All Aboard Florida (FECI)

20

HrSR Intercity

Siemens

Amtrak

60

Intercity

CAF USA

Boston (MBTA)

85

Rebuilt Light Rail

Alstom

24

Light Rail

CAF USA

284

Rapid Transit

CNR Changchun

Baltimore

53

Rebuilt Light Rail

Alstom

Buffalo (NFTA)

23

Rebuilt Light Rail

Ansaldo/Breda

Calgary (Calgary Transit)

63

Light Rail

Siemens

Calif./Illinois et al

175

HrSR Intercity

Sumitomo/Nippon Sharyo

Charlotte (CATS)

14

Light Rail

Chicago (Metra)

30

Rebuilt Commuter

Light Rail

6-12

Bilevel Commuter

California (Caltrain)

10

EMU Commuter

California (Caltrans)

11-39

Bilevel Intercity

California (ACE)

455

Rebuilt Commuter

160

Multilevel EMUs

Siemens

Cleveland (RTA)

75

Light Rail

In House

Dallas (w/DART)

2

Streetcar

Denver (RTD)

10

Light Rail

Edmonton (ETS)

83

Light Rail

Fort Worth (TEX Rail)

20

DMU Commuter

Guadelajara

14

Light Rail

Hamilton, Ontario

TBD

Light Rail

Honolulu (HART)

6

Rapid Transit

Los Angeles (LACMTA)

78

Light Rail

52

Rebuilt Light Rail

CAF USA Brookvile Equipment

Denver

14

EMU Commuter

Hyundai Rotem

29

Light Rail

Siemens

Detroit

6

Streetcar

Brookville Equipment

El Paso

6

Streetcar

Brookville Equipment

Guadelahara

18

Light Rail

Alstom

Honolulu (HART)

80

Rapid Transit

AnsaldoBreda

Kansas City

2

Streetcar

CAF USA

174

Light Rail

Kinkisharyo TBD

Miami-Dade

136

Rapid Transit

AnsaldoBreda

Milwaukee

4

Streetcar

Brookville Equipment

Mexico City (SCT)

85

Rebuilt Rapid Transit

Alstom

150

Intercity (EMU)

CAF

Minneapolis/St. Paul (Metro Transit)

5

Light Rail

Siemens

Monterrey

22

Light Rail

CAF

MontrĂŠal (Societe de Transport)

459

Rapid Transit

Alstom/Bombardier

Newark (NJ Transit)

35

LRT (center-sections)

Kinkisharyo

New York (LIRR)

92

EMU M-9 Commuter

New York (Metro-North)

3

EMU M-8 Commuter R-179 Rapid Transit

Commuter

60

Streetcar

300

33

Chicago (Metra)

Streetcar

New York (NYC Transit)

Boston (MBTA) Calgary

Streetcar

3

Rebuilt LRT

Diesel Light Rail

Rapid Transit 7000 Series

2

52

Type

TBD

400-846

Cincinnati

# of cars

Austin (Capital Metro)

TBD

Dallas (DART)

Los Angeles (Metro)

Purchaser

Charlotte (CATS) Chicago (CTA)

Los Angeles (city) Minneapolis/St. Paul (Metro Transit) Mississauga Monterrey (Mexico) Montreal (AMT) Montreal (Societe de Transport) Newark (NJ Transit)

TBD

Streetcar

27-77

Light Rail/Streetcar

TBD

Light Rail

4

Light Rail

24-84

Bi-level Commuter

386

Rapid Transit

202-375

Multilevel Commuter

New York (LIRR)

92-324

EMU M-9 Commuter

New York (Metro-North)

140-170

EMU M-9 Commuter

New York (Metro-North)

100-200

Bilevel Commuter

10-75

Rapid Transit

Norfolk, Va. (Hampton Roads Transit)

3-5

Light Rail

North Carolina (Triangle Transit)

TBD

Light Rail

Kawasaki

North Little Rock, Ark.

2-6

Vintage Trolley

Kawasaki

Oceanside, Calif. (NCTD)

6-12

Bilevel Commuter

Bombardier

Oklahoma City

322

R-188 Rapid Transit

Kawasaki

Ottawa

34

Light Rail

Alstom

Philadelphia (PATCO)

106

Rebuilt Rapid Transit

Alstom

San Francisco (BART)

775

Rapid Transit

Bombardier

San Francisco (MUNI)

16

Rebuilt PCC streetcar

Brookville Equipment

New York/New Jersey (PATH)

Orlando (SunRail)

8

Streetcar

0-46

Bilevel Commuter

Philadelphia (SEPTA)

36

Bilevel Commuter

141

Light Rail/Streetcars

Phoenix (Valley Metro)

22

Light Rail

6

Streetcar

Portland

TBD Streetcar

Pueblo, Mexico

TBD

Light Rail

San Bernadino (SANBAG)

TBD

Light Rail

260

Light Rail

Siemens

Seattle (Sound Transit)

9

Bilevel Commuter

Bombardier

Sonoma-Marin (SMART)

16

DMU Commuter

Sumitomo/Nippon Sharyo

San Diego (MTS)

52

Light Rail

Santa Clara (VTA)

60

Rapid Transit

9-11

Streetcar

Toronto (TTC)

54

Rapid Transit

Bombardier

191

Streetcar

Bombardier

Toronto (TTC/Metrolinx)

182

Light Rail

Bombardier

Toronto (Metrolinx/GO Transit)

116

Bilevel Commuter

Bombardier

Vancouver

24 Skytrain

115

Rebuilt Skytrain

In House

7

Bilevel Commuter

Sumitomo/Nippon Sharyo

Washington, D.C. (WMATA)

670

7000 Series Rapid Transit

Kawasaki

Waterloo, Ont.

14

Light Rail

Bombardier

Virginia Railway Express

Bombardier

Seattle (DOT) South Florida RTA

5

Streetcar

14-20

Bilevel Commuter

Toronto (TTC)

126

Rapid Transit

60

Streetcar

5-10

Commuter

24

Skytrain

Stockton, Calif. (ACE)

Vancouver (TransLink)

VIA Rail Canada Virginia Railway Express

100-150

Intercity

9

Bilevel Commuter

January 2016 Railway Age 49

2016 passenger rail outlook

Canada and Mexico. The current passenger railcar backlog, according to information complied for Railway Age’s exclusive, annual “Passenger Railcar Market At A Glance” chart (pp.

48-49) is a healthy 5,701 units worth an estimated $1.2 billion. Agencies like New York MTA, BART, WMATA, MBTA and the Toronto Transit Commission account for a sizeable chunk of the market.

Orders for more than 500 cars are expected to be placed this year by New Jersey Transit, which will soon release an RFP for 113 electric multiple-unit multi-level cars; Amtrak, which is in the midst of procuring trainsets to replace the Acela Express equipment on the Northeast Corridor; and WMATA, which continues to modernize its entire railcar fleet.

More impressive is the 2017-2021 five-year outlook. Transit agencies responding to the survey indicated they are contemplating placing orders for as many as 4,500 new and rebuilt vehicles.

In 2015, 971 cars were delivered to 24 agencies, the fourth-highest total in 10 years.

Railway Age asked Catherine Connor, Manager of Federal Government Affairs at WSP|Parsons Brinckerhoff, to comment on the passing of the FAST Act, how she thinks money will be allocated and what this means for the rail transit community. Connor is a registered lobbyist who has broad-based experience tracking the federal budget and appropriations process. She serves on numerous industry committees and coalitions that advance the cause of the transportation construction industry, actively engaging in public policy development in support of infrastructure investment. She works to develop industry consensus, and advocates those positions to Congress. Connor provided the following responses: RA: How is money being allocated and from where is it coming?

Connor: 92% of the overall bill is funded through the Highway Trust Fund, which is funded through a combination of user fees, primarily 50

Railway Age

January 2016

the federal gas tax, and more recently through several large transfers of revenue from the general fund — approximately $70 billion in the FAST Act alone. The rail title (i.e. Amtrak funding) and transit capital improvement grants are funded directly from the

in partnership with state and local governments to pick up the pace to create a safer, more effective and more resilient transportation network that meets the country’s growing needs.

Access to jobs, greater mobility, improved safety and a more sustainable future are just a few of the benefits Americans will see as the FAST Act is implemented. The private sector can

“For the first time, passenger rail programs are included in a federal surface transportation bill.”

WSP | Parsons Brinckerhoff Manager, Federal Government Affairs Catherine Connor has reason for optimism.

general fund and not through the highway trust fund and therefore are dependent on annual appropriations.

In most cases, funding is allocated by formula, but the FAST Act does create several new discretionary grant programs, such as a bus and bus facilities grant program, a nationally significant freight and highway projects grant program, and three small passenger rail grant programs.

RA: What is your general take on the FAST ACT and what does it mean to you and the rail transit community in terms of lease starts and upgrades, expansions to networks, etc.?

Connor: The FAST Act is a step in the right direction, and the five-year federal commitment will provide much-needed stability and certainty for transportation agencies. Armed with greater predictability and aided by a number of beneficial new programs particularly related to freight, multimodal projects and environmental streamlining/expedited project delivery, it is time to work

help achieve these objectives with innovative technologies, creative solutions, and by sharing project risk. However, the bill is only the first step—we have to keep up the momentum to identify a long-term funding solution.

RA: How do you think the FAST Act will benefit passenger rail?

Connor: For the first time, passenger rail programs are included in a federal surface transportation bill. This will help to put rail programs on equal footing with the traditional highway and transit programs. The funding levels in the FAST Act for Amtrak are not high as Amtrak and the rail industry had hoped, but they are an increase over the current levels. The rail title of the FAST bill authorizes the first funding for passenger rail (other than Amtrak) in several years. The new grant programs and separate Amtrak reform provisions indicate that rail improvements, especially on the Northeast Corridor, remain a Congressional priority. However, it is important to remember that passenger rail programs, including Amtrak, are dependent on annual appropriations.

Funding is derived from the General Fund, not the Highway Trust Fund. RA

People

Meetings

High profile Amtrak President and CEO Joe Boardman informed the Amtrak Board of Directors on Dec. 9, 2015 that he plans to retire from Amtrak in September 2016, following nearly eight years of service with the railroad.

Under his leadership, Boardman, a former Railway Age Railroader of the Year, “helped Amtrak achieve many accomplishments, including record ridership and revenue, improved operating cost recovery, procurement of new equipment, enhanced passenger services, expansion of Boardman service and advancement of critical infrastructure projects,” Amtrak the railroad said. “When I look back at this time I see so many accomplishments and so many changes we made to make America’s railroad a stronger, safer and more important part of our nation’s transportation system,” said Boardman in a letter to employees. Boardman will work closely with Amtrak’s Board of Directors as they begin the search for a new CEO.

Feb. 8, 2016

Short Line Safety Institute (SLSI)— Ron Hynes has been selected as Executive Director. Linda Darr, ASLRRA; Janet Gilbert, Fletcher & Sippel LLC; Ron Hynes, SLSI; Rose Lang-Poston, AON Risk Services; Judy Petry, Farmrail; Daniel R. Sabin, Iowa Northern Railroad; and Gary Vaughn, Watco Companies, will serve on the Board of Directors. Additionally, SLSI has selected Chuck Baker, Partner, Chambers, Conlon & Hartwell; David A. Brown, Chief Operating Officer, Genesee & Wyoming, Inc.; Karen Folino, Global Commercial Leader, GE Transportation; Mitchell Harris, Director Safety, Training & Rules Compliance, Rio Grande Pacific Corporation; Robert Grimalia, retired VP of Safety and Environment, Union Pacific; David Hofmann, Hugh L. McColl Distinguished Professor and Area Chair of Organizational Behavior, University of North Carolina; Mike Lowenger, VP of Operations and Regulatory Affairs, Railway Association of Canada; Alan Maples, President, Everett Railroad Company; Tom Murta, Assistant Vice President of Operations Compliance, CSX Transportation; and Jonathan D. Thomas, Sr. Director, Research and Safety Management Solutions Group, National Safety Council, to serve on its Advisory Board.

Southeastern Pennsylvania Transportation Authority (SEPTA)— Scott A. Sauer has been promoted to 52

Railway Age

January 2016

the position of Assistant General Manager of System Safety. He will continue to report to General Manager Jeffrey D. Knueppel.

TransLink—Don Rose appointed Chair of the Board of Directors.

Virginia Department of Rail and Public Transportation (DRPT)— Peter Burrus named Chief of Rail Transportation.

WAGO—Joe Stirpe appointed Regional Sales Manager for Upstate New York.

100 YEARS AGO in

January 1916 Formal Opening of the St. Paul Electrification The first engine division of the electrification section of the Chicago, Milwaukee & St. Paul, consisting of 112 miles and extending from Three Forks to Deer Lodge, was completed by the end of November 1915. On November 30, the trolley system was energized and on December 1 a train consisting of an electric locomotive and a few business cars was run over the line. During the following week various test runs were made and finally on December 8 an exhibition run was made for the president of the railway, directors and others.

Chicago Railroad Mechanical Association, Wheelworx Odyssey Golf Course and Banquets, Tinley Park, Ill. Contact: Ken Derby, thecrma1988@gmail.com Website: thecrma.org

Feb, 17, 2016 International Railway Summit 2016 Palais Hansen Kempinski, Vienan Contact: Jules Omura, julesomura@iritis.org Website: iritis.org

March 3, 2016 Railroad Day on Capitol Hill Renaissance Washington, Washington, D.C. Website: member.aslrra.org/ aslrra/RRDay2015

March 15, 2016 Western Railway Club-Railway Age Railroader of the Year Dinner Union Club League of Chicago Contact: wrcclub13@ comcast.com Website: westernrailwayclub.com/ railway-meetings

March 29, 2016 21st Annual AAR Research Review Cheyenne Mountain Resort, Colorado Springs, Colo.

Contact: Lori Bennett, Registration Manager, annualreview@aar.com Website: https://www.regonline. com/21stannual

April 27, 2016 Light Rail Philadelphia Marriott Downtown, Philadelphia, Pa. Website: railwayage.com/lightrail

June 7, 2016 Rail Insights Hotel Allegro, Chicago, Ill. Website: railwayage.com/ railinsights

The Railway Educational Bureau BOOKS - Railroad Resources -

Introduction to North American Railway Signaling by the Institution of Railway Signal Engineers Introduction to North American Railway Signaling covers the basics of signaling philosophy and techniques. This is the book to reach for if you need information pertaining to signaling systems used in the various rail transportation modes in North America: freight, main-line passenger service, commuter, light-rail, and heavy rail transit. It presents the underlying principles behind modern day signaling practices for the many systems integrated together to keep railroads running safely and efficiently. Softcover, 224 pgs.

BKINARS

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Elements of Planning, Engineering, & Operating Light Rail With Applications in NJ

Guide to Freight Car Air Brakes Guide to Freight Car Air Brakes presents a wealth of information pertaining to air brake maintenance. The procedures and methods presented in this book are designed to keep your freight car air brake systems in top condition. This 188-page book features 3-ring binding to facilitate the easy addition of notes and other convenient information - that means shop personnel can easily keep this book around and add additional specifications to help them do their job better for years after taking the course.188 pages. Now in soft cover format.

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Gain comprehensive insight into specialized technical and operating issues associated with light and interurban railways with Al Fazio's invaluable new book. This book closely examines the relationship between transportation and the economics of transit-oriented development (TOD) in a modern urban environment. This must-have book will appeal to transportation professionals in planning, operations, civil engineering, signaling, and vehicle engineering as well as undergraduate and graduate students looking to enter these fields. Softcover. 136 pages.

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FRA Regulations

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Track

Track Safety Standards, Subparts A-F • BKTSSAF • $10.50

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Railroads of Canada Wall Map (laminated) • MPRRCAN • $99.00 Training Videos (DVD)

Basic Railroad Shop and Yard Safety (DVD format) • DVYARD • $200.00 Blue Signal Protection (DVD format) • DVBLUE • $210.00 Railroad Hearing Conservation Training (DVD format) • DVHEAR • $165.00

Railway Geotechnics • BKGEOTECH • $195.00

Transit Urban Transit: Operations, Planning & Economics • BKUTOPE • $150.00* Urban Transit: Systems & Technology • BKUTST • $150.00*

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Add the following shipping and handling if your merchandise subtotal is: UP TO $10.00 10.01 - 25.00 25.01 - 50.00 50.01 - 75.00 75.01 -100.00 100.01 - 150.00 150.01 - 200.00 200.01 - 300.00

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We’re current, are you? FRA Regulations Mechanical Department Regulations

FRA News:

A combined reprint of the Federal Regulations that apply specifically to the Mechanical Department. Spiral bound.

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 Update 1-1-15 229 Locomotive Safety Standards 231 Safety Appliance Standards 232 Brake System Safety Standards Update 1-6-15

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The Railway Educational Bureau 1809 Capitol Ave., Omaha NE, 68102 I (800) 228-9670 I (402) 346-4300 www.RailwayEducationalBureau.com

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Products Pneumat’s air cannon gets material flowing again

The Pneumat Systems AirForce Blaster or AirForce Cannon Blaster is specially designed to overcome bulk

material hang-ups and get material flowing again. Ideal for commercial and industrial applications, the AirForce Blaster is available in a variety of configurations, pressures and size options. The AirForce Blaster System is a permanent, automatic solution to persistent hang-ups in the bulk material production line. Regular blasts of safe, compressed air from AirForce Cannons cut down on material build-up, reduce hands-on work, and minimize day-to-day problems.

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Pneumat’s equipment solutions are designed for use with various materials including DDGs, powdered cement, coal, fertilizer, and more. For more information visit www.pneumat.com.

Snap-on Industrial releases Tools and Solutions for Railroads Catalog Technicians, engineers and rail track maintenance professionals working in rail yards across the country now have a focused resource for their tooling and equipment needs—the new easy-touse Tools and Solutions for Railroads Catalog from Snap-on Industrial.

This 52-page catalog includes performance specifications on Snapon Industrial tools and equipment engineered solely for railroads. Major product categories include: track tools, locomotive tools, car shop tools, specialty tools, hand tools, industrial power tools, torque and more. Snap-on Industrial has been building custom tools for the railroads for nearly 100 years. The Tools and Solutions for

Railroads Catalog further showcases Snap-on’s commitment to serving the railroad industry.

Other features of the new Tools and Solutions for Railroads Catalog include information on industry specific offering, how Snap-on supports railroads with tits LEAN initiatives, Snap-on’s focus on safety supported by complimentary training, amd custom tool and kit capability.

For more information about the new Tools and Solutions for Railroads Catalog from Snap-on Industrial, or to receive your free copy, call 877.740.1900; email order@snapon.com; or visit: www. snapon.com/industrial.

New bracket reduces undesired air hose separations IRECO, LLC’s new bracket, The Synchronizer, attaches to the coupler and allows the end and intermediate air brake hoses to move along with the coupler, which reduces the occurrence of undesired air hose separations. The bracket is located completely below the head of the coupler and is not susceptible to damage due to bypassing couplers. The bracket can be installed with common hand tools and does not interfere with end of train devices. For more information visit www.ireco.com.

January 2016 Railway Age 55

RAWrkSiteTrn1_2pg2014AllClass_Layout 1 1/22/14 2:53 PM Page 1

Products My Employees don’t have time for training.

Flexible Scheduling. Anytime. Anywhere.

Work Site Training Courses: Locomotive: • GE 7FDL Diesel Engine Maintenance • Testing and Troubleshooting 26-Type Locomotive Air Brake Systems • Locomotive Periodic Inspection and FRA Rules Compliance • Locomotive Electrical Maintenance and Troubleshooting • Locomotive Air Brake Maintenance and Troubleshooting • Distributed Power Maintenance and Troubleshooting • Distributed Power Operations, Training, and Operating Rules

Freight Car: • Freight Car Inspection and Repair • Single Car Air Brake Test • FRA Part 232 Brake System Safety Standards for freight and other non-passenger trains • Train Yard Safety

Track: • Track Safety Standards

CORRESPONDENCE TRAINING • WORK SITE TRAINING • CONSULTING

The Railway Educational Bureau 1809 Capitol Ave., Omaha NE, 68102 Toll Free (800) 228-9670 • (402) 346-4300 www.RailwayEducationalBureau.com

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Railway Age January 2016

CDM optimizes custom, assembly services for the railroad industry CDM Electronics, a premier authorized distributor of electronic connectors and cables, now provides an expanded range of custom and valueadded RF coaxial cable assemblies and power jumper cable assemblies to meet the heavy duty, harsh environment requirements of the U.S. and Canadian freight and rail passenger industry. These new customization capabilities and valueadded services are designed to optimize the efficiency and safety of rail-specific connectivity, as well as to help accelerate railroad industry manufacturers’ time-to-market.

Assemblies are manufactured in CDM’s facilities, which are certified to ISO 9001:2008 and AS9100C, as well as ICPWHMA-620 and J-STD-001. Utilizing in-stock components and cables from leading manufacturers, CDM’s custom RF coaxial cable assemblies, Ethernet cable assemblies, and power cable assemblies are employed in a wide range of applications. Visit www.cdmelectronics.com.

Sonic Bonded pads for maintenance area spills New Oil Eater Universal Sonic Bonded pads and rolls provide the economic solut ion for a wide variety of spills in maintenance facilities, including oils, coolants, solvents, water and even acids.

The durable pads and rolls tear easily along their perforated seam to fit almost any space, especially leaks in hardto-reach places.

They are constructed from a single layer of high-quality uniform polypropylene fibers that have been bonded together using a unique high-loft process. The material provides superior strength and reduced linting.

The line is available in a variety of weights in sizes from 15 in. by 18-in. pads to 30-in. by 150-ft. rolls. For more information visit www.oileater.com.

Ad Index Company

Phone #

Fax

URL/Email address

Page #

Amsted Rail Group

312-922-4516

312-922-4597

kskibinski@amstedrail.com

39

Bombardier Transportation

215-441-1864

215-639-3724

Maryanne.roberts@us.transport.bombardier.com

46

Danella Rental Systems, Inc.

610-828-6200

610-828-2260

pbarents@danella.com

Dixie Precast

770-944-1930

770-944-9136

fbrown142@aol.com

16

FreightCar America

312-928-0850

312-928-0890

tbaun@freightcar.net

C2

3

GBW Railcar Services

15

Georgetown Rail Equipment Co.

512-869-1542 ext. 5292 512-863-0405

bachman@georgetownrail.com

11

Greenbrier Companies The

800-343-7188

503-684-7553

gbrx.info@gbrx.com

13

Holland Co.

708-672-2300 ext.382

708-672-0119

gpodgorski@hollandco.com

Hotstart

509-536-8667

509-534-4216 mfloyd@kimhotstart.com

42

ITT Enidine/Koni

859-488-0322

859-334-3340

jpipp@koni-na.com

C3

L B Foster Company

412-928-3506

412-928-3512

glippard@lbfoster.com

38

LORAM

763-478-6014

763-478-2221 sales@loram.com

Miner Enterprises

630-232-3000

630-232-3055

sales@minerent.com

Nord-Lock, Inc./Superbolt, Inc.

412-279-1149

412-279-1185

bolting@nord-lock.com

NRE

618-241-9270

618-242-8519 sales@nre.com

ORX

814-684-8484

glenn@orxrail.com

C4

Plasser American Corp.

757-543-3526

757-494-7186

plasseramerican@plausa.com

9

7

35 5 29 33

Progress Rail Services

256-505-6402

256-505-6051

info@progressrail.com

37

R&W Machine Division

708-458-4200

708-458-3299

jwarner@rwmachine.com

51

RJ Corman Railroad Group

800-611-7245

859-885-7804

www.rjcorman

41

Railquip Inc

770-458-4157

770-458-5365

sales@railquip.com

Railway Educational Bureau, The

402-346-4300

402-346-1783

bbrundige@sb-reb.com

17 36, 53, 54, 56

RailWorks

866-905-7245

952-469-1926 jrhansen@railworks.com

RCE

866-472-4510

630-355-7173 dennishanke@rcequip.com

30-31

REMSA

703-241-8514

703-241-8589

43

RSSI

502-327-7774

502-327-0541 rssi@rssi.org

18

Siemens-Rail Automation

502-244-7400

502-253-3760

bob.coffman@invensys.com

19

Soft Rail

888-872-4612

sales@signalcc.com

38

Star Headlight & Lantern

585-226-9500 ext.137

585-226-2029

chrisjacobs@star1889.com

14

STV Inc

212-777-4400

212-529-5237

info@stvinc.com

36

VGT Rail

618-343-0600

618-343-9015

jwhite@sircrail.com

16

Wi-Tronix

888-948-7664

630-679-9954 cjasmin@wi-tronix.com

40

27

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 Marc Condon 20 South Clark Street, Suite 1910 Chicago, IL 60603 (312) 683-5021 mcondon@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 Jerome Marullo 55 Broad St., 26th Floor New York, NY 10004 (212) 620-7260 Fax: (212) 633-1863 jmarullo@sbpub.com

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 The Netherlands, Britain, France, Belgium, Portugal, Switzerland, North Germany, Middle East, South America, Africa (not South), Far East (Excluding Korea /China/India), All Others, Tenders Louise Cooper International Area Sales Manager The Priory, Syresham Gardens Haywards Heath, RH16 3LB United Kingdom +44-1444-416368 Fax: +44-(0)-1444-458185 lc@railjournal.co.uk

Scandinavia, Spain, Southern Germany, Austria, Korea, China, India, Australia, New Zealand, South Africa, Russia, Eastern Europe Baltic States, Recruitment Advertising Julie Richardson International Area Sales Manager The Priory, Syresham Gardens Haywards Heath, RH16 3LB United Kingdom +44-1444-416368 Fax: +44-(0)-1444-458185 jr@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

January 2016 Railway Age 57

equipment Sale/Leasing

Available For Lease ◆ 3,600 cu. ft. Open Top Hoppers. 45 degree slopes for aggregate, coke, coal, etc. ◆ Covered Hopper Cars – 4,650 & 4,750 cu. ft. cars with trough hatches & gravity gates. 268K Gross Rail Load. ◆ Flat Bottom Gondolas – 4,000 cu. ft. cars, 263K Gross Rail Load and no interior bracing. ◆ Mill Gondolas – 65’ 6” inside length with 5’ sides and 52’ 6” inside length with 4’ 6” sides.

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

Available for Lease 4650 cu ft Covered Hopper Cars 3600 cu ft Open Top Hopper Cars 100 ton Automated/Manual Ballast Cars 4480 cu ft Aluminum Rotary Open Top Gons 65 ft, 100-ton log spine cars equipped with six (6) log bunks Contact: Tom Monroe: 415-616-3472 Email: tmonroe@atel.com

products & services

RFP

The oldest and largest manufacturer of railroad graphics headquartered in USA is soon going to be

REQUEST FOR LETTERS AND EXPRESSIONS OF INTEREST FIXED LIFT JACK EQUIPMENT SOLICITATION

Check next month’s advertisements for March specials on delineators Help and Reidler celebrate and enjoy some extra special pricing!

264 Industrial Park Rd. PO Box 8 Give St. Clair, PA 17970 Fax 1-888-826-0108 www.reidlerrailgraphics.com Email: areber@reidlerrailgraphics.com

us a call at

1-800-628-7770

The O’Hare Airport Transit System, Inc., is seeking letters expressing interest in supplying up to two sets of fixed lift jacks (12 fixed lift jacks per set) to be used in the maintenance of three-car trains for the Airport Transit System (ATS) at Chicago O’Hare International Airport.

The letters of interest must contain the name and address of company; name of principal contact at the company expressing interest in the solicitation; telephone number and e-mail contact information of such individual; and an expression of interest in supplying fixed lift jacks for the O’Hare ATS.

MARKETPLACE SALES

Upon receipt of the letter, a Request for Proposal (RFP) for the fixed lift jack solicitation will be forwarded. All letters expressing interest in this solicitation must be submitted by (February 12, 2016) and addressed as follows:

Contact: Jeanine Acquart Ph: 212/620-7211 Fax: 212/633-1165 Email: jacquart@sbpub.com

Mr. John F. Sisco – CEO O’HARE AIRPORT TRANSIT SYSTEM, INC. North Cargo Road – Bldg. 522 AMF O’HARE Chicago, Illinois 60666 e-mail: rfplifts@ohareats.com RE: LJ&T NO. 1

ALL MAJOR CREDIT CARDS ACCEPTED 58

Railway Age

January 2016

PROFESSIONAL DIRECTORY

RECRUITMENT

EDNA A. RICE, EXECUTIVE RECRUITER, INC

Kansas City (913) 661-2424

www.rrtemps.com

We offer: - Certified Locomotive Engineers - Certified Conductors - Train Dispatchers - Yardmasters - Brakemen/Switchmen - Mechanical For Your Temporary Needs!

EDNA A. RICE, President

(713) 667-0406 FAX (713) 667-1651 Web address: www.ednarice.com Email: resume@ednarice.com

6750 West Loop South Suite 735 Bellaire, Texas 77401-4111

EMPLOYMENT

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

PROFESSIONAL SALES Yangtze Railroad Materials Baltimore, MD Resume to info@yangtzeproducts.com See 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 January 2016 Railway Age 59

Financial edge DAVID NAHASS

2016: More questions than answers

I

ndeed, 2015 was an amazing year for those parties involved in rail equipment and in the affiliated industries.

What started out as a downtrend in oil pricing moved to a full-on slowdown in commodity demand on a global scale.

(Hopefully, if you thought WTI Crude would bottom out in December 2015 below $35/bbl, you’re reading this from your new palatial estate.) This led to a downturn in railcar loadings, railcar and locomotive demand and lease rates. It led to an increase in railroad velocity and a decrease in terminal dwell times, which softened demand and rates even further.

In January 2015, with WTI already on the slide (at just under $50/bbl), “The Financial Edge” discussed CBR, frac sand and future demand. The bubble in those assets continued to materialize, and a dark cloud remains headed into 2016. What was unexpected? The additional weakness in other commodity groups brought around by a weaker global economy and the softening export market tied to a stronger dollar.

Tank cars for hauling crude oil, projected to continue to be a market leader early in 2015, especially following the announcement by the DOT on the new tank railcar specification, have instead been marginalized by weak demand, oversupply and surging pipeline capacity in North Dakota.

In February and in Railway Age’s 2015 Guide to Equipment Leasing, I discussed the delays in finalizing the DOT specification changes and the importance of having the railroad industry on the front lines of safety as an advocate and educator, rather than as an industry viewed as defensive and insular. Today, those regulations remain stuck in the federal appeals court (and will be for some time to come), and the expected retrofit bonanza has not materialized.

60

Railway Age

January 2016

Parties building tank cars for hauling crude (and other flammable and combustible products) are building them to a minimum DOT 117 standard. Due to a dropoff in loadings and improved car design, crude related derailments, or at least the ones of the fireball type, have decreased. However, the industry has not taken a position to represent its record of leadership in safety in as vocal a manner as possible. It is still tantamount for the industry to be its most vocal advocate. One thing learned in 2015 is that no other party will represent the railroads’ safety record.

In play: Equipment issues, the regulatory environment, lease rates and railcar demand.

I discussed used equipment values in September and November 2015. Like new car prices, used cars experienced a runup in pricing, indicating that demand will increase. In spite of downturns in rental rates and railcar demand, and an increase in the number of cars in storage, used car prices continue to float at lofty levels, anticipating growth in loadings over stagnancy. In addition, on Dec. 16, 2015 the Federal Reserve raised interest rates for the first time in a decade!

If the era of cheap money is beginning to end, higher rates will impact future railcar values and potential investors’ financing costs. The prices paid for used cars indicate an already bullish approach to residual values. Increasing residuals

to offset higher capital costs seems unlikely. While 0.25% will not have much impact, an increase of 1% or more may start to shift the landscape on secondary market sales of assets and investment in new cars.

Last month, I addressed the public airing of the Canadian Pacific’s pursuit of the Norfolk Southern. Two months in, the battle rages on with shareholder meetings, open letters to each of the involved railroads and outside-chance threats of alternative buyers swooping in to raise the stakes.

As this hostile sprint becomes a longdistance grudge match, its seems clear that investors in NS are following NS management’s lead in indicating that the price, without regard to the regulatory and service issues associated with the bid (open access—what?!?!), is not nearly high enough. What’s interesting is the focus on the projected 2017 (and beyond) revenue growth that is key to the assumptions of NS’s value.

The signal is clear: 2015 was a weak year; 2017 won’t be. NS and CP seem to agree on that.

Planning is well under way for Rail Equipment Finance 2016. This year’s keynote speakers have been announced and are drawing interest from around the industry. They are Steve Feilmeier, Executive Vice President and the Chief Financial Officer of Koch Industries, Inc. and Sarah House, a Vice President and Economist from Wells Fargo Bank. Both parties will energize the conference with their knowledge of their markets and the information they can provide.

Equipment issues, the regulatory environment, current and future lease rates and projections on railcar demand are topics to be discussed at this year’s REF conference. You can register at www.railequipmentfinance.com.

Got questions? Set them free at dnahass@railfin.com.

WHO’S THE COOLEST GUY AT ORX?

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