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RailwayAge

May 2016 | www.railwayage.com

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RailwayAge

MAY 2016

visit us at www.railwayage.com Features Norfolk Southern

16

BNSF fire trains

27

Tie renewal machines

22

Railinc freight car market

28

Guide to Equipment Leasing 35

News/Columns From the Editor

2

Update

10

Watching Washington

15

Perspective

52

27

Departments Industry Indicators

4

Industry Outlook

6

Market

8

People

45

100 Years Ago

45

Meetings

45

Products

46

Advertising Index

49

Classified

50

22

On the Cover NS resisted the advances of CP for almost a year. Photo: Steve Schmollinger

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Railway Age, USPS 449-130, is published monthly by the Simmons-Boardman Publishing Corporation, 55 Broad St., 26th Fl., New York, NY 10004. Tel. (212) 620-7200; FAX (212) 633-1863. Vol. 217, No. 5. Subscriptions: Railway Age is sent without obligation to professionals working in the railroad industry in the United States, Canada, and Mexico. However, the publisher reserves the right to limit the number of copies. Subscriptions should be requested on company letterhead. Subscription pricing to others for Print and/or Digital versions: $100.00 per year/$151.00 for two years in the U.S., Canada, and Mexico; $139.00 per year/$197.00 for two years, foreign. Single Copies: $36.00 per copy in the U.S., Canada, and Mexico/$128.00 foreign All subscriptions payable in advance. COPYRIGHTŠ 2016 Simmons-Boardman Publishing Corporation. All rights reserved. Contents may not be reproduced without permission. For reprint information contact PARS International Corp., 102 W. 38th Street, 6th floor, New York, N.Y. 10018, Tel.: 212-221-9595; Fax: 212-221-9195. Periodicals postage paid at New York, NY, and additional mailing offices. Canada Post Cust.#7204564; Agreement #41094515. Bleuchip Int’l, PO Box 25542, London, ON N6C 6B2. Address all subscriptions, change of address forms and correspondence concerning subscriptions to Subscription Dept., Railway Age, P.O. Box 1172, Skokie, IL 60076-8172, Or call toll free (800) 895-4389, or (402) 346-4740. Printed at Cummings Printing, Hooksett, N.H. ISSN 0033-8826 (print); 2161-511X (digital). May 2016 Railway Age 1


From the Editor William C. Vantuono

Editorial and Executive Offices Simmons-Boardman Publishing Corp. 55 Broad Street, 26th Fl. New York, NY 10004 212-620-7200; Fax: 212-633-1863 Website: www.railwayage.com

We don’t need more mergers

N

ow that I have your attention, I’ll say it again: The last thing the North American railroad industry needs for the foreseeable future is the long-talkedabout “final round of mergers,” resulting in two gargantuan transcontinental Class I carriers that will still have to deal with getting through Chicago. The AAR will need to rename itself the Association of American Railroad. Atlas won’t shrug. He’ll have a convulsion. You think I’m joking? The just-concluded Canadian PacificNorfolk Southern saga (cover story, p. 16) is proof-positive that almost no one has the stomach anymore for this kind of activity. Not the Class I’s, including CP. Not the Class II and III carriers. Not the Department of Justice. Not the Department of Defense. Not Congress. Not the Surface Transportation Board. Not rail labor. Most important, not our customers. I’ve had the general impression that the railroads were saying, “Please don’t force us to combine,” because that’s exactly what would have begun to happen had William Ackman and Pershing Square Capital Management prevailed and swallowed up Norfolk Southern. Chances are, the STB would have said, “Hold on, let’s see what all these mergers will really do to competition.” As well, we’d probably be looking at a lot of onerous conditions, like open access. Most, if not all, railroads really don’t want that. Since partial deregulation under the 1980 Staggers Act, we’ve done a remarkable job with productivity and cost savings: • We’ve slimmed and consolidated into seven large railroads complemented by many entreprenurial regionals and short lines. • We’ve reduced headcount—going from five-person train crews to two-person crews, for example. • We’ve invested nearly half a trillion dollars of private capital into our physical plant, locomotives and rolling stock to the extent where North America’s freight railroads are the envy of the world. 2

Railway Age

May 2016

RailwayAge

• We don’t require government assistance, and when we do combine private and public dollars for projects with well-defined public benefits, like intermodal terminals and corridors, much of the money is ours. • We are technologically advanced. • We operate safely. • We are the most sustainable (“green”)form of transportion, land, sea or air. What is the number up to now, one ton of freight moves 500 or more miles in a train using only one gallon of diesel fuel? All of this, especially the cost-control part, is what we needed to do. But we’ve gone about as far as we can with cost saving and efficiency extraction. We’ve been improving our bottom line and lowering our operating ratios through higher productivity, rate increases, fuel surcharges and other methods at our disposal. We continue to do this, even in the face of economics-driven double-digit traffic drops. That’s the problem: Present-day business levels notwithstanding, growing the top line is getting tougher and tougher. Coal may rebound, but not to the level it once was. Powder River Basin coal may be gone in 10 years. Crude oil and ethanol? Down to a trickle. So from where will growth come? Many railroaders believe it will come from intermodal, and much of it domestic. I’ll say it again: We don’t need more mergers. So let’s put a halt to all this hedgefund-driven, short-term-gain-driven insanity, so-called “quarterly capitalism.” Let’s focus on the real challenge facing our industry: Growing the top line, for the longer term. I’ll conclude with some words of wisdom from Conrail President and Chief Operating Officer Ron Batory: “No business can save itself into prosperity. Current actions will determine tomorrow’s future, in part. Time waits for none of us and a sense of urgency surrounds us.” Like I said, we don’t need more mergers.

ARTHUR J. McGINNIS, Jr., President and Chairman JONATHAN CHALON, Publisher jchalon@sbpub.com WILLIAM C. VANTUONO, Editor-in-Chief wvantuono@sbpub.com CAROLINA WORRELL, Managing Editor cworrell@sbpub.com Contributing Editors: Roy H. Blanchard, Alfred E. Fazio, Lawrence H Kaufman, Bruce E. Kelly, Ron Lindsey, Ryan McWilliams, David Nahass, Jason H. Seidl, David Thomas, John Thompson, Frank N. Wilner Creative Director: Wendy Williams Art Director: Sarah Vogwill Associate Graphic Designer: Nicole Cassano Corporate Production Director: Mary Conyers Production Manager: Lily Man Production Director: Eduardo Castaner Marketing Director: Erica Hayes Conference Director: Michelle Zolkos Circulation Director: Maureen Cooney Western Offices 20 South Clark Street, Suite 1910, Chicago, IL 60603 312-683-0130; Fax: 312-683-0131 Engineering Editor: Mischa Wanek-Libman mischa@sbpub.com Assistant Editor: Jennifer Nunez jnunez@sbpub.com International Offices 46 Killigrew Street, Falmouth, Cornwall TR11 3PP, United Kingdom Telephone: 011-44-1326-313945 Fax: 011-44-1326-211576 International Editors: David Briginshaw, db@railjournal.com Keith Barrow, kb@railjournal.com Kevin Smith, ks@railjournal.com Customer Service: 800-895-4389 Reprints: PARS International Corp. 253 West 35th Street 7th Floor New York, NY 10001 212-221-9595; fax 212-221-9195 curt.ciesinski@parsintl.com Railway Age, descended from the American Rail-Road Journal (1832) and the Western Railroad Gazette (1856) and published under its present name since 1876, is indexed by the Business Periodicals Index and the Engineering Index Service. Name registered in U.S. Patent Office and Trade Mark Office in Canada. Now indexed in ABI/Inform. Change of address should reach us six weeks in advance of next issue date. Send both old and new addresses with address label to Subscription Department, Railway Age,PO Box 1172, Skokie, IL 60076-8172, or call toll free 1-800-895-4389. Post Office will not forward copies unless you provide extra postage. Photocopy rights: Where necessary, permission is granted by the copyright owner for the libraries and others registered with the Copyright Clearance Center (CCC) to photocopy articles herein for the flat fee of $2.00 per copy of each article. Payment should be sent directly to CCC. Copying for other than personal or internal reference use without the express permission of SimmonsBoardman Publishing Corp. is prohibited. Address requests for permission on bulk orders to the Circulation Director. Railway Age welcomes the submission of unsolicited manuscripts and photographs. However, the publishers will not be responsible for safekeeping or return of such material. Member of:

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Industry Indicators TRAFFIC ORIGINATED CARLOADS

SHORT LINE AND REGIONAL TRAFFIC INDEX FIVE WEEKS ENDING APR. 2, 2016

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

MAR. ’16 106,526 4,266 46,684 31,338 160,531 53,888 336,181 6,766 17,126 27,433 19,612 20,208 43,647 16,421 94,275 105,200 21,746 36,164 18,376 29,779 1,196,167

MAR. ’15 197,321 4,478 49,813 31,686 152,092 69,412 524,431 7,211 18,294 28,174 26,893 17,815 44,078 15,528 89,585 107,415 22,011 35,554 15,236 23,854 1,394,904

% CHANGE -4.3% -4.7% -6.3% -1.1% 5.5% -22.4% -35.9% -6.2% -6.4% -2.6% -27.1% 13.4% -1.0% 5.8% 5.2% -2.1% -1.2% 1.7% 20.6% 24.8% -14.2%

357,899

394,179

-9.2%

1,554,066

1,789,083

-13.1%

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

FIVE WEEKS ENDING APR. 2, 2016

MAJOR U.S. RAILROADS by Commodity TRAILERS CONTAINERS TOTAL UNITS

MAR. 2015 - 350,139 280,000 290,000 300,000 310,000 320,000 330,000 340,000 350,000 360,000 370,000 Copyright © 2015 All rights reserved.

Railroad employment, Class I linehaul carriers, march 2016 (% change from march 2015)

MAR. ’16 113,155 1,137,770 1,250,925

MAR. ’15 153,015 1,202,253 1,355,268

% CHANGE -26.0% -5.4% -7.7%

4,751 271,024 275,775

8,068 292,317 300,385

-41.1% -7.3% -8.2%

Transportation (train and engine) 58,827 (-19.81%)

117,906 1,408,794 1,526,700

161,083 1,494,570 1,655,653

-26.8% -5.7% -7.8%

Total employees: 153,723 % change from mar. 2015: -11.13%

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 11.1% -8.3% -4.7% -0.7% -12.2% 9.6% -3.1% -24.1% 13.7% 34.6% -29.5% -5.8% 1.7% 9.6% -4.2% 15.6% -4.7%

MAR. 2016 - 348,816

CANADIAN RAILROADS TRAILERS CONTAINERS TOTAL UNITS

ORIGINATED MAR. ’15 46,306 22,754 24,413 11,825 26,331 6,068 10,381 4,913 16,208 8,038 2,461 2,130 17,736 10,978 45,314 8,031 86,252

TOTAL CARLOADS, MARCH 2016 vs. 2015

CANADIAN RAILROADS ALL Commodities

ORIGINATED MAR ’16 51,430 20,869 23,266 11,743 23,108 6,653 10,058 3,727 18,423 10,822 1,734 2,007 18,045 12,031 43,418 9,286 82,196

BY Commodity

Executives, Officials, and Staff Assistants 9,373 (-5.80%)

Transportation (other than train & engine) 6,205 (-6.97%)

Maintenance of Equipment and Stores 29,394 (-5.89%)

Professional and Administrative 13,924 (-2.62%)

Maintenanceof-Way and Structures 36,000 (-3.88%)

Source: Surface Transportation Board

All class i employment categories down for second month Figures released by the STB show Class I total railroad employment dropped 11.13% in March 2016, measured against March 2015. All six categories again took a hit for the second month in a row, with Transportation (train and engine) dropping the most at 19.81%; followed Transportation (other thn train & engine), which dropped 6.97%; Maintenance of Equipment and Stores, which dropped 5.89%; and Executives, Oficials, and Staff Assistants, which dropped 5.80%. 4

Railway Age

May 2016


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Industry Outlook

Roughly 62% of the shippers surveyed have equipment needs.

Shipper survey: Rail equipment outlook not as bad as perceived Half the rail shippers queried in Cowen and Company’s 1Q16 Rail Shipper Survey say they will or may place orders for freight cars in the next 12 months, according to analyst Matt Ellkott. “On the heels of our Dec. 14, 2015 initiation of the rail equipment sector, we beefed up the railcar section of our quarterly rail shipper survey, adding several nuanced questions to gauge shippers’ equipment order plans,” said Elkott. “Just over one-third of shippers said they planned to order railcars in the next 12 months, with another 14% noting that they may do so. “This brings the total percentage of shippers who will or may place equipment orders to 48%, or roughly half those surveyed. “Given the subdued, if not grim, expectations for the industry by most observers, we believe these results are relatively positive and consistent with our view that the overall weakness in industrial markets could be partly offset, in a meaningful way, by a number of factors, not the least of which is replacement demand for certain car types such as boxcars and gondolas. Indeed, these two types represented about 30% of potential orders in the next 12 months. Hoppers represented 41%, likely driven by strong large-cube covered hopper demand, and tank cars 6

Railway Age

May 2016

came in at a respectable 29%. “Of the respondents who said they will or may place equipment orders in the next 12 months, 75% said their orders would be for fewer than 500 cars, 6% said they may order 500-2,000 cars, with the remaining 19% potentially placing orders for more than 2,000 cars per respondent. Shippers remain concerned about boxcar availability, with 33% of them (35% in our 4Q15 survey) saying boxcars are in tight supply. But concerns about gondola availability intensified most, with 13% of shippers now saying they are concerned about that car type’s supply, compared to none in our previous survey. “All in all, the equipment section of the survey is a net positive for the OEM industry, but especially for Trinity and Greenbrier, which build all the railcar types that could see solid demand in the next 12 months. One can deduce that roughly 62% of the shippers surveyed have equipment needs, including 34% who have plans to place orders, 14% who may place orders, 7% who have equipment needs but do not plan to place orders in the next 12 months due to capex restrictions, and 7% who have equipment needs but do not plan to place orders due to economic and regulatory uncertainty.”

Crude by rail (CBR) shipments to California oil refineries have dwindled to a trickle, compared to their December 2013 peak, according to RBN Energy LLC analyst Sandy Fielden. “Although California refineries initially met the criteria that spurred development of CBR shipments to other coastal regions (lack of pipeline infrastructure and wide crude price differentials between stranded inland supplies and coastal alternatives), neither rail shipments or terminal buildouts have made much of a dent in the Golden State’s crude supply,” wrote Fielden in Slow Train Coming: Crude By Rail Shipments to California Drying Up. “At their height in December 2013, CBR shipments into California reached 36 Mb/d (thousand barrels per day), just 2% of the state’s 1.9 MMb/d (million barrels per day) refining capacity, and they have since dwindled to a trickle.” “Looking at CBR to California, the first thing to note is that the volumes shipped to the Golden State are tiny compared to those shipped to the Pacific Northwest,” Fielden said. “California is a net importer of crude, and no crude pipelines supply the state from East of the Rockies or from the Northwest. That makes the Golden State a good prospect for CBR shipments that have tended to thrive when no pipeline alternatives exist (certainly this is the case on the East Coast). But as we have seen, CBR shipments into California have not materialized to the same degree as they have to refineries in the Pacific Northwest or on the East Coast.” “The principal reason that CBR volumes delivered to California have only been a fraction of those shipped to other coastal refineries in the U.S. is the painfully slow buildout of rail unload terminals in the state, caused initially by red tape requirements for permits to build rail unload terminals and later by higher levels of objection to building such terminals from environmental groups, heightened by an increase in CBR-related accidents,” Fielden said.

Bruce Kelly

CBR to California “drying up”


ENERGY

BY RAIL‘16 R A I LWAY A G E | O C T O B E R 2 7 - 2 8 P R E S E N T E D BY R A I LWAY A G E

OCTOBER

27-28 AGENDA HIGHLIGHTS

ARLINGTON, VA KE Y BRIDGE MARRIOT T

Traffic trends: compressed natural gas, crude by rail, ethanol Can liquefied natural gas move without an FRA waiver? Is crude oil volatility being addressed? Climate change, energy independence and the railroads The carbuilding market: hazmat tank cars and covered hoppers Politics, a Presidential election and regulation: Changes or status quo?

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The U.S. and Canada: Harmony or disparity? SPONSORSHIPS & EXHIBITS Contact Jon Chalon at jchalon@sbpub.com, 212.620.7224

WWW.RAILWAYAGE.COM/ENERGY 212.620.7205

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Market First Charger rolls off the line

The first high-performance Charger diesel-electric passenger locomotive has rolled off the line at the Siemens manufacturing plant in Sacramento, Calif., and will soon begin testing and qualifying. The Charger, designed to operate at speeds up to 125 mph, is powered by a Cummins QSK95 16-cylinder, 95-liter-displacement engine rated at 4,400 hp.

North America Bay Area Rapid Transit (BART): Has started dynamic testing of the first of 775 Fleet of the Future rapid transit cars being built by Bombardier Transportation under a $2.5 billion contract. The first car arrived in San Francisco on April 6, 2016. BNSF Railway: Announced, along with partners Hillwood and Packwell, a framework agreement for construction of a new plastics export packaging facility in the rail-connected Alliance Westport industrial sector, which is located within the 18,000-acre, master-planned, mixed-use AllianceTexas development in north Forth Worth. ENSCO Rail, Inc.: Delivered a Track Geometry Measurement System and Corrugation Measurement System to the Shanghai Metro. The contract is “in continuation of a successful business relationship with China.” 8

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May 2016

Harsco Rail: Awarded a multi-year contract by Network Rail in the UK valued at more than $40 million. The award continues a long-standing contracting service from Harsco Rail that began in 2004, under which Harsco operates and maintains a fleet of precision rail grinders on Network Rail’s behalf. Wabtec: Has signed a contract with Parsons Transportation Group (PTG) worth about $30 million to provide equipment and services for a Positive Train Control (PTC) system for the Northern Indiana Commuter Transportation District (NICTD). PTG is System Integrator. Wabtec will provide its Interoperable Electronic Train Management System (I-ETMS®) equipment, TMDS® Dispatch and Back Office Systems that will include interfaces to the traction power system, wayside design, training and related services. The contract is expected to be completed in 2018. NICTD’s PTC system will be interoperable with Metra’s.

Worldwide: Czech Railways (ČD): Launched three international tenders for new rolling stock with a total value of around Koruna 10.8 billion ($451million). Moscow: Announced plans to order 50 new LRVs for Roubles 5 billion ($74 million) by the end of the year, with similar orders expected to be placed in each of the next five years. Qatar Railways (QR): Unveiled designs for the Doha metro and Lusail light rail vehicles, which are due to enter service in 2020. Kinki Sharyo is supplying 75 three-car metro trains, dubbed Al Faras. SJ (Sweden): Signed a contract worth more than SKr 1 billion ($120 million) with Knorr Bremse subsidiary Swedtrac for interior refurbishment of its fleet of 36 X2000 tilting intercity highspeed trains.


Update Supply Briefs Cummins receives Tier 4 certification for QSK95 Cummins Inc. has received Tier 4 Locomotive certification for its QSK95, making it the first single prime power engine certified by the U.S. Environmental Protection Agency (EPA). At 4,400 hp (3,281 kW), the QSK95 achieves the highest output of any 16-cylinder highspeed diesel, and is capable of a top speed of 125 mph (201 kph) as a prime mover. Combining Cummins latest-generation Modular Common Rail Fuel System (MCRS) with quad-turbocharging, the QSK95 delivers reduced noise and excellent response in a smaller footprint than that of mediumspeed diesels traditionally used in locomotives. Integrated Selective Catalytic Reduction (SCR) aftertreatment makes the QSK95 capable of achieving the ultra-lowemissions required at Tier 4.

NRE acquires HK Engine Components, LLC NRE Hagerstown, an affiliate of NRE, last month announced that it has finalized the acquisition of the assets of HK Engine Components, LLC (HKEC), a Hagerstown, Md.-based manufacturer and remanufacturer of EMD-style 710, 645 and 567 engine power assemblies used in the railroad and marine markets. The acquisition of HKEC will enable NRE to significantly expand customer options for engine solutions for the global market. Steven Beal, President of NRE, says he believes this move will “make NRE even stronger in the market moving forward.” Manufacturing will continue in the existing Weston, W.Va. and Hagerstown, Md. shops where a history of superior quality and performance has been maintained for several years. 10

Railway Age

May 2016

New York MTA to APTA: We’re leaving and moving on MTA’s Prendergast said the decision to leave APTA was a “difficult” one.

T

he New York MTA, North America’s single-largest public transportation agency, last month pulled the plug on Transit Member status in APTA. MTA’s decision, according to a blistering letter to APTA President and CEO Michael P. Melaniphy, was based on numerous reasons, not the least of which is what the MTA called a basic lack of stakeholder representation that has been unaddressed for at least five years. Melaniphy resigned on April 29. APTA Vice President-Member Services Richard A. White, an experienced public transit executive, is Acting President and CEO until a permanent replacement is selected. MTA Chairman Thomas F. Prendergast was the letter’s principal signatory. He was joined by the heads of all the MTA’s affiliate and subsidiary agencies: New York City Transit President Veronique Hakim; Long Island Rail Road President Patrick Nowakowski; Metro-North Railroad President Joseph Giulietti; and MTA Bus President Darryl Irick. Prendergast said the decision to leave

APTA “was a difficult decision carefully made after many conversations among MTA agency heads and with APTA leadership” and “represents the unanimous opinions of the entire MTA Executive Leadership Team.” MTA considered “the value to our agencies of our Transit Member status,” which costs the MTA some $400,000 in annual dues, and “the impact [MTA’s] departure from APTA might have on the public transit industry.” The letter pointed out that no “Legacy System” (NYMTA, NJ Transit, SEPTA, CTA, MBTA, PATH, BART, MUNI, PATCO, etc.) has voting representation on the APTA Executive Committee. Nor do any commuter rail carriers. This “is unconscionable,” Prendergast said. A public transit industry professional with no ties to the MTA and who communicated with Railway Age with the stipulation of remaining anonymous offered the following observations: “APTA has generally failed to address legacy system/commuter rail issues. The challenges of updating legacy systems to comply with such things as fire codes, FRA regulatory


requirements and crumbling infrastructure have simply not been properly addressed. Technical assistance and knowledge transfer has been poor, prompting MTA and other legacy systems to turn to other organizations such as the AAR, AREMA, TRB, UITP, ENO Foundation and Network Rail Consulting for this support. This work is not particularly coordinated, and APTA plays no role in it. “APTA’s governance structure is way out of whack with legacy systems and commuter rail operations, which represent 60% of public transportation ridership. There is no voice on the Executive Committee, and the legacy systems have become largely irrelevant in key APTA policy circles. Newer western properties dominate the Executive Committee and policymaking. There is a strong view that APTA is primarily a ‘bus and trolley’ group. “Form is more important than substance. There are way too many

conferences (13 per year), and they are not particularly coordinated for maximum effect. Further, APTA does not provide substantive solutions to the problems that become particularly costly and complicated on the older and more complicated systems. “Challenges facing commuter rail systems generally have been ignored by APTA. Over the past five to eight years, commuter rail agencies have been under near-constant assault by onerous and costly legislative directives. They can detract from the mission, drain resources, harm their served communities, and be demoralizing to the rider, the workforce and contractors. Two recent examples of costly federal mandates include the 2008 unfunded Positive Train Control requirement and the 2015 increase in the liability cap. Only at the very end of the legislative process did APTA get on top of these issues (and staff did a good job in the final analysis). However,

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APTA should have reached a firm position and strategy at a far earlier time. The expenditures required by these mandates alone cost billions. They divert critical resources such as core capacity upgrades, procurement of new equipment, and refurbishment or replacement of aging rolling stock as well as other critical safety and risk reduction and mitigation strategies. “We are obviously disappointed as NewYork MTA’s membership is important to us,” said APTA Vice President, Communications and Marketing Rosemary Sheridan. “We are continuing the conversation with MTA and we are working hard to show the value of APTA membership to them and all of our members. We believe that continued partnership and collaboration among MTA, APTA, and the overall public transportation industry is important as APTA serves the public interest and represents all modes of public transportation.”

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4/18/16 5:33 PM May 2016 Railway Age 11


Update KCSR to invest $20 million in Kansas-Louisiana main line

Kansas City Southern’s principal U.S. subsidiary, The Kansas City Southern Railway Company (KCSR), will invest approximately $20 million in 2016 in construction and improvement projects on KCSR’s main line from Kansas through Missouri, Oklahoma, Arkansas and northwest Louisiana. This line segment is a key component of the KCS network.

12

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Work began April 19 and will end in June. The project includes the replacement of six miles of rail and 92,400 crossties, as well as improvements to more than 100 grade crossings. Rail, crosstie and crossing improvements are planned between Pittsburg, Kan. and Spiro, Okla. Communities that KCSR is working through include Pittsburg, Kan.; Asbury and Carl

Junction, Mo.; Gentry and Siloam Springs, Ark.; and Watts, Westville, Stilwell, Marble City, Sallisaw, Gans and Spiro, Okla. Rail improvements are planned between Heavener, Okla. and Blanchard, La. beginning and completing in June. Communities that KCSR will work through on this segment include Page, Okla.; Mena, Cove, Vandervoort, Gillham and De Queen, Ark.; and Blanchard, La. “KCS, through its U.S. and Mexican subsidiaries, continues to invest in capital projects to expand network capacity, keep maintenance in a regular and healthy cycle, and enhance the safety of our operation,” said KCS CEO David L. Starling. “These investments also help us be an economic growth partner to our customers and the communities through which we operate.”


15,000 employees reach training milestone at CN campuses Fifteen-thousand CN employees have completed a range of training programs at the railway’s two education campuses since they opened in 2014. CN also unveiled plans to provide customer safety training under its new CN Campus Partnership Program. CN President and CEO Claude Mongeau said, “CN attaining the milestone of training 15,000 employees at our two campuses reflects the re-engineering of how CN hires a new generation of railroaders and upgrades the skills of current ones. Sustaining a skilled employee base and instilling a strong safety culture in our ranks are critical priorities for CN as it builds for the future.” “In the next stage of CN’s training evolution, we will offer safety-focused courses to our largest carload customers at our Winnipeg training campus starting this May. The CN Campus

Partnership Program courses will deal with track, basic rail safety and the requirements of safe switching operations,” Mongeau said. “We plan to roll out a similar customer program at our U.S. campus in suburban Chicago in the near future,” Mongeau said. “Our target audiences will eventually include smaller carload customers, short line railways and intermodal customers. We think this kind of collaboration will help ensure safer operations throughout the entire

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Update NJ Transit Hudson-Bergen Light Rail turns Sweet 16 In April 2016, New Jersey Transit’s Hudson-Bergen Light Rail (HBLR) celebrated its 16th anniversary of operation. HBLR was the first successful DBOM (Design/Build/Operate/ Maintain) deployment of a transit system in the modern era (post-World

War II) and represents a throwback to when public-private partnerships (P3s) were commonly utilized to build and operate railways. Such notable systems as the initial two divisions of MTA New York City Transit (IRT and BMT), the original Newark

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May 2016

City Subway, and the Baltimore & Ohio Railroad were so deployed. HBLR was initially deployed by a defense contractor, Raytheon, during the administration of New Jersey Governor Christine Whitman. The system is currently operated by TwentyFirst Century Rail (TFCR), a partnership of AECOM and Kinkisharyo USA. HBLR, today comprising some 20 route-miles, has become the progenitor for additional public-private ventures, such as Denver’s Eagle PPP commuter rail and Vancouver’s Canada Line, and most recently, Ottawa’s new LRT. One of the most important elements in DBOM deployments is continuity of corporate interest by the private partners. The consequences of investment decisions made within the allowable design/build criteria regarding design or construction judgments must be carried through to the operation. A flaw in a DBOM potentially arises where the design/build lead firm exits the private partnership, thereby leaving the operations and maintenance group to somehow muddle through what may be less-than-optimal configurations or quality of work. On HBLR, even with the transition from lead partner Raytheon to Washington Group and ultimately to AECOM, the corporate interest, key personnel and the roles of the private partners have remained as they were at opening. Likewise, the customer (and owner), NJ Transit, continues to recognize the importance of working in partnership to deliver the highest quality of rail service. Importantly, working within the tight budget constraints facing the State of New Jersey, both parties have worked to find creative means of incrementally extending or otherwise enhancing the system, including the most recent extension to 8th Street in Bayonne. Regardless of the challenges, 16 years of innovation, growth and successful safe operation give witness to the ability of this P3 team in New Jersey to continue to move forward.


Watching Washington Frank n. wilner

Hunter Harrison: Disrupting the status quo

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ational Transportation Policy mandates that railroads be managed efficiently. While railroad performance is reflective of improvement, some railroads excel, with the reasons increasingly under digital scrutiny by activist money managers entrusted with investments of foundations, endowments and pension funds seeking superior returns. Consider Berkshire Hathaway’s acquisition of BNSF; The Children’s Investment Fund’s (TCI) attempt to refocus CSX management through election of new board members; Pershing Square Capital Management’s sacking of Canadian Pacific’s (CP) board and CEO in favor of Hunter Harrison, who previously turned Canadian National (CN) into the best of class; and Pershing’s recent attempts to extend Harrison’s management template to Norfolk Southern (NS) or CSX. Who better to analyze investor activism than Snehal Amin, nine years ago a most unwelcome (at CSX) change agent? A Stanford MBA now age 41, Amin currently leads Houston-based WindAcre Partnership, managing some $800 million in investments. Amin says Harrison’s management template is crucial to extending and improving the railroad renaissance: • At Illinois Central, CN and CP, Harrison improved the profit margins (net profit as a percentage of revenue) from worst to among the best of Class I railroads. Says Amin: “There is no evidence that during his 12 years at CN, Harrison skimped on maintenance or capital expenditures while reducing costs by hundreds of millions of dollars. For every ton-mile CN moves, its market value is 1.5 times that of CSX, NS and UP, creating 50% more value than its peers.” • Harrison improves profit margin through more efficient use of assets,

such as scheduling trains to smooth operating peaks and troughs. At CP, he parked 600 locomotives—almost $2 billion in the previous management’s capital investment—while handling more traffic. Says Amin: “Throwing money at problems, such as purchasing more locomotives, and their attendant additional crew and maintenance costs, is the easy, short-term way to address congestion. It’s also expensive. It’s better to use what you have more efficiently, but that requires hard work and an ownership mentality.”

He embodies the creative destruction concept, substituting the more efficient for the less efficient. • Since his 2012 arrival at CP, Harrison improved CP’s operating ratio (operating expenses as a percentage of revenue) from last place (77%) among Class I’s to second (61%). Industry best is CN (58%), where Harrison trained his successor, Claude Mongeau. By contrast, NS (73% in 2012) barely improved, finishing last among Class I’s in 2015 (72%). • Under Harrison, CP share price increased 149% (2012-2015), vs. 14% for NS, 22% for CSX and 49% for Union Pacific. The market values of CN and CP, individually, exceed the combined market value of CSX and NS. • “Only after CP sought merger with NS management did it feel sufficiently challenged to begin streamlining and

offering investors future guidance on management targets,” Amin says. He cited similar actions after TCI challenged CSX by seeking to install new board members possessing railroad backgrounds and beholden to shareholders, not the railroad’s chairman and CEO. “As the largest minority shareholder, we felt entitled to have the board listen to us,” Amin said. “We met fierce resistance. We become activists—investors with an ownership mindset—to challenge the status quo.” Amin says CSX, NS and UP managements “are not being adequately challenged because they do not separate the roles of chairman and CEO as do BNSF, CN and CP. An independent, industry-knowledgeable chairman, responsible to shareholders, should be challenger-in-chief of the CEO. Combining the titles allows the chairman/CEO to handpick a board of directors, encouraging perpetuation of the status quo and compensation less reflective of results. The best performing railroads have separate chairman/ CEO roles. I don’t think that is a coincidence.” Pershing Square’s effort to place Harrison in charge of a merged CP-NS was called off, but a non-railroad investment consortium—similar to Berkshire Hathaway—could emerge to take CSX or NS private without regulatory approval, and install Harrison or the Harrison template. Curse Hunter Harrison and one may as well curse steam power that replaced wind, or internal combustion engines that replaced steam. Harrison embodies the economic concept of creative destruction, a disruptor of the status quo substituting the more efficient for the less efficient—the free market’s messy means of delivering progress. It’s also the stuff of National Transportation Policy. May 2016 Railway Age 15


The Thoroughbred that got away

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he dust has settled, the smoke and mirrors have cleared. The Thoroughbred stands tall and proud, somewhat leaner, independent, surveying the landscape with a renewed sense of purpose, and a stronger feeling of confidence in its destiny. It has been put to the test. It has eluded a forced pairing with a strong, persistent, worthy suitor, albeit with assistance from those charged with guarding the stable. For the foreseeable future, Norfolk Southern will remain Norfolk Southern, having outrun unwanted suitor Canadian Pacific. CP, in hot pursuit, abruptly slammed on the brakes before it collided with a mounting wall of resistance from the U.S. Departments of Justice and Defense, members of Congress, rail union leadership, railroad customers, and NS itself. The Surface Transportation Board can, for now, put aside dealing with merger petitions and declaratory orders. Railroad analysts and economists can continue to debate the pluses and minuses of a race to form a transcontinental railroad that never came close to leaving the starting gate. The book closed on Monday, April 11, 2016, when CP terminated its efforts to merge with NS. This included, CP said, “withdrawal of a resolution asking NS shareholders to vote in favor of good-faith negotiations between the two companies. No further financial offers or overtures to meet with the NS board of directors are planned at this time.” Norfolk Southern responded by saying the railroad’s 16

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board and management “are committed to enhancing value for shareholders. Since the company’s new management team was appointed, we have been focused on implementing a strategic plan to streamline operations, reduce expenses and maintain superior customer service levels. The NS team has made significant progress and is on track to achieve annual productivity savings of more than $650 million and an operating ratio below 65% by 2020. We are confident the continued execution of our plan will deliver superior value to all of the company’s stakeholders by best positioning NS to succeed. We thank our shareholders for their input and support throughout this process and our employees for their hard work and dedication to strengthening Norfolk Southern as a critical component of the nation’s transportation infrastructure.” So, that appears to be it, for now. The hunter (no pun intended) and the hunted can take a break, assess the situation, and move on. Enough with the official corporate-speak, the usual rhetoric, filled with plainvanilla-cookie-cutter phrases like “shareholder value” and “streamlining operations,” crafted by communications pros playing offense and defense, depending upon who signs their paychecks. Here are two outside observations worth noting: • Cowen and Company Managing Director and Railway Age Wall Street Contributing Editor Jason Seidl: “Calling

Steve Schmollinger

Norfolk Southern has been looking over its shoulder for almost a year. Now, it can focus its attention ahead.  By WILLIAM C. VANTUONO, Editor-in Chief


off the dogs: CP is walking away from a negotiating table that never really existed. Presumably it was the Department of Justice’s opinion that broke the camel’s back as the company feels there is no clear path to a friendly merger. Unless another party should take the issue up, shareholders will not be voting to urge NS management to speak with CP management. As we’ve been saying for some time, the likelihood of a deal getting done was a long shot. In recent weeks, many parties have expressed their opposition to a transaction, but the most significant deterrent came on April 8, when the DOJ said the voting trust proposal put forth by CP ‘makes no sense.’ Other recent letters of opposition came from the U.S. Army and Rep. Bill Shuster, the Chairman of the House Transportation and Infrastructure Committee. This followed several high-profile transportation companies coming out against the deal, such as UPS and FedEx.” • A railroad president, speaking off the record: “NS was a potential acquisition victim—prey, really—that escaped. CP underestimated the heights of the external challenges, in particular the influence of the shipping community and government, that big money could not overcome. So there’s a lesson to be learned among the ‘Big Seven.’ The customer is king, with a captivating voice, and government does have the capability of non-regulatory influence. Combining the two makes it very clear: Do what you’ve committed to do when it comes to the customer and fulfill your regulatory requirements, without exception. It will afford nothing but upside in the way of customer growth and weaken the need for any further regulatory

tightening. Customers and government are powerhouses to be respected, not fought, provided you perform to the expectations set forth before you.” NS had been saying all along that it was making changes on its own to improve its performance, and didn’t need outside help. A few days after CP called off the chase, NS released its first-quarter 2015 financials. The results seem to indicate that it is indeed pulling out all the stops to follow through and deliver on its promises. NS reported “strong” first-quarter 2016 results that “demonstrate the significant progress we are making in line with our strategic plan,” in the words of chief executive Jim Squires. On the minus side, NS’s railway operating revenues were $2.4 billion, 6% lower compared with first-quarter 2015, and volume declined 2%. Average revenue per unit decreased 3% as the effects of higher rates were more than offset by a $114 million, or 70%, decline in fuel surcharge revenues. On the plus side, railway operating expenses were $1.7 billion, down 13% year-over-year, and income from railway operations was $723 million, up 19%. Merchandise revenues were $1.5 billion, 2% higher than the same period last year. Led by an 18% increase in automotive traffic, volume grew in all business groups except chemicals, which was impacted by fewer crude oil shipments. NS’s five merchandise commodity groups reported the following year-over-year revenue results: • Chemicals: $419 million, down 3%. • Agriculture: $386 million, up 3%. • Metals/Construction: $300 million, down 3%. • Automotive: $254 million, up 16%. • Paper/Forest: $190 million, up 3%. Intermodal revenues were $522 million, down 12% compared with first-quarter 2015. Volume was even for the quarter as lower domestic volumes offset growth in international volumes, due to the restructuring of NS’s Triple Crown Services subsidiary. In line with the rest of the industry, coal revenues were $349 million, 23% lower, due to mild winter temperatures, low natural gas prices and a weak global export market. The final tally: Net income was $387 million, up 25% year-over-year, diluted earnings per share were $1.29, up 29%, and the railway operating ratio was 70.1%, an improvement of 8% over the prior year and an NS firstquarter record. “Since I became CEO in June [2015], our team has been committed to streamlining operations, reducing expenses and maintaining superior customer service levels,” said Squires, who must be relieved that there’s no longer a target on his back. “Our focus on strengthening Norfolk Southern is yielding results, and the company is now on track to achieve productivity savings of about $200 million and an operating ratio below 70 in 2016. We are confident the continued execution of our strategic plan will deliver superior shareholder value by best positioning NS to succeed while ensuring the company is prepared to capture revenue and volume growth opportunities in 2016 and beyond.” May 2016 Railway Age 17


NoRthfolk southern

“NS blew away our and consensus EPS estimates as the company’s operating ratio improved more than 600 basis points to a 1Q16 record of 70.1%,” noted Jason Seidl. “After CP’s attempt at an acquisition, NS has kicked its cost-cutting initiatives into high gear. NS has been streamlining operations and adjusting to not only a soft freight environment, but also toward a structurally better OR longer term. NS’s 1Q16 EPS of $1.29 blew away our above-consensus estimate of $0.99 driven by an OR that was 520 basis points better than our forecast. Despite revenue falling 6% year-over-year, the company grew operating profit by 19% and EPS by 29%. Share repurchases, a lack of weather-related costs, moreefficient handling of freight cars, 12% fewer locomotives and nearly 2,000 fewer employees were key reasons for the big earnings beat. The top line will continue to be a headwind as coal stockpiles are at 100 days (vs. a normalized 60) and intermodal competition from truckload carriers is unlikely to abate for another couple of quarters. Intermodal pricing gains are being restrained by a loose truckload market. Management also expects the auto business to slow on a year-over-year basis as well, something we’ve already heard from rival railroads and have modeled into our estimates.” Seidl pointed out that NS is making more-aggressive changes than other Class I’s. “NS echoed themes similar to its peers,” he said. “Headcount reductions, stored locomotives, coal stockpiles, more favorable weather and better service have aided 1Q16 margins. However, NS has taken its productivity initiatives to another level. The company is now on pace for an additional $70 million of savings, or $200 million in total. That’s up 54% from prior guidance of $130 million. NS still expects to achieve $650 million in annual savings and a sub-65 OR by 2020. If management can keep posting results like 1Q16, it may have many people believing that will happen sooner rather than later. We think management’s guidance for a sub-70 OR in 2016 should be easily achievable, and we are now forecasting 68.1%—down from our prior estimate of 70.0%.” In his first annual report letter to shareholders since becoming CEO in 2015, Jim Squires wrote that the company “has taken decisive and deliberate action to capitalize on significant growth opportunities within our unique network.” He pointed to several cost control initiatives and network improvements, among them: • Closing the Roanoke, Va., office building and consolidating or relocating approximately 500 positions. • Restructuring the company’s Triple Crown Services subsidiary. • Reducing capital spending. • Expanding track rationalization in the coalfields. • Idling a major lake coal terminal. • Consolidating two operating divisions. While implementing these initiatives, NS “has maintained its commitment to providing superior customer service,” Squires said. “During this time, we achieved near all-time best service levels. In addition, we expanded our ability to 18

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May 2016

serve markets in the Northeast by acquiring the Delaware & Hudson Railway Company’s line between Sunbury, Pa., and Schenectady, N.Y.” What happens next? Observes Contributing Editor Frank Wilner in this issue’s Watching Washington (p. 15): “Pershing Square’s effort to place Hunter Harrison in charge of a merged CP-NS was called off, but a non-railroad investment consortium—similar to Berkshire Hathaway—could emerge to take CSX or NS private without regulatory approval, and install Harrison or the Harrison template. Curse Hunter Harrison and one may as well curse steam power that replaced wind, or internal combustion engines that replaced steam. Harrison embodies the economic concept of creative destruction, a disruptor of the status quo substituting the more efficient for the less efficient—the free market’s messy means of delivering progress.” How much of a “mess” would have been created had circumstances been different and CP succeeded in capturing and corralling The Thoroughbred remains open to interpretation. Whether another attempt is made to form a transcontinental railroad, regardless of whether Norfolk Southern is part of that attempt, remains to be seen. RA

Steve Schmollinger

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Fighting Fire with Fire Trains

BNSF’s large fleet of firefighting rail equipment is far advanced from the basic water-filled tank cars of the past.

Specialized equipment and training help protect assets from wildfire damage. By Bruce E. Kelly, Contributing Editor

E

very summer, particularly in the Western U.S. and Canada, fires triggered by lightning or human activity are an ordinary occurrence. During recent summers, however, wildfires have put railroads increasingly in the crosshairs. In 2014 and 2015, fires that spread to roughly 300,000 acres in northcentral Washington broke previously held records for that state. The blaze in 2014 destroyed several communities and caused trestle and track damage to short line Cascade & Columbia River Railroad. Other fires have led to closures of BNSF and Union Pacific main lines in Washington, Idaho and Montana, and prompted the deployment of firefighting resources throughout the region. Measured individually, these recent wildfires were smaller than some recorded in prior decades. Burn

20 Railway Age May 2016

complexes of 3 million acres or more struck the mountains of British Columbia and Alberta in 1950, Idaho and Montana in 1910, and New Brunswick in 1825. A cross section taken from an ancient Ponderosa pine in western Montana revealed scars from no less than 20 fires dating clear back to 1612, all but one of them occurring prior to 1892. The potential for wildfires to damage railway property and disrupt service has been around since the first locomotives breathed steam. Today, railroads place an increased emphasis on stopping wildfire damage before it happens. UP spokesman Francisco Castillo said, “Our focus has been on preventative measures, so that we’re ready to respond in the event wildfires were to reach UP property.” Castillo outlined those measures for Railway Age: “We have an active Fire Risk Assessment program to determine our high risk

territories. Water tenders are strategically staged throughout critical mountain pass territory (i.e. Oroville and Dunsmuir, Calif.; Pendleton, Ore.). Our team monitors the U.S. Forestry wildfire data 24/7. We participate in joint meetings with U.S. Forestry and relevant state agencies in high risk territories to prepare for any incident.” UP spends an estimated $20 million annually on vegetation control. A fire prevention program under way in the Donner Pass area of California during 2015 was “focused on 80 miles of the highest fire concentration.” UP said, “The project will clear the right-ofway of all grasses, brush and debris, and wood material (cleared trees) will be chipped on site and donated to the Rocklin Power Plant, where it can be used as a fuel source for the city.” The rail industry’s fire-suppression efforts often go unnoticed. Some short


lines operating in fire-prone areas run a hi-rail vehicle equipped with water and hoses behind each train during the height of wildfire season. Companies whose trackage runs through terrain that’s inaccessible to rubber-tired firefighting equipment will often keep one or more tank cars filled with water, outfitted with pumps and hoses, and ready to deploy at a moment’s notice. Remarkably dry conditions during 2015 brought an early start to the fire season, with BNSF dispatching a Spokane, Wash.-based fire train on two separate occasions in mid-June to assist aerial and ground resources on that city’s outskirts. BNSF keeps similar fire trains on standby throughout the Northwest, but the role they play in protecting vital transportation corridors and supporting local agencies didn’t really get widespread attention until August 2015, when a large forest fire on the edge of Glacier National Park closed a section of U.S. Highway 2 in northwest Montana and suspended freight and Amtrak service on much of BNSF’s Northern Corridor. Two fire trains, one from Spokane and one from Havre, Mont., helped transport firefighters to and from the scene and provided protection for timber snowsheds and wood-decked bridges. BNSF’s large fleet of firefighting rail equipment is far advanced from the basic water-filled tank cars of the past. The first of these modern fire trains to be built was in Spokane in the fall of 2007. And just in time. BNSF said, “We were just putting the final stenciling on it when it was called down to California, where a wildfire was headed toward a wooden trestle on our right-of-way.” The Spokane fire train utilizes bulkhead flatcars that have been converted to carry three to four modular tanks, each carrying roughly 3,250 gallons of water. Swiveling water/foam cannons are mounted on elevated platforms at both ends of the train’s center car, which also carries a 500-gallon tank of aqueous firefighting foam. BNSF says, “We can reach about 300 feet up an embankment.” The train also includes a caboose that serves as a shelter and command center and houses a generator to power lights for nighttime firefighting.

Fires triggered by lightening or human activity are common in the summer months.

BNSF built a second fire train in 2008 in Vancouver, Wash., with a different design approach. Stationed along the Columbia River at Wishram, Wash., it uses highly modified tank cars with generators and pump systems housed underneath and swivel cannons mounted on top, plus a command center caboose that’s outfitted with a spray bar that can soak wooden ties or bridges while the train is in motion. Since fire train crews often work jointly with local responders, hoses and couplings on the BNSF railcars are made compatible with fire trucks and other equipment. The cars also have siphons, which allow them to be refilled from storage tanks or natural water sources near the right-of-way. Walter Anno, Ed Dowdy and the team of BNSF carmen in Vancouver told Railway Age, “We convert and build steel firefighting tankers. We have been building at least one a year for some time now.” They say the Wishram-based train currently has four tank cars, and other fire tank cars have been based at Vancouver, as well as Klamath Falls, Ore. The Vancouver shop has utilized two basic car types: 16,000-gallon tank cars originally built in the 1940s for water transport service on the Santa Fe Railway, and 23,000-gallon tank cars that were converted in the 1980s into fuel

tenders for Burlington Northern. Additional fire trains based on the Spokane flat car design have been stationed at Seattle, Wenatchee and Pasco, Wash. As for the rest of the BNSF system, spokesman Gus Melonas said, “For the Southwest, we have an adequate fire protection plan with equipment, manpower and material in place designed to respond as necessary, same as in the Pacific Northwest.” Wildfires burned more than 10 million acres and destroyed more than 4,500 homes and structures across the U.S. in 2015, an all-time record, according to Agriculture Secretary Tom Vilsack. In a report released early this year, Vilsack said that 2015 wound up being “the most expensive fire season in our Department’s history, costing more than $2.6 billion on fire alone.” The U.S. Forest Service was forced to borrow from funds normally used for non-fire-related operations in order to shore up its depleted firefighting budget. Railroads that operate in wildfire country are learning that they, too, must allocate sufficient funding toward equipment, training and preventive measures. Melonas said BNSF approaches that funding with “the same strategy as with derailment response and snow removal. We invest as necessary, as this is an ongoing railroad response issue.” RA May 2016 Railway Age 21


BTE 420 Hi-Rail Backhoe with a BTE Tube Talon attachment.

Quick and tie-dy

changeout Every crosstie put into track will one day need replacement. These machines can handle the job. By Mischa Wanek-Libman, Engineering Editor

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ailroads continue their crosstie replacement efforts, even in leaner years, to maintain service and safety. Companies that manufacture tie replacement equipment continue to focus on improvements that will translate into productivity gains. As tie replacement equipment becomes more versatile, many companies say the next step may be to improve the replacement process itself.

Productivity gains

“Ballast Tools Equipment (BTE) has learned that the key to our customers’ needs for tie replacement is production: How many? How fast? Virtually everyone has less track time, manpower and money to replace more ties. System slow orders and Federal Railroad Administration requirements demand better track conditions and fast spot repairs. Additionally, smaller work windows necessitate equipment that can hi-rail to a work site and be able to off-track and get out of the way to maintain train velocity,” says Rick Bayers, BTE Marketing Manager. The company’s fleet of High-Rail Backhoes and Excavators can be equipped with a variety of tie handling equipment, 22

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May 2016

such as the BTE Tie Talon or BTE Tube Talon. Bayers says this equipment can hi-rail to a problem location and replace ties, working on- or off-track and then fill, tamp, restore the rail to service and move out quickly to the next problem area. The BTE Tie Dragon is an excavator-mounted attachment that can grab, unload, space and place as many as seven concrete ties at a time for new construction, rebuilding or restoration. “The long reach of the excavator can offload from trucks or flat cars and place spaced ties in one motion, so a good operator can correctly locate and place more than 125 ties per hour. That’s 1,000 ties per day,” says Bayers. Bayers says BTE offers a specialized Bridge-Tie Replacement System that can safely replace more than 150 bridge ties a day by utilizing two BTE Bridge-System Excavators equipped with BTE Track-Jacks. “This is a great combination of production, at more than eight times the speed of many bridge gangs, and safety with no exposed workers on the bridge structure,” he says. Bayers notes that bridge tie replacement is both a safety and production challenge for any railroad: “Starting with our


patented Bridge Stabilizer System, which can work with wood or steel span bridges, a tie structured bridge can be rebuilt with new ties, including removing the existing tie bridge deck, re-drilling and reinstalling J-bolts, continuously replacing the bridge deck ties and side rails, and then refastening the rail in place. The system keeps exposed workers off the bridge and safe while delivering real production results.”

Harsco’s Drone Anchor Adjuster is designed to travel on rail while adjusting the position of the rail anchors to the ties.

Continuous Improvement

Harsco Rail says its customers pay attention to total cost of ownership and look for tie replacement equipment that offers significantly more in terms of increased productivity. “That is why Harsco Rail is dedicated to continuous improvement,” says the company. “Adapting new technology to help a machine work more efficiently and reduce safety hazards is one of our highest priorities.” Harsco Rail has been busy the past few years developing new offerings to meet customer needs and expectations. The Drone Anchor Adjuster is designed to travel on rail while continuously adjusting the positional relationship of rail anchors to the ties. “Our high production continuous action equipment has the capability to squeeze all four anchors on each tie at a rate of up to 25 ties per minute. This machine uses Jupiter, Tie Finder and Drone Safety features to help reduce manpower,” says Harsco Rail. The company is also developing multiple-function machines, which are true to their name and offer multiple functions in a single machine. “Having a machine that can perform additional work reduces operating costs because it requires fewer engines, drive assemblies, hydraulic pumps, etc. It also allows for faster gang start-up (fewer machines to space out),” the company explains. “The small modular tie exchanger executes efficiency in tie removal or insertion on the track. The modular base chassis has been designed for use across a series of machines. This common platform improves serviceability, ease of training and spare parts commonality. The operator’s cab is equipped with heating and A/C to provide a safe and pleasant work environment.”

BTE 308 bridge excavator replacing ties in Laurel, Miss.

BTE 329 excavator with a BTE Tie Dragon attachment.

Customized Solutions

Knox Kershaw Inc. offers two types of machines that are used in the tie changeout process: A low production tie exchanger, the KTR 400 Tie Replacer, and several models of tie handlers, the KTC 1200 and KTC 2000 tie cranes, and the KBC 1100 and 2100 model bridge cranes. The company’s bridge crane comes in a standard and heavy-duty version. The heavy-duty unit incorporates an independent boom swing, larger axles and wheels and multiple grapple options including brush-cutter heads. The company says both machines incorporate rail clamps for safety while working on bridges and elevated sections and a winch to assistant in the handling of both wood and concrete ties and bridge caps. “Customers consider our KTR400 tie replacer as a simple, easy to maintain, cost-efficient solution to spot tie replacement, low volume tie gangs and narrow clearance envelopes, mainly transits, where traditional production machinery will

not fit. Customers prefer our cranes for their reliability and customization options,” says George Pugh, Vice President of Operations. “Large spacious cab designs with optional additional seating, multiple grapple and brush-cutter options and independent boom swing models available in both tie crane and bridge crane models make the Knox Kershaw Inc. crane a very strong candidate when purchasing new equipment.” Two-Minute Exchange

Mitchell Rail Gear says its customers are asking for multipurpose machines with higher productivity capabilities and cost effectiveness. Estel Lovitt, President of Mitchel Rail Gear, says the company’s solution, the Mitchell Tie Switcher System, transforms a customer’s choice of backhoe into a Backhoe Tie May 2016 Railway Age 23


M/W Focus - Tie Renewal

Switcher. The system has several elements, including rail gear, rail clamps, a 360-degree rotating tie head, parallel linkage out-and-down outriggers, tool circuit, tamper and ballast regulator. “The system is easy to learn with the modern backhoe joystick controls. A railroad tie can be exchanged in two minutes without the need for additional support equipment such as a tie crane,” says Lovitt. “A typical maintenance program consists of changing out every third tie and then getting off the track to let trains go by. We are able to accomplish this by not disturbing the rail gauge. We can lift the track in a vertical motion and set it back down in its original position. The process consists of clamping onto the rail and lowering the jack cylinders from the out-and-down outriggers that move the rail vertically so the tie will freely come out or in. The standard backhoe loader pivot style stabilizers force the rail inward as it is being raised resulting in the track being forced out of alignment,” says Lovitt. The company’s 360-degree rotating tie head opens to two positions to accommodate wood, concrete, or larger crossties. “Our tie head is designed to accept jaws for wood and concrete ties, as well as jaws for handling rail. Our system is ideal for working on bridges because our parallel linkage out-and-down outriggers are effective in tight quarters such as bridges, because the jack cylinder stays vertical throughout its extension reach, whereas pivot style stabilizers have to pivot through a large arc requiring more side distance that is not always available on a bridge,” says Lovitt. “The Mitchell Tie Gang System for Backhoe Loaders is very efficient with all its special attachment work tools and still has the ability to get off track anywhere and perform its normal backhoe digging on the ground.” Process Improvements

“In general, our railroad customers have continued to emphasize safety, productivity and ease of maintenance. Nordco has answered the railroads’ request for continued improvement in these areas by focusing on continually evolving our tie renewal equipment,” says Bob Coakley, Director, Sales and

24

Railway Age

May 2016

RCE’s Deere excavators contain the latest technology for safe operation.

Marketing, at Nordco Inc. In 2015, Nordco introduced the Nordco TRIPP HD, which it describes as its next generation tie exchanger, featuring a new heavy-duty workhead that will increase component life by more than 50%. Nordco also introduced its Nordco AA2R - Model B anchor adjuster in 2015, which functions as both an anchor spreader and anchor squeezer. The AA2R - Model B features an improved workhead design and is three-times faster than the Model A. “The one additional focus of our customers is to mechanize the plate handling process. Today, plate handling in the tie changeout process is a highly manual task that requires several people walking along the ballast and manually handling plates,” says Coakley. “Nordco is developing equipment that utilizes patented Nordco technology that will mechanize the plate handling process and get people off the ground completely.” Coakley points out that while tie replacement equipment has improved during the past decade, the tie changeout process has not. “The process has generally remained the same, and many of our customers have come to realize that the next ‘big leap’ in productivity improvements in the tie changeout process will likely require a change to the overall process,” he says. “Nordco is actively working


M/W Focus - Tie Renewal

with all of the major railroads to design new tie renewal processes and equipment that produce a breakthrough in productivity for tie changeout.” Machine Versatility

“Progress Rail Services’ Maintenance of Way division has been an industry leader in tie handling equipment with the Kershaw Model 12-12 Tie Crane,” the company says. “This machine is designed to meet all of today’s industry demands, including high productivity, ease of operation, ergonomic controls and maximum visibility. The machine is also strategically designed for ease of access to all components for daily maintenance or repair. Customer demands have recently called for new safety features such as an automatic swing stop system that will limit the handler’s swing to prevent fouling adjacent tracks. The model 12-12 tie handler can also be equipped with rail clamps and hydraulic tilting tie head to work on bridges and to aid in handling switch ties. Progress Rail has also recently introduced the Kershaw Model 2000 tie handler that has all the features of the Kershaw Model 12-12, but with an increased load handing capability. The Kershaw Model 2000 can handle up to two concrete crossties in a single move and can also be equipped with an enlarged five tie basket grapple for handling replacement ties,

making the machine more productive than other models on the market today.” Off-Track Option

Rail Construction Equipment Co. (RCE) says flexibility is a key feature gained by its customers, both railroad and contractor, that have utilized its excavator-mounted tie heads. RCE notes that the attachments can be used on machines with or without hi-rail gear, and while use of the attachments may result in a lower productivity rate as compared to a conventional tie gang, the user will see fuel savings, decrease needed equipment, reduce manpower requirements and gain the ability to perform tie replacement without interrupting railroad traffic flow. As well, a broader class of operator can use the excavator, given its easy-to-operate design. Its Deere excavators contain the latest technology for safe operation. RCE has also worked to incorporate options on its tie heads. Some of these options include 180-degree and 360-degree head rotation, and the ability to be mounted on tractor loader backhoes. RCE says it is working to increase the size options and number of machines that can handle tie replacement. RCE also provides a smaller compact excavator, the Deere 50G, equipped with bridge clamps as an alternative machine for tie replacement and bridge maintenance. RA

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North American Freight Railcar Review

Replacement needs are keeping carbuilders busy in a tough traffic By David Humphrey, Ph.D., Senior Analyst, Railinc Corp., for Railway Age environment

28 Railway Age May 2016

Railinc’s annual analysis of the North American revenue-earning fleet shows the total fleet increased for the fifth consecutive year. In 2015, the increase was driven by the growth of two key subfleets—tank cars and covered hoppers. The average age of cars declined for the fourth year in a row, suggesting more new cars are joining the fleet as older cars exit. And, larger cars—those with gross rail loads of 286,000 pounds (GRL 286)—continue to predominate among new additions.

Key Findings

The growth rate of the revenue-earning fleet increased to its highest level since Railinc began compiling this report in 2011. The total fleet size is up 3.3% from year-end 2014 to year-end 2015, compared with a 2.6% increase the previous year. Increases in tank car and covered hopper populations drove growth. Tank cars grew the most of all the sub-fleets, to 404,000 units, but at

Bruce Kelly

T

he revenue-earning fleet is a subset of the North American rail fleet largely composed of freight cars used in interchange service and against which an interline waybill can be placed. It is made up of six sub-fleets: hoppers; covered hoppers; gondolas; flats; tank cars; and boxcars. It excludes locomotives, intermodal trailers and containers, maintenance-of-way equipment and end-of-train devices.


railinc Fleet Size Increases for Fifth Straight Year

FIGURE 1. NORTH AMERICAN FREIGHT CAR FLEET, BY GROUP (Counts at year-end and shown in thousands. The total numbers exclude equipment that was scheduled to age out of the fleet in the first weeks of 2016.)

The revenue-earning fleet realized a net increase of 52,000 cars in 2015, and grew at a slightly higher rate than the previous year. At the end of 2015, the revenue-earning freight car fleet totaled 1.605 million units, up 3.3% from the previous year (Figure 1). Tanks again drove growth, increasing by 8.9% over 2014. Covered hoppers were up 5.3%, and flat cars increased 1.6%. In contrast, boxcars and gondolas were down 1.8%, and hoppers decreased by 1.4%. The average age of railcars in the revenue-earning fleet continues to decrease (Figure 2). In 2015, the average age was down 0.2 years to 19.6 years, the lowest since Railinc implemented the new Umler®

More than 130,000 new cars have joined the revenue-earning fleet since 2014.

FIGURE 2. NORTH AMERICAN FREIGHT CAR FLEET, AVERAGE AGE, IN YEARS (Average age at end of year.)

a reduced-growth rate. The covered hopper sub-fleet—the largest sub-fleet at 519,000 units—added nearly twice as many cars in 2015 as in the previous year. And, the two smallest sub-fleets— hoppers (140,000 units) and boxcars (109,000 units)—declined for the sixth consecutive year. On a percentage basis, gondolas (224,000 units) and boxcars declined the most of any sub-fleet. The average age of the revenueearning fleet decreased in 2015 for the

fourth consecutive year. It fell from 19.8 years to 19.6 years. The decrease suggests more newer cars are joining the fleet as older cars exit. The trend of GRL 286 cars predominating among additions to the revenue-earning fleet continued in 2015. In the past six years, GRL 286 cars have accounted for 83% of new additions to the fleet, and again held steady in 2015. Larger cars enable operational efficiencies that reduce costs and ease logistics challenges.

system in 2009. More new cars were added as older cars left the fleet in 2015. This suggests the economy continues to head in a positive direction, since historical data show that fewer new railcars join the fleet during and immediately following economic dips. More than 130,000 new cars have joined the revenue-earning fleet in the past two years, and the number of new cars added in each of the last five years has exceeded 40,000. Historically, the average age of the fleet and the number of cars added mirror the economic environment (Figure 3). When the economy is strong, as in the mid-1990s and mid-2000s, the fleet tends to be refurbished with the addition of new equipment. During periods of recession—such as around 1991, 2002 and 2009—the amount May 2016 Railway Age 29


railinc

FIGURE 3. NUMBER OF CARS BY AGE

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of new equipment added to the fleet decreases significantly. Over the past 20 years, the vast majority of new railcars added to the revenue-earning fleet are GRL 286. This trend continued in 2015 (Figure 4), though the number of GRL 263 cars increased by about 10,000, driven by the growth in tank cars. The fleet continues to add GRL 263 and GRL 220 cars, but at a much lower rate than GRL 286 cars. Sub-Fleet Trends

There are more than 700 equipment types among cars registered in the Umler system, and for the first time since Railinc began producing this report in 2011, nine of the top 10 car types are either tank cars or covered hoppers. The only car type to leave the top 10 in 2015 was a type of open hopper used almost exclusively in coal service. As demographics of the sub-fleets change, so do the average car size and the total combined cubic capacity of all the units. For example, with the growth in the tank car population, the total fleet capacity has increased by 40%. Most new tanks are large, which has also pushed up the average car size since 2009. The total fleet capacity for covered hoppers has increased, but the average car size has decreased, because

most new covered hoppers are small. The boxcar population decrease has driven down the total boxcar fleet capacity. Large boxcars have joined the fleet, which led to an increase in average car size, but not at a fast enough rate to offset the population loss. And, while the average car size for unequipped open hoppers is unchanged since 2009—the total fleet capacity is down 30%, suggesting these cars are not being replaced when they exit the fleet. Covered hoppers are commonly used to ship commodities such as grain and plastics. The covered hopper sub-fleet increased by 5.3% in 2015, to 519,000 cars. The sub-fleet has grown by 2.7% or more in three of the last four years, and it is the largest sub-fleet in North America, making up about 32% of the total revenue-earning fleet. Large covered hoppers, which have capacities of 5,000 to 6,000 cubic feet, account for 12% of the revenue-earning fleet. Medium covered hoppers, which have capacities of 4,000 to 5,000 cubic feet, make up 8% of the fleet— down one percentage point from 2014. Increases in the number of new, small covered hoppers continue to drive the growth of the sub-fleet. Over the past four years, about 50,000 new small covered hoppers have joined


railinc

No matter the need, we’ve got you covered

FIGURE 4. NORTH AMERICAN FREIGHT CAR FLEET BY AGE and SIZE

As sub-fleet demographics change, so do average car size and total capacity. the fleet—more than all other sizes of covered hoppers combined. Nearly all were GRL 286 cars. Despite the growth, small covered hoppers are still only 7% of the revenue-earning fleet. Gondolas are commonly used for shipping coal, iron and steel products, and scrap metal. The number of gondolas was down by 4,000 cars, or 1.8%, in 2015. Tank cars carry a variety of products, including food, chemicals, petroleum, and hazardous materials. They made up about 26% of the revenue-earning fleet in 2015, up two percentage points from the previous year. The tank car fleet continued to grow in 2015, but at a slightly slower rate. The sub-fleet increased in size by 8.9% in 2015 to 404,000 cars. The majority of tank cars are GRL 263 cars, though more GRL 286 cars join the fleet each year. More than 50,000 large tank cars were added to the fleet in the last two years, and nearly 40,000 of those were GRL 286. Large tanks make up 12% of the revenue-earning fleet—two percentage points more than the previous year.

Medium tanks and small tanks each make up 7% of the fleet. About 9,000 medium tanks—those with capacities between 22,500 and 27,500 gallons— joined the North American fleet in 2014 and 2015. Of those, about 8,700 were GRL 286. Open hoppers carry products such as coal, aggregates, and metallic ores. The number of open hoppers in the North American revenue-earning fleet decreased by 1.4% in 2015 to 140,000, continuing a steady decline. Boxcars are the smallest sub-fleet, and are used to ship a wide variety of products from consumer goods to automotive parts. The boxcar sub-fleet is older than other sub-fleets and continues to decrease in size, in part because of the addition of higher-capacity boxcars and network efficiencies that reduce the turnaround time of boxcars. The size of the boxcar sub-fleet continued its decline in 2015, and was down 2,000 cars to 109,000. The sub-fleet is down 18% since 2009. RA Railinc Corp. is a wholly-owned subsidiary of the Association of American Railroads.

816.233.9002 www.hrsi.com

flt May 2016 Railway Age 31


2016 GUIDE TO

EQUIPMENT LEASING

The Eeyore of Railcar Leasing

All photos: Bruce Kelly

I

t never hurts to keep looking for sunshine,” Eeyore once said. However, in the rail economy, it’s the end of the first quarter 2016, and the market is mired in a slump. Check in with any car lessor today and you’ll find that lease rates for cars across almost every sector in the market are significantly off highs and showing little hope for resurgence. One year ago, for the 2015 Guide to Equipment Leasing, the new DOT-117 tank railcar mechanical specifications for cars hauling crude oil and ethanol and the retrofitting of older DOT-111A “legacy” cars and CPC-1232 cars was the issue of the moment. Who would retrofit tank railcars, what would be retrofitted, how much would it cost and most important, who would pay for it? Today, with crude seemingly marginalized as a rail commodity, some tank railcar retrofits are being done, but the cost for doing the retrofits remains wildly divergent based on car type, design and scope. The broken promise of a long backlog of cars waiting for retrofit has been put to the side as bigger market issues have taken precedence. So what is on the minds of rail investors and lessors today? Primarily it’s the general sense of weakness in the market. Even with projected railcar manufacturing for 2016 at somewhere between 50,000 and 60,000 units, there is a sense of

By David Nahass, Financial Editor

gloom that permeates the market. Remember that before the crude and sand boom and bust, a build year of 40,000 or more railcars was considered to be robust. Today’s lease and manufacturing market lacks optimism. When asked about what, if any, bright spots there are in the market today, one lessor said, “In both commodity and car type, on a macro basis the [railcar] market is extremely difficult. On a micro basis, some opportunities exist, but they are harder to find and occasionally harder to close.” The macro headwinds in the rail economy are well documented: a strong US dollar having a negative impact on commodity (grain, steel, coal) prices and their export, and lowpriced oil and natural gas impacting coal rail loadings, domestic and Canadian frac drilling, oil sands production and the movement of sand and crude by rail in North America. Never mind the generalized global economic weakness where we can’t determine if the Chinese economy is growing or shrinking and where many central banks are working overtime to promote economic growth through the use of low or even negative interest rates. Put all together, and in spite of what on the surface seems to be a fairly healthy U.S. economy, economic headwinds in the rail economy are strong and far-reaching. Back to railcar leasing: What is a lessor to do when the May 2016 Railway Age 33


the right relationship can help you make the most of the miles ahead.

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EQUIPMENT LEASING GUIDE

Most industry sources suggest and agree that coal’s continued demise, as the baseload power supply, is inevitable and unavoidable.

market softens and opportunities are limited? The same lessor noted, “On a down cycle, we look for opportunities, as companies change their equipment positions and realign, we look for investment and growth opportunities that would suit our commitment to the market today.” Strategically sound in theory, but like many things, difficult in execution. 2015 began as a year of high asset prices. In the second half of 2015, new car prices and lease rates on many railcars classes began to or continued to trend downward. However, even as the market began its transition, high prices for secondary market assets (the market for the sale of used assets), driven by investor appetite and low interest rates, have remained lofty. Typically, used car prices follow the trajectory of new car prices. Late into the second half of 2015, certain used railcars, on lease, were selling for prices that equaled or exceeded their cost when new.

When asked about whether there have been any reductions in the prices of used railcars, this lessor said, “Broadly speaking, not yet. There have been some scattered indications that it might be beginning to happen. The declines are not as broad across product lines or as abrupt on a percentage basis as new car price reductions that we have seen for buyers willing to place orders for new cars today.” What is behind the curtain that allows purchasers of used cars to hold the value up? Three things: One, the used cars are in service (and therefore more difficult and more costly to return/replace). Two, every railcar purchaser hopes in some fashion that lease rates will always increase and never, ever decrease. Three, historically in the long term, railcar assets continue to increase in value even through the cyclical highs and lows of the rail market. This oasis of used car valuation optimism in the face of

May 2016 Railway Age 35


Lease rates for plastic pellet covered hoppers are in the high $600s and low $700s.


EQUIPMENT LEASING GUIDE

such doom and gloom is fueling the rumor that there may be additional re-alignment in the railcar lessor marketplace. The rail economy is a cyclical one, so savvy investors look to position themselves during a downturn in hopes of being prepared to capitalize when the cyclical market begins to stretch upwards. In the case of this specific downturn, the timing for the turnaround remains unclear. Our lessor identified the same by saying, “It’s always difficult to forecast a change in the cycle, but given the current market for most commodities and an economy that seems to be weak in manufacturing and infrastructure (roads, bridges and housing) construction, I would expect this to last for a couple of years. While that is a generalization, even though some commodities recover faster than others, rail is the last group to suffer in a downturn and the last group to respond in a recovery. Those of us who have been through several cycles know that recovery can occur quickly, but I see no basis for that in the immediate future.” With market headwinds in several markets, most notably, oil, coal and sand, where will the market rebound originate? We hear the question in the marketplace: What is the next great growth opportunity in rail? The answer has been and continues to be intermodal. But for many operating lessors, the intermodal market is not an investment option and the market narrows even further at its weakest points.

USE OUR CAPITAL — NOT

Asked about car types not open for investment, our lessor said, “Absent longer-term lessee commitments, there’s unlikely to be interest in coal cars and large non coiled/non insulated tank railcars. Given the lease rates for small-cube covered hoppers, it’s going to take a while before there will be much interest in investing in those cars.” Manufacturers have indicated that new-car order inquires are stable (albeit at a lower rate than a year ago) and seem to have stopped declining. For some of the brighter spots in the market, such as plastic pellet hoppers, orders continue to be placed, as new manufacturing facilities get committed once their financing

With market headwinds in oil, coal and sand, where will the rebound originate? is arranged. With so few bright spots in the market, the money in the market may easily level set into these pockets of optimism, create further weakness by overbuilding those segments and thereby extend the length of the downturn. There are so many factors at play that can influence the market for cars and their lease rates, beginning with the Federal Reserve’s stated plan to begin increasing interest

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EQUIPMENT LEASING GUIDE

rates mid-year 2016. Investors should expect that lease rates will more than likely flounder around at current levels. Working hard to keep cars active and employed will be as challenging as the return negotiations in which lessors engage when markets soften. As we heard from one lessor, the general consensus suggests that today’s market will continue at least through the end of 2017 (some sources believe 2018 is the first chance for a rebound). Typically, a two-year downturn has been the norm; this cyclical slump might challenge that standard. As lease rates languish, lessors will look for opportunities to move rates higher as the market allows while rates will move lower if the current state of the market continues apace. Right now, an Eeyore style approach of “No Expectations, No Disappointments,” disappointingly, seems just about right. Round the Market

A general weakness in the market is leaving many market segments floundering and those with cars ready to lease frustrated by overall weakness and the low rates for railcars on lease today. Here’s an update on cars and lease rates: Tank Railcars for Crude: Oversupply, increasing pipeline capacity, lower oil pricing, an end to the Brent Crude/WTI (West Texas Intermediate Crude) price spread, rail tariffs on

cars that are not DOT-117A standard and impending regulatory changes in tank railcar design have all combined to leave the lease market for tanks for hauling crude and ethanol on the ropes. Rumors of cars in storage in the thousands have investors, lessors and lessees wondering when a recovery might occur. If a car gets leased, and that’s a big if, we hear rates of $500 per car per month full-service, but there’s a lot of hope in that number. When does this market recover? Back to the 2014 speculator’s paradise? Probably never. However, consensus suggests that 2018 could be a year when regulatory issues are settled and oil pricing may rebound to where CBR has a more relevant role in the car leasing marketplace, albeit likely not to the peak levels of late 2014. Tank Railcars (Non Crude): Pressure tank railcars continue to suffer from oversupply, but the medium size range of tank (20,000-25,000 gallon) railcars continues to show strength vs. other tank railcar types and other asset classes. New-builds continue to push capacity into the market. Older “legacy” cars are most at risk as the bubble in tank railcars that have no chance for retrofit or that might be subject to tariff continues to grow as cars come off lease. For newer cars, lease rates continue to hold steady in the mid- to high$800s today, down from $1,100 to $1,400 a year ago. Older cars continue to show strength, sitting in the $600s. Grab it

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38

Railway Age

May 2016


EQUIPMENT LEASING GUIDE

while you can, as those opportunities may become less frequent in the near term.

calls of companies in the business of supplying sand, you can get some window into how bad this picture is right now. A crude price rebound is required to get oil rigs in service and prices and volumes back to pre-2015 levels. It also seems that some new-car backlog still remains in this car type; adding more assets to the party is likely to extend the price depression. In addition, the opening of new railcar manufacturing capacity will also provide some drag. Lease rates? We hear sub-$300 for lease opportunities fullservice but don’t count on any more than a handful of opportunities and all of those being pursued by a significant number of suitors.

Covered Hoppers for Grain: The

strong U.S. dollar had led to a weak export market and an abundance of grain on the ground or in storage. There was some building in this segment, but that has (mostly) come to an end as lessors and car owners cannot receive a reasonable return on their $80,000-plus investment at this time. Long-term prospects remain strong for a fleet in need of revitalization, but the time for this market is not now. How off balance is this market? On April 12, 2016, The Wall Street Journal reported that due to costly rail transportation, the strong dollar and low water borne transport rates, corn imports are surging even as record harvests leave farmers with an oversupply of product. Lease rates? Jumbo cars are leasing in the mid- to low-$400s full-service, while 4,750 cubicfoot cars are in the low to mid $200s full-service. Opportunities are few and far between.

Cover Hoppers for Plastics: Cheap natural gas (sub-$2.00 per million BTU as of 4/15/16) continues to support planning and development of facilities (ethylene crackers and production plants) for polyethylene. At the 2016 Rail Equipment Finance Conference, experts predicted a need for 18,000 new plastic pellet hoppers to haul all of the planned plastics manufacturing capacity. New car lease rates are quoted for 5 – 7 years in the high $600s per car per month full-service. Older (5,800 cubic foot) cars are bringing in full-service rates in the high $400s. Need a worry? Here’s two: One, many plant manufacturers built their own cars for purchase or long-term lease and short-term cars may be in

Covered Hoppers for Sand and Cement: Like its fraternal twin, crude oil, cars for hauling sand are confronting significant oversupply troubles. The lease market is weak and likely to get weaker until the price of oil and natural gas rebound to sustainable levels. If you listen to the earnings

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John Martin (403)246-8539 • john_martin@andersonsinc.com

STEEL FABRICATION • CAR CONVERSIONS Sam Anderson (406)560-6920 sam_anderson@andersonsinc.com

RAIL GROUP – PO BOX 119 • MAUMEE, OHIO 43537 – FAX: (419)891-2749 – www.andersonsrail.com

May 2016 Railway Age 39


U.S. Operating Lessor of Railcars & Intermodal Equipment Infinity is a private lessor of a variety of railcar rolling stock. Infinity prides itself on exceptional customer service and flexibility with regard to leases and railcar modifications to find the transaction and equipment to best serve our customers. Lease packages are tailored to meet customer needs, including a variety of short-term operating leases and long-term leveraged leases, as well as other assignment and deployment arrangements. Larry Smith Vice President Equipment Sales Office: 678-904-6306 Cellular: 678-296-9709 Email: lsmith@infinityrail.com

Lee Martini Vice President Sales & Marketing Office: 678-904-6315 Cellular: 404-290-9233 Email: lmartini@infinityrail.com

Corporate Offices 1355 Peachtree Street NE Suite 750 - South Tower Atlanta, GA 30309 www.infinityrail.com facebook.com/infinityrail twitter.com/infinity_rail A venture of Infinity Management Partners, LLC and Perella Weinberg Partners

GLOBAL RAIL TENDERS

TuRninG OppORTuniTies inTO new Business 40

Railway Age

May 2016

Get up-to-the-minute business intelligence by subscribing to GlobalRailTenders.com Powered by


EQUIPMENT LEASING GUIDE

excess once the market reaches parity. Two, sustained low oil prices have compressed the spread and cost benefit provided by natural gas as a feedstock. The viability of the investment is getting a second look at some announced facilities. Boxcars: Another market bright spot. Utilization in the boxcar fleet has been running high and market dynamics (velocity, turn times, loadings volumes) have continued to support this market. The supply of boxcars is supporting the volume of the business, and there are 4,000 cars to be built in the current railcar backlog, mostly being ordered by TTX. Lease rates are in the low $600s full-service, if you can find fixed rate leases. Per diem structures really rule the day here. Mill Gons and Finished Steel: Even with recent improvements to $230 per ton for Chicago No. 1 heavy scrap, weaker scrap volumes and weak domestic steel production continues to be a significant drag against this market. This market really suffers as a result of the global weakness (decreasing demand for U.S. scrap) and the strong dollar (making U.S. scrap less competitive and foreign steel cheaper). Older cars (pre-1990) are leasing for high $200s full-service, which will give at least some income above and beyond the cost of maintenance, while newer cars are in the

$400s. Per diem leasing is available here as well, but revenues are inconsistent. Coal Cars: Wither

King Coal? Most industry sources suggest and agree that coal’s continued demise, as the baseload power supply, is inevitable and unavoidable. Rail velocity improvements leading to lightening fast cycle times are keeping about 35,000-45,000 cars in storage on the western and eastern Class I railroads. Until natural gas breaches the $3.00/MMBTU level and a weaker dollar allows for U.S. export coal to compete with Australia and South America, investors should expect more events like the Peabody Coal bankruptcy to occur. (Three cheers for regulated utilities, anyone?) Longer term, global coal consumption will provide a destination for U.S. coal as domestic coal-fired power generation decreases, but the headwinds against coal today need to decrease. Government regulation rules all, so changing political winds could also improve coal’s prospects. Leasing? $100 per car per month net is about the best you can do today. Most investors will take that lease rate gladly (and in some cases less) if only to avoid the day-to-day accumulation in storage costs. As Eeyore said, “We can’t all and some of us don’t. That’s all there is to it.” RA

CIT Knows

Rail Leasing Optimized rail equipment solutions based on industry-leading leasing and financing expertise. CIT Rail keeps your operations on-track with innovative leasing solutions for your railcar and locomotive transportation needs. Our full suite of leasing and management services is designed to free up capital for your growth and operating priorities. With one of the most diversified and high-capacity fleets, we are committed to serving a wide range of industries in North America and Europe. CIT knows rail leasing, so work with us to power your growth. Visit citrail.com or call 312-906-5701. ATTRACTIVE ASSETS • FLEET MANAGEMENT CAPABILITIES CAPITAL PRESERVATION

© 2016 CIT Group Inc. CIT and the CIT logo are registered service marks of CIT Group Inc.

May 2016 Railway Age 41


equipment leasing Guide

Leasing Resource Directory

CIT Rail is an industry leader in providing customized leasing and financing solutions for our customers throughout North America as well as in Europe through our subsidiary, Nacco, A CIT Company. We leverage a highly diversified fleet of efficient railcars and locomotives to supply railcar transportation solutions to shippers and carriers across a wide range of industries. Our solutions free up capital for your growth priorities, increase efficiencies and reduce out-ofservice time. CIT Rail owns over 120,000 railcars and 450 locomotives leased to approximately 670 customers. CIT Rail brings unparalleled asset management expertise and commitment to the transportation sector.

citrail.com

NRE is an independent supplier of locomotive servicing, new and remanufactured locomotives, locomotive leasing, field services, parts and salvage operations. NRE serves class 1, regional, short lines, government and industrial railroads around the globe. In addition to designing and manufacturing a series of new NRE locomotives, the company re-engineers locomotives with state-of-the-art electronic and propulsion controls, emission and fuel-saving technologies, and new and remanufactured engine designs. 908 Shawnee Street Mt. Vernon, IL 62864 618-241-9270 sales@nre.com

With over 100 years experience in the rail and finance industries, Progress Rail Equipment Leasing is a full-service professional leasing firm specializing in leasing railroad maintenance equipment. We finance and refinance MOW equipment, intermodal equipment, locomotives, railcars, and other rail-oriented equipment. Our experts’ dedication and uncompromising focus on quality sets us apart from the competition. Progress Rail Equipment Leasing develops leasing programs to cut equipment costs and provides leasing structures that are tailored to meet the rail industry’s specific and everchanging needs. In addition, we offer finance and operating leases, sales/leaseback programs, and short and long-term rentals. Progress Rail Equipment Leasing 15173 North Road, Fenton, MI 48430 (810) 714-4626 Voice • (810) 714-4680 Fax

www.nre.com

www.progressrail.com/mowfinancing

The David J. Joseph Company

When evaluating your railcar needs, you need a partner with industry experience, deep asset knowledge, and the strength to offer competitive and flexible terms. From flat cars to covered hoppers and beyond, the Rail Finance team at PNC Equipment Finance offers the inventory of assets to meet your needs combined with the industry-leading financial expertise to maximize ROI. Whether you need Full Service Lease options, including maintenance or a simple net lease, short term or long term, we bring comprehensive railcar solutions for the miles ahead. PNC Equipment Finance – Rail Finance Team
 Ken Roseberry, SVP 513 455 9617, ken.roseberry@pnc.com
 Christopher Bell, Sales & Marketing 513-455-9620, christopher.bell@pnc.com 
 Robert Hogan, Sales & Marketing 513-455-9056, robert.hogan@pnc.com

www.pnc.com

42

Railway Age

May 2016

The Andersons Rail Group consists of approximately 23,000 rail cars and locomotives that we lease. To better serve our customers, The Andersons Rail Group operates multiple repair facilities across the U.S. and a steel fabrication facility to produce custom rail components. We understand the importance of having extensive knowledge about taxation, government regulations and railroad requirements. As a valued customer of The Andersons Rail Group, you can expect reliable equipment, flexible lease options and superior customer service. SALES/LEASING Chuck Brown, VP, Sales 419-891-6386 Matt Keck, Sales Rep. 419-891-6693 Sam Anderson

REPAIR

406-560-6920

Please visit our website at:

www.andersonsrail.com

The David J. Joseph Company’s Rail Group provides a broad range of transportation services throughout North America: single investor, leverage leases, freight cars, portfolio evaluation, remarketing fleet management, purchases and sales of portfolios, and private fleet management. Other services include freight car inspections and engineering services from design of new cars to complete ISL extended life, modifications and analysis; in addition to railcar dismantling for scrapping and parts reclamation. The David J. Joseph Company Rail Equipment Group 300 Pike Street • Cincinnati, OH 45202 Tel.: 513-419-6200 • Fax: 513-419-6221 Contact: info@djj.com

www.djj.com


equipment leasing Guide

The 2016 Guide to Equipment Leasing (pages 33 through 41) is supported by companies that provide equipment leasing and financial services and products to the rail industry. All of these firms have advertisements elsewhere in this section or have used paid profile space to present their background and capabilities.

SMBC Rail Services LLC is committed to providing innovative rail car leasing products and services to North America’s vital rail industry. Let one of our experienced professionals show you how. Visit us at our website: www.SMBCrail.com, or call us at 1-866-4-RAILCARS. Gene Henneberry, President and CEO SMBC Rail Services LLC 300 S. Riverside Plaza, Suite 1925 Chicago, IL 60606

MAKING CAPITAL WORK With total assets in excess of $25 billion, Element Financial is one of North America’s leading equipment finance companies operating across four verticals of the equipment finance market – Rail Finance, Aviation Finance, Vendor Finance and Fleet Management. Our Rail Finance group has a longstanding track record of delivering tailored financing solutions for all types of rolling stock including tank and general freight railcars. As trusted advisors on complex transactions, we put our experience to work by adding value through our counsel as well as our capital.

elementcorp.com

Infinity is a private lessor of a variety of railcar rolling stock. Infinity prides itself on exceptional customer service and flexibility with regard to leases and railcar modifications to find the transaction and equipment to best serve our customers. Lease packages are tailored to meet customer needs, including a variety of short-term operating leases and long-term leveraged leases, as well as other assignment and deployment arrangements. Larry Smith, Vice-President-Equipment Sales (678) 296-9709 • lsmith@infinityrail.com Lee Martini, Vice President of Sales & Marketing (678) 904-6315 • lmartini@infinityrail.com CORPORATE OFFICES 1355 Peachtree Street Suite 750 South Tower Atlanta, GA 30309

James D. Husband, President 1307 Jamestown Road, Suite 101 Williamsburg, VA 23185 757-903-4606 • Fax: 757-903-4705

www.infinityrail.com

Since 1966, V&H Inc. has excelled as a full service company. We serve local, regional and national customers. Our goal is to supply task-specific truck equipment, timely maintenance, and unparalleled customer service. V&H Leasing Service has one of the largest rental inventories in North America.  aterial Handling/ •M Grapple Trucks • Welding Trucks • Section Trucks • Rotary Dump Trucks • Pick-ups

RailSolutions provides a broad variety of railroad equipment-related consulting, technical and advisory services to financial institutions, railroads, shippers and fleet operators with a primary focus on equipment valuation and appraisal services. Additional areas of expertise include railcar and locomotive inspections, equipment repair and overhaul cost analysis, and portfolio valuations. RailSolutions draws on over 40 years of railroad industry experience in developing multiple quantitative valuation models supported by both a sound base of market data and advanced analytical techniques.

• Hirail Pick-ups • Service Trucks • Mechanics Trucks • Stick Boom Trucks • Knuckle Boom Trucks

Leasing & Rental Contacts: Dean Olson, Rental Coordinator 866.287.8581 Jason Adamski, Rental Sales 866.287.8581 V&H Leasing Service Inc. 1505 S. Central Avenue Marshfield, WI 54449 800-826-2308

www.vhtrucks.com

www.railsolutionsinc.com

Trinity Industries Leasing Company (TILC), with a fleet of approximately 73,500 railcars, offers a variety of railcar leasing options, management and administrative services and railcar maintenance. TILC also provides access to the manufacturing businesses and other services provided by Trinity Industries, Inc. Sales and marketing activities for Trinity’s rail leasing and manufacturing operations are coordinated under the trade name TrinityRail®, providing a single point of contact for customers seeking rail products, financing and services. An overview of Trinity’s complete portfolio of rail products and services is available at www.trinityrail.com 2525 Stemmons Freeway, Dallas, TX 75207 800.631.4420; Fax: 214.589.8623

www.gotilc.com May 2016 Railway Age 43


R AILWAY AGE AND PARSONS PRESENT

GEN

TRAIN CONTROL

THE FUTURE OF CBTC & PTC for safer, more efficient railways

The international conference on Next-Gen Train Control—now an annual event—will feature comprehensive project updates and in-depth technical sessions presented by leading rail experts from around the world. Entering its third decade, this conference is the rail industry’s single-most important gathering of communications and signaling professionals from around the globe.

SPONSORSHIP & EXHIBIT INFO: Jonathan Chalon at jchalon@sbpub.com, (212) 620-7224 REGISTER TODAY: www.railwayage.com/nextgen • (212) 620-7205

SEPTEMBER 15 & 16, 2016 KEY BRIDGE MARRIOTT ARLINGTON, VA

Supporting Organization:


People

Meetings

High Profile: William Glenn, a 14-year rail industry veteran, has joined railcar and locomotive leasing company Wells Fargo Rail as Chief Commercial Officer. Glenn will be responsible for leading sales, structured sales, customer service and business intelligence. Based in Rosemont, Ill., he will report to Wells Fargo Rail President Barbara Wilson. Prior to joining Wells Fargo Rail, Glenn spent 14 years at The Greenbrier Companies, most recently as Chief Commercial Officer, where he was responsible for sales, marketing and Glenn Wells Fargo Rail customer support. In addition, Glenn served as president of Greenbrier Europe. Before joining Greenbrier, he held a number of leadership positions at Louisiana Pacific Corp. “I have known William as a competitor and business partner for many years,” said Wilson. “He is a proven leader with the diverse set of skills necessary to lead our commercial group.”

June 7, 2016

Atlantic Track & Turnout Co.— William E. Roan Jr. has retired after 23 years of service to the company and 35 years in the railroad industry. Additionally, Paul “PJ” Schuler has been promoted to Manager-Transit Division. He has been with Atlantic Track & Turnout since 2011. Loram Maintenance of Way, Inc.— Katie Hadenfeldt has been appointed Vice President Sales & Marketing. Norfolk Southern—Ann A. Adams has been named Vice President Human Resources. She succeeds Juan K. Cunningham, who retired earlier this year. Nossaman LLP—Shant Boyajian, former Senior Counsel for the U.S. Senate Committee on Environmental and Public Works, has been hired as an Associate in the firm’s Infrastructure Practice Group. Rocky Mountaineer—Jonathan Hope has been appointed Director of Sales, North America. He will be based in Toronto. Short Line Safety Institute—Mike Long has joined as Senior Safety and Operations Manager and Michele Malski has joined as Safety Programs Manager. Union Pacific Corporation—Jane H. Lute has been elected to the company’s Board of Directors.

WSP | Parsons Brinckerhoff—David Thurston has been named a Vice President and National Technical Director within the company’s transit and rail technical excellence center. Additionally, Michael J. Churchill joins as a senior supervising mechanical engineer in the firm’s Atlanta office. WSP | Parsons Brinckerhoff has also hired Brock LaForty as the Area Manager for North Carolina and South Carolina; John Wong as a transportation facilities group lead in WSP | Parsons Brinckerhoff’s Washington, D.C. office; Roger Heebner as Freight Rail Principal in the company’s Philadelphia office; and Joyce Rose as Principal Consultant in the Baltimore office.

100 YEARS AGO in

November 1915 FREIGHT CAR MAINTENANCE COSTS The constantly increasing cost of freight car maintenance has been looked upon by some students of railway affairs with much concern, and it must be granted that when the increase is considered without analysis it does seem startling. But when the conditions prevailing on the railroads, and the related statistics are carefully studied the cost figures are shown to be not nearly as bad as they at first appear.

Railway Age Second Annual Rail Insights Conference Hotel Allegro, Chicago, Ill. Website: www.railwayage.com/ railinsights

June 14-16, 2016 International Crosstie & Fastening System Symposium Newmark Civil Engineering Lab, Urbana, Ill. Contact: crosstie-conf@illinois.edu Website: http://railtec.illinois.edu/ Crosstie/2016/crossties.php

June 19-22, 2016 APTA Rail Conference Phoenix, Ariz. Website: www.apta.com

June 28-30, 2016 RSSI 56th Annual C&S Exhibition Gaylord Texan Resort Grapevine, Tex. Contact: mike@rssi.org Website: http://www.rssi. org/2016-portal/index.html

July 11-12, 2016 Midwest Association of Rail Shippers (MARS) Summer Meeting Grand Geneva Resort, Lake Geneva, Wisc. Contact: mars@ mwrailshippers.com Website: www.mwrailshippers.com

August 8-12, 2016 Railway Engineering Short Course Newmark Civil Engineering Lab, Urbana, Ill. Website: http://railtec.illinois.edu/ short-course/overview.php

Sept. 15-16, 2016 Railway Age/Parsons Next-Generation Train Control Conference Key Bridge Marriott, Arlington, Va. Contact: conferences@sbpub.com Website: www.railwayage.com/ nextgen May 2016 Railway Age 45


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

Products My Employees don’t have time for training.

New locomotive battery, jump starters

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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

46

Railway Age May 2016

A revolutionary new maintenance-free, dry cell lead-acid locomotive battery and two heavy duty locomotive jump starters able to start locomotives up to 6,000 horsepower have been launched by START PAC. START PAC’s new patent pending locomotive battery, the AGM64RR, is a lightweight, compact option for the rail industry that has one major advantage—it does not require regular maintenance. Traditional lead-acid locomotive batteries require “watering” every 90 days and have a useful life of less than four years. The AGM64RR is based on dry cell lead technology, and does not need water to operate. By removing the need for scheduled maintenance to sustain battery health, the AGM64RR will help customers reduce operating costs by increasing efficiency and improving safety. Personnel no longer have to risk being exposed to harmful battery acid. It also has a much longer battery life than traditional alternatives. START PAC President Eve Storm said, “By using the dry cell lead acid battery technology, we have been able to create maintenance free batteries meaning that personnel are no longer bogged down with maintenance watering protocol or exposed to harmful acid during the process. The small powerful compact battery design is much easier to move, install and use, with a longer battery life.” START PAC has also introduced two new patent-pending increased-capacity jump starters for the locomotive industry. The 3370RR was designed to jump start larger locomotive engines, which require significantly more starting power. The second model, the 214RR, was designed for busy operations that require a unit to be able to conduct multiple or repeated engine starts before needing to be recharged. Typically, in the past, locomotive operators/ maintainers would either need to bring another locomotive engine nose to nose or bring out a truckload of batteries to jump start a locomotive, which was a very labor intensive, time consuming and inconvenient process. START PAC’s powerful and compact jump starter units are hugely more efficient and convenient for starting locomotives. For more information visit www.STARTPAC.com


ZTR Control Systems transforms the axle generator

New compact tracking by Lat-Lon Lat-Lon’s Compact Tracking Unit (CTU) is a solar-powered tracking device designed to fit in small spots, even in the grooves of a container or any other non-powered asset. The unit collects data through GPS and optional sensors and sends it from nearly any worldwide location to secure servers with multiple points for data access in near real-time.The CTU possesses many of the same capabilities of the larger Solar-Powered Tracking Unit (STU) commonly used by shippers around the globe. Both Lat-Lon tracking units incorporate lithium ion phosphate rechargeable cells delivering a long lifecycle product, averaging more than seven years, with reports as frequent as every 10 minutes when moving. The solar panels, energy storage and power circuitry are optimized for lower voltage, allowing the CTU to operate the GPS module 24/7 under typical conditions for location and speed awareness. In less than ideal conditions, these developments allow for up to five days of messages with no direct or indirect sunlight.

During the lifetime of a locomotive, an axle generator can be replaced time and time again. Debris that chips away at the unit and eventually shakes it loose can cause unplanned downtime and replacement costs. ZTR Control Systems LLC says its Axle Gen has a new slim profile that allows for eight individual outputs in one small but robust unit featuring selectable voltage levels and providing enhanced precision. “This device’s interface module not only provides power for the axle generator itself, but also takes the information the generator is communicating and produces the various speed signals for speedometers, control systems, event recorders or any other devices requiring speed information,” said Rich Colwell, Rail Sales Director at ZTR Control Systems. Axle Gen’s low-profile design reduces the likelihood of damage by debris and protects it from water and oil that can get inside and freeze, making it maintenance-free, while increasing the overall reliability of a locomotive.

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 May 2016 Railway Age 47


The Railway Educational Bureau BOOKS - Railroad Resources -

Professional Railroad Atlas of North America Now available new fourth edition. This atlas has been designed for the railroad professional and transportation consultant. Nine major lines are color coded for enhanced readability. A great reference tool. Great care has been taken to provide the most accurate and current information available. Over 40 insets displaying highly detailed maps of metropolitan areas. Also includes map of the "Conrail Merger." From Alaska and the Yukon to the Yucatan in southern Mexico, its all here. The atlas includes a listing of approximately 650 railroad companies and reporting marks in North America. Softcover, 112 pages.

BKATLAS

Railway Geotechnics

The Double-Stack Container Car Manual With intermodal container freight increasing, keeping double-stack container cars operating safely and efficiently is a growing concern to railroads–keeping customers and manufacturers happy with service is a large part of that concern. The Double-Stack Container Car Manual will help guide freight car inspectors through the major inspection issues regarding double-stack container cars. This reference incorporates the latest AAR rules along with information from component manufacturers to provide a practical tool for car inspectors. Soft cover, spiral bound, 76 pages.

BKDOUBLE

$18.50

$77.95

by Dingqing Li, James Hyslip, Ted Sussmann, Steven Chrismer Railway Geotechnics covers track, track substructure, load environment, materials, mechanics, design, construction, measurements, and management. Illustrated by case studies, with an emphasis on the geotechnical aspects of railway engineering, it discusses these topics from a historical perspective. It also presents the methodologies and best practices developed over the past 20 years. This book was written primarily for professionals and graduate students. 574 pages. Hard cover.

BKGEOTECH

$195.00

FRA Regulations

Freight Car

Track

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

Guide to Freight Car Couplers and Draft Gear Systems • BKCDG • $64.75

Dictionary of Railway Track Terms • by Chris Schulte • BKRTT • $33.50

Rules & Regulations Governing Railroad Signal and Train Control Systems • BKSTC • $20.50

Mechanical Department Regulations • (Parts 210, 215, 216, 217, 218, 221, 223, 225, 229, 231, & 232) • BKMFR • $28.95 General Train Wreck: The Forensics of Rail Disasters • by George Bibel • BKTW • $29.95 The Railroad: What It Is, What It Does - 5th Edition • BKRRNN • $45.95 Introduction to North American Railway Signaling • BKINARS • $54.95 All About Railroading - Second Edition • BKAARR • $34.95 The Historical Guide to North American Railroads, Third Edition • BKHIST • $24.99 Operations Managing Railroad Transportation• by Thomas White • BKMRT • $39.95

Railroad Communications • BKRRC • $5.95

Railroad Operations and Railway Signaling • BKRORS • $26.00 Railroad Signaling • BKSIGNAL • $24.99

Doorway to Safety With Boxcar Doors • BKBD • $21.95 Guide to Freight Car Trucks • BKFCT • $86.95

The Single Car Air Brake Tests Procedures Manual • BKSCTD • $35.00 Locomotive Guide to Locomotive Electrical Maintenance • BKGLEM • $44.50

Diesel Theory - Principles Explained • BKDT • $25.95 Guide to Locomotive Mechanical Maintenance • BKGLMM • $35.50 Maps & Atlases Canadian Rail Atlas • MPCANAT • $76.95 2014 Railroads of Continental United States Wall Map (laminated) • MPWML14 • $44.95

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

Basic Principles of Track Maintenance • BKTMB • $135.00 The Art and Science of Rail Grinding • BKGRIND • $135.00 Transit Urban Transit: Operations, Planning & Economics • BKUTOPE • $150.00* Elements of Planning, Engineering and Operating Light Rail with Applications in New Jersey • by Al Fazio • BKEPEO • $59.95

Shipping Rates:

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

U.S.A. $4.50 7.92 10.78 11.99 14.30 16.28 19.03 23.10

CAN $8.75 12.65 16.80 21.20 27.95 36.60 49.15 61.20

U.S.A. CAN 300.01 - 400.00 27.17 73.75 400.01 - 500.00 31.35 86.05 500.01 - 600.00 35.75 98.12 600.01 - 700.00 40.15 112.90 700.01 & up (Appropriate charges applied)

To order, call

1-800-228-9670 or visit www.transalert.com The Railway Educational Bureau 1809 Capitol Ave., Omaha NE, 68102 I (800) 228-9670 I (402) 346-4300 www.RailwayEducationalBureau.com


Ad Index Company

Phone #

Fax

URL/Email address

Page #

Andersons Inc The

419-891-6386

419-891-2749

CIT

212-461-5713

212-461-5694 abby.cohn@cit.com

Danella Rental Systems, Inc.

610-828-6200

610-828-2260

pbarents@danella.com

David J. Joseph Co., The

513-419-6200

513-419-6221

txs@djj.com

32

Element Financial Corporation

416-386-1067 x2222

lcarroll@elementcorp.com

C2

FreightCar America

312-928-0850

312-928-0890

tbaun@freightcar.net

Graham-White Manufacturing Co.

904-230-4525

904-230-4526

jkuhns@grahamwhite.com

19

Herzog Railroad Services, Inc.

816-233-9002

816-233-7757

tfrancis@hrsi.com

31

Infinity Rail

678-904-6300

678-904-6310

info@infinityrail.com

40

Interstate Diesel Service, Inc.

800-321-4234

216-706-5010

proach@interstate-mcbee.com

11

chuck_brown@andersoninc.com

39 41 9

3

LORAM

763-478-6014

763-478-2221 sales@loram.com

Mitchell Equipment Corporation

734-529-3400

734-529-3433

5

Nordco

414-766-2180

414-766-2379 info@nordco.com

30

NRE

618-241-9270

618-242-8519 sales@nre.com

36

PNC Equipment Finance

513-455-9056

robert.hogan@pnc.com

34

Progress Rail Services

256-505-6402

256-505-6051

info@progressrail.com

37

Railquip Inc

770-458-4157

770-458-5365

sales@railquip.com

25

RailSolutions, Inc.

757-903-4606

757-903-4705

jhusband@railsolutionsinc.com

35

bbrundige@sb-reb.com

lovitt@mitchell-railgear.com

24

Railway Educational Bureau, The

402-346-4300

402-346-1783

RSSI

502-327-7774

502-327-0541 rssi@rssi.org

46, 48, C3 14

SMBC Rail Services LLC

312-559-4800

888-4RAILCAR

sales@smbcrail.com

38

Soft Rail

888-872-4612

sales@signalcc.com

13

Trainyard Tech LLC

724-443-8881

724-443-8881

cra2@zooninternet.net

TrinityRail

800-631-4420

214-589-8623 info@trinityrail.com

C4

V&H Truck

715-486-8800

714-387-0657

a.thoreson@vhtruck.com

40

VTG Rail

618-343-0600

618-659-9532

sales.northamerica@vtg.com

12

Western-Cullen Hayes

773-254-9600

773-254-1110

co@wch.com

12

13

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

May 2016 Railway Age 49


equipment Sale/Leasing

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Railway Age

May 2016


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Help & Reidler celebrate during the month of May. Mention this ad to receive 10% off your railroad graphics order, - includes consolidated stencils, tank qualifications, & Chemtrec markings. (FRA delineators excluded) 264 Industrial Park Rd. PO Box 8 St. Clair, PA 17970 Fax 1-888-826-0108 www.reidlerrailgraphics.com Email: csweigert@reidlerdecal.com

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May 2016 Railway Age 51


Perspective Mike SMITH

A law full of unintended consequences

R

ailroads, at best, transport about 11% of the total freight tonnage now moving in the U.S., of which coal currently represents approximately 30%. Against that backdrop, regulators are proposing new rules that will frustrate our industry’s efforts to compete for the almost 90% of freight that doesn’t move by rail. The Federal Railroad Administration is pushing to require two certified people in the cab of every freight train. While some exceptions are conceded, we fully expect that, once this window is open, the exceptions will become even more restrictive, ultimately banning all single-person operations. Railway market share has decreased from its 13%-14% before the 2008 recession. As an industry, we do well in intermodal and run impressive tonnage in the unit train networks. However, intermodal and many unit train operations are not practical or competitive in market pairings under 500 miles, where most of the available freight resides, except in unique situations. How do we compete for this business? The short answer is not very well and it will be increasingly more difficult with regulations like the proposed two-person crews. As an example, Finger Lakes Railway’s business is concentrated in the short-haul market. More than 50% of its carloads move less than 300 miles vs. the national average of approximately 1,000 miles, yet annual volumes have grown from 5,500 carloads to 18,000. How did this come about? The answer is by providing more service at less cost, accomplished in part with single-person ground-control operations (RCO) with an unblemished safety record. Given that rail is a common-sense, safe and environmentally friendly form of transportation that provides a 52

Railway Age

May 2016

solution for moving freight off congested highways, there are a few facts that FRA should consider before taking any such action to so-dramatically hinder rail freight with its imposition of mandates prohibiting or restricting single-person operations: • To compete and grow, the railway industry needs to be able to provide “truck-like” service. That means multiple daily switches for carload customers to mitigate the problems of bunching and inconsistent line-haul services. That level of service is not the result of the

FRA’s proposed two-person-crew rulemaking seems to have little if anything to do with safety. “switching fairy” waving her wand and wishing it to happen. It reflects a corporate commitment to a higher level of service, and the ability to utilize technology to provide that service at reasonable cost. • Looking backward in time for answers to safety challenges will not serve any good purpose. Technological improvements cannot be stopped; there are always better ways being developed to accomplish goals. Year by year, technological advancements provide the means to deliver more service at less cost, in a safer working environment. Finger Lakes’ and other railways’ single-person protocol are part of the natural and continual application of technology to our industry’s operations, but Finger Lakes has never been interviewed by regulators as to what

we do or how we do it. The FRA shouldn’t propose a rule without a thorough investigation of actual field experience before drafting it. The results of those reviews should be merged with compelling safety data and sound science before any change is proposed. This proposed rule seems to have little if anything to do with safety and is causing the FRA to collide with the “law of diminishing returns” on safety with no regard for cost. We need to ask what the FRA is doing if its safety goals are not supported by this regulation. Is this a jobs bill for train and engine (T&E) employees? Who will immediately pay the price for this rule? The answer is in our labor history. When railroads had to employ superfluous T&E people for “safety reasons,” i.e., the fireman, extra trainmen and a conductor totaling up to six people, other crafts lost membership. Maintenance-of-way and Maintenanceof-equipment were the primary casualties, and it hurt our industry. Labor leaders in these two crafts should be nervous about explaining why their hard working memberships aren’t as important as some T&E personnel who will spend the majority of their time sitting unproductively. No one at FRA seems to have considered this “law of unintended consequences.” The FRA should recognize that without the ability to compete in the transportation marketplace with reasonable and safe operating practices, carload railways such as ours will have no economic future, and the real victims will be the industries and communities we serve. Futures are worth fighting for, and a two-person mandate will severely jeopardize our future. Mike Smith is President of Finger Lakes Railway.


We’re current, are you? FRA Regulations FRA News:

Mechanical Department Regulations 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 Update 4-11-16 225 Railroad Accidents/Incidents Update 1-1-16 229 Locomotive Safety Standards 231 Safety Appliance Standards 232 Brake System Safety Standards Order 25 or more and pay only $26.00 each

Current FRA Regulations Item Code

FRA Part #

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

Update effective

2-12-13 7-20-09 3-25-14 7-11-13 1-6-15 6-25-12 6-25-12 6-25-12 6-25-12 6-25-12

BKHORN 222 6-25-12 BKRFRS 224 6-25-12 BKHS BKLSS BKSLI BKSAS BKBRIDGE BKLER

228 229 230 231 237 240

6-25-12 12-19-12 6-25-12 6-25-12 6-25-13 6-25-12

BKCONDC 242 6-25-12

BKBSS

BKCAD BKSTC

BKPSS

FRA Part #

40 219

233 234 235 236 238 239

Update effective

Each

28.50 10.50 9.50 9.95 7.65 9.95

9.45 8.55 8.95 6.90 8.95

RR Communications Rear End Marking Device, Passenger, Commuter & Freight Trains Use of Locomotive Horns Reflectorization of Rail Freight Rolling Stock Hours of Service Locomotive Safety Standards Steam Locomotive Inspection RR Safety Appliance Standards Bridge Safety Standards Qualification and Certification of Locomotive Conductor Certification

5.95 5.50

5.35 4.95

13.75

12.40

6.95 11.00 11.50 23.95 9.95 6.95 13.25

6.25

8.95 6.25 11.90

11.50

10.35

Each

25 or more

15.25

13.70

BKTM

$6.95

Part 240–Qualification and Certification of Locomotive Engineers This book affects locomotive engineers, trainers and supervisors. The rule is largely based on recommendations made by an advisory committee comprised of rail industry and labor representatives. This final rule will clarify the decertification process; clarify when certified locomotive engineers are required to operate service vehicles; and address the concern that some designated supervisors of locomotive engineers are insufficiently qualified to properly supervise, train, or test locomotive engineers. 162 pages. Spiral bound.

Qual. and Certif. of Loco. Engineers

BKLER

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$13.25

10.35

Part 242: Conductor Certification The Conductor Certification rule (49 CFR 242) outlines details for implementing a Conductor Certification Program. The FRA implemented this rule in an effort to ensure that only those persons who meet minimum Federal safety standards serve as conductors, to reduce the rate and number of accidents and incidents, and to improve railroad safety. Softcover. Spiral bound. 124 pages.

BKCONDC

Conductor Certification

Order 50 or more and pay only $10.35 each

Combined FRA Regulations Each

25 or more

10-3-12 Drug and Alcohol Regulations in 7-7-15 the Workplace

37.25

9-2-14 Signal and Train Control Systems 5-28-15 10-21-14 4-29-16 2-5-16 Passenger Safety Standards 7-29-14

20.50

18.45

23.80

21.40

Track and Rail and Infrastructure Integrity Compliance Manual - Volume II, Track Safety Standards - Part 213 Technical Manual for Signal and Train Control Rules. - Includes Part 233, 234, 235, 236

Reflect/Rolling Stock Order 50 or more and pay only $6.25 each

BKRFRS

Compliance Manuals BKINFRA

49 Part 224. The FRA released this rule in effort to reduce the number of highway-rail grade crossing accidents and deaths. Softcover. Spiral bound. 45 pages.

50 or more

RR Safety Enforcement Procedures & Rules of Practice Track Safety Standards (Subpart A-F) Track Safety Standards (Subpart G) RR Workplace Safety RR Freight Car Safety Standards RR Operating Rules and Practices

232 10-5-15 Brake System Safety Standards

Part 224: Reflectorization of Rail Freight Rolling Stock

$28.95

Mech. Dept. Regs.

BKMFR

49 CFR Part 236, Positive Train Control Systems: FRA is amending its regulations to address changes in deadlines for positive train control (PTC) system implementation required by the Positive Train Control Enforcement and Implementation Act of 2015. FRA is also making conforming amendments and removing portions of its PTC regulations that are no longer applicable. DATES: This final rule is effective April 29, 2016.

33.00 47.00

Updates from the Federal Register may be supplied in supplement form.

30.00 42.30

$11.50

800-228-9670 www.transalert.com

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

Add Shipping & Handling if your merchandise subtotal is: U.S.A. CAN U.S.A. CAN UP TO $10.00 $4.50 $8.75 25.01 - 50.00 10.78 16.80 10.01 - 25.00 7.92 12.65 50.01 - 75.00 11.99 21.20

Orders over $75, call for shipping

*Prices subject to change. Revision dates subject to change in accordance with laws published by the FRA. 5/16


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May 2016 Railway Age  
May 2016 Railway Age