DECEM B ER 2 0 1 8
w w w. r a i lwaya g e .c o m
AILWAY GE S e r v i n g t h e r a i lway i n d u s t r y s i n c e 1 8 5 6
NS TECH TRANSFORMATION
Automation Driving Innovation
2019 FREIGHT RAIL OUTLOOK
Moving to PSR
GRADE CROSSING SURFACES Smoothing the Rough Spots
BNSFâ€™s Matt Rose
LESS is not
August 2017 // Railway Age 1
HIGH CAPACITY I PRECISION I RELIABILITY
The best connection The new technology of the APT1500RL offered by Plasser American is the first flash-butt welding machine that can weld rails fully automatically without manual interaction. Thanks to the integrated capability of the APT1500RL to perform automatic closure welds, a separate rail pulling device is not needed. Main features of the new rail welding robot are: fully automatic alignment of the running edge and top of the rail, pulsation welding to achieve a high-quality weld in shorter time and with less burn-off as well as automatic evaluation and documentation of the weld.
www.plasseramerican.com ”Plasser & Theurer“, ”Plasser“ and ”P&T“ are internationally registered trademarks
18 40 44 49
Matt Rose Interview A profile in leadership
2019 Outlook One big guessing game
Grade Crossing Surfaces Smoothing the right-of-way
NS Technology Focus Innovation, automation
DEPARTMENTS 4 6 8 52 52 52 53 54 54 55
Industry Indicators Industry Outlook Market People 100 Years Ago Meetings Products Professional Directory Classified Advertising Index
NEWS/COLUMNS 2 10 16 17 56
From the Editor Update Watching Washington Financial Edge Short Line/Regional Perspective On the Cover: BNSF Executive Chairman Matt Rose. Photo: BNSF
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December 2018 // Railway Age 1
FROM THE EDITOR
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“No Such Thing as a Bad Load”
att Rose is one of those rare individuals possessed of the experience, knowledge, wisdom and understanding that sets him apart from many of his peers, in my humble estimation. In an industry that seems to be consumed more than ever by an almostunsettling focus on only two defining elements—operating ratio and the two most overused (and misunderstood) words in modern business, “shareholder value”—he cuts through the corporate-speak and the euphemisims to state, in clean, simple, honest language that appeals to those of us that truly love railroading, what really matters. Here’s a sampling from our cover story, which begins on p. 18: “Railroads are still investing significant sums, but we’re starting to be goaded into lower capital targets by Wall Street, the sellside guys. They’re giving railroads kudos for saying, ‘Oh, I can spend capital as a percent of revenue.’ That’s not the best measure. We don’t spend capital as a percent of revenue. We spend capital based on gross ton-miles we haul. “Bridges don’t wear out with revenue; they wear out with units and gross tonmiles. So now, there’s this line of thinking out there where some of the railroads are saying, ‘We can get our capital as a percent of revenue down to 15%.’ And yet, railroads are making record profits. “The Street—I’m talking about sell-side
analysts—has been extremely aggressive with the publicly traded railroads. They’re saying that less is better. Less capital is better. Fewer market opportunities are better. Fewer unit trains are better. It’s all about lowering the operating ratio. I disagree with almost all of that. I truly believe that every industry, every business, needs growth ... the easiest way to reduce operating ratio is to take out track and reduce maintenance expenses. That’s really not the covenant, if you will, we have with our regulator, the STB, and even public policy makers. The Staggers Act wasn’t about, ‘Railroads, haul only what you want to haul on your network.’ It was about, ‘Haul everything, and you have the ability and the flexibility to differentially price on your network.’ That’s the deal, and it’s in the public’s best interest to move more tons to the railroad network, not to move tons off the railroad network. “There’s really no such thing as a bad load of freight ... If we fast-forward 10 years, we may not be saying that. But I do think we will be wanting to find ways to expand our offerings to bring more freight to the railroads ... I don’t think you can shrink yourself into a virtuous-cycle model that works.” Matt, stick around, OK? We need you to keep reminding us of what truly matters.
WILLIAM C. VANTUONO Editor-in-Chief
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Industry Indicators Ups and Downs for Rail Freight as Economy Continues Apace Most key indicators in October point to an economy that is doing well, the AAR reported, though some weren’t quite as good as they have been. For example, total manufacturing output rose a preliminary 0.2% in September over August, which isn’t bad but is the smallest gain in four months. Total U.S. rail traffic in October was mixed, up 1.0%, on higher crude oil, coal (its first increase in five months), and steel. But previous gainer sand fell as more locally-sourced frac sand was trucked to gas and oil fields, and uncertainties in export markets hurt grain shipments.
Railroad employment, Class I linehaul carriers, oct. 2018 (% change from oct. 2017)
Total employees: 148,719 % change from ocT. 2017: 1.62%
Transportation (train and engine) 62,780 (3.90%)
TRAFFIC ORIGINATED CARLOADS
MAJOR U.S. RAILROADS by Commodity
Grain Farm Products ex. Grain Grain Mill Products Food products Chemicals Petroleum & Petroleum Products Coal Primary Forest Products Lumber and Wood Products Pulp and Paper Products Metallic Ores Coke Primary Metal Products Iron & Steel Scrap Motor Vehicles & Parts Crushed Stone, Sand, & Gravel Nonmetallic Minerals Stone, Clay & Glass Products Waste & Nonferrous Scrap All Other Carloads
111,003 4,699 46,613 32,383 156,427 62,139 437,554 5,721 16,968 28,103 32,131 18,707 46,861 18,466 85,999 119,994 21,920 39,296 21,350 31,703
116,623 6,468 46,305 30,943 154,404 48,393 430,726 6,160 16,437 27,188 30,898 20,774 42,673 17,484 86,867 132,739 21,674 40,150 20,150 28,383
-4.8% -27.4% 0.7% 4.7% 1.3% 28.4% 1.6% -7.1% 3.2% 3.4% 4.0% -9.9% 9.8% 5.6% -1.0% -9.6% 1.1% 2.1% 6.0% 11.7%
Total U.S. CarLoadS
Executives, Officials, and Staff Assistants 8,495 (3.38%)
Professional and Administrative 11,811 (-3.16%)
COMBINED U.S./CANADA RR
Maintenance-of-Way and Structures 32,556 (-2.15%) Maintenance of Equipment and Stores 27,370 (3.02%) Transportation (other than train & engine) 5,707 (0.72%) Source: Surface Transportation Board
Calm before the storm Year-ago comparisons of employment figures in October track the bullish market for rail freight with segment gainers outpulling decliners. Not shown are figures for September 2018 that are essentially flat, mirroring the uncertainty in some commodity categories in recent months. More worrying is the forecast for 2019 and announced plans by Class I’s Norfolk Southern and Union Pacific to implement Precision Scheduled Railroading operations, with the latter reportedly cutting scores of jobs as part of a restructuring.
4 Railway Age // December 2018
Five WEEKS ENDING nov. 3, 2018
five WEEKS ENDING NOV. 3, 2018
MAJOR U.S. RAILROADS by Commodity
129,457 1,314,457 1,443,914
120,903 1,264,465 1,385,368
7.1% 4.0% 4.2%
1 357,863 357,864
5,337 349,629 354,966
-100.0% 2.4% 0.8%
TOTAL COMBINED UNITS
Trailers Containers TOTAL UNITS
CANADIAN RAILROADS Trailers Containers TOTAL UNITS
COMBINED U.S./CANADA RR
Source: Rail Time Indicators, Association of American Railroads
TOTAL U.S./CANADIAN CARLOADS, oct. 2018 VS. ocT. 2017
1,773,777 octoBER 2018
1,735,943 octoBER 2017
Short Line And Regional Traffic Index CARLOADS
ORIGINATED OCT. ’18
ORIGINATED OCT. ’17
53,975 17,870 30,121 12,811 30,112 7,636 10,131 2,726 19,427 8,779 2,470 2,512 19,507 15,093 52,009 9,836 80,471
45,863 26,523 31,986 11,858 27,510 6,543 9,936 2,872 16,314 9,716 1,612 2,234 18,390 14,645 43,979 10,002 84,891
17.7% -32.6% -5.8% 8.0% 9.5% 16.7% 2.0% -5.1% 19.1% -9.6% 53.2% 12.4% 6.1% 3.1% 18.3% -1.7% -5.2%
Chemicals Coal Crushed Stone, Sand & Gravel Food and Kindred Products Grain Grain Mill Products Lumber and Wood Products Metallic Ores Metals and Products Motor Vehicles and Equipment Nonmetallic Minerals Petroleum Products Pulp, Paper and Allied Products Stone, Clay and Glass Products Trailers / Containers Waste and Scrap Materials All Other Carloads
Copyright © 2018 All rights reserved.
average weekly U.S. Rail Carloads: all commodities (not seasonally adjusted) 280,000 2018
ARE YOU A RAILROAD OR SUPPLIER SEARCHING FOR JOB CANDIDATES?
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Data are average weekly originations for each month, are not seasonally adjusted, do not include intermodal, and do not include the U.S. operations of CN and CP. Source: AAR
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December 2018 // Railway Age 5 RA_JobBoard_1/3Vertical.indd 1
8/17/17 10:59 AM
Industry Outlook Branson Buys Into Brightline
Court Ruling Boosts CanaPux™ Prospects A recent U.S. court decision could give an assist to a CN-designed product aimed at making transportation of crude-by-rail (CBR) safer and cheaper. Canadian producers have seen shipments of their products stalled by congested pipelines, pushing it to more-expensive rail. And, on Nov. 8, a Montana District Court blocked President Trump’s permit from January 2017 to allow TransCanada to finish the nearly 1,180-mile Keystone XL pipeline connecting Alberta oil sands with refineries in Texas. That followed an August decision by a Canadian court to overturn Ottawa’s approval for the expansion in British Columbia of the Trans Mountain pipeline. Canada’s largest railroad recently filed a patent for CanaPux™, a pellet-like product that wraps tar sands extract bitumen in a layer of polymer for transportation by rail. It can be handled like dry bulk commodities, stacked in less-expensive open gondolas for shipment, then heated by refineries to separate the bitumen for refining and ready the polymer for recycling. Alberta crude is selling for less than onethird of the cost of U.S. benchmark light 6 Railway Age // December 2018
crude, according to reports, because of problems getting it to market. Moving oil pellets in lighter gondolas, CN said, would create more crude per car than tank cars, and eliminate the need for diluent required for movement of liquid crude. After a spill, the pellets are easily recovered on land as well as water, since they float. The railroad estimates costs of less than 50% of transporting liquid CBR. InnoTech Alberta is working with CN on the optimum composition of CanaPux™; a pilot production project by Toyo Engineering Canada is to demonstrate market viability. CN wants to partner on a pilot plant with capacity to transform 10,000 barrels per day of undiluted heavy crude into CanaPux. CanaPux™, developed by CN and InnoTech Alberta, are solid, dry pellets about the size of a bar of soap that can be shipped by rail with lower risk of explosion or water contamination than bitumen in sludge form, which is usually diluted with volatile petroleum-based additives—diluents—to ease loading and unloading with rail tank cars and pipelines. Diluents allow bitumen to be pumped into pipelines or railcars, but also increases its flammability.
Florida’s Brightline private higher-speed passenger rail service has a new investor, Virgin Group, headed by British billionaire Sir Richard Branson. Virgin Group will make a minority investment in Brightline, which will be managed and operated by Brightline’s executive team and affiliates of Brightline parent Fortress Investment Group. Brightline renamed itself Virgin Trains USA and will transition to Virgin Trains USA branding in 2019, “leveraging the Virgin brand and marketing expertise for existing and future developments.” The trademark licensing agreement with Virgin Group “will allow Brightline to leverage Virgin’s industry-leading expertise and customer experience to establish a powerful new brand, ‘Virgin Trains USA,’ Brightline said, noting that Virgin Group “has more than 60 companies focused on its core consumer sectors of travel and leisure, telecoms and media, music and entertainment, financial services and health and wellness. The partnership could help to provide access to millions of customers with the potential for increased ridership from other Virginbranded travel and hospitality businesses, including Virgin Atlantic, Virgin Hotels and Virgin Voyages.” Virgin Group “has significant experience operating in the UK rail sector, including its ongoing investment in Virgin Trains, a high-speed intercity passenger rail system it has run for 21 years,” Brightline said. “Last year passengers took more than 38 million trips on the UK’s West Coast Main Line.” As part of the partnership, an affiliate of Virgin Group has agreed, subject to certain closing conditions, to make a minority investment in Brightline. Funds managed by an affiliate of Fortress Investment Group LLC will retain majority ownership of Brightline. Brightline’s current management team will oversee daily operations, engineering, business development and strategy. railwayage.com
NE TGEN R A I L W AY A G E P R E S E N T S
Beyond Track. Beyond Trains.
WHERE IS THE GROWTH IN FREIGHT RAIL? DISCUSSIONS INCLUDE: • How digital access is transforming the supply chain • Class I’s: Investing in industrial development is good for business • Ports & the growth of intermodal gateways • First & last mile: Short lines show the way on freight Customers, Employees & Shareholders: Finding a Balance MATTHEW ROSE Executive Chairman, BNSF
MAR. 12, 2019
Union League Club of Chicago
Closing Remarks JJ RUEST President & CEO, CN
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Market BNSF Logistics: Bigger in Texas BNSF Logistics has introduced a new 20-axle railcar, the TEXX 900, which joins its specialized fleet to handle heavy-haul and over-dimensional loads. This shiftable, depressed deck flatcar will enable the third-party logistics services provider, based in Cleburne, Texas, to offer customers a new option for oversized shipments. The TEXX 900 has a load capacity of more than 900,000 pounds and can shift up 13 inches, down 11 inches, and 14 inches left to right. The deck space for cargo is 40 feet long, 4 feet high and 9.5 inches wide, making it wellsuited for complex project moves. It is one of three similar cars in North America and the only one of its kind available for booking outside a private fleet.
WORLDWIDE Moldovan Railways (CFM) has ordered 12 GE Transportation Evolution Series TE33AC locomotives, along with parts, training and services. This is the first locomotive order in Moldova for GE Transportation, as the country upgrades its existing fleet to haul freight trains that primarily carry grain and ore, as well as passenger trains. GE will produce the locomotives in the U.S. as kits later in 2019, and then ship them to Moldava for regional final assembly, with anticipated final delivery in 2020. Designed for the CIS (Commonwealth of Independent States)
8 Railway Age // December 2018
region’s wide temperature and operating conditions, the TE33AC features a 12-cylinder, 4,000-horsepower Evolution Series engine with EU3A emissions-level compliance. The contract is part of the broader “Project for the Restructuring and Reorganization of the State Enterprise Moldova Railways.”
NORTH AMERICA Société de Transport de Montréal (STM) has exercised a $340 million option on an October 2010 contract with the consortium of Bombardier Transportation and Alstom for 153 additional AZUR rubber-tired metro cars, configured as 17 ninecar trainsets. Bombardier’s share is valued at $213 million, Alstom’s at $127 million. Most manufacturing and all final assembly will take place at Bombardier’s facility in La Pocatière, in the Bas St-Laurent region of Québec, where manufacturing of the initial STM order is being completed, on schedule. As with the original order, Alstom will supply bogies and traction motors, as well as train control, communications, passenger information and video surveillance systems. Nearly 170 Bombardier employees will be assigned to this new order, which will also
involve 70 employees Alstom’s in Sorel-Tracy plant in southwestern Québec. “With 60% Canadian content, this order will leverage a network of several hundred suppliers across Québec,” the carbuilders noted. Only one company submitted a proposal to develop a passenger rail line connecting Tampa and Orlando, but that company is well-known in Florida transportation circles: Brightline (soon to be Virgin Trains USA), the start-up that operates higherspeed passenger service from Miami to West Palm Beach. Operated by Florida East Coast Industries’ subsidiary All Aboard Florida, Brightline is proposing a rail-and-real estate development deal modeled on its MiamiCentral project, which includes a station and 1.6 million square feet of high-end residential, office and retail space in Overtown near downtown. Consultant Ernst & Young has committed to occupying one of the office towers. In Tampa Brightline has identified three sites for prospective terminals, including an apartment complex, the site of a former jail, Tampa Union Station, and the GasWorx property adjacent to the site of a proposed stadium for Major League Baseball’s Rays. railwayage.com
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NEW YORK MTA
n a move that many observers call not surprising, New York Metropolitan Transportation Authority Chairman Joe Lhota resigned on Nov. 9, only one week after he expressed his intention to stick with the MTA at a board meeting.
Vice Chairman Fernando “Freddy” Ferrer, in accordance with MTA procedure, has become Acting Chairman at a critical time for the MTA. At the Nov. 15 board meeting, over which Ferrer (Bronx Borough President from 1987 to 2001) presided, the MTA released its four-year outlook, which is preliminary to adopting a 2019 budget. Lhota, 64, was appointed Chairman last year on a part-time basis for a token $1 salary, keeping his full-time post as Senior Vice President, Vice Dean and Chief of Staff at New York University Langone Health. He delegated responsibility for much of the MTA’s day-to-day operations to President Patrick Foye and Managing Director Veronique “Ronnie” Hakim. Lhota succeeded Tom Prendergast, Railway Age’s 2017 Railroader of the Year, who retired from the MTA in January 2017 and is now with STV, Inc. as Executive Vice President and Chief Strategic Officer. It was Lhota’s second tour of duty at the MTA; he had served as Chairman from January to 10 Railway Age // December 2018
December 2012. He resigned as MTA Chairman to run for mayor of New York City in 2013 on the Republican ticket. Bill De Blasio, a Democrat, crushed Lhota in that election with 73% of the vote. The two had been at odds, engaging in a public war of words over the city’s share of funding the New York City Transit subway system. New York Gov. Andrew Cuomo, who hand-picks the MTA Chairman and typically seeks outside talent (an exception was Prendergast, who had previously served as President of the Long Island Rail Road and NYCT), said in a tweet, “Joe Lhota has dedicated decades of his life to public service, culminating in two tours of duty at the helm of the MTA. He stabilized the subway system, appointed a new leadership structure, and led with a steady hand during some of the agency’s most challenging moments.” In a letter to MTA employees, Ferrer, Hakim, Foye, Chief Development Officer Janno Lieber and CFO Bob Foran said, “We are extremely grateful for the steady leadership [Joe Lhota] provided during his tenure. Joe launched the Subway Action Plan, reinvigorated the MTA and set us on the path to success. His focus on delivering better daily service for our customers and prioritizing cost containment and procurement reform
initiatives and working to create long-term sustainable funding sources were the hallmarks of his time leading the board.” When he accepted the MTA chairmanship for the second time, Lhota said he took the position for the “sole purpose of halting the decline of service and stabilizing the system for my fellow New Yorkers.” He frequently referred to the $800 million subway emergency repair package devised during his first month. NYCT President Andy Byford has taken on rebuilding and modernizing the 114-year-old subway system—the city’s transportation lifeblood—with his ambitious, $30 billion “Fast Forward” program.
We are grateful for the leadership he provided during his tenure.” railwayage.com
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GEXR Leased Segment Reverts to CN At midnight on Nov. 16, 2018, the 20-year lease of part of the 184-mile Goderich-Exeter Railway (GEXR) from CN came due, and the Class I lessor took back the lines. Owned by Genesee & Wyoming, GEXR was one of Canada’s first short lines. Created in 1992 by RailTex, it was subsequently purchased by RailAmerica in 2000, followed by Genesee & Wyoming in late
12 Railway Age // December 2018
2012. The owned portion consists of CN’s former Goderich Subdivision, 70 miles of track between Stratford and GoderichExeter, Ontario. On Nov. 15, 1998, GEXR leased CN’s Guelph Subdivision, which runs on 89 miles of main line track and 30 miles of branch lines between Silver Junction (in Georgetown) and London, Ontario. Commodities hauled are automotive,
chemicals, fertilizer, grain, gypsum wallboard, heavy machinery, lumber products, paper, propane, salt, soy meal, steel and wheat. Twenty years after the lease was signed, as short lines continue to be spun off by Class I’s (for example, CSX sold its Panhandle Division in Florida to holding company RailUSA; see p. 14), CN is doing the opposite. Most GEXR employees will reportedly be migrating to CN, and GEXR will retain some employees to maintain its owned portion of track between Stratford and Goderich-Exeter. CN has built offices in Kitchener and will base most jobs out of Kitchener Yard, keeping service largely the same as GEXR has provided. This wasn’t the first recent short line take-back by CN. On Sept. 18, CN took back most of the Hagersville Subdivision from GEXR sister railway Southern Ontario Railway (SOR), while SOR retained a terminal switching operation in Nanticoke, Ontario. More is also planned: On Dec. 13, 2018, SOR’s Hamilton Division was set to revert to CN. Part of the Guelph Subdivision consists of shared trackage with the new KitchenerWaterloo ION light rail system, now scheduled to open in early 2019. The ION LRT line’s infrastructure has been essentially complete since summer 2017. It had originally been hoped to open the system in mid-2018, but continued late delivery of 14 Flexity Freedom LRVs from Bombardier Transportation has resulted in postponement of this date twice, first to December 2018, then again to early 2019.
Update New York MTA’s $35 Million “No-Brainer” The New York Metropolitan Transportation Authority, for a mere $35 million, is purchasing Grand Central Terminal and Metro-North Railroad’s Harlem Line and Hudson Line from Midtown Trackage Ventures LLC, a private holding company. The MTA’s purchase will terminate a 280-year lease that gives the agency a onetime window of opportunity to buy the assets; the window closes in 11 months. The purchase price, MTA says, “is equal to the net present value of the estimated rental stream the MTA had been paying under the lease, discounted at a highly favorable rate of 6.25%.” Midtown Trackage Ventures LLC had acquired assets that once belonged to Penn Central Transportation Co., the railroad whose 1970s bankruptcy and liquidation led the MTA to assume management of the regional/commuter rail operations now known as Metro-North. “Owning the properties means that for the first time, Metro-North will have unencumbered control and responsibility of its operating environment,” the MTA said. “The MTA’s ownership of Grand Central Terminal will [also] give MTA Long Island Rail Road clear control of the East Side Access terminal being built beneath Grand Central. MTA ownership of the Harlem Line and Hudson Line means that the public can now capture the full value of improvements made
through transit-oriented development projects and other public-private partnerships along the rail lines.” Grand Central Terminal was built by the New York Central and opened on Feb. 2, 1913. The NYC had previously built the Hudson Line and Harlem Line in the 19th century. Penn Central declared bankruptcy in 1970 and leased the rail assets to the MTA in 1972. Those assets passed to the American Financial Group, then American Premier Underwriters. Commuter rail operations were assumed by Conrail in 1976; the system took its current form in 1983 when New York State, through the MTA, formed Metro-North. In 1994, the MTA signed the current 280-year lease with American Premier Underwriters, through February 28, 2274; the lease included an option for purchase in 2019. American Premier Underwriters sold the ownership rights to Midtown Trackage Ventures LLC in the early 2000s. “This was a no-brainer, from a financial standpoint,” said MTA Chief Development Officer Janno Lieber. “We had to exercise the option to purchase or remain a tenant for another 270-plus years. The interest rate environment—and the $500,000 discount offered by the seller—means it’s cheaper to buy it now than to pay rent for all that time. This transaction secures for the MTA control over development rights along the Harlem
Line and Hudson Line, which will allow us to help local jurisdictions implement highquality transit-oriented development.” The MTA’s Hudson Line ownership will extend to 2.2 miles north of Poughkeepsie Station on the Hudson River, on the former New York Central Water Level Route that once saw premium long-distance passenger trains like the legendary 20th Century Limited. This point, where Metro-North train dispatchers hand off control of train movements to Amtrak, is at Milepost 75.8, representing its distance from the bumper blocks at Grand Central. Tracks north of this point are owned by CSX. The portion of the Harlem Line being acquired by the MTA extends as far north as Dover Plains, N.Y. The MTA previously acquired the segment of the line from Dover Plains to Wassaic, N.Y., in 1990 when MetroNorth extended the Harlem Line tracks northward over this five-mile segment.
Connecting people for more than 90 years. Rail Vehicle Engineering railwayage.com
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Revenue Systems and Technology
Operations Planning and Simulation December 2018 // Railway Age 13
CSX Shedding Florida Panhandle Trackage CSX plans to sell 373 miles of track in the Florida Panhandle to a new Class III railroad backed by an investment group
14 Railway Age // December 2018
headed by veteran short line entrepreneur Gary Marino. The sale was revealed in a filing by the
Florida Gulf & Atlantic Railroad to the Surface Transportation Board Nov. 6. No terms were disclosed in the acquisition by International Rail Partners of Boca Raton, Fla., through subsidiary RailUSA. The investment group is head by Chairman, CEO and Managing Partner Gary Marino, who co-founded and served as head of short line operator RailAmerica for 20 years, and later founded Patriot Rail, another short line investor. The deal includes CSXâ€™s Tallahassee Subdivision between Baldwin and Chattahoochee, the P&A Subdivision between Chattahoochee and Pensacola, and portions of the Bainbridge Subdivision between Tallahassee and Attapulgus, Ga. The Florida Gulf & Atlantic said it has posted the sale notice to eight CSX unions at nine locations. It plans to hire 37 employees to operate the new railroad. Genesee & Wyoming acquired RailAmerica in 2012 for approximately $1.4 billion. The latter had acquired short line holding company RailTex in 2000.
Update FRA Offering SOGR Grant Funding The Federal Railroad Administration (FRA) has issued a Notice of Funding Opportunity (NOFO) for the Federal-State Partnership for State of Good Repair Program, which falls under the Catalog of Federal Domestic Assistance (CFDA). The Federal-State Partnership for State of Good Repair Program makes more than $272 million in capital grant funding available. It is authorized in Sections 11103 and 11302 of the Passenger Rail Reform and Investment Act of 2015 (Title XI of the Fixing America’s Surface Transportation Act.) The available $272.25 million “will assist in funding capital projects to repair, replace or rehabilitate publicly owned railroad assets, and to improve intercity passenger rail performance,” FRA said. “Eligible projects include those that replace existing assets in-kind; replace existing assets with those that increase capacity or provide a higher level of service, and those that ensure existing assets maintain service while being
brought into a state of good repair.” Federal funds awarded under this NOFO program must not exceed 80% of total project cost. The 20% non-federal share may be composed of public sector or private sector funding, or both. “In addition,” FRA noted, “selection preference will be given to projects where Amtrak is not the sole applicant; where multiple applicants submit applications jointly; where the proposed federal share of total project costs does not exceed 50%; where nonfederal shares consist of funding from multiple sources, including private sources, and where applications indicate strong project readiness.” FRA “will also consider how well the project aligns with key U.S. Department of Transportation priorities, including supporting economic vitality, leveraging federal funding, using innovative approaches to improve safety and expedite project delivery, and holding grant recipients accountable for
achieving specific and measurable outcomes.” Applications must be submitted via www. grants.gov and are due no later than 5 p.m. EDT on Monday, March 18, 2019. The Federal-State Partnership for State of Good Repair Program is made available by the Consolidated Appropriations Act of 2017, Public Law 115-31, Division K, Title I (2017 Appropriations Act) and the Consolidated Appropriations Act of 2018, Division L, Title I, Public Law 115-141 (2018 Appropriations Act; collectively the Appropriations Acts). Prior to the application deadline, FRA plans to provide Web-based training and technical assistance to answer questions from applicants. “It is important for rail infrastructure owners and operators to plan for the maintenance and replacement of their assets,” said FRA Administrator Ronald L. Batory. “The Department particularly recognizes the opportunity to reduce risk and enhance safety through this grant program.”
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December 2018 // Railway Age 15
STB: Nothing’s the Something It Does Best
ew leadership arrives at railroad-focused congressional committees in January, and unless Surface Transportation Board (STB) Chairman Ann Begeman ingests breakfast Wheaties and gains courage to produce decisions, Congress may prescribe more than a potent laxative. The motivation will be rail captive shippers begging prompt adjudication of grievances, and could result in sunset of the independent STB, a shift of most of its regulatory functions to the Executive Branch Department of Transportation (DOT), and a transfer to the Executive Branch Justice Department of rail merger authority and power to revoke STBapproved antitrust immunity. Shippers increasingly are agitated that Precision Scheduled Railroading (PSR)—a strategy to reduce operating ratios, boost profit and hike stock price—is degrading service quality, and fear worse should institutional investors goad railroads into a new round of merger applications before an STB historically more disposed toward corporate marriages than the Justice Department’s Antitrust Division. Shippers equally are distraught that the STB has postponed for years simplifying and making more efficient and less costly its maximum freight-rate-review methodologies; revising procedures for determining rail revenue adequacy and its use in establishing maximum reasonable freight rates, and establishing regulations allowing sole-served shippers access to a competing railroad. The uncertainty for all parties of interest is just how willing the new leadership of
for the past 23 months,
begeman has postponed advancing rulemaking proceedings
16 Railway Age // December 2018
the House Transportation & Infrastructure (T&I) Committee and Senate Commerce Committee will be in accommodating shipper disquiets. Expect Sen. Roger F. Wicker (R-Miss.), labeled the Senate’s “most pro-Amtrak Republican,” but whose freight issue views are uncertain, to chair the Commerce Committee, succeeding generally rail-friendly Sen. John Thune (R-S. Dak.), who becomes majority whip. Significantly, the Senate Commerce Committee’s senior Democrat, Florida’s railfriendly Bill Nelson, lost his election, leaving in Congress only six lawmakers who served when the 1980 Staggers Rail Act, which partially deregulated railroads, was passed. Succeeding Nelson as Commerce Committee senior Democrat will be Washington State Sen. Maria Cantwell, termed “not very friendly” toward Class I freight railroads. Rep. Peter DeFazio (D-Ore.), historically a supporter of short lines, but less tested on Class I issues, will chair the House T&I Committee, succeeding the retiring Bill Shuster (R-Pa.), the railroads’ most dependable defender. During the 1980s and early 1990s, lawmakers considered splitting rail regulatory authority between the DOT and Justice Department, as was the fate of the independent Civil Aeronautics Board following 1978 airline deregulation, and most motor carrier regulatory oversight following 1980 trucking deregulation. An STB sunset could now become reality owing to bipartisan congressional urgency to cut federal spending, a typically greater commiseration among Democrats for shipper grievances, Trump-inspired Republican enthusiasm to expand Executive Branch power, and a 2020 target date for reauthorizing—or not—the STB. It is difficult to defend a do-nothing federal agency. For the past 23 months, Chairman Begeman has postponed advancing long-festering rulemaking proceedings, and declined to set new deadlines. She prefers awaiting reinforcements to fill three vacant seats rather than pursue common ground with Democratic-member Deb Miller, with whom she has previously found agreement. Such timid performance is uncharacteristic of Begeman. For five years prior to
many shippers are agitated that psr is degrading service quality.” becoming chairman in January 2017, her scores of probing, imposingly reasoned and crisply written dissents and separate expressions evoked a regulatory tiger, not the passive chairman she became. The inaction is not necessarily a nod to a railroad-preferred status quo given Begeman’s proclivities—similarly seen in Miller—to comprehend shipper concerns. She told CSX that with PSR, it is “doing less with less,” and criticized Union Pacific as “expecting many customers to modify their own operations, at [shipper] time and expense, to accommodate UP’s new operating plan.” Believe that captive shippers, grasping the difference between words and deeds, have been talking with the incoming new congressional leadership. Former Federal Aviation Administration chief counsel and later rail regulator Gregory S. Walden wrote in 1994 that to ensure “a unitary federal transportation policy,” Congress should “place all elements under control” of the DOT to avoid being the “Department of Most Transportation.” How persuasive such an argument will be in 2019, given changes in Congress, may depend on whether and when Begeman grasps, with determination, the leadership baton.
FRANK N. WILNER Contributing Editor railwayage.com
Carl Icahn Knows Rail Investing
n Oct. 22, American Railcar Industries Inc. (ARI) announced that it was being acquired by a subsidiary of ITE Rail Fund L.P. (ITE). The acquisition price was $70 per share, for a total purchase price (including debt) of $1.7 billion. That price represented a 51% premium to the previous day’s close (Oct. 19) of $46.29 per share. As ITE is privately held, ARI will become a private company at acquisition. So what is to be made of a high-priced acquisition of a railcar manufacturer and lessor? After the initial acquisition, many insiders were overheard saying that the price seemed too high and did not support the purchase. After all, a 50% increase in share price does seem like a significant premium. But when one looks a little deeper, those concerns are unwarranted. First, a bit of history: The postannouncement headline was the cool 423% return on Carl Icahn’s (ARI’s largest shareholder) investment in ARI. That translates roughly into $757.2 million. Icahn’s involvement with ARI goes back into the 1980s, when he originally acquired a controlling interest in ACF industries (ARI’s predecessor) as part of a classic 1980s style LBO, where he outbid E.M. Warburg, Pincus & Co. Soon after, in the early 1990s, Icahn recapitalized ACF and took roughly $475 million for his firm, Highcrest Investor Corp. In other words, Carl Icahn has made a fortune selling railcars not once, but twice. What about today and the price paid by ITE? On a fundamental market level, railcar
greenbrier industries saw a
prices (especially tank railcars) seem to be on the rise. Right now, a DOT 117J tank railcar for crude service (lined) is pricing out at roughly $150,000 per car, a YOY increase of roughly 20%. The ARI acquisition brings with it a lease fleet of 13,721 railcars (mostly tank railcars). This lease fleet is a more recent phenomena, having begun serious accumulation after the sale of American Railcar Leasing’s (ARL) fleet of 50,000 railcars to SMBC Rail Services, LLC (an operating lessor) in 2017 for roughly $2.75 billion. ARI was the sole provider of railcars and tanks to ARL. Who was the owner of ARL? You guessed it: Carl Icahn again! Wait! In other words, Carl Icahn has made a fortune selling railcars three times. So on a per-car basis, ITE is paying roughly $125,000 per car for a fleet of relatively new tank railcars that are currently on lease. This does not even account for any value being attributed to the manufacturing facilities and the current 11,215-car ARI backlog with an estimated market value of $1.1 billion. Naysayers in the market will point to the statistical metrics that separate the sale of ARI from its competition in the manufacturing and leasing space. After the acquisition was announced, ARI was trading at two times its book value. On Oct. 23, GATX announced its earnings and book value declined from two times book value to 1.75 times book with a 15% decrease in market cap. Trinity Industries saw a decrease of 30% (this the spinoff of infrastructure-related business Arcosa Industries) with a price to book below one. Greenbrier Industries saw a decrease of almost 20% with a price to book of 1.3 (post earnings). All this happened while the backlog for railcars increased by 25,000 units in Q32019. The only company that did not get hit with a reduction in share price and book value was ARI. What gets lost in the sale of ARI is that the marketplace has a seeming insatiable appetite for purchasing railcars on lease. ITE began its investment in the railcar space by purchasing assets put on lease by someone else. These secondary
naysayers point to metrics that separate ari from competitors.” market transactions (unless they are of a critical mass, like the SMBC acquisition or GATX’s recent purchase of 3,100 cars from ECN Capital) generally do not make headlines. However, leasing companies make bank on secondary market sales. Don’t believe otherwise. The newly acquired ARI allows ITE to move the game forward one step. Before the acquisition, ITE was purchasing cars from third parties and paying a premium for doing so. After the acquisition, ITE can either increase the return on its leased assets by “acquiring” assets from ARI at a discount to the secondary market price or turn the tables and begin to sell railcars to the secondary market and make the profit it was once paying to others for cars on lease. Lease fleet, backlog, manufacturing and the opportunity to cut out the middleman in acquisitions. Maybe the price isn’t so high after all. Oh, and in 1996, Carl Icahn agreed to lease 80% of the then-present ACF Industries lease fleet of tank railcars to GE Railcar Services (now Wells Fargo Rail). That’s four times. Got questions? Set them free at dnahass@ railfin.com.
DAVID NAHASS President Railroad Financial Corp. December 2018 // Railway Age 17
LESS is NOT BETTER “We’re going to have to find ways, as an industry, to grow,” says BNSF Executive Chairman Matt Rose.
By William C. Vantuono, EDITOR-IN-CHIEF 18 Railway Age // December 2018
NSF Railway Co. Executive Chairman Matthew K. Rose will retire from the railroad in April of 2019, after 26 years of service. At the end of his tenure, Rose will have been Executive Chairman for six years, and CEO for the prior 13 years. He also served in senior marketing and operations positions at BNSF and predecessor Burlington Northern before assuming the CEO role in December 2000. Railway Age selected Rose as its 2010 Railroader of the Year. “In the railroad industry, where strong, focused leadership counts for a whole lot, [he] has led BNSF Railway to new heights,” wrote Railway Age Editor-inChief William C. Vantuono in the January 2010 issue. “One of Matt Rose’s most impressive traits has been the ability to grow,” wrote the late Larry Kaufman, a Railway Age Contributing Editor, in January 2010. “Like good executives in any industry, he thinks long-term—five years and more into the future.” “It was a very lucky day for me and for Berkshire Hathaway when I met Matt Rose,” said Chairman Warren Buffett when Rose’s pending retirement was announced. “Under Matt’s management, BNSF has become a major source of profit and pride for Berkshire. And, as a citizen, Matt has been an exemplar for corporate leadership.” Rose and Vantuono met at BNSF’s Washington, D.C. office in late November for a wide-ranging interview in which Rose reflected on his career and talked about the industry’s future. Vantuono: You joined BN as director of automotive terminals. Rose: Yes. I actually came out of the trucking industry. I joined BN in 1993. We merged on Sept. 22, 1995 with Santa Fe. The CEO, Rob Krebs, came from Santa Fe, the smaller railroad of the two. When I was 38, Rob told me that he wanted me to be the next CEO of the company. I laughed, and he said, “Why are you laughing?” I said, “Because I’ve never run a railroad.” He said, “Well, I’m going to change that tomorrow. You’re going to become the Chief Operating Officer of this company.” And I laughed even more. Sure enough to his word, he did that, and then a year later he named me railwayage.com
Matt Rose President. Then a year later, on Dec. 7, 2000 he named me CEO. He stayed one year, and then left. I really was not qualified in the least to run this railroad. Vantuono: I remember you telling me about this conversation nine years ago when you were Railroader of the Year. Rose: Same story. Still wasn’t qualified! Vantuono: How about now? Rose: Oh, I’m qualified now! Vantuono: Obviously! So, in the past 25 years, you’ve witnessed a lot. Rose: I’ve thought of my career as having three different cycles. The first cycle was 2000. I’ll start with safety, as I always like to do. We were really struggling with safety as an industry. A lot of derailments. People just can’t fathom the amount of
“Railroads are starting to be goaded into lower capital targets by sell-side guys on Wall Street.” head-on and rear-end collisions, non-accidental releases, injuries, amputations and deaths that were occurring. Safety was not very good. And we were not growing as an industry; we were really struggling to grow. It was the dot-com era. When I would go to Wall Street, all people wanted to talk about was technology stocks, internet stocks. Everybody was going to point-and-click. No more bricks and mortar. Everyone was going to buy stuff over the internet. The returns of the industry were midsingle-digits. And yet we were spending a lot of capital. There was an enormous amount of frustration, with customers saying, “We’ve got to re-regulate the railroads.” But the regulators, I think, almost felt a little bit of empathy for us because our returns were, quite frankly, subpar. And we would
say, “Look at all this money, and we’re only making 7.5% on our investment,” and so no harm was done. In the second phase, safety was getting much better, and the investments that we were making were starting to pay off in terms of a better-quality railroad to run on— rails, ties and ballast. Processes were getting better, and we were really seeing improvement in personal injury frequency, fatalities and everything else. We were spending a lot of money, and we were coming into a strong manufacturing growth cycle. A lot more business was coming to the industry. We started seeing fuel costs go up, and more customers wanted to use us. Rob Krebs, quite frankly, had laid a real nice bedrock for us in terms of capital to expand, specifically the Transcon and the Northern Transcon. We were seeing an enormous amount of growth from our trucking partners. All that point-and-click was really paying dividends for the Federal Expresses, UPS’s and J.B. Hunts of the world. We were really in this growth groove. That traffic was coming to the railroad. Somebody’s got to move it, and we were moving it. Our growth curve started going up, and we were spending, again, a really significant amount of capital. It was all working. But there was more regulatory oversight, and more and more people were calling for changes. And then we came into the 2011-2012 period where crude by rail really started hitting. The investments ramped up even more. And yet, at that point in time, the regulators were basically saying, “Look at all the money these guys are spending to meet demand. This is still really good.” Okay, returns were going up, but they were in the 10% to 12% range. We were still below the average return on invested capital for American business. All that worked as well. The third phase of my career in leadership is a little trickier, because now we’re seeing record profits and returns as well as sustained growth. We’re seeing an industry that is starting to have discussions around, “I only want what fits on my network.. I only want to provide service that fits on my network, based on a balanced view of my network.” The railroads are still investing significant sums, but we’re starting to be goaded into lower capital targets by Wall Street, December 2018 // Railway Age 19
the sell-side guys. They’re giving railroads kudos for saying, “Oh, I can spend capital as a percent of revenue.” That’s not the best measure. We don’t spend capital as a percent of revenue. We spend capital based on gross ton-miles we haul. Bridges don’t wear out with revenue; they wear out with units and gross tonmiles. So now, there’s this line of thinking out there where some of the railroads are saying: “We can get our capital as a percent of revenue down to 15%.” Somebody else has said 13%. And yet, railroads are making record profits. And now we’ve also got political shifting of the sands. Here we are, the day after the mid-term elections. The House flips, and there will be a new Transportation & Infrastructure Committee chair who may look at all this stuff differently. And so, the conversation is no longer about revenue adequacy. We’re talking about investment and service. I think we’re at a tricky time now. The Street—I’m talking about sell-side analysts—has been extremely aggressive with the publicly traded railroads. They’re 20 Railway Age // December 2018
“It’s in the public’s best interest to move more tons to the railroad network, not off it.” saying that less is better. Less capital is better. Fewer market opportunities are better. Fewer unit trains are better. It’s all about lowering the operating ratio. I disagree with almost all of that. I truly believe that every industry, every business, needs growth. Vantuono: So you would say less is not better? Rose: Absolutely. It’s not. Let me tell you why. If you go back to the 1980s, you saw where some railroads had a singular
focus on operating ratio. And the easiest way to reduce operating ratio is to take out track and reduce maintenance expenses. That’s really not the covenant, if you will, we have with our regulator, the STB, and even public policy makers. The Staggers Act wasn’t, “Railroads, haul only what you want to haul on your network.” It’s “Haul everything, and you have the ability and the flexibility to differentially price on your network.” That’s the deal, and it’s in the public’s best interest to move more tons to the railroad network, not to move tons off the railroad network. So, I think we’re going into an interesting period where that will all be sorted out. I can’t tell you how it’s all going to work out, but there’s going to be a lot of activity. I think again, when I go back to 2000, I had a saying. I never said it publicly: “There’s really no such thing as a bad load of freight.” We need to find the right operating expense to haul it, but we’ve also got to find the right price to haul it. We didn’t go around shooting down freight, because we saw this industry in the ’90s lose enormous amounts of market share to truck. I believe railwayage.com
Thank you, Matt Rose, for advancing the industry that moves industry. Upon his retirement, Matt Rose will have led BNSF Railway for 19 years and helped the Association of American Railroads break new ground in transportation policy. Weâ€™d like to thank him for his tireless service to our industry and wish him the very best in his future endeavors.
Matt Rose industry, to continue to grow. If there’s one thing that I think will impede the progress of the railroads, it’s lack of growth. We’ll get a little confused in the meantime because we’ve got crude by rail rolling because the pipelines aren’t in. Coal is still moving at a rate at which we are all a little surprised. But long-term, we’ve got to find ways to grow outside these commodities, and it’s probably going to be modal conversion, i.e.; intermodal. That’s going to require really strong maintenance and expansion capital, and service offerings that are available to everybody.
22 Railway Age // December 2018
and then provide service that’s going to get more customers to use our railroad in more locations. There was an article in the Wall Street Journal that’s instructive about supply chains. The point was that customers are moving their manufacturing facilities closer to their users because of high transportation costs. They aren’t fingering the railroads or trucks. It’s just higher transportation costs, driven by higher fuel costs, driven by congestion and all these things. We’re going to have to find ways, as an
Vantuono: How do you view hedge funds coming into our industry? Do you think it’s been beneficial, or not? Is the hedge fund era over, if there was a hedge fund era? Rose: When we were publicly traded, I would go to sell-side conferences. It used to be me with investors and sell-side analysts. And then it changed. The meetings got larger. There’d be 20 hedge fund analysts; they all seemed to be under 30 years of railwayage.com
that, when we fast-forward 10 years in the future, we may not be saying that there is no such thing as a bad load of freight. But I do think we will be wanting to find ways to expand our offerings to bring more freight to the railroads. I just don’t think you can shrink yourself into a virtuous-cycle model that works. BNSF’s mission has simply been to provide a great service through the heartbeat of the railroad—capital investment. Expand the railroad. You see every year that we do expansion in our company,
Vantuono: Since BNSF became part of Berkshire Hathaway, you haven’t had to answer to Wall Street. Would you say that’s been an advantage? Rose: Yes. When we did the deal in 2009, I told our management team that it would probably take us 10 years to look back and say whether or not this was a good experiment. And by that I meant, could we outperform vs. being a standalone company? And I think the answer is yes. Why is that? Warren has given me, personally, tremendous flexibility to run the company. He’s been very interested in our returns, and we have done a good job for him. They’ve got a couple basic philosophies. Charlie Munger, who’s Warren’s right-hand man, says, “We don’t have to make the last dollar.” Warren talks about this in his annual letter. He says that we make these investments with the belief that the future regulator—not the regulator who’s there today, the regulator who’s there tomorrow—will take all this into account. I simply call it the unwritten commitment. That is, we spend enormous amounts of capital on these networks, and we get a regulator who allows us to provide good returns. All that’s worked, I think, pretty well.
Congratulations and Thank You,
Matt Rose, for Your Leadership, Vision and Commitment to Growth, Productivity and Safety
www.gbrx.com | firstname.lastname@example.org
24 Railway Age // December 2018
“Warren told me to run BNSF as if I owned it, and would be in charge of it for 100 years.” markets and customers to grow your business, these are not necessarily 10-year opportunities, but they’re not something that always shows up in the next quarter, or even in next year’s numbers. Stock prices have certainly benefitted, if you look at the market caps of the railroads. It would be hard to say that there hasn’t been an enormous amount of shareholder value. But that’s just one of three elements of the value proposition. Vantuono: Do you think shareholder
value is misinterpreted? Or there’s too much emphasis on share price? Rose: Yes. We’ve always looked at the value proposition of the railroad as a threelegged stool. Shareholders are a very important leg of that stool because they provide the capital for us to make investments. The second leg of the stool is the employees. They provide the services that allow us to make the investments that allow us to make the returns to provide to the shareholders. And then finally, there are the customers. People are always asking, “What’s the most important?” Well, they’re all important. And if you think about a three-legged stool, if one of those legs gets a little out of whack, things don’t work very well. Vantuono: So, you believe that you’ve got to have a balance. The three legs should be more or less even? Rose: Right. You have to be worrying about all those constituencies. And if you’re not, bad things are going to occur. You would think that as the railroads become more profitable, by however measure you want to look at it, service would actually railwayage.com
age. Creating transparency about how you’re doing versus another company, and the old spirit of how you’re running your company versuss somebody else, I think that’s fine. But when a hedge fund says, “I really want to know how you’re going to do next quarter” on a railroad that is making 30-, 40-, 50-year-long asset investments, it’s really not consistent. The day after we had our shareholder meeting, and the shareholders voted 97% in favor of the Berkshire Hathaway transaction, it was snowing in Fort Worth. I’ll never forget. I called Warren, and I said, “Okay Warren, you now own a railroad. Congratulations. What do you want me to do? You want me to come to Omaha and bring a power point and show you what our next five-year plan’s going to be?” And he said, “No. I want you to run this company like you own it, and you’re going to be in charge of it for the next 100 years.” And I don’t think that’s consistent with a hedge fund wanting to know what the next quarter’s going to look like. When you think about getting back to the customer, and working with the
GE Transportation congratulates Matt Rose on his distinguished career and dedication to the rail industry.
improve. And I’m not sure we’ve seen that. I think we’ve seen, actually, a degradation in overall performance of the rail network in general. The litmus test would be things like ISAs (Interline Service Agreements), which nobody even talks about anymore. You would think these would be working perfectly with more people going to Precision Scheduled Railroading. You would think Amtrak performance would be at an all-time high. You would think commuter rail performance would be at an all-time high. They’re not. 26 Railway Age // December 2018
I’m not sure that higher shareholder value has resulted in a significant improvement in the railroad network. Employees have done okay. We’re a smaller network. But if you look at BNSF’s major productivity gains through the years, it’s mainly been through attrition, which I think is helpful. I think that balance is going to be really important going forward. And again, it gets back to that unwritten commitment that we have with the regulator that will, I think, come a little more into light. A little bit has to do with the politics. I
Vantuono: I wanted to bring up the subject of mergers. Do you care to comment? There’s a lot of rumor mongering, which I’ve contributed to! What do you think? Rose: Here’s what I’ve said for 20 years. Same two issues. I believe that we will have mergers when, one, a big railroad gets in trouble financially, or two, the economy is growing at such a rate that we need more rail capacity. I do believe you can get more rail capacity through mergers. But I don’t think a railroad’s going to get in trouble financially. And I’m not sure the marketplace is ready to accept the fact that we just need more rail capacity when railroads appear to be reducing capital, not increasing it, and the types of returns we’re having. The third piece, which is also really instructive, goes something like this: The market caps of the railroads have grown tremendously. CSX is actually worth more than what BNSF was worth when Warren bought it, almost by double. The market cap of Norfolk Southern is worth more than what Warren paid for BNSF. So, when we think about it, how do you do the construct of a merger? You start off with cost synergies. If you go back and look at the history of the mergers—SP-UP, BN-Santa Fe, the Conrail split with CSX and Norfolk Southern, CN-IC, etc.—you basically start out with four, five, six, or seven hundred million dollars of cost synergies. We call it the Noah Ark’s syndrome. You don’t need two CEOs. You don’t need two presidents. You don’t need two CFOs, etc. So you come up with a lot of cost synergies. You’re able to reduce some terminals, but that’s in that five, six, seven hundred million dollar a year number. And then you have revenue synergies. Well, how much more revenue can you add when you no longer have interchanges, like between railwayage.com
assume the new chair of the T&I Committee will be Peter DeFazio (D-Ore.). He is an extremely capable and insightful person who’s been around a long time. I assume he’ll have a very keen interest in passenger rail. He’ll have, I think, a very keen interest in making sure the freight railroads are implementing this three-legged stool to make sure it’s working for all the constituencies of the railroad industry—not just the sell-side guys.
THANK YOU, MATT. On behalf of all of us at TrinityRail®, we would like to congratulate Matt Rose on his successful tenure at BNSF. Matt, it’s been an honor to be your partner and work by your side. You’ve always represented BNSF with integrity and worked tirelessly to keep the rail industry a vital part of our economy. We wish you nothing but the best in your retirement.
Matt Rose the BN and Santa Fe? The answer was, we were able to grow revenue quite a bit, okay? But still, those numbers, I would tell you, are the billion-, billion-and-a-half type of synergies—costs and revenue synergies that you would put on the bulletin board and say, “By merging these two companies, this is what we can get.” What people aren’t talking about is what you’re going to give up. We know what you’re going to get. I’ve done this a lot. I’ve done a merger analysis on every railroad out there. What we don’t know is what we’re going to give up. What I’m talking about is that I don’t think that the industry is going to be allowed to consolidate without a huge change in regulatory policy. The Justice Department is in a much different place today, even though it’s not the primary overseer of railroad mergers. I think public policy is saying that more concentration, bigger companies are not necessarily better. And so, I can’t imagine anybody proposing a big transaction today without a full and
complete overhaul of the regulatory tenets that govern this industry. Things like reciprocal switching. There’d likely be a reciprocal switching aspect to it. With a reciprocal switch rate in the hundreds of dollars, not
“I can’t imagine anybody proposing a merger today without a full overhaul of regulatory tenets.” thousands of dollars or something like that. It would be very minimal, like what there is in Canada with the competitive line rate. I think that would likely come to us. I
think of exemptions right now that the STB doesn’t oversee, a large chunk of railroad commodities. You’d have the STB looking over a lot more commodities than they do today. I believe revenue adequacy standards would change. The point is that there’d be a lot of change. And none of us have put any of that into the model. The final piece that I think that people will be shocked about is—and this probably isn’t the right phrase—is community and environmental concerns. In the BN-Santa Fe merger, we got through with very little of that. The SP-UP got through with a little more of that. The Conrail split was really the first time where we started seeing cities saying, “Wait a minute. You’re going to reroute these trains, we want this, we want that,” and so on. The CN-Elgin Joliet & Eastern merger: That one hit a stride. The STB stipulated, I think, about $240 million for grade crossings. It was a very small railroad. And Hunter [Harrison] sued the STB and lost. And then he sued in federal court and lost.
Congratulations! The American Short Line and Regional Railroad Association congratulates
on his retirement. We thank you for your partnership with our industry.
28 Railway Age // December 2018
Thank you, Matt Rose, for your unwavering leadership. Your passion and visionary leadership have positioned BNSF well for what the future holds. Through the years you helped us navigate enormous changes in the rail industry. We are forever grateful for the guidance you provided us as a publicly traded company and as part of the Berkshire Hathaway family. We wish you well and know your influence will continue to shape BNSF for many more years to come.
Matt Rose My point is that the next big merger will have enormous environmental and social costs. I just don’t think anybody’s thinking about this. I may be tone deaf to it, but I don’t see it. There’s no doubt about it. The investment bankers are spending nights awake doing all their little models, trying to figure how much money they can make off fees by getting a big railroad transaction. These numbers have gone up in orders of magnitude compared to where they were when we did the last round of mergers. And at the end of the day, you have to ask what I call the big question: What’s the point? And I haven’t heard anyone say, “Well, it would be much better for employees; it would be much better for customers.” Let’s just take a big railroad buying a smaller railroad, with a 20% or 30% premium. How are you going to pay that premium? Again, I could almost guarantee there are going to be five, six, seven hundred million dollars in cost synergies. Revenue synergies, maybe another billion.
But the question is, how are you going to pay for that? The STB, and public policy in general, I think, could come in with rate
“A big merger will have huge environmental and social costs. Who’s thinking about this?” cap levels. That would prevent the parties from extracting the value to pay for the merger. So I don’t see it. I think it’s just a bad financial deal, and I think the unintended costs that would come from this would be enormous: environmental costs, regulatory rollback.
Vantuono: That’s saying, in financial terms, “unintended consequences?” Rose: Absolutely. I don’t think any investment banker understands that side of it, of what it would cost. Vantuono: Let’s talk about Amtrak. We’re asking the question, is it a failed public enterprise experiment? Rose: The question is, what’s the litmus test of success? Or failure? And if the litmus test is to be profitable, yes it’s probably a failure. But you put that same litmus test against any commuter rail operation, any highway project, any public transit system also fails as those things don’t make money. Public policy needs to determine who pays for this stuff, and what is the role of Amtrak. It’s not for the railroads to determine, and quite frankly, it’s not for the Amtrak board to determine. Do we want a national system? Do we want just a regional system? What is the value of having passengers being able to utilize that system in the
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30 Railway Age // December 2018
Matt Rose middle of North Dakota? If you’re living in the state of North Dakota, it’s a high value. If you’re living in L.A. and want to get to Chicago, it’s probably not a huge value. That’s what it all comes back to. We’re only going to talk about transportation policy a certain number of hours and days in Washington, right? There’s only so much you can talk about. If you look at the amount of time that we spend on Amtrak, it’s out-weighed versus the cost of Amtrak. Even in the budget. When the President puts his budget together, and the Congress puts its budget together, they’re always debating whether it’s going to be a billion-three or a billion-five or a billion-eight for Amtrak, in a DOT budget that’s hundreds of billions of dollars; a national highway system that’s investing $100 billion. So much of this focus, because of the political nature of Amtrak, is on this investment. And so I would say a couple things. Public policy needs to determine, do you want, long-term, to have a national passenger railroad network? If you do, then you
C E L E B R AT I N G
need to pay for it. Amtrak is not getting enough capital to renew its long-distance trains. And over time, you’ll have more and more service failures, you’ll be clogging up the national railroad network. That’s just the
way things work when they age out. Some would argue that there’s probably a lot of money that instead could be spent in the Northeast Corridor to provide a lot of value for this economy and all the various states around it.
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Matt Rose I don’t think it’s for the railroads to make that decision at all. As long as Amtrak runs the national network, our job at BNSF is to run it as a premium service, which we do. That is what we’re instructed to do. And we’re always going to try and do everything we can to meet the performance standards. Vantuono: Hypothetical scenario. Suppose the government were to come to you and say, “We’re dismantling Amtrak. We need a new business model. BNSF, we want you to run the long-distance trains, or corridor trains, and we will pay you, in some form, your avoidable costs. We’ll help you pay for capacity improvements. The object is not for you to make a profit. The object is to provide a service. And you could put the BNSF name on those passenger trains.” I’ve talked about this before. Do you think it could work? Rose: It all depends on for what they would reimburse us, at what rate. We would look at it and say, “Okay what’s the
alternative?” If outside operators were going to come in, we’d be concerned that they wouldn’t respect the same railroad operating rules and cadence that Amtrak does, and that we wouldn’t have the
“Longer-term, with PTC, We’re looking at several different ways to get to moving-block.” same liability structure that we have with Amtrak. We’d probably look at it, out of defense more than offense. I don’t think that anybody makes money anywhere close to the current rates that
are being charged today on a nationwide Amtrak route. But again, that’s not the question that should be asked. The question is, how much are we willing to pay for that public transportation service?” One thing we do appreciate about Amtrak. They really do conform to our safety rules. That is unbelievably important to us. Vantuono: What’s your view of private passenger train operators? Rose: I think they’re fine, as long as they have rail experience and they understand the operating rules. And in a lot of cases, they’re going to be operating with PTC. But again, this isn’t something you just all of a sudden decide, without the experience. Vantuono: BNSF, even before your tenure, has been a technology leader, pushing the envelope. Where do you see technology headed? Let’s just talk a little about autonomous or semi-autonomous trains. Rose: When we think about what’s going on around us, again, how do we grow our
G&W congratulates Matthew K. Rose for 26 years of distinguished service to BNSF Railway and his steadfast leadership of the U.S. railroad industry.
32 Railway Age // December 2018
Matt Rose business? We grow our business by having more opportunities with stuff that’s on the highway. We have to look at what’s going on with our largest customer, and largest competitor, the truck. We see them very aggressively moving toward autonomous platooning. If they just did platooning, how much market share could that cost us? If they did platooning with autonomous, how much market share can that cost us? If they did platooning, autonomous, and battery operated Class A tractors, how much can that cost us?” And then, if you look longterm, it’s no longer a stool; it’s a chair. The fourth leg of that chair? They no longer have to pay their true fair share of the national highway system. It’s a bleak picture for us. We have to do a couple things. One, we have to figure out how we can keep up with them on productivity. We believe with all of our hearts at BNSF that the term should be “attended automation.” With that, we believe that there is a long path with a certain number of trains, with PTC, that you can automate the left seat of
the locomotive. It’s not for every train on our network. For us, we don’t believe that you do this where you’re not running PTC. And that’s not a uniformly held belief in our industry.
“We believe in user pay. Bigger trucks not paying their fare share isn’t an equitable argument.” We also believe in the principle of user pay. We’re not asking for the public to pay for our private railroad, and we don’t think that longer, heavier trucks not paying their fair share is an equitable argument. We’re
going to be really strong and always coming back to those principles that trucks should pay their fair share on the highway. And that means user-pay systems, whether it’s commercial VMTs (vehicle-miles traveled) or a weight/distance fee, like what’s going on in Oregon. Interesting, right? Vantuono: Battery-powered trucks are not going to be contributing to motor fuels taxes, and they’re still going to be wearing out bridges and pavement. Rose: That’s why a VMT. We’ve got a path to a commercial VMT on the highway system. And we’ve also got to look at alternative fuels for our locomotives. We tested LNG, and we don’t see the spread between diesel and natural gas wide enough to justify us making that investment, and it’s a significant investment. For us, it’s probably $8 billion to $10 billion. We don’t see the returns of doing that. So we’ll open the next chapter of our book—battery operated locomotives. And we’re looking at different
Kansas City Southern Would Like to Join Railway Age and Railroaders Across North America In Congratulating Matt Rose On His Remarkable Career
December 2018 // Railway Age 33
Matt Rose tender configurations, and working with suppliers on who we think could provide us with some unique battery technology development. Long-term, I think we will head toward some kind of carbon pricing. ExxonMobil, the largest oil company in the world, is floating a carbon tax idea. It just feels like, long-term, we’re going to put a price on carbon, and the railroads need to be there step-by-step with the trucks on productivity, user-paid systems and alternative fuel sources for locomotives. If we don’t, we lose more market share. If we do, we’ll actually get more market share. Because pound for pound, ton for ton, we will always be the most efficient and potentially the best on carbon pricing, environmental impact, and highway congestion impacts when you look at how to move freight through this nation’s supply chain.
Railway Age Editor-in-Chief William C. Vantuono (left) with Matt Rose at BNSF’s Washington, D.C. offices.
Vantuono: LNG can work in certain operating scenarios, like Florida East Coast. But that’s a small, captive system, and they’ve got their own LNG supply. They set
up their network very well,as far as I know. To try and institute LNG on a big system like BNSF with interchange locomotives and fueling stations? Rose: It’s gnarly. But battery-powered locomotives? They create a lot of electricity going down the track. That energy all dissipates. We haven’t figured out how to capture that electricity. That’s what we’re spending a lot of time thinking about. Vantuono: What about electrification? This has been talked about in the past. At one time BNSF was looking at it, where the electricity is generated via huge wind farms out in the Rockies, for example. And you use the right-of-way for a power grid, and then tap off that grid for traction power. Rose: We looked it at in New Mexico and West Texas. We actually looked at putting a DC line underneath our right-of-way. The capital didn’t pencil out. Could it eventually? Maybe. But I believe that battery technology is going to really improve. Look at
Thank you, Matt, for your leadership, vision, and dedication to moving our industry forward.
Photo El Roco Photography 34 Railway Age // December 2018
-The Watco Team
Matt Rose what the automotive guys are doing. The problem with the railroad industry? We think it’s very large, but it’s actually a very small market for one of these guys. If you’re a battery guy, you’re going to see the automotive industry as this enormous market. You’re going to see the trucking industry as a much smaller market. You look at the railroads and you see an even smaller market. We can’t just wait for this to come to us. We have to go out and partner with suppliers to bring it. That’s been a trademark of BNSF. It’s what we did with PTC. It’s what we did with AC traction locomotives. And I think it’s reasonable to think that we will do it with battery, too. It’s game on when you see how much money Toyota, Ford, General Motors, Volvo, etc. are putting into this stuff. We have to stay up with that, and we must find suppliers willing to address it and be paid fairly in our much smaller market. Vantuono: Big data. That’s become sort of a buzz word in this industry. mainly on
the engineering side. You collect all this data. What do you do with it? How do you manage it, put it to good use? Rose: We’ve got thousands of wayside
“PTC is not the be-all, end-all for safety, but we are seriously a much safer railroad with PTC.” detectors out there. The trick is to take all that data that comes in every hour and to string it into a manageable set of information. We’ve partnered with IBM on some of that stuff. We’re doing some testing right
now with a Silicon Valley company, and they’re looking at actual detection data. We’re working with the FRA. We’ve got autonomous inspection vehicles running up and down our railroad everyday. Vantuono: You’re now using drones for bridge inspections. Rose: Yes, we are, but the real impact is with the collective total of all of our inspection technologies. The existing regulatory structure isn’t real accommodating to all this technology. And so we’re working with Administrator [Ronald] Batory and his staff on how to use more of it, instead of putting people in harm’s way to do inspections. Take inspecting track, for example, Instead of a hi-rail vehicle that puts our employees in harm’s way and relies on visual inspections, we’re using an autonomous inspection car that uploads the railroad data and really gets to see the defect ratios. The FRA has accommodated a demonstration of that. I think we are in the second and third inning of the technology impact to this
To a great railroader, partner and friend:
WISHING MATT ROSE THE BEST IN HIS RETIREMENT.
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811 Main, Suite 2800, Houston, TX 77002 usdg.com
December 2018 // Railway Age 35
Matt Rose more efficient railroad. Longer-term, as we think about PTC, the next piece of that is movement planning. We’ve been working with GE on that over the past couple of years. We’re going to start rolling that out next year. Movement planning, if you think about it, will automate a lot more of the dispatching decisions. And because there’s so much data, by harvesting this information, we believe that with the right algorithms, a movement planner can make better decisions than having to make sure you have a dispatcher with 30 years of experience to make that decision. And then, even longer-term that leads us into changing the fixed blocks within the signal system, and reducing train spacing. running a much safer railroad. PTC is not the be-all, end-all for safety, but we are seriously a much safer railroad. But we’re still reading out train orders. So we’re working with the FRA on automatic directives that will, we think, create a safer,
Vantuono: Moving-block? Rose: Yes. We’re looking at several different ways to do that. But if you think about the capacity implications of that, it really is significant. And if you think about the railroad flowing with better fluidity,
railroad industry. We’re going to see a lot of stuff with a fully implemented, integrated PTC network, starting with more efficient train operations and moving toward automated autonomation in the locomotive. With just PTC, we already know we’re
36 Railway Age // December 2018
Matt Rose you then have more regular maintenance windows. Safer, with lower costs. We’re just really in the first couple of innings of the baseball game on technology adoption and implementation. And it’s really exciting. I think in 10 years, we won’t recognize a lot of things today that we’re doing. Vantuono: You must be a baseball fan, because you’re using a baseball analogy. What’s the grand slam for this industry? It doesn’t matter what inning it comes in, though it may come in the bottom of the ninth with the score 3-0, the bases loaded, two outs, three balls and two strikes. Rose: It won’t come like that. It’ll come over time. It’ll come with attended automation, moving block and movement planner. With a battery-operated locomotive. If policy makers put a price on carbon. With a highway system paid for by users, and a regulatory agency that, as long as we are making these significant capital investments, will allow us to make double-digit-type returns. That’s the virtuous cycle that you heard me talk about. We’ll be attracting more business, we’ll be making higher returns, and we’ll be using that money to make more investments in addition to giving it to our shareholders. And regulatory oversight that will say, “Yep, this is all working really well.”
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Vantuono: I know you want to talk about this industry’s future leaders. Rose: In 2000, when I became CEO, I inherited a company that had an average age of 49. I’m talking about our exempt workforce. And I thought to myself, boy everybody’s going to be retiring here. And here I am, I’m 40 years old. I may have to be here for a long time. Generation X and Y were coming in; this was before the Millennials. They didn’t really appear to be fascinated with a militaristic command and control style of organization. They were more about looking at different opportunities. We adopted and developed what we call the BNSF Leadership Model. The executive team worked through the leadership team, and we installed it. It was a typical deal where most of the organization said, “We cannot do this. This , too, will go away.” And I remember telling everybody, “This is going to take 10 years,” because when you start talking about affecting culture, it really is a long-term deal. We started helping people understand what was good about leadership, the how and the what. The what was what we wanted people to achieve. And the how was how you accomplish it. We couldn’t just see people’s results. We also wanted to see how they accomplished those results. We had an enormous amount of effort put into development of our people. We believe strongly that developing people from within is a much better strategy than having to hire people from the outside—not that we’re against it, and I have personally done that at senior levels. But we think development is huge, and cross-fertilization is very instructive. As I leave, Carl Ice is there. He’s been a part of this, walking with us every step. The Leadership Model is now embedded into our organization, like the safety culture. When we think about developing the leadership after Carl, we are really pleased with what we have and what we see in terms of future leadership. A great example is Katie Farmer being promoted to Executive Vice President Operations. She’s been with our company for 25 years. It’s really great to see December 2018 // Railway Age 37
the highest-ranking woman in the industry working at BNSF. We’re really proud not only of Katie but of the whole leadership team that will be there after I retire, and eventually when Carl retires. It’s a team that’s wellpositioned for the next 100 years.
Vantuono: What’s next for Matt Rose? What do you want to do? (Rose will turn 60 next year). I think of 60 as the new 50, or the new 45. Where do you see yourself? Rose: I’m not going to do another CEO gig. I’m fascinated with the public policy
Diesel-Electric Locomotives How They Work, Use Energy, and Can Become More Efficient and Environmentally Sustainable by Walter
space. And I will find a way to stay involved in that, in one form or another. I may look at some opportunities in private equity in the logistics space. When I step back and think, 20 or so years of working with Carl and leading this company, it’s been an incredible honor. But there’s also a grind to it. There’s not a day that goes by—and this will sound awful to a lot of readers—there’s not a morning that goes by that I don’t wake up early in the morning and check my phone to see if we’ve had an accident or an incident, making sure that none of our employees were harmed, or that nothing bad happened in one of the communities in which we operate. That’s the downside of the operating environment, with 34,000 grade crossings and 45,000 employees. Stuff always happens. So, I’m looking forward to not having to have that burden of leadership so intensely, day to day. But honestly, I don’t know. I’m not going to rule anything out. I’m just going to keep my eyes open.
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s 2019 approaches, with rail freight traffic continuing to recover from the doldrums of the recent past, consider all the variables that are currently either in play, or expected to take on a life of their own in the near future: • Union Pacific and Norfolk Southern are moving toward their own versions of Precision Scheduled Railroading. UP’s version is called Unified Plan 2020, which UP says involves “principles” of PSR. UP2020 is accompanied by massive layoffs, some of which have already occurred, more of which are to come. NS will announce its PRS strategy in the first quarter of 2019. Not much 40 Railway Age // December 2018
is known about the specifics, except that NS is pulling up stakes in Norfolk, Va., and consolidating headquarters in Atlanta. This will mean that five of the “Big 7” Class I’s will have adopted the late E. Hunter Harrison’s PSR operating model, now in place at CN, Canadian Pacific and CSX. • Positive Train Control implementation continues on a steady course, with the freight railroads either 100% done, or meeting the statutory requirements of the Dec. 31, 2018 interim deadline and qualifying for an Alternative Schedule, with an absolute final deadline of Dec. 31, 2020. The Federal Railroad Administration, under the leadership of Ron Batory (a railroader, not a bureaucrat),
has been helpful and productive in working with the industry, including PTC suppliers, to finish the job. Data as of Sept. 30, 2018 shows 24 railroads have installed 100% of the PTC system hardware required for implementation. Eleven other railroads have installed between 95% and 99% of the required hardware. All railroads using radio spectrum-based PTC have acquired sufficient spectrum. Data also shows a 67% decrease in the number of “at-risk” railroads, down to five from 15 at the end of 2017—a 44% decrease since 2Q18. As of Sept. 30, PTC is in operation on 71% of freight railroads’ required route-miles, and 26% of passenger railroads’ required route-miles. railwayage.com
Railroads head into 2019 dealing with a host of operational, organizational and regulatory variables. BY WILLIAM C. VANTUONO, EDITOR-IN-CHIEF
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2019 Outlook • Freight car orders are on the rise, due in part to renewed strength in crude by rail (CBR), which is driving large orders for tank cars and frac sand covered hoppers. All the new DOT-117 cars that were placed in storage when CBR traffic collapsed a couple of years ago are in service. Fleet replacement is another strong factor, as indicated by such programs as CN and CP beginning wholesale replacements of the aging Canadian grain car covered hopper fleet with higher-capacity railcars. • The Surface Transportation Board limps along with only two members; there is no certainty as to when the full complement of five members will be in place. (See Watching Washington, p. 16, for Frank N. Wilner’s analysis.) • The Mid-Term Elections shifted the balance in Congress dramatically. The House of Representatives has returned to Democratic control after many years. Rep. Peter DeFazio of Oregon will chair the Transportation & Infrastructure
Committee. He’s described by BNSF Executive Chairman Matt Rose as “an extremely capable and insightful person who’s been around a long time” with “a very keen interest in making sure the freight railroads [are] working for all the constituencies of the railroad industry—not just the [Wall Street] sell-side guys. (Cover story, p. 18.) Outgoing Railroad Subcommittee Chair Jeff Denham (R-Calif.), an avowed enemy of high-speed passenger rail in his home state, lost his re-election bid and is out of the picture—much to the delight of HSR advocates. The biggest variable may be whether Class I M&A (mergers and acquisitions) will re-emerge in the foreseeable future, following a relatively quiet period since the mega-mergers of the 1970-2000 period, which resulted in creation of the Big 7 carriers we have today. The rumor mill has been grinding away. One Wall Street research firm has reported that while M&A can have “very
accretive synergies,” it is “very unlikely in the near- to medium-term.” This firm has created “quick and dirty” merger models for several potential combinations, including CSX-CP, NS-CP, CN-NS, UP-CP, and CN-KCS. Investor interest in M&A, the research firm said, resurfaced following reports that CSX’s corporate jet was recently flown to Calgary, where CP is headquartered, for the first time in several years. In addition, activist hedge fund TCI is now CP’s second-largest shareholder and holds major positions in three other Class I’s. As well, CP President and CEO Keith Creel “spoke quite openly about his continued support for M&A at CP’s Analyst Day.” The reasons M&A could move forward: “Following CP’s failed merger attempts with CSX and NS in 2014-16, it’s clear that a potential merger needs to be friendly and not hostile for it to have a regulatory chance. But with new management at CSX and a move to PSR at Union Pacific and Norfolk Southern, perhaps the railroads are more
Keeping Technology in Motion
42 Railway Age // December 2018
2019 Outlook open to M&A this time around. A merger would likely have to be announced in the next several months to get approval before Trump’s first term ends in 2020.” The reasons why nothing could happen: “Relative to 2014-15, the valuation gaps among the railroads have narrowed, and there isn’t a tax inversion angle anymore, so this takes away some of the EPS accretion. The margin gaps have also narrowed, so there’s less accretion from the high-margin acquirer turning around the low-margin target that was really the crux of CP’s past merger attempts. In addition, tension between the U.S. and Canadian governments could make it difficult for a U.S. railroad to acquire a Canadian carrier.” In what the research firm called “Game Theory,” a CSX-CP combination “seems plausible, since they are likely the most willing to do a friendly deal. However, we estimate a lot more EPS accretion from a CP-NS merger, since there’s more margin improvement potential for NS, although NS is probably a lot less open to a friendly
deal. We think both of these mergers are unlikely to receive STB approval, since UP and BNSF would likely strongly oppose an east-west transcontinental merger between a Canadian and an eastern U.S. railroad.
The STB limps along with two members; there’s no certainty as to when it will be filled with five. So perhaps a UP-CP combination could make sense, as it likely wouldn’t be too disruptive to the other railroads. Meanwhile, KCS is now trading at a discount, so M&A could be more likely, although
Mexico uncertainty persists.” Yet, there’s more to M&A than money. As Matt Rose points out in the cover story, “The investment bankers are spending nights awake … trying to figure how much money they can make off fees by getting a big railroad transaction. These numbers have gone up in orders of magnitude compared to where they were when we did the last round of mergers. And at the end of the day, you have to ask what I call the big question: What’s the point? And I haven’t heard anyone say, ‘Well, it would be much better for employees; it would be much better for customers.’ [And] the STB, and public policy in general, could come in with rate cap levels. That would prevent the parties from extracting the value to pay for the merger. So I don’t see it. I think it’s just a bad financial deal, and I think the unintended costs that would come from this would be enormous: environmental costs, regulatory rollback. I don’t think any investment banker understands that side of it, of what it would cost.”
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December 2019 // Railway Age 43
uppliers and manufacturers of grade-crossing surfaces continue to focus on longevity, Americans with Disabilities Act (ADA) compliance and durability in their offerings as safety remains key at crossings. Ease of maintenance and recyclability were also points of interest this year. American Concrete Products American Concrete Products offers a precast crossing for every concrete, wood, and composite tie manufacturer. It offers panels that the company says can have a unique configuration on the bottom to fit any specific tie. Crossing panels can be
44 Railway Age // December 2018
shipped throughout the country via rail or truck. Additionally, American Concrete Products manufactures panels for any length of tie and any tie spacing. The company supplies eight-foot and one-and-a-halfinch, nine-foot and ten-foot-long panels that are manufactured with a non-slip surface that is sealed to prevent ion mitigation from salt and other chemicals. Buz Hutchinson, Railroad Sales and Service at the company, noted that transit, port and high-speed rail projects are being constructed at an all-time high pace and many new port infrastructure and intermodal yard projects are bidding or being constructed now.
A Union Pacific railroad crossing in Cortland, Ill., equipped with a crossing surface from HiRAIL.
Manufacturers and suppliers aim for a smooth path with concrete, rubber, wood and composite crossing surfaces. By STUART CHIRLS, SENIOR EDITOR
“With the high demand, the Class I railroads are turning toward standardized, high quality product lines at ACP,” said Hutchinson. “The Class I’s are increasing their project plans to keep up with current and future work; they know to go with products they can trust and companies that can rapidly adapt to any changes that are presented.” HiRAIL Corporation HiRAIL Corporation manufactures a complete line of rubber grade crossing surfaces, including Hi-Rail, Pedestrail and Hi-Rail Rail Seal. Hi-Rail Full Depth Rubber crossings are a “green” product, as they are manufactured using recycled railwayage.com
grade crossing surfaces
motor vehicle tires. The crossings can also be recycled at the end of their useful life, said Jim Overfelt, the company’s director of marketing and sales. Hi-Rail’s Full Depth Rubber grade crossing systems are intended to provide a smooth, safe and attractive crossing surface for motor vehicles, Overfelt said. The systems are also manufactured to accommodate most common rail sizes, rail fastenings and wood, concrete, composite or steel ties. Full Depth Rubber crossing systems are available in both lagged and lagless designs. Overfelt said the lagless design lessens crosstie degradation, as well as enables installation on concrete and steel ties. The company also offers Pedestrail, a pedestrian crossing surface that meets ADA requirements. The surface offers all the features of the Hi-Rail Full Depth Rubber offering and comes with a raised diamond surface for pedestrian stability, the company said. Another product HiRail offers is its rubber rail seal, which works in conjunction with asphalt or poured-in-place concrete crossings. The rubber rail seal is manufactured to fit most common rail sizes on timber or concrete ties using all types of rail fastening, Overfelt said. He added that the company has noticed some specific interests among customers throughout the past year. “We have seen more requests for specialized products to fit different track configurations, different concrete ties and different rail fastening systems,” he said. Overfelt also said he’s seen demand this year affected by track maintenance and road maintenance. “The more maintenance on tracks or roads the more chance there is a need for a new crossing surface,” Overfelt said. “New transit startups and extensions of current systems also add to demand.” Railroad budgets appear to be holding steady, he said, and he does not expect that to change much throughout the rest of 2018. Despite the push toward high-speed rail, Overfelt also does not predict much change soon in terms of product modifications to account for increased speeds or volume on the crossing surface side of the business. Fortunately, he said, he hasn’t felt that his company or the industry as a whole have faced any major challenges this year in terms of grade crossing surfaces. railwayage.com
Koppers Koppers produces full-depth timber crossings that meet Class I specifications along with gauge and field timbers for use with asphalt inserted between the gauge timbers. Kevin J. Reinhart, a sales representative for Koppers, said a key demand seen this year was for safer crossings. One challenge Reinhart noted in 2018 has been getting access to an adequate amount of hardwoods for use. Echoing Overfelt, Reinhart also says budgets are holding up and said they have been slightly higher than they were in 2017. “We expect [budgets] to level off in 2018,” Reinhart said. LT Resources, Inc. LT Resources’ offerings include ENDURANCE®-XL Highway-Rail Composite Grade Crossings, which the company said utilize durable, recycled polymer materials and can be installed in a wide variety of applications. The panels are supplied predrilled and can also be drilled on site when needed. Optional rubber flangeway filler, lag screws and composite ties are also part of the package, and both the panels and ties can be recycled at the end of their useful life. The company supplies a complete composite system, including composite ties for use under ENDURANCE composite panels, which Linda Thomas, the company’s president, said are intended to extend the life of the crossing. Composite crossties are also meant to extend the life of concrete and rubber crossings, and Thomas said the trend of using composite ties under grade crossings of all kinds has continued to grow each year. This year, Thomas said corporate sustainability goals and the desire to use durable “green” products with improved performance features have driven the demand for LT Resources’ products, as she said it has in the past. Transit, port and industrial growth also drive the demand for composite products. One challenge Thomas noted this year is an increase in freight costs that has affected both overall operations and outbound transportation costs. Railroads continue to look for cost-saving options while addressing the need for products with long-term performance and reduced maintenance and replacement costs, she said. “Although crossing budgets are sometimes reduced as necessary to address railroads’ higher maintenance priorities, investments in safety and improved
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grade crossing surfaces
StarTrack produces modular crossings for radius track with restraining rail and a precast concrete slab track for crossings through turnouts.
infrastructure are still very important to our customer base,” Thomas said. Omega Industries, Inc. Omega Industries is currently in the testing stages with various crossing panel
prototypes, said National Sales Manager Mark Mottola. The existing Main Line Common Standard concrete panel design used by Class I railroads has been around for more than a decade, and Mottola says it
is a proven design and has held up well throughout time. “With that said, there are ongoing improvements with new concrete mix designs, and mixtures and fiber reinforcement products that we are experimenting with,” Mottola said. “It is our goal as a company to stay on top of any new technology that may improve the current design.” Omega Industries manufactures a Concrete Grade-Crossing System with an attached rubber flangeway design. Serving main line railroads, short lines, transit, industry and port authorities, Omega aims to keep a reputation for quality, delivery and service, Mottola said. The company’s main challenge so far this year has been flatbed trucking, he said. “With recent federal rule changes and electronic reporting, the flatbed demand far exceeds the supply. As a result, trucking has been difficult to find, and prices have increased dramatically.” During the past year, he said, Omega Industries has observed a large increase in
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grade crossing surfaces Omega Industries manufactures a Concrete Grade-Crossing System with an attached rubber flangeway
Omni Rail Products, Inc. Omni Rail Products’ OMNI’s TraCast “TUB” style crossing is now available with Pandrol-type fasteners, said Bob Cigrang, Vice President of Sales. Per industry demand, he explained that the
company has now added Pandrol Type E clips as an option to thde current “TUB” crossing design. The company offers both concrete and virgin rubber grade crossings, and has seen an uptick in requests for
transit and light rail work. The company is currently in the submittal or construction stages with projects in Seattle (Sound Transit), Dallas (TEX RAIL) and Miami (SFRTA). Other upcoming project that will require concrete crossing panels will take place in Texas (DART Cotton Belt) and Minnesota (Metro Green Line), he explained. Mottola cited population density and traffic congestion in larger cities as continued drivers of demand for new light rail, commuter and streetcar projects. Many such projects require thousands of feet of precast concrete panels, he said. Railroad budgets seem to be holding steady with signs of slight increases, Mottola added. He said the company foresees a busier year this year as compared to last. “The goal in any high-speed rail system is to eliminate, or at least reduce at-grade crossings,” Mottola said. “With that said, the roadway crossings left intact will likely receive state-of-the-art grade crossing surfaces and signals.”
December 2018 // Railway Age 47
grade crossing surfaces
for ADA-compliant f langeways and solid molded rubber rail seals. “All of our concrete and rubber crossing surfaces are compatible with HSR applications,” Cigrang said. He added that a challenge the company deals with has been maintaining the company’s high-quality standards while dealing with rising raw material costs as customers demand lower prices. “We have multiple products for almost any application and have our own rubber plant for custom molding,” Cigrang said. StarTrack Railroad Crossings StarTrack Railroad Crossings works with railroad and contractor customers to produce StarTrack Modular Crossings for radius track with restraining rail and a precast concrete slab track for crossings through turnouts. The company’s products are all domestically manufactured at its regional Oldcastle Precast facilities, said Patrick Juelich, Business Manager, Rail. The company provides all StarTrack surfaces as one-piece-casting, 6,000 PSI precast concrete modules, which it said offers a safe and durable surface placed on a prepared subgrade with no ties. StarTrack offers four standard size modules. The 5-foot by 11-inch StarTrack HD modules are designed for heavy impact loads and are the standard at port, industry and high ADT surfaces. Recently, Juelich said, the company has continued to see railroads and roadway authorities installing StarTrack crossing surfaces because the product has shown it will stand up to very heavy truck traffic while requiring little to no long-term maintenance. “Crossing safety and surface durability is only as good as its foundation, and many crossings have poor soil conditions,” Juelich said. “Heavy impact crossing areas can be solved through stabilizing the sub-base, improving drainage and distributing loads over a larger area with our StarTrack modular crossing systems.” Volume increases and heavier motor vehicle traffic are driving road authorities and design engineers to look for improved surface solutions, Juelich said. “We’ve seen greater coordination between the railroads public projects people and departments of transportation on crossing safety and reviewing surface options,” Juelich added. Total cost of ownership and life cycle maintenance costs of surface material have become of greater interest to railroads and public entities, Juelich said, adding that StarTrack has noticed a steady flow of maintenance, intermodal and port projects. Juelich also said higher train speeds are bringing more attention by track engineering to the stiffening of the track modulus in the approaches. “This is particularly important when using our StarTrack Modular crossing system because of the transition from flexible to rigid track structure,” Juelich said. “Our monolithic design and rail fasteners are proven in this area.” Stella-Jones Corporation Stella-Jones Corporation operates multiple plants that are capable of supplying timber crossings, including locations at: Goshen,Va.; DuBois, Pa.; Russellville, Ark.; and Bangor, Wis., said George Caric, the company’s Vice President of Marketing. Like many others in the field, Stella-Jones said the primary obstacle it has recently encountered is trucking. The company also noted that its Russellville location is capable of supplying timber screws by request.
48 Railway Age // December 2018
ns tech Class 1 Focus: CN
By STUART CHIRLS, SENIOR EDITOR
at norfolk southern
driving information Railroading will be safer, more customer-responsive, more efficient and more profitable with fewer humans in the equation.
othing says fundamental transformation quite like Norfolk Southern’s new Network Operations Center (NOC), a murmuring, windowless bunker where the Class I has aggregated its system dispatching under one roof at its office tower in downtown Atlanta. The NOC went live Oct. 26, and by late November, the longtime proponent of regional dispatching hubs expected to have all nine operating divisions on line. The message is clear: The future is digital automation, driven by data analytics, applied to the broad scope of railroad operations from centralized control to signaling railwayage.com
to locomotive fuel efficiency to crew calls. The company’s data revolution was well under way before President and CEO Jim Squires in October announced plans to implement Precision Scheduled Railroading in 2019—the latest Class I to go the operational route loved by Wall Street and deployed by the late Hunter Harrison, most recently at eastern rival CSX. In the darkened spaces of the NOC, dispatchers and supervisors in cubicle-like pods manage routes and communicate with train crews throughout the network via multiple screen displays. Larger screens are positioned around the room and display the condition of every active train on the
network, refreshed every two minutes. Centralized control isn’t new to railroading but NS, for years a proponent of regional dispatching, was designing from the ground up. Staff made visits to BNSF, CSX, CN, Canadian Pacific and Union Pacific to see how their Class I brethren made their own configurations. They ventured outside the tracks, to Home Depot among others, to examine analogous network practices. Talks with UPS, a major intermodal customer, are looking at real-time car visibility for customers. But the NOC is just the most visible example of the company’s transformation, driven by Positive Train Control, the federally mandated—but not federally December 2018 // Railway Age 49
funded—safety system. “What we are doing is leveraging the safety enhancements of PTC and the data generated by the Global Positioning System (GPS) for optimized operations,” says Warren Stubbs, Director of Information System Development. “We try to minimize human transactions. We want autonomous operations, not just autonomous trains.” Norfolk Southern set its largest-ever capital spending for technology as part of its fiscal 2018 budget, says Stubbs, and tech is the fastest-growing employee segment. The railroad has a four-point program for data analytics: Safety; Operating Efficiency; Customer Service, and Asset Utilization. That will mean, for example, using data to predict rail wear and schedule repairs before operations are disrupted; deploying machine learning to predict low coolant and battery problems in locomotives; monitoring the health of the thousands of wayside detectors, and, ultimately, moving much of that detection onboard trains. “With 70,000 pieces of rail in the network, we want to specify the right rail [for replacement] at the right place, at the right time,” says Clark Cheng, Senior Director of Operations Research. “In a network, any disruption is going to have a ripple effect, so the cost-benefit analysis makes analytics an attractive proposition,” says Djiby Faye, Manager Information Systems Development. “It’s all imputed into a plan. That way, we have a window for optimized supply and capacity 50 Railway Age // December 2018
planning, asset utilization and improved performance. Every day we see a clearer path to automation, it’s no longer theoretical. There’s a socialization aspect, of course, and the railroads are playing a leading role with that.” Central to NS’s network optimization is GE Transportation’s Movement Planner (MP) System. A subset of the Unified Train Control System (UCTS) introduced in the
NS is looking to become a modern technology company in a traditional industry that runs trains. 1990s and first implemented by NS in 2004, MP is automating train routing, switch control and signals, and sending dispatch commands directly to locomotives. “It’s the brains of automated dispatching, with GE’s AutoRouter as the execution tool,” says Charlie Turnipseed, System Manager Dispatch Operations. Movement Planner is now deployed on 60% of the NS network, and the railroad
in the coming months is rolling out PTC and GPS location information. (About 40% of the network, mostly former Southern Railway lines, is unsignaled dark territory where local dispatchers issue track warrants. PTC provides a safety “umbrella” where the railroad still maintains some remote dispatching with track warrants on these lower-density lines. NS has also filed for a two-year extension on fully implementing PTC to meet federal requirements.) All train schedules get fed into Movement Planner, which combines planned and existing trains to create a master operations plan. “Business rules are used to produce a series of solutions,” says Stubbs, “taking into account crews, train priority, dwell time and train type, to create the operational plan.” A total of 2,700 NS locomotives are now equipped with computers with precise GPS data mapped to an onboard track database, Stubbs says. This information is communicated to the back office and Movement Planner, for a near-real-time view and optimization of a train’s run, for better meets and passes – and a more fluid network. “Movement Planner says we are all going to be on the same operational page, not just what’s best for the Chicago-New York run, where 15-20 dispatchers are in their silos,” says Turnipseed. Movement Planner’s Train Performance Calculator codifies data and algorithms account for grades, curves, restrictions, horsepower to tonnage, topography, crew on duty times, consist, and length of trains. Crew calls are targeted for automation, and MP’s two-minute cycles adjust plans for trains in a given area, to account for changes in a train’s estimated time of arrival and produce a projected run time. “PTC has unleashed a torrent of information about operations and assets; that allows us to revise our timetable and recommended speeds, to run faster,” says Stubbs. “We have already started to raise speeds a little on PTC-deployed track, adding capacity with fewer locomotives and fewer crews. That’s better crew availability and asset utilization.” Another GE product, Yard Planner, is currently in testing at NS terminals, and there’s an array of in-locomotive technology looking for analytical and predictive items, including energy management systems Trip railwayage.com
NS TECH Optimizer from GE and LEADER (Locomotive Engineer Assist/Display & Event Recorder) from New York Air Brake. An ongoing “day in the life” program is testing thousands of theoretical train scenarios, and the company recently observed a demonstration of Trip Optimizer by GE at the Transportation Technology Center, Inc. (TTCI), a subsidiary of the Association of American Railroads. “It was part of intelligence gathering in a process we see leading to one-person road crews,” says Dan Plonk, Director of Transportation Application Planning. “With PTC integration, you can take everyone off the train. The development phase will take three to four years, including the sensor package and machine vision, and it will be 10 years to full integration” — until, he adds, public sentiment is firmly on the side of autonomous vehicle technology. “The last 10% of event-solving,” he admits, “is going to be a bear.” The railroad, with operations evenly split between road trains and local switching, is also focusing on yard
automation—centralized control, car inspections, predictive maintenance and more. “We’ve seen a 20-30% improvement in yard throughput with automated imagery and remote-control locomotives,” Plonk says. Norfolk Southern is even
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People / 100 years / Events january 6-9, 2019
Bombardier Transportation High profile: Bombardier Transportation appointed Elliot G.
“Lee” Sander as President-Americas Region. In addition to ensuring that the company “delivers on its commitments in the region,” Sander will oversee all sales and business development activities. Sander succeeds Benoit Brossoit, who will remain with the company in an advisory capacity. Until recently, Sander was Managing Director, Global Transportation and U.S. Infrastructure at Hatch Ltd. In addition, he held leadership roles at AECOM, notably as Group Chief Executive, Global Transportation; and at HAKS Group. A former Executive Director and Chief Executiv of the New York Metropolitan Transportation Authority, a former Commissioner of the New York City Department of Transportation, and a former Commissioner on the New York City Taxi and Limousine Commission, he is “credited with turning around several highprofile public-sector organizations in New York,” Bombardier said. In addition, Sander founded the Rudin Center for Transportation Policy and Management at New York University, and co-founded the Empire State Transportation Alliance (ESTA).
NTB Corp. named Robbie Hayes, AICP, ENV SP, Project Manager and Practice Builder for the environmental planning group, Franklin, Tenn. Tina Williamson, AICP, named Senior Planner, Lake Mary, Fla. Patricia Richters, GISP, named Senior Transportation Planner, Jacksonville, Fla., office. LJ Dickens, PE, returned to HNTB as a Project Manager for Engineering, Kansas City. The Railway Supply Institute (RSI) named veteran railcar professional Randall Thomure Director of Regulatory Affairs and Safety, with oversight responsibility for technical and regulatory strategies related to safety and operations. He will also manage RSI’s project committees, and collaborate with members and stakeholders “to promote policies that incentivize new technologies to
improve safe, efficient railroad operations.” The new National Railway Labor Conference (NRLC) Chairman is Brendan M. Branon, who was most recently Managing Director-Labor and Employee Relations at Delta Air Lines, the principal negotiator, attorney and company spokesman, dealing with the company’s domestic labor unions. Norfolk Southern appointed Michael A. Farrell Senior Vice President Transportation, Atlanta, another step in its previously announced plan to implement Precision Scheduled Railroading. Farrell reports to Michael J. Wheeler, Executive Vice President and Chief Operating Officer. His responsibilities include all transportation operations, division mechanical and rail terminal management functions.
100 years ago in railway age gazette DECEMBER 1918
Important Points In Fuel Conservation The maintenance of equipment department carries the responsibility for the waste of fuel by reason of engines not being in good condition. It is responsible for excessive fuel used at terminals and it is naturally striving to continually improve these conditions. The transportation department is responsible for the conditions causing fuel waste in that department and the maintenance of way department likewise.
52 Railway Age // December 2018
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December 2018 // Railway Age 55
Perspective: Short Line & Regional
Much Work To Do In 2019
hat does the short line industry have to look forward to in 2019? As it turns out, lots. Those who want heavier trucks (97,000 pounds) and longer trucks (twin 33s) fought hard for those changes throughout 2018. Fortunately, reason prevailed, and Congress declined to change the law. Unfortunately, this fight is never going away. The coming 116th Congress provides big-truck advocates significant opportunities to renew the fight. The Surface Transportation Act is up for reauthorization, and it is the natural legislative vehicle for implementing weight and length changes. Similarly, both political parties seem anxious to work on a large infrastructure package, and if such a package starts moving through the legislative process, it is also a natural home for big-truck amendments. In either instance, there will be a vigorous debate over how to pay for these programs, and that debate will necessarily involve the gas tax. Experience has taught us that whenever there is a discussion of the gas tax, an effort to increase truck size and weight is not far behind. There are 101 new Representatives and 10 new Senators in the 116th Congress. Together, those individuals present a huge blank slate that will require a whole new education effort. Short lines are part of an effective coalition of interests including safety advocates, law enforcement officials, the Class I railroads and even some truckload carriers. Together, we have as much opportunity as our opponents to make our
tax extenders awaiting approval
56 Railway Age // December 2018
case to these new Members of Congress, but it will require much time, effort and resources. The short line industry is fully committed to doing its part in this important initiative. The Short Line Rehabilitation Tax Credit (45G) is a good news, bad news story. The credit expired at the end of 2017, and as of this writing we have not secured an extension for 2018 or beyond. However, we have taken a giant step toward making the credit permanent. In late November, House Ways and Means Committee Chairman Kevin Brady introduced a tax bill that he hopes will be considered in this current lame duck session of Congress. It deals with a variety of tax issues, including the so-called “tax extenders” that 45G have been a part of over the years. There are 26 tax extenders awaiting approval. In this newly-introduced tax bill, 24 of those provisions are given a one-year retroactive (2018) extension. One is given a multi-year phase-out. One, and only one, 45G, is made permanent. The fate of this tax bill in what will be a very short lame duck session is unknown. Regardless of the outcome, this provides the short line industry a huge leg up in 2019. The Short Line Rehabilitation Tax Credit is now acknowledged to be the one credit that is worthy of permanency. As with the issue of truck size and weight, we are looking at 111 new Members of Congress that likely have little or no understanding of the short line industry or the importance of the tax credit. Our past success has always been based on our ability to attract more co-sponsors for our legislation than almost any other bill in Congress. To accomplish that, we need to get to those new Members as soon as possible in 2019. Plan to join us on May 8, 2019 for Railroad Day on the Hill to advance this effort. The Short Line Safety Institute is fully ramped up and has emerged as a model for industry partnership with the federal government. The Institute is now conducting up to 20 assessments per year. Even on those short lines that have excellent safety records, management acknowledges that the assessments are helping them identify ways to improve safety culture. By all
THE new tax bill Could make the 45G short line credit permanent.” accounts, the Federal Railroad Administration is very pleased with the results. The 2019 ASLRRA Annual Meeting will be held April 6-9 at the Orlando World Center Marriott. We have put together an extensive and informative program, including keynote addresses by FRA Administrator Ron Batory, and Luisa Fernandez-Willey, an economist with the Association of American Railroads. The meeting will feature 10 different breakout tracks with the most knowledgeable speakers on the most important subjects affecting short line railroad companies. Well over 1,500 individuals will attend what is one of the largest railroad gatherings of the year. In 2019, ASLRRA will have a new president to replace outgoing President Linda Darr. Over the past few months, the Association’s leadership has devoted considerable time and effort to our selection process. As this article goes to print, we will be interviewing numerous finalists for the job and will announce a decision shortly after the New Year begins. We are enthusiastic about the choices we are considering and believe whoever we select will be able to hit the ground running. There is no doubt that individual will have much to do.
JUDY PETRY President and General Manager Farmrail System Inc.
Chairman ASLRRA Board of Directors railwayage.com
Weâ€™re current, are you? FRA Regulations 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 Updated 4-3-17. 216 Emergency Order Procedures: Railroad Track, Locomotive and Equipment Updated 4-3-17. 217 Railroad Operating Rules Updated 4-3-17. 218 Railroad Operating Practices - Blue Flag Rule Updated 4-3-17. 221 Rear End Marking Device-passenger, commuter/freight trains
There are no new proposals or final rules to report for this issue. Be sure to check back next month to see if there are any changes to FRA regulations.
Part 232: Brake System Safety Standards 49 CFR 232. Regulations and general requirements for all train brake systems, inspection and testing, periodic maintenance and training requirements, and end-of-train devices for Class I, II, and III railroads. Plus the introduction of new brake system technology. Softcover. 155 pages. Softcover. Updated 4-3-17
Safety Glazing Standards Updated 4-3-17. Railroad Accidents/Incidents Updated 3-5-18. Locomotive Safety Standards Updated 4-3-17. Safety Appliance Standards Updated 4-3-17. Brake System Safety Standards Updated 4-3-17.
223 225 229 231 232
Mech. Dept. Regs.
Order 25 or more and pay only $26.96 each
Brake System Safety Standards
Order 25 or more and pay only $14.85 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
4-3-17 7-20-09 4-3-17 4-3-17 4-3-17 4-3-17 4-3-17 4-3-17 4-3-17 4-3-17
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
RR Communications Rear End Marking Device, Passenger, Commuter & Freight Trains BKHORN 222 4-3-17 Use of Locomotive Horns BKRFRS 224 4-3-17 Reflectorization of Rail Freight Rolling Stock BKHS 228 9-17-18 Hours of Service BKLSS 229 4-3-17 Locomotive Safety Standards BKSLI 230 4-3-17 Steam Locomotive Inspection BKSAS 231 4-3-17 RR Safety Appliance Standards BKBRIDGE 237 4-3-17 Bridge Safety Standards BKLER 240 4-3-17 Qualification and Certification of Locomotive BKCONDC 242 4-3-17 Conductor Certification
FRA Part #
233 234 235 236 238 239
Brake System Safety Standards
10.95 10.00 10.50 8.50 10.50
9.86 9.00 9.45 7.65 9.45
7.95 12.50 12.50 25.95 10.50 7.95 14.25
7.15 11.25 11.25 23.35 9.45 7.15 12.85
25 or more
Combined FRA Regulations Each
25 or more
1-1-18 Drug and Alcohol Regulations in 6-12-17 the Workplace
4-3-17 4-3-17 4-3-17 4-3-17 4-3-17 4-3-17
Signal and Train Control Systems
Passenger Safety Standards
49 CFR 215. Prescribes the minimum safety standards for freight cars allowed by the FRA. Includes safety standards for freight car components, car bodies, draft system, restricted equipment and stenciling. Softcover, spiral.
Freight Car Safety Standards Order 50 or more and pay only $7.65 each
Part 231: Railroad Safety Appliance Standards 49 CFR 231. General requirements for safety appliances including:â€ˆhandbrakes, brake step, running boards, sill steps, ladders, end ladder clearance, roof handholds, side handholds, horizontal end handholds, vertical end handholds, and uncoupling levers. 106 pages. Softcover.
Railroad Safety Appliance Order 50 or more and pay only $9.45 each
Part 224: Reflectorization of Rail Freight Rolling Stock 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.
Reflect/Rolling Stock Order 50 or more and pay only $7.15 each
Compliance Manuals BKINFRA18
Part 215: Freight Car Safety Standards
50 or more
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
Updates from the Federal Register may be supplied in supplement form.
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. 12/18
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