Railway Age June 2023

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How Long Will the Current Freight Car Market Cycle Last?

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Historically Speaking

You most likely already know this (I hope), but Railway Age, due to its advancing years, can legitimately say it’s a part of railroad history.

This year marks 167 years (since 1856) of continuous publishing—191 if you include The American RailRoad Journal, one of our antecedents, established in 1832 as the very first railway trade journal. Our complete print-to-digital history is at https://www.railwayage.com/about-us/.

On that note, I’m happy to annouce that Railway Age and Railway Track & Structures (founded 1905) have entered into a new partnership with the National Railway Historical Society (NRHS) to present the “Outstanding Railroad Historic Preservation Award.” Designed to recognize a railroad for its efforts in railway preservation, the intent is to honor and recognize a North American commoncarrier railroad for a historically significant preservation project completed or put into operation within the past five years.

Projects may include locomotives or any type of rolling stock, buildings, stations, a rail line, or a significant rail line feature, such as a bridge, viaduct, tunnel, etc. Projects that result in returning the asset to use as originally intended will be prioritized vs. a static display or no-longer-operational asset. Projects accessible to the general public will be prioritized for recognition.

A judging committee comprised of NRHS, Railway Age and RT&S (including me and my RT&S counterpart, David Lester) will review all nominations and announce three finalists in early September 2023. The Award winner is

expected to be announced at the Railway Interchange conference in early October 2023, in Indianapolis.

Something you may not know: The NRHS was founded in Lancaster, Pa., in 1935. The following year, Robert G. Lewis (1916-2011), a Pennsylvania Railroad employee, who in 1947, joined Railway Age as an associate editor and later became our publisher (and who hired me in 1992), founded with nine other people the NRHS Philadelphia Chapter. So, it’s fitting that we partner with the NRHS on an historic preservation award. I think Bob Lewis would be quite pleased.

“The National Railway Historical Society has established its interest in rail history and preservation through our Historic Grants program, and saving and sharing media,” NRHS president Tony White notes. “We are excited to partner with Railway Age and RT&S to recognize a significant North American railroad preservation project. Since our mission is to preserve railroad history in all its forms, we developed this award to honor a railroad for its efforts in railroad preservation. I look forward to hearing from our members—and Railway Age and RT&S subscribers—about what they think best exemplifies the spirit of railroad preservation today.”

The nomination period is open until July 31, 2023. NRHS members and Railway Age and RT&S subscribers may nominate a railroad preservation project via the form on the NRHS website: https://nrhs.com/ outstanding-railroad-historic-preservationaward/. Get involved!

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Industry Indicators

’RAIL INTERMODAL CONTINUES TO STRUGGLE’

“Rail intermodal continues to struggle,” the Association of American Railroads commented last month. “U.S. intermodal volume was 12.7% lower in April 2023 than in April 2022. April’s decline was the 14th straight and 20th in the past 21 months. In 2023 through April, volume was 3.97 million containers and trailers, down 10.9% (484,228) from last year and the fewest for January to April since 2012. Year-to-date container volume was down 9.5%; trailer volume was down 28.3%. Trailers accounted for 5.8% of intermodal units in the first four months of 2023, a record low. Meanwhile, carloads were better: Total originated carloads on U.S. railroads in April were up 1.8% over April 2022 and averaged 234,159 per week—the most in six months. Year-to-date, total carloads were 3.93 million, up 0.6% over the first four months of 2022 and the most for January to April since 2019.”

Railroad employment, Class I linehaul carriers, APRIL 2023

(% change from

TRAFFIC ORIGINATED CARLOADS

FOUR WEEKS ENDING APRIL 29, 2023

(+7.31%)

(+4.67%)

and Structures 28,715 (+1.80%)

of Equipment and Stores 18,030 (+3.58%)

(other than train & engine) 4,891 (+4.22%) Source: Surface Transportation Board

Source: Rail Time Indicators, Association of American Railroads

TOTAL U.S./Canadian CARLOADS, APRIL 2023 VS. APRIL 2022

1,262,5091,229,152

Short Line And Regional Traffic Index

TOTAL U.S. Carloads and intermodal units, 2014-2023 (in millions, year-to-date through APRIL 2023, SIX-WEEK MOVING AVERAGE)

STB Eyes Alternatives to URCS

THE SURFACE TRANSPORTATION BOARD (STB) IS EVALUATING PUBLIC COMMENT on a new report that identifies and evaluates alternatives to the Uniform Railroad Costing System (URCS) that could be used as a replacement general-purpose costing methodology. If the Board moves forward with a modification proposal, “further opportunity for comment will be provided.”

STB uses URCS for a variety of regulatory functions. URCS is implemented in rate reasonableness proceedings as part of the initial market dominance determination; at later stages, it is used in parts of the STB’s determination as to whether the challenged rate is reasonable, and, when warranted, the maximum rate prescription. Among URCS’s other uses: to develop variable costs for making cost determinations in abandonment proceedings; to provide the railroad industry and shippers with a standardized costing model; to cost the STB’s Carload Waybill Sample to develop industry cost information; and to provide interested parties with basic cost information regarding railroad industry operations.

“URCS is an accounting allocation method using Class I railroad data as reported annually to the STB,” explains Railway Age Capitol Hill Contributing Editor Frank N. Wilner. “URCS was developed by STB predecessor Interstate Commerce Commission in 1978 and adopted for use in 1989. URCS replaced Rail Form A, an accounting allocation system in use since 1939 that contained elements dating to 1907. URCS, however, was developed using now-antique mainframe computers with low processing speeds, and although it was given updates in 1993, 2009 and 2011, its reliability is questionable.

“A 2015 Transportation Research Board report, Modernizing Freight Rail Regulation, characterized URCS as ‘a cost allocation scheme that has no economic foundation.’ In an Aug. 9, 2019, Railway Age online article, URCS: Love It or Hate It, We’re Stuck with It, former STB Chief Economist William F. Huneke compared URCS to ‘a classic car lacking modern GPS and satellite radio [with] built-in averages from a time when railroads, rather than shippers, owned most of the freight car fleet and line hauls were shorter as the modern merger movement had not yet run its course.’

“A key gripe of shippers is STB’s prior refusal

to allow movement-specific adjustments to system-average URCS costs.”

STB in 2020 commissioned Laurits R. Christensen Associates, Inc. to perform a study and write a report to identify and evaluate alternatives to URCS, the STB reported in an Oct. 26 Federal Register notice. According to Wilner, it is a follow-up on a 2008 Christensen report, A Study of Competition in the U.S. Freight Railroad Industry and Analysis of Proposals that Might Enhance Competition, which said: “[Rail rate increases] do not appear to be excessive from a financial market perspective. The railroad industry is pricing at levels generating earnings that maintain or slightly exceed those necessary to ensure financial viability [which] implies that there is little room to provide significant rate relief to certain groups of shippers without requiring increases in rates for other shippers or threatening the railroads’ financial viability.”

In its new 203-page report, Christensen evaluated alternatives to URCS “that could better or more efficiently reflect the operating environment of the modern railroad industry. The project focused on costing methodologies that could be used as replacements or major structural updates to URCS to generate movement-specific variable costs for regulatory purposes.”

According to Christensen, the project:

• “Assessed the economic cost measure(s) that URCS or a successor cost system should represent given the regulatory applications of URCS.

• “Identified economic assumptions under which URCS or successor cost systems produce economically appropriate measures of costs for railroad movements.

• “Evaluated whether alternative costing methodologies and structural updates to URCS could generate economically valid railroad variable costs for regulatory purposes.

• “Implemented URCS alternatives and updates and compared model costs and revenue-to-variable cost (R/VC) ratios to current-methodology URCS.

• “Quantified the effects of URCS alternatives and updates on the application of the STB’s jurisdictional threshold for market dominance determinations.

• “Considered advantages and disadvantages of URCS alternative and updated approaches, including the ability to reflect current railroad operations and adherence to the costing principles in the Railroad Accounting Principles Board (RAPB) Final Report.”

Christensen reached the following main conclusions:

• “Short-run economic costs (marginal and incremental costs) are appropriate for the statutory application of URCS.

• “URCS and similarly structured models can produce short-run economic costs for railroad movements, but URCS costs depend materially on input values based on ‘stale’ analyses and non-empirical assumptions.

• “Using Carload Waybill Sample (CWS) data to reveal movement cost information has promise but also practical and theoretical challenges.

• “URCS variability inputs can and should be updated, but limitations of the R-1 annual report data may merit consideration of changes to cost reporting requirements.

• “The ‘Hybrid’ model is a feasible alternative for costing Class I movements, and its costs generally are plausible where different from legacy URCS.

• “Updates to URCS Phases I and III can improve movement costing largely within the existing URCS framework.

• “Both the Hybrid alternative and URCS update approaches have merit, with the key tradeoffs related to the validity of the Hybrid’s use of NEIO regression models to measure movement-specific costs.

•“Implementing either the Hybrid model or a significant URCS update will materially affect application of the STB’s statutory jurisdictional threshold.”

Gateway Developments

The Gateway Development Commission (GDC) on May 22 named a shortlist of qualified teams who will receive an invitation to submit a proposal in response to a Request for Proposals (RFP) to serve as a Delivery Partner for the Hudson Tunnel Project (HTP). The Delivery Partner “will provide key areas of support to help deliver the HTP.” Shortlisted teams include Joint Venture of Bechtel-HNTB; Hudson Delivery Partnership (Atkins North America, Inc., Arup US Inc., The McKissack Group, Inc.); and MPA Delivery Partners (Parsons Transportation Group of New York, Inc., Arcadis of New York, Inc., Mace North America Limited). The shortlisted teams are among those that submitted a Statement of Qualifications (SOQ) in early May in response to a Request for Qualifications (RFQ) issued by GDC through Amtrak.

WORLDWIDE

Hong Kong public transport operator MTR CORPORATION has awarded an approximately $14.9 million (£12 million) contract to WABTEC CORPORATION for the modernization of 25 Mk3 batteryelectric locomotives. The service life of the locomotives, built by Wabtec in 1996 and 1997, is slated to be extended by more than 15 years, according to the manufacturer. The project covers upgrading the locomotives’ existing control electronics; a datalogger that provides comprehensive diagnostic capabilities will be included; upgrading motor alternator control units; replacing battery charger units; and designing and building new automatic test equipment “to ensure the newly refurbished electronic racks meet different modes of operation,” according to Wabtec.

NORTH AMERICA

SECURITYSCORECARD prime contractor ALVAREZ LLC and distributor CARAHSOFT TECHNOLOGY CORP. have been selected by the TRANSPORTATION SECURITY ADMINISTRATION (TSA) to provide SecurityScorecard subscriptions, which will allow railroad and pipeline owner/operators to assess their public-facing internet applications and services with cybersecurity vulnerability monitoring, ratings and threat intelligence. “While use of the subscription service is not directed or required by any TSA cybersecurity security directives, TSA’s private-sector partners who elect to use the subscription will receive access to SecurityScorecard’s comprehensive security ratings and automated assessments,” the company said. “Owner/operators will receive findings in patented, easy-tounderstand, ‘A to F’ graded scorecards with collaborative mechanisms to remediate observed cybersecurity risks. This allows for more effective compliance reporting, improved communication and informed decision-making.” SecurityScorecard said that it will also provide TSA with “high-level reports containing data on the cybersecurity vulnerabilities

affecting the rail and pipeline sectors.”

PSC GROUP, a North American provider of product handling, site logistics, railcar repair and sustainability services for the petrochemical, refining and marine industries, has acquired the assets of STEEL LINE RAIL, a provider of mobile railcar repair, inspection and valve maintenance services for the petrochemical, refining and railcar leasing industries throughout the U.S. and Mexico. Acquisition of Steel Line Rail, which was founded in 2018 as a mobile repair and inspection company in Marshall, Tex., and has since expanded its service offerings to include mobile railcar repair service across the continental U.S., ASSOCIATION OF AMERICAN RAILROADS (AAR) certifications and an in-house valve shop for repair, testing and certification of tank car valves, marks PSC Group’s fifth acquisition since partnering with AURORA CAPITAL PARTNERS in 2019, including PROKAR, INC., FRYOUX TANKERMAN SERVICE, AKROTEX EXTRUSION and THERMOPLASTICS SERVICES, INC. The company also recently announced the opening of its Advanced Recycling Facility in Baytown, Tex.

2023 GUIDE TO EQUIPMENT LEASING

A SECOND-HALF REBOUND HOPES FOR

BY DAVID NAHASS, FINANCIAL EDITOR

Summertime is fast approaching. With the COVID-19 pandemic “o cially” over, it is time to turn attention to di erent matters, such as the immanent defaulting of the U.S. debt or the threat

of a moderate to severe El Niño to develop in the summer and fall of 2023 with a signi cant probability of extending into the winter of 2024. e El Niño pattern brings a host of domestic and global weather challenges. On the plus side, El Niño is generally

not correlated to a high-risk Gulf and Atlantic hurricane season.

Like many things in life, El Niño is a risk and reward proposition. e potential global impact of a severe El Niño is estimated to be more than US$3 trillion over

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the next ve years (according to a study by NOAA). On the other hand, according to NOAA, in the U.S. in 2021, there were 20 separate billion-dollar weather and climate disasters. e total cost for these events was $145 billion. e estimate for the economic impact of weather and climate disasters in 2022 is $165 billion.

e “bene t” to the hurricane zone from Texas to Florida and up the East Coast of the U.S. may be a fraction of the global impact of El Niño, and the total impact to the U.S. would be re ected globally and domestically in di erent ways. One dramatic impact could be potential of West Coast ooding if another one or two years of severe winters (and subsequent potential ooding) were to occur.

But readers of the Railway Age Guide to Equipment Leasing didn’t come for weather forecasting. e railcar lease market has continued the upward pressure on lease rates and tautness in availability. We are now entering (if one counts back to the early days of the COVID-19 pandemic) almost three full years of sequential increases in lease rates. As any industry veteran will tell you, what makes this current cycle di erent from previous cycles of increasing lease

rates on railcars is two separate and impactful points.

One is the long duration of the current cycle, and that this current cycle, even in the face of a potential recession, does not show any signs of near-term abatement. Two is that railcar manufacturing has always been a boom/bust series of events that built the supply to satiate the need in the moment of demand. However, in this current cycle, railcar manufacturing has maintained an austerity.

Call it labor, call it materials, call it decreases in total industry-wide production capacity, or call it supply chain di culties, all these factors have contributed to what feels like a secular change in the railcar manufacturing marketplace. Among other factors, this new, lower production cycle is causing cyclical rental cycle stability.

In previous cycles, lessor owners and end users (shippers) would have demanded more production, more components and more deliveries. e call for more, still heard in the alleys and byways from those that use and deploy rail assets for fun and pro t, remains unanswered.

is cycle is further driven by ongoing (seemingly never-ending) challenges to

utilization associated with poor railroad service and ongoing hiring issues being faced by the railroads. Raise your hand if you cringed when the railroads indicated a hiring pause in the face of a potential recession!

While this may or may not be the new normal, it is certainly di erent. But wait— several questions remain. First, is there an imminent recession that is unavoidable? In March, as the rst quarter was coming to a close, the signs were ashing red. Logistics companies (e.g. J.B. Hunt) were harbingering a failed freight rebound amid a massive inventory glut; intermodal loadings YOY for the rst 20 weeks of 2023 are down 11%. Consumer sentiment has been bending to the negative, as there has been a clear scaling back on purchases in an uberin ationary environment. It’s a negative fact pattern. True to this new normal, where everything is just di erent than it may have been in the past, news suggesting the inventory glut is being burned through at a faster rate than expected has recently bubbled to the surface. Hopes for a second-half of the year rebound might actually have some modest merit.

Second, who is the primary bene ciary

Bruce Kelly

of this new austerity? It feels a bit like El Niño (see the tie in?) where a few might be bene tting, while the larger population seems to be excluded from receiving equal bene t. Carry that thought a bit further. Many lessors of railcars have been the beneciary of increasing lease rates. Contrarily, it is di cult to nd an end-user of cars that would suggest higher lease rates and higher interest rates provide them any bene t. is is where things get interesting. ere are, more or less, ve primary competing interests in the world of moving freight by rail (and they o en overlap). Railroad, manufacturer, car owner, car user and component supplier. Of these parties, car owners stand to receive the greatest bene t from increasing lease rates. See chart, p. 18, courtesy of Matt Elkott, TD Cowen Machinery and Transportation OEM analyst (and frequent Railway Age contributor), which layers railcar utilization over railcar deliveries. See how utilization precedes a runup in manufacturing. See further how utilization has been running ahead of production since, you guessed it, the time when lease rates started to rise. Need a cherry on top? In 2020, when the utilization percentage started to rise, there were almost 600,000 cars in storage. Today there are fewer than 300,000.

With new car prices being so stratospheric, one might feel that the OEMs are making bank on their new lower volume austerity. e choice to increase net pro ts over generally improving gross revenue is

one of the factors behind today’s perception of railroad ambivalence about growing their franchise. It represents, to the casual observer (though this does not imply veracity on any level), the foundational mindset of PSR: Earn more money with fewerpeople, fewer cars, fewer locomotives, etc.

Recently, the Wall Street Journal highlighted that Wall St’s focus on margin/pro t over revenue was leading retailers to make it harder for consumers to execute item returns for free. e key takeaway from the reporting? “ e move to reduce returns is part of a sea change in retailing that is giving priority to pro ts over growth.”

It would seem then that rail is a leading indicator, a trendsetter one might say, in leading the Wall Street community in an occasionally elusive chase to improve pro ts rather than to increase revenues. In speaking with Elkott on the WSJ article, he had a similar thought, noting, “It may not be farfetched to think of a clamp down on returns as the retail industry’s version of PSR: an e ort to expand margins at the expense of the service o ering and the top line, at least initially.”

e problem is that, for railcar OEMs, it just isn’t true, even at today’s lo y railcar pricing. Railcar OEM margins have been compressed for some time, since passing through increased pro t margin during a period of rapidly increasing feedstock and personnel expenses is challenging. Companies are going to need railcars just like people are going to need clothes (though

most clothes don’t last 50 years). e question is, where is the ex point between price, demand and satisfying one’s investors?

is is an equally interesting question relative to the railroads. If the railroads survive regulatory scrutiny and can choose only high-margin business, that could, Elkott notes, “translate to a net reduction in freight market volumes, but it could improve freight network uidity. Both are potential mild headwinds to equipment demand.”

e conclusion is that, for the current rental market and those reaping bene ts from it, the path forward is not clear. If there is a tilt to recession and freight levels decline, system velocity could free up cars and so en demand for new builds. If demand for cars continues and new car production stays at historically reasonable levels, owning railcars might be the best long-term investment. Viscerally however, it feels that to make that new price paradigm stick, in ation must continue at current levels.

at seems somewhat far-fetched, even if, for the moment, other countries are forecasting in ation to have a tighter grip on their economy. See the U.K.’s recent indication of in ation staying above 5% for the remainder of 2023. It’s unclear that a bet against the U.S. economy (for rising in ation) sounds smart right now. Carl Icahn might suggest that following Warren Bu et’s advice to not bet against the U.S. economy is the better play.

Bruce Kelly

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Higher lease rates continue to support high secondary market values on many used car classes. It is interesting to note, however, that recent, call it consolidation in the railcar lessor space has led to a kind of “wealth gap” or death of the middle class in leasing. ere are, based on most recent data, six companies with operating eets of more than 80,000 railcars, three companies with eets of more than 30,000 and fewer than 80,000, and then a large handful of those with fewer than 30,000.

While there is plenty of liquidity chasing new opportunities for investment, today’s high lease rates cannot o en support a new investor’s desire to enter the market or an existing investor’s desire to grow through acquisition. It also suggests that

scale doesn’t lead to increases in margin. One only has to observe GATX’s “trust the process” ideology to see that consistency play out over the long term.

Will end users nd ways to use cars for longer to avoid paying new car prices and higher lease rates? Will they look to control costs by entering into more structured nancing vehicles or through more direct purchases? at also remains to be seen.

e other notable news item parked next to the one on tightening retail return policies: An article highlighting the $600MM in corporate stock buyback programs YTD. To quote a recent note from Tony Hatch about an 18% increase in big truck rig-related fatalities, “I haven’t seen the date for the scheduled Congressional hearings—have you?”

AROUND THE MARKET

e lease market continues to show stability at the higher price levels that have been in place for a while. e mix of so ened railcar deliveries, higher interest rates and railcar service issues continues to favor lessors, who continue to press the advantage on lease rates, length of term and on lease terms and conditions. As noted above, the current environment shows no signs of abatement.

Here’s what is happening around the market:

Covered Hoppers for Grain: Hate to repeat last year’s note, but “Wow, just wow!” Lease rates on grain hoppers continue to show incredible strength and an almost non-existent inventory of available cars.

Bruce Kelly

2023 GUIDE TO EQUIPMENT LEASING

Jumbo hoppers larger than 5,100cf are leasing for high $600s to low $700s full service (FS) with term lengths of greater than 5 years (there are higher numbers. In what might be the biggest 90s throwback ever, 4,750cf hoppers are in the high $400s FS for 3-5 years, with numbers reaching into the $500s. Hurtful.

Covered Hoppers for Sand and Cement: Ongoing strength in this market continues to support higher lease rates but without any additional improvements from 2022 levels. While stored inventory continues to decrease, there are still cars in storage, and that is collaring the upside in this market. Some spot rates continue to ex into the mid to high $200s FS. While rates can go higher depending on who is footing the freight and the return expenses, there are a fair number of deals also being done at rates in a lower range, especially if the term is short.

Covered Hoppers for Plastics: Inventory on these cars is generally nonexistent as well. And, with new car prices in the low $120,000s or higher and higher interest

rates, these hoppers are at high rates. For 6,200cf cars, new(er) cars are being quoted above $850 FS, and that is with some term on them. at rate is made more signi cant as the maintenance on these cars is lower than on most car types. Inventory on the smaller 5,800cf cars is also on fumes, with rates in the low $500s FS.

PD Hoppers: is market generally doesn’t get overbuilt, so when service slows, rates tend to increase. For the smaller 5,125cf car, expect rates in the high $600s to low $700s, and for the jumbo, more modern 5,660cf car, think low to mid $800s. Most of these cars are leased FS.

Mill Gondolas: is market had been ambling along and then recently exploded with newer 286 GRL six foot side gons jumping up to the high $600s FS for ve years. Older 263 GRL cars are staying in the mid $400s. ere is some new building in this segment. Probably a decent investment for the long term.

Boxcars: 50-foot and 60-foot plate F boxcars are in demand, and rates have

remined at high levels. Expect numbers in the mid to high $600s FS for both sizes, and limited availability of cars for lease.

Coal Cars: Coal loadings are up slightly from last year, and this is a er a fairly mild winter. ere are suggestions of longterm low-price stability for the natural gas market (Henry Hub is at $2.50 a er hitting $2.00 in April, per MMBTU) that could impact demand, but at the moment it has not created much of a drag. Rates continue to be high here. Looking for a gondola? You’re easily in the mid $400s FS if you have the car already. New lessees are going to be more than $500 FS for 5 years. Look for higher numbers as terms shorten. Rapid-discharge hoppers have rates that are running from $50 to $75 per car per month higher.

Tank Cars: Lots of chatter here on what the fate of this market will be after the East Palestine derailment. There is little talk about design changes, but an acceleration of the May 2025 and May 2029 regulatory threshold for Packing

Group I and all additional flammables (dates respective) is still on the table. Tanks continue to show strength in all segments, even with weakness generally in chemicals loadings (down 5.3% YOY). Food grade tanks have risen into the

high $800s (or even low $900s) depend ing on age, FS with term. Pressure cars for propane and butane (112J340s) are in the low to mid $600s with term. 23,000gallon and 25,000-gallon 117J tanks are also in short supply, and rates are in the

high $800s to low $900s. Tanks for crude have also been active with limited avail ability, and rates in the high $700s for used cars. For new cars, don’t expect anything that starts lower than $900. In the retrofit market (117Rs), FS lease rates are into the high $700s and low $800s. Plain vanilla DOT111As are floundering a bit, now that the May 2023 ethanol dead line has passed. With high maintenance and recertification costs, lessors are going to think long and hard about the decision to keep these cars working or to just cut and run. Right now, this is a “take what you can get” market.

Aggregate Cars: Continued infrastruc ture demand keeps this market at strong levels. Newer 286K GRL cars continue to show strength into the mid to high $600s FS. is market is not expected to change much in the near term.

Got questions? Set them free at dnahass@ rail n.com.

Equipment Leasing Guide Pro le Directory follows on pp. 20-21.

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equipment leasing guide

DIRECTORY LEASING RESOURCE

The 2023 Guide to Equipment Leasing (pages 8 through 18) is supported by companies that provide equipment leasing and financial services and products to the rail industry. All of these firms have advertisements elsewhere in this section or have used paid profile space to present their background and capabilities.

Union Tank Car Company is a leading designer, builder and full-service lessor of railroad tank cars and other specialized railcars. Together with its Canadian affiliate Procor, UTLX owns a fleet of approximately 120,000 railcars for lease to customers in chemical, petrochemical, energy and agricultural/food industries. UTLX manufactures tank cars in the U.S. and performs railcar maintenance services at more than 100 locations across North America. UTLX is part of Marmon Holdings, Inc., a Berkshire Hathaway company.

Union Tank Car Company 312-431-3111

leasinginquiry@utlx.com

UTLX.com

R S ,

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

Michael E Mahoney - President

1401 Walnut Street, Suite 500 Boulder, CO 80302 (646) 258-5812

mmahoney@railsolutions-llc.com

www.railsolutions-llc.com

June 2023

Railroad Equipment Leasing And Maintenance (RELAM) Inc. provides excellent quality MoW equipment for short- or long-term leasing. We work with you to provide customized solutions that maximize your productivity and profitability. Tell us about your upcoming projects, and we do the rest by delivering a program that works for you. From tie and rail replacement to surfacing equipment, car movers to vegetation equipment, and excavators to Wiskerchen hi-rail trucks; RELAM has the equipment you need. Facilities are located near Cleveland OH, St. Louis MO, Sacramento CA and Northern WI.

Request a proposal or more information at quotes@relaminc.com or call 800-962-2902

equipment leasing guide

The David J. Joseph Company’s Rail Group provides a broad range of transportation services throughout North America: single investor, freight cars, portfolio evaluation, purchases and sales of portfolios, and private fleet management. Other services include freight car inspections and engineering services from design of new cars to complete ISL extended life, modifications and analysis; in addition to railcar dismantling for scrapping and parts reclamation.

The David J. Joseph Company Rail Group a NUCOR® company

300 Pike Street • Cincinnati, OH 45202

Tel.: 513-419-6200 • Fax: 513-419-6221

Contact: info@djj.com

www.djj.com

The Greenbrier Companies is a leading international supplier of railroad equipment and services to global freight transportation markets. Greenbrier designs, builds, and markets freight railcars in North America, Europe and Brazil through its wholly owned subsidiaries and joint ventures. We are a leading provider of railcar wheel services, parts, maintenance and retrofitting services. Greenbrier owns a lease fleet of over 12,000 railcars, manages nearly 450,000 railcars and offers fleet management, regulatory compliance and leasing services to railroads, lessors and rail shippers. Learn more about Greenbrier at www.GBRX.com.

Info@GBRX.com

Thomas P. Jackson, Vice President of Marketing & General Manager One Centerpointe Drive, Suite 200 Lake Oswego, OR 97035

Tom.Jackson@GBRX.com

TrinityRail® provides our customers with comprehensive rail transportation products and services designed to provide value by optimizing the ownership and usage of railcars.

Available is an owned and managed fleet of approximately 141,000 railcars as well as fleet management solutions, administrative services and dedicated customer support. Access is also provided to TrinityRail’s extensive engineering and manufacturing platform, maintenance, parts, and on-site field support for operational assistance and training.

More information is available at www.trinityrail.com.

Gregg Mitchell, EVP, Chief Commercial Officer 14221 N. Dallas Parkway, Suite 1100 Dallas, TX 75254 800-631-4420

www.trinityrail.com

Our Rail division offers a full suite of leasing and financing solutions to rail shippers and carriers across North America. We’re a top lessor of highcapacity railcars and offer flexible lease terms, a diverse fleet and dedicated customer service that’s focused on building long-term relationships. Our turnkey-ready cars are available to support your increasing demand, free up capital for growth and minimize out-ofservice time.

Let’s explore how our full suite of services can help support your operating priorities and power your growth.

www.citrail.com

SMBC Rail Services is committed to providing innovative railcar leasing solutions to the North American rail industry. We are a full-service lessor of long-lived rolling stock, offering comprehensive rail leasing and finance solutions. Our fleet of railcars is one of the youngest and most diversified in North America, consisting of more than 52,000 railcars. Our leasing experts can work with you to find the right transportation solution for your rail operations. For more information, please contact sales@smbcrail.com.

Tina Beckberger

Senior Vice President Leasing

SMBC Rail Services LLC

300 S. Riverside Plaza, Suite 1925 Chicago, IL 60606

www.smbcgroup.com/americas

The David J. Joseph Company a NUCOR® company

LABORATORIES ROLLING

By Marybeth Luczak, Executive

Measuring and monitoring track geometry and detecting aws beneath the track surface not only allows railroads to take action before failures occur, but also helps them to manage maintenance proactively, prolonging asset life.

e following suppliers provide updates on their latest equipment and services to assess and manage track health, plus their insights on where the market is headed.

MERMEC INC., AN ANGEL COMPANY

San Francisco Bay Area Rapid Transit (BART)

District last month unveiled its newly acquired rail inspection vehicle from MERMEC that measures track position, curvature, smoothness and alignment, plus wear and corrugation, which contribute to train noise. e $10

million, diesel-powered “rolling laboratory” is part of MERMEC’s ROGER series and was developed over the past nine years under Build America Buy America Act requirements, according to Scott McLaughlin, Vice President of Business Development-West for MERMEC. It uses lasers, sensors and cameras as well as measuring and data management systems to create a comprehensive track pro le, all while traveling at speeds of up to 70 mph. Among its capabilities, the vehicle can create three-dimensional surface scans of the area around the track and capture hi-de nition images that detect abnormalities in components such as concrete ties and fasteners. It can also capture video in both normal and low-light conditions, including in tunnels, and infrared thermal imagery. GPS, axle counters and radio-frequency identi cation tags pinpoint problem-area locations.

According to McLaughlin, MERMEC also recently released Rail Studio, “a platform that incorporates both arti cial intelligence and in-cloud-based storage, and is able to visualize, analyze and interact with data from multiple collection systems,” including those from di erent vendors.

What’s next? “We are constantly interacting with our customers, getting valuable feedback, and making adjustments and improvements so the next iteration of our equipment provides more information and is more robust,” McLaughlin reports.

PLASSER AMERICAN CORPORATION

“Automation remains a hot topic” in the track geometry space, Plasser tells Railway Age. “Customers want to be able to cover the same amount of track with fewer people.” Also important today: eet management and data

BART’s MERMEC-built rail inspection vehicle uses lasers, sensors and cameras as well as measuring and data management systems to create a comprehensive track profile, all while traveling at speeds of up to 70 mph.

Editor

What’s new, what’s next in track geometry and rail flaw detection systems.

analysis. e company says it “continues to provide customers with new and improved platforms to bring track geometry and track maintenance together.” Data generated through Plasser machines are compatible, it points out, which saves track time by eliminating the need for pre-measurement. Additionally, partnerships with other railroad technology companies allows Plasser to integrate third-party data into its domains.

e future of track geometry will be a mix of manned and autonomous vehicles, Plasser tells Railway Age—both of which it will o er in the near future.

Plasser recently entered the ultrasonic rail aw detection (URFD) market and reports supplying both hi-rail and rail-bound options for service or purchase. e company is providing (or mobilizing to provide) Class I’s, Class IIs and transit agencies with URFD services, which it says will continue to expand in 2024 and 2025 within North America.

While Plasser says that “there is a sizeable need” for URFD for both stop and verify and continuous testing, it does “see a move away from eddy current and stop/verify and go with higher speed systems such as phased array, and a switch to continuous testing to cover more track within tighter schedules.”

Now under development is Plasser’s phased array system, which has entered the nal stages of testing. It was designed to inspect the rail and nd defects in the presence of surface conditions such as horizontal split heads, deep rolling contract fatigue and squats. “ is new technology will replace the eddy current systems to check the rst few millimeters of the rail for defects,” PAC reports.

ENSCO RAIL, INC.

“ e North American market has fully embraced the bene ts of rail-bound autonomous track geometry systems,” Rail Division Manager Jackie Van Der Westhuizen reports. “Currently, the number of autonomous railbound track geometry vehicles far outnumbers manned vehicles.”

ENSCO Rail recently deployed its rst autonomous rail-surface imaging systems for a Class I railroad, and additional autonomous joint bar imaging systems for existing customers. “ ese systems accompany autonomous track geometry measurement systems to assess rolling contact fatigue and rail damage [and] to monitor rail integrity and inspect,” Van Der Westhuizen tells Railway Age.

What’s new in research and development?

e company has developed digital twin capabilities, “made possible by combining our automated VAMPIRE processing with autonomous track geometry,” Van Der Westhuizen says. “With this capability, we can predict potential derailment locations in advance and provide instructions on how to correct defective conditions to prevent accidents.” Additionally, the company is leveraging its Automated Maintenance Advisor to predict future track conditions, he says, “which results in actionable maintenance plans and asset management strategies.”

ENSCO Rail also provides ultrasonic rail aw systems (URFS), and it anticipates “a persistent need for more frequent and faster testing,” according to Van Der Westhuizen. “We expect that advancements in sensors, data analysis and machine learning will facilitate more sophisticated and accurate inspection techniques. is progress will fuel the development of continuous testing and automated inspection, which can rapidly scan vast segments of railway tracks and detect potential aws or defects, thereby minimizing derailments and service disruptions.” Also, there is a growing trend to integrate and augment URFS with other types of inspection technologies, such as visual inspection, thermal imaging and magnetic particle inspection, he reports. “By combining these di erent inspection techniques, rail maintenance teams can get a more comprehensive understanding of track condition and make more informed decisions about maintenance and repairs.”

HARSCO RAIL

Harsco Rail o ers the Callisto track geometry measurement system, which can be mounted on a hi-rail vehicle or integrated into a Harsco tamper’s control system. e portable, hi-railmounted system is currently hard-wired to a keyboard and touchscreen monitor in the cab, but within a year, the company may eliminate most wires by implementing Bluetooth communications, according to Tom Leiby, Director of Measurement Products. Harsco Rail is also working to improve how operators input data and to provide scalable track-geometry graphs, he tells Railway Age

A Class I railroad is currently out tting its tamper eet with Callisto Protamp, which allows for a high-speed, pre-work track recording without the need for buggy extensions, Leiby says. is increases productivity as well as safety.

On the R&D side, Harsco Rail is testing an autonomous vertical rail displacement measurement system that it anticipates will be commercially available in rst-quarter 2024. Mounted on heavy-weighted freight cars or almost any type of rail-bound equipment, the system will detect “mud spots” or weak points in the railbed that are not always visible, according to Leiby. “By knowing where these spots are, you can watch them, and/or undercut or do other work to eliminate them and stop the stress on the rail,” he explains.

In addition to track geometry inspection services, the company will soon o er ultrasonic rail aw detection services, Leiby reports.

HERZOG

“Rail aw detection is a critical aspect of ensuring the safety and dependability of transit and freight rail systems,” Herzog tells Railway Age. “By using powerful ultrasonic technology (UT) and comprehensive data collection and analysis, Herzog’s hi-rail testing vehicles are capable of servicing rail tracks in any environment.” e company o ers turnkey Continuous Testing (CT) services and says that its CT platforms “are designed to capture robust and highly accurate data within short work windows, enabling a thorough assessment of rail infrastructure conditions.” ese platforms, Herzog adds, employ multiple inspection technologies on a single vehicle, allowing for customization. Among the key features of its CT equipment and data processing are:

• SmartProbe technology: “ e detection instrumentation within the wheel probe signi cantly accelerates processing time,” according to Herzog. “With 14 transducers per rail, it provides a superior signalto-noise ratio and comprehensive coverage using 24 UT channels.”

• Geometry system: is system evaluates track gauge, alignment, curvature, surface conditions, cross-level, super-elevation, warp and twist.

• Joint bar inspection: “High-de nition line scan cameras integrate detailed images of both the gauge and eld side of the rail joint bar into the UT so ware data stream,” Herzog says. “ is integration enables the quick identi cation of missing bolts, broken fasteners or cracks in the sh plate.”

• Historical record: Each indication is tracked across survey runs and prioritized based on its anticipated severity, according to Herzog, which notes that

analysts can reference previous inspection scans and photo imagery to monitor any growth or changes.

• Pattern recognition: “UT data is analyzed using machine learning algorithms that automatically identify and classify various types of anomalies or defects that may be present in the rail,” Herzog reports.

HOLLAND LP

How railroads use track geometry data is changing, with a move from reactive to proactive, data-driven maintenance, according to Senior Director of Product Development Sabri Cakdi. Since tracks are inspected multiple times per year, railroads can overlay data and look for trends. “In the past, you would provide an inspection technology to a railroad and they would run it, operate it, get a report and that was it,” he says. “Now, they ask us to integrate

our system’s output to a cloud-based system.”

Another trend, Cakdi says, is the use of portable track geometry systems in yards. “If you look at Federal Railroad Administration derailment rates, there has been a huge reduction in main line derailments, but yard derailments are still signi cant,” he reports.

Holland’s portable Track Inspector is a full geometry system that o ers two individual rail sensors depending on con guration and use, and can be mounted, con gured and calibrated by one person in less than an hour, according to the company. Cakdi points out that the Argus® track measurement technology no longer uses a conventional wheel-mounted encoder; this has been replaced with a noncontact speed and distance measurement device so there are no hardware reliability issues.

Holland also o ers Locomotive UGMS, a locomotive-based autonomous track geometry

and rail pro le measurement system. “Taking advantage of existing train routes, Locomotive UGMS provides continuous testing along critical network corridors while eliminating the need for track time,” the company reports.

KAWASAKI TRACK TECHNOLOGIES

e current and long-term outlook for autonomous track inspection systems remains promising, Program Manager Ryoji Negi tells Railway Age. KTT’s locomotive-mounted “high-reliability, low-maintenance and lowcost per mile” system provides the geometry data rail owners need to identify and more quickly respond to potential problem areas, he says. Over the past year, the company has added a web-based track condition viewer and updated the system to include more realtime data, as well as functionality to download geometry strip charts. Cloud storage options are also available.

KTT is currently testing an automated fastener inspection system. Mounted on a locomotive, processing is completed on board and exceptions sent to customers in near real time. “ is system is taking high-speed imagery of rail, ties, fasteners, ballast, and other track components and providing the data for our machine learning algorithms,” Negi says. “Initial results have been very promising and KTT is targeting early 2024 to have production systems available for installation. Once various fastener and tie combinations are completed, KTT will be able to utilize the same technology to identify potential exceptions on ties, joint bars, ballast and other track components.”

LORAM TECHNOLOGIES, INC.

LTI can target substructure issues and their underlying origins by integrating historical track geometry data provided by railroad

Rail Doctor software brings together and aligns for analysis track geometry data collected by the railroad and GPR and LiDAR data collected by Loram Technologies Inc.

Rail Flaw System (URFS) services

For the latest updates follow ENSCO Rail on LinkedIn

customers with information derived from its Ground Penetrating Radar (GPR) and LiDAR systems. ese systems measure ballast fouling, moisture conditions and track formation, and provide information about right-of-way topography, drainage ditch location, and depth and cut/ ll conditions, respectively. e company’s Rail Doctor so ware brings together and aligns all data for analysis and, ultimately, to help railroads with substructure maintenance management—a proactive approach.

“ e geometry data is a very good tool to nd out where the track is not performing correctly, where it’s deteriorating,” says Hamed F. Kashani, Manager of Railway Geotechnics. “We can then go and look for the root cause of the problem and recommend to the railroad how to x it.” Once any problems are corrected, LTI can monitor the track to determine if the provided solution was the right one.

e company is actively working on research projects with two universities to determine the best machines to resolve speci c problems, according to Kashani. For instance, if a certain amount of fouling in the center of the track is detected by GPR, is undercutting or shoulder

ballast cleaning the best way to x it? “We want to nd the best and economical solution for the condition,” he says. e company is also taking steps toward nding correlations between substructure and superstructure (rail and crosstie) defects as well as automating data collection and increasing the speed of analysis.

RAILWORKS MAINTENANCE OF WAY

“Automated track geometry inspections continue to be an important part of our Maintenance of Way Division and for RailWorks as a company,” says Jason Deaton, Vice President and General Manager. “Providing accurate, reliable track geometry services for Class I’s, short lines and transit agencies across North America gives our customers an opportunity to view and understand their railroads’ health in real time.”

According to Deaton, customers are not only implementing track geometry inspections more frequently, but also using data so ware to view and analyze data in more detail to better manage maintenance resources, personnel and budgets. “Having the ability to view multiple or overlapping inspections allows customers to pinpoint locations that require attention before they

become a track defect or problem area,” he says.

RailWorks is currently exploring technologies that can be incorporated into its Track Geometry Service Platform.

WABTEC CORPORATION

Customers today want more testing done faster, says Dave Staton, Vice President, General Manager of KinetiX Rail Inspection Technologies at Wabtec. It’s about “how fast can you get in, how fast can you get out,” he says. “And they want predictive results. ere’s a lot of things that go into being able to make that happen. And part of that becomes our ability to enhance our analytical capabilities in evaluating inspection data by adding and integrating arti cial intelligence into our background so ware.”

On Jan. 1, Wabtec brought track inspection, including ultrasonic rail aw detection, under its KinetiX umbrella, which already comprised wayside inspection, such as hotbox detectors and bearing acoustic monitors. “Part of our vision is to connect those disparate inspection technologies to derive insights,” reports Alan Fisher, Group Vice President, Logistics, Analytics and Digital Mine at Wabtec.

NONEXISTENT FOR NOW? NEW LOCOMOTIVE BUILD MARKET

BY DON GRAAB, TRAINGLE BROTHERS & ASSOCIATES LLC

It looks as though we will see three consecutive years with no new locomotives built for the North American market. This downward trend in production has been evident since late 2016 in that an average of only 77 units per year were built in the three years (2018-2020) preceding the current drought of new units. It is safe to say, in the era of diesel-electric locomotives this is unprecedented.

Fair questions to ask: “How can this be?” “Can railroads continue to buy no new locomotives?” “If so, how long can this last?”

There are numerous circumstances that contributed to this situation. Let’s begin with Precision Scheduled Railroading (PSR). Since dieselization and multiple unit (MU) control, railroads have understood longer, heavier trains reduce fuel and crew costs, which are railroads’ two primary expenses. When a lower Operating Ratio (OR) is management’s

objective, you cannot beat this combination. Along the journey, the advocates of PSR realized the next lever to pull for longer trains was Distributed Power (DP), which allows the continued progression of closely matching the tractive effort of a locomotive consist to train weight, yielding lower costs. While there has been much negative publicity about the longer trains of the PSR era, DP use has many tangible benefits.

Railroads buy new locomotives for two reasons: renewal of their fleet and new business. Presently, the demand for new units generated by new business is zero. The pandemic certainly put the chill on new locomotive orders, and we have not recovered since.

Railroads are most competitive when hauling large, bulky, heavy stuff. The shift away from manufacturing to a service economy combined with aggressive “offshoring” of manufacturing has not been kind to railroads. Significant traffic from

Asia moving on land in containers has offset these losses. However, in recent years a growing amount of inbound Asian traffic has been diverted from the West Coast to the East Coast, resulting in shorter rail hauls.

Looming in the background is the continued erosion of coal traffic, which peaked in 2008. In 2022, coal production was down 49% from 2008. While you can read about surges in coal shipments, coal loadings resemble a sine wave with a steady downward slope. Traffic goes up and traffic goes down, but over longer periods of 18-36 months the trend is obvious.

On top of this, Class I carriers have a limited enthusiasm for the new Tier 4 emissions-compliant locomotives. Their higher purchase price and increased maintenance expense are a deterrent to acquisitions. Contributing to the current situation, in 2014, the highest year of new domestic deliveries since 2008, there was a

MOTIVE POWER

surge in the purchase of road units before Tier 4 took effect (Jan. 1, 2015). About that time, significant volumes of Bakken crude oil were also moving by rail.

Returning to the fact that major railroads buy new locomotives for purposes of fleet renewal, the railroads have been more actively addressing the health needs of their locomotive assets than it may appear. For the first time in 65-plus years of diesel freight operations, the “capital” rebuilding of road units has surpassed new locomotive purchases for fleet renewal.

Let’s expound on capital rebuilds. Unlike the more routine engine overhaul, which is “expensed” from the annual operating budget, rebuilds are a life extension event where the cost is funded from the capital improvement budget. Upon completion of the rebuild, a locomotive asset is depreciated over its now-longer useful life. Notable programs from the past include Illinois Central’s “Paducah Rebuilds” where GP9 locomotives were upgraded to GP10 models; Sante Fe’s program at Cleburne, Tex., where U30C units were rebuilt as C30-7 locomotives; and other programs including work performed at Conrail.

The rebuilding activity that has taken place more recently is not fundamentally different, just far more pervasive. With a bias from my long-time employer, I would suggest that the current level of enthusiasm for capital rebuild programs started with Norfolk Southern (NS) under the direction of then-CEO Wick Moorman. Witnessing the complete rebuild of yard and local units in Altoona, Pa., and facing

the huge capital requirements of PTC plus a large aging Dash 9 fleet, Moorman advocated leveraging the shop capabilities to offer a lower capital alternative for fleet renewal. This focused NS shops on the rebuilding of road units, but NS included AC traction as part of its vision for the future of rebuilt road power. This generated pressure for the two locomotive builders to participate, and both Progress Rail and GE Transportation (now Wabtec), with their aging SD70M and C44-9W DC models, were soon actively

engaged. While the first Dash 9 units to emerge with AC power were delivered to BNSF, programs from both builders quickly followed at NS. Later, this concept expanded to include upgrading or rebuilding of first-generation AC units.

All the Class I railroads have participated in this capital rebuild activity, although neither BNSF nor Kansas City Southern have been active recently. While this rebuild process was originally envisioned to convert DC road units to AC traction motors (sometimes referred

Portable Inspection Solutions

and Full Geometry options available for any hi-rail vehicle with a standard hitch mount.

MOTIVE POWER

to as DC2AC conversions), most units

Let’s go into more detail about how

produce configurations for both modules that are identical to those for new locomotives. This results in a new microprocessor control system, new relays, power contactors, wiring, IGBT inverters, electronic air brake systems and associated hardware such as air conditioning and cab seats. The diesel engine, traction motors, traction alternator, air compressor, and sometimes the truck assemblies are also rebuilt, after which the locomotive is painted and sometimes renumbered. From the viewpoint of an operator, the locomotive looks and feels like a new unit. The additional useful life of these renewed assets is estimated to be 15-20 years. It is believed these capital rebuild locomotives have demonstrated reliability equal to new Tier 4 locomotives at 50% of the cost.

Despite the prospects of “reshoring/nearshoring,” we are a ways off from seeing a resurgence of heavy manufacturing in the U.S. and any associated uptick in rail traffic. Currently, there are few signs rail traffic is facing a rebound. In fact, statistics reveal just the opposite. Further, coal traffic will continue to decline while many first-generation AC locomotives remain viable candidates for capital rebuild programs. Railroad managers sense the current locomotive technology has reached a plateau where it is not changing much. Railroad management, conscious of ambitious Environmental, Social and Governance (ESG) goals, are anticipating the conversion to alternative fuels, namely hydrogen. A few are even expecting the next round of new locomotives to be driven by hydrogen fuel cells, not Internal Combustion Engines (ICE).

One of the unexpected consequences of the capital rebuild activity could be a spike in new locomotive demand. This would occur when locomotives that were new and never rebuilt age out at 20-25 years of useful life during the same year or years capital rebuild units reach the end of their second life. In other words, at some point, the retirement of shorter-life rebuilds is likely to coincide with the retirement of the new units that were built before rebuilding became popular. This will result in a peak demand for new power around the years 2034-2038. The likelihood of this occurring depends on capital rebuild life. The shorter the second life, the more likely a spike in demand. If the useful life of the rebuilt units turns out to be the same as the life of new units, no spike in demand will take place.

Predicting the demand for new locomotives is difficult. This is not the first time a change in operating practices has resulted in a large decrease in new locomotive production. But it is the first time production dropped to zero. What we know from the past is that locomotive demand often increases rapidly with little warning. When it does, it seems like the big railroads all want new locomotives at the same time.

Historically, railroads chose to retire locomotives based on issues with the diesel engine or overall locomotive reliability. When new diesel engines offer little fuel savings advantage, railroads are more willing to restore engine longevity with overhauls. When overall locomotive reliability declines, it is often driven by declining traction motor reliability. Rather than buy new traction motors, railroads have chosen to buy new locomotives, because replacement traction motors are quite expensive.

If new locomotive demand soars, it could easily exceed supply for a period of months or years. If prices soar as well, overseas builders could gain interest in the North American market. The flow of component parts such as traction motors may be impacted by increased production of electric vehicles and the competition for copper. Based on recent experience, the availability of skilled workers to assemble locomotives may be another looming challenge.

At some point, we will see a rebound in the demand for new locomotives. Presently, no one knows when this will occur. But the longer the resurgence is delayed, the more likely the return to new unit production will initially be a bumpy road for the railroad industry.

RAIL AND WHEEL FATIGUE CRACK DEFECTS INSPECTION IMPERATIVE

By Gary T. Fry, Ph.D., P.E., Vice President, Fry Technical Services, Inc.

Welcome to “Timeout for Tech with Gary T. Fry, Ph.D., P.E.”

Each month, we examine a technology topic about which professionals in the railway industry have asked to learn more. is month, our subject is fatigue defects that form in railway wheels and rails. Although this is prime material for a very thick volume (or two), our focus will be on a subset of safetycritical issues. Along the way, I will include a few brief callouts to related topics that hint at the breadth involved in these problems. Let’s get started!

In the January 2022 “Timeout for Tech,” I provided a general overview of metallic fatigue. e key takeaways were these:

Fatigue cracks in steel are neither manufacturing defects nor the result of manufacturing defects. Rather, fatigue cracks in steel are a result of routine use in service ey are caused by repeated load applications that give motion to atomic-scale imperfections called dislocations.

Dislocations are misalignments present in the crystal lattices of all metals, including steel. Dislocations individually may be on the order of 0.00000004 inches in length, but they occur in great numbers.

For example, one could expect to nd 10 million miles of dislocations in a three-foot length of AREMA 136RE rail and more than 65 million miles in a single 36-inch freight car wheel—amazing!

At rst thought, it might seem logical

that eliminating dislocations would improve steel components—making them essentially fatigue-proof. Remarkably, however, it is dislocations that give steel alloys essential structural properties such as ductility and fracture toughness. Even if it were possible, eliminating dislocations would make steel uselessly brittle. So, we are le facing the simple fact that every component made from steel is vulnerable to producing fatigue crack defects under the action of repeated loads that mobilize dislocations. at gives us two basic conditions to assess.

Let’s consider railway rails and wheels. With certainty, we can say that they both experience repeated loads. Each full revolution is a load cycle for a wheel, and the

William C. Vantuono

passage of a wheel is a load cycle at each location along the length of a rail. Now, we must address the question of mobilizing dislocations. is condition is much more di cult to assess and has been an active area of research for nearly 200 years.

Dislocation motion in steel is caused by shearing distortions of crystal lattices beyond threshold limits that are determined through controlled testing. Fatigue cracks come from the accumulated and irreversible motions of the dislocations. To assess the fatigue vulnerability of components, the threshold values from testing are compared to values obtained from analysis models of the components, values from eld measurements of the components under load, or both.

For example, Figure 1 (above) shows stress results from a computer model of rolling contact between a 36-inch freight wheel and an AREMA 136RE rail. e wheel load was just under 36,000 pounds, which is normal for current revenue service in North America. e form of stresses plotted in Figure 1 can be related directly to the stress-strain curve for the wheel and rail steel. In the peak zone, the stresses exceed the yield strength of both materials, which would generally be expected to fall below 120 ksi. Having the von Mises Stress exceed

the yield strength of the steel by any amount means the peak stresses in the wheel and rail substantially exceed the threshold level needed to cause dislocation motion.

We have now established that both conditions for fatigue vulnerability of wheels and rails have been met. Wheels and rails in North American revenue service are repeatedly loaded at levels that are expected to cause dislocation motion. A er some period of exposure to this service environment, we should expect to observe fatigue crack defects in both components. And, in fact, we do on a regular basis.

ere are two additional questions to consider. How many miles can a wheel travel under a given load before producing a fatigue crack defect in the wheel? How many of those loaded wheels can pass over a rail before producing a fatigue crack defect in the rail?

ese questions are the subject of a specialized eld called fatigue mechanics.

e best fatigue mechanic models are the critical-plane models, and among criticalplane models, the best are the strain-based approaches. With these, one can prepare detailed estimates for the expected wheel and rail fatigue lives at which end fatigue crack defects will be present. But there are substantial caveats to disclose. Notably, the

predictions rarely agree with test results to an actionable level useful to decision-makers.

is is because fatigue test results always contain large variability. Tightly controlled laboratory fatigue tests contain substantial scatter, easily a factor of two or more, even when using specimens polished to a mirror nish. In the comparatively less controlled environment of revenue service, we should expect more variability—an additional factor of two, at a minimum. In combination, that’s a factor of at least four!

Let’s look at this in a simpli ed example. Using a model calibrated against test data, I might predict on average that wheels are expected to be defect-free for 15 years. Given the expected variability, however, some wheels might experience a fatigue failure a er seven years or fewer. It can also go the other way. Some wheels might survive defect-free for 30 years or more. ere are rigorous statistical methods to consider these issues, but the takeaway is the same. I cannot point to a wheel on a train and say exactly how long it will last before producing a fatigue crack defect, even if I know perfectly its entire past and future service history. e same is true for rails.

ough I might not know how long a given wheel or rail will last, I do know that it is at risk of producing a fatigue crack defect

Figure 1: Stress plot from a computational model of wheel/rail rolling contact under normal revenue service conditions. Peak stresses exceed the minimum levels needed to produce fatigue crack defects in wheels and rails. (Courtesy of Gary T. Fry.)

and where the defect is likely to form. I know this from modeling and from corroborating forensic investigations of wheels and rails that failed because of fatigue crack defects. Qualitatively, the models and forensics agree extremely well. ey agree quantitatively only in a broad statistical context.

Now consider Figure 2 (above), which shows plots of the same stress function used in Figure 1. In Figure 2, we are focused on the peak stress areas immediately adjacent the wheel/rail plane of contact. e wheel is represented by the upper plots and the rail is represented by the lower plots. We see clearly that the peak stresses occur a little less than half an inch from their contacting surfaces. Fatigue models will tell us that is where the fatigue cracks will

nucleate and experience early growth.

Once established, those cracks are substantial stress raising defects in the material that will continue to grow larger and potentially serve as nucleation sites for new fatigue crack defects. Unfortunately, we cannot see any of those cracks since they are contained with the steel. But we can detect them using ultrasonic transducers (UTs) before they become a size that will cause complete failure of the wheel or rail.

We have been inspecting rails using UT systems for more than 70 years. Currently, it is a requirement to inspect rail for these internal fatigue defects. In-motion systems have been perfected to make the inspections e ective and e cient.

Consider Figure 2 again. Careful

examination reveals that the fatigue behavior in the wheel near the contact plane should be nearly identical to the fatigue behavior in the rail near the contact plane—namely, formation of invisible internal fatigue crack defects. It is a clear example of Newton’s Third Law (translated from Latin): “Actions of two bodies on each other are always of the same nature and in opposite directions.”

Inexplicably, it is neither a requirement nor a common practice in North America to inspect wheels for internal fatigue crack defects—defects that are well-known to occur. Given these facts, one imagines UT inspection of wheels as “low-hanging fruit” to signi cantly reduce the risk of wheel failures and associated train accidents.

Inspecting both rails and wheels for internal fatigue crack defects is imperative to enhancing and ensuring the future safety of railway operations.

REFERENCE:

Fry, Gary T. 2022. “Metal Fatigue: How Dangerous Fatigue Cracks Develop in Sound Steel.” Railway Age, January 2022, pp. 36-38. https://issuu.com/railwayage/ docs/railway_age_january_2022/38

Dr. Fry is Vice President of Fry Technical Services, Inc. (https://www. frytechservices. com/). He has 30 years of experience in research and consulting on the fatigue and fracture behavior of structural metals and weldments. His research results have been incorporated into international codes of practice used in the design of structural components and systems, including structural welds, railway and highway bridges, and high-rise commercial buildings in seismic risk zones. He has extensive experience performing in situ testing of railway bridges under live loading of trains, including high-speed passenger trains and heavy-axle-load freight trains. His research, publications and consulting have advanced the state of the art in structural health monitoring and structural impairment detection.

Figure 2: Plots of stress values immediately adjacent to the wheel/rail plane of contact. This is a clear example of Newton’s Third Law: “Actions of two bodies on each other are always of the same nature and in opposite directions.” (Courtesy of Gary T. Fry.)

SIT AND LISTEN

Railway Age, Railway Track & Structures and International Railway Journal have teamed to offer our Rail Group On Air podcast series. The podcasts, available on Apple Music, Google Play and SoundCloud, tackle the latest issues and important projects in the rail industry. Listen to the railway leaders who make the news.

William C. Vantuono Railway Age

David C. Lester Railway Track & Structures

Kevin Smith International Railway Journal Podcasts are available on Apple Music, Google Play and SoundCloud

Cybersecurity for rail operations has become one of the industry’s top concerns.

Each year, cybersecurity initiatives require more time and resources than the prior year, and can easily become an overwhelming situation for anyone. e intent of this article is to explain cybersecurity, how it relates to the railroad industry, and the roles of relevant regulatory agencies in terms that railroaders understand. For a discussion of cyber attackers and example attacks made to railways, please see our companion article in the January 2023 issue of RT&S.

WHAT IS CYBERSECURITY?

A good way to describe cybersecurity is as a series of processes and procedures that an organization needs to implement to ensure resilient protection against cyber threats. In many ways, it is similar to quality assurance that manufacturers use to deliver high quality products or services. For both quality assurance and cybersecurity, there are many documents that will define the specific actions that individuals in the organization need to take to meet their objectives.

Similar to quality assurance, cybersecurity is not a one-size- ts-all methodology. Rather,

RAILWAY CYBERSECURITY REGULATIONS & STANDARDS

BY MATTHEW DICK,

it is a risk-based application of the processes and procedures. For both a quality assurance program and a cybersecurity program, the stakeholders assess risk and determine what is acceptable and where to “draw the line” of what will be done. Additionally, this process is re-reviewed periodically because risks routinely change.

e objective of any organization’s cybersecurity program is to ensure con dentiality, integrity, and availability of its entire information technology (IT) system. Condentiality is the ability to keep information from being read by unauthorized sources. For a railway, this would be protecting sensitive information from being stolen, such as documentation on how a train control system can be remotely accessed. Integrity is the ability to protect information from being modi ed by unauthorized parties intentionally or through human error. For railways, this would be preventing an attacker from modifying a train control database without the railway being aware of the change. Lastly, availability is ensuring that systems, applications and data are accessible when needed by authorized parties. For a railway, this would be preventing an attacker from disabling a train control system from working.

To ensure con dentiality, integrity and

availability, an organization needs to formalize its cybersecurity program with appropriate processes and procedures that defend against the ever-evolving threat.

REGULATIONS AND STANDARDS

e regulatory body that de nes cybersecurity requirements at a high level is the Cybersecurity & Infrastructure Security Administration (CISA), which is part of the Department of Homeland Security (DHS). CISA is a coordinating organization for critical infrastructure protection requirements. Critical infrastructure is de ned as being private sector organizations that are key for the United States to operate. ey are de ned as 16 di erent sectors: 1) Chemical Sector; 2) Commercial Facilities Sector; 3) Communications Sector; 4) Critical Manufacturing Sector; 5) Dams Sector; 6) Defense Industrial Base Sector; 7) Emergency Services Sector; 8) Energy Sector; 9) Financial Services Sector; 10) Food and Agriculture Sector; 11) Government Facilities Sector; 12) Healthcare and Public Health Sector; 13) Information Technology Sector; 14) Nuclear Reactors, Materials, and Waste Sector; 15) Transportation Systems Sector; and 16) Water and Wastewater Systems Sector.

by

Freight and passenger railways are considered Critical Infrastructure as part of Sector 15, TTC

P.E., CHIEF OF STRATEGY & DEVELOPMENT; JEFFREY BACA, SR. STAFF CYBER SYSTEMS ENGINEER; AND ERIN PLEMONS, STAFF CYBERSECURITY ENGINEER, ENSCO, INC.

Transportation Systems. Additionally, manufacturers of locomotives, railroad and transit cars and rail track equipment are considered Critical Infrastructure as part of Sector 4, Critical Manufacturing Sector, because they are key to serving the Transportation Sector.

CISA is not the government body that de nes speci c cybersecurity regulation to the Critical Infrastructure organizations. Instead, CISA de nes the high-level requirements and then works with regulatory bodies already overseeing each sector to implement speci c requirements. For example, for Sector 16, Waste and Wastewater Systems, CISA gives high-level cybersecurity requirements to the Environmental Protection Agency (EPA), which then makes the speci c cyber regulations for Water Treatment facilities. e Transportation Security Agency (TSA) does the same for freight and passenger railways.

e TSA has recently utilized the CISA high-level requirements to release two Security Directives and an Advanced Notice of Proposed Rulemaking (ANPRM). Security Directive 1580-21-01, released on Dec. 31, 2021, was focused on establishing the basics for railways to report cybersecurity incidents to CISA and to coordinate with the TSA. Security Directive 1880/82-2022-01, released on Oct. 24, 2022, focused on railways providing their Cybersecurity Implementation Plan (CIP), which details their cybersecurity protection level. Additionally, on Nov. 30, 2022, the TSA released an ANPRM in Federal Register Vol. 87 No. 229, in which it posed a series of questions to freight and passenger railways to gain a better understanding of the status of cybersecurity in the rail sector to pursue development of comprehensive requirements.

A cybersecurity framework is a very useful collection of already-de ned controls that an organization can use as a starting point when building its cybersecurity program. e Security Directives and ANPRM do not mandate a speci c cybersecurity framework that a railway must use. e National Institute of Standards and Technology (NIST) is one of the largest cybersecurity framework creators providing a wide array of individual framework standards used across government and private sector organizations. One such standard is the NIST Cybersecurity Framework (NIST CSF), which includes best practices to identify, protect, detect, respond and recover from cyberattacks. Additionally, the International Organization for Standardization

(ISO) has also created a cybersecurity framework through their ISO 27001 standard. NIST and ISO 27001 have a lot of similarities. In general, NIST is the preferred framework for government organizations, and ISO tends to have more favor with commercial organizations. NIST has higher total number of controls, but the controls are more exible to meet each organization’s needs. ISO 27001 has fewer controls, but those controls tend to be more prescriptive as compared to the controls o ered by NIST. Another di erence from NIST and ISO 27001 is that NIST standards are voluntary and self-governing (not mandated), while ISO 27001 requires auditing and certi cation.

Rail industry companies identi ed as Critical Infrastructure by CISA will need to utilize a cybersecurity framework to address the callto-action from the TSA through its Security Directives and ANPRM.

WHERE TO LEARN MORE

The Transportation Technology Center (TTC), operated by ENSCO, is hosting

its first annual conference on Nov. 7 and 8 in Pueblo, Colo. The conference is excited to have Ms. Sonya Proctor, TSA’s Assistant Administrator for Surface Operations, as a featured speaker. Ms. Proctor oversees the organization responsible for security of U.S. railroads, including cybersecurity. The event is a great opportunity for railway industry stakeholders to hear directly from the TSA about cybersecurity expectations going forward for the rail industry. More information about the conference can be found at ttc-conference.com.

Partnering for success

Hatch is proud to support the transit industry. Together we can solve your toughest challenges with expanded and innovative services.

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RAHUL JALALI

Union Pacific

HIGH PROFILE: Union Paci c Chief Information O cer Rahul Jalali has been promoted to Executive Vice President. According to UP, Jalali has played a “pivotal role in the company’s modernization e orts and will continue leading the development, implementation and operation of UP’s information and telecommunications technologies, delivering hightech solutions for the railroad and its customers.” He most recently served as Senior Vice President and Chief Information O cer, having joined UP in 2020. Jalali was named one of Railway Age’s 2022 Readers’ In uential Leaders. Additionally, in 2023 he was appointed by the Cybersecurity and Infrastructure Security Agency (CISA) to its Cybersecurity Advisory Committee (CSAC).

MARIO PÉLOQUIN

VIA Rail Canada

HIGH PROFILE: Mario Péloquin this month will take over as President and CEO of VIA Rail Canada Inc. A nearly 40-year transportation industry veteran, Péloquin served most recently as Executive Vice President, Major Projects for the Keolis Group. He has also worked at Aecon Group Inc. as Vice President Operations (2021-22); at New York Metropolitan Transportation Authority as Chief Operating O cer (2020-21); at SNC-Lavalin as Senior Vice President, Business Development and Proposals (2018-19); at ales Transport and Security Ltd. as President and CEO (2017-18); at Nova Bus as General Manager and Vice President (2017) and Vice President Business Line (2016-17); at ales Canada–Transportation Solutions as Vice President Business Development (2011-16); at AECOM as Associate Vice President, Canadian Transit Market Sector (2009-11); and at Siemens Canada Limited as Director, Mobility-Rail (2004-09). He began his career in 1984 as CN’s Chief Rail Tra c Controller in Toronto, and later moved on to become Senior Advisor, Rail Safety at Transport Canada, Senior Investigator at the Transportation Safety Board of Canada, and Manager Light Rail for the city of Ottawa.

NICHOLAS J. RANDALL FreightCar America

HIGH PROFILE: FreightCar America last month announced the appointment of Nicholas J. Randall to COO, e ective June 26. He will report to President and CEO James R. Meyer. Randall has more than 20 years of global experience working in, and leading, engineering and manufacturing operations at world class companies. He currently leads a division of aerospace company Precision Castparts Corporation (PCC), part of Berkshire Hathaway Inc., and previously held senior positions at Alcoa and Jaguar & Land Rover Vehicles.

The Surface Transportation Board (STB) last month appointed

Justin Broyles of R.J. Corman Railroad Group and Robert (Buck) Rogers of CN to the Railroad-Shipper Transportation Advisory Council (RSTAC), established by the ICC Termination Act of 1995. RSTAC focuses on issues of importance to small shippers and small railroads, including railcar supply, rates, competition and procedures for addressing claims, according to the STB. It is charged with “developing private-sector mechanisms to identify, address and prevent obstacles to effective and efficient interstate transportation.” Members provide advice on regulatory, policy and legislative matters to the STB Chairman; Secretary of Transportation; Senate Committee on Commerce, Science and Transportation; and House Transportation and Infrastructure Committee.

Broyles joins RSTAC as a small-railroad representative. As Executive Vice President for Commercial Affairs since 2021, he oversees all Class I corporate relations and directs the commercial efforts for R.J. Corman Railroad Company’s short lines and Storm Team. Broyles has more than 20 years of railroad experience, serving in sales, construction, emergency response and other leadership positions. According to the STB, he is “a proponent of continuous customer service improvement and the advancement of railroad technology.” (Broyles was also recently named Vice Chairman of the American Short Line and Regional Railroad Association’s (ASLRRA) Executive Board of Directors.)

Rogers, Vice President of Petroleum and Chemicals for CN, joins RSTAC as a large railroad representative. He was promoted to his role at the Class I in April 2019, after serving as Senior Director, Mechanical. Rogers has also held the CN positions of Assistant Vice President Petroleum and Chemicals, Director of Sales Petroleum and Chemicals, Director of Regional Sales in Corporate Marketing, and National Account Manager. Based in Homewood, Ill., he has been a railroader for more than 25 years and served in the United States Air Force.

Both Broyles and Rogers will serve threeyear terms.

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Good Hits or Bad Hits? The Determination is Ours

And the hits just keep on coming” was a phrase popularized by 1960s radio announcers to boast that their radio station was going to play one beloved record after another. The 1992 movie “A Few Good Men” popularized a wholly different meaning of the same phrase when Tom Cruise (Lt. Daniel Kaffee) who, at the end of a litany of contentious disagreements with his unwanted co-counsel Demi Moore (Lt. Cmdr. Joanne Galloway), utters those words in a sarcastic response to her assertion that, like it or not, she is coming to Cuba with him for his meeting with Jack Nicholson (Colonel Nathan Jessup).

For the past few months the railroad industry has had to live with the Tom Cruise version of that phrase.

In the aftermath of the East Palestine train accident, six bills ostensibly related to rail safety are being considered by Congress. There are indeed some provisions in these bills that address safety issues relevant to that accident (defect detectors for example). But there is much that has nothing to do with safety and some that are truly counterproductive—crew size mandates being the most glaring.

The bill by Senators Brown and Vance that was considered by the Senate Commerce Committee in May, the Rail Safety Act, is the bill that has received the most attention. There have been some significant changes and improvements to the bill since introduction: After a lengthy collective effort, the committee leadership was willing to work with us in good faith to remove Class II and III railroads from prescriptive legislative text that would have implemented rules that are not relevant for short lines and impractical for them to implement, including proposed new rules on defect detectors, pre-departure car inspections, locomotive inspections and crew size.

That said, due to the interconnected nature of the U.S. freight rail system, short lines are still apprehensive these

new rules would cause significant disruptions for our Class I partners without a significant attendant safety benefit. And if it’s bad for our partners, then it’s bad for us and our shared customers. Additionally, since the legislative text doesn’t prohibit USDOT from expanding the rules beyond it, we remain concerned that short lines would end up being pulled into the rules, regardless of legislative intent.

The legislation also has not incorporated measures that we’ve stated would actually improve short line safety, such as focusing CRISI on freight rail safety projects and increasing support for the Short Line Safety Institute.

On the heels of the Senate Commerce Committee’s markup, the House T&I Committee approved a group of about 20 “supply chain” bills, two of which would increase truck size and weights if they were to make it into public law. The first would establish a five year “pilot program,” with one five-year renewal option, in which an unlimited number of states could opt to increase the weight of a commercial motor vehicle operating on an interstate highway from the current 80,000 pounds to 91,000 pounds.

This is not a “pilot project,” but a de facto increase in national truck weight policy. Ten years spans the average life cycle of two full surface transportation reauthorization bills.

The second bill would increase the permissible weight of an auto transporter from 80,000 pounds by 10% to 88,000 pounds. Changing truck size and weight limits in a piecemeal fashion based on type of truck or commodity or season or specific road or whatever is a slippery slope that never ends.

Short lines teamed up with a broad set of partners, including independent truckers, safety advocates, law enforcement, local government groups and of course the larger railroads to oppose this idea, but we were not successful— yet! We indeed lost this battle, but we intend to win the war.

When short lines struggle to get

enough business to thrive, they double down on what they do best. They hustle, scrap and fight for every carload and bend over backwards to provide world class service to their customers. And we’ll do the same thing on legislation— we’ll double down on telling our unique short line story, explain our focus on safety and safety culture, tell our friends in Congress about the devastating impacts that heavier trucks would have, and go make new friends too.

On May 17 in the midst of all this activity, more than 150 short line representatives met in person with 176 congressional offices in D.C. This event launched the newly minted Short Line Railroad Advocacy Day where Class II and III railroads, suppliers and supporting associations met personally to describe how Congressional actions impact our industry’s business and our ability to serve our shippers who depend on that service for the success of their business. The timing was fortuitous, as it gave short lines an opportunity to get up close and personal with their elected officials at a key moment, and that is the most effective kind of communication we can have with Congress.

We received a lot of great feedback from these meetings, both from the railroaders that participated and from Capitol Hill offices. And we’ll need to do a lot more going forward—both in D.C. and at home. If you’re reading this and have a railroad, now is a great moment to get to work on inviting an elected official to come tour your railroad and hear your story.

You can rest assured that the hits will keep coming—it’ll be up to us to determine whether those are the good hits or the bad hits.

We’re current, are you? FRA Regulations

FRA News:

Department Regulations

Now Includes Part 224

1-6-23

$34.50

49 CFR CFR Parts 40, 219, 240, and 242. This final rule amends the U.S. Department of Transportation’s regulated industry drug testing program to include oral fluid testing. This additional methodology for drug testing will give employers a choice that will help combat employee cheating on urine drug tests and provide a less intrusive means of achieving the safety goals of the program. In order for an employer to implement oral fluid testing under the Department’s regulation, the U.S. Department of Health and Human Services will need to certify at least two laboratories for oral fluid testing, which has not yet been done. The final rule includes other provisions to update the Department’s regulation and to harmonize, as needed, with the Mandatory Guidelines for Federal Workplace Drug Testing Programs using Oral Fluid established by the U.S. Department of Health and Human Services. In addition, this rule amends the FAA, FMCSA, FRA and FTA regulations to ensure consistency within the Department of Transportation and by removing or adjusting references to the word “urine’’ and/or add references to oral fluid, as well as removing or amending some definitions for conformity and to make other miscellaneous technical changes or corrections.

DATES: This final rule is effective June 1, 2023.

Part 215: Freight Car Safety Standards

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