Is this the new 1997?

When a railroad makes the front page of the Wall Street Journal, it’s almost never the cause for celebration at corporate headquarters. It means you have screwed up big time. Now it is the turn of BNSF Railway to do the front-page perp walk.

For 55 of my 70 years, the problem facing BNSF, namely more business than it can handle, was not on the table for American railroads. It was the other way around. There was way too much capacity, and railroads fought like feral dogs for the scraps they were tossed by shippers.

Things changed about a decade ago. How soon we forget. But that front-page story made me hearken back to 1997, when Union Pacific entered into a stupendous, monumental, self-inflicted traffic gridlock.

There are more differences than similarities. At its peak, 1997’s cataclysmic meltdown affected Union Pacific’s entire system; the Meltdown of 2014 is largely limited to the Chicago-Washington Great Northern Corridor of BNSF (but what a meltdown it is). The 1997 incident, occurring a year after UP bought rival Southern Pacific, was ignited by closure of a satellite yard in Houston that tipped the entire railroad into overload, made worse by the fact that UP was slow to see the looming disaster and way too late to react. BNSF, on the other hand, stands guilty of not expanding its capacity fast enough (its own estimates said it would be a backup carrier of crude oil by now, not the dominant force). Weather was not a factor then, whereas today it is probably the force that broke BNSF’s back in the corridor. UP in 1997 waited weeks to respond to the closure of Strang Yard and its aftermath; BNSF simply cannot throw enough resources into North Dakota-Minnesota-Montana fast enough to overcome the traffic demands and weather conditions.

What’s not different is the reality: You are screwed. BNSF will spend at least the remainder of this year working out of the mess created by this winter and the bountiful flow of business created for it in Great Northernland. The railroad understands this. Its capital budget this year is $5 billion-plus. I remember when the entire railroad industry could manage only $1 billion in capital investments.

This will be the crucible for Carl Ice. In an unbelievable instance of good timing, Matt Rose stepped aside late last year to let Carl, a Santa Fe alumnus, become chief executive officer; Matt remains chairman (and mentor, no doubt). I like Carl Ice. He is a decent and smart fellow, more number-focused and less people-oriented than Matt, but that in itself is meaningless. I’m rooting for Carl to find his way to a promised land, just as I did for UP’s Dick Davidson a quarter century ago. You know BNSF is serious about expanding capacity in the upper Midwest when it sends a track gang to lay a second main track between Minot, N.D., and Glasgow, Mont., atop frozen earth.

To answer the question posed by the title: No, it is not a new 1997, yet. Odds are that the mess will begin to sort itself out, if for no other reason than that spring is waiting to be sprung in the upper Midwest. It also comes down to the leadership capabilities of Carl Ice, by training a mechanical engineer but for many years the railroad’s chief operating officer. I confess to being a glass-is-half-full guy. We’ll know soon enough whether my optimism is warranted. — Fred W. Frailey