Samson in the temple?

Posted by Fred Frailey
on Thursday, November 02, 2017

So wrote analyst Anthony Hatch in an email to friends today, on news that CSX is backing away from a $145 million investment to help enlarge Howard Street Tunnel in Baltimore and thereby extend double-stack clearances up the Atlantic coast to New York state. That’s another way of saying, as I did to myself: What the heck is going on here?

The decision is clearly one made by CSX chief executive Hunter Harrison. Since coming to the railroad in early March, he has largely redesigned its approach to intermodal haulage. On one hand, he decided to close the intermodal mixing bowl in North Baltimore, Ohio, a hub-and-spoke terminal that took in trains from Chicago, St. Louis, smaller destinations in the Midwest, plus the east coast, and radiated the traffic in every direction. A somewhat similar terminal, to be built in Rocky Mount, N.C., to attract shorter-haul container traffic, was shelved. On the other hand, in place of North Baltimore, he is connecting intermodal terminals largely by having trains swap blocks of containers in places like Connellsville, Pa., and Ashtabula, Cleveland and Willard, Ohio. Some intermodal traffic now runs on scheduled automobile and even manifest trains.

And now Howard Street Tunnel. Double-stack traffic is roughly a third less expensive to handle than single-level containers, and Howard Street stands in the way of double stacking. The enlargement of this tunnel, built in the 1890s beneath downtown Baltimore, was once thought all but impossible. But a $425 million plan was hatched, and the previous CSX management agreed to put in that $145 million. Supposedly, the expected payoff from additional traffic justified the investment.

Harrison obviously feels otherwise. Said a CSX spokesman yesterday: “We determined that the Howard Street Tunnel project proposal no longer justifies the level of investment required from CSX and our public partners at this time.” So what has changed? It’s not the money CSX would put up. Maybe it’s that CSX rethought the revenue potential and concluded there was less to be gained than once thought. After leading the public down this garden path, the railroad owes us a better explanation, don’t you think?

In the absence of that better explanation, I’m reading all sorts of malarkey. The prevailing view in railroad circles—one that the Association of American Railroads endorses—is that gains in intermodal traffic will offset the loss of coal, oil, and general merchandise (boxcar) traffic. And here comes that man from Canada (Tennessee, actually) tearing down the CSX intermodal franchise, the thinking goes. Hence, the jest from analyst Hatch. One retired rail executive writes: “Arrrghhh! Harrison seems hell bent on destroying railroading in the east, if not elsewhere.” A friend of mine claims to see through it all: “You mold CSX to look like an extension of Canadian Pacific’s conveyor belt and then you merge the two because both will be sustained by doing it and Keith [Creel, CP’s chief exec] has been building a large cash pile to help with financing.” Whew! Does anyone now question why I wrote Love in the Time of Hunter a few weeks ago? The man is driving us all nuts.

The entire Maryland congressional delegation has invited Harrison to meet with it and explain the about-face by CSX. Our man in Jacksonville has a political ear made of tin, but I suggest he accept the invitation and lay out his cards—his reasoning why Howard Street now looks like a bad investment—for us all to see.—Fred W. Frailey  

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