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Shippers Hop Aboard Rail (The following story by Peter Krouse appeared on the Plain Dealer website on June 25.) CLEVELAND — Have you noticed a greater number of freight trains rumbling through Cleveland in recent years? Chances are you have. Perhaps on the Norfolk South ern line as it crosses Chester Avenue in Midtown, or maybe along the CSX track as it runs parallel to the Norfolk Southern near University Circle. Shippers across the country have been putting more and more freight on trains as the economics of hauling by rail have become more favorable. The increased traffic has meant strong profits for the railroads. But for many who rely on trains to ship their goods it has been -- at times -- a hassle. Congestion on the tracks and a shortage of rail cars, not to mention rising prices, have all contributed to headaches for shippers and their customers. It has also brought to a head the need for improved rail infrastructure in the United States and perhaps a public-private partnership when it comes to paying for it. Rail's good fortune extends across the spectrum, from the major carriers such as Norfolk Southern and CSX in the East, to the many regionals and short lines. The Wheeling & Lake Erie Railway, which serves northern Ohio and parts of Pennsylvania, West Virginia and Maryland, has seen steady growth turn explosive in the last two years, said Bill Callison, the railroad's chief operating officer. It handled about 115,000 carloads in 2004, while this year it expects to increase volume by about 30 percent to 150,000 carloads. Over that time, employment at the W&LE has jumped more than 10 percent to around 400. The high price of oil and diesel fuel has been a major factor in making railroads more competitive, Callison said, because trains are typically about three times more fuel-efficient than trucks. But the overall strength of the economy, including the demand for bulk commodities such as coal, stone and scrap metal, has contributed, too. Callison estimates that more than 30 customers seeking rail transport have located along W&LE track in Ohio over the last 15 years. Most recently Aurora Plastics put a plant in Streetsboro that's scheduled to open this summer, as is a Polymer Packaging plant in Massillon. The good fortune has filtered all the way down to the tiny Ashtabula, Carson & Jefferson, a 6.3-mile spur off the Norfolk Southern in Ashtabula County. Operator Bob Callahan has fielded half a dozen new business inquiries since February. He hauls a lot of paper to corrugated-box maker Smurfit-Stone Container Corp. and plastic pellets that are transferred to trucks and delivered to nearby plants. Business has been excellent at railroads across Ohio, said Lou Jannazo, chief of project development at the Ohio Rail Development Commission. "It's a great time to be in railroading, and they are at capacity." Full trains create tensions With more freight moving through a rail system that has not been able to grow with demand, there has been occasional tension between railroads and their customers. At Mittal Steel USA in Cleveland, shipments of coke and scrap metal still arrive pretty much on schedule, but the rail car shortage and general rail congestion requires a lot more hustle and coordination to keep on time. Mittal owns a short-line track called the Cleveland Works Railway, that serves the mill and three other companies in the Flats. The CROW, as the short line is known, takes possession of the freight after it's deposited in adjacent railyards by either the Norfolk Southern, CSX or the W&LE. The short line then positions the empties or any outgoing loads for the long-haul railroads to pick up. With certain kinds of rail cars in short supply, the railroads now closely monitor turnaround times. That requires Mittal and the CROW to unload cars as quickly as they can to get them back to the railroads without costly delays. "We are out to make them our friends so they will give us better service," said Dan Hereda, who heads up logistics and Mittal Steel-Cleveland. "And it's working." With greater profits, the railroads have been able to pump a lot more money into infrastructure. $8.3 billion on improvements The seven largest railroads that operate in the United States expect to spend $8.3 billion this year on such improvements as additional track, better switching yards and more locomotives. CSX, for example, is putting in new siding along its main line from Chicago to Florida. Smaller railroads are putting up dough, too. The Wheeling & Lake Erie recently borrowed $25 million to make improvements to its infrastructure that will increase the speed and efficiency of its trains. It also has ordered 150 open-top hopper cars. But not everybody can wait for the railroads to come to their rescue. Scrap dealer PSC Metals Inc. of Mayfield Heights has taken matters into its own hands. It recently acquired 27 cars, leasing 17 and buying 10. The overall shortage has rail car manufacturers working double time. At American Railcar Industries Inc. near St. Louis, the backlog for its tank and hopper cars exceeds 14,000, enough work to last into 2008. The Andersons Inc. near Toledo has tripled its fleet of rental rail cars in the last three years and still has none to spare, said Gary Smith, the company's chief financial officer. The diversified company's rail operations had operating income of only $4 million in 2003, but last year it reached $23 million. But will all the investment and coordination be enough? One of the biggest critics of the railroads is United Parcel Service, which complained to the Surface Transportation Board in Washington, D.C., last year that federal response is needed to address the capacity crunch. One proposal is a rail transportation fund akin to the highway transportation fund that applies gas taxes to road improvements. UPS is the largest corporate customer of the railroads, shipping trailers and containers from U.S. ports to inland terminals where they are attached to trucks and delivered to customers around the country. But the Association of American Railroads, which represents the major railroads, opposes such a tax. It could make the railroads uncompetitive with trucks and barges, said the association's president, Edward Hamberger. Also, bureaucrats and politicians would determine how the money is spent, not the railroads. Hamberger said the association would like Congress to provide tax credits to the railroads when they expand. The industry's problems stem from deregulation, which occurred in 1980. Railroads consolidated and restructured, and a lot of track that was deemed unprofitable was taken out of service. Wall Street pressured the railroads to operate much leaner, said Carl Martland, a senior research associate in the department of civil and environmental engineering at Massachusetts Institute of Technology, and they did. Also, prices rose, but only for a few years. They then began a steady decline in the face of competition from trucking, only to start rising again in 2004. Martland believes Congress should finance more research on rail issues and that ultimately a blueprint for a system that includes multiple tracks, efficient switching yards and both long-haul and short-line railroads should be established. Clearly, the railroads can't be asked to do it all, Martland said. The public should help pay for the benefits of increased rail use, which include less highway congestion, less energy consumption and cleaner air. "The railroads won't invest enough to get the full public benefits," he said. CSX spokesman Gary Sease laid out the economic reality: While railroads may be constrained now, they won't be when the economy cycles downward, and yet the debt on any infrastructure improvements will still have to be paid. There's a saying in the industry, he said. "You don't build the church for Easter Sunday." From BLET Site
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