It's the oil, stupid!

Posted by Fred Frailey
on Sunday, October 26, 2014

Who shot BNSF Railway? What’s the disease eating away at Norfolk Southern? Why is Chicago so screwed up? Whose knife is sticking in the back of CSX Transportation? The answer to all four questions is the same, and so obvious I am embarrassed. We have been in denial about oil.

Crude by rail has been a fun story to follow and write about. But it also is the root of the service collapse and congestion affecting railroads across the northern half of the country today. It’s not something I can prove to the satisfaction of every skeptic, and the very notion that a relatively few trains can so unhinge the rail network is counterintuitive. But . . . hear me out.

Railroads are handling about the same amount of traffic today as in 2006, when carloadings last hit a record. The network today has at least as much capacity as it did eight years ago. So what has changed? Oil is what—those highly visible trains of oil and those almost-invisible trains of 42-foot covered hoppers carrying fracking sand.

The network is in ruins (figuratively speaking) across the northern tier of the United States and operating quite well in the southern portion and up and down the Atlantic and Pacific coasts. Where do the oil trains congregate? Across the northern tier, is where! Where will you not find many oil trains? The answer is: everywhere that railroads are fluid, from North Carolina to Oklahoma and on to California.

And Chicago . . . something has changed, but what? All of my fingers point to oil. CSX is taking five trains a day from BNSF and Canadian Pacific, and NS as many. They bring back the same number of empty trains. Then there’s the tidal wave of fracking sand, much of its originating in northern Illinois and Wisconsin. Each train has to be interchanged, and often as not the receiving railroad isn’t ready and willing. You wonder why so many BNSF locomotives are ending up in New Jersey and Delaware? Because donating its locomotives to the use of the eastern railroads was the only way BNSF knew to get them to take its trains (can’t prove that either, but people with the words “vice president” in front of their names have told me just that).

Yes, I know we had a bad winter, but that ended so long ago it’s no longer a convincing excuse for the mess we have today, in the here and now. And yes, there was a huge harvest of grain in the upper Midwest in 2013; that, too, was a year ago. But neither the curse of winter nor the blessing of a bountiful harvest would have tipped the railroads into lasting chaos if the oil traffic had not so suddenly been thrown into the mix in such a concentrated manner.

This isn’t the story railroads would like you to hear. After all, we’re talking about maybe 3 percent of the traffic. With railroads, sometimes, that’s all it takes. Union Pacific closed satellite yards in Strang and Dayton, Tex., in 1997 and within weeks was in systemwide paralysis. It didn’t help UP to blame God and every other convenient suspect for what happened to it, and failure to quickly undo the closings only prolonged the railroad’s agony.

So if I’ve got your attention, is there anything to be done? I’m surprised there isn’t a special, streamlined protocol for interchanging the loaded and empty trains in Chicago; what I’m told is that each train is an ad hoc event that must be individually negotiated. I am not surprised that Warren Buffet handed Berkshire Hathaway’s checkbook to Carl Ice and Matt Rose, to add infrastructure PDQ, or that Canadian Pacific is spending huge sums to lengthen sidings and put centralized traffic control on the former Soo Line. But I am puzzled why neither CSX nor NS has seemed to share the urgency of the two western railroads.

Finally, this: Would it be so bad—maybe I should say will it be so bad—if pipelines absorbed more of this oil? Think about it.—Fred W. Frailey

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