Making do with less

Posted by Fred Frailey
on Friday, May 6, 2016

The four big U.S. railroads share the same problem this spring: the urgent need to resize themselves to match the business they have. Coal is an obvious problem. The collapse of this traffic has been swift and unrelenting. Let me give you some numbers. Union Pacific in November of 2014 loaded 28 unit coal trains a day in the Powder River Basin of Wyoming. Last month it averaged but 12 trains a day. Rival BNSF Railway loaded 46 trains a day in the PRB in November of 2014, but last month, a mere 25. On the other side of the country, Norfolk Southern coal loadings have gone from 17 a day in Appalachia in November of 2014 to about 10 a day last month.

But it’s not just coal. The whole world seems awash in about any commodity you can name—grain, oil, natural gas, steel, and probably even golf balls. It makes you wonder what is holding our economy together these days, because about everything railroads handle except new cars is caving. And as for cars, a huge bubble in subprime lending portends a crash in new-car sales when it gets pricked, which it surely will.

This is the environment railroads must live in for now. The interesting thing is, they are reacting, although not always in ways you would prefer. Union Pacific has lowered speeds on its 270-mile, double-track, Centralized Traffic Control-equipped coal corridor from the PRB to North Platte, Neb., from 60 to 40 mph, to save on maintenance costs. Its entire coal network is under review, as it should be. To deal with declines in its carload network, CSX Transportation last year instituted 28-hour scheduling headways on some 150 trains—in other words, Train X originates at midnight on Friday, 4 a.m. on Saturday, 8 a.m. on Sunday and so on, making six starts every seven days.

Now Cindy Sanborn, chief operations honcho of CSX, has bitten another bullet, announcing what CSX calls (somewhat portentously) its “Network for Tomorrow.” As explained by Sanborn, CSX will divide itself into a core network and that core’s feeder lines. The core network will be a triangle: Chicago to New Jersey, New Jersey to Jacksonville, Fla., and Jacksonville to Chicago. She calls this core “high-density, high-velocity corridors.” By implication, the rest of CSX is the feeder network, which won’t get as much maintenance going forward (but will be operated safely, she adds). The goal, Sanborn says, is to shift as much traffic as possible off of the feeder network and over to the core routes, with their longer trains and higher speeds.

Norfolk Southern is going through somewhat the same exercise, I’ve heard. Jim Squires has revealed himself as one tough hombre, telling his people to get moving to resize the railroad for the business that remains or move aside so someone else can.

These are precisely the things that CSX and NS need to be doing if they hope to remain independent. I would not be surprised to see CSX sell the former Conrail main line from Indianapolis to St. Louis to a regional railroad. Other candidates for spinoffs would be trackage south of Orlando and Winter Haven and the Bone Valley phosphate branch network in western Florida. In fact, you could make a case that CSX would be better off selling most of the feeder network to regional lines, whose entrepreneurial energies might produce more business than CSX itself can.

And I have an audacious suggestion for the Powder River Basin railroads. The two corridors could be consolidated into one. All of the BNSF coal traffic now routed through Alliance to Lincoln, Neb., could run on that Union Pacific route from Shawnee Junction, at the south end of the jointly owned Orin Subdivision, to North Platte and then east another 120 or so miles to Grand Island, Neb., where Union Pacific’s Overland Route crosses under the BNSF line to Lincoln.

The point is living within your means. If coal makes a miraculous recovery, the networks in place today can be revived. Until then, make do with less and count the savings.—Fred W. Frailey

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