February 2014 Railway Age Magazine

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February 2014 | www.railwayage.com

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CRUDE OIL CHALLENGE

Moving it safely, profitably

PAssENGER RAILCAR sAfEty stANDARDs M/W fOCUs: tRACk GEOMEtRy LRt ExPANDs IN ONtARIO

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RailwayAge

FEBRUARY 2014

www.railwayage.com Features The Crude Oil Challenge Re-inventing the DOT 111 at high or low speed, a safety need what’s the diagnosis?

Kitchener to waterloo, by lRT

20 27 31 35 40

Departments industry indicators industry Outlook Market People 100 years ago Meetings Products advertising index Classified

31

4 6 8 42 42 42 43 45 46

News/Columns From the editor Update watching washington Short line/ RegionalPerspective Financial edge

2 10 17

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19 48

On the COver BNSF motive power guides a crude oil unit train east near east algoma, idaho.

Photo: Bruce e. Kelly

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Railway Age, USPS 449-130, is published monthly by the Simmons-Boardman Publishing Corporation, 55 Broad St., 26th Fl., New York, NY 10004. Tel. (212) 620-7200; FAX (212) 633-1863. Vol. 215, No. 2.

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February 2014 Railway age 1

RailwayAge

From the Editor William C. Vantuono

Editorial and ExEcutivE officEs Simmons-Boardman Publishing Corp.

55 Broad Street, 26th Fl. New York, NY 10004 212-620-7200; Fax: 212-633-1863 Website: www.railwayage.com

Crude by rail, here to stay

D

on’t be misled by all the controversy surrounding crude by rail, specifically, tank car and operational safety.

It’s fair to say that the industry may have been blindsided by last year’s chain of bad accidents involving CBR trains—a series of isolated incidents that called attention to the fact that, as far as oil obtained through fracking, we’re dealing with a commodity more dangerous than previously thought.

CBR, as Contributing Editor Bruce Kelly points out in our cover story (p. 20), is here to stay. There are several reasons for this.

As one analyst put it, “We believe that rail is a permanent solution to stranded crude oil production in North America, and all of the Class I’s are poised to benefit from increased crude production over the next few years. . . . Building a rail terminal or upgrading track is significantly less costly than building a pipeline. A rail oil transloading facility typically costs a fraction of the $1-billion-plus pipeline capital cost (if an operator can get environmental approvals), and refiners or [energy companies] pay the majority of costs for a new rail transload facility. The rail capital commitment is minimal for terminals, and capital spent on track upgrades or maintenance typically benefits other traffic moves besides crude.”

We have serious issues to deal with, not the least of which is a pending government rulemaking that will define how new DOT 111 tank cars are to be constructed, and what to do with all the older cars that don’t meet the safety requirements the industry voluntarily implemented in 2011 (p. 27).

No doubt, a solution will be found, and the railroads will continue to move crude oil, profitably—and safely.

CBR conference in the works I’d like to call your attention to a new Railway Age conference we’ve scheduled for this summer: Crude By Rail, at the Keybridge Marriott, Arlington, Va., June 12-13. On the agenda: CBR operations and

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growth potential. Capacity enhancements for increased CBR traffic. Existing and planned safety regulations. Tank car design and construction. Inspection and identification of various grades of crude. Proper handing of CBR at origin and destination points. Dealing with dangerous byproducts of hydraulic fracturing. Insurance and liability considerations. First-responder issues in the event of an accident.

We’re developing this conference for railroad transportation and operating personnel, carbuilders and component suppliers, consultants, government personnel, crude oil producers and refiners, and first responders. Details to follow—be sure to check the Railway Age website.

CSX back on the track This column wouldn’t be complete without a mention of CSX’s successful NASCAR program, now in its third year.

After a season promoting public safety around railroad tracks with David Ragan in 2013, CSX will again partner with the race-winning driver and the Front Row Motorsports No. 34 team for the 2014 Sprint Cup Series season. The partnership will include primary sponsorship of Ragan’s Ford Fusion for four races: Daytona International Speedway Feb. 23, Darlington Raceway April 12, Michigan International Speedway Aug. 17, and Richmond International Raceway Sept. 6.

Ragan’s car will once again sport CSX’s blue and gold locomotive colors and “Play It Safe Around Railroad Tracks” graphics.

CSX will also be a major associate on the No. 34 at Pocono Raceway Aug. 3 and at Charlotte Motor Speedway Oct. 11. The familiar “I Brake for Trains” bumper sticker will once again be on the rear bumper of Ragan’s racecar for all 36 races of the Sprint Cup schedule. Boogity boogity boogity! Let’s go railroadin’, boys!

ARTHUR J. McGINNIS, Jr., President and Chairman JONATHAN CHALON, Publisher jchalon@sbpub.com WILLIAM C. VANTUONO, Editor-in-Chief wvantuono@sbpub.com DOUGLAS JOHN BOWEN, Managing Editor dbowen@sbpub.com LUTHER S. MILLER, Senior Consulting Editor lmiller@sbpub.com CONTRIBUTING EDITORS: Alex Binkley, Roy H. Blanchard, Lawrence H Kaufman, Bruce E. Kelly, Anthony D. Kruglinski, Ron Lindsey, Ryan McWilliams, Jason H. Seidl, David Thomas, John Thompson, Frank N. Wilner Creative Director: Wendy Williams Art Director: Sarah Vogwill Corporate Production Director: Mary Conyers Production Manager: Jessica Cajas Production Director: Eduardo Castaner Marketing Director: Erica Hayes Conference Director: Michelle Zolkos Circulation Director: Maureen Cooney WEstErn officEs 20 South Clark Street, Suite 1910, Chicago, IL 60603 312-683-0130; Fax: 312-683-0131 Engineering Editor: Mischa Wanek-Libman mischa@sbpub.com Assistant Editor: Jennifer Nunez jnunez@sbpub.com George Sokulski, Associate Publisher Emeritus gsokulski@sbpub.com intErnational officEs 46 Killigrew Street, Falmouth, Cornwall TR11 3PP, United Kingdom Telephone: 011-44-1326-313945 Fax: 011-44-1326-211576 International Editors: David Briginshaw, Keith Barrow, Kevin Smith customEr sErvicE: 800-895-4389 Reprints: PARS International Corp.

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Industry Indicators SHORT LINE AND REGIONAL TRAFFIC INDEX

TRAFFIC ORIGINATED

FOUR WEEKS ENDING DECEMBER 28, 2013

CARLOADS

mAJOR U.S. RAILROADS

BY COmmODITY Grain Farm Products ex. Grain Grain Mill Products Food products Chemicals Petroleum & Petroleum Products Coal Primary Forest Products Lumber and Wood Products Pulp and Paper Products Metallic Ores Coke Primary Metal Products Iron and Steel Scrap Motor Vehicles and Parts Crushed Stone, Sand, and Gravel Nonmetallic Minerals Stone, Clay & Glass Waste & Nonferrous Scrap All Other Carloads TOTAL U.S. CARLOADS

DEC. ’13 80,458 3,283 38,416 24,477 116,938 57,752 423,218 6,077 11,870 23,512 24,012 14,511 38,443 15,099 62,148 64,607 16,798 25,823 12,235 15,626 1,078,903

DEC. ’12 72,403 3,771 37,640 24,833 115,753 49,266 446,377 5,830 11,941 23,934 24,023 15,258 38,920 16,913 59,563 65,226 15,607 26,149 11,655 15,739 1,088,881

% CHANGE 11.1% -12.9% 2.1% -1.4% 1.0% 17.2% -5.2% 4.2% -0.6% -1.8% 0.0% -4.9% -1.2% -10.7% 4.3% -0.9% 7.6% -1.2% 5.0% -0.7% -0.9%

283,792

299,376

-5.2%

1,362,695

1,388,257

-1.8%

CARLOADS

Chemicals Coal Crushed Stone / Sand / Gravel Food & Kindred Products Grain Grain Mill Products Lumber & Wood Products Metallic Ores Metals & Products Motor Vehicles & Equipment Nonmetallic Minerals Petroleum Products Pulp, Paper & Allied Products Stone, Clay & Glass Products Trailers / Containers Waste & Nonferrous Scrap All Other Carloads

COmBINED U.S./CANADA RR

FOUR WEEKS ENDING DECEMBER 28, 2013

INTERMODAL

mAJOR U.S. RAILROADS

BY COmmODITY TRAILERS CONTAINERS TOTAL UNITS

DEC. ’13 128,509 830,269 958,778

DEC. ’12 114,041 773,995 888,036

% CHANGE 12.7% 7.3% 8.0%

6,338 190,490 196,828

5,539 183,461 189,000

14.4% 3.8% 4.1%

134,847 1,020,759 1,155,606

119,580 957,456 1,077,036

12.8% 6.6% 7.3%

COmBINED U.S./CANADA RR TRAILERS CONTAINERS TOTAL COmBINED UNITS

Source: Monthly Railroad Traffic, Association of American Railroads

AVERAGE WEEKLY U.S. RAIL CARLOADS: ALL COmmODITIES (not seasonally adjusted)

% CHANGE 2.3% 0.3% 5.6% -3.0% 2.0% -0.4% -2.1% 110.4% 7.2% 25.2% 70.0% 5.1% 11.8% -5.9% 8.7% -1.7% 1.6%

DECEmBER 2013 - 349,676 DECEmBER 2012 - 332,002 290,000 300,000 310,000 320,000 330,000

340,000 350,000 360,000 370,000 380,000

Copyright © 2014 All rights reserved.

RAILROAD EmpLOYmENT, CLASS I LINEHAUL CARRIERS, DECEmBER 2013 (% ChANGE FROM DECEMBER 2012)

CANADIAN RAILROADS TRAILERS CONTAINERS TOTAL UNITS

ORIGINATED DEC. ’12 41,742 23,577 22,451 12,393 23,532 6,688 8,861 4,464 17,684 9,773 1,372 1,919 16,845 11,231 38,753 10,864 79,853

TOTAL CARLOADS, DECEmBER 2013 VS. 2012

CANADIAN RAILROADS ALL COmmODITIES

ORIGINATED DEC. ’13 42,682 23,636 23,703 12,021 24,010 6,664 8,674 9,394 18,955 12,240 2,333 2,016 18,835 10,568 42,134 10,680 81,181

BY COmmODITY

Transportation (train and engine) 66,246 (1.15%)

Executives, Officials, and Staff Assistants 9,862 (-0.13%)

Professional and Administrative 13,887 (-1.42%)

TOTAL EmpLOYEES: 162,810 % CHANGE FROm DEC. 2012: 0.10% Transportation (other than train & engine) 6,656 (-1.63%)

Maintenance of Equipment and Stores 29,744 (-1.42%)

Maintenanceof-Way and Structures 36,415 (0.43%)

Source: Surface Transportation Board

EmpLOYmENT Up YEAR-OVER-YEAR, DOWN FROm NOVEmBER Figures released by the Surface Transportation Board show Class I railroads employed 162,810 people in mid-December 2013, up 0.10% from December 2012, but down 0.24% from November 2013.

Transportation (train and engine), up 1.15%, and Maintenance of way and structures, up 0.43%, were the only two categories gaining ground year-over-year. Maintenance of way and structures paced the monthly decline from November, down 2.05%.

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February 2014

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Industry Outlook

Tank cars drive 4Q production, backlog Fourth-quarter railcar orders, deliveries, and backlogs showed robust activity, according to Railway Supply institute american Railway Car institute (aRCi) data released last month. Tank cars continued to show robust activity. industry orders for the fourth quarter were 14,856, of which 4,916 were tank cars and 9,949 were other freight cars. That was up 3,799 cars, or 34%, from the 11,066 on order in the fourth quarter of 2012, and also up 2,112 cars, or 16.5%, from the third quarter 2013 total of 12,753. Deliveries for the fourth quarter totaled 15,776, up 3,961, or 33.5%, from the 11,815 delivered in fourth-quarter 2012, and also up 3,129, or 24.8%, from third-quarter 2013’s total of 12,647. within those deliveries, 8,440 were tank cars—the largest single-quarter tank car delivery number ever, besting 3Q13’s 7,589. The backlog at the end of the fourth quarter (and the 2013 year) was 72, 937 units, down 1% sequentially from the 3Q13 backlog of 73,848, although the mix shifted toward cars other than tank cars.

Court OKs MTA FRA amends track payroll mobility tax inspection regs New york State’s Court of appeals has upheld the payroll mobility tax used to help fund the Metropolitan Transportation authority (MTa), denying a repeal of the tax sought mostly by long island political officials.

The challenge to the tax, levying 4 cents on every $100 of payroll, previously was upheld by a long island Supreme Court justice but overturned last June by the state’s appellate Division. Nassau County executive edward Mangano said the Court of appeals decision, while disappointing, still represented a victory for his constituents, since the challenge to the tax has prompted changes in its structuring. MTa said “removal of the tax’s revenues would have had a catastrophic impact” on the region’s economy and transit operations.

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The Federal Railroad administration last month issued amended regulations contained within its Federal Track Safety Standards that govern rail inspections. The amendments “will help identify rail flaws and further eliminate the risk of derailments,” FRa said. The regulations require performance-based inspections, “a process designed to minimize rail defects that will generally result in an increase in tests performed over a designated area of track.” FRa is “promoting the safety of railroad operations by enhancing rail flaw detection processes,” seeking to set minimum qualification requirements for rail flaw detection equipment operators, and revising requirements for rail inspection frequencies, rail flaw remedial actions, and rail inspection records.

The National Transportation Safety Board, in coordination with the Transportation Safety Board of Canada, last month issued a series of recommendations to the Federal Railroad administration (FRa) and the Pipeline and Hazardous Materials Safety administration (PHMSa) to address the safety risks of crude by rail (CBR). The recommendations, though not unusual or groundbreaking, suggest increased cooperation among U.S. and Canadian regulatory bodies on CBR. NTSB and TSB issued three recommendations to FRa and PHMSa. The first would require expanded hazardous materials route-planning for railroads to avoid populated and other sensitive areas. The second is to develop an audit program to ensure that railroads moving petroleum products have adequate response capabilities to address worst-case discharges of the entire quantity of product carried on a train. The third is to audit shippers and railroads to ensure that they are properly classifying hazardous materials in transportation and that they have adequate safety and security plans in place. The recommendations are contained in NTSB Safety Recommendation letters R-14-001003 and R-14-004-006.

NTSB has investigated several accidents involving flammable liquids transported in DOT-111 tank cars, including a June 19, 2009 derailment in Cherry Valley, ill., after which the agency issued several safety recommendations to PHMSa regarding what it says is “the inadequate design and poor performance of DOT-111 tank cars.”

Since October 2011, all DOT 111s have been built to a voluntary standard—aaR CPC-1232—with stronger steel, head shields, topfitting rollover protection, double-shelf couplers, and bottom skid protection.

(Details, p. 27.)

William C. Vantuono

NTSB, TSB issue joint CBR safety recommendations

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Market

Bombardier gets BART add-on order for 365 cars Bombardier Transportation will supply Bay area Rapid Transit (BaRT) with an additional 365 railcars, part of BaRT’s “Fleet of the Future,” through a contract worth roughly $639 million. The contract is part of an option agreed to by the parties in June 2012, Bombardier noted, and brings the number of cars being built to 775, worth about $1.5 billion.

North America MARYLAND (DOT): Has culled down prospective private consortia willing to build the 16-mile, $2.2 billion Purple line light rail transit project from six to four groups.

MARYLAND (MARC): approved a $13 million contract with wabtec Corp. subsidiary wabtec Railway electronics to install Positive Train Control (PTC) equipment on 32 MaRC locomotives and 30 cab cars, as well as maintenance of the equipment through 2017.

MBTA: awarded Keolis Commuter Services an eight-year, $2.68 billion contract to operate MBTa regional rail passenger service for the Bay State. Two extension options of two years each could ratchet the total value to $4.3 billion.

ST. LOUIS LOOP TROLLEY: Purchased two gOMaCO-built vintage trolleys from Portland’s TriMet for $80,000, 8

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February 2014

anticipating use for service on a 2.2-mile line, interfacing with Metrolink light rail transit service.

Worldwide APPENZELL RAILWAYS (SWITZERLAND): awarded Stadler a contract worth roughly $6.6 million to supply seven Tango low-floor light rail transit vehicles.

GYSEV (HUNGARY): awarded Siemens a $42 million contract to supply five Desiro Ml electric multiple-units (eMUs) for regional services between Hungary and austria.

MTR CORP. (HONG KONG): awarded two contracts to supply new trains and refurbish existing vehicles for the eastwest Corridor of Hong Kong’s Shatin -Central link (SCl), due to open in 2018. CNR Changchun Railway Vehicles, China, will supply 14 new eight-car trains for the line in a deal worth $150 million. a Japanese consortium of itochu, Kinki Sharyo, and

Kawasaki has been awarded a $152 million contract to supply 36 new cars and upgrade 348 existing vehicles, which are used on the west Rail, east Rail, and Ma On Shan lines.

SJ (SWEDEN): Placed a $200 million contract order with aBB to install electrical equipment on its fleet of 36 X2000 trains, as part of a $510 million project to refurbish the 125-mph tilttrain equipment.

STUTTGART TRAMWAYS (GERMANY): Ordered an additional 20 Tango S-DT8.12 high-floor light rail vehicles from Stadler Pankow, exercising an option from an initial contract for 20 vehicles that was signed in January 2010. The first vehicles in the option order are to be delivered in 2016.

WARSAW TRAMWAYS: Signed a $54.8 million with Pesa, Poland for 30 type 134N Jazz low-floor light rail transit vehicles, which will be used on lowerdensity routes in the nation’s capital.

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Update Supply BriefS Savage expands services in Western Canada

Class I earnings

2013 another record year

Savage, a provider of bundled supply chain management services for electric power generation, coal production, oil and gas, refining, agriculture, chemical, mining, and manufacturing, has expanded its CBR (crude by rail) and truck transportation for crude oil services in western Canada. Two new terminals in Unity, Sask., and Reno, alb., offer a combined CBR transload capacity of 30,000 barrels per day (bpd), with direct access to Class i rail service. The Unity Petroleum Rail facility, providing direct access to Canadian Pacific, entered service last year; the Reno facility opens this month to serve CN.

Trinity industries closes leased railcar sale Trinity industries, inc. last month closed the sale of the second tranche of leased railcars to element Financial Corp., under a newly formed strategic railcar alliance announced last December.

Trinity subsidiary Trinity industries leasing Co. will act as servicer of the railcars sold to element per the terms of the alliance, operating as TrinityRail asset Management Co., or TRaMCO. The sale consisted of a portfolio of existing leased railcars from Trinity’s lease fleet with a value of approximately $396 million. The profit recognized from the sale in the first quarter of 2014 is expected to be between $1.00 and $1.10 per share. Trinity said it will not have any remaining ownership interest in the leased railcars sold to element.

Combined with the first sale of leased railcars executed last month, Trinity has sold a portfolio of leased railcars with a value of approximately $501 million from its lease fleet under the alliance.

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W

hether or not there really is a “War on Coal,” North American Class I railroads continue to signal that they won’t overly dwell on the issue, as fourthquarter and full-year 2013 earnings reports made abundantly clear.

Records continue to be broken, though in a few cases, earnings fell slightly short of analyst expectations.

A resurgent Canadian Pacific, charging ahead under the leadership of President and CEO E. Hunter Harrison, set numerous records for both fourth quarter and full-year 2013, and offered guidance suggesting continued improvement in 2014. CP reported fourth-quarter earnings of C$82 million, or 42 Canadian cents per diluted share, compared with C$15 million, or 8 Canadian cents per share, in the fourth quarter of 2012, and a record.CP’s fourth-quarter operating ratio also set a record, at 65.9% an 890 basis point improvement, the company said.

Revenue for the quarter was C$1.6 billion, up 7% from the fourth quarter of 2012 and setting another quarterly record.

CP said its full-year 2013 results included adjusted net income of C$1.1 billion, or C$6.42 per diluted share, up 48% from 2012, on revenue of C$6.1 billion, up 8% from 2102 and yet another company record. CP’s operating ratio for 2013 was 69.9%, up 710 basis points and, again, “an all-time record.”

“Once again, Canadian Pacific and its outstanding team of railroaders delivered solid results this quarter, closing a historic year with recordsetting operational and financial performance,” said Harrison.

“This journey is far from complete,” Harrison added. “Riding this positive momentum, I fully anticipate that 2014 will be another year of solid returns for our shareholders.” CP expects earnings per share to rise 30% above 2013 levels, on expected revenue growth of 6% to 7%, and also expects to achieve an operating ratio of 65% or lower.

CSX Corp. reported fourth-quarter earnings of $426 million, or 42 cents per share, down slightly from $449 million, or 44 cents per share, in the fourth quarter of 2012, a penny short of Wall Street analyst expectations.

CSX said intermodal and merchandise market segments paced fourth-quarter revenue of $3.0 billion, up 5% from 2012’s fourth quarter, and also just shy of analyst expectations of $3.01 billion. CSX said it was pleased by the gains it notched despite what it described as “challenging winter weather at the end of the quarter.” Coal volume fell 5%, while coal revenue fell 9% in the quarter compared with the year-ago period.

“Supported by the strength of an expanding economy, we delivered 6% volume growth in the quarter, despite another sharp decline in coal,” said Chairman, President, and CEO Michael J. Ward.

For 2013 overall, CSX net earnings were $1.83 per share, up slightly from $1.79 per share in 2012. Revenue rose 2% in 2013 to a record $12.0 billion, operating income remained stable at $3.5 billion, and CSX’s operating ratio increased slightly to 71.1%, compared with 70.6% in 2012.

Norfolk Southern Corp. reported record fourth-quarter net income of $513 million, or $1.64 per diluted share, up 24% from $413 million, or $1.30 per diluted share, earned a year prior. Revenue of $2.9 billion in the quarter was up 7% from a year ago.

Norfolk Southern’s operating ratio improved 5% to 69.4%.

“Strong intermodal, chemical, automotive, and agricultural shipments more than offset declines in coal traffic to drive total volumes up 4%” during the fourth quarter, NS said.

Also releasing full-year results for 2013, Norfolk Southern reported revenue of $11.2 billion, up 2% from 2012, and net income of $1.9 billion, up 9% in 2013 from the prior year. Diluted earnings per share of $6.04 rose 12% from 2012, while the railroad’s operating ratio improved 1%, to 71.0%.

Union Pacific notched fourth-quarter earnings of $1.17 billion, or $2.55 per share, up 13% from $1.04 billion, or $2.19 per share, in the fourth quarter of 2012. Earnings per share easily exceeded Wall Street analyst estimates of $2.49. Revenue of $5.63 billion, up

7.2% from $5.57 billion a year ago, also exceeded estimates.

UP President and CEO Jack Koraleski said the railroad saw higher overall volume for the first time in six quarters, even as coal shipments were “significantly weaker” in the fourth quarter.

Growth in agricultural, automotive, and industrial products, and intermodal offset coal’s decline. Koraleski also said volume growth and pricing gains helped

Growth in other traffic helped offset continued declines in coal volume. the company post a record fourthquarter operating ratio of 65%.

Kansas City Southern reported fourth-quarter net income of $114 million, or $1.03 per diluted share, up 12% from $93 million, or 83 cents per diluted share, in the fourth quarter of 2012, based on record fourth-quarter revenue of $616 million. KCS noted its operating ratio for the quarter was 68.1%, a 1.4-point improvement from fourth quarter 2012. Carload volumes rose 2%. Petroleum revenue grew 2%, while Energy revenue declined by 17% compared to the prior year, primarily due to a decline in utility coal shipments.

For full-year 2013, KCS revenue was a record $2.4 billion, up 6% over 2012. Full-year operating income was $739 million. KCS’s operating ratio for the year was 68.8% compared with the adjusted operating ratio of 69.9% in 2012, a 1.1 point improvement.

Yet, immediately after KCS reported its earnings, its stock price fell 15%, temporarily pulling down other rail stocks.

Cowen and Company Managing Director and Railway Age Contributing Editor Jason Seidl attributed KCS’s one-day stock slide to investors perceiving the company’s “dissapointing” guidance “as a retraction of elements of its growth story.” He said that though “some of the reasons behind the tempered outlook are out of the company’s control . . . the guidance

would translate to a 2014 EPS of roughly $4.58, well below our and the consensus estimates at the time of the earnings release of $5.10 and $5.02, respectively. Another subdued element of the guidance was management’s statement that a return to 20% growth beyond 2014 may not be feasible.”

“Any portion of the decline in other rail stocks that can be attributed to KCS’s quarterly results, rather than overall market weakness, may be an overreaction,” Seidl added.

As of late January, KCS stock was rebounding, along with shares of the other Class I’s. A federal government report showing 4% U.S. economic growth in fourth-quarter 2013 no doubt helped boost investor confidence in the overall market.

CN gained in 2013’s final quarter over the comparable period in 2012 on record revenue, but notching fullyear earnings lower than that of 2012.

CN fourth-quarter net income was C$635 million, or 76 Canadian cents per diluted share, up from C$610 million, or 71 Canadian cents per diluted share, in the fourth quarter of 2012.The company’s fourth-quarter operating ratio rose by 1.2 points to 64.8%.

CN touted record fourth-quarter revenue of C$2.74 billion, up 8% from the fourth quarter of 2012. Revenue increased for petroleum and chemicals (up 22%) and intermodal (11%), among others, while coal revenue fell 9%.

For the full year, net income of C$2.6 billion, or C$3.09 per diluted share, fell short of 2012’s total net income of $2.7 billion, or C$3.06 per diluted share. CN’s operating ratio for the full year was 63.4%, compared with 62.9% in 2012.

CN President and CEO Claude Mongeau said, “CN’s agenda of Operational and Service Excellence delivered record volumes and revenues in 2013.” He added, “CN sees good opportunities in 2014 in a number of markets, including intermodal, oil- and gas-related commodities, Canadian and U.S. grain, and commodities related to the recovery in the U.S. housing market.”

February 2014 Railway age 11

Update For Sasser Family Holdings, 85 years of growth

Chicago, Ill.-based Sasser Family Holdings, a diversified company that consists of Chicago Freight Car Leasing, CF Rail Services North America Division, CF Asia Pacific Pty. Ltd.

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Railway Age February 2014

(parent company of CFCL Australia and CF Rail Services Australia Division), Union Leasing, and NxGen Rail, in 2013 celebrated 85 years in the transportation industry.

A fourth-generation, privately held company, Sasser Family Holdings describes itself as an asset services and management company, though its most recent endeavor involves high-tech, high-speed rail inspection services (photo, above, and track geometry story, p. 35) through NxGen Rail.

Fred H. Sasser, grandfather of Chairman and CEO Fred R. Sasser, started the company in Chicago in 1928 as Central West Refrigerator Dispatch, after leaving Mather Stock Car Company. Central West provided refrigerated rail services for local railroads.

The stock market crash and the onset of the Great Depression hit the year after Sasser founded his company, but he managed to weather the economic tough times “by finding new markets in converting boxcars and reconditioning railcar parts,” his grandson recalls. “Since then, each successive generation of our family has found innovative ways to grow the company and improve services.”

Robert Sasser, father of Fred R. Sasser, graduated from Purdue University in 1939 and joined the company following service in the U.S.

Army Transportation Corps during World War II. Robert saw an opportunity to expand the company’s railcar fleet by purchasing and refurbishing large quantities of idle military rolling stock into usable container cars.

Fred R. Sasser, a Boilermaker like his father (Purdue Class of 1972, B.S., Mechanical Engineering), joined the company in 1973 and became president in 1981, chairman in 1983. He continued the company’s expansion as it acquired, in 1989, Union Leasing, which provides motor vehicle financing and fleet management services to corporate, rental agency, and government customers; and in 1998 formed Sydney, Australia-based CFCL Australia Pty Ltd., a provider of locomotive and rolling stock leasing services.

This Sasser subsidiary, along with freight car repair and maintenance provider CF Rail Services Australia Division, fall under the CF Asia Pacific Pty. Ltd. umbrella.

Incorporated in 2010, CF Rail Services North America Division has facilities in Columbus, Miss. (CF Rail Services Columbus); East Chicago, Ind. (Hoosier Railcar); Meridian, Miss.

(Mississippi Railcar); Waycross, Ga. (Waycross Railcar); DeQueen, Ark.(CF Rail Services DeQueen/Valient); Longview, Wash. (CF Rail Services Longview); and Schaumberg (CF Rail Services Field Services). This Sasser subsidiary provides running repair and program work services to railroads, private car owners, and shippers.

Among the company’s diversified rolling stock assets are ballast cars, container flats, covered hoppers, crew cars, flat cars, grain hoppers, mill gons, open-top hoppers, twin-pack ore hoppers, tank cars, pressure differential covered hoppers, and locomotives.

Sasser Family Holdings president and chief operating officer is Shad Peterson (husband of Fred R. Sasser’s daughter, Rebecca). Since 2008, the company has grown from 210 employees to 500.

“We look forward to a future as illustrious as our past,” says Fred R. Sasser.

Amtrak, CHSRA issue joint RFP for HSR trainsets Amtrak and the California High Speed Rail Authority (CHSRA) on Jan. 24, 2014 jointly issued an RFP (Request For Proposals) for high speed trainsets that will be “essential to meeting Amtrak’s critical short-term need to expand the capacity of its current Northeast Corridor high speed service and meeting the long-term operational needs of both Amtrak and the CHSRA.” Amtrak is seeking up to 28 high speed trainsets, each with between 400 and 450 seats, that can meet or exceed current Acela Express trip-times on the existing NEC infrastructure between Washington, New York, and Boston. CHSRA is seeking an initial order of 15 trainsets with a minimum of 450 seats that can meet its planned trip-time requirements for service from the San Francisco Bay Area to Los Angeles on what is planned as mostly new infrastructure.

Only current manufacturers of high speed rail equipment, which Amtrak and CHSRA define as “manufacturers with equipment in commercial operation at speeds of at least 160 mph (257 kph) for at least two years,” will be eligible to submit a bid.

Proposals are due May 17. A builder is expected to be selected by year’s end.

CHSRA requires operation at speeds

of a minimum of 200 mph (324 kph), similar to what Amtrak expects it will need to realize its “Vision for High-Speed Rail” on the NEC. Amtrak said it initially intends to operate the new trainsets at peak speeds of 160 mph “because that is the expected maximum allowable speed permitted by the NEC infrastructure at the time these trainsets will be delivered.

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Update UP: New Laredo-Memphis intermodal/auto service

Union Pacific has initiated a new intermodal service between Laredo, Tex., and Memphis, Tenn., “supporting growing transportation needs for the automotive manufacturing and intermodal marketplaces.”

“This industry-leading, third-morning service connects businesses in the southeastern United States and Mexico,” UP said.

“As the automotive industry continues to rebound and shift production to North America, manufacturers increasingly are locating vehicle production and

auto parts distribution facilities near where they are most likely to be consumed or purchased,” UP added.

“Intermodal shipping primarily involves transporting consumer products, which are increasingly produced in Mexico.

The Laredo-Memphis rail service connects manufacturers located in Mexico with retail storefronts and distribution centers in the southeastern U.S.” “The development of this LaredoMemphis service lane represents Union Pacific’s commitment to creating innovative products and services to

meet the evolving needs of our automotive customers,” said UP Vice President Automotive Linda Brandl.

“With a truck-competitive transit time, this service allows our automotive manufacturing customers to convert truck shipments to rail with minimal impact to their on-hand inventory of auto parts and the customized racks required to ship them.”

“The intermodal service between Laredo and Memphis is a great addition to the unparalleled Mexico market access Union Pacific offers its intermodal customers,” said UP Vice President Intermodal John Kaiser. “This new offering combines the industry’s fastest intermodal service with container programs that serve all major U.S. and Canadian markets, providing customers with unmatched service and capacity.”

UP noted that it is the only railroad serving all six Mexico gateways.

W o r l d ’s L a r g e s t C r a n k s h a f t M a n u f a c t u r e r a n d R e - M a n u f a c t u r e r

H e r m i t a g e , PA U S A 1 6 1 4 8 Te l e p h o n e 1 - 7 2 4 - 3 4 7 - 0 2 5 0 w w w . E l l w o o d C r a n k s h a f t G r o u p . c o m 14

Railway age February 2014

Gov. Cuomo backs Metro-North line to Penn Station New York Gov. Andrew Cuomo, considered by many to be lukewarm at best in his support for rail transit improvements in the Empire State, gave his support last month to MTA Metro-North Railroad New Haven Line access to New York Penn Station.

The governor, giving his State of the State speech in Albany, N.Y., justified the commitment based in part on the positive redundancy such access would offer New York metropolitan area rail service, particularly during emergencies, such as Superstorm Sandy in October 2012. Improved travel access and travel times to Manhattan’s West Side, and to Connecticut points, from the northeastern Bronx also were cited as reasons for the support.

Under the plan, some Metro-North New Haven Line trains would access Penn Station via Amtrak’s Hell Gate Line, a portion of the Northeast

Corridor used by Amtrak trains and some freight service. Metro-North initially would add stations in Co-op City, Morris Park, Parkchester, and Hunts Point in the Bronx, all northeast of Manhattan. A Metro-North public presentation to Co-Op City residents in the Bronx in September 2012 suggested travel time between the huge residential complex and Penn Station would be reduced from nearly an hour to just 27 minutes.

Metro-North M-8 electric multipleunit (EMU) trains, and newer M-9 EMUs, would likely require adjustable third-rail shoes to traverse a portion of MTA Long Island Rail Road (LIRR) right-of-way. LIRR trains utilize overrunning third-rail shoes, while Metro-North M-8 cars use underrunning shoes, as well as pantographs/catenary on most of the New Haven Line. Amtrak’s Hell Gate Line is also under wire.

Protests by some LIRR advocates, as well as silence from LIRR itself, have put the proposal at some political risk in recent years. But supporters of the plan suggest it is in essence a quid pro quo for LIRR’s own looming entry into Grand Central Terminal through East Side Access, and in any event is a more efficient use of existing infrastructure.

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February 2014 Railway age 15

Update

A New Year for Rail Operations and Infrastructure

The New England Railroad Club invites members, industry professionals, and their guests to join us in Worcester, Massachusetts, for our annual Rail Forum & Expo. This one-day event will focus on how innovation and expansion in the New England region is helping to move the rail industry forward.

2013 EASTERN REGION RAIL CROSSING CONFERENCE & EXPO Tuesday, March 25th

DCU Center • Worcester, MA 2014 Expo HIgHlIgHTs Seminars: • EpA’s locomotive Engine Rule - How it affects your motive power • positive Train Control Today - How the Northeast Corridor has set the benchmark for future PTC Systems • passenger operations in New England Expansion and interaction with freight railroads

Exhibitor Pavilion Equipment Display & Demonstrations Networking Reception & Dinner Engineering & Transit Night Dinner Keynote: Richard A. Davey Secretary and Chief Executive Officer, Massachusetts Department of Transportation

Tickets & Information: www.nerailroadclub.com 16

Railway age February 2014

Ridership gains buoy LA Expo Line backers

The first phase of Los Angeles’ Expo Line, which opened in April 2012, has matched ridership projections of 27,000 daily riders forecast for 2020. December 2013 weekday ridership on the line averaged 27,360.

Exposition Rail Authority Chief Operating Officer Samantha Bricker said much of the ridership comes from the numerous entertainment venues and institutions that are along the way, like Staples Center and the University of Southern California.

Bricker also said the line draws a lot of people from the Westside. A 600-space park-and-ride lot at the Culver City station—the furthest west spot on the Expo Line so far— regularly fills to capacity in the morning.

Los Angeles County Metropolitan Transportation Authority (LCAMTA) currently is overseeing Phase 2 construction work on the Expo Line, designed to extend the line’s western terminus from Culver City to Santa Monica in 2015. LACMTA expects 64,000 weekday riders on the full line by 2030.

Last November, the Exposition Metro Line Construction Authority announced that Phase 2 was more than 50% completed. Work has proceeded despite efforts to halt the project from anti-rail citizens groups, fearful of disruption to existing automotive traffic flows, perceived dangers to pedestrians (particularly school children), and an overall belief that light rail transit is either untested or unneeded.

LACMTA last month also marked the beginning of construction of yet another LRT project, the 8.5-mile Crenshaw Line. The $2 billion line links and overlaps with other LRT services and approaches – but does not quite reach—Los Angeles International Airport, a flaw area critics have lamented. Federal funding of about $700 million is aiding the project.

“This is a day that Angelenos deserve, a great day for Los Angeles,” Mayor Eric Garcetti said as construction began.

Watching Washington FRank n. wilneR

Send iron horses to glue factory: NITL

F

rustrated that rail rates are higher than desired by its members, and failing to convince Congress to repeal Staggers Rail Act provisions providing carriers greater rate-making freedoms, the National Industrial Transportation League (NITL) is attempting a Hail Mary, asking the Surface Transportation Board (STB) to confiscate railroad private property to achieve its aims.

The NITL Petition for Rulemaking to Adopt Revised Competitive Switching Rules asks the STB to allow shippers in origin or destination terminal areas, served by one Class I railroad that has at least a 75% market share at that terminal, to be granted mandatory terminal access to a second railroad having an interchange within 30 miles.

Under the NITL proposal, the railroad serving the shipper would be required to tender or receive any portion of a shipper’s traffic, upon demand, to or from a second railroad.

A shipper would have only to demonstrate that the existing carrier handles at least 75% of the shipper’s freight and that there is no effective truck or barge competition. Why the percentage of traffic is not 90% or 30%, but 75%, is not explained.

There would be no requirement that a shipper document anticompetitive conduct as a requisite for obtaining “competitive switching,” yet no shipper has ever asked the STB to waive or exempt the need for showing anticompetitive conduct to obtain terminal access.

The NITL does not indicate what is to be paid for moving the freight competitively switched, which would be less efficient than its handling by a single railroad. That price will be determined by the STB without any standards.

The Association of American Railroads (AAR) estimates that the

NITL scheme could cost the industry some $8 billion annually, fully 80% of the railroads’ annual capital investment in service-quality improvement.

There is no statutory authority for “competitive switching,” although the STB has authority to “require terminal facilities, including main line tracks for a reasonable distance outside of a terminal . . . to be used by another rail carrier.” Regulators historically have limited such rulings to railroad consolidations and, in one case, new control of a bankrupt carrier.

NITL now wants STB to confiscate railroad private property solely to produce lower freight rates.

For example, regulators ruled they were without authority to order Chicago & North Western (now part of Union Pacific) access to BNSF predecessor Burlington Northern’s line-haul trackage serving the Powder River Basin solely to create competition and achieve lower freight rates.

Converting railroad private property to communal trackage would overturn 126 years of legislation and regulatory rulings without any showing that the current regulatory arrangement protecting shippers from unreasonable rates is deficient.

Shippers served by a single railroad already have an effective rate-grievance forum at the STB. Of 45 shipper complaints filed with the STB since 1996, shippers prevailed

11 times, and railroads eight times. The remaining 26 complaints, a majority, were settled voluntarily.

Yes, the number of competing railroads, owing to consolidations—many following massive financial failure— has declined to just seven, and railroads have cancelled many joint rates and routes to increase traffic density, reduce inefficient routes, and (under the pre-Staggers Act regime of collective ratemaking) eliminate an uneconomic system of equalized joint rates, prescribed divisions of rates among connecting carriers, and below-cost switching charges.

Why? Because, previously, one-third of rail route-miles carried just 1% of freight—inefficiency that was a root cause of earlier railroad financial failures and widespread service degradation nationwide.

In years past, the NITL said an improvement in service quality— requiring substantial railroad capital investment—was an acceptable tradeoff for higher freight rates, and collaborated with the railroads on revised regulatory standards for resolving rate complaints.

Rather than rely on those guidelines, which have produced for shippers more victories than losses, the NITL now wants the STB to confiscate railroad private property solely to produce lower freight rates.

Rail service quality depends on profit that stimulates capital investment, making the NITL petition a prescription for returning railroads to the darkest days of the 1970s, when the healthiest railroad was but the fittest iron horse in the glue factory.

Macduff’s line in Macbeth well describes the NITL petition: “Confusion now hath made his masterpiece.”

February 2014 Railway age 17

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Perspective: Short Line & Regional KeiTH HaRTwell

Unfinished railroad business for Congress

T

he phrase “Why do today what you can put off till Tomorrow?” often seems like the guiding principle of the Congressional process. In December, Congress completed the first year of its current two-year session and left town with some unfinished business. For America’s short line railroads, the most important piece of unfinished business was extending the short line rehabilitation tax credit, which expired on Dec. 31, 2013.

This will be the fourth time the short line industry has had to mount a campaign to extend the credit and the third time it has had to fight the battle after the expiration date. Each campaign has come with its own set of challenges and this time is no exception. The primary challenge today is the desire by many in Congress to enact “comprehensive tax reform.” The rhetoric of tax reform is an easy sell—to simplify, to achieve fairness, to lower rates, to create a level playing field. The reality is much harder. Republicans and Democrats seriously disagree on the goals of reform.

Items enacted to promote or enhance economic growth face elimination in the pursuit of lower rates. Quantifying the actual impact of specific changes is difficult and often imprecise.

Leaders of the Congressional tax writing Committees, and particularly House Ways & Means Chairman Dave Camp (R-Mich.) and Senate Finance Committee Chairman Max Baucus (D-Mont.), are making a concerted effort to enact a comprehensive tax reform bill. For the past year, these two chairmen have traveled across the country together to promote the notion of tax reform. As would be expected, these Committee leaders do not want to be passing individual extensions when they are trying to convince the Congress to enact comprehensive change and they have asked their members to refrain from co-sponsoring individual bills in the meantime.

In the face of that difficult dynamic,

the short line industry has been remarkably successful. Two-hundred-eighteen co-sponsors would represent a majority of the House of Representatives, and when Congress left town in December, the short line tax credit extension legislation (H.R. 721) had 223 co-sponsors. In the Senate, the legislation (S. 411) had attracted 43 co-sponsors, just eight short of the 51 needed for a majority. Perhaps more telling is how the short line legislation stacks up with other tax bills. This session of Congress saw 359 tax bills introduced in the House of Representatives, and H.R. 721 has the third highest number of co-sponsors.Likewise in the Senate, there have been 179 tax

Congress must understand that short line railroads are small businesses that work in the real world. bills introduced and only one has more co-sponsors than the Senate version of the short line tax credit extension.

These are impressive numbers.They speak well of the tremendous effort the short lines and their supporters in the rail supply and contracting industries have made in building support.

But these numbers also reflect Congressional understanding of and appreciation for what the tax credit accomplishes. It allows small businesses to invest more of what they earn to build and grow their own businesses.

It helps tens of thousands of local

businesses in rural and small town America to stay connected to the national railroad network. It creates jobs not only for the railroads that are rebuilding their track, but in those industries that produce the ties, the rail, the ballast and the signal systems that are used in those rehabilitation projects.

Congress has an obligation to work hard on tax reform, but it also has an obligation to understand that short line railroads are small businesses that work in the real world. They cannot wait indefinitely for Congress to act. They must make their spending plans now. They need to know how much track they can rehabilitate in 2014. They need to order the materials required for that rehabilitation and begin hiring the personnel needed to do the work. Likewise, shippers need to know how much capacity the railroad has so they can plan and manage their own budgets for the future.

Neither the railroads, nor their suppliers, nor shippers can afford to stand still while Congress fails to act.

The best opportunity to deliver this message is at the railroad industry’s annual Railroad Day on Capitol Hill in Washington, D.C. In 2014 that event will be held on March 13. Railroad Day brings more than 400 railroad industry representatives to Capitol Hill to participate in more than 400 Congressional meetings that center on issues like the short line tax credit, truck size and weight, and railroad regulation.

It is a very important lobbying day for our industry, but it only works if the industry turns out en masse. To get more information on this event, check out the ASLRRA website at www.aslrra.org.

Keith Hartwell is President of Chambers, Conlon & Hartwell, Managing Member of the board of CC&H subsidiary firm Seneca Group, and the firm’s lead lobbyist for the American Short Line and Regional Railroad Association.

February 2014 Railway age 19

The crude oil challenge

CBR is re-energizing tank car traffic

I

f history records 2012 as the year when modern crude by rail (CBR) came into its own, 2013 will be remembered as a time of a nearly two-fold increase in that business, and as a time for examining more closely the means by which it’s handled. Figures posted by the Association of American Railroads in 2013 showed that CBR accounted for only 3% of North American Class I carloadings, and just 1.4% of U.S. Class I carloadings. But the rate at which that traffic has risen in just two years, and the projections for its continued growth, are unlike anything that energy producers, railroads, or investors have seen before.

Crude by rail is not entirely new. Railway cars were first developed for the shipment of oil out of Pennsylvania as early as 1865. By 1910, sets of crude-laden tank cars were 20 Railway age February 2014

routinely moving between wells and refineries in Asia, the Middle East, and much of the Western world. In the 1980s, unit train service was started between central California and a refinery outside Los Angeles, with 70 or more cars handling in excess of 40,000 barrels of crude per trip.

What is new is the enormous scale of volume and distance.

In 2009, U.S. Class I railroads moved just under 11,000 carloads of crude. In 2011, that number increased to more than 65,000 carloads. Then came 2012, when U.S. railroads hauled some 235,000 carloads of crude, a feat made possible in part through increased use of hydraulic fracturing, or “fracking” (which has tapped vast supplies of previously unreachable shale oil), and also through the increased use of unit trains that are dedicated to handling crude.

All photos by Bruce E. Kelly

By Bruce e. Kelly, contributing editor

Year-end estimates show U.S. railroads transported close to 400,000 carloads of crude in 2013. And the majority of those shipments are traveling 1,200 miles or more, by rail, from the heartland of North America outward to refineries and terminals on the Pacific, Atlantic, and Gulf coasts, locations that have traditionally been supplied by pipelines, offshore wells, or by tanker ships delivering crude from Alaska or foreign sources.

PiPelines on rails

Some have pointed to President Obama’s decision not to approve the Keystone XL pipeline as being the catalyst for the energy sector’s rush toward CBR. That pipeline, a portion of which remains under review, would deliver Canadian oil to

markets in the central and southern U.S. But at 1,179 miles and a price tag of $5.4 billion, Keystone XL will not be ready any time soon. In December 2013, one of its potential customers announced it was already shipping 90% of its crude by rail.

Likewise, a 740-mile, $2 billion pipeline that Kinder Morgan planned to build from Texas to California was cancelled after refineries chose to increase their use of crude delivered by rail.

In addition to the oil-rich Bakken shale/Williston Basin area of North Dakota and eastern Montana, CBR has tapped numerous other crude oil sources, the largest of those being the Marcellus shale formation in the Northeastern U.S., the Eagle Ford formation in southern Texas, and the Permian Basin in west Texas and New Mexico, as well as the oil sands of western Canada. Railroads already had the basic route structure in place to connect this new generation of oil producers with their customers. By investing millions of dollars in new transloading facilities, energy companies and railroads accomplished in a matter of months what it would have taken pipelines several years, and billions of dollars, to do.

In North Dakota’s Bakken alone, no less than 18 separate CBR loading facilities were operating as of 2013. In June 2013, a study by Bloomberg Industries said that 71% of Bakken crude production was shipping out by rail, up from 25% in early 2012. BNSF Railway, which has been at the forefront of Bakken CBR, offers the most rail loading capacity in the Williston Basin through service from 11 originating terminals. In all, BNSF serves more than 30 CBR loading facilities across its system.

Destinations for CBR include rail-to-barge terminals on the Mississippi River, as well as refineries and terminals on or near the Gulf Coast. However, CBR destinations on the East and West coasts have presented economic advantages, according to oil industry data published last year. Crude from as far west as Utah’s Uinta Basin was shipped by rail to the East Coast in 2013. That delivery of 250,000 barrels was minor compared to the 38 million barrels—mostly from the Bakken—that moved by rail through Albany, N.Y., alone.

CSX moved more than 46,000 carloads of crude oil in 2013, compared with fewer than 10,000 carloads in 2012. As for destinations, CSX serves existing unit train terminals in Albany, N.Y.; Westville, N.J.; Eddystone, Pa.; Yorktown, Va.; and Walnut Hill, Fla.; and refineries in Philadelphia, Pa., and Saint John, New Brunswick, Canada.

Norfolk Southern moves crude oil across its rail network in both unit train and manifest service to serve the Northeast (its largest customer, PBF Energy, built two unit train unloading tracks at its Delaware City, Del., refinery in early 2013), Gulf Coast, and Mid-Continent (Illinois/Indiana) refining markets. The railroad exchanges unit trains outside Chicago, and delivers to refinery customers in the Northeast and Mid-Atlantic. Its Mid-Continent service involves delivering crude to terminals for ultimate delivery via barge to refineries on the Mississippi River. For north-south movements, NS works with interline rail partners to transport February 2014 Railway age 21

CRude oil Challenge

heavy crude oil from Canadian shale fields to U.S. refineries on the Gulf and East coasts.

“We offer the shortest and most direct route to the East Coast,” NS says. “Our crude network is very resilient due to the existence of multiple tracks and large, evenly distributed rail yards capable of staging unit trains. We operate parallel routes on 91% of our network, providing even additional resiliency. We’ve made track improvements to accommodate crude traffic growth, and refineries are investing in plant expansions. For third-quarter 2013, we moved the equivalent of two unit trains (about 200 cars) per day, the largest absolute volume share for an East Coast rail carrier. But we still have adequate capacity to grow crude by rail volumes.”

Current market fundamentals and demand suggest that the crude oil business will grow well beyond current levels.

The West is arguably where CBR’s star shines brightest.

North Dakota is second only to Texas for U.S. oil production, but North Dakota is the largest and fastest-growing source of CBR in the U.S. There are no pipelines to adequately compete with rail for shipment of Bakken crude to Pacific region terminals. The cost for shipping Bakken crude by rail during 2013 hovered near $10 a barrel for Northwest destinations, $14 per barrel to California, but was up around $17 per barrel for the East Coast. Correspondingly, there are more than a dozen locations between California and the Pacific Northwest where receiving facilities are either in full operation, are undergoing expansion for CBR, or are on the drawing board.

Among its western destinations, BNSF delivers unit crude trains to refineries at Anacortes and Tacoma, Wash., as well as Richmond and Bakersfield, Calif. It also interchanges unit crude to short line Portland & Western for delivery to a distribution terminal near Clatskanie, Ore. An existing BP refinery at Cherry Point, Wash., will likely have the next West Coast unit train terminal to go on line. New unit train receiving tracks were in place at Cherry Point as of late 2013, with operation expected to begin in 2014.

Union Pacific tells Railway Age, “Our largest origin [for CBR] is the Bakken formation in North Dakota served by BNSF and Canadian Pacific. Through partnership with those two companies, we’re able to deliver Bakken crude to several on-line customers. Our flagship destination is St. James, La. There are two terminals in St. James and both facilities handle multiple trains per day.” System-wide, UP says it moves approximately three to five loaded unit crude trains per day. UP is tapping new crude sources outside the Bakken as well. It handled the first train departing the new terminal in Pronghorn, Wyo., in late December. This facility will serve the growing Niobrara shale area. canada to california, and coast to coast

Union Pacific is also increasing its unit train and manifest deliveries of crude to refineries in California. UP began hauling blocks of CBR south from Canada into California during 2013. Valero Energy, whose tank cars are transporting that 22 Railway age February 2014

Canadian crude, announced last year that it plans to enlarge its Benicia, Calif., terminal to accommodate unit trains.

Valero’s Benicia rail offloading facility is undergoing an environmental impact study, which should be completed soon.

Once it is complete, the city of Benicia can proceed with the project evaluation process.

CBR represents a small (less than 5%) but rapidly growing segment of California’s oil imports. Crude from North Dakota, via BNSF and UP, accounted for roughly 40% of the oil being delivered to California by rail in 2013. That figure may not include oil that was moved by rail to Northwest ports then brought south along the Pacific Coast by barge.

Canadian Pacific and CN deliver crude to terminals in the U.S. as well as Canada, and they’re hauling it from two distinctly different sources: Bakken shale and oil sands.

Between 2009 and 2012, CP went from moving 500 carloads

CRude oil Challenge

A BNSF unit train at Sandpoint, Idaho.

Among its Western destinations, BNSF delivers unit crude trains to refineries at Anacortes and Tacoma, Wash., as well as Richmond and Bakersfield, Calif.

of crude per year to more than 53,000 per year. Through 2013’s first three quarters, CP moved 65,000 carloads of crude, and predicted that year-end totals would reach 85,000-90,000 carloads. CN estimates its crude carloads for 2013 exceeded 65,000, up from roughly 35,000 in 2012.

What sets Canada apart from the U.S. is export policy.

Since the OPEC energy crisis of the 1970s, the U.S. has banned nearly all crude exports (with limited exceptions for crude from Alaska and California) to all countries except Canada. The oil industry and others are now lobbying for a repeal of that ban. For now, railroads can only deliver U.S. crude to refineries and distribution terminals in the U.S. or Canada. CBR originating in Canada, however, can be moved directly to export docks. OmniTRAX subsidiary Hudson Bay Railway plans to begin moving Canadian crude to an export terminal at Churchill, Man., by mid-2014.

the road ahead

For North America’s railroads, crude-by-rail could not have come at a better time. As BNSF CEO (now Executive Chairman) Matt Rose told Railway Age in mid-2013, “CBR is backfilling 50% of our coal loss, and we are allocating a significant amount of capital to our Northern corridor for CBR.” During 2013, BNSF spent $220 million on CBR-related infrastructure in North Dakota, and it’s also investing in capacity improvements from there to the Pacific Northwest. BNSF has been running one to three loaded crude trains per day into the Northwest. That number should increase once Cherry Point’s unit CBR terminal opens.

CBR-related capacity improvements are also happening at UP, including roughly $200 million for its route leading to St. James, La. And at CSX, CBR business benefits from a capacity expansion project along the River Line between February 2014 Railway age 23

CRude oil Challenge

Albany, N.Y., and northern New Jersey. In 2013, CSX spent $26 million double-tracking 18 more miles of this line.

Global Partners, which operates a CBR terminal in Albany, could bring optional crude capability to the Northeast through its proposed rail-to-barge terminal on the Hudson River at New Windsor, N.Y. CBR has made even bigger headlines following recent accidents in which tank cars carrying crude exploded or caught fire, following derailments—all of which were from different causes. Statistically, these incidents were an anomaly when compared with U.S. Department of Transportation figures cited by the AAR. U.S. railroads had fewer than 150 incidents during 2002-2012 involving releases of crude, with 2,300 barrels spilled. U.S. pipelines during that same 10 -year period had 1,785 incidents, which spilled an estimated 474,000 barrels. A single pipeline leak this past September went unnoticed for days and spilled some 21,000 barrels of crude across seven acres of a North Dakota wheat field.

Those figures provide little consolation for the 47 lives lost in a CBR-related disaster in Quebec last July. Nor do they address the surprisingly volatile nature of crude coming from Bakken shale, something the rail industry, DOT, and other agencies are now committed to resolve. Tank car builders are now gearing up to meet demand for safety-first equipment, and the current construction boom could accelerate as older

A BNSF DPU (Distributed Power Unit) locomotive shoves a westbound unit crude oil train up the grade near Athol, Idaho.

equipment is phased out or retrofitted, as Editor-in-Chief William C. Vantuono describes on p. 26.

In the coming year, the geopolitical and environmental aspects of oil could weigh more heavily on railroads than ever before. At the same time, railroads are proving capable of meeting unprecedented demand for transporting affordable energy to national and global markets. ra

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Re-inventing the DOt 111

Builders gear up to meet demand for safety-first tank cars.

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or tank car builders— American Railcar Industries, The Greenbrier Cos., National Steel Car, Texana Tank Car, Trinity Industries, Union Tank Car— the business outlook for the next five years is good, as demand for tank cars continues to surpass builder capacity.

The RSI’s year-end 2013 report showed deliveries of 28,996 tank cars, and a backlog of 55,386. With builder capacity expected to be approximately 30,000 cars per year, this backlog will take close to two years to fill.

The tank car building boom is tempered by a regulatory climate in which new safety standards are the subject of intense discussion among railroads, carbuilders, lessors, and oil producers. Following several serious accidents involving crude oil trains, as well as the discovery that crude oil from Bakken shale deposits extracted by hydraulic fracturing is particularly volatile, the PHMSA, FRA, and Transport Canada are expected to impose new standards for DOT 111 (AAR 211) non-pressurized tank cars handling hazardous materials, specifically those transporting Class 3 PG (Packing

By william C. Vantuono, editor-in-Chief

Group) I and II denatured ethanol and crude oil. That’s not expected to happen until 2015, despite calls by politicians to speed up the usually lengthy federal rulemaking process.

The industry has not waited for a rulemaking to manufacture stronger tank cars. Since October 2011, well before the CBR (crude by rail) boom started, all DOT 111s have been built far sturdier than their predecessors.

The AAR, with support from the RSI Committee on Tank Cars (RSICTC), in March 2011 submitted to PHMSA Petition 1577 to amend 49 C.F.R. Part 179 for tank cars used to transport PG I and II hazmat. P-1577 included both a jacketed and a non-jacketed option for new tank car construction. DOT 111s built since October 2011—so-called “good-faith cars”—have head shields, top-fitting rollover protection, halfinch-thick normalized tank steel (for unjacketed applications), double-shelf couplers, and bottom skid protection.

Currently, there are approximately 272,000 DOT 111s in the North American fleet. Of these, about 171,000 (63%) handle hazmat. Roughly 29,000 (17%) meet P-1577 standards,

which AAR implemented as CPC (Casualty Prevention Circular) 1232.

Now, the AAR and RSICTC each have proposals in response to a PHMSA Advance Notice of Proposed Rulemaking that would make the current voluntary P-1577 standards law, presumably improve upon those standards, and set a time-frame for the phase-out or retrofitting of pre-P-1577 DOT 111s. The proposals are similar, but there are some key differences based on ownership and car utilization.

The AAR Tank Car Committee on Jan. 22, 2014 proposed tougher standards for new non-pressurized tank cars, plus retrofitting of P-1577 cars: 9/16-inch-thick TC128 Grade B steel shell and head, an 11-gauge outer steel jacket around the tank with thermal protection in the form of a protective blanket or equivalent protective layer, full-height half-inch-thick head shields, high-flow-capacity pressure relief valves, and design modifications (removal of the operating handle or system) to prevent bottom outlets from opening in the case of an accident. AAR was expected to amend an earlier proposal to PHMSA to reflect its new position.

February 2014 Railway age 27

The RSICTC issued a proposal to PHMSA on Dec. 5, 2013 that continues P-1577 standards for newly constructed DOT-111s transporting Class 3 PG I and II materials, with some key enhancements: tank cars constructed to 286,000-pound GRL (gross rail load) standards, heads and shells made of normalized steel, and, at minimum, half-inch-thick half-head shields. For tank cars constructed of normalized TC128 Grade B steel, head and shell thickness must be one-half-inch for non-jacketed cars, and 7/16-inch for jacketed cars. For cars constructed of normalized A516-70 steel, shells of non-jacketed cars must be 9/16-inch thick, while shells of jacketed cars must be a half-inch thick. Top fittings must be protected by a protective structure as tall as the tallest fitting. Finally, the RSICTC recommends installation of a reclosing pressure relief valve.

The RSICTC also supports reclassifying denatured ethanol and

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Re-inVenting the Dot 111

crude oil grades that are currently classified as PG III to PG I or II. The RSICTC has urged PHMSA “to adopt a separate approach for existing tank cars that is uniquely tailored to the needs of the existing DOT 111 fleet. Because the industry voluntarily adopted the CPC-1232 standard, a significant number of DOT 111s are already compliant with P-1577 enhancements. Many builders and shippers have already made a significant capital investment in these cars. More than 55,000 CPC-1232-compliant tank cars will be in service by the end of 2015, representing an industry investment in excess of $7 billion.

In light of the industry’s proactive decision to incorporate these new safety enhancements, RSICTC requests that PHMSA recognize that these cars already contain safety enhancements and thus exempt them from any additional modifications that may be required under the future rule.”

What about the 140,000-plus nonP-1577 DOT 111s? The AAR has recommended that all such cars in hazmat service be phased out (retired, or repurposed to carry non-hazardous materials) or retrofitted. The AAR previously opposed retrofitting, saying it would cost the industry more than $1 billion, but there are many cars whose service life won’t expire for many years. There are about 75,000 of these newer yet nonP-1577 DOT 111s that are candidates for retrofitting; the cost is estimated at $20,000 to $40,000 per car.

What is a realistic time frame for retrofit or retirement of older cars?

How long before the DOT 111 fleet is up to specs (whatever those will be)?

“We have deferred to PHMSA to make this determination,” AAR told Railway Age. “The goal is for these improvements to be implemented as aggressively as possible, without curbing the industry’s ability to serve energy sector customers and support North American progress

toward energy independence. RSI and others had specific timeline proposals, to which we did respond as we believe this ultimately must be decided by PHMSA.” The NTSB estimates that 69% of today’s tank car fleet has a high incidence of tank failure during accidents.

For cars transporting Bakken crude, corrosion problems are a concern. The Volatile chemicals in the oil (hydrogen sulfide, etc.) are likely accelerating the corrosion. Crude oil composition varies by region, and even within regions, making documentation of loaded crude oil, now under intense scrutiny, problematic. Corrosion-resistant tank linings are one solution, but they may render CBR less competitive due to the high cost of a lining—$7,000 to $10,000 per car—and the resulting reduction in tank capacity and higher transportation cost.

The industry watches—and waits— for regulatory bodies to decide exactly what the rules will be. Ra

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At high or low speed, A sAfety need as the u.s. bolsters its passenger rail options, from high speed rail startups to streetcar revivals, those designing the safest land transport mode seek to make it safer still.

By Douglas John Bowen, Managing editor

N

otwithstanding high-profile incidents involving fatalities, from Los Angeles’s Metrolink in 2008 to New York’s Metro-North in late 2013, passenger rail transport remains far safer than most other options, even as expectations and demands for even greater passenger rail safety continue unabated.

Suppliers are confident they can meet—and even beat— those rising expectations. Railway Age talked to one industry representative who outlined safety developments for high speed rail (as well as higher-speed implementation), and to a second evaluating the lower-speed rail options, light rail transit and streetcars, with other (though not exclusively different) safety priorities.

Focusing, and Flexing, HsR needs

Last month, defying some doomsayers, Amtrak and the California High Speed Rail Authority (CHSRA) issued a long-awaited Request For Proposals for high speed trainsets that will be “essential to meeting Amtrak’s critical shortterm need to expand the capacity of its current Northeast Corridor high speed service and meeting the long-term operational needs of both Amtrak and the CHSRA.”

Proposals are due May 17, 2014; a builder is expected to be selected by the end of this year (details, p 13).

Paul LaRouche, Bombardier Transportation director of product planning, assures anyone interested that the new train equipment will be as safe as cutting-edge technology can make it, and dismisses recent rumors dogging both CHSRA and Amtrak HSR programs.

In part that’s because LaRouche, along with suppliers colleagues and competitors, transit agencies, and Amtrak, has helped advance specifications developed by the Federal Railroad Administration through the FRA Rail Safety Advisory Committee.

The industry in late 2010 established standards for passenger rail gear designed for speeds up to 125 mph through FRA’s Engineering Task Force 1 (ETF1). Standards for the next level, ETF2, initially outlined specifications for mixed service including speeds up to 150 mph, subsequently informally adjusted to 160 mph.

But the Rail Safety Advisory Committee, scheduled to meet again late last month, was to focus on “covering Tier 1 and Tier 3 simultaneously,” LaRouche says. Tier 1 specs would include alternative designs to facilitate mixed February 2014 Railway age 31

PassengeR Rail saFeTy

service—regional/commuter rail and more conventional passenger rail, along with service equivalent to Amtrak’s Acela Express at speeds up to 125 mph.

“It’s a giant step forward,” he says. Also scheduled: outlining safety procedures for Tier 3, mixed service up to 125 mph, and “dedicated” high speed rail passenger service, such as sought by California, at speeds of 220 mph.

LaRouche says the ongoing work is a good condition, and not indicative of a failure to achieve a consensus on safety or operations. “FRA is not lowering the standards,” he stresses. “They’re not inferior; they’re different.” LaRouche has previously noted that crash avoidance becomes more critical than crashworthiness as train speeds increase, a stance critics of the FRA stressed for years.

“People now are saying, ‘Amtrak backed down on speed requirements.’

But no, they’re still going forward with a joint procurement [with

California High-Speed Rail Authority]; they’d like to buy something with a similar platform.”

From Bombardier’s point of view, “Ideally, one would like to offer them equipment that eventually can go 220 mph, but can operate in mixed service at 160 mph,” LaRouche says. “That sounds like Tier 2, but Tier 3 rules creates an environment where Amtrak can work toward an environment that allows them to do that.” Both the Safety Advisory Committee and Engineering Task Force provide the groundwork for that to happen, he adds.

As for California’s HSR plans, “People are quick to seize on a setback and say ‘that’s the end of that project,’” LaRouche notes. As the state struggled with the quarreling over the legitimacy of a bond issue process, “people said that’s the end. But that’s one particular aspect of that project that has to be worked on,” LaRouche says.

The needs of the two HSR projects,

and the safety requirements surrounding them, will remain different for some time. “Tier 3 work is perfect for California, which is a ‘greenfield’ project” with brand-new right-of-way, says LaRouche, contrasting it with Amtrak’s venerable Northeast Corridor, “defined 100 years ago; you have to deal with that reality” of a “brownfield” project.

Amtrak is seeking up to 28 high speed trainsets, each with between 400 and 450 seats, that can meet or exceed current Acela Express trip times on existing NEC infrastructure.

CHSRA is seeking an initial order of 15 trainsets with a minimum of 450 seats that can meet its planned triptime requirements for service from the San Francisco Bay Area to Los Angeles, again, on what is planned as mostly new infrastructure.

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PassengeR Rail saFeTy

speeds of at least 160 mph (257 kph) for at least two years,” will be eligible to submit a bid. Bombardier plans to be one of those qualified bidders. saFety FoR low-speed geaR

Almost counterintuitively, the return of streetcars and light rail transit to North American urban centers (see story, p. 41) has highlighted potential safety issues urban rail can have vis a vis pedestrian and bicycle traffic, themselves enjoying a resurgence in cities across the continent.

The new mix, however, also has proven effective in exposing a far more dangerous mode—automotive traffic—giving rail suppliers that much more of an incentive to display the better safety performance of steel wheel on steel rail.

Indeed, some urban activists suggest the presence of a streetcar, by itself, enhances street safety through its predictable travel route and stricter adherence to street speed limits, both often far superior to the individual automobile, known to wander off path and onto sidewalks—or into LRT or streetcar vehicles, even broadsiding them.

“When a car T-bones a [rail] vehicle, we ensure that the design can absorb that impact,” says George Long, Director of Engineering, Siemens Rail Systems, U.S. So even at low speeds, crash energy management becomes critical for rail vehicles traversing and sharing those streets otherwise behaving themselves.

“What can we do to absorb the energy, and protect the drivers and the passengers?” Long asks, setting the table.

Siemens, in deploying its S70 platform for both light rail and streetcar submodes, has generated 14 iterations of the product line since 2002. Per Europe’s EN-13227 standard and the U.S.’s Rail Transit-1 (RT-1) standard, crash resistance of 20 mph was specified. A revision to RT-1 increased that to 25 mph, and “We thought it was better to go to 25 mph, just to be the first one in the market,” Long says.

Long notes Ottawa’s recent equipment purchase (awarded to Siemens competitor Alstom) specified RT-1 standards, something Long believes will be commonplace very shortly.

Automobiles do hit LRT and streetcar vehicles broadside, but more often the clashes are “typically vehicle-tovehicle head-on” incidents, Long says.

That makes it imperative for the rail vehicles to be built to protect engineers or operators through “a progressive collapse of the vehicle,” or crumple zone, similar to what automobiles employ. Such design also fosters “replaceable structural elements that are more ‘repairable,’” Long notes.

“We prove it first by calculation, then analytically by software analysis. Then we actually crash [a test vehicle] at 25 mph.” Since test crashes are costly, the effectiveness of a crash-absorbent operator’s cab pays off not just in a better product in the field but also reduces the cost of the crash tests themselves.

But just like HSR operations, crash avoidance also factors in heavily into Long’s thinking. “What can we do to have more pedestrian safety?” he asks rhetorically. Some responses are simple

(and elegant). S70 LRT gear in Minneapolis (and, later this year, in sister city St. Paul, Minn.) have automatic couplers and snowplows, with covers, to keep pedestrians and others from literally being dragged underneath a vehicle. Even automobiles are considered. “We’re looking at couplers all folded back so they can’t puncture a car vehicle gas tank,” Long says.

Then there’s the operator, the human element, that can be assisted. “How can we improve his or her viewing angles?

What are the blind spots he or she might have? You want good visibility around you,” Long says—as critical to enhanced safety as any high-tech development.

A final factor, compliance with the Americans with Disabilities Act (ADA), “is very critical,” Long observes. “A lot of cities have ADA committees,” active in ensuring the safe boarding, or departure, of rail passengers across the U.S. and Canada, more eager than ever to opt for the safer way to travel. rA

February 2014 Railway age 33

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Plasser’s multi-function track recording cars integrate various measuring and video systems, which in combination allow for comprehensive analysis of the track and the track structures. Collecting as many data as possible in one run reduces track occupation time and provides tremendous operational and economic advantages. Video systems installed on a multi-function track recording car support track walking inspections. Plasser’s high speed, high tech multi-function track recording cars have provided railroads worldwide with accurate track data for many decades. The data recorded by the multi-function track recording cars can be directly input into the guidance systems of Plasser’s tamping machines, increasing track quality and productivity. Plasser – helping to keep the railroads safe.

What’s the diagnosis?

How high-tech track inspection gives railroads a clear picture

By Mischa wanek-liBMan, engineering editor of their maintenance needs.

A

utomated track measurements assess overall track structure and individual components and, over time, can illustrate infrastructure health trends to aid in maintenance planning.

Companies that provide track assessments run into shared challenges, but each works to find solutions through research and working closely with customers to develop a clear understanding of a railroad’s needs.

Assessment chAllenges

By far, the most pressing challenge faced during track measurement is adequate work windows.

Larry Mahon, area operations manager for Balfour Beatty Rail, a division of Balfour Beatty Infrastructure, Inc., which is responsible for maintenance on the trio of main lines that make up the Alameda Corridor, says, “On some days, the heavy volume of traffic makes thorough and complete inspections more difficult than usual. Because of FRA regulations, we can’t inspect all three tracks at once unless there’s a second qualified inspector in the vehicle and the track centers are no more than 39 feet apart. On the Alameda Corridor, the track centers are 15 feet apart, but there are 143 power switches and each has to be inspected monthly.

With traffic the way it is, it’s a challenge making thorough track inspections and walking to each switch.”

Eric Sherrock, senior staff engineer at ENSCO, Inc., explains, “With high traffic volumes on freight lines and the growth of passenger services around the country, as well as ever increasing demands placed on railroad workforces, the time available for the range of various inspections required is becoming more difficult to schedule.”

Sherrock also notes that with regards to track components, the identification of rail breaks, which continue to be identified as a leading cause of track-related derailments, prior to a derailment is of critical importance to the industry, especially with the impending implementation of positive train control and the eventual decrease in reliance on track circuits.

ENSCO sees railroads trending toward comprehensive track inspection in a single pass from vehicles equipped with several complimentary inspection systems, such as the fullsized self-propelled inspection vehicle the company delivered to WMATA in 2012 that is capable of simultaneously measuring track geometry, rail profile, platform edges as well as third rail geometry and temperature. The vehicle is also able to record video and thermal images of the tunnels and conduct ultrasonic rail-flaw inspections, all while capturing February 2014 Railway age 35

TRack geOMeTRy

nxgen Rail services provides m/w planners with a “holistic view of their asset” through machine intelligence.

foot-by-foot track measurements in a single pass.

Joe Palese, senior director, engineering & technology at Harsco Rail, which provides the Automated Switch Inspection Vehicle, also sees a need for more comprehensive inspection technologies to take full advantage of track time.

“With track time being limited, most customers require inspection to occur at track speeds. Customers want inspection at track speed and for it to be autonomous as opposed to dedicated inspection,” he says. “Harsco Rail has been investigating and developing technologies that can be deployed on hi-rail vehicles for easy on/off to take advantage of short work windows. In addition, Harsco Rail has been investigating deploying these systems on other work equipment (grinders, tampers and UTVs) to take advantage of the allocated work window.”

Nordco, Inc., has incorporated track permit validation into its testing software of its skid-mounted and vehicle-mounted Flex Inspection System. The permit validation allows for proper work window management and adds an extra layer of safety for the inspector.

“Our testing software now includes a track permit validation enhancement,” says Bob Coakley, director of sales and marketing at Nordco. “When the operator receives the track time information from the railroad, either/both the mile poles or times are entered in the system. Shortly before the track permit parameters are met, e.g. 10 minutes before time expiration, the operator receives a warning message.

This allows the operator to either quickly exit the track or call for a track permit extension. The testing software automatically shuts down if the operator does not respond to the warning message.”

Holland LP says a challenge in track measurement is the validation of rail cant measured by track geometry test vehicles.

Holland’s TrackSTAR® fleet measures rail cant along with track geometry on one foot increments. Bob Madderom, vice president and general manager with Holland LP, says it has become standard practice for railroads to measure and report on rail cant exceptions from automated track geometry cars.

36

Railway age

February 2014

a Balfour Beatty Rail inc. track superintendent performs switch inspections on the alameda corridor, los angeles.

“Essentially, we now have the capability to identify rail cant exceptions in the normal course of our reporting for all measured track,” says Madderom. “Rail cant measurement has become a very important measurement of condition of track.

Differential plate cutting on wood ties in heavy tonnage or poorly maintained track can be a problem. Also, rail cant variation on concrete ties is an effective way to identify potential areas of worn pads, or worse, rail seat deterioration (RSD).

In addition to utilizing rail cant to identify potential tie problems, systems such as Georgetown Rail Equipment’s (GREX) Aurora Automated Tie Inspection system can be used to measure tie surface characteristics, such as plate cutting, to accurately report tie condition.

GREX’s Aurora system uses high-speed cameras and lasers to provide a tie condition assessment and report, which can be customized to meet specific customer needs.

“GREX develops exclusive tie grading models for each customer using sophisticated algorithms that embed unique grading characteristics specific to that customer. These unique characteristics are identified during a walking calibration process with the human tie inspector. Aurora then ‘learns’ these grading attributes and begins to mimic the expert inspector, mirroring the grading results,” says Lynn Turner, vice president marketing and sales for GREX. “This output, in a 3-D digital track image along with the statistical analysis of tie condition, allows a critical and thorough reporting and assigns each tie an exact GPS location signature. Incorporating rolling 39-foot defects, joint tie defects, and clusters of failed ties into customized reports are typical of customer-presented challenges that GREX engineers have developed solutions for. It is no coincidence that customers who have invested the most effort into Aurora have realized the best performance.”

AdvAntAges of AutomAted meAsurements

“One of the most significant advantages of autonomous inspection technology is that every movement of the host train offers an opportunity to evaluate the track, allowing for more

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A Track Measurement Partnership Unlike Any Other

Track Geometry Rail Profile Track Gauge Strength Rail Cant Measurement Machine Vision Assessment

We have a large and growing fleet of TrackSTARŽ testing vehicles that allows us the flexibility to provide a variety of track testing services to railroads all across North America. Our mobile fleet provides you with more than just simple data – we provide peace of mind knowing your most valuable asset is running safely.

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TRack geOMeTRy

Plasser’s multi-function track recording cars integrate various measuring and video systems for comprehensive analysis.

gReX’s aurora automated Tie inspection system can be used to measure tie surface characteristics, such as plate cutting.

frequent inspections without track time being consumed by dedicated inspection vehicles. The use of autonomous inspection technologies can result in earlier detection of track defects, allowing for maintenance practices to be preventative rather than reactive, ultimately reducing the number of track related derailments,” says ENSCO’s Sherrock.

Plasser American defines the track network as a dynamic system under constant change from varying factors such as rail traffic, the nature of the subsoil, temperature fluctuations or precipitation. To plan maintenance work efficiently, it is necessary to know the current state of the track and, above all, recognize possible deteriorations.

Plasser, which offers a range of track measuring machines, recommends regular measurements carried out by multifunction track recording cars several times a year to obtain the relevant data, which includes at least track geometry, rail profile and rail surface, complemented by driver’s view and track component video images.

Plasser’s multi-function track recording cars integrate various measuring and video systems, which in combination, as used on MTA’s Track System in New York City, allow for comprehensive analysis of the track and the track structures.

Collecting as much data as possible in one run reduces track occupation time and provides tremendous operational and economical advantages. Video systems installed on a multifunction track recording car support and reduce track walking inspections.

Plasser’s high-speed, high-tech multi-function track recording cars have provided railroads worldwide with accurate track data for many decades. The data recorded by the multi-function track recording cars can be directly input into the guidance systems of Plasser’s tamping machines, increasing track quality and productivity.

The company says the recorded data, merged into a railroads track and asset database provides the means for long-term analyses, providing planning offices a valuable instrument.

Rates of deterioration, derived from exception reports and

track quality indices indicate which type of action would be the most suitable and economical solution to restore the target geometry of the track and to retain it as long as possible.

Robert Grant, director of engineering sales for NxGen Rail Services, a Sasser Family Holdings Co., believes that condition-based maintenance of track and rolling stock will provide significant savings, as well as improvements in safety as railroad maintenance activities continue to become proactive. NxGen Rail Services says it provides maintenance planners with a “holistic view of their asset” by using machine intelligence to report precise locations of defects, enabling planners to examine them from different points of view to better understand the causes of the problems and design better solutions.

“Technology has evolved and the benefits of incorporating automation through machine vision into inspection processes are well documented and proven,” says Tom Keogh, president of Rail Radar. “Rail Radar’s 3-D system uses industry proven machine vision techniques to improve the efficiency, effectiveness and objectivity of the track inspection process [and] capitalizes proven technology through data acquisition, through image analysis and through data analysis, with input from the railroad’s maintenance and track experts.”

Harsco’s Palese says the data gathered during the inspection of any component can also be turned into a wealth of information for understanding component degradation and failure.

“This allows for developing maintenance practices to prolong the life of the components. Addressing the most critical components first is of paramount importance,” says Palese.

Balfour Beatty’s Mahon believes that despite advances in automated technology, eagle-eyed inspectors still have their place in the process. “There’s no substitute for good visual track inspections,” he says. “Geometry cars will find things the eye may miss, but they can’t find things that a walking person will. It all comes down to working with the dispatching center to make sure everyone understands the requirements so the FRA regulations are met.” Ra

38

Railway age

February 2014

Artist’s rendition of the new LRT line , northwest of downtown Kitchener, near Grand River Hospital.

Kitchener to Waterloo, by lrt After an absence of more than 67 years, rail transit is poised to return to Ontario’s twin cities.

By John D. Thompson, Contributing editor

T

he last trolley bus between Kitchener and Waterloo, Ontario—known as the province’s twin cities—operated on March 26, 1973, while Dec. 27, 1946 wrote finis to the King Street streetcar line. The planned arrival of light rail transit is yet one more example of how electric rail transit, specifically the updated and improved urban streetcar, has returned to the scene.

Approval, including funding, is in place for a 12-mile, C$818 million LRT line being built under the auspices of the Waterloo Region Rapid Transit Division. It will extend from Fairview Park Mall in south Kitchener to Conestoga Mall in north Waterloo. In addition, a 10.5-mile BRT (Bus Rapid Transit) line is being built from Fairview Park to Ainslie Terminal in downtown Cambridge, just south of Kitchener.

This is expected to be carrying passengers this year, and is projected to ultimately be converted to LRT.

40 Railway age February 2014

Some land clearing for the new intermodal station to be built at King Street and the CN main line to Toronto has taken place, but overall construction will commence this year. The intermodal terminal will provide connections between the LRT and GO Transit regional/commuter trains and VIA intercity trains, as well as city and intercity buses.

The existing Charles Street bus terminal will continue in operation as well, for the time being. Opening of the LRT line is projected for 2017.

From Fairview Park Mall, the LRT alignment parallels the CN Huron Park Spur between Mill Street and Hayward Avenue. Between Mill Station and Borden/Ottawa Station, the line is on parallel streets, then proceeds along Charles Street in double track to Frederick Street. From here, the line splits again, along Charles and King, to the Transit Hub Station (intermodal station) at Victoria Street. It tunnels

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beneath the CN right-of-way, then remains as a double-track operation all the way to the terminal at Conestoga Mall. The line will be above ground except for the underpass beneath the CN main line downtown.

Between Uptown Waterloo Station and Northfield Station, the route follows the CN Elmira Spur, then swings eastward onto Northfield Drive to the terminal. The split-running downtown is necessitated by the narrow width of King Street, the Kitchener-Waterloo main thoroughfare. Along the CN right-of-way, the LRT will serve the University of Waterloo, and the Research and Technology Park. Part of the route follows that of former streetcar and trolley coach operations, along King Street.

The LRT tracks will be curbside along Ottawa and Borden Streets, in downtown Kitchener and uptown Waterloo. For the street-running portions of the line, they will be separated from traffic by a raised concrete lip or other form of delineation. In downtown Waterloo the tracks will also be split, between paralleling King and Caroline Streets, before turning onto the CN Elmira Spur right-of-way.

The maintenance shop and yard will be located at 518 Dutton Drive in Waterloo, near the terminal. The yard will accommodate about 30 LRVs. Fourteen LRVs are required for the initial operation, and have been ordered from Bombardier Transportation, piggybacking on Toronto’s Transit City order, with an option for 14 more cars, seeking to benefit from a lower unit price. Bombardier’s low-floor FLEXITY cars will be built in Thunder Bay, Ontario. The LRVs will draw traction power at 750 volts DC. The population of Ontario’s Waterloo Region is 543,000,

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which is greater than Calgary and Edmonton when they launched their LRT projects more 30 years ago. Daily ridership is projected at 27,000, increasing to 56,000 by 2031.

Trains will operate on 7.5-minute headways during peak periods and at 15 minute intervals at other times. RA Waterloo’s King Street streetcar line shut down in December 1946.

February 2014 Railway age 41

People

Meetings

HigH Profile: Carl Ice, BNSF President since 2010, added the title of Chief executive Officer on Jan. 1, 2014.

Matt Rose will become executive Chairman, where he will be the railroad’s chief decision-maker, but without daily operational responsibilities. Rose, 54— Railway age’s 2010 Railroader of the year following warren Buffett’s “all-in ice Rose bet on america” when the “Oracle of BNSF BNSF Omaha” bought 100% of BNSF and added the railroad to his Berkshire Hathaway portfolio—is the odds-on favorite to succeed Buffett, 83, as Berkshire Hathaway chairman. ice, 57, is a 34-year veteran. in 1995, he led a team that orchestrated the merger and subsequent integration of Burlington Northern Railroad and Santa Fe Railway.

“Since then, he has helped lead the company and culture into what it is today,” BNSF said. “ice has been integral to the development of the company’s operating and marketing plans.”

“For more than a decade, Carl has worked alongside me, and his assumption of the CeO title is a natural and well-deserved transition,” said Rose.

February 26-27

CSX—Bryan Rhode named Regional Vice President, State government affairs in Virginia.

INDIANA RAILROAD—Kristin Bevil named general Counsel. Elizabeth Ebert named Manager, Human Resources.

UNION PACIFIC—D. Lynn Kelley, currently Vice President of Continuous improvement, will take on the added responsibility of the company’s supply organization.

Joseph O’Connor named Vice President of labor Relations, succeeding william (Rick) Turner, who is retiring in March.

SUPPLIERS Parallel Infrastructure LLC appointed Yannis Macheras President of the company’s Telecommunications infrastructure business.

Parsons Brinckerhoff named Linda Bohlinger a Principal Consultant, based in los angeles.

Parsons appointed Takis Salpeas global Rail & Transit Systems Director.

Steven A. LaRocco appointed Senior Vice President and Rail & Transit Systems Division Manager.

42

Railway age

February 2014

Pioneer Railroad Services, Inc. promoted Shane Cullen to Vice President Mechanical & Operations.

Bob Athens named Director Operations Center. Tom Black named Vice President Safety and Transportation. Nathan Johns promoted to Vice President Marketing and government affairs.

100 YEARS AGO in

(FEBRUARY 1914) PRR PENSIONERS The Pennsylvania Railroad has now on its pension rolls 4,037 employees, of whom 27 are women. During the past 13 years the total number of employees placed on the pension rolls has been 7,800. The payments have aggregated $9,500,500. The company has issued a circular in which there is a large picture taken at a recent luncheon given to the veterans of the road by the Railroad Young Men’s Christian Association of West Philadelphia. At this luncheon there were present 150 retired employees, of whom 48 had been in the service of the company for 48 years or more, and of whom 89 had served in the Army during the Civil War.

Southwest Association of Rail Shippers Annual Meeting Hyatt Regency San antonio Riverwalk, San antonio, Tex. website: www.swrailshippers.com

March 2-5 Rail Equipment Finance 2014 la Quinta Resort & Club, la Quinta, Calif. email: msilverman@railfin.com; website: www.railequipment finance/com

March 2-5 Railroad Day on Capitol Hill Sponsored by aaR, aSlRRa, NRC, RSi, and others. washington, D.C. Nicole Brewin, Tel.: 202-3474664; email: brewin@rsiweb.org

April 1-2 19th Annual AAR Research Review Cheyenne Mountain Resort, Colorado Springs, Colo.

Tel.: 719-584-0544; email: annual review@aar.com; website: www.regonline.com/19thannual

April 8-10 New Jersey TransAction Conference 2014 Tropicana Hotel, Casino & Conference Center, atlantic City, N.J. email: Njtransaction@aol.com; website: www.njtransaction.com

April 22-25 ASLRRA 118th Annual Convention Hilton San Diego Bayfront, San Diego, Calif.

Tel.: 202-585-3443; email: kcassidy@aslrra.org; website: www.aslrra.org

June 15-18 APTA Rail Conference Montreal, Quebec Tel: 800-999-2782; website: www.apta.org

Products EZ Oil engine oil drain valves from Global Sales Group global Sales group has introduced a new and improved engine Oil Drain Valve for industrial engines and construction equipment.

The new eZ Oil Drain Valve replaces

traditional oil drain plugs, providing for clean and easy oil changes with just a touch of a finger.

Both the l-Type and H-Type eZ Oil Drain Valves feature:

• Ball valve mechanism for leak-proof operation.

• Nickel plating for extra protection against corrosion.

• O-ring seal for improved sealing ability.

• Plastic lever cover for easy opening and closing.

Once installed without any special tools, all the user needs to do is simply turn the eZ Oil Drain Valve lever to drain oil. Turn the lever back and it locks closed. A hose may be attached to the hose end to drain the oil away from the engine, making it perfect for hard-to-reach stationary engines and construction equipment.

The l-Type hose end is ideal for areas with limited clearance. The company says both styles are a great tool for oil sampling.

For more information, visit www. eZoildrain.com, email the company at eZoildrain@msn.com, or call global Sales group, (425) 999-1200.

February 2014 Railway age 43

RAWrkSiteTrn1_2pg2014AllClass_Layout 1 1/22/14 2:53 PM Page 1

Products My Employees don’t have time for training.

Flexible Scheduling. Anytime. Anywhere.

Work Site Training Courses: Locomotive: • GE 7FDL Diesel Engine Maintenance • Testing and Troubleshooting 26-Type Locomotive Air Brake Systems • Locomotive Periodic Inspection and FRA Rules Compliance • Locomotive Electrical Maintenance and Troubleshooting • Locomotive Air Brake Maintenance and Troubleshooting • Distributed Power Maintenance and Troubleshooting • Distributed Power Operations, Training, and Operating Rules

Freight Car: • Freight Car Inspection and Repair • Single Car Air Brake Test • FRA Part 232 Brake System Safety Standards for freight and other non-passenger trains • Train Yard Safety

Track: • Track Safety Standards

CORRESPONDENCE TRAINING • WORK SITE TRAINING • CONSULTING

The Railway Educational Bureau 1809 Capitol Ave., Omaha NE, 68102 Toll Free (800) 228-9670 • (402) 346-4300 www.RailwayEducationalBureau.com

44

Railway age

February 2014

New from Lat-Lon: PC Query Application for desktop computers lat-lon, llC, a leading provider of asset management hardware and software solutions, has released the new PC Query application for desktop computers. as lat-lon’s first-generation desktop application, PC Query application is an entirely new point of access to data adding to lat-lon’s existing web-based and mobile applications. The Query app enables users to run complex, multiple conditioned searches with dramatically faster processing.

Query app downloads messages to a PC based on Unit iDs, Messages Types, and Time. Visually, this could be illustrated as a three-dimensional block of data, whereas in the past, only two-dimensional data searches were available, i.e. on unit across time. example: which units in a fleet experienced an impact sufficient for damage while traveling less than 10 mph during the past week? all data can filtered, sorted, and have columns added/hidden after messages are retrieved.

Query app is an application downloaded to a PC. as such, it avoids the inefficiencies and limitations of a web browser.

The Query app speed is boosted by running locally on a PC and accessing the lat-lon database over the internet.

Speed is also a result of harnessing the power of new secure off-site servers. Charting, images, dashboards, and more new features will be released in waves, with simple updates automatically prompted by the individual PC. Query app will also automatically update as newer versions are released. lat-lon hardware provides a wealth of location-based information. Units can report on up to 63 conditions with additional functionality in development. Units have the option to report as frequently as every minute and have built in intelligence knowing whether they are stopped or moving.

Factoring in a fleet of units, Query app enables users to sort through all of this information with multiple conditions in a variety of forms to extract trends and chart a better picture. Query permits lat-lon users another tool to extract the bits of information to make operations more efficient. lat-lon says its customers are given all the tools they need to manage their fleet online. There is no software to install. all that’s needed is an internet connected computer or mobile device. lat-lon’s web Reporting System can be accessed 24/7 via password-protected accounts. lat-lon systems can also integrate with existing fleet management software through industry standard iP/XMl data exchange. lat-lon, llC was founded in 1999 in Denver, Colo., to provide gPS based management tools for transportation industries. it is a member of the Tegra Corp group of companies (established 1918) and is privately held. For further information contact lat-lon at 877-300-6566 or visit www.lat-lon.com.

Ad Index Company

Phone #

Fax

Email address

amsted Rail group

312-922-4516

312-922-4597

kskibinski@amstedrail.com

C2

aReMa

301-459-3200

301-459-8077

marketing@arema.org

12

Dixie Precast

770-944-1930

770-944-9136

fbrown142@aol.com

43

ellwood Crankshaft & Machine

724-347-0250

724-347-0254

ecgsales@elwd.com

14

Halfen USa inc.

800-423-9140

877-874-7923

gprendergast@hallfenuse.com

32

Helm Financial Corp.

415-398-4510 ext 1610 415-398-4816

bwind@hlmx.com

43

Holland Co.

708-672-2300 ext.382

708-672-0119

gpodgorski@hollandco.com

37

lTK engineering Services

215-641-8826

215-542-7676

tfurmaniak@ltk.com

33

Midland Manufacturing

847-677-0333

847-677-0138

sales@midlandmfg.com

24

National Steel Car

905-544-3317

alan.wilson@steelcar.com

25

New england Rail Club

617-437-7810

jbudzyna@aol.com

16

ORX

814-684-8484

glenn@orxrail.com

C4

Plasser american Corp.

757-543-3526

757-494-7186

plasseramerican@plausa.com

34

Progress Rail Services lRS

256-505-6402

256-505-6051

info@progressrail.com

Railhead Corp.

773-779-2400

773-779-0231

jdonnan@railheadcorp.com

13

Railquip inc

770-458-4157

770-458-5365

sales@railquip.com

29

Rails Co.

973-763-4320

973-763-2585

rails@railsco.com

15

Railway age Crude By Rail

212-620-7208

212-633-1165

conferences@sbpub.com

26

Railway educational Bureau, The 402-346-4300

402-346-1783

bbrundige@sb-reb.com

Soft Rail

888-872-4612

Strato

732-317-5406

Transcore

214-461-6443

617-437-0722

Page #

5

18, 39, 44

sales@signalcc.com

15

732-981-1222

korozco@stratoinc.com

28

800-923-4824

www.transcore.com

3

The advertisers index is an editorial feature maintained for the convenience of readers. it is not part of the advertiser contract and Railway age assumes no responsibility for the correctness.

Advertising Sales MAIN OFFICE Jonathan Chalon, Publisher 55 Broad St., 26th Floor New york, Ny 10004 (212) 620-7224 Fax: (212) 633-1863 jchalon@sbpub.com AL, AR, IN, KY, LA, MI, MS, OH, OK, TN, TX emily guill 20 South Clark Street, Suite 1910 Chicago, il 60603 (312) 683-5021 eguill@sbpub.com CT, DE, DC, FL, GA, ME, MD, MA, NH, NJ, NY, NC, PA, RI, SC, VT, VA, WV, CANADA – QuEbEC AND EAST, ONTARIO Mark Connolly 55 Broad St., 26th Floor New york, Ny 10004 (212) 620-7260 Fax: (212) 633-1863 mconnolly@sbpub.com

AK, AZ, CA, CO, IA, ID, IL, KS, MN, MO, MT, NE, NM, ND, NV, OR, SD, uT, WA, WI, WY, CANADA – Ab, bC, Mb, SK Heather Disabato 20 South Clark Street, Suite 1910 Chicago, il 60603 (312) 683-5026 Fax: (312) 683-0131 hdisabato@sbpub.com bELGIuM, PORTuGAL, SWITZERLAND, GERMANY, EASTERN EuROPE, bALTIC STATES, MIDDLE EAST, SOuTH AMERICA, AFRICA (EXCEPT SOuTH AFRICA), FAR EAST (EXCEPT KOREA, CHINA, HONG KONG, INDIA), ALL OTHERS, TENDERS louise Cooper international area Sales Manager The Priory, Syresham gardens Haywards Heath, RH16 3lB United Kingdom +44-1444-416917 Fax: +44-(0)-1444-458185 lc@railjournal.co.uk

SCANDINAVIA, THE NETHERLANDS, SPAIN, GERMANY, AuSTRIA, KOREA, HONG KONG, CHINA, AuSTRALIA, NEW ZEALAND, SOuTH AFRICA, RuSSIA, RECRuITMENT ADVERTISING Steve Barnes international area Sales Manager The Priory, Syresham gardens Haywards Heath, RH16 3lB United Kingdom +44-1444-416375 Fax: +44-(0)-1444-458185 sb@railjournal.co.uk ITALY, ITALIAN-SPEAKING SWITZERLAND Dr. Fabio Potesta Media Point & Communications SRl Corte lambruschini Corso Buenos aires 8 V Piano, genoa, italy 16129 +39-10-570-4948 Fax: +39-10-553-0088 info@mediapointsrl.it

JAPAN Katsuhiro ishii ace Media Service, inc.

12-6 4-Chome, Nishiiko, adachi-Ku Tokyo 121-0824 Japan +81-3-5691-3335 Fax: +81-3-5691-3336 amkatsu@dream.com CLASSIFIED, PROFESSIONAL & EMPLOYMENT Jeanine acquart 55 Broad St., 26th Floor New york, Ny 10004 (212) 620-7211 Fax: (212) 633-1325 jacquart@sbpub.com

February 2014 Railway age 45

pRodUCTs & sERvICEs

EqUIpMENT sALE/LEAsINg

Available For Lease

◆ Mill Gondolas - 65’ 6” interior length with 5’ sides and 52’6 interior length with 4’6” to 5’ sides.

Reidler Decal Corporation St. Clair, PA 17970 Fax: 570-429-1528 marketing@reidlerdecal.com The Federal Railroad Administration's proposed new delineator configuration

◆ 4600, 4650 & 4750 cu. ft. covered hoppers – Trough hatches & gravity outlet gates. ◆ 3,600 cu. ft. Open Top Hoppers. 45 degree slopes for aggregate, coke, coal, etc. ◆ 4,240 cu. ft. tub bottom rotary gondolas Interior bracing still in place.

For additional information and pricing, please contact John Goodwin phone (605) 582-8318 fax (605) 582-8304 www.carmathinc.com e-mail jgoodwin@mwrail.com

Reidler can help you comply with the FRA ruling by offering prismatic reflective yellow delineators that meet their specifications.

• 4" x 150 fl Rolls (kiss-cut available) • 400 candlepower retroreflection • Application instructions provided

Give us a call at 800-628-7770 for more information The Leader in Railroad Markings since 1926

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EDNA A. RICE, President 6750 West Loop South Suite 735 Bellaire, Texas 77401-4111

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Railway age

February 2014

strAteGic PLANNiNG: • Commuter rail tranSitionS • fra ComplianCe programS • operationS auditing

Kansas City Office (913) 661-2424 oPerAtioNs trAiNiNG & coNsULtiNG: www.tcsrailservices.com • engineer training & CertifiCation other services: • exCellent HiStory witH fra, ntSB • Staffing • interim management • meCHaniCal & part 238(Qmp)

Locomotive repair shop with a pit available for sale in Monroe, GA (1 hr. east of Atlanta).

7,200 sq. ft. bldg. on over 17 acres of land with 727 feet of rail frontage. Contact Kyle Chong at kyle@railtrusts.com or (904) 241-4176.

EqUIpMENT sALE/LEAsINg

TRAININg

Part 243 Training & Certification Part 242 Conductor Training Part 240 Engineer Training and re-certification -------------------------------------------------------Modoc Railroad Academy 916-965-5515 info@modocrail.com

Railcars for Lease: · 52’-2500 Cu.Ft. Mill gondolas—263 GRL · 5125 Cu.Ft. Pressure Differential Covered Hoppers —263 and 286 GRL · 3281 Cu.Ft Pressure Differential Covered Hoppers —286 GRL

Railway Age Classified section Jeanine Acquart • 212-620-7211 jacquart@sbpub.com s r

r

Contact: Allan Lindy-479-935-9040 or allanlindy@everestrailcar.com www.everestrailcar.com

TM

Maps1_2horz_Layout 1 1/9/14 4:16 PM Page 1

Professional Railroad Atlas of North America From Alaska and the Yukon to the Yucatan in southern Mexico, its all here. The atlas includes a listing of approximately 650 railroad companies and reporting marks in North America.

This atlas has been designed for the railroad professional and transportation consultant.

Nine major lines are color coded for enhanced readability. A great reference tool. Great care has been taken to provide the most accurate and current information available. Over 40 insets displaying highly detailed maps of metropolitan areas. Softcover. 112 pages.

BKATLAS

$77.95

Find Your Way Railroads of Mexico Wall Map

Canadian Rail Atlas This 5th edition of the Canadian Railway Atlas illustrates Canada's world class rail network. Produced in association with the 50 goods, tourist, commuter and intercity Rail businesses represented by the Railway Association of Canada, as well as nonmember railways. It features 68 pages of detailed information, 16 large-format regional maps, connections to the North American rail network and an index of the more than 5,000 railway stations across Canada. Softcover.

The 36'' x 44'' full-color Railroads of Mexico map includes recent acquisitions and privatization of the rail in Mexico. Rail is color-coded to reflect ownership. Detail includes state boundaries, thousands of indexed cities, ports served by rail and intermodal hubs. The color map also displays connections in the U.S. and South America. This map will be extremely beneficial to any company doing business with Mexico or transporting through the country. 2007.

MPCANAT

MPRRMEX

Simmons-Boardman Books, Inc. 1809 Capitol Avenue Omaha, Nebraska, USA 68102 Email: orders@transalert.com

Call to order: 1-800-228-9670 or www.transalert.com

$76.95

$99.00

Add Shipping & Handling if your merchandise subtotal is: Shipping Rates: UP TO $10.00 10.01 - 25.00 25.01 - 50.00 50.01 - 75.00

U.S.A. $4.10 7.20 9.80 10.90

CAN $8.55 11.80 15.70 19.80

75.01 -100.00 100.01 - 150.00 150.01 - 200.00 200.01 - 300.00

13.00 14.80 17.30 21.00

26.10 34.20 45.90 57.20

Orders over $300, call for shipping

Company invoicing is welcome, shipping will be added for ground delivery, in US/Canada.

Nebraska residents add 5.5% sales tax.

February 2014 Railway age 47

Financial edge DaViD NaHaSS

Why short-term locomotive lease rates are on the rise

R

ecently, there’s been an unusual sound rumbling through certain storage tracks and yards in the North American rail system. It’s the sound of off-lease six-axle locomotives being pulled out of storage and into service on many railroads operating in the U.S. and Canada. What makes this circumstance notable is that many of these locomotives have been sitting for a period of months and/or years. What does this mean for investors in rail equipment?

Industry veterans know that the supply and demand curve for used locomotive power has followed an interesting trajectory. In the 1980s, the workhorse locomotive of the North American fleet was the six-axle, 3,000hp EMD SD40-2. In one 12-year period, there were more than 8,000 SD40-2s built. In the mid 1990s, as technology and locomotive design improved, the SD40-2 became the “go to” locomotive for lessors for shorterterm operating leases.

The SD40-2 fleet provided a huge benefit to the industry. These locomotives allowed the larger railroads the ability to increase or decrease total available horsepower without huge capital acquisitions. They also allowed short lines and regional railroads to lease recent locomotive technology and take advantage of excellent tractive effort for a relative fraction of the cost of a new locomotive.

Locomotive leasing tends to be a boom/bust type of business. Typically, if there is a shortage of horsepower on one Class I railroad, the situation causing the shortage is endemic throughout the system. What types of situations cause a steep increase in demand for horsepower? The list is pretty straightforward: increases in carloadings, weather-related slowdowns, a lack of

48

Railway age

February 2014

personnel to operate trains, and balancing of owned or leased locomotive inventories by the railroads. The list reverses itself for a steep drop in demand for used horsepower: decreasing loadings, optimal hauling conditions, and full rosters of qualified personnel to operate trains. Once a condition exists that slows the interchange system, it’s not long before those conditions impact the other partner railroads. Generally, used locomotive demand by one railroad means that the phones at your local locomotive lessor’s office are going to ring from another railroad. Soon afterwards, the rush is on and before you know it,

High locomotive demand can push freight car demand.

Keep your eyes open for opportunities. any “stored serviceable “locomotive is under lease and back working again in a matter of months.

In the early 2000s and into today, continued improvements in technology, changes in EPA emissions regulations, and an industry flush with cash caused a change in the lease market for six-axle locomotives. Class I’s were buying new, state-of-the-art, emissions-compliant locomotives, and the SD40-2 fleet was aggressively oversupplied. SD40-2s were sold at auction for less than $25,000. Owners of these locomotives were selling them to foreign buyers. It seemed as if the often-foretold death of

the SD40-2 was finally on the immanent horizon. Then the phone rang, and in the past four months, the process started up all over again.

Rents currently in the mid $100s per day (triple net) are good but still not reminiscent of the older days when rents could have been as high at $300 to $400 per day.

Does this mean that there are opportunities to invest in older high-horsepower locomotives to try to capture this and the next wave in the cycle? I approached a couple of industry resources to tell me about today’s market and to give a perspective on what the future might hold for shortterm operating leases of six-axle locomotives. My sources tell me that this is the first time since 2007 we’ve seen this type of demand, and as one might expect, it’s caused by increased carload demand mixed with some weather delays. This has slowed cycle times and created the current surge demand that may last throughout 2014.

As exciting as it is to be invested in these locomotives when the phone rings, rushing into this market offers more risks than likely rewards for the casual investor in rail assets. Beyond 2014, my sources suggest that today’s market is more the exception than the rule and that we could have another extended period before used locomotives roll into service again.

Having said this, Helm Financial Corp., one of the largest players in sixaxle locomotive leasing is “in play” at this time with a fully leased fleet of six-axle units (many of which are SD40-2s).

One final note: Sometimes, increased demand for locomotives is followed by—you guessed it— increased demand for freight cars.

Keep your eyes open for opportunities.

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Bob and the others like him here at ORX make us what we are: fully committed to getting you what you want, when you need it. Nothing will stop us. Either we'll find a way... or we’ll make a way.

December 7, 2013 – Bob takes his two boys, Tanner and Hunter, ice fishing. Things go smoothly because that equipment, too, is well-maintained and ready to go. Six perch, two crappies, and one great photo.

October 16, 2013 – A critical component in the underbelly of a critical CNC machine fails. We call the machine’s manufacturer to order a replacement part. Lead time: 14 weeks. Instead of accepting this set-back, Bob makes the part from scratch, and the machine is back in action the next day. And, if that weren't enough, he corrects the flaw in the part’s design that caused it to fail.

ORXceptional

Bob Gorman Senior Maintenance Mechanic

www.ORXrail.com | 814.684.8484