January 2015 Railway Age by Railway Age

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January 2015 | www.railwayage.com

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Railroader of the Year

Canadian Pacificâ&#x20AC;&#x2122;s Hunter Harrison A Railroading Giant Passenger railcar market at-a-glance Resurgence for Via Rail

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RailwayAge

january 2015

visit us at www.railwayage.com Features Railroader of the Year: Hunter Harrison

CP’s next move?

2015 Passenger Rail Outlook

VIA Rail’s new CEO

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On the Cover Canadian Pacific CEO Hunter Harrison Photo: Canadian Pacific 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. 216, No. 1. Subscriptions: Railway Age is sent without obligation to professionals working in the railroad industry in the United States, Canada, and Mexico. However, the publisher reserves the right to limit the number copies. Subscriptions should be requested on company letterhead. Subscription pricing to others for Print and/or Digital versions: $100.00 per year/$151.00 for two years in the U.S., Canada, and Mexico; $139.00 per year/$197.00 for two years, foreign. Single Copies: $36.00 per copy in the U.S., Canada, and Mexico/$128.00 foreign All subscriptions payable in advance. COPYRIGHT© 2015 Simmons-Boardman Publishing Corporation. All rights reserved. Contents may not be reproduced without permission. For reprint information contact PARS International Corp., 102 W. 38th Street, 6th floor, New York, N.Y. 10018, Tel.: 212-221-9595; Fax: 212-221-9195. Periodicals postage paid at New York, NY, and additional mailing offices. Canada Post Cust.#7204564; Agreement #41094515. Bleuchip Int’l, PO Box 25542, London, ON N6C 6B2. Address all subscriptions, change of address forms and correspondence concerning subscriptions to Subscription Dept., Railway Age, P.O. Box 1172, Skokie, IL 60076-8172, Or call toll free (800) 895-4389, or (402) 346-4740. Printed at Cummings Printing, Hooksett, N.H. ISSN 00338826. January 2015 Railway Age 1

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

A passion for railroading

’m sure you’ve all heard the old story about the man who decides to retire after a long and successful career, but soon after has his wife telling him, “You need to go back to work.” In Hunter Harrison’s case, this is sort of what happened after he retired from the CN in 2009, after 46 years in the railroad business. As our Railroader of the Year told me, “I think I underestimated how much I would miss the business, and I thought we had accomplished a lot of things, but I got a couple of phone calls. My wife had been pretty encouraging as far as retiring and taking it easy. I got off the phone with one of those calls, and she said, ‘You should go back to work.’ I said, ‘What brings that out?’ and she said, ‘Well I’ve never seen you passionate or enthusiastic about anything for the past couple years. Obviously you miss this and you’re in good health, so . . . go for it!’” Suffice to say that Jeannie Harrison can take some credit for Canadian Pacific’s remarkable turnaround. Her husband will be the first to say how valuable her support and encouragement have been over the years. Hunter just turned 70, “The big 7-0,” as he puts it, and he’s certainly making the most of his return to full-time railroading at CP. It’s what he does best, and this industry is all the better for it. Post-CN, Hunter spent most of his time at his family’s home in Wellington, Fla., where he owns and trains show horses. I suppose he finds horsepower more fulfilling than horse power? (Sorry, but I couldn’t resist the play on words.) After more than a half-century of railroading, Hunter Harrison speaks freely and candidly about the industry he so passionately loves. Here’s a few refreshing observations from my interview with him for our cover story: “I think there are times, when you’re trying to lead and motivate people, when they need a kiss on the cheek and a hug,

Railway Age

January 2015

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and sometimes they need a kick in the ass. So people kind of describe that as tough. I think it’s a case where somebody has to do it. And, you know, some of those things are distasteful. Some are not. I don’t know any of us that get pleasure from doing those things, but they need to be done at times.” “I understand the business from the ground up [and I saw] that there was a lot of talent [at CP]. If you could uncover the mud and get to the people, give them an opportunity to get back to railroading again, they could surprise you with their performance. And I was right about that. We discovered a lot more talent than people had given the organization credit for.” “The railroads have gotten their act together, they’re providing a better service to the customer, they’re being rewarded and making some returns and doing well in the market, and people say ‘They’re abusing things.’ And the people that argue the most that we should be regulated and that we make too much money are the ones in their own industry, if you raised those issues, would be squealing all the way to Washington. . . . I think one day, Washington might be a non-event when it comes to railroads. And I will dance at the foot of the White House that day!” “If one of the carriers in the East married one in the West, I promise you they wouldn’t route their traffic through Chicago. And I promise you when their train left Los Angeles and was headed for the Florida coast there would be a plan that’s different than today. The service would be better, the cost would be lower, they’d need less infrastructure. If that’s not good, then I don’t know what I’m doing.” For more insight from Hunter Harrison, a true railroading giant, see our cover story, beginning on p. 20.

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: Roy H. Blanchard, Lawrence H Kaufman, Bruce E. Kelly, Ron Lindsey, Ryan McWilliams, David Nahass, 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: Lily Man 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. 253 West 35th Street 7th Floor New York, NY 10001 212-221-9595; fax 212-221-9195 curt.ciesinski@parsintl.com Railway Age, descended from the American Rail-Road Journal (1832) and the Western Railroad Gazette (1856) and published under its present name since 1876, is indexed by the Business Periodicals Index and the Engineering Index Service. Name registered in U.S. Patent Office and Trade Mark Office in Canada. Now indexed in ABI/Inform. Change of address should reach us six weeks in advance of next issue date. Send both old and new addresses with address label to Subscription Department, Railway Age,PO Box 1172, Skokie, IL 60076-8172, or call toll free 1-800-895-4389. Post Office will not forward copies unless you provide extra postage. Photocopy rights: Where necessary, permission is granted by the copyright owner for the libraries and others registered with the Copyright Clearance Center (CCC) to photocopy articles herein for the flat fee of $2.00 per copy of each article. Payment should be sent directly to CCC. Copying for other than personal or internal reference use without the express permission of SimmonsBoardman Publishing Corp. is prohibited. Address requests for permission on bulk orders to the Circulation Director. Railway Age welcomes the submission of unsolicited manuscripts and photographs. However, the publishers will not be responsible for safekeeping or return of such material. Member of:

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LAST YEAR, NEARLY 3 MILLION FREIGHT CARS RODE ON OUR REPUTATION.

Industry Indicators TRAFFIC ORIGINATED CARLOADS

SHORT LINE AND REGIONAL TRAFFIC INDEX FOUR WEEKS ENDING NOV. 29, 2014

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 Products Waste & Nonferrous Scrap All Other Carloads Total U.S. CarLoadS

NOV. ’14 88,528 3,909 39,322 24,733 115,750 62,560 448,435 6,210 12,476 23,519 31,703 15,219 40,024 15,168 67,120 89,875 16,494 31,012 13,018 16,745 1,161,820

NOV. ’13 91,719 3,973 38,959 25,468 116,033 58,128 448,423 6,382 12,638 23,514 26,462 14,489 39,838 16,298 69,775 76,915 16,123 30,923 13,236 16,128 1,145,424

% CHANGE -3.5% -1.6% 0.9% -2.9% -0.2% 7.6% 0.0% -2.7% -1.3% 0.0% 19.8% 5.0% 0.5% -6.9% -3.8% 16.8% 2.3% 0.3% -1.6% 3.8% 1.4%

331,873

330,208

0.5%

1,493,693

1,475,632

1.2%

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 INTERMODAL

FOUR WEEKS ENDING NOV. 29, 2014

MAJOR U.S. RAILROADS by Commodity TRAILERS CONTAINERS TOTAL UNITS

NOV. ’14 152,682 914,688 1,381,749

NOV. ’13 116,468 891,123 1,007,591

% CHANGE 3.3% 2.6% 2.7%

5,301 218,246 223,547

6,913 216,108 223,021

-23.3% 1.0% 0.2%

125,667 1,132,934 1,258,601

123,381 1,107,231 1,230,612

1.9% 2.3% 2.3%

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 5.7% -5.9% 22.6% 13.0% 2.0% 0.3% -1.8% -34.2% 20.1% -9.8% 25.1% -10.8% -2.1% 8.0% 1.1% 1.7% 2.0%

Railroad employment, Class I linehaul carriers, NOVEMBER 2014 (% change from NOVEMBER 2013)

CANADIAN RAILROADS TRAILERS CONTAINERS TOTAL UNITS

ORIGINATED NOV. ’13 41,811 23,546 28,721 13,168 26,939 6,301 9,467 9,633 17,871 12,813 2,123 1,955 17,567 12,215 40,459 10,641 84,255

TOTAL CARLOADS, MONTH 2014 VS. 2013

CANADIAN RAILROADS ALL Commodities

ORIGINATED NOV. ’14 44,174 22,152 32,465 12,635 27,472 6,318 9,293 6,342 21,464 11,574 2,656 1,743 17,201 13,196 40,920 10,822 85,957

BY Commodity

Transportation (train and engine) 71,089 7.69%

Executives, Officials, and Staff Assistants 9,999 1.55%

Professional and Administrative 14,249 2.75%

Total employees: 169,845 % change from NOV. 2013: 4.07% Transportation (other than train & engine) 6,699 0.03%

Maintenance of Equipment and Stores 30,476 2.95%

Maintenanceof-Way and Structures 37,333 0.42%

Source: Surface Transportation Board

Employment AGAIN UP FROM YEAR-AGO, Prior-month periOdS Figures released by the Surface Transportation Board show Class I total railroad employment rose 4.07% in mid-November 2014, measured against mid-October 2013, and was up 0.37% from mid-October 2014. Transportation (train and engine) led all categories in the year-over-year sweep, up 7.69%. And only Transportation (other than train & engine) fell from mid-October, levels, down 0.30%.

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January 2015

Industry Outlook STB: Massachusetts can buy Housatonic Railroad assets The Surface Transportation Board last month gave a holiday gift to the Massachusetts Department of Transportation (MassDOT)—preliminary approval to acquire “certain physical railroad assets” from Canaan, Conn.based short line Housatonic Railroad. The Board split its decision, for now, on prospective status of freight rail operations, which it deemed secure, and potential passenger operations over the right-of-way, of which STB remains somewhat uncertain. STB, in Docket No. FD 35866, approved its initial clearance “because under the proposed transaction, HRRC would retain the legal obligation to provide freight rail service and MassDOT would not be able to interfere unreasonably with that service. “However, the Board requires additional information in order rule on the motion to dismiss with respect to MassDOT’s proposed acquisition of passenger rights and whether MRC is a necessary party to this proceeding. MassDOT is directed to submit the additional information the Board describes in this decision within

30 days of the service date of this decision,” STB said. Massachusetts seeks ownership of Housatonic’s current right-of-way between Sheffield, Mass, on the Massachusetts-Connecticut border, and Pittsfield, Mass., the short line’s northern terminus, where it interchanges with CSX. “MassDOT states that the acquisition of the Railroad Assets is intended to facilitate the Commonwealth’s long-term plans to restore regional

passenger service linking the New York City metropolitan area, and the Northeast Corridor megalopolis generally, with the Berkshire region of western Massachusetts, STB noted. Massachusetts has been aggressive in advocating restored passenger rail service between New York’s Grand Central Terminal and the Berkshires, a weekend and summer getaway region for many living on or near the Northeast Corridor. Connecticut’s role to date, however, has been more passive.

APTA: Rail powers 3Q ridership gains More than 2.7 billion U.S. public transportation trips were taken in 2014’s third quarter, up 1.8% from the comparable 2013 quarter, the American Public Transportation Association (APTA) says. Rail transit powered the best third quarter since 1974, the oldest third quarter APTA has available for comparison. 6

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January 2015

U.S. Senate approval last month of 45G has assured passage of the measure, part of H.R. 5771, The Tax Increase Prevention Act of 2014, providing a fiscal boost to freight railroads, particularly short line and regional operations. Section 116 of H.R. 5771 in essence extends the credit only through 2014, while keeping language defining the “Effective Date” as follows: “The amendment made by this section shall apply to expenditures paid or incurred in taxable years beginning after Dec. 31, 2013.” A summary by the House Ways and Means Committee says the provision is designed to “extend through 2014 the railroad track maintenance tax credit. The credit is equal to 50% of all qualified railroad track maintenance expenditures

paid during the tax year. According to [the Joint Committee on Taxation], this provision would reduce revenues by $207 million over 2015-2024.” Section 116 was one of numerous extensions enacted by the outgoing 113th Congress prior to its disbandment, as Republicans prepare to assume leadership in both the House and the Senate in 2015. The American Short Line & Regional Railroad Association (ASLRRA) has vociferously advocated for the tax credit as key to the health of smaller railroad properties. In a statement, ASLRRA said, “Action on this bill was critical for hundreds of small freight railroads as well as railroad customers, contractors, and suppliers.” But it cautioned that 45G “will expire again at the end of 2014,” necessitating more work.

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45G tax credit extended through 2014

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Market

Hitachi Rail Europe taps Huber+Suhner Huber+Suhner has been awarded a contract by Hitachi Rail Europe to supply a range of its RADOX® cables and SENCITY® Rail antennas for use in the train control and safety systems of the Intercity Express Program (IEP) Class 800/801 trains in the United Kingdom. Under the Department of Transport’s IEP project, Hitachi Rail Europe is replacing older diesel-powered higher-speed rail (HrSR) equipment on the Great Western and East Coast Main Line routes with a fleet of 122 new Class 800/801 trains, scheduled to enter into service beginning in 2017.

North America ALABAMA STATE DOCKS: Selected RailComm to provide and install a state-of-the-art car tracking and inventory management solution. LACMTA: Awarded Rockwell Collins a contract to develop the supervisory control and data acquisition (SCADA) system for LACMTA’s Foothill Gold Line Extension and the Exposition Line Phase 2 light rail systems. The SCADA system will be based on the company’s latest ARINC Advanced Information Management (AIM®) rail system, Rockwell Collins said. MET COUNCIL (MINNESOTA): Awarded a $117 million contract to Los Angeles-based AECOM to complete the remaining engineering of the Southwest Light Rail Transit line. 8

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January 2015

MTA NEW YORK CITY TRANSIT: Awarded a $26 million “task order” contract to Arcadis U.S. to, essentially, weatherproof huge swaths of the city’s subway system inundated by Superstorm Sandy in late 2012. PATH: Awarded a three-year, $6 million contract to HNTB to conduct a cost determination study on the proposed extension of Port Authority TransHudson rapid transit service to Newark Liberty International Airport

Worldwide BELGRANO CARGAS (ARGENTINA): Awarded a $270 million contract to China’s CSR Corp. Ltd. to supply 100 diesel locomotives and 3,500 freight cars of various types as part of the reconstruction of the Belgrano Cargas network.

ST. ETIENNE, FRANCE: Selected Besain, Spain-based Construcciones y Auxiliar de Ferrocarriles (CAF) in a €42 million ($51 million) contract to supply 16 LRVs, measuring 33 meters in length, for the city’s 11.9-kilometer (7.4-mile) light rail network, which consists of three lines and 35 stations. The meter-gauge vehicles are scheduled for delivery in spring 2016. TRENITALIA (ITALY): Signed two contracts with AnsaldoBreda for rolling stock maintenance services. WALLONIA REGIONAL TRANSPORT (BELGIUM): Selected Mobiliège, a consortium led by Alstom and construction group BAM, as preferred bidder for a private-public partnership contract to design, build, operate, and maintain the first modern light rail line in the Belgian city of Liège.

Update Supply Briefs Bombardier to skip Amtrak HSR equipment order

Greenbrier first fiscal quarter orders top 14,000 cars

Bombardier Inc. last month asserted it will not compete for Amtrak’s next-generation order of high speed rail (HSR) equipment for the railroad’s Northeast Corridor (NEC). Bombardier said its decision was made in part due to Amtrak making changes in its specs for its upcoming order. Amtrak is expected to purchase 28 trainsets capable of speeds up to 160 mph, and may announce its preferred supplier this spring. Bombardier produced the first Acela Express trainsets in tandem with Alstom SA, with equipment placed into service beginning in 2000.

Cubic mobile app to serve Chicago regional services Cubic Transportation Systems has landed a contract to supply an integrated, smart phone-based system supporting a variety of mobile ticketing, mobile top up, and contactless mobile payment applications using Near Field Communication (NFC), account management, and advanced trip planning technologies, to serve the Chicago Transit Authority (CTA), Metra, and suburban bus operator Pace. The new mobile app and associated services will give travelers a single mobile app to plan their journey, pay, and receive real-time alerts across the public transit services.

Hill International lands MTA NYCT repair contract MTA New York City Transit has awarded Marlton, N.J.-based Hill International a five-year indefinitequantity contract worth an estimated $55.8 million for construction management and inspection services for NYCT’s Superstorm Sandy recovery efforts and other miscellaneous construction projects. 10

Railway Age January 2015

A Greenbrier welder assembles a new tank car shell.

s 2014 drew to a close, The Greenbrier Cos. Inc. said it had received orders for another 2,700 freight cars, bringing the total number of cars ordered in the company’s first fiscal quarter (SeptemberNovember 2014) to 14,100 units valued at $1.24 billion. Orders for the quarter include small-cube covered hopper cars for sand and cement transportation, boxcars, doublestack intermodal, units, automobile carrying cars, gondolas, and tank cars, both for crude oil and other commodity types. These orders include 11,400 units valued at nearly $1 billion received in September and October 2014 that Greenbrier previously disclosed on Oct. 30, 2014. Said Greenbrier Chairman and CEO William A. Furman, “Our strategy to diversify our product mix continues to pay off, with nearly two-thirds of the orders received being non-energy related. We are well positioned to meet

this broad-based demand with our efficient, flexible, and lower-cost facilities. Greenbrier’s business has never been better balanced than it is now.” “We anticipate the regulatory picture for tank cars transporting hazardous materials will be clarified with final U.S. and Canadian government actions in early 2015,” Furman said. “This will prompt an additional wave of new tank car orders and tank car retrofits, regardless of current oil prices. Greenbrier is strategically positioned to meet this demand.” “The future is bright for Greenbrier,” Furman concluded. “We remain committed to operational excellence in each of our businesses and enhancing the long-term trajectory of key metrics, including financial goals of at least 20% aggregate gross margin and 25% ROIC by the second half of fiscal 2016. Our robust and diverse order book moves us one step closer to achieving these goals.”

NY/NJ governors’ trial balloon on PATH cutbacks draws fire New Jersey interests, ranging from the mayors of cross-Hudson urban municipalities to the statewide rail passenger advocacy group, slammed a proposal slipped under the holiday weekend news radar by the Port Authority of New York & New Jersey (PA) to consider several options downgrading PATH rapid transit service, which links New York and New Jersey urban points. Both New York Gov. Andrew Cuomo (D) and New Jersey Gov. Chris Christie (R) have vetoed an overhaul of the PA, called for by legislatures in both states. Both state legislatures urged measures including requiring an annual independent audit of the agency, creating an inspector general’s office, and creating whistleblower protection. Though insisting no one suggestion was “set in stone,” PA officials publicly were suggesting cutting frequencies, or even eliminating overnight service, with bus service to substitute for any loss of mobility. Private operation is also suggested as an option. Privately, PA officials were noting serious cutbacks in service were highly unlikely given their political volatility, leading some observers to point out the suggestion was a way to distract the public, and the media, from focusing on the dismissive move made by the two governors. The issue of PA efficiency – not just in terms of rail but also covering numerous roads, bridges, tunnels, and airports in the region – became acute

early in 2014 after it was revealed that a PA official and an aide to Gov. Christie shut down approach lanes to the George Washington Bridge, apparently for political reasons. But the 99-page report released late last month focuses on PATH, saying lower ridership and revenue figures compel a change in operations. Jersey City Mayor Steven Fulop said he and other mayors would fight any of the proposed PATH changes, and noted that while economic recovery in New Jersey has lagged behind the national average, it has scored better in urban portions of New Jersey, where HudsonBergen Light Rail and PATH have generated economic development.

“I’d like to think it’s just a byproduct of the commission really not understanding or appreciating the importance of PATH to northern New Jersey,” he said. Some New Jersey Republican legislative leaders say they’ll support the PA’s latest proposal in the interest of cost savings. But Democratic Assemblyman Brian Stack, who also serves as mayor of Union City, N.J., vowed to oppose any such move. New Jersey Association of Railroad Passengers (NJ-ARP) President Leonard Resto said service cuts would penalize late-night workers, including many in the service industry, as well as damage businesses reliant on discretionary spending for entertainment.

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Update Tiger Cool Express expands its domestic container fleet Tiger Cool Express LLC, a transporter of produce and food products in temperature-controlled intermodal containers, has added 35 domestic containers to its fleet. The new acquisition marks an increase in the fleet size by 17.5%, to 234 containers. The new containers match Tiger Cool Express’s current specifications. They are Hyundai boxes with Carrier X4-7300 refrigeration units and iBright telematics. The insulated containers are built to hold temperatures to minus 20 degrees Fahrenheit. “Employing the latest technology, the containers offer a host of technological safeguards for the safety and security of their valuable cargo,” the company said. “The containers are equipped with remote accessibility and can be turned on or off or have temperatures adjusted from any location, remotely. There are

four internal sensors that measure temperature, including a coring thermometer, to manage and monitor the environment inside the container and record that information during the entire trip. Additional sensors monitor door openings and closings. Cellular sensors monitor location speed and direction; they are equipped with geo-fencing capability to alert us and the customer if the equipment is out of route. Accelerometers measure vertical and horizontal impacts and timing and location of those impacts. Additional sensors measure the quantity of fuel in the containers’ 120-gallon diesel tanks. Twin canvass chutes and corrugated aluminum floors ensure that cold air is distributed evenly throughout the container. This entire suite of monitoring information is available to Tiger

Cool Express customers in real time via a link on our website.” “With the increasing use of transcontinental intermodal transport, it’s more important than ever to provide our customers the capability to trace the equipment physically in real time,” said Tiger Cool Express LLC CEO Tom Finkbiner. “Our fleet of temperaturecontrolled containers will provide customers with the most comprehensive set of monitoring tools and devices available for perishables cargo—not only a fast, efficient, and cost effective solution to nationwide temperature controlled cargo delivery, but also safe, reliable delivery with high visibility throughout the entire route, for our customers’ peace of mind.” Tiger Cool Express expects to announce additional fleet expansion early this year.

Analysis: OPEC move tugs at railcar expectations KeyBanc Capital Markets Inc. issued best- and worst-case scenarios for the freight railcar production market last month, “[g]iven the dramatic share price volatility in the railcar space following OPEC’s decision last week.” KeyBanc analyst Steven Barger, in a note to clients, said the firm is “maintaining our BUY ratings, but we are lowering our price targets for The Greenbrier Companies, Inc. (GBX-NYSE) to $60 from $76 and for Trinity Industries, Inc. (TRN-NYSE) to $45 from $55. “ In the near term, we expect share prices in the group will continue to be driven by oil price dynamics as investors focus on shale play production rates and adjust expectations about when the cycle will end. We think that focus on a single, dominant macro factor (despite broadening demand trends for other railcar types) means that the group has shifted from being “investable” based on existing positive fundamental factors to being dominated by a trading mindset, which is the driving factor for our price target reduction,” Barger said. 12

Railway Age January 2015

KeyBanc’s analysis included a “Bull [Market] Case,” where, among other factors, “GBX and TRN already have record, multi-billion dollar backlogs that should result in substantial operating cash flow in the next few years that will likely be deployed to benefit shareholders. In our view, the current production visibility and potential for incremental orders provides a multiyear “window” in which oil prices could stabilize or rise as supply and demand find balance.” In KeyBanc’s “Bear [Market} Case, by contrast, “The recent drop in oil prices

could be persistent, which, in the near term, could slow the rate of shale oil production and could eventually result in production declines. If true, it could imply orders for tank cars and small cube covered hoppers have peaked, and that orders for other freight cars will not be strong enough to support a positive book:bill. Historically, shares of railcar OEMs are more positively correlated with backlog than with orders and deliveries, so a shrinking backlog could result in a persistent headwind that we think is already being reflected in share prices.”

Update Canadian Pacific welcomes cab monitoring technology

Canadian Pacific has reviewed the Canadian Transportation Safety Board’s report on the collision between two CP freight trains near Dunmore, Alberta, in May, 2013 and says it “is fully supportive of the TSB’s conclusion with respect to cab monitoring technology. CP applauds the TSB’s call for the implementation of cab monitoring technology both for post-accident analysis and its use during in-train operations to prevent accidents.” Immediately following the collision,

CP said it “took the appropriate actions” to address its primary cause. “The technology has proven effective in analyzing the cause of railroad accidents, but its true value is in preventing incidents in the first place,” said Keith Creel, CP President and Chief Operating Officer. “We reiterate our call for the correct implementation of this tool, which has lowered the frequency of collisions by almost half in similar industries.” After U.S. transit agencies implemented monitoring technology, the

National Transit Database reported a 40% reduction in collisions per million miles traveled, a 30% reduction in passenger injuries, a 30% to 50% percent reduction in unsafe driving events, and a reduction in collision severity. In its report, the TSB acknowledged that the Canadian Transportation and Safety Board Act “is a barrier to the implementation of this technology in Canada.” “When this technology can be implemented elsewhere and lead to such remarkable improvements in public safety, the key question is, why it wouldn’t it be put to use in locomotives as well?” Creel added. “Safety is the highest priority at CP, where the top causes of safety failures are studied and understood, and the company’s robust safety culture drives a constant systemwide evaluation of application of best practices.”

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CSX opens Montreal intermodal terminal CSX has opened its new Valleyfield Intermodal Terminal in Salaberry-deValleyfield near Montreal, Quebec, expanding the railroad’s intermodal network capacity and offering Canadian customers domestic and international service that connects with the its 21,000 mile U.S. network. The $100 million, 100,000-loadcapacity terminal, which spans 89 acres, includes three state-of-the-art rubbertire gantry cranes, the first of their kind at an Eastern Canadian intermodal facility. Trains serving Valleyfield will connect through the Northwest Ohio intermodal hub, “offering efficient access to markets across the U.S. and Canada,” CSX said. “Valleyfield terminal is an important addition to our unique intermodal network, which offers both point-to-point corridor service and a hub-and-spoke model that allows it to reach into small- and medium-sized markets, to capitalize on the growing

demand for intermodal transport. ”Valleyfield’s construction also incorporated environmentally sustainable innovations in the areas of noise abatement and protection of downstream waterways,” CSX noted. “We continue to invest in our intermodal business as a key growth driver and we look for long-term opportunities, such as increased north-south

trade access outlined by the North American Free Trade Agreement,” said CSX Executive Vice President and Chief Commercial Officer Clarence Gooden. “Opening a terminal near Montreal creates an opportunity to build relationships with new customers on our network, expand access to new markets, and improve the efficiency of the North American supply chain.”

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Update California readies high speed rail groundbreaking

Battle-hardened proponents advancing California’s proposed high speed rail network at year’s end announced that Fresno, Calif., would be the host site for groundbreaking ceremonies in early January 2015, marking the start of construction for the HSR system, beginning in the Central Valley.

California Gov. Jerry Brown, an ardent HSR proponent, is expected to address those attending the event in Fresno’s Chinatown district. Also expected is Transportation Secretary Anthony Foxx and California High-Speed Rail Authority (CHSRA) CEO Jeff Morales.

CHSRA, emerging from 2014 with several judicial victories in hand at the expense of HSR opponents, claims the full system will “contribute to economic development and a cleaner environment, create jobs, and preserve agricultural and protected lands. By 2029, the system will run from San Francisco to the Los Angeles basin in under three hours at speeds capable of over 200 miles per hour.” Targeted top speeds of 220 mph are forecast. CHSRA also notes the HSR system “will eventually extend to Sacramento and San Diego, totaling 800 miles with up to 24 stations. In addition, the Authority is working with regional partners to implement a statewide rail modernization plan that will invest billions of dollars in local and regional rail lines to meet the state’s 21st century transportation needs” – described as a “blended” approach to passenger rail.

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OSHA rules in favor of Metro-North worker The U.S. Department of Labor (DOL) Occupational Safety and Health Administration (OSHA) has awarded an MTA Metro-North Railroad employee who was injured in 2011 the largest punitive damages ever awarded in a retaliation case under the Federal Railroad Safety Act (FRSA). Metro-North has been ordered to pay the unnamed employee $250,000 in punitive damages, $10,000 in compensatory damages, and reasonable attorney fees following an investigation determining that the employee, a coach cleaner, was retaliated against after reporting a 2011 knee injury. “While driving the injured employee to the hospital, a Metro-North supervisor also intimidated the worker, reportedly telling the worker that railroad employees who are hurt on the job are written up for safety and are not considered for advancement or promotions within the company,” DOL

said, adding, “Unofficial reports from other employees appear to corroborate the supervisor’s claims. For instance, one worker smashed her foot with a barrel while on the job, yet she did not file an accident report and showed up to work every day using crutches in hope of keeping her injury record clean. Another worker was injured when her hand was caught in a broken door but, like her coworker, she did not fill out an incident report for fear of reprisal.” “Shortly after the employee reported the work-related injury, Metro-North issued disciplinary charges against him,” DOL said. “The employee filed an initial FRSA anti-discrimination complaint with OSHA on April 19, 2012. An amended complaint was filed on April 9, 2013, after the railroad issued additional disciplinary charges against him. OSHA’s investigation found that the employee engaged in

protected activity when he reported his injury and filed his complaints with OSHA, that Metro North knew these were protected activities and that these protected activities were contributing factors in Metro North’s subsequent disciplining of the employee.” The National Transportation Safety Board (NTSB) published a preliminary Special Investigation Report dated Nov. 19, 2014, regarding several recent accidents, including fatalities, involving Metro-North. The NTSB noted in their findings that “Metro-North Railroad did not have an effective program that encouraged all employees to report safety issues and observations.” “OSHA’s findings here provide another example of this: If employees are discouraged from reporting injuries, the employees and the public are endangered, as Metro-North cannot correct the conditions which caused the injuries,” DOL said.

January 2015 Railway Age 17

Update Oklahoma City eyes Brookville, Inekon streetcar options

Prague, Czech Republic-based Inkeon Group a.s., appears to be the frontrunner among four streetcar suppliers bidding for Oklahoma City’s MAPS 3 project, with Brookville Equipment Corp. still a factor as well. The four companies submitted a total of seven proposals, including four by Brookville Equipment Corp. (one of which is shown in photo above), two

of which will also be evaluated by a nine-member committee to see who best can supply the planned 4.6-mile, 22-station route. China’s XEMC appears to have submitted a bid even lower than Inekon’s bid of $22 million for five streetcars, but it has no track record within the U.S. By contrast, both Inekon (with Pacifica Marine for

Seattle) and Brookville (for Dallas) are manufacturing streetcar equipment for U.S. locales. Inekon’s Trio streetcar is a dualpower vehicle with batteries providing up to one half-mile of wireless operation. Brookville’s Liberty streetcar submission also offers dual-mode capability. Oklahoma City seeks such capability for a portion of right-of-way traveling underneath a railroad viaduct. Oklahoma City also received bids last month from a fourth vendor, CAF USA, the U.S. subsidiary of Beasain, Spain-based Construcciones y Auxiliar de Ferrocarriles (CAF), which has been increasingly visible and aggressive in pursuing numerous U.S. streetcar opportunities. Sources last month told Railway Age the Oklahoma City contract could include an option for eight additional streetcars.

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Railway Age January 2015

Watching Washington Frank n. wilner

Passenger trains: Between Barack and a hard place

nly a damned fool would beg Congress for passenger rail funding, trapping in amber the status quo. With tax-and-spend hostile Republicans in control of the House and Senate until at least 2017, America’s passenger trains and their advocates are between Barack and a hard place. Even before Congress’ more pronounced shift to the right—giving Republicans their largest House majority in 83 years and ending eight years of Democratic Senate control—pinchpenny behavior swelled. Full operating subsidy responsibility for corridor passenger train routes fewer than 750 miles was shifted to states, rejected were requests for more than bare-bones Amtrak funding, and high speed rail promoters begging largesse were dispatched empty-handed. President Obama’s vocalized vision of delivering to 80% of Americans access to high speed rail, accompanied by an orgy of stimulus-funds spending as if it were HSR-enabling fairy dust, is a cataract-blurred recollection. Today’s congressional majority is separated only by the degree to which tax and spending cuts are supported. This doesn’t deny congressional support exists for passenger rail. To recruit the misers, however, will require articulation of a new vision containing generous freemarket elements. Only a damned fool would now beg Congress for passenger rail funding, trapping in amber the status quo. House Transportation & Infrastructure Committee Chairman Bud Shuster (R-Pa.) promises the same “inadequate” funding previously disparaged by Democrats. Rail Subcommittee Chairman Jeff Denham (R-Calif.) leads a “hell no” chorus for federal high speed rail spending in California. Amtrak tailtwister-in-chief John Mica (R-Fla.) promises again to pounce.

In the Senate, new Commerce Committee Chairman John Thune (R-S.D.), eyeing a 2016 Presidential nomination, says voters want federal spending “under control … reducing it.” Tea party stalwart and Senate Commerce Committee member Ted Cruz (R-Tex.), also eyeing the White House, says “citizens in the private sector are a lot better at deciding how to allocate their capital and how to assess the costs and benefits than is the federal government.”

Only a fool would now beg Congress for passenger rail funding. Possessing fluency in the lingua franca of today’s political and economic reality, which looks to the private sector to produce goods and services more efficiently, at less cost and of better quality than government, is former Amtrak Reform Council member Jim Coston. He superintends Chicago-based Corridor Capital LLC, which raises private-sector money for public-private partnerships, and engineers, in conjunction with states, non-traditional operating and equipment maintenance strategies. With freight railroads out of the passenger business and Amtrak stretched to the boundary in meeting just basic capital needs, Coston says “there is a role for a new kind of company—a passenger-rail developer to access capital, expertise, and other resources directly from the private

sector.” An example is private-sector capital to increase the number and quality of passenger cars that in turn boost corridor capacity and revenue and lower costs. The model allows private-sector partners a profit. Of course, Amtrak, now the sole operator of some 27 state-supported corridor routes of fewer than 750 miles, would compete for the corridor contracts—as it does in competition with Herzog, Keolis, and Veolia for “commuter” rail contracts. Such decisions would be made by states, although under current statute, host railroads would have to concur, in most cases, on operators other than Amtrak. Indiana recently explored, then retreated from, a public-private partnership with Corridor Capital. “If states are going to sponsor passenger rail services that make sense for their own populations and their own economies, then they will have to use resources that give them the necessary choice and control to address their diverse needs,” Coston says. Congress this year must reauthorize the Passenger Rail Investment and Improvement Act, which since 2008 has been a growth hormone for statesubsidized passenger rail corridors. Republicans certainly will warm to suggestions transferring to states more financial responsibility and greater managerial control—actions likely beneficial to Corridor Capital and the Association of Independent Passenger Rail Operators that represents potential Amtrak competitors. Stakeholders are many; outcomes varied. The voices most likely to be heard by the Republican majority will be those conversant in and comfortable with the theory of creative destruction—the method by which free markets supplant less efficient players with those more qualified. January 2015 Railway Age 19

Railroader of the Year

Now a two-time recipient of the industry’s most prestigious award, this giant of railroading tackles the questions, where are we going, and how are we going to get there?

t has often been said that many railroaders, especially those who have made a mark, never really leave the industry they love. Railway Age’s 52nd Railroader of the Year, Canadian Pacific Chief Executive Officer E. Hunter Harrison, who came out of retirement in June 2012 to lead a remarkable turnaround at CP, is such a railroader. Prior to Harrison’s arrival in Calgary following a contentious proxy battle, CP had been lagging in last place among North America’s “Big Seven,” in terms of performance. Under Harrison’s strong, highly focused leadership, CP has posted 20 Railway Age January 2015

By William C. Vantuono, Editor-in-Chief

record revenues and earnings, a record-low operating ratio, and a stock share price that has more than tripled. With favorable long-term growth prospects, CP has become one of Wall Street’s most favored investments in the rail sector. Regarded as one of the best all-time operating executives, Hunter Harrison has been railroading for more than a halfcentury. Born in Memphis, Tenn., in 1944, he began his railroad career at 19 as a carman-oiler for the St. Louis-San Francisco Railway while attending college in Memphis. He was later promoted to railroad operator with the Frisco and,

Photos of Mr. Harrison courtesy of Canadian Pacific

Hunter Harrison, Canadian Pacific

Railroader of the Year

Charlie Harris

“This industry grew up for the first 150 years heavily regulated. We weren’t ready to deal with deregulation. We’ve done really well, but it’s been a learning experience for some people—to get out of some of that traditional overhang from regulation of the long haul. Those things should become part of history.” later, with Burlington Northern following BN’s 1980 acquisition of the Frisco. Rising steadily through the ranks, he served as BN’s Vice President of Transportation and Vice President of Service Design. In 1993, he joined Illinois Central, where he served as Vice President, Chief Operating Officer, Senior Vice President of Operations, and finally as President and CEO. In 1998, CN acquired Illinois Central and appointed Harrison Executive Vice President and COO, a post he held until 2003, when he was named CN’s President and CEO. Railway Age named Harrison Railroader of the Year for the first time in 2002. Harrison also served on CN’s Board of Directors for ten years. He retired from CN in 2009—a move that proved only temporary, when the opportunity to take the throttle at

Canadian Pacific came along in late 2011. In a Dec. 15, 2014 interview, Harrison spoke candidly with Railway Age Editor-in-Chief William C. Vantuono about his career, and how he sees the future of the North American railroad industry. RAILWAY AGE: Hunter, on behalf of Railway Age magazine and Simmons Boardman Publishing Corp., we want to congratulate you on being selected our 52nd Railroader of the Year. You are one of the few people who has won the award twice. Congratulations to you. HUNTER HARRISON: Thanks very much Bill. I’m thrilled and honored and I’d like to take this opportunity to thank you and all the staff at Railway Age for this recognition. January 2015 Railway Age 21

RAILROADER OF THE YEAR

“So far, this two-and-a-half-year journey has been quick and successful, and it’s really the result of the whole team pulling together. No one person can take an organization and turn it around. You just have to be kind of the key to the door, and open doors of opportunity for them, and let them run with it.”

RA: You had such a great career, you did so many terrific things right up to the CN, you retired—and you came back! What motivated you? HH: I think I underestimated how much I would miss the business, and I thought we had accomplished a lot of things, but I got a couple of phone calls. My wife had been pretty encouraging as far as retiring and taking it easy. I got off the phone with one of those calls, and she said, “You should go 22 Railway Age January 2015

back to work.” I said, “What brings that out?” and she said, “Well, I’ve never seen you passionate or enthusiastic about anything for the past couple years. Obviously you miss this and you’re in good health, so . . . go for it!” RA: From my experience, you get into this industry and it just gets in your blood. Few people really retire, they keep their hand in it in some way, you know. HH: Clearly. RA:

I wanted to ask you about you. You have been written about by so many people. You’ve been described in so many ways by different journalists, yours truly included. You’re defined in so many ways, but how would you define yourself? Who is Hunter Harrison? If you had the chance to just say, “This is who I am, this is my philosophy on life,” who do you say Hunter Harrison is? Never mind what everybody else says. HH: It’s not a question I spend a lot of time on, and maybe you should ask others, but I would say I’m a hands-on type.

Charlie Harris

RA: Let’s talk a little about your background. You started on the Frisco as a carman-oiler back in . . . ? HH: 1963, I’m afraid. It’s been a long road. I started off there and got a few breaks and opportunities along the way. And then from the Frisco I went to the BN with the merger in 1980 at then left and went to Illinois Central in ’89. And then, after a nice run with Illinois Central, we did the transaction with CN. I had a two-year respite, in which I couldn’t sit still, and then I came back and re-entered the fray if you will, in 2012 with CP.

Railroader of the Year

I’m hopefully flexible in that regard. I think that I’ve learned through a lot of my career in trying to lead people that you have to be flexible, and certain environments call for certain actions. Clearly, I’m intense, passionate about this business, very competitive, and I want to do well, and all those things to some degree you can describe as good qualities. But at the same time you have to keep them in a certain balance, harmony, or they can become a detrimental force. So that’s a little bit about Hunter Harrison. RA: Some people would describe you as a “tough guy.” Personally I don’t see you that way at all. I just see you as someone who is very focused, very determined. You know exactly what you want to do, and you know how to get it done. HH: Well, it’s kind of a matter of semantics. Sometimes, you might call it tough. But I think there are times, when you’re trying to lead and motivate people, when they need a kiss on the cheek and a hug, and sometimes they need a kick in the ass. So people kind of describe that as tough. I think it’s a case where somebody has to do it. And, you know, some of those things are distasteful. Some are not. I don’t know any of us that get pleasure of doing those things, but they need to be done at times. RA: What

did you see when you had the opportunity to join the CP—the great Canadian Pacific, with such a great history, great tradition, really one of the railroads that built Canada? What opportunities did you see there, going in when you did your personal due-diligence —“OK, this is what I’ve got to work with, what do I want to do here”? HH: As you well-described, it was a great railroad steeped in tradition that really opened Canada up, in the development of Canada. But what I found was a lot of frustration for whatever reason. People were frustrated; they were being called the worst railroad in North America. Nobody wants to be the worst. RA: Worst in terms of what? HH: I think worst in terms of

operating. Worst in terms of service. Worst in terms of financial performance, you know, given evidence of the proxy battle. But there was one thing that I have the ability to do because I understand the business from the ground up: see that there was a lot of talent there. If you could uncover the mud and get to the people, give them an opportunity to get back to railroading again, they could surprise you with their performance. And I was right about that. We discovered a lot more talent than people had given the organization credit for. So far, this two-and-a-halfyear journey has been quick and successful, and it’s really the result of the whole team pulling together. No one person can take an organization and turn it around. You just have to be kind of the key to the door, and open doors of opportunity for them, and let them run with it. RA: You brought some good people with you, when you came on board.

HH: I did! Absolutely. I think that if I’ve had any success in the business, it’s that I’ve tried to surround myself with smart, bright, hard-working people, because I found early on that, in my view at least, the key to success in business— I don’t care what business you’re in—is people. So we did bring on some talented people that I had been exposed to before, and some that I hadn’t been exposed to. If you look at the makeup of the team now—there’s some in-house, there’s some [from outside], there’s some former, and we put that together—all of us collectively have worked to create a certain chemistry, a certain esprit de corps that has been pretty motivating to all of us. RA:

Keith Creel (CP President and COO) is one of them.You and Keith worked together at other railways for a long time. HH: Keith joined my team in about ’95 at Illinois Central, as an assistant trainmaster, in Memphis. Hard working, energetic, probably the brightest young man in North America, in my view, certainly on the operating side of the business. I quickly picked up and saw the talents that he brought to the business. As we were looking at a succession, I’m not going to be around forever, I just had a big, big birthday, so. . . . RA: What birthday was that if you don’t mind me asking? HH: The big 7-0! So 7-0 is big; now we’re working on 8-0,

and I don’t think we’ll be done at Calgary hopefully, but I think that’s just one example of bringing in Keith and everything he has brought to the organization. Once again, that’s 20 years of working together, understanding each other. It’s kind of like a quarterback and a wide receiver working together. You know, you go back to pass and you don’t have to wonder where he’s going to be.You know it, you sense it. He can do the same thing with me, and that’s pretty powerful when you can develop those types of combinations with individuals.

RA: One of the areas that CP has been known for is excellence on the engineering side and on the R&D side. You’ve done some innovative things, like distributed power, running very long trains, working with the National Research Council of Canada—those sorts of things. Besides those, what else do you think sets CP apart, makes it distinct, makes it unique? HH: Well, Bill, as such a historian as you are of the rail industry, you know some of the physical conditions of the planet, and the Rockies and the Spiral Tunnels and some of the engineering marvels that people created to get across the Rockies and get to the West Coast and open up those opportunities. And I was amazed, being a quote “flat-lander” originally from Memphis, Tennessee, to see what could be done. I had been a proponent early in my career of running larger trains successfully, but I don’t think I ever thought we’d see trains running the size that we’re running in a safe manner with distributed power exceeding 20,000 tons. When I entered the business, if a train was 4,000 tons it was a big one! So you can see the economy of scale and what that brings to us. At the same time it creates challenges with track/train January 2015 Railway Age 23

Railroader of the Year

“Clearly, I’m intense, passionate about this business, very competitive, and I want to do well, and all those things to some degree you can describe as good qualities. But at the same time you have to keep them in a certain balance, harmony, or they can become a detrimental force.” dynamics in a lot of areas that I would have to say that CP was certainly ahead of the curve in the industry, and was ahead of my curve. I really didn’t have much to do with that. It was there and I think we’ve leveraged it a little better and it’s been a big plus for us. RA: Aside from moving crude oil, which of course has been a huge boom, one of your other main commodities is grain. That’s heavily regulated in Canada, and the relationship with the government has been difficult. Have things improved? HH: I think so. There’s basically two big players in Canada, CN and CP. I might be a little biased, but I’ve said to the regulators and legislators in Ottawa that you’ve got the finest rail system in the world here in Canada. You’ve got the two top railroads. Don’t mess too much with a winning combination. We had [service problems] because of a lot of reasons last year. RA: Bad weather being one of them. HH: Yes, weather, the worst in 75 years, and coming off 24 Railway Age January 2015

floods. At the same time a record crop year that was something like 30% higher than any crop year before, so there were some real challenges. Now, I think as the dust has settled, both carriers have gained a little more respect from Ottawa. I think we’ve had some good exchanges with the regulators, and I feel very comfortable going forward that the situation will not stand in our way; it will just open more doors of opportunity. RA: The regulatory situation in Canada is a bit different than in the US. There is some form of open access, to a very limited extent, and you don’t seem to have a problem with that. Some of the U.S. railroads are fighting that tooth and nail. What’s the difference? How’s it work? HH: It’s called inter-switching, which relates to some degree to the U.S.’s old reciprocal switching, pre-Staggers. It’s one of these regs that are in place, but people don’t really take advantage of it, because there’s no need to if the individual carriers do their job. It’s kind of something that could be

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Railroader of the Year

called a lever that you have over here, if it needed to be used. My view is, for years a lot of railroaders had been scared of the term “open-access,” and I don’t know why. What that says to me is, all we’re going to do is open up more competition, and with a very limited number of players in North America now, it’s important to keep that competitive balance. And if an individual carrier, CP included, provides the right type of service for the customer, at an appropriate fair price, we have nothing to worry about. If we do not provide the service, we should not be resistant to someone [else] coming and providing that servicem. So I think it’s different, its change, and people, generally speaking, their normal reaction is to resist those initial change efforts. But I think if we would look back here in 20 years, most of these things are going to be behind us, and we’re going to be settled down with those types of issues. RA: Transcontinental mergers: Now, you did approach CSX, and it wasn’t the right time for a merger, but you seem to be 26 Railway Age January 2015

pretty determined that it’s the right thing to do at some point. Why do you feel that way? HH: Let me kind of separate myself from my CEO job at CP. I originally did some work on this while I was retired, doing some consulting. And I made the observation that there needs to be, and there will be in the future, transcontinental mergers in the U.S. Now I’m in Canada, effectively so, but if you look at it, particularly in the Eastern U.S., there’s no more room for infrastructure. There are people begging for more commuter rail, people begging for more [intercity] passenger rail, people begging for more freight on different routes because of sensitivity to crude or hazmat, whatever the case may be. We’ve got that situation in Chicago. So how are you going to deal with those capacity issues, to be able to deal with growth, to deal with the commuter situations, to deal with communities that want re-routes? If you don’t sit back and take a look at the industry first and how it could be modeled and then be sure that nobody is disadvantaged competitively, then you could create a lot of capacity just

Charlie Harris

“I was amazed, being a quote ‘flat-lander’ originally from Memphis, to see what could be done. I had been a proponent early in my career of running larger trains successfully, but I don’t think I ever thought we’d see trains running the size that we’re running in a safe manner with distributed power exceeding 20,000 tons.”

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Railroader of the Year

with mergers and some transparency there. We try to do the interchanges effectively at the Mississippi River as you know, up and down the river. And now a high percentage of it is in Chicago—the most populated city we have from a rail standpoint, with the most interchange. We’re trying to cram everything through Chicago and it just doesn’t make sense. So there are some efforts under way now from an industry standpoint that I feel very encouraged about, that they are taking place. RA: The CREATE Program being one of them. HH: Yeah, but it’s even beyond CREATE. When

you get a lot of committees and ad-hoc committees on top of that, and then you get some lobbyists involved, all you’ve done is created a program that’s not going to be successful. There are some efforts led by some people behind the scenes that will get recognized one day, that are bringing together some retired individuals who don’t have their old logo attached to them anymore, who are coming in as industry 28 Railway Age January 2015

observers, saying OK, if you were given the situation of “what would you do in Chicago” and all you have to worry about is conceptualize, there’s some pretty exciting work going on. Now, I’m trying to make some efforts to keep the other folks away from them, keep the politicians away, keep CREATE away and keep the AAR away. Let them do their thing and let’s see what could happen because if that would come together, it could have some very positive impact on the industry. But the only reason for the mergers was to say you effectively have two duopolies, one in the East and one in the West. The competition between them is effectively non-existent. But if one of the carriers in the East married one in the West, I promise you they wouldn’t route their traffic through Chicago. And I promise you when their train left LA and was headed for the Florida coast there would be a plan that’s different than today. The service would be better, the cost would be lower, they’d need less infrastructure. If that’s not good, then I don’t know what I’m doing.

Bruce Kelly

“With a very limited number of players in North America now, it’s important to keep a competitive balance. And if an individual carrier, CP included, provides the right type of service for the customer, at an appropriate fair price, we have nothing to worry about.”

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Congratulations to Railway Age‘s 2015 Railroader of the Year Hunter Harrison, CEO, Canadian Pacific Railway!

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“CP was a great railroad. But I found a lot of frustration. People were frustrated; they were being called the worst railroad in North America. Nobody wants to be the worst.”

RA: If and when a transcontinental merger happens—and if one goes through then eventually everyone else will fall into place—do you think there’s going to have to be some kind of give-back in terms of regulation, whether it’s reciprocal switching or whatever? HH: That was part of the misunderstanding of our initial efforts. All we were saying is, it looks like there is potential there. There could be an opportunity to, number one, enhance shareholder value, and number two, create more capacity and avoid Chicago and improve service. That seems all good to me! But if you end up with two major railroads in the U.S., clearly you’re going to have to have access. You’re going to have to have a case where if railroad A is not doing the job for the industry, then railroad B can come over and serve them, to keep competition, both from a service and a price standpoint. We ought to do that! Competition is good! This industry grew up for the first 150 years heavily regulated. We weren’t ready to deal with deregulation. I would say, shame on us, we’ve done really well, but it’s been a hard learning experience for some people—to get out of some of that traditional overhang from regulation of the long haul. Those things should become part of history, a thing of the past. That’s one of the things we talked about. We were going to open things up, let everybody have a shot. So yeah you’ll have to do some things that way, appropriately.

Kevin Dunk

Railroader of the Year

“All Aboard” The Aldon Express IN FOR THE LONG HAUL: 109 YEARS OF RAILWAY SAFETY

In the early 20th Century, an American financial tycoon named Percival Farquhar was the largest private investor in Brazil. Backed by European investors, Farquhar’s syndicate had controlling interest in Brazilian railways, river steamers, ports, and streetcar lines. He dreamed of creating a rail network that would link all corners of South America and open the continent to development. His boldest achievement was the building of the Madeira-Mamoré Railway, a 227-mile long narrow gauge line cut through the dense tropical forest of northwestern Brazil. His workers called the railroad “The Mad Mary,” and it did seem like madness; but Farquhar persisted. It took five years to complete, at a cost of several thousand lives and 33 million 1912 dollars (equivalent to $787 million today).

Get on our mailing list by calling 847.623.8800 or visit our archives at aldoninfo.com/AEX. 1. Government and railway officials inspect the newly-opened Madeira-Mamoré Railway in 1912

Bolivia was especially rich in rubber trees, but the landlocked nation had no rail access to Pacific coast ports. It was forced to ship its rubber through Brazil via the Mamoré River, which flows into the Madeira, a major tributary of the Amazon. The Mamoré was navigable for its whole length, but the first 200 miles of the Madeira was blocked by a series of 19 falls and rapids. This made shipping rubber by boat costly and treacherous. If a railroad could be built from the Mamoré River to below the last falls of the Madeira, the problem would be solved, and rubber could be easily shipped down to the Amazon.

1911, the railroad reached the half-way point at the Rio Abuna. Bolivian rubber shipments began moving to Porto Velho. Farquhar reported to his investors that the revenues for the year 1911 would be an astounding 140,000 British pounds sterling (equivalent to 43 million 2012 U.S. dollars). He estimated that revenues for BRAZIL 1912 might more than double that.

Construction began in August 1907. Surveying parties were sent to plot the right-of-way west along the Madeira and then south along the Rio Mamoré, to the starting point of the railroad at Guajará-Mirim. At the eastern end of the line, at Porto Velho, a company town was established as headquarters. Everything had to be built from scratch: a modern hospital, dormitories with wide screened porches, rail yards, and office buildings. A modern port was built to receive the tons of supplies and equipment that began pouring in from the United States: steel rails, steam shovels and pile drivers, side-dumping gondola cars, and locomotives. Farquhar used high wages to lure engineers away from the Panama Canal as well as doctors, nurses, and other skilled workers. Even the unskilled workers — local Brazilians and laborers from the West Indies, Italy, Germany, and Spain — were paid above average wages. The working conditions were terrible: torrential rain and mud, enervating heat and humidity, with mosquitos, spiders, snakes and scorpions to add to their misery. Hundreds of discouraged workers deserted, some disappearing into the jungle to die. Until the hospital was in full operation, the sick lists were filled with men shivering from malaria and yellow fever, their feet often swollen from insect bites. Each day three men died of disease or injury. The “Mad Mary” would ultimately cost 3,600 lives.

www.aldonco.com

IN FOR THE LONG HAUL: 110 YEARS OF RAILWAY SAFETY FA L L / W I N T E R 2 0 1 4

priceless

Since 1923 the Alaska Railroad

On April 30, 1912, the has been the transportation track gangs finally reached 2. Balls of cured rubber await loading into box cars. lifeline for the biggest state in the western end of the line. DuringUnion. World War II, the railroad The Madeira-Mamoré Railway, once the Some 75 temporarily percent of considered impossible to build, was now profited from a resurgence of Brazilian rubber exlive thenotrail ports when America andalong its allies could obtainline. in operation. On September 7, 1912, rail- Alaskans way officials drove a golden spike to symbolize rubber from Japanese-controlled Far East sources. the great achievement. Farquhar cabled his con- Starting from the ice-free, deep water Today, the Madeira-Mamoré Railway is largely gratulations, confident that his success would lead ports of Anchorage and Seward, the abandoned. At Porto Velho, less than five miles to even greater ventures. railroad snakes way 467 miles north of track remain intact its for running an occasional tourist train.some A few rusting 1912-era locomotives But no one foresaw how quickly through of the most spectacular and some skeletonized rail cars on weedAsian rubber — lower in cost and and rugged scenery in stand North America, higher in quality than the South grown sidings. A group of local business-people thetoharshest climate next to Siberia) are trying preserve what remains of the railroad. American variety — would come (and terminus at Fairbanks. Butthe the march of progress is unrelenting: there to dominate the world market. to 1912 proved to be the last good is pressure to tear down the 1912 railway station Alaska Railroad issite. an unusual and build a shopping center on the year for Brazilian-Bolivian rub- The ber exports. By 1914, their mar- railroad: ket share had plummeted and so • It is the only major railroad ever built had the revenues of the MadeiraMamoré Railway. by the federal government.

In that same fateful year of 1914 In the rainy season, the Madeira could rise forty feet above its banks, ripping away 3. A Brazilian beetle was big the Great War broke out in Europe. The international banking tracks and wooden trestles. Tracks had to be repeatedly re-located to get above the and creepy ...but not deadly like the malarial mosquito. system was disrupted and Farqufloodline. The swamps proved so bottomless har lost his financial leverage. His investors saw that the engineers resorted to their South American railroad holdings evapomaking floating roadbeds from rate. By October 1914, Farquhar’s numerous en“mattresses” of criss-crossed terprises had gone into receivership. Control of tree branches filled in with tons the railway passsed to a British consortium. In 1919, after the war had ended, the ever-confident of gravel. Farquhar returned to South America to organize Month by month the clearing, the steel industry in Brazil. He died in 1953 of grading and track-laying went Parkinson’s Disease at age 89. on. A year into the project — September 1908— only 8 miles The Madeira-Mamoré Railway never recovered of track had been laid west of from the collapse of the rubber monoply in 1914. Porto Velho. By May of 1910, 56 It limped along carrying local freight and passenmiles of track had been laid. By gers, and the region retreated into somnolence. 4 Mudslide caused by the flooding of the Madeira

priceless

SUMMER 2 0 1 3

Tracks, Time, and Telegraph Bind a Nation May 10, 1869: A great day in

American history.

Locomotives of the Central Pacific and the Union Pacific Railroads face each other at Promontory Point, in northern Utah. As construction crews and newspaper reporters look on, and as the nation awaits the news, a railroad official pounds a gold spike into a silver-faced laurel tie of the final section of track. Telegraph wires attached to the spike and hammer instantly transmit each hammer blow to telegraph offices back East. Then the telegraph operator at Promontory Point taps out the word “DONE.” This marks the completion of a transcontinental railroad that stretches 1,907 miles from Council Bluffs, Iowa, on the Missouri River, across the Rockies, to San Francisco, California.

• It is the only U.S. freight railroad that still maintains regular passenger service. 5. A palm tree grows through the remains of a 1912-era box car.

Gauld, Charles A. The Last Titan — Percival Farquhar. Stanford University Press, 1964 Frank, Zephyr and Aldo Musacchio. The International Natural Rubber Market, 1870-1930. March 16, 2008. URL http://eh.net/encyclopedia/article/frank.international.rubber.market

Currier and Ives 1872 colored lithograph: ROUTE TO CALIFORNIA TRUCKEE RIVER SIERRA-NEVADA. © Classic Stock/Masterfile.com Promontory Point, Utah. May 10, 1869. Public

Photos

Black and white photos (1,2,3,4,7) all by Dana B. Merrill. from Photography Collection, Miriam and Ira D. Wallach Division of Art, Prints and Photographs, The New York Public Library, Astor, Lenox and Tilden Foundations.the Dana B. Merrill Collection, New York Public Library. Box Car Skeleton (5). Erroll Uys. http://www.erroluys.com/ WalkingWiththeGhostsoftheDevilsRailroadinBrazil.htm 6. Masterfile Un-numbered photos, public domain.

ALDON Company, InC.

domain photo via Wikipedia.com

Building the Alaska Railroad 1914-1923 of native Aleut and Tlingit peoples, the interior of Alaska was unexplored and inaccessible. Untold mineral wealth might lie beneath its permanently frozen subsoil, but in 1867 there was no practical way to get at it, or bring it out.

Alaska remained undeveloped until 1897, when the discovery of gold in the neighboring Canadian Yukon awakened U.S. interest in its faraway territory. Government geological expeditions were sent deep into the backcountry; they reported finding large reserves of coal, copper and other minerals. By the early 1900s mining companies had begun exploiting these resources. Several shortline railroads were constructed to carry the coal and copper ore out. There were no rail connections 7 Cooking rubber ball through British Columbia, so the loads had to be dumped 2 into barges at the port towns of Cordova and Seward and then towed 1200 nautical miles south to the nearest ALDON Company, Inc. | 3410 Sunset Avenue, Waukegan, Illinois 60087 | 847.623.8800 | aldonco.com | e-rail@aldonco.com laska, our 49th state, was once U.S. port at Seattle. The shortlines soon found that owned by Russia. In 1867, needing operating in a sub-Arctic climate with essentially one way money and worried traffic devoured that the British their profits. With a might seize Alaska for Canadian population in 1910 territory, Russia offered to sell of less than 65,000 its distant colony to the U.S. The people, Alaska American government was equally could not support concerned that the British not a railroad run by expand Canada. Secretary of State private enterprise. William H. Seward negotiated a 3 If Alaska was ever treaty in which the United States August 1, 1867, the Treasury warrant to be developed, authorizing the payment for Alaska handed over $7.2 million ($119 the Federal million today) in gold bullion government would have to build a railroad and subsidize to the Imperial Russian its losses. Government, in exchange for a vast wilderness, In Seattle, business interests saw such a possibility twice the size of Texas, as a tremendous opportunity for their city. They that bordered the Arctic lobbied Congress hard to enact a railway bill. The Circle. U. S. Navy was also interested in getting Alaska coal for their North Pacific squadron. In December 1913, The newspapers of the President Woodrow Wilson included a proposal for day called it “Seward’s an Alaska rail line in his State of the Union message, Folly,” and “Seward’s and declared: “We must use the resources of the I c e b o x , ” a n d country, not lock them up.” questioned the value of acquiring On March 12, 1914, the Alaska Railroad Bill was 4 this remote and enacted into law. Congress appointed an engineering forbidding land of deep forests, wild rivers, commission to oversee the project, and gave it a simple and towering mountain ranges. It was located mandate: build a rail line not to exceed 1,000 miles so far north that for weeks in winter the sun long that would connect Alaska’s Pacific coast with barely rose, and for weeks in summer the sun its interior coal fields, and do it for $35 million ($842 barely set. Except for scattered settlements

grows abundantly in the Amazonian region, but the trees are widely-scattered in the mixed species forest. Harvesting the rubber involved cutting a diagonal gash in the bark of the tree and attaching a cup to catch the oozing white latex. Rubber gatherers were forced to walk many weary miles every day from tree to tree to collect the latex in a barrel strapped to their backs. At night, they smoked the latex on a spit over palm-nut fires to create 75-pound balls of blackened latex which would then be shipped down the Amazon to market. The rubber gatherers led a slave-like existence, were paid a pittance for their labor, and were cheated by storekeepers for supplies. The rubber exporters grew rich on the trade, and employed private 6. Harvesting latex armies to enforce production quotas.

IN FOR THE LONG HAUL: 109 YEARS OF RAILWAY SAFETY

• It is entirely “landlocked,” with no rail connections with any other North American railroad.

Works Consulted

Hevea Brasiliensis — the native Brazilian rubber tree —

www.aldonco.com

• Its only direct access to the lower 48 states is by barge and railroad car ferries which make the 1200 nautical mile voyage to Seattle.

BOLIVIA

photo: catskillarchive.com

Explore the history of the railroads by reading the ALDON EXPRESS.

WINTER 2 0 1 3

In 1907, when Percival Farquhar sized up this opportunity, he saw enormous profit potential in operating such a railroad. He gambled that the threat from Asian rubber was far enough in the future that he could build the railroad with revenues from the rubber monopoly and then further develop this remote region. Farquhar was willing to go deeply into debt to finance his jungle railroad. He believed it would be considered an American engineering triumph second only to the Panama Canal, which was then being built.

CMY

“The Mad Mary”: One Man’s Obsession

Rubber was the economic underpinning of the Madeira-Mamoré Railway. In the early 1900s, the development of the automobile industry created a huge demand for rubber for tires. At that time, Brazil and its neighbor to the west, Bolivia, produced Percival Farquhar (1864-1953) 90% of the world’s rubber supply. The only competition was Asian rubber grown on plantations in Malaya, Ceylon, and SuRapids on the Upper Rio Madeira matra, but they had only recently begun to export.

priceless

www.aldonco.com

Frederick Mears, a career Army officer and civil engineer was put in charge of surveying and construction, at a salary of $10,000 per year. Mears had served in the infantry during the Phillipine Insurrection in the early 1900s in the aftermath of the Spanish American War. In 1906 he went to work on the Panama Canal, in charge of relocating the Panama railroad and operating it. In 1914 the canal opened and Mears was available for an even greater challenge.

Begun in the middle of the Civil War and completed six years later, the transcontinental railroad ended the isolation of California, Oregon, and Washington from the rest of the Union. Passengers and freight could now travel entirely by rail from the Eastern seaboard to the Pacific coast instead of having to go by sea around the bottom of South America. This opened the West to rapid settlement and development. Within a few years, an extensive rail network linked all parts of the nation, carrying passengers, freight and U.S. mail on thousands of trains. The operation of such a complex transportation system was only made possible by three 19th Century innovations: 1) the telegraph, 2) standard time zones, 3) a uniform track gauge.

The Telegraph

Time Zones November 18, 1883.

On this day, at noon, a new concept of time came into being. American and Canadian railroads began running on Railroad Standard Time, a system in which the North American continent was divided into five time zones, each one hour apart (approximately Hamilton Railroad centered on a longitudinal meridian). We still Watch ca. 1915. use the original names for the United States zones: ©2013 Hamilton Eastern, Central, Mountain, and Pacific. A fifth zone, International Limited for eastern Canada, was called Intercolonial, and then later, Atlantic Time.

Gauge

1830-1890

In railroad parlance, gauge means the distance between the inside faces of two parallel rails spiked to wooden ties. The flanged wheels of railroad cars and engines require that the gauge be kept to rather close tolerance to avoid derailment.

In the past two centuries since railroads first The growth of railroad traffic, the speed of trains, and the distances the appeared, many different track gauges have trains travelled made precise time-keeping essential. Time had always been used, ranging from 7 feet wide to as been determined locally by sun-dial, but how do you determine time for narrow as 36 inches. But today, most of the a railroad hundreds of miles long? Most railroads used the time of the world’s railways — and almost principal city on their line as a all North American railroads George Stephenson reference and kept their stations — use what has come to be informed by telegraph. At one 1781-1848 known as standard gauge unattributed image in point the railroads operated on the public domain via (4´ 8½´´). 75 different time systems. At wikipedia stations where several railroads Credit for the 4´ 8½´´ gauge must go to George converged, a traveller would Stephenson, the British engineer who has been find a clock for each line, each called “The Father of Railways.” In the 1820s giving a different time. This Stephenson built the first steam locomotive and the chaos in time-keeping had led first commercial railway in England. In deciding on to numerous railroad accidents, the gauge for his locomotives and track, Stephenson 1883 confusing timetables, and missed followed the example of British coal mines, which connections for travellers. had traditionally built tracks 4´ 8´´ wide for their The railroads set the boundaries of the new time zones to include as much of their horse-drawn coal wagons. Stephenson added 1/2´´ By the early 1880s, the huge trackage possible within a zone. Note how to reduce wheel binding when his faster-moving growth in rail traffic had forced Florida and a good part of South Carolina locomotives entered a curve. Thus was born the the railroads to develop a were in Central time. Since then, time 4´ 8½´´ gauge. The term standard gauge probably standardized way of keeping zone boundaries have shifted considerably originated when Parliament passed the Gauge Act time. The change-over in 1883 westward and are still subject to change. in 1846, making Stephenson’s gauge the standard to standard time zones made it William Frederick Allen papers. Manuscripts and Archives Division, for British railways. possible to schedule more trains the New York Public Library, Astor, Lenox and Tilden Foundations on the same tracks with greater The first American use of the 4´ 8½´´ gauge came precision and safety. in 1829, after engineers of the newly-formed Baltimore and Ohio Railroad inspected Stephenson’s locomotives and railway. The official time-keeper for the new time zones was the U.S. Naval They decided his gauge was practical and adjusted their tracks Observatory at Washington, D.C. For many years, the Observatory accordingly. had provided Washingtonians a local noon-time signal by dropping a large rubber ball from a pole on the dome of the observatory. The Other American railroads in this early period chose different gauges Observatory now began sending its noon signal through Western since there was little inter-connection between rail lines. But in 1863, Union’s telegraph lines to all the railroads. This instantaneous messaging when Congress authorized the construction of the transcontinental of standardized time enabled station masters, dispatchers, and engineers railroad, it looked ahead to future rail development and mandated to synchronize their watches and clocks. the 4´ 8½´´ gauge for the new line. By 1890, the need for a uniform track gauge throughout the country had become an economic The public reaction to the new railroad time zones was mixed. Some imperative and most railroads converted. This meant that now communities adopted railroad time and some did not. Many people freight could be shipped across the country, from one rail line to continued to rely on the sun for time-keeping into the early 1900s. In another, without having to be reloaded onto different freight cars 1918, in the midst of WW I, Congress made time zones official by passdue to differences in track gauge. ing the Standard Time Act.

Waukegan, Illinois • 847.623.8800 • www.aldonco.com • e-rail@aldonco.com The building of the Alaska Railroad was an engineering achievement comparable to the Panama Canal. Mears commanded an army of civilian workers and contractors, which at the peak of construction numbered 4500. Except for what could be utilized of the existing shortline railroads, everything needed for a major railroad had to be created from scratch: rail yards and depots, machine and repair shops, housing for workers, hospitals, power plants, and sawmills for converting tree trunks into cross-ties. Town sites, streets and waterworks were laid out for the increase in population which the railroad would bring. Engineers, surveyors, track gang bosses, doctors and nurses, cooks and telegraphers, had to be hired; many of them were veterans of the Panama Canal construction.

RAILROAD SAFETY AND TRACK MAINTENANCE PRODUCTS SINCE 1904.

30 Railway Age January 2015

Modern docks had to be built at Seward, on the south coast and at Ship Creek, a small village at the head of Cook Inlet on the Pacific side, which would soon be re-named Anchorage. Into these new harbors would come shiploads of rail, spikes, tie plates and switch stands; reels of telegraph and telephone wire; timber and steel bridge sections, steam shovels, derricks, locomotives, freight and passenger cars. With few roads into the outback, trucks were of little use. Thousands of horses were needed to haul equipment and supplies; each animal, kicking and whinnying, was lowered to the dock by

Andrew J. Russell, Telegraph Corps at work, Weber Canyon, Utah, c. 1868 (detail). Stereographic collodion glass plate negative, 5 x 8 in. Collection of the

Oakland Museum of California. Purchase.

1844

Samuel F. B. Morse is credited with inventing the magnetic telegraph. Morse also devised the code that bears his name — a system of dots and dashes representing the letters of the alphabet. By tapping on the telegraph key, the operator could make or break electrical contact, thereby creating short and long clicks. These sounds could be instantly recognized and recorded as words by another operator a thousand miles away. The telegraph revolutionized communication. It gave the Telegraph key, Central Pacific railroads the means to issue RR Co., 1860s. courtesy, orders to its station masters Division of Work & Industry, NMAH, Smithsonian Institute and train crews in real time. The telegraph remained the principal means of communication on the railroads until the 1920s, when radio telephones took its place.

References for works consulted in preparing this article appear on page 2

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Railroader of the Year RA: There seems to be, at least in my perception, on the part of not only regulators, but a lot of politicians, that the railroads shouldn’t be allowed to make a good healthy profit. Why do you think that is? HH: They’re misguided. RA: Making too much money? Where does that come from? HH: We have a little overhang, both in Canada and in the U.S. RA: What do you mean by HH: Well, I think from the

“One day, Washington might be a non-event when it comes to railroads. I will dance at the foot of the White House that day!”

32 Railway Age January 2015

overhang? old days, when they viewed railroads as a utility, that we all kind of own them. That CN should still be a Crown Corporation. And so as a result, as I said earlier, for the first 150 years, never did any carrier come close to making its return on capital, as far as investments. We came to the Staggers Act in 1980. We were deregulated, and then due to our own fault we saw rates decline from ’80 to 2000 on about a 45-degree slope, which no sector did during that time. So we went from the start of [deregulation] to 2000 and nobody made any returns. And you know what we went through in the ’60s and ’70s with bankruptcy and railroad infrastructure crumbling. RA: Talk about nationalization. HH: Absolutely. And then we hit

in 2000. And now the rails

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have gotten their act together, they’re providing a better service to the customer, they’re being rewarded and making some returns and doing well in the market, and people say, “They’re abusing things.” And the people that argue the most that we should be regulated and that we make too much money are the ones in their own industry, if you raised those issues, would be squealing all the way to Washington. So I think, once again, it’s the political pressures that push and say “Here’s why the grain rates are up.” There’s a lack of understanding of markets and how markets move. You go with grain and you say: “You’re doing well with the grain. Much better than last year.” Well, the market’s soft, nobody wants to ship any grain. But I know one thing that’s happening: Grain’s going to move every year. People are going to eat every year, eventually. The world market is not good and people are sitting on grain and holding it. But when the market opens up, everybody’s going to want to go at once! That’s a huge cost in assets and human resources. So, working with shippers, as they become and we become more sophisticated about markets, they understand more about our issues. I think you’re going to see a lot of those things go away. And I think one day, Washington might be a non-event when it comes to railroads. And I will dance at the foot of the White House that day!

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34 Railway Age January 2015

Kevin Dunk

Railroader of the Year

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Railroader of the Year

As he walked into a room full of high profile investment professionals at a Cowen and Company hosted lunch earlier last year, he may have felt good about what he was able to accomplish at Canadian Pacific thus far, but CEO Hunter Harrison knew that the question from people who ran billions of dollars was “what is next?” Harrison proceeded to tell the room that there was more work to do at CP in terms of its operating ratio

but that the real potential for the railroad was in its top line. He put more meat on the proverbial bone for the investment community later in the year when he hosted an investor day up in White Plains, N.Y., and laid out aggressive plans to grow revenues at CP at a CAGR just north of 10% for the next four years. It is unlikely that Harrison envisioned that his rail career would take him from a carman/oiler on the St.

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What’s next: Growing the top line By JASON SEIDL, Contributing Editor

Railroader of the Year Louis-San Francisco Railway in the mid-1960s to head of one of the seven Class I railroads in North America. That said, he is on his second stint as head honcho of a Canadian railroad and has won over the investment community with his impressive track record of producing strong results. Indeed, when he took over CP, the railroad’s operating ratio was the worst in the industry at around 80%. Under Harrison’s watchful eye, the operating ratio has improved more than 1,700 basis points to 62.8% in the most recent quarter. While we believe that CP has more to go in terms of improving its operating ratio, it has become clear that the main vision of the company going forward is focused on the top line. Indeed, CP has laid out plans to grow its top line to $10 billion in 2018, from the $6.6 billion projected by Wall Street for 2014. Some of this growth should simply come from CP running a more reliable railroad than it has in the past, but a good portion depends on growing a number of traffic groups, including crude oil, which the company believed it could grow by 200,000 carloads during its guidance period. Harrisons’ goals, however, were made before the most recent drop in

40 Railway Age January 2015

energy prices. While predicting the direction of crude prices is far from our bailiwick, if prices do not rebound from current levels we would expect a pullback in demand for Canadian energy carloadings. Growth on the grain side could also impact CP’s top line over the next few years. While we are coming off some bumper crops, it is extremely difficult to predict harvests from a year-to year-basis. Hence, we may see CP revise its longer term outlook. That is not to say we expect there to be no growth, it just may not be as robust as prior company estimates. Whatever the pace of revenue growth over the next five years, Hunter Harrison will likely not be steering the ship, as his contract runs out in 2016. His longtime, and extremely capable, protégé Keith Creel remains ready to take the helm. When Harrison rides off into the sunset (likely on a locomotive we might add), CP should be in good hands with Creel. He has a very solid track record and has studied under Harrison. Investors appear confident in Creel as well but we cannot help but wonder what a challenge it will be to fill those shoes it appears he will be stepping into.

Railway Age’s Railroader of the Year Award

The Railroader of the Year Award was started by Modern Railroads magazine in 1964 as the “Man of the Year” award. Railway Age acquired Modern Railroads in 1991 and has presented the award annually since then. Railroader of the Year recipients under Modern Railroads: 1964: D. W. Brosnan, Southern Railway System 1965: S tuart T. Saunders, Pennsylvania Railroad Co. 1966: S tuart T. Saunders, Pennsylvania Railroad Co. 1967: Louis W. Menk, Northern Pacific Railway 1968: William B. Johnson, Illinois Central Railroad 1969: John W. Barriger, MissouriKansas-Texas Railroad 1970: John S. Reed, Atchison, Topeka & Santa Fe Railway 1971: Jervis Langdon, Jr., Penn Central Transportation 1972: C harles Luna, United Transportation Union 1973: James B. Germany, Southern Pacific Transportation Co. 1974: L. Stanley Crane, Southern Railway System 1975: Frank E. Barnett, Union Pacific Railroad 1976: Dr. William J. Harris, Jr., Association of American Railroads 1977: Edward G. Jordan, Conrail obert M. Brown, Union 1978: R Pacific Railroad 1979: Theodore C. Lutz, Washington Metropolitan Area Transit Authority 1980: John G. German, Missouri Pacific Railroad Co. 1981: Lawrence Cena, Atchison, Topeka & Santa Fe Railway 1982: A. Paul Funkhouser, Family Lines Rail System 1983: L. Stanley Crane, Conrail 1984: Hays T. Watkins, CSX Corp. 1985: John L. Cann, Canadian National 1986: R aymond C. Burton, Jr., Trailer Train Co. 1987: Willis B. Kyle, Kyle Railways 1988: Darius W. Gaskins, Jr., Burlington Northern 1989: W. Graham Claytor, Jr., Amtrak 1990: Arnold B. McKinnon, Norfolk Southern

1991: Mike Walsh, Union Pacific Railroad Recipients under Railway Age: 1992: William H. Dempsey, Association of American Railroads 1993: Raymond C. Burton, Jr., TTX Co. 1994: L. S. “Jake” Jacobson, Copper Basin Railway 1995: Edwin Moyers, Southern Pacific Transportation 1996: Robert D. Krebs, AT&SF, and Gerald Grinstein, Burlington Northern 1997: Paul M. Tellier, Canadian National 1998: David R. Goode, Norfolk Southern Corp. 1999: Edward A. Burkhardt, Wisconsin Central Transportation Co. 2000: The Railroad Worker (award presented as “Railroader of the Century”) 2001: Michael R. Haverty, Kansas City Southern 2002: E. Hunter Harrison, Canadian National/Illinois Central 2003: Richard K. Davidson, Union Pacific Railroad 2004: Robert J. Ritchie, Canadian Pacific Railway 2005: David R. Goode, Norfolk Southern Corp. 2006: Richard F. Timmons, American Short Line & Regional Railroad Association 2007: William E. Wimmer, Union Pacific Railroad 2008: Stephen C. Tobias, Norfolk Southern Corp. 2009: Michael J. Ward, CSX Corp. 2010: Matthew K. Rose, BNSF Railway 2011: Charles W. “Wick” Moorman, Norfolk Southern Corp. 2012: David L. Starling, Kansas City Southern 2013: James R. Young, Union Pacific Railroad 2014: Joseph H. Boardman, Amtrak 2015: H unter Harrison, Canadian Pacific

January 2015 Railway Age 41

Congratulations to E. Hunter Harrison, CEO of Canadian Pacific, for being named Railroader of the Year from

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CP’s next move?

A bid for CSX does not suggest that all of CP’s growth potential lies eastward. By Bruce E. Kelly, Contributing Editor

Charlie Harris

n the wake of Canadian Pacific Railway’s offer to merge with CSX, there was much speculation about CP’s ambitions in the eastern U.S. Adding CSX to its route structure would broaden CP’s ability to move Canadian and North Dakota crude to refineries and export terminals along the Atlantic Coast. Unifying its connection with CSX at Chicago could streamline the movement of international traffic through North America’s most congested freight rail hub. And while it can only be assumed that CSX might have faced reductions in workforce and property similar to those imposed at CP under CEO and Railway Age 2015 Railroader of the Year E. Hunter Harrison, it’s almost certain that investors and even a few shippers would have been favorably impressed by his acquisition of a key U.S. carrier. But don’t let a stalled attempt at eastward expansion distract from the other areas where CP is eyeballing growth potential. In fact, as far as the Northeast goes, around the same time CP announced its interest in CSX, CP also hinted it might soon be selling most of its former Delaware & Hudson Railway network. CP would keep possession of D&H trackage as far south as Albany, N.Y., where it serves a rail-to-vessel terminal that CP investor literature describes as “our main crude unloading destination.” All of these proposed

maneuvers seem to back the opinion of one Wall Street analyst who said CP’s bid for CSX “was all about oil.” Northwest from Chicago to the Canadian border, CP operates a nearly 1,000-mile corridor on the former Soo Line—plus hundreds of miles in related U.S. branch trackage—and it interchanges on or near the U.S./Canada border with Union Pacific (Idaho) and BNSF (Washington, Montana). Could either of America’s Western Class I’s be courted next by CP? Not likely, if you accept at face value an excerpt forwarded to Railway Age by CP from an Oct. 21, 2014 investors conference call, in which CEO Harrison said, “I haven’t talked to any of them other than CSX about this. So I want to make that part clear. . . . I guess when you place a little reality on it and you start thinking about the likelihood, I think the likelihood in my view, I could be wrong, it’s much lower with the two Western big boys.” That hasn’t stopped CP from growing its own business. And for CP, that business lies largely in the West. The company’s 2014 profile states, “Grain is CP’s single largest commodity, accounting for 22% of our freight revenues.” In 2013, that meant roughly 438,000 carloads of grain or grain products, producing $1.3 billion in revenue. That volume rose nearly 6% during the first half of 2014, and not just January 2015 Railway Age 43

CANADIAN PACIFIC

basic grains like wheat and barley. Corn, soybeans, and canola out of the Canadian and U.S. interior feed an increased demand for biofuels, food, and animal feeds both domestically and abroad. Roughly two-thirds of the grain hauled by CP is of Canadian origin, and much of that (49%) rolls west to export terminals in the Vancouver, B.C., area. The other third of CP’s grain haul originates mainly in North Dakota or Minnesota and moves toward milling or export on the Great Lakes, East Coast, or Pacific Northwest. To reach the PNW, CP runs grain trains northward from the U.S. into Canada, then west to Kingsgate, B.C., where they re-enter the U.S. on UP trackage for final delivery to export or processing terminals in Washington and Oregon. Grain and oilseed traffic originating on CP also moves south to California. After grain, CP’s next biggest revenue generators during 2013 and first half of 2014 were intermodal and coal. CP hauled 43% of its intermodal strictly within Canada. Another 34% of its intermodal was international container traffic that moved through Pacific ports in Vancouver, while 18% of its international containers passed through the port of Montreal. CP hauled roughly 245,000 carloads of Canadian coal in 2013—more than 93% of which was exported through West 44 Railway Age January 2015

Coast terminals—plus another 85,000 loads of U.S. coal destined for Midwest utilities and Pacific export. Andy Cummings, manager-media relations at CP, tells Railway Age, “The corresponding increase in demand for Canadian metallurgical coal will be met by announced Teck expansion plans and greenfield development in both northeast and southeast British Columbia. CP has been in discussions with a number of parties regarding mine development plans near our main line in southeastern B.C. With a reserve of high-quality coal at these locations, CP’s current and potential partners are expected to maintain a strong position in the metallurgical coal marketplace.” As for thermal coal, Cummings says, “CP volumes in the U.S. have not been impacted to the extent seen across the marketplace, largely due to the fact that the power generation facilities we serve have less ability to switch to gas with their current infrastructure. As well, these facilities are newer and have been able to meet regulatory standards with relatively less investment. Growth in Asian demand will continue to present opportunities for incremental movements of PRBoriginated coal. We participate in the most efficient route to Prince Rupert’s Ridley Terminal and are well positioned to capitalize on future opportunities to supply the market.”

Charlie Harris

CP could buy and build its way deeper into the American West, take a new approach at cracking the Northeast, or keep its growth confined within Canada. Anywhere grain, coal, crude, and containers must go, that’s where CP will likely make its next move.

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CANADIAN PACIFIC

CP’s grain, intermodal, and coal traffic rely on a network of feeder lines that lead toward Northwest ports, and also on a core main line that offers direct, competitive service between those ports and Chicago as well as eastern Canada. Cummings says, “CP is currently in a multi-year process of installing Centralized Traffic Control between Glenwood, Minn., and Moose Jaw, Sask., to meet the needs of our customers. This is a corridor where we see strong prospects for growth in a wide variety of commodities.” That project will benefit CP’s cross-border business through St. Paul/Minneapolis and Chicago. CP is also improving fixed plant in Canada, where Cummings says, “We continue to invest in our ‘North Line’ between Portage la Prairie, Man., and Wetaskiwin, Alta., with the final stretch of jointed rail on that route set for replacement with welded rail in 2015. We’ve begun a five-year ballast program on the line to enable faster train speeds, while new and extended sidings are also added.” Cummings says that these two routes represent “renewed focus” by CP, but similar investment in renewal and capacity expansion is under way across the system. Two other product lines pointing toward Western growth for CP are crude and potash. Though representing only 6% of CP’s freight revenue in 2013, crude is its fastest-growing commodity. In 2011, CP moved 11,000 carloads of crude, earning $29 million in revenue. In 2013, it moved 90,000

crude loads for $375 million in revenue. CP expects it will reach nearly 120,000 crude loads in 2014, and expand beyond 200,000 loads in 2015. Much of that growth is anticipated for Eastern markets, where crude by rail (CBR) provides an option when capacity isn’t readily available via pipeline or Great Lakes-St. Lawrence Seaway vessels. But in the West, CBR is currently the most practical way to channel increased Canadian crude production through the Rocky Mountains and on toward the coast. CP originates crude traffic that ultimately interchanges to BNSF and UP to reach refineries or barge terminals in the Pacific Northwest and California. Only recently have CP’s earnings from crude outpaced potash, which produced 5% of CP’s revenues in 2013. Of the 68,000 carloads of potash CP hauled toward export in 2013, 70% went straight west to Vancouver, while 30% went south into the U.S., then west via UP to Portland. Potash shipping conglomerate Canpotex recently announced it will invest $140 million to expand its Portland rail-to-ship terminal. It also received permits to build a new $775 million terminal at Prince Rupert, which would give Canadian potash producers a third outlet on the Pacific Coast. Export capacity will be key to the K+S potash mine that’s now under development near Moose Jaw, Sask. CP says it will be the exclusive rail carrier for this new site,

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CANADIAN PACIFIC

which is expected to begin shipping by late 2016. Along with CP’s investment in new track and capacity, there is continued reduction of what it considers to be surplus properties. A number of yards and other facilities have been closed, leaving CP with more than 45 parcels, totaling more than 4,000 acres, that it hopes to sell or lease for commercial or residential development. During the October 2014 investor conference, CP said, “Underutilized track will continue to be removed and monetized,” and noted that 100 miles of such track had been identified to date. More specifically, CP said 13 sidings totaling nearly 16 miles of track could be removed from the rugged canyon and mountain territory between Vancouver and Calgary, and some of that rail could be used to lengthen three other sidings on that route, plus a fourth siding on its route leading toward a UP connection at Eastport, Idaho. Cummings says, “In 2011, CP’s year-to-date operating ratio at the end of the third quarter stood at 82.4%. This year [2014], it’s 66.4%.” That figure is notable. When Harrison joined CP in 2012, he said he’d attain a mid-60s ratio by 2016. Having accomplished that in half the time, he recently told Canada’s Financial Post, “We’re doing things that people didn’t think were imaginable.” In that same Financial Post interview, Harrrison said, “Railroads aren’t different in North America. We all run on the same gauge. We’ve got the same cars.” There’s a degree of truth to that. But what continues to be ignored by many investors and the financial media—who tend to measure the performance of CP and others by final tallies of revenue-to-cost, ROI, tons-per-mile, etc.—is that CP operates across some of the most unforgiving geography in North American railroading. CP’s chief competitor, CN, crosses the Continental Divide at an elevation of just over 3,700 feet, with ascending grades of only 0.4% westbound and 0.7% eastbound. But for CP, the summit of the Rockies lies at 5,300 feet, plus a second major hurdle at nearly 3,500 feet in the Selkirk Range. On both of CP’s mountain passes, ascending grades are 1% westbound and 2.2% eastbound. That’s more than twice as steep as CN. To say that CP has a tougher route than CN between the Canadian heartland and the Pacific Coast is an understatement. To expect CP to perform there in the same manner as CN and achieve the same operating ratio as CN seems unthinkable. And yet, somehow, Harrison has come remarkably close to doing just that. A large measure of his success rides precariously on the shoulders of CP’s downsized workforce, and the leaner system in which it now operates. Where all of this leaves CP headed is anyone’s guess. CSX has proven there’s no crystal ball offering guaranteed outcomes on Hunter Harrison’s behalf. He could buy and build his way deeper into the American West, take a new approach at cracking the Northeast, or keep CP’s growth confined within Canada itself. Anywhere grain, coal, crude, and containers must go, that’s where CP will likely make its next move. RA

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2015 passenger rail outlook

Equipment suppliers keep sharp as more customers keep coming. States and cities join those purchasing railcar equipment, often with varied modal needs, prompting fierce competition from industry suppliers eager to serve. By Douglas John Bowen, Managing Editor

Josepth M. Calisi

The numbers keep growing.

North American rail passenger systems keep multiplying. Their sizes increase. Their fleet numbers keep increasing. And the number of global equipment suppliers seeking to tap such growth is expanding right along with that. The numbers counter pessismistic claims that North America’s rail renaissance had run its course in 2014. Indeed, 2014 saw several huge orders for new equipment that added to a backlog of healthy equipment orders from previous years, judging by the numbers of Railway Age’s 2015 Passenger Railcar Outlook. Such orders, be they from BART on the West Coast of MBTA back in the East, were indicative of longstanding commitments by established rail players who have no intention of shrinking their service offerings. But the old-timers continue to be joined by relative newcomers, often cities moving to establish rail without a corresponding or outside “agency” or “authority” to do so (and prompting complaints about how the Federal Transit Administration assists such city government-driven efforts). Almost in parallel, well-established and active rail equipment suppliers have found a more crowded playing field as smaller

companies, along with Chinese suppliers moving aggressively into the North American market, seek opportunity. Suppliers’ supple approach

Gone are the days where “build it new” was an axiom, the only option, for suppliers to North American passenger rail entities. While Bombardier continues to work on (and, by at least one report, struggle with) production of 300 new R-179 subway cars for MTA New York City Transit—still the key transit customer on the continent—Kawasaki Heavy Rail Industries is employing a mix-and-match approach for the agency. NYCT is counting on up to 440 R-188 cars to be delivered from Kawasaki’s plant just upstate in Yonkers, N.Y. But those cars, while including brand new end-units for train operators, also will include retrofitting numerous R-142 cars already on the property for several years. In similar fashion, Kinkisharyo will deliver 35 “midsection” light rail transit (LRT) units to NJ Transit for use within existing rolling stock serving both the Newark Light Rail and Hudson-Bergen Light Rail lines, to increase passenger capacity. The idea isn’t new: Kinkisharyo already has tackled a similar problem with success for Dallas Area Rapid January 2015 Railway Age 49

2015 passenger rail outlook

Streetcar moves, pro and con

Notwithstanding crocodile-tears reporting from various media over U.S. streetcar prospects as 2014 ended, the

Railway Age

2011

January 2015

2013

2014

2008

2010

2011

2,904

3,140

1,013

1,175 2012

4,502

2010

689

890 2009

(as of Dec. 31)

4,485

2008

New and rebuild backlog

1,555

1,109

1,818

New and rebuild deliveries

6,209

Congress’ “Cromnibus” FY15 spending bill cut TIGER spending from $600 million to $500 million, but demand for TIGER funding has always far outstripped supply, meaning the political process for municipalities and transit agencies likely will remain relatively similar, if smaller, to years past, objections from a Republican-controlled Congress notwithstanding.Amtrak retained funding comparable to its FY14 levels, a modest victory given increased sniping at its longdistance service offerings from some corners of Congress. Amtrak seeks to place its own order for new HSR trainsets this year to upgrade its Northeast Corridor service. Per California’s pending HSR order, suppliers know that states, both individual units and regional compacts, are stepping in more often when the federal government’s disinterest thwarts a purchase. During 2014, California and several Midwest states told carbuilder Nippon Sharyo to add 45 bi-level intercity cars to their existing 130-car order. California will add 11 cars to its initial 42-car order, and the Midwest states will boost their 88-car order by 34 cars.

5,167

Funding continues to flow

market for the rail submode seems to be growing, not shrinking. As just two examples, Oklahoma City is close to ordering five streetcars in 2015 from one of numerous suppliers bidding for the city’s business, with an option for eight additional cars. Meanwhile, track-gauge woes notwithstanding, construction of Charlotte, N.C.’s Phase 1 streetcar project is well under way, with Phase 2 getting approval last year from the FTA. Looming as real possibilities are numerous streetcar orders, including but not limited to Anaheim and Santa Ana, Calif., both Miami and Miami Beach, as well as St. Augustine, Fla., Grand Rapids, Mich., Minneapolis and St. Paul, Minn., Winston-Salem, N.C., Providence, R.I., and El Paso, Tex. Other efforts, including those in Fort Lauderdale, Fla., and even a decades-long effort in Milwaukee, seem poised to become reality. It’s likely many of these efforts will stall or fall. But all of them? To be sure, pushback from taxpayers and NIMBYs killed off or threatened numerous LRT and streetcar proposals in 2014, with particular attention given to a triad of D.C.-area projects: Arlington’s two proposed streetcar projects, the Purple Line light rail transit project spanning two Maryland counties northeast of Washington, and the District’s slow-toopen streetcar line on H Street. Media seized on the killing, threatening, and tardiness of the trio, flirting with the conclusion that U.S. urban rail transit growth had peaked. D.C.-area projects were not the only casualties. San Antonio anti-rail forces succeeded in scuttling a nascent streetcar project, while voters in Tampa Bay rejected the latest effort to advance light rail transit. And fumbles, described by some as ineptitude, put the proposed St. Louis Loop trolley project on the brink of dismissal. Those developments proved that the woebegone news generated within the Beltway did reflect reality, at least in part. But such setbacks failed to encompass the full breadth of U.S. rail passenger progress. Case in point: As San Antonio’s streetcar plan faltered, few seemed to notice that El Paso’s efforts were still ongoing. RA

4,967

Transit’s (DART) enhancement of existing LRT rolling stock. New car orders are still plentiful.Bombardier landed a BART add-on order of 365 rapid transit cars, while China’s CNS Changchun won a Massachusetts Bay Transportation Authority contract to supply 284 rapid transit cars for Boston’s “T” system. MBTA’s contract is likely a harbinger; Oklahoma City in December chose not to accept a low bid from Chinese supplier XEMC for five streetcars, but that bid signaled increased interest by Chinese equipment manufacturers to enter more rail markets. A bid this year by at least one Chinese firm, likely in a joint venture, to manufacture high speed rail (HSR) trains for California looms large, in tandem or competition with familiar players such as Siemens.

2009

2012

2013

2014

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2015 passenger rail outlook

2015 Passenger Car Market at a glance These new and rebuilt cars were delivered in 2014 Purchaser

# of cars

Type

Builder

Amtrak

Intercity

CAF USA

Atlanta

Streetcar

Siemens

Boston (MBTA)

Bilevel Commuter

Hyundai Rotem

Buffalo (NFTA)

Rebuilt Light Rail

Ansaldo/Breda

Caltrain (California)

Used (Metrolink) Bilevel Commuter

Bombardier

Caltrans (California DOT)

Rebuilt Intercity

Amtrak

Charlotte (CATS)

Light Rail

Siemens

Chicago (CTA)

224

Rapid Transit

Bombardier

Chicago (Metra)

EMU Biilevel Commuter

Sumitomo/Nippon Sharyo

Conn. (Shoreline East/N.Y. MTA)

EMU M-8 Commuter

Kawasaki

Denver (RTA)

EMU Commuter

Hyundai-Rotem

Houston (MTA)

Light Rail

CAF USA

Los Angeles (Metro)

Light Rail

Kinkishsryo

Maryland (MARC)

Multilevel Commuter

Bombardier

Mexico City (STEDF)

Light Rail

Bombardier

Minneapolis/St. Paul (Metro Transit)

Light Rail

Siemens

Montreal (Societe de Transport)

Rapid Transit*

Alstom/Bombardier

Newark (NJ Transit)

Rebuilt Commutr++

Bombardier

Multilevel Commuter

Bombardier

New York/New Jersey (PATH)

Rapid Transit

Kawasaki

New York (Metro-North)

M-8 EMU Commuter

Kawasaki

New York (New York City Transit)

153

R-188 Rapid Transit

Kawasaki

Orlando (SunRail)

Bilevel Commuter

Bombardier

Philadelphia (PATCO)

Rebuilt Rapid Transit

Alstom

Portland (TriMet)

Light Rail

Siemens

San Diego

Light Rail

Siemens

San Francisco (BART)

Automated People Mover

United Streetcar/DCC

Toronto (Metrolinx/GO Transit)

Bilevel Commuter

Bombardier

DMU Commuter

Sumitomo/Nippon Sharyo

Toronto (TTC)

Rapid Transit

Bombardier

Streetcar

Bombardier

Tucson

Streetcar

United Streetcar

VIA Rail Canada

DMU Intercity

In House

Virginia Railway Express

Bilevel Commuter

Sumitomo/Nippon Sharyo

Washington D.C. (WMATA)

7000 Series Rapid Transit

Kawasaki

New-car deliveries by mode

Orders likely to develop in 2015

Year Regional/Intercity Rapid Transit LRT/Streetcar/APM

Total

2005 486 302 132 920

Purchaser Amtrak

# of cars

Type

168

HSR Intercity

Austin (CapMetro)

DMU Commuter

Boston (MBTA)

DMU Commuter

Calgary

Light Rail

2008 227 272 97 596

California (Caltrans)

BIlevel Intercity

2009 187

1,141

California (CHSRA)

TBD

HSR Intercity

1,129

Chicago (CTA)

400

Rapid Transit 7000 series

Denver (RTD)

Light Rail

Fort Lauderdale

TBD

Streetcar

2012 343 243 59 645

Michigan DOT

TBD

Intercity

2013 531

Oklahoma City

Streetcar

Phoenix (Valley Metro)

Light Rail

Sonoma-Marin Calif.)

DMU Commuter

2006 358 250 130 738 2007 139 402 121 662

2010 199

752 782

202 148

2011 235 113 149 497

337

166

1,034

2014 251 484 116 851 Total 2,956 3,937 1,320 8,213 2014% of Total 8.5% 12.3% 8.8% 10.4%

Figures compiled by Douglas John Bowen, Managing Editor 52

Railway Age

January 2015

So. Calif. RRA (Metrolink)

45-55

Commuter/Rebuilt Commuter

Toronto (Metrolinx/GO Transit)

Bilevel Commuter

Virginia Railway Express

Bilevel Commuter

Work progresses on this undelivered backlog (as of Jan. 1) Purchaser

# of cars

All Aboard Florida (FECI)

Type

The five-year (2016-2020) outlook Builder

Purchaser

HrSR Intercity

Siemens

Austin (Capital Metro) Boston (MBTA)

Amtrak

110

Intercity

CAF USA

Boston (MBTA)

Rebuilt Light Rail

Alstom

Light Rail

CAF USA

284

Rapid Transit

CNR Changchun

Baltimore

Rebuilt Light Rail

Alstom

Buffalo (NFTA)

Rebuilt Light Rail

Ansaldo/Breda

Calgary (Calgary Transit)

Light Rail

Siemens

# of cars

Type

TBD

Diesel Light Railway

Commuter

Calgary

12-36

Light Rail

California (ACE)

6-12

Bilevel Commuter

California (Caltrain)

TBD

EMU Commuter

California (Caltrans)

45-105

Bilevel Intercity

Charlotte (CATS)

TBD

Streetcar

Chicago (CTA)

446

Rapid Transit 7000 series

Chicago (Metra)

455

Rebuilt Commuter

160

Multilevel EMUs Light Rail

192

Rebuilt Light Rail

Sherwood Electromotion

Calif. (Caltrain)

Rebuilt Bilevel Commuter

Bombardier

Calif. (Caltrans)

Bilevel Intercity

Sumitomo/Nippon Sharyo

Cleveland (RTA)

100

Calif./Illinois et al

175

HrSR Intercity

Sumitomo/Nippon Sharyo

Dallas (w/DART)

Streetcar

Charlotte (CATS)

Light Rail

Siemens

Denver (RTD)

Light Rail

Chicago (CTA)

106

Rapid Transit

Bombardier

Edmonton (ETS)

Light Rail

Chicago (Metra)

Rebuilt Commuter

In House

Fort Worth (TEX Rail)

DMU Commuter

Guadelahara

Light Rail

Hamilton, Ontario

TBD

Light Rail

Honolulu (HART)

Rapid Transit

Los Angeles (LACMTA)

Light Rail

Rebuilt Light Rail

Los Angeles (city)

TBD

Streetcar

Milwaukee

TBD Streetcar

Cincinnati

Streetcar

CAF USA

Dallas (w/DART)

Streetcar

Brookvile Equipment

Denver

EMU Commuter

Hyundai Rotem

Detroit

Streetcar

Inekon Group

Guadelahara

Light Rail

Alstom

Honolulu (HART)

Rapid Transit

AnsaldoBreda

Houston

Light Rail

CAF USA

Kansas City Los Angeles (Metro)

Streetcar

CAF USA

174

Light Rail

Kinkisharyo

Rebuilt LRT

TBD

Miami-Dade

136

Rapid Transit

AnsaldoBreda

Light Rail

Bombardier

Mexico City (STEDF) Mexico City (SCT)

Rebuilt Rapid Transit*

Alstom

150

Intercity

CAF

Minneapolis/St. Paul (Metro Transit)

Light Rail

Siemens

Monterrey

Light Rail

CAF

MontrĂŠal (Societe de Transport)

459

Rapid Transit*

Alstom/Bombardier

Newark (NJ Transit)

LRT (center-sections)

Kinkisharyo

New York (LIRR)

EMU M-9 Commuter

Kawasaki

New York (Metro-North)

EMU M-8 Commuter

Kawasaki

New York (NYC Transit)

300

R-179 Rapid Transit

Bombardier

330

R-188 Rapid Transit

Kawasaki

Ottawa

Light Rail

Alstom

Philadelphia/NJ (PATCO)

112

Rebuilt Rapid Transit

Alstom

Portland (TriMet)

Light Rail

Siemens

San Francisco (BART)

775

Rapid Transit

Bombardier

San Francisco (MUNI)

Rebuilt PCC streetcar

Brookville Equipment

260

Light Rail

Siemens

Seattle (Sound Transit)

Bilevel Commuter

Bombardier

Toronto (TTC/Metrolinx)

182

Streetcar Light Rail

Light Rail

Montreal (AMT)

Multilevel Commuter

Montreal (Societe de Transport)

386

Rapid Transit

202-375

Multilevel Commuter

New York (LIRR)

234

EMU M-9 Commuter

New York (Metro-North)

350

EMU M-9 Commuter

New York (LIRR/Metro-North)

160

EMU M-9 Interoperable

New York/New Jersey (PATH)

Newark (NJ Transit)

10-75

Rapid Transit

Norfolk, Va. (Hampton Roads Transit)

3-5

Light Rail

North Carolina (Triangle Transit)

TBD

Light Rail

North Little Rock, Ark.

2-6

Vintage Trolley

Oceanside, Calif. (NCTD)

6-12

Bilevel Commuter

Oklahoma City Orlando (SunRail)

Streetcar

0-46

Bilevel Commuter

Philadelphia (SEPTA)

Bilevel Commuter

141

Light Rail/Streetcars

Phoenix (Valley Metro)

Light Rail

Streetcar

TBD

Light Rail

Bombardier

TBD

Light Rail

Bombardier

San Diego (MTS)

Light Rail

Bombardier

South Florida RTA

Streetcar

14-20

Bilevel Commuter Rapid Transit

Pacifica Marine Sumitomo/Nippon Sharyo

198

TBD

Monterrey

San Bernadino (SANBAG)

Streetcar DMU Commuter

Mississauga

Pueblo, Mexico

7 14

Rapid Transit

Light Rail/Streetcar

TBD Streetcar

Seattle (city)

126

35-40

Portland

Sonoma-Marin (SMART) Toronto (TTC)

Minneapolis/St. Paul (Metro Transit)

Stockton, Calif. (ACE)

Toronto (Metrolinx/GO Transit)

DMU Commuter

Sumitomo/Nippon Sharyo

136

Bilevel Commuter

Bombardier

Toronto (TTC)

126

Vancouver

28 Skytrain

Bombardier

Streetcar

115

5-10

Commuter

Rebuilt Skytrain

In House

Vancouver (TransLink)

Skytrain

Virginia Railway Express

Bilevel Commuter

VIA Rail Canada

Intercity

In House

Virginia Railway Express

Bilevel Commuter

Sumitomo/Nippon Sharyo

Washington, D.C. (WMATA)

740

7000 Series Rapid Transit

Kawasaki

Waterloo, Ont.

Light Rail

Bombardier

*Rubber-tired vehicles ++ Equipment damaged by Superstorm Sandy January 2015 Railway Age 53

Now arriving on Track 1:

Via Rail’s ambitious new CEO

Yves Desjardins-Siciliano attempts to reshape Canada’s intercity carrier into a high-efficiency, high-performance system.

ver since Canada’s state rescue of passenger trains in 1977, VIA Rail has depended on the government of the day to spackle the gaps between revenues and operating costs. Allocations for fleet renewal and infrastructure have been meted out only grudgingly. The result, 37 years later, is a spinal cord of daily intercity services in the two central provinces of Quebec and Ontario, with thin microfilaments extending to each of Canada’s three ocean coasts—nearly all of it on track owned and dispatched by CN. So why are VIA’s unfailingly courteous on-board crews and station staff suddenly so chuffed about the future of their trackless railway? The answer is in the convincing futurism of VIA’s new CEO,Yves Desjardins-Siciliano. The lawyer-turnedrailroader dismisses questions about what’s next in the way of service cuts, and instead, looks ahead to building a brand new, intercity network in Central Canada—while restoring some long abandoned regional services in the East and West. “There is more of an opportunity for growth than there is a risk of downsizing,” he told Railway Age during an interview in his downtown Montreal offices, a few subterranean steps away from the city’s cavernous Central Station. Desjardins-Siciliano was appointed CEO last year, after four years as chief legal officer, and hard upon previous business and government careers in the walnut-paneled aeries of Montreal’s and Toronto’s financial districts and the neo-gothic sandstone fantasies sheltering Ottawa’s governing class. His new digs are refreshingly free of architectural pretension, with just a glass wall providing conversational privacy from the otherwise wide-open executive suite. A dramatic mural depicting a drone’s-eye view of a speeding steam locomotive (something VIA has never had on its roster, though much of its car fleet does indeed pre-date Canada’s total dieselization in 1960) dominates the minimalist décor. “Our first role is to run the railway—with the assets we have today,” Desjardins-Siciliano said in one of his first wideranging interviews since assuming his post in May 2014. “It’s not our role to make transportation policy.” After a tactical pause to allow the disappointment to set in, he proceeded to set out in delicious detail what sounds awfully like a thoughtful transportation policy for the future of rail passenger service in Canada.

54 Railway Age January 2015

By David Thomas, Contributing Editor

It starts with an epitaph for the historical cohabitation of passenger and freight services on crowded intercity routes: “After 150 years, the mixed environment is no longer sustainable. So, we might as well get on with the future,” he said. “The sheer number and size of freight trains are not going to change any time soon. We have to make our peace with that, which means: Either we accept it, which makes service extremely challenging for passengers, or we invest in dedicated trackage. “We will continue to work with our railway partners to ensure that wrong dispatching calls aren’t made too often; but in parallel, we have to develop an alternative that will convince the government that it’s time for VIA to look at other sources of funding, including other levels of government, and the private sector. The federal taxpayer is now covering 53% of the average passenger fare and has invested $1 billion in capital improvements; I think that’s enough.” Ontario has already hinted it might partner with VIA on regional train service, instead of pursuing the 50-year-old fool’s errand of trying to outpace car congestion by widening the highways. “The corridor of any railway is a wealthcreation engine,” posits the VIA CEO. “Industry and people want to get close to the tracks. Local governments that benefit from the deployment of high-efficiency, high-performance trains should make a contribution.” Desjardin-Siciliano’s vision of a “high-efficiency, highperformance” passenger system involves disentangling ownership of rights-of-way, track infrastructure, and trains. “In a perfect world, the Government of Canada should own the rights-of-way for passenger rail. Everything else, including trackage and perhaps rolling stock, should be funded privately.” Realistically, only the Quebec City-to-Windsor, Ont. “Corridor” has enough traffic potential to justify passengeronly trackage. The public-private partnership model depends, of course, on convincing both government and private investors that travelers would indeed patronize fast, safe, and punctual passenger trains. “It’s up to Canadians; the best way to express their interest is to get on a train. If the passenger commitment is there, then we have a case for investors.” VIA’s CEO hopes that more-energetic marketing will help customers demonstrate their commitment.

“In a perfect world, the Government of Canada should own the rights-of-way for passenger rail. Everything else, including trackage and perhaps rolling stock, should be funded privately,” says VIA Rail CEO Yves Desjardins-Siciliano.

“People are not really aware of the frequency of our trains in the Corridor, the comfort of the ride, nor the continuous Wi-Fi. We have to do a better job of promotion. I am cautiously optimistic that we are succeeding because the numbers are indeed improving.” In 2013, VIA served 3,624,917 passengers in the intercity Corridor, a 1% annual increase. But growing the Corridor business means bucking the track congestion that makes VIA struggle to maintain its already poor, 80% on-time performance. “The issue is not that our run times are longer than they should be; the problem is that it makes our run times unreliable. People can live with any reasonable trip time because they can plan around it. If you can’t make the schedule 95% of the time, then you have a big problem getting their trust.” Demographic changes make this a propitious time for passenger rail, believes Desjardins-Siciliano. “In 20 years, a quarter of the Canadian population will be over 65. Many of them will start to be mobility challenged and will need to use shared transportation. At the other end of the spectrum, today’s youth defines freedom as connectivity—not as being stuck in a car. (VIA’s Corridor trains offer continuous Wi-Fi and seat-side power outlets in business class.) Then you have Canada’s 250,000 immigrants per year, the vast majority of whom come from cultures friendly to

passenger rail. Those three factors should create a huge pool of demand for passenger rail services—provided our trains leave and arrive when we say they will.” Notably absent from his vision of a high-efficiency, highperformance passenger railway is the notion of “high-speed.” “One hundred miles per hour is quite fast enough, thank you. VIA is a train service and it should economically serve intermediate points as well as the large urban centers. If you take out the small towns and price yourself like an airline, you might as well be an airline.” Rather than trying to poach airline passengers, VIA treats them as customers in need of land links at either end. VIA’s Corridor trains already stop at Montreal’s international airport, with a free, five-minute shuttle between rail station and air terminal. By this spring, VIA will interconnect with the new Union-Pearson Express trains that link Toronto’s airport with the city’s downtown. Toronto’s centenarian Beaux Arts Union Station is in the midst of a transformation that will enhance the overall travel experience of passengers, and perhaps help VIA predate the 83% of trips in the Montreal-Ottawa-Toronto triangle that are by private car. Shifting any significant share of passenger miles from road to rail will strain VIA’s current Corridor capacity. Congestion January 2015 Railway Age 55

VIA RAIL CANADA

makes adding trains counterproductive, while longer trains would be hard to assemble with VIA’s tired intercity fleet. The 33-year-old aluminum LRC trainsets are undergoing their last feasible refurbishment, while the collection of postwar, heavyweight steel coaches, handed down from a variety of North American carriers, is considered economically beyond rebuilding. (The Canadian’s superb fleet of 1950s stainless steel cars and The Ocean’s Renaissance sets, originally built for Chunnel service between London and Paris, will be maintained into the foreseeable future). “The priority right now is replacement of the Corridor fleet. That’s why we need to know what kind of network we will have: Will it be electrified? What speeds will it run? Those are key considerations before we invite tenders. And maybe, depending on the type of business we are building, those cars could be sourced with private investment.” The money is there, he says. “Every major sovereign wealth fund and pension pool is looking for major infrastructure projects to invest in. There are two key conditions for infrastructure investors: One is the size of the project: bigger is better; the other is that it has to be in an economically strong and geopolitically stable environment. We are lucky enough to be in Canada, which in my opinion has the best-managed economy. There should be a way to tie these things together.” Socially sensitive investors also prefer climate-friendly projects, and VIA, amenably, emblazons “A Green Choice” on the flanks of its teal, gray, and gold locomotives. That factor might also appeal to a Canadian government somewhat wanting on environmental accomplishments. “In a world of carbon concerns, rail is the most efficient mode of transportation, particularly if it is electrified. We are sitting here in Quebec, which has surplus hydroelectric power. So for both economic and environmental reasons, rail is the

right way to go. The real test is whether there is an appetite out there in the private sector, with the support of the federal government, to appreciate the market opportunity.” Vast distances and sparse populations rule out a fresh start beyond the Corridor. The long-distance Ocean from Montreal to Halifax, the Toronto-Vancouver Canadian, and the non-name Winnipeg-Churchill overnight sleeper service to Hudson Bay will continue to share their historical routes with freight trains. That makes passenger schedules largely something to aspire to, but with most overnight passengers riding for the joy of the trip as much as for the destination, on-time arrivals are thus less critical than for the Corridor’s commercial and social travel. Imperfect but inexpensive track sharing also makes most sense for the restoration of intercity trains to the Prairie and Atlantic provinces. Alberta’s modern-day boomtowns of Calgary and Edmonton are unconnected by train. The provincial capitals of Regina, Sask., and Winnipeg, Manitoba, are similarly devoid of intercity service. Regional service in New Brunswick and Nova Scotia has been downgraded over the years to just the thrice-weekly Ocean, and VIA’s CEO hints that the Maritime provinces deserve better. Provincial support will doubtlessly be solicited for intercity additions to VIA’s timetable. “I believe that Canadians are coming to a common view that it makes sense to have an efficient, high-performance passenger service between major urban centers. And I also think our policymakers usually reach the right decisions; otherwise we wouldn’t have the best country in the world.” With his professional intimacy with big business and public policy (and his unapologetic love of country) DesjardinsSiciliano appears to have the tools and character to justify the faith of his 2,600 employees, and, of course, the four million passengers who choose VIA every year. RA

The Canadian is an authentic train, not a circular land cruise. (See sidebar on following page.)

56 Railway Age January 2015

VIA RAIL’s CANADIAN: Thanks, Buck, for your great mistake Miles from any trail or trapper’s cabin, the granitebowled lakes of northern Ontario shimmer in lavender and gold as rays of the rising sun ricochet off a cottony bank of late-autumn cloud. Divine as the spectacle is, the vista would be chilly and lonely from anywhere but the cozy observation dome of North America’s last, great, long-distance streamliner. For most of its twisting traverse of this hard-rock landscape, The Canadian’s distant pair of purring locomotives are out of sight—hidden by curving rock cuts, rough-blasted tunnels, and the dense stands of conifers that keep this glacially scoured expanse green, even in the deadest of winter. This particular eastbound Canadian is especially long for the off-season: 14 cars, including four observation domes, because the front half of the train is empty, deadheading to Toronto to rest up for the summer crush of leisure travelers who will keep the 60-year-old, stainless-steel fleet in constant motion between Canada’s industrial metropolis, Toronto, and its Pacific port city, Vancouver. When, as a young(ish) magazine writer, I interviewed Canadian Pacific’s retired boss N.R. (Buck) Crump in CP’s presidential business car, he lamented that his acquisition of The Canadian’s 155 coaches, baggage cars, buffet cars, diners, sleepers, and domed observation cars was “the worst mistake I ever made.” The occasion of our conversation was CP’s centenary in 1981, by when both CP and Canadian National had dumped their loss-making passenger trains onto publicly owned Via Rail. Canada’s government had denied Crump’s request to abandon The Canadian in 1970, and so the same early 1950s, Budd-built cars continued to roll uninterrupted, as Trains 1 and 2— albeit today over CN trackage, and with the welcome modernizations of aircraft-style vacuum toilets and spacious showers. Despite its taxpayer subsidy, it would be politically inopportune for any present or future government to cancel The Canadian—by now so integral to the national identity that it is featured, snaking through the western Rocky Mountains, on the country’s new, translucent plastic $10 bill. (Trainspotters be advised: The pictured locomotive was renumbered from 6403 to 6459, so as to avoid bad voodoo for the banknote should the FP40PH ever be involved in a mishap.) The Canadian lost C$54 million carrying 99,000 fare-paying passengers in 2013. A big number, perhaps, but ten times less than Ottawa invested otherwise in direct tourism promotion. There’s no spreadsheet to prove it, but it does seem likely that The Canadian’s average per-passenger subsidy of $550 is 58 Railway Age January 2015

returned many times over in visitor spending. The subsidy is actually modest for berth and bedroom passengers, with proportionately more of it supporting riders with intermediate destinations, backwoods dwellers, and the low-budget backpackers who occupy the coaches. As it gradually refurbishes the streamliner fleet, Via would like to eliminate the subsidy altogether for leisure travelers—boosting sleeping class fares as accommodations are upgraded from merely comfortable to outright luxurious. The strategy starts this year, with the launch of Prestige Sleeper class, which offers concierge service, drop-down beds for two in spacious cabins, private showers, and the darkwood-and-leather trim expected by the pampered 1%. Eight sleeping cars are being converted into six-room Prestige cars, with one additional Prestige cabin to be included with each refurbishment of The Canadian’s ovoid-ended observation cars. Via is indeed adopting the wisdom of the leftists’ old rallying cry, “let the rich pay.” Prestige clients will fork over full-freight fares for their duvets and in-room meal service, along with a nice margin of socialist profit to offset the rest of the train’s public subsidy. But The Canadian remains an authentic train, not a circular land cruise. It brakes to a stop when flagged down in the deepest of woods by a backcountry angler, and not just for the catch of fresh pickerel donated for the crew’s dinner. Arriving behind time at Edmonton station, our engineer doesn’t hesitate to swap his locomotive for the platform shuttle and deliver passengers to their assigned sleeping cars. And next morning, spotting a moose from his cab, he radios back to the service manager so that passengers may be alerted over the train’s public address system. If they are lucky, as we are on this November run, passengers can enjoy intimate lounge-car performances by Canada’s renown bluesman, Morgan Davis, as he works his way home to Nova Scotia after his yearly concert tour of the West. Nobody should book a tight connection based on The Canadian’s leisurely three-day, four-night run time from Vancouver to Toronto. CN routinely highballs its hotshot container trains, while sidetracking The Canadian. (On this particular trip, CN actually ordered our train to backup to a siding to let a freight overtake us, and then kept us in the hole for two more, opposing freights. This and other sleights of the dispatcher’s hand caused our train to roll into Toronto Union Station a half-day late, to the delight of many of the passengers who thus earned a 50% credit on their basic fares.)

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People

Meetings

High profile The Greenbrier Companies has promoted Jack Isselmann to Senior Vice President, External Affairs & Programs. Isselmann joined Greenbrier in 2012 as Director of Corporate Relations and Communications. Since then he has taken on increased responsibility for other programs, such as the companywide security program. In 2013, Isselmann was promoted to Vice President, External Affairs & Communications in part to recognize his role developing and advancing Greenbrier’s public safety efforts related to its Tank Car of the Isselmann Future. Isselmann reports to William A. Furman, Chairman and Greenbrier Cos. CEO and works closely with other senior staff members. A former partner at Portland-based law firm Tonkon Torp LLP, Isselmann also interfaces with Greenbrier’s legal department on select compliance and regulatory matters. He continues management of Greenbrier’s government and community relations, corporate security, and corporate communications.

January 15-16 11th Annual Southwestern Rail Conference: “Trains — Driving the Texas Economy” Holiday Inn Park Cities/SMU, Dallas, Tex. Tel.: 214=522-5525; Website: http://tms.us/tra.html

CHICAGO SOUTH SHORE & SOUTH BEND RAILROAD—Gregory J. Doughtery appointed Director of Sales and Marketing. COOS BAY RAIL LINK—Darrel “Duke” Rodley promoted to General Manager. MTA LONG ISLAND RAILROAD— David Kubicek appointed Senior Vice President Operations. Bruce Pohlot named Senior Vice President Engineering. Edward Dumas named Vice President Market Development and Public Affairs. MTS (SAN DIEGO)—Ed Musgrove named Security Manager, overseeing all field security and enforcement operations for LRT and bus operations. NORTHERN PLAINS RAIL SERVICES—Jesse J. Chalich named President of NPRS and Northern Plains Railroad. SAN PEDRO & SOUTHWESTERN RAILROAD—Richard Archunde promoted to General Manager. WATCO TRANSPORTATION SERVICES—Joe King named Senior Vice President of Finance.

SUPPLIERS Unitrac Railroad Materials, Inc. promoted Phil Pietrandrea to President. Chris Gerber has joined the company as director of Sales and Marketing. 60

Railway Age

January 2015

Brookville Equipment Corp. appointed Marion H. Van Fosson President. GE Capital Rail Services named Elizabeth Busch Customer Operations Leader. Patrice Powers named Government & Industry Relations Leader. Masabi named Brian Zanghi its President and CEO, succeeding CEO and co-founder Ben Whitaker. Railinc Corp. promoted Jerry Traynham to Chief Information Officer.

100 YEARS AGO in

(JANUARY 1915) RAILWAY CONSTRUCTION STATS, 2014 Less track was laid in the United States [during 1914] than for any year since 1895. Canada also show[ed a] decrease. The mileage of new lines build in the U.S. was practically the same for the three preceding years, [but in 1914] it fell to one-half the figure for these years [and the] lowest figure since 1895. No new or secondtrack mileage was added in Alaska, Arizona, Colorado, District of Columbia, New Hampshire, or Vermont. For some years the state in which the largest new mileage has been built has been in the West. [In 1914] a Southern state, Florida, takes the lead with 220 miles of new lines.

February 3-5 AAR Quality Assurance Auditor and Industry Conference Pueblo, Colo. Tel.: 719-584-0715; Email: QA@ aar.com; Website: https://www. regonline.com/2015aarqaaic February 18-20 International Railway Summit Co-sponsored by International Railway Journal and International Rail Infrastructure and Technology Summit (IRITS) Barcelona, Spain Tel: +44 1326 313945; Email: hello@irits.org; Website: www.railjournal.com

March 23-26 2015 Joint Rail Conference The Fairmont San Jose San Jose, Calif. Email: CraneS@asme.org; Website: www.asmeconferences. org/JRC2015/index.cfm

March 28-31 2015 ASLRRA Connections Hilton Orlando, Orlando, Fla. Email: kcassidy@aslrra.org; Website: www.aslrra.org

June 23-26 Railroad Day on Capitol Hill Renaissance Washington, Washington, D.C. Email: kcassiday@aslrra.org; Website: www.aslrra.org

October 4-7 Railway Interchange 2015 Minneapolis Convention Center, Minneapolis, Minn. Website; http:// railwayinterchange.org

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Railway Age

January 2015

Cost-effective component protection The elements can wreak havoc on exposed components, be it dust and debris, rain, saltwater or human-inflicted, hosejet cleaning solutions. And special enclosures for external components can cost a bundle, according to Indianapolis, Ind.-based REO-USA. The company’s fully encapsulated sinusoidal filters, line reactors, load reactors, and other components feature ingress protection ratings including IP65-66. They can be mounted anywhere—underneath or on top of vehicles or other external locations. Even when exposed to the elements, the components themselves are fully protected. They simply shut out dust and shrug off moisture and other aggressive attackers, whether natural or man-made. In addition to high IP ratings, RES-USA components can also be designed with a pollution degree of PD4, the highest possible rating according to IEC 60664-1. The pollution degree is a classification of the amount of dry pollution and condensation in any given environment. This is an important factor to consider for any component mounted outside of the vehicle. “Our IP66 rated components offer a highly cost-effective solution for railway applications,” says REO-USA Sales Engineer Alex Ward. “A range of input, output, and DC-link chokes, braking resistors and sinusoidal filters provides unsurpassed flexibility for mounting components externally. These encapsulated products also save both the space and the expense of special enclosures.” Ward notes that REO-USA’s latest fully encapsulated and IP66 rated sinusoidal filter with terminal box is one of several encapsulation technologies in the firm’s extensive array of components for railway applications. “Careful design considerations such as creepage/clearance distances and selection of encapsulation material all influence the design of components meant for exposure to the elements,” he says. “Attention to these details ensures that pollutants are not introduced, maintaining efficient functionality and extending product lifetime. Components that can perform for decades while withstanding aggressive environmental conditions are critical for railway equipment and service providers. So is saving money wherever possible, which is always a plus with corporate investors as well as transportation authorities.” REO-USA engineers and manufactures components for integrated product solutions in diverse fields and industries including railway, drive engineering, renewable energies, medical, and automation. Headquarters for the ISO 9001:2008 certified company, which entered the U.S. in 2000, is a 25,000 square-foot facility in Indianapolis. Parent company REO, a Germany-based manufacturer of electronic and inductive components founded in 1925, operates 14 global subsidiaries. For more information, call (317) 899-1395, email info@reo-usa.com, or visit www.reo-usa.com.

Protran Technology Portable Smoke and fire Shove Track Protection System compliant connectors

Protran Technology’s Portable Shove Track Protection System is described as “the only wireless system that allows Class I’s, processing facilities, hump yards, etc. to easily and safely set up protection limits in minutes without the expensive infrastructure and hardwiring costs. It communicates to the central location wirelessly.” The system gives a failsafe confirmation to the locomotive engineer when he/she has reached the operating limits of authority and also gives the engineer warning when track workers are coupling and uncoupling railcars, such as on a siding. Information: www.protrantechnology.com.

Designed for onboard or wayside TCMS (Train Control Monitoring System) and TIMS (Train Information Management System) applications, the MSG 3U connector by Esterline Connection Technologies–SOURIAU complies with EN 45545, the most stringent smoke and fire standard. It is described as one of the few connectors on the market that have been specially developed for 3U racks. Already adopted by several rail equipment manufacturers, the MSG 3U is currently being employed in a large number of projects. It is available in three configurations: with 29 and 41 standard contacts and with up to five Quadrax Ethernet contacts. The Quadrax version can transmit signals at speeds of up to 100 Mbps and the design allows users to select grounded or ungrounded contacts. “Its quick, tool-less locking/unlocking system and front accessibility are perfect for night-time maintenance jobs requiring minimal time without disrupting train service,” the company says. “The many commercial successes of the MSG 3U on Japan’s railway networks, among the world’s most demanding in terms of reliability, demonstrate just how much the connector can do.” Information: Rhonda Shaw, SOURIAU USA, 866-768-7428, shaw@souriau.com.

Want to know what railcars are in your yard and when they arrived?

NEW

AI3000 Wayside AEI Tag Reader

• Sends the train consist directly to you via an e-mail or to an FTP server.

• Has an antenna on each side of the track to read both AEI tags on the railcar.

• Easier to install and maintain than you may expect. It uses an

advanced radar system to determine speed, direction, and presence instead of using wheel detectors and a presence loop.

www.aeitag.com 1098 Venetia Road • Eighty-Four, PA 15330 Tel. 888.872.4612 or 724.942.1473 sales@signalcc.com

January 2015 Railway Age 63

Weâ&#x20AC;&#x2122;re current, are you? FRA Regulations FRA News:

Mechanical Department Regulations A combined reprint of the Federal Regulations that apply specifically to the Mechanical Department. Spiral bound. Part Title 210 Railroad Noise Emission Compliance Regulations 215 Freight Car Safety Standards 216 Emergency Order Procedures: Railroad Track, Locomotive and Equipment 217 Railroad Operating Rules 218 Railroad Operating Practices - Blue Flag Rule 221 Rear End Marking Device-passenger, commuter/freight trains 223 Safety Glazing Standards 225 Railroad Accidents/Incidents 229 Locomotive Safety Standards 231 Safety Appliance Standards 232 Brake System Safety Standards

BKMFR

$27.95

Mech. Dept. Regs. Order 25 or more and pay only $24.50 each

Dates: This regulation was effective January 6, 2015.

Current FRA Regulations Item Code

FRA Part #

209 211 BKTSSAF 213 BKTSSG 213 BKWRK 214 215 BKFSS BKROR 217 218 220 BKRRC 221 BKEND BKSEP

Update effective

2-12-13 7-20-09 3-25-14 7-11-13 7-1-14 6-25-12 6-25-12 6-25-12 6-25-12 6-25-12

BKHORN 222 6-25-12 BKRFRS 224 6-25-12 BKHS BKLSS BKSLI BKSAS BKBRIDGE BKLER

228 229 230 231 237 240

6-25-12 12-19-12 6-25-12 6-25-12 6-25-12 6-25-12

BKCONDC 242 6-25-12

BKBSS

Each

27.50 9.95 8.55 9.50 7.25 9.50

8.95 7.85 8.55 6.55 8.55

RR Communications Rear End Marking Device, Passenger, Commuter & Freight Trains Use of Locomotive Horns Reflectorization of Rail Freight Rolling Stock Hours of Service Locomotive Safety Standards Steam Locomotive Inspection RR Safety Appliance Standards Bridge Safety Standards Qualification and Certification of Locomotive Conductor Certification

5.50 5.00

4.95 4.50

13.25

11.95

6.25 10.50 11.00 22.95 9.35 6.25 12.75

5.60

8.50 5.60 11.50

11.00

9.90

Each

25 or more

14.75

13.50

Update effective

Each

25 or more

40 219

10-3-12 Drug and Alcohol Regulations in 5-6-13 the Workplace

36.00

BKSTC

233 234 235 236 238 239

6-25-12 Signal and Train Control Systems 5-14-13 6-25-12 7-13-12 1-28-14 Passenger Safety Standards 1-28-14

19.50

17.55

22.80

20.50

Compliance Manuals BKINFRA BKTM

Track and Rail and Infrastructure Integrity Compliance Manual - Volume II, Track Safety Standards - Part 213 Technical Manual for Signal and Train Control Rules. - Includes Part 233, 234, 235, 236

49 Part 213, Subparts A-F. Classes of Track 1 through 5: Applies to track required to support passenger and freight equipment at lower speed ranges. Includes Defect Codes and Appendices A, B, and C to Part 213. Softcover. Spiral bound. 120 pages.

BKTSSAF

33.00 46.00

Updates from the Federal Register may be supplied in supplement form.

Track Safety Standards, Subparts A-F Order 50 or more and pay only $8.95 each

$9.95

Part 213: Track Safety Standards, Subpart G

49 Part 213, Subparts G. Classes of Track 6 and higher. Softcover. Spiral bound. 88 pages.

BKTSSG

Track Safety Standards, Subpart G Order 50 or more and pay only $7.85 each

$8.55

9.90

BKCAD

BKPSS

Part 213: Track Safety Standards, Subparts A-F

Bridge Safety Standards FRA Part 237 establishes Federal safety requirements for railroad bridges. This rule requires track owners to implement bridge management programs, which include annual inspections of railroad bridges, and to audit the programs. Bridge Safety Standards Part 237 also requires track owners to know the safe load capacity of bridges and to conduct special inspections if the weather or other conditions warrant such inspections. Softcover. Spiral bound.

BKBRIDGE

Combined FRA Regulations FRA Part #

50 or more

RR Safety Enforcement Procedures & Rules of Practice Track Safety Standards (Subpart A-F) Track Safety Standards (Subpart G) RR Workplace Safety RR Freight Car Safety Standards RR Operating Rules and Practices

232 6-25-12 Brake System Safety Standards

49 CFR Part 214, Railroad Workplace Safety, Part 232, Brake System Safety Standards and Part 243, Training, Qualification, and Oversight for Safety-Related: FRA is establishing minimum training standards for all safety-related railroad employees, as required by the Rail Safety Improvement Act of 2008 (RSIA). The final rule requires each railroad or contractor that employs one or more safety-related railroad employee to develop and submit a training program to FRA for approval and to designate the minimum training qualifications for each occupational category of employee. The rule also requires most employers to conduct periodic oversight of their own employees and annual written reviews of their training programs to close performance gaps. The rule also contains specific training and qualification requirements for operators of roadway maintenance machines that can hoist, lower, and horizontally move a suspended load. Finally, the rule clarifies the existing training requirements for railroad and contractor employees that perform brake system inspections, tests, or maintenance.

30.00 39.10

Bridge Safety Standards Order 50 or more and pay only $5.60 each

$6.25

800-228-9670 www.transalert.com

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

Add Shipping & Handling if your merchandise subtotal is: U.S.A. CAN U.S.A. CAN Orders over UP TO $10.00 $4.10 $8.55 25.01 - 50.00 9.80 15.70 $75, call for shipping 10.01 - 25.00 7.20 11.80 50.01 - 75.00 10.90 19.80 *Prices subject to change. Revision dates subject to change in accordance with laws published by the FRA.1/15

Ad Index Company

Phone #

Fax URL/Email address

Page #

Aldon Company Amsted Rail Group

847-623-8800 312-922-4516

847-623-6139 312-922-4597

e-rail@aldonco.com kskibinski@amstedrail.com

30 3

Bombardier Transportation Custom Truck & Equipment

215-441-1864 816-241-4888

215-639-3724 816-241-3710

Maryanne.roberts@us.transport.bombardier.com bboehm@cte-equipment.com

48 11

Danella Rental Systems, Inc. Dixie Precast

610-828-6200 770-944-1930

610-828-2260 770-944-9136

pbarents@danella.com fbrown142@aol.com

17 63

Ellwood Crankshaft & Machine FreightCar America

724-347-0250 312-928-0850

724-347-0254 312-928-0890

ecgsales@elwd.com 15 tbaun@freightcar.net C2

GE Transportation Georgetown Rail Equipment Co

814-875-2099 512-869-1542 ext. 228

513-786-2540 512-863-0405

chris.banocy@ge.com karen@georgetownrail.com

Herzog Railroad Services, Inc. HKX, Inc.

816-233-9002 360-805-8600

816-233-7757 360-805-0718

tfrancis@hrsi.com 41 sales@hkx.com 14

Holland Co. Hotstart

708-672-2300 ext.382 509-536-8667

708-672-0119 gpodgorski@hollandco.com 509-534-4216 mfloyd@kimhotstart.com

7 16

ITT Enidine/Koni Kelso Technologies

859-488-0322 630-495-1151

859-334-3340 630-396-9069

jpipp@koni-na.com schwartz@kelsotech.com

C3 14

Koppers, Inc L B Foster Company

412-227-2739 412-928-3506

412-227-2841 412-928-3512

ambrosegf@koppers.com glippard@lbfoster.com

34 31

LORAM Miner Enterprises

763-478-6014 630-232-3000

763-478-2221 sales@loram.com 630-232-3055 sales@minerent.com

35 9

National Steel Car ORX

905-544-3317 Alan.wilson@steelcar.com 814-684-8484 glenn@orxrail.com

39 C4

Plasser American Corp. Power Drives, Inc.

757-543-3526 716-822-3600

757-494-7186 716-824-4817

plasseramerican@plausa.com r.panzica@powerdrives.com

27 5

Progress Rail Services R&W Machine Division

256-505-6402 708-458-4200

256-505-6051 708-458-3299

info@progressrail.com jwarner@rwmachine.com

37 57

Railquip Inc Railway Educational Bureau, The

770-458-4157 402-346-4300

770-458-5365 402-346-1783

sales@railquip.com bbrundige@sb-reb.com

Railway Equipment Co. RailWorks

763-972-2200 866-905-7245

763-972-2900 sales@rwy.com 952-469-1926 jrhansen@railworks.com

40 18

RCE REMSA

866-472-4510 703-241-8514

630-355-7173 dennishanke@rcequip.com 703-241-8589

47 42

RJ Corman Railroad Group Siemens US

800-611-7245 859-885-7804 800-SIEMENS

13 33

38 61, 62, 64

www.rjcorman www.usa.siemens.com/transportation

32 51

Siemens-Rail Automation

502-244-7400 502-253-3760 bob.coffman@invensys.com 29 Soft Rail 888-872-4612 sales@signalcc.com 63 Star Headlight & Lantern

585-226-9500 ext.137

585-226-2029

Wi-Tronix

888-948-7664

630-679-9954 cjasmin@wi-tronix.com

chrisjacobs@star1889.com

36 25

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

January 2015 Railway Age 65

products & services

RECRUITMENT

EDNA A. RICE, EXECUTIVE RECRUITER, INC (713) 667-0406 FAX (713) 667-1651 Web address: www.ednarice.com Email: resume@ednarice.com

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

equipment Sale/Leasing

LOCOMOTIVE BATTERY “AMERICAN INGENUITY FOR A MODERN WORLD”

TRAINING

PROFESSIONAL DIRECTORY

Kansas City (913) 661-2424

www.rrtemps.com

Railway Age

We offer: - Certified Locomotive Engineers - Certified Conductors - Train Dispatchers - Yardmasters - Brakemen/Switchmen - Mechanical For Your Temporary Needs!

January 2015

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

MARKETPLACE SALES

AGM64RR (3.375in x 5in).indd 1

22/09/2014 10:03

Contact: Jeanine Acquart Ph: 212/620-7211 Fax: 212/633-1165 Email: jacquart@sbpub.com

ALL MAJOR CREDIT CARDS ACCEPTED

equipment Sale/Leasing

EMPLOYMENT

New York City Transit

• SET YOUR CAREER IN MOTION • Join the Largest Public Transportation Authority in North America as a

SENIOR MANAGER, INSPECTION & TESTING (Concrete) JOB DESCRIPTION: The selected candidate will perform tasks designed to manage a staff consisting of Engineering Technicians, Transit Management Analysts, and technical consultants responsible for concrete batch plant inspection, concrete field testing, and cylinder testing for major capital projects, coordinate concrete inspection/testing with user departments, vendors, and technical consultants. Additional responsibilities will include, but will not be limited to: review of all concrete inspection and testing reports; managing all activities necessary to ensure timely cost effective delivery of concrete inspection and testing services; manage special projects. Plan and develop contract specifications, detailed cost analyses, and feasibility studies for future initiatives as needed. QUALIFICATIONS: Professional Engineering license (PE) is required. The successful candidate must possess a baccalaureate degree from an accredited college and six years of experience including three years of supervisory or managerial experience in the concrete industry. A satisfactory combination of equivalent education and experience may be considered. However all candidates must possess a minimum of three years supervisory or managerial experience and a PE license. This position offers an excellent compensation package which includes competitive compensation, comprehensive benefits, promotional opportunities and a diverse collection of work assignments. TO APPLY AND SEE FULL JOB DESCRIPTION, GO TO: http://www.mta.info/nyct/hr/, click on Job Postings, Click on Agree, Select MTA NYC Transit and Search for Senior Manager, Inspection & Testing (Concrete,) Job ID 81241. Application Deadline: March 1, 2015

Available for Lease

3600 cu ft Open Top Hopper Cars 100 ton Automated/Manual Ballast Cars 4480 cu ft Aluminum Rotary Open Top Gons Contact: Tom Monroe: 415-616-3472 Email: tmonroe@atel.com

New York City Transit

• SET YOUR CAREER IN MOTION •

Available For Lease ◆ 3,600 cu. ft. Open Top Hoppers. 45 degree slopes for aggregate, coke, coal, etc. ◆ Box Cars – 286K Gross Rail Load, 60’ 9” inside length, 12’ Plug doors. For additional information and pricing, please contact John Goodwin phone (605) 582-8318 fax (605) 582-8304 www.carmathinc.com

Join the Largest Public Transportation Authority in North America as a

SENIOR MANAGER, INSPECTION & TESTING (Metallurgy) JOB DESCRIPTION: The selected candidate will be responsible for project managing a Worldwide Technical Inspection Services Contract to ensure that only conforming materials are received at NYC Transit. The ideal candidate will manage a staff of Senior Quality Control Specialists and technical consultants responsible for contracts and projects related to in-plant technical inspection of critical materials valued at more than $350 million annually.; establish standards of review to be utilized in evaluating material conformance; review and approve inspection and testing protocols and sampling plans; be instrumental in helping the user departments write specifications and possess the ability and acumen to coordinate material inspection/testing, and concurrently work with internal and external stakeholders to best support procurement, and vendor interventions. QUALIFICATIONS: The successful candidate must possess a baccalaureate degree from an accredited college and six years of experience including three years of supervisory or managerial experience in metallurgy. A satisfactory combination of equivalent education and experience may be considered. However, all candidates must possess a minimum of three years supervisory or managerial experience. This position offers an excellent compensation package which includes competitive compensation, comprehensive benefits, promotional opportunities and a diverse collection of work assignments. TO APPLY AND SEE FULL DESCRIPTION, GO TO: http://www.mta.info/nyct/hr/, click on Job Postings, Click on Agree, Select MTANYC Transit and Search for Senior Manager, Inspection & Testing (Metallurgy), Job ID 81158. Applicaton Deadline: March 1, 2015 Follow us on: Twitter.com@NYCTSubwayScoop Facebook: MTA New York City Transit www.mta.info/employment/ EOE M/F/D/V

THE NEW RAILWAYAGE APP FOR IPHONE AND IPAD

January 2015 Railway Age 67

Financial edge DAVID NAHASS

Zigzagging oil prices and rail economics

il’s steep drop could create a bubble in the crude oil and frac sand railcar market. Recently, a Costco Warehouse opened near my house. It was equipped with a twelve-pump gas station. In suburban New Jersey, the retail gasoline market is competitive. Not suprisingly, this Costco seems to be using its gas pump as a loss leader, selling regular gasoline as low as $2.13 per gallon. Based on the Dec. 19, 2014 close of $1.59 for RBOB (technical term for refined fuel) Gasoline, Costco is allowing the recent drop in oil to draw foot (via automobile) traffic to its stores. Lines are long enough to make one wonder how much time is equal to a discount of 10 cents a gallon and to ponder how recent decreases in oil prices may affect rail economics. It’s not just about the consumer. As the price of diesel drops, fuel surcharges on rail transportation rates decrease. Rail transportation, already the low-cost provider for commodities that don’t have to arrive overnight, becomes even more competitive. Diesel and gasoline prices are at midyear 2009 levels, so rail transportation fuel surcharges may drop by up to 60%. That will open 2015 with an unexpected jolt of cash flow. (Changes in fuel surcharges may not be seen until February 2015. Fuel surcharges are calculated in arrears.) Low-priced fuel can spur additional infrastructure growth and create an economic boom that is more trickle-up than the traditional trickle-down economic boom of the Federal Reserve’s low run of interest rates. Trickle-up benefits rail through consumer consumption, industrial production, and housing construction. Rail has been enjoying the expansion in fracking. The two primary off-take

Railway Age

January 2015

products of this process are crude oil and natural gas. A steep drop in oil (roughly 40% since August 2014) has increased concerns about a bubble in the railcar market for crude oil and frac sand. Market intelligence suggests that at this price level, oil frac wells may be capped as delivered extraction costs could exceed the price at which the commodity could be sold.

As the price of diesel drops, fuel surcharges on rail transportation rates decrease. Rail, already the low-cost provider, becomes even more competitive. The conflict between the potential for additional growth and the potential for curtailing current growth raises the question: Do railroads benefit more from higher diesel and crude prices or lower diesel and crude prices? Crude and frac sand currently represent the most significant pockets of growth in North American rail. Crude loadings as of the week ending Dec. 13, 2014 were up 13% year-over-year. Loadings in the broad group of nonmetallic minerals are up 9%. Together these commodity groups account for roughly 10% of total carloadings. Compared to intermodal, which is

45% of loadings, these are still drops in the bucket. It would make sense that, for example, intermodal loadings, which are driven in part by consumer spending, have the capacity to surge as consumers take the up to $1.00 per gallon they’re saving and spend it on something else. There are winners in other commodity markets, but it’s not cut and dried. Low-priced oil impacts the plastics market and favors producers that use naphtha (a petroleum distillate) for feed-stock over ethylene, but that doesn’t change the price dynamic of the market or weaken its competitiveness. Oil pricing impacts food producers as the delivered price of corn and other grain products used as feed for livestock decreases. It is neutral for coal, which is impacted more by the price of natural gas, down 20% since August 2014, than by oil. Says Eric Starks, president of analyst FTR Associates, “You are really taking from one side and giving it to another. If oil stays low, there’s a loss of sunken investment dollars in the CBR infrastructure and there is worry about the economic loss there.” On the other hand, Starks observes, “Consumers are buying goods and worrying less about fuel costs. That is good for intermodal as consumer consumption drives strength it that marketplace. It also takes pressure off the manufacturer to pass through those fuels based transportation expenses. Overall, low fuel cost is a net positive, but you won’t see huge dramatic changes in the short term.” Timing might be everything here. Some investors look to capitalize when a growth trend takes a breather. Just make sure you have a strong stomach. Questions? Set them free at dnahass@railfin.com.

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