MAY 2013 Railway Age Magazine by Railway Age

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AMERICA’S RAILROADS Conservers of energy, friends of the environment

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RailwayAge

MAY 2013

visit us at www.railwayage.com Features america’s Railroads: Conservers of energy, friends of the environment 18 Tanks—a lot!

NJ Transit’s capital investment program

News/Columns From the editor Update watching washington

4 10 16

Financial edge

Departments industry indicators

industry Outlook

Market

People

100 years ago

Meetings

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advertising index

Professional Directory

Classified

On the COver intermodal growth has benefitted railroads and the environment.

Photo: Bruce Kelly 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. 214, No. 5. 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 or Digital only 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. Foreign $239.00 (U.S. funds) per year/$397.00 for two years for Air mail delivery. When ordering Both Print and Digital: $150.00 per year/$227.00 for two years in the U.S., Canada, and Mexico; $208.00 per year/$296.00 for two years, foreign. Foreign $308.00 (U.S. funds) per year/$496.00 for two years for Air mail delivery. Single Copies: $36.00 per copy in the U.S., Canada, and Mexico/$128.00 foreign All subscriptions payable in advance. COPYRIGHT© 2013 Simmons-Boardman Publishing Corporation 2012. 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 10, Omaha, NE 68101-0010 or call toll free (800) 895-4389. In Nebraska call (402) 346-4740. Printed at Cummings Printing, Hooksett, N.H. ISSN 00338826

May 2013 Railway age 1

RailwayAge

From the Editor williaM C. Vantuono

Wild exuberance over LNG: Cool your jets, Mr. Analyst

o doubt, the industry’s renewed interest in natural gas as a locomotive fuel is based upon some promising long-term benefits. Yet, like anything else, this technology is going to take years to supplant diesel fuel, which itself took some 30 years to totally replace steam and has been the mainstay of North American railroading for the past half-century. It seems as though BNSF’s recent foray into LNG has some Wall Street types hyperventilating. Case in point is this headline from The Motley Fool investor website: “Will Warren Buffett’s Newest Move Challenge the Competition?” Now, anything having something even remotely to do with The Oracle of Omaha can send analysts jumping for joy and engaging in frenzied fits of speculative behavior. Read on: “A few weeks ago, Berkshire Hathaway’s BNSF Railway Co. announced that it would be launching a pilot program to test the viability of transitioning locomotives from burning diesel to running on liquefied natural gas. Despite the significant cost of retrofitting BNSF’s 6,900 locomotives to accept the alternate fuel source, the comparable amount of energy available from LNG to a gallon of diesel is dramatically less expensive. Such a change would completely upend the rail industry and force holders of Union Pacific stock to evaluate how such a change might impact their shares.” Really? But hold on. There’s more: “The fact that Buffett is behind the push to move [motive] power from diesel to LNG is significant because of the effect he has on anything he touches. BNSF is the second-largest consumer of diesel behind the U.S. Navy, so a shift here is significant. Furthermore, Buffett has significant political juice, so you should not be surprised to see a push from him and Berkshire to support LNG-powered rail[roads] if the transition is successful. Even without any regulatory pressure, the cost savings have big potential, so owners of UP stock are 2

Railway age

May 2013

well-advised to follow these developments.” Ah . . . yeah. OK! Yes, Mr. Buffett is very smart. He bought BNSF, after all. But let’s get one thing straight: He’s not God. The fact that BNSF is getting serious about LNG is not going to send UP shares to Hell. Buffett himself is probably thinking, “Relax, folks. We’re just doing some testing. We’ll see where this takes us.” For some perspective, here’s what our knowledgeable Contributing Editor, Bruce Kelly (author of this month’s cover story, p. 18), has to say about LNG’s long-term development: “In my research on LNG locomotives, I came across some information on the pitfalls of LNG. First, the handling, infrastructure, and logistics for LNG represent a huge change from diesel—refrigeration, special safety concerns for refueling crews and train crews, etc. Second, the use of fuel tenders will need some serious improvement over past efforts. In the 1980s, Burlington Northern had quite a fleet of diesel tenders assigned to certain intermodal trains along the northern tier, as well as helper sets in the Powder River Basin and on Crawford Hill in Nebraska. The problems that developed were that these tank cars coupled between locomotives eventually developed frame and/or drawbar fatigue. Also, there was no safe way for crews to walk past the tank cars even at reduced speed, so any time a trailing unit died and needed to be restarted, reset, or isolated, the train had to come to a complete stop. I’m not sure what BNSF and the other railroads are going to come up with to make future LNG tenders more user-friendly. But these are questions that someone will ultimately ask.” In short, those of you with significant positions in UP stock need not worry about getting political-juice-induced gas cramps any time soon.

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 ARTHUR J. McGINNIS, Jr., President and Chairman JONATHAN CHALON, Publisher jchalon@sbpub.com WILLIAM C. VANTUONO, Editor-in-Chief wvantuono@sbpub.com DOUGLAS JOHN BOWEN, Managing Editor dbowen@sbpub.com LUTHER S. MILLER, Senior Consulting Editor lmiller@sbpub.com CONTRIBUTING EDITORS: Alex Binkley, Roy H. Blanchard, Lawrence H Kaufman, Bruce E. Kelly, Anthony D. Kruglinski, Ron Lindsey, Ryan McWilliams, Jason H. Seidl, Frank N. Wilner Creative Director: Wendy Williams Art Director: Sarah Vogwill Corporate Production Director: Mary Conyers Production Manager: Jessica Cajas Production Director: Eduardo Castaner Marketing Director: Erica Hayes Conference Director: Jane Poterala 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

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Industry Indicators shoRt line and Regional tRaffiC indeX

tRaffiC oRiginated

fouR WeeKs enDIng march 30, 2013

carLoaDS

maJoR u.s. RailRoads By Commodity grain farm Products ex. grain grain mill Products food products chemicals Petroleum & Petroleum Products coal Primary forest Products Lumber and Wood Products Pulp and Paper Products metallic ores coke Primary metal Products Iron and Steel Scrap motor Vehicles and Parts crush Stone, Sand, and gravel nonmetallic minerals Stone, clay & glass Waste & nonferrous Scrap all other carloads total u.s. CaRloads

maR. ’13 67,426 3,662 35,439 26,185 120,356 54,848 443,015 6,381 14,291 23,595 19,041 15,149 42,552 18,952 72,079 78,842 17,209 29,191 11,799 17,415 1,117,427

maR. ’12 84,397 3,136 37,902 26,205 121,937 35,553 451,978 5,561 12,873 24,216 21,949 13,599 45,132 20,422 67,952 70,462 17,372 29,522 12,327 20,901 1,123,396

% Change -20.1% 16.8% -6.5% -o.1% -1.3% 54.3% -2.0% 14.7% 11.0% -2.6% -13.2% 11.4% -5.7% -7.2% 6.1% 11.9% -0.9% -1.1% -4.3% -16.7% -6.3%

317,779

310,753

2.3%

1,435,206

1,434,149

0.1%

carLoaDS

chemicals coal crushed Stone / Sand / gravel food & Kindred Products grain grain mill Products Lumber & Wood Products metallic ores metals & Products motor Vehicles & equipment nonmetallic minerals Petroleum Products Pulp, Paper & allied Products Stone, clay & glass Products Trailers / containers Waste & nonferrous Scrap all other carloads

ComBined u.s./Canada RR

fouR WeeKs enDIng march 30, 2013

InTermoDaL maJoR u.s. RailRoads By Commodity TraILerS conTaInerS total units

maR. ’13 114,054 819,154 933,208

maR. ’12 120,101 808,248 928,349

% Change -5.0% 1.3% 0.5%

6,130 194,242 200,372

5,469 194,318 199,787

12.1% 0.0% 0.3%

120,184 1,013,396 1,133,580

125,570 1,022,566 1,128,136

-4.3% 1.1% 0.5%

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 -0.7% 69.2% 3.3% -5.2% -13.6% -9.1% 13.3% 48.8% -11.1% -6.4% 15.8% 1.6% -3.8% 2.3% 18.1% -5.0% -2.3%

maR. 2013 - 369,100 maR. 2012 - 354,179 290,000 300,000 310,000 320,000 330,000

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

RailRoad employment, Class i linehaul CaRRieRs, maRCh 2013 (% change from march 2012)

Canadian RailRoads TraILerS conTaInerS total units

oRiginated maR. ’12 43,696 15,336 25,001 13,426 25,905 7,400 9,620 6,303 24,928 12,460 1,937 2,389 18,395 11,509 34,480 11,370 90,024

total CaRloads, maRCh 2013 vs. 2012

Canadian RailRoads all Commodities

oRiginated maR. ’13 47,805 25,943 25,819 12,727 22,383 6,729 10,903 9,377 22,155 11,666 2,244 2,428 17,703 11,769 40,706 10,799 87,944

By Commodity

Transportation (train and engine) 65,581 (-0.06%)

executives, officials, and Staff assistants 9,779 (2.38%)

Professional and administrative 14,165 (2.61%)

total employees: 163,059 % Change fRom maR. 2012: 0.66% Transportation (other than train & engine) 6,753 (0.34%)

maintenance of equipment and Stores 30,039 (0.99%)

maintenanceof-Way and Structures 36,742 (0.56%)

Source: Surface Transportation Board

employment up yeaR-oveR-yeaR and fRom past month figures released by the Surface Transportation Board show class I railroads employed 163,059 people in mid-march, up 0.66% from march 2012, and up 0.51% from last february. all categories save one gained year-over-year, with only Transportation (train & engine) posting a decrease for a second straight month, down 0.06%. Just three of six categories gained ground from the previous month, led by maintenance-of-Way and Structures, up 1.31% from february. 4

Railway age

May 2013

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Industry Outlook Pa. railroad touts green incentives

association of american Railroads (aaR) President and CeO edward R. Hamberger last month told the Senate Committee on Commerce, Science, and Transportation that freight railroads are positioning themselves to meet future transportation demands in this country, including those related directly and indirectly to the expansion of the Panama Canal. The expansion project is designed to double shipping capacity via the Canal by 2015, and facilitate larger “post-Panamax” container ships to pass, overcoming current size constraints. Said Hamberger, “The fact is, whether the freight is coming into or leaving from long Beach or Savannah or Miami or Houston or Seattle or Norfolk or any other major port, our nation’s freight railroads are in a good position now, and are working diligently to be in an even better position in the future, to offer the safe, efficient, cost-effective service that their customers at ports and elsewhere want and need.” Hamberger said rail intermodal shipments are growing thanks to major private capital investments railroads have been making in equipment and facilities.

PHL honored for hiring veterans

BNSF touts gains in CO2 reduction

BNSF Railway says its customer base continues to reduce overall carbon dioxide emissions “shipping their freight by rail instead of entirely over the road,” leveraging the environmental benefits of freight rail transportation. in 2012, BNSF customers reduced their carbon dioxide equivalent emissions (CO2e) by more than 30 million metric tons, the railroad said. 6

Railway age

May 2013

The California employer advisory Council (CeaC) named anacostia & Pacific switching and terminal railroad Pacific Harbor line as Veterans employer of the year for its “exemplary contribution in hiring our american heroes, our veterans.” about 25% of Pacific Harbor line’s 150 employees are veterans or active duty guardsmen and reservists, says PHl President Otis Cliatt ii, himself a U.S. army veteran. “we’re very pleased to receive this award recognizing our efforts hiring veterans . . . Their military background increases safety and security and lessens the chance of accidents while working outdoors.” PHl provides switching services at the Ports of long Beach and los angeles, and dispatching all BNSF Railway and Union Pacific trains within the ports.

Reading & Northern Railroad Co.

Rails ready for Panama Canal traffic

Clinton, Pa.-based Reading & Northern Railroad Co. is offering a $5,000 rebate to any full-time rail employee who purchases an electric automobile in 2013—and offering the employee one-year’s charging access on railroad property at no cost to the car owner. R&N owner and CeO andrew M. Muller, Jr., who owns an electric automobile, initiated the incentive in part to demonstrate the company’s overall commitment to a cleaner environment, in keeping with its sponsorship of environmental organizations and, more directly, the environmental benevolence of the railroad itself. R&N made its offer to employees in its Spring 2013 in-house publication, R&N Magazine. “This is yet another example of the Mullers and R&N putting its principles ahead of pure profit,” the company said in a statement. “electric cars are good for the worldwide environment and we are all dedicated to making this world a better place for our children and grandchildren.” R&N has supported environmental causes since it began operations in 1983. “For years the company has sponsored environmental organizations and has encouraged our employees to join groups such as the Hawk Mountain Sanctuary,” the company said. Railway age named the Reading & Northern Railroad Co. the Regional Railroad of the year in 2002 and again in 2011. The railroad, Pennsylvania’s largest privately owned regional railroad, has 115 full-time rail employees.

Knoxville Locomotive Corporation Meeting Market Expectations for Locomotive Repowers

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Market CHSRA narrows design-build field a California-based joint venture of Parsons, Tutor Perini, and Zachry has been named “apparent best value bidder” by the California HighSpeed Rail authority to design and build the first segment of California’s 500-mile, $68 billion, 200-mph high speed rail system. The joint venture submitted a bid of $985.14 million for the 30-mile Madera-Fresno line, the northern stretch of the 130-mile Stage 1 initial Operating Section, less than CHSRa’s anticipated price tag of $1.2 billion-to-$1.6 billion. a joint venture of Dragados, Pulice, and Samsung placed second. CHSRa will negotiate with the highest-scoring bidder; if it is unable to conclude a deal promptly, it may open negotiations with the second place group.

North America CN: Reached a definitive agreement with Coalspur Mines ltd. for the transportation of thermal coal from its Vista Coal Project, in alberta, to Ridley Terminals inc., Prince Rupert, British Columbia, as well as final agreement regarding the construction of the railway line to serve the mine. The rail line construction agreement will govern the construction of a four-mile line providing CN access to Coalspur’s loading site, enabling Coalspur to load the entire train in one continuous load. FLORIDA DOT: Signed a $195 million contract with Bombardier Transportation to provide operations and maintenance services for the Central Florida Commuter Rail Transit (SunRail) project. The contract includes mobilization activities followed by 10 years of service. LOS ANGELES COUNTY MTA: awarded a three-year, $6 million contract to J.l. Patterson & associates 8

Railway age May 2013

Worldwide inc. to provide supplemental engineering services for rail facilities and third-party coordination. MTA NEW YORK CITY TRANSIT: will install stainless steel encased touchscreen information kiosks, designed and paid for by New yorkbased Control group, at 19 subway stations in Manhattan, Brooklyn, and Queens. The kiosks will go online this summer, and will list any delays or service disruptions in real time. a 30-month test period is planned.

DELHI METRO RAIL CORP. (INDIA): awarded Bombardier a $47 million contract to supply its Cityflo 350 integrated train control and signalling system for two metro extensions. ETIHAD RAIL (U.A.E.) Received the first two of seven SD70aCS locomotives ordered from lagrange, ill.-based electro-Motive Diesel, inc., (a Progress Rail Services subsidiary).

NEW MEXICO: will provide a tax break to lower the cost of locomotive fuel for the BNSF Railway Co. within the state, beginning July 1.

NANJING CHINA: Ordered 15 low-floor light rail vehicles from CSR Nanjing Puzhen, based on Bombardier’s FleXiTy 2 technology, for two new lRT lines. lRVs will operate without overhead catenary on 90% of the lines using Bombardier’s Primove system.

NORTH CAROLINA DOT: awarded RailPlan international inc. a multiyear contract, with options for extensions, to provide mechanical services for NCDOT’s amtrak Piedmont train, to begin June 1.

SINGAPORE LAND TRANSPORT AUTHORITY: Signed a $96 million contract for 45 Movia C951 metro cars from Changchun Bombardier Railway Vehicles (CBRC), China. Bombardier owns 50% of CBRC.

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Update Supply BriefS

Class I earnings keep growing

Alstom, lilee tout pTC product line lilee Systems and alstom have launched a “new, first-of-its-kind suite of interoperable Positive Train Control (PTC) products for rail lines.” The companies claim they have developed an interoperable Train Control (iTC) solution that for the first time offers the industry a wayside interface Unit with Systems Management agent (SMa) functionality. The joint offering is available to U.S. and Canadian rail operators, and can aid those working to meet the federal mandate for full PTC deployment by Dec. 31, 2015. The product was unveiled during the PTC world Congress held last month in Orlando, Fla. The joint PTC offering is built on alstom’s microwiU wayside interface Unit and addresses two fundamental priorities: safety and smart management of railroad’s wayside signaling and train control equipment.

Harsco launches new asset monitoring system Harsco Corp. has launched Compass, a telematics product designed to provide a graphical representation of machine activity and location, as well the status of particular asset’s condition to a central location. Trials have occurred since January on U.S. railroads. Harsco says the system connects directly to the machine’s system, and using cellular or satellite ommunications, uploads condition and performance data to a central location where operators can receive daily alerts for items such as required maintenance, engine faults and diagnostics. industry-specific applications are available to tailor Compass to a machine’s and an operator’s requirements. 10

Railway age May 2013

he slow pace of overall economic growth didn’t stop most of North America’s Class I railroads last month from logging solid financial results in the first quarter. CSX Corp. reported earnings of $459 million, or 45 cents per share, in the first quarter, up from $449 million, or 43 cents per share, in the first quarter of 2012, on revenue of about $2.96 billion, almost identical to that of a year ago. Earnings per share topped Wall Street analyst estimates of 40 cents.CSX also noted a record operating income of $875 million in the quarter, and achieved an operating ratio of 70.4%. CSX said that it expects to achieve an operating ratio in the high 60s by 2015, while remaining focused on attaining a mid-60s operating ratio longer-term. Said Chairman, President, and CEO

Michael J. Ward. “[W]e are prepared for the economy to accelerate and have great confidence in the long-term outlook for the business.” Union Pacific reported net income of $957 million, or $2.03 per share, in the first quarter of 2013, up from $863 million, or $1.79 a share, in the first quarter of 2012. The results beat Wall Street consensus earnings estimates of $1.95 a share. Revenue rose 3.5% to $5.29 billion, UP said, also beating estimates. UP’s operating ratio improved to 69.1% from 70.5% in the first quarter of last year. UP reported its gains despite continued lower shipments of coal. “We efficiently managed our operations in the face of dynamic volume shifts across the network,” CEO Jack Koraleski said. Kansas City Southern reported firstquarter revenue of $553 million, up

1% from the comparable quarter in 2012 and a record. Net income was $94 million, or 94 cents per diluted share, up 25% compared with $75 million, or 68 cents per diluted share, in the comparable 2012 quarter, and beating estimates by three cents. “The continued growth of our energy franchise, particularly that related to the transport of crude oil into the Gulf region,” was one reason why “the KCS growth story remains very much intact,” President and CEO David L. Starling said. CN reported first-quarter net income of C$555 million, or C$1.30 per diluted share, down from net income of C$775 million, or C$1.75 per diluted share, in the first-quarter of 2012.Adjusted diluted earnings per share for the quarter were C$1.22, up 3% over adjusted diluted EPS of C$1.18 for the same period of 2012 (excluding gains on rail line sales in

both years). Those results still beat by a penny Wall Street consensus estimates, lowered during the quarter, of C$1.21 per diluted share. CN revenue rose 5% to C$2.47 billion. CN’s operating ratio was 68.4%, down 2.2 points from the comparable quarter in 2012. Norfolk Southern Corp. April 23 reported a first-quarter 2013 net profit of $450 million, or $1.41 a share, up from $410 million, or $1.23 a share, in the first quarter of 2012. First-quarter results included a gain from the sale of land to the Michigan Department of Transportation, which increased net income by $60 million, or 19 cents per diluted share. Revenue of $2.7 billion slipped 2% from the first quarter of 2012. NS’s operating ratio was 74.8%, compared with 73.3% in the first quarter of 2012. First-quarter coal revenue declined $635 million, or 17%, from the

comparable 2012 quarter. Offsetting that to some degree was a rise in intermodal revenue, up 9% to $573 million compared with a year ago. Canadian Pacific reported firstquarter net income of C$217 million, or C$1.24 per diluted share, up sharply from C$142 million, or 82 Canadian cents per share, in the first quarter of 2012—a 51% improvement in earnings per share. Earnings consensus estimates of C$1.21 per share for the quarter. CP first-quarter revenue of roughly C$1.5 billion was up 9%, setting “a quarterly record,” the company said. CP’s operating ratio was 75.8%, a 430 basis point improvement and also a quarterly record, the company said. “CP delivered the best first quarter results in its history despite challenging winter conditions,” said CP CEO E. Hunter Harrison, who foresees “the best year-end financial and operating performance in CP’s history.”

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Update By land and by sea, “Intermodal has come of age”; post-Panamax impact is looming on the horizon Ports from Boston to Houston are spending collectively $10 billion on port infrastructure in preparation for the Panama Canal expansion, Richard Powers, director, Marketing, Maryland Port Administration, Port of Baltimore, told delegates at the New Intermodal Age conference, a joint venture of SimmonsBoardman Publishing Co. trade magazines Railway Age and Marine Log. “It’s not going to happen at the flick of a switch, but the cargo shift to the East Coast is coming,” said Powers. Through a public-private partnership between the Port of Baltimore and Ports America Chesapeake, $1.3 billion has been invested in expanding the Port of Baltimore’s Seagirt Terminal to handle the new Super Panamax-size ships when they start calling in June 2015 when the expanded set of locks is expected to open. Among the very

visible investments are a quartet of Super Panamax gantry cranes purchased from China. One hurdle for the port is CSX’s Howard Street Tunnel. Built in the early 1890s, the tunnel can’t accommodate doublestack intermodal rail. Estimates to expand the tunnel range from $1.5 billion to $4 billion. The proposed solution is a new intermodal site at the CSX Mount Clare Yard, off Interstate 95, southwest of the Howard Street Tunnel. In 2012, the Port of Baltimore ranked 11th among all U.S. ports in terms of foreign tonnage, handling 36.7 million tons of cargo, including close to 20 million tons of coal exports, second only to Norfolk/Newport News, Va. Container tonnage has grown to 6.3 million tons. Keynote speaker Ron Batory, president and Chief Operating Officer of

Conrail, said that intermodal “has come of age. It’s king, and its potential is yet to be fully developed.” Intermodal, he noted, has overtaken coal as the number-one revenue source for Class I railroads. Batory outlined eight growth drivers for intermodal: 1. Economic globalization. 2. Panama Canal widening. 3. The cost effectiveness of shipping by rail, and the railroads’ improved service responsiveness. 4. Rising fuel prices, as measured by the price of oil per barrel. 5. The railroads’ lower carbon footprint, compared to over-the-road trucking. 6. The railroads’ increasing marketshare recovery from highways. 7. The “infrastructure deficit” for trucking, both existing and projected.

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8. Truckload issues, such as driver shortages and high fuel costs. Today’s Conrail, a neutral switching carrier that operates three Shared Assets areas for Norfolk Southern and CSX following their 58%/42% split of Conrail in the late 1990s, “has experienced 141% intermodal growth since split date,” Batory said. Looking ahead, intermodal’s overall direction will be based upon such factors as “growth in domestic intermodal and transloading, shifting trade flows, export growth in commodities like food products, and development of new terminals.” Jim Hertwig, president and CEO of Florida East Coast Railway (pictured), described how his railroad is ideally positioned to take advantage of growing opportunities in intermodal. Florida, for example, “has three of the nation’s 15-largest container seaports,” he said. Two of them are “the closest U.S. ports of call from the Panama Canal—Port Miami and Port Everglades.”

Florida East Coast Railway President and CEO Jim Hertwig, addressing The New Intermodal Age conference in Baltimore, detailed how U.S. ports of call are a natural market for U.S. railroads eager to profit from growing ship-to-rail intermodal traffic.

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Update STB: California high speed rail falls under our purview The Surface Transportation Board April 18 said it “has jurisdiction over the California High-Speed Rail Authority’s proposed construction of the California High-Speed Train System, including the approximately 65-mile section that it proposes to construct between Merced, California, and Fresno, California.” CHSRA had filed a Motion to Dismiss with STB, “asserting that the Project does not require Board approval under 49 U.S.C. §10901 because it will be located entirely within California, will provide only intrastate passenger rail service, and will not be constructed or operated ‘as part of the interstate rail network’ under 49 U.S.C. §10501(a)(2)(A),” STB noted. Thus, “the Board denies the Authority’s Motion to Dismiss.” STB’s decision, Docket No. FD 35724, however, is not a rejection of CHSRA’s Petition of Exemption, filed March 27, STB spokesman Dennis Watson explained to Railway Age. STB, he said “has not yet ruled on the Petition. Given the significant interest in public participation in this proceeding, the period for replies to the Petition will be extended to May 8, 2013, to permit sufficient time for interested persons to prepare and file responses. The Board will determine whether the exemption criteria under 49 U.S.C. § 10502(a) are satisfied after reviewing the public comments.”

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STB noted that of its three decision makers, Vice Chairman Ann D. Begeman “concurred in part and dissented in part.” Begenen concurred with colleagues on the primary issue of STB having jurisdiction over the California HSR project. But Begeman added, “The Board’s finding of jurisdiction should be accompanied by a rationale to support that finding, instead of waiting to disclose it in a subsequent decision, which could be weeks, if not months, from today. Such an approach is rare by this agency and is one that I cannot support here, not only because it is important for the California High-Speed Rail Authority to know the reasons we reached this finding, but also to inform other states that are planning high speed rail projects so they can ensure full compliance with our regulations, as appropriate.” Begeman’s concerns notwithstanding, CHSRA is pressing ahead with plans to launch construction this year of an initial 30-mile segment in the Central Valley. The authority is reviewing bids for the project and has entered negotiations with the “apparent best value bidder” (see p. 8), and anticipates awarding a contract shortly.

NYC study: No. 7 subway extension to New Jersey feasible

MTA New York City Transit

Countering a blanket dismissal one year ago from the then-chair of the Metropolitan Transportation Authority, a 61-page study prepared for the City of New York, released April 9, asserts a No. 7 subway line extension under the Hudson River, linking Manhattan with New Jersey points, is worth pursuing. New York Mayor Michael Bloomberg, a proponent of a No. 7 extension, said in a statement, “The lack of new transit investment is creating a serious and urgent threat to New York City’s economic competitiveness. Extending the 7 train to Secaucus is a promising potential solution – it would leverage existing investments and be compatible with other proposed projects – and is deserving of serious consideration.”

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“The No. 7 Secaucus Extension Feasibility Analysis Final Report,” conducted by Parsons Brinckerhoff, states in part: “The extension of the No. 7 Subway would result in the first transHudson tunnel connection that would provide direct rail access from New Jersey, not only to the West Side of Manhattan, but also to the East Side and multiple locations in Queens. It would provide needed capacity across the Hudson River and advance the broader goal of enhancing regional connectivity.” Construction is ongoing for extending the No. 7 from its current western terminus, at Times Square, to 34th Street and 11th Avenue, on Manhattan’s West Side. “A conceptual alignment was developed providing a connection from the No. 7 terminal station currently under construction at West 34th Street and 11th Avenue to new tunnels under the Hudson River and the Palisades . . . to a new terminal station” at Secaucus Junction, N.J., on the Northeast Corridor, served by Amtrak and New Jersey Transit trains, the study notes. Supporters of the extension note the No. 7 would link New Jersey with multiple travel destinations, including the Javits Convention Center, Times Square, and Grand Central Terminal, all in Manhattan, as well as Citi Field in Queens, home of Major League Baseball’s New York Mets.

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Watching Washington FRank n. wilneR

War of the Roses, or Hundred Years War?

he 15th century’s War of the Roses, a three-decade conflict between two rival branches for the throne of England, resembles the clash between railroads and some of their most important customers—a 30-year combat with the sides so far utilizing lawyers and lobbyists rather than crossbows and lances. A majority in Congress so far has sided with railroads, comprehending a draconian result for rail service quality should shippers reverse the clock on economic deregulation. Consumers United for Rail Equity (CURE) asserts its shipper members are paying crushing freight rates because their effective transportation options are limited. Railroads counter that restoring artificially imposed caps on freight rates will smother new investment in plant and equipment, reduce service quality, and place shippers most dependent on rail service in dire straits. The conflict commenced soon after the Staggers Rail Act of 1980 partially reduced a century of railroad economic regulation—a law supported by most shippers as the solution to a growing number of railroad bankruptcies and service-quality deterioration. For shippers with limited transportation alternatives, the Staggers Act provided the Interstate Commerce Commission (now the Surface Transportation Board) with a venue for shipper grievances to be arbitrated. Although shippers have prevailed more frequently than railroads in recent years, one shipper attorney, requesting anonymity, declares, “We feel very much that the STB is out to get us.” CURE thus has lobbied vigorously for legislation putting a shipper thumb on the scales in expectation of 16

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lower rail freight rates without regard to the impact on investment and service quality. In the previous Congress, CURE attempts to amend the antitrust laws and the Staggers Rail Act were pushed unsuccessfully by two powerful Democratic senators—Antitrust Subcommittee Chairman Herb Kohl (D-Wisc.) and Commerce Committee Chairman Jay Rockefeller (D-W.Va.). Kohl sought increased antitrust penalties for railroads and the addition of Justice Department antitrust over-

Shippers have the most to lose by pursuing their short-term lowerrate ambitions. sight—two-master (Justice and STB) supervision not faced by airlines or truckers, although the Justice Department and the Federal Energy Regulatory Commission jointly oversee pipeline economic activity. Kohl retired, but new subcommittee chairperson Amy Klobuchar (D-Wisc.) in March introduced the Railroad Antitrust Enforcement Act (S. 638), instructing federal courts to cease giving STB decisions deference, and allowing courts to undo previous railroad mergers that helped restore the industry’s financial stability. Co-sponsors include Al Franken (D-Minn.), Tammy Baldwin (D-Wisc.), and David Vitter (R-La.). Rockefeller, who will retire in 2014, is crafting a new bill to give shippers “a

right” to two-railroad competition (i.e., open access), require the STB to amend its prior decisions to that effect, instruct the STB to be more aggressive in granting rate relief to shippers, and provide for a more streamlined and speedy regulatory process. CURE envisions support from the Commerce Committee’s ranking Republican, John Thune of South Dakota, whose constituents include agricultural and ethanol shippers and coal-using electric utilities. In the House, Transportation & Infrastructure Committee Chairman Bill Shuster (R-Pa.) is viewed as a bulwark against “reregulation.” However, CURE is pressuring the committee’s ranking Democrat, Nick Rahall of West Virginia, who has inherited what CURE terms “a captive shipper problem” via redistricting that put M&G Polymers in his district. M&G was previously embroiled in a now mutually settled rate challenge with CSX that M&G complained cost it millions in attorney fees and regulatory delays. As for the House Antitrust Committee, former chairman Lamar Smith (R-Tex.), who was regarded as “solid” by rail lobbyists, has been replaced by Bob Goodlatte (R-Va.), considered “largely unknown.” Alas, here we go again, and wondering if this three-decades War of the Roses-like conflict is going to progress to a Hundred Years War such as embroiled England and France in the 14th and 15th centuries. Railroads and their investors, who so far have put billions of dollars into capacity and service improvements, may not be that patient. And that is why shippers have the most to lose by pursuing their short-term lower-rate ambitions.

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Americaâ&#x20AC;&#x2122;s railroads: Conservers of energy, friends of the environment

Railway Age

May 2012

Why railroads are the cleanest, greenest way to go. By BRuce Kelly, contributing editor

ou might remember the TV commercial. A single locomotive pulling doublestacked containers through a pastoral landscape, a logjam of trucks and autos on the adjacent roadway, everything moving uncharacteristically slow, but the message conveyed with undeniable clarity: Trains move goods more efficiently than trucks. That same scenario is played out every day in countless locations: A mile-and-a-half-long train carrying more than 200 trailers and containers, making 60 mph or better across the wide open spaces, out-performing truckers on the nearby interstate who are moving freight trailers one, two, maybe three at a time. Or a throng of rush-hour motorists, six lanes wide, inching forward at a stop-and-go crawl in suburban Southern California. They can only watch as other commuters whisk by on a train that’s L.A.-bound at close to 90 mph. If those visuals don’t grab your attention, check out these numbers. According to the U.S. Environmental Protection Agency, freight that moves by rail instead of highway is estimated to reduce emissions by two-thirds. If just 10% of the long-haul freight currently moving by truck could be switched to rail, it would eliminate more than 12 million tons of greenhouse gas emissions per year. And while railroads handle roughly 40% of the revenue ton-miles of freight hauled in the U.S., they produce only 2.4% of the nation’s transportation-related emissions. As for fuel efficiency, the U.S. Department of Energy says each ton-mile moved on a Class I burns less than one-tenth the number of BTUs it takes to move the same ton-mile by truck.

Cleaning the air by Clearing the roads

PHOTOS BY BRUCE KELLY, except where noted

FULL CIRCLE: Environmentally friendly railroads are the most efficient way to move the components for wind turbines— an environmentally friendly means of generating electricity.

Railroads are the only practical choice when it comes to fast, cost-effective, overland movement of bulk commodities like grain or coal. The products of everyday life, from appliances and automobiles to building materials and toys, travel with more fuel efficiency by rail than by road. Trains have even become the preferred method for mass shipment of solid waste. And they’re moving stuff that contributes to cleaner energy, be it grains for biofuel or blade and tower assemblies for windmill generators. But there may be no better way to prove a train’s environmental advantage over trucks than to reach the public right where they live, in their wallets, at their dinner tables. The recent development of dedicated, expedited perishables service has made railroads competitive once again in a niche where trucks have typically ruled. In partnership with Union Pacific, Railex runs two refrigerated trainloads of fruits, May 2013 Railway age 19

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vegetables, and other food products eastward each week from warehouses in Wallula, Wash., and Delano, Calif. UP hustles these trains to Chicago, then CSX makes final delivery to a distribution center in Rotterdam, N.Y. Railex calculates it has taken more than 121,000 trucks off the road, reduced carbon emissions by more than one million metric tons, and saved more than 54 million gallons of fuel since service began in 2006. Cold Train, based in Quincy, Wash., loads Northwest perishables into newly-built, energy-efficient refrigerated containers that are picked up six days a week by a BNSF South Seattle-to-Chicago high-priority intermodal train. The trip east takes just two days. Cold Train is now looking at opening a Chicago-Florida service lane. A Seattle-based energy and facilities service firm says the BNSF/Cold Train operation reduces each shipment’s carbon footprint by 52% compared with long-haul truck. Truck companies can see measurable success when they’re allied with railroads for the long haul. J.B. Hunt, which has partnered with BNSF and predecessor Santa Fe Railway since 1989, and also shares business with Norfolk Southern, now moves close to one million intermodal trailer and container loads by train each year. investment that makes a differenCe

In March, Congress approved stop-gap transportation funding to continue through the second half of fiscal year 2013. In April, President Obama introduced a budget plan for FY2014 and beyond that calls for $40 billion in funding for improvements to passenger and freight rail. Some political analysts warn that significant cuts will likely be made to the president’s new transportation package before it gets passed. Funding from TIGER (Transportation Investment Generating Economic Recovery) grants has done as much for ecology as it has for economic development. In just the past two years, TIGER has helped improve passenger, light rail, and streetcar service in New Orleans, Los Angeles, Salt Lake City, Phoenix, Chicago, Sacramento, and other cities. TIGER and other government programs have also funded freight carriers in places where it benefited the local economy and helped reduce truck traffic. One of many examples is where Norfolk Southern applied TIGER money toward new intermodal terminals in Tennessee and Alabama, plus upgrades to an existing terminal outside Harrisburg, Pa. These improvements are part of NS’s $2.5 billion Crescent Corridor project, stretching 2,500 miles from Memphis and New Orleans northeast to New Jersey. NS says, “Independent studies estimate that the corridor, when fully operational, has the potential to divert 1.3 million trucks from interstate highways along the route, save 169 million gallons of fuel annually, reduce greenhouse gas emissions by 1.9 million tons, create or preserve 73,000 jobs by 2030, and save $575 million in costs associated with traffic congestion.” The massive Chicago Region Environmental and Transportation Efficiency Program (CREATE) has been 20

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Rail rights-of-way are generally far less destructive to the surrounding environment than highways.

putting local, state, and federal resources to work in building six grade separations between freight and passenger lines, and 25 separations between railroads and roadways. Trains will pass through former choke points in minutes rather than hours, reducing emissions and fuel consumption. The EPA’s National Clean Diesel Funding Assistance Program provided $1.13 million in 2011 to Montana Rail Link for purchase of Auxiliary Power Units from Hotstart Manufacturing. The APUs have let MRL avoid prolonged idling of 34 yard and local engines, cutting more than 5,400 tons of emissions and saving more than 470,000 gallons of fuel annually. Hotstart APUs were also purchased for 27 locomotives on six railroads under the New England Locomotive Idle Reduction Project, which received $850,000 in funding from the EPA. Installation of Automatic Engine Start Stop (AESS) systems helped Kansas City Southern reduce engine idle time by more than 50%. KCS added AESS to 48 switch locomotives with funding from the EPA and the State of Missouri. re-inventing the loComotive

Mike Iden, general director-Car and Locomotive Engineering at Union Pacific, received the 2012 John H. Chafee Environmental Excellence Award for what the AAR called his help in pioneering “over 40 new fuel efficiency improvement and emissions reduction technologies.” National Railway Equipment Co., Wabtec, R.J. Corman RailPower, Brookville Equipment, Railserve, and other companies are now supplying

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Our vast array of cost effective, sustainable solutions include trackwork, new and used rail, locomotives and freight car wheel mounting services, reconditioned bearings, traction motors, new, refurbished and repowered locomotives and components, freight car parts, new and reconditioned railcars, rail welding, MOW equipment and signal solutions. As a supplier of Cat ® engines and system solutions for locomotives, we also deliver the broadest range of traction power solutions, from switchers to mainline road locomotives.

RailROaDS aND THe eNViRONMeNT

if just 10% of the long-haul freight currently moving by truck could be switched to rail, it would eliminate more than 12 million tons of greenhouse gas emissions per year.

the industry with all manner of genset and single-engined ecofriendly motive power. In 2009, when the Central California Traction Co. tested Brookville’s BL21CG genset demonstrator, CCT found that it consumed 49% less fuel than a GP18 doing the same work. Brookville is now delivering BL36PH Tier 3-compliant passenger locomotives to Florida’s Tri-Rail. Last year, Railserve introduced the latest in its LEAF (Lower Emissions And Fuel) series, a 600-hp Cumminspowered genset designed to reach maximum tractive effort at or below 10 mph, making it ideal for switching or industrial service. And R.J. Corman Railpower delivered to UP seven “ultra-low-emitting” genset RP20CDs, each powered by three 667-hp Tier 3-certified engines. They use 37% less fuel and emit 80% less nitrogen oxide (NOx). While the majority of genset switchers have been four-axle, the RP20CDs are six-axle, providing greater adhesion. Likewise, NRE’s new N-Viro 2GS36C-DE provides six-axle traction, powered by dual gensets that enable it to operate as an 1,800-hp switcher or 3,600-hp road locomotive. Meeting EPA emission standards on the main line has required more focus on internal combustion and exhaust management. All eyes are looking to 2015 and the start of Tier 4 standards, which will call for another 70% reduction in NOx emissions, and a 76% reduction in particulate matter (PM), compared with current Tier 2-3 standards for linehaul power. General Electric, having already sold more than 5,000 of its GEVO 12-cylinder-engined, Tier 2-compliant Evolution Series locomotives, says it will be ready. Late last year, GE announced a new Evolution design that it says will attain Tier 4 standards by running engine 22

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cylinders hot enough to minimize NOx, yet below the temperatures that increase carbon dioxide (CO2). GE Transportation told Railway Age, “We are on schedule to deliver five Tier 4 units in late 2013 to begin field testing.” Also last year, UP and Electro-Motive Diesel announced a program to test three emission-reducing technologies in 25 SD59MX locomotives. These are SD60Ms refitted with a smaller diesel engine (3,200-hp 12-cylinder 710ECO instead of a 3,800-hp 16-cylinder), which will reduce fuel consumption 25% and make room for exhaust after-treatment equipment. SD59MX 9900 was given an oversized roof housing for more extensive after-treatment gear. Knoxville Locomotive Works offers what it says is “a simple, easy-to-install locomotive repower package that generates superior benefits and improved economic value” compared with other rebuild companies. In partnership with engine-maker MTU of Germany, KLW repowers GP and SD series locomotives to meet Tier 3 linehaul emission standards, and SW-series switchers to meet Tier 4 standards, and does so without resorting to exhaust after-treatment or PM filters. KLW says its repowered units, when equipped with a TMV AESS, achieve “comparative fuel savings of 37-43% in switcher and road switcher duty cycles.” a Cleaner fuel for the future?

Last year, cheap and abundant natural gas took a bite out of one of railroading’s key business sectors: coal. This year, it appears natural gas could become the very thing that drives railroads into the future. Manufacturers like Caterpillar, Wabtec, and Westport Innovations are developing LNG engines. CN is already there, having begun testing in 2012 with two SD40-2Ws that run on fuel that’s 90% LNG and 10% diesel. The locomotives reduced their CO2 emissions by 30% and NOx emissions by 70%, says CN. A fuel that’s cleaner burning than diesel is certainly attractive, but rest assured there’s also an economic factor that has railroads looking toward LNG. David Fox, president of Railway Equipment Co. (whose affiliates have provided control systems for LNG applications), says, “I believe that LNG fuel will offer a huge transformation for North American railroads, due to the cost difference between LNG and diesel. It’s estimated to be 50% to 70% less expensive. It will probably be a change comparable to the change from coal to diesel.” BNSF said in March that it would begin testing LNG locomotives this year, with cooperation already under way with GE and EMD. This is not completely new territory for BNSF. Predecessor Burlington Northern experimented with a natural gas-powered GP9 in the 1980s. Then came two SD40-2s, which BN tested with natural gas in the 1990s. But it was BNSF predecessor Santa Fe Railway, as well as Union Pacific, which finally placed LNG units in long-term service in 1994 when they each assigned a pair of Caterpillar-engined, LNG-fueled Morrison-Knudsen MK1200G switchers to terminal duty in Los Angeles.

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RAILROADS RAMP UP THEIR OWN EFFORTS Railway age surveyed several carriers about their environmental successes. RA: what recent achievements have you made that are considered beneficial to the environment? Amtrak: Through membership in the chicago climate exchange, we committed to reduce [locomotive] emissions 6% between 2003 and 2010. we exceeded our goal through various initiatives including anti-idling practices, installation of aeSS on locomotives, improvements in rolling stock, locomotive upgrades, and improved training for locomotive engineers. amtrak has recently adopted the use of a Five-year Strategic Plan (Fy 2011-2015), and one of the objectives is to increase energy efficiency. BNSF: in 2007, we became the first railroad to sponsor low-emissions natural gas hostler trucks to move containers within an intermodal facility. we’ve equipped more than 70% of our 6,600 locomotives with idle-control technology, and all new locomotives we purchase are equipped with this technology. BNSF operates 74 genset locomotives in Texas and california, and was the first u.S. rail carrier to install wide-span electric cranes. These cranes produce zero emissions on site while generating power each time they lower a load. we currently use this technology at our Seattle international gateway, Memphis, and Kansas city intermodal terminals. CN: we are participating in the carbon Disclosure Project to gain a more comprehensive view of our carbon footprint. cN is setting fuel efficiency targets for specific trains by route and to monitor train performance against these goals, based on established benchmarks for key fuel consumption variables such as train make-up, locomotives, train handling, route gradients, curvature, and weather.

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CSX: in 2012, we set a new goal to reduce greenhouse gas emissions intensity by 6% to 8% by 2020, building on recent emissions reduction success that led the ePa to recognize cSX with a 2013 climate leadership award. an example: cSX partnered with the Mississippi Department of environmental Quality to use state-of-the art techniques during remediation of the former gautier Oil site in gautier, Miss. we invest heavily in training that allows our employees to be safer and more productive while reducing our environmental footprint, including using eRaD (event Recorder automated Download) monitors to record train operations to help locomotive engineers improve fuel efficiency. KCS: we are recycling used crossties as a fuel supplement in an on-line paper mill. we’ve acquired 175 new Tier 2 and Tier 3 locomotives over the past 10 years, retired of older locomotives, and remanufactured some locomotives with Tier 2 technology. Fuel efficiency, measured by revenue ton-miles per gallon, has increased from 364 in 2002 to 489 in 2010, a 34% improvement. During the past 10 years, KcS has remanufactured 16 older locomotives with 710 ecO kits that operate at Tier 2, achieving up to 25% savings in fuel consumption and over 50% in lube oil savings. Montana Rail Link: we’ve purchased 16 SD70ace Tier 2 locomotives, and installed auxiliary power units on older locomotives. we’re recycling used oil to heat the main locomotive shop in livingston, and implementing a locomotive shutdown policy when temperatures are above 40 degrees F. Norfolk Southern: we’ve achieved more than 60% of our five-year goal to reduce greenhouse gas emissions by 10% per revenue ton-mile of freight between 2009 and

Joe Ferguson

CP: in 2011, cP brought 61 new high horsepower ge evolution Series a.c. locomotives into service, plus another 30 in 2012. The eVO locomotives, which are currently in transcontinental service on priority series trains, have increased capacity, enhanced service reliability, furthered the company’s long train strategy, reduced emissions, and contributed to the company’s 1%-2% annual fuel efficiency improvement target. Through Progress Rail Services’ electro-Motive Diesel subsidiary, cP also began to modernize a portion of its low and medium horsepower locomotive fleet. The remanufacture of these locomotives, which began in 2012 and will take place over the next several years, supports yard fluidity and yard dwell reduction goals, and reduces fuel consumption and ongoing maintenance costs. we’ve also equipped 98% of our yard-service locomotives with ZTR aeSS. This has reduced locomotive idling emissions 80%-90%.

CP sd30C-eCo locomotive 5004 rests outside of electro-motive diesel’s facility in mayfield, ky., late last year prior to being put into service. .

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RailROaDS aND THe eNViRONMeNT

Who needs more expensive-to-build and environmentally risky oil pipelines when railroads can move petroleum products cost-effectively and safely?

2014. we’ve ramped up a locomotive rebuild program to improve fuel economy and reduce engine pollutants, and finished construction of an indoor locomotive emissionstesting facility at Juniata locomotive Shop, enabling us to develop more cost-effective, fuel-efficient, cleanerburning engines. UP: Our railroad’s efficiency improvements, capital investments, and technology developments have improved our fuel efficiency by 19% since 2000. This means we used 1.23 billion fewer gallons of fuel over that time and saved nearly 18 million metric tons of greenhouse gas emissions. RA: How much did your company spend in 2012 toward becoming ePa compliant with locomotive emissions? How much is budgeted for 2013? Amtrak: we won grants to obtain genset switcher locomotives for yards in california and chicago. The gensets in california have been operating since June 2010, and the chicago units are scheduled for delivery in april 2013. amtrak also received a Diesel emissions Reduction act (DeRa) grant through ePa’s National clean Diesel Funding assistance Program to replace the existing diesel engines in two switchers with genset engines for use at our washington, D.c., (ivy city) yard. BNSF: Since 2000, BNSF has developed one of the industry’s newest and most fuel-efficient fleets of locomotives, purchasing 3,500 fuel-efficient locomotives to replace older locomotives. BNSF also has 86 ultra-low emission switchers that reduce NOx and PM by 80% to 90% and improve fuel efficiency by 25% compared to standard switchers.

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May 2013

KCS: in 2012, we acquired 20 Tier 3 locomotives. MRL: we plan to purchase up to nine Tier 3 units in the next two years if business trends continue to support that purchase. The company also overhauled five Tier 2 locomotives in 2012. NS: we purchase emissions kits from the locomotive manufacturers and install them during regularly scheduled overhauls. The kits are one of the largest expenses of an overhaul. To help lower that cost, we constructed an indoor locomotive emissions-testing facility at Juniata locomotive Shop. The two-story, climate-controlled facility is large enough for two locomotives and serves as a year-round testing ground. we can more economically obtain an ePa certificate to develop our own emissions kits, using reconditioned aftermarket parts. in spring 2012, we applied for an ePa certificate to build an emissions kit for our rebuilt SD60e locomotives. The development of less expensive alternatives to meet or exceed ePa emissions standards could enable us to move more quickly to improve fuel efficiency and reduce overall emissions across our entire locomotive fleet. UP: Since 2000, uP has invested more than $6 billion to purchase more than 3,500 locomotives that meet the ePa’s updated emissions guidelines, as well as an additional $200 million to upgrade older locomotives in our fleet to reduce emissions and increase fuel efficiency. rA

Sean Kelly

CSX: Our locomotive fleet comprised a significant part of cSX’s nearly $2.25 billion in capital investments in 2012. as manufacturers built greater efficiencies in their

locomotives, cSX continued its investment in fleet upgrades to improve fuel efficiency. we’ve spent more than $1.75 billion in the past decade to update our locomotive fleet with newer, more fuel-efficient locomotives and technologies. The company has added more than 30 genset locomotives to the fleet in the past five years. in addition, new locomotives such as the ge evolution Series offer 6% efficiency improvements compared to older locomotives.

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Tanks —a loT! Freight car building is in the tank—literally. According to the Energy Information Administration (EIA), U.S. total crude oil production averaged 6.4 million barrels per day in 2012, an increase of 0.8 million from the previous year. Projected domestic crude oil production will increase to 7.3 million barrels per day this year and 7.9 million barrels per day in 2014, which would mark the highest annual average level of domestic production since 1998. The railroads have been playing an increasing important role in moving all this “black gold,” which requires lots of equipment. A close look at freight car building metrics shows that the carbuilders with tank cars (“the most diverse of all freight car designs and the most challenging to design and build,” according to one manufacturer) in their portfolios— Greenbrier, Trinity, Union Tank Car, American Railcar Industries—have more than enough work to keep production lines humming. As of late April, tank cars continued to dominate the freight car building market, accounting for 81% of total orders in the first quarter of this year—19,267 cars out of 23,901,

Except for the increasing volume of oil the railroads are hauling, there’s nothing crude about the industry’s burgeoning need for tank cars. according to the Railway Supply Institute’s American Railway Car Institute (ARCI) Committee. “We’ve never seen numbers like this before,” says RSI Executive Director Tom Simpson. Overall, 11,952 cars of all types were delivered in the first quarter, and the backlog of cars ordered but undelivered swelled to 71,704—a figure no doubt skewed by the run on tank cars. “Based on current production run rates of approximately 24,400 per year, we estimate the industry has 2.5 years of tank backlog visibility, suggesting the OEMs are quoting delivery times into 2015,” KeyBanc Capital Markets analysts Steve Barger and Tejas Patel note. By contrast, the non-tank-car backlog stands at 10,411, “which at current production run rates is less than two quarters of production visibility, although from a total capacity standpoint, it is less than one quarter’s worth of production.” The KeyBanc analysts stress that “activity remains characterized by an extreme weighting toward tank cars, which we think is reflective of both the explosive growth in shale oil production and the generally weak volume environment for other commodity types. Specific to tank cars, 19,267 orders May 2013 Railway age 29

FReigHT CaR BUilDiNg

is highest number since ARCI started to provide data by car type in first-quarter 2007, and it exceeded the recent peak of 16,318 in first-quarter 2011. Over the past nine quarters, tank car orders have averaged 9,795 per quarter vs. the nontank average of 9,030.” Putting these orders into a fleet-makeup context shows just how extreme the weighting toward tank cars is: Tank cars account for roughly 20% of the industry wide railcar fleet. All other car types combined account for 80% of the fleet. Crude oil and gas shale development is behind the tank car building boom, a point not lost on analysts. A recent Wall Street Transcript headline declared that oil and gas shale will benefit western railroads, and their shareholders, significantly. Union Pacific, says one analyst, “has the ability to grow earnings per share 15% a year going forward,” based on crude oil and gas shale business growth. Said another analyst: “One good thing about the western part of the U.S. is that it’s growing very fast thanks to oil and gas shale development. Volume should continue to go up. We also believe that Union Pacific and BNSF have a very good cost structure, and they have been able to increase the price they charge for their volume. If you look at the past five years, UP increased its pricing by about 5% a year, which is very good in this low-inflation environment. We also think UP is very shareholder-conscious: UP repurchased close to $6 billion of shares

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May 2013

in the last few years. If you combine the volume increases, margin improvements, and the pricing gains with returning money to shareholders, we think UP can grow earnings per share at about 12% to 15% a year going forward.” Economic Planning Associates, in its most recent freight car building report, is also bullish on tank cars: “The most dynamic element in the long-term railcar environment will be tank cars to transport ever increasing volumes of oil and petroleum products. Though there was an expansion in demand for a variety of covered hoppers, mill gondolas, and Class F flat cars in the fourth quarter of 2012, tank cars remain the dominant force in overall equipment demand. In the second quarter of last year, tank cars accounted for 83.5% of total orders. Even with improvements among a variety of other railcars, tank car orders comprised 58.3% of total orders in the third quarter and 61.8% of the orders in the fourth quarter. It is quite obvious that the growth in tank car demand is centered in the movement of crude oil, particularly from the Bakken Shale Formation in the Dakotas.” The market beyond tank cars

Overall, EPA expects total car orders this year to top off just above 50,000, down from 2012’s 58,900, then rebound strongly in 2014 and experience steady growth through 2018. “While we are pleasantly surprised by the modest

FReigHT CaR BUilDiNg

expansion in demand for other car types, we “Replacement pressures and technologremain cautious,” EPA said. “We are ical advances as well as legislative concerned about the underwhelming growth measures will play a role in promoting of the economy as manufacturers, oil and gas the demand for a variety of railcars,” EPA producers, and coal companies struggle with said. “Construction activities are the increasing number of government reguexpected to continue to advance, which lations. GDP growth slipped in the fourth should support movements of aggregates quarter. Hopefully, our economy will and structural steel products. Continued embark on a stronger path of growth that expansion in demand for petroleum will improve railroad traffic, revenue, and products, chemicals, and food and beverinvestments, leading to continued growth in ages will prop up the haulings of liquid railcar demand. products, in addition to the demand for “Assuming no further jolts to our econtank cars. Stricter air emission standards omy, we look for a stabilization in demand will promote use of lower sulphur westfor most car types with the exceptions of ern coal, which should lead to limited small-cube covered hoppers and coal cars. replacements of older steel bodied coal After strong deliveries in 2011 and the first cars. At the same time, eastern coal fleet tank car builders like the half of 2012, demand for these hoppers requirements will stimulate some Greenbrier Cos. are dealing with weakened considerably in the second half. demand for technologically advanced three years’ worth of backlogs. As a result, our estimate of an easing in steel and hybrid coal cars. Growing assemblies of small-cube equipment from worldwide nutritional needs and expand13,781 units last year to 5,000 units in 2013, as well as ing exports will pressure the current grain service cars as we the pronounced weakening in coal car demand, will serve proceed through the longer term while long neglected to drop total railcar deliveries from 58,900 cars last year segments such as equipment to haul waste, aggregates, and to 50,500 cars in 2013.” limestone show signs of revival.” Ra

May 2013 Railway age 31

passenger trains on twentieth annual Conference

freight railroads

October 15 & 16, 2013 / Washington Marriott Hotel / Washington, D.C. presented by

Joseph H. Boardman President & CEO, Amtrak

2013 Recipient W. Graham Claytor Jr. Award for Distinguished Service to Passenger Transportation

October 15, 2013 Keynote Address

SPONSORSHIPS AVAILABLE: Contact Jane Poterala at (212) 620-7209; jpoterala@sbpub.com

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CONFERENCE FEE AND HOTEL: The registration fee for Passenger Trains on Freight Railroads is $925, which includes admission to all conference sessions, conference documentation containing all available proceedings, and social events. The Washington Marriott Hotel, 1221 22nd Street NW, Washington, DC 20037, has set aside a block of rooms at $289 single/double for attendees. These will be held until 30 days prior to the conference; those reserving after that date will rely upon room availability. Contact the hotel directly at (202) 872-1500 for room reservations (mention group code â&#x20AC;&#x153;Railway Ageâ&#x20AC;?). You will receive room confirmation directly from the Washington Marriott Hotel. CANCELLATION POLICY: Confirmed registrants who cancel less than one week prior to the conference are subject to a $250 service charge. Registrants who fail to attend are liable for the entire fee unless they notify Railway Age in writing prior to the conference.

Passenger CaPital investment: new Jersey By Douglas John Bowen, Managing editor

For New Jersey transit, keeping current with rail capital needs, following a hurricane, got a whole lot harder. But the corporation has a game plan to both press ahead and play catch-up.

Douglas John Bowen

or Hoboken Terminal, spring 2013 is just another season marked by renewal and repair. Scaffolding envelops the landward side of the main building (seen above), the latest section of the 106-year-old, copper-clad structure to be addressed in a continuing program now spanning more than a decade, demonstrating New Jersey Transit Corp.’s commitment to its third-busiest rail station and a major passenger intermodal hub, handling rail, light rail, bus, and ferry services. The work also is symbolic of NJ Transit’s current capital program, a combination of long-planned, ongoing improvements and expansion mixed with addressing substantial damage to rail infrastructure, courtesy of Hurricane Sandy’s visit to the Garden State late last October. Hoboken Terminal, most of it situated over the Hudson River, found itself virtually in the river in the storm’s aftermath, a poster child for the damage inflicted over wide portions of New Jersey and NJ Transit’s rail network—and an indicator that NJ Transit’s capital program would face a severe challenge in calendar year 2013. NJT Assistant Executive Director, Capital Planning and Programs Steven Santoro says the corporation is up to the challenge. Its $1.2 billion fiscal year 2013 capital program will be augmented by federal funds, including grants funneled through the Federal Transit Administration, to cover hurricane-related damages including track replacement, restored catenary lines, repair of flood-damaged rolling

stock, and repositioning of electrical substations inundated by flood waters last October. FTA funds also will help reimburse the costs of “supplemental services,” including bus and ferry substitutions, put in place while the rail sector worked toward recovery. Beyond that, Santoro says, “We’re moving forward on everything that was originally planned—normal state of good repair work and so forth.” NJT still is accepting delivery of 100 Bombardier BiLevel cars, “still coming on a normal schedule,” he says. Likewise, “Regular track [repair] is still funded on a normal schedule.” Needs oN the NeC

“Normal” also might include NJ Transit’s ongoing work to increase capacity on the Northeast Corridor, the spine of most NJT rail services, including between New York-Penn Station (NJT’s busiest) and Newark-Penn (second-busiest). While Amtrak slowly proceeds to increase capacity on this stretch with its Gateway Tunnel project, NJT is pressing ahead with a related task, construction of a new Portal Bridge crossing spanning the Hackensack River. A request for proposals for a new, fixed-span structure, dubbed Portal North Bridge, will be “out on street in the not-too-distant future,” Santoro says, while “some early action work” already has occurred, including utility relocation. As of last month, design is complete and construction can begin as soon as May 2013 Railway age 33

NJ TRaNSiT’S CaPiTal iNVeSTMeNT PlaN

funding becomes available; NJ Transit has been the lead agent for most of the work involved. Further south, NJT will aid Amtrak in upgrading the 24-mile “Jersey Speedway” portion of the NEC, running roughly between Trenton and New Brunswick, N.J. Santoro notes the project offers more than just top train speeds of 160 mph; it also will improve reliability and offer more potential train capacity for Amtrak and NJT alike.

upgrades are on tap for two newark light rail stations to meet aDa requirements. Two Speedway-related projects are moving ahead simultaneously. The “Midline loop project” located near Monmouth Junction, N.J., “will eliminate a cross-the-plant move at Jersey Avenue (New Brunswick), and allow us to fly over the Northeast Corridor” and allow NJT trains to reverse direction, bolstering inner-zone NJT service. Nearby, NJT seeks to expand capacity at Amtrak’s County Yard to improve storage capacity, also relieving conflicting moves generated by trains entering the NEC at the yard near Jersey Avenue Station. “We’re coordinating design of the two projects,” Santoro says. Other NEC projects include: improvements to train movements in and near Trenton, particularly northbound (eastbound) toward New York; a redesigned Elizabeth, N.J. station to relieve a bottleneck; and various repairs to Newark-Penn Station, including platform work. “We’ve got more than $600 million of NEC-related improvements we’re funding, in coordination with Amtrak, over the next five years,” Santoro says.

Bolstering lrt, Dlrt infrastructure

Work already has begun to make most of the NJT rail system able to handle Positive Train Control needs amongst all players—NJT, Amtrak, and freight rail users—as the federal deadline of Dec. 31, 2015 draws near. “We’re working with CSX, Norfolk Southern, and Conrail Shared Assets to make sure access is system-wide, except for branches that do not require” PTC coverage, Santoro says. NJT trains in turn also traverses portions of right-of-way owned by freight rail operators, notably on a portion of its Raritan Valley Line service southwest of Newark, overseen by Conrail. One project due for completion this September is the new Pennsauken Transfer station, offering connections between NJ Transit’s Atlantic City Line rail (east-west) rail passenger service with NJT’s RiverLINE north-south diesel light rail transit (DLRT) line. Along with another planned station to the north in Bordentown, N.J., the RiverLINE is being bolstered by a new backup control center, upgraded signals, and security cameras in each DLRT vehicle. Also on tap: a new wheel truing machine at the RiverLINE’s 36th Street maintenance facility. Upgrades also are on tap for two Newark Light Rail stations at Davenport Avenue and Bloomfield Avenue, Santoro says, in order to bring both stations into compliance with the Americans with Disabilities Act (ADA) and improve access on either side of the two-track LRT route. Meanwhile, on the nearby Hudson-Bergen Light Rail (HBLR) system, work continues on environmental reviews for a roughly 1-mile extension of the network from West Side Avenue in Jersey City, which Santoro says “is supposed to be finished sometime this year.” Funding for the extension remains uncertain, though political support for the add-on remains healthy. RA

Railway age

May 2013

Bob Vogel

A RiverLINE DLRT car passes by NJT’s Pennsauken Transfer station, set to open in September.

People

Schnautz Norfolk Southern

Meetings HigH Profile Norfolk Southern appointed Tom w. Schnautz assistant Vice President Research and advanced Technology, assuming some of the responsibilities of gerhard Thelen, including Positive Train Control and research. Schnautz joined NS in 1993 as a management trainee in the engineering department. He progressed through a variety of engineering positions and most recently was Director advanced Train Control. He holds a bachelor’s degree in electrical engineering from Penn State University. Thelen retired March 31 as Vice President Operations Planning and Support.

WATCo CoS.—Nate Henderson named Director of Operations-Central Region, Terminal and Port Services. watco western australia Rail named Ken Potts Vice President Projects.

SUPPLIERS A&K Railroad Materials named Jeff Galyean Chief Financial Officer, succeeding Ray Yamasaki, retired. Harsco Corp. appointed F. Nicholas Grasberger Senior Vice President and Chief Financial Officer. HDR, Inc. promoted Charlie o’Reilly to Director of the Transportation group, Boston. Senior Vice President Eli Khoury becomes east Region Transportation Director, New york. L.B. Foster Co. promoted Bill Zimmer to Director, Class i Rail Sales. David Sprinkle returns as Regional Class i Sales Manager. among other appointments announced by the company were: Rick Steininger, Director, Technical Rail Sales; Mark Hammons, general Manager, Rail Sales west; Joe Mahoney, Director, Rail Sales; Chuck Parks, Regional Sales Manager, Southeast Sales District; Jay Roach, Regional Sales Manager, Midwest Sales District; James Irr-Barr, Sales Representative, Midwest Sales District; Hector Herrera, Regional Sales Manager, latin america; Victor Gonzalez, Sales Manager, Mexico; Michelle Chapin, Director, inside Rail Sales; Roger Babusci and Hannah Posner, inside Sales Representatives; and Nancy Spirko, Rail inside Sales Coordinator.

Parsons Brinckerhoff named Hugh Fuller Senior engineering Manager in the firm’s Transit and Rail Technical excellence Center, Seattle. Ioannis Tassoulas named Supervising engineer, austin, Tex. Ron Tober, former CeO of Charlotte area Transit System, named Senior advisor, Charlotte. Railway Supply Institute promoted Nicole Brewin to Vice President government affairs, and Robyn Leach to Vice President administration. STV, Inc. named Senior Vice President Richard Amodei head of the firm’s Transportation & infrastructure Division’s Northeast region, which includes offices in New york, Connecticut, Massachusetts, and Canada.

100 YEARS AGO in

(MAY 1913) REBELS SEIZE RAIL ASSETS Press dispatches report that in the states of Sonora and Sinaloa, Mexico, the rebels who are fighting the government have taken complete control of the railroads, and are running trains to suit themselves, collecting revenue and using it to support their rebellion. The lines of the Southern Pacific between Nogales and Guaymas, 265 miles, and between Guaymas and Ouliacan, 332 miles, are said to have been thus confiscated. Officers of the road have been ousted and the repair of tracks is neglected.

June 2-5 APTA Rail Conference Philadelphia Marriott Downtown, Philadelphia, Pa. lynne Morsen, Tel.: 202-496-4853; email: lmorsen@apta.com; website: www.apta.com.

June 2-5 American Railway Development Association (ARDA) 2013 Annual Meeting Marines Memorial Club & Hotel, San Francisco, Calif. website: www.amraildev.com

September 29-October 2 Railway Interchange 2013 indianapolis, ind. Carol Steckbeck, Tel.: 919-303-5140; email:csteckbeck50@gmail.com; website: www.railwayinterchange. org/registration.html.

September 29-October 2 APTA Annual Meeting Hilton Chicago, Chicago, ill. yvette Conley, Tel.: 202-496-4868;

email: yconley@apta.com; website: www.apta.com. October 2-3 Southwest Association of Rail Shippers Conference Hyatt Regency Phoenix, Phoenix, ariz. Jack Dail, Tel.: 425-818-8240; email: jdailconsulting@ comcast.net; website: www.railshippers.com.

October 15-16 Railway Age Passenger Trains on Freight Railroads

washington Marriott, washington, D.C.

Jane Poterala, Tel.: 212-620-7209; email: jpoterala@sbpub.com; website: www.railwayage.com May 2013 Railway age 35

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Miner Enterprises Mobile Field Guide Miner enterprises has introduced a new Mobile Field guide, that is interactive and optimized for smartphones, tablets, laptops and desktop computers. a static PDF version of the installation and inspection guide is still available online, formatted to print on local desktop printers. The new guide includes 10 different field and shop setup height check calculators for constant-contact side bearings that are based on the Sum of Pairs method outlined in aaR Rule 62. The calculators automatically let customers know when a railcar needs adjustment, which position, and how much adjustment it needs. There are 10 different options for automatically determining what side bearing needs to be adjusted, five each for Shop and Field: Standard; low Profile Miner; low Profile Stucki; 3-Unit articulated; and 5-Unit articulated. Mobile Field guide users can also retrieve the latest product identification, installation, and inspection updates for draft gears, constant contact side bearings, brake beams, gravity discharge gates, and rapid discharge mechanisms. The new Mobile Field guide also allows customers to select replacement hatch covers. Users enter whatever information they have, including measurements. They search the hatch cover database and select the parameters they want. For information, contact Miner enterprises, inc., 1200 east State Street, geneva, il 60134. Tel.: 630-232-3000; website: www.minerent.com.

Ashcroft pressure gauge The ashcroft® Type 5503 differential pressure gauge is available with ranges from 30 iwD to 300 psi with optional static pressure to 3625 or 5801 psi. Optional wetted parts in Hastelloy C. applications include use with liquefied gas for nitrogen, helium, argon, and CO2. with a stainless steel case and with 316 stainless steel wetted parts, the gauge offers ±1.6% full scale accuracy and 1,450 psi static pressure standard, with optional static pressure of 3,625 or 5,801 psi. available in 4-inch (100 mm) or 6-inch (160 mm) dial sizes. Contact ashcroft, Tel.: 800-328-8258, email: info@ashcroft.com; website: www.ashcroft.com.

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+1 248 560 8485

bryan.mangum@tognum.com

Nisus Corporation

800-264-0870

865-577-5823

tonyc@nisuscorp.com

Progressive Rail Services

256-505-6485

256-840-2651

bcox@progressrail.com

RJ Corman Railroad group

814-835-2212

814-836-2908

www.rjcorman

Railquip, inc.

770-458-4157

770-458-5365

sales@railquip.com

Railway educational Bureau, The 402-346-4300

402-346-1783

bbrundige@sb-reb.com

28,C3

Siemens industry, inc.

800-SieMeNS

www.usa.siemens.com.transportation

Soft Rail

888-872-4612

sales@signalcc.com

STV, inc.

212-777-4400

212-529-5237

info@stvinc.com

western-Cullen Hayes

773-254-9600

773-254-1110

co@wch.com

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 Craig wilson 55 Broad St., 26th Floor New york, Ny 10004 (212) 620-7211 Fax: (212) 633-1325 cwilson@sbpub.com

May 2013 Railway age 37

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

Reidler can help you comply with the FRA ruling by offering prismatic reflective yellow delineators that meet their specifications. • 4" x 150 fl Rolls (kiss-cut available) • 400 candlepower retroreflection • Application instructions provided

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

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

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

EDNA A. RICE, EXECUTIVE RECRUITER, INC

38 Railway age

May 2013

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

Trainers and Training Developers The Railway Educational Bureau is in the process of creating a training and development database to be used as a resource for the railroad industry. If you have experience training in an instructor-led environment and/or developing training materials for the rail industry, and are interested in becoming a part of our group, please send your resume to:

Brian Brundige The Railway Educational Bureau

recruitMeNt

(713) 667-0406 FAX (713) 667-1651 Web address: www.ednarice.com Email: resume@ednarice.com

trAiNiNG

1809 Capitol Avenue Omaha, NE 68102

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

TO ADVERTISE CONTACT Craig Wilson PH 212.620.7211 • FAX 212.633.1325 E-MAIL cwilson@sbpub.com

equipment Sale/leaSing

Available For Lease

◆ 5,150 cu. ft. Pressure Differential (PD) Covered Hopper Cars. Food grade interior linings but don’t necessarily have to stay in food grade service. ◆ Mill Gondolas - 65’ 6” interior length with 5’ sides and 52’6 interior length with 4’6” to 5’ sides ◆ 4,170 & 4,200 cu. ft. Gondolas - Interior bracing removed. OK for C&D, coke, scrap, aggregates, etc. ◆ 3,600 cu. ft. Open Top Hoppers. 45 degree slopes for aggregate, coke, coal, etc. For additional information and pricing, please contact John Goodwin phone (605) 582-8318 fax (605) 582-8304 www.carmathinc.com e-mail jgoodwin@mwrail.com

Find your rail industry job opportunities @ www.rtands.com

noticeS

New York City Transit R211 - New Generation of Subway Cars Purpose: New York City Transit (NYC Transit) is developing its new subway car technical specification in preparation for the purchase of over 752 75ft cars. The project will be called the R211. The purpose of this announcement is to inform car manufacturers in the heavy rail metro market of NYC Transit’s intent to buy the new cars, share the anticipated procurement schedule, the technical features that are being considered, as well as gauge the market’s interest. Interested parties must have experience manufacturing heavy rail metro cars into which crash energy management is incorporated. Background: The NYC Transit subway system is one of the most demanding environments for transit vehicles in the world. The basic system is more than 100 years old, includes both underground and elevated structures and, with the provision of 24-hour service, the scheduling of system maintenance is constrained. Additionally, the subway cars encounter tight radius curves, elevated structures with load limits and limited time for routine maintenance. Customer loads are extremely high, meaning trains are heavily loaded, and run with high frequency. As a result, the physical and customer environment in which the cars operate is very demanding on equipment. Procurement Schedule: NYC Transit is currently evaluating the conceptual design of the R211 car, and will be evaluating technology options as described below. NYC Transit is developing the technical specifications during the next 18 months. The Request for Proposals is anticipated to be advertised in late 2014 with a contract award in late 2015. Configuration and Features: NYC Transit is currently evaluating train and car configuration options for the R211 fleet. Some technologies and features which are being considered for the R211 include: • Alternate vehicle configurations such as open gangways between cars • Open architecture for train networks and communications • Maintenance and operating efficiencies such as wireless data transfer to/from the train • Enhanced Customer Amenities • Lightweight materials • Compatibility with planned and potential system upgrades (Communications-based Train Control, Platform Screen Doors). How to Express Interest in the Procurement: Any interested party should contact Marian Murray, Assistant Chief Procurement Officer via phone at 646 252 6040 or via e-mail at marian.murray@nyct.com, no later than June 14, 2013, to schedule a meeting to discuss its interest in the project.

New York City Transit

Railway Age Digital Edition

and www.railwayage.com

For More Marketing Power contact cwilson@sbpub.com

May 2013 Railway age

Financial edge anthony KRuglinsKi

Revisiting shorter-term bank-funded finance leases

ast month when I submitted my monthly column, Editor-in-Chief Bill Vantuono and I had a spirited discussion on whether I was being perfectly clear in connection with my discussion of the shorter term, bank generated, 5-to-10 year finance leases that are currently the vogue in the rolling stock leasing market. It seems that he had “tweaked” to a bit of an anomaly in the situation that I thought I was explaining in an adequate fashion. He did not completely agree with me. I finally realized that Bill had a problem understanding what I had written because I was describing an anomaly that might not make sense when considered outside the situation in which it appeared. With some language reworking, I cleared the matter up with Bill, but I now wonder if my discussions of the shortening terms of bank finance leases in last month’s magazine, and in earlier columns, might have left something to be desired. To dispel doubt, let’s begin with a bit about nomenclature: • Under the accounting rules in place, virtually all the leases we currently see in the rolling stock marketplace are “operating” leases for balance sheet (accounting) purposes. But when it comes to the general “parlance” we use in our industry, there are two distinct types of leases within that group. • Rail rolling stock “operating leases” are generally leases where the lessor is a leasing company seeking to deploy its leased assets with a lessee for a short to medium term (six months to five years or so.) Exceptions exist, but one thing all of these operating leases have in common is that the lessee has virtually no say in the future of the cars or locomotives it is leasing after the end of the 40

Railway age

May 2013

base lease term. (Some operating lessees may have a fair-market-value renewal option, but that’s about it.) There are other differences, but this is the main one for our purposes. • So-called “finance leases” are generally offered by banks or bank-owned lessors for terms of 5-to-12 years or so. They differ from the operating leases described above in that under a finance lease, the lessee generally has the option to control the “back end” of the transaction through an early-buy-out or fixed-purchase-(or renewal) option.

Banks seek shorter-term finance leases, but residual risks still exist. As for the current issue of short- to medium-term bank finance leases: Several years ago the gnomes in the international bank regulatory arena took a look at the imploded housing finance market (among other financial disasters) and concluded that the assets securing mortgage loans (supposedly very safe) were, in fact, not so safe. The solution? Propose changes in the capital adequacy rules for banks that would require them to allocate more capital to longer term financial products. Arguably, once it cost more in allocated capital for banks to do these deals, they would do safer ones. Or, if the same deals were still made, more bank capital would be behind them if they failed and, as a result, fewer banks would fail themselves.

Fast forward to our rolling stock finance lease market. The banks active in today’s market have decided not to make the 20- to 22-year long term finance leases that they once made. (They also don’t want to do “leveraged leases” with third-party debt as a component of the lease.) Instead, they are seeking to do shorter-term finance leases of 5-to-10 years which will not require significant increases in bank capital that the longer-term deals would require under the new rules. The anomaly? The residual risks associated with these shorter deals, the amount unamortized when the equipment can be returned to the bank at the end of the shorter-term lease, becomes larger. For instance, the residual amount assumed on a 20-year finance lease might (depending on how it was structured) have been 25% or so. The residual assumption on a shorter 5-year lease might be more than 75%. Banks are trading one risk for another. Is that sensible? I’m a big fan of the long-term value of rail rolling stock. Historically, over many years, this value has held up. (My kids have gone to college on the profits of leasing ancient rolling stock and neither I, nor my investors, have ever sustained a loss.) But there have been losses in our industry. For instance, if an owner/lessor finds out that for financial reasons it has to dispose of leased rail rolling stock assets before it can “work its way out” of a loss by renting the equipment for a longer term, it will sustain that loss. Having said this, I believe that it’s likely more equipment will be coming “home” to banks doing these shorter deals. The actual risk will likely therefore be one of potential redeployment and profitability rather than actual loss. What do you think?

Do you have the most up-to-date FRA Regulations?

Reb Says...

Use this handy index to verify that you have the most up-to-date version of the FRA regulations. The left-hand column lists the FRA Part number and the right-hand column list the latest revision date. Items highlighted in red denotes recent changes. (IFR = Interim Final Rule) FRA Part #

Last Update Effective:

FRA Part #

Last Update Effective:

40 . . . . . . . . .10-3-12 209 . . . . . . . .2-12-13 210 . . . . . . . .8-14-89 211 . . . . . . . .7-20-09 213 A-F . . . . .6-25-12 213 G . . . . . .9-13-10 214 . . . . . . . .6-25-12 215 . . . . . . . .6-25-12 216 . . . . . . . .6-25-12 217 . . . . . . . .6-25-12 218 . . . . . . . .6-25-12

219 220 221 222 223 224 225 228 229 230 231

. . . . . . . .6-25-12 . . . . . . . .6-25-12 . . . . . . . .6-25-12 . . . . . . . .6-25-12 . . . . . . . .6-25-12 . . . . . . . .6-25-12 . . . . . . . . .1-1-13 . . . . . . . .6-25-12 . . . . . . .12-19-12 . . . . . . . .6-25-12 . . . . . . . .6-25-12

FRA Part #

232 233 234 235 236 237 238 239 240 242

Last Update Effective:

. . . . . . . .6-25-12 . . . . . . . .6-25-12 . . . . . . . .6-25-12 . . . . . . . .6-25-12 . . . . . . . .7-13-12 . . . . . . . .6-25-12 . . . . . . . .6-25-12 . . . . . . . .6-25-12 . . . . . . . .6-25-12 . . . . . . . .6-25-12

The following is a list of booklets reprinted from the Department of Transportation Code of Federal Regulations 49 CFR Parts 200 to 399 that apply to the rail industry. They are printed in a convenient format and are kept current with updates from the Federal Register which may be supplied in supplement form. Item Code

FRA Part #

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

Railroad Safety Enforcement Procedures & Rules of Practice Track Safety Standards (Subpart A-F) Track Safety Standards (Subpart G) Railroad Workplace Safety Railroad Freight Car Safety Standards Railroad Operating Rules and Practices Railroad Communications Rear End Marking Device, Passenger, Commuter & Freight Trains BKHORN 222 Use of Locomotive Horns BKRFRS 224 Reflectorization of Rail Freight Rolling Stock BKHS 228 Hours of Service BKLSS 229 Locomotive Safety Standards BKSLI 230 Steam Locomotive Inspection BKSAS 231 Railroad Safety Appliance Standards BKBRIDGE 237 Bridge Safety Standards BKLER 240 Qualification and Certification of Locomotive BKCONDC 242 Conductor Certification BKBSS

232

Brake System Safety Standards

Each

50 or more

Mechanical Department Regulations

8.95 8.55 8.55 6.25 8.55

8.25 7.85 7.85 5.85 7.35

4.15 3.50

3.80 2.75

12.25

10.95

5.25 9.40 10.00 19.95 8.35 5.25 11.75

4.75

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

9.00

BKMFR

26.40

10.00 Each

13.75

7.85 4.75 11.00 9.00

25 or more

12.50 Each

BKTM

Technical Manual for Signal and Train Control Rules. Includes Part 233, 234, 235, 236 - Spiral Bound Order 25 or more and pay only $39.10 each

BKPSS

Passenger Safety Standards 20.80 Part 238, 239 - Order 25 or more and pay only $18.95 each

BKSTC

Signal and Train Control Systems Includes Part 233, 234, 235, 236 Order 25 or more and pay only $16.00 each

17.50

Drug and Alcohol Regulations in the Workplace Part 40 & 219

35.00

BKCAD

Part 219 Control of Alcohol and Drug Use – In 1985, FRA implemented a post-accident toxicological testing (post-accident testing) program to test railroad employees who had been involved in serious train accidents for alcohol and certain controlled substances (marijuana, cocaine, phencyclidine (PCP), and selected opiates, amphetamines, barbiturates, and benzodiazepines). This final rule adds certain non-controlled substances with potentially impairing side effects to its standard post-accident testing panel. The non-controlled substances include tramadol and sedating antihistamines. This final rule makes clear that FRA intends to keep the post-accident test results for these non-controlled substances confidential while it continues to obtain and analyze data on the extent to which prescription and over-the-counter (OTC) drug use by railroad employees potentially affects rail safety. Dates: This regulation is effective May 6, 2013.

46.00

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

$26.95

Part 240–Qualification and Certification of Locomotive Engineers

This book affects locomotive engineers, trainers and supervisors. The rule is largely based on recommendations made by an advisory committee comprised of rail industry and labor representatives. This final rule will clarify the decertification process; clarify when certified locomotive engineers are required to operate service vehicles; and address the concern that some designated supervisors of locomotive engineers are insufficiently qualified to properly supervise, train, or test locomotive engineers. 162 pages. Spiral bound.

BKLER

Order Now!

Qual. and Certif. of Loco. Engineers Order 50 or more and pay only $11.00 each

$11.75

800-228-9670 8 a.m. to 5 p.m. C.S.T., Monday/Friday

www.transalert.com

Add Shipping & Handling if your merchandise subtotal is:

Orders over $75, call for shipping

The Railway Educational Bureau

UP TO $10.00 10.01 - 25.00

Ph: (402)346-4300 • Email: orders@transalert.com

*Prices subject to change. Revision dates subject to change in accordance with laws published by the FRA. 5/13

1809 Capitol Ave, Omaha, NE 68102

Add $4.10 Add 7.20

25.01 - 50.00 50.01 - 75.00

Add 9.80 Add 10.90