Archive for North America

Best business ally of the U S freight railroads? Maybe it is the U.S. Congresd

Once we in the USA had a world class interstate and primary national roadway system. Now we as citizen stakeholders  can’t seem to get even basic financing from the Congress to keep it maintained.

Deferred maintenance of highway bridges and road pavement — once a trait of the northeast US railroads like Penn Central — are now a hallmark of the national gas tax financed road system.

Plenty of funding is politically for the new “Mexico border fence” infrastructure. But zero for expanding the highway system that actually handles close to 80% of the nation’s interstate freight by value, and about 50% of the ton-miles.

// Maybe it is time to send most of Congress back to school for a course in Economics 101.  As stakeholders in the outcome, we need 51% of the House and about 60% of the Senate to take & pass the economics course.

In the meantime, the only significant national capacity addition to the US freight network is from the private rail freight companies and some pipeline companies. And a few new toll road concessions.

Once investing in transport infrastructure was at about a 3% to 4% annual clip. We now have fallen in this past decade to probably about 1% to 1.5% rate. To maintain our overall world class transport freight efficiency, those anemic investment rates “are not going to get the job done.”

And that is the way things look in mid year 2015. Do you disagree?

Hudson River NEC Rail Tunnel at NYC: Engineering report on its Decay // Summer 2015

From Bloomberg, Aug 21, 2015

Politicians got an inspection tour of the North East Corridor (NEC) tunnel under the Hudson River into the city of New York.

Repairs will not be quick.

The structural and damage to the tunnel is likely the result of long term years of use.  The original tunnel wire was fabricated from copper wire encased in lead, paper, cooling oil and rubber.

Recent damage came from flooding and corrosives deposited in  during the 2012 Hurricane Sandy.

Built 105 years ago on riverbed silt, the tunnel tubes rise and sway with the Hudson’s tides, even as trains zoom through at 70 miles an hour. “They shift enough to twist the conduit” say engineers.

For complete repairs and modernization, eacch of the two tubes would have to be closed at least a year for an overhaul.

To read the entire article, go to http://bloom.bg/1Jv3d42

Technical hurdles as CSX pushes towards intermodal growth with No U.S. Master Rail Plan

An 11 year plan. 7 years just to get permitting and financing in place. ====================

The Virginia Avenue Tunnel in Washington DC. is a $400 million project. CSX broke ground on in May.

The Virginia Avenue Tunnel is a critical project in the CSX broader $850 million National Gateway initiative. It is a public-private partnership between CSX, six states and the nation’s capital city. National Gateway is in effect a multiphase, 11-year undertaking to move more freight by rail between selective East Coast ports and the Midwest states. CSX is the plan developer and leading champion.

The entire Gateway Project involves double-tracking some CSX existing routes and increasing the vertical clearance for some tunnels and bridges. A CNBC report by Morgan Brennan for CNBC points out that seven of those years have been dedicated to permitting and complying with regulations. (@MorganLBrennan)

Interestingly, this is a private rail company strategic plan. The government agencies are helping finance and modify or delay the project with regulations and permits. But the government is not the leader.

WHY? CSX is looking to quadruple its rail freight carrying capacity in the 110-year-old single-lane Virginia freight rail tunnel. The tunnel is about one mile long underneath part of the city of Washington, D.C. Technically, a second parallel track will be added to allow two trains to pass at the same time. The vertical clearance height will also be increased to allow for double stacked container trains. To increase the vertical height, the tracks will actually be lowered. Today, CSX trains are restricted to the less efficient single-level intermodal train operations.

A change to double stack can have a 35% or better productivity. Reports indicate that the most challenging part of this engineering feat will be to construct these changes while the tunnel continues to allow some two dozen trains to pass per day.

The entire $850 million National Gateway initiative mirrors a similar bold move completed earlier by the Norfolk Southern for 1) its Norfolk to Ohio double stack corridor project and 2) its Shenandoah Corridor public-private partnership plan.

IN CONTRAST

In much of the rest of the world, these kind of plans are created by the government. In the U.S. business model, it is the reverse process. Private investor lead companies are the lead champions.

The entire North American double stack container train revolution was initiated in 1983 by a commercial deal between American Presidents Lines the ocean carrier and the Union Pacific railroad. Later on, various state and local governments joined in with the private railroads to expand the stack train network.

The federal government has also gotten involved. But there is no giant federal and state government master plan at work. And yet, more than 20% of the U.S. network is today stack capable.

Even without a government master plan, the United States (and Canada) are the world leaders in modern doublestack container train movements.

Governor Wolf of Pennsylvania Releases Oil Train Safety Report // Here is quick summary

Governor Wolf of Pennsylvania has released Oil Train Safety Report August 17, 2015

The report was written by Dr. Allan Zarembski . It focused on the safety of Pennsylvanians and protecting people from the potential of Bakken crude oil train derailments.

“I would also like to thank Dr. Zarembski for his hard work in writing this report and for producing numerous recommendations that will help my administration prepare.” Dr. Zarembski, who was hired by the governor in late-April and started in mid-May, is an internationally recognized expert in the area of railway track and structures, vehicle-track dynamics, failure and risk analysis, safety, railway operations, and maintenance.

Dr. Zarembski presents 27 recommendations.

———————————–

The report acknowledged that while the recent actions taken by the railroad industry and the Department of Transportation have been of great value, there is still concern about the level of risk present on these rail lines.

The Commonwealth of Pennsylvania asked the University of Delaware to look at the current level of risk and advise as to how to reduce the risk of a CBR incident in the Commonwealth.

For those derailment categories that are high risk, i.e. with a significant number of annual occurrences or significant potential for occurrence of major tank car failure, the University of Delaware team identified opportunities for improvement in inspection and/or maintenance practices, based on state of the art industry practice as well as specific practices of railroads operating CBR trains in the State of Pennsylvania.

In the area of Tank Car Breach/Rupture Risk, the assessment examined the proposed improvements to the tank car such as: Improved head shields Increased tank shell thickness/external jacket Valve Protection (top and bottom valves) and possible reduction in train speed.

In the area of Regulatory Oversight, the assessment reviewed the current safety oversight capabilities and resources of the Pennsylvania Public Utilities Commission as well as those of other neighboring states and identified opportunities for improvement of safety and Emergence Response. The report noted that the U.S. Department of Transportation, Federal Railroad Administration (FRA) has primary responsibility for rail safety and inspection under a 1970 federal law which preempted rail safety regulation.

Recommendations

A total of 27 recommendations are presented in this report; divided into primary (18) and secondary (9) categories.

Here are the 18 Primary category recommendations .

Secondary categories include activities which are more difficult to implement or which may require action by a party other than the railroad or Commonwealth of Pennsylvania.

Primary Recommendations

Railroad:

1. It is recommended that the routes over which CBR trains operate in Pennsylvania be tested at a rate such that the service defect rate is maintained at 0.04 to 0.06 service failures/mile/year. In all cases, rail on these routes should be tested no less than three times a year.

2. It is recommended that the routes over which CBR trains operate in Pennsylvania be tested by a railroad owned Track Geometry Car at a minimum of four times a year.

3. It is recommended that the routes over which CBR trains operate in Pennsylvania be tested by a vision based joint bar inspection system at least once per year, this test to be in lieu of one of the required on-foot inspections, as permitted by FRA.

4. It is recommended that NS and CSX adopt the BNSF Railway voluntary speed reduction to 35 mph for crude oil trains through cities with a population greater than 100,000 people

5. It is recommended that the railroad have sufficient Wheel Impact Load Detector (WILD) units in place to monitor all loaded oil train cars along their entire route within Pennsylvania, such that any track location on an oil train route within the state should have a WILD unit no more than 200 miles preceding (in the loaded direction) that location

a. If a WILD measurement exceeds 120 Kips, the train should be safely stopped, the wheel inspected, and then if condition of the wheel allows, the train proceed at a reduced speed of 30 mph until the alerting car can set out at an appropriate location until repairs are made.

b. If the WILD measurement is greater than 90 Kips, the car should be flagged and the identified wheels replaced as soon as possible but no later than 1500 miles of additional travel.

6. It is recommended that the railroads have sufficient Hot Bearing Detector (HBD) units in place as to monitor all loaded oil train cars along their entire route within Pennsylvania, with a maximum spacing of 25 miles between Hot Box detectors.

7. It is recommended that the railroad have at least one Acoustic Bearing Detector unit in place to monitor all loaded oil trains along their entire route within Pennsylvania.

8. It is recommended that those yards and sidings that handle a significant number of CBR cars be inspected by the Railroad inspectors at a level of track tighter than the assigned FRA track class. Thus Yards that are FRA Class 1 should be inspected at a FRA Class 2 level to provide railroads with early warning of potential track conditions that can cause problems.

9. It is recommended that oil trains in Pennsylvania, not equipped with Electronically Controlled Pneumatic (ECP) Brakes, use two way end of train devices (TWEOT) or Distributed Power (DP) to improve braking performance.

10. It is recommended that CSX and NS complete their initial route analysis of High-hazard flammable train (HHFT) routes in Pennsylvania as quickly as possible, taking into account proximity to populated areas and safety considerations as outlined by DOT.

Commonwealth of Pennsylvania:

11. It is recommended that the Commonwealth of Pennsylvania designate appropriate state and local officials to work with CSX and NS to provide all needed information and to assist in the route analysis.

12. It is recommended that Pennsylvania Public Utility Commission (PUC) inspectors, in co-ordination with FRA inspectors, focus on inspection of major CBR routes, to include track, equipment, hazmat, and operating practices. In particular, track inspectors should prioritize main line turnouts and yards and sidings that see a significant number of crude oil cars, to include both major railroads and the refineries themselves.

13. It is recommended that the Pennsylvania PUC and their track inspectors which are part of the PUC’s Transportation Division coordinate with the Federal Railroad Administration and try to schedule the FRA’s T-18 Gage Restraint Measurement System (GRMS) test vehicle to inspect all routes over which CBR trains operate in Pennsylvania at least once a year. This test should include both GRMS and conventional track geometry measurements.

14. It is recommended that Pennsylvania PUC fill their existing track inspector vacancy with a qualified inspector with railroad experience. Given the fact that most major refineries are in the eastern part of the state, where SEPTA and Amtrak are located as well, it may be necessary to add a third inspector to the eastern part of the state, pending filling of the existing eastern vacancy.

15. It is recommended that PEMA continue to actively work with both railroads to roll out information sharing technology tools and make these tools available to all emergency responders on CBR routes (PEMA is actively working in this area). 16. It is recommended that PEMA coordinate full scale emergency response exercise involving emergency responders from communities along the key oil train routes.

17. It is recommended that PEMA work with and insure that all communities along the CBR routes have appropriate emergency response plans.

18. It is recommended that PEMA work with NS and CSX to obtain an inventory of emergency response resources along routes over which Crude Oil Trains operate to include locations for the staging of emergency response equipment (PEMA is actively working in this area). Secondary Recommendations Railroad:

//

For full access to the text of the report and al 27 recommendations, you can download the report at: https://www.governor.pa.gov/governor-wolf-releases-oil-train-safety-report/

 

As a disclosure, I assisted Dr Zarembski in the report research. This is Jim Blaze

Railway Renaissance! Maybe not as challenges come from re-sourcing thermal coal

As a Middle Ages historian in college, I can tell you that the Renaissance period had its ups and downs.

The modern North American so called Renaissance Rail Freight Period has challenges also. Loss of potential thermal coal traffic market share is one such challenge.

Next time you are at a rail conference, look for a due diligence balance in the railway future discussion.

Renaissance Challenge #1 is to rail thermal coal markets and routes… The Bloomberg news has an excellent report on the changes coming in the U.S. Coal by rail market. Here are a few highlights:

“Coal Left Fighting Over America’s Last Plants as Rules Mount” — a report by Tim Loh and Mario Parker – Aug 2, 2015

One theory is that various states will fight to Steal Markets from one another & therefore rail coal train corridors could significantly change. We saw such massive rail routes changes in the 1970’s to 1990’s period as the Powder River traffic literally exploded as a new rail market.

Now comes a new cycle fight. One example is the fight for resourcing origin markets between the Illinois Basin producers and the Wyoming Powder River area. Illinois miners may try to “take 60 million tons of Powder River Basin’s market” says one source, Robert Moore, CEO Foresight Energy LP in St. Louis.

This geographic resourcing is particularly interesting since the rail regulators at the STB in ashington typically ignore source competition as an economic variable.

Amidst this, the pending Clean Power Plan rules will seek to cut coal-fired electricity by 90 gigawatts. The Energy Information Administration reported earlier that this cut would come out of about 292 gigawatts of coal-fired generation capacity that was in line during in 2014.

New replacement thermal coal power station in the next decade or two? Unlikely.

The railroads will therefore fight for a diminishing share of the coal energy market over possibly much shorter average lengths of haul as states fight for resourcing.

No one knows how this will play out even if there is a Rail Renaissance under way.

What is the calculated financial risk impact on the big 6 North American rail companies from such new sourcing + route shifting + power station energy changes?

To read the entire Bloomberg article and its authors’ story focus, go to http://bloom.bg/1N2BchP

Excellant due diligence analysis of changing rail values as companies by William Greenfield

This Is pretty thought provoking from an economics view of how railway operating companies can be valued as by investors in these changing times.

The logic is written by William Greenfield . Remember. This is just one benchmark approach.

WHY ARE most profitable railroad railroad company stocks down in mid year 2015 so far? Mr Greenfield points out that Railroads are in the transportation industry and for the last 15-20 years they have enjoyed one major advantage over all other forms of transportation – expensive oil. Other forms of land transportation, such as trucking, use more oil per ton-mile then a train. Therefore, when setting up a supply chain for distribution, an enterprise was willing to look at rails even though they aren’t the fastest or the most convenient (the train can’t go where the tracks aren’t laid).

Once you understand this connection he argues that you begin to see that railroads benefit from high oil prices. The senior railroad company managers know this.

He points to the commercials from rail companies like CSX Transportation (NYSE:CSX) that tell the listener how a train uses only 1 gallon of fuel to move 1 ton of goods over 480 miles.

While these commercials are telling you how great trains are for the environment relative to, say, trucks, they are also telling you their greatest economical advantage – not having to pay for a lot oil.

This of course also tells us that their greatest weakness. The weakness is cheap oil.

Due Diligence as an investor in rail companies.

In order to really get an idea of what we can expect from NSC, and really from any railroad going forward, Greenfield argues that we need to go back to a time when oil was last at ~$50/barrel (or lower) after adjusting for inflation.

Check the Seeking Alpha web site for his historical chart to see the detailed logic as his evidence.   (WTI Inflation-Adjusted (Chart from Macrotrends)

Log onto http://m.seekingalpha.com/article/3345245-norfolk-southern-6-degrees-of-oil?app=1&auth_param=d2tlu:1aqv27c:d0ceb761aa628f5514860c9326cfc30d&uprof=44

The Latest Sign That Coal Is Getting Killed // What is rail freight impact?

From Bloomberg, Jul 13, 2015

Coal is having a hard time lately. U.S. power plants are switching to natural gas, environmental restrictions are kicking in.. Prices have crashed, sure,. But for a real sense of coal’s diminishing prospects, check out what’s happening in the coal bond market.

Bonds are where coal companies turn to raise money for such things as new mines and environmental cleanups. But investors are increasingly reluctant to lend to them. Coal bond prices tumbled 17 percent in the second quarter, according to an analysis by Bloomberg Intelligence.

It’s the fourth consecutive quarter of price declines and the worst performance of any industry group by a long shot. Bonds fluctuate less than stocks, because the payoff is fixed and pretty much guaranteed as long as the borrower remains solvent.

A 17 percent decline is huge, and it happened at a time when other energy bonds—oil and gas—were rising.

Three of America’s biggest coal producers had the worst-performing bonds for the quarter:

Alpha Natural Resources: -70 percent

Peabody: -40 percent

Arch: -30 percent

To read the entire article, go to http://bloom.bg/1Hq3RK3

About 17 percent of U.S. coal-fired power generation will disappear over the next few years, according to an analysis by Bloomberg New Energy Finance.

Railway coal traffic loss will hurt rail profits somehow. As the markets shifts, how will rail companies respond?

US Shale Oil Output Heads for Record Drop

From Bloomberg, Jul 13, 2015

Shale fields that powered the U.S. energy renaissance will suffer the biggest drop in output since the boom began after companies idled more than half their drilling rigs.

How many crude oil train sets may be stored?

To read the entire news report, go to http://bloom.bg/1DcEfyt

Production from the prolific tight-rock formations such as the Eagle Ford in southern Texas will decline 91,000 barrels a day in August  the Energy Information Administration said Monday.

About 645 rigs were drilling for oil last week, down from 1,609 in October, according to oil-field service company Baker Hughes Inc.

Gary Indiana is not alone… Chicago South Works review of economic loss as a Case Study // & a Philadelphia rebirth case

The US Steel South Works economic story by  Jacob Kaplan illustrates economic decay even when surrounded by great infrastructure like rail and roads and waterways.

A long Lake Michigan on the Southeast Side of Chicago lies a huge empty tract of land. Probably the largest vacant parcel of land in the city,.

It was formerly home to the U. S. Steel South Works.  Almost 20,000 people were once employed where empty fields of concrete and rubble now sit. First opened in 1882 as the North Chicago Railway Mill Company, the placement of the steel mill at the mouth of the Calumet River at Lake Michigan made for easy transport of goods and raw materials.

The South Works began a long period of downsizing beginning in the 1970s. Finally, on April 10, 1992, the doors closed for good. The mill that once produced steel beams for most of Chicago’s skyscrapers and jobs for thousands of area residents was now gone, and with it went the prosperity of South Chicago.   Like in Gary, the neighborhood became more and more economically depressed.

See review at http://forgottenchicago.com/articles/south-works/

US Steel South Works completely GONE by early 1992 US Steel Chicgo South Works at its zenith

 

SUCESSFUL URBAN CORE INDUSTRY  REINVENTION —  a Philadelphia Case Study

 Sunday, July 12, 2015 in Philadelphia Inquirer 

Ten years after the Navy Yard’s first new offices opened, plans to transform the site from a symbol of the city’s lapsed industrial might into a vibrant new neighborhood are hitting their stride.

The roughly 12,000 workers at the yard now outnumber the 10,000 or so ship workers and others employed there when it closed as a military base in 1996. The yard is estimated to have generated $77 million in local and state taxes in 2012, when its managers conducted their last economic study.

Liberty Property Trust, the yard’s main developer, recently broke ground on its 14th new office building at the site, designed by the architect behind Two World Trade Center, and expects to start two or three more offices this year.

Read more at http://www.philly.com/philly/business/real_estate/commercial/20150712_Navy_Yard_hits_10-year_mark_in_stride.html#HdmulBMvWjSuvPJz.99

 

Turnover at the top hits Amtrak at a critical time says PHL Inquirer news report. / Pros and cons summary

Turnover at the top hits Amtrak at a critical time Paul Nussbaum is reporter Posted: Sunday, July 12, 2015, 3:01 AM For full report, go to   http://media.philly.com/designimages/partnerIcon-Inquirer-2014.jpg

Debate points offered by independent reporter.

As it recovers from its worst accident on the Northeast Corridor, Amtrak faces frequent management turnover and structural change, n addition to chronic financial and political challenges. Former Amtrak executives say the turmoil at the top in recent years has disrupted railroad management and distracted employees from their daily duties.

Steven Ditmeyer, a former Federal Railroad Administration (FRA) executive and now an adjunct professor in railway management at Michigan State University, said: “Rapid changes in management are never good, unless they’re aimed at getting rid of nonfunctioning people. Management turmoil is of concern.”

With upper management in flux, former Amtrak executives say, Amtrak may not have worked aggressively enough after deadly train wrecks on other passenger railroads – on Dec. 1, 2013, in New York and on July 24, 2013, in Spain – to identify fixes on its rail network that could have prevented the May 12 derailment in Philadelphia that killed eight passengers and injured 200. ======

Only after the Philadelphia derailment – at the order of the Federal Railroad Administration – did Amtrak quickly install automatic-braking circuitry on the northbound side of the Frankford Junction curve, which would have prevented the fatal derailment.   Amtrak had installed that braking system 24 years earlier on the southbound side of the curve and at several other tight curves on the Northeast Corridor, to automatically slow speeding trains if the engineer doesn’t.

“Certainly one of the reactions to the Metro-North derailment [in 2013] could have been, ‘Let me take a look at all my sharp curves and make sure I have protection for all my sharp curves,’ ” said rail expert Allan Zarembski of the University of Delaware. “With the benefit of 20/20 hindsight, it would have been a good idea.”

COUNTER POINTS

Amtrak president and CEO Joseph Boardman rejected the argument that Amtrak missed a chance to prevent the deadly Philadelphia derailment. He said the lack of automatic-braking circuitry on the northbound side of the Frankford curve was based on Amtrak’s assumption that trains wouldn’t enter the curve at more than the 80 m.p.h. maximum speed allowed on the preceding straightaway.

Mr Boardman also defended Amtrak’s management reshuffle, the latest in a series of reorganizations in the railroad’s 45-year history to try to improve finances and operations and placate Congress.

OTHER BACKGROUND

The railroad’s operating subsidy from the federal government declined from $565 million in fiscal 2010 to $250 million this year.    Amtrak has never been able to meet its congressional mandate to turn a profit. It received $1.4 billion from Congress this year to cover the operating deficit, as well as capital costs for construction, new vehicles, and debt payments.   Because Amtrak relies on unpredictable annual federal appropriations, the railroad lurches from year to year in a constant state of near-crisis.

“It looks like a company, but it is really a government agency,” said Jim Mathews, president of the National Association of Railroad Passengers. “People complain that a ‘real’ company could be more responsive to markets and its customers. “That’s like getting angry when frogs can’t fly.”

Amtrak inherited decrepit bridges, tunnels, and equipment when it took over passenger service from the private freight railroads in 1971. Since then, its backlog of worn-out infrastructure has been growing.   Now it would require an estimated $21 billion to restore just the 457-mile Northeast Corridor (NEC) to a state of good repair. Amtrak and eight regional commuter railroads carry 750,000 passengers a day on 2,000 trains on the NEC corridor.

Boardman, Amtrak’s chief executive since 2008, has repeatedly pleaded with Congress for more money to prevent what he warned last year could be “a bigger, costlier, and far more damaging failure than anything we have seen.”

“Our senior managers have little or no experience in operating or building a railroad,” said officials of the Brotherhood of Maintenance of Way Employees, which is in negotiations for a new labor contract. “The union’s struggle to maintain safe working conditions is hampered by Amtrak senior management’s lust for complete control and railroad inexperience,” they said in a recent union newsletter. The union also cited the problems with Amtrak’s “Safe-2-Safer” program identified in a report this year by Amtrak inspector general Tom Howard. Howard found that reported employee injuries at Amtrak increased from 695 in 2009, when the program began, to 1,301 in 2013, while employee injury claims increased by about 80 percent from 2009 through 2013, with a cost of $80 million.

Boardman dismissed the union leadership’s complaints as self-serving.   He said the union’s “concern has to do with negotiating the next contract and finding an enemy … and there’s no enemy here,” he said.

Boardman’s supporters say he is under constant pressure from Congress and the Amtrak board to cut costs and increase revenue. “He’s got a board of directors of 535 people,” said Mathews, the passenger advocate, referring to Congress. “When you have a congressman deciding the price of a hamburger in a dining car, how can you possibly make the best decisions for the customer?

“When you’re in a reactive mode, you’ve lost control of your destiny…”

The Amtrak inspector general, reported last year that Amtrak had made “significant progress implementing its 2011 strategic plan and accomplishing positive results,” while noting that “a number of challenges remain to be addressed.”

In another report, Louis Thompson, a former Federal Railroad Administration official and a railways adviser to the World Bank, said last year:   “Over its lifetime, Amtrak has had just enough political support to survive but never enough to invest properly or to prosper in any single market, and there is no convincing reason to think this will change significantly with the existing organizational structure.”

pnussbaum@phillynews.com 215-854-4587 @nussbaumpaul Read more at http://www.philly.com/philly/business/20150712_Turnover_at_the_top_hits_Amtrak_at_a_critical_time.html#J65lulgyoj8DgDkz.99