Archive for North America

How to execute a world class solution to complex DOT tank cars rules

How to execute a world class solution to complex DOT tank cars rules.

Railway Age has a very important message about regulatory confusion. So many regulations. How do corporations cope? says-complex-hazmat-transport- regs-would-even-challenge-einstein.html

Refresh connection with Facebook

Regulators tell you what to change or to do. They don’t tell you how to execute..

“They in fact seldom give advise about the myriad choices of how to comply”. They do not provide training either.

There is a company called STARS that can help you. Starting with training, like I received this past week.

From the RAILWAY AGE current issue :– here is added background discussion this week..

“Is complying with the multitude of regulations for the transport of hazardous materials—also known as dangerous goods (DG)—truly a challenge? According to 136 shipping executives surveyed online in April 2015 by Labelmaster , a provider of solutions for hazardous material transport compliance, even Albert Einstein would have had problems figuring out some of the rules.

More than half of the 136 executives polled—56%—said the brainy Einstein would have difficulties figuring out the 49 CFR, one of the government’s primary reference books that cover regulations, requirements and standards for U.S. hazmat transportation via highway, rail, air and water.

The survey also revealed a majority—59%—find it a challenge to keep with the ever- changing dangerous goods regulations.

As one example, 14% say that “the regulations are confusing—everyone has a different interpretation.” And the regulatory inspectors provide no or little help. Most DG professionals are looking for training and integrated solutions to simplify their role as to what to do now.


There is a real quandary as to “should we retrofit” or “should we abandon what migh be a suitable sunk capital fleet and switch to all new tank cars”?

Washington safety agencies lack the skills to give you guidance. Who pays for the retro fits? Washington has no idea. Why?

Because the thousands of already operating cars are subjects of complex lease agreements. Regulators don’t live in that complex world.

As a business example, if you use DOT type CPC-1232 tank cars, and your lease expires before the mandatory April Fools date of 4/1/2020, how do you handle the financial accounting for any improvements/modifications made between the lessor and the lessee? And exactly what technical modifications should you consider given the liability issues of a failure?

Who do you turn to to for such critical advise? The car manufacturers? Or a source of independent due diligence? Remember that on average you might pay around $60,000 a car for a retro-fit on a tank car with more than 20 years remaining life. But on a new tank car the cost might be more than $135,000.

As an insurance question to your broker, how would the insurance risk be perceived between the retro fit and the new car option? Do they calculate that value difference for you?

The economics are so complex that a special survey is being conducted with the results to be published in an upcoming Railway Age issue. You can contact for more about this. Or contact for a second professional opinion.

Economic Assessment of a city with these great attributes. Is All Well?

Here is a US city with the following favorable economic attributes.

It has ample water access. It has an international airport. It is served by three competing railroads. It has direct local access to three of the highest traffic density US Interstate Highway routes. Sounds like the basis of a solid urban economic development, correct?

You would be wrong.

This is Gary Indiana. A sort of mini Detroit says The Economist.

Gary’s unemployment rate is unofficially close to 30%

28% of the population lives below the poverty line.

50 some years ago, this city was home to 180,000 people and most were employed and earning good wages. 30,000 were employed at the U.S. steel mega steel mill after WW-2. Today, only about 5,000 work there. And the population is down to < 79,000.

With about one quarter of its building boarded up.

In 1970, about 50% of the residence aged 16 and over worked in manufacturing jobs. Today, only about 14%.

As a Conrail strategic planner with Chicago roots, I watched the change of the southern Lake Michigan heavy industrial regional landscape between the South Chicago steel complex and the Gary Works.  The entire region was caught up in the global steel making changes with cheaper competition from abroad. Gary was not alone.

Investors were losing faith in the old steel business model.  Political elected leaders missed the economic signs.  After all, many like Gary’s past leaders could say they had all the infrastructure qualities — some even an international airport!!


Gary is trying to reinvent itself. Maybe as a logistics semi processing and distribution center.

It is clear that despite its apparent advantageous characteristics in the introduction above, fancy economic indicators like “access” don’t by themselves make the future. Hard work and excellent choices are needed in order to reinvent a healthy city economy.

A manufacturing giant through and after WW-2, approximately 30% of the US workforce was in manufacturing. Today, maybe ten percent.

Lots of cities from Detroit to Gary failed to catch the changing economic trends after the late 1970’s an adapt. Some did, like South Bend and Galena.

The critical success factor is to know how to make change and execute.  To walk away from a historical core local employer like US Steel was in Gary is hard.  Too often the easy road of hanging on is the political choice.  City planning skills to make such strategic changes are often lacking.  It is a tough call,

Check The Economist 11 July issue for details of the stories as cities try to remake themselves rather than manage their decline.

Los Angeles Metrolink Goes “live” With PTC Train Safety

Los Angeles administrators early on embraced the mission to convert to higher safety PTC systems and now in mid year 2015 have gone “live”.

Meanwhile, many other US commuter railroads complain that they might need more than a thousands extra days to make their legislatively mandated train safety upgrade fully operational ( by this year’s) end.

See more discussion at:

LOS ANGELES Metrolink has launched its Positive Train Control (PTC) in Revenue Service Demonstration (RSD) across the entire 341-mile network the agency owns.  They did so earlier this month.

Metrolink thus becomes the first commuter railroad in the USA to have PTC running during regular service on all of its hosted lines and remains on track to become the nation’s first passenger rail system to have a fully operational, interoperable, and certified PTC system in place.

Metrolink began operating PTC RSD on the last of Metrolink’s hosted rail system on June 14. RSD simply means trains in revenue service or in Metrolinks case, with passengers on board.

The Rail Safety Improvement Act of 2008 (RSIA) set a federally mandated deadline of December 31, 2015 for PTC implementation. PTC involves a Global Positioning System (GPS)-based technology capable of preventing train-to-train collisions, over-speed derailments, unauthorized incursion into work zones and train movement through switches left in the wrong position.

The NTSB has consistently included PTC in its lists of most wanted safety technologies for more than 40 years.

Across its 512 route-mile network, Metrolink also operates on track owned and dispatched by the Union Pacific Railroad, BNSF Railway and the North County Transit District (NCTD) in San Diego County.

Metrolink provides nearly one million passenger boardings a month throughout its system.

The FRA has authorized Metrolink to operate PTC RSD using Wabtec’s ™ Interoperable Electronic Train Management System (I-ETMS)

Parsons Transportation Group, Inc., a business unit of Parsons Corporation, is the primary contractor managing Metrolink’s ™ PTC program.

The current cost for developing, installing and deploying PTC on the Metrolink system is estimated at about $216 million. Approximately 85 percent of the funds come from state and local dollars.

Among the metrics for the Metrolink PTC program are these:

the design and installation and then testing of a full deployment with a back-office server (BOS) system and new PTC-compatible computer-aided dispatch (CAD) system.

— installed on-board PTC equipment on 57 cab cars and 52 locomotives

— Out on track, they installed signal communication devices at 168 wayside locations, and implementing a six-county specialized communication network to link the wayside signals, trains and a new central train dispatch center.

The Metrolink Dispatch and Operations Center (DOC) is located in Pomona California.

GE Railcar-Leasing Business Lures Suitor – WSJ

Sumitomo Mitsui Financial Group Inc. is interested in buying General Electric Co.’s U.S. railcar-leasing business, people familiar with the matter say. This from the Wall Street Journal Asia edition.

It is cited as the latest example of Japanese financial institutions looking for significant purchases in the U.S.

China companies could also be a buyer.

GE Capital Rail Services could be valued at roughly $4 billion some report.

GE Capital Rail Services leases and manages boxcars, tank wagons and other railroad freight equipment in North America.

SMFG—Japan’s second-largest lender by market value, after Mitsubishi UFJ Financial Group Inc.—has been expanding in leasing. It bought Chicago-based railroad-leasing firm Flagship Rail Services from Perella Weinberg Partners LP for roughly $500 million in 2013. The latter is now called SMBC Rail Services.

People familiar with SMFG’s thinking said the bank considers rail leasing to be a higher-margin business that can supplement its lower-margin core lending business at home.

For more, see: Sent from my iPad

Economics of a MODERN rail box car (wagon)

From multiple recent news sources.

The railroad box car is threatened with economic extinction.  At least in North America.

No longer the most used piece of shipper equipment. Far from it, Here are a few marketing metrics.

Only THREE PERCENT of North American rail traffic moves in the older technology boxcars.

Shippers paid a noticeable approximate $6 billion in rail freight rates to move their products. That is ~8% of North American industry’s total railway revenue, (according to AllTranstek LLC).

Today, a modern engineered boxcar model would be built at a size of about 60 feet lengthwith an axle load rating of about 33 metric tons per axle when loaded to a maximum weight of 286,000 pounds. Today, that new boxcar can cost between $125,000 and $135,000 if bought in North America.

The older boxcars rent out at between $450 and $700 a month based on their original purchase price on ongoing maintenance costs. But the new boxcars will have a rate closer to $1,000 according to a report by Richard Kloster, senior vice president of AllTranstek.

The shrinking boxcar rail fleet. // WSJ report

News in the 21 June 2015 Wall Street Journal .

“Why Railroads Can’t Keep Enough Boxcars in Service” by  BOB TITA

He writes about the  shrinking supply of boxcars—once the ubiquitous symbols of U.S. railroads and a rolling bellwether for the economy. Fewer boxcars are causing a freight-hauling crunch for the industries that continue to use them. The number of boxcars in service in North America fell by 41% in the past decade to just under 125,000 last year as 101,600 cars were scrapped and only about 13,800 replacement were added. That downsizing accelerated a decades long shift…

Unanswere questions include these. Who needs them? Why?

Why not simply shift from boxcar to intermodal container?

The market is complicated.

I pointed out the pattern of this shrinking fleet in March.

US Intermodal Rail growth versus truck growth may be slowing after five years…

Intermodal Rail growth from truck may be slowing after five years…

A report in the JOC suggests that U.S. shippers are finding it more and more difficult to rationalize shifting their cargo from highway to rail.

Why?  Questionable service reliability and accelerating intermodal rates are to blame, according to intermodal analysts and a recent shipper survey.

For more details see

And contact Reynolds Hutchins at


A few highlights from published sources:

A Wolfe Research survey of roughly 600 shippers, intermodal share gains have slowed to their lowest level in nearly five years.

In the first three months of 2015, shippers diverted 1.3 percent of their volumes from truck to rail, down nearly 19 percent quarter-over-quarter. On the flip side though, shippers moved 1.6 percent of their rail volumes to the highways during the last quarter.

The Wolfe Research found that this is the second straight quarter that shippers have indicated a net freight diversion from rail to truck, after four years of the exact reverse pattern.


Over the past six months, the Cass Intermodal Price Index — a measure of “all-in” intermodal costs including rates and fuel surcharges — has risen more than 4 percent.

In the period, U.S. contract truckload rates rose only half that at ~ 2 percent, according to the Cass Truckload Linehaul Index.


CSX Transportation reported total intermodal volumes were up only 1.2 percent year-over-year in its first quarter.

Norfolk Southern Railway, reported intermodal gains, up 5 percent. Further west,

BNSF Railway reported port congestion among other factors had pulled down its intermodal volume roughly 5.5 percent for the quarter.

Over the longer term, a number of experts still expect railroads “to take market share from trucks” is the conclusion from Wolfe Research in its latest report.

The railroads continue to aggressively invest capital to improve track capacity and deploy more train equipment and train crews.

BNSF, for example, has trumpeted reports of significantly improved intermodal service and performance metrics. According to BNSF, since the fourth quarter of 2014, BNSF intermodal has experienced overall improvement with velocity up 6 percent since the beginning of November and on-time performance up nearly 20 percent since the middle of that month.

Log onto the Journal of Commerce for their complete report.

Forecasting next months 2nd quarter rail earnings — Try doing this for government owned rail companies

Here is an example of an average analyst making 2nd QUARTER PROJECTIONS OF PRIVATE INVESTOR HELD RAILWAY FINANCIALS in the case of Union Pacific.

Only in North America is there such transparency.  Well, maybe in a few other places. But not many.

In this case, an analysis like Michael Hooper is reporting seeing massive declines in certain categories of US railroad freight, especially coal.  So he asks, what is the likely report by union Pacific going to look like to an investor about 30 days from now?

He begins by observing that UNP’s coal volumes are down ~ 28% Q2 to date. Grain is down 21% in the quarter, crushed stone and gravel down 14%; petroleum  down 6%. The only gainers so far this quarter are primary forest products, up 7%; chemicals up 1%; motor vehicles up 9%; waste up 3%… to name a few.


If an assumption allows for an overall 2% pricing adjustment from a year ago; and if trends remain the same for the rest of June; then Union Pacific’s revenues will likely be down about 4%. His calculation.

Under that set of assumptions, UNP’s revenues in Q2 might decline by about $240 million. In turn, that might calculate to $5.76 billion of second quarter revenues –, slightly less than the average Wall Street analysts’ estimates.

But the rail company net profit margin may be the same at about 21.% for the 2nd quarter. Why?  Because UNP management is cutting variable costs.

Using this process, Michael then calculates the expected earnings per stock share.  Lot of maybes. But interesting to see how almost any analysts can see transparently the likely rail corporate income statement future outcomes.  By accessing public data.

Try doing that in South Africa, Senegal, Mongolia, or many other places were the citizens are the shareholders in the railroads. Cannot be done there with the government monopoly railways. Way too secretive in most of those organizations. In many, you might see the results about a year after they occurred.

For more about Michael’s analysis technique, go to:

Michael Hooper, “Thoughtful Investor”

Rail transit agencies and states will have to pay more to maintain the NEC rail infrastructure

Will the federal government pay up also? No one is sure.

But from the small states like DELAWARE and RI to the larger ones like PENN and Mass, the local will have to pay a lot more then they had been used to.

Major points by Paul NUSSBAUM in The Inquirer June 18, 2015 report include these:

Northeast states and transit agencies – including SEPTA and NJ Transit and DELAWARE – are being asked to pay more to maintain the rail corridor between Washington and Boston that they share with Amtrak.

The new cost-sharing plan for the Northeast Corridor is due to take effect Oct. 1

The states had 6 years to get ready for this change.

The state’s actually move more people on commuter trains each day then Amtrak does.

The 457-mile NEC corridor sees 710,000 commuter-rail passengers and only 40,000 Amtrak passengers each day.

The majority of the 2,000 daily trains are local state run commuters.

In 2008, congress ordered the multiple rail corridor users to devise a formula for sharing costs that historically have been divvied up in more than 50 separate contracts. “There hasn’t been any uniformity to how those costs are shared. Some are overpaying and some are underpaying,” says Toby Fauver, a Pennsylvania deputy secretary of transportation who co-chaired the committee that created the new cost-sharing plan.

That committee is part of the Northeast Corridor Infrastructure and Operations Advisory Commission. The commission is composed of one member from each of the NEC states (Massachusetts, Rhode Island, Connecticut, New York, New Jersey, Pennsylvania, Delaware, and Maryland) and the District of Columbia, four members from Amtrak, and five members from the U.S. Department of Transportation.

Hard to believe that 18 can agree unanimously on anything!

In December 2014″, the commission voted, 17-1, to approve a new cost-sharing policy, designed to spread the burden for spending $425 million a year over the next three years for maintenance and some limited upgrades on the corridor.

These costs would rise to $530 million a year.

NOTE: The NEC Commission has no way to compel the states to pay more.

Payment disputes might be taken to the federal Surface Transportation Board.

Under the formula, SEPTA payments to Amtrak will increase from $38.4 million this year to $52 million next year.

For NJ Transit, the cost would be more than $100 million a year.

Massachusetts is upset at its bill of $32.6 million for a 38-mile section of the NEC that it, not Amtrak, owns.

Massachusetts is also skeptical that the federal government will uphold its obligation to add $125 million in new funding for the corridor annually for the next three years, then boost its contribution to at least $400 million a year above current levels.

Massachusetts’ fears might be well-founded as the U.S. House approved a proposed budget for Amtrak this month that will cut Amtrak’s funding by 17% (or $242 million).


The corridor’s infrastructure improvement needs are expected to cost about $18 billion over the next five years  Only about $7.5 billion is funded under current plans.

Collectively, the NEC states contend that “it has been the longstanding position that the federal government has primary responsibility for eliminating the backlog of deferred maintenance to restore the infrastructure to a state of good repair”.

Will Senators from Wyoming and Idaho and others states with no direct NEC benefits agree?


Selective comments:

One associate Ted observes that the NEC States tried to roll back this PRIIA provision, assumed they would succeed and then did nothing of consequence reference a strategic plan as to the possible increase in their rates.

Another friend observed that “The crunch time is approaching. Politicians have to face up to the true costs of commuter service, just like they have to face up to true costs of Interstates, bad bridges, and regular highways. Everyone wants something for nothing.

GREX acquires SENSR Monitoring Technologies to offer complete track and bridge inspection service

SENSER competes with Atlanta based LifeSpan Technologies in using remote sensors to measure bridge and possible track movement under load.

The deal expands GREX services to its growing customer base. Many are rail companies.

More details can be found selective reports, including:

Essential highlights as I see the business.

Georgetown Rail Equipment Company (GREX) acquired SENSR Monitoring Technologies. It is setting up new wholly owned subsidiary, SENSR Monitoring Technologies, LLC (SMT).

SENSR develops and sells special monitoring equipment and has created an internet-based “health monitoring system” for measuring and managing structures movements by remote connections.

GREX says that its business plan is to expand its current advance infrastructure products and monitoring systems to include monitoring functions with SENSR on: Railway bridges, highway bridges, wind turbines, And even oil derricks.


Like its Atlanta based competitor, the SENSR products will facilitate the monitoring of these structures to better analyze what level of deterioration exists in them today and what might assist in prioritizing repairs or replacement options.


The SENSR team, including founder Chris Kavars and Les Davis, will be part of the resulting business efforts. GREX President and CEO Wiggie Shell will also be chairman of SMT.  The management team believes that its sensor product “can revolutionize the structural monitoring industry”… ——

Part of the business move came from a concept looked at by one of the large engineering consulting groups. But GREX appears to be the innovator with this deal.

As an economist, I see this offering a WOW technical change to heretofore a largely visual inspection regime.

These modern sensors create much more data driven certainty to inspection reports. GREX competitors for inspection service offered to railroad clients include Progress Rail, RailWorks, and Herzog to name a few. None appears yet to offer bridge and infrastructure movement sensing technology of this GREX type.

My blog readers will recall an earlier published piece on how these. modern sensing and recording devices can detect precise bridge movement conditions that can then be used as data points to determine immediate bridge repair requirements versus deferrable conditions. The level of analytical reporting condition confidence is an order of magnitude much higher with this innovation.

These innovative sensors can significantly alter perceived railroad company capital budget requirements by supplementing visual inspection procedures that historically gave “a range of uncertainty” to the customer.


Read more