Taking to the Tracks

By Lori Musser

Some U.S. rail operators are all smiles. Society’s surging sustainability aspirations favor rail over truck, and new technology and supply chain strategies are unlocking benefits for customers. Add to that US$66 billion of new federal funding for rail infrastructure, and new freight projects, and customers, may be just around the corner.

U.S. railroad infrastructure projects convey important socioeconomic benefits, but capital expenditures by railroads are rarely capacity projects; railroads typically report that more than three-quarters of their investment dollars are used simply to maintain a state of good repair.

Railway economist Jim Blaze’s outlook for 2022-2023 rail capital programs across North America, as published in his February 2022 Railway Age report, predicted average to above-average growth in railroad capital expenditure for bridges and key rail structures, with investments largely triggered by “aging of bridges and structures, plus some bottleneck fixes,” and, the prospect of joint passenger/freight rail funding largely related to the U.S. Bipartisan Infrastructure Law.

Chuck Baker is president of the American Short Line and Regional Railroad Association, or ASLRRA. Referring to the new five-year funding for the Consolidated Rail Infrastructure and Safety Improvements (CRISI) Grant Program, he said: “We are over the moon about it. There is a total of about US$1.3 billion available for short lines to compete for – four times what it has been in previous years.”

Short line projects may also be eligible for other major transportation infrastructure grants.

“Also, there is a new grade separation grant program with US$600-plus million per year guaranteed for five years,” Baker said.

While rail grant programs help, Baker said to Breakbulk there is more than US$12 billion in needed infrastructure upgrades, primarily because “a large chunk of short line track is not able to handle the 286,000-pound modern heavy freight rail car, and there are literally thousands of bridges that need to be rehabilitated and maintained.”

The nation’s 600 short lines are mostly light density, rural, or first/last mile facilities, often with spurs off Class 1 railroads, Baker said. Modernized short lines may be a major opportunity for breakbulk and project cargo shippers. “They are known for their white glove service, willingness to ‘go beyond,’ and for working with customers to grow business,” he said.


Short Line Optimism

Watco owns and operates a diverse network of short line railroads, terminals, ports and mechanical shops. Marc Massoglia, senior vice president of sales for Watco Terminals and Ports, said: “Watco is excited about the funding opportunities available for our short line railroads and ports.” He said Watco has about five short line projects in the works, mostly focused on modernizing track infrastructure to handle 286,000-pound railcars. “This will meet customers’ expectations as well as build resiliency and efficiency into our lines while increasing safety,” Massoglia said to Breakbulk.

Nicole Brewin is senior vice president of government and public affairs with the Washington, DC-based trade association Railway Supply Institute. She said that the Bipartisan Infrastructure Law secures historic investments in rail, modernizes key programs, preserves balanced regulations, and creates and maintains industry standards.

“It represents the largest federal investment in our nation’s rail infrastructure in history,” Brewin said to Breakbulk.

It will help U.S. rail entities “repair and replace aging fleets, rebuild core infrastructure, expand service, and improve safety and accessibility,” Brewin said. It also contains provisions to strengthen American competitiveness, improve supply chain security, and enhance safety. There are new restrictions on the foreign-state-owned content on freight cars, and the law “also re-establishes the One Federal Decision policy, which should expedite rail permitting. That’s critical for contractors, railroads and suppliers,” Brewin said.


Acquisition Route

Not all rail investments are construction projects. Railroads grow organically and through acquisition.

In November 2019, for example, Class 1 operator CP announced the acquisition of CMQ, with about 481 miles of rail lines primarily in Quebec and Maine. That transaction extended CP’s reach into the Northeast U.S. and Atlantic Canada, giving customers seamless access to the deepwater ports of Searsport in Maine and Saint John in New Brunswick via Eastern Marine Railway Co. and New Brunswick Southern Railway.

The CMQ deal provided CP with five short line connections, and access to 10 new transload locations. Now CP plans to invest up to US$90 million in upgrading CMQ’s infrastructure, a CP spokesperson said to Breakbulk.

Rail infrastructure improvements are helping supply chains reduce carbon emissions. Baker said. “It is a great environmental story – any given ton of freight that moves by rail versus truck reduces GHG emissions 75 percent. On average, railroads can move one ton of freight 480 miles on one gallon of diesel.”

Customers want to deal with companies that use fuel efficiently, invest in emissions reductions and combat climate change.

Norfolk Southern has been recognized for its green bond investments that help reduce supply chain emissions. Projects such as locomotive fuel efficiency improvements and investing in terminals to further promote the shift of freight from trucks to trains has led NS to a 7 percent improvement in fuel usage, saving 47 million gallons of fuel, and avoiding more than 470,000 tonnes of GHG in the last two years.


Leaning Into Supply Chain

Railroad investments are about having capacity in the right place, at the right time. Delving more deeply into the supply chain has been a rail growth strategy. Watco, for example, is teaming up with Crowley to support the development of the U.S. offshore wind energy. The partners are creating a single-source terminal and supply chain management solution.

Similarly, many railroads have invested in pop-up cargo yards that have been a successful solution to recent U.S. intermodal supply chain issues. The yards have also created value for breakbulk industries, if only to release the pressure on mixed-use port storage space.

Some railroads’ logistics divisions even help companies that aren’t rail-served. Arthur Adams, senior vice president of sales and marketing at CSX, said his company has specific targets in modal conversion: “We work with customers to get their entire supply chain.”

CSX’s TRANSFLO division is a value-added services platform that includes transloading and warehousing and leverages CSX’s heavy investment in a network of more than 45 terminals and counting. “TRANSFLO gets us into dimensional freight, carload quantities. In Atlanta, we repurposed Brownfield space and built a destination transload facility. Freight that was trucked from the Pacific Northwest to Atlanta is now railed and trucked only the last mile into Atlanta,” Adams said.

“Customers are truly reimaging their supply chain … government incentives have helped companies to think through their supply chains in that regard,” Adams said.

He added CSX’s industrial development program even goes into a brown or greenfield site and does pre-engineering, sharing expertise and working with municipalities and others so customers “don’t have to strategize from ground zero.”

“We are leaning in and making sure that we are agile and flexible to meet customer needs. That is going to make us the premier service,” Adams said.

Rail technology investments are also helping unlock the power of Big Data, artificial intelligence, robotics and automation to add value for customers, enhance infrastructure maintenance and help rapidly address shifting market demands.


Growth Mindset

Railroads in the eastern U.S. are investing broadly to best serve breakbulk, project cargo and other supply chains.

While the cost of rail improvements, unlike roadway infrastructure, has been largely borne by the railroads themselves, there is some federal funding on the table to help. Nevertheless, the rail industry will continue to rely heavily on reinvesting revenues, and deploying strategic controls and technological advancements, as well as supply chain integration to position the industry for greater growth and enrich societal and environmental benefits.

CSX Transportation is a Class I freight railroad operating 21,000 route miles in the eastern U.S. and parts of Canada. Tom Tisa, CSX head of business development, said that CSX has invested heavily over the past several years in projects designed to add capacity and serve breakbulk and project cargo customers more efficiently.

A US$466 million expansion project will provide vertical clearance improvements at the Howard Street Tunnel and 21 other locations between Philadelphia and Baltimore. The 127-year-old tunnel is being reconstructed to add 18 inches of clearance for trains moving to and from the Port of Baltimore.

Tisa said that the extra inches “will expand opportunities for shipping large dimensional cargo moving through the Port of Baltimore, such as heavy machinery and power plant and alternative energy equipment.” He said that CSX is committed to continued capital investment in rail infrastructure to support increased capacity and more efficient service across its network for all customers, including breakbulk and project cargo shippers.

“Our double-stack clearance projects … have specifically benefitted dimensional shipments, which can take advantage of new rail service lanes. Also, siding projects across the network support more efficient handling of train-meets and are benefitting commodity unit trains and dimensional loads moving through key corridors,” Tisa said.

Regarding new business opportunities, “we are excited about handling large cargo loads related to alternative energy projects, which represent a promising source of business growth for CSX and the rail industry,” Tisa said to Breakbulk. 


Based in the U.S., Lori Musser is a veteran shipping industry writer.

Image credit: American Short Line and Regional Railroad Association