jstagl

Sign o' the times

Jeff Stagl — Mon, 08 Mar 2010 20:01:00 GMT

I know jobs are hard to find. My brother-in-law has been out of work for 16 months, mostly because of a pinched nerve that required two surgeries and months of rehab, but partly because he hasn’t been able to find a job in his restaurant management field since December. I’ve also heard friends and co-workers tell similar stories of loved ones mired in the job-search market for long periods of time.

Those seeking employment in the rail industry are encountering some tough sledding, as well. Witness what happened at R.J. Corman Railroad Group last week. A crowd of 2,600 job seekers showed up at R.J. Corman’s Lexington, Ky., yard to apply for 100 track construction jobs — and the positions would only be filled for 12 to 18 months until a project was completed. A big enticement: the jobs would pay $25 to $35 per hour and include benefits.

R.J. Corman is hiring the workers to repair and renovate five lines in Kentucky, Tennessee and West Virginia. Last month, the company received a $17.5 million Transportation Investment Generating Economic Recovery, or TIGER, grant from the U.S. Department of Transportation to help fund the “Appalachian Regional Shortline Project,” which calls for upgrading rail, ties, ballast and grade crossings, and completing bridge work. R.J. Corman will provide $4.2 million for the project, which is slated to start in April.

The unemployment rate has finally flat-lined, but it’s not going to get any easier for job seekers to rejoin the ranks of the employed until positions aren’t so scarce and the competition for jobs isn’t as stiff. One of the American Recovery and Reinvestment Act’s primary aims was to create jobs, and its has, but very slowly. Those seeking a well-paying rail industry job want a brisker pace. So does my brother-in-law.

Not trying to get your goat

Jeff Stagl — Wed, 24 Feb 2010 21:56:00 GMT

I’m usually don’t read a news item strictly because of a whacky headline, but this one grabbed me: “VTA Sheep Grazing Contract Extended.”

The thing is, it’s not an outlandish headline, at least not on purpose. The Santa Clara Valley Transportation Authority (VTA) put out a press release to announce it extended a contract by one year and for $20,000 that enables sheep and goats to continue providing weed abatement services at the Cerone Operating Division in North San Jose, Calif. Honest, no tongue-in-cheek here.

The facility includes about 60 acres of open land that requires ongoing weed abatement work, and the service provider rotates in both sheep and goats — anywhere from 50 to 1,000 animals at one time — to eat up the pesky plants.

“In addition to being both less expensive and less labor intensive than mowing with tractors, the use of grazing animals has important environmental benefits,” said VTA General Manager Michael Burns in the press release.

Those benefits include improved water absorption and nutrient flow, decreased lawn-mower emissions and reduced pesticide usage.

“In addition, grazing rather than mowing open fields is less disruptive to bird and animal populations living in the area,” the press release states. Again, honest. I couldn’t make this up if I tried. If you don’t believe me, follow this link to read it for yourself.

I’m really not trying to get your goat — OK, I forced that in here. Bad pun, I know.

No economic hex on Class Is' capex

Jeff Stagl — Fri, 19 Feb 2010 19:10:00 GMT

Anyone who thinks railroads are spending fewer dollars on capital expenditures because of the sluggish economy and weak traffic levels, think again. Last year, U.S. railroads spent $9 billion on capex — the third-highest level in the industry’s history even though traffic fell 20 percent, said Association of American Railroads President and CEO Ed Hamberger during a media conference held Feb. 18.

This year, U.S. railroads plan to spend another $9 billion. As published in our February issue, here are the planned 2010 capex budgets for all North American Class Is:

• UP, $2.5 billion, the same amount as last year, including $150 million to complete an intermodal terminal in Joliet, Ill., and $200 million for positive train control (PTC);
• BNSF, $2.4 billion, about $240 million less than last year due to fewer locomotive acquisitions planned for 2010. The budget includes $2.1 billion for track, signals, freight cars and technologies, including PTC;
• CSX, $1.7 billion, about 70 percent of which will target infrastructure maintenance, with the remainder focused on the National Gateway intermodal corridor and equipment, as well as $200 million on regulatory requirements, including $170 million on PTC;
• NS, $1.4 billion vs. $1.3 billion in 2009, including $706 million for roadway work, $221 million for communications and signal projects and other work; $184 million for facilities and terminals, and $140 million for technology (including $40 million for PTC);
• CN, $1.4 billion, a slight increase over 2009’s budget, including more than $1 billion for infrastructure work;
• CP, between $680 million and $730 million, including $585 million to renew track;
• KCS, about $235 million vs. 2009’s $283 million, including $121 million for Kansas City Southern de México S.A. de C.V., of which $80 million is targeted for infrastructure upgrades;
• Ferromex, $121.6 million, primarily for infrastructure improvements and the construction of a new yard in Rio Escondido, Coahuila, near Piedras Negras; and
• Ferrosur, $37.3 million, primarily for new AC locomotives, infrastructure work and “urban programs” with several Mexican states.

A case of color blindness

Jeff Stagl — Wed, 17 Feb 2010 16:57:00 GMT

I was born and raised in Milwaukee and have spent most of my adult life in the former beer capital of the world. I was among the many who were surprised in 1994 when the city’s largest private college, Marquette University, changed the nickname of its basketball teams from the Warriors to the Golden Eagles.

To this day, the name change still rankles many Marquette basketball fans, who continue to refer to the teams as the Warriors. They believe the university caved in to pressure from Native Americans and other minority groups that considered the nickname offensive.

I can understand why Native Americans would take umbrage with “warriors,” but I can’t figure out why Atlanta-area Asian-Americans are offended by MARTA’s use of the color “yellow” as the name for the Chamblee rail line. Asian-American leaders expressed concerns that MARTA’s recent color-coding of the route as the “Yellow Line” could be perceived as racially insensitive. The transit agency isn’t taking the concerns lightly and now plans to color-code the route as the “Gold Line.”

“We have always sought to understand and effectively respond to any legitimate concern expressed by our riders or representatives of their communities,” said MARTA Chairman Michael Tyler and Chief Executive Officer/General Manager Beverly Scott in a joint statement issued on Feb. 11. “There was absolutely no intent to confer any negative connotation through the use of any of the colors chosen.”

However, I don’t perceive the Asian-Americans’ objection as a legitimate concern. “Yellow” is a color reference to a rail line and not a derogatory nickname associated with a race of people. MARTA also has Red, Green and Blue lines. Should Atlanta-area Native Americans now voice an objection to the Red Line? Or should minority groups in other cities — such as Washington, D.C — push their transit agencies to change the names of their Yellow and Red lines?

It’s all a bit silly, and much ado about nothing methinks. Yet, the cost to MARTA and any other transit agency that changes a line’s name from a color because of minority group pressure adds up to much more than nothing — and constitutes a case of color blindness.

Vote's in: BNSF/Berkshire a done deal

Jeff Stagl — Thu, 11 Feb 2010 17:25:00 GMT

“Welcome to snowy Fort Worth, Texas.” That’s how BNSF Railway Co. CEO Matt Rose began what became an abbreviated press conference/teleconference the morning of Feb. 11 on the Berkshire Hathaway Inc. buyout. He kept the conference at BNSF’s HQ to about five minutes because the Dallas-Fort Worth area was under a winter storm warning and expected four to six inches of snow, with about two inches already on the ground.

Despite the dreary weather, Rose had something cheerful to report for those who support Warren Buffett’s buyout of the railroad: About 70 percent of BNSF stockholders holding non-Berkshire-owned shares voted in favor of the transaction — exceeding the necessary two-thirds majority — during a shareholder meeting held just before the press conference. Now, BNSF and Berkshire expect to close the buyout at around noon on Friday Feb. 12 after the Class I files an 8K form for a stock offering with the Securities and Exchange Commission.

After that brief announcement, Rose fielded two questions pertaining to how the buyout will affect BNSF. Addressing the first on how Berkshire’s ownership might impact BNSF’s management, he said: “Warren’s been very clear that we should run the railroad like a family business that’s been around 100 years.” BNSF’s idea of long-term ownership is “very compatible” with Berkshire’s, which makes the buyout beneficial to the Class I, said Rose.

Addressing the second question regarding any differences in becoming a privately owned company vs. a publicly traded one, he said it was sometimes frustrating during the 39 quarters of financial performance he presided over that a large asset investment, such as a locomotive, was analyzed in a short- vs. long-term context on Wall Street.

“What our team is doing today really won't be felt in terms of capital spending for five or seven, or even 10 or 15 years, and beyond,” said Rose. “Warren has a great reputation for looking past the quarters.”

Going forward, the emphasis no longer will be about financial statements and performance in any individual quarter, he said.

More on PTC's capex implications to Class Is

Jeff Stagl — Fri, 05 Feb 2010 19:12:00 GMT

The Class Is continue to express serious cost concerns about mandated positive train control (PTC) implementation. I recently shared Norfolk Southern Corp. CEO Wick Moorman’s take on it. Now, here is Union Pacific Railroad’s stance courtesy of a letter Executive VP of Marketing and Sales Jack Koraleski wrote to customers on Jan. 27.

The Federal Railroad Administration’s (FRA) final implementation rule will increase the cost of “this already expensive mandate,” Koraleski wrote.

“In fact, the FRA itself calculates that the cost-to-benefit ratio is an astonishing 22 to 1, meaning that most of this huge investment will be unproductive,” he said. “Since we must comply with this mandate by 2015 across our network, and have agreed to implementation by 2012 in the Los Angeles basin area, we are already focusing resources on this project — consuming about $200 million of this year’s capital investment.”

As other Class I have noted of late, other infrastructure projects might be “pushed further down our priority list” because of limited capex resources, Koraleski wrote. For example, during CSX Corp.’s earnings conference last month, CEO Michael Ward said $200 million of the railroad’s capital expenditures in 2010 will be “diverted from other worthy capital improvements” because of PTC implementation.

I presume we’ll continue to hear about the “tough choices” Class Is are making in their capex programs as the year — and PTC roll out — move along. A federal tax credit, grant or some other form of government funding would go a long way toward relieving Class Is’ PTC sticker shock. Expect them to make a case for such funding later this month at Railroad Day on Capitol Hill, the rail industry’s full-court-press lobbying exercise in D.C.

NS' Moorman: Legislation a large, looming 'black cloud'

Jeff Stagl — Thu, 04 Feb 2010 19:56:00 GMT

During Norfolk Southern Corp.’s fourth-quarter earnings conference held Jan. 27, senior executives mentioned a few dark clouds hovering over their 2010 business prospects, namely domestic coal demand and international intermodal traffic.

But Chairman, President and CEO Wick Moorman described what he characterized as the “biggest black cloud” on the horizon for NS and the entire rail industry: the threat of “unbalanced” legislative action.

Example No. 1 is positive train control (PTC) and the federal mandate that requires 30 U.S. railroads — including the Class Is — to adopt the technology on required lines by 2015’s end. The cost to comply with the mandate is staggering, Moorman believes.

“While the $40 million we're projecting for PTC capex this year did not force us to exclude any other critical items from our capital budget, it’s just an installment towards what will be a total expenditure of well over $700 million over the next five years,” he said. “For that expenditure of over $700 million, by the government’s own estimates, we will receive only $1 in benefit for every $22 spent. And that imbalance has risen as a result of the FRA’s proposed implementation rules, which would force us to extend the technology far beyond the legislative mandate.”

The upshot of the “ill-conceived, if well-intentioned and unfunded mandate” and the FRA’s final implementation rule is that it will force railroads to forego major capital expenditures in critical areas over the five-year period, said Moorman.

“And the result may well be less capacity than is required to handle traffic volumes, a diminished ability to provide good service, and even possibly a less-safe working environment than we might have had otherwise,” he said.

If PTC was the only thing to come out of Washington, D.C., it would be “bad enough,” said Moorman. However, railroads are facing the STB Reauthorization Act, which could significantly change the regulatory structure under which railroads operate.

“The bill which emerged from the Senate Commerce Committee at the end of last year was a disappointment to say the least, particularly given the dialogue that the industry had had with the commerce committee staff over the course of 2009,” said Moorman. “We are certainly not giving up on the process and we will continue to work with the commerce committee on changes, which will be essential if we are not to oppose the bill.”

Railroads also are working with members of both chambers “on both sides of the aisle” to explain how the bill needs to be modified to ensure it meets the needs of all parties — as well as fosters a healthy, robust national rail system, he said.

“At the end of the day, I believe that Congress will vote to encourage and expand our industry rather than consign it to the conditions we experienced in the dark days before the Staggers Act of 1980,” said Moorman.

UP: On the 'value proposition' path

Jeff Stagl — Thu, 21 Jan 2010 21:35:00 GMT

During Union Pacific Railroad’s fourth-quarter earnings conference held the morning of Jan. 21, senior executives talked about the Class I’s ongoing efforts to provide shippers an optimal “value proposition” by improving operational performance.

Vice Chairman-Operations Dennis Duffy provided evidence that those efforts paid off in 2009. Safety performance metrics show that from 2006 to 2009, personal injuries per 200,000 manhours dropped 24 percent, grade crossing accidents per million train miles fell 26 percent and customer incidents per million train miles decreased 26 percent. UP achieved record levels in all safety metrics for the second-straight year in 2009, said Duffy.

In terms of full-year service metrics, velocity increased to a record 27.3 mph — an increase of nearly 2 mph from the previous record set in 2002 — average terminal dwell time decreased slightly to 24.8 hours, freight-car utilization improved to 8.6 cycle days and the service delivery index reached a robust 92 mark.

UP is excelling at managing volume variability, said Duffy. As of Jan. 16, the Class I had 4,200 furloughed train and engine-service workers available, and still had 1,600 locomotives and 44,000 rail cars in storage. The railroad had adjusted its resources in 2009, when gross ton miles dropped 17 percent and train starts decreased 20 percent.

UP also continues to manage train capacity, primarily by operating longer trains, enhance its surge capabilities, instill process discipline and upgrade infrastructure condition, said Duffy. Of $2.5 billion spent on capital improvements in 2009, $1.7 billion went toward “engineering replacement” work, $375 million toward capacity and commercial facility projects, and $375 million toward locomotives and equipment.

Slow orders on the network declined 30 percent last year because of several key projects, including the Boone High Bridge and increased tunnel clearances on the Donner Pass. Opening the Donner Pass route to double-stack containers “saves us 75 miles and up to three hours for our customers, making our route the shortest and fastest from Oakland to Chicago,” said Duffy.

UP is driving toward “best in class” safety performance, service excellence, “strong” infrastructure, and the ability to handle more carloads with fewer assets, said Duffy. The ultimate aim: to be resilient, agile and a volume-variable operation, he said.

“Above all, we will be ready for whatever demand comes our way, up or down,” said Duffy. “Cyclical demand changes, seasonal variations and hopefully a strengthening economy, all require that we stay agile and resilient.”

Interesting excerpts from CSX's 4Q conference

Jeff Stagl — Wed, 20 Jan 2010 20:09:00 GMT

CSX Corp.’s most profitable traffic segment floundered in the fourth quarter and likely will continue to falter through most of 2010. That’s the troubling message on coal that EVP of Sales and Marketing Clarence Gooden delivered the morning of Jan. 20 during the Class I’s fourth-quarter earnings Webcast and teleconference.

While intermodal traffic rose 5 percent and automotive traffic increased 3 percent in 4Q, coal traffic declined 23 percent to 365,000 units. The drop-off followed coal traffic decreases of 18 percent in 3Q, 21 percent in 2Q and 7 percent in 1Q. In addition, 4Q coal revenue tumbled 24 percent to $641 million.

Domestic shipments declined because demand is at low ebb and utility stockpiles are at high levels, said Gooden. Export volumes were weak because of lower global demand. Although natural gas substitution remained high through the quarter, substitutions will ease going forward and the export market will strengthen, said Gooden. But domestic demand and stockpile levels will remain a headwind through much of 2010, he said.

Low natural gas prices, mild weather and the recession contributed to elevated stockpiles as electricity generated by coal in first-half 2009 declined 12 percent against production cuts of 5 percent, Robert W. Baird & Co. Inc. analysts said in a report on CSX’s earnings.

“Current coal production forecasts have absolute production levels for the first quarter at decade lows during upcoming seasonally slower coal production months,” they wrote.

CSX expects line-haul revenue to grow in the first quarter because conditions in nine of 10 markets are favorable, with coal the sole exception, said Gooden.

Also during the earnings presentation, EVP and COO David Brown — who succeeded Tony Ingram last month — reviewed operational performance. On the safety front, CSX’s FRA personal injury rate fell to 0.99 compared with 1.19 in fourth-quarter 2008 and 1.28 in fourth-quarter 2007. The FRA train accident rate dropped to 2.65 from 2.78 in 4Q ’08 and 2.93 in 4Q ’07.

In terms of service, on-time originations decreased to 79 percent from 85 percent in 4Q ’08, but on-time arrivals increased from 77 percent to 79 percent and train velocity increased from 21.2 mph to 22.0 mph. Terminal dwell rose slightly from 23.2 hours in 4Q ’08 to 24.3 hours, but CSX is sacrificing a slight increase in terminal dwell for train sizes and other operating efficiencies, said Brown.

The Class I is well prepared to handle more traffic as volumes build primarily because of available resources, he said. As of Jan. 11, 1,882 train and engine-service employees (or 18 percent of the T&E workforce) remained furloughed; 564 locomotives (or 14 percent of the fleet) remained stored; and 23,602 rail cars (or 30 percent of the fleet) still were stored, said Brown.

It would take about one week to bring stored locomotives and cars back online, and a few weeks to return furloughed workers to their posts. But as volumes increase, resources will return at a less than one-for-one basis, said Brown.

“We’re working aggressively to manage resources as volume returns,” he said. “We’re [also] continuing to drive productivity and cost control.”

Regional reels from plant closure's effects

Jeff Stagl — Thu, 14 Jan 2010 20:38:00 GMT

The recession prompted many a railroad to lay off workers last year. For Montana Rail Link (MRL), the weak economy’s effects have carried over into this year, leading to four-dozen furloughs.

Smurfit-Stone Container Corp. — a large MRL customer — recently announced plans to close its Frenchtown, Mont., plant. With its annual carloads now projected to dwindle to 53,000 units this year from what had climbed to 82,000 units just three years ago, MRL decided to lay off 46 workers, according to an article in the Missoulian. The furloughs include administrators, train crews, mechanics and maintenance workers.

A few years ago, forest products accounted for 34 percent of the more than 900-mile regional’s traffic; now, forest product loads are projected to total less than 6 percent of 2010 traffic. The carload drop-off also is prompting MRL to drastically reduce its rolling stock. During the next several months, the regional’s rail-car fleet will comprise 600 units vs. 2,200 a few years ago.

“The events around us are so real and so stark and so massive, they have a significant effect on our business, and unfortunately, it's forced us to take some serious action,” said MRL President Tom Walsh in the news article.

Even though the economy is slowly improving, there’ll be more “stark reality” in the rail world as the year progresses — which could mean chalking up more layoffs and sizing down more rail-car fleets.

Buffett and Rose use prose to gain stockholders' vote

Jeff Stagl — Tue, 05 Jan 2010 21:05:00 GMT

Warren Buffett and Matt Rose are urging BNSF Railway Co. stockholders to vote in favor of Berkshire Hathaway Inc.’s proposed $44 billion buyout at a shareholders meeting on Feb. 11. To make their case, the billionaire and BNSF CEO are relying on an eight-page brochure the Class I recently mailed to shareholders that features a photo of them on the cover, as well as a simple and succinct statement: “We need your support.”

The buyout, which calls for Berkshire to pay stockholders $100 per share in cash or an equivalent value of Berkshire shares, “provides compelling value” to shareholders, said Rose in a letter that’s included in the brochure.

“The transaction will provide stockholders with a premium of 33 percent over the closing price on Oct. 30, 2009, the last trading day prior to the execution of the merger agreement, and 37 percent over the average closing price of our stock for the 12 months ending Oct. 30, 2009,” he wrote.

On a brochure page that includes “we need your vote” in big letters, Buffett and Rose say shareholders will benefit from being part of Berkshire’s diversified financial holdings.

“You have the ability to continue to participate in the upside of BNSF Railway through ownership in Berkshire Hathaway,” the brochure states. “Berkshire Hathaway views the acquisition as a long-term investment that will allow BNSF to continue to focus on the future needs of our railroad, our customers and the U.S. transportation infrastructure.”

The brochure — which features a shareholder Q&A — also encourages everyone to vote no matter how few shares they own. “Not voting has the same effect as a vote against the transaction,” the brochure states on its back page.

Whether the lobbying pamphlet pays off will be determined in a little more than a month. In the meantime, look for my cover story on the buyout and its implications (“Buffett & BNSF”) in our Jan. issue, which should hit the streets about mid-month. The online version will be posted on progressiverailroading.com on or about Jan. 11.

Pennsylvania short line bucks soft economy

Jeff Stagl — Thu, 17 Dec 2009 18:59:00 GMT

Many regionals and short lines have struggled through 2009 amid a weak economy and soft traffic demand. During the year’s first 49 weeks ending Dec. 12, 336 small railroads handled 4.2 million carloads, down 25.7 percent compared with volume from the same 2008 period, according to RMI’s latest RailConnect Index of Short Line Traffic.

But don’t count the Reading, Blue Mountain and Northern Railroad Co. (RBMN) among the traffic-declining crowd. The 300-mile short line has grown its business significantly this year in eastern Pennsylvania — so much so, it hired additional employees, purchased more than 100 new rail cars and two locomotives, and spent millions of dollars to upgrade infrastructure.

“Our customers have shown their confidence in us by continuing to expand their facilities on our railroad,” said RBMN owner and Chief Executive Officer Andrew Muller Jr. in a prepared statement.

To reward its full-time employees for a banner year, the short line will provide them an extra week of vacation, as well as an all-expense paid cruise or vacation to Disney World in Orlando, Fla.; Branson, Mo.; Williamsburg, Va.; or London, England. RBMN employs more than 150 people.

“This is our way of saying thank you for a job well done,” said Muller. “I am proud that in the worst economy since the Great Depression we did not layoff any employees, [and] had no furloughs or reductions in hours.”

After bucking the recession in 2009, RBMN is “poised for a fantastic 2010” in part because of new traffic that’ll be generated by natural gas production from the Marcellus Shale, said Muller.

It’s good to hear from a railroad that isn’t slogging through 2009 and is jazzed about the coming year. To learn about the short-line industry’s more reserved 2010 outlook, follow this link to read an article (“Short lines eye soft economy, ‘regulatory tsunami’”) that appears in our December issue. And for a review of Class Is’ somewhat conservative take on next year, follow this link to another December issue story (“Of recovery and regulation”).

New Brunswick comes to bat for rail

Jeff Stagl — Mon, 07 Dec 2009 20:57:00 GMT

A Canadian province has taken the initiative to make rail-car repairs an economic driver and job creator in the region.

The New Brunswick government recently decided to provide financial assistance totaling more than $20 million to Industrial Rail Services Inc. to expand its Moncton facility and obtain working capital for large rail-car repair contracts. The project will enable the company to retain 33 jobs and create about 250 positions.

Industrial Rail Services recently won a contract to refurbish VIA Rail Canada Inc.’s passenger coach fleet; the company will overhaul 98 coaches during the next four years. Work will be done at Industrial Rail Service’s Moncton facility, which is located on CN’s mainline.

“We are grateful that the government of New Brunswick recognizes the enormous potential for growth on this investment for the people of Moncton and the entire rail manufacturing industry in New Brunswick,” said Industrial Rail Services Chief Executive Officer Dick Carpenter in an article posted online by The Gov Monitor.

Before the Canadian and U.S. rail industries can completely hurdle the recession and get back on the growth fast track that is the ‘”rail renaissance,” more governments — be it the federal, state or local variety — need to recognize rail’s “enormous” potential, from taking more freight and motorists off congested highways to reducing air pollution to cutting fuel usage to supporting and creating jobs.

There’ve been a number of New Brunswicks that have come to bat for freight and passenger rail of late, but as the lead character in the musical “Oliver!” emphatically pleaded: “More please.”

At BNSF, passenger-rail relations take precedence

Jeff Stagl — Thu, 19 Nov 2009 19:37:00 GMT

I spent the past two days visiting with senior BNSF Railway Co. executives — including top exec Matt Rose — at the Class I’s Fort Worth, Texas, headquarters. Needless to say, the Berkshire Hathaway Inc. deal was a main discussion topic. I amused Rose by opening my half-hour interview with him by quoting the Nazi henchman from the film “Raiders of the Lost Ark”: “Now, what shall we talk about?”

But I’m not going to delve into the deal — you’ll have to wait for our December issue to learn some of the things Rose said, and for the January issue to get full-blown coverage of the Berkshire-BNSF marriage.

I’m also not going to share anything I learned about the second-most discussed topic: positive train control. I don’t mean to keep throwing out teasers, but I’ll cover PTC extensively in the December issue.

So what will I relay about my visit in this blog? I’m thinking an interesting discussion I had with Assistant Vice President of Passenger Operations D.J. Mitchell, who outlined the ways BNSF attempts to take a different approach to passenger railroad relations than other Class Is. Basically, it comes down to employing a high level of cooperation.

“You don’t say, ‘No.’ You say, ‘Yes, but…,’” says Mitchell, describing how BNSF reacts to requests from passenger railroads.

The Class I generally is open to their ideas for expanding or establishing commuter- or high-speed rail service on its lines as long as “it does no harm to our freight service now and in the future,” says Mitchell. In addition, BNSF expects to be compensated for costs incurred to provide service and retain the same liability coverage as a public agency.

When a proposal is on the table — whether it involves a new or expanded commuter-rail or HSR service — the following questions need to be answered: Is it safe, competitive in marketplace, reliable, comfortable and convenient?

“If you don’t answer all those questions in the affirmative, then don’t make the change,” says Mitchell.

BNSF currently is employing its cooperative-at-all-times approach to negotiations with the Regional Transportation District on a formal agreement concerning the Denver agency’s Northwest Rail Corridor and Gold Line plans along the Class I’s Front Range Subdivision, as well as negotiations with Midwest Regional Rail Initiative parties concerning a portion of their planned HSR line from LaCrosse, Wis., to the Twin Cities.

Ultimately, there’s another question BNSF needs to answer before those negotiations bear fruit.

“Can we do what they want us to do?” asks Mitchell.

Forbes' rail sector assessment on — and off — target

Jeff Stagl — Wed, 11 Nov 2009 21:01:00 GMT

Berkshire Hathaway Inc.’s proposed buyout of Burlington Northern Santa Fe Corp. shares is making investors pay more attention to the transportation sector, which largely has been overlooked, according to an interesting article posted online by Alexandra Zendrian on Forbes.com.

“This sector will boom in the recovery, so get in while the getting's good. As the economy eases into more of a recovery, and people begin to buy more goods or want to travel more, transportation modes are going to literally be the vehicles to make this possible,” he said in the article, which is titled “Buffett Bought A Choo-Choo (And You Should Too).”

As companies gain revenue and can afford to hire more workers, and people are more securely employed and have more money saved, they'll begin to take vacations and travel more on trains and airplanes, said Zendrian.

For now, railroads are doing better than other modes, aside from barges, because they move freight at a lower cost, according to Clint Currie, an analyst at Concept Capital's Washington Research Group that Zendrian quotes.

However, the article veers from insightful to uninformed when Zendrian quotes Currie on potential “re-regulation” legislation that could impact railroads’ growth.

“The Railroad Antitrust Enforcement Act, for example, would target the railroad monopolies and open up competition, which could hurt the industry,” Currie said.

Railroads aren’t monopolies — captive shippers notwithstanding — and they already compete with other railroads and modes for traffic. The legislation certainly would impact railroads, but not by “opening up” rail competition. As railroads themselves would tell Zendrian, the effects would be an inability to set or increase rates based on market conditions and invest sufficient capital in infrastructure improvements.