American Railroads

News each weekday of American railroads. Our focus is on freight rail, but Amtrak and commuter rail are also essential ingredients. Nothing published on holidays.

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Location: Middleburg (Jacksonville), Florida, United States

Published in Trains magazine, Railfan & Railroad, Passenger Train Journal

Friday, November 17, 2006

Thief steals blogs

A company calling itself "" is hijacking Blogspot blogs.

Our address is:

You can also see it at:

Somehow this guy is presenting the blogs under his domain and can then run his own ads for profit while running our content inside a frame.

This fellow is doing it to a number of blogs now and from what I am hearing elsewhere the hosting company is not doing anything about it.

Blogspot, owned by Google, is a copyright infringement on us and Blogspot.

By the way there is no connection possible at "". Connection is refused. It appears he has some script managing to get the subdomain name and running it as his own.

Friday, October 27, 2006

Peter Bowler

It looks like Amtrak and Canadian National are back on track to start new passenger train service between Chicago and outlying areas on Monday. On August 16, the view from Roosevelt Road showed a train and a pair of light P-42s inbound to Union Station, Chicago.

Added Amtrak service back on track

New Amtrak Illinois service between Chicago and St. Louis and Chicago and Carbondale will operate as planned as part of a late night deal struck between Amtrak and Canadian National Ry.

In an agreement reported Friday morning, CN is dropping its opposition to Amtrak’s plan to add two trains on the Chicago-St. Louis route and one new train on the Chicago-Carbondale line, according to The Southern Illinoisan of Carbondale, Ill.

The service was expected to begin Monday, but was thrown into limbo when CN attempted to wriggle out of a contract it signed in July.

At issue was a concern by CN that additional passenger trains on a stretch of track between Chicago and Joliet would slow freight traffic.

As part of the pact, the two sides will oversee a study of the how the added trains impact service on the busy corridor.

‘‘The demand for more passenger rail service in Illinois is clearly growing and we’re pleased that CN’s leadership has made it possible to move forward,’’ said Amtrak President Alexander Kummant.

The issue had taken on political overtones when it became known earlier this week. U.S. Sen. Dick Durbin, D-Ill., had threatened to draft legislation to thwart CN’s attempt to curtail the additional service. Durbin also enlisted other members of the state’s congressional delegation to publicly chastise CN for its position.

On Friday, Durbin hailed the agreement.

‘‘I’m glad it ended this way,’’ he said during a press conference at the Amtrak station in his hometown of Springfield. ‘‘It was very clear that if we went to court today we would have prevailed.’’

The added service was made possible by a $24 million subsidy from the state. That amount is double what taxpayers have been paying to keep Amtrak service rolling through the Prairie State in recent years.

For riders along the Chicago-Carbondale line, it will mean one additional round trip between the two cities, which serve three state universities and several communities. On the Chicago-St. Louis corridor, the added service will bring two more round-trip runs to cities including Normal, home to Illinois State University, and Springfield, the seat of state government and the center of tourist sites linked to Abraham Lincoln.

Gov. Rod Blagojevich thanked Amtrak and CN for coming to an agreement.

‘‘This expansion of Amtrak service is too important to people in Illinois to allow it to be derailed before it even got started,’’ Blagojevich said.

‘ACE’ is angry with UP over late trains

“The Altamont Commuter Express prides itself in being a premiere alternative transportation, service-oriented agency. We exist because of the faithful patronage of our passengers, and we continually strive to make our rail service the best in its class,” ACE told its riders last week.

Then they added, “However, our on-time performance is not where it needs to be, and this serious issue needs to be addressed immediately.”

The unnamed writer stated, “As of today, the ACE train is running at 52 percent on-time for the month of October and 77 percent for the year thus far. This is unacceptable considering Union Pacific’s contractual obligation to dispatch the ACE trains at 95 percent on-time.”

Industry standards allow for a leeway of 5 minutes for scheduled arrival and departure times, ACE stated, and pointed out, “According to ACE’s contract with the UP, ‘San Joaquin Regional Rail Commission shall have absolute priority’ on the tracks until the trains reach 95 percent.’”

Part of the blame falls with dispatchers, ACE stated.

“Due to this detrimental trend in dispatching, ACE understands the urgency of this matter and the importance this issue holds for the service to our passengers, and explained, “The Altamont Commuter Express, in a sense, rents track from the UP and is at the control of UP’s dispatching and maintenance. In addition to signal and dispatch-related failures, the ACE train experiences a high amount of slow orders, which, because of poor track and tie conditions, forces the train to travel at speeds below the normal scheduled speeds.”

The writer added, “Recent developments along the ACE corridor have also added to the failing on-time performance. The ACE corridor has experienced the traditional seasonal increase in freight traffic. In addition, the new Capitol Corridor schedule has created additional schedule conflicts for the ACE train.”

Those challenges to ACE’s on-time performance “are no excuse for the current level of service that our passengers are facing,” the writer stated.

The San Joaquin Regional Rail Commission (SJRRC) “takes these issues very seriously” and is working to rectify the challenges that “stand in our way of achieving at least 95 percent on-time performance.”

Today, ACE updated its original complaint, stating “Last Monday, ACE’s Director of Operations attended a meeting with UP administration regarding to ACE’s “discouraging on-time performance. Out of this meeting came a crucial plan for corrective action,” which includes a greater focus on ACE operations, sending a UP dispatcher to Stockton to ride and become familiar with the ACE trains, reporting performance to high-level UP management, and UP dispatcher and Corridor Manager participation in Corridor Improvement.”

Later, a meeting at UP’s in Omaha, headquarters on November 3 “will discuss other operational issues.”

After the meeting, ACE’s operations director “will report to the passengers on what was accomplished.”

The following stories were intended to be posted on Thursday, but because was down for maintenance, it was impossible to do so.


Law expert says Amtrak lawyers were lax

An forensic legal fee analyst hired by the federal government to investigate Amtrak’s extensive legal expenses with private law firms said yesterday he found numerous questionable management practices and lax oversight over tens of millions of legal expenses billed to Amtrak each year, according to the House committee and Infrastructure.

“Amtrak’s Law Department is not fulfilling its role,” John W. Toothman wrote in his 102-page report.

“Instead of being the aggressive protector of Amtrak’s interests, many in the law department, including upper management, seem to view themselves as the advocates for outside counsel,” he stated.

Reps. John Mica, R-Fla., and Don Young, R-Alaska, who is the committee chairman, requested the investigation.

Both solons said Toothman was hired for his expertise in analyzing legal billings to assist in a federal investigation of Amtrak’s Legal department by the Amtrak Office of the Inspector General and the USDOT’s Inspector General.

Yesterday the Transportation Committee released the report by both inspectors general which outlined alleged numerous examples of mismanagement and lack of oversight for more than $100 million in taxpayer-financed legal fees paid by Amtrak between 2002 and 2005).

A press release from the House committee stated Toothman was selected to assist the inspectors general investigation as one of the top U.S. experts in the field. He is a former Justice department attorney, who is often retained by public entities and large private clients who feel the performance of their legal counsel is in question, Mica and Young said

Some of the major findings in his report include questionable process for selecting outside legal firms.

He alleged, “Amtrak’s in-house lawyers appear to have been co-opted by their outside firms, they rarely select new outside firms, they are making no apparent effort to engage in a thorough law firm selection process, and the firms they use are among the largest and most expensive in the country.”

He said questionable billings and expenses by outside legal firms are rarely challenged. Instead of challenging many of the fees and expenses billed by the outside legal firms, Toothman wrote, “Amtrak’s Law department acts as though its job is to defend outside counsel, not manage them. The attitude exhibited by Amtrak’s Law department when their handling of outside lawyers was questioned was to defend the lawyers and provide excuses for not reviewing them more aggressively.”

He added, “This is a bad sign, indicating that the Law department has lost sight of its primary job: To protect the interests of Amtrak.”

Toothman wrote in his report Amtrak’s legal department “has not investigated its firms properly and not considered alternative law firms that would be cheaper and provide equivalent, if not better, services. There are thousands of firms with expertise handling most of the work done for Amtrak – most of Amtrak’s work is routine, both in subject matter and complexity.”

The Associated Press reported yesterday Amtrak’s law department responded that the review didn’t take into account “the rigorous oversight of work done by outside counsel.” Amtrak’s lawyers also said they save money by performing work in-house, which is cheaper than using outside firms.

The law department lowered its legal fees by 22 percent, from $31 million to less than $24 million, from 2003 to 2005.

Amtrak’s 130-person law department includes 25 lawyers, investigators said.

Toothman agreed with Mica’s estimates, but said that Amtrak is probably not unique among government agencies.

“My suspicion is that it’s toward the bad end,” said Toothman, who has investigated other government agencies.

The report found that Amtrak didn’t request budgets and didn’t scrutinize bills.

Mica conceded that Amtrak had changed some of its practices since the inspector general’s investigation.

A copy of the redacted Toothman report is online at

BLE alleges:

AAR, CEOs attack disabled rail unionists

The railroad industry has again shown its contempt for its workers, including those who are retired, the Brotherhood of Locomotive Engineers charged yesterday.

“Edward Hamberger, president of the Association of American Railroads, recently wrote to Sen. Michael Enzi, R-Wyo., in opposition to H.R. 5483, the Railroad Retirement Disability Earnings Act the union stated in a press release.

Enzi is chairman of the Health, Education, Labor and Pensions Committee.

The bill, scheduled for Senate consideration after the November 7 elections, would increase the amount of money a disabled individual can earn without affecting his or her Railroad Retirement disability benefits.

The House passed the bill on September 28 and the Senate needs to pass it in order for it to become law. However, AAR is lobbying against it.

“The House of Representatives saw fit to increase the amount of money these men and women can receive from outside employment,” BLET National President Don Hahs said in Cleveland at union headquarters.

“However, the railroads can’t concede an inch in their battle against their workers – both present and former. The total cost of this legislation would be about $400,000 annually – a pittance compared to the millions raked in by these CEOs in salary and bonuses.”

Current law limits the outside earnings of a railroad worker drawing disability benefits from the Railroad Retirement Board to a maximum of $400 per month. These limits have remained unchanged for more than a decade. The bill raises the monthly limit to $700. If passed, the measure would become effective January 1, 2007, and would also create an indexing formula to provide for automatic increases in the future.

“This is an attack against the most vulnerable,” said BLET vice-president and National Legislative Representative John Tolman, who is lobbying for passage of the bill on Capitol Hill.

He added, “Many of the individuals that would be affected by the passage of this legislation were hurt on the job.”

Tolman said others are considered disabled or disqualified from working by the railroads themselves for various reasons. These individuals rely on their Railroad Retirement disability benefits in combination with outside work.

“The attempt to destroy this legislation would jeopardize their benefits – and their ability to provide for their families,” he said.

Freight rails were up and down last week

Intermodal volume was up but carload freight was down on U.S. railroads during the week ended October 21 in comparison with the corresponding week last year, the Association of American Railroads (AAR) reported yesterday.

Intermodal volume of 253,387 trailers or containers was up 1.3 percent from the comparable week last year. Container volume rose 5.8 percent for the week while trailer volume declined by 11.8 percent.

Carload freight totaled 339,525 cars, down 1.1 percent from last year, with loadings up 0.9 percent in the West but off 3.5 percent in the East.

Total volume was estimated at 34.8 billion ton-miles, up 0.3 percent from 2005.

Only five of 19 individual carload commodities showed increases from last year, with coke up 6.4 percent, coal up 6.0 percent, and farm products other than grain up 4.9 percent. On the downside, primary forest products were down 22.1 percent, lumber and wood products fell 20.5 percent and metallic ores were off 18.8 percent.

Cumulative volume for the first 42 weeks of 2006 totaled 14,152,678 carloads, up 1.4 percent from 2005; 9,958,449 trailers or containers, up 5.9 percent; and total volume of an estimated 1.41 trillion ton-miles, up 2.7 percent from last year.

On Canadian railroads, during the week ended October 21 carload traffic totaled 77,054 cars, down 3.9 percent from last year while intermodal volume of 49,241 trailers or containers was up 2.9 percent from last year.

Cumulative originations for the first 42 weeks of 2006 on the Canadian railroads totaled 3,136,686 carloads, down 1.2 percent from last year, and 1,906,506 trailers and containers, up 5.6 percent from last year.

Combined cumulative volume for the first 42 weeks of 2006 on 13 reporting U.S. and Canadian railroads totaled 17,289,364 carloads, up 0.9 percent from last year and 11,864,955 trailers and containers, up 5.9 percent from last year.

The AAR also said that during the week ended October 21 Mexican railroad Kansas City Southern de Mexico (KCSM) reported total carload volume of 11,400 cars, down 3.6 percent from last year. KCSM reported total intermodal volume of 4,109 trailers or containers, down 2.6 percent from the 42nd week of 2005.

For the first 42 weeks of 2006, KCSM reported total cumulative volume of 477,980 cars, down 3.5 percent from last year, and 168,068 trailers or containers, down 3.2 percent.

Railroads reporting to AAR account for 87 percent of U.S. carload freight and 96 percent of rail intermodal volume. When the U.S. operations of Canadian railroads are included, the figures increase to 96 percent and 100 percent. The Canadian railroads reporting to the AAR account for 91 percent of Canadian rail traffic.

Railroads provide more than 40 percent of U.S. intercity freight transportation, more than any other mode, and rail traffic figures are regarded as an important economic indicator.

The AAR is online at

Wednesday, October 25, 2006


2 solons charge Amtrak lawyers with wasting cash

WASHINGTON – Two House Republican charged today that a federal review of Amtrak’s extensive use of outside legal firms uncovered numerous examples of mismanagement and lack of oversight for more than $100 million in taxpayer-financed legal fees over three years between 2002 and 2005.

The joint probe by the Amtrak Office of Inspector General (IG) and the U.S. DOT Inspector General was requested by Rep. John Mica (R-Fla.), a senior member of the House Transportation and Infrastructure Committee, and Committee Chairman Rep. Don Young, R-Alaska.

The main objectives of the review were to determine whether Amtrak and the federal government received “fair and reasonable value for the legal fees that Amtrak spent for outside counsel” and whether Amtrak’s in-house counsel properly managed and monitored the operations and billings by the private legal offices.

“Today, we have found that Amtrak’s Legal Department was not properly maintaining legal and billing records, failed to consistently prepare and manage budgets, and never even conducted audits despite documented cases of over-billing, errors and the prohibited practice of block billing,” said Mica.

“Some reform efforts are underway, but both the costs and management of unaudited, poorly administered contracts for outside legal services must be brought under control,” Mica added.

“The financial mess at Amtrak’s legal department is much worse than any of us on the Committee could have anticipated,” said Young.

“Millions and millions of federal dollars have been doled out to private law offices by Amtrak’s legal department but the paper trail is clearly incomplete.”

Young said, “Both the Amtrak and DOT Inspectors General have determined that Amtrak’s legal department has not followed its own rules and procedures for working with outside counsel and continues to provide millions of dollars to these outside firms each year without adequate oversight.”

The probe focused on the top 10 outside law firms hired by Amtrak between June 2002 through June 2005. These top 10 firms billed Amtrak for more than $40 million in fees out of the estimated total of $102 million Amtrak dispersed to outside legal firms during this three-year period, but a press release from both solons did not name the legal firms.

The pair charged Amtrak did not properly manage outside counsel “in a manner that limited costs and protected Amtrak’s interests,” Amtrak “did not enforce guidelines which would have been effective in protecting Amtrak’s interests and preventing overcharges,” and that Amtrak “signed agreements with one law firm that significantly supplanted the guidelines and voided its protections.”

The joint Amtrak/DOT Inspector General review determined that Amtrak’s in-house counsel did not enforce the required guidelines and did not adequately review outside counsel legal billings, properly manage outside counsel staffing and rates, prevent prohibited billing practices, nor “perform audits anticipated by the agency’s guidelines.”

All top 10 firms submitted invoices with block billing, Mica said, “a practice prohibited by the guidelines.” Block billing lumps different tasks together under one entry on an invoice, obscuring the cost of each task.

During the three-year review period, 31.4 percent of fees invoiced by the top 10 firms were block billed, Mica said, Amtrak’s in-house managing attorneys failed to question or disallow block billing, even though it is easily recognized and prohibited, and one firm block billed almost exclusively until September 2005.

Amtrak’s in-house counsel primarily selects large, metropolitan firms with high rates, Mica said.

“Some of the rates Amtrak is paying are generally high, from over $450 per hour for an eighth-year associate (2002) to $575 per hour for a partner (2004).” He added, “The guidelines state that Amtrak expects at least the same discount offered to an outside firm’s other government clients or large corporate clients, whichever is lower.”

The Amtrak and DOT Inspectors General “found no way to verify that the discounts Amtrak obtained were the best to which they were entitled, nor did they find any indication that Amtrak attempted to verify that the discounts were in fact given,” Mica alleged.

No evidence was found that Amtrak in-house counsel ever conducted an audit of invoices, one firm’s invoices frequently did not show hourly rates or the time spent on each task, as required, so it was impossible to determine whether invoices totaling $143,000 were correct and only one of the top 10 firms in the review routinely submitted receipts or other evidence of reimbursable expenses.

Mica added that two outside counsel firms voluntarily disclosed billing errors when they became aware of the Amtrak-DOT Inspector General review. Each firm proposed to refund about $30,000, but one firm has withdrawn its offer.

Mica charged “One of the firms most frequently used by Amtrak circumvented the budget requirement and other requirements in the guidelines by negotiating several agreements from 2003 to 2005 that supplanted the guidelines. The terms of the agreements were substantially less beneficial to Amtrak and more beneficial to the law firm than were the terms required by the guidelines.”

The IGs reported finding the use of highly paid attorneys and staff for work that is traditionally performed by lower-paid staff, Amtrak has no record of approval for changes in hourly rates, and records indicate duplicate payments on some accounts.

Some Managing Attorneys rely on outside counsel to maintain files and have no recourse if the firms are unable or unwilling to provide the records, the two House members said.

“Amtrak in-house attorneys, including two high-ranking officials, were unable to readily and promptly produce their own files related to the top billing firm. In-house counsel said the files ‘must have been thrown out,’” they stated.

The also alleged Amtrak in-house counsel was frequently unable to respond promptly and thoroughly to requests from the Amtrak/DOT Inspector Generals.

“Congress has a responsibility to conduct aggressive oversight of Amtrak, especially with a taxpayer subsidy of over a billion dollars a year. Unfortunately, today’s IG report discloses yet another example of problems with our nation’s current passenger rail service operations. Amtrak’s management of outside legal services has been found to be in serious disarray, with virtually no attention focused on costs and expenditures.”

Mica charged once again that “We have found that the taxpayers are subsidizing some passenger tickets over $600 each, and Amtrak is losing over $600 million each year on long-distance routes. “We have found that the taxpayers are underwriting Amtrak’s food and beverage costs at a loss of $83 million a year, and that Amtrak was spending $2 for every $1 it makes for this service.”

Mica has long complained that Amtrak is wasting money.

“We have found that the taxpayers are underwriting an Amtrak Mechanical Department that had no quality control system in place and was rife with waste, fraud, abuse and mismanagement, and now, today, we have found that Amtrak’s Legal Department was not properly maintaining legal and billing records, failed to consistently prepare and manage budgets, and never even conducted audits despite documented cases of over-billing, errors and the prohibited practice of block billing.”

He said, “Some reform efforts are underway, but both the costs and management of unaudited, poorly administered contracts for outside legal services must be brought under control.”

Young echoed Mica’s remarks.

“I want to be clear that I believe Amtrak is a critical part of our delicately balanced transportation network. I strongly support passenger rail in America, but when Amtrak requires in excess of $1 billion in taxpayer subsidies each year to function, I believe it’s my duty to ensure Amtrak runs efficiently and doesn’t waste taxpayer money.

“For years, Amtrak boasted it was on a ‘glide path’ to operational self-sufficiency. Clearly, those assertions were dishonest to Congress and the American taxpayer and did not reflect its true financial condition. Now we find one more department where the money Amtrak has been receiving is being spent with little oversight. Waste has been found in every Amtrak department that we have reviewed in the last four years.”

Young said, “Congress and the public deserve nothing less than complete, honest, accurate and timely information on how this money is being spent,” and added, “Amtrak is continually showing us it is incapable of effectively spending the $1 billion in federal funding it receives each year. One billion dollars a year is a lot of money and could accomplish a lot towards improving Amtrak’s passenger rail service if it wasn’t wasted on massive food and beverage losses and undocumented and questionable legal billings from outside private law firms.

“The financial mess at Amtrak’s legal department is much worse than any of us on the Committee could have anticipated. Millions and millions of federal dollars have been doled out to private law offices by Amtrak’s legal department but the paper trail is clearly incomplete.”

He stated, “Congressman Mica and I requested this investigation based on the numerous other financial and operational irregularities discovered in previous federal probes. Since investigations began several years ago, more than 200 Amtrak employees outside the law department have been fired for theft or financial irregularities with the company. Countless problems have been uncovered in Amtrak’s maintenance department, and Amtrak has accomplished what most people thought would be impossible – it loses $83 million a year in its food and beverage operation, losing $2 for every $1 it receives. We intend to continue our oversight of Amtrak and these problems until we finally get some real reforms in place and see some tangible results.”

A copy of the report is on the committee website at


An artist’s rendering of the forthcoming Ile de France commuter trains. Bombardier of Canada expects to build 372 trains that will operate on a Paris suburban network, and includes an initial order of 172 trains valued at an estimated $1.7 billion.

Bombardier to build French commuter trains

Bombardier Transportation of Canada today said that it has been selected by SNCF, French National Railways, to supply the future Ile-de-France commuter train, after a call for tenders launched in February 2004.

The contract is for the delivery of 372 trains that will operate on the Greater Paris-Ile-de-France suburban network, and includes an initial order of 172 trains valued at an estimated 1.35 billion ($1.7 billion U.S.). The total value of the contract is estimated at 2.7 billion ($3.4 billion U.S.) the firm said in a press release from its Montréal headquarters.

SNCF announced its decision at the conclusion of its board meeting today, convened to review the opinion of its contract committee.

Neither Bombardier nor SNCF said when they would sing the contract, saying only it would take place “in the near future.”

Delivery of the first trains is scheduled to begin in November 2009 and continue until 2015.

The new train will be designed, manufactured and built at the Bombardier Transportation facility in Crespin, in the Valenciennes region, France.

The Ile-de-France commuter train is an articulated train with extra-wide coaches, wide seats and wide doors to increase speed of passenger movement. Each train consists of seven or eight cars in a single unit and can also be operated as a double or triple unit.

The capacity of the trains will vary from 800 to 1,000 passengers, depending on the configuration and layout.

CSX looks to Midwest for rail yards

CSX Corp. has changed the focus of its hunt for a place to build a major rail cargo transfer yard from the Chicago suburbs to Indiana and Ohio.

CSX is actively talking to local officials in both states, according to Garrick Francis, a CSX spokesman.

The Northwest Indiana Times reported on Sunday the yard would be used for both cargo container transfers to trucks and some rail services such as equipment inspections, Garrick said.

“We are constantly looking at ways to expand and improve, and one part of that could involve an intermodal center in the Indiana or the Ohio areas,” said Francis.

Intermodal rail yards have the potential to create thousands of jobs because retail distribution centers and sometimes manufacturers build facilities adjacent to them.

The Center Point Intermodal Center, in Joliet, has created about 6,000 jobs since it opened in 2002. It serves BNSF’s intermodal yard.

Earlier this year, a CSX spokeswoman said the railroad was evaluating sites in Northwest Indiana and the southeast Chicago suburbs for such a facility, but Garrick confirmed that search has now shifted away from Illinois.

The Toledo Blade reported earlier this month that CSX officials were to meet with village council members and local residents about a proposal for an intermodal yard in the village of North Baltimore, about 25 miles south of Toledo.

The city of Hammond has also been pursuing such a facility for Gibson Yards, currently site of the largest rail auto transfer yard in the U.S.

The County of LaPorte would also like to attract such a facility to Union Mills south of the City of LaPorte. The CSX main line runs through the area.

Local and state officials confirmed last week there are active negotiations with Norfolk Southern Corp. to build an intermodal rail yard just west of the city.

NS would not confirm that negotiations are underway, but local property owners say real estate agents representing the railroad have approached them.

The Ports of Indiana said there are ongoing discussions with railroads about locating in intermodal site in LaPorte County.

“Railroads will decide where they want to be,” said Jody Peacock, Ports of Indiana spokesman, “but we are working with railroads trying to make it happen in Indiana.”

STB judges NS to be ‘revenue adequate’

The Surface Transportation Board said Monday that Norfolk Southern Railway Co. was the only big U.S. railroad last year earning a rate of return on its investment judged “revenue adequate.”

The board calculated the weighted cost of financing and operations – known as the cost of capital – at 12.2 percent for the railroad industry. That expense mainly consists of the cost of accessing money through the debt and equity markets, the Virginian Pilot of Norfolk, Va., reported.

Norfolk-based NS beat that with a 13.2 percent rate of return on net investment, the ratio of railroad operating income to capital investments. The second-best railroad was BNSF of Fort Worth at 10.3 percent. Third was the Soo Line Railroad Co., the U.S. operations of Canadian Pacific Ry., at 8.9 percent.

Being a revenue-adequate railroad can affect the rates charged by the railroads in certain cases, according to the STB NS was also the only railroad in 2004 to be revenue adequate, according to the board.

It has been difficult for railroads to meet that standard because until recent years, they’ve been saddled with low rates and slow growth, making it difficult to pay for big investments in track and trains, said Anthony B. Hatch, an independent railroad consultant based in New York.

NS would not disclose its individual cost of capital, company spokesman Richard W. Harris said.

In a separate matter, Norfolk Southern Ry.’s parent company, Norfolk Southern Corp., stated on Monday that its regular dividend of 18 cents per share of common stock will be payable on December 11 to shareholders of record on November 3.

NS service resumes in Pennsylvania

Freight and passenger rail traffic slowly resumed through Beaver County, Pa. on Monday, three days after a fiery train derailment toppled ethanol tankers into a river and prompted temporary evacuations of neighboring homes.

Authorities said Norfolk Southern resumed service at 12:50 a.m., soon after emergency workers extinguished a fire in a tanker on the trestle connecting Beaver Falls to New Brighton, according to the Pittsburgh Tribune-Review.

Typically, between 50 and 70 Norfolk Southern trains run through New Brighton daily at about 45 mph, railroad spokesman Rudy Husband said. With service resumed at just 10 mph as crews complete repairs to the tracks and trestle, and some trains rerouted over other lines, delays will continue over the next few days, he said.

Husband said damage to the trestle was not significant, and crews expected to retrieve two tank cars from the Beaver River early today.

A spokesman with the National Transportation Safety Board said investigators are still trying to determine why the 83-car train derailed. The crew reported a routine trip interrupted at 10:30 p.m. Friday when the brakes abruptly lost pressure, halting the train. The crew then saw the train was on fire, with 23 ethanol-carrying tank cars off the tracks.

Texas’ Cotton Belt plan takes another step

A commuter rail line would eventually ferry up to 10,000 passengers a day along a route between Grapevine and southwest Fort Worth and link directly to Dallas’ light-rail system, under a transit plan presented Monday.

The Fort Worth Transportation Authority at a meeting unveiled its proposal for the Cotton Belt commuter rail line, which would cut diagonally across Tarrant County, the Fort Worth Star-Telegram reported.

Officials say this is the best of all the options studied.

About 40 people attended the meeting, including several Grapevine residents who said they intend to vote for a half-cent sales tax Nov. 7. The tax would be divided so that three-eighths of a cent would go to commuter rail and the rest for other uses.

“I think this is a positive step toward change,” said Dan Schock, who travels to Dallas for his software business and would like an alternative to driving. “People won’t change until they see a reason to change.”

If Grapevine, Texas voters approve the measure, the rail line could be operating by 2011. It’s named after the former Cotton Belt Railroad, which became part of Southern Pacific and later absorbed into Union Pacific following a merger.

The $7 million generated annually by the Grapevine tax would speed up construction of the line by several years, officials from the city and the T say.

The Cotton Belt would carry up to 10,000 passengers a day by 2030, said Tim Baldwin of URS, a consulting company hired by the T. The region’s other commuter rail line, the Trinity Railway Express, carries about 8,000 passengers a day.

The T has spent the past year analyzing ways to move the large numbers of people already traveling between fast-growing Northeast Tarrant County and southwest Fort Worth.

The officials settled on the Cotton Belt system, which could cost up to $390 million to get started.

The system would provide an alternative for commuters traveling through the Texas 114/121 Grapevine funnel, Baldwin said.

Meanwhile, North Texas’ mass transit network will see about 40 miles of new rail lines by 2030 under a long-range plan adopted unanimously Tuesday night by the Dallas Area Rapid Transit (DART) board of directors, the Dallas Morning News reported.

It also will bring passenger rail service to the Cotton Belt freight rail line through Far North Dallas and northern suburbs but will not fully address Dallas’ concerns about running trains behind hundreds of homes.

A proposed $700 million light-rail line along LBJ Freeway was not included in the plan.

“We’ve done a good job of meeting the city in the middle,” said DART board Chairman Mark Enoch.

Dallas officials had asked DART to postpone Tuesday’s vote for several weeks so they could learn more about the proposals. The board declined to table the matter before launching into three hours of negotiations on its plans.

One of the major discussion points was Dallas’ request that DART spend $250 million to dig an open trench for the rail line through Far North Dallas. The city wanted the trains to run below ground level to reduce their impact on homes nearby.

DART refused to spend $250 million on a trench, something it has not built for other neighborhoods with rail lines, but it did agree to set aside $50 million to help address neighborhood concerns. The meeting drew dozens of Far North Dallas residents who urged DART to listen to the wishes of the Dallas City Council.

The board spent 90 minutes hearing testimony and deliberating on the plan. When it became apparent that the board was going to vote in favor the plan, several members of the audience grew upset, shouting, “This is insulting!”

Board member Terri Adkisson of North Dallas said she was disappointed with some things in the deal but ultimately voted for it.

“My personal belief is that North Dallas has gotten shortchanged,” she said. “But going forward, one of the strengths of DART is that its member cities walk forward united.”

Other audience members were upset to learn that the DART board worked out many of the details in a work session before the regular meeting.

“It was a lack of judgment and a lack of democracy and a lack of public responsibility on the DART board’s part,” said Far North Dallas resident Genny Mantzuranis.

Dallas City Council member Ed Oakley observed the hours of negotiations that led to the compromise.

“There are going to be some folks who are very unhappy,” Mr. Oakley said. “But at the end of the day, this is going to be the best solution.”

After the vote, City Council member Ron Natinsky, who negotiated extensively with DART, said the agency’s attitude toward Far North Dallas has not changed in the 15 years it has considered putting rail on the Cotton Belt.

“I don’t think this is over,” he said. He added that Far North Dallas residents plan to work at the state and federal level to change legislation that would force transit agencies such as DART to abide by a city’s wishes when it builds rail lines.

Complicating matters was the relatively small amount of money that DART said it would have for rail projects: $1.6 billion. That led to squabbles over several proposed projects and their merits.

As with any negotiation, the process was not without some winners and at least one loser.

Dallas got its wish for a rail line extension dubbed Southport to a proposed freight and trucking hub in southern Dallas.

“Looking at the stakes, this is the best chance the southern sector has had for development in years and years,” Mr. Enoch said.

Another winner could be the proposed West Dallas line, which would run along either Fort Worth Avenue or

The biggest loser Tuesday was a proposed light-rail line along LBJ Freeway. That project was not a priority with Dallas, and it barely missed the DART board’s funding cut, even though estimates indicate it would draw 9,800 riders a day.

“We’re all here to think about what’s best for the region,” said DART board member Angie Chen Button of Garland. “I would hate to think that the city of Dallas doesn’t think that almost 10,000 riders is important.”

The LBJ line didn’t make the list because of its cost and for political reasons. DART board members did not want to spend $1.2 billion of the $1.6 billion available on two east-west rail lines in the northern half of the region.

“For too long, the southern sector has been neglected. My concern is that we do not put all our money in the northern sector,” said Joyce Foreman of Dallas, the board’s vice chairman.

DART officials said they hope their sales tax revenue will exceed forecasts, allowing them to pay for part of the LBJ line and get federal funding for the rest.

Construction on any new rail lines that are part of the 2030 plan would not start until around 2020 at the earliest. The first projects would open around 2025. Other projects could open by 2030.

October 25

NS net income up 38 percent

Norfolk Southern Corp. (NYSE: NSC) reported record third-quarter net income of $416 million, or $1.02 per diluted share, a 38 percent increase compared with $301 million, or $0.73 per diluted share, for the same period of 2005. Third-quarter income from railway operations increased 35 percent to a record $715 million.

“We have consistently driven financial and operational performance to higher levels throughout each quarter this year,” said Wick Moorman, Norfolk Southern’s CEO.

“In the third quarter our performance enabled us to produce excellent results and set records for railway operating revenues, income from railway operations and net income, while also significantly improving our operating ratio.”

For the first nine months, net income set a record at $1.1 billion, or $2.62 per diluted share, an increase of 19 percent compared with $919 million, or $2.24 per diluted share, for the same period of 2005. Nine-month results for 2005 included a benefit of $96 million from the effects of Ohio tax legislation, which increased diluted earnings per share by $0.23. Excluding this item, net income for the first nine months of 2006 would have been 33 percent higher than the $823 million, or $2.01 per diluted share, earned in the same period of 2005.

Record third-quarter railway operating revenues of $2.4 billion improved 11 percent compared with the same quarter a year earlier. For the first nine months, railway operating revenues increased 13 percent to a record $7.1 billion compared with the same period of 2005. Both improvements were largely the result of higher average revenues, including fuel surcharges. All markets, with the exception of automotive, posted significant revenue gains, and several set new revenue highs.

General merchandise revenues were $1.28 billion, an increase of 13 percent compared with the same period last year and a third-quarter record. For the first nine months, general merchandise revenues rose 15 percent to a record $3.87 billion compared with the year-earlier period.

For the quarter, coal revenues increased 9 percent to a record $595 million and improved 9 percent to a record $1.74 billion during the first nine months compared with the same periods of the prior year.

Intermodal revenues continued growth in both the quarter and for the first nine months, rising 9 percent to a third-quarter record of $515 million, and climbing 13 percent to a record $1.48 billion for the year-to-date compared with the same periods of 2005.

Railway operating expenses were $1.68 billion for the quarter, an increase of 3 percent compared with third-quarter 2005, and $5.15 billion for the first nine months, up 8 percent compared with the same period a year earlier. Higher diesel fuel prices contributed to the increases during both periods.

For the quarter, the railway operating ratio improved 5.4 percentage points to 70.1 percent. For the first nine months, the railway operating ratio improved 3.1 percentage points to 72.6 percent.

Robby Gragg

Will Canadian National’s subsidiary Illinois Central allow the recently announced new Amtrak trains to operate over their tracks? That’s today’s question for lawyers. Amtrak signed an agreement with CN recently allowing the moves, but now, it appears, CN is backing out. On October 14, these engines were ready for work near Chicagoland’s 18th Street Bridge.

Amtrak, CN at odds over contract, new trains

By Leo King

The Canadian National Ry. is apparently trying to pull the pin on a new agreement with Amtrak.

Amtrak said yesterday it is “prepared to seek an emergency order requiring Canadian National-Illinois Central (CN-IC) Railroad to honor the existing agreement” between the two railroads allowing the addition of new passenger trains between Chicago and St. Louis and between Chicago and Carbondale.

Amtrak said it would seek relief from a National Arbitration Panel or a restraining order in federal court, should the CN-IC make a final decision not to honor the agreement.

The service expansion, being carried out by Amtrak for the Illinois DOT, (IDOT), is set to begin on October 30 and runs over tracks owned in part by the CN-IC. In July, Amtrak and the CN-IC signed an agreement permitting the new trains to operate on the CN-IC tracks.

On October 19, according to Amtrak, “CN-IC attempted to change the agreement to reduce the number of trains and shorten its term. Illinois rejected this proposal by CN-IC.”

Already popular with passengers, the carrier stated in a press release, some of the trains are sold out during the upcoming holiday season.

Following a Carbondale news conference on September 25, tickets have been on sale for the Saluki (train Nos. 390 and 391) and Illini (Nos.392 and 393). Ticket availability for the Lincoln Service (Trains 300, 301, 302, 305, 306 and 307) to and from St. Louis was announced on October 14.

“Canadian National’s unilateral move to violate its existing agreement allowing trains to operate is an affront to Illinois and its rail passengers,” said William Crosbie, Amtrak’s senior vice-president for operations.

He said, “Amtrak has been in communication with CN-IC officials since March concerning this service. Amtrak has hired and trained employees, renovated train equipment, purchased advertising and mounted a series of public events – some of which CN was a participant – supporting the new train frequencies.”

Crosbie charged, “CN-IC is now trying to back out of the agreement,” pointing out Amtrak and IDOT “will be resolute in enforcement of the pact to add new frequencies on downstate Illinois routes, in response to legislative action and to satisfy public demand.”

He said Amtrak has no plans to cancel these additional trains, and is continuing to accept reservations and sell tickets on all routes and frequencies.

Expanded service on the Chicago-Quincy route is unaffected, he added.

Amtrak explained it, IDOT and other railroads “have invested capital on the Chicago-Joliet route to increase capacity and improve reliability for passenger trains. Less than 37 miles of the 284-mile Chicago-St. Louis route is on tracks owned by CN-IC between Chicago and Joliet.”

Three Amtrak trains and three commuter trains make round-trips on this route, with no commuter trains on weekends. Under the agreement with CN-IC, two more daily round-trips by Amtrak trains will be added for eight passenger train round-trips on weekdays, and five passenger train round-trips on weekends.

Nearly the entire 310-mile Chicago-Carbondale route is on tracks owned by CN-IC. Two Amtrak trains currently make round-trips on this route, with all commuter trains using dedicated tracks nearby.

Under the agreement with CN-IC, one more daily round-trip by Amtrak trains will be added for a total of three passenger train round-trips daily.

The expanded service comes after news that all state-sponsored Amtrak routes posted record ridership levels for Illinois’ Fiscal Year 2006 and with an increase in state funding for passenger rail service by Amtrak from $12.1 million to $24 million approved by the Illinois General Assembly and Gov. Rod R. Blagojevich.

The Chicago Sun-Times reported this morning, “CN has told Amtrak that the CN official who approved the expanded access did not have the authority to make the agreement, railroad sources said. CN officials say there is not enough track capacity on the two lines to operate the additional Amtrak trains without inconveniencing other freight railroads that also use the CN tracks.”

CN officials appear to be open to a possible compromise.

“We are in discussions with Amtrak right now regarding expanding Amtrak service over our lines to Carbondale and Joliet,” said Jim Kvedaras, senior manager of U.S. public and government affairs at CN.

Amtrak law contracts are focus of an investigation today

The results of a lengthy ongoing federal investigation into allegations of questionable spending practices and the lack of oversight by the Amtrak Legal Department over the private sector law firms it uses will be released at a press conference this morning, according to a press release from the House Committee on Transportation and Infrastructure.

“The report is the product of a joint investigation by the Amtrak Office of the Inspector General and the U.S. Department of Transportation Office of the Inspector General into Amtrak’s legal department activities,” the statement read.

Amtrak receives approximately $1 billion dollars each year from the federal government, of which it is estimated the Amtrak Law Department spends approximately $150 million in annual legal and settlement expenses.

“Such a high percentage of legal costs in comparison to Amtrak’s overall budget has raised serious questions about the appropriateness of Amtrak’s legal spending practices.”

U.S. Rep. John Mica, R-Fla., a senior member of the committee, and committee chairman Rep. Don Young, R-Alaska, requested the investigation.

The hearing began at 10:00 a.m., 2167 Rayburn House Office Building in Washington, D.C.

Participants are expected to include Mica and D. Hamilton Peterson, Deputy Counsel and Director of Special Investigations in Amtrak’s Office of Inspector General.

Since 2004, according to the press release, the House Transportation Committee has been conducting oversight investigations concerning Amtrak operations in coordination with the Government Accountability Office (GAO), the Amtrak Office of Inspector General, and the Department of Transportation Office of Inspector General.

“Broad ranges of issues have been evaluated with the recent focus being on the operations of the Amtrak Law Department.”

Specifically, “issues have been raised about the extent to which the Amtrak Law Department has followed its own established rules and procedures for managing outside counsel, whether the relationships with outside counsel have been truly at arm’s length, and whether the Amtrak Law Department documents and maintains complete records of its activities.

The House subcommittee is also looking into whether legal service contracts are managed properly to protect the interests of both Amtrak and U.S. taxpayers, and whether the Amtrak Law Department has “prudently overseen and spent the taxpayer funds Amtrak receives from the federal government each year.”

Young and Mica requested that both the Amtrak Inspector General’s Office and the DOT’s Inspector General’s Office jointly investigate the procedures and expenditures by the Amtrak Law Office, with an emphasis on the top 10 law firms paid by Amtrak in recent years.

Tuesday, October 24, 2006

Ryan D. Humphrey

All the major railroads are reporting big profits for the third quarter, and BNSF is leader among them. In the photo, A BNSF stack train climbs towards Sullivan’s Curve as another BNSF stack train climbs up track 2 on March 5 in Cajon, Cal.

Bottom line:

BNSF reports all-time record quarter

BNSF said today in Houston its quarterly earnings were $1.33 per diluted share, or 22 percent higher than third-quarter 2005 earnings per diluted share of $1.09.

Third-quarter freight revenues increased $597 million to $3.82 billion, with increases in volume, price and fuel surcharge. Its operating income was $920 million, an increase of $142 million.

BNSF Corp. (NYSE: BNI) today reported record quarterly earnings of $1.33 per diluted share, a 22-percent increase over third-quarter 2005 earnings of $1.09 per diluted share.

“BNSF experienced double-digit revenue increases in each of the company’s four business groups during the third quarter of 2006,” said Matthew K. Rose, BNSF chairman, president and CEO.

“We again handled record volumes in the quarter led by a 10-percent unit increase in coal, and an 8-percent unit increase in both our intermodal and agricultural products businesses. This led to our 18th consecutive quarter of year-over-year volume increases.”

Third-quarter 2006 freight revenues increased $597 million, or 19 percent, to an all-time quarterly record of $3.82 billion compared with $3.22 billion in the prior year. Revenue for the third quarter of 2006 included fuel surcharges of approximately $500 million compared with approximately $300 million in the third quarter of 2005. The increase in fuel surcharges was driven primarily by rising fuel prices, which was offset by the $293 million increase in fuel expense.

Coal revenues rose by $126 million, or 20 percent, to $748 million, due to record loadings of Powder River Basin coal. BNSF exceeded second quarter 2006’s record loadings by nearly 3 percent. Consumer Products revenues increased $244 million, or 18 percent, to $1.58 billion due to strong revenue increases in the international and domestic intermodal sectors. Industrial Products revenues increased $128 million, or 17 percent, to $871 million led by double-digit revenue growth in chemicals and plastics, petroleum and construction products. Agricultural Products revenues were up $99 million, or 19 percent, to $621 million, due primarily to strength in corn and soybeans.

Operating expenses for the third quarter of 2006 were $3.02 billion compared with third-quarter 2005 operating expenses of $2.54 billion. The $480 million increase in operating expenses was principally driven by a $293 million increase in fuel expense primarily reflecting higher prices and a declining hedge position as well as a 7 percent increase in unit volumes.

All-time quarterly record operating income of $920 million, increased $142 million, or 18 percent, compared with the third quarter of 2005.

CN posts 27 percent quarterly increase

Canadian National Ry. last week reported its financial and operating results for the three-month and nine-month periods ended September 30.

Third-quarter 2006 financial highlights show a net income of Canadian $497 million, a 21 per cent increase over third-quarter 2005 in its October 19 report in Montreal. Elsewhere, its diluted earnings per share (EPS) was 94 cents, an increase of 27 per cent, its operating income of C$844 million was up 27 per cent, and solid revenues of C$1,981 million was an increase of 9 per cent.

The railway’s record quarterly operating ratio of 57.4 per cent was an improvement of 5.9 percentage points, and nine-months free cash flow of C$1,131 million.

E. Hunter Harrison, president and CEO, said, “CN produced exceptional third-quarter results, reflecting substantial revenue growth, asset utilization and cost control accomplishments. Revenues increased 9 per cent, freight volume was up six per cent, and carloadings improved by 2 per cent.”

Harrison added, “The top line benefited from the underlying strength of the diverse and balanced portfolio of commodities that CN transports, as well as freight rate increases. Cost control was again outstanding – operating expenses declined 1 percent during the quarter despite an increase in workload and much higher fuel expenses. Our revenue, cost performance and asset utilization focus all came together in producing a record quarterly operating ratio of 57.4 percent.

“CN’s business model – the pursuit of long-term, sustainable growth, and its consistent ability to grow the business at low incremental cost – continues to hit the mark, driving superior bottom line growth and delivering shareholder value.”

Harrison noted, “I’m pleased to announce today that CN is revising upwards its full-year 2006 earnings guidance because of the strong year-to-date financial performance of the company. CN now expects 2006 adjusted diluted earnings per share to be approximately C$3.40.”

Building on the strength of CN’s 2006 financial track record, the company expects 2007 diluted earnings per share to grow in the 10 percent-plus range, consistent with the company’s long-term vision.

In addition, CN expects 2006 free cash flow of approximately C$1.3 billion, and 2007 free cash flow of approximately C$800 million, with the reduction in 2007 reflecting higher cash payments for Canadian income taxes.

CN’s 2007 financial outlook assumes, among various conditions, the latest consensus forecast of North American economic growth of 2.6 per cent; crude oil prices (West Texas Intermediate) of U.S. $65 per barrel; and a Canadian-U.S. dollar exchange rate of U.S. $0.89 per Canadian dollar.

CP reports weaker third quarter

Canadian Pacific Railway (TSX/NYSE: CP) said today from Calgary, Alberta, a third-quarter net income of $162 million. Net income was lower in 2006 by $42 million when compared to the same period in 2005 due primarily to the impact of foreign exchange on long-term debt and a one-time special reduction to an accrual taken in third-quarter 2005.

“I am very pleased with our results,” said Fred Green, CPR President and CEO.

“CPR has delivered growth of 26 per cent in normalized diluted earnings per share and an improved operating ratio of 74.2 percent. We achieved this while significantly improving the safety of our train operations. Our operating metrics, which measure how well our railroad is running, are excellent and show that our scheduled railroad strategy is driving us closer to our goal of being the safest and most fluid railway in North America.”

Excluding foreign exchange gains and losses on long-term debt and other specified items, income was $168 million, up 24 percent. Its diluted earnings per share was $1.06, an increase of 26 per cent from 84 cents, and its operating ratio improved 320 basis points to 74.2 percent.

Operating expenses were virtually flat at $854 million despite increases in fuel costs, the carrier reported.

In the third quarter, total freight revenues improved by 4 per cent to $1.12 million, with growth in grain of 18 per cent; industrial and consumer products of 13 per cent; sulphur and fertilizers of 10 per cent; and intermodal of 8 per cent. This growth more than offset a sharp decrease in coal revenues of 25 per cent.

CSX reports strong third-quarter earnings

CSX Corp. [NYSE: CSX] reported on October 17 third quarter 2006 net earnings of $328 million, or 71 cents per share. Earnings in the quarter included a 17-cent per-share benefit from Hurricane Katrina insurance recoveries and the resolution of certain income tax matters.

Excluding these items, earnings were 54 cents per share, up 50 percent from 36 cents per share reported in the same quarter of 2005.

“Improved service, growing volumes and continued strong pricing drove our strong third quarter financial results,” said CSX Corp. chairman and CEO Michael Ward

“We continue to invest in strategic capacity and create opportunities for long-term growth,” he said.

The company’s surface transportation businesses posted record third quarter revenues of $2.4 billion, a 14 percent increase from the third quarter last year. The increase was driven by improved pricing and volume growth. Yields increased 12 percent with improvements across all markets. Volumes grew nearly two percent, led by strength in agriculture, coal and intermodal volumes, which more than offset softness in phosphates and fertilizers, automotive and forest products.

These top-line improvements, combined with continued momentum in operations, generated record third quarter Surface Transportation operating income of $489 million, including the $15 million benefit from insurance recoveries. Excluding the insurance recoveries, operating income was $474 million, a 31 percent increase over the $361 million reported in the third quarter of 2005.

“We expect demand for rail and intermodal transportation services to remain strong,” said Ward, adding, “With improved service on our extensive network, CSX is well positioned for the future.”

NS reports 18 cents

Norfolk Southern Corp. (NYSE: NSC) yesterday reported its regular quarterly dividend of 18 cents per share on its common stock, payable on December 11 to stockholders of record on November 3. The firm reported the change from its corporate headquarters in Norfolk, Va.

Peering into the NS mindset

Moorman offers a railway future view

By David Foster

Norfolk Southern President, Chairman, and CEO Charles “Wick” Moorman made a major address on October 19 at Hotel Roanoke, which he characterized as a “coming out party” for the railroad’s I-81 strategy.

Intermodal is the fastest growing sector of NS’s business, he said, and set out four key reasons behind that statement

First, he said, are rising oil prices, which constitute a competitive advantage for rail. Next comes a chronic shortage of long-distance truck drivers. He cited an example of a major trucking company that needs 18,000 drivers, and to retain this number they have to recruit 14,000 each year.

Huge increases in imported goods added to the mix – all the big box stores, from Wal-Mart to Target to Lowe’s, etc. are importing enormous volumes of goods from overseas, which helps railroads.

Highway congestion will remain a problem for the foreseeable future. There is neither the money nor the will to address this, he said, so it will stay with us.

Since the first quarter of 2003, NS’s intermodal revenues are up 23 percent. Margins are up, too, he said, noting how in the past it was hard for rail carriers to make money on intermodal shipments because of intense truck competition. Now, he said, the margins on intermodal are comparable to those on other commodities.

Moorman defined some I-81 terms as a prelude to his talk.

“I-81 refers to the truck catchment area,” he said, and can extend all the way to Texas.

“I-81 Corridor” refers to from North Jersey into the deep South, and includes both the NS Piedmont and Shenandoah lines. He said the Shenandoah line paralleling I-81 “will never be a route where we run a lot of trains at high speed.”

“NS can be part of the solution to congestion on I-81, but we can’t be the solution,” Moorman said.

He peered back at the company’s history of involvement in the corridor. Moorman said Wiley Mitchell started the analysis as far back as 1981. He traced developments up to more recent steps in 2003 with the PPTA and the Reebie Study, which he said is “the genesis of a lot of our plans since then.”

“We didn’t go out and beat the drums for I-81,” Moorman said, “because of priorities with the Heartland Corridor project.”

He described the significance of that effort and the multi-state cooperation and financial support it has received.

Now that Heartland is okay, it’s time to turn to I-81. “We’ll be talking a lot more about it as time goes on.”

Moorman said there are about 4 million trucks per year on I-81, and validation of data is ongoing.

“This market is largely untouched by rail,” he said. He drew a contrast by way of comparison with the Chicago-New York market. In that corridor, rail has a market share of more than 50 percent of the “would-be truck traffic.” Most of those are container shipments, and large companies control most of it.

The I-81 market is more highly fragmented.

It’s mostly trucks, and many are “moms and pops” (owner-operators). NS faces inadequate infrastructure and a very complex market in the I-81 corridor, which will make competing difficult.

“Consistency is number one,” he said, and that requires reasonable speed and adequate terminal capacity... in short, infrastructure. High speed is not required.

Over-the-road speeds of 35 to 40 mph have been adequate, he said, to capture premium intermodal business elsewhere.

A prerequisite for capturing the I-81 market is a more open intermodal strategy, and helped the audience understand what that means – mostly lots of new equipment, that can carry all kinds of trucks.

Moorman said the I-81 market could be attacked incrementally.

Modest infrastructure improvements could divert 100,000 to 200,000 trucks annually. At the billion-dollar investment level in track, terminals, and rolling stock, it may be possible to take a million trucks per year off I-81. A public private partnership would be needed, with the public’s share in such cost commensurate with public value.

Ultimately he said, with $6 or $7 billion, and a completely double tracked railroad, NS could do even better. It sounds like a lot, he said, but went on to contrast it to STAR’s $13 billion just for the section in Virginia.

State transportation officials are coming around, he said. They realize they cannot whip this thing alone. It’s going to require a corridor or regional approach, and NS can do that.

“We are the environmentally friendly way to go,” Moorman said, explaining some of the other advantages of relying on rail.

“We can move ahead quickly,” he said. If funding can be identified, he added, a project could be in place in five years.

The writer is the RAILSolution executive director

UP reports record third quarter earnings

Union Pacific Corp. (NYSE: UNP) reported on October 19 its record third quarter 2006 net income of $420 million, or $1.54 per diluted share. Last year’s third quarter net income was $369 million, or $1.38 per diluted share, which included a non-cash income tax expense reduction of $118 million after-tax, or $.44 per diluted share.

Excluding the tax item, third quarter 2005 net income would have been $251 million or 94 cents per diluted share. Comparing 2006 to 2005 results without the tax item, net income increased 67 percent and diluted earnings per share grew 64 percent.

Operating income during the third quarter of 2006 was $752 million, up from $481 million reported in the third quarter of 2005.

“Quarterly operating revenue and income were the best ever in the history of the Railroad,” said Jim Young, President and CEO.

“This quarter marks the sixth consecutive quarter of operating income growth. Unlike last year’s results, which were affected by hurricanes, this quarter we converted the demand for our services and greater operational efficiency into strong performance.”

Operating revenue set an all-time quarterly record, growing 15 percent to $4.0 billion compared to $3.5 billion in the third quarter 2005. Five of six business teams achieved all-time record results in the quarter. The sixth business team, Automotive, posted its best third quarter ever.

Operating ratio improved 5.0 points versus the third quarter 2005 to 81.1 percent.

The Railroad’s average quarterly fuel price increased 21 percent from $1.88 per gallon in 2005 to $2.27 per gallon in the third quarter of 2006. The fuel surcharge recovered approximately 89 percent of the cost in excess of the Railroad’s $.75 per gallon base fuel price.

The company’s fuel consumption rate, as measured by gallons per thousand gross ton-miles, was a best ever-quarterly rate of 1.26 versus 1.27 in the third quarter 2005.

While quarterly carload volume grew 3 percent, average terminal dwell, as reported to the Association of American Railroads, improved 7 percent year-over-year to 26.2 hours and average third quarter train speed decreased only slightly to 21.3 mph from 21.6 mph in 2005.

UP settled all insurance claims related to the January 2005 West Coast Storm, which reduced operating expense by $23 million in the third quarter 2006.

UP’s third quarter railroad commodity revenue summary vs. 2005 shows agricultural up 19 percent, energy up 17 percent, industrial products up 15 percent, chemicals and intermodal each up 14 percent, and automotive up 10 percent.

“We are optimistic about the fourth quarter,” Young said. “We anticipate that continued revenue growth and operational improvements will be converted into strong bottom line results.”

Monday, October 23, 2006

Two photos | Brock Johnson

Derailed tank cars carrying ethanol continued to burn through Sunday along Norfolk Southern tracks in New Brighton, Pa. A high hill overlooking the Beaver River Bridge from a resident’s back yard offered this view.

New Brighton residents return to homes

Most of the people living near the scene of Friday night’s fiery Norfolk Southern derailment in New Brighton, Pa., were back in their homes Sunday night, returning to their beds while one last ethanol-laden tank car continued to burn on a bridge over the Beaver River. The community is in Beaver County, about 40 miles northwest of Pittsburgh.

One track was reopened on Monday.

The Pittsburgh Post-Gazette reported today emergency officials from Beaver County, the state and the National Transportation Safety Board met last night to discuss whether to let the fire, fueled by the ethanol within the car, burn itself out. The other option, according to Wes Hill, director of emergency services for Beaver County, would be to have firefighters move in to extinguish it.

Two freight cars remained in the Beaver River, below the trestle where the NS freight train, transporting 100,000 gallons of ethanol fuel from Chicago to New Jersey, derailed.

Three locomotives hauled the 89-car tank train, enroute from Chicago to New Jersey when it derailed. NTSB investigators removed data recorders from all three locomotives. A section of track was broken, officials said.

Earlier in the day, teams of men in hard hats worked within feet of two burning tank cars, draining the explosive ethanol and continuing the removal of more than 70 tanker cars from the site. Crews also used bulldozers and cranes to lay new tracks across the bridge.

“We’re still in a caution stage because we have fire burning and product in the [last] car,” Hill said Sunday night, “but things are progressing well.”

Although the derailment at 10:30 p.m. Friday produced a massive explosion that rocked the New Brighton and Beaver Falls neighborhoods, none of the train’s crew or the more-than-150 evacuated residents was injured.

Fire officials yesterday reduced the blocked-off “hot zone” to a three-block area of Second Avenue, about 100 feet from the derailment, affecting 10 families living in five duplexes.

Residents returning to homes inside the original one-square-mile evacuation zone were urged to park their vehicles outside the area and walk in.

New Brighton Borough Manager Larry Morley said NS had set up a family-assistance center at a local church.

NS officials asked business owners who suffered financial losses to contact the railroad at 1-800-230-7049, from 8 a.m. to 5 p.m., Monday through Friday.

NS reported today in a service alert to customers, the derailment disrupted operations on two important NS routes “between Conway, Pa., and Fort Wayne, Ind., and between Conway, Pa., and Youngstown, Ohio.”

The freight hauler added, “Conditions at the site of the derailment are improving but delays on shipments normally moving over these routes should be expected.”

The line between Conway and Youngstown was reopened late Saturday and one of two mainlines between Conway and Fort Wayne reopened early Monday. However, trains moving through the area are operating at restricted speeds, due to continuing work on the second mainline between Conway and Ft. Wayne. Work to repair the line will continue over the next few days

The carrier added, “NS is now moving some traffic over normal routes but also continues to reroute some traffic normally moving over these routes via alternate routes on Norfolk Southern and other carriers. As repairs are made and conditions improve, all traffic will gradually shift to normal routes.”

State Route 18 in New Brighton opened to northbound and southbound traffic yesterday morning and Second Street in Beaver Falls also reopened.

The accident obliterated a length of track along the NS main line, closing a section used by 50 to 70 freight trains daily, as well as Amtrak passenger service, the Capitol Limited, which makes one round trip daily between Washington, D.C., and Chicago. Until the damaged section of track reopens, each one-way trip will take about 2-½ hours longer because the train is being detoured onto tracks between Pittsburgh and Cleveland, Amtrak spokesman Cliff Black said.

Unofficial sources noted Westbound train No. 29 of October 21 reversed out of Pittsburgh one mile to Field, then west on Allegheny Valley Ry. to Bakerstown, then Buffalo and Pittsburgh Ry. to New Castle, NS to Youngstown Center and to Ashtabula. The stop at Alliance was missed and “taxi-stuted.”

Train No. 30 operated the detour in reverse.

The service disruptions on Friday did not go well. The equipment that was originally No. 30 of the 20th turned at Cleveland and returned to Chicago at 4:55 p.m.

Buses from Pittsburgh arrived in Chicago between 9:30 p.m. and 11:20 p.m. Thirty passengers on No. 30 missed all connections in Washington after No 29 turned in Pittsburgh, departed eight hours late, and then hit a tree in Rockville, Md. It finally arrived in Washington about 12 hours late.

The NTSB has not yet determined the extent of structural damage to the Beaver Falls-New Brighton Bridge, which was littered yesterday with twisted tracks and splintered guardrails. The riverbed resembled a junkyard filled with pairs of sheared-off train wheels on their axles.

NTSB Vice Chairman Robert Sumwalt said that a section of damaged track from the bridge was shipped to Washington, D.C., to determine whether it was damaged before or by the derailment.

He said FBI officials, who are routinely called in for NTSB investigations, did not believe “any sort of sabotage” prompted the derailment

Preliminary indications from the train’s data recorders showed that the train was traveling 36 to 39 mph when it crashed, Sumwalt said. The speed limit is 45 mph along the rail bridge over the Beaver River.

Sumwalt said the train’s crew had told investigators the train was running well until it automatically applied emergency brakes because airbrake lines between cars had been severed.

“They looked behind them, they saw the train was on fire,” he said. “The engineer contacted 911, he contacted the dispatcher, and then they evacuated the locomotive cab and got... about a half-mile away from it.”

Federal investigators worked throughout the day yesterday making diagrams of the wreckage and recording the positions of the cars for later analysis, he said.

NS spokesman Rudy Husband said company officials inspect mainline tracks like the ones on the bridge at least twice a week. He added that 50 to 70 trains use the tracks each day.

Local officials are focusing on a dangerous situation that they said could have been much worse.

“I think we dodged a bullet here,” said New Brighton Mayor Rick Smith.

“You had the antithesis of ‘A Perfect Storm,’ “ said Beaver County Commissioner Charles Camp.

He explained that because the river level was high and ethanol is not the most dangerous fuel, there was minimal harm to animal and plant life. He also noted that the bridge is on the northernmost edge of town, away from most homes and businesses.

Betsy Mallison, spokeswoman for the state Department of Environmental Protection, said there had been no disruption to public water supplies and minimal environmental impact. Some aqueous white foam used to suppress the ethanol vapors was being cleared from the river, she said.

In terms of nostalgic value, locals said, the greatest loss was “Big Rock,” a giant boulder at the riverside that was a popular diving spot for swimmers. The rock, at the entrance to Big Rock Park, was shattered by the toppling freight cars.

On Saturday night, emergency crews in New Brighton began the delicate task of unloading nearly 100,000 gallons of the explosive chemical from overturned tank cars, while several others blazed nearby.

It was part of a systematic plan to put out a fire that had burned for a day. The wreck also stalled east-west traffic on one of the most heavily traveled corridors in the NS system.

Neither the train crew nor anyone in the town was injured, officials said, but hundreds of residents who live within a one-mile radius of the derailment were evacuated from their homes. They were allowed to return briefly last night to grab essential items, then most were sent off to hotels or relatives’ homes. Residents from about 45 homes on Fifth and Sixth Avenues were allowed to return for good later in the evening.

“We have people in and around each of the cars,” said Wes Hill, director of emergency management for Beaver County. “There’s always a risk anytime you’re dealing with these cars.”

The emergency workers converged on the site after 23 cars derailed just inside the borough limits. Moments later, a colossal fireball illuminated the night and sent hundreds of residents from their homes within the one-mile radius.

Hill said the process would take time.

“They were full cars,” he said. Each tank car was capable of holding 30,000 gallons of ethanol, a processed grain alcohol widely used as a gasoline supplement. The train was eastbound from a western refinery en route to a shipping point in New Jersey.

The cars that stayed on the tracks were hauled from the scene Saturday. Of the 23 derailed cars, some lay on their sides alongside the eastbound tracks, while others were jumbled at sharp angles after dropping from the bridge.

Earth in a park adjacent to the scene was saturated with the alcohol compound and a section of a brick foundation at the base of the bridge was dotted with flames where pockets of the ethanol had spilled.

Atop the bridge, wooden crossties smoldered and firefighters were posted nearby to make certain they did not erupt into full flame, imperiling tankers atop them.

By 5 p.m. Saturday, NS crews were moving heavy cranes to the scene to remove four cars that had tipped over in a row after they had crossed the bridge. Another crew shuttled empty tank trucks to and from the foot of the hill on which the tracks run to begin emptying a car that blazed from the top.

The touch-and-go procedure involved draining that tank car from the bottom and pumping it full of chemical foam. Then the contents of the other three cars were to be pumped into empty tankers moved up on parallel tracks.

At that point, the cranes moved in to lower the empty cars down some steps to be cut into the hillside below the tracks. A cutting machine was to be set up in the park below, and the $50,000 tank cars were to be cut into scrap and hauled away.

Commuter train hits truck, derails; injures 20

Rescue crews took up to 20 people to hospitals with minor injuries this morning after an inbound commuter train collided with a flatbed truck at a rail crossing in Franklin, Mass., according to fire and transit officials.

The truck was carrying a piece of construction equipment with a bucket loader and got struck at a rail crossing at Fisher Street, according to Joe Pesaturo, a spokesman for the Massachusetts Bay Transportation Authority. The driver got out of the truck and walked down the track to try to alert an approaching train, according to The Boston Globe.

“The engineer immediately began to apply emergency brake but was unable to stop the train before it collided with the truck,” Pesaturo said.

When the train hit the truck at about 7:52 a.m., the bucket loader swung around and hit the middle of the first car of the train. About 20 people who had been riding in the first car were taken to local hospitals with minor injuries, Pesaturo said.

The train derailed as a result of the accident and will be stuck at the Fisher Street rail crossing for some time, Pesaturo said. The train had just begun its run back to Boston.

Not a good day at Amtrak, either

Broken engines delay some Amtrak trains

Amtrak Regional Train No. 167 of October 22 was delayed departing Boston’s South Station because its scheduled engine, No. 658 (an HHP-8) was unavailable and shopped in South Hampton St. Yard. The was held an hour and 24 minutes until another HHP-8, No. 653, could be taken off the consist of No. 67 as a replacement.

Sources said as of this morning, 36 of the 49 AEM-7s on roster were available for service, but only seven of the 13 HHP-8s on roster were available. Both are within Amtrak’s “quota” for power availability. That means Amtrak’s “quota” for availability on the HHP-8 is less than half of its fleet: six out of 13.

Elsewhere, on October 22 at 3:45 p.m., CSX shut down train movement on its South End Subdivision at Rocky Mount, N.C., for investigation of a light aircraft crash with debris fouling both main tracks. CSX established single-track routing through the Rocky Mount freight yard and provided pilots for Amtrak movements through the yard.

Trains were able to stop at the Rocky Mount station. Trains 53, 70, 91, 97 and 98 were delayed from 10 to 38 minutes. The main tracks reopened at restricted speed at 10:20 p.m., but major congestion and delays due to backed-up freight traffic was expected.

Bombardier launches tender offers

Bombardier Inc. and Bombardier Capital Funding LP said today that they have launched “tender offers for any and all of the outstanding €500 million 6.125 percent notes due 2007 issued in Europe by Bombardier Capital Funding LP and a principal amount to be determined of the €500 million 5.75 percent notes due 2008 issued in Europe by Bombardier Inc.

$1 exchanged for €0.79286; 1 was worth $1.26126 at 3:15 p.m. today.

The minimum target amount of the tender offers is €500 million with the exact aggregate repurchase amount to be announced on the business day following the expiration date of the tender offers, being November 13. Settlement is expected on November 17, unless the tender offers are extended or terminated.

Details on the terms, conditions and restrictions relating to the tender offers are contained in the Invitation Memorandum dated October 23, Bombardier stated. The tender offers are not open to U.S. persons or persons located or resident in the United States or Italy.

“The purpose of the tender offers is to take advantage of current favorable conditions in the debt capital markets and to extend the Bombardier’s debt maturity profile by refinancing” the 2007 and 2008 notes with longer maturity securities. The tender offers are conditional upon completion of and will be funded with a portion of the proceeds of a proposed new issue of notes by Bombardier Inc., which is expected to be launched soon.

Bombardier said it expects to complete the issue of notes before the settlement of the tender offers, subject to market conditions. The new issue will not be registered under the securities laws of any jurisdiction and cannot be offered or sold in any jurisdiction without registration or an applicable exemption for registration requirements.

Deutsche Bank is acting as sole dealer-manager.