UTU Daily News Digest

Information of interest to operating railroad and transportation employees

Wednesday, July 28, 1999

WASHINGTON: NS, CSX digging out of Conrail operational quagmire

WASHINGTON -- Two railroads that embarked two months ago on an ambitious journey to break up Conrail's freight monopoly are only now beginning to dig out of the logistical and operational quagmire their takeovers caused.

Computer coding errors and other setbacks have led to congestion and shipping delays since early June. Manufacturers unable to get raw materials or send out finished goods have incurred expenses that may be passed on to their customers.

Neither railroad is willing to declare victory yet, particularly with pre-Christmas traffic expected to pose additional problems this fall, but CSX Corp. and Norfolk Southern Corp. believe the worst is behind them.

Shippers seem to agree.

"People are still having problems, but we're just not getting the volume of (complaint) calls we were getting early on," said Ed Rastatter, director of policy with the National Industrial Transportation League, a shipping group.

The setbacks have been costly: CSX reported last week that second-quarter earnings dropped 25 percent, while Norfolk Southern was expected to report lowered earnings today. The railroads have had to hire more crews, lease additional locomotives and run special trains for time-sensitive shipments.

CSX and Norfolk Southern together paid $10.3 billion to carve up and absorb Conrail's routes, taking control of virtually all rail traffic east of the Mississippi River.

Two years went into the planning for the June 1 split in an effort to avoid the prolonged service meltdown that followed Union Pacific's 1996 merger with Southern Pacific, a disruption that cost the U.S. economy at least $4 billion, by some estimates.

Despite all the preparations, CSX and Norfolk Southern quickly found the most complex restructuring in modern railroading to be even more complex than thought.

Far from meeting their goals of capturing more of the freight traffic that now moves on trucks -- traffic growth essential for repaying money borrowed to buy Conrail -- the railroads have struggled to keep what business they had.

Many rail shippers turned to more costly trucks to meet tight schedules. Some manufacturers curtailed production or paid workers overtime to process delayed shipments. Norfolk Southern, which suffered more of the congestion problems, put its service expansion plans on hold.

"The last two months were spent trying desperately to keep what we have," said Tom Finkbiner, vice president for intermodal services at Norfolk Southern. "If you can't service what you have, it's kind of ridiculous to try to ask for more and do new and different things."

The problems were primarily in the Northeast, although some of Norfolk Southern's yards in the Southeast suffered as well when the railroad began rerouting traffic there.

Both railroads had problems with computers, which prompted some shipments to go in the wrong direction or to the wrong yards. Norfolk Southern also had initial problems with dispatching its crews, getting enough workers to show up at the right places.

By the time the problems were solved, traffic already had backed up. It took a seasonal freight decrease in July, as automakers shut down to prepare for a new model year and many coal miners take vacations, for the railroads to catch up.

Freight levels will now pick up as merchants stock up for Christmas. This fall's shipping levels could be higher than usual: Companies will build up inventories of raw materials and other products to guard against suppliers' Year 2000 computer mishaps.

"We're not resting on our laurels yet," said Bob Haulter, assistant CSX vice president for integration planning. "Traffic levels are coming back. We will continue to refine our processes."

Mike Heimowitz of the Chemical Manufacturers Association said the key test for the railroads will come this fall.

"That's when things really pick up," he said. "There may be incremental improvement, but what's going to happen next week, next month and the month after that?"

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WASHINGTON: Key truck, rail legislation going nowhere this summer

WASHINGTON -- Truck and rail shippers can rest easy this summer if they like the regulatory status quo, the Journal of Commerce reported today.

Congressional insiders and trade association officials say key truck and rail legislation, including reauthorization of the Surface Transportation Board, is dead in the water for the foreseeable future.

Legislation to reauthorize the STB, which decides rail rate and competition disputes, has become a battleground for shippers, railroads and rail labor.

Groups such as the Alliance for Rail Competition have endorsed an STB reauthorization bill designed to help shippers by increasing competition and improving service.

Railroads, which want to preserve the status quo, claimed those proposals would cost them billions of dollars and impair their ability to deliver better service in the future.

However, the issue has never matured enough to force a Commerce Committee vote. Glenn Scammell, counsel to the House committee that has jurisdiction over the board, confirmed last week that STB legislation apparently is going nowhere.

"I don't think much is moving, period," said Edward Emmett, president of the National Industrial Transportation League.

"Summer is more of a discussion stage. We may find ourselves in that situation until the end of the year," Emmett observed.

Railroads, which back a legislative proposal to reauthorize the STB for four years without any changes, remain hopeful.

"It's early yet and a lot can happen. We're not giving up on STB reauthorization," said Tom White, spokesman for the Association of American Railroads.

"It's difficult to see a consensus in the Senate" to move an STB bill, he conceded, though a railroad-backed reauthorization bill has 27 co-sponsors.

The NIT League has pursued negotiation instead of legislation with the railroads, but nothing has come of that, either. The league wants more competition in railroad-terminal areas and is seeking procedures that will allow some shippers who are served by a single railroad to obtain service by a second carrier.

No STB legislation has been introduced in the House, where Rep. Bud Shuster, R-Pa., chairman of the transportation and infrastructure subcommittee, has set a policy course that stresses bipartisan legislation.

Labor also has a hand in the STB reauthorization. Union officials, who have substantial support for their position in the House, insist that STB legislation will not pass unless it contains language that blocks the agency from overriding collective bargaining agreements through rail merger proceedings.

Edward Wytkind, director of the Transportation Trades Department of the AFL-CIO, said, "The ability to move any bipartisan product is very remote, and in fact impossible. The STB reauthorization is supposed to be a vehicle to debate what's wrong with the industry and offer changes in the law to address those problems."

Without reauthorization, the STB stays in business through a continuing appropriation from fiscal year to fiscal year.

On the trucking side, a bill that could have saved an estimated $15 billion in logistics costs by allowing states to increase maximum truck weights to 97,000 pounds also is going nowhere.

That bipartisan legislation was introduced in the House, but never reached the Senate.

The truck-weight bill, supported by a shipper/carrier coalition called the Alliance for Safe and Efficient Trucking, hit an immediate buzz saw of opposition from railroad and some safety lobbyists.

The only change in the surface-transportation landscape could be provided by a tax bill now moving through Congress, although that bill has no direct effect on the commercial/regulatory arena.

Railroads could save about $160 million a year -- approximately half of one percent of their annual operating expense -- if they're freed from paying an existing fuel tax. The tax was imposed in 1991 to reduce the federal deficit. But in the current climate of budget surpluses, railroads have convinced both houses of Congress to repeal the tax.

The repeal is in a House-passed bill containing widespread tax cuts.

The bill is expected to be voted on this week in the Senate, but President Clinton has promised a veto unless the bill is amended.

Walter McCormick, president of the American Trucking Associations, said tax legislation would help motor carriers by reforming state tax and alternative minimum tax rules and potentially favorable tax treatment of independent contractors.

Insiders believe there also could be movement later this year on truck safety issues that sparked intense debate this spring over heavy-truck accidents and supposed lax oversight by the Department of Transportation.

No truck-safety bills have been introduced, but House and Senate staff are known to be working on the issue.

Legislation could include tighter inspection and licensing rules and a possible shift in jurisdiction over the trucking industry within DOT.

"We are optimistic there will be action before the end of the year" on trucking safety, McCormick said.

One trigger for congressional action could be a formal legislative proposal from the Department of Transportation that has not yet been unveiled.

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NORTH CAROLINA; CSX clears track in Charlotte

CHARLOTTE -- Railroad operator CSX Corp.'s CSX Transportation unit Tuesday reopened one of two main line tracks in eastern North Carolina blocked since midday Monday by a derailed train, a railroad spokeswoman said.

Crews lifted 22 derailed freight cars back onto the north-south tracks near Fayetteville, N.C., and planned to reopen the second line sometime on Wednesday, CSX spokeswoman Jane Covington said.

"We've rerouted six trains and we've held about 12 trains," Covington said. "Those 12 trains are moving now."

On Monday, 22 cars in a 138-car train derailed about eight miles south of Fayetteville, blocking a pair of north-south main line tracks used by 20 CSX freight trains and six Amtrak trains daily. 

There were no injuries.

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OREGON: Plan in works to use veterans’ funds for rail

PORTLAND -- Cash-strapped Oregon lawmakers have dreamed up a way to pay for the state's share of the passenger train system in the Northwest: borrow the money from the veterans' home-loan program, the Wall Street Journal reported today.

The Legislature voted 45-13 last week to lend $10 million from the Oregon War Veterans' Fund to the state Department of Transportation, and to repay the debt over four years with income-tax revenue that would be collected anyway on the wages of highway-construction workers.

Sen. Peter Courtney, a Democrat from Salem, calls it "wacko budgeting," but rail enthusiasts applaud the maneuver. What's important, they say, is that while sustaining existing services, the Legislature's action also funds a plan to expand Oregon's portion of the high-speed Cascades service that stretches from western Oregon to Vancouver, British Columbia.

"The trains will continue to run," says Sen. Susan Castillo, a Eugene Democrat.

The $10 million -- $4 million less than requested by Gov. John Kitzhaber -- will allow Oregon to buy a second locomotive and set of cars and subsidize Amtrak's operation of a second daily round trip between Eugene and Portland by mid-2000.

Amtrak has built marketing for the new service around the sleek, Spanish-designed Talgo train, but Oregon has opted for something cheaper: a used Metroliner retired from service elsewhere. Metroliners average 40 miles per hour on these tracks, while the Talgo, engineered to tilt through turns, averages 55 mph. But a Talgo would cost about $6.5 million more.

A fully refurbished Metroliner will suffice, says Claudia Howells, manager of the rail division at the Oregon Department of Transportation. Passengers boarding in Eugene for travel to Seattle or Vancouver will have to transfer to a Talgo in Portland, but at least growing demand for service will be satisfied. "It's not everything, but it's another step," says Sen. Castillo.

Still, rail proponents in Washington state complain that Salem is being stingy. Rep. Ruth Fisher, a Tacoma Democrat and co-chairwoman of the Washington House Transportation Committee, calls the Oregon plan a "patchwork" effort that is "exactly the opposite of what we're attempting to do" in Olympia.

Ms. Howells agrees that the financing plan "isn't a clear mandate" for high-speed rail in the state, but says it does keep the trains running.

Under an agreement signed five years ago, Oregon, Washington and the federal government cover about 30% of the $24 million in annual operating costs for the Cascades line, while ticket and onboard concession sales cover the rest.

Washington's Legislature this year appropriated $118.7 million for the high-speed rail service. Since 1992, that state has put more than $350 million into subsidizing passenger service, upgrading tracks and buying trains, while Oregon, as of last week's vote, has devoted $18 million to the Pacific Northwest Corridor.

The corridor, 446 miles of track between Eugene and Vancouver, British Columbia, is one of the U.S. Department of Transportation's eight high-speed-rail routes.

The ultimate goal is to have state-of-the-art trains zipping along at speeds of 125 mph, ferrying passengers in fewer than eight hours from Eugene to Vancouver, a route on which there's now no direct service. The trip from Portland to Seattle would be shaved to 2.5 hours from 3.5, making Amtrak a more desirable alternative to traveling by plane or car.

Even moving at their current relative snail's pace, trains are increasingly popular in the Northwest. A record 550,000 people rode the Cascades line last year. The biggest year-on-year increase in Northwest passenger loadings, more than 23%, occurred between Eugene and Portland.

To wrangle a funding commitment from Oregon's Legislature, rail proponents say, they had to keep pressure on the Republican leadership. Amtrak's chairman, Wisconsin Gov. Tommy Thompson, joined the campaign. "You've got to have local constituents and legislators behind this to make it work," says Gov. Thompson, who in June telephoned Oregon Senate President Brady Adams of Grants Pass and House Speaker Lynn Snodgrass of Boring.

Sen. Adams proposed the $10 million plan after consulting with state Treasurer Jim Hill. With $600 million in the bank, the Veterans' Fund was a likely target.

Under the Legislature's measure -- which Gov. Kitzhaber has said he will sign -- the fund will advance $15 million to the Department of Transportation at 8% interest for four years ($5 million of that is earmarked for transportation programs for the elderly in rural areas).

The loan will be repaid with income taxes paid by people who work on highway construction projects. The Department of Administrative Services will be responsible for identifying those collections and steering them into a special account. The idea is to avoid having to appropriate money each year through a budget line item.

Sen. Courtney says lawmakers acted foolishly. "It's a quick way to get a buck," he says, "but it's reckless for the state." Lending between agencies allows lawmakers to dodge the tough decisions a formal budget appropriation demands. Honoring its commitment to the rail corridor requires the Legislature to create a way to fund it permanently, not with borrowed money, he says.

But Sen. Adams defends the loan plan. He doesn't want the rail funding in the budget, where it would "have to compete vigorously each session" against higher-priority schools, police and health programs.

Bruce Shriver, chief financial officer for the Oregon Department of Veterans' Affairs, acknowledges that the arrangement is "a little unusual." But he notes that the loan is secured by a claim on the state general fund.

The plan "does set a precedent," says Rollie Wisbrock, chief of staff for the Oregon Treasury Department. But, he adds, "we're confident that it is not a raid on the Veterans' Fund. It's a safe loan, and a profitable one."

Amtrak's Pacific Northwest route is the fastest-growing federally designated high-speed rail corridor, in terms of passenger use. By 2018, Amtrak wants more than a dozen daily trains linking Eugene and Vancouver, a project that would cost about $600 million in Washington, $200 million in Oregon and $600 million in British Columbia. Among other things, it would require improved tracks. Washington has contributed nearly $100 million to that end since 1993; Oregon hasn't invested a dime.

Lawmakers in Olympia want their counterparts in Salem to step up to the plate soon. If rail travel is made faster and more people take trains, they argue, there will be less congestion on Interstate 5, lower highway-maintenance costs, and fewer demands on the already overtaxed airports in Portland and Seattle.

Money Train: Washington is spending heavily to make the high-speed rail corridor a reality in the
Northwest.  Oregon spends enough to keep the dream alive.

Spending by state in millions:

 

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MAINE: Railroad seeks to derail plan for more rail service

PORTLAND -- A deal intended to open Maine's rail lines to more competition could be sidetracked by a standoff involving the state, a local railroad and one of its freight customers, The Wall Street Journal reported today.

The state Legislature last June voted to include within a larger bond issue $6 million for the purchase and reopening of a tiny, defunct piece of track that could hold a key to big economic development in the state. The nine-mile route from Lisbon to Lewiston in western Maine would give the state something it hasn't had in years, says Allan Bartlett of the state's Office of Freight Transportation: a crucial east-west rail connection, and a competing line for shipping freight to New Hampshire and points farther west.

And that, says Mr. Bartlett, could save Maine companies time and money.

"This will give shippers another option" to move goods, says Mr. Bartlett, director of the freight office's rail programs. "It should make rate quotes much more attractive because there's competition." Currently, most rail freight moving out of Maine, even if it's ultimately headed west, must travel south to Massachusetts, mostly on track owned by Guilford Rail System of North Billerica, Mass.

If Maine voters approve the $56 million transportation bond in November, the state plans to begin formal negotiations to buy the abandoned track from Guilford, upgrade it and negotiate usage rights with rail companies. Mr. Bartlett says the state has had an interest in buying the track since 1991, when the state purchased adjoining track. "Guilford agreed they would be ready to discuss acquisition" of the additional track at some point, he adds.

But David A. Fink Jr., executive vice president of Guilford, is decidedly cool to the state's plans. Though he wouldn't elaborate, Mr. Fink says that if the state is interested in the purchase, "The price will be geometrically larger than $6 million."

One reason for Guilford's reluctance could be that reopening the tracks to Lewiston could aid one of its competitors in the area. The route probably would wind up serving a terminal in Auburn, the town next to Lewiston, operated by St. Lawrence & Atlantic Railroad Co.

Guilford, however, says the deal is on hold because of a lawsuit against it filed by one of its freight customers -- a company along the Lewiston Branch line that says it has received poor service from Guilford and has had to resort to moving goods by trucks, which is more costly for long-haul products. Pejepscot Industrial Park Inc. in Topsham, a scrap-metal salvaging business, sued Guilford in April in U.S. District Court in Portland, Maine, alleging breach of duty, breach of contract and other claims that Guilford didn't fulfill its duty to provide rail service.

Guilford filed to dismiss the case from federal court, arguing that the matter be brought before the U.S. Surface Transportation Board in Washington, D.C. On Monday, U.S. District Court Judge Gene Carter dismissed the case on those grounds.

Pejepscot's attorney, James T. Kilbreth, of Verrill & Dana LLP, Portland, says he intends to press the case either in state court, before the transportation board or an appeal to Judge Carter's decision. "We're going to have to look at this and whether there's a decent shot at an appeal," Mr. Kilbreth says.

Guilford's Mr. Fink says, "Everything's on hold because of the litigation."

Guilford attorney Glen L. Porter, of Eaton, Peabody, Bradford & Veague, Bangor, says Guilford denies Pejepscot's claims. Guilford's court documents state Guilford made an attempt to provide service to Pejepscot, but it would have required $250,000 in track improvements to do so. Therefore, Mr. Porter says, "There has not been a refusal or failure to provide service and no breach of contract."

Gary Grimmel, owner of Pejepscot, declined to comment.

According to Mr. Bartlett, Pejepscot contacted the state about difficulties in its service from Guilford in 1994. Three years later, he says, the state began informal talks with Guilford about buying the track to make the east-west connection.

Mr. Bartlett says the state's interest in the purchase is not related to Pejepscot's problems with Guilford. He says that reopening the connection, out of use since 1987, could help many companies along that rail line.

Meanwhile, Guilford is trying to learn more about the state's interest, and what a sale would mean for Guilford's competitors and the regional economy. On June 4, Guilford attorneys filed a Freedom of Access request, seeking all records of the state's Department of Transportation relating to the track, St. Lawrence & Atlantic and Pejebscot Industrial Park.

The state, through department counsel James E. Smith, offered to make all except 13 documents available to Guilford, citing attorney-client privilege. On June 28, Guilford challenged the state's compliance with the request in Kennebec County Superior Court.

The matter is pending.

Guilford attorney Thad B. Zmistowski of Eaton, Peabody says that the company has not yet looked at the documents offered by the state, but that the company intends to review them this week.

Mr. Bartlett says he can't disclose the economic impact the track purchase would bring to the state because it would hurt the state's ability to negotiate with Guilford.

At least one company, Gas Supply Resources Inc., says the rail connection to its terminal in Auburn could bring more business. "It would allow us to bring large quantities of propane into different areas," says Ken Douglas, chairman of the Houston firm.

Mr. Douglas's company is a client of St. Lawrence & Atlantic, a subsidiary of Emons Transportation Group Inc., York, Pa., which is eager to increase its presence in the state.

The company has added 14 customers in Maine in the past 18 months, says Matt Jacobson, the company's president and chief executive. "We've been really successful in attracting business to the railroad," says Mr. Jacobson.

It will be years before the first train moves west from Lisbon, if at all. But Mr. Bartlett remains an optimist.

The Guilford lawsuits, he says, are "just a little bump in the road."

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NEBRASKA: UP looks for new TOR to reduce wheel friction

OMAHA -- Union Pacific's Research and Development laboratory is conducting a study to determine if a top-of-rail (TOR) lubrication, a means of reducing wheel friction, would also cut locomotive fuel consumption.

With conventional rail lubrication, oil is applied directly to the wheel flange but new locomotives have steering trucks that keep the flange from touching the rail so the lubrication must be redirected. The top-of-rail lubrication is not oil, but a water-based friction modifier composed of an environmentally friendly glycol-like substance. Unlike oil, which leaves a film on the rail, TOR is laid down as the train moves along and then evaporates.

The railroad has yet to find a really effective rail lubrication technology and this holds a lot of promise. Testing will probably begin this summer.

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