The short line problem: Little money, lots of infrastructure needs
- Recently Karen Sandness wrote about how Portland lost its original streetcar
system through the ineptness of its city council of the time.
Here is an article relating to a similar problem, but with railroads
The short line problem: Little money, lots of infrastructure needs
Increasing financial support from government and the Class 1s will help
by Bill Stephens
Short lines and smaller regional railroads have always had a hand-to-mouth
existence, and many pride themselves on getting by with more resourcefulness
But you can only live on the edge for so long. Sooner or later, ties
splinter, rail wears out, and bridges need replacing. These are big-ticket
items that many short lines and regionals simply cant afford. And this will
be a problem in the coming years. A big problem.
Over the next decade, as the Class 2 and 3 railroads infrastructure
deteriorates after years of deferred maintenance, there will be nearly $7
billion worth of capital needs on the nations more than 500 short lines and
regionals, according to a study jointly funded by the American Short Line
and Regional Railroad Association and the Federal Railroad Administration.
Much of the money will be needed to upgrade track and bridges to support the
industry standard 286,000-pound railcar.
Dont blame the short line or regional carrier for the predicament, though.
Their lines were marginal before being spun off by the Class 1s. After all,
if these branches werent marginal or downright unprofitable for the big
systems, then they wouldnt have been shed as excess mileage. And the big
systems wouldnt have deferred maintenance for years before selling them.
Short lines and regionals, with their lower cost structures and customer
focus, are able to make these castoff lines marginally profitable. They eek
out enough money to pay for routine maintenance and keep their hand-me-down
fleets of locomotives running some long after theyve become museum
But at the end of the day, theres no change left in their pockets to fund
major capital investments.
Short lines like snowflakes
To a certain extent, this has always been a way of life on light-density
branch lines. But the growth of Class 2 and 3 railroads means that more of
the total U.S. rail mileage could face under-capitalization.
Between 1980 and 2000, Class 1s dropped 65,000 miles of light density
routes. Much of the mileage about 50,000 miles worth is now operated by
Of the 546 non-Class 1s operating in 1999, 359 were formed in 1981 or later.
Theyve been a success, of course, in keeping freight moving over the rails
instead of the highways. But after two decades of minimal maintenance, few
upgrades, and track problems inherited from the Class 1s, their physical
plant is becoming a liability.
Today, this problem is coming to a head because of a new element that is
completely outside the control of the shortline industry that is the
introduction of the heavier 286,000-pound freight cars that have become the
standard for the Class 1 industry, Frank Turner, president of the ASLRRA,
told Congress this spring.
These cars cause significantly more stress and wear and tear on rail track
and bridges. To handle these cars efficiently, light density lines can no
longer put off major capital expenditures. If they dont find the money for
that investment, their lines and their shippers will effectively be
disconnected from the nations main line railroad system.
Ed Hamberger, executive director Association of American Railroads, agreed
in his testimony before Congress. Absent outside sources of funding, many
of these companies will be unable to upgrade their lines which may
eventually face abandonment, he said.
If this happened, countless communities would be cut off from the national
rail network, resulting in severe economic displacement.
There also would be severe economic displacement for the Class 1s.
Say what? After all, if the local short line has to shut down, its Class 1
connection would barely notice much less miss its paltry few hundred or
thousand carloads per year.
But short lines are like snowflakes. Considered on its own, each is
insignificant. Considered together, they add up to a major drift of traffic.
In fact, short lines and regionals originate or terminate more than a
quarter of all railroad freight. Thats not small potatoes.
Three sources of funding
Fortunately, help is on the way through a combination of FRA loans, a bill
in Congress that would fund outright grants to small railroads, and
assistance from Class 1s.
The FRAs $3.5 billion Railroad Rehabilitation and Improvement Financing
Program, or RRIF, was maligned earlier this year because of delays in
turning on the loan spigot. The program was approved by Congress in 1998,
but no money was made available for nearly three years while the FRA drew up
loan guidelines. But now the money $1 billion in loans earmarked for short
lines and regionals is starting to flow.
Struggling carrier I&M Rail Link, whose financial situation was made more
precarious by this springs flood damage, has received FRA approval for a
$100 million loan. The money will help the Midwest regional refinance its
existing debt and launch a major five-year track improvement program. This
loan ensures quality rail traffic throughout Iowa and helps Iowa businesses
and industries move their product efficiently to other parts of the
country, said U.S. Sen. Charles Grassley of Iowa. I&M will now have the
opportunity to make significant improvements to its service.
More than 20 railroads have expressed interest in the program, under which
the FRA acts as a lender of last resort when railroads are refused by
private lenders. Five railroads the Tex-Mex; Arkansas & Missouri; Dakota,
Minnesota & Eastern; Mt. Hood of Oregon; and Livonia, Avon & Lakeville of
New York have requested a total of $140 million, and are at various stages
in the application process, according to the FRA.
Meanwhile, a bill in Congress, H.R. 1020, would provide small railroads with
outright grants for infrastructure improvements, particularly those needed
to support 286 cars. The three-year program, if approved, would earmark
$350 million a year for three years for direct grants. The bill has been
approved by the House Transportation Committee, but has yet to come to a
vote on the floor. It enjoys bipartisan support, however.
Certainly the large railroads will benefit from passage of the bill and
stabilization of light density rail infrastructure, Turner told Congress.
One way to think of the more than 500 shortline and regional railroads is
as a very big customer of the mega-carriers. We market business, gather
traffic from remote locations and tender it to the AAR member Class 1
railroads .If we fail, that traffic will be lost to the highways and
The third piece of the puzzle is the various forms of assistance the Class
1s sometimes give their feeder lines.
Burlington Northern Santa Fe and Canadian National, for example, have
provided financial muscle to important feeder lines.
Last month, BNSF partnered with Iowa Interstate and the Iowa Department of
Transportation to beef up its busiest 78 miles of track to handle 286
cars. The DOT is providing $2.1 million, with BNSF and Iowa Interstate
sharing the balance of the costs.
Our commitment illustrates our willingness to invest in our connecting
regional and shortline partners, to permit their handling of heavy
286,000-pound cars, where we find economic justification for doing so, said
Pete Rickershauser, BNSF's vice president,
Last year, CN agreed to provide $2.4 million to the Columbus & Greenville
Railway in Mississippi so it could handle 286 cars to and from a major
grain shipper. Over the next decade, the shipper is using CN to route a
substantial portion of grain and grain products to its plant in Indianola,
Union Pacific has helped critical feeder lines by providing materials on
occasion, UP spokesman John Bromley says. And Norfolk Southern has, on a
case-by-case basis, partnered with some short lines to replace bridges or
These investments by the Class 1s are a win-win situation. The short lines
business is boosted or saved, and the Class 1 gets the long haul with
minimal investment in a short line.
When combined, these approaches loans, grants, and Class 1 helping hands
should alleviate the capital crunch on some feeder lines, particularly those
that the Class 1s deem critical.
To be sure, there will be economic Darwinism at work as short lines face the
future. Some short lines particularly those dependent on a single customer
or commodity, or with exceptionally light traffic may no longer make
economic sense, and will not survive.
But its clear that the health of the entire rail industry depends, in part,
on how well the little guys are able to beef up their track and bridges.