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Short Line Industry Connects in Orlando

March 25th, 2015

More than 1,600 railroad and supplier representatives are expected this weekend at the American Short Line and Regional Railroad Association annual convention in sunny Orlando.

The event will mark the first annual convention for the association under its new president, Linda Bauer Darr. She succeeded Rich Timmons, who retired last year after about a dozen years leading the short line group. She will preside over the convention’s official grand opening and deliver a state of the industry presentation during the event.

The ASLRRA 2015 Connections convention will feature the organization’s largest number of exhibitors. Rail industry suppliers and contractors will take up more than 235 booths in the sold-out exhibit hall at the Hilton Orlando, displaying some of the latest technology products and services.

ASLRRA 2015 Connections features numerous educational sessions addressing railroading’s hottest topics, including short line PTC implementation, bridge management plans, Hurricane Sandy’s impact on railroad rates and coverage, and natural gas technology for locomotives. Other highlights include updates on the Short Line Safety Institute, a panel discussion with top executives from short line holding companies and the presentation of prestigious safety, marketing and distinguished service awards.

The event officially opens March 28 with various committee meetings and a service project and ends April 1.

G&W Expands International Footprint

February 25th, 2015

Genesee & Wyoming Inc. (G&W) will acquire about 95 percent of the shares of Freightliner Group Limited, a London-based international freight rail operator, from Arcapita and other shareholders for approximately US$755 million and the assumption of US$13 million in net debt and capitalized leases.

The proposed acquisition, which is expected to be completed by the end of the first quarter, would dramatically expand G&W international investments in Europe and Australia and provide a “strong platform” for future non-U.S. investments, G&W executives said in a Feb. 25 call with reporters and analysts.

Freightliner is the second-largest freight rail operator in the U.K. with its subsidiary, Freightliner Ltd., the largest rail maritime intermodal operator in the country. Freightliner also has operations in Poland, Germany, the Netherlands and Australia. The company employs over 2,500 people worldwide and has an annual revenue base of approximately US$785 million derived from the U.K. (65 percent), Continental Europe (25 percent), and Australia (10 percent).

Members of the existing Freightliner management team will retain an approximate 5-percent stake but G&W plans to own 100 percent by mid-2020.

“The acquisition of Freightliner is an excellent strategic fit for G&W,” said G&W President and CEO Jack Hellmann. “First, we are adding a world-class intermodal and heavy-haul franchise in the United Kingdom that will be the foundation of G&W’s European Region. Second, the overlap of our respective rail businesses in Australia and the Netherlands will unlock operating synergies and expand our presence in each of those markets. Third, we are pleased to be joined by a highly talented management team who have a long track record of success in building Freightliner over the past two decades.”

Post-acquisition, “we expect to build the existing business and also unlock a range of attractive rail investment opportunities worldwide,” Hellmann added.

Russell Mears, CEO of Freightliner Group, commented, “G&W brings additional investment firepower, extended international reach and increased below-rail infrastructure expertise to add to the existing strengths of the Freightliner Group. Their commitment to safety and service quality in all activities mirrors our own values.”

Freightliner owns 8 of the 13 U.K. maritime terminals where it operates and also owns a fleet of 250 trucks for pick-up and delivery. Its heavy haul subsidiary provides bulk rail freight service throughout the U.K., primarily serving the aggregates, cement, coal, and waste industries, and provides infrastructure train service to Network Rail, the owner of the U.K.’s rail infrastructure network.

In Continental Europe, Freightliner Poland primarily serves aggregates and coal customers in Poland, and operates in eastern Germany. The company’s Rotterdam-based ERS subsidiary provides cross-border intermodal services connecting 3 northern European ports to key cities in Germany, Poland, Italy and other countries.

In Australia, Freightliner currently transports coal and containerized agricultural products in New South Wales and is also an accredited rail service provider in Western Australia, South Australia and Queensland.

Freightliner operates in open access rail freight markets with limited ownership of track assets. Its fleet of primarily leased equipment includes approximately 250 standard gauge locomotives (mostly diesel-electric) as well as 5,500 wagons, with equipment maintenance provided at its own in-house shops.

Hellmann noted that following the Freightliner acquisition, G&W’s corporate structure will be best understood by looking at three parts. “The first will be our traditional North American short line and regional railroad operations, which is expected to contribute approximately 77 percent of annual pro forma operating income, where we will continue to execute on our long-term plan of commercial growth across our coast-to-coast rail footprint as well as acquisition growth from further consolidation of the short line rail industry,” he said. “The second will be our Australian operations, which is expected to contribute approximately 12 percent of annual pro forma operating income, where our above-rail and below-rail operations in South Australia and the Northern Territory will be combined with Freightliner’s above-rail business in New South Wales.”

“The third part will be our European operations, which is expected to contribute approximately 11 percent of annual pro forma operating income, with Freightliner’s U.K. business as the cornerstone that also will lead the development of our intermodal business serving deep seaports in northern Europe and our heavy-haul operations in Poland,” Hellmann added.

During its first year of ownership, G&W expects Freightliner to generate approximately £510 million in revenues (US$785 million at current exchange rates) and £60 million of EBITDA (US$93 million), which includes annual operating lease expense of £45 million (US$69 million). G&W expects the acquired business to require annual average capital expenditures of approximately £17 million (US$26 million) and to have depreciation and amortization expense of approximately £18 million (US$28 million).

Following the acquisition, G&W said it plans to maintain approximately $500 million of available capacity under its revolving credit facility for future investments. “Given the above-rail nature of Freightliner’s operations with limited ownership of track, it is worth noting that G&W’s European segment will have a relatively high operating ratio (approximately 90 percent) due to its lower capital intensity as well as the prevalence of rolling stock under operating leases,” concluded Hellmann.

G&W owns and operates short line and regional freight railroads in the United States, Australia, Canada, the Netherlands and Belgium. In addition, G&W operates the 1,400-mile Tarcoola to Darwin rail line, which links the Port of Darwin with the Australian rail network in South Australia. Operations include 116 railroads organized in 11 regions, with more than 15,000 miles of owned and leased track, 5,200 employees and over 2,000 customers. The company also provides rail service at 37 ports in North America, Australia and Europe and performs contract coal loading and railcar switching for industrial customers.

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VanderClute Retires as AAR SVP Safety & Operations

February 4th, 2015

The Association of American Railroads (AAR) has announced that Michael Rush has moved from his post as associate general counsel to senior vice president safety and operations, succeeding Robert VanderClute who is retiring after 12 years with the AAR.

Before joining AAR, VanderClute served for five years as vice president of rail at Parsons Brinckerhoff. Prior to that, he worked at Amtrak for 27 years, eventually being named vice president of operations and chief operating officer.

He earned a bachelor’s degree from the University of Tennessee and completed the transportation executive program at Harvard University.

“Bob’s contributions to the AAR, to our members and to the rail industry worldwide are vast,” said AAR President and CEO Edward R. Hamberger. “His depth of railroad knowledge and hands-on experience will be difficult to duplicate. As well, his love for all things railroading is unsurpassed. He is the consummate ‘train enthusiast,’ and his face lights up whenever a train goes by.”

Rush joined the AAR in 1980 and has counseled the AAR and its member railroads on environmental, hazardous materials and safety matters. He also spearheaded the freight rail industry’s push for stronger tank car safety standards.

Rush graduated with honors from the National Law Center at George Washington University.

“Safety has and always will be front and center for the rail industry and we are fortunate to have Mike’s expertise to lead this critical area,” said Hamberger. “Mike’s insights on myriad issues, particularly those with a safety focus are immeasurable.”

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Feinberg Named FRA Acting Administrator

January 14th, 2015

U.S. Transportation Secretary Anthony Foxx recently announced that Sarah Feinberg, U.S. Department of Transportation (DOT) chief of staff, will serve as acting administrator of the Federal Railroad Administration (FRA), becoming the second woman to lead the agency since it was founded in 1966.

Feinberg succeeds Joseph C. Szabo, who was appointed FRA administrator in 2009 and recently stepped down from his position.

“Sarah has been my partner and served as my closest advisor during her tenure as Chief of Staff at the U.S. DOT. With her ability to bring clarity, focus and direction to complex challenges, she has become a proven leader within our agency,” said Secretary Foxx. “Sarah has the right mix of experience and skills to adeptly lead the FRA as it continues its important work to ensure the safe, reliable and efficient movement of people and goods.”

As U.S. DOT chief of staff, a position she has held since 2013, Feinberg worked closely with Secretary Foxx and each agency in the U.S. DOT to ensure they are continuously raising the bar on safety. As FRA acting administrator, she will work to strengthen the culture of safety across the railroad industry.Norfolk

In addition, Feinberg managed the agency’s 10 modal departments and spearheaded the agency’s legislative, policy, and communications efforts. She provided strategic advice and counsel to the Secretary regarding operational and legislative initiatives across all modes of transportation and lead the department’s efforts on its $302 billion surface transportation reauthorization plan, which was sent to the U.S. Congress last year.

 

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STB Stands by Contractor Definition Ruling

January 5th, 2015

The Surface Transportation Board has refused to reconsider its controversial finding that railroad contractor Rail-Term Corp. is a rail carrier within its statutes.

In a decision released Dec. 30, the STB affirmed its finding that Rail-Term’s performance of dispatching services on behalf of several short lines made it a rail carrier subject to the board’s jurisdiction. STB Commissioner Ann Begeman dissented from the majority opinion. “Rail-Term does not meet any of the definitions or associated requirements of a rail carrier. Rail-Term does not hold itself out to the general public as a provider of interstate rail transportation for persons or property.  Rail-Term does not have track, locomotives, rail cars or crews, or have access to or operate a railroad line.  Rail-Term is not equipped to provide service upon reasonable request. Rail-Term’s clients—the rail carriers—provide interstate rail transportation services, and only they are carriers subject to the board’s jurisdiction.”

She concluded: “the majority materially erred in the prior decision, and does so again here.”

This is considered a pivotal case involving the definition of a railroad contractor, and the STB’s finding could lead to eligibility by Rail-Term’s employees for employee benefits under statutes administered by the Railroad Retirement Board.

At issue is a decision issued Nov. 19, 2013 in Finance Docket 35582 in which the STB ruled on a referral question from the U.S. Court of Appeals for the District of Columbia Circuit asking whether Rail-Term Corp., a contractor that provides dispatching services for short lines, fits its statutory requirements to be considered a rail carrier. The issue stems from the court’s review of decisions of the Railroad Retirement Board (RRB) finding that Rail-Term is a covered employer under rail employee-benefits acts that the RRB administers, entitling its employees to those benefits.

“We find here that, by performing an essential rail function on behalf of several short line railroads, Rail-Term has become a rail carrier under § 10102(5). Although Rail-Term does not directly hold itself out to the public as providing interstate rail transportation services, the dispatching services that it provides under contract with carriers are an essential part of the total rail common carrier services offered by its clients to the public,” the STB said, in that 2013 decision.

On Dec. 13, 2013, Rail-Term filed a petition for reconsideration. A few days later, several rail associations including the Association of American Railroads, the American Short Line and Regional Railroad Association and the National Railroad Construction and Maintenance Association filed petitions to intervene in the case and comment.

The associations voiced concern that the STB’s original ruling runs counter to agency precedent that has found that the performance of dispatching services and other functions would not make an entity a rail carrier. NRC, which represents contractors, vendors and suppliers to freight and passenger railroads, voiced concerns about the precedent and the potential for uncertainty in the marketplace.

“NRC’s members are generally not considered to be rail carriers within the meaning of 49 U.S.C. 10102(5),” NRC said. “The board’s decision raises new uncertainty as to when companies that provide services or products to rail carriers may be “imputed” to be rail carriers for purposes of regulation by the board under the Interstate Commerce Act and the application of other federal law which applies to entities subject to the jurisdiction of the board under the ICA.”

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Hoback Retiring as INRD President & CEO

December 3rd, 2014

Indiana Rail Road (INRD) Company Founder, President and CEO Thomas G. Hoback will retire, effective June 30, 2015, and be replaced by Peter Mills, whose position will be effective on July 1. Hoback will continue to serve as a director on the railroad’s board while pursuing other business and philanthropic interests.

“After nearly 30 years of concentrated focus on growth, and having reinvested nearly $200 million of our earnings into improvements, INRD is in the best physical condition it has ever been,” said Hoback. “With innovative marketing and customer service, we have grown our business by a compounded rate of more than 12 percent annually, and today we move the equivalent of more than 800,000 truckloads of freight per year.”

The INRD Board of Directors chose Mills as the next President and CEO of the railroad. He has served on the INRD board for 10 years and is currently vice president of finance operations for CSX Transportation, where he has been employed for 26 years. He will resign his position at CSX on June 30.

Mills attended the University of Delaware where he earned bachelors and masters degrees. He has held numerous management and financial leadership positions for CSX, including managing director of investor relations and director of international sales and marketing for Europe. Mills also took a business exchange assignment with British Steel, where he helped the company launch an innovative new product.

“Pete is a natural fit to assume leadership at Indiana Rail Road because he will continue the legacy of entrepreneurial thinking that has made us so successful,” said Hoback. “He will bring a real passion for business development while drawing on his commercial management experience.”

“This is the career opportunity of a lifetime for me to join Indiana Rail Road,” said Mills. “Tom and his team have built a remarkable franchise with which I have been associated for the past 10 years in my role on the board. I am excited about this opportunity and look forward to the future.”

Hoback established the Indianapolis-based regional railroad from an unused branch line and began operations in 1986 with a team of 16 employees. Today’s INRD moves Indiana commerce to and from Asia and points all over North America and employs nearly 200 people.

“The transformation of this company has been truly remarkable, and it’s due to an entrepreneurial spirit and an outstanding group of professionals who are among the best in the business,” stated Hoback.

Hoback gave the “go-ahead” 25 years ago to INRD employees who wanted to operate the Santa Train. Since 1990, more than 100,000 people have visited INRD’s Santa Train and thousands of donated coats, hats and gloves have been distributed to Indiana and Illinois families.

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FRA Administrator Szabo Resigns

November 12th, 2014

Joseph C. Szabo, who has served as Administrator of the U.S. Department of Transportation’s Federal Railroad Administration (FRA) since 2009, announced he will be leaving the agency in January 2015. He has accepted a position as senior fellow with the Chicago Metropolitan Agency for Planning (CMAP), the official regional planning organization for the northeastern Illinois counties of Cook, DuPage, Kane, Kendall, Lake McHenry and Will.

A fifth-generation railroader, Szabo is the 12th FRA Administrator and the first to have the distinction of coming from the ranks of railroad workers.

At CMAP, Szabo will play a leadership role in major policy-related projects, including infrastructure funding, coordinating with local officials to develop and implement policies, and developing a national transportation policy in cooperation with other major metropolitan regions and national associations.

In a letter to his co-workers and leaders in the rail industry, Szabo said, “As a 38-year veteran of the rail industry – one who worked out in the ranks – the most meaningful improvement to me was the dramatic drop in employee fatalities to a new record low. Over the course of my railroad career, I’ve lost five good friends to on-duty fatalities and, like most rail workers, survived my share of close calls in the workplace. In 2008, the year before I came to FRA, 26 rail workers perished in on-duty fatalities – a rate of more than two a month.”

He continued, “Through your good work, we drove that down to a record low number of 14 employee fatalities in 2013 – still too many, but a remarkable improvement. Now, ten months into 2014, we are at 5 fatalities for the year and getting so close to the ultimate goal of zero. I’m counting on the practices we’ve put into place, particularly proactive programs like Confidential Close Calls Reporting, to get us to zero in 2015. And I’ll be watching closely from the sidelines.”

The American Short Line and Regional Railroad Association praised the FRA administrator, saying his “support of the ASLRRA’s Safety Institute initiative has been unwavering and has set the groundwork for helping ASLRRA to establish improved safety processes and procedures on America’s short line and regional railroad operations.”

“We wish Joe well in his move back to Chicago and look forward to continuing to work with him in his new capacity,” the association said.

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Sampson Picked for Key Safety Institute Role

October 24th, 2014

Seasoned railroad executive JR Sampson has been chosen to serve as coordinator to help launch the Short Line Safety Institute.

Sampson, former vice president of safety and rules at short line operator OmniTRAX, will serve a key role in the pilot project, which is the first step in establishing the institute, made possible by an initial grant from the Federal Railroad Administration.

Sampson will head up an initial assignment in coordination with the American Short Line and Regional Railroad Association, the FRA, the University of Connecticut and the Volpe National Transportation Systems Center, resulting in both the creation of a training module and selection and training of safety assessment professionals for the pilot project. ASLRRA noted that this is a critical step toward the longer-range goal of developing a comprehensive industry-wide safety culture and safety compliance assessment program that will serve as the core of the Short Line Safety Institute.

The Safety Institute is an outgrowth of an ASLRRA proposal to U.S. Transportation Secretary Anthony Foxx in January 2014 as a step toward improving safety for crude oil shipments by rail.

“The Safety Institute is a top line priority for ASLRRA and reflects the short line industry’s dedication and leadership on an issue of critical importance to communities, shippers and railroads,” said ASLRRA Chairman Ed McKechnie.  “We look forward to working with JR on this critical initial assignment.”

The ASLRRA is a D.C.-based trade association representing more than 1,000 short line and regional railroad and associate members in legislative and regulatory matters.

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TTX Wins 15-Year Renewal of Car Pact

October 7th, 2014

The Surface Transportation Board has extended TTX Co.’s flatcar pooling authorization for another 15 years.

TTX filed for reauthorization with the STB on Jan. 16 in Finance Docket No. 27590 (Sub-No. 4). The Chicago-based company said that the railroad participants in TTX’s flatcar pool agreed to extend the TTX flatcar pooling agreement for another 15 years and by its application, TTX and its railroad participants sought STB approval of an amended pooling agreement and related car contracts between TTX and its participating railroads.

The railroads that participate in TTX’s flatcar pool include BNSF Railway Company; Canadian National Railway Company, through its U.S. affiliates Illinois Central Railroad Company and Grand Trunk Western Railroad Company; Canadian Pacific Railway through its U.S. affiliate Soo Line Railroad Company; CSX Transportation, Inc.; Ferromex; Kansas City Southern Railway Company; Norfolk Southern; Pan Am Railways, and Union Pacific Railroad.                                                                       

The former Interstate Commerce Commission approved TTX’s original flatcar pool in 1974, and the ICC and the STB extended TTX’s pooling authority in 1989, 1994, and, most recently, in 2004 for a 10-year period that expired in 2014.

In its decision, which took effect Oct. 1, the STB noted that more than 80 interested parties, including the Defense Department, shippers, ports, car parts suppliers, car manufacturers, and others, submitted written comments in support of continuing the TTX flatcar pool for another 15 years.

“On the record before us, TTX has shown that the pooling of flatcars promotes research and development of new and innovative equipment, permits standardized fleet repair and maintenance to reduce costs for the participating railroads, allows the participating railroads to spread the risk of investment in equipment, enables the participating railroads collectively to respond effectively and efficiently to the dynamics of the North American railroad network, and produces substantial capital savings by maximizing the efficient use and distribution of pooled equipment,” the agency said. “That record reflects and the industry’s many years of experience with the pool confirms that the full array of benefits achieved through flatcar pooling cannot readily be achieved through any other means. The benefits of pooling also clearly outweigh any anti-competitive effects that may flow from the arrangement. Based on the record, the Board believes that such anticompetitive effects (to the extent they exist) are likely to be minimal. We are aware of no alternative mechanism that would entail less restraint on competition while achieving benefits similar to those generated by the pooling agreement.”

The STB directed TTX and the participating railroads to continue discussions with the U.S. Army’s Military Surface Deployment and Distribution Command about mechanisms that might address the military’s need for an adequate and efficient supply of chain tie-down flatcars. It ordered TTX to file a status report by Oct. 1, 2015 on its discussions.

“We are mindful of SDDC’s lingering concern about the availability of chain tie-down flatcars and the military’s ability to access an adequate supply of such flatcars in times of national defense need. While we do not specifically condition the Board’s approval on TTX’s implementation of any particular mitigation measures, we direct TTX and the participating railroads to continue discussions with SDDC regarding mechanisms that might alleviate the issues it has identified,” the STB said.

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Rails, Shippers Weigh in on STB Bill

September 18th, 2014

Freight railroads and shippers, not surprisingly, have opposite views on new legislation in the Senate dealing with the Surface Transportation Board.

The Association of American Railroads (AAR) is concerned that the Surface Transportation Board (STB) Reauthorization Bill (S.2777) will harm the railroads’ ability to move what the economy demands and deliver the service shippers expect. The AAR also believes that the proposed legislation, if allowed to proceed in its current form, would have a negative effect on the industry’s continued reinvestment of record amounts of private capital into the freight rail system and on future hiring. The Senate Commerce Committee held a mark-up and passed the bill on Sept. 17.

AAR President Edward R. Hamberger said railroads have several serious concerns with the bill, beginning with the legislation directing the STB to pursue regulations that could cap rates and require railroads to turn over traffic to competitors. “The rail industry believes this legislation will harm the ability of the nation’s railroads to invest in the network and improve service for our shippers,” he said,  noting that railroads are moving the most freight in the last seven years and that some commodities are up double digits over last year. “These new restrictive regulations would be imposed on the nation’s railroads at a time when investments in capacity, new equipment and new hires are needed.”

According to the AAR, several other sections of the STB reauthorization bill could also harm the rail industry. These include directing the STB to prevent railroads from using the common approach of railroads and shippers alike in contract negotiations to “bundle” offers, but allowing shippers to continue to do so. The AAR says the STB has no authority over rail contracts and should not be directed to interfere in agreements that are arms-length transactions freely entered into by both parties. The AAR also believes that the STB already has broad regulatory oversight over the railroads. The legislation, however, would give the STB expanded authority to launch investigations of a railroad even where no complaint against the railroad has been lodged.

“On the one hand, everyone wants to see capacity grow and traffic flow unimpeded, and on the other hand there are those that want to undercut our very ability to get the capital necessary to invest,” stated Hamberger. “This is a perfect example of you simply can’t have it both ways. America’s rail industry is urging policymakers not to rush this legislation and instead give all stakeholders the opportunity to have a more productive conversation to try to find common ground.”

The National Industrial Transportation League, speaking on behalf of its shipper membership, has announced its strong support of the Senate legislation, which was introduced last week by Senators Jay Rockefeller (D-WV) and John Thune (R-SD).

“League members are gratified that Chairman Rockefeller and Ranking Member Thune have introduced an exceptionally well-crafted bill which, if enacted, will improve the operation and effectiveness of the Surface Transportation Board,” said League President and CEO Bruce Carlton. “Insuring that the STB has the resources it needs to carry out its statutory mandates is important to our members and rail shippers generally.”

“Senators Rockefeller and Thune have demonstrated the importance of a well-functioning STB by proposing legislation that will expand Board membership and its authority to help ensure that our nation’s rail system operates effectively and efficiently for the benefit of both railroads and shippers,” continued Carlton. “This bill is a shining example of effective and appropriate Congressional oversight to give this important federal agency needed new tools and direction.”

The bill calls for the addition of two new members to the Board and also encourages the STB to move forward in a timely manner on the League’s proposed competitive switching rulemaking to improve the state of competition for so-called captive shippers. “By bringing this bipartisan proposal forward now the Commerce Committee’s leadership has demonstrated a unity of purpose which we admire. Moreover, they have managed to draft a bill that does not reregulate the rail industry but appropriately requires the STB to achieve more balance in its policies and determine the necessary degree of economic regulation for the freight rail industry. They certainly have the League’s support and respect for a job well done,” concluded Carlton.

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