Creating Intermodal Capacity

Though railroads have spent significant capital to meet present and future demands for rail capacity, much remains to be done. With the increasing number of companies sourcing offshore, it's no surprise that freight moves from these distant factories by ocean container. When it arrives at U.S. ports, much of this cargo moves intermodally.

Just as global commerce will continue to grow over the coming decades so will intermodal traffic for Class I railroads. The Association of American Railroads (Washington, D.C., www.aar.org) defines Class I's as line haul freight railroads with operating revenue in excess of $289.4 million.

According to the Intermodal Association of North America (IANA, www.intermodal.org), in the second quarter shipments jumped 5.9% compared to 2005. International containers dominated the growth, increasing 9% and accounting for more than 90% of the quarter's gain.

"Even though there may not be as much capacity pressure this year, all of the forecasts say that if the economy grows at 2.7 to 3.0% annually—which is roughly the outlook at the moment— that's going to almost double the tonnage of freight moving in the next 20 to 30 years," observes Lance R. Grenzeback, senior v.p., Cambridge Systematics, Inc. (www.camsys.com). Specializing in transportation, the Cambridge, Mass.-based company helps clients formulate transportation strategies. Grenzeback recently testified before the National Transportation Policy and Revenue Study Commission (www.surfacecommission.gov) on highway and rail freight demand and network bottlenecks.

"The two huge pressures on railroads today are to move the coal coming out of the Powder River Basin to power the utilities and to handle the intermodal freight coming from the West Coast," he claims.

As demand for rail capacity exceeds supply, Grenzeback says that railroads are, "becoming a little more choosy about what freight they take. Trying to maximize profit, rail is taking the freight that they can handle cost effectively and profitably. They are beginning to turn down or price out very difficult, low profit freight." One question is whether small lot carload shippers—industrial shippers and the like—will be able to get sufficient service under these conditions.

Leaders at the Class I railroad's are aware of the issues and are taking short-and long-term steps to increase capacity.

"We have two intermodal services," explains Steve Branscum, group v.p., consumer products, for Burlington Northern Santa Fe Railway (BNSF, www.bnsf.com). "One is geared towards service-sensitive freight and one toward what we call value-oriented freight. About 20% of our freight is service-sensitive." He says the Fort Worth, Texas-headquartered company will move about 5.5 million intermodal shipments this year.

Branscum estimates that 70 to 75% of intermodal consumer goods traffic arrives at West Coast ports from Asia. "That business from the western railroads' perspective has been growing right around 10% a year for the past several years and it's doing that again this year," he claims.

In Branscum's view, to meet the long-term capacity needs requires improvement of the physical infrastructure of railroads. For the short term he's optimistic about the ability of the supply chain system—including ports, terminal operators that run port operations and the railroads—to be able to handle the freight.

"If there is an entity in the supply chain that's not working 24/7," Bran-scum suggests, "then that's an opportunity to create more throughput capacity." He points to the success of the Ports of Los Angeles/Long Beach PierPass program as a prime example, although it doesn't run around the clock and is an interface between steamship and trucking companies.

"Our primary interface is the on-dock rail facility," says Branscum. "Containers can be loaded at the port and then use the Alameda Corridor to ultimately hit our system. We have the assets if they would extend their working hours."

BNSF has improved productivity by running longer trains and making sure they have the types of railcars to maximize the number of containers on a given length of train. Branscum claims that on the railroad's existing network it's been able to absorb about 1.5 million more shipments over the last three years with virtually no increase in the number of trains.

As with other Class I railroads, inter-modal is a fast growing business segment for Canadian National Railway (CN, www.cn.ca). "We re-engineered the entire business model about three years ago," explains Mark Hallman, a spokesperson for the Montreal-based organization, "and created a system called IMX (intermodal excellence) which provides a scheduled environment for all intermodal traffic. The IMX shipper makes a reservation to get into our terminal and onto the train that operates on a very fixed schedule. This re-engineering has created much more balanced service that eliminates the peaks and the valleys that meant ineffective utilization of all the assets involved."

CN envisions significant opportunities from the opening of a new intermodal terminal at the Port of Prince Rupert, B.C., in the third quarter of 2007. This will be a new gateway for Asian goods entering North America. The first phase could have a capacity from 500,000 to 750,000 TEUs.

"We are acquiring 50 new high-powered locomotives that will enable CN to accommodate the increase in traffic via the Port of Prince Rupert," says Hallman. Similarly, the railroad sees potential for further growth in the east at the Port of Halifax for traffic coming via the Suez Canal. Halifax handles about 500,000 TEUs per year but has capacity for up to 1 million TEUs.

CN has increased its total network capacity by extended sidings to permit running longer trains. It has also cleared some tunnels and bridges to allow it to accommodate double-stack container cars. At its intermodal terminal in Montreal it uses a "bio" system for checking identity of entering drivers, which increases security and speeds truck movements.

A $141 million expansion completed late last year has meant increased inter-modal capacity for Canadian Pacific Railway (CPR, www.cpr.ca). "The Port of Vancouver is a key destination for our company," explains Ed Greenberg, a spokesperson for the Calgary-based company. "The work included a number of different projects of expansion—either double track or adding longer or new sidings and an entire infrastructure upgrade for our western corridor."

CPR also expanded capacity at its intermodal terminals, says Greenberg. It has spent $160 million this year on locomotive maintenance and overhaul, and the addition of 80 new AC locomotives. CPR has shifted away from conventional to standalone double-stack rail-cars. The higher capacity equipment has meant an increase in intermodal train carrying capacity.

"Overarching all of this," says Greenberg, "is an on-going process of fine tuning our integrated operating plan. We're as agile and responsive as possible in terms of being a 7/24/365 scheduled railway. That is the result of a concerted effort over the last 6 to 12 months of looking at our operations and how we can improve our execution so that shipments are moving efficiently."

More sidings, more terminals
"We have in place an operating strategy called 'one plan' that has dramatically improved our service," notes Gary Sease, spokesperson for CSX Corp. (CSX, www.csx.com). "It minimizes mileage and intermediate handlings and has our entire network running better."

In August the Jacksonville, Fla.-headquartered railroad announced the beginning of a significant improvement in capacity, specifically its heavily intermodal line from Chicago to Florida as well as its intermodal line from northern New Jersey to Albany where it connects to the CSX east-west line that runs to Chicago.

"Those two capacity projects represent a 2006-2007 additional capital investment of about $800 million," claims Sease. "The capacity takes the form of additional long passing sidings and up-to-date signaling to improve capacity. These sidings are frequent enough and long enough so when they're all completed we're going to have a much more fluid corridor."

CSX is in the property acquisition phase in Winter Haven, Fla., where it plans to build a new integrated logistics center. It has preliminary plans to create an intermodal terminal in Chambersburg, Pa. The company is also looking at a block swap yard in either Indiana or Ohio.

The railroad has been adding locomotives at the rate of about 100 new units per year and expects that to continue. "For intermodal" notes Sease, "we are using radio frequency technology to do a much better and efficient job of tracking containers and managing them in our terminals."

In Summer 2003 Chicago's Union Pacific Railroad (UP, www.up.com) began upgrading its main corridor out of the Los Angeles Basin that goes across the southern part of the country. At the end of the 760-mile route, in El Paso, Texas, freight moves in one of three directions: up to Chicago; to Dallas and Memphis where it connects to Eastern railroads; or further south to San Antonio, Houston and New Orleans where it interchanges with CSX.

"We've been really increasing our capital spending since 2004, when we spent $2.4 billion," says John Kaiser, vice president and general manager, intermodal, for UP. "In 2005 we spent just under $2.9 billion, and we're at $2.8 billion this year. All of the money was geared at improving the track infrastructure on this Sunset route as well as additional new terminals that have come on line on that route." By the end of 2006 the route will be 50% double-track. UP has purchased 200 new locomotives this year.

"We had some nice increases in our train size the last few years," says Kaiser. "We've gone from about 115 unit—depending on the mix—trains in 2000, and we're now up over 141."

Each of the new UP terminals has an advanced gate system. It used to take between 3.5 to 5 minutes per truck to get into a gate. The new AGS has optical character recognition, which permits drivers to put two fingers into a kiosk as they pull in. The system immediately verifies the driver as registered. Additionally, cameras can examine the underneath and top sides of the containers. Now it takes 45 to 90 seconds to get a truck into the ramp.

"We've built brand new terminals," says Kaiser." We opened a new one in Dallas last year that has been very successful. We opened a new terminal in Salt Lake City and have now acquired the needed property for a new facility in San Antonio. We'll be breaking ground and building that next year. Those are three brand new facilities and we've also expanded existing facilities in Memphis, as well as in the Los Angeles Basin."

PHOTO COURTESY OF CANADIAN NATIONAL

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