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Rail Report - Fall 2005

Industry Increases Readiness After London Attacks

While no rail-specific threats have been identified in the U.S. to date, freight railroads have moved to a higher state of readiness in light of the London subway bombings in July, reports the Association of American Railroads. The increased measures include deployment of additional police officers and K-9 teams to key areas, as well as elevated vigilance along the U.S. freight rail network.

“This is a precautionary step that is part of the industry’s security plan,” said Ed Hamberger, president and CEO, Association of American Railroads. “We continue to work closely with all government agencies to ensure that we are receiving and sharing the best possible information about potential threats and prevention measures.”

Following the terrorist attacks of Sept. 11, 2001, the nation’s major railroads, in close cooperation with the Department of Homeland Security, the Transportation Security Administration and other federal agencies, have taken significant steps to increase security along their rail networks.

The railroad industry worked with experts in counter-terrorism and intelligence on a security plan that focuses broadly on hazardous materials, operations, infrastructure, information technology and military movements. Among its features, the current security program includes:

• a 24/7 operations center that links railroads with the appropriate national security intelligence officials,

• improved monitoring of designated trains, including those carrying hazardous materials,

• security enhancements to computers and software, including new encryption technology for selected data communications, and

• tightened supply chain logistics in cooperation with certain customers.

RELCO Locomotives Completes Rebuild and Service Facility

RELCO Locomotives, Inc. has completed a new locomotive rebuild and service facility in Albia, Iowa. The southeastern Iowa facility is expected to increase the company’s manufacturing capacity and will complement RELCO’s smaller Minooka, Illinois location.

The 95-acre site contains a main locomotive shop, a self-contained blast and paint shop, office space and more than 10,000 feet of track. The 90,000-square foot main locomotive shop houses five tracks, six overhead cranes with a capacity of up to 50 tons, two raised rail pits, a drop-table, state-of-the-art fabrication and component rebuild areas, and nearly 30 miles of track available for locomotive run-in and testing. The facility has direct interchange with the BNSF and IC&E railroads and close interchange with the Union Pacific, reports RELCO. For more information, please contact Eric Bachman, vice president, RELCO Locomotives, Inc., 800-435-6091.

CN Encourages Advance Car Orders

Effective Aug. 1, 2005, Canadian National Railway (CN) is revising the Grain Train (GT) Product tariffs. The railway suggests registering to participate in its advance car order programs for Western Canada for the 2005-2006 grain shipping year. For details on ordering rail cars for grain shipments, call CSC Grain 1-877-208-5019, or visit their site.

Federal Loans to Two Smaller Railroads Could Benefit Ag Shippers

The Grain Transportation Report, a publication of the USDA Agricultural Marketing Service, notes that Railroad Rehabilitation and Improvement Financing loans to two railroads could be important to the movement of agricultural products.

The Texas-Mexican Railway (Tex-Mex) will receive $50 million to make safety and infrastructure improvements to 146 miles of track between Laredo and Corpus Christi, Texas. These improvements are expected to facilitate cross-border trade by allowing faster train speeds and increased capacity. Now a part of Kansas City Southern Railway (KCS), Tex-Mex connects KCS to Transportación Ferroviaria Mexicana, creating a NAFTA railway under common management control. Tex-Mex handles about 100,000 railcars annually. Farm products account for 22 percent of its traffic, while food products account for 12 percent, notes the Grain Transportation Report.

The Iowa Interstate Railroad (IAIS) will receive $32.7 million to upgrade 300 miles of track between Atlantic, Iowa; and Bureau, Illinois. The upgrades will allow the railroad to handle the larger 286,000-pound railcars and to increase train speeds to 40 miles per hour. Work has begun and is expected to be completed by the end of 2006. USDA reports that IAIS handles about 64,000 railcars annually, 96 percent of which carry farm products.

UP Invests $47.2 Million in Iowa Track Improvements

Union Pacific Railroad (UP) is spending $47.2 million this year on track improvements between Boone and Denison, Iowa. Crews are removing and installing 196,181 concrete ties; spreading 222,000 tons of rock ballast to ensure a stable roadbed; replacing the surfaces at 45 road crossings; and replacing 24 turnouts, which guide a train from one track to another. Work on these projects is scheduled to be completed by the end of October. These improvements are part of more than $1 billion that UP is planning to spend in 2005 to maintain its track across the 33,000-mile system.

Association of American Railroads to Host Customer Forum

The Association of American Railroads is hosting the North American Railroads Customer Forum in St. Louis, Mo., on September 21, 2005. Senior officers from leading North American freight railroads will address the group, discussing the current state of rail operations and ongoing transportation plans. The Honorable Roger Nober, chairman of the Surface Transportation Board, will also address the forum. AAR President Ed Hamberger will moderate a question and answer session following the presentations.

Increased Network Integration Boosts Cross-Border Grain Deliveries

Increased rail network integration has resulted in a 74 percent increase in year-to-date (through July 6, 2005) cross-border rail deliveries of U.S. grain to Mexico over the same period in 2004, says the Grain Transportation Report, a publication of the USDA Agricultural Marketing Service.

Mexican and Canadian railroads are becoming increasingly integrated with the U.S. rail network due to increased NAFTA trade. Kansas City Southern Railway’s recent acquisition of controlling interest in Transportación Ferroviaria Mexicana (TFM) is expected to accelerate this integration. Although TFM will be managed separately by Mexican citizens, common leadership of these railroads is expected to result in a seamless transportation corridor, says the Grain Transportation Report.

Swift Intermodal Ltd. Acquires BNSF-Leased 53-Foot Containers

Swift Intermodal Ltd. and BNSF Railway Company have reached an agreement for Swift to acquire approximately 3,800 53-foot containers currently leased by BNSF which are part of the North American Container System (NACS) program.

“We believe Swift’s proven expertise in the marketplace should maximize the utilization of this fleet, thus creating additional shipping capacity for the entire intermodal community,” says John Hickerson, BNSF vice president, Domestic Intermodal. “In addition, this change will allow BNSF to improve its intermodal facility operational fluidity.”

Dan Beers, president, Swift Intermodal Ltd., says, “This acquisition allows Swift to enhance its intermodal offerings to both our retail and wholesale customer base. This capacity, along with excellent rail service, provides Swift the opportunity to meet the growing needs of the intermodal shipping community.”

BNSF plans to allow the free interchange of the remaining containers sponsored by NACS that are still in service through December 31, 2006. NACS is a North American doublestack network encompassing almost every major U.S. market. It is designed to facilitate the free interchange of 48- and 53-foot domestic containers among member railroads without restrictions.

CPR Adds Low-Volume Branch Lines to Three-Year Plan

Long-term structural changes in the grain handling industry have resulted in Canadian Pacific Railway (CPR) updating its three-year network plan for discontinuance with the addition of 10 low-volume branch lines. Rail traffic has all but disappeared from these lines, which makes them no longer viable for CPR to continue operating, reports the company.

Adding the 10 lines to CPR’s three-year network plan is the first step in the legislated discontinuance process. Line discontinuance will take place in accordance with the process established in the Canada Transportation Act (CTA). Under the CTA process, prior to discontinuance, CPR must offer such lines to third parties for continued rail operation.

The 10 branch lines added to the CTA Three-Year Plan are as follows:

Manitoba

• La Riviere subdivision, between Morden and La Riviere – 30.7 miles
• Napinka subdivision, between La Riviere and Killarney – 49 miles

Saskatchewan

• Radville subdivision, between Weyburn and Bengough – 70 miles
• Outlook subdivision, between Loreburn and Broderick – 24.7 miles
• Kerrobert subdivision, between Conquest and Herschel – 51.5 miles
• Bulyea subdivision, between Neudorf and Cupar – 54.5 miles
• Bromhead subdivision, between Estevan and Tribune – 42 miles

Alberta

• Irricana subdivision, between Bassano and Standard – 36.4 miles
• Cardston subdivision, between Stirling and Raymond – 7.7 miles
• Stirling subdivision, between Foremost and Stirling – 45.7 miles

Unless new rail operators are found for these branch lines, CPR intends to discontinue operations in accordance with the CTA. Under CTA provisions, lines slated for discontinuance must first be offered for sale to the shortline marketplace for continued rail operation and then to governments before the railway can discontinue operations.

The decision allows the railway to direct crew time and salvaged rail and ties to other subdivisions in each province that have traffic or are experiencing growth and additional capacity needs, including capacity for commodities like grain and potash.

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