Regional and Short Line Railroads in the United States · Regional and Short Line Railroads in the United States Since the Staggers Act of 1980, the number of nonclass I freight railroads
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Regional and Short Line Railroads in the United States
Since the Staggers Act of 1980, the number of nonclass I freight railroads has grown by about260%, and there are now 574 nonclass I freight hauling railroads in the United States. Whilenonclass I rail holding companies (companies owning multiple nonclass I freight railroads)existed prior to Staggers, the existence of such holding companies proliferated post-Staggers,particularly in the 1990s. Today 341 (59%) of the nonclass I freight railroads and 64.5% ofthe nonclass I mileage are owned/controlled by 81 holding companies. The buying and sell-ing activity in this market is very active. This article documents this growth and notes theparticipants in this dynamic industry. In addition, the changing ownership of individuallyowned nonclass I freight railroads is also documented and problems faced by nonclass I freightrailroads are discussed.
by W. Bruce Allen, Michael Sussman, and Drew Miller
The US currently has seven class I freightrailroads1 (including the two majorCanadian carriers (Canadian National
and Canadian Pacific) and their three affili-ates (CN’s Illinois Central; Wisconsin Cen-tral; and CP’s Soo Line). These railroadsaccount for approximately 71% of the USrail route mileage, 91% of the freight rev-enue, and 89% of rail employment.2 Accord-ing to the Association of American Rail-road’s (AAR) Profiles of US Railroads, therewere 561for-hire, common carrier, freighthauling railroads operating in the US in2000.3 Subsequent additions and deletions tothat list found by the authors bring thatnumber to 581 in early 2002 (although itmust be stressed that the number of railroadschanges frequently through births, deaths,and mergers).
The remainder of the rail activity is under-taken by regional and short line railroads.The latest listing by the AAR gives 35 region-al railroads and 517 local and terminal andswitching carriers. Including trackage rights,the class I operates 122,186 miles, the
regionals 20,978 miles, the locals 21,512miles, and the terminal and switching com-panies 7,425.4
Prior to the Staggers Rail Act of 1980,there were about 220 regional and short linerailroads.5 Since Staggers, the number ofclass I carriers has shrunk due to mergersand definitional changes,6 while the numberof regionals and short lines has grown byabout 260%. The Staggers Act encouragedthe sales of lines that previously would havebeen abandoned to regionals and short linesand provided an expedited procedure, mucheasier than the previous abandonment pro-cedures, in which entities that would retainthe rail usage of the line were given prefer-ence in the transactions regarding that line.The mergers of the class I carriers also creat-ed redundant trunk lines that were pur-chased by the regional carriers.
Class I carriers have become more focusedon a wholesale type of business—runninghigh speed unit and intermodal trains longerdistances. With expensive labor, the retailbusiness to smaller customers requiring time
78
TRANSPORTATION QUARTERLY / FALL 2002
intensive switching and slow speed opera-tions was deemed less profitable by the classI carriers.
This scenario provided a business oppor-tunity for the regionals and short lines. Withless expensive labor, less capital intensiveoperations (because of the nonhigh-speedoperations allowing for less investment intrack and motive power), and more manage-ment attention to the customer (the remotefrom class I headquarters/district office,branch line becomes the main line of theregional/short line), short lines could poten-tially operate a profitable business on lineswhere class I carriers lost money.
The situation has proven complementaryto both parties. Since very little traffic bothoriginates and terminates on the same shortline, the short line originated traffic travels onclass I carriers. Likewise, some traffic origi-nated on a class I terminates on a short line.However, the traffic does not have to pick upor be delivered from/to the original shipper/ receiver as previously but only picked up/ delivered from/to the short line. The laborintensive retailing is done by the short line.7
Class I carriers have substituted cheap labor(the short line) for expensive labor and havesaved capital, too. Short lines benefit sincethey make a profit from this service. Cus-tomers on the short line benefit because theyreceive rail service (they have revealed it to bebetter than the alternatives—since they couldalways use the alternatives/move/go out ofbusiness), which would most likely have beenabandoned prior to Staggers.8
Start-Up Credit
While the Staggers Act is attributed much ofthe credit for the start-up of regional andshort line railroads, Due9 points to severalother reasons:
(1) Conrail’s formation in 1976, where overone-third of the lines of the predecessorrailroads, were not included in Conrail.
(2) The liquidation of the Rock Island Rail-road and the partial liquidation of theMilwaukee Railroad.
(3) The availability of Federal funds for assis-tance to new railroads.
(4) The availability of state (or regional,local) government funds for acquisitionand subsidy of new railroads. In somecases, states retain ownership of thefixed infrastructure and a private rail-road company provides the transporta-tion; in other cases, the state loans themoney for acquisition to the acquiringrailroad; in some cases, the governmentboth owns and operates the line. In the1971-1984 period, government authori-ties owned 51% of the new railroadsestablished during that time frame.10
Levine et al. point out that the 3R Act of1973, the 4R Act of 1976, and the Local RailService Assistance Act of 1978 all allowedfor operational subsidies for rail branch linesand that the 4R Act had provisions thatmade rail abandonment easier.11
Prior to Staggers, Due notes that 56 newrailroads were started in the period 1971-1979.12
‘Ma and Pa’ Owners
Who are the entrepreneurs who have entered(and exited) the regional and short line mar-ket since 1980 causing it to more than dou-ble? Prior to 1980, there were a number ofMa and Pa owners in the business. These areowners of single railroads operating as a for-profit business—but many times with aninherent love of railroading added (and with-out that love, the capital probably wouldhave been invested elsewhere). Certainindustries, e.g., steel, paper, aluminum, ex-tractive raw materials, etc., invested in rail-roads as part of vertical integration in theirindustries. Cities, counties, states, and portauthorities owned railroads as part of their
79
industrial development strategies. Termi-nal/switching companies were jointly ownedby class I carriers (or a city/port authority) toprovide unbiased railroad access to all cus-tomers and interchange among railroads ina metropolitan area. Shippers on a line to beabandoned sometime purchased the line.
In addition, some entrepreneurs formedcompanies, e.g., Pinsly, Emons, Cagy, R.J.Corman, to operate multiple and spatiallyseparated railroads. In general, however, theimage of the industry was one of Ma and Paoperations.13
All of the above exist as owners today andcertainly new Ma and Pa operators as wellas governments and industries have enteredthe market. But by far the leading fuel of thegrowth since 1980 has been the entry of hold-ing companies that own multiple railroads.These railroads are formed by entrepreneurswho view the industry as one of many possi-ble places to put their capital and makemoney and by ex-class I railroaders who seethe same monetary possibilities and left classI to take advantage of the opportunity (orwere downsized as class I carriers merged).Of the approximately 48,000 nonclass I milestoday, about 31,000 are controlled by or areaffiliated with entities that control two ormore US railroads (including class I, govern-ment, and nonrail industry control of someregional and short lines). Eighty-one entitiescontrol 341 of the approximately 574 region-al and short line carriers.14 The evolution ofthese multi-railroad entities post-1980 isgiven by Due and Leever.
During the period 1971-1984, shippersand entrepreneurs together formed 23.7% ofthe new lines while shippers alone formed20.3% of the new lines. Outside entrepre-neurs and investors formed 16.1%. Shortline holding companies formed 11%.15
To obtain a perspective on the whole railindustry, Table 1 shows the Class I carriersby US mileage and ownership affiliation.This table is likely to change as the class Icarriers react to a recent decision by the Sur-
US REGIONAL / SHORT LINE RAILROADS
face Transportation Board regarding railmergers.16
Table 2 shows the regional railroads in theUS. The railroads follow the pattern outlinedabove. The majority were formed since Stag-gers, i.e., post-1980, using redundant trunklines of merged class I carriers (although themerger may have occurred prior to or afterStaggers—the former proved difficult toabandon under the old abandonment proce-dures). Two are owned by government—theAlaska Railroad, owned by the state, and theTexas Pacifico Transportation Co., owned bythe South Orient (TX) Rural Rail District.Several are owned by class I carriers, i.e., theChicago, Central and Pacific (by CanadianNational), The Texas-Mexican Railway(49% by Kansas City Southern), the Gate-way Western Railroad (by Kansas CitySouthern). Others are owned by industries—Utah Rail (by Mueller Industries) and theElgin, Joliet, and Eastern (US Steel). TheIowa Interstate is 80% owned by shippers onthe line (Heartland Corp.). Some of the restare independent and founded prior to Stag-gers, e.g., Florida East Coast (1912), Provi-dence and Worcester (1973), Tuscola andSaginaw Bay (1977), while others are inde-pendent and formed after Staggers, e.g.,Dakota, Minnesota and Eastern (1986), Pad-ucah and Louisville (1986), and Wisconsinand Southern (1988). But at least 16 of thesecarriers are part of the holding companiesformed after Staggers.
Prior to 1984, there were very few region-al carriers. From 1984 to 1993, the forma-tion of regional railroads was one of the bigstories in short lines. The other was that 184new carriers were formed in this period.17
Regional railroads entailed more than one-third of the new railroad mileage during thistime frame. Of the new railroads started inthis period, governments owned 15.4%, theoriginal (i.e., abandoning) carrier owned8.9% (usually on a lease purchase agreementwith the short line), while the short line rail-roads (including short line holding compa-
80
TRANSPORTATION QUARTERLY / FALL 2002
nies) owned 73%; in fact, short line holdingcompanies owned 56.9% of the short lineowned miles formed in this period.18
In the 1993-1997 period, Due and Leevernote the growth of subregional railroads, i.e.,those with track between 150 and 400 inter-connected miles and the continued growth ofshort line holding companies. Only tworegional railroads were formed in this peri-od (the I & M and the Central Kansas),while 108 new lines were formed. Govern-ments owned 14.9%, the abandoning rail-road owned 15.2%, and the short lines andregional railroads (including rail holdingcompanies) owned 69%. Of the short lineand regional railroad owned miles, 85%were owned by short line railroad holdingcompanies. Shippers only accounted for2.8% of the total new mileage.19
Table 3 shows industrial owners of multi-ple railroads. In most cases, these railroadshave been around for a long time as part ofthe integrated production strategy of theowning firm. In several cases, e.g., Beth Inter-modal, Transtar, and Great Lakes Trans-portation, the railroads have been put into anew entity by the industry owner.
The major rail holding companies areshown in Table 4. This list excludes class Icarriers, governments, and nonrail industriesand defines major as controlling over 200miles of track. Virtually all were formedpost-Staggers. To contrast the multirail enti-ties, consider the following: the largest ofthese companies is RailAmerica, already amajor operator in 2000. During that yearthey acquired RailTex, which was the largestUS operator. In 2001, RailAmerica acquiredboth StatesRail and Park Sierra Properties.RailAmerica controls 39 US freight railroads(as well as railroads outside the US) andoperates 6,792 miles of track in the US. Itwas formed in 1986. One of the smallest isSMS Rail with two railroads and seven milesof track. RailAmerica is a New York StockExchange, publicly traded company, whileSMS Rail is privately held.
Table 5 lists the 81 owners/controllers/ affiliates that have two or more US railroadsand the names of their railroads. It includesall types of owners. Table 6 gives the rankorder by mileage operated by the 81 railholding companies.
Table 7 lists the short line railroads clas-
Table 1:Class I Railroads by Mileage, 2000 (railroads with operating revenues > $256.4 million)
Railroad States of Operation Mileage
Burlington AL,AR,AZ,CA,CO,KY,IA,ID,IL,KS,LA,MN,MO,MS,MT 33,251Northern-Santa Fe ND,NE,NM,NV,OK,OR,SD,TN,TX,UT,WA,WI,WY
Union Pacific AR,AZ,CA,CO,IA,ID,IL,IN,KS,LA,MN,MO,MT,NE,NM 33,035NV,OK,OR,TN,TX,UT,WA,WI,WY
Paducah & Louisville Railway KY Four Rivers Transportation 329 2001
Duluth, Missabe, & Iron Range Rwy MN,WI Great Lakes Transportation 283 1986
Bessemer & Lake Erie Railway OH,PA Great Lakes Transportation 186 2001
Elgin, Joliet, & Eastern Railway IL,IN US Steel 168 2001
Total 18,479
Class II Railroads have annual operating revenues between $20.5 million and $256.4 million. Most regional railroads are class II carriers
Source: Association of American Railroads at http://www.aar.org//rrstates2000.nsf/ and Strategic Rail Finance database
sified by the AAR as local railroads, andTable 8 lists the short line railroads classi-fied by the AAR as terminal and switchingrailroads—as augmented by our update.(Note: See Tables 5,6,7, and 8, starting onpage 105).
Complexity of Operations
In addition to the above mentioned benefitsof nonclass I railroads, the proliferation ofrailroads since 1980 has increased the com-plexity of operations in the rail industry. Railsafety entails not only physical inspection ofrail property but also examination of carrierrecords. Since the number of entities hasincreased, this increases the government’s(state and Federal Railroad Administration)burden. More parties now exist with whichto interchange (which requires interchangeagreements). To the extent that each entity
82
TRANSPORTATION QUARTERLY / FALL 2002
tends to do things in an idiosyncratic fash-ion, there are more ways of doing things inthe industry—an industry that requires com-plementarity. On the other hand, the hold-ing companies create a uniformity that miti-gates these effects, i.e., instead of having todeal with more than 570 individual nonclassI entities for certain items, the FRA needs todeal with about 310.
Many of the holding companies are quiteexplicit for the reasons for their formation.RailAmerica describes the industry as one ofexceptional growth opportunities whichwere brought about by the Staggers Act’sstreamlined provisions regarding the transac-tion of rail properties (as well as other dereg-ulatory actions of the act).20 Rio GrandePacific Corp. also recognizes the significantchanges and developments that occurred intransportation as a primary result of dereg-ulation.21
Table 3: Industrial Owners of Two or More Railroads, 2002
Company Number of Railroads Mileage Industry
Alcoa 4 36 Aluminum
Beth Intermodal 7 49 Steel
BHP Copper 3 60 Copper
Champion International 2 22 Paper
Georgia Pacific 5 220 Lumber/Paper
IMC Chemicals 2 37 Chemicals
LTV Steel 2 24 Steel
Martin Marietta Materials 2 20 Aggregates
Potlatch Corp. 4 85 Paper
Temple Inland 2 52 Paper
US Steel 5 231 Steel
Unimin Sand 2 112 Sand
Weyerhaeuser 4 146 Lumber/Paper
Total 44 1,094
Source: Strategic Rail Finance database
83
US REGIONAL / SHORT LINE RAILROADS
Table 4: Major Rail Holding Companies—Over 200 Miles of Track, 2002
Year Started or Last Company Number of Railroads Mileage Ownership Change
Anacostia & Pacific 4 488 1985
Cagy Transportation 4 323 1974
Cedar American Rail Holdings 2 2,437 1986
R. J. Corman 6 521 1973
Genesee & Wyoming 20 2,141 1899
Genesee Valley 5 258 1989
Grainbelt/Farmrail 2 424 1981
Great Lakes Transportation 2 469 2001
Gulf & Ohio Railways 10 316 1984
Iron Road 4 804 1993
KBN Inc. 2 331 1997
Livonia, Avon & Lakeville Railroad Co. 3 226 1964
Mueller Industries 2 463 1993
North American RailNET 5 1,145 1996
North Shore 8 254 1984
Oakes Development Corp. 4 993 1987
Ohio Central Rail 9 336 1986
OmniTRAX 8 223 1986
Pioneer Rail Corp. 16 444 1982
Pinsly Rail 5 214 1938
RailAmerica 39 6,792 1986
Rail Management & Consultants 13 668 1980
Rio Grande Pacific 4 565 1986
Seminole Gulf 2 242 1987
Vermont Rail 4 223 1997
WATCO 7 2,254 1983
Western Group 5 498 1987
Wheeling & Lake Erie 2 946 1990
Total 197 24,998
(Excludes Class I, government, and industry owned railroads)
Note: Genesee & Wyoming has done most of their acquisitions post-1980
Source: Strategic Rail Finance database
84
TRANSPORTATION QUARTERLY / FALL 2002
Short line railroads are not without prob-lems. Their trade association, the AmericanShort Line and Regional Railroad Associa-tion, notes several major issues22—the largestbeing the development of 286,000-pound,gross vehicle weight cars. This weight car isbecoming the choice for shippers of com-modities such as grain, lumber, and paperproducts—commodities that are shipped insignificant quantities on short lines. Theseheavier cars require more expensive infra-structure—rail, ties, ballast, and bridges thanexist on many smaller railroads. Many smallrailroads do not have the capital to makesuch investments.
Short lines do not originate and terminatethe same shipment very often. Thus, theydepend on connecting carriers (mostly classI carriers) for service. Since the shipper viewsservice as performance from origin to desti-nation, an excellent job by the short line canbe offset by a poor performance by anotheroperator. A piece of traffic which is a pri-mary piece of traffic for a short line opera-tor may be perceived as a marginal piece oftraffic by a class I. Poor service can occurduring normal operations or can be entailedby a systemic change in the handling of traf-fic as a result of a merger of larger carriers.Short lines would like compensation for serv-ice failures that arise when their business isharmed by actions of other railroads not intheir control.
Having to interchange to service their cus-tomers’ shipping needs, short lines can alsobe disadvantaged when they are inhibited intheir ability to interchange with all availablecarriers because of routing restrictionsimposed by their initial interchange partner,gateway closures, or because of pricing oninterchanges and routes that preclude the useof preferred interchanges/routes.
Short lines are concerned about discrimi-natory pricing policies potentially practicedby class I carriers. Place competition entailscommodity X potentially being suppliedfrom multiple places to the market. But since
transportation rates will influence whichlocations will serve the demand for good Xat the market, short line railroads are con-cerned that a class I can advantage shipperslocated on class I lines to the disadvantageof shippers located on short lines by control-ling the rates that short lines can quote theirshippers.
Car supply has historically been a railproblem. Since many products are seasonaland since specialty cars exist for some prod-ucts, peaks and troughs of demand for themovement of commodities leads to peaksand troughs in the demand for rail cars.While some short lines own cars (indeed,some short lines were formed to earn moneyon car-hire per diem rates as opposed to linehaul/switching transportation), most shortlines rely on class I carriers for car supply.Short lines are concerned about adequate carsupply in times of shortage and also con-cerned about fair prices to pay for cars in thedeprescribed (read deregulated) car-hire mar-ket.
Threats and Opportunities for Short Lines
A recent article in Transportation Quarterlyby Landry and Ozment23 surveyed short lineexecutives about their views as to the threatsand opportunities for short lines. Theirgreatest concern was with their relationshipswith class I railroads. These relate to theitems above concerning pricing policy,impacts of mergers on services, routing/gate-way policies, etc. These class I relationshipsdominated their responses. Of course, giventhe nature of their traffic flow characteristics,this is not surprising. Class I (in lip serviceat the very least) refers to short lines as part-ners and generally give short lines exposurein their marketing programs. According toLandry and Ozment, short line executivesview their relationships with class I carriersas slightly better than mediocre.
The second largest concern of executiveswas with government interaction. Recent
85
service failures surrounding mergers bringsconcern about reregulation—which they donot desire. Items not deregulated by Staggers,(e.g., safety) also cause them concern, as theyfear an escalation of government involve-ment in their activity. Car supply is a distantthird in their list of concerns. Heavier carrequirements and a need for revenue werefourth and fifth on their list.
Executives are optimistic about their busi-ness. Seventy-five percent predict growthexceeding the rate of inflation. They are opti-mistic that their value-added serviceapproach will be appreciated by a growingnumber of companies. They also view grow-ing into other value-added components ofthe supply chain and view positioning them-selves for future class I shredding of redun-dant or unwanted lines (the short line rolein the last 20 years) or for taking over otherfunctions which the class I carriers feel arenot core to their mission of a wholesaler ofhigh volume, high speed freight, e.g., cus-tomer switching, and yard operations—andone could expand this to managing current-ly outsourced class I activities such as carand locomotive repair, maintenance, etc.Clearly, these activities will run into laboropposition but opposition was also faced inthe already accomplished rail abandonmentand existing outsourcing scenarios.
What separates the successful short linesfrom those who have failed? To survive, Duenotes in his early analysis that short linesrequire competent, experienced manage-ment—both operating and executive/sales/ marketing; shipper support; adequate (due todeferred maintenance) track and facilities,e.g., bridges, yards; adequate traffic; accessto more than one connecting carrier (for bar-gaining leverage); adequate financing; andgovernment assistance.24 Adequate financ-ing was often tied to the fact that the shortline operator had paid too much for the line,the line generated an inefficient cash flow,and traditional commercial lending institu-tions did not lend to the industry.
Wolfe lists multiple reasons for failure, butthe most important is limited traffic.25 Praterand Babcock find that the most importantdeterminants of short line financial successare adequate traffic density (carloads/mile ofmainline track), control over nonmainte-nance of way costs, and amount of trafficmoved in the top three commodities of thecarrier (all variables lagged by a year).26
Lines fail for a lack of the above. Manylines are also dependant on one or a fewdominant shippers. If those shippers are ineconomic distress, the short line is likely tobe in distress, also. As with all rail, shortlines are susceptible to truck competition fororigin to destination moves. But trucks canalso hurt short lines in another way—truck-ing short line traffic to the class I carriers,thus bypassing the short line in the shippingroute. In fact, class I carriers may be encour-aging such moves with their development ofload centers for grain. Because of limitedcapital, a force majure, e.g., a major physi-cal problem—a track washout or a bridgecollapse, or a major derailment/accident canbring a carrier down. The short line is depen-dant on its connections, so if a connection isabandoned, either physically or by cancella-tion of joint rates, the short line is eitherphysically or practically disconnected fromthe rail network. Car supply is another con-cern—without cars from a class I carriers,the originating short lines can’t serve theircustomers.
In the most recent period of Due’s analysis(1993-1997),27 the reasons for short line fail-ure concentrated on the lack of traffic vol-ume. Rail management did not seem to be aproblem (bad management railroads havingfailed in the earlier periods—the survivorprinciple). Due and Leever note that subsidydoes not seem to be nearly as important inthe latter period as it did in earlier periods.Of the original group of 409 railroads start-ed in the 1971-1997 time frame, 62 hadfailed (15.2%) to continue to operate as arailroad—although in some cases, when a
US REGIONAL / SHORT LINE RAILROADS
86
TRANSPORTATION QUARTERLY / FALL 2002
line failed, another carrier took its place.Given that the average life of an Americanbusiness is about six years (perhaps less withthe recent demise of so many dot.coms), the15.2% over a quarter of a century is not abad record at all. Large rail holding compa-nies also tend to lead to financial stabilitybecause they hold entities in multiple geo-graphic areas (thus insulating themselvesfrom regional economic downturns) andhave a more diverse commodity mix acrosstheir whole system (thus insulating them-selves from an economic downturn of a spe-cific industry or a specific shipper). In addi-tion, they are diversified from the impacts offorce majures.
Conclusion
In the years directly prior to the Staggers Act(1980) and especially since the Staggers Act,there has been an explosion of short line and
regional railroads (a 260% increase). Thedominant portion of this very large increaseis accounted for by the formation andgrowth of entities, which own, control, orare affiliated with multiple railroads. Ofmore than 570 regional and short line rail-roads, 81 multiple owning, controlling, oraffiliated with entities control 59% of theserailroads and 64.5% of the regional/shortline mileage.
This article documents the short line andregional carriers in the US and the owners,controllers, and affiliates of multiple rail-roads. The likelihood of further rail merg-ers, the restructuring of existing rail entities,the existence of a buy and sell market amongmultirail owning entities,28 and the state-ments of multirail owning entities that theyare optimistic about opportunities in this lineof business, suggest that the trend of multi-rail ownership will continue.
American Railroads Southern California Railroad NAGulf, Colorado and San Saba 68Total 68 2
Anacostia & Pacific Chicago, South Shore & South Bend Railroad 75Louisville & Indiana Railroad 123New York & Atlantic Railway 269Pacific Harbor Line 21Total 488 4
Beth Intermodal Brandywine Valley Railroad 6Conemaugh & Black Lick Railroad 9Lake Michigan & Indiana Railroad Co 5Patapsco & Back River Railroad 10Philadelphia, Bethlehem, and New England RR 8Steelton & Highspire Railroad 5Upper Merion & Plymouth Railroad 6Total 49 7
Black River & Western Belvidere & Delaware River Railway 16Black River & Western Railroad 16Total 32 2
Burlington Northern-Sante Fe Belt Railway Company of Chicago (16.67%) 4.5Central California Traction (50%) 34Longview Switching Co. (50%) 8.5Los Angeles Junction Railway 63Oakland Terminal Railway (50%) 6Portland Terminal Railroad Co. (50%) 1.5Port Terminal Railroad Association (50%) 18.5Texas City Terminal Railway (50%) 2.5Total 138.5 4.17
Canadian National Belt Railway Company of Chicago (16.67%) 4.5Cedar River Railroad 102Chicago, Central, & Pacific Railroad 736Peoria & Pekin Union Railway (33.33%) 7.333333Total 849.8333 2.5
Canadian Pacific Albany Port Railroad Corp. (50%) 5Belt Railway Company of Chicago (16.67%) 4.5Total 9.5 0.67
Cedar American Rail Holdings Dakota, Minnesota, & Eastern Railroad 1,101I & M Rail Link 1,336Total 2,437 2
Champion International Angelina & Neches River Railroad 15Moscow, Camden & San Augustine Railroad 7Total 22 2
R. J. Corman Allentown Lines 15Bardstown Line 20Cleveland Lines 49Memphis Lines 98Penn Lines 245Western Ohio Lines 94Total 521 6
CSX Albany Port Railroad Corp. (50%) 5Belt Railway Company of Chicago (16.67) 4.5Conrail (50%) 262.5High Point, Thomasville & Denton RR (50%) 17The Indiana Rail Road (40%) 64Paducah & Louisville Railway (35%) 115.15Winston-Salem Southbound Railway (50%) 45Total 513.15 2.92
Denver Rock Island Railroad Denver Rock Island Railroad 11Sunflour Railroad Inc 26Total 37 2
Everett Railroad Everett Railroad Co. 25Hollidaysburg & Roaring Spring Railroad Co 10Total 35 2
New Hampshire & Vermont Florida West Coast Railroad 14New Hampshire & Vermont Railroad 40Twin State Railroad 28Total 82 3
New York & Lake Erie New York & Lake Erie Railroad 29Oil Creek & Titusville Lines 59Total 88 2
Norfolk Southern Belt Railway Company of Chicago (16.67) 4.5Conrail (50%) 262.5High Point, Thomasville & Denton RR (50%) 17Peoria & Pekin Union Railway (33.33%) 7.333333Winston-Salem Southbound Railway (50%) 45Total 336.3333 2
North Shore Juniata Valley Railroad 12Lycoming Valley Railroad 37Nittany & Bald Eagle Railroad 63North Shore Railroad 43Shamokin Valley Railroad 27Stourbridge Railroad 25
North Shore, continued Union County Industrial Railroad 12Wellsboro & Corning Railroad 35Total 254 8
Oakes Development Corp. Minnesota Prairie Railroad 95Red River Valley & Western Railroad 636Rutland Line 17Twin Cities & Western Railroad 245Total 993 4
Ohio Central Rail Columbus & Ohio River Railroad 160Mahoning Valley Railway 4Ohio & Pennsylvania Railroad 3Ohio Central Railroad 94Ohio Southern Railroad 11Pittsburgh & Ohio Valley Railroad 42Warren & Trumball Railroad 6Youngstown & Austintown Railroad 4Youngstown Belt Railroad 12Total 336 9
OmniTRAX Chicago Rail Link 57Georgia Woodlands Railroad 18Great Western of Colorado Railway 80Great Western of Iowa Railway 7Manufacturer's Junction Railway 2Newburgh & South Shore Railroad 3Northern Ohio & Western Railway 25Panhandle Northern Railroad 31Total 223 8
SMS Rail Penn Jersey Rail Lines 2SMS Rail Services 5Total 7 2
South Carolina Public Railways East Cooper & Berkeley Railroad 17Port Royal Railroad 25Port Terminal Railroad of South Carolina 27Port Utilities Commission of Charleston 10Total 79 4
South Central Rail Group South Central Tennessee Railroad 50Tennken Railroad 51West Tennessee Railroad 43Total 144 3
South East Shortlines Caldwell County Railroad 22Thermal Belt Railway 7Total 29 2
South Plains Switching Co. South Plains Lamesa Railroad 5South Plains Switching Co. 15Total 20 2
Temple Inland Corp. Sabine River & Northern Railroad 40Texas South Eastern Railroad 12Total 52 2
TNW Corp. Nebraska Northeastern Railway 120Texas, Gonzalez & Northern Railway 12Texas North Western Railway 43Texas Rock Crusher Railway 6Total 181 4
Tri Max Holdings Allegheny Valley Railroad 29Camp Chase Industrial Railroad 14Southwest Pennsylvania Railroad 65Total 108 3
Tulare Valley Tulare Valley Railroad 6V & S Railway Inc. 43Total 49 2
Unimin Sand Winchester & Western Railroad-NJ Div. 54Winchester & Western Railroad-Virginia Div. 58Total 112 2
Union Pacific Belt Railway Company of Chicago (16.67%) 4.5Central California Traction (50%) 34Longview Switching Co. (50%) 8.5Oakland Terminal Railway (50%) 6Peoria & Pekin Union Railway (33.33%) 7.333333Portland Terminal Railroad Co. (50%) 1.5Port Terminal Railroad Association (50%) 18.5Texas City Terminal Railway (50%) 2.5Total 82.83333 3.5
Wiregrass Central Railroad AL 20 Gulf & Ohio Railways 1987
Wyoming & Colorado Railroad OR,WY 49 Western Group 1987
Yadkin Valley Railroad NC 93 Gulf & Ohio Railways 1989/1995
York Railway PA 40 Genesee & Wyoming 2002
Yreka Western Railroad CA 9 Yreka Western Railroad 2000
Total 21,940
The Association of American Railroads defines local railroads as those with operating annual revenues below $40 million andoperating less than 350 miles
Source: Association of American Railroads at http://www.aar.org//rrstates2000.nsf/ and Strategic Rail Finance database
104
TRANSPORTATION QUARTERLY / FALL 2002
105
US REGIONAL / SHORT LINE RAILROADS
Table 8: AAR Switching/Terminal Railroads, 2002
Year Startedor Last
Railroad States Mileage Owner Transaction
Adrian & Blissfield Rail Road MI 27 Adrian & Blissfield Rail Road 1991
Yolo Shortline Railroad CA 28 Yolo Shortline Railroad 1991
Youngstown & Austintown Railroad OH 4 Ohio Central Rail 1985
Youngstown Belt Railroad OH 12 Ohio Central Rail 1986
Total 7,467
The Association of American Railroads defines switching/terminal railroads as those with annual revenues below $40 million andless than 350 miles of track operated
Source: Association of American Railroads at http://www.aar.org//rrstates2000.nsf/ and Strategic Rail Finance database
110
TRANSPORTATION QUARTERLY / FALL 2002
111
US REGIONAL / SHORT LINE RAILROADS
Endnotes
1. The Surface Transportation Board defines class I railroads as those with average annual revenues of$256.4 million or more.
2. See the American Short Line and Regional Railroad Association website at http://www.aslrra.org/ who_we_are/ .
3. See http://www.aar.org//rrstates2000.nsf/. 2000 is the latest data posted on the Association of Ameri-can Railroad’s (AAR) website.
4. Ibid, endnote 3. The numbers in the following tables may differ somewhat from the AAR’s numbersas some information has been updated, whereas the AAR’s latest posted information is for 2000. In addi-tion to—as up to date additions/deletions as possible—the numbers will differ from the AARs in thatregional, local, and switching/terminal railroads associated with the Wisconsin Central are incorporat-ed into the Canadian National System in our figures.
5. See http://www.aslrra.org/who_we_are/aslrra, p. 1.
6. For instance, in 1970 there were about 70 class I railroads. In 1980, there were 40, then 32 in 1982.In the late 1980s, there were 30 class I railroads. Nine have since dropped to class II or class III status dueto definitional changes in the revenue requirement to attain class I status, two went bankrupt, and theremaining 19 were merged or corporate absorbed into the seven class I freight railroads of today.
7. This reason was enhanced by a Supreme Court decision (Pittsburgh and Lake Erie Railroad versusRailway Labor Executives Association) in 1989 that ruled labor protection was not required in short linesales. This enabled nonunion short lines to operate where previous unionized class I operations had takenplace. See William Thoms, Frank Dooley, and Denver Tolliver, “Rail Spinoffs, Labor Standoffs, and theP & LE.” Transportation Law Journal 28(1), (1989): 57-83.
8. Prior to Staggers, the Interstate Common Carrier (ICC) tended to view abandonments as a 0-1 phe-nomena, i.e., either the railroad was forced to continue operation on the line (subsequently not enthusi-astically run by a railroad that wished to abandon the line) or was allowed to abandon it. The ICC didnot attempt to broker alternative solutions. Staggers allowed more creative solutions to a reluctant rail-road forced to provide service (which merely generated another abandonment application in severalyears) or abandonment of the line. Indeed, Mielke reports that by 1986 railroads began to abandonbranch lines in a manner that tied the disposing line to the acquirer. See Jon Mielke, “Short Line RailroadCreations: Terms of Sale, Impacts on Viability, and Public Policy Implications.” Journal of the Trans-portation Research Forum 29(1), (1988): 138-148.
9. John Due. “New Railroad Companies Formed To Takeover Abandoned Or Spun-Off Lines,” Trans-portation Journal, Fall (1984): 30.
10. Ibid., p. 35.
11. Harvey Levine et al. Small Railroads, Association of American Railroads, Chelsae, MI, 1982.
12. Ibid., p. 32.
13. Ian Savage. The Economics of Railroads Safety, Kluwer Academic Publishers, Boston/Dordrecht/ London (1998): 117.
14. The definition of a multiple railroad entity is a loose one. It included formal holding companies,industrial owners of multiple railroads, class I ownership of multiple nonclass I carriers, governments(state, county, local, port authorities), and affiliations of carriers. It should be noted that some industri-al owners only own one railroad, as is true for government entities. However, some government entities
112
TRANSPORTATION QUARTERLY / FALL 2002
have multiple railroads, e.g., the state of West Virginia, SEDA-COG in Pennsylvania. However, all thelarger entities are formal rail holding companies.
15. Due’s categories for ownership are: short line holding companies; holding companies with rail andindustrial interests; primarily shippers; shippers and local entrepreneurs; shippers and outside entrepre-neurs; outside entrepreneurs and investors; entrepreneurs alone; outside construction companies; localinvestors; municipal governments; and other short lines.
16. Surface Transportation Board, Major Rail Consolidation Procedures, STB, Ex Parte 582 (Sub-No. 1),Washington DC, June 11, 2001.
17. Due, John and Suzanne Leever. “The Post-1984 Experience With New and Small Railroads.” Trans-portation Journal, Fall (1993): 40.
18. Ibid., p. 43.
19. Due, John and Suzanne Leever. “The Experience With New and Small Regional Railroads—1993-1997.” Transportation Journal, Winter (1997): 12.
20. See http://www.railamerica.com/html/body_company.html, p. 2.
21. See http://rgpc.com/, p. 3.
22. See http://www.aslrra.org/whats_in_the_news/position_papers/index.cfm?newsid=17 andhttp://www.aslrra.org/whats_in_the_news/position_papers/index.cfm?newsid=18.
23. Landry, Michael and John Ozment. “Short Line and Regional Railroad Executives Look at TheirIndustry.” Transportation Quarterly 55(2), (2000): 19-27.
24. Due, John, op.cit., pp. 39-40.
25. Wolfe, Eric. “The Downside Risk: An Analysis of Local and Regional Railroad Service Failures.”Journal of the Transportation Research Forum 29(1), (1988): 124-137.
26. Prater, Marvin and Michael Babcock. “Determinants of Profitability of Grain Dependent ShortLine Railroads.” Transportation Research E 34(3), (1998): 187-200.
27. Due and Leever, op. cit. (1997): 18; 20.
28. In addition to the RailAmerica activity in the last quarter of 2001 mentioned above, Genesee andWyoming announced the acquisition of Emons and the Dakota, Minnesota and Eastern announced theacquisition of the I & M from the Washington group in the first quarter of 2002. Other, smaller trans-actions have also taken place in this time frame.
References
Association of American Railroads, website at http://www.aar.org.
American Short Line and Regional Railroad Association, website at http://www.aslrra.org.
Due, John. “New Railroad Companies Formed to Takeover Abandoned Or Spun-Off Lines.” Transportation Journal, Fall (1984): 30-50.
Due, John, and Suzanne Leever. “The Post-1984 Experience With New and Small Railroads.” Transportation Journal, Fall (1993): 40-52.
Due, John, and Suzanne Leever. “The Experience With New and Small Regional Railroads—1993-1997.” Transportation Journal, Winter (1997): 5-23.
Landry, Michael, and John Ozment. “Short Line and Regional Railroad Executives Look at TheirIndustry.” Transportation Quarterly 55(2), (2000): 19-27.
113
US REGIONAL / SHORT LINE RAILROADS
Levine, Harvey et al. Small Railroads. Association of American Railroads, Chelsae, MI, 1982.
Mielke, Jon. “Short Line Railroad Creations: Terms of Sale, Impacts on Viability, and Public PolicyImplications.” Journal of the Transportation Research Forum 29(1), (1988): 138-148.
Prater, Marvin, and Michael Babcock. “Determinants of Profitability of Grain Dependent Short LineRailroads.” Transportation Research E, 34(3), (1998): 187-200.
RailAmerica website at http://www.railamerica.com.
Rio Grande Pacific website at http://rgpc.com/.
Savage, Ian. The Economics of Railroads Safety. Kluwer Academic Publishers, Boston/Dordrecht/Lon-don, 1998.
Surface Transportation Board, Major Rail Consolidation Procedures. STB, Ex Parte 582 (Sub-No. 1),Washington DC, June 11, 2001.
Thoms, William, Frank Dooley, and Denver Tolliver. “Rail Spinoffs, Labor Standoffs, and the P &LE.” Transportation Law Journal 28(1), (1989): 57-83.
Wolfe, Eric. “The Downside Risk: An Analysis of Local and Regional Railroad Service Failures.” Jour-nal of the Transportation Research Forum 29(1), (1988): 124-137.
W. Bruce Allen is professor of Business and Public Policy, Transportation, and Regional Sci-ence at the Wharton School, University of Pennsylvania. Most recently, he was vice dean of theWharton Graduate Division. His research includes the areas of rail and motor carrier eco-nomics, freight demand models, supply chain management, and transportation regulation/ deregulation. Allen has consulted for numerous governmental entities and corporations.
Michael Sussman is president of Strategic Rail Finance, Inc. of Philadelphia, PA. In 2001, heformed the Rail Services Excellence Council in collaboration with other transportation indus-try and academic professionals. Strategic Rail Finance, which has conducted more than 3,500interviews with railroad executives, has also conducted more than 350 educational meetingswith US Senate and House offices including a recent rail transportation briefing for 55 con-gressional staff. Sussman has created a comprehensive program for expanding private andpublic sector capitalization of rail related transportation projects. This program is based on aninnovative approach to leveraging the underlying asset value and potential of the existingnetwork of freight railroad properties.
Drew Miller was a founder and principal of Strategic Rail Finance. For the past eight years,Miller was dedicated to the cause of freight rail development in the US, during which hemade invaluable contributions to the understanding of the network of Class II and Class IIIrailroads; he passed away in August 2001. Miller led Strategic Rail Finance’s education pro-gram of 150 congressional offices on the value and opportunity of supporting Class II andIII railroads.