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Apr.20, 2015

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LAND LINES 36 THE JOURNAL OF COMMERCE www.joc.com Lawrence Gross APRIL 20.2015 A CRUDE WARNING ON RAIL SERVICE INTERMODAL SERVICE IS sliding back downhill. After recovering rapidly in the weeks following Thanks- giving, the four-week moving aver- age intermodal train speed (for all Class I rails except Canadian Pacific) topped out at 30.9 mph in late January. Since then, this mea- sure has moved steadily downward. Almost all of the gains have been lost. Admittedly, intermodal train speed is an imperfect measure of intermodal service quality, which has more to do with reliability than speed. But history says this is a rea- sonably good indicator on at least a broad scale. When the decline began, tough winter weather was an easy culprit to blame. But temperatures have warmed and the snow is melting, yet the slide continues. Is it volume? Not if you look at overall carloads — that is, traffic excluding intermodal. For the first 10 weeks of the year, North American carload volume was up a modest 2.6 percent year-over-year. But if you compare those 10 weeks to the last 10 weeks of 2014, car- load volume was down 3.6 percent. Shipments of petroleum products, including crude by rail, in particu- lar, have been declining under the pressure of lower prices. During the most recent four-week period, carloads were down more than 12 percent from the peak in early November 2014. The railroads have been pour- ing in resources in the form of locomotives and crews. By cur- tailing maintenance-related track closures and running hard through the holidays, they made substantial progress late last year. But the sys- tem is still fragile, and the evidence suggests the true corner has yet to be turned. The U.S. West Coast port debacle isn't helping, of course. West Coast- related gyrations have thrown the intermodal system out of balance. In the East, Norfolk Southern and CSX Transportation are coming under pressure as significant volumes of cargo diverted from the West are still hitting East Coast ports. In the West, the volume being pumped out of the ports has been growing slowly but now appears to be hitting full stride. North American intermodal loadings reported by the Associa- tion of American Railroads were running at near-record levels in March. The imbalances created by this cargo surge are difficult to manage, and ensuring sufficient equipment supply on the West Coast is undoubtedly a challenge. But a major wild card is waiting in the wings that could make things dramatically worse: those unit trains of crude oil. There has been a spate of derailments recently involving crude-by-rail unit trains with uni - formly explosive results. Although these accidents have thankfully occurred in rural areas with no loss of life, they point to several questions: l All the accidents involved newer CPC 1232 desig n ca rs t hat proved incapable of prevent- ing an explosion in the case of derailment. Will beefed-up tank car specifications be sufficient to effectively reduce risk to a manageable level? l The accidents involved light Bak- ken crude and diluted Canadian tar sand oil. It turns out both can explode. What can be done to reduce the explosive charac- teristics of this cargo before it's loaded into the tank car? l Finally, and most importantly from an intermodal perspec- tive, these trains were running out in the country, at legally permitted speeds of 30 to 40 mph. Is there simply too much energy involved in a derailment at those speeds to manage effec- tively, and do the trains need to slow down? The net work effects of this last point could be immense. If the trains slow down, they will act as a rolling roadblock across the North American rail system. Rest assured, intermodal trains will be caught up in the backlog. To be clear, I'm not predicting this outcome, but rather f lagging a potential risk. At last report, the rules governing tank cars and their operation were at the Office of Management and Budget for final vetting, with issuance expected in May. The railroads, among the most effective of all groups in presenting their viewpoint to the government, have f ully explained what the negative congestion implications of slowing so-called High Hazard Flammable Trains would be. The reg ulations, therefore, may not include such a requirement, but instead rely on some combination of beefier equipment specifications and treatment of the cargo prior to loading. So keep an eye out for those new regulations. What Washing- ton decides on tank car regulations could have a major impact on inter- modal service in 2015. JOC Lawrence Gross is president of Gross Transportation Consulting in Mahwah, New Jersey, and a partner at FTR Transportation Intelligence. A veteran with 34 years in the transportation business, he covers freight transportation, concentrating on the intermodal and trucking sectors from a transportation and equipment perspective. He is a frequent speaker at industry events. Contact him at ljgross@optonline.net and follow him on Twitter: @intermodalist.

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