Vol. 6 No. 16
April 18, 2005

Copyright © 2005
NCI Inc., All Rights Reserved

The E-Zine of the National Corridors Initiative, Inc.
President and CEO - Jim RePass
Publisher - Jim RePass      Editor - Leo King
Webmaster - Dennis Kirkpatrick

A weekly North American rail and transit update

For railroad professionals
Political leaders at all levels of government
Journalists from all media

* Now in our Sixth Year *

This page is best viewed at 800 X 600 screen resolution


IN THIS EDITION...  In this edition...

  News Items… 
Amtrak cancels Acela Express service while
  brake system cracks get fixed
Amtrak's Problems
  More News Items… 
Boardman gets Senate hearing; expected to be new FRA chief
USDOT sends Amtrak bill to Congress
House gets Amtrak funding legislation.
  $2 billion annually in three-year deal
House to consider high-speed rail bill
Some Amtrak tunnel improvements approach completion
  in Gotham
Peering inside carrier: Amtrak’s future is cloudy, at best
Meteor stalls in South Carolina; other Amtrak problems
  mar week
Vermonter bus service returns
  Labor lines… 
BLE angry over another death
  Commuter lines… 
Amtrak, too: Transit gets $142 million for security
Minnesota’s Pawlenty signs rail bill
  APTA Highlights… 
Passenger and Freight Rail Face ‘Historic Transition’
Montreal Board of Trade Study: Transit Is Powerful
  economic engine
Green Named President of GFI GENFARE
Valley Metro Names Boggs as New Executive Director
Anchorage Voters Pass Transit Bond Referendum
  Freight lines… 
BNSF says okay to UP for running rights
BNSF to lower Montana grain rates
CN carload prices now online
Shareholder sues UP over safety
Butler, Krehbiel get new jobs at UP
  Wall Street lines… 
Rail sector finds favor again
BNSF, CN, NS downgraded at Morgan
Rail freight traffic continues to rise
  Selected Friday closing quotes… 
  End notes… 

At Work on the Long Island City ventilation system

Amtrak Ink

This big backhoe, some 40 feet below the surface at Amtrak’s Long Island City ventilation system, helped to demolish old shafts as the railroad and its contractors rebuild the safety appliances inside tunnels. The story is below.


Amtrak cancels Acela Express service
while brake system cracks get fixed

Amtrak’s Acela Express service has been cancelled through Wednesday, according to Amtrak. The carrier stated Saturday morning “Passengers with reservations on these canceled trains will be accommodated on other regular Amtrak service.” A statement from the railroad added, “As additional equipment becomes available, extra frequencies will be added in place of the canceled trains.”

The troubles began early Friday morning after discovering cracks in the brake components on most coaches. All Acela trainsets and schedules were anulled.

The New York Times told its readers on Saturday Amtrak took all its Acela Express trainsets out of service early Friday morning after an FRA inspector looking under a train following a speed experiment noticed cracks in the brakes, and a quick check found hundreds of similar flaws on other trains in Boston, New York and Washington.

The cracks appeared in 300 of the 1,400 brake discs examined on the fleet’s 20 trains. The part with cracks is a spoke on a brake disc, connecting the disc to the axle. The spoke is a thick piece of cast steel that is supposed to last for the life of the train. Until Friday, there was not a regular inspection schedule for it.

It would probably be months before all the brake systems are repaired, said William L. Crosbie, Amtrak’s senior vice-president for operations. He added that railroad officials did not know how to fix the cracked brake systems.

Other trains were unaffected. The passenger railroad added extra trainsets of conventional equipment in several Acela Express slots between Washington, New York and Boston.

Amtrak said no brake failures or other problems were reported.

On a typical day, according to Amtrak, Acela Expresses make 15 round-trips between New York and Washington and 11 between New York and Boston. That comprises 20 percent of Amtrak’s service to the three cities. The trains can carry 304 passengers.

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COMMENTARY...  Commentary...

Amtrak’s Problems

by James P. RePass
President, CEO
National Corridors Initiative

The continuing mechanical problems with Amtrak’s Acela are a direct result of America’s incoherent transportation policy of the last forty years. The Federal Railroad Administration, in its infinite wisdom ten years ago, imposed American buffering standards on the European-designed train set, effectively doubling its weight, therefore quadrupling the physical forces sustained by the undercarriages during operation. While one can argue American buffering standards vs. European high speed design, what emerges is a beautiful but compromised technology which, while safe, will need constant modification to compensate for the admixture.

This kind of compromise goes back for forty years through administrations and Congresses of both political parties. Although ignorant people will blame Amtrak and its employees for this recent problem, it is in actuality a symptom of America’s transportation mono-modalism which has dumped hundreds of billions of dollars into highways and relatively nothing into rail.

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Boardman gets Senate hearing;
expected to be new FRA chief

President Bush’s choice to run the Federal Railroad Administration – the nation’s rail safety agency – said April 12 the White House’s proposal to end federal funding for Amtrak would not pass Congress if the company changed its operations.

Joseph Boardman appeared before the Senate Commerce Committee, which was weighing his nomination to lead the FRA, Associated Press writer Devlin Barrett wrote on April 12 from Washington.

Boardman, now New York State’s DOT commissioner, criticized the current financial state of Amtrak, but said Congress and the Administration should be able to come up with money for the national passenger rail service.

“If confirmed, I believe we have to work in collaboration. It will not be zero. If we can reform and make the changes necessary to support rail transportation, that will not occur,” Boardman said.

After the hearing, Boardman said he thought the Bush proposal to cut the $1.2 billion Amtrak received last year down to zero had brought needed attention to Amtrak’s condition.

“The President and the secretary (USDOT’s Norman Mineta) both believe that this is generating, and what we’re going to have here, is a debate about the future,” said Boardman.

Sen. Charles Schumer (D-N.Y.), said he was supporting the nomination in part because Boardman “assured me he would fight hard for Amtrak.”

Boardman’s nomination is expected to be approved by the Senate, despite the complaints from some lawmakers, particularly in the Northeast, about Amtrak funding.

About the only tough questions Boardman faced at the hearing came from Sen. Frank Lautenberg (D-N.J.), who has launched a counterattack to the Administration’s proposal to cancel federal funding for Amtrak.

Amtrak’s defenders say a total cut in funding would end nationwide passenger rail service. The Bush administration has argued instead for the importance of regional intercity service, where there is steadier ridership.

Lautenberg tried to put Boardman on the spot by asking him about the competing interests and financial concerns of New York versus the federal government.

Amtrak’s operations in New York lost nearly $35 million last year, despite steady ridership of 900,000 between Albany and New York City, and Lautenberg questioned whether New York could afford to maintain service through upstate New York westward to Niagara Falls and north to Montreal.

“The recommendation by the President would abolish much, if not all of Amtrak’s service,” Lautenberg argued. “Will New York State be able to fully take over the responsibility of running the railroad from New York City on north?”

Boardman replied, “I do not know whether they’ll fully take over that responsibility but they will be committed to supporting intercity passenger rail.”

Boardman, who has run New York’s transportation department since 1997, said his top priority if given control of the FRA would be improving safety measures within the “very complex operation” of railways.

Ross B. Capon, Executive Director of the National Association of Railroad Passengers, endorsed Boardman’s nomination. He said, “The National Association of Railroad Passengers is pleased to endorse with enthusiasm the nomination of Joseph H. Boardman to be Federal Railroad Administrator,” but he also added a caveat.

“We understand that his job will be to advance Administration policies. We strongly disagree with those policies, which, as we understand them, would end all U.S. intercity passenger rail. Thus, of course, we hope he will be able to moderate them.”

Capon later told the NARP membership “Senators warmly received” Boardman.

Capon noted Boardman said the three areas which he plans to concentrate on are safety, intercity passenger rail, and human factors — “building an organization to accomplish changes” in the other two areas. He said Congress needs to “restructure and reform passenger rail…I don’t believe the current ‘one size fits all’ model works.”

New Jersey’s Lautenberg (D-N.J.) tried to nail Boardman down on that state’s willingness to fund passenger rail 100 percent, which the Bush administration is pushing.

Boardman said, “I don’t think any state volunteers unless called upon…New York will be committed to supporting passenger rail.” Boardman said New York spends $1.4 billion a year on passenger rail transportation, primarily in the New York City area.

Capon noted, “We have questioned the factual accuracy of many of Secretary Mineta’s statements about passenger rail, as reflected in the “Fact Check” section of our web site http://www.narprail.org/factcheck.pdf (Adobe Acrobat document). Particularly because of that, we believe that Commissioner Boardman’s knowledge will be of exceptional value to the Secretary, the entire Bush administration, the Congress and the general public.”

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USDOT sends Amtrak bill to Congress

Legislation that the Bush administration claims “breathes new life into the nation’s intercity passenger rail service and improves Amtrak’s operations nationwide” was sent to Congress on April 14.

The Passenger Rail Investment Reform Act to Congress sets the stage for a serious debate about the future of passenger rail. The Administration’s proposal is independent of legislation the House Transportation Committee sent to the House last week (see separate story, below).

The bill makes “key reforms” to transition Amtrak” into a purely operating company, create a federal-state partnership to support passenger rail, introduce market-based competition to the system and set up an interstate compact to maintain the heavily used Northeast Corridor service,” according to USDOT Secretary Norman Mineta.

In the Administration’s view, “Under the legislation, Amtrak will no longer carry the burden of maintaining tracks, stations and other infrastructure. Amtrak will have the ability to be an operating company, focused solely on running trains safely and on time. Regional, state or local authorities will be empowered to make decisions about service, planning where it is and what best meets local transportation needs; as well as ensure rail operators are providing a reliable, efficient and cost effective service.”

The reform proposal includes a new federal-state partnership to fund capital improvements, much like programs “relied on in other modes of transportation, such as mass transit.”

The federal government will offer 50-50 matching grants to states for development of infrastructure projects that improve passenger rail service. The matching grants will provide an incentive for states to make capital investments that support high quality, integrated regional rail services. The grant funding will come from the General Fund through an application process,” said Mineta in a press release.

The legislation makes the cost of “first dollar” liability insurance eligible for capital investment grants, meaning the federal government will continue indirect support for this coverage. The states will also have the option to shift liability insurance costs to their chosen carriers, should this arrangement work better for their needs.

The bill introduces what it terms, “true competition for intercity passenger rail service provided by rail operators. States will be able to select from Amtrak or a private or public rail operator. This allows rail service to respond to competitive demand and results in better service at a reasonable price, while also allowing states to decide what is best for their region. No matter which carrier a state chooses, the legislation guarantees that the winning passenger rail operator will have access to the train tracks in their region owned by freight or any other railroad entity.”

To ensure the stability of service in the Northeast Corridor (NEC), which accounts for nearly half of all passenger rail ridership, said Mineta, the legislation authorizes targeted capital funding for the backlog of projects needed to bring the NEC back to a state of good repair. This funding will be used to restore rail facilities and equipment, completing the necessary improvements that Amtrak has been unable to fund.

“This legislation carries forward our vision where a vibrant and viable passenger rail network continues to connect our nation. We can achieve this vision by dramatically increasing Amtrak’s accountability while allowing the proven principles of competition and local control to improve the operation of the system,” Mineta said.

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House gets Amtrak funding legislation

$2 billion annually in three-year deal

By a staff writer

Legislation that would authorize annual funding of $2 billion over the next three years to finance Amtrak’s capital and operating expenses was introduced in the House on Amtrak Funding Legislation on April 14. The bill is independent of a White House proposal for Amtrak sent to Congress last week.

The legislation, H.R. 1630, was introduced by Rep. Don Young (R-Alaska), chairman of the Transportation and Infrastructure Committee;

U.S. Rep. James Oberstar (D-Minn.), Ranking Democrat on the committee; Rep. Steven LaTourette (R-Ohio), Chairman of the Subcommittee on Railroads; and Rep. Corrine Brown (D-Fla.; Ranking Democrat on the Railroads Subcommittee.

The four also introduced legislation that would provide $60 billion for high-speed rail and rail infrastructure projects – The Railroad Infrastructure Development and Expansion Act for the 21st Century (RIDE 21), H.R. 1631 (See separate story below).

“Although serious disagreements still exist about Amtrak’s long-term management strategy and structure, there is a common understanding of the need for near-term funding,” said Transportation Committee Chairman Don Young.

“This bill, at its requested level of $2 billion per year, will allow Amtrak to continue with critical work under its current five-year plan.”

Young added, “The legislation also contains funding accountability procedures closely modeled on those already in effect under the current appropriations laws. It is my hope that the funding authorized in this bill will allow a window of opportunity for a last-chance Amtrak turnaround.”

An enthusiastic Oberstar declared, “Without Amtrak, millions of passengers – many of whom cannot afford to drive a car or buy a plane ticket – would be stranded, millions of travelers would be added to already congested roads and airports, 20,000 workers would be out on the streets looking for new jobs, communities and businesses that depend on passenger rail service would suffer, and states already under tight budget constraints would be forced to figure out how to pay for new service. It is our responsibility to ensure that Amtrak survives.”

Ohio’s LaTourette pointed out, “This bipartisan bill will provide funds so Amtrak can continue operations and begin to repair and restore the Northeast Corridor. It’s clear from the size and scope of the bill that we recognize the vital role railroads play in our national transportation system” and Florida’s Brown added, “The current funding issues concerning Amtrak bring up a fundamental question of where our nation stands on public transportation. We have an opportunity to improve a system that serves our need for passenger rail service, or we can let that fall apart, leaving our country’s travelers and businesses with absolutely no alternative form of public transportation.”

Details of the proposed measure show that H.R. 1630 would authorize “$2 billion per year for each of the fiscal years 2006 through 2008 to the Secretary of Transportation for the benefit of Amtrak capital and operating expenses, and Amtrak excess railroad retirement expense.”

The secretary would be “required to set aside a reserve to ensure that Amtrak meets all of its contractual obligations related to commuter rail and state-supported rail services.” Amtrak would be required to submit to the secretary “comprehensive business plans and follow-up reports with a separate accounting for its various lines of business, and reports related to capital projects expenditures.”

According to Amtrak, this level of funding “would be sufficient to begin to address critical needs outlined in its five-year capital plan, which is geared to restoring the Amtrak system, including the Northeast Corridor, to a good state of repair.”

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House to consider high-speed rail bill

Bipartisan legislation that would provide $60 billion for high-speed rail and rail infrastructure projects was introduced in the House on April 14.

The Railroad Infrastructure Development and Expansion Act for the 21st Century (RIDE 21), H.R. 1631 was introduced by Reps. Don Young; James Oberstar, Steven LaTourette and Corrine Brown.

“RIDE 21 is a historic commitment from this Congress to improve and expand our nation’s rail infrastructure and develop a viable high-speed rail system,” said Transportation Committee Chairman Young.

“This bill addresses the increasing needs of our passenger and freight rail systems and the growing congestion problems that hinder our other transportation systems” he added.

“This is a state-empowering bill in which the states will call the shots. States will select and design their own corridors, choose whether to use steel-wheel or Maglev trains, and also determine how and on what schedule they will finance and construct projects,” he said.

Transportation Committee Ranking Member Oberstar added, “If the U.S. is serious about maintaining our status as the world’s leader in transportation, then we must tap into the potential of our rail system.” Oberstar pointed out, “Even with continuing investments in highways and aviation, we cannot depend on those modes of transportation alone. We must strengthen our rail system by expanding capacity and improving reliability for freight and passenger services. RIDE 21 will enable us do that.”

Railroad Subcommittee Chairman LaTourette added, “RIDE-21 will pump $60 billion into new and improved rail infrastructure across the country. It will help create thousands of new jobs while preserving the rights of rail workers under existing collective bargaining agreements.”

Railroad Subcommittee Ranking Member Brown noted, “Expanding and improving our passenger and freight rail systems will allow this nation to keep up with ever expanding growth and improve congestion This legislation is a win-win for passenger and freight rail, and the people who utilize it.”

The bill establishes authority for states or interstate compacts to issue $12 billion in federally tax-exempt bonds and $12 billion in federal tax-credit bonds for infrastructure improvements for high-speed passenger railroad infrastructure. Other provisions include:

The USDOT secretary may approve overall corridor designs that have in place agreements of owning freight railroad if its rights-of-way are to be used; eliminates or avoids railroad grade crossings that would impede high-speed operations; applies prevailing wage rate standards to construction projects; and has an interstate compact in place for multi-state corridors.

The Transportation secretary may approve projects to complete a major portion of the infrastructure to complete a viable and comprehensive corridor for high-speed rail as defined in 49 U.S.C. sec. 26105 (including corridors designated under ISTEA/TEA-21) at 125 mph or higher.

The measure stipulates the Transportation secretary may give preference to projects that use a mix of tax-credit and tax-exempt bonds, link rail passenger service with other modes of transportation, and are expected to have a significant impact on air traffic congestion.

The secretary may also give preference to routes expected to also improve commuter rail operations, have all environmental work completed and are ready to commence, or have received state or local financial support.

The Secretary may designate $1.2 billion per year for 10 years of private-activity, tax-exempt bonds, plus $1.2 billion per year for 10 years in tax-credit bonds. Authority to designate unused annual amounts of each type of bond carries over to subsequent years.

State and local government bonds used for high-speed rail infrastructure must be designated by the secretary to be tax-exempt.

Tax-exempt bond amounts are excluded from the $225 million cap on state-issued federally tax-exempt bonds. Potentially displaced workers are provided protection through hiring preference for positions with new providers of high-speed rail passenger service.

States are required to submit annual reports on status of bonds and bond-funded projects.

The legislation reauthorizes and modifies the existing Swift Rail Development Act, a program to develop high-speed rail corridors, by extending the program authority through fiscal year 2011, and $100 million per year in general fund grants that are subject to appropriation.

It also changes funding emphasis from technology development (from $25 million per year to $30 million per year) to corridor development (previously corridor planning) (from $10 million per year to $70 million per year) and allows acquiring locomotives, rolling stock, track and signal equipment with program grants.

The legislation also expands the existing Railroad Rehabilitation and Infrastructure Financing (RRIF) loan and loan guarantee program by increasing funding authority from $3.5 billion to $35 billion of outstanding loan principal at any time, and modifies the RRIF program by making interstate compacts as well as states eligible for assistance.

Magnetic levitation systems as well as steel-wheel systems are eligible for assistance.

Amount available for primary benefit of Class II and III railroads is increased from $1 billion to $7 billion out of $35 billion in total loan principal authority.

Eliminates obstacles in the current RRIF program (structure of loan cohorts, collateral requirements, artificial limits on loan amounts, prior rejection requirement).

The Secretary of Transportation must approve or disapprove an application within 180 days after receiving it, and may not assess applicant fees or other charges.

The Secretary is required to publish review standards and criteria within 30 days after enactment.

Applicants must apply prevailing wage rate standards to construction projects.

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Some Amtrak tunnel improvements
approach completion in Gotham

When the finishing touches are made to a new ventilation system for the North River tunnel in Weehawken, N.J., this month, Amtrak will have reached a significant milestone of the first phase of the multifaceted $442 million New York tunnels fire and life safety program.

The six Amtrak-owned tunnels that carry traffic to and from New York’s Penn Station make up the centerpiece of the program, which is jointly funded by Amtrak, New Jersey Transit, Long Island Rail Road, and the Federal Railroad Administration and aimed at upgrading the safety systems unique to the tunnels, reports the April edition of Amtrak Ink, the monthly newspaper for Amtrak employees.

The ventilation system for the North River tunnels in Weehawken was substantially complete on January 31, four months ahead of schedule and under budget by approximately $1 million - including a payment to the general contractor to accelerate the project.

The new system includes computer-controlled bidirectional fans, and new stairways that provide safe access and egress, housed in a completely new seven-story ventilation portal structure.

The fans are operational, and are scheduled to be connected to the Supervisory Control and Data Acquisition (SCADA) computer control system, which enables the system to be monitored and operated via computer from Penn Station Control Center.

A few final pieces will complete the project this month, including a retaining wall for grade differences, paving, and installing a large clock outside the structure.

On the east side of Penn Station are Amtrak’s four East River tunnels. There the Long Island City ventilation project is about 40 percent complete, and in February 2007 will comprise new bidirectional fans, staircases, and substations to power the ventilation system, all within the walls of a new three-story ventilation structure.

The fan house and substation that were above ground have been knocked down and demolition of the 60-foot underground liners of the ventilation shafts has progressed to 40 feet below the surface. The pilings on which the foundation of the new structure were recently set. By this fall, new concrete shaft liners will be completed, the new structure built, and the fans installed.

“The general contractor that carried out the ventilation project in Weehawken submitted a bid that met our fiscal and technical expectations and was awarded the contract for the complex First Avenue Tunnel project,” said Fire and Life Safety Program Director Steve Alleman, whose six project managers are responsible for the management. The project is complicated because of its location in downtown Manhattan on New York Univ. Hospital grounds. Alleman added that the new southside ventilation structure will be only nine feet from the hospital, and that noise, dust and vibration concerns will take priority.

Construction began in January with a lane closing on First Avenue, installing temporary barricades, putting up trailers, and other start-up tasks. Drawings are currently being reviewed and meetings with the community’s advisory board are being held.

The tunnel shields that were so effective in enabling tunnel work without interfering with train operations on the Long Island City project are scheduled to be built this summer.

“The shields are one of a kind,” said Stan Wiecek director, Design Support.

“We used them to isolate the demolition of the existing vent shafts and construction of the new vent shafts from rail traffic. They worked out so well on the Long Island City vent project that we decided to employ the same concept for this project.”

The result in 2009-2010 will be a nine-story structure in which a new ventilation system with new stairways and bi-directional fans are housed.

A tunnel fire standpipe project is nearly complete, which, in July, will result in 16 miles of standpipe network in all six tunnels.

“This is an enormous improvement that enables fire department personnel greater access to the fire suppression system throughout all tunnels,” said program manager Abdul Rasheed.

In 2006, a supervisory system that monitors the pipes for leaks or any irregularities will be installed, and complete the project.

The major elements of the conceptual scope of Phase II, which would run from 2008 to 2013, are currently being designed.

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Peering inside carrier:

Amtrak’s future is cloudy, at best

By Leo King

Editor’s note: Thinking inside Amtrak seldom gets a public airing, but occasionally some wisdom bubbles to the surface. Such was the case last week when Joshua Sabin, Amtrak’s senior government affairs officer in Chicago appeared on the internet and a correspondence list named “All Aboard.”


What will eventually happen to Amtrak is anybody’s guess.

Joshua Sabin’s paper about the Passenger railroad’s future combines a summary of the proposed Bush administration Amtrak reform plan, and Amtrak’s commentary on the elements of that plan.

Sabin said his notes are not to be construed as an official Amtrak Government Affairs document, nor to necessarily represent the opinion of Amtrak.

The administration’s proposal, if enacted, “would mean a radical departure from the procedures and policies currently in place for America’s intercity passenger rail service,” Sabin wrote.

“Among other things, it would create three new rail companies, require states assume costs of any trains they want to retain which do not meet the standards established in the bill, create a new methodology for calculating long distance train performance, enlarge the board, and give greater control” to the USDOT.

Funding for rail corridor development would be modeled on transit projects but with differences; the federal share would decline over five years from 100 percent to 50 percent, and there would be nothing comparable for access to the Transit Sub-Account of the Highway Trust Fund to pay for rail projects.

Sen. John McCain as S.1501 introduced the Administration’s proposal in the Senate.

No specific dollar amounts of authorizations are proposed in the bill, and “all of the funds necessary to implement the transition process would be subject to annual enactment by Congress of discretionary appropriations.”

The Amtrak board of directors would be expanded from seven members to eleven, Sabin wrote. Its quorum would be reduced from one half of the current seats to a majority of the current members.

“This means that if there is a delay in the appointment of new members to the expanded board, the three current members could make board decisions,” wrote Sabin.

He added, “Even after new members are appointed to the board, its key decisions would be subject to the approval of a new Transition Committee consisting of the Secretary and one or two other members which would ‘ensure that the public interest is served in board decisions.’ Under that standard, Amtrak would essentially lose its independence of the DOT.”

The Northeast Corridor would be transferred to USDOT for lease to an entity to be formed under a compact among the eight concerned states and the District of Columbia.

“If the compact is not formed in two years, then the federal commitment to fund 100 percent of the NEC capital backlog is withdrawn, and the continuation of intercity passenger service in the NEC would be subject to the adoption of new legislation following recommendations from the transportation secretary. This raises serious questions about the continuation of passenger rail service in the Northeast Corridor,” Sabin continued.

He explained, “The NEC commuter authorities would lose their statutory right to use the NEC at incremental cost. Although the new NEC compact authority, if formed, would have the power to continue such favored treatment for the commuters, that seems unlikely, because the federal government would be providing no operating assistance to make up the difference between fully allocated costs of NEC commuter operations and incremental costs, which is what they pay today.”

Sabin pointed out, “The British experience is especially valid for high-speed operations like the Northeast Corridor. It has been consistently reported through many reputable sources that the British system has been an enormous and costly failure. Not only has the British system put passenger safety and reliability at risk, it has resulted in far higher public expenditures, not the savings that were promised by its sponsors.”

“For 25 years,” he wrote, “the NEC states and Amtrak have worked to improve capacity, reliability and utility for rail passengers. One of the key reasons for its success is that Amtrak largely controls the infrastructure and operations on the NEC. The Administration’s plan much more closely parallels the privatization of British Rail and the separation of its operations and infrastructure.”

He spelled out a possible route structure, and noted, “All of Amtrak’s 17 long distance routes would be subject to new loss per passenger-mile limitation on the federal share of operating expenses.”

The “glidepath to self-sufficiency” would be reduced over time, and “Any passenger-mile loss in excess of 40 cents in 2005 would have to be paid for by the state or eliminated. Any passenger-mile loss in excess of 20 cents would have to be paid for by the state or eliminated in 2006.”

Any passenger-mile loss in excess of 10 cents in 2007 would be paid for by the state or eliminated by 2008; there would be $0.00 subsidy for passenger trains after that.”

Sabin pointed out, “The proposed legislation is ambiguous on whether this calculation is to be based on avoidable or fully allocated costs. However, it probably means that long-distance trains would begin to disappear with increasing rapidity in the 2005 to 2007 timeframe.”

“Unless Congress appropriates funds to pay the labor protection resulting from route discontinuances, Amtrak would be in a financial crisis long before the end of this period, which would mean the long distance trains could disappear even faster than the new statutory formula would require.”

Any Amtrak routes (long distance or short distance) outside of the NEC that are still in operation after three years “would be subject to privatization.”

A new operator selected by a state, local authority or a compact entity formed to support the route would be assigned Amtrak’s statutory access right to freight rail lines at an incremental cost.

“However, merely to retain all current routes, a state could be required to form multiple compacts with several states. Should a new operator want to add a new route, it would be subject to negotiations with the freight railroads without recourse to incremental costs that are statutorily established for Amtrak.”

Labor costs would also be a large consideration, he explained.

Although Amtrak employees who do not accept a DOT buyout of up to $50,000 continue under current terms of employment with Amtrak successor entities (the Amtrak infrastructure and operating companies), “that protection could be short-lived. The NEC compact entity could select someone other than the new Amtrak Infrastructure Corp., and states could select new operators to replace the Amtrak Operating Corp. Who these parties might be is now anybody’s guess, and there is no guarantee that they will not offer substantially less compensation and benefits than Amtrak currently does.”

Sabin noted there are also noteworthy changes with respect to Amtrak’s secured creditors, vendors, and common stockholders

The debt secured by rolling stock will be assumed by the new Amtrak operating company, and the secured creditors are likely to view its credit-worthiness as substantially less than Amtrak’s and threaten repossession of rolling-stock.

The NEC would be transferred to the USDOT secretary, “who would then be responsible for payment of principal and interest on debt secured by the NEC, but only to the extent Congress appropriates funds to do so.” In any event, if the NEC compact entity is formed, “it will then assume the NEC debt, but the credit-worthiness of such an entity is now only speculative.”

Equity partners in Amtrak financing deals have the benefit of covenants against the loss of tax benefits that the deals provide them, Sabin stated.

“Transfer of the NEC to such a compact entity could, for example, trigger huge financial instabilities under such agreements if the NEC becomes ‘government-use property’ as the result of such transfer. There is no apparent source of funding anywhere to pay such liabilities.”

Amtrak vendors “will note that the current Amtrak ‘Buy America’ requirement, which applies to all Amtrak purchases in excess of $1 million, would be narrowed in that the requirement would be limited to purchases made with federal grant funds only, and state or privately financed acquisitions would not be subject to the current Buy-America requirement.

An item few people ever think about are the few shares of Amtrak stock, most of which are held by the USDOT secretary.

“The mandated redemption of Amtrak common stock, wrote Sabin, “would not satisfy Amtrak common stockholders, and the new authority to redeem it through condemnation is likely to be challenged on Constitutional grounds because the prescribed standard for just compensation is too narrow.”

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Meteor stalls in South Carolina
other Amtrak problems mar week

Northbound 10-car Amtrak train No. 92, the Silver Star, broke down in Bethune, S.C. between 4:00 and 5:00 a.m. on April 5, leaving about 270 travelers from up and down the East Coast stranded for approximately six hours in the small, rural Kershaw County town. The train’s last scheduled stop was at Columbia, S.C. at 4:20 a.m.

Despite the timing of the early morning breakdown, several local officials said they didn’t know anything was wrong until nearly 9:00 a.m. when Kershaw County’s central dispatch began receiving cell phone calls from passengers aboard the train, the Camden Chronicle Independent reported on April 12.

One of those calls seemed to indicate there was a pregnant woman on board who had gone into labor, but county deputy fire marshal Keith Ray and County Medical Center EMS assistant director Robert Johnson said, at most, the woman had suffered a panic attack.

That didn’t mean they found happy passengers when they arrived on the scene. Most passengers voiced one complaint or another regarding the conditions on board once the train stopped and a lack of communication from Amtrak officials and employees on board.

Alisha Pio, of Ocala, Fla., and her 2-year-old son were heading for North Carolina in the rear-most car when the train broke down.

“There was no electricity, no water, the bathrooms were nasty, and they didn‘t say anything to us,” said Pio, adding, “We couldn’t drink, and they didn‘t give us anything to eat.”

Pio said she and her fellow passengers were alternately told to sit down, get off the train, sit back down and, finally, to get off the train to wait for buses to take them north.

A broken fuel pump was to blame, said Darin Stoick, Amtrak’s Atlantic Coast Business Group customer service manager, who was on the scene.

“Once that happened, there was no power,” said Stoick.

Nearly everyone was off the train by 9:30 a.m.

Another Amtrak official on the scene, Trainmaster Doug Sloop, said seven buses were on the way. It wasn’t until 10:30 a.m. that the first arrived.

“I don’t know what happened,“ said Stoick. “We had them lined up to be here at 9 a.m.”

Gary Manning, of Bernardsville, N.J., said Amtrak employees on board didn’t communicate with passengers well enough.

“If they had, people wouldn’t be panicking,“ he said.

The county’s Johnson said conditions on the train were stable and that no one had really required medical attention.

“We had the one pregnant woman, and we assisted her in getting comfortable,“ said Johnson. “We also dealt with a man with chest pains, who‘s fine, and a young man whose family said he’s probably had a stress attack.“

Lila Hicho and Dennis Mortensen, wearing leather motorcycle clothes, were trying to keep cool as the temperatures outside rose. They were trying to reach Mortensen’s mother in Hamlet, N.Y.

“It’s crazy,” said Hicho, from Fort Pierce, Fla.

“There‘s no water, no breakfast, no bathrooms, no anything.”

Dorothy Teasley was also heading back to New York after a trip to Florida. She said she believed the problems on the train were a result of cutbacks in the government‘s Amtrak funding.

“I love Amtrak, and I love riding the trains, but the government obviously doesn’t. Our government can afford smart bombs and dumb trains,” she said.

All the buses had arrived by 10:45 a.m., and the passengers began to load up. Even then, Stoick and local officials had to help passengers figure out which bus to get on in order to reach their destinations - or at least waypoints where they could transfer to other trains.

The biggest complaint was how long it had taken Amtrak to officially ask for local assistance and start arranging for the buses to come to Bethune in the first place.

“The delay was due to figuring out the logistics for the buses and to see if we could either get the fuel pump fixed or get another engine to pull the train,” said Stoick.

Stoick and Sloop referred all other questions about the incident, including passenger complaints, to Amtrak’s Washington headquarters. No one answered at the number they provided and there appeared to be no way to leave a message.

Another delay came after nearly everyone was on the buses. Several passengers started asking if they could retrieve some of their luggage from the baggage car. Stoick initially said all the baggage would go on to their final destinations, but passengers were concerned about medications and baby seats. Quickly, a small crowd formed below one of the baggage car’s doors, and Stoick began checking baggage stubs.

Christopher Walters, who had been in Ft. Lauderdale, Fla., and was returning home to Cleveland, Ohio, via Washington, D.C., was one of those trying to get his bags.

“We just got told that if we don’t get back on the bus, they’re going to leave without us,“ said Walters.

At 11:15 a.m., more than six hours after the train had broken down, Johnson joined Ray and several others on a sweep of the passenger cars. A little while earlier, the locomotive had restarted, but officials had said it was unlikely the train was going anywhere.

As Johnson and the others passed through the train, they found the power back on and air-conditioning beginning to cool the cars.

“They might not want to move this train now while the buses are still here; the passengers would probably kill them,“ said Johnson.

Even with their baggage in tow and the somewhat cooler conditions on the buses, passengers still weren’t happy, and they let local officials know it.

The American Red Cross‘ Teresa Seay said several passengers told her Amtrak tried to sell them what snacks they had left.

Seay said she was able to obtain some 250 to 300 bottles of water, some of which were donated by a local gasoline station.

“The lady there even gave us $20 for whatever else we could do here,“ she said.

Around 11:30 a.m., another engine arrived on the scene to help take away the train. By then, all the passengers were off the train and boarding the buses. Despite the hard feelings, Davis said things didn’t get too bad.

“We did have three fights break out,“ he said.

Just before noon Tuesday, the buses rolled out of Bethune, heading for points north, but three passengers were left in Bethune for Amtrak to deal with.

Barbara Zook, who said she has been wheelchair-bound for 24 years, and two family members would have to find another way back to their Gordonville, Pa., home.

Johnson explained the buses had no means to accommodate Zook in her wheelchair and that most likely Amtrak would either place her back on the train or get her and her family home some other way. Seay came over and handed the trio bottles of water.

In another less than sterling episode concerning Amtrak, The Grand Rapids Press, reported on April 12, after Amtrak left 200 frustrated passengers temporarily stranded at the Holland, Mich., station, a West Michigan group offered ideas to improve service.

Leaders with the Westrain Collaborative, a group formed in the mid-1990s to help boost Amtrak ridership on the Pere Marquette line, planned to make suggestions to Amtrak for diffusing incidents that can leave passengers fuming.

That was the case April 13 when a mechanical problem put the train three hours behind schedule, then Amtrak dropped all passengers off at the Holland station because of the 12-hour hours of service limit.

Amtrak planned to have buses ready for passengers to board to continue the trip to Chicago, but the buses arrived late and put the riders another 90 minutes behind schedule.

Steve Bulthuis, transportation program manager for the Macatawa Area Coordinating Council and a Westrain member, said Amtrak could have done a better job of getting information about the delays to passengers.

Some passengers who boarded the train in Grand Rapids were unaware the Amtrak crew planned to deboard passengers in Holland and use the buses. Bulthuis also said he did not think a digital outdoor sign, installed to give updates about delayed trains and other problems, gave any information about when buses might arrive.

He said riders should have been told as soon Amtrak officials knew about the plan to use buses, allowing those waiting at the Grand Rapids station to decide whether they wanted to continue the trip.

Amtrak spokesman Marc Magliari agreed Amtrak could have handled the situation differently.

“There was plenty of room for improvement on how it was handled,” he said. “We look forward to hearing from (Westrain),” he said.

Magliari said he had not heard whether the digital sign was giving information about the problems. He said the train crew expected buses would be waiting at the station when they arrived or that a crew from Chicago would have been sent to Holland to take over.

“I think everyone was disappointed in how it turned out,” he said.

Magliari said passengers who experienced disrupted service may be able to get a discount, refund or other reimbursement by calling 1-800-USA-RAIL.

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Vermonter bus service returns

Amtrak’s Vermonter will change its schedule this spring and restore bus service to Montreal. Passengers will be bused from Saint Albans to Montreal. The train, which runs from Saint Albans to Washington, also has added a stop at Newark International airport.

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LABOR LINES...  Labor lines...

BLE angry over another death

A Union Pacific switchman died in a remote control switching accident in Riverdale, Utah, on April 11, the Brotherhood of Locomotive Engineers and Trainmen reported April 13 from their Cleveland headquarters.

BLET national President Don Hahs said it “underscored the dangers of unregulated remote control train operations.”

Early reports indicated that a lack of training may have contributed to the fatality, the latest in a string of serious remote control related accidents, the BLET stated in a press release.

The victim was 38-year-old switchman Anthony L. Petersen, who had eight months of total railroad experience at the time of the accident. It was only his second day on the job at Riverdale when he died.

The BLET has “lobbied the FRA for years to implement enforceable regulations to govern remote control train operations,” the labor organization stated. The BLET has lobbied the FRA to increase the amount of training that remote control operators receive.

“Right now remote control operators only get two weeks of training,” said Hahs. “That’s not enough, and, sadly, Anthony L. Petersen paid the ultimate price for this lack of oversight.”

It is believed that the switchman, who was not wearing a beltpack device, was riding on the side of a rail car when he fell and was run over.

Remote control operators normally receive 80 hours of training before going to work – 40 hours of classroom training and 40 hours of on the job training.

“These remote control operators are replacing engineers, who are the most experienced member of the train crew,” Hahs said. “Basic training to become a federally certified locomotive engineer is anywhere from eight months to a full year. To replace certified engineers with employees who have just two weeks of training clearly lowers the bar when it comes to safety.”

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COMMUTER LINES...  Commuter lines...

Amtrak, too:

Transit gets $142 million for security

The U.S. Department of Homeland Security awarded $141.6 million in transit security grants on April 12 under the Transit Security Grant Program – and it is awarding $6.4 million to Amtrak through the Intercity Passenger Rail Security Program (IPRSGP) for security enhancements for intercity passenger rail operations in the Northeast Corridor and at Amtrak’s Chicago hub.

Government Technology reported last week the grants are intended to protect regional transit systems and commuters from terrorism, especially explosives and unconventional threats. The program totals $135.3 million for owners and operators of some of the nation’s most critical infrastructure.

$107.9 will go to rail transit systems, $22.4 million for intracity bus systems, and $5 million for ferry systems.

“These grants will target our resources toward the greatest risk while contributing to the overall security of our nation’s transit systems,” said Matt A. Mayer, Acting Executive Director of the Department of Homeland Security’s Office of State and Local Government Coordination and Preparedness (SLGCP).

The grant programs specifically provide funding for the prevention and detection of explosive devices and chemical, biological, radiological and nuclear agents. DHS said it awarded $50 million in 2004 and $65 million in 2003 to transit systems.

The American Public Transportation Assn. helped to write the new legislation.

APTA President William W. Millar said the association was pleased that DHS Secretary Michael Chernoff allocated $135 million to transit security,” and added, the amount “is larger than the previous two years combined.”

Congress appropriated $150 million for transportation security in fiscal year 2005 to be split among transit, passenger and freight rail. Out of that total, $130 million was allocated for rail ($108 million) and bus ($22 million). Another $5 million from a separate account was allocated for ferries.

“This is definitely a step in the right direction, however, the public transportation industry needs $6 billion to meet its security needs,” Millar said.

Under the new appropriations, states have to apply for the new transit security allocations and a state can take up to 3 percent of the money. This means “less money for the transit agencies and means a delay in receiving the money,” Millar said.

Last year APTA surveyed its American transit agencies on transit security needs. The results of the survey showed a total of $6 billion in security needs – with $5.2 billion in capital needs and $800 million annually for operational security investments.

“Since September 11, 2001, the American public transportation industry has invested over $2 billion in security. In the same time, the federal government has invested $250 million in transit security. We urge Congress and the Bush administration to make transit security a priority and to fund it at an appropriate level.”

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Minnesota’s Pawlenty signs rail bill

Minnesota Gov. Tim Pawlenty promised relief to traffic-choked northern suburbs April 11 by signing a bill that frees up $37.5 million for a commuter rail line connecting Minneapolis and Big Lake. Before any trains can move, project planners need to secure $132 million in federal money and another $50 million from the state.

The Northstar line was the most celebrated and the most controversial project in a $945 million public works bill the governor signed into law, The AP reported last week from Coon Rapids. About $886 million of the debt will be borne by the state.

The 40-mile commuter rail line could be completed in 2008, if the rest of the federal and state money is approved. Pawlenty, a Republican, said he’ll push for the second installment next year and he is confident the legislature will come through.

“The momentum is now behind the project,” he said, “and to have this much invested in it and not go forward would be silly.”

Tim Yantos, the Northstar project director, said federal officials were adamant about seeing a state down-payment before giving final approval to the project.

More than a dozen lawmakers from both parties joined Pawlenty for the ceremonial bill signing at a park-and-ride lot that will house one of Northstar’s stations.

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APTA HIGHLIGHTS...  APTA Highlights...

Here are some other transit headlines, from the pages of Passenger Transport, the weekly newspaper of the public transportation industry published by the non-profit American Public Transportation Assn. For more news from Passenger Transport and subscription information, visit the APTA web site at http://www.apta.com/news/pt.

Passenger and Freight Rail Face ‘Historic Transition’

Passenger and freight railroads are facing a “moment of historic transition” regarding the sharing of rail corridors, Robert W. Turner, senior vice president, corporate relations, with Union Pacific Railroad, told the April 4 opening General Session of the APTA Commuter Rail Conference in Los Angeles.

“We really are at a critical crossroads…We need to make an assessment of where we are, and establish a framework for partnerships between modes,” Turner continued. He noted that both freight rail and passenger rail systems are operating at or near their capacity in several major U.S. corridors, and that the organizations will “have to re-examine our approach and change how we think about capacity.”

Specifically, Turner called on railroads to identify their core routes to protect them for future growth. He defined core routes as those that are critical to a railroad, and warned that finding an accommodation for passenger rail on such important freight lines may be difficult.

“How we deal with this issue will affect how we partner with public agencies,” he said. “We have to plan now to identify places where we can make improvements.”

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Montreal Board of Trade Study: Transit Is Powerful Economic Engine

In a new study quantifying the economic benefits of public transportation in the Montreal region, the Board of Trade of Metropolitan Montreal concludes that transit generates significant economic activity for the area.

Among the study’s findings are:

Economic benefits of almost $937 million (Cdn.) generated by the activities of transit authorities

Savings of $570 million (Cdn.) for Montreal households using transit

Benefits assessed at $62 million, in Canadian dollars, from a reduction in road accidents and $97 million from lowered polluting emissions, plus benefits linked to greater mobility of workers, increased vitality of real estate development, and reduced congestion

Creation of 12,845 jobs with transit authorities and their suppliers

Annual revenues of $300 million for the provincial and federal governments

The new study, titled Public Transit: a powerful economic-development engine for the metropolitan Montreal region, is based on data for 2003 and an opinion survey of the business community conducted by the Board of Trade in September 2004.

The Board of Trade noted that it carried out the study because of a growing interest in public transit by the business community, and an awareness that “the true economic role of public transit is not fully recognized.”

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Green Named President of GFI GENFARE

Kim R. Green, a 30-year veteran of the public transportation industry, has been named president of GFI GENFARE, a manufacturer of bus fare collection equipment headquartered in Elk Grove, Ill. He previously served the company as vice president for sales and marketing.

Green has spent virtually his entire transit career specializing in automatic fare collection systems. He began working for Duncan Industries-Mass Transit Division, a fare collection company, as a summer job while he was in school, becoming marketing manager in 1975; director of program management in 1978; and director of sales in 1980.

Green joined GFI GENFARE in 1986 as director of marketing, and became vice-president for sales and marketing in 1991.

He has been active in APTA for most of his career, serving on numerous APTA and Business Member Board of Governors committees. He currently serves as APTA vice chair-business members and BMBG chair, and served two years each as BMBG first vice chair and BMBG second vice chair.

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Valley Metro Names Boggs as New Executive Director

David A. Boggs was unanimously approved as executive director of the Valley Metro/Regional Public Transportation Authority in Phoenix by its board of directors. He begins his new position April 18.

Boggs succeeds Ken Driggs, who will retire April 15 after leading the public transit agency for 18 years.

Boggs has more than 13 years experience as a CEO and seven years as a CFO in both private and public sector organizations. He has served as regional vice president of ATC Southwest and Northwest Regions, and oversaw the operations of contracted bus service for Phoenix, Mesa, Tempe, the RPTA, and transit properties in Nevada and Washington. Prior to this, he was vice president and general manager of ATC Las Vegas.

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Anchorage Voters Pass Transit Bond Referendum

Voters in Anchorage, Alaska, passed a bond referendum April 5 for $1.93 million to support “People Mover,” the city’s existing vanpool, bus, and paratransit system.

The public transportation measure, Proposition 5, was approved by a vote of 27,710 for and 21,856 against, or 56 percent of the voters. The bond money will be used to match federal capital grants available to the city transit system on a four to one ratio, equaling $7.72 million of federal contributions or a total of nearly $10 million.

The money will fund replacement vehicles for the city’s vanpool system and AnchorRides paratransit system, as well as at least one new full-size bus for the city’s bus system.

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FREIGHT LINES...  Freight lines...

BNSF says okay to UP for running rights

BNSF has okayed a deal with Union Pacific to let UP operate over nearly 600 miles of BNSF tracks.

BNSF agreed to grant temporary overhead trackage rights to UP between BNSF milepost 4.8 near Kansas City, Kansas and BNSF MP 213.2 near Wichita on one line, and BNSF MP 345.6 near Fort Worth, Texas on another, a total distance of about 595.8 miles.

The Surface Transportation Board okayed the notion last week.

The transaction was completed April 1 and will expire on or about April 23. UP is repairing its lines so asked for the okay.

As a condition to the exemption, the STB stipulated, “Any employees affected by the acquisition of the temporary trackage rights will be protected by the conditions imposed in Norfolk & Western Ry. Co.–Trackage Rights (BN, 354 I.C.C. 605 (1978)), as modified in Mendocino Coast Ry., Inc. – Lease and Operate, 360 (I.C.C. 653 (1980)), and any employee affected by the discontinuance of those trackage rights will be protected by the conditions set out in Oregon Short Line R. Co. –Abandonment (Goshen, 360 I.C.C. 91 (1979)).

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BNSF to lower Montana grain rates

BNSF Ry., the transporter of nearly all Montana-grown grain, has agreed to an immediate reduction in transportation rates for the state’s wheat farmers, Gov. Brian Schweitzer said April 13.

Farmers can expect to pay 3 to 4 cents less per bushel on wheat sent to West Coast markets. That should result in a statewide savings of $5 million to $6 million a year, Schweitzer told the Great Falls Tribune.

BNSF confirmed it would adjust its rates.

The deal is part of a larger BNSF plan to temporarily change the way it calculates fuel surcharges on grain shipments.

The new rate will affect producers in four states – Montana, Minnesota and the Dakotas. The other states will wait until January 1 to see the savings.

“Montana’s rate will go down right now,” Schweitzer said.

Richard Owen of the Montana Grain Growers Assn. called the reduction “an important first step” to bring Montana shipping rates in line with those of other states.

He noted that the $5 million to $6 million savings from the reduction is about one-tenth of the $60 million overcharge paid by Montana farmers each year.

“They’ve got a long way to go to make it comparable to other states that have competition,” Owen said.

BNSF hauls about 80 percent of the state’s export grain and charges a higher rate than it does in states with more competitive shipping alternatives for grain headed to the Northwest, according to a 2004 legislative report on Montana freight competition. The discrepancy costs Montana growers about $60 million a year, the report said.

Pressure has been mounting for BNSF to reduce freight costs, including a bill in the legislature that would increase the company’s property tax in accordance with the shipping discrepancy with other states.

Schweitzer said the bill might have played a role in the reduction.

“It could be that they got the message that there is a fairly high level of frustration right now in Montana and they are looking to gain our confidence again,” Schweitzer said.

The sponsor of the rail-tax bill, Rep. Bob Bergren (D), has succeeded in shepherding the legislation through the House Agriculture Committee and through the House. The bill now awaits action by the Senate Taxation Committee.

“I think (BNSF) never dreamed that (the bill) would come out of not only committee but through the House,” MGGA’s Owen said.

Terry Whiteside, a Billings-based transportation consultant with the Montana Wheat and Barley Commission, said his group has long complained about the fuel surcharge.

The surcharge is calculated as a percentage of Montana’s high shipping rates, and costs the state’s farmers $7 million to $10 million a year, according to Wheat and Barley Commission.

“We still have the highest freights in the nation, and that’s still the issue here,” Whiteside said.

BNSF has agreed to a new method for calculating the fuel charge based on mileage instead of a percentage of shipping rates.

That means farmers in the eastern part of the state will pay more than those in the more westerly regions. The savings should range from $115 to $150 per railcar.

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CN carload prices now online

Canadian National Ry. Stated April 11 that its customers can now get instantaneous carload prices 24 hours a day, seven days a week from its website, at www.cn.ca.

CN’s James Foote, said, “This new pricing tool increases the speed at which we can quote rates for our customers, and makes it much easier for shippers to do business with us.”

He explained that “In years past, the manual, time-intensive methods of quoting single-line and interline prices could take days or even weeks. That’s something CN and the rail industry can no longer afford in today’s fast-paced business environment.”

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Shareholder sues UP over safety

Union Pacific stated April 12 all of its current directors and one former director were named as defendants in a lawsuit filed April 6 in a Utah court in Salt Lake City, alleging a breach of fiduciary duty over railroad safety. The complaint, according to MarketWatch, accuses UP of “disregarding problems relating to railroad safety, compliance with governmental regulations, including reporting requirements with respect to rail accidents, and the handling of evidence in rail accident cases,” according to a filing with the Securities and Exchange Commission. UP said it would provide any updates in its first quarter 2005 report.

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Butler, Krehbiel get new jobs at UP

Union Pacific said last week that Eric L. Butler was named Vice President and General Manager for Industrial Products, and Julie A. Krehbiel became Vice-President and General Manager for Automotives. Butler joined UP in 1986 in the Finance department. Krehbiel will succeed Butler as automotives chief.

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WALL STREET LINES...  Wall Street lines...

Rail sector finds favor again

Business writer Jim Jubak appears on Wednesdays on CNBC’s Jubak’s Journal.

Jim Jubak knows a thing or two about picking stocks – and for the first time in a long time, railroads are showing up on his and other lists.

“While the stock market looks for direction, railroad stocks just keep chugging along. And why not?” he asked last week.

The sector’s fortunes are closely tied to U.S. economic growth, still a robust 3.8 percent at last count. Railroads get a big bang for the buck since they carry exports and imports. So news that the U.S. trade deficit hit $61 billion in February, as imports climbed to $162 billion and exports stayed steady at $101 billion, was actually good news for railroads. Just about all industries, except autos, that make the bulky stuff that railroads ship best are projected to ship higher volumes this year than last.

The railroad industry is one of the few non-energy industries that benefit from rising energy prices. Sure, higher fuel costs bump up operating costs, but growing revenue from shipping coal, the cheapest domestic fuel now, more than makes up the difference. Need a broker?

In his regular 11:20 a.m. ET Wednesday appearance on CNBC’s “Morning Call” he picked three railroad stocks for the next six months.

CSX has been a truly badly run railroad, which is why the stock looks interesting as an investment in 2005. Slow trains and poor service have kept CSX, the operator of the largest rail network in the eastern U.S., from showing the revenue gains of its peers. Profit margins look like they’ll improve this year and next as the company improves operations and cuts a projected $90 million by slashing managerial jobs.

After anemic earnings growth of 5.7 percent annually on average over the last five years, Wall Street is projecting a pickup to 9.8 percent growth over the next five years. The stock’s high trailing price-to-earnings ratio of 27.8 anticipates a pickup in earnings growth to 24 percent in 2005 and 16 percent in 2006. On projected 2005 earnings the P/E ratio is a more modest 16.1. Our StockScouter rated the stock a 9 out of a possible 10 on April 13.

Canadian Pacific Ry., like CSX, is using cost cutting to push its margins higher, but the real story for this Canadian railroad is coal, which accounted for 14 percent of revenue in 2004. CP recently signed major new contracts to export coal, such as the deal with Fording Canadian Coal Trust to export metallurgical coal from the company’s mines to Vancouver for export. In addition, many analysts are expecting grain-shipping volumes to pick up this year from the drought-reduced levels of 2004.

In a sign of railroads’ pricing power in the current market, in the Fording Coal Trust deal, CP was able to add a fuel-cost surcharge for the last two years of the contract that’ll let the railroad pass along part of any increase in energy costs. Wall Street expects the company to grow earnings per share by 11 percent annually on average over the next five years. The stock trades at a trailing 12-month price-earnings ratio of 16.1. Our StockScouter rated the stock an 8 on April 13.

Norfolk Southern Ry. is one of the industry’s best-run railroads. Investors buying the stock can’t look for a pickup in profit margins from improvements in service as with CSX. Instead, the forecast is for NS to reap the rewards of its superior service in the form of gains in market share.

NS is already one of the industry’s largest shippers of coal, which accounted for 23 percent of the company’s revenue in 2003, and the company looks set to pick up market share in that sector this year. Along with more volume, NS’s superior speed to market should result in more pricing power for the railroad.

The Wall Street consensus calls for almost 12 percent earnings growth annually on average over the next five years. That’s a drop from growth in the last five-year period but still solid for a stock trading at just 15.3 times trailing 12-month earnings per share and works out to a PEG (price-to-earnings-to-growth rate) ratio of just 1.3. Our StockScouter rated the stock a 9 on April 13.

Jubak said he also likes Canadian National Ry and BNSF.

Editor’s Note: E-mail Jim Jubak at jjmail@microsoft.com. At the time of publication, Jubak didn’t own or control shares in any of the equities mentioned in this article, nor does he own short positions in any stock mentioned.

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BNSF, CN, NS downgraded at Morgan

Railroads stocks have risen in value much faster relative to major stock indexes, but with little room ahead for extended margin improvement, J. P. Morgan reduced its ratings on three railroads to “neutral” on Thursday.

MarketWatch reported J.P. Morgan analyst Gregory Burns downgraded shares of Norfolk Southern Corp., BNSF Corp. and Canadian National Ry. Co. joining the analyst’s rating of Union Pacific Corp. and CSX Corp. at neutral.

“Our downgrades today from overweight to neutral reflect our belief that rail valuations have seen their cyclical peak, that rising interest rates will make additional valuation expansion more difficult, and that rail and truck capacity expansion in 2004-2006 rule out the prospects for an extended period of margin improvement beyond 2006,” Burns said.

Railroads outperformed the 9.4 percent gain in the Standard & Poor’s 500 index in 2004 with a 30.9 percent jump. This year, the S&P 500 is down 2.4 percent, while railroad stocks are up 3.3 percent, J.P. Morgan’s research note said.

The analyst sees several signs of increasing freight capacity in the truck and rail sectors and expects truckload margins to peak in 2005, with less-than-truckload company margins peaking in 2006 and railroad margins peaking in 2006-07.

“We expect rail pricing fundamentals to be undermined by excess capacity in the trucking environment in 2006 and 2007. In addition, the Class I railroads are expanding capacity after years of shrinking capacity, and we believe even a modest slowdown in demand will turn a capacity constrained environment (2005) into a capacity surplus environment (2006 and beyond),” Burns wrote.

Nevertheless, the underlying dynamics of railroad shipping – higher pricing and volumes of goods, coal and chemicals – mean many of the companies rated neutral will surpass first-quarter earnings estimates, according to Burns. He said J.P. Morgan’s rail index should post a median per-share earnings gain of 33.7 percent in the first quarter.

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Rail freight traffic continues to rise

Freight traffic on U.S. railroads was up from the comparable week last year during the week ended April 9, the AAR reported Thursday.

Intermodal volume for the week totaled 213,899 trailers and containers, up 6.2 percent from a year ago, with containers up 7.8 percent and trailers gaining 2.0 percent.

Carload freight totaled 343,376 units during the week, up 4.9 percent from a year ago with loadings up 7.0 percent in the West and 2.2 percent in the East. Total volume was estimated at 32.1 billion ton-miles, up 5.9 percent from 2004. The 2004 week included Good Friday, which is a holiday on many railroads.

Sixteen of 19 carload commodities were up from last year, with crushed stone, sand and gravel up 12.6 percent; grain mill products up 11.5 percent; metals up 9.2 percent; and coal up 4.3 percent. Primary forest products were down 8.7 percent while metallic ores were off 6.5 percent.

Cumulative volume for the first 14 weeks of 2005 totaled 4,746,928 carloads, up 2.7 percent from 2004; 2,995,153 trailers or containers, up 7.5 percent; and total volume of an estimated 440.8 billion ton-miles, up 3.5 percent from last year.

On Canadian railroads, during the week ended April 9 carload traffic totaled 71,024 cars, up 4.0 percent from last year while intermodal volume totaled 41,323 trailers or containers, up 0.2 percent from last year.

Cumulative originations for the first 14 weeks of 2005 on the Canadian railroads totaled 977,200 carloads, up 1.8 percent from last year, and 580,007 trailers and containers, up 4.6 percent from last year.

Combined cumulative volume for the first 14 weeks of 2005 on 15 reporting U.S. and Canadian railroads totaled 5,724,128 carloads, up 2.5 percent from last year and 3,575,160 trailers and containers, up 7.0 percent from last year.

The AAR also reported that originated carload freight on the Mexican railroad Transportacion Ferroviaria Mexicana (TFM) during the week ended April 9 totaled 8,828 cars, up 6.9 percent from last year. TFM reported intermodal volume of 4,389 originated trailers or containers, up 68.9 percent from the 14th week of 2004. For the first 14 weeks of 2005, TFM reported cumulative originated volume of 119,688 cars, up 3.9 percent from last year, and 51,702 trailers or containers, up 7.7 percent.

Railroads reporting to AAR account for 88 percent of U.S. carload freight and 95 percent of rail intermodal volume. When the U.S. operations of Canadian railroads are included, the figures increase to 95 percent and 100 percent. The Canadian railroads reporting to the AAR account for 90 percent of Canadian rail traffic. Railroads provide more than 40 percent of U.S. intercity freight transportation, more than any other mode, and rail traffic figures are regarded as an important economic indicator.

The AAR is online at www.aar.org.

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STOCKS...  Selected Friday closing quotes...

Source: MarketWatch.com

  Friday One Week
Burlington Northern & Santa Fe(BNI)47.2252.15
Canadian National (CNI)57.0061.96
Canadian Pacific (CP) 34.1035.69
CSX (CSX)38.2241.54
Florida East Coast (FLA)39.2040.80
Genessee & Wyoming (GWR)23.5024.30
Kansas City Southern (KSU)18.6620.68
Norfolk Southern (NSC)30.6534.84
Providence & Worcester (PWX)13.3313.80
Union Pacific (UNP)62.9768.00

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End Notes...

We try to be accurate in the stories we write, but even seasoned pros err occasionally. If you read something you know to be amiss, or if you have a question about a topic, we’d like to hear from you. Please e-mail the crew at leoking@nationalcorridors.org. Please include your name, and the community and state from which you write.

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In an effort to expand the on-line experience at the National Corridors Initiative web site, we have added a page featuring links to other rail travel sites. We hope to provide links to those cities or states that are working on rail transportation initiatives – state DOTs, legislators, governor’s offices, and transportation professionals – as well as some links for travelers, enthusiasts, and hobbyists.

If you have a favorite rail link, please send the uniform resource locator address (URL) to the webmaster in care of this web site. An e-mail link appears at the bottom of the NCI web site pages to get in touch with D. M. Kirkpatrick, NCI’s webmaster in Boston.

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