Broken Railroads

I went to a rail planning conference last September.

I learned a few things.

One of them was:  Every North American railroad has great planning tools and processes.

Elaborate marketing forecasts.  Network modeling tools.  Asset analysis tools.  All highly integrated to work quickly and seamlessly.  Optimized operating plans.  "Right sized" assets - crews, locomotives, freight cars.  Targeted capital investment plans.  A shining example of modern, technologically driven, efficient industry!

FAIL!

The railroads  - all of them - are having trouble moving freight.

BNSF can't move all the oil and grain out of North Dakota.  They can't get the Amtrak's Empire Builder over the road between Minneapolis and Seattle.  Poor service put a refrigerated produce hauler out of business.  They doubled the transit time for goods coming into Seattle destined for the midwest.

NS can't get traffic into or out of or through Chicago and the congestion metastasized throughout the network.  Amtrak's Capitol Limited and Lake Shore Limited haven't been on time more than a handful of times since spring.  In the worst of it in October, Intermodal trains got parked.  Oil trains got parked.  Trains fill up controlled sidings in bunches. There are no crews available to move the trains.  Sometimes the clog moves around settling in Toledo, Cleveland, Pittsburgh or Harrisburg, but there has been a clog somewhere on the line for months.

CSX and UP haven't been hurt as badly, but all their operating metrics are way down.

Shippers everywhere are angry.  The STB has written nasty letters to the railroads.  Amtrak is angry. Politicians are yelling.

What the heck is going on?

I think it's just the nature of the beast.

Railroads used to move everything everywhere.  People. Coal. Goods. Parcels.  Everything.   Then, mid 20th century, traffic started drying up.  Small volume, high value stuff went to trucks.  People started driving and flying.  All that was left was bulk goods and low value goods.  Being highly regulated, there was little the railroads could do to complete for any other traffic.

Railroads started paring away assets they no longer needed, but couldn't do this very quickly because of regulation.  Every prospective line abandonment or sale required a long, long hearing with the ICC and often the answer was "no" because a single shipper on the line would object.  A whole generation of railroaders got used to having plenty of spare assets around to handle whatever came their way.  (See http://blerfblog.blogspot.com/2014/02/war-stories-episode-7-where-who-why-what.html)

 Then, partial deregulation occurred.  Railroads started competing for long haul highway traffic with intermodal services.  They sped up the paring of unneeded lines.  They merged with each other.

...and they started making money - enough to stay in business for the long term.

New tools and techniques helped them figure out how to improve efficiency and further trim assets to fit optimized operating plans.  ...and now the money really started pouring in!

They plowed a good chunk of that money into growing the intermodal business.

Growth.  This was something new.  But that old time mindset of "we have excess capacity out the wahzoo" was hard to shake.  There were real financial reasons to add assets slowly, too.  Having a "cushion" of assets seems like a good idea, but it adds expense and generates no revenue.  This hurts the ability of the railroad to borrow money to invest in new capacity.  So, there was a real push to keep things tight - and it nobody really worried about it.  We've muddled through before, right?  A tweak here, and tweak there and we can "manage" our way out of any crisis.

The problem was and is, nobody really knew, or had a measure of, how tight "tight" was.  That was okay until...

...2014 happened.  Oil traffic boomed.  Intermodal kept up it's recent pace.  BNSF's old Great Northern was swamped.  Chicago, that ancient maze of trackwork, that is the lynchpin of North American rail traffic, felt the effect.  Traffic flow slowed down and backed up onto other lines.

Crew supply was already tight.  Track space was already tight.  The railroads had used their planning tools to figure out exactly how little was needed for the traffic.  There was scant cushion.

The downward spiral began.  Trains that couldn't get through Chicago parked on sidings and had to wait for rested crews to continue on.  Each replacement crew used meant there was one less to handle the normal traffic.  Trains started being held in yards.  Locomotives sitting on trains couldn't be used elsewhere in the network.  Everything slowed down.

A slow railroad seems really busy.  There are lots of trains out on the main tracks.  There is a great need for locomotives.  Crews turn as fast as the law allows.  Yards are full of cars.  Lots of stuff going on.  Lots of equipment.  Lots of motion - but not much getting done.

The response?  "Lets shift traffic to where we have excess capacity!"  Uh, oh.  That superb planning meant things were tight everywhere.  There wasn't much that could be changed and any significant change risked creating a downward spiral elsewhere on the network.

When a highway gets into a traffic jam, it clears itself naturally once rush hour is over and the demand slacks off below the jammed capacity.

When an airline gets into a jammed condition, it clears itself overnight as the airline has time to reposition equipment and crews for a clean start the next day.

Railroads typically run steadily 24/7.  There is no low demand time of day.  There is no overnight reset period.  When things get jammed up, it's really hard to "unjam" them.  You need to apply more resources to clear the clog.

Uh, oh.  The lead time on those resources is really, really long.

More track takes engineering, planning and manpower.  Want to lengthen a siding or expand a yard?  Many months to years.

Need more train crew personnel?  Schedule a hiring session, screen, hire, train for months - and you have a conductor.  You need engineers, too.  Add on another year of training.  Can you move folks around the network?  Only if you have a surplus - and you can entice them to go - and you can get them qualified on the new territory.

Need more locomotives?  The order books of the locomotive manufacturers are full for more than a year.  You can beat the bushes and finds some second hand junkers for lease or purchase.  If you can get them to run well enough, you might scrape by.

So, what's the solution?  In the relatively short run, you have to do everything.  Reduce the demand as best you can in the clogged area.  Move traffic.  Divert trains.  Entice crews to move temporarily.  Buy or lease some used power.  Minimized trackwork delays.

In the long run, you need to change the game.  Here are some suggestions.

Maintain a bigger cushion of assets.  This is the Fred Frailey solution. This is expensive and might make investor's upset.  Might work for BNSF, but will be a hard sell for roads whose stock is "out in the wilds of Wall Street."

Don't overreact and be flexible.  The is the Jim McClellan solution.  His point is that you really don't know how traffic will ebb and flow, so don't overbuild, but don't paint yourself in a corner, either.

Specifically, Bakken crude could dry up.  Pipelines appear to be inevitable.  The price of oil is dropping in large part due to the success of crude by rail.  If you don't build out for a crude boom and one occurs, you risk a major league traffic clog, angry shippers and money on the table.  If you build out for a crude boom and it drys up, you have lots of stranded assets making no return at all.

The key is flexibility.  Easier said than done.  How would a railroad, with such long lived assets, become flexible?

Here's some thoughts:

Make assets cheaper.  How?

Reduce the initial cost and life.

Make things flexible.  Not sure oil boom will last?  How about disposable tanks in IM wells instead of building a bunch of tank cars.

 DPU could allow lighter weight cars.  There are benefits besides longer trains....

Speaking of DPU...get serious about it.  UP is pretty serious.  No reason others can't follow - even if it does mean having to install some radio repeaters here and there.

Improve assets.  100+ year old alignments breed hurry up and slow down - waste crews and fuel. If we think these will carry us into the future, we are missing the boat.  Get smarter about turning locos and cars and crews.  

Doubling up crew districts by raising crew speed.  You don't need to do much with train speed, but you do have to reduce crew idle time.  How?... 

 Improve on duty to depart.  No, it's not okay for a crew two spend two hours each time they come on duty before they get the train on the road - particularly if it's a "step off/step on crew change.  

Have trains that fit in and out of places - no doubling in and out.  ...unless you can figure out how to do it fast and easily.  Maybe DPU + ECP?  Is that cheaper than reconfiguring yards or trying to run more, shorter trains on the network?  ECP might not just be about "better braking".

Don't stop trains on main tracks!  That's a valuable asset.  Stopping, in general, is bad enough. 

Service equipment while it's idle.  No, it's not okay to top off locomotive fuel tanks every chance you get.  Don't service locomotives at every place there is a servicing facility "just because".  Give a once-around, sweep the cab and let's go!  Minimize mainline fueling.  Fuel when the locomotive is not on a train - even if it does cost a nickel more a gallon.

You don't have to do all these things at once.  You don't have to do any of these things if they don't make sense.  But, you do have to focus on the goals of these things because this is where the game is going to be won or lost.

The railroads have the tools to figure all this stuff out.  They have the people in place who can use  the tools.  All they need is the will to do it and the vision to get it done.