Buffett Builds Rail Superhighway to Grab Truck Freight
October 7, 2015 — 5:00 AM EDTUpdated on October 7, 2015
— 11:21 AM EDT
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A maintenance-of-way
worker watches as an Eastbound intermodal train passes by a track laying
machine on Burlington Northern Santa Fe (BNSF) Railway's Southern
Transcontinental line in Alva, Oklahoma, U.S. on Wednesday, August 19, 2015. In
order to increase capacity and decrease delays, BNSF is working to convert
several miles of single track into a double main line. Photographer: Luke
Sharrett Double-tracking almost done on 2,200-mile LA-to-Chicago line
·
`We have significant
opportunities' to snag cargo, BNSF says
A noisy yellow machine laying down railroad track near Alva,
Oklahoma -- as much as a mile a day of concrete and steel -- is Warren
Buffett’s solution to the industry’s dwindling coal traffic.
After this year, BNSF
Railway Co. will be more than 99 percent finished with a second, parallel line
to its 2,200-mile (3,500-kilometer) Los Angeles-to-Chicago route. Doubling up
will create a rail superhighway speeding deliveries of toys, electronics, autos
and other goods, because trains won’t have to yield to each other on sidings as
they do on single tracks.
Sawing rails on BNSF's
Southern Transcontinental line in Alva.
Photographer: Luke Sharrett/Bloomberg
The goal: help the unit
of Buffett’s Berkshire Hathaway Inc. grab cargo now going by road.
“If the rails can improve
the reliability of the transit time,” shipping consultantSatish Jindel said,
“it helps them compete with the trucks.”
Snatching consumer
products and other freight from big rigs is more crucial than ever. Coal, once
a pillar of U.S. rail traffic, is fading as utilities burn cheaper and cleaner
natural gas. Averageweekly carloads are down 20 percent from five years
earlier, according to data compiled by Bloomberg.
Viable Option
The Los
Angeles-to-Chicago route links the busiest U.S. container port to the biggest
mid-continent rail hub, giving BNSF a leg up in the race to find alternatives
to those dwindling coal cars. And there’s room to grow: consultant FTR
Transportation Intelligence estimates that trains now move only about 19
percent of the 71 million trailer loads that travel 550 miles or more, a rough
threshold for where rail becomes an viable option.
“We have significant
opportunities to convert” truck cargo to rail, said Katie Farmer, chief of
BNSF’s consumer group. “We’ve really narrowed the gap now between what was
traditionally rail service and over-the-road trucking.”
Dual track
construction in Alva.
Photographer: Luke Sharrett/Bloomberg
That’s where the dual
tracks come in. More and longer trains can be run on two tracks than on a
single line. Once the double-tracked section in Oklahoma is completed at the
end of October, BNSF will have just seven more miles of line to build --
involving three costly bridges -- and will be able to run 78 trains a day in
that region, up from 62 now.
Faster Speeds
With no need to pull
over, they can also go faster. A BNSF train laden with truck trailers now can
make the Los Angeles-Chicago run in 64 hours, said consultant Jindel.
Completing the twin-tracking will shave off as much as three hours, he said.
XPO Logistics Inc., an
arranger of shipments for customers such as Costco Wholesale Corp., figures
that about a third of the long-haul freight that it now sends by truck is a
candidate to switch to train, Chief Strategy Officer Scott Malat said. If
that rule of thumb were applied across the industry, there could be more than
$100 billion of business up for grabs by railroads, he said.
“Rails have realized that,
and that’s one of the main reasons they’ve been investing so much in their
capacity, service and efficiency,” Malat said.
Direct Shot
In the eastern U.S., CSX
Corp. is reconstructing a Washington tunnel with twin tracks and enough height
to handle two containers stacked atop one another. In the west, Union
Pacific Corp. is laying a second track on its 760-mile line between Los Angeles
and El Pa
so, Texas. It has about 150 miles to go.
so, Texas. It has about 150 miles to go.
Buffett’s railroad has a
key advantage over Union Pacific: the most direct shot between Chicago and
Los Angeles, where the region’s two ports handle about 40 percent of U.S.
imports shipped in containers. Those boxes, holding finished goods like shoes,
furniture and auto parts, leave ships to be hoisted onto trains or trucks.
Containers on a train
traveling on BNSF's Southern Transcontinental line in Belva, Oklahoma.
Photographer: Luke Sharrett/Bloomberg
Railroads are already
winning more of this so-called intermodal business. Rail shipments of
containers grew 15 percent over the last decade while other cargoes, such as
coal and chemicals, dropped 11 percent. Intermodal traffic is up 2.3 percent in
2015, the Association of American Railroads said Wednesday.
But persuading shippers
to switch still isn’t easy.
While it’s cheaper to
send freight by rail, it takes longer. The cost of transferring containers to
trains and then back to trucks for final delivery makes it difficult to compete
on trips of less than 550 miles, said Larry Gross, a partner at FTR
Transportation Intelligence. Trucks are more punctual and flexible.
This is why Tiera Adams’s
job in Oklahoma is crucial for BNSF. Sporting an orange vest, white hardhat and
a two-way radio on her hip, the 25-year-old is project manager for the 10-mile
stretch of new line going in alongside the Southern Transcon route, which was
completed in the early 1900s to bypass steep mountains in northern New Mexico.
Adams, tramping along on
foot behind the clanking track layer and dispensing instructions, revels in
taking out the bottleneck in the midst of the farmland outside Alva.
“You see the fruits of your labor when they start running the trains
double once you’re done,” Adams said.
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