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VOL. 128 | NO. 76 | Thursday, April 18, 2013

Riding the Rails

Memphis benefiting from increased railroad investments

By Jennifer Johnson Backer

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By some estimates, America’s railroad companies are in the midst of the largest investment boom since the Gilded Age – when America’s railroad track mileage tripled between 1860 and 1880.

A hostler truck lines up to receive a rail shipping contrainer from a crane at the BNSF Railway Intermodal Facility at 4814 Lamar Ave. The facility is part of the growing rail presence in Memphis. 

(Daily News File Photo: Lance Murphey)

This year, North American’s freight railroads plan to invest $24.5 billion in intermodal terminals, new track, bridges and tunnels, safety equipment and rail cars, according to the Association of American Railroads.

As an important intermodal and switching tie for five Class I railroads, the Memphis region already is benefiting from the national boom.

“We are definitely a part of what is going on nationally in the railroad industry, and we are seeing the direct benefit of increased railroad traffic,” said Martin Lipinski, director of the Intermodal Freight Transportation Institute at the University of Memphis.

Railroad industry leaders say they strive to make the U.S. freight network the most reliable and efficient in the world. This time around, the railway industry’s investment is about making existing networks more efficient and equipped to transport varied types of freight, rather than increased geographic sprawl. Increased fuel costs, congested highways and a truck driver shortage also have led to more rail demand.

That’s led many companies, including FedEx Corp. and Amazon.com, to rely on trains to ship more goods. Large consumer-based-shippers like Procter & Gamble Co., Wal-Mart Stores Inc. and The Home Depot Inc. also helped drive rail demand beginning in the early 2000s as they turned to rail to help meet corporate sustainability goals.

Last summer, Norfolk, Va.-based Norfolk Southern Corp. opened its $105 million, 380-acre facility in Rossville, just east of Collierville. Because of increased demand, the terminal began operations before water and electricity were connected. The intermodal terminal is part of the railway’s Crescent Corridor project, a $2.5 billion project to establish an efficient, high-capacity intermodal freight route between the Gulf Coast and the Northeast.

Intermodal terminals are huge parking lots with railroad tracks running through them. Rossville’s first phase has 1,000 trailer spaces for drayage truckers, the drivers who deliver containers from the yard to nearby distribution centers for off-loading. The railroad says the Crescent Corridor will enable Norfolk Southern to be competitive with long-haul trucks, opening up a market potential for highway-to-rail conversions.

The Association of American Railroads estimates the Rossville intermodal facility will have a 10-year economic impact of more than $2.7 billion and will create 6,200 jobs by 2020 in the Memphis region, including Fayette County and North Mississippi.

Earlier this year, Mike McClellan, Norfolk Southern vice president of intermodal and automotive marketing, told The Daily News the railway is currently rolling out new services in Rossville and expects to increase business this year. By the end of 2012, the facility was operating at about 50 percent capacity, he said. The terminal also has enough space to double in size to meet future demand.

Memphis also is one of the more eastern and southern stops for Fort Worth, Texas-based BNSF Railway Co., a company that operates primarily in the Western two-thirds of the U.S. In 2010, the railway opened a $200 million new and improved yard at Lamar Avenue and Shelby Drive. The facility, dubbed the Memphis Intermodal Facility, is used to transfer cargo between trains and trucks. BNSF increased lift capacity from 250,000 a year to 600,000, with room for expansion.

Montreal-based Canadian National Railway Co., a railway with a network that spans from the Great Lakes to Louisiana in the U.S., also invested $100 million to renovate its Johnson Yard freight car switching facility in 2009. The investment in the South Memphis rail yard helped increase efficiency for CN trains moving in and out of Memphis, one of the most important cities within the railroad’s U.S. network.

Jacksonville, Fla.-based CSX Corp., the largest East Coast rail carrier, also operates intermodal terminals in Memphis and Nashville, as does Omaha, Neb.-based Union Pacific Corp., which has regional operations. In 2011, CSX invested more than $50 million in its Tennessee network, including more than $948 million in freight cars and other rolling assets.

Lipinski said Union Pacific also is considering expanding its Marion, Ark., intermodal facility.

National experts say affordability and increased efficiency have led rail to steal market share from trucking, air transportation and other modes of transportation. U.S. freight demand is projected to grow by half, to $27.5 billion by 2040, according to the U.S. Department of Transportation.

For longer distances, trains have historically been three to four times more fuel-efficient than trucks. But many customers still preferred to rely on trucks because of better reliability. Increased railway investments and improved networks have led to increased dependability, Lipinski says. The railroad industry also increasingly uses advanced technology, like sensors, to detect mechanical issues and prevent delays.

Those factors all bode well for a logistics hub like Memphis.

A project that will double the capacity of the Panama Canal by 2015, allowing larger ships to pass through, also could prove to be a boon for Memphis in the years to come, Lipinski said. He expects increased container traffic at America’s ports to lead to more railroad capacity in Memphis.

Association of American Railroads President and CEO Edward Hamberger told the Senate Committee on Commerce, Science, and Transportation earlier this month that freight railroads are positioning themselves to meet future transportation demands in this country, including those tied directly and indirectly to the expansion of the Panama Canal.

“Whether the freight is coming into or leaving from Long Beach or Savannah or Miami or Houston or Seattle or Norfolk or any other major port,” he said, “our nation’s freight railroads are in a good position now, and are working diligently to be in an even better position in the future.”

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