Short lines playing bigger role in district economy

David Page | Intern

Published October 1, 1997  | October 1997 issue

Short line railroads (those with less than $40 million in annual revenues) are not merely miniature versions of their parents. They operate over shorter expanses and have fewer facilities, but they can also be much more dependent upon a single commodity. A case in point is the Central Montana.

In 1984, when Burlington Northern (BN) announced plans to abandon 87 miles of track from Geraldine to Lewistown in central Montana, the farmers in the area decided to fight against exorbitant trucking rates by running the railroad themselves. Working with the state of Montana, the farmers sued Burlington Northern and won a $5 million settlement. That money was used to upgrade track and trestles, and start Central Montana Rail Inc. (CMR). The nonprofit company has been operating the line for the past dozen years after signing a long-term lease with the state for the right of way. Only once during that time did the line not reach its break even point—about 1,200 carloads—and that was during the drought of 1988.

The swing in fortunes of Montana agriculture have a large impact on the CMR, since the line is almost completely dependent upon the grain industry. On occasion, however, a local project has given the line a financial boost. Last year, the CMR hauled equipment and supplies for the construction of a pipeline. In 1995, six weeks of work on the action film "Broken Arrow," starring John Travolta, provided some cash flow. The rail company furnished locomotives, cars and engineers 12 to 18 hours a day, six days a week, from late June through early August. A couple helicopters exploded on or near the train, and people riddled with bullets fell out of box cars, but most of the flames were studio special effects. None of the railroad's property was damaged.

Four years ago, the CMR also started a dinner train, running 17 excursions during the summer. General Manager Carla Allen, who serves as an engineer on the train, said the program has been successful. The line has been doing well enough to go from seven to nine full-time employees in the past year and build up about $3 million in its trust fund.

CMR operates six locomotives, but gets its cars from Burlington Northern Santa Fe, which gives CMR a payment for the cars it hauls. According to Allen, "The relationship between BN and CMR has been very good." Most importantly, Allen emphasizes, the rail link has provided a "lifeline for the communities" it serves. Without it, she claims, trucks would have devastated the surrounding roads.

Types of railroads
Class 1 Regional Local
Railroads with operating revenue of $255.9 million or more. Earning revenue between $40 million and the Class 1 level and/or operating at least 350 miles. Railroads falling below the regional criteria (known as short lines), as well as switching and terminal railroads.
11 railroads (2 percent of total). 30 railroads 500 local railroads
73 percent of the industry's mileage 11 percent of the mileage 16 percent of the mileage

Riding the ag market

The Twin Cities & Western (TC&W) short line is quite different from the CMR. The original track was laid by the Hastings & Dakota Railway in the 1870s. Eventually it became part of the Milwaukee Road's main line to the Pacific Northwest. When Soo Line took over the Milwaukee Road, it operated the stretch of track as the Ortonville Line, linking the western Minnesota border town to the Twin Cities. On July 27, 1991, the TC&W purchased 229 miles of track from Hopkins to Appleton. Trackage rights to the east and west allow the TC&W to serve shippers from Milbank, S.D., to the Pig's Eye yards east of St. Paul.

Since the track passes through some of the most productive agricultural counties in Minnesota and South Dakota, the TC&W's fortunes also rise and fall with the domestic agricultural market, but it does haul a greater variety of products than the CMR. On occasion, such items as lumber, crushed rock, fertilizers, clay, coal and agricultural machinery travel over TC&W track.

Unlike the CMR, which has just one interchange, one of TC&W's selling points is the line's direct access to various other shippers. Besides offering service to Mississippi River terminals at Camden Place in North Minneapolis and Minnesota River facilities at Savage, Minn., the TC&W interchanges with several other carriers, including the Sisseton Milbank Railroad at Milbank; the Burlington Northern Santa Fe, Canadian Pacific (CP) and Union Pacific within the Minneapolis/St. Paul terminal area; the Wisconsin Central via the Minnesota Commercial Railway; and the Minnesota Central Railroad at Norwood, Minn.

The road's 50 employees are trained at CP Rail System's Twin Cities training center to maintain the track and run nine power units. Since TC&W primarily hauls agricultural commodities, it owns or leases around 400 covered hoppers. It also operates a few of its own boxcars, refrigerator cars and Airslide cars. By selling personal service, the TC&W has done "pretty well," according to Dave Long, vice president of marketing and sales.

Presently, the TC&W offers six-day a week service over about two-thirds of its track and three-day service to the end of the line at Milbank.

Little flood impact

Kent Shoemaker, chief executive officer of the TC&W, also manages the Red River Valley and Western Railroad (RRV&W). The 687-mile operation serves southeastern and central North Dakota. Although the line is primarily dependent upon agricultural commodities for business, Shoemaker stresses there is very little seasonal change in the number of tons carried. The RRV&W hauls sugar beets, feeder grains and wheat, products with totally separate market destinations. "Besides, farmers do not ship only at harvest any more," Shoemaker points out. "They hold their products for speculation."

Fortunately, this past spring's floods on the Red River spared the railroad. "We were only out of operation over the Red River for 24 hours," Shoemaker says. A few washouts occurred, but nothing compared to the devastation suffered by the surrounding region.

The RRV&W began operations a decade ago on former Great Northern, Northern Pacific and Burlington Northern track, and business has grown steadily since then. Although always looking for expansion possibilities, Shoemaker says that opportunities depend on what the Class 1 railroads do.

Shoemaker does admit, though, that railroad owners are sometimes driven by romantic notions: "Railroads and sports teams seem to attract money that is not expected to bring much of a return." However, currently that isn't a concern, as the short lines in the Ninth Federal Reserve District continue to do well.

For more on the nation's railroads, visit the Association of American Railroads.