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Rail business is often best understood right up close — along a Class I rail company’s branch lines or out along a much smaller regional rail carrier’s track or sometimes inside a port.
With this in mind, this column examines what’s happening in New England. That is the small, six-state area, plus some geography into eastern New York, eastern Quebec and the Maritime Provinces of Canada. The region is almost surrounded by water. It has just three land choke points at its western boundary through which commerce passes to the rest of the North American continent near Montreal, Albany, New York, and New York City.
What is happening in that area that is significant to rail customers? Quite a bit, it turns out. Let’s examine changes at three New England-serving railroads.
What is CN up to in the region?
There have been two recent rail acquisitions in that area.
One is CN’s purchase of the former CSX CONRAIL branch that connects Syracuse, New York, to Montreal.
Technically the deal is somewhat hung up as the parties await a final determination by the U.S. Surface Transportation Board (STB) regulatory agency of what local interchange rights CN will obtain. That delay and uncertainty reinforce this writer’s opinion that railroads are really a “real estate play.”
To CN’s management team, the Syracuse branch is an opportunity for penetration deeper into the state of New York to connect via a haulage rights agreement to serve the Port of New York and New Jersey.
Some executives believe that CN also can obtain market access via CSX connecting service as far south as Philadelphia. However, based on similar deals in the past where the Delaware & Hudson tried that service, the Philadelphia link seems remote. Philadelphia is simply not a railroad-competitive service versus direct trucking that far south. Time will tell.
CN is much more focused for the moment on increasing its intermodal franchise service with the Port of Halifax. The concept is that the Halifax can become like Prince Rupert in the far west, a rapid growth center as a shorter route into the North American market out of Europe and the Mediterranean.
Does CN have some other northeastern regional service access in mind? Possibly, but nothing definitive as far as railroad watchers and investors can tell.
What is Canadian Pacific up to in the region?
A second big player around New England is the Canadian Pacific (CP) system. Like its chief Canadian Class I carrier rival CN, CP continues to have its eye on improving market share toward the Port of NY/NJ via its route down along Lake Champlain south past Albany and then via track access rights toward the massive northern New Jersey and New York City metro market.
There clearly is a reawakening at CP’s headquarters toward refocusing and rebuilding its market presence in both eastern Canada and into the New England states. The boldest thrust by CP in the past two years has seen it acquire a former “controlled” rail line route between Montreal toward both the ports of Saint John and Searsport, Maine.
That Central Maine and Quebec (CMQ) route includes 481 miles (774 kilometers) of rail lines primarily crossing Quebec and Maine.
Technically CP serves the Port of Saint John via an interchange with two short line railroads: the Eastern Maine Railway Co. (EMRY) and the New Brunswick Southern Railway (NBSR).
CP management sees this as a strategic deal. CP President and CEO Keith Creel labels it as giving CP “a true coast-to-coast network across Canada and an increased presence in the eastern U.S.”
However, strategic maritime growth for the CP on this Atlantic side might be limited. Here is why: While the Port of Saint John is in the middle of a $205 million expansion, that project may only increase the port’s possible annual container capacity from 150,000 twenty-foot equivalent units (TEUs) to 300,000 TEUs. That’s pretty small compared to other ports like Halifax and western Canada’s Prince Rupert. To encourage ocean container lines to call on a port, the normal commercial target is between a half million and a little over a million annual TEUs.
CP on Aug. 11 dispatched its first train of maritime containers from Saint John. The containers came from the Hapag-Lloyd vessel Detroit Express — destined for customers at inland CP’s served intermodal terminals across parts of Canada. The CP service plan calls for a 24-hour Saint John’s-to-Montreal train service.
Searsport port traffic is different. Searsport currently has very little container capacity. Its port potential could be expanded — but is more likely initially to be an industrial commodities port. This service would include rail-moved:
— Export petroleum and gas products.
— Export liquids to Europe and South America.
— Selected steel and forest products.
— And possibly other cargo like high-wide dimensional traffic.
It may take a couple of years before CP announces detailed traffic plans for Searsport.
Next up for changes? Likely the Pan Am Systems rail markets
There is also activity on the part of the Pan Am Systems railroads. That includes parts of the former Boston and Maine and Maine Central tracks connecting the major regional centers of Albany, New York; Springfield, Boston and Ayer, Massachusetts; Manchester and Portsmouth, New Hampshire; and Portland, Maine.
Both CSX and Norfolk Southern (NS) also enter the New England market. CSX operates as far east as near Boston (Worcester, Massachusetts) over the former main line of Conrail east of Albany.
The Norfolk Southern offers what might be called an extended market service north of Albany toward Montreal and east of Albany via a “market arrangement” over the tracks of the Guilford System toward Ayer near Boston.
The NS service has similar service attributes to the NS deal with Kansas City Southern between Meridian, Mississippi, and the Dallas-Fort Worth market. That and the New England service did not involve a merger or an acquisition process.
Here’s a closer look at the possible restructuring of the Pan Am rail system: Pan Am Systems replaced the previous Guilford Transportation Industries name in 2006. Pan Am management controls Pan Am Railways assets such as tracks, signals, bridges, tunnels and rolling stock equipment. The chief officer is Timothy Mellon. The company initials on certain assets like locomotives are labeled as “PAR.”
Part of the system includes the company name The Springfield Terminal. Today, Springfield Terminal crews operate all PAR trains. Other rail assets are reportedly managed under the B&M name or the Maine Central name.
Is the Pan Am System for sale? For lease? And what are the terms? It is not exactly clear yet. But there are signs of discussions underway.
One option appears to involve either the sale or a lease-type arrangement of the Pan Am-owned former B&M trackage between Rotterdam Junction, New York, near Albany, to Ayer, plus several branch line segments.
Next is the B&M-controlled tracks between Ayer and Portland, plus certain state of Maine tracks of the old Maine Central north of Portland.
While the NS has certain contracted rights over parts of these assets, as do certain state agencies such as the state of Massachusetts, it is possible that those rights are still available even if there is a larger sale transaction. Few details are circulating at this point.
What we do know is that there were some executive inspections by parties like the Norfolk Southern during July. But into early September, there have been no definitive statements as to intent or plans by the major parties, just lots of investor speculation.
The takeaway is that various sections of rail freight tracks are technically “in play” and changing. There is no talk of abandonment. Given the relatively light freight rail traffic density, that continuation to some is remarkable. Why? Because so much abandonment has taken place across the continent.
Acknowledgements: Special thanks to Joshua Davidson of the Atlantic Northeast Rails & Ports information service. Davidson is the publisher and editor and may be reached at www.railsandports.com.