Railroads sound alarm ahead of Chicago gridlock redux

With last week's 7 feet of snow in upstate New York heralding an early winter, railroads crisscrossing Chicago are rushing to open 24-hour command centers, install heaters to keep switches from freezing, and plotting ways to reroute traffic.

The aim is to avoid the gridlock that started with storms last winter in Chicago, the biggest Midwest city and the epicenter of a rail system where the six largest U.S. and Canadian lines intersect. Even after adding engines, crews and capacity carriers from Warren Buffett's BNSF Railway Co. to Norfolk Southern Corp. are still recovering from last winter's delays as this one roars in.

There's little room to make up for any new weather disruptions, with U.S. economic growth keeping tracks packed with consumer goods, autos, lumber, cement and steel. That's in addition to a record grain harvest and petroleum product shipments that have surged 13 percent so far this year, spurred by oil production in northern shale formations.

"Everybody has some apprehension," said Shelley Sahling- Zart, vice president and general counsel for Lincoln Electric System, a Lincoln, Nebraska-based power company that ships coal by railroad, in a phone interview Nov. 19. "We've seen some improvements, but it's a little scary when we know there's still service issues out there."

Snowy Chicago

Chicago, through which a quarter of all U.S. freight passes and where the six largest U.S. and Canadian railroads interconnect, remains the weak link in the rail system. Successive snowstorms and subzero temperatures last year slowed freight movement through the city, causing delays that rippled through the network.

Chicago had seven days of sub-freezing temperatures this month, tying a mark set in 1903, according to the National Weather Service office in Romeoville, Illinois. The city also posted eight days with at least a trace of snow since Nov. 12, matching similar stretches in 1937 and 1954. It's also the earliest 8-day snow stretch ever recorded.

"If we have another harsh winter, it could still be a very challenging environment," Justin Long, an analyst with Stephens Inc., said in a Nov. 18 telephone interview. "To some degree, you're always at the mercy of Mother Nature."

CSX Corp., the largest railroad in the eastern U.S., is hoping last week's storm, which dumped as much as seven feet of snow near Buffalo, New York, isn't a harbinger of the winter to come. About 100 CSX employees were trapped at home and those who did make it to work were busy digging out trains, Cindy Sanborn, CSX chief transportation officer, said in a Nov. 19 telephone interview.

Lessons Learned

CSX and other railroads say they're applying lessons learned from last season when Chicago suffered 26 days at zero degrees or less and logged 82 inches of snow, more than double the 20-year average, Sanborn said. The snowstorms came one after the other, never allowing rail crews to fully clean up tracks and trains, she said.

This year, the carriers have made contingency plans to route traffic around Chicago and to cooperate on sharing tracks when snags arise. They've agreed on a set of metrics that automatically trigger those actions instead of having to reach consensus on the fly as they did last year.

Chicago is no easy fix. Projects, such as an overpass opened last month in the Englewood neighborhood that separates Norfolk Southern freight trains from local trains, are expensive and complicated. The Englewood project sparked political infighting over the construction contract award, leading to delays and the resignation of the commuter rail agency's chief.

Snow Blowers

Railroads are taking their own steps. BNSF is adding 800 trailer and container parking spaces at three Chicago hub terminals, installing 150 more heaters to keep switches from freezing and acquiring two industrial-size snow blowers. BNSF, owned by Warren Buffett's Berkshire Hathaway Inc., raised its capital spending plan to $5.5 billion from about $3.9 billion in 2013 to alleviate congestion, and will top that with investment of $6 billion next year.

CSX invested to speed locomotive fueling in Cleveland and laid new double tracking -- a second set of tracks laid alongside the first to add capacity and keep slow trains from impeding faster ones. Union Pacific will have 24-hour command centers for service units in its northern region and is doing monthly moisture inspections of brake lines that froze up last winter.

Chicago Jams

The steps aren't enough to make Chicago operate smoothly, said Matt Rose, executive chairman of BNSF. The railroads should take as much as 15 percent of cargo out of the city to avoid "disruption that the industry can't afford to go through again and the weather, of course, just exacerbates that," he told a RailTrends conference last week in New York.

"When I think about one such issue that concerns me over the long term, it's the Chicago complex," Rose said. "As our shippers found out last year, with the combination of weather and volume, the network didn't work well at all."

Shippers' concern is heightened because railroad delays are worse now than when winter started last year, said Wayne Hurst, who grows wheat and sugar beets in Burley, North Dakota. Farmers in the state waited on more than 4,900 BNSF railcars that were delayed an average of about 29 days.

Wait, Wait

Train speeds have fallen to about 22 miles per hour in November, slower by 2 mph from a year earlier and 4 mph from 2012. The time that railcars sit in terminals waiting to be switched rose to 23 hours in mid-November from 20 hours a year earlier, according to statistics from the Association of American Railroads compiled by Bloomberg.

Railroads provide the only viable transportation for coal shippers and grain producers. That put farmers in a bind when carriers fell behind on moving this year's crop and struggled to ship them fertilizer, said Hurst, a past president of the National Association of Wheat Growers. Some farmers are stocking up early on fertilizer they will use in the spring to avoid last year's delays.

"We all hope that what the railroads have done is going to help us get through this coming winter, but there's still a lot of nervousness," Hurst said.

Poor service attracted the attention of the Surface Transportation Board, which held hearings in Fargo, North Dakota, in September and ordered all the major railroads to provide weekly status reports.

Rail lines may return to normal by the end of next year and perhaps sooner if there are few weather disruptions, said Long, the Stephens analyst based in Little Rock, Arkansas. Then again, if last week's record snowstorm is an indication of the winter to come, trains could slow even more, he said.

Long's advice to shippers: "Watch the Weather Channel a lot. That's what I'm going to do."

The aim is to avoid last year's gridlock that caused grain- shipment delays as long as a month. Carloads have grown more than 4 percent this year, approaching the 2006 peak, and are on pace to set a record next year. Even after adding engines, hiring more crews and spending to boost capacity, lines are still recovering from last winter.