The railroad began reviewing 8,000 miles of track as potential candidates for sale or lease in 2017. The goal was to determine which lines were core to the CSX network and which might be better off in the hands of short-line operators.
That review process has narrowed the sale candidates to 4,500 miles, a person familiar with the matter tells Trains News Wire. CSX declined to comment.
The railroad has identified an additional 500 to 1,500 miles of lines that are on the fence. CSX will retain them if their economics improve. If the numbers don’t improve, underperforming routes may be candidates for sale.
Former CEO E. Hunter Harrison, who died in December 2017, set an aggressive timetable to spin off non-core routes. But the railroad now intends to take a slower, more measured, approach to line sales.
If CSX ultimately sells 4,500 miles of low-density and redundant routes, it will shrink its 21,000-mile system by about 21 percent, to a core network of 16,500 miles.
CSX has said it aims to sell lines to local operators who can grow traffic.
The first line sale, to Watco’s Decatur & Eastern Illinois, has done just that. Traffic was nearly triple initial projections after its first months of operation, Watco executives have said.
The trackage in Illinois and Indiana was one of two lines put out to bid in January 2018. The other, 373 miles of track across the Florida Panhandle, was set to become the Florida Gulf & Atlantic Railroad before the deal fell through in January.
CSX put an additional 650 miles of track out for bid in June 2018. The lines, bundled in six packages, include:
- The Massena Line from Syracuse, N.Y., to the Montreal area.
- The Baldwinsville Subdivision branch line near Syracuse.
- Branches in West Albany and Rensselaer, N.Y.
- Cumberland Valley feeder lines extending east of Corbin, Ky.
- Eastern North Carolina branches terminating in Grangers and Plymouth, N.C.
- The Marietta Subdivision extending north out of Parkersburg, W.Va.
There has been intense interest in most of the routes, and railroad is nearing agreements on a couple of the line segments, according to people familiar with the matter.
In July, CSX sold 176 miles of railroad in Alabama and Georgia to OmniTrax, which had previously leased and operated the lines as Alabama & Tennessee Railway and the Fulton County Railway.
At a May investor conference, CEO Jim Foote confirmed that CSX was evaluating about 8,000 miles of its network.
“We’re doing a good job of analyzing about 8,000 miles of railroad and trying to determine what segments fit into … three baskets,” Foote said.
The three baskets are core and non-core routes, plus lines that are somewhere in the middle and needed further analysis.
At the RailTrends 2018 conference in November, Foote said that CSX is working with partners on creative ways to spin off routes.
“We are looking at some unique-type transactions with people that would actually bring reinvestment into and around the lines, and maybe those are packaged up differently,” Foote says.
The investors in these lines might attract industrial development, enabling the feeder lines to put more traffic on CSX’s core network, Foote says.
CSX expects the line sales program to generate up to $500 million in the next three to four years.
The railroad’s three-year financial targets, announced in March 2018, do not hinge on line sales.
I’m surprised to see the former B&O route between East St. Louis, IL and Cincinnati, OH is not on this list. It’s been closed as a through route for over two years, with the 92 mile segment between Caseyville and Flora out of service with rails severed at each end point.
Most class 1 railroads and some regionals don’t care about customers. Giving a customer a switch once a week doesn’t work. When customers complain the railroads charge exorbitant fees for an extra switch if they even get it. Your customer pays the freight. Giving poor service serves no one. Not many truckers turn down a load. No service equals no customers.
Mr Bouside, I would suggest that a quick glance at the map would show the Columbia River (ex-SP&S) route across the Cascades is a good 200 miles further than the more direct route over the mountains. Unfortunately, PSR somehow rationalizes circuitous mileage as more efficient. How revenue ton miles figure into that is a good question. Is anyone still using the old ICC accounting rules for determining operating expense, or is the pursuit of OR an exercise in accounting legerdemane? I wonder if the PSR crew studied at the school of GE accounting which has been shown to have borrowed billions to pay “dividends” when operating losses were being incurred. It worked after a fashion until the curtain was pulled back. The cost of maintaining legacy ROW and operating equipment is going nto be an increasingly difficult issue for both majors and shortlines. If an adequate reserve is not dedicated for this purpose, we could see a repeat of the 70s, a la PennCentral and Rock.
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I like Herb Wildman’s perspetive a lot.
The problem is that 100% privately funded rail rights of way need to have sufficient and demonstrated profitable levels of traffic to continue to justify continued investment. I don’t have an answer to this problem. And it’s a big problem mostly because the competition (highways and to some extent waterways) don’t have this constraint due to “industrial policy”.
I’m sure that if the option had been available to use Snoqualmie when BNSF resurrected the NP Stampede Pass route at a justifiable cost they would’ve used it instead. But because the Columbia River route is even better I’m not sure that even if they had used Snoqualmie to reach Puget Sound that this line would have a lot more traffic than it does today as an empty grain and coal return route. As the industry continues to force more traffic density PSR style on fewer “backbone” routes circuitous routes are on the upswing. This maybe isn’t bad for carload and bulk freight. But it can be fatal for service sensitive intermodal.
I think this is a good idea. After CSX sells or leases the lines off, CSX will still have a large percentage of the long haul business. Short line operators can do more of the first and last mile of the business. Short line operators are often more flexible and sometimes have less overhead compared to a class one railroads like CSX. It will be interesting to see who picks up these lines.
This a really stupid move by CSX. As a stockholder, I see this as selling off money-making assets for far less than they are worth. As others have noted, if short line and regional railroad companies can make money, with competent management CSX could make money. Over and over, we see incompetent management selling off company assets on the cheap to others, who presumably will make money running the cast-offs. It’s been happening in other industries recently, such as General Electric and Arconic (formerly Alcoa) as well as CSX. Maybe if the management of CSX would get off their butts and go out and drum up some business, there would be no need to dump potentially valuable assets.
Line amputation ran rampant in the late 60’s through the late 80’s. In too many cases after the fact, it became crystal clear that a valuable resource had been destroyed. I would suggest that the individual states, if not the Feds, should consider a rail banking program, particularly in urban and suburban locales to prevent the enormous expense and delay caused by injudicious abandonment of lines that will be badly needed at a later time. Think metro Chicago or Tampa-St Pete for example. Another glaring example is the Snoqualmie Pass route of the Milwaukee Road, //the best crossing of the Cascades by far. I believe another tool to build traffic would be required neutral access to shippers from parallel lines and the use of joint peddler freights to serve lines which individually could not support service. Short lines could play an important part in such a scheme, particularly on terminal areas. It seems that the big boys want no part of loose car origination/destination traffic. So be it. Let the short lines have it. And while there is a putative surplus of rolling stock, sell it to the little guys for depreciated and tax write-off value. That’s seed money for growth.
If short line can buy the asset then quickly triple the business, I question how well the original owner was managing the business. It seems that the current operating scheme of ignoring the customer’s needs is destined for failure. Those providing customer service will have much greater success at growing the business.
Senator Schumer has been pushing for an upgrade in rail loading facilities at Fort Drum, adjacent to Watertown, NY. The Watertown-Syracuse line is a connecting line in the Department of Defense essential railroad network. CSX may be forced to operate the line until it can be sold to a viable railroad.
@Charles Tardif I’ve never seen that line so don’t know what traffic it originates or terminates, but I don’t reckon upstate NY is a big online traffic generator (but I could be mistaken).
Because if not I don’t see much potential for bridge traffic. Any Montreal bound freight from CSX is probably more effectively interchanged to CN or CP around Buffalo. And from NS probably to CP around Albany.
Hopefully Canadian National takes it over. Very little local traffic on the St. Lawrence line and very little business for a short line to court to improve that any.
For instance north of the Watertown area, I believe it’s down to just the endangered Alcoa West traffic off the Massena Terminal Railroad, a feed mill in Canton, polluted soil from the former GM site in Massena on what will soon be a long inactive siding once remediation is done since Alcoa East is now permanently shuttered, two online paper mills in Potsdam and Gouverneur, a small steel fabricator in Gouverneur, and a few hundred carloads a year off the New York & Odgensburg from the Norfolk paper mill and the port of Ogdensburg. The Gouverneur mine branch doesn’t see much traffic these days and may even be inactive at this point.
That’s a lot of railroad north of Watertown for perhaps local 5,000 carloads a year and if Alcoa West goes, over 4,000 of those loads will immediately vanish. 95% of current and potential business is through traffic flowing between CSX and Canadian National across the border. So if a shortline takes it over, I hope they get some sort of guarantee like Montana Rail Link got, since if CSX reactivates their traffic rights on the D&H and reroutes their interchange traffic with CN, there’s essentially no business left.
As I see it, this line is all about interchange traffic and if one of the two partners is retracting and losing interest, its best hope is that the 2nd partner that’s now growing decides to tackle it and make something out of it as they expand their reach.
I’ll be curious to see who winds up taking the Montreal line, it certainly has potential with the right operator.
Shortlines typically do a much better job finding & working with customer’s meeting the customers needs (not investors). Plus shortlines usually don’t fall under the rules & regulations if unions. I know their pay isn’t the same, but many employees have more flexibility & more personal time with family.
I too am a PSR skeptic Mr. Landey, but not based as much on the principles as the focus on shareholder returns to the exclusion of every other stakeholder notably including – but not limited to – shippers.
All that said, lines sales to non class 1 short line operators like the Decatur line seem to me to make a lot more sense from a transportation policy perspective and benefit all stakeholders. The evidence is traffic growth after the sale. And that traffic growth btw benefits CSX and not just their shareholders because growth is growth. Short lines simply are able to execute retail last mile railroading much more effectively. Let them grow that business and leave the wholesale long hauls to the Class 1s.
I just don’t see many line segments on that list that are essential to the mission of aggregated wholesale long haul transport for CSX.
Local operators can be great traffic generators
Just sell the entire railroad to someone who actually wants to run it.