RLBA Aids Commonwealth of Virginia in Historic 350 Mile Rail Corridor Acquisition
In December of 2019 the Commonwealth of Virginia announced a historical $3.7 Billion agreement with CSX Transportation and Amtrak that will have passenger trains operating almost every hour between Washington D.C. and Richmond, VA by 2030. It will also vastly expand Virginia Railway Express commuter rail service and improve CSXT’s capacity, all while costing far less than an interstate highway expansion. The scale of the acquisition can’t be understated: it involves 350 miles of railroad rights of way from CSX Transportation, including the Buckingham Branch and the former S Line between Richmond, Virginia and the North Carolina State Line.
“I think this is a historic day for Virginia. I don’t say that lightly. We haven’t owned a rail corridor in well over 30 years. Taking ownership and having a stake in the corridor between Richmond and D.C. is a very big deal.” said Danny Plaugher, Executive Director of Virginians for High Speed Rail.
As with every “very big deal”, the devil was in the details. RLBA was part of the large team contracted by Virginia’s Department of Rail and Public Transportation (DRPT) to address them in supporting its program of acquiring vastly expanded rail capacity in Northern Virginia. RLBA’s analyses contributed to negotiations with host railroad, CSXT, notably by being part of a cadre of experts informing the negotiating team by way of an innovative analysis that monetized the capacity consumed by VRE commuter rail trains in terms of freight railroad profits impacted. RLBA is one of the few, if not the only firm capable of such work.
The intensive negotiations resulted in a mutually beneficial arrangement for both CSX Transportation and the Commonwealth. “CSX is proud of the innovative agreement reached with the commonwealth of Virginia, which will advance our goals for increased safety, efficiency and volume growth while meeting the public’s desire for more passenger rail service to relieve commuter traffic congestion in the I-95 corridor,” CSX President and CEO Jim Foote said.
More specifically, RLBA also 1) conducted feasibility assessments of various infrastructure and operating scenarios being considered between Washington, D.C. and Fredericksburg, Virginia; 2) utilized the firm’s real-world railroad operating expertise to evaluate network design options and calculate operating and maintenance (O&M) costs; 3) calculated track asset valuations and 4) oversaw and managed real estate valuations of the constituent corridors.
RLBA’s contributions helped make possible Virginia’s historical December 2019 announcement of what is perhaps the largest public investment in private railroad infrastructure in recent history – save for the acquisition of rights of way to foster Los Angeles’ Metrolink commuter rail system – which RLBA also helped facilitate.
STB Decides in Favor of RLBA’s Client in Construction and Operations Exemption
Texas Railway Exchange LLC, (TREX) engaged RLBA as part of its effort to establish direct rail access between a bulk import/export terminal of Texas International Terminals, Inc. (TIT) and BNSF Railway, providing an alternative to the inferior reciprocal switch service provided by Union Pacific Railroad (UP).
In support of TREX’s U.S. Surface Transportation Board (STB) filings to construct a track crossing UP at-grade, RLBA provided an Expert Report which included: 1) a detailed switching study of TIT’s traffic which produced train cycle time and car elapsed time metrics and 2) a track occupancy study of the prospective diamond crossing area. Also, RLBA’s professional engineer designed four, potential track alignments and testified in a Verified Statement as to their feasibility and ability to be constructed without adversely impacting UP’s and BNSF’s on-going operations.
The Expert Report documented the poor level of service experienced by TIT traffic subject to UP reciprocal switching and demonstrated significant service improvement which would result from construction of the TREX-proposed track. It also demonstrated that there would be sufficient capacity at the prospective diamond crossing to accommodate existing and future traffic levels without adversely impacting UP’s operation.
In its June 2019 filing with the STB, UP consented to STB’s issuance of the crossing order requested by TREX and indicated it was prepared to negotiate the terms of operation across the crossing and the amount of payment.
In January 2020, the STB ruled in favor of TREX’s petition to allow for construction and operation of the line.
$1.5 Billion In Funding Approved for New Build Freight Railroad, Based On Study Performed By RLBA
What backers call the first greenfield freight railroad to be built in the United States since the late 1970’s has found $1.5 billion in funding, based on work that RLBA conducted.
The Unita Basin Railway project, as it is known, has been debated since the early 1980’s. “A few things are different this time in than in the past” said Michael McKee, Executive Director of Utah’s Seven County Infrastructure Coalition.
“The studies and work done in the past have all been helpful and informative and helped us get to this point. We’re further along in the process than we’ve been before.”
RLBA was engaged by the Seven County Infrastructure Coalition, an independent Utah political subdivision, to prepare a pre-feasibility level study or draft plan regarding the economics, commercial prospects, operations, operating and maintenance costs and engineering capital costs of a potential, new rail line connecting the Uintah Basin in northeast Utah with the national rail network at two, alternative, junctions in Colorado connecting with Union Pacific and BNSF. As part of its pre-feasibility study, RLBA:
1) Estimated demand over each of 20 years as manifest in carloads of commodities and products outbound from and inbound to the Uintah Basin by interviewing representatives of all potential customers of the prospective railroad;
2) Estimated all capital costs and continuing operating and maintenance costs incurred by the prospective, short line railroad to transport various commodities to/from the national rail system at two, Class I railroad junctions, as well as the cost to continue transporting said commodities to/from various, ultimate, rail origins and destinations across the country;
3) Identified the approximate location, need and cost of rail-related facilities, such as transload facilities, required or helpful to support the project;
4) Recommended an institutional business model for the project, including the construction of a revenue/cost model that included a 20-year forecast and
5) Conducted an alternatives analysis comparing the cost/benefit of transporting bulk commodities in and out of the Uintah Basin via the prospective railroad as compared with trucking said commodities to/from existing railheads.
RLBA delivered an investment quality report to the client upon completion of the above tasks. Shortly after delivery, New York-based, Drexel Hamilton Infrastructure LP offered a reported $1.5 billion in design and construction costs through private financing. Drexel Hamilton, along with Rio Grande Pacific Corporation will build and operate the line through a joint venture pending approval by the Surface Transportation Board expected in 2020.
RLBA Assists In Acquisition of New Short Line Railroad
RailUSA LLC acquired the newly-christened, Florida Gulf & Atlantic Railroad (FG&A), from CSX Transportation in early June of 2019, after developing a business plan and bid in concert with RLBA.
Running roughly 430 miles along the panhandle of Florida linking Pensacola and Baldwin (23 miles west of Tallahassee) via Tallahassee, the FG&A has made news about its plans to actively grow its inherited customer base in that corridor, presenting a notably ‘can-do’ attitude.
In the words of its President, Charles “Hank” Hankerson, the FG&A believes that “there are industries, customers and prospects that want to get into the rail industry and if it requires us to put in a siding track, use existing infrastructure, do something differently, we’re extremely flexible to do that.”
That’s great news for local business in the Florida Panhandle. However, before new management could declare that they were open for business with notable enthusiasm, before the line was even theirs to manage, the team’s first move was reaching out to RLBA.
Deciding to buy a segment of a Class 1 Railway requires serious planning and due-diligence and those efforts must take place before the considerable process of completing the purchase transaction itself. RLBA helped with every one of these major, intermediate steps. On behalf of and in concert with the FG&A, RLBA managed the bid process in its entirety, including:
1) Developing a business plan to operate the Class I railroad as a standalone regional railroad, which stemmed from a detailed analysis of shippers, origin/destination pairs, crew bases, tonnage rating, and customer needs;
2) Determining the staffing required to operate, maintain, and manage the railroad;
3) Performing rail asset and rail corridor real estate valuation tasks to support both the formulation of the bid and to facilitate its financing;
4) Undertaking a waybill sample data exercise using a proprietary software to determine the average cost of the incumbent Class I railroad incurred in moving the existing freight, as well as determining the estimated rates that railroad charged the customers on the line;
5) Determining what rates the new short line railroad might be able to realistically charge the existing Class I railroad to take over service, including the anticipated revenue split of existing traffic, based upon the aforementioned waybill sample data analysis and
6) Synthesizing all of the findings into a bid package that ultimately was attractive enough to become the favored bidder for line while promising high enough returns to secure financing.
On the newly purchased line, the FG&A “will partner with new customers, and if it takes us to finance the infrastructure that needs to be put in, we have options. That’s what we look at first. We want to grow the business and maintain what we already have in place.”
That’s a commendable, growth-driven strategy, from a great team – a team that chose RLBA to help them make it all happen.
RLBA Provides Buy-Side Due Diligence in Short Line Holding Company Transaction
In April of this year, 3i Infrastructure PLC (3i) consummated a purchase of Regional Rail Holdings LLC (Regional Rail), a decision supported with buy-side work conducted by R.L. Banks & Associates, Inc. (RLBA).
Rob Collins, managing partner, 3i North American Infrastructure, said: “This is an exciting opportunity to partner with an established management team as we seek to put additional capital to work in North American rail infrastructure.”
RLBA was engaged by 3i Infrastructure to perform the necessary due diligence work associated with the then potential acquisition of Regional Rail. Comprising five, core, operating entities, Regional Rail represented a diverse and complicated set of assets, including 155 miles of track across three, separate railroads and multiple, disconnected track segments serving 70 customers. Further assets included a truck-to-train transload facility and, unusually, a national grade-crossing signal company, Diamondback Signal LLC.
To conduct the evaluation, RLBA: 1) reviewed historical revenue and expense performance against RLBA’s proprietary database of industry trends; 2) produced pro forma revenue and expense projections; 3) partook in interviews of the railroad’s management team and 4) conducted several on-site inspections to assess both commercial opportunities and the physical condition of the property.
As evidence of the typical care and expertise employed by RLBA in such potentially sensitive evaluations, all parties were very satisfied with the end result. Al Sauer, CEO of Regional Rail said at the time of sale that “[Regional Rail looks] forward to working with 3i as we continue to focus on servicing our existing customers, growing economic development in our local communities, and expanding into new regions through strategic partnerships and acquisitions. We see tremendous opportunity in the sector and are proud to have the support and asset management expertise of 3i behind us.“
RLBA is an industry leader in rail industry transaction evaluations and valuations, one of the most trusted and experienced names in rail consulting, having appraised more than $3 billion worth of rolling stock and tens of thousands of miles of railroad right-of-way and track assets as part of providing both buy-side and sell-side assistance.
RLBA Helps Illinois Tollway Authority Gain Access to Canadian Pacific Right of Way
The Illinois State Toll Highway Authority’s decades-long project to provide western access to/from new terminals at Chicago’s O’Hare International Airport is complicated by a Canadian Pacific Railway (CPR) right of way, which borders the same side of O’Hare. Thanks in part to two Verified Statements prepared by RLBA staff on behalf of the Tollway and presented before the Surface Transportation Board, the Tollway Board was able to approve a momentous “Letter of Intent” with the CPR. With the approval, both parties withdrew ongoing litigation against each other and construction can begin to road access from/to the west.
“This is an agreement that’s good for both sides,” said Tollway Board Chairman Robert Schillerstrom. “It’s good for our transportation network and it will create economic opportunity and jobs.”
The project has come a long way from the time when CPR broke off initial negotiations and refused to grant the access and property needed by the Tollway. Shortly afterwards, RLBA was engaged by counsel to the Tollway to examine the impacts on CPR of proposed construction and operation of the Tollway’s Western Access Interchange, a system of five highway bridges that will connect the new IL-390 Tollway with the new Western Access Tollway, as part of the Tollway’s overall Elgin-O’Hare Western Access Project .
To connect the two new highways, bridges will need to cross over the double-track CPR C&M Subdivision and the parallel, double-track Union Pacific Railroad Milwaukee Subdivision just west of O’Hare. The subject rail lines are part of the CPR route between Chicago and Milwaukee, extending to Minneapolis/St. Paul and Canada.
RLBA reviewed Tollway engineering drawings, interviewed leading engineers from the Tollway and its selected engineering consultants, gathered rail operations background information and performed twelve days of video surveillance of CPR train operations in the vicinity. RLBA’s team of veteran rail operations and engineering experts concluded that the project could be consistent with railroad engineering best practices and in keeping with countless similar projects involving CPR and other major railroads. Construction-related impacts should be minimal and lasting impacts would not unreasonably interfere with railroad transportation or interstate commerce. RLBA’s findings were presented in a Verified Statement that was part of the Tollway’s STB filing.
RLBA also prepared a second Verified Statement which examined, among other issues, the feasibility of two hypothetical facilities which CPR, in response, suggested might be located along a portion of its Milwaukee Subdivision. This in and of itself is a good example of RLBA’s knowledge of how railroads think: RLBA first helped to de-thaw complicated negotiations and, by the end, proposed solutions that were accepted by the opposing Class-I railroad.
RLBA Completes Multi-Year, Mutli-Disciplinary Project on behalf of GE Power in Schenectady, New York
R.L. Banks & Associates, Inc. (RLBA) recently completed a multi-year, multi-disciplinary study of the internal plant railroad used to service the GE Power facility at Schenectady, New York. RLBA was engaged by GE following interest its management had in increasing the maximum net rail load of its multi-axle flatcars from 800,000 lbs to 1,000,000 lbs and gauging how that weight increase might impact its track infrastructure. In response, RLBA: 1) undertook a detailed inspection and inventory of the entire GE Power rail assets; 2) provided a written report outlining infrastructure improvements, and estimated costs, to bring track into a state of good repair; 3) generated a written maintenance plan to keep the track in a state of good repair; 4) undertook surveying on-site to lay out a new turnaround facility; 5) provided conceptual engineering drawings of a new turnaround facility and 6) offered expert guidance on re-setting a continuously-welded rail curve at a proper rail neutral temperature. Shortly thereafter, GE engaged RLBA to manage a series of management tasks concerning returning its rail infrastructure and equipment to a state of good repair.
Regarding equipment, RLBA oversaw a detailed inspection of two 16 axle depressed center flatcars, each of 800,000 pound capacity. This included disassembling the flatcars down to the individual trucks to inspect key components and managing the procurement of new, custom-fabricated center bowls for replacement of those on the car. RLBA also worked with GE to petition the Federal Railroad Administration to enable one of the two railcars to operate beyond 50 years in age. That waiver was successfully granted in mid-2017, just as the railcar reached 50 years in age.
Furthermore, RLBA was engaged by GE Power to manage the rebuilding of two trucks of a General Electric 85 ton center cab diesel-electric locomotive No. 21, which is employed by GE Power to move loads around its Schenectady, New York, manufacturing facility. Working in connection with a local machine shop and a mechanical subconsultant, RLBA oversaw: 1) the transport of two spare, un-rebuilt trucks from GE Power to the machine shop; 2) complete disassembly and inspection of the spare trucks; 3) straightening of the truck frames, sandblasting of the truck frames and brake rigging, and painting of the equipment; 4) procurement of four rebuilt GE traction motors; 5) contract milling of the four wheelsets to return them to proper wheel profile; 6) complete rebuilding of the gearboxes; 7) swapping the spare trucks with the worn out trucks under No. 21; and 8) commissioning and testing of the trucks, tweaking as necessary to ensure reliable operation.
Regarding infrastructure, RLBA’s recommendations regarding repair of a welded rail curve as well as removal of vestigial rail structures were followed by the GE rail contractor. These corrections minimized risk and ongoing maintenance to the operation of the railroad. In addition, GE followed RLBA’s recommendation to re-install a “Wye” track, something that would increase the operational flexibility of the railroad and decrease premature wear of GE’s equipment.
RLBA Successfully Manages Over-the-Road Transport and Logistics of Two Subway Cars
R.L. Banks & Associates, Inc. (RLBA) was retained by the Loudoun County Department of Transportation and Capital Infrastructure (Loudoun County) to assist in the planning, procurement and execution of an over-the-road movement of two donated WMATA railcars from the Washington, D.C. Metrorail system to the Loudoun County Fire and Rescue Training Facility in Leesburg, Virginia. The railcars were successfully installed at that training facility earlier this Spring.
“We were honored to have the opportunity to assist Loudoun County with the development of this unique, and important, training facility,” said RLBA Principal Consultant Davidson Ward. “I am proud that our work with the County, as well as with WMATA, helped facilitate the safe installation of these 70,000 pound railcars.”
RLBA completed the work in multiple tasks: 1) move planning, in which RLBA negotiated with seven different government entities and completed mapping and route planning to gauge the best route to move the railcars over-the-road; 2) preparing the technical aspects of a Request for Proposals (RFP) for Loudoun County to move the railcar and assisting in the selection process and 3) project management, wherein it provided the selected contractor with all applicable contracts and reports generated in Task 1, as well as stationing staff members on-site at all times to ensure the move was completed safely and efficiently.
“The logistics and planning associated with over-the-road railcar movement is a unique skillset that our Firm is excited to be able to provide,” explained RLBA President, Charlie Banks. “Not only did this work include logistics and move planning, but it also required public sector solicitation, procurement review, and multi-year project management. In the end, it showcases the breadth of experience our Firm has to offer.”
RLBA Completes Regulatory Review of Shortline Railroad
On May 19, RLBA completed a federal regulatory review of Howard Energy Partners’ (HEP) G.T. Logistics (GTL) rail facility in Port Arthur, TX. HEP purchased GTL two years ago and was unfamiliar with regulations in the rail space but was familiar with federal oversight from their experience in the oil and gas industry. After visits from the Federal Railroad Administration and internal concerns regarding the loading, unloading, and handling of hazardous materials in unit tank car trains, HEP determined a full regulatory compliance review was needed. RLBA conducted an on-site review of all documentation to ensure compliance with FRA, PHMSA, TSA and OSHA regulations where applicable as well as determining if filing with the STB as a railroad would be beneficial. During the on-site review, RLBA interviewed key members of HEP and GTL’s management to gauge an understanding of the operations occurring at the facility and the team’s knowledge of rail operations. RLBA also audited for compliance with plans submitted to the FRA and advised on deficiency’s in those plans.
Virginia Railway Express Turns to RLBA’s Railroad Operations Simulation Team to Provide Capacity Analysis
RLBA was engaged by Northern Virginia’s commuter rail service, Virginia Railway Express (VRE), to develop a rail network simulation model depicting VRE’s existing operation. RLBA railroad operations experts employed Rail Traffic Controller (RTC©), the gold standard of rail network simulation applications, to evaluate VRE, Amtrak, CSX and Norfolk Southern (NS) train performance under eight VRE service plan alternatives which considered increased VRE train frequency, extension of service to Gainesville and Haymarket, VA and alternative locations of maintenance and storage facilities. Constraints upon the existing network’s capacity, such as single-track territory and single-platform passenger stations, were identified and infrastructure remedies were recommended. RLBA’s work served as the basis of regular dialogue among VRE staff and the consulting team to shape early prioritization of service plan alternatives presented to and discussed with the general public as well as advancement to a formal alternatives analysis.
Construction of the VRE RTC network model involved detailed reproduction of the actual infrastructure and operating conditions on four separate railroads: VRE, Amtrak, Norfolk Southern and CSX Transportation. That level of detail was necessary to ensure that the model reflected the real-world railroad and, therefore, was credible in the eyes of VRE’s host railroads. The completed network simulations model features the complex interlockings located at the south end of Washington Union Station and south of Alexandria, VA at the junctions of the CSX and NS freight mainlines. Real-world VRE, Amtrak, CSX and NS train consists and passing times were collected by RLBA staff viewing hundreds of hours of video supplied by VRE from station security cameras. Such real-world data enabled RLBA to “construct” those trains in the RTC train file and create simulations which accurately reflected train operations.
RLBA’s experience with RTC simulations is extensive, modeling both freight and passenger railroad simulations since 1994, with RTC simulations performed on networks of up to 2,200 miles of railroad over which more than 3,100 train were dispatched. RLBA’s experience in RTC simulations incudes successfully simulating coal and bulk movement on five of the largest railroads operating in North America. Several final reports delivered to the client.