Short-line railroads flourish in niche market
By Matt Mikus firstname.lastname@example.org October 27, 2013 11:04PM
Updated: December 1, 2013 6:37AM
CHICAGO — Short-distance freight train companies formed during the 1980s are providing industries with new logistical options along with other modes of transportation.
Rail and business leaders met at The Rail Summit on Friday at the Union League Club to discuss how short-line rail companies help connect businesses in the United States to a national and global marketplace.
These shorter rail operations help connect shipping routes for regional products to a larger rail system, said Michigan City-based South Shore Freight President Andrew Fox.
When Congress passed the Staggers Rail Act of 1980 that deregulated the railroad industry, Fox said a number of the larger railroad services dropped shorter lines that they felt were too expensive to maintain.
“But they still had life in them,” he said, “so entrepreneurs like our company and the other ones you see here today, took positions in those lines.”
Fox added that trucking industries are facing more safety regulations and see fuel costs increasing, making short rail more competitive.
South Shore Freight was unique, as it had operated as a combined shipping and commuter service from Chicago since 1909. When the line went bankrupt in 1989, short line operator Anacostia and Pacific Co. saw an opportunity.
The company purchased the line, and sold the railroad to Northern Indiana Commuter Transportation District.
Peter Gilbertson, founder of Anacostia and Pacific Co., and chairman of the Chicago South Shore and South Bend Railroad, said it was a learning experience.
“At the time it was one of the fastest railroad reorganizations ever,” Gilbertson said.
Another short-rail operator, Indiana Rail Road Co., was founded in 1986 and operates 500 privately held miles of rail between central Illinois, and central and southwest Indiana. The company provides the only all-rail intermodal service for trans-Pacific trade in Indiana.
Bob Babcock, senior vice president of Indiana Rail Road Co., said the service helps deliver products from Indiana to larger rail services. Those goods are then transported west and shipped overseas, and vice versa.
Small rail companies have formed to help fill the void left on abandon tracks that still hold economic viability, Fox said. More than 500 short-rail companies are operating in the U.S., compared to less than 200 before the 1980s.
“Many of them have been very successful by offering locally run service that’s flexible and willing to make capital investments,” Fox said, “and labor efficiencies have allowed them to prosper.”
Fox also received the summit’s Diolkos Award, recognizing his leadership in the rail transportation industry.