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THE FLATWHEEL The Official Monthly Publication of the Central Florida 

Railway Historical Society, Inc. 

January 2016

January 2016 Meeting Monday, January 11th at 7:00 PM

Central Florida RR Museum 101 S. Boyd St., Winter Garden, FL

Program: Remembering Our Best Railfan Trips As We Celebrate 45 Years

By: Ken Murdock Refreshments: Roger Wilson

January Birthdays Bob Grenier 1/12

Bill Dusenbury 1/17 Irv Lipscomb 1/18

Randall Thornton 1/31 Al Weber 1/31

February 2016 Meeting Monday, February 8th at 7:00 PM

Central Florida RR Museum 101 S. Boyd St,. Winter Garden, FL

Program: To Be Determined By: To Be Determined

Refreshments: Irv Lipscomb

Central Florida RR Museum Host Duty Schedule

January 2016

DAY DATE HOURS MUSEUM HOST Saturday 1/2/2016 1 P.M. – 5 P.M. Jarrod Reynolds

Sunday 1/3/1620 1 P.M. – 5 P.M. Gary Dettman

Saturday 1/9/2016 1 P.M. – 5 P.M. Irv Lipscomb

Sunday 1/10/2016 1 P.M. – 5 P.M. Phil Piet

Saturday 1/16/2016 1 P.M. – 5 P.M. Dan & Janet Crusie

Sunday 1/17/2016 1 P.M. – 5 P.M. Ross Marvin

Saturday 1/23/2016 1 P.M. – 5 P.M. Lloyd & Sylvia Brown

Sunday 1/24/2016 1 P.M. – 5 P.M. Clarence Hurt

Saturday 1/30/2016 1 P.M. – 5 P.M. Irv Lipscomb

Sunday 1/31/2016 1 P.M. – 5 P.M. Mike Kelly

The Winter Garden Heritage Founda-tion’s Yellow Chessie System Caboose has recently received a complete resto-ration inside and out. It looks great and once again, is a great addition to down-town Winter Garden.

January 2016 Museum Work Session

Saturday, January 16, 2016 8:30 AM to 3:30 PM

Please come out and help with the many chores that

need to be done!!!!

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December 2015 Museum Report By Ken Murdock, Museum Curator

We had another outstanding monthly museum workday on December 19, 2015, with 9 members participating who in-cluded Phil Cross, Lloyd Brown, Al Sharp, Ross Marvin, Jar-rod Reynolds, Irv Lipscomb, Jerry & Ginger Honetor and your curator. Many chores were taken care of which in-cluded cleaning up around the outside and housekeeping chores on the inside, primarily by Phil Cross. Lloyd Brown took care of some touch-up painting of the brown trim (his favorite color) on the inside and then started organizing our newspaper clippings into protective sleeves and files.

Phil Cross and Al Sharp ran a cat5 cable from the library computer to the Roper Building so that we can get tempo-rary Wi-Fi there for our computers and printers. Al Sharp and I worked on the walls in the Roper Building, adding nails and screws to the OSB sheets on the walls which were never adequately nailed. This was to secure the material flat to the studs so that sheetrock can be installed over it in the area where the new library will be built. Phil, Ross Marvin and I also pulled up more carpeting in the Roper Building, getting the area ready for construction when the permit is issued. Phil and Al also broke down a number of cardboard boxes and put them in the re-cycling bin.

Irv Lipscomb spent most of his time filing maps, calendars, timetables and brochures in the flat files and binders in the Roper Building. Jarrod Reynolds worked on inventory, searching the system for items that still need photographs. Ross Marvin continued getting more items ready to adver-tise on eBay. By the time you read this, Ross will most likely have our eBay store open. Ginger Honetor had taken care of vacuuming the meeting room earlier in the week. She worked on other house cleaning chores today before hosting in the afternoon.

The big news of the month is that John Root, of the Root Family Foundation of Ormond Beach, made a donation of $7,500 to our building fund. The money is in the bank!! A big THANK YOU to the Root Family!! We may be close to get-ting a permit for interior work in the Roper Building, so hope-fully construction can begin in a month or two. The Root do-nation came at a good time!

In case you haven’t noticed, Connie and David Rhea have been putting window tinting film on the lower sash of all of the windows to cut down on UV exposure when the window shades are up. David is donating the materials and doing the cutting and Connie has been installing it. Thank you Connie and David!! David has also sold two of the trains that he and William Walter have mounted on wood bases.

Then Jerry and Ginger worked every Wednesday throughout the month; Jerry in the library and Ginger cleaning displays and hosting. Al Sharp and I worked all but one Wednesday during the month on inventory and preservation and filing of our documents. I also repaired two HO locomotives at home and we now have them operational once again on our lay-out.

As you can see, we accomplished a variety of things this month and I want to thank each of you who came out and participated. Many thanks to each of you! We couldn’t do it without you!!

This Is The Way It Was This monthly photo column by Ken Murdock features railroad scenes of the past, a look back into railroading’s history.

This early 1940s scene finds ACL Pacific 1508; class P-5-A, at the old downtown depot on First Street in St Petersburg, Florida, after having arrived with one of ACL’s named west coast trains from New York. Note the pen stripping on the cylinder and the stripe and round logo on the tender, all of which added a nice touch of class. Sam Appleby photo, CFRHS collection

This photo of SAL’s new EMC E4 3006 as it arrived in St. Petersburg, Florida after pulling the very first Silver Meteor from New York City on February 7, 1939. This new all stainless steel streamliner drew a large crowd of spectators, which is evident in this scene. The Silver Meteor name plate on the locomotive would eventually be removed to allow more flexibility in power assignments. Sam Appleby photo, CFRHS collection

This scene finds SAL 4-8-2 219, class M-1, taking water while making a north bound stop at Sebring, Florida in the early 1940s, as it made its way from Miami to New York City. The second car is an RPO-coach and the fifth car an SAL “American Flyer” car, nick-named due to its design looking similar to cars produced by the toy train maker with that name. Sam Appleby photo, CFRHS collection

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Upcoming Events January 9 & 10, 2016 — Deland, FL — 54th Florida Rail Fair, Volusia County Fairgrounds, 3150 East New York Avenue, 9 am – 4 pm and 10 am– 3:30 pm. Contact: Charles Miller, 386-736-8185, rrshows@aol.com. Web-site: http://www.gserr.com.

January 11, 2016 — Monthly Meeting of the Central Florida Railway Historical Society at 7:00 PM in the Cen-tral Florida Railroad Museum, 101 South Boyd Street.

January 16, 2016 — Atlanta, GA — 49th Atlanta Model Train Show, North Atlanta Trade Center, Atlanta, GA. Con tac t : Cha r l es M i l l e r , 386 -736 -8185 , rrshows@aol.com. Website: http://www.gserr.com.

February 8, 2016 — Monthly Meeting of the Central Florida Railway Historical Society at 7:00 PM in the Cen-tral Florida Railroad Museum, 101 South Boyd Street.

February 13, 2016 — Jacksonville, FL — 38th Jackson-ville Rail Fair, Railroadiana and Model Train Show, 9:00 to 5:00. Prime Osborn Convention Center, 1000 Water Street (former Jacksonville Terminal). Details: Charlie Miller, (703) 536-2954, rrshows@aol.com. Website: http://www.gserr.com.

March 14, 2016 — Monthly Meeting of the Central Flor-ida Railway Historical Society at 7:00 PM in the Central Florida Railroad Museum, 101 South Boyd Street.

April 9, 2016 — Deland, FL — 55th Florida Rail Fair, Volusia County Fairgrounds, 3150 East New York Ave-nue, 9 am – 4 pm and 10 am– 3:30 pm. Contact: Charles Miller, 386-736-8185, rrshows@aol.com. Web-site: http://www.gserr.com.

April 11, 2016 — Monthly Meeting of the Central Florida Railway Historical Society at 7:00 PM in the Central Flor-ida Railroad Museum, 101 South Boyd Street.

May 9, 2016 — Monthly Meeting of the Central Florida Railway Historical Society at 7:00 PM in the Central Flor-ida Railroad Museum, 101 South Boyd Street.

June 13, 2016 — Monthly Meeting of the Central Florida Railway Historical Society at 7:00 PM in the Central Flor-ida Railroad Museum, 101 South Boyd Street.

July 11, 2016 — Monthly Meeting of the Central Florida Railway Historical Society at 7:00 PM in the Central Flor-ida Railroad Museum, 101 South Boyd Street.

August 8, 2016 — Monthly Meeting of the Central Flor-ida Railway Historical Society at 7:00 PM in the Central Florida Railroad Museum, 101 South Boyd Street.

September 23, 24 & 25, 2016 — Tavares, FL — Rifles, Rails & History 2016, Wooten Park, Downtown Tavares.

Old Engine 104 Leaves Herlong Park For Its Final Resting Place  

By Amber Riccinto   Thursday, December 17, 2015  

LEESBURG  —  A  95‐year‐old  steam  locomotive,  which  has drawn  little attention at a  local park,  is on  its way to a new home at the Florida Railroad Museum near Bradenton. 

The  city of  Leesburg  sold  the  locomotive  and  tender  to  the museum  for $20,000. And on Thursday,  a moving  crew dis‐lodged the mammoth engine from its covered display at Her‐long Park, across from the Cutrale juice plant along U.S. High‐way 441, and loaded it on a trailer for the long journey south. 

"We're moving it because the city wanted to get rid of it, and we would  like to have  it because  it's a Florida engine and  it tells a good story of Florida history," said Paul Chapman, who bought  the  locomotive.  "It was  sold  into  Jacksonville  brand new, and it's always been in Florida." 

Herlong Park  is mainly used by  fishermen, although  it has a few  waterside  picnic  tables.  Albert  Herlong,  a  former  Lake County  judge who went on  to become a U.S.  congressman, was a railroad enthusiast and donated the train and park site to the city. 

The coal‐fired  locomotive, called No. 104, was built  in 1920 by  the  Baldwin  Locomotive  Works  in  Philadelphia  for  the Cummer  Lumber  Company  in  Jacksonville  to  haul  pine,  cy‐press and other  logs  from Baker, Alachua and Levy counties to the company’s mill at Lacoochee in Pasco County, accord‐ing to the Cummer Museum. 

The Florida Railroad Museum has 12 acres  in Willow, about 20 miles northeast of Bradenton, which includes the site of a lumber mill that operated in the area in the 1920s and '30s. Herlong  Park  was  closed  Thursday  and  Friday  while  work crews prepared to move the train. 

A 95-year-old steam locomotive is placed on a trailer Thurs-day to be relocated from Herlong Park in Leesburg to the Florida Railroad Museum near Bradenton.

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Central Florida Railway Historical Society, Inc. Combined Board & Regular Meeting Agenda

Central Florida RR Museum December 14, 2015

7:00 PM

1. Call to Order – Jerry Honetor Board Members present: Jerry Honetor, Irv Lipscomb, Joe Lehmann, David Rhea, Phil Piet, Ken Murdock and

Phil Cross.

2. Meeting Prayer and Pledge of Allegiance – David Rhea

3. Recognition of Visitors – Jerry Honetor None

4. Recognition of Members/Friends Concerns – Jerry Honetor Phil Cross reported Dwight Stoffel doing well. Roger Wilson reported on Diane Hardwich that she is doing good but getting around slow.

5. Approval of the November 9, 2015 Combined Board & Regular Meeting Minutes – Jerry Honetor A motion by David Rhea second by Irv Lipscomb to accept the minutes, the motion unanimously carried.

6. November 2015 Treasurer’s Report – David Rhea David Rhea reported the society is solvent. Motion by Phil Cross, second by Ken Murdock to add Roger Wilson as an authorized signer on the checking

account. The motion unanimously carried. Motion by Phil Piet, second by Ken Murdock to and to authorize a credit card be secured in the society name

and Ross Marvin to be the authorized signer for the card. The motion unanimously carried. David Rhea read a letter from Frank Brubaker thanking the society for the card sent to them. David Rhea reported on vandalism that was done to the ramp of the building. A police report was made and the

paint has already been painted over.

7. Vice President of Membership & Programs Report – Jerry Honetor Membership Report

Currently 67 Members, 10 members have renewed for 2016. Field Trips Suggested/Planned for 2016

Gold Coast Railroad Museum in Miami, FL (Suggested) 253 Steam Association Museum in Ft. Pierce, FL (Suggested) Roger Wilson reported on last field trip to Plantation and Clem Kruse’s house to view his layout on Decem-

ber 11th. Les Westlake, Phil Piet, Diane and Jerry Hardwich, and Dan Crusie attended. Programs & Refreshments Hosts for 2016:

Programs are needed for February 2016, March 2016 and June 2016 through December 2016 Refreshments Hosts are needed for June 2016 thru October 2016 and December 2016.

8. Museum Curator Report – Ken Murdock CFRR Museum Report: The November 2015 CFRR Museum Report has Not Been Prepared Yet. Library Update: Jerry reported Larry Fellure donated 11 years of Model Railroader Magazine in binders. Technology Update: Ross Marvin reported the eBay store is ready to go. 10 to 20 items are going to be on

the site. Recent Acquisitions & Donations: Ken Murdock received a call from John Root of the Root Foundation. Their

board met and agreed to donate $7,500 to the Society for the expansion fund. Phil Piet donated 2 G gauge Lo-comotives with DCC and sound to be sold on eBay, plus a number of G gauge Kadee couplers and 2 G gauge power supplies.

Expansion Plans for the Central Florida Railroad Museum: Just received revised plans with the changes re-quested by the ARB architect. We should be ready to request a formal ARB meeting soon.

The Next Museum Work Session: The next work session is scheduled for December 19th, beginning at 8:30 AM.

9. Museum Host Schedule for January 2016 – Irv Lipscomb — A number of Museum Hosts were secured for January.

10. President’s Report – Jerry Honetor Winter Garden Heritage Foundation Board of Directors Activities for November 2015 – Preparing to hire a

Development Director and finalizing the reorganization of the board. CFRHS Facebook Page Update: No Report.

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11. FCRR, FMRR, FNRR & SunRail Update: No Report.

12. Tourist Train Operations on the Florida Central RR: Phil Cross reported the Cannon Ball is running their steam train Santa excursions. He rode it over the weekend and the

trains were full.

13. Items from the Board of Directors: David Rhea showed the membership a train set mounted on wood for sale in the gift shop for $10.

14. Items from the Membership: Patrick Smith reported on the FEC Santa train that he saw.

15. Installation of Society Officers for 2016 – Lloyd Brown installed the following as officer of the Society for 2016. President - Jerry Honetor Vice-President Education and Public Relations - Irv Lipscomb Vice-President of Membership and Programs – Ross Marvin. Secretary – Joe Lehmann Assistant Secretary - Phil Piet Treasurer – David Rhea Assistant Treasurer – Roger Wilson Museum Curator – Ken Murdock Immediate Past President – Bill Dusenbury Historian – Phil Cross

16. Tonight’s Program: Ken Murdock – Railroads in and Around Live Oak & Perry - Part 2

17. Tonight’s Refreshments Provided By: Jerry & Ginger Honetor

18. Meeting Adjournment Motion by Irv Lipscomb second by Phil Piet to adjourn the meeting, the motion carried.

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CSX's Offer Finally Opens the Door to Commuter Rail in Tampa Bay There are 96 miles of railroad track connecting the downtowns of Clearwater, St. Petersburg and Tampa. The steel grating links Tampa International Airport to the University of South Florida, stretches across four counties and reaches as far north as Brooksville. Freight trains run on those tracks now. But they could, one day, form the spine of a passenger rail sys-tem that would finally connect Tampa Bay — and ease the region's dependence on roads. This is no pie-in-the-sky scenario. It's an idea gaining sudden momentum because railroad giant CSX Corp. is shopping around two segments of its Tampa Bay routes. There is precedent in Miami and Orlando for converting freight lines to commuter rail. And no, it's not light rail. It doesn't require building brand-new rail infrastructure on top of existing development. That doesn't mean commuter rail is any more feasible than light rail — or cheaper. But now, it's an option. "There's no question in my mind that there's going to be a very serious conversation about it," said former Hillsborough County Commissioner Mark Sharpe, one of the bay area's most vocal transit advocates. "It's there, it's underutilized, and it connects important points. It's very viable."

For three decades now, local leaders have batted about the idea of converting freight rail to a passenger service. The bay area once had a Tampa Bay Commuter Rail Authority that pushed the concept in the 1990s but struggled to drum up support or funding. The agency folded soon after. In this decade, the Greenlight Pinellas effort considered incorporating the CSX tracks into its plan, then settled on a separate light rail system. That plan was rejected by Pinellas voters last year. Hills-borough voters did the same to a 2010 referendum that also included light rail. Transit proponents have long coveted the tracks. But one question always stood in the way: Was CSX open to a deal? It is now. At last month's meeting of the Tampa Bay Transportation Management Area Leadership Group, a gathering of the region's transportation planners, CSX said it's willing to sell two lines. One of the rail lines offered by CSX is the "Clearwater line." It stretches from downtown St. Petersburg, climbs northwest through Pinellas County to downtown Clearwater, veers to Oldsmar, then runs east past Tampa International Airport and ends near downtown Tampa, in Ybor City. The second route is the "Brooksville line." It starts in Tampa, juts north from the first line, passes by USF, cuts through Land O'Lakes in Pasco County and finishes in central Hernando County, near Brooksville. Urged by local leaders, CSX analyzed its lines and found that those two routes carried minimal freight traffic and could be used for passenger rail. "We will continue to explore win-win scenarios that would help provide transportation alternatives to the citizens of Tampa Bay," said CSX spokeswoman Kristin Seay, "while allowing CSX to continue to meet the freight needs of its customers in the region."

It's unclear how much the lines would cost. SunRail, a freight-turned-commuter rail service that started running last year in the Orlando region, offers some cost comparisons. In 2011, CSX sold 61.5-miles of track to the Florida Department of Transportation for $150 million. That's $2.4 million a mile. Other costs bumped the project's total to $432 million. Federal money paid half the tab. The rest was split by the state and SunRail's local partners: the city of Orlando and four counties. Under the agreement, the state owns the tracks, which it leases to CSX for freight use. Otherwise, those rail lines carry passenger cars. Commuter rail is not light rail, however. Light rail is smaller and nimbler. It can make tight turns on city streets. It's electrified, either with an overhead wire or through the tracks. Commuter rail uses bulkier diesel-powered cars that run on the existing track. They're heavier so they can comply with federal crash regulations. Commuter rail is cheaper to build but carries heftier operating fees. Like light rail, stations have to be built. Unlike light rail, railroad crossings are already in place. "People talk about rail here like it's one thing," said Ray Chiaramonte, executive director of the seven-county Tampa Bay Area Regional Transportation Authority, or TBARTA. "There's all different kinds. Some can go places others can't."

SunRail marked its first anniversary in April by carrying a million passengers, according to the Orlando Sentinel. In March, it averaged 4,100 paying customers a day, just below its target of 4,300. The 31.5-mile line is planning to double in size. It's had problems, though. SunRail doesn't reach Orlando International Airport, nor does it run often enough or on week-ends, riders told the Orlando Sentinel. A Tampa Bay commuter system also would have drawbacks. The lines CSX offers don't connect the area's nexus: Tampa's Westshore area to St. Petersburg's Gateway area. They ignore the southeast (Brandon) and northeast parts of Hillsborough (New Tampa) and eastern part of Pasco (Wesley Chapel), where new housing has risen. But CSX's two Tampa Bay routes are a better fit for commuter service than the tracks in Orlando, say local officials. The Tampa Bay lines run through what Sharpe calls "key primary points" — the three major downtowns, Tampa International Airport and USF. Then, it stretches north toward the new bedroom communities in Pasco and Hernando counties. "We would have better ridership than SunRail," said Beth Alden, the Hillsborough Metropolitan Planning Organization's executive director. "It's a real opportunity that we have as our opportunities seem to get narrower and narrower."

To seriously consider the idea, Tampa Bay's fractured municipalities would need to come together. SunRail is run by a regional government agency. Its board is comprised of elected officials from the region. The only comparable agency in this area is Tampa Bay Water, the regional water authority. TBARTA is the area's transportation planning agency, but the Legislature never gave it the power to tax and spend. Without money, it has little power. CSX will only sell its railroads to the DOT, which would work with local municipalities to build a governing and operating agency. Some fret that another transit option — commuter rail — will further muddy an already complicated transportation discussion. Nor will it help pay to fix the bay area's most pressing transportation need: a better bus service. "I think we come out with these big ideas and try to do multiple things at once," Chiaramonte said. "We keep switching from one thing to another. We're just spinning our wheels." Meanwhile, the area's latest transit initiative, Go Hillsborough, isn't even on the 2016 ballot yet but now faces legal and ethical questions — and an investigation meant to dispel doubts instead has political leaders in retreat. CSX's offer gives Tampa Bay a new option to consider. The state has shown that when it comes to commuter rail, it's willing to partner with local communities — and help pay the bill. "DOT has sort of thrown down the gauntlet on this with us," Alden said. "They're willing to work with us, but they need us to be partners at the table."

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January 2016 Museum Work Session

Saturday, January 16, 2016

8:30 AM to 3:30 PM Please come out and help with the many chores that

need to be done!!!!

The Central Florida Railway Historical Society, Inc. meets on the 2nd Monday of each month at 7:00 PM at the Central Florida Railroad Museum. The Museum is lo-cated at 101 South Boyd Street in downtown Winter Gar-den immediately north of the water tower. Guests and visitors are welcome and encouraged to attend.

All correspondence and other materials for the Society should be mailed to:

Central Florida Railway Historical Society, Inc.

PO Box 770567

Winter Garden, FL 34777-0567

Or e-mailed to the Society at: info@cfrhs.org

Web page: www.cfrhs.org Mission: The mission of the Central Florida Railway Historical Society, Inc. is: Promoting railway heritage and preservation and educating members and the public about rail transportation, its history and impact, with a focus on Central Florida.

Purpose: The purpose for which this Society is formed and the business or objects to be carried on and promoted by it are mainly historical, educational and not-for-profit. The more par-ticular objects are:

Preserve the historical materials of rail transportation of all kinds and issue publications relative to the subject.

Acquire by donation, purchase, lease or otherwise, real or personal property, and to maintain, sell, lease, deed or other-wise manage in a manner appropriate for the Central Florida Railroad Museum and the above mentioned purposes.

Plan and run a series of programs and events for Society members’ education and participation.

Work and support the activities of the Winter Garden Heri-tage Foundation. Assist in any and all group projects which benefit the goals and activities of the Society and the Winter Garden Heritage Foundation.

President: Jerry Honetor president@cfrhs.org 407-957-8788 Vice President - Membership & Programs: Ross Marvin vpmembership@cfrhs.org 407-909-9823

Vice President - Education & Public Relations: Irv Lipscomb vpeducation@cfrhs.org 407-895-4749

Secretary: Joe Lehmann, Jr. secretary@cfrhs.org 856-912-8628

Assistant Secretary: Phil Piet asstsecretary@cfrhs.org 407-656-4960

Treasurer: David Rhea treasurer@cfrhs.org 407-656-8749

Assistant Treasurer: Roger Wilson assttreasurer@cfrhs.org 352-314-0881

Museum Curator: Ken Murdock curator@cfrhs.org 407-277-5719

Assistant Museum Curator: Roger Wilson asstcurator@cfrhs.org 352-314-0881

Historian: Phil Cross historian@cfrhs.org 407-509-4572

Immediate Past President: Bill Dusenbury pastpresident@cfrhs.org 407-509-1521

Flatwheel Editor: Phil Cross editor@cfrhs.org 407-509-4572

Webmaster: Joseph Lehmann, Jr. webmaster@cfrhs.org 856-912-8628

The Central Florida Railroad Museum is located at 101 South Boyd Street, Winter Garden, FL, 34787 (downtown Winter Garden, immediately north of the water tower).

The Museum is open daily from 1:00 PM to 5:00 PM (ex-cluding selected holidays) or by special arrangements. Large groups are encouraged to contact the Museum at 407-656-0559 to arrange for their tour in advance.

The Central Florida Railroad Museum is operated under a cooperative agreement between the City of Winter Garden, the Winter Garden Heritage Foundation and the Central Florida Railway Historical Society, Inc..

The Flatwheel is the official monthly publication of the Cen-tral Florida Railway Historical Society. Opinions and views expressed in this publication are those of the editor and contributors and do not necessarily reflect those of the members, officers or directors of the Society.

Material for the Flatwheel (including exchange newsletters) should be sent to the editor via e-mail at:

editor@cfrhs.org .

Please Note: Material from The Flatwheel may be reprinted in other publications provided credit is given as to the source.

2016 CFRHS Membership Statistics Society Members 32 Society Century Members 15

Ward Britt Phil Cross Ann Cross Bill Dusenbury Charles Hanus, Sr. Chuck Hanus Linda Hanus Andy Healy Jerry Honetor Clarence Hurt Clem Kruse Ross Marvin Ken Murdock Al Sharp Jim Shoemaker

Society Friends 7 Society Family Members 13 Society Student Members 0 Total Members 67

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Rail News From the TRAINS, Railroad & Railfan, Rail Group News and AAR Web Sites

And Courtesy of Society Members Roger Wilson, Jerry Hardwich, Addison Austin, Warren McFarland, Craig Murdock, Connor Murdock and Some Other Members/Supporters From Time to Time

Gulf Coast Residents May See Passenger Train Service Again Tuesday, December 1, 2015

PENSACOLA, Fla. - There's a push to bring passenger train travel back to Pensacola.

The Southern Rail Commission is starting talks with cities across four states. They have invited mayors from cities across the Gulf Coast to their quarterly meeting to talk about the issue.

It’s scheduled for 9 a.m. Friday, at the Battle House Renaissance Mobile Hotel in Mobile, Alabama.

The commission’s mission is to improve rail service in Alabama, Mississippi and Louisiana. It’s bringing Florida onboard in its latest effort.

The Commission would like to see service restored from Orlando to New Orleans. Several cities in Northwest Florida and Alabama could be on the list of stops, including Pensacola, Mobile, Crestview, and Atmore.

A spokesman for the commission says officials in Milton, DeFuniak Springs, and Bay Minette would like to see stops in their cities as well.

Greg White, the chairman for the commission says the old route that existed through the Gulf Coast before Hurricane Katrina ran from East coast to West coast. It created problems with trains being on time.

That’s a problem they’re looking to fix. The shorter route will help trains arrive on time, according to White.

White also added there’s been a growing demand for passenger train service coming from Gulf Coast residents, as well as economic and tourism leaders.

“After we advertised the meeting, we began to get a few responses from people who indicate interest and excitement,” White said. “But more than that, you're starting to see the officials in town realize the importance of passenger rail.”

Pensacola city leaders have not taken spoke out about their position on the restoring passenger rail. But city officials note the area has infrastructure in place, pointing to the old Amtrak train station on Heinberg Street.

Ken and Karen Wilder who live near the train station were big fans when it was in service.

"I couldn't believe it (closed down) because Amtrak was doing so well," Ken said.

Both would welcome the service back.

"I'd like to have a day trip to New Orleans,” Karen said. “That would just be a lot of fun."

"It’s such a beautiful area to live and have a train to go to so many places,” Ken added.

A spokesman for the Southern Rail Commission said they’re looking at a time frame of 10 to 18 months.

New Tank Car Regulations: A Coatings Perspective Written by Mike Reed

Monday, November 30, 2015

By now, railcar manufacturers are well aware of U.S. Department of Transportation’s new rules regarding the nation’s fleet of crude-carrying cars.

The final rule for the safe transportation of flammable liquids by rail, which was finalized in conjunction with Canadian regulators this past May, will set in motion years of replacing and retrofitting of cars manufactured on or before Oct. 1, 2015. These new standards will eventually lead to the complete phase-out of the DOT-111 fleet currently in service.

While there’s still some debate about the number of cars that can be cost-effectively retrofitted and the number that will need to be totally replaced, it’s generally agreed that railcar manufacturers will face steepening demand in the coming years. According

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to a presentation by the Railway Supply Institute Committee on Tank Cars, there was a 50,400 tank car backlog as of March of last year. These orders are not expected to be completed until the end of 2015.

As Jack Gerard, President and Chief Executive of the American Petroleum Institute told the Wall Street Journal, the “railcar manufacturing industry’s own calculations show it does not have the shop capacity to meet the retrofit timeline.” He predicts this will “lead to shortages that will impact consumers and the broader economy.”

If U.S. refineries are to continue to max out capacity, railcar manufacturers can expect demand to remain high for some time as they scramble to complete an aggressive fleet phase-out.

Crude and Capacity

These new regulations coincided with unprecedented amounts of crude oil traveling domestically by rail. But beyond sheer volume, today’s crude presents another issue for railcar manufacturers. The process of hydraulic fracturing introduces water and other chemicals not previously present in other methods of extraction. Crude extracted from shale-rock contains drastically more water, of varying pH levels, that is now accompanying crude on its journey.

The crude, which traditionally got along pretty well with steel when extracted using older methods, now contains enough water to cause serious damage from interior corrosion. Combine this increased likelihood of interior corrosion with the fact that these new materials are accompanied by a lower flash point, and it’s easy to see why extra care needs to be taken when lining tank cars. Corrosion is, or should be, a core concern of railcar manufacturers and leasing companies looking to protect their investments. With all the capital that will undoubtedly be invested upgrading railroad tank cars, linings to protect against pitting corrosion should certainly make up a portion of that investment.

But protecting tank cars from corrosion introduces another problem rail shops will be familiar with. Coatings and linings emit byproducts known as volatile organic compounds (VOCs). VOC emissions are regulated at the federal, state and local levels and these regulations must be accounted for. While other components such as pneumatic braking systems may also cause bottlenecks, VOC regulations are another consideration for manufacturers trying to catch up to demand.

But thankfully, with advances in coatings technology, they don’t have to be.

A Solution to VOC Woes

Coatings shouldn’t be the limiting factor in a railcar manufacturing facility’s output. But the fact is, that can be the case. Some manufacturers are forced to limit output because the coatings used on their cars emit more VOCs than regulations will allow. Or, in other cases, shops shell out huge amounts of cash for outside engineers to monitor their compliance with local VOC regulations. Whether from deliberately lowering output, or from paying money to ensure compliance, VOCs can cost shop owners big.

Luckily, VOC regulations can also be addressed by the right coating or lining product. High solids—so called because of their relatively low levels of evaporating solvents—low-VOC linings can help those leasing tank cars to know that they are safe both from pitting corrosion and penalties from excess VOC emissions. High solids coatings are designed to cure with little or no help from chemical solvents, thereby eliminating VOC emission caps as a limit on output.

If VOC emissions haven’t typically been a problem for a shop in the past, then maybe there’s no reason to make a product switch. But if demand is expected to increase heartily, and there’s a chance VOC regulations could become an obstacle to churning out new cars full-bore, then these products can absolutely make a difference. Otherwise, manufacturers may run the risk of running right up to their max VOC outputs at a time when it’s critical that output remains high.

And lowering VOC emissions isn’t the only benefit of high solids coatings. These products also tend to cure faster than many others on the market. This means a coating could be helping to lower overall throughput times. With less times set aside for drying, manufacturers can keep the line moving and speed up production. Railcar manufacturers have their work cut out for them. It will take a herculean effort to eliminate the backlog of cars available to transport crude oil and ethanol from shale and natural gas fields. What doesn’t have to stand in their way are VOC regulations. With the high solids, low VOC linings now available on the market, there’s simply no reason for production to be limited by VOC emission caps.

CP-NS: Voting Trust and Other Conundrums Written by Frank N. Wilner

Monday, November 30, 2015

Levitation takes two forms among railroads—magnetic levitation relating to futuristic high-speed passenger transport, and stock levitation associated with bidding wars for asset control.

Stock levitation most recently was seen in 1997 when Conrail shares ascended within months from $85 to $115 during a bidding war involving CSX and Norfolk Southern (NS). It ended only after Surface Transportation Board (STB) Chairman Linda Morgan sent CSX and NS a message via Washington Post journalist Don Phillips that if they didn’t mutually agree on splitting Conrail assets, the STB would impose a third-party settlement neither might like.

Comes now the possibility of a new bidding war—for control of NS in the wake of Canadian Pacific’s (CP) initially unwelcome $28.4 billion solicitation offer called “too low” by NS. A previous unsolicited bid by CP for CSX was rebuffed by CSX

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management last year and then abandoned by CP amidst cost anxieties and festering concerns of rail congestion and service problems that made rail merger mavens chary.

Since, rail service-problem fears have faded while NS stock slid some 30% in price, with NS suffering worse traffic losses than its rivals. All this reenergized the still marriage-minded 71-year-old CP chief Hunter Harrison, who thirsts to create North America’s first transcontinental railroad.

As “no” rarely is heard as “no” among railroad CEOs whose testosterone levels soar when the word “merger” is uttered and a prey’s stock price is considered attractive, NS is now assumed “in heat.” In such an environment, CP best beware of another railroad, a rail holding company such as Berkshire Hathaway, or a non-railroad hedge fund entering the fray with higher offers.

Thus, CP is prepared to improve its bid to achieve—more certainly, more quickly and less expensively—a lock-up of a majority of NS shares so as to shut out other NS suitors pending a subsequent STB decision on a CP-NS merger application. As one Class I railroad may not exert operational control over another Class I railroad absent formal STB merger approval, the tendered NS shares would be placed in a voting trust pending regulatory finality.

A voting trust for railroads requires STB approval, which typically occurs in fewer than two months following a request. A subsequent decision on whether to permit a CP-NS merger could stretch more than a year, but no longer than 16 months, per statute, following filing of a formal merger application.

Requisite regulatory hurdles are significant and not confined to CP and NS. Responsive and inconsistent merger applications may follow a CP-NS merger submission. Kansas City Southern could seek inclusion as a condition of merger; other railroads might press for concessions such as line sales; while BNSF might make a play on CN, and Union Pacific one on CSX. Other permutations are possible.

Adding to the fog is that the top institutional shareholders of the major U.S. railroads, whose concurrence in any merger deal is essential, are largely the same—Capital Research, Vanguard Group, State Street Corp. and Black Rock Investment Trust.

The Voting Trust Issue

If CP and NS management reach a merger agreement in principal, CP will pay a yet-to-be-established premium above market value for NS shares—and the voting trust becomes integral to the holding of those shares while regulatory approval is sought for the merger.

Here is where CP shareholders assume a significant risk. As CP will pay a premium above market value for those NS shares placed in a voting trust, their value could plummet sharply should the STB subsequently deny the merger. A dissolution of the voting trust would follow, requiring sale by CP of the NS shares on the open market at whatever price is offered. CP shareholders could end up considerably poorer.

This is why Harrison wishes, under cover of a voting trust, to make a management swap—send CP President Keith Creel, and maybe even himself—to Norfolk to run NS as Harrison thinks it ought to be run; with NS CEO Jim Squires moving to Calgary to “learn” more about CP and the heralded Hunter Harrison productivity-enhancing management method. More in a moment on how this intended management swap could affect an STB decision on a voting trust.

The purpose of the management swap is to tamp down—sharply and quickly, before any STB decision on the merger application—the NS operating ratio, which would increase the value of NS stock substantially, notwithstanding how the STB rules on the merger application. (Operating ratio is a railroad’s operating expenses expressed as a percentage of operating revenue, and is considered by economists to be the basic measure of carrier profitability. The lower the operating ratio, the more efficient the railroad.)

Harrison, described by a Canadian newspaper as a “tough, polarizing rail chief [with] a board of directors totally in his thrall,” peddles himself with Donald Trump-like bravado as a god-from-the machine, able to squeeze from a railroad every penny of waste and every ounce of improved productivity in order to send operating ratios tumbling. To his credit, Harrison did just that on Illinois Central (IC), Canadian National (CN) and CP.

In fact, when CN acquired IC in 1998, it was the only modern merger transaction not plagued by service failures. Harrison, then CEO of IC, became CN’s chief operating officer before becoming CN’s CEO—a fact that may be prominent in a CP-NS merger application that requires a service assurance plan. Harrison’s critics, however, assert that IC, CN and CP are all less complex in route structure and traffic diversity than NS.

Harrison’s Scheduled Railroad Model

If history is a guide, and the CP-NS management swap occurs, Harrison will attempt to turn NS into a scheduled railroad, substituting high hourly pay for existing fixed trip-rates and guaranteeing train crews more predictable days off and starting times. Road and yard distinctions, as well as other costly work rules, would be eliminated and the work force trimmed significantly through attrition. Such a bundle of changes are intended to put productivity improvements on steroids, while annual wages could climb by as much as $30,000 in order to coax labor-contract changes.

There is, of course, no guarantee the Harrison model would work at NS—or work in time to protect NS share value should the proposed CP-NS merger be rejected by the STB. Time and pushback from rail labor—and even from a justifiably proud NS management—could work against Harrison.

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For all of Harrison’s declarations of NS shortcomings, NS is the only major railroad that consistently has been found by the STB to generate revenue equaling or exceeding its annual cost of capital; and no railroad in modern times has posted a consistently better safety record. There are other sobering considerations to the optimism attending the Harrison aura. Former CN Chairman Paul Tellier, who adored Harrison’s abilities, nonetheless winced at Harrison’s oft abrasive personality. “We try to keep Hunter in a cage so he doesn’t bite,” Tellier once jested. “But he finds a way to get back out and we have to put him back in.”

Indeed. At CN, Harrison was derisively called “the ugly American” by train crews over his brusque manner in seeking productivity improvements. U.S.-based labor union senior officer Carl Vahldick, who had worked closely with Harrison at IC, once was dispatched north in an effort to quell an uprising by conductors.

The so-called Harrison productivity-enhancement model was, in fact, developed at IC with substantial input from United Transportation Union Vice President Corky Swert; yet twice rejected by the rank-and-file before productivity payments successfully sweetened the deal. More recently, conductors on CP’s U.S. subsidiary Soo Line rejected a Harrison hourly rate concept, while labor leadership on CP subsidiary Delaware & Hudson (parts of which have since been sold to NS) declined even to consider the concept.

Such are the hazards of assuming early productivity enhancements at NS.

Perhaps the greatest peril to STB approval of a voting trust is the envisioned management swap. Yes, voting trusts have been approved in the past—such as when Southern Pacific (SP) and Atchison, Topeka & Santa Fe (ATSF) sought merger approval, only to have it dissolved when the STB denied the transaction. Billionaire energy tycoon Phil Anschutz stepped in to purchase a financially struggling SP, later merging it with Union Pacific, while ATSF and Burlington Northern combined to create BNSF.

But as the proverb reads, “That which is past is dead.” Railroads and their regulatory agency have entered a new age with changed rules and perceptions.

Too Big to Fail?

Recall that when BNSF and CN sought merger approval in 2000, the STB put the transaction on hold for 15 months while formulating new merger rules to meet what the STB considered changed conditions in the rail industry—not the least of which is concern that U.S. railroads already had become “too big to fail,” as was proven with banks during the financial meltdown of almost a decade ago.

The BNSF-CN merger application voluntarily was withdrawn, meaning a CP-NS merger would be the first to be considered under the STB’s new more-stringent-than-ever merger rules, which contain a revised procedure for voting trusts—a privilege to be granted by the STB and not a right. With regard to voting trusts, the rules state:

“[W]e are responsible for ascertaining whether a proposed transaction would undermine the financial integrity of the applicant carriers. If prospective applicants make larger tender offers for controlling stock interests in other rail carriers, they risk having to sell these assets at a greatly reduced price if we do not approve the control application or if they choose not to consummate it.

“Therefore, we believe that, with only a limited number of major railroads remaining, we must take a much more cautious approach to future voting trusts in order to preserve our ability to carry out our statutory responsibilities.”

The STB seeks to assure that, going forward, it does not act as an enabler of financial risk compromising CP’s ability to fund future capital investments and normalized maintenance for itself, or for its U.S. subsidiaries—Dakota, Minnesota & Eastern, Delaware & Hudson and Soo Line.

Jiggery-Pokery?

Comes now the more problematic hitch. The STB’s voting trust procedures require independence in the operation of the railroad held in trust. If the Harrison-intended management swap, perhaps essential to protecting the share value of NS should a merger be rejected by regulators, is viewed as jiggery-pokery by the STB—an attempt to circumvent required NS operational independence—voting trust approval could be in deep doo-doo.

As Harrison sees things, during STB deliberations on the 1998 successful CN-IC unification, the STB allowed a voting trust for IC during which time Harrison, then IC’s CEO, was sent to CN as chief operating officer. So why not now? Well, IC was a relatively small railroad during a different era. Times have changed—that which is past is dead—and new regulators sit in judgment.

So last week, Harrison hinted he might, instead, place CP in voting trust rather than NS. Some attorneys say such a tactic might avoid required STB approval of a voting trust of NS, while still allowing CP to lock up control of a majority of NS shares and make the management swap. It could be a perilous strategy, as seeking to involve the STB in a three-card Monte game run by Hunter Harrison’s creative attorneys might not be the sanest of strategies to gain voting trust or merger approval.

What CP should not be inviting in this effort is an unnecessary court challenge and its attendant delay. As CN and BNSF learned when fighting the 15-month merger moratorium in 2000 that cost them their merger, investors providing the acquisition cash are prone to having second thoughts when the calendar drags.

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As for Open Access

While a discussion of pro-competitive elements required by the STB for approval of mergers under its current rules is beyond the intent of this column, there is one curious element of this proposed transaction that could bite shippers more than railroads, notwithstanding that most railroads stand in opposition.

Harrison promises that if a CP-NS combination fails to provide adequate service or competitive rates, he would allow a competing railroad to utilize CP-NS tracks to reach otherwise sole-served customers (open access), and quote line-segment rates in bottleneck situations. Such are opposed by most railroads while craved by most shippers.

Yet giving previously sole-served shippers access to another railroad could eliminate the second of two required pre-conditions for bringing a rate challenge before the STB—a ratio of revenue to variable costs exceeding 180% AND evidence that the shipper has no effective transportation alternatives. Most, if not all, potential rate challenges by aggrieved shippers could thus be eliminated were open access a condition of the merger’s approval—but just on CP-NS.

Thus, railroads other than CP-NS would NOT be required to provide open access and elimination of bottleneck pricing. CSX, for example, could then poach on NS sole-served points without fear of similar poaching by NS. The investment funds whose holdings are spread among numerous U.S. railroads may not cotton to such market destabilization and withhold their shares in NS from CP.

As for the extension of open access and bottleneck pricing to other railroads as a condition of other mergers, many railroads and investors assert it could chill future investment in affected facilities. They stand in disagreement with economists over the theory of “conscious parallelism,” which predicts two competitors will not destabilize the status quo; that a third competitor, not contemplated by open access, is required for market destabilization.

DraftKings and FanDuel promise big payoffs for predictive-skill talent involving professional sports. That’s small potatoes compared to wins and losses faced by those with cash in this game. Interesting times, indeed.

Gulf & Ohio Railways to Operate Global Trans Park Rail Line in North Carolina

Monday, November 30, 2015

After a competitive solicitation for proposals to market and operate the state-owned Global Trans Park (GTP) railroad line in Lenoir County, the North Carolina Department of Transportation (NCDOT) selected Gulf & Ohio Railways, Inc. (G&O). The NCDOT Board of Transportation approved the new GTP Lease & Operating Agreement at its Nov. 5, 2015 meeting. Under the terms of the agreement, G&O will operate, maintain and market freight service on the GTP line.

Located just west of Kinston, the rail line connects to the North Carolina Railroad on its south end and extends 5.7 miles north to the GTP. The railroad is strategically located to provide service to the GTP, the Morehead City State Port and eastern North Carolina. NCDOT and G&O believe the GTP line has significant business development opportunities.

"We are excited about having an operator serving the GTP rail spur," said NCDOT Rail Director Paul Worley. "This will give us an advantage as we look to support economic development and job creation at the GTP and along the rail line."

NCDOT owns the GTP rail corridor, which was built in 2011. NCDOT and G&O will work closely with the Lenoir County Board of Commissioners and the Lenoir County Economic Development Commission to build a customer base along the rail line.

"We look forward to exploring the opportunities that we see this rail line offering," said Peter Claussen, president of G&O. "It is truly a unique piece of property and presents a lot of growth potential."

CP’s Holiday Train Ready to Ride Again Written by Carolina Worrell Monday, November 30, 2015

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The Canadian Pacific (CP) Holiday Train program is ready to go for its 17th year, bringing with it food, cash donations and awareness to local food banks and food shelves across North America, the railroad announced Nov. 26, 2015.

The two brightly lit trains —a U.S. train and a Canadian train—kick off their tours in the Montreal area on Nov. 27 and 28 on their way to visit approximately 150 communities. The Canadian train travels west across Canada finishing its journey in Port Coquitlam, British Columbia. The US train visits communities in Quebec, New York, and Southern Ontario prior to traveling across the U.S. Northeast and Midwest, returning to Canada for its final shows in Saskatchewan and Alberta.

Since 1999 the annual Holiday Train program has raised over C$10.6 million and 3.6 million pounds of food. Each Holiday Train is about 1,000 feet in length with 14 rail cars decorated with hundreds of thousands of technology-leading LED lights and a modified boxcar that has been turned into a traveling stage for performers.

Each Holiday Train event features performances by professional musicians that include holiday-themed songs. There's no charge to attend a Holiday Train show, but patrons are asked to bring a cash or non-perishable food donation. All money and food raised in a community stays there to help those in need locally. Again this year, legendary Canadian singer-songwriter Jim Cuddy will be on the Canadian train, this time joining his son, Devin.

"The Holiday Train is an amazing expression of old-timey Canadian joy," said Cuddy, who was given the Order of Canada by Governor General David Johnston earlier this month. "To be on board an old, refurbished train and traveling through the nooks and crannies of this country is an awe-inspiring experience. As we pull into towns and cities along the way, we also see all the people assembled to celebrate and who are filled with the Christmas spirit—it is an incredible experience for those of us on the train."

Also on the train is Montreal/Winnipeg band Chic Gamine who will play all the shows in Quebec, offering Francophone performances. Holiday Train veteran and award-winning country singer Kelly Prescott with Devin Cuddy and CP's famed Holiday Train band will then take the stage for the rest of the Canadian Train's tour before Jim Cuddy joins for the final leg.

The U.S. train will showcase one of Canada's brightest country music stars in Kira Isabella, who was recently named by CBC as one of Canada's top 25 artists under 25. Isabella, who won the 2013 Canadian Country Music Association "Female Artist of the Year", will rock the stage with chart topping jack-of-all-trades Wes Mack, until the Doc Walker country legends come aboard in Chicago.

"I look forward to another great experience on the CP Holiday Train and am excited to engage with fans in person and on social media as we go from place to place," said Isabella. "The CP Holiday Train is such a unique and amazing experience, benefiting people in need at this most important time of the year."

Each year, fans of the Holiday Train follow its journey over social media, posting spectacular images of the trains in various cities and landscapes. Those who take photos of the train, holiday entertainment and the spirit of giving are encouraged to enter the "Capture the Spirit" photo contest for the chance to win an exclusive ride on next year's train. Details about the contest are available on the Holiday Train Facebook page. Use #CPHolidayTrain.

The online schedule is now live at www.cpr.ca/holiday-train and lists which performers are stopping where and when.

To help make this year the best yet for local food banks, the Holiday Train asks fans new and old to follow the train on social media, invite their friends and family and spread the message about the importance of heart-healthy donations by using #HealthyDonations.

FAST Act on the Fast Track to Approval Written by Carolina Worrell

Wednesday, December 02, 2015

Congressional conferees on Dec. 1, 2015 reached an agreement on the Fixing America’s Surface Transportation (FAST) Act, a five-year surface transportation reauthorization bill and the first long-term bill of its kind in a decade. It comes after years of predecessor-bill extensions and partisan bickering. Of interest to freight railroads are key provisions on safety enhancements for tank cars moving flammable liquids in the U.S. and electronically-controlled pneumatic (ECP) train braking.

On July 30, 2015, the U.S. Senate approved the DRIVE Act on a bipartisan vote of 65-34. After House passage of similar legislation, the Senate and House formed a conference committee on which Senators John Thune (R-S.D.) and Bill Nelson (D-Fla.) both served to resolve the differences between the two bills. The text of the agreement, now known as the FAST Act, is available here.

Rail provisions in the FAST Act that exited the House-Senate conference committee include the following:

• Rail Infrastructure Improvements – Improves rail infrastructure and safety by consolidating rail grant programs, cutting red tape and dedicating resources for best use. It also establishes a Federal-State partnership to bring passenger rail assets into a state of good repair.

• Expedites Rail Projects – Accelerates the delivery of rail projects by significantly reforming environmental and historic preservation review processes, applying existing exemptions already used for highways to make critical rail investments go further.

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• Dedicated Funding for Positive Train Control (PTC) – Establishes a new limited authorization with guaranteed funding for the Secretary of Transportation to provide commuter railroads and States with grants and/or loans that can leverage approximately $2+ billion in financing for PTC implementation.

• Testing of Electronically-Controlled Pneumatic (ECP) Brakes – Preserves the DOT’s final rule requiring ECP brakes on certain trains by 2021 and 2023, while requiring an independent evaluation and real-world derailment test. It requires DOT to re-evaluate its final rule within the next two years using the results of the evaluation and testing.

• Liability Cap – Increases the passenger rail liability cap to $295 million (adjusting the current $200 million cap for inflation), applies the increase to the Amtrak accident in Philadelphia on May 12, 2015, and adjusts the cap for inflation every five years going forward.

• Cameras on Passenger Trains – Requires all passenger railroads to install inward-facing cameras to better monitor train crews and assist in accident investigations, and outward-facing cameras to better monitor track conditions, fulfilling a long-standing recommendation from the National Transportation Safety Board.

• Thermal Blankets on Tank Cars Carrying Flammable Liquids – Closes a potential loophole in Department of Transportation regulations and reduces the risk of thermal tears, which is when a pool fire causes a tank car to rupture and potentially result in greater damage.

• Real-Time Emergency Response Information – Improves emergency response by requiring railroads to provide accurate, real-time, and electronic train consist information (e.g., the location of hazardous materials on a train) to first responders on the scene of an accident.

• Grade Crossing Safety – Increases safety at highway-rail crossings by requiring action plans to improve engineering, education, and enforcement, evaluating the use of locomotive horns and quiet zones, and examining methods to address blocked crossings.

• Passenger Rail Safety – Enhances passenger rail safety by requiring speed limit action plans, redundant signal protection, alerters, and other measures to reduce the risk of over-speed derailments and worker fatalities.

• Passenger Rail Reform – Reauthorizes Amtrak services, empowers states, improves planning, and better leverages private sector resources. It also creates a working group and rail restoration program to explore options for resuming service discontinued after Hurricane Katrina. Many of these provisions are based on the bipartisan Railroad Reform, Enhancement, and Efficiency Act (S. 1626), which passed Committee by voice vote in June.

• Railroad Loan Financing Reform – Reforms the existing $35 billion Railroad Rehabilitation and Improvement Financing Program to increase transparency and flexibility, expand access for limited option freight rail shippers, and provide tools to reduce taxpayer risks.

Association of American Railroads (AAR) President and CEO Edward R. Hamberger applauded Congressional conferees on reaching agreement.

Hamberger said provisions requiring increased thermal blanket protection for tank cars, restrictions on the use of older DOT-111 tank cars moving flammable liquids and the requirement for top fittings protection on tank car retrofits address what the rail industry felt were safety shortcomings with the Pipeline and Hazardous Materials Safety Administration's (PHMSA) tank car rule enacted in May.

"The AAR's position has always been that the tank car rule was a good start, but didn't advance safety as much as it could," said Hamberger.

Hamberger said the House and the Senate should be commended for the hard work and bipartisan efforts that went into making possible a highway bill the country has long needed. This legislation, he said, demonstrates that it's possible to put partisan politics aside and deliver on the expectations of American voters.

The AAR also welcomed a measure in the surface transportation legislation to streamline the environmental permitting process for rail infrastructure projects based on previously enacted reforms for highway and transit projects. The reforms are designed to increase capacity, improve safety, hire new employees and provide efficient service to rail customers.

"America's freight rail industry is pleased with the commonsense reforms intended to address duplicative and burdensome permitting delays, unrelated to environmental quality," said Hamberger.

Apache Railway Saved by Last-Minute Purchase Written by Carolina Worrell

Wednesday, December 02, 2015

The 98-year-old Apache Railway Company, a short line railroad operating in Navajo County, Ariz., announced Dec. 1, 2015 that it has been purchased by an entity formed by Aztec Land and Cattle Company Limited and related entities, in a deal that will enable the railway to see its centennial and beyond.

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The three-year effort to save the Apache began after the 2012 closure of the Catalyst Paper Mill, which ultimately led to the mill and the Apache being purchased out of bankruptcy by a California investment group. Fearing that the Apache would be scrapped, concerned Navajo County leaders formed the Snowflake Community Foundation (SCF) to purchase the Apache from the investment group using short-term financing. Under SCF’s ownership over the past three years, the Apache continued operations and became profitable again.

In May 2015, SCF filed for U.S. Bankruptcy Court protection as it continued to seek permanent financing for the railway, and thereby ensure the railway would continue to be one of the region’s lifelines for jobs and economic development. The court had recently established a Nov. 30 deadline for SCF’s debt to be repaid. Last week, the court approved the sale of the Apache stock to the new ownership group. The deal, which closed Monday, Nov. 30, extinguishes SCF’s debt and related liens on Apache assets, and allows the railway to continue operations as it has for nearly the past century.

The Apache’s management will remain in place. Its workforce, which consisted of just eight employees three years ago, has increased to 21. The workforce will continue to expand to meet demand for the Apache’s rail services.

Through a collaborative local and state effort, equity investors were found to contribute significant capital to the acquisition of the railroad. The effort was complemented with a $2.5 million joint loan from the Arizona Commerce Authority’s Arizona Innovation Accelerator Fund program ($1.75 million) and Arizona MultiBank ($750,000).

In addition to the assistance of the Arizona Commerce Authority, other federal, state and local leaders have assisted the Apache during its long journey. United States Senators John McCain (R-Ariz.) and Jeff Flake (R-Ariz.), Congresswoman Ann Kirkpatrick, Governor Doug Ducey and his staff all played important roles during the last three years. Locally, the Apache was aided by the Snowflake Town Council, former Snowflake Town Manager Paul Watson (now with Navajo County), Snowflake Mayor Tom Poscharsky, and former Vice Mayor Jason Whiting (now Navajo County Supervisor). Apache customers Hormel Foods and Preferred Sands also lent key support to the effort.

“Strengthening Arizona’s rural communities is an important part of enhancing our statewide economy,” said Governor Doug Ducey. “The historic Apache Railway is a key piece of infrastructure that is vital for supporting economic development in Navajo County and its continued operation will attract industry and opportunity to the region.”

“The case of the Apache Railway demonstrates how public and private interests should work together,” said Steve Brophy, President of the Apache Railway Company. “In saving the Apache, both gave full measure so that our community might live well and prosper. A fully-functioning Apache Railway will attract new businesses, and gives Navajo County the necessary underpinnings for job growth and the resulting economic benefit for the entire community, now and into the future.”

“The Apache is such a tremendous asset to our community,” said Navajo County Supervisor Jason Whiting. “It provides Navajo County and the Town of Snowflake a connection to other markets, increasing our ability to better do business throughout the southwest. For economic development purposes, the more assets a community has, the better chance it will attract meaningful investment, and the jobs that go with it.”

“The ACA remains committed to supporting local communities throughout Arizona and is proud of our work to ensure the Apache Railway’s continued success,” said Sandra Watson, Arizona Commerce Authority President & CEO. “The Apache provides a foundation for bringing jobs and economic opportunity to Navajo County. The successful effort to secure new financing for the railway is an excellent example of collaboration between public and private sector entities to ensure the longevity of an important piece of infrastructure.”

"The Apache Railway has used up another one of its nine lives and we are glad it is still serving the economic development of our community and Navajo County," said Town of Snowflake Mayor Tom Poscharsky.

Amtrak: Ridership, Ticket Revenue Steady in FY2015 Written by Carolina Worrell

Wednesday, December 02, 2015

Led by a record of more than 8.2 million trips on its Northeast Regional service, Amtrak ridership and ticket revenue remained steady in Fiscal Year 2015, reflecting continued demand for passenger rail, the company announced Dec. 2. However, Amtrak notes that “significant and predictable investment is needed to ensure that intercity passenger rail will continue to deliver nationwide benefits including providing safe and reliable mobility and advancing America's economy.”

For Fiscal Year 2015, which ended Sept. 30, 2015, unaudited ticket revenues reached $2.185 billion, 0.1% below the prior year and ridership was more than 30.8 million, also 0.1% below 2014, primarily due to service disruptions on the Northeast Corridor, significant weather events and lower gas prices.

Unaudited total revenue for the company was approximately $3.2 billion for Fiscal Year 2015, 1% below the previous year. Operating cost recovery remained strong; Amtrak covered 91.1% of operating costs with ticket sales and other revenues.

In addition, Amtrak's unaudited adjusted operating loss was at $306.5 million which was higher than the previous year.

"We continue to make smart investments and advancements to critical infrastructure and significant improvements to the passenger experience so that the company can continue providing mobility to more passengers and make the best use of our limited resources," said Amtrak Chairman of the Board Tony Coscia. "This year's financial results show the resiliency of a

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company that faced a range of challenges and underscored the loyalty of our customers even during a period of low gas prices. Amtrak's board and management remain committed to moving the company forward and providing vital transportation for the country's future."

"This past year we continued to take America to where it needs to go, providing transportation to more than 30.8 million customers, which reflects continued strong demand and the value of our services," said Amtrak President & CEO Joe Boardman. "We have now carried more than 30 million passengers for five straight years, which is a testament to the value we bring to intercity travelers. However, critical investment is needed to ensure future growth of intercity passenger rail."

With ridership of 11.7 million, the Northeast Corridor (NEC) had its highest ridership year ever in Fiscal Year 2015, up 0.5% from the prior year, led by Northeast Regional service that saw a 1.5% increase and set a new ridership record with more than 8.2 million trips.

To ensure continued reliable transportation on the Northeast Corridor, Amtrak, in partnership with New York, New Jersey and the Port Authority is looking forward to forming the Gateway Development Corporation to start work on the critical Gateway Program.

In addition, Amtrak formed the Blue Ribbon Panel to address the Chicago rail gridlock that is causing major delays for passengers and for freight shipments.

NORFOLK SOUTHERN BOARD OF DIRECTORS UNANIMOUSLY REJECTS UNSOLICITED INDICATION OF INTEREST FROM CANADIAN PACIFIC

Norfolk, Va., December 4, 2015 – Norfolk Southern Corporation (NYSE: NSC) (“Norfolk Southern” or the “Company”) today announced that its board of directors has unanimously rejected Canadian Pacific’s (TSX:CP)(NYSE:CP) previously announced unsolicited, low-premium, non-binding, highly conditional indication of interest to acquire the Company for $46.72 in cash and a fixed exchange ratio of 0.348 shares in a new company that would own Canadian Pacific and Norfolk Southern. After a comprehensive review, conducted in consultation with its financial and legal advisors, the Norfolk Southern board concluded that the indication of interest is grossly inadequate, creates substantial regulatory risks and uncertainties that are highly unlikely to be overcome, and is not in the best interest of the Company and its shareholders.

“We believe in our ability to generate greater shareholder value through execution of our strategy – delivering efficient and superior service to build a more profitable franchise based on price and volume growth, implementing efficiency measures, and increasing returns on capital to strengthen our financial performance, all while maintaining our disciplined capital return strategy,” said Chairman, President and CEO James A. Squires. “Norfolk Southern has made growth investments and we expect to realize the benefits of these investments in the years ahead, especially as our intermodal volumes continue to build. Specifically, we expect to achieve an operating ratio below 70 in 2016 with additional improvements over the next five years resulting in increasing ROE and an operating ratio below 65 by 2020. By maximizing our asset utilization, we believe we can achieve double-digit compounded EPS growth over this period. In short, Norfolk Southern is well positioned to deliver compelling value to our shareholders.”

Mr. Squires continued, “There is a high probability that, after years of disruption and expense, the proposed combination would be rejected by the Surface Transportation Board (“STB”). We also believe the STB would reject Canadian Pacific’s proposed voting trust structure, and that there is no certainty that any other voting trust structure would be approved. Even if the proposed combination were ultimately to be cleared, it would be subject to a wide range of onerous conditions that would reduce the value of the stock consideration that has been proposed.”

Mr. Squires concluded, “We believe that Canadian Pacific’s short-term, cut-to-the-bone strategy could cause Norfolk Southern to lose substantial revenues from our service-sensitive customer base. We also believe the proposed transaction risks harm to vital transportation infrastructure and the communities we serve. Any strategy that hurts our customers and the broader community is highly unlikely to receive regulatory approval and is inconsistent with the delivery of shareholder value over the long-term.”

The Norfolk Southern board, composed of 13 directors, 11 of whom are independent, undertook a comprehensive review of the Canadian Pacific proposal. The Norfolk Southern board, in making its determination, considered among other factors:

The Canadian Pacific indication of interest substantially undervalues Norfolk Southern

o Norfolk Southern, under the direction of its board of directors and a recently appointed Chief Executive Officer, is successfully executing a strategic plan to drive operational improvements. The board is confident that the continued execution of this strategic plan is superior to Canadian Pacific’s grossly inadequate and high-risk proposal.

o The board believes that Canadian Pacific’s indication of interest is opportunistically timed to take advantage of a Norfolk Southern market valuation that has been adversely affected by a challenging commodity price environment, does not fully reflect infrastructure investments Norfolk Southern has made, and does not incorporate the upside from further improvements anticipated to result from the initiatives that the Company is implementing.

Norfolk Southern is successfully executing on its strategy

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o Norfolk Southern’s management team is successfully executing a number of revenue growth initiatives focused on pricing discipline and growth in merchandise and intermodal market opportunities.

o Norfolk Southern’s strategic plan is focused on providing superior customer service, continuing the recent improvement in network performance, and implementing efficiency measures, including managing headcount, increasing locomotive productivity, and integrating technological innovations.

o Norfolk Southern’s strategic plan provides for double-digit compounded EPS growth over the next five years, increasing ROE, and, by 2020, an operating ratio below 65.

o Norfolk Southern is committed to pursuing a disciplined capital allocation strategy while investing appropriately in its network. Over the past 10 years, since the inception of its share repurchase program, the Company has distributed nearly $15 billion to shareholders, consisting of an average of approximately $1 billion in share repurchases per year and a steadily increasing dividend with a 10-year annual compound growth rate of 14%.

Transaction would face substantial regulatory risks and uncertainties that are highly unlikely to be overcome

o The board believes that the proposed transaction is unlikely to be completed given the substantial regulatory risks. Notably, any transaction must be determined by the STB to both “enhance competition” and be in the “public interest”.

o Given the extended review process of two years or more and the uncertainty of approval, there would be significant disruption to Norfolk Southern’s business and operations.

o The Norfolk Southern board also believes that in the event the transaction did close, it would be only after the imposition of substantial regulatory conditions compromising the potential benefits of a combination and reducing the value of the proposed stock consideration.

There is no certainty that the STB would approve a voting trust - the voting trust structure proposed by Canadian Pacific is unprecedented and likely would not be approved

o Contrary to Canadian Pacific’s claims, a voting trust under which a transaction would close prior to final STB approval of the merger would not protect Norfolk Southern shareholders from regulatory uncertainty. Under STB rules established in 2001, any voting trust would require both a public comment period and approval by the STB based on a finding that the voting trust itself is in the public interest. There is no certainty that the STB would approve use of a voting trust.

o The voting trust structure proposed by Canadian Pacific is unprecedented, and it is highly likely it would be rejected by the STB because the Canadian Pacific management team would control or be substantially involved in the operations of Norfolk Southern prior to receiving regulatory approval of the proposed merger transaction.

The proposed transaction would be detrimental to Norfolk Southern’s customer base and communities

o Canadian Pacific’s unilateral open access proposal would undercut the financial performance of the combined entity as well as degrade service and dis-incentivize investment.

o Any strategy that adversely impacts Norfolk Southern’s service-sensitive customer base and communities is unlikely to receive regulatory approval and is inconsistent with the delivery of shareholder value over the long-term.

Canadian Pacific’s synergy targets are overstated and imply significant reduction in investment to maintain service

o Canadian Pacific’s overstated synergy targets imply significant reduction to investment and employment levels, which the board believes would harm service levels and would be unacceptable to the STB.

o Operating synergies are limited because the Canadian Pacific and Norfolk Southern networks serve entirely separate regions and only connect at five points.

o Any near-term cost savings that might result from applying Canadian Pacific’s short-term focused operating model on Norfolk Southern would be offset by traffic diversions, service deterioration and loss of service-sensitive customers.

o Open access has been widely documented to produce negative revenue synergies from traffic loss and rate compression while also increasing operating costs.

The transaction would not help Chicago congestion issues

o As the smallest Class 1 railroad in Chicago, accounting for less than 5% of all Chicago rail traffic, Canadian Pacific’s volumes are too small to impact Chicago rail traffic.

o The proposed transaction would likely increase Chicago congestion.

§ Less than 15% – or less than one train per day – of current Canadian Pacific-Norfolk Southern connecting traffic can be efficiently rerouted around Chicago.

§ Further, Norfolk Southern believes that the proposed transaction would cause more, not less, traffic congestion in Chicago. We expect Canadian Pacific would increase revenues by converting interline traffic between Norfolk Southern and both BNSF Railway (“BNSF”) and Union Pacific (“UP”) to single-line traffic in the proposed Canadian Pacific-Norfolk Southern system. Much

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of this Norfolk Southern traffic with BNSF and UP avoids Chicago today. Unlike BNSF and UP, Canadian Pacific does not have efficient Chicago bypass routes, so Canadian Pacific would have to route most of this traffic through Chicago.

o Not only do the lines of Canadian Pacific and Norfolk Southern not physically connect in Chicago, but neither company’s traffic can be moved to other Canadian Pacific-Norfolk Southern connecting points without all constituencies incurring substantial extra miles, cost and time.

The following is the text of the letter that was sent on December 4, 2015, to Canadian Pacific’s Chief Executive Officer, E. Hunter Harrison, and its Chairman of the Board, Andrew F. Reardon.

Mr. E. Hunter Harrison Mr. Andrew F. Reardon Chief Executive Officer Chairman of the Board Canadian Pacific Canadian Pacific 7550 Ogden Dale Road S.E.

Calgary, AB T2C 4X9 Canada

Dear Mr. Reardon and Mr. Harrison:

The board of directors of Norfolk Southern Corporation, in consultation with its financial and legal advisors, has carefully reviewed your letter dated November 9, 2015, that we received on November 17, 2015, regarding a potential acquisition of Norfolk Southern. After a thorough analysis, the board of directors has unanimously determined that the proposed consideration set forth in your letter of $46.72 in cash plus 0.348 shares in a new company which would own Canadian Pacific and Norfolk Southern is grossly inadequate and substantially undervalues Norfolk Southern. Further, the board determined that the transaction proposed by you gives rise to substantial risks and uncertainties and is not in the best interest of Norfolk Southern and its shareholders.

The risks and uncertainties result from the substantial regulatory hurdles that exist, which are highly unlikely to be overcome. We believe the regulatory review process would take two years or more from now, with a very low likelihood of approval. Even in the unlikely event of approval, Norfolk Southern would be in limbo for this extended period, causing loss of momentum and disruption to our business and operations. In addition, substantial regulatory conditions would be required to win regulatory approval, adversely affecting the value of the combined company and the stock our shareholders would receive.

While you have publicly raised the possibility that a voting trust could be used so a transaction could be closed before full regulatory approval has been obtained, you failed to disclose the fact that any voting trust would require a public comment period and regulatory approval process, with approval based on the STB finding that such a trust is in the public interest. There is no precedent for a voting trust being approved under the new rules adopted in 2001, and there is no certainty that the STB would approve use of a voting trust.

Moreover, the structure you have proposed, under which Canadian Pacific would take control of the management and operations of Norfolk Southern, is unprecedented and has never been approved by the STB. As such, we do not believe that regulators would approve the voting trust structure. In any event, a voting trust structure would not address the uncertain value of the stock our shareholders would receive, as the ultimate value of the combined entity would be impacted in large part by concessions imposed as part of the regulatory review of a transaction.

Beyond not being in the best interests of our shareholders given the regulatory risks and the grossly inadequate value of your proposal, we also believe that the proposed transaction would be detrimental to Norfolk Southern’s customer base. We have heard significant concerns from customers regarding a transaction with Canadian Pacific. Further, if Canadian Pacific were to implement its short-term strategy, it would cause Norfolk Southern to lose substantial revenues from our service-sensitive customer base. We also believe the proposed transaction risks harm to vital transportation infrastructure and the communities we serve.

We have seen your public statements regarding a desire to meet. As you know, I was the one who suggested a meeting with you following the incorrect Canadian press reports that we had been discussing a transaction. When we met you suggested the possibility of a further meeting, while acknowledging that the discussion might not be confidential; subsequently, I agreed to a meeting if you and Bill Ackman, the Principal of Pershing Square, a Canadian Pacific board member, and a controlling shareholder, entered into a customary confidentiality agreement, which you refused to do. The fact is that not only did we already meet, but I also offered you several opportunities to provide additional information to our board for it to consider in reviewing the transaction you proposed – you did not provide additional information. In light of the grossly inadequate terms you proposed, and the regulatory risks to both the approval of the transaction and the ultimate value of a combined entity, we do not believe that there is any basis to meet.

Our board of directors and management team are committed to continuing to act in the best interests of Norfolk Southern and its shareholders. Norfolk Southern is executing on its strategic plan to implement operational improvements, which the board believes will enhance value for all shareholders. Our board does not believe that the transaction you proposed reflects the value inherent in Norfolk Southern and the benefits of our strategic plan. Accordingly, the board has unanimously rejected your proposed transaction.

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Sincerely,

Jim Squires

Morgan Stanley & Co. LLC and Bank of America Merrill Lynch are acting as financial advisors to Norfolk Southern Corporation and Skadden, Arps, Slate, Meagher & Flom LLP, Hunton & Williams LLP and Morrison & Foerster LLP are acting as legal advisors.

Conference Call and Webcast

Norfolk Southern will host a telephone conference call and a webcast on Friday, December 4, 2015 to discuss the unsolicited indication of interest from Canadian Pacific. Presentation slides will accompany the live webcast, both of which will be available on the Norfolk Southern website. You may participate in this call by dialing (866) 610-1072 for domestic locations or (973) 935-2840 for international locations. A passcode, 93852422, will be required. Jim Squires will comment on the unsolicited indication of interest beginning promptly at 8:30 a.m. Eastern Time before answering questions. The live webcast and accompanying presentation slides can be accessed through the Norfolk Southern website, www.nscorp.com.

A replay of the discussion will be available shortly after the call and can be accessed through www.nscorp.com, or by dialing (800) 585-8367 for domestic locations or (404) 537-3406 for international locations. A passcode, 93852422, will be required.

About Norfolk Southern

Norfolk Southern Corporation (NYSE: NSC) is one of the nation’s premier transportation companies. Its Norfolk Southern Railway Company subsidiary operates approximately 20,000 route miles in 22 states and the District of Columbia, serves every major container port in the eastern United States, and provides efficient connections to other rail carriers. Norfolk Southern operates the most extensive intermodal network in the East and is a major transporter of coal, automotive, and industrial products.

Forward-Looking Statements

Certain statements in this press release are forward-looking statements within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act of 1995, as amended, including but not limited to statements regarding the indication of interest made by Canadian Pacific Railway Limited. In some cases, forward-looking statements may be identified by the use of words like “believe,” “expect,” “anticipate,” “estimate,” “plan,” “consider,” “project,” and similar references to the future. Forward-looking statements are made as of the date they were first issued and reflect the good-faith evaluation of the Company’s management of information currently available. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the Company’s control, including future actions that may be taken by Canadian Pacific Railway Limited in furtherance of its unsolicited proposal. These and other important factors, including those discussed under “Risk Factors” in the Company’s Form 10-K for the year ended December 31, 2014, as well as the Company’s other public filings with the SEC, may cause our actual results, performance or achievement to differ materially from those expressed or implied by these forward-looking statements. Forward-looking statements are not, and should not be relied upon as, a guarantee of future performance or results, nor will they necessarily prove to be accurate indications of the times at or by which any such performance or results will be achieved. As a result, actual outcomes and results may differ materially from those expressed in forward-looking statements. We undertake no obligation to update or revise forward-looking statements, whether as a result of new information, the occurrence of certain events or otherwise, unless otherwise required by applicable securities law.

Contacts: Media Inquiries: Frank Brown, 757-629-2710 (fsbrown@nscorp.com)

Investor Inquiries: Katie Cook, 757-629-2861 (InvestorRelations@nscorp.com)

Or

Joele Frank / Dan Katcher / Andrew Siegel Joele Frank, Wilkinson Brimmer Katcher 212-355-4449

Daniel Martinec Norfolk Southern Corporation Manager Online Communications 757-629-2708

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NS to CP: Proposed Merger "a Poor Combination" Written by William C. Vantuono

Friday, December 04, 2015

Refuting practically every purported benefit that Canadian Pacific has given, and citing substantial regulatory risks and uncertainties as well as many other negatives, Norfolk Southern on Dec. 4, 2015 loudly and firmly rejected CP’s proposal to merge the two railroads into a transcontinental.

The NS board “has unanimously rejected Canadian Pacific’s previously announced unsolicited, low-premium, non-binding, highly conditional indication of interest to acquire the company for $46.72 in cash and a fixed exchange ratio of 0.348 shares in a new company that would own Canadian Pacific and Norfolk Southern,” NS said. “After a comprehensive review, conducted in consultation with financial and legal advisors, the Norfolk Southern board concluded that the indication of interest is grossly inadequate, creates substantial regulatory risks and uncertainties that are highly unlikely to be overcome, and is not in the best interest of the company and its shareholders. The board believes that Canadian Pacific’s indication of interest is opportunistically timed to take advantage of a Norfolk Southern market valuation that has been adversely affected by a challenging commodity price environment, does not fully reflect infrastructure investments Norfolk Southern has made, and does not incorporate the upside from further improvements anticipated to result from the initiatives that the company is implementing.

“We believe in our ability to generate greater shareholder value through execution of our strategy—delivering efficient and superior service to build a more profitable franchise based on price and volume growth, implementing efficiency measures, and increasing returns on capital to strengthen our financial performance, all while maintaining our disciplined capital return strategy,” said NS Chairman, President and CEO Jim Squires. “Norfolk Southern has made growth investments, and we expect to realize the benefits of these investments in the years ahead, especially as our intermodal volumes continue to build. Specifically, we expect to achieve an operating ratio below 70 in 2016 with additional improvements over the next five years resulting in increasing ROE and an operating ratio below 65 by 2020. By maximizing our asset utilization, we believe we can achieve double-digit compounded EPS growth over this period. In short, Norfolk Southern is well positioned to deliver compelling value to our shareholders.”

“There is a high probability that, after years of disruption and expense, the proposed combination would be rejected by the Surface Transportation Board (STB),” Squires said. “We also believe the STB would reject Canadian Pacific’s proposed voting trust structure, and that there is no certainty that any other voting trust structure would be approved. Even if the proposed combination were ultimately to be cleared, it would be subject to a wide range of onerous conditions that would reduce the value of the stock consideration that has been proposed.”

“We believe that Canadian Pacific’s short-term, cut-to-the-bone strategy could cause Norfolk Southern to lose substantial revenues from our service-sensitive customer base. We also believe the proposed transaction risks harm to vital transportation infrastructure and the communities we serve. Any strategy that hurts our customers and the broader community is highly unlikely to receive regulatory approval and is inconsistent with the delivery of shareholder value over the long-term.”

NS: CP has it all wrong

While not specifically stating that NS would reject any further attempts by CP (or by any other Class I, for that matter) to merge, Squires went into great detail to explain why Canadian Pacific’s existing proposal is, essentially, a very bad idea, in NS’s opinion. He touched upon several areas.

“Regulatory review would not be complete for two years or more,” Squires said, citing “two required periods of public comment, with strong opposition expected from key stakeholders.” As well, “Norfolk Southern would remain in limbo during the entire review, likely interrupting focus and momentum in implementing our strategic plan.” Referring to CP’s proposed voting trust, Squires pointed out that “voting trusts must be approved in advance by STB under ‘public interest’ standards. No voting trust for a Class I railroad has been approved since new merger rules were adopted in 2001. A typical voting trust structure involves placing target shares in trust and insulating the target from control by the acquirer during the merger review process. CP’s proposal to have CP management at Norfolk Southern or otherwise have CP control or influence Norfolk Southern’s operations during the review process would violate the statutory bar against premature control, and we are confident it would not be approved by STB. There is no certainty that any voting trust, including typical structures, would meet the ‘public interest’ standard to be approved. Even if a voting trust were approved, CP stock consideration would be of uncertain value given the risk of the merger review and lack of interim operational control.”

Interpreting STB’s Major Merger Rules for Class I carriers enacted in 2001, Squires said that these “untested” rules (no major mergers have been attempted in the past 15 years) “create bias against consolidation. Merger review is a 16-month process after a formal application is filed, plus a pre-filing period. Even if the merger were approved, the STB would likely require a wide range of significant, onerous conditions that would undercut the value of the transaction, and the CP stock consideration. The Major Merger Rules establish a bias against approval based on concern that any transaction would not enhance competition, cause service disruptions and trigger further consolidations. A merger must serve ‘public interest,’ which is only achieved when ‘substantial and demonstrable gains in important public benefits—such as improved service and safety, enhanced competition and greater economic efficiency—outweigh any anti-competitive effects, potential service disruptions or other merger-related harms.’ The STB will review CP-Norfolk Southern as if it were the trigger for further consolidations, with difficult-to-predict implications for burdensome conditions. At minimum, however, the transaction, if approved, would be saddled with onerous, expensive conditions.”

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Operationally and financially, a combined CP-NS won’t work nearly as well as CP claims, Squires stressed. “The deal presents grossly inadequate value and substantial regulatory risks,” he noted. “CP’s operating model would drive away service-oriented, truck-competitive traffic in an effort to lower the operating ratio. Norfolk Southern’s current strategic plan drives an improved OR ratio, delivers double-digit compound annual EPS growth and enhances long-term value.” The proposed merger “is a poor combination,” Squires stated. “Pairing the smallest of the four major U.S. railroads with the smallest major Canadian railroad creates a long-term network disadvantage. It would not enhance Norfolk Southern’s geographic reach to areas of freight growth. The Norfolk Southern/CP interchange is small—less than 3% of Norfolk Southern volume, and substantially smaller than Norfolk Southern’s interchange volume with BNSF, CN or UP.”

Congestion relief in Chicago? Again, CP got it wrong, Squires said. “CP incorrectly claims that the merger would alleviate congestion in Chicago,” he pointed out. “CP accounts for less than 5% of Chicago traffic and thus any rerouting would have minimal impact. Less than one Norfolk Southern/CP train per day can be efficiently rerouted around Chicago. The proposed merger would likely increase rail traffic congestion in Chicago. We expect CP to convert interline traffic (BNSF/UP) to single-line traffic. CP does not have efficient Chicago bypass routes; consequently, any diverted rail traffic would flow through Chicago. This would only exacerbate Chicago congestion issues.”

Hunter Harrison has proposed a form of open access. Keeping in step with the AAR’s official position on this highly controversial topic, Squires said open access would “result in revenue loss. Service would suffer, increasing costs and compromising shareholder value creation. There would be a disincentive to investment, placing the combined company at a severe competitive disadvantage. More intermediate handlings increase costs, and shippers choosing interchange points disrupts the network and drives up costs. Even CP admits service will suffer.”

Squires said that, in a March 2014 press release, CP said open access will “slow down the supply chain, negatively impacting transit times.” And using Harrison’s own words at CP’s first-quarter 2014 Investor Call to drive home the point, Squires quoted Harrison as saying, “I remember the old days of reciprocal switching. Was it good for service? No. Was it good for costs? No. What was it good for? I couldn’t figure it out.”

“CP’s unilateral open access proposal is not contingent on other railroads taking similar steps, and it exposes up to 60% of Norfolk Southern traffic under the terms suggested,” Squires said.

“Norfolk Southern is successfully executing on its strategy,” Squires concluded. “Our management team is successfully executing a number of revenue growth initiatives focused on pricing discipline and growth in merchandise and intermodal market opportunities. Our strategic plan is focused on providing superior customer service, continuing the recent improvement in network performance, and implementing efficiency measures, including managing headcount, increasing locomotive productivity, and integrating technological innovations. It provides for double-digit compounded EPS growth over the next five years, increasing return on investment, and, by 2020, an operating ratio below 65. Norfolk Southern is committed to pursuing a disciplined capital allocation strategy while investing appropriately in our network. During the past 10 years, since the inception of its share repurchase program, the company has distributed nearly $15 billion to shareholders, consisting of an average of approximately $1 billion in share repurchases per year and a steadily increasing dividend with a 10-year annual compound growth rate of 14%.”

What could potentially happen next raises lots of questions. Will Canadian Pacific sweeten the deal? Is this all part of a long-term cat and mouse game that will continue until the Norfolk Southern board is satisfied that Canadian Pacific’s offer is worthy of consideration? Or, like it did with CSX in 2014, will CP give up and retreat? Hunter Harrison, who many observers believe wants his legacy to be a transcontinental railroad, doesn’t give up easily. Neither does Bill Ackman, CP’s largest shareholder and principal of hedge fund Pershing Square Capital Management. If Ackman is the type to fold, he probably wouldn’t be running a hedge fund. Then again, Canadian Pacific was an easy target for Ackman a few years ago, one that Hunter Harrison was quickly able to turn around.

Norfolk Southern is a different story entirely. In this editor’s opinion, it’s a great railroad with a great legacy and superb management. While there is certainly room for improvement, as Jim Squires himself has stressed, Norfolk Southern does not need to be “turned around.” But that’s not what this merger attempt is about. Yet, one has to ask, are Canadian Pacific’s purported merger benefits that far off-base, as Norfolk Southern is now claiming? Hunter Harrison is without a doubt one of the best operating men in the business. It is hard to imagine that he would be capable of making such strategic mistakes.

Interestingly, in all of these pronouncements, there is nothing that suggests Norfolk Southern’s emphatic “No” of Dec. 4, 2015 is its final answer. During the webcast that followed NS’s official announcement, Jim Squires was asked if any future merger attempt by a Class I other than Canadian Pacific would be considered—or ruled out. Squires responded by saying that any merger attempt would be faced with the same risky regulatory hurdles that the proposed combination with Canadian Pacific would face. When asked if Norfolk Southern’s pronouncements about practically guaranteed regulatory hurdles resulted from direct consultations with the STB, Squires skirted the question.

CP responds

Canadian Pacific did not respond to Norfolk Southern until after the New York and Toronto stock exchanges had closed at 4:00 pm EST.

CP’s official statement was brief and contained no surprises: “Canadian Pacific is disappointed with Norfolk Southern Corp.’s rejection of its proposal to create an end-to-end North American rail network that would enhance competition and generate

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significant shareholder value. CP takes exception to the claims, misdirection and mischaracterization of its offer and the benefits such a combination would provide to customers, shareholders, the industry and the public. CP will hold a conference call Tuesday, Dec. 8 to discuss our offer and deliver clarity, context and detail to the proposed transaction. CP will also address all concerns about timely regulatory approval raised by NS and correct every inaccuracy. CP is committed to this transaction and looks forward to engaging with the NS leadership team, its board and its shareholders. Details for the call will be disseminated in due course.”

CP, it’s your move.

CP Sweetens Deal as NS Calls Up Reinforcements, Says “No” Again Written by William C. Vantuono

Tuesday, December 08, 2015

Canadian Pacific’s pursuit of Norfolk Southern has taken on the tone of a rough-and-tumble yet well-intentioned star athlete pulling out all the stops to capture the heart of his dream woman, a relationship-shy political science major who continues to resist her suitor’s advances with perfectly logical yet unemotional reasons why the two aren’t right for each other.

On Dec. 8, 2015, CP sent a revised offer letter to Norfolk Southern proposing a sweetened deal that is “financially more attractive and dramatically reduces the regulatory uncertainty for NS shareholders.” NS once again said no, calling CP’s latest proposal “less than the prior proposal, which the NS board unanimously determined was grossly inadequate, creates substantial regulatory risks and uncertainties that are highly unlikely to be overcome, and is not in the best interest of the company and its shareholders.” NS backed up its response with a so-called “white paper” by former Surface Transportation Board Commissioners Frank Mulvey and Charles Nottingham stating numerous reasons why the STB would not approve a voting trust and a merger transaction.

In a letter to NS Chairman and CEO Jim Squires, CP CEO Hunter Harrison and Board Chairman Andy Reardon attempted to address NS’s “publicly expressed concerns” by improving upon its prior offer. CP’s newest deal is sweeter because it “dramatically reduces the regulatory risk for NS shareholders,” is “substantially more financially attractive, increasing NS shareholders' ownership of the pro forma company from 41% to 47%,” and includes “agreeing to complete due diligence in no more than three weeks while contemporaneously negotiating definitive documentation.”

CP is sticking to its voting-trust approach, which it continues to stress should alleviate any regulatory concerns that NS shareholders might have: “By utilizing a voting trust, NS shareholders will receive a substantial cash payment and shares in a new investment-grade company that would be listed on both the New York Stock Exchange and Toronto Stock Exchange. Based on extensive work done by our lead transaction counsel, Simpson Thacher, and our U.S. and Canadian regulatory counsel, Stinson Leonard Street and Bennett Jones, we anticipate the closing and listing of shares to occur on May 1, 2016.” CP is proposing putting itself in trust, and having Hunter Harrison resign from CP, severing all ties (including retirement benefits) and becoming CEO of NS. This approach, CP said, is similar to that taken by CN when it acquired Illinois Central (though IC was placed in trust).

CP also placed more money on the table. “At the closing of the transaction, NS shareholders will receive $32.86 in cash and 0.451 shares of stock in a new company that will own NS and Canadian Pacific,” CP said. “We estimate the total value of the stock and cash consideration to NS shareholders to be worth $125 to $140 per share at the closing of the transaction in May 2016. The revised transaction offers a 37% to 53% premium to [NS’s Dec. 7] closing price of $91.52 and a 58% to 77% premium to the unaffected price of $79.14 per share.”

“We remain ready to work with you and your team immediately on this transformational opportunity,” concluded Harrison and Reardon. “This offer has received the unanimous support of our Board of Directors.”

NS, which some industry observers are saying is “purposely playing hard to get,” says Mulvey and Nottingham have “carefully reviewed voting trust issues and the merger transaction proposed by Canadian Pacific and agree with the NS board of directors that both would be highly unlikely to be approved by the STB” as “neither would be in the public interest. The NS board remains confident that the continued execution of its strategic plan is superior to Canadian Pacific’s grossly inadequate and high-risk proposal.”

Following is the complete text of the Mulvey-Nottingham white paper:

Regulatory Review of Proposed CP+NS Merger

Having formerly served as Chairmen of the Surface Transportation Board, we have unique insights regarding how the STB would review the proposed CP+NS merger and any related voting trust mechanism. We publish this white paper to share these insights.

Out of respect for the independent professional judgment of the current members of the STB, we are not attempting to speak on behalf of our former agency. Rather, having been confronted with much misinformation about how the STB is likely to review the proposed voting trust and merger, we feel compelled to correct the record.

As simple background, rail carriers cannot assume control of another carrier without prior STB approval. The STB’s approval process can last between 19 and 22 months. Current STB regulations, adopted in 2001, set a high bar for approval of a

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proposed major merger and related voting trust based on an untested public interest standard. In our expert opinions, the STB is not likely to approve CP’s proposed voting trust or the CP+NS merger.

Voting Trust Approval

STB voting trust regulations have become far more stringent. In the past, the STB routinely and informally permitted carriers to acquire controlling stakes in other carriers using a voting trust, provided that the trustee was independent. This is no longer the case under current STB regulations. A voting trust to be used in conjunction with a proposed major merger (such as CP+NS) now must receive formal STB approval before it is implemented. The STB approval process includes a public comment period where interested stakeholders can object to the proposed use of a voting trust. And, the STB’s current approval standard is quite demanding. As was true under the old regulations, the trustee must be independent and the trust must prevent premature, unlawful control; but now under the new regulations, use of the trust also must be in the public interest. CP’s voting trust would be the first trust reviewed under the STB’s new regulations.

If the reports we have read are correct, CP seems to think it can use a voting trust to begin implementing its business plan for NS (“Plan”) during the STB’s merger review process and prior to formal STB approval of the merger. This would directly violate the express statutory bar against a premature exercise of common control. CP cannot assume control of NS, by any means, until the STB approves the merger—even if a voting trust is used. This conclusion applies regardless of the specific scheme CP might use. No matter how CP executives are put in charge of NS management before the merger is approved, the STB likely would not be fooled into thinking that CP and NS are operating independently.

Further, if CP begins to implement its Plan prior to formal STB review and approval of the merger, CP essentially would usurp and preempt the STB’s exclusive jurisdiction to review and approve that Plan and the other effects of the merger. The STB might not take kindly to this circumvention.

Even if CP does not use a voting trust to begin implementing its Plan and exercising control over NS prematurely, we have grave doubts that the STB would find any voting trust to be in the public interest. Because the public interest standard is completely new, even as former Chairmen of the STB, we cannot predict this outcome with certainty. However, we struggle to identify any public interest justifications for CP’s voting trust. It is far easier to identify the public interest harms from holding NS in voting trust limbo for nearly 2 years, which could include compromised service for shippers, reduced investments in rail infrastructure and network capacity, and disruptions for NS labor interests.

The STB also could view approval of any voting trust as triggering a domino effect. Under the current STB merger regulations, as discussed below, the Board must consider likely downstream effects as rival carriers react to a proposed merger. When the BNSF+CN merger was proposed in 1999, other Class I carriers notified the STB that they would find it necessary to respond in kind. Accordingly, the STB presumes that any major rail merger (such as CP+NS) will trigger further industry consolidation resulting in just two transcontinental carriers, with adverse effects for competition and rail service for shippers. As such, the STB could try to stop the first domino from falling—by rejecting CP’s voting trust.

Merger Approval

As with the voting trust regulations, STB merger regulations have become far more stringent. The current regulations eliminate the historical, longstanding presumption favoring rail industry consolidation. As then-Chairman Linda Morgan testified in a June 2001 Senate subcommittee hearing on the STB’s new merger rules:

The old rules said that mergers would be approved unless. The new rules say mergers will be approved only if. Our new rules clearly reflect a greater skepticism about the benefits of future mergers and a greater concern about the potential harm of further consolidation . . . And it is my hope that, in raising the bar, these rules will remind the railroads to take care of business with the systems they now have and to stop viewing mergers as the only way to go.

The proposed CP+NS merger would be the first merger reviewed under the STB’s new regulations.

As in the voting trust review process, there is substantial regulatory uncertainty and risk in the merger review process. Again, the STB approval process includes a public comment period where interested stakeholders can object to a proposed merger. And, the STB has broad discretion to determine if a proposed merger is in the public interest. Under STB regulations, mergers are in the public interest only if substantial and demonstrable gains in key benefits—such as improved service and safety, enhanced competition, and greater economic efficiency—outweigh anticompetitive effects, potential service disruptions, or other merger-related harms.

In the words of former Chairman Morgan, merger applicants have a high bar to clear, including: demonstrating how the merger would enhance competition; addressing the impacts of the merger in conjunction with potential further rail industry consolidation; providing a full-system operating plan in a cross-border merger as well as robust safety and service plans; and proposing conditions that would spring into effect if the merger benefits are not realized or if the STB approves further rail industry consolidation.

The STB can outright reject a proposed merger, or it can approve a proposed merger with conditions designed to safeguard the public interest and to stimulate effective competition. Typical conditions relate to environmental mitigation, labor protection, and safety and service.

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CP+NS Merger Review

Based on our collective experience with prior STB determinations under public interest standards, the STB likely would not approve the proposed CP+NS merger. There is every reason to expect substantial opposition to the merger from other railroads, shippers, labor interests, and community and environmental groups. Especially in this context, it is hard to see any public interest justifications for the CP+NS merger, and the STB could view CP’s claims with a large grain of salt.

(1) Chicago Congestion. Based on publicly available traffic data, there are limited opportunities for CP and NS to reroute traffic away from Chicago.

(2) Terminal Access and Bottleneck Proposals. The STB currently is considering whether open access would increase competitive rail options for shippers. It appears that CP has proposed a voluntary and unilateral open access condition to attempt to show that the merger would enhance competition. Even if this were enough to entice STB approval, the STB would have to define many elements of this open access proposal to make sure that it actually enhances competition in practice. And, open access would destroy value from reduced revenues and degrade service from increased operating complexities and costs.

(3) Improved Metrics. CP claims that it can improve NS’ operating ratio, but this is irrelevant to the STB’s review. Improved metrics can be achieved absent a merger, as demonstrated by CP’s own record. Further, the dramatic reductions in NS’ network and asset base that CP has proposed to improve NS’ metrics might not be in the public interest. Such reductions could disenfranchise shippers by eliminating key service products; compromise CP+NS’ ability to withstand operational or service disruptions; impair CP+NS’ ability to sustain future traffic growth; and overall, impede the national interest in a robust transportation network.

On the other side of the ledger, the STB likely would find significant harms from the CP+NS merger. Most importantly, the proposed merger would trigger a final wave of industry consolidation. As noted above, this is an entirely new consideration in the STB’s merger review. We strongly believe that the STB would be disinclined to allow railroads to merge down to just two transcontinental carriers, especially in the current climate where all of the large railroads are financially healthy, investing substantially in infrastructure, and providing generally good service.

Further, in our experience, rail mergers typically have resulted in substantial and lengthy service disruptions. The CP+NS merger would be no different. In fact, the proposed merger could create multiple stages of service disruptions—during the voting trust period, during merger implementation, during follow-on competitive responses to the merger, and during further industry consolidation.

Even if the STB were to approve the proposed merger, such approval should be expected to come with a huge price tag in the form of conditions. The merger review process provides the STB with the jurisdiction and authority to regulate carriers in ways that would otherwise exceed its authority. In addition to conditions regarding competition and potential further rail industry consolidation, the STB could impose other burdensome and expensive conditions.

(1) Environmental Mitigation Conditions. Since our tenures at the STB, community and environmental groups have become increasingly sophisticated and politicized. For example, several local municipalities in the suburbs of Chicago were successful in petitioning the STB for environmental and highway traffic congestion mitigation conditions in the CN/EJ&E transaction in 2008. In CN/EJ&E, total mitigation costs amounted to $160 million—more than 50% of the transaction price; and STB oversight continues to this day—nearly 7 years after formal STB approval. CP+NS should expect similarly burdensome and expensive environmental mitigation conditions, especially given their crude oil traffic volumes.

(2) Labor Protection Conditions. The STB would impose New York Dock labor protection, requiring payments to certain employees who lose their job as a result of the merger. If the reports we have read are correct, CP’s Plan includes extensive headcount reductions, so labor protection benefits likely would represent a huge cost for CP+NS.

(3) Service Conditions. Given historical service problems from mergers, the STB might impose conditions related to service levels, such as the frequency with which cars will be delivered to and picked up from shippers, or other conditions to address shipper concerns. Such service conditions necessarily would threaten CP+NS’ freedom to structure its operations.

Conclusion

Current STB regulations set a high bar for approval of CP’s proposed voting trust and merger based on an untested public interest standard. While no one can predict with absolute certainty what the STB will decide, we believe, based on our review of the public record, that the STB is unlikely to approve CP’s proposed voting trust and the CP+NS merger.

(Morgan Stanley & Co. LLC and Bank of America Merrill Lynch are acting as financial advisors to Norfolk Southern and Skadden, Arps, Slate, Meagher & Flom LLP, Hunton & Williams LLP and Morrison & Foerster LLP are acting as legal advisors.)

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Sneak Peek at Finished Vertex Rail Cars By: Taylor Yakowenko

December 8, 2015

WILMINGTON, NC (WWAY) — This is the first year the company has produced their rail cars here in Wilmington. According to a vertex spokesman, the company has achieved what he called a “critical goal” this year. That goal was getting the certification to proceed with the mass production of the cars.

According to a spokesman, 189 people are employed at Vertex about 96 percent of which are from New Hanover and surrounding counties. The spokesman says hiring will continue into 2016 as orders increase and Vertex works toward their goal of creating 8,000 cars per year. In order to reach that goal, Vertex will need 1,300 workers.

Vertex said it is proud to call Wilmington home and that south eastern North Carolina was the right location for the business because of its proximity to the Port of Wilmington, rail access, and of course the talented workforce in our area.

Amtrak President and CEO Joe Boardman Announces Retirement Written by Carolina Worrell

Thursday, December 10, 2015

Amtrak President & CEO Joe Boardman

Amtrak President and CEO Joe Boardman informed the Amtrak Board of Directors on Dec. 9, 2015 that he plans to retire from Amtrak in September 2016, following nearly eight years of service with the railroad.

Under his leadership, Boardman, a former Railway Age Railroader of the Year, helped Amtrak experience many accomplishments including record ridership and revenue, improved operating cost recovery, procurement of new equipment, enhanced passenger services, expansion of service and advancement of critical infrastructure projects, the railroad said.

“When I look back at this time I see so many accomplishments and so many changes we made to make America’s railroad a stronger, safer and more important part of our nation’s transportation system,” said Boardman in a letter to employees.

Boardman will work closely with Amtrak’s Board of Directors as they begin the search for a new CEO.

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Joe Boardman’s full letter to employees is as follows:

Dear Co-workers,

At the meeting of the Amtrak Board of Directors this week, I informed them of my intention to retire from Amtrak in September 2016. At that time, I will have served nearly eight years as the President and CEO of our company. When I look back at this time, I see so many accomplishments and so many changes we made to make America’s Railroad a stronger, safer and a more important part of our nation’s transportation system.

For those of you who know me, you know a decision like this is something that I spent a lot of time considering. Yet, I think in the railroad business, all of us know when it’s time to retire. I hear this often from you when I travel around the system. It’s not easy to find people to work in an environment that is as demanding as running a railroad and providing good customer service. One of the reasons why I gave our Board notice so far in advance of my planned retirement is because I want them to have the time to think about the next leader they will select and have a chance to think about the kinds of qualities this leader will need as we move forward. Having served on the Board prior to my time as CEO, I know that the selection of a President and CEO of Amtrak is perhaps the single most important decision that a Board can make.

The other reason why I want to work well into 2016 is because there are things I want to get done on my watch and they include critical and important investments both in the future of our service and the safety of our railroad. Early next year, we expect to place an order for the next generation of high-speed trainsets in North America. When they are delivered they will instantly add capacity and the newest technology available to our passengers. The introduction of that service will drive the future and the brand of Amtrak to new heights just as Acela did 15 years ago. I wanted very much to be a part of that accomplishment. I also want to make sure that by the time I left we had all the new ACS-64 electric locomotives delivered and operating. Finally, there will still be some work in 2016 to advance PTC implementation on sections of the railroad, which we own outside of the NEC. As I have said, there is no greater contribution that my generation of railroaders can make to the safety of our industry than full implementation of PTC.

Amtrak is a remarkable story and it is so because of the people who work here--people who put their entire life’s work into this company; people who go out in the middle of the night to rescue a train; people who deal with sick passengers; people who simply make a difference. I have tried to live and manage by these values as well. Over the next nine months, I expect to spend a large amount of my time at the facilities, crew bases and on the trains that we operate all around this country. We have an exciting future and I truly believe some of our best days lie ahead.

The Board has asked me to work closely with them in the selection of the new CEO. I am confident that the time I have given the Board they can achieve the goal of selecting a good leader for this company and provide a level of transition that a company like Amtrak deserves. In the meantime, there is a lot of work that needs our attention and I ask you to stay focused and work safely.

Sincerely, Joe Boardman President and CEO

Operator Error May Be to Blame for Runaway Boston Train, Investigators Say

By JEFFREY COOK December 10, 2015

Officials are now investigating "operator error" after a train on Boston's Red Line traveled several stops without an operator this morning, according to Stephanie Pollack of the Massachusetts Department of Transportation.

The six-car train left the Braintree Station without an operator just after 6 a.m. and traveled northbound toward Boston until it was finally brought to a stop when officials cut off power to the third rail. None of the approximately 50 passengers were hurt.

Massachusetts Gov. Charlie Baker said earlier that a safety device within the train's cab may have been tampered with. Pollack said operator error is likely the cause of the incident.

According to Pollack, the operator of the train exited the cab after a "signal issue." She said normally two different types of brakes are supposed to be used during such an event, including a manual break.

Passengers spent 9 minutes on board the driver-less train without any communication with transit officials. The operator has been put on administrative leave. The train has been impounded and is no longer in service.

Pollack said the incident was an "unacceptable breach of responsibility to keep our riders safe. We failed our passengers. Something happened that should not have been able to happen.”

The National Transportation Safety Board has been made aware of the incident but is not contributing to the investigation.

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WestSideLumberCompanyTrackInspectionCar

Bill Burner, Superintendent of California's West Side Lumber Company, with his track inspection car circa 1930s. Photo provided by Johnny Rosser, nephew of Mr. Burner.

Abram Burnett Photo Via Warren McFarland

EJ&E caboose 502 has just clattered over the Michigan Central and is about to cross the Rock Island as its westbound train arrives in Joliet, IL in this undated photo from the EJ&E archives.

Besides the MC diamond and its associated hardware, behind the (unknown) company photographer are a set of crossovers for the "J" mains and switches/signals for the EJ&E-MC interchange and the connection to the Milwaukee Road's Delmar (IL)-Joliet branch. At one time the MILW had trackage rights on the "J" from here to Aurora as part of this former Chicago, Milwaukee & Gary route.

That's still an impressive amount of pipe and rod!

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CP Ups the Ante; NS Responds Written by Carolina Worrell

Wednesday, December 16, 2015

Canadian Pacific (CP) on Dec. 16, 2015 announced a “revised, enhanced offer” in its bid to acquire Norfolk Southern (NS). The revised offer consists of, for each NS share, U.S.$32.86, 0.451 shares of stock in the combined CP-NS, and 0.451 of a contingent value right (CVR) worth a maximum $25. In response, NS said its board of directors “will carefully consider the publicly disclosed, revised proposal from CP with the assistance of its financial, legal and regulatory advisors.”

A CVR, CP said, “can be viewed as a liquid security that can be sold by NS shareholders and converted to cash at or after the transaction closes in May 2016. Each CVR would entitle the holder to receive a cash payment from CP equal to the difference between the CP-NS share price during the relevant measurement period, which would be from April 20, 2017 to Oct. 20, 2017, and $175/share (with no payment in the event CP-NS share price is above US$175/share), up to a maximum of $25/CVR. CVR holders would receive cash payment on Oct. 25, 2017 (T+3 settlement) of up to $3.4 billion.”

CP said its revised offer and CVR issuance “reflects CP’s confidence in the ultimate value of the transaction” and “represents a 61% to 78% premium to the undisturbed NS share price, based on our estimates for the intrinsic value of CP-NS.” It “represents approximately $10 per NS share of additional consideration based on the current trading price of CP, provides insurance on the ultimate trading value of CP-NS stock.” The CVR, CP added, “will be a highly liquid, easy-to-value security. In light of the expected CP-NS trading price in 2017, we expect payout under the CVR is unlikely. CP-NS will be able to finance any potential payment under the CVR on 10/25/17 with additional borrowings while maintaining its investment-grade credit rating, with 2017 estimated debt/EBITDA increasing from 2.8x to 3.2x at maximum payout.”

NS noted that CP’s latest, revised proposal, “other than the addition of a CVR, did not change any of the terms of the prior, reduced proposal dated Dec. 7, 2015 that was previously unanimously rejected by the NS board, and did not address the substantial regulatory risks and uncertainties inherent in the proposed combination. As [we] previously stated, if CP is confident that its proposed voting trust structure works, CP can seek a declaratory order to that effect from the STB now. The STB has clear, statutorily established authority to issue declaratory orders to remove uncertainty, and there is precedent for it doing so in the voting trust context.”

UPDATE: CP Makes Third Offer for NS By Bill Stephens

December 16, 2015

Canadian Pacific slightly sweetened its bid for Norfolk Southern today, offering NS shareholders what amounts to an insurance policy on the stock price of the combined company while the merger is under regulatory review.

“We are increasing our offer to NS shareholders by as much as $3.4 billion through the addition of a contingent value right,” Mark Erceg, CP’s executive vice president and chief financial officer, said during a conference call this morning with investors and Wall Street analysts.

The basics of the $30 billion proposal remain the same: NS shareholders would receive $32.86 in cash in May 2016 and 0.451 shares in the new CP-NS company. The wrinkle CP added today is that NS shareholders would receive 0.451 of a contingent value right, or CVR.

What’s a CVR? “Think about this as a long-term insurance policy on the share price,” says Bill Ackman, a CP board member and head of Pershing Square Capital Management, CP’s largest investor.

The CVR puts a floor beneath the share price of the combined CP-NS. It would protect investors if the CP-NS share price falls below $175. The CVR would be worth up to $25 and is a liquid investment that could be sold immediately after CP is put in a voting trust in May 2016.

“The CVR gives significant value to shareholders — unless we’re right,” Ackman says, adding they’re willing to bet $3.4 billion that CP-NS is worth at least $175 per share. “We’re not betting that money recklessly.”

CP values its latest offer as a premium of between 58 percent and 77 percent — the same premium of its second offer, which was made on Dec. 8 and immediately rejected by NS.

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The two railroads have disagreed on the value of the merger offers and have escalated their war of words over the past week. CP CEO E. Hunter Harrison said the CP-NS battle has turned into a “street fight environment,” adding, “if this is going to be a street fight, so be it.”

There are two ways that CP can move forward with a transaction in light of continued opposition from NS, Ackman says. Both require resolutions by current shareholders, which would need to be filed with NS by Feb. 14, 2016.

The first is a simple shareholder resolution asking the NS board to engage with CP to see if a deal can be worked out. The second — and more complicated — route would be a proxy contest that would seek to replace the NS board of directors with a slate of candidates who favor a merger.

In either case, it’s likely the outcome would be decided at or before NS’s annual shareholder meeting in May, Ackman says.

CP insists that its two-part merger plan can succeed.

The first part — putting CP in a voting trust, having Harrison sever ties with CP and become CEO of NS — is highly likely and will win STB approval, Ackman says. Harrison would then launch operational improvements at NS, which would save the company $1.2 billion and drive up its share price.

The second part — gaining STB approval of the merger, a process that could last 16 months — is less certain, Ackman says. But NS shareholders would be rewarded in either case, he says.

CP’s stock-and-cash offer would be worth $125 to NS shareholders if the STB ultimately rejects the merger. If the STB approves the deal, it would be worth $140 for NS shareholders, Ackman says.

NS did not immediately respond to CP’s latest offer.

NS Says 'We'll See' to Latest CP Bid December 16, 2015

NORFOLK, Va. — Norfolk Southern Corp. today confirmed that the Company's board of directors will carefully consider the publicly disclosed, revised proposal from Canadian Pacific with the assistance of its financial, legal and regulatory advisors.

Norfolk Southern noted that the latest revised proposal provides for a Contingent Value Right ("CVR"). Other than the addition of a CVR, the latest revised proposal did not change any of the terms of the prior, reduced proposal dated Dec. 7, 2015, that was previously unanimously rejected by the Norfolk Southern board, and did not address the substantial regulatory risks and uncertainties inherent in the proposed combination.

As Norfolk Southern previously stated, if Canadian Pacific is confident that its proposed voting trust structure works, Canadian Pacific can seek a declaratory order to that effect from the STB now. The STB has clear, statutorily-established authority to issue declaratory orders to remove uncertainty, and there is precedent for it doing so in the voting trust context.

Morgan Stanley & Co. LLC and Bank of America Merrill Lynch are acting as financial advisors to Norfolk Southern Corporation and Skadden, Arps, Slate, Meagher & Flom LLP, Hunton & Williams LLP, and Morrison & Foerster LLP are acting as legal advisors.

Catskill Mountain RR Compromise ReachedDecember 16, 2015

In a David versus Goliath fight for its life, the Catskill Mountain Railroad has defied the odds and a powerful adversary to survive. Much of the former Ulster & Delaware right of way will be converted to a trail, but not as much as the county had proposed, and the remaining railroad will be much more likely to be viable than previously expected.

The blue line shows the railroad surviving with a parallel trail. Pink is trail only. The short brownish section at the east end of the reservoir requires further study of rail-with-trail.

Given up for dead by many, the railroad fought back. It can be argued that it was saved by themed special events, which attracted thousands of visitors to Kingston and got the attention of local businesses and politicians.

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There is still uncertainty about the future because the railroad’s lease will soon expire and the county will be seeking proposals from rail operators.

Ulster County Lawmakers Amend Trail Policy to Allow Tourist Trains By Patricia Doxsey

Posted: 12/15/15

A Catskill Mountain Railroad train crosses Washington Avenues in Kingston in late 2014. Tania Barricklo — Daily Freeman File

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KINGSTON – Ulster County lawmakers on Tuesday voted unanimously to amend a formerly trail-only policy for the former Ulster and Delaware rail corridor, setting aside more track for train operations while guaranteeing a connected recreational rail trail.

The action followed years of controversy over the best use of the 38.6-mile rail corridor, which is owned by the county.

Legislators also agreed to begin engineering work on the conversion of a portion of the corridor along the Ashokan Reservoir to a recreational trail.

The new policy for the corridor, which came out of the Legislature’s Ulster & Delaware Corridor Advisory Committee, was lauded by rail and trail supporters alike who said the proposed plan offered the best hope for a recreational trail that could someday connect to the Walkway Over the Hudson while allowing the profitable operation of a tourist train.

“Nobody got everything they wanted, but everybody got something,” said Legislator David Donaldson, D-Kingston. Donaldson, an ardent supporter of the Catskill Mountain Railroad, said the policy “is good for the county.”

Ulster County Executive Michael Hein, who in 2013 first proposed converting the rail corridor into a recreational trail, said the legislative policy “allows Ulster County residents and visitors alike to have the best of both worlds.”

The plan approved by legislators mirrors is almost identical to a compromise plan Hein proposed earlier this year that provided for continued train operation between the Kingston Plaza and Hurley Mountain Road, as well as west of the Ashokan Reservoir.

Under the new county policy, the corridor would be converted into a recreational trail from Cornell Street in the city of Kingston to the Kingston Plaza shopping center. A tourist train would be permitted to operate along from the Kingston Plaza to Mile Post 8.33 in Hurley, about two miles more than called for in Hein’s compromise plan, and just short of the Ashokan Reservoir. Portions of the recreational trail would likely be moved to the former O&W rail corridor, which runs roughly parallel to the old Ulster & Delaware corridor, to accommodate the train operation.

Due to significant engineering and development issues, future use of the section of corridor between 28A in Hurley to Basin Road at the Ashokan Reservoir will be determined in the future, but a recreational trail through that area will take priority if both rail and trail can’t coexist, according to the policy.

The area along the Ashokan Reservoir will be used only for a recreational trail and the area between Boiceville and Phoenicia will be rail with trail where possible.

“While the Catskill Mountain Railroad did not get everything it wants, we support the resolution and look forward to working with the county and the trail committee to make the Ulster and Delaware corridor a world-class rail and trail attraction” said David Hilliard, reading a statement from Catskill Mountain Railroad President Ernie Hunt.

The Catskill Mountain Railroad, which operates a tourist train on the county-owned tracks under a lease that expires in May 2016, had wanted to extend its Kingston-Ulster operation to the reservoir’s Glenford Dike, which is about a mile west of the Woodstock Dike.

The resolution adopted Tuesday also directs the county to request proposals from tourist railroad operators for rail services to begin after the current lease with the Catskill Mountain Railroad expires.

The New York City Department of Environmental Protection, which operates the Ashokan Reservoir, has said it wouldn’t allow both a train and a recreational trail along the 11.5 mile stretch of rail bed that runs along the northern rim of the reservoir.

Earlier this year, the Department of Environmental Protection endorsed Hein’s plan to convert that portion of the rail corridor into a trail and pledged $2.5 million to help with the conversion. In October, the city gave the county the first $1 million of that promised money.

Legislators also on Tuesday voted to establish a $1 million capital project to allow for the design and engineering work for the trail along the reservoir.

Old Birmingham STREETCAR Rail and Brick Pavers Revealed in Pothole There is a pothole in the middle of the street at the crosswalk at the intersection of Clairmont Avenue and 30th Street South that has in it a rail of the old Birmingham STREETCAR tracks and brick pavers on both sides of the rail (the brick pavers seem to be typical of the streetcar rails around Birmingham). As you can see, in some parts of Birmingham, the old streetcar rails are not very far underneath the current asphalt.

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C&O - The Sportsman By Edward H. Miller

Train Nos. 4-46 and 5-47, The Sportsman, made its inaugural trip on March 30, 1930, on a somewhat different route for the Chesapeake and Ohio. It ran primarily between Newport News and Detroit, but with a good connection to Washington, D.C.

Its equipment included a combination baggage and smoking car, imperial salon coaches, a standard dining car (east of Ashland), a club dining car (west of Ashland), sleepers and an observation/lounge car. The club diners, numbered 90 and 91, and lettered Hocking Valley, had a section for dining that seated 24 and a lounge section that seated 14. The dining room chairs were designed after those in New York's Ritz-Carlton Hotel's restaurant. The exposed woodwork on the chairs was finished in gold with black striping, and the leather upholstery was either red, gold or blue with eight of each. When distributed randomly in the dining area, they produced an effect of richness. The imperial salon coaches had a single row of seats on one side and a double row of seats on the other side of the car. The seats sold at the same prices as standard coach rates, but rivaled parlor seats in comfort and room. The observation/lounge car had a radio installation –a first on the C&O.

The original locomotives for the train consisted of five heavy Pacifies, class F-19, and numbered 490-494. They had been built by Richmond in 1926. For inauguration of The Sportsman, the locomotives were shopped and given polished cylinder and valve head covers, polished air pump jackets and embossed eagles on the feedwater heaters.

The F-19 Pacifies were used to inaugurate The George Washington in 1932. Over the years, the Pacifies used to power The Sportsman included most of the classes of that type of locomotive owned by the C&O in the 1930's and 1940's.

The Pullman-Standard order for lightweight passenger equipment that arrived in 1950 became the backbone of the C&O passenger fleet until the Amtrak takeover on May 1, 1971. While some cars were sold before delivery, the C&O kept 59 coaches, four buffet-lounge-observation cars (one was converted into office car 29), 43 10-6 sleepers and five double bedroom sleepers. The coaches seated 52 with a center divider. The buffet-lounge-observation cars became diner-dormitory cars. The 10-6 sleepers had the bedrooms in the middle and the roomettes at the ends. Since no diners were retained, many trains carried heavyweight diners.

Dieselization of the C&O's passenger service occurred as 27 EMD E-8's were delivered between August 1951, and January 1952. The use of steam locomotives in passenger service essentially ended during 1952. Four more E-8's arrived in May 1953.

Union Station in Columbus was on the Pennsylvania Railroad, but not on the C&O. In order for C&O trains to reach it, if a train was coming from the east (south), the operator at LM Tower would head it into Yard A and a switch tender would let it onto the PRR. On leaving Union Station, a C&O train heading west (north) would back out of Union Station, through Yard A and onto the C&O main. Trains backing out expected a passable signal at the lead to the PRR transfer located immediately south of LM Tower on No. 2 Track. For an eastbound train such as No. 46 the whole process was reversed. The train stopped when clear of the lead to Yard A, and backed into Union Station. At some point in about 1968, the C&O decided to cut off the switch tender's position and have Nos. 46 and 47 use the PRR transfer to get to Union Station. Therefore, the whole process was reversed. No. 47 would come up No.2 track and head into the PRR transfer using 88 or 90 track as lined by the operator at LM. The operator would reverse a crossover, and No. 47 would back into Union Station. No. 46 did the same thing, but with the train direction reversed.

One evening in about 1968 or 1969, the operator (Pat Rose) at LM came on the dispatcher's line and in as calm a voice as possible announced "The Sport is on the ground." It had derailed something while in 88 or 90 track. Action to re-rail whatever was off the track came swiftly. It was the only known derailment of the Sportsman on the former Hocking Valley.

April 29, 1962 The Sportsman was discontinued east of Ashland and consolidated with The Fast Flying Virginian in that territory, but the schedule was better since No. 47 left Columbus around 7:30 a.m. After The F.F.V. made its last run on May 11, 1968, The Sportsman was consolidated with The George Washington. The Sportsman was cut back to just three days per week (Friday, Saturday and Sunday) effective August 2, 1970. By this time, it was running as an E-8, a food bar coach, and a P-

S deluxe coach. It made its last run on April 30, 1971.

F-16 #464 leads The Sportsman at Columbus Union Station ca 1935.

Photo courtesy of Chesapeake and Ohio Historical Society.

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F-19 #492 at Huntington, WV March, 1930, during The Sportsman's pre-inaugural tour.

Photo courtesy of Chesapeake and Ohio Historical Society.

Train 46, The Sportsman at Ivy, VA, September 1958, with E-8 #4003.

Photo by Gene Huddleston, courtesy of Chesapeake and Ohio Historical Society.

In the last months of The Sportsman, money was saved by laying off the switch

tender on the west end of Columbus Union Station. The Sportsman backed past CUS and entered the station from the east. Photo by Dave Bunge

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Train #47 just west of Toledo Central Union Station with E-8 #4004, a baggage car, two coaches, a dorm/dinner, a B&O sleeper and a PRR sleeper (Jefferson County).

Photo taken on November 15, 1967 by the author. 

BNSF's Rose: If CP-NS Happens 'We're Going to Play' December 11, 2015

FORT WORTH — In case you haven't heard, BNSF Railway is prepared to intervene in any merger proceeding involving Canadian Pacific Railway and Norfolk Southern, and to even seek out its own merger partner, the railroad’s executive chairman told Trains News Wire on Thursday. “If it’s going to happen, we’re going to play,” said Matt Rose in an interview with Fred W. Frailey.

Without explicitly saying so, Rose implied that the obvious partner for BNSF in a merger would be CSX Transportation. A CP-NS merger, he said, would have NS’s profits being taxed at Canada’s lower corporate tax rate, putting CSX at a competitive disadvantage.

At the same time, Rose said his own preference is to do nothing. “I always put myself in the minds of my customers. I just sense customers feel there has been too much consolidation and too much market power put in the hands of railroads.”

But if there is to be a merger case before the Surface Transportation Board, BNSF will not sit idly by, Rose said. BNSF is owned by conglomerate Berkshire Hathaway, and as Rose puts it, “Everyone knows it has the firepower to do a major transaction.”

CSX Breaks Ground on Pittsburgh Intermodal TerminalMonday, December 07, 2015

CSX joined Allegheny County officials, local and state partners and members of the Stowe Township and McKees Rocks communities in Pittsburgh, Pa., on Dec. 4, to formally celebrate the construction of the Pittsburgh Intermodal Rail Terminal.

The more than $60-million facility, which is expected to commence operations in 2017, will provide shipping logistics services to manufacturers and distributors in western Pennsylvania by supporting the reliable and efficient shift of long-haul freight from highway to rail, while strengthening the commonwealth's transportation infrastructure and driving the region's economy.

"Together, we are making an investment here in Stowe Township and McKees Rocks that will transform an industrial space into a modern, state-of-the art facility," said Clarence Gooden, president, CSX. "None of this would be possible without the vision, dedication and commitment of our many partners in this project, including Allegheny County, Stowe Township and the McKees Rocks Borough, Allegheny Conference on Community Development and the McKees Rocks Community Development Corporation."

Construction on the terminal began in September, with initial activity focused on demolishing existing buildings and clearing the site to prepare for major construction. The project is redeveloping the former Pittsburgh & Lake Erie Railroad Yard, which operated for more than 100 years on the 70-acre site.

"We are excited to have CSX make this investment in the community. We know the importance of rail in our region and the start of this work emphasizes exactly that," said Allegheny County Executive Rich Fitzgerald. "This terminal will not only help connect western Pennsylvania's businesses to the global marketplace, but it will also help stimulate McKees Rocks' and Stowe's economies. We are proud to have worked with all of the stakeholders to make this project a reality."

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The terminal is an important connection in CSX's $850-million National Gateway public-private partnership, which is creating a more efficient and environmentally-friendly transportation network that allows shippers to take advantage of the economics of double-stack containers between Mid-Atlantic ports and Midwest consumers.

House Passes S. 808; Next Stop: the President Written by Carolina Worrell Friday, December 11, 2015

The U.S. House of Representatives on Dec. 10, 2015 passed S. 808, the Surface Transportation Board (STB) Reauthorization Act of 2015, which among other provisions, will increase the number of STB members from three to five, improving STB's structure and decision-making processes by allowing, with proper disclosure, board members to speak with one another about cases on which the STB is ruling.

Sen. John Thune (R-S.D.), Chairman of the Senate Commerce, Science and Transportation Committee and Sen. Bill Nelson (D-Fla.), the ranking member of the Commerce Committee, introduced the bill in early 2015. The Commerce Committee approved the bill by voice vote on March 25, 2015; the full Senate passed it by unanimous consent on June 19, 2015.

S. 808 improves the STB's current dispute resolution process by setting timelines for rate reviews and expanding voluntary arbitration procedures to address both rate and service disputes. It also ensures that the STB has the authority to proactively resolve problems before they escalate into larger disputes by providing the STB with the ability to initiate investigations on matters other than rate cases.

The Association of American Railroads (AAR) issued a statement in support of S. 808's passage:

"In reauthorizing the Surface Transportation Board for the first time since the agency was created, Congress has clearly stated the critical need for railroads to be able to earn the revenues to build, maintain and further modernize the nation's 140,000-mile privately owned rail network. These investments are needed to meet current and future freight transportation demands," said AAR President and CEO Ed Hamberger. "This legislation strikes the right balance of preserving a market-based structure for shippers and railroads, while also providing commonsense process improvements that will allow the STB to work more efficiently."

"The industry invests revenue it earns, not government funding, to grow the nation's rail system and respond to the shipping needs of customers, large and small," added Hamberger. "Congress has reaffirmed balanced economic regulations that allow market-based competition to establish rate and service standards, with a regulatory safety net available to rail customers."

Hamberger noted that since partial deregulation under the Staggers Rail Act in 1980, the freight rail industry has invested more than $600 billion of capital in infrastructure and equipment.

"Enacting this legislation will make the Surface Transportation Board more accountable and effective in addressing rail service and other disputes," said Sen. Thune. "Heading off problems between rail customers and carriers whenever possible, and quickly resolving them when they do occur, is at the heart of this effort to make the STB work better."

The STB is the federal regulatory body responsible for economic oversight of the nation's freight rail system. Run by a three-member bipartisan board, the STB has regulatory jurisdiction over railroad rates, mergers, line acquisitions, new rail-line construction, line abandonment, and other rail issues. The STB was created by Congress in 1996 as the successor to the Interstate Commerce Commission. Since that time, the STB has not been reauthorized or substantively reformed.

Sen. Durbin to STB: Consider Negative Impacts of Potential CP-NS Merger Written by Carolina Worrell Tuesday, December 15, 2015

In response to the proposed merger between Canadian Pacific Railway (CP) and Norfolk Southern Corporation (NS), U.S. Senator Dick Durbin (D-Ill.) on Dec. 14, 2015 sent a letter signed by Democratic members of the Illinois Congressional Delegation to the Surface Transportation Board (STB) urging the agency to carefully consider the potential negative impact of the proposal on Illinois’ freight network. In the letter, the legislators requested careful review of the possible effects of CP’s proposed acquisition of NS on Illinois communities and businesses, particularly those in and around Chicago.

“We are writing to you regarding Canadian Pacific Railway’s proposal to acquire Norfolk Southern Corporation, a merger that could have significant implications to the freight network in Illinois and this country,” the members wrote. “We are concerned about the effects of the proposed CP-NS merger on Chicago. We urge you to carefully review any plans submitted to the STB, and consider the potential negative impact of the proposal with respect to building a more efficient freight network in Chicago—and comprehensively examine the economic effects of such a consolidation on local industries and jobs in the Chicago region.”

In addition to Sen. Durbin, the letter was signed by U.S. Representatives Dan Lipinski, Tammy Duckworth, Danny Davis, Mike Quigley, Bobby Rush, Cheri Bustos, Luis Gutiérrez, Jan Schakowsky and Bill Foster. All are Illinois Democrats.

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Canada's Trudeau Has Final Say on CP-NS Merger Written by David Thomas

Thursday, December 17, 2015

Rail industry cogitation focuses so far on Canadian Pacific's (CP) prospects for securing Surface Transportation Board (STB) approval for its—at first friendly and now increasingly hostile—attempt to take over Norfolk Southern (NS). Unremarked has been the even-less predictable, but equally essential, attitude of Canada's transportation and business regulators to a deal that would see one of the country's two Class I’s disappear into the alphabet soup of American megamergers.

Just how would Canada react to the notion of an NSCP reporting mark on the flanks of black and red locomotives running over tracks largely financed by public funds back in the 1800s and still revered as the “National Dream”?

Railway Age asked the office of Canada's new Minister of Transport, ex-astronaut Marc Garneau, to spell out the regulatory hurdles an NS-CP (or CP-NS) merger proposal would have to clear. CP is, after all, a Canadian company subject to Canadian law governing business combinations generally, and those in the transportation sector particularly. Canadian National, for example, would have to secure an Act of Parliament just to move its head office from Montreal, let alone merge with another carrier.

Transport Canada Media Officer Julie-Anne Codaire, responded Dec. 17, 2015 with the two-stage process a CP-NS merger application would face in Canada:

“Under the Competition Act, mergers of all sizes and in all sectors of the economy are potentially subject to review by the Commissioner of Competition. Before proceeding with a merger, parties are also required to notify the Commissioner of Competition if the target’s assets in Canada or revenues from sales in or from Canada exceed $86 million, and the combined Canadian assets or revenues of the parties, from or into Canada, exceed $400 million.

“If the Competition Act’s thresholds are met, the parties must also notify the Minister of Transport of the proposed transaction under the Canada Transportation Act. In particular, they must provide information regarding the public interest as it relates to national transportation (for example, an assessment of the impacts on communities and users of the transportation system).

“If the Minister of Transport believes that the proposed transaction raises issues with respect to the public interest as it relates to transportation, he may direct the Canadian Transportation Agency or another person to examine those issues, and the transaction cannot proceed without Governor in Council approval.

“Given that the proposal is in its early stages, we are not in a position to comment on whether a review of this merger will take place under the Canada Transportation Act.”

The key phrase is that no transaction could proceed “without Governor in Council approval.” The Governor in Council is Canada's supreme authority, albeit an entirely fictitious one. The Governor-General is the titular representative of Britain's Queen Elizabeth in Canada, which, maddeningly to some, is still constitutionally a monarchy under the British Crown. The Governor-General is in truth merely Canada's ceremonial head of state and never, ever meets with his “council” to decide anything. Governor in Council is a euphemism for the federal cabinet, composed of elected Members of Parliament chosen and tightly managed by the Prime Minister.

The reality is that a CP-NS merger would need the personal approval of Prime Minister Justin Trudeau (pictured). The essential question, then, is whether Trudeau II (his father preceded him as Prime Minister from 1968 to 1974) would want to be remembered as the betrayer of the greatest accomplishment of the country's very first Prime Minister, John A. Macdonald. The hard-drinking Macdonald literally bet Canada's public finances on completion of the Canadian Pacific Railway as a means of blocking “manifest destiny,” the U.S. catch-phrase for takeover of the Canadian West.

CP, for its part, reaffirmed its belief that regulatory authorities in both countries would bless the proposed union because of its business sense.

“CP is committed to creating a coast-to-coast railway combination that is pro-competitive, pro-customer and generates significant shareholder value,” CP Assistant Vice President Martin Cej told Railway Age after we provided him with a copy of the Canadian government's perspective on rail mergers. “We are confident that our proposal would meet regulatory requirements.”

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Turn Her Around Boys….

Employees turn the big Buick sedan around on the turn table for the terminal manager of a Chicago area railroad. The car as you can see is equipped with special flanged wheels for rail travel. It appears that the boss had the boys keep his car in a high state of polish, look at the reflection seen in the side of the car.

Train Cars Blown Off Railroad Bridge at Loop 287 W. in Lufkin By Gabby Sims and Malcolm Hornsby

December 20, 2015

LUFKIN, TX - Numerous train cars were blown off a bridge on Loop 287 West in Lufkin, Sunday morning.

According to TxDOT, the bridge crosses above Loop 287/ North John Redditt Drive, near the Pepsi Cola Bottling Company. Loop 287 from Highway 103 West to Highway 69 North is closed to traffic at this time.

Lufkin police sergeant Dale Jowell said 64 empty train cars blew over. Jowell said the cars were blown over around 7 a.m. by what is believed to be straight line winds. Several street signs, power lines, and trees were also blown down. Billboards in the area were also damaged.

“This morning we were still in bed and we just heard like a big thump and we ran outside thinking maybe it was a tree or something,” said Leticia Rico, a Lufkin resident.

But what Leticia Rico and her family heard was much more than a downed tree. It was multiple train cars blown completely off of their tracks.

“We didn’t know what was going on. That’s when the whizzing and all the winds started going crazy. We just shut the door, got the kids and went to the living room area,” Rico said.

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“These cars were idle and waiting for service and apparently the winds were strong enough this morning to blow them completely off their wheels,” said David Perkins, president of A&NR Railroad Company.

“Removing the railcars in the safest way possible will require certain things to happen,” said Rhonda Oaks, public information officer for the Lufkin District. “Our officials have devised a traffic control plan for motorists until the cars can be removed, and we are hoping that will be by Monday evening. We are waiting on equipment that is being sent from Houston before the cleanup can begin.”

TxDOT says it will take at least 48 hours to upright all 64 rail cars. Barricades will remain in place and drivers will be detoured until the roadway is cleared. Residents with direct access as well as businesses within the barricaded area will be accommodated to and from their locations.

No one was injured.

Replica of First Railroad Tank Car

When and why ACF constructed a replica of the first tank car, it would be interesting to know. The first tank cars were built for use on the Oil Creek RR in 1865. I have heard they were constructed in the Murray, Dougal & Co. shops at Milton, which company was merged with 12 other railroad equipment suppliers in 1899 to form American Car & Foundry. The replica really isn't a very good one, and probably isn't rail-worthy. But it's a nice trinket to have from the AC&F plant.

Plans to Restore Panhandle Amtrak Service Advance By KATIE LANDECK

December 16, 2015

PANAMA CITY — After a decade without passenger rail access, the service could be returning to the Florida Panhandle within the next five years.

“It’s realistic,” Gregory White, chairman of the Southern Rail Commission, said Wednesday. “And we’re excited about it.”

The commission, which covers Louisiana, Alabama, Mississippi, Florida and Georgia, is currently in talks with Amtrak about starting a daily service that runs from Orlando to New Orleans, as well as supplemental service that runs from Mobile, Ala., to New Orleans, according to White.

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The plan is still in its early stages, as a provider such as Amtrak would need to be selected. Negotiations with CSX, the company that owns the existing freight tracks the service would use, also need to begin and financing must be arranged.

However, White said he is “confident” a passenger train will be operational within the next three to five years.

“We have an unprecedented amount of support from elected officials and partners from all over the Gulf Coast region,” White said.

On Monday, Amtrak and the commission released a report outlining five different business proposals for the passenger rail service. The most likely one would extend Amtrak’s City of New Orleans passenger train, a route that currently stretches from New Orleans to Chicago and includes stops in Jackson, Miss., and Memphis, Tenn.

The plan, according to the study, likely would generate an annual ridership of 138,300 passengers and cost about $5.48 million to operate.

The loop would depart New Orleans in the late afternoon and arrive in Orlando late the next morning, then turn around in the afternoon to be back in New Orleans by midday the next day. The study tentatively names Pensacola, Crestview, Chipley and Tallahassee as intermediate stops in the Panhandle.

“In the study they identified stops on the previous service route that have depots and can handle the stops,” White said. “They are not definite.”

The commission also doesn’t know how the train service would be funded yet. Since it’s what’s known as a long- distance line, it would be eligible for federal funding through the recently passed $305 billion transportation bill President Obama signed at the beginning of the month.

Federal funding, though, is not a guarantee, White said. There is a chance the states as well as individual companies that stand to benefit from the project could be asked to share the bill.

The region has been without a passenger rail since August 2005, just before Hurricane Katrina struck. At the time, the train system, Sunset Limited, a subsidiary of Amtrak, was plagued with delays, forcing the company to bus a third of passengers, according to the report. In addition to its irregular schedule, stops in the Panhandle were often in the wee hours of the night.

Harrison to Durbin, et al: “There Appear to be Some Misconceptions” Written by William C. Vantuono

Friday, December 18, 2015

As Canadian Pacific continues to pursue a merger with Norfolk Southern, CP CEO Hunter Harrison sent a response to the members of the Illinois Congressional delegation (all Democrats) who sent a letter to the Surface Transportation Board on Dec. 14, 2015 expressing concerns about the potential transaction.

“I was surprised to read this letter in the media as it would have been my pleasure to sit down with you and walk through the benefits of our proposal to Illinois and Chicago and to address concerns, “ Harrison said. “That offer still stands.”

“We recognize that the State of Illinois relies on a strong freight rail industry as does the United States economy,” said Harrison. “We believe that a CP-NS merger would further strengthen our industry and allow us to make better and more efficient use of our assets to provide competitive rail service today and to meet the capacity challenges that we face tomorrow. We look forward to a robust regulatory process at the STB to clearly illustrate with compelling facts and evidence that a CP-NS combination is decidedly in the public interest.

“We have not yet had an opportunity to engage with NS and negotiate the specifics of a combination. That said, we are confident that such a combination would improve the railroad network by delivering a more seamless and robust network, and to do so without engaging in new construction which, in today’s environment, is especially difficult. Over the medium to long term, the strength of the network will be eroded unless we expand or find other innovative ways to grow. If we are unable to grow through merger or through new construction—a near impossible feat in many locations like Chicago—we anticipate that the challenges of the winter of 2013-2014 and the subsequent gridlock that ensued would become more frequent and impactful. “In regard to some of your specific concerns, improving Chicago is a key objective of this transaction and one of the many ways it is in the public interest. You can fully expect that this will be a major component of a compelling case to the STB. If new routings are planned, we will ensure that our submission is transparent on any impact and, we will work with local communities to address specific concerns that arise.

“We believe that the merger would benefit Illinois shippers making them more competitive domestically and internationally. A CP-NS combination would give Illinois shippers efficient single-line service to markets in Canada, the eastern United States and beyond. It should also increase capacity and efficiency in Chicago, allowing shippers to get their goods to market more quickly, reliably and safely, reducing inventory carrying requirements and shipper equipment costs.

“We have proposed innovative competition enhancements such as modified terminal access and an end to the bottleneck pricing approach, which would allow customers to obtain a separately challengeable rate to the customer’s preferred interchange location. For years, shippers have been demanding that Congress and the STB impose these changes as a means to increase rail competition. We would agree to the changes voluntarily as part of the merger consideration.

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“Greater efficiency would result in environmental benefits such as reduced fuel consumption. A more-competitive CP-NS would be able to better compete with trucks, [reducing] highway congestion and taxpayer-funded highway maintenance costs. On this point, I would note that the rail infrastructure is privately funded and maintained.

“We understand your concerns regarding the impact on jobs. Be assured that our intent is that reductions in headcount would be achieved through attrition. As demonstrated at the Illinois Central (IC), the Canadian National (CN) and CP, our model seeks to realize greater efficiencies and create a more competitive carrier on a sustainable basis; it is not a ‘cut to the bone’ approach.

“In your letter, you also reference ensuring that the independence of CP and NS is maintained while the STB completes a combination. That is exactly what an independent voting trust does. Voting trusts have long been held to be an effective and lawful means of insulating a carrier from unlawful control pending regulatory approval. They have and continue to be a common and important feature of rail transactions. The denial of the use of a voting trust would interfere with the market place, restricting stockholder's ability to realize the full value of their investment. Such intrusive regulatory action would be contrary to the Staggers Act and longstanding STB precedent.

“In your letter, you express concern regarding the lawfulness of management change at NS. Let me first clarify what is contemplated as there appear to be some misconceptions. CP contemplates that the CP operating entities would be placed in an irrevocable voting trust under an independent trustee. I would sever ties with CP and be hired as CEO at the newly acquired NS. Pending regulatory approval of the combination, CP and NS would continue to operate as independent carriers and vigorous competitors. Neither I nor the CP holding company would exercise any control over the carrier in trust. At NS, my sole objective would be to make NS a stronger, more efficient and more competitive railroad, consistent with my record at IC, CN and CP. What we are proposing is not new. It is similar to the CN-IC transaction, where I resigned my position at IC, which was put in trust, and moved to CN to begin making operational improvements prior to regulatory approval.

“I trust [this] letter helps clarify some of the concerns you expressed in your letter to the STB. Again, I would welcome an opportunity to sit down and discuss our proposal, how it is in the public interest and how it will allow us to collectively meet the challenge of providing a more robust, resilient and competitive rail system that has been called for by many over the past few years.”

STB Adds Rail Heritage Map to Interactive Online Railroad Map Depot Written by Carolina Worrell Friday, December 18, 2015

The Surface Transportation Board (STB) on Dec. 17, 2015 announced the addition of the Rail Heritage Map to its online Railroad Map Depot created and maintained by the STB’s Office of Environmental Analysis (OEA) for public use and research. Supported by ArcGIS Online (Esri), the Railroad Map Depot is a cloud-based platform featuring a number of maps maintained by OEA.

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The new Rail Heritage Map displays information on the locations of railroad-related historic properties listed on the National Park Service’s (NPS) National Register of Historic Places. The majority of the Heritage Map’s historic rail properties are rail depots, indicating the popularity of these iconic landmarks in communities nationwide. Other property types include bridges, trestles, car barns, freight houses, roundhouses, rail beds, tunnels, and rolling stock. Rail-themed and commercial districts featuring rail elements are also included.

Based on NPS data, the Heritage Map displays information on a United States Geological Survey topographic basemap providing considerable natural- and cultural-landscape detail.

The Heritage Map will benefit anyone interested in learning about rail history, visiting historic sites, or researching historic properties for purposes of project planning, STB says. While the Heritage Map includes current, unrestricted data acquired from the NPS in 2015, its data are dynamic. OEA currently is compiling information on other historic properties as well. Public recommendations for additions to the data list, or general comments, are welcome by emailing irwinj@stb.dot.gov. To view the Rail Heritage Map, click HERE.

Omnibus Bill Extends Shortline Tax Credit, Funds TIGER and Safety Grants Written by Mischa Wanek-Libman

Monday, December 21, 2015

The U.S. House of Representatives and Senate passed a monster spending bill late last week, which will keep federal agencies funded through the end of September 2016.

The $1.1 trillion Omnibus Appropriations bill includes an extension to the 45G shortline tax credit, funds the Transportation Investment Generating Economic Recovery (TIGER) grant program for another round and increases the amount of New Starts funding.

Regarding text extensions; the legislation extends the Railroad Track Maintenance Tax Credit, also known as the 45G shortline tax credit, a full two years to January 1, 2017, and it allows shortline railroads created after 2005 to claim the credit.

The legislation also permanently extended the transit/parking commuter tax benefit, which will allow employees in a program will be able to set aside $255 in pre-tax dollars each month in 2016 to spend on public transportation, up from the current $130 a month.

An eighth round of the popular TIGER competitive grant program will be funded at $500 million. In October, the seventh found of TIGER funding awarded $500 million to 39 projects.

Amtrak will be funded at $1.39 billion and there is no allocation for high-speed rail.

The Federal Transit Administration (FTA) will see more than an $850 million increase in funding to $11.8 billion. Of that amount, $9.34 billion will be allocated from the Mass Transit Account and $2.177 billion will be allocated to the New Starts Program.

The Federal Railroad Administration (FRA) will see an increase of $52 million in allocations, rising to $1.678 billion.

There were also some big waves made on the safety side of the industry within the bill such as not including Twin 33 truck lengths in the legislation (with the exception of Idaho); $350 million was allocated for Section 130 grade-crossing funds, which is an increase and there was $50 million allocated for railroad safety grants split between the railroad safety infrastructure improvement grant program and the railroad safety technology grants for Positive Train Control implementation.

On Friday, Dec. 18, the House passed the Omnibus Appropriations bill, 316-113; the Senate passed it, 65-33 and the president signed it into law Friday evening.

Flying Scotsman: A 'Colossus' of British Engineering Reborn - Telegraph Flying Scotsman squats immobile on the tracks, her great steel chassis gleaming and cooled. It is ten years to the month since her boiler was last fired up sending steam screeching from cylinders and the engine slowly rumbling into life. That was in North Yorkshire on a cold December day. The world’s most famous locomotive has not been seen in action since.

Over the ensuing decade, this 92-year-old war horse has undergone a mammoth £4.2 million restoration to restore her to the former glory. She was named Flying Scotsman after being but to work on the East Coast mainline, and in 1928 hauled the first non-stop service from London to Edinburgh, reducing the journey time to eight hours.. Six years later, she became the world’s first 100mph steam locomotive – her place cemented in the British engineering hall of fame.

The insides have been ripped out and replaced and a new chassis bolted on. She has been painted, for now, in the same black livery that once covered the steam engine during the Second World War to avoid the attention of Luftwaffe planes as she roared across Britain. On her front in white lettering is the number 60103 – the last she ever wore during her remarkable career and the first she will take with her back out on the tracks.

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 Flying Scotsman at the workshop in Bury 

The overhaul has been carried out in suitably evocative surroundings, at the 159-year-old East Lancashire railway works in Bury – the oldest standard gauge locomotive works in the country still being used for its original purpose. It is at one end of these vast brick-built sheds, past the steel skeletons of once glorious machines and the flying sparks of welding torches, that Flying Scotsman has been reborn.

The work is being undertaken by locomotive engineering specialists Riley and Sons on behalf of the National Railway Museum in York which bought Flying Scotsman for the nation in 2004 using a £1.8 million heritage grant, £415,000 in public donations and a £365,000 gift from Sir Richard Branson.

Test runs are due to begin on January 6 at the East Lancashire Railway, ahead of a mainline test from Manchester to Carlisle over the Ribblehead Viaduct in the Yorkshire Dales on January 23 when huge crowds are expected along the route. If that test passes relatively incident free, in late February (the date is yet to be confirmed) Flying Scotsman will steam from York to London with the public able to buy tickets to ride on the train behind. After that, Flying Scotsman will embark on a comeback tour across Britain throughout 2016, including in May visiting Scotland for the first time in 16 years when she runs from London to Edinburgh.

But it has been far from a smooth ride up until now. Four years ago the engine was declared all but ready and displayed on the turntable at the museum in York only for several serious faults to be discovered. Riley and Sons were bought on-board in 2013 and Colin Green, the 39-year-old director of the firm, admits the overhaul has been “an emotional rollercoaster”.

Green is a railway man through and through. His father, John Green, worked in the same Bury depot when it was owned by British Rail. His grandfather also worked on the railways. When we meet his hands are coated in oil and engine grease and his brow furrowed. Even in these final stages of the work, Flying Scotsman is proving a capricious beast.

 Colin Green with the original Flying Scotsman drawings 

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“Every time you do something you find another thing that is wrong,” Green says. “When I am in my more passionate moments I call Flying Scotsman a ‘she’ but at the moment I’m saying ‘it’ because we have had a bad couple of days. There is still so much to do and there is still a lot that can go wrong. It will be like walking out of hospital after major heart surgery.”

The overhaul has included re-working the old cast iron cylinders and installing a new boiler, chassis, copper pipework, motion and bearings. In short, Green says, “pulling the whole thing apart and starting again”.

Everything has been done according to the original engineering drawings with all measurements imperial rather than metric. The latter has no place in the world of steam engines.

This is not the first rebuilding job of Flying Scotsman. Since being built in a workshop in Doncaster in 1923 she has had three classes (A1, A10 and A3), four colours, six numbers, nine different tenders and myriad components including at least fifteen different boilers.

According to Railway journalist Robin Jones, who wrote on the subject several years ago: “Rather than consider a steam engine to be a priceless antique in itself, it is more akin to a football team, individual components wear out, are replaced and discarded, players come and go, yet a history and pedigree builds up as it continues its many campaigns through the good times and the bad.”

For Flying Scotsman, this history was forged at the British Empire Exhibition in 1924 where she was put on display as the pride of the London and North Eastern Railway fleet and seen by 20 million people. By the end of that decade she had starred in the first British “talkie” film, The Flying Scotsman, alongside the actors Ray Milland, Moore Marriott and Pauline Johnson.  

 Flying Scotsman at King's Cross 

“When Flying Scotsman came out it was noted how big she was as much as anything,” says Bob Gwynne, assistant curator of the National Railway Museum and an authority on Flying Scotsman. “She was nicknamed ‘Colossus’.”

In 1934, she became the first steam locomotive to achieve a 100mph run, but the outbreak of war a few years later put paid to her burgeoning fame. Like many of Britain’s fleet of trains, Flying Scotsman was painted black and put to work carrying increasingly heavy loads. A shortage of workers and parts meant the locomotive received far less maintenance despite the strenuous labour. Even on a machine like Colossus, time took its toll.

By the Sixties, British Rail announced it was to scrap Flying Scotsman prompting the entrepreneur and railway enthusiast Alan Pegler (who died in 2012) to launch a public appeal to rescue and restore the locomotive. A BBC documentary followed, which was screened the very same day the last mainline passenger train was hauled by a steam engine in Britain on August 11, 1968. The interest it generated secured the locomotive’s place in the pantheon of British engineering history and Flying Scotsman was taken on tour around the world.

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' Scotland by the Night Scotsman', London and North Eastern Railway poster from 1932   

Photo: National Railway Museum/Science and Society Picture Library/PA 

“She became wrapped up in all the nostalgia around the age of steam and became famous among everybody,” says Bob Gwynne. “Flying Scotsman is the one name that everybody knows.”

For the momentous occasion of her first run back to London she will be repainted in her iconic BR Green livery. Ian Hewitt, a former RAF jet pilot, who became involved with heritage trains after succumbing to a serious back injury during training, is the man wielding the brush.

 The Flying Scotsman at Derby in 1973 

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“This thing is massive,” he says. “When you are standing on the platform you only see half of it. It is difficult to grasp the full scale of how imposing she is. We are used to working on big engines but this is just a different scale. I will be so proud when I see her out there.”

Of course, that all depends on how the final few weeks of work turn out. Not many at Riley and Sons are planning much of a Christmas holiday. Someone will even be here on December 25 itself, firing up the coal heaters that keep the warehouse warm.

It is by one of these heaters where Stuart Jackson, a 23-year-old apprentice from Bury stands, contemplating the hulk of the locomotive to which he has devoted years of his life.

“A lot of it has been quite mind-boggling to be honest,” he says. “It is such a major job that you think to yourself, ‘basically I can’t mess this up’.”

Far away from the railway yards of East Lancashire, a nation waits for the return of one of its greats.

Norfolk Southern Ends 21st Century Steam Program Norfolk Southern has announced that its 21st Century Steam program has ended, according to the Roanoke Times.

“We’ve fulfilled the program’s goals, and we are scaling back now” Norfolk Southern public relations director Susan Terpay wrote in an email.

According to the articles, Norfolk Southern will not operate any excursions with the Tennessee Valley Railroad Museum (Southern 630 and Southern 4501) or the Fort Wayne Railroad Historical Society (Nickel Plate 765) in 2016. TVRM’s Southern 630 pulled the first 21st Century Steam trips in 2011, and NKP 765 joined the program in 2012. The Virginia Museum of Transportation restored and operated Norfolk & Western 611, which made its maiden runs for 21st Century Steam/ excursions in 2015.

Norfolk Southern, however, did provide some hope for possible operations of 611 on its rails. “We have advised our third partner, the Virginia Museum of Transportation, that we will work with them, if they can meet financial and operational requirements, so that they can run 611 in Virginia and the Carolinas in 2016,” said Terpay.

21st Century Steam was begun by former Norfolk Southern CEO Wick Moorman, who recently retired. The railroad is also the target of a takeover by Canadian Pacific. Hunter Harrison, Canadian Pacific’s CEO, is well-known for his disdain of steam.

Amtrak Activates PTC Along NEC Written by Mischa Wanek-Libman

Tuesday, December 22, 2015

Amtrak activated the final stretch of Positive Train Control (PTC) along the Northeast Corridor (NEC) on Dec. 18. The technology is now active on all Amtrak-owned track between Washington, D.C., and Boston.

PTC on the Philadelphia to New York segment was activated during the weekend of Dec. 18-20 and between Washington, D.C. to New York City the previous weekend, according to USA Today.

In the January/February 2015 edition of Ink, Amtrak's employee magazine, the passenger carrier detailed the work to install its Advanced Civil Speed Enforcement System (ACSES), a component of Amtrak's PTC system.

"We are trying to be the leader in passenger rail safety," Mid-Atlantic Division PTC Engineer David James said in the article. "We will implement PTC over the NEC; then we will analyze, renew and start looking at the next evolution of PTC."

The only hole in the system is along a Metro-North-owned stretch north of New York City. However, Amtrak and Metro-North are committed to closing that gap in the PTC system.

NS Says "No" for the Third Time; CP "Will Review Strategic Alternatives" Written by Carolina Worrell

Wednesday, December 23, 2015

Norfolk Southern on Dec. 23, 2015 rejected Canadian Pacific’s third and most recent proposal to acquire NS. CP on Dec. 16 offered $32.86 in cash, a fixed exchange ratio of 0.451 shares in a new company that would own Canadian Pacific and Norfolk Southern, and 0.451 of a Contingent Value Right.

NS’s board, employing (as expected) essentially the same language it has used to turn down CP’s first and second offers, called CP’s third try “grossly inadequate,” creating “substantial regulatory risks and uncertainties that are highly unlikely to be overcome,” and “not in the best interest of the company and its shareholders.”

Following is the text of the letter that was sent on Dec. 23 from NS Chairman and CEO Jim Squires and Lead Director Steven Leer to CP’s CEO E. Hunter Harrison, and its Chairman of the Board, Andrew F. Reardon:

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“The board of directors of Norfolk Southern has carefully reviewed your latest revised proposal, which you publicly disclosed on December 16, but have not otherwise communicated to us. That review was conducted with the assistance of our independent financial, legal and regulatory advisors. In its review, the board noted that the only change from your prior proposal was to include a Contingent Value Right (CVR).

“The board of Norfolk Southern has unanimously determined that your latest revised proposal is grossly inadequate, creates substantial regulatory risks and uncertainties that are highly unlikely to be overcome, and is not in the best interest of the Company and its shareholders. This would be the case even if the CVR had a value at the high end of the range suggested in your publicly filed presentation. In fact, our financial advisors believe that the CVR would trade at a significant discount.

“In addition, you have not addressed the significant regulatory issues that we have previously identified. We do not believe that your voting trust structure would be approved. As you know, our view reflects careful analysis by our regulatory experts and is fully supported by two former Surface Transportation Board (“STB”) Commissioners. You have a path to seek a declaratory order from the STB as to whether the voting trust structure that you proposed could work. The STB has clear, statutorily-established authority to issue declaratory orders to remove uncertainty, and there is precedent for it in the voting trust context. No involvement by Norfolk Southern is required for you to seek a declaratory order regarding the legality of putting Canadian Pacific into a voting trust under your proposed structure. Your decision not to seek an order shows a lack of confidence in your proposed structure.

“You continue to publicly declare that we are not “engaging” or “meeting” with you. There is no basis to meet until you both make a compelling offer and address the regulatory issues, which you have the ability to do by seeking a declaratory order. We also note your repeated public statements that you are not willing to increase your offer regardless of whether we were to meet.

“The Norfolk Southern board of directors is focused on protecting the interests of our shareholders. It would be inconsistent with the duties of the board to pursue a risky and uncertain offer that substantially undervalues the Company. Accordingly, the board of directors has unanimously rejected your latest revised proposal.”

CP issued a brief statement in response:

“Canadian Pacific is disappointed that Norfolk Southern Corp. has rejected without engaging in a dialogue CP's enhanced offer of Dec. 16 to create a truly transcontinental railroad to better serve customers and the economy. CP remains confident that a CP-NS combination would secure regulatory approval as a seamless coast-to-coast single-haul service benefits shippers, the industry and the public, and would generate tremendous shareholder value. It is apparent that neither the executive leadership at NS nor its board of directors are willing to sit down in an open and constructive dialogue about this transformational opportunity and that the interests of the NS board are not aligned with the best interests of NS shareholders. Therefore CP will review its strategic alternatives.”

BNSF Moves Cargo from One of the World’s Largest Container Ships Written by Mischa Wanek-Libman

Monday, December 28, 2015

It will take 10 trains to move BNSF's portion of cargo from one of the world's largest container ships. Port of Los Angeles

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The largest container ship ever to call at a North American port, CMA CGM Benjamin Franklin, arrived at the Port of Los Angeles on Saturday, December 26.

The CMA CGM Benjamin Franklin, a brand new 18,000-Twenty-Foot Equivalent Unit (TEU) container ship, is the largest container ship ever to visit a U.S. port. TEU is a term used to indicate a ship's cargo capacity. It refers to a 20'x8'x8' cargo container. The longer 40'x8'x8' cargo container equals two TEUs.

BNSF was ready with a train to transport many of the ship's containers inland.

BNSF said it will take 10 of its trains to move its share of the cargo, more than 2,500 containers, to inland intermodal facilities located in Chicago, Dallas, Houston, Kansas City and Memphis. From there the containers will continue by truck to their destinations.

The ship is among the largest in the French shipping line CMA CGM's fleet and is about a third larger than the biggest container ships that currently call at the San Pedro Bay Port Complex at the Port of Los Angeles. The ship will depart from the Port of Los Angeles on Wednesday, December 30, for the Port of Oakland.

CSX Train Hits Camper in Bushnell

 A CSX train hit a camper in Bushnell Wednesday, closing three major roads. (Sumter County Fire and EMS) 

BUSHNELL -- No one was hurt when a CSX train ploughed into a camper in Sumter County Wednesday (12/30). Sumter county Fire and EMS says the initial impact happened around 2:25 p.m. in Bushnell. The train came to a stop near Noble Avenue.

Florida Highway Patrol said the camper was a fifth wheel travel camper being towed by a 2015 Ford F-350. The camper had stopped on the tracks when the truck towing it stopped behind another vehicle.

The driver of the truck was cited for stopping on a railroad crossing.

Sumter County Fire and EMS says the following roads were closed at the railroad crossings because of the accident: Seminole Avenue, Central Avenue and U.S. 301.

Because of this, traffic was heavier around town while crews cleared away the scene.

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NS 4000-4001

Two more NS units to be on the lookout for when out and about. Apparently the special treatment is to designate the first two units to go through their DC to AC conversion program, and this is a company portrait outside the shop at Chattanooga.