What steps would need to be taken to start a shortline on an abondoned line with a potential customer base?
Get customer to commit to enough volume to make investment worthwhile.
Find investor to bankroll your dream. Then do whatever is necessary to rehab the line to an acceptable service level. Then you have a railroad if you have a locomotive and interchange agreements with whatever connecting Class I’s you will interchange with…don’t forget to check with the FRA on all the operating reqirements and the SEC for all the financing requirements. Don’t expect to get rich.
On an abandoned line? First you’d have to get permission to rebuild the line, unless it has been railbanked.
Next, you’d have to get a few industries to start out with. It’s no use rehabilitating an old rail line if no one will ship on it.
Then you’ll have to rehabilitate the track so that your trains can run on it safely.
Next, you’ll need a locomotive or two to start operations. If it’s an older unit you’ll probably want a junked on that can be salvaged for parts that aren’t available otherwise.
Finally, you’ll need some train crews, who may double as MOW employees, a railroad agent (sometimes the line’s president) and all that.
There’s probably a lot of steps I’ve missed, but that’s a start.
Aside from the measures mentioned in the previous postings, you would have to get regulatory permission from STB to resume operations (or reconstruct) an abandoned line. One would think that would be a cakewalk but, in the current climate of NIMBY’s objecting to anything, that can’t be assured.
Aside from that consideration, however, I would be VERY cautious about trying to resume service on an abandoned line. Contrary to popular belief, most Class I railroads these days aren’t particularly aggressive about abandoning lines. They won’t do so unless they determine that (i) the line is unprofitable, (ii) there is no reasonable potential for the line to become profitable, and (iii) the line has no strategic value. In other words, the reason the railroad abandoned the line because it determined that the line was hopeless. The fact that the abandoning railroad has made this determination should be a great big red flag for anyone thinking about resuming service. That’s particularly so if resuming service would require reconstruction. Further, don’t assume that, as a short line, you would be able to operate substantially cheaper than the former railroad. Twenty years ago, short lines had a significant cost advantage over Class I roads. While short lines still have some cost advantages, they are not nearly as significant as they once were, and they can be offset by additional costs of operating a stand alone railroad. And don’t be fooled by shippers who say they will ship vast volumes of traffic if the line were reopened. Ask hard questions about why they weren’t shipping before the line was abandoned. Better yet, get them to sign “take or pay” contracts, where they commit to ship the traffic they are promising, or pay if they don’t. If they won’t make such a commitment, alarm bells should ring all over the place, and you’d be well advised to put your money into a
Mr. Smith -
Assuming you have an actual prospect, there are a number of important steps to take. Many of the other respondents have given you some portions of the list and yet each is missing several important points. I would suggest that as a start you conduct some basic research on the subject. Start by reading the publication entitled “So, You Want to Start a Small Railroad” available free from the Surface Transportation Board website under the publications link at www.stb.gov. Review the information on short lines on the website of the American Short Line and Regional Railroad Association (ASLRRA) www.aslrra.org.
Also, I’d make sure you have a complete understanding of all the laws and regulations covering short lines these days and there are many. Have access to persons with knowledge in each of the critical areas to a short line, including, at a minimum, management, marketing, finance, engineering (including track, bridge and building), operations (T&E, dispatching, car accounting, etc), mechanical, and communication and signal. You should have most of this knowledge base on your team. Acquiring it outside your company can be very expensive.
Locate excellent advisors who have done this before at a minimum an attorney, accountant (CPA) and consulting engineer all with short line experience should be available to you. The attorney should have railroad organizing experience, STB experience, RRB experience and FELA experience. The accountant needs to be familiar with RRB requirements as well as the Tax Code provisions pertaining to railroads and railroad rolling stock.
Never believe customer projections. Especially those who aren’t now customers.
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Mr. Smith -
Assuming you have an actual prospect, there are a number of important steps to take. Many of the other respondents have given you some portions of the list and yet each is missing several important points. I would suggest that as a start you conduct some basic research on the subject. Start by reading the publication entitled “So, You Want to Start a Small Railroad” available free from the Surface Transportation Board website under the publications link at www.stb.gov. Review the information on short lines on the website of the American Short Line and Regional Railroad Association (ASLRRA) www.aslrra.org.
Also, I’d make sure you have a complete understanding of all the laws and regulations covering short lines these days and there are many. Have access to persons with knowledge in each of the critical areas to a short line, including, at a minimum, management, marketing, finance, engineering (including track, bridge and building), operations (T&E, dispatching, car accounting, etc), mechanical, and commiunication and signal. You should have most of this knowledge base on your team. Acquiring it outside your company can be very expensive.
Locate excellent advisors who have done this before at a minimum an attorney, accountant (CPA) and consulting engineer all with short line experience should be available to you. The attorney should have railroad organizing experience, STB experience, RRB experience and FELA experience. The accountant needs to be familiar with RRB requirements as well as the Tax Code provisions pertaining to railroads and railroad rolling stock.
Never believe customer projections. Especially those who aren’t now customers. Good luck getting any contract
Comment.Didn’t Trains do an a piece on short lines. The one comment I remember was “1 carload a day for each mile of track”
Rgds IGN
Actually Roy Blanchard’s much vaunted rule is 100 carloads per mile per year I believe. For any number of reasons I am not a big follower of such canned “Rules of Thumb”. There are far too many variables…
LC
I agree that “rules of thumb” like this aren’t very accurate. And 100 cars per mile per year seems a little high (the “1 carload per day per mile” criteria mentioned in one of the prior posts is even higher - 365 cars per mile per year). For comparison, the ICC once used a “34 cars per mile” rule to identify lines that were presumptively abandonable. Still, “rules of thumb” like this have value in sending up warning flags to people who think that a low volume line can be viable. That’s particularly so for a line that has actually been abandoned by the prior railroad. If the abandoning railroad determined that the line wasn’t viable, how realistic is it to suppose that a different operator will be able to profitably operate it? Most short lines haven’t been created from “abandoned” lines, and those that have usually haven’t fared very well. Short lines are more typically created from branch lines and secondary main lines which the incumbent railroads believe are marginal with their cost structures, but potentially viable in other hands.
One other thing. Most rail abandonments these days are made under an STB class exemption for lines that have handled no originating or terminating traffic in the last two years (these are the abandonments covered by the “Notices of Exemption” you see on the STB website). The prospects for a short line to successfully resurrect a line like this are pretty grim, unless the short line can come up with a major source of t