A highly-anticipated project to raise the 121-year-old Howard Street Tunnel, enabling CSX Transportation to run double-stacked trains, collapsed Wednesday after the railroad said it would no longer provide about one-third of the $425 million project budget.
The Maryland Department of Transportation (MDOT) informed the federal government that it would no longer be applying for the funds for the project — which port officials have said is key to the port’s future expansion — because CSX had informed the state “they will not be moving forward with the project.”
The abrupt halt of the tunnel upgrade is a major blow for the port, which was banking on improved rail service to help continue its recent rapid growth. Officials hoped that the tunnel, along with the port’s 50-foot port depth and fast rail links to the Midwest, would help the port compete for East Coast containerized cargo in the big ship era.
CSX’s withdrawal comes as the railroad is discontinuing hundreds of domestic intermodal services and destination pairs in an overhaul to build cargo density. The intermodal network overhaul is part of a broad sweep of changes under the leadership of CSX CEO E. Hunter Harrison, which he calls a “precision railroading” strategy.
“Since March CSX has been adopting a new, and significantly different, operating plan called Precision Scheduled Railroading," CSX said in a statement to JOC.com. "The overall objective of this new operating plan is to drive better performance, which results in a superior service product for our customers and safer, more efficient operations."
The railroad’s decision not to raise the Howard Street Tunnel appeared to leave Maryland Transportation Authorities with no room to maneuver. The railroad had agreed to contribute $125 million to the project.
"Given the operating changes that CSX’s new leadership team has made over the last several months, and upon an updated evaluation, we determined that the Howard Street Tunnel project proposal no longer justifies the level of investment required from CSX and our public partners at this time," CSX said.
Currently, westbound trains can only be single-stacked because of the height limitations of the 121-year-old, 1.7-mile long tunnel. To change that, the port planned to elevate some parts of the tunnel and lower others, enabling double-stacked trains to pass through.
Double stacking trains is more efficient than single stacking trains and increases the capacity and the economies of scale of each train. The port hoped that the ability to double-stack would enable CSX to offer more competitive rates.
“Ultimately, as the project is to improve CSX infrastructure, Maryland cannot pursue the project without the support of CSX,” Pete K. Rahn, secretary of Maryland, wrote in a letter dated Wednesday to US Transportation Secretary Elaine Chao.
Maryland applied for $155 million under the Department of Transportation’s FASTLANE, or Fostering Advancements in Shipping and Transportation, program in 2016, but was not selected for funding in the face of stiff competition from other projects around the United States. The state reapplied earlier this year, and planned to apply again under the Infrastructure For Rebuilding America (INFRA) program, which succeeded FASTLANE. Maryland, led by Governor Larry Hogan, would have contributed the remaining $145 million.
CSX decided not to move ahead with it as a result of a “business decision,” according to the letter to Chao, which the state department provided to JOC.com.
“While the project meets all four merit criteria for the INFRA grant program and the Hogan Administration enthusiastically supports it, CSX has informed MDOT that they will not be moving forward with the project,” Rahn wrote. “As you can imagine, this decision by CSX was both surprising and incredibly troubling, especially considering the countless hours and energy that have been expended by the Hogan Administration on this effort.”
The letter said that the state would work with CSX to “explore other options to improve the flow of freight in and out” of the port.
MDOT and the Port of Baltimore declined to comment, saying the letter spoke for itself.
James J. White, executive director of the Maryland Port Administration, told JOC.com earlier this year that moving beyond single-stacked trains was key to the port’s rail future because such trains underpin the cost structure of rail out of the port, keeping costs higher.
Port officials said completion of the tunnel could boost the port’s rail cargo from just more than 30,000 containers per year to more than 110,000. They depicted it as the centerpiece of a long-term cargo volume expansion plan that would play out over the next 30 years.
Laden container traffic through the port rose 6.5 percent to 464,572 TEU, in the first eight months of the year, according to PIERS, a sister product of JOC.com. Imports from Asia, for which strong intermodal connections are a major draw, grew 7.3 percent to 149,532 over the same period of time.
“The way it works right now with double stack, New York has it, Virginia has it. Maryland doesn’t,” White said. “And the railroads only have to commit half the capital assets to handle the same amount of volume. Here, we need twice as many rail cars as in New York or Norfolk because they can double stack; we can’t.”
“So the railroads look at it, and say, ‘If I am putting more capital assets in there somebody has to pay for it!’ Their rates in Baltimore are higher than those ports that have double-stack capability,” White said. “So if we have the Howard Street Tunnel cleared to handle double stack, we would become much more competitive than we are today, because the railroads could price it more competitively.”