Norfolk Southern Railway’s proposed purchase of 282 miles of track in Pennsylvania and New York could allow the railroad to make much-needed improvements to its intermodal service.
NS yesterday announced its plan to buy the portion of the Delaware & Hudson Railway Co. line running between Sunbury, Pennsylvania, and Schenectady, New York, from Canadian Pacific Railway for $217 million. The deal is dependent on approval from the Surface Transportation Board, the U.S. regulatory agency.
“Acquiring this portion of the D&H provides for more efficient rail transportation system by consolidating freight operations with a single carrier,” NS CEO Wick Moorman said in a statement. “Aligning the D&H track with Norfolk Southern’s 22-state network allows us to connect businesses in central Pennsylvania, Upstate New York and New England with domestic and international markets while enhancing the region’s competitive rail and surface transportation market.”
While NS already has trackage rights to the line, its ownership would likely lead to better intermodal network fluidity on its single-line routes from the Northeast to Chicago and the Southeast. The deal would also leverage the railroad’s enhancements to its intermodal terminal in Mechanicville, New York, which connects with the D&H line. The acquisition would improve the railroad’s connection to its joint venture subsidiary Pan Am Southern, which connects NS to the New England market, NS said in a release.
NS would keep and get to modify its trackage rights for the part of the D&H line connecting Schenectady and Mechanicville. Under the proposed deal, NS would acquire D&H’s car shop in Binghamton, New York, along with the CP subsidiary’s other facilities on the 282-mile line. D&H would keep its access to Schenectady and Buffalo shippers.
The deal benefits CP by allowing the Calgary-based railroad to offload an unprofitable line. Since take over the railroad in 2012, CEO E. Hunter Harrison has pared down the company’s rail network to focus on profitable routes. For example, in January, CP agreed to sell part of its Dakota, Minnesota & Eastern Railroad to Genesee & Wyoming, a major operator of rail short and regional lines.
The D&H deal timeline sets up the duo to get a greenlight from the STB in the second quarter. In the meantime, NS is working to restore intermodal service to mid-2013 levels by adding train crews, deploying more locomotives and rerouting some loaded and empty trains away from Chicago, a major freight bottleneck. The completion this year of a series of capital projects, including a $160 million expansion of its classification yard in Bellevue, Ohio, will also help the railroad restore network fluidity, NS told customers yesterday. The company expects rail service will return to historic levels by the end of June.
“The acceleration of resource additions, coupled with the annual decline in volumes after Thanksgiving, should provide incremental improvement in train performance and terminal fluidity,” NS said.
Average NS intermodal train speeds, a metric of rail performance, have improved steadily over the last four reported weeks, with the average train moving 24.7 miles per hour in the week ending Nov. 7. But the average NS train speeds in that week were still down 15 percent from a year ago, according to metrics reported to the Association of American Railroads. NS leds the Class I railroad industry in improving its average intermodal train speeds by improving 0.5 mph from the week before, as the broader Class I rail industry, excluding CP, saw train speeds slip on average 0.3 mph in the same period to 28.3 mph, according to Larry Gross, a senior consultant at FTR Associates. Average Class I intermodal train speeds in the week ending Nov. 7 were down 8.2 percent year-over-year.