Port to distribution center, by rail

Port to distribution center, by rail

Tony Minyon is intrigued by the idea - a rail shuttle from the Port of Oakland to distribution centers in California's lower Central Valley near Bakersfield. But Minyon, national logistics manager at Toyota Motor Sales U.S.A., doesn't see it as a fit for his company.

"I bring everything in through L.A.-Long Beach," Minyon said. "I use five lines with five different day-of-the-week arrivals," he said. Oakland cannot offer a comparable schedule.

Minyon is likewise curious about the Alameda Corridor Transportation Authority's proposed rail shuttle from Los Angeles-Long Beach to Ontario, Calif., in California's Inland Empire region, where Toyota's Southern California distribution center is located. But there, too, he sees drawbacks.

The 50-mile rail trip, followed by a truck haul to Toyota's distribution center, would cost more and take longer than a straight truck trip from the harbor to the distribution center. "I have a great dray from L.A. to the Inland Empire. I don't know how they could touch that," Minyon said.

Port authorities and transportation agencies on the West and East coasts are studying at least a half-dozen proposals for short-haul rail services to burgeoning inland distribution hubs. The Port Authority of New York and New Jersey is analyzing the feasibility of shuttles to central New Jersey and Pittsburgh. Savannah is considering a shuttle to Atlanta. But Toyota's reaction typifies the hurdles that these projects face. "Cost, lead time, consistency - those are the challenges," Minyon said.

Although most of the proposed short-haul rail services would cost more for shippers than what they now pay for trucking, ports are under political pressure to shift truck traffic to rail to reduce traffic congestion and air pollution.

Local government agencies are considering subsidies for rail shuttles, which would divert hundreds of truck trips to rail each day. In some cases, elected officials are considering a per-container fee on all truck moves from the harbor. Containers that move by rail would be exempt from the fee.

If the fee were as high as $100 per container, which is the approximate cost differential between short-haul rail and trucking, importers and exporters could be forced to serve their distribution facilities by short-haul rail.

However, some independent rail operators believe they can run a shuttle service to and from busy container ports with little or no subsidy required. NW Container Services in Seattle has been operating short-haul rail services between Portland, Ore., and Seattle-Tacoma, and from Pasco, in eastern Washington, to the ports, since 1985.

NW Container Services owns the double-stack railcars and some of the rail-transfer facilities. Its Pacific Northwest operations move more than 60,000 containers a year to and from Seattle-Tacoma by hooking the railcars onto the scheduled long-haul trains operated by the Union Pacific and Burlington Northern Santa Fe railroads.

The large western railroads wouldn't offer such a service on their own. "Short-haul is not part of their business model," said Art Scheunemann, senior vice president of business development at NW Container Services.

NW Container Services, which is interested in being the operator of the rail shuttles proposed for California, said its Pacific Northwest operation earns a profit without subsidies. "We've been in business for 20 years. We've made good money every year," Scheunemann said.

NW Container Services runs a "hook and haul" service. It arranges the trucking of the containers to its intermodal yards and lifts the containers on to the railcars. The line-haul rail carriers stop their regularly scheduled trains at NW Container Services' yards, hook the pre-loaded railcars to their trains and move them to Seattle-Tacoma. NW Container Services is usually able to get two-way hauls, which help to make its services profitable.

A similar strategy is planned for the Northern California shuttle. The city of Shafter, near Bakersfield, wants to develop the California Integrated Logistics Center, a hub for distribution warehouses. The lower San Joaquin Valley is already a hub of distribution centers for retailers such as Target Corp., Sears Roebuck, IKEA and Wal-Mart Stores.

The Shafter proposal calls for a short-haul operator such as NW Container Services using its own railcars in a hook-and-haul service from the Port of Oakland to the Shafter hub almost 300 miles away. The service would move inbound containers, mostly imported consumer goods from Asia, to Shafter. The marine containers would be unloaded at the distribution centers and then re-loaded with agricultural exports from the fertile San Joaquin Valley, generating a two-way haul.

Though Shafter is only about 100 miles north of Los Angeles-Long Beach, it is teaming up with the Port of Oakland rather than the Southern California ports. Project directors say inland service from Oakland would be cheaper and at least as fast as from the Southern California ports because of the congestion in the Los Angeles area.

The Shafter promoters are marketing their plan through the use of Southern California Association of Government statistics highlighting the congestion in the region. The figures cite the 40,000 truck trips per day on Interstate 710 in Los Angeles-Long Beach, increasing to 97,000 by 2020; 112 freight trains per day from the harbor, increasing to 165 by 2010, and proposed legislation in Sacramento that would cap emissions from the ports at current levels.

The Shafter promoters also warn shippers that they are becoming too dependent upon Los Angeles-Long Beach as their gateway for Asian cargo, with 78 percent of West Coast imports moving through the Southern California port complex.

Brent Green, business development director for Shafter, said the city has land set aside for the project with all of the necessary zoning and environmental clearances. Land leases and labor costs are affordable, especially compared to the Los Angeles area, Green said. "Shafter is doable and now," he said.

During the past year, the Port of Oakland has been engaged in serious discussions with shippers, ocean carriers, railroads and short-haul rail operators, said Steve Gregory, senior strategic planner. "It is definitely a live project," he said.

The challenge, Gregory said, is to persuade more shipping lines to run inbound services through Oakland as their first call from Asia. The vast majority of Pacific-Southwest services call at Los Angeles-Long Beach first, giving the Southern California ports a time advantage and critical mass of services needed to support distribution hubs. However, Oakland is actually a day closer to Asia by water if the carriers would re-route some services to call there first.

Transportation consultant Don Breazeale said the Shafter plan has all of the elements for success except regular first-call inbound services from Asia. "You can't support a distribution center operation on irregular service," Breazeale said.

The proposed Alameda Corridor Transportation Authority's shuttle from Los Angeles-Long Beach to the Inland Empire has numerous first-call services from Asia and 360 million square feet of distribution space in the Inland Empire in its favor. The Alameda authority has canvassed terminal operators, more than 100 shippers and ocean carriers about a pilot project to be started later this year.

"There seems to be a willingness," said John Doherty, the authority's chief executive. The UP and BNSF railroads, however, have not been so enthusiastic. "We're about to get serious with the railroads."

The Class 1 rail carriers say they don't make money on short-haul services so they'd need a subsidy. The Alameda authority's figures show that moving a container to Ontario by rail shuttle would cost about $100 more than by truck. Furthermore, the transportation community has serious concerns about the governance of a shuttle and the collection of its fees.

Railroads see other options as more viable. BNSF, for example, is negotiating with the ports for development of a near-dock container transfer yard similar to UP's Intermodal Container Transfer Facility 4.4 miles from the harbor. Lena Kent, a BNSF spokeswoman, said the near-dock facility would take 1 million containers a year off Southern California highways.

Except for the Pacific Northwest model, rail shuttles appear to require a subsidy, at least initially, or a reverse incentive, such as a per-container fee on harbor trucking, to generate enough interest from shippers, ocean carriers and railroads. While most parties would support a limited pilot project in South-ern California, a permanent high-volume rail shuttle would require a huge capital investment in new tracks, equipment and rail facilities because the railroads are already operating at close to capacity.

Breazeale, however, believes a combination of political, environmental and logistical pressures will force the initiation of rail shuttles, and that it could happen relatively soon. "Anything to decongest the ports," he said.