Pact with CSX would help the Louisville & Indiana Railroad better serve customers — and attract new ones

— by Kathy Bergstrom

The Louisville & Indiana Railroad Co. (LIRC) is on a reinvestment roll, upgrading locomotives and track, and making an array of service improvements. And if the Surface Transportation Board (STB) blesses a proposed agreement with CSX Transportation to upgrade LIRC track to accommodate 286,000-pound rail cars, the Jeffersonville, Ind.-based short line could be on a roll of a different sort.

In June, the LIRC and interchange partner CSX filed a request with the STB for approval of an easement and joint-use agreement under which the Class I would increase the number of trains it runs on the short line's track and invest an estimated $70 million to $90 million in infrastructure upgrades. As part of the agreement, the LIRC would sell an easement to CSX for $10 million.

The railroads, which have labeled the project "South Wind," hope to receive STB approval by year's end.

If approved, the agreement would provide CSX more capacity to improve service for its customers in the Indianapolis-Cincinnati-Louisville area.

And it would help the 106-mile LIRC better serve existing customers and attract new ones.

"Our customers that are on our line will start shipping cars at full capacity, and other shippers that had avoided us in the past because of our weight limits can now ship across us," says LIRC President Michael Stolzman, adding that some customers would be able to shave up to two days off current transit times. "It also makes it extremely attractive to potential customers along this central Indiana corridor that would not have ever considered relocating here because of the restrictions. It broadens our horizons for growth."

Louisville & Indiana's Roots

The growth potential traces back to LIRC's roots, which extend to two railroads: the Madison & Indianapolis Railroad, which started business in 1838; and the Jeffersonville Railroad, which began operating in 1850. The railroads merged in 1866 and later became part of the Pennsylvania Railroad. The Pennsylvania and New York Central railroads merged in 1968; and after the Penn Central's bankruptcy, the LIRC became part of Conrail in 1976. Anacostia Rail Holdings Inc. bought the Indianapolis-Louisville mainline in 1994 and formed the LIRC.

In the LIRC, the new owners saw potential.

"It was the only direct route between Indianapolis and Louisville," says Peter Gilbertson, president of Anacostia Rail Holdings, which owns five other short lines and a switching company.

The LIRC interchanges with two Class Is, CSX and Norfolk Southern Railway, and three short lines: the Indiana Rail Road Co., MG Rail Inc. and the Paducah & Louisville Railway. LIRC also serves the Port of Indiana-Jeffersonville, and has transload facilities in Franklin, Jeffersonville and Seymour, Ind.

"The location of the line in Indiana is very close to many important markets and attractive sites for future industrial development," Gilbertson says, noting that a number of automobile plants operate nearby in Indiana, Ohio and Kentucky.

Today, LIRC hauls a variety of commodities, including cement, chemicals, food products, grain lumber, manufactured goods, paper, plastics, scrap and steel.

The management team is headed by Stolzman, who was named president in fall 2012, replacing John Secor, who retired. Stolzman had been president of Anacostia's Pacific Harbor Line Inc. (PHL), and also serves as president of Anacostia's Gulf Coast Switching Co. L.L.C. Other new team members include Vice President John Goldman, a former CN superintendent; and Roadmaster James Connolly, who had been the PHL's manager of track maintenance. Both also signed on last fall.

The LIRC, which employs 40 people, registered 35,572 carloads last year; through June 2013, the railroad tallied about 25 percent more carloads than it did during the same 2012 period.

But to take another traffic-growth step, the LIRC needs to be able to handle 286,000-pound cars. To fund the necessary infrastructure work, the short line needed an investment partner.

In 2008, LIRC officials began talking with CSX officials about upgrading the Indianapolis-Louisville corridor. The Class I's mainline between Louisville and Cincinnati was nearing capacity, and the grades and curvature on the route constrained train lengths, tonnages and operating speeds. It wasn't practical to upgrade the route, CSX officials concluded. But upgrading the LIRC would be, they believed.

The project would provide the following benefits to both CSX and LIRC, officials from both roads say:

• Diverting trains from congested, less-efficient routes to the improved LIRC line would enable CSX to accommodate anticipated business growth and provide better service.
• LIRC customers would become more competitive and open to new markets because they'd be able to use 286k gross-weight cars, as well as double-stack and high-cube equipment that is 20 feet, two inches high.
• With an additional route between the north and east, and Louisville, CSX would gain the flexibility to improve car utilization and reduce fuel consumption.
• The Port of Indiana-Jeffersonville would obtain better rail access to markets north of the Ohio River, including routing options for grain and coal, western products via Chicago, and potash from Canada.
• Intermodal service to Louisville would benefit southern Indiana markets; services include imports and exports via East Coast ports, coordinated service and access to additional markets via CSX's Northwest Ohio intermodal facility.
• An increased ability to handle automotive traffic through Louisville.

Investing In Locomotive Power

For CSX, the key benefit is adding another link so some trains can bypass terminal congestion in Cincinnati, says CSX Director of Network Planning Larry Ratcliffe.

"We're giving ourselves a significant number of additional routing options for trains that run throughout our network," he adds.

LIRC, meanwhile, would be able to continue to serve all existing and future customers, including the Port of Indiana on the Ohio River and Camp Atterbury at Edinburgh, Ind.

The project could take up to seven years to complete, depending on business levels, LIRC and CSX officials say. Both roads had hoped to get the project going sooner, but the recession slowed progress, Gilbertson says. It didn't keep the LIRC from investing in other facets of the railroad — notably, locomotives.

LIRC is in the midst of refurbishing or replacing its 11-unit motive-power fleet. Work includes completely overhauling the power plants, adding new air compressors and new generators, and upgrading the traction-control systems.

The railroad has leased (with an option to purchase) four GP38-3 units from CIT Rail, which have been painted in the erstwhile Pennsylvania Railroad's Tuscan red heritage color scheme. Meanwhile, three GP38s and four GP39s owned by the LIRC either will be upgraded or replaced, and painted in Tuscan red.

The LIRC also has completed a lot of "housekeeping" work, says Stolzman. Work included cleaning up the right of way with brush cutters, and picking up debris and scrap rail. And signage has been standardized across the railroad, Stolzman says.

Customer service, too, has been a focal point — and customers have noticed.

"[The LIRC] is quick to act, and they're always accessible when you need somebody," says Gary Parker, fleet manager at the A&R Logistics rail yard in Jeffersonville. A&R provides bulk transportation, packaging and logistics services to the plastic resin industry. But the proposed South Wind venture is key to enabling the short line to step service levels up a notch, LIRC officials say.

The $70 million to $90 million in upgrades would include installing newer and heavier continuous welded rail, improving roadbeds with fresh crushed ballast, adding passing sidings as necessary to increase track capacity, upgrading bridges and replacing one bridge in Columbus, Ind.

LIRC's track also would be upgraded to Federal Railroad Administration Class 4, permitting train speeds up to 49 mph, compared with the current 20 mph to 25 mph speed limit.

The Significance Of South Wind

For some LIRC customers, upgrading track to accommodate 286k cars is crucial. In July, Kokomo Grain Co. Inc. officials wrote a letter of support for the South Wind project to the STB, stating the LIRC-CSX partnership would "not only help to assure that the Louisville & Indianapolis will continue to serve us and other businesses, but do so more efficiently and safer."

The letter described the LIRC as a lifeline for Kokomo Grain, which owns 10 grain elevators, including the one in Edinburgh that's served by the LIRC.

Using rail service instead of trucks reduces the company's transportation costs and helps it compete in more markets, officials wrote. And LIRC's service to date has exceeded Kokomo Grain's expectations, says Brad Ortman, the company's vice president of operations.

"They'll just do about anything we ask them to do help us out," he adds.

For example, LIRC recently brought rail cars to the grain company about four days faster than Ortman had expected. "They bring cars all hours of the night, whatever we need," he says. "The service is really good."

The agreement with CSX will make it even better, Stolzman says. Ortman, for one, is looking forward to seeing the partners' pact come to fruition.

"This new [LIRC] management team is really going unbelievably fast to make all this happen," he says.

For LIRC officials and customers alike, December, or when the STB is expected to weigh in on the deal, can't come soon enough.

Kathy Bergstrom is a Milwaukee-based freelance writer. Email comments or questions to prograil@tradepress.com.