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— by Jeff Stagl, Managing Editor
A lot has changed at the Cedar Rapids and Iowa City Railway Co. (CRANDIC) over the past 110 years. The railroad launched freight and passenger service on Aug. 13, 1904, as the Iowa Railway & Light Co., then added an intercity bus line in 1929, discontinued passenger service and introduced all-freight service in 1953, acquired a Milwaukee Road line in 1980, relocated its shops in 1996, established a new main route in 2001 and recovered from heavy flood damage in 2008.
And more changes are taking shape at the short line, which is owned by Alliant Energy Corp. and operates 100 miles of track in four east-central Iowa counties, including a 60-mile mainline between Cedar Rapids, Iowa City and Hills. CRANDIC recently launched a wheel-cutting business at its locomotive shop and took delivery of several rebuilt locomotives. In addition, the railroad's managers are exploring the possibility of pursuing industrial development opportunities involving large-scale plants and soon resuming transload services.
Continuing to transform the railroad is vital to generating business growth and attracting more customers, says CRANDIC President and General Manager Kevin Burke. The short line's managers also hope the latest changes help the railroad prosper for a long time — perhaps another 100 years and beyond.
When Burke joined the railroad in 1981 as a clerk and yard manager, annual carloads totaled about 20,000; now, they exceed 100,000, he says. Staying in tune with CRANDIC's traditional commodity mix — namely corn and coal — while finding ways to handle other products and offer more services has helped quintuple traffic.
Corn and coal account for 25 percent and 20 percent of annual carloads, respectively, including outbound shipments of corn gluten meal, corn syrup, dried distillers grains (DDGs) and ethanol. Those sectors likely will continue to drive traffic, especially since CRANDIC is located in an agricultural state and close to Powder River Basin and southern Illinois coal mines, says Marketing and Business Development Manager Jeff Woods.
Yet, CRANDIC managers believe the railroad can work with local constituents to develop more greenfield sites along rights of way that would help build business beyond the two key commodities. Industrial sites that offer all necessary utilities and rail access are in limited supply in the area, says Woods.
“We think we could attract a large-scale manufacturing or processing plant,” he says.
CRANDIC needs to “stay ahead of economic development” as a way to guard against a potential loss of coal traffic or a weak grain harvest, adds Burke.
“We can gain an edge in getting new customers,” he says.
Over the past few decades, CRANDIC has attracted several large shippers, including Archer Daniels Midland Co. (ADM), Cargill Inc., International Paper Co. and Penford Products
Co. One of the short line's largest customers is its owner, Alliant Energy, which provides electric and natural gas services to about 1.4 million consumers in Iowa, Minnesota and Wisconsin. CRANDIC delivers coal to Alliant Energy's power plant in Cedar Rapids.
ADM has been a major customer since 1968, says Woods. The short line reached an agreement on rates and service with the shipper 12 years ago, and in 2010, ADM opened a $1 billion ethanol plant in Cedar Rapids, he says. CRANDIC delivers corn to the large plant.
For years, Weyerhaeuser also was a key customer. In 1994, the company opened the world's largest cardboard recycling facility in Cedar Rapids, says Woods, adding that the plant was a good geographic fit for the company at the time.
Now, the plant is a paper facility operated by key customer International Paper. CRANDIC moves outbound pulpboard from the facility that's transported to box plants around the country, says Woods. Since the facility's truck traffic is heavy on weekdays and light on weekends and holidays, the short line works with International Paper to coordinate the mode needed at any given time.
“We can provide the specific service they need, to go from using trucks for several hours to rail for several hours,” says Woods.
In addition to developing business with shippers, CRANDIC has tried to build traffic with its fellow regionals and short lines in Iowa. Two years ago, CRANDIC managers forged an agreement with Iowa Northern Railway Co. and Iowa Interstate Railroad Ltd. officials to move DDGs and ethanol from east-central Iowa to Chicago or points south. The moves serve as a “bypass per se,” enabling the three railroads to “get around the Class Is” in the region, says Woods. CRANDIC interchanges with CN and Union Pacific Railroad in addition to the two regionals.
The efforts to generate traffic both with shippers and other railroads likely will continue paying off this year, Woods believes.
“I think we will hit 100,000 carloads again in 2015,” he says.
In addition to building more volume, CRANDIC is trying to generate more revenue from non-traditional sources. A return to transload services could help in that regard, says Woods. The short line previously offered transloading at a Cedar Rapids facility, but managers received an offer they “couldn't refuse” and sold the facility in 2003, he says.
“We want to get back into transloading and establish a facility in Cedar Rapids,” says Woods. “We think the timing is right with the Class I service issues and the truck industry issues. We have two sister companies that have transload facilities, but one is 75 miles away and one is 125 miles away.”
Another non-traditional service for a short line — wheel cutting — could be a revenue generator much sooner than transloading. CRANDIC in November completed the installation of a wheel-truing lathe at its locomotive shop in Cedar Rapids. The short line also expanded the shop, which should be able to handle wheel-cutting services for one six-axle locomotive in an eight-hour period, says Woods. Other railroads already are showing interest in the service.
“There is a lack of shops in the area that can true wheels,” says Woods. “We previously did some smaller-scale truing on our own fleet.”
In addition to cutting locomotive wheels, CRANDIC is trying to cut its teeth on a newly designed locomotive fleet. About three years ago, the short line began to design its own MP1500 locomotives through an effort to standardize motive power, and improve crew comfort and safety. The railroad developed the 1500 XD (extreme duty) unit with RELCO Locomotives Inc., which is rebuilding the MP1500 locomotives at its Albia, Iowa, plant.
“We wanted to improve the cabs, make them more efficient and get better fuel economy,” says Burke. “The newest models we have were built in the 1950s.”
The 1500 XDs are customized for weight, ballast and tractive control, and offer increased electric capacity and microprocessors. The locomotives are the first of their kind in the rail industry, says Burke.
Essentially built from the ground up, the units feature dozens of upgrades that are ideal for CRANDIC's switching-based operations. For example, the locomotive's generator has twice the electrical output of the previous DC fleet, boosting pulling power at lower throttle speeds. In addition, larger windows and an onboard camera will improve engineers' line-of-site.
CRANDIC plans to rebuild eight locomotives, which will be paired with new slugs. As of late 2014, the short line had taken delivery of four units and slugs. The remainder are slated for delivery by mid-2015.
“The eight locomotives will take us out another 10 to 20 years,” says Burke.
CRANDIC also has focused on infrastructure improvements the past several years to ensure the short line can accommodate traffic demand well into the future. Over the past six years, the railroad has spent about $50 million to upgrade its mainline and several bridges, says Burke.
For example, the short line in 2009 completed a new $9 million Cedar River Bridge that replaced a bridge built in 1903 that was destroyed by floodwaters in 2008. In addition, CRANDIC from 2008 to 2012 completed upgrades on the Amana line acquired from the Milwaukee Road in 1980, including the replacement of nine bridges and installation of 17 miles of continuous-welded rail.
Zero-interest loans from the Iowa Department of Transportation have helped fund some of the work. Now, the railroad is better positioned to accommodate 286,000-pound rail cars, says Burke.
“All of our track is 286k-compliant or better,” he says.
The challenge going forward: to use the bolstered infrastructure, new services and locomotives, and industrial-development approach to continue building business. Staying ahead of the industrial development curve and deciphering how to better serve shippers should help in that regard, Burke believes.
“We're trying to reach out to customers and learn what they need,” he says.