As diesel costs rise, railroads turn to technology, training and procurement strategies to reduce fuel consumption

by Angela Cotey, Associate Editor

It's hard to predict where fuel prices will stand next month or next year. But one thing is certain: Costs are only going up, and with every penny that gas prices increase, transportation expenses rise accordingly. For North American railroads, fuel costs are one of their largest expenses, second only to labor.

During the past five years, Norfolk Southern Railway's fuel expenses have almost doubled, while CSX Transportation's have skyrocketed 80 percent since 2009. And at Kansas City Southern, locomotive fuel costs have risen 77 percent during the past two years.

To keep costs in check, rail officials are implementing or testing technology, purchasing more fuel-efficient locomotives, launching training and incentive programs, and taking a smarter approach to fuel procurement.

"Fuel is one of the key areas that we're able to measure and manage efficiently," says CN Director of Fuel Procurement and Productivity Mina De Oliveira. "The more efficient we can run, the better we'll be able to meet sustainability targets, operate a better railway and have a better operating ratio."

CN has been working the past several years to expand its approach to managing fuel costs. In 2010, the railroad launched its Fuel Management Excellence (FMX) program, which combines all the efforts into one "official" program, says De Oliveira. The program focuses on measuring the amount of diesel going into each locomotive and the number of gross ton miles per liter of fuel per train. CN officials measure fuel consumption against factors such as whether a train features a locomotive monitoring system, is operating in distributed power mode, or is a merchandise or intermodal train, says De Oliveira.

One component of the FMX program: the Horsepower Per Ton Analyzer, which was developed and implemented by CN in 2009. The system takes into consideration horsepower tonnage and the amount of power on locomotives to ensure the railroad isn't using more power — and, therefore, fuel — than needed. For example, if a train had two locomotives but could be pulled by one, engineers were told to shut down the second unit.

To ensure locomotive engineers were following the instructions, CN managers began tracking locomotive operations using Wi-Tronix L.L.C.'s telemetry systems, which provide real-time information about locomotive and train performance by remotely measuring and reporting data to an off-board computer system. The system continually scans train operations to ensure proper train-handling rules are being applied, determines when a train needs to be fueled, and ensures temporarily inactive locomotives are shut down.

"That revolutionized how we did things," says De Oliveira. "Crews no longer just have instructions; we now verify the instructions are being followed."

The Class I began installing the telemetry systems on high-horsepower locomotives in 2006. To date, CN has equipped about 750 units; by 2013, the Class I expects to equip 1,200.

In addition, CN is relying on GE Transportation's Trip Optimizer system, which the Class I began implementing in 2009, to help control fuel consumption. The technology serves as a "cruise control" system, enabling trains to follow a pre-determined speed trajectory over a global positioning system-based track map, according to CN. The Class I's Vancouver-Montreal corridor is fully mapped to use the system. To date, CN has equipped more than 125 locomotives with the Trip Optimizer system; by 2013, the railroad plans to install it on up to 400 units.

CSXT also is working with GE to implement the Trip Optimizer, which is expected to "generate significant fuel savings" once it's fully installed, said CSX spokesman Gary Sease in an email.

In The Lead

NS has been testing the Trip Optimizer since 2010. The system appears to be saving about 7 percent in fuel consumption — the same as the Class I's Locomotive Engineer Assist Display and Event Recorder (LEADER®) system developed by New York Air Brake Corp., says NS Manager of Locomotive Maintenance Paula Stiffler.

LEADER is designed to continually log a train's operating conditions, monitor fuel usage and create a statistical profile of an optimal run. Profiles are used to develop the most fuel-efficient run and coach engineers on maintaining performance to eliminate unnecessary braking and throttle use, and conserve energy.

After testing LEADER in 2009, NS began installing the technology in locomotives in 2010, says Stiffler, adding that the railroad has equipped about 750 locomotives with the system. As for how GE's Trip Optimizer might benefit the Class I? That's still being determined.

"You can put both [systems] on the same locomotive, but we're not sure what advantage it will buy us yet," says Stiffler. "We want to be tried and true with LEADER before we start overlaying another system."

Consolidated Rail Corp. (Conrail) relies on locomotive monitoring systems to control fuel consumption, as well. For the past five years, the railroad has been using a Lat-Lon L.L.C. GPS-based health and welfare reporting system to help manage its locomotive shutdown policy. The system can help determine locomotive block temperature and ambient temperature, which enables Conrail managers to instruct engineers on the shutdown policy, says Director of Motive Power and Mechanical Policy Eric Levin.

"When we operate in warm weather, any locomotive not in use will be shut down," he says. "But when we get into cold weather or varying temperatures where it's 35 degrees during the day but colder at night, we'll shut down all locomotives during the day. Then at night, locomotives must be left running."

The monitoring system enables Conrail to "run a much more disciplined and precise operation," says Levin. In addition, railroad managers can analyze locomotive operations to determine if shutdown policies are being followed.

"If the policy is not being adhered to, this system lets us find out why," says Levin.

Mechanical department officials at KCS also are looking into equipping locomotives with electronic management systems to better track fuel consumption and train handling. The technology could save 3 percent to 7 percent on fuel usage, said KCS spokesperson Doniele Carlson in an email.

Meanwhile, CSXT is using a locomotive event recorder system to monitor and record train operations data, which is used to give engineers feedback on how to improve fuel efficiency. The railroad also is using auxiliary power units, which enable the larger diesel engine to be shut down.

In addition, CSXT, CN, NS, KCS and Union Pacific Railroad are installing automatic engine start-stop devices on locomotives to automatically shut down the units when not in use.

Other rail-related products and operational strategies are helping freight railroads reduce fuel consumption, as well. CSXT and UP officials noted they are using lubricants and other friction modifiers to reduce the amount of force needed to pull freight. CN, UP and other railroads are operating more trains with distributed power. And at NS, officials are testing an electronic valve that can be placed on a fuel pump to reduce spillages.

Railroads are trying to better train their workers to keep fuel consumption top of mind, too. UP continues to employ Fuel Masters Unlimited, a program that rewards locomotive engineers for operating trains in a fuel-efficient manner, according to UP spokesperson Thomas Lange. At CN, officials are upgrading training programs to include a fuel-management component. And at CSXT, engineers are trained on locomotive simulators to help them develop best practices and improve their awareness of fuel-efficient train handling, said Sease.

Railroads' multi-faceted efforts to reduce fuel consumption are paying off. Most railroads contacted for this article declined to provide figures on monetary savings they've realized during the past year. However, CN's De Oliveira says the Class I logged a 10 percent improvement in locomotive fuel productivity between 2007 and 2011. In 2011 alone, CN expects fuel productivity to improve about 1.5 percent, she says.

Smart Shoppers

But saving money on fuel expenses isn't limited to reducing diesel consumption. Railroads also are working to purchase fuel as cheaply as possible. For example, KCS is considering whether to use an online reverse auction platform for spot bulk purchases, hedging fuel, renegotiating long-term supply contracts to keep suppliers competitive and making spot bulk purchases at below-market prices when possible, Carlson said.

For large railroads that procure millions of gallons of fuel per year, fuel management is critical, says Matt Tormollen, president and chief executive officer of FuelQuest Inc., which provides on-demand fuel management, tax automation and compliance solutions for petroleum product suppliers, distributors, buyers and traders.

The company counts BNSF Railway Co., UP, CSXT and NS among its customers. The railroads are becoming licensed fuel distributors, which essentially means they purchase fuel and sell it back to themselves to achieve procurement flexibility and cost savings, says Tormollen.

But with those benefits comes responsibility. By becoming a fuel distributor, railroads have to comply with motor fuels and other related taxes. They also have to track and properly manage the thousands of gallons of fuel purchased to ensure it's being delivered under the contract terms and being used appropriately. And, railroads need to be able to remotely manage fuel tanks to detect fuel thefts, leaks or losses.

"Railroads have to try to create a single view of all that fuel as it flows through their systems, and that is no small feat," says Tormollen. "Essentially, you want to have that view from a procurement standpoint, inventory control and financial reconciliation to ensure you have the right product at the right time at the right price."

To help railroads and other companies obtain that perspective, FuelQuest offers the Fuel Management System, which automates all aspects of the fuel management process; ForeSite™ Inventory Control, which helps detect and resolve issues related to theft, leakage, deliveries, gray loads, dispensing equipment and operational errors; and Zytax tax automation software.

"By looking more holistically [at fuel management] from a system standpoint, there is a lot of opportunity to recoup costs," says Tormollen.

An all-inclusive approach to fuel management — from procurement strategies to technology to training programs — will help railroads keep their No. 2 cost item in check. As Conrail's Levin says: "All fuel saved goes right to the bottom line."