Watco welcomes chance to nurture another short line in Lone Star State
8/12/2022
By Jeff Stagl, Managing Editor
Watco’s short-line portfolio grew larger again on Aug. 3. That’s when the company launched the Texas Coastal Bend Railroad (TCBR), its seventh short line in the Lone Star State.
Watco’s Texas subsidiaries also include the Texas & New Mexico Railway and Austin Western, Lubbock & Western, Pecos Valley Southern, San Antonio Central and Timber Rock railroads. The company now owns 44 short lines in the United States and 45 in North America.
TCBR operates a 63-mile line within the Port of Corpus Christi, which owns the track. The short line interchanges with BNSF Railway Co., Kansas City Southern and Union Pacific Railroad.
A year ago, the Port of Corpus Christi Authority issued a request for proposals for a railroad operator. Since Aug. 3, 1997, Genesee & Wyoming Inc. subsidiary Rail Link had operated the line as the Corpus Christi Terminal Railroad. The authority was determining whether to retain the incumbent or select a new operator.
Authority leaders opted for the latter. In January, they chose Watco as the new operator because of its service and capital commitments.
Readying TCBR for launch on Aug. 3 — when Genesee & Wyoming’s contract expired — took a lot of effort in a short time, says Watco Executive Vice President and Chief Commercial Officer Stefan Loeb. The biggest challenges were hiring, transporting locomotives to the site and communicating with all the short line’s customers, he says.
TCBR’s first-ever train moved an outbound pig iron load from a bulk terminal to the Nueces River Rail Yard at the port’s west end for a hand-off to UP. Watco is acquiring five locomotives for TCBR, which is the company’s 46th rail operation worldwide, including Australia. There are several operations in Australia, but Watco considers them one profit center.
Ranked the third-largest U.S. port according to annual tonnage, the Port of Corpus Christi is served by BNSF Railway Co., Kansas City Southern and Union Pacific Railroad. Port of Corpus ChristiDarl Farris was appointed TCBR’s general manager. He joined Watco in 2014 as GM of the Blue Ridge Southern Railroad and later became manager of training and development. Farris previously served BNSF for more than 19 years in such roles as director of rules and field support, senior manager of operations testing and rules and manager of operating rules.
TCBR launched operations with 20 employees, many of whom were retained from the Corpus Christi Terminal Railroad.
“That helped because they know the property well,” Loeb says.
The short line in Corpus Christi dates to 1924, when a railroad was formed to facilitate heavy bulk cargo traffic from the city’s new deepwater port. The port now handles an expanding range of commodities via its rail system, including wind turbine components, agricultural commodities, feed grain, plastics, steel products, refined fuels and military cargo. Much of the freight is moved in unit trains.
The port’s commitment to investing in new projects and forging partnerships to help spur volume growth intrigued Watco, Loeb says. In Houston, Watco handles ocean vessels, barges, trains and trucks carrying various freight at the Greens Port Industrial Terminals on the city’s ship channel.
“That’s right up our alley,” says Loeb. “What the [Corpus Christi] port is doing is exciting, with expanding and growing. We want to grow with the port.”
Watco plans to invest capital in TCBR, such as by upgrading the line or adding track. The operator contract stipulates certain infrastructure investments.
Watco also owns and operates the 105-mile Texas & New Mexico Railway — which interchanges with UP — in the Lone Star State. Watco“We contractually signed up to put capital in,” says Loeb.
The Corpus Christi Terminal Railroad registered 50,000 carloads in 2021 and TCBR should best that on an annual basis, Loeb believes.
“We plan to grow traffic well beyond that,” he says.
What’s promising for carload growth is a large grain facility at the port and a flat-rolled steel mill Steel Dynamics Inc. (SDI) expects to open soon in nearby Sinton, Texas.
“SDI is a major customer of ours,” says Loeb.
Portfolio growth continues to be a priority for Watco. The company aims to keep landing contracts or deals for railroads that fit its growth strategy.
But a major acquisition — such as Patriot Rail Co. LLC’s recent purchase of Pioneer Lines — isn’t in the offing because such deals are becoming more expensive, Loeb says.
“The multiples to buy big existing companies is extraordinary,” he says. “We grow with singles, doubles and sacrifice bunts. We’ll look for more of that.”
