Friday, August 01, 2014YOUNGSTOWN, Ohio -- Four years ago, many of the short line railroads here had been abandoned and the lines that connected the parcels they ran through were dangerous at any speed.
When the Ohio Commerce Center bought the former Space Center in Lordstown, the rail yard there, built to “move everything but munitions” during World War II, couldn’t be used, says real estate broker Dan Crouse.
Few improvements had been made to the warehouses since the end of the war. Crossing the property required a 4x4 truck; nothing else was capable. Only two companies were receiving shipments from the rail yard.
The 12 miles of rail were in such poor condition that CSX Transportation, the only company with rights to use the freight lines, threatened to stop using the largest rail yard in Trumbull County.
Crouse, with Routh-Hurlbert Real Estate, Warren, which markets the Ohio Commerce Center, says the low point for rail use in the Mahoning Valley was five years ago.
“It was a tremendous low. There was a lot of abandonment of rail throughout the area. Many rail spurs were unused, sitting in place rotting,” he says. “What is on the ground and in place, you’re seeing a tremendous amount of usage compared to what you would have seen [then].”
The price of oil began to rise and continued to climb and, coupled with the emergence of the oil and gas industry in the Utica shale, rails began to regain their utility in northeastern Ohio.
“The bulk shipments have grown. There’s also been a realization that, with the price of diesel going up, that bulk shipments are better served in many cases by railroad rather than trucking,” Crouse says.
Shipping freight by rail becomes cost-effective at long distances, Crouse explains.
“For your average trucker, about 400 miles is what they can drive in a day. So you’re hauling one load in and one load out,” he says. “Rail really starts to become cost-effective at about 300 miles.”
The freight that moves through the Mahoning Valley serves a variety of industries. At the Ohio Commerce Center, products that range from frozen french fries to beer to fracking sand end their journeys on cars on freight rails.
“Through the area, it’s pretty diverse. Imagine anything that’s bulk and in containers. Everything from acids in railcars to oil, even edible oils – those things come by rail,” Crouse points out. “Anything you can move in bulk is well-served on rails, especially if it’s something that doesn’t have a shelf life.”
Grain and lumber also are coming through the area frequently in rail cars.
For some products, one rail car can carry the same quantity as five semi-trailers, Crouse says.
Short lines, used to connect long-distance railroads with local stops, are also seeing resurgence. Mike Conway, executive director of the Mahoning Valley Economic Development Corp., reports that 11 companies use MVEDC short lines and three companies are looking to begin using them.
“It is something that businesses are thinking about as an alternative to trucks,” Conway says. “It allows businesses to take on new processes and new production methods because they now have raw materials that are provided to them with less cost.”
Most of the freight moved on the short lines MVEDC owns consists of steel, plastics and refrigerated commodities, Conway says.
The low point for use of the MVEDC shortlines occurred in 2008 and, except for last year, every year since has recorded more freight tonnage than the preceding 12 months.
“There was a drop last year because we lost one large customer. We expect rail activity to increase,” Conway says. “Any revenues that we realize from the operations and rail activity goes right back into the maintenance of rail.”
Both Crouse and Conway see the use of freight rails increasing as economic development and the economic recovery continue.
“I don’t have a crystal ball, but if the trend line is indicative of the future, then I would say there will be an increase in activity,” Conway says. “Quite frankly, the price of petroleum will continue to increase and that’s a factor in a business’ decision to ship by rail.”
One of the biggest factors is whether the growth in the oil and gas industry is sustainable. Matt McComber, operations manager for Savage Services, Midvale, Utah, says that his company began moving fracking sand through the Ohio Commerce Center enter rail yard early last spring.
“In this state, we’ve seen growth ever since March. We’ll only see it continue to grow in the years to come as drilling moves closer this way,” McComber says. “Right now, we serve an industry that’s primarily drilling in the south and east of us.”
Company policy prevents him from disclosing the volume of sand moved, but Savage Services is “moving a manifest volume of rail cars through here,” he says.
Running just south of the commerce center and the rail line Savage uses lies a part of the CSX National Gateway project. Forty trains use the line daily, Crouse says, a number he expects to increase.
“That line is going to explode when they open the Panama Canal to bigger ships because they’re going to come to Baltimore to offload,” he continues. “Instead of coming to Long Beach [Calif.] and crossing the country through three different shippers, they’re going to go to Baltimore, get on the CSX and come to the North Baltimore terminal near Toledo.”
Regional development in the surrounding areas will also play a part in the future of freight railroads in the Mahoning Valley, Crouse says.
“If the cracker plant comes to Beaver County [Monaca, Pa.] and there already is a cracker plant project going forward in West Virginia, those handle bulk materials. They have material pumped in by gas line and handled out as plastic, ethanol, polyethylene or whatever, it will leave on rail cars,” Crouse says. “That’s a big deal.”
Copyright 2014 The Business Journal, Youngstown, Ohio.
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