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Vol. 17, No. 36 Week of September 02, 2012
Providing coverage of Alaska and northern Canada's oil and gas industry

AK-WA Connection 2012: Freight spurs 2012 growth for railroad

Key federal funding allows unique carrier to continue program of service enhancements while major projects boost business traffic

By Rose Ragsdale

Alaska-Washington Connection

After posting solid growth in its freight business in 2011, the Alaska Railroad Corp. is reporting continued growth this year. A vital player in Alaska-Washington commerce, the railroad has served the passenger and freight transportation needs of Alaskans since its 470-mile-long track from Seward to Fairbanks was completed in 1923.

In 2011, the railroad had another profitable year, reporting net income of $13.4 million on revenue of $185.7 million in March. Freight train revenue, which accounts for 70 percent of the railroad’s business, increased 12.7 percent last year, thanks to expanded coal exports and a 3 percent volume increase in interline (barge-rail) railcar traffic from Seattle and Canada.

Passenger revenue also climbed 7.7 percent in 2011 as ridership grew from 405,000 in 2010 to 413,000 in 2011. In addition, the railroad corporation’s real estate leasing and permitting business provided net income of $8.5 million.

Though it does not currently have a direct, land-based connection with other railroad lines on the North American network, the railroad is able to move cargo to Alaska from anywhere in the Lower 48 and Canada via rail barges operated by the Alaska Railroad-owned Alaska Rail Marine, and the CN Rail-owned Aqua Train that sail regularly between the Port of Whittier and Seattle and Seattle’s Harbor Island in Puget Sound, and Prince Rupert, B.C., respectively.

“We can move pipe, for example, from Texas across the United States to Seattle where it is transferred to our rail barge,” said Dale Wade, Alaska Railroad’s vice president of business development. “We can move very large and bulk, heavy commodities very efficiently and very economically.”

Much of the freight traffic was tank cars moving petroleum products from the Flint Hills Refinery in North Pole to storage tanks at Ship Creek in Anchorage for distribution in Southcentral Alaska a hopper cars moving coal from Usibelli Coal Mines Inc.’s operations in Healy to tidewater in Seward where it was loaded onto oceangoing barges for shipment to Asia and South America.

Key federal funding

The railroad expects to receive $31 million annually in Federal Transit Authority funding under provisions of H.R. 4348, a new 28-month Highway Bill that the U.S. House of Representatives overwhelmingly passed by a vote of 373 to 52 June 29. The legislation is said to be critically important because it will fund federal highway, transit and highway safety programs nationwide through the end of fiscal year 2014.

“A great deal of thanks goes to Cong. (Don) Young and his staff for their hard work to retain critical funding for the Alaska Railroad in the transportation bill,” Alaska Railroad President and CEO Chris Aadnesen said, after the bill passed the House.

The federal funding will cover the railroad’s debt payments and fund continued track improvements, Wade said.

“We are focused on customer service and expanding business. We think great things are ahead for the State of Alaska and the Alaska Railroad,” he observed.

Enhancements and upgrades

In early 2011, the railroad added 70 new aluminum hopper cars, which increased capacity and efficiency.

“Our freight traffic is up another 4.8 percent year to date,” Wade said in late June.

While owned by the State of Alaska since 1985, the railroad receives no state funds to support operations, and its profits are used to fund capital investments, match federal dollars, and support work force programs.

The railroad has focused recently on enhancing and improving its services by adding new sidings for greater flexibility and efficiency of operations and by expanding its welded rail program.

A 10,500-foot-long rail siding was added earlier this year to support a new gravel operation in Kashwitna, Alaska.

Rail sidings allow the Alaska Railroad, which operates only one 470-mile-long track between Seward and Fairbanks, to pull one train aside and allow a faster one to pass.

Welded rails allow faster, smoother rides as well as increased speeds. This benefits the railroad’s passenger services in addition to its freight business.

Boost in freight shipments

Though Alaska is a relatively stable market with some peaks and valleys, Wade said the railroad’s business this year has benefited from orders to move specialized equipment for several large projects.

These include Golden Valley Electric Association’s $90 million EVA Creek windmill generation project, which required the railroad to transport components for 12 wind turbines, or 36 tower blades – each 148 feet long and covering three railcars – from Anchorage to Healy.

The railroad is also continuing to fulfill its mandate to support statewide economic development with strong partnerships that moved two major rail extension projects from the environmental phase into design and construction. In 2011, the $188 million Northern Rail Extension, supported by state and federal funding, has begun construction on Phase One, a bridge over the Tanana River at Salcha; and in Southcentral Alaska, the $50 million-plus Port MacKenzie Rail Extension, funded by the State of Alaska, began final design, permitting, and land acquisition. Both projects hold tremendous potential for new commerce.

“Maintaining a solid financial footing and investing intelligently in our infrastructure are key to keeping our promises to the people of Alaska,” Aadnesen said. “This new year is no different. The Alaska Railroad will continue to be fiscal stewards and to advance projects and programs that benefit Alaskans.”

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