(The following story by Bob Withers appeared on The Herald-Dispatch website on March 24. Brother J.R. Krupinski is a member of BLET Division 481 in Parkersburg, W.Va. Brother J.J. Case is a member of BLET Division 284 in Grafton, W.Va.)
HUNTINGTON, W.Va. — Amid this era of corporate mergers and downsizing, central West Virginia is getting a new railroad.
The Appalachian & Ohio Railroad, the Pittsburg, Kan.-based Watco Companies Inc.’s newest short line, will begin operating on 117 miles of leased CSX Transportation track between Grafton and Cowen, plus five short branch lines, at midnight Thursday. The route penetrates the heart of the historically lucrative Gauley coalfields.
CSXT says the change-over will affect 90 of its employees.
The railroad gave its trainmen and engineers in Grafton, Buckhannon, Burnsville and Cowen until March 21 to apply for permanent transfers to any of nine other terminals in a seniority district that stretches from Philadelphia, Pa., and Richmond, Va., to Willard, Ohio, and Parkersburg, W.Va.
Benefits accruing to those who are selected to move include a $5,000 transfer allowance, $375 for lodging and meals while hunting for a new home, $750 to compensate for loss of wages during the search, extra pay for “qualifying” — becoming familiar with the characteristics and operations of an unfamiliar territory — and use of carrier-approved lodging for up to 30 days, for the employee only, during that process.
If the worker decides not to stay at the new location for at least a year or doesn’t change his residence, he must give the benefits back to the company.
The transfers could have a wider ripple effect on jobs as employees arriving at different terminals displace younger workers at those points. The final ripple usually takes the form of furloughs.
New tactic
CSXT has abandoned, sold or leased more than 13,000 miles of what it calls redundant rail routes since 1982 to concentrate resources on its most profitable routes — including more than 1,000 miles in 2004 and another proposed 1,000 miles this year.
More than 7,000 of those miles were shed in the mid- to late 1980s, more than half of them by abandonment. But in the past couple of years, the company has leaned more toward sales and leases.
“Property values have exceeded business values,” says CSXT spokesperson Jane Covington. “It pays in certain cases to hold onto property, but not operate it.”
“Short lines are better equipped than the major carriers to operate certain lines,” Covington says. “The major carriers are better at long-haul moves; the short lines are better at short hauls.”
CSXT’s decisions to lease nonstrategic lines to short-line railroads are driven by the bottom line.
“If our return on investment capital is below our cost of capital, then we need to reduce our asset base,” Covington says. “Line-sale and -lease candidates are typically low-revenue, low-density lines with high operating expenses.”
The Grafton-Cowen line includes a helper district, a section with steep grades where an extra set of locomotives couples onto coal trains and shoves them over the mountains. Helpers cost the railroad in extra wages, fuel and track maintenance.
Careful and helpful
“It’s important to note that short-line buyers and lessees are carefully chosen,” Covington says. “It’s a long-term relationship, and we want them to succeed.”
The company contends that sales and leases provide value.
“And here’s how,” Covington says. “We can extract capital through the lease, they also enhance local marketing and traffic growth, and short lines also have better access to public capital.”
The carrier looks for successful operators.
“We make sure they have a proven track record of success and business growth,” Covington says. “They have to provide us with proof of financial viability, and we also prefer that they have a strong geographic presence and a solid relationship with state and local officials.”
Covington adds that the smaller railroads are better able than the major carriers to touch every market.
“Short lines do a better job of marketing, serving and selling the benefits of rail to local customers because they can be more flexible and more innovative when approaching new local traffic opportunities,” she says. “In the long run, this helps preserve not just rail business, but also rail jobs, because it helps attract more customers to their territory. The line segments we select are low-contribution-per-mile routes with high operating ratios and high capital requirements looking forward.”
CSXT says coal comprises 82 percent of the Grafton-Cowen route’s traffic. Most of it is steam coal for power plants in the North Atlantic and mid-Atlantic states, with a small percentage destined for export.
How long?
Doubts are beginning to surface about how much coal will be available for the A&O to haul — and for how long.
Emily Medine, writing in the February issue of Coal Age magazine, said Appalachian fields are starting to run dry. Supply sources that are lining up to replace these fields likely will include some combination of imports, Western regions such as the Powder River Basin, and, in the Midwest, the Illinois/Indiana/Western Kentucky Basin.
“Depletion is most evident in the Central Appalachian coalfields, where production levels barely increased between 2003 and 2004 despite a doubling in the coal price,” she wrote. “Within 20 years, depletion in Northern Appalachia will also affect total production levels.”
Medine, a principal of Energy Ventures Analysis Inc., a consulting firm in Arlington, Va., cited as examples the decision last year by two power plants — AES Somerset in New York and Carolina Power & Light — to purchase coal mined in the Illinois Basin to supplement their historic Appalachian supply either because supplies weren’t available or because the economics of spot purchases in Illinois were more compelling. She also noted that Powder River coal from Wyoming has been displacing Appalachian coal for more than a decade.
Neither CSXT nor A&O are worried.
Covington says there were five loadouts in the affected territory last fiscal year; now there are six. She says the first five shipped 5.6 million tons on the railroad in fiscal 2004, but offered no comparative figures for previous years.
“Each of these has projected increases in the next few years,” she says. “We’re not talking about any imminent depletion anytime soon. And there are still substantial undeveloped reserves in that area and CSXT’s coal development office will continue to work with the lessee to convert those undeveloped reserves into rail business.”
Kirk Hawley, Watco’s senior vice president of marketing, sees it the same way.
“We’ve got more opportunities to move more coal out of that region in the next few years,” he says. “Our intentions would be to work with the customers and CSX to do just that.”
Union concerns
But it’s the fate of railroaders — rather than the cargoes they haul — that worries the labor unions.
John Bentley, a spokesman for the Brotherhood of Locomotive Engineers and Trainmen in Cleveland, sees a downside for CSXT employees, whom he says are among the most professional railroaders in the industry.
“Most are second- and third-generation railroaders who have endured the elements, worked some of the toughest terrain in the Eastern United States and consistently are some of the very safest employees in the industry, and have been for many years,” he says. “They have set a high standard for performance and have taken care of each other. It’s disheartening to see employees who have been with CSXT for 20 or more years who are over the age of 50 have to pick up and relocate at this stage of their life.”
Bentley adds that the lack of job security will shadow those who are still able to work on the line.
“Under the A&O Railroad, they will become nonunion — or ‘at will’ — employees who basically can be terminated at any time for most any reason,” he says. “Currently those employees have union representation and covered by labor agreements and work rules that support and create job security.”
Active CSXT employees won’t comment about the loss of union representation on the record for fear of their jobs, but retirees who have worked on West Virginia lines readily reveal their distaste for the plan.
“It’s an effort to get rid of the union and seniority in the name of cost-efficiency,” says J.R. Krupinski of Coolville, Ohio. “It’s about money.”
J.R. “Monty” Montgomery of Hardeeville, S.C., remembers hearing about striking railroaders who were replaced by “scabs” and lost their jobs long before he went to work in 1943.
“It looks to me like they’re going backward,” he says. “It might be all right for the company, but it sure as heck isn’t good for the men, that’s for darn sure.”
J.J. Case of Belpre, Ohio, knows all about relocation.
“I faced that myself back in ’85 when I was running the Branch,” he says, referring to a CSX route between Grafton and Parkersburg that’s now mostly a walking trail. “I told my wife, ‘I’m the oldest guy out here, and they’ll have to take the railroad up to get rid of me.’ And that’s exactly what they did.”
Hawley says that the A&O’s headquarters will be at Buckhannon, at least for now. If that city is selected as a permanent base, a car shop and locomotive shop will be built there.
“But everything is open right now,” he says.