Short-line Freight Railroads

After decades of neglect and shrinking influence, short-line railroads are showing their relevance once more to Oregon's economy. But as communities like Coos Bay win plaudits from the rail industry for restoring these short-distance links to the national railroad system, others, like Tillamook, are opting to abandon old tracks — reflecting a divided approach to the state’s economic future.

Investing in short-line rail, which connects far-flung towns and business operations to the national rail network, is investing in a resource economy, driven by timber, wheat and commodities. But where tourism and the tech economy reign, old rails are being converted into long-distance bike trails.

The Coos Bay Rail Link highlights both the economic perils short-lines face, and the opportunities that they represent. After a tunnel collapse, Central Oregon & Pacific Railroad shut down its 111-mile Coos Bay-to-Eugene line, citing the high cost of repairs. Forced to instead truck goods to market, shipping costs for regional employers including Roseburg Forest Products and Georgia Pacific soared — with economic development officials estimating local businesses paid $2 million extra per year to truck products to market.

Remote Coos County, four hours south of Portland by car and eight hours north of San Francisco, already been hard hit by the decline in logging that has shuttered mills nationwide in recent years, feared more job losses. The Oregon International Port of Coos Bay – a small agency seeking to live up to its big name – stepped in, buying 111 miles of track from Central Oregon & Pacific Railroad and securing a 24 mile donation from Union Pacific, then winning $27.3 million in grants to fund repairs.

“We ran the first train in 2011, we moved 200 carloads that October and it seemed huge at the time,” recalls Duke Rodley, director of railroad operations at Coos Bay Rail Link, the company contracted to run the port’s short-line system. “Now we’re at the point where we’re moving 7,500 carloads per year – and that’s not as good as it’s going to be.”

A city government-run rail line some 250 miles to the east set the example for Coos Bay. As sawmill after sawmill closed, the City of Prineville Railway saw its customers disappear – until just one remained in 2004. Today, after developing warehouse access and bulk-handling facilities and securing several dozen new customers, the Prineville short-line has posted its first profit in recent memory: $92,000, according to a January City Council presentation.

Officials in the community say the restored short-line is saving local businesses on shipping costs, and is a recruiting tool as they seek to bring new manufacturers to the region More recently, last year Central Oregon & Pacific Railroad – which cited high operating costs in 2008 when it shut down rail between Ashland and Weed, California– reopened those tracks, after making $95 million in upgrades to dozens of bridges and a decaying tunnel along a 65-mile stretch. Similar stories are emerging across the U.S. – usually with similar government funding behind them.

Market research firm IBISWorld estimates that the country’s short-lines have averaged 3.6%  revenue growth each year since 2010 – despite sharp declines linked to recession in 2008 and 2009. But the costs involved in sustaining Oregon’s short-line freight railways are staggering.

ODOT estimates it would cost $1.4 billion to replace the state’s 332 aging rail bridges – or $142.6 million to fund less ambitious bridge repairs that would at least allow fully loaded train cars to accelerate to 25 miles per hour. Improvements to stabilize tunnels, some built more than a century ago, would cost another $92.2 million. National railroads once controlled most of the country’s short-lines, but deregulation in 1980 prompted them to spin off less profitable lines into independent companies.

Today, short line companies cumulatively operate just over half the state’s 2,400 miles of active track. National players Union Pacific and Burlington Northern Santa Fe operate the other 47%. Tillamook County has decided that these costly upgrades are the wrong economic investments for its community. When heavy storms washed out the Port of Tillamook Bay Railroad’s tracks in Salmonberry River Canyon, the estimated price to repair the damage was $57.3 million.

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An hour-and-a-half west of Portland, Tillamook has staked its economic future, in part, on tourism. Visitors brought $193.1 million into the community in 2012, the local economic development agency estimates, and the county is trying to boost that figure. So rather than invest in upgrades to its damaged short-line system, Port of Tillamook Bay officials leased a portion of undamaged track west of Salmonberry River Canyon to a nonprofit that operates a steam-powered dinner train along the coast – and they’re working with state officials to turn 86 miles of rail right-of-way into a recreational trail connecting the Portland to the coast.

Michele Bradley, Port of Tillamook Bay general manager, says turning her organization’s now-defunct short-line into a trail will draw tourist dollars and boost the local economy. More than a dozen abandoned short-lines crisscross the state, some neglected for a century, some only recently discontinued. Biking enthusiasts are pushing for unused track between Silverton and Salem to become a trail – though Willamette Valley Railway officials say they are still weighing the costs of repairing the line to resume service.

John Burns, CEO of the Port of Coos Bay, says investments in rail may not make sense in every Oregon community. But they are key to his vision of Coos County’s economic future – especially given the region’s geographic distance from big cities. Coos Bay Rail estimates rail’s much-touted cost advantage over trucking saved its customers $2.2 million in 2014, and Burns hopes to see more commodities use system in the coming years.

But that reliance on a cost advantage over trucking, as well as Coos Bay’s now faltering hopes of building the Jordan Cove LNG terminal, both illustrate an ugly little secret at both short-line and national freight railways: while proponents are quick to cite the environmental benefits of rail, which reduces highway congestion and transports goods at a fraction of the carbon footprint of trucks, the industry’s growth is inextricably tied to the fate of fossil fuels.

Among the two national rail networks that serve Oregon, BNSF has profited richly from its connections to North Dakota’s Bakken oil fields, and Union Pacific touts its numerous connections to other shale drilling sites across North America. Dropping oil prices have cut into both companies’ revenues – and are simultaneously cutting into the cost advantage of shipping via rail.

Burns acknowledges the detractors, but argues that government-backed commitment to short-lines makes sense for commodity dependent communities like is own. “We got into the railroad business because the businesses of the greater Coos Bay community needed us. We still have a lot of work to do.”

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