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February 2014
Tracking Success
By Jim Froneberger

     The Norfolk Southern Railway is one of 11 Class I railroads in the United States. With headquarters in Norfolk, Virginia, the company operates over 20,000 route miles in 22 states and the District of Columbia and is a major transporter of coal, automotive and industrial products.

     Norfolk Southern serves every major container port in the eastern United States and provides efficient connections to other rail carriers, operating the most extensive intermodal network in the East. As part of the Norfolk Southern Crescent Corridor expansion program running between Louisiana and New Jersey, the terminal at Charlotte-Douglas International Airport has become one the company’s newest major intermodal facilities.

     The current Norfolk Southern system was formed in 1982, essentially a combination of the Southern Railway in 1990 and Norfolk & Western Railway in 1997. In 1999, the system grew substantially with the acquisition of over half of Conrail.

     Norfolk Southern’s predecessor railroads date to the early 19th century. The three main branches of the current corporate family tree were systems for many years themselves: Norfolk & Western, formed in 1881; Southern Railway System, formed in 1894; and Conrail, formed in 1976 from the Penn Central Railroad (1968–1976). Penn Central itself was created by merging three venerable rivals—the Pennsylvania Railroad (PRR, 1846), the New York Central Railroad (NYC, 1831), and the New York, New Haven & Hartford Railroad (NYNH&H, 1872)—as well as some smaller competitors.

 

Norfolk Southern’s Strategic Planning

     There is no doubt that America is facing a transportation infrastructure crisis; roads and bridges cannot handle all the traffic forecasted. The U.S. Department of Transportation predicts that demand for freight transportation will increase by 92 percent by 2035.

     One solution is to shift some of this freight from the roads to the rails. Shipping by rail is a safe, clean, fuel-efficient, green alternative to building new highways. One train can transport the same amount of freight as nearly 300 trucks. And railroads are three or more times more fuel efficient than trucks—on average moving a ton of freight 436 miles per gallon of fuel.

     In 2007, Norfolk Southern launched a major strategic initiative in that regard—a $2.5 billion railroad expansion and infrastructure improvement program spanning 2,500 miles of track across 11 states to create a high-speed intermodal freight route between the Southeast and Northeast that is competitive with all-highway freight transportation.

     Called the Crescent Corridor, it is one of the single biggest additions of new freight capacity in America since the creation of the Interstate Highway System. Norfolk Southern is straightening curves, adding nearly 400 miles of new passing track and double track, improving signal systems, and expanding terminal capacity in 11 markets.

     The continued growth of intermodal has caused Norfolk Southern to look to increase capacity in key markets. The company now operates a total of 52 intermodal facilities throughout their 22-state operating area in the eastern United States. While the Charlotte terminal is their newest, they have also recently opened new or expanded facilities in Birmingham, Ala., Memphis, Tenn., and Greencastle, Pa.

     When the Crescent Corridor initiative is fully implemented, Norfolk Southern expects that 1.3 million truckloads of freight will be absorbed from the highways to the rails annually, saving 169 million gallons of fuel per year, reducing carbon emissions by 1.9 million tons, and generating a projected 73,000 jobs by 2030—47,000 of those being created by 2020. The Corridor started handling traffic in 2012, and, according to Norfolk Southern, with shared investment, could reach full capacity by 2021.

     The Crescent Corridor is expected to bring substantial safety, environmental and economic benefits to North Carolina, including the creation or retention of 7,060 green jobs by 2030.

     According to Norfolk Southern, each year, the Crescent Corridor will help divert more than 392,000 long-haul trucks from North Carolina’s highways, especially along Interstates 77 and 85. Annually, this should conserve 6.2 million gallons of fuel and reduce CO2 emissions into the atmosphere by 69,000 tons.

     At the same time, it is expected to save $21 million in congestion-related costs and $5.3 million from reduced accidents and fatalities and eliminate $4.2 million in annual highway maintenance costs.

     The Crescent Corridor will strengthen North Carolina’s transportation network with improved rail connections and faster transit times for goods moving in and out of the state and provide shippers and receivers with a new high-speed intermodal freight option that could reduce annual logistics costs by as much as $81 million.

     Company officials point out that development of a new intermodal facility at the Charlotte Douglas International Airport has created employment opportunities and will increase the economic competitiveness of the state.

 

Charlotte’s Strategic Planning

     This past December, over 15 years of planning finally came to fruition when Norfolk Southern opened its new regional intermodal facility at Charlotte-Douglas International Airport. The 200-acre facility replaces an outdated 40-acre site located between North Davidson and North Brevard streets near uptown Charlotte.

     The term “intermodal” refers to the movement of freight via one or more modes of conveyance. In this case, it refers to 20, 40, 45, or 53-foot containers that can travel by ship, train or truck. The Norfolk Southern intermodal facility transfers these shipping containers between trains and trucks, while also providing easy access to southeastern U.S. ports and the air cargo facilities at Charlotte-Douglas.

     Because the new Charlotte intermodal hub links rail, truck, air, and major eastern seaports, Charlotte-area leaders hope it will become a catalyst for economic development as manufacturers and distributors realize the benefits of locating close to a facility that allows freight to move efficiently to multiple modes of transportation.

     Interestingly, Charlotte leaders envisioned an intermodal center at the airport as far back as 1997, when it was put forth as a part of the airport’s Strategic Development Plan. Consultant Michael Gallis worked with airport and city officials to develop a unique way for Charlotte to differentiate itself and compete with other major freight hubs.

     “We realized that the way to out-compete these other cities was to develop a new kind of freight hub—one where all the different transportation modes would be located at a single center,” explains Gallis. “That concept gave rise to the idea of building a rail yard at the airport between the runways.”

     As it so happened, intermodal traffic on the Norfolk Southern system was growing at a rapid pace, and they had outgrown their facility near uptown. The old intermodal facility had become landlocked due to residential development, and parking space for containers was limited. Remote satellite parking areas were being employed to supplement the main facility, but that had a negative impact on the efficiency of the transfer operations.

     An airport location offered Norfolk Southern more than just growth space and the obvious access to the air cargo facilities. Area streets and nearby Interstate 485 provided easy access to Interstates 77 and 85, and the Norfolk Southern main line ran just north of the airport, minimizing the amount of new track that would have to be laid to get trains to an airport-located facility.

     Then a few years ago, when the airport needed 10 million cubic yards of dirt to build a third parallel north-south runway, the cheapest most environmentally friendly place to get that dirt was right next to that runway. So after that dirt was moved, they were left with a big, flat graded area that was at the same elevation as the Norfolk Southern main line. It all fit together perfectly, and Norfolk Southern began construction in 2012.

     The tracks now extend for over a mile along the airfield between the two western-most north-south runways. The intermodal transfer facility itself is located on the south side and is 40 feet underneath two taxiway bridges that connect the rest of the airport with the far western runway.

     The intermodal facility has an initial capacity of 200,000 lifts per year, transferring containers between trucks and trains. Ultimately, it is designed to handle 600,000 containers, equal to the two largest U.S. centers in Dallas-Fort Worth and Chicago. There is also room to expand the parking area to add a finished automobile parking area, so that if Charlotte were to become a destination for the automobile business, they will have the footprint to add that on the same piece of property.

     The total cost of the new facility was $92 million, paid for by Norfolk Southern with $15.7 million of federal assistance. The city and state funded other improvements, including $9.7 million for public road infrastructure. The new roads included relocation of West Boulevard to provide the road connection to the facility as well as a new interchange at West Boulevard and Interstate 485.

     The new facility opened in December last year, and after a short phase-in period, all train service ended in uptown Charlotte and moved to the airport. The City of Charlotte has an option to purchase part of the vacated land at the uptown location, and Norfolk Southern retains the option to use part of the site for other types of freight operations.

 

Intermodal Growth Strategy

     The new Charlotte intermodal facility is just one part of what has become the fastest growing business line within Norfolk Southern. Intermodal traffic now makes up almost half of the total volume of shipments at Norfolk Southern, and by contributing 20 percent of annual revenue, intermodal is now about the same size as the company’s legacy coal transportation business. Norfolk Southern’s remaining revenue is split between finished automobiles, steel, agricultural products, chemicals, and forest products.

     Much of the growth in intermodal shipping has come from domestic shippers as big companies that need to move goods have been converting more and more of their business from moving over the highway by truck to intermodal. Five years ago, international and domestic traffic each represented about 50 percent of the total intermodal activity, but today, between 60 to 70 percent of the traffic is domestic.

     “The Great Recession disproportionately impacted international,” explains Jeffrey S. Heller, vice president intermodal and automotive marketing for Norfolk Southern. “But the domestic business continued to grow despite the economy because most freight in the United States moves by truck. Companies were converting to intermodal at a very rapid pace during that period; so as a result, the domestic business took over as the leader in terms of share in our network.

     “One reason intermodal is growing so rapidly is the amount of congestion we have today on our interstate highways. By shifting freight traffic from roads to rails, traffic congestion is reduced, less fuel is used, and fewer emissions are put into our atmosphere. One train with two locomotives can take almost 300 trucks off the highway, and railroads are three or more times more fuel efficient than trucks.”

     The growing shortage of licensed long-haul truck drivers is also helping to boost intermodal growth. According to the American Trucking Association, there are about 25,000 unfilled truck driver jobs nationwide as younger workers are being drawn to careers that don’t involve so much time away from home.

     “If you are a big mover of freight, you don’t want to have all of your eggs in one basket and have to rely wholly on moving with motor carriers,” says Heller. “Companies are trying to hedge a little bit because of driver shortages and capacity issues, and also as good corporate citizens, they are contributing to less congestion, less emissions, and less use of fuel. Plus, intermodal generally costs less than shipping by truck.”

     By providing rail access to major ports, the Norfolk Southern intermodal facility will also connect Charlotte to the world, allowing the facility to serve as an “inland port.” Inbound cargo is transferred directly from a ship to rail cars for transport to an inland port location away from the more congested seaport. Freight arriving in ports like Charleston or Savannah can thus easily travel by rail to Charlotte for transfer to other trains or to trucks to reach their final destination.

     “We really have three ports that serve Charlotte directly—Los Angeles/Long Beach, Savannah, and Charleston,” says Norfolk Southern’s Heller. “The fastest route from Asia to Charlotte still happens to be through the ports in Southern California, and then by rail into Charlotte. That’s the premium route. But with the Panama Canal’s expansion coming, we are going to see more and bigger ships coming to the east coast and freight moving directly to Charlotte from those east coast ports.”

     Heller says the reason a shipper would want to come direct to an east coast port despite the west coast’s speed advantage is mainly cost-related. To the extent containers are kept onboard for more of the distance traveled, shippers don’t have to pay for inland transportation 3,000 miles or so across the country.

     “By rail from Los Angeles to Charlotte we can run it in about 5 days,” Heller explains. “But it takes an extra week for a ship to get through the Panama Canal to Charleston or Savannah. Then you still have another day or two for offloading and transportation up to Charlotte. So it’s really a tradeoff of time versus cost.”

 

The Inland Port

     Increasingly, inbound cargo is transferred directly from an ocean vessel to railcars and then transported to an inland location, away from the more congested port itself, for further processing and distribution. These inland locations, or intermodal centers, serve as “inland ports,” with some handling as much cargo volumes as their coastal counterparts. Charlotte is already on the relatively short list of current areas widely recognized as full-fledged inland ports.

     Though the inland port concept is not new, these locations are becoming increasingly critical to the global supply chain, affecting logistics decisions ranging from shipping routes to warehouse locations.

     Gallis describes the strategy in developing the airport: “We began to realize that freight centers attracted enormous amounts of business,” Gallis says. “With the way the world was going with e-commerce, companies were looking for efficiencies. The world trade lanes were shifting and we wanted them to come through Charlotte.

     “If the world recognized Charlotte as a freight center, then businesses connected with the movement of goods would all be attracted to the airport area.

     “We had a great opportunity to do something that other metropolitan areas could not—to build a connection point for rail, for trucking and for air at a single location.”

     He points out that the intermodal center also makes Charlotte attractive to the international supply chain.

     Heller agrees that while a lot of freight moves between ships, trains, and trucks, there is not a lot of interaction between rail and air. Air cargo tends to be made up of items that need to move very quickly, reducing the consolidation of freight between the two modes. He says the intermodal location at the airport was thus driven more by land availability, proximity to the main line and major roads, plus the ability to create synergy that goes beyond freight transfer.

     “A company is not going to air freight parts for an automotive plant from Frankfurt to Charlotte only to put it on a train and have it take another day or two to get somewhere else,” explains Heller. “We don’t feed off each other, but we do cohabitate well with the airport because no one is going to complain about our lights and noise at an airport. Proximity to highway access is also important to both airports and intermodal facilities.”

     Even though there is little direct freight transfer between rail and air, having multiple transportation modes concentrated at one location creates a global-trade hub that can move goods a multitude of ways. The hope is the rail yard will attract truck terminals that can serve both the rail yard and the airport, and because all three modes will be located at the same place, transfer times will be reduced, as will the cost.

     This global-trade hub will offer the opportunity to elevate Charlotte’s status internationally, making the city more attractive to companies as a distribution or manufacturing location. By providing close, convenient access to all three modes of transport, which, in turn, link the region to ocean ports and the rest of the world, Charlotte has the potential to truly become a global city.

     “We’re confident that more and more business will continue to move by intermodal—both domestically and internationally,” concludes Heller.

     “We also believe that when a company looks at where they want to locate a new warehouse or a manufacturing facility, on their checklist of things they look for will be transportation infrastructure.

     “We think our new Charlotte intermodal facility will rank high on their list.”

Jim Froneberger is a Greater Charlotte Biz freelance writer.
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