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May 2014
Connecting NC Freight to the Global Economy

     Today, there are seven Class I freight railroads in the U.S. that account for 69 percent of freight rail mileage, 94 percent of revenue, and 90 percent of rail employment. The remainder of the rail activity is undertaken by over 550 Class II and Class III regional and short line railroads.

     These regional and short line railroads, often feeding traffic and receiving traffic from Class I railroads for final delivery, account for 33 percent of U.S. freight rail mileage and 11 percent of employees. They serve nearly every industrial, wholesale, retail, and resource-based sector of our economy, and range in size from tiny operations handling a few carloads to multi-state operators. Many Class III railroads were once branch lines of larger railroads that were spun off, or portions of mainlines that had been abandoned.

     Railroads transformed American life. They opened vast new areas of the American interior to settlement while stimulating resource use, commercial farming, and manufacturing. There is no doubt that they were particularly important to economic development in the South.

     While the growth of the rail industry through much of the 20th century was robust, it took a decidedly different turn in the latter part as the trucking industry, interstate highway system, and commercial airlines began to compete for the same revenues. Competition spurred railroad consolidations as well as bankruptcies. In 1980, Congress passed the Staggers Rail Act, easing regulations and encouraging the sales of lines—that would otherwise have been abandoned—to regionals and short lines.

     Class I carriers became more focused on the wholesale type of business—running high speed unit and intermodal trains longer distances—leaving the regional and short line carriers with the less profitable, more labor-intensive retail business dealing with smaller customers requiring intensive switching and slow speed operations.

     It provided business opportunities for the regionals and short lines. With less expensive labor, less capital-intensive operations, and more management attention to the customer, the short lines could potentially operate a profitable business on lines where Class I carriers lost money; it was a situation complementary to both parties.

 

Taking On a Challenge

     That is precisely what brought about the opportunity in 1987 for Robert Menzies to purchase the Aberdeen, Carolina & Western Railway Company, a short line railroad from Aberdeen to Star, and bring it into the 21st century.

     Today, the Aberdeen Carolina & Western Railway (ACWR) extends across the heartland of North Carolina from Charlotte towards Raleigh and south toward Pinehurst, connecting to both CSX and Norfolk Southern rail lines. In responding to the classified ad for sale, he says he acted on his “gut feeling to get in the game.” Defying conventional wisdom (who says you can’t run a railroad when you’ve never even worked on a railroad?); he relocated to Star, N.C., to bring it back to life.

     At a time when most thought the best days for the railroad transportation industry were past, Menzies has always seen it differently. “I always figured that Americans couldn’t ignore the most efficient form of transportation forever,” he says assuredly.

     He means “efficient” as in more accommodating to the concept of green energy, fuel prices, population growth, and commercial expansion—factors that were not considered or nowhere near as meaningful in the ’80s.

     Menzies has had a lifelong interest in the transportation industry. He received his bachelor’s in transportation from Arizona State University and a graduate degree in transportation and logistics from Michigan State University. He taught transportation at Murray State University in Kentucky as well as Tri-State University in Indiana. In addition, he has owned businesses in other service industries across the U.S.

     He knew taking on the short line would be challenging and very capital-intensive. But believing that quality people produce quality outcomes, Menzies says he was purposeful about surrounding himself with an accomplished team. He has been fortunate in employee retention over the years, and credits that to finding and empowering the right talent to produce the right outcome.

 

Revitalization of a Railroad

     One of his first recollections upon arrival in Star, Menzies says, was looking at 30-some miles of dilapidated track that were pretty much scrap metal, abandoned years earlier. “Just moving the freight car alone, the tracks would literally move or spread. That’s how run down they were,” he describes.

     Russ Smitley, vice president of marketing, describes it back then as “a railroad falling into the sand.”

     Undaunted, Menzies and his team have rebuilt the railway over the years, converting the 70 lb. rail into 141 lb. continuous-welded rail on many sections of the railroad and upgrading the bridges along the routes to handle larger capacity freight cars. He says the company has spent over $30 million in the last decade alone improving the corridor. ACWR now has over 150 miles of quality rail infrastructure.

     “Because of these upgrades,” says Menzies, “our rail infrastructure can handle 90 car unit trains at 286,000 pounds per car. This is the kind of infrastructure you’ll find on the Class I railroads, which translates to dependability and safe handling for our customer’s freight.”

     Smitley, who has worked for a number of Class I carriers including CSX and BNSF says that what Menzies has accomplished with the failing short rail company in the last 27 years has been nothing short of remarkable. For his part, Menzies credits it to his Scottish heritage, asserting that he is just stubborn enough to keep at it until it’s right. He remarks that the early years especially required an inordinate amount of frugality and hard work.

     In addition to its infrastructure, ACWR also offers railcar transloading services—moving liquid and dry bulk commodities between rail and truck for the efficiency of rail for the long-haul and truck for the short-haul. For those looking to set up a rail distribution center in North Carolina, Smitley confirms they have strategic partnerships with trucking companies for transloading to get the freight to where it needs to be.

     Interchange infrastructure determines the capacity with which a railroad can send/receive freight from other railroads. Smitley points out that ACWR has long sidings at its interchanges, allowing it to handle the longest trains: “For our customers handling 90 car unit trains spanning over a mile long, this capacity is essential for the smooth transfer of freight. Small interchanges require additional handling that often results in congestion in the yard or at the interchange, making it more challenging to get customers their freight quickly.”

     Menzies proudly says, “We have 20 fully operable locomotives that are used to serve most of our freight customers. In addition, we have run through locomotive agreements to use CSX locomotives when handling dedicated unit trains for larger customers. Finally, we also lease locomotive capacity for those customers wanting to do their own railcar handling within their plant site.

     “We have heavy machinery to deal with all the day to day maintenance and upgrades. From installing ties and rail to tamping and regulating the ballast, we have the equipment to keep our track profile looking like the big railroads. We maintain all track, bridges, and sidings. We give customers the option of using us to maintain their sidings.

     “We even have passenger cars and business cars for holding economic development events, political fundraisers, social functions, etc. While we are a freight railroad, we hope to be able to use these assets to promote new business on our railroad.”

 

Current Operations

     With roots going back to an 1887 logging railroad, and its transition through many owners and operators, one might expect this short line to be neglected and outdated. It isn’t. In fact, it is a model of how to run a modern, efficient, profitable railroad in the 21st century.

     Today, ACWR is the largest privately held Class III short line or regional freight railroad in North Carolina, with multiple connections to both CSX and Norfolk Southern rail networks.

     “With lines that run from Charlotte towards Raleigh, and extend south towards Pinehurst, the 150-mile Carolina Route rail corridor crosses six counties,” Smitley points out, “and is logistically centrally located between all major metropolitan areas in N.C. as well as near population centers in South Carolina such as Columbia, Rock Hill, Greenville, and Spartanburg.”

     The ACWR serves approximately 18 industries, moving plastics, grain, dimensional lumber, wood chips, aggregate, brick, butane, ethanol, propane, among other products. Customers include Mountaire Farms, Perdue Farms, Locust Lumber, KAG Logistics and Texon.

     Known for its distinctive hunter green color with cream and magenta accents, the short line visage is as regal and dignified as its Carolina Route logo. Rail fans can catch the 90-car, 4-6 engine, 10,000-ton unit corn train as it winds through the Sandhills through Aberdeen, up the 2.8 percent hill beyond, and then through the countryside and curves to the ACWR headquarters in Candor. 

     Carl Hollowell, vice president of operations and general manager, describes usual operations: “Most weekdays, we’ve got a ‘miscellaneous’ freight between Aberdeen and Candor and often up to Star, or the reverse. The big draws, and the most important financial impact on the railroad, however, are the 90-car unit grain trains that come from the Midwest via CSX at Hamlet to Aberdeen. These trains supply the major poultry feed processing plants in Candor: Perdue and Mountaire.”

 

Short Line Goes Long

     Last spring, ACWR located and acquired an existing building in Candor, just eight miles away from is Star location, and began retrofitting the 91,000-square-foot warehouse facility to turn it into a locomotive repair shop facility, installing 4,600 feet of track leading to the building and a locomotive pit which allows access to the underside of engines for repairs.

     Last fall, the company also moved its headquarters there. It maintains refueling and locomotive repair operations at its Star location.

     The company has also formed a new division to repair and retrofit locomotives as well as passenger and freight cars.

     “It’s common for us to take a locomotive worth $30,000 in scrap and turn it into something worth $300,000,” attests Dale Parks, vice president of mechanical and chief mechanical officer.

     “Dale has been building the locomotive, freight, and passenger railcar repair business for years now,” says Menzies. “In fact, Dale and his team have built the business to the point where we had greatly exceeded our capacity in Star to keep up with it. Interest has only increased since we’ve located to our new facility and we expect this to be a key part of our future business.”

     Parks says the repair facility is the only one of its kind in the state and one of the few on the East Coast. He firmly believes that he and the team are tasked with saving an important part of Americana by restoring vintage railcars such as the “Roamer.”

     ACWR’s longer term goal in Candor is to develop the rest of the 78-acre rail-served industrial site that will offer manufacturers easy access to rail and bring jobs and a stronger tax base to Montgomery County, says Smitley.

     The company is marketing a 70-acre business park and multimodal facility dubbed the Midland Multi-Modal Industrial Park in southern Cabarrus County, just seven miles east of Charlotte, with highway access to I-485, rail access to both Norfolk Southern and CSX, and all utilities.

     The industrial park is a piece of a larger development strategy the company calls RailVantage East (Moore, Montgomery) and RailVantageWest (Charlotte, Midland) to develop other available properties as logistics centers along the ACWR short line. Unabashedly, Smitley touts it as “Connecting North Carolina’s freight to the rest of the world.”

 

Connecting With Strength 

     Menzies views trucking companies as partners more than competitors: “While ultimately dependent on short haul trucking for distribution, railroads are making a comeback in the long hauls. Over the last 15 years, highway congestion, higher fuel costs, driver shortages and pending safety regulations are moving shipping from trucks back to rail.”

     Of their relationship with the Class I carriers, he says, “It’s common for short line railroads to have issues with bigger rail companies because the interchanges are often undersized and inadequate, but fortunately with both CSX and NS, ACWR has substantial track at their interchanges with their Class I partners that result in a seamless transfer of customers freight.”

     Menzies admits he took a risk by purchasing ACWR knowing that it would require tremendous capital investment, but he says the rewards have far surpassed anything imaginable. They are now focused on keeping up with the projected 30 percent population growth over the next few years. 

     He says they continue to look for opportunities to collaborate with adjacent landowners as well as communities that seek to attract new industry, jobs and tax base to North Carolina. As a result of these strategic partners and acquisitions, ACWR has sites and partners across its network that position it very well for long-term future growth.

     Menzies’ vision for the Aberdeen Carolina & Western Railway Company was to strengthen and enhance the fabric of American industry. In fact the ACWR’s tagline touts with “Connecting with Strength.” Menzies has been able to bring together diverse and competing interests that includes trucking, logistics companies, Class I rail carriers as well as state and local political leaders that has resulted in new industry on his network that not only touches North Carolina but also the global economy.

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