The Iowa Interstate Story, to This by 2015, You Might Even See Twice-Daily with 137 Cars Weighing 17,600 Tons

The A regional railroad’s hard sweat and pure dumb luck Iowa by Fred W. Frailey In terstate story

© 2011 Kalmbach Publishing Co. This material may not be reproduced in any form without permission from the publisher. www.TrainsMag.com Iowa Interstate’s “heritage” ES44AC, he “Made in Hollywood” and are nursing seen rolling through Davenport, Iowa, version of The Iowa Inter- their outrage. Then honors its Rock Island roots. Tom McNair state Story might begin the phone rings. On like this: Henry Posner III the other end is a stands in a field of head- co-owner of the rose again rapidly. Today it owns the newest, high Iowa corn. Spreading Iowa Interstate Rail- biggest locomotives, runs 17,000-ton his arms wide, he looks up road. We need mon- freights, and provides intermodal service. Tand exclaims, “Why, if you could just turn Henry Posner III. ey! Now! Help! Ten Coming soon: Centralized traffic control corn into fuel, think of the railroad you’d Bill Metzger years later, Posner’s and possibly 79-mph passenger trains. Its create!” Then comes thunder, the heavens initial investment roster even includes two modern made-in- open, and God gives man ethanol. Posner turns into sole own- China steam locomotives. And if it’s drama makes a fortune. ership of the Interstate, just before corn- you want, the struggle for control of the Cut! Pretty good, but he never said that. created ethanol becomes the additive of Iowa Interstate a decade ago would make So how about this? Henry Posner III and choice in gasoline. Posner makes a fortune. any screenwriter envious. Gather your Coke three associates sit in a Pittsburgh office just Real life can sometimes be as fascinating and popcorn, and enjoy the tale. big enough to hold their chairs and a single as what appears on the silver screen. In the desk, atop of which sits a telephone. They’ve 22 years since Trains last looked at this Birth of a regional just been unscrupulously outmaneuvered in Chicago-Council Bluffs, Iowa, railroad, the When the Chicago, Rock Island & Pacific a quest to buy the Pittsburgh & Lake Erie Iowa Interstate came close to collapse, then breathed its last on March 31, 1980, shippers

www.TrainsMag.com 31 On newly ballasted track, Iowa Interstate makes its first revenue run through North Peoria, Ill., on June 22, 1987. Roger D. Kujawa

on its main line between Chicago and and down the Peoria branch to Henry, Ill., pockets of track in the Quad Cities and Council Bluffs were left high and dry. Then the next 88 miles, to reach shippers along Des Moines. Finally, on June 1, 1982, the began a scramble. Metra bought the com- the industrialized Illinois River. B.F. Good- six-month-old Iowa Railroad leased the muter trackage to Blue Island and Joliet, Ill., rich, meanwhile, formed the Lincoln & entire 375 miles between Bureau and 40 miles. For $2 million a year, Baltimore & Southern to buy the rest of the Peoria Council Bluffs. Starting on a shoestring, Ohio (soon to become CSX Transportation) branch and give its chemical plant at Henry Iowa Railroad lived precariously. leased the main line from Joliet to Bureau a second rail outlet. Other operators ran To the rescue of this route came the

Iowa City Rock Island BICB08 BIRI09 (extra train) CRNTXH leaves 1:25 p.m. to pick up 177 RISW09 Rock Island day switcher Blue Island-Council Bluffs Blue Island-Rock Island Iowa Interstate at 6:15 a.m. empty tank cars in Cedar Rapids for on duty 7:30 a.m. to work between 711 GP38-2, 512 ES44AC, 510 ES44AC 511 ES44AC Newton Rock Island and Silvis 37-83-7,397 1-86-2,455 (loads, empties, tons) ICSW09 Iowa City switcher leaves Other yard jobs on duty 7 p.m. and On duty 7:45 p.m. On duty 12:30 a.m. Tuesday, November 9, 2010 3:30 p.m. for Wilton and return 11:59 p.m. ICRI09 leaves 5:22 p.m. for Rock Island 615 MG RINT09 leaves 3:00 p.m. for (returns as RIIC09) Newton (continuation of BIRI09) L a I O W A RIIC09 leaves 8:48 p.m. for Iowa k Chicago e N E B R A S K A Grinnell City (return of ICRI09) M

Council WORK Leaves 11:47 p.m. CN 30 MG r Listening in: IOWA Bureau ic Bluffs for Iowa City (light engine) e CP h

Iowa Interstate road: 161.220 (AAR 74) v BUSW09 Bureau day switcher i i g IANR CN a Iowa Interstate yard: 160.305 (AAR 13), 160.320 (AAR 14) ILLINOIS R leaves 10:40 a.m. for Peoria 110 MG Walford n i and return CSX: 160.290 (AAR 12), 160.230 (AAR 8) p UP Newton p BUSW09 Bureau night switcher Chicago

Metra: 161.340 (AAR 82) Grimes Colfax Cedar Rapids i 110 MG M BNSF s Altoona s leaves 10:00 p.m. for Peoria Grinnell Brooklyn CP i

i CIC CIC s and return Blue Train number s 110 MG Booneville Marengo is CBBI08 s Y Island Origin-destination o Casey Rock M Rockdale Y Council Bluffs-Blue Island u CN Y Iowa City Wilton r Island Atkinson Power i BNSF Kellogg Newton METRA 503 ES44AC, 513 ES44AC Harlan Anita Prairie City Walcott Joliet R UP Hancock Des Moines NTSW09 Newton LibertyWest CSX Loads, empties, tons 78-12-10,758 i La Salle v Stuart switcher leaves 8:00 Homestead Wyanet Bureau NS e Menlo Earlham Y Utica r a.m. for Des Moines Silvis Geneseo BNSF IHB 50 MG Million gallons Colona CSX UP Y NS and return Annawan CN CRL Iowa Interstate Atlantic UP Y BNSF DavenportMilan CN UP Ethanol plant Connection Y Oakland Council Bluffs (opens 2011) (closes 2011) Illi iver Trackage Rights BNSF nois R Blue Island BNSF Three yards jobs Atlantic CP Henry Biodiesel plant Y Yard KCS Rover Atlantic switcher on duty as called on duty 6:30 a.m. BICB09 leaves 6:45 p.m. Job working at 6:15 a.m., 200 MG for Council Bluffs Intermodal November 9, 2010 ramp Yard job(s) or train to be called later I O W A CBSW09 RIBU09 (extra train) TZPR Locomotive shop Daytime yard job Rock Island-Bureau BUSW09 Bureau night switcher I L L I N O I S CN On duty 4:30 a.m. CBBI08 CRIC09 RIIC08 (extra train) 505 ES44AC, 155 SD38-2 Bureau-Peoria and return Peoria NS Council Bluffs-Blue Island Cedar Rapids-Iowa City Rock Island-Iowa City-Moline turn 131-0-17,343 717 GP38-2 TPW N Council Bluffs 503 ES44AC, 513 ES44AC 502 ES44AC, 500 ES44AC, 508 ES44AC 720 GP38-2, 157 SD38-2 On duty 4:00 a.m. 5-56-2,574 0 Scale 60 miles KJRY CBBI09 leaves 3:35 p.m. for Blue Island 78-12-10,758 (loads, empties, tons) 86-11-11,225 51-3-6,646 Ethanol that BUSW daytime On duty 8:00 p.m. UP CBSW09 night switcher on duty 4:30 p.m. On duty 2:00 a.m. On duty 12:15 a.m. On duty 11:30 p.m. crew will take to Peoria © 2011 Kalmbach Publishing Co., TRAINS: Bill Metzger IMRR BNSF

32 Trains JUNE 2011 state of Iowa; such shippers as Maytag, Pella, and Pioneer Hi-Bred; and the Cedar Rapids & Iowa City Railway, or Crandic, which connected with the former Rock Is- land at Iowa City. They pooled their re- sources, formed a company named Heart- land Rail, and for $31 million bought the Bureau-Council Bluffs property in 1984 from the Rock Island estate. With that came trackage rights over CSX and Metra between Bureau and what would become its small freight terminal in Blue Island. A second company, Iowa Interstate Railroad, was formed to replace the Iowa Railroad and actually operate the route [see “Iowa Interstate: Humility and Profits in the Heartland,” Trains, June 1989]. Iowa Interstate was the creation of Paul For Iowa Interstate, reaching Chicago was paramount. A freight crew builds its train at Banner, Harry Meislahn, and Paul Victor, Blue Island, Ill., while a Metra SW1 (of Rock Island lineage) looks on. Steve Smedley all experienced railroaders, Banner having been Rock Island’s last executive vice president. They cobbled together a locomotive the bills, service the debt, and improve the road owed considerable sums to other car- roster descended mostly from Illinois property. One of the earliest employees, riers as part of their division of revenues, Central GP7 and GP9 road-switchers Dennis H. Miller, describes it as a 40-mph and any of those creditors could have (many rebuilt as GP8s and GP10s) and railroad perhaps good for 25 mph because tipped it into bankruptcy. Hence, the call ran their first train on Nov. 4, 1984. In of slow orders. “If you didn’t fix them,” he for help to Henry Posner. 1985, the railroad handled 31,584 carloads adds, “they just got worse and worse.” and generated revenue of $11.6 million. In 1990, while seeking to refinance the Enter the entrepreneur The next year, Meislahn left the Interstate railroad’s debt, Banner got an offer from The first Henry Posner, a Polish immi- and Banner succeeded him as president, Chicago West Pullman, a shortline owner, grant who ended up in Pittsburgh early in with Victor overseeing operations. to buy the Iowa Interstate. But that deal the last century, created his family’s initial Over the next five years, according to collapsed early in 1991 when CWP, also wealth during the Great Depression, in the Trains, the railroad lost a cumulative $15 embroiled in a failing airline investment, billboard and neon sign businesses. His son, million. There wasn’t money enough to pay couldn’t find financing. By then the rail- the second Henry Posner, who died this

Council WORK Leaves 11:47 p.m. CN 30 MG r Listening in: IOWA Bureau ic Bluffs for Iowa City (light engine) e CP h

Metra: 161.340 (AAR 82) Grimes Colfax Cedar Rapids i 110 MG M BNSF s Altoona s leaves 10:00 p.m. for Peoria Grinnell Brooklyn CP i i CIC CIC s and return Blue Train number s 110 MG Booneville Marengo is CBBI08 s Y Island Origin-destination o Casey Rock M Rockdale Y Council Bluffs-Blue Island u CN Y Iowa City Wilton r Island Atkinson Power i BNSF Kellogg Newton METRA 503 ES44AC, 513 ES44AC Harlan Anita Prairie City Walcott Joliet R UP Hancock Des Moines NTSW09 Newton LibertyWest CSX Loads, empties, tons 78-12-10,758 i La Salle v Stuart switcher leaves 8:00 Homestead Wyanet Bureau NS e Menlo Earlham Y Utica r a.m. for Des Moines Silvis Geneseo BNSF IHB 50 MG Million gallons Colona CSX UP Y NS and return Annawan CN CRL Iowa Interstate Atlantic UP Y BNSF DavenportMilan CN UP Ethanol plant Connection Y Oakland Council Bluffs (opens 2011) (closes 2011) Illi iver Trackage Rights BNSF nois R Blue Island BNSF Three yards jobs Atlantic CP Henry Biodiesel plant Y Yard KCS Rover Atlantic switcher on duty as called on duty 6:30 a.m. BICB09 leaves 6:45 p.m. Job working at 6:15 a.m., 200 MG for Council Bluffs Intermodal November 9, 2010 ramp Yard job(s) or train to be called later I O W A CBSW09 RIBU09 (extra train) TZPR Locomotive shop Daytime yard job Rock Island-Bureau BUSW09 Bureau night switcher I L L I N O I S CN On duty 4:30 a.m. CBBI08 CRIC09 RIIC08 (extra train) 505 ES44AC, 155 SD38-2 Bureau-Peoria and return Peoria NS Council Bluffs-Blue Island Cedar Rapids-Iowa City Rock Island-Iowa City-Moline turn 131-0-17,343 717 GP38-2 TPW N Council Bluffs 503 ES44AC, 513 ES44AC 502 ES44AC, 500 ES44AC, 508 ES44AC 720 GP38-2, 157 SD38-2 On duty 4:00 a.m. 5-56-2,574 0 Scale 60 miles KJRY CBBI09 leaves 3:35 p.m. for Blue Island 78-12-10,758 (loads, empties, tons) 86-11-11,225 51-3-6,646 Ethanol that BUSW daytime On duty 8:00 p.m. UP CBSW09 night switcher on duty 4:30 p.m. On duty 2:00 a.m. On duty 12:15 a.m. On duty 11:30 p.m. crew will take to Peoria © 2011 Kalmbach Publishing Co., TRAINS: Bill Metzger IMRR BNSF

www.TrainsMag.com 33 getting into, and some confidence that with a combination of capital and luck we could manage our way out.” So in August 1991, RDC invested $1.2 million to stabilize Iowa Iowa Interstate growth in carloads IowaInterstate’s Interstate finances. trafﬁc For that, distribution it got a 20 percent stake in the railroad. It also got a piece 120,000 of paper giving it an option to buy the other 80 percent of Iowa Interstate and all of 100,000 Heartland Rail,Grains owner of Intermodalthe track struc- ture, at any time during the next 10 years. Paul Banner and Paul Victor sold their in- 80,000 terest in Iowa Interstate to Heartland, which thereby became the operating railroad’sOils/Syrups 80 60,000 percent owner. Banner, then age 70, retired. Today,Ethanol Victor is president of the New York & Atlantic Railway on Long Island,Feeds N.Y. 40,000 In subsequent years, RDC made some incredibly profitable investments in priva- Iowa Interstate growth in carloads tized railroads overseas. But it’s unlikely 20,000 Iowa Interstate trafﬁc distribution The diesel terminal at Iowa City, Iowa, will be replaced120,000 later this year with a new shop at that any worked out as well as this firstAggregates ven- 1991 1993 1997 1992 1987 1994 1985 1995 1996 1999 1998 2001 2010 2007 2002 2003 2005 2006 2004 2009 2008 2000 Plastics Homestead. The road rosters 14 ES44ACs, 22 GP38-2s, and eight SD38-2s. Robert Kaplan ture, in Iowa Interstate. It just Foresttook products a long Fertilizer time for the Metalswisdom of Consumerthat investment products to Coal Grains Intermodal 100,000 becomeChemicals apparent. year at age 92, succeeded his dad and creat- supply company) as president. Posner de- The fight for control ed a second fortune by investing in a Pepsi scribes80,000 Pietrandrea as “my polar opposite distributorship before Pepsi’s ascendancy in almost every respect and my source of The railroad waxed in the 1990s, along- Oils/Syrups against Coca-Cola. Would Henry Posner wisdom and strategy. Bob is why we’ve side the ups and downs of Iowa agriculture. III continue in the family businesses? No. gotten60,000 so far.” For four years the two men CSX alumnus Fred Yocum, whom RDC had In 1969, at age 14, he bought his first issue tried without success to buy a railroad. Of- hired to run the P&LE before that deal fell Ethanol Feeds ten they fell afoul of greater fools — that is, ofGrain Trains loads and entered a new world. Maybe 40,000 though, replaced Banner as president until he had his grandfather’s brains, but the tra- competing bidders for a railroad spinoff his own retirement in 1998. Posner credits jectory25,000 of this unapologetic train-lover had willing to pay stupidly high prices. (For Yocum with keeping creditors calm until been forever altered. After graduating from Posner’s20,000 rendition of the Pittsburgh & Lake they could gradually be paid off. Otherwise, 20,000 Aggregates

Princeton University, Posner spent a de- Erie affair, a disaster1991 of a different sort, go RDC and Posner maintained what he calls 1993 1997 1992 1987 1994 1995 1996 1985 1999 1998 2001 2010 2007 2002 2003 2005 2006 2004 2009 2008 2000 Plastics 15,000 Forest products cade with Conrail, initially as an assistant to www.rrdc.com, click on Position Papers, an arms-length relationship with Iowa In- Fertilizer trainmaster in its Detroit-Toledo corridor, and then on “P&LE — The Final Years.”) terstate. In any event, as a minority investor, Metals Coal Consumer products 10,000 Chemicals working 6 p.m. until 6 a.m. with one day a The Iowa Interstate opportunity was not he was not in a position to call the shots. week5,000 off. By 1986, he managed accounts of low-risk. True, this was a tested railroad, Increasingly, the corporate leadership food-product1990 1995 shippers2000 2005from 2006Conrail’s2009 New2010 but also a marginal one (some would say came from Archer Daniels Midland, the York City sales office. failing). Iowa Interstate could not produce agribusiness conglomerate. Ironically, EthanolThat wasloads the era when big railroads shed a financial statement. There was a shoebox ADM has but one small elevator on the unwanted30,000 routes large and small and new of unpaid bills totaling $8 million. “What Iowa Interstate. But it had a big problem: regionals emerged, starting with Chicago, Iowa Interstate had been doing,” Posner Its huge corn-processing mill in Cedar Central25,000 & Pacific in 1985, and Indiana Rail says,Grain “was loads paying off all the small creditors Rapids connected to Chicago & North Road20,000 and MidSouth Rail in 1986. To hell 25,000but holding off the big ones, the logic be- Western, which the giant Union Pacific with corporate life! Fortunes were being ing, if you owe the bank $100 you’ve got a bought in 1995. Iowa Interstate kept ADM made15,000 and lost, and Posner ached to join the 20,000problem, whereas if you owe the bank $100 from becoming captive to UP by virtue of ranks of those entrepreneurs. million the bank has a problem.” A smart its link to Cedar Rapids via the Crandic. To 10,000 15,000 So Posner left Conrail and with his way to handle debt, maybe, but it doesn’t further protect its interests, ADM became family’s5,000 financial backing created Railroad work10,000 indefinitely. Heartland’s (and therefore Iowa Interstate’s) Development Corp. in 1987, with himself Posner and Pietrandrea, however, were majority shareholder in 1995, by buying a 0 5,000 as chairman1990 1995 and business2000 2005 partner2006 Robert2009 2010 willing1990 to take1995 a chance.2000 2005 As Posner2006 2009 later 2010put new stock issue and the shares of some Pietrandrea (from L.B. Foster, the railroad it: “We had a general idea of what we were other owner-shippers. And by 1997 or 1998, Archer Daniels Midland leapfrogged DDG/Feed loads Ethanol loads appliance maker Maytag, based in Newton, 16,000 30,000 Iowa, to become Interstate’s biggest shipper. 25,000 So Posner and Pietrandrea were in a 12,000 pickle when, in July 2001, they dropped 20,000 their atomic bomb, exercising Railroad De- velopment Corp.’s option to buy the rest of 8,000 15,000 Iowa Interstate, plus Heartland Rail. ADM 10,000 4,000 was not just Iowa Interstate’s big Kahuna; it was also quite content to remain in charge. 5,000 A retired ADM executive, Jon Roy, was 0 1990 1995 2000 2005 2006 2009 2010 0 Iowa Interstate’s president then. For sure, 1990 1995 2000 2005 2006 2009 2010 this multinational company would not be

34 Trains JUNE 2011 DDG/Feed loads 16,000

12,000

8,000

4,000

0 1990 1995 2000 2005 2006 2009 2010 happy and could easily retaliate against the Iowa Interstate growth in carloads Iowa Interstate trafﬁc distribution regional railroad by diverting traffic. 120,000 But as Posner saw it, what choice did they have? Once their 10-year option to Grains Intermodal buy expired a few weeks later, RDC would 100,000 be “a minority shareholder forever in a company where we had no influence. Why 80,000 bother with that?” Oils/Syrups So began two and a half years of walking 60,000 on eggshells. Terms of the option required Ethanol RDC to pay a nonrefundable $1 million to Feeds Heartland. Then RDC and Heartland each 40,000 hired an appraiser. If the appraisals differed by more than 10 percent, a third appraiser 20,000 would reconcile the two numbers. This Aggregates 1991 1993 1997 1992 1987 1994 1985 1995 1996 1999 1998 2001 2010 2007 2002 2003 2005 2006 2004 2009 2008 sounds simple, but it was not. 2000 Plastics Forest products Predictably, the appraisals came in Fertilizer Metals Coal Consumer products worlds apart. RDC’s appraiser, veteran rail- believed to be closer to the one advanced the former ADM man running the Inter- Chemicals road consultant Charlie Banks, evaluated by Banks. But thanks to the squabbling, state, left in mid-2002, and everyone the Interstate not by its liquidation value, RDC didn’t take control until Jan. 1, 2004, agreed on Dennis Miller as the new chief but by what it was worth as an ongoing at which time Posner became Iowa Inter- executive, which he remains to this day. business. “To do this,” Banks explains, “you state’s non-executive chairman. Since joining the railroad in May 1985, this look at future cash-generating potential.” Did Archer Daniels Midland retaliate former Rock Island Lines wire chief and With Iowa Interstate’s history of losing against RDC for kicking it out of an owner- train order operator had held about every money and the low crop yields in 2001, ship position? Not at all. While the railroad job, from locomotive engineer to VP of Banks says his valuation of the company Grainneeded loadsADM, ADM needed Iowa Interstate customer service. “I ran the place while all came in quite low. Actual numbers were 25,000just as much. the litigation went on,” he says. The owners never made public, but L.E. Peabody & As- were preoccupied with their disagreements. sociates, the appraiser for Heartland 20,000Red ink turns green As Miller tells it, the events resemble a (which is to say, ADM), came up with a 15,000Had RDC’s option lasted another year snowball rolling downhill. He brought in value believed to be several times higher. or two, the selling price of Iowa Interstate three new road foremen of engines, front- A lot of time went by before a third ap- might10,000 have risen substantially, because line managers “who knew what they were praiser was mutually agreed upon. Some something strange occurred: In May 2002, 5,000 of that time was spent in courtrooms, liti- the railroad1990 1995 began2000 making2005 money.2006 2009 Jon Roy,2010 Iowa Interstate acquired the famous gating details of the option and appraisal shield logo from the Rock Island’s process. When finally selected, the third Ethanol loads trustees, and began placing it on diesels appraiser settled on a valuation in the mid-2000s. Steve Schmollinger 30,000

25,000

20,000

15,000

10,000

5,000

0 1990 1995 2000 2005 2006 2009 2010

DDG/Feed loads 16,000

12,000

8,000

4,000

0 1990 1995 2000 2005 2006 2009 2010 Iowa Interstate growth in carloads Iowa Interstate trafﬁc distribution that, $22 million went to root out deferred 120,000 maintenance of the track and the rest to re- tire old debt. “That got rid of slow orders,” Grains Intermodal Miller reports, “and made the difference of 100,000 night and day.” The railroad also began a five-year maintenance cycle to keep the 80,000 track in good shape. Oils/Syrups Miller applied for a second RRIF loan of $9 million in late 2005 and got the money 60,000 Ethanol in 2006, to cleanse the locomotive fleet of Feeds the last old road-switchers and standardize 40,000 with 22 2,000-hp Electro-Motive GP38-2s (as well as four SD38-2s bought separately). By then, the traffic snowball was -be 20,000 coming an avalanche. In May 2006, ADM Aggregates 1991 1993 1997 1992 1987 1994 1985 1995 1996 1999 1998 2001 2010 2007 2002 2003 2005 2006 2004 2009 2008 2000 Plastics announced it would double the size of the Forest products Fertilizer Cedar Rapids corn-processing plant, creat- Metals Coal Consumer products Chemicals ing an ethanol refinery that has become the country’s largest. A host of other doing,” and a new superintendent over would-be refiners revealed plans to locate them. Those managers reinstilled discipline beside Iowa Interstate, and three of them in the operations. Safety benchmarks im- actually did: in Council Bluffs; Menlo, proved (the railroad won its first Harriman Iowa, also on the west end of the railroad; gold medal on the basis of its 2003 safety re- and Annawan, Ill., between Bureau and cord), and trains consistently departed their Rock Island. Plus, a biodiesel plant opened Grain loads origins on time. This led to substantially in Newton. All this business would come 25,000 lower car-hire costs. Customer satisfaction on line from 2008 through 2010. shot up, and the railroad began being offered So what had once been a hand-to- that it had two more ES44ACs needing an 20,000 more business — not just farm products, but mouth enterprise now had to adapt, and owner, Iowa Interstate bought those, too. 15,000 also steel, scrap metal, cement, and paper. quickly, or be overwhelmed. The beauty When Whirlpool bought Maytag in 2006 was the railroad could now afford to ex- A thrilling conclusion 10,000 and closed the Newton plant a year later, pand. Says Mick Burkart, who came to Iowa That’s not all Iowa Interstate did. In Iowa Interstate scarcely missed what had Interstate in that period to become chief 2006, it bought the Lincoln & Southern 5,000 1990 1995 2000 2005 2006 2009 2010 been its biggest customer a decade earlier. operating officer: “If we went with SD40-2s, from Goodrich successor PolyOne, gaining In 2002 Miller drew up an application we’d need 30 more locomotives, giving us ownership between Henry and Peoria, and Ethanol loads for a low-interest, $32.7 million Railroad 70 diesels altogether, and we had neither the assumed the CSX lease between Henry and Rehabilitation & Improvement Financing facilities nor the mechanical people to deal Bureau and east on the main line to Utica, 30,000 (RRIF) loan from the Federal Railroad Ad- with that many.” So back went Miller for a Ill., 32 miles in all, giving it greater control 25,000 ministration, then sat on it until ownership third RRIF loan, this one $31 million to pay over its operations. It began running its of the railroad was settled. With Posner’s for 12 4,400-hp ES44AC locomotives that trains directly in and out of Cedar Rapids 20,000 blessing, he filed the application in early General Electric assembled in 2008 on the in 2004, using trackage rights on Crandic’s 15,000 2004 and got the money a year later. Of tail end of a CSX order. Told by GE in 2009 former Milwaukee Road branch that inter- sects the Interstate main line at Yocum 10,000 Connection, 25 miles west of Iowa City. 5,000 And in 2006, on a field that had been Rock Island’s receiving yard in Silvis, Ill., just east 0 of the Quad Cities, the railroad began 1990 1995 2000 2005 2006 2009 2010 building a new storage yard that, when completed this year, will include nearly 11 DDG/Feed loads miles of track capable of holding 850 cars. 16,000 The Silvis yard mostly benefits ADM, and highlights the close relationship be- 12,000 tween Iowa Interstate and its No. 1 ac- count. The once- or twice-daily turns in and out of Cedar Rapids bring most of the 8,000 ADM loads (ethanol, feed, syrup, starch, and the like) to Rock Island and Silvis. 4,000 Lacking waybills, they’re held in storage until ADM sells the commodities. Then 0 the railroad builds unit trains or blocks for 1990 1995 2000 2005 2006 2009 2010 its scheduled trains to move the cars out. Says Burkart: “This holding, switching, and building of trains is why regional rail- “Hawkeye Express” football specials (using Iowa Northern equipment) are an Interstate roads can get the business, as it’s some- tradition, running from Coralville to University of Iowa games at Iowa City. Robert Kaplan thing the big railroads don’t want to do.” The next big change you’ll see is a new

36 Trains JUNE 2011 Two GEs hustle east at West Liberty, locomotive facility near Yocum Connection, is illustrative. The night before, westbound Iowa, in January 2010. Tom McNair close to the community of Homestead, BICB left Blue Island for Council Bluffs Iowa. It will replace the shop in Iowa City, with 120 cars, meeting on CSX track west now bursting at the seams. of Joliet its eastbound counterpart, CBBI, So ends The Iowa Interstate Story, to this By 2015, you might even see twice-daily with 137 cars weighing 17,600 tons. Wait- point. For sure, the outcome today is far passenger trains between Chicago and Iowa ing for BICB to pass Silvis was a 131-car, happier than seemed likely a decade or two City, using Iowa Interstate for the 105 west- 17,000-ton extra train of feed bound for or three ago. What have we learned? That ernmost miles from a junction with BNSF Peoria. Behind BICB out of Blue Island was you can struggle for years to find a winning Railway at Wyanet, Ill. The federal govern- another extra train taking 87 empties, plus strategy and get nowhere. And conversely, ment in 2010 awarded Illinois and Iowa 50 more picked up at Bureau, to west end that the proverbial heavens can open and $230 million for improvements (on Iowa ethanol plants. That day’s regular Cedar deluge you with business you never Interstate, rail, ties, sidings, CTC, and posi- Rapids turn from Iowa City hauled 90 cars dreamed existed. Posner is the first to say tive train control) to start the service. (12,000 tons) to Rock Island before return- that waiting for pure dumb luck to trickle Whether that money ever leaves Washing- ing to Iowa City with some empties. This is down is a viable corporate strategy, if you’re ton, D.C., or Iowa agrees to subsidize its a Class II railroad that looks like a Class I. patient enough. Fortunately, he was. 2 share of the service, were open questions as this issue went to press. But bear this in mind: In late 2011 Railroad Development Corp. will begin running its own unsubsi- dized passenger trains in Germany, between Hamburg and Cologne. Chairman Posner calls this a test of whether you can make money hauling people atop steel rails. If it works in Germany, you can almost count on his trying to do the same across the Iowa Interstate, given the right circumstances. Remember those 31,000 carloads the In- terstate handled in 1985? Make that 78,000 cars in 2008 and 105,000 in 2010. The company hired employees right through the Great Recession. Posner says that what used to be the railroad’s total revenues is now the extra cash left over each year. For all of that, the railroad isn’t bulging with freight trains. But those that do run tend to be huge. A Tuesday last November Conductor Stan Thomas lines a switch at Walcott, Iowa, to let his train, BICB, out on >> Conrail can openers in Peru? the main after a meet with its eastbound counterpart on Nov. 9, 2010. Fred W. Frailey Read about other lines under the Railroad Development Corp. umbrella in a free special bonus PDF available at www.TrainsMag.com www.TrainsMag.com 37