South Dakota State University Open PRAIRIE: Open Public Research Access Institutional Repository and Information Exchange South Dakota State University Agricultural Bulletins Experiment Station 5-1-1983 Restructing a Rail System: South Dakota's Experience from 1976-81 C. E. Lamberton Follow this and additional works at: http://openprairie.sdstate.edu/agexperimentsta_bulletins Recommended Citation Lamberton, C. E., "Restructing a Rail System: South Dakota's Experience from 1976-81" (1983). Bulletins. Paper 693. http://openprairie.sdstate.edu/agexperimentsta_bulletins/693 This Bulletin is brought to you for free and open access by the South Dakota State University Agricultural Experiment Station at Open PRAIRIE: Open Public Research Access Institutional Repository and Information Exchange. It has been accepted for inclusion in Bulletins by an authorized administrator of Open PRAIRIE: Open Public Research Access Institutional Repository and Information Exchange. For more information, please contact [email protected]. B 688 Restructuring :i; a rail system J South Dakota's experience from 1976-81 "t' ]I; _. Agricultural Experiment Station • South Dakota State University • Brookings, South Dakota 57007 B 688 Restructuring a rail system South Dakota's experience from 1976-81 By C.E. Lamberton with the cooperation of Rail Management As sociate professor of economics Services, Incorporated , a shortline South Dakota State University operator and consulting firm in Syra­ cuse, NY. The sixth line , Napa to Platte, was studied with the assistance Introduction of Rowell and Associates , a railway engineering consulting firm in Syra­ cuse. This report is a s ummary of the restructuring of South Dakota's rail­ The six studies were publ ished in road system between 1976 and 1981 and November and December of 1980, and of a series of six studies on the distributed to all who had shown feasibility of branchline rail service interest in the branchlines. Those in South Dakota. Each of the six included shippers, local business and studies examined the economic feasibil­ community leaders and officials, state ity of a specific branchline . The transportation officials, and various lines studied were: potential public and private lending agencies. 1. Andover to Brampton, ND; A seminar was held on the results 2. Roscoe to Linton, ND; 3. Trent to Elk Point ; of the study , as well. All interested parties were invited to attend the 4. Napa to Platte ; 5. Mitchell to Rapid City; and , meeting held December 16, 1980 in 6. Blunt to Gettysburg. Brookings, SD. In addition to the presentation of study results, a general The fir st five lines were aban­ discuss ion of railroad op erations and doned in 1980 by the Chicago, Milwaukee , costing was given by representatives of St. Paul, and Pacific Railroad Company Rail Management Services Incorporated . (Milwaukee) during bankrup tcy and An d , the potential for rail line reorganization proceedings. The sixth financing was ou tlined by representa­ is a light density branchline of the tives of the Omaha Bank for Coopera­ Chicago and Nor th Western Transporta­ tives, Farmers Home Administration, tion Company (C&NW) . Consumers Cooperative Bank , Economic Development Administration, and the Small Business Administrat ion. Sub­ sequent presentations have also been Milwaukee's bankruptcy threatened made upon request. service on approximately one half the rail mileage in South Dakota. This The primary purpose of this report threat provided the principal impetus is to describe the developments in for these studies. The studies were South Dakota 's branchline system and funded by the Farmers Home Admin� its relationship to the national istration and administered by the railroad system. The first chapter Economics and Statistics Service of the ou tlines the changed railroad environ­ USDA. Five of the lines were analyzed ment and physical restructuring . In 2 Chap ter III, the imp lications of rate such as the covered hopper car . There and service policies in a deregulated were improvements in rail management environment are discussed. Brief systems , as well , reflected in the use descriptions of the reconnnendations of of multicar and unit train operations. the six branchline feasibility studies are presented in Chapter III, along with explanations of developments on All of these changes have individ­ those lines in the year following the ually and collectively altered the studies. The final chapter presents economics of grain handling and trans­ some conclusions-with respect to such portation . The economic changes rural rail systems and the role of inspired changes in technology and , state and local entities in their perhaps belatedly , changes in social ,reshaping. and polit ical institutions and at­ titudes about transportation. At the same time that larger , more powerful CHAPTER I trucks were being built to move over South Dakota's branchline system wider , stronger , faster highways, Americans continued to demand service on the ubiquitous railroad branchline The developing crisis: 1965-1975 system. The laws and regulations which allowed this , while consistent with Significant technological develop­ social desires , often failed to face ments have occurred in the production, the economic realities of declining handling , and transportation of grain rail traffic and revenues and increas­ since World War II. Producers now rely ing rail costs. on hybrid seed , chemicals, sophisti­ cated management and market ing skills, Penn Central Ra ilroad's bankruptcy and connnunications and computer systems , in 1970 was a shock which marked a as well as more specialized and pro­ beginning of the recognition of rail ductive capital equ ipment . The re­ problems. The Regional Rail Reorgani­ sulting increase in grain production , zation (3 R's ) Act of 1973 replaced combined with greater export demand , Penn Central with the subsidized has required larger , faster grain Consolidated Rail Co rporation (Conrail) . handling systems , resulting in larger The act did not, however , recognize the elevators and subterminals . extent of the rail problem. Conrail was required to provide service over To assemble the increased quan­ most of the same unprof itable Penn tities at these larger facilities , Central branchlines. Rail industry producers' delivery equipment has leaders and the US Department of changed from fa rm wagons and small Transportation were quick to notice trucks to large farm trucks , and even that the redundant rail system in the tractor-trailer combinations which can Midwest could well face problems carry 850 bushels or more. These similar to tho se of Penn Central. vehicles helped induce the development of improved rural roads. In response to their warnings, Congress passed the Railroad Revitali­ The effic iency and convenience of zation and Regulatory Reform (4 R's) the modern truck and the public pro­ Act of 1976 . It was an attempt to vision and maintenance of high quality improve railroad profitability by highways caused much of the grain allowing more flexible rates and traffic which had moved by rail to be expediting the decision processes for diverted . This occurred despite railroad abandomnents and mergers. The technological developments in rail­ act also required states to become roading which included signaling involved in rail system planning and equipment, diesel-electric locomotives, provided funds for rehabilitation of 100-ton cars, and specialized equipment part of the branchline system. 3 Map 1 shows South Dakota's rail subsidies in the Northeast . And , the system in 1925 . Only minor changes Ch icago , Rock Island , and Pacific (Rock occurred during the following 40 years. Island) and the Milwaukee were bankrupt The restructuring of South Dako ta's in the Midwest . The 1976 act, which rail system , wh ich began in 1965 , is required that individual states become shown in the following tab le. A first involved in rail planning and made wave of abandonments occurred between ma tching funds available for rehabili­ 1965 and 1972 . Of the 22 abandonments tation, helped to achieve recognition in these years , 13 reflected a policy of the problem at the state level. undertaken by the Chicago and North Western (C & NW) Transportation Company to rid itself of the financial drain Saving the tracks caused by light density branchlines. South Dakota is at the western end of During this time the attitude of the C&NW system. Since this period of both the general public and state abandonments in the state, the C&NW has officials in South Dakota changed from continued this policy in Iowa , Min­ that of fighting each mile of abandon­ nesota , and Wisconsin . Map 2 shows the ment to one of realizing the need to South Dako ta system after tLis first retain an essential core system. At1 abandonment wave . early step in the evolution of this new attitude came in 1973 when the governor After the 4 R's Act was passed in appointed an Advisory Task Force on 1976 , South Dakota experienced a second Ra ilroad Abandonment Policy. Although ·wave of abandonments . This was pri­ the task force continued to focus on marily due to the financial plight of the prevention of abandonments, it also the Milwaukee. During this second reconnnended changes in the state wave , the nation 's rail prob lems �axation and regulation of railroads gained wider recognition . Conrail wh ich recognized the railroads ' finan­ continued to require massive federal cial plight . Out of the work of the South Dakota railroad branchline abandonments Year Nt.llllber Miles Year Nt.llllber Miles 1965 1 5.3 1973 0 0 19 66 2 35.4 1974 1 26.0 19 67 1 47. 7 19 75 0 0 19 68 2 53.2 19 76 1 4.1 1969 3 65 .5 1977 4 14 3.0 19 70 4 12 8 .5 1978 3 210.2 19 71 5 73 .83 19 79 7 256 .5 19 72 4 122 .9 19 80 21 1, 089 .0 19 81 4 70 .3 4 5 O> JI , \}.,,71 :-. ,.J\.,�·v 1 I \ ,.-.'-' '-<I.