Kansas Joint Legislative Transportation Vision Task Force

Testimony by Dave Ebbrecht, President of the Kyle Railroad

To be submitted at the November 8, 2018 meeting at State University

Contact: Jeff Van Schaick AVP Government Affairs 682-351-6275 [email protected]

The Kyle Railroad (KYLE) is a 508-mile railroad with 421 track miles serving 15 counties across north central and northwest Kansas and 87 miles serving two counties in . The line has a long and colorful history, but it almost came to an end in the 1970’s. The route was part of the main line network of the Chicago, Rock Island and Pacific Railroad (known as the Rock Island), as part of its routes between Chicago, St. Louis, and . This railroad suffered terribly in the general decline in revenues and profits of the U.S. freight railroads after World War II, aggravated by expansive over- regulation of freight railroads by the federal government. This led to significant deferred maintenance and chronic service problems all over the Rock Island by the 1970’s.

In 1975, a group of investors purchased the line that would become the KYLE from the bankrupt Rock Island to preserve rail service in Kansas’ northern tier and eastern Colorado. This was timely; in 1980 what was left of the Rock Island stopped service and was liquidated, either for scrap or for sale to other companies. At the time of its shutdown on March 31, 1980, it was the largest railroad in the country to be liquidated.

Today KYLE transports 24,000 carloads of freight annually, principally grain harvested in the northern Kansas agriculture belt. This is the equivalent of approximately 96,000 semi-truck loads. Please see attached map.

While KYLE saved a significant rail freight corridor in Kansas from the eventual liquidation of the Rock Island in the 1980s, the line itself suffered from decades of deferred maintenance. The early owners of KYLE had their hands full simply maintaining service over the line, let alone making long-term improvements to handle heavier freight cars.

There is a broader public policy issue at play here. Without short line freight railroads like the KYLE saving lines that otherwise would be abandoned, hundreds of communities and rail freight customers across Kansas would have been left without access to the national rail freight network. To put it in perspective, in the 1970s, 16 Class I railroads operated over 8,000 miles of rail lines in Kansas. Today,

Dave Ebbrecht, Kyle Railroad November 8, 2018

three major railroads own and operate just 2,723 route miles of track, complemented by 1,806 miles of track operated by short lines.

Fortunately, Kansas Department of Transportation (KDOT) has always recognized the importance of the state’s Short Line freight railroads. With agriculture as the state’s principal industry, trucking is not a realistic alternative to move Kansas’ vast production to the regional and national markets, as well as port facilities at the Gulf of Mexico and along the west coast of the United States. Trucks are not a cost-effective mode to move bulk commodities, such as grain, over long distances due to high fuel costs.

With an understanding of the importance of rail and the recognition of the infrastructure need, the Kansas state legislature authorized the State Rail Service Improvement Fund (SRSIF) in 1999, which provided low interest loans and accompanying grants to railroads in Kansas. In 2004 and 2005, KDOT completed two studies that documented the importance of the short lines to the state and the benefits of SRSIF to the short lines. The 2005 study concluded: “Significant infrastructure requirements such as rehabilitation of track and structures, still face the Kansas short line railroads in order for the short lines to be able to provide safe, dependable, and efficient service to the hundreds of Kansas businesses that rely on short line railroads to transport their products and goods. The magnitude of this infrastructure need is sufficient to warrant a multi-year extension of this effective Program.” During its 2010 session, as part of the Transportation Works for Kansas (T-WORKS) multimodal transportation program, the Kansas Legislature approved an increase in SRSIF funding to $5 million annually beginning July 2013, up from the $3 million in the original program.

As it stands, KYLE is the only connection to the national freight rail system for many grain elevators in north central and northwest Kansas. These elevators and their customers are at a significant competitive disadvantage because much of KYLE from Limon, CO across Kansas can only accommodate lower capacity, 268,000 pounds, or light loaded freight cars. The condition of the KYLE rail bridges prevents the railroad from handling the standard 286,000-pound railcar.

It has been more than 20 years since the Association of American Railroads issued the standard that increased the maximum gross-weight-on-rail allowed per car from 263,000 pounds to 286,000 pounds. Nearly all the railcars manufactured since then have been 286,000-pound cars. Over time, it will become more and more difficult to find lower capacity railcars to provide service on railroads that do not meet the current standard.

Kansas depends on the Kyle and other short line railroads to move its products to market, provide its industries with raw materials, and deliver consumable goods to its residents. The short lines play an especially crucial role in moving grain from local elevators to market destinations.

KYLE’s inability to transport the standard 286,000-pound railcar adversely affects the farmers and grain elevators served by KYLE, thus the local rural economy. This is through the increased transportation

Dave Ebbrecht, Kyle Railroad November 8, 2018

costs associated with shipping less than standard railcar shipments, resulting in the inability then to complete in many U.S. and international markets.

The major growth market for grain exports is through the Texas and Central Gulf ports. The connecting Class I railroads, BNSF Railway (BNSF) and (UP) serve these high-demand grain markets with dedicated unit trains consisting of 100 or more 286,000-pound covered hopper cars to meet the required 420,000 bushel contract spec.

Export elevators in the Texas and Central Gulf discount the price on bushels that do not meet contract spec, as is the case with KYLE’s smaller railcars. Thus, grain shipments originating on those short lines are relegated to already-saturated domestic markets due to their inability to compete with a single unit train. Consequently, the grain elevators served by KYLE, and ultimately the Kansas farmers, receive lower prices for their grain.

The solution to this situation is to find a way to augment current KYLE investments in its lines to accelerate upgrades in its bridge structures to allow handling of industry-standard 286,000 lb. freight cars. The continuation of KDOT and State of Kansas support through programs like the SRSIF effort are very important to this end.

State investment in short line Kansas rail infrastructure through the SRSIF is critical to ensuring the livelihood of rural Kansas farmers. The Kansas SRSIF can help close the gap in the massive infrastructure need that plagues the Kansas short line industry. This will allow for continued safe operation of the Kyle, and more efficient service for the Kyle’s customers.

Dave Ebbrecht, Kyle Railroad November 8, 2018

Dave Ebbrecht, Kyle Railroad November 8, 2018