Branch Lines – Going Down the Tube in Montana

Great Falls, Montana, Sunday, September 26, 2004. Branch railroad lines -- the tracks that  once connected Montana's farm towns to the world's major grain markets -- are in danger of vanishing as business shifts to semi-trucks bound for giant  new elevators. Seven of the "Top 10 At-Risk Rail Lines" listed in a  major new state study serve north central Montana. In some cases traffic on them dropped 80 percent in the past 12 years.

The trend is driven by a  variety of factors: drought, farm subsidies and, perhaps most strongly, a railroad rate structure that  discourages use of the secondary rail lines, according to the study. "Much of  the branch line trackage in Montana was built in the days before roads were paved, so they represent ... how far a farmer could go with a horse and wagon in one day," said Robert Banks,  whose Washington, D.C., railroad economics consulting company conducted the study. "Basically they are an anachronism. They just don't fit  into the contemporary ways of doing business."

The endangered tracks  range from the spur line from Eastham Junction to Choteau, which saw only 89 carloads last year, to the  Fort Benton line, which carried 1,381 grain cars in 2003. Valier, Big Sandy,  Lewistown and Geraldine also are on the endangered list. The longest  threatened route in the region is the 95-mile Great Falls to Helena line, which has had virtually no traffic since  2000. Although the lines are the legacy of another era, they're a  valuable inheritance, say those who want to save them. For small towns and counties, the rails are tied to jobs, property taxes and hope for future  economic development.

Rural Montanans also cherish something less  tangible when a train whistle pierces the night. "Once you start pulling things away you  tend to lose your pride, you tend to lose your sense of community, and the town starts to deteriorate," said Big Sandy grain farmer and state legislator  Jon Tester. The nearly 300-page report was commissioned by the state departments of Transportation, Agriculture and Commerce. "We were  trying to get ahead of the branch line abandonment process for a change, instead of reacting every time BN (Burlington Northern Santa Fe Railway) does something," said Dave  Galt, director of the Montana Department of Transportation. Galt sees the  branch lines as a strong economic development card for small towns, though making them cost-effective is a challenge. "I  hate to see the systems go away," he said. "Once they're gone, they're impossible to get back."

Prairie skyscrapers. In many  small towns, the blare of train whistles is rare compared with a decade ago. Traffic on Choteau's branch line dropped from 465  carloads in 1991to 89 in 2003. In Big Sandy, use dropped from 1,747 carloads to 282 in the same period. Those interviewed in the study pointed to  several causes. They include prolonged drought and the Conservation Reserve Program, which pays farmers to idle cropland. Last year Montanans had 3.4 million  acres enrolled in the program, second only to Texas.

But the interviews  often came back to what is perhaps the biggest change in Montana's grain industry in decades, the 10 high-speed grain elevators that sprung up in the Montana countryside in the past five years. The tallest buildings on the skyline, the high-speed  "shuttle loaders" can fill 110 grain cars in well under 24 hours. One of their main features is a circular rail track that rolls cars continuously under  the grain spout. BNSF rewards the efficient new elevators with cheaper  freight rates.

Shuttle loaders enjoy a basic rail discount of $250 a car.  Those that fill a train in 15 hours or less earn an additional $100-a-car  discount. "Our vision and our approach is to focus on what we do best,  and we think that is to provide a high-volume, far-reaching mainline trainload network," Patrick Hiatte, spokesman for BNSF in Fort Worth, Texas, said in a phone interview with the Tribune Friday. "What that means is moving a whole train from one location to another." That's bad  news for traditional elevators at the end of branch lines, which can take two days to do the same job.

Because the high-speed  elevators usually offer the best prices for grain, farmers are willing to drive their harvest an extra 20, 30, even 50 miles, bypassing their branch rail line and local elevator altogether. That was the case in Big Sandy, roughly 35 miles  southwest of Havre. BNSF charges the shuttle loader elevator in Havre 12  cents a bushel less to haul grain than it charges Big Sandy's standard elevator,  which sits at the end of a branch line, according to the report. Both  elevators are operated by a limited liability partnership of Archer Daniels Midland and CHS, formerly Cenex Harvest States. The elevator  in Big Sandy hasn't requested grain cars since October 2003 because it's cheaper to ship grain to Havre by truck, the report said.

Extra miles costly. For farmers who don't live near a  shuttle loader, losing the local elevator could mean a sizable bump in fuel costs. Jim O'Hara, a Fort  Benton-area farmer and Chouteau County commissioner, would drive an extra 35 miles to Great Falls if his  local elevator closed. With trucking costs at about $1.30 per mile, he'd pay  an extra $45 to deliver a truckload of grain. But O'Hara's biggest  concern is the impact on the local economy. "As a rule, when the railroad  leaves town your elevators close up, and that's our big concern," he said last week. He estimates Fort Benton would lose 15 jobs if its rail line closed. The county would lose  tax dollars from the elevators and the railroad. Meanwhile, road maintenance costs would increase from additional truck traffic. "We're  facing depopulation, the schools are losing children, and the elevator is the lifeblood of the community," O'Hara said in the  study.

Vince Goecke, vice president and general manager of Columbia  Grain in Montana, doesn't see an imminent threat to the Fort Benton rail  line. Columbia operates elevators in Carter and Fort Benton on that  line. Although carloads dropped by almost two-thirds since 1991, the line still hauled 1,381 cars last year. "I think there's enough volume up  there to make them economically viable for BN," Goecke said. Farmers in Chouteau County, the state's  top producer, harvested 17 million bushels of grain last year of the nearly 110 million bushels produced statewide. Nearly all of the state's grain production  eventually is loaded on rail cars and shipped to coastal ports on the BNSF mainline. BNSF handles  roughly 30,000 carloads of grain a year in Montana.

Lewistown  negotiates. One Central Montana town is resigned to losing part of its  branch line, but is negotiating with BNSF for a compromise. The shuttle  loader in Moccasin, roughly 30 miles west of Lewistown, changed things "dramatically," Fergus County Commissioner Ken Ronish said in the study. BNSF wants to abandon its line through Lewistown, which has 30 costly crossings and saw only 17 grain trains in 2003.

City and county officials are teaming with business  interests to build an industrial park west of town, which would shorten the railroad's trackage and eliminate the need to maintain crossings. The state  transportation department agreed to help develop the plan, and BNSF agreed to service the park for five years. In fact, BNSF has not formally filed for abandonment of any of its lines, Hiatte emphasized. The complex abandonment process is conducted through the federal Surface Transportation Board. However, the railroad is reviewing inefficiencies in its system, Hiatte said. "We are  as a whole, as a railroad, still are not earning our cost of capital," he said. The railroad's return on capital investments last  year was 6 to 7 percent, compared with a cost of 8 to 10 percent.

Banks, with the  D.C. consulting firm, echoed the railroad's assessment of the situation. "The rate of return is so low it doesn't match the cost of the money they have to shell out," Banks said. "One way to raise their return on investment is to get rid of the  branch lines that are losers." The railroad hastened the demise of country  elevators across the Plains states in the 1980s, with the introduction of a similar discount for 52-car trains -- a new leap in efficiency at the time. "Attempts  by small communities to swim against the tide in most cases -- not in all cases -- are futile," Banks said. But communities  with the right combination of circumstances, namely enough production of goods or commodities to maintain a viable level of rail traffic, can succeed in saving their branch rail lines, Banks  said.

Focusing efforts. Galt would like to see the state focus on  lines that remain active over those where traffic has already dried up. The report, for example,  names the still-active Choteau line in Teton County as a route whose value is worth further study if BNSF moves to abandon it. Traffic on the line dropped to a relatively light use of  89 cars per year from 465 cars in 1991. But sources interviewed in the study described Teton County as a "slow growth" county, with  potential for new rail-use industry, such as oil or  manufacturing.

Saving such lines is costly. The study suggests tax  cuts or subsidies for the railroad as one option for saving branch lines. Montana Agriculture Director Ralph Peck  doesn't see subsidies for BNSF as a likely solution. "There's so many demands on state revenue right now, I would hope we could do it on a private basis," Peck  said. He would support subsidizing private, short-line railroads to operate vital branch lines.

BNSF is interested, but Hiatte wouldn't comment  on how such an arrangement might be structured. "Each individual line has its own unique circumstances in terms of customers, in terms of communities, in terms of attractiveness to a short-line operator," he said. "... It  really is just a matter of looking at the situation of each line and talking  with customers." Galt says the next key step is negotiating with the railroad. "I'm hoping we could take a more proactive stance and sit  down with the railroad and say what's in the long-term best interest for Montana  ...and I'm telling you, that's not going to be easy."

Lines  defended. Tester, the Big Sandy farmer and legislator, would prefer to see  BNSF continue running branch lines. "I don't think farmers in general  want to be in the trucking business. ... That's one of the reasons to keep the line open," he said. "I'm not so sure farmers want to be in the railroad business either." Tester and  other farm advocates don't buy claims that CRP cut grain traffic on the branch line. Although grain production slipped from  206 million bushels in 1993 to roughly 110 million in 2002, harvests should improve as drought conditions ease, they say. And some of the  past 10 years weren't as dismal. The state produced 181 million bushels of grain in 1997 and 135 million in 2000.

"It  all boils down to the railroad wanting to run through the state as quickly and efficiently as they can, and the best way to do that is to have 110-car loading facilities on the main line," said Richard Owen, executive director of the Montana Grain Growers Association. "That's the bottom line that's driving this." MGGA's president, Big Sandy  farmer Lochiel Edwards, says high railroad rates made the CRP program more attractive to many  farmers. Rail freight costs account for a third to a fourth of the value  of a bushel of wheat, he said. "The tight margins in grain production are in part caused by the excess profits of a monopolistic railroad," Edwards  said. "That makes CRP more attractive."

Changing times. Not all  farmers bemoan the change in the countryside. Brady farmer Don Bagley  lives a stone's throw from a 110-car grain elevator opened in 2002 by the Mountain View Co-op near Collins. I  couldn't ask for a nicer elevator that close," said Bagley, who invested in a 50-year-old, closed elevator in Brady at a rock-bottom price to store grain. He shows the elevator's empty meeting rooms and offices and jokes that he'll build a penthouse apartment on  top.

Bagley sees the boarded up businesses and empty homes in town as a natural evolution. He attributes the change in the community and Montana's grain industry to technology as much as railroad policies. His air seeder can cover 500 acres a day, compared with 160 in the old days. Thanks to "no-till" farming practices that use chemicals to control weeds, he can treat 1,000 acres in an afternoon, a chore that took two weeks of tilling a decade ago. "It just so happens  that times are changing," Bagley said. "That's just the way it is. Farming is not the small farm anymore. It's the corporate farm." (From The Great Falls (MT) Tribune)

Comment: It took a government funded study to tell these guys what all of us knew 25 years ago. Ever wonder why taxes are so high?

Posted: 09/27/04