The Little Railroads That Could

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The Little Railroads That Could

by Luke Jones on Monday, Apr. 1, 2013 12:00 am

The Arkansas Midland Railroad started in 1992 and has 150 miles of track across several regions of the state.

Luke Jones

A Little Rock & Western Railway engine hangs out in a shed built onto Perry (Perry County)’s original Rock Island passenger depot.

Luke Jones

The Little Rock & Western Railway is one of Arkansas’ 22 short line railroads.

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Short line railroads account for only about 3 percent of the country’s total railroad-generated revenue. But compared with other states, where governments have had to buy up miles and miles of unused track to keep them operational, Arkansas’ network of short lines has stepped up to help keep the industry stable.

A little more than 1,000 miles of railroad in Arkansas are locally owned and operated.

“I think Arkansas is really very blessed with the short line industry that is here as I compare that to some states in the country,” said Charles Laggan, president of Local Railroads of Arkansas Inc. and the Arkansas Midland Railroad.

Michigan’s government, for example, operates 15.5 percent of its rails; Wisconsin operates 24 percent.

Arkansas is among the states with the lowest percentage of state-owned rail track, with less than 1 percent owned by the government.

“Those are mostly things like, for instance, the trackage at the Port of Little Rock,” Laggan said. “It’s owned by the city of Little Rock by design. They didn’t have to acquire it because it was abandoned by one of the larger railroads.”

Short lines, Laggan said, are helping rescue unused track from abandonment. Rights of way operated by short lines are usually spun off by larger carriers. For instance, the Missouri & Northern Arkansas that runs from Diaz in Jackson County to Cotter in Baxter County runs on former Union Pacific rails. The Little Rock & Western Railway uses east-west rails between Danville (Yell County) and Little Rock that became available when the Rock Island Railroad went bankrupt in 1980.

“These are lines that, for the most part, the large carriers didn’t have interest in operating anymore,” Laggan said.

Laggan’s company, the Arkansas Midland Railroad, is another example of this. When it started in Malvern in 1992, it comprised four former Union Pacific lines, three of which were candidates for abandonment if they had stayed with UP.

Now, Midland owns nine lines comprising 150 miles of track across several regions of the state.

In the state there are 22 class 2 and class 3 — usually called short line — railroads.

By comparison, the three class 1 railroads in the state — BNSF, Kansas City Southern and Union Pacific — have about 2,500 track miles.

The three classes are divided by gross revenue and track mileage: Class 1 railroads exceed $359.6 million per year; class 2 railroads are between $40 million and $359.6 million and operating more than 350 miles of track; and class 3 railroads are under $40 million.

Forty-two of the state’s 75 counties are served by short lines. Some of the lines are held by larger railroads like Genesee & Wyoming Inc. of Greenwich, Conn., but many are headquartered in Arkansas and all of them at least have a local office.

Personalized Service

Typically, short lines exist in a symbiotic relationship with larger railroads and other modes of transportation.

“They have a tendency to reach for business that’s been lost where the main line carrier is running at capacity in some areas,” said Craig Christiansen, a rail historian who runs a train museum in Bald Knob (White County). “When it comes to short lines, they can do personalized service that a lot of people can’t.”

Laggan, for instance, said about 95 percent of his railroad’s cargo starts or ends on another railroad.

“We call that an ‘interchange’ when we hand a car off to Union Pacific,” he said. “We have seven different interchanges with Union Pacific in Arkansas. We actually feed them traffic.”

The first-mile and last-mile parts of the trip tend to be the most labor-intensive, Laggan said. In other words, they’re expensive and time-consuming for a huge company like UP, so those are the parts of the trip that Midland handles.

Midland transports lumber, stone for road construction, drilling pads, cotton seed, aluminum and cement. Some of its major clients are local facilities of large companies like Clearwater Paper, Potlatch, Georgia-Pacific and Firestone Building Products Co.

Not every short line is as diverse as Midland: The Little Rock & Western spends most of its 79 miles of track on one client: Green Bay Packaging in Morrilton. Operations Manager Steve Marsh said LR&W also handles some Deltic Timber Corp. products, but otherwise focuses on Green Bay products from Morrilton to class 1 interchanges in Little Rock.

“Paper has always been its major client,” Marsh said. “We’ve always had a good business here. We’ve always been a profitable railway.”

Some other clients served by short lines in Arkansas include Albemarle Corp., Entergy Arkansas Inc., ConAgra Foods and Tyson Foods Inc.

Also, some of Arkansas’ short lines have diversified from just freight. Midland, for example, operates two Railroad Distribution Services locations for loading and unloading rail cars. The Arkansas & Missouri Railroad in northwest Arkansas operates a passenger excursion line between Fort Smith and Winslow (Washington County) using antique Pullman cars.

Ups and Downs

Just like the larger railroads, short lines have had ups and downs during the past 100 years.

“Some have gone by the wayside,” Christiansen said. “That may not necessarily be their fault more than just the economical business climate being what it is.”

But in recent history, the amount of track operated by short lines has increased as class 1 lines have decreased.

“It’s an ebb and flow, like breathing in and out,” Christiansen said.

The Association of American Railroads showed in 2010 that class 1 carriers have decreased their countrywide track mileage by about 50 percent since 1967 — from 200,000 to about 100,000. Short lines have increased from nearly nothing to about 50,000 miles.

Laggan said one of the big reasons was the Staggers Rail Act of 1980 that partially deregulated railroads.

“It gave us pricing freedoms that we didn’t have prior to 1980,” he said. “It let us price to the market. It’s been a blessing to the industry as well as railroads over time.”

Laggan said a good customer-railroad relationship is common among Arkansas short lines and this also accounts for the industry’s current health in the state. Laggan worked with a class 1 carrier for the first 20 years of his career and said customer service is on a different planet in the short line universe.

“Generally, the short line is a lot closer to the customer,” Laggan said. “If we have an issue with the customer, we can hop in a car, go see them and talk about the problem.”

“I’m not saying the big railroads are at fault,” Christiansen said, “but a little railroad speaks one-to-one like you and I would, rather than making you go to an 800 number.”

“I know a number of the operators,” Laggan added. “A lot of them are not in it for just short-term profit. Our company is long-term focused. We develop quality relationships with who we serve. Most of the time I know customers’ spouses, kids. We’re into the trenches.”

Short Line Railroads in Arkansas