Wednesday, January 16, 2013

Engineer rides American Dream to a short line

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It is unlikely Scott DeVries soon will be sitting aside Norfolk Southern Chairman Wick Moorman at an Association of American Railroads board meeting, or sharing small talk over lunch with Union Pacific Chairman Jim Young. And whether DeVries someday becomes Railway Age's Railroader of the Year is unknown. But read on.

DeVries not only runs a railroad —he outright owns one (Rogue Valley Terminal Railroad, formerly White City Terminal Railroad), putting him in the rarified environment of Warren Buffett, whose Berkshire Hathaway investment fund outright owns BNSF. As the cliché goes, DeVries' 13-mile railroad may not be as long Buffett's BNSF, but it's just as wide in track gauge.

DeVries is an FRA licensed locomotive engineer in Superior, Wis., on Canadian National's Wisconsin Central subsidiary, and how he came to create a railroad holding company, with its first acquisition being a short line in Oregon, is a story worthy of Walter Mitty (author James Thurber's fictional character who imagined himself a wartime pilot, emergency room surgeon, and hired killer). DeVries, by contrast, is no fictional character.

The 30-year-old Michigan native followed the career footsteps of his great-grandfather (a Railway Post Office employee and later a Pennsylvania Railroad shopcraft employee) and his father (still a CSX clerk in Grand Rapids, Mich.), after earning an undergraduate degree in physics and math at Washington State University. DeVries is now an MBA candidate via on-line courses offered by Aspen University, which will serve him well in overseeing the finance, marketing, information technology and other managerial requirements of running a small railroad. "Railroads have always been my passion," says DeVries.

His acquisition of White City Terminal Railroad was a fortuitous event. "In late October, an acquaintance aware I was shopping for a railroad pointed me to BNSF's filing with the Surface Transportation Board disclosing" a common-ownership wrinkle stemming from the Berkshire Hathaway acquisition of BNSF and requiring divestiture by BNSF of White City Terminal Railroad.

"You don't necessarily need to be a millionaire to acquire a railroad," says DeVries, who declines to say what he paid but says the potential for profit exists. "There are many lines that can be acquired by relatively ordinary folk for reasonable sums. The problem usually is that most rail lines for sale for such smaller amounts are usually a challenging investment in terms of developing the line enough to realize a reasonable return on investment."

So it was that DeVries created RVTR Rail Holdings, of which he is sole owner, and which he calls "a platform for the possibility of future railroad acquisitions down the road." Aware that railroads historically have been named to describe their geographic scope or intent, the name Rogue Valley Terminal Railroad borrows ambition from the Rogue Valley of southwestern Oregon, a timber, fruits, and wine-producing region along the Rogue River.

(As a historical note, until more modern times, Pere Marquette Railroad, named for a Jesuit priest and now part of CSX, stood alone as a railroad with a name not describing its geographic reach or intentions. Consolidations of Class I railroads largely blurred that historic artifact, with, for example, the consolidation of Northern Pacific, Great Northern, and Chicago, Burlington & Quincy into Burlington Northern; and the consolidation of Atchison, Topeka & Santa Fe with BN to create BNSF. Similarly, there was the consolidation of Atlantic Coast Line, Seaboard Coast Line, Baltimore & Ohio, Chesapeake & Ohio, and Richmond, Fredericksburg & Potomac into CSX. Conrail—now parceled out between CSX and Norfolk Southern—obliterated New York Central, Delaware, Lackawanna & Western, New York, New Haven & Hartford, and the Pennsylvania Railroad. But I digress.)

So in the CEO chair of Rogue Valley Terminal Railroad now sits locomotive engineer Scott DeVries, holding dominion over 13 miles of track, two locomotives with builders' plates dating to 1946 and 1954, 87 freight cars under lease, and a connection with Genesee & Wyoming's Central Oregon & Pacific short line that connects with Union Pacific at Eugene.

Rogue Valley Terminal Railroad's principal commodities currently are wood products, asphalt, and fly ash, but DeVries, invoking "the American dream," envisions industrial development that will emerge following the current economic downturn. An Oregon newspaper reported that with heavier rails installed, Boise Cascade and other area plywood manufacturers could become customers.

Perhaps it is ironic that a locomotive engineer—continually reminded by his labor union of the existence of the Federal Employers' Liability Act (FELA), which allows injured railroaders to sue for actual and punitive damages when injured—now occasionally disturbs his sleep with visions of a bankruptcy causing FELA lawsuit. "I am very familiar with FELA and there is always risk in that area," DeVries says. "My strategy, like many other modern executives, is to mitigate those risks through active safety management/risk management practices and actively engaging employees in the safety culture process."

"Establishing and maintaining a successful safety culture is about far more than writing more rules and regulations," says DeVries. "It's about engaging employees in a two-way open, honest discussion to establish mutual trust and ownership sense when it comes to safety responsibilities for both parties. This day and age, because of the financial risks, available technologies and valuable past experiences, there is simply no acceptable reason to operate any standard lower than a total commitment by both employees and management. Zero injuries/incidents can no longer be a goal. It has become a business and ethical mandate by necessity."

On that note, perhaps DeVries should, in fact, be sitting with other railroad CEOs at Association of American Railroads board meetings; and perhaps in a roundtable with railroad, rail union and FRA leaders.

Frank N. Wilner

Frank N. Wilner is author of six books, including, Amtrak: Past, Present, Future; Understanding the Railway Labor Act; and, Railroad Mergers: History, Analysis, Insight. He earned undergraduate and graduate degrees in economics and labor relations from Virginia Tech. He has been assistant vice president, policy, for the Association of American Railroads; a White House appointed chief of staff at the Surface Transportation Board; and director of public relations for the United Transportation Union. He is a past president of the Association of Transportation Law Professionals.