Monday, April 08, 2013

Railway Age’s 2013 Short Line of The Year: Gardendale Railroad

Written by  Douglas John Bowen, Managing Editor
By almost any definition, Gardendale Railroad is clearly a short line railroad. And by most measures, it’s also an extraordinary one. Indeed, “Mighty Mite” stands tall in Texas.

The wholly owned subsidiary of Ironhorse Resources, Inc. began its existence in 2010 overseeing approximately 1,600 feet of the connecting interchange track and 6,200 feet of a 100-foot wide railroad right-of-way roughly midway between Laredo and San Antonio, Tex., a vestigal remnant of a 50-mile ex-Missouri Pacific route since abandoned.

Gardendale has made the most of its geographic positioning. In a just 28 months, the railroad has grown from having no customers to handling nine; has generated 170 full-time jobs (combining 12 railroad employees and personnel among industry customers served); has grown its locomotive fleet from zero to five; has expanded its operations from 15 acres to 270 acres of property served (with an option to add 220 acres more); and has grown from 1,600 feet of track to 25 miles of track, predominantly yard track to serve its growing customer base.

It’s a performance deserving of—and perhaps overdue for —Railway Age’s 2013 Short Line Railroad of the Year Award.

Gardendale officials say 2013 will see continued growth, with annual carloads increasing from just 395 in 2010 to 16,409 in 2012; with projections of 22,000 this year.

Eagle Ford shale, UP spur growth

GRD officials trace the short line’s history back to 1990, when Crystal City Railroad, Inc., a wholly owned subsidiary of parent Ironhorse Resources, purchased 50 miles of right-of-way from Missouri Pacific. In 1995, the major customer on the line, generating 1,000 carloads per year, discontinued shipping, prompting abandonment of 49 of the 50-mile branch. Ironhorse Resources discontinued operations maintained ownership of approximately 1,600 feet of the connecting interchange track and 6,200 feet of a 100-foot-wide railroad right-of-way. And it waited for opportunity.

Hydraulic fracturing, a factor in freight railroading in North Dakota and Pennsylvania as well as in Texas, proved to be a trigger factor, according to Matt Cundiff, Gardendale’s vice president Southern Region at Ironhorse Resources, Inc. “We started receiving calls in 2010 about something called ‘shale,’” Cundiff quips, as the oil industry began earnest efforts to extract product from the Eagle Ford shale formation.

Short on assets, Gardendale Railroad first established an “Agency Agreement” with Union Pacific Railroad, allowing UP to interchange cars to GRD directly to the 1,600 feet of track. UP also acted as GRD’s agent for creating outbound trains when the cars were released by a Gardendale customer. The arrangement gave the short line time to upgrade its track and acquire its own motive power to interchange cars and switch customers.

Union Pacific “has been a tremendous partner in this progress, working to grow this facility,” says Ironhorse Resources President Greg Cundiff. “It’s really been to both of our interests to have this succeed. They’ve done everything they can to help us grow.”

The entirety of GRD’s infrastructure is 100% new build and, according to Matt Cundiff, a complete replacement and upgrade of the original 1,600 feet now sports 112 pound rail and new ties throughout, replacing 90 pound rail and ties well past their useful life.

Supplier expertise assists effort

As with most small railroads, Gardendale sought help from suppliers for the revamp. Cundiff praises the work of Trac-Work, Inc., and particularly Clarence Bader from the company’s San Antonio office, for yard track layout and expansion. As well, Schertz, Tex.-based Central State Resources, Inc., specializing in railroad design and construction for oilfield and commercial industries, made its mark with subgrade and subbase work in preparing GRD to operate and to increase its outbound traffic capacity.

Inbound moves also are increasing, Cundiff says. “We’ve begun receiving unit trains of frac sand, a new evolution in 2012,” he notes. In addition, “Since 2011, unit trains of pipe and unit trains of crude” have become part of outbound traffic.

GRD’s nine current customers—five of them added in 2012—have diversified the railroad’s product line; movements now range from frac sand to barite and bentonite, hydrochloric acid, line pipe, crude and natural gas liquids, and even what Matt Cundiff terms “drilling mud.”

As the customer base has grown, so has the need for yard space, necessitating GRD’s Phase 3 development plans to add 220 acres to its operations, in essence nearly doubling the existing space, and sporting 28 miles of track in total. The original two phases, consisting of land mostly obtained through long-term lease, are nearly fully filled.

When GRD initially secured an 80-year lease for 100 acres adjacent to its modest right-of-way, “We thought we’d acquire twice what we needed,” Matt Cundiff recalls. “It didn’t work out that way; we filled up all of that 100 acres almost immediately,” with four customers brought on line for service.

Planning for growth

In January 2011, GRD purchased more than 150 acres of adjacent land to expand its operations, subsequently realizing that Phase 3 would be necessary to handle continued growth.

“Our corporate strategy is not to invest in any solution that does not allow unit train handling solutions, Cundiff told Railway Track & Structures in 2012. “If a Class I railroad prefers to handle a 100-plus car train, that is the solution we need to invest in. With only a 6,200-foot-long, 100-foot-wide corridor, how do you create a unit train handling solution with a switching lead that allows growth and flexibility to service new customers?

“We simultaneously worked in-house on conceptual designs and further employed Central State Resources, Inc., to provide the final rail engineering for the site,” Cundiff said. “After a multitude of designs, we finalized our Memorandum of Understanding with Union Pacific. “The result provided an expandable solution that provides for an open-runaround track and multiple 3,300-foot-long tracks. This allows an inbound movement to ‘double-over’ and allows the Union Pacific locomotives to run-around the placed inbound interchanges.”

The long-range planning continues today. Gardendale Railroad is one of nine affiliated companies under Ironhorse Resources, which includes six short lines, two truck companies, and one logistics company. Parent company President Greg Cundiff says the trucking and logistics arms offer synergies to the short lines, including Gardendale.

“We put a logistics arm together that we use for all our locations,” the president says, noting that even when it came to transload business, “UP helped us.” The transload business also assists Ironhorse Resources in applying lessons learned on the Gardendale Railroad, the first short line it acquired, with its rail brethren, or vice-versa.

Overseeing GRD’s development is General Manager Del Randall and Director of Operations Greg Wheeler, both deserving of high praise, Greg Cundiff says, adding, “It’s been a team effort; the staff has worked hard.”

Judging from the impact Garden-dale Railroad has made for its size, in so short a time, that hard work is being rewarded.