Tuesday, May 18, 2010

NS chief: Washington rail stance is “verging on schizophrenia”

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Norfolk Southern CEO Wick Moorman had good news for his shareholders, at least for the short-term, at their annual meeting in Williamsburg, Va., last week.

moorman_lg.jpg"Simply put, your company came out of the worst economic downturn since the Great Depression in as good or better physical and financial condition than we went in, an exceptional tribute to the strength of the industry, the NS franchise, and most importantly, to the people of Norfolk Southern," said Moorman (pictured) in a prepared statement posted on the company's website. A news release also quoted him as saying:  "The stage is set for a good 2010."

But in his statement, Moorman warned of potentially serious long-range problems, for which he blamed (1) a group of '"cynical and short-sighted shippers" who with the enthusiastic help of Senator Jay Rockefeller (D-WVA), chairman of the Senate Commerce Committee, are attempting to win reduced freight rates by tinkering with rail regulation; and (2) a Washington attitude toward railroads that "is verging on schizophrenia."

"With strong fundamentals and a company with terrific people, excellent customer service, and a strong physical plant and assets, you would think that I would be forecasting a bright future, indeed, but I also have to say a word about Washington, where bright futures have been blighted before," said Moorman. "On the negative side, we are still engaged in defending against the long-running initiative by a small, but well-funded, group of rail shippers who are attempting to alter the economic regulatory regime that governs us so as to lower their rates, and at the same time seriously damage our ability to earn adequate returns for you our shareholders, and invest in the future.

"Fortunately," he added, "this is neither a public issue nor a partisan one, and relatively few congressmen support any significant changes, although unfortunately for us, a couple of those who do hold key committee chairmanships. The industry has been working with the Senate Commerce Committee for well over a year now to try to find common ground. The Commerce Committee has produced a bill that causes grave concern, but they want our support and we are continuing the dialogue with them. At the end of the day, I still believe that a bill that's fundamentally bad for our industry cannot be passed."

He went on to the " second really bad thing that Washington has done to us...  mandate the installation of Positive Train Control, or PTC, technology by the end of 2015."

"I don't want to say much about PTC, so I'll just remark that other than the mandate being unfunded, the technology unproven for heavy main-line operations, the cost of installation of the system estimated to be $10 billion, and the government's own estimate that every $22 of cost will yield $1 of benefits, it's really not such a bad idea," Moorman said.  "It is a legislated mandate, so all we can do is argue for changes in the legislation. We're getting a lot of sympathy, but it's unclear how that will manifest itself in votes."

Bu schizophrenia has two sides, and Moorman was also able to say: "The very positive thing that is happening in Washington, in state capitols, and in broader public opinion as well is the growing belief that rail transportation, for both freight and passengers, must play a much stronger role in helping to solve our nation's growing transportation problems. This is the reason that D.O.T Secretary Ray LaHood is calling for a complete rethinking of transportation policies and advocating shifting freight traffic off of the highways and onto rails. Not only is the Administration advocating this, with broad Congressional support, they are putting money up to get the process started. As part of the Stimulus Act, $1.5 billion in TIGER (Transportation Investment Generating Economic Recovery) grants for non-traditional transportation projects was set up.

"Norfolk Southern put together a five-state coalition to seek funding for our Crescent Corridor initiative, and we received a $105 million grant, the largest single TIGER grant, to build new intermodal terminals near Memphis and Birmingham. Similarly we worked closely with Amtrak and several states in seeking participation in the $8 billion in High Speed Rail funding set up under the Stimulus Act, and as a result, several hundred million dollars will be spent on NS lines over the next three years, including relieving chokepoints on our key route into Chicago.

"This funding was obtained through the creativity and hard work of a lot of members of the NS team, and I believe that our success is a harbinger of more good things to come."