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New name, expanded game plan

Written by Douglas John Bowen

Take three small railroads, add acres of intermodal transfer capability, mix with marketing, and get ready for dynamic change in South Carolina's key port city, courtesy of Palmetto Railways.

What’s reflected by a name change? Plenty: a revamped organization of three area short lines, a new role as economic development counselor, and a focus on bolstering activity at the Port of Charleston, S.C., including intermodal as a key growth driver.

In just two years under its new name, Palmetto Railways has made its mark in the Palmetto State, earning it Railway Age’s 2015 Short Line of the Year award.

Palmetto Railways unified three properties, all under the umbrella of South Carolina Public Railways, which President and CEO Jeffrey M. McWhorter observes was “creating a lot of confusion” on official levels, from a public viewpoint, and even among employees.

“A response you’d get on the street is, ‘Oh, you work at the port railroad,'” regardless of the actual railroad involved, McWhorter says, reflecting on his arrival at his current post as president in 2007.

Unification in 2013 solved the identity crisis and allowed Palmetto Railways to reorganize under three subdivisions: The Charleston Subdivision, the North Charleston Subdivision, and the Charity Church Subdivision.

“He has done a wonderful job of building the railroad and expanding its offerings,” says Mark Clinton, owner of Louisville, Ky.-based Millennium Rail Services, supplying Palmetto Railroad with signal products, replacement parts, and rebuild components.

The railroad currently employs about 63 employees, up significantly from 35 people (spread across three properties) seven years ago and from 46 as recently as early last year. Staff includes a mechanical group of four employees, and an engineering group of six, covering maintenance and infrastructure needs.

Those needs are expanding as the railroad grows. Palmetto Railways recently added two locomotives to its fleet, for 12 locomotives in all. As well, last year the railroad completed adding 3,400 track-feet of capacity, replaced some 4,500 crossties in various locations, and upgraded two highway-rail grade crossings.

Roughly 125,000 carloads are moved across its rights-of-way, a total seemingly destined to grow. Palmetto Railways anticipates a 16% growth spurt in 2015, or approximately 140,000 carloads.

Palmetto Railways also offers locomotive repair and leasing services for its customers and other clients, which McWhorter hopes to expand. “We’ve not pursued that too aggressively, but the business is there,” he says. “We may be looking to expand, as well as [offer] car repair service,” in the near future.

Intermodal opportunity beckons

Palmetto Railways is an “enterprise agency” of the state of South Carolina, receiving no direct appropriations for operations. The short line interchanges with both CSX Corp. and Norfolk Southern Corp., serving customers from outside its territory as well as some within the port area, including heavyweights such as BP Chemical and Nucor Steel, a subsidiary of Charlotte, N.C.-based Nucor Corp. specializing in hot-rolled, cold-rolled, and coated steel coils. Other customers are well-known names to the railroad world: Siemens and General Electric.

Those companies, and others, can expect to benefit from development, now ongoing, of the 100-acre, $200 million Intermodal Container Transfer Facility (ICTF), which Palmetto Railways will own and operate (diagram below). “We describe it as a hybrid on-dock/near dock facility,” McWhorter says. “It will operate as on on-dock facility, so the drayage between the facilities will operate as an internal drayage, and won’t be out on public railroads and highways.”

Local political crosscurrents have put the disposition of other nearby parcels of the former 400-acre Charleston Navy Base in North Charleston in flux, but McWhorter says he expects Palmetto Railways, “after all is said and done, to have 150 acres available for development.” The railroad has received submittals from eight different development teams, all involving a mixed-use approach. “We’ve not decided on any one thing right now, but we hope for some type of mixed use of warehouses and, perhaps, distribution centers that are well-served,” McWhorter says.

The Port of Charleston, meanwhile, already handles post-Panamax international container shipments, making it the No. 8 U.S. port measured by cargo volume. Dredging work will improve shipping capabilities still further, with work to increase Charleston Harbor to 52 feet by 2020.

ICTF is scheduled to begin operations in 2018, as is the nearby South Carolina Port Authority’s new marine container terminal immediately adjacent, with both expected to benefit significantly from improved port operations.

The ICTF’s design has minimized, if not eliminated, Palmetto Railways’s need to acquire additional rights-of-way to properly incorporate the facility into existing infrastructure. Plans call for equal access by CSX and Norfolk Southern through use of existing rights-of-way, reducing potential conflicts with adjacent neighborhoods.

McWhorter allows, “We have to reach an agreement with CSX; to date, we haven’t reached that agreement, but we continue discussions.” Palmetto Railways does have the option of an alternate route, using land it owns running through the “hospital district,” McWhorter notes, “but it is within a historic district. We’d like to avoid that, if possible.”

SECURE-ing a future

McWhorter is proud of Palmetto Railways’s safety record. During 2013, the company had no lost time injuries, no FRA reportable derailments, and no human factor derailments. While all of 2014’s results haven’t yet been finalized, the railroad again “worked injury free,” and McWhorter says to his best knowledge the railroad last year extended its winning streak across the board.

He attributes that record in large part to the company motto of being SECURE, an acronym denoting Safety, Efficiency, Customer service Requirements, and Expenses. Palmetto Railways complies strictly with FRA and OSHA regulations using SECURE as its template for its safety record.

As for the first “E” of SECURE, “Efficiency is key because it has multiple meanings,” McWhorter observes. “We not only want to create efficiencies across the company; we want to maximize efficiencies so that we are better positioned for growth.” That includes Palmetto Railways’ assumption of operations this year that currently are leased to other parties, McWhorter says.

No mystery surrounds the drive for customer service, McWhorter says. “We want to have the right car in the right place at the right time,” he says, in order not to just meet customer expectations, but exceed them.

Controlling expenses involves offering technical assistance to existing and potential customers, not just in the private sector but also including local, regional, and state authorities. Services such as locomotive repair and consulting advice are also part of Palmetto Railways’s income spectrum.

On the investment side of the expense equation, Palmetto Railways last January submitted a 36-page waiver request to the FRA, related to the agency’s Buy America policy applicable to the Railroad Rehabilitation and Improvement Financing loan program (RRIF). The railroad seeks to acquire three electric, rail-mounted, high capacity wide-span cantilever gantry cranes, but notes such cranes available on the market are manufactured only outside the U.S.

McWhorter doesn’t plan on limiting the railroad’s potential to its physical reach. “We plan to continue to grow our business beyond the confines of the port terminal fence line,” he says, to serve an ever-larger slice of the Palmetto State—and beyond.

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