Kansas shortline railroad keeping communities vital, filling needs

SHERWIN, Kan. (AP) _ An aging General Electric locomotive backs slowly toward the Butterball feed mill in rural Cherokee County. <br><br>Engineer John Horton eases the train toward a string of cars, 33

Sunday, May 5th 2002, 12:00 am

By: News On 6

SHERWIN, Kan. (AP) _ An aging General Electric locomotive backs slowly toward the Butterball feed mill in rural Cherokee County.

Engineer John Horton eases the train toward a string of cars, 33 empty ones, nine loaded with poultry mash. Motorists wait on Kansas Highway 96 as the South Kansas & Oklahoma churns at 10 mph northeast toward Pittsburg.

A shortline railroad is a labor-intensive business. While major railroads are quickly shedding that business, Watco Companies, headquartered in Pittsburg, is picking up customers one grain elevator at a time.

After 19 years in business, Watco is one of the nation's largest privately owned shortlines with 675 employees and more than 2,700 miles of shortline track.

Rick Webb, Watco's chief executive officer, credits his employees for Watco's growth, as well as ``the vision my father had.''

Webb is a third-generation railroader but didn't see the business as a good career move, especially given the state of the industry in the late 1970s.

``All I saw were railroad bankruptcies, railroad deterioration and railroad abandonment,'' he said.

But with federal deregulation in 1980, Class 1 railroads _ those with revenues of $250 million or more _ began consolidating and abandoning less-profitable track.

Webb's father saw opportunities. Watco first provided service in DeRidder, La., which is now part of the Timber Rock Railroad, one of eight owned by Watco. The company would not disclose its revenues, but said none of the railroads topped $25 million annually.

Webb said Watco has experienced about a 20 percent growth in recent years, and expects double-digit growth to continue for another five years.

Rapid expansion marks the shortline industry.

Adam Nordstrom, lobbyist for the American Short Line and Regional Railroad Association in Washington, D.C., said the industry has expanded from 200 shortliners in 1980 to 550 today _ a contrast to consolidation among Class 1 railroads.

The eight Class 1 railroads posted revenues of $33 billion in 2001, compared to the shortliners' $3.2 billion, according to the Association of American Railroads.

Shortliners like Watco, Nordstom said, find a niche because they represent the local face of railroads.

In today's climate, large Class 1 railroads move large quantities of freight _ such as coal, grain and chemicals _ over long distance. Shortlines traditionally cover lesser distances, providing customized service, such as the case with the Butterball mill.

As Watco grows, it also refurbishes track. The cost of repairing abandoned miles of rail led Watco to seek help from the Kansas Legislature.

``Right now it's 'as conditions allow,' which is walking speed,'' said Ed McKechnie, a former Kansas House member who lobbies for the company. ``It really hurts efficiency. Have you ever tried to walk from Colorado to Wichita?''

When Watco acquired its track, much of it was deteriorated, permitting trains to move at 10 mph or less. Today, only one 20-mile stretch of its original Southeast Kansas & Oklahoma railroad is not up to 25 mph condition but is due for rehabilitation this fall.

``Ten miles an hour and beyond is the make or break for railroads,'' Nordstrom said, noting that slower speed reduces any advantage railroads may have over truck transportation.

McKechnie said Watco can't make a ``throw away decision.''

``A railroad decision is a 40-year decision,'' he said. ``For example, we're pulling out ties that have been in the ground for 76 years.''

Webb agreed: ``We make improvements one tie, one locomotive or one switch at a time. It's easy if you stay focused.''

Today and for the future, Watco's focus is customers like Gary Beachner of Beachner Grain in St. Paul. Watco services six of Beachner's 16 elevators in eastern Kansas. The other 10 move grain by trucks.

In the past two years, Watco has moved 15,000 truckloads of grain to market, Beachner said. It takes approximately 3.75 truck loads at 26.5 tons fill one rail car.

``It's been real important to our grain shipments, particularly wheat, milo and soybeans,'' Beachner said.

Watco gives Beachner's elevators a direct link to the Port of Catoosa in Tulsa, Okla., opening markets that otherwise would not be accessible if grain had to be moved by trucks only, with their lesser capacity.

Lt. Gov. Gary Sherrer, who serves as secretary of commerce and housing, said having such shortline railroad service available gives companies with potential shipping a reason to invest in Kansas.

Watco has convinced many Kansas legislators that its business is important enough to rural communities to give Watco a tax credit of up to $500,000 annually for 20 years for improvements made to track it owns in Kansas. A bill awaits Gov. Bill Graves' signature.

McKechnie said refurbishing the Central Kansas & Oklahoma track will not be cheap .

For example, it will cost between $800,000 and $1 million to improve the 40 miles between Kingman and Coats to permit 10 mph travel. Routine maintenance runs as much as $6,000 a mile.

In southeast Kansas, Horton's journey halts as he and a Watco road crew switch cars near Cherokee. He has to pull his 1963-built engine through a crossing and back it down a switch onto BNSF tracks to head toward Pittsburg.

The process can take as long as an hour because of the age of the engines and track conditions. Too heavy a load can mean spinning wheels. This day goes rather smoothly _ the switch taking only about 30 minutes.

``Such is life on the shortlines,'' he said. ``You never do this on Class 1's.''