2012 MATC Fall Lecture Series: Dan Sabin

Larissa Sazama Author

11/07/2017 Added

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2012 MATC Fall Lecture Series

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[00:00:02.311]Well, welcome to MATC Seminar Series.
[00:00:05.267]It's my pleasure to introduce Dan Sabin,
[00:00:07.994]who's going to be talking today.
[00:00:09.569]He's the CEO and President of Iowa Northern Railway Company.
[00:00:13.650]He has a wealth of experience in running short lines
[00:00:15.943]and working for the Class I railways.
[00:00:18.700]For the football fans out there,
[00:00:19.925]he also runs the Hawkeye Express every Saturday
[00:00:23.723]when there's a home game in Iowa City.
[00:00:26.040]And I can't wait to actually take that train, Dan.
[00:00:29.007]I'm looking forward to that.
[00:00:30.837]And he's gonna be talking about the issues
[00:00:35.498]of operating and the engineering issues of running a railway
[00:00:38.794]and looking at the big picture.
[00:00:40.099]So, Dan, thank you very much.
[00:00:41.576]Thank you.
[00:00:42.650]Good morning.
[00:00:47.732]I'll talk a little bit about the Iowa Northern
[00:00:50.253]and how we came to be.
[00:00:52.917]But, what I'd like to do is,
[00:00:55.655]as many of you may not know a lot about railroading,
[00:00:59.015]it may be interesting to talk about the opportunities
[00:01:02.496]that we have in the industry,
[00:01:04.233]particularly the growing short line industry.
[00:01:06.960]So, I've adapted this in a way where I kinda take a lot
[00:01:09.934]of the small pieces and put 'em into a big picture scenario
[00:01:14.573]because, at the end of the day, we're a business.
[00:01:17.510]And we'll talk a little bit about that.
[00:01:19.446]This was originally a main line of the Rock Island.
[00:01:23.013]The Rock Island liquidated in the early '80s
[00:01:25.974]and so, the grain elevators on the line worked together
[00:01:29.788]with the trustee of the liquidated Rock Island
[00:01:32.586]and bought it on February 22 in 1984.
[00:01:36.571]We now cover north eastern Iowa with about 185 miles.
[00:01:45.254]In the early years, when they took over the line,
[00:01:47.437]there hadn't been trains over the track for some time
[00:01:50.055]and it was, literally, pastures for the farmers.
[00:01:52.968]They had knocked down all the fences
[00:01:56.713]and there were actually four-inch in diameter trees
[00:01:59.720]growing between the rails.
[00:02:01.309]So, you can imagine what a challenge it was.
[00:02:05.365]This is a map of our line.
[00:02:06.389]We're kind of unique in the short line industry
[00:02:08.525]because many short lines are spin-offs of a Class I railway
[00:02:12.964]and they only have one connection.
[00:02:14.997]The Iowa Northern's very fortunate
[00:02:16.397]that we have three connecting points with Union Pacific,
[00:02:19.787]two with Canadian National, two with Canadian Pacific
[00:02:23.858]and then we connect, also, with the Iowa Interstate System
[00:02:26.413]through the CRANDIC in Cedar Rapids.
[00:02:29.896]We've been very aggressive in our economic development of,
[00:02:33.884]I believe that we're one of the leaders in the state of Iowa
[00:02:37.356]on attracting new businesses.
[00:02:39.629]We've had a growth curve about 18% annually between 2003
[00:02:44.212]and 2011, and that was despite a major flood damage
[00:02:47.497]that put us out-of-service for 18 months,
[00:02:50.730]or at least bifurcated our line,
[00:02:52.785]and coming through a fairly major recession.
[00:02:57.759]This kinda shows our relationship
[00:02:59.234]with the connecting railroads.
[00:03:01.082]We operate 24 hours, seven days a week.
[00:03:04.977]Many of our interchanges are met twice.
[00:03:08.588]Most of the customers on our line are served twice-a-day,
[00:03:11.212]seven days a week, which is literally unheard of
[00:03:14.145]in the railroad industry.
[00:03:16.825]The probably the most important thing that we're proud of
[00:03:19.220]is we run the company like a business,
[00:03:21.668]and not like a railroad.
[00:03:24.020]And, we really encourage our employees to look at
[00:03:27.875]what we need to be doing, take the side of the customer,
[00:03:30.917]and use their authority in the field to
[00:03:34.084]be empowered to make decisions right away.
[00:03:36.825]They'll never be criticized for making the wrong decision,
[00:03:39.125]as long as it's always in favor of the customer.
[00:03:42.695]We take a very serious position with the state
[00:03:45.723]and the communities we serve.
[00:03:46.983]We spend a lot of time in the field with these people.
[00:03:50.155]We deal with crossings and a lot of issues.
[00:03:54.404]And we always wanna have the community know us as a face,
[00:03:58.390]and not just a big railroad from somewhere else.
[00:04:01.231]We also encourage our people to take some risk.
[00:04:04.133]We can't grow if there's not risk-taking,
[00:04:07.511]and I encourage healthy
[00:04:10.229]risk because we've gotta be easy to do business with.
[00:04:13.417]We've gotta be something that stands out,
[00:04:15.977]and then I repeat over and over and over,
[00:04:17.776]"Don't act like a railroad."
[00:04:21.605]These are some of our markets.
[00:04:22.651]I won't go through them all,
[00:04:23.663]but when you consider a railroad
[00:04:25.528]that started only with grain, we've expanded quite a bit.
[00:04:29.928]And next year, we'll be adding
[00:04:31.037]even more commodities to our mix.
[00:04:35.118]When we first took over the line in 1994,
[00:04:38.916]a typical month was about 230 cars of grain loaded.
[00:04:43.594]We have elevators now that will do,
[00:04:45.649]one elevator will do 250 or 300,
[00:04:48.635]and so we do nearly 2,000 carloads of grain per months now.
[00:04:54.586]Interesting point is, at the bottom of our line,
[00:04:57.108]we kinda look at Iowa Northern as a funnel.
[00:05:00.258]And there's a billion bushels of corn in a normal year
[00:05:03.441]that's goin' along our line.
[00:05:05.409]And we'll handle about 22,000 carloads this year of corn,
[00:05:08.898]soybeans, oats, and now we're even moving
[00:05:11.202]some barley to Quaker.
[00:05:13.274]But if Cedar Rapids was an independent nation,
[00:05:16.146]it would be the third-largest importer of corn in the world.
[00:05:19.996]It would rank only behind Japan and Mexico
[00:05:22.962]for the level of consumption.
[00:05:25.314]So when you consider that they're consuming
[00:05:27.140]a million bushels a day, every month they're consuming
[00:05:32.245]an entire county out of the state of Iowa.
[00:05:36.632]The drought is certainly scary for all of us.
[00:05:39.670]We believe that, by the end of this year,
[00:05:42.352]will effect us by a loss of about 6,000 carloads of corn.
[00:05:46.842]And it took about four million dollars
[00:05:48.277]out of our predicted revenue this year,
[00:05:50.291]just because the market conditions
[00:05:52.849]and then the market conditions
[00:05:54.078]that we're reacting to, the drought.
[00:05:57.079]We really don't know where this is going to go.
[00:05:59.056]It could be a long-lasting effect on a lot of our customers.
[00:06:04.698]We were a leader in the ethanol world.
[00:06:06.550]We developed one of the only originating ethanol terminals
[00:06:11.422]to consolidate ethanol.
[00:06:13.349]We have two ethanol plants that are on our line,
[00:06:15.829]besides the consumers at Cedar Rapids.
[00:06:18.822]And we went from zero cars in 2005,
[00:06:20.757]to abut 14,000 cars a year in 2011.
[00:06:25.401]It's a big piece of our business.
[00:06:28.513]We also work on creating new business.
[00:06:32.049]With Union Pacific, UP serves
[00:06:33.633]the big John Deere tractor factory in Waterloo.
[00:06:36.912]And they have about four miles of track
[00:06:38.946]and then they bring the tractors to us, so we take them back
[00:06:41.372]to UP, either at Cedar Rapids or Manly.
[00:06:44.073]And we often get in to some very interesting scenarios.
[00:06:46.411]Where we had a shipload of tractors going to China
[00:06:51.705]and the delays of getting 'em loaded,
[00:06:53.551]the production, was very, very close.
[00:06:56.206]So they asked if we would team up with them
[00:06:58.296]and run a solid unit train
[00:07:00.577]instead of going 10 or 15 cars a day.
[00:07:02.731]So we put together about a 97-car unit train of tractors,
[00:07:06.906]and each one of those are worth about
[00:07:08.393]a quarter-of-a-million dollars, and we were able
[00:07:10.617]to beat the deadline on the ship at Galveston by four days.
[00:07:14.922]And so, we're working with UP and John Deere now
[00:07:16.868]to maybe put all of their rail production into,
[00:07:20.187]particularly the exports, into unit trains.
[00:07:23.594]We're very big in fertilizer.
[00:07:24.914]We've got several fertilizer plants on our line,
[00:07:27.306]with quite a bit of expansion.
[00:07:29.904]We work as UP's agent on their fertilizer into Waterloo.
[00:07:35.369]I think we've probably,
[00:07:36.782]we're fearful that we lose a lotta fertilizer business,
[00:07:39.305]but we're hearing now that it's actually going to take more.
[00:07:43.701]We were a leader in the wind energy business.
[00:07:45.878]We've built one of the largest distribution centers
[00:07:48.397]in the United States at Manly.
[00:07:51.063]But, of course, we're really concerned now,
[00:07:53.173]the wind business has died off nearly completely
[00:07:57.129]until the determination is made
[00:08:00.010]on the Production Tax Credits and that's all
[00:08:02.528]in the hands of Congress.
[00:08:04.631]And right now, it doesn't look very favorable
[00:08:07.570]for wind to restore much in the next year or two.
[00:08:13.251]That's a picture of our 25-acre, actually,
[00:08:15.434]about 30 acres of solid wind.
[00:08:18.051]That's what it generally looks like from about April
[00:08:21.141]through October of the last five years at Manly.
[00:08:25.726]There's probably well over a billion dollars
[00:08:27.637]worth of components in that picture.
[00:08:32.048]We also do a lot of transloading.
[00:08:33.504]And we're developing a lot of growth in this area.
[00:08:36.454]We do a lotta food products.
[00:08:38.126]We do sugar.
[00:08:40.222]We do vegetable oils, lot of unique things that we're doing.
[00:08:46.058]And after the recession started, we found that,
[00:08:48.443]for the first time, that we'd start handling lumber.
[00:08:51.602]What few folks were buying lumber had to reduce the cost,
[00:08:55.160]and so, where they used to truck it in from maybe
[00:08:57.175]British Columbia or a regional center, they came to us
[00:09:01.320]and asked if we could set up a transfer reload.
[00:09:03.991]And now, we're doing about a car of lumber
[00:09:06.498]about every-other-day, so it's very good growth.
[00:09:10.734]We also do food-grade starches.
[00:09:16.145]The boxes there on the right,
[00:09:19.632]is vegetable oil coming in for salad dressing.
[00:09:23.516]And there's a lotta unique things that,
[00:09:25.280]for a short line railroad, we get very involved in.
[00:09:27.383]And part of this is because we have so many connections
[00:09:30.189]that we really serve well
[00:09:31.287]as that last mile for the large railroads.
[00:09:35.049]We also do some container work,
[00:09:36.740]all related to the wind components.
[00:09:40.343]A lot of imports of wind, we'll have a lot of small parts
[00:09:43.443]and pieces that got with the turbines
[00:09:46.367]and we convinced the UP to work with us
[00:09:48.061]that we could take care of that at Manly
[00:09:49.574]if they would run it by rail instead of trucking.
[00:09:52.411]And it was a nice little niche
[00:09:53.608]as long as the wind business was alive.
[00:09:56.941]Then, of course, we do a tremendous business
[00:09:58.879]with John Deere at Waterloo,
[00:10:03.370]and it's a lotta fun to see a trainload of tractors.
[00:10:05.391]It's a very beautiful train and it has a lot of value.
[00:10:09.607]Interesting point, too, is that a tractor's never built,
[00:10:12.043]unless that owner's identified.
[00:10:13.952]So, in many cases, a farmer, say, from Saskatchewan,
[00:10:17.928]will come, and he'll turn the key on the tractor
[00:10:20.145]for the first start up of that tractor.
[00:10:22.919]And it's really fun to see how sophisticated
[00:10:26.391]this business has become and how much it's growing.
[00:10:29.321]Most of the tractors we handle are exports.
[00:10:32.548]So, when you see a trainload of tractors,
[00:10:34.802]you might see different and very unique tractors.
[00:10:37.432]They may be going to Kazakhstan or Russia
[00:10:41.074]or China or Brazil or Argentina and every one
[00:10:43.934]has their own specs on the design of them:
[00:10:46.395]the lights, the fenders, and a lotta the apparatus
[00:10:49.181]on each tractor.
[00:10:51.694]In 2008, we had a horrible disaster.
[00:10:56.501]In June, my son came in and said,
[00:10:57.980]"What's the worse thing that could happen?"
[00:10:59.162]I said, "The worst thing that could happen
[00:11:00.723]"would be losing the UP bridge at Waterloo."
[00:11:03.676]And, about 12 hours later, he came running into my office
[00:11:06.610]and I knew exactly what had had happened.
[00:11:08.258]We lost the UP bridge at Waterloo.
[00:11:11.433]We also lost our CRANDIC bridge at Cedar Rapids,
[00:11:14.021]which is the one on the bottom left.
[00:11:16.616]We had about 38 miles of our track torn up or underwater
[00:11:21.093]and the severing of the UP bridge at Waterloo took,
[00:11:25.354]it's a nine-span bridge and five of 'em were in the river,
[00:11:28.653]and it took 18 months through the bureaucracy, the processes
[00:11:31.590]with the community, the state, and the Corps of Engineers
[00:11:34.946]to get that bridge rebuilt.
[00:11:37.669]And so, we had to run our railroad
[00:11:39.283]with a break in the middle, and run it from both ends.
[00:11:44.449]And the Union Pacific was very gracious.
[00:11:46.185]They did a 250-mile detour of our corn
[00:11:48.856]from Manly to Cedar Rapids so we could survive through this.
[00:11:55.410]In total, it was costing us about 800,000 per month
[00:11:58.757]with the detours and the additional costs,
[00:12:01.533]segmented for 18 months, and we're still doing a lot
[00:12:04.398]of flood-mitigation and, hopefully, we'll never have
[00:12:07.070]to go through what we did,
[00:12:08.811]but it was a very painful experience.
[00:12:12.646]So, there's a few new things we're doing at Iowa Northern.
[00:12:18.005]One thing that we've been working on
[00:12:19.723]is what's called a slug unit.
[00:12:21.698]If you look at the second unit
[00:12:23.080]in that consist of locomotives, you'll see it's a short,
[00:12:27.840]flat device that has no motor of any kind in there.
[00:12:30.823]It has, excuse me, no diesel engine.
[00:12:33.145]It's got four traction motors on the axle,
[00:12:35.207]just like a locomotive, but it takes the power
[00:12:38.057]from the generator of the mother unit that's attached to it.
[00:12:42.416]So when that mother unit and the slug go out,
[00:12:45.801]it has the emissions and the fuel burn of one locomotive,
[00:12:48.871]but the tractive effort of two.
[00:12:51.420]And, we found that, for every slug that we put into service,
[00:12:55.643]it paid for itself in 10 months, just in fuel savings alone.
[00:13:00.926]We also took over a line that was going
[00:13:02.380]to be abandoned by the Union Pacific.
[00:13:04.666]We operate over Canadian Pacific for about 28 miles
[00:13:07.082]to the Forest City-Belmond Line.
[00:13:09.611]And Forest City, you may or may not know,
[00:13:12.184]is the home of Winnebago, for the large RVs.
[00:13:17.511]It was quite an interesting experience
[00:13:18.982]to take over this line.
[00:13:20.242]There's two major elevators that load regularly.
[00:13:23.452]They had not loaded any corn for about five years.
[00:13:26.594]In the first month after taking over,
[00:13:28.428]we handled more traffic than had been handled
[00:13:30.565]on that line in prior five years.
[00:13:33.722]And so, we expected that it would take us
[00:13:35.412]about a year to get a break-even.
[00:13:38.010]We're break-even or profitable
[00:13:40.355]in about 45 days of operation in the line.
[00:13:44.367]And so, the service levels that we provide
[00:13:47.497]to this line now has become very attractive.
[00:13:50.209]There's some new industrial parks
[00:13:51.306]that are going to be built.
[00:13:53.500]We're working with Winnebago
[00:13:54.596]to bring inbound chassis and other material.
[00:13:57.093]We're also looking at containerizing outbound export RVs
[00:14:01.196]over time that will go out by rail instead of being driven,
[00:14:05.484]literally, to the West Coast.
[00:14:08.553]We've also been working for about,
[00:14:10.785]probably 10 years now, on biomass.
[00:14:13.810]We thought things would happen much quicker than it had,
[00:14:17.094]but we joined up with a couple of folks
[00:14:19.100]and with Iowa State University, really do a lot of research.
[00:14:23.672]There's a possibility that regulators will require
[00:14:26.063]about a 20% blend of biomass in with coal in the future
[00:14:31.936]and our line, just coincidentally, has about 12 million tons
[00:14:34.879]of excess corn stover with every harvest
[00:14:38.353]that's currently just plowed over
[00:14:41.079]or just tilled in the next year.
[00:14:45.940]That's within 30 miles of our line.
[00:14:48.954]By baling this and getting to the rail, and to a processor,
[00:14:53.946]like a thermogassification plant or a power plant,
[00:14:57.447]it would generate 75,000 carloads of business
[00:14:59.919]for our short line.
[00:15:02.319]The larger railroads are not too focused on this right now
[00:15:04.653]because it's generally short haul moves.
[00:15:09.121]We do have some other interesting future plans
[00:15:11.206]with the industrial development.
[00:15:13.496]We've designated four areas along our line
[00:15:15.583]that will become major industrial parks.
[00:15:19.287]This first one is at Butler.
[00:15:20.564]It's a little blurry, and that's deliberately,
[00:15:22.596]so you can't go out and buy some land next to us.
[00:15:26.697]But, the Butler park will expand about 300 acres.
[00:15:29.765]We're goin' to have new locomotive shop,
[00:15:31.837]fairly major rail yard there.
[00:15:33.956]We have two new industries that are breaking ground
[00:15:35.725]by the end of this year
[00:15:37.189]and we'll anticipate that we'll probably have
[00:15:39.715]six or seven industries there over the next five years
[00:15:42.541]that'll generate about a thousand jobs.
[00:15:46.785]Manly is kind of our pride and joy right now.
[00:15:48.689]It's also my hometown.
[00:15:51.609]The Manly terminal operation that you saw before
[00:15:55.299]has a three-million gallon tank
[00:15:57.348]for outbound ethanol or, perhaps crude, now.
[00:16:01.344]We have two one-million gallon tanks for inbound diesel fuel
[00:16:04.833]or denaturants or other products.
[00:16:07.355]We do about 12 different chemicals through Manly now,
[00:16:10.596]and we've also started as fairly center of operations
[00:16:14.232]for outbound corn oil coming from the extraction
[00:16:17.154]of corn oil from the ethanol plants.
[00:16:19.992]If you see the UP spine line is right adjacent to our yard.
[00:16:24.088]We've got a very large yard
[00:16:25.232]that we've just completed rebuilding.
[00:16:27.764]And our Logistics Park is 162 acres that we're developing
[00:16:31.292]and we'll talk a little bit about that.
[00:16:35.514]We've got the 162 acres that's just about
[00:16:37.876]right on the Minnesota-Iowa border.
[00:16:39.570]We're actually about 15 miles
[00:16:44.580]from the border
[00:16:46.605]and we're establishing a much larger transloading facility.
[00:16:52.993]Next week, we've got the groundbreaking
[00:16:54.659]for a steel distribution center that will bring coil steel
[00:16:58.130]in for Iowa manufacturers and for southern Minnesota
[00:17:02.229]and they'll be, we'll be working with outbound moves.
[00:17:05.285]We're looking for a very large cold storage
[00:17:07.717]and freezer warehouse.
[00:17:09.747]There's some major players like Hormel, Tyson, Kraft Foods,
[00:17:14.645]Cargill, that are in the area.
[00:17:16.856]And we're tryin' to create a whole campus-like setting
[00:17:19.646]of an origination point
[00:17:21.119]where mix-and-match loads can be sent,
[00:17:23.701]not only for domestic purpose, but too, for export.
[00:17:29.107]And then there's a substantial intermodal facility
[00:17:31.198]that we're planning in conjunction with a number
[00:17:33.956]of our partners, including the state of Iowa.
[00:17:36.498]This is a picture of our coil steel operation
[00:17:38.777]and what it will look like when we start.
[00:17:41.274]That should be in full operation by April or May.
[00:17:45.022]The other interesting thing about north Iowa is,
[00:17:48.126]Iowa's the largest producer of eggs in the United States.
[00:17:52.464]We've got about, I recall now, about 63 million laying hens
[00:17:57.192]in north Iowa, and each one of 'em
[00:17:59.034]lays an egg every 26 hours.
[00:18:01.569]There's 400 trucks a week that leave north Iowa
[00:18:03.742]for California alone.
[00:18:05.980]And so, what we're working on is to develop a mechanism
[00:18:09.844]to safely load those into refrigerator cars or trailers
[00:18:12.894]and run 'em by rail into these large markets.
[00:18:18.578]The Intermodal Base Case is very interesting
[00:18:21.043]for the state of Iowa.
[00:18:22.696]Iowa ships out about three loads for every one inbound load.
[00:18:27.982]So what happens, is a company that wants
[00:18:30.224]to ship intermodally out of Iowa, say Des Moines
[00:18:32.422]or north Iowa, has to order a container from Chicago.
[00:18:38.060]They have to pay for the empty container to come out
[00:18:41.213]and put a loaded container on that truck and ship it back.
[00:18:43.701]So they start with a cost of about $1,200 for that box
[00:18:48.312]to get to an intermodal train that's gonna go through Iowa
[00:18:51.510]on its way to to California.
[00:18:53.463]And so what we did is we took a regional approach to it.
[00:18:56.828]We analyzed, "What does the state of Minnesota do,
[00:18:58.923]"since we're so close to the border?"
[00:19:00.965]And, if you draw a circle, with say a 150 mile radius
[00:19:03.270]of Manly, Iowa, the ratio of inbound to outbound boxes
[00:19:07.938]comes out 7.2 to 7.6.
[00:19:11.233]And it's one of the few locations that we believe will have
[00:19:13.570]almost perfect balance on the containers.
[00:19:16.891]We're working with a Chinese company now that is committing
[00:19:19.918]to a million metric tons of distiller grains
[00:19:23.593]and they've been working with the Chinese shipping companies
[00:19:26.528]to identify inbound loads for Iowa and Minnesota
[00:19:29.026]that can be developed into this new efficient facility
[00:19:33.622]in north Iowa.
[00:19:35.548]Also working very closely with the Department
[00:19:38.582]of Economic Development, the Governor's Office, and, now,
[00:19:41.901]we'll be working very closely with the State Legislature
[00:19:44.751]to see if we can make a public-private partnership
[00:19:47.215]out of this and develop a world-class facility.
[00:19:54.882]This is the map indicating kinda where we're at.
[00:19:58.594]It brings Des Moines, Cedar Rapids, almost all the way
[00:20:01.091]to Sioux Falls, goes into Wisconsin,
[00:20:03.822]but primarily the southern third of Minnesota's
[00:20:06.490]within that radius.
[00:20:08.293]We're on three major Interstate highways,
[00:20:11.947]so the availability of good truck moves
[00:20:15.253]in and out of Manly is there now.
[00:20:18.498]All the road ways were increased in structure
[00:20:21.990]over the last fives years by the state of Iowa
[00:20:24.009]and Worth County to handle the very heavy wind components
[00:20:27.810]and the blades and the type of commodities
[00:20:31.398]that we already have, so the infrastructure is there.
[00:20:39.519]This is kind of a sketch
[00:20:40.383]of what our facility will look like.
[00:20:42.460]On the left side is, the little pink box,
[00:20:45.038]is the new steel distribution center.
[00:20:47.600]Then we're gonna have new transload tracks.
[00:20:49.983]We'll have a bypass that will connect the loop tracks.
[00:20:53.979]Then a cold storage freezer warehouse.
[00:20:56.758]And then a fairly substantial intermodal facility
[00:20:58.831]and container yard.
[00:21:00.704]The loop track that goes around here will ultimately
[00:21:02.568]be double tracked, so it'll have a capacity of handling
[00:21:06.272]two full container trains
[00:21:10.312]inbound and outbound
[00:21:11.500]simultaneously without getting in each other's way.
[00:21:16.640]We do a lot of business right now with Union Pacific
[00:21:18.901]and that's growing actually as we speak.
[00:21:22.312]We're up to about 20,000 revenue cars annually with UP.
[00:21:26.176]We're doing about 6,000 with Canadian Pacific
[00:21:28.717]and that is expected to grow.
[00:21:31.174]We do quite a bit with Canadian National,
[00:21:33.216]but our goal is to go from 20,000 carloads
[00:21:37.780]in about 1998 to hit 105,000
[00:21:41.949]carloads by 2014.
[00:21:46.643]And we're on the curve right now.
[00:21:47.927]We've broken through the 60,000 mark
[00:21:50.994]and some of the projects that we have over the next
[00:21:53.073]15 months should put us well up toward 90,000 revenue units,
[00:21:58.720]not counting the intermodal.
[00:22:00.984]Getting into the financial side of things,
[00:22:04.683]that graph kinda shows where we've been in revenues
[00:22:07.417]and operating expense and, of course, our earnings.
[00:22:11.096]And you can see the hit that we took with the flood,
[00:22:15.206]but since then, and despite the recession,
[00:22:17.371]we've been able to continue
[00:22:18.922]with some fairly sizeable growth and cost reduction.
[00:22:24.828]We try to encourage all of our engineering
[00:22:26.404]and operating guys, realize that they have
[00:22:27.874]a very strong effect on the bottom line of the company.
[00:22:31.367]And we talk a lot about that.
[00:22:33.453]We show them that, as we grow, we have the ability
[00:22:36.612]through capital spending to reduce our cost.
[00:22:39.833]Our unit cost has dropped dramatically
[00:22:41.392]over the last few years and,
[00:22:43.582]as a consequence of this spending,
[00:22:45.228]we reach a point with the capital spending can drop off
[00:22:48.338]and more profitability can go into the company
[00:22:51.958]and then have more opportunities for development,
[00:22:54.499]acquisitions, and building the company.
[00:22:58.746]When we started, we were right about
[00:23:00.105]three-and-a-half million in revenue in 1994
[00:23:02.916]and we've broken through the 30 million dollar's worth
[00:23:05.885]of revenue this year.
[00:23:09.440]In the overall scheme of things,
[00:23:11.011]three full years over 30,000, you're brought up to
[00:23:14.550]let's call it a Class II railroad instead of a Class III,
[00:23:19.204]and so we're kinda going from the lowest levels
[00:23:21.536]of the minor leagues into maybe more of a triple A club.
[00:23:28.481]Productivity is real important.
[00:23:29.825]We get down to the train crew level, have them see,
[00:23:33.654]"How many more cars we can get on that same train?
[00:23:36.925]"What can they do to deliver this as well as possible?
[00:23:41.285]"What impact do they have?"
[00:23:43.113]We have conductors that will be going across the country
[00:23:45.324]and they'll call the next elevator and say,
[00:23:47.047]"Look, we don't have any instructions to stop and serve you,
[00:23:50.497]"but if there's something while we're in town
[00:23:52.642]"that's come up, we're here for you and we'll be there
[00:23:55.878]"in about 15 minutes."
[00:23:57.882]I don't think too many railroads have that culture.
[00:24:01.959]We try to create a very close correlation
[00:24:05.209]to the number of crew starts.
[00:24:08.261]We believe very strongly in high service levels.
[00:24:10.681]As you can see, as we've increased the number
[00:24:12.520]of crew starts, the traffic actually grows with the service.
[00:24:18.185]And our revenue per crew start,
[00:24:19.779]we have some fairly large goals on where to get this,
[00:24:24.455]but there's so much we can do.
[00:24:26.383]The economies of scales of railroading is so efficient,
[00:24:30.580]that a train that's currently handling 25 cars, three years
[00:24:34.516]from now might be handling 95 cars with the same crew.
[00:24:38.899]You just add the locomotives and make sure that you have
[00:24:41.300]the track structure to allow them to get over the road.
[00:24:45.918]Our fuel burn per revenue car is going down
[00:24:48.074]and we'll talk a little bit about how we've done that.
[00:24:50.775]Our goal is to cut our fuel burn
[00:24:52.493]from about 2008
[00:24:55.186]to 2013 by half
[00:24:57.698]And that's not very easy to do,
[00:24:59.613]but we've done a number of things.
[00:25:00.719]We have what's called smart starters and hot starters.
[00:25:03.720]If the engine detects that there's been no activity
[00:25:05.825]for 15 minutes, it shuts the engine down.
[00:25:08.887]It charges the battery.
[00:25:10.006]And we've got a little diesel engine
[00:25:11.676]that'll burn maybe two-and-a-half gallons per hour
[00:25:14.303]instead of the prime mover that's going to burn 30.
[00:25:18.230]And so, even in the wintertime, our locomotives
[00:25:20.350]will shut down if they're not constructive.
[00:25:25.382]We have a lot of attention given to the crews
[00:25:27.602]and how they manage the train, how they use their power,
[00:25:30.571]the braking, and we're able to get our fuel down.
[00:25:34.762]Our control stands tell the engineer
[00:25:36.158]how much fuel he's burning and how he can back off
[00:25:39.513]based on throttle position.
[00:25:41.580]If he doesn't need to have that throttle
[00:25:42.890]in the eighth notch, back it off to number six
[00:25:45.714]and it's gonna save us 80 gallons per hour.
[00:25:49.660]So, it's a very sophisticated approach
[00:25:51.307]that we're trying to take.
[00:25:52.839]We have GPS on every locomotive.
[00:25:55.207]We can tell how much fuel is in the tank at any given time.
[00:25:58.337]We know their throttle position,
[00:25:59.998]what they're doing with their brakes.
[00:26:02.211]It's kinda spooky.
[00:26:03.044]The guys, we'll call 'em up and say,
[00:26:05.061]"Why did you stop there at mile post 190?"
[00:26:07.455]Say, "How did you know?"
[00:26:09.809]It's very interesting to see now the way the crews
[00:26:13.598]have taken this as a tool for themselves.
[00:26:17.574]We talked about slugs.
[00:26:18.664]And this train that you see there
[00:26:22.053]used to take seven locomotives to handle about 90 cars
[00:26:24.710]into ADM in Cedar Rapids.
[00:26:26.816]We do it now with four locomotives and two slugs.
[00:26:30.024]And so, as I mentioned, the payback for a slug
[00:26:32.463]is 10 months just in fuel savings.
[00:26:36.033]And when we have a 24/7 operation, we look for those trains
[00:26:40.749]that have a lot of stopping and going
[00:26:42.414]and acceleration penalties and put the slugs on those
[00:26:46.587]and it has a dramatic impact on the fuel savings.
[00:26:51.438]Our capital spending is primarily tied
[00:26:53.566]to safety and to efficiency.
[00:26:56.662]And over a, roughly an eight-year period,
[00:26:59.261]we will have spent $100 million on the line
[00:27:03.917]by 2015.
[00:27:05.603]To give you and idea of what that means,
[00:27:08.460]that over the last three or four years,
[00:27:10.022]we've spent $59,000 per mile.
[00:27:13.174]The Union Pacific is the largest spender of capital
[00:27:15.980]in the entire industry and they spent less per mile
[00:27:19.791]than the Iowa Northern.
[00:27:23.550]Critical to our operations at Manly,
[00:27:26.241]in particular, is a new yard.
[00:27:28.697]We've got tracks Seven through 12 done.
[00:27:31.310]Two and Six are just being finalized now.
[00:27:34.268]We've added lights and new crossovers.
[00:27:36.910]There's a new car repair facility.
[00:27:39.171]And so, as soon as we started building this,
[00:27:42.057]we gave Union Pacific our design,
[00:27:44.213]asked them if there was anything that they would see
[00:27:46.400]that should change.
[00:27:48.207]And then we came back to them as it was being built
[00:27:50.415]and said, "If this was a Union Pacific facility,
[00:27:53.179]"what would you do with it?"
[00:27:55.018]And now, we're meeting with UP on a regular basis to say,
[00:27:58.142]"Gee, we can save $5,000,000 at Mankato, Minnesota
[00:28:01.782]"if we bring traffic into Manly, you switch it for us,
[00:28:04.212]"you hand it back to us in a finished form."
[00:28:07.106]A lot of partnerships now that we're doing with UP
[00:28:09.738]and the other railroads.
[00:28:11.321]It's a lot of fun because now,
[00:28:12.431]even their industrial development people
[00:28:13.900]will get potential new customers and the UP will say,
[00:28:17.324]"Call Iowa Northern first."
[00:28:18.978]They know that we'll take care of the business,
[00:28:20.535]we'll be like an agent of UP in that instance
[00:28:23.754]and we can grow together and have a national network
[00:28:26.414]to support it.
[00:28:28.363]The picture there is a continuous welded rail train.
[00:28:32.103]Welded rail is the greatest thing that's ever happened
[00:28:35.112]in the rail industry, as far as I'm concerned.
[00:28:38.387]And some of you may have an interest in welded rail,
[00:28:41.921]but it has a huge impact on our ability
[00:28:43.631]to get over the railroad.
[00:28:45.292]It brings us up to a federal railroad, FRA standard,
[00:28:48.420]that's good for 40 miles an hour.
[00:28:51.606]We find our sweet spot for fuel consumption at 25.
[00:28:57.269]But we've just about eliminated any sort
[00:28:59.224]of main track derailment on our line.
[00:29:02.048]We've also gone on kind of a unique situation
[00:29:04.979]where every yard track or every non-mainline tie
[00:29:08.860]that we install is steel ties.
[00:29:12.035]It costs us a bout $20 a tie more to install it,
[00:29:16.223]but when you install a wood tie in a place like north Iowa,
[00:29:20.148]you can count on maybe
[00:29:22.542]35 to 45 year life on that tie.
[00:29:26.041]After Norfolk Southern did their studies on steel ties,
[00:29:29.599]I'm convinced that my great-great-grandchildren will never
[00:29:32.423]have to replace any of these ties.
[00:29:34.246]They're probably good for a couple of hundred years.
[00:29:36.492]They also appreciate in value, so if I ever need
[00:29:39.596]to borrow money on collateral at the railroad,
[00:29:41.476]we've got a steel infrastructure to support it.
[00:29:47.310]Eliminating slow orders, it's so key to have good rail.
[00:29:50.460]There's nothing more important than track.
[00:29:52.591]You can have anything else in the world if it's not track.
[00:29:55.355]So just in the last few months,
[00:29:57.942]we've done a tremendous job in reducing.
[00:30:01.698]And we're down from 46% of our railroad to 32%
[00:30:05.822]is now at 10 mile or slow-ordered for some other reason.
[00:30:09.655]And we've done that in 18 months.
[00:30:12.771]I asked my operating
[00:30:17.196]planning guy to help me quantify,
[00:30:19.457]"What's the true ROI on welded rail?"
[00:30:22.720]And I went to all my counterparts at Class Is
[00:30:25.369]and the other shortlines and said,
[00:30:26.619]"How do you justify welded rail?"
[00:30:29.047]And I've never found anybody that can give us the answer,
[00:30:31.626]or the justification.
[00:30:33.347]So, maybe I could challenge some of you folks
[00:30:35.193]to help us get to this answer.
[00:30:36.784]But we found, with our GPS,
[00:30:39.764]that our derailments per mile were eliminated,
[00:30:43.150]literally, on the main track.
[00:30:45.895]The only derailments we have now are generally
[00:30:47.241]on someone else's railroad with our trains operating.
[00:30:49.836]Thank goodness.
[00:30:51.841]But with the GPS data that's available,
[00:30:54.613]we found some very interesting things.
[00:30:56.330]We had a 67% increase in our track speed.
[00:31:00.082]We saved 4.21 gallons per mile.
[00:31:03.693]And so, at $3.34 a gallon,
[00:31:07.410]just the welded rail alone
[00:31:09.161]is cutting almost a half million dollars off our fuel bill.
[00:31:12.935]And that's where I get my goal of,
[00:31:15.525]with these additional opportunities, we need to be able
[00:31:19.961]to justify this fairly large capital spending.
[00:31:22.803]We spent 12.75 million since 2008 on welded rail
[00:31:27.781]and I think we'll find that it's absolutely
[00:31:30.030]the best investment we ever could have made.
[00:31:32.758]We still have to quantify our crew start savings,
[00:31:35.549]our track capacity increases, the utilization
[00:31:38.505]of our rolling stock and our locomotives.
[00:31:40.432]But it's a process now that's showing us
[00:31:42.456]that we've been going in the right direction.
[00:31:46.251]We're also working,
[00:31:48.433]We're pretending that we're the big guys in a lot of ways.
[00:31:50.600]Our track guys have insisted, wherever possible,
[00:31:53.982]that they do the work themselves.
[00:31:56.787]In new track construction, everything,
[00:32:01.200]there's only two things we don't do
[00:32:02.372]on the Iowa Northern right now
[00:32:03.401]is replace a bridge or lay welded rail.
[00:32:07.333]If you see that bridge there,
[00:32:08.943]that was a victim of the floods.
[00:32:11.926]And we had a contractor come in,
[00:32:13.983]the railroad's out-of-service for about 24 hours
[00:32:16.247]to replace that bridge.
[00:32:18.139]And then the other two pictures
[00:32:19.290]are building new leads at Manly Yard.
[00:32:22.961]We also have taken on some mammoth projects
[00:32:25.714]replacing bridges with culverts.
[00:32:28.063]And we're doing all of this in-house.
[00:32:30.540]I don't think UP even does stuff like this in-house anymore.
[00:32:33.395]It's generally a third-party contractor.
[00:32:36.989]And then, with our capacity spending,
[00:32:40.041]we've added new bridges, a lotta siding capacity.
[00:32:43.631]We have to be ahead of the curve.
[00:32:45.027]When you get new industries online,
[00:32:46.221]they expect that that rail capacity will be in place.
[00:32:49.510]So, oftentimes, what we do
[00:32:50.917]is we'll have a new industry come in and we'll say,
[00:32:52.679]"Look, we don't know if you're gonna ship by rail or not,
[00:32:54.895]"so you put the money up for the material,
[00:32:56.394]"we'll build the track, and then we'll pay you back
[00:32:58.840]"on a per-car basis."
[00:33:00.941]Creates a really good partnership with that customer.
[00:33:03.705]And it's paid off very well for all of us.
[00:33:07.101]But it's very interesting to see
[00:33:09.459]that our 30-some engineering employees
[00:33:11.536]probably build more track than any group of employees
[00:33:15.137]anywhere in North America.
[00:33:17.089]And I will put all, any of our guys up against some
[00:33:19.900]of the major track builders on efficiency and quality work.
[00:33:26.189]This is a table that just brings down the bottom line
[00:33:29.521]with derailment costs.
[00:33:30.506]If you look at the last column, there were years
[00:33:32.856]that almost 10% of our revenue went
[00:33:35.161]to derailments and incidents.
[00:33:37.891]In 2011, that was less than 1% and we wanna keep it
[00:33:41.596]that way and keep diminishing that cost to the company.
[00:33:46.167]We've expanded our shop capacity.
[00:33:47.868]We have 26 locomotives.
[00:33:49.846]All of the work is done in-house,
[00:33:51.473]unless there's a major overhaul.
[00:33:53.429]And, in that instance, we'll generally take
[00:33:55.294]that diesel engine out, send it out to a contractor,
[00:33:59.105]and have that locomotive rebuilt or that engine.
[00:34:03.123]We have 26 locomotives right now.
[00:34:06.249]We've gotten to be so efficient in some of our traffic
[00:34:08.243]that we've actually got about five locomotives stored.
[00:34:11.518]So, we do have a capacity for a lot of growth.
[00:34:15.093]And then, with the expansion, we're hoping
[00:34:16.850]to get four more slug units this year.
[00:34:20.310]Increase our savings and our ability
[00:34:22.578]to handle more tonnage with the same fleet.
[00:34:26.090]And we're continually rehabbing our older locomotives.
[00:34:29.340]The 461, not only was set up to be a mother for a slug,
[00:34:34.576]but also it has the generator to power the Hawkeye Express.
[00:34:40.726]We try to provide leadership through our people.
[00:34:44.797]There's a tremendous momentum in logistics right now.
[00:34:47.596]Nothing stays the same.
[00:34:49.886]The railroad used to be the same railroad year in, year out.
[00:34:54.563]And we find about every quarter now,
[00:34:56.062]we have to make major adjustments on the marketplace,
[00:34:59.780]the connections we work with, the needs of our customers,
[00:35:03.164]and "what can we always do
[00:35:05.116]"to know what that customer needs?"
[00:35:07.781]And then to decide which one of our connections
[00:35:10.148]has the strength to work with us.
[00:35:14.039]And by doing this, we put the authority in the field.
[00:35:16.657]There's shift workers that make decisions night and day
[00:35:19.153]that most railroad shortline Presidents
[00:35:21.069]would expect to make.
[00:35:22.519]And we're very proud of our people, to be able to take
[00:35:25.130]that risk and to do the right thing.
[00:35:31.070]We're trying, as I say, to constantly redefine.
[00:35:35.549]We were very big in ethanol.
[00:35:37.705]Nobody knows what's going to happen to ethanol now,
[00:35:39.962]so the ethanol infrastructure is there.
[00:35:43.121]We have the tanks, we've got the tank parts,
[00:35:45.287]we've got the service, the sidings,
[00:35:47.548]so maybe it becomes crude oil.
[00:35:49.342]Or maybe it becomes, who knows what's next?
[00:35:52.265]Maybe it's jet fuel A, made out of biofuels.
[00:35:56.391]But we're going to be there and we'll have the ability
[00:35:58.530]to absorb this new traffic
[00:36:01.573]well before it comes onto the marketplace.
[00:36:05.159]And, finally, I'd be remiss
[00:36:06.217]if I didn't highlight the Hawkeye Express.
[00:36:09.287]We handle 5,000 football fans
[00:36:12.529]into the stadium every home game day.
[00:36:15.659]That's 30,000 fans on the seven-game schedule.
[00:36:20.113]We're really lookin' forward to the Cornhuskers
[00:36:21.986]coming to see us on November 23rd.
[00:36:24.528]We invite you to come and find us at Coralville
[00:36:26.297]and ride the Hawkeye Express and I hope you'll come over
[00:36:29.068]and introduce yourself.
[00:36:30.971]Thank you very much.
[00:36:32.433](applause)
[00:36:39.247]So, did you have any questions from the audience?
[00:36:49.194]Not all at once.
[00:36:50.166]Any questions from the online audience?
[00:36:53.274]Clint VanWinkle asks, "Are there any M-track routes
[00:36:56.099]on your tracks, either current or future planned?
[00:36:59.725]There's not.
[00:37:01.281]We've had M-track special trains operate over Iowa Northern,
[00:37:06.192]with private cars and this sort of thing.
[00:37:08.487]And we have had some other special passenger trains,
[00:37:11.894]but we're not in any future routes for M-track.
[00:37:15.017]But that doesn't mean that a short-cut
[00:37:17.446]to Minneapolis might someday be in the future
[00:37:21.061]and we'd certainly be ready for it.
[00:37:28.113]I just wondered if you could talk
[00:37:29.059]a little bit about your extension plan.
[00:37:30.954]How to you decide when to expand, and how,
[00:37:32.852]and what are your limitations
[00:37:34.186]within your area of operations now?
[00:37:37.903]Well, we're an overnight sensation after 43 years,
[00:37:41.288]so, we've learned through a lot of pain
[00:37:43.687]and in my shortline life that some of the business models
[00:37:48.189]for shortlines just don't work for us.
[00:37:50.338]So we've got one rule, and that is,
[00:37:52.211]"We'll take any line that we can get,
[00:37:54.134]"as long as it's contiguous to us,
[00:37:56.024]"either by trackage rights or connecting directly."
[00:37:59.904]And part of the thing we do, is we try to be very supportive
[00:38:03.520]for the Class I efforts to show them that we have ability
[00:38:07.235]to serve customers that they will never have.
[00:38:10.354]As a consequence, if they get to the point
[00:38:12.397]where they identify a line as marginal,
[00:38:15.115]I think most of them realize now that the Iowa Northern
[00:38:17.384]would be a great candidate to either lease the line, buy it,
[00:38:20.704]or partner with that Class I.
[00:38:22.893]So it wouldn't surprise me in, say, five years,
[00:38:25.743]if we pick up another 500 miles of track.
[00:38:28.770]But, otherwise, all of our growth is organic.
[00:38:32.026]It's internal.
[00:38:33.865]So we have a question we ask ourselves every month.
[00:38:37.861]"Is there any piece of track on our railroad
[00:38:39.427]that's not making money?"
[00:38:41.603]And, if we could make more money by building another track,
[00:38:44.829]what's that return on investment?
[00:38:46.336]How soon can we get it in?
[00:38:48.471]Whenever we lay welded rail,
[00:38:50.381]it's usually at seven-and-a-half miles at a time,
[00:38:53.069]so that gives us some tremendous cascade rail
[00:38:56.312]for the next industrial project.
[00:38:58.430]And that's really saved a lot of our customers
[00:39:00.850]a lot of cash to get that new industrial track built,
[00:39:04.729]with a fairly high-quality rail.
[00:39:09.465]We have two questions online.
[00:39:10.521]One from the University of Iowa, "When hiring people,
[00:39:12.818]what type of education are you seeking?"
[00:39:16.235]Well, it depends.
[00:39:17.825]Most of our field people are high school graduates.
[00:39:23.097]We've got some conductors that are degree-ed.
[00:39:27.514]We're at a juncture now,
[00:39:29.398]where we have professional engineering staff
[00:39:32.584]and that will have to grow.
[00:39:36.288]We're really looking for people who have the appetite
[00:39:38.313]to work for a railroad.
[00:39:40.158]I mean, I think the railroad industry
[00:39:41.550]is probably the most exciting place for a young person
[00:39:44.843]to ever wanna consider.
[00:39:47.297]But we still have a culture that's very materialistic
[00:39:49.832]where you need to be out there in the middle of the night
[00:39:52.991]or on that weekend or in that snowstorm or dig out
[00:39:58.028]a train that's stuck in the snow or watching for that flood.
[00:40:02.212]There's a lotta people that come into it,
[00:40:03.874]we give them very thorough training,
[00:40:07.086]and we wash out about 60% of our new people
[00:40:10.266]within the first six months.
[00:40:12.673]They just decide that it's not for them.
[00:40:15.330]On the other hand, we get people
[00:40:16.390]that find out it's in their blood
[00:40:18.255]and they're the best damn employees we could ever find.
[00:40:20.342]They're great.
[00:40:23.641]And we have another question from Kristy Jameison,
[00:40:28.015]"How has your growth and capacity been aided
[00:40:30.214]"or has your growth and capacity been aided
[00:40:32.634]"by any state-administered grant or work programs?"
[00:40:36.187]Yes, very much.
[00:40:38.149]Since the inception, the original mortgage
[00:40:39.639]of the Iowa Northern was with the IRFA program,
[00:40:43.455]the Iowa Railway Finance Authority, which is the only reason
[00:40:46.279]that some of these lines were able to exist,
[00:40:48.702]because they had low-cost funding.
[00:40:51.621]We did a remortgage to pay for our
[00:40:54.573]very extensive initial welded rail program
[00:40:59.241]and we got a 25.5
[00:41:01.656]a 25.5 million dollar loan
[00:41:04.215]through the federal railroad administration
[00:41:06.515]at about 3 7/8 percent interest for 30 years.
[00:41:11.925]That is now even better.
[00:41:13.446]It's a 35 year term at probably about 1% and so,
[00:41:18.113]with our flood, we not only had help
[00:41:20.743]from our connecting railroads, particularly Union Pacific,
[00:41:23.530]but we also had, literally, an act of Congress
[00:41:26.113]to help us raise the money it took to restore that bridge.
[00:41:30.349]And there's been other grants on our development
[00:41:33.477]of industrial facilities that the state
[00:41:36.912]is involved in very heavily with us.
[00:41:40.969]Okay, and another question from Loren Knight,
[00:41:43.714]"Could you give us a brief overview
[00:41:45.274]"of what spurred your interest in railroads to begin with
[00:41:47.947]"and how you got started when there's so many
[00:41:50.644]"different options in the transportation industry?
[00:41:53.018]"Why railroad?"
[00:41:55.256]Well, I'm kind of an old guy.
[00:41:56.937]I'm gonna turn 60 next week and
[00:42:00.992]I was raised in a railroad family.
[00:42:02.954]My dad was a locomotive engineer,
[00:42:04.320]ran passenger freight trains between Des Moines and Manly
[00:42:08.506]and Cedar Rapids and to Minneapolis,
[00:42:10.338]so I was raised on trains.
[00:42:13.924]I got the opportunity to spend a lot
[00:42:15.660]of time along the railroad.
[00:42:17.866]I was the youngest, I started when I was 15 in 1968
[00:42:21.576]as a student telegrapher.
[00:42:23.657]Worked as a track laborer when I was 16.
[00:42:25.649]And I was the youngest train dispatcher
[00:42:27.033]in the United States at the age of 18.
[00:42:30.100]Started workin' at Des Moines
[00:42:30.933]and then I decided I better get my act together
[00:42:33.270]and get an education.
[00:42:35.236]So, I ended up with a double major in economics and business
[00:42:39.777]while I was going to school.
[00:42:41.542]And it's probably a better way for me,
[00:42:44.357]because I was just gonna railroad
[00:42:46.701]and then once I got the opportunity, I thought, "Now what?
[00:42:49.330]"What will I do?"
[00:42:50.163]And I realized that, without the education,
[00:42:52.920]I was gonna be very limited in how far I could progress.
[00:42:56.188]After about 15 years working in management
[00:42:58.162]for the large railroads, I realized I was unemployable
[00:43:01.880]and I had to get out on my own.
[00:43:04.118]Started a consulting firm with the idea of getting
[00:43:06.685]into shortlines and, coincidentally,
[00:43:09.383]the first shortline opportunity was where my dad started
[00:43:11.613]in 1944 in northern Iowa.
[00:43:14.173]So, I'm back.
[00:43:18.957]Any more questions online
[00:43:20.118]or in the studio audience?
[00:43:28.964]I have two questions, actually.
[00:43:30.468]First is, "where do see the railroad industry
[00:43:33.643]"in, say, 50 years?"
[00:43:36.028](inaudible speech)
[00:43:39.338]And my second question is, "With the upcoming elections,
[00:43:42.070]"with two opponents that have
[00:43:44.064]"pretty different energy policies,
[00:43:46.201]"how do you feel like that affects your industry
[00:43:49.799]"over the next four years?
[00:43:51.740]Those are good questions.
[00:43:53.244]50 years from now, I know I'm gonna be kinda crabby,
[00:43:57.197]but I'm very excited.
[00:43:58.785]When you look at an industry, Union Pacific's
[00:44:00.846]celebrating their 150th anniversary this year.
[00:44:05.508]And you look how far we've come, in the railroad industry,
[00:44:09.502]but it's still a steel rail and a steel wheel.
[00:44:13.682]And so, the technology of the principle of railroading
[00:44:17.466]is pretty much the same, where track is everything,
[00:44:20.555]and everything else in between is the technology
[00:44:23.049]that's made us so efficient,
[00:44:26.455]so much beyond anything that I ever imagined
[00:44:29.547]when I first started on the railroad.
[00:44:33.205]I think my sons and my grandkids are going
[00:44:35.620]to have a tremendous opportunity to go
[00:44:38.556]to the next generation.
[00:44:40.235]When I started, we were loading grain
[00:44:42.201]in 40-foot grain boxes.
[00:44:45.798]Now, you know, we're 286,000 pound capacity grain cars
[00:44:50.217]and I would imagine the next few years
[00:44:52.067]they'll be about 318,000 pounds.
[00:44:55.497]When you can keep adding that productivity
[00:44:57.381]on a per-car basis, when you look at the gains we've made
[00:45:01.485]just through work rules with labor,
[00:45:04.741]where Union Pacific can run from Council Bluffs to Cheyenne
[00:45:08.131]with two crews and at 70 miles an hour
[00:45:12.032]and the ability that we have as an industry,
[00:45:15.791]and then you look at the very serious situation
[00:45:17.907]with what's happening with truck drivers.
[00:45:20.412]Where will those drivers come from?
[00:45:21.869]So, the relationships that we're generating now
[00:45:24.883]are partnering with truckers.
[00:45:26.950]And that's an unlimited opportunity,
[00:45:28.627]as far as I'm concerned.
[00:45:30.428]Capacity has to be there.
[00:45:32.348]Very interesting point is that, through this recession,
[00:45:35.478]the railroads are just one of the few industries
[00:45:38.222]that have spent more money on capacity and capital spending
[00:45:41.975]through the recession than they ever did before.
[00:45:45.329]So they're coming out of the recession in the next year
[00:45:47.401]or two, hopefully, with incredible capacity.
[00:45:52.013]I think, on your question on the Presidential election,
[00:45:55.830]it's a little frustrating
[00:45:57.369]because I think both sides understand railroading.
[00:46:02.942]Both sides understand transportation.
[00:46:05.676]Both sides understand the critical part
[00:46:08.318]that we play to the economy.
[00:46:11.832]But one area that really frightens me
[00:46:13.360]is the regulatory environment
[00:46:15.416]that the Obama side has created.
[00:46:18.185]I'm on an advisory committee
[00:46:20.878]at the Surface Transportation Board on Energy.
[00:46:24.773]And five years ago, when we started this group,
[00:46:27.973]the utility companies were at odds
[00:46:29.633]with the railroads constantly on service, and rates,
[00:46:32.170]and efficiency and productivity.
[00:46:35.397]But now, we're 300 million tons a year less coal
[00:46:41.074]in our industry than we handled two years ago
[00:46:44.250]and it'll keep growing.
[00:46:45.795]And until we solve that issue of using coal
[00:46:48.976]in a positive way, and creating a partnership
[00:46:52.337]on how we use these commodities,
[00:46:56.037]I think it's gonna be very, very serious
[00:46:58.176]for us as an economy
[00:47:02.477]with what this will do to the price of energy.
[00:47:06.030]And that's about as far as I better go politically, I guess.
[00:47:08.942](laughter)
[00:47:13.013]Well, first off, Dan, thanks for a great talk.
[00:47:15.774]And I did have one question.
[00:47:19.380]I appreciate the multi-line aspect
[00:47:21.004]of some of the things you're talking about,
[00:47:22.408]but I was wondering if you talk a bit more about that.
[00:47:24.940]The challenges of being multi-lined,
[00:47:27.067]having to work with these different railways
[00:47:29.531]and the state DOT and those things.
[00:47:32.835]It clearly is a feature of our industry
[00:47:34.595]and I'd appreciate your insight on that.
[00:47:37.579]It is.
[00:47:39.191]As I mentioned, we have a very close relationship
[00:47:40.934]with our connecting railroads.
[00:47:45.023]With a big railroad system, you've got a lot
[00:47:46.116]of politics involved, you've got changes in managers,
[00:47:49.526]changes in dynamics and personalities.
[00:47:52.579]And sometimes, you're on the right side
[00:47:54.403]and sometimes you're on the wrong side.
[00:47:56.300]What we've tried to do, is to always go
[00:47:57.835]to our connecting railroads and be very honest with them.
[00:48:01.510]We say, "We're an independent company.
[00:48:03.349]"We're here for the benefit of the customer first,
[00:48:06.038]"but we'd like you to be aggressive with us
[00:48:08.446]"to capture more business and we think we can show you how
[00:48:11.782]"to do more yourself."
[00:48:13.468]For example, when the wind industry came out,
[00:48:16.916]we had just completed Manly Terminal
[00:48:18.420]with the ethanol facility.
[00:48:21.220]I got a call from a friend of mine at Union Pacific in Omaha
[00:48:24.169]and he said, "Hey, we need to have distribution centers
[00:48:27.291]"in five locations on Union Pacific and Manly, Iowa
[00:48:30.685]"is one of 'em.
[00:48:32.081]"Will you take the last mile for us?"
[00:48:34.622]And, ultimately, we partnered up with UP
[00:48:36.377]and created the largest distribution facility,
[00:48:40.630]literally, in North America.
[00:48:42.778]We do this a lot now.
[00:48:46.560]At least three days a week, someone at one
[00:48:47.892]of the Class I railroads will call and say,
[00:48:50.237]"What do you think of this?
[00:48:51.821]"Is there something you can do for us to make this better?"
[00:48:55.198]And that relationship has really been fun.
[00:48:58.791]The state of Iowa, as I mentioned, had the mortgage
[00:49:01.411]on the property when we first came back to Iowa.
[00:49:05.312]And, had it not been for the state of Iowa,
[00:49:07.095]and assistance through the flooding and a lot of help
[00:49:10.355]in facilitating the relationship,
[00:49:14.804]none of these railroads,
[00:49:18.588]other than just the core mainlines would be there today.
[00:49:21.712]I mean, just look at what Nebraska's lost
[00:49:23.133]in the last few years.
[00:49:24.646]They lost most of the Rock Island,
[00:49:26.924]they lost most of the C&W.
[00:49:29.358]In fact, I was involved in a study of what we call
[00:49:32.165]the "cowboy line" from Norfolk to Chadron
[00:49:35.294]and worked very hard to try to save that line
[00:49:37.622]and it just couldn't get through appropriations
[00:49:39.813]quick enough, so the line was abandoned.
[00:49:42.623]But I think we'll regret that as an industry
[00:49:45.119]and for the state of Nebraska for generations.
[00:49:49.354]And so, I'm not sure if I answered the question
[00:49:52.485]exactly the way it was asked, but the relationships
[00:49:55.950]that we have, even with our communities are incredible.
[00:50:00.773]I'll get called to a city council meeting and they'll say,
[00:50:03.561]"You have seven crossings in town.
[00:50:05.025]"When you gonna fix 'em?"
[00:50:06.706]I'll say, "Well, that's 349th on our list,
[00:50:10.618]"but I tell you what, if you restore that crossing with us,
[00:50:13.961]"and let us close a couple of these unused crossings,
[00:50:16.690]"we'll put it at the top of our list."
[00:50:18.857]And it's been a great relationship with the counties,
[00:50:21.114]the communities, and now, after probably 10 years,
[00:50:25.545]we've got 90% of our almost 400 crossings
[00:50:29.596]totally rebuilt now.
[00:50:40.203]So, two more questions from the online audience.
[00:50:43.065]University of Iowa asks, "Safety, car versus train conflicts
[00:50:47.494]"at railroad crossings is a concern.
[00:50:49.959]"Do you have any thoughts on how it can be improved?"
[00:50:54.291]Well, in my career, it's improved a lot.
[00:50:57.455]Folks like you that have that research capability,
[00:51:02.532]Operation Lifesaver, I think, has been very good,
[00:51:05.186]particularly when you start teaching young children
[00:51:08.027]in elementary school of the dangers.
[00:51:12.170]There's probably nothing scarier than to be on a train
[00:51:15.822]and see a car on that crossing or a school bus
[00:51:18.664]or a gas truck or something like that.
[00:51:21.267]And I've been on trains with some near misses
[00:51:23.328]that I'll never forget.
[00:51:26.089]And it's the most powerful thing to frighten you
[00:51:30.822]to see that from the locomotive
[00:51:32.271]and know how helpless you are.
[00:51:33.902]I was on a rail diesel car in Canada
[00:51:38.381]quite a few years ago and we were doing 90 miles an hour
[00:51:40.675]and a gravel truck just cleared,
[00:51:44.106]and I was standing in the cab with the engineer.
[00:51:46.753]And there wouldn't have been one survivor
[00:51:48.768]if we would have hit that gravel truck.
[00:51:51.049]Out of about 95 passengers, and the crew, and myself,
[00:51:55.508]none of us would have survived that.
[00:51:58.005]And so, I can't answer your question
[00:52:00.208]on how it can continue improving other than it's an area
[00:52:03.568]that has been getting good federal and state funding.
[00:52:08.106]It's probably one of the most important things we can do
[00:52:11.823]and the work that I've seen here just in my brief visit
[00:52:14.750]indicates that you guys are really in the right direction
[00:52:17.678]and it's really tweaking now to get those nuances fixed on
[00:52:21.710]that relationship between a busy road with traffic lights
[00:52:25.263]and double track main lines and that,
[00:52:29.082]but it's very frightening.
[00:52:31.445]But, we also have
[00:52:35.430]have a lot of technology now.
[00:52:36.876]All the Class Is have cameras, so you can at least reenact
[00:52:40.033]what occurred and try to prevent it from happening again.
[00:52:43.126]But I wish there was an easy answer for that
[00:52:46.182]to eliminate it completely.
[00:52:50.405]And one last question is, "What is the possibility
[00:52:52.747]"of running fully automated trains
[00:52:55.771]"where they are operated remotely
[00:52:57.629]"from the University of Iowa?"
[00:53:00.198]Well, go Hawks!
[00:53:01.093](laughter)
[00:53:03.954]I hope that never happens.
[00:53:06.461]I would guess that if you can run
[00:53:11.528]an airplane from over Afghanistan from North Dakota,
[00:53:15.695]I guess that the technology's probably there to run a train.
[00:53:20.177]I don't even like remote control locomotives.
[00:53:24.200]We're down to two-man crews.
[00:53:26.263]We've got four eyes that are diligent to look out
[00:53:29.819]for things, not only the safety of themselves,
[00:53:32.288]but the safety of the public and other folks.
[00:53:37.489]I have no doubt that the technology will get us there,
[00:53:40.478]but I hope that they never practice it on a total basis.
[00:53:47.408]And that concludes the questions.
[00:53:48.826]Give your speaker a nice round of applause.
[00:53:50.509]Thank you.
[00:53:51.559](applause)

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2012 MATC Fall Lecture Series: Dan Sabin

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