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Short-line rail takes on new economic development role
By Dan McCue
Staff Writer
It’s been 30 years since a short-line railroad was created in South Carolina, but that drought in activity could soon change as state officials and hopeful investors look for ways to profit from an anticipated onslaught of Asian trade and other foreign investment.
Beyond providing existing South Carolina businesses with another direct link to distant domestic markets, short-line rail could foster a distribution center cluster in the state while protecting the quality of life of coastal and other residents.
Rail is also being mentioned as a potential tool in promoting the development of at least three “mega-sites” in parts of the state with historic underemployment.
“Do I think there are a lot of opportunities to utilize rail as an economic development tool? Absolutely,” said Jeffrey M. McWhorter, president of S.C. Public Railways, a division of the S.C. Department of Commerce. “And I think we’re at a point now where there’s a real opportunity to broaden our approach and look at future development.”
South Carolina’s last comprehensive analysis of the rail network crisscrossing the state and the needs of rail’s then-current and potential customers was completed in 1995. Since then, not only have cargo volumes through the Port of Charleston climbed dramatically, but a host of new players with an interest in quickly moving cargo inland has established a presence here.
In the past year alone, a number of entities have made multimillion-dollar investments in the Palmetto State in hopes of earning profits in the global economy: Jafza International, a subsidiary of a holding company owned by the royal family of Dubai; Hillwood Investment Properties, a commercial and industrial real estate company owned by H. Ross Perot Jr.; the Rockefeller Group; and others.
Of those projects, Jafza International in Orangeburg has the most direct link to a major rail line—a connection to the main line of CSX Corp.’s railroad passes through its property—but rail’s potential is lost on no one.
“I would love to have a rail connection to our site,” said Gary Frederick, senior vice president of Hillwood Investment Properties, whose Jedburg land isn’t far from the existing Norfolk Southern line that runs roughly parallel to Interstate 26.
“If we had that, I could see us using rail to bring exports into our site and performing value-adding services and then sending (the exports) the last mile by truck to the Port of Charleston for shipment overseas,” he said.
As for Jafza International, project managers are formulating a plan for their site that will include a rail component, but according to sources, they’re also looking to forge a cohesive rail plan that will benefit commerce parks in the tri-county region.
Much will rest on the fate of a resolution sponsored by state Sen. Raymond E. Cleary III, R-Murrells Inlet, which calls for an update of the 1995 rail study. Introduced last spring, the resolution has since been sent to the state House of Representatives.
“I introduced this bill knowing that ports throughout the Southeast, including the Port of Charleston, are anticipating a doubling of cargo over the next decade and a half, and thought it may assist in reducing road needs and traffic nightmares,” Cleary said.
“That’s especially true here,” he said. “At many ports in the U.S., 80 percent of the cargo moving inland moves by rail, while 20 percent moves by truck. Here in Charleston, I believe, those percentages are nearly reversed.”
To qualify for federal funds to deal with these transportation issues requires a state rail plan, he said.
If Cleary’s bill passes the House this session, the model for future state rail is likely to be the East Cooper and Berkeley Railroad, a 17-mile line built in 1978 that links the BP Amoco Chemical Co.’s Cooper River plant in Berkeley County to the CSX junction near Cordesville.
“The history of the line goes back a few years earlier, to 1973, when the state was still trying to lure BP Amoco to Berkeley County, and CSX had said it wouldn’t build a connection to Anderson,” McWhorter said.
To facilitate the creation of the rail line, the legislature established the S.C. Public Railway Commission, an entity that received no appropriations under the state budget but was instead intended to survive solely on the fees charged to customers on rail facilities that had previously belonged to the S.C. State Ports Authority.
SPA was originally overseen by three commissioners, a number that was eventually bumped up to five before former Gov. Carroll Campbell rolled the authority into the state Department of Commerce.
“At five years young in 1978, the commission didn’t have the $7 million necessary to finance the rail line, so Amoco agreed to put up the money up front, and the commission paid the company back, taking ownership of the tracks,” McWhorter said.
But the talks between Amoco and the commission extended beyond deal-making.
“Looking back, you can see that they had a lot of foresight in respect to future growth,” McWhorter said. “They laid down 132-pound continuous welded steel, and the only real improvement since has been the creation of an additional two-mile spur to connect Nucor Steel to the line.”
In 1979, its first full year of operation, the East Cooper and Berkeley line handled 2,000 “revenue” cars, and while the annual numbers have varied widely over the years, recently the numbers have been increasing.
In 2006, for instance, the line handled 60,807 rail cars, McWhorter said. Through November 2007, the number of rail cars had reached 62,779.
S.C. Public Railways hasn’t created another short-line rail operation since, but it has used its rail expertise for economic development purposes, building rail spurs for both BMW and Michelin in the Upstate.
“Basically we had tied the existing rail lines directly into their facilities, just as we did with Nucor Steel,” McWhorter said.
Today, the 16-employee, five-locomotive operation has three common carrier railroads, the East Cooper and Berkeley line and the original operations it inherited from SPA.
Those operations, the Port Utilities Commission of Charleston and the Port Terminal Railroad, provide switching services to the SPA terminals, CSX Transportation and the Norfolk Southern line.
But a new statewide rail study would give South Carolina access to federal money that would allow it to do more. According to McWhorter, the steel alone for additional rail in the state would cost $200 to $300 a track foot.
The state commerce department is marketing three mega-sites in the state, including 1,340 acres known as Sage Mill East in Aiken County, 1,151 acres known as the Carolinas Interstate 77 Mega Site in Chester County and 2,600 acres known as the Young Lands Industrial Site in Florence County.
“Clearly, taking a new look at rail and accessing federal funding would enhance our ability to market these sites,” McWhorter said. “Add to that the fact that as Jafza International and others have come on the scene, it’s created an environment where rail could play a bigger part in economic development in the future.”
Dan McCue is a staff writer for the Business Journal. E-mail him at dmccue@setcommedia.com.
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