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Norfolk Southern has been largely silent during the region’s broiling commercial rail debate, but a deal struck by a group of rivals last week pushed the company to address the issue publicly on Wednesday.
By Daniel Brock
dbrock@scbiznews.com
Published July 15, 2010
Norfolk Southern Corp. has been largely silent during the region’s broiling commercial rail debate, but a deal struck by a group of rivals last week has pushed the company to address the issue publicly.
Speaking to the Business Journal on Wednesday, officials from Norfolk Southern and S.C. Public Railways outlined their grievances with a memorandum of understanding that links the city of North Charleston, local developer Shipyard Creek Associates and CSX Transportation.
The deal, which had been in the works for months and started coming together in earnest in late June, was hammered out in backroom meetings and kept out of the public eye.
Norfolk Southern officials said they, too, were left out of the discussions.
The pact calls for CSX to abandon miles of tracks in North Charleston and hand over more than 30 acres to the city. In return, North Charleston would help CSX purchase new rights of way that would allow for southern access to a proposed intermodal terminal at the Shipyard Creek-owned Macalloy property.
The plan would achieve North Charleston Mayor Keith Summey’s ultimate goal: protecting residential and commercial projects on and around the former Navy base by nixing rail access from the property’s north end, including redevelopment efforts at the 340-acre Noisette Co. property.
But that’s where Norfolk Southern currently accesses the former base.
The project would rely heavy on federal funding and even with the backing of political muscle in Washington, D.C., it’s not certain the money would come. City council will vote on approving the agreement next month.
Officials from Norfolk Southern said they had a number of issues with the plan, primarily that it doesn’t afford equal access to a near-dock intermodal rail yard that would service the S.C. State Ports Authority container terminal under construction at the former Navy base.
The agreement allows Norfolk Southern access from the south — if the company builds a facility of its own on the former Promenade property, now called Laurel Island.
Officials from Norfolk Southern rejected that idea “unequivocally” on Wednesday.
“It’s a lousy place to put an intermodal facility,” said Steven A. Evans, a vice president in Norfolk Southern’s Ports and International Department.
Evans said the site, a former landfill, would have to be stuffed with thousands of pilings to keep it from settling; that it was in a bad location, conducive to causing log jams at the Columbus Street terminal; and that the tracks there would inconveniently dead-end.
“You end up with a brand-new, second-rate facility,” said W. Augie Eckhardt, a Norfolk Southern market manager. He said the plans he’s seen are a “deficient design.”
Proponents of the Macalloy plan contend the Laurel Island site would provide equal dual access.
“It’s a hollow offer, at best,” Eckhardt said.
If Norfolk Southern didn’t build there, getting to the Maccalloy terminal would be an issue. Not only has the rail line not been offered access, but nothing in the recently signed memorandum of understanding addresses track usage at that facility, officials said.
“There is nothing in the MOU that says CSX is going to let us into the Macalloy Terminal,” Evans said.
Even if it did, Evans contended, Norfolk Southern would still be at a disadvantage, and not just because of the hundreds of dollars per car in switching fees CSX would likely charge for use of its line.
Evans broke it down like this: CSX controls a busy interchange at the north end of town called the YS interlocking. It would also control the tracks in Macalloy. If CSX allowed Norfolk Southern through the YS, but was running a train in or out of the intermodal yard, the Norfolk Southern train would be stalled, blocking crossing for two miles or more along Meeting Street Road.
“What a log jam,” Eckhardt said.
CSX would likely not allow Norfolk Southern through the interchange until its own train had cleared from the south, holding his company up for hours and causing it to miss delivery windows in places such as Atlanta, according to Evans.
Norfolk Southern said trains heading to the Union Pier terminal loaded with BMWs are forced to wait for an hour or more at the interchange.
“Thirty-three years working with a railroad, I can tell you: working with their facilities, they’re going to prioritize their trains,” Evans said.
It’s been CSX’s position that if it owns the facilities and has already invested millions of dollars in the site, that allowing Norfolk Southern free-reign would be akin to forcing Piggly Wiggly to cede half of a store to Publix for free, officials for the company said.
Counter plan
Norfolk Southern has a plan, endorsed by S.C. Public Railways, a for-profit division of the S.C. Department of Commerce, that it says would solve the issue of equal dual access.
A single intermodal yard would be built on property currently deeded the Clemson University Restoration Institute at the Navy Base.
Norfolk Southern trains would pull into the facility from the north, while CSX could simultaneously arrive from the south. That, however, runs afoul of 2002 memorandum of understanding between the North Charleston and the SPA in which the authority agrees to utilize rail access only from the south.
Problems between the two sides start with the memorandum, Evans said.
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| S.C. Public Railways President Jeff McWhorter |
“I understand why he did not want that rail there with the Noisette project and where they were heading with that,” said S.C. Public Railways President Jeff McWhorter about Summey. “Quite frankly, I’m not sure what resulted from that. What is it that’s been constructed in there?”
Norfolk Southern officials said their plan, which has yet to entirely address significant questions about rail access and land acquisitions, would be paid for by federal grants. Unlike the Macalloy plan, they said, theirs is fair — and superior.
The key is striking a deal with Summey, which seems highly unlikely at this point.
“If we could find some sort of compromise with Mayor Summey, this is light-years better than what CSX is proposing. I’m sorry, but it is,” Evans said.
Evans said it doesn’t make sense to use federal or state funds to built a facility to serve the port and then “exclude a railroad when you could, in fact, let both railroads in there.”
The Norfolk Southern officials and McWhorter said that a single dual-served facility is best for price-lowering competition between the rail lines, which would in turn be good for the state economy.
The Macalloy plan — and a potential loss of rail access from the north stemming from the recent memorandum — would likely run Norfolk Southern out of town, according to officials.
“Eventually we’d have to say, ‘Our margins are such here that we have to try to do what we can somewhere else,” Eckhardt said.
Reach Daniel Brock at 849-3144.
For a full report on Summey’s rail plan, what’s at stake for South Carolina, the port and North Charleston, see the upcoming issue of the Charleston Regional Business Journal.
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