Shipping project cargo by rail is expensive
October 13, 2008 – 11:03 am--> Journal of Commerce Break Bulk

There are three primary growth areas in BNSF Railway’s project cargo business, said Dave Garin, the railroad’s group vice president of industrial products. At the top of the list is equipment related to wind energy.

“We have considerable initiatives in blades, towers and other equipment, and they’re getting bigger and bigger,” Garin said.

As the national gross domestic product tripled capital investment over the past 30 years, investment in public water resources infrastructure decreased by 70 percent. The Army Corps of Engineers has a current backlog of more than 500 projects with a cost of about $38 billion. At current funding levels, it would take 25 years to complete the active projects.

The lack of funding for maintenance dredging has reached crisis proportions. The Harbor Maintenance Tax was created in 1986 specifically to fund dredging projects, but Congress must appropriate the funds annually. More than $1.4 billion was collected and put into the Harbor Maintenance Trust Fund in fiscal 2007, yet only $751 million was allocated to the Corps of Engineers for maintenance dredging.

“Without dredging, many port facilities and navigation channels would be rendered unsafe and non-navigable to users in less than a year,” the American Association of Port Authorities says.
The project cargo industry has largely been spared from negative impact of the nation’s aging inland waterways infrastructure, said Dennis Devlin, director of global projects and energy for BDP Project Logistics. Most project cargo moves inland by truck, and while ports continue to devote more resources to container operations, there are more marine terminals handling project cargo now than there were 10 years ago. The Gulf Coast ports of Houston, New Orleans, Beaumont, Freeport, Galveston and Port Arthur are adding breakbulk capacity or have the ability to do so, and there are many other options on both coasts.

Coordinating container and project shipments can be challenging. Vast amounts of ancillary equipment are needed to support projects, and much of it is containerized, including pipes, valves, pumps and instruments, Devlin said. BDP uses freight process management software from Houston-base HAL Inc. that is specifically designed to track all project-related cargo shipments door-to-door.

Although the nation’s marine ports have kept up with the demands of the breakbulk and heavy-lift industry, when the economy eventually improves, there will be an even greater demand for project cargo that could strain port capacity, said Frank Fogarty, senior vice president of sales and marketing for general stevedoring at Ports America.

Without a secure, ongoing source of funding for maintenance dredging and infrastructure upgrades, some of those ports could be at risk.

“If we don’t improve our infrastructure over time, we will put some ports out of business,” Fogarty said. “Shippers will be forced into less attractive or more expensive ports, and more cargo will have to go over land, further deteriorating our national infrastructure.”

Piping is the second leading growth area as the global boom in pipeline and drilling projects continues. Transmission and drilling pipes are getting longer and heavier, requiring temporary distribution sites across the rail network.�

The third growth category is refinery equipment such as reactors and specialized vessels. Project cargo falls under BNSF’s industrial products freight business, which also includes aircraft parts, military equipment and agricultural and industrial machinery. The industrial products business accounted for 24 percent of BNSF freight revenue in 2007.

Clearance is the biggest challenge in moving project cargo by rail. Finding the right combination of equipment and routes for rail and truck movements of oversize equipment is so difficult that some component manufacturers are designing and fabricating equipment with bridge and sidings clearance restrictions in mind. In some cases, manufacturers and project developers have invested their own funds to modify bridge clearances and other impediments along routes.
“They are making investments of a few hundred thousand dollars, but the equipment costs millions,” Garin said.

Shipping project cargo by rail is an expensive undertaking. Cargo of specified weights and dimensions must travel on specialized trains at slower speeds and often on longer routes. Union Pacific Railroad applies special train charges of $120 per rail mile to any excessive dimensional shipment, with a minimum charge of 200 miles, or $24,000, in addition to regular freight charges. Heavy-duty flatcar, detention, demurrage and other changes also may apply.
Under common-carrier obligations, railroads must accept project cargo, but all of the hurdles and requirements, including car availability, make it difficult for shippers, said Grant Wattman, director of logistics for global engineering and construction firm CH2M Hill and president of the Exporters Competitive Maritime Council, a coalition of project cargo stakeholders.

The already formidable challenge of moving oversize cargo over the highways is further complicated “with the trend of Class 1 railways refusing to accept oversize and overweight cargoes, which will force additional freight to the national highway system,” according to an ECMC report.

The trend is understandable given the disruptions associated with moving project cargo by rail compared with the smooth, profitable flow of containerized cargo. “If I was in their shoes,” Wattman said, “I would do same thing.”

– David Biederman