BNSF plans record capital expenditure for 2015

Mark Szakonyi, November 20, 2014, JOC.com

 

 

BNSF Railway plans to spend a record $6 billion on capital projects next year and will invest $500 million more this year than it originally planned, it said today.

 

While $2.9 billion will be spent next year on replacing and upgrading the railroad’s existing network, there will be still be $1.5 billion spent on expansion projects. Adding capacity is crucial to BNSF being able to restore network fluidity and bring back the level of service intermodal and railcar shippers enjoyed before the 2013-2014 winter caused performance to significantly decline.

 

Like many other Class I railroads in North America, the steady rise in volume has made it difficult for BNSF to restore service. This winter will further test BNSF and its counterparts’ ability to keep trains moving and avoid a cargo backlog that weighed them down this year. BNSF told customers in late October that it was better prepared for this winter with more personnel ready and expanded storage capacity at facilities in Chicago, which suffered the worst gridlock last winter.

 

“We have made great progress in expanding the segments of our railroad that have been most constrained by rapidly increasing demand,” BNSF President and CEO Carl Ice said. “Once these new capital programs are completed, we expect to further restore the capacity flexibility we have historically enjoyed to manage the periodic demand surges that come from a dynamic and fast-paced economic environment.”

 

BNSF will spend nearly $500 million on expanding capacity on its Northern Corridor, the railroad’s biggest chokepoint. The growth of frac sand, oil and other domestic-energy related shipments tied to the nearby Bakken Shale, coupled with healthy export grain traffic, has pulled down service on the corridor connecting the Pacific Northwest and Chicago.

 

The railroad has deployed more train crews and locomotives to restore network fluidity on the corridor, but continued capacity investments are needed to gain major service gains. BNSF said early next year it would detail the line capacity and maintenance projects it will take on, including those on the Northern Corridor. BNSF also said it would acquire 330 new locomotives next year and replace aging locomotives to bring its fleet to 7,500.

 

The railroad will have spent $5.5 billion on capital projects this year, after investing $4 billion in 2013. BNSF’s 2016 capital plans mark three years of record investment in its network.

 

BNSF profit in the third quarter rose nearly 4.7 percent to $1.03 billion, as revenue ticked up $69 million to nearly $5.9 billion from the same period a year ago. Total volume, both carload and intermodal traffic, rose 2.6 percent year-over-year in the July through September period. Berkshire Hathaway, owner of BNSF, admitted that service had fallen below customers standards and had lost market share.

 

BNSF average intermodal train speeds, a metric of rail performance, has hovered around 30 miles per hour for the last reported nine weeks, with trains moving on average 29.7 mph in the week ending Nov. 14, according to the most recent statistics reported to the Association of American Railroads. Average BNSF intermodal trains speeds were about 5.4 percent faster in the same week in 2013.

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