“The railroads’ starting point in the discussion is that they don’t want to pay for anything,” he said. “There’s a stalemate. The railroads are the party-poopers who take all the fun out of the party.”

Port of Oakland’s rail plans can’t leave station
(The following story by Blanca Torres appeared on the San Francisco Business Times website on August 14.)

OAKLAND, Calif. — Every day, ships bring thousands of cargo containers to the Port of Oakland where they are transferred to either trucks or trains and slip quickly from view.

More than 450 miles away, rail freight crosses the Tehachapi mountain pass on its way to the Southeast. Donner Pass, almost 200 miles northeast of Oakland, is the main gateway to the Midwest. Improving these two arteries and moving forward with local projects could dramatically improve the port’s ability to increase volume and not lose business to other West Coast ports.

“The Port of Oakland could really grow if we could get the rail capacity we need down the line,” said Steve Gregory, a senior planner with the Port of Oakland.

The port wants to double its volume to about 5 million container units per year by 2020. Currently, the port moves about 2.4 million container units per year and more than 6,100 each day. Omar Benjamin, executive director of the port, believes now is the time to make major improvements and investments to ensure future growth.

Thirty percent of containers leaving the port these days move by rail and the other 70 percent go on trucks, Gregory said. The port wants to see that divide shift to at least 50-50.

“Rail is where the growth will be,” Gregory said. “Our goal is to work with our tenants and customers to create more economic benefits and jobs. We must have an effective partnership with the railroads.”

The two rail companies that operate out of the port — Fort Worth, Texas-based Burlington Northern Santa Fe and Omaha-based Union Pacific — agree with officials that a rise in container volume could benefit all of them. The hassles begin when they get down to details: What types of improvements are needed and who will pay for them?

The port looks to invest in its future despite a slowdown in some segments thanks to a sluggish national economy. It announced plans to slash 100 of its 600 jobs this month. Container traffic is down about 2 percent so far this year. In 2007, container traffic remained flat compared with 2006, but had grown 5 to 11 percent each year from 2004 to 2006.

In the meantime, it’s time to smooth the paths from the port to the rest of the country. Pumping up rail volume out of the port makes more sense than using trucks because trains are more fuel-efficient, environmentally friendly and help free up roads for passenger cars.

In order for the port to expand, Gregory said, it must capture more business from shippers, make its facilities more efficient and persuade the railroads to boost capacity by enhancing their routes and services.

Those elements work together like the gears of a locomotive, but moving forward has proven difficult. The railroads and the port often struggle to agree on improvement projects and potential third-party private investors feel shut out of the conversation.

“We’d like to be able to invest in these assets,” said Peter Luchetti, a partner with San Francisco-based Table Rock Capital.

Private investors look for infrastructure projects that can generate revenue over time such as toll roads and railroads, which charge a fee for each container shipped. The problem, Luchetti said, is that railroad companies dodge paying for infrastructure as much as possible and leave the bill to public entities.

“The railroads’ starting point in the discussion is that they don’t want to pay for anything,” he said. “There’s a stalemate. The railroads are the party-poopers who take all the fun out of the party.”

The port and both railroads spent several years discussing possible expansions of their railyards and intermodal facilities, which is where container units are transferred from ships to either trucks or trains, on a parcel of former Oakland Army Base land that the port now controls.

These discussions have failed to yield commitments from the railroads to fund specific projects to match funding from the state.

“We need to maximize our return on this property,” Gregory said. “We can’t wait on the railroads sitting and waiting and talking. We’re wasting time.”

Cami Elliott, general director of business unit operations for BNSF, said the rail company expects negotiations to continue with the port for several more months and is also looking into improving its operations through the Tehachapi Pass.

“We’re not constrained there today,” Elliott said. “But we see that as the first place we would need to expand.”

Union Pacific is also considering an enhancement project for the Donner Pass route that trails through the Sierra Nevada to major destinations. It was constructed during the 1800s, decades before trains carried double-stacked containers.

Union Pacific crafted a proposal to improve the existing tracks, build a second main track and alter tunnels and snowsheds to accommodate double-stacked trains. Under the proposal, the railroad would pay for half of the $86 million cost and secure the other half from the state’s Trade Corridor Improvement Fund.

“The ports of Los Angeles and Long Beach are close to reaching capacity and the port of Oakland really wants to capitalize on that,” said Zoe Richmond, a spokeswoman for Union Pacific. “That’s where we can come in and help them.”

Another issue is congestion on a 15-mile stretch of track that runs from the port to Martinez before splitting off into other railways. That section, known as the Martinez Subdivision, accommodates trains from BNSF and Union Pacific as well as passenger rail operators like Amtrak. Proposals suggest adding additional tracks to the existing lines. Discussions so far have failed to produce a solution or secure enough money.

“There’s lots of uncertainty,” Gregory said. “No one was willing to commit.”