Andre joined Twin Cities Business in September 2014 and now serves as Online and E-Newsletter Editor, a role in which he manages TCB's website, covers breaking news, updates social media channels and oversees the twice-weekly e-newsletter,Briefcase. Previous to joining TCB, Andre dabbled in several roles, including experience in several newsrooms, a one-year stint at a nonprofit through the AmeriCorps national service program and developing social media strategy at Carmichael Lynch Spong.
Dale heads up the production of TCB’s magazine, website, e-newsletters, live events and editorial partnership projects. He also serves as both an editor and a writer, is a weekly on-air business news contributor for CBS’s WCCO radio and regular commentator on Gannett’s KARE-11 TV, and emcee’s several events throughout the year.
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Vance K. Opperman (firstname.lastname@example.org) is owner and CEO of MSP Communications, which publishes Twin Cities Business.
Sarah Lutman is a St. Paul-based independent consultant and writer for clients in the cultural, media and philanthropic sectors.
David Burda (twitter.com/@davidrburda, email@example.com) is editorial director, health care strategies, for MSP-C, where he serves as the chief health care content strategist and health care subject matter expert, and was editor of Modern Healthcare, the industry’s leading health care business publication.
Tom Hubler (firstname.lastname@example.org) is president of Hubler for Business Families, a family business consulting firm.
Many miles south of the Aerial Lift Bridge, the Canal Park and the ore docks, the global economy is reshaping a quiet part of Duluth.
Canadian National Railway (CN) is in the midst of a two-year, $30 million project to build approximately 4½ miles of double track on Steelton Hill, which rises from Duluth to the north and west. “The project will essentially add a passing lane on CN’s busy freight corridor,” CN spokesman Patrick Waldron says; it’s designed to reduce and eliminate congestion faced by the 20 to 25 freight trains that operate through Steelton Hill each day. The project, due to be completed next year, also includes a couple of new rail bridges to accommodate the double-tracking, as well as some smoothing of curves.
The project’s size and scope reflect how northern Minnesota has become an increasingly important passageway for global freight between Canada’s West Coast and Chicago. Nearly a fifth of all freight traffic from Canada to Chicago comes through Steelton Hill, and that amount is expected to increase. It’s a rail boom that could mean a new economic development opportunity for Duluth.
The project is CN’s latest investment to improve the safety and efficiency of its 424-mile rail network in Minnesota. One of the largest railroads in the state, employing more than 460 people, each year CN trains move billions of dollars’ worth of freight around northern Minnesota between Ranier, Minn., a small town near International Falls, and the Proctor freight yard west of Duluth, as well as from the Iron Range to the Duluth and Two Harbors docks.
The Steelton Hill line was originally part of the Duluth, Missabe & Iron Range railroad (DMIR) that once dominated Iron Range ore transport. Steelton Hill was DMIR’s connection between the Range to Duluth’s U.S. Steel plant, which was torn down in the early 1980s. CN acquired the DMIR in 2004, and the Steelton Hill line took on a new role as part of CN’s core route between the major North American rail hubs of Winnipeg and Chicago.
CN’s Waldron notes that as the general economy has rebounded from the downturn, traffic across CN’s system increased 8 percent in 2014 over 2013. That reflects a trend throughout North America. “In 2014, the freight rail industry moved more traffic than any time since 2007 and the last recession,” says Ed Greenberg, spokesman for the Association of American Railroads (AAR), which represents the American freight rail industry. Shipments of chemicals, grain, cars and automobile components were all up over 2013.
The main driver in the rise of freight rail has been the record amount in intermodal shipments. In railroad terminology, intermodal refers to the movement of trailers and shipping containers by rail. More than half of intermodal freight enters or leaves North America through the coastal ports. The rest moves within the continent. According to AAR figures, U.S. intermodal freight was up 5.2 percent over 2013—which was also a record year. Intermodal accounted for 47.1 percent of total rail traffic last year.
What’s fueling the intermodal boom? Imports from Asia have climbed as the U.S. economy improved. Larry Gross, president of New Jersey-based Gross Transportation Consulting, also notes that railroads have been picking up market share from trucks “primarily because the service in recent years has improved to the point where it’s sufficiently reliable for people to use. It was always cheaper than truck, but you always paid a big price in terms of service in the old days. Nowadays, though it’s still not as fast as a truck, its reliability has improved to the point where it’s tolerable.”
That’s not to say that trucking has declined. “It has now recovered to the point that it was prior to the recession,” Gross says. “It did take a big hit during the recession, and it’s been very slow to recover altogether.” That said, he notes that trucking still accounts for the vast majority of shipments in the U.S. Intermodal is a small player in comparison.
Still, Gross says that intermodal is the fastest-growing sector of the surface freight transportation world in North America. A fast-growing freight category has been crude oil, which “didn’t even exist prior to the recession as a rail commodity,” he adds. “Now it’s significant.” (While oil carloads have increased from 9,500 in 2008 to 493,126 last year, AAR figures put crude oil at about 1.6 percent of total U.S. rail freight in 2014. Coal, by comparison, made up about 20 percent.)
In addition to oil from Alberta, the freight that CN moves via its northern Minnesota corridor includes forest products, general merchandise, grain and fertilizer. But CN’s Steelton Hill project is largely driven by the increase in container traffic. And it appears that many more containers will be coming through.
Caught flatfooted by the recent boom in traffic—a boom that overtaxed Minnesota’s rail system in 2013 and 2014—railroads are now in the midst of a big capital improvement push. According to AAR’s Greenberg, railroads in the U.S. are spending about $29 billion on infrastructure and equipment in 2015. CN, meanwhile, is spending $2.2 billion across its system.
Steelton Hill is just one of those parts of Minnesota seeing a spending increase. The Twin Cities “was one of the epicenters of congestion last year, in particular because of the huge jump in crude by rail moving out of North Dakota,” Gross says. The BNSF line to the Twin Cities is “essentially a single-track railroad. And they were trying to stuff a lot of volume over that railroad”−not only crude but grain and also a lot of intermodal from Seattle and Tacoma. “You had a 10-pounds-in-a-five-pound-bag problem there,” Gross says. BNSF has been “spending copiously to address those bottlenecks.”
Steelton Hill is part of Canadian National’s core line connecting Canada’s Pacific Coast container ports and the rail-hub cities of Winnipeg and Chicago. Between 20 and 25 freight trains pass through the area each day, which is located near CN’s rail classification yard in Proctor. Additional tracks are being installed to reduce congestion and increase efficiency on a route that CN expects will become busier.
Location: Duluth (Gary-New Duluth neighborhood)
Cost: $30 million
What the project entails:
For intermodal freight, another chokepoint has been U.S. ports, which have been overwhelmed by the hyperabundance of container ships and their cargo. Canadian ports and the railroads that serve them see an opportunity to take market share from the U.S. port freight system. A nine-month labor slowdown at West Coast ports that ended in February resulted in a significant amount of freight being diverted north of the border to the ports of Vancouver and Prince Rupert, Gross says.
The port at Prince Rupert, he adds, was not a big container port until recent years. “And it was created with the express purpose of accepting freight for forward movement by rail into Eastern Canada and the Midwest U.S. So that is competing with Seattle-Tacoma and the U.S. [rail]roads that connect the Pacific Northwest to the Midwest.” An ongoing expansion project will allow Prince Rupert to accommodate the massive new ships, some carrying as many as 20,000 containers, that several shipping companies are planning to introduce. As more intermodal traffic comes from Canadian West Coast ports and flows in to the United States, it’s putting stress on another chokepoint in CN’s Winnipeg-to-Duluth core line. This roadblock runs across the mouth of the Rainy River between Pither’s Point in Fort Frances into Ranier.
According to a May 11 article in the Duluth News Tribune, about 18 percent of all rail freight from Canada to the United States comes through Ranier, and the number of trains coming through this entry point has nearly doubled since the recession. Those trains then head to Steelton Hill.
CN projects that the number of trains will continue to increase, making improvements to this part of its northern Minnesota corridor crucial. CN’s Waldron says that the railroad is looking to decrease congestion and increase efficiency at the border crossing. The state of Minnesota also has proposed a new bypass that will make it easier for drivers to avoid getting stuck when a freight train rolls through.
A recent episode highlights infrastructure stresses on the important CN route. On May 27, an old timber rail bridge about 15 miles south of Ranier burned and collapsed as a train carrying potash was crossing. No one was hurt, but the collapse closed off freight traffic on the route.
The improvements CN is making in Duluth could lead to some new economic development projects. Duluth has hopes that CN’s Steelton Hill project can help it redevelop empty industrial land associated with the U.S. Steel plant site. Part of the project includes the replacement of an old rail bridge that prevented tall trucks from passing underneath. This improvement could assist with the Duluth economic development agency’s efforts to redevelop the land into a multi-modal freight facility. Trucks bearing containers and other tall freight would be able to pass underneath the bridge on their way to nearby Interstate 35.
With more containers and other rail freight coming through Duluth, the sites also could serve as a transfer location for containers and other goods to be shipped by trucks or by ship via the Port of Duluth-Superior, which is spending $17 million on improvements. That’s being done to accommodate more and diverse cargo, and to more easily transfer cargo to trucks and rail lines. That cargo, by the way, could include containers.
And though Duluth is no Prince Rupert, the Steelton Hill project could raise its profile in an increasingly complex global transport network.
Gene Rebeck is a Duluth-based freelance journalist who writes monthly for Twin Cities Business.