Railroads making tracks to Memphis
Heavy investments beef up role in Aerotropolis plan
Memphis Business Journal - by Andy Ashby
Investments to improve all modes of transportation are key ingredients if Memphis is to succeed in marketing itself as “America’s Aerotropolis,” and railroad companies have shown they are all aboard. Rail is a key component in the aerotropolis concept in the Bluff City, connecting with the river and road systems at docks and intermodal yards across the Memphis Metropolitan Statistical Area. Of the five Class I railroads in the Memphis, three are investing about $430 million on new rail operations or improving operations in the metro area. A Class I railroad has annual operating revenue of $401.4 million or more, according to the federal Surface Transportation Board.
J. Vann Cunningham, assistant vice president of economic development at BNSF Railway Co., was in town April 21 to help open the company’s new $200 million intermodal facility on Lamar Avenue. “For us, it was landlocked, it had bad transportation access, and Shelby and Lamar is one of the most congested intersections in the entire city,” Cunningham says. “Everything said, this is a really bad place to be from an operational standpoint, but the market said we needed to be here.” “Here” is Southeast Memphis, which has 85.3 million square feet of distribution space, according to Xceligent Inc.’s first quarter 2010 report. There is also 30.9 million square feet more just south of it in DeSoto County, primarily in Olive Branch and Southaven. BNSF’s Lamar facility, which grew from 250,000 lifts to 600,000 lifts annually through the expansion, is the 10th largest out of 33 facilities in the railroad’s system. It has the capacity to become the third largest with 1 million lifts annually. The company made the decision to consolidate its primarily international facility in Tennessee and domestic facility in Marion, Ark., in 2003. It looked at more than a dozen sites in Tennessee, Arkansas and Mississippi. BNSF tried to lease the Marion facility, but is now working to turn it into a transload facility. This would allow BNSF to move a shipment from a railcar onto a truck, which would then be transported for its local customers.
Canadian National Railway Co. completed a $100 million reconstruction of its Harrison Yard, named after retiring president and Memphis native E. Hunter Harrison, in September 2009. The move nearly doubled its capacity to 3,100 freight cars, making it the company’s second largest classification yard in the country. The completion of Harrison Yard comes four years after the opening of Intermodal Gateway Memphis, a $35 million intermodal terminal operated jointly by Canadian National and CSX Corp. inside Frank C. Pidgeon Industrial Park. Norfolk Southern Corp. is planning to open a $129 million intermodal facility in Fayette County, Tenn., by 2012. The facility will be able to handle 327,000 containers and trailers annually. And Union Pacific Railway Co. expanded its West Memphis intermodal yard with a $25 million investment in the 1990s. “When you have those railroads coming together in a single place, you really have the best of all worlds from an intermodal standpoint,” Cunningham says. “Anybody who’s going to be importing and serving this region needs to be thinking about Memphis for a location.” The area’s five Class I railroads join other aerotropolis transportation options in river, airport and roads. “There are just not very many places in the United States that have this kind of transportation base to it,” Cunningham says. “We’re making a $200 million bet on it.”
Dexter Muller, senior vice president of community development for Greater Memphis Chamber, says railroads were a large part of the city’s early development, when they were used for shipping cotton. The rail industry started to decline in Memphis and nationally in the 1980s, when manufacturing started going overseas. The benefit for the railroads was that the finished goods from outside the country were coming back in containers, the bread and butter of intermodal operations. “That’s what changed the rail industry,” Muller says. “Prior to that time, rarely did companies ask to be located on a rail line.” With more containers coming from Asia to the West Coast, railroads started showing more interest in Memphis.“The reason we’re important is because we’re the interchange point to the East Coast markets,” Muller says. Muller cites Berkshire Hathaway Inc.’s $26.7 billion acquisition of BNSF — the largest acquisition in Berkshire Hathaway’s history — in February as proof that rail is experiencing a resurgence. “We’re in the second rail era,” Muller says. “It’s a new heyday for rail and there’s no end in sight.”
Cargill Inc. uses rail extensively for its incoming and outgoing shipments. The Memphis facility is a “forward mill,” outside of the main corn-growing regions in the Midwest. All the corn coming into Memphis is from Southern Illinois. It’s turned into sweeteners and other products for soft drinks and food manufacturers. “This particular plant in Memphis was built because of access to rail and river,” says John Thompson, international business development manager at Cargill. It uses all of the modes in the aerotropolis concept except air because the costs would be too high. Corn shipments are brought in half by rail, half by barge. Cargill sends outbound finished products two-thirds by rail and one-third by truck, with a small amount being sent by barge. These shipping formulas change depending on market conditions. “If it’s cheaper to rail, we rail, if it’s cheaper to barge, we barge,” Thompson says. “It’s never 100% of either one, it depends on the marketplace.” The ability to use other modes has been key to Cargill’s growth in Memphis. The company has other plants, such as one in Eddyville, Iowa, where it can only use rail because it is in the middle of a corn field. Memphis’ increased intermodal capability gives companies more options. “Memphis is focused on intermodal because it’s trying to become the distribution center of the Southeast,” Thompson says. “That’s been the value of this city.”