SD12 - Master Rail Plan for The Port of Virginia (SJR 69, 2014)


Executive Summary:
1. EXECUTIVE SUMMARY

The General Assembly initiated through Senate Joint Resolution 69 (SJR 69) the development of a Master Rail Plan for The Port of Virginia. The objective of this Master Rail Plan is to improve the overall competitive position of the Port through improved rail service to Port of Virginia facilities (specifically those owned or leased by the Virginia Port Authority), for the benefit of the Commonwealth and its citizens. The Master Rail Plan does not specifically consider private marine terminals or the bulk rail service (e.g., coal, grain or aggregates) to those terminals.

Rail service, in the context of this plan, is the collective term for the opportunity to transport cargo by rail as part of an overall competitive cost, schedule and service quality structure (against other port locations) and via a system that has sufficient capacity to reliably and safely handle the demand volume. A summary of specific issues the General Assembly requested be addressed in the Master Rail Plan can be found in Appendix A.

1.1. Background

While the Master Rail Plan considers the movement of containerized, bulk, and break bulk cargo through The Port of Virginia, some of the most significant master plan issues relate to the import and export of containers through The Port of Virginia – a highly competitive global industry, as illustrated by Table 1 (found on page ES-1 of the report).

For over 180 years, the maritime industries of Virginia have been served by multiple rail lines, which have evolved into today’s current rail network served by two Class I railroads (Norfolk Southern and CSX Transportation) that connect The Port of Virginia to inland markets, as well as short line railroads that provide local rail service between the Class I railroads and industries. Ownership of the rail network elements and trackage rights agreements between the railroads shape the opportunities available to Virginia industries, including the individual Port of Virginia facilities, to use rail service to their competitive advantage.

Having evolved over more than a century, the rail network serving The Port of Virginia is not a simple grid, and just as The Port of Virginia competes for global cargo, the railroads compete for cargo at The Port of Virginia and the right to move that cargo on their private rail infrastructure. This competition for cargo is further part of the larger competitive environment where both ship lines and the railroads make strategic decisions regarding vessel schedules and pricing across their entire systems, which include multiple port locations. These decisions ultimately affect the Port’s competitiveness but are outside the Port’s ability to fully control. Attracting rail cargo to The Port of Virginia is achieved by minimizing the cost and maximizing the reliability of the transfer between the ship lines and the railroads. Figure 1 (found on page ES-2 of the report) begins to illustrate the complexity of the rail network serving The Port of Virginia Hampton Roads facilities.

Virginia International Terminals (VIT) is the sole operator of the Commonwealth’s terminals, allowing it to strategically align activities to the terminals best suited for those activities. Typically, U.S. seaports are “landlord” ports that host privately leased and operated independent terminals that compete against each other. Supported by substantial investments in rail infrastructure, The Port of Virginia is competitively positioned to provide the access to international trade lanes that factor into ship lines’ and railroads’ strategic decisions to route cargo through a port. This position can be further enhanced through improvements to rail service at the Port facilities and the railroad-owned corridors that convey its cargo to inland markets.

Table 2 (found on page ES-3 of the report) illustrates the very significant Commonwealth and federal rail investments that have benefitted The Port of Virginia. Due to the highly competitive nature of the global freight industries, comparable levels of rail investments are underway at or near many of the major U.S. seaports.

Grants and other funding mechanisms offered through the Commonwealth are typically accompanied by commitments to report and achieve specific and quantified performance goals, such as annual rail traffic, travel time reductions, or other metrics tailored to the anticipated benefits of the project. The investment totals set forth in Table 2 exclude other incentives such as tax credits offered by the Commonwealth to further encourage economic activities that contribute to its goals, including port and rail activities.

1.2. Master Rail Plan

The Master Rail Plan is built on the following major assumptions and findings:

• The vast majority of rail cargo through The Port of Virginia’s marine terminals is containerized, intermodal cargo.

• Intermodal rail service provides The Port of Virginia an opportunity to access major Midwest markets and new market sectors.

• Norfolk International Terminals (NIT), Virginia International Gateway (VIG), and a planned future marine terminal on Craney Island are The Port of Virginia’s primary opportunities for intermodal rail service.

• Other Port facilities have the potential to support development of other rail-served markets, such as agriculture or other commodities.

• Rail-related developments outside The Port of Virginia facilities could have a significant impact, directly or indirectly, on Port facilities and operations.

Planning efforts to support rail freight are complicated by the competitive environment within which this activity takes place, where business plans are closely held by all stakeholders (ship lines, railroads, the Port, and their customers).

The Master Rail Plan therefore identifies impacts, constraints, recommendations and other considerations regarding increased rail traffic on a terminal by terminal basis.

1.3. Master Rail Plan Findings

While this Master Rail Plan is organized around operational and capital improvements at individual marine terminals, it also is based on a pragmatic understanding of competitive dual rail access that is appropriate, affordable and achievable. Two Port of Virginia terminals, NIT and VIG, currently handle the vast majority of containerized cargo, of which, VIG provides competitive dual rail access. At NIT, NS enjoys a competitive advantage as it owns a rail line leading directly into the NIT complex. CSX accesses NIT utilizing the Norfolk and Portsmouth Belt Line Railroad (NPBL), which was formed over 100 years ago by the Class I railroads (of which, NS and CSX are the sole remaining shareholders) to improve level of service to rail-served industries in Hampton Roads. This introduces additional rail operations for CSX to access the terminal. NS’s advantage has thus far limited CSX rail demand at NIT to relatively low volume project, bulk, and break-bulk cargo.

The Port and the Commonwealth are managing the reopening of the Portsmouth Marine Terminal and the possibilities of growth at VIG and/or a future marine terminal on Craney Island in such a way as to preserve or promote a climate of competitive dual rail access to the extent feasible (and as may be constrained by trackage rights outside the terminals).

The findings and recommendations of the Master Rail Plan are intended to preserve, promote and enhance the competitiveness of The Port of Virginia, including improvements to competitive dual rail access where practical.

1.3.1. Intermodal Rail

The Port’s capacity to transfer containers between the ship lines and railroads at a sufficient level of service to meet customer requirements is an interaction of several elements, each of which may be constrained by different factors. Major capacity elements include:

• Availability and productivity of Port resources (labor, container handling equipment)
• Availability of railroad resources (rail cars, locomotives, crews)
• Availability of U.S. Customs and Border Protection (CBP) resources to screen import cargo
• Alignment of Port, railroad, and CBP resource availabilities
• Port and railroad infrastructure and operational capacity to support the full range of cargo activities
• Impacts of Port and rail activities on the surrounding communities and the affected industries

At The Port of Virginia, the coordination of many of these elements have a private and/or competitive element and are worked through in confidential settings with limited public transparency.

Within this environment, the Master Rail Plan includes the findings, observations, and related issues, as listed in Table 3 (found on page ES-5 of the report).

1.3.2. Dual Rail Access

Dual rail access can be provided through several different means. Whether these conditions provide the opportunity for the customer to have the railroads effectively compete with one another is largely dictated by the specifics of the site and the rail network serving it. Table 4 (found on page ES-8 of the report) summarizes these various forms and likely constraints to establishing competitive service associated with each. A significant limitation to concepts that seek to provide dual rail access through expansion of trackage rights is that granting such trackage rights is strictly between the railroads and is a matter of interstate commerce outside the jurisdiction of the state to compel.

Measures to mitigate the operational and physical constraints to competitive dual rail access need to be evaluated in terms of the overall competitive position of the Port (i.e. the cost of mitigation vs. the benefit of doing so). Potential means for the Port to improve its competitive position through mitigation of existing rail access conditions is an overall port-wide approach to competitive dual rail access that includes:

• Strategic alignment of ship lines, where possible, to maximize availability of rail capacity for those ship lines with significant rail cargo (in consideration of multiple complex factors, of which rail is only one element).

• Ongoing coordination among the Port, railroads, and other stakeholders (e.g. U.S. Customs and Border Protection) to align resources and seek process optimizations that benefit all parties.

• Improved utilization of off-dock intermodal yards via drayage or barge service, if unable to meet demand with on-dock rail.

• For locations where tenant development is being sought (e.g. PMT) and may have tenants served by different railroads, development operating procedures and strategies to coordinate tenant operations and define expectations for level of service.

• Strategic investments in infrastructure where operational constraints cannot be overcome.

1.3.3. Other Rail Opportunities

There is potential to support other rail-served activities at several of the Port’s facilities, including Portsmouth Marine Terminal (PMT) and Port of Richmond (POR). To this end, the Master Rail Plan includes the following observations:

• The Port has thus far remained open to a broad range of prospective industries, for example bulk agricultural exports or automobile imports.

• The unique needs of each industry and the potential for operational conflicts limits the opportunity to fully plan development of the Portsmouth or the Richmond terminals without a long-term commitment to one or more targeted industries or activities.

• The Port generally has the capacity and willingness to assist prospective industries with developing on-terminal solutions.

• Other economic development entities may be better positioned and have the necessary resources to assist prospective industries with developing off-terminal elements of a new operation.

• Realization of major industrial development opportunities can be improved through further coordination between on- and off-terminal improvements where proposed operations cannot be wholly accommodated on-terminal.

As with all aspects of transportation, infrastructure and operational needs are driven by public and private land use decisions. The Port has the clear authority to plan, fund and regulate on-terminal land uses. However, seaports are part of a global supply chain connecting disparate activities and bringing producers and consumers together in a competitive and increasingly efficient manner. All seaports are directly affected by the location and intensity of production, distribution and consumption activities outside the individual marine terminal.

Virginia was one of the early pioneers in stimulating rail-related economic development through the Virginia Inland Port in Front Royal. Equivalent opportunities exist today outside the gates of the Portsmouth Marine Terminal and the Port of Richmond. However, the ability, resources, and authorization for such initiatives are likely best found through collaboration among The Port of Virginia, the Virginia Economic Development Partnership, and supporting local and regional agencies, provided the Commonwealth develops clear benchmarks and goals to guide those efforts.

1.4. Recommendations

Traditional transportation plans yield a map with specific capital improvements. This Master Rail Plan follows a period of significant capital investment in rail and rail-related facilities, and the immediate priority of this Master Rail Plan is earning an appropriate level or rate of return on those prior rail investments, better collaboration among major stakeholders, and a process for ongoing operational improvements, out of which additional infrastructure improvements may be identified. However, this Rail Master Plan also contains a list of potential capital improvements (Recommendation 4) which should be considered in light of the more immediate operational, administrative, and strategic decision making recommendations (Recommendations 1-3).

Recommendation 1: State planning and investment in rail infrastructure serving the Port should maximize utilization of existing rail and rail-related infrastructure among all parties.

• Designate an existing entity (e.g. OIPI) or create a new entity (e.g. Office of Freight Planning) to facilitate continuous and comprehensive coordination efforts among the Port, railroads, passenger rail, U.S. Customs and Border Protection, and other stakeholders to optimize rail service to the Port through improved alignment of schedules and resources. Similar efforts have been successful at other U.S. ports and in the Virginia I-95 rail corridor.

• The Port should provide regular input to, and collaborate with, this entity to evaluate and establish achievable and sustainable goals for rail intermodal service across the entirety of the Port.

• Focus of these efforts should include identification of critical infrastructure needs that are not readily apparent to any one stakeholder, conducting more accurate benefit/cost assessments, development of analytical tools and supporting data collection to support better decision making, and exploring cost-and risk-sharing opportunities.

• Designated entity should also regularly review public funding programs for rail, port, and highway infrastructure and operations to ensure that operational enhancements, such as use of mechanisms to provide supplemental funding to U.S. Customs and Border Protection operations, receive due consideration in such programs.

• A wide variety of performance expectations, performance incentives, and performance standards have been established as justification for public investment in rail infrastructure. The Commonwealth and the Port should ensure, in a transparent and collaborative fashion, that those expectations, incentives and standards all contribute to the overall goals of The Port and the Commonwealth.

Recommendation 2: Develop policies and/or programs to support local infrastructure planning and investment where rail activity occurs.

• Designate a lead individual or entity to explore programs to assist communities with coordination, planning, and funding of improvements to mitigate rail impacts, including quiet zones, crossing safety improvements, and grade-separated crossings, with short-term emphasis on the Commonwealth Railway corridor and Class I corridors in the vicinity of the CWRY interchange. Similar programs adopted by other states include California’s Section 190 Grade Separation Program and North Carolina’s Sealed Corridor Project.

• Designate a lead individual or entity (e.g. the entity designated in Recommendation 1) to explore program options for ensuring that existing, rail-served industries are not disadvantaged by other rail projects and programs.

• Establish a process for the Commonwealth to develop guidelines and metrics for use in prioritizing and justifying community and industrial mitigation efforts.

Recommendation 3: Where opportunities to foster Port-served private industrial activities are present, maximize the value of Port assets by improving coordination of on- and off-terminal development.

• Given the value and scarcity of Port property and the access it provides to deep draft vessels, the Port should evaluate, on a case-by-case basis, the extent to which it accommodates prospective private rail-served industrial operations within its terminal boundaries. If the Port determines an attractive operation cannot be wholly accommodated within a terminal, a lead individual or entity such as VEDP or DRPT should be designated to coordinate roles, responsibilities, and resources among stakeholders to evaluate and develop off-terminal rail facilities that could support realization of the opportunity.

• The designated lead individual should use this Master Rail Plan to assist with the identification, coordination, and development of off-terminal needs.

• Off-terminal development plans should seek to support other terminal rail activities where feasible and practical to maximize potential use as rail needs evolve over time.

• Off-terminal rail development plans should preserve the opportunity for competitive dual rail access to the terminal(s) it supports.

Recommendation 4: The Master Rail Plan identifies off-terminal impacts and constraints as intermodal rail traffic increases at NIT, VIG, PMT, and a future marine terminal. The following efforts will support near-term competitive improvements or community relief for intermodal rail activities, provided that the host railroad accepts the improvements and any associated conditions, and that planned terminal expansions occur as currently planned.

4A - Norfolk International Terminal (NIT) (See Figure 2 on page ES-12 of the report)

• Double-tracking the rail line between Portlock and NIT would lower operational costs for NS, NPBL, and other railroads that all use the line. NOTE: This recommendation is not currently supported by NS based on existing rail volumes.

• A direct connection between Lambert’s Point line used by NPBL and the rail line to NIT once existed; reconstructing it would improve access for NPBL to serve its customers on the Sewell’s Point Line. NOTE: This recommendation is not currently supported by NS based on existing rail volumes.

• Establish storage for a complete unit train (i.e. no breaking) on NPBL system in order to more efficiently stage longer trains

4B - Virginia International Gateway (VIG) (See Figure 3 on page ES-13 of the report)

• Commonwealth Railway (CWRY) corridor should be double-tracked along its full length to support increased rail traffic at VIG.

• CWRY’s Suffolk Marshalling Yard should have two additional tracks constructed (already partially funded by an REF grant).

• The interchange between CWRY and the Class I railroads in Suffolk should be evaluated for improvements.

• Related community impacts resulting from increased rail traffic should be identified and mitigated through the program described in Recommendation 2. (*1)

4C - Portsmouth Marine Terminal (PMT) (See Figure 4 on page ES-14 of the report)

• If competitive rail operations are established at PMT, improvements to circumvent the physical constraints of the Pinner’s Point interchange could mitigate some potential rail conflicts. This would likely require off-terminal property to construct.

• There are likely on-terminal solutions to mitigate rail conflicts on the east lead, once Midtown Tunnel construction is complete, but those will depend on any on-terminal activities or users.

4D - Newport News Marine Terminal (NNMT)

• Engagement with CSX to address vertical clearance restrictions on the Peninsula Subdivision that currently limit the height of rail cars (in particular, multi-level automobile carriers) would allow the Port to more effectively compete for automobile cargo and other breakbulk cargo through NNMT.

4E - Future Craney Island Marine Terminal (CIMT) (See Figure 5 on page ES-15 of the report)

• Property for the rail corridor needs to be acquired.

• A significantly larger CWRY marshalling yard will be necessary to support CIMT at full build out. A process to identify potential sites for this yard should be initiated.

• Improvements will be needed near VIG to allow CIMT traffic to pass while trains arrive at or depart from VIG.

• Related community impacts must be identified and resolved. (*1)

While the above efforts are intended to improve the competitive position of The Port of Virginia, the improvements recommended herein would be above and beyond the considerable progress made in 2014 to maintain the longstanding success of The Port of Virginia.
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(*1) Improvements to mitigate long term traffic mobility impacts resulting from increased rail traffic, including traffic generated by VIG and CIMT have been identified in the Suffolk Rail Concepts Screening Report, by Moffatt & Nichol dated March 13, 2015.