Printer Friendly

Back on track.

The Alaska Railroad Corp. survived a derailment and record moose kills last year to post a $4.5 million profit.

Last year's upturn in the Alaska economy could have meant a record profit for the state's railroad. But despite hauling 20 percent more freight than it did in 1989, the Alaska Railroad Corp.'s income was cut by more than half because of a costly derailment near Dunbar and its attempt to thwart a record winter moose kill.

Railroad expenditures increased 10 percent last year, from $58.9 million in 1989 to $65.3 million in 1990. Nevertheless, the railroad made $4.5 million in 1990 - up from the $3 million it netted in 1989.

On the revenue side, the increase in freight shipments helped translate into a 13 percent increase in revenue over 1989, when the railroad took in $61.9 million. Historically, freight operations account for about 85 percent of the railroad's total revenue, and 1990 was no exception.

Gravel hauled from suppliers in the Matanuska Valley accounted for the bulk of the freight increase. Last year the railroad shipped 2.6 million tons, up 44 percent from 1.8 million tons in 1989.

Richard Knapp, the railroad's vice president of marketing, says the gravel was shipped primarily to Anchorage, where it was used for the construction of the new Federal Express terminal and the construction of a high-speed taxiing runway at Anchorage International Airport. The state Department of Transportation and Public Facilities also used a significant amount of gravel on its Raspberry Road project in the city's south side.

In all, 6 million tons of freight were shipped by the Alaska Railroad in 1990, compared with 5 million tons in 1989. Natural resource cargoes - coal, petroleum products and gravel - accounted for 90 percent of cargoes. Coal hauled from the Usibelli Coal Mine at Healy the railroad's sole source of coal shipments - increased slightly, by 55,000 tons, to 1.4 million tons.

The railroad's petroleum products hauling rose 17 percent over 1989. The Alaska Railroad Corp. transported 1.2 million tons of jet fuel, gasoline, heating oil and diesel fuel between Anchorage and Fairbanks. Knapp says a 17 percent increase was driven by shipments from Fairbanks oil refineries.

Knapp does not expect continued increases in refined petroleum hauling. He says the opening of Russian air space, combined with use of the longer-range Boeing 747-400 model cargo and passenger jets, could decrease air traffic in Anchorage. The resulting decline in aviation fuel consumption, despite expansions at the airport by United Parcel Service and Federal Express and the installation of a new jet fighter squadron due to arrive at Elmendorf Air Force Base from the Philippines, could result in a loss of petroleum product cargoes.

The remaining 600,000 tons of freight the railroad carried in 1990 was made up, for the most part, of freight the railroad hauled out of the port of Whittier. General cargo arriving in Whittier, aboard barges from Prince Rupert, British Columbia, and Seattle, increased by 23 percent. That freight includes machinery, heavy equipment, animal feed, newsprint, gasoline and automobiles hauled to Anchorage and Alaska's Interior.

Although contributing only about 10 percent of total revenue, passenger service recorded a 19 percent increase in ridership for the railroad last year. In 1990, 436,964 passengers boarded, compared with 366,370 the previous year.

On March 28, 1990, a 70-car train derailed near Dunbar. Nineteen tanker cars filled with diesel and jet fuel left the track, seven of them rupturing to spill 160,000 gallons. The railroad spent $5 million out-of-pocket to clean the spill before its insurance kicked in.

Added to the railroad's woes last year was the $400,000 it spent on clearing paths in the snow so that moose could find browse and respite from deep snow pack away from the railroad tracks. A record 722 moose were killed by trains in the first quarter of 1990.

The railroad's debt from capital projects increased by nearly $3 million last year. Controller John O'Meara says the increase was due to rail replacement - part of a three-year track maintenance project begun in 1988 with tie replacement. The project ends this summer when another $1 million is expected to be spent filling in ballast underneath the track.

The railroad's total debt as of the end of 1990 was $21.5 million, or about 30 percent of its $99.5 million in total assets. According to O'Meara, the railroad's overall financial picture is better than that of at least 50 percent of the railroads operating in the Lower 48.

Opening of the Wishbone Hill Mine near Palmer by the Japanese firm Idemitsu Kosan could almost double the amount of coal the railroad ships to Seward. When fully operational, the surface mine is expected to produce 1 million metric tons, or 1.1 million short tons, of coal annually for about 15 years. A July 1990 court injunction over lands designated to pay for mental health services has halted exploration and development of the mine site.

State legislators are optimistic the mental health lands issue would be settled by the end of this legislative session. Although only about 5 percent (90 acres) of the 1,350-acre mining site is considered mental health land, the mine's developers say they cannot start mining until the mental health issue is settled.

Once that land issue is settled many legislators are optimistic it will be resolved this year - it would take another 18 months for construction and excavation before the mine could begin shipping coal, according to David Gerner of McKinley Mining Consultants, a Palmer firm on contract as project manager of the Wishbone Hill Mine.

To help launch the Wishbone project, the railroad received $9 million from the state last year. That money is designated for a new locomotive and coal cars to serve the mine once it opens.

In addition to the investment in railroad equipment and $2.5 million in state funds earmarked for road improvements, Sen. Jay Kerttula of Palmer is asking the state to spend another $11 million on the Wishbone project this year. Kerttula proposes building a railroad spur to the mine site from Palmer. Critics of the plan say the spur, which would help to squelch the opposition of area residents who have protested the trucking of coal past their homes, most likely would cost the state $20 million and would not be cost effective.

Kerttula's aide, Ted Beilmen, argues that the $11 million railroad extension would create 220 jobs for Alaskans, while making mining of additional coal reserves feasible by lowering costs. He also says limestone deposits located near the mine could be mined because of reduced costs.

Although much past discussion has focused on whether the railroad should be sold to private ownership, with Walter Hickel in the governor's mansion, the issue is not expected to resurface this year. Gov. Hickel favors maintaining state control of the railroad.

According to Vivian Hamilton, formerly Hickel's press secretary, the new governor has plans for the railroad. Specifically, he favors extending track from Nenana along the Yukon River to create new opportunities in natural resource extraction and tourism.


One hundred and twenty-seven executives scrambling between three buildings. Is this any way to run a railroad?

Construction of a 35,000-square-foot office building to house the Alaska Railroad Corp.'s Anchorage administrative staff is expected to start this summer. The new building replaces three buildings - one the 50-year-old railroad depot on First Avenue - that now accommodate top railroad executives.

Railroad spokeswoman Vivian Hamilton says the old depot still will be used as a passenger terminal, The railroad plans to rent out the two floors of office space above the passenger terminal to cruise ship agencies that book passengers on railroad excursions, she explains. Those businesses currently work out of mobile trailers located on the railroad grounds around the depot. Space also could be rented to other tourism vendors. Railroad excursions contracted by cruise-ship agencies accounted for most of the 50,000 passenger trips aboard railroad charters and specials last year, roughly an eighth of the railroad's passenger service.

The new office building, which will be owned by the contractor and leased to the railroad, is expected to be built on railroad property between Warehouse Avenue and Ship Creek within one quarter mile of C Street. Six contractors bid on the project in February. The railroad's board of directors could select the winning contractor when it meets in May.
COPYRIGHT 1991 Alaska Business Publishing Company, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:includes related article on Alaska Railroad Corp. offices; Alaska Railroad Corp. posted profits and showed growth in 1990
Author:Petrovsky, Michael
Publication:Alaska Business Monthly
Date:May 1, 1991
Previous Article:Highway haulers turn hopeful: competitors in the trucking industry anticipate increased cargo demand in 1991.
Next Article:Hatfield at the helm.

Related Articles
Putting customers in the locomotive: the Alaska Railroad's freight marketing hinges on customer service.
Railroad land.
Trucks, trains and transportation.
A straighter track.
Alaska Railroad tomorrow.
A Rail Connection Across Canada.
A Faster Track.
The Alaska Railroad: contributing to communities' economics: from Seward to Fairbanks and everywhere in between, the Alaska Railroad has a presence...
The Alaska Railroad keeps chugging along: 2003 was a good year for the rairoad, but 2004 might even be better.

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters