Monday, March 16, 2015

Central, Maine & Quebec: Revive, rebuild

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A before-and-after look at the Newport Sub, which was in excepted status when CMQ first took possession of the line.
CMQ’s Farnham Yard following an upgrade effort to remove the yard from excepted status.
A before-and-after look at the Newport Sub, which was in excepted status when CMQ first took possession of the line.
CMQ’s Farnham Yard following an upgrade effort to remove the yard from excepted status.
A before-and-after look at the Newport Sub, which was in excepted status when CMQ first took possession of the line.

Central Maine & Quebec management faced a massive rebuilding effort of the railroad's infrastructure, its safety culture and its community relationships.

All photos courtesy of Central, Maine & Quebec.

Safe. Reliable. Secure. Those three words greet visitors to Central Maine & Quebec Railway's (CMQ) website and within those words isn't just a statement of what the railroad has become, but a commitment to the communities it operates through of what it will continue to be.

CMQ was formed less than a year ago when Railroad Acquisition Holdings LLC, an affiliate of New York-based Fortress Investment Group, acquired the just under 500 (481) miles of rail line from Montreal, Maine and Atlantic Railway (MMA) for a reported $15 million. MMA fell into bankruptcy following the tragic accident at Lac-Mégantic, Quebec, in July 2013.

Possession of the U.S. assets took place in the middle of May 2014, while the Quebec assets didn't close until the end of June 2014. What CMQ also took possession of was a slew of notices and orders from Transport Canada and a railroad that required rebuilding, quite literally, from the ground up.

Capital work
Ryan Ratledge, chief operating officer at CMQ, is one of the shortline industry veterans now in top management at CMQ. Ratledge has extensive experience taking underperforming railroads and successfully turning them around, demonstrating that expertise at a number of former RailAmerica properties.

"When we arrived, we were told, 'we were a Class 3, 40 mph railroad', which is what the time table said at the time, but when you looked at the operating bulletins and speed restrictions, it was as a practical matter a couple of sections that were good for 40 mph, but most of the rest of it was 10 mph," said Ratledge. "One of the plays we immediately called was to abandon the fiction that it was practical to think about returning it to a 40 mph railway.

We decided that we would return it to a continuous maximum authorized speed to 25 mph and get to work fixing the 10 mph slow orders."

Ratledge says the railroad had two goals for the initial phase of work: Address any regulatory issues and get the railroad up to a solid 25 mph operation.

"The Quebec side needed more attention than the Maine side. That is where we focused our attention and most of our resources. In Quebec, we essentially had a 10 mph railroad and the Newport Sub was in 'excepted status.' We had yard tracks in Farnham, Quebec, that were either out of service or in excepted status and the entire mainline through Quebec had notices and orders from Transport Canada that we inherited," he said.

While Ratledge says there was a complete list of things to correct, such as crossties and surfacing at select locations, to tackle the regulatory issues from Transport Canada, the railroad spent a good portion of its CA$10-million (US$7.9-million) investment in rail.

"The rail was one of the biggest items. We bought an entire rail train," said Ratledge. "I've been in the shortline industry since 2007, I've managed many shortline railroads and I've never purchased an entire rail train during the course of a capital season."

CMQ's shortened 2014 construction season was spent installing more than 32,000 new crossties, 110,000 linear feet of rail and 25,000 tons of ballast along its line. It also upgraded bridges, culverts and crossings, completed surfacing work and removed more than 300 in-track rail defects from its main tracks and sidings.

Ratledge estimates 80 percent of the work mentioned above was performed in Quebec and gives credit to Ron Marshall, the railroad's general manager of engineering, for being the architect behind the CMQ's aggressive and ambitious capital program.

"[CMQ needed to perform] a large scope of work in a very short period of time. We didn't close on the Canadian side until June 30, 2014; so naturally, you're limited to what you can commit yourself to until you own the railroad. Ron was trying to source ties and rail and things like that in the beginning of July, when he should have had that stuff going in the ground at that time of year [given a normal capital season]. I'm convinced that he's one of the only guys that could make that happen," said Ratledge. "In my opinion, it's tapping into the relationships that Ron has built in the industry over the past 30-plus years, that allowed him to find what little was available."

On December 5, 2014, CMQ received the official revocation of a series of notices and orders from Transport Canada that confirmed immediate threats no longer existed on CMQ's line.

At the time of the announcement, John Giles, president and chief executive officer, said, "We had to make this investment. The line was covered in snow last February and March when we were finally able to begin our diligence, but we made a commitment to Lac-Mégantic Mayoress Laroche and citizens, as well as many regulators, that we would address the years of neglect. It was an extremely tough undertaking. We had industry peers questioning the amount of work that we signed up for with such a short construction season."

While Giles notes that Phase 1 of the line's transformation is largely completed, he did mention there was more to do.

"Not to say we don't have a lot more track and infrastructure work to do next spring, but we have already started Phase 2, which focuses on growth, customers and interline partners," added Giles.

Looking toward 2015 and beyond, the railroad estimates this year's capital spend to be between $5 and $6 million. Ratledge notes that the 2015 capital program is a continuation with similar type of work planned in order to maintain a 25 mph railroad.

"We can handle the business that we have, at a pace that gets across the railroad at 25 mph with an operating plan that lends itself to a 25 mph railroad, so we're going to continue to do that until there is a business case to do something different," said Ratledge.

He continued that if a customer or commodity, such as intermodal, presented a need to travel across CMQ property at a faster rate of speed, the railroad would evaluate that option on a case-by-case basis.

"Every time we looked at upgrading a sub-division or section of track [at previous railroads to accommodate faster speeds], we found we frequently didn't gain that much. With current carload volumes, what little we may gain in velocity could easily be eroded elsewhere. We burn more fuel and our track deteriorates much quicker at 40 mph than it does at 25 mph, so by running at 25 mph, we can stretch those capital dollars a little further, as well," said Ratledge.

He also notes that regulated minimum standards are just that to CMQ, minimum standards, they aren't CMQ standards and the railroad does not intend for the track to deteriorate to a condition that will require regulators to impose notices and orders.

"We're operating a Class 2 railroad, we'll fix and maintain areas and not to a standard that is borderline in compliance. If something gets close to getting out of standard, Ron and his team are going to put a temporary speed restriction on it and then correct the defect," said Ratledge.

Affecting cultural change
Investing in infrastructure was only one challenge faced by CMQ when it took ownership of the line. Establishing relationships in the communities the railroad operates within and rebuilding a safety culture among its work force was also part of the CMQ's revitalization efforts.

As mentioned above, the leadership team's past experience turning floundering railroads around provides CMQ with a solid blue print to base a successful transition.

"It's really about getting all members of the team involved. I know we have a lot of valuable thoughts and sincere ideas that can help us from the people that are out doing the work every day," said Ratledge. "I started as a switchman in 1994 and I remember sitting on that locomotive and thinking, 'if somebody would listen to me, I would do this and that to correct this problem.' I know I'm not the only person in the industry that thinks like that."

He continued by saying the first step in the process is simple, yet effective: Listen.

"I would be foolish to think, I could just show up and understand the history and the lay of the land. It's listening to a lot of people and getting feedback from those folks," said Ratledge.

Once feedback is received, the next step is tapping into CMQ's collective knowledge base to form a team approach.

"It's really the team collaborating on what the best approach is to talk through these ideas. With whatever amount of capital that we allocate each year, it's important to gain other people's input on how to best deploy. We're taking a rifle shot approach as opposed to a shotgun-type approach," he said. "Our owners and leaders deserve to know that every dollar was spent exactly where it needed to be."

Regarding safety, Ratledge notes the approach is two-fold; part of the solution is making sure procedures are in place, but equally important is management's accessibility.

One example of new safety procedures is the implementation of a job briefing book, which was developed by Marshall for the engineering department, but will also be rolled out to other departments. The book is in English and French and provides a standardized and formal way for work to be tracked on a daily basis.

"Being out of the office, being visible is the other big thing that we all feel is important to building a good safety culture," said Ratledge. "If we're at a customer meeting, on the way back, we'll go by and find a crew that is working to say hello and shake their hand. We know it won't happen overnight, we know it will take a while to change the culture, but we have a team, thank goodness, that is very receptive to that approach and they are very appreciative of the time Ron Marshall and the other leaders are spending in the field."

In addition to safety, community relations is another continual effort.

"We stop in and meet with the civic leaders and not just in Bangor, Maine, but in as many places along our rail line as possible," said Ratledge. "[The communities] take notice of track machines, they can see progress along our corridor and through their communities that they haven't seen in years, if ever. When you stop in and share some of the specifics with them, they are very appreciative. It's one of those things that I'm reminded how important it is. I've learned that we can't do too much of it."

Ratledge recounts a recent outreach effort where top CMQ leadership loaded up in an RV for a three-day tour, stopping at a dozen different communities along the railroad's right-of-way to meet with the various mayors, economic development departments, fire chiefs and people in the communities on CMQ's railway.

"That was a civic outreach vision that John had from day one. It was appreciated and allowed community leaders to put faces with names, shake hands and exchange contact information with the decision makers," he said.
For Ratledge, summarizing the infrastructure, safety and outreach endeavors of the railroad can be boiled down into one sentence: It's getting back to the basics.

"A robust, annual capital program, getting back to the basics of the inspections and maintenance. It's the rail geometry testing, it's rail-flaw testing and it's getting back to putting those best practices into implementation. We'll continue to do that here, not just on the track side, but on the rest of the operation side, as well," he said.

 

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