In the last blog, the focus was on Canada’s “Gateway Strategy” initiatives, a series of government/industry association projects designed to smooth the flow of goods through Western Canada, Central Canada and Atlantic Canada. The intent of these projects is to increase Canada’s competitive position. It is important to understand that much of Canada’s freight flows through the industrial heartland of America and in particular through Chicago, Illinois. Other than Chicago, there is no single common geographical point in Canada or the United States where all major railroads intersect or meet.

Chicago is the most important rail hub in the United States and one of the freight transportation industry’s biggest bottlenecks. One third of all U.S. freight goes to or through Chicago. A large percentage of Canada’s cross-border freight goes through this hub as well. Six Class 1 railroads send nearly 500 freight trains hauling 37,500 railcars through Chicago every day where they compete for space with more than 800 passenger trains and road traffic. These trains all have switching, intermodal, and/or refuelling sites in this area. Trains originating in Canada may take two to four days to arrive from Canadian locations and can take two days to move across the city of Chicago.

Chicago, known as the world's Rail Capital, has become the world's largest rail bottleneck and the epitome of congestion. At many of the Chicago locations there are no rail-to-rail connections. The passing of rail bulk freight cars and rail freight is normally routed on rail, albeit slowly, to avoid transloading. However, the transfer of intermodal containers (COFC) and piggyback (TOFC) between railroads is not seamless. Many trailers and containers move via truck, across town, to connect among the railroads.

Since Chicago is an interchange point for the major U.S. and Canadian rail lines, most trains headed for the city must stop at terminals or processing yards to be broken apart so that blocks of railcars can relayed to multiple locations throughout North America. In an ideal world, the rails would send their trains direct and intact, to destination. Except for bulk commodities, that is not a viable approach. To run a profitable railroad, it is necessary to create some critical mass, a unit train. To make service, the trains must have enough volume and move in a timely manner to be competitive with truck service.

Total rail volumes in the U.S. are projected to increase by 69 percent by 2035 (American Association of State Highway and Transportation Officials AASHTO 2007b) and total freight volumes, transported via all modes, are expected to increase by 70 percent (U.S. Department of Transportation 2002). Unless change occurs there will continue to be rail congestion in Chicago. As a result, daily rail traffic is significantly delayed. These consistent delays and inherent congestion negatively impact the U.S. and Canadian economies and national security, public safety, freight security, and the environment.

To address these issues, at least two approaches are being undertaken. One approach is designed to maximize throughput through Chicago; the other approach is designed to bypass it.

Chicago Region Environmental and Transportation Efficiency project (CREATE)

Just as Canada’s Gateway Strategy initiatives encompass a variety of infrastructure and transportation related projects, CREATE is an ambitious network of 78 infrastructure projects, including 25 rail-highway grade separations, six new “flyovers” and a series of other signalling and track improvements. While CREATE was proposed a decade ago, the need to stimulate the U.S. economy, to create jobs and to improve the current freight transportation infrastructure are creating the impetus to move this project forward.

The new Obama administration has strong links to Chicago. Transportation Infrastructure funds are part of the economic stimulus program. However, CREATE’s completion is likely somewhere between 2015 and 2020. The scope of the projects and the time needed to obtain funding approval will extend the completion date of this work by a decade or more.

Bypass Chicago Strategy

This timeline is what encouraged CN to take a different route. The company has closed a transaction to purchase the Elgin, Joliet & Eastern Railway which loops around Chicago, to provide an improved connection between CN’s east-west and north-south route trains. This will allow CN’s trains to bypass Chicago, where they now face extensive delays.

Hunter Harrison, CEO of CN warned that the amount of freight moving by rail will continue to grow, and that an ongoing effort by the rail industry and government to reduce problems in the Chicago area, were moving too slowly. CN will now begin a measured, step-by-step integration of the newly acquired EJ&E lines to ensure a safe, efficient combination of the two rail operations. EJ&E operates over 198 main line miles of track encircling the City of Chicago from Waukegan, Ill., on the north, to Joliet, Ill., on the west, to Gary, Ind., on the southeast, and then to South Chicago.

Not to be outdone, CP Rail is looking at partnering with the Kansas City Southern Railroad in Kansas City. The two railways share a railyard at Kansas City, Mo., where KCS is based. With CP's absorption of the regional Dakota, Minnesota & Eastern in the Great Plains, this created some opportunities for synergies between the two railroads.

While these scenarios may benefit some CN and CP customers, they do not and probably will not fully address the prospects of increased congestion in Chicago in the years ahead. There is probably a need for all of the major railroads to look at alternate sites (e.g. Kansas City, St. Louis or certain points in Ohio) as a means of taking the pressure off Chicago. A well engineered and efficient freight rail system would reduce congestion, improve transit times, improve safety, maximize security, and minimize the effects on the environment. Hopefully this will be given consideration as part of the Stimulus measures that are being planned. Since a significant part of Canada’s NAFTA freight flows through this corridor, all Canadians involved in the freight industry will be watching the progress of addressing Chicago’s congestion problems with a keen interest.