Railroads warn Harvey may cause long closure of Houston tracks

Reuters News
Posted: Aug 30, 2017 12:32 PM

By Nick Carey and Eric M. Johnson

(Reuters) - Major U.S. railroads have warned it could be a long time before normal operations resume after Hurricane Harvey caused catastrophic flooding in the Houston area.

The closure of rail lines in the grain transport hub and nexus for cross-border traffic with Mexico presents a costly headache for companies ranging from automakers to farmers which use the lines to send ethanol, cereals and auto parts to and from Mexico or to be loaded onto ships.

The top two U.S. railroads, Union Pacific Corp and Berkshire Hathaway Inc's BNSF Railway have suspended operations in the area affected by the storm, as has regional railroad Kansas City Southern.

"We don't have a historical precedent with this one," said Thomas Williamson, owner of Florida-based rail broker Transportation Consultants Co. "I expect service to be disrupted anywhere from two to six weeks."

Omaha, Nebraska-based Union Pacific said on Wednesday in a customer announcement it aimed to begin cleanup operations at two yards in Houston either the same day or on Thursday.

According to a Midwest-based conductor at the railroad who spoke on condition of anonymity, parts of Union Pacific's Englewood Yard in Houston were flooded as of late Tuesday.

Union Pacific, the No. 1 U.S. railroad, told customers on Wednesday that it is using helicopters and drones to inspect track and facilities in areas without road access.

But the company warned that the "majority of areas east of Houston are still inaccessible at this time." Union Pacific has been re-routing traffic away from Houston.

BNSF, the No. 2 U.S. railroad, said in a Tuesday customer announcement that normal train flows in the area are not likely to resume for "an extended period."

A spokesman at CSX Corp, the No. 3 U.S. railroad that has so far been unaffected by Harvey, said on Wednesday it is "closely watching the weather conditions in Louisiana and the southwestern portion of our operating network."


Kansas City Southern, with much of its business focused U.S.-Mexico trade, may have greater exposure to disruption caused by the storm than the other two railroads, said Cowen & Co analyst Jason Seidl in a client note.

Kansas Southern said in its last update on Monday that it had stopped traffic through impacted areas. It said it will update customers as the situation develops.

Rail customers and their transportation providers will find ways to bypass Houston, said Rick Ehrensaft, ?Chief Operating Officer at Grand Worldwide Logistics Corp, a warehouse and third-party logistics company with locations across the United States.

"There will be some triaging using other modes of transportation to get around anything that's been routed through there," he said. "What that's going to do to costs is unknown."

Once the rails are up and running, railroad operators will likely benefit as goods for recovery and rebuilding are sent to the region, said independent railroad analyst Anthony Hatch. "We can be sure that the rails will be quicker to recover than most as they have been through this before."

The railroads all have experience with storm disasters. Hurricane Katrina in 2005 damaged about 200 miles (320 km) of CSX track on the Gulf Coast. That caused around $250 million in damages, 90 percent of which was covered by insurance.

(Reporting by Nick Carey in Detroit and Eric M. Johnson in Seattle; Additional reporting by Jarrett Renshaw; Editing by Bill Rigby)