Before Blast, Hauling Oil Revived a Tiny Railroad By IAN AUSTEN Published: July 12, 2013 OTTAWA — The increased shipment of oil by train in North America has revived investor interest in the once sleepy rail industry. On one end of the industry there is Warren E. Buffett, who invested $44 billon to control Burlington Northern Santa Fe, or William A. Ackman, the activist investor who won a bitter proxy fight for control of the 14,700-mile Canadian Pacific railroad, a company with a market capitalization of $21 billion. On the other end are the little guys like Edward A. Burkhardt, the chief executive and majority owner of Rail World Inc. That is the company whose runaway train of oil tankers exploded last week in the town of Lac Mégantic, Quebec, killing 28, leaving 22 people missing and presumed dead, and the vacation town’s core incinerated. The Montreal, Maine and Atlantic Railway runs on 510 miles of track, including a former section of the Canadian Pacific Railway that runs through Lac Mégantic. As large railways in Canada and the United States have divested themselves of low traffic routes, small players like Mr. Burkhardt have swept in with the hope that they can be turn the lines into profit makers. Mr. Burkhardt, an American who turns 75 this month, bought the rail lines that form the Montreal, Maine and Atlantic Railway in 2003 after a long career running railroads in the United States. The 21 locomotives that make up the railway’s secondhand fleet provide a colorful cavalcade with many showing the faded paint schemes from previous owners. Rail World also owns the 13-mile San Luis Central Railroad in Colorado, where it mostly hauls potatoes and grain. It runs trains in Estonia and owns two small railways in Poland, which rely on secondhand Moroccan locomotives built in the 1970s. One of the railways is based in Oswiecim, better known by its World War II German name of Auschwitz. Mr. Burkhardt did not respond to requests for an interview. Calls to the head office in Rosemont, Ill., are met with this recorded message: “Hello, you’ve reached the offices for Rail World and the New Zealand Consulate.” The incongruous combination is the legacy of Mr. Burkhardt’s global ambitions and dates to when he helped privatize New Zealand’s national rail network. Mr. Burkhardt began his career with the Chicago and North Western Railway, a large carrier that eventually disappeared through mergers. But it was the purchase of a network of tracks from Canadian Pacific to form the Wisconsin Central in 1987 that made him something of a legend in the railroad business. He was a man who, as a cover headline on Trains magazine put it in 2007, ran railroads that “defied adversity.” The Wisconsin Central, by several accounts, became a success by offering customers better service than Canadian Pacific. But Mr. Burkhardt had global ambitions, which included the privatization in New Zealand and running several freight lines in Britain. Shareholders thought he had overreached and he was eventually ousted in 1999. With Rail World, founded that year, Mr. Burkhardt made an unsuccessful effort to buy back the Wisconsin Central. Then Mr. Burkhardt landed the bankrupt Bangor and Aroostook Railroad in 2003, renaming it the Montreal, Maine and Atlantic Railway. It was not an obvious prize. A combination of a long established railroad in Maine and pieces of former Canadian Pacific lines in Quebec, the Bangor and Aroostook’s primary business had once been shipping potatoes in distinctive red, white and blue freight cars emblazoned with the words “State of Maine Products.” But the forestry and paper-related industries that remained along the M.M.& A.’s tracks were in decline. In 2010, Mr. Burkhardt sold 223 miles of track he had threatened to close down to the state of Maine for $20 million. The rail business was not great, but the Bakken oil fields in North Dakota changed all that. Just over a year ago, Irving Oil contracted with the M.M.& A. to carry Bakken crude to its refinery in Saint John, New Brunswick. That deal revived the railway. The train that devastated Lac Mégantic, now known in Quebec as the “ghost train,” started out in the Bakken oil fields. It was loaded with crude oil that then traveled across the Continent on Canadian Pacific rails to Montreal, the line’s Eastern terminus. Mr. Burkhardt’s M.M.& A. took it from there. Despite the oil deal, the railroad is not a financial success. The Caisse de dépôt et placement du Québec, the province’s pension fund, invested $7 million for a 12.8 percent stake in 2003. This week it disclosed that even before the disaster, that investment had been written down to a token $1,000 value. What happened in the village of 6,000 last week is not yet clear to accident investigators. Mr. Burkhardt initially blamed “tampering” with the train’s locomotives for the derailment before pointing a finger at volunteer firefighters who put out a fire in one of the locomotives. As residents of Lac Mégantic jeered in the background during the news conference on Wednesday, Mr. Burkhardt shifted blame again, this time to the engineer who parked the train for the night uphill from the village. Although the railway is not involved in the investigation and he offered little detail, Mr. Burkhardt said he thought the engineer had ignored safety laws and did not properly secure the train’s hand brakes. Mr. Burkhardt’s prolonged absence from the disaster scene had been widely condemned by politicians and residents. As he was driven to the village, the cable news channel of the Canadian Broadcasting Corporation updated viewers about Mr. Burkhardt’s travel progress on the roughly two-hour drive. The news conference opened with him lecturing reporters about their manners. As the news conference began to fall apart on Wednesday, and before he was whisked away from reporters by police for several hours of questioning, Mr. Burkhardt was asked if his tiny railroad’s giant disaster would be its financial ruin. Smiling, he said, “Everyone in the world that has a business of any size has occasions when they think they might go bankrupt.” Mr. Burkhardt mixed his “abject apology” with jokes. When pressed repeatedly by a reporter about his personal worth in the wake of the accident, he eventually said, “A whole lot less than I was Saturday.”
Posted on: Sat, 13 Jul 2013 08:57:18 +0000
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