PRICHARD - After a long history of planning, construction delays and difficulty finding a company to operate the Heartland Intermodal Gateway in Prichard, the facility was finally up and running in late 2015.
Unveiled in 2005 and long heralded as the top project in the area needed to spur economic growth, the future of the Heartland Intermodal Gateway, or HIG, is tinged with a level of uncertainty as the endeavor's main partner, Norfolk Southern Railroad, is facing a potential hostile takeover from Canadian Pacific Railroad, a company that historically has little to no interest in such facilities.
Owned by the West Virginia Port Authority, the $32 million HIG is situated on 100 acres of land - 76 of which were donated by Norfolk Southern - along the Big Sandy River about 10 miles south of the Interstate 64 interchange in Kenova. Norfolk Southern also provided $1 million to help develop the site and has contractual agreements in place.
The facility provides businesses with a truck-to-rail transfer option along the Heartland Corridor, a 530-mile stretch of railway from the Port of Virginia in Hampton Roads through West Virginia to Chicago.
The project was paid for through a $12 million federal grant, more than $18 million from the state of West Virginia as well as the $1 million from Norfolk Southern.
The West Virginia Port Authority expects the creation of 1,500 jobs as a direct result of the HIG, an economic boost similar to what has been generated by intermodal facilities in rural Front Royal, Virginia, and Greer, South Carolina.
A successful formula
The South Carolina Port Authority's inland port in Greer opened in 2013 near the state's BMW plant.
The Front Royal Port opened in 1989 and runs along the Norfolk Southern corridor 60 miles west of Washington, D.C. The port has generated more than $700 million in investments and created 8,000 jobs. Home Depot, Kohl's, Rite-Aid and Red Bull have distribution centers near the Front Royal Port, according to the Associated Press.
Discussions about using the HIG have taken place with the timber, steel and auto parts industries as well as various small businesses.
The Federal Railroad Administration reports intermodal traffic has grown faster than any segment of the rail industry since 1980, with facilities shipping 13.5 million containers and trailers in 2014, supplanting coal as the No. 1 source of major railroads' revenue.
"There is a want and need to diversify our economy," said State Sen. Robert "Bob" Plymale, D-Wayne. "The intermodal facility is vital for us to try and do that."
The first truck-to-rail container arrived at the HIG Dec. 17, 2015. It was the first of many containers elected officials anticipate creating an "economic ripple effect" in the region.
United States Rep. Evan Jenkins, R-W.Va., touted the HIG as a transportation corridor to the Midwest. Of the many intermodal facilities in the country, the nearest to the Tri-State is 140 miles away in Georgetown, Kentucky, home to the state's Toyota Motor Manufacturing plant.
"This facility holds the promise of more development throughout West Virginia as it is connected to other ports and shipping hubs," Jenkins said. "We should do everything possible to promote this resource, attract new jobs and bring new businesses to the Tri-State."
Feasibility studies in 1999 and 2003 identified Prichard as the preferred location for the HIG that was originally part of the Heartland Corridor Double Stack Initiative, which included raising tunnels to accommodate double-stacked cargo containers on rail cars. The height of 28 tunnels was increased and overhead obstacles removed on main lines. The project also added provisions for container transfer terminals along the route, ultimately reducing each container move by approximately 250 route miles and decreased transit times by a day.
Construction on the HIG began in 2010, a decade after officials started pushing to make it a reality.
The use of intermodal facilities has gained popularity in the United States recently because it affords decreased handling, improved security, reduced damage and loss and allows overall faster transportation of freight, according to the Intermodal Association of North America.
"Given the high cost of bringing containers from these relatively distant intermodal terminals to markets in West Virginia, the hope is that the HIG will be able to offer meaningful cost savings to West Virginia's intermodal customers," the feasibility study said.
Getting the right help
The HIG reaching its full economic potential hinges on other improvements being made, many of which can be done using funds from the Fixing America's Surface Transportation, or the FAST Act, Jenkins said. The FAST Act is the first federal law in more than 10 years to provide long-term funding for surface transportation. The FAST Act authorizes $305 billion over fiscal years 2016 through 2020 for the multiple programs, including rail.
"I will be urging the governor to make the Tolsia Highway a priority and leverage Prichard intermodal into a regional economic powerhouse," Jenkins said.
One obstacle in getting the project off the ground was negotiated when the Port Authority in June of 2015 hired Parsec Inc. to operate the terminal. Parsec operates 33 intermodal facilities in the United States, Canada and Mexico and is responsible for handling approximately 45 percent of the nation's trailer-on-flatcar traffic each year, according to its website.
"The fact Parsec even bid on the project shows the company feels this terminal has massive potential," said Del. Don Perdue, D-Wayne, who is also executive director of the Wayne County Economic Development Authority. "Parsec's history in the industry shows they are a company that knows and recognizes potential."
Parsec also operates Norfolk Southern's Rickenbacker terminal near Columbus, Ohio. The $68.5 million facility is one of the largest integrated logistics complexes in the country.
A cost analysis by WSP/Parsons Binkerhoff shows companies choosing to use the HIG could see savings of around $500 per container if shipping by rail. Containers range in size from 20 to around 53 feet in length. The facility's operations are supported financially by charging a set price for every 20-foot equivalent unit.
Containers at the HIG are moved using two reach stackers, which are vehicles designed for handling cargo containers. Reach stackers can lift nearly 100,000 pounds and are able to transport containers short distances quickly and arrange them in various rows.
Neal Vance, director of the West Virginia Port Authority, said Norfolk and Southern provided rail cars at the HIG to train employees just before the facility opened.
A full-fledged team effort is underway to market the HIG, both for container traffic and the development of warehouse and distribution-type facilities to develop near the terminal.
The state development office is marketing the HIG in conjunction with the Port Authority. The Wayne County Economic Development Authority has reached out to domestic markets through print advertising, which Perdue said has been met "positively." Vance said although the marketing effort has been aggressive, the HIG essentially sells itself.
"Any company shipping overseas or receiving freight from overseas should seriously consider using the facility," Vance said. "It's simply a less expensive, more effective way to move product."
Other local elected officials have begun using the HIG to recruit business and industry to their communities. When Terry Carpenter, mayor of Kenova, sent a letter urging online retailer Amazon to consider building a warehouse on 20 acres of land in Kenova currently owned by the Hamer family, he used the HIG as a bargaining tool.
"We have a FedEx hub here and the land is only eight miles from the intermodal facility, which is something a company like Amazon could really take advantage of," he said.
Some companies interested in using the HIG are in the forestry industry, Vance said. But since the project's inception, Perdue has said he believes Toyota Motor Manufacturing West Virginia in Buffalo would be terminal's biggest initial customer, but several other area companies could benefit from using the facility as well.
"Most likely the next industry to move significant freight will be the hardwood lumber distributors; local manufacturers like Sogefi and Okuno will likely be early contributors," Perdue said. "It is well to keep in mind that the steamship companies have a lot to do with what gets shipped when and where. The contracts that drive these freight shipments are written at least a year in advance."
Doug Drehobl, production manager for Toyota Motor Manufacturing West Virginia, recognized the potential benefits of the site when it was in its early stages.
"Right now our parts from the East Coast travel to Columbus by train before coming back down to us by truck," Drehobl said. "With this facility in Prichard, we'd cut travel time by having our parts get dropped off right here, and travel less distance on the road. Less time on the train, less time on the truck - we know that's worth looking into."
Once scheduled freighting occurs, trains will stop at the HIG three times a week, Perdue said.
One of the HIG's first customers will be D&F Trucking in Logan County, West Virginia, according to the Associated Press. D&F stopped hauling coal in 2012 because of the industry's downturn and switched to long-haul shipments of lumber and scrap metal for overseas markets. D&F currently sends its trucks to a port in Norfolk, Virginia.
"Everybody's got to look for different ways to make a living," said Jon Doty, president of D&F. "It opened up new opportunities for us."
Norfolk Southern, HIG's major private partner, has been the target of a hostile takeover by Canadian Pacific, Canada's second-largest railroad.
This past January, West Virginia's congressional delegation and others spoke out against Canadian Pacific's takeover bid, fearing job losses and harm to the HIG, which could be undercut.
Sen. Joe Manchin, D-W.Va., called for an immediate investigation into Canadian Pacific's bid to acquire Norfolk Southern, saying the plan is not an ordinary merger, but rather one that will profit "Wall Street titan" and hedge fund billionaire Bill Ackman, whose company, Pershing Square Capital Management, acquired 14.2 percent of Canadian Pacific's shares in 2011. Ackman later won a proxy battle that ultimately earned him more board members, a new CEO in Hunter Harrison and a new direction for the railroad.
Since Ackman took control, Canadian Pacific has cut 6,000 jobs - one-third of its workforce - including 1,800 jobs in 2015. This past January, the railroad announced plans to cut 1,000 more jobs - 12 percent of its workforce - in 2016.
Canadian Pacific's recent history of job- and cost-slashing has officials concerned about the future of the HIG if the takeover is successful. Norfolk Southern' board has rejected a $28 billion bid from Canadian Pacific three times. The company now is pushing for stockholders to make the decision instead.
If the merger is successful, Canadian Pacific is likely to under-utilize, if not completely ignore the HIG, Plymale said.
"There is some concern (about the merger) because of an agreement that is in place that Norfolk Southern will support the facility by stopping there a certain number of times every week over the next few years," Plymale said. "Now that the facility is finished, the first five years are critical to its success."
Plymale, former director of the Rahall Transportation Institute, said he has concerns also because the merger proposed by Canadian Pacific could jeopardize the quality of service West Virginia receives from Norfolk Southern and seriously hamper what the HIG was intended to do.
Perdue said a merger would put the future of the terminal in limbo.
"What upsets me most about this is Canadian Pacific has no investment in this facility and has given no indication about what they intend to do with it," he said.
Norfolk Southern in February released a statement on its website in regard to the merger, saying the company has met with Canadian Pacific and provided clear details regarding the concerns of its board.
"While Canadian Pacific continues to publicly declare that Norfolk Southern should 'talk to Canadian Pacific about a potential combination,' we believe further discussions are not in the best interests of Norfolk Southern shareholders unless Canadian Pacific offers Norfolk Southern shareholders compelling value and addresses the regulatory issues inherent in its proposal," according to the statement.
The Norfolk Southern board has unanimously rejected three unsolicited acquisition proposals by Canadian Pacific after determining each was "grossly inadequate and would face substantial regulatory risks and uncertainties Canadian Pacific would be highly unlikely to overcome," according to the statement. "The Norfolk Southern team remains focused on executing our plan to reduce costs, drive profitability and enhance value for all shareholders. We believe the interests of shareholders are best served by the continued execution of our strategic plan."
If the Canadian Pacific and Norfolk Southern merger is successful, it would be the first since the Surface Transportation Board rewrote its rules in 2001 following a flurry of consolidations in the 1990s that reduced the number of major North American railroads from 35 to seven.
On March 3, Canadian Pacific filed a declaratory order with the Surface Transportation Board asking for the regulatory body to agree to the merger by May 6, 2016, just before the Norfolk Southern annual shareholders' meeting, which typically takes place in mid-May.
Follow business reporter Brandon Roberts on Twitter @brobertsHD.
>> Intermodal - adj. The transfer of products involving multiple modes of transportation such as truck, railroad or ocean carrier.
>> Here's what the Intermodal Association of North America says about the growing transportation structure:
Nearly 25 million containers and trailers of electronics, mail, food, paper products, clothes, appliances, textiles and auto parts are moved using intermodal transportation each year.
>> Intermodal is growing faster than any other mode of transportation because it combines the best abilities of different transportation modes to deliver service, savings and solutions to shippers.
>> Using real-time information, intermodal companies keep track of schedule changes and monitor customers' shipments.
>> Intermodal transportation provides cost savings compared to over-the-road transportation.
>> With high-tech lift technology and articulated intermodal railcars (rail cars semi-permanently attached to each other), damage to freight is minimized.
>> Railroads move one ton of freight an average of 405 miles on a single gallon of gasoline, according to the Environmental Protection Agency.