By BRENT JANG, Globe and Mail      Posted Friday, February 15, 2008

Canada's two largest railways are adding everything from new tracks to modern locomotives as they hustle to keep pace with heavy demand for freight hauling across the continent.

Canadian National Railway Co. and Canadian Pacific Railway Ltd. executives outlined their plans yesterday, saying they're keen to take advantage of bustling consumer imports from Asia, the commodity export bonanza and their competitive edge over trucks.

Customers are clamouring for more space to move their goods on the rails, leaving the carriers scrambling to keep up.
"Right now we are not meeting our customer demands. The demand for our transportation services is very strong," James Foote, CN's executive vice-president of sales and marketing, said during an investment webcast.

One of CN's efficiency projects focuses on lengthening "sidings" — zones used to temporarily park trains on tracks to the side of main lines, allowing locomotives to move faster on the main thoroughfare. Over the past five years, CN has spent $300-million to extend sidings, and plans to continue such improvements.

Montreal-based CN is also seeking approval from the U.S. Surface Transportation Board for its $300-million (U.S.) purchase of Elgin, Joliet and Eastern Railway Co. (EJ&E).

CN chief executive officer Hunter Harrison wants to invest a further $100-million to make EJ&E more efficient, including rerouting tracks in Chicago's core to the suburbs to avoid congestion.

"Whether it's a box of cereal, a new vehicle or a high-definition television, most products travel a long way before we see them. By far the most efficient way to haul freight overland is rail," Mr. Harrison said in an open letter, responding to complaints from suburban Chicago residents worried about longer waits in their cars at rail crossings.

"Railroads are more than three times as fuel-efficient as trucks, conserving oil and reducing greenhouse gases. With our highways in gridlock, it's worth knowing that one typical freight train carries the equivalent cargo transported by 280 trucks," Mr. Harrison said.

CN's upgrades in Canada include the corridor between the Port of Prince Rupert and the B.C. Interior. It is also modernizing its Athabasca Northern Railway unit in Alberta by spending $135-million over the next three years.

CN, CPR and the four largest U.S. railways are expanding because they need to handle ever-increasing volumes of freight and reduce bottlenecks along their systems, notably at ports, transportation consultant Greg Gormick said. "Demand is growing, and networks are being stretched to the limit," he added.

While CPR has numerous projects on the go, the biggest one on the drawing board by far is its plan to expand into Wyoming in a quest to haul coal, CPR chief financial officer Michael Lambert said.

Calgary-based CPR is awaiting U.S. regulatory approval for its $1.5-billion acquisition of Dakota Minnesota & Eastern Railroad Corp. (DM&E), amid opposition from the Mayo Clinic in Rochester, Minn.

If approval is granted, CPR could invest up to $6-billion, probably with partners, to tap into Wyoming's Powder River Basin coal project. But Mr. Lambert said a final decision has yet to be made on the coal initiative.

CPR's expansion has included a $160-million project in Western Canada to achieve "fluidity" — industry lingo for smooth rail operations that are mostly free of traffic jams. More improvements are slated for the West.

Mr. Lambert said the railway is keen on expanding its network around Refinery Row in the Edmonton region.
Trains using the new tracks — pegged to cost about $100-million, including other rail-related infrastructure — will service existing refineries and new petroleum processing plants to be built over the next five years in what has been dubbed Alberta's Industrial Heartland.