(This page printed from UtahRails.net, Copyright 2000-2012 Don Strack)

Kennecott Utah Copper

Contract Switching at Magna and Garfield

By Don Strack

This page was last updated on January 25, 2012.

Additional Information

Overview

Kennecott had provided its own in-plant switching between its mills at Magna and Arthur, and the copper smelter and copper refinery at Garfield. Throughout the years, D&RGW provided a interchange connection at Magna with Kennecott. In 1996, Union Pacific bought D&RGW, and began operating the Garfield Branch.

With the closure of the Magna concentrator in late November 2001, Kennecott Utah Copper ended the operation of its private mainline railroad between the Bingham mine and the concentrator mill at Magna. With the shutdown of the mainline operations, Kennecott no longer had a need to maintain its railroad locomotive and car maintenance facilities at the Magna location, and contracted with RailWorks Corporation to provide maintenance for Kennecott's large fleet of white KCCX sulfur tank cars, using the former Magna car shop and locomotive shop. RailWorks Corporation had been formed in 1998, and soon became a leader in railroad construction and maintenance services for transit authorities, and commercial and industrial companies with rail infrastructure. At the same time, Railworks purchased three Kennecott high-cab GP39-2s (KCC 707, 792, 799) to perform the switching. (more about RailWorks)

On March 26, 2002, all rail switching operations at Garfield were assumed under a contract awarded to Railworks. From that date, Railworks was responsible to deliver rail cars to Copperton, as well as delivering cars from the Union Pacific connection, to the refinery and the smelter.

As part of its contract with Kennecott, Railworks made a subcontract with Rail Link, a company owned by Genessee and Wyoming, the parent company of Utah Railway. Railworks was responsible for the operations contract and Rail Link furnished the operating crews. Railworks was also responsible for the maintenance of Kennecott's rail car fleet (mostly the white sulfuric acid tank cars). To fulfill the operations contract, Railworks purchased three of the GP39-2s from Kennecott.

Railworks contracted in late 2002 with Rail Link (RLIX) to operate the locomotives and provide operating crews. Rail Link was a subsidiary of Genesee & Wyoming Industries (GWI) which had just purchased the Utah Railway in August 2002. Utah Railway was under contract with Union Pacific and BNSF to provide local railroad service over UP's former D&RGW Garfield Branch, connecting with Kennecott Utah Copper's Magna concentrator. (more about Rail Link)

Between 2002 and October 2005, the three GP39-2s, 707, 792, and 799, had large Railworks and Rail Link labels to the sides of the locomotives, covering the Kennecott lettering.

In October 2005, RailWorks sold portions of its rail services business to the newly created Tangent Rail Corporation, including its rail car and locomotive maintenance operation at Magna, Utah. Tangent Rail took over both the rail car maintenance contract, and the switching contract. Large new labels were applied to the locomotives, covering the RailWorks logo on the hood sides, and the Rail Link logo on the cab sides. (more about Tangent Rail)

In April 2010, Tangent Rail Corporation was sold to Stella-Jones, Inc., a large international company that furnishes treated wood products to all industries, included treated wood ties to the railroad industry worldwide. In the years following its creation in October 2005, Tangent Rail Corporation had become the major U.S. supplier of treated wood products, and its sale to Stella-Jones was said to be a good fit, allowing them to enter the U.S. market with a well-established sales and service organization. (more about Stella-Jones)

One minor result of the sale of Tangent Rail to Stella-Jones, was that the locomotives assigned at Magna, Utah for the Kennecott switching contract had their logos changed to reflect the new owner. Two of the three locomotive were seen on October 3, 2011, and are plainly labeled as Stella-Jones locomotives.

Photos

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RailWorks

RailWorks was incorporated in Delaware in March 1998 as a holding company to acquire companies that provide rail system services, including construction and rehabilitation, repair and maintenance, and related products. Kennedy Railroad Builders was one of RailWorks’ 14 founding companies, and was established by John Kennedy in 1965. In 2001, Kennedy was named CEO of RailWorks.

Although it was formed in March 1998, no operations were conducted and no revenue was generated until August 1998, when RailWorks Corporation acquired, in separate concurrent transactions, 14 groups of companies engaged principally in the rail system services and products business, and consummated their initial public offering. These 14 companies were referred to as the Founding Companies. Since August 1998 through December 31, 2001, RailWorks acquired an additional 21 companies or groups of companies. At December 31, 2000, RailWorks streamlined their corporate structure by reducing the number of individual operating companies through various mergers and dissolutions.

Expenditures by rail system operators for new construction, rehabilitation, repair and maintenance were approximately $12 billion in 1997. The use of outsourced service providers had increased significantly as rail system operators sought to reduce costs by focusing on their core competencies. Shortline railroads and industrial companies generally outsource because they lack the know-how, specialized equipment and resources to cost-effectively install signal systems or build and maintain their own tracks. Finally, the rail system services and products industry was highly fragmented, presenting a consolidation opportunity to provide a competitive advantage over smaller competitors. (SEC Form S-1, RailWorks Registration, dated May 22, 1998, which includes a list of the 14 founding companies)

RailWorks Corporation was formed to capitalize on the growing need for rail construction, maintenance, and materials products and services. This growth was brought about by railroad mergers and increased federal funding for rail-transit infrastructure improvements, and manufacturers' needs for modern rail infrastructure in their facilities. In the years that followed, RailWorks grew by acquiring businesses serving a wide variety of rail and rail-transit needs, making the company capable of offering a broad array of rail-related products and services.

July 27, 1998
RailWorks Corporation, of Whiteplains, New York, was founded in 1998, with an initial public offering on July 27, 1998 for 6.8 million shares. (New York Times, July 27, 1998)

March 29, 1999
RailWorks filed its first annual report with the SEC, listing companies acquired up to that time. (RailWorks 1999 Annual Report)

October 6, 1999
Railworks Corporation agreed to buy four companies for an undisclosed price to expand outside of the New York area. (New York Times, October 6, 1999)

January 5, 2000
RailWorks Corporation purchased Dura-Wood Treating Company, Alexandria, Louisiana, a closely held maker of railroad ties. (New York Times, January 5, 2000)

February 29, 2000
RailWorks filed its second annual report with the SEC, listing companies acquired up to that time. (RailWorks 2000 Annual Report)

During the year 2000, the Company's management and Board of Directors conducted and completed a strategic review of Railworks' operations. The resulting restructuring plan involved systems integration, rationalization of real estate, equipment and inventory and maximization of human resource productivity around three lines of business. The restrutcturing resulted in reduction of personnel, facilities, and overall cost reduction.

In June 2000, RailWorks purchased Western Tar Products Corporation, Winslow, Indiana, renaming the company to RailWorks Wood Products, Inc., an operating unit of RailWorks Corporation. The new company manufactured and marketed cross ties, switch ties, crossing materials, and treated wood products to railroad contractors, industrial yards, and general construction industries.

September 20, 2001
RailWorks and its 22 affiliate companies filed for Chapter 11 bankruptcy.

November 2001
RailWorks was operating with three separate segments: (1) transit services, (2) rail track services and (3) rail products and services. The transit services segment provided transit construction and rehabilitation services, as well as installation of signaling, communications and electrical systems. The rail track services segment provided design, engineering, construction, rehabilitation and repair and maintenance of track systems. The rail products and services segment provided a broad range of rail related products, including treated wood ties. At the time, contracts for New York Transit Authority provided 17 per cent of revenue.

In 2002, RailWorks integrated its subsidiaries into two divisions — Transit Systems and Track Products & Services.

There were four major subsidiaries:

March 26, 2002
All rail switching operations at Garfield were assumed under a contract awarded to Railworks. From that date, Railworks was responsible to deliver rail cars to Copperton, including cars with new conveyor belt segments for the conveyor belt refurbishment project. They also made several trips per month unrelated to the belt cars. On December 11, 2003, a separate contract line item was added for Rail Link to operate "extra switching" trains between Garfield and Magna, and Copperton. These became known as a “Copperton run.”

As part of its contract with Kennecott, Railworks made a subcontract with Rail Link, a company owned by Genessee and Wyoming, the parent company of Utah Railway. Railworks was responsible for the operations contract and Rail Link furnished the operating crews. Railworks was also responsible for the maintenance of Kennecott's rail car fleet (mostly the white sulfuric acid tank cars). To fulfill the operations contract, Railworks purchased three of the GP39-2s from Kennecott. The Railworks contract (and Rail Link subcontract) remained in place until Railworks was purchased by Tangent Rail in 2005.

September 6, 2002
RailWorks became a privately held company and was no longer subject to the regulations of the SEC.

November 13, 2002
RailWorks was reorganized as a privately held company with new, experienced leadership and strong financial backing.

March 3, 2003
Kenneth J. Bauer ended his three-year stint as chief of Long Island Railroad, the nation's largest commuter line, on March 3, 2003 to become chief financial officer at Railworks Corporation, a private transportation-services company in White Plains. (New York Times, February 23, 2003)

October 19, 2005
Tangent Rail Products, Inc. purchased four RailWorks subsidiary companies, including RailWorks Wood Products, RailWorks Rail Products & Services and RailWorks Wood Waste Energy.

May 11, 2007
U.S. private equity investment firm Wind Point Partners acquired New York-based RailWorks Corporation in partnership with RailWorks president and CEO Jeffrey M Levy and other members of the management team. RailWorks served a broad range of customers including Class I, II and short line railroads, transit authorities, commuter railroads, municipalities, and industrial, manufacturing and power plant facilities. RailWorks has approximately 1,300 employees located at more than 30 offices throughout the U.S. and Canada. Its largest customer was New York City Transit Authority, which was planning several new projects.

Rail Link

Rail Link started doing business in April 1987 as a company subject to the regulations of the Railroad Retirement Board.

Rail Link provided contract switching service and locomotive leasing to non-railroad industries. Sixty-four of Rail Link's employees perform that service. None of Rail Link's business was associated with affiliated railroad companies or the railroad industry in general. Rail Link offered switching service and locomotive leasing to specific paper mills, chemical companies and petrochemical companies, but did not offer service to the general public. Rail Link owned the locomotives being leased. In fact, 67 per cent of Rail Link's assets were attributable to locomotives; Rail Link had no other rolling stock assets. None of Rail Link's contract switching was performed on trackage or property owned or controlled by a railroad. Seventy percent of Rail Link's revenue was attributable to contract switching.

On November 4, 1998, Genesee and Wyoming Inc. of Greenwich, Conn., the owner of 12 railroads in the United States, purchased Rail Link Inc., a provider of railroad switching and related services, for an undisclosed amount of cash. Rail Link was a former unit of Brenco Inc., which was acquired by the Varlen Corporation of Naperville, Ill., in August 1998. Varlen sold Rail Link to concentrate on Brenco's core business of manufacturing transportation equipment. Rail Link had 19 industrial switch operations in Texas, Louisiana, Georgia, Florida and South Carolina, as well as three short-line railroads in Virginia, North Carolina and Florida. Varlen said it would use the proceeds of the deal to repay the debt associated with the $165 million Brenco acquisition. According to Varlen, Rail Link contributed about $10 million of Brenco's 1995 revenues of $120 million. (New York Times, November 5, 1998)

Tangent Rail

Tangent Rail Services provided rail grinding services for class I, short line, and transit rail lines in the United States and Canada. It also offered switching, and locomotive and car maintenance services to operators of industrial tracks. The company was founded in 2005 and had an office at Rio Tinto's Kennecott Utah Copper in Magna, Utah. Tangent Rail Services was a subsidiary of Tangent Rail Corporation.

October 19, 2005
Tangent Rail Corporation purchased the four products and services subsidiaries of RailWorks Corporation. Tangent Rail, with headquarters in Pittsburgh, Pennsylvania, soon became a leading provider of maintenance-of-way products and services to the railroad industry. Tangent Rail President and CEO was William Donley, who previously served as president of RailWorks’ Track Products & Services Group.

Tangent Rail was formed by its management team (a group of former RailWorks managers) and PNC Equity Partners, L.P. (PNC Equity), a private investment fund sponsored by The PNC Financial Services Group, Inc., which provided $13.2 million to fund the acquisition.

March 21, 2007
Loram Maintenance of Way, Inc., purchased the rail grinding business of Tangent Rail Corporation. Tangent Rail was a leading provider of maintenance-of-way products and services to the railroad industry. Loram was a railroad maintenance equipment and services provider based in Hamel, Minn. Loram acquired Tangent Rail's rail grinding fleet and hired most of the associated operations personnel. Tangent Rail sold its rail grinding unit to focus on its core business of providing the railroad industry with quality treated wood products and preservatives, switching and track maintenance services and environmentally friendly railroad tie pickup and disposal services. Founded in 2005, Tangent Rail had operations throughout the United States. Tangent Rail Corp. was based in Pittsburgh, Pennsylvania. (Tangent Rail news release dated March 21, 2007, Business Wire)

Stella Jones

April 1, 2010
Stella-Jones, Inc., purchased Tangent Rail Corporation, including its three operating units, Tangent Rail Services, Tangent Rail Products, and Tangent Rail Energy. This acquisition expanded Stella-Jones' capabilities within the U.S. railway tie market and provided the company with coal tar distillation operations. With the acquisition of Tangent Rail Corporation, Stella-Jones' North American wood treating infrastructure consisted of 19 facilities, 11 of which were located in the United States, including facilities located in Warrior, Alabama; Terre Haute and Winslow, Indiana; Alexandria, Louisiana and McAlisterville, Pennsylvania. The wood preservative, creosote, was produced at its distilleries in Terre Haute, Indiana and Memphis, Tennessee. Railroad tie disposal operations consisted of tie pickup and tie disposal, and were carried out at three facilities in Alabama, Minnesota and North Carolina. During 2009, Tangent Rail Corporation generated sales of approximately $178 million and earnings of approximately $28 million. The purchase price was approximately $165 million. The purchase of Tangent Rail allowed Stella-Jones to expand within the U.S. railway tie industry and provide the company with creosote manufacturing operations.

With the purchase of Tangent Rail Corporation, Stella-Jones became a leading North American producer and marketer of industrial pressure treated wood products, specializing in the production of railway ties and timbers as well as wood poles supplied to electrical utilities and telecommunications companies. The company also provided treated consumer lumber products and customized services to lumber retailers and wholesalers for outdoor applications. Other products include marine and foundation pilings, construction timbers, highway guardrail posts and treated wood for bridges.

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