BNSF to spend $6 billion on 2015 capital expenditure

Class I railroad carrier BNSF announced late last week that its planned capital expenditures for 2015 will come in at $6 billion.

BNSF said that its 2015 capital expenditures will be allocated towards various areas of its business, including maintenance and expansion of the railroad to meet the expected demand for freight rail service, with 2015 representing the third straight year BNSF has invested a record annual capital expenditures investment.

In 2014, the company invested $5.5 billion, and from 2000 through the end of 2015, BNSF said the company’s total capital expenditures outlay will be more than $50 billion towards equipment, network, and infrastructure for maintenance work geared towards maintenance work to help maintain train traffic fluidity and capacity expansion projects to meet shippers’ growing freight shipment demands.

BNSF identified some main areas of its 2015 capital expenditures investments, including:

• an estimated $2.9 billion for the renewal of assets and maintenance for projects such as replacing and upgrading rails, ties, and ballast needing to be updated;

• roughly $1.5 billion on expansion projects, with nearly $1.5 billion in the Northern region, where BNSF is seeing the most growth, in this market, which serves shippers in agriculture and coal markets, as well as crude oil and materials related to crude oil exploration and production; and

• increasing the size of its locomotive fleet through the addition of new energy and fuel efficient locomotives through the acquisition of 330 new locomotives to its current fleet of 7,500 and replacing others nearing the end of their expiration date

“BNSF’s capital investment program since the beginning of 2013 through the end of 2015 is unprecedented and is clear evidence of our confidence in a growing economy and our intention to meet the demand for service that comes from all our customers,” said Carl Ice, BNSF president and chief executive officer, in a statement. “We have made great progress in expanding the segments of our railroad that have been most constrained by rapidly increasing demand. Once these new capital programs are completed, we expect to further restore the capacity flexibility we have historically enjoyed to manage the periodic demand surges that come from a dynamic and fast-paced economic environment.”

At last week’s RailTrends conference in New York hosted by Progressive Railroading magazine and independent railroad analyst Tony Hatch, BNSF Executive Chairman Matt Rose said that making these types of capital expenditures investments is the optimal approach to take for handling growing volumes and increasing demand that BNSF sees going forward.

Taking that a step further, Rose noted that it is not as if railroads are standing still not stepping up to the plate to make investments. He explained that over all economic growth is the driver for railroads cumulatively spending more than $20 billion annually of their own funds, not taxpayer dollars, to improve safety and the reliability of the rail networks and to expand capacity and accommodate customer growth. From 1982 through 2013, Rose said freight railroads have invested about $550 billion, and since the recession have spent record amounts on track and signaling systems, locomotives, freight cars, and more, topped $25 billion in investment in both 2012 and 2013.

“This high level of investment by the industry needs not only to be sustained but increased as volumes continue to increase and over all capacity decreases,” Rose said. “Collectively as an industry we must invest at higher levels than we ever have in our industry to build sufficient capacity to implement and handle this future growth. BNSF was the first to see this growth, and we have been the most aggressive to respond. Since 2000, BNSF has invested more than $47 billion into our network.”

And like all Class I railroads, Rose explained that over the last four years BNSF have represented the company’s largest ever capital outlay both as an industry and a company, with volume increases and growth occurring on various parts of its network like its Northern segment, which is currently not equipped to handle the current levels of traffic.

The capacity investments Rose alluded to include people, equipment, investment, and maintenance, and expansion, which he said represents about $5.5 billion in 2014 investments.