Keeping on track: some Down East businesses fret they'll pay the freight for bringing competitive rail service to the state ports.

• Author: Feege, Jr., Edward H.
• Position: FEATURE

When John Pike looks at the railroad tracks that serve his company, he sees more than two ribbons of steel stretching to the west. He sees a lifeline. He is operations director of Goldsboro Milling Co., which produces 500 million pounds of turkey and pork a year, fattened on feed made at its two mills in Wayne County. It buys grain from Tar Heel farmers but can't get enough. "We still have a big hole that needs to be filled. Sixty to 65% still has to come from the Midwest."

Every week, 185 Norfolk Southern Railway Co. hopper cars, each carrying about 100 tons of grain, roll onto the siding, almost always on schedule. Otherwise the company would have to increase stockpiles, running up its storage and inventory costs. Given the grain's bulk and the distance it travels, rail is the cheapest transportation. The savings, Pike says, can mean the difference between red and black ink.

But now his company and others are watching the future with a wary eye. Plans to bolster rail service throughout Eastern North Carolina might make the state's two ports more attractive to shipping lines, importers and exporters and boost the economy of the entire region--the poorest part of the state. But some users fret that the fast, reliable service they depend on could be derailed in the process. "We're very concerned about anything that makes for inefficient movement on the railroad," Pike says.

Twenty-three railroads operate commercial freight lines in North Carolina. Two are giants: Norfolk, Va.-based Norfolk Southern and Jacksonville, Fla.-based CSX Transportation Inc. Called Class I railroads, their networks span the Eastern United States. Their main lines carry freight to destinations throughout their systems, and their secondary lines collect local freight and funnel it to the main lines. CSX carries freight to and from the state port at Wilmington; Norfolk Southern does the same for the one at Morehead City.

Other railroads are called short lines. They operate in smaller territories and feed freight to Class I railroads. Many were formed after deregulation in 1980, which occurred as the entire rail industry was on the verge of financial collapse. Class I railroads ditched unprofitable lines. Some were abandoned. Others were leased or sold to short-line operators. There were plenty of these marginal lines in North Carolina, including several east of Interstate 95. "In the 1980s and 1990s, Eastern North Carolina was at risk of losing rail service," says Scott Saylor, president of the North Carolina Railroad Co., the state-owned real-estate investment trust that owns and manages a 317-mile corridor between Charlotte and Morehead City. Norfolk Southern pays $12 million a year to haul freight traffic over it.

In 2001, Norfolk Southern looked at its business in Eastern North Carolina. The picture was dismal. Then-CEO David Goode characterized it as "having flat revenues, high costs and facing costly reinvestment." The railroad...