Humboldt Bay Alternative Rail Corridor Concept Level Construction Cost and Revenue Analysis

Humboldt Bay Alternative Rail Corridor Concept Level Construction Cost and Revenue Analysis

Final Report 2013

Executive Summary

BST Associates, along with the Burgel Rail Group, was retained by the Humboldt Bay Harbor, Recreation and Conservation District to examine the concept of restoring rail service to the Samoa Peninsula, either through restoration of the existing North Coast Rail line or through construction of a new east-west rail corridor linking the Humboldt Bay region with the mainline rail system near Red Bluff.

This analysis involved two main tasks: in the first task, the Burgel Rail Group developed preliminary cost estimates for constructing a new east-west alignment to the Red Bluff vicinity, as well as for reconstructing the existing North Coast Rail corridor. In the second task, BST Associates estimated the volume of cargo that would be required to cover construction costs if the project were to be self-financed, based on the net revenue generated per ton of cargo. This analysis assumes that the project would be financed through bonds, and the analysis used a range of interest rates to illustrate both public and private financing.

The goal of this analysis was to provide a preliminary estimate of the volume of rail cargo needed to make rail service to Humboldt County economically viable. The focus of this analysis is dry bulk cargos such as coal, iron ore, grain, potash, and others. The identification of these commodities was not intended to provide a market analysis for a rail line to the Humboldt Bay region, and makes no recommendations regarding potential rail cargo. Rather, these commodities were chosen due to the fact that they now move by rail in high volumes, and that these existing movements provide the revenue and cost data needed to estimate the volume of rail cargo required to finance a rail line to Humboldt Bay.

Because the focus of this analysis was high-volume cargoes, containerized cargo was not included. The concept of a container port on Humboldt Bay has been the subject of several past studies, and the cost estimates presented in this analysis assume that the rail corridor would support double-stack container operations. However, given the relative strength of the bulk cargo markets compared with the container market, bulks represent a stronger potential market for a Humboldt rail line at this time.

Conclusion

Rail service to Humboldt County will require a major investment, through either a new East- West rail alignment or through reconstruction of the former North-South line. In order for this investment to be financially feasible, the rail line will need to generate large volumes of cargo.

A rail line to Humboldt County would face strong competition from existing ports, primarily those on the U.S. West Coast. Humboldt County would face several competitive disadvantages relative to these other ports, including the need to cover the cost of constructing the new line, and the lack of a rail distance advantage.

In addition to the lack of rail infrastructure, waterborne exports of large volumes of bulk commodities (or containers) would likely require substantial investments in new cargo terminals. Also, the Humboldt Bay navigation channel is not as deep as that at most of the competing ports, which would also require a substantial investment.

In conclusion, development of rail service to Humboldt County is likely to be both high cost and high risk.

The full final report is available here:
http://humboldtbay.org/sites/humboldtbay.org/files/Humboldt%20Rail%20Analysis%20Final%208_22_2013.pdf

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