Lake State: Short line that acts like a Class I
Lake State Railway doesn’t look nor act like a short line
Ryan Krengel has quite a view out the windshield of his SD40-2 as he rolls northward through the seemingly remote landscape north of Wixom, Mich. Although he’s running through densely populated exurbs on the fringe of metro Detroit, up ahead he sees wooded moraines, small glacial lakes, and the occasional deer. There’s no hint that, within a few miles, his train will once again be snaking through the industrial tangle of Flint and, later, Saginaw. For Krengel, it’s a relaxing run this morning. As the road foreman of engines for Lake State Railway, he’s been assigned to take some of the railroad’s executives on a brief inspection trip. Serving as his brakeman is Roger Fuehring, Lake State’s chief mechanical officer. Behind their lead diesel is a trailing GP40-3, then four passenger cars, including business car Jim George bringing up the markers. It’s a smooth ride along the welded rail and deep ballast of what just a couple of years ago was CSX Transportation’s heavy-duty Saginaw Subdivision.
If some of the company officers back in the dome-lounge Lake Huron are proud of what they see through the curving glass, that’s understandable. This is not your everyday short line. In its brief 29-year history, it has become a railroad powerhouse, adding track miles and growing carloadings at an impressive pace, keeping railroading alive across a large swath of the state’s eastern Lower Peninsula. As a homegrown entity, it’s very much in keeping with the state’s slogan: Pure Michigan.
FIGHTING THE TRENDS
Back in the late 1970s and early ’80s, as the aftermath of Conrail settled over much of the Michigan railroad landscape, it would have been easy to give up on many of the railroads serving the state’s northern Lower Peninsula and Thumb. Abandonments were common. Shippers shrugged and switched to truck service. The few trains that ventured up from the south crept along weed-grown, sloworder track. The creaky old carferry Chief Wawatam continued to carry railroad cars across the Straits of Mackinac, but only until 1984.
But a few railroads have hung in there north of Interstate 96, none more tenaciously than Lake State Railway. Organized in 1992 by railroad entrepreneur and former Ann Arbor Railroad and Central Michigan Railway executive Jim George, Lake State kickstarted by acquiring one of Michigan’s storied short lines, the Detroit & Mackinac, known for its meandering 124-mile main line up Michigan’s Lake Huron shore to Alpena. George is considered a visionary by current Lake State management, hence his name on the flanks of the business car. George died unexpectedly in 2009; his widow, Judy George, sustains family ownership in the role of chairwoman and the company holds staunchly to its independence.
George didn’t stop with the original D&M. As part of the same acquisition, Lake State also assumed operations on 121 miles of state-owned former New York Central line to Gaylord, part of NYC’s old Mackinaw Division to Mackinaw City, at the top of the Lower Peninsula. This was the route of NYC’s Northerner, a DetroitMackinaw City coach and sleeping-car train known for its summer tourist traffic. With its route to Gaylord secure, the railroad was in business.
Lake State grew significantly, in carloadings if not trackage, when in 2005 it acquired 67 miles of CSX serving Midland, Saginaw, and Bay City, a dense industrial region noteworthy for Dow Chemical’s huge Midland complex. Another longterm lease with CSX in 2019 added 55 miles of main line between Flint and Plymouth. To protect its traffic to Port Huron and maintain a connection with Canadian National at Belsay (Flint), CSX retained overhead trackage rights.
With those southernmost trackage segments, Lake State inherited a first-class piece of CTC-controlled main line, featuring 122-pound welded rail and deep rock ballast. This segment is dispatched from its headquarters in Saginaw. Other parts of the railroad operate under track-warrant authority. The entire system comprises 375 route-miles, moving Lake State into the category of a regional railroad.
THE BIG “Y”
As a Michigan railroad map shows, Lake State constitutes a huge “Y.” From south to north, its main stem runs from
Plymouth to Pinconning, where the two northernmost lines diverge to Alpena along the Huron Subdivision to the northeast and Gaylord on the Mackinaw Sub in the northwest. South of the crux of the Y, surrounding the base in Saginaw, is a web of other lines serving industrial customers in surrounding cities, divided into five other separate subdivisions. Lake State has connections with four other railroads, including Class I carriers CSX at Plymouth; Canadian National in Flint and Port Huron; as well as Genesee & Wyoming’s MidMichigan at Paines, just west of Saginaw, and G&W’s Huron & Eastern in Saginaw and Bay City.
Nearly everywhere you look on Lake State, track is being upgraded. Much of the attention is focused on the two principal lines running north, aided by a pair of separate federal Consolidated Rail Infrastructure & Safety Improvements grants. The first, awarded in 2018, is enabling Lake State to upgrade the Mackinaw Subdivision, replacing approximately 30 miles of old 105-pound jointed rail with 115-pound welded rail at strategic locations, including curves. “These locations were selected as they include the highest tonnage and are locations where track speeds can be increased for highest immediate operational benefit,” says project engineer Sean Pengelly.
Other components of the Mackinaw Sub project include tie replacement, surfacing in sections of new welded rail, upgrades to some switches, and grade-crossing rebuilds. The FRA is funding half of the $17.3 million project, with the balance split between the Michigan DOT and Lake State. When completed, the improved track will allow the railroad to raise train speeds from 25 to 40 mph.
A subsequent 2019 federal grant is enabling Lake State to focus on the Huron Sub — essentially the original D&M — where trains move at 10 mph over ancient 90-pound and even some 85-pound rail. The railroad is speeding up rail replacement, including 30 miles of mostly 85-pound jointed rail with 115-pound welded rail, along with new ties and surfacing. These improvements will allow 286,000-pound maximum gross rail load cars on the line, compared with the current limit of 263,000-pound cars, as well as upgrade FRA track classification from “excepted” to Class II and its higher 25-mph speed limit.
Lake State’s Pengelly sees these projects as important to the railroad’s growth, as it includes the strategic Pinconning Subdivision. “This subdivision carries traffic from both the Huron and Mackinaw subdivisions,” Pengelly explains. “Advancing this portion of the Huron project has benefits for traffic on all [Lake State] lines in
northern Michigan. The Huron Subdivision’s traffic volume is growing at a rate faster than projected. Advancing the Huron project allows the track conditions to better support this growth.” Executive Vice President Kevin Mitrzyk, the railroad’s chief financial officer, says the railroad will have invested more than $80 million in infrastructure and assets over a 10-year period ending in 2023.
That growth drives Lake State’s busy slate of train operations. The railroad averages 20 trains per day across the system, including mainline and yard moves. On the Saginaw Subdivision, at least two trains run seven days per week in each direction between Wixom and Flint, and six days per week north of Flint, along with intermittent unit coal trains coming off CSX at Plymouth for Consumers Energy’s D.E. Karn generating station at Essexville, just outside Bay City and scheduled to convert to natural gas in 2023. Also in Flint are daily classification jobs working the Coldwater Yard, as well as a five-day per week interchange run to CN.
At Saginaw, Lake State runs two terminal trains each weekday as well as a daily road job to Bay City. Customers in Bay City are served by a local five days per week. From Bay City north, trains operate daily round trips through Pinconning to both Gaylord on the ex-NYC and to Alpena over the old D&M; the list of customers around Grayling see two local jobs six days per week. Up in Alpena, a local job works five days per week. Finally, Lake State’s short orphaned line at Port Huron sees service anywhere from one to three days per week.
PLENTY OF FREIGHT
If anything speaks to the long-term prospects for Lake State, it’s the railroad’s diverse and growing traffic base. Lake State hauls a healthy mix of aggregates, cement, forest products, chemicals, agricultural products, fertilizers, plastics, and, increasingly, automobiles and trucks. Unit-train business includes coal, grain, potash and phosphate, liquid urea ammonium nitrate, windmill blades and turbines, and various empty trainsets for storage. There are even occasional military moves for the Army at Camp Grayling. Management has grown total carloadings from 29,000 in 2018 to projections of nearly 65,000 in 2021.
“[Lake State] is a service-oriented company,” says Executive Vice President and Chief Operating Officer Mike Stickel. “We
provide consistent service regardless of train size, so our customers can rely on getting a scheduled switch, our interchange partners can plan on our service, and our crews can bid assigned jobs with predictable hours. We run unit trains as expedited trains, meaning that we get them loaded (or unloaded) and back to interchange quickly, providing good service, but also reducing costs of run-through power and system railcars.”
Stickel points to the way the railroad handles its unit coal trains, which come onto Lake State off CSX at Plymouth approximately every fourth day and go to Essexville. “Consumers Energy has told us they need one less set of equipment in the rotation from the PRB since switching over to [a Lake State] routing into the plant. [The railroad] typically cycles a loaded Consumers Energy train to the plant and returns an empty set to CSX with BNSF run-through power in less than 30 hours,” Stickel explains.
Lake State performs similarly with its grain trains for the Andersons elevator complex in Standish, 41 miles north of Saginaw. Ohio-based Andersons operates large grain terminals in 11 states and has invested heavily in Standish. “The Express Load unit grain trains turn in 24 to 36 hours from interchange empty to interchange loaded, and that includes load time for the 240-mile round trip. These sets run with CSXT run-through power and the quick turn helps our customers achieve better economics,” Stickel says.
Although the timber industry as defined by logging peaked in the late 19th century, forest products remain a huge part of Michigan’s industrial landscape, with recent estimates placing the value at more than $20 billion, a figure that includes manufactured goods, mainly furniture and paper. The state’s DNR reports that at least $338 million of that total comes from the northern Lower Peninsula — much of it in Lake State territory.
Lake State feels the good effect of this in the Grayling area, where a number of companies have either begun or expanded operations. Notable is the new $450 million facility opened in April 2019 by Arauco North America, an Atlanta-based manufacturer with plants in North and South America. The Grayling plant is described by Arauco as having North America’s largest-capacity, continuous singleline particleboard press. Among its neighbors in Grayling are Weyerhaeuser,
Georgia-Pacific, Hydrolake, Stella-Jones, and AJD Forest Products.
And what’s more “pure Michigan’’ than the automobile industry? Here again, Lake State has managed a big score, reestablishing regular service out of what’s known as the old Buick City yard in Flint, serving various automotive assembly plants. In the case of one plant, a previous arrangement required that vehicles be trucked long distances to a railhead. Lake State now ships them almost directly from their distribution location near the plant in an arrangement that includes both outbound and inbound loads. To accommodate this business, the railroad has rebuilt 2 miles of former mainline track and numerous support tracks seldom used for 20 years. Stickel says volumes have been consistent at about 1,000 cars per month.
KEEPING THE ROUNDHOUSE
Lake State’s self-sufficiency is evident at its shops in Saginaw, specifically the 10-stall roundhouse its diesels call home. Built by the Pere Marquette in 1922 as a nearly full-circle facility, the building helped keep two generations of PM steam on the road, including its celebrated fleet of 1200-class 2-8-4 Berkshires. In its diesel years, the facility supported the needs of C&O, successor Chessie System, and ultimately CSX until it was downgraded, including the razing of much of the structure. In the 1980s and early ’90s, the roundhouse was home to the passengercar fleet of the Bluewater Chapter, NRHS.
Much of the industry considers roundhouses to be an anachronism. But don’t tell that to Lake State. Inside the old stalls and its attendant shop building is a modern facility, where a team of 10 mechanics works five days per week (and on-call 24/7) to keep the railroad’s nearly all-EMD roster on the road. Here, the new contrasts with the old, where a new 15-ton walking crane and huge modern maintenance racks share stall space with tiny yellow steel wheel blocks lettered “PM.”
In charge of the operation is CMO Fuehring. He oversees a roster of 30 locomotives as well as four passenger cars used for customer relations and special events. A veteran of modern freight railroading as well as historic preservation — his father was the late Bill Fuehring, founder of the Mad River & NKP Museum in Bellevue, Ohio — the younger Fuehring is as conversant with 645 prime movers as he is Budd-built dome cars.
Lake State prides itself on its roster of well-maintained diesels, a mix of four- and six-motor power that includes five SD40-2s originally built as SD40s and upgraded; three GP40M-3s; and five SD50-3s, so designated for their upgrades to new control systems. Half are in the new Lake State paint scheme, with the rest to be painted as time is available. Approximately 85% of the units are equipped with fuel-saving auxiliary power units. There’s also an outlier among all that EMD power: shop switcher No. 7, a 45-ton GE built in 1956 as Kansas Gas & Electric No. 18 and later owned by Midwest Maintenance Service.
The SD50s were picked up to protect unit grain trains and the Essexville coal trains. The three GP40Ms and a single GP40-2 are mated with road slugs of various vintage (see page 14). All of them receive frequent attention by a mechanical crew with wide-ranging capabilities.
“We do just about everything here at Saginaw now,” says Jack Laurin, mechanical superintendent. “We haven’t pulled a prime mover yet, but we’re capable of doing our own truck rebuilds. We do still send out our traction motors for certain repairs. When problems crop up, they’re about 90% electrical.” His team’s skills extend to just about anything that moves, including track equipment and a fleet of maintenance trucks.
As for working in a steam-era roundhouse, Laurin likes it just fine. That includes the facility’s turntable, a potent symbol of the steam era, kept in good working order by Laurin’s crew. “In some ways that’s one of our most important pieces of equipment,” he says. “Eventually we plan to redo the pilot
house, make it look closer to the original. It’s a great way to move things in and out.”
LAKE STATE VARNISH
The Saginaw terminal isn’t for freight only. The facility also is home to the railroad’s passenger-car fleet, which includes four cars currently in service, updated, and maintained when shop forces find the time amid work on locomotives and freight cars. Although each car has an interesting history, Lake State doesn’t keep them around as historical pieces, nor to entertain railfans.
“Our passenger fleet is best described as a business development train,” Fuehring says. “We utilize the equipment for current and potential customers to help develop better lines of communications and logistics. We work with area economic development planners, legislators, and other railroaders to not only develop new business but also improve service and review upgrades to the right-of-way.”
Once aboard the cars, those various Lake State stakeholders will be in comfortable surroundings. The most recently refurbished is five-bedroom lounge-bar Saginaw Bay, built in 1956 by Pullman as the 11-bedroom car Venice for use on Seaboard Air Line. Lake State has upgraded the interior with new paint, carpet, upholstery, custom woodwork, and a new bathroom. Also available is the dome-lounge Lake Huron, built by Budd in 1950 as Wabash dome-coach No. 202, slated for a refurbishment “in the near future,” Fuehring says. The roster includes baggage-power car Au Sable River, built by Budd in 1953 as a Santa Fe baggage car.
That brings us to the gem of the fleet: business car Jim George, a handsome vehicle sporting a classic brass-rail observation platform. Although technically a heavyweight, it is only 62 feet long and rides on two-axle trucks, betraying its origins as a Santa Fe division superintendent’s “shorty” car, built by Pullman in 1924. Modifications included the removal of one of two bedrooms and expansion of the dining room. It was previously owned by the defunct Michigan short line Tuscola & Saginaw Bay.
THAT INDIANA INFLUENCE
Even before they arrived at Lake State, key members of the railroad’s management team had established a successful track record at the Indiana Rail Road. That includes CEO John Rickoff, formerly Indiana Rail Road’s executive vice president, chief operating officer, and marketing VP. His boss at Indiana was Chairman Thomas Hoback, who retired in 2015 after an award-winning career taking the railroad to a leading position among short lines. Hoback gives Rickoff plenty of credit for Indiana’s success.
“After doubling our traffic in our first five years of operation — then doubling it again in the next five years — [Indiana Rail Road] needed a highly skilled marketing executive to help keep up our pace,” Hoback recalls. “I had known John Rickoff for several years while he was at Canadian Pacific and greatly admired his marketing skill.
“On joint marketing calls, John was always sure of his facts and aggressive with the opportunity — but not with the individual sitting across the desk. That’s an important distinction,” Hoback adds. “He was highly effective and seldom gave up on an opportunity. He knew how to close deals that were profitable for both sides.”
Rickoff prizes his years at Indiana. “The time I spent there was extremely valuable,” he says. “The requirements in physical plant improvements, the ability to maintain equipment, secure and maintain improved locomotives and other rolling stock, train and maintain a workforce that could handle significant change — all that helped us make the transition from being a good short line to a very successful regional railroad.”
Hoback also praises Lake State’s Stickel, whom he met when the latter was an Indiana University student. “Unlike other college interns we hired, who mostly wanted to go into operations, Mike was interested in the business side of railroading, which made him a natural to bring aboard. He is very smart, and also because of this acute railroad knowledge, he has become a skilled marketer.” Hoback can’t help but add: “Lake State’s gain in brainpower was our loss.”
GOING BOLD
The Michigan railroad scene is in a constant state of ferment, with Lake State’s expansion via its lease of CSX’s Flint line serving as Exhibit A, not to mention the recent incursions into the state by shortline holding companies Genesee & Wyoming and Watco, which owns the Ann Arbor and Grand Elk railroads. Although CSX says its Detroit-Grand Rapids-Porter (Ind.) main line is not for sale, its future is speculative. In fact, years ago, most of that railroad was on the block for a time, with no takers. Any big changes CSX might contemplate would certainly draw Lake State’s attention.
Meanwhile, Lake State seems content to build on what it already has, and that means going bold on business seemingly lost forever to trucks. A good example is propane, once a staple for railroads serving the northern half of the Lower Peninsula. In Bay City and Gaylord, recent expansions by Kiros Energy, a major Calgary-based marketer of petroleum products, were directly related to initiatives by Lake State.
“[Lake State] recognized the large volume of truck traffic and began pursuing opportunities to get propane directly to the marketplace by rail,” Stickel says. “Kiros was the first propane customer to commit to building a facility on our railroad, and it’s a franchise we expect to continue to expand in northern Michigan in the coming years.” Back on the back platform of the Jim
George, CEO John Rickoff admires the track as the inspection train glides through the birch and pinewood forests south of Gaylord. “[Lake State] has a plate full of online customers — new and existing — that we expect to expand over the next few years. We have the bench strength to grow by way of acquisition. As with some of our recent expansions, we hope to find additional railroad to operate.”
It appears Michigan is in for plenty more ferment: the good kind.