A major freight rail carrier and a logistics company have reached an agreement for the sale of key rail lines, including 650 miles of track in Wisconsin and upper Michigan
CN will sell to Watco its non-core lines and assets on the Soo subdivision. This includes about 250 miles of track that runs from Sault Ste. Marie, Ontario to Oba, Ontario and about 650 miles of branch lines of Wisconsin Central Ltd. in Wisconsin and Michigan. This marks the successful conclusion of the sale process that CN announced and launched in July of 2020.
Not all lines the company uses here would be sold, according a map of the affected assets provided by CN. The map shows the sale includes rarely used Rusk County tracks from Tony west to Goodman in Marinette County. CN will retain its track between Ladysmith and Tony.
Terms of the sale were not released.
Pittsburg, Kans.-based Watco is an owner and operator of short lines, terminals, ports and mechanical shops.
In Ontario, Watco will continue freight operations as well as the Agawa Canyon Train Tour. Watco has also signed a Memorandum of Understanding with the Missanabie Cree First Nation regarding partnership opportunities for the Algoma Central Railway (ACR).
The Class I railroad CN reported it will continue to play a central role in the U.S. and Canada as the transferred segments will remain connected to CN’s tri-coastal network, linking businesses to markets around the world.
Wisconsin Gov. Tony Evers called the sale great news for the state.
“This announcement means not only continued freight rail service for Wisconsin’s Northwoods, but it also presents an opportunity to expand service,” Evers said. “That is especially good news for our Northwoods economy and the timber and paper industries that rely heavily on freight rail to connect to major ports and markets all over the world.”
Watco owns or operates nearly 7,500 miles of rail over 44 short lines and provides industrial switching services. It also provides material handling and warehousing through more than 80 terminals it owns or operates. Watco also operates 10 railcar repair shops in addition to providing mobile and dedicated railcar repair services.
“Watco’s relationship continues to grow and flourish with Canadian National as we work together to provide the best value-added services to rail shippers in North America,” Watco CEO Dan Smith said in a statement. “This announcement is an extremely important and exciting next step in this relationship, and we look forward to serving these crucial customers and expanding our footprint in the Upper Midwest and Canada.”
The rail lines consist of approximately 900 miles of track serving more than 90 customers in Wisconsin, Michigan, and Ontario, Canada. The lines handle a diverse group of commodities including packaging and paper products, lumber and building materials, metals, minerals, agriculture products, and chemicals.
In addition to freight service, Watco said it is working with local constituents to reinstate passenger rail service that runs through Ontario’s Agawa Canyon out of Sault Ste. Marie once post-pandemic conditions allow.
A Watco spokesperson said company officials are excited about all of the opportunities that exist.
Watco will be working with CN in the coming weeks to prepare a filing to the Surface Transportation Board (STB) for approval of the transaction. Officials are hopeful the transaction will be approved this summer, with an exact Watco start-up date currently unknown.
“Watco is preparing for a seamless and smooth start-up of operations focusing on rail customers, their service needs and their supply chains. Watco is entirely committed to superior customer service and improved safety across all our railroad properties,” spokesperson Tracie Van Becelaere said.
Watco currently operates the Wisconsin & Southern Railroad LLC. in southern Wisconsin, which is about 600 miles. Watco also operates the Grand Elk and Ann Arbor Railroads in Michigan.
“To northern Wisconsin, Watco brings decades of experience of operating short line and regional railroad networks that are based on growth, improved safety and public/private partnerships. Watco looks forward to expanding our footprint in Wisconsin and executing key opportunities that are good for the rail customer, the region and the state,” Van Becelaere said.
A “Holding Company” like Watco is a railroad that is owned by a corporation holding several short lines. There are three holding companies operating in Wisconsin, including Watco, Genesee & Wyoming, and Progressive Rail. Watco owns and operates Wisconsin & Southern, as well as 29 other lines in North America. Genesee & Wyoming Inc. (GWI) owns and operates the Tomahawk Railway in Wisconsin, as well as 110 other lines on three continents. Progressive Rail operates Wisconsin Northern, one of its nine lines across five Midwestern states.
There was no county or other local government involvement in the transaction, according to Rusk County Coordinator Andy Albarado.
“My knowledge is that CN made a decision to make the lines available and received inquiries from multiple parties,” Albarado said.
It is difficult at this time to know what impact the sale might have in the area, Albarado added.
“It should be an improvement, as CN didn’t seem interested in generating business on these lines which are mostly in rural areas. I believe Watco can aggregate the cars servicing these areas, but will ultimately connect back to CN for longer shipments out of the region,” Albarado said.
More than 170 million tons of freight move by rail in Wisconsin each year, according to Wisconsin Transportation Secretary-designee Craig Thompson.
“For many of Wisconsin’s major industries – agriculture, manufacturing, and wood products – rail is the most cost-effective way to move freight. Having reliable rail access will make our industries more competitive and contribute to our economic recovery. Rail is also a more energy-efficient way to move freight, reducing our state’s carbon footprint. Plus, every ton of freight that move by rail means less congestion and wear and tear on our highways,” Thompson said.
In Wisconsin, nearly all rail lines are owned by private companies. Watco currently operates the Wisconsin and Southern Railroad (WSOR), which connects to the CN line and other Class I railroads.
U.S. Rep. Tom Tiffany (WI-07) and Rep. Jack Bergman (MI-01) expressed appreciation for the sale the companies say will improve access to rail service in northern Wisconsin and Upper Peninsula.
Tiffany said he hopes to work with WATCO and CN to ensure a brighter future for the region.
“Access to reliable rail service is a critically important to the viability of our agriculture, timber and manufacturing sectors,” Tiffany said. “Northern Wisconsin in poised for growth, and stable, affordable and dependable rail service a key component for reaching that potential.”
It’s good that CN followed through on their commitment to spin off old the Wisconsin Central lines and I hope we can work together to ensure a brighter future for the region,” Tiffany added.
“Economic prosperity for many industries, manufacturers, and working families in the Upper Peninsula is tied to rail connectivity,” Bergman said. “While I will continue to remain watchful, I’m optimistic that today’s announcement will safeguard future commerce and access across the U.P. and throughout the region.”
Owing to service reductions in recent years, businesses throughout the region face limited shipping options and must rely more heavily on trucking to transport goods as a result. While the trucking industry plays a critically important role in regional and international commerce, the economics are often not as favorable or desirable as those associated with freight rail options.
“This is a great opportunity, but the devil is in details,” concluded Tiffany. “I look forward to working with CN and WATCO, the Surface Transportation Board, industry leaders and other stakeholders to ensure that this agreement results in better service, lower rates, and a long-term commitment to the region.”
Last fall, Watco began leasing and operating the Phoenix Line in Illinois from Wisconsin Central Ltd., renaming it the Elwood Joliet & Southern Railroad (EJSR). It also acquired Wisconsin & Southern Railroad Co. (WSOR) in 2012. In February, Watco subsidiary Ringneck & Western Railroad LLC purchased the 285-mile Mitchell to Rapid City rail line in South Dakota.