Market studies are interesting avenues to find out more about a company’s competitive position within an industrial or market segment. Idaho Waste Systems will be participating in a waste-by-rail study that assesses their position in being able to use the waste-by-rail option.
Darell Luther and Ronda Avery
At the end of 2012, Tealinc and Waste Advantage Magazine decided to jointly offer a high-level market study for a potential customer that has truck-rail, truck-rail-barge or truck-rail-truck logistics in place or that they are considering, compliments of Tealinc, Ltd. Tealinc will help with the research, providing guidance on what data is required and organizing the information and determining the final costs of putting together the move to support the candidate company market reach or cost reduction efforts.
The candidate company that was selected for the market study is Idaho Waste Systems, Inc. of Mountain Home, Idaho. The published market study is segregated into three consecutive articles. The first of which is this article in which Idaho Waste Systems tells us about their current operations and described their perceived competitive situation. The second article will encompass the competitive market situation and detailed rail rate analysis from various origin points. Finally, the third article will encompass recommendations to strengthen Idaho Waste Systems competitive position.
Introducing Idaho Waste Systems
Idaho Waste Systems (IWS) owns and operates the Simco Road Regional Landfill (SRRL), the only private, commercially licensed, Federal Subtitle D landfill in Idaho. SRRL is regulated by the Idaho Department of Environmental Quality and the Idaho Central District Health Department. IWS has owned and operated SRRL since it was permitted, constructed and began operations in 1999. The landfill currently receives waste materials generated mainly in the southwest portion of Idaho. IWS also has an agreement with Union Pacific Railroad to remove and dispose of site clean-up waste materials from their gondola cars. IWS is now exploring other opportunities to increase flow into the SRRL. The landfill has a tremendous amount of remaining capacity in its first phase estimated to be approximately 45 million tons with the ability to expand the capacity to over 210 million tons. The only item lacking is a steady flow of material into the facility.
The SRRL is approximately 25 miles east of Boise and just a few miles off of Interstate 84. It is located in a very rural area with less than ten inches of annual rainfall. The landfill is also located adjacent to the Union Pacific main line and has more than 10,000’ of rail spur that was constructed in 2003. SRRL has onsite a container handler and all equipment required to offload railcars and dispose of material that is delivered by rail. An all-weather access road to the working face and tipper is maintained year round. The landfill is permitted to accept RCRA non-hazardous residential, commercial and industrial waste streams including, but not limited to: municipal solid waste, construction and demolition, asbestos, liquids, sludge, contaminated soil and non-hazardous special wastes including automobile shredder residue (ASR) and naturally occurring radioactive material (NORM). In addition, IWS offers intermodal services to other companies in the area.
The waste market in Idaho, especially with the continued downturn in the economy, is extremely competitive. Idaho was recently named as the State with the lowest disposal fees in the nation, which should allow SRRL to aggressively compete for waste contracts nationwide. However, at this time, SRRL receives a very limited amount of product by rail. IWS has worked on securing waste streams for municipal solid waste out of both Washington State and Northern California, but has not been able to obtain competitive rail transportation rates. With the difficulty and opposition to permitting and constructing landfills, the proximity to the Union Pacific Railway’s main line, and the fact the necessary infrastructure is already in place to receive waste-by-rail, the SRRL should be taking in material from across the U.S.
Initial Assessment
Market studies are interesting avenues to find out more about a company’s competitive position within an industrial or market segment. High-level approaches are generally categorized as SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis. A SWOT analysis can be as broad or narrow as need be as long as it provides a broad enough look at the competitive market situation to be of value and not mislead the conclusion(s). In this study, Tealinc will confine the review to rail and rail-related opportunities.
Idaho Waste Systems has a lot going for it. There are a number of items that fall in the Strengths category that indicates that IWS has competitively positioned itself for rail delivered waste. A short list of Strengths includes:
- Long rail spurs situated next to the Union Pacific Railroad (UP) mainline. IWS has two rail spurs, one that is 8,000 feet and another that is 2,000 feet in length for a combined capacity of 10,000 linear rail feet. That is enough capacity for a unit train of either intermodal railcars or high cube bulk commodity gondolas with room left over for consecutive handling of single or smaller rail carload quantities.
- A direct Class I connection with the UP that thru interchanges gives IWS access to virtually any rail served origin in the U.S. or Canada.
- Direct unloading equipment access to the rail sidings that allow material or containers to be timely removed is a significant advantage. The design allows IWS to scale up with volume. IWS scalability will, in the long run, help negate railroad railcar demurrage charges and could help it win larger volume contracts.
- Ability as a private subtitle D landfill to act faster and respond quicker to market changes than a public entity.
- Idaho generally has some of the lowest disposal costs in the U.S., which will help offset some of the additional transportation costs required to haul waste streams farther than other states.
An initial review of Weaknesses primarily focuses on:
- Captive rail to the UP. Generally shippers and receivers that are captive to one railroad pay higher freight rates. In this case, IWS may or may not be paying the rail freight but the freight differential may be detrimental to some rail shipment receipts.
- Nearby competitive landfills that are vying for the same material IWS is hoping to receive by rail.
Taking the “glass half full” approach, IWS has several initial Opportunities:
- IWS has significant landfill capacity that is capable of receiving large clean up jobs particularly those that require all material go to the same landfill.
- The ability to offset some rail rate charges with lower disposal charges characteristic of Idaho disposal costs.
- Ability to take multiple waste streams via rail including liquids. IWS can handle intermodal shipments (containers), bulk rail (mill gondolas, high cube gondolas) and possibly tank railcars hauling liquids (with some landfill modifications).
- Alternative to large city MSW landfills, particularly those that are looking for alternatives pre-closure.
A market study would not be complete without an assessment of Threats. IWS’ primary threats are:
- Captive destination rail service on the UP
- Competitive nearby rail served landfills
A Different Approach
IWS’ situation is indicative of many companies that aren’t familiar with the steps required to ship or receive product by rail. Face it, shipping by rail is much more complex than having a truck show up in a timely fashion. If the trucking company is continuously late you get a different trucking company to take on your business. If a train is late, you wait.
When dealing with rail transportation, the first order of business is to determine economically feasible shipment patterns that fit into the railroad’s method of doing business. This is generally a portion of the market study conducted at a very high level. Upon finding out whether or not the product, in this case a waste stream, can economically move via rail from the source to the destination, one then delves into the finite detail to understand all aspects of the potential movement so as to encompass all the details to determine costs, revenue and profit of a movement.
The second part of this study will encompass the competitive market situation and detailed rail rate analysis from various origin points.
Darell Luther is president of Forsyth, MT-based Tealinc Ltd., a rail transportation solutions and railcar leasing company. Darell’s career includes positions as president of DTE Rail and DTE Transportation Services Inc., Fieldston Transportation Services LLC, managing director of coal and unit trains for Southern Pacific Railroad and directors positions in marketing, fleet management and integrated network management at Burlington Northern Railroad. Darell has more than 24 years of rail, truck, barge and vessel transportation experience concentrated in bulk commodity and containerized shipments. He can be reached at (406) 347-5237, via e-mail at [email protected] or visit www.tealinc.com.
Ronda Avery is president of Idaho Waste Systems, Inc. She has been with IWS since 2000 first as controller then became president and CEO in March of 2011. She is a member of the American Institute of CPA’s and The Idaho Solid Waste Association. She can be reached at (208) 724-8943, via e-mail at [email protected] or for more information visit www.idahowaste.com