Return of Crude to PAR?

I want to clarify my point. I think Pan Am has a future in the oil business, and yes, even the unit CBR business. I also don't think we're that far from seeing it come back. I just don't think you're going to see CSX or NS investing 100M+ in a 2-trains-a-day line 150 miles east of the end of their tracks.

What does Pan Am need to make unit moves happen again? In my opinion, another 3 crews east of NMJ, and Enfield siding put back in service. It takes 3 crews to roundtrip WASJ/SJWA from NMJ to Keag. Thats 24 hours. If you put Enfield in service you can meet trains halfway, which means you double capacity (1 train each way/day to 2 trains each way/day). Of course a second train would require another 3 crews, since crews work 8 hour shifts and it takes 24 hours to roundtrip the 130 miles...

Otherwise, I think they showed in the winter 2012/2013 they can handle an onslaught of 4 or 5 unit trains/week, up to the point where the NMJ-Keag line chokes. Getting oil (or anything for that matter) from the west to NMJ is a relatively simple process, and not all that slow. Getting it the last 65 miles is a 12 hour ordeal. In terms of rolling pipeline OT-Keag is the choke point.

MEC407 wrote:I would dare say that PAR's current motive power situation might actually be a bit worse than MMA's. PAR has had two locomotive fires in two weeks. PAR's 300-series locomotives, which still make up the backbone of the fleet, are approaching 50 years old... and they're crapping out all over the place. The 500s are showing their age, as are the 600s, and there's never enough of either of them to go around. The leased GMTX 3000s are no better than the PAR 300s.

A couple points real quick. If you look at in service locomotives (based on Bill's Jan 2014 roster) you will see 44+6 GP40's (300's and 6 leased), 16 GP40-2W's (500's, not including burned up 507), 37 SD40-1/2/3's (600's+17 leased). So the GP40 is still the most common model on the property, but GP40's do not make up the majority of the road fleet. This is compounded by the fact that SEPO/POSE run at least part of the way with CSX power, and 22/23K, 205/206 run with NS power. Times are a changing...
RT, "crapping out all over the place" is a bit harsh in my opinion, its been a really tough winter and bigger and better railroads are also having trouble with power shortages. CP, NS, and BNSF are all power pinched at the moment. And credit to Waterville, if you look through the last year of locomotive summaries, you will find average deadline time for new failures is <2 months.

That said I couldn't agree more that Pan Am's locomotive fleet is historically under-maintained and was likely no better maintained than MM&A's. A capital rebuild program (maybe even a -3 upgrade program) would do wonders and will become increasingly necessary if they continue to rely on 1960's era locomotives. All of their GP40's can be overhauled and upgraded to -2 or -3 with no worries about emissions, since Tier 0+ applies to locomotives built 1973 or later. This would also apply to some of the 600's, specifically those rebuilt from SD40's, or 45's, and any early built SD40-2's.

fogg1703 wrote:Well put KSmitty. This is CN traffic for the foreseeable future. I can't see any Class I risking sending any considerable amount (IE 1 Unit CBR Train/week) over a under maintained, slow and sometimes gridlocked PAR. Too much aggravation with easier fruit at Albany or the Mid Atlantic.

Why would a Class I be choosing what route the oil uses? The customer chooses the source. If that source uses a Pan Am routing (like CSXT) that's how it gets there.

There is a chance Pan Am can get unit trains back (without track work) if they offer a competitive price. Right now CN is beating them.

I know CN is the dominant player in Oil Sands from Alberta, while they are a "0" in the Bakken. I know Irving was taking lots of Bakken oil, but seem to remember Bakken was lighter than the refinery was set up for and that they were cutting it with a heavier oil (Brent maybe). This all brings up a question, whats the source of the oil trains running to Saint John right now? They are either oil sands originated in Alberta or Bakken originated in N. Dakota on BNSF (one assumes CP isn't going to source loads for CN when they have the Port of Albany and Irving seems happy to ship oil in).

i apologize for the wrong cars/day. it should be 400 not 4000. locomotives? lease for $16k/month each. hos? .have an extra person riding and take-over after 10 hours. i think hos doesn't count for a relief person riding along. track? $50k/mile for alignment and safety ties. all this easily covered. sad outcome resulting from myopic thinking. ken patrick

KEN PATRICK wrote:hos? .have an extra person riding and take-over after 10 hours. i think hos doesn't count for a relief person riding along.

You think wrong.

Ken-
I used to be optically myopic, but cataract surgery reversed that among other things. There may be some question whether I am -- to julienne a metaphor -- cognitively myopic. Whether the linked reading ( http://www.fra.dot.gov/eLib/Details/L04246" onclick="window.open(this.href);return false; ) helps in your reassessment of some of your positions on the Hours of Service Law, its interpretations, and its applications is a matter for you to determine.

KEN PATRICK wrote:i apologize for the wrong cars/day. it should be 400 not 4000. locomotives? lease for $16k/month each...track? $50k/mile for alignment and safety ties. all this easily covered. sad outcome resulting from myopic thinking. ken patrick

While not insane, 400/day is still not realistic, Ken. The refinery was supposed to have a 192 car capacity/day. 4 tracks with a 12 car capacity switched 4 times a day. This link -> http://www.flashearth.com/?lat=45.27844 ... =0&src=msa" onclick="window.open(this.href);return false; <- is the current crude rack at Saint John, its HUGE compared to the old one, one 6 car track. However, I only count 10 in each track, granted the image isn't super great...that means you aren't going to fit 20 cars in each track. Which means you aren't going to fit 100 cars in the rack each switch. Which means you aren't going to fit 400/day. Its a fact the rack is NOT set up to handle 400 cars/day. And after expanding the terminal 2 years ago when they were getting more CBR I find it unlikely they will again increase the size now that CBR shipments to Saint John are down. I realize 15 trains/month on CN sounds "big" rather than "down," but in the winter 2012/13 Pan Am was running 4+ units/week, CN had daily blocks, and MM&A was running at least 1 or 2 units/week.

Locomotives. What you suggest sticks Pan Am with a big bill if and when (as it happened March 2013) the oil business dries up. Using BNSF power took a little off the top, but now they aren't stuck with an expensive locomotive lease and no oil to move...Essentially, they leased exactly the amount of horsepower they needed to, for exactly as long as they needed it. No wasted locomotive time, no expensive monthly bill to pay when the power wasn't needed. MM&A should have followed this route and used CP power...

Track. What are "safety ties?" Thats a term I'm not familiar with. However, $50K/mile is still a lot, the 220 miles of MM&A line by 50K/mile is $11M. There is nothing affordable about that for MM&A.

If Safety Ties are regular ties, they used to cost about $88 to purchase and install, conservative price to say the least. There are roughly 2000/mile on the average Maine railroad. To replace 1/4 of the ties (500/mile, the bare minimum to see any effect) the costs are $44,000/mile. To tamp or align, you need adequate ballast. Rock bought in bulk and dropped on the main used to cost, conservatively, $43/ton, plus tamping and regulating crews time/fuel/machinery. A ton of rock barely does a 15x8 rock walkway, let alone a mile of railroad. Were talking 500tons/mile to get about 2" of new rock coverage. Thats $21,500 a mile just to buy and drop. Then it still needs to be tamped and regulated. And surfacing is worthless if the rail is bad, but thats besides the point...To simply ballast and surface the line from Brownville to Montreal would have been (using your figure) $11M. To actually have enough rock to do surfacing, and enough ties to make it worth a damn, would have been $16.5M, very conservative, for the MM&A. Not realistic... Even with your figure, which is unrealistically low, a single train would provide enough money to work on 6 miles of railroad, if all the revenue was available for trackwork.

Railroads cover massive amounts of land. Think of the scale you're talking about. Any "small figure" like $50K has to be multiplied by the miles you need to cover, and small numbers add up quick when you're talking covering railroad miles. Just keep scale in mind, its quite important.

newpylong wrote:Why would a Class I be choosing what route the oil uses? The customer chooses the source. If that source uses a Pan Am routing (like CSXT) that's how it gets there.

They can't. My point was after Lac Megantic wouldn't Class I's better scrutinize and cover any potential liabilities when handing off to smaller roads? Which in this particular case may make the BNSF/CSX/PAS/PAR/NBSR rate higher than a BNSF/CN rate to cover any potential liabilities they may be made party to.

newpylong wrote:There is a chance Pan Am can get unit trains back (without track work) if they offer a competitive price. Right now CN is beating them.

Beating them by what matrix? Unless they have changed their rates recently, CN was historically more than a MMA or PAR routing which was one of the reasons they were later to the game.

KSmitty wrote:Why is reliability most important? Think about it, if it costs a little more, or takes a little more time to get to you it costs you a little. If your supply line is interrupted (unreliable) you have a billion dollar business stopped because you haven't got anything to refine. Sure pipeline might require more inventory/money, account the longer end to end time, but you know when you open the spigot crude flows. CBR has its risks, and I'm sure Irving paid a price with the Plaster Rock derailment that screwed up their oil deliveries for a few days. Even if all that happened was their stockpile of crude at Saint John dropped. Basically, its WAY MORE EXPENSIVE to sit on a refinery idled because of a lack of crude than it is to pay a little more in delivery costs or time.

Just to add to this: I'm no petroleum industry expert, but it is my understanding that starting and/or stopping a refinery is a big deal-- akin to powering up a nuclear power station. Refining oil basically involves bringing a volatile liquid to a boiling point then siphoning off the even-MORE-volatile products that come off as vapors-- all without causing an explosion.There's a long sequence of things that need to happen in a precise order before you can safely put crude in one end and take refined product out the other. It's not like an assembly line, that can be shut down at the flip of a switch w no adverse consequences (other than to the manufacturer's bottom line), and that's why these things run 24/7.

So, yeah-- reliability of supply is VERY important if you're in the oil business.

fogg1703 wrote:

newpylong wrote:Why would a Class I be choosing what route the oil uses? The customer chooses the source. If that source uses a Pan Am routing (like CSXT) that's how it gets there.

They can't. My point was after Lac Megantic wouldn't Class I's better scrutinize and cover any potential liabilities when handing off to smaller roads? Which in this particular case may make the BNSF/CSX/PAS/PAR/NBSR rate higher than a BNSF/CN rate to cover any potential liabilities they may be made party to.

newpylong wrote:There is a chance Pan Am can get unit trains back (without track work) if they offer a competitive price. Right now CN is beating them.

Beating them by what matrix? Unless they have changed their rates recently, CN was historically more than a MMA or PAR routing which was one of the reasons they were later to the game.

What do you mean by what matrix? Are you refering to price hedging instruments?

I wouldn't be surprised if because of the self-insured aspect of PARs business, as well as the fact they now have to report crude movements to the State of Maine and pay a bit extra (Funny how when they started reporting, CBR dropped off), it is certainly possible they changed their rates. Also, consider the volatility in pricing of the crude, I'm not sure the CN oil is even Bakken. The spread however is back to what it was (Bakken to International), in fact almost better, back in 2012/2013 when PAR was shipping a lot of trains. Assuming that Irving will source from as many places as they can, (They were running MMA, PAR, and some import traffic during the rush more than a year ago) and also assuming that Irving has price hedging instruments that tell them when to buy and from whom (Which I'm 99.9% sure they do), it certainly may shift back. Also, Irving is looking to export crude from Candian tar sands and perhaps even Bakken. Once their rail loading plant is finished in Alberta, then you could easily see CN pick up the export traffic, and PAR (and someday CMQR) pick up the refinery traffic.

KEN PATRICK wrote:i apologize for the wrong cars/day. it should be 400 not 4000. locomotives? lease for $16k/month each. hos? .have an extra person riding and take-over after 10 hours. i think hos doesn't count for a relief person riding along. track? $50k/mile for alignment and safety ties. all this easily covered. sad outcome resulting from myopic thinking. ken patrick

Of course HOS counts for someone riding along. Do you think someone sitting in the middle seat after 12 hours is any more alert than the guy in front of the stand?

fogg1703 wrote:

newpylong wrote:Why would a Class I be choosing what route the oil uses? The customer chooses the source. If that source uses a Pan Am routing (like CSXT) that's how it gets there.

They can't. My point was after Lac Megantic wouldn't Class I's better scrutinize and cover any potential liabilities when handing off to smaller roads? Which in this particular case may make the BNSF/CSX/PAS/PAR/NBSR rate higher than a BNSF/CN rate to cover any potential liabilities they may be made party to.

newpylong wrote:There is a chance Pan Am can get unit trains back (without track work) if they offer a competitive price. Right now CN is beating them.

Beating them by what matrix? Unless they have changed their rates recently, CN was historically more than a MMA or PAR routing which was one of the reasons they were later to the game.

Just relaying information given to me, take it or leave it

newpylong wrote:Of course HOS counts for someone riding along. Do you think someone sitting in the middle seat after 12 hours is any more alert than the guy in front of the stand?

Use a sleeper car as the buffer car in the oil unit train, have the ride-a-long sleep in style

my limited understanding of hos is based on airline applications. i believe hos for railroads is based on 'operations' not presence. thus a supine rider is simply taking space. i don't accept the position that fatigue is the driving force. i'm of the opinion that boredom is the culprit hence the rationale behind the i minute 'dead man' tapping.
'safety ties' are 3 per 40'. plugged recycled- about $25 installed. best source are transit systems who overkill the rail structure. now think of the financing that arises from 400 cars/day. the current transportation costs are $14/bbl. each railcar carries 728 bbl or $10k billing. $4mil of railroad billing. 2400 miles $4/car mile. railcosts? probably .50cents/car mile. so 300 miles yields $420k gross profit per day. borrow $20mil @6% 10 year . $3mil/yr payback from about $106 million gross profit? ( 252 day year). so mma couldn't finance this because of ? all that was necessary was irving awarding a long-term contract. bakken isn't going anywhere. a golden goose laid low by myopic railroad thinking. i would have paid for irving track and multiple switches.pas should approach this oppotunity with an open checkbook. ken patrick