Hey freight trains dont make money either...

It was the peddeler freights that was the reason why the railroad were created in the first place. The railroads were a public/private partnership and were deemed to be common carriers by the courts in inumerouse court rullings. The railroads themselves have turned away freight first by conrail doing away with LTL in the 1970s then railway express then not accepting freight in containers that is going less then 500 miles. Not only that but they wont spot a once a week boxcar on a siding anymore and charge 2,000.00 a year just for the privlage of being a railroad custumer for sidings. No wonder some are calling for the reteran of the ICC. The railoads are giving a unfair avatage to big buisness by giving low railroad rates and good service to there big manufactures who play at there country club. Every one else hits the glass celing of truck rates which are good up and only to a certain point.

First of all, railroads did not start as quasi-public corporations. Some were given land grants (primarily in the west) to encourage investment in lines that would otherwise have been uneconomic to build.... Railroads gladly accept LTL freight now: from UPS, YRC, ABF, Con-Way, even FedEx on occasion... shippers that require a turnout have to pay for turnout maintenance, because it costs money to maintain a turnout - reasonable enough, no? Truckers don't pay to maintain the asphalt and loading dock at a shipper's plant... what's the difference? And , uhhh, it's big business - namely utilities - that are calling for reregulation. With all due respect, you need to bone-up on railroad economics.

Does it really cost 2,000.00 a year to maintain a switch? Come on here. The switch maintance fees were started by Conrail when they were trying to cut branch lines and chase away small industry on those lines in favor of big shippers on the main.

IIRC, those switch maintenance fees were only charged if a customer did not meet a certain threshold of business, as in so many moves or so much revenue , per year.

Exactly, or a rebate was provided... and that practice is older than dirt - Conrail didn't invent the charge.

If we are concerned here at this topic about the outlook for the railroad industry's profitability, as we should be, The Wall Street Journal reports that an Obama administration appointee, subject to Senate confirmation, to head the "Surf Board" will be inminical to industry interests:

http://online.wsj.com/article/SB124900542847195859.html

Brief passage:

• President Barack Obama's nominee to head the agency that regulates the railroad industry said he would be "proactive" in addressing shippers' allegations of pricing abuses by freight-rail companies, and indicated that a law that deregulated the industry is outdated.
  
  The comments by Daniel R. Elliott III came as a House Judiciary subcommittee approved a bill Thursday that would eliminate exemptions from antitrust law for commercial railroad companies. The bill, introduced earlier this year by Rep. Tammy Baldwin (D., Wis.), could face a hearing and a vote by the full committee as early as September.
  
  Meanwhile, Sen. John D. Rockefeller IV (D., W.Va.), chairman of the Senate Commerce Committee, and Sen. Herb Kohl (D., Wis.), chairman of the Judiciary's antitrust subcommittee, are crafting a proposal to overhaul the Surface Transportation Board -- which approves rail mergers and decides rate disputes between shippers and railroads -- and repeal antitrust exemptions for railroads. The package, which would modify a bill introduced by Mr. Kohl earlier this year that was tabled, hasn't been unveiled.
  
  Patti Reilly, a spokeswoman for the Association of American Railroads, a trade group representing CSX Corp., Union Pacific Corp., Burlington Northern Santa Fe Corp. and Norfolk Southern Corp., said Mr. Kohl's earlier bill was "overreaching" and would saddle railroads with "onerous" regulations

Be sure to note the mature reader's comments that follow.

Volks, this is a regulation minded Administration. It has been one thing to invoke massive government intervention at a time, regardless of laying fault on one party or the other, when our global economy was staring into the abyss of "Great Depression II". But now it appears that, if confirmed, under Mr. Elliott's tenure, one industry that as of late has "been doing just fine, thank you" will have its renaissance over the past thirty years undone (respect that Amtrak and other passenger train advocates likely disagree). We could well be returning to the Dark Ages, or otherwise the years I was employed within the industry (1970-81).

Finally, while I realize that I am not all that much of a railfan, this industry has been part of my life for as I have been observing its affairs for now almost sixty years including eleven of such from the inside. It is indeed disheartening to learn that the incumbent Administration apparently holds that 'we got to get those mean, greedy, and monopolistic railroads back where they belong'.

As most readers of this discussion board know, I've spent my career (32 years and counting) with and around railroads. I just left STB for a position in the Office of the Secretary of Transportation, so maybe I know a bit about railroad economics and regulatory policy. Oh, and I worked for the Rock Island and the AAR, as well as the US Railway Association (the banker for Conrail -- remember them?), so I don't just know about the history of railroads under regulation, I lived through it.

In 1977, when I started at the AAR, a third of the railroad mileage in the country was being operated by companies in bankruptcy or by the government (Conrail). Does anybody REALLY want to return to that sort of scenario? Railroads still aren't "revenue adequate" by STB's determination. Does it really make sense to give big shippers a break on the rates they pay by depriving the railroads of revenue they need?

As for small shippers, railroads have become a wholesale rather than a retail business. There are a host of reasons why this has happened, not least the orgy of road building by government at all levels during the 20th Century. Gee, give me a virtually free ROW and I can sure beat the railroads on price.

I can tell you that situation is going to change shortly. We'll have a mileage tax rather than a gas tax very soon, and we'll also have "congestion pricing" of highways. That will clear up traffic jams and also raise truck costs substantially -- which will be very good for railroads. Howl all you want, but putting highways and railroads on an equal footing -- charging per mile for the use of either -- is the most rational way to get us out of the transportation mess we find ourselves in. I'm glad that, in the twilight of my career, I'll have a shot at shaping road pricing policy. It's about time.

Oh, and railroads were never "public utilities". From the start, they were built with private money and operated by private owners. They still are. That's one oddity of our transportation system. Mileage tolls will address that inequity.

A really disquieting element here -- as pointed out by other observers -- is that many of today's decision makers are too young to recall or to have experienced just how bad things were in the 1960s and '70s, when, as Nellie Bly pointed out, one-third of U. S. railroad mileage was in bankruptcy (I still remember John Ingram's famous remark, when the Rock Island went under --"The Northeast railroad problem has now reached Tucumcari"). The Atlantic, Pacific, and Gulf coasts were all served by one or more railroads in bankruptcy. If the trend toward reregulation isn't stopped it could happen all over again, but it would take 20 to 30 years, by which time the mischief makers will all have moved on to greater things. Somehow something needs to be done to increase general awareness of why the Staggers Act and related legislation was enacted in the first place, but I'm not sure how to do it.

Today's ironic moment:

Harley Staggers was a Democrat.

Mr Norman wrote:

Volks, this is a regulation minded Administration.

I would more aptly describe it as an expropriation-minded Administration. As with the slow looting of the Eastern trunk lines 1945-1973, the structure of rail economics would allow the freight roads to post years of losses whie continuing to generate a cash flow sufficient to pay the bills. I, for one, believe in calling a thief a thief, even if that thief does wear an expensive suit and mouths a few platitudes about "social responsibility", or similar drivel.

A friend of mine, educated only by high school and three years in the military(non-combat), observed earlier today that the United States has three unmatched advantages in the global arena; (1) an agricultural sector self-sufficient to some degree in virtually every crop, (2) the most efficient system for the generation and distribution of energy, and (3) the world's most efficient, and most privatized transportation network.

The third is clearly under attack, the second soon likely will be, since it is similarly immobile, and the first will prove resistant only because the Beltway fools are largely ignorant of how it operates.

I sincerely wish I could view these developments in a less-belligerent frame of mind, but the dynamics of the institutions involved lead me to see little hope for moderation. The only positive I can discern at this point is that the quickening pace of global market forces may make the cost of this power grab apparent to the moderate center sooner than its architechts anticipate.

"Reregulation," in whole or in part, could spell disaster for the rail industry from both profitability and investment attractiveness standpoints. But remember the Staggers Act DID NOT completely deregulate pricing and, as such, carriers need to tread very cautiously when it comes to pricing in monopolistic situations, especially where the stakes are high. Recent rate cases have shown that the railroads may be treading a little less cautiously than they should be. A wise man once told me, "pigs get fat, hogs get slaughtered." I'm not saying that carriers shouldn't be allowed to charge whatever the market will bear, but abusive action raises the hackles of the shipping public. To put it more personally, what would you do if your local electric utility arbitrarily raised its rates five-fold tomorrow? Cheer for them and say, "hurrah for capitalism!" ? I doubt it... even if the rate increase was to offset a railroad's rate increase on coal shipments

what market , if there is only one railroad serving a customer ???? .
unless you have a true free market ( which would mean open access ) , then shippers need some form of protection from excessive rates by the railroad .

I know this might seem "way out there", or kinda far fetched...

but what if a certain majority of customers served by rail are provided the choice between (2) or more rail service providers ?
Some shippers already have this luxury, where they have the option of being switched by the nearby Class I (NS or CSX), or by the local neighboring shortline or regional road. Obviously this would be advantageous to competitive free trade and fair rates, but also equally obvious would be the fact that:
(1) Difficult legislation is needed to REQUIRE BY LAW that two or more rail carriers provide service to every on-line shipper (minus a few exceptions)
(2) Complicated trackage rights and shared assets agreements would be necessary to comply with this regulation.

While any threat of over-regulating the industry and threatening its ability to earn returns approaching, meeting or exceeding the cost of capital is scary for its long-term health, perhaps the political meat grinder will moderate the changes being called for. It is, however, unnerving that calls for greater regulation are also being joined with political pressure to increase truck weight capacity...the political agitation seems to be above and beyond the fact of which party is in the White House and controlling Congress.

I guess this threat of tightening up the regulatory reigns on the industry is the "yang" to the railroads' "ying" of becoming more-relevant in solving the nation's transportation problems and stepping up to the public funding trough to finance/fund capacity improvements. Should the absolute worst-case scenario, from the industry's perspective, of open access ever become reality, I believe that it could/would only work if the entire rail system's infrastructure were to become government owned/operated like highways, airport/ways, and ports and waterway. Lastly, the policy-makers need to remember that railroads compete within the umbrella of transportation competition and, in a greater sense, logistics and economics amongst producers/consumers. There is a scale of potential non-competitiveness amongst the commodities railroads carry with coal and grain "captive" on one end where the greatest chance for abuse might occur and those commodities whose characteristics lend themselves to multiple intermodal and modal competitive alternatives ie., transloading, multiple routes, container/trailer intermodal, alternative sourcing, etc. etc. where a railroad has diminished pricing power.

It's a challenge that has been brewing since the mid-90's but now seems to be boiling over.

Mr. Benton wrote:

what market , if there is only one railroad serving a customer ???? .
unless you have a true free market ( which would mean open access ) , then shippers need some form of protection from excessive rates by the railroad .

We concur (with the first sentence, anyway) ...... the question is: Given the increasing emphasis on grades and physical right of way in the pricing/competitive arena, how can we level the playing field (literally!) with minimum reliance upon the state's power to coerce?

And back in the dark days of the 1950's and 60's, the idea of keeping the rolling stock, but selling the fixed plant to the Federal government was occasionally discussed. Unfortunately, the ability of the surviving roads to rehabilitate their plant, re-orient their marketing strategy, gain labor contracts more in line with present-day realities, and all of it with no direct aid other than the temporary custody of Conrail, leaves those players justifiably suspicious given the thirty-plus-year destruction of the auto industry due largely to an unpredictable series of mixed signals, combined with no verifiable limits to the potential for abuse via misregulation.

What's more, while it can't be discerned exaclty how much of the new Administration's anti-business stance is just posturing to please the agressive far-Left cadre' at the center of the Democratic coalition, the very prominence of that group is enough to make anyone with a basic pro-market orientation uneasy.

Over the long run, a policy of open access should be consistent with the beliefs of those who believe that open competition provides the greatest good for the greatest number. The problem lies in the fact that the men who rebuilt our efficient, and privately-held core infrastructure justifiably don't want to see it looted by those who view political power through an ethic not far removed from that of a street gang.

Somewhere, there ought to be room for a couple of innovations that would start things moving in the right direction. But the industry's suspicions toward those who essentially possess life-and-death power over it are very well-founded.