• Hey freight trains dont make money either...

  • General discussion about railroad operations, related facilities, maps, and other resources.
General discussion about railroad operations, related facilities, maps, and other resources.

Moderator: Robert Paniagua

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  by 2nd trick op
 
Gentlemen, while it delights me to see a philosophy I was first introduced to as an undergraduate some 41 years ago finally gaining some mainstream recogntion, I want to emphasize one or two sidelights.

Rand had two protagonists in Atlas Shrugged; Steel magnate Hank Rearden was based on her husband Frank O'Connor and John Galt was based on Nathaniel Branden, an associate of Rand from 1950 to 1968. The "railroadress" in Atlas Shrugged was Dagny Taggart.

Rand apparently didn't care to fully address the origins of financial, rather than proprietary capitalism. Her "heroes" are always depicted as having much more personal control over their enterprises than is the case in real life.

According to numerous accounts, while researching Atlas Shrugged, Rand was suprised to learn of the depth of economic regulation imposed on the railroads. During the early 1970's, a soft-cover pro-free-market economic journal called The Freeman, produced by an early think-tank called the Foundation for Economic Education, produced an execellent series of articles called "Throttling the Railroads". It was later reproduced in book form, just as the deregulation movement was getting underway.

As an aside, for personal inspiration, I find the gentleman below a bit more interesting:

http://en.wikipedia.org/wiki/Eric_Hoffer
  by HoggerKen
 
David Benton wrote: I am arguing that open access is the answer , not blunt govt intervention . for what its worth Economics was my best subject , i got a 89 % pass .

Open access is a sure ticket to reverse the positive trends since Staggers. Some Wisconsin and Arkansas utilities have been complaining since the 80's about rates, competition, service ect. The same stuff today's CURE is crying about. Yet they have not been able to prove to the I.C.C. or STB their case. amd they have tried every angle. ( I am talking about specific customers, who make up the base of groups like CURE, not all utilities.)

You can be absolutely certain that if Open Access comes about, we will revert the the same conditions in the mid-1970's when investment dried up to keep lines viable. Because in order to compete, one will need some sort of advantage, either in labor costs, or equipment, or trackage fees. Only if Congress steps forward and permits trackage fees on the same basis as they do stand alone railroads in rate cases, will a host road survive. But then, where will the advantage be for the competition?

And undoubtedly, remaining customers on the host road (if there are any) will end up paying higher rates to absorb the losses.

Personally, I feel these utilities already have competition. Most are close enough to barge points, and have adequate roads to handle the traffic.
  by David Benton
 
The host railroads would be compensated . Either the government buys the line , or compensates the host railroad for allowing competition . Competition is not the answer to everything , as seldom can all exntunating circumstanes be reoved , so absolute free trade is impossible .
Many would argue that this would require a large govt input , but it is difficult to see the situation improving without large govt spending one way or the other . of course if this big spending was on highways or air , it would hardly cause a ripple .
  by Ken W2KB
 
David Benton wrote:The host railroads would be compensated . Either the government buys the line , or compensates the host railroad for allowing competition . Competition is not the answer to everything , as seldom can all exntunating circumstanes be reoved , so absolute free trade is impossible .
Many would argue that this would require a large govt input , but it is difficult to see the situation improving without large govt spending one way or the other . of course if this big spending was on highways or air , it would hardly cause a ripple .
The US government did not compensate or contribute whatsoever to electric utilities for electric transmission (generally 100kV and higher wholesale transportation of bulk electric power) when that was mandated to become open access about a dozen years ago.

See FERC Order 888 and its progeny: http://www.ferc.gov/legal/maj-ord-reg/l ... der888.asp

The traditional rate based rate of return regulation of transmission continues, with certain rate incentives for new technology, and certain other factors, filed with and approved after hearing and opportunity to be heard by the Federal energy Regulatory Commission. There was no deregulation of US traditional electric transportation. The transmission asset owners are responsible to build and maintain the infrastructure and must accept wheeling (i.e., shipping) of power from any and all entities at tariff rates, terms and conditions. Such transportation must be non discriminatory, i.e., not favoring affiliated generation or marketers over non-affiliated third parties. Dispatching of wheels must be done by a functionally separate entity to further help prevent favoritism. In the midwest, mid-Atlantic, northeast, California and Texas the dispatching is done by a completely non-related entity, called an Independent System Operator or Regional Transmission Organization, voluntarily formed by the utilities in those regions.

Despite the gloom and doom predictions of electric industry naysayers at the time, the system has worked fine.

There are many close parallels to the railroad industry and a similar arrangement could be utilized. The railroad companies would continue to own, build and maintain all track infrastructure, at rate based rate of return, with perhaps incentives for new technology, economic expansion, and so forth. Use of trackage would be at tariff rates, terms and conditions filed with and approved by a designated federal agency in a traditional rate case. Rates could be tied to some extent to priority of service, so entities like Amtrak and time-sensitive freight could get what they need, while commodities such as coal get a lower rate since time is generally not of the essence. Use of the tracks would be on a non-discriminatory basis, dispatched by a functionally separate department of the track owner, or by a completely independent entity if that's what one or more the railroads want to do. Competition by users of the tracks would be on the basis of prices, customer service, etc.

No taxpayer money needs to be expended, if it does, that is because the railroad(s) is not viable in a free economy and a subsidy is necessary to keep it operating for public policy reasons. (think Amtrak)
  by QB 52.32
 
I'd have to trust the railroad industry and its managers to understand the implications of open access. From what I have gleened, from their point-of-view it is a worst case scenario...perhaps even worse than a return to re-regulation itself. In 1999 their take was that even limited open access would take $2.4b. in income out of the system. If there was economic benefit for the industry they'd be championing the cause.

First, what is the direct benefit for shippers without majorly eroding the industry's economic health except for specific segments of their business which tend to be "captive" like some coal moves? Or perhaps for those lines of business which may be short/medium hauls (or have other characteristics which make them less economically attractive) which must pass interchangeably between 2 (or more) carriers and are subject to both factoring in their overhead (and interchange) costs in their economic analyses /pricing, and, consequently, don't move via rail. Certainly not for those other intra- and inter-modally (and/or logistical and/or sourcing) competitive segments, which , arguably, hold a majority position (1/2 to 2/3 ?) of the industry's business. Secondly, operationally, open access would be much more complex than the electric power distribution example provided, and, would have its greatest complexity (and therefore costs) not in the linehaul but in the terminal and distribution end of things as well as the actual operational issues that would have to be tackled. Lastly, lets give the industry credit for working towards efficiencies, managing their business to a healthier state approaching earning the cost of capital, being good at understanding existing and potential markets for its service, and working towards what is realistically and ecomically best for their industry. Open access would turn everything upside down with high( -to-astronomical) cost for what in the end would be relatively (in comparison) small benefit. Just like total re-regulation, there's got to be some much-better alternatives to meet shipper industry, public and political pressures.
  by HoggerKen
 
But Ken, the current structure of rate rules are far different than electric transmission as you described. While there are parallels, it is far more costly to maintain a track bed for 49 mph when you have coal trains slowly pounding it into the sub base every time they use the line. There is also a difference in complexity of operations.

80% of open access desires comes from utility companies. Second in line are chemical companies, then Grain customers. Everyone wants their traffic to come first. (Note, there is traffic that pays to be first, so the others will wait since their rates do not support expedited operations)

In order to attract investment, which pays to maintain and rebuild track, a company must first show viability through profitable operations, which at the moment, they do. Without that investment, money to pay for maintenance projects is harder to come by. Then limited to projects on important trunks. But each segment must hold it's own. Once a segment fails to support itself, it eventually is either embargoed, or abandoned. In modern times, I have not read of this happening.

Basically, the premise of groups like CURE is that all segments of traffic must pay the same as their members do. In a lot of situations, it is their traffic that pays for the line to even exist, and requires more cost to maintain the track. Yet the STB in rate cases, does not govern that way.


And if you force in an open access scenario, the tenant carrier to pay in relation to previous rate structure, what is the difference? Where is the advantage? XYZ's trains will not arrive any faster, nor will be much cheaper. They will suffer the same delays because of congestion, mine capacity, and equipment failures as the host road. Again, where is the advantage?
  by FormD
 
There has been a number of moves by the railroads themselves to move tward open access,

1.The MM&A in Maine wants to sell the track to the State.
2.CSX wants to sell bridges and track in Commuter Rail Teritory to the states (Mass and Other States
3. Almost all of the railroads in VT are owned by the state dot
4.There are a number of port and ecommiocal developmental authritys that own railroads (Austin,Akron,Pittsburgh)
5. The state of NC and the City of Cincy own hundreds of miles of track in there regions
All these deals usauly involve a lease back arangement where the railroad leases back the railroad. With the exception of Pan Am prostesting a short line lease back in NH (Millford& Bennington) things run smoothly and the state helps out with funds for track improvment from time to time
  by 2nd trick op
 
I'd like to begin this post by thanking our (relative) newcomers Cowford and QB 52.32 for adding some insights on a subject -- the solicitation and development of freight business -- that isn't very easy for those of us far removed from the industry to follow. Now I'd like some comment on some of the changes I've witnessed in a pivotal market segment -- intermodal -- over the years.

I'm old enough to remember when intermodal was usually referred to as Trailer/Container on Flat Car (TOFC/COFC) or even the popularized term "piggyback". Although it can be traced back as far as the late 1930's, the game really got started in response to the first surge in construction of superhighways in the mid-1950's.

There were a number of approaches tried during those formative years. New York Central recognized the advantages of not taking those wheels, hubs and axles along on a less-aerodynamically-stable ride and pushed its Flexi-Van service from the opening bell, while the Pennsylvania was a big promoter of what was called "Plan 1", seeking to perform the line haul for common carrier truckers. All sorts of variations emerged, including an early version of RoadRailer tried out by Chesapeake and Ohio as early as 1959.

http://en.wikipedia.org/wiki/Roadrailer

Equipment was anything but standardized, with flats hauling anything from one to three trailers, and a trend toward increased highwway size and weight limits certainly didn't simplify things. But by the time I entered the motor carrier industry c.1972, the two-trailer 89-foot(IIRC) TrailerTrain car was pretty much the common denominator.

During those years, traffic, which had grown steadily during the sixties, seemed to stagnate for a few years. The loss of reliability of Eastern trunk line connections at Chicago and St. Louis was cited as one factor. and a lot of shorter hauls originating at smaller markets (Altoona and Scranton were two I was personally acquainted with) were simply abandoned as uneconomical. That 89-foot car caused a lot of problems due to the potential for vertical "play" in its center; I recall one afternoon when my boss at the time went looking for "the fool who put that load of plate glass on the railroad" -- then remembered he'd approved it. :-)

But eventually, with the emergence of articulated "spine cars", double-stacks and all the rest, and coming right about the time of the mid-80's deregulation and work-rules reform, the growth resumed. But I can remember seeing hundreds of now-redundant 89-footers rusting away in a yard near Jacksonville a few years ago.

And the dozen-or-more intermodal moves that pass my home every day are far removed from what I remember from the 60's-70's. It's rare to see a logo from one of the major freight roads, some of the better-known names from a re-invented motor-carrier industry (Hunt, Schneider) are more common than others (Werner, National), and the freight forwarders seem to have carved themselves a stronger niche.

And if the present economic downturn proves to have established a "high-water mark" for container traffic, one wonders if the major roads will start looking for domestic business involving a somewhat shorter haul to take up the unused capacity.

My main point being that, as everywhere else in the private sector, nothing is constant except change. And with the writing now clearly on the wall as regards the sustainablity of an economy too closely tied to petroleum (I doubt we'll see any further growth in domestic refinery capacity, for example) the time would seem auspicious for further innovation in both marketing and equipment. The history of the development of rail intermodal traffic is one of a continuous series of changes, mistakes and mismatches, but the same can be said of capitalism itself; that's just the way an economy grows.
Last edited by 2nd trick op on Sat Aug 22, 2009 5:40 pm, edited 1 time in total.
  by QB 52.32
 
Thanks, Mr. 2nd Trick Op, for your words of welcome.

Yeah, intermodal is one area of railroading providing a very visible marker of the dramatic changes the railroads have gone through during the past 40 years. It represents the regulatory, organizational, equipment, infrastructure, operational and marketing changes that have taken place to keep the industry relevant and, since the early 1990's, has provided an engine of growth and reversal of 70 years of market share decline. It also represents the bigger picture changes within the transportation industry, with the shifting towards a more-efficient intermodal transportation network (where each mode is utilized according to its economic strengths) meeting the needs of shifting national and global production and distribution.

Of course, arguably the biggest influence on intermodal, like all of freight railroading, has been the deregulation commencing in the late 1970's, which allowed the railroads pricing freedom, the ability to write individual contracts with its customers, and, the ability to freely enter/exit markets.

Organizationally, with the outside influences of deregulation and the superiority of trailer/container-based merchandise shipping for a whole host of reasons, railroads began to understand the importance and profit-potential of intermodal. Up until the 1980's many roads considered intermodal to be a "step-child", marginal and a nuisance, and, cannibalizing their existing carload traffic. With the new opportunities presented them in the '80's, railroads began to bring in strong marketing folks (many from the trucking industry), organized them so that the business' leadership had management over sales/marketing and operations with bottom-line responsibility, and, in a greater sense, as opportunity and profitability rose, afforded organizational status where there often was none.

On the equipment front, as you alluded to and as Mr. Cowford cogently put forth earlier in this thread, the industry has had to deal with the mismatch between trailer (container) lengths and lifecylces and those of the railcars upon which they are carried. Despite early railroad innovation like roadrailer and containers (like NYC's flexivan and one might argue, the PRR's use of LCL containers earlier in the century), the industry's need for universality in the interconnected world of railroading has played a big part of what has succeeded and when, as well as an overarching economic characteristic of attempting to maximize the amount of traffic carried on a per trainload basis (as do all modes with their vehicles). Also, one other important part of the change, as the industry's management has evolved to meet the needs inherent with the freedoms of deregulation, has been an astute awareness of its capital needs and rigorous management of its assets, which has shifted equipment innovation and ownership/management to 3rd parties, whether owned/operated cooperatively by multi-carriers, like TTX, or to shippers or outside interests. Lastly (and added via editing), probably the single biggest intermodal development, besides the market freedoms afforded with deregulation, is that of doublestack. Whether developed by SP or a steamship line, or both, I can't recall, it has provided the vehicle for the industry's participation in the huge upswing in (merchandise) imports and has subsequently morphed into a technology used to move domestic merchandise traffic with great productivity and excellant returns for the industry. Simple in concept by adding big gains in the amount of freight capacity per train, it provides excellant economic results for shippers and carriers alike.

On the infrastructure front, intermodal has played the role in providing an alternative system for more-efficiently moving merchandise traffic vs. switching-intensive operation and light-density lines. As railroads were deregulated and intermodal management became more-creative, the shift from smaller, circus-style terminals to larger mechanized hub terminals with well-managed, efficient trucking feeding traffic has been acknowledged as necessary to providing profitablity and growth. Beginning in the '80's with international traffic and accelerating in the '90's for domestic traffic, the need for routes cleared to 19'6" or 20'6" doublestack has predominated infrastructure initiatives.

Operationally, along with the acknowledgement that you can only make the kind of money to support re/investment in the business is with large mechanized hub terminals, also came the realization that on the linehaul side it had to be done in high-volume, dedicated and reliable (and oftentimes fast, too) intermodal trains/service.

And, lastly, on the marketing front, and pulling all of the above together, with marketing freedom in intermodal came management that responded to the opportunities inherent with that freedom. Like any business, the marketeers brought the concept of segmenting the marketplace into lines-of-business which could be organized by their individual characteristics and to bring to bear management of each line to respond to deficiencies, take advantage of opportunities, and provide service that met its needs, with the goal of the kind of profitability necessary for long-term success. On the market side, each carrier's intermodal position and business reflected their overall position with merchandise-oriented roads more-heavily involved and reliant on intermodal earlier on. As railroads have evolved during the deregulated era and during which time the overall economy has demanded more rigor, management and competition for the industry's lifeblood, capital, and railroad managements focused to meet those demands, like equipment, some/much of the market innovation has come from 3rd parties, with the railroads providing the basic wholesale linehaul (track, crews, power) while the 3rd parties provided the "retailing" end of the service, including +/- the sales/marketing; terminals; pick-up/delivery; trailers/containers/roadrailers; cars; and, overall management of the system. Of course, we have seen railroads provide innovative retailing (truck-like) initiatives like Triple Crown, Conrail Mercury (which is now NS's Thoroughbred Direct), and CSX's CMX which is now CSX Intermodal, to name a few.

To me, it makes sense. Much has been driven by outside influences: government promotion/regulation, larger economic changes, and trends in our larger transportation system, but also from the economics inherent in the mode, industry and this particular railroad technology. How the railroads have managed things seems to fit with the organic nature of organizations responding to the world in which they live: for the industry, focus upon rationalization early on, but now growth, and productivity; adapting to deregulation and larger market forces; and, becoming very focused upon capital requirements and asset management. As we all know, nothing is ever cast in stone and there's always plenty of threats (and opportunities) on the horizon, but, I'd sure take these past 25-30 years over the previous 20. I can't help but marvel at the duration, adaptability and relevance of this 185 year old technology!
  by Cowford
 
There has been a number of moves by the railroads themselves to move tward open access,

1.The MM&A in Maine wants to sell the track to the State.
2.CSX wants to sell bridges and track in Commuter Rail Teritory to the states (Mass and Other States
3. Almost all of the railroads in VT are owned by the state dot
4.There are a number of port and ecommiocal developmental authritys that own railroads (Austin,Akron,Pittsburgh)
5. The state of NC and the City of Cincy own hundreds of miles of track in there regions
All these deals usauly involve a lease back arangement where the railroad leases back the railroad. With the exception of Pan Am prostesting a short line lease back in NH (Millford& Bennington) things run smoothly and the state helps out with funds for track improvment from time to time
Yes, Thanks for the welcome, Op. Just wanted to comment on the above quote... these examples don't reflect a migration toward open access, but rather a move toward public ownership of otherwise economically unviable/non-strategic trackage. In such cases, the state/public authority in question would contract with a designated operator and that operator would have sole authority to serve on-line industries. For instance, MMA is not proposing that the state buy the property and open it up to Pan Am; they are attempting to have the state to take over the lines (or just assume its maintenance costs) to help keep themselves stay solvent while they continue to play fantasy choo-choo on the ex-CP line, waiting for business that will never develop (sorry, I got carried away :P ) With CSX, they would not give up their sole freight rights. With VT, the state took over the remnants of the old Rutland. Industry is "closed" on that line to VRS, just like any other. Another example: BM sold much of their commuter trackage to MBTA... but retain trackage rights and sole authority for freight service.
  by FormD
 
No but publicy owned tracks means that if someone wants to push it in the courts could be open access has the goverment can not limited a public highway to one carrier. Can the NJ turnpike say only JB hunt can run on its road.
  by QB 52.32
 
2nd trick op wrote:And if the present economic downturn proves to have established a "high-water mark" for container traffic, one wonders if the major roads will start looking for domestic business involving a somewhat shorter haul to take up the unused capacity.
I'd imagine that the railroads will continue to focus upon their capacity improvements in existing intermodal lanes and new capacity/clearance initiatives in some new corridors like CSX's National Corridor from the Carolinas to Ohio and NS's Crescent Corridor from New Orleans/Memphis up the eastern seaboard to New York/New England. I believe that they're watching and waiting to see what will happen with the economy, government regulation and promotion, energy prices, and changes, for good or bad, within the trucking industry during the next couple of years. I believe they'll be simultaneously responding to their domestic intermodal partners needs/new opportunities within their existing/planned domestic-doublestack-oriented networks including shorter-hauls (depending upon the particular rail carrier), and, perhaps will work to segment/price to reach more-distant markets via highway from their existing terminals in an attempt to maintain/build volume through their existing/planned networks.

From what I have seen, it sounds as though domestic traffic highway-to-intermodal conversion has been taking place during this recession and has helped offset and soften the impact of a 25% decline in international volume (but that, to some degree, is rail carrier-specific).
  by Cowford
 
No but publicy owned tracks means that if someone wants to push it in the courts could be open access has the goverment can not limited a public highway to one carrier. Can the NJ turnpike say only JB hunt can run on its road.
I know of no publicly-owned trackage that has been designated for open-access, and comparison with a turpike doesn't wash - a toll road is, by design, an open access system. Once a state retains ownership of a line, they will contract with a designated operator. Take, for example, the former MEC Rockland branch in Maine. In the 90s, the line was operated by Maine Coast Railroad under (a ten year?) lease with the state. In 2000, the concession was transferred to Maine Eastern. I believe the Maine Coast chose not to continue operations, but am not sure. Regardless, there are stipulations in these leases that provide protection of restricted access for the operator. It's doubtful that many operators would bid on a concession if the state reserved the right to open up the line to competition at any time. And keep in mind, the lines that are falling into government possession are not exactly flush with traffic. It's not like any of the lines have 8 million ton/year coal-fired plants that carriers are salivating over. Opening up, say, Maine's MMA trackage in question would be an absolute disaster... kinda like adding water to a Coors Light and expecting it to enhance the beer's flavor.
  by HoggerKen
 
Why would a railroad look for domestic biz in a box owned by a steamship line. Those guys are constantly looking for backhauls. And they are not leashed by a single carrier or terminal, i.e. flexibility. The ratio of company boxes to Steamship are probably 1:10 in the grand schemes of things. (I don't limit my view to NE U.S. either, but nationwide carriage as well as Canada.)
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