KEN PATRICK wrote:transit time is a major cost factor. i continue to be amazed at the railroad thinking that transit is not as important as pricing.think of the product value stuck for 14 days in a pipeline when the railroad has already delivered similar product.
Its not as simple as pricing, or transit time. Its reliability, costs and transit time in that order that answer the question "How do we get out crude?" 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.
KEN PATRICK wrote:as i poste in the lac megantic disaster, mma was penny wise in handling crude. they should have done everything to insure a rapid transit. new power, new trackage and new hos rules.
I can't agree more that oil on MM&A should have been prioritized. However, you'll find it was prioritized. There are no railroads in North America that aren't doing their absolute best to expedite CBR. They know its importance and value.
I know you've run the numbers and estimate MM&A had a revenue of roughly $300K for each oil train, and expect that that money would be spent on new power, track and HOS rules. You need to rembember MM&A had shaky books prior to oil, and was arguably losing money. So some of the oil revenue was used up just covering other losses. Then there is the expense of at least 3 crews each way to move an oil train and the fuel burned. Overhead operation, no terminal/switching costs, oil was high margin business. Say they managed to net $250K per train. A New locomotive costs $2.5 Million, they would have to move 10 trains to buy a single new locomotive. It takes 3 new locomotives to move a train, so the first 30 unit crude trains would have been needed to purchase enough new power to handle the CBR business.
How about track? The Downeaster upgrades which brought freight speeds to 40mph cost over $1M/mile. MM&A's line from Montreal to Brownville was about 220 miles. Figure they had already replaced a lot of rail, so cut the track costs to $500K/mile then go further and say the Moosehead is in good shape (not a big stretch) and cut it in half again, we'll say $250K/mile. 250Kx220 miles=$55Million. Thats equal to the profit from about 220 oil trains. I can tell you, they didn't run nearly enough needed to upgrade the whole of the CP main from Brownville Jct to St Jean. Maybe they ran 30 unit trains, its business and you can't simply stockpile money buy locomotives when other assets/operations are bleeding money. They simply didn't have the money to make the needed upgrades.
And HOS, how the hell are they supposed to change this? Its a federal law, not a company policy. MM&A has just about 0% impact on HOS rules. Thats simply the dumbest statement I've read here, and I've made some dumb statements...
KEN PATRICK wrote:par has an opportunity to capture some of the cn irving business. i'm certain ns would supply funding for a cbr plan. there's 4000+ cars/day volume to go after.
Pan Am's cost to upgrade the Freight Main to 25mph from Keag to existing good track at CPF 185 is better than $100M. That is again a lot of oil trains they would need to run to make it worthwhile. There is also in no way 4000 cars/day to go after. The crude rack in Saint John has a capacity (peak) of 192 cars. This is if NBSR switches are perfectly timed, and the weather cooperates (the cold slows unloading). Reality says they can unload around 160cars/day at the rack. Transitive property would state that if there is 160 car capacity at the refinery there is in fact 160 cars/day in volume to pursue.
Finally, I doubt you will see NS invest in a PAR CBR deal, considering all oil previously has run on a CSX-PAR routing...I also don't think you will see CSX invest. Both big eastern roads are plenty busy with CBR projects elsewhere on the east coast, and NS is power short, requiring money be spent there. Compared with Delaware/NJ/Pennsy, Irving-SJ is small potatoes, not going to get the big boys interest.