Return of Crude to PAR?

KEN PATRICK wrote: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

I fail to see the similarity between airplanes and a locomotive. For international flights that require more than 12 hours of flight time, air carriers must establish rest periods and provide adequate sleeping facilities outside of the cockpit for in-flight rest. Last time I checked freights don't have sleeping births.

Thank god you don't accept the FRA's position, we were getting worried.

KEN PATRICK wrote: 'safety ties' are 3 per 40'. plugged recycled- about $25 installed. best source are transit systems who overkill the rail structure.

3 ties in 40'? Hmm...good luck with that one. Thats 396 ties a mile, and it doesn't even put 2 good ties under each rail joint. Which means a surfacing isn't going to hold because the rail joints are going to get beat into the ground. Besides the fact that a used tie costs more than $25, no one is going to put used in ties in the ground unless their building a flower bed.

KEN PATRICK wrote:now think of the financing that arises from 400 cars/day.

I've said multiple times Ken, the rack at Saint John handles MAXIMUM 192 CARS/DAY. It doesn't matter if you deliver 193 cars or 400 cars a day, they can only unload 192 so the rest sit and wait. If you repeat the process and deliver a surplus the next day you wind up with more stored cars. There is a split in the difference between refining capacity and railcar capacity, you NEED TO UNDERSTAND THAT. Talking about 400 cars/day is NOT REALISTIC. Irving isn't going to order 400/day because they are incapable of unloading them.

KEN PATRICK wrote: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

Reportedly, Pan Am (and likely MM&A) had a per train price for unit moves. They didn't receive and equal share of the money by mile, they got a flat price. Why? Several reasons, key being Pan Am was using BNSF power and that came off the top, and neither PAR or MM&A originated/terminated the train, which means their share was smaller than that of the end road who has to incure terminal/switching costs. It's been said here that Pan Am was grossing $300K/train, MM&A was likely in the same ballpark. So throw your numbers out.

Why couldn't MM&A finance 20M over 10 years? Had you seen the property, they weren't running trains less often and providing poor service because it was fun. They weren't using old power because it was fun. They didn't paint locomotives for 10 years because it was fun. They didn't cut crews because it was fun. They did it because the operation had shaky financials. You can't simply make nothing for 10 years, then put 2 months of profits on the board and walk into bank and ask for a $20M loan when you have weak financials and a pretty well filled folder of other loans to repay. As we found out in Megantic MM&A was loaned up and tapped out. They owed the FRA more on a loan from 2004 than the bankrupt road sold for, and they had many more creditors. No one was going to write a loan for MM&A when they looked at the books and see more debt than net value.

great posts. thank you. my thinking is that irving should have been leveraged by mma. leveraged to be a co-signer on the debt. leveraged with rail world stock, board positions. set up pricing/delivery so irving would build new off-loading infrastructure to handle the 400 cars/day. now as for pas. i would set pricing and schedules to arrive at a balance with irving increasing off-loading capacity. pas can certainly borrow money for equipment and track with an irving contract. ken patrick

From an armchair, Ken, Pan Am (or MM&A) has leverage, but, in reality their relatively small overhead-carrier position gives them very little leverage amongst the competitive permutations available to Irving, whether for pricing or service, or, an ownership position.

qb-i disagree . irving has two options. cn and pas. mma redux is tainted. water is too slow. pas needs to present irving with a believable plan ( credibility). induce irving to contract for 400 cars/day, step back and watch all the players get on board. pas would need to offer guarantees. irving would need to increase it's offloading rate. an opportunity to generate this amount of rail traffic will create great divisions. pas could borrow enough to create a class 1 rail corridor from mechanicville to st. john. nothing is impossible when you have cash flow. no longer any need to chase marginal intermodal
( except potato maybe) or sweat out paper. probably need some new faces in pas management to assure irving there will be no return to current practices. ken patrick

KEN PATRICK wrote:qb-i disagree . irving has two options. cn and pas. mma redux is tainted. water is too slow. pas needs to present irving with a believable plan ( credibility). induce irving to contract for 400 cars/day, step back and watch all the players get on board. pas would need to offer guarantees. irving would need to increase it's offloading rate. an opportunity to generate this amount of rail traffic will create great divisions. pas could borrow enough to create a class 1 rail corridor from mechanicville to st. john. nothing is impossible when you have cash flow. no longer any need to chase marginal intermodal
( except potato maybe) or sweat out paper. probably need some new faces in pas management to assure irving there will be no return to current practices. ken patrick

400 cars per day means, in net result, 800 cars per day traversing the bottleneck between Lowell and Gardner in addition to dispatching around MBTA commuter rail and the daily freight movements.

Ken,

Why do you keep proposing 400/cars per day when Irving can only accomodate 192? Are you deliberately trying to provoke anger and frustration? Why are you ignoring what others have said (KSmitty in particular of course, and to include myself)?

Abe Froman wrote:400 cars per day means, in net result, 800 cars per day traversing the bottleneck between Lowell and Gardner in addition to dispatching around MBTA commuter rail and the daily freight movements.

Unrealistic. I agree. Even with close to 100% double tracking between Ayer and Waterville there still might not be enough space.

He's got this number of 400/day from refinery capacity. Irving can refine 400 carloads of oil a day. But just because they can, doesn't mean they will, production is of course dependent on every economic variable. He is also disregarding the fact that the energy market is quite volatile, and just because Bakken is cheaper now doesn't mean it will have favorable economics in 6 months. Irving would be foolish to sign a long term contract, anyone in the petroleum's market would be foolish to. Prices are constantly up and down, hell they'd go left and right if they could.

He is hung up on water being too slow, disregarding the fact that for its history Irving has managed to do just fine bringing in the bulk of its crude by sea. This practice continues today, even with the CN oil deliveries, a good chunk of oil is seaborne.

He underestimates the cost per mile of railroad by amounts so unbelievable it isn't funny. 50K/mile doesn't begin to do enough good to be worth it, but that was his suggestion for adequate.

He also completely disregards proven railroad economics with his constant campaigning against intermodal.

His view is different than ours and seems it will always be. As QB put it, "From an armchair, Ken, Pan Am (or MM&A) has leverage, but, in reality their relatively small overhead-carrier position gives them very little leverage amongst the competitive permutations available to Irving, whether for pricing or service, or, an ownership position."

my posts reflect the market opportunity for pas. rather than conjecture as the other posts reflect, my belief is that given cost-based transportation numbers , irving would add off-loading capacity. many posters herein seem to avoid thinking about time costs of alternatives, like water or pipelines. i recognize that railroad thinking always avoids the cost of slowness. slowness to railroads is a security blanket. no need to push the envelope. let cars sit because it's easy. tie down trains rather than provide people to keep the train moving. after all, the railroad still sends out the same invoice whether your car moves in 5 days or 30 days. what i'm proposing is that pas develop a plan, fund it and get a long-term put-or-pay contract from irving. dangle it in front of the bakken railroads to get equipment and supportive divisions. do an all-out track rehab at $9.46/ft ( $50k mile). let irving secure a long-term crude supplier with a put-or-pay contract.
lastly intermodal is marginal because it must chase truck pricing. it is slower.goes more miles than truck. look at class i profits- all from bulk. coal is the best. ken patrick

KEN PATRICK » Sun Mar 09, 2014 12:30 pm
do an all-out track rehab at $9.46/ft ( $50k mile).

While there might be some debate over your figures, one factor -- literally -- you leave unmentioned is the number of miles needing rehab and the effect of that figure's function as a cost-multiplier. As the number of places to the left of the decimal point increases, the likelihood of the event decreases.

lastly intermodal is marginal because it must chase truck pricing. it is slower.goes more miles than truck. look at class i profits- all from bulk. coal is the best.

You've been both quick and consistent in your critiques of "myopic" mindset. Whatever your feelings about IM may be, those feelings tend not to be shared by Class 1 executives who seem in competition with one another to not only provide service but also to provide a history of good service at a distinct cost savings to shippers. You may see coal as "the best," but its future is even more uncertain than many other commodities. Good chess players and good railroad leaders try to anticipate future moves: theirs and those of their current customers, not to mention both fading and future market opportunities.

I visited Saint John last summer. The ferry to and from Digby, Nova Scotia sails right past Irving's Canaport terminal and the nearby refinery. At one point I counted TEN oil tankers standing offshore (that I could see - there may well have been more). I'm not sure Irving has any problem with the speed of water transport, and they have the facilities for it. Seems to me rail is in fact a very small player in the overall supply to their huge and impressive operation.

jmwhite et al. how many of the tankers were waiting to be loaded with product? irving takes in 400k bbls. obviously ships out 400k. how? don't know of any railcars of finished product. can't be trucked. shipped to the gulf refineries? to europe? maybe a new opportunity for pas tto move finished products ? ken patrick

Most finished product is shipped by truck thru the northeast US by another Irving firm RST and by Irving tanker trucks themselves also by smaller feeder tanker ships at its east side terminal location. the same location where the new discharge racks are for unloading tank cars.

Canaport will be much busier in years to come when the new pipeline comes, there they will ship refined alberta oil from the refinery to places by tanker infact the floating pipeline is already being built as we speak and land has already been cleared for a new tank farm storage area

Hope this info helps brings some insight into this thread from a local perspective

I thought they also sent out refined products by barge.