General Discussion

gabe:

  Thank you for stating so eloquently what I have been attempting to convey, via other forums, for some time.  Urban sprawl v. regentrification is one of the areas I try to do a lot of work in.  You just hit one of the bigger problems with trying to encourage regentrification rather than simply pushing developments out to the edge of the city in an endless sprawl that leaves high-crime areas, lower property values, and longer commutes in its wake.

In some way the problem is even worse than you state--even if can managed to obatin an agreement to assume environmental liability, Superfund liability can pierce that agreement.  Of course, one can purchase insurance for such liability to reduce expenses to a sum-certain.  But, it is very expensive--less expensive than cutting down a bunch of trees or bulldozing some corn field on the edge of town.

Sorry for the soap box, you just managed to trigger one of my few political beliefs.

Gabe

Proving once again, as my high school calculus teacher, the late Paul F. Brindisi - a man who had extennsive and cited the value of 'experience in industry' - used to say: "Fools rush in where angels fear to tread . . . ", here I go again*:

Gabe, are you aware of / have you considered the effect that 'urban growth boundaries' as imposed by zoning ordinances/ laws - which are intended to have the effect of confining developemnt to closer in to the urban core, and which thereby also raise the demand for and value of that land, etc. - may have on resolving/ mitigating that problem ? 

However, I am aware of only 1 large area/ city that has adopted them so far - generally referred to as Multnomah County = Portland, Oregon.  Also, that as such, clearly that is the exception to the more general development patterns and rules.

*I am fully aware of a certain unusual and improbable geographical coincidence inherent in this question - but sorry, that's unavoidable if I am to be able to ask it.

- Paul North.

 Thanks, Paul.  I respect your knowledge and experience, and, your contributions to my knowledge base.

It's easy to divert into example for the sake of the example.  The question to me is whether the example unreasonably diverts attention from a more important topic.  If the topic of whether rail market share of intermodal is increasing is uninteresting to us, and it's more interesting to talk about brownfield sites, let's go start a discussion about that.  But if the point is to talk about intermodal market share, then a brownfield redevelopment discussion is at best a minor point in that larger discussion.  We can note it as a constraint in about one sentence, and move on.  However, if someone wants to use expertise to dispute my point that brownfield sites are not a constraint, I welcome that -- if it's really expertise -- because then I learn something I didn't know.  Lack of expertise posing as expertise is disingenuous. 

However, if we don't care about the larger discussion, let me know -- that's all I ask.  I'll move on.  I participate in this forum to learn more about rail issues and practices I'm interested in and to improve my performance at my rail job for the real debates I have to have with management, elected officials, shippers, and agencies.  When it stops being that and starts being a collection of people claiming that one datum establishes a trend line, it stops being a useful place for me to visit.  (I don't do well with that kind of interjection from my staff in meetings, either.  And I don't think they like me very much, but they do get a lot of work done anyway.)

RWM

RWM -

Well, I'm kind of wondering how we came to be here, too, at a couple of different levels.  You said that "The question to me is whether the example unreasonably diverts attention from a more important topic."  Fair enough - from the self-discipline editorial function to keep a thead on topic and from going random or anarchistic*, I can readily see what you mean- otherwise, it becomes just a collection of random messages.

[* . . . must  . . . resist . . . writing . . . . "rogue" . . .  ]

But I just looked back and found that my 1st post = 2nd one under this thread was this - and had no mention of 'brownfields':

"He noted that intermodal is also more attractive to shippers because it’s greener—as it takes about a third less fuel than shipping by truck alone."  Do the shippers really even care about either of those ?  As long as the service meets their needs, and the price and time are competitive ?

Then I came back in the middle of thread Page 2 and 'brownfields' had come up, but as more than merely being noted as "a constraint in about one sentence"- by then it was the subject of 5 posts by 3 different members.  So it seemed to have become - or at least was gaining traction as - a significant sub-topic.  Hence my post - which again was intended to be informative, not challenging - seemed to be relevant to where we were at then.  But in looking back at it - yeah, I see where that post may have seemed to have divert the thread from brownfields in the limited context of affecting rail access for intermodal, to just an example of a brownfield successfully redeveloped - even though the rail access is the defining characteristic of that one.  So enough on that - I think we've both had about enough of this now.

Your last line about your staff reminds me of a remark supposedly attributed to President Theodore Roosevelt:

"The world will never love us. They respect us - they might even grow to fear us. But they will never love us . . . "  (From the 1975 movie The Wind and the Lion , with Brian Keith as TR - see: http://www.imdb.com/title/tt0073906/ )

- Paul North.

 

 

Seems appropriate about now ...

Does anyone have a grave exhumation icon?  For restarting this topic not rehashing the dead horse.

greyhounds:

Paul_D_North_Jr:

[snip] "One reason for the growing popularity of intermodal is the depressed state of the trucking industry, plagued by excess capacity and aggressive pricing, Longbow Research analyst Lee Klaskow told Reuters."  Huh ?  Wouldn't those factors tend to keep traffic on trucks and not intermodal ? 

Now "excess capacity" is the same as an increase in 'supply', which in classic economic theory - and all else remaining unchanged - leads to price cuts, which is "aggressive pricing".  So far, so good.  We would also expect that with price cuts, demand would shift in response and the volume/ market share of the price-cutter would increase (i.e., same as Wal-Mart's retail business model) - again, all else being equal.  But this guy is telling us that the opposite is happening - that despite the trucking induustry's aggressive pricing, intermodal's market share is increasing.  That does not comport with Mr. Smith's notions - cut prices and lose market share ?!?  And the nuances I referred to are such things as the 'no-show'  truckers.  I don't remember that being a part of Econ 101 or 102 - that if you take advantage of a depressed market price (not a 'loss-leader' or other 'quick buck' situation), the result is going to be less supply ?!? 

Exactly.  At a lower price there will be less supply.  That's the supply curve.  That's what's happening in trucking.  The price went down and trucks are being pulled from the market.

The truckers leaving the market are being forced out because they can't cover their cost.  The "Zombie" thing still leaves too many trucks chasing too little freight, but eventually they face a cost hurdle they can't clear, and then they're gone.

[snip; emphasis added - PDN]

greyhounds and jeaton, thanks for the repsonses and insights. 

I was a little embarassed at first after reading the post above - sure, lower prices lead to less supply and capacity - but only for about 5 seconds; then I realized the following:

- How do you tell 'cause' from 'effect' ?  Do low prices cause a drop in supply - as greyhounds says ?  Or, are low prices caused by a decrease in demand, which concurrently causes an increase in supply, which leads to a decrease in prices ?  Since we're in a recession, the destabilizing force from the previous supply-price equilibrium was a decrease in demand due to less economc activity, which results in a temporary excess of supply and lower prices, as I contend.

- Perhaps the analyst quoted in the article needs to learn from Mr. greyhounds above - that "At a lower price there will be less supply", because he's saying that the industry is "plagued by excess capacity", which is the exact opposite.  Note that the quote is not qualified as applying to a 'temporary' condition;

-  Nevertheless, I understand and can harmonize the apparent inconsistency between too many trucks chasing too little freight, and  At a lower price there will be less supply - the former is just a transient dislocation, the latter reflects the new reality = longer-term equilibirum, at least until the next fundamental change in makret conditions.  The scenario outlined by jeaton is of like kind - be careful to identify exactly what you're looking at and what conclusions you draw, because any one event or sequence can be misleading . . . I still think you guys make more sense than that analyst, though. 

- Paul North.

Railway Man:

.  If the topic of whether rail market share of intermodal is increasing is uninteresting to us, and it's more interesting to talk about brownfield sites, let's go start a discussion about that.  But if the point is to talk about intermodal market share, then a brownfield redevelopment discussion is at best a minor point in that larger discussion.  We can note it as a constraint in about one sentence, and move on. 

RWM

      I can see the outline of something here that we've run into before.  That being, a subject within a thread that, for better or worse, overtakes (sometimes hijacks) a thread.  Sometimes, it steers a thread to new and exciting destinations.  Sometimes, no doubt, it can kill a thread dead as a doornail.  A lot of times, I find myself wishing to transplant a subject to a new thread.  The few times I've tried, the results were so-so.  Such is the nature of internet forums.

    That being said, I probably should step up and take the blame for being the first on this thread to lead it astray.  Suffice to say, that the green issue is something pretty hot in my industry right now. (Building materials.)  Let's just say, the discussion hit one of my hot buttons.

    Now, back to our regularly scheduled program.

    How will an increase in domestic intermodal traffic nationwide affect those of us in the railroad outback areas like S.D.?  I envision more origination/destination pairs between big places to help out with congestion and perhaps lower consumer prices.  What about those off the beaten path?

Murphy Siding:

    That being said, I probably should step up and take the blame for being the first on this thread to lead it astray.  Suffice to say, that the green issue is something pretty hot in my industry right now. (Building materials.)  Let's just say, the discussion hit one of my hot buttons.

I think that it may be true that the 'green' thing may have been in there but now that I read my posts through I believe that I'll take the blame for knocking it right into the 'brownfield' stuff. Too bad I can't delete these things---empty the posts?

 

Murphy Siding:

    How will an increase in domestic intermodal traffic nationwide affect those of us in the railroad outback areas like S.D.?  I envision more origination/destination pairs between big places to help out with congestion and perhaps lower consumer prices.  What about those off the beaten path?

I'm glad you ask that question.  It's a good one.

You live in a good freight market.  The Sioux Falls and Sioux City areas produce a lot.  They also consume.  I'll just bet you folks out there buy tires for your cars, replace your kitichen appliances, acquire new carpeting, and everything.  I'll wager you even have bananas and coffee in your grocery stores.  You probably even have UPS service.  I'm pretty sure of that last fact because we hauled Sioux Falls UPS loads on the ICG.  (After we left South Dakota they went to Sioux City and were trucked into Sioux Falls.) 

None of this stuff is produced locally and it all must be trucked in because no railroad has an intermodal terminal in the area.  It's a good question as to why they don't.  The production and consumption mean that there are revenue loads both in and out for the IM equipment.  Empty, non-revenue miles, they are a bad thing. 

The rail lines to the area aren't capacity constrained.  CN's light density Iowa line is the prime example.  I don't know.  I can't figure it out.  Why the railroads just walk away from significant additional revenue that can be had for very little additional cost is beyond me.  Why they just conceed these markets to the truckers is a question I can't answer.

There are exceptions.  The FEC is only 360 miles long.  But they've shown a willingness to put a new IM terminal in place between the ends of that 360 miles if it will make 'em a buck.  (They've opened two new IM terminals in that 360 miles in the past few years.)

NS also seems to have a pretty good grasp on the market situation.

Last year and this year I participated in taking two marketing proposals to Class 1's.  One carrier simply didn't believe the freight existed, even though they used to haul it. (I am serious and truthful when I say that.) We had the volumes by destination, the truck rates, the seasonality, everything.  It's length of haul was over 2,000 miles.  We had the backhaul covered.

Maybe they thought we were just lightweights with no chance of success?   Well, they're still not hauling the freight.

 The telling question they asked was:  "When does this get to be a trainload?"  I asked:  "What's a trainload?"  He said 6,000 feet.  Well the volume was never going to be a 6,000 foot double stack trainload.  It was a good chunk of long haul freight but they only wanted solid 6,000 foot trainloads.  If they stay with that attitude they're going to leave a lot of profit on the table.  They didn't talk money, they only talked train length.  Go figure.  If they only want 6,000 foot IM trains, Sioux Falls is SOL.

The other proposal was on that light desnity CN Iowa line.  They claimed their haul was too short.  Again, they weren't talking about money.  This time it was about miles.  Who cares!  We wanted to charter a train.  They weren't interested, the haul was too short.   The freight was going 1,000 miles but thier part of the haul was too short.  Who cares about your length of haul, talk money not miles.  How much do you want for this? 

 Again, maybe they just figured I was a lightweight bother to be gotten shed of.

Until the attitudes of SOME railroads change, Sioux Falls is going to be left out.   For reasons that I do not begin to understand.    

   

I don't follow these posts on a daily basis; it's more like weekly, so I've just now spent the last half hour following a very interesting thread.  Thanks all, especially RWM, for teaching me a LOT about the brownfield issue.  I mean this - okay so the topic got hijacked, but this was all new to me and I did appreciate reading it. 

First, for those of you who may not recognize me (I don't post here very often), my credentials are 15 years in the industry, mostly spent marketing intermodal.  For the most part, I would hand out A's and B's to the comments already made, but there are a couple of points I'd like to add.

a)  I'm not sure why brownfields along right-of-ways were even mentioned here.  The whole point of intermodal is to connect shippers and receivers who aren't rail served.  (Although I have often wondered if the trusty old boxcar couldn't be used more effectively than containers for at least some intermodal freight.  Since we're already destuffing containers on the west coast...  topic for another thread.)

b)  For "green" (an unfortunate term as it conjures up visions of tree-hugging vegetarians) substitute "realization that from here on out, oil demand growth is going to outpace supply, while some form of international pricing scheme to charge for the privelege of spewing carbon into the air is inevitable".  Simply put, it's becoming obvious that we're in they dying days of the "cheap fossil fuel" economy of the 20th century, and the 21st century economy is going to be structured quite differently.  Any good company wants to be out in front of that.

3.  I love the comment on BNSF's marketing department not working too hard.  Tell me about it.  Starting in the early '90's, we had to beat business off with a stick.  I'm serious.  Even at the railroads that are "best" at it, intermodal is the most marginal/least profitable traffic.  And we all know that railroads are capital hogs.  Every year, you can only justify X hundred million in new capital investment.  And naturally intermodal is going to get what's left over after the more profitable lines of business have been looked after.  In a capital-constrained world, every Chicago - Oklahoma City load diverts a container, as well as a parking spot and lift at Chicago, that could otherwise be used for a more profitable LA load.  And don't forget that ATSF/BNSF had to build two new intermodal terminals in Chicago - on brownfield sites by the way (darn, there we go again, sorry!) - in the last 20 years just to keep up with west coast demand.  It's that simple - as long as your longest-haul lanes keep growing fast enough to absorb your available capital, everything else is going to be ignored.  Boringest marketing job on the planet.

4. Which leads me to Sioux Falls.  Lovely little city; my in-laws live there.  It consumes, it produces.  Combined with Sioux City, Yankton, other towns in the area, it seems like a decent freight market.  Yet it should be no mystery why there's no intermodal service.  Let me count the ways:

1) Sioux Falls to where exactly?  What's the 'lane'?  And what's the length of rail haul for the local carrier?  Sioux Falls is to the western roads what Columbus or Cincinnati are to the eastern roads.

2) Where do the inbound consumer goods come from?  Is it the same place as the outbound loads are going, or am I going to have to perform some crazy triangular juggling act to balance the equipment without moving empties all over the place?  And if, as I suspect, the Sioux retailers are stocking their stores from no farther away than regional DCs in Omaha or the Twin Cities, how am I going to compete with trucks on such a short length of haul?

3) What does the region produce?  Are those products a natural fit for the high-cube dry boxes best suited for consumer goods?  Or are they better suited for overseas containers, refrigerated units, or hopper cars?

4) Is the existing train service in the lane identified in item 1 truck competitive?  Can you move a load to Minneapolis in 4-6 hours, at the right time of day?  If I put cars and containers in service on the existing train in that lane, how many turns would the equipment make and how much revenue will I earn on it in a month?

5) How concentrated is the customer base?  How many shippers and receivers am I going to have to sell in order to aggregate enough volume to justify the cost of a minimal terminal and lift? (Let alone a new train start.)

6) Even if there's attractive long-haul freight - let's say to and from the west coast - is there enough to build full blocks, or even carloads, to the same two or three places every day, or am I going to have to deal with one for here, two for there, etc.?  Are we talking about reworking these loads at an already congested intermodal ramp in Minneapolis or KC?

There's a company called Railrunner that tried for years to sell the concept of 'feeder' intermodal service to places like Sioux Falls (in fact, that was one place they looked at specifically).  Their approach was to use carless technology to virtually eliminate the cost of terminal and lift at the small market end, and connect into an existing big city intermodal ramp, kind of like the little regional airline services connecting into the major air hubs.  I explored the idea with them when I was with one of the big roads and later as a consultant.  The bottom line is that intermodal creams truck when it's simple, balanced, and long haul.  Start reducing length of haul and throwing in complexities and that advantage goes out the window faster than you can say "empty repositioning". 

Having said all that, around the time oil prices were peaking before the recession, a buddy of mine at CN told me they were starting to seriously consider all sorts of shorthaul, oddball stuff we would have laughed at when I was still there only a couple of years earlier.  In my opinion, the double whammy of oil scarcity and carbon pricing are going to revolutionize the transportation industry well within most of our lifetimes, in much the same way the interstate highway system (built with billions of government dollars and given away to drivers for free, don't forget), did in the '50's and 60's.  But probably more so.  If you don't believe me, ask Warren Buffet.  Then go out and find yourself a nice 10 or 20-acre brownfield site along a railroad in Sioux Falls to buy and hold. 

Both Greyhounds and CNSF make some good points here about the IMS possibilites/disadvantages for an area like western Iowa/South Dakota.  I can understand the points CNSF is making but yet at the same time I, too, am perplexed (not to mention bloody disappointed) at CN's seeming unwillingness to experiment with intermodal service on the former IC/ICG/CC Iowa Division mainline.  I believe that there are some exciting possibilities there and this would be a great opportunity for the new Railmate technology to have its mettle tested.

This has been a great thread. Thanks to all for taking us to school on railroading's business end. It really helps me to understand the "why" behind what I observe happening on the railroad outside my window every day. Some of the questions that get asked and answered are ones that I have wondered about for years.

George

Thanks for the information guys--it helps in understanding the whole thing better---can anyone suggest some good sites to keep up on this issue?

About a year ago someone (perhaps Greyhound) discussed TOFC out of the beef plant at Dakota City NE, which is the Sioux City area.  My impression is that it was a eastbound daily train on what is now the CN.  It was ordered ended by the ICC.. 

That plant is still there, producing more than ever; but the product is now boxed beef.  It moves to both the east and west coasts by refer trucks.   Would that not be an attractive market for the railroads?   Obviously, something is restraining them.  Is the problem that for the CN this is only a haul as far as Chicago? 

For the westbound meat, the production complex is on a BNSF secondary line that connects to one of their east/west lines at Lincoln.  You could get single railroad service clear into the LA basin. 

Perhaps the lack of a backhaul is the basic problem? 

 

CNSF:

[snip] 

3.  . . . Even at the railroads that are "best" at it, intermodal is the most marginal/least profitable traffic. . . . In a capital-constrained world, every Chicago - Oklahoma City load diverts a container, as well as a parking spot and lift at Chicago, that could otherwise be used for a more profitable LA load. . . . It's that simple - as long as your longest-haul lanes keep growing fast enough to absorb your available capital, everything else is going to be ignored. . . .

[snip] 

 4. [snip] 6)  . . . Are we talking about reworking these loads at an already congested intermodal ramp in Minneapolis or KC?

[snip]

CNSF and greyhounds, thanks again for sharing your critical insights and commentary.  This is kind of a 'University of the Internet' . . . .

The one thought I had to contribute on this is related to the above 2 quotes, but subtly different:  Would any container or block or even a train heading to/from Sioux Falls be using a 'slot' in or on any portion of a lane that is already capacity-constrained ?  (The same question could be asked of the terminal at the 'other' end, too, as CNSF did above.)  If so, then the reluctance to serve that market is more understandable; if not, then it's not so much.

Since CNSF mentioned the usual intermodal conundrum of being most marginal/ least profitable traffic, it bears pointing out yet again that the 'metric' that the railroad ought to be considering - which they apparently are not, per greyhounds - is not the number of trains, nor the number of loads, nor the length of the haul, nor even the gross revenue from each load.  Instead, the most important number is maximizing the marginal net revenue = profit that will be gained and lost from each such load that is under consideration for being added - or dropped, if that is necessary to carry the other load.  

To illustrate this by using some invented numbers - for the rail-haul segment only, i.e., not including the drays at each end - for an example:  A LA-Chicago container may garner, say - $3,300 in gross revenue = 2,200 miles at $1.50 per mile - and bring 10 % of that or about $330 down to the bottom line; total costs are about $1.35 per mile = $2,970.  But suppose the Sioux Falls to Chicago move - about 476 'straight-line' miles, so call it 500 miles - can get $2.00 per mile = $1,000 because there's less rail and truck competition.  And further suppose that the total costs are about the same $1.35 per mile [not realistic, I know, but bear with me here] = $675; then the marginal profit on that move is $325, or 32 %.

Strictly speaking, since the $330 profit on the LA-Chicago move is just slightly higher than the $325 for the Sioux Falls-Chicago move, the railroad might be justified in staying with then longer haul.  But from the perspectives of profitability %, less main line and likely less equipment assets needed to be involved, deployed, utilized, or committed to the Sioux Falls traffic, with less exposure to things going wrong over that shorter distance and for a shorter time, and hence a much greater rate of return - then any practical and economic-based decision would choose the Sioux Falls move over the LA-Chicago one.  Even though the latter is longer-distance and has a larger gross revenue, in theory none of that matters to the bottom line.  Although that would leave the western 3/4 of the run lacking that number of containers - so what ?  The railroad is making just as much money with the Sioux Falls traffic as it would with the LA traffic, without having to work near as hard.  But from the comments above it seems that too often the decisional metric is some other indirect parameter of profitability such as ton-miles or the number of container/ trailer loads moved, not dollars.

- Paul North.