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Energy, Powder River Basin, and the DM&E

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[quote user="futuremodal"][quote user="Murphy Siding"] ......1)open can....2)dump out worms in a microwaveable continer...3)heat on medium for 3 to 4 minutes...4) re-open discussion of DME?PRB merits.....[:P]     Dave-on another thread, you suggest that the railroads don't have enough money to maintain their trackage at the current levels of traffic.  On this thread, you're once again championing a third rail line into the PRB to increace competition, and lower shipping costs.  You do see the irony in this-don't you?[/quote]The reason railroads can't cover their cost of capital is due to the anachronistic integrated system combined with the natural monopoly characteristics that cause US railroads to make irrational choices.  Like spending most of their capacity enhancement funds on the low margin import intermodal corridors, while throwing nickel and dime expenditures at the high margin corridors.  Like simply trying to add trackage to existing lines e.g. maintaining the error of consolidation rather than diversifying/dispersing new lines into new corridors.But you know what?  That's a whole 'nother subject.  The question put forth in this thread is whether the PRB is better off with two railroad companies simply trying to add track to existing lines or with a new third railroad coming in with a uniquely located new line.  I of course vote for the latter.  I would amend that basic question with a scenario of my own:  The PRB would also be better off if UP and/or BNSF added new trackage on new corridors out of the PRB than if a third railroad company was added but was instead granted trackage rights over the present set of lines.Of these four choices, I choose a third player over new trackage in new corridors.  Next would be UP/BNSF adding new trackage on new corridors.  Next would be adding a third player over present trackage with added sidings et al, and last is UP/BNSF simply adding trackage on present lines.I have to go to work.  I'll explain it later.[/quote]Okay, here goes....Murphy postulates that it is ironic that (1) on one thread it is pointed out that railroads cannot meet their equilibrium of maintaining trackage and current profitability, which means the difference will probably be funded by us taxpayers, and (2) on this thread it is pointed out that more capacity and more competition is needed in the PRB.I hypothesized that #1 is due to the integrated rail model combined with the natural monopoly of railroading that produces irrational market behaviour.....like spending most of the capacity enhancement funds on the low margin corridors rather than the high margin corridors.  #2 is just obvious to those of us in the energy sector, you know, what with coal delivery shortfalls and rate increases approaching 300%....that sort of thing.  If BNSF, which has 57% of it's system ton/miles from coal hauling, spent it's maintenance funds on new dispersed trackage for it's coal corridors, it may have been able to meet and beat that aforementioned equalibrium.  Alas, they're speding it all on the LA-Chicago corridor where margins are thinnest.As for DM&E, remember they are not constrained by all this low margin import intermodal hullaballoo, so most of their business (along with sister railroad IC&E) is of the high margin caliber - grain, ethanol, and soon coal......<a href="http://www.progressiverailroading.com/freightnews/article.asp?id=10534">http://www.progressiverailroading.com/freightnews/article.asp?id=10534</a><a href="http://www.progressiverailroading.com/commentary/article.asp?id=10527">http://www.progressiverailroading.com/commentary/article.asp?id=10527</a><blockquote>".....the DM&E has always had other options besides the feds - after all, the DM&E has built a fine franchise in of itself (think "ethanol")...."</blockquote>So, for DM&E to build tracks into the PRB makes sense financially for them, since they are under no *overlord* pressure to waste such funds on double stack tracks.  If the DM&E PRB line pressures rates for coal to be lowered, so be it.  Those rates will still be higher margin than the import intermodal lanes unless there is a complete collapse of the coal market.  If BNSF and UP still want to throw all their money at their respective "Route 66's", well let Warren and John worry about that.
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