Possible RailRunner app in North Dakota

[Anonymous]

There's the possibility that North Dakota officials will start using the RailRunner bi-modal technology between Minot ND and the Twin Cities to ship containerized ag products. Here's the link:

http://www.minotdailynews.com/news/story/023202005_new3news2.asp

The distance between Minot and the Twin Cities is within the scope of applicability projected by RailRunner. The question arises though - Are these containerized shipments bound for Gulf and/or East Coast ports, or do they include transport to the PNW? If the latter, doesn't both BNSF and CP run intermodal between the Twin Cities and PNW via Minot, and as such can't one of them include an intermodal stop for such consists instead of forcing shipment nearly 400 miles in the opposite direction before the containers can start heading west?

If these shipments are bound for the South and East, then this application seems to be an apt fit for this technology.

[CSSHEGEWISCH]

One would need to see the traffic volumes involved before making an extra stop in Minot for any extra westbound traffic. Keep in mind that such a stop would add 2-3 hours to an intermodal schedule. I was always under the assumption that ag traffic in the Dakotas was oriented to Minneapolis anyway.

[Anonymous]

QUOTE: Originally posted by CSSHEGEWISCH

One would need to see the traffic volumes involved before making an extra stop in Minot for any extra westbound traffic. Keep in mind that such a stop would add 2-3 hours to an intermodal schedule. I was always under the assumption that ag traffic in the Dakotas was oriented to Minneapolis anyway.

If the cargo is destined for the Pacific Rim, it's a wash whether said cargo moves to Minneapolis then to the Gulf, or Minneapolis then reversed westward to the PNW, the overall rates are about the same Twin Cities to Pacific Rim. Since Minot is 400 miles farther to the West, one would think the rate to the PNW from Minot would be lower than the rate Minot to the Gulf, but we've already discussed that inconsistent rate paradigm ad nauseum in other threads.....

Doesn't BNSF still have an intermodal terminal in Billings Montana? Maybe it would make more sense to run a RailRunner operation from Bismark to Billings for Pacific Rim bound cargo, rather than Minot to Twin Cities.

[greyhounds]

QUOTE: Originally posted by CSSHEGEWISCH

One would need to see the traffic volumes involved before making an extra stop in Minot for any extra westbound traffic. Keep in mind that such a stop would add 2-3 hours to an intermodal schedule. I was always under the assumption that ag traffic in the Dakotas was oriented to Minneapolis anyway.

Oh Pshaw!

It's been over 30 years since I hooked up an air hose, but if I couldn't make a pickup in less than 2-3 hours I'd go drive a truck.

On the ICG the time allowed for a pickup was 15 minutes. A pickup/set out was 20. And the ICG was never the best operated railroad in the country.

There are far too few intermodal terminals in the US of A. Railrunner, with it's ability to mix with conventional intermodal, has the ability to fix that. Specialty grain, shipped in containers, is a wide open market for such an operation.

Please quit being a naysayer. The railroads need more freight. This is one way to get it. Make the opportunity work.

[CSSHEGEWISCH]

I based my 2-3 hour timeframe based on published freight schedules in the Official Guide from the late 60's through 70's. I would assume that the proposal for Minot hopefully would involve more than a handful of cars.

Railroads don't just need more freight, they need more profitable freight. Intermodal terminals have become fewer because they are an expensive proposition that requires a substantial capital outlay. Piggypackers aren't cheap. A ramp and circus loading does not an intermodal terminal make.

As far as rates are concerned, anybody who has followed airline fares knows that distance is only part of the formula.

[greyhounds]

QUOTE: Originally posted by CSSHEGEWISCH

I based my 2-3 hour timeframe based on published freight schedules in the Official Guide from the late 60's through 70's. I would assume that the proposal for Minot hopefully would involve more than a handful of cars.

Railroads don't just need more freight, they need more profitable freight. Intermodal terminals have become fewer because they are an expensive proposition that requires a substantial capital outlay. Piggypackers aren't cheap. A ramp and circus loading does not an intermodal terminal make.

As far as rates are concerned, anybody who has followed airline fares knows that distance is only part of the formula.

Yes, but....

The economic advantage of Railrunner is that it doesn't need all that investment to set up an intermodal terminal.

www.railrunner.com

This makes intermodal terminals less expensive and, therefore, will increase the demand for rail intermodal terminals.

Circus ramps were perfectly suitable for smaller volume operations, but they had problems such as; flatcars facing the wrong way, the need for very expensive rail engine switching, flatcars with full lenght decks (needless weight), bridge plates (where did it go?) and knock down hitches (boy, those sure cost a lot to maintain.)

Railrunner doesn't need any of this. Unlike RoadRailer they've focused on making their equipment compatible with existing use - a general prerequisite for the adoption of a new technology. Unlike RoadRailer, Railrunner can handle containers.

It's gonna' work. Just watch it.

[CSSHEGEWISCH]

I've checked the website and it looks like RoadRailer for containers. It isn't all that different and it doesn't address compatibility with conventional railroad cars.

[Anonymous]

Greyhounds, I don't suppose you're up on revisions to the power brake law in recent years? 20 minutes for a pickup? With a two-man crew? Not today! Especially not in an icebox like Minot. Maybe if you have a switch engine and a carman to set the pickup, put air on it, and inspect it. Or a local has made it up. But if they're cold, dead cars and it's minus 20, you might be out there all night, too. The thought of breaking the train line on a perfectly good train on a subzero night is enough to make me want to quit this business and give you the railroad. A one hour hit is a reasonable expectation from the moment you start slowing the train down to the moment it's back to track speed. Some nights it will be three hours. I sure hope you're not doing this pickup off the main track or a CTC siding you need for other trains, because you'll be stopping all of them that are in the vicinity, too.

I wouldn't know about the economics of the equipment. The economics from the operating department's perspective are suspect. If I was the superintendent of that division, and someone proposed stopping anything other than a junk manifest to make this pickup, I'd be writing a letter saying I was no longer responsible for that train making schedule. Every pickup inserts uncertainty, and uncertainty means unreliability. Moves like this subordinate 98% of the freight in that train to the needs of 2% of the freight. I guess that might be OK if that 98% is all moving on a space-available rate and the customers don't care if the car gets there Tuesday or Wednesday. If it's freight moving on a premium rate, it's a terrible idea.

OS

[greyhounds]

QUOTE: Originally posted by O.S.

Greyhounds, I don't suppose you're up on revisions to the power brake law in recent years? 20 minutes for a pickup? With a two-man crew? Not today! Especially not in an icebox like Minot. Maybe if you have a switch engine and a carman to set the pickup, put air on it, and inspect it. Or a local has made it up. But if they're cold, dead cars and it's minus 20, you might be out there all night, too. The thought of breaking the train line on a perfectly good train on a subzero night is enough to make me want to quit this business and give you the railroad. A one hour hit is a reasonable expectation from the moment you start slowing the train down to the moment it's back to track speed. Some nights it will be three hours. I sure hope you're not doing this pickup off the main track or a CTC siding you need for other trains, because you'll be stopping all of them that are in the vicinity, too.

I wouldn't know about the economics of the equipment. The economics from the operating department's perspective are suspect. If I was the superintendent of that division, and someone proposed stopping anything other than a junk manifest to make this pickup, I'd be writing a letter saying I was no longer responsible for that train making schedule. Every pickup inserts uncertainty, and uncertainty means unreliability. Moves like this subordinate 98% of the freight in that train to the needs of 2% of the freight. I guess that might be OK if that 98% is all moving on a space-available rate and the customers don't care if the car gets there Tuesday or Wednesday. If it's freight moving on a premium rate, it's a terrible idea.

OS

Aside from that, what do you think of it?

You've got to look at it from a business standpoint. Is it going to put significant revenue on the bottom line? If it will, then there needs to be a way to do it.

I know a two man crew isn't going to do a quick pickup - so use a yard engine on overtime for two hours. I'd guess that to be about $800. Throw in another $200 for the car knocker. Now is the money from the shipment going to cover that and it's other expenses? If it will, then it has to be considered.

If the loads moved in 20 container lots, and the per container rate was $900 that would be $18,000 per shipment and the operation cost in Minot doesn't seem all that out of line.

Just stating a worst case scenario and walking away from the freight isn't good business.

Reminds me of the time the operating people at Centrailia said they'd need an entire extra engine shift to make one more block.

CSSHEGWISH - I talked to the Railrunner people about mixing their equipment with conventional intermodal. They said it's OK.

[Anonymous]

Grey, if you're talking profit, and lots of it, I'm on your side 100%. As long as we're not talking another one of these incremental-cost pricing deals, not another "it's just one more move, how hard is that" deals. I'd really like to see the revenue quality on all the existing moves come up before we start combing the bushes for little opportunities here and there.

OS

[greyhounds]

QUOTE: Originally posted by O.S.

Grey, if you're talking profit, and lots of it, I'm on your side 100%. As long as we're not talking another one of these incremental-cost pricing deals, not another "it's just one more move, how hard is that" deals. I'd really like to see the revenue quality on all the existing moves come up before we start combing the bushes for little opportunities here and there.

OS

Getting the margins up should always be a goal. At the ole ICG there was once upon a time a rule that every sales office had to fire its worst performing salesman every year. One sales manager actually fired his father-in-law. I don't know if the marriage survived.

It wouldn't hurt to take a look at taking the same approach to customers. Figure out the worst 5% or so each year and raise their rates. Make room for new, more profitable business.

But you gotta' remember. Profit is maximized when marginal revenue equals marginal costs. MR=MC. Sell the last unit of production to the point when its additional cost exactly equals its additional revenue. So it's a balancing act. Especially since rail costing is inexact to say the least.

[Anonymous]

QUOTE: Originally posted by O.S.

Grey, if you're talking profit, and lots of it, I'm on your side 100%. As long as we're not talking another one of these incremental-cost pricing deals, not another "it's just one more move, how hard is that" deals. I'd really like to see the revenue quality on all the existing moves come up before we start combing the bushes for little opportunities here and there.

OS

It may be that this particular Minot to Twin Cities move will go by way of Grand Forks rather than the busy Surrey line. If that's the case, then there is available capacity and incremental costing would therefore be appropriate. This was kind of the same approach we used when trying to get BNSF to run RailRunners over Stampede Pass in Washington, there was excess capacity available so why not price the move at a rate where everyone wins?

[Anonymous]

QUOTE: Originally posted by O.S.

QUOTE: Originally posted by futuremodal

It may be that this particular Minot to Twin Cities move will go by way of Grand Forks rather than the busy Surrey line. If that's the case, then there is available capacity and incremental costing would therefore be appropriate. This was kind of the same approach we used when trying to get BNSF to run RailRunners over Stampede Pass in Washington, there was excess capacity available so why not price the move at a rate where everyone wins?

You wanted a discount and didn't get it!!! Or, should I say, you thought you should be rewarded because you arrived behind all those chumps who are actually paying for their service. I'm almost made speechless by your bald-faced confession. You actually expected the railroad to charge everyone but you the full rate, and now you're pouting because they didn't want to slice their throat to make you happy. Any luck trying this incremental-pricing strategy with your local gas station, or the grocery store, or the city sewer bill? No? Gee, I wonder why.

Thanks! I finally understand the immense conceit behind every one of your 422 posts to date. Your real self has just been laid bare: you think the world owes you a deal.

OS

OS,

Why are you such a bitter vetch? Explain to us all how providing a service at a profit for all is "cutting" BNSF's or anyone's throat? BNSF gained nothing by turning down the Stampede Pass proposal. The fact is that BNSF's marginal cost for maintaining the Stampede Pass line is exceeding the marginal revenue they are deriving from using the line, that's usually what you get when you have excess capacity available. For reasons that I don't even want to guess at, they are deliberately choosing not to maximize their profits on that line. Okay, I'll venture a guess - they are banking the line for some future use, and don't want to get saddled with a profitable venture now that might interfere with an even more profitable venture later. Twisted? Yes, but apparently consistent with today's Class I mentality, which is why some managerial punk at BNSF's Minot division will find a way to screw up this RailRunner proposal in North Dakota.

[Anonymous]

Nope, irony ain't dead.

OS

[greyhounds]

QUOTE: Originally posted by futuremodal


It may be that this particular Minot to Twin Cities move will go by way of Grand Forks rather than the busy Surrey line. If that's the case, then there is available capacity and incremental costing would therefore be appropriate. This was kind of the same approach we used when trying to get BNSF to run RailRunners over Stampede Pass in Washington, there was excess capacity available so why not price the move at a rate where everyone wins?

Well, not really. Ownership and maintenance of the rail line itself isn't that big of a deal given that there is a reasonable (4 trains/day) amount of business over the line.

I'm looking at a line haul cost analysis of a 397 mile run from New York to Pittsburgh put out by an intermodal reasearch arm of the AAR.

For a 3,800 ton train with two 4,000hp locos the long run variable line haul (excluding terminal) cost is $19,133. Of that, only $1,859 (less than 10%) is track cost (maintenance and ownership).

Other cost elements are not, in any way, incremental. Crew, Locomotive maintenance, fuel, locomoitive ownership, etc. all relate directly to the movement and go up directly with the movement. These are the overwhelming majority of the total costs

Got to cover 'em with revenue from the move. Hope this explains why you didn't get the cheap-O rate over Stampede. The railroad may have some excess track capacity, but that relates to only a small fraction of their cost structure.

They certainly don't have excess locomotives, crews, fuel, etc. - the items that make up the bulk of their cost. No incremental rates for you or anybody else.

[Anonymous]

QUOTE: Originally posted by greyhounds

QUOTE: Originally posted by futuremodal


It may be that this particular Minot to Twin Cities move will go by way of Grand Forks rather than the busy Surrey line. If that's the case, then there is available capacity and incremental costing would therefore be appropriate. This was kind of the same approach we used when trying to get BNSF to run RailRunners over Stampede Pass in Washington, there was excess capacity available so why not price the move at a rate where everyone wins?

Well, not really. Ownership and maintenance of the rail line itself isn't that big of a deal given that there is a reasonable (4 trains/day) amount of business over the line.

I'm looking at a line haul cost analysis of a 397 mile run from New York to Pittsburgh put out by an intermodal reasearch arm of the AAR.

For a 3,800 ton train with two 4,000hp locos the long run variable line haul (excluding terminal) cost is $19,133. Of that, only $1,859 (less than 10%) is track cost (maintenance and ownership).

Other cost elements are not, in any way, incremental. Crew, Locomotive maintenance, fuel, locomoitive ownership, etc. all relate directly to the movement and go up directly with the movement. These are the overwhelming majority of the total costs

Got to cover 'em with revenue from the move. Hope this explains why you didn't get the cheap-O rate over Stampede. The railroad may have some excess track capacity, but that relates to only a small fraction of their cost structure.

They certainly don't have excess locomotives, crews, fuel, etc. - the items that make up the bulk of their cost. No incremental rates for you or anybody else.

Greyhounds,

First just let me say that I apprciate your ability to provide counterpoint without being insulting.

On those AAR numbers, can you provide the breakdown of cost allocations for that $19,133? $19,133 - $1,859 = $17,274. Of that $17,274 what is the crew cost? Assume $6,000 for the crew costs, that leaves $11,274. Then 3,800 tons going 397 miles, say we're using a gallon of fuel per ton so that's 3,800 gallons at $4,000 - $5,000 dollars, that leaves roughly $6,000. What's left? Locomotive cost allocation, freight car allocation (do they assume the freight cars are fully depreciated, leased?), insurance, ???

By comparison, for the Stampede Pass RailRunner operation, we assumed a gross revenue of between $30,000 and $40,000 depending on the number of boxes at 25% backhaul. If we assume the same cost allocation the AAR used in it's example, then there is a $10,000 to $20,000 net in there somewhere. Even with 0% backhaul we're still making a flat minimum of $5,000 net for the per trip.

Given all that, I will stand by my assertion that something else was going on outside of normal business thought. It may have something to do with the fact that BNSF spent three times to repurchase the Stampede Pass line for what they sold the Valley portions for, and they lined and signalled the route for 20 to 30 trains per day. Right now they are running maybe 5 per day at most, so it may be that these trains are being forced to accout for the full cost recovery one would expect with the projected traffic counts.