Trains.com

The Federal government effectively subsidizes truck freight - have they ever tried to subsidize rail freight?

6167 views
39 replies
1 rating 2 rating 3 rating 4 rating 5 rating
  • Member since
    September 2017
  • 5,636 posts
Posted by charlie hebdo on Tuesday, February 5, 2019 10:31 PM

Murphy Siding

 

 
charlie hebdo

 

 
GERALD L MCFARLANE JR
After all was said and done, between the IPO(Initial Public Offering) and the final sale of Conrail to NS and CSX it's one of the few things the Government actually ended up  either breaking even on or recouping more than was spent, but you'd never know that from typical Government accounting practices.

 

 

You are right, Gerald.  Conrail received federal aid totaling about $7 bil. The IPO gave ~$1.65 bil. back to the Feds while the takeover by NS and CSX gave the feds another $10.3 bil. 
https://www.nytimes.com/1999/06/01/business/conrail-chugs-off-into-the-sunset-csx-and-norfolk-southern-take-over.html

 

 

 

 

Are you sure about that? Didn't the IPO  effectively sell ConRail to private sources who then sold for $10.3 billion?

 

 

I think you are right.

  • Member since
    May 2005
  • From: S.E. South Dakota
  • 13,569 posts
Posted by Murphy Siding on Tuesday, February 5, 2019 10:35 AM

charlie hebdo

 

 
GERALD L MCFARLANE JR
After all was said and done, between the IPO(Initial Public Offering) and the final sale of Conrail to NS and CSX it's one of the few things the Government actually ended up  either breaking even on or recouping more than was spent, but you'd never know that from typical Government accounting practices.

 

 

You are right, Gerald.  Conrail received federal aid totaling about $7 bil. The IPO gave ~$1.65 bil. back to the Feds while the takeover by NS and CSX gave the feds another $10.3 bil. 
https://www.nytimes.com/1999/06/01/business/conrail-chugs-off-into-the-sunset-csx-and-norfolk-southern-take-over.html

 

 

Are you sure about that? Didn't the IPO  effectively sell ConRail to private sources who then sold for $10.3 billion?

Thanks to Chris / CopCarSS for my avatar.

  • Member since
    September 2017
  • 5,636 posts
Posted by charlie hebdo on Tuesday, February 5, 2019 9:17 AM

GERALD L MCFARLANE JR
After all was said and done, between the IPO(Initial Public Offering) and the final sale of Conrail to NS and CSX it's one of the few things the Government actually ended up  either breaking even on or recouping more than was spent, but you'd never know that from typical Government accounting practices.

 

You are right, Gerald.  Conrail received federal aid totaling about $7 bil. The IPO gave ~$1.65 bil. back to the Feds while the takeover by NS and CSX gave the feds another $10.3 bil. 
https://www.nytimes.com/1999/06/01/business/conrail-chugs-off-into-the-sunset-csx-and-norfolk-southern-take-over.html

 

  • Member since
    September 2014
  • 376 posts
Posted by GERALD L MCFARLANE JR on Monday, February 4, 2019 11:20 PM

CMStPnP

So didnt we sink $7-10 Billion into CONRAIL before the Feds sold it off at $1.5 Billion or so?    Wasn't that a subsidy? 

After all was said and done, between the IPO(Initial Public Offering) and the final sale of Conrail to NS and CSX it's one of the few things the Government actually ended up  either breaking even on or recouping more than was spent, but you'd never know that from typical Government accounting practices.

  • Member since
    January 2002
  • From: Canterlot
  • 9,575 posts
Posted by zugmann on Monday, February 4, 2019 10:03 PM

charlie hebdo
The PRR got a $77 mil. loan in 1934 from the Public Works Administration (repaid) for additional electrification of lines, such as Paoli to Harrisburg.

When they got that money, just about everyone in my town became an electrician overnight. 

From what I was told, the PRR took a train load of these new-found "eelctricians" from town, brought them to the outskirts, told them to get lost for 10 hours, then picked them up again to bring them home.  Did this for the whole summer, or until the WPA money ran out.

 

(Or at least that's what I was told).  Maybe someone was making it all up.

It's been fun.  But it isn't much fun anymore.   Signing off for now. 


  

The opinions expressed here represent my own and not those of my employer, any other railroad, company, or person.t fun any

  • Member since
    September 2017
  • 5,636 posts
Posted by charlie hebdo on Monday, February 4, 2019 2:11 PM

The PRR got a $77 mil. loan in 1934 from the Public Works Administration (repaid) for additional electrification of lines, such as Paoli to Harrisburg.

The aid given for building many of the transcontinental lines was land grants of 175 million acres (larger than TX) and also US bonds for construction. 

The original Illinois Central Railroad (A. Lincoln was its lawyer and lobbyist) got the first railroad land grant in 1850.

  • Member since
    November 2018
  • 47 posts
Posted by RailRoader608 on Monday, February 4, 2019 10:12 AM

CMStPnP

The bonds were underwritten by the state in some way or subsidized to make them cheaper than most other sources of financing.   They didn't really need the discount and would have expanded anyway but like I said state government had the taxpayer money burning a hole in it's pocket and so ....

 

 

Warning for language but this reminded me of a scene from The Wire (great show if anyone here hasn't seen it before).

 https://www.youtube.com/watch?v=6ktvE2vfxSQ&feature=youtu.be&t=85

  • Member since
    June 2009
  • From: Dallas, TX
  • 6,952 posts
Posted by CMStPnP on Sunday, February 3, 2019 1:48 PM

Prior to Conrail we had other direct federal subsidies to railroads perhaps not always in the area of freight.   The most recent Milwaukee Amtrak depot was built in 1965 to consolidate the C&NW and Milwaukee Road rail passenger facilities in large part due to a rather large financial grant from WisDOT.

The first Milwaukee Road Hiawatha was built in large part due to a make work program grant passed by the Roosevelt Administration in the 1930's.

Other examples as well.   Even private businesses that you would think would never have any inkling or need for a subsidy get one.   My Father used to run a large manufacturing firm in SE Wisconsin with annual revenues of approx $30 million a year.    Firm was doing great financially (and still is), yet Wisconsin couldn't help itself and offered him subsidized bonds to (Industrial Revenue Bonds they were called) to expand business operations in the state.    The bonds were underwritten by the state in some way or subsidized to make them cheaper than most other sources of financing.   They didn't really need the discount and would have expanded anyway but like I said state government had the taxpayer money burning a hole in it's pocket and so ....

  • Member since
    January 2003
  • From: Kenosha, WI
  • 6,567 posts
Posted by zardoz on Sunday, February 3, 2019 1:35 PM

Backshop

 

 
zardoz

If that is correct, then trucking uses 32x more labor to deliver 10x in sales....not exactly what I would call efficient. 

 

 

Not really.  How many of those railroad shipments were siding to siding and how many were intermodal that required a truck to deliver them the last 10-300 miles?

 

I agree that it is not a linear comparison, but regardless of how the labor is divided or how the freight is transported, 32x is always bigger than 10x.

  • Member since
    May 2003
  • From: US
  • 25,292 posts
Posted by BaltACD on Sunday, February 3, 2019 9:03 AM

RailRoader608
 
CMStPnP

So didnt we sink $7-10 Billion into CONRAIL before the Feds sold it off at $1.5 Billion or so?    Wasn't that a subsidy? 

I don’t know that story. What was Conrail and what happened with it?

http://www.conrail.com/history/

Never too old to have a happy childhood!

              

  • Member since
    April 2016
  • 1,447 posts
Posted by Shadow the Cats owner on Sunday, February 3, 2019 8:20 AM

Conrail was the government takeover of 6 northeastern bankrupt railroads and then telling the new company to make it work. The companies that were thrown in were the PC Erie Lakawana Reading Lehigh Valley CNJ and PRSL.  They were given carte blanche to abandon whatever they needed sell also money was poured in via the federal government and it still took 7 years for them to turn a profit.  They were given just right at 10 billion dollars overall in 7 years.  

  • Member since
    November 2018
  • 47 posts
Posted by RailRoader608 on Saturday, February 2, 2019 9:28 PM

CMStPnP

So didnt we sink $7-10 Billion into CONRAIL before the Feds sold it off at $1.5 Billion or so?    Wasn't that a subsidy?

 

 

I don’t know that story. What was Conrail and what happened with it?

  • Member since
    June 2009
  • From: Dallas, TX
  • 6,952 posts
Posted by CMStPnP on Saturday, February 2, 2019 8:26 PM

So didnt we sink $7-10 Billion into CONRAIL before the Feds sold it off at $1.5 Billion or so?    Wasn't that a subsidy?

  • Member since
    April 2016
  • 1,447 posts
Posted by Shadow the Cats owner on Saturday, February 2, 2019 7:54 PM

We offer 2nd morning service to Salt Lake City with solo drivers. Our fleet is governed at 72 so once their west of Lincoln Nebraska it's let em roll. We only have 1 major customer in Salt Lake loaded both ways drop and hook at both ends.  

 

Why are we running ragged servicing a customer that is already serviced by both class 1 railroads in the west they can't get reliable enough service to keep their production line running.  When Huntsman Chemical can't get reliable service and needs a trucking company to haul in both liquid and soild resins there is a huge problem in customer service and they are not happy with both the UP and BNSF.   

  • Member since
    July 2016
  • 2,631 posts
Posted by Backshop on Saturday, February 2, 2019 6:13 PM

zardoz

If that is correct, then trucking uses 32x more labor to deliver 10x in sales....not exactly what I would call efficient. 

Not really.  How many of those railroad shipments were siding to siding and how many were intermodal that required a truck to deliver them the last 10-300 miles?

  • Member since
    March 2007
  • From: Rhododendron, OR
  • 1,516 posts
Posted by challenger3980 on Saturday, February 2, 2019 5:32 PM

Railroader 608, at least out west, you need to add at least 100miles/Day to your range.

With the exception of Californicated, which HATES Trucks in all forms, Washington State is slow with a Truck speed of 60mph, Oregon has stepped up to 65mph, Idaho is at 70mph and Utah will let trucks run 80mph with the cars on open highways. We have a 13.5 hour work day (we are required to have a 30 minute break at no more than 8 hours) and we can LEGALLY drive for 11 of those hours, so running across ID and UT you could Legally cover 800-850 miles in a day, if those states were big enough. I drive locally now, but I was running IIRC about 625 miles a day, in 9.5-10 hours from Portland to SLC. I could have run further each day, but those segments put me where I wanted to stay the night.

I gotta say, I miss the days of running 80mph in a truck, rolling down Rattle Snake Pass headed to SLC at 87mph and getting passed. Utah even has higher speed limits in Urban areas, than most other places, and you know what, the Body Bags WEREN'T lined up alongside the highways, like cordwood as the gloom and doomers always predicted they would be any time a speed limit increase was considered, especially if it included truck speeds.

Split speed limits are Stupid beyond beleif, the Safest speed for ALL Traffic is at the SAME SAFE speed.

Doug

30+ years, and 3,000,000+ miles of moving America's freight

May your flanges always stay BETWEEN the rails

  • Member since
    February 2003
  • From: Guelph, Ontario
  • 4,819 posts
Posted by Ulrich on Saturday, February 2, 2019 5:15 PM

zardoz

 

 
Ulrich
Trucking (in the US) employs roughly 8 million people directly.. railroads employ about 250,000. Trucking is a much much larger industry.. it generates some  750 billion a year in sales verses about 70 billion for rail.. 

 

If that is correct, then trucking uses 32x more labor to deliver 10x in sales....not exactly what I would call efficient.

 

 

 

Depends on how you look at it... truck and rail don't necessarily compete in the same space. One example from yesterday that might highlight trucking efficiency from my own personal experience....We picked up a 49 000 lb load of steel in SC yesterday late morning and delivered it in Brooklyn, NY this morning.. at 10:15 am..that' s when the receiver, a jobsite, wanted it  And the price? Three Mars bars a mile.. for the price of three candy bars one can run a load of steel.. covered and weather protected.. an entire mile. To me that's pretty efficient. Sure.. put that load on a train.. and it will get to Brooklyn.. but overnight? Nope. And to the jobsite at 10:15 am precise time? Nope. Like I've said, we don't compete in the same space most of the time... so its an apples to oranges comparison at best.

  • Member since
    February 2003
  • From: Guelph, Ontario
  • 4,819 posts
Posted by Ulrich on Saturday, February 2, 2019 5:02 PM

I don't think railroads are down on customer service. In my limited experience in working with them from time to time over years, the service is actually much improved over what it once was. And let's not forget about the short lines and regionals who have done alot of the heavy lifting in getting shippers back to using rail. 

I don't believe railroads should focus too much on capturing short to medium haul truck traffic.. they're just not well suited to serving that market anymore than a trucker who wants to compete hauling coal out of the Powder River Basin. Why not focus on markets that are most suited to the conveyance you provide? Or.. become a true transportation company that offers both truck and rail services, with each mode used in its most effective manner. Trying to make a saw do the work of a hammar will never work well.. 

Both modes are efficient in their respective markets... and vastly inefficient in others.. the whole competitive us verses them is really kinda dumb given that both are simply tools of the trade. Greater even than Precision Railroading would be Precision Transportation, where carriers aren't married to one mode...let the job, price, and service requirements determine the mode used. True transportation companies...the next frontier.

 

 

  • Member since
    January 2003
  • From: Kenosha, WI
  • 6,567 posts
Posted by zardoz on Saturday, February 2, 2019 4:52 PM

Ulrich
Trucking (in the US) employs roughly 8 million people directly.. railroads employ about 250,000. Trucking is a much much larger industry.. it generates some  750 billion a year in sales verses about 70 billion for rail.. 

If that is correct, then trucking uses 32x more labor to deliver 10x in sales....not exactly what I would call efficient.

  • Member since
    January 2003
  • From: Kenosha, WI
  • 6,567 posts
Posted by zardoz on Saturday, February 2, 2019 4:41 PM

RailRoader608
An old government report found that an 80,000 pound truck caused as much pavement damage as 9,600 average passenger cars. I've seen that number disputed - saying that the multiple depends on the pavement type - but everyone agrees that a truck does thousands of times more damage per mile than a car. As a result, that 10% of vehicles is responsible for as much as 99% of pavement damage caused by vehicles. 

And that is just for the 'legal' trucks...imagine how much damage the overloaded one cause, although those probably do more damage to the rural highways as opposed to the interstates, as the drivers will take to the back roads hoping to avoid the scales. Not only that, but I'd bet that the companies that intentionally overload their trucks probably are not on the up-and-up regarding other violations, especially safety.

  • Member since
    November 2018
  • 47 posts
Posted by RailRoader608 on Saturday, February 2, 2019 3:57 PM

Interesting stuff, Shadow. It's sad the railroads are so disinterested in customer service. 

 

Regarding speed, do you think UP has to beat 30 hours for the Chicago to SLC run in order to be competitive? What if they could do it in three days with a high degree of reliablity? I always thought the bigger issue with rail wasn't that it couldn't deliver as quickly as truck (although that's a problem when the difference is 30 hours vs 10 days) but that the window for rail was maybe +/- several days while truck's window is +/- several hours. In other words, rail can't be 5x slower and compete - but if it were within a day or two and had truck-like predictability of service they could do OK.

 

And finally, I think of trucks as having a ~500 mile per day range with the ELD mandates. Is that about right in your experience? A team of drivers can get a delivery to SLC 1,400 miles away but a single driver would take ~3 days. Does a team delivery cost twice as much? or more like 1.5x as much since only the labor piece of the cost puzzle is doubled?

 

And regarding the emissions restrictions: in 2016 Class 1 railroads used 3,385 million gallons of diesel while combination trucks used 29,555 million gallons. When you're trying to reduce GHG emissions it makes sense to give extra scrutiny to the industry burning 9x more fuel. 

  • Member since
    April 2016
  • 1,447 posts
Posted by Shadow the Cats owner on Saturday, February 2, 2019 3:22 PM

Backshop

 

 
caldreamer

Rail transportation is MUCH more efficient thant trucks.  You can put a couple ofhundred containers or trailsrs on one train with a few diesel engines and run it crosscountry for far less per ton mile than you can with a truck.  Each trailer needs on tractor to pull it vs rais 2 to 4 diesels/ 

With Trump in the whitwhosue you will NEVER see any government support for railriads.of any kind.  Trucks are important , but they pollute a lot more than locomotives and trump won't drop the tier 4 regulations for locomotives. 

 

 

1. If railroads are so much cheaper and more efficient, then why can't they compete?

2. Trucks also have much tighter emissions standards than they used to.

 

 

Backshop I can answer 1 for you really easy with a 3 part answer.  First off is Customer SERVICE something the Class 1 Railroads have forgotten all about anymore.  Unless your shipping trainloads of freight with them a day or weekly its like talking to the freaking moon to get a customer service rep on the phone.  Not in the trucking industry.  2nd is Speed of service anything under 1000 miles door to door I am going to slaughter a train with speed of service and if I have a team I can beat even the fastest IM trains coast to coast without breaking a sweat on any city pair in the nation that is served by the railroads.  My boss offers 30 hour service between Chicago and Salt Lake City with a team Truck.  You think the UP can make it in that timeframe.  3. Last for us is ease of access no need for extensive capital outlays for switches trackwork and equipment to move cars around.  All we require is a dock to back up to and either pallet jacks or forklifts for the most part or even enough manpower to move the load.  

 

What the railroads consider Tier 4 regulations on a emission basis are equal to what we had forced on this industry 12 years ago in 2007.  We are 50% under what those are now and the EPA wants even more reductions if possible.  

  • Member since
    July 2016
  • 2,631 posts
Posted by Backshop on Saturday, February 2, 2019 1:23 PM

caldreamer

Rail transportation is MUCH more efficient thant trucks.  You can put a couple ofhundred containers or trailsrs on one train with a few diesel engines and run it crosscountry for far less per ton mile than you can with a truck.  Each trailer needs on tractor to pull it vs rais 2 to 4 diesels/ 

With Trump in the whitwhosue you will NEVER see any government support for railriads.of any kind.  Trucks are important , but they pollute a lot more than locomotives and trump won't drop the tier 4 regulations for locomotives. 

1. If railroads are so much cheaper and more efficient, then why can't they compete?

2. Trucks also have much tighter emissions standards than they used to.

  • Member since
    April 2016
  • 1,447 posts
Posted by Shadow the Cats owner on Saturday, February 2, 2019 12:04 PM

My boss strives to have the smallest carbon footprint he can possibly do that makes economic sense for his business.  The new tank wash we just finished 90 percent off all the water is recovered and reused in the next wash cycle of a tank trailer. That's after it's filtered and deinionized first.  All of the fleet has Apu units plus bunk heaters that lower our idle time.  We run as much lighter material in our equipment as possible. Our bulk fuel in the yard is now a 50/50 biodiesel blend.  

  • Member since
    November 2018
  • 47 posts
Posted by RailRoader608 on Saturday, February 2, 2019 9:51 AM

caldreamer

With Trump in the whitwhosue you will NEVER see any government support for railriads.of any kind.  Trucks are important , but they pollute a lot more than locomotives and trump won't drop the tier 4 regulations for locomotives.

 

Is that because the benefits of rail have an environmental component and he doesn't want to be seen as bowing to climate change concerns? Or becausing trucking employs so many more people? 

Trump talks about the need to fix our failing infrastructure and the left talks about the need to combat climate change. A more optimistic person might see shifting freight to rail as a bi-partisan goal (or as close to bi-partisan as anyone in Washington gets these days). Unless you're a truck driver it's a rare win-win in terms of economics and carbon reduction. 

  • Member since
    September 2013
  • 2,505 posts
Posted by caldreamer on Saturday, February 2, 2019 9:41 AM

Rail transportation is MUCH more efficient thant trucks.  You can put a couple ofhundred containers or trailsrs on one train with a few diesel engines and run it crosscountry for far less per ton mile than you can with a truck.  Each trailer needs on tractor to pull it vs rais 2 to 4 diesels/ 

With Trump in the whitwhosue you will NEVER see any government support for railriads.of any kind.  Trucks are important , but they pollute a lot more than locomotives and trump won't drop the tier 4 regulations for locomotives.

Every time I see a truck go by me on the interstee at 80+ miles perour smoking like crazy in a 65 mile per hour zone, I yell "PUT IT ON A TRAIN".

    Caldreamer.

  • Member since
    October 2008
  • From: Calgary
  • 2,047 posts
Posted by cx500 on Saturday, February 2, 2019 9:35 AM

Statistics are wonderful, and can be (ab)used to prove nearly every point of view.  This debate is a case in point.  Another approach might be to figure out how much private and commercial vehicles are paying by ton-miles, a common metric in railroading.  This could also capture the heavy motor homes.  And add in the lost opportunity cost for the property tax waived for the roadways.

 

  • Member since
    January 2014
  • 8,221 posts
Posted by Euclid on Saturday, February 2, 2019 8:46 AM

RailRoader608

Truck freight generates more negative costs on society than are captured through taxes on tires, diesel, license fees, etc. I understand the reluctance to raise taxes on an important piece of the supply chain that moves almost everything we buy and use every day but has the government ever tried to subsidize rail freight instead? 

 

And before I get jumped on for promoting government intervention in the markets; you could make a case that the government is already interfering by allowing trucks to externalize a lot of their costs onto the taxpayer (pavement damage, congestion, pollution, etc). I believe the government sees moving freight off the roads onto rail (and reducing the external costs of trucking) as a net societal benefit, but have they ever put their money with their mouth is? Or has it been more of a "well that'd be great if the markets worked towards moving freight via rail but we're not going to get involved directly". 

 

Roads cost money and somebody pays the cost.  Everybody involved in this writes reports that promote their interest in the transaction.  A person could spend their entire lifetime researching to find an objective truth in the matter.  

It is a well-worn, but never convincing premise that if government subsidizes trucking; it is unfair that they don’t subsidize railroads.   

If you really want to see more freight carried by rail instead of truck, figure out a way for rail to do that at enough profit to be worthwhile to them.

Let me ask you this:  Do you think the railroad industry would welcome the proposal that government will subsidize them to haul the class of traffic currently being hauled by trucks?  It seems to me that if they would welcome that idea, they would be promoting it as much as they promote things such as how ECP braking will do them no good.   

Why not just eliminate the entire problem by banning internal combustion engines, and converting all transportation to clean, renewable energy?  Voila. 

  • Member since
    April 2016
  • 1,447 posts
Posted by Shadow the Cats owner on Saturday, February 2, 2019 8:08 AM

500k OTR trucks paying an average 55 grand in highway taxes state and federal level comes to 27.5 billion a year to everyone.  That chart you showing doesn't have the state fuel taxes on them that in some states are double what they are on gasoline and we are required to pay them for every mile we rolled in that state regards of if we bought fuel or not.  Pennsylvania charges 74 cents a gallon even if my bosses trucks don't buy a gallon in there . We do 40 percent of our business with states that connect with Pennsylvania.  Well let's just say Harrisburg better like the check each quarter. 

Join our Community!

Our community is FREE to join. To participate you must either login or register for an account.

Search the Community

Newsletter Sign-Up

By signing up you may also receive occasional reader surveys and special offers from Trains magazine.Please view our privacy policy