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Government Sticking Too Much of Its Nose Into Transportation .. Again!

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Government Sticking Too Much of Its Nose Into Transportation .. Again!
Posted by SD60MAC9500 on Thursday, July 8, 2021 10:00 AM
 

While regulation may have a place in some aspects of interstate commerce. This isn't the time and place ... The current administration has deemed the railroad industry anti-competitive due to consolidation and "unreasonable cost". The claim is American businesses are paying increased prices on goods due to the railroad industry... Excuse me while I laugh a bit...... I'm going to link an article from Railway Age.. Read and see what you get out of it..

https://www.railwayage.com/regulatory/biden-targeting-class-i-rail-mergers-report/

 
 
 
Rahhhhhhhhh!!!!
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Posted by tree68 on Thursday, July 8, 2021 11:44 AM

They need to put the shippers and the railroad stockholders in the same room and let them argue about it.  

As we've discussed here before, the shippers would prefer that their goods be moved free, while the stockholders want the maximum possible return on their investment.  The actual railroads are kind of stuck in the middle.

There's middle ground there somewhere, but I would expect a bloody battle to reach it.

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Posted by Ulrich on Thursday, July 8, 2021 12:59 PM

What are they talking about? If I had only ONE competitor I would continue to offer low freight prices.. because I'm fair and a nice person and my one competitor will keep me in check anyway. Yes siree.. Unfortunately Biden is about 50 years too late with this initiative.. the horse is out of the barn and long since gone.. or perhaps a better way to put it.. the train has left the station. 

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Posted by Juniata Man on Thursday, July 8, 2021 2:07 PM

The reciprocal or competitive switching proposed here in the US is similar in nature to the interswitching that has existed in Canada since the mid to late 1980's.

Interswitching along with competitive line rates have certainly not killed Canadian railroads so, there is no reason to believe a similar structure would kill US railroads. 

CW

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Posted by Ulrich on Thursday, July 8, 2021 2:27 PM

Reciprocal switching would likely bring about some competition..i.e. instead of having only one rail option, some customers may now have two. i don't think anyone is too worried about that.. More worrisome I think is the more vague spector of "more regulation". That's what the market is reacting to today.. 

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Posted by BaltACD on Thursday, July 8, 2021 2:40 PM

Ulrich
Reciprocal switching would likely bring about some competition..i.e. instead of having only one rail option, some customers may now have two. i don't think anyone is too worried about that.. More worrisome I think is the more vague spector of "more regulation". That's what the market is reacting to today.. 

Reciprocal switching is a guaranteed 2 to 4 day delay in car cycle times.

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Posted by Juniata Man on Thursday, July 8, 2021 2:57 PM

Or about half what has resulted from psr...

CW

 

BaltACD

 

Ulrich
Reciprocal switching would likely bring about some competition..i.e. instead of having only one rail option, some customers may now have two. i don't think anyone is too worried about that.. More worrisome I think is the more vague spector of "more regulation". That's what the market is reacting to today.. 

 

Reciprocal switching is a guaranteed 2 to 4 day delay in car cycle times.

 

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Posted by Ulrich on Thursday, July 8, 2021 3:03 PM

And I wonder how well reciprocal switching works in most of Canada. Let's say you're a shipper in Atlantic Canada's largest city, Halifax. You're not happy with CN's prices so you contact CP for pricing on your five carloads a week. CP's nearest interchange to Halifax is roughly 300 miles away.. not sure how high CP would jump to price that business, but my guess would be not high at all. 

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Posted by CMStPnP on Thursday, July 8, 2021 3:20 PM

It would be smarter to ease barriers of entry into the railroad industry.   Maybe have some of these shortline firms start laying rail again to compete for business.

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Posted by Ulrich on Thursday, July 8, 2021 3:26 PM

CMStPnP

It would be smarter to ease barriers of entry into the railroad industry.   Maybe have some of these shortline firms start laying rail again to compete for business.

 

 

I like that idea, but critics would point out it would cost billions upon billions in this day and age. Maybe if someone like Elon Musk came along it could happen.. someone with the ability to think huge and with the wherewithal to raise the required capitial. 

 

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Posted by Juniata Man on Thursday, July 8, 2021 4:09 PM

Interswitching applies only within a 35 kilometer radius of a physical interchange point so; it wouldn't apply to your Atlantic Canada situation. Rather, the shipper would approach CN and request a competitive line rate to the nearest CP interchange then negotiate with CP for their rate beyond.

I used interswitching extensively prior to retirement because each of our Canadian production sites fell within a zone 1 or 3 for interswitching. I never had an opportunity to try using competitive line rates but, from conversations with industry colleagues they were beneficial at times but, not always. 

CW

Ulrich

And I wonder how well reciprocal switching works in most of Canada. Let's say you're a shipper in Atlantic Canada's largest city, Halifax. You're not happy with CN's prices so you contact CP for pricing on your five carloads a week. CP's nearest interchange to Halifax is roughly 300 miles away.. not sure how high CP would jump to price that business, but my guess would be not high at all. 

 

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Posted by Juniata Man on Thursday, July 8, 2021 4:15 PM

Nimbyism would kill this real quick. Heck, the short line folks who were proposing leasing and reopening UP's Tennessee Pass line ran into a firestorm of opposition from communities along the line. And that railroad is still in place albeit out of service for something like 20-25 years.  

Just imagine the opposition if a railroad attempted to acquire land to build a completely new rail line.

CW

 

CMStPnP

It would be smarter to ease barriers of entry into the railroad industry.   Maybe have some of these shortline firms start laying rail again to compete for business.

 

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Posted by BaltACD on Thursday, July 8, 2021 4:27 PM

Juniata Man
Or about half what has resulted from psr...

CW 

BaltACD 
Ulrich
Reciprocal switching would likely bring about some competition..i.e. instead of having only one rail option, some customers may now have two. i don't think anyone is too worried about that.. More worrisome I think is the more vague spector of "more regulation". That's what the market is reacting to today..  

Reciprocal switching is a guaranteed 2 to 4 day delay in car cycle times.

That will be on top of what PSR has dealt the shipping public, not in place of.

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Posted by jeffhergert on Thursday, July 8, 2021 4:30 PM

One proposed reciprocal switching zone in the US was 31 miles from an interchange point.  You can bet that distance wasn't just pulled out of thin air.  I would guess it's the distance that would encompass most, if not all, facilities of the major industries that use rail service.  It would still leave the smaller rail users out in the cold.  Probably even those within the zone.

I see reciprocal switching resulting in only "cherry picking" of those major customers between the class one carriers. 

I would think that to impose such a switching zone, it would have to also apply to short lines and regionals.  I don't think just imposing it on class ones would survive a court challenge.  This could be detrimental to those railroads in that the class one might be able to "cherry pick" some of their best revenue producing clients.  Thus leaving some of them to survive on a switching charge and whatever's left of their other customers.

It also leaves the track owner as "first/last mile" carrier.  I wonder how well UP will switch out a customer who's freight will be turned over to BNSF for only a switchng charge and vice-versa.

I think in the long run the class ones should spin off more branch and secondary lines.  Allow short lines/regionals to do the "first/last mile" service and have the class ones become mostly line haul carriers between major points.  (I think that's what CSX was looking at on some of their lines.)  The smaller companies do a better job of going after new business and then serving that, and existing, business.

Jeff 

   

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Posted by Juniata Man on Thursday, July 8, 2021 4:31 PM

The psr induced higher cycle times were usually accompanied by higher rates. At least with reciprocal switching, the extra couple of days should be cheaper.

CW

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Posted by jeffhergert on Thursday, July 8, 2021 4:36 PM

Juniata Man

The psr induced higher cycle times were usually accompanied by higher rates. At least with reciprocal switching, the extra couple of days should be cheaper.

CW

 

Hey, the "enhanced" service that PSR brings customers doesn't come cheap. Laugh

Jeff 

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Posted by CMStPnP on Thursday, July 8, 2021 5:45 PM

Ulrich
I like that idea, but critics would point out it would cost billions upon billions in this day and age. Maybe if someone like Elon Musk came along it could happen.. someone with the ability to think huge and with the wherewithal to raise the required capitial.   

Oh think of the negotiations that would go on between an existing Class I and a shortline about to parallel it's line for a distance in a customer intense area.    I think money would be exchanged or some other sweatheart deal to make sure some lines were never built.   In some circumstances the startup would have a lot of cards in their hands.

Yeah it would cost Billions but maybe limit it to private money or use federal funding only if in the National Interest to reduce congestion.

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Posted by BEAUSABRE on Thursday, July 8, 2021 6:23 PM

You mean the PRR, CNJ, WP et al aren't coming back? DARN! Sixty years on from the beginning of the modern merger movment (N&W and VGN in 1959), there's no way to unscramble the egg. Lots of parallel routes have been torn up (talk to your local Sierra Club about laying down tracks on the neighborhood rail-trail), truncated or otherwise downgraded and/or mutilated to allow traffic to be concentrated on the high density "lanes". And, if you spot something, try getting roadbeds back from the nimbys. 

But, it isn't just rails and ships - Biden has declared war on "bigness" in all business. Economies of scale? What's that? It's being done in the name of "the consumer", of course. I'm all for consumer choice, but that ought to be on the basis of somebody having a better way of serving their needs, not on government fiat. 

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Posted by Juniata Man on Thursday, July 8, 2021 6:29 PM

Jeff:

Insofar as interswitching in Canada; my experience with it was that CN, CP and even CSX near Montreal, tended to submit serious bids for business only when it made sense to them from both a financial and network perspective. Put another way, they didn't go after business simply to grab another carrier by the shorts.

With regard to inclusion of short line and regional carriers in any reciprocal switching proposal here in the US; I can tell you that when we developed the NITL competitive switching proposal, we specifically excluded these smaller railroads. One reason was the hope (naive, I will admit) that by excluding them they would either support or, at the very least, not oppose the proposal. Too; many short lines and most regional railroads connect with more than one Class 1. Since the smaller railroads are generally exponentially easier to work with than a Class 1; elimination of paper barriers that prevent these smaller railroads from actually interchanging with another Class 1 would address the option of using a competing Class 1 without causing financial harm to the smaller railroad.

Personally; my preference would still be to see the US adopt Canadian style interswitching and competitive line rates with the STB establishing the various zone switching charges much like the Transport Board does in Canada. I'm doubtful this is politically possible here in the US though.

CW

 


jeffhergert

One proposed reciprocal switching zone in the US was 31 miles from an interchange point.  You can bet that distance wasn't just pulled out of thin air.  I would guess it's the distance that would encompass most, if not all, facilities of the major industries that use rail service.  It would still leave the smaller rail users out in the cold.  Probably even those within the zone.

I see reciprocal switching resulting in only "cherry picking" of those major customers between the class one carriers. 

I would think that to impose such a switching zone, it would have to also apply to short lines and regionals.  I don't think just imposing it on class ones would survive a court challenge.  This could be detrimental to those railroads in that the class one might be able to "cherry pick" some of their best revenue producing clients.  Thus leaving some of them to survive on a switching charge and whatever's left of their other customers.

It also leaves the track owner as "first/last mile" carrier.  I wonder how well UP will switch out a customer who's freight will be turned over to BNSF for only a switchng charge and vice-versa.

I think in the long run the class ones should spin off more branch and secondary lines.  Allow short lines/regionals to do the "first/last mile" service and have the class ones become mostly line haul carriers between major points.  (I think that's what CSX was looking at on some of their lines.)  The smaller companies do a better job of going after new business and then serving that, and existing, business.

Jeff 

   

 

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Posted by flourish96 on Thursday, July 8, 2021 6:29 PM

I'm sure the trucking industry will see no changes while the STB forces higher rates on railroads to give trucks an even bigger advantage over rail just like the pre-Staggers ICC days. I thought this administration was rail friendly and environmentally friendly...

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Posted by BEAUSABRE on Thursday, July 8, 2021 6:32 PM

CMStPnP
to make sure some lines were never built.

What would be the show stoppers would be the impossibility of convincing Wall Street to provide the money ("You want to lay down tracks so you can get involved in a rate war with a Class I?") and the political impossibility of providing taxpayer money to fund private corporations (Yes, yes, I know all about the support the truckers and airlines get, but try and get traction with the voters. To use the trendy expression it's all about the "optics") 

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Posted by BEAUSABRE on Thursday, July 8, 2021 6:37 PM

flourish96
I thought this administration was rail friendly and environmentally friendly...

SUCKER !!

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Posted by Ulrich on Thursday, July 8, 2021 7:04 PM

Reciprocal switching is really only an option for those shippers who already "almost" have two rail shipping options. In many parts of Canada only one carrier is available, and the only realistic option is to use that carrier or another mode like road or ship. But it does seem to work.. the truckers keep a lid on how high rates can go. The railroads can't really charge more than the truckers can charge, and the trucking rates are kept competitive because (unlike rail) there are lots of trucking companies.. hundreds of them specializing in any given lane, thereby keeping rates competitive. 

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Posted by Convicted One on Thursday, July 8, 2021 7:09 PM

flourish96
while the STB forces higher rates on railroads to give trucks an even bigger advantage over rail

Isn't the linked article about the government forcing the railroads to lower their rates? Shouldn't that make  the RRs more price-competitive with trucks? 

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Posted by flourish96 on Thursday, July 8, 2021 7:24 PM

Convicted One

 

 
flourish96
while the STB forces higher rates on railroads to give trucks an even bigger advantage over rail

 

Isn't the linked article about the government forcing the railroads to lower their rates? Shouldn't that make  the RRs more price-competitive with trucks? 

 

 

Ever since trucks became a viable alternative to rail in the 1920s/30s the ICC has shown to set rates higher than what trucking can offer; it wasn't until deregulation in the late 70s and 80s where rail rates started dropping after the ICC gave them their ability to negotiate with shippers directly instead of having to base their rates off of predetermined charts.

So we've been here before, can't say I trust the STB when they say they're going to lower rates; I'm in favor of letting markets figuring out what fair rates are on a case by case basis

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Posted by Convicted One on Thursday, July 8, 2021 8:57 PM

Just me, but I feel that the current admin sincerely wants to do whatever it can to curb inevitable inflation. 

So many businesses are taking advantage of the pandemic to gouge consumers, that I think the gov't is gonna squeeze hard to try and wrestle control.

That's what I think is fueling this story.

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Posted by Murphy Siding on Thursday, July 8, 2021 9:30 PM

BEAUSABRE

 

 
CMStPnP
to make sure some lines were never built.

 

What would be the show stoppers would be the impossibility of convincing Wall Street to provide the money ("You want to lay down tracks so you can get involved in a rate war with a Class I?") and the political impossibility of providing taxpayer money to fund private corporations (Yes, yes, I know all about the support the truckers and airlines get, but try and get traction with the voters. To use the trendy expression it's all about the "optics") 

 

I think you just summarized the DM&E fiasco.

Thanks to Chris / CopCarSS for my avatar.

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Posted by PNWRMNM on Thursday, July 8, 2021 9:49 PM

The idiot sock puppet needs something to distract people from son Hunter's $500,000 paintings.

There is much more to fear from big government than from the railroads and steamship lines.

Mac

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Posted by DSchmitt on Thursday, July 8, 2021 10:05 PM

BEAUSABRE
Biden has declared war on "bigness" in all business.

The "business" that really needs scaling down is the govermnent.

I tried to sell my two cents worth, but no one would give me a plug nickel for it.

I don't have a leg to stand on.

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Posted by CMStPnP on Thursday, July 8, 2021 11:07 PM

BEAUSABRE
What would be the show stoppers would be the impossibility of convincing Wall Street to provide the money ("You want to lay down tracks so you can get involved in a rate war with a Class I?") and the political impossibility of providing taxpayer money to fund private corporations (Yes, yes, I know all about the support the truckers and airlines get, but try and get traction with the voters. To use the trendy expression it's all about the "optics") 

WSOR gets anything it wants in Wisconsin.   Laying new track?   No problem the state says, "how much do you need?".    Though WSOR is very careful it has a long-term (10+ years or more) haulage contract on new track that also has other potential.    I am pretty certain we will see further expansion of WSOR via new rail in the next 10 years but not sure how much.

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