Montana vs BNSF, railroad blinks

[greyhounds]

from Futuremodal: "If the grain rates were mileage based, why are rates Minnesota to Porland less than rates Montana to Portland, which are more than rates Eastern Washington to Portland and Nebraska to Portland?"

Because they're not fully "mileage based" rates. And you refuse (and that's the right word) to understand that because your ideology.

Any rate has to cover a lot of various costs. Everything from the cost of capital (ownership of the cars, locomotives, track, etc.) to labor to fuel to management.
Those are the four basic elements needed (capital, labor, raw materials and management) to produce anything; from transportation to baby formula.

The miles needed to move a load of freight is only one part of the cost incurred.

You, and those lunatics in Montana, seem to think that the cost equation for rail freight movement is: cost=(miles x cost per line haul mile) It isn't.

The equation is cost= "a" + (miles x cost per line haul mile) Where "a" includes everything from putting the crew up in a motel at an origin/destination terminal to sending a bill to the shipper.

This means, to any logical person, that the per mile, (or per ton mile if you so choose - it's the same thing) cost of moving a load of freight by rail a shorter distance will naturally and normally be greater than the cost per mile of moving a load of freight a longer distance. Else why do you think the short hauls go by truck?

And that's what the BNSF wheat rates reflect. The absolute charge for moving a load of wheat from Minnesota to a PNW port is higher than the absolute charge for moving a similar load of wheat from Montana to a PNW port. But because there are fewer miles from Montana to the port than from Minnesota, the "per mile" charge (or "per ton mile" charge) will be greater from Montana.

That's just math and a logical person will understand it. But you're a "True Believer" and you reject facts and reason that conflict with your ideology. A very smart man named Eric Hoffer wrote a very good book about "True Believers". It's called: "The True Believer". Pick it up and read it. You may find yourself.

[Anonymous]

QUOTE: Originally posted by edbenton

Montana may be closer to Portland, but have you ever tried to pull some of the grades out there on the highway there are multiple 5-6 percent grades going arcoss the state. Just to get to Washington you have to pull 3 major passes 2 in montana and 1 in Idaho. The railroads do not have it any easier.

BNSF's High Line has a maximum 1% grade westbound through Montana. I believe the Great Falls line has a max 1.4% grade. MRL has a 1.8% at Bozeman Pass next to I-90, and a 2.2% at Mullan Pass. The railroads do have it much easier. Plus, all the grain coming from the Midwest bound for PNW ports must pass through Montana along one or more of these routes. Again, if distance was the determinent of rates, Midwest grain shippers would be paying more than Montana grain shippers.

Just for fun, you can emulate the rail's experience in moving grain through Montana's mountain country to PNW ports by taking U.S. Highway 2 from the east over Marias Pass to Spokane, then take I-90/U.S. 395/I-82 to the Hermiston area, then head due west through the Columbia Gorge to the lower Columbia River ports. Although the highways will take the shorter, steeper alignments, you get a good idea of the railroads' relatively gentle alignment through these same areas.

[Anonymous]

Ed,

I'll agree that the topic is played out. I'll just make one last attempt to get a point across.

If we use inductive reasoning, we can see that rates for the Northern Tier of the U.S. are higher than other areas, all other things being equal. In this news story provided courtesy of arbfbe, BNSF states that it will now reduce the fuel surcharge for those areas of the U.S. that make up the Northern Tier. They say nothing about a similar action in areas such as Eastern Washington or Nebraska, implying that the rates in those areas outside the Northern Tier are already substantially lower.

[arbfbe]

So here is today's further news about the lower grain rates along the northern hi-line.

http://www.ble.org/pr/news/headline.asp?id=13345

We will have to see what "temporary" means, perhaps just as long as the legislature is in session and there is a chance of the Senate passing the tax bill.

Note to MP173, many of the legislators are business persons. Now how does that conundrum work out on the smartness scale? <G>

quote from MP 173 " I have always maintained that an average business person is far smarter than the smartest politician."

[MP173]

Future:

I repeatedly came up with tariff rates which supported my arguements in the old post.

I do not wi***o revisit that entire conversation.

What I do understand (from having years of rate and traffic experience) is that a company will normally "mileage" based rates on file. I know that BNSF does as I have seen those rates. In the past, at least in trucking, those rates were called class rates.

Common carriers have the right to file lower commodity rates from point to point than the filed mileage rates. These rates are usually filed either to gather new business or to protect the current business from competition.

I have not seen these rates in BNSF's tariff. The discussion by others in the past Montana Wheat thread was very vague in the tariff authority on those exception rates. It was a very frustrating discussion. Different rates seemed to appear each time a point was proved.

I would assume that carriers have the ability to match or beat competition, including trucks, barges, and other railroads. The rights to match or beat that competition on SPECIFIC moves does not mean that all other shippers' rates will be lowered accordingly.

Years ago, one of the railroads (I believe SP) had contract rates with a ocean carrier. Part of that contract forced SP to lower the rates to that ocean carrier if it developed contract rates which were lower with a competitor. That sucked. The whole thing of a contract is that it is a meeting of the minds between two parties and that it should be confidential.

Because BNSF and another party have negotiated lower rates does not (at least in my opinion) force BNSF to offer lower rates to all other shippers. Specific shippers of grain should negotiate lower rates on their own. The fact that there is no other competition is brutal for Montana wheat farmers.

I have nothing against the farmers. I dont own BNSF stock. So, I really dont have a vested interest in either party. But, I do know as a sales profession that I attempt to maximize profit on each and every order with each and every customer. With certain customers I hold a very substantial edge and I leverage that advantage. With other customers I have no leverage and must choose whether or not I want the business.

Montana needs to do something to gain some leverage, other than political hocus pocus. I have always maintained that an average business person is far smarter than the smartest politician. I would not want to burn the bridge that pushed the only transportation source that I have into a corner they dont want to be in.

ed

[Anonymous]

Fileing taxes sucks,It's even worse when you owe the Government.

[edbenton]

Montana may be closer to Portland, but have you ever tried to pull some of the grades out there on the highway there are multiple 5-6 percent grades going arcoss the state. Just to get to Washington you have to pull 3 major passes 2 in montana and 1 in Idaho. The railroads do not have it any easier.

[jeaton]

Speaking of taxes, I have to finish mine today and send some money, go to the dentist, get to some over due house and lawn maintenance completed and then maybe post a comment on this thread.

I always do things in order of most fun to least fun.

[CSSHEGEWISCH]

Courts have repeatedly stated that the first duty of a firm's management is to maximize the return to stockholders. If that means charging a higher rate for shipments from Montana to compensate for higher costs in the state (property tax gouging, akin to New Jersey in the past), then that's what management has to do.

[Anonymous]

QUOTE: Originally posted by MP173

Greyhound:

I agree completely. I kept pulling rates from the tariffs which indicated the rates were pretty normally biased based on mileage.

No one could ever pull a definative rate which gave any proof. Everything was based on yet another assumption. I dont understand the methodolgy in which rates can be proven excessive, but I would image carriers can respond to competitive pricing.

I think Montana is just in a tough situation. Too far from market and no competitive manner to get their product to market.

ed

Ed,

If the grain rates were mileage based, why are rates Minnesota to Porland less than rates Montana to Portland, which are more than rates Eastern Washington to Portland and Nebraska to Portland? I am astounded that you and others did not understand the numbers put up in the "other" thread. As we already stated, even BNSF admits it charges more to move Montana grain than those areas on either side of Montana, so if even BNSF can get it, why can't you? If the rates were mileage based, Montana grain shippers would be paying less than Minnesota farmers, and would be paying the same as Nebraska farmers.

The rates aren't mileage based, which even you allude to in your last sentence. They are based on pricing ability, e.g. differential pricing, e.g. monopolistic allowances. There are no assumptions about this, just plain fact.

The whole argument wasn't whether BNSF engaged in differential pricing, it was how this situation came about and some of the "solutions" being explored by the "victims". Contrary to your statement about Montana being in a geographically tough situation, it is much closer to Portland than Minnesota, so if you discerned from the tariff schedule that the rates are "pretty much" mileage based, you evidently need a geography lesson. You and greyhounds can be in denial all you want, it won't change the facts, even if you cannot cognitively perceive them.

BTW, this recent action by BNSF is just window dressing to try and stave off the perfectly legal proposed change in how a state delegates it's property valuations, Gabe's objections not withstanding. BNSF is not going to stray from it's prime directive of maximizing the returns for it's mostly foreign stockholders, to the detriment of U.S. producers. For those overseas stockholders, it's a win-WIN. Get a small return on the "investment" via the railroad stockholding and a much larger return via the degradation of the economic position of a major global trade competitor in the form of the U.S.

[MP173]

Greyhound:

I agree completely. I kept pulling rates from the tariffs which indicated the rates were pretty normally biased based on mileage.

No one could ever pull a definative rate which gave any proof. Everything was based on yet another assumption. I dont understand the methodolgy in which rates can be proven excessive, but I would image carriers can respond to competitive pricing.

I think Montana is just in a tough situation. Too far from market and no competitive manner to get their product to market.

ed

[greyhounds]

QUOTE: Originally posted by MP173

And just when I thought it was safe to start posting again....MONTANA WHEAT RATES return!

I still shudder at the time I spent on that subject. I never did find any indication the BNSF was charging more, but that is not for me to decide.



ed

I'm glad you said that. I never saw any indication that the BNSF was charging more to move a carload of wheat (under similar conditions) from Montana to a PNW port than they were from a more distance origin either. But a couple people sure kept saying they did.

This is just a political horse for the Montana Democrats to ride. It's got nothing to do with reality.

[chad thomas]

QUOTE: Originally posted by arbfbe

A quote from the article:

"The sponsor of the rail-tax bill, Rep. Bob Bergren, D-Havre, has succeeded in shepherding the legislation through the House Agriculture Committee and through the House. The bill now awaits action by the Senate Taxation Committee."

It is half way through the legislative process but that appears to be far enough to call the BNSF's bluff. The article also states it is part of the fuel surcharge adjustment not as a result of the fuel surcharge adjustment.

Chad, go bait someone else, I won't take it.

Alan

I wasn't baiting you. I guess you can dish it out but can't take it.

[Junctionfan]

Has the state of Montana thought that perhaps the reason why BNSF might charge them more for shipping grain is because the property taxes near or in close proximity to farmland is higher than most states so they are raising rates to compensate?

I don't know personally so this is just an inquiry.

[arbfbe]

A quote from the article:

"The sponsor of the rail-tax bill, Rep. Bob Bergren, D-Havre, has succeeded in shepherding the legislation through the House Agriculture Committee and through the House. The bill now awaits action by the Senate Taxation Committee."

It is half way through the legislative process but that appears to be far enough to call the BNSF's bluff. The article also states it is part of the fuel surcharge adjustment not as a result of the fuel surcharge adjustment.

Chad, go bait someone else, I won't take it.

Alan

[martin.knoepfel]

The article sais implicitely that the bill has not yet passed. It is in the (Montana) senate taxation committee, but BNSF agreed to lower fuel-surcharges on grain-shipments.

[gabe]

I wonder if Montana farm land is cheaper than Iowa farm land . . . .

Sorry, I couldn't resist taking one last parting shot.

Gabe

[MP173]

And just when I thought it was safe to start posting again....MONTANA WHEAT RATES return!

I still shudder at the time I spent on that subject. I never did find any indication the BNSF was charging more, but that is not for me to decide.



ed

[Anonymous]

QUOTE: Originally posted by arbfbe

BNSF Railfan,

It looks like you learned your posting ethics from the BNSF's business ethics. Do you enjoy hijacking posts or are you just trying to increase your star count? I believe there are other posts concerning the unfortunate events on the UP in Iowa, perhaps you should post your thoughts on that matter where they belong.

Thank you for your consideration.

alan

Ok so I was wrong!

[mudchicken]

Amen...

And now you know why the ICC Valuation Act of 1913 happened. This, to a large degree, is history repeating itself.

[gabe]

Point taken.

[greyhounds]

QUOTE: Originally posted by gabe

QUOTE: Originally posted by arbfbe

The Montana legislature passed a law tying BNSF property taxes to the rates they charge for grain shipped out of Montana relative to what they charge neighboring states to the east. BNSF says they will sue but it appears they are offering the carrot before the stick.

http://www.ble.org/pr/news/headline.asp?id=13331

Where in the article does it say that they passed this law. This law is mega unconstitutional. I can't believe they would waste the money passing it.

Gabe

Oh, it certainly wasn't a waste of money. It did some politicians a lot of good.

Here's the template (it's the six "V's")

1) Vilan (The evil BNSF)
2) Victim (The "Family" farmers)
3) Vindicator (The politicians)
4) Vehicle (the media giving the politicians publicity and status as saviors)
5) Value(the public's ideal of the the family farmer and that life should be 'fair')
6) Void(the public's lack of knowlege of Constitutional Law and railway economics)

The politicians are simply beating up on the BNSF to further their own fortunes. Wether anyone besides themselves really benifits from their actions is not relavant. Its been happening since the first rails went down. They've "created" the rate issue and keep telling the folks of Montana that they're "crusading" against the BNSF.

This isn't about helping the farmers, it's about helping the politicians.

[jeaton]

I thought that I saw somewhere that the BNSF change to the method of calculating the fuel surcharge applies system wide. If I am correct on that point, I would guess that it is an effort to more accurately tie the increased fuel cost to the service produced.

If Montana wants to consider it a special favor to themselves, so be it.

Jay

[gabe]

QUOTE: Originally posted by arbfbe

The Montana legislature passed a law tying BNSF property taxes to the rates they charge for grain shipped out of Montana relative to what they charge neighboring states to the east. BNSF says they will sue but it appears they are offering the carrot before the stick.

http://www.ble.org/pr/news/headline.asp?id=13331

Where in the article does it say that they passed this law. This law is mega unconstitutional. I can't believe they would waste the money passing it.

Gabe

[chad thomas]

arbfbe,
Want some cheese with that whine?

[arbfbe]

BNSF Railfan,

It looks like you learned your posting ethics from the BNSF's business ethics. Do you enjoy hijacking posts or are you just trying to increase your star count? I believe there are other posts concerning the unfortunate events on the UP in Iowa, perhaps you should post your thoughts on that matter where they belong.

Thank you for your consideration.

alan

[Anonymous]

Also the UPRR had a bad wreck on the IOWA line near Blairstown.
BNSFrailfan.

[Anonymous]

Oh that's 'NOT" being very fair at all to BNSF.
BNSFrailfan.

[arbfbe]

The Montana legislature passed a law tying BNSF property taxes to the rates they charge for grain shipped out of Montana relative to what they charge neighboring states to the east. BNSF says they will sue but it appears they are offering the carrot before the stick.

http://www.ble.org/pr/news/headline.asp?id=13331