286K

[Mookie]

Mark - I am Jane Q Public Taxpayer. I am not going to look at this from a Wall Street Journal perspective - economics.

My personal perception is that the roads, bridges and streets that those trucks travel on are the same ones that I use. So in my mind, this is a smooth picture. We need to repair them because we share them. Truckers are those nice, safe drivers that you can't see around. They are an accepted part of the highway.

But the railroads don't share their space with me. So why would I invest money in keeping them running? Plus I pick up the Omaha paper and find that by selling the Overnite Corp, UP was able to give 400 certain execs a one-time gain worth $62.3 million. That would haul a lot of veggies to my state.

I don't read the WSJ, I don't have a degree in economics and I don't work for a trucking/railroad company. And I don't ride Amtrak. I vote, pay taxes and read the paper. So why would I want to support the railroad industry at all? In fact, if I didn't read Trains Magazine, I would be pretty unaware there was any problem in transporation at all.

Is this maybe a PR problem as well?

[Anonymous]

Mookie, like I said earlier, it's totally up to you to spend your money however you wish.

Here's an example from your neighboring state, Kansas, from a report released in Transportation Quarterly in Fall 2003:

If all the short line railroads in the state were abandoned tomorrow, the extra wear-and-tear it would cause to the state's highways, as trucks replace the short-line railroads, would be $57.8 million per year. The fuel tax take from the trucks would increase, because they'd be hauling the freight the short lines used to haul, and burning diesel fuel. The extra take will be just $288,531 a year. Who will be asked to make up the missing $57,511,469? I don't know. Kansas DOT says the only other source is the people who drive cars and pay income taxes, which I guess would be people like you and me.

[Mookie]

Martha and I have insider information, so I understand where the railroads are coming from. But does the regular public who only knows that a train is something they have to wait for and always when they are in a hurry. And how many of them read Transporation Quarterly - two that I know of - you and probably Mudchicken.

I know we aren't going to solve this, but it is an interesting subject and I appreciate your taking time from your busy schedule to explain this to me.

[Anonymous]

Mookie, you're 100% correct on that. Hardly anyone is paying attention. The state DOT association (AASHTO) put out a report a year ago warning that if something is not done about railroad infrastructure, that the cost to the U.S. public in the next 20 years will be $1 trillion (not billion, trillion) in extra transportation costs. I saw a press release from them recently that expressed frustration that no one is listening.

[JoeKoh]

Mark
Here in Ohio the local represenitives are listening.however like most states we are in a budget crunch.Like I said US 24 is crowded enough.
stay safe
Joe

[Train Guy 3]

QUOTE: Originally posted by Mark W. Hemphill

Jay: I do not know if much has changed from when you were in the rate-making side of the business. If there are more sophisticated costing formulas, no one has shown them to me. The questions you pose are ones I wish I could answer!

While much has been improved in track structure, the key in this case is the rail itself. The head-hardened rail now being used is much more sophisticated than what was available three decades ago. Also, railroads have moved up another increment in rail weight. As you probably recall, in the 1970s the standard heavy rail section was 136 lb. (or 132 lb. on some roads such as UP). Now, it's 144 lb. I think the extra weight is all in the head. We have an article on rail underway, from which I hope to learn a lot.

As for concrete vs. wood, in general terms, unless damaged by dragging equipment, a derailment, or improper installation, the concrete tie should last virtually forever, or so I am told. The purchase price between wood and concrete favors wood -- even assuming you're buying oak ties out of Arkansas or Oklahoma -- but the installation cost for concrete is much higher, as is the cost to get them to the site because they are so much heavier.

Moreover, it's and all-or-nothing proposition. You can't mix the two, and the concrete tie takes a different ballast section, so you have to replace the ballast at the same time. Concrete ties give a much stiffer track, which saves on fuel (the track depresses less under load, which means the locomotives are not always climbing out of a hole). Concrete also gives better gauge holding on curves.

As well as the ballast, don't concrete ties also require a different type of spike.

[Anonymous]

Originally posted by Mark W. Hemphill
[
The real question is economic value: which mode provides more in which lane for which commodity? And, just as important, how much do we (the public) want to insert taxpayer money to enhance the economic value of one or more modes? And, how much do we want to favor one mode in order to get other things we value -- such as safety, environmental quality, peace and quiet, and other things -- that are difficult to quantify in dollars? Right now, the public is continuing its decision to provide an open-access, taxpayer-provided highway system with no fixed costs for truckers and user fees that do not reflect true costs, while at the same time hoping that railroads can continue to provide a high fixed-cost, franchise-based system that doesn't pay for itself.

As we can see, this huge input of taxpayer money has shifted the economic value decision toward trucks in many commodities and lanes since the 1920s. (This is not necessarily a bad thing; the advent of trucking has had huge economic benefits and greatly increased wealth in this country.) Every shipper is going to pick the best solution, and if the public wants to give you (the shipper) money, you're not going to turn them down. Your competitor won't!

The public can change its mind at any time. Whatever the public decides to do is their decision to make, not mine, not this magazine's, and not a trucking or railroad companys'. All we do in Trains is point out the outcomes of any given policy. One outcome of the current policy is that it is causing disinvestment in railroads, through such things as abandonment and extraction of cash, which is given to investors to put into other businesses which presumably have a better long-term outlook. Maybe the public doesn't NEED railroads, in which case this decision is fine. If they do, then this decision is not so fine.

Before anyone decides to put taxpayer money into a transportation mode, or take it out, they might want to decide what kind of an America they want to live in. The decisions made about transportation will influence these decisions and their outcomes.

Mark,

I am wondering if the "open access" concept might improve the public's awareness of these issues. Although I assume it is not your place or that of TRAINS to take a position one way or the other on open access, there are two areas I'd like to explore. First, if the ownership of certain railroad right of ways were shifted to a state, port district, or regional transportation authority, wouldn't that in and of itself improve the public's awareness of the needs of railroad infrastructure maintenance? Secondly, if truck companies, 3PL's, large shippers, or even barge lines began running their own trains on a public rail right of way, wouldn't there be a greater degree of interaction between John/Jane Q. Public and railroad operators? I know it is kind of a vague line of questioning, but with the aforementioned correlation between improving efficiencies and reduced revenues for the rail industry as a whole, it seems to me to be only a matter of time until some form of open access is instituted by the regulators as the only way to truly save railroading in this country.

Dave Smith

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It won't happen anytime soon bubba....Today congress killed the tax break for railroad reinvestment in ICETEA21reauthorization bill (see LC's posts) and jacked up the spending on highways even though Bu***hreatens not to sign that.

As long as the playing field is badly/ irrepairably tilted the way it is, bury the OPEN ACCESS idea. The utilities that want it do not want equity, they only want a larger profit.
If the pendulum swings the other way for about 50 years and the subsidy issue balances out (right now they won't even increase road crossing safey allowances from 1970 levels), let's open up the idea to discussion again...[:(][:(][:(]

MC[banghead][banghead][banghead]

[Anonymous]

Why are people such as mudchicken so ridiculously threatened by open access? Maybe it's the fact that open access is the obvious cure to the issue of monopoly power and lack of competitive rate setting that is screwing so many captive rail shippers. I guess industry insiders might feel that their jobs would be threatened if open access became a reality due to the sudden onset of competition. If open access is what it takes to bring the majority of shippers back to using rail, then so be it. Otherwise, the rail industry is heading for a disasterous implosion as rail CEO's pad their bank accounts while the infrastructure crumbles.

If railroads were separated into their respective operating and infrastructure owning components, there would be more incentive for the infrastructure companies to provide a state of the art right of way for the 286k and 315k cars. Otherwise, they will lose their customers to another infrastructure company. This is how competition works. With the macro-monopolies we have now, the incentive to invest in the proper maintenance for any but the most heavily used lines just does not exist. Rail lines deteriorate, service suffers, and the rail shippers on those lines either switch to trucks or close down their operations and invest their capital elsewhere. It is a situation that should have been addressed in the Stagger's Act back in 1980, or at least during the UP/SP and BN/SF mergers. Unfortunately, Linda Morgan and the other greased palms of the STB have created a situation in which much of the nation is under monopolistic inefficiencies. Our ag, forestry, and export sectors are suffering as a result.

If open access is buried as some are suggesting, then we should all prepare ourselves for the economic implosion that is not too far off. It is inevitable.

[Anonymous]

I have another point of view regarding open access.

Railroads are natural monopolies and therefore there are cost advantages from integration. Open access would translate into many high-cost operators instead of few lower-cost big-railroads. Nevertheless, a good legal framework is essential for competitive railroads. For those interested in economic studies, this paper (only for engineers and economists) may help:

Bitzan, J. "Railroads Cost and Competition. The implications of introducing competition to railroad networks". Journal of Transport Ecoomics and Policy, Vol. 37, Part 2, May 2003, pp. 210-225.

On the other hand, separating infrastructure and operations would create incentives for increased rail/wheel damage that don't exist today and that would be very expensive to manage. If train operators are not responsible for rail maintencance, they wouldn't care about evenly load cars.

Finally, this is the 21st century. Locomotives are no longer steam and railroads are no longer monopolies. Let's face it, diesels and highways rule.

[mudchicken]

Left: Rather difficult to have a rational, open discussion with someone with a closed mind. You have a very unrealistic idea of what competition is. In essence everyone else gets a discount other than the transportation provider who goes broke. The classic example is RailTrack, but since you chose not to read the above post, you'll never understand....and again, I posted that as a maintenance person's point of view, not the entire industry .

All open access does is take the playing field and replace it with a bottomless pit. Congrats- no more levelling required! But nothing is there anymore.......Take the blinders off!

PS - If open access works for the airline industry works so well, try to fly out of Cincinnati sometime.

[Anonymous]

OK, so some of you might have wondered where I was while this long discussion was raging. I have been out "Turning, burning and earning" (to the non-rails, that means working). Although not entirely working on my rest, things have been busy of late as NS benefits from the CSX and it's recent service issues.

I don't have a lot of time now as I really need some sleep so I won't pretend to respond to everything said here. I will hit just a few high points.

1. Call me a dreamer, but I can't agree with everything in Mr. Hemphill's article. Short lines will manage to survive so long as there are small communities and industries that need rail service. Even now, the forces of legislative muscle that have historically supported shoirt lines are gathering. They gain force with each manufacturing job lost to overseas competition. As always, these forces were never truly the short lines themselves but the customers and constituents themselves.

2. The Kansas DOT study mentioned above by Mr. Hemphill is indeed powerful as is the endorsement of freight rail by AASHTO and other government groups. It demonstrates the futility of trying to have a truck perform a train's job.

3. MC. On many things I agree with you, especially open access. It won't work, the British example only illustrates some of the problems with it. The heart of open access, splitting of the essential functions, creates a divergence of responsibility that cannot be overcome and results in a downward spiral of maintenance. Our friend "Limp" is merely spoiling for a fight. He seems to think that price cuts attract customers, that tells me how little he knows about our industry. Any competitive advantage that those shippers get from competition will go to their pockets, not to keep railroads solvent.

3. MC. I can't agree with you about operating people knowing nothing about track and structures. Having done some of both on short lines the best short lines are where the people work together well. Unfortunately, many track folks I have met are much better at the hands on than at the paper aspect of railroading. Turn them loose as management and you have a major mess. Operating people don't know track well, but they can learn when management structures it so they need to. And believe it or not, many track guys can learn to run on a short line and do pretty well at it.

Anyhow, I'm too tired and showing as second out now, so it's bed time. Peace.

LC

[kenneo]

QUOTE: Originally posted by leftlimp

Why are people such as mudchicken so ridiculously threatened by open access? Maybe it's the fact that open access is the obvious cure to the issue of monopoly power and lack of competitive rate setting that is screwing so many captive rail shippers.

If railroads were separated into their respective operating and infrastructure owning components, there would be more incentive for the infrastructure companies to provide a state of the art right of way for the 286k and 315k cars.

Please see earlier posts by Mark and myself near the start of this thread. Rates are so low that the railroad can not earn sufficient money to purchase, maintain and operate the lines they have. Exceptions to that are rare. You sight coal rates. They, if fact, should be not less that 50% higher than they are now. These rates are regulated as a response to the "Robber Barons" of the 1800's. Part of the idea behind these regulations is that the railroad should pay for these peoples actions for infinity.

This idea is not new. The land grants that were used to build the Western Roads had, for the most part, a provision that the Feds goods and people would be carried by the railroads for free or at a almost free rate without end. This provision of the Land Grant Act was removed AFTER WW2.

And about how well "Open Access" will work, well, look at England. They did that there when they privatized BR. I am not permitted to use words that accurately describe the situation that has caused.

The folks, such as Mud Chicken, that have spoken against this idea are not looking out for their jobs. In fact, I would postulate that MC would gain job security and greater wages under open access.

It ustawas that a business put back into itself what it cost to keep running before it paid to the stockholders. That kept the business healthy and well repaired. Now, since a certain Federal Court decision in Delaware about 25 years ago, all stock companies are required to pay out 100% of their after tax earnings to the stickholder (maximized earnings) and do the repair and depreciation and stuff like that by borrowing. That way, the bank gets rich and the stockholder gets rich. The company goes bust. Take a very close look at the railroad industry. The railhead is just barely above ground level and the flanges are kicking up a dust storm. You can not borrow yourself into prosperity. All borrowing will get you is bankruptcy.

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[jeaton]

Look, I am going to stick by my view that open access is not going to solve any problem with crumbling infrastructure. As we all know, trucks have open access to all public highways. So why have we gotten behind on highway maintenance and construction? And why would anybody think that privately or publicly owned railroads would always charge operating companies rates high enough to maintain tracks in good order? I'd venture there would be a lot of playing the often deadly margin game. " We already have twenty five trains a day running over the tracks. We don't notice any wear after each train, so what if we add one more, even if we have to cut the rate to get the business." All of a sudden you loose 15 of the higher priced trains to some competition and you're screwed.

Beside that, I think that open access probably would add to operational management overhead. One guy gets in the seat of an 18 wheeler, and has almost unlimited options to pass other vehicles, pull off the roadway or turn off to another road as he chooses. Try doing that with a train.

My point has been and is, anybody who thinks there is some big potential for increased economic efficiency with open access is probably wrong. At best, you get a short term benefit, but only if you ignore the the non-cash cost of the assets you are using. In other words, forget depreciation because it is just a paper cost. Anybody want to crunch some numbers to try to prove me wrong?

[kenneo]

QUOTE: Originally posted by tomtrain

These days, K can refer to 1000s. I grew up learning that M refers to 1000s. I guess we're each supposed to pick our own language so we can all misunderstand each other.[:(]

I grew up with the M also. K is the KILO version, kilo meaning one thousand.

[Anonymous]

Jay, Charlie, Eric: You'll get no disagreement from me. Open-access is a hopelessly inappropriate scheme for railroads. We don't even have to invoke history for a reason: the technology of railroading is a sufficient argument against open-access. It simply doesn't lend itself to open-access.

Unlike air, water, and highway, railroads are constrained in orders of freedom--you can't go up, down, left, or right to go around something, so someone has to manage the traffic flow constantly, and the imperatives of traffic are inviolate, rigid, and constantly operative. It is a horrible problem at railroads already to decide what train or traffic or car gets precedence. Fracturing the current management structure into hundreds of competing entities would grind it all to a halt. There are too many uncontrollable variables to use a logic system or a set of rules to provide rank and order. We'd have to build an immense government bureaucracy to adjudicate all the disputes, and wouldn't that be efficient!

Unlike highways and oceans and to some extent air, railroads require operational rigor--you can't just get on the track anytime you feel like it.

Unlike air and water and for most purposes roads, railroads have a huge, inflexible, fixed, expensive, complicated, fragile, and constrained infrastructure that someone has to design, manage, and pay for. The oceans and the skies are free infrastructure. We do have to build port and airports, but these are very simple compared to a railroad yard: again, you can just drive around on a big piece of concrete or in a big pool of water if some idiot breaks down in front of you.

Actually, we already HAVE true open-access: nothing is stopping someone from building a new railroad and thus destroying the so-called monopoly enjoyed by existing railroads. Nothing, that is, except the fact that it could never pay for itself.

If there really, truly, was all this excess profit being made by railroads, or the tremendous waste through mismanagement that is alleged by many, then shrewd entrepreneurs would have already solved the problem by building new, parallel railroads, and forcing existing companies to cut their prices and become more efficient, or forcing them out of business. That is exactly what happened until about 1900, then stopped, because by that point the amount of railroad infrastructure vastly exceeded the ability of the market to support it.

The market has never caught up. Recall that the ICC, which was created to correct the evil of overpricing, found out that the true problem was underpricing. That is what it restricted in its desperate gambit to keep weak railroads from collapsing one by one until there were no railroads left at all. It was all for naught once the U.S. government built a virtually free highway and waterway system, thus kicking the props out from under the ICC's mandate.

Consider the Powder River Basin, the greatest prize in railroading ever. The DM&E has beat back one legal challenge after another, but yet it still hasn't built the line. Is there funding to build it? Not that I have heard of. Good lord, if the PRB can't justify a new railroad, what can?

[Anonymous]

Here's the deal: You are all arguing against a possible solution to the problems of lost business and underutilization of our rail infrastructure by using the British experience as the poster child for the alleged shortcomings of open access. The problems of the British experience were simply the expected growing pains of a radical shift in ownership of the infrastructure and occurred several years ago. Part of the problem was that the British open access experiment was somewhat akin to the California partial deregulation of the energy markets. Instead of having multiple infrastructure ownership, they allowed a single company to own the entire rail grid, thus there was no competitive incentive to keep the lines in tip top shape for the users. The regulators had to come back in and make sure RailTrak lived up to its responsibilities. Now that they have had time to adjust, it seems to be working just fine, at least according to TRAINS and other railroad press. Yes, I'll admit it will take more time to truly give a reasonable evaluation of the open access experience, but that is preferable to not trying it at all.

Secondly, the rail lines which are threatened with abandonment due in part to the spector of 315k cars do not carry "25 trains a day". They are lucky to run trains once or twice a week (and at 10 mph if that). It's not that the traffic potential doesn't exist, it's that the potential shippers by and large got or are getting fed up with unreliable service because the big RR's won't provide cars in an expedient manner, and/or at the competitive rate. Sometimes the big RR's won't even provide a quote for a new service. Nine times out of ten that shipper is going to abandon the railroad and shift to trucks, even with the inherent added expenses. Examples of such are abundant here in the Pacific Northwest, where the state government is having to take over ownership of some critical shortlines just to keep the prospect of future rail service alive. Unfortunately, the lines in question used to have a connection to the nearby barge ports, but before the Class I sold the lines to the shortline operator, they abandoned the key connection to the river ports to keep the shortline operatory from running shuttle trains to the barge lines. Then the Class I decided a few years later that they'd rather have the farmers truck their grain a few hundred miles to the Class I's mega grain loading station instead of allowing the short line to gather the harvest in rail hoppers and pass them on to the Class I at the nearest connection. Obviously, the farmers pretty much en masse started trucking ALL their grain to the nearest barge port rather than the mega rail terminal.

It's not that the traffic isn't there, it's that it isn't moving by rail, and all logic says that it should be moving by rail. But for the monopolistic situation, it would. Can you imagine what would happen if an electric utility decided to tear down a 10 mile length of transmision line prior to selling to another entity, just to keep the new owner from accessing a prior end market? Needless to say, there would be Senate hearings and prison time for the corporate CEO's. So why are railroads allowed to take such actions?

No one here would deny that the nation's shortline and regional rail infrastructure is severly underutilized, thus not enough trains to pay the overhead, thus a whole lot of defered maintenance, thus an inability to handle the heavier cars. If all the nation's shortlines and regionals could shed their captive status and get competitive rail quotes from any and all Class I operating companies for their online shippers (both current and potential shippers), there would be more than enough traffic for most of them to have the revenues necessary to maintain the track to its optimal status.

If anyone else has a better solution to the 286/315k crisis without resorting to using tax dollars for private captive lines, I'm all ears.

[TH&B]

There is still one way to solve much of the problems mentioned AND save tax $$$$. That is all and everyone pays user fees for every thing they use. Start with transportation and electricity, then go to water usage and health care....etc...etc...etc ......... in theory that is.