Cost per Car load. Dollars.

[kenneo]

With those differences in captive and build-out rates, you can see why the DME wants into the Powder River fields and the BN and the UP want to keep them out. The rates will drop to Chicago area interchanges "like a rock into a lake". It would make it a bit difficult for the DME to make a profit after meeting capitalization costs and the BN's and UP's stockholders would take it in the pocket books.

With the external rate of return what it is for the railroad industry, reduced rates are not what they need. One thing that they do need in this arena is to get higher container rates so that the external rate can raise sufficiently to cover required rate of return on capitol and also support lowering rates for things like PRB coal to realistic levels. Right now, commodities like coal support the short-falls from commodities like containers.

Obviously, the solution is not that simple, but such things like open-access and what the State of Montana is trying to do with grain rates don't help things a bit, either. Contract rates, which are not necessarily a bad thing, have had the effect of driving rates down to such levels as we see now which, if such commodities as Montata wheat and PRB coal rates are reduced to realistic levels, the affected railroads would be in a real hurt. As mentioned above, contract rates are disappearing (several reasons) and tariff rates are returning which will help in the reballancing needed.

"What we have here is [a can of Spammed Worms and] a failure to communicate."

[Anonymous]

Eric,

You hit the nail on the head, and what will eventually happen is that new rail-dependent capital will locate (with some exceptions - see question on Idaho coal plant proposals) where they can get competitive rates. This is why the proprietary closed access system is much like the problems of Social Security, in that both are set up in a way that will eventually bankrupt the system some time in the future. The closed access rail system is an anachronism compared with the other transportation modes, which are all open access. Economic growth can only be fostered when customers have price and service choices via the most optimal modal systems.

As more and more rail dependent capital migrates to competitive rail locales, the railroads will need some form of subsidy to stay afloat under the current set up. The idea of giving taxpayer aid to entities that do not engender price choice for the customer will have a hard time getting support. As much as railroaders loathe the idea, the concept of separating out the infrastructure into an independent entity, supported by some form of tax incentive, and regulated to prevent price gouging and use discrimination, is the only way to rectify this situation for the long term, and to do so in a way that will win support of customers.

Equalization. That's what it's about. Equalize the government support systems among the transportation modes. Equalize the ability of consumers to have a choice of transporter service providers for each mode. To only do the former is to subsidize monopolistic tendencies. To only do the latter is to institute socialistic re-regulation.