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[quote]QUOTE: Originally posted by futuremodal What was the shortline viability rule of thumb? 100 carloads per mile per year? How many carloads minimum would probably ship from this plant each year, more than a few hundred? If so, then UP can more than afford to pay for a few miles of upgraded spur line. Remember, this plant will be captive to UP, which means UP is getting up to 400% of revenue to variable costs. Obviously, something else is going on with the railroad's management to derail this project. Something other than reasoned logic and up front honesty. But as mudchicken points out, the railroads are right and everyone else is wrong! [/quote] OH, here we go with the rules of thumbs... If you follow that rule, which dates back to the days just after Staggers you'd better be prepared for an expensive reality check. The kind of traffic I'd expect out of this facility is gonna require a heavy rebuild, hence the high cost numbers. Those tanks are heavy beasts and have a nasty tendency to pick on every weak spot in the track structure. If you read the article, again, you'll notice that UP was asked to rebuild the spur for between $2Million and $3Million. Also, Baard was getting 60 acres of land that the City bought for $600,000 (60 acres @ $10,000/acre) for free ($1). Finally, Baard says the plant will "eventually" produce 100,000,000 gallons of ethanol (I am assuming annually although it is not said). So, obviously, having gotten $600,000 in property for free and having NO CLUE about that nice choo choo over there that will bring us our corn...we'll just guess that it's free too... A lot of these ethanol outfits are out there trying to get RRs interested in helping them. They get big government tax breaks and tax credits for building these facilities and running them, plus BIG incentives from the local and state governments including land purchases, services (watrer, sewer, electric, gas and roads) and more tax breaks (property and sales taxes). What are they out of pocket, not much. Further, I strongly suspect the $140Million number is inflated to include the land cost and probably a bunch of the other stuff thrown in for free. After all, the community is competing with other localities for this plant and its BIG 50 jobs [insert sarcasm here]. (How many jobs will actually be there???) There are a very large number of investment groups out there right now trying to slap up ethanol and biodiesel plants on rail lines across the country and get as many benefits without putting up $$ to get in on the free government handouts and sell ethanol that is or will be required by law in most states soon. OK. back to RRing. Apply "customer discount" to the wildly speculative 100,000,000 gallon estimate by the customer 100,000,000/ 10 = 10,000,000 gallons annually. Customers always inflate numbers to encourage the RR to invest. Tank car 20,000 gallons capacity each. 500 carloads per year. Hardly a big customer worth of a large buildout or rehab project. The revenue from those 500 cars would take at least 10 years to put a small dent in the investment. Even if Baard moves a LOT more traffic than projected, it still is a nonstarter for UP. FMs projection of 400% of costs is simply drawn out of the air. Rates are simply not that high and would not be sustainable at that level. Oh, and FM, just for the record, MC is far closer to being right on this one than you are. This deal is a loser... LC
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