STB to hold hearings on grain shipments

[greyhounds]

Greydog,

Yes, costs are assigned for each car move.  Mostly it is pretty arbitrary and can be skewed any way management wants it to be.  Ever wonder why some branch lines the railroads are seeking to abandon have higher costs then some other line with a favored customer?  Don't even try to tell me that does not happen.  Certainly poor trackage, slow speeds and increased crew costs have something to do with it but the railroads can find ways to "allocate" other costs as they deem fit.

This doesn't happen.

No railroad company "wants" to abandon any line or service.  They don't make money by not hauling freight.  They are "forced" to abandon lines that can not be made to pay their way. 

It a business decision - and what they "want" or "don't want" has nothing to do with things.  It's how the analysis works out.  The big problem with branch line analysis is not the costing - you can do that for a branch fairly accurately. (as opposed to carload movement costs, which you can't do accurately.) You know the MofW expenses, the crew cost, the taxes, the locomotive hours, the fuel used, etc. 

The problem with analyzing a branch is how much of the through movement revenue do you allocate to the branch.

 

So how about just adding all the fixed costs and divide that by all the car miles, ton miles or train miles and assign the individual $$ amounts that way?  Seems fair and makes a good model but that is not entirely accurate.  Then you can add the variable cost for the move to figure the cost to decided whether or not the rate will be suffecient or not.  I doubt the railroads are too keen on setting cut rates any more just to increase the volume. (We lose money on every load but we will make it up in volume)  The near perfect example of this is all the downtown office space available on upper floors sitting vacant all over the place and landlords who want to hold out for their set rate rather than fill the space with a lower rate.  Go figure.    

Well, which one is it?  Car miles, ton miles, train miles or some other totally arbitrary method of pricing?

What you're proposing is what basically existed prior to deregulation.  If you're proposing we go  back to that you'd better have a United States Railroad Plan because the existing system of private companies won't work.    You're trying to arbitrarily allocate fixed cost.   This will destroy the financial viability of the railroads and we'll be right back where we were 25 years ago with deteriorating infrastructure (because there was no money to fix it) and bankrupt railroads.

I see two big problems with such an arbitrary scheem. 

1) It will fail to produce the optimal railroad service output for our society/economy.  This will harm those of us who live in the US and make our economy less competitive and robust.  This failure would be because the railroads would be prohibited from competing for freight that they otherwise could profitably handle to the benifit of society.  You're setting an artificial rate floor that will keep prices higher than they would otherwise be. I have no idea why you would want to do this, but you seem to think it's a good idea.

2) It will fail to allow the railroads to maximize their return to shareholders.  If they can't do this they will fall into disrepair and ill serve the nation.  I have no idea why you would want to do this either.

 

[arbfbe]

FM,

 

I thought we were talking about Conrad here.  I limited my comments to my views of why he lost his election.  I hardly think all Democrats are squeaky clean and now they are in power there will be even more temptations placed in front of them to take the fall from grace.  We will all have to keep an eye on them and exercise our perogative to vote them out in 2008, 2010 and 2012 if needed.

The election of Testor to the Senate in and of itself did not change the composition of the senate.  Several races went to the Democrats, Montana and Virgina were just the last two counted and so they are memorable.  They are no more important to the change than any of the other individual races were.

I fail to see how Burns is/was the only one in the state carrying the torch for regualtory reform for grain shippers in Montana.  As I pointed out, Testor and Schweitzer both have a personal interest as well as a professional interest in lower or more competitive shipping rates in MT.

I fail to see how the coal issues you mention hinge upon the committee chair in one Senate committee.  The syndiesel is one of the Governor's pet projects. Montana owns a lot of coal buried beneath school trust lands which could be developed for profit and to supply needed funding for public education in Montana.  We will have to see if successful development of these coal projects will require federal funding or tax incentives to become profitable.  Right now things are still in the very preliminary stages of development.  Schweitzer is doing a lot of leg work to bring people and organizations together on this one.  Conrad was not voted out of office account Montanans did not want to see coal based industry developed in Montana.  He was voted out since he seemed less interested in representing Montana voters than outsiders with lots of money.  He was shooting from the hip and striking out at others in a manner not supported by residents towards visitors to the state.  Finally, he was beat by someone who shared nearly the same constituency as Burns himself.

So if you really think Montanans lack the big picture view you have failed to understand the state.  At least we know the local tapestry we see is colorful but distorted.  I am sorry we are not trying to eminent domain the BNSF mainline into an open access railroad for your studies but we generally do not impose upon others that way.  Probably never will.

We just collectively voted to change our junior senator.  That alone should not be too big an issue anywhere else in the country for at least a few years anyway.     

[arbfbe]

Greydog,

Yes, costs are assigned for each car move.  Mostly it is pretty arbitrary and can be skewed any way management wants it to be.  Ever wonder why some branch lines the railroads are seeking to abandon have higher costs then some other line with a favored customer?  Don't even try to tell me that does not happen.  Certainly poor trackage, slow speeds and increased crew costs have something to do with it but the railroads can find ways to "allocate" other costs as they deem fit.

This doesn't happen.

******************************REPLY*******************************

So unbelievably untrue.  You need to get out on the ground around the railroad to find out what really happens.  Yes, it happens all the time.

****************************************************************************

No railroad company "wants" to abandon any line or service.  They don't make money by not hauling freight.  They are "forced" to abandon lines that can not be made to pay their way.

*********************************REPLY**************************

So you do not think railroads cherry pick the freight they want to haul and price the commodities and services they would rather be rid of?

******************************************************************  

It a business decision - and what they "want" or "don't want" has nothing to do with things.  It's how the analysis works out.  The big problem with branch line analysis is not the costing - you can do that for a branch fairly accurately. (as opposed to carload movement costs, which you can't do accurately.) You know the MofW expenses, the crew cost, the taxes, the locomotive hours, the fuel used, etc.

*********************************REPLY**************************

The "analysis" is many times based upon data meant to give the desired result.  The figures are so nebulous at times as to allow any decisions desired.  The railroads know how to cook the books to bend the ICC and STB any way they want the findings to go.

******************************************************************* 

The problem with analyzing a branch is how much of the through movement revenue do you allocate to the branch.

***************************REPLY***************************

That part is correct.  Unfortunately different lines may and have been assigned far different values for the same costs at the whim of management.  If you give the boss the answer he wants it is commonly beneficial to the careers of those who did the "analysis".

******************************************************************

 

So how about just adding all the fixed costs and divide that by all the car miles, ton miles or train miles and assign the individual $$ amounts that way?  Seems fair and makes a good model but that is not entirely accurate.  Then you can add the variable cost for the move to figure the cost to decided whether or not the rate will be suffecient or not.  I doubt the railroads are too keen on setting cut rates any more just to increase the volume. (We lose money on every load but we will make it up in volume)  The near perfect example of this is all the downtown office space available on upper floors sitting vacant all over the place and landlords who want to hold out for their set rate rather than fill the space with a lower rate.  Go figure.    

Well, which one is it?  Car miles, ton miles, train miles or some other totally arbitrary method of pricing?

****************************REPLY***************************

Take your pick.  Assigning costs is truely arbitrary.  Follow the accounting practices, sort of, cover with lots of camouflage and get things the way you want them.

*******************************************************************

What you're proposing is what basically existed prior to deregulation.  If you're proposing we go  back to that you'd better have a United States Railroad Plan because the existing system of private companies won't work.    You're trying to arbitrarily allocate fixed cost.   This will destroy the financial viability of the railroads and we'll be right back where we were 25 years ago with deteriorating infrastructure (because there was no money to fix it) and bankrupt railroads.

************************REPLY**********************************

I never advocated going back to regulation.  The railroads arbitrarily assign fixed costs every time them cost out a move and negotiate a rate.  Since most of the larger moves are all under private contract now it would not be easy to dig down through the data.  Now what is to stop the railroad from moving more fixed costs to smaller shippers in order to keep a larger customer happy?  Especially if the larger shipper has far more potential to increase volume in the long run.  How does the railroads setting their own rates in their own manner threaten the economic viability of the industry?

************************************************************************ 

I see two big problems with such an arbitrary scheem. 

1) It will fail to produce the optimal railroad service output for our society/economy.  This will harm those of us who live in the US and make our economy less competitive and robust.  This failure would be because the railroads would be prohibited from competing for freight that they otherwise could profitably handle to the benifit of society.  You're setting an artificial rate floor that will keep prices higher than they would otherwise be. I have no idea why you would want to do this, but you seem to think it's a good idea.

2) It will fail to allow the railroads to maximize their return to shareholders.  If they can't do this they will fall into disrepair and ill serve the nation.  I have no idea why you would want to do this either.

 

****************************REPLY***************************

Most of your post makes so little sense I wonder if even circular logic can straighten it out.  I see no real cause and effect between your posit and conclusions.  I would like to try to hire out on your Pollyanna railroad and see it survive in the world of today's big boys.  Probably could not quite earn the revenues to stay in business.

***********************************************************************

[arbfbe]

Since this thread has pretty much been hopelessly hijacked there is another on the forum offering some insight to how the hearings are turning out.

http://www.trains.com/trccs/forums/949220/ShowPost.aspx

 

Perhaps that thread can be kept on track. 

[Datafever]

Now what is to stop the railroad from moving more fixed costs to smaller shippers in order to keep a larger customer happy?  Especially if the larger shipper has far more potential to increase volume in the long run.  How does the railroads setting their own rates in their own manner threaten the economic viability of the industry?

As I understand it, this shifting of fixed costs is the basis of differential pricing, although it isn't always the big shippers that are the recipients of the price breaks.  More than likely, it will be the shippers that have alternatives that will get those price breaks.

If a railroad has three customers (just to make the illustration clear enough for me to understand it), that combined produce 10 trains (tons, ton-miles, whatever) and the fixed costs are $100, then the fixed costs could theoretically be allocated at the rate of $10 a train.  But if one of the customers would become a non-customer if it had to pay that much, the railroad may decide to make that customer pay only $5 a train instead.  The other two customers end up paying a higher rate (depends upon how many trains each customer runs).

But the other two customers are still better off.  If the first customer goes elsewhere, the remaining two customers must now pay even higher rates to make up the difference.

[Datafever]

Since this thread has pretty much been hopelessly hijacked there is another on the forum offering some insight to how the hearings are turning out.

http://www.trains.com/trccs/forums/949220/ShowPost.aspx

Perhaps that thread can be kept on track. 

That thread seems to have found its own branch line.

[Anonymous]

FM,

 

I thought we were talking about Conrad here.  I limited my comments to my views of why he lost his election.  I hardly think all Democrats are squeaky clean and now they are in power there will be even more temptations placed in front of them to take the fall from grace.  We will all have to keep an eye on them and exercise our perogative to vote them out in 2008, 2010 and 2012 if needed.

The election of Testor to the Senate in and of itself did not change the composition of the senate.  Several races went to the Democrats, Montana and Virgina were just the last two counted and so they are memorable.  They are no more important to the change than any of the other individual races were.

I fail to see how Burns is/was the only one in the state carrying the torch for regualtory reform for grain shippers in Montana.  As I pointed out, Testor and Schweitzer both have a personal interest as well as a professional interest in lower or more competitive shipping rates in MT.

I fail to see how the coal issues you mention hinge upon the committee chair in one Senate committee.  The syndiesel is one of the Governor's pet projects. Montana owns a lot of coal buried beneath school trust lands which could be developed for profit and to supply needed funding for public education in Montana.  We will have to see if successful development of these coal projects will require federal funding or tax incentives to become profitable.  Right now things are still in the very preliminary stages of development.  Schweitzer is doing a lot of leg work to bring people and organizations together on this one.  Conrad was not voted out of office account Montanans did not want to see coal based industry developed in Montana.  He was voted out since he seemed less interested in representing Montana voters than outsiders with lots of money.  He was shooting from the hip and striking out at others in a manner not supported by residents towards visitors to the state.  Finally, he was beat by someone who shared nearly the same constituency as Burns himself.

So if you really think Montanans lack the big picture view you have failed to understand the state.  At least we know the local tapestry we see is colorful but distorted.  I am sorry we are not trying to eminent domain the BNSF mainline into an open access railroad for your studies but we generally do not impose upon others that way.  Probably never will.

We just collectively voted to change our junior senator.  That alone should not be too big an issue anywhere else in the country for at least a few years anyway.     

Just keep your eyes and ears on Boxer.  There is very little reason to expect business as usual in our nation's coal development projects.