"Open Access" and regulation of railroad freight rates.

[bobwilcox]

Rail customers have two other alternatives beside using another railroad or using a truck.  Many rail customers have more than one manufacturing plant making the same product.  If the railroad serving their widget factory in MI charges too much they can fullfill the order from their midget factory in TX. The railroads serving the plants in MI and TX need to understand the threat posed by the other source for widgets. If an electric utility in Wuhan finds to cost of BC coal too high he can switch to fuel oil from Kuwait.  The CPR needs to understand the threat of product competition when they make their rates.

[TimChgo9]

As I read these threads, I begin to wonder if Open Access is a good idea. Now, I have no railroad freight moving experience at all, all I know is what I read. But it seems, that opening up rail lines to "anyone" who wants to use them, while someone else (be it government, or a corporation, or what have you) maintains the infrastructure seems like a model that could be fraught with problems. While, from what I read, "competition" would increase, and would benefit those captive shippers out there (would it?), it seems like a system asking for trouble.

Aside from safety, and maintenance issues, would Open Access mean that any Tom, Dick or Harry that could afford to buy a train, ask for permission to run it on the rails?

Let me ask it this way.. Say that I have some money to burn, and I find out that the railroads are now "Open Access" and I have always wanted to buy a train, and run it, and make some money. So, I buy an old locomotive, and some cars, and put myself in business as "TimChgo9 Transportation Company" Now, under OA, would I be able to just put my train on the tracks, and go drumming up customers, or not? How would I be regulated, would the FRA still play a part, or not? Who inspects my equipment, and the training of my Engineers and Brakemen? Or under OA, would all of the regulations be cursory? Or nonexistent? And if the government were to be the ones in control of the infrastructure, would repairs even be made, or would one have to jump through bureaucratic hoops to get something simple done? How long would it take to replace defective rail, or ties, or worn switch points? Not to mention signals, crossing gates, and the like. Since the owner would have no vested interest in a profit, then what would be the motivation to fix anything? AND if there is an accident due to poor infrastructure maintenance, who reimburses the affected carrier, as well as the shipper?

What would be the regulating body? Airports can be used by anyone who wants to start an airline, whether they own 2 747's or a bunch of Gulfstream I's, they may be able to start the airline, but they have to submit to the FAA as far as airworthiness of their airplanes, crew training and etc... So, would I have to submit to the FRA, or in lieu of them, would the infrastructure owner demand standards. And who gets priority? The big Railroads, or is it a first come first served.... In other words, if I am there with my old GP40 and my half a dozen cars, can I ask for and get priority over, say, a Chicago to Seattle intermodal? Who would dispatch? Does that fall under "Infrastructure" or would each carrier dispatch their own?

I don't see these questions being answered, all I see are one person's apparent dislike, if not loathing of the big railroads, and perhaps his desire for OA is to see the "giants" cut down to size, and his remarks are followed by, either jibes, links to other places, or large, broad based answers that don't deal in nuts and bolts.

The theory of a "level playing field" where everyone can "compete fairly" is a nice one.... in theory. But, would it not lead to a period of confusion, over crowding, reduction of service, and possibly a decrease in safety? And if that were the case, would that be good? (Before anyone says anything, I know that some railroads defer maintenance, and have the occasional "safety issue", since I am not a railroader, the railroaders in this forum could probably address the safety thing better than I can)

I don't think OA is a magic bullet as some in this forum would like to suggest. It can't be, there is nothing that is a "magic bullet" for anything. Logic would dictate that if OA were implemented, it would lead to a potential mess. While the system we have now works for some, and not really for others, would we be doing rail transportation in this country any favors by going OA?

[MichaelSol]

Don't make it too complicated. You can pose as many constraints as you like or look at the lowest common denominator or worst case scenario if you wish. Taking that approach will answer the questions for you. We wouldn't have the Staggers Act in the first place if Congress and the industry took that approach.

Assume a level of "reasonablenss." That's always a good place to start.

What do you think would be reasonable?

Suppose Open Access meant, in general, open access with the following service providers, BNSF, UP, CSX, NS, CN, CP, KCS, NdM, MRL, DME. Would that idea suggest answers to your questions? Each could also bid as operators on the line or system segments. An alternative, each could be a proportionate owner of the system, and they would select, bid out, contract out maintenance and operations.

[Datafever]

I have another question, though. I've read alot of theory and some statistics on this thread, and now I'd like to see some factual examples (please, no links!) of pricing for captive shippers compared to rates for non-captive shippers and compared to other modes of transportation (primarily trucking). I suspect that the price per ton-mile is lower for almost anything by rail, even for the so called captive shipper, than it would be by truck, but this is just an assumption, as I have no facts to back it up with.

I don't have information about trucking.  For captive vs. non-captive shippers, here is an example:

To ship grain from Minot, ND to Portland, OR, the cost per ton-mile has dropped from about 3.4 cents in 1997 to about 2.9 cents in 2004.  Minot is served by only one Class 1 railroad.

To ship grain from Sioux Falls, SD to Portland, OR, the cost per ton-mile has dropped from about 1.9 cents in 1997 to about 1.5 cents in 2004.  Sioux Falls is served by two Class 1 railroads.

I think that it is fair to say that if a shipper in Minot could ship grain to Portland by truck for less than 3 cents per ton-mile, then they would be doing so.

[Anonymous]

There are a couple of points that keep getting made over and over that just kind of nag at the back of my cognitive processing.  These points frequently seem to be used to bolster each other and they do provide a backdrop for each other.  These points are:

1) Trucks are not (always) a competition for trains.

2) Imported goods are never captive.

Both statements are fairly accurate.  The argument seems to go something like this:

Domestic manufacturers that are captive shippers are at an economic disadvantage to imported goods.  Since imported goods will get low competitive rail rates while domestic manufacturers (at least the ones for whom truck transport is not an alternative) are likely to be tied to only one Class 1 railroad and therefore pay exorbitant monopolistic rates.  This gives imported goods an economic advantage over domestic goods and contributes to the trade imbalance.

And yet, what types of commodities cannot reasonably be transported by truck?  Minerals (such as coal and potash) are brought up as an example.  Grains (such as wheat and corn) are another example.  Liquids (such as ethanol).

But these are not the types of commodities that are generally imported.  Most imported goods can generally be reasonably transported by truck or rail.  Domestic manufacturers of those types of goods can also use truck or rail for transport and therefore they are not captive shippers.  Therefore they are not paying outrageous monopolistic rates for transportation of their goods.  And therefore, they are on level playing ground economically.

I don't know that I have done a very good job of expressing what I wanted to say, but hopefully my point has been made.

Notwithstanding the "argument", it rests on a false premise, that trucks and railroads each have an impregnable market segment only they can fill.  Coal, grain, potash, ethanol are all not only "reasonably" transported by truck but in enormous volumes and often for some surprisingly long distances.  Transportation is too complex to reduce to simple generalizations about the market-matched niches of transportation modes, and the result of that reduction has been and continues to be a lot of bad public policy.  There are plenty of examples of coal moving 500 miles by truck and 5 miles by train, for instance.

But now you're setting up an undefined straw man to try and shoot down the premise.  The combination of shipping volumes, distance, and time sensitivity generally dictate which mode is chosen for the main haul.  Are you talking about 10,000 tons of coal/grain/potash/et al, or are you talking about a few hundred tons of coal/grain/potash/et al?  Are you talking a few hundred miles or a few thousand miles?  Once you determine your product's shipping characteristic, then you decide how it moves - other than intermodal combo's, you're not going to sub an alternate mode in place of the optimal mode.

In other words, you're probably not going to call the railroad to ship 100 tons of flaxseed 50 miles down to the barge port, nor are you going to call J.B. Hunt to ship 10,000 tons of potash from Saskatchewan to Portland OR, nor are you going to call Bubba's Barge line to ship 10 UPS trailers from Dubuque to Memphis...........

[Anonymous]

As I read these threads, I begin to wonder if Open Access is a good idea. Now, I have no railroad freight moving experience at all, all I know is what I read. But it seems, that opening up rail lines to "anyone" who wants to use them, while someone else (be it government, or a corporation, or what have you) maintains the infrastructure seems like a model that could be fraught with problems. While, from what I read, "competition" would increase, and would benefit those captive shippers out there (would it?), it seems like a system asking for trouble. Aside from safety, and maintenance issues, would Open Access mean that any Tom, Dick or Harry that could afford to buy a train, ask for permission to run it on the rails? Let me ask it this way.. Say that I have some money to burn, and I find out that the railroads are now "Open Access" and I have always wanted to buy a train, and run it, and make some money. So, I buy an old locomotive, and some cars, and put myself in business as "TimChgo9 Transportation Company" Now, under OA, would I be able to just put my train on the tracks, and go drumming up customers, or not? How would I be regulated, would the FRA still play a part, or not? Who inspects my equipment, and the training of my Engineers and Brakemen? Or under OA, would all of the regulations be cursory? Or nonexistent? And if the government were to be the ones in control of the infrastructure, would repairs even be made, or would one have to jump through bureaucratic hoops to get something simple done? How long would it take to replace defective rail, or ties, or worn switch points? Not to mention signals, crossing gates, and the like. Since the owner would have no vested interest in a profit, then what would be the motivation to fix anything? AND if there is an accident due to poor infrastructure maintenance, who reimburses the affected carrier, as well as the shipper? What would be the regulating body? Airports can be used by anyone who wants to start an airline, whether they own 2 747's or a bunch of Gulfstream I's, they may be able to start the airline, but they have to submit to the FAA as far as airworthiness of their airplanes, crew training and etc... So, would I have to submit to the FRA, or in lieu of them, would the infrastructure owner demand standards. And who gets priority? The big Railroads, or is it a first come first served.... In other words, if I am there with my old GP40 and my half a dozen cars, can I ask for and get priority over, say, a Chicago to Seattle intermodal? Who would dispatch? Does that fall under "Infrastructure" or would each carrier dispatch their own? I don't see these questions being answered, all I see are one person's apparent dislike, if not loathing of the big railroads, and perhaps his desire for OA is to see the "giants" cut down to size, and his remarks are followed by, either jibes, links to other places, or large, broad based answers that don't deal in nuts and bolts. The theory of a "level playing field" where everyone can "compete fairly" is a nice one.... in theory. But, would it not lead to a period of confusion, over crowding, reduction of service, and possibly a decrease in safety? And if that were the case, would that be good? (Before anyone says anything, I know that some railroads defer maintenance, and have the occasional "safety issue", since I am not a railroader, the railroaders in this forum could probably address the safety thing better than I can) I don't think OA is a magic bullet as some in this forum would like to suggest. It can't be, there is nothing that is a "magic bullet" for anything. Logic would dictate that if OA were implemented, it would lead to a potential mess. While the system we have now works for some, and not really for others, would we be doing rail transportation in this country any favors by going OA?

Did you notice how you framed it all in your last sentence?  E.g. "doing rail transportation.....any favors" rather than "doing US rail shippers any favors".  Just a thought, but why is it that US politicos are supposed to prioritize railroads over rail shippers? 

But to answer your question, yes OA is meant to benefit rail shipping in the US, not necessarily the current rail industry.  Obviously, an unhealthy rail line sector is bad for rail shipping.  But what we are witnessing today is that a strong and powerful rail industry is not necessarily good for rail shipping interests.  So somewhere between having a healthy but abusive rail line sector and an advantageous rail shipping sector but struggling railroad industry is where we're trying to find the utilitarian optimum.

BTW - for the record, I see OA as just one option for bringing comprehensive intramodal rail competition to bear.  Another option I'd favor is keeping the integrated model but making sure all regions of the country have at least three rail service providers, e.g. triopoly or better.  The latter would probably involve a lot of track sharing to prevent overcapitalization.

As for anyone with some bucks buying their own locos and railcars and offering their services (just like many trucking outfits), I'd say the dispensers of scarce capacity would laugh you out of the office, while the overseers of ample capacity would probably consider your bids.  You'd be better off just forming a 3rd party intermodal company like Pacer, then subletting your rail transport needs to one of the presumed established rail service providers - BNSF, UP, KCS, DME, et al.  Other than the largest trucking outfits like JBHunt or UPS, I can't see too much of non rail outfits deciding to run their own trains with an advent of OA.

[Datafever]

But to answer your question, yes OA is meant to benefit rail shipping in the US, not necessarily the current rail industry.  Obviously, an unhealthy rail line sector is bad for rail shipping.  But what we are witnessing today is that a strong and powerful rail industry is not necessarily good for rail shipping interests.  So somewhere between having a healthy but abusive rail line sector and an advantageous rail shipping sector but struggling railroad industry is where we're trying to find the utilitarian optimum.

And this point may be where a significant amount of disagreement will occur.

The STB has found that NS is the only class 1 railroad that is revenue adequate, which means generating sufficient revenue to not only covering operating costs and maintenance costs, but also the future cost of replacing depreciating assets and building additional capacity.

What we are seeing today is a railroad system that is falling apart because the cost of replacing track is exceedingly high, and maintenance can only do so much to keep the trains rolling.

While the railroad industry may be in much better health than it was 20 years ago, it still has a long way to go to get to the point of being a "strong and powerful rail industry".

[greyhounds]

But now you're setting up an undefined straw man to try and shoot down the premise.  In other words, you're probably not going to call the railroad to ship 100 tons of flaxseed 50 miles down to the barge port, nor are you going to call J.B. Hunt to ship 10,000 tons of potash from Saskatchewan to Portland OR, nor are you going to call Bubba's Barge line to ship 10 UPS trailers from Dubuque to Memphis...........

No, Dave.  You're the one with the straw man.  Each of the movements you cite has significant competitive alternatives.  Just not the alternatives you (straw man like) cite.

[oltmannd]

As I read these threads, I begin to wonder if Open Access is a good idea. Now, I have no railroad freight moving experience at all, all I know is what I read. But it seems, that opening up rail lines to "anyone" who wants to use them, while someone else (be it government, or a corporation, or what have you) maintains the infrastructure seems like a model that could be fraught with problems. While, from what I read, "competition" would increase, and would benefit those captive shippers out there (would it?), it seems like a system asking for trouble. Aside from safety, and maintenance issues, would Open Access mean that any Tom, Dick or Harry that could afford to buy a train, ask for permission to run it on the rails? Let me ask it this way.. Say that I have some money to burn, and I find out that the railroads are now "Open Access" and I have always wanted to buy a train, and run it, and make some money. So, I buy an old locomotive, and some cars, and put myself in business as "TimChgo9 Transportation Company" Now, under OA, would I be able to just put my train on the tracks, and go drumming up customers, or not? How would I be regulated, would the FRA still play a part, or not? Who inspects my equipment, and the training of my Engineers and Brakemen? Or under OA, would all of the regulations be cursory? Or nonexistent? And if the government were to be the ones in control of the infrastructure, would repairs even be made, or would one have to jump through bureaucratic hoops to get something simple done? How long would it take to replace defective rail, or ties, or worn switch points? Not to mention signals, crossing gates, and the like. Since the owner would have no vested interest in a profit, then what would be the motivation to fix anything? AND if there is an accident due to poor infrastructure maintenance, who reimburses the affected carrier, as well as the shipper? What would be the regulating body? Airports can be used by anyone who wants to start an airline, whether they own 2 747's or a bunch of Gulfstream I's, they may be able to start the airline, but they have to submit to the FAA as far as airworthiness of their airplanes, crew training and etc... So, would I have to submit to the FRA, or in lieu of them, would the infrastructure owner demand standards. And who gets priority? The big Railroads, or is it a first come first served.... In other words, if I am there with my old GP40 and my half a dozen cars, can I ask for and get priority over, say, a Chicago to Seattle intermodal? Who would dispatch? Does that fall under "Infrastructure" or would each carrier dispatch their own? I don't see these questions being answered, all I see are one person's apparent dislike, if not loathing of the big railroads, and perhaps his desire for OA is to see the "giants" cut down to size, and his remarks are followed by, either jibes, links to other places, or large, broad based answers that don't deal in nuts and bolts. The theory of a "level playing field" where everyone can "compete fairly" is a nice one.... in theory. But, would it not lead to a period of confusion, over crowding, reduction of service, and possibly a decrease in safety? And if that were the case, would that be good? (Before anyone says anything, I know that some railroads defer maintenance, and have the occasional "safety issue", since I am not a railroader, the railroaders in this forum could probably address the safety thing better than I can) I don't think OA is a magic bullet as some in this forum would like to suggest. It can't be, there is nothing that is a "magic bullet" for anything. Logic would dictate that if OA were implemented, it would lead to a potential mess. While the system we have now works for some, and not really for others, would we be doing rail transportation in this country any favors by going OA?

Did you notice how you framed it all in your last sentence?  E.g. "doing rail transportation.....any favors" rather than "doing US rail shippers any favors".  Just a thought, but why is it that US politicos are supposed to prioritize railroads over rail shippers? 

But to answer your question, yes OA is meant to benefit rail shipping in the US, not necessarily the current rail industry.  Obviously, an unhealthy rail line sector is bad for rail shipping.  But what we are witnessing today is that a strong and powerful rail industry is not necessarily good for rail shipping interests.  So somewhere between having a healthy but abusive rail line sector and an advantageous rail shipping sector but struggling railroad industry is where we're trying to find the utilitarian optimum.

BTW - for the record, I see OA as just one option for bringing comprehensive intramodal rail competition to bear.  Another option I'd favor is keeping the integrated model but making sure all regions of the country have at least three rail service providers, e.g. triopoly or better.  The latter would probably involve a lot of track sharing to prevent overcapitalization.

As for anyone with some bucks buying their own locos and railcars and offering their services (just like many trucking outfits), I'd say the dispensers of scarce capacity would laugh you out of the office, while the overseers of ample capacity would probably consider your bids.  You'd be better off just forming a 3rd party intermodal company like Pacer, then subletting your rail transport needs to one of the presumed established rail service providers - BNSF, UP, KCS, DME, et al.  Other than the largest trucking outfits like JBHunt or UPS, I can't see too much of non rail outfits deciding to run their own trains with an advent of OA.

With true OA, you wouldn't have to buy anything.  The cost of entry into railroading would be near zero.  All the equipment you'd need is available for lease.  All you'd need is a little bit of credit to secure a lease on a locomotive, an engineer's licence and a way to keep HOS records and away you go.   Those operators with a young, non-union work force would be the winners and the traditional carriers would be the losers.  OA would play out exactly like it did in the airline industry with all the "legacy" carriers, that used to "own" the routes going belly up (United, Delta, USAir -twice, American, TWA, PanAm, Continental) as the new guys with low pensions and labor rates took hold (Southwest, JetBlue, Airtran).

If you restrict or regulate access, then it isn't "open" and is much more like the regulated truck companies used to operate.  Notice that most of them have gone by the wayside and have been replaced by JBHunt, Schnieder and other post-regulation upstarts.

But, because of the huge number of OD pairs for rail shipments in the US, the best analogy would be if UPS and FedEx were required to allow "open access" to each others sorting centers.  Completely unworkable.