When to double-track?

[Kevin C. Smith]

The railroad "machine" works at its most effective economic efficiency at about 20-25% of capacity, 8-10 trains per day on a typically configured mainline. That reflected the typical mainline utilization of smaller railroad companies which did not have the traffic to "load up" their mainlines to achieve the conventional view of efficiency which was to operate as close to capacity as possible. Using the Poole Formula, a manager can clearly see why, at a given tariff rate, he might earn a profit of 12% on 7 trains per day, but suffer a negative 4.4% return on revenues at 20 trains per day, even though line capacity is 35 trains [an example I just took off of a specific model configuration]. System "friction" in the form of train delays and crew costs at 20 trains per day in that specific example adds 18% to the cost of hauling the freight -- a huge increase when considering that a 5% increase in the price of fuel throws everyone into a tailspin ... At capacity, 35 trains per day, the cost of hauling freight is 52% higher per ton than at 7 trains per day.

Wow! This is facinating stuff, Michael. These numbers are way below what I would have thought would be a point of diminishing (let alone negative) return. Thanks for another gold mine, here.

[MichaelSol]

My position is that improved communications allowed a certain increase in the efficiency in the dispatching function to the point that the observed percentage ratio of siding to running time could be lower than the formula calculation.

The formula is based on the measured running time, whatever it happens to be.  And that is a key: if a given practice is better than a previous one, the formula automatically recognizes that since the data input reflects the improvement -- it has to. But the formula also looks at the underlying mathematics: for a given number of trains, there is a corresponding number of meets which is mathematically related; it can't get "lower". You can speed up various aspects of efficiency, but then that applies across the board and doesn't change the relative comparisons of the configurations. Poole in fact included in his formula a differential between train orders, ABS, and CTC -- giving CTC a 20% advantage over the train order system.

 

[MichaelSol]

Even just intuitively, I will accept the idea that as traffic grows over a given segment, the average time for trains to cross the segment will increase.  The formula cited was appearantly developed from actual observations of train movements circa 1960 or so. 

Well, it was developed during the period 1943 through 1962 as a tool to analyze CTC innovations.

[jeaton]

Even just intuitively, I will accept the idea that as traffic grows over a given segment, the average time for trains to cross the segment will increase.  The formula cited was appearantly developed from actual observations of train movements circa 1960 or so.  Given that, it is reasonable to assume that for any given set of parameters, the formula would have been reasonably accurate in predicting average transit times for railroad operations of that same period. 

My position is that improved communications allowed a certain increase in the efficiency in the dispatching function to the point that the observed percentage ratio of siding to running time could be lower than the formula calculation.

Seems to me that there is another point worthy of consideration.  Assuming a direct correlation between total transit time and operating cost, and further assuming that operating cost is on the order of 50% of revenue for the 5 train volume, total profit for the 25 train volume would be on the order of three times that of the 5 train volumn.

Personally, I'll sacrifice the per train margin for the total profit gain.  

[Railway Man]

I question capacity limitations that everybody complains about (except engineers) because if I recall, the average capitalist mentality would say "keep pushing the envelope until it starts costing money." The transcon for example...this line segment through Kansas had alot of single track. Then some BNSF exec woke up and realized "hey, we're almost  at 100 trains a day, lets propose to double track this line all the way to chicago." Did the decision occur because of conjestion and crew time-outs or because well paying over-seas customers didn't appreciate their containers taking 2 and 1/2 days to make the run into the Port of Los Angeles? I know, I know...they both cost money but I would guess the decision ultimately is decided by interference with revenue as oppossed to conjestive running conditions. 

mlg4'81/2"

The decision was made so the railroad could add more trains and increase revenue.

Congestion doesn't just happen without a concious decision to create it -- someone makes the decision to add trains to the point that the capacity is saturated.  There's an immense experience base to railway operations, and if someone asks if there's spare capacity for new train XYZ with such-and-such horsepower/ton, such-and-such schedule, etc., and wants to hear an honest answer, he'll get one.  The railway may accept temporary congestion for various reasons, and most congestion is temporary.  The single-track lines I used to be responsible for could some days be a jackpot and two days later would be dead.  Traffic fluctuated violently from one day to the next depending upon what our connections did or didn't do, the weather, grade-crossing accidents, mine problems, power-plant problems, the opening day of elk hunting season, power shortages we sometimes created ourselves and sometimes another railroad created for us, etc.  You could ask if we should have built additional sidings and 2nd main track to handle the bad days, and we asked the same question, but every time the economists and finance experts calculated the cost of the new track vs. the savings of the new track, it came up cheaper to pay the inefficiency of the congestion on the bad days.

If there's recurring and permanent congestion on a railroad, or the railroad anticipates that new business being proferred will cause congestion, it compares the revenue potential to the cost of additional capacity, and either demarkets the low revenue business until the volume decreases and the high-revenue traffic can be handled efficiently on the existing plant, or it adds capacity which is paid for by reduced cost of operation for the existing business plus the new business it can now handle.  There's nothing particularly difficult about the calculations; but as Bob Wilcox pointed out, the hard part is predicting future traffic levels.  Most customers are unwilling to offer take-or-pay contracts for future freight.

A single 9,000-foot controlled siding costs $3-10 million depending on terrain.  $6 million is an good average.  Figure $4 million per mile for continuous second main track in open country like you might find in the western Great Plains or the desert.  Double that figure for heavy earthwork.  Multiply by 10 if there are tunnels, significant bridges, urban areas, and severe environmental issues involved.  Add $2-6 million for every grade separation and $250K-$500K for every signaled grade crossing.  Figure a savings of $800-$1000/hour for a manned train cooling its heels waiting for a meet.  I leave it to you to calculate how many train-hours it takes to come up with a satisfactory discounted cash flow for that investment.

RWM 

[bobwilcox]

DRI was orginally Data Resources Institue.  They sell econmetric data to private firms, the Federal Reserve, the Executive Branch, Congressional Committies, etc.  As an example I would use their orgininated carload forecast for chemical traffic for the next five years broken down origin territory and by quarter as a place to start making my annual carload forecast. 

[MLG4812]

This might be sarcastic oversimplification, but here goes:

How many trains, how many tons, were you running when you tore up that second track?

Are you running more now?

Then it's time.

________________________________________________________________________________

And this is the conundrum...I question capacity limitations that everybody complains about (except engineers) because if I recall, the average capitalist mentality would say "keep pushing the envelope until it starts costing money." The Transcon for example...this line segment through Kansas had a lot of single track. Then some BNSF exec woke up and realized "hey, we're almost  at 100 trains a day, lets propose to double track this line all the way to chicago." Did the decision occur because of congestion and crew time-outs or because well paying over-seas customers didn't appreciate their containers taking 2 and 1/2 days to make the run into the Port of Los Angeles? I know, I know...they both cost money but I would guess the decision ultimately is decided by interference with revenue as oppossed to congestive running conditions. 

mlg4'81/2"

 

[Murphy Siding]

I was at a gathering where one of the senior planning officers from CSX presented there outlook for future tonnage along their main corridors.  The forecast was broken down by type of service-loose car, bulk unit trains and intermodal.  No doubt the forecast is the starting point for deciding where future expansion will take place. 

I suspect that current expansion decisions are based more on what do we need yesterday.  It seems to me that choke points and lines with tonnage over the capacity would be well known by the Class 1's top managers.  At that point, it's just deciding the scope of the project, the cost for the project, the projected return and prioritizing the projects to get the best bang for the available buck.

A very high risk is the difficulty in making a revenue forecast more than five years into the future.  So many varibles start entering the picture the chance of being wrong goes way up.  Operations and financial models have vastly improved with the ability to gather and sort data.  However, setting down with the DRI numbers for future units out into the future and estimating how will I do better or worse than history would indicate is still a real crap shoot.  A good revenue forecast is based on taking the econmetric data from someone like DRI and talking to your customers about variances from the trend.  Past five years your customer does not have a clue.  As soon as you move away from what your customers think they need you are going into very deep water.

What does DRI stand for?

[CShaveRR]

This might be sarcastic oversimplification, but here goes:

How many trains, how many tons, were you running when you tore up that second track?

Are you running more now?

Then it's time.

[MichaelSol]

1961  Communication between dispatcher and train crew:  Writing on tissue paper handed up at random locations along the route.

       Communication between train crews:  None.

Chances that a 1961 formula on train movement will produce a picture close to today's real world:  Iffy.

First recommendation: understand the formula.

The formula doesn't care how you do it -- on a given section of track, the variables are filled in from real time, real world measurements, taken with a stopwatch and a specific track profile. It doesn't matter what you did in 1961 and what you do now: it shows up on the stopwatch. The formula isn't based on a particular set of "practices", it is based on operating results. They are what they are and the rest is physics.

In the absence of specific line parameters, the formula reflects comparisons between system congestion levels that assumes that train movements are "equal", that is, that the trains are not operating under different systems from different eras. Fair enough?

If you were familiar with the formula, you would know that it contains an average speed between sidings. The "average" speed between sidings is a variable. It is not prejudiced to 1961, 2001, or 2020. If trains are slowing for the tissue paper, that's reflected in that average speed. If they are not slowing, that's also reflected in that speed. The formula doesn't care what you might be doing in terms of practices, it only cares about how those practices affect average train speed. You would know, from the formula, how a practice that changes average speed affects line capacity. Which is probably something you would want to know.

But that has nothing whatsoever to do with the validity of the formula as you suspect -- rather, it simply confirms it.

 

[jeaton]

1961  Communication between dispatcher and train crew:  Writing on tissue paper handed up at random locations along the route.

       Communication between train crews:  None.

Chances that a 1961 formula on train movement will produce a picture close to today's real world:  Iffy.

[bobwilcox]

I was at a gathering where one of the senior planning officers from CSX presented there outlook for future tonnage along their main corridors.  The forecast was broken down by type of service-loose car, bulk unit trains and intermodal.  No doubt the forecast is the starting point for deciding where future expansion will take place. 

I suspect that current expansion decisions are based more on what do we need yesterday.  It seems to me that choke points and lines with tonnage over the capacity would be well known by the Class 1's top managers.  At that point, it's just deciding the scope of the project, the cost for the project, the projected return and prioritizing the projects to get the best bang for the available buck.

A very high risk is the difficulty in making a revenue forecast more than five years into the future.  So many varibles start entering the picture the chance of being wrong goes way up.  Operations and financial models have vastly improved with the ability to gather and sort data.  However, setting down with the DRI numbers for future units out into the future and estimating how will I do better or worse than history would indicate is still a real crap shoot.  A good revenue forecast is based on taking the econmetric data from someone like DRI and talking to your customers about variances from the trend.  Past five years your customer does not have a clue.  As soon as you move away from what your customers think they need you are going into very deep water.

[MichaelSol]

Mr. Dweezil posted an excellent point about crews timing out in some siding someplace waiting for a meet. Trains Mag's recent cover story about the new Sunset Route shows a line that imo did it right. Their expansion was desperately needed. It spoke of trains waiting in about every siding on a typical day.

On a sample 120 mile section of 35 train capacity CTC mainline with siding spacing at 8 miles:

# trains, moving hours, siding hours, % siding hours/moving hours, Ave. transit time, # meets

5    30, 4, 12.5%, 6.8 hours, 13

10  60, 15, 25%, 7.5 hours, 50

15  90, 34, 38%, 8.3 hours, 113

20  120, 60, 50%, 9.0 hours, 200

25  150, 94, 63%, 9.8 hours, 313

30  180, 135, 75%, 10.5 hours, 450 

35  210, 184, 88%, 11.3 hours, 613

 

[MLG4812]

I agree Mr. Sol on the efficiency ratio. Because of the nature of railroading and it's difficult infrastructure, rail companies must project well into the future projected traffic patterns as well as dependable revenue. You can't just pop in a new mainline overnight like a freeway expansion (It's a "tad bit" more difficult.) Also you have the guaranteed traffic issue to deal with. How many rail lines became rails-to-trails because of drying traffic sources due to domestic industry shutting down or slowing down in that region? How many second mains were ripped up and became CTC single track? On the other hand, keeping WT, Mr. Dweezil posted an excellent point about crews timing out in some siding someplace waiting for a meet. Trains Mag's recent cover story about the new Sunset Route shows a line that imo did it right. Their expansion was desperately needed. It spoke of trains waiting in about every siding on a typical day. Several years ago, my wife and I were driving on I-10 between Phoenix and Tucson and we (I..heh,heh) witnessed that...headlights for miles from waiting trains. Traffic is still at near capacity level on many of our mainlines...And even though our economy is slowing for now, I don't believe traffic will wane much. The several billion dollar boost of investment into our economy from oversea interest lets me know that.

MLG481/2

 

[MichaelSol]

If there is an industry welded to its conventional wisdoms, it is undoubtedly the rail industry, and it is no different when it comes to "capacity". Most manufacturing industries know at exactly what level of operation best maximizes the economic efficiency of their machines. And, it's usually not "wide open." In the industry I am currently familiar with, the mills run their best at between 86% and 92% of "capacity". Above or below that and the economic efficiency -- profitability -- of the production falls off for a variety of reasons. The rail industry, based on no actual studies that I am aware of, continues to believe that operating at capacity is economically efficient.

 In 1961, Kent Healy produced his interesting study The Effects of Scale in the Railroad Industry (Cambridge: Yale University Press, 1961). During his study, he found the puzzling result that smaller railroads were generally more profitable than larger railroads, and through his analysis -- he was a Transportation Economics professor at Yale -- discovered that in the rail industry there were economies of scale but that, at a certain point, railroads suffered diseconomies of scale. The problem with railroads was that they were generally staffed by people who had 19th Century views of problems: and bigger was always better to those gentlemen, including the notion that consolidation of lines to increase capacity utilization generated more profit.

It didn't.

However, Healy's landmark study never took hold in the rail industry, notwithstanding the statistical evidence that his conclusions were absolutely true, because the conventional wisdom was simply stronger than the actual evidence. It was neither the first, nor the last time that conclusive proof of something would be dismissed by rooms full of cigar-smoking "insiders" proclaiming "that's BS. Everyone knows that such and such is what we need to ....". And they proceeded to rip out perfectly good mainlines to increase utilization of others -- and shot themselves squarely in their collective foot.

At the time that Healy did his study, a useful and well-known formula existed in the industry for calculating line capacity. This goes to the posts above talking about train delays and crew costs -- frictional costs of systems. The formula was developed by Ernest Poole while he was Director of Transportation Research at the Southern Pacific, and the "Poole Formula" is the generally accepted template for calculating the theoretical capacity of a given single track line configuration. It is described by Poole in his book Costs -- a Tool for Railroad Management, published in 1962, and his bibliography plainly shows the influence that modern methods of "cost analysis" had on his refinements, although he had been developing the formula since at least 1943, originally as a tool to analyze the effectiveness of CTC, to improve its utilization, and to predict and manage dispatching delays.

The nice thing about the Poole Formula is that it is readily accessible to econometric modeling -- assigning cost inputs, rates, cost of capital investment, interest rates, crew cost and size, cost of equipment and turnaround time, fuel, etc -- everything that goes into the revenue and expense of a railroad, to the ultimate determination of profitability.

Had Healy had that formula plainly in front of him, and the computing power to utilize it, he would have seen more clearly the economic principles underlying his findings regarding organizational size and the "diseconomies" he saw in the developed statistical record.

The source of most of the diseconomies of scale are shown by the Poole Formula -- which was one of the earliest and most accurate measures of "network" and capacity costs -- to result from simple laws of physics operating in network systems.

To make a long history short, the Poole Formula, adopted to an econometric model, shows why Healy got the results that he did in his analysis. The railroad "machine" works at its most effective economic efficiency at about 20-25% of capacity, 8-10 trains per day on a typically configured mainline. That reflected the typical mainline utilization of smaller railroad companies which did not have the traffic to "load up" their mainlines to achieve the conventional view of efficiency which was to operate as close to capacity as possible. Using the Poole Formula, a manager can clearly see why, at a given tariff rate, he might earn a profit of 12% on 7 trains per day, but suffer a negative 4.4% return on revenues at 20 trains per day, even though line capacity is 35 trains [an example I just took off of a specific model configuration]. System "friction" in the form of train delays and crew costs at 20 trains per day in that specific example adds 18% to the cost of hauling the freight -- a huge increase when considering that a 5% increase in the price of fuel throws everyone into a tailspin ... At capacity, 35 trains per day, the cost of hauling freight is 52% higher per ton than at 7 trains per day.

The effect was to increase the variable costs of operation with each additional ton of freight over the optimum -- with decreasing profitabilty even as revenues could be doubled and tripled by reaching line capacity.

Healy's review and discovery of the diseconomies of scale in the rail industry has a firm foundation in the laws of physics that govern networked systems, and the Poole Formula clearly shows why that is so.

By those measures -- mainlines today operating in general far above the economic optimum for efficient operation -- the rail industry is hugely undercapitalized at the current time, but obtaining the capital for expansion is handicapped by the historically high debt to equity ratios which were one of the fallouts from the Staggers Act.

 

[jeaton]

I was at a gathering where one of the senior planning officers from CSX presented there outlook for future tonnage along their main corridors.  The forecast was broken down by type of service-loose car, bulk unit trains and intermodal.  No doubt the forecast is the starting point for deciding where future expansion will take place. 

I suspect that current expansion decisions are based more on what do we need yesterday.  It seems to me that choke points and lines with tonnage over the capacity would be well known by the Class 1's top managers.  At that point, it's just deciding the scope of the project, the cost for the project, the projected return and prioritizing the projects to get the best bang for the available buck.

[diningcar]

The analysis which RR's apply to all facets of their operations, expenses, revenues and projected revenues is so much more sophisticated today than it was even ten years ago. They are more 'on top' of their business than most posters here realize.

Since I am 17 years retired I do not know how crews are compensated; perhaps Dweezil or someone else can tell me if crew costs are extra for waiting on meets if they do not exceed the 12 hour law.

[Anonymous]

One would think that with all the whining you hear from the RRs about cutting crew costs, they'd see how much they are pouring down the drain paying crews to wait for hours on end for meets, in single track land

[Railway Man]

The answer you already know, of course, is when traffic volumes projected well into the future exceed the capacity of single-track, and the profit from that traffic is sufficient to pay for the net present value of the construction.

It's really a very tall threshold.  In rough terms, if traffic projected 20-30 years into the future is expected to exceed 35-50 trains per day and the new traffic will consistently pay a freight rate of maybe 4 cents a ton-mile or more, then there might be a case for the railroad spending its investors' money on a second main track.  If it's less than that, then there might still be a case for some judicious expenditures on new sidings and siding extensions.  Alternatively, the railroad might talk to the state and point out that a public-private partnership under which the state helps fund the new track provides greater public benefits in terms of reduced costs of emissions, transportation, construction, and maintenance, compared to the equivalent capacity on the highway system.

RWM 

[MLG4812]

I'm not a railroad employee, former or otherwise. I do however, like to follow the future of the industry. There are several expansion projects going on, there are proposed projects as well. However, when do you know that "it's time." You know what I mean? The multi-tracking of a railroad is based on many factors, I am aware of that. I look at the ebbs and flows of the economy, imports, exports, fossil fuels, etc. and I have sense enough to know that you don't just double track a railroad simply because you are "currently" running more trains. What influences a company to finally make that decision? P.S....while I'm here, CSX's proposed "Pennsy" style multi-tracking for it's former RF&P/ACL main from D.C. to Miami?...Are they trying to expand this line into an extended NE-SE corridor or are they only trying to ease conjestion for commuter traffic from D.C. south into VA?

 

Thanks guys'

MLG4'8.5"