To get back on track. (?) Nobody is more dependent on oil than the oil companies and they are not sitting on their hands. Several of them have contracts to build and provide synthetic fuel made by the Fischer - Tropse method to produce synthetic Jet A for the Air Force and United Airlines is involved too. The most interesting possibility is Exxon - Mobil investment in genetically engineer diatoms that will produce the correct fuel without it having to be refined. SASOL in South Africa has the most experience right now with producing synthetic diesel fuel used on South African railways in conventional diesel locomotives. I would like to see a plant built in Wyoming coal mining area to refuel all the locomotives and all the mining equipment.
The problem with all this is that if synthetic fuel is developed too fast it will drive down the market price for the conventional stuff. I think they need about $ 70 a barrel to make it worthwhile.
schlimm Bucyrus: Not to be testy, but why do you insist that anyone (with any credentials) is talking about a totally non-oil system? Do you believe that shifted some percentage of transportation to a non-oil basis is foolish?
Bucyrus: Not to be testy, but why do you insist that anyone (with any credentials) is talking about a totally non-oil system? Do you believe that shifted some percentage of transportation to a non-oil basis is foolish?
I assume people are talking about a non-oil system because that is what the original poster said. Granted, it would not be an instantaneous conversion to oil alternatives, but “non-oil” does mean totally non-oil. The objective of a non-oil system is all over the source material related to the topic started by the original poster. Even the FRA cites the achievement of a non-oil system as the main justification for HSR.
Do I believe that shifting some percentage of transportation to a non-oil basis is foolish? I don’t know. It depends on the reason for doing so, and it depends on who is doing the shifting. If it is done by the public sector as a sort of down payment on the entire conversion, and the stated purpose is to ultimately create a non-oil system, then yes, I do think it is foolish.
I was not endorsing electrification but pointing out that it might actually be a good thing just not for the reasons presented. Offhand, yes, I like electrification for high density and urban areas for both speed and environmental reasons but would certainly not say that every line in and out or through urban areas should be electrified. There might be some heavy grades out in the hinterlands, too, that might benefit from electrification because of the cheapness of electricity to generate the horsepower and adhesion; it might also be an environmental factor, but not the main reason to do it. Each application has to be done on a case by case basis. But as was posted, to electrify just for environmental reasons and not taking into account any other reasons might prove fatal.
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Henry,
Why is electrification the right thing? What reason would be right?
If electrification is right, why have the carriers not done it? There are two likely possibilities the return on investment is not sufficient to support the investment, or the carriers do not believe they can finance it on the open market even at today's historically low interest rates. Answer #2 is just a variation on #1.
I think we can take the decision of management not to string wires as strong evidence that electrification is not a good investment. No one in all of this has put forth a credible economic case for electrification.
I personally believe that there will be a point, fairly soon, when the world encounters "peak oil" production. That is a condition in which oil output is physically constrained rather than artificially constrained by OPEC. At that point oil prices will begin a relentless rise in prices. Congress will go through its monkey dance and the best we can hope for is that they do not do something stupid.
This oil price rise, in and of itself, will tend to shift freight from long haul truck to rail. Since fuel is a much smaller portion of rail operating cost than truck operating cost this shift will be driven by fundamental economics, as truck costs increase faster than rail costs.
Once management believes that rising oil prices are real and will be sustained, the business case for electrification will look better, but prices for other fuel sources will also tend to increase so the relative ballance may not change much.
The vast majority of oil use in this country is auto gasoline. Since 1945 we have spread our economy out and made virtually everyone dependent on automobile transportation for work, for shopping, for entertainment. Electrifying freight railroads will do nothing to address this, the 800 pound gorilla in the room. To reduce auto consumption will require a long time, say 50 years, to revise our economic geography by abandoning the suburbs and moving into skyscraper apartments in the cities. This holds no charm for me or a lot of other people but I will be dead and the kids will not know anything else, kind of like they can not imagine life without cell phones.
Credible passenger service will require massive new construction that may or may not involve existing rights of way. That separate issue will look a lot like Amtrak's recent proposal about the NEC.
Having the freight rail system not dependent on oil strikes me as a good idea. The only way I can see a national defense angle in it is that the freight railroads could operate through a politically/war induced loss of oil supply, not that it would make much difference to our oil dependence in general. I think that having the government spend $500 billion for that reason will be a tough case to make. If it is to be made the proponents will have to be accurate in their claims and not mix freight and passenger services. The documents cited in this thread are simply so full of factual errors that they are not credible on their face.
Mac
I did try to clarify that that there are basically two proposals for electrification:
1) The most long running proposal is the one based on private business economics.
2) The other proposal, more recently developed is based on the government electrifying the railroads to save the planet.
As far as I know, prior to this thread, this second proposal has only been discussed once on this forum, and that was in this thread:
http://cs.trains.com/TRCCS/forums/t/162687.aspx?PageIndex=1
The first proposal has been discussed in probably 100 threads. Many who discuss the first proposal are simply not aware of the second proposal. I would not have brought up the second proposal on this thread had it not appeared to me that the original poster had made it the topic of this thread.
My preference is that the first proposal is fine with me because it will not hurt me. However, I regard the second proposal is being a dishonest political power grab that will hurt all of us. I suspect most electric railfans would support the second proposal, however, because they would see it as free electrification from the government.
Bucyrus makes that point because that's how the topic has been presented: electrify to eliminate dependency on oil. While it sounds a lofty endeavor, like so many other things in this country, it is the right thing for the wrong reason. Thus its results will not appease expectations and therefore be deemed a failure even before it is begun. Find the right reasons to electrify then do it for the right results.
Be very careful when describing the amount of taxes any railroad has available to be sheltered. Any corporation's provision for state and federal income taxes consists of two components -- current and deferred. The current portion is the money that will actually be paid now; the deferred portion is assumed to be due at some future point in time from income earned now.
To take two examples (before the current economic unpleasantness) from 2007. NS Corp had a $250 mil current tax provision and $338 mil deferred -- see footnote 3 of their annual report. Thus, they have already sheltered more than half of their income from today's tax collectors. UP had $822 mil current and $354 mil deferred, see footnote 4.
On a philosophical basis I tend to dislike special tax deals, even when they serve some worthwhile purpose. The problem is that your worthwhile purpose may be different than mine. Moreover, the availability of special deals leads to a small army of lawyers and accountants trying to jump through complex hoops to claim the benefit. It strikes me a more simple and open process is to go ahead and collect the taxes and then underwrite those activities that the majority of us deem worthwhile.
Depends what percentage, I guess. My hometown is on a former PRR/PC/CR electrified route. I guess the handful of electric operations that conrail had weren't enough to justify keeping the wires up.
Also, if the price of oil does go through the roof, won't the economy completely crash and train traffic will be severely hurt (electric or diesel)?
Just some questions from a lowly brakeman.
It's been fun. But it isn't much fun anymore. Signing off for now.
The opinions expressed here represent my own and not those of my employer, any other railroad, company, or person.t fun any
WilliamKiesel Reviewing the back of the envelop arithmetic, the gross earnings before taxes of railroad industry for the past 4 years averaged $15 billion. Earnings after taxes, average about 63%. So, 37% of earnings available for shelter. If income were sheltered for 30 years, potential option. Or, a combination of guaranteed bond together with income shelter. Or, add government matching funds of some sort.
Reviewing the back of the envelop arithmetic, the gross earnings before taxes of railroad industry for the past 4 years averaged $15 billion. Earnings after taxes, average about 63%. So, 37% of earnings available for shelter. If income were sheltered for 30 years, potential option. Or, a combination of guaranteed bond together with income shelter. Or, add government matching funds of some sort.
Thanks to Chris / CopCarSS for my avatar.
C&NW, CA&E, MILW, CGW and IC fan
WilliamKiesel But, to get there, consensus needs to be made as to the fact that a non-oil based transportation system is indeed useful for national defense and economic growth.
But, to get there, consensus needs to be made as to the fact that a non-oil based transportation system is indeed useful for national defense and economic growth.
But is that really a fact? I do not believe that a non-oil transportation system is all that necessary. I don't deem it worth the cost. Why do you think it is?
The vulnerability caused by being reliant solely upon an oil based transport system cannot be understated whether a constrained oil supply is by hostility or by competition.
In an economy money is like the atmosphere and air that the body uses. Transportation in an economy is like the circulation system needed by the body.
The timing and development of alternative sources of energy is not predictable. Having access to a non-oil based transportation system is predictable and provides options for an oil constrained future.
The convergence of transportation capacity constriction beginning in 2020 and worsening in 2035 should be anticipated and most efficiently addressed by freight railroad electrification.
Foreign oil purchases contribute to a negative balance of payment account. The long term negative import / export account, balance of payments, weakens the national economy.
Correct. Back of the envelope arithmetic has problems. What was looked at was before tax income, not net. Even with that, it does appear that diverting taxed income to public interest funding of electrification and associated upgrades would require 30 years to payoff assuming static earnings.
In reality, the upgrades would create new and increased earnings going forward. That's where business and engineering expertise comes into the picture. But, to get there, consensus needs to be made as to the fact that a non-oil based transportation system is indeed useful for national defense and economic growth.
Schlimm,
I agree it should be possible to determine how many route and track miles handle 80% of the traffic. My point is that the proponents of spending $500 billion (their number) have not bothered to determine that. They simply assumed that it applies.
Mac:
80/20: A rule much quoted in business that states that eighty per cent of a firm's business is derived from twenty per cent of its customers; also that eighty per cent of its business is obtained by twenty per cent of its sales force. The rule derives from the work of Pareto.
A random variable x with the simplest type of Pareto distribution has probability density function given by
where a and k are positive constants.Pareto proposed the distribution in terms of its cumulative distributive function {1−(k/x)a} which he believed gave a good approximation to the proportion of incomes that were less than x. According to Pareto the shape of the income distribution was the same for all countries, though the values of a and k varied from country to country.
Seeing if that principle applies to rail traffic density as well should be possible to determine.
As I stated before, all Presidents, GOP and Dem. have been calling for "reducing our dependence on foreign oil" through conservation and alternatives (there isn't enough oil here) since Richard Nixon (40+ years ago). Hardly a sudden development. Having a national policy as opposed to letting market forces determine is nothing new or unique, dating back to the early 19th century and continuing through the 20th. Nothing unusual, new or radical about that. All it would take would be an incident in the Persian Gulf to have us again wondering why some President didn't push for conservation and alternatives. No one is calling for an oil-free (oh, some extreme folks of the Peak Oil fringe might) US economy. But reducing our use of it for transportation (quite possible) is important because it is more hard to replace its uses in the chemical and plastic industries.
Paul,
The Pareto Principle is the 80/20 rule. The two documents cited have invoked it to claim that 80% of the traffic is on 20% of the mileage. Their conclusion is thus that by electrifying 20% of the mileage, 80% of the traffic will move by fuel other than oil. Rather they mean route mileage or main track mileage I have no idea, since they have not made that detail clear. My point is that by either name the authors have offered no evidence that the principle/rule applies in this case.
Can someone explain why we should all of a sudden strive to be an oil-free society?
Whether we get oil here or imported it, we still have to pay for it. The foreign sources that have oil also need people to buy their oil. There is a competitive world oil market setting the price according to supply and demand. We may be running out of oil, but we are not there yet. And as we do run out, the market will gradually find substitutions at its own pace. And, we have national policies that are discouraging domestic oil production.
Becoming independent of foreign oil could be advanced by stepping up domestic production, but that option is not on the table for larger reasons of an environmental nature. So in the final analysis, it is not just an objective of becoming free of foreign oil. It is a matter of stopping the use of oil. Why are we being asked to give up oil at an enormous cost?
I think this proposal to electrify the railroads to achieve oil-free society is overstating a problem to turn it into a crisis that supposedly needs some swift action; a kind of Marshall Plan to go non-oil for national security, if you will.
PNWRMNM [snipped] [UP's 2009 data is that it] Burned just under 1 Billion gallons of diesel fuel
PNWRMNM [snipped] Obviously at some oil price point electrification will be cost effective. No one has offered any data, credible or not, as to what that price point is. That is the big question.
PNWRMNM Electrification in and of itself does not increase capacity! No one has demonstrated that the Pareto Principal, also know as the 80/20 rule applies to rail freight traffic density.
With respect - I'm not understanding how the "Pareto Principle" is applicable to this discussion or your post. Can you expand on or explain that a little further ? Thanks in advance.
- Paul North.
HIgher speeds equal higher capacity. Is this just a theory or is it true but only in commuter and mass transit situations. It would seem to me that it could also apply to freight situations because if you can move three trains in the same time you used to take for two, then you've increased capacity.
But, more importantly. Today investors seem to want much quicker and higher returns on investment than a five to ten year development and construction project gives. That leaves governement the only machinism available to tackle such a project. Even if a company were to procure a ROW (probably an existing ROW if not an entirely exising railroad line) then devlope and construct a high speed electrified railroad what would they do with it? Would they have to also operate it? Or would they have to supervise operation to private haulers (i.e. say it was built Chicago to Denver, would the builder run it as a railroad business as we know it today or would they just operate the railroad by allowing UP or BNSF operate thier trains over it with electric engines or would they provide the electric engines and crews and haul trains for other railroads or shippers? There really are so many opportunities to make it work.
However, I don't see present day railroads under present day investment and operating philosophies tackle such a project. Nor do I see government stepping this far into the fray either as no one thinks that way. One would think that if there was a railroad track that handled maybe even 10 trains daily would find selling the unused space for other services, such as passenger trains, to help cover fixed costs, that it would happen. But it doesn't.
WilliamKiesel Your estimate of $180 to 200 billion for the cost. Last four years of taxed earnings average $15 billion per year. Assume 5 to 7 years for project completion. Sheltering railroad earnings from taxation will mean about 12 or 14 years of sheltered earnings to pay for the project. It is within the realm of probability. The nation needs this transport tool.
Your estimate of $180 to 200 billion for the cost.
Last four years of taxed earnings average $15 billion per year.
Assume 5 to 7 years for project completion.
Sheltering railroad earnings from taxation will mean about 12 or 14 years of sheltered earnings to pay for the project.
It is within the realm of probability.
The nation needs this transport tool.
Lets look at some real numbers. I hate to quote Wikipedia, but since the AAR site is slow today will use Wikipedia's 140,500 route miles of class I ownership as of 2006 for starters.
From Union Pacific 2009 Analyst Fact book UP has:
32,094 route miles
22,144 important enough to be dispatched by CTC
Burned just under 1 Billion gallons of diesel fuel
Had $2.5 Billion Capital Expenditure, of which 1.8 was maintenance, balance capacity expansion.
Federal Income tax paid $1.089 Billion
On route mile basis UP is about 22% of the industry. I think UP density is probably a bit higher than average so that they are more likely 25% of industry output. UP is middle of the pack in terms of profitablity. So UP paid something between 20 and 25 percent of the federal income taxes paid by the entire industry. That means total taxes paid are in the range of $4 to $5 billion.
The article first cited by the OP figured $500 Billion in capacity enhancements including electrification. Sheltering the entire earnings of the industry from taxation is worth about $5 Billion per year. At that rate electrification of the 30,000 miles or so being bandied about would take 100 years.
If the greens are serious about getting truck freight off the highway and reducing greenhouse gasses, they should support a 10 year program of income tax forgiveness for the railroads so long as the taxes retained go to projects that enhance freight capacity, including electrification. I would be willing to bet dollars to doughnuts that the carriers could find economically good freight capacity enhancement projects, and that no electrification would be undertaken in that time period.
If this is a national defense imperitive, use Amtrak's plan for true high speed rail in the NEC as a demonstration project for the wonders of electrified HSR. Note that ATK plans to build a lot of new miles not on its existing right of way.
Obviously at some oil price point electrification will be cost effective. No one has offered any data, credible or not, as to what that price point is. That is the big question.
Electrification in and of itself does not increase capacity! No one has demonstrated that the Pareto Principal, also know as the 80/20 rule applies to rail freight traffic density.
Mr. Kiesel: I think it is a great idea that surely needs to be done, but using sheltered earnings to pay for the cost of $180 bil. doesn't add up. You seem to be assuming that the tax credit would be equal to net income? But one also needs to look at how much corporate income tax the railroads typically pay per year. For example the UP in 2009 paid income taxes of $1.089 bil. on operating income (pre-tax) of $3.392 bil. an effective rate of 36,5%. This includes state taxes. [see page 34 of the link to the 10k]
http://www.up.com/investors/attachments/secfiling/2010/upc10k_021710.pdf
Murphy Siding said much the same thing while I was getting the UPRR numbers. It doesn't add up.
schlimm - Thanks; you 'get it'. The "finding the funding" challenge is unavoidable, and probably so is the private vs. public debate, but I don't see where I can add a lot to the latter. Instead, I'd rather first cut it down to size and then start figuring out ways to do what can be done on reasonable terms.
Electrification is not a panacea, but there's lots of applications/ situations/ places where it is 50 to 70 years overdue, and a decent if not compelling 'business case' can be made for it. We owe it to ourselves, our nation, and our children to get going on this, and not let the extremist views or wacko agendas - of any viewpoint* - delay it much longer.
(*I can accept that the economics don't work, $ not available, or another rational basis. But I don't much care where the electric power or the money comes from nas long as it's more or less voluntary or part of the political-social contract that is the framework of the nation. That somebody someplace might have an oddball view on some aspect of this should not contaminate or make objectionable the broader and more important goals.)
An analogy can be drawn with centralized water and sewer systems, and maybe the electric utilities, too - they're not for everybody nor every situation or location (such as in rural areas), some are privately-owned/ operated, and some are publicly-owned/ operated - but we can't seriously argue that we could live without them entirely, especially in the more built-up or urban areas. Electrified railroads are of like kind, it seems to me - an essential technological infrastructure. [See what you get, Professor, when I feel compelled to respond to something nice you said about me ? ]
Paul: Your response puts it in a realistic perspective of what can be done. An incremental approach would seem most sensible, focusing on the most heavily (freight) used lines + potentially heavily used short distance passenger corridors.
Sheltering railroad income from taxation substantially creates the funding stream to electrify. Therein lies the means to enable a economically logical basis to proceed. Doing so lessens government involvement.
Electrifying the railroad system by direct government involvement would be fraught with problems and impediments.
Electrifying the freight railroads will create a parallel non oil based transportation system basis to national defense in an oil constrained future.
Here is a national defense tool that will likely have likely environmental benefits.
The Reconnecting America organization has become involved with the conservative Free Congress Foundation in advocacy for an electrified urban transport system.See the original post for the citation.
This subject was thoroughly discussed in several threads here after the late 2008 Trains issue then on electrification, so I'm not going to rehash much of that.
But as far as the route map and gross cost estimate, as with many things a 'blanket' or 'universal' "let's-do-it-all' approach is not going to be cost-effective, let alone optimum. Instead, I suggest using the Amtrak route map as a surrogate, proxy, or starting point for the routes that ought to be electrified - not that Amtrak needs or deserves wires, or the country wants Amtrak to have electrification, but that just saves typing a detailed list about 25 - 30 line segments - and then intelligently add and subtract important freight railroad segments. For example, add in the NS CNO&TP route; and subtract the Raton Pass portion of the Southwest Chief's route.
When we're done, I believe the total will be about 25,000 - 30,000 route miles - roughly, 5 cross-country E-W routes @ 3,000 miles each, 5 N-S routes @ 1,000 miles each, and 10 - 20 other / misc. routes and connections in the 500-mile range. I can believe the $6 Million per route-mile estimate for speeds up to 125 MPH - Amtrak's late 1990's New Haven - Boston electrification was about $2 Million per route-mile for 2 high-speed electrified tracks all the way, plus a little more at certain places. So that would approximate the total project at 30,000 route-miles x $6 Million per route mile = $180 to $200 Billion or so. Now that's more than my pocket change, and dwarfs the aggregate capital spending of the rail industry today - roughly $1 - 2 Billion for each Class I, which includes renewals as well as upgrades, and totals maybe $15 Billion or so annually in the aggregate; even adding in the annual fuel expenditures won't get us there. But that's a more realistic, believable, 'saleable' proposition than $900 Billion, which will never 'get traction' (excuse the pun), and so wold be more likely to be achievable by whatever funding means we decide to accomplish it with, whether private, public, a combination, or some other way, etc.
More to the point, that much electrification would drastically reduce use of diesel fuel by the US railroads and enable them to use other power sources, and could attract and/ or handle anyway enough long-distance freight traffic off the highways to make a big dent in that portion of the fuel use. By reducing those two aggregate demands, less imported oil will be needed, the entire demand-price curve will shift, and everyone will benefit from the lower prices and more availability of petroleum fuel for those uses and applications that can't go by rail or under electrification, and that will go a long ways towards reducing foreign oil dependency.
The purpose of electrifying the freight railroad system is to achieve a non oil based transport system parallel to the oil based transport system. Whether or not the mechanical engineering efficiencies noted might or not be achieved is not nearly as important as to national defense in an oil constrained future.
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