Montana fights back against BNSF

[gabe]

QUOTE: Originally posted by futuremodal

Michael: Thanks for the clarification. You stated the case better than I ever could.

Gabe: Property taxes are based on assessed valuations. If a certain property shows a higher income generation potential, the Assessor has the directive of increasing the tax to match that increased revenue. What the Montana legislator is proposing is simply an adjustment of assessments within the legal constraints. If indeed the proposal is thrown out by a court, it would be because of the stated reason for the tax adjustment, e.g. a public attempt to get back at BNSF. However, on the surface the tax proposal seems to fit within legal constraints. As for the McDonalds example, if indeed the location is ideal it is likely other fast food resturants will follow suit, and prices will eventually come down. Fast food is an extremely elastic entry market. Railroading is extremely inelastic entry market.

Futuremodal,

Trust me on this one. Turn it inside out, upside down, or whatever you want to do with it. This doesn't have a snow ball's chance in Hatti of surviving in the courts.

If you don't want to take the word of a young pup of an attorney such as myself, look at BNSF's response, which was basically do whatever the heck you want, we will see you in court. They know this doesn't have a prayer.

States have tried to use their taxation power in such a manner since the Founding. This is nothing new, and the results are always the same--a good thing too, as Oliver Windel Holmes Jr. stated, we would cease to exist as a country if they were allowed to do this sort of thing.

I am not saying I don't have any sympathy for your desire for competition. But, there is no way this bill has a chance.

Gabe

[CSSHEGEWISCH]

QUOTE: Originally posted by MichaelSol


Are you suggesting that BNSF is offering noncompensatory rates to Minnesota, Wisconsin, Iowa, Kansas, Illinois, Washington and Nebraska farmers and making up the difference in the Dakotas and Montana?

Should Montana and the Dakotas be forced to compensate the railroad for non-compensatory rates it is charging elsewhere? Do you really think BNSF is charging non-compensatory rates anywhere, and that eliminating inverse pricing would result in non-compensatory rates? If not, what's your point?


Best regards, Michael Sol

I am not suggesting that any of BNSF's rates are non-compensatory, loss leaders are not a factor in transportation pricing. I was wondering if Montana farmers really wanted a rate structure comparable to the aberration known as the Crows Nest Pass Agreement.

[MichaelSol]

QUOTE: Originally posted by bobwilcox

Concerning your comments on rate discrimination. You say it has been going on since about 1980. If you check you will see railroads have been using this method of pricing since about the day the B&O opened. Of course it was under the ICC's effective supervision from 1906-1980.

The remark was intended to note that rail competition ended in Montana with the last Milwaukee Road train, March, 1980. Best regards, Michael Sol

[espeefoamer]

1.Corporations don't pay taxes.They never have,and they never will.Corporations simply add any taxes they pay into the cost of doing business,and charge the coustomers accordingly.
2.Why is BNSF charging Montana farmers more to ship thier grain than farmers from other states?I haven't seen this issue discussed yet.
3.If the Milwaukee road were still around,rates on both roads would be lower because of competition.

[csxengineer98]

mich so...and futur...................
you both talk about....but nothing you says proves anything...you toss numbers around...and try to double talk your way out of things...myself and others have called you on your facts a few times in here..but yet you 2 still seem to think that the more numbers you can type..and the more words and longer postings can confuse people into agreeing with you.... i see through you...and so do many others...no matter how you try and argue that this idea is good for montaina.... its wrong...evey fact that i have shown..you 2 try to tiptoe around it by posting more worthless data....and as for you michso....you are a heard core communest...eveything you have said is anti corropration..anti amerian.........how dose wage taxes have anything to do with shipping rates in differnt states.... as far as these farmers that are crying the blues that they arent being treated "fare" ...... move to another state.....
csx engineer

[bobwilcox]

QUOTE: Originally posted by MichaelSol


As of this morning, the rate for identical carloadings is as follows: On a 50 car train, covered hopper car LO designation, 0113710 grain, the rate, Minneapolis to Portland, is $4,223 per carload. The rate from Havre, MT to Portland, 50 cars, 0113710 grain, is $3256. per carload.
Differential pricing has been in effect since, oh, March 22, 1980. Since that time, Montana farmers have consistently been overcharged compared to their compatriots in other states.

I was the principal author of a 1997 grain rate study, similar to the one performed more recently by R.L. Banks & Associates.

If I am running a business I only car about dollars. The dollars say BNSF gets 29% per car more from the Twin Cities that they do from MT. $/cl do not pay the bills although they do work for STB fillings.

Who paid for the study you performed? Were they pleased with you conculusions?

Concerning your comments on rate discrimination. You say it has been going on since about 1980. If you check you will see railroads have been using this method of pricing since about the day the B&O opened. Of course it was under the ICC's effective supervision from 1906-1980.

[Anonymous]

Michael: Thanks for the clarification. You stated the case better than I ever could.

Gabe: Property taxes are based on assessed valuations. If a certain property shows a higher income generation potential, the Assessor has the directive of increasing the tax to match that increased revenue. What the Montana legislator is proposing is simply an adjustment of assessments within the legal constraints. If indeed the proposal is thrown out by a court, it would be because of the stated reason for the tax adjustment, e.g. a public attempt to get back at BNSF. However, on the surface the tax proposal seems to fit within legal constraints. As for the McDonalds example, if indeed the location is ideal it is likely other fast food resturants will follow suit, and prices will eventually come down. Fast food is an extremely elastic entry market. Railroading is extremely inelastic entry market.

LC: You continue to make a fool of yourself with your personal insults. May I remind you I'm not the one proposing the law. Why don't you write to the Montana legislators with your concerns?

[MichaelSol]

QUOTE: Originally posted by CSSHEGEWISCH

Do Montana farmers want the same deal that Canadian farmers had for over a century with Crows Nest Pass grain rates? Those rates were non-compensatory to an obscene degree and go a long way to explaining why Canadian railroads never invested in modern grain-hauling equipment.

Are you suggesting that BNSF is offering noncompensatory rates to Minnesota, Wisconsin, Iowa, Kansas, Illinois, Washington and Nebraska farmers and making up the difference in the Dakotas and Montana?

Should Montana and the Dakotas be forced to compensate the railroad for non-compensatory rates it is charging elsewhere? Do you really think BNSF is charging non-compensatory rates anywhere, and that eliminating inverse pricing would result in non-compensatory rates? If not, what's your point?

Best regards, Michael Sol

[CSSHEGEWISCH]

Do Montana farmers want the same deal that Canadian farmers had for over a century with Crows Nest Pass grain rates? Those rates were non-compensatory to an obscene degree and go a long way to explaining why Canadian railroads never invested in modern grain-hauling equipment.

[MichaelSol]

Well, people have this just about exactly backwards, which is dangerous in war, pregnancy, and economics.

The average number of cars shipped by a state per train has absolutely nothing to do with the rate structure. That is absolute baloney.

As of this morning, the rate for identical carloadings is as follows: On a 50 car train, covered hopper car LO designation, 0113710 grain, the rate, Minneapolis to Portland, is $4,223 per carload. The rate from Havre, MT to Portland, 50 cars, 0113710 grain, is $3256. per carload.

On a mileage basis, the Minneapolis shipper is paying $2.36 per mile; the Montana shipper is paying $3.65 per mile even though handling on both ends is identical. and the cost per mile is identical to the railroad.

And the rate differential is not a long haul consideration; the rate from Spokane to Portland is also cheaper, per mile, than Montana's, costing less per mile per carload to load and ship 26 cars, Spokane to Portland, as to ship 109 cars from Montana to Portland.

Neither distance nor handling is the controlling factor for rail rates for Montana wheat.

Rates are not set based on what the railroad thinks other shippers in the state might be shipping in terms of average carload numbers. That is preposterous. The fact of the matter is that Montana shippers are paying, this morning, a 65% premium for shipping the same kind of wheat, in the same size shipment., to the same destination as a Minnesota shipper.

Even though this has nothing whatsoever to do with the rates, it is a good question as to why Montana has a lower average carload shipment?

Differential pricing has been in effect since, oh, March 22, 1980. Since that time, Montana farmers have consistently been overcharged compared to their compatriots in other states.

What is the result of that? The same result that you would suffer if your wages were arbitrarily taxed at a rate 65% higher than your neighbor's, and there wasn't anything you could do about it and it went on for years and years. You would have less disposable income, less profit. You wouldn't have as much money to maintain your house, or buy a new car, or do the things your neighbors can afford to do. CSX Engineer thinks that's how America should work.: people SHOULD be treated differently.

Well, that's exactly what has happened to Montana farmers for nearly a quarter of a century.

The BNSF takes a third of their crop (the old sharecropper portion).. They have less money to save, they have less money to invest in combines, in fertilizer, in silos, in elevators. Less profit means less taxable income for the state government, which then cannot spend as much on rural roads, or short line railroad facilities. Less money is invested in infrastructure. Bad roads and longer hauls in older equipment costs more money; profitability continues to decline, and BNSF takes a third of that without regard to the higher operating expenses of the farmers.

It becomes a vicious cycle.

Minnesota farmers, co-ops, and private vendors can afford to invest in Flood elevators because their rate of return is signifcantly higher as a result of normalized rail rates. They can afford to spend money on new equipment to transport their grain longer distances. Their state government gets increased tax revenues from higher profits and can build better roads, and maintain short line railroads.

The economic differential continues to acccelerate with the passage of time.

BNSF makes it impossible in Montana to generate a rate of return that justifies the loans necessary to build new high efficiency, high volume elevators, then crtitiques those famers for not being able to "take advantage" of the lower rates available through unit train economies by building bigger elevators. BNSF itself has made it unfeasible to invest; they take the money that ordinarily would be invested in such facilities.

But, even if someone could justify the investment, and somehow find the money, Montana doesn't receive unit train advantages. It pays a rate that is 65% higher for the same train service, even if the money was available to build new grain loading facilities.

If you were a bank, where would you loan the money for new facilities? There's no return.

BNSF charges a Minneapolis grain dealer with a SINGLE hopper carload of 0113710 grain $2.41 per mile to ship to Portland. Yep, one single carload.

BNSF charges a Montana grain dealer with a 120 car unit train of the same grain $3.29 per mile to ship to Portland.

I would like to hear more about the impact of handling costs from the List Expert on rates. Even BNSF admits to a different pricing policy: Steve Bobb, VP and former Pricing manager of Grain for BNSF in December, 2001 in a speech to the ND Farm Bureau in Dickinson, ND stated, “We don’t discriminate against shippers, we charge more to those shippers who need us and less to those who don’t need us.”

There is absolutely no merit to the argument that "handling" is built into the railroad grain rate structure. The current structure has no relevance to handling costs whatsoever. It is based entirely on the hostage concept of rail service: Montana farmers are hostages to the BNSF and Minneapolis grain dealers are not.

The problem with the backwards view of this ("it's the farmer's fault") is that Montana farmers, and the State of Montana, have sufffered from a quarter century of reduced profits. Compared to farmers that enjoy the normal rates that BNSF has offered them, Montana agriculture and infrastructure is severely undercapitalized. That's the natural result of profit extraction by a monopoly over a long period of time..

I was the principal author of a 1997 grain rate study, similar to the one performed more recently by R.L. Banks & Associates. We found the Montana losses through 1996 averaging approximately $64 million per year., somewhat higher than the Banks 2004 study ( a 6% difference based probably in part on a very good grain year in 1996). However, unlike Banks, we also looked at the undercapitalization of the industry as the result of profit extraction and long term effects on state economy, and saw that Montana agriculture was undercapitalized by nearly $1 Billion as a a result of the long-term effects of differential pricing, solely as it related to wheat, and not other commodities that might be similarly affected.

That would buy a lot a Flood elevators, IF Flood elevators made any difference , but they really don't. Montana suffers significant rate discrimination regardless of the handling efficiency of the grain system, because for Montana the rates are not set based on handling efficiency, length of haul or any other criteria related to cost of service.

The amount of undercapitalization directly resulting from high wheat rates now represents nearly twice the value of the total annual wheat crop in Montana. For the State, it represents over $100 million in infrastructure investment that remains unmade, because the revenue goes to the BNSF, instead of to the farmers, and into taxable profit.

It is the classic conundrum of a colonial economy. While immensely profitable to outside interests, It is never permitted to earn enough reinvestment income to sustain itself. Insofar as wheat is concerned, BNSF has made Montana an archtypical colonial economy.

Like any colony, sooner or later there is a rebellion. It's a very American thing to do.

Best regards, Michael Sol

[jeaton]

I agree with Gabe that the law won't fly. But suppose it did and the BN decided they would just pay the tax. How would that benefit the grain shippers? A special tax rebate? A special tax rebate, less the cost of the administration off the law? NOW YOU CAN GET 50 CENTS BACK FOR EVERY EXCESS DOLLAR CHARGED BY THE BNSF RY. YOUR GOVERNMENT AT WORK. [:D]

[gabe]

QUOTE: Originally posted by jchnhtfd

Once again we appear to have a legislator of very little brain and great ideals (of whom there are, unfortunately, a great many) confusing a private enterprise with a government or quasi-governmental operation, i.e. a regulated public utility.

Last time I heard, a private enterprise was free to charge what it darned well pleased for its product, whether it was widgets or transportation.

In too many cases, we have folks advocating deregulation and private enterprise and consumer choice and so on, and then crying bloody murder when the private companies charge what the market will bear. I do wi***hey would all fall into either Boston Harbor or Long Beach Harbor or Seattle harbor, whichever is nearest to their latte... and let the rest of us get on with business.

jchhtfd,

Actually, the only technical problem with the politician's plan is where it is coming from. If that proposal came from the U.S. Congress, BNSF would be sweating bullets right about now, have an army of lobbyists on their way to Washington, and be saying to Montana “why can’t we all just get along.”

Even as private enterprise, railroads are not necessarily free to charge what they want. For various reasons, railroads are not subject to several anti-trust acts. In exchange, Congress may regulate the industry in a variety of ways—including regulating pricing.

I am not saying this makes the politician's idea a good or bad one in and of itself. The only technical problem with it is that Montana using its taxation powers in attempt to regulate interstate commerce is about akin to Luxemburg telling the United States it better not invade Iran or it will sanction it—maybe a good idea, maybe a bad idea, but it ain't gonna make a darned bit of difference. Montana has no more authority than Luxemburg to attempt to do what the politician calls for.

Gabe

[jchnhtfd]

Once again we appear to have a legislator of very little brain and great ideals (of whom there are, unfortunately, a great many) confusing a private enterprise with a government or quasi-governmental operation, i.e. a regulated public utility.

Last time I heard, a private enterprise was free to charge what it darned well pleased for its product, whether it was widgets or transportation.

In too many cases, we have folks advocating deregulation and private enterprise and consumer choice and so on, and then crying bloody murder when the private companies charge what the market will bear. I do wi***hey would all fall into either Boston Harbor or Long Beach Harbor or Seattle harbor, whichever is nearest to their latte... and let the rest of us get on with business.

[bobwilcox]

QUOTE: Originally posted by Limitedclear

FM -

You are clueless. This is just stupid political posturing.

The proposed statute violates of at least two Constitutional provisions and is in fact discriminatory both on its face and in effect. It is therefore illegal.

It is also irrelevant other than showing BNSF that Montana is a bit upset .

LC

I think there is something in the water on the high plains. Its like the Lost Cause in Virginia.

[zardoz]

QUOTE: Originally posted by jeaton

While I don't think Montana has a chance of a snowball in hell to get the proposed law to go in effect, what would keep the railroad from passing the excess taxes back to the shippers in the form of increased rates? Maybe they could pass a law against that action, and throw the railroad in prison if it was found guilty of violating that law.

Can you imagine a prison 4' 81/2" wide and hundreds of miles long?

Some railroad employees would call that prison "work".

[Anonymous]

FM -

You are clueless. This is just stupid political posturing.

The proposed statute violates of at least two Constitutional provisions and is in fact discriminatory both on its face and in effect. It is therefore illegal.

It is also irrelevant other than showing BNSF that Montana is a bit upset .

LC

[gabe]

Actually, Ironrooster,

I don't think it is unfair at all. I am free not to stop if I so desire. I wish I had more choices, but I do not. Cudos to whomever decided to locate the McDonalds there in such a good location. That is simply business; I don't really think it is that unfair. As a consumer, I would like to have a law pased that taxes that McDonalds, for every penny they charge me more than another McDonalds, but as a person who isn't opposed to making a profit myself, I think it is perfectly fair.

Gabe

[IRONROOSTER]

QUOTE: Originally posted by gabe

....
On a side note, on my way home from work there is only one fast food place, a McDonalds. The average meal at this McDonalds is roughly $2.50 more than any other McDonalds in the greater Indianapolis area. Yet, because it is the only restaurant in the area, I am forced to stop there on a late night when I wont have time to fix myself dinner.

They are able to get away with these prices because they know that the area it is in will not support two fast food restaurants, and no one is going to spend the money to build a restaurant in an area where it has a 50-50 chance of going out of business.

Unfair?

Gabe

If the business prospects are that bad, then your McDonalds probably has to charge extra just to stay in business. Here in Northern Virignia where I live it seems like as soon as one fast food goes in, there's another right next to it.

But I agree, it doesn't seem fair.[:(]

Enjoy
Paul

[jeaton]

Tanks

[greyhounds]

QUOTE: Originally posted by jeaton

Greyhounds

I'd be interested in looking at the R.L.Banks study. Is it on line? (We may actually be in agreement on something.)

I seem to recall that there have been some cases where a shipper has been successful in a discrimination procedure. I wonder how the cost of the Banks study would compare to the cost of a SBC procedure. Or maybe Banks did it pro bono? LOL.

Jay

Jay, it's online at:

www.mdt.state.mt.us/tranplan/docs/railcomp_study.pdf

[jeaton]

Greyhounds

I'd be interested in looking at the R.L.Banks study. Is it on line? (We may actually be in agreement on something.)

I seem to recall that there have been some cases where a shipper has been successful in a discrimination procedure. I wonder how the cost of the Banks study would compare to the cost of a SBC procedure. Or maybe Banks did it pro bono? LOL.

Jay

[greyhounds]

QUOTE: Originally posted by futuremodal

Greyhouds: The comparative rates charged to Montana grain shippers vs Nebraska grain shippers are based on unit train and shuttle train rates. BNSF runs shuttle train facilities in Billings and Mocassin. The rate they charge for these 100 car trains out of the Montana facilities are 50% higher than corresponding unit train facilities in the other states. That's where the rate discrimination is taking place. The smaller carload lots are usually confined to the shortlines and they take the cost of aggregating these smaller car lots into full trains. BNSF is only taking the full trainsloads to the coast.

In other words, what BNSF is doing is charging Montanans twice as much for step #3 as they're charging other states. BNSF is not having to spend more for steps #1 and #2 because those jobs are either being taken care of by the shortlines or being bypassed altogether as farmers truck their grain long distances to the shuttle train facilities. Therefore, it is disingenuous to imply that BNSF has to charge higher rates for Montana shipments due to more expensive aggregation duties, because it is only the long haul rates that are the point of contention. Even if you prorate the shortline rates in with BNSF's rates, that still doesn't justify a 50% rate increase, because the shortline's cut just isn't that much.

There aren't to many farmers and co-ops that have that kind of time and money. Michael Sol presented a fine example of that problem, go back and read it.

Well, I provided a citation for the data I used. It is open for anyone to verify and check. Can/will you do the same. What I saw was an invalid comparison of rates on shipments that were significantly different in size. An invalid comparison probably done to produce the desired political result. Many consulting firms make a living providing false "facts" to back up bogus political arguments.

Where are the comparisons on similar size shipments?

I never mentioned any shortlines. And you do not know the relative importantce of the terminal costs vis a vis the line haul costs - for you to say the extra terminal costs on Montana origins do not justify the rates, without providing any analytic substantiationcan for such a statement, is only emotionalism in support of an ideology.

As for Mr. Sol, his post was poetic, and again emotional. But it made absolutely no recognition of the terminal costs and how they relate to shipment size. It doesn't matter if the cars are in the same train going over the same mountains, as he so lyrically wrote. The procedures that have to be done to the cars before and after they are in that train are very important cost elements. He ignored those elements.

[Junctionfan]

What kind of expansion and system capabilities does the Montana Rail Link have? Do they have the ability to make interchanges with CP and CN in Alberta?

I ask this because as far as running goods to the east coast, interchanging with CP or CN and the good can be taken at least as far as Chicago for interchanges with CSX and NS. CP runs in a few of the north eastern states and CN runs all the way to the Gulf of Mexico and has running rights with KCS so it might be worth the thought anyways.

[gabe]

Don't get me wrong, this is a great conversation, and I hope it doesn't end. But this is much ado about nothing.

This law will NEVER get by a Commerce Clause challenge--among a few other ways to challenge the bill that are obvious at first glance. If Montana wants to get at BNSF, it must do so through the Feds.

On a side note, on my way home from work there is only one fast food place, a McDonalds. The average meal at this McDonalds is roughly $2.50 more than any other McDonalds in the greater Indianapolis area. Yet, because it is the only restaurant in the area, I am forced to stop there on a late night when I wont have time to fix myself dinner.

They are able to get away with these prices because they know that the area it is in will not support two fast food restaurants, and no one is going to spend the money to build a restaurant in an area where it has a 50-50 chance of going out of business.

Unfair?

Gabe

[spbed]

I guess the Montana pols do not realize that we are capitalist country where the law of supply & demand control the economy.

[csxengineer98]

QUOTE: Originally posted by futuremodal

CSX,

A word of advice: If you want your posts to be taken seriously, try to be a little more coherent. Then (once your posts are legible) if you want your arguments to have merit, try to address the points being made without going off on a tangent. So far, your retorts (at least the ones we can read) are weak. Case in point: Your retort to M Sol"s example of wage discrimination for workers from different towns totally misses the point. If two workers of the same seniority and ability are paid drastically different wages, the one being low balled would have a cow. Mileage pay is not wages, it is compensation for use of private vehicles in the course of work and is meant only to repay wear and tear on your vehicle.

The example of having users of the LA to Chicago corridor pay for the upgrades rather than captive shippers who don't even use that corridor only follows logic. The concept of the user fee is applicable to private industry as well as public expenditure. What BNSF is doing is charging higher rates in one part of the country to help pay for track upgrades in another part, e.g. the payers of the higher rates are not the recipients of improved service. THAT is a true example of robbing Peter to pay Paul. If LA - Chicago shippers want expansion of the BNSF race track, then they should pay for it.

By the way, what exactly is a "communest"?

Selector: A business is totaly dependent on it's customers, therefore any business that thinks it's first loyalty is to investors is a business that will eventually **** off enough customers to the point of causing a loss to those investors. You're also a bit behind the times in regards to what other countries have done. Nationalization of rail lines is a thing of the past. What those nations have done is to return the nationalized railroads to the private sector under an open access regiment. Thus, those rail customers are the beneficiaries of competition, while the infrastructure owner is the recipient of certain tax incentives to ease the strain of capital ownership. It is the best possible scenario for returning freight to the rails, and needs to be implemented here ASAP.

once agin...you are talking about something that you seem to not have a real clue about....mileage on the railraod..... has nothing to do with ones personal vehical... if your going to try and put up an argument about railroad work and how we get payed...i sugest that you do some more resurch first.....but since you want to pick part my poor use of spelling..and grammer (which i realy dont give a rats***if you do or not) i will school you ..so sit down and listen... mileage is how we railroaders get payed...eveything is based on a mileage rate for the number of miles on a run.....a yard day pays 100 miles...or 8 hours...road jobs start out at 130...which is an 8 hour road day...now how the pay is calculated is...any run over the 130 mile day is about a buck for evey mile over that...so..like i said befor... railroaders do make more then some in other terminals becouse of MILEAGE!!!!!!!! your thinking of mileage as the IRS defintion of it..which in railroad turms..only applys in a deadhead when you drive your own car...
also... a railroad company is a transportation system..and what money is earned in one part of its network can and has to be spent on other parts of the system... when you ship by rail..regardless of what you pay...you are in part paying for repairs and upgrades to the whole system....when you ship by truck...unless you get an owner opporater...when you pay the shipping fees to the trucking company...your paying for any and all repairs to equipment in that outfits fleet not just that truck...all the money that is earned got into the general buget...and that is how any company opporates....and how the bills get payed .. its called opporating expences..and that money has to come from somewhere...go back to economics 101...

csx enigneer

[Anonymous]

Greyhouds: The comparative rates charged to Montana grain shippers vs Nebraska grain shippers are based on unit train and shuttle train rates. BNSF runs shuttle train facilities in Billings and Mocassin. The rate they charge for these 100 car trains out of the Montana facilities are 50% higher than corresponding unit train facilities in the other states. That's where the rate discrimination is taking place. The smaller carload lots are usually confined to the shortlines and they take the cost of aggregating these smaller car lots into full trains. BNSF is only taking the full trainsloads to the coast.

In other words, what BNSF is doing is charging Montanans twice as much for step #3 as they're charging other states. BNSF is not having to spend more for steps #1 and #2 because those jobs are either being taken care of by the shortlines or being bypassed altogether as farmers truck their grain long distances to the shuttle train facilities. Therefore, it is disingenuous to imply that BNSF has to charge higher rates for Montana shipments due to more expensive aggregation duties, because it is only the long haul rates that are the point of contention. Even if you prorate the shortline rates in with BNSF's rates, that still doesn't justify a 50% rate increase, because the shortline's cut just isn't that much.

Jeaton: The "nationalization" argument is taking place on a different thread. Suffice it to say, if your business was railroading, you would have to operate under the auspices of the FRA and STB, and your "business" probably got it's start by some hefty land grants, and is relegated to a rather inelastic head to head market. It is rather simple minded to infer a commonality of the railroad industry with an office business. For a better comparison of what would be entailed under an open access reformation, try the AT&T breakup, since telecommunications is a form of transportation. I don't know too many people who consider the AT&T breakup an example of "nationalization". If the same was done for the railroad industry and infrastructure separated from transporter operations, both segments would still be in private hands, so there is no semblence of nationalization. The offer of tax incentives to infrastructure owners is just a recogniztion of the need to equalize the funding mechanisms among other modes' infrastructures. If as an addendum the federal government decided to expand the rail network with new capacity built in the manner of the Interstate Highway System, that still wouldn't qualify as nationalism, since the rail service providers would all be private entities, same as the trucking industry. Unless of course you consider the trucking industry as nationalized.......

As to the rate discrimination, the way the STB rules are set up, it costs individual shippers a bundle of time and money just to present a rate discrimination case, with no guarantee that their case will even be heard. There aren't to many farmers and co-ops that have that kind of time and money. Michael Sol presented a fine example of that problem, go back and read it.

[jeaton]

Futuremodal

I have to hand it to you. You are really great at splitting hairs. If passing laws that requires a form of open access isn't a form of nationalization, what is it? I am an owner of a business. I have invested in office machines, computers, office space, and training for myself and my employees. If I was ordered by law to allow somebody to use my facilities to sell the same services that I can provide and I could only assess a legally defined "reasonable" charge for the use of my facilities, you can bet I would say that my business has been taken over by the government.

Michael Sol confirmed my understanding that that the Staggers Act prohibited rate discrimination. I seem to recall that the law or the regulations stemming from the law provide that rates a certain percentage level above variable cost is legally defined as discriminatory. So if the Montana grain rates are in fact discriminatory, why have those parties damaged not taken legal action? Is it possible thay can't make the case? If the latter is true, doesn't that make the proposed Montana law a political red herring, and the aggrieved farmers and their supporters a bunch of whiners?

By the way, I have known many fine people, business owners who who had your business principles-great ideas, the finest products, the best service, great prices, anything for the customer. For all to many, at the end of the day there wasn't enough cash left to put groceries on their own table. What do you suppose went wrong?

[greyhounds]

Well, I had some time on my hands so I took a look at the politically inspired study that the Montana farmers are hanging their hats on.

It was commissioned by the Montana State Senate (SB315) and performed by R.L. Banks and Associates of Washington, DC.

Looking at their rate comparisons on page 44 produces the inevitable conclusion that they are comparing apples and oranges. Montana wheat shipments are nothing at all like wheat shipments from Minnesota and Nebraska. To simply say that it "cost more" to haul wheat from Minnesota or Nebraska because there are more line haul miles involved is to ignore the ecnomics of rail transportation.

In 2002 the average wheat shipment from Montana was only 14.24 cars. From Minnesota it was 50.64 cars, and from Nebraska it was 50.43 cars. Why is this important?

The unit of production in railroading is the trainload. When the shipment size does not produce a full trainload unit of production then five distinct steps must be performed to complete the transportation.

1) Collection - the shipments must be gathered up by locals or switch crews
2) Aggregation - the shipments must be grouped in a yard into a trainload
3) Line Haul - on a railroad, this is very efficient and frequently the low cost component of total cost
4) Sorting - the trainload must be broken up into delivery units
5) Delivery - once again the locals and switch crews do their work

Now step #3 is very efficient. Steps 1, 2, 4, and 5 are not. The Montana shipments, because of their relatively small size require over 300% as much work in steps 1, 2, 4, and 5, which are the least efficient steps, as the shipments from the other two states. No wonder the rates are higher, and justifiably so despite the longer line haul distances.

Additionally, all the time spent in steps 1, 2, 4, and 5 destroys equipment utilization. Cars literally sit idle waiting for the local crew to go on duty, then they sit idle waiting for the local to come back and pick them up after loading, then they sit until the yard and switch crew can group them with other shipments.

All the BNSF is doing is passing along some of the efficiencies produced by the larger shipment sizes in states other than Montana.

Yes, the 50 car blocks do also have to be joined with other shipments to produce a trainload. But it is much easier and quicker to put the larger shipments together.

Line haul miles are only one cost component, and they are often the lowest of the cost components. If the farmers of Montana want lower rates, they'll have to increase the size of their shipments.

[Anonymous]

CSX,

A word of advice: If you want your posts to be taken seriously, try to be a little more coherent. Then (once your posts are legible) if you want your arguments to have merit, try to address the points being made without going off on a tangent. So far, your retorts (at least the ones we can read) are weak. Case in point: Your retort to M Sol"s example of wage discrimination for workers from different towns totally misses the point. If two workers of the same seniority and ability are paid drastically different wages, the one being low balled would have a cow. Mileage pay is not wages, it is compensation for use of private vehicles in the course of work and is meant only to repay wear and tear on your vehicle.

The example of having users of the LA to Chicago corridor pay for the upgrades rather than captive shippers who don't even use that corridor only follows logic. The concept of the user fee is applicable to private industry as well as public expenditure. What BNSF is doing is charging higher rates in one part of the country to help pay for track upgrades in another part, e.g. the payers of the higher rates are not the recipients of improved service. THAT is a true example of robbing Peter to pay Paul. If LA - Chicago shippers want expansion of the BNSF race track, then they should pay for it.

By the way, what exactly is a "communest"?

Selector: A business is totaly dependent on it's customers, therefore any business that thinks it's first loyalty is to investors is a business that will eventually **** off enough customers to the point of causing a loss to those investors. You're also a bit behind the times in regards to what other countries have done. Nationalization of rail lines is a thing of the past. What those nations have done is to return the nationalized railroads to the private sector under an open access regiment. Thus, those rail customers are the beneficiaries of competition, while the infrastructure owner is the recipient of certain tax incentives to ease the strain of capital ownership. It is the best possible scenario for returning freight to the rails, and needs to be implemented here ASAP.