Montana fights back against BNSF

[bobwilcox]

QUOTE: Originally posted by daveklepper

The enormouse amount of money could have been spent over a period of time, while hanndling the traffic. The emergency repairs could have been done first, then replace the oldest ties and jointed rail, etc, such as the UP has done with former SP and Rock Island trackage. But that is past history. What I am saying now is that the economic development track is the right one and not legal battles, and the economic development track should include rail improvements that can bring lower rates on BNSF and/or competition. New cars need not preclude state-owned track, and both are possible.

Think about the analogy with Amtrak, the cuts in maintenance on equipment before David Gunn took hold to improve a quick bottom line..

I think your right about groups trying to look toward the future as agriculure on the High Plans goes through wrenching changes. As an examle five of the poorest ten counties in the US are in Nebraska.

When the Milwaukee pulled the pin on North Dakota the state passed a temporary sales tax, bought the lines and leased them to the BN. Today I beleve SD is interested in selling the lines to the BNSF. Does anyone have any information how this has worked out for wheat growers in ND?

[CSSHEGEWISCH]

QUOTE: Originally posted by arbfbe

bobwilcox

Time will tell on that plan. I have not heard of any co-op built elevators yet but I don't get as much news about farm economics in Missoula as I would in Billings or Great Falls. Still, these co-ops are going to have to walk away from a lot of infrastructure that has not yet reached the end of it's economic life. Perhaps the technology has made their elevators obsolete but I am pretty shure they could undergo an upgrade to bring them up to specs if they were not on trackage the BNSF has slated for abandonment.

Alan.

If the co-ops are scared of upgrading their facilities since they are located on a branch that's scheduled for abandonment, would they be better off if they put some more money down to buy and operate the branch themselves in order to protect the investment in their elevators?

Paul

[MP173]

There are already a number of shuttle elevators in place in Montana.

BNSF's website has a listing of all elevators, including shuttle elevators located on their system. I think there are about 10 or so in the state.

That has to be a really pretty state, but mountains and farming usually dont mix too well.

ed

[gabe]

QUOTE: Originally posted by MP173

There are already a number of shuttle elevators in place in Montana.

BNSF's website has a listing of all elevators, including shuttle elevators located on their system. I think there are about 10 or so in the state.

That has to be a really pretty state, but mountains and farming usually dont mix too well.

ed

Ed,

I come from the same farm country you do. I have been to Montana 4 times. Let me tell you wheat fields as far as the eye could see. Truly overwhelming. I once rode the Empire Builder to Shelby. It seemed like there was a grain elevator every 10 minutes.

Gabe

[StillGrande]

CSSHEGEWISCH is on the right track with regards to communities and business which seem to think the rail line is vital to their community but is not worth the railroad's expense to operate. Nothing is stopping these communities from stepping in and setting up their own gov't owned shortline to act as a public service rather than a profit system. Especially if they can't even attract a shortline operator to run the thing at a bare minimum. Treat it like a bus line and give up funding in the county or even city (well, cities) budget. Run it like a commuter rail service. If it is so vital yet such a loss leader, that is what county government is for. Paying as a whole for what benefits the group is better than losing the service and all the attached jobs.

The part of Mike's argument I was addressing with state owned railcars was his statement that Montana loses railservice to other states due to a lack of available covered hoppers. If you have the cars in dedicated service, you avoid the argument that the resource (the railcars) is scarce and therefore you are cut off. (On a side note, don't some of the Canadian provinces do the same thing?)

[Anonymous]

QUOTE: Originally posted by StillGrande

CSSHEGEWISCH is on the right track with regards to communities and business which seem to think the rail line is vital to their community but is not worth the railroad's expense to operate. Nothing is stopping these communities from stepping in and setting up their own gov't owned shortline to act as a public service rather than a profit system. Especially if they can't even attract a shortline operator to run the thing at a bare minimum. Treat it like a bus line and give up funding in the county or even city (well, cities) budget. Run it like a commuter rail service. If it is so vital yet such a loss leader, that is what county government is for. Paying as a whole for what benefits the group is better than losing the service and all the attached jobs.

The part of Mike's argument I was addressing with state owned railcars was his statement that Montana loses railservice to other states due to a lack of available covered hoppers. If you have the cars in dedicated service, you avoid the argument that the resource (the railcars) is scarce and therefore you are cut off. (On a side note, don't some of the Canadian provinces do the same thing?)

It took a bunch of local governments a few years of doing just that before they realized that their shippers were still captive to the original Class I owner, thus still reluctant to pay the overcharges for rail service. There is no point in any local government buying a branchline if the potential shippers on it are still constrained by the illogic of differential pricing and captivity to one Class I service provider at the junction. The same goes for purchasing railcars for dedicated service on a captive shortline. The savings will only be pocketed by the Class I, while the taxpayers get saddled with maintenance costs and the shippers get saddled with continued overpriced sloppy service.

[MichaelSol]

QUOTE: Originally posted by MP173

"Studied indifference to data"?
Now, you have never, as far as I can tell quoted the published Spokane to PNW wheat rate, so I took it upon myself to find that rate.

The carload rate for wheat is $1477, based on 26 -109 cars (tariff authority 4022, item 43590, book 3, section c, page 4).

Michael, the term "rate" is $1477. That is the "rate" quoted in the tariff publication. The rate is "per carload".

You have referred to "rate" in terms of dollars per mile. That is incorrect in this application, however, I will go along with your reasoning.

Please review the following pricing data:

The following is quoted to PNW:
Havre $3181 per carload 890 miles $3.57 per mile
St. Paul $4148 per carload 1793 miles $2.31 per mile
Spokane $1477 per carload 325.6 miles $4.53 per mile

Also, compare the above to the following which you stated:
St. Paul to Duluth $841 per car 157 miles $5.36 per mile

Thus we have the following matrix:
157 miles @ $5.36 per mile
325.6 @ $4.53 per mile
890 @ $3.57 per mile
1793 @ $2.31 per mile

Anyone who has experience in transportation rate making or in fixed and variable costing methodology understands the trend above. Michael, I would assume you also understand it.

1) The rates have to be for equivalent transportation. I utilized tariffs for 100 car trainloads, and, in the event of no such tariff for a specific point, then the next available tariff.

2) In the case of conflicting tariffs, for consistency I chose the cheaper tariff. Spokane has two tariffs at the selected carload number. You chose the highest tariff. For consistency with the other stations, I chose the lowest tariff, which is consistent with the other data used.

3) Comparing Spokane's highest tariff with other stations' lowest tariffs will indeed give you the result you desire.

4) The ICC determined that hauls under 500 miles do not accurately reflect mileage rate, as terminal costs became a significant component of the variable cost involved, skewing the mileage rate above a reasonable cost for that mileage.

6) If a cost factor for terminal costs is deducted from all tariffs across the board, it is possible to show a useful mileage rate for short hauls. The shortest clean haul I could find is Spokane to Cheney Wa, 10 miles, which must be nearly all terminal costs which suggests that $300 originating and $300 terminating may be useful figures.

7) BN utilized mileage in determining it's variable cost in rate litigation proceedings, because tariffs are based on mileage and terminal costs. A multivariate regression analysis will show a 99.9% casuality between tariff and mileage because that is what the tariffs are based on.

"To detemine the (mileage) rates for use of private cars for traffic in the comparison group, we [the ICC] relied on the railroad industry's "UMLER" files, a computerized list of railroad cars showing the actual mileage rate ..." McCarty Farms, et.al. v. Burlington Northern Inc. 7 ICC2d 1027.

While your essay on the disconnect of mileage from the meaning of tariffs is interesting, I cannot find anyone that recognizes it for the purpose of comparing rates in the railroad industry.

8) Adjusting for terminal costs, as a group Montana stations show significantly higher rates per mile for their tariffs for wheat and barley than any other cluster of stations on the BNSF system.

"We have previously found that Burlington Northern Railroad Company has market dominance over movement of wheat and barley from Montana to Pacific Northwest ports." 31 ICC2d 822 (1991). "[We found that] certain of its rates for traffic are unreasonable." 4 ICC 2d 262 (1988).

While the case was overturned eventually on modified evidentiary grounds, the law has since been modified to essentially put it back to reflect the ICC's original interpretation. This is the impetus for state legislatures attempting to organize another case.

However, compare BNSF's $55 million annual excess profit from Montana alone, and the resources of a typical ag state government or private shipper to pursue litigation with financial stakes that high for, 15, 16 or 17 years. That is, how much BNSF is willing to devote to lobbying and litigation, compared to the financial resources of the farm community.

Ironically, less profit of course has meant less financial ability to litigate.

Best regards, Michael Sol

[CSSHEGEWISCH]

How is EXCESS profit determined? A Montana farmer may feel that any profit to BNSF from the rate he pays is excessive while any profit that the farmer receives from the sale of his crop is reasonable.

[gabe]

QUOTE: Originally posted by CSSHEGEWISCH

How is EXCESS profit determined? A Montana farmer may feel that any profit to BNSF from the rate he pays is excessive while any profit that the farmer receives from the sale of his crop is reasonable.

What we need is a bean counter.

[MichaelSol]

QUOTE: Originally posted by CSSHEGEWISCH

How is EXCESS profit determined? A Montana farmer may feel that any profit to BNSF from the rate he pays is excessive while any profit that the farmer receives from the sale of his crop is reasonable.

Well, we are starting to go in circles here. As was mentioned on March 15, the rate is considered excess when the ratio of the revenue received to the regulatory variable cost of the move exceeds the statutory ratio defined by Congress.

It is not based on anyone's "feelings," nor is the concept of profit in a captive market comparable to that of an open market such as exists in commodity industries.

Congress, in any case, in setting the law of the land, has a specific set of laws regarding railroads in this circumstance. For farmers the reasonable rate of profit has usually been invoked from the standpoint of minimum prices received, since otherwise farmers do not set their own prices and force other people to pay them in order to survive.

Best regards, Michael Sol

[gabe]

QUOTE:

Well, we are starting to go in circles here.

You have a gift for understatement.

Gabe

[MichaelSol]

QUOTE: Originally posted by MP173

That has to be a really pretty state, but mountains and farming usually dont mix too well.

Somehow, it manages to mix in Montana. Montana grows more wheat than IIlinois, Nebraska, Wisconsin and Iowa combined.

Montana and North Dakota, the two states that have complained the most bitterly about rate discriminations, represent 22% of all wheat production in the United States, together producing, for example, nearly five times the bushels of wheat produced by Minnesota [2004 production year].

For the Northern Tier of states served by the northern line of BNSF between the key ports of Duluth and Portland, the states complaining of rate discrimination produce 65% of all wheat harvested in that market area.

This isn't a small group of grumpy farmers who are subject to unfair pricing, but rather the bulk of wheat produced in the region, a crop of overriding significance to the economies of these states.

Best regards, Michael Sol

[Anonymous]

QUOTE: Originally posted by gabe

QUOTE: Originally posted by CSSHEGEWISCH

How is EXCESS profit determined? A Montana farmer may feel that any profit to BNSF from the rate he pays is excessive while any profit that the farmer receives from the sale of his crop is reasonable.

What we need is a bean counter.

Nothing ruins a railroad like a BEANCOUNTER.

Have you ever heard the story of Jack and the Beanstalk? Well, there are a few accountants out there with nothing on Ol' Jack...

Just ask Mr. Ebbers...or check in at ENRON...lol...

We don't need no stinking beancounters....

LC

[gabe]

I was just enjoing the double entendre of "beancounter."

Gabe

P.S. Illinois' cash crop is corn rather than wheat, so comparing it to Montana's wheat is not really a fair comparison.

[MichaelSol]

QUOTE: Originally posted by gabe

I was just enjoing the double entendre of "beancounter."

Gabe

P.S. Illinois' cash crop is corn rather than wheat, so comparing it to Montana's wheat is not really a fair comparison.

And Minnesota's is Norwegians, but I included its wheat crop too.

Although ranked 15th in production, Illinois is no slouch on wheat. At 53,000,000 bushels annually, it produces more than Wisconsin and Iowa, nearly as much as Nebraska, and nearly half as much as South Dakota, a big wheat producer. Even at 31% of Montana's wheat crop, it is no pygmy in wheat production. Best regards, Michael Sol

[MP173]

Michael:

What is the carload rate you are referring to, along with the tariff authority?

I will be glad to revisit my analysis based on other information.

BTW, just found a Havre to PNW rate of $2830 per carload...$300 lower than your rate quoted. This reduces the per mile cost to $3.19.

Regarding my definition of "rate"...it is a published cost for service in a tariff. The rates listed in BNSF's tariffs ( and others I have examined) are not based on mileage, but either on specific points or what we used to call back in the day "rate bases" in which locations are grouped into central points in order to reduce tariff size.

The "rate" in effect is a carload rate from a specific point to a specific point. The rate is not a "per mile" rate. Mileage is no doubt a very important component of the rate, along with the mentioned "terminal costs", equipment costs, and probably dozens of other factors. Those factors determine the costs involved. The rate will be what is charged and will take into determination other factors such as the value of the commodity shipped, market factors (competition), et al.

So, we are probably splitting hairs here, but the "rate" in transportation industry is a published or contract charge, not a component. If these were mileage "rates" the layout of the tariff would be much different, with mileages rather than specific points being the determining factor.

I do not have the ability to discuss the regulatory pricing structures in place today and will not even attempt to do so.


I am looking forward to your reply.

ed

[CSSHEGEWISCH]

Nothing ruins a railroad like a BEANCOUNTER.

Have you ever heard the story of Jack and the Beanstalk? Well, there are a few accountants out there with nothing on Ol' Jack...

Just ask Mr. Ebbers...or check in at ENRON...lol...

We don't need no stinking beancounters....

LC

[MichaelSol]

QUOTE: MP173: What is the carload rate you are referring to, along with the tariff authority?

BTW, just found a Havre to PNW rate of $2830 per carload...$300 lower than your rate quoted. This reduces the per mile cost to $3.19.

Authority: BNSF 4022 Item: 43591, Series K, covered hopper cars LO 26-109 cars, $1357, compared to your $1477.00, a companion rate. This occurs at many stations. Simply as a matter of consistency, the lowest rate was consistently utilized among comparable carloadings and rates.

For Havre, several rates are published. They vary from $1800 for a single boxcar to 3461 and 3592 for 52-109 carloads, and $3624 for a shipment of 1-25 carloads. Again, using an arbitrary standard of 100 carloads, the lowest quoted rate, $3461, was selected for comparison purposes. I am sure there is a $2830 carload rate in there somewhere that reduces something to something, but for the purposes of a comparative study, looking for similar treatment of the commodity for rate purposes, cherry picking the data isn't very useful.

Havre, incidentally, was chosen not because it represented an extreme example of high rates in Montana, nor was Spokane chosen because it represented an extreme case of a low rate for a shorter haul. Indeed, Havre is on the low end of the scale of Montana rates, understating the case. You might note that from the following examples.

Removing terminal costs to achieve true mileage rate comparisons:

Origination/Destination Rate $/Mile

Butte/PDX 3.99
Malta/PDX 3.50
Cut Bank/Seattle 3.21
Havre/Seattle 3.09
Shelby/PDX 3.01
Cut Bank/PDX 2.98
Big Sandy/PDX 2.81
Harlem/PDX 2.79
Havre/PDX 2.79
Bozeman/PDX 2.73
Great Falls/PDX 2.68
Lewistown/PDX 2.46

Spokane/Seattle 2.30
Moses Lake/Portland 2.26
Quincy/Portland 2.05
StPaul/PDX 1.98

Moses Lake/Seattle 1.77
Spokane/PDX 1.97
Thief River Falls,MN/St Paul 1.86
St Paul/Los Angeles 1.77
Kansas City/Galveston 1.73

Odessa/Portland 1.67
Ritzville/Portland 1.63
Sprague/Portland 1.63
St. Paul/Duluth 1.54
St Paul/New Orleans 1.22
Seattle/Galveston 1.13

PDX is Portland. It's quicker to type.

As you can see, Montana shippers pay significantly more, per mile, than either longer or shorter haul shippers, utilizing, however, criteria for similar treatments of terminal expenses, shipment size, tariff, and commodity..

Best regards, Michael Sol

[Anonymous]

QUOTE: Originally posted by CSSHEGEWISCH



Nothing ruins a railroad like a BEANCOUNTER.

Have you ever heard the story of Jack and the Beanstalk? Well, there are a few accountants out there with nothing on Ol' Jack...

Just ask Mr. Ebbers...or check in at ENRON...lol...

We don't need no stinking beancounters....

LC

Accountants (beancounters) are not the problem and are probably more of a necessity. The problem in the cases cited above was massive fraud by the perpetrators aided in part by a lack of due diligence by more than a few people.

Try to see how long you can last in operating a business other than a sole proprietorship without any accountants unless you like paying the IRS more than necessary.