OAT : Open Access Thread

[Murphy Siding]

Darn it ! I had my reply already typed out. Then I hit a wrong button and it was gone![:(!]. When I got back,PNWRMNM had hit most of the high points![:)]. Those utilities can demand that type of return because of a long track history, and because there aren't too many alternatives if your power company turns off the switch. People will allow these utilities to make a decent return. If a TOC can't get a decent return and shuts the doors, UPS will still get the packages delivered. Again, you're asking investors to go into a venture with a capped return,but no minimum return guaranteed. How do you sell those investors on the idea?

[jeaton]

QUOTE: Originally posted by futuremodal



jeaton - So you think that utility regulation and anti-trust laws are socialist? Do you think the Interstate Highway System is socialist? What about public funding for education, is that socialist? Public land ownership? Business licenses? Hey, maybe you think the original railroad land grants were socialist!

Well, yeah!

socialism, n. a theory or system of social organization by which the major means of production and distribution are owned, managed or controlled by the government.

Fortunately for my own peace of mind, I am not bothered by the particular ideological label that might be used to describe any given government program and I am not moved by "slippery slope" assertions.

Interesting how such conflicts are often handled.

I oppose socialism. I favor the Interstate Highway System. Therefore the Interstate Highway System must not be socialism.

non-sequitor.

[PNWRMNM]

Murphy,

Your question about guaranteed return is highly relevant. My regulated monopoly electric company is guaranteed by the state that it is a monopoly. The state can guarantee the regulated monopoly its rate of return by protecting it from competitive suppliers.

Part of the railroad's macro problem is that for the entire 20th century the industry has had to compete with competitors who are massively, and mostly indirectly, subsidized by govenrments at all levels. Those subsidys contine to this day, and congress has so much fun spending Other People's Money and then bragging about how they bring home the bacon for their district that it would be irrational to expect a change in this behavior. The recently passed highway bill is an example. My congressman made these claims, and I will bet yours did too.

An OA regime will not, in and of itself, change that fact. I do not recall anyone guaranteeing the infrastructure company(s) demand or rate of return. Futuremodal did not answer your question.

Mac

[Anonymous]

beaulieu - Thanks for spotting that. My mistake. From now on transporters will be designated as TOC's while infrastructure owners will be designated as IO's.

Murphy - Did you know that over the last few decades regulated utilities have had a higher ROI (10% give or take) than the S&P 500? I think investors have a pretty good idea of why they would put a portion of their portfolio in regulated utilities, namely steady dependable return and low risk.

As far as an IO not wanting a certain line, the best course of action from a societal standpoint is for that unwanted line to be railbanked under a State or Regional jurisdiction, and let those entities be the judge of whether a line should be saved or scrapped. It is my view that under a nationwide OA scenario, states and localities would finally have the necessary incentive of competitive transport services to supplement the private IO's trackage, something that is lacking now under closed access and publicly-owned shortlines/potentially publicly-owned shortlines that are/would be subject to captivity of one Class I connection.

[Murphy Siding]

futuremodal: If the current ROW ownership remains intact? I do see a couple problems with that assumption. If given the choice of owning your existing ROW or your existing TOC, I would think most railroads would pick owning the TOC,and letting someone else face the greater of two hassles. I guess I thought OA would go from the ROW's being in the hands of a handfull of Class 1's to being owned by 100's of individual owners. Each IO (thanks beaulieu) would only want to own the part of the system he could make money on. In addition there would also be the problem of the ROW that nobody wants.
REGULATED PROFIT MARGIN? How does that work? What incentive is there to invest in a system that has a top end profit margin that is determined by a govenment agency? Will they also guarantee that profit margin?

[beaulieu]

To help this dicussion along I think that I should clarify something, someone suggested that the current BNSF route from LA to Chicago would be the "Intermodal " route while the UP route would become the "Bulk/Carload" route. What happens in Europe and I would suggest here is that there are various speed paths available, what type of train runs in what path is immaterial. Are the cars able to run at the required speed, and does the train have the required power to weight ratio would be the only questions.

I would suggest that the BNSF route would be the higher speed route, each hour there would be one train path for trains cleared to operate at 70 mph. and powered by 4.0 hp/t , there would several paths for 60 mph trains powered by at least 3.0 hp/t. The would need to be a handful of paths each day for work trains and low speed trains to intermediate points on the line.
The UP route would have no 70 mph trains but would add a slower lower powered band.

[beaulieu]

Minor clarification TOC = Train Operating Company , the people who run the trains. The Infrastructure Owners are usually refered to as "Infra(s)" or IO(s).

You think Seattle to New York is bad. Hupac AG is a large Swiss Intermodal company, like The Hub Group in the US. Six days a week they originate an intermodal train at Oslo, Norway and run it to Milan, Italy. It requires pathing over
Norway, Sweden, Denmark, Germany, Switzerland, and Italy national infrastructures. The train is Operated by Railion the freight arm of DB, the German national railway company, they do the pathing for Hupac.

[Anonymous]

Murphy - If the current ROW ownership remains intact, you're not going to have more than two or three TOC's to deal with in a cross country trek. You will have single entity intermodal firms pre-establishing runs between the major markets. You wouldn't have a situation of someone just showing up at a TOC's track with an unanounced handful of carloads, it is more likely that access will have to be scheduled in advance.

Don't forget under the current closed access system, a railroad with even a fraction of a mile of track in the two owner scenario can effectively bottleneck out any through runs, something the railroads have been doing for 25 years now since they were partially deregulated by Staggers. Under OA, the TOC's are only covering actual associated costs with passage. They will charge for wear and tear, slot bumps, and operational charges, plus a regulated profit margin, but they will not be able to bottleneck or throw down a paper barrier. This will do wonders for supply chain efficiency.

jeaton - So you think that utility regulation and anti-trust laws are socialist? Do you think the Interstate Highway System is socialist? What about public funding for education, is that socialist? Public land ownership? Business licenses? Hey, maybe you think the original railroad land grants were socialist!

[jeaton]

Futuremodal

Nice to see that you are still opposed to any move toward socialism, such as internationalization of railroads, rate regulation of railroad infrastructure owners offering open access, and anti-trust/monopoly laws.

[Murphy Siding]

futuremodal: I see what you're saying, but see a few issues. Going from Seattle To NYC could take a train over a dozen TOC's. As was explained over on the thread about British rail operations, each of their freight trains has to get a time slot to operate on a TOC's section of track. That sounds like the potential for 12 delays. Also, you would have to have 12 diferent oprerating contracts with 12 different TOC's? Suppose I wanted to send a train to a place that your TOC hadn't yet worked with the local TOC's? Are you going to negotiate that contract, while my stuff is being loaded onto a JB Hunt truck to leave this afternoon? [:)]

[PNWRMNM]

FM

Your forgot one. They could sit down and negotiate a deal like they have done for the past 150 years. It is not difficult, IFF there is sufficient traffic.

Mac

[Anonymous]

QUOTE: Originally posted by Murphy Siding

FM: I guess that's the second time I've gotten the spelling wrong ![:)]. Come to think of it, I shouldn't be abreviating your name as FM, if it's actually futuremodal.


Therefore-

f: How about that post on single line routing and OA ?[:)]

RE: The single line routing post

I like to look at it as a trucking analogy. I can hire J.B. Hunt to ship my cargo from Anywhere USA to AnywhereElse USA, and it all shows up on JB's bill of lading. What route JB takes is up to JB, but it doesn't have to be the same Interstate, it can be a combination of Interstates, Tollways, etc. In the OA example, if the ROW's are regulated, then rail route combinations would be more akin to highway route combinations.

Another way to look at it is what's happened to the "I-15" rail corridor from Calgary to Salt Lake and beyond. There are connecting tracks from CG to SL, but one section is owned by CP, another owned by BNSF and affiliates, and one owned by UP. BNSF has apparently given up on the Great Falls to Helena section, so it's out of service. There's basically four ways this rail corridor could be reborn: Reregulation of the railroads to force line haul rates, a BNSF-UP merger (with or without CP), internationalization of the NA railroads, or OA. The last three fit into the single line scenario cited in the article as an improvement in railroad dynamics, but all three have potentially serious drawbacks. The mega merger imposes even more monopolistic behaviour by railroad companies, internationalization involves a move toward socialism, and OA could cause a massive collective stroke among at least half of the TRAINS forum participants. Take your pick, choose your poison!

[Murphy Siding]

FM: I guess that's the second time I've gotten the spelling wrong ![:)]. Come to think of it, I shouldn't be abreviating your name as FM, if it's actually futuremodal.


Therefore-

f: How about that post on single line routing and OA ?[:)]

[Anonymous]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by jeaton

So the added crew cost per car for the 25 car train vs. the 100 car train is $86.46. Now if running the shorter trains actually reduces the turn around time on the car, we can quickly see some cost offsets. I don't have any handle on the price of a new car, so indulge me, but if the price is $100,000 per car, interest is 10.25% for 20 years the daily cost comes to about $32.72. If the numbers are correct, then the time the car spends on the train has to drop by a little more than 2 1/2 days or 5 days off a turn around.

I put equipment costs into the model. Very interesting results.

Best regadrs, Michael Sol

MIchael,

Can you work the model to run a comparison on the hot button issue regarding Montana grain transportation, namely how the rate differential is affected by BNSF continuing branchline service vs forcing those shipper to truck to the larger terminal? I assume that there would be a rate surcharge of some kind for cars heading to 10 mph territory to make up for the increase in cycle times for those cars, regardless of if they are eventually part of the shorter grain shuttle or the longer grain shuttle. I assume such a rate surcharge would still make rail shipment more attractive than truck shipment through that branchline corridor.

Of course, if it's a situation where a shortline operator simply transloads the grain from the branchline hopper to the shuttle elevator (rather than those hoppers being a part of the larger consists), then it's a separate analysis. If it's a transload situation, the matter shifts to the grain shipper, who has to compare branchlining the grain to the larger facility vs trucking to the larger facility.

[Anonymous]

QUOTE: Originally posted by Murphy Siding

QUOTE: [

Of course, a few quasi economists will claim that the higher rate will cause the farmer to move his operation closer to the 110 car facility.[;)]

Future Modal: And to think that sometimes I worry that you don't have a sense of humor ![:)]

Well, I try.

And that's futuremodal [^], not Future Modal [V]. It's one word, like intermodal, not Inter Modal.

Anyway, have a great weekend, murphysiding!

[greyhounds]

Anybody know what the actual cycle time is on those "large, slow" grain shuttles?

[MichaelSol]

QUOTE: Originally posted by jeaton

So the added crew cost per car for the 25 car train vs. the 100 car train is $86.46. Now if running the shorter trains actually reduces the turn around time on the car, we can quickly see some cost offsets. I don't have any handle on the price of a new car, so indulge me, but if the price is $100,000 per car, interest is 10.25% for 20 years the daily cost comes to about $32.72. If the numbers are correct, then the time the car spends on the train has to drop by a little more than 2 1/2 days or 5 days off a turn around.

I put equipment costs into the model. Very interesting results.

Best regards, Michael Sol

[Murphy Siding]

QUOTE: [

Of course, a few quasi economists will claim that the higher rate will cause the farmer to move his operation closer to the 110 car facility.[;)]

Future Modal: And to think that sometimes I worry that you don't have a sense of humor ![:)]

[MichaelSol]

Jay, your cost assumptions are pretty close to the ones used in the model. They work through pretty consistently. And, for the purposes ot this first phase of the model, the total labor costs were wildly exagerated. That is, what in the heck is a train doing for 26 days in terms of labor attention, when it is ostensibly only moving through 6-10 crew districts? The model, in fact, assumes that crews are "with" the trains during much of that time, even if the train isn't 'doing" much.

It is in the fact that the labor costs, even under that assumption, are a surprisingly small part of the revenue received that makes it difficult to leverage labor cost arguments into anything significant. The cycle time is far, far more important because of the impact that has on revenue earned, compared to the difference in labor costs incurred, and even more importantly because we use accounting periods, and don't compare the revenue/costs of one cycle time vs a different cycle time. Cycle times measure trains. Accounting periods measure money. When this is all translated into standard accounting periods, ie monthly or annual reports, then we start to really see what is happening because that's how we actually count money.

This is one of the advantages of models, they show a final profit figure that puts labor cost vs revenue received into a very clear perspective as they both relate to cycle time.

Whether or not there is a car shortage to justify it, the Company simply makes more money by far because of the cycle time improvement. You can take the model, in fact, and make the rates identical, and show that the simple improvement in cycle time by a very small amount has a significant impact on profitabiltiy.

Indeed, you can use the model simply to demonstrate the leverage that cycle time alone has on the bottom line. And it is surprisingly significant.

If you have Excel, I can email the model. It's a rough first draft, but it's interesting.

Grain transport is pretty much non-seasonal these days. It gets "tight" in a few weeks, but otherwise these cars are moving year round.

Best regards, Michael Sol

[jeaton]

Michael

I am not disputing your arguments about the benefits of modeling or that the model you talk of here can provide good insight and raise questions concerning the efficiency of an existing operation.

I am quite aware of the fact a calculation of the reduction in per unit crew cost as a function of increasing train length shows a rapidly diminishing return. If I may illustrate, let us go with the number $140,000 annual cost, wages and benefits, for a two man crew and assume that they operate 300 trains per year between their crew terminal points.

Now this is arguable, but let us also assume that neither their pay nor the number of runs per year would vary with the length of the train. It then follows that the crew cost per train for their portion of the operation would be $466.66. Let's round to $477. If all is true, then crew cost per car for a 100 car train is $4.77. Add ten cars to the train and the cost per car drops about 44 cents to $4.33. Not much of a deal. On the other hand, look at the number for a 25 car train and it is $19.08 per car.

That is just one crew district, so let us say that our train runs over 6 crew districts from its origin to its destination. We then have the following crew cost per car for the entire run of the train.

110 cars $25.98
100 cars $28.62
25 cars $115.08

So the added crew cost per car for the 25 car train vs. the 100 car train is $86.46. Now if running the shorter trains actually reduces the turn around time on the car, we can quickly see some cost offsets. I don't have any handle on the price of a new car, so indulge me, but if the price is $100,000 per car, interest is 10.25% for 20 years the daily cost comes to about $32.72. If the numbers are correct, then the time the car spends on the train has to drop by a little more than 2 1/2 days or 5 days off a turn around.

Now we get to some critical issues. First we have to determine if the dispatch of short trains will in fact improve the transit time so that the train can make the run in 2 1/2 fewer days than the long train. That is the part where I earlier said I would at least have to see an operating simulation indicating that such an improvement would be possible. Given that condition, I would have to have it demonstrated the days saved could actually be put to productive use. When we discuss the Montana grain situation, it is argued that there is not currently enough car capacity, i.e., there is a car shortage. But that leads me to add the next question. Is the shortage just a seasonal condition? If not, it seems to me that one of two things happen. We have been told that the Montana grain producers do not have the options of other modes, so either the grain is "forced" to move through the 100 car terminals, or the grain is hauled back to a field and plowed under.

I will add that I realize that extra $400 per car revenue on the 25 car train will offset the add crew cost per car even if there is no improvement in transit time. However, if you let me slip back to observable conditions, are Montana grain shippers experience car shortages at this time? If after the harvest moves there is no other use for the cars, then one must question if the added $400 revenue is enough to cover. The daily $32.72 daily cost doesn't stop when the car is idle.

Jay Eaton

[MichaelSol]

QUOTE: Originally posted by MP173
[br What are the average speeds of trains for NS and CSX yty?

NS this time 2004 average train speed, 22.8. Last week: 22.4
Grain trains, 19.5, 18.4
Cars handled 2004 184,833, this year: 188,592.

CSX, this time 2004: 20.1 mph, last week: 19.4.
Grain trains, 19.1, 17.1
Cars handled 2004, 233,667. Last week: 232,056.

UP, incidentally, is down on cars handled during the week. Last year, 322,350, this year, 320,3232. So, its decline in train speed is despite fewer cars handled, and same for CSX.

Best, Michael Sol

[Anonymous]

QUOTE:
So, essentially we are checking the pricing of a carload at $3100 vs $2700. However, as you know, those Montana grain farmers want the $2700 price, and possibly even lower. How would you go back from $2700 to $3100 with the promise of running faster trains? They dont care, they want lower rates.

The only rate that matters is the best rate from farm to whatever entity is interested in purchasing his crop. Most farmers or local elevators will gladly take a $3100 rate from the neighborhood elevator as opposed to a $2700 rate from an elevator a hundred miles away. The cost of trucking to the 110 car facility often negates the lower rate.

Of course, a few quasi economists will claim that the higher rate will cause the farmer to move his operation closer to the 110 car facility.[;)]

[MichaelSol]

QUOTE:

QUOTE: Originally posted by bigedd

The 6000 grain hopper cars BNSF is buying. You see that as positive. That's all this railroad needs is another 6000 freight cars to haul around and get in the way and pay for. They are buying 6000 more hopper cars to simply keep carrying what they carry because the available capacity keeps dropping due to increased cycle times resulting from the slower train speeds. Those 6000 hopper cars will only add to the congestion.

BN's fleet is getting old and tired.It is costing more to fix the old cars.
I dont think BN purchased these cars to add to the congestion.They will
retire many of the older cars.

That's probably very true, the average age is something like 20 years. But then that leaves the Company considerably short of capacity compared to historic need, and this year is running ahead of last year in terms of need.

Best regards, Michael Sol

[Anonymous]

The 6000 grain hopper cars BNSF is buying. You see that as positive. That's all this railroad needs is another 6000 freight cars to haul around and get in the way and pay for. They are buying 6000 more hopper cars to simply keep carrying what they carry because the available capacity keeps dropping due to increased cycle times resulting from the slower train speeds. Those 6000 hopper cars will only add to the congestion.

BN's fleet is getting old and tired.It is costing more to fix the old cars.
I dont think BN purchased these cars to add to the congestion.They will
retire many of the older cars.

[MichaelSol]

QUOTE: Originally posted by MP173

Michael:

Got the spread sheets and will play with them when I have time.

What are the average speeds for shuttle grain trains vs conventional grain trains?

Is the reduced velocity of trains yty solely due to the larger trains??? or might there be other factors at work here? What are the average speeds of trains for NS and CSX yty? My guess is that it is down for most carriers and probably due to large increases in tonnage, but that is just a seat of the pants guess and not based on the hard data which I know you will find.

Well, the point of models is to use them as planning tools, not operating tools. In this case, you have long, heavy grain trains. That's a given by the fact that we know they are 110-120 carloads. Depending on the mix of covered hopper cars types, 15,000 tons or more.

These trains are not Sprints, and they don't sprint anywhere. If this was being set up a textbook example, this how this project would be described.

The planning model wants to look at an alternative because car cycle times are just miserable. The alternative proposed was a four train replacement -- very light, very short trains. The theory is that possibly these short, fast trains can speed up car cycle utilization. and we can avoid purchasing another 6000 covered hopper cars.

The project was discussed briefly with the T&E Guy, with unsatisfactory results. His opinion was that the railroad needed to cut costs, and replacing one train crew with four train crews, and increasing car handling time and train assembly times was the stupidest thing he had ever heard of. His message was that Railroads don't make money by increasing their labor costs, although he phrased it much more colorfully.

The Operating Department has a flow model which will show the impact of additional trains on car cycle times, and whether or not these shorter, faster trains would be able to achieve the proposed improvements in train speed and utilization, but the guys running that office are up to their ears juggling curent projects, and this one is not far enough along to warrant a full-blown simulation on their program.

In order to get approval to undergo a full-scale simulation, we need to show that the idea is even workable, if indeed the speed benefits are possible. Therefore, we need to be able to show, in a concise manner, that under comparable conditions, that four trains and four train crews generate more profit than one train and one train crew. If we can't show that, then there's no point in talking about faster trains.

So, we need to show that to the VP of Wild Ideas before we can get permission to approach the Operating Department for a feasibility analysis. That is, we need to show that it makes economic sense in principle, before we can begin assembling detail data and bothering other departments.

We know that the current car cycle time is about 26 days. If we can move short, fast trains on the system, is there any economic gain to be made? Everyone is skeptical because of the additional crew costs.

A proposed test project is at Shelby, Montana. We have a bunch of farmers up there who have been mad at us for 35 years. They don't get good service, and they pay high prices. The Pricing people seem to think this is a good way to do business, but our point is, can we provide better equipment accessibility and faster service for those farmers, and make money in the process?

We built a model which essentially treats the cost of labor per train the same, that is, the Fast Train model will use four times the labor as the Unit Train, but then obtain some efficiency results as a result of faster speeds. The model uses what we know at this point about system cycle times, and for the Fast Train program we initially proposed to be at least half of the current cycle time. That's very optimistic, but the point of doing that is if there is no return under optimistic conditions, we can drop the idea and not waste any more time.

Well, by plugging 12 days into the Fast Train program concept, and 27 days into the Shuttle Train formula, we found that the Fast Train was enormously more profitable for us. Train crew costs went from $36,000 to nearly $120,000 a month, but our equipment turnaround time brought in an additional $5 million in projected annual revenue.

Because it is in an active model format, we could play with crew sizes, labor costs, car cycle times, and rates, and get instant economic analysis of the results of any particular change, or any particular combination of changes.

In entering various options, we found that the Fast Train concept was profitable even if it could only beat the Unit Train cycle time by as little as a day. This was a big surprise, but showed that labor is not nearly as important in these considerations as the revenue component of the changes.

And, in this model, which only estimated labor needs, it appears that labor needs are grossly overstated, but overstated equally for both concepts.

The utilization efficiency of the four train model was so superior to the unit train model, that even if these trains can only beat the unit train by one day, the Railroad company can still make a profit despite higher labor costs. The opinion of the staff is that, without even submitting this to the Operating Department's simulation, there is no doubt that a 25 car train will be able to substantially best the unit train's transit time under all circumstances and that four such trains will ease the loading and unloading pressures at both ends as well and probably improve car cycle time from that aspect as well.

That would be a textbook mockup of the problem and the approach to examining the problem.

Now, are car cycle times lengthening because of increased tonnage? Well, increasing usage is a standard, networking problem. Keeping the network from bogging down by improving its efficiency is the role of system administrators. When it begins to bog down, it means that solutions are not being implemented. A solution is what this model proposes to look at in a limited fashion.

What was remarkable was how little the "fast train" concept has to actually achieve in order to be more profitable for the railroad than the unit train.

And of course, this is an important role of econometric models. To raise questions.

Best regards, Michael Sol

[MP173]

Michael:

Got the spread sheets and will play with them when I have time.

I cannot go back to Montana regarding the rates. I did for awhile and am not willing to invest time and energy to return to Montana...except on vacation.

I dont know all of the particulars and will not begin to speculate.

What are the average speeds for shuttle grain trains vs conventional grain trains?

Is the reduced velocity of trains yty solely due to the larger trains??? or might there be other factors at work here? What are the average speeds of trains for NS and CSX yty? My guess is that it is down for most carriers and probably due to large increases in tonnage, but that is just a seat of the pants guess and not based on the hard data which I know you will find.

BTW is the train eastbound out of Kansas City a passenger train? If so, obviously then it is in unsignaled territory (dark) as passenger trains are restricted to 59mph in dark territory. The 40mph out of Cleveland must be a loaded grain train or coal train.

ed

[Anonymous]

I think what OA advocates see is an opportunity to rationalize the pricing available to shippers -- particularly those used on highly accessible, well traveled mainlines such as Montana and North Dakota wheat farmers use -- and to make that pricing more rational for everyone by investing in managements that in turn invest in the kind of ideas that improve capacity, not diminish it.

therein lies another multitude of questions......................

[MichaelSol]

QUOTE: Originally posted by MP173

I am back...but please, no more trick questions. I am not a 20 year old college student hung over.

If a train leaves Cleveland westbound at 40 mph, and a train leaves Kansas City, eastbound, at 59 mph ....

QUOTE: So, essentially we are checking the pricing of a carload at $3100 vs $2700. However, as you know, those Montana grain farmers want the $2700 price, and possibly even lower. How would you go back from $2700 to $3100 with the promise of running faster trains? They dont care, they want lower rates. So, plug in the $2700 on the small trains and see what happens.

Ed, I think this misunderstands the problem. Farmers understand rate differentials. If they have to pay more to be able to ship 25 carloads, rather than 110 carloads, but can avoid the capital costs of $23 million in a new shuttle facility, the rate differential is a bargain. Or, as Dave points out below, they would gladly pay the rate to be able to use their local elevator rather than the big shuttle elevator 100 or more miles away.

The complaint is this. At Shelby, there is a shuttle.facility. It was expensive. It's a whopper. It can handle 3,200,000 bushels of grain and 162 carloads at a time. It is located on a mainline. Other than the Continental Divide, the train practically rolls itself downhill to Portland. The 25 car rate is $3066. The Shuttle rate is $2716.

Same railroad. Same distance to an export port. Lubbock, Texas. Cone Elevator is also a whopper at 3 million bushels but can only handle 30 carloads at a time. Cone gets a $2300 single carload rate. If they could finagle 110 carloads, they get a $1900 rate. BNSF offers it. But Cone doesn't spend the money to load the trains. They aren't interested in the shuttle capacity because they already get such a good rate at single carload. There is about 10 million bushels of combined elevator capacity in Lubbock, among four elevators, and not one of them cares to invest the money to be shuttle capable.

Montana invested the money to be shuttle capable and yet pays a very high $2,716 for each shuttle carload. Lubbock is offered a $1900 rate if they would go shuttle, but at $2300 a carload anyway, why should they? Montana got it in both directions on that one: they paid a ton to build the shuttle, and they pay a ton to ship out on it. Naturally, they feel aggrieved. BNSF has a tendency to move goal posts in games where they can set the rules.

QUOTE: If that is correct, then BNSF is going in the absolutely correct direction IMHO by offering discounts for quick loading at the shuttle terminals. Perhaps BNSF's service problems in the past couple of years were based on a combination of factors and not just the shuttle operations. ... The more I think about open access, the more it becomes apparent to me that KEY lines in the US (Transcon, UP, NS's Chicago, CSX Chicago and no doubt others) are at or near capacity. OA will simply add to the chaos...wont it?

I think the idea of OA stems partly from the idea that congestion is a result of policy, not necessarily "capacity". The shuttle train controversy highlights the fact that railroads have been implementing a 1970s solution to a 1970s problem -- labor costs -- all across the board. Unit trains galore, and every pressure to increase their use, hence the shuttle train policy of BNSF.

Now, this isn't the 1970s. The problem is different. The 1970s solution may the 21st century problem. Indeed, some of the support for OA comes from the idea that there is an industry that is culturally unprepared and unwilling to change the way it does business in the light of fundamentally changed conditions.

Networking capacity is perhaps one of the most studied and common problems in general industry and commerce. All sorts of solutions, ranging from the elegant to the expensive. One solution: identify and get rid of the bottlenecks.

And what is it in the rail industry that increases the duration of "wait" states for the network: long, slow trains. They are moving bottlenecks. Capacity is completely time dependent. As an example, double average train speed, and the capacity problem is solved for about 20 years. Well, long, heavy trains aren't that nimble. They take longer to get going and longer to stop. When they are rolling, they keep that other train waiting longer as they go by.

Railroads are carrying more traffic, but trying to put more and more on longer and longer trains. Average train speeds keep dropping which reduces capacity even more.

BNSF average train speed has dropped over the past year from 24.7 mph to 23.1 mph. In dog years, that's huge. It represents a big drop in overall available capacity, even at a time when the Company needs more capacity.

Mr. Rose claims that the shuttle program is involving progressively more and more of the total wheat crop carried by the Company. They keep saying, over and over, that these are faster more efficient trains. Yet, of all train types, average grain train speeds have dropped the most on BNSF over the past year, from 23.7 mph to 20.8 mph. And these trains are getting in the way of other trains, so they are going slower too.

And its endemic. UP average train speed, 2004 to 2005, 21.8 to 21.4. Grain, 20.4 to 19.4. KCS, 25.4 to 23.1. Grain, 23.9 to 22.4.

Despite incredible sums of money to increase physical capacity, real capacity continues to decline.

The 6000 grain hopper cars BNSF is buying. You see that as positive. That's all this railroad needs is another 6000 freight cars to haul around and get in the way and pay for. They are buying 6000 more hopper cars to simply keep carrying what they carry because the available capacity keeps dropping due to increased cycle times resulting from the slower train speeds. Those 6000 hopper cars will only add to the congestion.

I think what OA advocates see is an opportunity to rationalize the pricing available to shippers -- particularly those used on highly accessible, well traveled mainlines such as Montana and North Dakota wheat farmers use -- and to make that pricing more rational for everyone by investing in managements that in turn invest in the kind of ideas that improve capacity, not diminish it.

Best regards, Michael Sol

[MP173]

I am back...but please, no more trick questions. I am not a 20 year old college student hung over.

A couple of questions...what is the going lease rate for railcars. I have a couple of rail customers, including a major leasing company and the number that sticks in my mind is about $700 per month. Does that sound correct?

If so, Michael, plug that number into your excel sheet and see what happens. And, if you want to send me a copy of the spreadsheet, I will check the numbers...as I always do.

So, essentially we are checking the pricing of a carload at $3100 vs $2700. However, as you know, those Montana grain farmers want the $2700 price, and possibly even lower. How would you go back from $2700 to $3100 with the promise of running faster trains? They dont care, they want lower rates. So, plug in the $2700 on the small trains and see what happens.

We all know what would happen if the rates suddenly went from $2700 to $3100 for a low valued commodity such as grain. Every politician in Montana and surrounding states would be ... oh well, lets let that comment go.

Second, the CSX is running 65 car corn trains from Northern Indiana to North Carolina. This fits somewhere in the middle of the equation. It must work, look at how profitable CSX is. OOPS!

Seriously, I believe 65 cars is the ideal number the consignee can receive.

Third, if I read correctly...and I may not be as I moved my oldest to college yesterday and am physcially, but not emotionally drained...the RAT for IC had extremely quick terminal turn around times. My guess is that the problem for the low utilization for grain is terminal...on both ends.

If that is correct, then BNSF is going in the absolutely correct direction IMHO by offering discounts for quick loading at the shuttle terminals. Perhaps BNSF's service problems in the past couple of years were based on a combination of factors and not just the shuttle operations.

I do know that BNSF ordered 6000 covered hoppers from Trinity about a year ago.

The more I think about open access, the more it becomes apparent to me that KEY lines in the US (Transcon, UP, NS's Chicago, CSX Chicago and no doubt others) are at or near capacity. OA will simply add to the chaos...wont it? If it wont, then tell me why it wont.

Someone had offered the suggestion that certain lines be set up for high speed intermodal and another for general freight...the LA - Chicago lines. What happens to those shippers on the high speed line that want to ship 15 cars a day of liquified petroleum gas, or really great wheat, or corn oil, or scrap metal, but cant? The door is closed on them.

Infrastructure is the issue here and just like the expressways which I drive daily in Chicago, there is no let up in sight. The tollways have similar problems also.

ed

[MichaelSol]

QUOTE: Originally posted by jeaton

ow the IC could have doubled service to two time per day, with trains running half the size. That may have done wonders for car utilization, but unless you can quickly sell the extra vehicle capacity, you can't generate the ca***o pay for twice the crews. Remember, unless the crew went on hours between terminals, it wouldn't make any difference on crew cost if the run took 2 hours or 10 hours.

Demand has generally exceeded supply in recent years for grain, so doubling the trains to increase utilization would make sense. In 2003, BNSF began having system wide cycle time problems, and as grain harvests came on, BNSF's "committment" to its shuttle service caused the whole grain car supply system to collapse, including its entire COT program. BNSF was not only in a position to sell the "extra vehicle capacity" that would have resulted from a Fast Train program, shippers were pleading for it.

No dice.

Unit trains or die.

Best regards, Michael Sol