NITL's suggestions to STB for rail policy oversight

[MichaelSol]

The Staggers Act and subsequent modifications and amendments set 180% of variable costs as the threshold below which rates were presumed to be fair, and above which the burden fell on the railroad to prove that the rate was justified by increased ancillary or fixed costs. "153 percent has been estimated to be the average break-even point .... a large amount of rail traffic moves at rates considerably below 153%." Railroad Reregulation is the C.U.R.E. Worse Than the Disease? CATO Institute, January 20, 1988, p. 10.

That is, by law, the 180% R/VC is the threshold at which the STB obtains jurisdiction to review "rate reasonableness" for those categories of freight still regulated by law. And that is part and parcel of the discussion: these rates are specifically regulated and it is illegal to charge an unreasonable or confiscatory rate. The problem is that the burden of bringing the complaint is on the shipper, and the cost of bringing and prosecuting the complaint is estimated to cost between $3 million and $5 million even under the "small shipper" provisions of the complaint procedure. McCarty Farms cost around $17 million. Of course, if there is no profit left after paying high shipping costs, where does the money come from to pursue a complaint? Which private lawyer out there has the resources of the BNSF Legal Department? Or to risk between $3 million and $20 million? Which farmer has that kind of money to invest in litigation? In the meantime, BNSF earns an estimated $80 million per year in profits in excess of 180% R/VC out of Montana shippers alone. Not only can the railroad afford to litigate into eternity, they have every financial incentive to fight complaints tooth and nail, which they do. Indeed, the fat profits made off the farmers funds the very litigation against those farmers.

As the result of so much rail traffic moving at below fully compensatory rates -- think "subsidizing imports from China" -- captive shippers are targeted to make up the difference and to provide the profit for the railroads. In this fashion, the railroads tax the wheat farmer to his economic limit, and beyond, so that the railroad can turn around and offer a great rate to and assist a manufacturer in China to put a factory worker in Illinois out of a job.

Agriculture shippers have been routinely taxed at R/VC rates of 260% to 290% [Montana and ND wheat shippers], and the rates charged to some have exceeded 300% of the variable cost of the service. William Hawks, Under Secretary of Agriculture, October 19, 2005, STB Ex Parte No. 658., p. 11.

Best regards, Michael Sol

[Anonymous]

QUOTE: Originally posted by MP173

180% above variable costs seems a bit ... thin to me. How was that number derived?

Railroading is a very capital extensive industry, with lots of fixed costs to absorb.

ed

According to this link (scroll down to the "UGPTI" heading)...

http://www.ndgda.org/Articles/42602dorganholdssenatehearing.htm

.....at 160% of variable costs, "the railroad is said to be covering its fixed and variable costs plus a reasonable profit" (Gene Griffin, Director of the Upper Great Plains Transportation Institute at NDSU in Fargo, North Dakota). So logically, at 180% of variable costs, railroads are more than covering their fixed costs as well. My understanding is that the 180% figure wherein a shipper can theoretically challenge the captive rate is derived by the STB.

If you read further through the link, there are some interesting revenue to variable costs ratios to consider:

1.85 for single cars
2.44 for 26-car units
2.71 for 52-car units
3.07 for 55-car units
3.11 for 110-car units

This is for North Dakota to the PNW, and I am not sure of the date of this testimoney, but I think it is around 2001.

[MP173]

180% above variable costs seems a bit ... thin to me. How was that number derived?

Railroading is a very capital extensive industry, with lots of fixed costs to absorb.

ed

[Anonymous]

QUOTE: Originally posted by jeaton

CURE defined any rate at or exceeding 180% of variable cost as being a captive rate and compared the average of those rates to rates below 180% which they defined as competitive rates.

Granted, 180% is an arbitrary dividing line, but you have to start somewhere for analysis, so 180% it is. Frankly, I would think CURE would use any rates just above the revenue adaquacy standard. Average revenue above 160% of variable cost could also be defined as captive rates. I personally think CURE is being generous to the railroad industry with the 180% standard as the definition of captive rate.

QUOTE:

As you have studied this closely, you will know that a rate applicable to a captive shipper that exceeds 180% of variable cost is not lawful.

That's not exactly true. Any rate to a captive shipper that exceeds 180% can be challenged by the shipper, but it is not illegal in the sense that the railroad will be charged with a crime. Although I think you're on to something, because it would be alot easier for captive shippers to get rate remittence if such was a crime than it is to go to the expense and trouble of filing a rate challenge. As things are currently, the costs of filing a challenge can exceed the rate being charged, with little likelyhood that the STB will do what it is supposed to do under the perpetually ignored Staggers caveats regarding competition.

QUOTE:
However, a rate at or over 180% of variable cost for a shipper with competitive options, i.e., service provided by two or more carriers is not unlawful. Further, CURE assumes that no captive shipper has any rate that falls below the 180% mark. Obviously, the exclusion of any such rates in the calculation skew the average "captive" rate higher.

As I mentioned above, if there is any skewing, it is to the benefit of the railroad. CURE is actually being very conservative in it's definition of captive rates. And if you can find a captive rate that is below the 160% mark, let alone the 180% mark, I would really like to see it.

QUOTE:

Also, as you know, rates tend be a function of distance. If by chance the universe of rates exceeding the 180% threshold happen to be for longer than average hauls, there is a further bias in the comparitive results presented.

In the Northern Tier grain transportation business, the old adage of rates being a function of distance doesn't hold. If you remember from the "Montana Farmers Fight Back" thread, Montana grains shippers are paying more than both the longer hauls out of Eastern North Dakota and the shorter hauls out of Eastern Washington.

QUOTE:

Frankly, I would prefer to see a less costly method for an administrative procedure for adjudicating the issue of captive rates. It would pull the whole issue out of "he said,he said" babble and resolve individual cases on the facts. Talk is cheap, the walk is going to cost some time and effort.

There are two ways to do this: Rate reregulation, or head to head rail competition for every rail shipper. Choose your poison.

QUOTE:

And by the way, the next time you call people who disagree with your view as a bunch of anti-American, cool-aid drinking, dumpster diving stupids, I might ask if the owners of this forum if they consider that kind of rant conducive to thoughtful exchange of ideas and opinions.

Whereas being called an ***, liar, ect. is okay? I never start the flame wars, but I do tend to respond in kind. If the owners of this forum want to take action, let them start with those who originate such tactics. I am perfectly fine with that. I would prefer that those who disagree with my opinions to respond with their own salient arguements, but of course they never do, as anyone who peruses these forums can attest.

[jeaton]

In this forum, I really don't have to do squat to back up taking CURE, the NIT League, the AAR or the STB to task for anything. But since you asked, CURE defined any rate at or exceeding 180% of variable cost as being a captive rate and compared the average of those rates to rates below 180% which they defined as competitive rates.

As you have studied this closely, you will know that a rate applicable to a captive shipper that exceeds 180% of variable cost is not lawful. However, a rate at or over 180% of variable cost for a shipper with competitive options, i.e., service provided by two or more carriers is not unlawful. Further, CURE assumes that no captive shipper has any rate that falls below the 180% mark. Obviously, the exclusion of any such rates in the calculation skew the average "captive" rate higher.

Also, as you know, rates tend be a function of distance. If by chance the universe of rates exceeding the 180% threshold happen to be for longer than average hauls, there is a further bias in the comparitive results presented.

Frankly, I would prefer to see a less costly method for an administrative procedure for adjudicating the issue of captive rates. It would pull the whole issue out of "he said,he said" babble and resolve individual cases on the facts. Talk is cheap, the walk is going to cost some time and effort.

And by the way, the next time you call people who disagree with your view as a bunch of anti-American, cool-aid drinking, dumpster diving stupids, I might ask if the owners of this forum if they consider that kind of rant conducive to thoughtful exchange of ideas and opinions.

[Anonymous]

QUOTE: Originally posted by jeaton

Mac

The methodology used by CURE is flawed. Trying to point that out to FM is useless, because his definition of truth is everything that agrees with his view. If you don't agree with his view then you are obviously just stupid and anything you say is wrong.

Jay

Jay,

If you're willing to debate without slipping into ilk territory, then can you please provide evidence that CURE's methodology is flawed? You can say what you want about my typo's and such, but if you are taking CURE to task, then you better be able to back it up.

CURE's numbers come from data given to the STB by the railroads. It is interesting to note that the STB will no longer allow groups like CURE, ARC, NITL, et al to access those numbers. Seems the railroads finally figured out the release of these numbers to the public has resulted in bad PR. And of course, when the railroads tell the STB to jump, the STB says "Sir, yes sir. How high?"

[jeaton]

Mac

The methodology used by CURE is flawed. Trying to point that out to FM is useless, because his definition of truth is everything that agrees with his view. If you don't agree with his view then you are obviously just stupid and anything you say is wrong.

Jay

[PNWRMNM]

FM

Been around this bend with you before. You are impervious to facts you do not like. I have wasted enough time with you on this.

The only reason l respond to any of your blather is to encourage others to not take you seriously. If your responses do not convince them nothing will.

Mac

[Anonymous]

Still can't address the topic issue can you? You can only start a flame war, then get defensive when you get burned by it.

As a topic debater, you are impotent.

And I seriously doubt that you voted at all, let alone for Bush. The tone and content of your posts are more indicitive of a King County dumpster-diving captive pawn of the left.

[PNWRMNM]

FM

There you go again making stuff up out of thin air. I am not a leftist. I proudly voted for George Bu***wice. My complaint is he has not been conservative enough.

Your theories are so incredible that I see no reason to take them seriously. The more you talk the more you reveal your ignorance. Go for it!

Mac

[Anonymous]

Mac,

Thank you for your latest post, which only solidifies the collective ill will that your types have for debate and conversation. The only asses on this thread are you and greyhounds, because you both go to great lengths to obfuscate the central theme of these threads, namely that there are captive rail shippers who pay rates that are twice that of non-captive shippers, that most captive shippers are U.S. producers, and that this domestic rail captivity contributes to the U.S. trade deficit in many ways.

When you say something as stupid as "You are the one who always hyperventilates about sources" it just shows your pig headed ignorance, because anyone who has read through this thread can detect the source baiting coming from you leftist types. That's a typical tactic of the Hate-America-Crowd when they lose an argument, take an aspect of your own short-comings and accuse your opposition of that very short-coming. Your ilk buddy accused me of not having sources, and when given sources chooses not to access them. Whether I made a typo or two is irrelevent, because the typing mistakes I made does not detract in anyway from the gist of the evidence presented. The fact that your side either is too lazy to access the sources, or is so intelletually lacking as to not be able to come up with even ONE counterargument on your own, is telling indeed.

[PNWRMNM]

FM

You are the one who always hyperventilates about sources. You either can not cite them or can not read them. Here you have made both mistakes and made an***of youself to boot.

I sincerly hope that the ilk herd is growing!!!!

Mac

[Anonymous]

QUOTE: Originally posted by PNWRMNM

FM

Better read the CURE propaganda again. The item you cite says nothing about intermodal.

Mac

Try this one:

http://www.railcure.org/pdfs/captivitychart.pdf

You know you could have found this yourself since it's on the issue papers link.......

http://www.railcure.org/issuepapers.htm

......under "The Cost of Captivity, by Industry" link.

Not that it does any good, since this is obviously just propaganda by those evil shipper groups. But since CURE is using numbers submitted to the STB by the Class I's themselves, perhaps you'll go so far as to lay the "propaganda" label on the railroads themselves. Or would that just blow your mind?

[CSSHEGEWISCH]

Methinks that FM is starting to take disagreement with his undisputed truths a bit too personally. This isn't religion; it's economics, self-interest and a fair amount of politics.

[PNWRMNM]

FM

Better read the CURE propaganda again. The item you cite says nothing about intermodal.

Mac

[Anonymous]

QUOTE: Originally posted by greyhounds

QUOTE: Originally posted by futuremodal

Ooops, I did make a mistake. It is "revenue per ton", not "revenue per ton mile". The print out copy was smeared on top. The actual caption reads:

"Calculations are based on 2002 Revenue-Per-Ton rates (as submitted to the Surface Transportation Board) and 2001 Railroad Revenue-to-Variable Cost ratios (RVCs), by individual rail carrier"

I'll go back and correct it. My apologies to your left foot.

My left foot declines your apology.

It knows full well you are still using made up, meaningless numbers to try to advance a political point. Nobody records how many actual tons are in an intermodal load. So nobody can produce an accurate "per ton" revenue figure. Every UPS load I ever saw was billed as having 20,000 pounds. They moved on the same rates as some guy shipping 44,000 pounds of aluminum ingots.

So we charged UPS "over twice" as much per ton as the aluminum guy? Well, no, we weren't charging per ton, we were charging "per vehicle used". We charged so much to move a trailer from here to there. And we didn't care if you put one can of dog food in it or 44,000 pounds of aluminum.

"Per ton" revenue figures on intermodal are as meaningless as your "per ton mile" figures. But you're going to use them because you don't have any actual experience to make you know better.

You can shove your left foot up your own orifice then. You keep charging that I am making up these numbers, yet anyone else on this forum can verify that they come from the CURE website. If I had presented these figures and claimed them as my own, then I would be a plagiarist, 'cept of course I cited the sources.

The chart presented on the CURE website entitled "The Cost of Captivity, by Industry" lists various commodities. It does not differentiate between "revenue per ton" and "revenue to variable cost ratios" among these commodities. I simply went down the list, found "Intermodal, captive rate" and "Intermodal, non-captive rate", and highlighted it as evidence that there is such a thing as a captive intermodal rail shipper. One can presume that "captive vs non-captive, intermodal" comparisons, if not presented on a revenue per ton basis, is subsequently presented on a revenue to variable cost ratio. Either way, it is presented to provide evidence that discriminatory rates can even affect intermodal. Since the site claims these figures are presented to the STB by the individual railroads themselves, one can only conclude that the railroads themselves acknowledge such a rate differentiation.

So you see, if I'm not making up these numbers, then CURE must be making up these numbers, and if CURE isn't making up these numbers, then the railroads themselves must be making up these numbers.

So basically, what you are doing is accusing your precious railroad dominatri of making up numbers soley for the purpose of inadvertently exposing themselves to public scrutiny. And since you choose not to read the material yourself, you are choosing to remain ignorant. So why don't you just stick your head where your left foot was inserted and give it some company?

[greyhounds]

QUOTE: Originally posted by futuremodal

Ooops, I did make a mistake. It is "revenue per ton", not "revenue per ton mile". The print out copy was smeared on top. The actual caption reads:

"Calculations are based on 2002 Revenue-Per-Ton rates (as submitted to the Surface Transportation Board) and 2001 Railroad Revenue-to-Variable Cost ratios (RVCs), by individual rail carrier"

I'll go back and correct it. My apologies to your left foot.

My left foot declines your apology.

It knows full well you are still using made up, meaningless numbers to try to advance a political point. Nobody records how many actual tons are in an intermodal load. So nobody can produce an accurate "per ton" revenue figure. Every UPS load I ever saw was billed as having 20,000 pounds. They moved on the same rates as some guy shipping 44,000 pounds of aluminum ingots.

So we charged UPS "over twice" as much per ton as the aluminum guy? Well, no, we weren't charging per ton, we were charging "per vehicle used". We charged so much to move a trailer from here to there. And we didn't care if you put one can of dog food in it or 44,000 pounds of aluminum.

"Per ton" revenue figures on intermodal are as meaningless as your "per ton mile" figures. But you're going to use them because you don't have any actual experience to make you know better.

[Anonymous]

Ooops, I did make a mistake. It is "revenue per ton", not "revenue per ton mile". The print out copy was smeared on top. The actual caption reads:

"Calculations are based on 2002 Revenue-Per-Ton rates (as submitted to the Surface Transportation Board) and 2001 Railroad Revenue-to-Variable Cost ratios (RVCs), by individual rail carrier"

I'll go back and correct it. My apologies to your left foot.

[gabe]

Good point and I am glad someone clarified that for me. I didn't want to say anything because all the people arguing this issue know so much more than me. However, I was really scratching my head when I saw the $54 per revenue ton per mile. Can you imagine how much a 132-car coal train from the Powder River Basin to Florida or something like that would generate?

Futuremodal, I am not saying you are wrong on those numbers, but if you are right can you prove it to me? I only ask because if that is the case, I think I could line up the investors to start laying track.

Gabe

QUOTE: Originally posted by greyhounds

QUOTE: Originally posted by futuremodal


greyhounds - You seem to have emotional problems as well as problems grasping rather simple concepts and ideas. For the record, the term "captive intermodal" was around long before I came on the scene. Now, the links have been provided, but you apparently choose not to access them, so I guess I am just as justified to suggest that you are making up alot of stories about your alleged business. Apply your own standards to yourself, and you can see why any skeptic would doubt the basis of your statements as well. At least I provide the links and the references, you do not. Case closed.

Gee, my ex-wife used to say things like that about me. She said them a lot, and a lot, and a lot.

Yes, you cite sources. Like this one from you:

QUOTE: Originally posted by futuremodal

From the following, you can clearly see that captive rates for domestic intermodal are over twice the rates for intermodal import rates:

Average revenue/ton mile for intermodal, captive vs non captive -
CSX - $54.11 captive, $26.18 non captive
NS - $45.42 captive, $20.85 non captive
BNSF - $115.70 captive, $48.88 non captive
UP - $91.42 captive, $40.60 non captive
source: Rail Price Advisory, First Quarter 2003, Vol 12, No. 1

Do you really believe that any rail carrier is getting $20.85 per ton mile? (and that's the lowest figure you "cite" from your "source") On a 15 ton load that would be over $300 per mile to move a trailer. That is insane. Any trucker or railroad that got 1/100th of that would be thrilled. But you just quote it like its reality.

People make this stuff up to further thier political goals and personal fantasies.

$20.85 per ton mile - my left foot.

[greyhounds]

QUOTE: Originally posted by futuremodal


greyhounds - You seem to have emotional problems as well as problems grasping rather simple concepts and ideas. For the record, the term "captive intermodal" was around long before I came on the scene. Now, the links have been provided, but you apparently choose not to access them, so I guess I am just as justified to suggest that you are making up alot of stories about your alleged business. Apply your own standards to yourself, and you can see why any skeptic would doubt the basis of your statements as well. At least I provide the links and the references, you do not. Case closed.

Gee, my ex-wife used to say things like that about me. She said them a lot, and a lot, and a lot.

Yes, you cite sources. Like this one from you:

QUOTE: Originally posted by futuremodal

From the following, you can clearly see that captive rates for domestic intermodal are over twice the rates for intermodal import rates:

Average revenue/ton mile for intermodal, captive vs non captive -
CSX - $54.11 captive, $26.18 non captive
NS - $45.42 captive, $20.85 non captive
BNSF - $115.70 captive, $48.88 non captive
UP - $91.42 captive, $40.60 non captive
source: Rail Price Advisory, First Quarter 2003, Vol 12, No. 1

Do you really believe that any rail carrier is getting $20.85 per ton mile? (and that's the lowest figure you "cite" from your "source") On a 15 ton load that would be over $300 per mile to move a trailer. That is insane. Any trucker or railroad that got 1/100th of that would be thrilled. But you just quote it like its reality.

People make this stuff up to further thier political goals and personal fantasies.

$20.85 per ton mile - my left foot.

[MP173]

Case closed.

Time to move on.

ed

[Anonymous]

Ed,

The difference between the path the trucking idustry took to get to today's "more business than they can handle" scene, and the path the current U.S. railroad industry is taking to be able to say the same, is that no trucking company has ever had nor will ever have the power to enforce monopolistic actions upon any customer, while that same monopolistic attitude absent from the trucking industry is paramount to the railroads reaching that goal. No one can argue against any business taking actions that maximize profits, but one can argue that giving legal exemptions to that business to facilitate that profit maximization is just plain wrong. I would add that railroads are in a special catagory by themselves for no other reason than it is nearly impossible for any other company to enter that market under the closed access system. Compared to the need to secure new ROW to build new tracks, any other capital investment is a cakewalk. However, if the tracks were already there and available to any qualified operator(s), then entry into the railroading market would take on a whole new perspective.

I'll just add this one thing: It is not necessary to tap the general fund of the U.S. Treasury to aid in constructing new rail capacity. There is still enough federally held land out there that could be doled out in land grants, which wouldn't cost taxpayer's a dime. There are also the options of tax credits and federal loan guarantees, neither of which takes present money out of the Treasury but which can affect future tax collections and spending options. Creative financing would be crucial to the construction of new rail capacity regardless of access issues.

greyhounds - You seem to have emotional problems as well as problems grasping rather simple concepts and ideas. For the record, the term "captive intermodal" was around long before I came on the scene. Now, the links have been provided, but you apparently choose not to access them, so I guess I am just as justified to suggest that you are making up alot of stories about your alleged business. Apply your own standards to yourself, and you can see why any skeptic would doubt the basis of your statements as well. At least I provide the links and the references, you do not. Case closed.

[greyhounds]

QUOTE: Originally posted by Murphy Siding

Gee Whiz greyhounds, it appears that you have become as stupid as I is![;)] When will we ever learn?

Yep - If you disagree with him it's because you're stupid.

The fact that I've got experience going head to head with truckers over frieight doesn't mean a thing to the guy.

FM, when Schlitz closed their Milwaukee brewery and started to supply Chicago out of Memphis we went head to head with a bunch of truckers for the beer movement. That's 500 miles. You ever compete with a trucker at 500 miles? They'll do that in 10 hours easy.

And it's a consumer product. It's temperature protected and if you dent a can you'll buy the six pack. We put that frreight on our railroad and made a buck doing it.

FM, have you ever done that? Have you ever gone head to head with a bunch of truckers and come home with the money in your pocket?

Ever put together a program to haul bananas out of Gulfport? I sure did. Ever found out you've got a load of imported Honduran tomatoes bound for Canada stuck at your Chicago ramp becuase of Customes? Ever worked a Stike and crossed the picket line in Chicago?

How about putting together a proposal for Montgomery Ward on freight from Mississippi to Chicago only to find out Mclean Trucking has matched it word for word and taken the freight? Then having the Monkey Ward traffic manager deny that he ever told them a word about your offer?

And, most important of all, have you ever taken an angry phone call from Caterpillar or UPS, or any other customer, or your sales staff, or a drayman. If they'd a had a phone gun they'd a shot me! I had 'em all. You calmly find out what the problem is and solve it.

Do you know that one of the "hottest" commodities shipped is (or was) telephone books. They held 'em till the last minute to get the number changes in, but they didn't get the yellow page ad revenue until the books were delivered. That make's 'em hot freight. So we got about 20 trailers of New Orleans phone books comming off the Kankakee ramp on Saturday for Monday delivery in New Orleans.

So the last thing I did before leaving on Friday was leave a message that there was a "hot pickup" in Kankakee the next day. I get into work Monday morning and take a phone call from a very irritated RR Donely traffic manger wanting to know why his loads were still sitting in Kankakee.

Now have you ever done anything, or dealt with anything, like the above. If you haven't, please quit making up stuff like "Captive Intermodal". It's garbage.

[MP173]

Dave:

Perhaps I came down a bit harsh last night, but frankly, I dont have a lot of time trying to find information on the internet. For example, sometime over the weekend, at your suggestion, I attempted to find the CURE website and gave up. Thus, the call for a reference where a less than astute websurfer can find the information quickly.

Along the same lines, the term captive intermodal was extremely puzzling to me. Your last definition makes sense, but I still maintain that it is not entirely captive as the option to ship via truck exists.

One of your early points was that we are subsidizing Asian imports with low cost intermodal and this is driving jobs from the US. I wont go back and find your exact phrasing but I came away with the impression that the captive rail situation drove the business to Asia. It would be interesting to analyze such "driven away by greedy railroad" case studies. If in fact the product is now coming in via containers from Asia...and the only factor, or even the major factor in the loss of the business was transportation, then the simple solution would have been for the US shipper to ship via intermodal. Perhaps not at the same low rate of overseas container,as pricing benefits do occur based on containerized moves, but still at a rate that would have made it competitive.

One cannot tell me that it costs less to ship a product from China via container to a port, then by boat, then by container to Chicago vs intermodal from Texas to Chicago. Thus, it is more, much more than simple transportation costs.

Regarding the land grant reparations issue, I dont know what the original wording of the contract between the government and the rails were. Plus, how would one now go back and determine a value of the land parcels? How did the railroads know what they were getting (in terms of value) when the land grants were received? You indicated "most" railroads were built thru land grants. What about the ones that were not? How would one reconcile those routes? For example, it is probable that portions of the major lines were land grant based and portions were not. Does that mean that certain portions of the route would be public and the other private? Quite a can of worms to sort thru.

Finally, I hope that I never stop learning. That is why I do spend so much time on this forum. It can be mind numbing talking about your favorite locomotive paint scheme and it can be challenging defending your position...and even enlightening when you realize that there are problems with your position and it needs to be modified. My whole point with the grad student (BTW...no MBA title, behind my name, just a BA, so I am a bit behind the level of all you MBA's) is that I will research and read data (and opinion), but dont make it painful to do so.

Another finally, then off to bed. I am trained in sales. I do very well at it. I am taught to maximize margins, I am paid to maximize margins. I do not sell on volume, but primarily how profitable the sale is. Railroads got into a lot of problems due to "volume" mentality. It was not until they were freed to actually market themselves (and gained productivity thru labor revisions) that the industry started on the road to financial stabilty. My point is that as a trained sales person, I understand the position of leverage (both on the giving and receiving end) and the absolute need to maximize margins on each and every sale.

Business (and life) is not fair. For years transportation companies subsidized manufacturing's returns based on a lack of leverage. Not only railroads, but also truckers. Today, two of my trucking company accounts just beamed when I asked how business is, both responded even with fuel prices at record levels, their business has never been better. They understand the leverage that they possess, as do the rails. The truckers always understood that no one held a gun to their heads and forced them to handle a load...it was always a choice. It meant a very difficult and lean period of time for a number of people. Isnt it ironic that now as railroads are finally on the verge of earning cost of capital, there is this huge explosion calling for reregulation of some kind?

Finally (for the third time), good luck on getting government built infrastructure built in the form of added rail capacity. Thanks to the current group of Rockafeller Republicans in DC we are up to our noses in government debt. Jus t a glimmer of hope tho, there are a few conservatives starting to get it right and make their point known.

good night.

ed

[Anonymous]

Ed - I make assumptions that others on this forum can put two and two together as well as I.

"Captive" is used to describe rail shippers with access to only one railroad. This "access" can be diseminated into two catagories by my estimation: Those rail shippers whose product can only move viably by rail directly from the plant and who only have one physical rail connection at their production facility (e.g. physically captive), and those rail shippers whose product can viably move short distances by truck without losing a competitive edge to their main competitors but whose particular region has only one decent Class I in service (e.g. regionally captive). Chemicals are the best example of the former, while intermodal or grain are good examples of the latter.

Thus, "captive intermodal" refers to intermodal terminals located in regions where there is short haul access to only one Class I. Billings Montana is a good example of a captive intermodal terminal, Nampa Idaho another. If you allow some grey area for the purpose of definition, then you can also say that a captive intermodal terminal is one in which there may be more than one Class I railroad in the area, but only one provides actual intermodal services from this terminal. I think Spokane Washington fits into this second category, both UP and BNSF serves Spokane but only BNSF provides intermodal services. This is probably due to the fact that the UP line is only a Canadian connection, serving primarily as a conduit for potash, grain, mixed freights.

However, for the sake of reference, I will contact CURE and ask them to define what a "captive rail shipper" is so that I won't be putting words and concepts into the lexicon that may not necessarily be part of their efforts. If they do email me back, I will give their definition verbetum.

I take a different opinion on the NITL's position than what you discerned. I believe they are in favor of going back to some form of rate regulation, they just don't want to frame it that way. Because let's face it, there are only two ways to force railroad rate reductions for captive shippers: Either re-regulate rate setting, or introduce head to head rail competition via open access. The NITL makes no mention of Rep. Mark Green's bill (H.R. 3318) to make railroads subject to anti-trust laws that apply to every other industry, and only by anti-trust action can the railroads' natural monopoly be broken up.

I also take a different view on how best to achieve an expansion of the rail system. Because most railroads that exist today were built with some form of public support, they were not built as an adjunct of a succesful business model being exonerated by higher revenues. To assume that if railroads finally are able to more than cover their ROI's they will start building more lines is naive, e.g. it lacks understanding of how monopolies function. Monopolies are natural price discriminators, and as such will take no action that might denigrate their ability to price discriminate. Easing rail congestion is not synonymous with increasing railroad ROI's, at least under the closed access system. Secondly, it is my view that transportation infrastructure development is best left in the hands of the public, as that is the realilty of most transportation systems today. It would be better for railroad ROW's to follow the example of highways and waterways, and allow user fees combined with local and state financing perogatives to pay for much of any new railroad expansion, and let de facto transportation companies do the actual hauling. But that is far beyond what the NITL envisions, too ambitious and far-fetched to be used in lobbying negotiations. It is much easier to lobby for rate regulation than it is to lobby for a complete overhaul of the U.S. rail system.

I am sorry you feel like you are being condescended to, that is not my intent. I would like to have lively conversations, but if is a fact that most participants on this forum too easily slip into sub-par sparring. BTW, it may very well be that being treated like a graduate student is insulting to you, that is your perogative, but for some of the others on this forum being treated like grad students is better than they deserve.

[MP173]

You know Dave, you could go a long way towards civility on this forum with just a bit of respect.

We dont all have time to go searching for all of these sources. I really got steamed at our Montana grain expert when he INTENTIONALLY mislead me into wasting about an hour of my time searching for information that he later admitted wasnt there and simply wanted to see, in the spirit of academia, if a good student would prove him wrong.

Well, lets get a couple of things straight...I am no student and my hourly rate is pretty ***ed high. If you want to provide sources, I will check them, if I have time. This internet is pretty big and vague references dont play well.

I enjoy these discussions and would like to think that i lend quite a bit to them, as do the others here...but we have passed the age of 20 and do not spend our entire lives researching, drinking beer and eating pizza.

I asked the same question...what is captive intermodal.? It took a lot of time and energy to get a somewhat vague answer, which I will now have to spend time looking up to verify.

Now, I found the NITL paper very interesting, not only on what they said, but what they didnt. I actually took 30 minutes to search for it and read it. These people sure dont seem to want to go back to regulation. If they do...then I obviously need a refresher course in English.

They are admitting that after 25 years of Staggers the ROI is finally reaching the point of equalization to the COC. That is quite a bit of running into the wind in my book. Huge potential future issue are looming on the horizon, namely how will the railroads be able to finance expansion that will be needed.

For the first time in quite awhile, railroads will be faced with having to invest in capacity. Productivity will no longer yield desired results.

Now, do me and the others on this forum a favor, if you want continued dialog...quit treating me and others as if we are graduate students.

ed

[Murphy Siding]

Gee Whiz greyhounds, it appears that you have become as stupid as I is![;)] When will we ever learn?

[Anonymous]

Ed,

There are exceptions to every rule, nothing is completely black and white. There's a difference between imports from Canada or Mexico, which also can be relegated to rail captivity, and imports from overseas, wherein importers have a wide choice of ocean carriers, U.S. ports, and subsequent rail connections to those ports. There are also consumption markets in the U.S. that are captive as well, so imports into those markets can be construed as captive imports if it fits your POV. And yes, when the collective rail industry has not kept up with capacity demands, the aggregate demand for intermodal transportation services can exceed aggregate supply of transportation options which will result in increased pricing power for carriers of imports. That is a temporary situation in theory as elasticity brings supply and demand back into equalibrium, akin to the longshoremen strike or the hurricane shutdowns of Gulf Ports, which also changed the demand/supply dynamic for imports on a temporary basis.

Of course, the overseas manufacturer does not bear the brunt of those smaller exceptions, rather it is the consumers in those areas that pay the added costs. With growing markets elsewhere in the world, those overseas manufacturers won't sweat U.S. supply constraints. Contrast that with the captive U.S. manufacturer, who is captive right from the get-go, no matter what market is being sold to.

The whole point of this exercise is to show that those manufacturers that locate overseas will free themselves from U.S. rail captivity. Those producers who cannot physically relocate their land sites (such as Montana farmers) do not have that option and will eventually close their operations unless rate relief or federal aid is provided. If it's the latter, then that aid becomes an indirect subsidy to the railroads. It becomes a big negative for the U.S. economy no matter what happens, outside of actual rate relief via access to competitive rail carriers for all U.S. rail shippers.

http://www.railcure.org

[Anonymous]

QUOTE: Originally posted by greyhounds

I didn't want to quote the entire post, but this is from Futuremodal:

"From the following, you can clearly see that captive rates for domestic intermodal are over twice the rates for intermodal import rates:

Average revenue/ton mile for intermodal, captive vs non captive -
CSX - $54.11 captive, $26.18 non captive
NS - $45.42 captive, $20.85 non captive
BNSF - $115.70 captive, $48.88 non captive
UP - $91.42 captive, $40.60 non captive
source: Rail Price Advisory, First Quarter 2003, Vol 12, No. 1"

Dave,

Breaking your buble - there is no such thing as "Captive Intermodal". It's on a freaking truck to start with. It can move to destination by that truck.. I think you're using made up numbers. And By God, there are people who will make stuff up to "prove" their point.

There's no "Captive" intermodal. All they gota do is get a driver and go with it. Please take a common sense pill.

Greyhounds, you're stuck on stupid. The term "captive" is accepted nomenclature in both the shippers and railroads' lexicon. We've explained this to you a hundred times before. Captive intermodal relates directly to those North American rail intermodal shippers who only have access to one Class I intermodal terminal within a short haul distance for trucks.

Not only are you stuck on stupid, you're apparently stuck on lazy as well. The source was provided, you chose not to access it to verify the numbers. I purposefully did not provde a link just to see if you had an actual initiative to research these things yourself. You don't.

For those who want a web link to those numbers, here is the one I used:

http://www.railcure.org/pdfs/captivevscompetitive.pdf

Now, if you have evidence to the contrary, I would suggest you provide them. And if you are making up numbers, I'm going to challenge the validity of any such statement you provide.

You remind me of an episode of the M*A*S*H* TV series, where Radar is attempting to contact a suit in Seoul to tell him they are being bombed and could Seoul please do something about it. The brass man in Seoul replies, "Our latest information informs me that we have no units in that area. You are not being bombed, young man."

[greyhounds]

I didn't want to quote the entire post, but this is from Futuremodal:

"From the following, you can clearly see that captive rates for domestic intermodal are over twice the rates for intermodal import rates:

Average revenue/ton mile for intermodal, captive vs non captive -
CSX - $54.11 captive, $26.18 non captive
NS - $45.42 captive, $20.85 non captive
BNSF - $115.70 captive, $48.88 non captive
UP - $91.42 captive, $40.60 non captive
source: Rail Price Advisory, First Quarter 2003, Vol 12, No. 1"

Dave,

Breaking your buble - there is no such thing as "Captive Intermodal". It's on a freaking truck to start with. It can move to destination by that truck.. I think you're using made up numbers. And By God, there are people who will make stuff up to "prove" their point.

There's no "Captive" intermodal. All they gota do is get a driver and go with it. Please take a common sense pill.