Good News for DM&E

[Anonymous]

QUOTE: Originally posted by PNWRMNM

Future,

Go look at the CURE website where they show the carrier's discrimination against captive coal. You have given us the reference before. Look at the ratio for competitive coal. The 102% is a representative number.

Mac

NO! You are confusing the RVC (revenues to variable costs) percentages with the percentage differential between captive and non-captive coal rates. The CURE website shows the per ton rates of captive coal shipments can be over 100% of the per ton rates of non-captive coal shipments. For BNSF the average percentage difference is 136% between captive and non-captive coal shipments. For UP it is 101%.

The CURE website gives no numbers on the RVC ratios for captive vs non-captive coal. It only gives the average RVC between all captive and non-captive customers, using the STB's 180% standard as the dividing line. For BNSF, the RVC for captive customers is 238.1%, for non-captive customers the RVC is 100.6%. For UP, the RVC for captives is 239.8%, for non-captives 106.5%. The figures are from a 2001 RSAM study.

[Anonymous]

QUOTE: Originally posted by beaulieu

QUOTE: Originally posted by futuremodal

QUOTE: Originally posted by PNWRMNM

Future,

I presume you would agree that DME coal will all be rail competitive. How is DME going to show any profit hauling competitive coal at 102% of variable cost, even with RRIF funding?

Mac

Show me any railroad profits sheets where coal is being hauled at 102% of variable cost. You're confusing coal hauling with import intermodal. Import intermodal is where railroads can't come close to meeting revenue adequacy (which doesn't explain why most capacity investments are going to improve the import intermodal corridors).

Most power plants are captive, even if the source of the coal is not. Therefore, DM&E will be able to charge a rate that is more than adequate to cover it's portion of the investment.

The trouble for DM&E is that there are no captive powerplants of any size on its lines, and only one on the IC&E.

DM&E may not have a number of captive plants (yet), but if the theories regarding DM&E being a planned conduit for the other Class I's sans UP and BNSF, then they may still be the recipient of a portion of a captive rate of one of it's connections.

My understanding is that coal RVC numbers are higher than RVC numbers for other commodities, regardless of the ratio of captive to non-captive coal customers. Hauling coal in unit trains makes money for the railroad even if it's customers have a competitive hedge with another railroad's connection. The variable costs associated with unit trains are much lower than other commodity hauls, so the RVC ration should always be relatively high.

Plus, we are in a period of rising demand for coal. It is an interesting take on the old supply-demand theories, in that the supply of coal is as high as the demand for coal (which in theory would keep prices constant), yet the railroad bottlenecks have serverly restricted the ability to have that ample supply of coal delivered to the customers. Neither BNSF nor UP can add capacity fast enough, nor do they seem to want to add coal hauling capacity all that badly, so DM&E's PRB project looks like it is being timed perfectly.

[beaulieu]

QUOTE: Originally posted by futuremodal


Show me any railroad profits sheets where coal is being hauled at 102% of variable cost. You're confusing coal hauling with import intermodal. Import intermodal is where railroads can't come close to meeting revenue adequacy (which doesn't explain why most capacity investments are going to improve the import intermodal corridors).

Most power plants are captive, even if the source of the coal is not. Therefore, DM&E will be able to charge a rate that is more than adequate to cover it's portion of the investment.

One other thing Dave, don't assume that Import Intermodal is as revenue inadequate as you presume, relative to its costs it is much better than Domestic Intermodal. The speeds harmonize better with other traffic, unlike the UPS bullets where costs of failure and disruption to other traffic more than offset the potentially higher revenues, after all the containers just spent two plus weeks on a ship that may have been delayed by storms. as long as the train isn't days late the shipper isn't going to get too nervous. You must have noticed that BNSF took a pass on the UPS business when UPS wanted fast trains from LA to Chicago.

[PNWRMNM]

Future,

You are correct in part. The CURE data does not give RVC data for coal per se.

I am correct in using the 102% RVC as repersentative of competitive traffic, BNSF was 100.6 and UP 106.5 which would average 103%.

Coal is the railroads largest single tonnage by far, accounting for 21% of revenues at per ton rates of 1/2 to 1/3 (round numbers) of the other commodites specifically listed.

In the absense of other data, and for the purpose of this discussion, I see no reason to assume the RVC on coal is different than all traffic.

My question stands. How is DME to make any money hauling coal out of the PRB?

Mac

[nanaimo73]

QUOTE: Originally posted by PNWRMNM

How is DME to make any money hauling coal out of the PRB?

...with a route twice as long to Kansas City (and KCS)?

[Murphy Siding]

QUOTE: Originally posted by nanaimo73

QUOTE: Originally posted by PNWRMNM

How is DME to make any money hauling coal out of the PRB?

...with a route twice as long to Kansas City (and KCS)?

Darn that logic thing again![;)]

[Anonymous]

QUOTE: Originally posted by beaulieu

QUOTE: Originally posted by futuremodal


Show me any railroad profits sheets where coal is being hauled at 102% of variable cost. You're confusing coal hauling with import intermodal. Import intermodal is where railroads can't come close to meeting revenue adequacy (which doesn't explain why most capacity investments are going to improve the import intermodal corridors).

Most power plants are captive, even if the source of the coal is not. Therefore, DM&E will be able to charge a rate that is more than adequate to cover it's portion of the investment.

One other thing Dave, don't assume that Import Intermodal is as revenue inadequate as you presume, relative to its costs it is much better than Domestic Intermodal. The speeds harmonize better with other traffic, unlike the UPS bullets where costs of failure and disruption to other traffic more than offset the potentially higher revenues, after all the containers just spent two plus weeks on a ship that may have been delayed by storms. as long as the train isn't days late the shipper isn't going to get too nervous. You must have noticed that BNSF took a pass on the UPS business when UPS wanted fast trains from LA to Chicago.

beaulieu, the difference between Import Intermodal and Domestic Intermodal is that all import intermodal has competitive rail access at all major seaside container ports. Furthermore, overseas importers have a multitude of options regarding which combination of container lines and container ports to utilize. And finally most major US consumption markets are either located seaside, or located within a shorthaul of the major waterways (which all seem to be paralelled by at least three Class I's). Until the CN's Prince George container port comes on line, there are no captive container ports in North America.

The point is, since all import intermodal has competition driving down rates, those import intermodal rates have to be at the low end of the RVC spectrum.

Contrast that with domestic intermodal. There are many domestic intermodal terminals that are geographically captive to one Class I. The only other options available would require an expensive long truck haul to an alternate intermodal terminal, so the rate alternative would also be high. The monopoly Class I can charge rates from these terminals that are much higher than those rates from import intermodal terminals. And as you point out, since much domestic intermodal is time sensitive aka UPS, the rates for those shipments are on the high end of the RVC spectrum. Yeah, those time sensitive trains will use more fuel, but their crews are less likely to go dead, so the variable costs attributed to those trains cannot be that much higher. I guess if you count the delays to other trains going in the hole for the hotshots as a variable cost of the hothsot, you could make an arguement for a higher VC for the hotshots. But the rates the railroads can charge for hotshots are as high as any such rates can be, because the only alternatives are long haul trucks or airlines, so the rates can be just below those higher cost alternatives.

I know BNSF has turned down more UPS business. They terminated the Swift RoadRailers. They are making business decisions that are not making sense. There is no way they can charge rate that exceeds the RVC standard of 180% on import intermodal no matter how much they try to minimize VC on those doublestacks, because there is just too much competition from other railroads and other shipping options to allow any profit mazimization. They are ordering more and more double stack wells. Those new equipment purchases cost money. They are spending an awful lot of money on increasing capacity on the LA to Chicago corridor. That is costing a pretty penny. If we attribute those expenditures as a portion of the doublestack VC, there is no way they are much above recouping 100% of RVC. And I suspect they may actually be below the 100% RVC on those double stack trains if we include the costs of capacity improvements and equipment purchases. We know they're not buying more spine cars for domestic TOFC, there seems to be plenty of those still sitting around stored on various sidings.

[Anonymous]

QUOTE: Originally posted by nanaimo73

QUOTE: Originally posted by PNWRMNM

How is DME to make any money hauling coal out of the PRB?

...with a route twice as long to Kansas City (and KCS)?

What's KC got to do with it? Wouldn't most interchange with the eastern railroads occur north of KC?

Also, perhaps DM&E has lower overall VC with it's SOP than BNSF and UP, which would allow them a lower RVC than the STB's 180% standard.

All we do know is that demand for PRB coal is exceeding the ability of BNSF and UP to deliver it. A third PRB railroad may only provide an equalibrium to the supply demand shortfall. I don't forsee any cutthroat rates coming down the pike with DM&E's entry to the PRB.

[nanaimo73]

QUOTE: Originally posted by a Forummember

Until the CN's Prince George container port comes on line, there are no captive container ports in North America.

Except Halifax.

[Anonymous]

QUOTE: Originally posted by nanaimo73

QUOTE: Originally posted by a Forummember

Until the CN's Prince George container port comes on line, there are no captive container ports in North America.

Except Halifax.

Yep, my oversight. Thanks for the correction.

The problem for Halifax and Prince George is that they are kinda out of the way, they will never be the prefered first, second, or third ports of call for their respective coasts and geographic service regions. If I remember correctly, Halifax has had a hard time retaining any importance as a major container port due to an on going spat with CN. And the story on the new Prince George container port is that they are soley being seen as an overflow port for Vancouver. Are any container lines even willing to make more than a token port of call once in a while at Prince George?

[Murphy Siding]

QUOTE: Originally posted by futuremodal
. I don't forsee any cutthroat rates coming down the pike with DM&E's entry to the PRB.

I don't see it coming either. The *possibility* of cutthroat rates may be enough to scare off private investors.

[beaulieu]

QUOTE: Originally posted by futuremodal

QUOTE: Originally posted by beaulieu

QUOTE: Originally posted by futuremodal


Show me any railroad profits sheets where coal is being hauled at 102% of variable cost. You're confusing coal hauling with import intermodal. Import intermodal is where railroads can't come close to meeting revenue adequacy (which doesn't explain why most capacity investments are going to improve the import intermodal corridors).

Most power plants are captive, even if the source of the coal is not. Therefore, DM&E will be able to charge a rate that is more than adequate to cover it's portion of the investment.

One other thing Dave, don't assume that Import Intermodal is as revenue inadequate as you presume, relative to its costs it is much better than Domestic Intermodal. The speeds harmonize better with other traffic, unlike the UPS bullets where costs of failure and disruption to other traffic more than offset the potentially higher revenues, after all the containers just spent two plus weeks on a ship that may have been delayed by storms. as long as the train isn't days late the shipper isn't going to get too nervous. You must have noticed that BNSF took a pass on the UPS business when UPS wanted fast trains from LA to Chicago.

beaulieu, the difference between Import Intermodal and Domestic Intermodal is that all import intermodal has competitive rail access at all major seaside container ports. Furthermore, overseas importers have a multitude of options regarding which combination of container lines and container ports to utilize. And finally most major US consumption markets are either located seaside, or located within a shorthaul of the major waterways (which all seem to be paralelled by at least three Class I's). Until the CN's Prince George container port comes on line, there are no captive container ports in North America.

The point is, since all import intermodal has competition driving down rates, those import intermodal rates have to be at the low end of the RVC spectrum.

Contrast that with domestic intermodal. There are many domestic intermodal terminals that are geographically captive to one Class I. The only other options available would require an expensive long truck haul to an alternate intermodal terminal, so the rate alternative would also be high. The monopoly Class I can charge rates from these terminals that are much higher than those rates from import intermodal terminals. And as you point out, since much domestic intermodal is time sensitive aka UPS, the rates for those shipments are on the high end of the RVC spectrum. Yeah, those time sensitive trains will use more fuel, but their crews are less likely to go dead, so the variable costs attributed to those trains cannot be that much higher. I guess if you count the delays to other trains going in the hole for the hotshots as a variable cost of the hothsot, you could make an arguement for a higher VC for the hotshots. But the rates the railroads can charge for hotshots are as high as any such rates can be, because the only alternatives are long haul trucks or airlines, so the rates can be just below those higher cost alternatives.

I know BNSF has turned down more UPS business. They terminated the Swift RoadRailers. They are making business decisions that are not making sense. There is no way they can charge rate that exceeds the RVC standard of 180% on import intermodal no matter how much they try to minimize VC on those doublestacks, because there is just too much competition from other railroads and other shipping options to allow any profit mazimization. They are ordering more and more double stack wells. Those new equipment purchases cost money. They are spending an awful lot of money on increasing capacity on the LA to Chicago corridor. That is costing a pretty penny. If we attribute those expenditures as a portion of the doublestack VC, there is no way they are much above recouping 100% of RVC. And I suspect they may actually be below the 100% RVC on those double stack trains if we include the costs of capacity improvements and equipment purchases. We know they're not buying more spine cars for domestic TOFC, there seems to be plenty of those still sitting around stored on various sidings.

Right Dave, CP just stopped handling TOFC traffic completely, if it isn't in a can they won't handle it. BNSF hasn't gotten there yet but they might. Don't forget that just because its a container doesn't necessarily mean its import business.
CP moves lots of domestic business in containers. And if you need to move freight to the West Coast, Maersk, COSCO, Hanjin, Evergreen would love to ship it in one of their boxes even if it isn't leaving the country, saves them paying to move empty boxes. I realize Dave that all six of the Class Is are nuts and you know best.

[Anonymous]

QUOTE: Originally posted by beaulieu

QUOTE: Originally posted by futuremodal

QUOTE: Originally posted by beaulieu

QUOTE: Originally posted by futuremodal


Show me any railroad profits sheets where coal is being hauled at 102% of variable cost. You're confusing coal hauling with import intermodal. Import intermodal is where railroads can't come close to meeting revenue adequacy (which doesn't explain why most capacity investments are going to improve the import intermodal corridors).

Most power plants are captive, even if the source of the coal is not. Therefore, DM&E will be able to charge a rate that is more than adequate to cover it's portion of the investment.

One other thing Dave, don't assume that Import Intermodal is as revenue inadequate as you presume, relative to its costs it is much better than Domestic Intermodal. The speeds harmonize better with other traffic, unlike the UPS bullets where costs of failure and disruption to other traffic more than offset the potentially higher revenues, after all the containers just spent two plus weeks on a ship that may have been delayed by storms. as long as the train isn't days late the shipper isn't going to get too nervous. You must have noticed that BNSF took a pass on the UPS business when UPS wanted fast trains from LA to Chicago.

beaulieu, the difference between Import Intermodal and Domestic Intermodal is that all import intermodal has competitive rail access at all major seaside container ports. Furthermore, overseas importers have a multitude of options regarding which combination of container lines and container ports to utilize. And finally most major US consumption markets are either located seaside, or located within a shorthaul of the major waterways (which all seem to be paralelled by at least three Class I's). Until the CN's Prince George container port comes on line, there are no captive container ports in North America.

The point is, since all import intermodal has competition driving down rates, those import intermodal rates have to be at the low end of the RVC spectrum.

Contrast that with domestic intermodal. There are many domestic intermodal terminals that are geographically captive to one Class I. The only other options available would require an expensive long truck haul to an alternate intermodal terminal, so the rate alternative would also be high. The monopoly Class I can charge rates from these terminals that are much higher than those rates from import intermodal terminals. And as you point out, since much domestic intermodal is time sensitive aka UPS, the rates for those shipments are on the high end of the RVC spectrum. Yeah, those time sensitive trains will use more fuel, but their crews are less likely to go dead, so the variable costs attributed to those trains cannot be that much higher. I guess if you count the delays to other trains going in the hole for the hotshots as a variable cost of the hothsot, you could make an arguement for a higher VC for the hotshots. But the rates the railroads can charge for hotshots are as high as any such rates can be, because the only alternatives are long haul trucks or airlines, so the rates can be just below those higher cost alternatives.

I know BNSF has turned down more UPS business. They terminated the Swift RoadRailers. They are making business decisions that are not making sense. There is no way they can charge rate that exceeds the RVC standard of 180% on import intermodal no matter how much they try to minimize VC on those doublestacks, because there is just too much competition from other railroads and other shipping options to allow any profit mazimization. They are ordering more and more double stack wells. Those new equipment purchases cost money. They are spending an awful lot of money on increasing capacity on the LA to Chicago corridor. That is costing a pretty penny. If we attribute those expenditures as a portion of the doublestack VC, there is no way they are much above recouping 100% of RVC. And I suspect they may actually be below the 100% RVC on those double stack trains if we include the costs of capacity improvements and equipment purchases. We know they're not buying more spine cars for domestic TOFC, there seems to be plenty of those still sitting around stored on various sidings.

Right Dave, CP just stopped handling TOFC traffic completely, if it isn't in a can they won't handle it. BNSF hasn't gotten there yet but they might. Don't forget that just because its a container doesn't necessarily mean its import business.
CP moves lots of domestic business in containers. And if you need to move freight to the West Coast, Maersk, COSCO, Hanjin, Evergreen would love to ship it in one of their boxes even if it isn't leaving the country, saves them paying to move empty boxes. I realize Dave that all six of the Class Is are nuts and you know best.

Hmmm, call me paranoid, but I think I detect a slight, just a slight, note of sarcasm here. That's alright, I'm used to it.

Nonetheless, you do bring up a good point regarding the ongoing problem of repositioning ISO containers once the import goods are offloaded. There was another thread some time back where it was shown that many of these ISO boxes are just sitting around stacked in various places on the East Coast or the Midwest, it just doesn't pay for the railroad to haul them back empty, and most westward domestic moves are going in the roomier domestic boxes and trailers if they are going intermodal at all.

There is an opportunity for using empties to haul export grain back to a Pacific Coast port, but again the problem is getting the empties from where they wind up to where they could be used. I know, where I live Pacific Rim exporters have a big problem just trying to get some empty high cubes for their products. These guys end up hauling their stuff in domestic trailers or boxcars to the Pacific ports where the ISO's are available, and transloading into the ISO's there with expensive longshoreman labor.

Again, the point being that the overseas manufacturers probably aren't having the problems that domestic exporters are having.

[PNWRMNM]

Future,

You are missing the point. According to CURE, competitive traffic of all kinds moves at a RVC ratio of 103% in the West(UP-BNSF Average).

DME coal will be all competitive. One would expect it to move at about the regional RVC ratio in the absence of data to the contrary.

If their route is better in terms of mileage, ruling grades, and/or rise and fall, then their RVC would be higher at a given rate than the competition's. If their route is inferior their variable cost will be higher and they will hit the 100% RVC wall before their competitors. I do not know which is true. Odds are these factors will be reasonably close on some moves. I would assume them a push.

DME's problem is that their investment base will be in current dollars, while much of the competitors is in older dollars, some of which has been depreciated. I suspect DME's ratio of investment to revenues will be higher than their competitors. Industry average is $3 investment to generate $1 of annual revenue.

If DME ratio will be higher, that will be a big burdem. I suspect it is more likely to be higher than lower. Even if DME is willing to settle for 6% ROI they need a RVC ratio of at least 118% (100% plus 3*.06). I do not think they can get that RVC, BNSF and UP will not let them. They don't let each other get 118%, so why would they let the DME?

The other point is that the private capital markets would not invest in this project even at 6%. They will demand more than that even of a sure investment. DME is far from sure so the market will require a risk premium. The prospect of RRIF money minimizes this problem and could get cost of capital down to 6%, but it will be a very risky business and the FRA does evaluate the borrower's business plan. I would not put my money into it.

How will DME make any money on PRB coal?

Mac

[Anonymous]

QUOTE: Originally posted by PNWRMNM

Future,

You are missing the point. According to CURE, competitive traffic of all kinds moves at a RVC ratio of 103% in the West(UP-BNSF Average).

But why do you think this 103% average is based on coal more so than import intermodal? According to the CURE study, the captive coal rates for BNSF/UP ($18.52 average) are 15% higher than the corresponding captive coal rates for NS/CSX ($15.82 average), while the non-captive coal rates for all four railroads are only a 7% difference. This would indicate that BNSF and UP have a greater percentage of captive coal customers than the eastern railroads. Meanwhile, the percentage of revenue derived from captive customers is about 37% for NS/CSX and 24% for BNSF/UP, so a far greater percentage of total captive traffic is in coal for BNSF/UP than it is for NS/CSX. Therefore, it is statistically less likely that either BNSF or UP would have an RVC ratio for coal under the 180% standard. The recent news that demand for PRB coal is outweighing BNSF's and UP's ability to deliver would infer that both BNSF and UP can exercise more pricing power for PRB coal moves.

I just doubt that DM&E's entry into PRB will cause a rate war.

QUOTE:

DME coal will be all competitive. One would expect it to move at about the regional RVC ratio in the absence of data to the contrary.

If their route is better in terms of mileage, ruling grades, and/or rise and fall, then their RVC would be higher at a given rate than the competition's. If their route is inferior their variable cost will be higher and they will hit the 100% RVC wall before their competitors. I do not know which is true. Odds are these factors will be reasonably close on some moves. I would assume them a push.

DM&E would have the most direct route east out of the PRB with their east-west alignment contrasted with the Orin line's north-south alignment. I am assuming therefore that DM&E's mileage to the eastern customers will be shorter than either BNSF's or UP's routes. As for gradient, I'll have to check the website to see if they are offering a profile map of the extension. Again, my assumption is that relative grade comparisons will be a wash.

QUOTE:

DME's problem is that their investment base will be in current dollars, while much of the competitors is in older dollars, some of which has been depreciated. I suspect DME's ratio of investment to revenues will be higher than their competitors. Industry average is $3 investment to generate $1 of annual revenue.

If DME ratio will be higher, that will be a big burdem. I suspect it is more likely to be higher than lower. Even if DME is willing to settle for 6% ROI they need a RVC ratio of at least 118% (100% plus 3*.06). I do not think they can get that RVC, BNSF and UP will not let them. They don't let each other get 118%, so why would they let the DME?

If you can source that, that'd be great. At this point I am not willing to take your word that either BNSF or UP have RVC ratio's under 180% for all (captive and non-captive) coal hauling out of the basin. I will however accept your contention that DM&E will need an average RVC of over 118% to make the project viable to it's investors (including Uncle Sam), and I have no doubt they will be able to do this unless PRB coal demand collapses somehow.

QUOTE:

The other point is that the private capital markets would not invest in this project even at 6%. They will demand more than that even of a sure investment. DME is far from sure so the market will require a risk premium. The prospect of RRIF money minimizes this problem and could get cost of capital down to 6%, but it will be a very risky business and the FRA does evaluate the borrower's business plan. I would not put my money into it.

Again, I believe the lack of private investment enthusiasm over DM&E's PRB extension is soley due to the uncertainty of PRB coal demand being able to outweigh potential changes to the political landscape come 2006/2008 and beyond. If the Democrats take over both the Presidency and/or Congress it could spell trouble for coal based projects. We saw that in the 1990's with Clinton's EPA et al and the negative effects it had on coal relative to natural gas power plant development. That's why DM&E needed some hard federal backing to make sure financing is independent of private investment skittishness. If DM&E gets all the 2.5 billion secured before the 2006 elections they'll be just fine.

[PNWRMNM]

Future,

In your most recent reply you cite CURE rate data and conclude from that that BNSF and UP have a higer percentage of "captive" coal than the Eastern Roads. Please explain how to calculate any conclusion as to percentage of captive coal on any of the carriers from this rate data. I do not see how this data supports that conclusion.

You say that you doubt DME entry into the market would cause a rate war. That I agree with. The rate war is already raging. When BNSF and UP are carrying competitive traffic at and average of 103% of variable cost that is plain evidence of a rate war. DME enty into the market would turn the current two party rate war into a three party rate war.

I have made no claim as to BNSF or UP RVC ratios on ALL coal out of PRB for two reasons. First the CURE data is not sufficently detailed to enable the calculation. Second, and more important, is that ratio on ALL coal is irrelevant since any coal the DME hauls will, by definition, be competitive.

Your take on "lack of private investment enthusiasm" for DME's project is both reasonable and interesting. I would agree that the Democrats could spell trouble for coal projects. If DME gets RRIF funds before the election, and the Democrats reduce PRB coal growth, freeze volumes, or drive them down, then the DME coal project is dead regardless of how cheap the money is. It would be foolhardy to put $2.5 billion into track that will not have traffic. In that case they would be wise to give the money back and quit before they squander it on the road to bankruptcy.

Mac

[Murphy Siding]

Why doesn't DM&E build a line into the grain country of Montana? I hear talk of a railroad up there making so much money, that they're actively trying to turn some of the business away?[:-,]

[Anonymous]

Mac,

I disagree with your contention that BNSF and UP are engaged in a rate war for the transport of PRB coal, or that there are any number of coal hauling contracts that result in RVC's in the 100% range. Most coal fired plants out West are captive to one or the other. Even if a connecting line in the South and East (such as KCS, NS, or CSX) has the ability to play one connection against the other, the coal fired plants on those railroads are also likely to be captive, so the overall rate from PRB to those plants will be a captive rate, and either UP or BNSF will share in a percentage of those captive rates. Given the pricing power railroads have right now for coal transport I would expect those "shared" corridors are bringing in revenues well in line with the STB RVC standard.

I just don't see either UP or BNSF having an average RVC for all PRB coal hauling at below 180%. If true, then the entry by DM&E will not have that great of an impact on average PRB coal rates. You may be right that DM&E will have less on line captive customers relative to BNSF and UP to balance out the total coal hauling RVC ratios.

There are also the the cross benefits of this project on DM&E's other business, such as grain hauling.

And I still think that there is more to this project than just DM&E's desire to enter the PRB. It's just a hunch.

[PNWRMNM]

Future,

On what basis do you disagree with my contention, which is based on CURE data, that noncaptive coal from PRB is already moving at RVC ratios very little over 100%? Their data shows all noncaptive traffic at an average of 103%. Coal rates per ton are 40-50% of rates for other commodities, again CURE data. I see no data to support your conclusion.

For DME what RVC other western carriers are getting for ALL coal is irrelevant. All the coal DME proposes to haul will be noncaptive, by definition. They will loose their shirt hauling noncaptive coal.

Mac

[Murphy Siding]

QUOTE: Originally posted by PNWRMNM

For DME what RVC other western carriers are getting for ALL coal is irrelevant. All the coal DME proposes to haul will be noncaptive, by definition. They will loose their shirt hauling noncaptive coal.

Mac

I agree 100%

[Anonymous]

QUOTE: Originally posted by Murphy Siding

Why doesn't DM&E build a line into the grain country of Montana? I hear talk of a railroad up there making so much money, that they're actively trying to turn some of the business away?[:-,]

For DM&E to make such a venture even close to being realistic from a business perspective, they would have to not only tap into the heart of the Montana wheat country, but they would have to extend that line all the way to a Pacific port. What you are suggesting is basically another transcon, aka rebuilding the Milwaukee PCE. I don't think the feds are going to loan or grant them any money for that, and no one can build a railroad these days without significant federal aid.

[Anonymous]

QUOTE: Originally posted by PNWRMNM

Future,

On what basis do you disagree with my contention, which is based on CURE data, that noncaptive coal from PRB is already moving at RVC ratios very little over 100%? Their data shows all noncaptive traffic at an average of 103%. Coal rates per ton are 40-50% of rates for other commodities, again CURE data. I see no data to support your conclusion.

For DME what RVC other western carriers are getting for ALL coal is irrelevant. All the coal DME proposes to haul will be noncaptive, by definition. They will loose their shirt hauling noncaptive coal.

Mac

Well, without convincing either BNSF or UP to open their books for us, we can only surmise what kind of revenue they are getting from PRB coal hauls. We do know that value-added products command a higher rate than non-value added products. Of all the CURE data, only coal can be assumed to be a non-value added product. It would be interesting if they could separate their unit grain train data from the all inclusive category of "Farm Products" to see if the unit coal rates are that much different. Also, coal is for the most part exclusively unit train stuff, while farm products, chemicals, lumber and wood, and pulp paper may be mostly carload commodities, and anything that has to be switched will command a higher rate to cover those costs.

What we can both agree on is that DM&E's coal traffic will be in unit train form, meaning costs will be lower than for carload traffic, so they can correspondingly have lower per ton rates for coal than for that other traffic. And since demand for PRB coal is outstripping the ability of the railroads to deliver, it is my hunch that the railroads will not waste this opportunity to maximize pricing power over those PRB loads.

Anything can happen in the near future that will prove either you or myself right regarding the prospect of DM&E making a viable commercial go of this project. I'll still go with DM&E on this one if for no other reason than coal's long term demand prospects remain high.

[PNWRMNM]

Future,

Only when those noncaptive RVC ratios get into the 150% range will I agree that the carriers have pricing power on that traffic, and that DME has a chance.

I do not expect to see that happy day.

Mac

[Murphy Siding]

Today's paper has a story that BNSF has hit a *delay* of sorts in it's plan to buy trackage owned by the stat of South Dakota. My guess is that there are some issues with letting other railroads (DM&E, and another up by Aberdeen) use portions of what will be BNSF trackage.

[Anonymous]

QUOTE: Originally posted by Murphy Siding

Today's paper has a story that BNSF has hit a *delay* of sorts in it's plan to buy trackage owned by the stat of South Dakota. My guess is that there are some issues with letting other railroads (DM&E, and another up by Aberdeen) use portions of what will be BNSF trackage.

Can you post the article, or at least post a few exerpts? Or a link?

[Murphy Siding]

QUOTE: Originally posted by futuremodal

QUOTE: Originally posted by Murphy Siding

Today's paper has a story that BNSF has hit a *delay* of sorts in it's plan to buy trackage owned by the stat of South Dakota. My guess is that there are some issues with letting other railroads (DM&E, and another up by Aberdeen) use portions of what will be BNSF trackage.

Can you post the article, or at least post a few exerpts? Or a link?

Alas, I am a computer dummy[D)]. The article appears in the Sioux Falls Argus Leader.

[Anonymous]

QUOTE: Originally posted by Murphy Siding

QUOTE: Originally posted by futuremodal

QUOTE: Originally posted by Murphy Siding

Today's paper has a story that BNSF has hit a *delay* of sorts in it's plan to buy trackage owned by the stat of South Dakota. My guess is that there are some issues with letting other railroads (DM&E, and another up by Aberdeen) use portions of what will be BNSF trackage.

Can you post the article, or at least post a few exerpts? Or a link?

Alas, I am a computer dummy[D)]. The article appears in the Sioux Falls Argus Leader.

So plagerize a few choice tidbits then. You must plagerize, you must! The information is vital!

[Murphy Siding]

I'll look for it.

[Murphy Siding]

QUOTE: Originally posted by futuremodal

QUOTE: Originally posted by Murphy Siding

QUOTE: Originally posted by futuremodal

QUOTE: Originally posted by Murphy Siding

Today's paper has a story that BNSF has hit a *delay* of sorts in it's plan to buy trackage owned by the stat of South Dakota. My guess is that there are some issues with letting other railroads (DM&E, and another up by Aberdeen) use portions of what will be BNSF trackage.

Can you post the article, or at least post a few exerpts? Or a link?

Alas, I am a computer dummy[D)]. The article appears in the Sioux Falls Argus Leader.

So plagerize a few choice tidbits then. You must plagerize, you must! The information is vital!

Another little, filler article about it today in the paper. It says that the state is holding out on selling the trackage to BNSF until the deatails can be worked out concerning shortlines using BNSF trackage. This time, the Dakota Southern is mentioned. I didn't know they were still around.

[CSSHEGEWISCH]

QUOTE: Originally posted by futuremodal
So plagerize a few choice tidbits then. You must plagerize, you must! The information is vital!

So it appears that FM has no scruples, intellectual or otherwise, when it comes to his attempts to make his case. As it turns out, the information was hardly sufficient to be vital; to what, I don't know.