Good News for DM&E

[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.

[Anonymous]

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.

[PNWRMNM]

Murphy,

The marketing guys may not be disciplined enough to get above 102% but they are disciplined enough not to go under 100% of their own cost. That is why mileage and ruling grade count, they mightily influence your costs, and the other guys.

Mac

[Murphy Siding]

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

You see that as a problem too?[;)] Wait until someone plays the cut-throat. and 102% drops to 90% or 75%?[:-,]

[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

[Anonymous]

QUOTE: Originally posted by spbed

Is the BNSF getting public money to build that 3rd main track from East Barstow towards Daggett they are now building[?][

QUOTE: Originally posted by futuremodal

Off topic: I know the writer of the article, Peter Harriman. He was one of my old running chums back in Moscow ID.

On topic: Of course DME will need public funds. All rail projects today use public funds. And given the liabilities private debt holders would face if the current pro-coal Congress and Admininstration were replaced by an anti-coal party, it's not suprising private cash was scarce for this project.

C'mon Spbed, surely you can tell the difference between adding capacity to an existing line vs building an entirely new line from scratch, right?

But just for the sake of dissection, from the other forums you know that BNSF is using it's excess profits from gouging Montana and North Dakota grain growers (e.g. our fellow Americans) and using those profits to add capacity to it's Chinese import corridors. Those grain growers, in response to the lack of net revenue from the sale of those crops (with one third to one half of their crop income going to pay BNSF's transport rates), will be more likely to access agricultural subsidies. BNSF is also gouging it's captive coal customers and chemical shippers, so those customers must access the newly available Energy Bill funds to pay for new projects.

So it can be argued that some ag subsidies and energy bill subsidies are really indirect subsidies for railroads, since most railroads out west make the bulk of thier income off either farmers or utilities. Or to put it another way, eliminate all ag subsidies and energy subsidies, and what do you think happens to the railroads? Quite simply, they go broke, because the *revenues* from intermodal don't even cover the STB's revenue adaquacy standard.

Add to that the neo-subsidy which comes in the form of anti-trust exemption (an exemption not enjoyed by any other industry in the US except for the railroads), and of course the continuing impact of the original land grants, and we got quite an array of various forms of public support for railroads.

So is BNSF getting public money for their Chinese import corridor expansion projects? Absolutely, but not in the classic sense of the direct subsidy or loan. DM&E is just taking it's place at the trough along with the current Class I's. I say more power to them.

[spbed]

Is the BNSF getting public money to build that 3rd main track from East Barstow towards Daggett they are now building[?][

QUOTE: Originally posted by futuremodal

Off topic: I know the writer of the article, Peter Harriman. He was one of my old running chums back in Moscow ID.

On topic: Of course DME will need public funds. All rail projects today use public funds. And given the liabilities private debt holders would face if the current pro-coal Congress and Admininstration were replaced by an anti-coal party, it's not suprising private cash was scarce for this project.

[CSSHEGEWISCH]

If we need to wait for Federal financing to build this line, then this project will take forever to be built. The CREATE program for Chicago only got a fraction of what was needed and that's just for upgrading so it's debatable whether funding for another line to the Powder River Basin will see a dime.

FM seems to be meeting himself coming in the other direction: He decries Federal environmental regulations in other postings yet he expects the Fed to come through for projects that the private sector won't fund.

[bobwilcox]

QUOTE: Originally posted by Murphy Siding

Among other things, the writer says that the state would get money from every ton of coal hauled through the state. Anybody have an idea what that would be about? I don't think any state levies a *transit tax?* on goods moving by rails that happen to be inside their borders, do they?

Minnesota had a ton-mile tax on rail customers twenty years ago. I don't know if still have the tax.

[Anonymous]

QUOTE: Originally posted by CSSHEGEWISCH

I'll believe that the line into the Powder River Basin is going to be built when I see the contracts being put out for bid. Since there hasn't been any great ru***o lend money to DM&E at a reasonable rate, I don't think that the line will ever be built, unless FM has some financiers lined up that nobody else knows about.

Well, the more things change the more they stay the same.

No one rushed to finance the original transcons either. Given the overwhelming increase in risk associated with new capital intesive projects since those days a century and more ago, it's not suprising we need the feds to step in for financing.

[Murphy Siding]

Today's Argus Leader features a local resident's glowing enthusiastic belief that the DM&E's PRB line will be the cat's meow for SD. Among other things, the writer says that the state would get money from every ton of coal hauled through the state. Anybody have an idea what that would be about? I don't think any state levies a *transit tax?* on goods moving by rails that happen to be inside their borders, do they?

[fuzzybroken]

QUOTE: Originally posted by Murphy Siding

QUOTE: Originally posted by futuremodal


3. A rehab of 150 track miles on the DM&E’s western end between Wall, S.D., and Colony, WY*


Of those four separate projects, the one I find most intriging is actually the rehab of the Colony line, since this line represents the best shot of accessing Montana's PRB resources, as well as "reaching out" to a possible connection with the MRL. Remember, The Washington Group (which owns MRL) was the entity that sold the IC&E to Cedar River Holdings, and as such they may still have an interest in those lines as a way to free up MRL from being captive to BNSF's whims.

[(-D][(-D][(-D] I'm sorry man, but that's a longshot even bigger than the PRB extention.

True as that may be, it's still neat to consider the possibilities. No one thought DME wuld ever pull off the PRB extension but... oh wait, it hasn't been built yet... [:I]

[CSSHEGEWISCH]

I'll believe that the line into the Powder River Basin is going to be built when I see the contracts being put out for bid. Since there hasn't been any great ru***o lend money to DM&E at a reasonable rate, I don't think that the line will ever be built, unless FM has some financiers lined up that nobody else knows about.

[Murphy Siding]

Or DME trying to find any money possible, to keep the railroad from disappearing into the prairie.

[nanaimo73]

I thought this was more like a step backward, with DME realising it must look for government financing as a last resort.

[mheilmann]

I've been watching for this since the announcement in '97. Anyone know about infrastructure plans? For example: CTC signaling or GPS as Alaska RR is experimenting with? Asphalt sub-roadbed as per BNSF in Texas/Oklahoma?

[Anonymous]

QUOTE: Originally posted by nanaimo73

QUOTE: Originally posted by futuremodal

3. A rehab of 150 track miles on the DM&E’s western end between Wall, S.D., and Colony, WY
Of those four separate projects, the one I find most intriging is actually the rehab of the Colony line, since this line represents the best shot of accessing Montana's PRB resources, as well as "reaching out" to a possible connection with the MRL.

FM-
It is about 200 miles from Colony to Huntley, and against the lay of the land. There seems to be a large, well organized opposition already in place fighting the stalled Tongue River Railroad.
Would there be a lot of traffic that MRL and DME could interchange ?

I know there were railroad surveys westward from Colony. The lay of the land suggests either a northern routing via Miles City or a southern routing via Gillette.

Opposition to ANY project is simply the cost of doing business these days. Nothing new.

There is an opportunity for railroads to take advantage of the energy bill to justify new trackage that ostensibly serves to feed new energy projects. There are several coal fired projects prelimanarily planned or in existence in Montana, some accessable to MRL. For MRL to get this business, they are completely dependent on BNSF. As it is now, BNSF would likely serve any such plant located on MRL, with MRL getting a track use fee. With utilities becoming ever more cognizant of the risks associated with being a captive shipper, some of these proposals may not opt for an MRL location if MRL is itself captive to BNSF. If MRL had it's own link into PRB, or an alternate PRB link besides BNSF, they could then offer the prospect of competitive rate offerings to prospective on line clients.

Yeah, it's a long shot.

[Murphy Siding]

QUOTE: Originally posted by futuremodal


3. A rehab of 150 track miles on the DM&E’s western end between Wall, S.D., and Colony, WY*


Of those four separate projects, the one I find most intriging is actually the rehab of the Colony line, since this line represents the best shot of accessing Montana's PRB resources, as well as "reaching out" to a possible connection with the MRL. Remember, The Washington Group (which owns MRL) was the entity that sold the IC&E to Cedar River Holdings, and as such they may still have an interest in those lines as a way to free up MRL from being captive to BNSF's whims.

[(-D][(-D][(-D] I'm sorry man, but that's a longshot even bigger than the PRB extention.

[nanaimo73]

QUOTE: Originally posted by futuremodal

3. A rehab of 150 track miles on the DM&E’s western end between Wall, S.D., and Colony, WY
Of those four separate projects, the one I find most intriging is actually the rehab of the Colony line, since this line represents the best shot of accessing Montana's PRB resources, as well as "reaching out" to a possible connection with the MRL.

FM-
It is about 200 miles from Colony to Huntley, and against the lay of the land. There seems to be a large, well organized opposition already in place fighting the stalled Tongue River Railroad.
Would there be a lot of traffic that MRL and DME could interchange ?

[Anonymous]

It should be noted that the 2.5 billion is for more than just the PRB extension:

http://www.progressiverailroading.com/freightnews/article.asp?id=7796

The $2.5 billion is earmarked for -
1. The 262.3-mile extension into the PRB and an upgrade of 600 miles of other potential coal-hauling lines
2. An upgrade of 250 track miles on the IC&E
3. A rehab of 150 track miles on the DM&E’s western end between Wall, S.D., and Colony, WY*
4. An upgrade of 30 track miles on IC&E’s Marquette IA line

Of those four separate projects, the one I find most intriging is actually the rehab of the Colony line, since this line represents the best shot of accessing Montana's PRB resources, as well as "reaching out" to a possible connection with the MRL. Remember, The Washington Group (which owns MRL) was the entity that sold the IC&E to Cedar River Holdings, and as such they may still have an interest in those lines as a way to free up MRL from being captive to BNSF's whims.

[beaulieu]

QUOTE: Originally posted by Murphy Siding

I thought there was one in Sherburn, MN still?

Natural Gas burner, the only rail traffic to the plant is the rare transformer.

[Murphy Siding]

QUOTE: Originally posted by beaulieu

QUOTE: Originally posted by Murphy Siding

Wouldn't you think there would be a power plant somewhere closer to Heron Lake, that they could team up with? What kind of transload facility is at Marshaltown?

Thanks

It is a purpose built facility owned by Alliant Energy one of the big Electric Companies. They have a couple of small powerplants in the area, none of which are large enough for unit train service. Plus Iowa State University gets coal for its heating plant there, and one of the cement plants at Mason City gets its coal there.
BTW the only coal fired powerplants that might be closer are at Sergeant Bluff, IA or Minneapolis, MN.

I thought there was one in Sherburn, MN still?

[beaulieu]

QUOTE: Originally posted by Murphy Siding

Wouldn't you think there would be a power plant somewhere closer to Heron Lake, that they could team up with? What kind of transload facility is at Marshaltown?

Thanks

It is a purpose built facility owned by Alliant Energy one of the big Electric Companies. They have a couple of small powerplants in the area, none of which are large enough for unit train service. Plus Iowa State University gets coal for its heating plant there, and one of the cement plants at Mason City gets its coal there.
BTW the only coal fired powerplants that might be closer are at Sergeant Bluff, IA or Minneapolis, MN.

[MP173]

With a ROI which Exxon commands, Lee Raymond will be extremely slow to invest. That is one heck of a company. He is a top notch CEO. I hope he is grooming his successor well.

ed

[Murphy Siding]

QUOTE: Originally posted by beaulieu

QUOTE: Originally posted by Murphy Siding

QUOTE: Originally posted by gabe

The lack of private investment says it all. Railroads are already undercutting one another for better rates in the Powder River Basin, this will just make things worse. I think this is going to go down in history as a collasal blunder with lobyists and power companies to blame.

Gabe

Skeptic me wonders if it will ever get done? As a side note: On a recent thread about bio-diesel in ND, I asked why none of the ethanol plants were coal-fired. This seemed like a perfect compliment for rail operations to me. The newspaper mentions just that thought, without elaboration. Do you think someone is reading this message board, and **stealing** my thoughts?[:-,][}:)]

Murphy, the new Ethanol plant going in at Heron Lake, MN is going to be coal powered. One of the problems with using coal is that none of the facilities are big enough to receive unit train loads of coal which is the only way to get a good price. Also you need a large area to dump the coal onto. Heron Lake will purchase its coal jointly with other customer via the transload facility near Marshaltown, IA it will be trucked in from there.

Wouldn't you think there would be a power plant somewhere closer to Heron Lake, that they could team up with? What kind of transload facility is at Marshaltown?

Thanks

[nanaimo73]

QUOTE: Originally posted by eastside

When wind power and tar sands start to become discussed seriously as competitive sources of energy and viable investments (remember the last time?), it's time for investors in energy stocks to start heading for the hills.

Projects under way or announced in Alberta's Tar Sands currently total $100 billion dollars. That's the biggest project on the planet. Canada is second in the world in proven oil reserves.

[eastside]

QUOTE: Originally posted by gabe

The lack of private investment says it all. Railroads are already undercutting one another for better rates in the Powder River Basin, this will just make things worse. I think this is going to go down in history as a collasal blunder with lobyists and power companies to blame.

Indeed, the fact that the banks and energy companies aren't lining up to fund the project says volumes. The energy industry is highly sensitive to the economic cycle. I think the current cycle is nearly past its peak and the energy industry is about to enter the bust phase of the economic cycle. When wind power and tar sands start to become discussed seriously as competitive sources of energy and viable investments (remember the last time?), it's time for investors in energy stocks to start heading for the hills.

Lee Raymond, Exxon Mobil's CEO, was interviewed on the PBS show Charlie Rose tonight. He mentioned that they've been slow to invest because Exxon has had a difficult time finding attractive projects. I think he means that they're shrewd enough to realize the good times are about to come to an end.

[Anonymous]

QUOTE: Originally posted by Swafford

You just may be right but don’t forget the UP and BNSF. They may want to keep their monopoly on the Powder River Basin!

Best regards,
Swafford

MAYBE, JUST MABE and from deep left field. There might just be another couple or three railroads from the East that might be sneaky enough to do something completly un-orthodox, off the wall and totally original. This would of course be much to the questioning and wonderment of the two giants of the West. Now that would be a truly intersesting development. Not likely to happen, but interesting.

[Murphy Siding]

QUOTE: Originally posted by futuremodal

If indeed BNSF and UP are competitors for PRB coal haulage, then they are a duopoly. If there is collusion between BNSF and UP to manipulate rates higher, the effect is monopolistic.

I agree.

Have you worked out that story problem about the loan repayment yet?[:)]

[Anonymous]

If indeed BNSF and UP are competitors for PRB coal haulage, then they are a duopoly. If there is collusion between BNSF and UP to manipulate rates higher, the effect is monopolistic.