BNSF boss says transport system nearing crisis

[eolafan]

Ten, fifteen or twenty years hey? Well, sounds like my post-retirement (I plan on retireing in 2012) will be really exciting and full of trains to watch.

[Anonymous]

Well, there's so much Mr. Rose avered that could be parsed and diced, but the fact remains that the actions of the railroads post-Staggers (mege-mergers, capacity retrenchment) is the cause of the current crisis. Now the rail oligarchy wants taxpayers to subsidize the expansion of the import intermodal corridors? Does anyone think these guys would be in favor of subsidizing NEW railroads into their captive service territories?

Solution #1 is to break up the rail oligarchy via antitrust action to form separtate infrastructure and transporter entities. Then and only then can public funds be used in such massive outlay to provide capacity expansions (to be then utilized by all rail transporters), and do so within the philosophical constraints of encouraging free market competition.

What Mr. Rose proposes is to deal with the devil, namely subsidizing rail monopolies to the benefit of overseas importers and to the chagrin of domestic rail shippers. "Higher shipping prices" he says? Tell that to those domestic rail shippers paying 400% of R/VC, aka memo to Mr. Rose: We're already paying higher shipping prices due to your railroad's actions. What are you suggesting, that we'll be paying 800% R/VC while our Chinese competitors continue to enjoy rates of 106% R/VC?

Let's subsidize our trade deficit! What a concept!

[Anonymous]

QUOTE: Originally posted by eolafan

Ten, fifteen or twenty years hey? Well, sounds like my post-retirement (I plan on retireing in 2012) will be really exciting and full of trains to watch.

I just hope ill dead by then.........
Allan.

[Anonymous]

BNSF will get through this. UP might not[swg][swg][swg] (if it affects them). BNSF had better order more SD70ACes to handle this traffic[swg]

[Anonymous]

Futuremodal,

Where did Mr. Rose suggest subsidizing the railroad? From my interpretation of the article, Mr. Rose talks of the demand for transportation capacity from all modes, not just railroads. The article goes on to show what the railroad is trying to do to keep up with the demand and at no time is the word "subsidize" mentioned there. It is the talk about the roads and waterways that infer tax payers money.

To blame the railroads' past decision to eliminate unused capacity for the current bottle neck is kind of strange. Would any business continue to maintain high cost assets "just in case" the need arose 20 to 30yrs down the road? I would hope not. Not many share holders would play that foolish game.

[Anonymous]

QUOTE: Originally posted by NS2317

Futuremodal,

Where did Mr. Rose suggest subsidizing the railroad?

Last time I checked, 25 percent federal tax credit = subsidy.

[Anonymous]

QUOTE: Originally posted by NS2317

Futuremodal,

Where did Mr. Rose suggest subsidizing the railroad? From my interpretation of the article, Mr. Rose talks of the demand for transportation capacity from all modes, not just railroads. The article goes on to show what the railroad is trying to do to keep up with the demand and at no time is the word "subsidize" mentioned there. It is the talk about the roads and waterways that infer tax payers money.

See post by James the Mad.

QUOTE:
To blame the railroads' past decision to eliminate unused capacity for the current bottle neck is kind of strange.

Why? I happen to think the opposite is strange, aka the railroads for the last few decades have gone hog wild to eliminate effective rail capacity, then they turn around and ask the taxpayers to subsidize new capacity. You don't find that the least bit ironic?

QUOTE: Would any business continue to maintain high cost assets "just in case" the need arose 20 to 30yrs down the road? I would hope not. Not many share holders would play that foolish game.

Look at the forest products industry for a model of maintaining underutilized assets for future gain 20 to 30 years down the road (although their long term hold goes for more like 40 to 50 years). Why do such businesses do so? Because it results in a long term pay-off. Just because some greedy stockholders demand profit maximization now at a cost of future lost profits doesn't mean you aquiesce to them, because to do so is a bad business model, unless you're in it for the shorthaul e.g. take the money and leave a corporate corpse.

However, the railroads didn't embark on the task of eliminating capacity to avoid even mothballing fees, they eliminated capacity to extract pricing power aka monopoly profits with the unwitting aid of those Stagger's era politicians. When you can reduce usage to a few remaining lines, you get predictable congestion, which means you can pick and choose premium price takers and eliminate sub-premium price takers, who then of course will default as much as possible to using highways, so now we get more highway congestion. That's where the federal regulators really screwed up, and why Mathew Rose's statements of *concern* over our nation's transportation system clogging up is really laughable. And we should remind Mr. Rose that the purpose of our nation's transportation policy isn't to make it easier to bring in more imports in a time of growing trade deficits. On the contrary, our transportation policy should be directed to making it easier for domestic producers to get their products to the consumer markets, both here and abroad. The current railroad modus operandi is the antithesis of this purpose.

[Anonymous]

@John_the_ Mad

Never would have considered a tax credit as a subsidy. Thanks. Guess I should start checking more often.

@ Futuremodal

I see the point of your response. Where can I get some of the green kool-aid? The red stuff is starting to get old. [;)]

As for the idea of making a separate entity owner of the rail infrastructure and creating an open access rail market, the idea sounds good. Many rail companies under cutting each others rates would create a boon to the economy. Not to mention dropping the shipping rates to all those poor, struggling farmers. Who knows. Maybe it would even create more businesses here at home, willing to take advantage of the rock bottom shipping costs.

[Murphy Siding]

QUOTE: Originally posted by NS2317

@ Futuremodal

I see the point of your response. Where can I get some of the green kool-aid? The red stuff is starting to get old. [;)]

As for the idea of making a separate entity owner of the rail infrastructure and creating an open access rail market, the idea sounds good. Many rail companies under cutting each others rates would create a boon to the economy. Not to mention dropping the shipping rates to all those poor, struggling farmers. Who knows. Maybe it would even create more businesses here at home, willing to take advantage of the rock bottom shipping costs.

[(-D][(-D][(-D]

[TomDiehl]

QUOTE: Originally posted by futuremodal

QUOTE: Originally posted by NS2317

To blame the railroads' past decision to eliminate unused capacity for the current bottle neck is kind of strange.

Why? I happen to think the opposite is strange, aka the railroads for the last few decades have gone hog wild to eliminate effective rail capacity, then they turn around and ask the taxpayers to subsidize new capacity. You don't find that the least bit ironic?

QUOTE: Would any business continue to maintain high cost assets "just in case" the need arose 20 to 30yrs down the road? I would hope not. Not many share holders would play that foolish game.

Look at the forest products industry for a model of maintaining underutilized assets for future gain 20 to 30 years down the road (although their long term hold goes for more like 40 to 50 years). Why do such businesses do so? Because it results in a long term pay-off. Just because some greedy stockholders demand profit maximization now at a cost of future lost profits doesn't mean you aquiesce to them, because to do so is a bad business model, unless you're in it for the shorthaul e.g. take the money and leave a corporate corpse.

However, the railroads didn't embark on the task of eliminating capacity to avoid even mothballing fees, they eliminated capacity to extract pricing power aka monopoly profits with the unwitting aid of those Stagger's era politicians. When you can reduce usage to a few remaining lines, you get predictable congestion, which means you can pick and choose premium price takers and eliminate sub-premium price takers, who then of course will default as much as possible to using highways, so now we get more highway congestion. That's where the federal regulators really screwed up, and why Mathew Rose's statements of *concern* over our nation's transportation system clogging up is really laughable. And we should remind Mr. Rose that the purpose of our nation's transportation policy isn't to make it easier to bring in more imports in a time of growing trade deficits. On the contrary, our transportation policy should be directed to making it easier for domestic producers to get their products to the consumer markets, both here and abroad. The current railroad modus operandi is the antithesis of this purpose.

First, there is no current transportation policy in this country related to railroads, just the decisions of the railroad management based on current trends. Mothballing fees PLUS property taxes on unused infrastructure add up quickly if the freight revenues aren't coming in. In my area about 15 years ago Conrail removed a section of the Lackawanna cutoff in New Jersey, and single tracked the part in Pennsylvania. Why? because the traffic levels at the time didn't support maintaining two routes from Binghamton to NYC. It's the same section that the rail authorities are trying to reinstall to provide rail passenger service from Scranton to North Jersey and NYC area. Property taxes an NJ sure ain't cheap, and the line was sold off to a developer so the RR had no property tax obligation in New Jersey. Sounds more like a sound business decision, made based on the business conditions at the time.

[DPD1]

QUOTE: Originally posted by zardoz

After years of suffering from excess capacity, BNSF, like other railroads, is struggling to handle an unprecedented increase in shipments, caused primarily by a surge in imports from China and rising demand for coal produced in Wyoming and Montana.

They make it sound like they're doing it for free or something...'We make more money, so we want more of our bills to be paid by somebody else.'

It works for the oil companies, so why not I guess.

Dave
http://www.dpdproductions.com
- Featuring the TrainTenna Railroad Scanner Antennas -

[CSSHEGEWISCH]

All modes of transportation are getting close to the limit regarding capacity. We're pretty familiar with the capacity constraints of railroading, one would have needed a very good crystal ball to justify paying taxes on unproductive property when excess capacity was the problem. Shareholders don't take too well to that sort of management decision.

The limitations in trucking have been sliced and diced pretty well on these forums, but how do you alleviate a personnel (driver) shortage when it gets increasingly hard to recruit and KEEP drivers. Larger trucks are worthless if they sit at the terminal due to a lack of drivers.

The airlines are running into the same problem. Airports are getting more congested and it's becoming almost impossible to expand any of the existing airports (see Chicago O'Hare) or build new ones that the airlines will use (see Mid-America near St. Louis). The airline situation shows that "open access" doesn't necessarily increase overall capacity.

[FJ and G]

they're always complaining about something. 20 years ago it was lack of traffic so they removed a lot of track; now it's congestion.

Maybe if the system was 265K + instead of 125K, they would have more routes. No matter, they'll find something to grumble about.

[SALfan]

Does anyone remember the Chicago, Rock Island & Pacific? They held onto underused capacity so long they went out of business. Granted, the Rock didn't have enough traffice density anywhere except Chicago-Quad Cities to justify its continued existence, but a lot of other railroads weren't much better off. The capacity decreases that took place after 1975 weren't a matter of evil railroads plotting to take advantage of everyone 30 years down the road, they were a matter of survival. Remember Erie? After Conrail was formed, and after deregulation made abandoning track easier, virtually the entire former Erie was abandoned - it was one railroad too many.

[Anonymous]

sounds to me like their is something wrong with the system.

[Anonymous]

QUOTE: Originally posted by futuremodal

the fact remains that the actions of the railroads post-Staggers (mege-mergers, capacity retrenchment) is the cause of the current crisis. Now the rail oligarchy wants taxpayers to subsidize the expansion of the import intermodal corridors? Does anyone think these guys would be in favor of subsidizing NEW railroads into their captive service territories?

[#ditto][#ditto][bow][bow][bow][#ditto][#ditto]

Maybe if taxpayer subsidy is limited to helping new entities open parallel corridors, the existing RR's will find something they can do to solve the problem.


Funny how when there are several competing entities looking for growth opportunities in an industry, they never seem to have a crisis that harms consumers. But once you allow a small handfull of mega entities to predominate an industry, then every little problem spells doom for the consumer's check book.

Electricity, Gasoline, etc.

[samfp1943]

QUOTE: Originally posted by JOdom

Does anyone remember the Chicago, Rock Island & Pacific? They held onto underused capacity so long they went out of business. Granted, the Rock didn't have enough traffice density anywhere except Chicago-Quad Cities to justify its continued existence, but a lot of other railroads weren't much better off. The capacity decreases that took place after 1975 weren't a matter of evil railroads plotting to take advantage of everyone 30 years down the road, they were a matter of survival. Remember Erie? After Conrail was formed, and after deregulation made abandoning track easier, virtually the entire former Erie was abandoned - it was one railroad too many.

In the Southeast, the NS has suuccessfully" rail banked" [mothballed] several low traffic lines. It would seem with a minimum of maintenance they can be reactivated, or used occassionally. Here in Kansas, many lines have been abandoned and salvaged out of existance. Capacity that could be used as needed. I understand that lightly used track still has maintenance cost issues, but certainly those costs might be small in light of having to do total rebuilds and relays.
A prime example of a program of capacity reduction was the Illinois Central's removal of one of its double tracked main lines from Chicago to New Orleans for salvage. The relay to gain new capacity will be thunderously expensive for the new owners CN when it is needed. Not to mention complications from local kenvironmentalists or the NIMBY crowd. Which is why hindsight is 20/20.
Sam

[Anonymous]

maybe the railroads want it both ways .abandon track to satisfy bankers .get tax relief to rebuild.seems to be a problem here

[wallyworld]

The typical commodities that made up a train have changed as well as the length of a haul and the length of consists as well. Over the past twenty years, the evolution from carload to containers, the increases in car weight are driven by the market and in turn by reengineering the technology of the system to balance the equation has used to expotentially bypass the issues of capacity. Routing have always been a moving target based on profitability..None of these factors can be "controlled.' The problem is not capacity, it is fluidity based on traffic currently outpacing the current dispatching of loads through terminals that interchange. More run throughs-more coordinated forecasting and schedualling among Class 1's could be researched and implemented by a third party consortium among Class i roads to keep cars rolling instead of parking them.

[TomDiehl]

This sounds like another reporter covering the same story. From the Trains Newswire 27 March 2006, Story title, BNSF shows off the Transcon for press representatives:

http://www.trains.com/Content/Dynamic/Articles/000/000/006/555uiowx.asp

[edbenton]

Yes the RR are running at capacity. I fwe do not want a service meltdown like the UP in 97 and the whole country in WW1 we need to give the RR their tax break to increase capcitay so we do not have this issue. When we think about it still faster to ship a container across the country for a shipping line then reaload it onto another ship for europe then go around the horn or around africa since the mega ships are to big for both the canal or Suez so we will need the capicity for the long term not short term.

[MichaelSol]

QUOTE: Originally posted by edbenton
.... so we will need the capacity for the long term not short term.

But the rail industry has not thought that way in 25 years.

A friend of mine, retired BN, offered the following remark on the rail industry, as it lurches from major policy change to policy change, each one allegedly motivated by regard for the "bottom line" by allegedly "capable" executives.

"If there are any of them left still working for Mr Rose, whose pronouncements sound to me like (finally) an exercise in common sense, I am sure all the Ex-Frisco lackeys who nodded their heads up and down like good little lapdogs when his distant predecessors Richard Grayson and Bill Thompson and a third manager, (well-known for converting double or two main track territory into single track, and who incidentally now is head of another transcontinental railroad as we speak) all said Stampede Pass had to be shut down and the "redundant" Milwaukee Option over Snoqualmie pass sold to State Parks (remember "to better serve our railroad customers," and "our whole railroad is for sale..."), not to mention the MRL Sale, those same lackeys now are innocently nodding their little heads up and down, when all of this past foolishness is now brought to light.

"Too bad P.Bill Thompson and Gang couldn't have gotten their hands on all that
Santa Fe double track. They'd have had it all sold for scrap in a jiffy, making
Matt Rose's job even more difficult now...

"Remember the famous line from the movie "Judgement in Nuremberg," where the Nazi judge is attempting to convince american judge Burt Lancaster that he didn't think his support of the regime was wrong or would cause any problems? The answer he got was, "You knew it was wrong when you made your very first
conscious choice to support those people."

"Lest somebody jump all over me for the Nazi comparison, I don't mean that at
all. What I do mean is the reply given to the moral part of it. You don't
liquidate profitable businesses, or portions of them, just to squeeze out a
profit. That's wrong, and it is wrong whether you do it with just a little
short piece of "redundant" track or with the whole dam thing".

Best regards, Michael Sol

[TomDiehl]

The two things that seem to be contrary to each other: in the last paragraph of your quote, third sentence, "You don't liquidate profitable businesses, or portions of them, just to squeeze out a profit. That's wrong, and it is wrong whether you do it with just a little short piece of "redundant" track or with the whole dam thing".

Then compare it to the first paragraph of the quote, the unnamed third manager states that "our whole railroad is for sale..."

If it was profitable and for sale, why didn't anyone buy it?

[MichaelSol]

QUOTE: Originally posted by TomDiehl

The two things that seem to be contrary to each other: in the last paragraph of your quote, third sentence, "You don't liquidate profitable businesses, or portions of them, just to squeeze out a profit. That's wrong, and it is wrong whether you do it with just a little short piece of "redundant" track or with the whole dam thing".

Then compare it to the first paragraph of the quote, the unnamed third manager states that "our whole railroad is for sale..."

If it was profitable and for sale, why didn't anyone buy it?

The quote "the whole railroad is for sale" is from a manager, judged an incompetent strategist by many. The second quote is from a long time BN dispatcher-- the author of the comment -- offering his views on the quality of such managers, including his opinion on the manager who made the observation, "the whole railroad is for sale."

Yes, the comments are contrary to each other.

His point is that the rail industry paid high salaries to men who are responsible for the current "crisis" which is in many ways a self-inflicted crisis, as most rail industry "crises" have been.

[TomDiehl]

Unfortunately, not a crisis limited to the railroad industry. In recent news reports, recall the major flap over a big bonus paid the the big-wheel of Delta Airlines, right on the heels of the workers being asked for big give-backs in salary and benefits.

[Anonymous]

Sounds like it will be a repeat of the UP crisis of the late '90s. Only time will tell.

[Anonymous]

Well, we have quite a few unused rooms at the farmhouse. I guess we could tear out the "excess capacity" so that we're not paying mothball fees (higher property taxes, more energy to heat/cool, etc). Then, when family growth spurs the need for more rooms, we'll just pay a contractor to rebuild those rooms at a much higher price than if we'd just kept the rooms minimally maintained......



[oops]
[:-,]


...well, I guess that's what we'd do if I was a "rail professional"![D)]

[jeaton]

I suppose those of you who argue that the railroads should have never eliminated under used lines would also argue that General Motors, Ford and Chrysler are making a big mistake by shutting down plants. After all, what will they do if the American public suddenly decides to "Buy USA".

The carrying cost of unused or underused assets will put a compnay under in the blink of an eye. The world is littered with the bones of businesses that died because the owners and/or managers did not manage the business assets. If the railroads had not downsized as they did, they would probably now have less ca***han I have in my change jar.

By the way, people do live in houses with much more space than they need, but many will sell the house that is to big or to small to get something that more closely meets their needs. I have even heard that some people who down size their housing just want to spend their money on something else.

[jeaton]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by edbenton
.... so we will need the capacity for the long term not short term.

But the rail industry has not thought that way in 25 years.

A friend of mine, retired BN,

"Lest somebody jump all over me for the Nazi comparison, I don't mean that at
all. What I do mean is the reply given to the moral part of it. You don't
liquidate profitable businesses, or portions of them, just to squeeze out a
profit. That's wrong, and it is wrong whether you do it with just a little
short piece of "redundant" track or with the whole dam thing".

Best regards, Michael Sol

Was he saying that common business practises are immoral or capitalism is immoral?

Jay Eaton

[edbenton]

If you want to see atraffic capacity issue all you have to do is look at a major city come rush hour. I have seen parkinglots devolp in Chicago LA Atlanta and New York City. The hardest issue for increasing capacity is called the lack of money. We would rather spend money on a war overseas than fix up the highways properly. Right now every Americans share of the National Debt is 90K each.

[Anonymous]

QUOTE: Originally posted by jeaton

I suppose those of you who argue that the railroads should have never eliminated under used lines would also argue that General Motors, Ford and Chrysler are making a big mistake by shutting down plants. After all, what will they do if the American public suddenly decides to "Buy USA".

The carrying cost of unused or underused assets will put a compnay under in the blink of an eye. The world is littered with the bones of businesses that died because the owners and/or managers did not manage the business assets. If the railroads had not downsized as they did, they would probably now have less ca***han I have in my change jar.

By the way, people do live in houses with much more space than they need, but many will sell the house that is to big or to small to get something that more closely meets their needs. I have even heard that some people who down size their housing just want to spend their money on something else.

I would say it's just opposite: Businesses that circle the wagons will last less longer than businesses that expand aggressively.

You either grow or die.

Wal-Mart constantly expands. McDonald's constantly expands. Swift Trucking constantly expands. Nissan and Toyota constantly expand.

They are all growing.

GM and Ford constantly close down "excess" plants.

They are dying.

As for the housing analogy, you missed the point, entirely.

[greyhounds]

QUOTE: Originally posted by jeaton

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by edbenton
.... so we will need the capacity for the long term not short term.

But the rail industry has not thought that way in 25 years.

A friend of mine, retired BN,

"Lest somebody jump all over me for the Nazi comparison, I don't mean that at
all. What I do mean is the reply given to the moral part of it. You don't
liquidate profitable businesses, or portions of them, just to squeeze out a
profit. That's wrong, and it is wrong whether you do it with just a little
short piece of "redundant" track or with the whole dam thing".

Best regards, Michael Sol

Was he saying that common business practises are immoral or capitalism is immoral?

Jay Eaton

I'm convinced he has no understanding of ecnomics (socialist, capitalist, or otherwise.)

People make rational economic decisions and he attributes their thinking to some kind of weird conspiracy thingy.

Now people do make rational decisions that are wrong. But he doesn't understand that.

He actually said the Milwaukee Road was in recievership because it had too much business and he also said that supply and demand had nothing to do with price.

There is none so blind as he who will not see. And these are the writings of a "blind" man who can not fathom his economic environment.

[jeaton]

QUOTE: Originally posted by futuremodal

QUOTE: Originally posted by jeaton

I suppose those of you who argue that the railroads should have never eliminated under used lines would also argue that General Motors, Ford and Chrysler are making a big mistake by shutting down plants. After all, what will they do if the American public suddenly decides to "Buy USA".

The carrying cost of unused or underused assets will put a compnay under in the blink of an eye. The world is littered with the bones of businesses that died because the owners and/or managers did not manage the business assets. If the railroads had not downsized as they did, they would probably now have less ca***han I have in my change jar.

By the way, people do live in houses with much more space than they need, but many will sell the house that is to big or to small to get something that more closely meets their needs. I have even heard that some people who down size their housing just want to spend their money on something else.

I would say it's just opposite: Businesses that circle the wagons will last less longer than businesses that expand aggressively.

You either grow or die.

Wal-Mart constantly expands. McDonald's constantly expands. Swift Trucking constantly expands. Nissan and Toyota constantly expand.

They are all growing.

GM and Ford constantly close down "excess" plants.

They are dying.

As for the housing analogy, you missed the point, entirely.

No, I think you missed my point, entirely.

Ford and GM may be dying, but their demise would come much sooner if they did not dispose of under used assets.

And, Wal Mart and McDonalds do not locate stores in locations that will not immediately have a volume of business that will make the store profitable. Swift does not buy trucks that will not be needed for several years. Nissan and Toyota do not build plants unless they are reasonably sure that they will sell all the cars that the plants can produce.

Circling the wagons is an effect that is caused by a decline in business and profits, or it is the result of a conscience decision to cash cow a business with the intent to liquidate when the cow runs dry. So long as the owners are not fooled, the latter strategy is entirely legitimate. In all of these, the assets are being managed in a manner to meet business objectives of revenue and profit generation.

The tag line "If you build it, they will come" only works in a fantasy world where long dead baseball players come to have a game on a field built in the middle of Iowa.

So, what was the point of your housing analogy? Seems to me that an analogy requires a reasonably comparative condition. May I point out the obvious? Since the ownership of ones private residence is not a business activity, suggesting that a business owner should behave in the same manner as a home owner seems rather specious.

[bobwilcox]

QUOTE: Originally posted by greyhounds

I'm convinced he has no understanding of ecnomics (socialist, capitalist, or otherwise.)

People make rational economic decisions and he attributes their thinking to some kind of weird conspiracy thingy.

Now people do make rational decisions that are wrong. But he doesn't understand that.

He actually said the Milwaukee Road was in recievership because it had too much business and he also said that supply and demand had nothing to do with price.

There is none so blind as he who will not see. And these are the writings of a "blind" man who can not fathom his economic environment.

I don"t think this is it. He just likes to have an argument and tosses out comments he hopes will start something (ie steam vs. diesel).

[MichaelSol]

QUOTE: Originally posted by greyhounds
He actually said the Milwaukee Road was in recievership because it had too much business and he also said that supply and demand had nothing to do with price.

As to the former, I cannot take credit for the remark, it was Milwaukee Road's Vice President -- Operations who made the comment in sworn testimony to the ICC and it was Forbes magazine which declared Milwaukee in the mid-1970's "the fastest growing railroad in America."

Regarding the latter, with elastic supply or demand it does, with inelastic supply or demand it doesn't.

Best regards, Michael Sol

[CSSHEGEWISCH]

While going over the reasons for the Milwaukee's demise can be an interesting intellectual discussion, the Milwaukee Road is quite defunct (over 20 years now) and its resurrection is highly unlikely.

[SALfan]

QUOTE: Originally posted by CSSHEGEWISCH

While going over the reasons for the Milwaukee's demise can be an interesting intellectual discussion, the Milwaukee Road is quite defunct (over 20 years now) and its resurrection is highly unlikely.

And it was already discussed quite thoroughly in the "Milwaukee Road" thread, which I greatly enjoyed and which taught me a lot I didn't know.

[Anonymous]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by edbenton
.... so we will need the capacity for the long term not short term.

"Remember the famous line from the movie "Judgement in Nuremberg," where the Nazi judge is attempting to convince american judge Burt Lancaster that he didn't think his support of the regime was wrong or would cause any problems? The answer he got was, "You knew it was wrong when you made your very first
conscious choice to support those people."

Best regards, Michael Sol

Actually I'm going to jump on you for listing the wrong actor. Burt Lancaster actual played as the Nazi judge, Ernst Janning. The American judge was Spencer Tracy.

Anyhow back on topic. In light of the time period cutting back trackage did seem like a good idea as it made little sense to keep around old unused track and paying maintenance and taxes on it when it could be used to build new routes or keep up current ones. Business wasn't as good as it is now and few anticipated it becoming that way.

Most stockholders in a lot of businesses are risk-averse and don't like losing money. They'll often go for the most conservative route instead of adventurous. They fear they will lose money if a company keeps pouring out their own money on unused equipment or property and goes belly-up like The Rock did as someone mentioned earlier.

[MichaelSol]

QUOTE: Originally posted by jeaton

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by edbenton
.... so we will need the capacity for the long term not short term.

But the rail industry has not thought that way in 25 years.

A friend of mine, retired BN,

"Lest somebody jump all over me for the Nazi comparison, I don't mean that at
all. What I do mean is the reply given to the moral part of it. You don't
liquidate profitable businesses, or portions of them, just to squeeze out a
profit. That's wrong, and it is wrong whether you do it with just a little
short piece of "redundant" track or with the whole dam thing".

Best regards, Michael Sol

Was he saying that common business practises are immoral or capitalism is immoral?

Jay Eaton

"Common business practices" of sacrificing long term prospects to the exigencies of short term gain don't work too well in capital intensive industries. I think what the author of the comment was saying was that sure, it is possible to generate a marginally higher rate of return in the short term by cannibalizing long term assets.

Kind of like a tree farm ... you can show a h*** of a good rate of return if you cut all the trees; then you are a company in trouble for the next fifty years.

Who pays? The employees, the shareholders, the watershed. And I agree, it is immoral to utilize short term business gains that sacrifices the future benefits for the company and for the society as a whole.

People are acting like capacity issues have never existed before, and that they were unforseeable.

Some comments from one of those notorious consultants:

"In World War I the issue was congestion and too little capacity; the twenties saw a relative balance between capacity and traffic levels. During the Great Depression there was too much capacity and the financial impact was disastrous. WWII created massive congestion and all the surplus capacity proved invaluable. After WWII, the East and Midwest suffered from massive overcapacity as passenger and freight traffic fled to the highway. But in the Southeast and the West, a growing economic base generated more rail freight traffic despite a loss of market share. Railroads in both of those regions had limited capacity, most of the lines had but one track. Technology, in the form of dieselization and automated dispatching saved the day.

"In the seventies and at the very time much of the Northeastern and Midwestern network was being rationalized, Burlington Northern was coping with a massive increase in coal traffic. New lines were built and thousands of miles of branch line track were upgraded to mainline status. The cost of that new capacity nearly destroyed the financial viability of BN."

Yet another odd example of how traffic growth and additional business can "destroy financial viablity" of a company.

Even odder, BN and Milwaukee's coal traffic growth during that time period were very nearly identical, both railroads experienced traffic growth in excess of 250%, 1973-1977. Milwaukee's growth was better situated: it did not have to build new lines for the traffic. But, both companies grossly underestimated the impact of coal unit trains on their infrastructure and both companies underpriced the cost of service as a result. Of course, Milwaukee's pricing chief at that point was from BN.

An interesting side note reflecting on recent PRB line problems. Milwaukee hired Bechtel Corp. to jointly design coal cars that would protect the railroad from blowing "fines". Milwaukee's coal trains were covered hoppers with automatic lids that rotated open as the coal cars entered the automatic unloading facilities at Big Stone. BN opted for open cars. Whether this reflected or not Milwaukee Road's longer experience as a coal carrier, I do not specifically know.

Another observation from the consultant:

"The 100-ton freight car caused the abandonment of thousands of miles of feeder lines, primarily in the Midwest. The track could not handle the larger cars, and traffic volumes did not justify the investment needed. Thus, a capacity-enhancing strategy had the unintended consequence of removing substantial track capacity."

Best regards, Michael Sol

[SALfan]

From something I read, it took BN 10 years or so after the PRB coal boom started to make any money from it, because of all the new track and locomotives they had to buy to handle the traffic. Worse, they got trapped in low-profit long-term contracts with utilities who were willing to buy coal cars, because BN couldn't afford to buy them.

Yes, too much of a good thing can kill, or come close to it. It isn't like BN had a crystal ball at the beginning of the boom, to see how things would end up.

[BaltACD]

Railroads, all of them, have been hard press to generate sufficient earnings to cover the cost of capital to enhance the physcial plant. For years and years, the only thing the railroads heard from the Capital Markets (Wall Street) was that the railroads had too much physical plant for their traffic levels and the physical plant had to be pruned if the railroads were to gain financing for their needs. The railroads listened and pruned the 'excess capacity' in order to gain the capital the needed to survive.

But let's remember one thing about both railroads and financial wizards....Figures lie and Liars figure. Wading through the lies is critical to survival as the lies come from all directions dressed in enough truth for the lie to be sold. Wall Street has sold lies. The Railroads have sold lies. And now we have the present where the demand for rail transportation is outstriping the imagination of both Wall Street and Rail Management.

For their employed lifetimes, both Wall Street and Rail Managment have had only one business model...CUT CUT CUT. Now they are having to develop a new business model the includes capacity enhancements, not cuts. It's a Brave New World and it is also a scary world for both Wall Street and Rail Management.

[MichaelSol]

It's an old argument: "cutting their way to prosperity."

Never did work.

Blame Wall Street, but for most of this period, railroads weren't raising funds by selling stock. Brock Adams -- a Congressman turned bureaucrat -- started this talk about "rationalization.". Then it became a carrot/stick to receive 4R funding, notwithstanding Warren Magnuson's [Chairman, Senate ICC Committee] thundering retort that it wasn't the place of DOT and the FRA to set national rail policy by setting capacity standards. Congress meant to help all the railroads, under the theory that the ICC, and ultimately Congress, bore a good share of the blame for the predicament facing railroads in 1976.

Well, the bureaucrats got their way, so effectively that three years after 4R, something like only 6% of funds allocated had been distributed. A "big help" for what Congress had determined was a national rail "crisis." An entire industry was held hostage to a bureaucrat's idea of how the industry should be organized.

The bureaucrats got their way.

And all the industry sycophants bobbed their heads up and down and said, yup, excess capacity, "THAT'S the problem" because Brock Adams required them to say so as a condition for receiving federal funds.

The only railroader that ever made sense at the time was Tom Lamphier, president at BN: "Excess capacity is necessary, even desireable, in a competitive rail environment."

Words you don't hear from self-aggrandizing managements along the way.

The problem was never excess capacity; it was the lack of a reasonable rate of return at any level.

Best regards, Michael Sol

[greyhounds]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by greyhounds
He actually said the Milwaukee Road was in recievership because it had too much business and he also said that supply and demand had nothing to do with price.

As to the former, I cannot take credit for the remark, it was Milwaukee Road's Vice President -- Operations who made the comment in sworn testimony to the ICC and it was Forbes magazine which declared Milwaukee in the mid-1970's "the fastest growing railroad in America."

Regarding the latter, with elastic supply or demand it does, with inelastic supply or demand it doesn't.

Best regards, Michael Sol

Boy, I'd sure like to know what the VPO really said. You know, like a quote or something. It is not credible that he said they went broke because they had too much business. It is credible to me that you don't understand what he said and are interpreting it in a way that supports your ideology.

As to your false claim that inelastic supply/demand doesn't influence price, you're wrong again. In economics elasticity is the measurement of the change in in quantity sold vs the change in price. If a good or service experiences a 5% reduction in sales on a 10% increase in price it will have an elasticty of 0.5 (5%/10%). Conversely, it a good or service has a 10% reduction in sales on a 5% price increase it will have an elasticity of 2. (10%/5%).

Any ratio below 1 is defined as inelastic. Elasticity can vary with time or the position on the supply/demand curve. It can be expressed in an equation involving the slope of the supply or demand curve.

So for you to say that supply and demand have no effect once the ratio drops below 1, which is exactly what you said, is ridiculous. You're claiming, falsely, that they have an effect above a ratio of 1, but then magically stop having an effect below that level.

That's exactly what you're claiming. And you are wrong once again.

As I have said, you just don't understand this stuff. But you keep trying to use it.

[Anonymous]

QUOTE: Originally posted by MichaelSol

It's an old argument: "cutting their way to prosperity."

Never did work.

Blame Wall Street, but for most of this period, railroads weren't raising funds by selling stock. Brock Adams -- a Congressman turned bureaucrat -- started this talk about "ratilonalization.". Then it became a carrot to receive 4R funding, notwithstanding Warren Magnuson's [Chairman, Senate ICC Committee] thundering retort that it wasn't the place of DOT and the FRA to set national rail policy by setting capacity standards. Congress meant to help all the railroads, under the theory that the ICC, and ultimately Congress, bore a good share of the blame for the predicament facing railroads in 1976.

Well, the bureaucrats got there way, so effectively that three years after 4R, something like only 6% of funds allocated had been distributed. A big help for what Congress had determined was a national rail "crisis." An entire industry was held hostage to a bureaucrat's idea of how the industry should be organized.

The bureaucrats got their way.

And all the industry sycophants bobbed their heads up and down and said, yup, excess capacity, "THAT'S the problem" because Brock Adams required them to say so as a condition for receiving federal funds.

The only railroader that ever made sense at the time was Tom Lamphier, president at BN: "Excess capacity is necessary, even desireable, in a competitive rail environment."

Words you don't hear from self-aggrandizing managements along the way.

The problem was never excess capacity; it was the lack of a reasonable rate of return at any level.

Best regards, Michael Sol

Michael,

Whatever happened to Tom Lamphier? He sounds like someone who actually had the logical perception missing from this current crop of rail industry advocates.

As a life long Northwesterner, I agree with you regarding Brock Adams. What a disaster he turned out to be.

[bobwilcox]

QUOTE: Originally posted by futuremodal
[
As a life long Northwesterner, I agree with you regarding Brock Adams.

Talk about the tail wagging the dog. The Feds didn't care that much about PNW railroads in the 1970s. They cared a great deal about the railroads in the Northeast and Midwest. Con Rail, the 4R Act, the Madison Hotel Meeting ( ie. No CR for CRIP), and down the road the Staggers Act were to meet the needs of those regions.

[MichaelSol]

QUOTE: Originally posted by greyhounds

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by greyhounds
He actually said the Milwaukee Road was in recievership because it had too much business and he also said that supply and demand had nothing to do with price.

As to the former, I cannot take credit for the remark, it was Milwaukee Road's Vice President -- Operations who made the comment in sworn testimony to the ICC and it was Forbes magazine which declared Milwaukee in the mid-1970's "the fastest growing railroad in America."

Regarding the latter, with elastic supply or demand it does, with inelastic supply or demand it doesn't.

Boy, I'd sure like to know what the VPO really said. You know, like a quote or something. It is not credible that he said they went broke because they had too much business. It is credible to me that you don't understand what he said and are interpreting it in a way that supports your ideology.

You keep attempting to bring this stuff up, and you were answered quite some time ago, with citations. Now it is just a pretend game for you. Your charge that I stated that supply and demand has nothing to do with price was 1) not something I originally said as a general economic rule, and 2) "inelastic" is the description used to describe 100% inelastic, i.e. no change. There are many degrees of elasticity or inelasticity. And they all have a relevant range. As many as you want in between elastic and inelastic. You had attempted to argue earlier that all supply and demand curves were elastic. Now that you've looked it up on the internet, you've changed your tune to a technical argument regarding "degrees" of elasticity. And here you are on a thread where this is not only not credible, but not relevant. Move on.

[Anonymous]

A wise man once said cutting costs in an organization was like squeezing water out of a sponge. The important thing is not how much you get, but what is done to that which remains. And it would seem railroads, dancing to the tune of Wall Street, have cut into the bone - deeply.

[Anonymous]

I agree about the Northeast and to a lesser extent the Midwest being the driving issues politically back then. Consider how much went into Conrail. I think it's also worth remembering that Communist China was the 'enemy' and our last president was loudly criticized for allowing a Chinese businessman a sleep over at the White House. The Republican party was(and still is) divided and many conservatives such as Pat Buchanan wanted tough trade and monetary restrictions on China. The neo-cons are largely pro-business, but I'm not sure anyone forsaw the degree to which we have sold out to the Chinese. The flood of imports could have just as easily come from Russia or India.

In the Trains article on BNSF Reborn, I recall it was mentioned that at the time, nobody was really sure they wanted the SF transcon. Likewise, PRB coal became desirable after changes in the Clean Air act. The point is that radical shifts in traffic patterns can occur rapidly due to external factors such as legislation, foreign policy shifts, etc.and because of the expense and time involved rail can't react overnight. Banking ROW's is a great idea IMO, but operating redundant lines just in case, is a loosing proposition and just leads to more Conrails. Pundits and Consultants, some well known in Trains, have advocated downsizing and hauling only bulk commodities for almost as long as I've been reading the magazine. Why is CSX such a mess and what are they saying should be done about it?

Regarding the PNW, I wi***he governor luck, but wonder what he's been smoking. The dominant school of economics for the past 30 years has favored de-regulation, privatization, and little or no interference in pricing or profits. The powers that be have shown no interest in controlling prices of prescription drugs or imposing price caps or profits taxes on oil. The state of California with many times the population and GDP of Montana sued the FERC over electric rates and the Adminstration and Justice sided with the FERC and California lost the case. The former Enron execs are on trial for Investor fraud, not defrauding their customers. One possible end result for the PNW could be the complete elimination of the STB and rate regulation. The new Supreme Court would likely go along.

[Anonymous]

QUOTE: Originally posted by up829

Regarding the PNW, I wi***he governor luck, but wonder what he's been smoking. The dominant school of economics for the past 30 years has favored de-regulation, privatization, and little or no interference in pricing or profits. The powers that be have shown no interest in controlling prices of prescription drugs or imposing price caps or profits taxes on oil. The state of California with many times the population and GDP of Montana sued the FERC over electric rates and the Adminstration and Justice sided with the FERC and California lost the case. The former Enron execs are on trial for Investor fraud, not defrauding their customers. One possible end result for the PNW could be the complete elimination of the STB and rate regulation. The new Supreme Court would likely go along.

Of course, the KEY difference is that when you deregulate a market that has multiple players, you get the public benefit of increased competition and subsequent investment (at least in theory). But when you deregulate a monopoly, you get absolutely no public benefit. Ergo, lobbying efforts to enact Staggers was a con game foisted upon the public by a naive Congress who simply have no perception of what is embodied in natural monopolies such as railroads.

Do you really think Congress had any idea that the output of Staggers would result in massive retrenchment, industrial consolidation into a handful of Class I giants, paper barriers that prevent shortlines from effectively competing for online business, bottleneck rate gouging that prevents logical line hauls from Point A to Point B, or that differential pricing would result in 400% R/VC rates for domestic rail shippers while importers would be gifted rates of 106% R/VC?

Of course not, which is proof of the con game.

The California situation was different, because (1) there were multiple utilities and energy firms involved, thus it can be argued that the price spikes were a result of market conditions and not the typical collusion inherent in monopoly markets, and (2) the consumer side of the California energy markets were still regulated, so consumer prices remained out of kilter with the unregulated supply side prices. Quite simply, the California energy crisis was the result of California politics as usual, and it is incredibly disingenuous for California politicians to blame the entire energy industry for their partial deregulation fiasco. Those energy firms who helped craft California's legal discombobulation are the ones who should have been investigated right along with the politicians who took their bling, not the outside firms who simply took advantage of what California's IPO offered them.

The most likely result of the rail situation is an AT&T-style breakup of the rail industry, because there really is no other effective solution.

[Anonymous]

So the consensus of the experts here is that because Bnsf needs more capacity at this moment that they should have planned for it 35 years ago by keeping extra lines on hand. And because of that blunder those execs are now as guilty as former Third Reich officials. Uhh-huuuuh.

[TomDiehl]

QUOTE: Originally posted by cornmaze

So the consensus of the experts here is that because Bnsf needs more capacity at this moment that they should have planned for it 35 years ago by keeping extra lines on hand. And because of that blunder those execs are now as guilty as former Third Reich officials. Uhh-huuuuh.

Yep.

They should have invested in a better crystal ball.

And used it for collateral for the big loans to build up the capacity back then.

[edblysard]

While helping out the Montana wheat growers by building free sidings and double tracking those lines just in case....oh, and improving, (for free) the yards and loaders at all the small mom and pop grain elevators...you know, planning for the future and all....

Ed[:D]

[mudchicken]

Ed:

Maybe we ought to let the big brainwashed fool have his one day. Today appropriately.[:D]

[edblysard]

Ya know, I think you hit the nail on the head!
Ed

[edbenton]

Yeah we need to let Futremodal have his day. LOL

[MichaelSol]

Well, this thread went downhill fast. The usual suspects showed up ....

Here's how good of a "crystal ball" was needed.

The net ton miles on Class I railways in the US increased between 1960 and 1980 approximately 160.57%.

The Staggers Act was supposed to improve the position of US Railways to be competitive with other forms of traffic, while at the same time permitting elimination of allegedly "redundant" rail lines.

What would Grayson et.al. have been entitled to assume from a simple trend line analysis that the requirements of railroads would be in the future? Contrary to myth, post War the trend was almost always up. That 160% increase in the 20 years pre-Staggers, during a period of relatively flat U.S. economic growth would have, at the minimum provided a basis for predicting capacity needs in the future. Staggers said the growth should get even better.

So, what would Grayson's corporate planning people have been telling him, had to have been telling him?

That by 2004, US railroads would be carrying 1,838,027,584 ton miles of freight. Get ready.

That's what the "crystal ball" had to have said, at a minimum.

The actual results: 1,660,535,032 ton miles.

Ironically, post-Staggers growth has been slightly slower than the pre-Staggers growth that occured during the "boom" times of the 50s and 60s. Tongue firmly in cheek. That the growth is not only slower, but during a time of unprecedented overall economic growth is one of the odd results of Staggers you don't see much comment on.

Current "congestion" results from traffic that is only 90% of any reasonable minimum prediction that would have made twenty years ago. There should have been no surprises.

The results reflect on both results of the Staggers Act and on what passed for corporate planning in some departments.

[edbenton]

QUOTE: Originally posted by MichaelSol

Well, this thread went downhill fast. The usual suspects showed up ....

Michael I never have attacked you at all it is just certain people think what they learned in school applies here in the real world 99% of the time it does not.

[MichaelSol]

QUOTE: Originally posted by Murphy Siding

MichaelSol: The railroads may have been able to reasonably predict a continued increase of ton miles in 1980. I have some doubts about whether they would have been able to predict where those trains would be rolling. Did any of them have an idea of how much PRB coal and west to east container traffic there would be in 2006, based only on 1960 to 1980 statistics?

Railroads have been building new lines to meet new traffic for 170 years. Most of what I recall hearing about in the era 1970-1980 was nothing but coal, coal, coal, and intermodal too. As mentioned earilier, MILW and BN coal traffic from that region increased by over 250% prior to 1980.

Speaking of corporate planning, Milwaukee engaged Bechtel Corp. to jointly design special cars, and ordered covered hopper cars to control the fines in transit, BN didn't. James Schlesinger, the pipe-smoking Secretary of Energy in the late 1970s, informed railroad investors that the Powder River basin would account for nearly all railroad growth over the next twenty years.

It isn't that railroads missed the clues. The question is how could they have missed virtually every reasonable indicator that said that the traffic of today would exist in nearly the form that it does. Recall, we are not talking about too slow building of capacity, we are talking about rail managements scrapping double track on BN, IC, CP/SOO/MILW, creating instant operating slowdowns at the time, guaranteed to compel a crisis as rail traffic inevitably grew., even as wholly useful, profitable and viable single trackage was eliminated upon some theory which still escapes me today.

This idea that laymen need to offer excuses for professional rail managment is just not something I find useful. The very good managers on the one hand -- Lamphier, Downing, Krebs -- who argued one direction contrast dramatically with a bunch of misfits at high salaries who did the opposite.

[MichaelSol]

QUOTE: Originally posted by Murphy Siding
MichaelSol: Hard to follow your numbers, when they change 75-90% of the time.[;)][:0][:-,][(-D]

I have a cold, and I always recheck my work in any case.

[Murphy Siding]

QUOTE: Originally posted by MichaelSol

This idea that laymen need to offer excuses for professional rail managment is just not something I find useful. The very good managers on the one hand -- Lamphier, Downing, Krebs -- who argued one direction contrast dramatically with a bunch of misfits at high salaries who did the opposite.

I don't understand what you're trying to say here. Can you explain please?

[MichaelSol]

QUOTE: Originally posted by Murphy Siding

QUOTE: Originally posted by MichaelSol

This idea that laymen need to offer excuses for professional rail managment is just not something I find useful. The very good managers on the one hand -- Lamphier, Downing, Krebs -- who argued one direction contrast dramatically with a bunch of misfits at high salaries who did the opposite.

I don't understand what you're trying to say here. Can you explain please?

I am looking at some of the posters above who gladly "excuse" railroad management on the basis of the "lack of the right crystal ball" -- like they've got one or ever used one -- as though failure to anticipate demand is a perfectly legitimate business excuse if you're a railroad company, and a reason to continue to collect bonuses and salaries, along the lines that "the company is always right," even when they screw up. It is the "admirable" quality addressed by Spencer Tracy in the movie referred to above by a retired BN official who watched the whole thing unfold before his eyes.

[Anonymous]

Ed, ed, and mud,

You all won't face up to the truth: THERE WAS NO "EXCESS CAPACITY" OF THE US RAIL SYSTEM. There was only fixed capital that wasn't being marketed correctly.

Hmmmmm, ed, ed, and mud. Reminds me of the "locals" in those old Newhart sitcoms. "Hi, I'm Mudchicken, this is my brother ed, and this is my other brother ed."
[:D]

[daveklepper]

I still fault basic USA transportation policy that did not include LAND USE in economic planning when it was decided that all highway taxes should support only highway expansion, maintenance, and repair.

Which means that freight railroading in the USA is the ONLY mode that really is self-suporting and that indeed helps support its competition.

[bobwilcox]

QUOTE: Originally posted by edbenton

QUOTE: Originally posted by MichaelSol

Well, this thread went downhill fast. The usual suspects showed up ....

Michael I never have attacked you at all it is just certain people think what they learned in school applies here in the real world 99% of the time it does not.

Some think when they can't make an argument based on facts or reason they must then turn to a personal attack. Oh well, their statements are out there for the whole world to read.

[zardoz]

QUOTE: Originally posted by MichaelSolty, we are talking about rail managements scrapping double track on BN, IC, CP/SOO/MILW, creating instant operating slowdowns at the time,

If one looks at the CP track between Chicago and Milwaukee, you will notice that track 1 is still jointed rail in many places, whereas track 2 is welded rail. This is because at some point in the recent past (early 80's; I do not know who owned the track then, SOO, Milw, or CP), the plan was to eliminate one of mains (track 1) and convert track 1 into controlled sidings. Fortunately, this plan was never carried out, because now the track is at capacity (according to CP).

In the late 90's, CP added a new set of crossovers to their main line between Milwaukee and Chicago (C&M Subdivision) at WEPCO, partially to give them flexible access to the Pleasant Prairie power plant (now served by UP), but also to add flexibility to daily operations. Another set of crossovers was recently added to the same main line, this set at Oakwood Avenue in Milwaukee near the new Amtrak station at Mitchell Field (which BTW, has greatly increased ridership in and out of Chicago).

A few years before the UP took over the CNW, the CNW proposed an agreement with whoever (CP? SOO?) owned the above mentioned trackage whereby the CNW could eliminate it's New Line (now Milwaukee) subdivision and run the trains on the CP/SOO tracks. The idea was shot down because CP/SOO claimed that their trackage was already at capacity.

Interesting how the pendulum swings. Imagine how successful a railroad like the North Shore would be today. Fast trains, all-electric operation, frequent stops, good running time, nice equipment. If only the North Shore had not been sold for scrap and much of the ROW been developed.....


I wonder if either BNSF or UP's crystal balls hint at the potential for the development of superconductivity. If a metal is ever developed that has superconductivity properties at 'normal' temperatures, the utilities will build their powerplants at or near the mine mouth, thus eliminating the need for coal transportation. The railroads will then have lots of capacity.

[chicagorails]

CHICAGO & LOS ANGELES RAIL ROAD .... chicago to los angeles main line

TRIPPLE TRACKS
ELECTRIFIED
HIGH SPEED

A WHOLE NEW RAILROAD NEEDS TO BE BUILT

[CSSHEGEWISCH]

QUOTE: Originally posted by chicagorails

CHICAGO & LOS ANGELES RAIL ROAD .... chicago to los angeles main line

TRIPPLE TRACKS
ELECTRIFIED
HIGH SPEED

A WHOLE NEW RAILROAD NEEDS TO BE BUILT

And what would you use for money to acquire a right of way and build it?

[jeaton]

No doubt in my mind that the invention of a metal with super conducting power would cause a rather dramatic in the location factor of new power generating stations. However, unless someone can also come along with a plan to divert the lower Mississippi river to flow somewhere around Gillette, WY, don't plan on seeing any big power plants going up around the PRB mines. OK, I suppose that if we are dreaming, we can invent an efficient electric generating system that uses a gas other than steam to turn the turbines.

So what if in a decade or two, this scheme becomes possible? Our what if, and perhaps more likely, nuclear powered electric generation becomes the method for new and replacement generation capacity? What would hindsight say about a multi-billion dollar investment in railroad track to increase capacity to haul coal?

Hear is my point. Posts on this thread have reported that some senior railroad managers strongly disagreed with with the reductions of routes and trackage prevalent in the 1980's. I don't know for sure, but I doubt that any of these people could have come close to predicting just where the capacity problems would be developing at the turn of the of this century. But suppose they were dead on. Could the railroads have afforded to carry excess capacity just to fill a need that wouldn't appear for 10 or 20 years? I seriously doubt it. In fact the carrying cost of the excess capacity may have precluded building any thing close to the infrastructure now in place to carry PRB coal. As I recall, at the time the PRB began to develop, track into that area was not much more than junk status.

Hindsight is wonderful. It works even better if one can ignore any possible negative consequences of a different course of action.

Jay Eaton

[MichaelSol]

QUOTE: Originally posted by jeaton
Hear is my point. Posts on this thread have reported that some senior railroad managers strongly disagreed with with the reductions of routes and trackage prevalent in the 1980's. I don't know for sure, but I doubt that any of these people could have come close to predicting just where the capacity problems would be developing at the turn of the of this century. But suppose they were dead on. Could the railroads have afforded to carry excess capacity just to fill a need that wouldn't appear for 10 or 20 years? I seriously doubt it.

"Afforded to carry excess capacity ...?"

Capacity is what permitted premium service, fast cycle times, low load wear on mainlines.

Every study I have seen, with a few exceptions unique to geographical circumstances, found positive economic advanatages to the railroad company in maintaining its "excess capacity." Indeed, for mainlines -- again some geographical exceptions --it was never "excess," railroad company's enjoyed better rates of return than after the "excess" was trimmed.

Railroads got rid of excess capacity. They continued to struggle. Cost of operations went up, not down.

I have a specific recollection of the Milwaukee main, Chi-TC. Double track with 135 MGT capacity, operating at about 40 MGT. Now, that's excess capacity.

MILW wanted 4R money to repair it.

FRA said no way, we are not going to give you $101 million to maintain that much "wasted" capacity.

MILW produced an elegant engineering study which showed conclusively that there was no financial penalty to operating that "much excess capacity." That, to the contrary, the alternative proposed single line with long sidings was more expensive to operate, would generate excess costs to the company in increased transit times, increased equipment cycle times, and operating complexity. Sprints would not be competitive with highway traffic.

By abandoning "excess capacity" MILW would have been forced to purchase additional equipment, motive power, and since no cost savings could be identified, the cost of relocation and consolidation would become a sunk cost that could never be recovered.

Every dollar invested in reducing capacity generated a negative net rate of return.

Milwaukee got the money.

[TomDiehl]

QUOTE: Originally posted by futuremodal

Ed, ed, and mud,

You all won't face up to the truth: THERE WAS NO "EXCESS CAPACITY" OF THE US RAIL SYSTEM. There was only fixed capital that wasn't being marketed correctly.

Maybe there wasn't in the Pacific Northwest. Also, it doesn't address excess capacity in relation to where capacity is needed.

Almost like granting government land in Alaska for a midwest railroad.

[nanaimo73]

QUOTE: Originally posted by futuremodal

THERE WAS NO "EXCESS CAPACITY" OF THE US RAIL SYSTEM.

Yes there was.
Dave, look at pages 7 to 12, November 1976 Trains, and pages 14 and 15, December 1976 Trains.

[Anonymous]

QUOTE: Originally posted by Murphy Siding

QUOTE: Originally posted by nanaimo73

QUOTE: Originally posted by futuremodal

THERE WAS NO "EXCESS CAPACITY" OF THE US RAIL SYSTEM.

Yes there was.
Dave, look at pages 7 to 12, November 1976 Trains, and pages 14 and 15, December 1976 Trains.

OK suppose my Trains library doesn't run that deep.[sigh] What does it say?[:p]

I think what nanaimo is refering to is what we all read (and therefore took as a basic tenet) in the railroad press during the 70's, 80's, and 90's - namely the economy was shifting from a manufacturing economy to a service economy, therefore there was no more need for carrying lots of heavy bulky things, ergo railroads had "excess" capacity. I believed it, we all believed it.

The problem is, no one cared to mention that a "service" based economy had just as much a need for adaquate mass transportation systems as the manufacturing economy, maybe more. Because even though there was an ostensible shift in the economy, the demand for manufactured things continued to grow with the ever expanding economy (the occassional recession not withstanding). Instead of railroads hauling most cars out of Detroit, they began hauling in foreign cars from US ports in great numbers. Instead of most consumer goods being hauled by railroads from the MIdwest to the cities, now railroads were hauling consumer goods from ports to cities. It should be noted that the average length of haul by rail for these products probably increased, e.g. instead of the bulk of auto hauls from Midwest to Northeast, now that haul came from Portland OR and LA/Long Beach to the Northeast.

In the meantime, there was still a continued increase in US ag production, and coal demand for the most part continued to increase incrementally as Clean Air requirements increased longer haul coal trains from the PRB. Housing demand has mostly been on an upward trend ever since WWII, so lumber demand has remained mostly constant, maybe more was coming out of Canada than the US but that still resulted in increased demand for railroad centerbeams.

Then of course, with a service economy, you have more demand for trucking services. I expect that trucking firms during this time period would have been glad to shift their medium to long haul truck routes to TOFC, but the railroads seemed to have a reluctance to fully embrace TOFC right up to today, after all isn't that aquiescing to the "enemy"? Railroads prefered (and continue to prefer) COFC to TOFC, while truckers prefer van trailers over domestic containers. Since the US rail system was and is closed access, if truckers wanted to shift to rail they had to play by the rules of the railroad or keep the trailers on the roads.

Bottom Line - Demand for rail services (explicit and implicit) has grown with the economy regardless of what kind of economy it is, yet the railroads ignored this demand (Remember John Kneiling's general quote of railroad marketing people? "That business does not exist. It doesn't show up on our traffic sheets anywhere"). Which is why the push for reducing capacity wasn't really related to a drop in railroad demand, it was instead the byproduct of rail industry consolidation for the purpose of increasing pricing power.

All Stagger's really accomplished was pushing this potential business onto the highways, where it remains to this day, if not actually shutting it down. Not that this business shouldn't be on rails, and demand for railroad services is as high as it['s ever been. But the capacity to handle this business (and thus push railroading's market share back to the 50 - 70% range) was let go..........

[MP173]

It is good to be back from my trip to Arizona, glad to see you guys were able to keep things normal!

Significant quote from Trains, Nov, 1976 p 8

"The Department of Transportation, which is holding the purse strings on 1.6 billion dollars worth of Federal loans for rail rehabilitation, concludes from these figures:
1. "Many thousands of miles of rail line in the nations's system carry an almost imperceptible level of traffic" and
2. "When one considers the declining financial condition of the industry together with the continuingt deterioration of track, it becomes very apparent that limited resources are being stretched too far."

The then current figure of 193,500 route miles of US track are sub divided as follows:
A Main - 20 million or more gross ton miles per year.... 17.1% of trackage
Potential A Main - "through line in excess capacity corridor 11.6% of trackage
B Main - Less than 20 million GTMbut more than 5 21.7% of trackage
A Branch - Less than 5 million GTM but at least 1 21.9% of trackage
B Branch - less than 1 million GTN 25.6% of trackage
Defense Essential Branch 2.1% of trackage

Discussion then centers on Chicago - Twin Cities (main lines of BN, Milw, North Western, Rock, and Soo). "these carriers operate 2171 route miles. The traffic density is 111m GTM yet the line capacity of these five roads totals 272 million gross tons. Individual disparties range from a density of 38MGT vs capacity of 49MGT for BN to density of 20MGT vs capacity of 100MGT for Milw."

further..,."DOT argues that 2 or 3 routes would suffice; and that excess capacity should be pared by:
1. mergers
2. joint trackage rights
3. downgrading

Other corridors discussed:

Chi - Pitt 4 routes 1802 ttl miles, 438 short route, 163 MGT vs capacity of 427
Chi - Buff 4 routes 2077 ttl miles, 506 short route, 129 MGT vs capacity of 234
Chi -Ohio Rivr 7 rtes 2193ttl miles, 282 short route, 91MGT vs capacity of 227
Chi-KC 8 routes, 3934 ttl miles, 450 short route, 167 MGT vs capacity of 362
KC -Dall 6 routes, 3573 ttl miles, 506 short route, 120 MGT vs capacity of 189
Dall-Hous 5 routes, 1494 ttl miles, 266 short route, 81 MGT vs capacity of 157
Chi-Omaha 5 rts, 2365 ttl miles, 463 short route, 123 MGT vs capacity of 208
KC/Omaha to
Colorado, 6 rts, 3572 ttl miles, 561 short route, 127 MGT vs capacity of 280
Chi - St. L , 5 rts, 1402 ttl miles, 269 short route, 95 MGT vs capacity of 214
Chi- Detroit, 4 rts 1158 ttl miles, 264 short route, 85 MGT vs capacity of 171


further, the DOT addresses the need for a "certain level" of excess capacity to cope with traffic peaks, reroutings, etc but...."above that level, which DOT conservatively estimates at 50% "the costs of maintaining excess capacity exceed any potential benefits".

There you go...DOT's own statements, facts and figures.

Also, "At the current rate of 8.5%, the interest alone on that amount (to maintain a line at 60mph) would exceed the maintenance cost of the track for any line carrying less than 35 million gross tones.

Trains (I assume David Morgan) then assumes the DOT believes that a 163,000 mile or even a 93,000 mile system is in order.

That is a summary of the November 1976 article.

I am going to eat lunch think about the numbers and then read the December editoral.

Lots to chew on.

ed

[Anonymous]

Murphy,

Why? Because the insiders should have known, if indeed they didn't have an ulterior motive.

Ed,

The DOT in the 1970's was the Brock Adams era, right? There's your explanation - stupid is as stupid does.

You should ask yourself why a 1970's era government agency would come up with such conclusions ("railroads need to reduce capacity") when even then there was the perception that oil was running out and there would be a need to shift traffic from road to more efficient modes?

Also, don't those first two statements you relayed say it all?

"$1.6 billion in purse strings"
"....limited resources are being stretched too far."(!?!)

That first statement can lead to a conclusion of possible blackmail by the federales. Question: Why would the federal government be so insistent on reducing railroad capacity? Who gained by this capacity reduction, railroads or truckers/barge lines?

That second statement, if taken in the latter context, would lead one to believe that the "limited resources" were being pushed to the max, e.g. demand for railroads was exceeding demand. It doesn't matter whether you are a supply sider or a Keynesian, that section of statement #2 is counterintuitive to the first section of statement #2, e.g. "When one considers the declining financial condition of the industry together with the continuing deterioration of track,...". If trackage was deteriorating, how could putting current rail traffic on a single deteriorating track be a solution to keeping traffic on double and triple deteriorating track? Answer - it wouldn't, rather it would instead accelerate the deterioration of the remaining track.

But, of course if it was just a question of maintenance funding from the federales, it would have made more sense to fix all the relevent trackage, and with this balance extend the life expectancy of all trackage by sharing the loads, rather than fixing a single track and expecting it to shoulder all the load burden. All that did was increase the frequency of needed maintenance cycles.

[nanaimo73]

QUOTE: Originally posted by futuremodal

The DOT in the 1970's was the Brock Adams era, right? There's your explanation - stupid is as stupid does.

DOT published Preliminary Standards, Classification, and Designation of Lines of Class 1 Railroads in the United States in August 1976.
Why are you trying to blame the Democrats when Ford was President ?


ED (MP173)
Do you know anything about
http://www.newspaperarchive.com/DesktopDefault.aspx
Is it worth joining ?

[MP173]

The December, 1976 Trains, pages 14 and 15 put the previous month's discussion into graphic form...3 US maps with depicting A Main lines and Potential A Main lines on one map, B Mains on a second map and Branch lines on the other.

Dave, regarding Brock Adams...cannot comment. Back in that era my needs did not include Brock Adams.

Ok, here goes on this. You and I agree on the Fed basically holding the purse strings and thus the power. I do remember certain things from the 70's including my senior thesis in college entitled "Can Conrail Succeed". (BTW...I said yes). There was not enough money to fix all rail lines which needed fixing Dave. The term "not enough tea in China" comes to mind and it is a bit ironic, now isnt it?

The Fed was very selective in who was going to get the $$$ and who wasnt. Their thinking was that they wanted out of the railroad business as quickly as possible, hence the best lines were going to get the cash. PC/Conrail in the east was essential. Without that system, GM would shut down quickly (more irony, huh? now it is UAW thru Delphi that can shut GM down).

There simply wasnt enough money at the Federal nipple for all.

Dave, take a look at the maps on pages 14/15 in the December, 1976 trains and decide if those lines were just "fixed assets that were not marketed correctly".

Where was the money going to come from to fund not only the rehabilitation of those lines, plus the five man crews?

Where is the growth on today's rail lines? Where are the bottlenecks?

I spent a morning at Flagstaff last week and watched BNSF attack gravity with a never ending stream of trains. Train after train after train. Lots of motive power. They kept the parade moving. That is a testiment to Rob Krebs philosophy of "if you build it, they will come." He was right on the money. Unfortunately, he didnt really get to realize much credit for it, as Wall Street demanded higher returns and questioned his common sense of investing (INVESTING) in a railroad.

Rob Krebs looks pretty darned smart right now.

Dave, it is really simple, when your rate of return does not exceed your cost of capital, it is extremely difficult to fund expansion. That has been the story for a long time in this industry.

The bottlenecks today are terminals. Choke points are LA, St. Louis, Chicago, etc. Why? All the motive power that Matthew Rose can tie to those 129 car grain trains battling the 1.42% grade at the Arizona Divide doesnt mean a hill of beans when you cannot move the train thru the terminals.

Personally, I dont believe the government has any business spending money (direct investment or tax credits) with rails. The rails must stand on their own. The Feds have a huge problem now with spending, but that is another topic...not only are we exporting our jobs, but also are debt.

To suggest that the railroads "saw it coming" in the 70's is pretty much a rear view mirror observation. Tisk, tisk, they should have invested back then. WITH WHAT? It was a game of survival back then, as it is now.

I dont look back on my life and say "what if" or "only if I would have..."

Finally, I finished reading Leaders Count, the look at the history of the BNSF. Lou Menk made a huge bet on coal in the 70's...it wasnt a sure bet. Looking back, even with the odds as good as they were, the investment took several years to yield results.

gotta go to the airport and pickup the lovely and talented girlfriend...back from Italy.

ed

[MichaelSol]

I have my original copy of that DOT study. Still use it as it has some good statistical references regarding capacity.

The rest of the study was garbage.

You might wonder how a government agency just up and started lecturing railroads on what their problems were. A little chutzpah there. Remember, DOT had no experience with railroading outside of its safety agency, FRA. I believe Tom Lamphier's comments earlier on this thread were directed to this study, the kind of "whoa, whoa, whoa" from a professional railroader to a bunch of bureaucrats who knew nothing about railroading on their "bright idea" which they clearly thought would solve everything.

And this generated the confrontation with Congress as well. The study was ostensibly designed to support FRA's tying of 4R rehab funds to "capacity rationalization," a new approach to national rail policy. Except, it wasn't national rail policy. Congress had intended no such thing.

Essentially, bureaucrats were substituting their "ideas" in place of those of both the rail industry and Congress -- which was the authentic source of national rail policy. Then, those same bureaucrats who were trying to lecture everyone else on railroading and efficient operation, botched the administration of their own 4-R program so badly it did almost no good for its intended beneficiaries.

The rail infrastructure was in a crisis because of declining investment during the 50s and 60s -- Dieselization and its economic effects were sucking away funds from maintenance -- but when Congress allocated money to help, less than 6% was distributed after 3 years, as FRA and DOT tried to muscle their "new" ideas in on top of authentic national rail policy. Help the railroads? Hell no, that study had nothing to do with helping railroads. It was more important for DOT and FRA to get control of the funding and the policy than it was to get the money out where it was supposed to do some good. That study was a mere prop.

It was designed to show that the ICC had failed in its mandate to regulate the U.S. rail industry, and by implication, that DOT should get the job.

It was classic government empire building.

DOT basically invented a crisis. A crisis of perception. This was part of a process of attempting to show that it, not the ICC, should have jurisdiction over railroads. This "report" was part of that process, and within a year, the term "Surface Transportation Board" first appeared [Brock Adams!], to be housed within the DOT of course.

Of course, there was more than a little government CYA. Government policy was more responsible for railroads' failure to earn a reasonable rate of return than anything, but here was a nice example of a government report that showed that-- surprise -- it wasn't the government's fault at all, it was really the fault of these stupid railroads for trying to maintain all this "capacity" -- even though they had done so profitably at other times. Indeed, they were more profitable because of that capacity, with higher speed trains, fast equipment cycle times, and premier services.

DOT did not have the expertise to develop that kind of study.

The ICC's Bureau of Economic Research did, and never supported these conclusions.

[Anonymous]

nanaimo,

The 1970's was an era of homogenous politics. It really didn't matter who was in control of the beauracracy, Democrats or Republicans, the effects were essentially identical. Thanks to Nixon, we got the EPA, the 55 mph speed limit, et al. Ford didn't change anything one way or the other being basically impotent as President, and Carter basically topped the irrational policy sundae with the culmination of Staggers, yes to Conrail but no to Milwaukee, et al.

Ed - On that map, how does the Milwaukee, CNW, WP, D&RGW, SP, and RI lines appear? I do not have that copy of TRAINS, so please enlighten me. Is the PCE deemed "excess"? If so, knowing what we know today do you think that was a rational, educated, even sensical designation?

Let's face some facts here. The policy during the 1970's was that energy was scarce, hence the 55 mph speed limit, et al. Yet instead of applying that philosophy to the US railroad infrastructure (e.g. save national energy consumption by shifting as much freight as possible from trucks to rails), we did just the opposite, encouraging the loss of rail infrastructure.

Don't you think that is a classic case of counterintuitive policy application?

How many lines show up as being excess capacity just because of the temporary downturn in rail business during the two decades of self-inflicted collapse? How was it self-inflicted? We all discussed this before - 1. defered maintenance to sex up stock prices for potential mergers, 2. The introduction of the 100 ton car, 3. The lack of labor rationalization to keep up with modern times.

Are you going to sit there and tell us that the PCE, CNW, RI et al were all legitimate candidates for excessive existence just because the culture of the federal beauracracy at the time was imbided with a lack of foresight and common sense? Or will you take a look at that map and discern some obvious and gratuitous errors of judgement on the part of DOT? You and I would look at that same map and see two different things. You see it and unthinkingly agree with the premise because it was put out by the federales. I see it and think things like "why can't they add capacity to those branch lines to connect them into potential A mains? Instead of taking out the Cowboy Line, why don't we encourage CNW to finish what they started 100 years ago and punch that line to the West Coast? Why not aid Milwaukee in streamlining the PCE into a modern day high capacity corridor?" Stuff like that. Because during this same time period our nation was in the midst of nearing completion of the Interstate Highway System and the Columbia/Snake River Waterway system. What's good for one mode (federal aid) is good for the others, right?

What I will venture without having seen that map is this: Yes, most of those "excess" lines were lines which were not being (or allowed to be) marketed to take advantage of the inherent efficiencies of railroad technology.

[nanaimo73]

Dave,
The PCE appears on the B main lines map, meaning between 20 and 5 gross ton-miles per mile per year, from the Twin Cities to Tacoma. The maps in Trains, and DPM's comments, are mostly about the 11 Potential A Main (excess capacity) corridors. The Milwaukee Road was one of 5 in the Chicago-Twin Cities corridor, 1 of 7 in the Chicago-Ohio River, 1 of 8 Chicago-KC and 1 of 5 Chicago-Omaha. Trains did not discuss the lines west of St. Paul-Cheyenne-Colorado Springs-Houston.
You said-

QUOTE: You all won't face up to the truth: THERE WAS NO "EXCESS CAPACITY" OF THE US RAIL SYSTEM. There was only fixed capital that wasn't being marketed correctly.

I say there was excess capacity in the mid-west, causing the Milwaukee, Rock Island and North Western to not earn the cost of capital. Will you agree there was excess capacity in the mid-west ?

[MP173]

BAck from the federally built, taxpayer supported O'Hare airport.

The maps are pretty difficult to determine the exact lines. Dave if you want...email me a fax number and I will copy and fax copies to you...assuming Trains doesnt have a problem with that.

Dave, you are pretty deep into some philosophical discussions here regarding the roles of our government.

Do I think the PCE, CNW, RI et al were candidates due to federal policy? Never thought of it in that sense. My feelings were (and still are) they were lousy businesses. Money coming in didnt support the money going out plus return to investors. That simple.

As interesting as the map is, it appears to be a bit flawed. For instance, the ex NYC mainline across Indiana is shown as "potential A line", as is the Santa Fe line to Kansas City from Chicago. Were things really that bad back then?

I would like to see these maps in a bit more workable form, with the ability to enlargen and disect.

ed

[MichaelSol]

QUOTE: Originally posted by nanaimo73
I say there was excess capacity in the mid-west, causing the Milwaukee, Rock Island and North Western to not earn the cost of capital.

I think this underscores how simplistic DOT's study was.

"Excess capacity" did not cause Milwaukee, et. al. to not earn their cost of capital.

It sure as hell isn't the reason railroads can't earn their cost of capital now, and it wasn't the reason then, either.

Cause and effect has been conclusively eliminated on that allegation.

If you look at a broad cross section of business in trouble, rarely, very rarely, is "excess capacity" even close to the fundamental underlying reason for the business weakness.

The temptation to abandon a realistic analysis of what happened to the rail industry in favor of a simplistic answer must be overwhelming, especially when viewed in the light of the provenance of the simplistic theory coming from a government agency with no one experienced in the industry and which was instead battling for political turf.

DOT had it backwards, and you people have it backwards.

"Excess capacity" is a symptom, it is not a cause, of financial weakness.

Treat the symptom, you leave the cause. That was the weakness of that argument then, and it hasn't gotten any better with age. In this case, it was so backwards that the alleged symptom was, in nearly all mainline cases, an asset, not a handicap. The more "treatment" the weaker the patient got.

[nanaimo73]

MichaelSol-
During the mid 1970s there were 5 lines (6 if you count N&W) running between Chicago and Omaha. Are you saying all of them should have been kept, and there was enough traffic out there to warrant all of them ?

[nanaimo73]

QUOTE: Originally posted by Murphy Siding

QUOTE: Originally posted by nanaimo73

MichaelSol-
During the mid 1970s there were 5 lines (6 if you count N&W) running between Chicago and Omaha. Are you saying all of them should have been kept, and there was enough traffic out there to warrant all of them ?

N&W?

Yes, N&W acquired the Wabash which had a roundabout Chicago to Omaha route. This was more of a Chicago to St. Louis route down to Bement, IL, and then the Detroit-KC line to Brunswick, MO and then a St. Louis to Omaha route to Omaha.

[MichaelSol]

QUOTE: Originally posted by cornmaze

QUOTE: Originally posted by MichaelSol
. . .
I think this underscores how simplistic DOT's study was.
. . .
The temptation to abandon a realistic analysis of what happened to the rail industry in favor of a simplistic answer must be overwhelming, especially when viewed in the light of the provenance of the simplistic theory coming from a government agency with no one experienced in the industry. . .
DOT had it backwards, and you people have it backwards.

A few pages ago you stated that BN, in about 1980 or so, could have done a linear extrapolation of tonnage data to predict where tonnage would be at the present day. That strikes me as simplistic, and I don't think it is a very safe way to predict future traffic levels. Too many variables.

I am sure that the fact that it was pretty close to the mark is just a coincidence.

I don't know how many traffic levels you have predicted in your career but one of the fundamental rules is that the past is almost always a better predictor of the future than some half baked theory. "Too many variables" is usually a novice's excuse for not understanding the variables.

In that instance, there was a 30 year data spread, 1950-1980. That data already took into account "all the variables" -- that's why it is so useful.

That was not a boom time for railroads. All in all, sluggish growth, 2-4%. After 1980, the Staggers Act promised increased growth because the railroads would finally be "unleashed." So, the previous 30 years would provide an appropriate minimum of growth which a linear regression would permit estimation out as far as you wanted to go. That is a form of what is called "Naive Forecast." But, past performance is always what you start with.

The maximum range would depend on how optimistic the future growth prospects might be. Say you are optimistic that the railroads would grow something better than they did during the 1950s-1980.

From that assessment, the Year 2004 would show a probable ton mile range of between 1.8 billion and 2.3 billion ton miles.

Starting from 1980, with something less than 1 billion ton miles, you can reasonably predict that you will need to add 34 million ton miles of capacity each year to keep pace with the minimum expected growth. You may grow faster, but at least you know what you need to do for a minimum. Naturally, the model takes into account each most recent year in what would be called a Moving Average forecast model. As each year passes, the reliability of the model gets better and better through the use of "tracking signals" which provides a monitor of the forecast model reliability. Probabilities of different need levels can be assessed into a decision making process through computer programs -- one is called "Crystal Ball' interestingly enough.

In any event, these aren't just random predictions, nor do they just "sit" there for 20 or 25 years.

Now, as the interesting answer turns out, railroads only reached a little over 1.6 billion ton miles by 2004. Had railroads followed the minimum probable growth rate, they would be just fine today. They didn't. Even armed with these predictions, they tore up double track. Now there's a crisis and they want tax relief -- you and me -- to help fund their improvements.

The reason the answer is interesting is because, after the Staggers Act, railroad traffic grew more slowly, albeit only marginally more slowly, than it did during the sluggish years of the 60s and 70s. Everything you read about traffic "rebounding" under the Staggers Act is pretty much a statistical fabrication. It didn't happen.

However, that should have left the railroads in a very good position in 2005 with regards to available capacity, had they been following and implementing the minimum reasonable projection for traffic growth.

It is not plausible to suggest that railroads were caught by surprise. The only defense for that would be that railroads did not really believe the Staggers Act hype, and believed that their traffic would in fact, grow substantially more slowly than 1950-1980. However, that would call 20 years worth of public relations officers and handouts liars.

[MichaelSol]

QUOTE: Originally posted by nanaimo73

MichaelSol-
During the mid 1970s there were 5 lines (6 if you count N&W) running between Chicago and Omaha. Are you saying all of them should have been kept, and there was enough traffic out there to warrant all of them ?

No.

I don't see that I said anything about the Omaha corridor or the traffic levels there.

I am sure data for each railroad, and its revenue and cost of operation for their line in that corridor, would be useful for an answer. I don't have them. Did each line offer a distincitve usefulness to its particular company? I have to assume so, since they were willing to operate them. But, without that data, I have no idea whether "excess capacity" in that corridor was a financial problem, or merely a housekeeping detail: "looks like too much capacity to me. Yup, me too! We should clean it up." That's about as good as the DOT study got.

I am sure you will recognize that combining operations of two or more companies on one existing facility is a different conversation than the one regarding single tracking an existing double track mainline.

[jeaton]

Michael

You are correct that excess capacity is a symptom caused by a decline of business. Kidney failure is a symptom of diabetes. Both accelerate the demise.

Your argument that by holding on to all the pre-Staggers track the railroads would have the capacity that is needed now presumes that all that track was exactly where it is needed now. To say the least, I find that quite far fetched. If I looked hard enough, I could probably find dozens of examples, but I will cite two. In the mid 70's when I left the IC, I don't think the double track mainline between Chicago and Cairo saw more than a dozen trains each way any day of the week. I suppose that it could be argued that Hunter Harrison lied to the Board when he presented the plan to replace the two track direction traffic operation with single track CTC, but being able to write off the entire cost basis of track two is a good start on the justification. I haven't heard that the CN is now having any serious problems moving trains between Chicago and Memphis. In fact, I understand they have had the BN come over and make some use of a good section of that track.

I will cite another piece of railroad. A remnant of the MILW's Sturdevant, WI to Savanna, IL line runs through my home town. If someone could show me that there would be any rational business use for that line, I would go out tomorrow to line up investors. I have spent a good part of my life in Wisconsin, and I have a pretty good handle on the business activity of the kind that might be suited for rail. It ain't there anymore.

On the other hand, I don't recall that the UP or BNSF were tearing up any track used for hauling coal out of the PRB, or the Santa Fe picking up any track along the Transcon. Or was Abo Canyon once double track?

I haven't done a thorough search on this, so here is a modest challenge for you. If you can, please direct my attention to any major business that has survived and thrived by holding on to idle physical assets on the basis that that the assets could come back into use even as little as a decade later.

[greyhounds]

Well, one of the first assignments I had at the ICG was doing line abandonment analysis. I can't see that any track was taken up that shouldn't have been taken up.

The route structures of the IC and the GM&O (the ICG) were laid down before there were any paved roads, let alone interstate highways. If you want to go through a little mental exercise, think about how shoes came to the people in a town like Manito, IL.

When the rails were spiked down, the trains brought the shoes (and everything else) to the town. By the mid 1970's people were driving to malls in "The Big City" where they found a larger selection and better prices. They no longer used the trains for such purposes.

To maintain a route structure that had been laid down to be virtually the sole transportation system for a nation was silly.

(The only alternative was navigable waterways - once you got away from them you were either dragging it through the mud with a team of animals or it was on the railroad. And the rivers are kind of limited in where they go.)

We did need a ratiionalization to get rid of a lot of branch/secondary lines that had been built in the horse and buggy era.

The ICG had two such lines in my home county. One was an ex GM&O line that left the main at Bloomington and ran west of the main though Lincoln Country. It rejoined the main to Kansas City at Murrayville, IL There was one significant customer on the line, a major chemical plant near Jacksonville, IL. Other business was something like a once in a while carload of lumber to a small town lumber yard. Service had been south one day, north the next six days per week. That's less than one train per day. Then we lost a bridge south of Mason City. We had to operate with two "turn" locals.

So a train would originate in Bloomington, complete with a four man crew and caboose, run down to Mason City, then come back. A similar operation worked north from Roodhouse, IL. But that crew had some work to do, since they serviced that chemical plant. (There was no other traffic to develope. Those small towns had become bedroom communities for people working in the larger cities.)

My mother once was in the Hopedale, IL hospital. The north end of the line ran by her room. I went down to see her and she described the train to me. "It's happy little train", she said. I knew the cost and revenue figures and there was nothing "Happy" about it. We had to get rid of that line. It was a looser. And if we would have kept it, it would add absolutely nothing useful today

We kept the line north to the chemical plant and junked the rest. It was a good and wise decision.

I can go into the other branch if anyone wants. (It went to Havana, the county seat of Mason County on the navigable Illinois River.) But I think I've covered enough. The lines crossed at Mason City, IL. There were 12 trains per week across that diamond - and it's hard to support two rail lines with 12 locals per week.

I don't know of any rail capcity we've lost due the rationilization of the late 20th Century that is hurting now. I can't say that absolutely no mistakes were made. It's impossible to not make "any" mistakes.

But.

The capacity problems today are not the result of getting rid of useless rail lines to nowhere - they are the result of failure to build new capacity where it is needed. We don't need a rail line to Mason City, IL. We need double track through Abo Canyon and on the Sunset Route.

So why wasn't this capacity built. It's simple, they couldn't get the money to build it because the US Federal Government (through its Interstate Commerce Commission) prohibited railroads from earning their way. You're not going to lend mony to someone who can't pay you back. And the railroads couln't pay it back thanks to the stupid people in our Federal Government..

The ICC is now thankfully gone. But the railroads are still digging out of the hole it put them in. Why do you think the UP doesn't double track the Sunset Route tomorrow? It's obviously needed. Anybody can see that.

They can't borrow the money to do it. That's why.

They've got to charge more and reduce headcount. There's no other way to survival. Government money would just drag the whole country down. Throwing money into the hole as it were.

[nanaimo73]

QUOTE: Originally posted by MichaelSol

....I am sure you will recognize that combining operations of two or more companies on one existing facility is a different conversation than the one regarding single tracking an existing double track mainline.

Yes, I agree.
You said-

QUOTE: Originally posted by MichaelSol

Recall, we are not talking about too slow building of capacity, we are talking about rail managements scrapping double track on BN, IC, CP/SOO/MILW, creating instant operating slowdowns at the time, guaranteed to compel a crisis as rail traffic inevitably grew.

What double track did BN pull up ? Do you mean Spokane-Pasco ?
I agree with what Jay said, the CN (IC) line is not strained.
Soo Line changed the 2 track ABS to single CTC from Duplainville to St. Croix Tower. CP competes with BNSF, UP and CN in this corridor. I don't think they need the second track there either.
The excess capacity of the 1980s was all in the wrong place.

[bobwilcox]

QUOTE: Originally posted by greyhounds

Well, one of the first assignments I had at the ICG was doing line abandonment analysis... There's no other way to survival. Government money would just drag the whole country down. Throwing money into the hole as it were.

You nailed it on the head. I base my opinion on sixteen years doing traffic forecasts at the Rock Island and Northwestern. In addition I spent a lot of time with grain and fertilzer shippers talking about growing traffic on their branch line or pulling the plug. If we did not pull the plug and stop the bleeding the whole company would have died within months. The Rock Island did die as a company. The Northwestern would have died if they had not clawed their way into the Powder River Basin.

Of course it was always fun to take a break and due a press conference with Harry the Bruce!

[Anonymous]

I can predict the S&P 500 will be a lot higher 20 years from now, but that doesn't tell me what stocks to buy, when the big drops will occur, or who the next Google is.

A company that keeps a large number of under-performing assets on the books that have high fixed costs, will find it very difficult to weather recessions and economic downturns. The result will be a lot of deferred maintainence and unhappy investors. By the time a use for that asset occurs, it may be completely unsuitable and the weakened condition of the company will make it impossible to raise the capital needed. The Northwestern couldn't use the Cowboy line to tap the PRB because the line was in bad shape and the company wasn't financialy strong enough to raise the necessary capital. Wasn't the PCE largely a victum of deferred maintainence? Capacity is also a function of speed restrictions, derailments, etc.

An investor can't buy stock in the locomotive division of GE without also getting NBC, jet engines, etc. So is 'Wall Street' to blame? The majority of shares of most corporations today are owned by retirement plans, 401Ks, IRAs, mutual funds, etc., so take a good look at your financial statements the next time the market drops, then look in the mirror.

FM,
You've missed my point entirely. Barring a Katrina-size meltdown of the rail industry, the political and economic reality of today means there's no appetite at the Federal level for AT&T style breakups or re-regulation. Things do run in cycles and that time may come, but it's not now. Regarding Enron, California's law probably would have been sufficient had Enron been trading under the same rules that govern the actual commodity markets. Instead Enron ran the trading operation, made and enforced the rules, and manipulated the market by being both a buyer and seller. Not too different from the Hunt brothers attempts to corner the Silver market some years back.

[MichaelSol]

QUOTE: Originally posted by jeaton
Your argument that by holding on to all the pre-Staggers track the railroads would have the capacity that is needed now presumes that all that track was exactly where it is needed now.

"all the pre-Staggers track" is not something I have said. I have not used the word "branchlines" once. Not once. That constitutes a substantial part, let me repeat, a substantial part, of the pre-Staggers trackage.

If it suits your argument to imply that I said that branchlines should not be abandoned, and your argument looks better as a result, so be it. I didn't say it.

The DOT study that prompted this portion of the thread was not a branchline abandonment study and the concept of "excess capacity" as used in that study has nothing whatsoever to do with branchlines as that was never an "excess capacity" issue, but most clearly an "outlived" asset issue.

Branchlines certainly do not, to me, connote "capacity" in the sense of the DOT study. "Capacity" for what? We are talking about traffic movement, not traffic origination or termination. There is no "capacity" for a branchline to handle a through movement.

These three or four comments that have suddenly discovered branchlines, declaring triumphantly "yeah, see! Nobody could survive carrying those! Whadya mean railroads should't have shut those down?" epitomize the careless reading, careless discussion, and careless thinking that passes for conversation here sometimes.

If you want to change the subject fine. Don't pretend by sleight of keyboard that it is the same topic, and that the comments regarding one circumstance apply to other other.

Now, Jay, you state that I said "by holding on to all the pre-Staggers track the railroads would have the capacity that is needed now ."

That is completely false.

I have absolutely never said such a thing.

My posts above clearly talk in terms of "building" to expected minimums of traffic by 2004, including a minimum capacity build expectation on a year by year basis.

I don't know if your comment is intentional, or merely disingenuous, but in fact, it completely misrepresents my remarks.

You state: "To say the least, I find that quite far fetched." I assume you mean that your misrepresentation of my remarks is quite far fetched.

[MichaelSol]

QUOTE: Originally posted by jeaton
I haven't done a thorough search on this, so here is a modest challenge for you. If you can, please direct my attention to any major business that has survived and thrived by holding on to idle physical assets on the basis that that the assets could come back into use even as little as a decade later.

Mining
Forestry
Agriculture
Oil & Gas
Electric Power
Shipping

[bobwilcox]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by jeaton
I haven't done a thorough search on this, so here is a modest challenge for you. If you can, please direct my attention to any major business that has survived and thrived by holding on to idle physical assets on the basis that that the assets could come back into use even as little as a decade later.

Mining
Forestry
Agriculture
Oil & Gas
Electric Power

Notice that these are not business but broad industry groups. I can not by stock in a firm called "Mining"

[bobwilcox]

QUOTE: Originally posted by MichaelSol

I don't know if your comment is intentional, or merely disingenuous, but in fact, it completely misrepresents my remarks.

Atta boy, attack the person not the thought!

[MichaelSol]

QUOTE: Originally posted by bobwilcox

QUOTE: Originally posted by MichaelSol

I don't know if your comment is intentional, or merely disingenuous, but in fact, it completely misrepresents my remarks.

Atta boy, attack the person not the thought!

Oh you mean like this one, posted earlier on this thread by the usual group of attack chihuahuas who had nothing to actually say about the thread topic:

QUOTE: Originally posted by mudchicken
Ed:

Maybe we ought to let the big brainwashed fool have his one day. Today appropriately.
--------------------
Mudchicken

You were pretty quiet on that one.

Or is "elastic" the right word?

[MichaelSol]

QUOTE: Originally posted by bobwilcox

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by jeaton
I haven't done a thorough search on this, so here is a modest challenge for you. If you can, please direct my attention to any major business that has survived and thrived by holding on to idle physical assets on the basis that that the assets could come back into use even as little as a decade later.

Mining
Forestry
Agriculture
Oil & Gas
Electric Power

Notice that these are not business but broad industry groups. I can not by stock in a firm called "Mining"

BobWilcox, go to S&P. Hoovers. YahooFinance. Go to industries. Click on the selected industries. Say "mining". Click on any representative company within the industry. Then you will be able to buy stock in a mining company.

Good grief.

[edblysard]

Jay,
Come on man, get with it...you have to learn how to speak "attorney", and say a lot with out saying anything at all…
What you should have said was "All pre-Staggers excess capacity", which of course can mean anything from a extra barrel of track spikes to a entire main line, depending on what the person wishes it to mean at that particular time...and leaves open the ability to redefine the meaning at a later date, or when ever it suites your needs.
You know, an “elastic” use of the phrase.
Quite being so specific, you will give us all headaches by speaking clearly!


Ed

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by jeaton
Your argument that by holding on to all the pre-Staggers track the railroads would have the capacity that is needed now presumes that all that track was exactly where it is needed now.

"all the pre-Staggers track" is not something I have said. I have not used the word "branchlines" once. Not once. That constitutes a substantial part, let me repeat, a substantial part, of the pre-Staggers trackage.

.

[SALfan]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by jeaton
I haven't done a thorough search on this, so here is a modest challenge for you. If you can, please direct my attention to any major business that has survived and thrived by holding on to idle physical assets on the basis that that the assets could come back into use even as little as a decade later.

Mining
Forestry
Agriculture
Oil & Gas
Electric Power
Shipping

I'd like to give everyone a little insight to the forestry business, from my personal experience. I have 42 acres of timber land, which was cut over in the 1990's. It will be decades before the timber can be cut again. It costs me $700+ per year in taxes, and will for decades before I see any income. As an investment, I should run, not walk, away from it. Why do I keep it? Only because it has been in my family for 150 years, and my father struggled and strained and did without to keep it, even when he badly needed the money it would have brought at sale.

Yes, you can make money in forestry, IF you have vast acreage so you can sell trees every year and afford to replant behind the cutters, and IF you are vertically integrated like Weyerhauser and the other big timber companies. Ever wonder why there are only huge companies that own vast amounts of timberland? Only big outfits with huge acreages can afford to grow timber and wait 50 years or more for income from any individual acre.

Unlike railroading, timber doesn't consume vast amounts of money in maintenance every year. Also unlike railroad track, timber becomes more valuable (i.e., larger trees) with every year that passes, instead of deteriorating like track and structures. Forestry is so different from railroading it isn't a very good analogy.

[MichaelSol]

QUOTE: Originally posted by Murphy Siding

MichaelSol: As I'm reading your posts, I get the idea that you believe that the railroads were somewhat *forced* into pareing down their capacity, by the Feds who made it a condition for Fed railroad money (?). Then the reverse must be true? The railroads that didn't need, or receive Fed money didn't pull up any track? They just left the unprofitable lines there, paid taxes and amintenance costs, and waited a generation untill the capacity need came back?

I am not sure that one premise leads directly to the other conclusion.

[MichaelSol]

QUOTE: Originally posted by JOdom
Unlike railroading, timber doesn't consume vast amounts of money in maintenance every year. Also unlike railroad track, timber becomes more valuable (i.e., larger trees) with every year that passes, instead of deteriorating like track and structures. Forestry is so different from railroading it isn't a very good analogy.

I gather that, unlike Weyerhauser, et.al., you have no provisions for ongoing road-building and maintenance, forest fire protection, infestation and blister rust management, security ( most of these big companies attempt to accomodate public use), grazing management issues, weed control (a big one), replanting, erosion control, back office staff that supports all that. I gather you have never had a forest fire which takes years of "unproductive" investment to restore to productive capacity.

There is, in fact, a substantial ongoing economic committment to professionally managed forest land.

[MP173]

Think we could convince Trains to put up a copy of the maps in the Dec 1996 issue for all to see? That would certainly help in the discussion.

I think there have been a few selected lines that have gone away which would be extremely valuable today. No doubt the PCE would be a good one. I can think of a few here in the Midwest...the EJE branchline to Porter comes to mind and more importantly the Kankakee Belt line which extended to South Bend. Now, that would have help the situation greatly.

The maps show several things...the rail industry was overbuilt in the midwest, particularly the granger lines stretching from Minnesota down to Kansas. Also in the industrial belt from the Mississippi to the east coast, north of the Ohio River.

What is striking is there are very few lines west of Kansas City/Dallas/Minneapolis heading west. Just the usual suspects...UP, Santa Fe, Southern Pacific, BN, and Milw. Those are the lines today that are at or nearing capacity.

What is happening today with the railroad industry (IMHO) is something similar to the Perfect Storm. Several key economic factors are coming into play at the same time in history:
1. Asian invasion of manufactured goods.
2. Demand of coal from PRB based on environmental concerns...remember that coal burns clean, but doesnt burn hot. It takes quite a bit more to generate the BTU's required.
3. Energy costs for other forms of transportation (trucking primarily) are spiking which pushes more to the rails. I now have customers with fairly small fleets which are now railing trailers to and from Chicago/West Coast. These typically were team drivers in the past.


Rails suddenly are seeing big growth in business and along with it is finally a bit of pricing power.

Increases in capacity have been occuring over the past several years...UP's triple tracking in Nebraska, BNSF's doubling of the Transcon, UP's doubling of the Sunset Route. Notice all were in the west. Why? All of the energy and resources in the east were spent on digesting the Conrail meal. One notable exception in the east was the doubling of the CSX across Indiana.

As more and more imported goods bypass the west coast and come east, NS and CSX are going to find their intermodal business will be increasing. Already the NS is running extra sections of their Norfolk/Chciago and Jacksonville/Chicago intermodals, nearly daily.

As I stated earlier...capacity issues seem to stem around terminal operations, primarily Chicago and St. Louis. The lack of movement of CREATE in CHicago seems to mean these capacity issues will continue.

Which makes me nominate for an extremely valuable piece of railroad...the NS ex Wabash line from Kansas City to Detroit, which bypasses St. Louis and Chicago. Now single track, one must wonder...when will it see capacity expansion.

I agree with earlier discussions of the CN (ex IC). No capacity issues there now. One can make the argument instead of double track between Chicago and Cairo, it was triple track...at least south of Edgewood.

Gotta run, computer is going to get the oil changed. See you guys tomorrow.

ed

[MichaelSol]

QUOTE: Originally posted by MP173

Think we could convince Trains to put up a copy of the maps in the Dec 1996 issue for all to see? That would certainly help in the discussion.

I am not sure that it would. My complaint with the DOT study is there is no sound economic argument being made, only some enormous assumptions that I do not believe were well supported by economic arguments then, and less so now.

In any case, some further notes from BN days:

"Tearing out "redundant" trackage was one of the few things they were good at.

"The one that comes to mind immediately is Easton to Martin, 11 miles, on former NP . Of course just a couple years after that they shut the whole *** line down.

"They were looking long and hard at Seattle to Portland also- made several studies about single tracking it. About that time, along came Grinstein and the Frisco Reign of Terror was over.

"They loved to take out sidings too. One notable one I remember: On the CTC main line there was a siding near Everett WA extending westward from Lowell station past a crossover at next station called PA Jct, and then extending another half mile to the entrance to the Everett tunnel, where it re joined the main track. At PA Jct the line to Vancouver Canada branched off. Trains coming off the Vancouver line headed toward Everett tunnel and Seattle were on an upgrade at this junction and couldnt be stopped at the junction point (in the case of a more important train using the mainline) or they would stall, so instead of making them wait at the crossover at that point, we always headed them into the siding extension at PA Jct and once they passed that point they would be on level siding track and could pull their train to the west switch at the mouth of the tunnel, and from that point they could easily stop and start again if necessary. Saved a lot of delay.

"One day Pisser Bill Thompson and some dumb Frisco car toad who had recently been appointed Trainmaster although he was from (where else?) Sprang-field Mo, and knew nothing of the territory, were in their hy rail vehicle, and they wanted to use this siding extension but instead of calling it "The siding between PA Jct and Everett Jct" as they should have, they told the dispatcher they wanted to use the "Siding at Lowell." So the dispatcher blocked out the portion from Lowell to PA Jct and gave them a written permit betweeen those stations. THey then proceeded to hyrail into the little short extension, even though it was outside their territory. The dispatcher then ran a train from Vancouver into this short siding to meet an eastbound train for SPokane coming thru the Everett Tunnel. Well guess what -- the Vancouver train barely got stopped in time before running into the hy rail. Of course the fur flew and the Frisco dinks were getting ready to fire a dispatcher, but then they discovered whose mistake it actually was and the whole thing got dropped. - Until the following month, that is, when a crane showed up and completely removed the siding extension. The Frisco dinks felt it needed to be removed because it was "too confusing" to have a siding divided between three stations. After that, all the Vancouver trains waited a mile away at the bottom of the hill if we couldnt take them onto the main track at PA Jct immediately.

"These are the same rocket scientists who closed up Minot Hump Yard, Wenatchee yard, Wishram yard, took out or discontinued the hump at Pasco, and were seriously considering closing the Flat/Hump yard at Interbay (Seattle). They closed Stampede Pass, sold the Milw Snoqualmie pass to the State, shut down Bayside Yard at Everett, etc. After they were gone some of these facilities were in part restored."

The overal effect of seemingly small actions cannot be underestimated:

" I figure at their peak they cost us at least one fourth of our rail handling capacity due to their shutting down of facilities and other things that kept the railroad fluid."

"If you extrapolate this little bit of info I gave you re the NW Corner of the RR, into the whole BN you can maybe see why railroads like BN and UP are having problems taking care of business. Every time they have just the slightest downturn they went looking for track to tear up, and now it is costing them ."

Best regards, Michael Sol

[MichaelSol]

QUOTE: Originally posted by Murphy Siding

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by Murphy Siding

MichaelSol: As I'm reading your posts, I get the idea that you believe that the railroads were somewhat *forced* into pareing down their capacity, by the Feds who made it a condition for Fed railroad money (?). Then the reverse must be true? The railroads that didn't need, or receive Fed money didn't pull up any track? They just left the unprofitable lines there, paid taxes and amintenance costs, and waited a generation untill the capacity need came back?

I am not sure that one premise leads directly to the other conclusion.

Why not?

Because the proposition that railroads receiving 4R funds were required to meet certain qualifications says absolutely nothing about what railroads that didn't meet those qualifications did, did not do, may have done, or intended to do.

And I don't mean that to sound as abrupt as it does, but it just doesn't follow from the conversation at all. On the face of it, certainly MILW pulled up track. So did RI. I just don't see the purpose of the remark.

[Anonymous]

QUOTE: Originally posted by nanaimo73

Dave,
The PCE appears on the B main lines map, meaning between 20 and 5 gross ton-miles per mile per year, from the Twin Cities to Tacoma. The maps in Trains, and DPM's comments, are mostly about the 11 Potential A Main (excess capacity) corridors. The Milwaukee Road was one of 5 in the Chicago-Twin Cities corridor, 1 of 7 in the Chicago-Ohio River, 1 of 8 Chicago-KC and 1 of 5 Chicago-Omaha. Trains did not discuss the lines west of St. Paul-Cheyenne-Colorado Springs-Houston.
You said-

QUOTE: You all won't face up to the truth: THERE WAS NO "EXCESS CAPACITY" OF THE US RAIL SYSTEM. There was only fixed capital that wasn't being marketed correctly.

I say there was excess capacity in the mid-west, causing the Milwaukee, Rock Island and North Western to not earn the cost of capital. Will you agree there was excess capacity in the mid-west ?

To take something Michael mentioned and expanding on it, in my view the only excusable classification of trackage as being "excess capacity" is that in which the business potential has ceased to exist. A spur to a mine that has played out. A branch to a suburb where the lumber mill has been replaced by a housing development. Stuff like that.

Not those Midwest branchlines, if they serve(d) functioning grain elevators. I'll wager a bet that the businesses on those ex-branches which were served by the railroad still exist for the most part, and are now shipping by truck, over county roads that are now getting beat up year after year, as those elevators are forced to ship to the railroad shuttle facility 100 miles away. From the 1970's DOT perspective, why would they classify working branchlines as "excess" only to have that traffic shift to roads? Don't the federales and states have to support the roads too? I just don't see how the federal DOT exuded any gain for society by quasi-forcing those lines to shut down (via a withholding of rail rehab funds) if the business on those lines are still functioning.

Just a hunch, but I'll bet there is a correlation between the closure of a railroad branchline, most any branchline in the Midwest from that map, and a sudden increase in state and county road maintenance costs subsequent to that closure.

You almost get the feeling that the DOT rail folks were quarantined from discussions with the DOT road and highway folk.

[greyhounds]

QUOTE: Originally posted by futuremodal

Originally posted by nanaimo73

To take something Michael mentioned and expanding on it, in my view the only excusable classification of trackage as being "excess capacity" is that in which the business potential has ceased to exist. A spur to a mine that has played out. A branch to a suburb where the lumber mill has been replaced by a housing development. Stuff like that.

Not those Midwest branchlines, if they serve(d) functioning grain elevators. I'll wager a bet that the businesses on those ex-branches which were served by the railroad still exist for the most part, and are now shipping by truck, over county roads that are now getting beat up year after year, as those elevators are forced to ship to the railroad shuttle facility 100 miles away. From the 1970's DOT perspective, why would they classify working branchlines as "excess" only to have that traffic shift to roads? Don't the federales and states have to support the roads too? I just don't see how the federal DOT exuded any gain for society by quasi-forcing those lines to shut down (via a withholding of rail rehab funds) if the business on those lines are still functioning.

Just a hunch, but I'll bet there is a correlation between the closure of a railroad branchline, most any branchline in the Midwest from that map, and a sudden increase in state and county road maintenance costs subsequent to that closure.

You almost get the feeling that the DOT rail folks were quarantined from discussions with the DOT road and highway folk.

OK, let's go over this one more time. The grain comes out of the field loaded in a truck. What I see in the Illinois and Wisconsin fields are semis loading from the combines (equiped with heads to harvest corn or soybeans). I know that Sol has falsely said those trucks don't go ino the fields, but I belive what I see, not what he says.

Once you have the load on a truck, (and the load WILL be on a truck) the additional costs of moving it some extra miles to a large grain terminal are not that great. The additional costs of maintaining a country elevator system and branch line rail network - which were both necesitated by the lack of paved roads, is very great.

In case you haven't looked at (or maybe understood) a map, the midwest has a lot of navigable waterways. Once the roads got paved and the semis got built, the farmers started trucking their grain to river terminals where they got a better price.

Take a look at Illinois: Mississippi River runs the entire western boundary, Ohio River runs the southern boundary until it meets the Mississipi, the Illinois River cuts through the middle of the state. And the Port of Chicago lies in the northeast corner.

When the roads got paved the farmers started trucking to the water and the entire country elevator/rail branch line network was obsolete. Now, I know you don't understand this, but it was a reality we had to deal with. (and remember, back then, the stupid Federal Government maintained the waterways free of any charges to the barge operators.)

What amazed me was that the ICG could be somewhat competivie with the barges by offering a shuttle train service from locations some miles away from a river. Heyworth, Dwight, Gibson City became "Rent-A-Train" terminals that gathered grain by truck from large areas. We got one turn a week out of these high performance, low cost trains. Load in Heyworth, roll to New Orleans, unload at the export terminal, and get back to Heyworth. In one week. No way to do that with loose car railroading and branch lines serving the obsolete country elevators.

Did the road maintenance costs go up? Yes, probably, and so what? You don't optimize one cost element in a distribution/gathering system at the expense of overall costs. Maybe someday you'll be able to understand that, but I doubt it.

What the governments charged the truckers for the use of the public roads was beyond our control. If they weren't charging enough, it was their problem to solve, not ours at the railroad. If they would have charged more, then maybe that country elevator/branch line system would have remained viable. But they didn't and it didn't.

And we had to survive in the real world and couldn't base our decisions on your "Hunches".

"By many measures, the U.S. freight rail system is the safest, most efficient and cost effective in the world." - Federal Railroad Administration, October, 2009. I'm just your average, everyday, uncivilized howling "anti-government" critic of mass government expenditures for "High Speed Rail" in the US. And I'm gosh darn proud of that.

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