BNSF boss says transport system nearing crisis

[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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