July TRAINS takes on the captive shipper debate - Best Issue Ever?

[edblysard]

Wow, Dave,
You might want to call Shell, British Petroleum, Phillips, Solvay, Lubrizol, Exxon Mobil, Valero, and Fina and tell them that...those silly companies seem to have thousands and thousands of miles of pipeline they are not using...

QUOTE: Originally posted by futuremodal

QUOTE: Originally posted by n012944

QUOTE: Originally posted by futuremodal

QUOTE: Originally posted by n012944

QUOTE: Originally posted by MichaelSol

National Petrochemical and Refiners Association:

Now if you are going on about price gouging in an industry, why on earth would you use oil companies as an example??? I get it, its the railroads fault that I paid $3.05 a gallon to fill up my car today. 1st it was Katrina, then Rita, then tensions in Iran, and now the railroads. Give me a break.

Bert

Bert,

The reference to the petroleum industry was in the context of it being subjected to captive rates, aka roughly 50% of the industry is captive to one Class I railroad. Whether the oil industry itself also engages in captive pricing or not was not the issue.

However, if you know of ANY locale that only has one oil company offering, please let us know. I know that there are scads of small towns (under 1000 population) that have only one local source of fuel, but of course they are not that far (10 to 15 miles) from larger towns that have several fuel sources. Unless you are walking down to the fuel pumps to fill your gas cans for your lawn mower, most small town residents have no problem filling their tanks at any number of fuel stations.

Considering oil and most of its by products very easily shipped by either pipeline or truck(oh yea I forgot railroads don't compete with trucks) they have many options. If they do not like the price that the railroads give use something else. Also as you pointed out there are many places with only one fueling station in the area. If the next fuel source is only 10-15 miles away, is it worth using a gallon of gas round trip to save $0.10 a gallon? The oil companies know this, and as a result have many people "captive."

Bert

Most petrochemicals are specialized products not fit for transportation by pipeline, thus rail is usually the only option.

[bobwilcox]

It would be nice if the STB would get back to the original capitive intent in Staggers-a lack of competition from other railroads, transportation companies, sources or products. The shippers made a major tactical error when they did not nail down an efficient way to determine profit margins.

[MichaelSol]

Money talks in this Congress. Some folks think that high priced lawyer tactics and high priced lobbyists are justified if it supports their predetermined conclusions and agendas.

[bobwilcox]

QUOTE: Originally posted by rrandb

So the short answer to my court or legislative question would be the Congress? [?]

Yes, but they do not show the least desire to bring the Dow/Dupont Loot the Railroads[V] bill to a committe vote let alone bringing it to the floor of the House or Senate for a vote. .

[rrandb]

So the short answer to my court or legislative question would be the Congress? [?]

[rrandb]

QUOTE: Originally posted by futuremodal
Thus, the railroad market is severely skewed, skewed in favor of imports to the detriment of US production, and it shows up via the US trade deficit, abandoned factories across the USA, and the lack of new heavy manufacturing and production in the USA.

So it's the railroads fault for all that. They killed the very cash cows that used to keep them alive in favor of lower margined import traffic. How do they sleep at night. And the courts, STB and legislature have been part and parcel of it. They must have the papers and magazines on there payroll as well. There influnence is greater than anyone could have suspected.

[bobwilcox]

QUOTE: Originally posted by futuremodal

Most petrochemicals are specialized products not fit for transportation by pipeline, thus rail is usually the only option.

Suggest you research further. Basic petrochemicals like Ethylene go virtually 100% by pipeline. On the other hand commodity plastics from TX and LA will have rail market shares of 75-95%. In the middle products such as styrene will move 75% water, 15% rail and 10% by truck. Benzene moves 85% water and 15% rail.

These commodities move in hudge volumes by water, truck, pipeline and rail.

[MichaelSol]

Shippers and even the STB itself have asked Congress to provide clarification, as the federal courts have plainly left the evidentiary requirements a mess; the railroads have been strenuously resisting the effort. [STB's request for clarification in "Testimony of Roger Nober, Chairman of the Surface Transportation Board, House Committee on Transportation and Infrastructure Subcommittee on Railroads, Hearing on the Status of Railroad Economic Regulation, March 31, 2004, p. 9.]

Congress, you may note, has a lobbying problem with cash flush industries having a strong influence on legislation ... or the lack of it.

The Shippers are not asking for anything unreasonable; but the railroads simply want to preserve the status quo where they can hire the fanciest lawyers and outspend any shipper in litigation and on expert witnesses.

Here's exactly what the shippers say.

Joint Written Testimony of the American Chemistry Council, American Farm Bureau Federation, American Soybean Association, Colorado Wheat Administrative Committee, The Fertilizer Institute, Idaho Barley Commission, Idaho Wheat Commission, Kansas Wheat Commission, Montana Wheat & Barley Committee, National Association of Wheat Growers, National Barley Growers Association, National Council of Farmer Cooperatives, National Farmers Union, National Grain and Feed Association, National Grain Sorghum Producers, The National Industrial Transportation League, North Dakota Grain Dealers Association, North Dakota Public Service Commission, the North Dakota Wheat Commission, South Dakota Wheat Commission, Texas Wheat Producers Board, Washington Barley Commission, Washington Wheat Commission, Alliance for Rail Competition, Consumers United for Rail Equity.

Ex Parte No. 646, Rail Rate Challenges in Small Rate Cases, Before the Surface Transportation Board, July 24, 2004.

"Simplicity is crucial. Complexity and undue uncertainty drive up the cost of any litigation, including litigation before the Board, and given the smaller amounts at stake by definition in a “small rate case,” complexity and cost will terminally chill the exercise of the statutory right to reasonable rates for the very large majority of captive users of rail services. In this regard, the Board’s experience in Stand-Alone Cost cases is an object lesson in what should not happen in small rate case proceedings.

"Since the Interstate Commerce Commission decided the first Stand-Alone Cost case eighteen years ago, the complexity, size and cost of a SAC case before the agency has increased astronomically. But instead of guarding against complexity in small rate cases, the Board’s current small rate case rules invite complexity at the very outset: they define little, rule nothing out, and identify virtually no standards for decision.

"While this gives the Board maximum flexibility and discretion, it makes it impossible for potential complainants to know whether small rate case procedures will be used; what evidence will be considered; how long the case will take; and what the case will cost. These problems, formidable in the best of cases, become insurmountable when combined with defendants’ litigation incentives to make small rate cases long, complex and expensive in order to discourage future complaints. The issue was summed up by Chairman Nober in recent Congressional testimony: the uncertainty of the small rate case procedures “appears to be a major reason why no cases have been brought using the small-case process.”

"Clarity is similarly important. If parties are going to avail themselves of the rate complaint process, they need the assurance of a system featuring relatively straightforward eligibility and substantive standards, so that they can predict to some reasonable degree what cases qualify for small rate case procedures and which rates are likely to be found unreasonable.

"This does not mean that the outcome of small rate case litigation must be perfectly and entirely predictable. It does mean that the eligibility for small rate cases should be clearer and that processes for determining eligibility should be defined. It also means that the substantive inquiry should be sufficiently transparent to allow exercise of reasonable, though necessarily imperfect, judgment.

"Most importantly, clarity and predictability will enhance the potential of private settlements, since both parties will be able to make more accurate assessment of their risks. Where there is good reason to conclude that rates are reasonable, neither side has an incentive to litigate. Where rates appear unreasonable, regulatory uncertainty should not protect the status quo. And where cases fall between these points, clarity promotes negotiated solutions. In short, if the small rate case process becomes clearer, it is even more likely that customers and suppliers will conduct balanced negotiations leading to private resolutions rather than Board-ordered relief.

"Finally, it is most important for the Board’s rules on small rate cases to establish a process under which a complainant can be assured of expeditious action. Unlike coal movements that generally continue for years and even decades, small rate cases are likely to involve movements that may last for only a few years. The need to spend two years litigating rates for a movement that may last only three to five years would discourage most if not all potential complainants. Moreover, increased litigation time usually means increased litigation cost.

"The Board’s current small rate case standards do not appropriately balance the rights of shippers and carriers. The complexity, uncertainty and cost that are inherent in the current small case procedures and standards, combined with the astronomical cost, time and uncertainty of a Stand-Alone Cost case, make it virtually impossible for any captive shippers, other than the largest coal shippers, to exercise their right to a reasonable rate under the ICC Termination Act.

"As Chairman Nober testified before Subcommittee on Railroads of the House Committee on Transportation and Infrastructure on May 20, 2003, “shippers who feel they have been charged an unreasonable rate have a right to have that complaint heard by the Board in a fair, impartial, expeditious and economical manner. That is part of our fundamental charge from the Congress. That is not the case now ....” Nober Testimony, May 20, 2003, p. 9.
...
"As Chairman Nober testified on May 20, 2003 to the Railroad Subcommittee of the House Committee on Transportation and Infrastructure, railroads have been known to spend $5 million on each rate case, while a shipper’s spending on the same case is more likely to be only $2-3 million. Nober Testimony, p. 7."

[Anonymous]

QUOTE: Originally posted by bobwilcox

QUOTE: Originally posted by MichaelSol


The State of Montana spent $3.2 million on the litigation. However, high priced railroad lawyers, an unlimited litigation budget, and 14 years of constant litigation and appeals, replaced the original ICC implementation with an unwieldy, nearly impossible litigation standard, an impossibly vague standard of proof, and essentially rendered the original provision, as interpreted correctly by the ICC, unenforceable.

It sounds like Montana had its day in court and lost. Get over it.

Except there have been hundreds of such cases brought before the STB. The problem is the bizarre set up that favors the few Class I oligarchs over the collection of rail shippers. Which is why some form of railroad re-regulation willl surely make it't way into law as a result of these cases.

It looks like the railroads have finally lost in their quest to further skew markets. Get over it.

[Anonymous]

QUOTE: Originally posted by n012944

QUOTE: Originally posted by futuremodal

QUOTE: Originally posted by n012944

QUOTE: Originally posted by MichaelSol

National Petrochemical and Refiners Association:

Now if you are going on about price gouging in an industry, why on earth would you use oil companies as an example??? I get it, its the railroads fault that I paid $3.05 a gallon to fill up my car today. 1st it was Katrina, then Rita, then tensions in Iran, and now the railroads. Give me a break.

Bert

Bert,

The reference to the petroleum industry was in the context of it being subjected to captive rates, aka roughly 50% of the industry is captive to one Class I railroad. Whether the oil industry itself also engages in captive pricing or not was not the issue.

However, if you know of ANY locale that only has one oil company offering, please let us know. I know that there are scads of small towns (under 1000 population) that have only one local source of fuel, but of course they are not that far (10 to 15 miles) from larger towns that have several fuel sources. Unless you are walking down to the fuel pumps to fill your gas cans for your lawn mower, most small town residents have no problem filling their tanks at any number of fuel stations.

Considering oil and most of its by products very easily shipped by either pipeline or truck(oh yea I forgot railroads don't compete with trucks) they have many options. If they do not like the price that the railroads give use something else. Also as you pointed out there are many places with only one fueling station in the area. If the next fuel source is only 10-15 miles away, is it worth using a gallon of gas round trip to save $0.10 a gallon? The oil companies know this, and as a result have many people "captive."

Bert

Most petrochemicals are specialized products not fit for transportation by pipeline, thus rail is usually the only option.

[Anonymous]

QUOTE: Originally posted by n012944

QUOTE: Originally posted by futuremodal

QUOTE: Originally posted by rrandb

Some rates were artificialy low. Most were not. What is obvoius was the number of miles of track that disappeared when the railroads no longer had to provide service to customers that were unable to afford these services based on the actual cost of rail service. How do you get permission to adandon a line if its making too much money? You can not. Can you abandon a line because it doesn't make enough money to operate it. YES The remarks were about grainger lines that after de-regulation became dirt paths. Was this because the railroads were making too much money NO

"How do you get permission to abandon a line if it's making too much money?" The "too much money" statement aside (e.g how much is "too much"?), a line that was profitable pre-Staggers can end up in the scrap heap for any number of reasons. Mergers can make a profitable line redundant, and we all know what happened to the redundant lines post-Staggers, don't we? The seemingly sole purpose of mergers was to allow railroads to lop off assets to *reduce* costs, totally irrespective of whether those assets made money or not. The whole purpose of dereg seems to be to consolidate as much trackage as possible into the fewest corridors possible, to allow maximization of pricing power. Thus, it is probable that most of those lines being scrapped were profitable, but the proliferation of them repressed pricing maximization. Of course, the railroads turned around then and, instead of maximizing all profits on the few remaining lines, used captive rates to maximize profits on only captive US rail shippers, then cross subsidized the rates for non-captive shippers, including all overseas importers.

Thus, minus imported oil and in spite of a relatively weak dollar, we still have a growing trade deficit, thanks in part to the market skewing activities of US railroads.

Economic theory predicts such, and WHOOOMP there it is.

The area of the country I reside in is full of abandoned ROW's that made money for their owners - The Milwaukee PCE, the ex-NP nee BN Palouse and Lewiston line, the SP&S from Spokane to Pasco, the 2nd and 4th subdivisions of the ex-Camas Prairie, the UP Yakima Valley line, et al. It's quixotic and bizzare, yet instead of returning some of those profits to the line in question for maintenance and/or upgrade, the Class I's siphoned off all those profits for other projects, possibly for the cross-subsidies given to the importers of Asian made products![V]

Oh, thats right we forgot about your and Sol's "conspriracy theory" that the world is out to make the northwest captive to two railroads. The reason all the railroads were abandoned was economics, you can say all the things you want, but the bottom line is that if the lines made money, which includes covering the maintance of the line, the lines would still be here and operating.


Bert

Your ignorance of basic economic fundamentals is astonishing. Do you not yet understand the hows and whys of which monopoly activities skew the market away from your simplistic "if it makes money, it would still be here" mindset.

Under a true competitive market environment, the participants make their money via volume, thus a competitive railroad environment would result in the saving of all lines with even minute profit potential. To scrap these lines would result in a smaller consumer base, thus would threaten such an entity with being squeezed out by those who are constantly expanding their customer base.

Under monopoly environments, the few participants make their money via consolidating their business avenues into a few, which allows them to extract maximum profitability via maximized pricing power. Thus, lines that are either marginally profitable e.g. earning at least 180% R/VC for that line, or those normally profitable lines that have become redundant to newly merged lines, end up on the scrap heap.

This is exactly what the railroads have quasi-engaged in post Staggers. However, because there are some areas in which more than one or two railroads are in play (such as the overseas import markets), the railroads have engaged in below cost pricing (under the STB's 180% R/VC formula) to win the market share of those areas, and they then must make up for it by charging their captive markets (e.g. domestic rail shippers)excessive rates (up to 400% R/VC). Thus, the railroad market is severely skewed, skewed in favor of imports to the detriment of US production, and it shows up via the US trade deficit, abandoned factories across the USA, and the lack of new heavy manufacturing and production in the USA.


Yes, Bert, that's how it happens. Look outside your window, you can percieve it for yourself. No, it isn't a conspiracy, it is just the result of shortsighted legislation and subsequent lack of caveat enforcement.

[rrandb]

The act needs to be updated to todays enviroment. If railroad "A" rebuces rates to "C" (captive ) shippers it wil have to raise rates to "NC" (non-shippers) as there is no excess funds to offset the loses. Fair enough. If railroad "B" (whom it competes with)does not have as many C shippers it wil not have to raise its rates as much for NC shippers and will begin to increase its NC business formerly served by A with the resulting economic decline of A. Capital improvement, maintenance deffered and eventuall decline. Staggers was a result of a previouse rate system problem. While the principle is still sound by your own addmission it does not work as interpritted.`Do you think the courts should update it or the legislature. It is obviouse the industry can not. [2c]

[MichaelSol]

QUOTE: Originally posted by n012944
Oh, thats right we forgot about your and Sol's "conspriracy theory" that the world is out to make the northwest captive to two railroads. The reason all the railroads were abandoned was economics, you can say all the things you want, but the bottom line is that if the lines made money, which includes covering the maintance of the line, the lines would still be here and operating.

"The bottom line," ...

Sometimes referred to as a "roll up" strategy, it is a well known business strategy of buying up perfectly profitable, sometimes even more profitable, businesses and shutting them down in favor of the acquiring company to obtain market share and pricing power.

Sometimes this is part of a cost-cutting strategy as well. Doesn't mean any particular facility is unprofitable, simply that a bean counter somewhere decided that cost efficiencies could be obtained by consolidation, which invokes the old saw about "cuttng your way to prosperity" a recognizably risky strategy in any business as it often leads to production constraints that then entail new and more expensive facilities, incurring unecessary debt, to meet capacity needs.

However, to assume that either of these strategies is ipso facto proof that the something was unprofitable is simply too much of a stretch, since either strategy makes more sense if the facility/business is inherently profitable, rather than not.

[MichaelSol]

The original law, and the original ICC interpretation (which is supposed to be given deference by the federal courts, and wasn't) was the enacted solution, and would be perfectly viable today if enforced according to its original intent.

[rrandb]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by rrandb
Whether you remove, add or misconstrue someone elses word its still just like lying.

Then you need to stop doing it and get your facts straight.

Micheal when it comes to facts no one can top you. You have the amazing ability to pull facts and figures from a savant like mind or a data base that appears to rival IBM. What you lack is an original solution (of your own) to an obvious problem. Is that because one does not exist that someone else has proposed? [?] I would offer an example but you will just carve it up with your usual surgical precsion and neglect to offer your own. [2c]

[bobwilcox]

QUOTE: Originally posted by MichaelSol


The State of Montana spent $3.2 million on the litigation. However, high priced railroad lawyers, an unlimited litigation budget, and 14 years of constant litigation and appeals, replaced the original ICC implementation with an unwieldy, nearly impossible litigation standard, an impossibly vague standard of proof, and essentially rendered the original provision, as interpreted correctly by the ICC, unenforceable.

It sounds like Montana had its day in court and lost. Get over it.

[n012944]

QUOTE: Originally posted by futuremodal

QUOTE: Originally posted by n012944

QUOTE: Originally posted by MichaelSol

National Petrochemical and Refiners Association:

Now if you are going on about price gouging in an industry, why on earth would you use oil companies as an example??? I get it, its the railroads fault that I paid $3.05 a gallon to fill up my car today. 1st it was Katrina, then Rita, then tensions in Iran, and now the railroads. Give me a break.

Bert

Bert,

The reference to the petroleum industry was in the context of it being subjected to captive rates, aka roughly 50% of the industry is captive to one Class I railroad. Whether the oil industry itself also engages in captive pricing or not was not the issue.

However, if you know of ANY locale that only has one oil company offering, please let us know. I know that there are scads of small towns (under 1000 population) that have only one local source of fuel, but of course they are not that far (10 to 15 miles) from larger towns that have several fuel sources. Unless you are walking down to the fuel pumps to fill your gas cans for your lawn mower, most small town residents have no problem filling their tanks at any number of fuel stations.

Considering oil and most of its by products very easily shipped by either pipeline or truck(oh yea I forgot railroads don't compete with trucks) they have many options. If they do not like the price that the railroads give use something else. Also as you pointed out there are many places with only one fueling station in the area. If the next fuel source is only 10-15 miles away, is it worth using a gallon of gas round trip to save $0.10 a gallon? The oil companies know this, and as a result have many people "captive."

Bert

[TomDiehl]

QUOTE: Originally posted by futuremodal

Speaking of the pot calling the kettle black..........

(RE: The petrochemical industry complaining about captive rail rates)

QUOTE: Originally posted by narig01

Comment: If you think your prices are too high build your own f#%*#@’g RR!!!

Comment: If RR's think their diesel fuel prices are too high, then let them build their own f#%*#@'g refineries!!!![}:)]

The railroads AREN'T saying the fuel prices are too high, they're explaining what the fuel surcharge is for.

[n012944]

QUOTE: Originally posted by futuremodal

QUOTE: Originally posted by rrandb

Some rates were artificialy low. Most were not. What is obvoius was the number of miles of track that disappeared when the railroads no longer had to provide service to customers that were unable to afford these services based on the actual cost of rail service. How do you get permission to adandon a line if its making too much money? You can not. Can you abandon a line because it doesn't make enough money to operate it. YES The remarks were about grainger lines that after de-regulation became dirt paths. Was this because the railroads were making too much money NO

"How do you get permission to abandon a line if it's making too much money?" The "too much money" statement aside (e.g how much is "too much"?), a line that was profitable pre-Staggers can end up in the scrap heap for any number of reasons. Mergers can make a profitable line redundant, and we all know what happened to the redundant lines post-Staggers, don't we? The seemingly sole purpose of mergers was to allow railroads to lop off assets to *reduce* costs, totally irrespective of whether those assets made money or not. The whole purpose of dereg seems to be to consolidate as much trackage as possible into the fewest corridors possible, to allow maximization of pricing power. Thus, it is probable that most of those lines being scrapped were profitable, but the proliferation of them repressed pricing maximization. Of course, the railroads turned around then and, instead of maximizing all profits on the few remaining lines, used captive rates to maximize profits on only captive US rail shippers, then cross subsidized the rates for non-captive shippers, including all overseas importers.

Thus, minus imported oil and in spite of a relatively weak dollar, we still have a growing trade deficit, thanks in part to the market skewing activities of US railroads.

Economic theory predicts such, and WHOOOMP there it is.

The area of the country I reside in is full of abandoned ROW's that made money for their owners - The Milwaukee PCE, the ex-NP nee BN Palouse and Lewiston line, the SP&S from Spokane to Pasco, the 2nd and 4th subdivisions of the ex-Camas Prairie, the UP Yakima Valley line, et al. It's quixotic and bizzare, yet instead of returning some of those profits to the line in question for maintenance and/or upgrade, the Class I's siphoned off all those profits for other projects, possibly for the cross-subsidies given to the importers of Asian made products![V]

Oh, thats right we forgot about your and Sol's "conspriracy theory" that the world is out to make the northwest captive to two railroads. The reason all the railroads were abandoned was economics, you can say all the things you want, but the bottom line is that if the lines made money, which includes covering the maintance of the line, the lines would still be here and operating.


Bert

[MichaelSol]

There was at least the idea that captive shippers would need protection, built into the Staggers Act. The mechanism of ensuring "competitive" rates for captive shippers was somewhat vague, but legislation involving established regulatory agencies often is; Congress simply defers to the technical expertise of the regulatory agency to implement guidelines.

With regard to the ICC, this had been problematic, dating back to the days when Congress finally mandated a minimum of 6% return for railroads, yet the ICC through its rate making powers never accomplished that.

With Staggers, the ICC stepped up to the captive shipper provisions and on December
14, 1984 found that pursuant to Congressional guidelines, that the BN had market dominance in Montana and that its rates were unreasonable. The Administrative Law Judge (ALJ) further found that the rates were higher than 300% of variable cost of the service provided, far above the Staggers' guidelines.

The State of Montana spent $3.2 million on the litigation. However, high priced railroad lawyers, an unlimited litigation budget, and 14 years of constant litigation and appeals, replaced the original ICC implementation with an unwieldy, nearly impossible litigation standard, an impossibly vague standard of proof, and essentially rendered the original provision, as interpreted correctly by the ICC, unenforceable.

The idea however, remains clear. Pricing had to be rational to all shippers. Didn't have to be equal -- great latitude was provided for differential pricing. However, specific variable cost guideline limits were set. Not only would that provide protection to captive shippers, but discourage what in other industries would be called "dumping" -- offering a below cost good or service to destroy genuine competition. Companies that "dump" naturally have to have a source of funds to cover their losses, which they obtain from other customers. Internationally, it strictly outlawed. It's against the law to do it domestically for most businesses under state consumer protection and trade practices laws.

The evidence strongly suggests that railroads have been the only industry permitted to follow this practice, even though a strict application of Staggers guidelines would have, and still would, keep them from shifting the cost of an ultimately destructive business strategy to captive shippers. If intermodal (and some coal) were charged fully compensatory rates, it is likely there would be no congestion problems of the magnitude requiring billions of dollars of further and costly investment -- at the cost of poorer service to the captive shippers supplying the funds -- and heightened risk of financial distress in the event of an economic downturn or rationalization of the value of the Yuan.

That is, railroads would not have their current problems, and would be rationally profitable, had they not been able to fund a ruinous long term price war and a rate "race to the bottom" out of captive funding.

[Murphy Siding]

QUOTE: Originally posted by MichaelSol

That is precisely my contention. It is not market theory.

However, if railroads are not taking the 250, 300 and 400% revenue to variable cost profits and not using them to subsidize other shippers, then that means other shippers are also contributing their fair share, right? And railroads are earning 250%, 300% or 400% of their variable costs, right?

And VC/TC is the current estimated 50%, then railroads, not subsidizing, are not earning 10-15%, but really are earning 125%, 150% or 200% of their gross, right?

!!??!!

I am sorry, but the math does not work for any contention that there is not subsidized traffic, and if there is not subsidized traffic, then railroads must be earning profit in excess of their revenues.

Can't buy it.

As you explain it that way, I understand it. I see what you're saying. The reality is that railroads are cross-susidizing. That makes sense in this context. I don't feel that was part of anybody's grand plan to do that. It's just the way it worked out.
If, we are to force the prices down on captive shippers, how do you forsee railroads making up that difference?

[MichaelSol]

QUOTE: Originally posted by rrandb How do you get permission to adandon a line if its making too much money? You can not.

I am curious as to the basis for these broad statements you keep making. How many line abandonment proceedings have you participated in and what was your role?

My reason for asking is because there are significant examples contrary to what you say. I have here an Application to Abandon, dated August, 1979, showing that the largest line abandonment proceeding ever before the ICC, to that date, showed that the line proposed for abandonment made more money than the parent company.

The application was granted.

[Anonymous]

QUOTE: Originally posted by rrandb

Some rates were artificialy low. Most were not. What is obvoius was the number of miles of track that disappeared when the railroads no longer had to provide service to customers that were unable to afford these services based on the actual cost of rail service. How do you get permission to adandon a line if its making too much money? You can not. Can you abandon a line because it doesn't make enough money to operate it. YES The remarks were about grainger lines that after de-regulation became dirt paths. Was this because the railroads were making too much money NO

"How do you get permission to abandon a line if it's making too much money?" The "too much money" statement aside (e.g how much is "too much"?), a line that was profitable pre-Staggers can end up in the scrap heap for any number of reasons. Mergers can make a profitable line redundant, and we all know what happened to the redundant lines post-Staggers, don't we? The seemingly sole purpose of mergers was to allow railroads to lop off assets to *reduce* costs, totally irrespective of whether those assets made money or not. The whole purpose of dereg seems to be to consolidate as much trackage as possible into the fewest corridors possible, to allow maximization of pricing power. Thus, it is probable that most of those lines being scrapped were profitable, but the proliferation of them repressed pricing maximization. Of course, the railroads turned around then and, instead of maximizing all profits on the few remaining lines, used captive rates to maximize profits on only captive US rail shippers, then cross subsidized the rates for non-captive shippers, including all overseas importers.

Thus, minus imported oil and in spite of a relatively weak dollar, we still have a growing trade deficit, thanks in part to the market skewing activities of US railroads.

Economic theory predicts such, and WHOOOMP there it is.

The area of the country I reside in is full of abandoned ROW's that made money for their owners - The Milwaukee PCE, the ex-NP nee BN Palouse and Lewiston line, the SP&S from Spokane to Pasco, the 2nd and 4th subdivisions of the ex-Camas Prairie, the UP Yakima Valley line, et al. It's quixotic and bizzare, yet instead of returning some of those profits to the line in question for maintenance and/or upgrade, the Class I's siphoned off all those profits for other projects, possibly for the cross-subsidies given to the importers of Asian made products![V]

[Anonymous]

Speaking of the pot calling the kettle black..........

(RE: The petrochemical industry complaining about captive rail rates)

QUOTE: Originally posted by narig01

Comment: If you think your prices are too high build your own f#%*#@’g RR!!!

Comment: If RR's think their diesel fuel prices are too high, then let them build their own f#%*#@'g refineries!!!![}:)]

[narig01]

[2c][2c][2c]

National Petrochemical and Refiners Association:

"Legislation to remedy the current lack of access to competitive railroad operations and rates facing “captive shippers” -- including many petrochemical manufacturers -- has been offered in the 109th Congress. S. 919, The Railroad Competition Act of 2005, is co-sponsored by a bi-partisan group of Senators including Conrad Burns (R-MT), John D. Rockefeller IV (D-WV), Max Baucus (D-MT), Byron Dorgan (D-ND), Tim Johnson (D-SD), Mark Dayton (D-MN), Larry Craig (R-ID), John Thune (R-SD) and David Vitter (R-LA). S. 919 proposes to "clarify" national rail policy under the Interstate Commerce Commission (ICC) Termination Act and requires the Surface Transportation Board to "ensure effective competition" among railroads at origins and destinations; enforce reasonable rail rates "in the absence of effective competition," and maintain consistent and efficient rail service for shippers, including timely distribution of rail cars."
...
"NPRA supports a competitive, market-driven, and consumer-oriented North American rail transportation system. The Association favors providing the necessary federal resources to improve rail competition as well as rail infrastructure. Actions must be taken to hold railroads accountable in maintaining or improving service and making operations more efficient. As captive shippers, NPRA members should be protected from lack of competitive rail alternatives and rates. Severe service problems, such as those that resulted from past railroad mergers, must be prevented and/or mitigated though effective remedies. These remedies should include provisions such as performance guarantees, reasonable compensation for unacceptable performance, and guaranteed access to gateways and other railroads."

According to NPRA: Percentage of "Petroleum or Coal Products" captive by revenue percentage: 49.1%


Comment: If you think your prices are too high build your own f#%*#@’g RR!!!

Rgds IGN

[rrandb]

The pot calling the kettle black

[MichaelSol]

QUOTE: Originally posted by rrandb
Whether you remove, add or misconstrue someone elses word its still just like lying.

Then you need to stop doing it and get your facts straight.

[rrandb]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by rrandb
My position stays the same. I'm sitting.

OK,

1) most shippers are captive,
2) there are 13 trains on day on the BNSF northern line,
3) regulated rates were "artificially low".

Sit.

Most rail shippes are basically captive to the rail line they built beside. 55 cars x 13 unit grain trains a day is not too much for BNSF. By its very nature regulation caused some (not most) rates to be artificialy low. Whether you remove, add or misconstrue someone elses word its still just like lying. Its good money while you can get it but maynot serve you very well in the real world. But then you probably know that by now. [2c]

[MichaelSol]

QUOTE: Originally posted by rrandb
My position stays the same. I'm sitting.

OK,

1) most shippers are captive,
2) there are 13 trains on day on the BNSF northern line,
3) regulated rates were "artificially low".

Sit.

[rrandb]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by rrandb

Some rates were artificialy low. Most were not. What is obvoius was the number of miles of track that disappeared when the railroads no longer had to provide service to customers that were unable to afford these services based on the actual cost of rail service. How do you get permission to adandon a line if its making too much money? You can not. Can you abandon a line because it doesn't make enough money to operate it. YES The remarks were about grainger lines that after de-regulation became dirt paths. Was this because the railroads were making too much money NO

Well, your positions change faster than a speeding railroad locomotive. Can't keep up.

My position stays the same. I'm sitting. Why were so many lines ripped out when railroads would lose all those cash cow "captive" shippers.