Railroads Struggle to Deliver Coal to Utilities

[TomDiehl]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by jeaton
Short term, long term or intermediate term, even if there is no direct expense to hold on to an idle asset (not true with rail lines), there is an oppurtunity cost. That is to say that the salvage or scrap value is converted to ca***o put in the bank to earn interest or invested into something makes money. Top do otherwise is the same as putting your money in a coffee can to bury in the back yard.

The cash in the Coffee Can does not appreciate. Real property usually does.

Railroads were not going to go broke sitting on valuable, appreciating real property assets. The Land Grant roads did just fine followng exactly that philosophy. Indeed, in general real estate over the time period being discussed typically appreciated faster than the ordinary rate of return. If there was an "opportunity cost" it was probably incurred by selling off the assets.

Discussing scrap value. If it generally cost about $1 million to get a line in shape from scratch, but $100,000 could be recovered in scrap, here's the opportunity cost. By maintaining the ROW, if the value of that ROW at the end of 20 years was a $1 million per mile to the railroad, the Present Value of that exceeds the Present Value of the opportunity cost gained by selling the scrap and reinvesting it, over that same 20 year period at 9%.

Which is the better investment? Well, that's where long range planning comes in and yet, the intrinsic appreciated value of the real property alone can equal or exceed the opportunity cost gained by scrapping and sale, let alone the value of the property to the railroad for railroad purposes.

Yes, there is an "opportunity cost" to anything. Simply saying it doesn't mean anything however unless you actually know what it is.

The opportunity can also be a liability depending on how good your crystal ball is. The question of which line(s) to save and which to scrap is the whole line of this section of the thread. Someone even asked Dave, the supposed bookkeeper, to predict which lines that are being considered for abandonment today should be saved for such a possible use 20 years from now. He couldn't, any more than the people making the decisions 20 or 30 years ago could make that prediction for today. The whole thing is a gamble, you take your best guess based on past trends, up and coming businesses, demands that may or may not grow to the point where you can make a profit transporting the products, and hope your "opportunity costs" from today doesn't become "money down the crapper" tomorrow.

Dave's choice to "Monday morning quarterback" the abandonments decided a couple decades ago doesn't mean a thing, especially in view of the fact that he can't do any better today for the trackage needed 20 years in the future.

Sort of makes you wonder where the screen name "Futuremodal" comes from.

[jeaton]

Your example works for 20 years, but $100,000 at 9% for 27 years goes over a $million. But let us not forget the risk. It does cut both ways, but if at the time of decision to bank or scrap the estimate is that the track will never have a productive purpose, then the decision to scrap would seem to be appropriate.

To be fair, I only suggested the existance the ongoing cost to keep the property which might be just the property tax and while it would likely be well below the $1 million per mile to rebuild, after a couple of decades sitting idle, there is going to be an expense to put the track back in shape. You might also remember that under the betterment accounting system, the track was not depreciated. Tearing it up converts the book value to a current expense, which can become a nice non-cash deduction from taxable income. All of the above goes into the decision making process to dispose of unneeded or unused assets. As I have said before, I don't know of very many business that will keep unused production assets that will have no use in the foreseeable future.

[n012944]

QUOTE: Originally posted by MichaelSol

Here's a reference, reprinted from another thread, from a friend of mine, a retired BN dispatcher, about track management on an existing mainline, which might show up on a "map" as a "route" without showing that it, too, had been constricted by policies aimed at reducing even capacity on existing routes.

"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."

" 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 ."

Sounds like a guy who still thinks you need crew change points every two hundred miles. From my experience the rank and file do not alway see the big picture, they just see how it affects them.


Bert

[Murphy Siding]

QUOTE: Originally posted by MichaelSol


The cash in the Coffee Can does not appreciate. Real property usually does.

Railroads were not going to go broke sitting on valuable, appreciating real property assets. The Land Grant roads did just fine followng exactly that philosophy. Indeed, in general real estate over the time period being discussed typically appreciated faster than the ordinary rate of return. If there was an "opportunity cost" it was probably incurred by selling off the assets.

Discussing scrap value. If it generally cost about $1 million to get a line in shape from scratch, but $100,000 could be recovered in scrap, here's the opportunity cost. By maintaining the ROW, if the value of that ROW at the end of 20 years was a $1 million per mile to the railroad, the Present Value of that exceeds the Present Value of the opportunity cost gained by selling the scrap and reinvesting it, over that same 20 year period at 9%.

Which is the better investment? Well, that's where long range planning comes in and yet, the intrinsic appreciated value of the real property alone can equal or exceed the opportunity cost gained by scrapping and sale, let alone the value of the property to the railroad for railroad purposes.

Yes, there is an "opportunity cost" to anything. Simply saying it doesn't mean anything however unless you actually know what it is.

But still, back to one of the basic question: These numbers sure look good in this hypothetical example, if the railroads knew 20 years beforehand, which lines were going to be of such value in the future. 20/20 hindsight is a pretty easy thing to have. When the lines were torn up, they were done so, with the reality of the time. Without a crystal ball, I'm not convinced the railroads could predict the future.

[MichaelSol]

Here's a reference, reprinted from another thread, from a friend of mine, a retired BN dispatcher, about track management on an existing mainline, which might show up on a "map" as a "route" without showing that it, too, had been constricted by policies aimed at reducing even capacity on existing routes.

"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."

" 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 ."

[n012944]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by jeaton
Short term, long term or intermediate term, even if there is no direct expense to hold on to an idle asset (not true with rail lines), there is an oppurtunity cost. That is to say that the salvage or scrap value is converted to ca***o put in the bank to earn interest or invested into something makes money. Top do otherwise is the same as putting your money in a coffee can to bury in the back yard.

A touch of real world here.

Which is the better investment? Well, that's where long range planning comes in and yet, the intrinsic appreciated value of the real property alone can equal or exceed the opportunity cost gained by scrapping and sale, let alone the value of the property to the railroad for railroad purposes.

However when you are struggeling to pay you bills, sometimes one must take the short term gain over the long term to survivie. The railroads of the 70's/early 80's were facing exactly that.


Bert

[MichaelSol]

QUOTE: Originally posted by jeaton
Short term, long term or intermediate term, even if there is no direct expense to hold on to an idle asset (not true with rail lines), there is an oppurtunity cost. That is to say that the salvage or scrap value is converted to ca***o put in the bank to earn interest or invested into something makes money. Top do otherwise is the same as putting your money in a coffee can to bury in the back yard.

The cash in the Coffee Can does not appreciate. Real property usually does.

Railroads were not going to go broke sitting on valuable, appreciating real property assets. The Land Grant roads did just fine followng exactly that philosophy. Indeed, in general real estate over the time period being discussed typically appreciated faster than the ordinary rate of return. If there was an "opportunity cost" it was probably incurred by selling off the assets.

Discussing scrap value. If it generally cost about $1 million to get a line in shape from scratch, but $100,000 could be recovered in scrap, here's the opportunity cost. By maintaining the ROW, if the value of that ROW at the end of 20 years was a $1 million per mile to the railroad, the Present Value of that exceeds the Present Value of the opportunity cost gained by selling the scrap and reinvesting it, over that same 20 year period at 9%.

Which is the better investment? Well, that's where long range planning comes in and yet, the intrinsic appreciated value of the real property alone can equal or exceed the opportunity cost gained by scrapping and sale, let alone the value of the property to the railroad for railroad purposes.

Yes, there is an "opportunity cost" to anything. Simply saying it doesn't mean anything however unless you actually know what it is.

[jeaton]

QUOTE: Originally posted by idhull

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by jeaton
[br
I will add to my original point. Of all the track abandoned, what was the split of branch line and trunk line, and then just how much of the abandoned trunk line would now be useful.

But, branchlines are just not a capacity issue. The closing of a phosphate mine on some branch has little to do with discussions of capacity, which is a through route or mainline issue and even at that, the discussion is tempered by management of existing mainlines as much as broad discussions of mainline abandonment.

You are quite right with respect to lines that are served only by one or two significant customers. But there are many examples of where main routes whether sections of multiple track or whole complete lines have been abandoned or removed for short term gain. In the past the railroads have been guilty of making the capacity meet the traffic level rather than going out and marketing their services so that the traffic level meets the capacity. Obviously technology also plays a role in their decision to replace multi-track routes with signalled single track routes but in my opinion signals do not replace track. It is one thing to downgrade a triple track route to double track but to downgrade a double track route to single is part of the reason why we are where we are today.
Railroads have been guilty of abandoning routes that while not being high density routes do have enough volume to remain open but choose to re-route the traffic via alternate routes to save money. The problem is that they assume the traffic will follow their plan in spite of longer transit times due to indirect routings. This means the cost increases in the long term.
The other thing people forget about is the impact of passenger train service on rail density. Although gross ton miles may have increased on many routes the actual number of trains has declined due to the withdrawal of passenger service. If the government or somebody had supported more passenger service much of the infrastructure would have been maintained. It is not just tonnage that makes a rail line viable. Passenger train service tends to keep the trackage and signal system at a higher level which also benefits freight. The question has always been how much of the costs should be borne by the freight and passenger components.

And just how much success would any marketing or sales type have calling on the closed factory or a tipple serving a mined out facility? I was there, and let me tell you that railroad marketing were working as hard as they could to market their services.

Short term, long term or intermediate term, even if there is no direct expense to hold on to an idle asset (not true with rail lines), there is an oppurtunity cost. That is to say that the salvage or scrap value is converted to ca***o put in the bank to earn interest or invested into something makes money. Top do otherwise is the same as putting your money in a coffee can to bury in the back yard.

[Murphy Siding]

QUOTE: Originally posted by futuremodal

Murphy,

I think you will understand this:

The decommissioned power plants were replaced by newer power plants.

The abandoned rail lines were not replaced by newer rail lines.

Comprende muchacho?

Similar to how the traffic from unprofitable rail lines was replaced by traffic on other lines, and gasp! highways? I see the similarities, even if you don't.

QUOTE:
And I never said all abandoned rail lines should have been saved. We talked about that before, not to long ago. You have either a very poor memory, or a very disingenuous tact for trying to denegrate folks such as I. Which is it?

[(-D][(-D][(-D] It must be poor memory, or trying to hit a moving target. As far as the disingenuous tract,well, I don't think so. I did have chilie for dinner last night, though, so maybe that's part of the problem?[;)] I did go back and look. Sure enough, you did provide info on two current rail lines.
As you keep refering back to past abandonments that you think railroads made in error, I keep thinking that they did what made sense at the time. So what abandonded lines, (other than the Milwaukee Road, I'll give you that one, as we all know the feelings of everybody on that one)are you talking about?

[Anonymous]

QUOTE: Originally posted by MichaelSol

QUOTE: Originally posted by jeaton
[br
I will add to my original point. Of all the track abandoned, what was the split of branch line and trunk line, and then just how much of the abandoned trunk line would now be useful.

But, branchlines are just not a capacity issue. The closing of a phosphate mine on some branch has little to do with discussions of capacity, which is a through route or mainline issue and even at that, the discussion is tempered by management of existing mainlines as much as broad discussions of mainline abandonment.

You are quite right with respect to lines that are served only by one or two significant customers. But there are many examples of where main routes whether sections of multiple track or whole complete lines have been abandoned or removed for short term gain. In the past the railroads have been guilty of making the capacity meet the traffic level rather than going out and marketing their services so that the traffic level meets the capacity. Obviously technology also plays a role in their decision to replace multi-track routes with signalled single track routes but in my opinion signals do not replace track. It is one thing to downgrade a triple track route to double track but to downgrade a double track route to single is part of the reason why we are where we are today.
Railroads have been guilty of abandoning routes that while not being high density routes do have enough volume to remain open but choose to re-route the traffic via alternate routes to save money. The problem is that they assume the traffic will follow their plan in spite of longer transit times due to indirect routings. This means the cost increases in the long term.
The other thing people forget about is the impact of passenger train service on rail density. Although gross ton miles may have increased on many routes the actual number of trains has declined due to the withdrawal of passenger service. If the government or somebody had supported more passenger service much of the infrastructure would have been maintained. It is not just tonnage that makes a rail line viable. Passenger train service tends to keep the trackage and signal system at a higher level which also benefits freight. The question has always been how much of the costs should be borne by the freight and passenger components.

[MichaelSol]

QUOTE: Originally posted by jeaton

The first reference I made with the quote from the article was to the coal,ore and phosphate product of mines. I think that if you consider where those products are now produced and where they go, compared to the the origin and destination pairs of 1950, you will find that the traffic routes are considerably altered, and the abandoned trackage would not now be useful for present day movements.

While that stuff may have moved off of branch lines, the manufacturers in the northeast and upper midwest were certainly located on the mainlines. When those companies discovered that they did not have to be on a railroad they moved to cheaper land, lower cost labor and lower taxes. That left a lot of track rusting just like the plants that were left behind and 30 or 40 years later, if left in place those tracks would still be rusting away. By the way, the first major shift worked quite well for the Southern Railway.

I will add to my original point. Of all the track abandoned, what was the split of branch line and trunk line, and then just how much of the abandoned trunk line would now be useful.

My post actually alludes to this, apparently inscrutibly.

Since early days, railroads have built branches to support traffic origination, and pulled the lines when the traffic quit. That's the history of railroading. The problem came when regulation prevented the logical abandonment when the time came.

But, branchlines are just not a capacity issue. The closing of a phosphate mine on some branch has little to do with discussions of capacity, which is a through route or mainline issue and even at that, the discussion is tempered by management of existing mainlines as much as broad discussions of mainline abandonment.

[MichaelSol]

QUOTE: Originally posted by jeaton

Murphy

I see that Michael has thrown up the old saw of the railroads getting only 10% of the intercity revenue while producing 42% of the ton miles. I wonder what happens to those numbers when you strip out all the ton miles of bulk commodities hauled by the railroads and all revenue produced by the package and LTL truckers and all the trucks hauling intercity freight direct from a plant or warehouse to a store.

The "old saw" eh?

Well, it seems like not just a significant number, but a significant change from when railroads were doing "poorly."

Strip out the commodities? That would take out some of the highest revenue freight on the railroads, the BNSF anyway. I am sure some numbers can be generated that would be interesting one way or another.

[Mookie]

Thank you.

The first one - I thought about trucks - but while coal was delivered to homes in trucks years ago, I don't think it would be feasible to do a business that way. Can you give me an example? Remember that I live where coal is used in power plants, so I only know of big ticket items using coal.

Did a lot of businesses go overseas or to Mexico as a direct result of no coal? Or was it a combination of several factors and the energy or lack of, was just one factor?

Did we lose a lot of businesses either big or small because of this situation?

I notice you say options, but can you cite facts where this actually happened?

I honestly don't know the answers and would like to read your thoughts on this.

Mook

[Anonymous]

QUOTE: Originally posted by Mookie

QUOTE: Originally posted by Mookie

Now I am confused. If the railroads couldn't or wouldn't meet the demand, who did? If they lost the business - who picked it up?

Dave - you are ignoring me! I asked some pretty good questions, without any of the flourishes in the other postings. I got right to the point and just asked the bottom line.

Without demeaning my poor IQ, would you please go back and just answer the questions I asked?

Mookie

"If the railroads couldn't or wouldn't meet the demand, who did? If they lost the business - who picked it up?"

Three options availed themselves:

1. The business in question turned to the mode of last resort, aka trucks
2. The business moved overseas or south of the border
3. The business shut down, and the money vested shifted to non-rail related sectors

[Mookie]

QUOTE: Originally posted by Mookie

Now I am confused. If the railroads couldn't or wouldn't meet the demand, who did? If they lost the business - who picked it up?

Dave - you are ignoring me! I asked some pretty good questions, without any of the flourishes in the other postings. I got right to the point and just asked the bottom line.

Without demeaning my poor IQ, would you please go back and just answer the questions I asked?

Mookie

[jeaton]

The first reference I made with the quote from the article was to the coal,ore and phosphate product of mines. I think that if you consider where those products are now produced and where they go, compared to the the origin and destination pairs of 1950, you will find that the traffic routes are considerably altered, and the abandoned trackage would not now be useful for present day movements.

While that stuff may have moved off of branch lines, the manufacturers in the northeast and upper midwest were certainly located on the mainlines. When those companies discovered that they did not have to be on a railroad they moved to cheaper land, lower cost labor and lower taxes. That left a lot of track rusting just like the plants that were left behind and 30 or 40 years later, if left in place those tracks would still be rusting away. By the way, the first major shift worked quite well for the Southern Railway.

I will add to my original point. Of all the track abandoned, what was the split of branch line and trunk line, and then just how much of the abandoned trunk line would now be useful.

[jeaton]

Murphy

I see that Michael has thrown up the old saw of the railroads getting only 10% of the intercity revenue while producing 42% of the ton miles. I wonder what happens to those numbers when you strip out all the ton miles of bulk commodities hauled by the railroads and all revenue produced by the package and LTL truckers and all the trucks hauling intercity freight direct from a plant or warehouse to a store.

Once the motor vehicle, both passenger and frieght could move at the speed of a train and travel over government built and maintained highways, it was no longer for necessary for wholesale or retail outlets or people to be located on or near a railroad. With that, it was also discovered that moving freight direct to the point of sale could be more economical than moving via rail, then handling the freight over a dock and into a truck for delivery to a store, even if the rail charges were lower than the trucks.


Consider this. Whether hauling people or freight, railroads are a mass transportation facility. They are no more capable of being able to compete to haul the majority of the high revenue merchandise traffic than they are to compete with the automobile to haul the majority of people traffic. The only way railroads are able to be competitive hauling people is if there are a lot of people going between the same two place at the same time. The same thing is true of freight.

As I stated in my previous post, some trackage may have been pulled up that could be useful today, but I doubt very much that there would have been enough for railroads to be providing any kind of vastly improved service that would have given a significantly greater share of intercity frieght revenue.

[MichaelSol]

Jay, I would hate to suggest, as I did above, that "the subject is ... fairly complex." If you have all the answers, by all means, don't be coy.

When you assert, "almost none of those products are now shipped from the origins of the 1950's" I hope you are recognizing exactly what I said -- the through routes, not the branchlines (which is what an origin usually is), were the focus and the problem.

[jeaton]

Let see now. If the Santa Fe hadn't torn up all the double track on the Transcon in Kansas, Oklahoma and the eastern half of New Mexico, the SP had left in the two track main on the Sunset and Tucumcari lines, and the UP had kept in the all the rail on the lines from Salt Lake to LA and Oregon, and worst of all, if the Burlington had kept the four tracks into the Powder River Coal Mines, there probably wouldn't have been any capacity problems to the west.

Oh, excuse me! Am I being to coy? Then allow me to be straight forward and suggest reference to the (current) multiple-track main lines map and article by Curtis Richards (Trains, January 2006) and the multiple-track lines, 1950 map and article by Matt Van Hattem (Trains, June 2006). Perhaps that would provide some insight to the concept of stranded assets. Van Hattem notes in his article that in 1950, "Products of mines (coal, iron ore, phosphate) accounted for half of the originated tonnage..." Almost none of those products are now shipped from the origins of the 1950's. Manufactured products once shipped from factories in the Northeast and upper Midwest on the multiple double tracks mainlines that served that area first went to production plants in the South and then out of the country. As for grain and grain products, the day in 1967 that the Illinois Central Railroad hauled the first unit train load of corn to the Gulf Coast marked the beginning of the end of the country elevator, and with the increase of the capacity of trucks and the quality of rural highways, grain branch lines became as obsolete as buggy whips. Just like old factories, that track was torn down, and if the track material was usful for any more than scrap, it was moved to a place where it would be useful.

No doubt some of the trackage that was torn up 20 to 50 years ago could now be useful, but I have yet to see a case made that a railroad would have been financially better off to have kept a segment of track.

[MichaelSol]

QUOTE: Originally posted by Murphy Siding

QUOTE: Originally posted by Murphy Siding

QUOTE: Originally posted by futuremodal
Many other industries will maintain "unused" assets for long periods of time, because they understand the cyclical nature of business. Apparently, railroads do not understand this basic business tenet.

You see, if you scrap an asset, you don't have that asset later on when you need it. Now that the nation's energy and other transportation needs are such that abandoned lines would be put into play right now, it shows a lack of foresight (or a complete lack of concern) by the shortsighted railroad industry.

Don't these guys follow economic trends? Or did they think that the US was destined for a Soviet-style command economy, so why save assets if the railroads are going to be taken over by the federales?

Hey Dave- any chance you could make a quick list of the under-utilized or dormant rail lines that will be really busy 10 years from now? 20 years from now? That way, the railroads would have an easier time planning some of this stuff?[;)][:-,]

Michael: The post relates back to this post. It is Dave's contetion that railroads should have held onto all of those unused,or under-used rail lines that they would need far in the future, although they just didn't know it at the time. Your recent postings on this thread seem to support this same idea. Somewhere on a Milwaukee Road thread (of all things!) you wrote a very good explanation of how the granger roads were going broke because of all the unprofitable lines they weren't allowed to abandon. Would you have advocated railroads spending money to save lines for a rainy day, that may never have come?

Murphy, the subject is to me, fairly complex. It's like Open Access. Someone with an economics background, like Dave, probably has far more comfort with a concept like that than I do. I would need to do a lot of homework and a considerable amount of econometric modelling before I would feel comfortable at all on a topic like that. I see some interesting examples that "suggest" it's workable, but it's just too different from my background and experience in other business models which are not open access for me to have an instant opinion either way.

Abandoning rail lines. For the Grangers, it was mostly branchlines that were alleged to be the problem. I think Dave is primarily referring to through routes; not sure, haven't followed the discussion that closely.

Mileage has gone down from, what, nearly 200,000 route miles in 1970 to just under 100,000 now? The Grangers tended to be branchline heavy. Milwaukee was probably typical at about 70%. BN was about 35%, almost all Q stuff. The FRA under Brock Adams got this idea that it was the duplicative mainlines that were the problem, not the branchlines that the railroads themselves had theretofore claimed were the problem. Adams conditioned financial assistance on "duplicative" mainline elimination and all the Class I's dutifully shook their heads, yup, the problem must be those duplicative mainlines, now give us the check.

Now, that background is suggestive.

It wasn't an industry decision, or even an industry perspective. It was strictly a government initiated concept, implemented and propelled by the corrosive influence of government money at a critical time.

As I have mentioned before, BN's Tom Lamphier was the only Class I president who really questioned the fundamental concept, arguing that "excess capacity" was essential to the ability of railroads to provide "service" and to offer a competitive alternative to trucking.

Well, the government got its way. "Excess capacity" was eliminated, with a vengence.

What happened? Exactly what Lamphier predicted. Railroads could not, in fact, offer "competitive" service for premium traffic. They hauled more and earned less. They moved slower, and costs went up. Railroads now earn less than 10% of total intercity freight revenue, while producing over 42% of the ton miles of intercity freight. The tonnage is considerably more than during the 1970s, but the profitability in relationship to the tonnage considerably less, compared to what trucking got out of the regulatory changes.

The interesting study that this suggests isn't that capacity was a "future" problem -- but that removing "excess" capacity has, all during the process, continually reduced railroad ability to price against trucking for premium traffic, resulting in continuing erosion of the basic profitability of rail traffic, even as trucks obtained the more profitable shares.

It isn't hindsight to say that "gee railroads should have done this or that," the fact is that the ultimate results of capacity constraints were showing up from the get-go. The problem was, the eroding profitability of rail freight haulage compelled more cost cutting -- the sure fire road to business perdition -- which resulted in further declines in ability to "meet the competition" in terms of price and service.

Well, more later. But you can see where I am suggesting this goes. The process of intentionally creating capacity constraints had little to do with overall rail abandonment -- branch lines -- but everything to do with abandoning those specific portions of the U.S. rail system that offered the rail industry the ability to earn profit -- competition for premium price, rather than the race to the bottom of commodity pricing, which is what happened as the result of the focus on cutting capacity.

Is it a problem just now? No, it has been a problem since 1976. It just gets real expensive about now, but in terms of lost profits, it has been a price paid all along.

[Anonymous]

QUOTE: Originally posted by MichaelSol

Ladies and gentlemen, a manufacturing facility is simply not the same thing as a right of way. Companies do, in fact, gain advantages by opening new facilities and closing down old ones. "Buildings" are meant to be replaceable assets. Look at the depreciation schedules.

That's what I have been trying to explain to the cult of utmost density. The rail assets were not replaced.

If they had stopped pissing and gave it some thought, they could have figured it out on their own. At least, a reasonable person would assume they could figure it out.

Perhaps I was being too complimentary in calling them the double digit IQ crowd.[}:)]

[Anonymous]

QUOTE: Originally posted by Murphy Siding

QUOTE: Originally posted by TomDiehl

QUOTE: Originally posted by Murphy Siding

QUOTE: Originally posted by Murphy Siding

QUOTE: Originally posted by futuremodal
Many other industries will maintain "unused" assets for long periods of time, because they understand the cyclical nature of business. Apparently, railroads do not understand this basic business tenet.

You see, if you scrap an asset, you don't have that asset later on when you need it. Now that the nation's energy and other transportation needs are such that abandoned lines would be put into play right now, it shows a lack of foresight (or a complete lack of concern) by the shortsighted railroad industry.

Don't these guys follow economic trends? Or did they think that the US was destined for a Soviet-style command economy, so why save assets if the railroads are going to be taken over by the federales?

Hey Dave- any chance you could make a quick list of the under-utilized or dormant rail lines that will be really busy 10 years from now? 20 years from now? That way, the railroads would have an easier time planning some of this stuff?[;)][:-,]

Michael: The post relates back to this post. It is Dave's contetion that railroads should have held onto all of those unused,or under-used rail lines that they would need far in the future, although they just didn't know it at the time. Your recent postings on this thread seem to support this same idea. Somewhere on a Milwaukee Road thread (of all things!) you wrote a very good explanation of how the granger roads were going broke because of all the unprofitable lines they weren't allowed to abandon. Would you have advocated railroads spending money to save lines for a rainy day, that may never have come?

Actually Murph, it goes back to the third post on page 2 by Futuremodal, last paragraph:

"Again, I will ask you this: Can you name any other industry besides the rail industry that has engaged in such a canabalistic attitude toward it's hard assets?"

A few people took the bait.

Come to think of it, there were several power plants in the Dakotas, Minnesota and Iowa that have been decommisioned and torn down. Didn't they anticipate future energy needs? What do you think that is all about?[:0]

Murphy,

I think you will understand this:

The decommissioned power plants were replaced by newer power plants.

The abandoned rail lines were not replaced by newer rail lines.

Comprende muchacho?

And I never said all abandoned rail lines should have been saved. We talked about that before, not to long ago. You have either a very poor memory, or a very disingenuous tact for trying to denegrate folks such as I. Which is it?

[edblysard]

Murphy,
I am sure it is because BNSF, in a national conspiracy with the Atomic Energy Commission, intentionally failed to deliver enough coal at a cheap enough price and in sufficient volume, thereby forcing the coal fired power plant operators to close down and abandon their plants...which in turn allowed BNSF to abandon the key rail lines in Montana that kept marginally producing farms in business...see how it all ties together?
BNSF is the Government....



[:D]

[Murphy Siding]

QUOTE: Originally posted by TomDiehl

QUOTE: Originally posted by Murphy Siding

QUOTE: Originally posted by Murphy Siding

QUOTE: Originally posted by futuremodal
Many other industries will maintain "unused" assets for long periods of time, because they understand the cyclical nature of business. Apparently, railroads do not understand this basic business tenet.

You see, if you scrap an asset, you don't have that asset later on when you need it. Now that the nation's energy and other transportation needs are such that abandoned lines would be put into play right now, it shows a lack of foresight (or a complete lack of concern) by the shortsighted railroad industry.

Don't these guys follow economic trends? Or did they think that the US was destined for a Soviet-style command economy, so why save assets if the railroads are going to be taken over by the federales?

Hey Dave- any chance you could make a quick list of the under-utilized or dormant rail lines that will be really busy 10 years from now? 20 years from now? That way, the railroads would have an easier time planning some of this stuff?[;)][:-,]

Michael: The post relates back to this post. It is Dave's contetion that railroads should have held onto all of those unused,or under-used rail lines that they would need far in the future, although they just didn't know it at the time. Your recent postings on this thread seem to support this same idea. Somewhere on a Milwaukee Road thread (of all things!) you wrote a very good explanation of how the granger roads were going broke because of all the unprofitable lines they weren't allowed to abandon. Would you have advocated railroads spending money to save lines for a rainy day, that may never have come?

Actually Murph, it goes back to the third post on page 2 by Futuremodal, last paragraph:

"Again, I will ask you this: Can you name any other industry besides the rail industry that has engaged in such a canabalistic attitude toward it's hard assets?"

A few people took the bait.

Come to think of it, there were several power plants in the Dakotas, Minnesota and Iowa that have been decommisioned and torn down. Didn't they anticipate future energy needs? What do you think that is all about?[:0]

[TomDiehl]

QUOTE: Originally posted by Murphy Siding

QUOTE: Originally posted by Murphy Siding

QUOTE: Originally posted by futuremodal
Many other industries will maintain "unused" assets for long periods of time, because they understand the cyclical nature of business. Apparently, railroads do not understand this basic business tenet.

You see, if you scrap an asset, you don't have that asset later on when you need it. Now that the nation's energy and other transportation needs are such that abandoned lines would be put into play right now, it shows a lack of foresight (or a complete lack of concern) by the shortsighted railroad industry.

Don't these guys follow economic trends? Or did they think that the US was destined for a Soviet-style command economy, so why save assets if the railroads are going to be taken over by the federales?

Hey Dave- any chance you could make a quick list of the under-utilized or dormant rail lines that will be really busy 10 years from now? 20 years from now? That way, the railroads would have an easier time planning some of this stuff?[;)][:-,]

Michael: The post relates back to this post. It is Dave's contetion that railroads should have held onto all of those unused,or under-used rail lines that they would need far in the future, although they just didn't know it at the time. Your recent postings on this thread seem to support this same idea. Somewhere on a Milwaukee Road thread (of all things!) you wrote a very good explanation of how the granger roads were going broke because of all the unprofitable lines they weren't allowed to abandon. Would you have advocated railroads spending money to save lines for a rainy day, that may never have come?

Actually Murph, it goes back to the third post on page 2 by Futuremodal, last paragraph:

"Again, I will ask you this: Can you name any other industry besides the rail industry that has engaged in such a canabalistic attitude toward it's hard assets?"

A few people took the bait.

[TomDiehl]

QUOTE: Originally posted by rrandb

QUOTE: Originally posted by chad thomas

QUOTE: Originally posted by rrandb

Mr Sol I beleive your are swimming up stream on that one and will never see the source of the river as are we with dave. Its a lot of work and you get nowhere.[#dots]

True, but isn't it entertaining.

If he wasn't entertaining why would we chat with him. [swg] [:-^]

I want to know where Chad gets these animated smilies. [:D]

[rrandb]

QUOTE: Originally posted by chad thomas

QUOTE: Originally posted by rrandb

Mr Sol I beleive your are swimming up stream on that one and will never see the source of the river as are we with dave. Its a lot of work and you get nowhere.[#dots]

True, but isn't it entertaining.

If he wasn't entertaining why would we chat with him. [swg] [:-^]

[Murphy Siding]

QUOTE: Originally posted by Murphy Siding

QUOTE: Originally posted by futuremodal
Many other industries will maintain "unused" assets for long periods of time, because they understand the cyclical nature of business. Apparently, railroads do not understand this basic business tenet.

You see, if you scrap an asset, you don't have that asset later on when you need it. Now that the nation's energy and other transportation needs are such that abandoned lines would be put into play right now, it shows a lack of foresight (or a complete lack of concern) by the shortsighted railroad industry.

Don't these guys follow economic trends? Or did they think that the US was destined for a Soviet-style command economy, so why save assets if the railroads are going to be taken over by the federales?

Hey Dave- any chance you could make a quick list of the under-utilized or dormant rail lines that will be really busy 10 years from now? 20 years from now? That way, the railroads would have an easier time planning some of this stuff?[;)][:-,]

Michael: The post relates back to this post. It is Dave's contetion that railroads should have held onto all of those unused,or under-used rail lines that they would need far in the future, although they just didn't know it at the time. Your recent postings on this thread seem to support this same idea. Somewhere on a Milwaukee Road thread (of all things!) you wrote a very good explanation of how the granger roads were going broke because of all the unprofitable lines they weren't allowed to abandon. Would you have advocated railroads spending money to save lines for a rainy day, that may never have come?

[MichaelSol]

Well, what ever that means.

The point is, you hang on to irreplaceable assets, as they are not comparable to assets that are meant to be replaced, or, dispense with them, at a minimum, with a great deal of caution, because you are never going to get them back.

[Murphy Siding]

QUOTE: Originally posted by MichaelSol

Ladies and gentlemen, a manufacturing facility is simply not the same thing as a right of way. Companies do, in fact, gain advantages by opening new facilities and closing down old ones. "Buildings" are meant to be replaceable assets. Look at the depreciation schedules.

Ladies and gentlemen and MichaelSol, a wholesale building materials company, such as Georgia Pacific Corporation, mentioned in the post in question, is a wholesale building materials company. Thay means they sell building materials, wholesale. It too, is not the same thing as a right of way. I thought I'd do my civic duty, and point that out to any who may have been confused on that issue as well.[;)]