double-stack vs piggyback

[TomDiehl]

One thing that has never been evident to me through all of FM's postings about the topic is how his theory of open access can generate extra capacity on the same track that is capacity-constrained in the current method of operation.

I will use a theoretical example of the mostly single track Los Angeles-El Paso segment of the Sunset Route.  FM has stated that the rates charged by the owners of the track to train operators would be regulated.  If the firm owning the capacity-constrained Sunset Route is earning an adequate rate of return on investment in the existing line, where is the incentive to add capacity and maintain that same adequate rate of return on a now appreciably larger investment?

Now Paul, Dave's mind is made up, don't confuse him with the facts or reality of the situation.

Sometimes you must make yourself walk away from FM.  It is not worth the headache.

Bert

But he's always good for a laugh.

[n012944]

One thing that has never been evident to me through all of FM's postings about the topic is how his theory of open access can generate extra capacity on the same track that is capacity-constrained in the current method of operation.

I will use a theoretical example of the mostly single track Los Angeles-El Paso segment of the Sunset Route.  FM has stated that the rates charged by the owners of the track to train operators would be regulated.  If the firm owning the capacity-constrained Sunset Route is earning an adequate rate of return on investment in the existing line, where is the incentive to add capacity and maintain that same adequate rate of return on a now appreciably larger investment?

Now Paul, Dave's mind is made up, don't confuse him with the facts or reality of the situation.

 

Sometimes you must make yourself walk away from FM.  It is not worth the headache.

 

Bert

[Anonymous]

One thing that has never been evident to me through all of FM's postings about the topic is how his theory of open access can generate extra capacity on the same track that is capacity-constrained in the current method of operation.

I will use a theoretical example of the mostly single track Los Angeles-El Paso segment of the Sunset Route.  FM has stated that the rates charged by the owners of the track to train operators would be regulated.  If the firm owning the capacity-constrained Sunset Route is earning an adequate rate of return on investment in the existing line, where is the incentive to add capacity and maintain that same adequate rate of return on a now appreciably larger investment?

I've read that paragraph three times and it still doens't make any sense!

By "rates" I assume you are refering to the user fee or toll.

You have it backwards.  By regulating the user fees (the equalization of private ROW to public ROW)you keep the owners from exploiting capacity crunches, thus their incentive to limit capacity to maximize the tolls is extinguished.  Now their income is dependent on volume, not premium, so adding capacity as demanded equates to added income, while not adding capacity means less income.

Make no mistake - railroad pathways are of the utility persuasion, de facto if not de jure.

[TomDiehl]

One thing that has never been evident to me through all of FM's postings about the topic is how his theory of open access can generate extra capacity on the same track that is capacity-constrained in the current method of operation.

I will use a theoretical example of the mostly single track Los Angeles-El Paso segment of the Sunset Route.  FM has stated that the rates charged by the owners of the track to train operators would be regulated.  If the firm owning the capacity-constrained Sunset Route is earning an adequate rate of return on investment in the existing line, where is the incentive to add capacity and maintain that same adequate rate of return on a now appreciably larger investment?

Now Paul, Dave's mind is made up, don't confuse him with the facts or reality of the situation.

[CSSHEGEWISCH]

One thing that has never been evident to me through all of FM's postings about the topic is how his theory of open access can generate extra capacity on the same track that is capacity-constrained in the current method of operation.

I will use a theoretical example of the mostly single track Los Angeles-El Paso segment of the Sunset Route.  FM has stated that the rates charged by the owners of the track to train operators would be regulated.  If the firm owning the capacity-constrained Sunset Route is earning an adequate rate of return on investment in the existing line, where is the incentive to add capacity and maintain that same adequate rate of return on a now appreciably larger investment?

[TomDiehl]

Tom, I'll sum it up this way:  Bailouts of closed access rail systems have never happened, have they? (insert sarcastic smilie here)  Seems to me the US system is in a constant state of perpetual bailout, whether by direct financial aid, or indirect legal exemption.  One fact is clear - the growth in OA is stronger than that of CA.  Live with it.

In a free market society, competitive access is preferable to a lack of competitive access.

The point is, the open access model you keep promoting is no improvement in this area. Maybe in your limited mind it's "clear the open access has stronger growth than closed access," but you've shown no proof of this.

And exactly why is competitive access to private property preferable? That flies completely in the face of "free market society." Are you going to impose emminent domain back at the railroads to have the government take over their tracks? Then have the government take over the repair and maintenance of them, as well as build new lines? We've seen how well this works with the highway system for which they already have responsibility. Putting those two statements together you're contradicting yourself yet again.

The free market DOES exist. There is no law stopping anyone from buying a truck and starting a long haul business, or buying a barge and tug to operate on the waterways. The right-of-way is built and maintained with tax dollars.

There also is no law stopping any person or company from building a new roadway and charging tolls on it, or using it to operate their own vehicles. Just like this, there is no law stopping any person or company from building a new railroad, traditional or newer technology such as monorail or maglev. They also have the right to operate this as a private right-of-way or open it on a toll basis. If you've been following even the posts in here, the most desirable rail routes are already near or at capacity operating the owning company's trains. There's no capacity or incentive to open the access on these lines. To increase the capacity just in case someone might want to run a train on their lines is speculation, and the railroads are spending big bucks to increase their capacity just to handle the traffic they already have. No need to speculate there.

You need to learn the difference between private property and tax supported public property.

[Anonymous]

Hey, in case anyone wants to know...NS 218 this morning (7am) had 52 trailers, no containers.  Of the 52 trailers, at least 12 were UPS trailers, probably more as there were lease trailers on the train.

Lots of big orange too. 

Trains 217/218, the Greensboro - Chicago trains typically only have 50 - 60 trailers...there must be pretty good revenue for these to justify that small of train. 

 

What is the average trailer revenue per mile these days?  About a buck a mile?   That yields about $45k for this trailer.  That seems thin.

 

ed

All the railroads have to do to attract more trailers is to keep the TOFC rates consistently below the cost of taking that trailer OTR.  Just make sure you get it to the unloading dock on time, that's all we ask.

It is interesting in the barge vs rail debate, since the barges can stack 'em five high, their container per platform ratio potential is 2 1/2 times that of the railroads.  But for trailers, both types can only go single stack - barges can be specialized to have multiple decks for trailers, but that usually is not practical since they prefer to load trailers bulk crane lift style, not ro/ro.  Too much specialized infrastructure at the barge ports, and not that much demand for shipping trailers at 7 mph.  So any trailers are shipped as add ons to container barges, and such is a rare occurance.  

But ISO containers only need to meet ship departure schedules, and thus they can be shipped JIT.  That's why containerization has really blossomed on the Columbia/Snake waterway.  Haven't seen much in the way of domestic containerization though.

[Anonymous]

Someone please tell Tom that when he is replying to a single post, try to keep the subsequent *responses* within a single post as well, not five or six.

Tom, I'll sum it up this way:  Bailouts of closed access rail systems have never happened, have they? (insert sarcastic smilie here)  Seems to me the US system is in a constant state of perpetual bailout, whether by direct financial aid, or indirect legal exemption.  One fact is clear - the growth in OA is stronger than that of CA.  Live with it.

In a free market society, competitive access is preferable to a lack of competitive access.

[MP173]

Hey, in case anyone wants to know...NS 218 this morning (7am) had 52 trailers, no containers.  Of the 52 trailers, at least 12 were UPS trailers, probably more as there were lease trailers on the train.

Lots of big orange too. 

Trains 217/218, the Greensboro - Chicago trains typically only have 50 - 60 trailers...there must be pretty good revenue for these to justify that small of train. 

 

What is the average trailer revenue per mile these days?  About a buck a mile?   That yields about $45k for this trailer.  That seems thin.

 

ed

[TomDiehl]

Also it begs the question "who built the rivers?"

Which begs the question "where did you learn your geology?"

The barge lines, or the government didn't "build the rivers." Call it natural erosion, hand of God, or what have you, they existed before the boats were built.

Rail lines, as well as highways need to be built by man.

And those are facts of life and geology.

[TomDiehl]

Plus, Tidewater and Foss (as well as anyone else) is welcome to build a rail line between two end points. Why are you hung up on the idea they have to use certain passes or canyons? Let them find their own routes like the railroads did. Or let the government build a rail line for them, like they maintain the riverways. Oh wait, the government is so far in debt now our grandchildren will be paying the principal.

The AAR clone strikes again!  How about we make the railroads open access like the waterways and highways, instead of building each potential rail transporter their own exclusive line?  Read that last phrase again, it bears worth contemplation.  

Where is it written in stone that each individual transportation service provider must build their own exclusive transportation pathway?

Apparently it is written only on the stoney minds of rail propagandists!

It isn't. Any more than it is written that a private company, that has invested it's own money in developing a transportation right-of-way needs to allow the use of it by anyone, in any way they see fit, without compensating the owner. If they build, or pay to have built, such a right-of-way, they have every right to dictate its use.

But that must be written in the stoney minds of the open access propagandists.

[TomDiehl]

And the old "open access" argument still isn't flying. Highways and riverways aren't single lane, or even single lane dual direction like most of the railroads. Plus, we still haven't heard how you figured out the logistics of making the concept actually work. Lots of things sound good in theory, but fall flat on their face with an attempt to try and make them work.

As per your AAR submindset, you ignore that little segment of land outside North America known as "The Rest Of The World", where railroad OA in various implementations continues to grow unabated.  And why you think having signal controlled bottlenecks somehow bars multiple user access on highway and riverways is something only a psychologist can answer - don't highways have signalled intersections?  Aren't locks through dams one user at a time?  It's amazing but true, if a certain transporation pathway is signalled to control fluidity through bottlenecks, you can have multiple users aplenty without accident or delay.  In fact, there are some sections of US railroads where multiple users access single track sections with no apparent drawbacks...........

Yes, we've been reading how well this "open access" works in the rest of the world, especially in England. The government just had to financially bail out one of the right-of-way owners with big bucks (well, big Pounds in this case). But then, since the news is just "propaganda" to you, don't clutter your little mind with such things.

Bottlenecks on the highways or the waterways are a small percentage of the distance travelled by the cargo carriers. The railroads have built up a system and adjusted it over the years dependant on market forces rather than political pressures. If you ever listened to the news you would have heard of the infamous Alaskan "Bridge to Nowhere," an excellent example of the government deciding where to invest transportation funds. The trackage rights setups you describe are hardly "open access." Only certain trains from certain railroads can operate on the given section of track.

And I notice you still haven't told us how "open access" is supposed to work here in the US.

[TomDiehl]

And some creative accounting with the Waterway Trust Fund "helps *reduce* the federal deficit?" Maybe you haven't been watching the news for the last six years.

The point I made that is obvious to everyone but you is that the Waterway Trust Fund is being held in account as a way of countering deficits (much like the Social Security *Trust Fund*), and is not being fully dispersed for use on waterways projects.  We're not arguing about the relative size of the federal deficit.  Perhaps you shouldn't have the CBS Evening Indoctrination.......er, *News*.... on while you are typing away on your computer, it seems to cause crossed signals in your mind.

Oh I'm sorry. Keeping up on current events is obviously beyond your limited capabilities. We don't want to clutter your brain with useless information like this. But I guess you don't care that once you get a job, your portion of that federal debt will be $375,000. And that's according to our Comptroller General, David Walker. So any supposed "reduce federal defict" talk is, at best, suspect, just like the rest of your "arguments."

The bottom line to this is, a certain amount of money is required to maintain the waterways. Only a small percentage is recovered by "User Fees." Guess where the rest is coming from, our govenment borrowing money against taxes to be collected in the future. At this rate it will be our grandchildren.

[TomDiehl]

The problem with trying to determine the portion of waterway maintenance costs attributable to users is that you can't come up with a reliable standard of measure.  Take dredging, for instance.  Some including the CBO would say the cost of dredging should be fully borne by the barge lines, yet the accumulation of silt behind dams would not occur if the river was free flowing, so since prior usage scenarios were sans siltation, why should silt removal be borne by the bargelines under slack water conditions?  Yet, we also know that capacity of the old river boats was limited by free flowing conditions, including a seasonal cessation of navigation during low water periods.  Since modern barge lines have far deeper draft than the old river boats, should we pro-rate any maintenance dredging cost over those sections of the river that used to be shallower than current draft?

To their credit, the barge lines argue that since the dams themselves provide a valuable commodity called electricity, all the costs associated with waterway maintenance should be included in the cost of producing that electricity.  Well, that is true, those projects are producing both a transportation service and a valuable commodity, something the railroads can't claim.

For the record, most of the Waterways Trust Fund is kept in limbo to help *reduce* the federal deficit, and is not being fully dispersed for use in waterways projects.

What's most important to remember here is that the rail companies are not being discriminated against by this perceived waterways subsidy.  Waterways are Open Acess, railroads are not.  Anyone can start up a barge company with relatively minimal investment (e.g. no need for a $2 billion federal loan guarantee for a PRB extension or a $1 billion federal grant to aid in a double stack clearance project!)  Both UP and BNSF have every right in the world to start up their own barging divisions if they choose.  Contrast that with the various public subidies of the railroads, which have not resulted in any improved public access benefits.  Though UP or BNSF can start up a barge division and use the Columbia/Snake River Waterway, neither Tidewater nor Foss have the right to start up their own rail divisions and use Marias Pass or Weber Canyon.

To the point of the dams, would the river be navigable by the barges if the dams weren't there to maintain a minimum water level?

Yes, but only part of the year.

"To their (barge lines) credit, they argue?" I hate to break the news to you Dave, but not every dam is hydroelectric.

I hate to break the news to you Tom, but every dam on the Columbia/Snake Waterway is hydroelectric.

So making the rivers navigable for "only part of the year" makes a difference who built or maintains the dams and waterways?

And you suddenly want to narrow the discussion to one river. Lame tactic.

[TomDiehl]

Regarding other modes, specifically barge traffic, while there are prior claims to the use of the river systems, where they existed, the expenses for inland waterway improvements are still not meet by user fees. Since some of the conversation has turned to the 80's take a look at part 4 of the linked CBO report from the 80's. http://www.cbo.gov/ftpdoc.cfm?index=5321&type=1

Per page 34 only 10% of the costs were/projected to be recovered through users fees for operations of which "maintenance dredging and operation of navigation aids" amounted to 3/5ths of the expenditure.

Why do certain members of the public act as though the railroads are treating them unfairly when the government is giving away the right of ways to barge operators? Railroads where released from the majority of their common carrier obligations due to the skewing of the transportation marketplace by such practices as those above.

A little bit off topic, and the whole "give away" thing is more than quite a bit askew. 

It is humorous to hear railroads and their fans complain about "subsidized" waterways, while apparently forgetting those land grants without which most Western railroads wouldn't even exist.  Even giving credence to the argument that waterway user's fees only amount to a small percentage of the total cost of maintaining those waterways, the amount of *subsidy* given to waterways is still just a fraction of the subsidy given to the original land grant railroads.

Talk about living in the past. Those land grants to the western railroads you keep refering to were about a century ago. Add to that, if the railroads hadn't built a transportation system into this area, the land would have been nearly worthless until the government could build highways into the area. And that would have had to wait until the automobile and motor truck was invented and perfected enough to be able to run long distances.

The railroads own the land the track is on, pay taxes on it, and maintain those tracks and property. QUITE a bit different than using a government maintained waterway that isn't paying taxes and only charges a fraction of what the maintenance costs as a user fee.

Tom, you really should apply for a job with the AAR.  You really seem to have no independent thought abilities other than to repeat the same worn out mantra's while at the same time ignoring the massive amounts of aid that the railroads have received and continue to receive, both financial and legal.

Or as they say, weak minds think alike.

And you need to learn the difference between "independent thought" and "stay awake in history class." Maybe you should get together with that other weak mind running Iran so you can both rewrite history to you liking. You start spouting "No holocost" for him and he'll start spouting "the US railroads should forever be grateful and obligated for land grants they received a century ago."

So tell us "Mr Expert" (and I use that term loosely), how much subsidy and land grants have the big railroads received in this country in the last one or two decades?

[Anonymous]

The problem with trying to determine the portion of waterway maintenance costs attributable to users is that you can't come up with a reliable standard of measure.  Take dredging, for instance.  Some including the CBO would say the cost of dredging should be fully borne by the barge lines, yet the accumulation of silt behind dams would not occur if the river was free flowing, so since prior usage scenarios were sans siltation, why should silt removal be borne by the bargelines under slack water conditions?  Yet, we also know that capacity of the old river boats was limited by free flowing conditions, including a seasonal cessation of navigation during low water periods.  Since modern barge lines have far deeper draft than the old river boats, should we pro-rate any maintenance dredging cost over those sections of the river that used to be shallower than current draft?

To their credit, the barge lines argue that since the dams themselves provide a valuable commodity called electricity, all the costs associated with waterway maintenance should be included in the cost of producing that electricity.  Well, that is true, those projects are producing both a transportation service and a valuable commodity, something the railroads can't claim.

For the record, most of the Waterways Trust Fund is kept in limbo to help *reduce* the federal deficit, and is not being fully dispersed for use in waterways projects.

What's most important to remember here is that the rail companies are not being discriminated against by this perceived waterways subsidy.  Waterways are Open Acess, railroads are not.  Anyone can start up a barge company with relatively minimal investment (e.g. no need for a $2 billion federal loan guarantee for a PRB extension or a $1 billion federal grant to aid in a double stack clearance project!)  Both UP and BNSF have every right in the world to start up their own barging divisions if they choose.  Contrast that with the various public subidies of the railroads, which have not resulted in any improved public access benefits.  Though UP or BNSF can start up a barge division and use the Columbia/Snake River Waterway, neither Tidewater nor Foss have the right to start up their own rail divisions and use Marias Pass or Weber Canyon.

To the point of the dams, would the river be navigable by the barges if the dams weren't there to maintain a minimum water level?

Yes, but only part of the year.

"To their (barge lines) credit, they argue?" I hate to break the news to you Dave, but not every dam is hydroelectric.

I hate to break the news to you Tom, but every dam on the Columbia/Snake Waterway is hydroelectric.

And some creative accounting with the Waterway Trust Fund "helps *reduce* the federal deficit?" Maybe you haven't been watching the news for the last six years.

The point I made that is obvious to everyone but you is that the Waterway Trust Fund is being held in account as a way of countering deficits (much like the Social Security *Trust Fund*), and is not being fully dispersed for use on waterways projects.  We're not arguing about the relative size of the federal deficit.  Perhaps you shouldn't have the CBS Evening Indoctrination.......er, *News*.... on while you are typing away on your computer, it seems to cause crossed signals in your mind.

And the old "open access" argument still isn't flying. Highways and riverways aren't single lane, or even single lane dual direction like most of the railroads. Plus, we still haven't heard how you figured out the logistics of making the concept actually work. Lots of things sound good in theory, but fall flat on their face with an attempt to try and make them work.

As per your AAR submindset, you ignore that little segment of land outside North America known as "The Rest Of The World", where railroad OA in various implementations continues to grow unabated.  And why you think having signal controlled bottlenecks somehow bars multiple user access on highway and riverways is something only a psychologist can answer - don't highways have signalled intersections?  Aren't locks through dams one user at a time?  It's amazing but true, if a certain transporation pathway is signalled to control fluidity through bottlenecks, you can have multiple users aplenty without accident or delay.  In fact, there are some sections of US railroads where multiple users access single track sections with no apparent drawbacks...........

Plus, Tidewater and Foss (as well as anyone else) is welcome to build a rail line between two end points. Why are you hung up on the idea they have to use certain passes or canyons? Let them find their own routes like the railroads did. Or let the government build a rail line for them, like they maintain the riverways. Oh wait, the government is so far in debt now our grandchildren will be paying the principal.

The AAR clone strikes again!  How about we make the railroads open access like the waterways and highways, instead of building each potential rail transporter their own exclusive line?  Read that last phrase again, it bears worth contemplation.  

Where is it written in stone that each individual transportation service provider must build their own exclusive transportation pathway?

Apparently it is written only on the stoney minds of rail propagandists!

Also it begs the question "who built the rivers?"

Which begs the question "where did you learn your geology?"

[Anonymous]

Regarding other modes, specifically barge traffic, while there are prior claims to the use of the river systems, where they existed, the expenses for inland waterway improvements are still not meet by user fees. Since some of the conversation has turned to the 80's take a look at part 4 of the linked CBO report from the 80's. http://www.cbo.gov/ftpdoc.cfm?index=5321&type=1

Per page 34 only 10% of the costs were/projected to be recovered through users fees for operations of which "maintenance dredging and operation of navigation aids" amounted to 3/5ths of the expenditure.

Why do certain members of the public act as though the railroads are treating them unfairly when the government is giving away the right of ways to barge operators? Railroads where released from the majority of their common carrier obligations due to the skewing of the transportation marketplace by such practices as those above.

A little bit off topic, and the whole "give away" thing is more than quite a bit askew. 

It is humorous to hear railroads and their fans complain about "subsidized" waterways, while apparently forgetting those land grants without which most Western railroads wouldn't even exist.  Even giving credence to the argument that waterway user's fees only amount to a small percentage of the total cost of maintaining those waterways, the amount of *subsidy* given to waterways is still just a fraction of the subsidy given to the original land grant railroads.

Talk about living in the past. Those land grants to the western railroads you keep refering to were about a century ago. Add to that, if the railroads hadn't built a transportation system into this area, the land would have been nearly worthless until the government could build highways into the area. And that would have had to wait until the automobile and motor truck was invented and perfected enough to be able to run long distances.

The railroads own the land the track is on, pay taxes on it, and maintain those tracks and property. QUITE a bit different than using a government maintained waterway that isn't paying taxes and only charges a fraction of what the maintenance costs as a user fee.

Tom, you really should apply for a job with the AAR.  You really seem to have no independent thought abilities other than to repeat the same worn out mantra's while at the same time ignoring the massive amounts of aid that the railroads have received and continue to receive, both financial and legal.

Or as they say, weak minds think alike.

[MichaelSol]

Also it begs the question "who built the rivers?"

It is true that private initiative primarily developed steamboat trade on the Mississippi, the Ohio, and extended trade far inland on the upper Missouri, as well as provided development to California via sailing and steamships, and to the Oregon Territory. Likewise the Oregon Trail and others like it represented in most instances private initiative. Roads like the Sawyer's Wagon Road, the Bozeman-Bridger Road in 1864, the Minnesota-Montana Road in 1866, and the Corinne-Dunraven Road in 1874 began to criss-cross the West.

Great civilizations and commerce over thousands of miles dating back thousands of years had risen and fallen through those perfectly ordinary methods of transportation and without the benefits of railroads. When the Spanish arrived in Mexico, they traveled on a well-developed Aztec road system.

The Government initiated the Pacific Rail Surveys, and built the Mullan Road, but really got involved when it created the Northern Pacific Railroad and the Union Pacific Railroad.

Recall, both of these were created by specific government legislation representing specific political goals of the United States government, just as the Erie Canal had been promoted as a government project prior to that time, the Panama Canal after that time and the St. Lawrence Seaway more recently.

Big road projects, big rail projects and big canal projects all resulted from government initiative and support. Railroads were always part of that picture.

[TomDiehl]

The problem with trying to determine the portion of waterway maintenance costs attributable to users is that you can't come up with a reliable standard of measure.  Take dredging, for instance.  Some including the CBO would say the cost of dredging should be fully borne by the barge lines, yet the accumulation of silt behind dams would not occur if the river was free flowing, so since prior usage scenarios were sans siltation, why should silt removal be borne by the bargelines under slack water conditions?  Yet, we also know that capacity of the old river boats was limited by free flowing conditions, including a seasonal cessation of navigation during low water periods.  Since modern barge lines have far deeper draft than the old river boats, should we pro-rate any maintenance dredging cost over those sections of the river that used to be shallower than current draft?

To their credit, the barge lines argue that since the dams themselves provide a valuable commodity called electricity, all the costs associated with waterway maintenance should be included in the cost of producing that electricity.  Well, that is true, those projects are producing both a transportation service and a valuable commodity, something the railroads can't claim.

For the record, most of the Waterways Trust Fund is kept in limbo to help *reduce* the federal deficit, and is not being fully dispersed for use in waterways projects.

What's most important to remember here is that the rail companies are not being discriminated against by this perceived waterways subsidy.  Waterways are Open Acess, railroads are not.  Anyone can start up a barge company with relatively minimal investment (e.g. no need for a $2 billion federal loan guarantee for a PRB extension or a $1 billion federal grant to aid in a double stack clearance project!)  Both UP and BNSF have every right in the world to start up their own barging divisions if they choose.  Contrast that with the various public subidies of the railroads, which have not resulted in any improved public access benefits.  Though UP or BNSF can start up a barge division and use the Columbia/Snake River Waterway, neither Tidewater nor Foss have the right to start up their own rail divisions and use Marias Pass or Weber Canyon.

To the point of the dams, would the river be navigable by the barges if the dams weren't there to maintain a minimum water level?

"To their (barge lines) credit, they argue?" I hate to break the news to you Dave, but not every dam is hydroelectric.

And some creative accounting with the Waterway Trust Fund "helps *reduce* the federal deficit?" Maybe you haven't been watching the news for the last six years.

And the old "open access" argument still isn't flying. Highways and riverways aren't single lane, or even single lane dual direction like most of the railroads. Plus, we still haven't heard how you figured out the logistics of making the concept actually work. Lots of things sound good in theory, but fall flat on their face with an attempt to try and make them work.

Plus, Tidewater and Foss (as well as anyone else) is welcome to build a rail line between two end points. Why are you hung up on the idea they have to use certain passes or canyons? Let them find their own routes like the railroads did. Or let the government build a rail line for them, like they maintain the riverways. Oh wait, the government is so far in debt now our grandchildren will be paying the principal.

Also it begs the question "who built the rivers?"

[TomDiehl]

Regarding other modes, specifically barge traffic, while there are prior claims to the use of the river systems, where they existed, the expenses for inland waterway improvements are still not meet by user fees. Since some of the conversation has turned to the 80's take a look at part 4 of the linked CBO report from the 80's. http://www.cbo.gov/ftpdoc.cfm?index=5321&type=1

Per page 34 only 10% of the costs were/projected to be recovered through users fees for operations of which "maintenance dredging and operation of navigation aids" amounted to 3/5ths of the expenditure.

Why do certain members of the public act as though the railroads are treating them unfairly when the government is giving away the right of ways to barge operators? Railroads where released from the majority of their common carrier obligations due to the skewing of the transportation marketplace by such practices as those above.

A little bit off topic, and the whole "give away" thing is more than quite a bit askew. 

It is humorous to hear railroads and their fans complain about "subsidized" waterways, while apparently forgetting those land grants without which most Western railroads wouldn't even exist.  Even giving credence to the argument that waterway user's fees only amount to a small percentage of the total cost of maintaining those waterways, the amount of *subsidy* given to waterways is still just a fraction of the subsidy given to the original land grant railroads.

Talk about living in the past. Those land grants to the western railroads you keep refering to were about a century ago. Add to that, if the railroads hadn't built a transportation system into this area, the land would have been nearly worthless until the government could build highways into the area. And that would have had to wait until the automobile and motor truck was invented and perfected enough to be able to run long distances.

The railroads own the land the track is on, pay taxes on it, and maintain those tracks and property. QUITE a bit different than using a government maintained waterway that isn't paying taxes and only charges a fraction of what the maintenance costs as a user fee.

[Anonymous]

Regarding other modes, specifically barge traffic, while there are prior claims to the use of the river systems, where they existed, the expenses for inland waterway improvements are still not meet by user fees. Since some of the conversation has turned to the 80's take a look at part 4 of the linked CBO report from the 80's. http://www.cbo.gov/ftpdoc.cfm?index=5321&type=1

Per page 34 only 10% of the costs were/projected to be recovered through users fees for operations of which "maintenance dredging and operation of navigation aids" amounted to 3/5ths of the expenditure.

Why do certain members of the public act as though the railroads are treating them unfairly when the government is giving away the right of ways to barge operators? Railroads where released from the majority of their common carrier obligations due to the skewing of the transportation marketplace by such practices as those above.

A little bit off topic, and the whole "give away" thing is more than quite a bit askew. 

It is humorous to hear railroads and their fans complain about "subsidized" waterways, while apparently forgetting those land grants without which most Western railroads wouldn't even exist.  Even giving credence to the argument that waterway user's fees only amount to a small percentage of the total cost of maintaining those waterways, the amount of *subsidy* given to waterways is still just a fraction of the subsidy given to the original land grant railroads.

The problem with trying to determine the portion of waterway maintenance costs attributable to users is that you can't come up with a reliable standard of measure.  Take dredging, for instance.  Some including the CBO would say the cost of dredging should be fully borne by the barge lines, yet the accumulation of silt behind dams would not occur if the river was free flowing, so since prior usage scenarios were sans siltation, why should silt removal be borne by the bargelines under slack water conditions?  Yet, we also know that capacity of the old river boats was limited by free flowing conditions, including a seasonal cessation of navigation during low water periods.  Since modern barge lines have far deeper draft than the old river boats, should we pro-rate any maintenance dredging cost over those sections of the river that used to be shallower than current draft?

To their credit, the barge lines argue that since the dams themselves provide a valuable commodity called electricity, all the costs associated with waterway maintenance should be included in the cost of producing that electricity.  Well, that is true, those projects are producing both a transportation service and a valuable commodity, something the railroads can't claim.

For the record, most of the Waterways Trust Fund is kept in limbo to help *reduce* the federal deficit, and is not being fully dispersed for use in waterways projects.

What's most important to remember here is that the rail companies are not being discriminated against by this perceived waterways subsidy.  Waterways are Open Acess, railroads are not.  Anyone can start up a barge company with relatively minimal investment (e.g. no need for a $2 billion federal loan guarantee for a PRB extension or a $1 billion federal grant to aid in a double stack clearance project!)  Both UP and BNSF have every right in the world to start up their own barging divisions if they choose.  Contrast that with the various public subidies of the railroads, which have not resulted in any improved public access benefits.  Though UP or BNSF can start up a barge division and use the Columbia/Snake River Waterway, neither Tidewater nor Foss have the right to start up their own rail divisions and use Marias Pass or Weber Canyon.

[MichaelSol]

As to me not being able to read a chart, take a look at page 14 in;

http://rscc.mt.gov/docs/White_Paper_Meeting_10_05.pdf#search=%22whiteside%20associates%20governor%20montana%20wheat%20rates%22:

The blue line is the actual freight rate for the year shown on the x axis.  Note that despite what Mr. Sol says, the rate in 2004 was $0.61/bushel less than the 1982 rate level.  In other words, the rate went down.

For some reason he denies this. 

This is bizarrre.

The red line shows that rail rates would have been very high had rail rates tracked the inflation index used to measure the cost of french fries. But industrial and production items never track that inflation index. Whatever that shows, other than the high cost of french fries and sports cars, I do not know. It is not relevant to rail costs or rates in any way, shape or form.

The CPI cannot provide an adjustment to rail costs and rates because it measures nothing in the industry and is designed to measure completely different metrics. You might as well take a bowling ball to a spelling bee. It's the wrong implement at the wrong place for the wrong purpose at the wrong time. The CPI does not measure or assess anything at all that is relevant to railroading, unless it would be regarding employee compensation.

The blue line, a Rail Cost indexed line, clearly shows a higher cost per bushel in 2004 than the 1982 level. Further, the Rail Cost inflation index line as adjusted for productivity (provided by employees losing their jobs) shows that what cost 92 cents per bushel in 2004 should have cost 42 cents adjusted for the inflation/deflation in rail costs and productivity increases.

Had that been true, and BN earning the same rate of return as its 1981 ROS of 8.7%, it would have received 42 cents per bushel in 2004. But, it was actually receiving 240% ROS on Montana wheat in 2004 at 92 cents per bushel (92 cents revenue vs 38 cents operating costs per bushel).

That doesn't happen in "competitive" industries.

Interestingly, that Cost/Productivity line does represent what actually happened to rates in the rail industry as a whole during the time period defined by the chart. Ultimately, the Chart shows that real rail rates for Montana wheat increased, and that Montana wheat transportation rates compared to average industry rates increased dramatically.

Strawbridge can't read the graph, and still insists that the french fry inflation index applies.

[MichaelSol]

Regarding other modes, specifically barge traffic, while there are prior claims to the use of the river systems, where they existed, the expenses for inland waterway improvements are still not meet by user fees. Since some of the conversation has turned to the 80's take a look at part 4 of the linked CBO report from the 80's. http://www.cbo.gov/ftpdoc.cfm?index=5321&type=1

Per page 34 only 10% of the costs were/projected to be recovered through users fees for operations of which "maintenance dredging and operation of navigation aids" amounted to 3/5ths of the expenditure.

Why do certain members of the public act as though the railroads are treating them unfairly when the government is giving away the right of ways to barge operators? Railroads where released from the majority of their common carrier obligations due to the skewing of the transportation marketplace by such practices as those above.

I don't think anyone here is arguing that barge subsidies were fair, economical, or beneficial as an economic force. Like any subsidy, monopoly, or regulation, they distorted rational markets and rational investment decision-making.

The point here is that such traffic was irrelevant for a certain market of wheat, irregardless of any supposed advantages obtained. That is, notwithstanding government's role, it provided no advantages for Montana wheat, except as an escape valve for some wheat during a time of railcar shortages or even perhaps ridiculous rail prices and even then that was dependent on the willingness of Idaho taxpayers to pay for the destruction of their roads to subsidize truck transport of Montana wheat to a barge terminal. As you might guess, that attitude didn't last too long nothwithstanding the favorable, subsidized barge rates.

Too, there is a habit among some to look at some artificial perception of efficiency as controlling, without recognizing that marketing and markets are usually far more important.

This was demonstrated historically in Eastern Washington:

The Milwaukee "cut heavily" into the Northern Pacific’s markets for grain hauling and machinery deliveries. By 1910, the Milwaukee and the Great Northern’s routes through the Cascades overcame the natural efficiencies and economies of "nature’s gravity route" down the Columbia River to Portland, delivering 20% more wheat to the Puget Sound and twice as much flour. [Meinig, D.W., The Great Columbia Plain: A Historical Geography 1805-1910 (Seattle: University of Washington Press, 1968), p. 266.]

Well, the buyers were in Seattle, and the better ocean going facilities were in Seattle.

In the 1970s and early 1980s, markets were again, as always, a key. Cargill was a big buyer of Montana export wheat and a big driver of the market. It's big terminal was Pier 87 in Seattle.

What good would the truck/barge down the Columbia do for that?

Nothing.

And BN knew it.

Strawbridge doesn't.

Likewise, Continental Grain had bought a number of Montana elevators in the late 1970s, and was a big buyer of Montana wheat, most of which it moved through it's Tacoma export facilities. Western Farmer's Association marketed through Seattle's Pier 87. Farmer's Coop elevators -- all Seattle destinations. Fisher Flour Mills in Seattle -- a big buyer of Montana wheat. For as much as 60% of Montana export wheat, going down the Columbia River made no sense at all; that's not where the wheat was going during that time frame.

Strawbridge argues, in the absence of any facts, his unique version of "logic" but his argument begs a basic question:

How could a truck/barge rate be competitive to a destination that they didn't go to?

 

[VPayne]

Regarding other modes, specifically barge traffic, while there are prior claims to the use of the river systems, where they existed, the expenses for inland waterway improvements are still not meet by user fees. Since some of the conversation has turned to the 80's take a look at part 4 of the linked CBO report from the 80's. http://www.cbo.gov/ftpdoc.cfm?index=5321&type=1

Per page 34 only 10% of the costs were/projected to be recovered through users fees for operations of which "maintenance dredging and operation of navigation aids" amounted to 3/5ths of the expenditure.

Why do certain members of the public act as though the railroads are treating them unfairly when the government is giving away the right of ways to barge operators? Railroads where released from the majority of their common carrier obligations due to the skewing of the transportation marketplace by such practices as those above.

[MichaelSol]

The mendacious Ken Strawbridge now confuses a lack of evidence -- that trucks provided competition -- with an entirely different legal question of the standard used to assess unreasonableness of rates. Isn't this how the conversation typically goes: change the subject, then pretend it applies to the original premise ... somehow?

The point of BN somehow providing "efficiencies" over trucks gets lost and that trucks were providing an alternative gets lost.

It was supposed to.

Strawbridge:

The stardard initially used by the "administrative" law judge was a simple revenue to variable cost ratio.  That standard got knocked in the head by a U.S. Court of Appeals.  But Mr. Sol keeps trying to use that same standard as the sole test of a shipper being captive.  Why?  I guess it serves his purpose.

No, it's because it is absolutely false, and completely and I think intentionally misrepresents what the court said and did.

The federal court decided that the ICC's use of the R/VC standard was in error for the purpose of determining rate reasonableness.

It made no such finding regarding using the R/VC standard for captivity.

Based on that decision, the ICC then adopted a CMP standard for rate reasonableness. It did not change its finding regarding captivity -- that there was no effective competition to BN for transportation of export grain out of Montana, by truck, by barge, by plane, or by catapult.

"On July 22, 1993, the ICC served an order in response to the D.C. Circuit's February 9, 1993 decision. In its order, the ICC stated it would use the Constrained Market Pricing/Stand-Alone Cost principles in assessing the reasonableness of BNSF Railway wheat and barley rates moving from Montana to Pacific Coast ports from 1978 forward. The ICC assigned the case to the Office of Hearings to develop a procedural schedule. On October 28, 1994, plaintiffs filed their opening evidence arguing that the revenue received by BNSF Railway exceeded the stand alone costs of transporting that traffic and that BNSF Railway rates were unreasonably high. BNSF Railway filed its evidence March 29, 1995, showing that the stand alone costs of transporting the traffic exceeded the revenue derived by BNSF Railway on that traffic and that consequently, its rates were not unreasonably high. The parties filed briefs simultaneously on August 16, 1995. In a decision served August 14, 1997, in McCarty Farms, Inc. et al. v. Burlington Northern Inc., No. 37808, the STB, successor to the ICC, ruled that the plaintiffs had failed to demonstrate that BNSF Railway rates charged to transport export wheat and barley from Montana to West Coast ports were unreasonable" under the CMP standard. [Summary from Class Action Reporter, Wednesday, April 21, 1999, Vol. 1, No. 54 ].

Nothing in there about captivity at all.

You would search in vain in the Staggers Act for any reference to the CMP standard, although the R/VC standard is clearly there. You would also search in vain for any refutation of the ICC's earlier decisions regarding market dominance. Indeed, the federal courts didn't reverse on those issues at all. Only the method of calculating rate reasonableness was appealed. That is the last step in the analysis process, and comes after a finding of captivity.

The finding on captivity was not overturned. BN did not appeal that finding. It stands, and it stands based on the R/VC test.

Recall there are two steps in the process:

1) market dominance.

2) rate reasonableness.

BN was found to be market dominant (the shippers captive) and this was not appealed nor overturned nor was the R/VC standard changed for that determination.

The second step was challenged, by one of the railroads that had earlier agreed that the R/VC standard was appropriate for such determinations in order to achieve passage of the Staggers Act. Based on other court opinions, and regulatory proceedings in other industries, BN now argued that a CMP standard used in telecommunications cases should apply to rate reasonableness. Even at that, it turned CMP on its head to achieve the desired result.

"McCarty Farms, the State of Montana, and BN then sought review of the ICC decisions by this court.  In an opinion issued in 1993, we questioned the theoretical basis of the R/VC test and remanded the proceedings to the ICC for the purpose of reconsidering whether it was appropriate to use the R/VC test instead of the Constrained Market Pricing ("CMP") test to evaluate the reasonableness of the challenged rates."  Burlington Northern R.R. v. ICC, 985 F.2d 589 (D.C. Cir. 1993). 1998 DC Circuit opinion.

Oops, Strawbridge didn't understand the case. The market captivity findings of the ICC decisions were allowed to stand. The railroad itself decided not to appeal them.

Wonder why?

The fact is, Strawbridge has to live with the fact that the Montana export wheat market, 1980-1987, was determined by the ICC to be a captive market and that portion of the ICC decision remains valid for historical purposes and as a testament to the validity of that portion of the decision.

The CMP test is an interesting study of federal court power over congressional legislation. The R/VC test is in the statute. The CMP test is not. The R/VC test was designed by economists, not judges, and was approved by the rail industry.

Note the above Circuit Court opinion -- "we questioned the theoretical basis of the R/VC standard ..." that the ICC had applied using Congressional guidelines. That "theoretical basis" was developed by economists and accepted by the industry. It was enacted by Congress. Which judges have the competence or education to question the "theoretical basis" of an economic standard?

When the question later came back to them after CMP was applied, they refused to offer an opinion on the utility of using the CMP method, stating that their role was to defer to the regulatory agency unless manifest "abuse of discretion" could be shown. But, the use of the R/VC standard by the ICC was not a manifest abuse of discretion, it couldn't be, it was the standard required by law! 

The Circuit Court simply muddled the whole process when it decided to make judgments on economic theory the first time around, then refused to do so the second time around.

And yet, among economists, it is the CMP test, not the R/VC test, that is both theoretically and practically suspect.

Here are the comments by Alfred Kahn, generally regarded as the "Father of Deregulation", on the earlier telecommunications decisions that adopted the CMP test by regulatory quasi-judical fiat:

"I never dreamed, however, in proclaiming that efficient prices should be based on incremental costs, that policymakers would then proceed to ignore the actual incremental costs of the incumbent suppliers and instead adopt as the basis for policy the costs of a hypothetical, most efficient new entrant, constructing an entire set of facilities as though writing on a blank slate .... The entire logic of the marginal cost pricing principle requires that prices reflect the additional costs that society will actually incur or save if purchasers take somewhat more or somewhat less of the product or service in question. " [Alfred E. Kahn, "Whom the Gods Would Destroy, or How Not to Deregulate," AEI–Brookings Joint Center First Distinguished Lecture, AEI–Brookings Joint Center for Regulatory Studies, WASHINGTON, D.C., 2001.]

 

[Murphy Siding]

Didja' ever notice............how some threads take on the tone of an election campaign?  (insert *head spinning* smilie here)

[greyhounds]

Aside from grain car shortages, one other plausible reason that might have existed that caused grain to go to Columbia River ports by truck, rather than PNW ports by rail. That would havae happened if BN raised prices substantially. If true, hardly a "competitive" tactic at a time of grain car shortages, and certainly does not speak to any efficiencies, but rather the company taking advantage of its own equipment shortages to coerce more profit. 

Well, first Mr. Sol said: 

"In 1980, a good percentage of wheat did leave Montana by truck, to the Lewiston barge terminal. There was a pretty good rate there. A relatively short truck movement over a two lane road through a wilderness. After the trucks tore up the highway, Idaho put a weight limit that killed the traffic"

Then he said the move never existed - trucking was only to processors that went out of business.

Now he says it existed due to a railcar shortage and high rail rates.

Pretty unbelievable - but now as unbelievable as what he follows with: 

The following is an Appeals Court summary of the timeline and issues as handled by the ICC regarding wheat and barley railroad transportation prices in Montana in the early 1980s.

"In their Montana suit, McCarty Farms and the other class representatives alleged that BN was charging unreasonable rates for transporting single cars of wheat for the two-year period ending September 12, 1980, in violation of 49 U.S.C. § 10701(a) of the Interstate Commerce Act. See McCarty Farms, Inc. v. Burlington Northern, Inc. , 787 F. Supp. 937 (D. Mont. 1992).

"Under the doctrine of primary jurisdiction, the district court referred the action to the Interstate Commerce Com- mission ("ICC" or "Commission") to determine the rate rea- sonableness issues. On March 27, 1981, McCarty Farms filed the referred complaint with the ICC (Docket No. 37809), in which it challenged not only BN's single-car wheat rates, but also its single-car rates for barley. McCarty Farms sought a prescription on future rates and did not limit its request for reparations to the two-year period specified in its complaint filed with the district court. McCarty Farms' Petition for Declaratory Order and Complaint at 6 (March 27, 1981). In an unpublished decision served on December 14, 1981, an Administrative Law Judge found that (1) BN had market dominance over wheat and barley traffic, (2) BN's present and past rates were unreasonable insofar as they exceeded 200% of the variable cost of service, and (3) a revenue-to- variable cost ratio of 200% was to be the maximum reason- able rate for the transportation of wheat and barley.

<>"McCarty Farms was not alone, however, in challenging the reasonableness of BN's rates. In a separate proceeding filed with the ICC (Docket No. 37815S), the State of Montana challenged BN's rates for multiple-car and trainload ship- ments of wheat and barley and sought prescription for rea- sonable rates for the future. In an unpublished decision served on July 30, 1982, the ICC reopened the case filed by McCarty Farms (Docket No. 37809). The ICC instituted a separate proceeding regarding the reasonableness of barley rates (Docket No. 37809 (Sub-No. 1)) because it did not believe they were part of the district court's referral. The ICC consolidated the proceedings filed by McCarty Farms and those filed by the State of Montana.

"The three consolidated cases before the ICC were held in abeyance indefinitely. In May 1984, McCarty Farms and the other class representatives filed a complaint in the district court, seeking a writ of mandamus. In response, the ICC reopened the proceedings on September 11, 1984. In a decision served on December 28, 1984, the ICC ruled that, to the extent market dominance issues had not been developed, additional evidence concerning market dominance would be accepted. After extensive discovery, on May 22, 1987, the ICC ruled that BN was market dominant over the subject wheat and barley shipments moving from Montana to the Pacific Northwest. McCarty Farms v. Burlington Northern, Inc. , 3 I.C.C.2d 822 (1987).

"Having determined that BN was market dominant for the movements at issue, the ICC turned to the rate reasonable- ness analysis. On February 5, 1988, the ICC decided that the Revenue-to-Variable Cost ("R/VC") standard was an appro- priate means for testing the challenged rates and found that the rates charged by BN were unreasonable. The ICC directed BN to (1) compute the reparations due, (2) modify its existing rate structure, and (3) present a proposal of compli- ance to the ICC. On February 21, 1989, the ICC issued an unpublished decision that corrected several costing problems in the R/VC test and recomputed the ratios by which repara- tions were to be calculated. The ICC directed BN to submit a quantification of reparations due the class based on the corrected procedure and a proposal for modifying its existing rate structure so that BN would comply with the maximum reasonableness standard in the future.

"On March 20, 1991, the ICC affirmed its earlier decisions in which it concluded that BN was market dominant over the movement of wheat and barley and that BN's rates for this traffic were unreasonable. The ICC calculated the amount of reparations owed by BN through 1986 to be $9,685,918 plus interest, and imposed on BN a future rate prescription procedure. McCarty Farms v. Burlington Northern, Inc. , 7 I.C.C.2d 1026 (1991)." [McCarty Farms, Inc., et al. -vs- Surface Transportation Board and United States of America, USCA, DC, 1998)].

This was covering the same period of time that Strawbridge now insists BN was lowering rates, passing through efficiencies and becoming competitive with truck/barge service for export wheat. He comes to this conclusion based on reading truck/rail charts for all wheat during that time period.

The question is straightfoward: 1) was the agency law judge wrong, and was the agency opinion wrong, or 2) is Strawbridge misinterpreting his chart?

Any bets?

Yes, I'll bet on myself.  The "agency law judge" was wrong.  His decision was reversed in court and the case sent back to the ICC.  The railroad won the case and its rate stood.  It did not have to make monetary restitution. 

The stardard initially used by the "administrative" law judge was a simple revenue to variable cost ratio.  That standard got knocked in the head by a U.S. Court of Appeals.  But Mr. Sol keeps trying to use that same standard as the sole test of a shipper being captive.  Why?  I guess it serves his purpose.

If anybody wants to read about it for themselves, here's a source.  (Report pages 15-17, which will be different from the PDF page numbers.)

http://www.mdt.mt.gov/publications/docs/brochures/railways/railcomp_study.pdf#search=%22montana%20wheat%20senat%20railroad%22

Why Mr. Sol would write that the outcome of the case was the exact opposition of the real outcome is unclear.  But he sure did that.

As to me not being able to r

[MichaelSol]

Aside from grain car shortages, one other plausible reason that might have existed that caused grain to go to Columbia River ports by truck, rather than PNW ports by rail. That would have happened if BN raised prices substantially. If true, hardly a "competitive" tactic at a time of grain car shortages, and certainly does not speak to any efficiencies, but rather the company taking advantage of its own equipment shortages to coerce more profit. 

The following is an Appeals Court summary of the timeline and issues as handled by the ICC regarding wheat and barley railroad transportation prices in Montana in the early 1980s.

"In their Montana suit, McCarty Farms and the other class representatives alleged that BN was charging unreasonable rates for transporting single cars of wheat for the two-year period ending September 12, 1980, in violation of 49 U.S.C. § 10701(a) of the Interstate Commerce Act. See McCarty Farms, Inc. v. Burlington Northern, Inc. , 787 F. Supp. 937 (D. Mont. 1992).

"Under the doctrine of primary jurisdiction, the district court referred the action to the Interstate Commerce Commission ("ICC" or "Commission") to determine the rate reasonableness issues. On March 27, 1981, McCarty Farms filed the referred complaint with the ICC (Docket No. 37809), in which it challenged not only BN's single-car wheat rates, but also its single-car rates for barley. McCarty Farms sought a prescription on future rates and did not limit its request for reparations to the two-year period specified in its complaint filed with the district court. McCarty Farms' Petition for Declaratory Order and Complaint at 6 (March 27, 1981). In an unpublished decision served on December 14, 1981, an Administrative Law Judge found that (1) BN had market dominance over wheat and barley traffic, (2) BN's present and past rates were unreasonable insofar as they exceeded 200% of the variable cost of service, and (3) a revenue-to- variable cost ratio of 200% was to be the maximum reasonable rate for the transportation of wheat and barley.

"McCarty Farms was not alone, however, in challenging the reasonableness of BN's rates. In a separate proceeding filed with the ICC (Docket No. 37815S), the State of Montana challenged BN's rates for multiple-car and trainload shipments of wheat and barley and sought prescription for reasonable rates for the future. In an unpublished decision served on July 30, 1982, the ICC reopened the case filed by McCarty Farms (Docket No. 37809). The ICC instituted a separate proceeding regarding the reasonableness of barley rates (Docket No. 37809 (Sub-No. 1)) because it did not believe they were part of the district court's referral. The ICC consolidated the proceedings filed by McCarty Farms and those filed by the State of Montana.

"The three consolidated cases before the ICC were held in abeyance indefinitely. In May 1984, McCarty Farms and the other class representatives filed a complaint in the district court, seeking a writ of mandamus. In response, the ICC reopened the proceedings on September 11, 1984. In a decision served on December 28, 1984, the ICC ruled that, to the extent market dominance issues had not been developed, additional evidence concerning market dominance would be accepted. After extensive discovery, on May 22, 1987, the ICC ruled that BN was market dominant over the subject wheat and barley shipments moving from Montana to the Pacific Northwest. McCarty Farms v. Burlington Northern, Inc. , 3 I.C.C.2d 822 (1987).

"Having determined that BN was market dominant for the movements at issue, the ICC turned to the rate reasonableness analysis. On February 5, 1988, the ICC decided that the Revenue-to-Variable Cost ("R/VC") standard was an appropriate means for testing the challenged rates and found that the rates charged by BN were unreasonable. The ICC directed BN to (1) compute the reparations due, (2) modify its existing rate structure, and (3) present a proposal of compliance to the ICC. On February 21, 1989, the ICC issued an unpublished decision that corrected several costing problems in the R/VC test and recomputed the ratios by which reparations were to be calculated. The ICC directed BN to submit a quantification of reparations due the class based on the corrected procedure and a proposal for modifying its existing rate structure so that BN would comply with the maximum reasonableness standard in the future.

"On March 20, 1991, the ICC affirmed its earlier decisions in which it concluded that BN was market dominant over the movement of wheat and barley and that BN's rates for this traffic were unreasonable. The ICC calculated the amount of reparations owed by BN through 1986 to be $9,685,918 plus interest, and imposed on BN a future rate prescription procedure. McCarty Farms v. Burlington Northern, Inc. , 7 I.C.C.2d 1026 (1991)." [McCarty Farms, Inc., et al. -vs- Surface Transportation Board and United States of America, USCA, DC, 1998)].

This was covering the same period of time that Strawbridge now insists BN was lowering rates, passing through efficiencies and becoming "competitive" with truck/barge service for export wheat, notwithstanding the fact that truck/barge had never been able to compete. He comes to this conclusion based on reading truck/rail charts for all wheat during that time period.

The question is straightfoward: 1) was the agency law judge wrong, and was the agency opinion wrong, or 2) is Strawbridge misinterpreting his chart?

Any bets?

Consider this. His chart contains no information regarding the distinction. None whatsoever.

So, he makes up a conclusion: that the entire 30% of wheat that was trucked was for export to barge terminals. How does he know that? He doesn't. He hasn't a shred of proof to offer -- he simply says it is logical. How is it logical? Because it supports his bias, that's the only reason he can offer. He reads his bias into the chart without any basis to do so. Indeed, he argues that rail rates for Montana grain went down, when all the available published information by neutral government agencies says they went up.

We know he's biased and frequently misinterpets data as well as simply being argumentative -- after all, he claimed that air resistance did not affect train speed and horsepower needs, and that trains and train cars were getting lighter not heavier -- but is there any reason to conclude that an ALJ, and then the full ICC, were biased?

That after five years of hearings and argument by educated, experienced experts from both sides, that the ICC knew less about this than Ken Strawbridge?

Hardly.

[MichaelSol]

Well, that's Michael Sol's story this time.  He has to try to explain away the diversion to rail of export wheat from a truck/barge combination movement on the Snake River. 

The only logical reason for the wheat to shift from the truck/barge movement to BNSF movement would be the fact that BNSF lowered its overall costs to the Montana producers and this caused them to shift their production to rail movement away from truck/barge.

But that disproves two pet core beliefs of Michael Sol.  1) The railroad is a 'monopoly' (it can't be a monopoly if a viable competing truck/barge system using the Snake River exists) and, 2) The railroad is using this 'monopoly' to charge high rates to the Montana farmers (the farmers would shift back to truck/barge if the rail rates were too high.)

So now Mr. Sol is simply saying the trucks never handled the export wheat.  It went to domestic processors that have largely gone out of business.  That's what he's saying this time.

But on June 13, 2006 ----

In 1980, a good percentage of wheat did leave Montana by truck, to the Lewiston barge terminal. There was a pretty good rate there. A relatively short truck movement over a two lane road through a wilderness. After the trucks tore up the highway, Idaho put a weight limit that killed the traffic.

He was blaming an Idaho highway weight limit for "killing" traffic that he now claims never existed. 

Real hard to keep 'em straight when you keep making 'em up, isn't it Mr. Sol.

No, that was one reason that the brief boom in truck movements, due to a nation-wide shortage of railroad grain cars, died out relatively quickly. I was there. I saw the traffic. I saw it vanish. And I saw the non-export truck traffic dry up as users and processors closed. As studies show, there was no intermodal competition prior to deregulation in Montana for wheat.

Now, a grain car shortage, with millions of dollars of wheat sitting on the ground, now that was a different story ... for the producer, all the costs except transportation are sunk at that point, the banker is calling, and the railroad says it has no cars.

Call the trucks. Costs more but what are you going to do? Feed the mice?

Strawbridge:

The truth of the matter is that the BN simply took the business by offering a lower system through put cost than its competition.  There is no other logical explination.  The export grain that moved on the Snake River changed to moving on the BN because the BN beat its competiton on cost.  The movement wouldn't have shifted to a higher cost system.

Well, this is getting pretty strained. Just keep repeating it, and maybe you will go home to Kansas. U.S. Gov., Federal Reserve, GAO, Whiteside & Associates, R.L. Banks & Assoc., every independent study ever done all say the rates went up, or that the shippers were captive within the meaning of the Staggers Act, as did the Interstate Commerce Commission in 1987, in a decision which specifically covers that relevant time period.

Strawbridge says the prices went down.

Take your pick on who is rewriting history.

We have argued that in some detail in the past here, and the only way Strawbridge could make it work was by using the wrong inflation index. He had to outright misrepresent what had happened, claiming that an index used for french fries was more appropriate than one used for rail costs. But, that's the only way, when given an actual example, that he could make his argument work -- his usual use of the false premise.

If there was barge competition, the ICC couldn't find it when they declared that Montana wheat shippers were captive, 1980-1986, which was the time period of the data presented at the hearings. Yet, 30% of wheat was still being hauled by truck. Was the ICC blind? No, the ICC understood it was a different market being served. But, the export wheat shippers were captive. There is a regulatory opinion on the subject, specifically saying that, after presentations by all parties concerned.

I am sure Strawbridge would have changed their minds if only he had an opportunity to present the stuff he presents here. BN was apparently unable to successfully present the argument at the time, or didn't attempt to offer an implausible argument in the first place. I am sure Strawbridge could do better than BN did. He obviously knows more about it than the railroad, the shippers, the State, or the ICC.

Whether or not that is a "pet core belief" of Michael Sol's or not isn't relevant. It happens to be the existing record, based on literally millions of dollars worth of studies, litigation, and argument by people far more knowledgeable on both sides of the argument than Ken Strawbridge, and the yet the only person or institution contradicting it is Ken Strawbridge on a railfan forum because of his clearly personal agenda.

At some point, any reader has to take a deep breath and simply say, sorry Ken, the record on this topic is well-developed and not ambiguous. Michael Sol had nothing to do with creating that record, but rather it has been analyzed by a broad spectrum of parties, state and federal agencies, shippers, and in addition to hired consultants, neutral government agencies with no axe to grind on the matter.

And they all keep coming to the same conclusion.

And Ken Strawbridge keeps spluttering that they're wrong, all wrong, because of course, only Ken Strawbridge knows all about the Montana wheat market.

The Montana wheat market of 25 years ago, no less.

 

[Anonymous]

It is interesting to note that railroads paying their full cost of capital could not beat barge movements. What is the recovery rate from the barge industry in the form of "user fees" for the Army Core of Engineers designed lock & dam inland water system?

If I recall correctly it is around 10 to 30%. Why are we worried about a private companies, the railroads, charging 300% of variable costs when the government is charging 30% to their competitor for the use of the inland waterway system?

You have to remember, there were riverboats on the Columbia Snake river systems prior to the dams being built.  The Corps of Engineers were required by law to design the dams with locks and navigation aids to maintain this prior usage claim.  There was an efficiency gain for river shipping companies when the slack water was introduced, and the barge company fees are set as a determination of this improvement over the free flowing prior river system.

Don't let the econuts and the rail oligarchy fool you.  The barge lines do pay their own way, and they do it within the scope of a completely open access system.  Contrast that with the railroads, who received huge land grants, anti-trust exemption, and now they are getting a portion of the highway users' money's to fatten their wallets.  And all that occurs in a closed access system, aka monopolistic.  If anything, it's the railroads that are taking advantage of the US taxpayers.