(The following editorial by Gerald E. Vaninetti was posted on the Milwaukee Journal Sentinel on October 9.)MILWAUKEE, Wisc. -- Some media reports from recent state Public Service Commission hearings on Midwestern rail service suggest that the several railroads serving Wisconsin and the region are somehow not doing their jobs. Nothing could be further from the truth.The railroad industry is operating at a record-setting pace. Tonnage shipped so far in 2006 is well ahead of last year's record volumes, with coal up 4.5% and general freight shipments up 6.4%. In addition, over the past decade, the railroad industry has reinvested 18% of its revenue back into its infrastructure, as opposed to less than 4% for the manufacturing sector.The hearings were largely one-sided affairs in which opponents to market-based rail services were provided a platform to advance their pro-regulation, special-interest agendas. The complaints included concerns about railroad capacity, rail service and rail rates, despite a 40% reduction in rail rates since the industry was deregulated in 1980.The efforts of railroads to operate efficiently and profitably on lines of varying capacity is a central issue with shippers, which are coming to find that one size doesn't fit all. Underutilized lines, like much of Wisconsin's rail system, don't produce the same economies of scale for price and service as do the more heavily used lines.Conversely, the cooperation of shippers is required for the highly utilized lines to be operated efficiently to avoid congestion and forestall expensive capacity expansions. Wisconsin's shippers must contend with both issues.The railroad industry has been awash in capacity for many years, and with increased shipment levels, the industry is finally working off its "excess" capacity in its primary haul corridors. Consequently, much of the railroad marketplace is shifting from an excess-capacity mentality to one in which capacity is in sync with demand. This means that rail rates and business practices based on excess capacity no longer apply, and this makes shippers mad. Their anger is misplaced, as one can't expect railroads, or any business for that matter, to make expenditures "on spec" without commitments and rates that justify the expense.What we're really talking about is using public pressure and threats of re-regulation to force the railroads to do something that isn't financially prudent.An example of a business practice that needs to change due to constrained capacity is utility coal stockpiling. In recent years, many utilities have dramatically reduced their coal stockpiles to save on inventory carrying costs - a practice that has increasingly exposed them to delivery risks. Some of these utilities recently found themselves in a bind when the railroads couldn't jump through hoops for them in a capacity-constrained marketplace. While they blamed the railroads for having to buy high-priced gas to supplement their low-cost coal generation, the real culprit was their inadequate fuel inventory policies. Xcel Energy Inc., a major utility in the Midwest based in Minneapolis, is changing its fuel inventory policies. Despite all the hoopla, what this really is all about is maximizing profits at the expense of someone else's pocketbook - in this case, the railroad's pocketbook.For instance, utilities would complain that rail rates for coal shipments are too high, but since the 1980 deregulation of railroads, coal rail rates have declined by more than 30% while electric rates have increased by 38%. Let's state the obvious: Lower rail rates mean higher profits for shippers. Now that the rail system's major haul corridors are at capacity, shippers are unwilling to make the commitments or pay the market rates necessary for the railroads to justify the costs of adding capacity, relying instead on desperate measures that would attempt to re-regulate the industry. Given the dramatic improvements in the nation's rail system since deregulation, what we're looking at here is killing the golden goose.
From BLET Page
I'm amazed we haven't heard from FM yet...lol
LC
Limitedclear wrote: I'm amazed we haven't heard from FM yet...lol LC
Maybe he's feeling the sting from Bergie deleting his political thread.
TomDiehl wrote: Limitedclear wrote: I'm amazed we haven't heard from FM yet...lol LC Maybe he's feeling the sting from Bergie deleting his political thread.
He's got to do his "research" first.
"We have met the enemy and he is us." Pogo Possum "We have met the anemone... and he is Russ." Bucky Katt "Prediction is very difficult, especially if it's about the future." Niels Bohr, Nobel laureate in physics
Wow. That was a very sensible article. That was in the Journal-Sentinal?
Double wow.
solzrules wrote: Wow. That was a very sensible article. That was in the Journal-Sentinal? Double wow.
Actually, it was a guest editorial from a known Class I rail consultant. Here's the link to the story that someone conviently left out to make it seem to be a JS perspective....
http://www.jsonline.com/story/index.aspx?id=510991&format=print
As you can see, the writer is a self described "management consultant and a transportation and coal industry expert". You'll be interested to note he is also currently employed by the Mayo forces in opposition to the DM&E expansion project
http://postbulletin.typepad.com/soapbox/files/dme_report_5_8_06_final.pdf
Vaninetti's opinion follows in lock step with that of the AAR, which is everything is just fine the way it is with captive domestic shippers and differential pricing. Don't go and do something radical like actually introducing intramodal competition into the mix! The stats he uses in the JS story seem to be lifted directly from the AAR's website, and are not an independent analysis of the rail-shipper interaction.
Any guesses on the how and why he ended up with a JS opinion piece?
The fact that he (as a de facto Class I consultant) is also an opponent of the DM&E project seems to confirm the suspicions that BNSF and UP are heavily involved with the Mayo opposition forces.
futuremodal wrote: solzrules wrote: Wow. That was a very sensible article. That was in the Journal-Sentinal? Double wow. Actually, it was a guest editorial from a known Class I rail consultant. Here's the link to the story that someone conviently left out to make it seem to be a JS perspective.... http://www.jsonline.com/story/index.aspx?id=510991&format=print As you can see, the writer is a self described "management consultant and a transportation and coal industry expert". You'll be interested to note he is also currently employed by the Mayo forces in opposition to the DM&E expansion project http://postbulletin.typepad.com/soapbox/files/dme_report_5_8_06_final.pdf Vaninetti's opinion follows in lock step with that of the AAR, which is everything is just fine the way it is with captive domestic shippers and differential pricing. Don't go and do something radical like actually introducing intramodal competition into the mix! The stats he uses in the JS story seem to be lifted directly from the AAR's website, and are not an independent analysis of the rail-shipper interaction. Any guesses on the how and why he ended up with a JS opinion piece? The fact that he (as a de facto Class I consultant) is also an opponent of the DM&E project seems to confirm the suspicions that BNSF and UP are heavily involved with the Mayo opposition forces.
The article posted was an editorial, not an independent analysis, it even says so, a fact that you confirm. I'd like to see the DM&E succeed and it wouldn't surprise me if other railroads with interests are forwarding their own interests, however, nothing in this article mentions the DM&E, nor is there any direct argument concerning such an alternative. Shippers are picking the railroads pockets with the reregulation stupidity. The competition represented by DM&E doesn't change that, if anything the FRA and STB support of the DM&E loan only points out that the existing system works, regardless of the views of the AAR or individual members of that organization.
futuremodal wrote: Vaninetti's opinion follows in lock step with that of the AAR, which is everything is just fine the way it is with captive domestic shippers and differential pricing. Don't go and do something radical like actually introducing intramodal competition into the mix! The stats he uses in the JS story seem to be lifted directly from the AAR's website, and are not an independent analysis of the rail-shipper interaction. Any guesses on the how and why he ended up with a JS opinion piece? The fact that he (as a de facto Class I consultant) is also an opponent of the DM&E project seems to confirm the suspicions that BNSF and UP are heavily involved with the Mayo opposition forces.
But Dave---
What did Mr. Vaninetti say that you disagree with? In inflation adjusted dollar terms (which are the only terms that are realistic), rail rates fell dramatically. Just like the author pointed out.
If I was in charge of a railroad, and all my customers were just tickled pink with their prices, I'd have a long talk with the pricing managers.
As to introducing more intramodal competition, why? The fact that the rates went down as they did indicates there is already a good level of competition.
As to the BNSF and UP not welcoming the DM&E into the Powder River coal fields, they're not stupid and this isn't a game.
Limitedclear wrote: futuremodal wrote: solzrules wrote: Wow. That was a very sensible article. That was in the Journal-Sentinal? Double wow. Actually, it was a guest editorial from a known Class I rail consultant. Here's the link to the story that someone conviently left out to make it seem to be a JS perspective.... http://www.jsonline.com/story/index.aspx?id=510991&format=print As you can see, the writer is a self described "management consultant and a transportation and coal industry expert". You'll be interested to note he is also currently employed by the Mayo forces in opposition to the DM&E expansion project http://postbulletin.typepad.com/soapbox/files/dme_report_5_8_06_final.pdf Vaninetti's opinion follows in lock step with that of the AAR, which is everything is just fine the way it is with captive domestic shippers and differential pricing. Don't go and do something radical like actually introducing intramodal competition into the mix! The stats he uses in the JS story seem to be lifted directly from the AAR's website, and are not an independent analysis of the rail-shipper interaction. Any guesses on the how and why he ended up with a JS opinion piece? The fact that he (as a de facto Class I consultant) is also an opponent of the DM&E project seems to confirm the suspicions that BNSF and UP are heavily involved with the Mayo opposition forces. The article posted was an editorial, not an independent analysis, it even says so, a fact that you confirm. I'd like to see the DM&E succeed and it wouldn't surprise me if other railroads with interests are forwarding their own interests, however, nothing in this article mentions the DM&E, nor is there any direct argument concerning such an alternative. Shippers are picking the railroads pockets with the reregulation stupidity. The competition represented by DM&E doesn't change that, if anything the FRA and STB support of the DM&E loan only points out that the existing system works, regardless of the views of the AAR or individual members of that organization. LC
I'm just amazed the Urinal Sentinal (oops, must be a typo) printed anything that I agree with on their editorial page!
I don't know that I see any references to the DME in this article, but the point about the BNSF and the UP having a vested interest in preventing the project from going forward is a good one. AntiGates was the first one to postulate it, and I guess after considering it I am sure that there is some intensive lobbying going on behind the scenes to keep the loan application from going through. Certainly they would want to prevent another competitor from entering the scene and screwing up the status quo. Other than that, I don't think the author said anything different from what Trains magazine has been saying for a while now. Excess rail capacity is history, and railroads are now stuck with squeezing every ounce of efficiency out of their existing infrastructure without have to invest mega dollars in new track. Where the profit and ROI are there for the taking, some RR's like the BNSF have seen fit to add track. I don't know that WI has seen the benefits of this upswing in rail traffic - maybe someone has more to add in that arena, but right now it seems like a good time to be in the rail business.
Nothing is more fairly distributed than common sense: no one thinks he needs more of it than he already has.
Well, here's your first clue -
"The hearings were largely one-sided affairs in which opponents to market-based rail services were provided a platform to advance their pro-regulation, special-interest agendas."
Market-based rail services?!?! Are you kidding us?
First of all, those stating their case at the aforementioned hearing are most likely captive shippers, and as we all know captive shippers are not afforded market-based rail services.
Funny, the hack writer makes no mention of captive shippers. None at all. This fact discredits his whole flawed premise, because it is the captive shippers who are pushing for greater federal oversight of monopolistic rates.
Funny, the hack writer makes no mention of differential pricing. Rather, he seems hell bent on blurring any such distinction by making it appear rates are even across the board.
There's more dishonesty in this piece. Productivity increases are a result of technology, not of the so-called deregulation. The loss of branchline services means the carload portion of rates have not disappeared but have transfered to the highways. Truck rates tend to be higher than carload rates, so there hasn't been any overall rate reductions in the supply chain for those who are complaining.
But wait. There's more outright lying in this hack piece. "Some of these utilities recently found themselves in a bind when the railroads couldn't jump through hoops for them in a capacity-constrained marketplace." Since when is meeting contractual obligations akin to "jumping through hoops"? The railroads contracted for certain guarantees of coal deliveries, and when their collective incompetence brought forth the predictable shortfalls, they blamed it on an Act of God. No mention of the contractual shortfalls in the hack piece.
If Vaninetti had at least mentioned such things as captive shippers, differential rates, loss of rail service to rural customers, contractual shortfalls of promised coal deliveries, et al, maybe one could contend with the allegation that this article is pure tripe. He didn't, so it is.
Is that like being a self employed independent “energy consultant” such as yourself?
A mouth for hire/will testify for cash thing?
Just though I would ask a “expert” about it…
futuremodal wrote: it was a guest editorial from a known Class I rail consultant. Here's the link to the story that someone conviently left out to make it seem to be a JS perspective.... As you can see, the writer is a self described "management consultant and a transportation and coal industry expert".
it was a guest editorial from a known Class I rail consultant. Here's the link to the story that someone conviently left out to make it seem to be a JS perspective....
As you can see, the writer is a self described "management consultant and a transportation and coal industry expert".
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futuremodal wrote: <snip> If Vaninetti had at least mentioned such things as captive shippers, differential rates, loss of rail service to rural customers, contractual shortfalls of promised coal deliveries, et al, maybe one could contend with the allegation that this article is pure tripe. He didn't, so it is.
<snip>
Let's face it, Dave. It could be an article about the demise of the caboose, but if it doesn't mention captive shippers, it isn't worth reading...
Larry Resident Microferroequinologist (at least at my house) Everyone goes home; Safety begins with you My Opinion. Standard Disclaimers Apply. No Expiration Date Come ride the rails with me! There's one thing about humility - the moment you think you've got it, you've lost it...
tree68 wrote: futuremodal wrote: <snip> If Vaninetti had at least mentioned such things as captive shippers, differential rates, loss of rail service to rural customers, contractual shortfalls of promised coal deliveries, et al, maybe one could contend with the allegation that this article is pure tripe. He didn't, so it is. Let's face it, Dave. It could be an article about the demise of the caboose, but if it doesn't mention captive shippers, it isn't worth reading...
Thanks to Chris / CopCarSS for my avatar.
No, it's an opinion piece meant to counter the growing movement to reregulate the railroads, an unfortunate but predictable response to the inherent abuses of partially deregulated natural monopolies. As such, it would have served Vaninetti's purpose manyfold if he had actually addressed the captive shipper and differential pricing issues and then provided his counterarguments.
Oh, he'd still be a hack, but at least a credible hack.
But since there are no valid counterarguments to those issues, perhaps he was better off with the fictional view he displayed.
And if you can provide any referential tie-ins to cabooses and captive shippers, let's here it. Otherwise, it's just another wasted fish and bicycles comparison.
futuremodal wrote: And if you can provide any referential tie-ins to cabooses and captive shippers, let's here it. Otherwise, it's just another wasted fish and bicycles comparison.
Exactly.
Dave ............ when someone authors a piece for publication, there are space criteria that must be met (the piece must not be too short or too long) and also the publisher will require the author to stay on subject.
Captive shippers and differential pricing were not part of the subject.
As long as the article is accurate, it does not matter what the author's feelings or beliefs are.
And since this was an opinion piece, accuracy is not relevent. Opinion is.
futuremodal wrote: tree68 wrote: futuremodal wrote: <snip> If Vaninetti had at least mentioned such things as captive shippers, differential rates, loss of rail service to rural customers, contractual shortfalls of promised coal deliveries, et al, maybe one could contend with the allegation that this article is pure tripe. He didn't, so it is. Let's face it, Dave. It could be an article about the demise of the caboose, but if it doesn't mention captive shippers, it isn't worth reading... No, it's an opinion piece meant to counter the growing movement to reregulate the railroads, an unfortunate but predictable response to the inherent abuses of partially deregulated natural monopolies. As such, it would have served Vaninetti's purpose manyfold if he had actually addressed the captive shipper and differential pricing issues and then provided his counterarguments. Oh, he'd still be a hack, but at least a credible hack. But since there are no valid counterarguments to those issues, perhaps he was better off with the fictional view he displayed. And if you can provide any referential tie-ins to cabooses and captive shippers, let's here it. Otherwise, it's just another wasted fish and bicycles comparison.
Instead of an"incredible hack" like you FM?! FOFLMAO...
kenneo wrote: Dave ............ when someone authors a piece for publication, there are space criteria that must be met (the piece must not be too short or too long) and also the publisher will require the author to stay on subject. Captive shippers and differential pricing were not part of the subject. As long as the article is accurate, it does not matter what the author's feelings or beliefs are. And since this was an opinion piece, accuracy is not relevent. Opinion is.
Short and sweet answer:
Writing a synopsis on the battle to reregulate railroads (or stave off that eventuality) without even mentioning captive shipper abuses/differential pricing is like writing a synopsis on the cause of the Civil War without mentioning slavery.
I don't know what everyone is all fired up about. The article mentions how railroads have benefited from the Staggers Act and de-regulation in 1981. Yes, some people may not like the market based pricing they are paying, but an open and free market is essential to our economy and our way of life. Introducing competition (DME) is a good way to maintain a healthy industry that regulates itself. It is kind of hard for a monopolistic railroad to charge exorbitant prices if another railroad can still make a profit with lower rates. Perhaps captive shippers should consider location if they don't want to be served by only one railroad.
I hardly think that re-regulation of the railroads is going to solve anything. We have one of the greatest rail systems in the world, in large part because it is a private system that HAS to be competitive to survive. A heavily regulated semi-public system is prone to failure and mis-management. Why go back to the dark ages?
solzrules wrote: Perhaps captive shippers should consider location if they don't want to be served by only one railroad.
Perhaps captive shippers should consider location if they don't want to be served by only one railroad.
And where would those wheat ranches and coal mines move to?
What is a "wheat ranch"?
Never heard of that one, and my family has been farming for decades.
solzrules wrote: What is a "wheat ranch"? Never heard of that one, and my family has been farming for decades.
For those who raise cattle, it is a perjorative. For those who raise wheat, it is a sarcasm.
The point is, certain captive shippers are not captive because they are shippers. They are captive because of what they produce. They are not a glass manufacturer, a Toyota plant, or a steel mill. The coal mine can't be moved to a more favorable shipping location. The wheat field cannot be moved to where BN and UP compete.
Well, I suppose I can see your piont.
However, farmers do have options. When my uncle harvests soybeans every year in Minnesota, he hires trucks to drive the beans to the elevator offering the best price - sometimes it is by BNSF, sometimes DME, sometimes the Minnestoa Prairie RR (I think that's the name). They aren't always the same distance away from the farm. The BNSF elevator may have the best price but be an hour further away than DME. Or vice versa. You don't have to move the field to enjoy market pricing, but you do have to do some research. If the elevators were to locate in an area where two lines are close enough to build spurs, then they could enjoy a more competitive rate. Obviously not all elevators can do that, so what do you propose the solution is? Re-regulation? Price controls?
I would imagine that it would be similar for a coal mine, although here I know less. If there are three RR's competing for business, wouldn't the competition force transportation costs lower?
Unless it is done well, any government involvement in setting railroad freight rates will cause great harm. Harm such as the almost total diversion of perishable traffic to highway movement and the similar diversion of LTL/LCL traffic. Then we got the collapse of the Penn Central, etc.
The problem is, there is no way to do it well.
The government can't figure out what a price should, or shouldn't, be. Read this GAO report:
http://www.gao.gov/new.items/d06898t.pdf#search=%22%20%22GAO-06-898T%20%22%22
They don't know how to do this. They can't possibly know. There is no way to know.
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