futuremodal wrote: Murphy Siding wrote: TheAntiGates wrote: Murphy Siding wrote: The sad truth, I believe, is that the sum accomplishment of the DM&E PRB extention would only be the re-distribution of money from BNSF and UP's stockholders to someone else's pockets. In one of the reports on Matt Rose's objection(s) to DM&E, the comment was made that BNSF and UP already hold all the contracts for PRB coal .Sure would like to understand that claim better, Are they saying that there is a franchise-like relationship, with the two majors having an exclusive right to deal with the mines, or are they saying that all the contracts for delivery with the end user utilities are currently with them?The former might be a big deal, but the latter seems like only a matter of time before contracts need to be renewed, and utilities currently using a seperate source could always create new contracts with DME that previously used eastern coalSo, I'm at a loss to appreciate what Rose was trying to imply with that comment. I take that as meaning that BNSF and UP have all the long term contracts at this point. When the contracts come up for renewal, then it will be a 3-way pricing battle. At that point, doesn't DM&E have a 1 in 3 chance of getting the business? You see Murph? Use a catchphrase like "re-distribution of wealth" in describing the DM&E vs BNSF/UP battle, and suddenly AG seems almost reticent in his critisism of DM&E. I guess Solz and I had it all wrong regarding the framing of this debate - we should have portrayed DM&E as the oppressed proletariat fighting for equality against the bourgeoisie BNSF/UP/Mayo elite, and AG would have been all over those evil capitalist Mayo pigs.
Murphy Siding wrote: TheAntiGates wrote: Murphy Siding wrote: The sad truth, I believe, is that the sum accomplishment of the DM&E PRB extention would only be the re-distribution of money from BNSF and UP's stockholders to someone else's pockets. In one of the reports on Matt Rose's objection(s) to DM&E, the comment was made that BNSF and UP already hold all the contracts for PRB coal .Sure would like to understand that claim better, Are they saying that there is a franchise-like relationship, with the two majors having an exclusive right to deal with the mines, or are they saying that all the contracts for delivery with the end user utilities are currently with them?The former might be a big deal, but the latter seems like only a matter of time before contracts need to be renewed, and utilities currently using a seperate source could always create new contracts with DME that previously used eastern coalSo, I'm at a loss to appreciate what Rose was trying to imply with that comment. I take that as meaning that BNSF and UP have all the long term contracts at this point. When the contracts come up for renewal, then it will be a 3-way pricing battle. At that point, doesn't DM&E have a 1 in 3 chance of getting the business?
TheAntiGates wrote: Murphy Siding wrote: The sad truth, I believe, is that the sum accomplishment of the DM&E PRB extention would only be the re-distribution of money from BNSF and UP's stockholders to someone else's pockets. In one of the reports on Matt Rose's objection(s) to DM&E, the comment was made that BNSF and UP already hold all the contracts for PRB coal .Sure would like to understand that claim better, Are they saying that there is a franchise-like relationship, with the two majors having an exclusive right to deal with the mines, or are they saying that all the contracts for delivery with the end user utilities are currently with them?The former might be a big deal, but the latter seems like only a matter of time before contracts need to be renewed, and utilities currently using a seperate source could always create new contracts with DME that previously used eastern coalSo, I'm at a loss to appreciate what Rose was trying to imply with that comment.
Murphy Siding wrote: The sad truth, I believe, is that the sum accomplishment of the DM&E PRB extention would only be the re-distribution of money from BNSF and UP's stockholders to someone else's pockets.
The sad truth, I believe, is that the sum accomplishment of the DM&E PRB extention would only be the re-distribution of money from BNSF and UP's stockholders to someone else's pockets.
I take that as meaning that BNSF and UP have all the long term contracts at this point. When the contracts come up for renewal, then it will be a 3-way pricing battle. At that point, doesn't DM&E have a 1 in 3 chance of getting the business?
You see Murph? Use a catchphrase like "re-distribution of wealth" in describing the DM&E vs BNSF/UP battle, and suddenly AG seems almost reticent in his critisism of DM&E.
I guess Solz and I had it all wrong regarding the framing of this debate - we should have portrayed DM&E as the oppressed proletariat fighting for equality against the bourgeoisie BNSF/UP/Mayo elite, and AG would have been all over those evil capitalist Mayo pigs.
WOW! That was a page right out of the Communist Manifesto!
Marx would be a proud man!
Throw in a few cuss words and Lennin would be even prouder!
Kill all your opponents and then Stalin would probably sign on too!
I think without getting carried away we can suffice to say that three competitors fighting for business will translate into reduced shipping costs. Wether that savings will be passed on to the consumer depends entirely on how utilities in each state affected by this treat their customers - AG's point about political entities that are supposed to watch over these matters failing to pass the savings on to the consumer is not lost on me.
As for the class warfare scenario, FM, that is the real trick behind winning these arguments, isn't it? If you can identify someone who is profiting v. someone who isn't than automatically the person profitting is the one at fault, right? The Mayo clinic is one of the richest research hospitals in the world - health insurance costs bear that out. The DME is a fairly small fry in the world of business - most people look on it as old technology spewing pollution with 1800's era arrogance. If you frame this as the working man against the intelligentsia, doesn't the DME represent the proletariat? Something to think about.
Murphy Siding wrote: nanaimo73 wrote: Murph- I've decided that this is not a $6 billion dollar project. I believe DME is including the cost of coal cars that the utilities will own, and locomotives that leasing companies will own, to make the project sound more impressive. Personally, I would not include those in the pricetag as DME will not be paying for them. I could be wrong. Perhaps John B up in Dairyland knows. Now I'm puzzled. All along, I understood this to be a $2.5B project. Then, several posters pointed out that it was $2.5B in government loan, to go with $3.5B in *private* investment money. This doesn't seem to be the case, if the $3.5B investment is for cars and locomotives owned by others.
nanaimo73 wrote: Murph- I've decided that this is not a $6 billion dollar project. I believe DME is including the cost of coal cars that the utilities will own, and locomotives that leasing companies will own, to make the project sound more impressive. Personally, I would not include those in the pricetag as DME will not be paying for them. I could be wrong. Perhaps John B up in Dairyland knows.
Murph-
I've decided that this is not a $6 billion dollar project. I believe DME is including the cost of coal cars that the utilities will own, and locomotives that leasing companies will own, to make the project sound more impressive. Personally, I would not include those in the pricetag as DME will not be paying for them. I could be wrong. Perhaps John B up in Dairyland knows.
Now I'm puzzled. All along, I understood this to be a $2.5B project. Then, several posters pointed out that it was $2.5B in government loan, to go with $3.5B in *private* investment money. This doesn't seem to be the case, if the $3.5B investment is for cars and locomotives owned by others.
Keep in mind that the figures quoted in the STB decision were 1998 figures - the costs of material and labor have risen since then. Also, these figures were PRIOR to the enviromental impact studies that were subsequently released. The additional construction, engineering, and material required to satisfy these studies would be added onto the project cost. I am sure there are also substantial legal fees that have acrued since then and I am ABSOLUTELY sure that there will be many more legal fees incurred throughout construction.
I think if you couple the revised cost of construction with equipment leases (or purchases - I think DME is holding that card yet) you certainly may arrive in the neighborhood of 6 billion.
Thanks to Chris / CopCarSS for my avatar.
CSSHEGEWISCH wrote:One issue that keeps recurring to me in this and other threads is where FM came up with the improbable notion that BNSF is in complete thrall to the Chinese.
"By their works ye shall know them."
No one has said that BNSF is an actual arm of the Red Chinese Army. All I've pointed out over the years is that when you compare the R/VC related to the rates charged to overseas importers, and compare that with the same charged to captive domestic rail shippers, it would certainly appear that the overseas importers are given favorable treatment by BNSF at the expense of the captive domestic rail shippers.
Why an ostensibly American corporation would cross subsidize Chinese imports on the backs of US producers is something I'll leave you to ponder. Circumstantial evidence (and logical analysis) suggests that BNSF is under the control of those who in turn receive special treatment from BNSF. One thing we do know - it ain't Montana farmers.
Spin away, Chessiewitch.
Murphy Siding wrote: futuremodal wrote: Murphy Siding wrote: Datafever wrote: futuremodal wrote: You still don't get it, do you? Why is it so hard to understand the difference between adding capacity to buttress a monopolistic situation, or adding new competitive capacity to alleviate a monopolistic situation? If you cannot grasp the vital importance of this difference, then we are all wasting our time with this thread. Regarding that bit about alleviating a monopolistic situation - I guess that I am confused again. I did not realize that the PRB was monopolistic. I was under the impression that both BNSF and UP served much of the PRB.OTOH, I will admit that I am not completely up to speed on this issue, and most of what I know about it, I have read on this thread. An honest answer to this, is that Dave(futuremodal) and the economists he quotes believe that having only 2 competitors is no different than having none. I, and the rest of the world, who compete for business every day, have an entirely different opinion. To say that it only takes 2 to tango, but it takes 3 to have competition, seems to work in economist's theories, but doesn't work in the real world I live in. Suffice to say, that both sides of this issue are sure that they are correct. Not quite the right phrasology. To be more precise, having two service providers competiting (aka duopoly) is not that far removed from having one service provider (aka monopoly) in terms of pricing, whereas having three service providers (aka triopoly) is not much different from having many service providers (aka perfect competition) in terms of pricing. The reasoning is that collusion is easier between two firms, but much harder among three firms. Two's company, three's a crowd. Whoever feels like the odd man out may react proactively to head off exclusionary discrimination within an informal pact, aka even if the three wanted to collude, human nature provides it's own check and balance on such collusion attempts. I know I've posted this before, but it's worth examining. A small scale study of rail rates in the 90's showed that there is a 17% difference between monopoly and duopoly pricing (assuming no collusion), but a 32% difference between monopoly and triopoly pricing. Thus, the spector of collusion can erase that 17% price differential in the duopoly situation, but the check against collusion via triopoly almost guarantees the 32% price differential will stick. http://www.ams.usda.gov/stb.htm BTW - that's a real world study there Murph, not a theoretical construct. As I said, there is a difference of opinion on this subject. Dave's gone from saying monopolies and duopolies weren't that far off in pricing. Now, there's a 17% spread. 17% is a lot of difference.
futuremodal wrote: Murphy Siding wrote: Datafever wrote: futuremodal wrote: You still don't get it, do you? Why is it so hard to understand the difference between adding capacity to buttress a monopolistic situation, or adding new competitive capacity to alleviate a monopolistic situation? If you cannot grasp the vital importance of this difference, then we are all wasting our time with this thread. Regarding that bit about alleviating a monopolistic situation - I guess that I am confused again. I did not realize that the PRB was monopolistic. I was under the impression that both BNSF and UP served much of the PRB.OTOH, I will admit that I am not completely up to speed on this issue, and most of what I know about it, I have read on this thread. An honest answer to this, is that Dave(futuremodal) and the economists he quotes believe that having only 2 competitors is no different than having none. I, and the rest of the world, who compete for business every day, have an entirely different opinion. To say that it only takes 2 to tango, but it takes 3 to have competition, seems to work in economist's theories, but doesn't work in the real world I live in. Suffice to say, that both sides of this issue are sure that they are correct. Not quite the right phrasology. To be more precise, having two service providers competiting (aka duopoly) is not that far removed from having one service provider (aka monopoly) in terms of pricing, whereas having three service providers (aka triopoly) is not much different from having many service providers (aka perfect competition) in terms of pricing. The reasoning is that collusion is easier between two firms, but much harder among three firms. Two's company, three's a crowd. Whoever feels like the odd man out may react proactively to head off exclusionary discrimination within an informal pact, aka even if the three wanted to collude, human nature provides it's own check and balance on such collusion attempts. I know I've posted this before, but it's worth examining. A small scale study of rail rates in the 90's showed that there is a 17% difference between monopoly and duopoly pricing (assuming no collusion), but a 32% difference between monopoly and triopoly pricing. Thus, the spector of collusion can erase that 17% price differential in the duopoly situation, but the check against collusion via triopoly almost guarantees the 32% price differential will stick. http://www.ams.usda.gov/stb.htm BTW - that's a real world study there Murph, not a theoretical construct.
Murphy Siding wrote: Datafever wrote: futuremodal wrote: You still don't get it, do you? Why is it so hard to understand the difference between adding capacity to buttress a monopolistic situation, or adding new competitive capacity to alleviate a monopolistic situation? If you cannot grasp the vital importance of this difference, then we are all wasting our time with this thread. Regarding that bit about alleviating a monopolistic situation - I guess that I am confused again. I did not realize that the PRB was monopolistic. I was under the impression that both BNSF and UP served much of the PRB.OTOH, I will admit that I am not completely up to speed on this issue, and most of what I know about it, I have read on this thread. An honest answer to this, is that Dave(futuremodal) and the economists he quotes believe that having only 2 competitors is no different than having none. I, and the rest of the world, who compete for business every day, have an entirely different opinion. To say that it only takes 2 to tango, but it takes 3 to have competition, seems to work in economist's theories, but doesn't work in the real world I live in. Suffice to say, that both sides of this issue are sure that they are correct.
Datafever wrote: futuremodal wrote: You still don't get it, do you? Why is it so hard to understand the difference between adding capacity to buttress a monopolistic situation, or adding new competitive capacity to alleviate a monopolistic situation? If you cannot grasp the vital importance of this difference, then we are all wasting our time with this thread. Regarding that bit about alleviating a monopolistic situation - I guess that I am confused again. I did not realize that the PRB was monopolistic. I was under the impression that both BNSF and UP served much of the PRB.OTOH, I will admit that I am not completely up to speed on this issue, and most of what I know about it, I have read on this thread.
futuremodal wrote: You still don't get it, do you? Why is it so hard to understand the difference between adding capacity to buttress a monopolistic situation, or adding new competitive capacity to alleviate a monopolistic situation? If you cannot grasp the vital importance of this difference, then we are all wasting our time with this thread.
You still don't get it, do you? Why is it so hard to understand the difference between adding capacity to buttress a monopolistic situation, or adding new competitive capacity to alleviate a monopolistic situation? If you cannot grasp the vital importance of this difference, then we are all wasting our time with this thread.
An honest answer to this, is that Dave(futuremodal) and the economists he quotes believe that having only 2 competitors is no different than having none. I, and the rest of the world, who compete for business every day, have an entirely different opinion. To say that it only takes 2 to tango, but it takes 3 to have competition, seems to work in economist's theories, but doesn't work in the real world I live in. Suffice to say, that both sides of this issue are sure that they are correct.
Not quite the right phrasology. To be more precise, having two service providers competiting (aka duopoly) is not that far removed from having one service provider (aka monopoly) in terms of pricing, whereas having three service providers (aka triopoly) is not much different from having many service providers (aka perfect competition) in terms of pricing. The reasoning is that collusion is easier between two firms, but much harder among three firms. Two's company, three's a crowd. Whoever feels like the odd man out may react proactively to head off exclusionary discrimination within an informal pact, aka even if the three wanted to collude, human nature provides it's own check and balance on such collusion attempts.
I know I've posted this before, but it's worth examining. A small scale study of rail rates in the 90's showed that there is a 17% difference between monopoly and duopoly pricing (assuming no collusion), but a 32% difference between monopoly and triopoly pricing. Thus, the spector of collusion can erase that 17% price differential in the duopoly situation, but the check against collusion via triopoly almost guarantees the 32% price differential will stick.
http://www.ams.usda.gov/stb.htm
BTW - that's a real world study there Murph, not a theoretical construct.
As I said, there is a difference of opinion on this subject. Dave's gone from saying monopolies and duopolies weren't that far off in pricing. Now, there's a 17% spread. 17% is a lot of difference.
Look at it this way - the triopoly pricing is twice the drop as compared to the duopoly pricing.
The problem with duopolies (and this is not addressed in the USDA study, but is addressed in general economic studies) is that collusion is easier with the tango, but harder with the trio. I look at that particular USDA study as an analysis of duopoly pricing while under the microscope of the big bad feds. Once the study concluded and the feds moved on to other issues, is it possible the 17% difference disappeared?
Who knows, since there was no longer any follow-up studies to give us the answer!
Murphy Siding wrote: Now I'm puzzled. All along, I understood this to be a $2.5B project. Then, several posters pointed out that it was $2.5B in government loan, to go with $3.5B in *private* investment money. This doesn't seem to be the case, if the $3.5B investment is for cars and locomotives owned by others.
nanaimo73 wrote:The cars and locomotives would be about 500 million ? There must be another $3 billion for something else. (?)
Lawyer's fees and media ads
The $3 billion is probably the bloodsucker's, sorry, I meant the lawyers fees
Germanium
I was a touch puzzled by that, too. Is BNSF the only rr with an office in China?
Does that automatically mean that they are the back pocket of the Chinese?
solzrules wrote:I do, however, maintain a small glimmer of hope that there are some in the PSC and even at the utilities that will pass along any cost savings they may receive to the consumer. I realize this is idealistic, but that's probably why I would be a terrible politician.
I do, however, maintain a small glimmer of hope that there are some in the PSC and even at the utilities that will pass along any cost savings they may receive to the consumer. I realize this is idealistic, but that's probably why I would be a terrible politician.
TheAntiGates wrote: solzrules wrote: . I hope. Hope is nice, but it hardly qualifies as a hard promise, does it?Absent any rigid obligation to pass the savings along, I think it's pretty naive to assume that they will. First inclination will be to 'explain away' any benefit as offsetting some other intangible cost.They'll just claim that line maintenance costs have gone up 17% to offset the 12% fuel cost savings, and have a nice little ledger pretending to back that claim, that the PSC will review before approving. (or some similar maneuver)
solzrules wrote: . I hope.
. I hope.
Can't argue with you there. The current state of affairs in WI is such that the common citizen is powerless over issues just like the one you described - companies realize that they can purchase influence here and regulatory agencies that are supposed to serve as safegards can be bought off. Just ask our governor.
futuremodal wrote: Conversely, I don't see where CREATE will have a similar positive impact for the nation.
Conversely, I don't see where CREATE will have a similar positive impact for the nation.
Finally, a spot on one of these threads where I can weigh in.
The DM&E project has it's merits, and so does CREATE.... in fact, CREATE is a necessity in this area. Chicago plays host to 37,500 freight cars A DAY, (that's 375 100 car freight trains A DAY snaking their way through the Chicago area) at an average speed of 12 miles an hour. It is not uncommon for a train entering throught the south side of Chicago (perhaps a CSX train headed for Proviso yard) and transferring to another road, to go to the west coast, to take 2-3 days to make the trip through the Chicago area. That is a distance of about 60 miles, if the train enters on the South East side, near, say Calumet City, or something like that. What are the bottle necks?? Well, there are many, one of them is Brighton Park Crossing, in the city proper, it is a network of switches that is still thrown by hand. Trains go through 5mph. Then there is the IHB, the belt around Chicago not uncommon to see 60+ trains a day through there. . I could go on. But, Chicago's rail infrastructure is old, and it is pushed to capacity, and in some places is even starting to deteriorate from age. Chicago needs this project if it is going to remain competitive. Chicago relies heavily on rail traffic (or so I have read) for many things, and there are alot of shippers that rely on the railroads in this area. There are many road crossings that would benefit from being turned into over, or under passess, some crossovers could be turned into flyovers, and things like that. Brighton Park, 16th St, Blue Island, CP Hill, the list goes on.
So, CREATE would be a benefit to the nation, because it open up a huge bottleneck, as opposed to forcing the railroads to go around Chicago, either by rerouting, or building a route around the city.
Let DM&E have their coal.... but let us have CREATE also.....
Just thought I would have my say...
solzrules wrote:. I hope.
Murphy Siding wrote: TheAntiGates wrote:The bad news is that we are losing a little over a buck on every car load.The good news is we expect to make it up on volume? LOL!!Seriously, this offer that "cheaper coal" will equate to lower utility costs at the consumer level, is promised EXACTLY WHERE? The so called promise is pie in the sky if you ask me Don't be silly! It's printed on the same page that says DM&E will be able to take business from UP & BNSF, and still make money. The sad truth, I believe, is that the sum accomplishment of the DM&E PRB extention would only be the re-distribution of money from BNSF and UP's stockholders to someone else's pockets.
TheAntiGates wrote:The bad news is that we are losing a little over a buck on every car load.The good news is we expect to make it up on volume? LOL!!Seriously, this offer that "cheaper coal" will equate to lower utility costs at the consumer level, is promised EXACTLY WHERE? The so called promise is pie in the sky if you ask me
Don't be silly! It's printed on the same page that says DM&E will be able to take business from UP & BNSF, and still make money.
That is so nonsensical, it makes the whole French invasion of California argument seem elementary by comparison.
What you have just said is basically this.......
*New competition in the PRB is the moral equivelant of redistribution of wealth.*
Hmmmmm, competition = communism?
Next you'll be telling us that oil and water do mix!
Murphy Siding wrote: In my mind, I wonder if DM&E will be able to offer that much lower rates than BNSF and UP? It's hard to compete against an established,ongoing company if you have to buy all your plant and equipment new. Especially, if all you would have to offer is a cheaper price. It would be hard to offer any value-added premium to hauling coal.
In my mind, I wonder if DM&E will be able to offer that much lower rates than BNSF and UP? It's hard to compete against an established,ongoing company if you have to buy all your plant and equipment new. Especially, if all you would have to offer is a cheaper price. It would be hard to offer any value-added premium to hauling coal.
UP and BNSF spent a lot off money on Powder River plant not all that long ago and they are buying new equipment all the time. I doubt that they got 25 years to pay off the loans for the plant, however, whereas DM&E will. The DM&E equipment loans will probably have about the same terms as those with UP and BNSF - with maybe a slightly higher interest rate.
UP and BNSF share a lot of the ROW in and out of the Basin. That makes their duopoly there even closer to a monopoly - without the need for opinions of the economists.
In WI (watch this now, AG) there is a utilities commission that sets the rates and has to approve rate hikes.
There is government oversight on this. IF the utilities wanted to pocket the savings (it seems to me that by law they HAVE to pass the savings on to the consumer) they would have to answer to this commission at the next rate hike, which the commission would probably turn down. I hope.
Murphy Siding wrote: TheAntiGates wrote:Or the utility stockholders who will enjoy greater potential margin.Afterall, there is no guarantee what-so-ever that the utilities will pass the benefit along, they might opt to pocket the difference In my mind, I wonder if DM&E will be able to offer that much lower rates than BNSF and UP? It's hard to compete against an established,ongoing company if you have to buy all your plant and equipment new. Especially, if all you would have to offer is a cheaper price. It would be hard to offer any value-added premium to hauling coal.
TheAntiGates wrote:Or the utility stockholders who will enjoy greater potential margin.Afterall, there is no guarantee what-so-ever that the utilities will pass the benefit along, they might opt to pocket the difference
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