"Open Access" and regulation of railroad freight rates.

[greyhounds]

Even the GAO report notes an uncertainty about the number of captive shippers. 

" It is difficult to determine the number of captive shippers,.."

Difficult?  Sure, if one is too lazy to go out and make a physical count of all the rail shippers who have physical access to only one railroad.  I think if those beauracrats would get off their fat **** and make the physical counts, we'd find actual captive shippers to be much, much more than what the GAO is willing to admit.

Memo to GAO:  It's easy to find an actual count of captive rail shippers- any rail shipper with only one physical connection to a Class I rail service provider is captive.  Doesn't matter if they "can" ship by truck or barge, or use multiple modes, or not, or if they can modify production to fit the lack of desired rail service, or not.  Having only one physical connection is captive, period.

So, according to FM, the Exxon-Mobile refinery near Joliet, Illinois, which is served by barges on the commercially navigable Des Plaines River, is adjacent to Interstate 55, and has Lord Knows how many pipeline hook ins - is, acording to him, "captive" to the railroad.

It isn't.  A fool could see that.  FM doesn't see that.  Is there a status in life of being "less than a fool"?

[Datafever]

I think that we need to agree on what it means to be a captive rail shipper.  By definition of the Staggers Act, any shipper that pays over the 180% R/VC rate is a "potentially captive shipper".  So, any shipper that pays a rate of 180% R/VC or less is not a captive shipper.  In addition, the GAO report already referenced by greyhounds talks about the need to look at all competitive options, including trucks and barges.  Beyond that, I have found nothing that clearly defines exactly what a captive shipper is.

However, I think that it is safe to say that any shipper that falls into the potentially captive category on the basis of the rate that it is charged can be deemed to be a captive shipper if other shipping options are not available or are available only at a higher rate than the shipper already pays.

NOTE:  This would include shippers that use trucks for short-haul to a facility that then uses rail for long-haul transport.  In other words, for the example that I have previously used, those elevators may still be considered to be captive shippers IF the overall rate that they pay (truck + rail combined) is over 180% R/VC.  Why?  Because the cost of shipping by truck to final destination is probably prohibitive and not a viable option.

What does this mean.  Well, it partly means that futuremodal is somewhat right.  He just didn't do a very good job of wording it.  It also means that he is somewhat wrong.  All transportation options need to be taken into account in order to determine if a shipper is captive, and no shipper is captive if they pay less than 180% R/VC regardless of whether any other alternatives exist.

The GAO report comment still stands - it is difficult to determine the number of captive shippers.  In fact, when it is taken into account that shippers may be captive even though they do no direct business with a railroad, it becomes even more complicated to determine exactly which shippers are captive.

Again from my example, let's say that the elevator utilizes truck transport (short haul) to a facility for long haul rail transport.  Even if the long haul transport is charged at a rate that is under 180% R/VC, that still doesn't mean that the originating elevator's overall rate would not exceed 180% R/VC, which would make that elevator a captive shipper even though the facility to which it ships is not a captive shipper.  And the reverse situation also applies.  If the long haul transport is charged at a rate over 180% R/VC (making that facility a potentially captive shipper), that still doesn't mean that the originating elevator is a captive shipper when its overall costs are taken into account.

The GAO report is quite correct in its assessment.  I would even say that it understates the task.  It is probably impossible to determine the number of captive shippers.

[Murphy Siding]

     Perhaps, a better definition of captive shipper is: any shipper served by only one railroad, who uses that fact as a tool to try and lower his rates from said railroad? ()

[CSSHEGEWISCH]

     Perhaps, a better definition of captive shipper is: any shipper served by only one railroad, who uses that fact as a tool to try and lower his rates from said railroad? ()

This is a good starting point.  I would add to the definition that said shipper is also attempting to use any political influence he may have to lower his rates and protect his own political assets from his customers (utility rates?).

[Anonymous]

Even the GAO report notes an uncertainty about the number of captive shippers. 

" It is difficult to determine the number of captive shippers,.."

Difficult?  Sure, if one is too lazy to go out and make a physical count of all the rail shippers who have physical access to only one railroad.  I think if those beauracrats would get off their fat **** and make the physical counts, we'd find actual captive shippers to be much, much more than what the GAO is willing to admit.

Memo to GAO:  It's easy to find an actual count of captive rail shippers- any rail shipper with only one physical connection to a Class I rail service provider is captive.  Doesn't matter if they "can" ship by truck or barge, or use multiple modes, or not, or if they can modify production to fit the lack of desired rail service, or not.  Having only one physical connection is captive, period.

So, according to FM, the Exxon-Mobile refinery near Joliet, Illinois, which is served by barges on the commercially navigable Des Plaines River, is adjacent to Interstate 55, and has Lord Knows how many pipeline hook ins - is, acording to him, "captive" to the railroad.

It isn't.  A fool could see that.  FM doesn't see that.  Is there a status in life of being "less than a fool"?

Anyone with more than a double digit IQ could see that those different modes ship different products from that refinery for the most part, and those products are all bound for different places.  Barges are limited to waterways, so anything bound for non-waterway locales must go by rail or pipeline.  Pipelines can only carry certain bulk items, not the speciality items.  Thus for specific products, the refinery near Joliet is a captive situation if it only has one Class I rail connection.

Gee, we went over this a while back, when the double digit crowd erroneously claimed that pipelines and railroads carry the same things to the same places.  Either Ken forgot, or he just couldn't grasp it.

So yes, Ken, you are what you typed.

[Anonymous]

I think that we need to agree on what it means to be a captive rail shipper.  By definition of the Staggers Act, any shipper that pays over the 180% R/VC rate is a "potentially captive shipper".  So, any shipper that pays a rate of 180% R/VC or less is not a captive shipper.  In addition, the GAO report already referenced by greyhounds talks about the need to look at all competitive options, including trucks and barges.  Beyond that, I have found nothing that clearly defines exactly what a captive shipper is.

However, I think that it is safe to say that any shipper that falls into the potentially captive category on the basis of the rate that it is charged can be deemed to be a captive shipper if other shipping options are not available or are available only at a higher rate than the shipper already pays.

NOTE:  This would include shippers that use trucks for short-haul to a facility that then uses rail for long-haul transport.  In other words, for the example that I have previously used, those elevators may still be considered to be captive shippers IF the overall rate that they pay (truck + rail combined) is over 180% R/VC.  Why?  Because the cost of shipping by truck to final destination is probably prohibitive and not a viable option.

What does this mean.  Well, it partly means that futuremodal is somewhat right.  He just didn't do a very good job of wording it.  It also means that he is somewhat wrong.  All transportation options need to be taken into account in order to determine if a shipper is captive, and no shipper is captive if they pay less than 180% R/VC regardless of whether any other alternatives exist.

The GAO report comment still stands - it is difficult to determine the number of captive shippers.  In fact, when it is taken into account that shippers may be captive even though they do no direct business with a railroad, it becomes even more complicated to determine exactly which shippers are captive.

Again from my example, let's say that the elevator utilizes truck transport (short haul) to a facility for long haul rail transport.  Even if the long haul transport is charged at a rate that is under 180% R/VC, that still doesn't mean that the originating elevator's overall rate would not exceed 180% R/VC, which would make that elevator a captive shipper even though the facility to which it ships is not a captive shipper.  And the reverse situation also applies.  If the long haul transport is charged at a rate over 180% R/VC (making that facility a potentially captive shipper), that still doesn't mean that the originating elevator is a captive shipper when its overall costs are taken into account.

The GAO report is quite correct in its assessment.  I would even say that it understates the task.  It is probably impossible to determine the number of captive shippers.

I would counter that using rates as the determining factor is a bit misleading, since rates can change at a whim.  We all know about the long term coal hauling contracts that have come under renewal periods.  Mines and power plants that may have received rates at or below the 180% standard are now being foced to accept rates well over the 180% standard.  Since such studies tend to use older data, it is likely the GAO analysis is using the old rate structure which would then understate the number of captive shippers. 

Using the physical connection concept has more merit, because it is "fixed" without an actual construction or trackage rights amelioration.

You have to remember, there are current customers, and there are potential customers.  There may be thousands of facilities with one rail connection which are currently idle for lack of rail competition.  That's the shutdown factor, a variable not accounted for in the GAO's study.  Thus, using current active rate structures as the basis for determining captive shippers misses entirely these idle accounts.

Hey, the dead and comatose don't complain, do they?

[Datafever]

I think that we need to agree on what it means to be a captive rail shipper.  By definition of the Staggers Act, any shipper that pays over the 180% R/VC rate is a "potentially captive shipper".  So, any shipper that pays a rate of 180% R/VC or less is not a captive shipper.  In addition, the GAO report already referenced by greyhounds talks about the need to look at all competitive options, including trucks and barges.  Beyond that, I have found nothing that clearly defines exactly what a captive shipper is.

However, I think that it is safe to say that any shipper that falls into the potentially captive category on the basis of the rate that it is charged can be deemed to be a captive shipper if other shipping options are not available or are available only at a higher rate than the shipper already pays.

NOTE:  This would include shippers that use trucks for short-haul to a facility that then uses rail for long-haul transport.  In other words, for the example that I have previously used, those elevators may still be considered to be captive shippers IF the overall rate that they pay (truck + rail combined) is over 180% R/VC.  Why?  Because the cost of shipping by truck to final destination is probably prohibitive and not a viable option.

What does this mean.  Well, it partly means that futuremodal is somewhat right.  He just didn't do a very good job of wording it.  It also means that he is somewhat wrong.  All transportation options need to be taken into account in order to determine if a shipper is captive, and no shipper is captive if they pay less than 180% R/VC regardless of whether any other alternatives exist.

The GAO report comment still stands - it is difficult to determine the number of captive shippers.  In fact, when it is taken into account that shippers may be captive even though they do no direct business with a railroad, it becomes even more complicated to determine exactly which shippers are captive.

Again from my example, let's say that the elevator utilizes truck transport (short haul) to a facility for long haul rail transport.  Even if the long haul transport is charged at a rate that is under 180% R/VC, that still doesn't mean that the originating elevator's overall rate would not exceed 180% R/VC, which would make that elevator a captive shipper even though the facility to which it ships is not a captive shipper.  And the reverse situation also applies.  If the long haul transport is charged at a rate over 180% R/VC (making that facility a potentially captive shipper), that still doesn't mean that the originating elevator is a captive shipper when its overall costs are taken into account.

The GAO report is quite correct in its assessment.  I would even say that it understates the task.  It is probably impossible to determine the number of captive shippers.

I would counter that using rates as the determining factor is a bit misleading, since rates can change at a whim.  We all know about the long term coal hauling contracts that have come under renewal periods.  Mines and power plants that may have received rates at or below the 180% standard are now being foced to accept rates well over the 180% standard.  Since such studies tend to use older data, it is likely the GAO analysis is using the old rate structure which would then understate the number of captive shippers. 

Using the physical connection concept has more merit, because it is "fixed" without an actual construction or trackage rights amelioration.

You have to remember, there are current customers, and there are potential customers.  There may be thousands of facilities with one rail connection which are currently idle for lack of rail competition.  That's the shutdown factor, a variable not accounted for in the GAO's study.  Thus, using current active rate structures as the basis for determining captive shippers misses entirely these idle accounts.

Hey, the dead and comatose don't complain, do they?

Well, then, there is nothing left to discuss, is there?  If you insist on using your own definitions - no matter how generally unaccepted they are -, then "by definition", you can't be wrong in anything that you say.

[Murphy Siding]

Well, then, there is nothing left to discuss, is there?  If you insist on using your own definitions - no matter how generally unaccepted they are -, then "by definition", you can't be wrong in anything that you say.

     Methinks the same type of definition contortions could be used to prove that the sky is, or isn't blue.

[JSGreen]

'specially if I get to define what is and isnt "Blue"!

[Anonymous]

Well, then, there is nothing left to discuss, is there?  If you insist on using your own definitions - no matter how generally unaccepted they are -, then "by definition", you can't be wrong in anything that you say.

     Methinks the same type of definition contortions could be used to prove that the sky is, or isn't blue.

Well, the definition I use is quite straightforward, e.g. no gray area, no arbitrary R/VC standards, etc.  Either you have one physical connection to one Class I railroad, or you don't.

 

[jeaton]

Well, the definition I use is quite straightforward, e.g. no gray area, no arbitrary R/VC standards, etc. 

 Also usless, immaterial, etc.

[greyhounds]

Anyone with more than a double digit IQ could see that those different modes ship different products from that refinery for the most part, and those products are all bound for different places.  Barges are limited to waterways, so anything bound for non-waterway locales must go by rail or pipeline.  Pipelines can only carry certain bulk items, not the speciality items.  Thus for specific products, the refinery near Joliet is a captive situation if it only has one Class I rail connection.

Gee, we went over this a while back, when the double digit crowd erroneously claimed that pipelines and railroads carry the same things to the same places.  Either Ken forgot, or he just couldn't grasp it.

So yes, Ken, you are what you typed.

Does anyone have a clue as to why FM is of the absolute certainty that the refinery can not ship and receive by truck?

Does anyone have a clue as to why he is of the equal certainty that the refinery would be captive if it was served by the EJ&E and a Class 1 railroad.?

Anticipating his response - they can receive the crude oil by pipeline and barge.  They can distribute the refined product to the nearby Chicago area by truck (or pipe to distirbution terminals).  They've got a lot of options.  They are in no way "captive" to any rail service.

 

[Datafever]

Well, then, there is nothing left to discuss, is there?  If you insist on using your own definitions - no matter how generally unaccepted they are -, then "by definition", you can't be wrong in anything that you say.

     Methinks the same type of definition contortions could be used to prove that the sky is, or isn't blue.

Well, the definition I use is quite straightforward, e.g. no gray area, no arbitrary R/VC standards, etc.  Either you have one physical connection to one Class I railroad, or you don't.

It appears that your reason for wanting to expand the definition of captive shipper is so that you can encompass a much larger problem. 

Perhaps you would be willing to answer a question that I posed in another thread regarding the obligation of railroads to provide service.  While I suggested several possible scenarios, most respondents seem to feel that railroads should not have to provide service under any of the scenarios.  Do you see any differential in what a railroad's obligation to provide service should be based on the type of scenario?

[jeaton]

Greyhounds

Maybe this will help.  Two companies of different modes, say one truck and one rail, do the same thing, i.e., moving freight from one place to another. Since one or the other can do the job offering better service at less cost there can't be any competition between the two. 

But, if you have two carriers of the same mode and one carrier can do the job offering better service at less cost then there can be competition between the two.

How could I be so dumb as to not understand this. 

 

[bobwilcox]

Anyone with more than a double digit IQ could see that those different modes ship different products from that refinery for the most part, and those products are all bound for different places.  Barges are limited to waterways, so anything bound for non-waterway locales must go by rail or pipeline.  Pipelines can only carry certain bulk items, not the speciality items.  Thus for specific products, the refinery near Joliet is a captive situation if it only has one Class I rail connection.

Gee, we went over this a while back, when the double digit crowd erroneously claimed that pipelines and railroads carry the same things to the same places.  Either Ken forgot, or he just couldn't grasp it.

So yes, Ken, you are what you typed.

Does anyone have a clue as to why FM is of the absolute certainty that the refinery can not ship and receive by truck?

Does anyone have a clue as to why he is of the equal certainty that the refinery would be captive if it was served by the EJ&E and a Class 1 railroad.?

Anticipating his response - they can receive the crude oil by pipeline and barge.  They can distribute the refined product to the nearby Chicago area by truck (or pipe to distirbution terminals).  They've got a lot of options.  They are in no way "captive" to any rail service.

 

Before I retired we worked with ExxonMobil on setting up a truck/rail transload via Joliet.  It was a big success for ExxonMobil since it saved them a lot of money.

[Anonymous]

Anyone with more than a double digit IQ could see that those different modes ship different products from that refinery for the most part, and those products are all bound for different places.  Barges are limited to waterways, so anything bound for non-waterway locales must go by rail or pipeline.  Pipelines can only carry certain bulk items, not the speciality items.  Thus for specific products, the refinery near Joliet is a captive situation if it only has one Class I rail connection.

Gee, we went over this a while back, when the double digit crowd erroneously claimed that pipelines and railroads carry the same things to the same places.  Either Ken forgot, or he just couldn't grasp it.

So yes, Ken, you are what you typed.

Does anyone have a clue as to why FM is of the absolute certainty that the refinery can not ship and receive by truck?

Does anyone have a clue as to why he is of the equal certainty that the refinery would be captive if it was served by the EJ&E and a Class 1 railroad.?

Anticipating his response - they can receive the crude oil by pipeline and barge.  They can distribute the refined product to the nearby Chicago area by truck (or pipe to distirbution terminals).  They've got a lot of options.  They are in no way "captive" to any rail service.

I did not say the refinery won't ship some product by truck, or pipeline, or barge.  But there will be certain products bound for certain areas that are:

1.  Not on a waterway

2.  Not near a pipeline

3.  A long haul distance away

4.  Too volumous for truck

You seem to think that the inputs and outputs of refineries are in a homogenous market.  You forget both product specificity and the available transportation options of certain destinations.

We went over this in the coal mine/power plant examples a while back.  We have two Class I' out of the PRB, yet most power plants that use PRB coal have only one physical connection to a Class I, thus they can only receive the needed quantities of coal from that one Class I connection, even if there is a second Class I a few miles away..  Clearly, the coal deliveries are captive, even though the GAO counts PRB coal transportation as not captive "since both UP and BNSF serve the PRB".

You and Jay should get together and contrive a response to this little factiod:  Why do transportation economists refer to railroads as "natural monopolies" if indeed any available mode should be counted as *competition*?  If, as you both contend, trucks are competition for railroads (and since trucks are everywhere), why do these economists seemingly ignore the nationwide saturation of trucks in defining railroads as monopolies?

[Murphy Siding]

  Why do transportation economists refer to railroads as "natural monopolies" if indeed any available mode should be counted as *competition*? 

  Ooooh! Ooooh!  I know this one!!  It's because they get to make up their own definitions to fit their pre-conceived ideas!

[oltmannd]

  Why do transportation economists refer to railroads as "natural monopolies" if indeed any available mode should be counted as *competition*? 

  Ooooh! Ooooh!  I know this one!!  It's because they get to make up their own definitions to fit their pre-conceived ideas!

And exactly who are these "transportation economists" and exactly what is their definition of "natural monopoly" as it relates to 21st century RRing?

Tail wagging the dog, perhaps?

 

[jeaton]

  Why do transportation economists refer to railroads as "natural monopolies" if indeed any available mode should be counted as *competition*? 

  Ooooh! Ooooh!  I know this one!!  It's because they get to make up their own definitions to fit their pre-conceived ideas!

Also so they wouldn't be confused with "unnatural" or worse yet "supernatural" monopolies.

[oltmannd]

  Why do transportation economists refer to railroads as "natural monopolies" if indeed any available mode should be counted as *competition*? 

  Ooooh! Ooooh!  I know this one!!  It's because they get to make up their own definitions to fit their pre-conceived ideas!

Also so they wouldn't be confused with "unnatural" or worse yet "supernatural" monopolies.

Only the E(e)rie was allowed a supernatural monopoly.

[jeaton]

For those who may wonder, here is at least one defination of natural monopoly as found in the glossary of the recent Microsoft Anti-Trust case.

"Natural monopoly: A market that has high natural barriers to entry (usually because of increasing returns to scale) is referred to as a natural monopoly because such a market has a tendency to become a monopoly. Indeed, in the presence of increasing returns to scale, a market that consists of a single large producer is the most economically efficient."

(While I hardly did in depth research on the subject, the term was being bounced around in the Nineteenth Century.)

 

 

[Datafever]

It is my belief that if open access were to become a reality, most of this nation's railroads would be out of business within ten years.  The small lines that survive would be railroads that serve areas that have economic disadvantages.  And in those cases the small lines would mostly be providing service from shipper/receiver to a larger railroad.  Small railroads that have a nice profitable niche now would find their best customers wooed away by the big guys who could give lower rates and be a one-stop solution no matter where the destination happened to be.

I suspect that we would end up with a handful of class ones providing national service and no class twos at all.

Alternatively, the railroads could eventually break down into various types of service.  Class ones might basically decide to handle only the long-haul freight (such as intermodal facility to port) and unit trains - trains that run point to point with very little overhead (the cream of the crop, so to speak), leaving class twos to handle "junk" trains that would require switching and handling of small numbers of cars per shipper/receiver.

What I am not convinced of - one way or the other - is whether this would be good or bad for the railroad industry overall, and whether it would be good or bad for shippers overall.

[edblysard]

Data,

What you just described is in fact going on now.

Although the Class 1s still provide a lot of local switching and intermediate service, for the most part they concentrate on the yard to yard, unit and bulk trains like containers.

 

One of the reason you are seeing a slight resurgence in the Class 2 and 3 markets is simply due to the fact that the Class 1s have found in quite a few instances it is cheaper to do the long haul themselves and leave the short haul and local work to the rest.

 

My railroad receives at least two trains daily that are nothing but mixed or “junk” freight, one from Little Rock and one from Tulsa.

We switch out, block and classify over half of the Little Rock train for UP…the other half is for our customers.

We do this because it is cheaper for UP to drag the mix to us, let us switch it, and then have their local yard to yard job run it out of our yard to their customer.

Even with the additional switch charges, it still works out better for the customer, in that it is faster and still cheaper than UP dragging it to their major yard, then have to hump it, re block it, classify it, and then, when they get the chance, dig it out of the bowl and take it to the customer.   

 

Now, I doubt that UP, BNSF or KCS, CSX and NS will get out of the short haul/local work altogether, but they are realizing that taking the cars to a local, regional or short line and leaving the switching, along with the actual working of the customers facilities to these guys is often is cheaper overall for the Class 1, and better for the customer.

For a better idea, take a look at how the Conrail Shared Asset group works.

It is my belief that if open access were to become a reality, most of this nation's railroads would be out of business within ten years.  The small lines that survive would be railroads that serve areas that have economic disadvantages.  And in those cases the small lines would mostly be providing service from shipper/receiver to a larger railroad.  Small railroads that have a nice profitable niche now would find their best customers wooed away by the big guys who could give lower rates and be a one-stop solution no matter where the destination happened to be.

I suspect that we would end up with a handful of class ones providing national service and no class twos at all.

Alternatively, the railroads could eventually break down into various types of service.  Class ones might basically decide to handle only the long-haul freight (such as intermodal facility to port) and unit trains - trains that run point to point with very little overhead (the cream of the crop, so to speak), leaving class twos to handle "junk" trains that would require switching and handling of small numbers of cars per shipper/receiver.

What I am not convinced of - one way or the other - is whether this would be good or bad for the railroad industry overall, and whether it would be good or bad for shippers overall.

[Anonymous]

  Why do transportation economists refer to railroads as "natural monopolies" if indeed any available mode should be counted as *competition*? 

  Ooooh! Ooooh!  I know this one!!  It's because they get to make up their own definitions to fit their pre-conceived ideas!

And exactly who are these "transportation economists"

Check the first post of this thread.  Some of them are in the very article Ken so cavalierly posted.

[Anonymous]

  Why do transportation economists refer to railroads as "natural monopolies" if indeed any available mode should be counted as *competition*? 

  Ooooh! Ooooh!  I know this one!!  It's because they get to make up their own definitions to fit their pre-conceived ideas!

[jeaton]

You and Jay should get together and contrive a response to this little factiod:  Why do transportation economists refer to railroads as "natural monopolies" if indeed any available mode should be counted as *competition*?  If, as you both contend, trucks are competition for railroads (and since trucks are everywhere), why do these economists seemingly ignore the nationwide saturation of trucks in defining railroads as monopolies?

Here is a little "factoid" for you.

"Natural monopoly: A market that has high natural barriers to entry (usually because of increasing returns to scale) is referred to as a natural monopoly because such a market has a tendency to become a monopoly. Indeed, in the presence of increasing returns to scale, a market that consists of a single large producer is the most economically efficient."

Answer to your question:  Maybe there are conditions where a railroad may meet the defination of a "natural monopoly".  I don't see anything that says a natural monopoly always exist when only one railroad serves a shipper.

Note the first underlined phrase.  A market being called a "natural monopoly" is called that because condition exist that can lead to a monopoly AND NOT because it is a monopoly.

The key part of the defination "A market that has high natural barriers to entry" is a natural monopoly.  So if it only takes a truck to get into a market, obviously that market does not have a high natural barrier to entry and is not a natural monopoly.

Your view that competition in the transportation can only exist on an intramodal basis presumes that for the movement of frieght there are "railroad markets", "truck markets", "pipeline markets", "barge markets", etc.  Is there a divine decree that makes this so?

People who are in charge of getting a shipper's freight moved from point to another are going to select the mode or method that gets the needed level of service at the lowest cost.  For the right price and availability, alien spacecraft can work.

 

Thought the last sentence in the defination was rather interesting.

 

[greyhounds]

I did not say the refinery won't ship some product by truck, or pipeline, or barge. 

Yes you did.  Here's exactly what you said:

Barges are limited to waterways, so anything bound for non-waterway locales must go by rail or pipeline.   

To you it's barge, pipe or rail.  You totally left out trucks

Why do transportation economists refer to railroads as "natural monopolies" if indeed any available mode should be counted as *competition*?  If, as you both contend, trucks are competition for railroads (and since trucks are everywhere), why do these economists seemingly ignore the nationwide saturation of trucks in defining railroads as monopolies?

You really don't understand that trucking companies and railroads compete for freight? 

Try to understand the definition of "Natural Monopoly" that Jay posted.  It's got nothing to do with your concept of what a monopoly is.  It doesn't mean that the customer has only the one transportation producing firm to buy from, or that he can't shift freight between modes. 

It means that the low cost method of handling railcar freight to and from facilities such as the ExxonMobile refinery generally involves only one rail firm.  Introducing a second rail carrier into the situation would increase the cost of rail service to the plant.  This cost increase would shift freight from rail to other modes, such as trucks.  Bad idea Dave.

On the simplest of levels, instead of sending in one crew to switch out the plant, you'd now have two crews.  (who would probably get in each other's way and P/O each other even if they didn't by the way each left things for the other.) So unless the volume doubled, which it couldn't do unless there was a modal shift (and you falsely maintain there is no modal competition), each crew switching the plant would handle fewer cars (maybe by as much as half) than the one crew would. 

This will increase the per unit and overall rail cost of switching the facility.  Increasing the rail cost and diverting freight to truck movement is no way to go through life Dave. (Other rail cost will also go up with the introduction of a second serving railroad.)

The low cost method of providing railcar service to the facility is through one single railroad firm.  That's what they mean by "Natural Monopoly". 

A railroad "Natural Monopoly" does not mean the Joliet refinery can't put a load of gas in a semi and send it to Rockford.  The refinery has many transport options.  It is, in no way "captive" to rail.  But the most efficient way to provide rail service to the facility is by concentrating the business with a single railroad.  That is what they mean by "Natural Monopoly".

[bobwilcox]

It is, in no way "captive" to rail.

The idea of the ExxonMobil being captive at Joliet or any one of their facilities would make their transportation vendors fall down on the ground with laughter.  Quiz :  Who has the larger market capitalization? EM or the entire North American Railroad industry?

[oltmannd]

Hey!  I have an idea!  Since rail seems to be so much more efficient in some lanes with some commodities such that trucks have a hard time competing, lets fix the problem.  We could require RRs to be less efficient.  We could set up a gov't oversight agency to help decrease that efficiency.  They could mandate circuitous routing, allow extra car handling, and force rates to make RRs always give up traffic to waterways.  Then, if the RRs happen to make too much money, they could always confiscate those "excess profits". 

Now, all we have to do is come up with a name for it.  How about, the Intricate Commodity Commitee?  No?  How about, the Inefficient Coffee Consumers?  No, that's no good either.  Inane Commision of Complication?  I guess not.

Any suggestions?

[Datafever]

It is, in no way "captive" to rail.

The idea of the ExxonMobil being captive at Joliet or any one of their facilities would make their transportation vendors fall down on the ground with laughter.  Quiz :  Who has the larger market capitalization? EM or the entire North American Railroad industry?

Market Capitalization
BNSF 27.7 B
UP 24.5 B
NS 21.2 B
CSX 15.6 B
KCS 2.0 B

Exxon Mobile 423.2 B