Thanks to Chris / CopCarSS for my avatar.
Keeping the Cotton Belt separate from the Espee had twofold advantages.
Murphy Siding wrote: Bob- can you explain the Ogden Gateway issue a little further please?
"Ogden Gateway" has been discussed on another thread in this forum. I started to write something about it, but my knowledge is altogether too vague.
Appearing below is my weak understanding of the issue.
Edward Henry Harriman's Union Pacific was the largest holder of Southern Pacific + Central Pacific securities at the time of his death in 1909. The Federal Government was in a trust busting mood then and set its sights on loosening U.P.'s grip on the Central and Southern Pacific railroads. In the ensuing litigation, the parties came to an agreement (1922?) that would allow U.P. to retain its traffic solicitation rights in central and northern California plus western Oregon - rights that would maintain the heavy tonnage flows to The Overland Route via the Ogden Gateway. Of course this arrangement somewhat short-hauled the Espee lessening their division of revenues for each revenue carload. For example, between Sacramento and East Saint Louis an SP - Santa Rosa - RI, or SP - El Paso - T&P - Texarkana - MP, or SP - Corsicana - SSW routing would have yielded a greater share of the revenue move to the Southern Pacific than SP - Ogden - UP - Kansas City - Wabash.
Although the Staggers Act of 1980 may have nullified the "Ogden Gateway" issue, Union Pacific continued to enjoy a brisk interchange with the Espee at Ogden until the close of 1982. Upon consumating the UP-WP-MP merger during December of that year, the volume of SP-to-UP traffic dropped sharply. 65 Market St. was not at all happy that their traditional eastern partner now had a direct line right into Espee's backyard. Union Pacific competitor Rio Grande was the beneficiary of Espee's displeasure.
"No soup for you!" - Yev Kassem (from Seinfeld)
From Utah Rails:
In return for supporting Southern Pacific's control of Central Pacific, UP in 1923 won an agreement with SP to send traffic via the Overland Route through Ogden. This pact became known as the "Santa Margarita Agreement." It stated that all eastbound traffic originating north of Santa Margarita, at the south end of California's Salinas Valley, would travel by way of Ogden. With the agreement in place, SP was forced to furnish a dependable amount of rail traffic to Union Pacific at the Ogden Gateway, with a small bit going to D&RGW to satisfy the ICC government regulators. The ICC decided in Southern Pacific's favor in 1923, giving it control of CP but insisting that Southern Pacific solicit traffic for the Overland Route, via Ogden, for interchange with Union Pacific there.
In using such specific language, the ICC unwittingly shut Rio Grande out of sharing any meaningful amount of SP traffic at Ogden. This decision effectively forced D&RGW to depend even more on its connection with Western Pacific at Salt Lake City.
Murphy Siding wrote: I'm not sure if I'm getting this yet. By an agreement, SP couldn't solicit a carload from northern CA, for a trip down to southern CA, then east on SP tracks? But SSW could do that?
If I remember correctly, yes. Mark Hemphill's article ("And then the Golden Empire Came Crashing Down") in the March 2005 issue of Trains covered that.
SSW was not a party to the Santa Margarita Agreement. It seems like Mark wrote that SP acquired SSW specifically to get around this agreement.
Good answers to the question, guys.
SP owned (I think) over 99% of SSW's stock and could have merged the Cotton Belt any ol' time it wished to do so. Obviously, it had its reasons for refraining.
Yes, that is correct.
"Santa Margarita Agreement and "Ogden Gateway Conditions" are both shorthand for what is formally known as the "Central Pacific Order" of 06 February 1923, under which the SP by ICC order had to solicit preferentially for UP in the former Central Pacific territory, and in territory deemed tributary to the UP. The intent of the order was to prevent SP from soliciting traffic in favor of itself by way of El Paso, Texas, on the Sunset or Golden State routes. The rationale for the decision is difficult to describe and stems from law that created the charter for the Union Pacific-Central Pacific transcontinental route.
The limits of this territory were defined as Santa Margarita, Calif., on the Coast Line; Caliente, Calif., on the Valley Line; Kirk, Oregon, on the Cascade Line; and north of the Oklahoma-Texas border to the Ohio River and Buffalo, New York.
This did not mean that traffic absolutely had to go that way; it only meant that if the shipper did not specify routing the SP had to enter an SP-UP routing for traffic in that territory. The shipper had 100% freedom to specify SP-D&RGW-CB&Q or SP-D&RGW-MP, or SP-SSW, or SP-MKT, or whatever the shipper felt like. But few shippers were going to do so because the rate was identical either way -- rate competition having been legislated out of existence by the Hepburn Act and Elkins Act, and equalized among parallel routes between rate-making gateways -- and the service by any route other than SP (Central Pacific)-UP was vastly inferior. The predominant exception was some of the lumber movements where the shipper, usually a lumber broker, desired to actually retard transit time in order to arbitrage market swings.
By purchasing control of but not merging SSW, SP could in effect circumvent the Ogden Gateway Conditions by having an SSW salesman visit the shipper and write in an SP-SSW routing -- if the shipper didn't specific SP-UP, which most continued to do. And again, the predominant traffic on this route was lumber where speed was not of the essence. In the 1950s and 1960s, when Oregon lumber was on the ascendancy as Washington forests approached cut-over, this became important for SP.
In 1923 the Central Pacific Order was of little practical importance to the Rio Grande because it was in no position to compete for anything but local (i.e., originating and/or terminating on line) traffic because its physical plant was wretched and running times extremely slow. Eventually Rio Grande improved its physical plant substantially and thought it could win some of this traffic, or at least that traffic of shippers too apathetic to specify route. By arduous petition the Rio Grande in 1966 achieved a very limited opening of the Ogden Gateway for some traffic originating in OSL and CP territory. However Rio Grande never enjoyed any ICC order that guaranteed it any percentage of any traffic. And, the opening of the Ogden Gateway also required continued prevention of rate competition by the ICC. Once railroads were deregulated the Rio Grande was unsurprisingly soon out of the picture as a through route.
The Rio Grande thus was like Goldilocks sampling the porridge, wanting its regulation just right -- not too much and definitely not too little!
S. Hadid
Interesting situation for the Rio Grande. I am taking a look at their financials in the 70's and they were a very profitable carrier.
It appears they had a couple of advantages...on one hand they were a bridge carrier, receiving traffic from the western carriers such as WP or SP and then handing off to other carriers at Denver or Pueblo. Is that a correct assessment? If so, they were essentially a "division" of the haul without considerable costs for pickup or delivery.
On the other hand, they appeared to originate some coal traffic, usually profitable traffic.
How much traffic did they lose as a result of Staggers? \
What is their current status as a part of the UP? Was Tennessee Pass closed mainly due to the lack of interchange to the Mopac in Pueblo, or due to the nasty grades?
thanks,
ed
MP173 wrote:Interesting situation for the Rio Grande. I am taking a look at their financials in the 70's and they were a very profitable carrier.
Calling the Rio Grande very profitable is actually an understatement. When purchased by Anschutz Industries the D&RGW owned most of its locomotives and freight car fleet outright -- no leases (how many other railroads can you say that about in the 1970s?); a large new office building occupying an entire block in downtown Denver's financial district, of which D&RGW occupied maybe 10% and leased the rest to bankers and lawyers; substantial industrial land; and had about $400 million in cash in the bank. Anschutz bought the property for less than its ready cash assets, which shows how wrong the free market can be, at least in the short term.
I hope you don't take this wrong, but you have it completely backward, and for that I blame Lucius Beebe for his mythology and romanticism, and Robert Athearn for his partisan agenda of western regionalism and the Rocky Mountain West's inferiority complex post WWII. Neither author wanted to report reality how it was but only how they wished it would be -- Beebe wanted to live in the past and Athearn wanted Eastern respect. Unfortunately what they wrote stuck like glue probably because it conformed so perfectly to railfans' internal biases, and everything David P. Morgan and his successors wrote to the contrary continues to be ignored!
The D&RGW was enriched by its local traffic, not its bridge traffic. Interchange wasn't all that heavy and on an average day amounted to one train with WP at Salt Lake City, two with SP at Ogden, one or two with the Q at Denver, one or two with RI at Denver, two with MoPac at Pueblo, and in total maybe two trains worth with UP and Santa Fe combined (not including coal). Very little of this traffic bridged across the D&RGW because its route was quite inferior in service to UP and Santa Fe, if one was looking at a California-Kansas City or California-Chicago routing. Most of the interchange business either terminated or originated on Rio Grande. The only notable through business was Ford autos and autoparts which Rio Grande had half, UP the other half. That amounted to about 180 trains a year, which usually had to be filled out to tonnage with other freight.
Where Rio Grande did very well was on business terminating and originating in Denver and Salt Lake City in competition with UP and Santa Fe, because its local service was vastly better thatn the big roads. Thus a shipper originating a carload in California for a Denver destination would usually specify a SP-D&RGW routing rather than SP-UP, because UP would lose so much time switching the car in Cheyenne to a Denver train, and waste more time in Denver. It was not uncommon for a car of lumber to arrive in Denver on the 134 in the early morning, get switched to the Short Local for Hugh M. Woods in Arvada, get set out by 0800, unloaded, the empty picked up by the local coming back that afternoon, get switched into a 187 that night, and be out of Denver in less than 24 hours.
Where the Rio Grande made the money in the 70s was on-line industry: U.S. Steel Geneva Works, Kennecott Copper Utah Copper Div., ASARCO Magna Smelter, U.S. Smelting & Refining Midvale Smelter, CF&I Steel Minnequa Works, Conoco and an independent refiner in Denver, four refineries between North Salt Lake and Woods Cross; Pacific States Cast Iron Pipe; and about two dozen coal mines. Geneva was Rio Grande's largest shipper and good for about 250 cars a day in and out. Some of this traffic was quite unknown and quite heavy: Conoco generated about 60 cars a day, every day, for Grand Junction -- a business that dated to 1914.
Some?!! The D&RGW was a coal road -- born that way, built that way, ran that way, still is that way. The bridge traffic was froth. Even today with the spectacular ascension in UP's empire of the Powder River Basin, former Rio Grande lines in Utah and Colorado continue to generate 24-26% of UP's total coal train loadings, about 350 trains/month vs. 1,000 trains/month for the PRB.
If you want to see what coal did for D&RGW finances, compare the annual reports from 1950 to 1980. Coal declined badly in the 1950s, reaching a nadir in the early 1960s, then began a steady rise through to 1980 -- note what it did to revenue and profitability. There was always a heavy and steady coal movement for Geneva Works, Minnequa Works, and Kaiser Steel-Fontana Works, but the steam coal business took off spectacularly beginning in the early 1960s.
Circa 1984, there was a pie chart at SP headquarters in Denver showing that coal originations on D&RGW accounted for 15% of the revenue and 75% of the profit of the SP system.
How much traffic did they lose as a result of Staggers?
All of the overhead business. Staggers, as everyone knew, meant that the Rio Grande would be reverting to a coal-originating branch line. Which it did. It took awhile for mergers to sort it out but there was no question in anyone's mind of the end game, which was the closure to through traffic of the Rio Grande. The RI gateway dried up in 1980, the WP gateway in 1982, the Q gateway in 1986, and the Santa Fe and UP business wasn't that great anyway, except for coal. That left the D&RGW with its virtual railroad to Kansas City, which it gained as a condition of the UP-MP-WP merger in 1982, and the SP connection at Ogden. SP transferred its severely declining Overland Route business to D&RGW in 1982. Most of it went to St. Louis because the Rock Island in Kansas City was nothing but an island, and some of it went to Chicago, especially after SP purchased the Spizzle (the SPCSL, former Alton). (Recall that SP acquired Rock Island in Kansas City when it purchased Rock Island's half of the Golden State Route to become the Cotton Rock.) Santa Fe, BN, and UP were not good connections in Kansas City (or anywhere else for that matter) because it usually meant they would be short-hauling themselves. If they even would quote a rate it would be unfavorable.
What is their current status as a part of the UP?
The Rio Grande originates and terminates local business, though not at the scale it once did given the loss of Geneva, Minnequa
Mr. Hadid:That was quite a report. I really appreciate it. Time to go back and digest it and then no doubt come back with a few more questions.
Rio Grande was one of those roads that always fascinated me. As a kid, we went to Pueblo on vacation in 1964, riding the Colorado Eagle from St. Louis and then in 1966 returned for a family funeral, riding the NW/UP City of Portland, I believe to Denver and then down to Pueblo on the RG. In 1964 we went took the obligatory trip to the Royal Gorge...oh what an incredible place!
I had very little knowledge of the RG. I certainly appreciate you correcting me on my assumptions. Got a couple of Moody's from 1972 and 1980 here, guess I will dive in.
Thanks,
Rio Grande's tonnage from connecting carriers in 1962 was greater than what it originated (9.5 million tons vs 8.6 million tons originated). By 1979 the numbers were 22.2 million tons originated and 11.9 millions from connecting carriers.
Further, coal went from 136,000 carloads in 1962 to 201,000 in 1979. Total carloadings for the system was 491,000 in 1979, so coal was HUGE, as previously stated by Mr. Hadid.
Their balance sheet was sterling.
Quite a bargain.
MP173 wrote:Rio Grande's tonnage from connecting carriers in 1962 was greater than what it originated (9.5 million tons vs 8.6 million tons originated). By 1979 the numbers were 22.2 million tons originated and 11.9 millions from connecting carriers. Further, coal went from 136,000 carloads in 1962 to 201,000 in 1979. Total carloadings for the system was 491,000 in 1979, so coal was HUGE, as previously stated by Mr. Hadid.Their balance sheet was sterling. Quite a bargain.ed
Connecting carriers aren't just the SP, MoPac, etc. Buried in the details on those numbers of tonnage from connecting carriers in 1962 are the following:
1. Amost all the coal for USS-Geneva originated on Carbon County Railway.
2. All of the coal for CF&I Steel originated on the Colorado & Wyoming Railway.
3. All of the outbound business from CF&I Minnequa Works originated on C&W Railway.
In sum they probably amounted to more than 2 million tons in 1962, and Rio Grande got most of the line haul.
Good on ya looking those up -- I appreciate it.
The 1964 trip to Pueblo was highlighted by the Royal Gorge trip. Second best event (other than the ride on the Colorado Eagle) was a trip to the CF&I steel mill. My great uncle was a foreman there and we got a little tour.
I forgot about the C&W. Looking it up in Moody's, it appears to be a subsidiary of the CF&I, much like the EJE was for USSteel. Looks like they had a tidy little operation in 1979 with $11.5 million in revenue bringing $3.2 million down to net.
I assume the Minnequa Works was in Pueblo...correct me if I am assuming wrong. Is the Pueblo CF&E mill gone? I believe it is.
Mr. Hadid, earlier you mentioned "steam coal". Would you mind defining, in layman's terms of course, what that is, as compared to other coal. Or perhaps a internet reference.
It appears Mr. Anschultz (sp) did quite well with his purchase of the DRGW. Based on your earlier assessment, he pretty much go the railroad for nothing, when applying assets and cash to the purchase price. What about his purchase of the SP? Was that done primarily to provide an outlet for DRGW, or was that also an asset play?
Did I not read recently that he resigned as a director of UP? Obviously he parlaid his purchase of DRGW into quite a stake into today's railroading structure. Isnt his holdings about 10 - 15% of UP stock?
He seems to fly a bit under the radar. I havent read too much about him. Is that intentional on his behalf, or have I simply not found anything on him?
MP173 wrote:The 1964 trip to Pueblo was highlighted by the Royal Gorge trip. Second best event (other than the ride on the Colorado Eagle) was a trip to the CF&I steel mill. My great uncle was a foreman there and we got a little tour.I forgot about the C&W. Looking it up in Moody's, it appears to be a subsidiary of the CF&I, much like the EJE was for USSteel. Looks like they had a tidy little operation in 1979 with $11.5 million in revenue bringing $3.2 million down to net. I assume the Minnequa Works was in Pueblo...correct me if I am assuming wrong. Is the Pueblo CF&E mill gone? I believe it is.
Correct, C&W was a CF&I subsidiary, and Minnequa was CF&I's company town on the south side of Pueblo where the mill was located (just like Gary). As you know most steel mills had a common-carrier rail operation in order to obtain the originating carrier's participation in the through rate, to achieve direct interchange with all or most of the trunk lines serving that city, and secondarily to switch the plant. The CF&I mill is not gone but is no longer an integrated mill, only a mini mill. The blast furnaces were permanently blown out in 1983 and subsequently demolished. CF&I went bankrupt and emerged as Rocky Mountain Steel Mills, which was subsequently purchased by Oregon Steel Mills, and a few weeks ago OSM was purchased by a Russian steel company. Minnequa was always a "western" steel mill rolling products needed in the west: rail, barb wire, oilfield pipe and drill stem, light structural shapes, as opposed to a plate and sheet mill typical of eastern steel mills. It still rolls rail, drill stem and oilfield pipe, wire products, and merchant bar. Minnequa does not have the capability of producing the high-quality head-hardened rail now used by high MGT main lines, and rolls 136# control-cooled rail used for secondary tracks, yards, sidings, etc.
"Steam coal" is coal used to generate steam in a electric utility station. It's a category. Other categories of coal are "met coal" used to make coke for metallurgical purposes, "lump coal" or "heating coal" used for domestic heating on grates (a category that scarcely exists now), and "railway coal" (a category that has ceased to exist). If someone refers to steam coal, that tells you something about not only the purpose of the coal but the chemical characteristics of the coal and size of the coal. Some of the mines in Colorado and Utah did produce met coal, notably the Allen Mine on the C&W west of Trinidad, Colo.; Somerset Mine on the North Fork Branch at Somerset, Colo.; Mid-Continent Mine in Coal Basin above Carbondale, Colo., on the Aspen Branch; Geneva Mine in Horse Canyon on the Carbon County Railway (Utah); and Sunnyside Mine at Sunnyside on the Sunnyside Branch (Utah). All of this except for Mid-Continent was "met coal" of a quality that a Pittsburgh Seam miner would sneer at, and it was always difficult for the western steel mills to produce a really good coke from it. Often it was blended with small quantities of coal from Oklahoma to try and produce a decent coke.
It was obvious after BNSF that UP had to have the SP. The D&RGW didn't need an outlet; other railroads were only too happy to accept its high-revenue coal trains. SP needed the D&RGW but D&RGW didn't need the SP.
Did I not read recently that he resigned as a director of UP? Obviously he parlaid his purchase of DRGW into quite a stake into today's railroading structure. Isnt his holdings about 10 - 15% of UP stock?He seems to fly a bit under the radar. I havent read too much about him. Is that intentional on his behalf, or have I simply not found anything on him?ed
I'm not the one to comment.
MP173 wrote:Did I not read recently that he resigned as a director of UP? Obviously he parlaid his purchase of DRGW into quite a stake into today's railroading structure. Isnt his holdings about 10 - 15% of UP stock?
You are correct that Mr. Anschutz is no longer on the board of directors at UP. He does not hold his stock directly, but through Anschutz Investment Company, which currently owns 4.12% of UP, valued at a bit over 1.2 billion dollars.
1435mm wrote: By purchasing control of but not merging SSW, SP could in effect circumvent the Ogden Gateway Conditions by having an SSW salesman visit the shipper and write in an SP-SSW routing -- if the shipper didn't specific SP-UP, which most continued to do. And again, the predominant traffic on this route was lumber where speed was not of the essence. In the 1950s and 1960s, when Oregon lumber was on the ascendancy as Washington forests approached cut-over, this became important for SP. S. Hadid
Correct, Staggers voided the Ogden Gateway Conditions.
But merger of SSW and SP still did not occur -- returning to the original question -- because the SSW had in the meantime obtained at a very favorable interest rate a government loan to purchase and rebuild the Cotton Rock. Merger of SP and SSW would have required refinancing the loan at a much higher rate.
True, and the loan was the reason the Cotton Belt did not pass away corporately. The SSW outlasted its parent by more than a year on paper. The Cotton Belt was merged into the Union Pacific on September 30, 1997.
1435mm wrote: Correct, Staggers voided the Ogden Gateway Conditions.But merger of SSW and SP still did not occur -- returning to the original question -- because the SSW had in the meantime obtained at a very favorable interest rate a government loan to purchase and rebuild the Cotton Rock. Merger of SP and SSW would have required refinancing the loan at a much higher rate.S. Hadid
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