A posting of about two weeks ago stated that an MIT report predicted a dim future for coal. I have checked in the MIT wewbsite, read the issues of the alumni magazine, and have come to a different conclusion. MIT predicts a great future for coal but says that affordable and practical pollution control measures must be adopted. I believe they will be.
The fact that American railroads are capacity restrained in going after new business is a well-established fact. And some want government to help with the investment to increase capacity. I am not such an idealogue either way on this issue, but I do think capacity should be increased. The question regarding Powder River is can BNSF and UP increase capacity sufficiently fast to keep up with demand and still satisfy their other customers’ demands, which may also call for increased capacity? Certainly, it is possible to put down a fourth or fifth track in Wyoming, but what about critical junctions, the servicing of power, yards, etc.? For this reason I hope the DM&E expansion plan is a success. In addition to providing added capacity for Powder River Basin coal, it will also provide better rail service for areas that have mediocre service and rail service to places where none is provided now. This will strenghen the USA rail system in general and the country in general. I think there will be enough business for everyone and BNSF and UP profits won’t suffer.
In the grand scheme of things, I’ll bet that it’s much cheaper and easier to expand the capacity on the UP and BNSF lines, than to try to start from scratch(DM&E).
That’s an interesting take. I just have one question. “Cheaper and easier” for whom in particular? The utilties? The taxpayers? BNSF and UP? Rail shippers in general?
It’s not such an easy question to answer. If indeed DM&E represents an introduction of triopoly competition into the PRB duopoly, then the subsequent market pressure to lower rates will be “cheaper and easier” for the utilities and for rail shippers in general.
Since the FRA has rejected DM&E’s “wish list” loan request, it may be DM&E can find a less overall expensive way to enter the PRB with mostly private funding. That gets the taxpayers off the hook, although I expect DM&E will file another loan request for a much lesser amount to facilitate the actual PRB entry trackage.
(BTW - I see where DM&E did get a loan approval for the Colony line. Maybe they can tap into the Basin from that point with a shorter extension, albeit a longer overall route to the power plants.)
Seems to me the only folks who really will experience “cheaper and easier” are BNSF and UP.
…1)open can…2)dump out worms in a microwaveable continer…3)heat on medium for 3 to 4 minutes…4) re-open discussion of DME?PRB merits…[:P]
Dave-on another thread, you suggest that the railroads don’t have enough money to maintain their trackage at the current levels of traffic. On this thread, you’re once again championing a third rail line into the PRB to increace competition, and lower shipping costs. You do see the irony in this-don’t you?
Maintenance cost curves for typical manufacturing facilities typically show optimal levels of production. A given system of machines, for instance, may show optimal maintenance costs at 85% of maximum production. To ramp up to 95% doesn’t simply require 10% more support costs, but 30% more, and another 30% to achieve 99% capacity. To achieve an optimal output, it can be substantially more cost effective to be operating 10 machines at 80% capacity, than 8 machines at 100% capacity.
The company could not afford to operate 8 machines; but the cost of operating ten to achieve the same output is not just feasible, but the only rational alternative.
At the identical levels of overall output, there’s not enough money to maintain and operate 8 machines, but there is plenty of money to maintain and operate 10, under the specific circumstances.
There may be a moral to the story in there for railroads at capacity, perhaps even irony.
I don’t remember writing that any of the Class I’s don’t have the money to maintain the plant at current levels of traffic, but I know this has been true of some of the short lines. Others have written about the CN, and perhaps CSX with regard to sunkinks, but generally the Class I’s seem to be both maintaining current plant and pursuing moderate expansion, but leaving the question of enough expansion. One issue I didn’t raise is the security by having an altogether different route accessing the Basin, since BNSF and UP are completely together for part of the access.
After so much track has been ripped up, I think it would be great if a lot were put down and be economically viable.
The reason railroads can’t cover their cost of capital is due to the anachronistic integrated system combined with the natural monopoly characteristics that cause US railroads to make irrational choices. Like spending most of their capacity enhancement funds on the low margin import intermodal corridors, while throwing nickel and dime expenditures at the high margin corridors. Like simply trying to add trackage to existing lines e.g. maintaining the error of consolidation rather than diversifying/dispersing new lines into new corridors.
But you know what? That’s a whole 'nother subject. The question put forth in this thread is whether the PRB is better off with two railroad companies simply trying to add track to existing lines or with a new third railroad coming in with a uniquely located new line. I of course vote for the latter. I would amend that basic question with a scenario of my own: The PRB would also be better off if UP and/or BNSF added new trackage on new corridors out of the PRB than if a third railroad company was added but was instead granted trackage rights over the present set of lines.
Of these four choices, I choose a third player over new trackage in new corridors. Next would be UP/BNSF adding new trackage on new corridors. Next would be adding a third player over present trackage with added sidings et al, and last is UP/BNSF
I think this is a dynamic of national public energy needs vs the capacity of private capital vs government investment whose wheel rolls around an axle that is tensioned and welded to the impasse of private and public money, and the traditional respecting of boundaries where never the twain shall meet. The specter of socialism lurks in the back pages of recent history of this 500 pound elephant who sired a hybrid offspring in Transit Authorities, even Amtrak. Freight is the sole remaining surviving Dutch Kid holding every available finger he can reasonably afford plugging the holes in the dike with one hand tied behind his back. My take on this situation is that in this country for a variety of reasons, we are on a path of wading into the water that is already 2/3rds up our trunk and all it will take is a good push to get us to swim in a similar concept of quasi nationalisation of freight services, following passenger services. There will be the same outcry of Socialism, the same debate over meddling with market forces, the same outcry over the use of public money…but when the squeeze gets its grip tighter in the capacity of a one gallon bucket that overfloweth…all bets are off. It will taste like castor oil applied as a remedy when the ailment worsens. Someone once said, you dont have to be a fortune teller to predict what will happen tomorrow, it will be more of the same, based on the common sense equation that simply results from nothing having been fundamentally changed today.
The reason railroads can’t cover their cost of capital is due to the anachronistic integrated system combined with the natural monopoly characteristics that cause US railroads to make irrational choices. Like spending most of their capacity enhancement funds on the low margin import intermodal corridors, while throwing nickel and dime expenditures at the high margin corridors. Like simply trying to add trackage to existing lines e.g. maintaining the error of consolidation rather than diversifying/dispersing new lines into new corridors.
But you know what? That’s a whole 'nother subject. The question put forth in this thread is whether the PRB is better off with two railroad companies simply trying to add track to existing lines or with a new third railroad coming in with a uniquely located new line. I of course vote for the latter. I would amend that basic question with a scenario of my own: The PRB would also be better off if UP and/or BNSF added new trackage on new corridors out of the PRB than if a third railroad company was added but was instead granted trackage rights over the present set of lines.
Of these four choices, I choose a third player over new trackage in new corridors. Next would be UP/BNSF adding new trackage on new corridors. Next would be adding a third player over present trackage with added sidings
I agree with the above analysis, except that what will prevent rail freight from going Socialist is the increasing demand for freight service, continual shift from highway-alone to intermodel with greater profit pricing ability given to the railroads, and greater use of industrial land with rail access. This will improve profitability of all the Big Six and the regionals. Short Lines with benefit also, but some will require some “Socialism” to improve physical plant to handle the business. Like what Maine is proposing for the Portland - Crawford Notch line.
One interesting consideration that is a wild card is the lead time required to complete civil engineering studies, project and then actual cost budgets and the filing and approval of enviromental studies…and then ponder the rate of increase for traffic within that time frame and then, of course the time required to actually add trackage. Will one overrun the other? It would be interesting to compare long term capital planning and the actual phases toward completion that are ongoing now based on the projections of available capital and projected increases in traffic and the ultimate reconciliation of the four aspects of this dynamic. If they do not meet in a syncronicity of events, then perhaps the socialist remedy will be applied. I think the tipping point could be a tangent path of increased demand for rail passenger services adding to the load. In other words, if the political situation changes during the next cycle occurs ( and who can plan for that?) and a legislative cure-all for additonal access by passenger services is wedged forward, it will make for a interesting set of circumstances.
Will the increase in freight traffic projected now actually be larger in scope than the increase in capacity designed into projects already on the books, given the lead time r
Will the increase in freight traffic projected now actually be larger in scope than the increase in capacity designed into projects already on the books, given the lead time r
Will the increase in freight traffic projected now actually be larger in scope than the increase in capacity designed into projects already on the books, given the lead time r
Always amusing how people throw “Socialism” around. Guess it comes down to the “Limbaughization” of American politics - any money spent by government on health care, roads, or basically anything except the military is “socialism”.
Except for the Great Northern, virtually every 19th c. transcontinental railroad was built thanks to government subsidies via land grants…this during a 30-40 year period when Republicans controlled the Presidency, House and Senate for all but a few years. Guess Abe Lincoln was a “Socialist” for authorizing the subsidies for the UP and NP to be built?? How about General / President Grant?? Well, a lot of those Presidents did have beards kinda like Karl Marx I guess, maybe they were really Bolsheviks!![swg]
so·cial·ism
Pronunciation: 'sO-sh&-"li-z&m
Function: noun
Any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods.
Actually, Lincoln gave money to private companies to help them complete a monumental task. ‘Socialism’, as defined in wallyworld’s post above, would mean that the government undertook the task of building the transcons itself. There is a difference, if you think about it.
There’s the unique reason you and I disagree on some things. I’m all in favor of a Cinderella story. Small, ad-hoc,struggling regional railroad builds dream line into fat city coal market, steal business away from two big Class 1’s, and saves the day! That has Disney movie written all over it.
The reality, as I see it, is different. UP and BNSF already go to the mines, and to the power plants. Use whatever number you wish-$6 billion for example. $6Billion invested in infrastructure investments by BNSF,UP, or both, would yield far more capacity growth than the same amount invested in a new route. Unique-yes. Logical-no. I think the market is proving that. Warrn Buffet isn’t buying big chunks of DM&E.