This genesis and thesis of this thread is an outgrowth of:
1.) The discussion of the former car-float and other water-borne interchange and delivery to customer methods in the New York City area in the concurrent “PRR- Mis-Application” thread; and,
2.) The observation by RWM in another recent thread (Saint Louis vs. Chicago as a “gateway”, etc.) that intermodal interchange in Chicago today is essentially by truck transfer over the streets of Chicago. As most of us know, for regular railcar traffic - both “back in the day” and currently - a lot of that can be accomplished or facilitated by the 2 “belt line” railroads there, the Indiana Harbor Belt, and the Belt Railway of Chicago.
3.) The Houston Belt & Terminal Railway/ Port Terminal Railroad Association’s operation there (edblysard, I almost forgot yours !)
What I’m wondering is whether the availability of these common and non-exclusive (= “open access”) tools complemented the proprietary nature of the main line long-hauls and so served to optimize the transportation network at these locations, more so than in other “articulation points” without such a well-developed and free interchange capability. Of course, there’s a “Which came first - the chicken or the egg ?” aspect to this, as without a large traffic base to start with no one would have cared enough to develop these techniques.
But once these hubs became important, I’m wondering if these “freedom of interchange” or “equal access” methods enhanced the value of the long-haul franchises as well. Once a railroad could reach or connect to water (NYC) or a belt line (Chicago & Houston), that railroad could then reach many other railroads and customers for the “last mile”, without being subject to geo-political and competitive blockades fr
Paul, I don’t think I am following your premise. Who says that Class 1s do not and did not at any time freely interchange, so long as it does not or did not short-haul themselves?
Also I think there’s a conflation in your premise between the “belt line” meant to effect interchange, and the “joint facility” meant to originate or terminate traffic that is not interchanged between the Class I participants. The two are usually exclusive of each other.
There’s a second principle at work which may be more important, and that is reciprocal switching. Strong railways with strong positions usually did not participate in reciprocal switching, most famously the PRR. Weak railways in weak positions, which was everyone west of Chicago, usually did. It gets awfully complicated to figure out whether this was a good long-term strategy. It worked for the PRR for about a hundred years. The SP revoked reciprocal switching as a strategy to encourage its acquisition at a premium price, which worked for it, too.
Stepping back to the 100,000-foot range, there’s nothing particularly magical about a jointly owned belt railway. It’s purpose is not so much to effect interchange between multiple carriers (because the desirability of that is a given), but to do so with less plant than with each carrier having its own trackage to each other carrier, and thus accomplish the goal more cheaply. Note that the belt railway with a substantial amount of industry located upon it is the exception, not the rule. Generally the Class 1s discouraged the location of industry on the belt line because that meant it was open to everyone with ownership in the belt line, and defeated the goal of each Class 1 to enhance the value of its individual franchise. The EJ&E was not a belt railway; it was an extended intraplant railway meant to give USS an initial carrier share of line-haul moves no matter which Class 1 the traffic went to. The Alameda
RWM, I think you’re following my premise just fine. I very well may have mixed a couple of concepts together into the same stew - but I’m also seeing aspects of my thought in your response. I’ve got to go tend to some other things for a while - that highly over-rated “day job” thing, you know - so let me chew on your response and maybe break this down a bit further as you suggest, later on. In the meantime, thanks for the insights, though.
First. When Conrail was being formed it was stated that there was no profit in moving traffic within a 40 or so mile limit from New York CIty; rails lost if they were terminating the traffic or cars had to be delivered somewhere other than at an interchange.
Second. Likewise, Class Ones didn’t like anything less than trainloads from one terminal to the end terminal. The likes of EL and PC did a lot to get rid of traffic originating/terminating branch lines plus intermeidate or smaller cities and towns lost “local” service as was known up to that time.
Third. The real downfall of float operations in NY was PC not needing it as long as everything could go via Selkirk and the EL had the Poughkeepsie Bridge connection at Maybrook. (Again, when that was lost, PC had a monopoly via Selkirk. Thus the costly and time consuming marine operations could be eliminated and PC go the long haul via Selkirk to the City and Long Island.
Fourth. With Wall Street investors running railroads to push for only the highest profit margin traffic and operations, terminating, originating, and transfer operations were considerd unwanted overhead costs to be eliminated by being sold off or otherwise dealt with via belt lines and switching lines. Short lines took on a new form, too, with large corporations owning many lines.
Just a few comments that come to mind reading your premise, Paul.
I’m sure that railroads are like most businesses. At our business, we will work with our competitors toward a common interest…after we’ve exhausted every other option. [;)]
Seems to me, that it would be difficult to say that what you have described increased the value of one franchise over another. Wouldn’t the value would be the same for all the railroads involved in some sort of switching agreement? All would save money, but the rising tide would raise all the boats?
Murph: There are two types of belt lines, one cooperative, the other basically a device to enrich one at the expense of many.
Houston is a cooperative example. This big city that is not the end-point terminus for the two major line-haul railways in the region, SP and MP. There is very large quantities of traffic that originates or terminates here, as opposed to passing through, and relatively little interchange occurs between the line-haul roads. Here the belt line is constructed to reduce the cost to its owning railways of building parallel, redundant tracks to each of the industries, and industries are encouraged to locate onto the belt line
Chicago (prior to deregulation) is a non-cooperative example. This big city that is the end-point terminus for virtually all of its line-haul railways. Much of the traffic passes through the city, from one line-haul carrier to another line-haul carrier. Here a belt line is constructed to reduce the cost of each railway effecting interchange with all the other railways through parallel redundant tracks owned by and operated by the individual railways. Industries are not encouraged to locate onto the belt line.
I never realized the BRC was PRR’s Chicago belt railroad. It sure makes sense when looking at the CORA map. NYC flowed directly into the IHB while PRR branched off at 95th street.
Did the size of Clearing Yd vs Blue Island Yd (IHB) reflect the difference of interchange of PRR/western rr’s vs NYC/western rr’s? Or did NYC simply outgrow Blue Island and then built Elkhart to handle the growing interchange?
What was the role of B&OCT? Was that simply a paper railroad for other purposes?
It is interesting how US Steel simply took matters into their own hands and built the J.
BTW, do you know of a construction which is occuring as we speak in Gary? It is between the Indiana Toll Road and the CSX line. I noticed it this morning…track was being laid, but it was not possible at 55mph and the line of vision to determine from where to where. It might be connecting the former J runner to the South Shore with something.
RWM: You point out that PRR was pretty good at being the 800 # gorilla, as far making the switching situation be whatever was best for PRR. Was it just PRR that did that, or was that the norm for every bigger railroad that had the upper hand over a smaller road? The Northern Lines verses the Milwaukee Road, for example.
Remember that the J was built not to be a belt railroad, but only to make sure that USS was an originating carrier no matter where its carloads went. In effect, the connecting roads we’re hauling USS Chicago District steel for less money than they were hauling anyone else’s Chicago District steel – which meant that USS’s competitors were in effect subsidizing USS. Ugly, huh?
That the J looked on the map like a belt was only because of geographic idiosyncracy. It did not operate as a belt line.
I’m pretty much helpless to answer your other questions, perhaps Jay or Ken can do so.
US Steel looked at the EJE as an investment. Other steel companies could have (yes, I know could have is a very big COULD HAVE) built similar investments but did not. Someone was going to split that thru rate from Gary, Indiana to ________(fill in the blank). EJE no doubt received a high proportion of that rate, but that is factored in on the interline splits, based on high expenses for originating/terminating carloads.
The other steel companies, in my opinion, were not subsidizing US Steel. That rate would have been paid. The fact that US Steel invested in a railroad, entitled them to the earnings of that carload of steel (or coal, coke, etc). With the investment came the risk and the rewards, or lack of.
I do not know what percentage of the entire steel cost that transportation was. But, with the efficiencies that US Steel developed over the years in its logistics and that EJE participated in, it was probably significant. But, remember too that when US Steel closed down the South Chicago Works, there was an investment in the EJE which did not return the same yields. So, it would have cut both ways.
Whether or not by design, EJE became a very desired railroad for inbound coal for the electrical producers in Chicago/NW Indiana. I doubt if it were by coincidence. ComEd and others probably figured it out that it was much better to have a shortline or regional connect with the line haul carriers in order to keep the rates open to negotiation.
In the regulated era, a carload of steel moving on a commodity rate from a Chicago District mill to any point paid the same rate to get to that point regardless of which Chicago District mill originated the car and which route the car took. Suppose the rate was $1000 to Council Bluffs for 50 tons of wide-flange beams. Suppose the steel could originate at Wisconsin Steel, and move single-line on Rock Island from Deering to Council Bluffs. Or, suppose a carload of identical steel could originate at Gary and move EJ&E-Rock Island to Council Bluffs via Joliet. As originating carrier, EJ&E would be entitled to about $150 of the $1,000 move. But did EJ&E provide $150 worth of value? Not hardly. More like $70 of cost to switch the mill, assemble the car into a train, and move the car about 20 miles. The other $80 was profit to EJ&E, less its cost to build the railway, which, amortized over every carload of steel moved over 50 years, was a couple of pennies. Thus for every $1000 worth of steel USS sold FOB customer’s dock, its real sales price was $1080 to USS while its Chicago competitors such as Wisconsin Steel or J&L realized only $1000 for the same product delivered FOB the same customer’s dock.
In effect, what USS did by building the J was an legal end-around on the rebate practices rendered illegal by the ICC Act and the Hepburn Act.
As for the railroads, they needed a certain income to pay their bills and have something for their owners at the end of the day. So they had to set their overall rates to accomplish that. But now we have a customer who is contributing less to that revenue stream than other customers shipping the same commodity in the same equipment to the same places. Thus one class of customers is contributing disproportionately more to the railroad’s net income than one of their competitors. If that isn’t a subsidy
I always wondered how Fisk received it’s coal. Thanks for the info.
Interesting regarding the J’s handling of PRB coal. It appears the J really used their “pricing power” on several fronts.
Regarding the J/USS relationship…
I am a little surprized the J’s portion of the rate to Council Bluffs would have been $150. Perhaps that is an estimate on your behalf, I would have thought it to be a little more. The LTL interline settlements were based on established railroad rates (from long ago). Say a shipment moved from Gary to Council Bluffs over Chicago. One would look up in the book the factor for Gary/Chicago and then Chicago/Council Bluffs. It usually favored the short haul, based on the building of rates. Typically such an LTL movement would have been about 20-22% for the short haul. Perhaps I am splitting hairs here.
I look at what USS did as vertical intergration of their business. Not much different than purchasing a coal mine or ore deposits. They certain took the “captive shipper” issue in their own hands.
Do you know what the rail construction is in Gary now? It doesnt appear to be a big project.
I’m just taking a guess at the split. But regardless, the interline portion for a rail originating carrier during the regulated era was generous to the originating carrier, to say the least.
You could look at the J, or the DM&IR, or any of the steel-mill roads, as vertical integration. But typically vertical integration only affects the business model of the integrator, lowering its costs independently of any effects on any other competitor or any other business. If a coal mine produces all my coal for my steel mill, and one day I buy the coal mine, that doesn’t necessarily make the cost of coal at all the other mines go up, because each of those coal mines has independent utility. Whereas in this case, the vertical integration had an effect on the business model of all other shippers and raised their costs, because rail shipments do not have independent utility. If I buy the switching railway that serves my mill, and use the law to force all the line-haul roads to give me a portion of the through rate, that does necessarily make the cost of shipping for all the other shippers go up. (I’ve also created redundant railway plant and jobs, too.) This law was meant to protect rural communities served by a single short line that had no other transportation choice. It wasn’t meant to protect steel mills that could have five Class 1s fight for their business.
What I’m trying to get across is that during the regulated era there was much more incentive for a rail shipper to own a rail line than simply to gain control over its switching and the managerial efficiencies of vertical integration. That was all well and good, but when you owned your originating carrier, you got additional wealth, too. In other words, you’re underestimating the business acumen of Judge Gary.
From an economic efficiency point of view, the steel mill railway was pretty ugly. It’s primary purpose was not to create operational efficiencies
Just popping in to say that I appreciate how all of you have kept this discussion going with the questions and examples while I’ve been busy elsewhere - although not quite where I intended (I didn’t submit the EJ&E as an example of a belt line because I never thought of it as one - but that’s OK anyway). It’s all pretty dense thought to me, but the places where I do most of my deep thinking - in the shower and while driving - don’t lend themselves to reading from either a computer or a print-out. So I haven’t abandoned the thread - you’re just getting ahead of my ability to keep up and respond. So keep going anyway. Thanks.
Paul North.
P.S. - [:-,] Murphy was concerned that my use of “Open Acess” in the caption of the Original Post would lead to the oft-seen “flame war” over that topic here. Glad to see that it hasn’t (so far) - so I don’t owe him the proverbial “cold one” for that (although maybe for some others . . . [:-^] ). - PDN.
One minor point to be raised here: How did you consider BRC to be PRR’s belt line in the Chicago area other than by analogy to IHB and NYC? NYC was a majority owner of IHB, PRR only had a 1/12 interest in BRC. Also, BRC was an outgrowth of the Chicago & Western Indiana, a terminal railroad for C&EI, WAB, MON, Erie and GTW. In fact, until 1962, BRC leased its lines from CWI. BRC had a fair number of industrial customers on its own lines, mostly adjacent to Clearing Yard and in the South Chicago area.
So the deregulation pretty much closed the loophole for USS and the J. Did they (until earlier this year) charge USS for their freight portion? They have a daily train that is interchanged with the NS at Van Loon. The NS runs empties to the J and they exchange cars around 2pm daily. The train can have 70 cars of steel and I have heard it with less than 10. Tightly scheduled operation. I am very curious how it will now operated with the CN owning the line to Van Loon.
Regarding the construction in Gary…
Just east of downtown Gary there is an EJE track which is between the Indiana Toll Road and theCSX tracks. This line runs under the toll road and interchanges to the South Shore. It is primarily used for interchange of NIPSCO coal trains off of the UP and usually has UP power. There is a track which seems to be running from the J, angling parallel with the CSX then turning south, as if to cross the J.
It was difficult for me to see, as I was on the toll road and it showed up quickly. Perhaps I will return and go down and check it out.
I am just curious if this has anything to do with the CN purchase of the J, either by the CN or the surviving carrier.
That’s the problem with railways and categories, they never fit neatly. And you’d be correct in saying that as a defense of the points I brought up previously, that’s a weak one. The point I’m trying to make, if I can restate it, is that belt lines were usually not conceived as a “cooperative venture” among railways in the sense that “if we all play nicely together we all are the better off for it.” Railways never play nicely together if they can help it. Instead, belt lines were conceived as:
A method by which two strong roads in a terminal, neither with clear advantage over the other, could make it difficult for a third weak road to grow its traffic.
A method by which a single strong road commanding one side of the terminal could force many weak roads on the other side of the terminal to spend all their competitive energies fighting each other instead of seeking advantage over the strong road.
A method by which a strong shipper could legally create rebates on its traffic from many Class 1s, and keep all the Class 1s fighting each other (see Method 2), and thus increase its advantage over shippers of similar products.
No belt line fits any one definition perfectly, they’re all blurred to greater or lesser degree. The only value to coming up with categories is to try and bring rank and order to phenomena and historic events. Categories are like
Of course. They always did. But rates might have been excessively high when the J was owned by USS. When you’re vertically integrated, it matters not which pocket you put your profit into, but it matters a great deal if anyone else is paying into that pocket at the same time.
Wow - a key principle of analysis that is well and succintly said, and not always fully appreciated and understood. It has application to many fields of study, situations, and people - not all of them here. Thanks much (as always !) for that formulation.