The Siskiyou line

Ironhorseman Dec 17, 2008

  1. Ironhorseman

    Ironhorseman Staff Member In Memoriam

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    Here is an article from the Siskiyou Daily News, 17 December 2008:


    Montague, Calif. -
    A Surface Transportation Board (STB) ruling is expected soon as to whether a new rail operator will be allowed to run on the Siskiyou Subdivision Rail Line (SSRL). In the meantime, some Siskiyou cities and groups are working together toward a different, but related goal: Public ownership of the SSRL.
    Montague Mayor John Hammond said, “It has been a really tight time for private shippers over the Siskiyou Line,” adding that the entities involved feel that they may be able to stabilize the function and consistency of service on the line.
    The entities, which include the county of Siskiyou and the cities of Yreka, Montague and Weed, form the Joint Powers Association (JPA), which is looking to gain control of the line. The JPA is working with Gary V. Hunter, Chairman and CEO of Railroad Industries Incorporated, a consulting firm familiar with the SSRL, to try to begin negotiations with the line’s owners, Union Pacific.
    According to a media release from Hunter, the plan for public purchase of the line began with a meeting between JPA key members and staff, followed by the letter to Union Pacific declaring public interest in purchasing the line.
    The next step would be a general feasibility study, determining the value of the line, evaluating the condition of the line, developing traffic estimates and revenue expectations and development of financial statements regarding expected operations and line sustainability.
    The third phase, the release states, includes identification of long-term development strategies and benefits and Union Pacific negotiations and funding.
    Hammond explained that the movement has found support in both California and Southern Oregon, including the cities of Ashland and Medford as well as Oregon Senator Alan Bates. Oregon recently saw the Port of Coos Bay receive a favorable ruling from the STB regarding a feederline application on Union Pacific rails.
    Dave Pearce, mayor pro-tem of Weed, said that he believes that the rail line is vital for his city, citing the businesses who had regularly used the line to ship their goods.
    “We feel that a public entity will be much more capable of providing money for rail structure and maintenance,” Hammond said. He added that the first steps have been put in motion already, with the awarding of a grant for $70,000 to do a feasibility study and to write applications for federal funding to help purchase the line if that ends up being a reality.
    Hammond mentioned that it is important to remember that ultimately the process is still in its early stages and much of the progress from this point depends on Union Pacific’s willingness to negotiate whether or not they will consider selling the line. He explained that if Union Pacific doesn’t agree to sell the line, the JPA has a number of options, including dropping the pursuit altogether. Other options include submitting a feederline application to the STB, such as was the case in the Port of Coos Bay ruling, or the JPA can pursue a condemnation of the line as a public entity. Hammond called the last two options “adverserial” and stressed that they are avenues that the JPA does not want to have to try.
    “I’m hopeful, I’m positive,” Hammond said. “I’m hopeful that Union Pacific will consider negotiations.”
     
  2. Siskiyou

    Siskiyou In Memoriam

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    Thanks for sharing the article on the Joint Powers Association - interesting new movement. Up here, I'd like to see Sen. Bates, Ashland and Medford get more involved. Also, classy rebuttal, 'My Friend.'

    Scott
     
  3. Siskiyou

    Siskiyou In Memoriam

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    Okay, I read them. Please help me out - where in the decisions did it say the Board told "The Gang" to shove it? Sure, there was lotsa citing of precedent, criticism of "across-the-fence" real estate evaluation and other legal stuff, but I don't recall the proceedings or decisions dissing the Port et al. Must have missed it - I'll read it again.

    I'd sure hate to have the BocaBoys thinkin' we're all stoo-pid out this side o' the ChisholmTrail.

    Scott
     
    Last edited by a moderator: Dec 20, 2008
  4. CAPFlyer

    CAPFlyer TrainBoard Member

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    Prior to the surcharge notice, a letter was sent to all customers notifying them of the impending reduction in service on Siskiyou. It mentioned within that they would be contacting those affected in the "no scheduled service area" about possible rate changes if needed. Those contacts were made several months before the surcharge. The shippers told CORP where to shove it. CORP responded by posting the surcharge (basically, if you don't want to negotiate, then we'll put a charge that will either drive you to deal or drive you off, either way, we cut our losses). Then the "Gang" formed, shared CONFIDENTIAL shipping rate information, and then proceeded to engage in a dishonest campaign with the media to make it look like the railroad was trying to force them into some exhorbitant rate that would put them out of business. That is what is pure BS. Yeah, CORP probably is overstating what their costs are to operate the line, but then again, it's also not bankrupting the shippers to use trucks instead of rail. The difference is in the media campaign. CORP tried to work under the radar and get it done one way or the other, the shippers are trying to only work in the limelight, who does that make look bad in the end when the STB rules that it's a rate dispute and finds them in violation of their contracts?

    Two things -

    1) You seem to have a misleading idea of how the RailAmerica takeover happened. It was an "all or nothing" deal. RailAmerica was to take RailTex as is or not take it at all. There was no option to pick up individual railroads. In addition, RailAmerica did not buy any leases. If any of the leases were in the name of RailTex (which I doubt) then they would have been transferred to RailAmerica, not bought by the new, merged corporation. If they were in the name of the CORP (which all of DGNO's are in our name, not RailAmerica or RailTex), then there would have been no grounds for any purchase or transfer of lease as the owning entity didn't change.

    2) When CORP began operations of the line, the track was in decent shape, they were getting a more favorable rate compared to costs (remember, oil was less than $30/barrel until the early 2000's so the cost of running over the hill in terms of fuel and lubrication oil was much less) and the carloads were much higher. Today, they face a much higher cost of operations in oil products (still over double what it was when they started operations) and more than a 50% decrease in total carloadings, even before the current economic downturn began. In addition, UP has not been increasing their shortline switch charge payments as quickly as costs have risen and that's an across-the-board issue RailAmerica, GWI, and WATCO have been fighting with the UP over for years. As a result, the only thing that's changed is that costs have gone up while revenue has gone down and it's become unprofitable to run scheduled operations.

    Again, the major reason for ceasing regular service over the hill was because the UP wanted as much traffic as possible to go through Eugene. As such, the costs that were being amortized into other traffic was no longer there making the situation even worse than it already was.

    I compare the situation to defense acquisition programs. Have you ever noticed that when a program gets shortened the cost per unit goes up? This is because the R&D costs still have to be paid for but you have to pay for them in a smaller number of copies of the unit being developed. Same here. When CORP was running through trains, the overhead cost to operate the line was able to be spread among all the cars going over the line. When they lost those trains, the overhead cost didn't change but the amount of traffic they could spread it over did. So, CORP still needs to recover their costs and thus they sought to increase the rates with their customers. The customers balked, so CORP did what they could under the regulations to tryand force the customers' hands one way or another.
     
  5. CAPFlyer

    CAPFlyer TrainBoard Member

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    Scott, when the STB told the Port that the price for the line was almost exactly the price that CORP put forth, and then was telling them that many of their claims (especially the ones in public) held very little water, it was as close to telling someone to step off as you can get in regulatory proceedings. In addition, the repeated acceptance of the CORP and other parties (like the TransLoad company's) numbers instead of those given by the customers and the Port is indirectly a statement to what the Board though of the veracity of the numbers. The STB by design is supposed to lean to the benefit of the customers over the railroads as this is what the Common Carrier rules require so when they continually omit the customer's numbers when they've been supplied, it's saying something.
     
  6. CAPFlyer

    CAPFlyer TrainBoard Member

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    I'm still trying to figure out where they have the authority to approach the UP for negotiations in the first place or more importantly, where the UP has authority to negotiate a forced change of operator. CORP is the legal lessor of the line, they have not abandoned it, and they have not embargoed it and the STB is currently in the process of making a decision on whether another company can operate segments of the line as a sub-lessor to CORP; where in that does it imply that CORP is willing to take the steps necessary for any sort of change of lessor to occur much less the UP? If the CORP's lease is anything like what is fairly standard in the industry, there is no clause for the lease to be forcefully cancelled while it is in effect. The only ways a lease could be changed in those cases are - legal order from the STB, joint decision by the operator and the owner, the operator goes out of business, or the lease expires and the owner chooses not to renew the lease.
     
  7. Ironhorseman

    Ironhorseman Staff Member In Memoriam

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    Look ... I do not now, nor have I ever stated that I know everything about what's going on behind the scenes, now or prior. But I do know some things. Again, I'd ask you to advise us how and where you get the information you post? I have asked you this question twice before and you ignore it. We'd like to know.

    I admit I know nothing about the acquisition of RailTex's holdings by RailAmerica. I'm sure there was ample study of all the elements by RA prior to the takeover and RA went into it with their eyes wide open. Accordingly, I feel if the Siskiyou line did not indicate a profitable venture, then RA could have sub-let that portion of the line.

    "When CORP began operations of the line, the track was in decent shape ...

    I agree. I remember SP doing major track work on the Siskiyou line prior to leasing it out to RailTex. But as evidenced by the Coos Bay line, RA / CORP will operate with an absolute minimum of maintenance. Then when it becomes too expensive to bring up to standards, back out of it at the expense of the shippers. At least that's how it appears to the layman.

    All I know is the announcement of reduction of service, the requirement to ship 'around the horn' via Klamath Falls and the shipping rate hike was unacceptable to all shippers on the Siskiyou line.

    "... if you don't want to negotiate, then we'll put a charge that will either drive you to deal or drive you off, either way, we cut our losses."

    Now, isn't this an arrogant attitude! If this does not confirm my statement of holding the Siskiyou line, (including the shippers) hostage, I don't know what else to call it. I don't think the shippers told CORP to "shove it". That is not professional and unproductive. As I read the quote above, CORP has told the shippers to shove it with a pay up or I'll pick up my ball and take it home position! I understand that the shippers could not accept a reduction of service with protracted delivery time at a higher rate, especially with the screw you attitude indicated. I don't know anyone who would accept those term in private life, including you I'm sure.

    "Again, the major reason for ceasing regular service over the hill was because the UP wanted as much traffic as possible to go through Eugene."

    This statment has me confused! Are you telling us that UP dictates how they want RA / CORP to run their railroad? Unless there's some sort of covert 'kickbacks' involved, I have a real hard time understanding this one. I was under the understanding that the "major reason" for the increase was the lack of profitability. Hmmmm

    I guess it all comes down to the all-mighty buck. And look where it has gotten us. I don't think anyone has a problem with a business making a reasonable profit, but $3,000 per car is obscene and in my opinion ... a step away from extortion.

    Come on ... lets stop the urination contest and let someone else operate the Siskiyou line. As I mentioned before, it would be a win-win move for all concerned.
    __________________
     
  8. SP Cabforward

    SP Cabforward TrainBoard Member

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    Another thing I'd like to point out, is that Timber Products and Roseburg Forest Products are losing money from using trucks. My dad is/was a truck driver and he's talked to some of the drivers of TP and Roseburg and they've all told him that TP and Roseburg weren't making any money having to use trucks and that it was/is cheaper to go by rail.
     
  9. YoHo

    YoHo TrainBoard Supporter

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    And if Timber products and Roseburg go out of business....


    I'm a little confused by the claim that UP is dictating where to interchange as well. I mean I remember they said they wanted to reduce interchanges in Weed, but Then the entire line shut down this year. It's not like the Natron cutoff isn't busy. They don't need the additional traffic.
     
  10. CAPFlyer

    CAPFlyer TrainBoard Member

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    I have no special access and I've said that more than once. I simply read everything on the issue, not just what's posted here or put in the paper. I read the actual STB filings, I ask questions, I call people out there and ask them questions; it's nothing anyone can't really do, it's just something most choose not to.

    Again, you have to read the STB filings and the whole story. RailAmerica took over RailTex in 2001. The Coos Bay line didn't become unprofitable until 2003 when Weyerhaeuser closed their plants and the line traffic was reduced by over a third. Since then, things have only gotten worse as far as carloads and the rates they're getting for the cars haven't increased. In addition the RailTex acquisition by RailAmerica is public domain, just do a search. There's several news articles, websites, and such that mention it and tell what happened.

    The only way it would appear that your scenario is correct is if you listen only to the customers and the media who are biased. If you read the STB filings and actually think about how railroads work and how they make their money, then you'll see a totally different picture.

    First, CORP is maintaining the track at a given service level. SP maintained the line for a lot of through traffic, something the CORP doesn't have. As a result, they don't have the need to keep the track at as high of a maintenance level. SP probably maintained somewhere around Class 5 or Class 6. CORP only needs Class 3 or Class 4 in most areas and as little as Class 2 in others. As such, the amount of maintenance required is much less, but still substantial. As well, as CORP doesn't have nearly the infrastructure that SP had, it cannot afford to maintain excess trackage capability like SP could becuase of it having more economics of scale in its favor that isn't present with a shortline. The apparent increase in cost that the customers are seeing is that CORP has a fairly fixed cost of maintenance. That cost doesn't change just because the carloads go down. As such, they have fewer carloads to recover the money needed to maintain the track, thus the "per car" cost needs to go up once they fall below a certain level to be able to cover the full cost of keeping the line running. The customers don't see the "big picture" nor does the largely ignorant on everything media (not a bash, just a fact that they aren't in the business of knowing how everything works, only reporting what they're given. They do however fail repeatedly in the job of finding out what they need to know to give a competent report on an event).

    Again, that's a myopic view that the customers are free to have. It doesn't make them right.

    It's a TACTIC. Nothing more, nothing less. CORP went to the customers and told them they had a problem. The customers didn't like it (it is life, you're not going to like everything you get). They also have a choice - they can use rail or truck. The railroad doesn't have that kind of choice. They can either make money or go out of business. Right now, they've been loosing money (i.e. going out of business). CORP told the customers "we have a problem and we need you to help us resolve it" and the customers told CORP "too bad, we don't care." CORP then took the tactic up a notch and said, "if we don't get help, we'll have to change what we're doing to be able to even serve you at all" and the customers said "yeah, sure, we don't believe you." CORP then said, "okay, if you don't want to work with us, then we'll put a surcharge on the line and you can either take it or leave it." They did and the shippers acted like they'd not been told that there was a problem.

    Again, remember that the customers whom are complaining right now about service are the ones who were getting "going this way" rates and weren't paying full price for service before the change in operations. CORP's initial request was for those customers to start paying the same full rates everyone else was. They balked and so CORP took it up a notch when negotiations weren't working. At some point you have to take your ball and go home if the other team isn't willing to play.

    There are several issues going on here. CORP wasn't making money running the Siskiyou line at the rates they were getting from the UP. They also weren't loosing a ton either. However, UP has several programs they've put in place in the last year and a half in an attempt to "help" their shortline partners make some more money, one of these is "preblocking". Part of this "preblocking" is to reduce the number of interchange points by allowing for everything to be preblocked for the UP and thus the cars coming off the shortlines from staying in the yard as long to get switched out. This frees up capacity and speeds up transit times. CORP is now getting "Pool Power" from the UP for some of their longer trains at little or no cost. They are also getting a suppliment to their per-car charge if they can make certain reporting and activity goals. This is compelling them to try and lean out the operation as much as possible to ensure they can try to at least break even at the end of the year (something I'm not sure they've done in the last few years)

    It's extortion only if the rate doesn't jive with the cost. You'd be suprised how quick $3000 gets eaten up on a railroad.

    BTW, Douglas Timber put up a copy of the letter from the CORP about the Siskiyou Line service reduction / closure - http://www.dougtimber.org/documents/ClosureCORP.pdf

    If you read the whole document, you'll notice that CORP left the door open to the shippers that if they and CORP could make the numbers work, they wouldn't have a problem keeping operations going at least twice weekly, but if they didn't, they'd either have to close the line or impose surcharges. I think it's also important here to note that the letter is clear that the UP was not going to change their shipping rates and that the transit times were not expected to be affected for the customers, two things the customers (and media) have continually espoused as a reason they didn't want to work with CORP.

    You're right that it comes down to the dollar. CORP can only stay in business if they can make money. The customers can only stay in business if they can make money. The CORP was loosing money and needed to change. The UP wanted change and was willing to put some incentives into the changes. The customers, however, didn't want anything to change, and didn't care why it needed to change. The problem comes back to the customers - unwilling to change. That's a problem in business and it's what led us to where we are now with the Siskiyou line.
     
  11. Siskiyou

    Siskiyou In Memoriam

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    CAPFlyer, I'm amazed by your impressive knowledge of railroading, command of the subject at hand and ability to write copiously about it. As I'm sure you've read, some of us enjoy sharing info about ourselves, like my aviation background, others' railroad careers. Would you mind telling us what you do? Public/investor relations? Director of business development? Operational manager? Come on - not "clerk" - clerks file tariff pages, and you're obviously much too talented to be doing that! I'm curious - please share a little info about what I'm sure must be a fast-track career!

    Happy holidays,
    Scott
     
    Last edited by a moderator: Dec 21, 2008
  12. CAPFlyer

    CAPFlyer TrainBoard Member

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    As with all shortlines, a title is just that, a title. I do a little of everything that is required (crew calling, customer service, customer relations, paperwork for the crews, marketing on occasion, assisting in "special projects") but the big thing is that at DGNO, our management wants us all to know what is going on, where we're at, and why we have to do certain things. It's been an enlightening 3 years here so far. I took a genuine interest in the railroad and railroading when I started here and I continue to have one. As part of that interest, I learn how things work to see how I can do my job better (all about making yourself as integrated as possible to make sure you're as unfirable as possible :)). I talk to people (managers, crew, contractors) to find out how their job and activities affect mine and the railroad, and I take an interest in major events at other RA railroads when I'm aware of them becuase it helps me expand my knowledge.

    I'm also big into aviation (hence my name). I applied the same tactics when I was working in the Aviation industry from 2001 through 2004 when I left the industry for various reasons but mainly because I wanted to come back to Texas from Ohio (and prior to that Colorado) and I timed it wrong and ended up coming back right after Delta pulled out and saturated that job market. I really apply the idea to learn as much about whatever I'm doing and how it "fits in" to whatever I do. I've found it ends up with me being able to have more opprotunities for advancement and just overall being able to see where things are going so I know if I need to look for other work or not. :)

    As for the economic side, I learned a lot from my Dad and Grandfathers about business (Dad's an accountant, his dad is a Financial Planner and former business owner, and my mom's dad is a retired salesman for ESAB/Linde/Union Carbide and multi-business owner) and basic economics. Add onto that a GREAT Economics teacher in HS (better than the 2 classes I took in the little College I got done before entering the workforce), and the realization that all businesses are really the same at the basic level if you choose to understand the driving force is that they have to make money and that it's not a bad thing (even though some people want to make you think that making any profit is somehow evil).

    My current major project outside of work is re-installing the Radio Operator's table and some of the radios in the Commemorative Air Force's B-24A "Ol' 927" and I just finished doing a re-design of the panel for CAF's Mobile Engine Test Stand (called "Testiclese") and sending that off to be cut from aluminium and installed by the B-29/B-24 Squadron's Crew Chief. Unfortunately, work right now is 6 days a week, so I've not been getting as much time into the radio operator station as I'd like.

    BTW, I wish my career was on the "fast track", but right now it's stalled due to various reasons (the economy being number one). However, I've got a job (for now) and I've got an opprotunity coming up in January for some more aviation training, so we'll see what happens.
     
  13. YoHo

    YoHo TrainBoard Supporter

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    I think it's pretty obvious that CORP was put in a rough position too, but I take issue with the notion that they either make a profit or fold.

    You mentioned economies of scale. That's what Fortress provides. Rail America can afford to lose money on Corp if it makes sense to long term.

    Shipments are down, because building construction is down (which makes it harder for the remaining mills to remain profitable too) But that business will come back.

    There's a giant bridge building company in Coos bay and a president of the country who is talking up spending billions on infrastructure improvments (ie bridges)

    Fortress has the money to let Corp operate in the red for a few years. They keep their rates low and support their customers, and a year or two from now, they could be making money hand over fist.

    They didn't do that though. Fortress, Rail America and CORP are operating on a short term plan without looking at the long term.

    Now, I'll grant you, that their request for help from the Oregon Government was actually a good idea based on this, but it was handled just stupidly.


    So in short, I feel like CORP, RA and Fortress are being stupid and not thinking long term. They can afford to.
     
  14. CAPFlyer

    CAPFlyer TrainBoard Member

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    No, RailAmerica and CORP aren't thinking on a short-term. Fortress did not buy RailAmerica to be a charity to the railroads. That's not what they do and that's not what RailAmerica has been doing. First, CORP has been loosing money on the line for somewhere probably around the same 5 years they were loosing money on Coos Bay. RailAmerica was giving them money to continue operations, but at some point, you've got to throw in the hat because doing so any longer will put you in a hole you'll never dig out of.

    IORY is operating in the red. Has been for 20+ years. RailAmerica can't get rid of it for anything. They even (reportely) tried to PAY someone to takeover the operation at one point. RA went in on the IORY not fully understanding what a SNAFU that operation is because of the Class I's and having a mistaken belief they could fix it. They didn't and now they can't get rid of it. CORP has no reason to operate in the red, thus RailAmerica (and thus Fortress) have finally put down the foot and decided that the losses have gotten to the point where the railroad can't sustain it as a business anymore. As CORP has said, they're more than willing to sublease operations to another operator on Siskiyou and they abandoned the Coos Bay line (albeit in a poorly handled way, which was part of what cost the GM his job), so now they're down to a line that should be financially viable in the long run. Had they kept running the two branches, they would have certainly failed.

    I don't want to make this a political statement, but the president-elect's plan will fail. He may get a lot of public works programs going, but they won't pay anywhere near true market rate and no companies will really benefit. It is a common myth that the New Deal worked. It got us a LOT of new achievements and monuments, but it didn't jumpstart the economy. In fact, it probably was responsible for the Great Depression lasting in the US until the start of WWII in 1938/9. Why? Because the programs created operated at government imposed rates which were less or at cost so no companies made any money to be able to invest elsewhere. In addition, while it put people to work, it didn't do so at a level which gave them any spending money or confidence to spend what they did have. All the "New Deal" did was make a lot of people feel good. Feeling good doesn't equal long term benefit or productivity. It was only the onset of WWII and Lend-Lease that finally broke the depression and started the country forward again, only to hit another major recession when the war ended 6 years later.
     
  15. Siskiyou

    Siskiyou In Memoriam

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    CAPFlyer, from your perspective - ie what you can see - what should happen next re the Siskiyou line? What do you see as a logical scenario, through which all players can better pursue what companies are supposed to do - making a profit?

    Scott

    Speaking of "profits" - talking to my old airline buddies, be glad you switched industries!
     
  16. CAPFlyer

    CAPFlyer TrainBoard Member

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    I think what CORP did was what they had to do. I think the only way any operator will be able to survive, even a government-backed one like has been recently proposed, is if they can generate enough traffic. If RFP, Douglas Timber, and TimberProducts are only going to ship 3-4 loads a week each, it's not going to cut it.

    I'll run some quick numbers (these are probably nowhere near true, but if anything are probably on the low side):

    A railroad typically needs to run 4-5 days a week, and if you can't sustain that with at least enough cars to pay the employee's salary and the lease on the engine, you don't have a railroad. If you pay a crew $15/hr each and have basic benefits, you're talking about needing to make ~$500/wk to pay for the crew, ~$700/wk for the engine, and whatever you need for maintenance. The locomotive will burn somewhere around 500 gallons a day. If you work 5 days, that's 2500 gallons. At the current (Weed, CA) diesel price of $3.00/gallon (per MotorTrend and is about what we're paying in Texas both at the pump and for our locomotives), that's $7,500 a week. So, just for the crew, engine, and fuel, you're talking $8,700/wk. Add into that the water needed for the engine and lube oil (say another $200/wk) you're now in the $9000/wk range. So, that means that at an average per car rate of $350/car as a "Switch Carrier" (this is a guess, the rates up there may be higher, but I doubt it's significantly higher), you'd need to move at least 26 cars per week just to pay for your basic costs of engine and crew. That doesn't include your mechanics, office staff, leases on the office and/or locomotive maintenance facility, the regular maintenance costs on the locomotive, nor your track costs. I would gander to say that realistically, you're looking at needing to move somewhere in the range of 40-50 cars per week (10 cars a day) to be able to break even on operations at even a good (level) railroad unless you're getting excellent per car rates or you're running as a line-haul carrier instead of a switch carrier and you get to set your own rates on a "per mile" basis instead of a "per car" one.

    As for me switching industries, I unfortunately saw it coming in 2000 when I started my flight training. They were touting that aviation was a good industry to get into because of all the retiring pilots, but I saw a lot of overhead and a lot of over capacity issues when I started getting into learning about the industry. There are still opprotunities in Air Freight, but "Mainline" is really struggling from a lot of the same issues that are affecting the "Big 3" right now - legacy overhead. I think it'll work itself out and the opprotunities will be there, maybe even in the next 12-18 months. It will really be determined by how soon one of the "Mainlines" fail, the longer it's prolonged, the longer the recovery will take. Until then, I'm not holding my breath.
     
  17. Ironhorseman

    Ironhorseman Staff Member In Memoriam

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    Thanks for all the good information you have shared with us in the last couple of posts. It helps understanding CORP to some extent.

    I know you must feel like everyone here is jumping on you. I recognize that the actions of CORP and RA are not your fault. So, I have a couple of comments to make. But because you can not see my face nor hear my voice you can't tell if I'm just speaking, or yelling. I am not yelling! Trainboard is a friendly forum! :)

    In you last post you state a railroad needs to move at least 26, (we'll round that off to 30) cars per week to keep even with costs, (or 40 to 50 cars) ... OK?

    Timber Products alone was producing around 8 to 12 cars per day for the YW to pull to the Montague Junction with CORP. If my math is correct, that comes to 40 to 60 cars per 5 day work week, just for TP alone, not taking into consideration what RFP or DT might ship ... Correct? But more often than not, (because car storage space is limited) the YW would take shipments to Montague six days a week, which would bring the car loads considerably higher ... Right?

    Now for a couple of questions these factors bring to mind:

    1. Why does the number of cars generated by TP alone not justify service ... even 5 days a week?

    2. If it is the number of cars that dictates the amount of profit a railroad can generate, why does CORP give their rail traffic, (cars) to UP to haul through Klamath Falls to Eugene?

    3. Is it not a fact that CORP, by giving cars to UP subtracts from the potential profitability of taking cars over the Siskiyou line themselves? Why would they do that?

    Below is something I wrote in response to an earlier post you submitted. Again, I stress the fact this is a friendly post to you -

    ===================

    CAPFlyer, I have been pondering your earlier statement: "Again, the major reason for ceasing regular service over the hill was because the UP wanted as much traffic as possible to go through Eugene".
    Here's a possible scenario:

    UP offers CORP a nice deal if CORP will send as much freight to them as possible. Why? Well, I suspect there's some government money involved to UP for one reason or another, that gets fatter depending upon how many cars travel over a particular section of their rail between Black Butte and Eugene.

    So, CORP seeing an easy chance to make a buck and save wear and tear on the Siskiyou line and equipment, arrogantly sells out the shippers as sacrificial lambs to accomodate UP and get a kickback for doing so.

    I guess when CORP told its shippers it was losing money by taking freight over the hill, that was true if the benefit from UP was greater than the money made from taking freight over the Siskiyous. Can't say I blame CORP for good business practices.

    But the kickback from UP won't last forever and CORP may have seen this as a good opportunity to play both ends against the middle to justify raising freight rates. There likely would have been no problem with a rate increase had the increase been reasonable, and presented with thoughtful and considerate public relations. Instead, the shippers received an arrogant alternative that was unacceptable.

    It has appeared, for years, CORP has been trying to squeeze out the Yreka Western. Probably so that CORP can run the freight from the mills without the middle man (YW).

    I say this because it's been noted in the past, CORP has been known to withhold chip cars from the YW, telling us there were no chip cars available. This caused great stress on the YW and tested relations with Timber Products. During this period, (2003) we would drive to the Black Butte interchange and count numerous empty chip cars. We also noted that Shasta Forest Products had all the chip cars they could use. It was only after I wrote a letter to the FRA the YW began to receive chip cars again.

    With the grace of God, the Siskiyou line will get a new operator, the Yreka Western will survive, and the shippers on the Siskiyou line will prosper along with the YW.

    =========================

    Historically, railroads have been ruthless enterprises with no consideration given to the welfare of others in the frantic frenzy to make money. These are times everyone needs to work together to survive. It may cost more right now, but in the long run it will benefit all concerned.

    Again ... Thank you for your time here, and Merry Christmas to you and yours. :)
     
    Last edited by a moderator: Dec 23, 2008
  18. CAPFlyer

    CAPFlyer TrainBoard Member

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    As I said above in my post, the numbers are generic and don't take into consideration costs for maintenance of the track or locomotives or for leases on the other plant required to run a railroad (that's way out of what I have any working knowledge of). I would more realistically expect that they'd probably need to be running somewhere closer to 15 or 20 cars per day (up to 100 cars a week) over the Siskiyou line just to break even because of the large maintenance cost with that difficult terrain and trackage. So, for the most part, running cars to Eugene is cheaper in operating costs than running them over the Siskiyou, so with the UP programs, it's almost shorter to run north than run south because your track maintenance cost is much less on the much flatter trackage, even though it can be a longer distance for the cars to run. The CORP gets a flat rate; they don't get any more of a cut of the pie to take it to Weed than to take it to Eugene, so their sole driving factor in where to send cars for interchange is what is going to cost them the least in manpower, time, and maintenance, to do. In addition the UP, to their own detriment, chose not to increase the shipping rates for customers who'd previously shipped their cars south even though they'd be carrying the cars for a longer distance once on the UP.

    As for the cars situation - one thing I've learned is that just because they're empty doesn't mean they're available. That also doesn't mean that CORP wasn't holding out cars on you. However, I know that for us, we have only certain cars we can reload online or they have to be ordered from the UP for loading (which cuts our revenue because we don't get the 30-day carhire rebate on them) by our scrap paper customers. We've had more than one customer ask about "all those box cars" that we had sitting in the yard at one time or another. Unfortunately, those cars were either not from the UP or not in the right "pool" for us to be able to use them. I suspect that the CORP had a similar situation with the chip cars and when you wrote the FRA, that gave them ammunition to go to whomever was restricting the cars and get authorization to use them for Timber Products.
     
  19. Ironhorseman

    Ironhorseman Staff Member In Memoriam

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    Part of the problem for the YW is the lack of trackage to store loaded and empty cars at both the TP mill and in Montague. This is especially critical in the summer months when the YW is running the Blue Goose excursion train. Often during the summer there's no way to turn the train around without moving all the freight cars around. Some times we are forced to push the train back to Yreka because we were unable to make space to turn around.

    There used to be six tracks that went through Montague. That would have allowed more cars to be stored ... obviously. :)

    Hornbrook has a much greater storage capacity. How about talking CORP into allowing the YW to take its freight to the Hornbrook sidings! By doing so, CORP would not have to make daily runs. More cars could be stored and collected when they do run, thereby making it more cost effective, and probably profitable to pull the drag over the Siskiyous.

    The only hitch I can see with this kind of arrangement would be receiving empties when we need them. Any way you can see to remedy that hitch? Do you think CORP would go for this idea? (I know... I know .. INSURANCE)! But this setup would sure solve the problems for all. :)
     
  20. CAPFlyer

    CAPFlyer TrainBoard Member

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    The problem with limited operations is that cycle times drop. This hurts the CORP in other areas (company goals, UP incentives for keeping trip times down, corporate incentives for the same, etc).

    Unfortunately, we're all in a bit of a pickle. Carloads have fallen off at many shortlines in the last 2 years. The massive increase in intermodal and unit train movements hasn't been meet by anywhere near any kind of similar growth for the manifest traffic that is the bread-and-butter for us. The fuel price surge over the last couple of years somewhat mitigated the losses (drove new customers to rail), but at the same time, it drove plastics companies (one of the larger shortline segments) out because the cost of plastics went through the roof as the price of oil spiked.

    So, while the Class I's were all reporting double digit increases in traffic and tightening capacity, their manifest traffic (and thus the shortline traffic) has been falling off by 2-3% per year. Now with the economy on a cyclic downturn exacerbated by the credit crisis into a potential prolonged recession, the shortlines will be hit the worst as more and more customers take smaller and smaller shipments as the demand for their product wanes.

    DGNO/TNER, BLR, and the FWWR have been fortunate. North Texas is fairly recession-resilient and DGNO/TNER is welcoming new customers online faster than we're loosing customers although our total carloads are still down and will probably take some time to recover as these new customers get going. We also have enough of a swath of customer types that we don't get hit as hard during recessions. Others, like the CORP, YW, and roads that are heavily dependent on one type of customer, have been hit much harder. I think what we're seeing in Siskiyou is symptomatic of that need to still make a profit and keep operations going at as high a level as possible but not having nearly the traffic to support the levels that were expected at the start of the year and the despiration to try and make those numbers.
     

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