Tuesday, April 5, 2016

A Farmer Economics Review of the Great Lakes Basin Business Plan

"The land is the only thing in the world worth working for, worth fighting for, worth dying for, because it's the only thing that lasts "
        - Margaret Mitchell
          Gone With the Wind

To call Frank Patton's sales pitch as canned and scripted is an understatement.   It shows how little he knows and understands about the rail industry much less grain markets.    He explains how he will bring rail service to any property the Great Lakes Basin Transportation llc cuts through.    He says GLB will not deny rail service to any farm along the way and this is a selling feature for his railroad easement and farmers are to see this as a benefit.

This isn't 1880.   Farmers don't sell individual railcar allotments much less have them loaded on the farm.
So why does Frank Patton continue to sell this "feature" to the press and government agencies?

It's a selling feature to distract the uneducated.  His goal is to make claims of be accommodating to those who fail to realize his claims are completely irrelevant.

Farmers don't care about your claims to be willing to be a shortline while at the same time being an expressway to other railroads.    We don't want or need another shortline operation.  Consider how much rail track is in service in Northern Illinois. More track is not going to benefit farmers.  This claim is not about economic stimulus or benefit any farmer will utilize.   It's a lame distraction as OPEN ACCESS is a bit of a hollow selling point.  If a speculation project went to the Surface Transportation Board proposing a shortline limited access railway,  it would be immediately denied.  

We really want to know more about the GLB business plan. It's not that we don't trust anyone who comes along and says they want a 200 foot wide easement through our production farms, but we have a right to be contrarians and question the legitimacy of proposed projects.  It is our duty as guardians for society against unscrupulous corporations.   The Great Lakes Basin business plan is a bit confusing.    Frank Patton makes GLB sound as a shortline railroad but he also talks about it being basically a toll expressway around Chicagoland.

Which is it?

Can Great Lakes Basin Transportation llc be all things to all people?

If it is built, will Great Lakes Basin Transportation llc have any actual customers?  There is already an abundance of intermodal terminals in Northern Illinois servicing the container and trucking industry.

We read a lot about Frank Patton claiming a railroad would potentially bringing jobs to towns.   Again, this sales pitch sounds a bit like this is 1880 in the Great Plains, but we already have railroads through our major towns.   How is this transportation company going to revitalize and provide economic stimulus beyond the rail service already provided?  Perhaps we just find his claims of economic growth sounding a bit of hogwash.   

Then there the other side of Patton’s supposed business plan.    Great Lakes Basin is supposed to be an expressway around the interchanges of Chicago.   We understand it can take up to 30 hours for an intermodal train (containers) to get through Chicago and exchange from one railroad to another.  That sounds like a long time, but it also only takes 15 hours for a unit train to get through Chicago.  Interesting it takes half the time for bulk commodity trains of oil, coal,  or grain to clear Chicago.

Six of the seven largest railroads in North America feed into Chicago.   Union Pacific, Burlington Northern Santa Fe, Norfolk Southern, CSX, Canadian National, and Canadian Pacific Railway all feed into Chicago.    All of them but for Canadian National stop in Chicago. When CN bought the Illinois Central, it became a north-south railroad and beyond a regional railroad as CN goes south to New Orleans

With the big six railroads stopping in Chicago, there are two shortline railroads that preform the task of interchanging cars from the yards of one company to another.     For instance, Indiana Harbor Belt Railroad takes the cars from Norfolk Southern's yard and delivers them to Canadian Pacific.  

If GLB intends to be a bypass around Chicago who receives the cars? It's not like Burlington Northern is going take the bypass around Chicago and pick up on Burlington Northern tracks on the other side.    These railroads end in Chicago and cars are interchanged to another railroad.  Should we expect massive rail yards being built all along the way everywhere GLB intersects with another railroad?

Where GLB would intersect Burlington Northern at US Rt34 east of Earlville, should we expect a rail yard capable of handling a unit train built?

Should Seneca residents expect a rail yard where GLB track intersects the CSX?  

Would cars get dropped off at Earlville and a GLB shortline deliver cars to Seneca to continue eastward on CSX tracks?

It's not like BNSF would just take a shortcut on GLB rails and jump back on BNSF tracks on the other side.    BNSF tracks heading east in Indian do not exist.  In many respects, without a company having tracks on the other side of Chicago, this bypass is indeed a bypass to nowhere.

Next, would the fees to interchange cars on GLB be lower than the fees currently charged by the 2 shortlines in Chicago?  Keep in mind GLB will cost 8 billion dollars and include 278 miles of new track to pay for. Railroads costs are heavily weighted towards the fixed costs. 

If GLB is built, will Frank Patton be lobbying Congress or the Surface Transportation Board for BOTTLENECK REGULATIONS to mandate railroads use his track in an attempt to relieve congestion in Chicago?

If GLB cannot prove he can interchange cars at a lower price than the existing shortlines in Chicago that are jointly owned by the six major railroads, how does he expect his company to survive?

Forgive the bluntness, but from what I've read about Frank Patton's transportation company and Chicago's rail industry, I feel like Frank Patton is being less than forthcoming with information.  There is something missing here.  This business plan seems like a high risk business investment that will require massive government loan guarantees to obtain financing.  

As much as Frank Patton claims this is his business plan, I suspect there is probably another business plan he is not telling us about.   If this project is built, it is not surprising Union Pacific has no intention of using it.     It's a bypass to nowhere.    At best, it's moving the congestion in Chicago outward and requiring all six railroads to build more infrastructure and double up on existing infrastructure in Chicago. Again, more fixed costs for the railroads to pay for without increased capacity.   

If I was the CEO of UP, I'd say "This is a great idea.   All five other railroads should use this interchange, pay higher rates and build more overhead.  We'll appreciate the fewer cars in Chicago and continue to interchange cars at a lower price."   The largest railroad in the nation is more or less telling the other 5 railroads "If you're going to interchange cars with UP, it will be done in Chicago just as it is currently preformed.  We're not going to interchange through the Frank Patton Transportation Company llc. "

I'm not calling Frank Patton a liar, a fraud, a hustler,  or a carpetbagger,  but there has to be alternate motives.    In my opinion, I don't believe this proposed business plan is the real intentions.     Basic farmer logic says you can't run a railroad in this manner.

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