Wednesday, December 7, 2016

Real Change in the Freight Transporation Industry



It's not that we oppose change to our communities.
Like those working in the rail industry, we just see the proposed Great Lakes Basin rail project as a generally dumb idea.

While Frank Patton imagines
GLBT with dreamy "Field of Dreams” eyes and a, "If you build it, they will come" attitude.
We chose reality of:
"The only constant through all the years has been baseball”.  Everything other than baseball changes.

Frank envisions all those tracks going to Chicago as though it always was and always will be.  In the rural Midwest, we see rail as a means of transportation for bulk commodities like grain.  We recognize market fluctuations and understand nothing is constant. Trends in freight transportation can take decades to move and sway.   Just like the path the creek chooses through the pasture moves and relocates itself depending on the water supply or lack thereof, supply and demand ebb and flow continuously.

Minneapolis once was a hot rail market for grain.  Now those elevators stand like silent tombstones throughout the Twin Cities.  Grain once traveled by ship through a series of locks and out the Saint Lawrence Seaway.  Here too, there may still towering silent structures reminding us of a bygone era. New Orleans is the new destination, the mighty Mississippi the new preferred route.

It's a basic lesson in economic history that farmers have learned.  Markets are not developed because that's where the rail tracks are laid.   Markets are developed because there is a supply or a demand and a means of transportation is discovered.  It's easy for people not familiar with the history of supply and demand to believe markets develop because that's where the railroad decided to lay the tracks.  Nothing could be further from the truth.    Tracks are laid because there is a product that requires transportation to or from a place.  

There is no question of what was first, the chicken or the egg.
The need for transporting something came first, the means by which to do that, whether it was rail, barge or truck, came second.

CEOs of actual railroads understand this basic concept:
They respond to a demand for transportation and compete for this demand with other modes of transportation.

The Chicago Stockyards are gone. The Joliet Stockyards are history.  Markets move on and the means of transportation move with it. Instead of shipping corn and beef to Chicago, today corn is shipped by rail from Illinois and Indiana to feedlots in Hereford, Texas.  Corn is shipped by rail from central Iowa to St. Louis where it is placed on a barge to go to New Orleans.  From there it travels via ship to somewhere in the world.
With Patton's logic, stockyards would still exist in Chicago because that's where the railroads chose to lay the tracks.

It's completely understandable why the Big 6 Class 1 railroads have no interest in a Chicagoland bypass toll railroad.    The industry is already too heavily vested into the Chicago market.  CEOs of the Class 1s recognize that to solve congestion in Chicago, the industry must get out of Chicago.    The industry must adapt elsewhere rather than embrace the congestion and build another layer on top of it.  Routes other than Chicago need to be developed as opposed to inviting more train traffic into the problem area.    Rail CEOs recognize that the nation’s transportation needs are changing and they must change with it in order to maintain or increase their market share.

Because baseball is the only constant in America.  Everything else changes.

Building more infrastructure in and around Chicago makes their problem worse not better.    They recognize their industry moves at the pace of a snail and legacy decisions like building more rail infrastructure in the greater Chicago area may turn out to be a curse if the nation's supply or demand decides to move elsewhere.  There is nothing new or innovative about building a bypass. This bypass does not address the bigger problem of transporting goods over longer and longer distances. Businesses are getting away from depending on their supplies coming from farther and farther away. They want a reliable and dependable supply line and are bringing suppliers closer.

Instead of Patton’s Chicago beltway,
*Intermodal container yard on the Mississippi River at St.  Louis area to create a new industry with barge to truck or rail at the old Army Depot in Granite City,  Illinois.
* Take advantage of barge freight being cheaper than rail freight and send containers up the Mississippi River into the Heartland of the United States. 
*Persuade the Department of Transportation for federal guaranteed loans to create an industry where no one dares.
* Create a new industry with containers by barge transportation to rail. Take west coast freight away from Chicago and create a new intermodal rail hub in the St. Louis area where none exists. 

That's real change to the freight transportation industry!

What Frank Patton is doing is assuming the only change in the rail industry's future is more of the same.  A bypass by its nature is only a bypass until urban sprawl catches up to it.  Frank isn’t think outside the Chicago box.  He’s only suggesting creating a bigger Chicagoland box with a beltway around the existing infrastructure.  Building a beltway around Chicago isn’t solving the problem but tying the rail industry to Chicago and making the problem worse.  The freight transportation industry will change.  Adding a Chicago beltway only makes the rail industry less adaptive to future change.

 It's not that the rail industry does not want to let Frank play trains with them.
It's not that we don't want industry or growth in our communities.

We all recognize if and when the market serviced by rail does not grow as speculated or as transportation needs change, we will be stuck with another abandoned rail, collecting empty beer and soda cans, plastic shopping bags and other trash in our back yards.

Rural Illinois already has thousands of abandoned rail track that pays little to no taxes!

Northern Illinois is not just collar counties for Chicagoland.  Collar counties of every large city are not utility closets.  Urban centers, like Chicago, fill our landfills.  They tap into our aquifers that we choose to protect.  We host their power plants when Chicago chooses to close theirs.   We host electric transmission lines.  We host their wind turbines.  We host their pipelines.  As “collar county” residents, many are tired of Chicagoland not fixing their own problems.  Adding a rail beltway is not a solution for Northern Illinois and it is not a solution for the rail industry.

3 comments:

  1. Thank you for thinking outside the box. The Saint Louis information was very enlightening. Your analysis is intriguing.

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    Replies
    1. Sorry -- you usually post really good, valid stuff here, but you are wrong about grain traffic on rail. It is going UP and is one of the commodities that is making up for lower coal (which recently spiked up) shipments & flat container traffic:

      http://www.railwayage.com/index.php/freight/class-i/grain-coal-lead-freight-traffic-gains.html

      While it is true that a 100 year old grain elevator by U of M is no longer used, that does not mean that the northwest corridor - to the heartlands is no longer feasible.

      You post an interesting idea -- but reality dictates that we remember the Mississippi River will never have the capacity year-round to haul the majority of U.S. grain. Even if New Orleans grows as a grain export center, there is no reason to move most of our grain through their port -- you are talking about a highly circuitous route that cannot serve domestic needs.

      Even more important -- my concern is that it is wrong to say that grain is somehow not moving through Chicago's rail corridor. Please be careful -- the lie that there is a need to move low-cost commodities through Chicago faster is the lie that Frank Patton is basing GLBT RR on.

      And now we know that he is using GLBT to hijack land for a railroad and private tollway!

      The money, for Patton, is not in the RR -- that will go bankrupt and be absorbed into a larger system just like all the other major US rail corridors built 125 or more years ago! It will be acquired by another carrier whether industry interest are directly involved with Patton or not. The application for GLBT has been filed and now the picture is clear.

      The RR is how he justifies a massive speculative land grab. He hoped to slip this through without meaningful opposition. We raised hell (and Great Lakes Basin Railroad: News & Views did more to get the opposition going than anyone else.

      This is an crude oil corridor linking CSX and CPR. The new CEO of CSX, Hunter Harrison, comes directly from CPR.

      More significant -- Harrison is how was CEO when Canadian National purchased its Chicago bypass (the "Elgin"). CN is not one of the nation's biggest crude oil shippers.

      CPR, falling behind the other Class 1's and losing more freight traffic than the industry-as-a-whole, is looking to turn itself around and needs to develop a long-haul for crude. Remember, it runs through North Dakota, Bakken Shale, and Alberta Tar Sands territory.

      It has access to all the oil produced in that region -- it just has no place to take it.

      Speeding up grain shipments in no way helps anyone, especially when the costs are staggering. This commodity simply is not worth enough.

      GLBT is not about moving Nike shoes to NYC a day faster. It is not about a need to speed up grain traffic. It is about creating a bridge between a western railroad and an eastern seaboard line.

      Frank benefits from the tollway and the airport -- the railroad be damned -- it will be sold at a bankruptcy sale for pennies on the dollar. It will not be removed if it is built -- it will become a permanent part of the U.S. rail network and a Class 1 carrier will obtain ownership at a cost much lower than the construction.

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  2. Oops! 2 key typos (year, there are others):

    1. GLBT is about creating a tollway and airport! The railroad is the foot-in-the door.

    2. CN is NOW one of the biggest carriers of crude.

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