Monday, November 21, 2016

GLBT the Proposed Robber Baron Railroad

The Surface Transportation Board must evaluate how the proposed Great Lakes Basin Transportation, LLC would affect the existing rail companies in the Chicago land market.

(The Blue FLAG is the universal rail industry sign that means STOP GO NO FURTHER!)

Chicago has a handful of shortline railroads handling the interconnection between the 6 major railroads like the Indiana Harbor Belt and the Belt Railway Company, along with several other short lines servicing industry in Chicago.  With that, Canadian Pacific, Norfolk Southern, Union Pacific, Burlington Northern Santa Fe, CSX, and Canadian National all come to Chicago where cars are handed off from one railroad to another through these shortline railroads.  With few exceptions, Chicago is the end of the line for the railroads.  These two existing shortline railroads and the hundreds, if not thousands of existing jobs are the competition to a proposed GLBT in a very real sense.  
One has to wonder………….

can these Chicago railroads handle the loss of business and remain sufficiently profitable to stay in business?

Hypothetically, suppose the GLBT takes away 50% of the rail transfer business from the two existing short lines. While these two short lines don't exactly compete with each other, a GLBT would directly compete with both of them.  

There are many questions needing answered about the proposed ramifications of doubling the needed infrastructure

  •  Would increased operation costs from more rail miles increase rail rates?
  •  Would displaced Chicago employees leave or go on unemployment?
  •  How much revenue would Chicago communities loose?
  • With less freight traffic to carry the burden for rail repairs, would the taxpayers or increased passenger tickets rail be accessed to cover the bills?
  • Would these short lines and interchange railroads operate with less freight income or would they go bankrupt?
  • Would then abandoned tracks in Chicago create a greater blight on Chicago communities with no property taxes being paid and their deterioration?

Because tracks need maintenance and crews need to be paid regardless of the amount of rail traffic, railroads require sufficient freight traffic to pay the fixed costs.  In Chicago passenger and freight share the same tracks and crossings often. Chicago rail companies generally make money off freight and loose money with passengers. The government subsidizes passenger rail.

In addition, without sufficient freight traffic, the cost to transfer each car increases and rail shipping rates go up.  Consumers would pay more for transferring rail cars through Chicago because that cost is distributed through GLBT and their billions of dollars of infrastructure plus paying the cost to maintain the existing infrastructure in Chicago.  Adding the Chicago bypass and forcing railroads to utilize it could easily make all the Chicago market unprofitable, increase risk, and create an unstable rail industry.

Will the Surface Transportation Board find itself in a position to mandate the use of a certain interchange railroad to maintain profitability of all the interchange railroads? 

The rail industry is a fragile business.  While the industry has done well over the last several decades with deregulation, one of the duties of the Surface Transportation Board is to make sure proposed projects such as GLBT don't upset the industry, cause harm to an existing railroad, or create an adverse situation that increases rail tariffs resulting in consumers paying more for goods.

Creating a new shortline interchange railroad in the Chicagoland market could do just that.  The Chicagoland rail market is a perfect example why America has regulated monopolies.  There are times when adding a duplicate high fixed cost infrastructure will increase the cost of business, reduce profitability, and potentially create a corporate bailout problem.

  • Recreating infrastructure, like GLBT is proposing, can improve efficiency, but sometimes the cost is more than the benefit.
  • What benefit is there to close shortline railroads only to create another at a higher cost for consumers? 
  • What benefit is there to take rail jobs away from Chicago yards and relocate those jobs south of Chicago?  
  • Will the proposed GLBT accept the responsibility of creating a depressed economy and increasing urban blight with abandoned rail tracks in Chicago?  
  • What benefit is there if the final outcome will be higher rail rates?

·         Why does Union Pacific and Norfolk Southern have no intentions of using Patton's GLBT?

The companies realize taking business away from the existing interchange railroads will only lead to lower profitability for their company and shareholders. Utilizing the existing infrastructure maximizes profitability. It would be interesting to hear Union Pacific explain how dividing trains between the existing interchange railways and GLBT would affect all rail tariff rates through Chicago.  Even if Canadian Pacific or another railroad used GLBT, the loss of business to GLBT would affect the costs of all the other railroads.

If building GLBT increases efficiency but at a higher cost to the consumers and risks railroad profitability, then no one but Great Lakes Basin Transportation investors benefit. (Whoever the investors behind GLBT might be.)   Then again, if the investors in Great Lakes Basin Transportation envision a North American railroad with all the benefits of globalism for the owner, GLBT is the missing link.  A merger with Great Lakes Basin Transportation, LLC and Norfolk Southern would make a powerhouse with GLBT added.

Until The Surface Transportation Board (and not Frank Patton) proves Great Lakes Basin Transportation will do no harm to the existing Chicagoland rail companies with GLBT's duplicate of the Chicagoland infrastructure, this project should not be built. There is no doubt Frank Patton will take a Pollyanna position that this project will do no harm to the industry but really?  There have been a long line of braggadocios dreamers like Patton claiming to bring economic expansion but the only profit seen is in their wallet.  

We don't need more abandoned railways through our fields. We have enough abandoned rail sewer lines though our farms.

If this proposed project is just forced transfer of wealth from the agribusiness owners and the existing shortline interchange railroad owners to GLBT investors by eminent domain are we really better off as a society? 

Are we just creating a new Robber Baron Railroad with GLBT?