Posts Tagged Railroads

Staggering Improvement

Looking over a CoBank report on the state of rail capacity in the West, I came across this astonishing graph:

The Staggers Act effectively deregulated the rail industry in this country, after almost a century of increasingly heavy-handed rules set out by the Interstate Commerce Commission (RIP).  It took a few years for volume to rise, but contrary to the arguments of the regulators, rates fell, revenue fell, and productivity shot up almost overnight.  As effects rippled through the economy, volume began to take off.

In recent years, as the cost of fuel has risen, and capacity constraints have become more evident, rates and revenue have started to rise, which accounts for the turnaround in railroad stocks.

What’s really striking is the stasis that the railroad industry was held in before 1980.  The ICC set their rates, limited their service, and forced freight lines to continue to run unprofitable and largely unused passenger service, competing with bus lines that were getting significant federal help through the interstate highway system.  How much of the overall economy’s stagnation and deterioration through the 60s and 70s was a result of this misguided paternalism can only be guessed at.

Harley Staggers, the author and chief sponsor of the Staggers Act, was no economic or political libertarian.  He was a 16-term Democratic representative from West Virginia who tried to subpoena the footage from a CBS documentary on Watergate and filed an FCC complaint over the F-word in a song on a radio station.  But he had enough sense to see that Appalachia’s coal industry needed a healthy railroad system to grow.  He’s lucky that this act from his final term in office is what people remember him by.

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In For The Long Haul

Well, this is interesting.  From Burlington Northern Santa Fe’s AAR reports from the last two years:

Coal, as you can see, makes up about half of car loadings, and that’s headed down.  Just from the couple of years, it looks as though there may be some seasonality in Intermodal, falling off in the last quarter.  I’ll know some more when I look at Union Pacific (back to 2002 and also mostly western) and CSX (back to 2006, but mostly the northeast and south).  Intermodal has improved through this year, but coal has been dropping for about 6 months.

Since the beginning of the year, coal has decoupled – so to speak – from the rest of loadings, which have climbed slightly or stayed level, even as coal has dropped.  We export a great deal of coal, and BNSF serves the western half of the country, Mexico, Canada, and the Gulf of Mexico.  (The railyard north of downtown Denver is a BNSF railyard, although we have a fair number of UP lines through the state, too.)  There have been reports that China’s been slowing down, and nobody really trusts – or should trust – the official numbers coming out of there.  Is it possible that fewer coal loadings as a sign of slackening Chinese demand?

I’m not quite sure what to make of the stagnating carloads combined with the improving outlook for intermodal.  We know that, over long distances, trains are more efficient than trucks.  Intermodal will continue to grow as a percentage of both rail traffic and overall freight ton-miles.  Is it possible that this is just more inefficiency being wrung out of the system?  Any other ideas?

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