BNSF's 2015 $6 Billion Capital Plan

That's a billion more than 2014. Good to see the railroads doing so well these days and able to expand and maintain the rails.  

I wonder if the Keystone Pipeline, when it is approved, will impact Warren Buffet's rail road.

It certainly might, and that is probably why he is against it, plus lobbying hard to the President to block it also.

Looks like there's one in my area.  Double track project on the Fort Scott sub. 

 

 

Posted by Bobby:

 

I wonder if the Keystone Pipeline, when it is approved, will impact Warren Buffet's rail road.

 

I don't want to start a hulabolu here but this should read - "if it gets approved."

 

Additionally transportation by rail has proven to be invaluable due to the varying circumstances of refinement.  Moving crude by pipeline places it in one location only.  Rail has the ability to quickly move to alternative locations based on capacity, cost and viscosity.  Warren is no dummy...

 

From what I've read the two won't really compete against each other but I don't see how that could be.  Like Hot Water said, Buffet is big time against it.

I don't think one pipeline can serve all the areas.  But I'm sure Pipeline people are lobbying against crude by rail so its just business.  Plus the Bakken crude can be moved by rail without being diluted.

BNSF moves almost all the Bakken Field oil at a rate of approx. $30 per barrel. It represents about $2 billion of their annual revenue.

 

The Keystone Pipeline could move that same oil for only $10 per barrel. BNSF would lose almost all that oil business.

 

Warren Buffet was a huge campaign contributor to the current regime.

 

Hmmm...I think I know why the White House has opposed this pipeline.

But these railroads were seeing record revenues and profits before the oil by rail boom of only two years ago if that.  Plus its possible the RR have some wiggle room in their margins.  Its nice to see RR flex their lobbying muscle.  They deserve it after decades of unfair disadvantage from trucking.  Private infrastructure plus property taxes...vs tax payer supplied infrastructure where you pay a user fee that's not the full cost....but there are times when trucks crowd you on the interstates.  I see trucks speeding nightly as well...though I like to drive fast as well.  But it seems regs are harsher on the operating procedures of railroads.

BNSF and CP pretty much have a duopoly on rail movement of Bakken oil and, while the Keystone, if built, will certainly eliminate both railroad's oil business coming south to the Gulf coast, BNSF and CP will continue to originate crude oil trains so long as the global pricing of oil makes it a good economic decision.  Crude oil from the Bakken can only move by rail if it is shipped to refineries on the east or west coasts of the U.S. and Canada and, I truly doubt we wil EVER see pipelines proposed or built that could squeeze the railroads out of that traffic.

 

And Mike, as a rail shipper for 36 years, I can't let your comment about how nice it is to see the railroads flex their lobbying muscle go by without offering a counter argument. 

 

The railroads have had one of the strongest lobbying positions in Washington since hiring Ed Hamberger as their CEO 16 or 17 years ago.  Ed is one of the more astute industry association / lobbyist people I have ever interacted with. And, while I have a tremendous amount of respect for Ed both personally and professionally, I can tell you his single minded pursuit of anything and everything beneficial to his members can be trying at times.  (And I know before someone says it - that IS what he is being paid for.)

 

If you are a rail shipper who has struggled to deal with lousy and at times indifferent rail service while at the same time having no choice but to accept ever increasing rates, your perspective on "how nice it is" would abruptly change.  The AAR is extremely single minded in pursuit of their goal and the strategy and the tactics used to achieve it.  If something is in any way beneficial for the railroads while being bad for rail shippers, the AAR will see that it is accomplished.  Conversely, if something is even remotely beneficial to shippers, the AAR will oppose it.  And, if something is bad for the railroads, the AAR will figure out a way to make shippers pay for it. 

 

And I can assure you the AAR and the railroad industry have had far more wins than losses in the 35 years since the Staggers Act.  In fact, there are many on the shipper side of the equation who believe the pendulum has swung way too far in favor of railroads at the expense of their customers and the public in general.

 

Curt

I can't speak to the rest of your comments, but in a word...coal. Coal used to generate electricity was profitable for RR's until the current administration took office and now it is diminishing, but the oil production boom has more than made up for the reduced coal shipments. 

Hmmm...I think I know why the White House has opposed this pipeline.

 

Because their boss told them to. 

 

 

BNSF and CP pretty much have a duopoly on rail movement of Bakken oil and, while the Keystone, if built, will certainly eliminate both railroad's oil business coming south to the Gulf coast

 

BNSF moves almost all the Bakken Field oil at a rate of approx. $30 per barrel. It represents about $2 billion of their annual revenue.

 

The Keystone Pipeline could move that same oil for only $10 per barrel. BNSF would lose almost all that oil business.

 

If tanker operators offer shipment from the gulf coast to refineries for less than $20 per barrel the BNSF will lose market share or profit on shipments to the east coast.

 

Look at the locations of the BNSF's projects.  Many are in North Dakota where shipments originate or along north Puget Sound where they terminate at refineries that used to rely on Alaskan crude.  Prohibiting new production in Alaska is also helping the railroads.

 

Plus the Bakken crude can be moved by rail without being diluted.

 

Bakkan oil is a light, sweet crude.  It does not need dilution to be pumped.  Alberta tar sands crude is the heavy stuff.

The other day I read that congress voted against keeping the Keystone pipeline oil here for our use in this country and also against requirements for using only supplies made in the USA for the pipeline's construction. Sounds like the benefits of it are shrinking rapidly.

 

Also, I have previously read that a lot of the Bakken oil is going East and West and the pipeline will be North and South.

 

Anyone know for sure on these items?   

So is it normal for railroads to lower service quality for captive shippers?  Or do some still offer quality service?  

 

I guess my comment was geared more towards operations...and capital expense.

 

I assume intermodal will continue to grow with RR and become their bread and butter.  But the profits will always be highest with the things RR transport that can't be carried by trucks.

Mike:

 

I have experienced multiple instances over my career where the railroad serving one of our plant sites made an arbitrary decision to alter or reduce the amount of service we received each week or change the days or times they would switch us.  In some instances (including as recently as last August), these changes weren't even communicated to us.  The railroad simply changed the schedule and we found out when they didn't show up when they normally would have. These arbitrary changes cause problems in production and shipment scheduling and can present serious issues in terms of the flow of inbound raw materials and private empty cars for loading.  If the railroad / captive shipper relationship was more of a supplier/customer relationship, there would be no arbitrary changes like this.  Proposed changes would be discussed in advance and tweaks made that would accomodate the needs of both parties.

 

The other major issue confronting captive shippers is what options they have if service becomes really bad.  We experienced this issue last year at one of our sites in the Chicago area.  I won't mention the railroad but, their service deteriorated so much that at the end of February, we were forced to declare force majeure because our serving railroad wasn't keeping us supplied with raw material loads or empties to handle our outbound shipments.  The railroad that served us claimed weather was the issue and snow and ice were hampering their operations and the local that served us was constantly going on the law because of the conditions.  I completely understood the weather conditions and what the crews were having to deal with.  The larger issue was if the local crew couldn't complete all their work on a given day, they didn't pick up the next day where they had left off the day before. By way of example, if a local has to serve customers A, B, C, D and E each day; the conditions last winter meant the local might only make it as far as C before running out of hours.  The next day, rather than starting at C or D, they would start again at A.  This meant that at times, we were going 4 and 5 straight days without service.  When I mentioned this to the local trainmaster and suggested it would be better to start where they had left off the day before, I was told I don't know how a railroad works.  He could have cared less whether we received our service and, when I complained to the people above him all the way to headquarters, the organizational apathy was apparent.

 

Curt

Interesting.  How do you juggle being a railfan with the realities of dealing with one as part of business.

 

Well I guess my post was more about the restrictions towns and nimbys place on railroads but they never seem to raise any issue when the interstate wants to build an overpass and cover the town...or when trucks speed 80+ which I see often on my daily commute.  I speed too haha and the truck drivers are often much better drivers than the average person.  But if a train speed or blows there horn near the new subdivision its the end of the world.

Mike:

I balance being a captive shipper and a railfan in the same manner railfans who work for a railroad must do so; you have to separate the two worlds in your head.

Put another way, while I like trains and the history of railroading, I regard the railroads themselves simply as a business.

Curt

As you should!  As bad as they can be at times someone once asked me to name another private enterprise of that size and scope you would rather have provide that service.  Airlines?  Trucking?  UPS/FedEx?  None of them are perfect and all of them have royally p*** me off at one time or another sometimes costing me, as an individual, a lot of money. 

 

But none of them p*** me off as much as the local water company.  Too much water, raise rates, not enough water, raise rates, just enough water but we haven't raised rates in a couple months raise rates; ~18 increases in the past 2-3 years, that's what a private for profit water company with no competition gets us.

Actually, a captive shippers' interaction with his serving railroad can frequently mirror your experience with your water company.

The railroad I referred to in my example above came to me in May last year with a proposal to raise rates from that Chicago area site across the board.  When I objected on the basis of their lousy service that had shut us down in February and cost us hundreds of thousands of dollars in lost business, I was told "we don't price to the weather" and the increase took effect.

Curt

So why would RR's risk this lousy service knowing in the long term those shippers may work hard to make sure trucks can handle their shipments?  Rather than building a long term (we love the Railroad) mentality.

Mike:

I guess "because they can".  For chemical shippers, volumes can be such that trucking really isn't a viable option. 

Too, there is a growing capacity crunch in the trucking industry, particularly with bulk tank trucks.  The average age of a tank truck driver is mid-50's and the industry cannot find enough drivers to replace those who are retiring.  And, though Congress took steps last December to temporarily reverse some trucking hours of service regulations that had proven particularly harmful to trucking capacity, the industry is still operating somewhere around 96-98% capacity utilization, so any interference from weather or a surge in business can cause extreme problems.

There have been a number of threads here on the Forum in recent months about the increased level of advertising from the Class 1 railroads.  I believe this is directly related to the crappy levels of service experienced by many rail shippers last year and the increased scrutiny coming from Congress and the STB.

And I don't think the railroads deliberately set out to provide bad service.  Rather, when a substantial part of your customer base has no other transportation option and is captive to your particular railroad, it can be easy to develop  an institutional indifference to your customers not unlike what some of us experience with our home utility providers such as the water or cable company's.

Curt