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A Shippers Perspective on the Ever Changing Railroad Industry

A Shippers Perspective on the Ever Changing Railroad Industry. March 14 th , 2007 Badger Mining Corporation. The Beginning of Railroading. Interstate Commerce Act of 1887. Interstate Commerce Commission (ICC) Formed Subjected railroads to comprehensive federal economic regulation.

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A Shippers Perspective on the Ever Changing Railroad Industry

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  1. A Shippers Perspective on the Ever Changing Railroad Industry March 14th, 2007Badger Mining Corporation

  2. The Beginning of Railroading

  3. Interstate Commerce Act of 1887 • Interstate Commerce Commission (ICC) Formed • Subjected railroads to comprehensive federal economic regulation. • Controlled railroad operations for the next 108 years and nearly destroy the industry.

  4. Elkins Act of 1903 • Strengthened the Interstate Commerce Act of 1887 • Imposed heavy fines on railroads offering rebates and shippers accepting them.

  5. Surface Transportation Board (STB) • Replaced the ICC in 1995 • Shift in Control from Shippers to the Railroads

  6. The Peak Period of Railroads • In 1916, there were over 1,500 railroads operating in the U.S. • They operated on about 254,000 miles of rail • Employed 1.8 million people. • Largest U.S. Employer

  7. Shipper Advantages • Mandatory Interchange • Interchange traffic w/out discrimination • Contract-like preferences were illegal • Nonnegotiable Tariff Rates • ICC Enforcement

  8. Government Intervention • Federal Government seized control of railroads during World War I • 1920s returned to private ownership • Rundown condition • By 1940s Unregulated Competitors • Automobiles, buses, trucks, planes, pipelines, etc.

  9. Bankruptcy in the Future • After World War II, railroad invest billions • New locomotives, freight equipment, passenger trains, etc. • Rail market share continues to decline • Deferred Maintenance in the Billions • Operate at Reduced Speeds • Standing Derailment

  10. Bankruptcy • Northeastern Railroads • Midwestern Railroads Lead to Congressional Involvement!

  11. Consolidation from 1980 Avoid Bankruptcy or simply increase profits 1982 - WP & MP merge into UP 1985 – Milw Rds & Soo Line = CP 1986-87 – Seaboard System, B&O, C & O =CSXT 1988 – DRGW & SP 1988 – MKT = UP 1995 – CNW = UP 1995 – ATSF = BN 1996 – SP = UP

  12. Staggers Rail Act of 1980 • Nationalization OR • Deregulation Deregulation was chose.

  13. Post Staggers Rail Act 1980

  14. Staggers Act Worked For Class 1’s • From the brink of bankruptcy in 1980 The free market place conditions allowed by Staggers produced 2006 4th quarter profits: • BNSF $519 million • Canadian National $499 million • Canadian Pacific $145 million • CSXT $347 million • Kansas City Southern $88 million • Norfolk Southern $385 million • Union Pacific $485 million

  15. Consequences • Shippers captive to a single railroad. • Lack of Competition

  16. Railroad Classification Today 2006 Class 1 Railroads >$277M OR Class 11 Railroads > $20.5 M OR Class 111 Railroads < $20.5 OR

  17. Classifications Rarely Used • Regional Railroads Regional Railroads 350 miles $40 M Local Railroads Non-regional feeder railroads Switching & Terminal Railroads BRC 28 MILES

  18. Why short lines are needed • In 1916 250,000 miles of track 1,500 + railroads • 2006 – 500, regional & local rail roads (short line) railroads feeding the 7 class 1s • 150,000 miles of track

  19. The Role of The WSOR & Feeder R R • WSOR is one of 34 Regional Railroads • 700 miles of branch & mainline track • 21 counties in Wisconsin • Made up of defunct WI & C, M R, C&NW runs over UP & CP track • Connects with 6 Class 1’s BNSF, CN, CP,UP,CSXT,NS

  20. Operational costs 6 of the 7 class 1 railroads intend to spend over 1 B @ in 2007 on Maintenance of Way, Infrastructure, & Horsepower Without State & County help the WSOR’s could not compete or stay in business.

  21. Operation Comparison Class 1 2m onlymi TRACK ONLY Class 1 New Track 2m per mile Rehab track $250,000.00 per mile WSOR $10,000.00 PER MILE

  22. Private vs. Railroad Owned Equipment

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