freight transportation and logistics - railroads

82
Civil & Environmental Engineering – Freight Transportation Winter 2008 1 Freight Transportation and Logistics - Railroads CE 453/553 Winter 2008 Dr. Chris Monsere

Upload: others

Post on 12-Feb-2022

7 views

Category:

Documents


0 download

TRANSCRIPT

Page 1: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 1

Freight Transportation and Logistics - Railroads

CE 453/553Winter 2008

Dr. Chris Monsere

Page 2: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 2

Freight Railroads Outline

• Modal profile• Major commodities• Market structure• Oregon railroads and profile• Car types and loadings• Car ownership• Locomotives• Types of trains• Terminal operations• Moving freight from here to there• Bills of Lading• Waybills and tariffs• A little regulatory history

Page 3: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 3

Common Carrier

• English common law– Judicial precedent

• A transportation company that provides freight service to all who seek it

• Duties – must serve, deliver, charge reasonable rates, and not discriminate

Page 4: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 4

Excellent Reference

• The Railroad: What It Is, What It Does /4th EditionAuthor: John H. Armstrong, Judy ShepherdPublisher: Simmons Boardman Pub Co; 4th edition (September 1998)Description: Paperback: 270 pages ; ISBN: 0911382046

Page 5: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 5

Modal profile

• Railroads ideal for transporting high volume, low value commodities– Coal– Farm products– Petroleum– Chemicals

• Growing use of intermodal movements– Containers, TOFC, COFC

• Efficient per ton-mile in terms of fuel

Page 6: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 6

Major commodities

Page 7: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 7

Market Structure

• Class I carrier has >$250 M in revenue

• Regional (Class II): operating revenues between $250M and $20M

• Local Short-line (Class III): Carrier operating revenues <$20M

• Terminal and switching railroads also Class III

Page 8: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 8

Rail Track Mileage and Number of Class I Rail Carriers, United States, 1833-2005

0

50,000

100,000

150,000

200,000

250,000

300,000

1830 1850 1870 1890 1910 1930 1950 1970 1990

Mile

s of

trac

ks

0

20

40

60

80

100

120

140

160

180

200

Rai

l Car

riers

Rail Track MileageClass I Rail Carriers

Copyright © 1999-2006, Jean-Paul Rodrigue, Dept. of Economics & Geography, Hofstra University, Hempstead, NY, 11549 USA. Used for educational purposes only as per copyright

Page 9: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 9

Major North American Railroads

• United States– Union Pacific– Burlington Northern Santa Fe– CSX– Norfolk Southern– Kansas City Southern

• Canada (US)– Canadian Pacific (Soo Line)– Canadian National (Grand Trunk)

• Mexico– Transportacion Ferroviaria Mexicana– Ferrocarril Mexicano

Page 10: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 10

Major North American Railroads

Page 11: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 11

Union Pacific

• Operating Revenue $11 billion

• Operating Expense $8.8 billion

• 27,692 miles of road

• Carloads 7.6 million

• 2006-capital expenditures - $2.1 billions

Page 12: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 12

Burlington Northern Santa Fe

• Operating Revenue $9.2 billion

• Operating Expense $7.5 billion

• 25,355 miles of road

• Carloads 6.9 million

Page 13: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 13

CSX

• Operating Revenue $6.4 billion

• Operating Expense $5.8 billion

• 19,503 miles of road

• Carloads 6.3 million

Page 14: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 14

Norfolk Southern

• Operating Revenue $6.3 billion

• Operating Expense $5.3 billion

• 17,065 miles of road

• Carloads 5.1 million

Page 15: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 15

Kansas City Southern

• Operating Revenue $0.56 billion

• Operating Expense $0.50 billion

• 2,888 miles of road• Carloads 495,000

Page 16: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 16

Canadian Pacific

• Operating Revenue $2.3 billion

• Operating Expense $1.8 billion

• 9,600 miles of road

• Carloads 2.0 million

Page 17: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 17

Canadian National

• Operating Revenue $3.8 billion

• Operating Expense $2.9 billion

• 19,559 miles of road

• Carloads 3.3 million

Page 18: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 18

Car types and loadings

• In 1995, railroads raised gross rail loading to 286,000 lbs from previous 268,000 lbs– Problems for short-lines and regional – can

receive government funding to improve infrastructure

• Typical maximum cargo of 100 tons (200,000 lbs)

• Typical car– Length – 50-70 feet– Width – 10 feet– Height – 15 feet (Double stack containers

max)

Page 19: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 19

Boxcars

• Covered, enclosed environment• Also can be refrigerated

Page 20: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 20

High capacity boxcars

• Overheight boxcar• Specialized design• Newsprint rolls

Page 21: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 21

Open Hopper

• Many privately owned• Some couplers are rotary – entire car

turned upside down for unloading• Coal, stone, gravel, coke

Page 22: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 22

Covered Hopper

• Grains, corn, soybeans, fertilizers• Gravity feeds for unloading

Page 23: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 23

Gondola

• Scrap metal, steel rolls, logs

Page 24: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 24

Centerbeam flatcar

• Lumber or steel products

Page 25: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 25

Tank Cars

• Chemicals, Petroleum, Food Products

Page 26: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 26

Flatcar

• Equipment, rails, etc

Page 27: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 27

Autorack

• Automobiles• Tri-level or bi-level• Fully enclosed for cargo protection• Capacity bi-10 autos, tri- 15-18 autos

Page 28: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 28

TOFC

• Trailer of Flatcar• Articulated cars

Page 29: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 29

COFC

Articulated Well Car -Shared trucks

Page 30: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 30

Car ownership

Page 31: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 31

Locomotives

• Modern locomotives are diesel-electric– Diesel motors run alternators– AC traction motors for driving wheels

• Typical weight of 380,000 lbs– 60-70,000 lbs per drive axle

• Horsepower from 3,000 – 6,000 hp• Two variables in choosing power

– Tractive force needed to start – Horsepower

Page 32: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 32

Locomotives

• Grade has an effect on locomotive performance– A train powered to make 60 mph on level

track will slow to about 22 mph on 1% grade and 10 mph on a 2% grade

• Locomotives can be connected in multiple units and run remotely– In series, in front– Extra locomotive in middle of train– “Helper” locomotives at end

Page 33: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 33

Locomotives

Source: Armstrong

Page 34: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 34

Types of trains

• “Average” freight train (1994)– 65 cars (37 unloaded)– 2,750 revenue tons of lading– 22.4 average speed– 800 mile haul length

• General types of trains– Unit– Manifest– Intermodal

• Priority set by business importance and schedule needs– “Hot freight” or “Hot-shot”

Page 35: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 35

Unit Train

• Single commodity trains, sometimes with specialized cars and assigned locomotives

• Point-to-point service• Create efficiencies in assembling,

loading, and unloading• Maybe as long as 100-120 cars and be

assigned more power for speed• Examples:

– Coal, chemicals, grain

Page 36: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 36

Grain Unit

Grain elevator “loadout”

Grain train / ship transfer

Page 37: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 37

Coal Unit

Coal car being “flooded”

Page 38: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 38

Intermodal

• Similar to unit train in that all shipments are intermodal

• Maybe TOFC or COFC• Scheduled runs, usually high priority• Typically shorter than grain or coal units,

50-60 cars

Page 39: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 39

Intermodal

Crane unloading containers

Page 40: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 40

Intermodal growth

Page 41: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 41

Manifest

• Advertised or scheduled freight service

• Mixed freight traffic train

• Shippers can reliably know time for shipment to reach direction

Picture: Pat Huemmer

Page 42: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 42

Moving freight

• Customer orders cars• Railroad delivers cars to siding “set-out”• Customer loads car or unit trains

– Time specified or demurrage charges

• Customer given bill of lading• Railroad creates waybill• Cars picked up, assembled into trains,

routed through system• Cars delivered to customer

Page 43: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 43

Moving freight

Page 44: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 44

Bills of Lading

• Contract between customer and railroad• Receipt for shipper that railroad has

taken possession of carload• Shipper usually pays freight unless

stated as “collect”• Standard documents

– Open or straight– Order

Page 45: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 45

Waybills and tariffs

• Rail makes a waybill for the carload shipment

• Shipment class, tariffs, contracts, to determine freight charges– Rates depend on commodity

• Contains:– Car number, waybill number, shipper,

consignee, STCC, weight, freight rate, route, other details

• Contract between railroads moving shipment

• Electronically filed with AAR and other RR

Page 46: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 46

Classification and blocking

• Cars enter terminal yard to be assembled into other trains

• Manual or gravity classification• Manual

– Train crews with a switching locomotive move and assemble cars

– Source of worker injuries– Railroads experimenting with remote control

locomotives

Page 47: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 47

Gravity classification

• “Hump yards”• Strategically located• Decline in number since intermodal

container traffic growth• Automatic control• Cars made into trains based on

destination, priority

Page 48: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 48

Hump Yard Schematic

Source: Armstrong

Page 49: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 49

Bailey Yards, North Platte, NE

Every 24 hours, Bailey Yard handles 10,000 railroad cars. Of those, 3,000 are sorted daily in the yard's eastward and westward yards, these two hump yards allow four cars a minute to roll gently into any of 114 "bowl" tracks Together, these two yards have 18 receiving and 16 departure tracks.

Page 50: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 50

Railroad Performance

Page 51: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 51

Performance Measures

Page 52: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 52

Performance Measures

Page 53: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 53

Signals and Communications

• Blocks– Two types:

• Manual– Train orders or warrants, radio control

• Automatic

– Blocks can be varying lengths

• Train Signals– Proceed– Approach– Permissive– Absolute stop

Page 54: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 54

Signals and Communications

Source: Armstrong

Page 55: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 55

Signals and Communications

• Automatic Train Stop (ATS) / Automatic Train Control (ATC)– Controls “absolute stop” point which sets

brakes of any train passing a specified point– Can limit speed

• In-cab signaling– Communicate with engineer

• Automatic Train Control Systems (ATCS) or Positive Train Control (PTC) – Uses GPS and other information systems to

improve train control

Page 56: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 56

Dispatch centers

• Centralized control of most mainlines switches and signals

Page 57: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 57

Balancing Power and Cars

• Locomotive power needs vary along grade, train priority, and speed

• Need to know where cars are

• Seasonal demands• For power and

cars:– Imbalance in freight

density and backhauls

Page 58: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 58

Labor

• Unions for each craft (+-28 total unions)• Own pension system• Hours of service requirements

– Federal (fatigue)

Page 59: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 59

Capacity Issues

• Type of train control– PTS– ABS– Manual

• Number of tracks– Passing tracks (length)

• Tunnel and bridge height restrictions– ISO containers and domestic

• Interchange points– Other railroads and internal between

divisions• Grade and route

Page 60: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 60

Page 61: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008

Capital improvements

61

Capital improvements –completed in 1929 the longest railway tunnel in the US shortened the mainline by 7.66 miles and 500 ft of elevation

Page 62: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008

Grades of the Northern TCs

62

Page 63: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 63

Page 64: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 64

Oregon railroads and profile

Page 65: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 65

Oregon railroads and profile

Page 66: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 66

Capacity Issues - Oregon

Page 67: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008

PNW Railroad Network

Spokane

Pasco

HinklePortland

Auburn

Everett

Stevens

Stampede

Vancouver

Columbia Gorge

Page 68: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008

Columbia Gorge Network

Page 69: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008

OpenTrack Worksheet

Page 70: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008

BNSF Train Diagram, Existing

Page 71: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008

BNSF Train Diagram, No Build

Page 72: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008

2020 Volumes, Directional Strategies

Page 73: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 73

Economic Regulation

• Defined as –– "control of an industrial activity by

government, in the sense of actions, such as restrictions on firms entering the industry, constraints on firms actually in the industry, or both”

– M. Waterson Regulation of the Firm and Natural Monopoly. Basil Blackwell. Oxford. 1988. pg 2

Page 74: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 74

Economic Regulation

• In an perfect market no regulation needed– A perfect market -- allocation of resources

and goods, prices, level of service all set by competition

• To correct imperfections in the market some type of government intervention is often necessary (i.e. regulation)

Page 75: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 75

Eras of Regulation

• Initiation– 1860-1920– Protection of shippers

• Positive– 1920-1946– Protection of shippers and carriers

• Strict – 1960-1978

• Deregulation– 1979-present– Return to mostly market regulation

Page 76: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 76

Initiation

• Commerce between states (intrastate) relatively small. Commerce mostly water-based

• First railroad to begin operation in the United States – Baltimore and Ohio railroad (1830)

• Railroads are natural monopolies – Require large capital investment, large

infrastructure requirements, and are fundamental to the economy of a nation

– Other examples - utilities such as gas, water, sewer and electrical, telecommunications

Page 77: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 77

Initiation

• “Robber barons” of late 1800’s• Extremely competitive

environment and overbuilding of the system

• Captive shippers could be charged monopoly prices which led to– agricultural “granges”– state laws attempt to regulate RRs

• Public demand for government intervention in railroading practice

NYSE Archives

“Let the public be damned”

Page 78: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 78

Act to Regulate Commerce, 1887

• Required rates be just and reasonable• Rate-making rules

– Outlawed personal discrimination• Different rates for different shippers with same

service and commodity

– Banned preference and prejudice• Different rates based on places, shippers or

commodities

– Banned long and short haul discrimination• Charging more for the shorter haul on the same

route, in the same direction, for the same commodity

Page 79: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 79

Act to Regulate Commerce, 1887

• Eliminated pooling– traffic and revenues shared to prevent

competition• Formed the Interstate Commerce

Commission (ICC)• Required rates be published in a tariff

and filed with the ICC– Known as the “filed rate doctrine”

• However, the ICC was largely ineffective until the passage of the – Elkins Act of 1903 , Hepburn Act in 1906,

Mann-Elkins Act of 1910

Page 80: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 80

Rail Revitalization and Regulatory Reform Act (4-R), 1976

• Provided funds to rehab CONRAIL• Increased flexibility in rate-making• No rate could be too high unless carrier

had “market dominance”• Set the stage for deregulation

Page 81: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 81

Staggers Act, 1980

• Deregulation of railroads• Allowed railroads to negotiate contract

rates (previously not allowed)• Made it easier to abandon low density

lines • Much more flexibility in rate making to

respond to competition• More commodities exempted

– Limited liability rates the norm, full Carmack liability rates available at a premium

Page 82: Freight Transportation and Logistics - Railroads

Civ

il &

Env

ironm

enta

l Eng

inee

ring

–Fr

eigh

t Tra

nspo

rtat

ion

Winter 2008 82

Surface Transportation Board

• The STB serves as both an adjudicatory and a regulatory body.

• The agency has jurisdiction over – railroad rate and service issues and – rail restructuring transactions (mergers, line sales, line

construction, and line abandonments); – certain trucking company, moving van, and non-

contiguous ocean shipping company rate matters; – certain intercity passenger bus company structure,

financial, and operational matters; and – rates and services of certain pipelines not regulated by

the Federal Energy Regulatory Commission.