Questions about the economics of railroad cars...

Factual Questions
1

A recent thread about brakes on trains made me realize that we have several railroaders here. Soooooo, I thought I’d asked a couple of questions I have had about trains.

How do train cars make money? It seems that the name on the side has no relationship to the railroad that owns the tracks. Train cars clearly cross onto other railroads regularly. Does one railroad pay the other railroad for hauling their stuff? What about pool cars like RailBox? Who maintains the cars? Who pays if they’re in an accident?

A coal unit train comes through my town every day. All of the cars are identical. Some of the cars are marked as belonging to the power company receiving the coal. The other cars are marked as belonging to UP. Since the train is always going from the same place (a coal mine in Wyoming) to the same destination (power plant in Central Texas), why would the cars be mixed up like that? Shouldn’t they all belong to the power company? (Yes, the empty train then makes the return trip. In fact, these trains have locomotives on both ends. They don’t even have to turn the train.)

If I owned a business next to a rail line, how would I get the railroad to stop and pick up stuff? How do I get them to set out and pick up cars on my siding? Heck, how do I get them to build a siding for me? If I wanted to ship a large quantity of stuff by freight car, how do I do it?

Thanks for your patience and I am looking forward to a wonderful conversation about trains.

2

I can’t give you a US answer, but I hope an Australian one will do until some of your local railroaders drop by…

It’s complicated. Very complicated. It never used to be though. In the old days, we simply had “the railways”. They were government owned, tracks, locomotives, cars, the lot. You just rang them up and got a price to ship your stuff. These days though… Oy.

The industry has been privatised and deregulated to represent something like an American (or more likely, maybe British) model. The state government sold everything off - including selling some parts to itself. The tracks are now owned in some areas by a body called Railcorp (State government owned) and in outlying areas by ARTC (Australian Rail Track Corporation) (Federal government owned). So the tracks are still government owned, but it’s done through companies they’ve set up.

Next come the trains. The passenger services have experienced a similar thing to the tracks, with Railcorp (that owns part of the tracks) setting up second companies called Cityrail (Sydney commuter) and Countrylink (intercity and regional). These “accredited operators” pay Railcorp to run on its lines - so effectively, the government has set up a front company which has set up another front company in turn, and they all pay one another, and the accountants stay in a job.

Now to the freight trains - the only truly private ones. The government sold off all its freight business in the 90s, and the big logistics companies moved in. In the most simple form of this model, the freight company applies to become an “accredited operator”, then buys a whole bunch of locomotives and cars, employs train crew, and away they go, paying Railcorp for “paths” on their tracks. Some of the bigger ones did just this. More commonly though, the smaller ones got their accreditation sorted out, then needed to rustle up the money to buy locomotives and rolling stock, found they couldn’t afford it, so they lease them from third parties.

In an example of complexity, lets say QRN (a freight company) receives a sudden big contract to move a few thou tons of wheat. It doesn’t have any spare rolling stock or locomotives, so it hires a train from its competitor, Pacific National. Pacific National supplies the train, but is itself running low on rolling stock in that particular area on that particular day, so some of the wagons or locomotives might in turn have been hired by Chicago Freight Car Leasing Australia. As new companies are constantly emerging, and old ones being swallowed up in mergers, or going bankrupt, the paintwork on the sides of any given wagon could be anything (the signwriters can’t keep up). You might even see old FreightCorp logos from the nationalised days mixed in with CFCLA ones, with Pacific National, etc.

So Company A runs a train, but to them it’s only a paper train, as in it’s a scheduled run. The physical train is provided by Company B, with cars leased from Companies C through G, running on tracks owned by companies H and I.

In short, it’s a mess.

As for setting up shop by the side of a railway line and wanting to ship goods, you can forget it (in Australia at least). Unless you are shipping bulk commodities (coal, wheat, cement, etc), everything is done with intermodal trains these days. The old “mixed goods” trains that used to travel slowly, stopping off at little sidings like “Joe’s Dog Biscuit Factory” to add one or two cars here and there, are gone. The sidings have been pulled up. If you want to ship by rail, you will need to truck your stuff to a container facility, of which there might only be one or two in the city. I’d hazard a guess that most manufacturers etc don’t even know whether their shipment is going by road or rail for most of its journey. All they care about is the transport company delivers as promised, and how it gets there is up to them.

3

[QUOTE=Drum God]

How do train cars make money? It seems that the name on the side has no relationship to the railroad that owns the tracks. Train cars clearly cross onto other railroads regularly. Does one railroad pay the other railroad for hauling their stuff? What about pool cars like RailBox? Who maintains the cars? Who pays if they’re in an accident?
[/quote]

That’s a bit complex. In some cases, the name on the side of the railroad is what we’d call a “Fallen Flag,” a railroad that (generally) was swallowed up by a merger. So, on UP for example, all of the cars marked SP or Southern Pacific are owned by Union Pacific. Same goes for MoPac, Texas & Pacific, Chicago & Northwestern, and a whole host of others. All those are UP’s now.

In other cases, one sees a UP car on a BNSF train. It could be that the train started as a UP train and was given only a new set of BNSF locomotives when it changed into their territory: sometimes breaking up a train to build a new one isn’t practical. Or, it could be that the UP car has been on the BNSF system for a while. BNSF might have bought it and not yet repainted, or (most likely) there is a BNSF car on a UP train somewhere. Lots of times it works like a trade…or, to be a little more accurate, and interlibrary loan.

Maintaining the cars is also a complex story. Heavy stuff is expected to be done by whoever owns the car. For example, Texas Eastman chemical company in Longview owns a bunch of tanker cars that transport its products across the country. At the plant there is a facility to clean, repair, rebuild, and otherwise maintain the cars as they come in. Now, let’s say one of Eastman’s cars develops a hot axle somewhere far away. That would trip a hotbox detector and the train would have to stop. That car would be set out at the next available siding/spur. In most cases, a railroad employee would come to that siding and repair it, or get it to a shop facility. As far as I know, Eastman would be billed for the work done on their car. The rate would likely be higher than if they fixed it themselves, and so it provides some incentive to keep the car in good shape at their plant.

The pool companies, I’m sure, have a similar arrangement. If they don’t have their own repair facilities, the railroad would do it and probably bill it out. As far as an accident goes, the loss of the car would affect its owner. If it derailed because of a railroad employee mistake, or poor track or something of that nature, I’m sure there’d be a court date. Cars are fairly expensive.

[QUOTE=Drum God]

A coal unit train comes through my town every day. All of the cars are identical. Some of the cars are marked as belonging to the power company receiving the coal. The other cars are marked as belonging to UP. Since the train is always going from the same place (a coal mine in Wyoming) to the same destination (power plant in Central Texas), why would the cars be mixed up like that? Shouldn’t they all belong to the power company? (Yes, the empty train then makes the return trip. In fact, these trains have locomotives on both ends. They don’t even have to turn the train.)

[/QUOTE]

The power plant may not have enough of its own cars to fit the demand. Leasing railroad cars, in the long run, will be more expensive than having their own, but it’s not a huge deal to mix them up like that.

Interesting tidbit of trivia…the locomotives on both ends isn’t so much so that they don’t have to turn the train (moving the lead set around the train to the other end doesn’t take much time) but is rather because of the tonnage involved in the loaded train’s journey. In the old days, the one at the end would be a “pusher” or “helper” and would have a crew. Nowadays, they’re called DPUs (distributed power units) and work via radio, pushing from the back. Sometimes you’ll see DPUs cut in the middle of the train as well.

[QUOTE=Drum God]

If I owned a business next to a rail line, how would I get the railroad to stop and pick up stuff? How do I get them to set out and pick up cars on my siding? Heck, how do I get them to build a siding for me? If I wanted to ship a large quantity of stuff by freight car, how do I do it?

Thanks for your patience and I am looking forward to a wonderful conversation about trains.
[/QUOTE]

The railroad has a customer service department where you could set up your pickups and deliveries. You’d call and talk to the person in charge of your particular region, figure out the frequency of pickups/deliveries, and they’d tack your order onto whatever local train serves that area. Not sure how easy it’d be to negotiate rates, but I’m sure it’s just like anything else; it depends on competition and such.

The railroad isn’t likely to build you a siding. If you want one, you’d be responsible for the cost. Here in Jefferson, we just got a railcar repair facility (an independant one that contracts the work from the cars’ owners.) The city of Jefferson kicked in some money, and the new repair place covered most of the rest. I don’t remember if the railroad paid any percentage (I think they did, a little) but regardless, the majority of the cost was on the business. Offhand I think the switch and siding cost them about $250,000.

If you made your patented Drum God Widgets ™ and wanted to ship them, in bulk, to me…you’d buy/lease a boxcar. When it was dropped off on your new 250K siding, you’d have your employees load it with widgets, then schedule a pickup. A local train would lumber along (probably in the dead of night sometime) and grab it. The RR would know where it was going, so they’d put it in a yard and have it attached to a train headed my way. When that train got to the Longview yard, it’d be pulled off and attached to the local train that comes to Jefferson, where it’d be dropped off at my 250k siding. My guys would unload the widgets and the good old UP would come get the car again, and put it on a train back to your siding.
Disclaimer
While I am a railroader, the whole topic of railcars is, even today, a strange and arcane art form. I do not work in the car department, nor do I have access to the computer list of cars. I’m going purely on experience and inference, plus what little I can recall from Trains magazine articles of years past. :slight_smile:

4

Can a lone investor purchase a rail car and lease it out, or is that only for the big freight companies? I always thought it would be a nice investment to compliment my real estate holdings. "Why, I rent out several apartments. Oh, and rail cars. :wink: "

5

Union Tank Car, makes, leases and manages (maintanence) a fleet of 80,000 cars (covered and tanker) for various railroads. There is software to track and manage the cars, track charges, demand/load, etc. Name it. Complicated, half science and half art.

One big gigantic jigsaw puzzle.

6

[QUOTE=Drum God]
How do train cars make money? It seems that the name on the side has no relationship to the railroad that owns the tracks. Train cars clearly cross onto other railroads regularly. Does one railroad pay the other railroad for hauling their stuff? What about pool cars like RailBox? Who maintains the cars? Who pays if they’re in an accident?
[/QUOTE]
I can’t speak for all railroads, but I was able to find this page from the Canadian National Railway, which operates trains in both Canada and the US. It contains links to a number of things of interest to owners of private railcars: tariffs for various services, fuel charges, costs for car movement, etc. Anyway, this page and the others you can link to from it may provide some answers to your above questions.

7

[QUOTE=Philster]
Union Tank Car, makes, leases and manages (maintanence) a fleet of 80,000 cars (covered and tanker) for various railroads. There is software to track and manage the cars, track charges, demand/load, etc. Name it. Complicated, half science and half art.

One big gigantic jigsaw puzzle.
[/QUOTE]

Definitely true. One point I’d like to make is that the system is no less messy under government control than otherwise. Even if the clashes, conflicts, and messes are less discreet, it ultimately makes little difference to the consumer whether or not the cars in a train are all owned by the same company or government.

8

[QUOTE=Drum God]
How do train cars make money? It seems that the name on the side has no relationship to the railroad that owns the tracks. Train cars clearly cross onto other railroads regularly. Does one railroad pay the other railroad for hauling their stuff?
[/QUOTE]
I’ve worked for a railroad in computer software, and know about this (even though I wasn’t working on that system).

Every rail car has an assigned serial number. There is a joint system that all the railroads participate in. Every night, each railroad submits a computer file listing the serial number and location for every single railcar that is sitting anywhere on that railroads tracks. These are all combined, and used to calculate who owes who rent. So if a UP car is sitting on BNSF tracks that night, BNSF owes UP 1 days-worth of rent for that car.

There is a great incentive to get these reports in, because you don’t get paid otherwise! And an incentive to keep track of cars, and get them back to their owner as soon as possible. The deadline is midnight, I think, and we heard stories about crews frantically moving cars around just before midnight, to get them across the line onto the owners’ trackage before the reporting deadline.

I believe there are provisions for ‘retroactive’ rent, if a car is lost for a while and then located. All that time it was ‘lost’, sitting unnoticed on a siding in your yard, you will have to continue paying rent on it. (And it might even be at a higher rate for that time when it was unreported.) But you have no additional income from it, your fee was for hauling it originally. You might even get complaints from a customer who is waiting for it, of from the customer who has this empty car sitting around on their siding.

9

I’ll add that very few utilities own enough coal cars to supply their own plants, and a large number of utilities only own a tiny number of cars, sometimes for unusual reasons. A coal unit train in the US is between 90 to 120 cars long, and some plants might need as many as 5-7 trains per week to run. If you count the logistics involved of a round-trip to the PRB, you might end up with an enormous number of cars that have to be owned. Also, owning the cars means you have to perform maintenance and inspections on them, keeping that staff and facilities, spare parts, etc. With utilities trying to slim down every year, there’s not a single one I know looking to buy coal cars. In fact, even when studies I’ve done have shown that they would save money owning their own cars, they never want to do it.

10

Thanks to everyone who has replied. I have especially enjoyed browsing Canadian National’s pages that describe how to get something shipped and how much it will cost. That charge of $500 an hour to wait to be unloaded would sure motivate me to get things moving. Talk about time being money.

Moving all these train cars around sounds to me like how the internet must work. You’ve got a packed of information and it needs to go to its destination. You choose a route, check it along the way, and get confirmation that it was received at the destination. Whether you’re talking a bit of information or freight car of widgits, it’s all the same. T-bonham’s inventory of every car every night must be an amazingly huge undertaking.

According to this page, the local power utility has more than 1500 railcars transporting coal from Wyoming to Texas. I’ve been told that it takes one trainload per day to keep the power plant running. That’s a mountain of coal.

11

[QUOTE=Drum God]
According to this page, the local power utility has more than 1500 railcars transporting coal from Wyoming to Texas. I’ve been told that it takes one trainload per day to keep the power plant running. That’s a mountain of coal.
[/QUOTE]
When I worked there, Burlington Northern (pre-BNSF merger), about 20% of BN’s traffic was to a single customer: running coal trains from the Powder River Basin in Wyoming to Detroit Edison. BN ran 3-4 unit trains of about 100 cars each out of Powder River every single day; about 3/4ths of them went to Detroit Edison.

12

[QUOTE=Drum God]
Moving all these train cars around sounds to me like how the internet must work. You’ve got a packed of information and it needs to go to its destination. You choose a route, check it along the way, and get confirmation that it was received at the destination. Whether you’re talking a bit of information or freight car of widgits, it’s all the same. T-bonham’s inventory of every car every night must be an amazingly huge undertaking.
[/QUOTE]

You’ll be interested in The 20-Ton Packet, a Wired magazine article from several years ago that describes containerized shipping as a packet switched network.

13

A simpler answer as to why you see (for example) UP cars on a BNSF train - it’s cheaper to do it that way than to unload each car and reload it onto the ‘host’ railroad’s car. Same thing with through power on coal trains.

Oh, and even though the trains have locomotives at both ends, chances are good that they still turn the train around. Many of the coal mines and power plants have what are known as ‘balloon tracks’ where the trains are loaded and unloaded - trains go in one end, and when they come out the other they just head back to the mine. The dual-ended power, or ‘distributed power,’ helps run the trains more efficiently.

Good source of info on the running of the Powder River coal trains is in the book Uncommon Carriers by John McPhee