Bacon's Rebellion

Democracy Thrives in Sunlight

WARREN’S “ALL IN” BET

—

by

James A. Bacon
in

THERE IS A LOT OF TALK ABOUT WARREN BUFFETT’S BIG BET ON BNSF AND THE FUTURE OF THE US OF A.

What is MUCH more important is what he DID NOT bet on:

Warren DID NOT bet on Autonomobiles – and there are a lot of them for sale.

Warren DID NOT bet on Airlines – and all of them are hurting.

Autonomobiles and Airlines are hurting and transcontinental rail has potential for the reasons EMR spells out in TIMBERFENCE TRUTH OR CONSEQUENCES.

Perhaps Warren has seen the light at the end of the tunnel?

EMR grew up 200 feet from the main line of the northernmost of the three transcontinental routes that Warren now controls – The Great Northern, one of the two reasons for the “N” in BNSF.

When in the seventh grade, the strawberries EMR picked by 2 PM in the Northern Rocky Mountain Urban Support Region rode those rails and were on Minneapolis – St. Paul New Urban Region (nee Minneapolis – St. Paul Industrial Center in the early 50s) in time to put on breakfast tables while they were still fresh.

Just-in-time delivery is not the exclusive province of airplanes and trucks.

Now if:

Warren turns his attention to the settlement patterns in the BNSF terminal areas, and

Works to evolve multi-functional transfer points near the Clear Edges around the Core of New Urban Regions that provide across the platform transfer of GOODS from transcontinental rail to shared-vehicle systems,

And that system delivers GOODS at night to Community and Village scale distribution centers,

We will know Warren has seen the light at the end of the tunnel.

EMR

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17 responses to “WARREN’S “ALL IN” BET”

  1. Anonymous Avatar
    Anonymous

    Warren is betting that his trains will haul a lot of coal to the new powerplants we will need, and to the western coal export markets.

    RH

  2. Scott Avatar
    Scott

    Many environmentalists, including myself, are worried that this is a bet on more dirty coal. At the same time, I do believe railroads are due for some love as the post suggests. I am kicking myself for not following my intuition and buying BNI a month ago. Oh well, I still have my CSX stock. And I will keep urging them to get off dirty coal also, no matter my profit line. I am a pragmatic Green.

  3. Gooze Views Avatar
    Gooze Views

    FYI,
    Coal shippers call BN "The Boogeyman of the Rails."

    Peter Galuszka

  4. Anonymous Avatar
    Anonymous

    If the economy comes back, the first thing it will need is energy to do work with.

    RH

  5. Anonymous Avatar
    Anonymous

    Good for you, Scott.

    I keep trying to explain that the only true green is pragmatic green. There is nothing green about wasting money, which represents resources, and so we need to be pragmatic about being green.

    If you paint your house green and then you paint it gereen again, you ae not any more green, you just wasted money and resources that might have been better used.

    RH

  6. E M Risse Avatar
    E M Risse

    "FYI,

    "Coal shippers call BN "The Boogeyman of the Rails."

    "Peter Galuszka"

    Peter:

    You have me here. Do you mean BNSF or the old BN (Burlington Northern)?

    Which ever it is what does "Boogeyman" mean in this context. Pro coal shipping? Bends the rules to thwart coal shipping?

    We know you are close to the railroad folks so your insight would be very useful, unincripted.

    Is not western coal low in sulpher?

    Is there evidence that Buffett is trying to get in on the 'clean coal' gravy trian? Pun intended.

    Burning coal cleanly and close to the electric and heat energy demand to cut line lose and waste may well be part of the big picture, right?

    EMR

  7. Gooze Views Avatar
    Gooze Views

    EMR,
    Sorry about being unclear. It's the old BN and it refers to shipments from the Powder River Basin in Wyoming. BN had a stranglehold on shipping coal from there until CHicago & Northwestern was able to use some Union Pacific lines and offer competition.
    I went on the gala train ride through Nebraska on an old business car with the gate at the back filled with investment bankers from New York who were drunk by 10 a.m. The chefs served up some of the best food I ever tasted from a tiny kitchen.
    PG

  8. Anonymous Avatar
    Anonymous

    Economist consider that western coal development should be promoted as long as the benefits exceed the costs. Total Costs being mining costs including envirnmental mitigation measures, plus the costs of damage that could not be avoided, plus shipping costs, plus the costs of government regulation and inspection.

    TC = PC + EC + GC

    Environmentalists saw large scale shipments from the west differently: why should one region accept environmental damage for the benefit of another?

    The Carter administration held the view that overall economic impacts were most favorable when coal production and development takes place near the consuming markets. This meant developing eastern markets in spite of the demand for western coal. This demand was caused by the fact that the cost of shipping was less than the cost of sulfur removal.

    The solution adopted was to require scrubbers on all units regardless of their ability or willingness to burn low sulfur coal. The result was to require the installation of costly scubbers to remove sulfur from coal that ha very ltittle to begin with, which is an affront to economic rationality AND the environmental ethic. After that things got very complicated with lawsuits and counter lawsuits concerning leasing rights to western coal and scrubber requirements for eastern coal, with the overall result that any sort of progress was delayed for many years.

    Maybe Buffet's move is based partly on resolution of some of those issues.

    RH

  9. Anonymous Avatar
    Anonymous

    I could be mistaken but I seem to recall that Western coal has more radioactivity than eastern coal.

    RH

  10. Anonymous Avatar
    Anonymous

    Anyone else hear that new single family houses are dead in California and that 30 units per acre are now the requirement for new development?

  11. RBV Avatar
    RBV

    I have a family member who is "Train Crazy" and he informed me that Buffet's bet is on moving raw materials (coal, timber etc), to the ports on the West Coast for shipment to Asia.

    The trains will return to the Eastern US with finished goods from Asia.

    I also found this quote interesting;

    "Economist Erik Reinert, in his book "How Rich Countries Got Rich and Why Poor Countries Stay Poor" pointed out that countries get rich as they turn away from raw material and commodity production to manufacturing, and countries that lose their manufacturing base become poor over time. Buffet's deal may not be a bet on America as much as it is a bet on the growing prominence and perhaps predominance of Asia over the US in time."

    Scary thought.

  12. E M Risse Avatar
    E M Risse

    Peter:

    Thank you for the clarification.

    BNSF now includes the old UP but I recall hearing of a new rail line being built to also get to the Powder River Baisn.

    This is all very complex BUT there is light at the end of the tunnel.

    I still wonder if Buffet sees that light or is this just more 19th century monopoly games?

    EMR

  13. Gooze Views Avatar
    Gooze Views

    EMR,
    FYI, BNSF does NOT include the old Union Pacific. The latter merged with Southern Pacific years ago and competes directly with BNSF in the West. The two western roads are BNSF and Union Pacific and the two eastern ones are CSX and Norfolk Southern.
    The line I am talking about was built in the mid-1980s and I covered it when I was working for McGraw-Hill in Chicago. The old C&NW built a line from roughly the UP hub at North Platte, Neb. west to southeastern WYoming and up to Powder River. That broke BN's monopoloy on Powder Riover shipments.
    PG

  14. E M Risse Avatar
    E M Risse

    Peter:

    Thank you again for the further clarification.

    As EMR said before: “This is all very complex”

    EMR foolishly relied on a MainStream Media map (the WaPo map with the Buffet story) and jumped to the wrong conclusions. Sorry.

    EMR said: “BNSF now includes the old UP…”

    And Peter said: “FYI, BNSF does NOT include the old Union Pacific. The latter merged with Southern Pacific years ago and competes directly with BNSF in the West. The two western roads are BNSF and Union Pacific and the two eastern ones are CSX and Norfolk Southern.”

    You are absolutely right, to a point. When you print out all the system maps from BNSF and from UP what you find is that with trackage rights and joint ownership – the Powder River Division for example – it is ALMOST true that BNSF does includes the old UP and the New UP includes BNSF.

    You said: “The line I am talking about was built in the mid-1980s and I covered it when I was working for McGraw-Hill in Chicago. The old C&NW built a line from roughly the UP hub at North Platte, Neb. west to southeastern Wyoming and up to Powder River. That broke BN's monopoly on Powder River shipments.”

    As far as I can tell – but may be wrong – during the mergers and consolidations parts that line became jointly owned / covered by trackage rights so both railroads claim it as part of their system.

    From a competition standpoint, this all seems like a good idea. There are two railroads that can offer service almost everywhere there used to be only one. For example GN or NP or Burlington Road in many parts of Montana.

    But then you see that the justice department is investigating both BNSF and UP for fixing prices for Powder River Basin coal…

    I also said: “I recall hearing of a new rail line being built to also get to the Powder River Basin.”

    Turns out that is the Dakota, Minnesota and Eastern (DM&E) a division of the Canadian Pacific. According to a September 2009 update, they are still planning to expand into Wyoming and the Power River.

    So it turns out there are three railroads west of the Mississippi with DM&E serving eight states…

    All this and neither one of us ever went to journalism school.

    The details are interesting and complicated BUT there STILL is light at the end of the tunnel and EMR STILL wonders if Buffet sees that light or is this just more 19th century monopoly games?

    EMR

  15. E M Risse Avatar
    E M Risse

    EMR said:

    "From a competition standpoint, this all seems like a good idea. There are two railroads that can offer service almost everywhere there used to be only one. For example GN or NP or Burlington Road in many parts of Montana."

    Wrong Again!

    EMR has given this further thought and for much of Montana there is still only one railroad option.

    That is the problem in Urban Support Regions unless the SubRegion happens to already have more than one railroad and government controls of mergers requires competition.

    Someone said this topic is complex.

    Peter:

    EMR got a call from JMK.

    He did not post a story assignment, he just wants a list with asterisks.

    He has bonifide journalism skills but works for a MainStream Media newspaper (aka, owned by an Enterprise) that hires editors that think Bethesda and Arlington are "suburbs."

    He wants out but cannot find the sort of media outlet that you say exists.

    If he uses his name in his posts he will get fired and not be able to support his aging mother, wife and three children. (His wife was fired by MainStream Media TV outlet and also cannot find a job.)

    Please help if you can.

    EMR

  16. E M Risse Avatar
    E M Risse

    Oh yes, JMK's editors own stock in the Enterprise and part of their compensation package is stock options.

    EMR

  17. Anonymous Avatar
    Anonymous

    "JMK's editors own stock in the Enterprise and part of their compensation package is stock options."

    I imagine they have good incentive to find the short term profits needed to keep it going until the long term profits arrive.

    RH

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