Escalation Consultants has been Reducing and Controlling Rail Expenses for over 30 years!

Past Projects

Results of Railroad Negotiations

Determine the Railroad's Cost Savings from Capital Investment

Estimated the cost savings railroads would receive as a result of a capital investment in joint facility by a consortium of shippers that would enable the carriers to avoid one or two switches during the return trip of the empty cars to their origins. The analysis was used to determine the expected savings attributable to the project due to gains in efficiency.

Negotiated Lower Rates to a Captive Plant

Determined the transportation expenses associated with a major transload operation that would allow a Client to avoid the railroad serving its plant at a captive location. Obtained competitive rates from other carriers to serve receivers and determined the total savings to the Client if the transload operation was implemented. Analyzed the railroad's cost of movements in order to determine the profits that would be lost by the rail carrier. Used the results of the economic analysis, along with input from other disciplines within the company to negotiate reduced freight rates with the current rail carrier.

Site Location Study and Rate Negotiation Assistance

Found alternative site locations for a new chemical plant. Evaluated transportation logistics at each site in order to determine the optimal site regarding transportation flexibility and expenses. The evaluation included an analysis of offsetting incentives for industrial development offered by cities, counties, states and shortline railroads as well as expenses for labor, utilities and taxes. Assisted Client in rate negotiations with the existing and alternate rail carriers as well as in negotiations for: railroad incentives, switching fees, storage fees, gateway rates, service issues, leasing and land availability.

Used Market Evaluation and Railroad Profitability Study to Help Lower Rail Rates

Determined the market share for rail shippers of a commodity into the Texas market. Determined the rates and the rail carriers' profits on each shipper's movements into Texas. Found opportunities for Client to negotiate lower rail rates by increasing volumes on its railroads. Study supported win/win opportunities with Client and its railroads.

Expert Testimony on PRB Coal Rail Movements

Escalation Consultants, Inc. was retained to provide expert testimony on the market price of Powder River Basin (PRB) coal movements to Texas power plants. To support testimony the rail rates for all coal movements originating in the PRB and terminating in Texas were determined. The range of rail rates being obtained by plants with and without competitive options was used to support market price for a specific plant. Rail rates were determined over time to show the degree to which they have been increasing or decreasing at specific power plants to support rate projections.

Controlling Railroad Fuel Surcharges

Escalation Consultants was retained by major associations and by individual shippers to determine if railroads are over-recovering their fuel costs through their fuel surcharge practices. Major railroad's actual fuel cost were analyzed in relation to the revenue generated from their fuel surcharge practices. The analysis showed the railroads which had the largest and smallest over-recovery of fuel cost. The analysis was used for lobbying efforts on Capitol Hill and to support fuel surcharge negotiations with railroads.

Develop Rail Cost Reduction Strategy

Escalation Consultants was retained to analyze competitors' rail rates into all of Client's markets and help formulate a negotiation strategy to improve ClientÕs competitive position. In markets where Client is disadvantaged we determined the capital investment and change in operations needed to improve its competitive position. Markets were prioritized in terms of capital support and potential benefit. A negotiation strategy was developed to reduce rates to accomplish the goals of our Client.

Negotiated Reduced Rail Rates for Client

Assisted rail shipper in reducing rates by 20%. Developed a workable negotiation strategy, which included input from various disciplines within Client's organization, as well as, input from alternative railroads and alternate methods of transportation. Organized all phases of the negotiation and participated in all communications between Client and railroad, including settlement proposals.

Strategic Planning for Coal Burning Power Plant

To help our Client prosper in a deregulated utility industry, Escalation Consultants helped to implement a risk management plan that puts downward pressure on Client's delivered cost of coal. We performed a current and projected benchmark analysis to determine where our Client's delivered cost of coal will need to be over the next five years. The results of the analysis were presented to top management, including the president.

We assisted in developing and implementing a strategic plan designed to achieve the required delivered cost of coal and participated in negotiations to help obtain contracts with significant pricing, quality, term, and tonnage flexibility. Escalation Consultants helped develop contracts, which put downward pressure on the delivered cost of coal while providing cost effective risk management over the long term.

Results of Railroad Negotiations

Captive Movements Reduced $2.50/Ton:

Showed the impact of the current rate structure on volumes and competition in the marketplace.

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  • Rates reduced $2.50 to $3.00 per ton.
  • This is the first time this company has ever received a rate reduction from railroad on captive movements.

Rates at Captive Plant Reduced 40% in Client's Major Market

Determined the cost of importing the client's product to a tank farm and demonstrated that this business would never touch the railroads system.

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  • Reduced rates for a captive plant that was the only producer of this product on the railroad's system.
  • Signed long-term contract with more than a 40% reduction in rates.

Eliminated Fuel Surcharge

Provided rates needed for the railroad to obtain clients competitive business

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  • The railroad captured the competitive traffic by providing competitive rates and discontinuing its fuel surcharge.
  • Amounted to more than a 20% reduction from current rail costs.

Rate Increase Pulled Back on Captive Movements

Railroad proposed a large rate increase on captive movements which already had high rates.

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  • Railroad pulled back its rate increase and signed a multi year contract.

Railroad Increased the Fuel Surcharge Strike Price with No Increase in Rates

An analysis of the profit structure for all of the company's movements on each railroad was performed to show a railroad, whose contracts were expiring, that it was pricing its movements above its competitors on captive and competitive movements.

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  • The railroad increased the strike price for fuel surcharges without increasing the rates for movements.
  • This substantially reduced the current rail costs for movements.

Captive Movements Reduced. But Not Enough

Showed the railroad that it was putting movements, at a captive plant, at a competitive disadvantage.

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  • Railroad came back with lower rates, but the transportation cost savings at a new plant were so great that the new plant was built anyway.
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