The crisis in the nation's railroads spread west this summer, carrying a threat of economic dislocations on a scale difficult for easterners to comprehend.
If the bankrupt Milwaukee Road railway system collapses in the next few months, as some fear may happen, the consequences would be far more devastating than the inconveniences suffered when the rickety old commuter lines of the East failed.
More than the survival of a railroad is at stake in the maneuvering to save the system. The fortunes of hundreds of communities in a vast area between Chicago and Seattle are bound up with the Milwaukee, and some might not survive its demise.
Its failure also would be a general blow to landlocked areas that produce coal and grain increasingly crucial to the U.S. economy. The incomes of farmers and the supply lines of coal-burning power companies in the Midwest would be affected.
Here in Montana, the company's plans to abandon all track west of Miles City in the eastern part of the state have revived old fears of railroad monopoly because the plan would leave most of the state served by a single company, Burlington Northern.
"They're ready to raise lynch mobs against us in Montana," acknowledges Tom Phillips, a spokesman for the Chicago-based Milwaukee Road.
The importance of the railroad to local economies is demonstrated Washington to plead for its survival in some form. But the crisis has turned region against region. While Montana's representatives are fighting the abandonment of the western track, Wisconsin and Minnesota politicians support the cutback on grounds that it will provide the savings needed to keep the railroad going in their states.
Under a reorganization plan submitted by the trustee of the bankrupt line Aug. 10, the Milwaukee would cease service on 6,400 miles of its 9,800 miles of track nationwide.Marked for abandonment is the entire western half of the system that now qualifies the Milwaukee as a transcontinental railroad. The move would lop off whole sections through prime coal and wheat country on the eastern slopes of the Rocky Mountains.
The plan's backers, which include the Department of Transportation and the White House, argue that a drastically pared-down system is preferable to a corporate corpse. Service would continue to be provided to such major cities as Chicago, Louisville, Milwaukee, Kansas City, Minneapolis and Duluth.
The railroad is lossing $500,000 a day, and the trustee has warned that money will run out by next month unless the reorganization plan is approved and more loans are forthcoming. Officials of the Interstate Commerce Commission, only slightly more optimistic, said last week that there probably was enough money for the railroad to hold out until Dec. 1. The ICC begins hearings in Butte, Mont., today on the plan.
The Milwaukee Road's financial difficulties are a case study of the ironies of modern railroad economics.
If the Milwaukee goes under, it will do so when demand for many of its services is at peak levels.
As a railroad that hauls Montana coal and far northwest lumber eastward to Midwest cities and carries Midwest grain westward to Pacific ports, the Milwaukee has been under pressure to supply more service. In 1978, the Milwaukee carried 68,681 carloads of grain and 111,253 carloads of coal -- increases of 20.8 percent and 10.2 percent respectively over 1977.
This summer, grain has been piling up on farms in Montana and elsewhere because of difficulties getting railroad service to haul the large crop to markets and ports. Huge harvests and a surging demand for American grain abroad have placed unprecedented demands on the rail transportation system.
Moreover, much of the nation's vast western coal reserve lies in Montana, Wyoming and North Dakota. Some experts here believe the demand for additional coal-hauling capacity is likely to outstrip even the rising requirements of grain shippers. With the coal boom barely under way in the West, they note, Montana's coal production has multiplied 27 times in the last 10 years.
Energy producers such as Montana Power, Wisconsin Power & Light and Pacific Power & Light already have pledged cash to a drive spearheaded by the state of Montana to save the Milwaukee Road lines slated to be cut in the coal fields.
In a speech on the Milwaukee Road issue here last week, Sen. John Melcher (D-Mont.) warned that new coal fields could be crippled by the rail cutbacks. Already, mines holding contracts with Midwest power companies have had trouble keeping up with orders because of shortages of rail transport.
Furthermore, although most of the new coal being mined here is pledged to the Midwest, a second market could open up soon in the Pacific North-west, where sources of hydroelectric power have nearly reached capacity.
In any other business, these conditions would be encouraging signs of future growth. But in the railroad business, they simply compound the problems.
Regulation of rates by the Interstate Commerce Commission has prevented the Milwaukee from raising its rates to accommodate rising demand, say the company's backers. At the same time, they add, union featherbedding has raised labor costs.
The resulting shortage of cash has led to a steady deterioration in the condition of tracks, and in other problems.
By federal order, the Milwaukee's locomotives can proceed no faster than 10 miles an hour over 660 miles of main trunk line because of diapidated track.
Numerous private studies corroborate Milwaukee Road claims that its western sections are inefficient and losing money.
Company officials say that the fatal mistake may have been in 1901, when the directors decided to push west to the Pacific. This created a system strung out through hundreds of miles of desolate country and up against competition from such powerhouses as the then Great Northern. Since 1901, banruptcy proceedings have twice embroiled the line.
The Milwaukee has received $80 million in federal aid since 1970 and now is drawing on revenues from its land company to keep operating. Federal authorities have advised that no more aid will be granted to the far western sections.
Some estimates show requirements "well over" $130 million to rehabilitate the tracks from Minneapolis to the Pacific, and show losses of $168 million a year in the interim.
Studies of financial problems so far have focused more on the railroad than on its customers.
There is as yet no solid evidence, other than vague assurances by government officials, that other rail companies will be able to take up the slack if the Milwaukee shuts down in the wheat and coal country.
Deputy Administrator Robert E. Gallamore of the Federal Railroad Administration said last week he believed that other, financially stronger railroads such as the Burlington Northern and Union Pacific will be able to do the job.
But in testimony before a Senate Commerce subcommittee Friday, Sen. Melcher contended that this capacity was lacking.
Milwaukee Road officials do not deny that their survival plan will cause hardships in some places, but they insist the alternative is collapse with disaster for the entire area served by the system.
"There's no question that some shippers are going to be driven to the wall and may find themselves in a hell of an economic squeeze," said Phillips. "To say our departure won't have an economic impact is ridiculous. But to say it will be catastrophic is equally ridiculous. The basic fact is that a railroad out there is falling apart."
Critics counter that Milwaukee Road officials, in their haste to get rid of two-thirds of their track, have turned their backs on evidence that prosperity is just around the corner.
They note that a study by the Booz Allen & Hamilton consulting firm concluded that a rehabilitated transcontinental system could make money by 1986 under favorable conditions.
Faced with federal backing for the reorganization plan that entails massive cutbacks, however, state governments have been trying to work out their own separate deals with bankruptcy trustee Richard Ogilvie in Chicago.
For example, in return for aid commitments from Iowa, the railroad has agreed to continue service on a grain-handling line between western Iowa and the Mississippi River, from Sheldon to Marquette. However, the fate of this track still is clouded because the railroad has refused to include it in the proposed new system.
At the same time, the Milwaukee is still trying to cancel service in Iowa from Spencer to Herndon, on a line that the state government already has spent $1.6 million to repair and improve.
"It's possible we've granted aid to a railroad that's about to go out of existence," said Less Holland, director of the railroad division of the Iowa Department of Transportation.
Officials in Iowa and other states hope that, ultimately, other railroads will purchase or lease some of the lines that the Milwaukee is dropping. But that is little comfort to Milwaukee customers today.