Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


Colorado Hyperloop Plan would not pay for itself

Colorado’s Hyperloop scheme; one of the finalists in Hyperloop One’s Global Challenge, would not generate enough money to pay for itself.

The Rocky Mountain Hyperloop would cost $24 billion to build but only generate $2 billion in revenues a year, The Denver Post concluded. The system might add around $25 billion to Colorado’s economy and carry 45 million passengers.

That conclusion was based on a report put together by the Colorado Department of Transportation (CDOT), Denver International Airport (DIA), AECOM (NYSE: AECOM), the City and County of Denver, and the City of Greeley, Colorado. Disturbingly, the report might grossly underestimate the true cost of the Rocky Mountain Hyperloop scheme?

Colorado Hyperloop Might Cost Far More than $24 Billion

There is very good reason to believe that the Rocky Mountain Hyperloop would cost far more than $24 billion. The planned system includes a line from Denver to Vail that would run along I-70, which would presumably require a tunnel under Loveland Pass.

The existing Eisenhower Tunnel under Loveland Pass cost $261.8 million to build in the 1970s, that works out to $941.10 million in 2017 dollars. Obviously, inflation is not going to stop, so just the cost of the tunnel may exceed $1 billion.

Note: the tunnel cost might be far higher, it if is longer. There’s little room in Clear Creek Canyon; where Interstate 70 runs, so the Hyperloop tunnel might have to be over 20 miles long, beginning perhaps at Idaho Springs. That would raise the tunnel costs to several billion dollars.

How would Rocky Mountain Hyperloop Pay for Itself?

The revenue estimates obtained by The Post are also extremely questionable. It claims the Rocky Mountain Hyperloop would add $25 billion to Colorado’s economy from the ability to transfer freight between cities.

That is questionable because there is not enough industry along Rocky Mountain Hyperloop’s proposed routes to generate that much freight. The first route runs from the college town of Greeley; where there is little industry beyond meatpacking, to DIA. What freight would move along that route?

How much freight would really move between empty and abandoned steel mills in Pueblo and brewpubs and software companies in Denver? How much freight will move between Denver and the ski and golf resorts in Vail? The idea that this system would move $25 billion worth of freight seems absurd.

The industry to generate enough freight to support the system simply does not exist in Colorado. The only way to get that much freight would be to extend the Hyperloop to other states and cities.

A Smarter Alternative to Rocky Mountain Hyperloop

A better alternative was the plan proposed by the Rocky Mountain Hyperloop Consortium (no relation to Rocky Mountain Hyperloop); which included a route from Cheyenne to Houston, a major port.

That system might pay for itself by moving grain and corn from the Great Plains, coal from Wyoming’s Powder River Basin, and meat from packing plants in Colorado and Kansas for export form Houston. It would also connect Denver to major metro areas such as Dallas-Fort Worth, Austin, San Antonio, and potentially Laredo.

Another obvious route that might pay for itself would be to extend the Hyperloop from Pueblo south to El Paso, and from there to Guadalajara, Mexico City, and Mexican Ports. Other smart routes would follow I-70 all the way east to Baltimore (a major port), and West to I-15 in Utah where it would connect to a route to Las Vegas, Barstow, San Bernardino, Riverside, Los Angeles, and San Diego. Los Angeles is America’s largest port.

Such routes; as well as a connection to Chicago, New York, and the San Francisco Bay area along I-80, would attract tens of millions of passengers. Unlike Rocky Mountain Hyperloop these long-distance lines would pay for themselves by moving tremendous numbers of passengers and vast amounts of freight.

Unrealistic Hyperloop Planning

It is time for realistic Hyperloop planning in Colorado. In particular, planning that takes advantage of existing resources such as the unused railroad line in Colorado’s Arkansas Valley. That line includes an existing unused tunnel under Independence Pass and runs close to Vail.

The planned lines should also run through heavily populated communities; not empty farmland like the Greeley to DIA route. Such schemes would only benefit real estate developers and speculators at the expense of existing residents.

It looks as if real-estate speculators are planning to use the fascinating new technology called Hyperloop to line their pockets at taxpayers’ expense. Hyperloop One and CDOT need to distance itself from Rocky Mountain Hyperloop and find some better partners.