Freight Lifting

Investing in rail infrastructure is vital for the continued health of the nation. By Edward R. Hamberger, President and CEO, Association of American Railroads

America’s freight rail system provides the world’s most efficient, cost-effective freight rail network. It is vital to the economic health of the American economy and keeps US companies competitive in world markets, providing some 43 percent of the nation’s freight transportation, based on ton-miles, more than any other mode.

The US rail freight network is almost entirely privately-owned. This means that rail companies must build and maintain tracks, rights-of-way and signal control systems themselves. They also pay state and local property taxes on their infrastructure, some $600 million in 2007 alone. From 1980 through 2007, freight railroads invested approximately $420 billion – more than 40 cents out of every revenue dollar – to maintain, renew, and expand track and equipment.

Freight railroads play a vital role in the US economy and they do it safely. From 1980 to 2007, the last full year for which data is available, railroads have reduced the overall train accident rate by 71 percent and the employee casualty rate by 80 percent, with 2007 being a record year in terms of overall safety. Today, railroads have lower employee injury rates than most other modes of transportation and most other major industry groups – including agriculture, construction, manufacturing, and even some types of retail activity.

Freight railroads provide the nation's only privately funded transportation system, operating a 140,000-mile network. This requires vast amounts of private investment. To operate, maintain and expand their infrastructure, the two largest railroads spend more than the State of New York and almost as much as California do on their highway systems. Other modes of transportation rely on government funding to support their infrastructure. The ability of railroads to fund this private investment is a tremendous asset and benefit to our country.

If railroads couldn't do this, the government might have to find the billions of dollars necessary to fund the rail network, much as it already funds highways and inland waterways. Otherwise it would have to spend vastly more on highways to handle the business railroads carry, thereby forcing an even heavier burden on taxpayers.

Today's transportation infrastructure is not adequate to meet tomorrow's needs, and that is true across all modes of transportation. Before the onslaught of the recession, congestion was becoming a growing concern on the railroads, on the highways, in ports and in aviation. Economic growth is expected to double the demand for freight transportation by 2035. But that growth could be stunted unless we expand our transportation network to handle it.

For railroads, the need to expand is acute. A 2007 study by Cambridge Systematics concluded that to meet the nation’s projected need for freight rail capacity over the next 25 years, a $148 billion investment is needed to expand capacity. Even more must be invested if the growing demand for rail passenger services is to be met because outside of the Northeast Corridor, most Amtrak and commuter passenger trains run on tracks owned by freight railroads.

Railroads have been investing heavily in their infrastructure. Over the past two years, freight railroads invested more than $18 billion in capital improvements, the most in history. It’s expected that railroads on their own should be able to invest about 70 percent of the money needed to expand the freight rail network. Yet there remains a gap of about $1.4 billion annually between what railroads can invest on their own and what needs to be invested to handle growth. The gap grows even larger when plans for expanded rail passenger service are taken into consideration.

If that gap is not closed, about 30 percent of the nation’s primary rail corridors will be approaching capacity by 2035. That would cause freight to shift from rail onto highways, increasing fuel consumption, air pollution and highway congestion.

Moreover, railroads are also a cost-effective mode of transportation. Based on revenue per ton mile, on average it cost 54 percent less (in inflation adjusted terms) to move freight by rail in 2007 than it did in 1981.

Rail passenger and freight interests recognize the need to work together to increase total rail capacity and recently formed OneRail, a coalition that brings together a diverse group of freight rail, passenger rail and environmental advocates, united in the belief that public policies that support both freight and passenger rail objectives are needed to maximize transportation options that enhance mobility, achieve energy efficiency, address climate change, boost economic growth and improve quality of life for all Americans.

The gap between what should be invested in rail expansion and what currently can be invested is significant. But that gap can be narrowed and closed through adoption of public policies that foster investment in the rail network. One way to close that gap is through development of public-private partnerships in which the public pays for the public benefits it receives while the railroads pay for the benefits they receive. The best known example of this is the Alameda Corridor in Southern California which connects the Ports of Los Angeles and Long Beach with inland intermodal rail facilities. It separated the rail lines from highways, improving the fluidity of both the highway and rail networks. More than 100,000 trains have crossed the corridor since it opened in 2002, reducing air pollution by close to 10,000 tons.

Other successful public-private partnerships include ones in Northern California and in North Carolina where capacity was added to accommodate additional passenger service; the Heartland Corridor from the Atlantic to the Midwest where clearances are being increased to handle energy-efficient double-stack intermodal trains; the Gateway Corridor in the East and the CREATE project in Chicago. Additional opportunities exist throughout the country for cooperation between public agencies and freight railroads.

An infrastructure tax incentive such as the bi-partisan Freight Rail Infrastructure Capacity Expansion Act would also help revitalize and expand the rail network. That legislation would provide a 25 percent tax incentive for investments in new tracks and other projects that expand rail capacity. This legislation would make the tax incentive available not just to railroads but to any entity that invested in projects that expand the capacity of the rail network. For example, a shipper that invested in a spur to connect to the rail network would be eligible to receive the credit.

Finally, the nation has been well served by the balanced rail regulatory system implemented by the Staggers Rail Act of 1980. That regulatory system protected the rights of shippers from rail market power while at the same time providing railroads with new ability to react to changes in the market place. The result has been an unqualified success. US freight railroads are recognized as the international standard, providing the world's most affordable freight service.

As a result of the Staggers Act, a railroad industry that was on the brink of collapse and faced with billions of dollars of deferred maintenance has been able to invest some $420 billion to maintain, renew and upgrade facilities and equipment, providing the nation with billions of dollars in annual benefits. Efforts by some special interests to reverse the Staggers Act and return railroads to a regulatory system in which government bureaucrats make all of the decisions must be rejected or else capital for expansion of the rail industry will dry up.

Boxcar benefits
There is a strong public interest in expanding the capacity of the rail network so that more trains – both freight and passenger – can operate throughout the country. The rail advantage includes:

• More fuel efficiency (a freight train can move a ton of freight an average of 436 miles per gallon of diesel fuel, three times as far as a truck)
• A cleaner environment (freight trains pollute one-third as much as trucks)
• Less traffic on our nation's highways (a single intermodal train can remove up to 280 trucks from the highways)
• Similar advantages flow from increased passenger rail investment
• Beyond this, each billion dollars in capital investment in the rail industry creates 20,000 new jobs