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Freight Rail


  • [ Barrels of Oil Equivalent Saved: ]

    14M
  • [ Jobs Impact:]

    • Low
    • Medium
    • High
  • [ Budget Impact:]

    • Low
    • Medium
    • High
  • [ Conventional Pollutants Reduced: ]

    NOx
    271,955 tons
    PM
    11,520
  • [ Megatons of GHG Reduced: ]

    23

Overview

The U.S. freight rail system consists of 139,000 miles of track used to move 40% of the nation’s goods each year.1 It also provides the cleanest, safest, and most energy efficient way to transport freight over land.2 Trucks will always play a vital role in servicing the “last mile” of the transportation chain. But with total freight movement expected to grow 50% by 2040, America must take full advantage of opportunities to promote its most efficient modal options.3 To maximize its market share, rail will have to overcome challenges like the immense capital investment required to build and maintain infrastructure and the disparity between the federal investments channeled toward rail and highways.

Analysis

Moving freight by rail is four times more fuel efficient than using trucks. It also emits roughly 75% less greenhouse gases4 and eliminates large quantities of vehicle pollution like NOx and particulate matter.5 Rail also helps relieve highway congestion, since a single freight train can carry enough cargo to replace 300 trucks.6 Increasing rail’s market share of total freight movement by just 2.5% would eliminate the need for 7 billion miles of truck travel on American highways.7

Rail also shifts less cost to the public. For every million ton-miles traveled by truck, taxpayers pick up the tab for $7,000 worth of infrastructure costs not covered by gas taxes and user fees, and another $7,000 for the cost of congestion—totaling roughly $29 billion each year. Rail, in comparison, carries less than 4% of those costs.8

Railroads are one of the most capital-intensive sectors in the economy. Unlike highways, which are built and maintained primarily by government, railroad companies are responsible for almost all of the costs of their infrastructure, reinvesting 30-40% of their revenues each year to build and maintain tracks, facilities, locomotives, and equipment.9 However, this investment translates directly into economic growth and job creation, as roughly 50 cents of every dollar spent on rail rehabilitation goes to labor.10

Implementation

The federal government should encourage investment in rail infrastructure and level the playing field between rail and trucking in federal planning and policy.

Reform the Existing Railroad Financing Program to Unlock Funds

The federal government already has a zero-cost financing program for rail that is underutilized. If modified slightly and provided with a relatively small amount of funding, the Railroad Rehabilitation and Improvement Financing Program (RRIF) could provide loans and loan guarantees for billions of dollars in rail infrastructure investment. However, administrative complexity and lack of flexibility in lending terms have kept RRIF from meeting its potential, and only $430 million of the $35 billion in available authority is actually being used.11 Congress can make several adjustments to this program to make it more accessible to applicants and expedite the approval process.12 Fully utilizing the RRIF program would lead to the creation of over 100,000 full-time jobs.13

Extend and Expand the Tax Credit for Rail Infrastructure Investment

The rail industry already invests a greater percentage of its revenues back into infrastructure than most other industries. But to maintain their market share and avoid shifting freight traffic to already-congested highways, railroads may need to dig even further into their pockets.14 This can be particularly difficult for “short line” railroads, which tend to be smaller companies that carry goods a relatively short distance. To help fill this investment gap, Congress should maintain the current tax credit for short line rail infrastructure investment, and extend eligibility to newly-formed or expanded short line railroads.15

Incorporate Rail into National Freight Planning

  Despite its contributions to the transportation system, rail is rarely given the same level of priority as highways in federal policy.16 Going forward, Congress and the Administration should be sure to account for the needs of America’s freight rail in all applicable transportation authorization legislation, freight studies, and infrastructure funding mechanisms.

EndNotes
  1. United States, Department of Transportation, Bureau of Transportation Statistics, "Shipment Characteristics by Mode of Transportation for the United States: 2007," Table 1a, Commodity Flow Survey, December 2009, p. 1. Accessed April 15 2013. Available at: http://www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/publications/commodity_flow_survey/final_tables_december_2009/index.html.
  2. United States, Government Accountability Office, "A Comparison of the Costs of Road, Rail, and Waterways Freight Shipments That Are Not Passed on to Consumers," Report, p. 27, January 2011. Accessed April 15, 2013. Available at: http://www.gao.gov/products/GAO-11-134.
  3. John Porcari, Speech, Revitalizing the Maritime Industry Forum, Linthicum, MD, May 7, 2012. Accessed April 15, 2013, Video. Available at: http://www.maritime-executive.com/pages/videos.
  4. Analysis using data provided by the U.S. Department of Energy and the U.S. Department of Transportation. See United States, Department of Energy, “Summary Statistics for Class I Freight Railroads, 1970–2010,” Table, Transportation Energy Data Book, Edition 31, July 31, 2012. Accessed April 21, 2013. Available at: http://cta.ornl.gov/data/chapter9.shtml; See also United States, Department of Energy, “Energy Intensities of Freight Modes, 1970–2010,” Table, Transportation Energy Data Book, Edition 31, July 31, 2012. Accessed April 21, 2013. Available at: http://cta.ornl.gov/data/chapter2.shtml; See also United States, Department of Transportation, Federal Highway Administration, “Comprehensive Truck Size and Weight Study,” Report, Vol. 2, Ch. 3, p. 9, August 2000. Accessed April 21, 2013. Available at: http://www.fhwa.dot.gov/reports/tswstudy/TSWfinal.htm.
  5. Government Accountability Office, p. 27.
  6. Chris Nelder, “Rising Energy Costs May Usher in U.S. Freight Rail Revival,” Scientific American, October 22, 2012. Accessed April 15, 2013. Available at: http://www.scientificamerican.com/article.cfm?id=freight-rail-back-to-the-future.
  7. Analysis based on data provided by the United States Department of Transportation and the United States Government Accountability Office.
  8. Government Accountability Office, pp. 22-23, 32.
  9. “National Rail Freight Infrastructure Capacity and Investment Study,” Report, Cambridge Systematics, Inc., September 2007, p. 4-12. Accessed April 15, 2013. Available at: http://www.camsys.com/kb_pubs_freight.htm; See also United States, Congress, House of Representatives, Subcommittee on Railroads, Pipelines, and Hazardous Materials within the Committee on Transportation and Infrastructure, “Sitting on our Assets: Rehabilitating and Improving our Nation’s Rail Infrastructure,” Testimony of Richard F. Timmons, 112th Congress, 1st Session, February 17, 2011, pp. 2-3. Accessed April 15, 2013. Available at: http://democrats.transportation.house.gov/hearing/subcommittee-railroads-pipelines-and-hazardous-materials-sitting-our-assets-rehabilitating.
  10. Timmons, pp. 2-3.
  11. United States, Congress, House of Representatives, Subcommittee on Railroads, Pipelines, and Hazardous Materials within the Committee on Transportation and Infrastructure, “Sitting on our Assets: Rehabilitating and Improving our Nation’s Rail Infrastructure,” Summary of Subject Matter, 112th Congress, 1st Session, February 17, 2011, p. viii. Accessed March 4, 2013. Available at: http://www.gpo.gov/fdsys/pkg/CHRG-112hhrg65451/pdf/CHRG-112hhrg65451.pdf.
  12. The Department of Transportation should direct additional funds each year toward administrative assistance to RRIF applicants and potential applicants to reduce burdens of the program, as well as processing time. Congress should authorize additional flexibility in the payment of the credit risk premium (CRP) associated with RRIF loans. This could include allowing applicants to utilize private bond insurance for some or all of their CRP, or allowing a borrower to pay the CRP over the life of the loan. Congress should also ensure that FRA methods of valuing collateral incentivize infrastructure in addition to equipment. And finally, Congress could appropriate funds to be used for administrative costs and partial subsidy of the CRP, which would lower a major barrier for railroads that want to utilize RRIF loans but so far have not. The Transportation Infrastructure Finance and Innovation Act Program (TIFIA), used mostly for highway projects, provides this type of credit assistance. It is managed by the Federal Highway Administration and receives $122 million in appropriations each year. See United States, Department of Transportation, Federal Highway Administration, “Fact Sheets on Highway Provisions,” Fact Sheet. Accessed April 15, 2013. Available at: http://www.fhwa.dot.gov/safetealu/factsheets/tifia.htm.
  13. Analysis based on data from the American Short Line and Regional Railroad Association, United States House of Representatives Committee on Transportation and Infrastructure, and the Office of Management and Budget. See Timmons, p. 2; See also “Sitting on Our Assets,” p. viii; See also United States, Executive Office of the President, Office of Management and Budget, “OMB Circular No. A-76,”p. C-8, May 29, 2003. Accessed April 16, 2013. Available at: http://www.whitehouse.gov/omb/circulars_default.
  14. “National Rail Freight Infrastructure Capacity and Investment Study,” p. 7-1.
  15. United States, Congress, House of Representatives, “H.R. 721—Railroad Rehabilitation and Investment Act of 2013,” 113th Congress, 1st Session, February 14, 2013. Accessed April 16, 2013. Available at: http://hdl.loc.gov/loc.uscongress/legislation.113hr721.
  16. As an example, in the 2012 surface transportation authorization, Congress required the Department of Transportation to study and report back on freight routes with the greatest amount of congestion, presumably to help prioritize future investment. Yet Congress specified that the study was to be done only on highway routes, neglecting railroads and waterways other than to allow for a limited amount of consideration of intermodal access. United States, Congress, House of Representatives, “H.R. 4348—MAP-21,” 112th Congress, 2nd Session, Section 1115, Introduced April 16, 2012, Signed Into Law July 6, 2012. Accessed April 16, 2013. Available at: http://hdl.loc.gov/loc.uscongress/legislation.112hr4348.