# Presentation: 209769

## U.S. Freight Railroad Infrastructure: Current and Future Issues

**Craig F. Rockey**
**Vice President - Policy and Economics**
** ****Association of American Railroads**
**Washington DC**
**March 17, 2004**

## The U.S. Rail Network

## U.S. Freight Intercity 

**Modal Market Share: 2001**

- “Other” for ton-miles is less than 0.5%.      Source: Eno Transportation Foundation

**RRs**
**42%**

**Trucks**
**28%**

**Water**
**13%**

**Pipeline**
**17%**

**Trucks**
**80%**

**RRs**
**10%**

**Ton-Miles**

**Revenue**

**Water**
**1%**

**Other**
**7%**

**Pipeline**
**2%**

## Freight Rail Provides Major Public Benefits

-  	Fuel efficient
-  	Less pollution
-   Reduced congestion
-  	Safer

##  	Fuel efficient
 	Less pollution
  Reduced congestion
 	Safer

-  	Less pollution
-   Reduced congestion
-  	Safer

**The EPA estimates that for every ton-mile, trucks emit roughly three times more nitrogen oxides and particulates than locomotives.**
**  ****Other studies suggest trucks emit 6 to 12 times more.**

**Freight Rail Provides ****Major Public Benefits, cont.**

##  	Fuel efficient
 	Less pollution
 	Reduced congestion
 	Safer

-  	Less pollution
-  	Reduced congestion
-  	Safer

- Source:  Texas Transportation Institute

**Freight Rail Provides ****Major Public Benefits, cont.**

##  	Fuel efficient
 	Less pollution
 	Reduced congestion
 	Safer

-  	Less pollution
-  	Reduced congestion
-  	Safer

** **

**Freight Rail Provides ****Major Public Benefits, cont.**

- Source:  AAR analysis of data from FHWA, FRA, RSPA, and STB.

## Today’s Freight Rail Environment

-   Vast majority privately-owned.

-   Essentially no government funding.

-   Separate freight & passenger operations.

-   Access privately negotiated, voluntary.

-   Generally owner *and* operator.

## Economic Fundamentals of Freight Railroading

- 	Railroads are networks with virtually unlimited origin-destination pairs — what happens in one place affects many others.
-  	High fixed and sunk costs — infrastructure can’t easily be picked up and moved.
-  	Substantial economies of scale and scope.
-  	Huge differences in customer demands and options.

## Freight Rail Traffic Density

**Freight Rail Traffic Density**
**(Millions of Class I Ton-Miles **
**Per Mile of Road Owned)**

- Source:  AAR

## RRs Have Far Higher Capital Expenditures Than Other Industries

## Class I RR Spending on Roadway and Structures ($ Billions)

**Class I RR Spending ****on Roadway and Structures ****($ Billions)**

## Transport Demand:  U.S. DOT says freight traffic will increase nearly 70% by 2020; international higher. 
Service Quality:  Reliability, speed, frequency
Price
 	Highway Congestion:  Pressure to reduce congestion, emissions, fuel use, and enhance safety. 
 	Passenger:  Demands for freight-owned track.

*Service Quality*:  Reliability, speed, frequency
*Price*
- * **	**Highway Congestion*:  Pressure to reduce congestion, emissions, fuel use, and enhance safety.* *
- * **	**Passenger*:  Demands for freight-owned track.
*	*

**Drivers of Railroad Demand**

##  But Because Railroads Do Not Earn Their Cost of Capital...

- Source:  Surface Transportation Board

**Cost of Capital**

**Return on**
** ****Investment**

**Class I Cost of Capital vs. Return on Investment**

##  ...They Cannot Make All Desired Investments 

** ...****They Cannot Make All Desired Investments **

## Best used for projects whose main purpose is to meet public needs.
RRs pay for their benefits and public pays for public benefits.
Not “subsidy” to RRs

- RRs pay for their benefits and public pays for public benefits.
- Not “subsidy” to RRs

**Public-Private Partnerships **
**Can Help**

- “Relatively small public investments in the nation’s freight railroads can be leveraged into relatively large benefits for the nation’s highway infrastructure, highway users, and freight shippers.” --AASHTO

## Railroads Providing Better Service

- 	Alliances with other RRs, other modes, customers, suppliers, others
-  	Technological applications
-  	Innovations in locomotive operations, staffing, asset utilization, scheduling
- Better equipment and infrastructure
- New offerings

## Other Challenges Facing RRs

**Truck Size and Weights**

**Economic Growth**

**P**

**New Technology**

**3**

## 	Daunting growth forecast.
 	Infrastructure is preeminent issue.
Don’t restrict rail earnings through reregulation
Tap public/private partnerships.
	Continued focus on meeting customer needs

-  	Infrastructure is preeminent issue.
- Don’t restrict rail earnings through reregulation
- Tap public/private partnerships.
- 	Continued focus on meeting customer needs

**Summary**