# Presentation: 210723

## Public Policy and Surface Transportation Capacity 

- Freight Transportation Productivity Summit
- Atlanta, Georgia
**Surface Transportation Board**
**Roger Nober, Chairman**

**Notes:**
Thank the RR’s for participating, etc.....

## 
Quantity of infrastructure assets
Efficiency in using existing assets
Mechanisms to finance and grow infrastructure
Changes in Demand 
Coping with constrained capacity

- Quantity of infrastructure assets
- Efficiency in using existing assets
- Mechanisms to finance and grow infrastructure
- Changes in Demand
- Coping with constrained capacity

- Elements of Transportation Capacity

## Economic Activity
Population Growth
Globalization
Business Practices
Technology

- Economic Activity
- Population Growth
- Globalization
- Business Practices
- Technology

- Drivers of Transportation Demand

## Factors in Transportation Infrastructure Supply

- Public Investments:
- Roads
- Mass Transit
- Airports
- Port Facilities
- Private Investments:
- Pipeline
- Rail

## 	Demand for transportation will grow significantly in the next 20 years:
Population will increase by 26%
GDP is estimated to increase by 100%
Passenger travel will increase by 72%
Truck tonnage will increase by more than 75%
Rail traffic is estimated to increase by over 60%

- Population will increase by 26%
- GDP is estimated to increase by 100%
- Passenger travel will increase by 72%
- Truck tonnage will increase by more than 75%
- Rail traffic is estimated to increase by over 60%

- Congestion is a Growing Problem for the National Economy

## Highways

## More than two-thirds of all travel during peak periods occurs in congested conditions
60% of major roads are congested at peak
Length of rush hour congestion has grown from 4.5 hours to 7 per day
Peak hour travel takes 40% longer than off-peak; it took 13% longer in 1982

- 60% of major roads are congested at peak
- Length of rush hour congestion has grown from 4.5 hours to 7 per day
- Peak hour travel takes 40% longer than off-peak; it took 13% longer in 1982

- Highway Congestion is Growing

## Sources of Highway Congestion

## Increases costs for customers
Requires more corporate assets:  drivers, tractors, trailers
Makes transportation logistics less efficient
Incents freight suppliers and customers to change behavior

- Requires more corporate assets:  drivers, tractors, trailers
- Makes transportation logistics less efficient
- Incents freight suppliers and customers to change behavior

- Impact of Highway Congestion on Freight Movements

##    Truck Capacity is Strained

- Increased fuel prices
- Driver shortages
- High insurance costs
- Uncertain hours of service rules
- Freeze on productivity improvements
- Insufficient highway capacity
- Strained capacity of rail system

## Potential for Increased TruckProductivity is Limited

- Hours of Service rules will remain unsettled
- Size and weight changes are highly unlikely
- Hazmat requirements will likely increase
- Truck driver training and recruitment will remain difficult
- New Highway capacity unlikely and existing capacity is strained

## Railroads

## Insufficient Capacity – A New Kind of Regulatory Problem

- Current and future service issues largely demand and capacity driven
- Most commodities are deregulated by virtue of being modally-competitive or shipped by contract
- Regulatory powers intended for different type situation
- Interstate Commerce Act laws and doctrine look at reasonableness of regulated traffic
- Customers want fairness for all movements

## Capacity Constraints – Causes of Increased Demand

- Capacity Constraints – Causes of Increased Demand

-   Expanding economy
-   Large grain harvests in recent years
-   Soaring demand for coal
-   Double-digit increases in intermodal growth
-   Shortness of crew and equipment
-   Insufficient capital expenditures

## Capacity Constraints – Long-term Causes

- Capacity Constraints – Long-term Causes

- Constraints on capital investment for private companies
- Railroads inability to achieve revenue adequacy
- Need to cut expenses to maximum extent
- Demands of investors
- Under capacity and over capacity at the same time
- Demands of changing freight flows
- Long-term nature of rail investment versus business-cycle fluctuations in demand
- Returns will have to justify further investment

## Railroad Return on Investment

## Railroad Track Miles

## Growth in Intermodal Rail Carloadings

## Railroad Cost of Capital and ROISources: Annual R-1 Reports and AAR

|  | Cost
Of
Capital | 
BNSF | 
CSXT | 
NS | 
UP | 
KCS | 
SOO
 | 
GT | 
IC |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 1996 | 11.9% | 8.6% | 8.9% | 13.0% | 9.3% | 7.2% | 23.5% | 0.0% | 15.2% |
| 1997 | 11.8% | 8.4% | 9.8% | 13.1% | 5.2% | 3.6% | 12.3% | 5.2% | 15.8% |
| 1998 | 10.7% | 9.7% | 8.1% | 10.5% | 2.9% | 9.1% | 4.9% | 3.0% | 13.6% |
| 1999 | 10.8% | 9.5% | 3.8% | 5.2% | 6.8% | 6.4% | 2.5% | 25.4% | 10.0% |
| 2000 | 11.0% | 8.8% | 3.6% | 5.5% | 6.9% | 6.3% | 5.6% | 5.9% | 5.9% |
| 2001 | 10.2% | 7.1% | 4.6% | 8.3% | 7.6% | 7.0% | 5.9% | 4.9% | 4.9% |
| 2002 | 9.8% | 6.4% | 5.2% | 9.1% | 8.6% | 6.5% | 5.7% | 3.1% | 3.1% |
| 2003 | 9.4% | 6.2% | 4.0% | 9.1% | 7.3% | 3.7% | .01% | 4.5% | 4.5% |

**Notes:**
Communication needed because customers deserve to know what to expect and when to expect it so they can plan accordingly

## Legislation -- Overall

- 	The Conference Report provides $244.1 billion in guaranteed spending and contract authority for highways, public transit, and highway-safety programs from FY 2005 to 2009 ($286.5 billion if 2004 totals are included).

## Freight Infrastructure Provisions

-     More than $4 billion will fund projects and improvements whose benefit primarily target goods movement, including:
- $1.5 billion in the Projects of National and Regional Significance;
- $1.8 billion in the National Corridors program;
- $833 million in the Borders program; and,
- $140 million for the National Corridor planning and development and Coordinated Border Infrastructure programs for fiscal year 2005.

## Significant Freight Rail Provisions

- Significant Freight Rail Infrastructure:
- $100 Million for CREATE
- $125 million for Alameda Corridor East
- $370 for 6 other significant projects
- Increases RRIF Program to $35 billion
- $6 million Freight Intermodal Distribution pilot grant program
- Increases grade-crossing program to $220 million annually

## Can public infrastructure spending keep up with needs of industry and economy?
Can the Highway Trust Fund remain a viable source of financing?
Will structural changes in the manufacturing economy stress our transportation and logistics network?

- Can public infrastructure spending keep up with needs of industry and economy?
- Can the Highway Trust Fund remain a viable source of financing?
- Will structural changes in the manufacturing economy stress our transportation and logistics network?

- Issues Going Forward

## Rail Service Issues

## 2005 Letter to railroads asking them to submit Fall Peak plans, capacity bottlenecks and plans to alleviate those identified issues
Industry-wide customer forum in September
Individual carrier meetings where appropriate

- 2005 Letter to railroads asking them to submit Fall Peak plans, capacity bottlenecks and plans to alleviate those identified issues
- Industry-wide customer forum in September
- Individual carrier meetings where appropriate

- 2005 Service Actions

## 90 customer complaints in 2005, YTD
12.5 percent y/y increase from 2004
123 total complaints in 2004, 19 percent increase over 2003
2005 Complaints Filed:
	UP  	19        CN 	4CSXT 	15        KCS	1          
	BNSF	9          CP	0 NS	7

- 2005 Service Complaints to the STB

**90 customer complaints in 2005, YTD**
**12.5 percent y/y increase from 2004**
**123 total complaints in 2004, 19 percent increase over 2003**
**2005 Complaints Filed:**
**	****UP  ****	****19        CN ****	****4****CSXT ****	****15        KCS****	****1          **
**	****BNSF****	****9          CP****	****0 ****NS****	****7**

## Other Concerns Affecting Productivity

## Hazmat Traffic

- Communities are concerned about risks of moving hazardous materials
- Carriers have common-carrier obligation to carry hazmat materials
- Washington DC ordinance
- Other communities are looking to bar hazmat shipments as well.
- Significant public policy issue

## Railroads and Communities

- Railroads and Communities

- Major carriers have rationalized their systems, so they now have more traffic on fewer lines.
- Communities now see a greater frequency of rail service on lines, and communities are struggling to co-exist with railroads.
- Communities are looking to partner with private carriers, states, and federal government to invest capital to increase rail fluidity, mobility for their citizens and livability.
- Will happen more and more, further straining carrier capital investment.

## Slide 30