Yesterday, the Wall Street Journal’s Daniel Machalaba held an online round-table discussion on the future of the freight rail industry with a small group of consultants, lobbyists and federal administrators. They predicted that freight rail will experience spectacular growth over the next 30-50 years, largely because of population expansion and the industry’s reliably cheap shipping rates. Which is excellent news—from an environmental perspective, rail replaces trucks, airplanes, river barges and other highly-polluting modes of freight transport. Meanwhile, a freight train moves 435 tons one mile on a single gallon of fuel, making it one of the greener methods of moving a large amount of product over vast distances.
Freight rail is growing (Oliver Wyman consultant Bill Rennicke predicted that shipping volume could double by mid-century), but it still faces some grave infrastructural challenges. Crucially, rail has taken less out of the trucking market than one might expect, partly because the United States simply has much greater highway than rail capacity. Because of this, road transport is far more reliable than rail transport—a truck that has five days to make it cross-country will be on time more often than a train that’s required to make an identical trip. As Surface Transportation Board commissioner Francis Mulvey explains,
Many factors determine rail traffic levels and market share. Since Staggers [the 1980 law that partly deregulated railroads], the rail share of intercity ton miles has grown from just over 30% to over 43%. But much of that has been due to declining shares of barge, Great Lakes and pipeline traffic—as opposed to shifts from truck to rail.
Whether the railroads can increase their share of truck-competitive traffic will depend on railroad pricing and service policies, and on the railroads’ willingness to invest in capacity.
There won’t be a significant shift from road to rail shipping if existing rail systems are overloaded. Without infrastructural upgrades and expansions, American rail lines will be clogged and chronically inefficient, especially if they’re being saddled with the kind of government regulations that could stifle industry growth and innovation (the “pricing and service policies” bit).
Which isn’t to say that government should just step aside. Railroad consultant Jim McClellan notes that passenger traffic has all but supplanted freight traffic on the Northeast Corridor, meaning that all major shipping between Washington, DC and Boston must be done by truck, plane or boat. If the government were serious about building a world-class rail system, it would raise taxes and invest heavily in common-sense infrastructural improvements, like the building of higher freight capacity in the most densely-populated section of the country:
Passenger service can literally drive freight traffic off the railroad; look no further than the Northeast Corridor for an example. What was a vital and busy north-south freight line has essentially been eliminated.
The amount of money being proposed for passenger rail is far short of what is needed for a first-rate, European-type passenger network. We are trying to do high-speed rail on the cheap and run a real risk, by ducking very real capacity issues, of doing serious harm to the rail freight system.
To get the job done, the country would have to embrace higher gas taxes and higher airport fees, just as Europe and Canada have done, and a long-term investment in infrastructure many times that which has been proposed.
The rail industry wants the government to give it enough regulatory leeway to keep current incentives in place—which in turn keeps shipping prices low and encourages rail companies to innovate and upgrade. But it also wants the government to pursue as many rail-friendly policies as possible, including the taxation of other modes of shipping. This seems like a hard sell, with gas prices increasing and the cost of basic goods potentially increasingly along with them. And the rail industry’s challenges are relatively far in the future. It’s self-serving to ask everyone to pay taxes in order to ensure the rail industry’s long-term profitability. But the alternative—namely an outmoded freight rail system in a time when railroads will carrying twice as much freight as they currently do—could be even worse.
