SWUTC/11/473700-00076-1 the Potential for Improving Rail

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SWUTC/11/473700-00076-1 the Potential for Improving Rail Technical Report Documentation Page 1. Report No. 2. Government Accession No. 3. Recipient's Catalog No. SWUTC/11/473700-00076-1 4. Title and Subtitle 5. Report Date The Potential for Improving Rail International Intermodal Services in June 2011 Texas and the Southwest Region of the United States 6. Performing Organization Code 7. Author(s) 8. Performing Organization Report No. Robert Harrison (CTR) and James R. Blaze (Harsco) Report 473700-00076-1 9. Performing Organization Name and Address 10. Work Unit No. (TRAIS) Center for Transportation Research University of Texas at Austin 11. Contract or Grant No. 1616 Guadalupe Street DTRS99-G-0006 Austin, TX 78701 12. Sponsoring Agency Name and Address 13. Type of Report and Period Covered Southwest Region University Transportation Center Texas Transportation Institute Texas A&M University System 14. Sponsoring Agency Code College Station, Texas 77843-3135 15. Supplementary Notes Supported by a grant from the U.S. Department of Transportation, University Transportation Centers Program. 16. Abstract The report covers a period of great significance for railroading in the U.S as it contains a number of milestones now shaping the future performance of the industry. The specific subject is improving intermodal service so that it can support state and regional highway planning, now facing severe financial cut-backs as revenue sources become fully committed to bond servicing, user taxes, loose purchasing power and fuel consumption begins to fall. Intermodal traffic grew strongly in the period 1995 – 2007 and UP and BNSF trans-continental routes were improved largely on the back of intermodal demand. Alliances with larger trucking companies strengthened and transportation officials began to ask whether rail could take some of the predicted freight off key highway corridors. This report addresses elements of this question, more especially as it relates to intermodal traffic in Texas and the Southwest. The report comprises the following sections. Chapter 2 considers the changes in rail freight since the Staggers Act, Chapter 3 evaluates Class 1 intermodal service, and Chapter 4 identifies the major trade corridors serving Texas and the Southern region of the U.S. Chapter 5 describes rail bottlenecks on the state rail system that might impact future intermodal growth, and Chapter 6 concludes by examining the strengths, weaknesses, opportunities and threats to rail intermodal service in Texas and the Southern region over the next decade. 17. Key Words 18. Distribution Statement Freight rail, Intermodal, Texas Rail Investment, No restrictions. This document is available to the Multimodal Planning public through NTIS: National Technical Information Service 5285 Port Royal Road Springfield, Virginia 22161 19. Security Classif.(of this report) 20. Security Classif.(of this page) 21. No. of Pages 22. Price Unclassified Unclassified 78 Form DOT F 1700.7 (8-72) Reproduction of completed page authorized ii THE POTENTIAL FOR IMPROVING RAIL INTERNATIONAL INTERMODAL SERVICES IN TEXAS AND THE SOUTHWEST REGION OF THE UNITED STATES ROBERT HARRISON AND JAMES BLAZE RESEARCH REPORT SWUTC/11/473700-00076-1 SOUTHWEST REGION UNIVERSITY TRANSPORTATION CENTER CENTER FOR TRANSPORTATION RESEARCH UNIVERSITY OF TEXAS AT AUSTIN AUSTIN, TX 78701 JUNE 2011 iv Abstract The report covers a period of great significance for railroading in the U.S as it contains a number of milestones now shaping the future performance of the industry. The specific subject is improving intermodal service so that it can support state and regional highway planning, now facing severe financial cut-backs as revenue sources become fully committed to bond servicing, user taxes, loose purchasing power and fuel consumption begins to fall. Intermodal traffic grew strongly in the period 1995 – 2007 and UP and BNSF trans-continental routes were improved largely on the back of intermodal demand. Alliances with larger trucking companies strengthened and transportation officials began to ask whether rail could take some of the predicted freight off key highway corridors. This report addresses elements of this question, more especially as it relates to intermodal traffic in Texas and the Southwest. The report comprises the following sections. Chapter 2 considers the changes in rail freight since the Staggers Act, Chapter 3 evaluates Class 1 intermodal service, and Chapter 4 identifies the major trade corridors serving Texas and the Southern region of the U.S. Chapter 5 describes rail bottlenecks on the state rail system that might impact future intermodal growth, and Chapter 6 concludes by examining the strengths, weaknesses, opportunities and threats to rail intermodal service in Texas and the Southern region over the next decade. v vi Executive Summary ES.1 Background The report covers a period of great significance for U.S railroading as it contains a number of milestones which will shape the future performance of the industry. The specific focus of the study is improving intermodal service so that it can further strengthen state and regional multimodal planning, since new highway capacity faces severe financial cut-backs as revenue sources become fully committed to bond servicing, the user taxes1 loose purchasing power and fuel consumption begins to fall2. Intermodal traffic grew strongly in the period 1995 – 2007 and UP and BNSF trans-continental routes were improved largely on the back of intermodal demand. Alliances with larger trucking companies strengthened3 and transportation officials began to ask whether rail could take some of the predicted freight off key highway corridors. A summary of the most significant milestones forming the economic and operating environment of U.S railroads between 2006 and 2010 is are follows: 1. Increasing profitability from a variety of successful market segments (not simply intermodal) and strategies to control and cut costs enables companies to meet their cost of capital. 2. Fuel efficiencies enable the sector to be considered by logistics companies over a variety of truck-competitive routes. 3. Cambridge Systematics completed a report on the U.S rail system4 which estimated the improvements needed on that part of the rail network predicted to carry most of the U.S rail traffic to 20355. Class 1 railroad companies were allocated $ $135 billion over this period and it was calculated that they could fund around $ 96 billion from operations leaving a shortfall of $ 39 million or $ 1.4 billion per year6. The study recommended that a national strategy by formed to support increased rail capacity sourced from a variety of financial instruments and beneficiaries. The figure of $ 1.4 billion annually for creating a system that could carry double the 2005 traffic volumes seems quite modest, especially given the magnitude of the last federal initiative to stimulate the economy. 1 Principally state and federal fuel taxes and registration fees 2 Total state consumption fell between 2007 and 2009 from 16.3 to 15.8 billion gallons of gasoline and diesel 3 Reducing adversarial relations related to truck size and weight legislation 4 “National Rail Freight Infrastructure Capacity and Investment Study” sponsored by the Association of American Railroads, September 2007 5 The figure was estimated by the U.S DOT and represents an increase of about 90 percent over the 2005 rail figure. 6 http://www.camsys.com/pubs/AAR_Nat_%20Rail_Cap_Study.pdf vii 4. In December 2009, Warren Buffet’s investment company Berkshire Hathaway which already had around a 21 percent stake in BNSF reached an agreement to purchase the remaining stock for $ 26.67 million, taking his total investment to $ 34 billion8. Buffet called it “an all-in wager on the economic future of the United States. I love those bets.” This important vote of confidence by arguably one of the most respected financial leaders sealed the transition of U.S Class 1 railroad company success and relevance in the national transportation system. Independent of fluctuations in the economy impacting demand, operating efficiencies and financial returns, two major issues remain that critically affect railroad operations. These are: 1. Re-regulation which has generated several policy initiatives including an STB restructuring the regulatory process and a rail anti-trust exemption revocation bill. 2. Providing access to passenger rail services on freight networks. This is highly problematic to the major companies who have spent two decades of investment on move freight on long unit trains at speeds up to 65 mph. Amtrak operations have shown the difficulty of moving passenger trains on schedule across freight systems even with the full support on Class 1 dispatchers. The opportunity of implement high speed rail (HSR) systems but only with limited funding has encourages HSR proponents to advocate the use of sections of the freight rail system or right-of-way has created concerns centering on reducing freight reliability, liability issues related to mixed HSR and freight use, freight rail subsidies to HSR operations and forced passenger rail access. The safety issues are highly relevant and it is interesting to note that, across the globe, when rail carried large volumes of both freight and passengers the system was separated9. ES.2 Recommendations for Improving Rail Service in Texas The first decade of the 21 century was one of great change, significance and success for the U.S rail industry. Rail now has an opportunity to grow its share of Texas freight, whether it is linked to U.S domestic markets, international imports and exports, or state transits on key corridors. Improving rail share is critical for Texas in a variety of ways, from improved emissions per ton mile to providing congestion relief at critical highway system bottlenecks. The study reports the following suggestions to remedy current rail 7 This represented $ 100 per Ordinary share. 8 http://www.camsys.com/pubs/AAR_Nat_%20Rail_Cap_Study.pdf 9 It is also worth noting that UP ran into trouble maintaining a trans-con double- driver truck competitive service for UPS and had to abandon the service after numerous freight trains were delayed while waiting in sidings for the faster train to pass.
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