ABOUT THE TEXAS PUBLIC POLICY FOUNDATION The Texas Public Policy Foundation is a 501 (c)(3)(h) non-profit, non-partisan research institute guided by the core principles of limited government, free enterprise, private property rights and individual responsibility. The Foundation's mission is to improve Texas government by generating academically sound research and data on state issues, and by recommending the findings to opinion leaders, policy makers, the media and general public. The work of the Foundation is conducted by academics across Texas and the U.S. and is funded by hundreds of individuals, charitable foundations and corporations. The Foundation conducts no contract research and accepts no contributions to influence outcome of research. The public is demanding a different direction for their government and TPPF is providing the research that enables policy makers to chart that new course. Call the Foundation at (210) 614-0080 for membership information or sign up online at: www.tppf.org NOTE: Texas Public Policy Foundation materials are published for educational purposes only. The views of the authors are their own and do not necessarily reflect the views of the Texas Public Policy Foundation. Nothing written herein is an attempt to aid or hinder the passage of any legislation. TABLE OF CONTENTS EXECUTIVE SUMMARY ......................................................1 ABSTRACT ............................................................1 TRAFFIC CONGESTION AND FREIGHT ...................................1 THE UNIQUE ROLE OF FREIGHT RAIL IN THE UNITED STATES ............2 FREIGHT RAIL AND TRAFFIC CONGESTION: PROSPECTS ..................3 REDUCING TRAFFIC CONGESTION ......................................4 I. TRAFFIC CONGESTION AND FREIGHT .......................................7 TRAFFIC CONGESTION IN TEXAS .......................................7 HIGHWAY AND RAIL FREIGHT ........................................12 Highway Freight (Trucks) ..........................................14 Rail Freight .....................................................16 II. THE UNIQUE ROLE OF FREIGHT RAIL IN THE UNITED STATES ...............18 The International Decline of Freight Rail ..............................19 THE SURVIVAL OF FREIGHT RAIL IN THE UNITED STATES ...............27 THE HIGHWAY-DEPENDENT U.S. NORTHEAST CORRIDOR ...............28 Assessment: Freight and Passenger Rail ...............................29 III. RAIL FREIGHT AND TRAFFIC: PROSPECTS .................................31 FREIGHT RAILROAD COMPETITIVENESS ...............................31 Expansion of Passenger Rail ........................................34 Freight Railroads: One-Way Highways ................................35 TRAFFIC IMPLICATIONS ..............................................37 RAIL AND HIGHWAY FREIGHT IN TEXAS ...............................38 Freight Projections ................................................41 THE ECONOMIC COST OF EXCESS TRAFFIC CONGESTION ...............42 IV. REDUCING TRAFFIC CONGESTION ........................................44 FREIGHT PROJECTS AND TRAFFIC CONGESTION: THE POTENTIAL .......44 Example #1: Houston-to-Dallas Intermodal Upgrade .....................49 Example #2: Austin Truckway ......................................50 Example #3: Laredo Rail Grade Separation ............................51 The Pivotal Position of Texas .......................................54 BALANCED TRANSPORTATION POLICY ................................54 APPENDIX .................................................................64 TRAFFIC CONGESTION AND PASSENGER RAIL .........................64 THE LIMITATIONS OF CHARTS ........................................71 Freight Rail’s Potential to Reduce Traffic Congestion EXECUTIVE SUMMARY ABSTRACT Urban areas around the nation face serious traffic congestion. While trucks represent an important resource, they have a disproportionately high impact on traffic congestion. That impact would be even greater if it was not for the strong freight rail industry. The United States is unique in having retained a strong freight rail market. Freight rail in Europe and Japan has lost most of its market share, which has led to much higher levels of truck traffic, and more intense traffic congestion. Part of the reason for the decline of freight rail in these areas has been that emphasis on passenger rail has limited freight capacity and competitiveness. U.S. freight railroads have been able to grow and maintain most of their market share at least partially because passenger rail services have been greatly curtailed, which has provided needed capacity for growth. The Northeast Corridor of the United States is more akin to Japan or Europe, with a much smaller market share for freight rail, again largely due to the emphasis placed upon passenger rail. The international experience, historical trend, and Northeast Corridor experience suggest that a strong freight rail system is incompatible with a strong passenger rail network. This is important, since many states and metropolitan areas seek to reduce traffic congestion through expansion of passenger rail (intercity and commuter). By driving freight away from railroads, the net effect of these projects could be to worsen traffic congestion. With respect then to traffic congestion, the question is whether a strong freight rail system or a strong passenger rail system is likely to provide greater benefits. To contain urban traffic congestion, it is crucial that the freight rail industry maintains or expands its market share. If freight rail experiences market share losses akin to those sustained in Europe or Japan, the equivalent of a 50 percent increase in urban traffic volumes can be expected by 2020. This would translate into serious economic losses. Freight projects that assist in maintaining freight rail market shares or separate or expedite truck traffic appear to have more potential for reducing traffic congestion than passenger rail projects in many areas. Public policy should be directed to implementing the most effective freight or passenger projects for reducing traffic congestion. TRAFFIC CONGESTION AND FREIGHT Traffic Congestion in Texas: Steadily increasing urban traffic congestion has become one of the most important issues in public opinion polls and public policy. It is especially a problem in fast-growing areas such as the state of Texas. Texas traffic is exacerbated by its high population growth rate, its proximity to the Mexican border, and the rapidly increasing truck traffic being generated by the North American Free Trade Agreement (NAFTA). High costs and community impacts have made wholesale expansion of metropolitan roadways difficult, if not impossible. For decades, urban road expansion has fallen far behind the increases Texas Public Policy Foundation p Page 1 Freight Rail’s Potential to Reduce Traffic Congestion in traffic. Significant increases in overall traffic volumes are expected in all Texas metropolitan areas, and it is likely that truck traffic will increase at an even greater rate because of NAFTA. Highway and Rail Freight: The nation’s highway freight industry moves 42.7 percent of combined rail and truck intercity freight and has been improving its share of the combined rail and truck freight market for decades. The industry was deregulated in 1979 and improved its productivity 36 percent through 1998 (ton miles per million dollars of revenue). At the same time, trucks contribute disproportionately to traffic volumes. It is estimated that the average combination truck (single trailer or double trailer) consumes approximately 3.8 times the road space of an automobile. Large truck traffic volumes have been rising considerably faster than other traffic. From 1990 to 1999, urban truck traffic increased 48.7 percent, 80 percent above the 26.9 percent growth rate of other traffic. Over the next 20 years, truck volumes are expected to more than double in the United States. Despite the market share gains of trucks, freight rail has maintained a strong market share, at 57.3 percent of the combined rail and truck market in 1998. Rail freight was deregulated in 1980. Since deregulation, rail freight has improved its productivity 143 percent (ton miles per million dollars of revenue). The volume of rail freight is illustrated by the fact that if all rail freight traffic was diverted to trucks, truck traffic would increase approximately 116 percent. Over the next 20 years, rail freight volumes are expected to increase by one-half. This is a slower rate than the projected truck increase, and implies a further erosion of 15 percent in rail market share. This will lead to greater roadway congestion. Little attention has been given to implementation of freight projects to alleviate traffic congestion. This report will provide a preliminary analysis of the potential for reducing traffic congestion through both rail freight and highway freight projects. THE UNIQUE ROLE OF FREIGHT RAIL IN THE UNITED STATES The United States and Canada are unique among high-income world nations in having retained considerable rail freight market shares. The International Decline of Freight Rail: This greater reliance on rail freight in the United States reduces the amount of truck traffic on highways. The United States has the highest volume of freight traffic in the world, and its per capita volume is second only to Canada. Despite the continuing urbanization of lower-income nations such as China, the U.S. freight rail industry expanded its share of the world’s