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Rail News Home Federal Legislation & Regulation

July 2008

Rail News: Federal Legislation & Regulation

Guest Comment: "Freight rail can be a potent reliever for the nation’s highway headaches," by Wendell Cox

By Wendell Cox

Want to make a real impact on the nation’s highway congestion problems? Build more railroad miles. Even the Washington Post, which has long pushed for more government subsidies for passenger rail, recently noted, “the freight rail industry is having its biggest building boom in nearly a century,” the industry’s funding is private instead of taken from taxpayers, and freight rail is more efficient and environmentally friendly than trucks.

Unfortunately, the Post and other mainstream media continue to push for big subsidies to expand passenger-rail systems across the United States, when government policies are the biggest obstacle to further expansion of freight rail.

Public policies the problem

As I note in my recent Heartland Institute study, “Solving the Freight Rail Transportation Bottleneck,” railroads are investing $2 billion a year less in capital than is required to maintain their current market share, according to the Association of American Railroads. Public policies are in good part responsible for this:

  • Federal laws require freight railroads to prioritize Amtrak trains over freight trains, which are routinely stopped on sidings so passenger trains can pass. That makes freight-rail service less reliable than and less competitive with trucking than it could be.
  • Federal law prevents freight railroads from charging Amtrak the actual costs for infrastructure use, forcing the railroads to subsidize passenger trains.
  • Freight railroads bear the entire cost of building and maintaining tracks, whereas the cost of building and maintaining roads used by trucks is shared with car and bus drivers. Plus, highways are financed on a “pay as you go basis” with no interest payments for debt.

It is important to the economy and the environment that we remove these barriers to investment.

Consider the following: Freight train average operating speeds slowed from 24 mph in 1990 to 21 mph in 2000, suggesting the system is nearing capacity; trucks are held up by serious traffic congestion across the nation; average peak-hour delays in the largest urban areas increased 285 percent from 1983 to 2005; and Texas Transportation Institute data shows annual congestion costs rose from $6 billion in 1982 to $60 billion in 2003, in constant dollars.

With sufficient funding, the freight-rail industry could add the capacity it needs to handle much larger volumes. That would relieve bottlenecks on highways by cutting the need for trucks on longer routes. Commuters would benefit from shorter drive times.

The investment would pay off impressively. The American Association of State Highway and Transportation Officials estimates a $30 billion investment would save $839 billion in costs to highway users and shippers, as well as highway investment costs — a benefit-to-cost ratio of more than 25 to 1. Another $30 billion would yield $653 billion more in benefits, a ratio of 22 to 1.

The Texas Governor’s Business Council estimates the economic benefits from reducing congestion over the next 25 years in the state’s urban areas would be eight times the cost of roadway expansion.

Two-fisted approach

Freight transportation reform is urgent and requires both a market and public approach.

The market approach should consist of reforms to remove freight railroads’ priority requirement for Amtrak, allow freight railroads to charge Amtrak actual costs of infrastructure use, ensure any expansion of passenger-rail service on freight-rail infrastructure has no harmful impact on freight traffic, and grant freight railroads investment tax credits and accelerated depreciation for infrastructure improvements.

The public approach should focus on the creation of an independent federal commission to identify cost-effective opportunities for increasing freight-rail capacity and removing intermodal bottlenecks. In addition, a federally chartered Strategic Rail Enhancement Corporation could seek competitive bids on the highest-priority projects, and award tax incentives, tax-exempt bonds and government loans to the winning bidders.

These measures would not mean more government intervention in transportation. They would help level the playing field so that freight rail can help relieve pressure on the highly government-subsidized areas of the nation’s transportation infrastructure.

Wendell Cox is a senior fellow of The Heartland Institute, a non-profit and non-partisan public policy research organization.


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