freight railroads: moving america forward association of american railroads march 2, 2009
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Freight Railroads:
Moving America Forward
Association of American Railroads
March 2, 2009
America’s demand for safe, affordable, and environmentally-responsible transportation has never been greater than it is today — and that demand will grow in the future.
Railroads are the most sensible way to meet this demand.
Efficiency From Coast to Coast
0%5%
10%15%
20%25%
30%35%
40%45%
'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06
Pipeline excludes natural gas. Source: U.S. DOT
The Leader in Freight Transportation
Railroads
Trucks
Water
Pipeline
(ton-miles)
Why Freight Rail? Fuel Efficiency
Move a ton of freight 436 miles per gallon.
Three times more fuel efficient than trucks.
Since 1980, double the freight on same amount of fuel!
Source: EPA
U.S. Greenhouse Gas Emissions
Freight Rail 0.7%
Why Freight Rail? Lower Greenhouse Gases
Everything Else99.3%
Moving freight by rail instead of truck reduces greenhouse gases by two-thirds or more.
Diverting 10% of long-distance truck traffic to rail would be like taking 2 million cars off the road or planting 280 million trees.
One train does the work of 280 (or more) trucks.
That means less highway gridlock and lower highway spending.
Why Freight Rail? Less Highway Gridlock
2¢
3¢
4¢
5¢
6¢
7¢
'81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07
Why Freight Rail?Keeping Goods Affordable
*Average revenue per ton-mile, Class I railroads. Source: AAR
Inflation-Adjusted RR Rates* — Down 54% Since 1980!
Today
Expected Traffic vs. Capacity
2035 without improvements
Below capacity
Near capacity
At capacity
Above capacity
Massive equipment and infrastructure investment
Enough people for the job
What Are Railroads Doing to Increase Capacity?
Cooperative alliances
Improved operating plans
Technology
$39 Billion Gap Between What RRs Can Afford and the Capacity We Need
Class I railroads only. Source: Cambridge Systematics
Growth: $70 bil.
Productivity: $26 bil.
Shortfall: $39 bil.
$135 billion in infrastructure expansion by
2035
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Sources: U.S. Census Bureau, AAR
Class I RRs
Avg. All Mfg.
Food
Petrol. & Coal Prod.
RRs Have Far Higher Capital Intensity Than Most Other Industries
Capital Expenditures as a % of Revenue: Avg. 1997-2006
Computers
Wood Prod.
Motor Vehicles
ChemicalsPaperNonmet. Minerals
Plastics
Railroads Spend More Than Most State Highway Agencies!
*Capital outlays plus maintenance expenses.
Sources: FHWA Highway Statistics Table SF-12; AAR
Class I Railroad Spending* on Infrastructure
vs. State Highway Agency
Spending* - 2006($ billions)
1. Texas $7.572. Florida $5.693. California $4.19
Union Pacific $4.17BNSF $3.89
4. New York $3.595. Pennsylvania $3.306. Illinois $3.30
CSX $2.627. Michigan $2.618. North Carolina $2.489. Ohio $2.14
Norfolk Southern $2.1210. Georgia $1.88
Source: Value Line
0%
4%
8%
12%
16%
20%
2003 2004 2005 2006 2007
Railroads Median All Industries
Return on Equity: Railroads vs. All Industries
RR Profitability is Below AverageEven in Era of “Record Profits”
25% tax credit for projects that expand rail capacity.
$1 in investment yields $3 in economic benefits!
$1 billion in rail investment = 20,000 jobs.
Huge public benefits far outweigh costs.
Tax Incentives Are a Smart Choice to Bridge the Funding Gap
Combine resources to meet public needs.
Railroads pay for their benefits, public pays for public benefits.
Examples: Alameda Corridor, CREATE, Heartland Corridor, National Gateway
Working Together: Public-Private Partnerships
Source: AAR
0306090
120150180210240270300
'65 '68 '71 '74 '77 '80 '83 '86 '89 '92 '95 '98 '01 '04 '07
Revenue
Volume
Productivity
Price
Staggers Act Passed Oct. 1980
The Staggers Act: Balanced Regulation Works
(Index 1981 = 100)
Excessive Regulation Would Mean Reduced Capacity and Service
Goal = lower rail rates for certain shippers
Result = lower rail revenue, capital drain, disinvestment.
Would mean less rail capacity and capability when we need more.
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