Thursday, June 27, 2013

AAR to Congress: Freight rail strong and flexible—and the backbone of passenger rail

Written by  William C. Vantuono, Editor-in-Chief
AAR President and CEO Ed Hamberger AAR President and CEO Ed Hamberger
In two days of testimony before two separate U.S. House of Representatives transportation panels, Association of American Railroads President and CEO Edward R. Hamberger emphasized that “billions in annual privately funded rail infrastructure investments have made America’s rail network vital to U.S. competitiveness in the global supply chain,” and those investments spent on infrastructure and maintenance “provide a world-class foundation for America’s intercity passenger and commuter rail operations.”

Hamberger on Wednesday, June 26, testified before the House Transportation & Infrastructure Committee Panel on 21st Century Freight Transportation on the subject of freight logistics. The following day, he testified before the T&I Committee Subcommittee on Railroads, Pipelines, and Hazardous Materials on reauthorization of the Passenger Rail Investment and Improvement Act of 2008 (PRIIA).

NS Stack Train“There is a tremendous amount of strength and flexibility in our nation’s freight transportation systems—more so than any other country in the world,” Hamberger told the freight panel. “Freight railroads are investing today to meet increased freight demand forecasted for tomorrow—through record investments in infrastructure and equipment, development and implementation of technology, and improved operational efficiencies. Most freight moving in America today moves on more than one mode of transportation, including truck, train, and barge or ship. In addition to a strong underlying infrastructure for each mode, a critical link in all of these intermodal freight movements is the health of the first- and last-mile connection. These connections, where freight is perhaps handed off from ship to truck or ship to rail, are highly vulnerable to disruptions and improving them will ensure America can stay competitive in the global supply chain and handle the large increases in future freight demand.”

“One of the distinguishing characteristics of our economy in recent years is sharply increasing globalization,” Hamberger said. “In 2000, for example, the value of U.S. exports of goods (as opposed to services) was $843 billion. In 2012, it was $1.3 trillion, a 54% increase. In 2000, the value of U.S. imports of goods was $1.4 trillion. In 2012, it was $1.9 trillion, a 36% increase. Products and commodities across the industrial andscape have been part of this increased globalization. We estimate that railroads account for approximately one-third of U.S. exports, and that approximately half of U.S. rail intermodal traffic consists of exports or imports. There’s no doubt that globalization will continue, and railroads are working hard to ensure that they can continue to play a crucial role.”

“The expansion of the Panama Canal is a case in point. Larger ‘post-Panamax’ ships will be able to carry up to approximately 12,500 containers, or nearly three times the maximum number carried by existing ships that use the canal. The big unknown is where ships carrying cargo that are bound for, or coming from, the eastern part of the U.S. will go. Today, a significant portion of the cargo from Asia destined for the eastern part of the U.S. is offloaded at West Coast ports, and then transported inland on trucks, railroads, or, in some cases, rivers. Going the other way, cargo headed to Asia from the eastern part of the U.S. often travels via rail or truck to West Coast ports, where it is loaded onto ships heading west.

“It is not uncommon for existing Panamax (or smaller) ships coming from Asia with cargo bound for the eastern U.S., as well as ships with cargo from the eastern United States heading to Asia, to go through the Panama Canal on an “all-water” route, rather than use the land bridge. Some observers believe that the huge capital costs of the post-Panamax vessels and other factors will cause these ships to remain primarily on routes to the West Coast. Many others, though, think that a post-Panamax ship is just as likely to find it cost effective to use the “all-water” route to or from the eastern U.S. Of course, if an all-water route is to be used, the eastern ports must be able to handle the post-Panamax vessels, which is the rationale for the efforts by a number of ports on the East Coast, the Southeast, and the Gulf of Mexico to dredge deeper channels, install new cranes, and/or build new dock capacity to accommodate post-Panamax ships. Meanwhile, ports on the West Coast are pursuing many of these same kinds of improvements to better position themselves as the preferred destination for ocean carriers even after the canal expansion is complete.

“Frankly, I don’t know which ports will be the ‘winners’ and which will be the ‘losers’ of this competitive battle. I do know, though, that from the point of view of our nation’s rail industry as a whole, it doesn’t really matter. Our nation’s freight railroads are in a good position now, and are working diligently to be in an even better position in the future, to offer safe, efficient, cost-effective service.”

Hamberger also addressed public-private partnerships, balanced regulation, the impact of longer, heavier trucks, the efficiency (or lack thereof) of environmental reviews, and the federal infrastructure funding policy of “user-pay,” which he said “has worked well.”

“As a general rule, the various freight transportation modes should pay their own way,” Hamberger stressed. “The traditional system under which users of infrastructure pay for that infrastructure should not be broken. Freight railroads pay virtually all of the costs of their tracks, bridges, and tunnels themselves. Trucks, airlines, and barges, however, operate over highways, airways, and waterways that the government largely pays for. Today, for example, 80,000-pound trucks pay only about 80% of the cost of the damage they cause to taxpayer-funded roads and bridges, while trucks weighing 80,000 to 100,000 pounds pay for only around half of the damage they cause. This huge underpayment, which totals several billion dollars per year, means that repairing much of the highway and bridge damage caused by heavy trucks is paid for by the general public, not by the trucking companies themselves.

“As the Government Accountability Office has pointed out, the existence of underpayments ‘distorts the competitive environment by making it appear that heavier trucks are a less expensive shipping method than they actually are and puts other modes, such as rail and maritime, at a disadvantage.’ Moreover, under current projections, revenues to the Highway Trust Fund (HTF) will continue to decline relative to projected needs. Funding shortfalls in the HTF in recent years have caused the federal government to transfer some $55 billion in general fund revenues to meet contract obligations and authorized funding levels. Absent the addition of new revenue streams, general fund transfers are expected to be required in the future as well—perhaps as high as $15 billion annually. These transfers directly benefit the railroad industry’s major competitor, which is trucking. Combined with the existing huge truck underpayments noted earlier, these transfers are an enormous competitive hurdle that railroads must overcome and they artificially distort the freight transportation marketplace.”

At the hearing focused on national rail system policies in advance of PRIIA reauthorization, Hamberger stated that freight railroads “for 40 years have successfully worked with Amtrak and local commuter railroads to ensure millions of American intercity passengers and commuters can travel safely and reliably by rail every day. Any planned expansion of passenger rail—whether it’s high speed or expanded intercity passenger service—must be done in conjunction with, and not at the expense of, freight rail operations.”

“Our nation can have both safe, effective passenger railroading and a safe, productive, world-best freight rail system,” Hamberger said. “Freight railroads want passenger railroads to succeed, they work cooperatively with passenger railroads to help make this happen, and they support government efforts to grow passenger rail in ways that complement freight rail growth. The reauthorization of PRIIA presents an opportunity for policymakers to help achieve this goal.

Freight and Passenger“Freight railroads are already partners with passenger railroads all across the country. Approximately 93% of Amtrak’s approximately 21,300-mile system consists of tracks owned and maintained by freight railroads, and more than 60% percent of the miles traveled by Amtrak trains are on tracks owned by freight railroads. Freight railroads also furnish other essential services to Amtrak, including train dispatching, emergency repairs, station maintenance, and, in some cases, police protection and communications capabilities. In addition, hundreds of millions of commuter trips each year occur on commuter rail systems that operate at least partially over tracks or right-of-way owned by freight railroads, and most of the high speed and intercity passenger rail projects under development nationwide will utilize freight-owned facilities.

“Reshaping the nation’s passenger transportation system with expanded rail choices entails significant challenges. There has been a great deal of discussion in recent years—and a great deal of disagreement—on how to deal with these challenges. There should be no disagreement that America’s economic health and global competitiveness would suffer greatly if the expansion of passenger rail service were to impede our nation’s freight railroads.

Freight railroads provide the foundation for passenger rail. Great care must be taken to ensure there will be a regulatory and legal framework that protects the business needs and responsibilities of all parties. In that regard, freight railroads strongly support existing federal guidelines that stipulate that states receiving federal grants for intercity and high speed rail projects must have written agreements up front with host freight railroads. The issues addressed—such as safety, capacity, compensation, and liability—help to ensure that all parties are on the same page, protect all parties’ interests, and avoid unpleasant surprises later.”

Hamberger reiterated the AAR’s “five key principles”:

• “Safety has to come first when it comes to passenger trains sharing track or rights-of-way with freight trains. Under certain conditions (case-by-case evaluations are always necessary), passenger trains operating at speeds over 79 miles per hour may be able to safely share tracks with freight trains. Where separate passenger tracks are required, AAR believes safety would be enhanced if these separate tracks were sufficiently far apart to minimize the likelihood that a derailment on one track could foul an adjacent track and lead to a collision involving a freight and passenger train.”

• “Capacity issues must be properly addressed. New capacity will be needed before passenger trains can operate. New infrastructure built for passenger trains should fully preserve both the ability to operate freight trains as needed and the opportunity to expand further freight service as the need arises in the future, including the ability of the freight railroad to access new customers along the right-of-way.”

• “It is reasonable for the host freight railroad to expect full and fair compensation. Tracks on which passenger trains operate, particularly high-speed trains, must meet different standards requiring significantly higher and more expensive maintenance than tracks on which freight trains operate. Host freight railroads should be fully compensated for these and any other added costs involved. Moreover, railroads should not be subject to any new local, state, or federal tax liability as a result of a passenger rail project.”

• “Freight railroads must be adequately protected from liability that would not have resulted but for the added presence of passenger rail service. It is almost inevitable that some accidents will occur on railroads, despite railroads’ best efforts to prevent them. An accident involving passenger trains is far more likely to involve significant casualties than an accident involving only freight trains. Passenger operations also bring more people onto railroad property, resulting in a corresponding increase in risk. These potentially ruinous risks make freight railroads extremely reluctant to allow passenger trains on their tracks without adequate protection from liability.”

• “There can be no one-size-fits-all approach. By statute, access fees that Amtrak pays to operate over the freight railroads’ tracks are only required to cover the incremental costs associated with Amtrak’s operations—that is, the additional costs that arise solely because of Amtrak’s presence. Amtrak is not required to contribute to the freight railroads’ fixed costs or to the shared costs for which Amtrak operations have a responsibility. Consequently, Amtrak’s [fee to freight railroads] is low and is, for all intents and purposes, an indirect subsidy paid by freight railroads to Amtrak. This means that the current structure by which Amtrak ‘rents’ freight tracks should not necessarily serve as a guidepost for the future. Agreements must be tailored to the specific needs and conditions of each project, which is why each project must be evaluated on a case-by-case basis.”

Hamberger emphasized that, regarding Amtrak’s future, “it is not reasonable to expect Amtrak to be able to plan, build, and maintain adequate infrastructure that provides optimal transportation mobility and connectivity when there is so much uncertainty regarding what its capital and operating funding will be from one year to the next. Freight railroads agree with Amtrak CEO Joseph Boardman when he said, ‘If Congress provides predictable and needed levels of federal funding support, Amtrak and our state partners can better deliver a future of improved reliability, enhanced capacity, more service, increased speeds, and reduced trip times on the Northeast Corridor and other passenger rail corridors around the country, including the development of new ones.’”

With regard to operating agreements between freight and passenger operators that involve such “complex interactions” as ontime performance standards, maintenance requirements, and service quality standards, “the freight railroads and Amtrak are in a far better position than anyone else to determine, working together, what these operating agreements should contain and how they should be structured,” Hamberger said. “Establishment and measurement of schedules and on-time performance metrics should be undertaken jointly by host freight railroads and Amtrak and governed by private bilateral contracts and the facts and circumstances of particular routes, not by one-size-fits-all legislative mandates. The railroads involved are in the best position to have a clear understanding of the cause of delays that occur on a particular rail system and how they can be reduced. This kind of shared contract-based responsibility has worked well in the past, enabling Amtrak and freight railroads to better address problems and improve service. That’s why freight railroads oppose legislative provisions that penalize freight railroads for Amtrak delays. Penalties inject antagonism and mistrust into what should be a cooperative relationship.

“PRIIA contains a provision that required the FRA and Amtrak to jointly develop metrics and standards to measure the performance and service quality of intercity passenger trains. Freight railroads viewed this delegation of rulemaking authority to Amtrak as contrary to the U.S. Constitution and have sought judicial intervention. A decision on this case is expected soon. Depending on the outcome, the status of the ontime standards developed under PRIIA will be affected and may need to be revised by Congress. It would be best if Congress modified the PRIIA metrics and standards provisions to give precedence to the performance standards contained in the operating agreements negotiated between Amtrak and the particular host freight railroad.”

frd grade crossingHamberger stated that the Section 130 Program, which helps fund installation of and improvements to highway-rail grade crossing warning systems and surfaces, must be continued. “Railroads urge you to retain dedicated funding for the Section 130 program when you reauthorize MAP-21. In addition, because the safest grade crossing is the one that no longer exists, we recommend that Congress consider measures that would provide incentives for grade crossing closures. One approach may be to give latitude to the U.S. Department of Transportation to give preferential consideration to state passenger rail grant applications that include detailed goals and plans for grade crossing closures within passenger rail corridors.”

Hamberger reiterated prior testimony before the U.S. Senate on Positive Train Control and why the federally imposed deadline of Dec. 31, 2015 is not feasible.

Hamberger concluded his testimony by stating that Amtrak—and only Amtrak—should operate intercity passenger rail services on the nation’s freight rail network.

“Due to concerns about Amtrak’s finances and other factors, some have proposed that Amtrak should be replaced by other passenger rail operators on all or part of Amtrak’s current routes and on any new passenger rail routes that may develop,” he said. “Freight railroads do not support these proposals, and would oppose the transfer or franchise of Amtrak’s right of access, preferential access rates, and operating priority to any new non-Amtrak passenger operators.

“Why? First, the terms and conditions under which Amtrak uses freight-owned tracks were originally negotiated 40 years ago under circumstances that are vastly different from today. Amtrak has historically enjoyed federal financial support and has proven itself to be a safe and professional operator over four decades. Should Amtrak services be picked up by others, it is unclear what the circumstances would be. For example, private entities may have different degrees of financial backing; public authorities may or may not enjoy the full faith and credit of their sponsoring states; some prospective passenger rail operators may be less committed to safety and sound operating standards than Amtrak; and serious labor issues could arise. Clearly, the status quo would be altered in respects that are impossible to know beforehand, creating huge uncertainties that, frankly, freight railroads do not need. They would rather concentrate on helping the economy grow by meeting the freight transportation needs of their customers.”

AmtrakCoastStarlightMtShastaCa226883-1023x670“Moreover, proposals to force freight railroads to grant other passenger carriers access to their tracks under preferential terms and conditions ignores the fundamental fact that freight railroads’ rights-of-way are private, not public. In the absence of voluntary agreement, freight railroads should not be forced to allow passenger operators to use their assets any more than any other private business should be forced to allow another company to use its assets without its consent or at non-compensatory rates. Indeed, forcing freight railroads to convey mandatory access to non-Amtrak passenger operators would create serious constitutional issues. Amtrak and freight railroads have ‘grown up together. Certainly, there have been struggles along the way, as there are in any complex relationship, but the relationship works.

“For decades prior to Amtrak’s creation, our nation’s railroads learned the hard way how difficult it is to recover the full costs of passenger railroading. Although Amtrak was created as a for-profit entity, experience has shown that this is not achievable. No comprehensive passenger system in the world operates today without significant government assistance, and the fact that Amtrak requires public support should not be seen as a primary reason for seeking alternative passenger rail providers.”