CEO PERSPECTIVE: Sustainable Economic and Legislative Policies

As part of a special series in Railway Age’s March 2021 issue, 11 North American railroad CEOs address the daunting challenges the freight rail industry faces as the 21st century enters its third decade—from operations and technology to marketing and growth. Here, Ian Jefferies, President and CEO of the Association of American Railroads, covers championing balanced economic and legislative policies.

Railway Age readers probably sense the opportunity that the Association of American Railroads and its members do, as railroads could occupy a little more time in the limelight this year. Infrastructure and transportation policy will capture greater importance in 2021 than in recent years, and rail—both passenger and freight—will be important to the process.

This makes good sense.

As a privately financed, safe and environmentally efficient transportation mode, railroads are uniquely positioned to make progress on major challenges, including—most immediately—economic recovery, as well as climate change and maximizing the efficient movement of goods. How, specifically, railroads will be empowered to do so will play out this year, in part through the need to reauthorize the surface transportation law, ideally in keeping with past precedent of bipartisan cooperation.

Indeed, with renewed enthusiasm for addressing infrastructure, a relevant question in Washington should be: How can freight rail manage more freight to help reduce greenhouse gas (GHG) emissions and alleviate pressure on publicly owned infrastructure? Certainly, exploring policies that emphasize the industry’s efficiency and balances the competitive playing field in the freight market is a sensible goal. Railroads, through sustained private investment, modernized operations and the continued deployment of new technologies, are already increasing critical capacity and improving product delivery in their existing footprint and without significant public dollars.

But future progress requires data-driven and forward-thinking policies—not measures that undermine railroads’ competitive viability. So, to inform the process and foster policies that encourage rail growth in parallel with resulting societal benefits, AAR will emphasize a set of key points to policymakers and the public.

Freight Rail’s Public Benefits 

Some fundamental truths worth repeating:
• By any measure, the most recent decade has been the safest in history.
• Freight railroads have invested roughly $25 billion annually in recent years—of their own funds, not government funds.
• While accounting for 40% or more of long-distance freight volume, freight railroads account for only 0.6% of total U.S. GHG emissions. On average, railroads are three to four times more fuel efficient than trucks.
• Railroads haul approximately 35% of all U.S. exports.

Freight Rail is Adapting and Fueling Growth

Railroads are future-focused and increasingly nimble:
• Structural changes in traffic patterns have been long-afoot, and railroads are continuing to make strides to offer just-in-time service at more competitive rates.
• With retailers continuing to restock their inventory and strong seasonal e-commerce demand, railroads closed 2020 consistently exceeding 2018 levels—which were 6%-10% above comparable 2019 volumes.
• Forthcoming research from the Northwestern University Transportation Research Center (NUTC) shows railroads directly won business from new retail customers amid the COVID pandemic, leveraging available capacity and seizing a clear market opportunity.

Rail Will Continue To Thrive With Sensible Policies

To make greater progress, policymakers should consider measures such as
the following:
• Maintain the balanced economic regulatory structure that empowers the market to govern most interactions (including rate setting) between railroads and customers, while also providing needed regulatory protections for qualifying shippers.
• Make the Highway Trust Fund solvent again by implementing, over time, a vehicle miles traveled (VMT) fee that takes into account vehicle weight or axle count. A VMT offers the opportunity to create a more equitable system of funding public road and bridge infrastructure by ensuring that all passenger and commercial vehicles pay for their use.
• Consider a market-based program to reduce emissions from freight transportation by encouraging businesses to ship their products using modes with lower GHG emissions.

Shortsighted policies are incongruent with future growth.

When considering surface transportation authorization, the primary objective should be a bipartisan bill focused most squarely on funding and devoid of divisive policy measures. Riders that have no place in a transportation bill will only undermine bipartisan buy-in, while rail-specific measures, like those that follow, will undermine the industry’s positive externalities.

• Mandating specific operating models, such as a minimum railroad crew size, and unnecessary personnel requirements that are not supported by safety data and would roll back efficiency gains and limit innovation. Rather, policymakers should embrace innovation that bolsters network safety and performance.

• Limiting railroad efficiency through the imposition of arbitrary operational complexities and restrictions on private and largely closed networks, such as a specific train length maximum. Larger and more predictable train sizes allow railroads to reduce the number of trains running concurrently, and more precisely match the locomotive power assigned to each train, which improves efficiency and lessens the environmental impact.

• Increasing truck size or weight limits, as this would shift freight to roads and increase subsidies to the trucking sector, already a beneficiary of substantial subsidies from consistent infusion of general taxpayer funds into the Highway Trust Fund. 

Read more of Railway Age’s special CEO Perspectives series:

• Katie Farmer, BNSF: Leveraging Advanced Technologies
• Keith Creel, Canadian Pacific: Growing the Top Line
• JJ Ruest, CN: Improving Customer Supply Chain Visibility
• Jim Foote, CSX: Railroads as a Sustainable Business
• Pat Ottensmeyer, Kansas City Southern: Maximizing USMCA for Cross-Border Growth
• Jim Squires, Norfolk Southern: Building the Digital Railroad of the Future
• Lance Fritz, Union Pacific: Smart Capital Investment Strategies
• Peter Gilbertson, Anacostia Rail Holdings: Providing Outstanding Customer Service
• Dean Piacente, OmniTRAX: Building Better Communities Through Industrial Development
• Dan Smith, Watco: Integrated Transportation Services Fuel Growth