By: John Gray, AAR Senior Vice President of Policy & Economics
Lawmakers should make supporting the national intermodal network a priority because it is so crucial to our nation’s economic growth.
Intermodal is the movement of shipping containers and truck trailers by a combination of trains, trucks, and ships. Intermodal takes advantage of the best attributes of each mode to yield an efficient, cost-effective overall movement.
Freight rail is the backbone of our nation’s intermodal network. The rail segment often begins at on-dock port facilities where containers are transferred directly from ships to trains, then carried long distances inland. Railroads are also used to move millions of intermodal units in purely domestic service each year, representing a valuable and effective alternative to excessive reliance on highways to transport freight.
Successful intermodal corridors need sufficient line haul and terminal capacity to keep trains moving and avoid congestion or delay. With that in mind, US railroads have created the most advanced intermodal network in the world by more-fully utilizing existing capacity and through tens of billions of dollars in spending on new infrastructure and equipment directly connected to intermodal operations.
This intermodal-specific spending is part of a broader $25 billion average, annual spending — paid for with railroads’ own funds, not taxpayer funds — on capital expenditures and maintenance expenses related to locomotives, freight cars, tracks, bridges, tunnels, and other infrastructure and equipment.
1980: A Turning Point for Railroads
Railroads’ high levels of spending were not always possible. Prior to 1980, the industry was in dire condition. Bankrupt railroads accounted for more than 21 percent of the nation’s rail mileage, rail infrastructure was crumbling, and railroads lacked the funds to properly maintain their tracks.
Excessive government regulation was largely to blame. As the US Department of Transportation put it, “The current system of railroad regulation … is a hodgepodge of inconsistent and often anachronistic regulations that no longer correspond to the economic condition of the railroads, the nature of intermodal competition, or the often-conflicting needs of shippers, consumers, and taxpayers.”
To save the industry and the countless businesses and communities it serves, Congress passed the Staggers Act in 1980, which partially deregulated the industry. The Staggers Act ushered in a new era in which railroads could largely decide for themselves — rather than have Washington decide for them — what routes to use, what services to offer, and what prices to charge.
Since then, America’s freight railroads have been transformed into global leaders. Volumes and productivity have soared, safety and reliability are greatly improved, and average rail rates are down sharply. Every year, railroads save consumers billions of dollars while reducing energy consumption and pollution, lowering greenhouse gas emissions, cutting highway gridlock, and reducing the high costs to taxpayers of highway construction and maintenance. Railroads also have a tremendous broader economic impact: in 2017 alone, they supported 1.1 million jobs, nearly $219 billion in output, and $71 billion in wages across the US economy.
Looking ahead, the need to move freight will grow. Forecasts from the Federal Highway Administration suggest total US freight shipments will rise 3%7 by 2040. Fortunately, freight rail in general, and intermodal rail specifically represent a viable and socially beneficial way to help meet this growing demand. This does not mean we should no longer recognize the importance of trucks and highways, but it does mean policymakers should be doubly aware of the tremendous role railroads are playing, and can play in the future, in meeting our nation’s freight transportation needs.
Among other things, that means policymakers should be aware of the need for smart infrastructure policy.