The pandemic has challenged supply chains, with many common consumer and industrial goods experiencing chronic delays, roiling the availability of everyday items.
While multiple modes of freight transport have struggled to adjust, freight rail has remained resilient. Freight railroads are working hard to overcome supply chain disruptions thanks to their 24/7 operations and ongoing private investments.
However, proposed regulations such as those mandating “forced switching” or “forced access” would imperil this performance, threaten investment and reduce fluidity. Under forced access, privately owned and maintained railroads — which have invested in infrastructure and other assets to serve customers — could be forced to use those assets for the benefit of another railroad that is taking that customer away. If a railroad has to allow a competitor to use the infrastructure it has paid for, its incentive to install the infrastructure in the first place would be reduced. The entire supply chain would suffer if this happened. It would also undermine the economic, environmental and transportation goals of the administration.
It’s never a good time to implement unwise and unnecessary regulations. Americans are counting on freight rail to keep supply chains running, and now is a terrible time to consider imposing restrictions on an industry that is so critical to our economy. Recent polling shows that 8 in 10 American adults agree that the private freight rail industry is vital to the economy. Here are just a few ways railroads benefit the American public:
Unlike many other modes of transport, freight rail relies on its investments, not government subsidies.
While freight rail spends well above $20 billion per year on infrastructure and equipment, competing modes rely on extensive subsidies, both explicit and in the form of negative externalities to the public. Freight rail’s infrastructure investments serve freight and support Amtrak, with approximately 70% of Amtrak trains running on tracks owned by freight railroads. Additionally, about half of the nation’s commuter rail systems operate at least in part on freight-owned right-of-way. While the government funds truck and inland waterway infrastructure, freight rail not only funds itself but is also responsible for supporting most interstate passenger train lines.
The investments railroads make strategic and targeted to meet market demand. For instance, in 2021 alone:
- BNSF will spend about $3 billion, and approximately $400 million will be for expansion and efficiency projects. On its Southern Transcon route between the West Coast and the Midwest, BNSF will continue a multi-year effort to add several segments of new double-track in eastern Kansas. Once fully completed, BNSF will have 50 miles of additional main track to support traffic growth.
- Canadian National (CN) plans to invest $3 billion as part of a capital program, including crucial track expansion projects to boost capacity.
- Canadian Pacific (CP) is on track to spend $1.55 billion to strengthen its networks.
- To the East, CSX will spend about $1.8 billion as it moves into another phase of its network overhaul. Increased efficiency and port expansion in areas like Georgia will help CSX become that much more competitive with trucks in its more densely populated footprint.
- Kansas City Southern (KCS) expects to spend approximately 17% of revenue in 2021 and 2022 on capital spending, focusing on investments that improve service, volume growth, and productivity improvements.
- Norfolk Southern is also growing and recently opened its new headquarters in Atlanta and targets about $1.6 billion in Capex.
- Union Pacific (UP) is spending approximately $2.9 billion on capital investments, including $1.8 billion on infrastructure replacement, $535 million on capacity/commercial facilities, $255 million on equipment, and $235 million on technology.
Railroads spur billions of dollars in economic impact.
Railroads are among the top capital investors in the nation, creating good-paying jobs and building the hard infrastructure that makes the modern economy possible. Freight railroads spend six times more on capital expenditures as a percentage of revenue than the average U.S. manufacturer.
As the most fuel-efficient way to move freight over land, railroads are also making several investments in fuel-saving technologies, like battery-powered locomotives, aerodynamic railcars and zero-emissions cranes. Investments in green tech will further reduce greenhouse gas emissions through investments in an industry that only accounts for 1.9% of transport-related emissions.
Freight rail played an essential role in keeping supply chains running during the height of the pandemic.
The value of the freight rail network has become even more apparent as it plays a vital role in keeping supply chains running during the most disruptive parts of the pandemic.
A recent report on rail supply chains during the pandemic from Northwestern University’s Transportation Center found that “the reliability of the freight rail network played an essential role in ensuring critical needs for all sorts of goods were met.” If we want supply chains to return to normal, it is crucial to avoid policies that cause disruptions to rail intermodal service, like forced switching.
Rail exhibited this pandemic resiliency despite heavily subsidized competition from trucks. To keep up on this unlevel playing field, rail has innovated through cutting-edge technologies to help keep its networks safe and fluid.
The rail industry has undertaken extensive recalibration to adjust to changing markets, including recent extreme economic fluctuations. Unfortunately, with the warehousing, trucking, and container ship industries experiencing significant challenges such as equipment and driver shortages, supply chains will not return to full performance until other industries can rebalance as well.
Simply put, the solution to these disruptions is not to institute new measures that would slow the movement of goods. America’s ability to compete in a tough global economy requires vibrant, effective freight railroads. Still, history shows that the level of government control over railroads has a tremendous impact on their vibrancy and effectiveness. A return to unbalanced regulation would mean the efficiency and quality of rail service would fall sharply. The entire supply chain would be much worse off because of it. It’s a no-win scenario for the whole country and opposed by an enormous amount of stakeholders.
Don’t put our economy in danger.
Rail provides immense value to its customers and the public; is one of the most capital-intensive industries; relieves stress on supply chains; and helps keep America competitive in a challenging global economy. Poorly targeted regulations would imperil these benefits, making our country less connected and dynamic. Lawmakers should not try to fix a system that not only isn’t broken but is performing to the highest standards in the freight industry.