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New Public Management in the Transport Sector Nordic Transport Research Conference Oslo, Norway, 4th-5th September 2006 Rail Infrastructure – The Scene in the USA John C. Spychalski Professor of Supply Chain Management Smeal College of Business The Pennsylvania State University
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Nordic Transport Research Conference
Oslo, Norway, 4th-5th September 2006
Rail Infrastructure – The Scene in the USA
John C. Spychalski
Professor of Supply Chain Management
Smeal College of Business
The Pennsylvania State University
University Park, Pennsylvania 16802-3603 USA
2. Industry and Market Structures
3. Infrastructure – Ownership and Access
4. Paying for Infrastructure – Rail Service Providers and
5. Paying for Infrastructure – External Sources
6. Current and Emerging Challenges for Infrastructure
7. Summary and Conclusions
Class I Sector (≈ 98,000 miles of line in 2004)
Regional and Local (Short Line) Sector
(Miles of line, 2004: Regional: 15,641; Local: 27,109)
The US Surface Transportation Board (STB) defines Class I railroads on the basis of an annual operating revenue threshold. For 2004, the threshold was $289.4 million or more. The Association of American Railroads (AAR) identifies non-Class I railroads on the basis of their revenue and mileage characteristics. Regional railroads are carriers operating at least 350 miles of line and/or earning operating revenue between $40 million and the Class I revenue threshold. Local (short line) railroads are either line-haul carriers below the Regional criteria or switching and terminal railroads (Railroad Facts, p. 3).
- BNSF Railway and Union Pacific Railroad in the
- Norfolk Southern Railway and CSX Transportation
* Some railroads within this total are subsidiaries of either regional/short line holding companies which own several railroads, or of Class I carriers.
- Result of post-1976 trend: 86% decrease in sector
population, massive consolidation/concentration
- Despite consolidation, ≈ 50% of rail shipments are
handled by two or more railroads
- Post-1976 trend: 61% increase in sector
population, great rise in sector atomization (most
short lines are primarily feeders to large railroads)
For carload (wagonload) and trainload (unit train or block train) service, with origination and termination on rail service users’ private sidings: Monopoly – except in the relatively small number of instances where (a) location of a user’s facility makes possible private siding access to lines of more than one carrier, (b) the user is served by a ‘neutral’ short line that interchanges traffic with two or more line-haul railroads on the same terms, or (c) STB-ordered access as a condition of merger approval.
For intermodal service (TOFC, COFC, Double Stack, RoadRailer®,etc.:
Competitive inhigh-volume corridors served by two or more line-haul railway companies which possess intermodal terminal facilities of comparable internal efficiency and access by complementary (feeder) truck and water carriers
* Excludes metro, light rail, and tram (streetcar) systems
Ownership – Almost entirely private, with few exceptions, i.e.:
- ‘Tenant’ on suburban/commuter and freight railways elsewhere
* Gross revenue from charges for line-haul freight transport service, switching (shunting), demurrage and incidental rail operating services. Source: Railroad Facts, p. 12.** Rail operating revenues minus rail operating expenses, taxes, and rent for joint facilities. Fixed (interest) charges are excluded. Railroad Facts, p. 17.
* Average net investment in assets used to provide transport service.** As computed by STB, calculated on basis of cost of debt and post-tax cost of equity (shareholders’ investment). Source: Railroad Facts, pp. 18-19.
Bases for differential pricing:
- Spot (rate in effect only for limited period of time)
- Doubt about durability of traffic/revenue increases
- Magnitude of expenditures required
- Specialized, long-lived, site-fixed infrastructure
- Skepticism by ‘Wall Street’ – large CAPEX
programs often drive down rail share prices
- Rates of return on capacity additions seen as ≤
railway companies’ cost of capital
- Reduced infrastructure and operating costs for rail
- Increased trucking costs for initial shipper of grain
- Increased capital and maintenance costs for rural
road infrastructure provider
- Removal of automatic train stop/automatic train
control safety equipment from signal system to
lower capital and maintenance costs
- Reductions in super elevation of track on curves
Blanchard, Roy “What makes a successful small road?” Railway Age, April 2006, pp. 31-33.
“Freight Rail Transportation: Long-Term Issues,” A CBO Paper, Washington, D.C., Congressional Budget Office, January 2006.
Gormick, Greg, “The great grain strain,” Railway Age, May 2006, pp. 25-33.
Interstate Commerce Commission (ICC), Annual Report-1959.
Johnston, Bob, “The Emperor’s new railroad – Less cash, more efficiency required of Amtrak in 2006,” Trains, March 2006, pp.24-25.
Miller, Luther S., “Can intermodal ease the squeeze?” Railway Age, August 2006, pp. 19-23.
Roth, Daniel L., and Aggarwala, Rohit T., “Whose Railroad Is This, Anyway?: Opportunities and Challenges in Regionalizing the Northeast Corridor,” Paper 02-2636, Transportation Research Board, Annual Meeting, January 2002, Washington, D.C.Railroad Facts – 2005 Edition. Washington, D.C.: Policy and Planning Department, Association of American Railroads, November 2005.
Vantuono, William C., “Keep them moving,” Railway Age, September 2005, pp. 45-60.
Vantuono, William C., Twenty-five years after Staggers – New challenges, huge opportunities,” Railway Age, July 2005, pp. 22-26.