Rail: It's for Ugly, Unfun Stuff Too

Freight rail is booming primarily because of the 3:1 fuel efficiency superiority of rail over trucks. Ryan Avent notes that "This boom is all the more impressive given that the railroad companies will pay for about 65 percent of the network expansion" while trucking companies do not, of course, pay for the roads.

Clearly trucks have a massive inherent advantage as a method of doing the last-mile of shipping, but for long-haul stuff a more rational federal policy environment in terms of carbon pricing and road/rail funding balance would give further momentum to this boom.

Comments

"This boom is all the more impressive given that the railroad companies will pay for about 65 percent of the network expansion" while trucking companies do not, of course, pay for the roads."

The last is not exactly true. Truckers pay all kinds of taxes that pay for roads.

Posted by lgm | April 21, 2008 2:57 PM

"trucking companies do not, of course, pay for the roads."

Tell it to the trucking companies and independent truckers. They'll be happy to explain something to you about gas taxes (not to mention tolls).

Sheeesh.

Posted by Thom | April 21, 2008 3:12 PM

Matt,

If you're driving across Westchester on 287, you'll find that truckers have to compete for space on the interstate with, well, everyone else.

Meanwhile, railroad companies are, essentially, paying a premium to make sure that they can avoid things like traffic jams. Hell, the Amtrak ride from Chicago to Ann Arbor took about twice as long as scheduled both ways because Amtrak has to yield to freight on tracks they don't actually own.

I'd say that's a fair deal, paying 65% of the capital costs, if you're going to get, at the very least, oligopolistic usage rights.

Posted by Greg | April 21, 2008 3:13 PM

Matt, do you think ALL the diesel taxes go to purchasing hookers for Congressmen? Hell, I'm as big a cynic I know, and even I don't go that far.

Posted by Will Allen | April 21, 2008 3:20 PM

Yes, obviously truckers contribute to both national and state spending on roads, but at the same time they constitute only a small part of it, far smaller than railroad companies do of financing railroad networks.

Though certainly railroads had a lot of help from favorable policies in the past, which makes it hard to say that they've had any kind of a raw deal.

Posted by BP | April 21, 2008 3:22 PM

I agree that figuring out who is paying what for infrastructure in the trucking and freight rail industries is more complicated than Matt suggests. Generally, I am not at all sure there has been much standing in the way of freight rail taking its "natural" share of traffic in the U.S.--at least holding aside the arguably unnatural price we have all been paying for gasoline, and perhaps also some output reduction resulting from consolidation (railroads have an antitrust exemption).

Anyway, yes, higher energy prices means freight rail is competitive in more circumstances, and if we experience sustained higher energy prices, then that likely means a lot more switching to freight rail. But don't forget about inland waterways: moving freight on inland waterways is even cheaper than moving it on rails (barges are about 2.5 times again more fuel-efficient than rail).

Posted by DTM | April 21, 2008 3:29 PM

Do trains use tax-free diesel? Otherwise they have to pay for roads as well.

Posted by Mo | April 21, 2008 3:34 PM

I see I'm not the first person (or the second, or the eighth) to have the same thought.

And in response to BP, if truckers are paying only a portion of the taxes that go to pay for the highways, that's most likely because they account for only a portion of the vehicles using the highways.

Posted by Steve H | April 21, 2008 3:40 PM

Of course, the best answer is to make truckers pay their way in more direct ways that diesel/gas taxes. I.e., toll and usage pricing - not just for them but for everyone who uses roads - would make everyone more conscience of the cost of construction, plus the environmental impact of their use.

As with anything you need to connect pricing to usage in order to get a feedback loop operating properly.

Posted by Joe Strummer | April 21, 2008 3:59 PM

"This boom is all the more impressive given that the railroad companies will pay for about 65 percent of the network expansion" while trucking companies do not, of course, pay for the roads.

Clearly trucks have a massive inherent advantage as a method of doing the last-mile of shipping, but for long-haul stuff a more rational federal policy environment in terms of carbon pricing and road/rail funding balance would give further momentum to this boom.
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I don't need to pile on how wrong you and Avent are about the use of truck fuel taxes. Also, most people forget how heavily subsidized railroads used to be. All you have to do is look at a map of the "checkerboard" land ownership situation in many areas of the west to see how many hundreds of thousands of acres of public land (and the minerals underneath it) were given away to bribe the railroads to extend across the continent.

Also, do you really read what you link to? The boom in railroad transportation is fueled by the increase in our shipping coal to China and our import of EVIL cheap manufactured goods from there. So you believe the government should have a "more rational federal policy environment in terms of carbon pricing and road/rail funding balance" so the Chinese can burn more coal at a cheaper price?

That's some real deep thinking!

Posted by Campesino | April 21, 2008 4:06 PM

And in response to BP, if truckers are paying only a portion of the taxes that go to pay for the highways, that's most likely because they account for only a portion of the vehicles using the highways

But as I understand it, trucks have a hugely disproportionate impact on highway wear. I doubt they are actually covering the real costs of those trucks driving the highways.

On the other hand, either way, I think this is pretty obviously one of those cases where the cost to our economy of consuming fewer fossil fuels would be negligible. It's not like the price of freight shipping will go up proportionally to gas prices. At some price, you just switch to trains.

Posted by mpowell | April 21, 2008 4:12 PM

I'd also like to point out that the railroad freight boom makes them less likely to permit their corridors to be used for passenger traffic. Here in Nashville, one of the big problems we've had in developing commuter rail is that most of the lines serving the city, including lines along the most heavily traveled commuter routes, are controlled by CSX, which flatly refuses to consider the idea. And the more freight they handle, the more hostile they'll be.

Posted by David in Nashville | April 21, 2008 4:30 PM

David in Nashville,

That is one of the reasons why the case is getting stronger for not trying to add high-speed passenger rail in the Acela style of using existing tracks with minor upgrades, but rather just putting together the upfront cash necessary to go straight to new dedicated high-speed passenger tracks.

Posted by DTM | April 21, 2008 4:45 PM

Uh oh, pass Mixner the smelling salts.

Posted by bozo | April 21, 2008 4:53 PM

So the fact that railroads got land grants in 1870 means what exactly. Truckers got the interstates. Call it a wash. Except of course that the road and gas taxes paid by the trucking industry comes no where near paying for the damage they inflict on roads.

Posted by msj | April 21, 2008 4:59 PM

So the fact that railroads got land grants in 1870 means what exactly.
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Oh, NOTHING.

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With the passage of the Pacific Railway Bill during the Civil War, the Union Pacific Railway Company and Central Pacific were given millions of acres of land to complete a railroad all the way to the Pacific Ocean, one company starting at the West Coast and the other farther east. Both lines met at Promontory Point, Utah, in 1869, where the ceremonial "golden spike" was driven with a silver-plated hammer to commemorate the historic event.

Shortly after this, however, land grants ceased to be public policy, because many people had begun to question giving away so much land to private companies. Between 1850 and 1870, over 129 million acres -- seven percent of the continental United States -- had been ceded to 80 railroad companies.
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Seven percent of the land area of the country and the minerals under it couldn't be worth much, could it?

Posted by Campesino | April 21, 2008 5:18 PM

"Freight rail is booming primarily because of the 3:1 fuel efficiency superiority of rail over trucks."

That's why Warren Buffett bought 17% of Burlington Northern last year.

Posted by Fred | April 21, 2008 5:18 PM

Given the externalities of the fuel situation (i.e. resource wars, climate change, financing of terrorist organizations, etc.) it ought to be a no-brainer to have policy encourage the more fuel-efficient transport option.

One of the many changes we'll be making in coming decades whether we want to or not.

Posted by jimBOB | April 21, 2008 5:22 PM

So the fact that railroads got land grants in 1870 means what exactly.
*************************************************
Oh, NOTHING.

*************************************************

With the passage of the Pacific Railway Bill during the Civil War, the Union Pacific Railway Company and Central Pacific were given millions of acres of land to complete a railroad all the way to the Pacific Ocean, one company starting at the West Coast and the other farther east. Both lines met at Promontory Point, Utah, in 1869, where the ceremonial "golden spike" was driven with a silver-plated hammer to commemorate the historic event.

Shortly after this, however, land grants ceased to be public policy, because many people had begun to question giving away so much land to private companies. Between 1850 and 1870, over 129 million acres -- seven percent of the continental United States -- had been ceded to 80 railroad companies.
*************************************************

Seven percent of the land area of the country and the minerals under it couldn't be worth much, could it?

Posted by Campesino | April 21, 2008 5:29 PM

"This boom is all the more impressive given that the railroad companies will pay for about 65 percent of the network expansion" while trucking companies do not, of course, pay for the roads.

Freight railroad companies also generally own the trackage (with a few exceptions such as the North Carolina Railroad, which carries quite a few NSX trains, and a few areas in the Northeast Corridor). Also, since the Staggers Rail Act of 1980, rail carriers can charge whatever they want for freight, charging more where they have a strong competitive advantage or monopoly.

The rail companies are investing in the network because they own the trackage and it's profitable. It is not in general surprising that railroad companies would be willing to make investments that will make themselves even more profitable. (The trucking companies do not, of course, own that many private roads, nor could they compete with the subsidized ones, so it's unsurprising that they would not invest in them.)

Posted by John Thacker | April 21, 2008 5:40 PM

Studies have shown that a loaded 18-wheeler causes as much damage to highways in one mile as an average passenger car inflicts in 700 miles. If combined state and federal gas tax is 36 cents per gallon, an 18-wheeler at four miles per gallon would pay nine cents in road taxes in exchange for causing that amount of damage. The average passenger car would pay about $12.60 to do the same damage. So, passenger car owners are paying about 140 times as much for doing the same amount of damage as a trucker does. If truckers were not subsidized by the taxes paid by car drivers, the rails would have a much more substantial advantage.

Posted by jim gundlach | April 21, 2008 5:52 PM

If combined state and federal gas tax is 36 cents per gallon, an 18-wheeler at four miles per gallon would pay nine cents in road taxes in exchange for causing that amount of damage.

To be fair, 18-wheelers also pay taxes at weigh stations that cars do not. I am very sympathetic to the idea that trucks do not pay enough, or that congestion and/or carbon charges are a good idea. Claiming that trucks pay not at all for the road is, however, ridiculous.

Posted by John Thacker | April 21, 2008 6:06 PM

Trucks also pay a significant tire tax.

Posted by Rob | April 21, 2008 6:15 PM

Re Campesino

The railroads are certainly making a pretty penny shipping coal. However, most of it is being shipped to coal burning power plants in the US (coal burning plants contribute 47% of US electric power). China has large coal deposits and has little need of imports from the US, although they do import some from Australia.

Posted by SLC | April 21, 2008 7:25 PM

It's the trade deficit with China and other far eastern countries that's driving the boom in rail shipments. I've worked for two of the four American class I railroads' intermodal businesses. Take a look at the jam-packed ports on the west coast--that's the whole story right there. There's very little going East to West. And if the railroads and Rick Perry have their way, those ports will move to Mexico.

Buffet bought BN because its operations are better than UP's, its competitor in the western half of the U.S.

Posted by Guy in Jersey | April 21, 2008 9:46 PM

Lots of great stuff. I'm listening to the train whistles right now from the freight trains that rumble through my town.

Jim G. threw out the stat that matters - trucks do way more damage to roads than cars. Fully loaded trucks weigh 80 tons, or 160,000 lbs, or just under 10,000 lbs / tire. Passenger vehicles are between 2500 and 6000 lbs., so at most 1500 lbs / tire. If we all rode sport bikes, our roads would last forever - 300 lbs / tire.

Do truckers really pay a special tax on tires?

They also pay way more in tolls.

Posted by phil | April 21, 2008 10:28 PM

"Buffet bought BN because its operations are better than UP's, its competitor in the western half of the U.S."

Buffett also owns Union Pacific, but he's been selling some of it recently.

Posted by Fred | April 21, 2008 11:10 PM

mpowell and jim gundlach got it right!
powell was my mom's maiden name. Out here in Kalifornination and the Irish Free State of O'Reagan.

Posted by dilbert dogbert | April 22, 2008 12:00 AM