The United States’ freight rail network is the finest and safest in the world, crisscrossing North America to connect the largest ports up and down the East and West coasts, as well as the Gulf of Mexico. All at an unbeatable cost to taxpayers — nothing. The railroads own, maintain, and pay taxes on their infrastructure.
This system, the envy of the world, moves everything from coal to corn to cars at incredible speeds and carries invaluable benefits to both commerce and the environment for the nation. It does, however, come at one striking cost to the public — the quality of passenger rail. For all of our prowess at transporting goods, America has fallen dramatically behind in moving people. But that trade-off could well be worth it.
Chances are that the electricity used to power the things we take for granted is dependent upon the railroads. The Union Pacific and BNSF Railway annually transport billions of tons of coal mined in Wyoming’s Powder River basin for use in power generation plants all across the country.
It’s the same when Americans go to the supermarket. A loaf of bread, a box of cereal, a box of cookies — all of these edible things require some type of flour or grain or wheat to make them. Most of these raw materials move over the rails in covered hopper cars.
That brand-new car just driven off the lot may have been delivered to the dealership on a car-carrier truck, but it was transported from the factory to a distribution center in a specialized railcar designed to protect its cargo from the elements. If you buy a Volkswagen Jetta, it’s manufactured at a plant in Puebla, south of Mexico City. It’s loaded onto a railcar known as an Auto-Max and transported up through Mexico and across the border by the Mexican subsidiary of the Kansas City Southern Railway.
Rail, as a form of transportation, has existed for the better part of 200 years, and its basics — large vehicles with steel wheels rolling on steel rails — really haven’t changed all that much since the early 19th century.
The same can’t be said for the system itself. Prior to World War II, freight railroads operated their own passenger trains. Passenger trains like the Boston & Maine’s Boston-to-Bangor Flying Yankee or the Pennsylvania Railroad’s storied Broadway Limited, which whisked passengers between Chicago and New York in luxury in less than 16 hours, overnight, were often the public face of the railroad.
Then when the federal government began building the Interstate Highway System, giving rise to long-haul trucking, and the airline industry — bolstered by passenger-carrying jet planes, government-financed airports, and a government-operated air traffic control system — blossomed almost overnight, two things happened very quickly: The bottom fell out of the passenger rail business, and the privately financed freight railroads began losing huge chunks of market share to truckers. By the late 1960s, things had gotten so bad that nationalizing the freight railroads was seriously considered.
Thankfully, that didn’t happen. Amtrak was created in 1971. It was a godsend for the industry, for Amtrak’s purpose was not to save the passenger train but to save the freight railroad industry by giving it the opportunity to get out of the passenger business. In the mid-1970s, the federal government stepped in and created Conrail from the remains of six bankrupt Northeastern railroads. (Conrail 10 years later was privatized.) In 1980, the railroads were partially deregulated under the Staggers Rail Act, which allowed them to price their services to market and concentrate on efficiency and productivity.
Shortly after the Staggers Act was enacted, the railroads were able to emerge from nearly a century of government overregulation brought on in 1887 by the Interstate Commerce Act, which created the Interstate Commerce Commission, formed largely to deal with the so-called robber barons of the day who often engaged in monopolistic business practices. By the late 20th century, though, it was simply stifling innovation.
Today, the US rail system looks considerably different. After an intense period of consolidation through mergers and acquisitions, the North American rail industry consists of seven large “Class I” railroads and more than 500 short line and regional carriers, many of them created from unprofitable branch lines the big railroads were able to spin off. It’s kind of like the circulatory system in the human body, where the arteries are the Class I railroads concentrating on long-haul transportation and the capillaries are the small railroads.
It is a network even long-haul truckers want to utilize. Several of the big truckload carriers — companies like Schneider National and J. B. Hunt — put their freight in containers for cross-country moves aboard rail cars. You’ve probably seen long trains carrying these containers, which are double-stacked. The bottom container sits in a railcar that looks something like an oversize bathtub, a “well car.”
This collaboration is called “intermodal” transport — and it works impressively well. Intermodal is the fastest-growing form of freight railroad business. Intermodal terminals, where containers and trailers are taken off trucks and put on railroad cars and sent on their long-distance way to yet another terminal, where they are offloaded onto trucks for local delivery, are being built at a furious rate all over North America. At every major US port today, enormous container ships from the Far East and other locations around the globe offload their cargo directly onto railroads.
The next time you’re sitting at a grade crossing, waiting for a 100-car stack train to roll by, just think: That’s 200 tractor-trailers with which you don’t have to deal on the highway. It’s safer, and the three or four diesel-electric locomotives hauling that train pollute a heck of a lot less than 200 tractors. There’s no better way to move all that stuff than by rail. And as we see offshore manufacturing slowly returning to Mexico and the United States, it will still get where it has to go the best by rail.
None of this is to say trucks aren’t needed. They always will be. They go places railroads can’t or don’t reach. It’s a question, however, of balanced transportation, a “modal choice,” as transportation planners like to call it.
Highways will also be needed, but it’s safe to say the United States is done building the Interstate Highway System. It’s a simple matter of running out of space. Unfortunately, though, what has been built up to this point is starting to crumble. One of the nation’s biggest challenges of the next two to three decades will be transportation — the roads, bridges, and, yes, railroads — needed to sustain a growing population. Without investment, the gridlock today will be nothing in comparison to the trouble ahead.
The freight system, as cost-effective as it is, does require some government funding. Many of the intermodal terminals are financed through public-private partnerships. The railroad puts up most of the money to build the terminal. State and, on occasion, federal dollars complete the package. Lawmakers obviously have taken notice of all those containers and trailers that aren’t tearing up the highways.
Today public-private partnerships are being used to finance improvement and expansion of entire freight rail corridors. Faced with the choice of spending billions to widen a highway to accommodate more tractor-trailers, some states are choosing to collaborate with railroads at far less cost to improve parallel rail lines to accommodate more intermodal trains. In some of those cases, there are additional benefits for moving people. It stands to reason that if you can add capacity to accommodate more freight trains, you can probably accommodate more passenger trains — or maybe even start new passenger rail service.
Norfolk Southern’s Heartland Corridor is a great example of this. The Heartland Corridor involved the Federal Highway Administration and three states (Virginia, West Virginia, and Ohio). The $150 million project was developed to improve transportation on Norfolk Southern’s rail lines between the Norfolk, Va., port region and two Midwest destinations — Chicago and Columbus, Ohio. One of the goals was to increase tunnel clearances for double-stack trains, increasing rail capacity, shortening rail travel time, and reducing tractor-trailer traffic. Construction began in 2007, and the route opened for double-stack service three years later. The project involved increasing clearances in 28 tunnels and 24 other overhead obstacles. About 5.7 miles of tunnels were modified. Ultimately, the effort reduced travel times from port facilities in Virginia to Chicago to three days, reducing the distance traveled by 250 miles and slashing travel time by 25 percent.
There are only a handful of large railroads crisscrossing North America today. In the near future, that number may very well be reduced from seven to two or three. The Canadian Pacific Railway is currently attempting a merger with the Norfolk Southern. If the merger goes through, the resulting mega-carrier will stretch, unbroken, between the Pacific and the Atlantic oceans — a true transcontinental. A sizable chunk of the traffic that now has to route its way through Chicago, North America’s biggest rail bottleneck, will be able to bypass the Windy City, cutting down on transport time by at least one day.
The remaining Class I lines will have no choice but to combine. How those mergers will shake out isn’t totally clear, but it’d be little surprise if Union Pacific hooked up with CSX, or for Canadian National to merge with BNSF Railway. That would leave Kansas City Southern and its very lucrative Mexican franchise — a North-South railroad essentially linking Chicago with Mexico City via Kansas City. Any one of these carriers could make a play for Kansas City Southern. Canadian National’s US operations stretch from Chicago to New Orleans, over the former Illinois Central Railroad. If it manages to grab the Kansas City Southern, which is essentially on a parallel alignment, the Canadian National could vastly increase its capacity through directional running: one line southbound, the other line northbound.
If all this takes place, will it be a return to the days of railroad monopolies, as some railroad shippers will undoubtedly and loudly raise concerns about?
No. That’s because there’s something called “open access” or “competitive access” that will change the way railroads have traditionally done business. Basically, it grants a shipper located on one railroad the right to choose a different railroad to move its shipments, if it is not satisfied with the service it is receiving from its “home” carrier. The alternative carrier would have access to use the tracks of the home carrier.
Up until now, American railroads have been fighting calls for open access tooth-and-nail. But Hunter Harrison, the Canadian Pacific’s larger-than-life, charismatic CEO, says that if his railroad is able to merge with Norfolk Southern, the new, bigger railroad will gladly grant open access to accommodate shippers that aren’t satisfied with its service. In short, competition is a good thing — something North America’s freight system has long known.
William C. Vantuono is editor in chief of Railway Age magazine.