Transcript No Slide Title

Freight Railroads:
Moving America Forward
Association of American Railroads
March 2, 2009
America’s demand for safe,
affordable, and environmentallyresponsible transportation has
never been greater than it is today
— and that demand will grow in
the future.
Railroads are the most sensible
way to meet this demand.
Efficiency From Coast to Coast
The Leader in Freight Transportation
(ton-miles)
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Railroads
Trucks
Water
Pipeline
'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06
Pipeline excludes natural gas.
Source: U.S. DOT
Why Freight Rail? Fuel Efficiency
 Move a ton of
freight 436 miles
per gallon.
 Three times more
fuel efficient than
trucks.
 Since 1980, double
the freight on same
amount of fuel!
Why Freight Rail?
Lower Greenhouse Gases
U.S. Greenhouse
Gas Emissions
Everything Else
99.3%
Freight Rail
0.7%
Source: EPA
 Moving freight by rail
instead of truck reduces
greenhouse gases by
two-thirds or more.
 Diverting 10% of longdistance truck traffic to
rail would be like taking 2
million cars off the road
or planting 280 million
trees.
Why Freight Rail?
Less Highway Gridlock
 One train does the
work of 280 (or
more) trucks.
 That means less
highway gridlock
and lower highway
spending.
Why Freight Rail?
Keeping Goods Affordable
7¢
6¢
5¢
Inflation-Adjusted RR Rates*
— Down 54% Since 1980!
4¢
3¢
2¢
'81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07
*Average revenue per ton-mile, Class I railroads. Source: AAR
Expected Traffic vs. Capacity
Today
2035 without improvements
Below capacity
Near capacity
At capacity
Above capacity
What Are Railroads Doing
to Increase Capacity?
 Massive equipment and
infrastructure investment
 Enough people for the job
 Cooperative alliances
 Improved operating plans
 Technology
$39 Billion Gap Between What RRs Can
Afford and the Capacity We Need
Shortfall: $39 bil.
$135 billion in
infrastructure
expansion by
2035
Productivity: $26 bil.
Growth: $70 bil.
Class I railroads only. Source: Cambridge Systematics
RRs Have Far Higher Capital Intensity
Than Most Other Industries
Capital Expenditures as a % of Revenue: Avg. 1997-2006
18%
16%
14%
Class I RRs
12%
10%
8%
6%
4%
Computers
Avg. All
Mfg.
Plastics
Wood
Prod.
Petrol. &
Coal Prod.
2%
0%
Nonmet.
Minerals
Sources: U.S. Census Bureau, AAR
Paper
Chemicals
Motor
Vehicles
Food
Railroads Spend More Than Most
State Highway Agencies!
Class I Railroad
Spending* on
Infrastructure
vs.
State Highway Agency
Spending* - 2006
($ billions)
1.
2.
3.
4.
5.
6.
*Capital outlays plus
maintenance expenses.
7.
8.
9.
Sources: FHWA Highway
Statistics Table SF-12; AAR
10.
Texas
Florida
California
Union Pacific
BNSF
New York
Pennsylvania
Illinois
CSX
Michigan
North Carolina
Ohio
Norfolk Southern
Georgia
$7.57
$5.69
$4.19
$4.17
$3.89
$3.59
$3.30
$3.30
$2.62
$2.61
$2.48
$2.14
$2.12
$1.88
RR Profitability is Below Average
Even in Era of “Record Profits”
Return on Equity: Railroads vs. All Industries
20%
16%
12%
8%
4%
0%
2003
2004
Railroads
Source: Value Line
2005
2006
Median All Industries
2007
Tax Incentives Are a Smart Choice to
Bridge the Funding Gap
 25% tax credit for projects
that expand rail capacity.
 $1 in investment yields $3
in economic benefits!
 $1 billion in rail investment
= 20,000 jobs.
 Huge public benefits far
outweigh costs.
Working Together:
Public-Private Partnerships
 Combine resources to
meet public needs.
 Railroads pay for their
benefits, public pays for
public benefits.
 Examples: Alameda
Corridor, CREATE,
Heartland Corridor,
National Gateway
The Staggers Act:
Balanced Regulation Works
300
270
240
210
180
150
120
90
60
30
0
(Index 1981 = 100)
Productivity
Volume
Staggers Act Passed Oct. 1980
Revenue
Price
'65 '68 '71 '74 '77 '80 '83 '86 '89 '92 '95 '98 '01 '04 '07
Source: AAR
Excessive Regulation Would Mean
Reduced Capacity and Service
 Goal = lower rail rates
for certain shippers
 Result = lower rail
revenue, capital drain,
disinvestment.
 Would mean less rail
capacity and capability
when we need more.