Bill supports expanding railroad infrastructure

By Jeff Berman, Senior Editor -- Logistics Management, 9/1/2006

WASHINGTON—A bipartisan bill introduced in Congress is designed to expand rail capacity and help prepare the U.S. transportation infrastructure for the coming surge in freight traffic, which is expected to rise 67 percent over the next 15 years. The bill’s co-sponsors, Senators Trent Lott (R-Miss.) and Kent Conrad (D-N.D.), say it will push shippers and carriers to move more freight onto railroads to reduce congestion on the nation’s highways.

“With highways and airways becoming increasingly congested, pressure is on the railroads to accommodate the rising tide of freight,” Lott said in a statement. “The nation faces a major challenge in responding to the rising tide. If we do nothing now, we can expect to pay a growing price.”

The Freight Rail Infrastructure Capacity Expansion Act would provide a 25 percent tax credit for businesses that make investments in new rail infrastructure. The tax credit would be available to any shipper or carrier that makes a “qualified” expenditure. Examples of qualifying expenditures for the bill include track, grading, tunnels, signals, certain locomotives, bridges, yards, terminals, and intermodal transfer and transload facilities.

A recent report issued by the American Association of State Highway and Transportation Officials (AASHTO) appears to validate the bill’s objective. The report states that the U.S. highway system currently carries 78 percent of domestic freight tonnage; railroads carry 16 percent; and coastal shipping carries 6 percent. By 2020, AASHTO predicts, the highway system will carry an additional 6.6 billon tons of freight, a 62 percent increase, while the rail system will carry an additional 888 million tons, for a 44 percent increase.

“This bill shows great foresight on the part of Congress to address an issue before it becomes a crisis,” said Association of American Railroads (AAR) spokesperson Peggy Wilhide. “Shippers are well aware of the ongoing capacity crunch, and we need to start working our way out of it … but it’s not something you can do overnight.”

If the bill passes there could be many benefits for shippers, said Brooks Bentz, a partner in Accenture’s Supply Chain Practice. “Adding capacity will help to take out a sizable chunk of service variability and should improve reliability as well as costs over the long haul. This will give shippers more options and more opportunity to use rail.”

Nevertheless, Bentz warned, railroads can’t count on infrastructure alone to carry the day. “Sufficient linehaul and terminal capacity is a wonderful thing, but if trains are continually 'held for tonnage’ or annulled on light days, then the shipping public will remain skeptical and seek other, more reliable ways to move product to market,” he said.