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Feb
27

Spending $60 million a day to revitalize North American rail infrastructure. Is it enough?

Posted by Isuru     0 Comment(s)    Add a Comment  comment-icon.png

The topic of improving domestic infrastructure has been dominating contemporary discourse in the United States for many months. The US is expected to see the commencement of 50 high-priority infrastructure projects over the next few years, with the goal of strengthening infrastructure and creating more jobs.

The 50 projects carry an expected cost of almost $140 billion, with 50% of this expenditure to be covered via private investment. Freight infrastructure alone, which is composed of freight rail, port, and waterway improvements, makes up over 31% of the total anticipated expenditure.

Enhancing rail infrastructure comprises 18% of total expenditure ($24 billion), with freight rail expected to receive a significant portion of this focus – split between private and public investment. On paper, the news appears to be good for the rail industry as private freight rail investors have already stepped up to the plate. The Association of American Railroads (AAR) recently reported that privately owned U.S. freight railroads are expected to spend approximately $22 billion in 2017 – an effort that is intended to upgrade and strengthen the nation’s private rail network.

This funding would likely be funneled through a plethora of basic rail infrastructure projects that address basic damage and wear and tear incurred over the years. The investment would also feed into advanced projects like fully implementing Positive Train Control technology, which helps prevent head-on collisions. This is a dire need given that the current coverage of the technology is severely limited, with only 38% of locomotives and 12% of route miles carrying the technology. The expected date of full implementation is 2018, but is unlikely to be met.

The focus on rail infrastructure may be surprising to some given that it is considered a dinosaur industry, owning the reputation of being one of the nation’s oldest industries. However, the contribution of the rail industry in modern times cannot be understated. Recent reports by the AAR indicate that railroads generated $274 billion in economic activity, $33 billion in state and federal taxes, and, not to mention, 1.5 million jobs in 2014 alone.

Despite this gargantuan contribution, the state of the rail infrastructure, particularly freight rail, is below standard and comprises areas where upgrades are not only optional but essential. Funding the enhancement and improvement is therefore of prime importance, given that failure to do so would only result in greater ineffectiveness, growing inefficiency, and severe risk to goods and personnel. The question that now remains is whether this influx of investment is truly enough.

Is it enough?

To make a long answer short, no it is not and more needs to be done. Let’s put things into perspective. The 18% of funding that is going into rail infrastructure only comprises three main projects - a gateway commissioned by Amtrak and the Port Authority of New York and New Jersey, a central railway in Texas, and the completion of the Howard Street Tunnel for CSX's transit through Washington, D.C. These are three rail infrastructure projects, both passenger and freight, that will cost over $24 billion – a fortune for what will only have the impact of a mere drop in the ocean of what is truly required to enhance rail infrastructure.

However, there is reason to be optimistic given that there is now a visible shift and focus on investment in enhancing domestic rail infrastructure. Over the past 37 years, railroads have spent around $600 billion in improving infrastructure and, while more needs to be done, this has come at an annual average railroad expenditure of $16 billion. The recent pledge of $22 billion indicates an inclination by railroads to do and contribute more, which only spells good news for the rail industry – particularly freight rail.

This commitment to overall infrastructure enhancement shows that there is much to look forward to and expect in terms of freight rail infrastructural improvement going forward – a much needed impetus to one of the country’s oldest industries.

With more developments expected in the future regarding this, stay tuned to this space for the latest on the rail industry.

 

Sources:

Association of American Railroads

Supply Chain Dive [1]

Supply Chain Dive [2]

McClatchy DC Bureau

 

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