Short Line Freight Rail — a Critical Provider of Cost-Effective Transportation

15 May 2017

While many may think of major freight carriers like BNSF or Norfolk Southern, or passenger railroads like Amtrak, when thinking of railroads, there is another critical piece of the puzzle: short line railroads.

Defined by their role in the hub-and-spoke transportation network, often providing the first or last mile connections between farmers and manufacturers and the ultimate consumer, short line rail is a critical part of the U.S. freight network. To ensure transportation competition and the viability of short line railroads, we need regulations that are more efficient, more goal oriented, less reliant on a one-size-fits-all mindset and much more focused on costs and benefits.

The nation’s 602 short lines, operating 47,500 miles, or 29 percent of freight rail, provide the first and last mile service for one in four cars moving each year. For large areas of rural and small-town America, short line and regional railroads are the only way shippers can stay connected to the national network, helping business and employment stay local.

Short line rail service provides safe, efficient, competitive, environmentally responsible access to transportation for nearly 10,000 shippers, serving a variety of industry segments.

They also help avert costs to the nation’s deteriorating highway infrastructure — a key policy priority in Washington right now. Estimates indicate that one railcar provides the equivalent of three trucks. Beyond the wear and tear, and the accident risk avoided, shipping by rail conserves approximately 93.3 million gallons of fuel per year.

And Federal Railroad Administration data show short line freight rail is one of the safest modes of transportation, with record low numbers of FRA reportable accidents in 2016.

The Short Line Safety Institute, formed in 2015, has assisted in this effort by providing training, assessments and guidance for short line railroads related to safety culture. Safety culture is defined as the shared values, actions and behaviors that demonstrate a commitment to safety over competing goals and demands. It goes beyond just compliance.

But we still must make our voice heard, including in differentiating ourselves from other players in the rail network, including Class I railroads — the classification given to the biggest seven railroads in the United States.

There are four main differences.

First, short lines are small businesses. Our combined annual revenues are less than the annual revenues of any one of the nation’s four large Class I railroads. The average short line employs 30 people or fewer.

Second, most short lines operate track headed for abandonment under previous Class I owners. These marginal lines received little or no capital investment resulting in significant deferred maintenance. Consequently, short lines must invest between 25 percent to 33 percent of their annual revenues in rehabilitation, making us one of the most capital intensive industries in the country.

Third, short line operating characteristics are far different than those of the Class I’s. Short lines are generally operating in a much smaller geographic area. These shorter distances combined with slower speeds and shorter trains produce more predictable work schedules and more routine patterns of interchange and delivery.

Forth, short line railroads typically have a much smaller customer base, often with just two to four, so that each customer is a vitally important to the short line.

These four characteristics — our size, our capital needs, our operating requirements and our small customer base — shape our view of the safety regulations that affect our businesses.

We must also speak up for key public policy items. We need access to capital. As one of the most capital intensive industries, we have been successful with a public-private partnership opportunity known as 45G. This piece of tax legislation, which has broad bipartisan support, allows short lines a tax credit of 50 cents for each dollar spent on infrastructure and maintenance up to $3,500 per track mile.

This credit leverages private capital to promote even further investments, amounting to more than $4 billion since 2004, helping short line railroads improve their track and bridges more quickly than otherwise would be possible.

Currently the tax credit is expired. We are working to make this investment credit permanent with the widely bipartisan piece of legislation known as the BRACE Act, which would eliminate the sunset provision. We hope to accomplish this in 2017.

In sum, short line rail service provides safe, efficient, competitive, environmentally responsible access to transportation. Without the access we provide, many customers would be cut off from competitive transportation to access domestic and overseas markets.

SOURCE:  insidesources