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S T R A T E G I C C O N S U LT I N G S E R V I C E S
www.pbworld.com
Update of the Freight Rail Bottom Line Report: Continuing Study of Freight Rail Supply Meeting Demand
Briefing for SCORT
Fort Worth, Texas
September 10, 2015
2 |
Revisit Premises of 2002 Freight Rail Bottom Line Report, Examine New Issues
SCORT Premises
1. Private railroads are not responsible for solving national capacity issues. Railroads respond to market forces, which may not necessarily provide an incentive to add capacity at a pace to meet demand.
2. Rationing of capacity will impact some shippers worse than others
3. Public private partnerships are valuable capacity enhancing tools
4. State DOT’s can further develop and implement performance measures to ensure effective PPP’s
5. Conclusions of the 2002 Freight Rail Bottom Line Report are basically true, namely that relatively small additional investments in the freight rail system can be levered to provide relatively large public benefits
3 |
Study Tasks
• Work Item #1: Proposed changes to the Scope of Work
• Work Item #2: Review of the 2002 Freight Rail Bottom Line Report– The railroad industry now and then– The economy now and then
• Work Item #3: Railroad Share of Freight Movement– Charting over the past 25 years and causes of shifts– Implications for the future
4 |
Study Tasks, Continued
• Work Item #4: Impacts of railroad market share– Proposed metrics used to assess impacts– Impacts from increasing rail modal share/disbenefits
from decreasing rail modal share– Projected impact of forecast changes in rail modal
share, impacts of increases 1%, 3%, 5% over forecast
• Work Item #5: Which industries most likely impacted by rail capacity constraints
5 |
Study Tasks, Continued
• Work Item #6: Railroad public private partnerships for capacity projects– Overview of types of capacity improvements– Assessing the economic need for a capacity project– Benefit calculation techniques– Capacity models– Performance measures– P3 case studies
• Work Item #7 and #8: Draft and Final Report
6 |
SCORT Study Tasks and Status
Work Item 1: Critique of SCORT
Study Proposal
Work Item 2: Review
of the 2002
Freight Rail
Bottom Line
Report
Work Item 3: Analysis of Railroad
Share of Freight
Movement
Work Item 4: Impacts
of Expected Railroad Share of
Transport Market
Work Item 5:
Industries most
impacted by Rail
Capacity
Work Item 6:
Parameters for State-Railroad PPPs for Capacity Projects
Work Items 7 and 8:
Draft and Final
Report
Are Here
BeganJune 2015
EndJune 2016
7 |
Themes from Work Item 2: Railroad Industry then and Now
• Rail traffic– Tons, carloads below pre-recession levels, but ton-miles at
an all-time high– Coal, lumber, and automotive down, but intermodal, crude,
ethanol, sand up
• Improved financial performance of Class I railroads– Operating ratio decreased from 88 to 70 percent– Revenue per ton-mile up by 35 percent in real terms– Railroads found to be revenue adequate per STB– Capital investments nearly doubled between 2000 and 2014– Strong financial performance with the backdrop of a
recession
8 |
Themes from Work Item 2: Railroad Industry Then and Now, Continued
• Short lines– Lower carloads per mile– Slight increase in revenue per mile, but uncertain
whether revenue increased faster than costs
• Performance– No improvement in train speeds– More efficient use of inputs, but higher input costs
• Intermodal developments– Experiments with hub and spoke system, made
possible by wide span gantry cranes– Less reliance on trans continental traffic
9 |
Themes from Work Item 3: Railroad Modal Share
• Flat modal share since 1995 in tons• Increase in modal share by ton-miles, mostly at
the expense of pipeline, water• Modal share influenced by changes in
commodity flows– Shift to PRB coal favored rail modal share– Greater use of grain for domestic consumption
reduced rail modal share– Reduced share in ethanol because new ethanol
plants are closer to consumption areas
10 |
Themes from Work Item 3: Railroad Modal Share, Continued
• Faster growth in intermodal, unit train, slower growth in commodities served by manifest
• Evidence that in certain markets, investments have made a difference
• Railroads have been effective at exploiting new opportunities
• Slow growth of bulk commodities could drag down rail market share somewhat, but no major shifts
11 |
Next Task
Work Item 1: Critique of
SCORT Study Proposal
Work Item 2:
Review of the 2002 Freight
Rail Bottom
Line Report
Work Item 3: Analysis
of Railroad Share of Freight
Movement
Work Item 4: Impacts
of Expected Railroad Share of
Transport Market
Work Item 5:
Industries most
impacted by Rail
Capacity
Work Item 6:
Parameters for State-Railroad PPPs for Capacity Projects
Work Items 7 and 8: Draft and Final Report
Up Next
12 |
Questions? Comments?