Introduction
As “climate change” has penetrated further into our daily vocabulary and 21st century decision processes, much popular literature assumes an anti-economic growth posture that severely constrains productive economic activity in developed countries. Entrepreneurs everywhere have been creating new businesses and luring billions of dollars of investment into new technologies to develop new energy sources or more efficient ways to consume energy in existing applications. Generally, these technologies utilize renewable carbon-based energy that offer low increase in carbon footprint, or non-carbon methods such as solar, wind power, water or even nuclear processes. Other technologies utilize silicon or biological based device or process improvements to reduce carbon consumption by raising efficiencies. Energy efficiencies are achievable in transportation from available and easily adopted technology platforms, such as RailRunner. Using these platforms can save over 100 million gallons of petroleum-based fuel annually, with a only modest shift of 1% traffic from road to rail in the short haul market segment.
Surface Freight Transportation in the United States
Surface freight transportation in North America involves an annual expenditure of more than $300 billion. Highway freight traffic represents 55% of the total. Highway vehicles transport 8.85 billion tons of freight and highway vehicles overall consume 172 billion gallons of petroleum-based fuels of which 34 billion gallons are annually consumed in delivery of freight by truck. Class I railroads (large operators with more than $300 million in revenues), on the other hand, consume less than 4.1 billion gallons of fuel, first because they carry less freight than trucking firms and second, because they can carry 400 ton-miles of freight per gallon whereas trucks can only carry 123 ton-miles per gallon of fuel. Container-on-Flat-Car (COFC) or Trailer-on Flat-Car (TOFC) rail operation are those that are most readily substituted for highway freight traffic.
A closer look at the intermodal rail segment reveals that most intermodal traffic operates in lengths of haul longer than 1000 miles. US railroads (especially Class I railroads) have learned to make money with long trains running long distances; multiple stops and short hauls translate into higher costs and lower margins which Class I railroads can’t afford in their eternal, mortal combat with highway haulers. The Staggers Act (1980) led to the break-up of rail lines into Class I (“national”) rails, Class II (“regional”) rails and Class III (“short line”) rails, with the latter accumulating smaller markets and lower margin operations.
Data derived from Reebie (acquired by Global Insight), shows Ton-Mile traffic in the US by LOH for 2004. These data stay constant over time because surface transportation generally changes only with GNP growth and because the high cost of infrastructure additions preclude big shifts from one mode to another.
In 2004, rail carload moved 269 billion ton-miles of freight and rail intermodal moved 60 billion ton-miles of freight in the 300 to 1,200 Length-of-Haul segments. Highway truck traffic in the same period and segment was 2.05 trillion ton-miles of freight. Rail is reported to move 370 ton-miles per gallon of fuel (adjusted for drays at the origin and destination), while highway moves freight at 123 ton-miles per gallon, a difference of 247 ton-miles per gallon.
In these segments, we calculate that trucking consumes 22.17 trillion gallons of fuel consumed a significant portion of total fuel consumption of 33.9 trillion gallons annually for all trucking LOH segments, including those under 300 miles, that have been independently reported by the Bureau of Transportation Statistics.
Shifting Traffic from Road to Rail
The American Association of Railroads suggests that a 10% shift of freight to rail could save one billion gallons of fuel per year. This is a revealing and startling figure that should be setting our national priorities. A modality shift of 1% of traffic from the short haul trucking (300 to 1200 miles) mode to intermodal rail will move 20 billion ton-miles from road to rail.
A 1% modality shift from road to intermodal rail saves 111 million gallons of fuel per year. Since most highway freight in these segments is transported by diesel trucks, using 7 gallons per barrel exchange, the 1% shift reduces crude requirements by 16 million barrels per year. At $60 per barrel, this has a favorable effect of nearly $1 billion per year on the nation’s balance of payments.
Effect on Capacity
Most Class I railroads are operating at or near capacity in many of their lanes. A 10% shift of freight to only Class I operators may not be possible. However, regional railroads and short lines have capacity and are normally looking to increase revenues and profits, but the high cost of intermodal terminals and equipment have traditionally precluded these firms from entering the intermodal market.
Local and regional rail operators are firms that can actually accommodate a modal shift to rail from highway. A 15% increase in their operating levels would offer almost 75% of the capacity required to accommodate a 1% modality shift from highway to rail in the 300-1200 Mile LOH segment. The balance would amount to an increase of 1.5% in the operating level of total intermodal capacity and only 0.6% in total Class I rail capacity. Since the shift target is in the short haul LOH segments, it is reasonable to expect that much of that new demand could be absorbed by short lines and regional railroads.
Investment Considerations
The high cost of intermodal equipment and terminals have long been a barrier for short line and regional railroads entry into intermodal. In fact, most Class I operators require on the order of 100,000 payloads per year for the profitable operation of an intermodal terminal and for the full amortization of all costs. Traditional intermodal terminals can cost on the order of $15 million or more to construct. Not only are high costs a barrier to new short-haul terminals, it has also led to the closure of many existing terminals to concentrate traffic at major hubs. Typically the intermodal traffic gets to major hubs by road, which contributes to high fuel consumption, traffic congestion and operating cost associated with highway freight haulage.
RailRunner offers a solution to this dilemma and a path for shifting 1% or more of short haul highway traffic from road to rail with its Terminal Anywhere® technology. RailRunner rolling stock and direct operations are competitive in speed and cost with traditional intermodal. Typical RailRunner terminal investment, for equipment, ground preparation and all facilities are in the $1 million to $2 million range, which allows profitable operations at much lower transaction levels.
RailRunner offers operational costs lower than double-stack well cars for annual transaction levels under 50,000 per year.Compared to traditional flatcar intermodal operations, RailRunner yields are equal or better for all ranges of volumes. This supports conversion to intermodal via RailRunner in urban and suburban areas but at a dramatically lower investment and operating levels than normally associated with traditional intermodal operations.
Conclusion
Shifting highway freight traffic from road to rail in a developed economy such as the United States can generate significant reductions in carbon fuel consumption, for as little as a 1% shift in short haul traffic segments (300 miles to 1200 miles). Capacity to accommodate the modal shift shared among both Class I and smaller railroads. RailRunner’s Terminal Anywhere technology offers a currently available affordable route to implement a program to save over 100 million gallons of fuel per year, with approximately $1 billion reduction of oil imports. Our White Paper provides background details on this subject, including charts, figures and references.