Managed Decline: When US Railroads Fail to Compete, We All Pay the Price.

Why mode shift to rail is in the public interest; why electrification is an inseparable condition for that shift; and why a new business model is necessary.

Over the past 10 years freight rail volume has decreased. The Surface Transportation Board, the federal agency responsible for regulating freight rail, wants to know why, and how the trend can be reversed. It is asking executives of the nation’s top railroads and other interested parties to testify at the important Sept. 16-17 event. The Backbone Campaign’s Solutionary Rail project has as a key goal to shift freight from trucks to rail, and to restore freight rail service to communities that have lost it. Here is the testimony Backbone Executive Director Bill Moyer will offer.

I am Bill Moyer,  the executive director and co-founder of Backbone Campaign, a creative activist organization that provides artful activism tools, tactics training and action support to progressive causes across the US and beyond. Though a lifelong activist, tactician and social movement strategist, until a decade ago I knew very little about rail. 

While opposing the expansion of fossil fuel exports through the beautiful Pacific Northwest - a place I deeply revere - I entered into a conversation with Mike Elliott, a railroad worker and labor advocate working on the opposite side of that particular issue. We discussed whether a proposed coal export terminal was the truly highest use of this infrastructure and whether rail workers and environmentalists might have more in common than was immediately apparent. Eventually, Mike presented me with a 2008 paper on modernizing the Northern Transcon (BNSF’s line from Chicago to Seattle) and challenged me and “my people” to “green it.” 

I took that relationship and Mike’s challenge seriously. I assembled a team of folks and began the long climb up the vast steep grade of learning about railroad. Three years later, we published the book Solutionary Rail - A people-powered campaign to electrify America’s railroads and open corridors to a clean energy future. What struck me most about that initial process and continues to be true after a decade of learning from, interviewing and collaborating with other stakeholders for rail in the public interest is this: after spending much of my activist life saying NO! to this or that injustice, saying YES! to a rail-centric vision for the future is tremendously refreshing, uplifting and fills me with hope. 

Like all of you, I have come to love trains. This is not just because the technology of rail is so efficient, the history is so compelling, or the promise of electrification is so cool; I love rail because it provides people from very different places and points of view an opportunity to connect and find common cause. This is a precious thing in a society that currently suffers so much polarization and division. It allows unlikely allies to come together in service of a shared vision. Only together, can those allies overcome the obstacles and topple the practices that are, and have been, harming us all. Today, I would like to share some key lessons about rail and the public interest in regards to mode share, external costs of mode choice, and how your work can shape a future freight system that increases benefits and reduces harms of rail as a critical element of our national freight system.

Solutionary Rail has engaged with hundreds of people from all walks of life and all corners of this country. We’ve conducted hundreds of interviews with stakeholders whose lives intersect with railroads in numerous ways. Though public interests in rail vary from community to community and from one sector of society to another, common interests far outweigh conflicting interests. And, where conflict exists, it is resolvable. 

Increased rail capacity and improvements to operations that deliver reliable service and draw freight from roads to rails is most definitely in the public interest. On time performance and returning access to communities that have been left behind is good for passengers as well as shippers - large and small - and it is critical to reshoring, supply chain resilience and national security. What cannot be allowed is for the benefits of mode shift to come at the expense of already overburdened communities that live adjacent to rail yards.

A robust and resilient rail system must be accomplished in concert with the decarbonization of our entire freight system. The Biden Administration recently announced a National Goal for a Zero Emissions Freight System. Though symbolic, this is an important recognition that the challenge of decarbonization of freight cannot be tackled in artificial silos of trucking and rail. The same is true with mode shift and electrification. Investment in the electrification of rail yards must go hand in hand with mode shift.  And the electrification of rail yards should be declared a national priority.

In 2020, Solutionary Rail submitted comments to the Select Committee on the Climate in the form of our paper Moonshot Mode Shift. In its creation we learned how unreasonably difficult it is in the US to quantify the external costs of freight transport. (The EU did an Internalization Study to quantify the external costs of mode choice in 2019. They followed that with the Shift2Rail Joint Undertaking, published a Shift2Rail handbook, and declared 2020 the Year of the Train.) Since our Moonshot paper, we have advocated at the Transportation Research Board for a user-friendly External Cost Calculator for public interest advocates, policy makers, and planners. Solutionary Rail even developed a prototype that draws data from the obtuse, limited and user-hostile Freight Analysis Framework and formulas from the Kansas DOT to show how such a tool might work.  

It says something about the current state of public access to data that only recently was I able to find a 2015 report by the Congressional Budget Office and its systematically developed set of formulas to quantify accident risk, pavement damage, particulates + NOx, traffic congestion and CO2. This slide from a 2016 CBO presentation shows the range of cost estimates (in 2014 dollars), the median and the resulting 8:1 ratio between truck and rail freight, by ton-mile. 

Thanks to the CBO formulas and FAF data it is possible (though still not user-friendly) to estimate the external cost of freight by ton-mile. 

Solutionary Rail has applied these formulas to FAF 2023 data. We excluded cereal grains/coal/oil which railroads still have a common carrier obligation to transport and are unlikely to move by truck. We also exclude distance bands less than 500 miles, since railroads are explicit about their market advantage for longer hauls. FAF estimates that the long haul (>500 miles) freight moved by truck in 2023 was approximately 954 billion ton-miles. The CBO report used 2014 dollars. Adjusting for inflation, the external cost of this long haul freight is $0.0559 per ton-mile by truck and only $0.00674 per ton-mile when moved by rail. 

This adds up to a $53 billion cost to society with a potential savings from mode shift of $46.87 billion dollars. In reality, people are paying with their lives. Two hundred million tons of carbon pollution could have been avoided had this long haul freight moved by train rather than truck. This societal cost is being paid annually.

When rail operations overemphasize short term profits, lower operating ratios and stock buybacks rather than investments in capacity and service, we all suffer. As we know, Class 1 railroads spent $196 billion on stock buybacks and dividends for shareholders between 2010 and 2020, but who really paid for that? The numbers above make clear that it is the US public and future generations who are sacrificing to subsidize the outrageous profits of the Class 1 railroads and the predation of an unaccountable investor class. 

Despite this staggering cost to society - this urgency of this hearing makes clear - mode shift of truck freight to rail is not the direction the Class 1 railroads are pursuing. In fact, they are headed in the opposite direction. So, how do we stop the managed decline of our rail system and turn it around to serve the public interest? 

What won’t work are the half-measures the Association of American Railroads call for to “level the playing field.” The 2015 CBO confirmed what others have found, conventional strategies such as vehicle miles travelled and fuel taxes for trucking hold little promise, with maximum impact of <4% modal shift. They are not enough to compel shippers to utilize rail rather than trucks, even for long hauls. 

Reliability and service are critical factors for shippers, but it feels naive to think that there is a market strategy to pivot to growth when activist investors enforce their wrath on even the most modest of initiatives. We need a dramatic course correction that only the STB our federal government can provide. 

The country depends upon the STB to chart this new path forward. Certainly, the White House and Congress must also do their part, but the STB does not need to wait. It is time for the STB to clarify and return the power of common carrier obligations, revoke service and commodity exemptions and to restore service to industries and communities that have been left behind. 

It is also time for the STB to consider the broader implications of the National Rail Transportation Policy’s mandates to protect workers, communities, the environment and national interests. A system that prioritizes private profit over public benefit is exactly what is pushing freight off rails and onto roads and what is keeping the railroads from following the global trend to electrification. Without a shift in the ownership and operation model of US rail infrastructure, the public will continue to suffer and bear unnecessary external costs of an industry flawed from its creation. 

Three important documents that Solutionary Rail asks the Board to consider are:

1. Toll Roads for Train by Thomas White posted at https://www.solutionaryrail.org/trt. This piece describes a scenario for vertical separation of infrastructure from train operations and how that could incentivize greater utilization of infrastructure.

2. Maddock Thomas’ Putting America Back on Track: The Case for a 21st Century Public Rail System available at PublicRailNow.org. This piece lays out a plan for a more complete shift of rail from private to public control.

3. Moving Forward Network testimony to Senate Committee, sub-committee on Clean Air, Climate & Nuclear Safety. This testimony provides a clear picture of why electrification must be part of the mode shift discussion.

Solutionary Rail currently suspects that the most viable path for a moonshot mode shift on an electrified system includes elements of all the above. Lessons from the past, from the Plumb Plan to the 4R act of 1976 and lessons from the rest of the world could be applied to structure a future system.

Class 1 railroads and their lobbying tool the Association of American Railroads (AAR) consistently call for “leveling the playing field” with trucks. Our national highways and waterways are owned and maintained by the public and accessible to all. They are never required to turn a profit. Why should it be otherwise for rail? Providing Class 1 railroads an exit strategy from maintaining the infrastructure by allowing them to shift that burden to the public is the most direct and rational manner for leveling the playing field. Today’s US mainlines would become our Steel Interstate.

The business model for railroading should be forced to lean on service to grow business and profits rather than monopolistic control of infrastructure its managed decline. Doing less to make more is simply extracting value from past societal investments, transferring external costs to the public and betraying future generations. A voluntary off-ramp from this disastrous cycle should be a win-win, allowing those who want to manage and grow railroads the opportunity to do so and protect them from the avarice of unaccountable capital. Relieved of the need to use private capital to make the electrification and other infrastructure improvements that are needed to have a truly modern rail system, they could focus on long term growth.

Railroads are critical national infrastructure and play a pivotal role in determining the future resilience, prosperity and health of our country. Increasing rail capacity, utilization, and sustainability through investments in infrastructure, improvements in service and accessibility, and its conversion to a backbone for a zero emissions freight system is inseparable from our public interests and national security. 

Railroads have always existed in this quasi-utility space. After 45 years as relatively unaccountable monopolies which prioritize profit maximization over their long term viability and public interests are not compatible with national interests. Therefore, a reorganization of how railroads are regulated, incentivized, and their assets utilized must be considered. It is time that we embrace the unique role that rail can play in our future and harness them to Reconnect America.

Thank you for the opportunity to present to you today.

NOTE: A special note of gratitude to Jeff Silverman for compiling the spreadsheet calculator tool using the CBO formulas and adjustments for inflation. Thanks Jeff!

Join the Solutionary Rail team

Be part of this people-powered campaign to put American railroads in service of the public interest through rail electrification, shifting freight and people from roads to rail, and using rail corridors to transmit renewable energy. Participate in webinars, strategy sessions and skill sharing with community and technical experts by signing up at SolutionaryRail.org. Support this work with a tax-deductible donation here. To buy our book, Solutionary Rail - A people-powered campaign to electrify America's railroads and open corridors to a clean energy future, go here.

ICYMI: We will be launching our Reconnect America podcast later this month. Be sure to check out our teaser and subscribe to the podcast on Substack, Apple or Spotify.