Online Exclusive

Betting on Rail

The topic of a recent article was a price war between two Chinese airlines and Chinese high-speed trains. The notion that high-speed trains could compete with air service is in many regards foreign to the typical notion of modal competition we have in the United States. In other parts of the world however, such competition is getting close scrutiny and will, in all likelihood, increase as nations construct infrastructure systems to meet the needs and demands of a global economy in the 21st century.

Warren Buffett’s recent investment in railroads with the purchase of the 131-year-old Burlington Northern Santa Fe Corp., have caused many to begin to assess the potential significance of rail in America's transportation future. Buffett's railroad carries freight and raw materials collected at ports and moved across the country. He is betting that growth in emerging markets will require shipping even more commodities by rail and it is no coincidence that he purchased a railroad that is located in the Texas megaregion. The Burlington Northern Santa Fe runs along the NAFTA superhighway where goods are shipped from Mexico through the United States and north to Canada. The increasing focus on trade agreements that facilitate ease of movement and exchange through open-door border policies are of increasing importance in global competitiveness. Buffett readily acknowledges that he,” bet on the country” and the continuance of spiraling congestion and gridlock.

Buffett’s acquisition will contribute to recent efforts to “go green” producing far less pollution than trucks would operating in the corridor, particularly when carrying tonnage in excess of 1,000 miles. Commodity movement and travel by rail is not as vulnerable to fossil fuel price fluctuations. The competition between rail companies is somewhat structured and limited by the high capital costs required to build and operate a new railroad.

A number of recent developments suggest an increasing demand for rail transportation and increasing pressures to respond to a number of challenges including climate change, carbon reduction, sustainability, clean energy and green jobs creation, and improved management of natural resources. In addition, the Obama Administration has awarded $8 billion in high-speed rail grants to more than two dozen states and has proposed an additional $13 billion to launch a "new era" of high-speed passenger rail transportation. The construction of high-speed rail systems within the United States moves the country in the direction taken by many other nations including Britain, Japan, China, France and Germany and many others that have made the decision to invest in rail. In 1989 Spain decided that by 2012 it wanted to have the longest high-speed rail system in Europe. If it continues to implement its high-speed rail plan by 2020, more than 90 percent of the country's total population will be within 31 miles of a high-speed train station. Economic development and extensive rider enthusiasm have silenced many critics.

The Obama Administration's newly announced rail program includes upgrading existing rail corridors to accommodate high-speed travel and establishing new corridors to enhance and expand rail service. While all agree that the amount of resources are but a down payment on what will ultimately be required, it does in fact signal a new era in infrastructure planning for the United States. The Acela, Amtrak's high-speed rail service, operates along the Northeast Corridor (NEC) running between Boston and Washington, D.C., and is the only high-speed train service in the United States. While the Acela is designed to attain a high speed of 150 mph (240 km/h), it usually operates at 50 percent of design speed. U.S. spending on passenger rail could benefit U.S. companies and create millions of jobs while saving 125 million barrels of oil, eliminating 20 million pounds of CO2 per mile per year, reinvigorating the U.S. manufacturing sector and generating $23 billion in economic benefits in the Midwest alone — all alongside a long list of intangible side benefits In addition, it has spurred U.S. industry to begin to develop and manufacture railcars and other system components. A number of U.S. and foreign companies have announced plans to build new factories to produce equipment. Siemens AG has purchased land to construct a facility for manufacturing high-speed rail passenger trains.

High-speed rail creates new opportunities for cities through increased accessibility, increased connectivity, reduced travel times and reduced emissions since high-speed rail consumes nearly 10 times less fuel than cars and six times less than planes (according to the U.S. Department of Transportation). Linking transportation, environmental and natural resources management with a push to develop clean fuel alternatives has ushered in an increasing focus on sustainability, economic development and quality of life. Our commitment to reduce dependence on foreign oil has fueled the search for cleaner fuels and more efficient sustainable ways to move people and commodities. The current environment has served to underscore the wisdom and the significance of Warren Buffett's recent purchase of Burlington Northern Santa Fe (BNSF) railroad. The federal role and a newly implemented transportation vision support an expanded role for rail and transit.

The Triple Bottom Line

One definition of a sustainable corporation is one that creates profit for its shareholders, protects the environment and improves the quality of life for its employees, clients and society at large. It strives to minimize its impact on the environment and development of the capacity to regenerate many of the resources it consumes in order to assure its long-term success and survival. While there is no standard definition for sustainable transportation, several adopted definitions suggest that a sustainable transportation system is effective and efficient and provides safe and equitable access to basic economic and social services, promotes economic development and supports environmental integrity.

Investment in rail and public transportation has great potential to affect the triple bottom line contributing to our country's ability to develop and implement environmental, social and economically sustainable strategies that enhance our competitive advantage while meeting our mobility needs and preserving our quality of life. The challenge is to develop new approaches to maximize the triple bottom line through adoption of sustainable practices and procedures that apply to both commodity and people movement. Major organizations such as the World Bank, the Organization for Cooperation and Economic Development (OECD) and Transport Canada have adopted definitions for sustainable transportation. The OECD, for example, defines sustainable transportation as transportation that does not endanger public health or ecosystems and meets the needs for access consistent with (a) the use of renewable resources at or below their rates of regeneration, and (b) the use of non-renewable resources below the rates of development of renewable substitutes (OECD 1999).

Global climate change and our dependence on the availability of fossil fuels are creating greater urgency to develop new transportation strategies in response to global dynamics and competitiveness. Edward Kershner, a Wall Street strategist suggests, “Climate change is a market force as profound as the changes ushered in by the baby boom, globalization, the aging of populations and the digital age.” To make a positive contribution on the issue of global climate change, transportation policies must focus on reducing our dependence on foreign oil, reduce energy consumption and reduce travel demand.”

The Obama Administration has made a commitment to the development of sustainable transportation and sustainable communities. In June 2009, EPA joined with the U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of Transportation (DOT) to help improve access to affordable housing, more transportation options and lower transportation costs while protecting the environment. They jointly outlined a set of guiding livability principles and a partnership agreement that will guide the agencies' efforts; this partnership will coordinate federal housing, transportation and other infrastructure investments to protect the environment, promote equitable development and help to address the challenges of climate change.

One new interagency agreement is the HUD-DOT-EPA Interagency Partnership for Sustainable Communities. The partnership is committed to enhancing integrated planning and investment between housing, transportation, water infrastructure and land-use planning and investment. HUD, EPA and DOT make planning grants available to metropolitan areas and create mechanisms to ensure those plans are carried through to localities. The partnership provides a vision for sustainable growth, develops federal housing affordability measures that include housing or transportation costs and other expenses that are affected by location choices, redevelops underutilized sites, achieves critical environmental justice goals and other environmental goals by targeting development to locations that already have infrastructure and offer transportation choices, and to research, evaluate and recommend measures that indicate the livability of communities, neighborhoods and metropolitan areas.

The U.S. Department of Transportation announced $1.5 billion in TIGER Grant funding for more than 50 high-priority, innovative transportation projects across the country that will create new jobs. The TIGER grant program targets major national and regional transportation projects that are in many cases difficult to pursue through other government funding programs. Selected projects must foster job creation, show strong economic benefits and promote communities that are safer, cleaner and more livable.

Population forecasts indicate that more than 140 million more people are expected over the next 50 years. Globalization is transforming urban economies around the world, and a great deal of effort is going to investigate sustainability and often this is done through renewed focus on regions. There is also increased focus on the “megaregion” in the United States. Some have suggested that two-thirds of the nation’s population growth and more than half of economic activities are taking place in megaregions, defined as connected metropolitan centers and their surrounding areas. These eight to 10 megaregions and their hinterlands cross standard administrative boundaries and can be strategic platforms within which to consider infrastructure investment, innovative finance, natural resources management, diversified economic activities and sustainability. The emergence of these megaregions and a renewed focus on them offers great potential within which to begin to develop and implement sustainable transportation systems.

Approximately two-thirds of the nation’s population growth and more than half of economic activities are taking place in “megaregions.” Megaregions are connected cities and their surrounding areas, generally areas with a population of about 10 million. In the United States, the 10 largest megaregions represent 80 percent of our economic activity and seven of them have populations of 10 million people. Through planning at the megaregion level we are able to keep our cities economically viable and healthy providing a high quality of life, good jobs, cultural amenities, and natural assets and resources from parks to ports.

Regional coordination of infrastructure investments is increasingly regarded as a way to enhance the productivity of the entire region while preserving elements that would lead to greater quality of life, such as the Randstad’s Green Heart. In the Philippines and Africa, regional coordination and cooperation are seen as a way to improve economic returns on infrastructure investment, while in China, regionalism is a tool to respond to rapidly increasing transportation demands. The European Union (EU) hopes that the EU-wide Trans-European Transport Networks will promote economic growth throughout while limiting the negative environmental impacts of transportation.

What is most striking about the cases outside the United States is the difference between those projects that originate at the federal level or higher and those that originate at the local level. The EU has the capacity to propose a transportation network far more ambitious than any one of its member states could suggest, but control of funding remains with the member states. The most successful cases appear to be those where local actors take the lead, as in the Yangtze River Delta and the Randstad. Since China’s state government has empowered cities to decide on and finance major infrastructure investments, further regional efforts in China will probably originate from actors within the metropolitan areas, especially dominant actors such as Shanghai’s city government, rather than be imposed by the state government.

In the United States, as we have seen, the locally originated regional associations have tended to be weaker than those that originated at the federal level. Has the time come for empowered regional planning from the bottom up in the United States? It may be that megaregions can be the first (North) American example of regionally cooperative approaches with enough local buy-in to be able to act decisively. The Metropolitan Planning Organizations, a case of a federal creation and empowerment of regional organizations, could possibly become actors within a megaregional framework.

Schwieterman & Scheldt indicate that about 63 percent of the proposed mileage for high-speed rail service in the United States is included in corridors that cross state lines. The location of the proposed HSR coincides with the economic core of most megaregions and would serve to provide greater mobility in a more sustainable way. The triple bottom line should be adopted as the measurement against which we can evaluate the sustainability and performance of our transportation system to assure improved quality of life for all citizens. Rail transportation holds out the promise of greater efficiency, sustainability and enhanced competitiveness and some in the United States have committed to going along for the ride.

Dr. Catherine Ross is the director of the Center for Quality Growth and Regional Development, Georgia Institute of Technology.