Nation’s Freight Rail System Needs $148 Billion Upgrade Investment Over Next 28 Years

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Researched by Industrial Info Resources (Sugar Land, Texas)--A study released by the American Association of Railroads (AAR) on September 20, 2007, states that $148 billion worth of upgrades will be required over the next 20 years on the infrastructure of the nation’s freight-rail system.

The study, conducted by Cambridge Systematics Incorporated (Cambridge, Massachusetts), is primarily based on federal forecasts for rail demand over the next three decades. The study concludes that the nation’s Class I railroads, the seven biggest freight railroads, will require $135 billion worth of infrastructure work by 2035 while short line and regional freight railroads will require $13 billion worth of work.

It is estimated that the Class I railroads will be able to cover $96 billion worth of that investment over the time period, but the balance will have to come from governmental funding. That means that about $1.4 billion a year in additional funding will be necessary to meet the report’s upgrade requirements.

Class I railroads, such as Burlington Northern Santa Fe (NYSE:BNI )(BNSF) (Fort Worth, Texas), CSX Corporation (NYSE:CSX ) (Jacksonville, FL), and Union Pacific Corporation (NYSE:UNP ) (Omaha, NE), each spend more than $1 billion annually on maintenance, upgrades and capital expansions of their lines. However, additional money and work will be necessary if the study’s findings are accurate.

Without the investment, products that are transported by way of the nation’s freight rail system will be forced onto the nation’s highway system.

The AAR is backing federal legislation that would provide tax incentives for infrastructure investments to address the issues outlined in the study. The freight rail system is in need of capital because the demand for freight rail transportation is expected to increase by 88% by 2035.

The AAR was asked to perform the freight study by the National Surface Transportation Policy and Revenue Sturdy Commission, which is also conducting a similar study pertaining to the passenger rail system on its own.

Passenger rails will also require upgrading, and the increased interest in light rail across the country will benefit the system, as well. Tens of billions of dollars are already being allocated to create or expand light rail systems in major cities from Maine to California, and that investment will only continue to rise. The study assumed the number of passenger trains that run on freight lines currently would remain the same but in all likelihood they will increase in the coming years as Amtrak and passenger rail advocates have discusses expanding into key corridors.

Some examples of the type of projects that freight rail providers perform each year and the type of projects that will continue to be necessary as the freight rail system is upgraded in the coming years include grassroot intermodal hubs, such as CSX’s proposed $21.8 million project in Florida, BNSF’s $100 million rail system expansion in Wyoming, a $200 million grassroot intermodal center in California and Union Pacific’s grassroot intermodal terminal in Texas.

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