1. Washington, DC February 21, 2016
Update of the Freight Rail Bottom Line Report: Continuing Study of Freight Rail Supply Meeting Demand Briefing for AASHTO
Alexander King
WSP | Parsons Brinckerhoff
Washington, DC
February 21, 2016

2. Revisit Premises of 2002 AASHTO Freight Rail Bottom Line Report, Examine New Issues
AASHTO Premises
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.
Rationing of capacity will impact some shippers worse than others
Public private partnerships are valuable capacity enhancing tools
State DOT’s can further develop and implement performance measures to ensure effective PPP’s
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
Project Shift: from capacity to rail service in general

3. AASHTO 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
We’re Here
Began
June 2015
End in
2017

4. Main Points To Date & What’s Next
The railroad renaissance: Over the past decade, Class I’s have been better able to invest
Rail mode share is driven by performance of rail service
Slow growth in manifest
Ups and downs of unit train
Investment helps intermodal
Freight rail yields significant benefits
What’s Next:
Reboot central message of the 2002 Report
Freight rail projects can be good public investments
Going beyond
Help states be smarter about public/private partnerships
As we shift this project to the question of when public/private partnerships are appropriate and the role of state agencies in freight rail investments, several directions occur to us. One is that maybe the role of state agencies should not be a generic “let’s promote rail.” Rather, let’s promote specific rail services that the railroads, investments for which the railroads would not have funded or not have funded any time soon. There may be a difference in the need for state agencies to fund projects to promote bulk unit train v. intermodal v. manifest freight projects.

5. Work Item 5
Which industries most likely to be impacted by rail issues/benefit most from resolving rail issues
Purpose
Provide guidance of industries that would benefit from public investment in rail infrastructure
Help states to communicate industry rail needs with stakeholders
Understand better the dynamics of rail service, what drives the level of service shippers receive in order to inform state decisions

6. Work Item 5 – Information Sources
Several Interviews with shippers, USDA, short line railroads
Past interviews for rail plans, freight plans, other studies
Review of 34 presentations at North American Rail Shipper Association meetings
Shipper filings in Ex Parte 724 before STB
Federal Railroad Administration’s Quality of Service Provided to Rail Shippers and Transport Canada’s Rail Freight Service Review

7. What We Found – Different Industries Have Different Rail Service Concerns
Industry Characteristics:
Types of rail services used
Volatility of demand, service patterns
Ownership and type of equipment
Size of shipper
Location on rail network
Relative reliance on rail

8. Types of Train Services Used
Intermodal
Unit Train
Source: By BriYYZ from Toronto, Canada
Manifest
Source: Jeff Schultz
Transit Time and Service Variability
Boxcar in Manifest Service
Covered Hopper in Unit Train Service
Double Stack Train Service
Average Loaded Trip Time (Days)
8.77
5.33
3.21
Percentage of Shipments Arriving within 24 Hour Window
32.42
41.90
89.2
Total Cycle Time (Days)
26.88
15.27
6.14
Source: Transportation Research Record, 1995
Source: Craig Sanders of the Akron Railroad Club

9. Types of Concerns Manifest Unit Train Intermodal Service reliability
Local switching
Classification yards
Branch line/ short line infrastructure
Access to rail network
Cost
Inventory levels
Reliance on rail
Mainline capacity and fluidity
Intermodal terminals, access to terminals
On time performance, in transit visibility
Classification Yard in Denver, Colorado
Some of these concerns are things that all shippers would want, but differences in emphasis
By Bradley Gordon (originally posted to Flickr as trains) [CC BY 2.0 ( via Wikimedia Commons

10. Industry Usage of Rail Services
Rail Service Usage
Electric Utility, Coal Mining
Unit Train
Metallic Ore Mining
Crude Oil Development
Grain Producers, Marketers, Processing Industries
Unit Train, Manifest, Intermodal
Non-metallic Mineral Manufacturing
Unit Train and Manifest
Ethanol Manufacturing
Automotive Manufacturing and Distribution
Unit train for finished vehicles, Intermodal for vehicle parts
Food Manufacturing
Manifest, but also Unit Train for inbound
Chemical Manufacturing
Manifest
Steel Manufacturing
Pulp and Paper Manufacturing
Lumber and Wood Products
Plastic and Rubber Product Manufacturing
Agriculture Excluding Grain
Manifest, some Intermodal for export
Retail (though steamship lines, intermodal marketing companies)
Intermodal
Small Package Delivery/Less-than-Truckload

11. Service Patterns
Conveyor Like Rail Moves
Uncorrelated Demand
PRB Mine
Power Plant
Correlated Demand (Commodity Prices)
Service patterns impact the ease with which railroads can make resources available
Source: Steward Grain Co., Williamsport, IN

12. Seasonal Peaks
Percentage Change in Weekly Average Carloads, Containers, and Trailers Originated by Month by Major U.S. Railroads
Source: AAR
While all shippers are impacted by peaks, those shipping more at peak times may be more impacted

13. Impact of Railcar Ownership
Types of Concern
Railroad-Owned
Shipper-Owned
Third Party
Equipment availability
Condition of equipment
Service reliability - demurrage
Cycle time
Equipment balance and repositioning of empties
Safe handling of hazmat cars
For containers, additional restrictions on usage
Railcar Ownership by Type
Car Type
Railroad
Shipper or Car Company
Box Cars
89%
11%
Covered Hoppers
25%
75%
Flat Cars
65%
35%
Refrigerator Cars
80%
20%
Gondolas
52%
48%
Open Top Hoppers
41%
59%
Tank Cars 0%
100%
Other
27%
73%
Total
Box Car Availability
Source: AAR
Source: AAR

14. Railcar Ownership by Industry
Types of Railcars Used
Ownership/Control
Electric Utility, Coal Mining
Gondolas, Open Top Hoppers
Generally Shipper in the West, Railroad in the East
Metallic Ore Mining
Railroad, Shipper
Crude Oil Development
Tank
Shipper
Grain Producers, Marketers, Processing Industries
Covered Hoppers
Non-metallic Mineral Manufacturing
Ethanol Manufacturing
Automotive Manufacturing and Distribution
Various
Railroad, Shipper, Third Party
Food Manufacturing
Chemical Manufacturing
Tank, Hoppers
Steel Manufacturing
Railroad
Pulp and Paper Manufacturing
Boxcars, Hoppers and Gondolas
Lumber and Wood Products
Flat Cars, Hoppers and Gondolas
Plastic and Rubber Product Manufacturing
Agriculture Excluding Grain
Retail
Intermodal
Third Party (railcar by TTX, container by other)
Small Package Delivery/Less-than-Truckload
Shipper (railcar by TTX, container by shipper)

15. Shipper Size – The 80/20 Rule
Canadian Class I Rail Market by Shipper Size
Shipper Size – Shipments per Year
Number of Shippers (2013)
Percentage Traffic on Railway (2013) CN CP
Large > 5,000
101 (4%)
74 (3%)
82%
76%
Medium
1,001 – 5,000
155 (6%)
127 (5%)
12%
14%
Small 301 – 1,000
195 (8%)
204 (8%) 4% 6%
Very Small < 301
2,107 (82%)
2,132 (84%) 2%
Source: QGI Consulting
Small Shipper Issues
Access to rail network, switch frequency
Customer service
Issue resolution
Electronic resources
Rates and charges
Tariff rates
No volume discounts
High fees like demurrage
Sample Transportation Management Tracking Screen
Source: Nucor Steel Presentation, March 30, 2016, SE Assoc. Rail Shippers

16. Typical Shipper Size by Industry
Volume of Typical Shipper
Electric Utility, Coal Mining
Large
Metallic Ore Mining
Crude Oil Development
Grain Producers, Marketers, Processing Industries
Varies
Non-metallic Mineral Manufacturing
Ethanol Manufacturing
Automotive Manufacturing and Distribution
Food Manufacturing
Chemical Manufacturing
Steel Manufacturing
Pulp and Paper Manufacturing
Lumber and Wood Products
Plastic and Rubber Product Manufacturing
Agriculture Excluding Grain
Retail (through transportation companies)
Small Package Delivery/Less-than-Truckload

17. Shipper Location – Sample Guidelines
Union Pacific Railroad Industrial Requirements
Requirements
Restricted
Controlled
Allowable, Customer Leads
Sufficient running track to allow train to enter, exit mainline without stopping 8,500 – 9,000 feet X
#15 power turnouts to allow train to clear mainline in continuous move
Two sided access if require varying directional flow
Switching clear of mainline
Close access to crossovers if require counter flow movements on double track segments
Source: Union Pacific Railroad Website
Source: Union Pacific Railroad Website
The costs of building, maintaining industrial access tends to increase with rail line density

18. Do trains of some industries move faster than others?
Average Train Speed by Train Type – Miles per Hour
Source: WSP | PB Analysis of STB Ex Parte 724 Spreadsheet
Yes. Intermodal Trains.

19. Capacity implications of train prioritization
Trains on a “First Come/First Served” Basis – Single Track
Train
Train
Train
Train Overtaking Another – Single Track
Area needed for pass
Priority Train
Train
Trains on a “First Come/First Served” Basis – Double Track
Train
Train
Train
Train
Train
Train
Train
Train
Train
Train Overtaking Another – Double Track – Train Being Passed Stops
Train
Priority Train
Train
Train
Train
Train
Source: NCHRP Report 773

20. Differences in Dwell Time at Origin
Average Dwell Time at Origin for Unit Train Movements - Hours
Source: WSP | PB Analysis of STB Ex Parte 724 Spreadsheet
Differences are Likely Due to Variations in Loading/Unloading Processes

21. Rail Modal Share for Moves over 500 Miles
Commodity
Rail Modal Share
Coal
94%
Wood prods.
27%
Cereal grains
69%
Milled grain prods.
25%
Basic chemicals
56%
Other foodstuffs
24%
Natural sands
Transport equip.
Fertilizers
54%
Other ag prods.
23%
Metallic ores
49%
Logs
20%
Gravel
42%
Base metals
Nonmetallic minerals
34%
Waste/scrap
19%
Plastics/rubber
33%
Nonmetal min. prods.
18%
Newsprint/paper
Motorized vehicles
14%
Animal feed
32%
Chemical prods.
Fuel oils
31%
Paper articles
12%
Alcoholic beverages
Articles-base metal
10%
Gasoline
Crude petroleum
Source: WSP | PB Analysis of FHWA Freight Analysis Framework – 4.3

22. Relative Importance of Rail Needs by Industry
Mainline Capacity
Branch Line or Short Line Condition, Network Access
Local Rail Service, Classification Yard Capacity
Intermodal Terminal Availability, Capacity, Access
Railroad Railcar Availability
Rail to Rail Competition
Electric Utility, Coal Mining
Medium
Low NA
High
Metallic Ore Mining
Crude Oil Development
Grain Producers, Marketers, Processing Industries
Non-metallic Mineral Manufacturing
Ethanol Manufacturing
Automotive Manufacturing and Distribution
Food Manufacturing
Chemical Manufacturing
Steel Manufacturing
Pulp and Paper Manufacturing
Lumber and Wood Products
Plastic and Rubber Product Manufacturing
Agriculture Excluding Grain
Retail
Small Package Delivery/Less-than-Truckload

23. Small/ Manifest Shippers Shippers with Heavy Reliance on Rail
Implications for Public/Private Partnerships – Types of Projects by Which Shippers Would Benefit
Small/ Manifest Shippers
Intermodal Shippers
Shippers with Heavy Reliance on Rail
Corridor preservation, short line projects
Improvements to low density rail lines
Better mainline access, such as improvements to, access to sidings and spurs
Transload
Projects that aggregate demand, share industrial access, such as industrial parks
Yard improvements
Intermodal terminals, terminal capacity
Clearance projects
Access to terminals
Mainline capacity
Access to competing railroads
Industrial locations with access to multiple Class I railroads
Short lines that can physically and legally interchange with multiple Class I railroads
Many of these projects are things that multiple industries would want, but differences in emphasis

24. Defining the Parameters Public/ Private Partnership
Work Item 6: Parameters of State – Railroad Public/Private Partnerships
Defining the Parameters
What the public sector would invest in
What the private sector would invest in
Public/ Private Partnership
Opportunities

25. What the Public Sector Would Invest In
Drivers of Benefits
Volume of freight impacted
Likelihood of modal shift without project
Level of modal shift attributable to project
Drivers of Economic Impacts
Job creation
Number of businesses
Land development, tax revenues, local economic health
Other
DOT strategic plan, development strategy
Impacts on general public

26. What the Private Sector Would Invest in
Return on Investment
Revenue
Costs of service
Growth prospects
Cost reduction
Other Factors
Risks
Competing opportunities
Fit with existing service
Fit with corporate growth strategy
Corporate governance

27. Task 6 Subtasks
Exploration of public and private investment decisions per previous slides
Best practices in project evaluation, setting up agreements, implications of federal competitive grant programs
Considerations that could indicate a railroad would fund a project in the absence of public assistance
PPP case studies – how the public sector assessed the project, how agreement was structured, results, (hopefully) how railroad assessed projects
In general, what makes for a “good” opportunity for a PPP?

28. Questions/Comments kingap@pbworld.com
Source: Virginia Avenue Tunnel Website