Short line railroads across the United States offer affordable and flexible options for shippers, yet they are still struggling to overcome track quality, technology and reliability.
Short line railroads across the United States offer affordable and flexible options for shippers, yet they are lagging behind in terms of track quality, technology and reliability.
However, in recent years, the nation’s short line market has made strides in funding to improve operations and is now looking to enhance technology and digitization to improve operations and become a more competitive option for shippers.
The short line tax credit (Section 45G of the 1986 Internal Revenue Code), which was enacted in 2004 and extended six times since then, has resulted in about $4 billion being invested in the nation’s short line network, according to the American Short Line & Regional Railroad Association (ASLRRA). The credit provides 50 cents for every dollar spent on infrastructure improvement, capped at $3,500 per mile of track.
In February, the credit was extended retroactively through Dec. 31, 2017, as part of the 2018 Bipartisan Budget Act of 2018. However, the short line railroad industry is pushing for the tax credit to be made permanent through the Building Rail Access for Customers and the Economy (BRACE) Act, introduced in the House (H.R. 721) and Senate (S. 407) in early 2017. As of mid-May 2018, H.R. 721 had 260 co-sponsors and S. 407 had 56 co-sponsors.
Additionally, the Consolidated Rail Infrastructure and Safety Improvements Program (CRISI) was funded at $593 million in the fiscal year 2018 appropriations bill, up from $68 million in fiscal year 2017.
A total of $250 million has been set aside for positive train control technology implementation. “I think a lot of that is going to go to the commuter railroads, but it’s also a critical priority for 90 of our short lines that will be in a position of having to comply,” ASLRRA President and CEO Linda Darr said at the Rail Supply Chain Summit in Chicago earlier this month.
Created by the FAST Act, Darr said CRISI is basically the result of a lot of very small railroad subsidy programs that were combined together a few years back to create the program.
In addition, the 2018 Consolidated Appropriations Act made $1.5 billion available through Sept. 30, 2020, toward the BUILD program (formally known as the TIGER program), up from $500 million the prior year, according to the U.S. Department of Transportation. At least 30 percent must be awarded to projects in rural areas. Darr noted these rural areas are the “home field” for many of the nation’s short lines.
Short lines have inherited track with years of deferred maintenance by their prior owners and now are investing at least 25 percent of their annual revenues in rehabilitation and maintenance, which is far more than almost any other industry in the country, according to ASLRRA.
Despite tailwinds from funding, the short line market needs to step up its game to revolutionize connectivity if it wants to keep up.
This past year, a working group of senior short line executives and IT professionals was formed to explore better ways to collect, analyze and utilize data that’s needed to provide reliable trip lanes for customers, Darr explained.
She said to compete effectively in a “push button” economy, the short line railroads need a digital platform.
“Failure to do so threatens our business, and particularly our carload business, in a very material way,” she said. “The Amazons and the FedExes of the world have revolutionized and commoditized freight delivery, making it faster, more reliable and more customer friendly. Their drive to excel in this new world will only intensify, and unless we match that intensity, we are going to gradually lose the traffic war.”
The goal is to create a central data bank that receives information from every link in the supply chain, Darr said, adding that this would provide various applications, including predictive estimated arrival times for loads and empties, transit times, score-carding, interchange performance and historical event visibility.
She said the web-based platform should be easily accessed by any railroad and shipper that wishes to use it.
The working group has worked on a pilot project with an individual shipper, a Class I railroad and a short line to test it and is in discussions with the Class I to further develop a methodology and platform that would allow it to be used across multiple railroads.
“I think the country is starting to recognize the value of short lines,” Darr said. “I think that there are changes going on in the Class I world that will mean more opportunities for short lines to grow. I think we are a good bang for the buck.”
The 603 short lines across the United States operate 47,500 route miles, or 29 percent of freight rail in the nation, according to ASLRRA. Transferred cargo from Class I trains to short lines for final delivery accounts for 48 percent of short line traffic.
With the outlook for short line transport appearing bright, it could very well capture the attention of shippers currently relying on the tight trucking market to move their goods, especially since only time will tell if pay boosts in trucking actually will retain drivers and if autonomous trucks kick into gear.
Desmoreaux is Associate Editor of American Shipper. She may be reached by email at hdesormeaux@shippers.com.
On The Surface: Short line strides
