Short Line Rail: Its Role in Intermodalism and Distribution

One measure of the vitality of the U.S. economy is to look at the amount of goods
transported by freight. In 2002, in the U.S., 53 million tons of goods valued at more
than $36 billion (2002 dollars) were transported each day. The freight volumes are
projected by the Freight Analysis Framework (FAF) to increase by 92% by 2035. The
national expenditure on freight transportation in the United States is estimated to be 5%
of Gross Domestic Product (GDP). The value of freight moved on the U.S.
transportation system is increasing faster than tons transported, even when calculated
in 2002 prices. The FAF 2007 provisional estimate and 2035 forecast expect the value
of shipments to increase between 3.1 percent and 3.5 percent per year while tonnage is
predicted to grow between 2.0 percent and 2.1 percent per year – going from slightly
over $13.2 billion in 2002 to almost $41.9 billion in 2035 (2002 dollars) (FHWA, 2008).
Not surprisingly, transportation costs constitute a significant part of the price of finished
goods. For example, a Canadian study finds 13% of primary industry expenditures and
11% of secondary industry expenditures are for transportation (Owoc, 1993). One
measure of the performance of the nation's freight transportation system is total logistics
cost. Total logistics cost is the cost of managing, moving, and storing goods. The major
components of total logistics cost are administration (e.g., management, insurance),
transportation (e.g., by truck, rail, air, and water), and inventory carrying costs. In the
U.S., logistics costs rose through the 1960s and 1970s to a high of about 16 percent in
1980, then declined through the 1980s and 1990s. Total logistics costs in 2003 were
estimated to be about 8 percent of U.S. GDP (FHWA. 2005). These costs are just
those associated with the actual transport of goods. The numbers become larger when
the capital costs of infrastructure are included, although it is not easy to sort them out
completely since railroad capital costs are embedded in their rates, while trucking,
barge and air freight rates capture some of their capital costs, they do not capture the
full costs of highways, waterway infrastructure and airport and air traffic control systems.
Nevertheless, it is clear that freight transportation is a major component of the U.S.
economy.
The freight transportation industry is complex. There are multiple firms and agents,
often with conflicting objectives and motives that interact in attempts to maximize or
minimize some particular set of objectives. In addition, transportation infrastructure
requires huge capital investments, and frequently has significant implementation delays.
Further, there is stiff competition among the different players in the freight industry.
Often, there is a strong correlation between their decisions, although independently
taken. Finally, the industry has to adapt and evolve quickly in response to social,
economic and demographic changes (Crainic, 1999; Valsaraj, 2008).
It has been said that meeting America’s surface transportation needs for the future will
require a strategy that goes beyond just “more of the same.” It will require a multi-modal
approach, which preserves what has been built to date, improves system performance,
and adds substantial capacity to highways, transit, freight rail, intercity passenger rail,
and better connections to ports, airports, and border crossings (AASHTO, 2007a).
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