Fall/Winter 2015 Vol. 15 Number 2

Table of Contents

Bookmark and Share

Industries on the Move

A Look at Two Critical Modes of
Freight Transportation


Companies in the U.S. rely on various transportation systems to make sure needed commodities reach American manufacturers and consumers, so ensuring the physical condition and economic efficiency of these systems is important. Approximately one-third of all freight tonnage is moved by rail, and nearly 7 percent is transported on the country's inland waterways. Shippers of bulk commodities such as corn, wheat, and other farm products, coal and petroleum, and chemicals are especially dependent on these two modes of transport.

For much of the 20th century, freight railroads had grown inefficient, in part because of overregulation. The Staggers Rail Act of 1980 eliminated or eased many federal regulations governing railroad pricing and operations and allowed railroads to redress decades-long declines in traffic, stagnant productivity, and oversized networks that had become chronically under-maintained and misaligned with demand. A recent Academies report says that while the Staggers Act enabled the development of a financially stronger and innovative freight railroad industry better able to compete with trucks, invest in capacity, and respond to shippers' needs, key components of the revamped regulatory system are no longer suited to today's freight railroad industry. The report recommends that these outdated regulatory processes be replaced.

In particular, current procedures designed to protect rail users from excessive rates are not working for many shippers who transport small volumes. The Staggers Act allows rail shippers who lack competitive transportation options to challenge some rates that seem unreasonably high, but the formula used to identify those rates is arbitrary and unreliable. More appropriate and usable procedures are needed to resolve rate disputes without threatening the ability of railroads to earn the total revenues they need to pay for their capital-intensive networks.

The report recommends that regulators develop a better tool that compares disputed rates with those charged for similar rail shipments made in competitive transportation markets. Rates that greatly exceed their competitive benchmarks would then be eligible for arbitration to decide if the shipper is entitled to relief. The use of arbitration would compel faster, more economical resolutions of rate cases for shippers whose claims are too small to justify the expense of litigating a case using traditional regulatory hearings.

Another recent Academies report looks at prioritizing investments in the federal inland waterways infrastructure, managed by the U.S. Army Corps of Engineers (USACE) and consisting of more than 36,000 miles of commercially navigable channels and about 240 working lock sites. The chief and most expensive component of this system is the installation and maintenance of locks and dams to enable the upstream and downstream movement of cargo.

©Ed Metz/Hemera/Thinkstock

The study committee that wrote the report found that while the inland waterways system covers a vast geographic area, its freight traffic is highly concentrated, and the system needs a well-executed and sustainable plan for maintaining system reliability and performance to ensure that limited resources are directed where they are most essential.

About 50 percent of barge cargo moves on six major corridors -- including the Mississippi, Illinois, and the Ohio rivers -- which account for 16 percent of the total waterway miles, while other inland waterway segments have minimal freight traffic. Navigation could be improved by directing operations and maintenance resources toward major facilities with higher volumes of traffic, and where the time lost to shipping delays is significantly greater than the river average, the report says. A system of asset management prioritized by the economic importance of facilities is already influencing USACE's maintenance and budgeting processes, but it is not fully developed or deployed across all USACE districts. Further, greater reliance on a "user pays" funding strategy for the commercial navigation system is feasible, would generate new revenues for maintenance, and would promote economic efficiency.

-- Dana Korsen

Modernizing Freight Rail Regulation -- TRB Special Report 318. Committee for a Study of Freight Rail Transportation and Regulation, Transportation Research Board (2015, 264 pp.; ISBN 978-0-309-36906-0). The committee was chaired by Richard L. Schmalensee, Howard W. Johnson Professor of Management Emeritus, Sloan School of Management, Massachusetts Institute of Technology, Cambridge. The study was sponsored by the Federal Railroad Administration and U.S. Department of Transportation.

Funding and Managing the U.S. Inland Waterways System: What Policy Makers Need to Know -- TRB Special Report 315. Committee on Reinvesting in Inland Waterways: What Policy Makers Need to Know, Transportation Research Board (2015, 230 pp.; ISBN 978-0-309-29568-0). The committee was chaired by Chris T. Hendrickson, Hamerschlag University Professor, departments of civil and environmental engineering and of engineering and public policy, Carnegie Mellon University, Pittsburgh. The study was sponsored by the Transportation Research Board and the U.S. Army Corps of Engineers.

Previous Table of Contents Next

Copyright 2016 National Academy of Sciences