AAR: Class I

Stressing that U.S. Class I railroads have committed “the three highest years of capital expenditure on record, in the middle of the greatest recession since the Great Depression,” Association of American Railroads CEO Ed Hamberger on Wednesday said “the individual freight railroads have have announced that they will spend $12 billion on capital expenditures … in the United States.”

The commitment by freight railroads, Hamberger noted, dovetails with President Obama’s call for the private sector to commit to job growth, and also shows the industry “is not just on the sidelines; this industry has been in the game.” Hamberger (pictured at left) said the Class I’s expect to hire up to 10,000 employees in 2011, “and these are good jobs” with salaries higher than the national average.

Hamberger, addressing the media on a conference call, said, “We’re doing this with private capital, not taxpayer money,” and added, “the railroads own, maintain, improve—and pay taxes!—on our right-of-way.” Hamberger said 40 cents of every railroad revenue dollar has been put back into railroad infrastructure during the last 10 years. “As I like to say, we invest so the taxpayer doesn’t have to.”

Given the expected growth in U.S. freight movement forecast by the federal Department of Transportation for the next 25 years, such investment will be needed, Hamberger said. At present, “one-third of all exports get to port on a railcar,” and “we’re going to need a lot more steel on the ground, and locomotives, and etc.” if rail simply maintains its market share, let alone increases it.

Four concerns are still eyed by AAR and its members, including the federal mandate for Positive Train Control, potential regulatory action from the Surface Transportation Board, the potential revision of truck size and weight limits by Congress, and the regulation and/or legislation addressing “the use of coal at electric utility plants,” since coal currently generates about 25% of rail revenue and accounts for one in five jobs, Hamberger said. 

PTC may top the list of concerns, since its cost-to-benefit ratio is 22 to 1, Hamberger said. “It’s a bad mandate; we’re going to try to live up to it.” Of some cheer to the Class I’s is the willingness by the Federal Railroad Administration to adjust and tailor its PTC requirements, driven in part by requirements for passenger rail traffic and by toxic inhalation hazard (TIH) shipments that already are out of date. “FRA was going to hold us to the traffic pattern of 2008, even though the pattern has already begun to move,” particularly regarding TIH, Hamberger said.

Asked if the Class I’s were benefitting from the Administration’s support of passenger rail improvements, including high speed rail efforts, Hamberger said, “Freight railroads are good corporate citizens; that’s what we get out of it. It’s good for the environment, good for energy use, good for national security to move goods, and people, by rail.”

Hamberger reiterated the freight railroad’s belief that, long-term, separate railroad rights-of-way are a must for U.S. HSR. “We would like to see true high speed, and that can’t operate over the freight railroad network,” he said. But he noted that such a goal is a “long-term vision, an expensive vision,” and interim steps were more likely at first, such as five instances at present where “freight railroads will cooperate by making capacity available for passenger rail.”

The Class I’s “are the foundation” right now for any passenger rail improvements “outside the Northeast Corridor,” Hamberger observed.

Political maneuvering in Washington “can cause uncertainty in our industry” and can upset even an optimistic investment outlook, Hamberger warned. As one example, he cited the isues involving domestic coal use as a potential cloud, depending on how Congress or the President acts. On the other hand, export volume growth looks promising, with “investments being made both in Canada and the United States in the Pacific Northwest to put in export facilities for coal there,” he said.