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G-92 Guidebook for Assessing Rail Freight Solutions to Roadway Congestion choice or market share model can estimate the shift in truck and rail shares that would result from changes in logistics costs and service levels available from alternative modal options. How- ever, all such models depend on assumptions regarding the mix of customers, shipments, and available carriers. It will normally be much too difficult to attempt a comprehensive analysis of thousands of individual shipments. Instead, it is more realistic to use statistical models with assumptions about a given mix or representative set of shippers and shipments. 5.5 Calculate Traffic & Economic Benefits 5.5.1 Overview This step evaluates the benefits of projects and policies that reduce traffic congestion by reducing truck traffic in those areas and shifting it to rail freight services. There are four distinct perspectives for viewing their impacts and benefits: (1) transportation system efficiency, (2) user benefit, (3) economic growth benefit, and (4) total societal benefit. 5.5.2 Components Different analysis methods are required for analysis of benefits as viewed by each perspective. Accordingly, the analysis approaches are discussed separately for each of these four views: Transportation system efficiency benefit, in terms of improved traffic flow and reduced cost for carriers; User benefit, in terms of reduced total logistics cost for freight shippers; Economic growth benefit, in terms of resulting increase in jobs and income in a local, regional, or national economy; and Total societal benefit, including the value of environmental improvements that may be over- and-above any economic benefits. 5.5.3 Background Direct travel benefits associated with transportation investments include out-of-pocket oper- ating cost savings and the value of time savings and safety benefits. These travel benefits are also referred to as transportation system efficiency benefits since they reflect performance characteris- tics of the transportation system. In urban planning contexts, these benefits are sometimes also referred to as user benefits, based on the notion that the vehicle drivers and passengers are the parties using the transportation system and hence benefiting from its improvement. However, freight studies may separately define the full user benefit of freight transportation system changes as the total logistics cost benefits accruing to shippers (rather than just the change in vehicle cost and staff time for the carrier). Analysts sometimes disagree about the value of measuring benefits as carriers' cost changes (here referred to as freight travel benefits) versus measuring benefits as shippers' total logistics cost changes (here referred to as freight user benefit). Both measures can be useful, and they can be seen as different perspectives for viewing the benefits of rail freight projects and programs. The freight user cost impact is more complete in its coverage and is particularly important for calculating truck/rail modal diversion effects and impacts on economic growth. Freight user benefits, in turn, can have significant impacts on economic activity. The diversion of some freight to rail can save operating and safety costs for all affected groups: (1) freight ship- pers making the switch from truck to rail, (2) freight shippers still relying on trucks using the affected highways, and (3) passenger car and bus travelers who also use the affected highways.

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Methods for Detailed Analysis G-93 The latter two groups benefit insofar as the highways remain less congested than they would have been without any modal diversion. The benefits for shippers using both rail and truck modes can lead to increased business pro- ductivity (which is the level of economic activity that can be generated per dollar of labor and materials). That, in turn, can enhance the cost competitiveness, profitability, and economic expansion of directly affected shippers and indirectly affected firms that are their suppliers and customers. Of course, the extent of these broader economic benefits will depend on the extent to which benefiting shippers, suppliers, and customers are locally based in the affected region. To calculate those effects, a regional economic model is necessary. In the end, the economic expansion of benefiting firms can expand employment opportuni- ties and income levels for workers throughout the affected region. In addition, the local com- munities and states in which investments are made can become more attractive sites for business activity, leading to growth of existing firms and, in some cases, greater attraction of new or expanding businesses. Changes in economic activity levels, then, generate fiscal impacts on gov- ernment revenues and costs at the local, state, and national levels. 5.5.4 Factors The various benefits of encouraging rail freight options in congested highway segments come as a consequence of the following factors: Rail and truck cost and delivery performance changes, Overall vehicles and total ton-miles of diverted freight, Production cost and market access changes, Regional job and income generation by affected industries, and Air quality and other environmental impacts of traffic congestion reduction. Each of the methods discussed below relies on some subset of these factors to calculate bene- fits from a particular perspective. 5.5.5 Methods Element 1 Transportation System Efficiency (Carrier Benefit) Traditionally, transportation system efficiency benefits have been calculated as the sum of traveler savings in out-of-pocket operating costs, time savings, and safety costs (i.e., costs asso- ciated with fatal and non-fatal accidents). We can refer to the value of these three types of sav- ings as the overall savings for travelers. Ideally, analyses should capture benefits to all classes of travelers, including (1) existing travelers, (2) "modal diversion" travel changes associated with modal switching and (3) "induced" travel changes associated with changes in length and fre- quency of travel.iii The transportation system efficiency benefits can include travel savings impacts for both high- way system travelers and rail system travelers. For analysis of rail freight solutions to highway congestion, though, the main emphasis is on benefits from reduced highway congestion that accrue to existing highway system travelers. However, some rail improvement projects may also bring added benefit for existing rail system travelers. For analysis of passenger-oriented rail proj- ects, such as introduction of high-speed rail, benefits to "diverted" and "induced" users also become important for estimating total travel-related benefits. Focusing only on the benefits of iii Weisbrod and Weisbrod, p.20.

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G-94 Guidebook for Assessing Rail Freight Solutions to Roadway Congestion congestion reduction that accrue to existing highway travelers will provide a conservative esti- mate of total transportation efficiency benefits. Calculation of Traveler Benefit. A shift of some truck traffic to rail freight can reduce traffic congestion and improve travel times for all (car and truck) travelers who remain highway users. The value of the highway traveler benefit for all car and truck travelers who remain highway users is calculated as the difference between the higher travel time and expense incurred if no changes were made and the lower time and expense incurred if the project is instituted and congestion is reduced. It can be represented as follows: [(highway travel time value and expensewithout investment) [(highway travel time value and expensewith investment) If we focus instead on the benefit for all freight travelers (carriers), including trucking and rail carriers, then the value of the traveler benefit is calculated using information on expected cost changes for rail and truck freight and expected changes in modal share. The total expected savings for existing freight carriers can be calculated as follows: [(truck freight costwithout investment truck sharewithout investment) + (rail freight costwithout investment rail sharewithout investment)] - [(truck freight costwith investment truck sharewith investment) + (rail freight costwith investment rail sharewith investment)] This, however, only captures the benefits that accrue for current freight travel. For some proj- ects, including large, long-range projects that might take 5 or 10 years to complete, it will be important to capture benefits that will accrue to all future users, i.e., current and expected new users. The impacts of the project on all future users can be estimated as follows: [(projected truck freight costwithout investment projected truck sharewithout investment) + (projected rail freight costwithout investment projected rail sharewithout investment)] - [(projected truck freight costwith investment projected truck sharewith investment) + (projected rail freight costwith investment projected rail sharewith investment)] Available Modeling Tools. Modeling tools can be used to represent transportation system performance and then calculate the total savings in delivery times, operating expenses, and accident rates resulting from freight transportation projects. Available models are discussed in the Caltrans Benefit-Cost website (http://www.dot.ca.gov/hq/tpp/offices/ote/Benefit_Cost/ models/index.html). Most of the available tools focus exclusively on highway user benefits, although a few also address rail user benefits. Examples of available options are noted below: STEAM is a well-known modeling tool for urban transportation planning that calculates trav- eler benefits at the regional or corridor levels and distinguishes peak and off-peak impacts. It then calculates the economic value of those benefits. It can also account for air quality benefits. State or regional highway network models use more sophisticated network simulation tech- niques to calculate the highway system benefits of proposed projects, and they can also capture small area changes affecting highway network connectivity and additional benefits of projects affecting connections between highways and special generators, such as ports or intermodal rail terminals. Results of highway models can be translated into dollar values, using values as shown in the AASHTO Red Book or using broader factors discussed more fully in the Caltrans Bene- fit Cost Guide at http://www.dot.ca.gov/hq/tpp/offices/ote/Benefit_Cost/index.html. It is also possible to perform these calculations automatically using a highway-oriented economic analy- sis tool such as StratBENCOST or Cal-B/C or NET_BC.

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Methods for Detailed Analysis G-95 For rail system benefits of proposed projects, the time and cost impacts on carriers and ship- pers can be calculated based on rail carrier cost and service models as discussed in Section 5.2. Detailed examples are provided in the collection of Project Resources cited in Chapter 6. A rail-oriented economic analysis tool, such as RAILDECiv, can then be used to calculate and assess the relative benefit of alternative rail projects. It is also possible to allocate freight carrier benefits to industries using them. The most direct way is to use the U.S. DOT's Freight Analysis Framework (FAF) data that profiles the industries and commodities moving through large regions and along major corridors. The alternative, particularly applicable for urban freight cases, is to use the U.S. Bureau of Economic Analysis' Transportation Satellite Accounts (TSA) data, which estimate spending by mode per dollar of output and multiply it by the actual local profile of business output by industry. The product of these two vectors will yield an estimate of total local spending by mode by industry, which can be used to apportion total carrier benefits to individual shipping industries. Element 2 Additional Freight User Impact (Shipper Benefit) The preceding calculations capture total cost savings for truck and rail carriers. Recent research describes the sequence by which transportation investments can translate into eco- nomic efficiency benefits on shippers, who are the true "users" of freight transportation services. By introducing, improving, or reducing freight costs in one or more transportation modes, transportation investments can lower logistics, loading, warehousing, and production costs and potentially also provide economies of scale by increasing market delivery areas. So although cost reductions at carriers may be fully passed on as price reductions for shippers (the long-term trend in the transportation industry), the changes in service levels associated with decreased con- gestion and improved reliability can also lead to changes in operating costs, market opportuni- ties, and behavior at the shipping firms. It has been estimated that the traditional transportation efficiency measure of benefit, which examines only impacts on carriers, underestimates the total value of benefits for freight travel by 10 to 40 percent because it neglects additional shipper ben- efits (FHWA, 2004).v As laid out in the FHWA Freight Benefit-Cost Study (ICF and HLB, 2002),vi benefits to shippers can be thought of as occurring in three stages: In the first stage (i.e., "short term"),vii shippers incur changes in direct transportation (car- rier) costs as a result of new transportation projects. Any realized increase in transportation speed and reliability and decline in transportation costs does not affect the amounts of each type of transportation and logistics service purchased by firms (e.g., rail, truck, marine, inventory, warehousing, administration, and customer interactions) but only the prices that they pay for outside transportation services or costs they incur for self-transportation. In this stage, shippers benefit from the reduction in transportation costs but do not change their production or distribution processes--they merely realize a savings on the basket of iv RAILDEC is a family of software programs designed to evaluate the economic benefits from rail-related infra- structure benefits. It is available from the Federal Railroad Administration. v Freight Transportation: Improvements and the Economy. US Department of Transportation, FHWA, Washington, DC; June 2004. vi Economics Effects of Transportation: The Freight Story. Final Report. ICF Consulting and HLB Decision Eco- nomics; January, 2002. Appears as Appendix A in FHWA, 2004, op cit. vii "Short-term" refers to a time period that is short enough that firms do not have a chance to change any factors of production, i.e., cannot change the "recipe" they use to produce and distribute goods. The "long-term" refers to a time period of sufficient length that all factors of production can be changed. The "medium-term" here is used to capture that period that is long enough that some factors of production can be changed (e.g., less ware- housing and more frequent deliveries) but too short for all factors to be changed (e.g., changes in capital and labor mix and utilization associated with adoption of just-in-time production schemes). Note that "short-," "medium-" and "long-term" are not used in the ICF/HLB (2002) report, but are introduced here.

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G-96 Guidebook for Assessing Rail Freight Solutions to Roadway Congestion logistics-related services they already purchase. These savings have been termed "first-order benefits" (ICF/HLB, p.A-12).viii In the second stage ("medium term"), firms shift the relative proportions of modal inputs to take advantage of the price reduction in one or more modes. That is, an increase in service quality and decline in costs in one transportation mode can lead firms to substitute spending on this mode for other transportation modes (e.g., more rail and less trucking). The logistics models discussed above and other mode choice models capture inter-modal substitutions, i.e., freight diversion. These savings are the first component of what have been termed "second- order benefits" (ICF/HLB, p.A-12).ix Preliminary research suggests that, to account for second stage (i.e., substitution) impacts, "the benefits found in current benefit-cost models should be increased by about 15 percent to account for these newly measured [i.e., shipper] effects" (FHWA, 2004; p.8).x Diversion will account for most, but not all, of these effects, which can include gains from modal shifts (i.e., diversion) as well as substitution of (newly improved) logistics services for other inputs. In the third stage ("long term"),xi firms can reorganize their entire distribution systems around the availability of better or cheaper transportation services, leading to shifts among the types of logistics-related services purchased (e.g., more reliance on trucking and less on warehous- ing). Case studies also show that better freight transportation services can eventually spur firms to reorganize their entire distribution process, including (but by no means limited to) introduction of just-in-time systems. This can occur as, for example, a firm that relies increas- ingly on direct shipment to customers ends up adding investment and staff in computerized tracking systems while reducing warehouse-related labor, inventory, and insurance (FHWA, 2004; pp. 6, A-9, A-10).xii Although logistics models generally capture inter-modal substitu- tions, none has been identified that explicitly models substitutions between transportation and other logistics services. Survey approaches that capture both intermodal substitution and substitution between transportation and other logistics services could be designed. These savings are second-order benefits. The benefits associated with reorganization of distri- bution will vary according to the size of the transportation cost reduction, but can be substantial. Prior studies suggest that when transportation cost reductions are less than 2 percent, there is lit- tle or no measurable impact on shipper benefits, but that at transport cost reduction levels of 20 percent, reorganization effects can add an additional 9 percent in benefits (ICF/HLB, p. A-14).xiii Other potential benefits include additional adjustments in operations due to the reduced need for schedule padding to allow for uncertainty in delivery times. Related work has identified additional stages related to shipper response to reduced cost of trans- portation and logistics services. In particular, firms that have reorganized their distribution sys- tems can also reorganize their production systems. For example, firms that develop just-in-time distribution systems can use this change as an entre to introduce just-in-time production systems. Case studies indicate that savings from introduction of JIT manufacturing methods can create large savings on the assembly line.xiv However, it is very difficult to predict whether or not and which firms will reorganize their production systems in advance of transportation investments. To do so would require analysts or firms themselves to be able to predict the types of broad reorganization viii Op cit. ix Op cit. x Op cit. xi The third stage (or "phase", which ICF/HRB use) is marked by a shift in shippers' demand curves in response to new prices and services at carriers. xii Op cit. xiii Op cit. xiv Economic Implications of Road Congestion. Weisbrod, G., D. Vary and G. Treyz. 2001. National Cooperative Highway Research Program, Report 463, National Academy Press.

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Methods for Detailed Analysis G-97 that could be undertaken years down the road and to predict how competitors and other related actors (e.g., carriers, suppliers, and customers) would respond. For these reasons, these effects are usually not considered in economic impact studies for major projects. Calculation of Freight User (Shipper) Benefit. The simplest approach for estimating the total freight transportation user benefit is to start with the measure of freight carrier benefit previously defined and multiply it by a factor that accounts for the shipper benefits that are beyond carrier cost savings. Based on the cited literature, this would mean adding roughly 15 percent to account for second-stage effects and 0 to 10 percent to account for potential third-stage effects (depending on the size of the transportation cost reduction). Although this approach would yield only a rough estimate of total user benefits and would yield little information on user impacts by industry, it is less data-intensive than methods that rely on surveys of shippers and/or additional analyses of likely second- and third-stage effects. A second approach relies on estimating directly the impacts of transportation improve- ments on shippers using survey methods. Surveys can be designed to capture estimates of first, second- and even third-stage cost reductions. Two survey approaches are possible. For the first approach, industry users would be surveyed about the likely cost changes associated with investments and the results directly used to capture shipper benefits. For the second approach, industries would be surveyed about transportation, modal dependence, and transportation substitution possibilities to estimate the relative benefits likely to accrue to each industry. The relative measures can then be used to apportion total expected user benefits to individual industries. This method was used in the study of freight investments in Chicago (Reebie and EDRG, 2003). A practical reason to prefer the direct approach is to confirm the sufficiency of benefits to induce modal shift. The previous chapter section, Designing Transactions, prescribed steps for the assurance of traffic volumes. They were founded on the engagement of shippers in first-hand discussions, which ought to begin in the early stages of a project--if for no other reason than information gathering--and should certainly take place before an evaluation is fully developed in order to demonstrate market acceptance. Quantitative methods of diversion analysis are derived from and are meant to model shipper behavior; however, they should not replace the direct affirmation by transportation purchasers that a particular service will win their business. Realistically, this can be done just as well during the estimation of diversion as during the calcu- lation of benefits, and at either time can satisfy both purposes. The key thing is for shippers to agree with what the models represent and ultimately be willing to commit traffic. Element 3 Broader Economic Impacts Three general types of economic impacts are associated with transportation projects: (1) pro- ductivity, (2) location, and (3) fiscal impacts. Economic productivity benefits are those that raise the level of economic output produced per unit of labor and material cost. These come about in two general ways. First, the reduction in the cost of (freight and passenger) transport allows businesses to reduce the cost of inputs required to produce a given level of output or, conversely, to increase the amount of output for a given dollar level of inputs. Second, transportation improvements provide businesses access to larger labor, supplier, and customer markets, which results in better cost and quality in terms of inputs and greater economies of scale in production of outputs. Both raise the productivity of economic activity in the affected area and (to a much smaller degree) in the national economy. Location of economic activity can also be affected by transportation projects. The reduction in costs and increase in productivity in project areas can result in a shift in business activity toward those areas. Some national productivity gain is associated with such shifts because

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G-98 Guidebook for Assessing Rail Freight Solutions to Roadway Congestion businesses that relocate due to transportation improvements do so in order to experience higher productivity than they otherwise would in their original location (otherwise they would not be moving). However, the impact at a larger national level can be mostly distributive, as a major portion of the gain at the new location occurs as a transfer of activity from another (non-project) area. Shifts in business location patterns can be viewed as a net national social benefit under two conditions: (1) if the areas that gain growth opportunities have been identified by state or federal agencies as targets for economic development; or (2) if shifts in business location or increased output associated with projects represent net national gains in economic activity. For example, some portion of new economic output and employment in affected areas will be the result of increased exports to foreign markets that come at the expense of foreign rather than other U.S. producers. Similarly, a portion of business location shifts will reflect foreign investors taking advantage of better productive conditions in the project areas. Although some of the foreign direct investment (FDI) stimulated by a project will come at the expense of other U.S. locations, a portion could come at the expense of foreign (i.e., non-U.S.) locations. Thus, where trans- portation projects stimulate exports and/or FDI, it is likely that some of this increase in output and employment reflects a net national economic benefit. Fiscal impacts on government revenues and costs can also occur at the local, state, and national levels as a result of various business efficiency and location impacts. Fiscal impacts can be traced to capital, operating, and maintenance expenses associated with transportation invest- ments, and changes in tax revenues from output and employment effects. Input-output and economic simulation models can provide estimates of fiscal impacts associated with user and economic benefits. Calculation of Economic Impacts. Depending on project budget and the degree of confidence in results that is required, analysts can use different techniques and models to estimate economic impacts: If estimates of output impacts from carrier and/or shipper cost savings are available, input- output models (which can be relatively inexpensive) can be used to estimate total employ- ment, output, and fiscal impacts. If only estimates of cost savings by carriers and/or shippers are available, economic simula- tion models can be used to estimate total employment, output, export, fiscal, and other impacts. Neither input-output nor economic simulation models can capture likely business attraction effects, which must be estimated using a business attraction model or if resources are con- strained, estimated based on information gathered from local and state economic develop- ment agencies. Regional Economic Impact Models. Economic impact models are frequently used to con- vert direct cost savings, market access, and productivity effects into broader regional/macro- economic impacts on measures such as employment by industry, gross regional/state product, and personal income. A listing of economic impact models, with links for further information about them, is provided on the website of the TRB Committee on Transportation and Eco- nomic Development (www.tedcommittee.com). The most commonly used types of tools are summarized below: Regional Economic Models. For cases where the primary impact is on changing business costs, the most frequently used models are regional economic simulation models such as REMI, Global Insight, or TREDIS-REDYN models. Sometimes, static input-output models such as IMPLAN and RIMS II are also applied in conjunction with price elasticity response calculations to esti- mate the full industry impacts of projects. Application of these models for highway and rail

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Methods for Detailed Analysis G-99 transportation projects are summarized in NCHRP Synthesis of Highway Practice 290xv and more recent experiences are discussed in Weisbrod (2006).xvi Business Attraction Models. Sometimes, economic impacts accrue from changes in market access as much as from changes in cost. Methods for evaluating those market access effects are discussed in NCHRP Report 456: Guide for Assessing Social and Economic Effects of Trans- portation Projectsxvii and NCHRP Report 463: Economic Implications of Road Congestion.xviii Those market access impact methods are also embedded in business attraction models such as ARC-Opps and EDR-LEAP (now also part of TREDIS). Their impacts can then also be fed into the regional economic analysis tools noted in the prior bullet item. Element 4 Total Societal Benefits Transportation planners often think of "social benefits" in the context of environmental impact studies, where the term can refer to the non-economic side of "socio-economic" impacts. However, to economists, the term "social benefits" refers to all benefits to society, including time, money, environment, and quality of life factors. To avoid confusion here, we also refer to these total benefits as "societal benefits." Rail investments can reduce truck freight movements and thus reduce congestion, mainte- nance, environmental, and other costs associated with truck traffic. These societal benefits of reduced highway congestion can accrue to highway users (crash and congestion costs), non-users (air pollution and noise costs) and government (highway maintenance costs). The value of societal benefits associated with truck diversion will vary greatly depending on local conditions ("where"), the types of trucks diverted ("what"), and the time of day the diverted freight movement would have occurred ("when"). For example, areas with significant existing congestion or air pollution problems will benefit more from truck diversion than uncongested or less polluted areas; benefits are higher when diverted trips take place during high traffic time slots; and in general, the overall value of truck diversion is much higher in urban than rural areas because of congestion costs. Characteristics of trucks also matter: com- bination trucks are associated with higher maintenance, congestion, and safety costs than sin- gle-unit trucks; larger trucks tend to create higher maintenance costs than smaller trucks; and 5-axle trucks create greater pavement and safety costs but contribute less to congestion than 4-axle trucks. Calculation of Societal Benefits. An FHWA report (2000) has shown how the public costs associated with each additional highway vehicle-mile traveled can vary by type of trucks.xix These marginal costs were presented in Step 4 and are reproduced in Exhibit 3-19. As the data in that table show, social costs associated with truck movements can be as high as almost 70 cents per mile for an 80 kip 5-axle combination truck driving in an urban area. In general, diverting a truck mile of freight will reduce social costs by 8 to 20 cents in rural areas and 34 to 70 cents in urban areas. xv Current Practices for Assessing Economic Development Impacts from Transportation Investments, NCHRP Synthesis 290, TRB, 2000. xvi Weisbrod, Glen: Evolution of Methods for Assessing Economic Development Impacts of Proposed Trans- portation Projects, paper presented at International Conference on Transportation and Economic Development, 2006. xvii Guidebook for Assessing Social & Economic Effects of Transportation Projects, Forkenbrock, D. and G. Weisbrod. NCHRP Report 456, National Academy Press. 2001. (see Chapter 8) xviii Economic Implications of Road Congestion, Weisbrod, G., D. Vary and G. Treyz. 2001. National Coopera- tive Highway Research Program, Report 463, National Academy Press. xix Addendum to the 1997 Federal Highway Cost Allocation Study Final Report. U.S. Department of Trans- portation; Federal Highway Administration, May 2000.

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G-100 Guidebook for Assessing Rail Freight Solutions to Roadway Congestion Source: Reproduced in part from Addendum to the 1997 Federal Highway Cost Allocation Study Final Report; U.S. Depart- ment of Transportation Federal Highway Administration, May 2000, Table 13. Exhibit 5-4. Marginal Costs of Highway Use by Trucks, 2000 (Cents per Mile). The costs presented in Exhibit 5-4 provide only an approximation of the type and magnitude of social cost savings that can be expected from truck diversions. The estimates of unit values presented in that table can be applicable when combined with additional information about rail mode alternatives as shown earlier in Exhibit 3-16. However, care must be taken to avoid com- bining disparate information that compares costs per vehicle-mile and costs per ton-mile, since analytical findings can vary depending on specific size and weight restrictions on trucks and rail cars in various states. In addition, actual societal cost savings will depend heavily on a number of factors, including local conditions; truck and trip characteristics; and expected increases in costs associated with greater freight movements by rail. Thus, the estimates below provide only rules of thumb regard- ing the expected changes in social cost associated with diversion of freight from truck to rail. In situations where local conditions or truck or rail characteristics are atypical or when the analy- sis must provide detailed, high-confidence estimates, a separate analysis of social costs should be undertaken using more sophisticated models, such as network optimization and highway capac- ity models. Underlying Logic of Societal Impacts. To illustrate calculations and reporting of user and economic costs and benefits, Exhibit 5-5 provides an outline of the logic underlying the estima- tion of project benefits. There are multiple ways to estimate benefits from freight diversion: in the exhibit, "Level 1" refers to methodologies that are generally less time- and resource- consuming than "Level 2" options. Included among Level 1 methodologies are logistics models and marginal cost factors. Level 2 methodologies include surveys of carriers and users, to fore- cast shifts in mode choice, and diversion, network optimization, and highway capacity models, which can be used to estimate the impact of truck diversion on the highway transportation system. The latter models are complex, but are useful in situations where the marginal benefits of truck diversion are high. In these cases, small amounts of truck diversion could have large effects on congestion and social costs because of network configuration or other local conditions (e.g., proximity to an international port). Social equity may also be a factor. Diverting traffic from one congested corridor to a less congested corridor, whether by truck or to rail, may increase traffic, noise, and grade crossing incidents in other areas.

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Methods for Detailed Analysis G-101 Accounting Analysis Steps Methodologies Direct Econ Dev/ Benefits & Level 1 Level 2 Indirect Costs Specific Investments Shipper/ (costs, type, etc.) Logistics Impacts Railroad Impacts cost, service Factor Logistics Surveys & other factors that Model Trucking affect total logistics Impacts performance Mode choice Non User/ Baseline Public Forecasts Diversion Benefits: Models Factor DOT Impacts Jobs, (Congestion, # of trucks diverted Net Income Maintenance) Network Optimization General Models Public FHWA Impacts (Congestion, factors Environment) Effects on highway performance Highway capacity model & network optimization Public $ Benefits Exhibit 5-5. Elements of the Calculation of Total Project Benefits. For all analyses, the reduction in social costs associated with diverted truck traffic must be compared to any costs (e.g., environmental, noise, and safety) associated with increased rail freight. In general, railroads should be a good source of information on expected increases in the factors that contribute to these social costs (e.g., crashes and emissions). Air Pollution Impacts. Special attention should be given to air pollution costs when the pro- posed investment is to take place in an area designated by EPA as not in attainment with national air quality standardsxx or when the investment will be in a rural area. In non-attainment areas, rail projects that divert truck traffic can have much larger societal cost reductions than the averages. In rural areas, air pollution costs account for 20 to 50 percent of total societal costs; in these cases, xx To determine the ozone and particulate matter non-attainment status of counties potentially affected by rail projects, go to www.epa.gov/ozonedesignations and www.epa.gov/pmdesignations.

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G-102 Guidebook for Assessing Rail Freight Solutions to Roadway Congestion the accuracy of estimates of social costs will depend strongly on the accuracy of air pollution cost reduction estimates. In general, freight movements that involve rail are understood to generate less air pollution than those that rely wholly on trucks. The U.S. EPA recently concluded that "For shipments over 1000 miles, using intermodal transport cuts fuel use and greenhouse gas emissions by 65%, relative to truck transport, alone."xxi A 2004 study reported that "per ton-mile, trucks emit three times more nitrogen oxide and particulate matter than a locomotive does" and that despite new regulations on trucks emissions that will be in place by 2007, "for the foreseeable future, freight trains should be considered cleaner and more efficient than tractor-trailer trucks on a per- ton-mile basis."xxii 5.5.6 Required Resources The calculation of total project benefits can be data and model intensive, especially as the scope of benefits and the scale of analysis is expanded. The types of information and models that may be required are enumerated below. However, an elaborate analysis of every element is by no means always necessary, and it is possible to mix a detailed evaluation of one facet with an esti- mate of another, if practical conditions require it.xxiii Data needs include Rail carrier costs per unit of freight movement, Truck carrier costs per unit of freight movement, Total shipper logistics costs per unit of freight movement, Commodity mix and trip distance profile, Regional economic profile, and Regional air quality conditions. Models include Modal Diversion Model--Forecast of total ton-miles of diverted freight and resulting change in truck and rail vehicle volumes; User Benefit Model--Calculation of shipper cost savings and market access changes; Economic Benefit Model--Productivity benefit due to cost savings and scale economies from production and market access changes; Regional Economic Impact Model--Job and income generation from freight-dependent industries, their customers, and suppliers (as viewed from local or national levels); Environmental Impact Model--Air quality impacts of reductions in traffic congestion; and Government Fiscal Impacts Model--Changes in public agency revenues and expenditures as a result of regional economic changes. xxi "A Glance at Clean Freight Strategies," www.epa.gov/smartway/documents/intermodal%20shipping.pdf xxii Investing in Mobility, Environmental Defense Fund, 2004; p. 40. xxiii For example, under Element #2, above, was an FHWA citation to the effect that shipper benefits represent a 1040% increase over carrier benefits. Thus, in the absence of better information, a detailed analysis of carrier benefits could be multiplied by this factor to yield an estimated range of the benefits to shippers.