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8 C H A P T E R 3 Findings and Applications PART 1: Review of Class I The North American Class I railroads overall reduced staff Railroad Permitting and from 209,000 in 1990 to 168,000 in 2006 (1). At the same time, Agreement Processes freight volumes, profitability, and on-time performance have significantly increased since deregulation under the Staggers The railroads' permitting and agreement review processes are Act of 1980. The Association of American Railroads (AAR) the result of nearly 100 years of interaction with modern high- cites numerous efficiency statistics in documenting the resur- ways and with highway agencies. The trends apparent in gence of the railroads: today's agreement process reflect the legal, engineering, eco- nomic, and operational strategies that affect the modern Class I America's freight railroads are the most productive in the railroads. The first section of this chapter includes a brief his- world. . . . Railroads generated 93 percent more ton-miles tory of modern railroad developments that influence the rail- of freight in 2008 than they did in 1980, but they did so with roads' approach to project agreements and project reviews. 41 percent fewer miles of track, 64 percent fewer employees, 15 percent fewer locomotives, and no increase in gallons of fuel consumed--and at rates that, on average, were 49 per- Summary of Railroads' cent lower when adjusted for inflation (3). Perspectives Today, 559 railroads operate in the United States, but the These trends have resulted in the railroads operating fewer seven Class I railroads dominate the industry, according to tracks but having much higher train volumes on those that FRA. Class Is represent only 1% of the railroad companies in remain. Train lengths have increased over the decades; it is now the country but generate more than 90% of the rail revenue. common to see trains over 1 to 2 miles long. Mainlines, there- The remaining 99%, generating less than 10% of rail revenue, fore, are critical, 24-hour operations that cannot be delayed comprises 33 regional carriers and 519 local railroads (1). without serious effects on the just-in-time operation. The AAR Numerous reports indicate that the American rail industry reports that between 1980 and 2008 rail employee productivity is healthier than it has been for decades. FRA reports that in rose 439%, locomotive productivity rose 126%, and productiv- 2006 the railroads generated $54 billion in revenue and set a ity of each mile of track rose 226%. It says that overall produc- new record for freight traffic with 1.77 trillion revenue ton- tivity, measured in ton-miles per dollar of inflation-adjusted miles, up 4% from 2005. (The revenue ton-mile is a unit that operating expenses, rose 144% since 1980 and the Staggers Act incorporates weight and distance into the calculation of vol- deregulation (3). ume shipped.) Many studies show that for the first time in Productivity rates increased because of track consolidation, decades railroads were able to raise rates in excess of inflation railroad mergers, dropping of inefficient lines, and improved and to increase hiring after decades of downsizing (1), at least operations. The U.S. rail network hit its peak miles in 1916, before the recession of late 2008. with 254,000 miles of rail service (2). Today the U.S. has However, these accomplishments are relatively recent and 140,810 miles, or 44% less. Class I railroads control 96,664 are the result of decades of struggle, retrenchment, bankrupt- miles, regional lines 15,388, and local railroads 22,519 (4). cies, deregulation, and slow rebirth of the American rail indus- Although the current American rail network is 44% smaller try. In 1920, the American rail industry was the largest U.S. in terms of miles, it is carrying record volumes. Since 1980, employer, with 2 million workers (2). Today, it has 187,000. ton-miles shipped have risen 93%.

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9 These successes have made railroads profitable, but they decades. The Ports of Los Angeles and Long Beach accommo- still struggle to earn their cost of capital, since railroads earn date the largest portion of these imports. From there, the ship- only about 7% on net capital, according to FRA (1). This is a ments stream across the continent on trains to warehouses and modest rate of return compared to some other industries. For other distribution points. The trade with China, the growth in decades, American railroads earned the lowest rates of return India, and the general global economic trade expansion spurred of any major U.S. industry. Between 1960 and 1979 the aver- significant growth in the past decade's rail intermodal ship- age annual return on shareholder equity was 2.3% (2). U.S. ments. Panama is expanding the Panama Canal, which will railroads have estimated that up to 40% of their revenues are allow the largest Asian container ships greater access directly devoted to capital assets, a percentage that is significantly to the East Coast and the Gulf of Mexico ports. Such trends higher than most industries. The high cost of maintenance could significantly increase intermodal traffic on the eastern for track, rolling stock, and yards requires substantial capital and southern coasts, as has already occurred on the West investments, which are not liquid or mobile. Investing in a Coast. Again, the higher oil prices of 2006 and 2007, along line represents a significant long-term investment for a rail- with the international recession of 2008, have significantly road. Therefore, railroad executives repeatedly note that they clouded the short- and intermediate-term forecasts for are reluctant to pay for projects that do not provide a proven international intermodal trade. However, over the long term, return on investment. 20 to 30 years, international intermodal trade is expected to The railroads' reluctance to invest in or cost-share on high- steadily increase. way projects has also been constrained by the intense compet- A 2007 study examined the effects if the major U.S. rail lines itive rate pressures they face. Because railroads competed with are not expanded (7). The National Rail Freight Infrastructure barges and trucks for decades, they had not raised rates com- and Capacity Study, prepared for the Association of American mensurate with inflation. The railroads and FRA repeatedly Railroads by Cambridge Systematics, Inc., examined current note that between 1980 and 2006 rail freight rates declined 55% levels of rail freight capacity, focusing on the 52,340 miles of in inflation-adjusted terms. Much of that decrease occurred in primary rail corridors that carry the majority of the nation's the early decades of deregulation. FRA now reports that freight traffic. The study forecasted that on these corridors an inflation-adjusted rates increased by 14% between 2003 and estimated $148 billion (in constant dollars) in improvements 2006, representing a significant new trend, but one that again will be required over the next 28 years to keep pace with eco- was suppressed by the 2008 economic downturn. nomic growth and freight demand. Although the large major- ity of the current system is operating at an acceptable level of service, the amount of excess capacity on the rail network Expansion Concerns has diminished in the last two decades of growth, the study After consolidating and abandoning tracks for decades, Class I reported. It forecasted that if the 2035 rail freight volumes railroads have been for the past decade in a marginal but were to occur on today's rail network, 30% of the major rail steady period of expansion, despite the downturn in 2008. The network would be operating above capacity, creating severe U.S. DOT's Freight Analysis Framework 2 predicts an 88% congestion. Because of the interrelated nature of the nation's increase in rail freight demand between 2002 and 2035 (5). This rail network, this congestion would affect every region of the increasing demand is spurred by general growth in the econ- country. Frustrated shippers would potentially shift freight to omy, increasing foreign trade, and the continued pressure of already congested highways, the study suggested. just-in-time logistics. Current annual volumes are forecast to Of the $148 billion in constant dollars needed to keep pace increase from 1.77 trillion to 3.5 trillion tons moved annually with the level of growth through 2035, the Class I railroads by 2035. These volumes will continue to represent approxi- could contribute about $96 billion from expected income and mately 40% of all ton-miles of freight. operations and the Class II and short-line railroads could con- This percentage of the nation's ton-miles represents the tribute $13 billion, the same study estimated. That leaves an heavy lifting of the U.S. freight industry. The major cate- investment gap of $39 billion, or $1.4 billion annually, to meet gories of commodities include coal, chemicals, farm products, the rail capacity needs through 2035 (7). transportation equipment, and food. Mixed shipments, which These trends indicate the following: include intermodal shipments, are one of the largest single rev- enue categories, according to the AAR (6). Intermodal ship- Major U.S. rail corridors will require additional rail capac- ments are those that inherently rely on two or more modes, ity and right-of-way. mostly rail and truck or rail and ship, and are generally very Railroads will be seeking to optimize their capacity through time-sensitive deliveries. new technology. Intermodal shipments from the coasts into the heartland The railroads will face a continuing capital shortage despite have repeatedly been predicted to at least double in the coming their growth.

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10 Partnering with public agencies on major corridor projects UP rail yard in Texarkana, Arkansas. The collision resulted in will become more valuable to the railroad and the public. the puncture of a railroad tank car containing propylene, a It is in the national interest to preserve the maximum capac- compressed flammable gas. The propylene was heavier than air ity of these rail corridors to capture the environmental, and flowed near the ground into a nearby neighborhood. The energy, and congestion-reduction benefits of rail freight. flowing gas reached a house where an unknown ignition source ignited the gas, and the house exploded. The single occupant was killed. The fire moved quickly along the flowing gas back For these reasons, railroads are reluctant to accept any high- to the punctured tank car. A second, unoccupied, home was way project that can constrain the horizontal, vertical, or oper- destroyed in the fire, and a wooden railroad trestle burned ating capacity of a railway--or its potential future expansion. completely. Approximately 3,000 residents within a 1-mile radius of the punctured tank car were advised to evacuate Safety Concerns the area. The two crews and the employees working at the Texarkana yard were not injured, and they evacuated the area To understand the railroads' attitude to the construction of safely. Total damage was $2.4 million, including $325,975 in highway projects on or adjacent to their rights-of-way, one equipment damage and $2,053,198 in track damage (10). must appreciate their attitude toward safety. Safety concerns are paramount to them. Railroading has a lower employee The AAR reports that each year 1.5 to 1.6 million carloads of injury rate than many other major industries, including truck- hazardous materials are transported by rail in the United ing (8), but deaths of rail workers still are common nationally. States; toxic inhalation hazards (TIH), such as chlorine and Workers who are required to work in proximity to passing anhydrous ammonia, account for approximately 76,000 car- trains can be struck by the trains, by debris coming off the loads annually (11). It notes that the rail industry is particu- trains, or by items extending from passing trains. In addition larly concerned because it legally cannot refuse to ship these to their workforce, the railroads are also concerned about lia- materials under government regulations. While TIH materials bility for highway construction workers who are killed when make up a small fraction of the railroads' total volumes of working on or adjacent to rail rights-of-way. freight, they represent significant liability to the railroads. Highway construction projects can cause derailments that These safety concerns cause the railroads to be cautious in are potentially catastrophic to the railroads. Derailments can allowing construction activity on or near their tracks. They be caused by undercutting near the railroad base and inadver- insist on standard contract provisions to ensure that contrac- tently lowering the rail grade, by fouling the tracks with debris, tors abide by their safety provisions. They require "flagging," or by equipment such as cranes getting too close to the tracks or control of train traffic through construction sites by trained or undermining the rail bed while boring casing pipes beneath personnel. They reserve the right to shut down any operation the right-of-way. deemed unsafe. In addition, they require indemnification Such derailments and accidents can cause disruptions to for contractor error and require Railroad Protective Liability shipments that can ripple for days across the busy rail network. Insurance with amounts that vary from $2 million per incident Railroads often have guaranteed shipping windows for which to $10 million aggregate. they earn premium rates. Missing delivery times results in Railroads are adamant about these provisions. Failure to penalties and potentially lost business. include them in project agreements will lead to delays with the Even more worrisome is the potential for loss of life and railroad reviewers. property caused by hazardous materials releases. The rail- The following summarizes the railroads' perspectives regard- roads transport only 5% of all hazardous materials (9); truck- ing highway projects. ing, which handles many shorter trips of commodities such as gasoline, carries an estimated 53%. However, individual Highway Projects Don't Directly Help Railroads train tanker cars carry large volumes of chemicals, and when they crash they are subjected to intense forces and heat caused Highway agencies personnel are deeply imbued with an ethos by sparks, friction, and impact. This can lead to toxic releases, that they exist for the public good. Hence, they deeply believe fires, and poisonous plumes. that the projects they build are clearly and without question A summary of crash reconstruction reports from the necessary for the safety, mobility, and convenience of the National Transportation Safety Board (NTSB) provides a litany nation's travelers and freight shippers. However, railroads also of examples from recent years. Just one example follows: exist for the public good. They move the nation's freight, carry its coal, ship much of its chemicals, and transport much of the At 4:56 a.m., central daylight time, on October 15, 2005, farmers' grain to market. Railroads struggle to compete against westbound Union Pacific Railroad (UP) train ZYCLD 13 col- trucks for trips less than 500 miles. While they struggle to lided with the rear of standing UP train MPBHG 15 in the ship goods competitively against trucks that travel on public

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11 highways, the railroads generally derive little direct benefit from disruptive delays, penalties on guaranteed shipments, and rip- highway projects that, moreover, may constrain them horizon- pling effects across their national network. tally, vertically, or longitudinally. Such projects may give rise to Railroads will not accept interruption to train traffic as the physical constraints, operational delays, and disastrous con- highway agencies build overhead bridges, resurface grade struction accidents. So, while highway agencies innately assume crossings, or work adjacent to tracks. One rail executive noted that the projects they bring to the railroads have intrinsic pub- that closures measured in hours rather than days are what the lic benefits, the railroads only indirectly share in those benefits. railroad will accept. To close tracks longer would disrupt ship- ments and cause penalties of hundreds of thousands of dollars to the railroads. Railroads Are Private Companies Railroads take such constraints in stride. It is common for Fundamentally, railroads are legally, financially, and morally railroads to replace their own bridges in a day, not months or bound by their corporate structure to first and foremost pro- years as highway agencies do. Railroads plan their maintenance tect the interests of their shareholders and, subsequently, in short windows arranged around train schedules. They build their customers. Making money and protecting their assets bridges for 100-year life spans to avoid repairs. They have are not a sign of malevolence but a legal commitment that unique construction and maintenance equipment that accom- railroads have as public companies. When shareholders pur- modates rapid activity within narrow windows. These practices chase stock, they receive an implicit and explicit guarantee are much less common among highway agencies. that the company assets will be used first and foremost to generate returns on investment. This obligation greatly dis- Safety Is Paramount courages railroads from donating rights-of-way, providing free project reviews, allowing future rail expansion to be Train wrecks in past decades have resulted in hundreds of curtailed by low or narrow bridges, granting unrestricted deaths, chemical spills that forced city evacuations, and dis- access to rights-of-way, interrupting service, or exposing the ruptions to train networks that took days to resolve. Highway corporation to liability. projects are not a common cause of derailments, but many Highway agencies do not expect banks to give them free construction activities could cause a derailment or accident. money, or oil companies to provide them free fuel. However, Debris left on tracks can cause derailments. Trackside work- highway agencies have often asked railroads to donate property, ers distracted by equipment noise periodically are struck by provide engineering advice for free, or constrain future rail passing trains. Changes in track signaling are required when capacity in the interest of public highway projects. Highway workers are present; and signal confusion is a leading cause agencies routinely pay $150 to $200 per hour for senior engi- of train collisions. neering consultants to review and manage complex projects. Such potential disasters are why railroads protect their However, some are surprised when railroads do not provide rights-of-way. When highway contractors bring cranes, load- such reviews for free on highway projects that cross railways. ers, dozers, dump trucks, and boring equipment near rail Such costs are incurred by the railroads during review of public rights-of-way, the railroad wants to monitor carefully the highway projects. Passing those costs back to the highway contractor's actions. Railroad "flaggers" need to be present to agency is routine for the railroads, which otherwise must pass warn of approaching trains, which may take miles to stop. The on the cost to shippers or shareholders. railroad safety engineers must be assured that tracks can be restored to service within minutes if necessary. Railroad attor- neys and safety officers must be assured that trains and their Railroads Have Little Tolerance for Interruptions cargos are not threatened by crashes or derailment. Highway agencies routinely close lanes and even entire free- Highway agencies and their contractors face complex con- ways periodically for maintenance and construction. Highway struction requirements, narrow construction windows, and networks have extensive redundancy, which allows motorists absolute indemnification requirements when dealing with rail- to detour onto other bypasses, beltways, arterials, and even roads. These requirements are generally more restrictive than local streets. Railroads lack this redundancy. They have those highway agencies impose on themselves or their contrac- fewer routes and each one is optimized for maximum 24-hour, tors. To the highway officials unaccustomed to dealing with 365-day-a-year operation. Because of the huge costs, railroads railroads, these requirements can seem onerous and expensive. cannot afford to build redundant tracks, bridges, or sidings or However, imposing such restrictions is well within the rights of buy additional rolling stock. Since approximately 1920, the the railroad and is understandable when past construction entire business structure of railroads has been to consolidate catastrophes are analyzed. greater volumes of freight onto fewer, more efficient routes. One railroad official described the railroads' concern for their Therefore, closing a track even for a few hours can lead to rights-of-way to be analogous to highway agencies' concerns for

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12 their most congested interstate highways. Highway agencies do The railroad personnel interviewed consistently offered the not allow construction in live lanes of interstate traffic. Simi- following general guidance to sponsors of projects that will larly, railroads cannot allow construction in active rights-of- interact with their rights-of-way. way without minute-by-minute control. Coordinate Early Railroads Were There First Coordination at the project concept or early planning stages Highway agencies generally are influential organizations. They was routinely recommended. Early coordination is particularly have large budgets, a public mandate, powers of eminent important for any project that may create horizontal or vertical domain, and teams of engineers and attorneys to advocate for constraints on the railroad right-of-way or that may be contem- what the public highway agency needs. plated to interfere even briefly with track operations. Railroad However, railroad companies wield significant rights and personnel repeatedly told of initial coordination occurring at protections, too, and these have been recognized by the nation's the 30% plan-development stage, which sometimes was far courts for decades before highway agencies were even created. too late. At that point designers had already made decisions These rights and protections go back to the 1850s when the pri- about overhead bridge type, size, and alignment that may not vate capital, private initiative, and private engineering expertise be acceptable to the railroads. Critical issues, such as pier place- of the railroads were welcomed as the salvation to a land-rich ment, drainage outfalls, vertical clearances, and structure types, but transportation-poor continent. Railroads, under a series of may create nonnegotiable issues for the railroads. These basic influential laws and court decisions, were given protection for concepts need to be clarified early. their rights-of-way, allowed to use eminent domain, and viewed A common issue that was repeatedly cited by railroad per- generally as benign and essential public utilities (12). sonnel was a need for overhead bridge structures to span the This history instills in the railroad personnel a deep, propri- width of railroad rights-of-way to accommodate future track etary sense regarding their right-of-way and their operations. expansion. The railroad may require additional track capac- This can be surprising to the uninitiated highway official who ity that could warrant numerous tracks beneath an overhead is accustomed to routinely using eminent domain, or the threat structure. Railroad executives routinely stated that their busi- of it, to acquire property. A large highway agency may rou- ness plans and needs may change quickly. While a few years tinely acquire 2,000 or more parcels of right-of-way annually ago they might have been content with two tracks, today they for their projects. Most are small parcels needed when bridges want to protect certain rights-of-way for three, four, or even are expanded, curves are flattened, or interchange ramps are five tracks. Without early coordination, the highway designer extended. Acquiring such property is taken for granted by will not know what span configuration is acceptable to the highway agencies, which have few areas that are generally off railroad. These issues can be particularly important and expen- limits, except for cemeteries, schools, parks, churches, and sive in areas of skewed alignments, expensive rights-of-way, historic properties. However, railroads routinely are cautious or complex terrain that can increase the cost and complexity when the highway agency needs railroad property. Railroads of longer spans. may not acquiesce to takings because of the effect they could have on the railroads' future ability to add more tracks or sid- Review Commitments When ings. The railroad may insist on longer spans and wider pier Projects Take Years to Develop spacing for overhead highway bridges to protect its right-of- way, regardless of the higher cost to the public. Highway agencies routinely complained about railroads chang- ing their requirements for span length and pier location on previously reviewed projects. However, the railroads noted that Railroads Want to Be Responsible some highway projects had taken years to develop. Although Corporate Citizens the railroads might have found acceptable a narrower right- The railroad engineers and executives interviewed for this of-way several years before, changing business needs may now study stress that they want to be good corporate citizens. They require track expansion. Railroad personnel routinely advised are "corporate" in that they have to represent the best inter- that highway project sponsors should update basic assumptions ests of their shareholders and customers. However, they also when projects take years to develop after initial coordination. are citizens who live in and serve the communities through which their railways pass. After 150 years of operation, they Predicate All Design on Railroads' Unique Standards expressed uniform understanding that they need to accom- modate highway projects that cross or are adjacent to their The American Railway Engineering and Maintenance-of- rights-of-way. Way Association (AREMA) represents a cooperative effort

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13 among the nation's railroads to develop common standards. consultation with the railroads is needed. The interviewees AREMA standards provide ready guidance for designers who commonly stated that an intimate knowledge of each of the need to accommodate railroad needs. However, nearly every railroads' standards makes the accommodation of unique railroad interviewed noted that it has key deviations from situations more manageable for the project designer. AREMA standards that are unique to its specific railroad. Some want longer tangents between S curves because of the terrain. Anticipate Time Frames for Review Some want track centers as wide as 25 feet so maintenance can be done without disrupting trains on adjacent tracks. Some A decision on a project can affect a railroad for decades. High- may accept open bridge decks, and others do not. Some rail- way bridges are designed for at least a 50-year life span. High- roads publish their design standards, some do not. Those who way alignments are seldom changed once constructed. The do not, cite potential liability concerns as their reason. In such finality of much highway construction work compels the rail- cases, the designer should use the early coordination process to roads to make a measured, fully informed decision about any establish basic project parameters and then should expect com- project. Also, a project may affect multiple departments within ments from the railroad at the preliminary design stage. In a railroad. The structures department, the operations unit, effect, the railroad will explain how its standards differ from the construction department, the signal and communication AREMA's, but the explanation will come in the form of case- division, and the real estate or legal department routinely all by-case project review comments. The full array of unique need to coordinate their comments on a project. standards is not available from some railroads. The need for coordinated, fully considered comments requires time from the railroads. Some offer standard perfor- mance measures for reviews in 30 to 60 days, while others do Use Only Experienced Railroad Designers not. The ones that do not offer guaranteed review times say Although state and federally funded projects generally require they are unable to do so because of the wide variation in types a "Qualifications-Based Selection Process" for consultants, a and quality of submittals. As is common with many review firm that is qualified for highway work may not have extensive agencies, the completeness of the submittal is a critical factor experience with railroad coordination. Also, local public agen- in the railroad's ability to provide timely comments. cies using local funds often tend to select local, hometown A representative from one of the national engineering firms firms that may have little experience in railroad coordination. that conduct reviews for railroads noted that it is important All railroads interviewed suggested selecting firms for proj- not only to include the proper information but also to include ect development based on their explicit experience with the it in the format and sequence to which the railroads are accus- railroad involved. They noted that such expertise can com- tomed. Having the right information but in the wrong format pensate for the lack of published design standards. Firms that can lead to delays and confusion. have undergone repeated project reviews with specific rail- Another national firm that works for both highway agencies roads are more likely to have experience with the unique and railroad companies said that a common problem is for state design requirements of an individual railroad. Most prequal- or local officials to blame project delay on railroad reviews. ified design firms are experienced with the national highway Blame, the firm advised, is the worst strategy for expediting design manual, A Policy on Geometric Design of Highways reviews. Often, when delays occur, it is because submittals come and Streets, 2001, published by the American Association of late in the project development, they are incomplete, or are not State Highway and Transportation Officials (AASHTO). This predicated on advice received from earlier rail coordination. "Green Book" is the national standard by which highway Such conditions can add months to the review process. design engineers are trained. Despite its 905 pages, however, Railroads and experienced engineering firms advise plan- the Green Book provides minimal guidance on projects involv- ning on at least 60 days for each review stage. Shorter time ing railroads. Much of the guidance that is provided addresses frames have been negotiated, particularly when highway agen- signage and signals by referencing the Manual of Uniform cies work routinely with the reviewing firms who are working Traffic Control Devices. This brevity is indicative of the need for the railroads. When highway agencies can reliably predict for reference to the AREMA standards and to individual con- when they will make a submittal, and when the submittal is sultation with the railroads. Moreover, the Green Book is a complete based on railroad needs, turnaround times can be as design manual, not a construction manual. There are means short as 30 days. and methods of construction that present issues outside of the Green Book standards. Use Standard Designs and Legal Agreements Many projects present unique situations because of terrain, adjacent structures, alignment, hydraulics, or other factors that Many state DOTs and railroad companies have negotiated cannot always be addressed in design manuals. In such cases, standard legal agreements and standard designs. Use them,