Multimodal Freight Transportation Within the Great Lakes--Saint Lawrence Basin (2012)

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1 S U M M A R Y The Great Lakes–St. Lawrence Basin (GLSLB) is a bi-national region (United States, Canada) comprising eight states (Minnesota, Wisconsin, Michigan, Illinois, Indiana, Ohio, Pennsyl- vania, New York), two provinces (Ontario, Quebec), and hundreds of municipalities, large (e.g., Chicago, Toronto) and small. The GLSLB region generates 30% of U.S. and Canadian gross domestic product (GDP) and is home to 31% of the two countries’ population. The multimodal freight transportation system within the GLSLB is extensive and comprises: Multimodal Freight Transportation Within the Great Lakes– Saint Lawrence Basin

2 Multimodal Freight Transportation Within the Great Lakes–Saint Lawrence Basin Economic Importance of the GLSLB Multimodal Freight Transportation System The GLSLB transportation system has a primary role in supporting local, regional, and international trade and economic activity. The following highlights the economic importance of the GLSLB freight industries and supply chains: Key Commodities Flows in the GLSLB The multimodal freight transportation system in the GLSLB handles a diverse range of freight, serving a wide range of industries. The major commodities moving to, from, or within the GLSLB include coal (largely for regional power production), iron ore (for regional steel production and export), grain and other agricultural products (local consumption and export), auto- motive and machinery (supporting local manufacturing base), and other manufactured goods (including containerized imports for regional distribution and consumption and exports).

Summary 3 The importance of these commodities varies significantly when it is measured in weight or value. Mode Million tons % (weight) $ per ton % (value) Top Three Commodities by Mode Top Three Commodities by Mode By weight By value Air 8.3 0.1% $116,020 12.8% Manufacturing and misc. 55.1% Manufacturing and misc. 68.7% Machinery and transport. equip. 21.8% Machinery and transport. equip. 24.9% Pulp and paper products 5.9% Primary and fabric. metal products 1.9% Marine 1,152.2 15.3% $270 4.1% Minerals 30.2% Machinery and transport. equip. 38.2% Coal 22.4% Fuels and chemicals 17.0% Fuels and chemicals 22.4% Minerals 9.0% Truck 4,742.8 63.0% $1,160 72.8% Minerals 25.8% Machinery and transport. equip. 28.6% Agriculture and food products 23.3% Manufacturing and misc. 26.1% Fuels and chemicals 17.2% Agriculture and food products 14.1% Rail 1,169.5 15.5% $490 7.6% Coal 49.2% Manufacturing and misc. 33.1% Minerals 17.2% Machinery and transport. equip. 32.3% Agriculture and food products 11.2% Primary and fabric. metal products 9.4% Pipeline 456.4 6.1% $440 2.7% Fuels and chemicals 100.0% Fuels and chemicals 100.0% - - - - - - - - All Modes 7,529 100% $1,003 100% Minerals 23.5% Manufacturing and misc. 30.6% Fuels and chemicals 21.3% Machinery and transp. equip. 28.1% Agriculture and food prod. 18.1% Fuels and chemicals 14.3% GLSLB Multimodal Freight Transportation System Performance The “performance” of the GLSLB multimodal freight transportation systems is complex, particularly when assessed from a multimodal, multijurisdictional, and multicommodities perspective. Complicating matters is the reality that the GLSLB is a region within a larger con- tinental and global transportation network, serving regional and international supply chains. While performance is assessed differently by different stakeholders (carriers, policy makers, regional planners, etc.), the most salient perspective in considering freight transportation Top 5 Commodities Groups with an Origin or Destination in the GLSLB The transportation needs of these commodities depend both on their intrinsic char- acteristics (e.g., weight, value, volume, perishability) and their market characteristics (e.g., origin, destinations, cost of alternative transportation). The following table summarizes the interaction between modes and commodities for flows moving to, from, or within the GLSLB.

4 Multimodal Freight Transportation Within the Great Lakes–Saint Lawrence Basin performance is, albeit arguably, that of the freight (shippers). By and large, shippers assess freight transportation performance on the basis of total logistics cost, transit time and reliability, and related risks thereto. Thus, transportation decisions, including routing, mode selection, and other supply-chain decisions, including location decisions and inventory planning, are primarily made on the basis of appropriate tradeoffs between these factors as well as the characteristics of the freight, including origin and destination. Transportation characteristics and “performance” needs can differ significantly by commodity and supply chain, as do the pressures these different commodities exert on the GLSLB multimodal freight transportation system. For instance, coal, one of the most significant commodities in terms of volume transported in the GLSLB, is largely captive to its transport chain, moving between three coal-producing regions (largely outside the GLSLB) to regional coal-fired power plants in the GLSLB, and to a lesser degree regional industries. Coal supply chains are less time sensitive than higher- value commodities and are moving in bulk by rail and marine/barge transportation. Coal movements generally don’t move by long-distance truck, nor does related traffic interact significantly with urban transportation systems. In terms of freight values, automotive parts and machinery transportation are most significant in the GLSLB. Michigan, Ontario, Ohio, and Indiana are major players in the region’s automotive industry. Most of the industry inputs (e.g., parts) are regionally produced. U.S. trade with Canada is central to the region’s industry, with nearly 20 million tons of automotive inputs and related freight crossing the border each year, mostly at the Detroit/ Windsor land-border crossing. Given the time-sensitive automotive production process (just-in-time), truck is often the mode of choice for intermediate inputs. Consumer goods and general cargo moving in intermodal containers also represent a significant share of regional freight traffic. Chicago is the region’s undisputed intermodal and regional distribution hub with nearly 20 intermodal facilities served by six Class 1 railways, providing linkages to West Coast ports (Vancouver, Los Angeles/Long Beach, Seattle and Tacoma, Prince Rupert) and East Coast ports (including Montreal, New York, and Philadelphia). Most intermodal traffic moves by rail between coasts and the GLSLB. Truck transport moves intermodal freight the last/first mile, contributing to urban congestion, which in turn increases logistics costs, reduces reliability, and lengthens transit times for the movement/distribution of intermodal traffic. Other major GLSLB commodities flows (grain, iron ore, petroleum products, etc.) likewise have different supply-chain characteristics, performance drivers, and different pressures exerted on the GLSLB multimodal freight transportation system. This creates a significant challenge for policy makers, transport planners, and researchers interested in understanding and improving the performance of the GLSLB multimodal freight transportation system, as barriers and constraints to improving freight transporta- tion performance are often commodity supply-chain specific, as are the opportunities and initiatives to promote improved performance. Barriers and Constraints to Multimodal Freight Transportation System Performance in the GLSLB Modal constraints and barriers—both hard infrastructure capacity constraints or bottlenecks and soft regulatory or operational constraints—are fairly well understood in the GLSLB. Commodity supply-chain–specific multimodal and multijurisdictional constraints and

Summary 5 barriers and related potential solutions are less well understood. The following are some of the most significant barriers and constraints to multimodal freight transportation performance in the GLSLB. Capacity constraints and bottlenecks: Road and rail infrastructure around major markets and freight transportation hubs in the GLSLB is capacity constrained. The performance implications are most significant for the movement of general cargo and manufactured prod- ucts, including intermodal container traffic, which is most dependent on rail and truck linkages to/from major population centers and markets. Capacity constraints and congestion are most significant around Chicago, the GLSLB’s most important transportation hub. Capacity constraints around Chicago and other major urban centers in the GLSLB, including Minneapolis, Detroit, Toronto, and Montreal, are resulting in increased transit time and cost with reduced reliability, particularly for general cargo, which critically depends on rail intermodal and truck transportation to/from major centers. Air pollution, carbon dioxide (CO2) emissions, congestion, and increased wear and tear on regional roads are some of the negative externalities that also result from intensive freight transportation. This issue is expected to worsen with time and economic growth, cre- ating new and more significant capacity constraints in the regional surface transportation system. This could have important implications for the competitiveness of the region for manufacturing and exports, among other segments of the regional economy. Unlike the regional road and rail system, the region’s waterways and airports generally have excess capacity to handle freight. However these other modes are not necessarily conducive to absorbing freight currently moving on congested segments of the rail and road network for a host of reasons, not least of which is compatibility with the way existing supply chains have been organized and the specific transit time, cost, and reliability requirements. The challenges in encouraging modal shift of containerized traffic from rail or truck to marine transportation within the GLSLB is a case in point. This not to say that modal shift does not have potential, with the right enabling conditions. Modal integration challenges: Modal integration was cited frequently as a major barrier to the improvement of the multimodal freight transportation system in the GLSLB. Modal integration issues range from poor physical modal connections, inefficiencies in the transfer of freight, and transportation-chain coordination problems. Other coordination problems are the delays and variable wait times at land-border crossings, which reduce reliability and lead to increased inventory requirements (and, in turn, total logistics costs). As a result of these and similar modal integration issues, many noted that it was difficult to optimize or plan for performance improvements to the multimodal freight transportation in the GLSLB. Lack of jurisdictional coordination: Poor harmonization across state boundaries, including regulations about road size and weight limits, was often cited as a major barrier. From a freight transportation planning perspective, most state departments of transportation (DOTs) and provinces are focused within their jurisdictional boundaries, as evidenced by the number of state-level freight and modal plans recently completed or currently under way in the GLSLB. There are few overarching multimodal and multijurisdictional freight plans considered for the broader GLSLB region. Some notable exceptions include the I-70 corridor initiative in the U.S. and Canada’s Ontario-Quebec Continental Gateway and Corridors Strategy initiative. Lack of multimodal funding mechanisms: Several stakeholders noted that very little exists by way of multimodal funding mechanisms in the GLSLB at present, particularly in the U.S. Modal inequality: Several stakeholders consulted spoke directly or indirectly to issues of modal inequality, particularly with respect to the marine mode. From a multimodal

6 Multimodal Freight Transportation Within the Great Lakes–Saint Lawrence Basin perspective, modal inequality could be seen as preventing an optimal allocation of freight in the GLSLB multimodal transportation system. Of course, policy makers cannot directly compel modal shift. Mode selection will remain a decision of shippers. However, policy makers can take steps to internalize external costs of transportation (externalities) including emissions, road wear and tear, etc., and in doing so, promote modal switch, in line with the incentives of shippers. Insufficiency of data and performance metrics: A major perceived gap in improving the performance of the GLSLB multimodal freight transportation system relates to the public availability of transport-chain performance measures. This hinders a full appreciation of the issues limiting transport-chain performance in the GLSLB and where measures to address performance are most warranted. Lack of awareness of importance and role of freight transportation system: Many consulted noted a lack of awareness about the importance of multimodal freight transportation in the GLSLB, and related planning issues, particularly among elected officials (since freight does not vote). There is also a concern with the “silo” approach to transportation planning (mode or jurisdiction specific) where those involved in the policy process tend to have limited understanding of freight supply chains beyond their respective areas of focus. Labor constraints: The current workforce in the transportation sector in the GLSLB, and indeed elsewhere in North America, is aging. This is particularly true for the trucking and marine modes, where the average age has been increasing for some time, and there is a lack of new entrants into the industry. Labor shortages and related challenges could have the effect of increasing transportation costs in the GLSLB in the longer term. Opportunities and Initiatives to Improve the Performance of the GLSLB Multimodal Freight Transportation System One of the key messages to emerge from this study and from consultations with stakeholders in the GLSLB is the need for a well-informed, coordinated, and strategic approach to planning for improving the performance of the GLSLB multimodal freight transportation system. Some of the key opportunities and initiatives for moving forward include the following. Opportunity for better freight transportation performance data and performance measures: What gets measured gets managed. At present few public organizations in the GLSLB use or track metrics on the performance of the regional multimodal freight trans- portation system. This is in part due to limitations in data, which are often commercially sensitive. There is an opportunity to define regional and perhaps even continental freight data needs and develop an integrated set of available data, in a consistent format, for use by transportation planners and policy makers. Some initial work has been done by Transport Canada (TC) to collect and analyze end-to-end “fluidity” indicators to define transit times, costs, and reliability issues. This represents a significant area of future research. Opportunity for gateway and corridor- or supply-chain–specific performance analysis: More work could be done to develop and measure the performance of key regional supply chains (e.g., coal, iron ore, grain, and other agricultural products, automotive and machinery, general cargo, including intermodal traffic, etc.) and related gateways and corridors. This would facilitate an understanding of supply-chain–specific issues and provide greater insight on how to address related performance issues, within a broader regional and indeed global multimodal freight transportation planning framework. We are aware that private-sector companies use and track end-to end network performance measures; however, this data

Summary 7 is typically commercially sensitive. Identifying ways to access and share some of this data would be a significant step forward in understanding the performance of key gateways, corridors, and supply chains. Opportunity for better modal and jurisdictional coordination: At present, transportation policy and planning in the GLSLB is largely undertaken by mode or jurisdiction. Moving forward, one or more coordinating bodies could be established to work with regional and modal agencies as well as transportation providers, shippers, and their associations to work together to identify and address barriers to the performance of key supply chains and related multimodal freight transportation systems in the GLSLB and beyond. For example, a pan– North American body, coordinating both U.S. and Canadian interests vis-à-vis the multimodal freight transportation system, could go some way in doing this. However, it is recognized that such an initiative risks becoming unwieldy as a result of all interests and constraints involved. Nonetheless, there is an opportunity to review current regional and global freight transporta- tion coordinating initiatives to identify practical opportunities for the GLSLB. Opportunity for regional strategic framework to identify multimodal freight trans- portation priorities: A strategic framework can help prioritize initiatives and investment to improve the performance of the GLSLB multimodal freight transportation system. Indeed, by making priorities and objectives clearer, it would underscore tradeoffs and lead to more structured and consistent choices across competing projects. At present, there is no national transportation plan in the U.S. Canada has established a National Framework for Strategic Gateways and Trade Corridors, which is viewed as a positive model by stakeholders on both sides of the U.S.-Canadian border. Regional and national freight transportation policy makers could work together to identify broad regional, national, and continental freight transportation and economic policies, and anchor these in a strategic framework. Opportunity for multimodal funding and funding mechanisms: Appropriate multi- modal funding and funding mechanisms would helpful to support investment priorities. At present, there is no multimodal freight transportation funding mechanism in the U.S. In Canada, the Gateways and Border Crossings Fund is one model that seeks to provide funding to priority multimodal freight transportation projects that are in line with the Canadian National Framework for Strategic Gateways and Trade Corridors. The recent Transportation Investment Generating Economic Recovery (TIGER) grant program in the U.S. also provides some useful lessons for multimodal freight transportation funding. Opportunity for greater infrastructure investment: There will always be a greater need for infrastructure investment—both public and private—to support improvements in the performance of the freight transportation system, across all modes. A number of infrastructure investment projects are planned, underway, or recently completed in the GLSLB. Examples of significant project plans (not all are funded) include the following: • The Heartland Corridor. • The CREATE Program in the Chicago area. • The Detroit River International Crossing (DRIC). • Detroit–Windsor rail tunnel to accommodate double stacking. • Northeast CanAm Corridor. TC is also expecting to soon announce its infrastructure investment strategy for the Ontario-Quebec Continental Gateway and Corridor. Educating and raising awareness: There would be value in promoting greater awareness of the importance of multimodal freight transportation in the GLSLB and beyond, particu- larly for elected officials, but also for policy makers, planners, and researchers. Some related initiatives include North America’s Corridor Coalition (NASCO) educational consortium,

8 Multimodal Freight Transportation Within the Great Lakes–Saint Lawrence Basin which brings together institutions that play a vital role in training the next generation of transportation innovators. Other entities, including the Transportation Centers funded by the Highway Trust Fund in the U.S. and the Southern Ontario Gateway Council in Canada are also promoting awareness and education around the importance and need for regional freight transportation planning in the GLSLB. Conclusions The multimodal freight transportation system in the GLSLB is complex. It spans numerous modes, geographies, and jurisdictions. It serves a wide variety of commodity and supply chains. In such a complex system, making informed, fact-based policy decisions can be particularly challenging. We present in this report a process framework for strategic freight planning, based on the lessons from this study. It is ambitious and in many respects represents a departure from the status quo approach to freight transportation planning in the GLSLB. It nevertheless may be a useful framework for addressing a number of the issues, barriers, and constraints noted by stakeholders consulted vis-à-vis freight transportation planning in the GLSLB. Future Research A number of areas for future research have been identified as part of this NCFRP Project 35 study of the multimodal freight transportation system in the GLSLB. As a point of departure, greater clarity is needed on specific regional/national/continental transportation policy objectives so that corresponding research goals and needs can be established. Based on our consultations, significant research work could be undertaken, focused in three intertwined areas: data development and sharing, collaboration and coordination, and the development of a strategic framework to guide these efforts and freight transportation planning. Of course, further research and analysis to address the modal barriers and constraints identified in this report will continue to be important. But more research on multimodal and supply-chain–specific performance matters is particularly needed to inform a coordinated approach to strategic policy and investment decisions that are in line with regional, national, and continental transportation policy objectives. Data Development and Sharing • Link data needs to strategic and research goals • Define meaningful key performance indicators • Identify means of obtaining required data • Establish appropriate data sharing arrangements • Integrate data across modes (multimodal) Collaboration/Coordination • Define barriers to collaboration and integration of multimodal freight planning per pan-regional policy goals • Review successful collaborative examples for lessons (international) • Identify potential collaborative structures and governance models that could be used in GLSLB Strategic Framework • Define regional/national/continental freight transportation policy objectives • Identify best practice freight planning approaches and relevance to GLSLB • Develop process for collaboration, funding, and decision making to realize policy objectives