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Guide for Conducting Benefit-Cost Analyses of Multimodal, Multijurisdictional Freight Corridor Investments (2017)

Chapter: Appendix D - Logsum Evaluation, Diversion Parameters, and Examples

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Page 133
Suggested Citation:"Appendix D - Logsum Evaluation, Diversion Parameters, and Examples." National Academies of Sciences, Engineering, and Medicine. 2017. Guide for Conducting Benefit-Cost Analyses of Multimodal, Multijurisdictional Freight Corridor Investments. Washington, DC: The National Academies Press. doi: 10.17226/24680.
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Suggested Citation:"Appendix D - Logsum Evaluation, Diversion Parameters, and Examples." National Academies of Sciences, Engineering, and Medicine. 2017. Guide for Conducting Benefit-Cost Analyses of Multimodal, Multijurisdictional Freight Corridor Investments. Washington, DC: The National Academies Press. doi: 10.17226/24680.
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Page 135
Suggested Citation:"Appendix D - Logsum Evaluation, Diversion Parameters, and Examples." National Academies of Sciences, Engineering, and Medicine. 2017. Guide for Conducting Benefit-Cost Analyses of Multimodal, Multijurisdictional Freight Corridor Investments. Washington, DC: The National Academies Press. doi: 10.17226/24680.
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Page 136
Suggested Citation:"Appendix D - Logsum Evaluation, Diversion Parameters, and Examples." National Academies of Sciences, Engineering, and Medicine. 2017. Guide for Conducting Benefit-Cost Analyses of Multimodal, Multijurisdictional Freight Corridor Investments. Washington, DC: The National Academies Press. doi: 10.17226/24680.
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Suggested Citation:"Appendix D - Logsum Evaluation, Diversion Parameters, and Examples." National Academies of Sciences, Engineering, and Medicine. 2017. Guide for Conducting Benefit-Cost Analyses of Multimodal, Multijurisdictional Freight Corridor Investments. Washington, DC: The National Academies Press. doi: 10.17226/24680.
×
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Page 138
Suggested Citation:"Appendix D - Logsum Evaluation, Diversion Parameters, and Examples." National Academies of Sciences, Engineering, and Medicine. 2017. Guide for Conducting Benefit-Cost Analyses of Multimodal, Multijurisdictional Freight Corridor Investments. Washington, DC: The National Academies Press. doi: 10.17226/24680.
×
Page 138
Page 139
Suggested Citation:"Appendix D - Logsum Evaluation, Diversion Parameters, and Examples." National Academies of Sciences, Engineering, and Medicine. 2017. Guide for Conducting Benefit-Cost Analyses of Multimodal, Multijurisdictional Freight Corridor Investments. Washington, DC: The National Academies Press. doi: 10.17226/24680.
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Page 139

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133 A p p e n d i x d D.1 Logsum Evaluation The logsum is an alternative method of developing consumer surplus. It can be important for new modes, for very large projects, and for a feasibility or an investment grade study. Using mode choice and commodity classes, the logit-based modal shares could be given by p, where i and j are origins and destinations, m is the mode, qc is a calibration parameter for commodity or cargo type c, and T is transport costs (Equation D1): (D1), , , , p e T e ij m c c ij m T m c ij m∑ ( )θ θ The surplus of each group of users is the composite utility, which is given by the logarithm of the denominator of the logit formula (thus the name logsum), multiplied by the number of trips, plus a constant. The variation in the users’ surplus is given by the difference between the surpluses calculated in the reference and in the alternatives (Equation D2). T2 and T1 are costs before and after the change. The sum of these variations for all the users’ groups gives the total variation of consumers’ surplus associated with the scheme or policy. Unfortunately, while it has been exten- sively discussed and is appropriate for use with step-level changes in infrastructure like large-scale projects, it has been not been used much. However, it alone can help account for changes in equity and/or accessibility while accounting for differences in category effects. ln ln (D2)2, 1,c trips e ei j c c Tm T m c ij c m c ij c m∑ ∑( ) ( )∆ = − θ θ D.2 Diversion Filters-Market Segmentation and Rules of Thumb These are compiled from Bryan et al. Guidebook (1). The percentages are approximate and may be used to establish induced demand in the absence of more formal mode choice param- eters. The accompanying worksheet shows how this can be used in BCA. Tables D1, D2, and D3 provide information on the use of cross price elasticities and commodity types for use as diversion filters. Logsum Evaluation, Diversion Parameters, and Examples

134 Guide for Conducting Benefit-Cost Analyses of Multimodal, Multijurisdictional Freight Corridor investments Standard Commodity Code (STCG) FAF, CFS Commodity Description Typical Service Class Percentage Movement by Rail Percentage Movement by Truck Diversion Potential Truck to Rail (% of truck tonnage converted to equivalent rail tonnage) 1 Live Animals and Fish 0% High Zero 2 Cereal Grain (including seed) Unit Trains 0-10% Significant 40% 3 Agricultural Products Except for Animal Feed (other) Unit Trains 20-30% 40-50% Large 80% 4 Animal Feed and Products of Animal Origin Unit Trains 50-60% Large 80% 5 Meat, Fish, and Seafood and Their Preparations Intermodal 0-5% >90% Small 20% 6 Milled Grain Products and Preparations, and Bakery Products Carload 60-70% Significant 40% 7 Other Prepared Food Stuffs, and Fats and Oils 20-30% 60-70% Significant 40% 8 %03-02 60-70% Significant 40% 9 Tobacco Products 0-5% 60-70% Zero 10 Monumental or Building Stone %5-0 >90% Zero 11 Natural Sands 20-30% 60-80% Significant 40% 12 Gravel and Crushed Stone %03-02 40-50% Large 80% 13 Other Nonmetallic Minerals 40-50% 40-50% Large 80% 14 Metallic Ores and Concentrates %03-02 0-10% Small 20% 15 Coal 80-90% 80-90% 0-5% Small 20% 16 0-5% Small 20% 17 Gasoline and Aviation Turbine Fuel 30-40% 30-40% Small 20% 18 35% Significant 40% 19 Other Coal and Petroleum Products 30-40% 5-10% 20-30% Large 80% 20 Basic Chemicals Carload 20-30% Large 80% 50-60% 30% 20-30% Alcoholic Beverages Crude Petroleum Oil Fuel Oils 40-50% 40-50% 21 Pharmaceutical Products 0-5% 60-70% Zero 22 40-50% Large 80% Fertilizers Table D1. Diversion filters—market segmentation and rules of thumb for use.

Logsum evaluation, diversion parameters, and examples 135 Standard Commodity Code (STCG) FAF, CFS Commodity Description Typical Service Class Percentage Movement by Rail Percentage Movement by Truck Diversion Potential Truck to Rail (% of truck tonnage converted to equivalent rail tonnage) 23 Other Chemical Products and Preparations 10-15% 80-90% Small 20% 24 %04-03rebbuRdnascitsalP 60-70% Significant 40% 25 Logs and Other Wood in the Rough 10-15% 80-90% Small 20% 26 Wood Products 50-60% Large 80% 27 Pulp, Newsprint, Paper, and Paperboard Carload, Intermodal 40-50% 40-50% 50-60% Large 80% 28 Paper or Paperboard Articles %5-0 80-90% Small 20% 29 Printed Products 0-5% 70-80% Zero 30 Textiles, Leather, and Articles of Textiles or Leather %1-0 70-80% Small 20% 31 Nonmetallic Mineral Products 10-20% 70-80% Small 20% 32 Base Metal in Primary or Semi-Finished Forms and in Finished Basic Shapes %03-02 60-70% Significant 40% 33 Articles of Base Metal 10-20% 75-85% Small 20% 34 %5-0yrenihcaM 80-90% Small 20% 35 Electronic and Other Electrical Equipment and Components, and Office Equipment 0-5% 70-80% Small 20% 36 Motorized and Other Vehicles (including parts) %03-02 60-70% Significant 40% 37 Transportation Equipment 0-5% 40-50% Zero 38 Precision Instruments and Apparatus %5-0 70-80% Zero 39 Furniture, Mattresses and Mattress Supports, Lamps, Lighting Fittings, and Illuminated Signs 0-5% 90-95% Small 20% 40 Miscellaneous Manufactured Products 0-5% 70-80% Small 20% 41 Waste and Scrap (except of agriculture or food) 30-40% 30-40% Large 80% 43 Mixed Freight 0-5% 80-90% Small 20% Carload Table D1. (Continued).

136 Guide for Conducting Benefit-Cost Analyses of Multimodal, Multijurisdictional Freight Corridor investments D.3 Mode Switch Elasticities NAICS Commodity Category STCG code(FAF) Rail-Truck (McCullough, 2013) Truck-Rail (McCullough, 2013) 111 Agricultural Prod. 2,3 1.234 0.839 112 Livestock 1 1.341 0.806 311 Food Mnfg. 6,7 1.587 0.872 312 Beverages and Tobacco 8,9 3.091 1.357 317 Textiles and Apparel 30 NA NA 321 Wood Product Manufacturing 26 NA NA 322 Paper Mnfg. 27,28 0.805 0.902 323 Printing and Related Activities 29 NA NA 324 Petroleum and Coal Products 17–19 0.69 0.736 325 Chemical Manufacturing 21–23 0.388 0.473 Note: Use cross elasticities as a sensitivity parameter along with change in transport cost. Please also note that corridor competition has a major impact on diversion. Table D3. Diversion filters—cross price elasticities using NAICS. Rail-to-Truck (2 ) Truck to Rail (2 ) Rail-to-Truck (3 ) Truck to Rail (3 ) Interpretation Food Products -0.023 0.004 1.4888 1.2612 Positive substation opportunities between truck/rail and rail/truck based on Abdelwahab Wood and Wood Products -0.05 -0.129 1.293 1.1125 Paper, Plastic, and Rubber Products 0.007 0.003 1.2592 1.2812 same as above Stone, Clay, and Glass Products 0.025 0.016 0.9525 0.9818 Iron and Steel Products -0.053 -0.013 NA NA Fabricated Metal Products -0.059 -0.099 0.9042 0.9326 Non-Electrical Machinery -0.032 -0.01 NA NA Electrical Machinery -0.151 -0.061 1.1672 1.1991 Chemical NA NA 1.0421 1.0786 same as above same as above same as above same as above same as above Table D2. Diversion filters—cross price elasticities.

Logsum evaluation, diversion parameters, and examples 137 D.4 Mid-Atlantic Rail Operations (MAROps) Case Example of Diversion (Market Segmentation) (Regional) • Study conducted by Cambridge Systematics (4) for the I-95 corridor coalition. • Identifies four high level factors impacting demand for rail mode share in the region: shipping cost, transit time (travel time to get goods to destination), terminal access, and service quality as reflected in reliability of service. • Defines rail markets for MAROps by Bureau of Economic Analysis zone, origin-destination pairs, and equipment type for both rail carload and rail intermodal service (auto, bulk, dry van, flat car, refrigerated, and tank). These are compared with 284 comparable national rail origin-destination (O-D) pairs to determine diversion opportunities at the regional level. Tables D4 and D5 provide the assumptions and data used in obtaining diversion forecasts used in the Interstate 81 study using URCS and the ITIC tool respectively (5). These tables provide details for Example 5 (Interstate-81) in the guidebook. Table D4. Virginia Interstate 81 new user—diversion forecasts using uniform rail costing system (URCS) (Norfolk Southern) rail variable costs and intermodal transport costs. No-Build Rail Concept 1 Star Solutions Rail Concept 2 Piedmont Line Rail Concept 3 NSRR Pilot Intermodal Rail Concept 4 Steel Interstate Truck Assumptions Speed (mph) 43 43 43 43 43 Transit Time Reliability (standard deviation/mean transit time) 0.42 0.42 0.42 0.42 0.42 00.0$00.0$00.0$00.0$00.0$lloT Rail Assumptions 0.040.331.828.425.22)hpm(deepS 83.024.034.044.054.0ytilibaileRemiTtisnarT Investment Recovery (per 100 weight) $0.00 $0.00 $0.14 $0.14 $0.02 51.051.051.075.075.0)sruoh(emiTdaolnU/daoL Truck Trailer Equipment Lease Rate $20/day $20/day $20/day $20/day $20/day 043$043$043$043$043$)esab(egrahCegayarD Drayage Distance (miles) (estimated at the BEA geography) using zip code centroid (instead of county) and location of intermodal terminal. Distances weighted by manufacturing employment in the zip code. 80 80 80 80 80 Drayage Charge/Mile (developed from 2004 North American Truckload Rate Index) $2.00 $2.00 $2.00 $2.00 $2.00 (continued on next page)

138 Guide for Conducting Benefit-Cost Analyses of Multimodal, Multijurisdictional Freight Corridor investments Table D4. (Continued). No-Build Rail Concept 1 Star Solutions Rail Concept 2 Piedmont Line Rail Concept 3 NSRR Pilot Intermodal Rail Concept 4 Steel Interstate $3,200.00$280.00$267.00$111.00$0.00)liM(tnemtsevnIerutcurtsarfnI $300.00$229.00$229.00$0.00$0.00)liM(tnemtsevnIkcotSgnilloR URCS Estimate Method/Model run with each scenario Plan 1.0+35% Plan 1.0+35% Plan 1.0+15% Plan 1.0+15% Plan 1.0+15% 2035 >500 Mile Total Truck Trips (000) 7,363.8 7,363.8 7,363.8 7,363.8 7,363.8 5.422,18.4474.6061.7412.701)000(spirTkcurTdetreviD5302 Percent Diversion of >500-Mile Trips 1.5% 2.0% 8.2% 10.1% 16.6% 2035 Total Truck Trips (000) 3 21,031.2 21,031.2 21,031.2 21,031.2 21,031.2 5.422,18.4474.6061.7412.701)000(spirTkcurTdetreviD5302 Percent Estimated Diversion of All Trips 0.5% 0.7% 2.9% 3.5% 5.8% Inputs Data Source Origin Region and Destination Region TRANSEARCH 1998 Origin and Destination Geographic Reference Rail Standard Point Location Code (SPLC) Rail Pounds/year and pounds/shipment TRANSEARCH 1998 Pounds/cu ft Jack Faucett Associates Truckload Conversion Factors/ITIC Assumptions $ per Pound (value) Freight Impacts on Ohio’s Roadway System, Ohio Department of Transportation, June 2002, pg. 1-3. Rail miles Rail miles of TOFC movement from Origin terminal to Destination terminal TOFC miles Total drayage miles Rail variable cost per hundred weight (cwt) Norfolk Southern Variable Costs (per cwt) Piedmont and Shenandoah line Shipper/Commodity Characteristics Pounds per day 10,476.71 Pounds per year 3824000 Pounds/cubic foot 16.63 Price per pound $0.04 Required protection (service life) 90% Inventory carrying cost factor 20% Network miles 314.01 Line-haul miles (rail) 628 (Estimated as the total distance of an intermodal move and includes drayage to and from intermodal terminals) Days between orders 5 Payload (lbs) 52,441 Payload (cu ft) 999,999 Line-haul cost/mile $1.34 Other dollar costs (pickup delivery) 0 Load/unload hours 0.50 hours Wage rate/hour with fringes $20 Table D5. Virginia Interstate 81 new user—diversion forecasts using ITIC inputs.

Logsum evaluation, diversion parameters, and examples 139 References 1. Bryan, J., G. Weisbrod, and C. Martland. Guidebook for Assessing Rail Freight Solutions to Roadway Conges- tion. NCHRP Project 8-42, Task 11 Product, Transportation Research Board, Washington, DC, 2006. http:// onlinepubs.trb.org/onlinepubs/archive/NotesDocs/NCHRP08-42_Guidebook_Rev10-06.pdf. 2. Friedlaender, Ann F., and Richard H. Spady. A Derived Demand Function for Freight Transportation. The Review of Economics and Statistics, 62(3), 1980. 432–41. 3. Abdelwahab, Walid. Elasticities of Mode Choice Probabilities and Market Elasticities of Demand: Evidence from a Simultaneous Mode Choice/Shipment Size Freight Transport Model. Transportation Research-Part E: Logistics and Transportation Review, 34(4), 1998. 257–66. 4. Cambridge Systematics, Inc. Mid Atlantic Rail Operations Study. Phase II Study. Final Report. I-95 Corridor Coalition, 2009. 5. Virginia Department of Transportation. Interstate 81 Corridor Improvement Study. Freight Diversion Forecast Report. Tier 1 Environmental Impact Statement. PPMS: 67587 Project No. 0081-961-111. Note: The basis for these assumptions and values is not presented in the source document. Expected loss and damage claim per shipment ($) $0.59 Inputs Data Source Claim payment days 60 Legal payload (lbs) and Maximum shipment by weight (lbs) 52,441 Gross vehicle weight (lbs) 80,000 Shipper/Commodity Characteristics Transport charges/shipment 848 Number of shipments per year 73 Transport charges/year/ Transport costs $61,866 Safety stock (days) 0.9 Order cost $1094 In transit carrying cost $74 Cycle cost carrying cost $196 Loss and damage claims $43 Capital cost on claims $1 Total (Non-Transport logistics cost) $1481 Total Transport and Non-Transport $63,347 Transportation and logistics cost per hundred weight (cwt) $1.66 Tare weight of vehicle (lbs) 27,559 Wait time (hours) 0.50 Transit time (days) 1.26 Loss and damage as percent of gross freight revenue 0.07% Table D5. (Continued).

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TRB's National Cooperative Freight Research Program (NCFRP) Research Report 38: Guide for Conducting Benefit-Cost Analyses of Multimodal, Multijurisdictional Freight Corridor Investments explores how to conduct benefit-cost analyses (BCAs). A BCA is an analytical framework used to evaluate public investment decisions including transportation investments. BCA is defined as a collection of methods and rules for assessing the social costs and benefits of alternative public policies. It promotes efficiency by identifying the set of feasible projects that would yield the largest positive net benefits to society.

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