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WSU Economist Finds Nation’s Railcar Fleet in Jeopardy, Impacting Environment and Shipments of Goods

Pullman, Wash. — The nation’s $90 billion fleet of privately owned freight railway cars may be in jeopardy, according to a new report released today by the Transportation Research Group in Washington State University’s School of Economics. The fleet is integral to the efficient movement of goods by rail and drastically reduces the environmental impact of shipping by eliminating the equivalent of 30 million truck shipments a year. The report finds that private owners of railway freight cars may not be making high enough returns to justify their continued investment in the cars.

The report, “Economic and Environmental Benefits of Private Railcars in North America,” was jointly authored by Dr. Thomas M. Corsi, Michelle Smith Professor of Logistics at the Smith School, and Dr. Ken Casavant, Professor of Economics and Director of the Freight Policy Transportation Institute at Washington State University.

Corsi and Casavant find that the poor rates of return for private railcar owners are due in part to changes in the railroad industry’s interchange rules, which have resulted in a number of new rules with major efficiency benefits to the railroads and only marginal safety benefits to the public and private car owners. Nevertheless, the entire significant cost of the new rules has been borne by the private car owners.

“In the past, railcars were typically owned and operated by railroads, but increasingly, railcars are privately owned these days,” Casavant said.

The report notes that unless there are major changes in process by which new interchange rules are promulgated to more equitably allocate benefits and costs, the economic value of private car ownership will be further eroded and the availability of this capacity will be in doubt with severe consequences to the national economy.

“Interchange rules are those that govern the operating practices of the railroads and that control how trains efficiently exchange railcars,” Casavant said. “From an economic efficiency and welfare point of view, benefit/cost ratios should be calculated for the industry as a whole and distributed in line with the benefits to all parties,” said Corsi. “For the market to work in terms of investment in railcars, there is a need for equitable, non-discriminatory and transparent interchange rules.”

If the freight rail system lost all or part of the privately owned fleet now used to transport a large portion of goods, those commodities and products might be moved to truck transportation. If trucks handled all the traffic now moved in private rail cars, the total cost to clean the pollutants associated with this increased truck traffic is estimated conservatively at $12 billion. The report finds that moving goods using private railcars saves 10 times the hydrocarbon production currently saved by all public transportation.

The report was prepared with financial support of the North America Freight Car Association, the industry trade association of rail car manufacturers, freight car lessors, lessees, and railcar owners who own or operate the majority of freight cars in North America. A full copy of the report is available at http://www.nafcahq.com/economic-and-evironmental-benefits-of-private-railcars-in-north-america.

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