(The following story by Gregory Richards appeared on The Virginian-Pilot website on July 28.)
NORFOLK, Va. — Norfolk Southern Corp. and the nation’s other freight railroads would receive a 25 percent federal tax credit for adding tracks and terminals under a bill introduced in the U.S. Senate.
The legislation, announced this week by Sen. Trent Lott, R-Miss., would provide a big boost to the railroads, which say that despite spending record amounts to improve and expand their rail networks, they still cannot keep pace with cargo growth. Railroad freight volumes are expected to increase 67 percent in the next 15 years, according to the Association of American Railroads.
“With highways and airways becoming increasingly congested, pressure is on the railroads to accommodate the rising tide of freight,” Lott, chairman of the Senate’s Surface Transportation Subcommittee, said in a statement Wednesday. “If we do nothing now, we can expect to pay a growing price.”
Items eligible for the credit would include spending on new track, tunnels, bridges and the terminals used to transfer truck-size cargo containers between trains and trucks. Maintenance expenses would not be covered. All companies expanding rail capacity – not just railroads – could receive the credit, such as a distributor wanting to build a rail spur between a main track and a warehouse.
Norfolk-based Norfolk Southern, the nation’s fourth- largest railroad, is “very supportive” of the legislation, said James A. Hixon, the company’s executive vice president of law and corporate relations.
“It’s something that’s necessary if the country wants us to make the massive investments that they claim needs to be made by railroads,” Hixon said.
Railroads spend, on average, 17 percent of their revenue on infrastructure, much higher than many other industries, according to Lott. Manufacturers, for example, invest about 3.4 percent of revenue on capital projects.
This year, railroads are projected to spend a collective $8.3 billion expanding and improving their privately owned networks of tracks and trains, the railroad trade group reports.
With the tax credit, railroads would be able to improve their rail networks ahead of cargo increases, rather than the current system of boosting capacity after it’s needed, Hixon said. Norfolk Southern has not completed calculating how much money it could save with the credit, he sai d.
Railroads move 42 percent of the nation’s freight, according to the railroad association. The largest categories of cargo moved via train are coal, cargo containers and chemicals.
If enacted, the legislation would expire in 2011. It could not be determined Thursday whether and when a hearing for the bill would be arranged.
Anthony B. Hatch, an independent railroad analyst based in New York, said the bill would enable more freight to be moved via rail rather than truck and would serve the national interest on many fronts, including reducing highway congestion and lessening the country’s fuel consumption.