(The following column by Houston City Council Member Shelley Sekula-Gibbs appeared on the Houston Chronicle website on September 4.)
HOUSTON — Gridlock isn’t limited to roadways anymore. Our nation’s railways are experiencing similar congestion as well. Increased demand, too many rail cars and insufficient manpower are creating gridlock on our nation’s freight rail system. Currently, the demand for freight transportation is rising faster than the national gross product, and that trend will continue for many years to come. The ability of rail to move goods efficiently, timely and affordably is a main driver of our local and national economies. Indeed, our economic recovery depends on it.
Recent events suggest that our freight rail system is heading toward a crisis that can dampen our economic recovery and create gridlock on both our rail systems and highways, leaving its customers and the goods that they move paralyzed.
Consider this: According to the Association of American Railroads, rail-cargo shipments rose 6 percent in the first half of 2004, and the year-end total is expected to exceed last year’s record. Rail-cargo shipments, a rail-truck combination, rose by 9.6 percent while our economy grew at 4.4 percent. At the same time, average train speeds fell 6.7 percent in the first half of this year. Union Pacific has suffered the most — with its average train speed dropping 12 percent.
To meet increased demand, most businesses would increase capacity, but the railroads are unable to do so. Even though railroad productivity has increased since deregulation in 1980, the railroads are not earning enough to meet their cost of capital to reinvest in added infrastructure. Most of today’s railroad budgets are committed to maintenance and preservation. Without significant investment in improved infrastructure, railroads will be unable to satisfy the increased demand. Gridlock will become a common occurrence, mirroring the traffic problems on our highways.
How costly can rail gridlock be? We need only to examine the effects of the last meltdown by Union Pacific in 1997 and 1998, shortly after the Union Pacific and Southern Pacific merger took place. According to a study prepared for the Texas Railroad Commission in 1998 by the Center for Economic Development and Research at the University of North Texas, the Union Pacific freight delays cost Texas businesses $1.093 billion because of lost sales, reduced output and higher shipping charges. The Houston area endured the most economic harm because of Union Pacific’s service problems. Nine of the 11 rail lines that run in and out of Houston are controlled by Union Pacific. Burlington Northern operates the other two.
Industries hardest hit by the Union Pacific service meltdown included the Texas Gulf Coast’s $105 billion chemical industry, with about $400 million in economic losses and companies in the Houston Ship Channel area suffering the brunt. Texas farmers and grain shippers and the forest and paper products industry were also adversely affected, along with the cement, concrete and building materials industry; electric utilities, because of inability to receive timely coal shipments; retail and small businesses; and the Port of Houston, because of a loss of customers who diverted cargo and container ships to other ports where rail congestion was not a factor.
Union Pacific’s 1997-98 gridlock nightmare is beginning to repeat itself in 2004.
Dow Chemical, which makes 150,000 rail shipments annually, has seen rail transit time rise 12.5 percent this year. The most severe delays occur in Chicago, New Orleans, Houston and Los Angeles. Lyondell Chemical had to cut some production lines this spring because the raw materials it needed for its operations were stranded on the rail system. The timber industry in the Northwest has suffered huge losses when it’s been unable to ship out timber goods to its suppliers. When the timber does arrive, it may be in unmarketable condition.
Many companies practice just-in-time inventory to keep inventory costs low. Timely shipment of goods is imperative to them. Freight delays of needed raw or finished materials have produced delayed production times, lost sales opportunities and inconvenience for consumers. These delays will be heightened when peak season occurs in late summer to early fall. That is when agricultural products are being harvested and shipped to market, and retail orders for Christmas goods are being filled and shipped.
Union Pacific is trying to reduce these delays by hiring 5,000 train-crew workers. Federal safety laws require that a worker on a train crew cannot work more than a 12-hour shift. In addition, many of its older employees took advantage of a revised retirement plan that lowered the retirement age from 62 to 60. As a result, reduced manpower has left trains stranded on side tracks for lack of a crew.
The railroad is also adding 700 locomotives and relocating workers to areas where there are shortages. In addition, the railroad is temporarily cutting back on service to some customers. Gravel companies, such as Houston-based Cemex Inc., recently received notice from Union Pacific that it was reducing the number of carloads of rock and aggregate materials, including gravel, by one-third. This could impact the construction industry, including maintenance and repairs, across the board.
However, increasing manpower and locomotives is only a temporary fix and does not resolve the core issue — congestion caused by increased demand and limited capacity. Diverting rail shipments to the trucking industry is no longer an option. Shortage of truck drivers and congested highways make this an impractical alternative. The petrochemical industry is captive to rail transport with most companies owning their own rail cars. Air-emission mandates by the Environmental Protection Agency for ozone-nonattainment areas such as Houston and Los Angeles would make increased truck shipments nearly impossible. Hydrocarbon emissions from trucks are 10 times greater than rail, and nitrogen oxide emissions are about three times greater.
Improved infrastructure with added capacity that can meet the increased demand is the only answer. To meet these infrastructure expansions and improvements will require creative thinking and problem solving.
One study projects that an investment of $175 billion to $195 billion over the next 20 years would be needed to meet freight rail demand nationally. The railroad companies cannot pay for these capital improvements alone. Public-private partnerships and cooperation are needed to maintain freight rail’s viability. The national government must identify corridors of important national interest, such as Houston, and help local governments and the private sector fund the needed infrastructure.
There are models to be observed. The Almeda Corridor, which services the Los Angeles and Long Beach ports, combined four branch lines with speeds of only 10 mph into a 22-mile rail corridor of 40 mph. It reduced conflicts at 200 grade crossings, thus improving both rail and vehicular traffic flow. The managing entity allowed creativity, flexibility and timely completion of the project. Yet, from the inception and filing for environmental permits to construction, the project took 10 years to complete.
Houston cannot wait any longer. We must work together to resolve the freight-rail crisis. I challenge our city, county and other local governments, our business sector and the railroad companies to come to the table. Let’s implement a strategy that will include both short-term and long-term actions to improve our rail system here in Houston, before our economy gets derailed.
(Sekula-Gibbs is an at-large member of the Houston City Council and a member of the council’s Fiscal Affairs Committee.)