(Reuters circulated the following story by Nick Carey on August 1.)
CHICAGO — If asked to close their eyes and think of a locomotive, chances are many people would conjure up the image of a noisy behemoth belching black smoke — hardly the picture of an environmentally friendly industry.
Yet being a “green” transportation alternative to trucks is just what U.S. railroads are turning to as a marketing tool.
“For some months we have been communicating to customers the message that as well as being a cheaper alternative, we can lower their carbon footprint,” said Mark Schulze vice president for safety, training and operations support at No. 2 U.S. railroad Burlington Northern Santa Fe Corp.
“The response so far has been overwhelmingly positive.”
For decades, the railroads have touted as a major selling point the fact they use less fuel than trucks to move freight.
The recent run-up in oil prices has made that advantage pay dividends, with railroads taking market share from trucks.
In mid-July, for instance, trucking company JB Hunt Transport Services Inc reported a better-than-expected profit thanks to a 28 percent jump in intermodal revenue.
Intermodal services use standardized containers that can be hauled by ship, truck or train.
To save its own fuel costs and offer customers a cheaper service — albeit a slower one — JB Hunt has switched some containers to train from truck.
As a result, its profits have risen in a weak economy while those of many of its rivals are hurting.
Earnings conference calls held by railroad operators with analysts and reporters have recently become peppered with terms like “carbon footprint” and “environmental sustainability.”
“For a long time the railroads have been able to claim they are more efficient, but the fact they produce fewer emissions as well is a formidable marketing tool,” said Chicago-based transportation consultant Ron Sucik.
“The carbon footprint issue is frosting on the cake for the railroads,” he said.
MAINSTREAM ISSUE
Companies as diverse as computer maker Dell Inc and retailer Wal-Mart Stores Inc are targeting carbon footprint reductions, and analysts say railroads will benefit.
Dell last year pledged to cut its footprint by 15 percent by 2012, while Wal-Mart is working with its suppliers to measure and reduce theirs.
“In the course of just a few years, environmentalism has become mainstream,” said independent railroad analyst Anthony Hatch. “Reducing carbon footprints and emissions has gone from a fringe element to a major topic of discussion.”
“Railroads offer a low-cost way to do that,” he added.
Banging the green drum is not entirely new for railroads.
Norfolk Southern Corp, the No.4 railroad, proclaimed its green credentials early on with a 2005 TV commercial in which a tree snatches a container from a passing truck and plonks it with a metallic thud on a train.
The message: Norfolk Southern can take goods off the road, cutting emissions and highway congestion.
The company’s website also has a “carbon footprint analyzer” where a shipper can calculate the tonnage of emissions that can be cut by using trains instead of trucks.
More recently, CSX Corp, the No.3 operator, has run a commercial in which it says it can haul a passenger car, or about a ton of freight, 423 miles on a gallon of fuel.
“This commercial has resonated with our customers,” CSX Chief Executive Michael Ward said.
Railroads have also been conserving fuel by reducing engine idling, and they are funding research into hybrid engines.
COULD DO MORE
Don Anair of the Union of Concerned Scientists said railroads could play an important role in reducing road congestion and lowering emissions.
“But there is a lot more they could do lower their footprint even further,” he said.
“There is plenty of room to reduce idling and they could invest more in engines with lower emissions.”
Anair said railroads also haul vast quantities of coal, which does not have a low carbon footprint.
“But to be fair, that is a part of a much broader national energy debate,” he said.
One challenge for the railroads to capitalize on their lower carbon footprint is providing reliable service.
“In the past, shippers have been reluctant to move freight to trains from the highway because they are slower and less reliable,” Jason Seidl, an analyst at investment bank Dahlman Rose. “But the price differential is now so wide that they are reexamining trains as an option.”
For some customers such as United Parcel Service Inc, the largest U.S. intermodal user, reliability is crucial because of delivery guarantees it offers to customers.
“For decades we have tried to ship as many packages as we can by rail, as long as that allows us to meet our service commitments,” said UPS spokesman Norman Black.
UPS is compiling a study of its carbon footprint to be released in the fall
“We will continue to favor any environmentally sensitive way to ship packages as long as it meets those service requirements,” Black said.