Robert Hooper: Freight railroads offer infrastructure blueprint
April 8, 2017
In the last several years, Nevada and our Sierra region have seen an economic development boom. The Tesla Gigafactory outside Sparks, opened in 2014, now employs more than 1,000 workers. Other major distributors, manufacturers and fulfillment centers like jet.com have also moved to town, supporting thousands of good jobs and additional waves of local development.
While several factors have fed this growth influx — notably Nevada's pro-business tax structures — none of it would be possible without our all-important transportation infrastructure. Logistics plays a huge role in our daily lives: it takes an interconnected network of trucks, trains, barges and planes to deliver 54 tons of goods, on average, for every person in the U.S. each year.
That's why the newest Infrastructure Report Card from the American Society of Civil Engineers (ASCE) is so troubling. The report, released mid-March, gives the nation's overall infrastructure a "D+" grade and its roads a "D." Nevada itself fared better, but only slightly, receiving a "C-" in a 2014 ASCE assessment. It was noted our economic downturn from 2008-13 "resulted in deferred maintenance, which took a toll on the state's infrastructure."
As policy makers at every level of government work toward solutions on infrastructure, including ways to fund the projects that need to get done, it would be prudent for them to consider the one essential part of America's infrastructure puzzle that stood out in ASCE's report card. The nationwide 140,000-mile freight rail network received a "B," the highest grade in the report. This is a great example of how smart public policies, a user-pay principle, and massive private sector investments create unparalleled infrastructure.
Many people may not realize how much money it takes private companies to run a railroad. Reinvestment into the rail network is about six times the rate the average manufacturer puts back into their infrastructure. Private rail companies pay their own way with little help from taxpayers. In the last five years alone, railroads have spent about $25 billion on average annually, putting that money into maintaining and enhancing the network that supports so many Nevada businesses and industries to conduct business and succeed.
Nevada's rail network, spanning nearly 1,200 miles, is indeed an economic engine for the state, connecting miners, ranchers and manufacturers to U.S. and global markets. Efficient, reliable and safe rail service — bolstered by the industry's massive spending — helps expedite Nevada's explosive economic growth.
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Trains are also the most efficient way of moving freight over land, moving a ton of cargo about 473 miles on a single gallon of fuel. In 2014, it would have taken approximately 2.6 million additional trucks to handle the 47.1 million tons of freight that originated in, terminated in, or moved through Nevada by rail. Our highways simply couldn't handle that load.
Important to keep in mind is rail's continued ability to make private investments that have public benefits can't be guaranteed. Not long ago, we had a freight rail industry unable to invest into infrastructure. Prior to 1980, when Congress deregulated the industry with the Staggers Rail Act, railroads were characterized by deferred maintenance, failing infrastructure, and bankrupt or near-bankrupt railroads.
Since deregulation in 1980, railroads have spent more than $630 billion in private capital on the network, improving both safety and efficiency dramatically. However, there are proposals today at the U.S. Surface Transportation Board — chiefly, something called "forced access" — that would reregulate the industry, eventually cutting off the flow of private rail dollars to the infrastructure supporting our businesses and communities.
As the President and Congress develop infrastructure plans, they could glean valuable insights and important lessons from the long history of freight railroads. While overregulation nearly decimated the industry, smart policies adopted in 1980 have allowed rail companies to thrive and earn enough capital to make unparalleled investments into the nationwide rail network. As the saying goes, "if it ain't broke, don't fix it." Today's policy makers ought to be encouraged to avoid undermining Nevada's economic growth, which is about both today and tomorrow, if we're to achieve a prosperous, resilient and sustainable economy in Nevada and nationwide.
Robert Hooper is the executive director of the Northern Nevada Development Authority.