How to realize rail’s full potential as a climate solution

Nationalization versus open access toll roads?

The current system of private railroad ownership discourages carbon-reducing solutions such as increased passenger rail. A new system is needed.

8 minute read

Railroad management vs. climate solutions

Railroads have a tremendous opportunity to offer transportation that reduces climate pollution to near zero, bringing freight back from trucks and restoring passenger service that cuts car and airplane travel. The problem is the railroads themselves, who manages them and for what ends. It is in how the railroads are structured, and only a profound shift can release them to fully realize their climate-saving potential.

The issue is a bottom-line orientation that sees railroads as primarily a money machine to generate dividends for shareholders. It is a product of a long process. Facing new competition from publicly subsidized highways and aviation, railroad industry business models collapsed in the 1970s. The response was deregulation of the railroads, followed by super-concentration that has winnowed the greater part of the U.S. rail industry down to four major carriers focused on loads that provide highest profit. Those are shipping containers and bulk traffic in commodities such as coal, oil and grains.

Mixed freight is less profitable and harder to manage. So railroads have discouraged it through raising prices and downgrading service. That has pushed mixed freight to trucks, which typically consume 3 to 5 times the energy to move the same amount of material, meanwhile tearing up highways. Trucks are the major source of road damage, but the repair bills are subsidized by all drivers and the general public. 

The creation of Amtrak in the 1970s took passenger service off the railroads’ backs, and that is how they regarded it. Lifting a burden that ate into their bottom lines. Yet aside from a few lines owned by Amtrak, most of the service runs on railroad main lines. Hours-long delays behind freight trains indicate the priority railroads give to passenger service. And they resist expanding service because it interferes with their bread-and-butter traffic.

Clearly, to restore freight and passenger service, and realize the capacity of railroads to reduce and eliminate transportation climate pollution, a different structure is required.

Open access toll roads versus nationalization

Many see the answer in nationalization of the railroads, putting them in a public service utility mode rather than a for-profit mode. Embodying a broader set of social and environmental goals beyond the financial bottom line, publicly owned railroads would elevate the climate priority and enhance the role of railroads in the transportation system. Other arguments against continuing the current private ownership system are deteriorating service levels, underinvestment in rail infrastructure and inhumane labor practices.

For all these reasons, Railroad Workers United in October endorsed nationalization. RWU is an umbrella organization meant to unite rail industry craft unions around common agendas. There is no singular industry union. In the resolution, RWU said it “supports the public ownership of the rail infrastructure of the U.S., Canada, and Mexico, to be operated henceforth in the public interest, placed at the service of the people of all three nations.”

It is a clean solution that makes great sense. As RWU noted in its resolution, “rail infrastructure the world over is held publicly, as are the roads, bridges, canals, harbors, airports, and other transportation infrastructure.” That is because it is generally understood that railroads are a vital public utility. Operating them to serve private interests gets in the way of realizing their full benefits to society, as is clearly the case here.

Personally I favor this solution, as I wrote about in this recent post. But there are practical difficulties that force me to consider another pathway offered by veteran railroader Thomas White, which he describes as open access toll roads for trains. White proposes a regulatory route in which rail line operators are financially separated from rail service operators. In this system, lines are opened up for service providers which pay tolls for using them. In essence, it would break the monopoly major railroads have on tracks, and open the door for a multiplicity of new freight and passenger operations.

“An open access, toll road for trains arrangement allows the railroad corporations to provide or discourage service as they currently do,” White writes. “Other companies provide the service that is now missing. Those companies could be existing short line operators, existing commuter rail operating companies, or new companies established to serve some segment of the rail transportation market.”

So the decision whether or not to operate mixed freight and passenger service is taken out of the hands of current railroad management that recalcitrantly resists them. Instead the tracks are under the control of rail infrastructure companies with an incentive to maximize track use, much of which is currently underutilized.

The European Union provides a precedent for this system. Most European railroads were made public early last century, but this was also a system in which infrastructure and service operators were joined. The EU Commission opened up the system in 1991, creating public infrastructure corporations that set common tolls for all service companies. In Germany, which White says has gone furthest in implementation, 350 service providers now operate.  

The issue of time and climate urgency

White’s most powerful argument for his pathway is the need for rapid reductions in climate pollution. The Paris Climate Accord goal to limit global heating to 1.5°C requires a 45% cut in carbon dioxide pollution from 2010 levels by 2030, and that only provides around a 50-50 chance of meeting the  target. Unfortunately, that seems increasingly out of reach, according to a new U.N. report. To achieve the more modest limit of 2°C, a cut of 25% from 2010 levels by 2030 is needed. All this while carbon dioxide levels reached record levels in 2021.

White counterposes this urgent situation against the practical reality that nationalization would require a long, drawn out process and be stuck in litigation for many years.

While the railroads could be nationalized via eminent domain, which allows the government to take property for public purposes, “The Constitution does not allow government taking of private property without compensation,” White notes. “Eminent domain only means the owner must sell. The owner must still be compensated. Determining ‘fair’ value for the entire U.S. rail network will be in court for generations of lawyers, during which nothing will change. Then Congress will need to come up with the (wild guess based on recent transactions) trillion bucks to pay for it.”

As an indication of the difficulties, White points to the years of court battles California has had to acquire right-of-way for its high speed rail network, as landowners contested valuations under eminent domain proceedings.

White outlines other challenges.  “The railroad industry occupies land acquired by purchase, grant, franchise agreement, right of way agreement, lease, easement, and other instruments. Many of the instruments may need modification to accommodate a change of rights. Some may prohibit transfer of ownership, further complicating the process.”

The open access toll roads model could be accomplished much more rapidly through an act of congress forcing the division of infrastructure and service operators. And it would not drain public coffers to compensate railroad owners.

The companies would likely fight it. They would not readily give up the money machine that has made railroads the most profitable industry in the U.S. by opening the door to new competition. But the nationalization path would also require congressional action, which they would also fiercely resist. While open-access legislation would probably be challenged in court, that would be a relatively straightforward matter compared to years of litigation over fair value.

Either pathway would be an uphill battle. The contrast, in White’s view, is that open access would be settled much more quickly, opening the way for rail to provide low carbon transportation options in a timeframe meaningful for reaching climate targets.

A mixed system

White has over 55 years of experience in railroad operations. He has been a towerman, train order operator, yard clerk, crew caller, train dispatcher, and assistant chief dispatcher. Today he works as a railroad operations consultant in the US, Canada, Mexico, and South Africa. He has authored four books in the field, and contributed to three others.

His last position as a railroad employee was at Burlington Northern, where he worked on service design, scheduling, new passenger projects, technology development, and capacity planning. As part of that, he led development of the Amtrak Cascades Long-Range Plan. The plan lines out a series of track improvements that, if fully realized, would provide passenger transportation from Vancouver, BC to Portland at the relatively high speed of 110 mph. The Seattle-Portland leg would be around a 2-1/2 hour trip. It could be realized in a decade.

The 2009 stimulus, passed after the 2008 financial meltdown, provided $800 million to start funding those improvements. But the attention of political leaders has instead been diverted to creation of a bullet train reaching up to 220 mph on a new track. White is critical of this for the same reason as nationalization, the time and money needed to accomplish it, at least 20 years for an estimated $24-$42 billion, versus urgent climate deadlines

In White’s envisioned system, as in the upgrades on the Cascades line, the public would make investments in railroad infrastructure on the basis of its social, economic and environmental benefits. Such a system could potentially overcome the problem of underinvestment in rail infrastructure seen today. The infrastructure company would apply for funds to accommodate new business, and would own the improvements. It could be through a lease in perpetuity that guarantees if the line is eventually nationalized, the public will not pay for improvements it has made.

That could facilitate electrification of the lines. Electrified rail run on renewable energy holds the promise for rail to supply transportation services with near zero carbon pollution. This is the prospect lined out in a book I co-authored with Bill Moyer, Solutionary Rail - A people-powered campaign to electrify America's railroads and open corridors to a clean energy future. In a regulated system, electrification could be mandated due to its public benefits, and funded by the public to realize those benefits. Because electric locomotives are more economical to operate than diesel versions, rail service operators would have an incentive to invest in them once overhead electrical wires were available.

Remaining questions

Public-private partnerships have come in for skepticism, charged with inordinately benefitting private interests at the expense of the public. In this system, there would have to be careful assessment of infrastructure investment benefits to make sure the public is getting a good deal. Druthers, I would prefer the model of outright public ownership of rail infrastructure. But if such partnerships are needed to realize the carbon-reductions rail might provide in a reasonable time, the argument for them is powerful.

Similarly, if private companies brought on new freight and passenger services under open access faster than a system in which the government operated both tracks and service, the climate case would also be persuasive. That does not count out the possibility of a hybrid resembling today’s highways in which private services run on a nationalized track network.

The other big question is whether open access would solve the problem of poor labor practices. As documented in my last post, these include the lack of paid sick leave and set work schedules, as well as the inclination of railroads to try to shunt responsibility for workplace injuries onto workers. So far, unions have been unsuccessful in gaining concessions from railroads on these issues, and the settlement imposed by congress and the president does nothing to resolve them.

Workers have to suck up and deal with these conditions because the industry is an oligopoly with only a few major employers. If there were more rail service companies, workers would have more options, and companies would have to compete for workers. Better working conditions would be a selling point. At the same time, these companies could also be non-union, so workers would not have representation. It is clear why RWU favors nationalization, though as the recent rail strike ban indicates, as an employer the federal government might be not much of an improvement over private rail companies.   

At this point, I have to conclude that if we could achieve a nationalized rail infrastructure system in a timeframe meaningful for needed carbon reductions, we should go for it. The railroad companies as they are currently structured will not get the job done. But if regulatory reform that breaks infrastructure and service providers into financially separate units will accomplish the task faster, the climate argument tips the scales in favor of this pathway. I will continue to explore this in future posts.

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