US rails add capacity, warn against regulation

12 April 2007 18:25  [Source: ICIS news]

WASHINGTON (ICIS news)--Major US freight railroads said on Thursday they will spend more than $9bn (€6.6bn) this year to expand rail capacity but warned that re-regulation of the rail industry will impede much-needed improvements.

The rail operators disclosed their plans for capital spending as US chemical producers and other manufacturers pressed legislation in Congress for relief from what the chemical industry and other high-volume shippers said are exorbitant rail freight rates.

The Association of American Railroads (AAR), which represents major US rail freight carriers, known as Class I railroads, said its member companies will spend $9.4bn this year to lay additional track, buy new locomotives and other rolling stock and refurbish infrastructure to improve capacity and service.

Chemical industry shippers, among others, have complained to federal rail regulators that in addition to being costly, rail service is irregular and often causes delays in delivery of feedstock to producers and products to consuming sectors.

The association said capital spending this year exceeds last year’s $8.6bn in improvements by 9.3%.

“Railroads are hauling more freight than ever before,” said association president Edward Hamberger. “These traffic increases have resulted in capacity constraints at certain junctions and corridors within the rail network.”

Hamberger indicated that despite railroads’ increasing capital investments, the capacity crunch is likely to worsen.

“Capacity challenges will increase as the demand for freight transportation grows,” he said, adding rail freight demand is forecast to grow by 70% during the next dozen years. 

He said railroads will need to spend nearly $200bn from 2008 to 2020 in order to keep up with demand growth, but that rail operators would be able to fund only $142bn of that from their earnings and borrowing.

He said that capital improvements funding shortfall will be aggravated if legislation now pending in Congress results in re-regulation of freight rail.

“The financial community has consistently supported the view that under re-regulation, an era of capital starvation and disinvestment would return,” he said.

The US rail system includes some 140,000 miles of track.

($1 = €0.74)

By: Joe Kamalick
+1 713 525 2653

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