Benefit-Cost Analysis for Freight Transportation

Why Compare Costs and Benefits of Alternative Modes of  Transportation?

When most of us go shopping, we want to find the item that is the best quality for a price we are willing to pay. Every item we buy is judged by criteria relevant to that item. Freight transportation is no exception. People seeking to transport freight want the safest, most careful transport at the lowest possible cost. So how do we figure out which mode of freight transportation meets those criteria? How do we determine  which criteria are relevant and critical? 

More specifcally, the claim that rail freight transportation is more efficient than road freight transportation may seem obvious to some, but it still requires explanation. What is efficiency in the context of freight transportation and how can we tell which mode of transportation is more appropriate for a given project?

What is a Whole Systems Approach and Why is it Important?

In talking about efficiency, OTNA takes a whole systems approach. We are not solely concerned with economic efficiency or a dollar comparison of the cost of transporting a specific type of freight between two different points.

We are also concerned with impact that freight transportation has on the environment, the communities that the freight is transported through (in terms of things like noise and taxes and subsidies provided to the mode of transport) and the effect on individual lives (in terms of safety).

Traditional comparisons look primarily at economic issues: the cost of fuel; the cost of acquiring equipment to transport freight; and so on.  These measures do not measure all the costs associated with transportation, and in particular, they don’t measure the hidden subsidies for the mode of transportation, such as building roads or accepting more pollution in the community caused by that mode of transportation.

What do we need to measure in order to make a truly fair comparison of the different modes of freight transportation?

OTNA has developed a list of twenty elements that will enable anyone to compare the cost of freight transportation on any mode of transportation. This list was created by OTNA in cooperation with experts in the field of freight transportation. The elements chosen were then vetted by many more people with expertise in one aspect or another of freight transportation, or the environment or people knowledgeable of the needs of communities affected by rails and roads.

We have sorted the cost factors into four factors:

1. Cost of impact on community
2. Cost of infrastructure construction
3. Cost of consumables
4. Cost of impact on environment

Community factors are costs, both direct and indirect, that affect people in their everyday lives. Construction factors include things like the cost of building a road or a rail line and all the initial costs involved with that. Consumables are costs associated with the operation and maintenance of roads and rail. Environmental factors include things like water and air pollution, noise and light pollution. They are related to community factors, in that they affect people in their everyday lives, but we have separated them into their own category because most, if not all of them are subject to environmental regulations by local or national governments.

Core Metrics: Construction and Consumables

Construction

1. Paying for the labor involved in constructing road or rail.
2. Initial construction costs of roads and railways, not including land acquisition.
3. Existing right-of-way. The availability of existing or legacy rights of way for building new roads or rail lines.
4. Right-of-way. The costs of both land and right-of-way needed for a project.

Consumables

5. Cost of fuel or energy used to transport goods via rail or road (diesel, gasoline, electricity, natural gas, etc).
6. Cost of maintenance required to keep freight transportation in working condition.
7. Rolling Stock. The cost of acquisition of trucks, locomotives, containers, rail cars, etc.
8. Useful life of rolling stock. Estimated life of rolling stock bought today.

Environment and Community

Environment

9. Criteria pollutants. A set of air pollutants that cause smog, acid rain, and other health hazards.
10. Greenhouse gases. Emissions from the operation and maintenance of road and rail transport that contribute to global warming.
11. The impact of noise on quality of life for areas abutting roads and rails including engine, rolling stock, aerodynamics, etc.
12. Land used for transport. Track or lane-miles required to move a given tonnage. This is land devoted to track or pavement, not the entire amount of land needed for right-of-way.
13. Water quality. Impact of vehicle and fuel contamination on adjacent wildlife and natural environment.
14. Light pollution. Impact of light for freight transport on a community or on wildlife and the natural environment.

Community

5. Property tax change. Added or lost property tax due to road or rail construction.
6. Environmental Justice. Difference in impact of road and rail on communities when sorted by economic status.
7. Local and Regional Development. Multiplier effect of road or rail construction on area economic development.
8. Losses, injuries, and fatalities due to accidents.
9. Short term economic impact. Local economic impact from job creation and other benefits due to construction of road or rail infrastructure.
10. Travel Congestion. Both non-recurring (the cost of delays caused by accidents) and recurring travel congestion (the effect of lost time due to congestion or capacity limits as well as the impact of additional truck or rail traffic in terms of creating more congestion on roads or rails).

Data Sources

This table displays a starting point for data sources for the twenty factors.

No.	Factor Name	Sources/Stakeholders	Comments
1	Labor	AASHTO, AGC, AAR	Broad estimates generated by industry, case study assessments, others.
2	Materials	AASHTO, AGC, AAR	Industry estimates, AAR/AASHTO and other umbrella organizations, fluctuations in cost to be reflected.
3	Existing Right-of-way	AAR, Industry	Assess availability of adequate existing ROW for rail vs highway major projects; resources tied land inventories rimming active routes, abandoned or surplus track and sidings, etc.
4	Right-of-way	FHWA, AASHTO, AAR	Rail industry and highway association estimates across development, new construction projects.
5	Energy	DOE, EPA, DTF, Industry	Locomotive consumption rates (road, switcher, new standard, in-use average); heavy-duty diesel truck, new and in-use avg.
6	Maintenance	AASHTO, ASLRRA, AAR	Analysis of annual cost average for maintenance/replacement, extrapolations for less regular requirements.
7	Rolling Stock	Industry	Rolling stock and tire manufacturers, industry estimates.
8	Useful life of rolling stock	FTA, Industry	Government and industry estimates available.
9	Criteria Pollutants	EPA, FHWA, FRA	Highway truck vs. road locomotive, EPA/DOT figures, not primary modeling.
10	Greenhouse gases	EPA, DOE	No standardization, broad estimates of impacts, new standards vs. in-use average for both loco and HDDT.
11	Noise	FHWA	Likely a general estimate of marginal rail and highway noise levels, added truck VMT, possibly a link between added noise and social cost tied to public health.
12	Land used for transport	FHWA, FMCSA, AAR	Congestion related, space occupied for given tonnage equalized to unit train, e.g. 10,000 tons.
13	Water quality	FHWA, AASHTO, FWS, EPA, USGS	Review water quality impacts associated with different modes and infrastructure, tied largely to erosion, resulting sedimentation, pollutant runoff, and groundwater infiltration.
14	Light Pollution	EPA
15	Property tax change	FHWA, NACO, Industry, ULI	Review of added acreage in revenue for increased rail ROW, decreases tied to road ROW; averages needed for property tax rates
16	Environmental Justice	USDOT, FHWA, FTA, FRA, EPA, E.O. query	An assessment of environmental justice challenges brought about by major project development.
17	Local and Regional Development	AASHTO, Industry, Chamber of Commerce	Assess economic multiplier effects of added rail and road resources, location factors associated with transport access, etc.
18	Safety	NHTSA, FHWA, AAR	Both highway and rail statistics on crash/incident related fatalities based on rates over time
19	Short term economic impact	Chamber of Commerce, Industry, AGC, AASHTO	Estimate for local impacts during construction including direct and indirect job creation, temporary and transitional full-time, etc.
20	Travel Congestion (non-recurring and recurring)	AASHTO, TTI, FHWA, NHTSA, AAR, APA, AICP	Estimates of nonrecurring incidents projected based on added highway volumes, grade-crossing emergencies, others.Broad estimates of recurring congestion based on added traffic, highway equivalent for 10,000 ton unit train, volume contributed to daily peak congestion.

Future Directions

OTNA is committed to making the road and rail efficiency metrics into a tool that every community must use when considering the impact of freight transportation on the community. We are planning to take steps to make this a reality.

Fundraising

We are currently seeking funding from the Ford Foundation and we have submitted a Small Business Innovation and Research Proposal to the National Science Foundation.

Data Gathering

We are planning to partner with local colleges and universities to get both the human resources and the knowledge necessary to find the data we need. We plan to build a database that can hold the data. We expect to find that we will have to massage the data in order to make it possible to compare road and rail using one number.

Data Dissemination

Once the data are available and in a usable form, we will make them publicly available through our website.