Tuesday, July 26, 2011

Why do I, as a conservative, support high speed rail in California?

That modern American conservatism is, in general, highly opposed to high speed rail programs is not a matter of dispute and one that I do not believe I need to source or prove. In certain respects it is even understandable where passenger rail advocates have grossly misrepresented or wrongly implied basic passenger rail improvements as being “high speed rail”, such as was the case in Ohio and Wisconsin and is the case, although the funding remains, with line upgrades and extensions in Illinois and Iowa. That is not to say that I oppose those projects, merely that I understand why, with the lackluster reality of 79 and 110 mph trains when the implication is one of bullet trains, conservative opposition might greatly result. However, opposition to the lines in Florida and California, where the lines are truly high speed, is less clear, if perhaps even more vociferous. So what are some of the reasons that I, as a self-identified conservative, support high speed rail in California if the zeitgeist of conservatism is opposition to high speed rail programs in the United States?

1. High speed rail systems support themselves

As I have previously noted, every high speed rail system in the world brings in enough revenue to cover its operational costs. While they may not necessarily cover the initial capital costs of constructing the lines, that makes them no different from most toll roads and certainly no different than any newly constructed highways. The overall economic benefits of increased mobility and commerce are sufficient to make the initial capital investment a worthwhile expense, especially given that the government can take the long view and evaluate investments not merely over the next few quarters, but over a century or longer (which is not to say, of course, that projects are necessarily a good idea if they take a century to recoup their investment value).

2. High speed rail, especially where it overlays commuter rail, decreases congestion

Currently, despite not being time competitive against cars, the Metrolink commuter rail system ”clears the equivalent of one lane of the 91 Freeway per day” and is expected to do so with another lane following the Perris Valley Line extension. Trains operating on the OC Line add an additional half lane of capacity in terms of riders and cars removed between the hours of 4am and 8am while the San Bernardino Line, over the course of one hour (5:15am to 6:12am) removes just under 2,000 riders, or a full lane of traffic, from the highways. 125 mile per hour commuter trains sharing lines with high speed intercity trains will represent trip times that are not merely time competitive with cars, but outright faster than automobiles on uncongested roads, leading to greater use of them and decreasing overall trip times for those who stay on the roads while others change modes.

Similarly, because high speed rail is competitive with airlines on shorter distance hops of five hundred miles or so, with rail journey times under three hours taking approximately 70% of the air-rail market, air congestion can be lowered (assuming proper regulatory authority is granted to airport managers to ensure that flights are actually dropped rather than replaced with smaller jets and turboprops), resulting in safer air travel with fewer delays.

3. High speed rail reduces the need for other capital investments

We do not live in a static world, but rather a dynamic world of fairly continual growth (at least for the next few decades), and our infrastructure planning must plan for the future. That means we must rationally look at the most cost-effective means of expanding transit mobility to keep up with the expected population growth, expected to reach approximately 44 million by 2020 and 49 million by 2030.

What the recent “Carmageddon” flap in Los Angeles showed, although it was not remarked upon, is that it can no longer be taken as a given that highway spending is the most cost-effective means of reducing traffic congestion. One billion dollars is being spent upon that project in order to add a single carpool lane in each direction for a total of ten miles. One hundred million dollars per mile is tremendously expensive, on par with the cost of building and upgrading urbanized high speed rail lines, and more expensive than building greenfield rail lines (even with America’s cost inflation relative to the rest of the world when it comes to infrastructure projects). For all that, the additional capacity is only up to 2,300 vehicles per hour per direction, or about 4,600 persons since this is a carpool lane requiring at least two persons per vehicle. By contrast, a rail line, for the same money or less, would be capable of carrying as many as 8,300 passengers with ten minute intervals between trains, not including standees, effectively doubling the capacity of the highway improvement for similar amounts of money. With the tremendous population growth in the Inland Empire that we have seen in the past decade and expect to see in the future, it makes far more fiscal sense to utilize high speed rail to expand our mobility solutions rather than the continual expansions of highways that has previously been the case in the California. This is especially the case when high speed rail is more than capable of operating without additional government spending and as the Phase II expansion through the Inland Empire, in particular, is currently intended and expected to be financed through CAHSR revenues and private investment rather than taxation or general obligation bonds.

4. High speed rail insulates intercity travel and commerce from oil shocks.

The heart of economic growth lies in the rapidity and affordability of transport, both for goods and persons. With the current poor fuel efficiency of American cars and the general inefficiency of short distance airline hops such as represented by intrastate air travel, rising fuel costs pose a general harm to our ability to continue to engage in the normal travel and personal commerce to which our economy is accustomed, the loss of which most likely having a deleterious effect upon the economy as a whole. With extremely low profit margins hovering around 2% and cumulative losses of $54 billion over the previous ten years, it is entirely possible that, although the Bay Area-Los Angeles Basin represents the heaviest travelled air corridor in America, future oil shocks may result in curtailment of service, either by airlines seeking to cut costs, or from travelers cutting their own costs and forgoing travel and with it the commerce that would have resulted. Electric high speed rail, by contrast, is unaffected by increased petroleum prices. For those who have work commutes that may be accessed by rail, the steady fares of high speed rail and commuter trains on high speed rail trackage in the face of fuel price increases may very well represent a viable alternative which saves them money. Discretionary income saved (or rather, continuing to be spent in a discretionary manner) rather than being turned into non-discretionary income for transportation is far more beneficial to the economy.

5. High speed rail, as currently designed in California, expands travel and commerce opportunity and activities

Currently, if one wishes to travel in California somewhere other than between the LA Basin and Bay Area, their only choices are extremely expensive air fare or a lengthy piece of driving. Personally this was quite recently hammered home to me when, looking at the potential for meeting up with a friend from out of state who would be visiting Sacramento, I was faced with the options of either spending several hundred dollars on airfare, with inconvenient flight times, or 8-9 hours each way driving, the latter of which was not a feasible option due to work scheduling. For many areas, such as in the Central Valley, driving is currently the only option. With the more convenient transit that high speed rail can generally provide, travel and tourism, already major industries in the state, can only benefit.

Tuesday, July 19, 2011

Do we actually want DesertXPress?

Note: This was reposted to accurately reflect the day it was written rather than Blogger's insistence on publishing it from when the draft was first created.

The proposed private high speed rail line between Los Angeles and Las Vegas, DesertXPress, has gotten quite a fair bit of attention and some degree of government support, such as use of the I-15 corridor. As it would, if current plans proceed at their current rate, be the first true high speed rail line in America (Acela only briefly touching 150 mph for a few miles), it also has a strong degree of support from high speed rail proponents. Is DesertXPress necessarily a rail line we want however?

To begin with, DesertXPress is not likely to succeed financially. While they have claimed to have large amounts of private capital behind them, they have also applied for a 4.9 billion dollar Railroad Rehabilitation & Improvement Financing loan from the Federal Railroad Authority. These loans carry "interest rates equal to the cost of borrowing to the government"which is currently equal to 3.75% on a 30 year bond (the Wall Street Journal is reporting about 4.3% currently). At that rate, the annual loan repayments would equal 273.4 million dollars per year (292.2 million at 4.3%), around the same amount as Taiwan High Speed Rail paid in 2010 (NT$8.9 billion, page 5; that is US$308 million today, but the NT$ has risen in value against the US$ and one year ago, that amounted to $276.2 million). The Taiwan HSR system was unable to pay the cost of financing and required a government takeover to refinance the loans at even lower interest rates despite far higher revenues than DesertXPress expects. Page 16 shows the revenue levels that DesertXPress expects to make. It is not until 2031 that revenues would be sufficiently high as to lower financial charges to only a quarter of total revenues. Given that operational profits prior to interest and taxes is less than 10% of total revenues for European high speed rail operators (running from a Spanish 2% to SNCF at 7%), it is unlikely in the extreme that DesertXPress could meet its interest expenses and would be forced into bankruptcy. This would not be the case, of course, if there should happen to be an appropriate sum of private investment to build the line rather than building it on loans, however, it raises the question of why DesertXPress would apply for a loan sufficiently large to build the entire line if it had the requisite private investment secured.

When and if DesertXPress fails, it will be a tremendous PR blow for the case of the California high speed rail program and other high speed rail programs in the United States. Any initiative that has been gotten in the public mindset is likely to be lost with such a visible failure, especially as anti-HSR groups such as Reason and Heritage seize upon it to use as an example in their mantra of the unprofitability of high speed rail (while ignoring toll roads with much higher margins being similarly crippled by debt loads).

From another standpoint, there must also be considered the nature of the line. While high speed travel between New York, Boston, and Washington D.C. is mutually enriching, high speed travel between the Los Angeles area and Las Vegas is unlikely to so be. The main industries of Las Vegas and the main reason for the relatively high level of travel to Las Vegas are parasitical in nature, gambling and the leisure and entertainment industries which serve its customer group. From the viewpoint of California, given the low return spending which the connection would bring from Las Vegas, it would be greatly preferable not to have it and instead encourage that gambling be conducted at Indian casinos within the state (such as the promotion between San Manuel and Metrolink), thus keeping the dollars and their related jobs inside California rather than exported to another state with little return.

Additionally, Las Vegas is itself of dubious quality. While there is nothing inherently wrong with responsible gambling, Las Vegas has consistently promoted itself as being the home for every vice it can, as being a destination and resort for debauchery and decadence, thus earning its nickname as "Sin City." Promoting and encouraging easier access to vice runs contrary to good order and the benefit of society and hence on that basis ought to be avoided except whereas deemed necessary by pragmatism (for instance, were it to lay upon one of the best routes connecting two worthier cities rather than being the entire purpose of the line itself).

Wednesday, July 13, 2011

Have Metrolink Express trains been a success?

On May 9th, Metrolink introduced express train service along the Antelope Valley and San Bernardino lines. These lines both received a pair of express trains, one heading to Los Angeles in the morning, and one leaving Los Angeles again in the evening. Now that a few months have passed, ridership data for the months of May and June have been posted, allowing us to see whether the faster train times resulted in higher ridership.

Antelope Valley Line total ridership
April 2010: 141,616
May 2010: 132,876
June 2010: 139,586
April 2011: 137,327
May 2011: 142,024
June 2011: 144,762

San Bernardino Line
April 2010: 281,242
May 2010: 268,550
June 2010: 279,766
April 2011: 290,095
May 2011: 295,575
June 2011: 298,514

Even a simple eyeballing of the numbers indicates that the combination of additional service and express trains has resulted in much higher ridership than would otherwise have been expected. However, the express trains appear to be underperforming. AV 282, the morning express service, averaged 214 passengers per weekday. That's only 55-60% of the performance of its preceding and following local services which averaged 383 and 349 passengers respectively. Similarly, the afternoon AV 285 averaged 291 passengers against the 411 and 366 of its earlier and later trains.

San Bernardino does far better however. SB 383 averages 522 passengers per weekday to Los Angeles, substantially better than the earlier SB 305 with 279 passengers and close to the following SB 307 with 583 passengers. In the afternoon, SB 384 carried an average of 563 passengers, substantially better than its neighboring trains at 531 and 511 passengers.

There are two explanations that come readily to mind for why the Antelope Valley express trains do so poorly. The first is that the commuting population is more concentrated in the stops served by the express trains on the San Bernardino Line than they are on the Antelope Valley Line. Considering the 2007 boarding pattern, the express train only serves 36% of commuters and serves the first, fourth, and eighth (third to last) busiest stations. Meanwhile, the San Bernardino line served the busiest three stations representing 46% of the total commuters.

The second explanation may simply be a lack of sufficient time saving to draw a suitably large number of commuters from other trains and from cars. The new express trains, if on time which the AV trains had some trouble doing at first, are slightly less than half an hour faster than their local counterparts (with the noted exception of SB 383 being 45 minutes earlier than its predecessor, arriving 15 minutes before it despite leaving 30 minutes later). San Bernardino is now competitive in terms of trip time with cars, although it is still slower when one accounts for the first and last mile problem of mass transit. Antelope Valley, however, is still slower than the car (in both cases, using Google Maps to determine trip time). In this case, the dominating factor is going to be the arrival timing since it cannot function as a suitable alternative to road congestion for those who are intent on minimizing their transit time.

Monday, July 11, 2011

Oil prices, airline ticket prices, and CAHSR

In 2010, Southwest Airlines reported that the average price that they paid for aviation fuel came to $2.51 per gallon (source, page 3). That price represented nearly a third, 32.6%, of all operating expenses and slightly more than double the price of fuel merely five years prior. In total, over the past ten years, fuel costs have risen by 250% from 99.6 cents (after inflation adjustment, 78.69 cents in 2000 dollars, page F22) and an increase in total operating expenses of 186% from 17.4% of total operating expenses in 2000 (ibid, page F7). As of this week, the world price for fuel is $2.998, a 344% increase in nominal and a 273% increase in real price since 2010.

Working backwards from this carbon calculator's result of 203 pounds of CO2 per Southwest traveller between LAX and SFO (Southwest chosen due to being the most commonly cited and advertised airline between the two airports and their entirely economy seated aircraft), we can see a fuel consumption of 9.6 gallons per passenger per flight with $24-29 per ticket being devoted simply to paying the fuel cost (depending on 2010 hedged SWA price vs current market price). The portion of the price paid simply to account for the fuel costs is quite large, as much as half the ticket price with current $59 discounted fare sales but still remaining a solid 25-30% of the ticket fare at the more common $99 fare level that travel on that route sees this year (for an advance purchase ticket).

This rise in fuel prices is not indefinitely sustainable of course. Too high of an oil price will cause major drops in consumer spending as increased transportation costs raise the price of goods and lower household discretionary incomes. At a certain breaking point, this causes a sufficiently large drop in demand as to cause an economic downturn, reducing the price of oil. Until and unless significant forces of alternative fuels (be it Fischer-Fropsch synthetic fuel, biofuel, or widespread adoption of electric cars and mass transit) or a coordinated price fixing action by the oil producing nations act to stabilize the price of oil, this will result in a perpetual cycle around the "sustainable" price.

Still, it is certainly possible for oil to increase sustainably by another 50% (to an average world price of $150 dollars per barrel and an airline price of $4.50 per gallon) or catastrophically double (to $200 and $6 respectively). This would push up the fuel price between LAX and SFO to $43.20 and $57.6. If airline operating expenses and profit seeking (in terms of dollars per ticket) remain fixed and fares only rise in accordance with fuel, our $99 baseline fare would rise to $114 and $129. Assuming that other factors similarly rising (such as wages to deal with transportation expense inflation) meant that fuel did not exceed 40% of the total airfare, only the catastrophic scenario would see a price rise, to $144 per ticket.

While this would impact transportation to a degree, in neither case does it seem that air travel between the Los Angeles and San Francisco regions would be greatly affected. There is a sufficiently high degree of travel that increased fuel costs are unlikely to so greatly reduce demand and profit margins such as to significantly reduce service.

Among the trains cited in "Estimating Emissions from Railway Traffic" (page 74), the TGV Atlantique, which runs 300 km/hr maximum and 240 km/hr average between Paris and St. Pierre des Corps (Tours), best represents CAHSRA's planned 350km/hr top speed, 220km/hr average speed train between Los Angeles and San Francisco. That train consumes 22 kilowatt-hours per kilometer for a total consumption upon the 695 kilometer route of 15,290 kilowatt-hours. With 485 seats, if we assume an average train capacity factor of only 50%, the energy consumption will be 63 kilowatts per passenger. At the 2010 price of electricity for transportation customers in California of 8.46 cents per kilowatt-hour, the fuel price per passenger is a mere $5.32.

This does not mean, of course, that high speed rail tickets will necessarily be able to drastically undercut the price of airlines. Rail, after all, has significant infrastructure maintenance costs that airlines do not. Renfe financial report shows traction energy costs amounted to only 7.5% of total expenditures (source, page 163). Following that result, if averaging only 50% of total seat capacity, a break-even fare, of all operational costs, would be $71, declining to $50 at 70% capacity factor. Electricity is somewhat cheaper in Spain, but this should not greatly affect matters. SNCF reports energy costs averaging 4.3% of total costs from amongst all divisions, with the result of much higher train fares if that were to hold true for CAHSR ($123).

In the end result, higher oil prices are not likely to impose a significant burden to air demand although competitive pressure may lead to failures and consolidations before ticket prices rise to match fuel costs. Provided that gold-plated design can be avoided, maintenance costs kept low, and tendencies towards overstaffing as currently demonstrated by American passenger rail kept at bay, the California high speed rail system stands a very good chance of potentially greatly undercutting airline fares and establishing itself as the major low cost carrier of high speed intrastate intercity travel.

Tuesday, July 5, 2011

Railroads targeting domestic intermodal freight

For decades, international commerce has dictated the rules of engagement in the U.S. intermodal industry. Seagoing containerized imports were offloaded at U.S. ports of entry, transloaded onto railroads, and moved inland.

That business is hardly going away. However, the days when domestic intermodal operations were viewed strictly as a "bolt on" to international service that involved a prior or subsequent ocean freight movement are fast becoming history. Today, the four U.S. Class I railroads are putting greater emphasis than ever on the domestic market as they look for ways to fuel intermodal growth. In so doing, they will try to move beyond their comfort zone of near 2,000-mile hauls and muscle in on the short- to intermediate-distance markets dominated by truckload carriers.

To be sure, it isn't a zero sum game. Collectively, the trucking industry is the country's largest intermodal user and has for years relied on the service to cut its linehaul costs. UPS Inc., known to many as a ground carrier, is also the single biggest intermodal customer.

However, there are still many shippers who will not use intermodal service and depend exclusively on truck, a fact that railroads know all too well. For example, the Burlington Northern Santa Fe Railway (BNSF) estimates its customers use intermodal for only about one-quarter of their total transport needs.

The railroads believe U.S. businesses may be ready for a change, especially as trucking costs escalate, road congestion intensifies, and fears of a driver shortage persist. The rails maintain that the speed and reliability of their domestic intermodal service has now improved to the point where they can offer a compelling price-service solution on shorter stage lengths.

A wide-open opportunity
If rail industry estimates are accurate, there is plenty of incentive to focus on the domestic business. Omaha, Neb.-based Union Pacific Railroad Co. (UP) says 11 million truckloads are up for grabs in its service territory, while Fort Worth, Texas-based BNSF puts its potential market at 7 million. In 2010, BNSF handled between 2.25 million and 2.5 million domestic intermodal loads, while UP handles, on average, about 2 million a year.

Jacksonville, Fla.-based CSX told analysts recently that of the 14 million truckloads that normally move in the Eastern United States each year, about 5.1 million have already been converted to intermodal, leaving a potential market of somewhere around 9 million. CSX said it handles about 40 percent of the 5.1 million loads that have already been converted.

Senior rail executives recognize the potential bonanza that awaits them should they convince shippers that they can deliver on their intermodal service commitments and continue to do so at lower rates than truckload. "We have a unique opportunity, and the opportunity is huge," says Steve Branscum, BNSF's group vice president, consumer products marketing.

To capitalize on this opportunity, the rails are building out their intermodal networks. Norfolk Southern's "Crescent Corridor," a 2,500-mile joint public-private project linking New Jersey with Louisiana, is expected to divert 1 million trucks per year from 10 interstate highways when the work is completed in 2013. Executives for the Norfolk, Va.-based railroad were unavailable for comment.

Earlier this year, CSX opened an intermodal facility in the Northwest Ohio town of North Baltimore. The facility serves as the pivot of a hub-and-spoke operation where freight arriving from nationwide points is transferred to double-stack trains for delivery throughout the East. It enables shippers to bypass the notorious "choke point" of Chicago, and thus can reduce transit times by up to two days between West Coast ports and distribution centers in the Ohio Valley, CSX officials say.

"It is our gateway to the West," says Michael Rutherford, director of intermodal marketing for CSX Transportation.

Out west, UP has upgraded eight of its 10 primary corridors to enable intermodal to better compete with truckload, according to Matt Gloeb, the railroad's assistant vice president of domestic intermodal. The two remaining lanes, Los Angeles–Seattle and Los Angeles–Houston, are expected to reach service parity by year's end, Gloeb says.

UP has raised tunnel clearances at Donner Pass, 90 miles northeast of Sacramento, Calif., to accommodate double-stack container trains, according to spokesman Tom Lange. The railroad has built intermodal terminals in Chicago, San Antonio, Dallas, and Salt Lake City. It is also laying a second track on its Los Angeles–El Paso "Sunset Route"—a move that will double train capacity on the heavily used intermodal corridor by allowing two trains to operate over it at the same time, Lange says.

More at the link.

This, I feel, is probably one of the most important things that we can do with regards to our railroad infrastructure. Unlike high speed rail (or roads), these lines can generally pay back their capital investment costs through the increased revenue alone, without resort to considering a financial estimate of external benefits (as a result, I disapprove of the use of capital grants instead of low or no interest loans to aid in their construction). These also have, by far, the best external benefits per dollar invested in rail infrastructure and operations and make the greatest reductions in carbon emissions and oil consumption. Consider, for instance, the Crescent Corridor. It costs $2.2 billion dollars, yet has an anticipated benefit:cost ratio of 16:1. With this comes claimed CO2 reductions of 1.875 million tons per year and a claimed 170 million gallons of diesel saved annually (compare to CAHSRA's expectations of 5.4 million metric tons and 533.4 million gallons at more than 15 times the expense and quite a few years down the line).

That is not, however, to suggest that I think projects like Steel Interstates are a good or worthwhile endeavor. Such projects do not merely take a good idea such as railroad electrification or aiding railroad modal capture and run with it, but engage in a baton race with the Flash, taking things far beyond a good or worthwhile end. Fanciful ideas ought to be avoided as they quickly become fodder for ridicule and easily derided, as they ought to be, while clouding and overshadowing the more important and worthwhile investment concepts which they took root from.

At the same time, I do not mean to take away from the need for passenger rail investment including, where appropriate, high speed rail. It is however, secondary to that of freight in its benefits (especially relative to investments) with certain well-planned local transit and commuter rail exceptions. Happily, freight generally requires a great deal less government investment than does passenger rail, which itself often helps bring public attention and willingness to fund to rail, so the two may peacefully coexist in governmental investment budgets.