From TPM: BNSF’s Rose Urges US to Invest in Infrastructure

From TPM: BNSF’s Rose Urges US to Invest in Infrastructure

BNSF Railway CEO and Chairman Matt Rose at TPM 2013.

LONG BEACH, Calif. — BNSF Railway CEO and Chairman Matt Rose said the western railroad expects modest volume growth in 2012 but said the U.S. needs to spend more to prepare for a surge of freight growth expected over the next decade.

He said BNSF’s total volume will expand about 4 percent this year, exceeding anticipated total U.S. economic growth of 2 percent. International intermodal traffic will rise between 2 and 3 percent year-over-year in 2013, while domestic volume will expand at a clip of 4 to 5 percent in the same period, Rose said following his lunch address at the JOC’s 13th annual TPM Conference. His intermodal forecasts for this year fall in line with most railroad analysts’ expectations for U.S. total rail traffic.

“All in all, 2013 for the industry will be another year of a long recovery track to those peak volumes that we don’t expect to get to until 2014,” Rose said. 

But the volume will come back, largely because of an expanding U.S. population and GDP, and the nation’s transportation infrastructure needs to be ready to handle the increased volume, he said. Within a decade, forecasters expect the vehicle miles traveled by Americans to grow 150 percent and freight volume to rise 90 percent, Rose said.

“This poses major challenges to our surface transportation network,” he said. “We need the ability to effectively and efficiently build U.S supply chain infrastructure.”

BNSF is doing its part by spending $4.1 billion in capital investments this year, a $500 million increase from 2012 and the biggest annual spending by a U.S. railroad in history, Rose said. About $550 million will be used to expand intermodal terminals and networks, with half going toward completing a $500 million terminal and logistics park in Kansas City.

He urged Congress and the Obama administration to find a way to fund more infrastructure construction and to create a national freight policy. Whether Washington gains more infrastructure dollars by raising the fuel tax or by charging drivers by how far they travel, a user-based method of funding must be maintained, Rose said.

The authorization of infrastructure projects also needs to be faster, as highway projects can take 10 to 12 years to receive permits, according to Rose, who took the reins of the railroad in 2000. Freight railroad projects still take too long despite that they aren’t dependent on government dollars, and he pointed to how permitting BNSF’s proposed near-dock intermodal facility in Southern California has taken eight years. When completed, the Southern California International Gateway will allow shippers through the ports of Los Angeles and Long Beach to shift more truck loads onto the rails.

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Rose warned that calls for taxing carbon emissions are increasing, with some think tanks and legislators suggesting such a tax could reduce the federal deficit. California is moving forward on a cap-and-trade program, putting BNSF on the hook for roughly $30 million in additional annual costs within about three years.

“The bigger question is what impact it will have on the West Coast and the industries that call on these ports,” Rose said. “It will not impact the speed or access to market that we provide our customers, but it could impact the overall total cost of supply chains.”

On the effect of the opening of the expanded Panama Canal in 2015, Rose said the “West Coast ports and the western railroads will continue to serve the Midwest and Ohio Valley.” A failure to maintain their market share will only result if they “do something significantly wrong.”

Shippers will consider many factors, including canal fees, bunker fuel prices and labor certainty, in deciding whether they will shift cargo to the East. But Rose said two key factors suggest the West Coast will keep its dominance: transit times are 10 to 12 days shorter, and western ports enjoy 70 vessels calls weekly, compared with a total of 30 on the other coasts.

Contact Mark Szakonyi at mszakonyi@joc.com and follow him on Twitter at twitter.com/szakonyi_joc.