show me the green

In the never-ending battle between rails and truckers to win the hearts, minds, and budgets of shippers, it seemed only a matter of time before the environment became a competitive weapon. And that's precisely what happened.

The Web site of the Association of American Railroads, the leading rail trade group, states that, on average, a train can carry one freight ton 436 miles on a gallon of fuel—four times farther than a truck can—and that an intermodal train removes 280 trucks, or the equivalent of 1,100 automobiles, from the road. AAR also notes that each ton-mile of freight moving by rail instead of on the highway cuts greenhouse gas emissions by more than two-thirds, and that by shifting 10 percent of domestic freight from truck to rail, emissions would be reduced by 12 percent and 1 billion gallons of fuel would be saved each year.

The AAR site includes a "carbon calculator" that allows users to plug in data on train sizes, traffic lanes, and commodities hauled to determine the reductions in carbon footprint if the goods moved by rail rather than truck. For example, a 100-car train moving intermodal or consumer-goods shipments from Atlanta to Chicago would save 125 tons of CO2 compared to the same amount of freight moving on the highway, according to the calculator. It would take 2,909 tree seedlings 10 years to remove that amount of carbon from the environment, the AAR site says.

While the numbers keep AAR statisticians busy and employed, they do little to endear the railroads to what is at once their chief rival and their key partner and customer: the trucking industry. Truck advocates argue that some environmental data spouted by the railroads is misleading, noting that even if virtually all long-haul truck freight (roughly defined as freight moving more than 550 miles) migrated to intermodal, a truck would still start and finish every intermodal haul. Thus, the elimination of long-haul truck movements would barely make a dent in the number of commercial vehicles on the road, truck advocates say.

Truckers also chafe at what they believe are slaps at their industry by the railroads in the name of environmental awareness. Clayton Boyce, spokesman for the American Trucking Associations (ATA), says many truckers "do not appreciate the railroad industry's penchant for attacking the trucking industry" to assert environmental superiority or further its legislative goals in Congress. The ATA has advanced an environmental initiative of its own, which includes limiting truck speeds to 65 mph and increasing the gross vehicle weight limit for single-trailer units to 97,000 pounds from the current 80,000 pounds.

In recent months, the topic of intermodalism has received attention from outside the industry as well. In late March, the political publication National Journal hosted a blog titled "Are We Intermodal Enough Yet?" The posts from thought leaders in the private and public sectors as well as academia focused on the importance of intermodal and the need to expand the intermodal network.

One notable exception was a post by Bill Graves, ATA's president and CEO. Graves said rather than wasting the nation's limited infrastructure funds on a "vision," money instead should be funneled into the highway system and to strengthen existing intermodal relationships. Graves said intermodal service should be encouraged when it makes sense for shippers. But he noted that 83 percent of all freight tonnage still moves by either truck or rail as a single mode. "Barring major shifts in lifestyles, land use, or freight logistics, this will be the reality for the foreseeable future," Graves said in his post.

Getting shippers on board
For all the political posturing, the real question is whether sustainability will become an economic factor in shippers' transport buying decisions. Few dispute that intermodal represents the most environmentally friendly mode of transportation. The question is whether railroads and intermodal marketers can connect the environment and the bottom line to persuade shippers that intermodal makes as much business sense as it does ecological sense.

Thomas K. Sanderson, chairman, president, and CEO of Transplace, a third-party logistics service provider, says there is "clear empirical and anecdotal evidence" that companies are factoring environmental concerns into their transport decisions. He cites continued demand for intermodal services despite declines in fuel prices and truckload rates, both of which should, in theory, drive significant traffic to truck. He also sees more shippers awarding more business to carriers certified under the Environmental Protection Agency's "SmartWay" program, which identifies products and services that reduce transportation-related emissions. "Enlightened shippers are ahead of the curve in making decisions that favor the bottom line and carbon footprint," he says.

Others are not so sanguine about shipper interest. Charles W. Clowdis Jr., managing director, North America, for the consulting firm IHS Global Insight's global commerce and transport practice, says that while some large shippers are "making noise" about environmentally friendly shipping, they normally default to the mode that offers the fastest transit times to maximize their inventory turns and shorten cycle times. Though railroads have improved their speed and reliability to market, trucks remain the fastest way of getting goods to stores and warehouses.

Tom Malloy, a spokesman for the Intermodal Association of North America, says that though environmental concerns are driving some additional intermodal growth, no data exists to quantify the claim beyond what a specific railroad would have on its own customers. The intermodal industry has been selling the environmental story for more than 30 years, he says, but only recently have shippers stated they are migrating to intermodal in an effort to be more environmentally responsible.

A question of access
Lawrence Gross, a senior consultant for the logistics consultancy FTR Associates, says environmental and economic issues may not yet be sufficiently connected to drive a mass migration to intermodal, but sustainability will soon be a critical buying factor in weighing rail versus truck. "It will become an issue to the extent that being a good environmental citizen will become more aligned with being a profitable operator," he says.

Gross cautions, however, that intermodal's environmental advantage will go largely for naught unless the railroads build more secondary ramps and terminals to make intermodal service more accessible to shippers that are located away from the nation's major freight corridors. Currently, intermodal operations in these tertiary markets must depend on an often lengthy and expensive dray to get freight from factories to a main rail line for the intermodal haul.

Legislation introduced in the House by Reps. Eric Cantor (R-Va.) and Kendrick Meek (D-Fla.) might, if enacted in its current form, help remedy the situation. The bill (H.R. 272) would provide federal tax incentives for investments in new track, bridges, and tunnels that would enable more freight to move by rail. A similar bill was introduced in the last Congress but was never given serious consideration. As of mid-May, the legislation had not been scheduled for hearings in the House, and no companion bill had been introduced in the Senate.

The nation's big truckers, as represented by ATA, say they will take a wait-and-see posture toward the legislation. UPS Inc., the nation's largest single intermodal user, would oppose the bill if there are no guarantees the funds would be dedicated to rail improvements. UPS spokesman Malcolm Berkley says the company favors the creation of a railroad trust fund largely financed by user fees.

Dollars and sense
The key determinant in choosing intermodal may not be green but the black gold of oil. With diesel fuel prices at $2.22 per gallon, the cost of shipping a double-stack container moving 2,000 miles door to door from Chicago to Los Angeles would be $1,613, according to data from intermodal and drayage provider Pacer International Inc. and IHS Global Insight. The same shipment moving over the road on a 53-foot trailer would cost $3,315, according to data from the companies. (Both examples include fuel surcharges of between 12 and 14 percent.) When diesel prices were more than double the prevailing rate last July, the industry saw similar price differentials but on shorter hauls.

In ironic timing, the railroads raised their intermodal rates at around the time diesel prices began falling from their July 2008 peak of $4.76 per gallon. The converging events made it more economically compellingfor shippers that had been using intermodal to switch back to the highway. Today, the fast pace of growth enjoyed by intermodal for most of 2008 has dramatically slowed in response to the economic downturn.

According to FTR Associates data, in the fourth quarter, intermodal's share of international and domestic containerized freight moving more than 550 miles fell by 0.2 percent to 12.1 percent. Though first-quarter 2009 data were not yet available at press time, Gross of FTR says he expects the trends for intermodal to remain soft for some time to come.

Despite the talk about promoting sustainability and making the planet greener, shippers are likely to use intermodal for freight movements where it makes sense to save shipping dollars. The issue for shippers has been and continues to be whether they are willing to accept longer transit times in intermodal in return for cost savings. Whether green is or will be a factor in that calculation remains to be seen. Sanderson says that, for shippers, the choice of mode will not rest with fuel, the environment, or the structure of the intermodal network, but with the ability of rail or motor carriers to provide reliable service. "Getting the right product to the right place at the right time, and in the right condition and quantity will drive buying decisions," he says.