U.S. Rail Keeps Chugging Along

Investment in railway lines, subways and light rail networks is expected to reach $20.3 billion in 2017

Billionaire entrepreneur Elon Musk might be capturing the public’s imagination with his Hyperloop high-speed transportation project, but the traditional railway system in the United States keeps chugging along with new investments and projects.
Rail, subway and light rail are expected to grow to a combined $20.3 billion this year from $19.3 billion in 2016, according to “Market Forecast 2017”, a recent report by the American Road & Transportation Builders Association (ARTBA). The rise is due to a number of factors, including a growing economy, oil production, demand for freight rail services and the arrival of more cargo by sea as a result of the opening of the new Panama Canal.
Most of the rise will come from Class 1 freight transportation, from $11.9 billion to $12.7 billion. Others like subway and light rail work will hit $7.7 billion from $7.4 billion.

Projects include the $2 billion Purple Line in Maryland involving a consortium with Lane Construction, the U.S. subsidiary of Salini Impregilo; the $3.7 billion World Trade Center Transportation Hub in New York; the $6.6 billion Honolulu Rail Transit Project and the $2.8 billion Silver Line Project in Washington, D.C.
As for freight transportation, the country has seven Class 1 lines and 560 smaller, regional lines. In the first 10 months of 2016, traffic along them fell 6.6% from the same period the previous year, a trend that the Association of American Railroads attributes to a slowdown in the energy sector, with 23.8% less coal being hauled and 22.3% less oil and derivatives.

Union Station, Denver

These trends have naturally influenced the investment plans of big private operators. BNSF, known for operating in North Dakota, reduced spending to $4.1 billion in 2016 from $5.8 billion the previous year. A similar decision was taken at Union Pacific, which cut by 14%. CSX Corp sliced $100 million to $2.4 billion.

Ahead of the Trump plan, new public financing will be coming from the FAST Act approved in December 2015 by the Obama administration. It foresees a rise in annual spending on the transport sector from $10.7 billion to $12.6 billion by 2020. Under the Act, rail will get the same amount at $2.3 billion a year until 2020.

As for high-speed rail, which concerns a number of projects across the country, ARTBA says $8.6 billion worth of funds are earmarked for 69 projects to build lines as of November 2016. That is nearly all of the $10.1 billion allocated by the Federal Railroad Administration. California is the state that has received the biggest portion of available funds: $4.2 billion in 2016 for a line between Los Angeles and San Francisco. Then there is a high-speed railway line being built between Chicago and St. Louis that received $1.3 billion.
Rail is also present in the development projects of airports. In the United States, 28 airports are linked to cities by rail and this infrastructure needs to be maintained and in some cases expanded. For example, the FAA National Plan of Integrated Airport Systems foresees $758 million of investments between 2017 and 2021.

The need for rail also comes by way of the sea. ARTBA cites the new Panama Canal, completed in June 2016 by a consortium led by Salini Impregilo, as the reason. Given how container ships represented 85% of U.S. intermodal transport in 2015, investment opportunities abound as more freight arrives by means of larger cargo ships passing through the canal.