As the House and Senate debate how to handle the transportation authorization bill that is set to expire in September, there are many questions about how the freight rail industry will manage projected demand increases. During today's OnPoint, Garrick Francis, director of financial and corporate communications at CSX Corp., addresses infrastructure concerns. He explains how his industry will be affected by a carbon cap-and-trade plan and discusses his company's plans to cut carbon dioxide emissions by 8 percent by 2011.
Monica Trauzzi: Welcome to the show. I'm Monica Trauzzi. Joining me today is Garrick Francis, director of Financial and Corporate Communications at CSX, nice to have you on the show.
Garrick Francis: Glad to be here.
Monica Trauzzi: CSX recently announced a commitment to cut CO2 emissions by 8 percent by 2011 as part of this partnership you have with EPA. How does CSX plan to reach that goal?
Garrick Francis: Well, there will be a variety of ways. We were very proud in June that we were able to announce our goal. We became the first transportation company back in 2007 to join the climate leaders program and committed at that time to inventory and then commit to reduce our carbon emissions. So, it was very important to us to get that right. There are a variety of ways that we'll do that. We will employ what we call gen-set locomotives. These are locomotives with very innovative technology, refitting some locomotives with three small diesel engines that automatically decide, depending on what the load is, how much they're going to use, one engine, two, so it reduces fuel consumption. We'll manage our fleet to make sure that we're using things appropriately and efficiently. We've installed new technologies on our locomotives. By the end of this year we'll install, on 1200 locomotives we'll carry what we call auxiliary power units or APU technology which helps us manage fuel consumption, so there'll be a variety of ways, both with technology and personal ingenuity that we achieve the goal.
Monica Trauzzi: Obviously climate and energy policy are front and center in Congress right now. How is the freight rail industry going to be impacted by a cap-and-trade program?
Garrick Francis: Well, CSX supports mandatory restriction of carbon, including some cap-and-trade mechanism. But what we want to make sure is that as we do that we look at things that will preserve a diverse fuel mix, that will reduce emissions, and that will do so affordably for consumers when they're purchasing electricity and for industry as well. So we think there's some key components to it, but freight rail will play, I think, a very important part in the overall mix because freight rail is so much more fuel efficient than some other modes of transportation.
Monica Trauzzi: So, do you think that the Waxman-Markey bill which passed through the House achieves those goals that you just described?
Garrick Francis: We have some concerns with the legislation. We think some of the timetables and targets would need to be adjusted, there's some safety valves. Again, our focus is on making sure that the affordability factor is there. At a time when our economy is still struggling we want to make sure the businesses and consumers that make up 70 percent of our economy really have affordable energy that allows things to get back on track.
Monica Trauzzi: President Obama secured $8 billion in the stimulus to begin building a high-speed rail system. He's looking for another 5 billion for the effort. Has the administration unfairly left out certain transportation sectors that have infrastructure needs by focusing in on this high-speed rail system?
Garrick Francis: Well, high-speed rail is just one part we feel of what should be part of the mix. Freight rail is an extremely efficient way of moving goods and services. As we've said before, you know, we can move one ton of goods 436 miles on one gallon of fuel. It's much more fuel efficient. It takes congestion off the highways. So while we're doing high-speed rail and we're moving people we need to remember that if we just move 10 percent more of our goods by freight rail we could avoid one billion gallons of fuel used annually, so it would help diversify our energy mix. I mean that's 20 percent of the oil we import from Saudi Arabia, so freight rail can be a vital part of this House policy.
Monica Trauzzi: And DOT recently projected that freight rail demands are going to be increasing by 88 percent by 2035. What are the ramifications for the economy if these infrastructure issues aren't addressed before then?
Garrick Francis: Well, part of rail infrastructure would be it meets all of the objectives of the stimulus package, you know, the things that we want to see done. It's job creation. It's infrastructure investment. There are a number of things that go into it. So, with the projected increase in freight rail we think that employing freight rail would be the best way to move goods and services. Now high-speed rail, again, is an excellent way to move people, but when we look at freight rail and what needs to be done in this country it's largely invested by private enterprises. Rails invest 15 to 70 percent of their revenues back into the infrastructure each year. This year alone CSX is putting $1.6 billion into our infrastructure. We'll continue to do that, but we think there are some very good public/private partnership opportunities out there that will help increase those things.
Monica Trauzzi: And you're looking for what type of funding from the government? More along the tax credit line? You don't want to go to the mandate route.
Garrick Francis: Well, we think there are a variety of things. We have, for instance, our national Gateway project which would link the ports along the East Coast to the consumption markets in the Midwest by creating a double-stack corridor. One thing that we think would be very helpful that we've committed $350 million to the effort to create terminals to the states of Ohio and Maryland and Virginia and North Carolina are very supportive of this effort as well, both with funding and support, policy support. So we think funding of that nature to help create clearances, to help create the infrastructure in that way and incentives for creating tax incentives is another way to do that.
Monica Trauzzi: The Transportation Authorization Bill expires in September. It's unclear whether Congress is going to pass the full six-year bill or just extend what we currently have. They're trying to figure out the funding. Is there enough urgency behind the infrastructure issue?
Garrick Francis: Well, I think in Washington and across the nation we've seen the urgency increase. People are recognizing the importance of our infrastructure. Our roads need some rebuilding. Obviously, we believe that the rails need more investment. We think a tax incentive would be a great way to have private companies invest in rail spurs and extra rail and rail facilities. We think that there's a growing sense of urgency in Washington about infrastructure, that people recognize that investing in infrastructure will help our economy strengthen in the short term by creating jobs in local communities. And in the long term it will prepare our infrastructure to carry the goods and services that come in from the West Coast ports and the East Coast ports and at the same time reduce congestion.
Monica Trauzzi: You mentioned a public/private partnership on this type of funding. What's your company's capacity for funding these types of investments that are needed for the improvement of infrastructure? I mean should this be like a 50-50 deal with the government?
Garrick Francis: Well, again, what we've done is we've said we are investing 350 million in our national Gateway efforts and we are looking for funding, similar funding from government entities. But the Gateway itself, for every dollar invested privately brings $16 in public benefit. So we think public/private partnerships of that nature, when there's such a great public benefit is vital to helping move our economy, to rebuild an infrastructure because it's an expensive venture.
Monica Trauzzi: OK, we'll end it right there. Thanks for coming on the show.
Garrick Francis: Great.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
[End of Audio]