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October 07, 2024 Feature

How the Railroad Industry Became the Vanguard of Innovation

Timothy J. Strafford

Railroads hold a special place in the American collective subconscious: the golden spike punctuating Western expansion, the rapid industrialization of a growing world power, pictures of Jazz Age glamour and travel. But those images in our collective memory are in black and white and hearken to a world of yesterday. To the extent that we think about railroads today, most of us probably don’t think of railroads as being at the vanguard of innovation. But throughout our nation’s history and through today, railroads have been at the forefront of technological change, both harnessing innovation and leading it.

For an Industry Born of Innovation, it was About Time

The very creation of a system of freight and passenger transportation network of mechanical vehicles on steel rail across the North American continent was a marvel of the 19th century. Indeed, the use of steam locomotives taking advantage of the reduced friction of metal wheels on metal rails allowed the movement of goods and people on an unprecedented scale and “was the first phase of the most important transportation advance in all history, the application of heat energy from a machine to transcend animal power.”

The unprecedented expansion of mobility and commerce created by railroads affected every aspect of American life and created the modern economy. Time zones, and even standardized time, are the product of railroads. Before the establishment of rail transportation, there was little need to coordinate the measurement of time across different locations. Before railroad companies began to operate on a coordinated system of four time zones starting in 1883, there were over 100 local times in North America. With the regulation of railroads by the Interstate Commerce Commission (ICC) came federal oversight of time zones. In 1918, the Standard Time Act vested in the ICC the responsibility for establishing boundaries between the five time zones in the continental United States that are still used today. The responsibility for time zones shifted to the Department of Transportation when it was created by Congress in 1966.

A Leader in Telecommunications Innovation

Railroads were also at the forefront of both wired and wireless communications even in the industry’s earliest days. As superintendent of the Erie Railroad, Charles Minot was so sure that the newly invented telegraph would be crucial to running a railroad that “he had already put up poles and strung wire alongside the Erie and was prepared to make his own illegal instruments if necessary, before he reached agreement with the inventor providing service.” Telephones and radio communications were swiftly integrated into railroad operations as they matured, causing a system-wide increase in communications between engine and caboose, and train and centralized train controls.

For example, Southern Pacific Railroad (SP) built a private microwave radio system to serve its internal communications needs in the late 1950s and early 1960s. It also created a then state-of-the-art computer system, Total Operations Processing System, that allowed SP to use the radio system for operational control of the railroad, including train dispatching, automatic car identification, and centralized operational control.

By the early 1970s, SP had begun selling long-­distance telephone service to the public over its networks. SP formed Southern Pacific Communications Company and eventually became a leading nationwide telecommunications company, competing with AT&T in long-distance telecommunications. That network became known as SPRINT (the “SPR” representing Southern Pacific Railroad), which was at one point the third-­largest telecommunications company in the country before being acquired by T-Mobile. The sale of SPRINT to General Telephone and Telegraph Company in 1983 generated $1.2 billion, roughly equal to the value of all of SP’s other assets at the time.

Scan the Supermarket for a Remnant of Railroad Technology

It would come as no surprise that most of the products on the shelves of a modern supermarket, or at least one of those products’ ingredients, moved by railroad. But even the supermarket checkout scanner has roots in the railroad industry, as the ubiquitous barcode was first put to widespread commercial use by the railroad industry.

While the patent for the barcode predates railroads’ use of the technology, that patent did not include the now-familiar modern array of varying vertical lines. Instead, early codes used a series of concentric circles in the shape of a bull’s-eye. In 1960, engineer and physicist Theodore H. Maiman built the first working laser, which made it possible to quickly decode a barcode’s line patterning. David J. Collins then pioneered a way to scan barcodes with flashes of light and developed a system to identify railcars.

In 1967, the railroad industry implemented KarTrak, as the system was called, the world’s first operating barcode system. KarTrak barcodes were developed to automatically identify railcars as they moved past scanners, but rather than the black vertical lines we use today, they used a design of lines of varying colors. Nonetheless, KarTrak opened up the commercial possibilities of barcodes and ushered in their use in modern life, used across industries for identifying inventory, goods for sale, packages, and on boarding passes for airplane travel.

Deregulation Leads to Innovation

Modern American freight railroads have been described as the “envy of the world” for their efficiency.

That distinction has been the result of the ability of railroads to deploy new technologies and operational innovations to take advantage of the industry’s economies of scale and scope. Such innovations have included:

diesel-electric locomotives, larger and more specialized freight cars, the use of microprocessors in locomotives and signals, welded rail and use of better steel in track to reduce derailments, computerized systems to deploy assets more efficiently, advance telecommunications for safety and productivity, automatic grade crossing warning devices, and much more. With these innovations, plus retiring the caboose, moving freight in unit trains, and double-stacking intermodal containers, the railroad industry demonstrated that its reputation of being stuck in the past was no longer true.

But for much of the century, railroads were saddled with a regulatory system that did not allow them to innovate commercially and caused severe economic hardship that limited investment in technology. During the 1970s, virtually every major railroad in the Northeast and several major Midwestern railroads filed for bankruptcy. More than 20 percent of the nation’s rail routemiles were on railroads operating under bankruptcy protection.

As inflation had risen during the 1960s, the ICC granted regulated rate increases infrequently and only after protracted administrative proceedings. Traffic migrated from railroads to trucks during this period. The combination of the publicly funded interstate highway system, competition from trucks, and heavy-handed regulation by the ICC handicapped the railroads for decades. By 1978, the rail share of intercity freight had fallen to 35 percent, down 75 percent from the 1920s. Between 1970 and 1979, the rail industry’s return on net investment never exceeded 2.9 percent and reached a low of 1.2 percent. The average rate of return had been falling for decades: it was 4.1 percent in the 1940s, 3.7 percent in the 1950s, 2.8 percent in 1960s, and 2.0 percent in the 1970s. These low returns meant that railroads lacked capital to invest in their businesses.

Deregulatory legislation, culminating in the Staggers Rail Act of 1980, recognized that railroads operate in competitive markets but that the existing regulatory framework prevented railroads from earning adequate revenues and competing effectively with other modes of transportation. The effects of deregulation were overwhelmingly positive for railroads, their customers, and the public at large. Since 1980, average rail rates (defined as average inflation-adjusted rail revenue per ton-mile) have declined over 40 percent, railroad productivity has skyrocketed, and accidents have declined sharply.

Since the Staggers Rail Act, the freight railroads have spent close to $700 billion of their own funds and funneled it back into their privately owned networks. This investment led to new technology because in older integrated industries, reinvestment is the main way new technology is deployed. The new facilities and technologies, in turn, made the industry much safer. In this complex way, economic deregulation—more than prescriptive safety rulemaking—was at the root of the substantial improvements in safety performance railroads achieved in the last two decades of the twentieth century.

Government Mandates Rail Safety Innovation

More recently, some railroad innovation has occurred as result of government mandate. A Metrolink commuter train in Los Angeles ran a red signal and crashed head-on into a freight train that had been given the right-of-way by the dispatcher on September 12, 2008. Twenty-five people were killed and 135 were injured. As a result, Congress passed the Rail Safety Improvement Act of 2008 (RSIA), which required the railroads to develop and install Positive Train Control (PTC) technology on main lines used to transport hazardous materials and on main lines over which intercity rail or commuter rail passenger transportation is regularly provided. PTC is “a computer-based technology that uses a communications system to monitor and control train movements to minimize human factor errors.” As the US Government Accountability Office (GAO) explained:

PTC’s communications-based system links various components, namely locomotive computers, wayside units along the side of the track, and dispatch systems in centralized office locations []. Through these components, PTC is able to communicate a train’s location, speed restrictions, and movement authorities, and can slow or stop a train that is not being operated safely.

The RSIA initially created a requirement that railroads submit implementation plans to the Federal Railroad Administration (FRA) within eighteen months, and PTC was required to be fully implemented by December 31, 2015. FRA promulgated rules governing PTC implementation in January 2010, which were later amended in May 2012, and again in August 2014. In October 2015, Congress extended the deadline for full implementation by at least three years to December 31, 2018.

But when the RSIA was passed in 2008, the technology to implement an interoperable PTC system across the entire railroad network in the United States did not exist. Developing and implementing PTC proved to be an “unprecedented technological challenge.” PTC was not an off-the-shelf product; it was an interlocking set of programs and equipment that had to be able to communicate with each other seamlessly for PTC to function safely and effectively. Locomotives had to be upgraded to transmit and receive wireless information, thousands of wayside interface units had to be installed to transmit information from signals and switches, and back-office equipment and software had to be developed to receive and process data from the field.

FRA announced in December 2020 that PTC was fully implemented. However, the National Transportation Safety Board (NTSB) found in 2023 that while PTC is successful at signal enforcement, current limitations on train location technology impede detection of and response to threats of train-to-train collisions during restricted-speed operations; thus, the NTSB has advocated for further regulation. It remains to be seen how railroads will leverage the massive investment made in PTC for further advances in efficiency and safety.

The federal government has also encouraged railroad innovation in less prescriptive ways. FRA encourages innovation in rail safety through its Office of Research, Development, and Technology (RD&T). According to FRA, the “RD&T mission is to ensure the safe, efficient, and reliable movement of people and goods by rail through basic and applied research, and development of innovations and solutions.” Its “strategies include stakeholder engagement and partnerships with other researchers such as the Association of American Railroads, prioritization of projects, and conducting research through cost-effective procurement.” FRA also owns the Transportation Technology Center, a facility in Pueblo, Colorado, on 52 square miles of land leased from the state of Colorado for ongoing research, development, and testing of rail infrastructure and equipment.

Drones are Railroads’ Eyes in the Skies

In recent years, railroads have also been at the forefront of deploying unmanned aerial systems, or drones, for commercial purposes. Railroads use drones for multiple safety and environmental purposes, like track and bridge inspection and air quality testing.

BNSF Railway (BNSF) has been testing and using drones for supplemental inspection of rail infrastructure since 2016. The drone operations include “beyond visual line of sight” flights– flights where the aircraft operates autonomously according to pre-programed flight plan and monitored remotely. In 2019, BNSF was granted exemptions from the Federal Aviation Administration’s (FAA) Extension, Safety, and Security Act of 2016, allowing expanded drone operations. BNSF was able to use drones mounted with high-definition cameras over tracks in parts of Texas and Oklahoma that had flooded, allowing BNSF to pinpoint the location of damaged track and safely engage employees to repair the line.

Environmental Innovation Creates a More Earth-Friendly Locomotive

Railroads have long innovated in ways that made them more environmentally friendly. The earliest railroads were powered by steam generated by burning wood and later coal, but steam locomotives were costly to operate and maintain. Steam locomotives needed to stop frequently to fill up on water and fuel, causing delays to passengers and freight. As automobile manufacturers began developing reliable internal combustion engines, railroads began considering such engines as an economical alternative over shorter routes in the 1920s.Gasoline-electric engines proved moderately successful, but railroads sought more power and speed. The result was a hybrid diesel-electric locomotive. The ­diesel-electric hybrid design enabled a medium-speed diesel prime mover to power a direct current generator (later an AC alternator), developing electric power to feed traction motors on axles. These locomotives were more powerful, created adhesion improvements that were valuable in starting and climbing steeper grades, lowered polluting emissions, and lowered costs.

The success of the hybrid diesel-electric locomotive has made freight rail the most fuel-efficient way to move goods over land. A train is the equivalent of hundreds of trucks and much more fuel efficient . . . Moving freight by rail instead of truck lowers greenhouse gas emissions by up to 75 percent, on average. Yet, the industry and regulators are pushing to reduce emissions further. The Association of American Railroads has advocated a pragmatic approach, commenting that, “[n]otably, zero-emission locomotives are still in a pre-­commercial stage and do not currently meet freight railroads’ safety, reliability and functionality requirements. However, there are ongoing demonstrations and commercial testing initiatives for battery-electric and hydrogen fuel cell locomotives.” As recently noted by the Wall Street Journal, “freight operators are investing in diesel-­electric models that are more fuel efficient, as well as exploring alternative ways to power locomotives, homing in on three main technologies: batteries, biodiesel and hydrogen.”

Recently, locomotive manufacturer Wabtec unveiled its first-production FLXdrive battery heavy-haul locomotive. Wabtec and Australian mining firm Roy Hill have introduced the world’s first 100% battery-powered, heavy-haul locomotive for mainline service.

The FLXdrive locomotive contains 72 lithium-ion modular battery packs with a total of 36,288 cells, giving the locomotive an energy capacity of 7 megawatt-hours. This is about three times the power of a 2.4-megawatt-hour FLXdrive prototype that operated 13,000 miles on BNSF Railway in California with zero failures in 2021.

After testing, the locomotive will be shipped to Australia to enter revenue service.

The railroad industry is also working with locomotive manufacturers and fuel refiners to test higher-percentage blends of low-carbon fuels, including biodiesel and renewable diesel, which could result in substantial greenhouse gas emissions savings. FRA is also supporting research into expanded use of biofuels by railroads. Currently, FRA RD&T is partnering with industry and other government research organizations to develop engine hardware able to operate with select biodiesel fuels, demonstrate engine operation and responses with select alternative fuels, and test those engines’ ability to operate with a reduced carbon footprint and efficient resource utilization.

Railroads are also exploring hydrogen fuel cells to power locomotives. In December 2020, Canadian Pacific (CP) announced plans to develop North America’s first line-haul hydrogen-powered locomotive. CP’s first hydrogen locomotive, named H2 0EL for “hydrogen zero-emissions locomotive,” made its first revenue run in local service in Calgary in October 2022. The locomotive uses hydrogen fuel cells and batteries to power its electric traction motors and was designed and built in-house by a team of CP engineers. The unit now has accumulated more than 1,000 miles of testing in revenue service. In 2023, CPKC “deployed a second hydrogen locomotive for testing in terminal operations, a program expansion supported by funding awarded by Emissions Reduction Alberta and the Government of Canada Low Carbon Economy Fund.” CPKC and CSX Transportation (CSX) have recently formed a joint venture to build and deploy hydrogen locomotive conversion kits for diesel-electric locomotives. CSX will be concentrating on converting low-horsepower locomotives and has debuted its first hydrogen-powered locomotive in field tests. CPKC now “has two low-horsepower hydrogen fuel cell locomotives in service and has plans to test a high-horsepower, six-axle unit in revenue coal service” after testing is complete.

Artificial Intelligence and Big Data Can Add Safety and Efficiency

Artificial intelligence (AI) is a broad term encompassing software tasked with performing various functions that may either replicate tasks historically done by humans or create new procedures. Machine learning is closely intertwined with AI, employing software and mathematical techniques to process analytical data, with algorithms being a primary function of machine learning.

Railroads use machine learning and “big data” to predict a number of maintenance issues—such as track wear and tear—based on patterns and trends. For example, Norfolk Southern has begun using models and algorithms powered by machine learning and AI to predict the wear and tear of track over a five-year period. A five-year look-ahead window allows the railroad to proactively plan repairs and maintenance, helping make its network safer and more efficient. Likewise, railroads use AI to power machine visioning to inspect tracks. Union Pacific can collect 40,000 images per second of railcars as they pass over sensors in facilities in Nebraska and Iowa, and it uses algorithms to analyze the images for any anomalies.

The adoption of advanced tracking devices—known as telematics—also has great potential to improve railroad efficiency, transparency, and safety. Telematics placed on railcars can produce data on the cars’ location, condition, and health. This data can be used by the car owner to track the health of the asset and to provide real-time tracking capabilities and other information. Rail industry stakeholders have formed a coalition, called RailPulse, to provide the infrastructure needed to capture, disseminate, and analyze data from telematics sensors.

Freight Rail Without Trains

There is even currently a company seeking to disrupt the freight transportation industry by introducing autonomous vehicles that operate on the same tracks as conventional trains. Parallel Systems is testing a battery-electric autonomous container car system that can operate on the rail network. In 2020, former SpaceX engineers founded the company, seeking to develop transportation systems that would improve the movement of freight in every way: cleaner, faster, safer, and more cost-effectively. The cars have already completed preliminary tests for emergency stops, braking efficiency, dynamics, temperature control, GPS, communication, and towing. This technology is designed to operate on busier railroads and will contribute to improving the efficiency of freight transport by rail.

Each Parallel railcar is individually powered and can form platoons of up to fifty cars to reduce energy consumption and efficiently use rail network capacity. The platooning is fully automated: the railcars don’t need to physically couple or uncouple. They simply move close to each other and then initiate contact through bumpers to form platoons.

This year, MxV Rail, a subsidiary fully owned by the Association of American Railroads, will conduct suitability testing for the railcars in Pueblo, Colorado.

Conclusion

As modern American society rushes toward a technological future, railroads are not always at the forefront of the conversation. Yet, railroads have historically led technological change and grown as they have adopted emerging technologies. That continues today and will no doubt continue into the future.

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    Timothy J. Strafford

    Steptoe LLP

    Timothy J. Strafford is a partner at Steptoe LLP in Washington, DC.