It just may be a hunger for wood pellets that drives a resurgence of freight rail in the U.S. Southeast. European demand for this greener fuel is expected to triple by 2020, driven by climate-friendly policies that encourage coal-fired utilities to burn biomass as well to cut down on carbon dioxide emissions. But Europe does not have enough wood pellets, and the shortfall between global supply and demand is expected to grow to 45 million metric tons per year. And that is where Sean Dunlap, director of Mississippi's Wayne County Economic Development District, sees an export opportunity.

"We're blessed with trees and we want to get them to market," Dunlap explains. "Mississippi has two counties that are 50 to 70 percent covered in forest, but they can't get the timber out economically without rail."

Bulky, low-density materials like wood pulp and pellets are too expensive to ship by truck, so Dunlap, along with partners, wants to build a 90-kilometer (56-mile) freight rail link that would restore direct service from Chicago all the way to the Gulf of Mexico.

Absent such a link, regional suppliers have to ship their products far to the east or west to get the goods to Gulf ports. "That 56 miles might as well be 5,000 miles to them," says Dunlap, calling the plan "the missing link in the economic spine of east Mississippi."

Such economic dreams—and high diesel prices—are spawning a renaissance of freight rail in the U.S., rather than the high-speed passenger rail that gets most of the attention.

The efficiency advantage

Diesel prices are nearly four times higher today than they were in 1999, forcing shippers to seek the most fuel-efficient modes of travel. According to a 2009 study by the Federal Railroad Administration, rail fuel efficiency varies from 66 to 218 ton-kilometers per liter, whereas truck fuel efficiency ranges from 29 to 57 ton-kilometers per liter.

Moreover, the fuel efficiency of rail has been ramping up at a far faster rate than trucks. Between 1990 and 2006 rail efficiency improved by about 20 percent, or 1.1 percent annually.

Some of the gain is owed to technological and efficiency improvements: Railroads have adopted electronic controllers in locomotives, including advanced sensors and fault diagnostics; improved diesel fuel mixture and combustion as well as cooling systems that maintain optimal engine temperature; replaced binary switch DC motors with AC traction motors that respond to loadwith variable voltage/frequency output, and better control/communication systems.

Also added were lightweight, high-capacity coal cars, improved aerodynamics, lighter containers to replace truck trailers and spin/slide-protected steering wheels to maximize traction. These improvements, along with reductions in weight as well as rolling and aerodynamic resistance, and coupled with the addition of stronger (6,000-horsepower) motors, have reduced the number of locomotives needed to pull a train. Hybrid locomotives, which carry a 1,200 amp-hour battery bank and use regenerative braking, were also introduced. Operational practices like optimizing traffic at sidings, improved scheduling, reducing empty car mileage and changes in the traffic mix also helped.

Further, as rail privately invested $40 billion in new infrastructure over the past five years, the trucking industry has suffered high fuel and labor prices—the two largest costs—which have forced it to contract since 2005. Accordingly, rail has gradually taken market share away from trucks since 1999. The migration from trucks to rail is particularly evident for shipping distances longer than 800 kilometers. The longer the haul, the more of a fuel efficiency advantage rail has over trucking.

The trend toward freight rail is destined to continue, according to a projection by rail transportation veteran Ron Sucik of RSE consulting. He believes that market share of rail could double 2035 as more trains are "double-stacked" with shipping containers and fuel prices continue to rise. The benefit is obvious: One double-stacked train can replace 300 trucks and save 285,000 liters of fuel on the 3,200-kilometer journey between Chicago and Los Angeles.

Fast-tracking opportunity

Although the expansion of freight rail in recent years has been almost exclusively privately financed, a little government support could go a long way. Adding one lane to a mile of highway can cost $15 million or more and take a decade to complete, whereas adding a typical mile of rail line costs $2 million to $4 million and can be built in a few years.

Under the MAP-21 transportation bill signed into law this summer, a national plan for freight policy will be developed jointly by federal, state, and business participants. The U.S. Department of Transportation is investing more than $953 million in freight improvement projects, including $354 million for port facility upgrades. Additionally, up to $35 billion in loans and loan guarantees are available for railroad rehabilitation and improvements.

"We don't want a handout—we want a hand up," Dunlap says.

Public investment in freight rail will help to level the playing field for shippers. Being almost entirely privately financed puts rail at a real disadvantage to trucks. As senior analyst Derik Andreoli of Kirkland, Wash.–based Mercator International explains, "Truckers run on a free infrastructure. We would have a completely different landscape if there was equity in infrastructure."

Recent gains in locomotive fuel efficiency, higher capacity freight cars, and reduced rolling resistance can be extended. Some potential efficiency improvements, however, will require systemic upgrades and industry-wide agreement on new technical standards, such as: improved signaling systems; "Positive Train Control" technology that only works if all trains and routes in an area are equipped with it; upgrading more locomotives to hybrid technologies, if government grant support is available; adopting electronically controlled pneumatic brakes, so that trains can travel farther without stopping for routine brake inspections; and implementing integrated monitoring and inspection systems to reduce delays caused by equipment faults.

In the meantime the ongoing transition of freight to rail will permanently cut U.S. oil consumption, improve the balance sheet by boosting exports, open up new economic opportunities and create millions of jobs. Rail built this country by fortifying and expanding the economic link between the coasts—an essential part of U.S. history and development. But railroads are not just the past; they may be destined to become an even more essential part of our economic foundation in an energy-constrained future.