America Back on Track, an Electrifying Idea

by John on March 3, 2009

What with the response to the Gulf oil spill, politicized near-gridlock in Congress and the crippling expenditures from the Afghan and Iraq wars along with bailing out Wall Street, our leadership seems incapable of coming up with an idea that will capture the imagination of the public and lead us into a more sustainable future.  History repeats.  From 1962 to 1974, Sir Barnett Cocks presided as England’s Clerk of the House of Commons, wearing his wig, seated in front of the Speaker. As senior official, the Clerk advises the House and its committees on the rules governing their activities, formal and informal. Some people considered the Clerk’s chair “the best opera box in the theatre” but in describing his daily work Cocks created his immortal description of a committee as “a cul-de-sac down which ideas are lured and then quietly strangled.” What with all the committees, commissions and czars in Washington,  President Obama’s going to have to come up with some real Roosevelt-like leadership to get things moving.

Roosevelt tried many ideas but those that worked for his administration added true economic value and long-term infrastructure benefits, while providing large-scale employment and revenue streams. They were highly leveraged in that many provided multiple benefits from a single investment, putting lots of people to work for a long time. They were politically and economically structured to be implemented quickly and fill a real public need. Today’s stimulus projects should also cut pollution, greenhouse-gas emission and dependence on foreign oil, and stimulate technological advance and engineering excellence, using existing technologies while not requiring major scientific leaps of faith. They should eliminate or avoid complex regulatory and environmental issues as much as possible. A few health benefits would be nice.

One of the 30’s most successful projects was the Pennsylvania Railroad electrification, funded by Reconstruction Finance Corporation loans. The funding enabled it to meet the 1925 Kaufman Act, an early environmental law designed to protect the public from coal dust and soot particulates by banning steam engines from New York City. This immense project required not only huge numbers of engineers and workers but tons of steel and copper stretching from Philadelphia to Washington. The ‘Pennsy’ got a good deal via the electric railways’ efficiency and repaid the loans and bonds quickly. We could do something similar today.

On any given day, Burlington Northern Santa Fe RR (BNSF) is the world’s largest consumer of petroleum (only the U.S. Navy occasionally uses more). Many railroads with rail yards in urban areas like Richmond and Long Beach are under fire from the health risk of particulate pollution from the diesel locomotives. Most of Europe’s railroads and all high-speed rail links are electrified. Historically, railroad electrification in the rest of the U.S. was largely defeated by GM’s success in marketing diesel locomotives but recent electrification studies by BNSF and the Canadian Government show the environmental, economic and health benefits. The Russians, who have their own oil, had electrified the entire 5,778-miles Trans Siberian railroad by 2002.

The railroads have right of way through some of the country’s best wind and solar resources, solving one of the major impediments to starting a national ‘super grid’ initially linking the renewable power to the federal grids at Bonneville and Western Power Authorities.  It could supply electric power from private wind and solar farms with easily financed long-term power contracts based on the success of  Roosevelt’s Rural Electrification Program. This would solve many issues in bringing major renewable sources to market. Burlington Northern’s President, Matt Rose, has expressed real interest in providing support. The railroads would represent a solid new power purchaser; the federal power authorities, with the financing, management and distribution structure in place, would have a new clean-energy source that takes advantage of the natural balance between hydro and wind energy, providing back-up when the wind is low, and conserving water when the wind output is high, thus providing dependable baseline power.

The Journal of Homeland Security, eying cross-country transportation not dependent on foreign oil, estimates a cost of $34 billion for such a rail electrification. This could be financed with federal “Independence Bonds” similar to the Rural Electrification financing, except using bonds.  The bonds would incorporate carbon offset credits from eliminating greenhouse gasses, creating an additional market and value for bondholders. Bonds and public financing for specific green projects have done well in Canada and elsewhere, much like the Rural Electrification Program of the ’30s. The default rate on Rural Electrification Loans was less than one percent, while the program provided electricity to over half of America’s farms by 1942, and virtually all of them by 1950, perhaps the most successful government infrastructure program ever undertaken.

Examination of Roosevelt’s New Deal developments reveals his willingness to innovate and create new structures, his insights into how Washington works and his political leadership. Between agency turf battles, committees and K-street lobbyists, it’s hard to see how any deals based on the New Deal lessons could make it out of Washington alive.  Maybe investing giant Warren Buffett, who recently purchased Burlington Northern, could cooperate with Blankfein of Goldman-Sachs to come up with the bonds that would make it safe for the American public, and overseas investors who are flocking to the dollar to participate as investors in a grand program of energy independence.  However, I’m not holding my breath.   It’s going to take strong, inspired leadership out of Washington to get us back on track.

The photo is of a Milwaukee Road “Little Joe” electric locomotive, originally built in 1946 for the Soviet railways by General Electric, who built twenty of them but were prevented from delivering them by State Department Cold War prohibitions on exports.  Milwaukee Road bought 12 of them, complete with controls labelled in Russian, and the South Shore another three.  Showing the incredible longevity of electric locomotives, they were still going strong at the end of Milwaukee electrification in 1974, and the South Shore retired the last of theirs in 1983.

The end of the Milwaukee electrification is a sad tale of self-serving, incompetent management, with the board playing ill-advised stock and merger games then abandoning and scrapping the most efficient and only electrified route to the West Coast, despite GE offering to finance an upgrade of the electrified portion of the railroad. The board overruled their management and engineers, selling the copper from the overhead wires as scrap to buy diesel engines but they dumped so much copper on the scrap market at once that they only got half of the $10 million value of the metal.  They did this all with exquisite timing:  right before the first fuel crisis in ’74.  The calculated savings per year if they had kept the electrics was $68 million dollars.  Interstate Commerce Commission regulators reviewing the company records, found out that the expenses for the electrified division had been double-entered, and even with the loss of the electrics in 1974 and all the deferred maintenance, the line was still profitable.  For a good general article on this very sad tale of what happens when management is more interested in financial games than their actual business; http://www.american-rails.com/milwaukee-road.html It links to Michael Sol’s case study based on his actual engineering evaluation of the Milwaukee Road.

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