Full steam ahead for US railways

By Kevin Connolly
BBC News, New Mexico

Warren Buffett said his investment in BNSF was a bet on America's future

The story of the railroad is written like a thread of thick and shining steel woven into the tapestry of American history.

There is a poetry to the names of the trains and the tracks that bound this great land together as it expanded west towards California in the 19th Century.

Perhaps it is no coincidence that the names of the Wabash Cannonball or the Atchison, Topeka and Santa Fe are remembered in song where those of the London and North Eastern Railway or the French national SNCF by and large are not.

This month's business headlines though are a reminder that America's railways have a future, as well as a past.

It was the announcement that Warren Buffett - the man often described as the world's greatest investor - was forking out $44bn (£26bn) for the Burlington Northern Santa Fe (BNSF) which made the news.

If the Oracle of Omaha was convinced there was money to be made on the rails, ran the argument in many investment columns, then surely he must be right.

And in a sense, you could see his decision to invest as a kind of vote of confidence in the whole American economy - after all BNSF carries the heavy stuff like coal and corn - the kind of commodities for which you can expect increased demand when recovery comes.

And even if recovery is not economically straightforward, of course it hauls cheap imported goods from Asia to points all over the United States from the Pacific ports - like Los Angeles - where they land.

Freight success

Mr Buffett himself explains the reasoning behind one of the biggest investment decisions of his career in characteristically straightforward terms as a bet on the future of his country.

I basically believe this country will prosper and you'll have more people moving more goods 10 and 20 and 30 years from now, and the rails should benefit Warren Buffett Buffett in railroad buy-out deal

He says simply: "It's a very effective way of moving goods. I basically believe this country will prosper and you'll have more people moving more goods 10 and 20 and 30 years from now, and the rails should benefit."

But the truth is that American freight railways have probably been doing rather better than you might have been thinking for quite a while.

True, it is not so long since there were too many, too big, railway companies with thousands of miles of uneconomic track, unprofitable passenger operations and over-long pay rolls - there was a time when 2% of the entire population of the United States worked on the railroad.

Deregulation set the industry onto a leaner, but more profitable path (it happened under Jimmy Carter by the way, rather than under Ronald Reagan) and rail companies settled down to making steady, if unspectacular profits moving bulk goods across the vast expanses of North America.

The industry has prospered to the extent that it now transports nearly 10 times more freight by rail than the European Union does.

That may come as something of a surprise when you consider how ready Europeans tend to be to lecture Americans about the environment.

Road transport loses out on its environmental credentials

Rail travel is vastly more environmentally friendly than road transport - American trains can shift a ton of freight over 436 miles on a single gallon of diesel fuel for example.

So the freight sector is strong and will get stronger as the American economy revives. Does that mean there is also a future for rail passenger transport here? The short answer is that it might - and the prospects have probably improved a little in the last year.

Passenger trains of course are already an important part of the transport mix in big cities, especially in New York.

'Essence of frontier state'

And around the time the stimulus programme was passed, there was talk of new state investment in high-speed rail links - even if some of it was accompanied by dark muttering that one of the potential projects just happened to be in the constituency of Senate majority leader Harry Reid.

The frontier state of New Mexico boasts a striking success in passenger travel

And from New Mexico, perhaps rather surprisingly, comes a striking example that new passenger rail projects can be made to work in North America.

The south-western state where commuter trains carve their way between craggy mountains and across sun-baked plains is the very essence of an American frontier state - a place where the old settler trails crossed Mexican and Navajo lands.

Under its governor - the former presidential candidate Bill Richardson - New Mexico has used public money (quite a bit of it) to open a new train service operating between Albuquerque and Santa Fe, a distance of about 60 miles.

It was a very European solution to a worldwide problem of overcrowding on the highways - and a direct alternative to widening one of the state's most congested roads, I-25.

'Rifles and pick-ups'

The Rail Runner (the name is a play on the state bird, the roadrunner) is a clean, modern, roomy double-decker train that offers what by European standards are very low prices for a 90-minute commuter journey.

That lone spirit, that individualist spirit, you can still exercise it on a train Bill Richardson New Mexico governor Profile: Bill Richardson

Mr Richardson admits that selling the idea of environmentally-friendly public transport to car-happy New Mexicans was not easy at first.

"A lot of New Mexicans said this is going to be Richardson's folly... we like to drive our pick-ups, we like to drive fast, we like to drive along with our rifles in the rack at the back of the car, and what's happened is everyone's realised that the Rail Runner has been a blessing because it gets people to where they're going quicker," he says.

"And you know, that lone spirit, that individualist spirit, you can still exercise it on a train."

Rail Runner is still bedding down - there are more stations due to open in the future for example - but the commuters we spoke to as we travelled between Albuquerque and Santa Fe were all keen supporters of the project.

Bill Richardson, one of America's most experienced politicians, does believe there is a head of steam growing up once again behind the idea of expanding rail travel in America.

As part of his case he points to the reputation of Warren Buffett as a kind of superstar of capitalism.

"That's his image," he told me. "Everything he touches turns to gold, so if Buffett is putting money into trains and rails, then that is a good signal."

We will see - there are plenty more economic and environmental points to be made - and the over-arching argument to be had about whether or not public transport in itself is compatible with the rugged individualism of the American way.