Washington (Platts)--22Jun2007

The railroad industry has gained the support of coal producers in its efforts
to convince Congress to pass a bill that would grant a 25% investment tax
credit for railroad infrastructure projects.

Both industries agree that federal incentives are needed to spur greater
investment in railroad capacity that would accommodate increased flows of
coal. 

Representative Kendrick Meek, Democrat-Florida, said granting tax credits for
investments in rail infrastructure does not mean that the federal government
would be subsidizing major railroads. Rather, he said, investment tax credits
would "incentivize" the railroad industry and their users to invest more of
their own money into capacity expansion projects. 

Meek and Eric Cantor, Republican-Virginia, are co-sponsoring the Freight Rail
Infrastructure Capacity Expansion Act, which would grant a 25% investment tax
credit for up to five years. A similar bill was introduced in the Senate
earlier this year.

Under the legislation, both railroads and their customers would qualify for
tax credits, and eligible projects could include rail spurs to power plants
and new rail yards. 

Tax credits said to promote fuel efficiency 

Speaking at a press conference on Capitol Hill on Thursday, Meek, Cantor and
two other representatives made their case for rail infrastructure tax credits,
saying that the nation is facing a capacity crunch, and expanding railroad
infrastructure would encourage railroads to haul more freight and take more
trucks off congested highways. 

The railroads are facing a difficult task in their quest to muster enough
support for the passage of the tax credit legislation. Congress is currently
preoccupied with other matters, such as the energy bill, the war in Iraq,
immigration, and many members of Congress are calling for more fiscal
discipline.

Meek said that a study is in process on estimating the cost of the tax credits
to taxpayers, but results are not available yet. He said that whatever the
cost to the public, taxpayers and the overall economy would benefit from
increased hiring and capital spending by railroads and their customers. 

The legislation has the support of the National Mining Association, the US
Chamber of Commerce, officials from US ports and other organizations that
would benefit from an expanded railroad system, he said.

If the tax credit is passed, coal producers and utilities that are currently
relying on a single railroad for service may be encouraged to build rail spurs
to gain access to competing railroads. 

-- Marcin Skomial, marcin_skomial@platts.com

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