Methodologies to Estimate the Economic Impacts of Disruptions to the Goods Movement System (2012)

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N A T I O N A L C O O P E R A T I V E H I G H W A Y R E S E A R C H P R O G R A M NCHRP REPORT 732 Methodologies to Estimate the Economic Impacts of Disruptions to the Goods Movement System GeorGia Tech research corporaTion Atlanta, GA parsons Brinckerhoff, inc. New York, NY a. sTrauss-Wieder, inc. Westfield, NJ Subscriber Categories Economics • Freight Transportation • Planning and Forecasting TRANSPORTAT ION RESEARCH BOARD WASHINGTON, D.C. 2012 www.TRB.org  Research sponsored by the American Association of State Highway and Transportation Officials in cooperation with the Federal Highway Administration

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C O O P E R A T I V E R E S E A R C H P R O G R A M S CRP STAFF FOR NCHRP REPORT 732 Christopher W. Jenks, Director, Cooperative Research Programs Crawford F. Jencks, Deputy Director, Cooperative Research Programs William C. Rogers, Senior Program Officer Charlotte Thomas, Senior Program Assistant Eileen P. Delaney, Director of Publications Hilary Freer, Senior Editor NCHRP PROJECT 20-59(34) PANEL Field of Special Projects John T. Gray, Association of American Railroads, Washington, DC (Chair) Christopher G. Caplice, Massachusetts Institute of Technology, Cambridge, MA Barbara A. Ivanov, Washington State DOT, Olympia, WA Richard “Rick” Johnson, Maryland DOT, Hanover, MD Mark H. Johnson, C&H Patriot Security, Alexandria, VA Yuko Nakanishi, Nakanishi Research and Consulting, LLC, Rego Park, NY Eric C. Shen, Port of Long Beach, Long Beach, CA Vincent P. Pearce, US DOT Liaison Joedy W. Cambridge, TRB Liaison

NCHRP Report 732 describes the impacts of bottlenecks and interruptions to the flow of goods through the nation’s major freight corridors and intermodal connectors, the dynamics of that flow in response to disruptions, and the full economic impact on public and private entities beyond just the critical infrastructure and the carriers that depend on that flow. The report developed two approaches to analyzing the economic impacts: (1) a high-level meth- odology (that provides the user with “rules of thumb” that can be used to estimate the likely economic costs associated with any type of disruption) based on the concept that the eco- nomic impact of any disruption would depend primarily on the commodity characteristics, the extent and nature of the disruption, and the costs associated with different elements of the cost structure; and (2) a more detailed methodology that depends on a much higher level of detail and more sophisticated analysis of the supply chain dynamic. This research will help to increase public understanding of the freight transportation system and improve the nation’s ability to rapidly reconfigure the goods movement system to minimize disruptions. The goods movement system in the United States has suffered from many large-scale dis- ruptions since 2000. Examples include disruptions resulting from the terrorist events of Sep- tember 11, 2001; the Baltimore rail tunnel fire in 2001; the lockout of dock labor unions at the Ports of Los Angeles and Long Beach in 2002; infrastructure failures after Hurricane Katrina in 2005; and the Midwest floods in 2008. Over this same period, new supply chain management techniques have created demands for highly efficient delivery systems. When disruptions to the system occur, especially to critical components, they can cause significant economic dam- age locally, regionally, and nationally. Unfortunately, the complex interrelationship between the goods movement system and economic activity is not well understood. Under NCHRP Project 20-59(34), Georgia Tech, with the assistance of Parsons Brincker- hoff and A. Strauss-Wieder, was asked to develop and apply one or more conceptual methodologies for identifying and estimating economic impacts, both short and long term, due to disruptions to the goods movement system. To accomplish the research objective, the research team (1) reviewed and evaluated methodologies that have been used to mea- sure direct and indirect economic impacts of disruptions to the goods movement system from natural and human causes; (2) considering a loss of capacity to the goods movement system lasting longer than 7 days and up to 1 year in duration, developed both a high-level and an in-depth methodology to estimate direct and indirect economic impacts over time and geographic scope; and (3) applied the proposed high-level methodology by estimat- ing economic impacts in six case studies that assessed the results in terms of reliability and effectiveness and identified additional data needed for the application of the in-depth methodology in each of the case studies. F O R E W O R D By William C. Rogers Staff Officer Transportation Research Board

1  Summary 6 Chapter 1 Introduction and Background 6 1.1 Background 7 1.2 Research Objectives 7 1.3 Research Approach 11 1.4 Intended Audience 12 1.5 Report Organization 13 Chapter 2 Methodologies to Measure Direct  and Indirect Economic Impacts of Disruptions  to the Goods Movement System 13 2.1 Overview 16 2.2 Research on Economic Impacts of Disruptions to the Goods Movement System 21 2.3 Available Modeling Tools that Estimate Economic Impacts of Disruptions to the Goods Movement System 26 2.4 Empirical Estimations of Economic Impacts of Disruptions to the Goods Movement System 30 2.5 Construction of Freight Cost Matrices 30 2.6 Summary 33 Chapter 3 Analysis Framework  33 3.1 A Five-Step Decision/Analysis Process 43 Chapter 4 Case Studies  43 4.1 Introduction 43 4.2 The Northridge Earthquake, Southern California, 1994 48 4.3 Winter-Storm-Related Closures of I-5 and I-90 in Washington State, 2007–2008 52 4.4 Local Impacts of the 9/11 World Trade Center Attack 55 4.5 Los Angeles/Long Beach (LA/LB) Ports Shutdown, California, 2002 59 4.6 The I-40 Arkansas River Bridge Collapse near Webbers Falls, Oklahoma, May 2002 64 4.7 CSX Howard Street Tunnel Fire in Baltimore, Maryland 69 Chapter 5 High-Level Methodology 69 5.1 Overview of High-Level Methodology 76 5.2 Key Parameters 79 5.3 Key Data Inputs and Major Assumptions 81 5.4 Economic Impact Rules of Thumb 87 5.5 Illustrated Application of Methodology to Representative Case Study–Northridge Earthquake C O N T E N T S

89 Chapter 6 Conclusions and Future Research 89 6.1 Conclusions 91 6.2 Future Research 93  Bibliography  Note: Many of the photographs, figures, and tables in this report have been converted from color to grayscale for printing. The electronic version of the report (posted on the Web at www.trb.org) retains the color versions.