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On Friday, President Bush signed into law the American Jobs Creation Act of 2004 (H.R. 4520, S. 1637), which includes provisions to repeal the 4.3-cents-per-gallon fuel tax paid by railroads under a phased rollback, and provide a tax credit to help regionals and short lines fund infrastructure projects.

The fuel tax will be reduced by one cent in January and July 2005, and by the final 2.3 cents in January 2007. Each year, U.S. railroads consume more than 3 billion gallons of diesel and pay about $170 million in fuel taxes.

"We commend the president and Congress for including in the legislation a provision to repeal an unfair excise fuel tax paid by freight railroads, who provide the most efficient, environmentally friendly way to move our nation's freight," said Association of American Railroads President and Chief Executive Officer Edward Hamberger in a prepared statement. "The repeal of this tax is necessary to help the freight rail industry meet the huge growth predicted in freight transportation."

The tax credit will provide small roads 50 cents for every dollar of qualifying track maintenance expenditures, such as costs to improve track, bridges or signals. The credit is capped at the dollar figure reached by multiplying the number of track miles owned or leased by a Class II or Class III times $3,500. Regionals and short lines have been seeking more federal funds to help fund track improvements tied to heavier axle loads — improvements that are estimated to cost the short line industry more than $7 million.