PTC mandate may be less onerous depending on outcome of White House regulatory review

The topic of Positive Train Control (PTC), which has been commonly referred to as the “unfunded mandate” in railroad circles, has a chance to be less onerous and costly as the White House moves forward with its review of federal regulations that have a negative impact on the United States economy and future growth as part of its January 2011 Executive Order on Improving Regulations and Regulatory Review.

The objective of PTC systems is to prevent train-to-train collisions, overspeed derailments, and incursions into roadway work limits. PTC sends and receives a continuous stream of data transmitted by wireless signals about the location, speed, and direction of trains, according to the Federal Railroad Administration (FRA). PTC systems, added the FRA, utilize advanced technologies including digital radio links, global positioning systems and wayside computer control systems that aid dispatchers and train crews in safely managing train movements.

A mandate for PTC systems was included in House and Senate legislation-H.R. 2095/S. 1889, The Rail Safety and Improvement Act of 2008. The legislation was passed shortly after a September 12, 2008 collision between a freight train and a commuter train in Los Angeles. And it calls for passenger and certain hazmat rail lines to take effect by 2015 and authorizes $250 million in Federal grants.

A major concern of freight railroads has been that PTC rules finalized in January 2010 required PTC on sections of tracking where the cost is not justified, according to a Wall Street Journal report. The report said that the law requires PTC technology on track carrying passengers or highly toxic chemicals, and freight railroads maintain that without changes they will be required to install PTC for thousands of miles of track that will not be carrying toxic chemicals by 2015.

Department of Transportation Secretary Ray LaHood wrote in his “Fast Lane” blog last week that PTC is an example of how its costs could be reduced and still maintain its effectiveness.

“FRA has examined this rule and decided that revisions could be proposed that would significantly reduce industry burdens without adversely affecting rail safety,” wrote LaHood. “We expect savings on PTC installation alone to total between $225 million and $400 million.  Over 20 years, installation and maintenance savings should total between $440 million and $1.04 billion.”

This was viewed as welcome news by Association of American Railroads President and CEO Edward R. Hamberger.
In a statement issued by the AAR, Hamberger said that the AAR has been working with the FRA on its review of various rules, including implementation of positive train control (PTC) technologies as mandated by the 2008 Rail Safety Improvement Act.
He added that in March 2010, the AAR on behalf of its member railroads filed suit in the U.S. Court of Appeals for the D.C. Circuit seeking to change certain aspects of the PTC regulations.  And on March 2, 2011 the parties asked the court to put the suit on hold while FRA agreed to undertake a review of its final rule.  The D.C. Circuit granted the motion.

“A major issue is the scope of the PTC mandate,” said Hamberger. “For example, while Congress clearly stipulated that PTC be installed on main lines used to transport passengers and TIH as of Dec. 31, 2015, FRA required PTC to be installed on lines used to transport passengers and TIH in 2008. This seven year difference in implementation dates substantially affects the cost – according to AAR estimates by more than $500 million.  AAR also estimates that at least 10,000 miles of track that saw TIH movements in 2008 would no longer be used for such movements by Dec. 31, 2015.”

Under the terms of the settlement between the AAR and FRA, “the FRA will publish a Notice of Proposed Rulemaking (NPRM) that will address the issue of whether the PTC rule should be amended by eliminating the requirements to install PTC on Class I railroad mainline track segments that do not carry poison-by-inhalation traffic and are not used for intercity or commuter rail passenger transportation by December 31, 2015,” with the AAR holding off on a planned legal case regarding PTC until the NPRM is issued. 

This development follows legislation introduced earlier this year by Senator Kay Bailey Hutchison (R-Texas) which vows to reform the Positive Train Control (PTC) regulatory mandate to reduce compliance costs and maintain a safe rail system.

According to the Senate Commerce Committee, on which Hutchison serves as Ranking Member, traffic patterns for shipping toxic chemicals are changing, in part, due to new Department of Transportation and Transportation Security Administration regulations. 

“This means that at least 10,000 route miles used to move chemicals in 2008 are no longer expected to transport these products in 2015,” the committee said. “By requiring that PTC be installed on lines used to transport passengers or certain toxic chemicals based on 2008 usage rather than 2015, the Federal Railroad Administration (FRA) has expanded the Congressional mandate beyond what was intended and dramatically inflated compliance costs.”

The PTC requirement has not been warmly received by the railroad industry, due primarily to the high price tag associated with it.

According to FRA estimates, installing PTC technology will cost more than $5 billion for the freight rail industry to install on more than 73,000 miles of tracks by the 2015 deadline, with total costs coming to more than $13 million when passenger trains are included. What’s more, the FRA has publicly stated that the cost-to-benefit ratio of installing PTC is 20-to-1. And the FRA has stated that safety benefits of PTC coming in at between $440 million and $674 million over a 20-year period.

A report on PTC prepared for the AAR by management consultancy Oliver Wyman stated that without external funding the PTC requirement will remove capital away from capacity expansion and other programs required by railroads at a time when the economic recovery is going to require additional railroad infrastructure. And the report added that the $5 billion cumulative PTC investment required by Class I railroads equals what Class I’s have doled out over the last four years, coupled with them having to spend hundreds of millions of dollars per year to maintain the PTC system.

Oliver Wyman Managing Director Bill Rennicke told LM that the PTC legislation is essentially a safety mandate, which ultimately will be paid for by shippers in the form of increased rates.

“If there are 10,000 unneeded miles and the government is now going back to provide a more accurate adjustment of the area in which the technology will be applied, it benefits everybody, not just carriers, but shippers, too, because it is a very expensive system being put in for safety reasons, not for economic or efficiency reasons,” he explained.

Despite the costs issues associated with PTC, there is some sentiment that it has potential to improve productivity in network operations.

“Much as the current air traffic control system limits the number of take-off and landings that can be handled at the nation’s airports, the conventional railway signaling system, based on fixed block length and way-side signals is outdated in terms of the capabilities of today’s technologies,” said Brooks Bentz, a partner in Accenture’s Supply Chain practice. “The reformed bill could be a vehicle to actually improve the utilization of fixed and rolling assets, which will add capacity to the network in a way that would not require constructing new track miles (or at least as many as otherwise will be needed) in order to accommodate future growth. This could be a significant benefit to rail users, carriers and the public if it is structured to incent such an outcome.”