Saturday, February 02, 2013

Competitive bidding for corridor passenger rail service in play

Written by  Frank N. Wilner
Among priorities of the House Transportation & Infrastructure Committee is reauthorization of the Passenger Rail Investment and Improvement Act of 2008 (PRIIA), portions of which are a growth hormone for state-subsidized intercity passenger rail corridors that are separate from Amtrak’s long-distance network, Amtrak’s Northeast Corridor, and commuter rail operations.

State-subsidized passenger rail corridors currently number 27 in 19 states—all fewer than 750 miles long and all now operated by Amtrak under contract with states.

PRIIA, intended to remediate highway congestion, allows states to apply for federal grants (primarily from the American Recovery and Reinvestment Act) of up to 80% of the cost of corridor capital improvements—infrastructure and equipment—to increase train speeds and improve passenger train service quality.

An example is a Chicago-St. Louis corridor where Union Pacific, Amtrak, the Federal Railroad Administration, and the State of Illinois are collaborating to provide 110-mph passenger train speeds.

Section 209 of PRIIA provides that effective Oct. 1, states must pay 100% of the operating subsidy for these corridor passenger trains (while the 80/20 capital investment cost sharing remains in place). On the theory that one spends their own money more carefully than spending another’s, and that competition generates greater efficiencies, states now faced with paying 100% of the operating subsidy likely will wish to investigate alternatives to Amtrak as the passenger train operator for these corridors.

Amtrak alone has statutory access authority to operate corridor and long-distance passenger trains over freight railroad-owned track, which effectively eliminates competing operators unless the freight railroad voluntarily agrees to grant others access. While commuter agencies have successfully negotiated such access for operators other than Amtrak, access over non-commuter, state-supported passenger rail corridors is problematic for operators other than Amtrak.

As part of PRIIA reauthorization, it is logical that experienced commuter train operators—such as Bombardier, Herzog Transportation, Keolis Rail Services, and Veolia Transportation—will seek legislative language creating a competitive bidding process for operation of corridor passenger trains similar to the open bidding process used by 11 of 17 commuter agencies where Bombardier, Herzog, Keolis, and Veolia compete with Amtrak for commuter operating contracts.

Much of the legal framework for selecting alternative corridor operators to Amtrak already is in place for states receiving PRIIA grant funds. Section 301 of PRIIA requires states to provide a written justification if the corridor passenger operator is not selected through a competitive bidding process. That section also sets up a detailed process for transitioning rail labor contracts from Amtrak to a new operator. PRIIA also establishes a binding arbitration process at the Surface Transportation Board for disputes on how Amtrak must tender facilities, equipment, or assets necessary for the alternative corridor service.

The FRA took this a step further in Illinois, requiring that any non-Amtrak operator selected by the Illinois DOT have access to the PRIIA-funded upgraded 110-mph right-of-way, conditioned on approval by Union Pacific.

But PRIIA speaks to the competitive operator issue only on trackage receiving significant PRIIA grants, such as the Illinois project or the proposed California high speed rail project that will link Sacramento with Los Angeles. On other routes it is problematic that freight railroads voluntarily would grant access to contractors other than Amtrak for operation of intercity corridor trains.

Recently, however, some Class I railroads have been warming to the idea of having a qualified non-Amtrak operator over corridor routes, provided liability protection is at least equivalent to the $200 million liability insurance required of Amtrak. Some independent operators, with contractual commuter operation relationships with freight railroads, already carry liability insurance in excess of $200 million.

Meanwhile, the Association of Independent Passenger Rail Operators (AIPRO)—which represents Bombardier, Herzog, Keolis, and Veolia—is expected to lobby Congress to enact legislation creating a framework for state-subsidized corridor service similar to competitive commuter operations. Those independent operators already operate more than 250,000 commuter trains annually.

The painful lesson from decades of stultifying railroad economic regulation doomed last year’s Senate attempt to create a command-and-control template with a politically appointed three-person board to license and regulate all aspects of commuter and intercity passenger rail service. AIRPO joined the American Association of State Highway and Transportation Officials (AASHTO) and the American Public Transportation Association in opposing that Senate proposal.

Instead, AIPRO advocates bringing together all stakeholders—states, the FRA, the STB, Amtrak, AIRPO’s independent operator members, and freight railroads that own the track over which corridor trains operate

AIPRO President Ron Hartman said, “We consider freight railroads key stakeholders and partners in corridor service along with states and operators. We seek no extension of forced access at incremental cost. The freight [railroads] should have an absolute veto over alternative operators they consider unqualified to operate on their tracks. We want to work through such issues as adequate liability coverage and qualifications to be an intercity passenger operator. Our goal is to move to a system of arms-length transactions that can be a win-win for everyone. That is the commuter model, and it works.”

Cash-strapped states likely will sign on to such a template for state-subsidized corridor passenger trains, explaining that where competitive bidding for commuter operations exists, costs have declined and service improved, even where Amtrak won the bid.

In fact, Pennsylvania transportation officials told Dow Jones News Service that Amtrak corridor service linking Harrisburg and Pittsburgh is slower than driving, and the state is “struggling” to pay Amtrak’s prices. A Maine official told Dow Jones that having to pay Amtrak 100% of the operating subsidy for Portland-Boston corridor service “will force” Maine “to take a closer look” at how to obtain improved quality service at lower costs.

While continued Republican-majority opposition to further federal spending on high speed rail is a certainty, there appears bipartisan support for improving the interconnectivity and service quality on state supported passenger train corridors receiving federal capital assistance.

When T&I Committee Chairman Bill Shuster’s father, Bud, chaired the T&I Committee, he insisted that all bills reported out of the committee be bipartisan. He was succeeded by Republican Don Young and then Democrat Jim Oberstar, who continued the tradition. During Oberstar’s final year as chairman, he collaborated with ranking Republican John Mica to shepherd the PRIIA through Congress, which was signed by President Bush. It was the last true bipartisan effort on passenger legislation

How Bill Shuster and the T&I’s now ranking Democrat, Nick Rahall—a long-time passenger rail advocate—collaborate on reauthorization of PRIIA is unknown. For sure, freight railroads and states—the latter expected to demand improved service and lower costs obtainable through competitive bidding—deserve a seat at the T&I Committee table, along with Amtrak, the independent operators, the FRA, rail labor, and the STB.

Such collaboration does not foretell Amtrak losing its operating contracts for intercity corridor service. It does promise, however, that all stakeholders will have their voices heard, and that what emerges from the T&I Committee will have more broad support on the House floor and in the Senate, and will produce a result more palatable to all.