Monday, October 19, 2009

Matt Rose on passenger rail: Invest capital effectively

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BNSF Railway Chairman, President, and CEO Matt Rose, delivering the keynote address at Railway Age’s 16th Passenger Trains on Freight Railroads Conference in Washington, D.C., said that carefully targeted investments in the national freight rail infrastructure will be absolutely needed if higher speed passenger rail services are to be realized.

matt-rose.jpg“It all comes down to the money,” Rose (top) stressed. “If it’s not spent effectively, there is more risk of doing damage than the opportunity to help. We must invest at levels that will make rail better than the best alternative.”

In particular, Rose referred to Positive Train Control, which at present represents a $10 billion price tag for federally mandated implementation, by 2015, of PTC on shared-use and hazmat-traffic rights-of-way. He said that that the requirement, essentially an unfunded mandate, could siphon capital funding away from other capital investments in the railroads’ infrastructure. The real foundation of railroad safety, Rose said, is “good ties, track, and ballast,” investment in which has typically produced a good return. The ROIC (return on invested capital) for PTC remains to be seen, but it’s generally believed to be about $600 million, based on a $10 billion investment—not a very favorable return. At BNSF, ROIC has historically kept pace with capital commitments (chart).

Rose, one of the driving forces behind the industry’s OneRail Coalition, took care to emphasize that the freight rail industry does support higher speed passenger services. BNSF “is proud of its relationship” with the passenger services it either hosts or operates, and believes that new and expanded passenger rail, including high speed, is essential for economic, mobility, safety, and environmental reasons, he said. Rose reiterated BNSF’s Passenger Principles, roseroislide.jpgwhich state that any passenger rail operation on BNSF tracks must do no harm to the railroad’s freight operations and be paid for on the basis of fully allocated costs. He said that, for higher speed rail, anything above 90 mph will require grade crossing closures, a separate right-of-way from the freight right-of-way, or at the very least, widely spaced (25- to 30-foot) track centers.

Federal Railroad Administrator Joseph Szabo (bottom), addressing the gathering of over 175 people at lunch, spoke in general terms about the FRA’s intercity/high speed passenger rail and safety initiatives, as well as the agency’s Preliminary National Rail Plan.

The Preliminary National Rail Plan “lays the groundwork for developing policies to joe-szabo.jpgimprove the U.S. transportation system.,” Szabo said. “Its goals are consistent with the top goals of the U.S. Department of Transportation: to improve safety, to foster livable communities, to increase the economic competitiveness of the United States, and to promote sustainable transportation. The important attributes of rail—safety, fuel efficiency, and environmental benefits—can meaningfully assist in achieving these goals.” (To download a PDF of the plan, CLICK HERE.)

Szabo emphasized that, with regard to an approximate three-month delay in awarding HSR grants, the FRA “wants to do the program justice and get it right.” Noting that FRA has received 45 applications from 24 states totaling $50 billion, projects would be selected and grants awarded “on the basis of merit.” When questioned about whether the FRA would take a “peanut butter approach”—spreading the $8 billion from the American Recovery and Reinvestment Act earmarked for HSR too thinly, with little effect—or target one or two projects, Szabo reiterated the FRA’s merit-based methodology.

Two questions were proposed on the federal mandate for Positive Train Control by 2015. One had to do with the timeline. Some railroads have suggested that it’s much to aggressive, and would the FRA consider extending the deadline by two or more years. Szabo emphasized that his job as FRA Administrator is “to uphold the law,” and mentioned that “there are those that believe 2015 isn’t aggressive enough.” He cited the agreement involving Union Pacific and the Southern California Regional Rail Authority (Metrolink) to install PTC by 2012.

The other question on PTC had to do with the mandate’s projected $10 billion price tag. Would the federal government consider paying, at least in part, for PTC on lines used by passenger trains, since the safety gains would mainly be of benefit to the riding public? While he could not commit to anything at this early stage of implementation, Szabo said that “it’s a possibility.”