Thursday, October 28, 2010

HSR: Should suppliers be upbeat?

Written by  Douglas John Bowen, Managing Editor

Step back from the current political frenzy, say suppliers, and one can see the U.S. passenger rail market as emerging, with great potential.

Election season is in full bore, and passenger rail investment has become a political issue: Some want rapid rail expansion and investment, while others call such fiscal commitment a waste of taxpayer dollars. The debate has also magnified pre-existing, but very real, contention between passenger and freight rail needs.

Rail industry suppliers remain upbeat, almost optimistically defiant, in the face of such news. As a group, suppliers say they’re ready to do business, regardless of the political fallout. Some go even further, suggesting a U.S. commitment to expanded passenger rail—including incremental improvements, higher-speed rail (HrSR)—and true high speed rail (HSR), as envisioned by Amtrak for the Northeast, is inevitable.

In fact, such a range increases the opportunity, even as the U.S. faces infrastructure ownership issues almost unique to national networks, suggests Robert E. Furniss, Vice President, Business Development and Sales, Rolling Stock, Locomotives and High Speed Rail, for Bombardier Transportation. “Yes, the U.S. infrastructure is largely owned by the Class I’s, and they have to be partners in developing high speed rail as well as any other intercity rail,” he acknowledges. “There are lots of players—the Class I’s, the state or states involved, the municipalities, and (usually) Amtrak. That requires a well-thought-out plan.”

Such plans might well mean taking the small steps to improvement decried by some, such as Rep. John Mica (R-Fla.), but endorsed by others. “Infrastructure could be improved incrementally, in terms of track, signals, grade crossings, and joint operations,” Furniss asserts. “Not all of those [FRA-identified] corridors outside of Florida or California will be electrified,” or hit true HSR speeds any time soon.

A range of (funded) opportunity

But that very fact may prove beneficial for the supplier community. “VAE Nortrak believes that both HrSR and HSR offer great market opportunities, which it will be able to respond to well using its service proven technology as a base,” says Blaine Peterson, VAE Nortrak Director, High Speed Rail. “Which offers the greater opportunity? Only time and financing will provide the answer. We believe that they are merely different parts of a greater process, parts which each satisfy particular needs of the service users and providers.”

Balfour Beatty Rail, Inc. Business Development Manager Santiago Muniz is equally upbeat. “Achieving a high speed rail infrastructure in America comes in many flavors, all suited to the local requirements and needs. And, yes, they do offer the same market opportunities,” Muniz asserts.

Patrick Jansen, Vice President-Sales for Progress Rail Services, is more reserved, but also optimistic. “From our point of view as a supplier, the HSR stimulus has had little effect on Progress Rail Services at this point in time,” he says. “However, we do think it will have a significant effect once these projects become reality and ground is broken. There are still significant amounts of other work that need to be done before any track will need to be laid.”

The catalyst for much of such work is federal funding, provided in recent years during two administrations, of the Passenger Rail Investment and Improvement Act of 2008 (PRIIA), and the American Recovery and Reinvestment Act of 2009 (ARRA, or the “stimulus package”). An $8 billion “down payment” for U.S. HSR efforts through ARRA, augmented by additional funding through annual congressional appropriations, has been modest by world HSR investment measures (led by China), but nonetheless has been far more than U.S. passenger rail interests—including suppliers—have experienced in recent decades.

The benefits have exceeded the obvious financial boost. Says Bombardier’s Furniss, “Under ARRA and PRIIA, there’s been a great deal more cooperation between the Class I’s, the states, Amtrak, and others than ever before.” Squabbles are inevitable, Furniss concedes, but even so, coordination and cooperation—not confrontation—have been more the norm for the issue of shared mandates such as PTC or the contentious issue of “joint use of rail corridors.” “So, finally, all parties are working in potential partnerships, with FRA providing oversight and injecting the regulatory aspects,” Furniss stresses.

Addressing capacity concerns

U.S. freight railroads, particularly Class I’s, remain fearful over potential capacity constraints any shared use with passenger rail might engender, even if PTC costs and other similar issues are resolved. But suppliers believe capacity issues can be addressed, to the benefit of freight and passenger interests—and, of course, suppliers themselves. “HrSR implementation in the U.S. provides a growth prospect for Balfour Beatty and will complement the freight railroad growth,” says Santiago Muniz.

Says Bombardier’s Furniss, “The U.S. infrastructure is largely owned by the Class I’s, so they have to be partners in developing HrSR as well as any other intercity rail”—and made whole. But that can be a positive, Furniss insists. “The U.S., in an intelligent way, has looked at ‘lessons learned,’ and is attempting to apply those as we build its systems.” In fact, the U.S. in some ways, is looked at “as the next emerging model,” he says.

That model would allow suppliers to pursue a growing passenger/HSR/HrSR market even as their freight business also expands. “We view the development of passenger rail systems in the U.S. as a boon, as opposed to a competitor, to the current freight market, says VAE Nortrak’s Peterson. “Passenger rail developments for both HSR and HrSR will benefit the freight sector through innovations designed to permit higher passenger speeds while tolerating the high load demands unique to remarkably efficient U.S. freight railroads.”

Adds Balfour Beatty’s Muniz, “HrSR implementation in the U.S. provides a growth prospect and will complement the freight railroad growth.” Progress Rail Services believes both HrSR and HSR offer “a significant growth potential for our company,” says Jansen. “The dollars being invested will help increase the overall market size for all railroad related products and services, thus giving suppliers opportunity for significant growth. The key will be maintaining and servicing our core customer base, the freight railroads, while taking on these new opportunities.”

Of politics and “Buy America”

Asked if growing vocal political opposition to HrSR and HSR investment, in the name of cutting costs, is likely to thwart those new opportunities, suppliers are surprisingly upbeat.

“All the pieces are coming together,” asserts Bombardier’s Furniss. “I think the industry is revitalized right now and I don’t see the process stopping.” Rail is “one piece of a triad” of aviation/highway/rail, he says, arguing that potential political change won’t matter. Says Balfour Beatty’s Muniz, “The intent of the stimulus money was to provide the seed for the rehabilitation of U.S. transportation to meet the needs of the 21st century. We accept this notion and look forward to the incremental development of HSR in the U.S. in the same manner as it was for the nation’s Interstate Highway System.” “Buy America” provisions, for better or worse, are intended to assuage concerns that U.S. business won’t benefit from HSR or HrSR investment. Here, too, suppliers express confidence. “VAE Nortrak developments include higher-speed turnout designs that use 100% North American components including ‘Tee rail’ switch points and moveable point frogs,” Peterson points out. Bombardier’s Furniss notes that the company’s rolling stock plies the rails throughout the U.S. Says Progress Rail Services’ Jansen, “Engineering and specifications will play a big role in what is supplied, but there are acceptable alternatives to most specifications that will enable suppliers to provide products that will meet Buy America requirements.”

Now, suppliers must count on a sustained federal commitment for America to advance HSR and HrSR.