The origins of the looming deadline to implement a railroad crash-avoidance technology mandate and a shipper petition to require mandatory reciprocal switching are completely different. But the rail industry says the result of not pushing back the positive train control deadline and forcing carriers to give shippers with direct access to only one line access to another could be the same: poorer service. Unsurprisingly, the shippers that expect to benefit from gaining access to another railroad’s line argue rail service wouldn’t suffer if the Surface Transportation Board, the railroad’s regulation agency, followed their proposal to change switching rules.
Debate on whether railroads could see service disruptions if not given enough time to fully assess the many untested systems that make up the federally required PTC network is far less contentious. The railroads need more time to implement the systems on more than 60,000 route miles and train three-quarters of their work force on how to use the technology, said Patti Reilly, the Association of American Railroads’ senior vice president of communications. The rail lobby group wants Congress to extend the deadline for the roughly $12 billion mandate past the 2015 date, pointing to the vastness of the task and noting that much of the technology needed has yet to be created.
At a National Transportation Safety Board hearing in late February, Gerhard Thelen, who represented AAR, warned that the various untested systems that interlock to make the PTC network could initially reduce capacity and “shift traffic to less safer modes of transportation.” PTC would prevents about 3 percent of the accidents that occur on freight lines, said Thelen, vice president of operations planning at Norfolk Southern Railway. Because of the important of on-time performance to shippers, delays caused by PTC could make “them reconsider the cost-benefit analysis” of using rail, said Julie Minerva, managing director of Manatt, Phelps & Phillips’ government and regulatory practice group.
The AAR won’t give a specific target date for implementation, saying railroads need as much time as it takes to implement the systems properly. But NTSB hearing witnesses estimated it would take another five years to get the wireless communication system entirely online. The Class I railroads have spent more than $2.7 billion on the crash-avoidance systems already, and there may be some segments of the interlocking network that will be PTC operable by the end of 2014, according to AAR.
Congress called for passenger and freight railroads to build their PTC systems after Metrolink and Union Pacific trains crashed in 2008, killing 25 people, near Los Angeles. A texting passenger train conductor was the cause of the accident that spurred the Rail Safety Improvement Act of 2008.
Although NTSB Chairman Deborah Hersman strongly expressed her disappointment that the industry wasn’t on track to meet the deadline, it’s unlikely that Congress won't extend the deadline. Supporting this optimism is the fact that the Federal Railroad Administration in August recommended that Congress push back the date, citing limitations in needed hardware and software and saying that such a project “has never been implemented anywhere in the world.” Even if the deadline isn’t extended, the financial consequences are paltry for the Class I railroads. Fines would exceed $25,000, Mark Hartong, FRA’s senior scientific technical adviser, said at the NTSB hearing on Feb. 27. Those fines, however, could hurt short line railroads, whose pockets aren't as deep as those of their Class I counterparts.
The rail industry also warns that service will suffer if the STB follows the National Industrial Transportation League’s proposal to allow for mandatory switching. Through the petition, shippers with access to only railroad line would be able to access a line of a competing carrier if the latter’s track is within 30 miles of the customer’s present or future loading spot. NITL, the nation’s largest shipper association, said changing STB rules would save shippers with access to only one line, who refer to themselves as "captive" shippers, about $900 million annually. The cost savings, a product of an analysis commissioned by NITL, was presented to the STB March 1, following the group's request for a rule change in July 2011. The rule change would affect carload shippers, not intermodal customers. NITL Chairman Bruce Carlton emphasized that the proposed rule change wouldn’t violate the Staggers Rail Act of 1980, legislation that deregulated the rail industry, nor would it hamper service.
The Department of Agriculture voiced its support of NITL’s proposal in a March 3 letter to the STB, saying, “adequate railroad competition has suffered since the last round of mega-mergers.” The rule change could give oilseed shippers access to more markets, and the department recommends extending the proposed 30-mile range because too few grain and oilseed shippers would benefit, USDA Director of Transportation Services Bruce Blanton wrote. He also noted that mandatory switching is available to Canadian agriculture shippers.
“Interswitching is a matter of right in Canada and has been in existence for decades,” Carlton said during a media conference call March 1. “Shippers and carriers are not complaining about it.”
That’s an unfair comparison because Canada is only served by two major railroads and their networks have an east-west orientation, Bill Rennicke, partner at Oliver Wyman, said at the Rail Suppliers and Finance Conference earlier this month. The railroad consultant told La Quinta, Calif., conference attendees that the chances of service failures increase as the points of handling rise, according to a Stifel Nicolaus note. A change in switching rules would benefit a “small group of shippers” at the expense of the larger customer base, Reilly said.
After accepting comments on the rule-making petition March 1, the STB will receive replies from the railroads, rail and shippers associations, and individual rail customers at the end of May. The agency isn’t under any obligation to issue a decision on the NITL petition.