July 28, 2014

Controversy over PTC business benefits

Railroads are campaigning hard to get federal funding for all or part of the cost of developing and deploying a positive train control (PTC) system, writes Larry Kaufman in Rail Business newsletter.

There are two elements to the PTC issue. Most aggravating, the railroads are on the hook to invest anywhere from $5 billion to as much as $15 billion, depending on which source one believes, to satisfy the Congressional mandate that PTC be deployed by the end of 2015 on all tracks that handle passenger trains and/or toxic inhalation hazard (TIH) shipments.

There also is the issue of business benefits. PTC might allow more trains to be dispatched over a segment of track than under present block signaling technology. That could allow expensive investment in additional track construction to be deferred.

Congress mandated PTC in the Rail Safety Improvement Act of 2008, passed in only three weeks and in near-panic following the head-on collision of a Los Angeles Metrolink passenger train and a Union Pacific freight train at Chatsworth, Calif., in September 2008. The passenger train had blown through a stop signal, presumably while the engineer was distracted by texting.

Congress provided no funding, just a mandate. That makes PTC deployment an unfunded federal mandate, something that infuriates railroads.

In filing its implementation plan with the Federal Railroad Administration (FRA), BNSF said “financing this unprecedented PTC expense may have the effect of forcing BNSF to divert scarce capital resources from the baseline maintenance of the railroad as well as potentially jeopardize other investments that could have significantly more benefit for society including capital expansion projects that could attract more freight to move by rail.” Senior executives of other Class Is say much the same.

The anger is justified. FRA did a cost/benefit assessment of PTC. It came up with a ratio of $1 in safety benefits for every $22 the railroads would invest in PTC.

U.S. railroads are safe. Trains rarely collide. No one in his right mind would justify spending $22 to get $1 back, and railroads adamantly say they shouldn’t be forced to do so either.

The real issue is business benefits. Industry officials say there are no business benefits that justify investing in current PTC technology. They want Congress to give them an investment tax credit (ITC) for capital spending that increases capacity. If they acknowledge that PTC might produce significant benefits, they make it easier for Congress simply to ignore industry lobbying.

The ITC proposal has been around for several years and hasn’t had a serious hearing on Capitol Hill.

The railroads are fighting an uphill battle. The unfunded federal mandate is patently wrong. Congress, in the 4R Act of 1976, said that if rail service must be provided in the public interest, the public should pay. By this logic the public should pay for PTC.

Railroads may not have as strong a case on business benefits. Depending on which study one chooses to believe, business benefits of PTC range from a claimed loss of capacity all the way to full recovery of costs in less than a year.

FRA did not consider business benefits in its assessment of PTC costs and benefits because Congress justified the federal mandate as improving rail safety. Business benefits were not even a gleam in the eye of anyone in Congress.

The Association of American Railroads (AAR) commissioned a study by consulting firm Oliver Wyman. It concludes that there might be benefits when the next generation PTC technology is ready to be deployed, but that current technology not only wouldn’t provide business benefits, it might result in a loss of rail capacity.

That flies in the face of a 2005 study published by the Transportation Research Forum.

It determined PTC internal rates of return ranging from a low of 44 percent in a high cost, low benefit scenario, all the way to 160 percent in a low-cost, high-benefit scenario.

The peer-reviewed study, which was done for FRA, quantifies the benefits that might accrue to railroads and shippers.

Line capacity would be increased, they say, because locomotive on-board computers would continuously calculate a minimum safe stopping distance, which would enable the system to determine a minimum safe distance between on-coming and following trains. Precise knowledge of the required distance between trains also would allow trains to operate at higher speeds.

The concept of PTC, which has been under research and development for about 25 years, is quite simple. The global positioning satellite system can provide extremely precise information on the location of an equipped locomotive, precise enough to know the difference between two locomotives passing on parallel tracks. Train data — speed, location, minimum stopping distance based on actual train, locomotive, and route characteristics — is transmitted from the locomotive on-board computers to the dispatch computer system.

Any time a locomotive is about to exceed its track authority, either speed or location, the system can take control and stop the train.

This issue isn’t so much whether the railroads can afford to deploy PTC. It’s whether they can afford not to.

(The preceding opinion column by journalist and former railroad executive Larry Kaufman was published by Rail Business newsletter.)