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The Passenger Rail Working Group (PRWG) of the National Surface Transportation Policy and Revenue Study Commission has unveiled a plan to improve passenger-rail service during the next four decades. Working group members say it’s a “bold and visionary” plan to expand transit-rail service, but the freight-rail industry says the proposal relies too much on the existing freight network.

Released last month, “Vision for the Future: U.S. Intercity Passenger Rail Network Through 2050” outlines $357.2 billion in investments needed to expand and enhance the national passenger-rail system. The plan calls for maintaining the entire intercity passenger-rail system, reintroducing service to several cities, upgrading lines to offer higher speeds and greater frequencies in fast-growing corridors, strengthening service links in the Northeast Corridor, adding routes in areas where the population is expected to grow significantly, and developing federally designated high-speed rail corridors.

Some of the proposed new routes would require building new tracks while others would operate over existing freight tracks.

Freight-rail’s response
And that’s where Association of American Railroads (AAR) officials have a problem. In a Dec. 6 statement issued just hours after the PRWG released its report, AAR President and Chief Executive Officer

Edward Hamberger said the working group’s proposal “rests the future of passenger rail on the freight-rail network,” and that the report doesn’t adequately emphasize freight railroads’ capacity needs.

“Piggy-backing on privately owned and operated freight railroad assets will give America a third-rate passenger-rail system — one that is not attractive to passengers or competitive with automobile and air travel,” he said. “It will place limits on the capacity of freight-rail operations, creating delays for freight customers, forcing more freight onto our already overcrowded highways, and harming our economic and global competitiveness.”

But Capitol Corridor Managing Director and PRWG member Eugene Skoropowski says the group used feedback from BNSF Railway Co. Chairman, President and CEO Matt Rose, a member of the national commission that oversaw the freight-rail report, as well as the AAR when developing its plan.

“The PRWG did not prepare our report in a vacuum, and we made an exceptional effort to complement the freight-rail report submitted by the AAR to the same commission,” he says. “Efforts were also made to respect the need to facilitate freight movement, respect the capacity for growth for future freight needs, and make passenger investments that would be additive to the freight investments to benefit both movement of people as well as goods.”

Outlining capacity needs
Released in September, the National Rail Freight Infrastructure Capacity and Investment Study identified $135 billion in freight capacity improvements needed during the next 30 years. The report did not forecast passenger-rail demand or estimate

future passenger-rail capacity needs, but did include capacity recommendations for Amtrak and local commuter-rail services that currently operate over freight tracks.

“Additional investment, beyond that projected in this report, will be needed if freight railroads host increased levels of passenger-rail service,” the study says.

Meanwhile, PRWG acknowledges that providing adequate track capacity to address expanding passenger and freight needs is one of the biggest challenges in creating the future passenger-rail network.

“The passenger system relies on the freight system for access to rail infrastructure; therefore, it is important to consider a process in which freight and passenger rail providers and other stakeholders can work to create the broad principles of the nation’s rail strategy,” the report reads.

PRWG has submitted the report to the surface transportation commission, a 12-member committee appointed last year by President Bush and congressional leaders to examine the nation’s transportation needs and ways to fund them. The working group has recommended that an intercity passenger-rail program be included in the next federal transportation authorization bill, which could be funded through an 80/20 federal/state matching program.

Formed by Wisconsin Department of Transportation Secretary Frank Busalacchi to advise the Commission, PRWG counts intercity passenger rail experts and transportation professionals as members, and includes representatives from states, Amtrak, public interest groups and regional rail transportation authorities.

CSX GOVERNANACE TCI teams up with 3g Capital partners to boost CSX stake The Children’s Investment Fund Management L.L.P. (TCI), which has been critical of CSX Corp.’s management and performance, increased its stake in the Class I last month. On Dec. 19, TCI and 3G Capital Partners Ltd. announced they formed a group whose members will own 8.3 percent of CSX’s outstanding common shares and hold derivative securities equivalent to an additional 11.8 percent. TCI previously owned 4.1 percent of CSX shares. The group plans to nominate five directors to CSX’s board at the Class I’s 2008 annual shareholders meeting to be held in spring to “add strong independent directors with a shareholder orientation, a broad range of railroad and other relevant experience, and a firm commitment to improving CSX’s operating performance and corporate governance,” TCI officials said in a prepared statement. The nominees are TCI founder Christopher Hohn, 3G Capital Managing Director Alexandre Behring, Lamphere Capital Management Managing Director Gilbert Lamphere, London Underground Managing Director Timothy O’Toole and Northwest Airlines Co-Chairman Gary Wilson. “CSX’s incumbent board has overseen a railroad that for many years has lagged its peers on many of the key metrics of operational and financial performance,” said Hohn. “Rather than engage in a constructive dialogue with one of its largest shareholders, the CSX board has consistently ignored our substantive concerns and failed to hold management accountable for continuing operational underperformance.” In October, TCI sent letters to CSX’s board stating they should separate the chairman and chief executive officer roles; install new independent directors; amend CSX bylaws to allow shareholders to request special meetings; align management compensation with shareholders’ interests; present a detailed plan to improve operations with specific long-term operational and cost targets; justify the railroad’s 2007-2010 capital spending plan; and improve relations with labor, shippers and shareholders. A month later, CSX board members sent a letter to TCI expressing support for Chairman and Chief Executive Officer Michael Ward and his management team, and approving their efforts to boost financial and operational performance. In a Dec. 19 statement responding to TCI’s announcement, CSX officials said the railroad’s current directors are well qualified to further advance the company’s interests, and various financial, safety and operational improvements prove the Class I is well run. “CSX has a strong board of directors with a broad range of experience,” they stated. “This group of directors has driven the company’s successes, including nearly tripling the stock price in the past three years, and provided shareholders a return better than the rest of the North American rail industry and 89 percent of all S&P companies.”