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February 2014

Rail News: Rail Industry Trends

Rail funding, safety expected to dominate industry's Capitol Hill agenda in 2014


— by Julie Sneider, associate editor

When a bitter, partisan political fight over Obamacare led to the U.S. government's 15-day shutdown in October 2013, many in the rail industry were left wondering whether Congress would be able to accomplish anything during its 113th term, let alone address key issues of relevance to railroading.

In general, the main rail issues of concern remain the same as a year ago. Among them: the potential for new regulations; long-term surface transportation funding; Section 130 grade-crossing funding; Amtrak's future; positive train control implementation; the short-line tax credit; and truck size and weight.

But the political environment in Washington, D.C., can change quickly. As of early 2014, with fallout over the government shutdown hanging in the air, the outlook for Congress to get down to business on matters other than political gamesmanship appears to have brightened, some transportation industry stakeholders believe.

"You can already see the climate in Washington is improving," says Joshua Schank, president and chief executive officer of the Eno Center for Transportation.

Schank cites the water infrastructure bill, which came out of the House Transportation and Infrastructure Committee (T&I), and sailed through the House with just three "No" votes a week after the shutdown ended; and the bipartisan compromises that led to the $1.1 trillion omnibus budget bill that passed Congress in a matter of weeks and was signed by President Obama on Jan. 17.

"Both [pieces of legislation] point to the fact that, since the horrible breaking point of the government shutdown, Congress has come to terms with the idea that they need to work together on some of these issues," says Schank. "And when it comes to working together on issues, transportation is often among the most bipartisan to work on. So, it wouldn't surprise me to see real movement this year on some transportation issues."

Schank is among a variety of industry D.C. observers that Progressive Railroading interviewed in recent weeks to get their perspectives on rail-related legislation and/or regulation most likely to attract congressional eyes during the second half of the 113th Congress. As they see it, the biggest political issues under debate in D.C. this year will be reauthorization of the Passenger Rail Investment and Improvement Act (PRIIA), which expired last year; the surface transportation law known as MAP-21, which is set to expire on Sept. 30; and railroad safety, with a heightened focus on tank car design and positive train control (PTC).

Although the rail industry regularly asserts that its No. 1 concern is safety, this year some members of Congress, regulators and officials at state and municipal levels are calling for closer scrutiny of rail safety following a series of high-profile accidents, starting with last summer's derailment and subsequent explosion of a crude-oil-carrying Montreal, Maine & Atlantic Railway train in Lac-Mégantic, Quebec.

The accident caused 47 deaths. Since then, other crude-oil train derailments in the United States and Canada have fueled lawmakers' and regulators' safety concerns.

On the passenger side, an MTA Metro-North Railroad commuter train crash that killed four people near New York City in early December 2013 has renewed calls for passenger-rail protections, including faster implementation of — and additional federal funding for — PTC.

"Rail safety is obviously a very high-profile topic right now," says Chuck Baker, a partner with rail lobbying firm Chambers, Conlon & Hartwell L.L.C., who also serves as president of the National Railroad Construction and Maintenance Association (NRC). "When you have high-profile accidents, you get attention. That's a fact."

While it's not yet clear if the accidents will lead to new safety laws coming out of Congress or ongoing rulemaking by regulators, safety will be in the spotlight in Washington this year.

On the subject of reauthorization of rail legislation, there's already talk on the Hill — "as there always is" — about combining PRIIA, the law that authorizes Amtrak, with a larger surface transportation bill, says Eno's Schank.

"Whether that happens depends on a lot of things that would be difficult even when Congress was doing well," he says. "There will be a lot of conversation and discussion about Amtrak reauthorization and highway and transit reauthorization, and that represents the potential for progress in both areas."

Good News In Budget Bill

In last month's budget bill, rail advocates found some things to like, including the 20 percent increase in Transportation Investment Generating Economic Recovery (TIGER) funding in 2014 over 2013. And while not everything was on the upside — the bill contained no spending for high-speed rail projects, for example — the speedy action on a budget package gave a bit of encouragement to those looking for reauthorization of surface transportation legislation before MAP-21 expires.

A Leader In Shuster

Another positive sign, they say, is the leadership shown so far by U.S. Rep. Bill Shuster (R-Pa.), who took over as chairman of the House T&I Committee in January 2013. Shuster worked in a bipartisan manner to quickly shepherd the water infrastructure bill — which is designed to facilitate projects for ports, inland waterways and flood control — through his committee. (As of press time, House and Senate conferees were still working out differences to get a final bill to the president.)

Shuster also officially kicked off the surface transportation reauthorization process with hearing on a Jan. 14, 2014, during which he laid out an aggressive timetable for legislation. His goal: have a bill drafted and ready to move out of the T&I Committee by spring or early summer, then on to the House floor before Congress takes its August recess — and with enough time to conference the House version with the Senate's. He also outlined a number of "key principles," including "reducing regulatory burdens and making sure our federal partners have flexibility in how they spend their money and approve projects," Shuster said in his opening statement.

"Shuster is a fellow who has really exhibited an ability to bring warring factions together, get people to sit down at the table and work out their differences," says Bruce Carlton, president and CEO of the National Industrial Transportation League (NITL). "He has the confidence that [Congress] can actually get legislation done."

Of course, the biggest hurdle in a long-term surface transportation legislative package is figuring out how to pay for it. The Highway Trust Fund, which pays for a good portion of surface transportation projects and is funded by the federal gas tax, is running out of money. Based on current spending and revenue trends, the U.S. Department of Transportation (USDOT) has estimated the trust fund's Highway Account will reach a shortfall and the fund's Mass Transit Account will have a $440 million balance before the end of fiscal-year 2014.

Federal government officials, several lawmakers and transportation industry representatives have called for serious dialogue about how to shore up the fund and close the gap in funding transportation infrastructure needs. Ideas already being floated: raise the gas tax, which Congress hasn't done since 1993; shift to a wholesale oil tax; and pass corporate tax reforms with some proceeds going to transportation infrastructure projects.

"Our [nation's] surface transportation infrastructure is an investment, not just a cash-flow expenditure," says Carlton. "And the current Highway Trust Fund and the way we feed it is not working."

NITL, which supports the interests of shippers, is on record supporting continuation of the gas tax and increasing it by "a responsible amount, indexing it for inflation and guaranteeing that monies raised for the trust fund are used for highways and not bled off for other interesting-but-not-highway uses," Carlton says.

But using gas tax revenue to support highways only wouldn't fly with the American Public Transportation Association (APTA). The association has endorsed a bill introduced by U.S. Rep. Earl Blumenauer (D-Ore.) that would phase in a 15-cent per gallon increase in gas taxes dedicated to both transit and highway programs. Blumenauer also has called on House Ways and Means Committee Chairman Dave Camp (R-Mich.) to begin holding hearings to address possible funding options for the Highway Trust Fund.

Known by the acronym UPDATE, Blumenauer's bill would index gas taxes to inflation and examine ways to replace those taxes with a more stable source of funding by 2024.

"It is imperative that Congress address the impending shortfall for federal transit and highway programs in fiscal-year 2015," APTA President and Chief Executive Officer Michael Melaniphy said in a prepared statement. "Our federal government must increase transportation investment to address our aging infrastructure and provide the transportation options that are necessary for our country to prosper and remain economically competitive."

Hoping For A Long-Term Bill

Getting a long-term surface transportation reauthorization bill through Congress is a top focus for APTA in 2014, says APTA Vice President of Government Affairs Rob Healy. While MAP-21 was a two-year bill, APTA hopes the next bill will cover six years so that public transit agencies have time to develop major capital investments needed to bring existing infrastructure into a state of good repair and expand facilities to meet demand for more service. Although APTA is open to finding "innovative financing" for public transportation projects through mechanisms such as public-private partnerships, the innovation should not be advanced as a replacement for a dedicated source of federal funding of public transportation, Healy says.

Election-Year Politics

Increasing taxes or finding new revenue sources for transportation is going to be a hard sell, especially with mid-term elections in November.

"It's difficult to imagine right now the House Republican leadership making a gas tax increase one of their main pushes in election year 2014," says NRC's Baker, adding that each option for raising revenue to support transportation funding will have its detractors.

Transportation funding notwithstanding, the Association of American Railroads (AAR) is gearing up for major transportation legislation this year — whether that comes in the form of one big bill that includes a rail title or as separate bills to cover PRIIA and rail safety, AAR President and CEO Ed Hamberger said in an interview with Progressive Railroading in late 2013. He also said that he expects to see proposals for new or expanded rail safety regulations in reaction to Lac-Mégantic.

Railroad industry officials have indicated for some time that there's room for improvement on the crude-by-rail safety front. Crude by rail and tank car design became the No. 1 target for action by federal rail-safety regulators in the United States and Canada after the Lac-Mégantic accident. The Transportation Safety Board of Canada (TSB) determined that older and unprotected tank cars ruptured and spilled crude during the derailment, which led to the explosion and fire that incinerated the town's center.

In November 2013, AAR asked the USDOT to require all tank cars used to transport crude oil and other flammable liquids to meet higher safety standards. In November, the AAR urged the USDOT's Pipeline and Hazardous Materials Safety Administration (PHMSA) to increase federal standards for tank cars used to move flammable liquids such as crude oil and ethanol. AAR called for PHMSA to not only raise federal standards for new tank cars, but also require existing cars to be retrofitted or phased out of service.

"We have to acknowledge that Quebec did happen, and Quebec did change the equation of various people's thinking," AAR's Hamberger told Progressive Railroading in late November.

RSI's Response

AAR's request surprised many in railroading, particularly the manufacturers and lessors of rail cars. The Railway Supply Institute (RSI) responded in December 2013 with its own letter to USDOT in which it agreed to most of AAR's tank-car safety proposals, but not all. [For more detail and commentary by rail-car market consultant Toby Kolstad, see this article.]

Since Lac-Mégantic, additional crude-oil train derailments have occurred in Canada and the United States. Although the Federal Railroad Administration's preliminary data indicate 2013 was a record-setting year for rail safety, those accidents combined with the Metro-North crash sharpened the public's focus on the risks associated with railroading — and prompted political leaders and federal regulators to pledge action.

Last month, U.S. Transportation Secretary Anthony Foxx met with executives from major U.S. freight railroads, AAR and petroleum producers to discuss ways to improve the safety of transporting crude and ethanol. A week later, RSI's Committee on Tank Cars (RSICTC) wrote to Foxx asking for clarification of the meeting's outcome. Committee members had asked to attend the meeting, but the request was denied.

In his letter to Foxx, RSI President Tom Simpson expressed concern that rail-car manufacturers and lessors were being left out of a discussion on tank-car standards. He cited published accounts of the Foxx meeting that indicated energy and railroad interests had agreed on new, tougher train-car standards.

"To exclude the actual manufacturers of tank cars and major lessors from this discussion, in our opinion, leaves out a vital player in the equation to speak for itself as we all strive to make our nation's railroads safer," wrote Simpson, who also noted that rail-car manufacturers have been voluntarily building all tank cars to a higher industry standard on orders placed after Oct. 1, 2011.

NTSB, TSB Weigh In

Meanwhile, in an unprecedented move, the National Transportation Safety Board (NTSB) and Transportation Safety Board of Canada on Jan. 23 jointly issued a series of safety recommendations for transporting crude oil by rail. Canada's TSB also recommended that Transport Canada and the USDOT's PHMSA toughen standards on the Class-111 tank cars — not just the newer models.

The NTSB recommended to the FRA and PHMSA that hazardous materials route planning for railroads should be expanded to avoid populated areas; an audit program be developed to make sure railroads that carry petroleum products are capable of responding to worst-case scenarios; and railroads and shippers should be audited to make sure they're properly classifying hazardous materials.

How, when and in what form new crude-by-rail safety requirements will come out may not yet be known, but industry officials agree something will happen. The USDOT expects to finalize rules governing tank-car construction sometime in 2015. Some political leaders — including U.S. Sens. John Hoeven (R-N.D.) and Heidi Heitkamp (D-N.D.), whose state was the location of a BNSF Railway Co. derailment in December that spilled 400,000 gallons of crude oil — are clamoring for something to happen sooner rather than later. So is U.S. Rep. Rick Larsen (D-Wash.), who in late January asked the House T&I Committee to hold a hearing on whether additional measures should be taken to protect communities from crude-oil train derailments.

And crude-by-rail won't be the only safety headline-grabber on Capitol Hill this year. PTC will continue to be a hot topic. AAR and APTA have been lobbying for a three- to five-year extension of the Dec. 31, 2015, deadline for some time.

"Despite railroads' best efforts, due to PTC's complexity and the enormity of the implementation task — and the fact that much of the technology PTC requires simply did not exist when the PTC mandate was passed and has been required to be developed from scratch — much technological work remains to be done," Hamberger told the T&I Committee in June 2013.

Deadline Request Under Review

A PTC implementation extension appeared possible (a bill to do so has been introduced) until December 2013, when NTSB officials announced that a PTC system likely would have prevented the Metro-North train from derailing on a sharp curve while traveling at 80 mph in a 30 mph zone. Four passengers died and dozens more were hurt in the Dec. 1 accident.

In the wake of the tragedy, U.S. Sen. Dianne Feinstein (D-Calif.), who authored the earlier bill to require PTC to be installed on all major rail lines, has called for a speedier deployment of the crash-avoidance technology.

"Positive train control will save lives when it is deployed, and every day of delay leaves in place a 19th century signaling system dependent entirely on the attention of each train's lone engineer," Feinstein wrote in a Dec. 4, 2013, letter to Sen. John Rockefeller (D-W.Va.), who chairs the Senate Commerce, Science and Transportation Committee.

Whether PTC, other rail-safety issues and PRIIA will be considered as separate legislation or as part of a rail title under a larger surface transportation reauthorization bill remains to be seen.

Also yet-to-be answered is the big-picture question: Can this Congress pass a long-term, comprehensive surface transportation package before MAP-21 expires at September's end?

"That's a very short timeline," says Eno's Schank. A more likely scenario is that Congress will pass a MAP-21 extension, at least until after the November congressional election, he says.

But one thing is certain: Rail funding and safety will get plenty of consideration on Capitol Hill in 2014.

[Editor's note: Read this related article for more information on this year's rail agenda in D.C.]


Browse articles on Congress Amtrak Eno Center for Transportation House Transportation and Infrastructure Committee Passenger Rail Investment and Improvement Act

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