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BNSF is focusing a significant portion of its signal-related capital to pole line elimination and classification yard maintenance. The pole line elimination spending is part of BNSF’s overall strategy to increase reliability of our train control systems, increase velocity and position us for implementation of Positive Train Control (PTC). All of the pole line elimination work that BNSF is undertaking is compatible with our effort to begin implementation of PTC with minimal rework. Our capital expenditure in train control and signal systems has been increased to take advantage of arrangements BNSF has with respect to our Brotherhood of Railroad Signalmen-represented workforce and our suppliers.
BNSF’s capital expenditure in our classification yards is a significant piece of the signal work for 2009. Several projects have already been completed, including the replacement of the master retarder in our Barstow, Calif., yard. For the remainder of 2009, we will be focusing on retarder replacements in our yards at Northtown (Minneapolis) and Galesburg, Ill. Further, switch machines, lighting protection systems, uninterruptible power supplies with battery backups and cable replacements will be completed at several other yards across the system.
Our long-term effort is focused on increasing the reliability and maintainability of all of our classification yards. When traffic levels rebound, we will be prepared to handle it in all areas of our engineering infrastructure.
The mandate to implement PTC by 2015 has brought together nearly every department within BNSF with a strong focus on how to accomplish the task in a manner that best utilizes our resources. The implementation of PTC will significantly alter how BNSF, and all railroads, operate and, as such, will have far-reaching implications with nearly every aspect of our business. BNSF has had an organizational structure in place for over five years, with a PTC central planning office. Through that office, BNSF has been developing, in cooperation with the FRA, our version of PTC called Electronic Train Management System (ETMS). Our plans through 2009 are to continue testing the effectiveness of ETMS on our Beardstown, Red Rock, Fort Worth, Wichita Falls and Hettinger subdivisions. From these efforts, we will be developing production-ready systems and equipment that will speed installation and reduce in-servicing time.
In addition, BNSF will be prioritizing the subdivisions that are mandated to have PTC in place by the end of 2015.
A key hurdle that BNSF sees is working through the RSAC process with the FRA to fully understand the requirements as mandated by Congress and the interpretation of those mandates by the FRA.
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In 2009, CN will continue to focus on improving corridor train velocity and eliminating network bottlenecks. These corporate initiatives will be key factors influencing C&S expenditures at CN for the next few years. The C&S investment plan for 2009 concentrates on initiatives that can reduce train delays by improving the reliability of our CTC plant, as well as strategic communication and signal system upgrades to expedite train movements through network pinch points.
Capital plant renewal initiatives targeting CTC reliability will include investments to upgrade older code systems, replacement of relay-based CTC control points, pole line elimination as well as wayside inspection system enhancements. In addition, CN will make strategic capital investments to renew and optimize our telecom network to improve CTC reliability, and initiate a program to build out our telecom network backbone to support upcoming PTC implementation.
Special capital investments for C&S infrastructure upgrade and expansion will concentrate on siding extensions, yard improvements, plant capacity upgrades and reduction of train velocity bottlenecks. In addition, we expect to see strong investment levels on commuter and passenger rail service enhancements as well as significant capital investments to support EJ&E integration this year. Overall C&S investment levels in 2009 will be relatively stable versus 2008, but we will see some shift between basic capital investments in plant renewal and special capital investments for infrastructure upgrades.
The Rail Safety Improvement Act of 2008 that was signed into law last October defines a number of key dates for PTC systems implementation. In 2009, CN will be focusing efforts on activities to support the development of our PTC Implementation Plan, which must be submitted by April of 2010. Our objective will be to make final determinations on preferred equipment technologies, as well as development of typical signal design drawings for wayside equipment installations and final system designs for our data radio infrastructure. CN is actively involved in the PTC effort through meetings with other Class I roads on technical standards, interoperability issues, data communication protocols and security, as well as common infrastructure requirements. We are also actively supporting the FRA-sponsored Railroad Safety Advisory Committee (RSAC) PTC process.
To achieve our 2009 PTC objectives, CN will be working closely with PTC systems and equipment suppliers to perform technical evaluations as well as review operational benefits that can be realized with their respective equipment. Also this year, we will complete a review of our data communication infrastructure and develop a detailed network upgrade plan that will support both PTC implementation as well as improving the reliability of our existing CTC code systems. We have also initiated a program to build a CN-owned telecom backbone in some key areas where there are gaps in our existing system.
The PTC implementation mandate is an aggressive one that will pose a number of technical and operational challenges for the rail industry. Some of the technical hurdles relate to data communication protocols, data security, radio spectrum requirements and equipment compatibility. Two of the operational challenges for PTC will be ensuring seamless interoperability between roads as well as determining how the system should handle data communication or PTC component failures. In spite of these many challenges, I am convinced that the unprecedented cooperation we are seeing within in the rail industry will make the PTC initiative a successful one.
In total, C&S-related spending will remain at a level similar to 2008 with two large multi-year investment programs that we’re ramping up in order to meet regulatory timeframes; the Narrow Band replacement of radio equipment and the implementation of Positive Train Control (PTC). Both programs will require significant effort and investment for a number of years.
Close cooperation and coordination between railroads will be key to maintaining interoperability, and to avoid inadvertently impacting the fluidity of operations during deployment. Narrow Band replacement is well under way, and deployment will continue this year to meet the FCC’s 2012 deadline.
For PTC, 2009 will be a year of planning and design. The FRA is currently in the consultative phase in the rulemaking process for PTC systems with the Railroad Safety Advisory Committee (RSAC) and the industry is working to define PTC interoperable functions. Canadian Pacific will use the outcomes of these two processes to guide the development of its PTC Implementation Plan. In addition to these large program workloads, ongoing basic C&S plant renewal investments are planned as required in 2009.
As mentioned already, the entire industry’s PTC timeline is dependent on the outcome of the FRA rulemaking process and the industry’s own work to define interoperability. Clearly, establishing certainty on the regulatory requirements and system functionality are the first hurdles to overcome. Canadian Pacific is actively working to scope the effort and is participating in both the RSAC process and the industry interoperability definition.
A key step this year will be to establish the program work plan that will include identifying CP specific requirements (what is unique about how CP does its business) within the interoperable framework. Year-end deliverables will include developing the company’s PTC system architecture, defining the PTC Implementation Plan as required by the FRA and planning a PTC Pilot implementation.
Our focus in capital spending is threefold: maintaining/improving C&S reliability, improving transportation productivity and cutting operating costs. We focus our greatest investments on our greatest reliability issues. Our greatest mainline reliability issue is our remaining pole line, and we invest to eliminate that. New hump yard process-control systems enable us to improve transportation throughput. Automation allows us to use technology to eliminate manual tasks.
Pole line leaves us exposed to significant and potentially lengthy outages from storms. Eliminating our remaining pole line is a real priority in order to improve reliability. We also spend capital to replace equipment either because of chronic problems or because of outdated technology. These older systems are typically fine, but parts and support might not be available anymore, and outages are tougher from which to recover. So, we have to replace the equipment to ensure continued reliable operation.
We also make improvements by upgrading classification yard process-control systems. By moving to newer equipment at a yard, we can improve our reliability. A newer system is much less likely to have a long outage. It can also add functionality that was not available on the older system. The newer system allows the entire classification yard operation to be more productive.
Finally, we are always looking to cut operating costs. Using technology to automate an interlocking eliminates the need for an operator for that interlocking. Using technology to remotely control yard switches reduces train crew workloads.
CSX is working closely with the other railroads in our PTC efforts. Interoperability standards are important. Of course, a key input to those standards will be the FRA PTC regulations that are expected early this year. So, interoperability standards and overall system definition are key deliverables for 2009.
With the complexity of PTC, there are a lot of decisions to make this year. Key decisions that are necessarily interrelated include the overall system architecture and the wayside interface. Signal safety and reliability is the product of many years of experience and continuous learning. One question for us is how we leverage that experience and our wayside investment in the best way possible to meet PTC requirements.
CSX will proceed with a CBTM pilot project in both signaled and dark territory this year. While this system will not be our final solution, it will provide key lessons for PTC system architecture decisions going forward. We also expect to test wayside products in 2009 that will be part of our final PTC solution.
Finally, PTC will be an enormous implementation project. It is essential that we finalize our implementation plans for the FRA as much as possible this year, given the April 2010 deadline for those plans. We also have to plan the priority order, project logistics and details for PTC implementation on CSX this year in order to maximize our implementation window. We need all of the time that we can get to do this, to do it safely, and to do it efficiently and effectively.
C&S-related spending in 2009 at Norfolk Southern is planned to be about even with 2008. We are continuing our rehabilitation and replacement programs in the major categories of yards, grade crossings signal and communications systems. These projects are targeted at improving the reliability and efficiency of these facilities.
Yard projects include replacement of several master and group retarders, as well as upgrading and replacing skate retarders in a couple of our busiest terminals. We are also completing the installation of a process-control system in one of our remaining manual/CRO yards and by the end of the summer, this facility will have a fully automated hump.
We are continuing significant contributions to state grade crossing projects and are replacing older gate mechanisms. In our signal system rehab program, we have interlocking, track circuit replacements and pole line elimination. The communications area has a project to upgrade a section of our microwave data/voice network and a substantial investment in replacing locomotive and wayside radios to meet the deadlines set for conversion to narrowband operations.
We are continuing our development and testing of Optimized Train Control (OTC) to satisfy the PTC deployment requirements related to the rail safety bill. NS is playing an active role in the industry interoperability effort, which seeks to address the remaining hurdles for a successful industry-wide PTC rollout, including passenger operations with Amtrak, commuters and others.
Ongoing PTC efforts include development and testing of: onboard locomotive systems, communications equipment for train control data, wayside signal interface equipment, messaging, system architecture, back office server hardware/software and interfacing with existing CAD systems. Ultimately, FRA regulatory approval of our PTC system and implementation plan is required before rolling out OTC in revenue service.
Our signal capital dollars this year are focused on upgrading systems, and replacing components that are nearing the end of their reliable life cycle. Part of our strategy to increase capacity includes upgrading to CTC on key lines, including the installation of higher speed crossovers, where appropriate. To increase reliability, we are eliminating aging pole line with an aggressive program of installing coded track circuits. Our overall signal spend will be about the same in 2009 as it was in 2008, but will be slanted more toward these two projects.
We will continue to replace aging components and invest in new technology equipment. Advancements in products like LED lights that increase the visibility and reliability of our systems will continue to receive funding. Our Total Cost of Ownership teams will continue to evaluate new products and processes that can bring more value to our business.
We will begin conducting site surveys for PTC by the beginning of the third quarter this year. These surveys will give us all of the pertinent information for each location that will allow us to start design work. I would like to have these first two steps far enough along to begin construction work next January.
We have established a protocol for the surveys that should give us all the information necessary for the design of both signal and communications work, and have surveyed a sampling of locations. Within the next couple months, we will design a few of these locations, to ensure the surveys are adequate. Once the survey process has been validated, we will begin surveying and designing locations based on our internal priority list.
There are two primary hurdles that we need to address. The first is that we don’t currently have the equipment PTC requires. As an industry, we have been working with material providers to spec and design both the signal and communications equipment. We hope to have equipment delivered this year in time to do credible tests and work out any bugs in time to begin mass production next year. The second hurdle we will need to address is the funding of this enterprise. The mandated timeline for PTC is very aggressive, and we will need to figure out how we can fund it while at the same time continuing work on our systems upgrades and capacity.