September 2015 | Commentary | Fine Print

Positive Train Control: Negative Impact On Railroads?

Tags: Legislation, Public Policy, and Regulations, Rail, Transportation

Kathryn C. Thomas is Partner, Litigation Practice Group & Transportation Team, Freeborn & Peters LLP, 312-360-6520

The Rail Safety Improvement Act of 2008 (RSIA) mandates that Positive Train Control (PTC), a set of advanced technologies designed to stop or slow a train before accidents occur, be implemented across approximately 60,000 miles of the nation's rail lines by Dec. 31, 2015.

Class I railroad main lines that handle any poisonous, inhalation, or hazardous materials, and any railroad main lines over which regularly scheduled intercity passenger or commuter rail services are provided, require PTC.

The PTC mandate does not directly affect the majority of the Class II and III railroads. During the Federal Railroad Administration (FRA) rulemaking process, the American Short Line and Regional Railroad Association (ASLRRA) proposed several changes to the FRA final rule designed to limit the impact on Class II and Class III railroads.

Extended Deadline for Class II and Class III Railroads

In an amended final rule, the FRA eliminated the PTC requirement for trains traveling fewer than 20 miles on PTC-required track, and extended the deadline to Dec. 31, 2020, for Class II and Class III railroads to employ PTC-equipped locomotives.

Despite these caveats for Class II and Class III railroads, the ASLRRA reports approximately 100 of the Class II and Class III carriers, roughly one-fifth, will have to make substantial investments to upgrade their locomotives to be PTC compliant as they have trackage rights over Class I lines that are required to have PTC installed. These Class II and Class III railroads report that nearly 80 percent of their upfront PTC costs will be related to purchasing and installing onboard PTC equipment. While locomotives built in the past 25 years have been equipped with microprocessor-based control systems, older locomotives lack the necessary modern electronics for PTC.

Current average costs for PTC installation on a modern locomotive are $50,000 to $75,000, while installation of PTC equipment on older locomotives averages at least twice that investment, at approximately $150,000. In light of this price tag, the railroads have to decide if PTC installation on older locomotives is cost-effective for them. Finally, estimated PTC maintenance costs for these 100 Class II and Class III railroads collectively average $3 million to $5 million per year.

Demanding Participation

As the deadline for PTC implementation looms, Class II and Class III railroads will likely find that the Class Is demand their participation in both PTC capital implementation costs and ongoing maintenance costs. Depending on the provisions of the applicable trackage rights agreement, these smaller railroads may have to contribute, at the very least, to long-term maintenance costs.

The railroad industry estimates that PTC will cost between $14.5 billion and $22.3 billion over the next 20 years. Estimates of the initial deployment costs range between $6 billion and $10.7 billion. Given the gravity of these numbers, Class II and Class III railroads must carefully review and negotiate their rights and obligations relating to PTC under any trackage rights contracts.