(By Angela Greiling Keane of Bloomberg News)
Burlington Northern Santa Fe Corp., the largest U.S. railroad, is pushing Congress to scale back a requirement for carriers to install automatic-braking systems on most of their tracks.
“Heavy-handed” legislation enacted last year would cost Fort Worth, Texas-based Burlington Northern almost $2 billion, Chief Executive Officer Matt Rose said yesterday. Rose predicts revenue will fall about $3 billion this year from $18 billion in 2008 primarily because of lower fuel surcharges.
“It’s in everybody’s best interest that we lower the cost of this installation tremendously and not just turn a tin ear to the railroads’ whining about this,” Rose, 50, said yesterday in an interview in Dallas. “This is one of those great examples of regulation gone awry where there will be unintended consequences.”
So-called positive train control technology is designed to stop trains in perilous situations without an engineer’s involvement. Congress acted after investigators said such a system may have prevented the Los Angeles crash between a commuter train and a Union Pacific Corp. freight train that killed 25 people in 2008.
Rose said Burlington Northern is urging lawmakers to allow carriers to put the technology only on the busiest lines. The Federal Railroad Administration, which regulates rail safety, is now writing the rule to carry out Congress’s mandate.
Costs Versus Benefits
Outfitting all U.S. tracks would be a $10 billion expense for the industry, Rose said. Burlington Northern has tested its own automated control systems and would have preferred to install the technology on its own timetable, he said.
The four largest U.S. railroads agreed last year to a common standard for the crash-avoidance technology. Under the law, railroads are required to install the technology on major routes by 2015. Then-Federal Railroad Administrator Joseph Boardman, who is now CEO of Amtrak, the U.S. passenger railroad, said the technology would have stopped the trains in the Los Angeles accident before they collided.
The Federal Railroad Administration plans to have a final rule on the technology out in October, Warren Flatau, an agency spokesman, said today in an interview.
Rose, citing the agency’s analysis, said the technology would have a $600 million benefit for the $10 billion in costs. He called the cost-benefit ratio “horrible.”
Burlington Northern fell $1.11 to $82.73 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have gained 9.3 percent this year.
Lobbying Efforts
Burlington Northern is also lobbying to shape legislation supported by railroad customers that has renewed interest this year as Senator Jay Rockefeller, a West Virginia Democrat, became chairman of the Senate Commerce Committee, which oversees railroads, Rose said. Rockefeller has criticized railroad pricing practices at hearings. West Virginia is the second- largest coal producing state after Wyoming, according to the Energy Information Administration.
The measures, sponsored in the Senate by Rockefeller and Senator Herb Kohl, a Wisconsin Democrat, are aimed at increasing competition among railroads and curbing some freight rates. Rail shippers, including electric utilities, are backing the effort.
“If a bill comes out that the railroads can’t see their ability to reinvest, you will see the railroads fight it,” Rose said. “And we have a lot of friends.”
Burlington Northern may also stand to lose from the climate-change legislation Congress is considering, he said. The House passed a climate change bill in June.
Coal Shipments
The bill may damp demand for coal, the second-largest revenue category for Burlington Northern this year. Coal was the only type of product that didn’t lose shipping volume in the second quarter compared with a year earlier.
The railroad’s shipping volume, as measured by carloads, fell 17 percent during the quarter.
“Within that bill, the bad news is that we don’t think there’s enough allowances or protections for our coal-burning facilities,” Rose said.
The measure would be “problematic” for the coal business, he said. “The good news is that whatever bill goes through, it will provide some level of certainty.”