(The following article by Ari Natter appeared on the Traffic World website on October 13.)
WASHINGTON, D.C. — The most significant rail safety legislation in decades stands to shoulder the rail industry with billions of dollars in new technology and operating costs. But rail shippers may be the ones ultimately footing the bill.
The sweeping array of issues addressed in the 315-page Railroad Safety Improvement Act of 2008 range from rail worker hours of service to new training standards to railroad bridge safety and resolving disputes that arise when commuter and freight railroads share track. Those requirements are likely to impact rail operations, scheduling and service levels – all things that are raising shipper concern, especially in terms of cost.
“That is something we are going to have to talk to the railroads about and get some perspective from them,” said Peter Gatti, executive vice president of the National Industrial Transportation League. “That’s a discussion we are going to have to have.”
While changes to rail worker scheduling could have a broad impact, the most costly provision is a requirement for positive train control technology – something investment firm Stifel Nicolaus says could cost the rail industry upwards of $4 billion.
Among the new provisions in the legislation are new hours of service rules that rail unions have lauded as a victory, but could mean drastic operating changes.
That includes capping the total maximum number of hours a railroad employee can work at 276 per month, and requires at least 10 consecutive hours off-duty following 12 hours on duty.
The legislation also creates a 40-hour cap on “limbo time” – periods when train crews must wait for relief crews. While the House’s version of the legislation called for total elimination of limbo time, a Congressional Research Service report said that would have lead to “intractable scheduling problems” and higher costs for shippers. The cap goes down to 30 hours after a year.
The legislation also calls for rail employees to be given two days off for every six consecutive days worked and three days off for every seven consecutive days worked, effectively ending a practice that put employees “on-call” 24 hours a day.
Some carriers, such as BNSF Railway, say they are ready.
“BNSF has for a long time been a leader in innovative crew management ideas and fatigue countermeasures, and based on the progress we’ve made in those areas, we are well prepared for hours of service and limbo time caps and are well positioned to incorporate these caps into our operations,” said company spokesman Patrick Hiatte.
Although the legislation has a high price tag, shippers say the timing – coinciding with a general freight slowdown – will mute many negative effects.
“Now would not be a good time to illustrate” how the hours of service provisions would affect rail operations and service, said Scott Cantonwine, president and CEO of Cascade Warehouse, a distribution company whose four facilities spread out across Western states handle roughly 5,000 railcars annually.
“It’s the ideal time to do it right now,” said Wayne Johnson, director of logistics for wallboard producer American Gypsum, which ships about 1,400 rail cars a year. “It’s not going to affect shippers that much; they have plenty of time and plenty of opportunities.”
In the long term, however, the costs could be high. The legislation requires railroads to install PTC technology on all main-line track that is shared with commuter railroads, as well as track used to haul poison and toxic inhalation hazard chemicals, by 2015.
Though that date is an extension from earlier versions of the legislation as well as legislation introduced in the Senate following a deadly crash in California between a commuter train and freight train, the costs will be reflected in the rates shippers pay. “No question about it,” said NITL’s Gatti.
BNSF has been developing a PTC system of its own since 2003 and said the scope of PTC requirements in the rail safety bill means it “could cost considerably more” than the original $500 million price tag the railroad had anticipated, a company spokesman said.
But carriers and shippers see positives in the PTC mandate as well. They are optimistic that the technology could lead to capacity increases if combined with other systems such as electronically controlled pneumatic brakes.
“PTC is a key component to further efficiency gains and could lead to a step change in productivity in 2010,” Morgan Stanley wrote in a research note late last month.
“Anything that improves the efficiency and the overall reliability of the system is certainly good for customers,” said Marty Durbin, managing director of federal affairs for the American Chemistry Council, whose members shipped 176 million tons of chemicals last year.
House Transportation and Infrastructure Committee Chair Rep. James L. Oberstar, D-Minn., introduced the legislation in May 2007 after several high-profile rail accidents. It appeared it wouldn’t gain any momentum in the 2008 legislative session until it was revived after the California crash. The legislation was coupled with a $13 billion provision for Amtrak, and passed 74-24.
It also reauthorizes the Federal Railroad Administration to the tune of $1.6 billion over five years and adds 200 federal rail safety inspectors.
Last fall the Bush Administration said it was “strongly opposed” to the House version of the rail safety bill, calling many of its provisions “overly prescriptive.”
But Rep. John L. Mica, R-Fla., the ranking member of the House Transportation and Infrastructure Committee, said recently White House officials told him the president would sign the legislation into law, a notion seconded by Transportation Secretary Mary E. Peters.
Though the bill was supported by the railroad industry, many observers say their support was based on speculation about further Democratic gains in Congress and, possibly, the White House that would result in even stricter legislation. The Association of American Railroads, though, rejects that claim.
“The general sense was that it was inevitable,” said Tony Hatch, a rail analyst for ABH Consulting. “It’s good to have the issue behind us.”
But with lawmakers poised to reintroduce railroad antitrust and competition bills in the next session, carriers are not in the clear by any means.
“We’ve had sort of a cowboy government for the past several years, ever since the Reagan Revolution,” said Fred Millar, a rail consultant for Friends of the Earth. “I think the tide is moving in the other direction. This bill is just one small indicator of that.”