(Dow Jones Newswires circulated the following story by Josh Mitchell on April 27, 2010.)
WASHINGTON, D.C. — U.S. freight railroads will send a study to the Obama administration this week asserting that the economic benefits of equipping trains with collision-avoidance technology are lower than what some shippers have claimed.
The study will refute claims by chlorine distributors, a customer of freight railroads, that rail companies are undervaluing the benefits to justify charging higher rates for transporting goods. The debate is part of a broader dispute over shipping rates, with railroads arguing they are being saddled with requirements for expensive new technology and shippers contending that railroads overcharge in order to pocket big profits.
The railroad study, set to be filed Tuesday with the Transportation Department’s Federal Railroad Administration, analyzes the economic benefits gained by installing “positive train control” systems, technology designed to prevent trains from barreling through stop signals. The FRA has ordered railroads to install the technology by late 2015.
The study, conducted by the consulting firm Oliver Wyman and funded by the Association of American Railroads, an industry trade group, pegs the economic benefits, including faster trains and more efficient operations, at $413.2 million over 20 years. That doesn’t take into account the costs of installing the technology, which the FRA has said could cost between $7 billion and $24 billion over 20 years.
Last month, the Chlorine Institute Inc., which represents chlorine users and suppliers, filed a petition with the FRA contending that the railroad agency hadn’t properly accounted for the economic benefits of safety upgrades. An analysis funded by the institute said the economic benefits, not including savings associated with fewer crashes, could total $5 billion over 20 years.
The institute said that undervaluing the benefits would enable railroads to pass on more costs to shippers through higher rates.
A spokesman for the Chlorine Institute said the group hadn’t seen the latest railroad study and that it stood by the institute’s filing with the FRA.
Edward R. Hamberger, president of the AAR, which represents Berkshire Hathaway Inc.’s (BRKA) Burlington Northern Santa Fe Corp., Union Pacific Corp. (UNP), Norfolk Southern Corp. (NSC) and CSX Corp. (CSX), said it is important for railroads to win the argument over costs now in order to undercut future attempts by chlorine distributors or other shippers to bring rate disputes before the federal Surface Transportation Board, the government agency that regulates the industry.