January 10, 2021

Biden's "Second Great Railroad Revolution": PTC, Fossil Fuels and Amtrak "Preference"

Part 2 of a 3-Part Series
Holland & Knight Transportation Blog
William P. Byrne | Jameson B. Rice | Amanda Barbour Fantauzzo
Election Impacts on Transportation & Infrastructure with Transportation themes

As noted in Part 1, during the presidential campaign, candidate Joe Biden called for "Sparking the second great railroad revolution." Biden pledged to "make sure that America has the cleanest, safest, and fastest rail system in the world – for both passengers and freight."

Part 2 of this series focuses on three key issues faced by the railroad industry and how the Biden Administration could respond.

Positive Train Control Compliance

In the rail safety arena, the outgoing Trump Administration leaves behind a true gift to the newcomers in the form of widespread carrier compliance with the congressional Positive Train Control (PTC) mandate. In 2008, Congress mandated the implementation of an automatic train control system that would automatically stop trains when a switch is misaligned, or a train is operating too closely behind another train ahead, as well as in other unsafe situations. No such system existed at the time, and the complexities of developing such a system were legion. (As just one example, the system must be sufficiently complex to enable it to stop a single engine with no cars, as well as a 10,000-ton coal train at the same point in the network under the same traffic conditions.) Although the rail industry threw massive resources into research and development, it was still unable to implement a compliant system by the original deadline, necessitating a legislated extension to the end of 2020. Had the industry not been able to achieve compliance by the end of the year, the Federal Railroad Administration (FRA) would have been in the politically untenable position of having to tolerate noncompliance or order railroads to suspend service to customers wherever required by law. As it is, essentially all the freights have PTC up and running on their own systems, and there is just one location where a freight carrier must operate over a commuter line that may not achieve full compliance by the deadline.

True, there are still isolated locations where one freight railroad operates on another and has yet to achieve interoperability on the "host." The incoming Biden Administration will need to make a decision on how to address those situations, and that decision will be informed by the significance of each case. A lack of interoperability on a line segment that the "tenant" railroad can bypass may require the FRA to prohibit operations. On the other hand, it would (merely as an example) be both highly disruptive and politically untenable to preclude a major western railroad from interchanging transcontinental traffic with a major eastern railroad in Chicago. Fortunately, the near-universal compliance by owners of the lines will likely render these issues a regulatory detail, unlikely to generate political attention and controversy.

Environment and Use of Fossil Fuels

When it comes to environmental policy, railroads will be part of the center stage. Although freight railroads are fueled by fossil fuels, their fuel efficiency has made them many firm friends in the environmental community. Railroads like to boast that, thanks to steel wheels rolling on steel rails, a train can move a ton of freight 500 miles on a single gallon of diesel fuel. Still, diesel fuel is fossil fuel, and Biden has made it clear that his goal is to transition the entire U.S. economy away from all fossil fuels. No doubt this was a consideration when he said that his administration "will work with Amtrak and private freight rail companies to further electrify the rail system, reducing diesel fuel emissions." In the end, this aspirational expression may manifest itself in general support for freight rail and its near-term environmental advantages, with only modest freight rail-related steps actually being taken by the administration in pursuit of its long-term zero-emissions goal.

On the other hand, freight railroads may find themselves unwilling players in the battle over fossil fuels. In recent years, communities and environmental groups have targeted railroads transporting fossil fuels in efforts intended primarily to stop the end use of the products being transported. Coal, crude oil, natural gas and propane all move to one degree or another by rail. An activist administration could very well use the safety and economic regulation powers over railroads to discourage the transport – and thus the use – of these controversial energy sources.

Amtrak "Preference" and Litigation Concerns

President-Elect Biden's support of Amtrak, could lead to pressure (from inside the administration) on the passenger line to invoke its right to sue freight railroads before the STB. By statute, freight railroads are required to permit Amtrak to operate on their lines and are similarly obligated to give Amtrak trains "preference" over their freight trains. The freight roads have long maintained that the term "preference" falls far short of Amtrak's interpretation as "absolute priority." The reality is that in many locations on the national rail network, absolute priority would bring freight operations to a halt – an outcome with disastrous consequences for industries that rely heavily on rail service.

In recent years, Amtrak has tested the statutory right to seek damages based on allegations that the freight line has failed to provide Amtrak the required "preference." Following much convoluted litigation in the federal courts, the FRA has adopted new "metrics and standards" by which the STB is to review these cases. Essentially, the FRA has indicated what measurements should be used, how they should be interpreted and what levels of such measurements are probative in these "preference" cases. It is unclear how these new metrics and standards will interrelate with the privately negotiated master contracts that have long been in place between Amtrak and the freight carriers.

The parties have had an uneasy relationship since Amtrak was created, but they have generally found ways to coexist. However, the litigation over the past several years has not improved matters. Traditionally, Amtrak unilaterally set its schedules, largely without regard to the impact of its operations on freight traffic. In adopting the new metrics and standards, FRA strongly admonished the parties that Amtrak's schedules should be negotiated and agreed upon so as to be reasonably achievable. This admonition should go a long way toward avoiding litigation and is another gift to the incoming administration. However, even negotiated schedules may prove difficult to meet in a sufficiently reliable manner for passenger advocates.

Railroading is an outdoor sport. Traffic volumes can and do change over time, weather can slow all operations, and mechanical breakdowns of freight and passenger trains alike will happen. In short, it is easy to envision Amtrak failing to meet even reasonable negotiated schedules through no real fault of its own or its hosts. Historically, Amtrak leadership has taken a pragmatic view of these difficulties. However, if pressure is brought to bear from the new administration, Amtrak may feel that it must pursue litigation over difficulties in meeting schedules, despite the friction that it inevitably creates with the hosts upon which it depends.

20 Posts in 20 Days Leading to Inauguration Day on Jan. 20

Holland & Knight's Transportation & Infrastructure Industry Sector Group is prepared to assist industry clients in adapting to the anticipated changes by the new administration. Our team is writing new blog posts each day leading up to President-Elect Joe Biden's inauguration, with insights as to likely impacts on the various segments of the industry, including Aviation, Construction, Maritime, Freight Rail, Motor Carriers, Transit and Autonomous Transportation. Bookmark our Election Impacts on Transportation & Infrastructure resource page to follow along.

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