Railroads Would Get Until 2020 to Add Crash Systems in Plan

Railroads including Warren Buffett’s Burlington Northern Santa Fe (BNI) would get five more years to install crash-avoidance technology -- a project estimated to cost about $12 billion -- under a proposal by the U.S. House transportation committee.

The deadline would move to Dec. 31, 2020 from Dec. 31, 2015, according to a draft copy of legislation to provide long- term funding for highway and transit programs obtained by Bloomberg News. The House Transportation and Infrastructure Committee is scheduled to release the draft tomorrow.

A 2008 law enacted after a California train collision killed 25 people requires railroads to install technology to stop or slow trains to prevent crashes on lines used to transport passengers or toxic chemicals by the end of 2015. Some railroads say that the necessary technology won’t be available in time to meet that deadline.

“The idea that you could do this on a more rational, planned basis” is a win for railroads, Tony Hatch, an independent transportation analyst based in New York, said in a phone interview. “You’re still going to spend the same, maybe even more, amounts of money but you’ll be able to do it over a longer period of time.”

The Federal Railroad Administration estimated in 2010 it would cost railroads $13.2 billion over 20 years to install and maintain the systems. When the agency last year proposed changes to the rule that would exempt as much as 14,000 miles of track, it said railroads would save as much as $1 billion over 20 years.

Wabtec Corp. (WAB), the maker of the only on-board computer technology approved by the Federal Railroad Administration to comply with the mandate, fell 4.1 percent to $69.16 in New York at the close of trading. That’s the steepest drop since Nov. 9. in the Wilmerding, Pennsylvania-based company’s share price.

Most Expensive Mandate

The requirement is the most expensive U.S. government mandate in history for the country’s railroads, according to the Association of American Railroads, the Washington-based trade group that represents the industry.

The association has said the rule’s costs outweigh its benefits and that railroads might not be able to develop and test the technology in time to meet the deadline.

CSX Corp. (CSX) Chief Executive Officer Michael Ward said last week that a 2015 deadline wasn’t possible because the technology necessary wouldn’t be available in time. The Jacksonville, Florida-based railroad, the largest in the eastern U.S., will spend about $250 million this year toward fulfilling the mandate, Ward said on an earnings conference call.

CSX, Union Pacific

Union Pacific Corp. (UNP), the largest U.S. railroad by revenue, projects it will spend about $2 billion through 2015, a $600 million increase over last year’s estimate, to install the technology, Lance Fritz, executive vice president of operations, said on a Jan. 19 earnings call.

The Omaha, Nebraska-based railroad spent $400 million through 2011 on the crash-avoidance technology known as positive train control and plans to invest about $335 million this year, Fritz said. While the 2015 implementation date poses “some pretty big challenges,” the company is making a “good-faith effort” to meet the deadline, he said.

California Democratic senators Dianne Feinstein and Barbara Boxer last week wrote to Joseph Szabo, head of the Federal Railroad Administration, saying they are “deeply concerned that falling behind” on deploying the new systems “could prompt attempts to extend the 2015 deadline.”

The senators urged Szabo to include in the railroad agency’s fiscal 2013 budget request a description of how the amount it is seeking will be enough to ensure that railroads meet the deadline. Feinstein and Boxer also asked Szabo to give Congress a status report on railroads’ progress in implementing these safety systems.

To contact the reporter on this story: Lisa Caruso in Washington at lcaruso7@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net

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