Railroads Save $775 Million on Crash-Avoidance Systems

U.S. railroads including Warren Buffett’s Burlington Northern Santa Fe LLC will get some relief from a $10 billion regulation requiring them to install crash-avoidance technology.

Railroads won’t have to add so-called positive train control on lines that don’t carry passengers or toxic materials, Cass Sunstein, administrator of the White House Office of Information and Regulatory Affairs, said today.

The industry will save $335 million in five years and as much as $775 million over two decades, according to a White House statement. The administration estimated savings of as much as $1 billion when it first discussed reducing the scope of the Federal Railroad Administration rule last year.

“This very fancy high-tech technology needn’t be imposed where the safety risk is very low,” Sunstein said at an American Bar Association meeting in Washington today.

The change in the positive train control mandate was part of a White House initiative announced today to repeal or modify five regulations affecting hospitals, gasoline stations, railroads and local governments.

California Crash

Railroads won’t have to install the crash-avoidance technology on about 10,000 miles (16,090 kilometers) of track, the railroad administration said in a statement.

“As a result of this review, the revised regulations will provide greater flexibility to railroads and save hundreds of millions of dollars even as they improve rail safety,” FRA Administrator Joseph Szabo said in the statement.

A 2008 law enacted after a California train collision killed 25 people required railroads to install, by 2015, the technology to stop or slow trains to prevent crashes. Some railroads have said that the necessary technology won’t be available in time to meet that deadline.

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

Costs Increasing

The costs of positive train control have been going up, John Larkin, managing director of the Stifel Nicolaus Transportation and Logistics Research Group, said in a note today. CSX Corp. (CSX) had intended to spend $1.1 billion, and that’s risen to $1.7 billion, Larkin said. Union Pacific Corp. (UNP) is planning to spend $2 billion, up from $1.4 billion.

Railroads stand to gain more if Congress pushes back the installation deadline, Larkin said.

“In our view, that 2015 deadline was never realistic,” Larkin said. “We believe an extension of the deadline would be a more significant positive to the rails than the regulatory changes announced this morning.”

The Association of American Railroads challenged the positive-train control requirement, which it called the most expensive regulation ever imposed on the industry, in a lawsuit filed in March 2010. The group and the railroad administration reached a settlement in March 2011 that included revisiting where the technology would be required.

Industry Pledges Cooperation

The industry will work with regulators to implement elements of positive train control, AAR President Edward Hamberger said in a statement.

“Ensuring the safest possible transport of all rail passengers and commodities, particularly highly toxic chemicals, remains the freight railroads’ highest priority,” Hamberger said.

The industry wanted the administration to use a 2015 map of track use instead of the 2008 version that had been included in an earlier rulemaking, Holly Arthur, a AAR spokeswoman, said in an interview.

“This is what we have been looking for in terms of where to put positive train control,” Arthur said.

The Washington-based trade group’s members include the largest freight railroads operating in the U.S., including Burlington Northern Santa Fe, CSX and Norfolk Southern Corp. (NSC)

To contact the reporter on this story: Jeff Plungis in Washington at jplungis@bloomberg.net

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.