A Grand Bargain With UPRR?
the recent Initial Ruling on Atherton v. CHSRA underscored yet again that lines on a map are not at all the same thing as deeds to rights of way. The judge essentially signaled that the level of risk of eminent domain takings needs to be quantified at the program level, i.e. factor into the choice of preferred route. In this particular case, the biggest red flag related to the UPRR Coast Corridor ROW between Santa Clara and Gilroy, especially the section south of way point “Lick”. It lies roughly 3 miles south of San Jose Diridon, close to the intersection of Almaden Expressway and hwy 87.
However, that isn’t the only stretch of the planned network in which CHSRA will have to contend with UPRR – far from it, in fact. As we discussed on this blog back in March, 50% of the entire HSR network as planned today relies on acquiring part of a UPRR right of way or else land very close to it. Where possible, the expensive grade separations required for HSR should include adjacent legacy tracks to maximize bang per taxpayer buck.
View UPRR sections of CA HSR route in a larger map
In the discussion thread on the Initial Ruling On Atherton v. CHSRA, regular commenter Tony D. in
San Jose(?) Gilroy claimed that “Freight service in this corridor and traffic on Monterey Hwy is nil.” While that’s no doubt an overstatement, it does highlight the fact that the coast corridor isn’t actually all that busy north of San Luis Obispo. Its primary value is as as a backup freight route in case UPRR’s core route via Cajon Pass and the Tehachapis were to become unavailable for trains heading up the west coast or across to Salt Lake City, e.g. after an earthquake. Since UPRR is a for-profit enterprise, Tony surmised “that [it] will either operate or co-operate [with] high-speed rail in California. They’re not blind to the profits HSR systems are making overseas […]. I don’t think this would be a bad arrangement.”
To which another regular, SF native and Amtrak employee Jim, replied: “Well they can’t just operate it, they have to bid on it first and prove that they can provide the service infrastructure (staff, ticketing systems, the list goes on per the requirements an operator must offer) and UP doesn’t have any such thing or people to do the job. [CHSRA] wants someone who can bring experience, personnel and the other infrastructure needed for passenger travel. That means Amtrak, an airline or a foreign railway.”
Now, I don’t work for UPRR nor do I have any shares in the company or any other affiliation to it. I have no inside knowledge regarding where the company’s head is really at relative to California HSR right now. Publicly, the company still maintains that HSR trains running next to its own would be a safety hazard. Simple passing of an aerodynamically contoured high speed train has already been shown not to present a showstopper problem even for extra-tall AAR plate H cars loaded with two empty containers. Lateral sway at the top of the upper container reached a maximum at a relative speed of 110mph and declined beyond that. The amount of sway obviously depends on the track centerline distance as well, which in the California system could be larger than the usual 15′ or so (if the ROW is wide enough).
The root cause of the cited safety concerns may therefore be the quality of UPRR’s track and rolling stock maintenance program. The income generated by hosting HSR would go a long way toward addressing any deficiencies on that score. Derailment detection and automatic train protection systems would further reduce the risk of a freight train ever fouling an adjacent track and also triggering a follow-on collision.
So, the noises UPRR is making could be either a signal that UPRR isn’t really interested in avoiding derailments or, a negotiating ploy to jack up the price.
However, for the sake of argument, let’s pretend that Tony is correct and that UPRR secretly would be interested in getting back into the intercity passenger rail business, if only it were sufficiently profitable.
The experience in other countries has shown that true bullet trains can and do turn operating profits, i.e. enough to pay for running the trains, maintaining the system, insurance fees and future expansion beyond the starter line. What they cannot do is turn a total profit, i.e. service the debt on the initial capital investment as well. That difference, combined with property tax laws, is why US railroads are not voluntarily building HSR systems on their own nickel. DesertXPress is the exception that proves the rule: it would be a loss leader for getting punters/tourists/convention attendees from (Southern) California to Lost Wages and back again.
HSR opponents often cite this inability of passenger rail to fully fund its own infrastructure as evidence that it is a bad idea per se. As this blog has often pointed out, they conveniently forget the financial, energy security, environmental and social costs shouldered by taxpayers when they agree to invest in new highway lane-miles and airport runways. Fortunately, California voters showed in November 2008 they understand that moving people – as opposed to freight – just isn’t a profitable enterprise in its own right. It takes public investment to reap the macroeconomic benefits of high speed rail, which in the California system will include traveling on renewable electricity instead of distilled dino-juice.
Funding is supposed to come from federal, state and local governments plus private investors. The ~$33 billion estimate for the starter line reflects the cost of planning, land purchases, engineering, constructing the line plus yards and maintenance facilities, buying a fleet of trains and developing the human resources needed for safe and cost-effective operations. In its 2008 Business Plan (PDF p23), CHSRA estimated the cost of acquiring the ROW for the starter line at 7% of the the total, i.e. roughly $2.3 billion. This assumed that required land already in public hands (Caltrain, SCRRA, Caltrans etc.) would be made available at no cost.
However, since UPRR is an interstate freight railroad that ostensibly delivers a public service so valuable Congress even delegated limited powers of eminent domain to it, the chances of successfully exercising eminent domain against UPRR itself are slim to none. That means the company has CHSRA over a barrel and can more or less name its price. The initial ruling in Atherton v. CHSRA has now strengthened its hand even further.
The operations of the California HSR are supposed to be put out to tender via long-term contracts, separately for the infrastructure (a local monopoly) and the trains (competition possible). The idea was that these tenders will be entirely divorced from the process of acquiring land and getting the infrastructure built. However, there’s more than one way to skin a cat. As we explored in the post on HiSpeed Services And Branding, there is always the option of bartering for ROW rather than paying for it up front.
Any railroad that owns a ROW that CHSRA would like a slice of could negotiate for the initial contract to operate the HSR infrastructure and/or for easements such as deeply discounted slots on the timetable or blocks of seats on trains to be operated by someone else. One-off asset sales generate cash, but railroad operators are in the business of running trains. Participating in the operations of the HSR system could therefore be an attractive proposition for them.
If CHSRA could somehow strike a statewide “Grand Bargain” barter deal with UPRR, that would solve most of its ROW issues at a stroke. It would also allow the Authority to claim UPRR as a private investor-in-kind. After all, a dollar you don’t need to spend is almost as good as one you raise from financial institutions. Some lateral thinking could go a long way here.
Whether this would be a genuine bargain for taxpayers or a Faustian one obviously depends on the fine print, of which there would no doubt be copious amounts. Giving up on the opportunity to put the initial operations contracts out to open tender, reducing its scope and/or saddling it with easements would be no small matter. Negotiators would also need to put a dollar figure on the value of grade separations plus fences plus CCTV surveillance of the entire ROW width, including all legacy freight/passenger tracks, to a freight operator. Cameras and software could conceivably even detect a derailed bogie on a freight car before that train’s crew does. The wireless signaling and train control infrastructure of the HSR network could be leveraged to implement interoperable PTC functionality on the heavy freight tracks at sharply lower incremental cost. If all traffic on the entire ROW is controlled by a single infrastructure operator, the accident liability issue should become much more tractable.
Add to that the potential for light rail freight, i.e. driverless High Speed Cargo trainsets coupled to passenger trains during the day plus a limited number of much slower cargosprinter or intermodal trains at night. Such trains would need to negotiate the 3.5% gradients in mountain crossings. To avoid excessive track maintenance overheads, the axle load on HSR tracks is strictly limited, typically to 17 metric tonnes, including the power cars/locomotives. That’s only possible with non-compliant equipment, so light freight trains would be restricted to the isolated HSR network augmented with spurs to transshipment facilities in selected locations. The business model would be focused on getting high value goods shipped quickly and trucks off the roads. In technical, regulatory and business model respects, light freight would be entirely divorced from conventional heavy freight rail.
In the simplest scenario, UPRR could limit its involvement with HSR to operating and maintaining the infrastructure according to timetables negotiated with the train operator(s).
However, the company could go one step further and negotiate to also operate some or even all of the trains wholesale, by which I mean it would employ the drivers and maintain the rolling stock. Dealing with HSR and light freight equipment would involve a learning curve, but there would be plenty of time to build up a new business unit with a skilled workforce, headed up by managers poached from foreign railways that already have plenty of HSR experience. Keep in mind that UPRR has been in business for 147 years and that during most of that time, its progenitors did operate passenger trains. Companies can and do change their business models all the time, just look at how Apple Computer now makes cell phones and sells music online.
The retail end of high speed passenger trains, i.e. marketing, selling tickets, cabin service and cleaning, could be left to organizations that already have relevant expertise in the state: heavy rail transit operators (Amtrak California, Caltrain, Metrolink et al.), perhaps airlines already plying the California Corridor. Some of these might prefer to own their trainsets, others could charter them from UPRR in whatever livery they want. Similarly, UPRR might be content with just running the trains for established logistics players like FedEx, UPS etc. and not handle individual cargo items. On the other hand, retailing intermodal freight and cargosprinter service might well be something UPRR would want to do itself.
1) Needless to say, the bigger the bite of the HSR cherry UPRR would get without having to bid for it in open tender, the more value that would represent. At some point, it would exceed the total represented by the ROW offered. Conceivably, UPRR might even have to throw in track construction services, even cash, to get the deal it wants. That’s fine, every dollar of private investment, in kind or regular, would let CHSRA stretch taxpayer dollars (both state and federal) that much further.
2) As part of any Grand Bargain, UPRR would formally transfer the ROW (land or underground/air rights) for the HSR tracks to a new entity owned by the state of California, possibly others as well. UPRR would not have a stake in this entity. This arrangement would let it avoid a massive hike on its property taxes while ensuring the new entity will be able to put the follow-on operations contracts out to a genuinely open tender some (large) number of years later.
3) Since infrastructure operations and maintenance and possibly train maintenance will be natural monopolies, the rates UPRR would be permitted to charge for these services would have to be spelled out in the Grand Bargain contract and regulated thereafter to prevent gouging. A cap on fee income would give UPRR an incentive to participate in track construction to make sure it’s done right. The company does not yet have the specialized expertise required to actually design and build the track and overhead catenary geometry for a safe HSR system, that’s where experienced foreign engineering consultants come in. UPRR would contribute its expertise in general track construction plus material logistics and some brawn plus supervisors on site. The idea is to let them learn on the job so they can maintain the high-tech infrastructure after it’s built.
4) BNSF might be interested in a similar Grand Bargain in the Central Valley, perhaps even on its Trancon line out of the LA basin. HSR infrastructure operations are a natural local monopoly, with appropriate care it’s perfectly possible to hand over control to another operator at well-defined interface locations. Air traffic controllers do it all time.
5) All of the above fun and game are moot if neither UPRR nor BNSF are interested in participating in HSR operations in any way. That is their prerogative, of course.