Amtrak's next challenge: New rail competition

Posted by Fred Frailey
on Thursday, October 13, 2011

Amtrak President Joe Boardman was in St. Louis today to deliver the good news: a record year in ridership for Amtrak; the eighth record year, in fact, out of the past nine. This is especially noteworthy in light of declining gasoline prices in recent months, a soft economy, and a mass of cancellations and extremely late arrivals this past summer for such important long-distance trains as the California Zephyr and Empire Builder.

But I can’t help thinking that Amtrak’s upbeat chief executive must wonder if he’s walking around these days with a target painted across his torso. Powerful Rep. John Mica wants to strip away Amtrak’s Northeast Corridor and peddle it on Wall Street. A U.S. House of Representatives subcommittee proposes an Amtrak subsidy for fiscal 2012, which began Oct. 1, that would cripple the company (the U.S. Senate hasn’t yet acted). Rival companies keep taking over operation of commuter services traditionally run under contract by Amtrak. And last but not least, the Federal Railroad Administration is preparing to put up for bid to other interested parties one or two of Amtrak’s routes as an experiment.

I must admit that this last bit takes me by surprise. The provision for awarding other railroads the right to run Amtrak routes was a little-noticed (at the time) provision of the Passenger Rail Investment and Improvement Act of 2008, commonly known as PRIIA. Rumor has it that a certain Amtrak vice president wrote chunks of that law, but certainly not this piece of it. Rep. Mica, R-Fla., and Rep. Bill Shuster, R-Pa., take credit for this section of PRIIA. Recently, FRA posted a rulemaking notice in the Federal Register that outlines how it will all work, or not work, as the case may be.

First of all, FRA admits it has no legal authority to subsidize another carrier and says it will go back to Congress to get it. But FRA is also more than two years late implementing what was to be a five-year experiment due by statute to end in2013, and authorization for an extension would be needed from Congress, it appears. Finally, the language of the law appears to limit bidders to those railroads whose tracks are already being used by whatever route is bid on.

But enough of those piddling details. What’s the skinny on this provision? According to Bloomberg News, commuter train operators Herzog, Keolis America, and Veolia Transportation North America all are interested in bidding to run one of the no more than two intercity routes FRA would put up for temporary adoption. Add to that the rumored interest of FirstGroup PLC, which owns Greyhound, the intercity bus company, and operates passenger trains in Great Britain.

Just which intercity routes these companies might bid on is unknown. Veolia told Bloomberg’s Lisa Caruso its eyes are on all three of the busy Amtrak corridors in California as well as two radiating out of Chicago. Amtrak would be permitted to counter bid, and whichever entity is judged by FRA to require the least subsidy and to possess a sound business plan gets the nod. If Amtrak isn’t the winner, the PRIIA legislation specifies that it must grant the operator access to its reservation system, stations, and facilities, which I assume includes equipment.

I spoke today to Bill Bronte, who runs the Rail Division of California DOT, which subsidizes Amtrak trains in that state to the tune of some $100 million a year. Obviously, he would be interested in anything that would reduce the amount of that subsidy without sacrificing service quality. PRIIA also mandated that states pay all and not just some of the full costs of operating short-distance Amtrak trains; this provision goes fully into effect in 2014 and will cost California an additional $25 million a year on just the Pacific Surfliner corridor, Bronte says. “I want to see how all the details play out, including the numbers,” he adds. “I am concerned with continuing the way we are, versus having an opportunity to address the costs.”

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But we’re getting ahead of ourselves. Ray Chambers is executive director of the Association of Independent Passenger Rail Operators, whose members include Herzog, Keolis, and Veolia. He concedes that the law will probably need at least one change, extending the time for a pilot to run, if  this experiment is to ever get off the ground. “Nobody is going make a bid for something that must end a year or so after it begins,” he says. Chambers applauds  FRA for recognizing this fact in the proposed rule making. Plus, that eligibility requirement seems to restrict potential bidders to Amtrak’s current roster of host railroads.  Every Class 1 contacted by Trains today expressed no interest in the whole idea, although that could easily change.  Presumably, a Class 1 could partner with one of AAIRO’s members.

Competition in intercity passenger service is desirable, provided you come up with wise ground rules that discourage lowball subsidy bids that lead to a collapse of service standards. But right now, this dog isn’t ready to hunt. If congressmen Mica and Shuster really want to experiment with competition, they need to revise the legislation to allow more time and maybe widen the field of eligible bidders. And next time, FRA had best not sit on its buns for two years before starting to implement the mandate of Congress. — Fred W. Frailey


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