Commuter Rail: Information and Guidance Could Help Facilitate Commuter and Freight Rail Access Negotiations
Published: 2004-01-09T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Commuter and freight rail services have the potential to play increasingly important roles in the nation's economy and transportation system as demand for these services increases. Because the cost of building new infrastructure can be costprohibitive, commuter rail agencies typically seek to use existing infrastructure--which is primarily owned by private freight railroads. Consequently, commuter rail agencies must negotiate to purchase, lease, or pay to access the existing infrastructure from freight railroads. GAO was asked to examine (1) the challenges commuter rail agencies and freight railroads face when negotiating and sharing rights-of-way, (2) the actions that help facilitate mutually beneficial arrangements between commuter rail agencies and freight railroads, and (3) the role the federal government plays in negotiations between commuter rail agencies and freight railroads.
section_title: What GAO Found
paragraphs: Freight railroads and commuter rail agencies face a number of challenges when negotiating agreements and sharing access to the same rights-of-way, including reaching agreement on compensation, capacity, and liability issues. For instance, in negotiating the agreements, freight railroads typically require that the commuter rail agency contractually indemnify them from any liability in the event of a commuter rail accident and procure a certain level of insurance coverage. Officials from freight railroads said they seek these provisions to protect their shareholders from the potential costs associated with commuter rail accidents. However, accepting these liability terms--notably the expense of maintaining a high level of insurance--can be problematic for the commuter rail agencies. In 1997, Congress limited the aggregate damages that may be awarded to all passengers from claims from a particular rail accident to $200 million and permitted providers of rail transportation to enter into indemnification agreements. However, we found some confusion within the commuter and freight rail community as to whether the liability cap applied to commuter rail agencies, which could result in problems during negotiations. After reviewing the legislation, we have concluded that the liability cap applies to commuter rail operations. Although there is no exact formula for success, officials from commuter rail agencies and freight railroads identified actions that can help facilitate mutually beneficial arrangements--understanding each other's position, identifying and using incentives to leverage cooperation, securing adequate and flexible funding, and establishing good lines of communication. Although commuter rail agencies and freight railroads agreed on actions that could help facilitate win/win arrangements, they disagreed on the appropriate role for the federal government in negotiating access or resolving disputes between commuter rail agencies and freight railroads. The Federal Transit Administration (FTA), Federal Railroad Administration, and Surface Transportation Board (STB) have responsibility for different aspects of rail transportation. For example, FTA helps fund the planning and development of eligible commuter rail projects. However, none of the three agencies play a role in commuter rail access negotiations. Therefore, they have not provided any guidance or information to commuter rail agencies or freight railroads to facilitate and inform negotiations.

section_title: Letter
paragraphs: As highways become increasingly congested, communities are looking to  different forms of public transit for relief. An increasingly popular choice  is commuter rail—passenger trains operating on railroad tracks to provide  regional rail service. For instance, 18 transit agencies currently provide  commuter rail service in the United States, and an additional 19 commuter  rail projects are in various stages of planning or development in  communities across the nation. An attractive feature of this type of transit  service for communities is that commuter rail can operate on existing  railroad rights-of-way, eliminating the need to build a new rail corridor,  which could be cost prohibitive. However, the majority of existing rail  rights-of-way in the United States are owned by private freight railroads.  Consequently, commuter rail agencies—which have no statutory rights of  access to freight railroads’ tracks—must often negotiate with the freight  railroads to purchase, lease, or pay to access their rights-of-way.
As demand for commuter rail services is increasing in communities across  the country, the demand for freight transportation services is also growing.  For example, the Department of Transportation (DOT) estimates that  freight rail tonnage will increase by about 50 percent from 1998 to 2020.  The rail network, like other modes of transportation, has capacity  limitations—that is, only a certain amount of rail traffic can be efficiently  and safely accommodated by existing infrastructure. When commuter rail  trains use freight-owned rights-of-way, the amount of capacity, or the  number of train “slots,” available for freight trains may be reduced. Thus,  freight railroads must balance requests by commuter rail agencies to  purchase or use their tracks against their ability to serve their current  freight customers as well as their efforts to grow their freight business in  the future.
As you requested, this report discusses (1) the challenges freight railroads  and commuter rail agencies face when negotiating agreements and sharing  access to the same rights-of-way, (2) the actions that help facilitate  mutually beneficial arrangements between freight railroads and commuter  rail agencies, and (3) the role the federal government plays in access  negotiations between freight railroads and commuter rail agencies. To  address these objectives, we visited 8 commuter rail agencies and 4 Class I  freight railroads across the nation. During these site visits, we interviewed  senior level management; toured operation, dispatching, and maintenance  facilities; and/or traveled on the commuter rail system. We conducted  structured interviews with officials from the other 29 commuter rail  agencies—both existing and proposed—and the remaining 3 Class I freight  railroads. We also interviewed officials at the Federal Transit  Administration (FTA), Federal Railroad Administration (FRA), Surface  Transportation Board (STB), and the National Railroad Passenger  Corporation (Amtrak) as well as representatives from a variety of industry  associations. Additionally, we reviewed federal laws and regulations; court  cases and research related to the rail industry; and internal documents of  federal agencies, commuter rail agencies, and freight railroads. We  conducted our work from June through November 2003 in accordance  with generally accepted government auditing standards. (See app. I for a  more detailed discussion of the report’s scope and methodology.)
subsections: section_title: Background
paragraphs: Commuter rail is a type of public transit that is characterized by passenger  trains operating on railroad tracks and providing regional service (e.g.,  between a central city and adjacent suburbs). Commuter rail systems are  traditionally associated with older industrial cities, such as Boston, New  York, Philadelphia, and Chicago. However, over the past decade,  commuter rail systems have been inaugurated in such cities as Dallas and  Seattle as communities sought to ease congestion on their roads. Today,  there are 18 commuter rail agencies throughout the country. (See fig. 1.) In  the first quarter of 2003, commuter rail systems provided an average of 1.2  million passenger trips each weekday. Advocates of commuter rail  contend that it provides a number of public benefits, including reduced  highway congestion, pollution, and energy dependence. Moreover,  commuter rail service can operate on existing rights-of-way, which  eliminates the time and significant expense associated with constructing  new infrastructure. The potential benefits ascribed to commuter rail have  stimulated interest in this type of public transit in many communities  across the country; as a result, many communities are planning to provide  commuter rail service. Specifically, as figure 1 shows, 19 commuter rail  projects are currently in various stages of planning or development in  communities across the nation. All of the proposed commuter rail  agencies have purchased or plan to purchase, lease, or pay to access  existing rights-of-way from freight railroads or other entities.
As demand for commuter rail services is increasing in communities across  the country, the demand for freight transportation services is also growing.  The nation’s private railroads are important providers of freight  transportation services. Currently, 7 Class I railroads—CSX  Transportation (CSX), Burlington Northern Santa Fe Railway Company  (Burlington Northern Santa Fe), Union Pacific Railroad Company (Union  Pacific), Norfolk Southern, Kansas City Southern Railway Company,  Canadian National Railway, and Canadian Pacific Railway—and over 500  short line and regional railroads are operating in the United States. These  railroads operate the nation’s freight rail system as well as own the  majority of rail infrastructure in the United States. (See fig. 2.) According  to the Association of American Railroads (AAR), freight railroads carried  about 42 percent of domestic intercity freight (measured by ton miles) in  2001. Railroads are the primary mode of transportation for many products,  especially for such bulk commodities as coal and grain. In addition,  railroads are carrying increasing levels of intermodal freight (e.g.,  containers and trailers), which travel on multiple modes and typically  require faster delivery than bulk commodities. The demand for freight rail  service is projected to increase in the future. For example, DOT estimated  that freight rail tonnage will grow by almost 50 percent from 1998 to 2020.  According to advocates for the freight rail system, transporting freight by  rail offers a number of public benefits, including reducing congestion on  the highways, lowering highway costs, increasing fuel efficiency, and  supporting military mobilization.
Historically, America’s rail corridors have been used for both freight and  passenger purposes. At one time, both passenger and freight services were  operated by the private railroads. The private railroads were required by  federal law to maintain their passenger services. However, by the 1970s,  American freight railroads were in serious financial decline. Congress  responded by passing the Rail Passenger Service Act of 1970, which  created Amtrak to provide intercity passenger rail service because existing  railroads found such service unprofitable. In creating Amtrak, Congress  relieved freight railroads of the requirement to provide passenger service.  In return, Amtrak operates primarily over tracks owned by freight  railroads, and federal law requires that freight railroads give Amtrak trains  priority access and charge Amtrak an incremental cost—rather than the  full cost—associated with the use of their tracks. Congress also passed the  Railroad Revitalization and Regulatory Reform Act of 1976 and the  Staggers Rail Act of 1980, which reduced rail regulation and encouraged  greater reliance on competition to set rates. Since these acts were passed,  the railroad industry has become more stable, as railroads continue to  consolidate to reduce costs, become more efficient, and improve their  financial health.
Unlike Amtrak, commuter rail agencies do not possess statutory rights of  access to freight railroads’ tracks. If a commuter rail agency wants to use a  freight railroad’s existing infrastructure, it must negotiate with the freight  railroad to purchase, lease, or pay to access the railroad’s right-of-way. If  the two parties reach agreement, there are often multiple documents  detailing this agreement, including the purchase, lease, or access  agreement and the shared use agreement. The number and type of  agreements vary by the parties involved and location. The contents of  these agreements may also vary, but they are likely to address a number of  important issues, including dispatching trains, maintenance of rights-of- way, liability, capital improvements, and access fees, among other things.  Hence, the agreements will govern how the two parties will operate on the  rights-of-way they share. The period of time covered by the agreements  and amount of time required to negotiate the agreements also varies. For  example, some commuter rail agencies and freight railroads reach  agreement in a manner of months; negotiations of other commuter rail  agencies and freight railroads can extend over a period of years.
As commuter rail agencies buy or lease rights-of-way from freight  railroads, they create unique and complex relationships with the freight  railroads. As table 1 shows, about half of the existing and proposed  commuter rail agencies lease or plan to lease rights-of-way from freight  railroads for their operations. An even greater number of these agencies  own or plan to purchase at least a portion of the rights-of-way from freight  railroads. (See tab. 1.) When the commuter rail owns rights-of-way, there  is a role reversal between the freight railroad and the commuter rail  agencies from the typical relationship—that is, if a freight railroad uses the  commuter rail agency’s rights-of-way, the commuter rail agency is the host  and the freight railroad is the tenant. Moreover, as table 1 shows, a number  of existing and proposed commuter rail agencies may be both the host and  tenant in certain situations, creating a unique relationship with the freight  railroads with whom they interact.
Three federal agencies—FRA, FTA, and STB—are responsible for different  aspects of commuter or freight rail in the United States. In particular, FRA  administers and enforces the federal laws and related regulations that are  designed to promote safety on railroads, such as track maintenance,  inspection standards, equipment standards, and operating practices.  Freight railroads and commuter rail agencies are subject to FRA  regulations. FTA is the primary federal financial resource for supporting  locally planned, implemented, and operated transit capital investments. As  a form of public transit, commuter rail projects are eligible for FTA  funding. Unlike FRA and STB, FTA is not a regulatory agency. STB is  responsible for the economic regulation of interstate surface  transportation, primarily freight railroads, within the United States. STB  has jurisdiction to resolve compensation and access issues between  freight railroads and Amtrak in the event of an impasse in negotiations.  Proposed legislation (H.R. 2192) would give STB the jurisdiction to order  agreements between freight railroads and commuter rail agencies that  have reached an impasse during negotiations. The legislation would also  grant commuter rail agencies the same right of access to freight railroads’  rights-of-way that Amtrak currently possesses. In May 2003, the proposed  legislation was referred to the Subcommittee on Railroads, House  Committee on Transportation and Infrastructure. As of December 2003,  the proposed legislation has not been moved out of the subcommittee.
section_title: Commuter Rail Agencies and Freight Railroads Face Numerous Challenges in Negotiating and Sharing Rights-of-Way
paragraphs: According to officials from commuter rail agencies and freight railroads,  negotiating and sharing access to the same rights-of-way can be  challenging. Although they cited a variety of challenging issues, there was  overall agreement among commuter rail agencies (both existing and  proposed) and freight railroads that reaching agreement on compensation,  capacity, and liability issues presents the most problems during  negotiations. For example, commuter rail agencies and freight railroads  may disagree as to whether there is adequate capacity available to  accommodate commuter trains and/or what capacity enhancements (e.g.,  additional tracks) are needed to accommodate the commuter rail service.  Until the commuter rail agencies and freight railroads reach agreement,  the commuter rail project may not move forward. If the parties  successfully reach agreement and the commuter rail service begins  operations, there are yet more day-to-day challenges that the commuter  rail agency and freight railroad will have to work through when sharing  the same rights-of-way. Officials from commuter rail agencies and freight  railroads described a number of challenges in sharing the same rights-of- way; however, the most commonly cited problems were issues associated  with dispatching trains and maintaining the rights-of-way.
subsections: section_title: Negotiating Mutually Beneficial Agreements Is Difficult
paragraphs: Officials from commuter rail agencies and freight railroads cited a variety  of challenges in negotiating agreements. However, there was overall  consensus about the most significant challenges. These challenges can be  grouped into three issues: compensation, capacity, and liability.  Depending on how long it takes the commuter rail agencies and freight  railroads to resolve these and other issues, the amount of time required to  negotiate agreements can range from months to years. Given the growing  demand for commuter rail and freight rail services and financial pressures  on the rail industry, reaching agreement will likely become even more  difficult in the future.
subsections: section_title: Agreeing to a Price Can Be Challenging
paragraphs: Officials from both commuter rail agencies and freight railroads reported  that negotiating a mutually agreeable price for the freight-owned rights-of- way is challenging. Like other transactions, there is often a natural tension  between the seller and buyer—that is, the seller wants to obtain the most  money from the transaction possible, and the buyer wants to keep the  price as low as possible. In addition to this natural tension, the commuter  rail agencies and freight railroads cited reasons why they believe the other  party’s compensation offers or demands can be too high or low, making it  difficult to reach agreement.
From the freight railroads’ perspective, the commuter rail agencies’  compensation offers are often inadequate. Officials from freight railroads  and AAR commented that a common misconception is that rail  infrastructure is public property. According to these officials, this  misconception leads people to assume that the public should be able to  use the railroads for a minimal cost. In reality, most rail infrastructure in  the United States is owned by private freight railroads that must generate  sufficient profits to survive. This can be difficult given the intense  competition within the transportation marketplace and the capital- intensive nature of railroads. According to AAR, the financial health of the  freight railroads has improved since the enactment of the Staggers Act;  however, overall the freight rail industry does not earn its cost of capital,  and the railroads must borrow money from commercial sources for much  of their capital expenditures. It is with this financial backdrop that freight  railroads negotiate with commuter rail agencies. Hence, when negotiating  a purchase agreement for their rights-of-way, freight railroads typically  expect the price to reflect the fair market value, which is a function of the  limited commodity and the high demand for its use. Similarly, when  negotiating a lease or access agreement, freight railroads generally want to  be compensated for all operating, capital, and other costs associated with  hosting commuter rail trains. This would include both direct costs, such as  costs of dispatching trains and maintaining the rights-of-way, and indirect  costs, such as opportunity costs. For example, when a commuter train fills  a train slot, the freight railroad loses the opportunity to use the slot for its  own purposes or to lease it to another freight railroad at a premium price.  According to freight railroads, when they are not compensated for all of  the costs incurred from hosting a commuter rail train, the result is that the  freight railroads subsidize the commuter rail service. Although the freight  railroads recognized the potential public benefits of commuter rail service,  they argued that they should not be forced to bear the costs of providing  such benefits.
In contrast, from the commuter rail agencies’ perspective, freight  railroads’ compensation demands are often too high. Officials from  commuter rail agencies stated that they have limited financial resources.  Notably, commuter rail agencies usually rely on public funds to bridge the  gap between operating and capital costs and farebox revenue. Officials  from APTA and a commuter rail agency also suggested that the price  should reflect all of the benefits commuter rail agencies bring to the table.  For example, commuter rail agencies could invest in and improve the  freight-owned rights-of-way through projects designed to accommodate  commuter rail trains, such as improving grade crossings and adding tracks.  These projects would benefit the freight railroad’s operations as well as  the commuter rail service. Finally, if the right-of-way is not fully utilized,  the commuter rail service serves as a stream of revenue that the freight  railroad would not have otherwise received.
section_title: Capacity Issues Are Also Problematic during Negotiations
paragraphs: Another challenge in negotiations is the issue of capacity. The number of  trains that can pass over a line of track is limited. If the line is full, or at  capacity, additional trains cannot be accommodated unless enhancements  are made to increase the capacity of the line. Capacity enhancements can  range from adding new tracks to increasing height clearances of tunnels.  (See fig. 3 for an example of a capacity enhancement.) The amount of  capacity available varies by line of track. Determining whether capacity is  available and/or what capacity enhancements are needed to accommodate  additional trains on a particular line is a subjective exercise. For example,  depending on the assumptions used, capacity studies of the same line can  produce different results. Consequently, capacity issues can become  contentious during negotiations.
From the freight railroads’ perspective, freight service is their core  business, and their ability to efficiently move freight through their systems  must be protected. Thus, officials from the freight railroads insist that they  must protect their systems’ capacity to handle today’s freight traffic as  well as tomorrow’s anticipated traffic growth. According to the AAR, some  rail lines do not currently have capacity available for commuter rail  operations, or expected increases in freight traffic will consume the  available capacity unless capacity is expanded. In determining what  capacity enhancements are needed to accommodate commuter rail  service, officials from the freight railroads generally argue that the  commuter rail agency must “keep them whole”—that is, their ability to  serve their freight customers must not be degraded or impinged upon  because of the presence of the commuter rail service. Freight railroads  also consider the need for additional capacity enhancements in the future  when negotiating with commuter rail agencies. In particular, a freight  railroad official noted that when adding capacity, it is common practice in  the rail industry to “pick the low hanging fruit”—that is, construct the  cheapest and most cost-effective enhancement. If the cheapest and most  cost-effective enhancements are built for the commuter rail service, any  future capacity enhancements needed for freight operations will come at a  much higher cost, according to freight railroad officials.
From the commuter rail agencies’ perspective, freight railroads are too  conservative when estimating available capacity and/or overly optimistic  about projected freight traffic growth. Consequently, officials from some  commuter rail agencies and APTA argue that freight railroads set  excessive demands for capacity enhancements. For example, officials  from one commuter rail agency told us that a freight railroad’s cost  estimate of capacity enhancements needed to accommodate the commuter  rail service was $75 million more than the commuter rail agency’s  estimates. This difference in estimates has contributed to challenges  during the negotiations. Even if the commuter rail agencies believe the  freight railroads demands are unreasonable, they have little recourse.  Because the freight railroads own the infrastructure, the freight railroads’  assessment of capacity is the final word, according to commuter rail  agencies.
section_title: Liability Is a Major Challenge for Negotiations
paragraphs: Liability was the most frequently identified challenge by proposed and  existing commuter rail agencies and freight railroads. If a passenger rail  accident should occur, injured passengers may sue the transportation  provider for their damages. Freight railroads have been traditionally  sheltered from this exposure when they haul freight. However, when a  freight railroad allows a commuter rail service to operate over its rights-of- way, the freight railroad becomes exposed to these risks as passengers  may sue the commuter rail provider and owner of the track. Hence, freight  railroads do not want to allow commuter rail service on their rights-of-way  unless they are protected from liability.
Freight railroads generally want the commuter rail agency to assume all  risks associated with the presence of the commuter rail service. This is  often referred to as a “but for” arrangement—that is, but for the presence  of the commuter rail service, the freight railroad would not be exposed to  certain risks; therefore, the freight railroads should be held harmless.  Officials from freight railroads stated that they must take this position in  order to protect their businesses and stockholders from potential lawsuits.  As a result, freight railroads typically require that the commuter rail  agency contractually indemnify them from any liability in the event of a  passenger accident, and procure a certain level of insurance coverage to  guarantee the commuter rail agency’s ability to pay for all of the damages.  The amount of insurance required can range significantly—for example,  we heard insurance coverage requirements of $100 million to $500 million.  Several commuter rail agency and freight railroad officials commented  that the amount of insurance required has increased in recent years. For  instance, officials from one commuter rail agency told us that during  negotiations for their new agreement (their previous agreement expired),  the freight railroad informed the agency that it must carry $500 million in  insurance—double the amount the agency was required in its previous  agreement with the freight railroad. This has contributed to stalling the  negotiations between the commuter rail agency and freight railroad.  Accepting these liability terms can be financially problematic for the  commuter rail agencies. The premiums on the commercial insurance  coverage becomes an operating expense for the commuter rail agencies— and these expenses can be significant. For example, officials from one  commuter rail agency told us that their annual premium for their $125  million insurance coverage is $1.5 million. These officials also noted that  the freight railroad they share the rights-of-way with is seeking to increase  the amount of insurance the commuter rail agency must maintain from  $125 million to $500 million, which would significantly increase its annual  premium. Officials from another commuter rail agency estimated that their  insurance premiums would account for 20 percent of their annual  operating budget.
Recognizing the freight railroads’ exposure to liability when hosting  passenger trains on their rights-of-way, Congress established liability  provisions in the Amtrak Reform and Accountability Act of 1997 (ARAA).  Specifically, the act limits the aggregate overall damages that may be  awarded to all passengers for all claims (including punitive damages) from  a particular rail accident to $200 million. The act also permits Amtrak and  other providers of rail transportation to enter into indemnification  agreements allocating financial responsibility for passenger accidents. In  discussions with officials from commuter rail agencies and freight  railroads, we found some confusion as to whether the liability cap  established in the ARAA applies to commuter rail agencies. After  reviewing the legislation, we have concluded that the liability cap applies  to commuter rail operations on the basis of the plain language of the  statute and our review of the pertinent legislative history. However, there  are limitations to the protection the legislation provides. The legislation  does not limit damages for claims brought by nonpassengers. For example,  the legislation would not apply to claims brought by adjacent property  owners or populations that may be harmed in a hazardous materials spill  or an accident at a rail crossing. Further, because the application of this  liability cap has been untested in court, many freight railroads and  commuter rail agencies are hesitant to rely upon this statute to cover the  full extent of their potential liability. (See app. II for a more detailed  discussion of the applicability and limitations of the ARAA.)
section_title: Challenges Also Exist in Sharing Rights-of-Way
paragraphs: In addition to the challenges in negotiating agreements, officials from  commuter rail agencies and freight railroads identified a number of  challenges in the day-to-day operations of shared use rights-of-way. The  challenges cited by officials from commuter rail agencies or freight  railroads ranged from dealing with the public’s concern about additional  train traffic to safety concerns. The most frequently mentioned challenges,  however, can be grouped into two categories: dispatching and  maintenance issues.
Officials from freight railroads and commuter rail agencies frequently  identified issues associated with the dispatching of trains as an important  challenge in sharing the rights-of-way. Dispatching controls the movement  of trains through the rail network. The owner of the rights-of-way  generally dispatches all trains on those rights-of-way. For instance, when  Virginia Railway Express trains are traveling on CSX-owned rights-of-way,  CSX dispatches the Virginia Railway Express trains. Because dispatching  controls and directs rail traffic, it is key to the on-time performance of  commuter and freight trains. The success of a commuter rail service is  largely dependent on its reliability. If commuter rail passengers cannot  count on the train to be on time, they will stop using the service. Freight  railroads are increasingly providing “just-in-time” delivery for their  customers. If the freight trains carrying time-sensitive freight do not arrive  on schedule, the freight railroads run the risk of losing customers and/or  incurring financial penalties. Thus, officials from commuter rail agencies  and freight railroads want their trains to run on time. Keeping both  commuter and freight trains consistently on time, however, can be difficult  due to the amount of traffic on a corridor as well as unexpected events,  such as severe weather, which disrupts normal operations.
Officials from commuter rail agencies and freight railroads also cited  issues associated with maintenance-of-way as a significant challenge in  sharing rights-of-way. A frequently cited challenge was finding time in the  schedule for maintenance-of-way work. As traffic on the rights-of-way  increases, scheduling and performing maintenance become more difficult.  For example, if a commuter rail agency provides morning and evening  rush hour service as well as mid-day service and the freight trains operate  at night, the windows of opportunities for maintenance work are limited. If  maintenance is deferred, the tracks may deteriorate from a state of good  repair, resulting in speed restrictions for the tracks. Reducing the speed of  the traffic can further complicate efforts to keep commuter rail trains on  time. Another maintenance-of-way challenge identified was handling the  different track maintenance requirements for passenger and freight trains.  Because of the speed of passenger trains, the tracks used by these trains  must be maintained at a higher standard compared with tracks used solely  by freight trains. In addition, freight trains create more wear and tear on  the tracks because of their weight. In combination, these differences  create the need for more maintenance on tracks shared by passenger and  freight trains, compounding the problem of finding time to schedule and  perform maintenance work.
section_title: There Is No Template for Success, but Certain Actions Can Help Facilitate Good Relationships
paragraphs: According to industry representatives and officials from commuter rail  agencies and freight railroads, there is no single approach or “cookie  cutter” formula for developing mutually beneficial arrangements between  commuter rail agencies and freight railroads. A cookie cutter approach is  not possible because every situation is unique—from the parties involved  to the needs and expectations for the commuter rail system—requiring the  agreements to be tailored to the circumstances of the situation. The  characteristics of the rights-of-way, such as freight traffic density and the  physical constraints of each rail line and whether the tracks are a main or  branch line, also vary from location to location, creating unique  negotiating environments. An example of how the characteristics of the  rights-of-way can affect negotiations is Sound Transit’s efforts to extend  service from Seattle to Everett, Washington. In particular, the right-of-way  from Seattle to Everett is a main line of the Burlington Northern Santa Fe,  which experiences heavy freight traffic and serves as a critical link from  the Pacific Northwest seaports to the markets in the midwest and on the  east coast. Amtrak also uses the corridor, adding to the level of traffic on  the right-of-way. Moreover, the right-of-way is physically constrained— Puget Sound is on one side of the right-of-way and steep terrain is on the  other side, which can be prone to mud slides. (See fig. 4.) The high level of  traffic and physical constraints along this corridor have made adding  passenger trains to the existing infrastructure or adding capacity difficult  and, therefore, made negotiations between Sound Transit and Burlington  Northern Santa Fe challenging.
Although there is no template for success, officials from commuter rail  agencies and freight railroads identified conditions or actions that can  help facilitate mutually beneficial arrangements between commuter rail  agencies and freight railroads. The officials identified a number of actions,  ranging from capacity improvements strategies to legislative initiatives.  Although the officials discussed a range of ideas related to these themes,  there were several recurring suggestions, including understanding each  other’s position, identifying and using incentives to leverage cooperation,  securing adequate and flexible funding to help improve capacity and  infrastructure, and establishing good communication between both parties  (see fig. 5).
Understanding each other’s position: Although commuter rail agencies  and freight railroads are both in the rail business, they differ in many  respects. Commuter rail agencies want to have fast and predictable service  for their customers, which can clash with the railroads’ desire for flexible  scheduling and need for trains of varying lengths and speeds to meet their  customers’ shipping demands. Also, freight railroads have shareholders  while commuter rail agencies have stakeholders—that is, freight  railroads are private companies that seek to generate profits to benefit  their stockholders, and commuter rail agencies are usually public entities  that provide service to the public. In addition, commuter rail agencies are  usually concerned with relatively small, defined portions of the right-of- way. In contrast, freight railroads own and operate rail networks that span  thousands of miles and multiple states. These differences, as well as  others, result in freight railroads and commuter rail having very different  agendas and goals for the negotiations. For example, commuter rail  agencies may want to get through the negotiation process as quickly as  possible because of public pressure to begin service; however, such a rush  to reach agreement does not necessarily benefit freight railroads’  shareholders. Freight railroads will likely want to examine how the  proposed commuter rail service will affect their entire network, not just  the specific location of the proposed service. To help commuter rail  agencies better understand their position, several freight railroad  companies have developed guiding principles that they provide to  commuter rail agencies that are interested in using freight railroads’ rights- of-way. (Fig. 6 lists Burlington Northern Santa Fe’s guiding principles for  commuter rail service.) Several commuter rail agency officials also  stressed the importance of having people with freight railroad knowledge  and expertise on their teams. According to these officials, having railroad  expertise on their teams during negotiations helps commuter rail agencies  better understand the challenges faced by the railroads, speak and  understand railroad terminology, and establish credibility with the  railroads.
Identifying and using incentives to leverage cooperation: Officials  from commuter rail agencies told us that identifying and using incentives  to leverage freight railroads’ cooperation can help negotiations. According  to both commuter rail agency and freight railroad officials, using an  incentive or “carrot” can make the freight railroads more amenable to  commuter rail service by making the opportunity to host commuter rail  service more attractive. There is a range of incentives commuter rail  agencies may be able to offer, from lobbying for rail infrastructure funding  with the railroad, to seeking local tax relief, to investing in railroad  infrastructure. According to several commuter rail officials, the key is  identifying something the freight railroad wants or needs. For example,  the Utah Transit Authority (UTA) in Salt Lake City was interested in  purchasing a portion of a right-of-way owned by Union Pacific. However,  the purchase of this right-of-way would significantly diminish the ability of  Union Pacific to operate its downtown freight intermodal transfer yard. In  order to spur negotiations, UTA offered to pay the cost of relocating Union  Pacific’s facility to a site that allowed Union Pacific to upgrade its support  operations and provide for future growth opportunities. According to UTA  officials, adding this incentive helped UTA and Union Pacific reach  agreement on UTA’s purchase and lease of Union Pacific rights-of-way. In  another example, the state of Delaware financed the reconstruction of a  bridge that will provide access to an alternative freight route. In exchange,  Norfolk Southern agreed to grant Delaware’s Department of  Transportation free access to all of its Delaware rights-of-way for its  commuter rail service for a 20-year period.
Securing adequate and flexible funding: Several commuter rail  officials stressed the importance of treating the freight railroads as true  partners and acting as real customers. For instance, one commuter rail  agency official noted that commuter rail agencies should be willing to fully  reimburse the freight railroads and pay their fair share. Officials from the  freight railroads also echoed the importance of commuter rail agencies  bringing adequate funds to the negotiating table to pay for the costs they  impose.  APTA suggests that commuter rail agencies and freight railroads  can work together to obtain federal, state, or local funds for rail  improvements that benefit both parties. For example, Metra, the  commuter rail agency in Chicago, is partnering with the city of Chicago,  the state of Illinois, and six freight railroads to secure $1.5 billion in funds  for rail improvements in the Chicago area that will reduce the impact of  freight traffic on the region as well as benefit both freight and passenger  operations. In addition to adequate funding, officials from several  commuter rail agencies emphasized the importance of having the  flexibility to invest in capacity improvements outside the commuter rail  service area. Because freight railroads operate national networks, delays  on one part of the system are likely to cause ripple effects throughout the  entire network. Thus, according to several commuter rail and freight  railroad officials, sometimes the most effective way to improve commuter  rail operations or to accommodate additional trains on a given corridor is  to make improvements to the rail infrastructure 10 miles or even hundreds  of miles away from the corridor. Having the flexibility to invest funds  outside the commuter service area allows for the freight railroads and  commuter rail agencies to implement the most effective solution.
Establishing good lines of communication: Officials from many  commuter rail agencies and freight railroads stressed the importance of  early, direct, and continuous communication. Officials from both  commuter rail agencies and freight railroads noted that freight railroads  should be notified early in the planning process about proposed commuter  rail systems or expansions on their rights-of-way because the freight  railroads can help the commuter rail agencies develop realistic cost  estimates. Moreover, many freight railroads noted that hearing about such  proposals through the media or other sources sets a bad tone for  negotiations. Officials from freight railroads also commented that they  prefer to work directly with the commuter agency rather than being  pressured through the media or elected officials. As one freight railroad  official noted, when commuter rail agencies use elected officials to apply  political pressure, his company is likely to “dig their heels in” rather than  bow to the pressure. In addition to early and direct communication, a  number of commuter rail officials stated that continuous communication  with the freight railroads was important in order to identify and resolve  issues as they arise. One commuter rail official said that his agency has  daily monitoring and conference calls as well as quarterly meetings with  railroad contacts. Similarly, through the Chicago Transportation  Coordination Office, Metra works with the freight railroads that travel  through the Chicago area to coordinate freight and passenger train  movements and to address any problems as they arise. Although there was  general agreement that early communication is important, a number of the  commuter rail officials noted that the freight railroads do not want to  begin negotiations until they are sure the project is funded and moving  forward; however, the commuter rail agencies cannot secure funding and  move the project forward until they reach agreement with the freight  railroads. One official described this situation as a “Catch 22.”
section_title: Federal Government Currently Does Not Play a Role in Commuter Rail Access
paragraphs: The federal government currently does not participate in access  negotiations between commuter and freight railroads. Three federal  agencies— FRA, FTA, and STB—have responsibility for different aspects  of rail transportation. FRA is primarily focused on ensuring safe operation  of railroads; FTA’s primary role is providing funding to transit projects,  including commuter rail; and STB serves as the freight rail industry’s  economic regulator. None of these three agencies currently play a part in  facilitating negotiations between freight and commuter railroads.  Commuter rail agencies told us that they have few options if they reach an  impasse with freight railroads; as a result, they usually continue  negotiations or elevate the problem through the railroad’s chain of  command. Commuter rail agencies and freight railroads disagree on the  role they would like to see the federal government play in resolving  disputes between commuter rail agencies and freight railroads.  Specifically, most commuter rail agencies would like the federal  government to play a more active role; freight railroads generally do not  want the federal government involved except for assuring the adequacy of  funding for commuter rail projects.
subsections: section_title: FRA’s Primary Focus Is on Rail Safety, Not Access Issues
paragraphs: FRA has safety jurisdiction over all freight and passenger railroads in the  United States. FRA is responsible for promoting and enforcing rail safety,  administering railroad financial programs, conducting research and  development, and developing executive branch policy on railroad industry  issues. Both commuter rail agencies and freight railroads are subject to  FRA’s oversight. According to an FRA official, the agency’s primary role in  commuter rail issues is promoting and enforcing safety—that is, ensuring  that the commuter rail system is safe. For example, FRA has issued  regulations that establish safety standards for passenger rail cars that are  used by commuter rail agencies.
FRA does not currently play a role in commuter rail access issues.  According to FRA officials, FRA has no specific statutory authority over  commuter rail access issues. FRA officials also stated that FRA does not  have responsibilities for negotiations between commuter rail agencies and  freight railroads. Consequently, FRA is not involved in helping commuter  rail agencies negotiate agreements with freight railroads or resolving  impasses between commuter rail agencies and freight railroads. FRA also  has not issued regulations related to commuter rail access issues or issued  any guidance to assist commuter rail agencies in developing agreements  with freight railroads.
section_title: FTA Provides Funding for Commuter Rail Projects but No Assistance on Access Issues
paragraphs: Since the early 1970s, the federal government has provided a large share of  the nation’s capital investment in mass transit.  FTA is the primary  federal funding source for commuter rail projects, and much of the  investment has come through FTA’s New Starts program, which helps pay  for certain transit projects, including commuter rail, through full-funding  grant agreements. A full-funding grant agreement establishes the terms  and conditions for federal participation, including the maximum amount  of federal funds available for the project.  The New Starts program is an  important source of funding for many commuter rail projects. For  example, FTA reports that the commuter rail project in Johnson County,  Kansas proposes to use New Starts funds for 80 percent of the project’s  total capital cost of $31 million and the commuter rail project in  Washington County, Oregon proposes to use New Starts funds for 60  percent of the project’s total capital cost of $120 million. In making  funding recommendations to the Congress, FTA assesses the cost  estimates for the commuter rail projects, which would include payments  to freight railroads for purchasing, leasing, or accessing freight-owned  tracks. According to FTA officials, FTA will not award full-funding grant  agreements to commuter rail projects unless the commuter rail agency and  freight railroad have reached agreement on relevant access issues. To  obtain a full-funding grant agreement, a commuter rail project must first  progress through a local or regional review of alternatives, develop  preliminary engineering plans, and obtain FTA’s approval for final design.
Projects may receive federal funds as they advance through the planning,  preliminary engineering, and final design phases.
FTA does not currently play a role in commuter rail access issues.  According to FTA officials, FTA does not have authority over commuter  rail access issues. Consequently, FTA does not consider it appropriate to  help commuter rail agencies negotiate agreements with freight railroads or  resolve disputes between commuter rail agencies and freight railroads.  FTA officials state that because FTA has no specific statutory  responsibilities over commuter rail access issues, the agency has not  developed or issued any guidance to commuter rail agencies on  negotiating with freight railroads. Although FTA has not issued any  guidance, agency officials indicated that they encourage commuter rail  agencies to contact the affected freight railroads early in the planning  stages and to consult with the railroads as the project advances through  the stages of development. These officials stated that getting the freight  railroad’s early buy-in and assistance in developing realistic cost estimates  is important to the successful implementation of the commuter rail  project. FTA does not have any documented guidance, however, on when  the commuter rail agency should contact the freight railroad or why such  consultation is important.
section_title: STB Has No Role in Negotiations between Commuter Rail Agencies and Freight Railroads
paragraphs: STB’s mission is to ensure that competitive, efficient, and safe  transportation services are provided to meet the needs of shippers,  receivers, and consumers. Among other things, STB must determine  whether freight railroads may construct, acquire, or discontinue service  over individual rail lines, and whether proposed railroad mergers and  consolidations will be allowed. STB also adjudicates complaints  concerning the quality of freight rail service and the reasonableness of  certain freight rail rates. In making these decisions STB considers a  number of factors, including the interests of affected shippers and the  financial health of the railroad(s) involved. In carrying out its duties, STB  is charged with providing an efficient and effective forum for the  resolution of certain disputes. Because Amtrak was specifically created to  relieve freight railroads of the requirement to provide passenger service,  STB has jurisdiction to resolve compensation and access issues between  freights and Amtrak in the event of an impasse in negotiations. According  to STB officials, STB’s authority to adjudicate disputes or provide a forum  for the resolution of shipper disputes does not extend to disputes over  access between commuter rail agencies and freight railroads.
STB officials stated that STB does not currently have a role in or  responsibilities for commuter rail access issues. In particular, STB officials  noted that STB is statutorily prohibited from assuming jurisdiction over  mass transportation provided by local government authorities.  STB  officials said that STB’s jurisdiction may be extended to commuter rail in  certain circumstances, including if (1) the local government authority  providing commuter rail services meets the definition of a rail carrier; (2)  the commuter rail agency enters into a contract with Amtrak; or (3) a  commuter rail agency acquires control of a railroad and therefore meets  the definition of a rail carrier. STB officials stated that because the Board  does not have a specific statutory role in commuter rail access issues, STB  has not been involved in helping commuter rail agencies and freight  railroads negotiate agreements or resolving disputes between commuter  rail agencies and freight railroads. Moreover, STB has not issued  regulations related to commuter rail access issues, nor has it issued any  guidance to assist commuter rail agencies in developing agreements with  freight railroads.
Prior to the sun-setting of STB’s predecessor, the Interstate Commerce  Commission (ICC) played a more active role in commuter rail access  issues. In particular, the ICC’s Rail Services Planning Office provided  technical expertise and assistance to commuter rail agencies and  conducted national studies on such matters as rail and port rates and rail  mergers. The Rail Services Planning Office also examined the U.S. Railway  Association’s plan to reorganize the northeastern railroads after the Penn  Central Railroad’s bankruptcy and assessed the impact of the plan on  commuter rail agencies. According to DOT officials, the roles and  responsibilities of this office were not transferred to STB when ICC was  abolished in 1995.
section_title: Commuter Rail Agencies and Freight Railroads Have Differing Views on the Appropriate Role of the Federal Government
paragraphs: Commuter rail agencies and freight railroads do not agree on the  appropriate role for the federal government in commuter and freight rail  access issues. Although there was some difference of opinions among  individual commuter rail agencies, most commuter rail agencies would  like the federal government to take a more active role in access issues.  Officials from commuter rail agencies suggested a number of roles the  federal government could serve in negotiations or dispute resolution  between commuter rail agencies and freight railroads, ranging from  helping with the liability issue to giving commuter rail agencies the same  statutory rights as Amtrak. The most frequently cited suggestions by  commuter rail agencies were for the federal government to serve as an  arbitrator or mediator for disputes between commuter rail agencies and  freight railroads, provide additional funding for commuter rail projects  and railroad infrastructure, and provide guidance and information. In  contrast, officials from freight railroads generally do not see a role for the  federal government except for assuring the adequacy of funding for  commuter rail projects.
Officials from a number of existing and proposed commuter rail agencies  would like to see the federal government serve as an arbitrator or  mediator for disputes between commuter rail agencies and freight  railroads. Commuter rail officials often stated that commuter rail agencies  have little to no recourse if the freight railroads refuse to negotiate,  prolong the negotiations, or demand what they perceive as unaffordable  amounts of compensation or capacity enhancements. Officials from most  commuter rail agencies told us that they continue to negotiate or elevate  the problem through the railroad’s chain of command if they reach an  impasse during negotiations. These officials commented that it would be  beneficial to have a forum in the federal government that commuter rail  agencies and freight railroads could use if negotiations broke down.  Commuter rail officials emphasized, however, that the federal government  agency that served as a mediator or arbitrator must be viewed by the  industry as having rail expertise and being unbiased. Although a number of  commuter rail officials supported the idea of a federal government entity  serving as a mediator or arbitrator, a few commuter rail officials explicitly  rejected this role for the government because they were concerned it  would only further complicate negotiations.
According to some commuter rail officials, another potential role for the  federal government is providing additional funding for commuter rail  investments and railroad infrastructure. Commuter rail agencies  sometimes must pay freight railroads a significant amount of money to use  their rights-of-way. For example, one commuter agency agreed to pay for  approximately $350 million in capital improvements to a freight railroad’s  rights-of-way in exchange for access. Obtaining the necessary funds is not  an easy task for the commuter rail agencies, especially considering that  their fare box revenues do not cover their costs. Moreover, although the  federal government provides funding for capital improvements, many  commuter rail agencies are prohibited from using federal dollars for  operating expenses, such as access fees. According to commuter rail  agencies, being able to come to the negotiating table with additional funds  would help them reach agreement with the freight railroads. In addition,  commuter rail agencies noted that additional federal funding for freight  railroads’ infrastructure would also benefit commuter rail negotiations. As  discussed earlier, negotiations between commuter rail agencies and freight  railroads often get hung up on capacity issues. According to commuter rail  officials, increased federal funding for rail infrastructure could help pay  for additional capacity; moreover, it could improve the infrastructure,  which would benefit commuter rail operations.
Officials from commuter rail agencies also repeatedly suggested that the  federal government provide guidance and information, such as best  practices, tips for negotiations, and technical expertise. Commuter rail  officials said it would be helpful if the federal government provided  information on such matters as what to expect during negotiations and  what data are needed for negotiations. Providing this type of information  would establish a framework for negotiations, which could guide  commuter rail agencies and freight railroads through the negotiation  process. American Public Transportation Association (APTA) and  Association of American Railroads (AAR)—trade associations that  represent commuter rail and freight railroad interests, respectively— attempted to work together to develop a framework for negotiations  several years ago. According to representatives from APTA and AAR, both  associations believed a framework would be beneficial; however, the two  associations were unable to develop a framework and are no longer  actively continuing this effort. Commuter rail officials also said that it  would be helpful if the federal government identified and shared best  practices from past negotiations as well as provided technical assistance.  Officials from several commuter rail agencies told us that in the past they  had relied on ICC’s Rail Services Planning Office for technical expertise  and assistance, which was helpful to their agencies. A commuter rail  agency official noted that since the Rail Services Planning Office was  abolished, there is no longer a source of professional, accurate, and  unbiased information that can be used during negotiations.
In general, officials from the freight railroads we spoke to did not believe  the federal government should be involved in negotiations between  commuter rail agencies and freight railroads. There was universal  agreement among officials from all of the freight railroads we spoke to  opposing the federal government serving as an arbitrator or mediator.  According to freight railroad officials, negotiations over the purchase or  lease of rights-of-way should be private and at arms-length. They said that  limiting the negotiations to the affected commuter rail agency and freight  railroad helps to ensure that mutually beneficial arrangements will be  negotiated—that is, that they make economic and business sense for both  parties. Freight railroad officials expressed concern that having the federal  government serve as an arbitrator or mediator would result in freight  railroads being forced to accept arrangements that do not make good  business sense for the railroads. Officials from a number of freight  railroads we spoke to also expressed opposition to the federal government  granting commuter rail agencies the same statutory rights of Amtrak—that  is, giving commuter trains priority access to freight-owned tracks at the  incremental cost. Freight railroad and AAR officials stated that giving  commuter rail agencies these statutory rights would force the freight  railroads to subsidize commuter rail operations and harm their freight  business. Moreover, officials from one freight railroad characterized  extending Amtrak’s statutory rights to commuter rail agencies as the  “taking” of private property.
Rather than taking a direct role in negotiations, a number of officials from  freight railroads stated that the most appropriate role for the federal  government was serving as a source of funding for commuter rail agencies.  Freight railroad officials noted that commuter rail could provide public  benefits, such as reduced highway congestion and pollution; therefore, the  federal government, not freight railroads, should pay for these benefits. In  addition, officials from a couple of freight railroads raised concerns that  the federal funding process, notably FTA’s New Starts program, may skew  communities’ decision-making about the implementation of commuter rail  projects or create a situation where the commuter rail service is  unsustainable. For example, officials from one freight railroad noted that  there is a significant amount of pressure on proposed commuter rail  systems to make “the numbers work” so that the commuter rail option is  the preferred alternative in the New Starts evaluation—that is, commuter  rail is chosen as the preferred public transit option. According to these  officials, this pressure can result in the costs of proposed commuter rail  systems being underestimated, which may create funding shortfalls in the  future. Officials from another freight railroad also commented that the  timing of FTA’s New Starts program can create problems. For example,  local communities can use New Starts funds for feasibility studies for  proposed commuter rail projects, which can result in increased public  expectations; however, the funding of these studies is not a guarantee that  the federal government will help pay for the proposed commuter rail  system.
section_title: Conclusions
paragraphs: The expeditious flow of people and goods through our transportation  system is vital to the economic well-being of the nation. The movement of  people and goods by rail is an important part of the nation’s transportation  system and is likely to play an even greater role in the future. To ensure  that both commuter and freight rail reach their potential, it is important  that the success of one form of rail does not come at the expense of the  other. Striking the right balance is a difficult task that the federal  government, commuter rail agencies, and freight railroads will wrestle  with as demand for commuter and freight services continues to grow.
Negotiating mutually beneficial arrangements between commuter rail  agencies and freight railroads is challenging. The negotiation process can  be lengthy and tedious as commuter rail agencies and freight railroads try  to reach agreement on a number of tough and critical issues. To help  tackle these issues, officials from commuter rail agencies told us that  information and guidance, such as best practices, would be useful. Several  commuter rail officials said that they had relied on the Rail Services  Planning Office in the former ICC for technical assistance and expertise;  however, this office was not transferred to the STB when the ICC was  terminated in 1995. The federal government could act to help facilitate and  inform negotiations by providing guidance and information, such as best  practices, tips for negotiations, and information on the applicability and  limitations of the liability provisions in the Amtrak Reform and  Accountability Act of 1997, to commuter rail agencies and freight  railroads. Without accurate, unbiased guidance and information,  negotiations may stall, issues (such as the applicability of the federal  liability cap) may be needlessly reexamined, and/or decisions may be  made on the basis of questionable data. The three federal agencies—FTA,  FRA, and STB—responsible for different aspects of commuter and freight  rail have not provided such guidance and information because they do not  consider it an appropriate role for them to play. The upcoming  reauthorization of the surface transportation legislation, however,  provides an opportunity for these agencies and the Congress to reexamine  their roles and responsibilities for commuter rail access issues, notably  their roles in providing guidance and information to commuter rail  agencies and freight railroads to better inform negotiations. As long as the  federal government is funding the planning and development of individual  commuter rail projects, it may be appropriate for the government to  provide guidance and information to help facilitate negotiations between  commuter rail agencies and freight railroads and thereby help to ensure  that federal dollars are efficiently used.
section_title: Recommendation
paragraphs: In order to facilitate and inform negotiations between commuter rail  agencies and freight railroads, we recommend that the Secretary of  Transportation and the Chairman of the Surface Transportation Board  determine whether it would be appropriate and useful for them to provide  guidance and information, such as tips for successful negotiations and  information on best practices, availability of federal resources, and the  applicability of the liability provisions in the Amtrak Reform and  Accountability Act of 1997, to commuter rail agencies and freight  railroads. If DOT and STB determine that it would be helpful for them to  provide such information but that they lack the statutory authority to do  so, DOT and STB should seek a legislative change to allow them to provide  guidance and information to commuter rail agencies and freight railroads.
section_title: Agency Comments
paragraphs: We provided draft copies of this report to DOT and STB for their review  and comment. On December 8, 2003, DOT and STB officials provided oral  comments on the draft. DOT and STB officials generally agreed with the  report’s findings, conclusions, and recommendation. They also provided  some technical comments, which we incorporated into this report where  appropriate.
As we agreed with your office, unless you publicly announce the contents  of this report earlier, we plan no further distribution of it until 30 days  from the date of this report. We will then send copies of this report to the  Secretary of Transportation, the Chairman of the Surface Transportation  Board, the Administrators of the Federal Railroad Administration and  Federal Transit Administration, the Director of the Office of Management  and Budget, and interested congressional committees. We will make  copies available to others upon request. In addition, this report will be  available at no charge on our Web site at http://www.gao.gov.
If you or your staff have any questions about this report, please contact me  on (202) 512-2834 or at heckerj@gao.gov. Individuals making key  contributions to this report are listed in appendix III.
section_title: Appendix I: Scope and Methodology
paragraphs: To address our objectives, we contacted officials from all existing and  proposed commuter rail agencies and Class I freight railroads. To identify  the universe of existing and proposed commuter rail agencies, we  compiled a list on the basis of information published by the American  Public Transportation Association (APTA), the Federal Transit  Administration’s (FTA) New Starts Project Profiles from fiscal years 2003  and 2004, and the 2001 National Transit Summaries and Trends report. We  reviewed our initial list with a representative from APTA in order to  identify potential changes in program status and to confirm contact  information for the commuter rail systems. Using these sources, we  identified 19 existing and 30 proposed commuter rail agencies. We then  contacted officials from the 49 commuter rail systems to verify the status  of each commuter rail service or project. On the basis of information  collected from these officials, we further refined our list of existing and  proposed commuter rail agencies—resulting in the identification of 18  existing commuter rail systems and 19 proposed commuter rail systems.  To identify the Class I railroads, we reviewed the January 2003 Surface  Transportation Board (STB) Report of Railroad Employment and  information provided by the Association of American Railroads (AAR).  AAR also provided contact information for each Class I railroad. We  limited our scope to Class I railroads because they own the majority of all  rail lines in the United States and therefore have more interaction with  commuter rail agencies than short line or regional railroads. (Table 2 lists  the names and locations of the 18 existing and 19 proposed commuter rail  agencies and the 7 Class I freight railroads.)
We conducted site visits to eight commuter rail agencies across the  country and to the four largest U.S. Class I freight railroads. We selected  the eight commuter rail agencies on the basis of the type of track  arrangements (i.e., lease or own); representation of the four largest U.S.  Class I freight railroads; the system’s maturity; and geographic dispersion.  (The commuter rail agencies and railroads that we visited are listed in  italics in table 2.) During the site visits, we interviewed senior level  management; toured operation, dispatching, and maintenance facilities;  and/or traveled on the commuter rail system. In addition to the site visits,  we also conducted semistructured interviews with officials from the  remaining existing and proposed commuter rail agencies and Class I  freight railroad companies via teleconference or in-person meetings. We  synthesized the information we collected from the site visits and  semistructured interviews. We also performed a content analysis of the  information to identify major themes and commonalities and differences  among proposed and existing commuter rail agencies as well as between  commuter rail agencies and freight railroads. We did not observe  significant differences between the existing and proposed commuter rail  agencies in terms of the most frequently cited challenges in negotiating  and sharing rights-of-way, actions that could help facilitate mutually  beneficial arrangements, and possible roles for the federal government in  access issues.
We also conducted informational interviews with DOT, FRA, STB, and  FTA; and with representatives from industry associations, including AAR,  APTA, the National Industrial Transportation League, and the American  Short Line and Regional Railroad Association. We also interviewed  representatives from the law office of Kirkpatrick and Lockhart and  Woodside Consulting, who have served as consultants to commuter rail  agencies and freight railroads. Additionally, we reviewed statutory and  case law and federal and commuter rail agency regulations, guidance, and  internal documents as well as information from freight railroads, including  annual reports, ridership and traffic density reports, and position papers.  We also identified and analyzed rail-related research.
We did not examine FTA’s process of reviewing commuter rail projects for  federal funding, the costs and benefits of individual commuter rail  projects, and the merits of Amtrak’s statutory access rights to freight- owned rights-of-way or the costs and benefits of extending these rights to  commuter rail agencies. Statistics presented in the background section of  this report about the freight and commuter rail industries, such as freight  ton-miles hauled and ridership, were obtained from DOT, FRA, FTA, AAR,  and APTA. This information was presented for background and illustrative  purposes only; consequently, we did not assess the reliability of this  information. We also did not assess the reliability of the factual  information provided by commuter rail agencies, freight railroads, and  industry associations because of the abundance of corroborating evidence.  Therefore, we determined that the data we obtained were sufficiently  reliable for the purposes of this report.
section_title: Appendix II: Federal Legislation Addresses the Major Liability Concerns, but Other Issues Remain
paragraphs: The issue of managing risk and liability is a huge concern for commuter  rail operators and freight railroads when they negotiate agreements for  commuter rail operators to use the freight railroads’ rights-of-way. This  concern has the potential to slow the expansion of commuter rail services  by delaying or preventing the signing of such “access” agreements.  Understandably, freight railroads want to minimize their exposure to  liability for any potentially large damage awards and associated costs that  may result when they allow commuter rail operators to use their tracks.  Accordingly, it has become customary for freight railroads to require  commuter rail operators to enter into agreements with them that will hold  the host freight railroads harmless, indemnify the freight railroads from all  liability, and require the commuter rail operators to purchase commercial  liability insurance that will ensure a reliable funding source to pay the  entire amount of any damage awards. In some parts of the country, freight  railroads generally require commuter rail operators using their rights-of- way to acquire up to $500 million in liability coverage. The required  premiums to obtain such a large amount of insurance coverage are cost- prohibitive for many existing or proposed commuter rail operators.
The issue of liability arising from rail accidents was addressed by  Congress when it enacted the Amtrak Reform and Accountability Act of  1997 (ARAA). Congress introduced tort reform measures within Section  161 of the ARAA in response to concerns from freight railroads, commuter  rail operators, and Amtrak about the liability issue and the difficulties the  parties were having in negotiating the use of freights’ rights-of-way by  Amtrak and the commuter rail operators. These concerns were  particularly acute after a 1987 district court decision that put in doubt the  ability of private parties to deal contractually with liability issues by  entering into indemnification agreements. That decision, National  Railroad Passenger Corp. v. Consolidated Rail Corp., 698 F. Supp. 951  (D.C. 1988), vacated, 892 F.2d 1066 (D.C. Cir. 1990), stemmed from the  1987 collision of Amtrak and Conrail trains in Chase, Maryland, that left 16  people dead and more than 350 injured.
The catastrophic Chase accident was caused by the gross negligence of  Conrail employees, including the engineer, who was under the influence of  illicit drugs. Amtrak asked the court to abrogate its indemnification  agreement with Conrail, which required that Amtrak defend and indemnify  Conrail for any claims and damages arising out of the Chase accident, on  the grounds that it violated public policy. The trial court acted in Amtrak’s  favor and voided the indemnification agreement. This decision had a ripple  effect throughout the industry, and as the House Committee reported,  “his avoided a large taxpayer-funded expense in the short-term, but in  the long run convinced the entire freight industry that the indemnity  agreements offered no real legal protection.” H.R. Rep. No. 105-251, at 21  (1997).
In 1997, Congress enacted Section 161 of the ARAA, which limited the  overall damages for passenger claims from a single rail incident to $200  million and also authorized the providers of passenger rail transportation  to enter into contracts allocating financial responsibility for claims. Pub. L.  105-134, § 161 (1997); 49 U.S.C. § 28103. Congress intended to facilitate the  ability of freight railroads and passenger rail operators to contract for the  use of the freights’ rights-of-way, stating that without tort reform and  liability protection, “future passenger operations, whether commuter,  high-speed rail, or intercity rail, will be placed in jeopardy as freight  railroads resist taking on what is increasingly viewed as an unacceptable  and uncompensated liability exposure.” H.R. Rep. No. 105-251, at 22  (1997).
During the course of our work, questions arose about the proper  interpretation and application of the liability protections set forth in the  ARAA and related issues. In particular, questions were raised about  whether the liability provisions that are part of the ARAA apply to  commuter rail operators and whether the statute applies to all types of rail  incident damages claims. The ensuing discussion addresses the  interpretation and application of the ARAA and the limitations of this  legislation in resolving all of the concerns raised by commuter rail  operators and freight railroads.
Our examination of Section 161 of the Amtrak Reform and Accountability  Act of 1997 leads us to conclude that all commuter rail operators, as well  as Amtrak, are covered by the $200 million cap on awards for any claims  by or on behalf of rail passengers resulting from an individual rail  accident. The act creates a $200 million cap for passenger injuries arising  “in connection with any rail passenger transportation operations over or  rail passenger transportation use of right-of-way or facilities owned,  leased, or maintained by any high-speed railroad authority or operator, any  commuter authority or operator, any rail carrier, or any State.” 49 U.S.C.  28103(a)(1)(emphasis added). Additionally, the definitions section defines  a “claim” as “against Amtrak, any high-speed railroad authority or  operator, any commuter authority or operator, any rail carrier, or any  State.” 49 U.S.C. 28103 (e)(1)(emphasis added). The plain language of the  statute expressly provides that commuter authorities or operators are  protected by this statutory cap.
The statutory language that specifically authorizes freight railroads and  commuter rail operators to enter into agreements allocating financial  responsibility for claims, which forms the statutory underpinning for the  indemnification agreements that protect freight railroads, is embodied  within 49 U.S.C. § 28103(b). That subsection provides that “ provider of  rail passenger transportation may enter into contracts that allocate  financial responsibility for claims.” 49 U.S.C. § 28103(b). By enacting this  provision, Congress intended to protect commuter rail operators, as well  as Amtrak, by establishing a clear statutory basis for the enforceability of  indemnification contracts. In this respect, the Senate Committee’s report  on the legislation states “he bill contains a provision that would help  assure the enforceability of certain contracts between operators of rail  passenger services—some of which are state and local governments—and  owners of rights-of-way and other facilities.” S. Rep. No. 105-85, at 9  (1997). Although we understand that the enforceability of indemnification  agreements entered into pursuant to this provision has never been  addressed in federal court, we believe the express statutory language and  clear legislative history suggest that such indemnification agreements  would be upheld.
Although Section 161 of the ARAA resolves the major concerns that have  been voiced by commuter rail operators and freight railroads with respect  to the liability issue, it does not address all potential issues that have been  raised. For example, the ARAA’s liability provision is limited in the scope  of claims that it covers. The liability limitation, which does include claims  for punitive damages, is restricted to “a claim for personal injury to a  passenger, death of a passenger, or damage to property of a passenger.” 49  U.S.C. § 28103(a)(1). It does not cap personal and property third-party  (nonrail passenger) claims. Such potential plaintiffs could include adjacent  property owners or populations that may be harmed in a hazardous  materials spill or an accident at a rail crossing. Although the original  version of the bill (H.R. 2247, § 401, 105th Cong. (1997)) would have  applied to all potential plaintiffs, it was not contained in the legislation as  enacted. H.R. Rep. No. 105-251, at 93-94 (1997). An official of one freight  railroad said that in this era of escalating verdicts, they need to have  adequate insurance to protect themselves in the event of potential third- party claims, and they use the example of an environmental spill and  evacuation that may cause no human injuries or deaths but nonetheless  could amount to a very large damages award against the freight railroad  determined to be responsible. Because of the limited nature of the liability  cap in the ARAA, extensive arms-length negotiation between the freight  railroads and commuter rail operators to address the concerns of both  parties remains essential.
There are other concerns that compound the freight railroads’ desire to  require commuter rail operators to obtain a high level of liability insurance  coverage for use of their rights-of-way. The concerns that have been raised  include potential state law claims and questions about whether a court will  uphold the liability limit established in the ARAA as it has never been  tested in federal court. Although many carriers admit that they are being  “super-cautious” in requiring such high levels of insurance, they point to  the Amtrak-Conrail decision as an example of “judicial justice” as they  seek to be protected from any potential liability.
We find that the ARAA offers a good starting point for resolving many of  the most important issues that arise when commuter rail operators use  rights-of-way owned by freight railroads. However, it does not eliminate  the need for freight railroads and commuter rail operators to consider  individual circumstances and factors as they negotiate the terms of these  access agreements because of the potential liability concerns that are  otherwise not addressed by the statute.
section_title: Appendix III: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Acknowledgments
paragraphs: In addition to those named above, Alan Belkin, Nikki Clowers, Lindy Coe- Juell, Michelle Dresben, Sharon Dyer, Amy Higgins, Kristen Massey, and  Stacey Thompson made key contributions to this report.