PTC will not provide 'substantial' business benefits to railroads, AAR says
(The following appeared on the Progressive Railroading website on April 28, 2010.)
Yesterday, the Association of American Railroads (AAR) announced it filed an expert analysis that dispels assertions there will be substantial business benefits to railroads that implement positive train control (PTC) technology under federal regulations.
Conducted by Oliver Wyman Inc., the report also shows that costs associated with implementing PTC could hinder the railroads ability to fund other safety technologies that might have greater commercial benefits to railroads and their customers.
The Federal Railroad Administrations (FRA) regulatory impact analysis did not assume any business benefits from PTC, according to AAR.
The association filed the analysis in response to a Chlorine Institute petition filed last month with the FRA that claimed railroads would see substantial business benefits from implementing PTC.
The Chlorine Institute analysis ignores the tremendous strides that the U.S. railroad industry has made in the past three decades in terms of productivity and efficiency in large part by the industrys continuous pursuit of state-of-the-art operational processes and technology, the Oliver Wyman study said.
There are many broad and general assertions out there on business benefits from PTC, so it was important to get an independent analysis and clear up any misconceptions that might exist, said AAR President and Chief Executive Officer Edward Hamberger in a prepared statement.
The Oliver Wyman study concluded that the upper limit of business benefits from PTC is $413.2 million over 20 years using a 7 percent discount rate. FRA assessed the potential safety benefits of PTC at $440 million over 20 years, using a 7 percent discount rate.
Given that the FRA has assessed the cost of PTC to be $9.55 billion over 20 years, the best-case scenario would put the cost-benefit ratio at 11 to 1, according to the AAR.
Overall, Oliver Wyman could not find any instances where PTC will increase rail line capacity and network velocity.
