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Study Shows PTC Business Benefits Claims Overblown

April 27, 2010
The Association of American Railroads (AAR) has filed an expert analysis that clearly dispels assertions that there will be substantial business benefits to railroads that implement positive train control (PTC) technology under federal regulations. The report by international rail industry experts Oliver Wyman Inc. also allows that the 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 Administration’s (FRA) regulatory impact analysis did not assume any business benefits from PTC.

AAR filed the Oliver Wyman analysis to set the record straight in response to a Chlorine Institute petition filed with FRA last month which claimed railroads would see substantial business benefits from implementing PTC. Oliver Wyman found that the purported benefits cited by the Chlorine Institute’s analysis can be achieved by technologies other than PTC or by more technologically advanced PTC systems than those the railroads will implement.

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 – improvements driven in large part by the industry’s continuous pursuit of state-of-the-art operational processes and technology,” the Oliver Wyman study reported.

“This is the single largest regulatory cost ever imposed on our industry by the FRA, and as such, we take the mandate very seriously,” said AAR president and CEO Edward R. Hamberger. “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. Oliver Wyman brings considerable expertise on these issues, both in the U.S. and Europe.”

Hamberger noted that the firm’s European experience was of particular importance, since Great Britain’s Strategic Rail Authority concluded that European PTC-like systems, comparable to those envisioned for use in the U.S., would in fact have a negative impact on capacity. “It’s important to compare apples to apples, and to be realistic about what technology is available for use in meeting the mandate,” he said.

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. The FRA assessed the potential safety benefits of PTC as $440 million over 20 years, using a 7 percent discount rate. Taking the two into account, the maximum safety and business benefits from the PTC mandate is $853 million over 20 years. Given that the FRA has assessed the cost of PTC installation to be $9.55 billion over 20 years, the best-case scenario would put the cost-benefit ratio at 11 to 1.

Overall, Oliver Wyman could not find any instances where PTC will increase rail line capacity and network velocity, as others have asserted including the Chlorine Institute.  Specifically, the study found:

- The operational and commercial benefits associated with precision dispatching have no direct relationship with implementation of PTC.
- PTC as currently planned by Class I railroads will not increase line capacity or train speeds, whether on single or multi-track mainlines.

To see the entire Oliver Wyman report, go to www.aar.org.