Short-line railroads await funding

Short-line railroads await funding

Congress pushing for funds to rehabilitate tracks. Bush administration pressured to liberalize loan policy.

WASHINGTON
Bipartisan U.S. House support is building to infuse the nation’s 500 short-line and regional railroads with funds to upgrade tracks and other infrastructure needs.

Members of the House Transportation and Infrastructure Committee and its railroad subcommittee are pushing legislation that provides $350 million a year to the industry over the next three fiscal years.

They are also pressuring the Bush Administration to liberalize its loan application regulations, which lawmakers say are threatening the ability of the industry to make desperately needed infrastructure improvements.

Three years have passed since that Railroad Rehabilitation and Improvement (RRIF) Program was established in Department of Transportation’s Federal Railroad Administration, and "not one dollar" of the $3.5 billion in the fund has been put to work, said Rep. Don Young, R-Alaska, chairman of the House Transportation and Infrastructure Committee, at an oversight hearing held by the subcommittee on railroads.

Young charged that the executive branch could be defying the will of Congress by writing regulations that impede the issuance of loans under the program.

Under the FRA regulations, loan applicants must show a rejection for private lenders before being considered by the agency.

The law, known as the 1998 Transportation Equity Act for the 21st Century (TEA-21) never envisioned the FRA as being the "lender of last resort," Young said.

"I don’t like DOT writing something we (Congress) didn’t write, Young said.

Such a policy has "crippled the effectiveness of the program," the railroad subcommittee said in a statement issued after the hearing.

He is hopeful that the problem will be resolved personally by Capitol Hill colleagues and Secretary of Transportation Norman Mineta. "I hope that we can explore with the Department of Transportation what has gone wrong and how it can be fixed — now," Young said.

‘Serious Crisis.’ The railroad industry "is facing its most serious crisis since the 1970s," said James L. Oberstar of Minnesota, the committee’s ranking Democrat. "If the railroads shut down, the U.S. economy comes to a halt."

Oberstar called the bill "a good bill in the right direction," but said that $1 billion over three years will not be sufficient to address all of the industry’s infrastructure problems.

Rep. Jack Quinn, chairman of the Subcommittee on Railroads, noted a "dire need for infrastructure improvements."

Rep. Nick Rahall, D., W.Va., has already introduced legislation ensuring that applicants can obtain an RRIF loan without having to show prior rejection by a commercial lender.

"I want to make it clear that I am very displeased with the FRA’s disregard of congressional intent," Rahall said. "The FRA is mandated to execute the laws written by Congress, not to re-interpret them if they disagree with a particular provision."

The short-line companies need funds to safely move the new 286,000-pound rail cars, "yet at the same time they have been effectively blocked by the FRA from getting the RRIF loans," Rahall said. "This makes no sense, and we must correct this unnecessary problem."

$2-Billion Package. If Congress passes the $350-million-per-year funding bill, known as the "Railroad Track Modernization Act of 2001," and succeeds with the new administration, some $2 billion will be ready for the short-line and regional line carriers.

Such a package will help the industry in its endeavor to invest in tracks and bridges to handle the heavier rail cars, which are now the norm for the major Class 1 railroads.

The funds "are desperately needed," said Frank K. Turner, president of the Washington, D.C.-based American Short-line and Regional Railroad Association.

But over the next 10 years, it will take almost $7 billion to improve the lot of the smaller railroads, according to a study funded jointly by Turner’s association and the FRA.

The regional and short-line railroads provide a critical link to the major Class 1 railroads, Turner said. "We market business, gather traffic from remote locations and tender it to the Class I railroads."

The smaller railroads stand to lose much of the $3 billion in yearly revenues they get from generating business to the large rail carriers, Turner said. "If we fail, that traffic will be lost to the highways and waterways. At the very least, it will move great distances over rural and secondary road systems at great cost to the taxpayers."

"Without small railroads, our shippers lose their connection to the national railroad system," Turner said.

AAR Backs Funding. The American Association of Railroads, agreed with Turner’s assessment.

"Specific attention should be directed to short-line railroads," said AAR president Edward R. Hamberger. "Short-line railroads provide the vital task of connecting rural areas to the national rail network."

Without funds to upgrade tracks to handle the heavier rail cars, many of the nation’s 500 smaller companies will be forced to abandon their services, Hamberger warned. "Countless communities would be cut off from the national rail network, resulting in severe economic displacement."

The short-line and regional railroads, which operate some 50,000 miles of rail and employ more than 24,000 people "preserve rail service and rail jobs that otherwise would be lost," Hamberger said.

He predicted the long-term growth in rail service demand "will clearly continue." Estimates are that traffic will double over the next 20 years.

FRA: Making Progress. S. Mark Lindsey, FRA’s acting Deputy Administrator, said his agency met with 19 prospective applicants over the past seven months, and that a decision regarding at least one applicant is expected soon.

I&M Rail Link, Davenport, Iowa, which has an application pending for a $100-million direct loan, is in the final review stage, and could very well turn out to be the first candidate for the RRIF program, Lindsey said.

I&M serves more than 900 shippers in Iowa, Minnesota, Missouri and Wisconsin.

The FRA is also reviewing an application filed by the Arkansas & Missouri Railroad, Springdale, Ark.

The short-line railroad, which operates in northwest Arkansas and southwest Missouri, is seeking $11 million to purchase the line it leases from Burlington Northern Santa Fe and to rehabilitate 30 miles of track, Lindsey said.

Other applicants include the Texas Mexican Railway and the Dakota, Minnesota and Eastern Railroad. "We anticipate reports from their financial advisors very soon," he said.

Lindsey vowed that the FRA "is committed to making the RRIF application as simple and expeditious as possible."

"The FRA looks forward to making this program a model of customer responsiveness as well as fiscal responsibility," he said.

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