    Commuter Rail: Information and Guidance Could Help Facilitate
    Commuter and Freight Rail Access Negotiations (09-JAN-04,
    GAO-04-240).

    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.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-04-240
        ACCNO:   A09085
      TITLE:     Commuter Rail: Information and Guidance Could Help
    Facilitate Commuter and Freight Rail Access Negotiations
         DATE:   01/09/2004
      SUBJECT:   Federal aid to railroads
    	     Railroad industry
    	     Railroad regulation
    	     Railroad safety
    	     Railroad transportation operations
    	     Interagency relations
    	     Strategic planning

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    GAO-04-240

    United States General Accounting Office

     GAO 	Report to the Ranking Democratic Member, Committee on Transportation and
                        Infrastructure, House of Representatives

    January 2004

    COMMUTER RAIL

    Information and Guidance Could Help Facilitate Commuter and Freight Rail Access
                                      Negotiations

    GAO-04-240

    Highlights of GAO-04-240, a report to the Ranking Democratic Member,
    Committee on Transportation and Infrastructure, House of Representatives

    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.

    GAO recommends that the Department of Transportation (DOT) and STB
    determine whether it would be appropriate for them to provide guidance and
    information, such as best practices and information on the applicability
    of the federal liability cap, to commuter rail agencies and freight
    railroads. DOT and STB generally agreed with the report's findings,
    conclusions, and recommendation.

    www.gao.gov/cgi-bin/getrpt?GAO-04-240.

    To view the full product, including the scope and methodology, click on
    the link above. For more information, contact JayEtta Z. Hecker at (202)
    512-2834 or heckerj@gao.gov.

    January 2004

    COMMUTER RAIL

    Information and Guidance Could Help Facilitate Commuter and Freight Rail Access
    Negotiations

    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.

    Contents

      Letter

    Results in Brief 	Background	Commuter Rail Agencies and Freight Railroads
    Face Numerous

    Challenges in Negotiating and Sharing Rights-of-Way There Is No Template
    for Success, but Certain Actions Can Help Facilitate Good Relationships
    Federal Government Currently Does Not Play a Role in Commuter

    Rail Access Conclusions Recommendation Agency Comments

                                           1

                                          2 5

    12

    20

    26 34 35 36

    Appendix I Scope and Methodology

    Appendix II 	Federal Legislation Addresses the Major Liability Concerns,
    but Other Issues Remain

      Appendix III GAO Contacts and Staff Acknowledgments 45

    GAO Contacts 45 Acknowledgments 45

        Tables
                   Table 1: Type of Rights-of-Way Arrangement by Commuter Rail
                                            Agency                             10
                Table 2: Names and Locations of Existing and Proposed Commuter
                      Rail Agencies and the Class I Freight Railroad Companies 38
    Figures
                  Figure 1: Map of Existing and Proposed Commuter Rail Systems  6
                             Figure 2: Map of Class I Rail Lines                8
                          Figure 3: Example of Capacity Enhancement            16
                Figure 4: Photograph of a Segment of Burlington Northern Santa
                          Fe Right-of-Way in the State of Washington           21

    Figure 5: Identified Actions Can Help Lay Foundation for Win/Win
    Arrangements 22 Figure 6: Burlington Northern Santa Fe's (BNSF) Guiding
    Principles for Commuter Rail Service 24

    Abbreviations

    ARAA Amtrak Reform and Accountability Act of 1997 	AAR Association of
    American Railroads 	APTA American Public Transportation Association 	BNSF
    Burlington Northern Santa Fe Railway Company 	CSX CSX Transportation 	DOT
    Department of Transportation 	FRA Federal Railroad Administration 	FTA
    Federal Transit Administration 	ICC Interstate Commerce Commission	STB
    Surface Transportation Board 	UTA Utah Transit Authority

    This is a work of the U.S. government and is not subject to copyright
    protection in the United States. It may be reproduced and distributed in
    its entirety without further permission from GAO. However, because this
    work may contain copyrighted images or other material, permission from the
    copyright holder may be necessary if you wish to reproduce this material
    separately.

    United States General Accounting Office Washington, DC 20548

    January 9, 2004

    The Honorable James L. Oberstar

    Ranking Democratic Member

    Committee on Transportation and Infrastructure House of Representatives

    Dear Mr. Oberstar:

    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 service1 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
    2020.2 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

    1For purposes of this report, we refer to transit agencies that provide
    commuter rail service as "commuter rail agencies."

    2Department of Transportation, Freight Analysis Framework (October 2002).

    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 railroads3 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.)

    Freight railroads and commuter rail agencies face a number of challenges
    when negotiating and sharing access to the same rights-of-way. However,
    reaching agreement on compensation, capacity, and liability issues present
    the most problems when negotiating agreements, according to both commuter
    rail and freight railroad officials. For example, freight railroads
    generally do not want to allow commuter rail service on their
    rights-of-way unless they are protected from the potential liability
    associated with passenger rail accidents. As a result, freight railroads
    typically require that the commuter rail agency contractually indemnify
    them from any liability

    3Class I railroads are the largest railroads, as defined by operating
    revenue, and account for the majority of U.S. rail freight activity. There
    are three classes of railroad. STB designates the class of railroad and in
    2002 defined Class I railroads as railroads with operating revenues of
    $271.9 million or more.

      Results in Brief

    in the event of a passenger accident and procure a certain level of
    insurance coverage to guarantee their ability to pay the entire allocation
    of damages. Accepting these liability terms can be problematic for the
    commuter rail agencies; therefore, negotiations could stall or fail.
    Recognizing the freight railroad's potential exposure to liability when
    hosting passenger trains on their rights-of-way, Congress enacted the
    Amtrak Reform and Accountability Act of 1997 (ARAA), which limited the
    aggregate overall damages that may be awarded to all passengers for all
    claims from a particular rail accident to $200 million and permitted
    providers of rail transportation to enter into indemnification agreements
    allocating financial responsibility for passenger accidents. However, 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 applied to commuter rail agencies. After reviewing
    the legislation, we have concluded that the liability cap applies to
    commuter rail operations based upon the plain language of the statute and
    our review of the pertinent legislative history. Given the growing demand
    for commuter and freight rail services and financial pressures on the rail
    industry, reaching agreement will likely become even more difficult in the
    future. In addition to negotiation challenges, there are dayto-day or
    operational challenges that the commuter rail agency and freight railroad
    have to work through when sharing the same rights-of-way. Officials from
    commuter rail agencies and freight railroads identified a number of
    challenges in sharing the same rights-of-way; however, the most commonly
    cited problems were associated with the dispatching of trains (i.e.,
    controlling the movement of trains) and maintaining the rights-ofway.

    There is not a defined 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, also vary from location to location, creating unique negotiating
    environments. For example, the freight railroads would likely be more
    willing to allow commuter rail trains on a lightly used branch line (or
    secondary line) than a main line that is critical to their freight
    network. Although there is not a formula for negotiating and cultivating
    successful arrangements, 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

    most frequently identified actions include 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.

    The federal government currently does not play a role in access
    negotiations between commuter and freight railroads. Three federal
    agencies, FTA, FRA, and STB, have responsibility for different aspects of
    rail transportation. Specifically, 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 is responsible for the
    economic regulation of railroads. For example, FTA helps fund the planning
    and development of eligible commuter rail projects-currently funding up to
    60 percent of the total capital costs of new projects through its New
    Starts program.4 According to officials from FRA, FTA, and STB, these
    agencies do not have the authority or responsibility for commuter rail
    access issues; therefore, they do not currently act to facilitate
    negotiations or resolve impasses between commuter rail agencies and
    freight railroads regarding access to freight-owned rights-of-way. For
    instance, none of these agencies have issued guidance or information on
    commuter rail access issues, such as best practices for negotiations, to
    commuter rail agencies or freight railroads. Commuter rail agencies and
    freight railroads differ on the roles they would like to see the federal
    government play in negotiations between commuter rail agencies and freight
    railroads. In general, most commuter rail agencies would like the federal
    government to play a more active role, such as serving as a mediator;
    freight railroads do not want the federal government involved, except for
    assuring the adequacy of funding for commuter rail projects.

    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

    4FTA's New Starts program provides funds to transit providers for
    constructing or extending certain types of mass transit systems, like
    commuter rail projects. Current law allows FTA to grant up to 80 percent
    of the estimated net project cost to individual transit projects. However,
    on the basis of direction from Congress in the conference report that
    accompanied DOT's fiscal year 2002 appropriations act, FTA instituted a
    preference policy to recommend projects with federal shares that do not
    exceed 60 percent for funding. The administration's proposed surface
    transportation reauthorization legislation seeks to reduce the statutory
    federal share to no more than 50 percent of the net project cost.

    Background

    provisions in the Amtrak Reform and Accountability Act of 1997, to
    commuter rail agencies and freight railroads. This information and
    guidance would serve to facilitate and inform negotiations. 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. We provided
    draft copies of this report to DOT and STB for their review and comment.
    DOT and STB officials generally agreed with the report's findings,
    conclusions, and recommendation. They also provided some technical
    comments on our draft, which we incorporated where appropriate.

    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).5 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.

    5For more information about commuter rail, see FRA's statement of policy
    concerning enforcement of railroad safety laws (49 CFR 209, Appendix A).

    Figure 1: Map of Existing and Proposed Commuter Rail Systems

    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 Railway6-and over 500
    short line and regional railroads7 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.

    6The entire Canadian National Railway and Canadian Pacific Railway systems
    are not Class I railroads. However, the U.S. portions of these railroads
    (e.g., Grand Trunk Corporation and Soo Line Railroad Company) meet the
    U.S. regulatory criteria and are Class I railroads.

    7Short line and regional railroads are small and medium-sized railroads,
    respectively. Generally, short line railroads are Class III railroads, and
    regional railroads are Class II railroads. STB defined Class II railroads
    as railroads with operating revenues less than $271.9 million but more
    than $21.7 million and Class III railroads as railroads with operating
    revenues less than $21.7 million in 2002.

    Figure 2: Map of Class I Rail Lines

    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,8 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.9 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-ofway, 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

    8Over 95 percent of Amtrak's 22,000-mile network operates on freight
    railroad tracks. Amtrak owns about 730 miles of track, primarily on the
    Northeast Corridor between Boston, Massachusetts, and Washington, D.C.

    9The shared use agreement documents how the rights-of-way will be
    operated-for example, it will outline the agreed-upon dispatching rules.

    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.10

           Table 1: Type of Rights-of-Way Arrangement by Commuter Rail Agency

    Own or plan to own Lease or plan to lease right-of-way Name of commuter
    rail agency right-of-way from freight railroads

                            Existing commuter rail agencies

    Altamont Commuter Express

    Connecticut Department of Transportation: Shore Line East line

    fb

    New Haven line

    e

    Maryland Transit Administration (MARC)

    Massachusetts Bay Transportation Authority X

    Metra X

    a

    MTA Long Island Rail Road

    a

    MTA Metro-North Railroad

    New Jersey Transit Corporation X

    North County Transit District (Coaster) X

    Northern Indiana Commuter Transportation District X

    Peninsula Corridor Joint Powers Board (CALTRAIN) X

    b

    Pennsylvania Department of Transportation

    Sound Transit X

    Southeastern Pennsylvania Transportation Authority X

    a

    Southern California Regional Rail Authority (Metrolink)

    a

    Tri-County Commuter Rail Authority (Tri-Rail) Trinity Railway Express X

    e

    Virginia Railway Express X

    Proposed commuter rail agencies

    d

    Akron line X X

    10For example, the Southeastern Pennsylvania Transportation Authority owns
    a portion of the rights-of-way it uses; and freight railroads use these
    rights-of-way. In addition, the Southeastern Pennsylvania Transportation
    Authority uses rights-of-way owned by CSX, Amtrak, and the City of
    Philadelphia.

    Own or plan to own Lease or plan to lease right-of-way Name of commuter
    rail agency right-of-way

    from freight railroads

    a

    Alaska Railroad Corporation

    Austin-San Antonio Intermunicipal Commuter Rail District X

    Charlotte Area Transit System X

    Cumberland-Dauphin-Harrisburg Transit Authority X

    Dane County T2020 (Transport 2020)

                   cDelaware Department of Transportation              TBD    TBD
        Eastern Corridor, Hamilton County Transportation Improvement    X
                                  District
                       Georgia Rail Passenger Program                  TBD    TBD

    Johnson County Transit

    a

    Nashville to Lebanon Corridor Regional Transportation Authority

    NeoRail line X

    b

    New Haven-Hartford-Springfield Commuter Rail

    Northstar Corridor

    Regional Transportation District X

    a

    Sonoma-Marin Area Rail Transit

    Triangle Transit Authority X

    a

    Washington Country Commuter Rail

    Utah Transit Authority, Commuter Rail X

    Source: GAO.

    TBD = To be determined.

    Note: The proposed commuter rail agencies' plans to purchase or lease
    rights-of-way are subject to change.

    aThe rights-of-way are owned by commuter agency's local or state
    government or the agency's regional transportation authority.

    bCommuter rail agency operates exclusively on Amtrak-owned rights-of-way.

    cSoutheastern Pennsylvania Transportation Authority provides a "turnkey,"
    or contracted commuter rail service for the Delaware Department of
    Transportation between Newark/Wilmington, Delaware, and Philadelphia,
    Pennsylvania.

    dThe Akron line, which is proposed to run between Cleveland and Canton,
    Ohio, was originally part of the NeoRail study, which has several proposed
    lines out of Cleveland. Due to an opportunity to move forward, the Akron
    line was separated as a distinct project for planning purposes. The Akron
    and NeoRail lines may be integrated again at some point in the future.

    eThe commuter rail agency owns a very limited portion of the rights-of-way
    it uses. Most of the rightsof-way are owned by Amtrak or a freight
    railroad.

    fThe New Haven line is operated by MTA Metro-North Railroad. The state of
    Connecticut owns about 50 miles on which the Connecticut trains operate.

    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.11
    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.12 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.

    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,

    11FRA exercises jurisdiction over all areas of railroad safety under title
    49, U.S.C., chapter 201.

    12In May 2000 a similar piece of legislation, Transit Rail Access
    Improvement and Needs Act for the 21st Century (H.R. 4507), was introduced
    and referred to the Subcommittee on Ground Transportation, House Committee
    on Transportation and Infrastructure. The bill proposed to designate STB
    as a forum for resolution of disagreements between mass transportation
    authorities and freight railroads regarding access to freight track and
    rightsof-way.

      Commuter Rail Agencies and Freight Railroads Face Numerous Challenges in
      Negotiating and Sharing Rights-of-Way

    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-ofway; however, the most commonly cited problems were issues
    associated with dispatching trains and maintaining the rights-of-way.

        Negotiating Mutually Beneficial Agreements Is Difficult

    Agreeing to a Price Can Be Challenging

    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.

    Officials from both commuter rail agencies and freight railroads reported
    that negotiating a mutually agreeable price for the freight-owned
    rights-ofway 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 capitalintensive 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.

    Capacity Issues Are Also Another challenge in negotiations is the issue of
    capacity. The number of

    Problematic during trains that can pass over a line of track is limited.
    If the line is full, or at

    Negotiationscapacity, 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.13
    (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.

    13Adding new tracks can include the construction of a new track to
    existing single-track line allowing simultaneous operations in opposite
    directions (double tracking) or the building of additional track(s) to an
    existing multiple track line. Tunnel clearance enhancements are necessary
    for the movement of "double-stack" freight trains and doubledeck passenger
    cars.

    Figure 3: Example of Capacity Enhancement

    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

    Liability Is a Major Challenge for Negotiations

    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.

    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-ofway, 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.)

        Challenges Also Exist in Sharing Rights-of-Way

    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.

    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-

      There Is No Template for Success, but Certain Actions Can Help Facilitate Good
      Relationships

    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.14

    Figure 4: Photograph of a Segment of Burlington Northern Santa Fe
    Right-of-Way in the State of Washington

    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,

    14As of November 2003, negotiations between Sound Transit and Burlington
    Northern Santa Fe are ongoing.

    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).

    Figure 5: Identified Actions Can Help Lay Foundation for Win/Win
    Arrangements

    o  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-ofway. 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'
    rightsof-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.

    Figure 6: Burlington Northern Santa Fe's (BNSF) Guiding Principles for
    Commuter Rail Service

    o  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.

    o  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.15 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

    15The identified sources of funding for the rail improvements include
    Metra, the city of Chicago, the state of Illinois, the federal government,
    and freight railroads. As of this date, the federal government has not
    committed any funds to this project.

    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.

    o  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."

      Federal Government Currently Does Not Play a Role in Commuter Rail Access

    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.

        FRA's Primary Focus Is on Rail Safety, Not Access Issues

    FRA has safety jurisdiction over all freight and passenger railroads in
    the United States.16 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.

    16Excluding urban rapid transit operations that are not connected to the
    general railroad system of transportation.

        FTA Provides Funding for Commuter Rail Projects but No Assistance on Access
        Issues

    Since the early 1970s, the federal government has provided a large share
    of the nation's capital investment in mass transit.17 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.18 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.19 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.

    17U.S. General Accounting Office, Mass Transit: FTA Could Relieve New
    Starts Program Funding Constraints, GAO-01-987 (Washington, D.C.: Aug. 15,
    2001).

    18Current law allows FTA to grant up to 80 percent of the estimated net
    project cost to individual transit projects. However, on the basis of
    direction from the Congress in the conference report that accompanied
    DOT's fiscal year 2002 appropriations act, FTA instituted a preference
    policy to recommend projects with federal shares that do not exceed 60
    percent for funding. The administration's proposed surface transportation
    reauthorization legislation seeks to reduce the statutory federal share to
    no more than 50 percent of the net project cost.

    19Federal Transit Administration, Annual Report on New Starts: Proposed
    Allocations of Funds for Fiscal Year 2004 (Washington, D.C.: Feb. 3,
    2003).

    Projects may receive federal funds as they advance through the planning,
    preliminary engineering, and final design phases.20

    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.

        STB Has No Role in Negotiations between Commuter Rail Agencies and Freight
        Railroads

    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

    20The alternatives analysis stage provides information on the benefits,
    costs, and impacts of alternative strategies leading to the selection of a
    locally preferred solution to the community's mobility needs. During the
    preliminary engineering phase, project sponsors refine the design of the
    proposal, taking into consideration all reasonable design alternatives,
    which results in estimates of costs, benefits, and impacts (e.g.,
    environmental or financial). Final design is the last phase of project
    development before construction and may include right-of-way acquisition,
    utility relocation, and preparation of final construction plans and cost
    estimates.

    certain freight rail rates.21 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.22 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;23 (2) the commuter rail agency enters into a contract
    with Amtrak;24 or (3) a commuter rail agency acquires control of a
    railroad and therefore meets the definition of a rail carrier.25 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

    21Under the ICC Termination Act of 1995 (49 U.S.C. 10101), STB may review
    the reasonableness of a rate only upon a shipper's complaint. Moreover,
    STB may consider the reasonableness of a rate only if (1) the revenue
    produced is equal to or greater than 180 percent of the railroad's
    variable costs for providing the service and (2) it finds that the
    railroad in question has market dominance for the traffic at issue.

    2249 U.S.C. 10501(c)(2).

    23A rail carrier is an entity providing common carrier railroad
    transportation for compensation, but does not include street, suburban, or
    interurban electric railways not operated as part of the general system of
    rail transportation (49 U.S.C. 10102(5)). STB officials noted that STB has
    not had an opportunity to interpret its jurisdiction pursuant to this
    subsection within a ruling.

    24STB officials noted that a commuter rail agency has never tried to use
    STB's jurisdiction over compensation and access issues between freights
    and Amtrak as a means to have STB resolve a dispute between the commuter
    rail agency and freight railroad. Therefore, STB officials were unsure as
    to the outcome of such an approach.

    2549 U.S.C. 10501(c)(3)(B).

    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.26 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.

        Commuter Rail Agencies and Freight Railroads Have Differing Views on the
        Appropriate Role of the Federal Government

    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.

    26The ICC Termination Act of 1995 (49 U.S.C. 10101) terminated the ICC,
    eliminated various functions performed by the ICC, transferred licensing
    and certain nonlicensing motor carrier functions to the Federal Highway
    Administration, and transferred remaining rail and nonrail functions to
    the STB.

    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.27
    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.

    Conclusions 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

    27There are three stages of the New Starts program-alternatives analysis,
    preliminary engineering, and final design. The alternatives analysis stage
    provides information on the benefits, costs, and impacts of alternative
    strategies leading to the selection of a locally preferred solution to the
    community's mobility needs.

    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.

    Recommendation 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.

    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.

      Agency Comments

    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.

    Sincerely yours,

    JayEtta Z. Hecker 	Director, Physical Infrastructure Issues

                          Appendix I: Scope and Methodology

    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.1 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.2 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.)

    1APTA does not consider the Port Authority Trans-Hudson (PATH) a commuter
    rail service, therefore it was not included in our universe. According to
    an APTA official, PATH's vehicles and services are more characteristic of
    heavy rail rather than commuter rail. PATH is regulated by FRA because it
    provides interstate service.

    2Specifically, we eliminated 11 commuter rail agencies (1 existing and 10
    proposed) from the initial list because the agency no longer provided
    commuter rail service or the agency was still considering what type of
    transit service to provide. We combined 2 commuter rail projects from the
    initial list of proposed commuter rail systems because we found they were
    the same project. We also combined 1 proposed commuter rail system with an
    existing commuter rail system because we found that the proposed system
    was merely an expansion project of the existing commuter rail. Finally, we
    separated 1 commuter rail project on the list of proposed commuter rail
    systems because we found that it was 2 distinct projects.

    Appendix I: Scope and Methodology

    Table 2: Names and Locations of Existing and Proposed Commuter Rail Agencies and
                         the Class I Freight Railroad Companies

    Name of commuter rail agency and freight railroad Location

                                 Existing commuter rail

    Altamont Commuter Express Stockton, CA

    Connecticut Department of Transportation (Shore Line East and New Haven
    lines) New Haven, CT

    Maryland Transit Administration (MARC) Baltimore, MD

    Massachusetts Bay Transportation Authority Boston, MA

    Metra Chicago, IL

    MTA Long Island Rail Road New York, NY

    MTA Metro-North Railroad New York, NY

    New Jersey Transit Corporation Newark, NJ

    North County Transit District (Coaster) Oceanside, CA

    Northern Indiana Commuter Transportation District Chesterton, IN

    Peninsula Corridor Joint Powers Board (CALTRAIN) San Carlos, CA

    Pennsylvania Department of Transportation Harrisburg, PA

    Southeastern Pennsylvania Transportation Authority Philadelphia, PA

    Southern California Regional Rail Authority (Metrolink) Los Angeles, CA

    Sound Transit, Central Puget Sound Regional Transportation Authority
    Seattle, WA

    Tri-County Commuter Rail Authority Pompano Beach, FL
    Trinity Railway Express Dallas, TX
    Virginia Railway Express Alexandria, VA
    Proposed commuter rail
    Akron Line, Northeast Ohio Corridorsa Cleveland, OH
    Alaska Railroad Corporation Anchorage, AK
    Austin-San Antonio Intermunicipal Commuter Rail District Austin, TX
    Charlotte Area Transit System Charlotte, NC
    Cumberland-Dauphin-Harrisburg Transit Authority Harrisburg, PA
    Dane County T2020 (Transport 2020) Madison, WI
    Delaware Department of Transportationb Wilmington, DE
    Eastern Corridor, Hamilton County Transportation Improvement District
    Cincinnati, OH
    Georgia Rail Passenger Program Atlanta, GA
    Johnson County Transit Johnson County, KS
    Nashville to Lebanon Corridor Regional Transportation Authority Nashville,
    TN
    NeoRail Line, Northeast Ohio Corridors Cleveland, OH
    New Haven-Hartford-Springfield Commuter Rail Hartford, CT
    Northstar Corridor Minneapolis, MN
    Regional Transit District Denver, CO

                           Appendix I: Scope and Methodology

    Name of commuter rail agency and freight railroad Location

                    Sonoma-Marin Area Rail Transit San Francisco, CA

    Triangle Transit Authority Raleigh, NC

                Utah Transit Authority, Commuter Rail Salt Lake City, UT

    Washington Country Commuter Rail Portland, OR

                           Class I Freight Railroad Companies

    Burlington Northern Santa Fe Railway Company Fort Worth, TX

         Canadian National Railway (Grand Trunk Corporation)c Montreal, Canada

         Canadian Pacific Railway (Soo Line Railroad Company)c Calgary, Canada

                          CSX Transportation Jacksonville, FL

                  Kansas City Southern Railway Company Kansas City, MO

    Norfolk Southern Norfolk, VA

    Union Pacific Railroad Company Omaha, NE

    Source: GAO.

    Notes:

    The commuter rail agencies and freight railroad companies that we visited
    are listed in italics.

    A number of the existing commuter rail agencies are currently planning
    expansion projects.

    aThe Akron line, which is proposed to run between Cleveland and Canton,
    Ohio, was originally part of the NeoRail study, which has several proposed
    lines out of Cleveland. Due to an opportunity to move forward, the Akron
    line was separated as a distinct project for planning purposes. The Akron
    and NeoRail lines may be integrated again at some point in the future.

    bSoutheastern Pennsylvania Transportation Authority provides a "turnkey,"
    or contracted commuter rail service for the Delaware Department of
    Transportation between Newark/Wilmington, Delaware, and Philadelphia,
    Pennsylvania.

    cThe entire Canadian National Railway and Canadian Pacific Railway systems
    are not Class I railroads. However, the U.S. portions of these railroads
    (e.g., Grand Trunk Corporation and Soo Line Railroad Company) meet the
    U.S. regulatory criteria and are Class I 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

    Appendix I: Scope and Methodology

    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
    freightowned 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.

    Appendix II: Federal Legislation Addresses the Major Liability Concerns,
    but Other Issues Remain

    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-ofway to acquire up to $500 million in
    liability coverage. The required premiums to obtain such a large amount of
    insurance coverage are costprohibitive 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, "[t]his avoided a large taxpayer-funded expense in the
    short-term, but in

    Appendix II: Federal Legislation Addresses the Major Liability Concerns,
    but Other Issues Remain

    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, S: 161 (1997); 49 U.S.C. S: 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.

    Appendix II: Federal Legislation Addresses the Major Liability Concerns,
    but Other Issues Remain

    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. S: 28103(b). That subsection provides that "[a] provider
    of rail passenger transportation may enter into contracts that allocate
    financial responsibility for claims." 49 U.S.C. S: 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 "[t]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. S: 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, S: 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 thirdparty 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.

    Appendix II: Federal Legislation Addresses the Major Liability Concerns,
    but Other Issues Remain

    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.

    Appendix III: GAO Contacts and Staff Acknowledgments

    GAO Contacts Acknowledgments

    (544077)

    JayEtta Z. Hecker (202) 512-2834 Susan Fleming (202) 512-4431

    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.

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