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 [email protected].

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
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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 [email protected]. 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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