Legislature(2015 - 2016)SENATE FINANCE 532
02/02/2015 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| Presentation: Positive Train Control | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE FINANCE COMMITTEE
February 2, 2015
9:04 a.m.
9:04:15 AM
CALL TO ORDER
Co-Chair Fairclough called the Senate Finance Committee
meeting to order at 9:04 a.m.
MEMBERS PRESENT
Senator Anna MacKinnon, Co-Chair
Senator Pete Kelly, Co-Chair
Senator Peter Micciche, Vice-Chair
Senator Click Bishop
Senator Mike Dunleavy
Senator Donny Olson
MEMBERS ABSENT
Senator Lyman Hoffman
ALSO PRESENT
Bill O'Leary, President and CEO, Alaska Railroad
Corporation; Eileen Reilly, Vice President, Advanced Train
Control Systems and Technology, Alaska Railroad
Corporation.
SUMMARY
PRESENTATION: POSITIVE TRAIN CONTROL
Co-Chair MacKinnon discussed the day's agenda.
^PRESENTATION: POSITIVE TRAIN CONTROL
9:05:43 AM
BILL O'LEARY, PRESIDENT AND CEO, ALASKA RAILROAD
CORPORATION, the PowerPoint presentation, "Positive Train
Control (PTC): Alaska Railroad Status" (copy on file). The
presentation would be in three pieces: the fiscal situation
of the Alaska Railroad; a description of PTC; and a focus
on the PTC project. He shared that it was an understatement
to declare that it had been a difficult six years for the
Alaska Railroad. He shared that there were significant
reductions in commercial activity related to the freight
hauls of petroleum products and coal for export from the
Seward terminal. He relayed that there were significant
reductions in federal financial support and passenger
services. He shared that the railroad had experienced three
significant reductions since 2003, totaling loss of nearly
300 positions from the railroad. He shared that there were
steps to reduce costs by initiated wage freezes and benefit
alterations. He shared that there were hopes that the
negative impacts would cease in 2014, but the largest
customer informed the railroad that they would be
conducting independent terminal operations, causing
significant financial impact to the railroad. He stressed
that meeting the unfunded federal mandate of PTC was not
financially possible for the railroad. The railroad chose
to approach the legislature for funding for the mandate. He
stated that the administration and the legislature were
receptive to the approach, and had given the railroad a
total of $34 million over two years for PTC. The project
would cost $160 million, and was mandated by the federal
government with no incremental funding for the project. He
pointed out that legislative requests were unusual for the
Alaska Railroad, and shared that the railroad preferred to
solve their problems within the organization. He restated
that it was unusual for the railroad to approach the
legislature for funding.
9:11:06 AM
Senator Olson recalled that the Alaska Railroad had
previously announced that most of its revenue was derived
from the land leases from railroad-owned land. He wondered
if that was an accurate summation. Mr. O'Leary replied that
the freight revenue was the greatest generator for the
Alaska Railroad, ranging from two-thirds to three-quarters
of the total revenue. The passenger revenue was the second
largest component, and real estate was the third largest
component of the three major revenue streams. He stressed
that a significant portion of the railroads profitability
came from the real estate revenues.
Co-Chair Kelly wondered what portion of the total revenue
represented real estate. Mr. O'Leary responded that there
was approximately $145 million of gross revenue in real
estate revenue, and was approximately $18 million in the
previous year.
Senator Dunleavy requested a comparison of the cost of
diesel for the previous, current, and projected years. Mr.
O'Leary agreed to provide that information.
Senator Dunleavy remarked that the state was facing a
budget shortfall because of the low cost of oil. He
suggested that the industries that use high volumes of
diesel, would possibly face a cost savings, because of the
current low price of oil. Mr. O'Leary remarked that the
railroad had a fuel surcharge program that was facing a
decrease.
9:14:28 AM
EILEEN REILLY, VICE PRESIDENT, ADVANCED TRAIN CONTROL
SYSTEMS AND TECHNOLOGY, ALASKA RAILROAD CORPORATION, looked
at slide 2, "What is PTC?":
Train-to-train collisions by enforcing authority
limits;
Over speed derailments;
Trains entering maintenance of way work zone limits;
and
Train movement through a main line switch in the
improper position.
Ms. Reilly highlighted slide 3, "PTC System Overview." She
stated that there was a computer aided dispatch system at
the operating center, with a backup system in the data
center. She explained that the train would receive
authority, and communicate with the hand thrown switch to
ensure the correct position. The maintenance of way (MOW)
vehicles were required to carry technology that allowed the
train to come in their authority. The MOW vehicles were
also equipped with a global positioning system (GPS), to
inform the locomotive of their location.
9:18:48 AM
Ms. Reilly discussed slide 4, "PTC System Overview." The
picture was intended to display the technology and how it
functions. She stated that there were 35 communication
towers, and a number of the communication sites were
helicopter sites. There was a signal to the communication
shelter in order to communicate with the train and dispatch
offices.
Ms. Reilly displayed slide 5, "Why PTC?":
Over the last four decades, the National
Transportation
Safety Board (NTSB) has investigated a long list of
accidents in which crewmembers failed to operate their
trains effectively and in accordance with operating
rules.
Because of these human performance deficiencies, the
NTSB has advocated for systems that would compensate
for human error and prevent train collisions.
NTSB 2014 Most Wanted List - reinforces the December
31, 2015 deadline.
Mr. Reilly shared that there was a train accident in The
Bronx, because a train took a turn and too high a speed.
9:22:19 AM
Co-Chair Kelly queried the number of accidents that were
not a result of driver error. Ms. Reilly responded that
there were few, if any accidents that were not the result
of operator error.
Co-Chair Kelly remarked that modern security cameras were
sophisticated enough to recognize guns or knives. He felt
that a camera could be fixed on the operator to recognize
when the operator is falling asleep or allowing the train
speed to accelerate, and alarms could alert the driver to
their maleficence. Ms. Reilly replied that there would soon
be regulation for inward and outward cameras in the rail
system. She furthered that there would also need to be
communication between the operator and dispatch. She
remarked that the cameras would be used for training
purposes and evidence.
Co-Chair Kelly agreed that there must be sophisticated
communication system.
Mr. Reilly looked at slide 6, "Why Mandatory PTC
Regulations?":
Two major railroad accidents in Graniteville, South
Carolina in 2005 (pictured at right) and in
Chatsworth, California in 2008 (pictured below) were
cited as PTC preventable accidents during
Congressional hearings that resulted in legislation
leading to the unfunded PTC mandate.
Ms. Reilly explained that the left-hand photo displayed a
freight train and passenger train collision. She remarked
that the passenger trains were not as heavy as freight
trains, so they would endure a greater impact. She shared
that the Alaska Railroad had both freight and passenger
trains in a similar circumstance.
Ms. Reilly explained slide 7, "No Way Out":
$12 billion to $15 billion industry cost
-$160 million for ARRC
Congressional Delegation
Alaska Attorney General
NTSB Most Wanted List - 2012 & 2014
Association of American Railroads
Vice-Chair Micciche queried the total loss of life from
2010 to 2014 due to work associated with the train control.
Ms. Reilly agreed to provide that information.
9:27:34 AM
Vice-Chair Micciche wanted to understand whether the cost
delivered a significant potential improvement in saving
lives, and providing an appropriate level of safety. He
stressed that the absolute elimination of risk was
impossible at any cost.
Vice-Chair Micciche queried the potential for extending the
deadline to allow funding over a longer period of time. Ms.
Reilly replied that all of the associations were working
diligently on the extension. She explained that any
extension language needed to include good-faith efforts.
Vice-Chair Micciche remarked that he wanted to ensure that
the investment would actually reduce risk.
Co-Chair MacKinnon asked for the percentages of accident
rates compared to the major transportation systems in the
United States, such as airplanes. Ms. Reilly shared that
there was an accident in Canada, when a train rolled back.
She explained that PTC would have prevented that incident.
She agreed to provide further information of loss of life
and impact on the community.
Senator Dunleavy felt that the federal government was
trying to ensure the safety of the train system. He
surmised that the total cost of PTC was $160 million. Ms.
Reilly indicated in the affirmative.
Senator Dunleavy wondered if the Alaska Railroad had
received any funds in previous years. Ms. Reilly replied
with slide 8.
Senator Dunleavy queried the deadline for the project. Ms.
Reilly replied that the law would be enacted December 31,
2015. There were regular communications with the Federal
Railroad Administration (FRA), which was responsible that
the Alaska Railroad met the regulations. The FRA monitored
the good-faith efforts of the railroad. She remarked that
it was difficult to determine exactly the definition of a
"good-faith effort", but it was intended to ensure that the
railroad was moving forward in enacting the regulations.
She stressed that no one in the railroad industry will meet
the deadline of December 31, 2015.
9:32:58 AM
Senator Dunleavy wondered if there would be an explanation
of the penalties. Ms. Reilly responded in the affirmative.
Co-Chair Kelly queried the political strategy of the
regulation, and wondered if it was Senator Boxer who
encouraged the federal regulation. Mr. O'Leary replied that
there were two people.
Co-Chair Kelly surmised that there were two California
congressmen that reacted to an accident in California.
Those two senators were no longer in the majority. He
understood that the efforts with the two senators were
fruitless, because they were immovable. He felt that it was
unnecessary for Alaska to enact this regulation. He
understood that the regulation may need to be utilized, so
Alaska needed financial help or a deadline extension. Mr.
O'Leary replied that he was in contact with congressional
delegation on the matter at hand. He felt that there would
be no change as a result of the adjustment in the U.S.
Senate. He stressed that it was a safety issue.
Vice-Chair Micciche agreed that Alaska should have a waiver
on this regulation. The risk profile was different in
Alaska compared with the Lower 48, based on population
density and the potential for loss of life. Mr. O'Leary
agreed.
9:36:34 AM
Vice-Chair Micciche wondered why there was not a base level
for PTC, because of the drastic population difference. He
felt that there could be an adjustment in the risk
footprint. Ms. Reilly replied that the regulation was over
one hundred pages, with many different characteristics. The
primary characteristic stated that passenger hauls required
PTC. There were numerous deaths on small railroads, like
the railroad in Alaska.
Vice-Chair Micciche he stressed that there were different
passenger profiles in Alaska than in other parts of the
country. He wondered if the Alaska Railroad provided a
greater potential for postponing its deadline. Ms. Reilly
restated that the Alaska Railroad had consistently
communicated with the FRA that it would not meet the
December 31, 2015 date. The soonest expected date for the
Alaska Railroad was December 31, 2018. She stated that the
FRA accepted that estimation, because the Alaska Railroad
had shown good-faith efforts.
Senator Bishop queried the revenue generated for freight
versus passengers, and whether Europe had PTC. Ms. Reilly
replied that all of Europe was using PTC.
Mr. O'Leary furthered that the Alaska Railroad had
approximately $140 million annual gross revenue. Passenger
revenue in the previous year was roughly $28 million.
9:41:49 AM
Co-Chair MacKinnon wondered if there were accidents in
other countries that used PTC. Ms. Reilly replied that
there was an accident in Spain, which occurred at the time
of PTC implementation. She remarked that the train industry
took note of the proper way to conduct the PTC
implementation.
Co-Chair Kelly felt that the committee did not need to be
convinced that PTC was a good idea. He felt that PTC was
not necessary for the Alaska Railroad, but he understood
that it was a federal requirement.
Co-Chair MacKinnon shared that she has an automobile that
reacted to some road hazards, but she felt that the car was
not responding to the hazard appropriately. She shared a
story about how her car was reacting inappropriately in an
Alaska environment. She wondered if there was an effort to
ensure the best available technology for Alaskans.
9:46:03 AM
Co-Chair Kelly commented that the "antilock brake system"
in Alaska should be known as the "anti-brake system." Co-
Chair MacKinnon agreed.
In response to the question from Co-Chair MacKinnon, Ms.
Reilly stated that the systems in Europe were based on
passenger transportation. The United States had a freight
and passenger system, without the protection that was in
place in Europe. She stressed that PTC would not regularly
take over they train operation. The PTC system provided
warnings to the train operators. The PTC system did have a
brake application, but it had never been triggered. She
stressed that it was her responsibility to implement the
system effectively and efficiently. She stressed that the
system was a safety overlay.
Co-Chair MacKinnon asked if the federal government chose
how the PTC would be implemented. Ms. Reilly replied that
the federal government did not determine the implementation
of PTC. The airline industry's control system was set up by
the Federal Aviation Administration (FAA), and the airlines
worked to implement that specific control system. The
railroad industry, however, had been deregulated.
Therefore, the railroad industry needed to interoperate
using different types of equipment. The work had been
ongoing since 1999 to encourage the railroads to work
together to find a way for the system to interoperate. The
FRA's responsibility would then monitor the efforts to
ensure a safe and reliable system.
Co-Chair MacKinnon stressed that the Alaska Railroad was
not interoperable. She wondered why there was no physical
person monitoring the tracks. She stated that she had
visited the Alaska Railroad headquarters, and remarked that
every train was monitored. Ms. Reilly stated they did look
at different systems and currently use GPS to provide
situational awareness. She noted that GPS in Alaska has
challenges and these needed to be mitigated by PTC. She
pointed out challenges in acquiring technology because of
our small size.
9:52:39 AM
Vice-Chair Micciche wondered if the $140 million was net or
gross revenue. Mr. O'Leary responded that that it was gross
revenue.
Vice-Chair Micciche noted that the net revenue would be
somewhat smaller than $140 million. He stressed that the
expense of PTC was more than one year's net revenue. He
assumed that the impact of the Alaska Railroad on that
proportion was more significant than other parts of the
country. Mr. O'Leary stated that he did not know the exact
ratios to the other railroad entities. He agreed that PTC
was greater than one year's gross revenue. He declared that
he would not use $160 million for PTC on the Alaska
Railroad. He stressed that he did not have a choice in the
implementation of PTC, because it was required by the
federal government.
Vice-Chair Micciche understood Mr. O'Leary's concerns. He
wondered if the Alaska Railroad had evaluated the cost of
passenger service. Mr. O'Leary replied in the affirmative.
He stated that it was important to continue passenger
service. He stressed that without PTC, the Alaska Railroad
would no longer be permitted to run the passenger service.
That would have significant impact on the tourism industry
and the state in general, and would have direct impact on
the Alaska Railroad. He explained that there was only one
track running both freight and passenger. He stressed that
650 miles of track, but limited density in certain times of
year to pay for the operation. He explained that the
passenger operations ensured the federal receipts of
approximately $28 million per year.
Senator Bishop remarked that the focus of the committee was
related to the cost of implementation.
9:57:19 AM
Co-Chair Kelly wondered how recently the congressional
delegation refused to grant a waiver. Mr. O'Leary responded
that they had refused in December 2014.
Co-Chair Kelly stressed that the state was in a $4 billion
budget deficit. He felt that the cost of implementing PTC
was too expensive. He felt that the federal government was
understanding, and noted the good faith efforts. He
wondered if Alaska's budget deficit could be used in PTC
waiver negotiation efforts. Ms. Reilly replied that the
Alaska Railroad provided updates to the FRA on a quarterly
basis, and were given information regarding Alaska's budget
situation. She stressed that there were hard negotiation
techniques.
Co-Chair Kelly felt that the Alaska Railroad was doing good
work, and he wanted to stress the reality of Alaska's
financial situation. He understood that PTC must be
implemented, but it take time.
Senator Dunleavy wondered would happen if the Alaska
Railroad did not implement PTC. Ms. Reilly responded with
slide 18, "What if ARRC Does Not Comply?":
Federal law provides penalties for non-compliance:
FRA authority to fine 61 different PTC-related
violations
Maximum FRA fine for failure to complete PTC
installation by December 31, 2015, is $16,000 per
violation and $25,000 for each "willful"
violation. A separate violation is issued for
each day the violation occurs. The FRA can fine
up to $100,000 per day as it deems warranted.
FRA rail safety law compliance pertains to
"persons" so both the corporation and individuals
are on the hook.
Prohibit passenger service
10:03:30 AM
Senator Dunleavy queried the definition of a "violation."
Ms. Reilly replied that each definition was outlined in the
regulation. She stated that it could be in each location;
brake enforcement; communication errors; etc. She stressed
that it was an extensive four-column list.
Senator Dunleavy wondered what the specific financial
penalties would be for not implementing PTC. He wondered if
the penalty that Ms. Reilly spoke of was for $105,000. Ms.
Reilly replied in the affirmative.
Senator Dunleavy asked if the $105,000 was the maximum
penalty. Ms. Reilly responded that $105,000 per day was the
maximum fine. She explained that there could be fines for
problematic individuals. The federal government could
finally prohibit passenger service. She explained that the
manager of safety for Metro North was fined $45,000 per day
personally until he resigned. The FRA used their ability to
fine on a regular basis.
Senator Dunleavy felt that the FRA fines were ridiculous.
He wondered if the Alaska congressional delegation would be
willing to go against the regulation, if the bill were
revisited in Congress. Mr. O'Leary replied that Alaska's
delegation did not believe that there was an ability to get
an exemption for Alaska. The delegation did, however, feel
that an extension was possible.
Senator Dunleavy explained that $105,000 times 365 a year,
was $38.325 million. The Alaska Railroad had approximately
$470,000 passengers a year, at $81 per passenger. He
wondered why the Alaska Railroad did not pay the penalty,
and integrate it as part of the price of doing business. He
felt that the Alaska Railroad would also see savings in
diesel costs, because of the current low oil prices. Mr.
O'Leary replied that the regulators would not stop at the
outlined penalty dollars. He felt that the FRA would stop
passenger service on the Alaska Railroad.
Senator Dunleavy stressed that it was unknown whether or
not the FRA would shut down passenger service. Mr. O'Leary
agreed.
10:07:46 AM
Vice-Chair Micciche stressed that it would take 17.5 years
of penalty costs, before it matched the cost of PTC, if the
FRA did not prohibit passenger service. He looked at the
memo from the FRA Office of Safety and Analysis (copy on
file). He remarked that the total accidents and incidents,
which equated to 769 fatalities in 2014. He noted that
trespasser fatalities was the top fatality, at 498 in 2014.
He stressed that PTC would not help to stop trespasser
fatalities. The second category for fatalities was highway-
rail incidents at 239 fatalities in 2014, and stressed that
PTC would not help to reduce those incidents. The third
category was 10 employee fatalities in 2014, and PTC would
only affect a small portion of those incidents. The fourth
category was the only category that PTC would help to
reduce. He shared that there 6 to 8 fatalities between 2011
to 2014. He stressed that PTC would only affect a small
number of fatalities related to railroad operations. He
felt that it was difficult to justify the PTC investment.
He felt that the federal government did not effectively
understand how to reduce risk when put in a dollar amount.
Mr. O'Leary restated that he would not use $160 million for
PTC.
Co-Chair MacKinnon felt that the budget request should be
the focus of the presentation.
Mr. O'Leary highlighted slide 8, "PTC Funding Sources 1997
- 2015." He explained that the Alaska Railroad, with its
internally generated funds and the available federal
monies, put nearly $69 million into PTC. He explained that
the legislature had appropriated $34.1 million over the two
years prior to the Alaska Railroad for PTC.
10:12:02 AM
Mr. O'Leary addressed slide 9, "ARRC 2016 - 2018 PTC
Unfunded Budget." The Alaska Railroad wanted three
additional years of legislative requests: 21.65 million in
FY 16; $16.85 million in FY 17; and $16.45 million in FY
18. The requests were the amounts needed for a December 31,
2018 full implementation. He remarked that this was the
plan, prior to Alaska's recent sudden budget deficit.
Ms. Reilly discussed slide 22, "The Way Forward":
Fund remaining $55 million through a combination of
bonds and state funds
$37 million in ARRC bonds
Maximum amount we can add to bonds
Adds 4 years to maturity schedule
$18 million in state funding
Shows backing to creditors/bond buyers
Shows "good faith effort" to regulators
10:18:07 AM
Senator Dunleavy looked at the fund titled "Total Internal
Funding Available" with a balance of $22.127 million. He
queried the purpose of that fund. Mr. O'Leary replied that
it was the expected 2015 cash flow to be used for the
internally funded capital projects. Those projects included
replacing track, vehicles, and other general capital needs
for the Alaska Railroad.
Senator Dunleavy surmised that the funds were not to be
used for PTC. Mr. O'Leary replied that the fund was
available for PTC.
Vice-Chair Micciche queried the number of rail systems that
would defer maintenance in order to fund PTC, and therefore
introducing more risk. Mr. O'Leary responded that everyone
already knew the answer to that question.
Mr. O'Leary stressed that the Alaska Railroad did not enjoy
requesting funds from the legislature.
Senator Dunleavy reiterated that the Alaska Railroad did
not need PTC, but the federal government did not care. He
felt that the congressional delegation's refusal to work to
bring Alaska a waiver, then the federal government was in
trouble.
Co-Chair MacKinnon felt that the federal delegation as
merely communicating a likelihood, rather than their
unwillingness to work with the Alaska Railroad. Mr. O'Leary
agreed.
Senator Dunleavy was not implying that the federal
delegation was not working to ensure good thing for Alaska.
He stressed that the federal government was a large entity,
and opined that PTC was created by someone who did not
understand what was best for Alaska.
Co-Chair Kelly queried the cost of an engine that was
powered by natural gas. Ms. Reilly replied that there was
some current testing on locomotives, and it was estimated
at $3.2 million. She stated that those natural gas powered
locomotives were not approved for general rail service.
Senator Bishop looked at slide 22, and felt that there
should be an attempt to leverage some funds with the
partners.
10:23:47 AM
Senator Dunleavy wondered if the implementation was
required within three years. Ms. Reilly replied in the
affirmative.
Co-Chair Kelly wondered if PTC was intended to prepare the
infrastructure for high-speed trains. Ms. Reilly replied in
the negative.
Co-Chair MacKinnon wondered if the corporation would be
negatively impacted by the possible natural gas pipeline.
Mr. O'Leary replied that the rail line was in good shape,
and had been preparing for a possible natural gas pipeline.
The infrastructure was in good shape for the natural gas
pipeline.
Co-Chair MacKinnon asked how the railroad may be affected
by the recent Fairbanks natural gas proposal. She noted
that the liquid natural gas (LNG) trucking may not be
utilized. There could be a need for LNG rail cars to
Fairbanks. She queried the impact on the railroad. Mr.
O'Leary replied that the financial projections for 2016
showed that the North Pole refinery would have a full year
of terminal operations. That would be a significant
reduction on the railroad freight haul. The railroad had
continued to offer the option to the stakeholders of the
capabilities to move LNG. He stressed that the railroad was
available as an interim solution until the LNG pipeline was
constructed.
Co-Chair MacKinnon queried the cost of the containers. Mr.
O'Leary replied that the Alaska Railroad was merely one
portion of the larger supply chain. He explained that the
Alaska Railroad had recently worked with a number of
shippers, and had quoted different rates based on
logistical solutions. The containers would be approximately
$160,000 per unit. He stressed that the cost was
incorporated into a rate that would be given to the shipper
as they determine the price of gas at the burner tip.
ADJOURNMENT
10:30:21 AM
The meeting was adjourned at 10:30 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 020215 Don Young PTC Letter.pdf |
SFIN 2/2/2015 9:00:00 AM |
|
| 020215 LAW Rail Safety Improvement Act of 2008 - Hupprich.pdf |
SFIN 2/2/2015 9:00:00 AM |
|
| 020215 Positve Train Control SFC Presentation.pdf |
SFIN 2/2/2015 9:00:00 AM |
|
| 020215 PTC One Pager - Amended Request.pdf |
SFIN 2/2/2015 9:00:00 AM |