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February 6, 2012

Positive Train Control Systems

Proposed Rule

Score: 21 / 60

RULE SUMMARY

Under the Federal Railroad Administration’s (FRA) statutory authority, the regulation issued on September 27, 2010, requires Positive Train Control (PTC) systems to be installed on lines specifically required by Congress under the Rail Safety Improvement Act of 2008 (RSIA) and on lines that fail to meet one of two tests: the ‘alternative route test’ and the ‘residual risk test.’ FRA is now proposing to amend the final PTC rule so that railroads will no longer be required to meet the two tests. The FRA agreed to amend the final rule after the Association of American Railroads (AAR) filed a lawsuit.

Given the elimination of these two tests, the FRA estimates that between 14,000 and 7,000 miles—or a mean of 10,000 miles—of track will no longer be required to install PTC systems. Over the first 20 years, the net benefit to society is estimated to be between $1,041,764,269 (at a discount rate of 3%) or $793,856,299 (at a discount rate of 7%) and $581,441,797 (at a discount rate of 3%) or $442,825,061 (at a discount rate of 7%).

The proposal contains no mention of market failure or whether there is a systemic problem associated with certain train lines that carry passengers and PIH materials. Previous rulemaking may have identified various reasons used to justify PTC regulations, but there is no mention made in this economic analysis. There is also no mention that the agency may have made a mistake, as this proposed regulation represents a lessening of a previous government rulemaking. The agency also failed to propose an alternative regulatory approach or to establish measures or goals that could be used to track the regulation's effects in the future.

COMMENTARY

METHODOLOGY

There are twelve criteria within our evaluation within three broad categories: Openness, Analysis and Use. For each criterion, the evaluators assign a score ranging from 0 (no useful content) to 5 (comprehensive analysis with potential best practices). Thus, each analysis has the opportunity to earn between 0 and 60 points.

Criterion	Score
Openness
1. How easily were the RIA , the proposed rule, and any supplementary materials found online? The NPRM turns up easily in regulations.gov with a RIN search, but a keyword search produces a large number of documents to wade through. Both the proposed rule and RIA can be found on regulation.gov using the RIN and keyword. Additionally, the proposed rule can be found on the Federal Railroad Administration's (FRA) website, though it did not show up using the search bar on the home page.	3/5
2. How verifiable are the data used in the analysis? The data reported are, for the most part, not verifiable using RIA (RIN 2130-AC27). Some data come from the suit filed by the Association of American Railroads (AAR), but much of the cost data come from the previous proposed and finalized rule (FRA-2008-0132, RIN 2130-AC03) that is being amended. Looking at the 2010 final rule, much of the data comes from the 1999 Economics Team of the PTC Working Group. RIA contains numerous tables displaying year-by-year estimates of benefits and costs over 20 years that were used to determine net benefit estimates, but discussion of individual estimates is very limited.	2/5
3. How verifiable are the models and assumptions used in the analysis? Numerous assumptions are made, but few are discussed in detail that would explain their selection versus to other possibilites. RIA contains only 5 footnotes, and thus offers little verification. Again, most of the assumptions come from the previous rule, and thus one must refer to the previous proposed and final rule (FRA-2008-0132, RIN 2130-AC03). A few of the models and assumption are generated by the 1999 Economics Team of the PTC Working Group and thus are not easily verifiable. Moreover, a number of assumptions, such as the average risk on non-PTC tracks of 60 percent, are presented without any cites or basis and are thus not verifiable.	2/5
4. Was the analysis comprehensible to an informed layperson? The results and summary are clear. Analysis is easy to follow, but this is mostly because RIA does not go into much detail about the data, its analysis, or even the rationale for the positive train control regulation.	3/5
Analysis
5. How well does the analysis identify the desired outcomes and demonstrate that the regulation will achieve them?	3/5
Does the analysis clearly identify ultimate outcomes that affect citizens’ quality of life? RIA focuses on relieving some of the burden of an earlier rulemaking on Positive Train Control (PTC) regulations as borne by affected railroads. RIA does note the increase in costs due to greater risk of death, injury, delay, property damage, equipment and environmental clean-up, and evacuations. However, it only states the benefits of cost reduction accruing to the railroad operators and provides almost no discussion of how this would affect freight rates and costs of goods people buy.	3/5
Does the analysis identify how these outcomes are to be measured? The RIA identifies benefits associated with lessening the regulatory burden stemming from reducing the number of track segments that require PTC equipment.	4/5
Does the analysis provide a coherent and testable theory showing how the regulation will produce the desired outcomes? Theory is that removal of various regulatory requirements requiring railroads to meet two tests in order to avoid PTC system implementation on track segments results in substantial cost savings. The proposed rule eliminates the need for positive train controls and other types of risk reduction required for certain rail lines that will not be used to carry PIH traffic and 5 million gross tons or more of annual traffic and will not be used for intercity or commuter rail traffic as of December 31, 2015. Although rail lines would forego some risk reduction measures, reductions are believed to be small since these lines pose low risk of accidents.	4/5
Does the analysis present credible empirical support for the theory? Credible support given assumptions used in analysis. But assumptions are not clearly discussed in RIA in terms of why they are chosen or what alternative assumptions were rejected. DOT simply states, "The analysis shows that if the assumptions are correct, the savings to the industry in the form of regulatory relief as proposed far outweigh the cost associated with increased accident exposure." This statement suggests considerable weakness in empirical support for the theory.	2/5
Does the analysis adequately assess uncertainty about the outcomes? RIA acknowledges uncertainty in how many miles of track will be affected by the rule change as well as the costs and benefits of reducing the number of segments requiring the PTC system. DOT analysed three cases that might be excluded from PTC requirements because of changes in PIH traffic: a high case (14,000 miles), expected case (10,000 miles), and low case (7,000 miles). However, DOT does not address potential changes in the distribution of headline versus non-headline accident percentage, nor does it address uncertainty of the relative accident exposure on the non-PTC segments.	3/5
6. How well does the analysis identify and demonstrate the existence of a market failure or other systemic problem the regulation is supposed to solve?	2/5
Does the analysis identify a market failure or other systemic problem? FRA argues that under the previous regulation costs outweigh benefits for the sections of track they now propose to deregulate. However, FRA does not provide any discussion of why PTC regulations are necessary to correct market failure or systemic problems. Previous rulemaking may have identified various reasons used to justify previous PTC regulations, but no mention is made in this RIA. There is no mention that "government failure" might be a problem since this proposed regulation represents a lessening of a previous government rulemaking.	1/5
Does the analysis outline a coherent and testable theory that explains why the problem (associated with the outcome above) is systemic rather than anecdotal? None directly discussed though it might be inferred that DOT believes some PTC regulations are necessary since otherwise DOT would have pursued total elimination of previous rulemaking. RIA simply states that the current rules are a consequence of the severity of certain very public accidents, coupled with a series of other less publicized accidents that led to the Rail Safety Improvement Act of 2008.	2/5
Does the analysis present credible empirical support for the theory? RIA does present empirical data from a 1999 Working Group and the Association of American Railroads, but it does assume certain risks without credible support.	3/5
Does the analysis adequately assess uncertainty about the existence or size of the problem? RIA acknowledges uncertainty in how many miles of track will be affected by the rule change as well as the costs and benefits of reducing the number of segments requiring the PTC system. However, RIA does not address potential changes in the distribution of headline versus non-headline accident percentage, nor does it address the uncertainty of the relative accident exposure on the non-PTC segments.	2/5
7. How well does the analysis assess the effectiveness of alternative approaches?	1/5
Does the analysis enumerate other alternatives to address the problem? No alternatives are presented. RIA simply looks at amending the PTC rule to eliminate the two qualifying tests, which will release approximately 10,000 miles of track and locomotive equipment from PTC regulation.	1/5
Is the range of alternatives considered narrow (e.g., some exemptions to a regulation) or broad (e.g., performance-based regulation vs. command and control, market mechanisms, nonbinding guidance, information disclosure, addressing any government failures that caused the original problem)? There is only one regulatory option presented to address the "government failure," and thus it is extremely narrow. Analysis briefly discussed various mitigation measures that could be used to lower PIH risk, but more as complements rather than substitutes for this proposed rule.	0/5
Does the analysis evaluate how alternative approaches would affect the amount of the outcome achieved? Not applicable. Only one method of implementation is proposed.	0/5
Does the analysis adequately address the baseline? That is, what the state of the world is likely to be in the absence of federal intervention not just now but in the future? The baseline is no change to the previous rulemaking on PTC. However, there is no mention of whether or not affected railroads would alter their behavior in the absence of the change.	2/5
8. How well does the analysis assess costs and benefits?	2/5
Does the analysis identify and quantify incremental costs of all alternatives considered? Only one proposed regulatory method is proposed.	2/5
Does the analysis identify all expenditures likely to arise as a result of the regulation? RIA identifies expenditures made by railway businesses associated with PTC installation, maintenance, and mitigation as benefits since these are costs now avoided. RIA also lists potential costs, such as costs of fatalities, injuries, delay, property damage, evacuation, and cleanup that result from deregulation. No mention is made about how deregulation may affect railroad or shipper insurance expenditures.	3/5
Does the analysis identify how the regulation would likely affect the prices of goods and services? RIA does attempt to determine the effects of the reduction in mitigation costs of train transportation. It does not attempt to show the effect of prices on product shipped via trains that no longer require PTC and mitigation equipment.	0/5
Does the analysis examine costs that stem from changes in human behavior as consumers and producers respond to the regulation? RIA does not look at how transporters might use alternative methods, say from trains to trucks or ships. RIA fails to look at how consumers may alter their behavior, but it suggests railroads might use cost-savings from lessened regulation to enhance their efficiency.	1/5
If costs are uncertain, does the analysis present a range of estimates and/or perform a sensitivity analysis? In this proposed rule, there are three cases that vary depending upon the number of miles of track that no longer require PTC and other mitigation methods: 7,000, 10,000, and 14,000 miles of track. The analysis also looks at high and low estimates of each type of costs of greater risk of fatality, injury, delays, property damage, clean-up, and evacuation. The analysis also looks at high and low estimates of the benefits of fewer PTC system installations.	4/5
Does the analysis identify the alternative that maximizes net benefits? Only one regulatory option is presented to address the government failure.	0/5
Does the analysis identify the cost-effectiveness of each alternative considered? Only one regulatory option is presented to address the government failure.	0/5
Does the analysis identify all parties who would bear costs and assess the incidence of costs? RIA contains no discussion of businesses that stand to lose from the regulation since they will now supply fewer PTC services to affected railroads. The analysis does identity the types of costs, such as fatality, injury, delay, property damage, evaculation, and cleanup, but not the parties that will incurr such costs of the regulation change.	3/5
Does the analysis identify all parties who would receive benefits and assess the incidence of benefits? RIA does identify seven Class III railroads and two Class II railroads will no longer be required to install PTC systems. It does not, however, include the net effect on the customers. Implicitly assumes all cost-savings flow to railroad industry.	2/5
Use
9. Does the proposed rule or the RIA present evidence that the agency used the analysis? The FRA clearly determined that amending the previous rule is a net benefit for society. However, there is little evidence that this RIA was used to determine the proposed rule. Moreover, this rule was driven by a lawsuit brought by the Association of American Railroads (AAR) challenging the two qualifying tests provisions of the final rules in prior rulemaking. DOT and AAR reached a settlement agreement in which DOT agreed to issue a NPRM proposing to amend the PTC rule to eliminate the two qualifying tests; this NPRM fulfills this requirement.	1/5
10. Did the agency maximize net benefits or explain why it chose another alternative? Although the previous rule did not maximize net benefits to society, this rule proposal amends the previous rule, so as to improve net benefits. Without alternatives, however, there is no way to know whether the net benefits are actually maximized.	2/5
11. Does the proposed rule establish measures and goals that can be used to track the regulation's results in the future? DOT requests comments on aspects of the analysis but does not establish measures or goals for tracking results of the regulation in the future.	0/5
12. Did the agency indicate what data it will use to assess the regulation's performance in the future and establish provisions for doing so? FRA does not indicate how it will assess the regulation's performance in the future.	0/5

Total	21 / 60

Additional details

Agency: Department of Transportation
Regulatory Identification Number: 2130-AC27
Agency Name: Department of Transportation
Rule Publication Date: 08/24/2011
Comment Closing Date: 10/24/2011