Why this government safety deadline could cost almost $70 billion

September 24, 2015, 7:37 PM UTC
Oil Collapse-Railroads
FILE - In this Nov. 6, 2013, file photo, a BNSF Railway train hauls crude oil near Wolf Point, Mont. A collapse in oil prices won't derail the railroads’ profit engine even if it does slow the tremendous growth in crude oil shipments seen in recent years. Railroads went from hauling 9,500 carloads of crude oil in 2008 to 435,560 last year, as production boomed and oil routinely sold for $90 a barrel or more. But even with the surge, crude oil shipments remain less than 2 percent of all the carloads major U.S. railroads deliver. (AP Photo/Matthew Brown, File)
Photograph by Matthew Brown — AP

Unless Congress takes swift action, America’s rail network could be facing widespread shutdowns in January 2016, with catastrophic impacts on both railways and the overall economy.

The looming threat was originally put in place by Congress itself. The Railway Safety Improvement Act of 2008 mandated 2015 as the deadline for nationwide implementation of Positive Train Control, or PTC, a ‘smart’ system for coordinating train movement and preventing collisions and derailments. But that deadline was a political compromise, and railways and trade groups have been warning for years that, despite their best efforts, they would not be able to meet it.

Now, the Government Accountability Office has confirmed the truth of those warnings, finding that most of America’s railroads will not have PTC installed by the deadline. The RSIA legislation outlines serious fines for lines that continue operating without PTC after the deadline, and in a slew of letters released earlier this month, America’s major freight carriers have warned that they may be legally required to shut down large portions of their networks on the first day of 2016. (The Association of American Railroads has conveniently compiled the letters from the seven largest U.S. carriers).

If they continued to operate, carriers say they risk more than fines. Accidents that might occur while in violation of the RSIA would present greatly increased liability, and railway employees could not be compelled to work in violation of federal law.

Not all rail lines would be shutteredsome more remote tracks are not affected by the RSIA. But major carriers have said that at least 1/3 of regulated tracks and trains do not yet have PTC hardware installed.

MORE: Should Amtrak be privatized?

The potential economic impacts of a large-scale rail shutdown are hard to conceptualize, much less calculate. Rail carries 40 percent of all intercity freight in the U.S. The American Association of State Highway and Transportation Officials has estimated that if all freight rail traffic were shifted to trucks, the additional operating cost would be $69 billion annually. But the rush to make such an adjustment over the next three months would impose huge unplanned labor costs on companies at every point on every shipping network in the country. In fact, those costs are already real, as companies devote time to thinking about contingency plans.

In addition to freight lines, Amtrak and regional commuter lines such Chicago’s Metra line would likely have to suspend some or all operations. The American Public Transportation Association has said that failure to extend the deadline could cause widespread commuter disruption.

Of course, it might seem inconceivable that Congress would let any of this happen, and railways’ warnings have an element of political chicken. Extending the deadline is seen in some corners as a concession to an industry that has failed to move quickly enough on a crucial safety technology. Regulators and the government have been pushing for PTC in some form for decades, and the 2008 mandate came on the heels of a series of crashes that the technology might have prevented.

But the practical implementation of PTC has proven to be hugely complex. As Fortune reported in July, and as the carriers reiterate in their letters, freight lines have made large investments in PTC. But, as Union Pacific CEO Lance Fritz described it, PTC is “the largest and most complex technological undertaking ever attempted by the freight rail industry.” It requires a massive amount of new physical infrastructure, such as signals and control boxes. Securing spectrum for wireless communication has also slowed progress.

But perhaps the biggest challenge is the system’s complex software. PTC will monitor the position and trajectories of not just individual trains, but trains across the entire network, and make decisions about braking and speed to prevent accidents.

Groups including the AAR, APTA, and GAO have found that 2020 is a more realistic date for PTC implementation. But legislative prospects for an extension are, for the moment, not clear. The Senate has approved a long-term transportation bill including a provision for extending the PTC deadline, but the House version of that bill has shown few signs of life.

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