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The year ahead: ASLRRA's Darr offers outlook for short-line railroads

Linda Bauer Darr sums up the past 12 months as like a trip on "Mr. Toad's Wild Ride.” Not only did railroads take a hit in carload traffic activity for the year, but the rail industry found itself in one of the most difficult political environments in recent history.

Linda Bauer Darr

"There was a lot of scrutiny on railroad operations, and that scrutiny impacted everything we were trying to accomplish," says Darr, president of the American Short Line and Regional Railroad Association (ASLRRA). "Whether it was the extension of the PTC deadline, or dealing with training rules pending at the U.S. Department of Transportation, or whether it was the 45G tax credit and even funding for the Short Line Safety Institute — all these things were in play at a time when people were in a pretty bad mood, generally, about railroading." The people she's referring to are lawmakers, regulators and the news media, who zeroed in on rail safety issues in the aftermath of some large-scale derailments, including a number of crude-oil train explosions and the Amtrak crash in May 2015 that left eight people dead. The intense scrutiny of railroads in the aftermath of those high-profile incidents put the industry in "more of a defense mode than we had been in the past," she says. So, all in all, 2015 — which was Darr's first year on the job at ASLRRA — was a challenging year. But like Mr. Toad's trip at Disneyland, the rail industry's wild ride eventually landed on a smoother path. In December, Congress passed a multi-year surface transportation bill that extended the positive train control (PTC) deadline for five years, and an omnibus appropriations bill that includes a two-year extension to the 45G short-line tax credit. "Ultimately, I was really excited about the way that we wrapped up the year," says Darr. Getting down to business Now that Congress has removed the uncertainty over the tax credit and PTC deadline issues, Darr hopes that 2016 will be a year in which ASLRRA members can spend less time on what’s happening in the political realm, and more time on taking care of business to improve safety, carload activity and infrastructure. For example, the 45G tax credit is "very important to our members," Darr explains, adding that many short lines were reluctant to forge ahead with certain infrastructure project plans while the credit's future was in question. A federal tax credit for track maintenance conducted by short lines and regional railroads, 45G is equal to 50 percent of qualified track expenses and other infrastructure projects. In place since 2005, the credit expired Dec. 31, 2014. The new law allows short lines and regionals to claim the credit for 2015 and extends it to 2016. "It's always a risk when you are dealing with a tax credit that will be retroactive," Darr says. "It wreaks havoc with budgeting and planning." With the extension in place, short lines and regionals can ramp up their capex plans and invest in infrastructure that will improve safety and operational efficiency, Darr says. The ASLRRA estimated that the latest bill would support an $800 million investment in short-line track improvements over the next two years. PTC: an industry transformation On the PTC front, the three-year extension of what was originally the federally mandated Dec. 31, 2015, deadline for railroads to implement the safety technology came as a sigh of relief to railroads. However, that doesn’t mean that the short lines have three more years to figure out how PTC will affect their businesses; they will have to start adapting to the new technology as soon as their Class I partners are ready to implement PTC on their lines, Darr says. "I think PTC is going to be transformative for the industry overall," she says. "The Class Is are investing billions of dollars in this technology. Once they have PTC up and running, I think they will aggressively push to make sure that the people they are doing business with are PTC compliant." The run-up to the 2015 deadline helped sharpen the industry's focus on PTC compliance in ways that it hadn’t been focused before, Darr believes. "As that focus deepens, we also see the concern about where we will get the resources to be in compliance," she adds. One thing ASLRRA is exploring is creating a pooling arrangement for a product that would help its members with the back-office server function of PTC. "We don't feel like everyone in the short-line industry should have to invest in that independently, so we're looking at a bulk-buying opportunity," she says. Additionally, ASLRRA is exploring the potential for a pooling arrangement for PTC-related insurance requirements of its members. Also on ASLRRA's agenda for 2016 is assessing the rail-service market and the potential for short lines, regionals and Class Is to work together on new business development opportunities. "Because of the decline in certain commodity areas, we're going to take a much harder look at how we do carload business, the single-unit business that has really been the lifeblood for our industry," Darr says. "In particular, we've looked at how we can grow the communication between the Class Is and short lines on carload collaboration." Darr says those conversations will take place on a case-by-case basis between Class Is and their short-line partners, as well as at rail industry association caucuses and committee meetings. "All boats will rise for the Class Is and short lines if we can figure out ways to promote the rail sector business for everybody," she says. Making progress at the Safety Institute Another item on ASLRRA's 2016 planner will be safety of the non-PTC kind. The association has developed the Short Line Safety Institute with the Federal Railroad Administration (FRA), Volpe National Transportation Systems Center and University of Connecticut (UCONN). And ASLRRA officials are "very excited" about the newly established institute’s progress over the past year. In December, the institute announced it had hired Ron Hynes as its executive director. Hynes, who started his new job on Jan. 4, more recently served as the FRA's director of the Office of Technical Oversight. He has more than 40 years of railroad experience, including in the short-line sector. "There's no one who understands safety better than Ron Hynes," Darr says. Moreover, the institute will soon start producing some results. Over the past year, the institute has focused on assessing the safety cultures of 12 regionals and short lines that transport crude oil. It is charged with using those assessments to identify ways in which the railroads can improve safety. In the next few months, the institute expects to come out with aggregate results that will help set an "aggressive agenda" of programming in the form of best practices, training and education, webinars, communications and research, Darr says. By 2016's end, Darr hopes the industry will find itself in an even better position to promote the positive side of rail. "We're not the only game out there — we're competing with ships, planes and trucks — so we need to stay on our game," she says. "We have to provide excellent customer service, which the short lines are known for. It's about sticking to our business, working hard, keeping at it, collaborating and keeping an eye on the customer."

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