Hotline #695 -- February 25, 2011

U.S. Transportation Secretary Ray LaHood this afternoon said he has extended by one more week the federal government’s deadline for Florida to accept $2.4 billion in federal funds for high-speed rail.  He met with Gov. Rick Scott earlier today.

The $2.7 billion project would link Tampa and Orlando with high-speed rail.  LaHood said the governor “has committed to making a final decision by the end of next week.”
Here is more from LaHood’s statement: “This morning I met with Gov. Rick Scott to discuss the high-speed rail project that will create jobs and economic development for the entire state of Florida.  He asked me for additional information about the state’s role in this project, the responsibilities of the Florida Department of Transportation, as well as how the state would be protected from liability.

“I have decided to give Gov. Scott additional time to review the agreement crafted by local officials from Orlando, Tampa, Lakeland and Miami, and to consult with his staff at the state Department of Transportation…I feel we owe it to the people of Florida, who have been working to bring high-speed rail to their state for the last 20 years, to go the extra mile.”

Publicly, Gov. Scott has stuck to talking points about his desire to protect taxpayers from potential cost overruns.  The federal government would have covered $2.4 billion of the line’s costs, with around $300 million to come from local sources.  However, Scott failed to explain why he did not solicit the private sector for bids even though several business consortia had expressed interest in covering any cost overruns.

The eight private sector consortia teams that attended the two Florida DOT sponsored industry forums agreed to build the project for the available public capital funding, take all risk, and guarantee the construction price, and bear cost over-run on construction, if any.  The teams all indicated that they were prepared to take all the revenue and ridership risk, so that there would be no state subsidy.  The feds even agreed that if the project were abandoned after being built, that Florida would not have to repay the federal grant.

Those working to save the project include Senator Ben Nelson (D-FL); House Transportation and Infrastructure Committee Chairman John Mica (R-FL); a bipartisan group of 26 state senators; the Florida Chamber of Commerce; and countless mayors and councils, businesses, and members of the public.

A negative decision is projected to cost the state of Florida around 24,000 jobs.

Mica had suggested cutting the line back, saying, “The first 21-mile section of the proposed corridor from the Orlando Airport to the Convention Center and Disney World holds the potential for not only being a viable project, but one that could turn a profit with a qualified private operator.”  However, Nelson did not agree with this suggestion.

Before today’s announcement, there was speculation that a cadre of state senators would seek a legal remedy to circumvent the governor’s ‘thumbs down’ decision.  There are no clear indications, however, and—should the governor say no again next week—the U.S. Department of Transportation may seek to reallocate the funds to train projects in other states.

This has been a Florida DOT project for 30 years under both Republican and Democratic administrations.  Only after Gov. Scott was elected and the state grant application to the feds approved, did the project become “Obama’s high speed rail project.”


Popular unrest in Libya disrupted the country’s oil production this week causing oil prices to surge a barrel, and again highlighting the need for the U.S. to invest in energy efficient transportation options.  This is seen as the biggest disruption to oil supply at least since Hurricane Katrina in 2005.

Libyan oil production, recently 1.6 million barrels a day, has been crippled.  That, and concerns about social unrest in bigger oil-producing countries, led Brent crude oil to $119.79 yesterday, up from $100 last week.  Shortly before 4 PM today, Brent was at $112.21 and West Texas Intermediate $98.44.

[Click here to read NARP’s recently issued statement on America’s over-dependence on foreign oil.]

“The overall significance of the situation is more than just about lost barrels” Amrita Sen, an energy analyst for Barclays Capital, told the Financial Times.  “Destabilization in the Arab world, home to the world’s largest oil and gas reserves and production, is of extreme significance.”

If these prices are sustained, Amtrak will almost certainly see the explosion in ridership that coincided with 2008’s rise in oil prices.  Almost 30% more energy efficient than automobiles and 20% more energy efficient than airplanes (per passenger mile), intercity passenger trains are better able to absorb increases in fuel prices.

Industry representatives are warning that if production is not restored within as little as three weeks pressure in Libyan oil fields will drop, reducing the country’s output for months to come.

Chris Lafakas, an economist at Moody’s Analytics, told the New York Times that production in Saudi Arabia and Iran (production 8.5 and 3.7 million barrels a day, respectively) are particularly influential in determining value.  Disruptions in those countries “would be catastrophic for prices” said Lafakas, and “Saudi Arabia alone could cause maybe a 20 to 25 percent increase in oil prices overnight.”  The Saudi king, seeking to “beat unrest” in his absolute monarchy, Wednesday announced a $36 billion package including 15% salary increase for public employees.  But the FT quoted a 34-year-old businessman who responded, “We need a new higher education minister, a new health minister, reform of the judiciary and codified laws—not handouts.”  FT yesterday reported that unemployment in the kingdom has remained above 10% “despite a prolonged economic surge.”

Congress is failing to invest in an energy-efficient transportation alternative, however.  They are even proposing cutting the budget for Amtrak and high-speed rail in a funding bill currently under consideration.


Transportation Secretary Ray LaHood spoke at the Indiana Rail Summit in Chesterton yesterday, and he delivered an emphatic message: “rail means jobs.”

“Skilled workers at Columbia City’s Steel Dynamics, Incorporated, are already forging the steel track for construction workers to install in New England.  Engineers are busy grading new routes,” said LaHood in a blog post on the Department of Transportation’s website.  “These are good jobs that American workers and their families are benefitting from now.”

Rail advocates, transportation officials, and business leaders from Indiana and Michigan attended the summit, hoping that higher-speed passenger rail will give them a much needed tool for staying competitive.

“We pay about a two to four hour penalty by living in Warsaw versus living in a community that’s better served by air travel,” said Dane Miller, President and CEO of Warsaw-based Biomet, Inc., when speaking about operating a business in a smaller community rather than a large city.  “I think a [rail] connection between Warsaw, Indiana and Detroit and Chicago, I think, would be a great advantage to the community and the Midwest in general.”

The Secretary was there, in part, to promote President Barack Obama’s high speed rail initiative.  LaHood, a native of Peoria, Illinois, believes Amtrak and passenger trains will continue to do well in the Midwest as oil prices continue to rise.

“Amtrak had record ridership last year when gas prices weren’t that high. Amtrak is doing very well, they’re providing good service, they’re providing on time service, they’re providing service that now Americans want to use,” said LaHood.  “As gas prices go up we think companies like Amtrak who are proving on time good service to the American people it will only enhance their ability to continue to do well.”

The Metropolitan Transportation Authority (MTA) of Los Angeles announced yesterday a $75 million land purchase surrounding Union Station, laying the groundwork for the expansion and development of a downtown multimodal hub.

The deal gives the MTA 38 acres, and almost six million square feet of entitlements.  It will allow the authority to accommodate ridership increases, plan for future high-speed rail service, and develop revenue streams from leases to transit agencies and retail merchants.

“The purchase price is good at this time in the real estate market,” Don Knabe, a L.A. county supervisor and chairman of the MTA board, told the Associated Press. “There’s not a downside to this deal.”


Florida’s Tri-Rail has come under fire for selecting a company that will manufacture locomotives using an outdated motive technology that critics say is less efficient and less dependable.  Tri-Rail administrators have responded by saying they went with the lowest bid.

The South Florida Regional Transit Authority (SFRTA) ordered 10 diesel locomotives that will operate on direct current (DC), at a cost of $4.2 million each.  Tri-Rail’s administrators say that the specifications are well suited to Florida’s climate, utilize a newer generation of DC technology, and that these locomotives are markedly cheaper than the more advanced alternative.

“If we had gone with a higher bidder, then we would be getting a lot of questions about that,’’ Miami-Dade Commissioner Bruno Barreiro told the Miami Herald.  Barreiro serves as chairman of SFRTA.  Half of the funding for the locomotives will come from the federal government, and the remaining balance will be provided by local sources.  Tri-Rail’s board has questioned the state’s willingness to provide additional funds for more advanced locomotives.

Opponents of this choice—whose numbers include state senate leaders, the Florida Chamber of Commerce, and clean-energy activists—say that locomotives using the more efficient alternating current technology are more dependable, and would save tens of millions over the 25-year lifespan.

“It’s a shortsighted decision,’’ countered Adam Babington, vice president of the Florida Chamber. “It’s been frustrating to see the obstacles and resistance they have put up to a fresh approach.’’

Tri-Rail’s board will meet today to vote whether to accept the bid.


Amtrak introduced “ticketless check-in” on the Auto Train beginning February 20 in Sanford, FL, and today in Lorton, VA.

This upgrade will allow passengers to check-in without a paper ticket, and will eliminate complications arising from misplaced documents.  In the near-term, if you have already been issued a paper ticket it is important to hold on to that document.  Passengers who have paid through a travel agency will be issued with traditional paper tickets, and an Amtrak Guest Rewards redemption trip will also result in the issuance of traditional paper tickets. 

Amtrak is currently developing an electronic ticketing program for the entire system.  However, Amtrak says enactment of the $850 million capital+debt service level approved by the House last week in the FY 2011 continuing resolution, would delay or abandonment of the e-ticketing initiative, among others. 

You can read an FAQ at Amtrak.com.