The Texas Department of Transportation and Abrams-Kiewit Joint Venture Reach Agreement on the Loop 375 Border Highway West Extension Project

On August 22, 2014, the Texas Department of Transportation and Abrams-Kiewit Joint Venture (Developer) reached commercial close on the Loop 375 Border Highway West Extension Project (Project).  The contract, which includes design-build and comprehensive maintenance agreements (collectively the CDA), was conditionally awarded to the Developer in April of this year.  Developer is a joint venture consisting of J.D. Abrams and Kiewit Infrastructure South Co.

The Project is located west of downtown El Paso, south of Interstate Highway 10 (I-10) and extends approximately nine miles from Racetrack Drive near Doniphan Road and New Mexico 273 east to US 54, one mile east of Park Street. The Project includes the design, construction and comprehensive maintenance of a four-lane, controlled access tolled facility from Racetrack Drive to the terminus of the existing Loop 375, in the vicinity of Santa Fe Street, a distance of approximately 5.6 miles.  The cost of the Project is approximately $525 million, excluding maintenance.

The Project will provide an alternate route for Interstate Highway 10 to address needed improvements to system capacity, reliability and regional system linkage for the El Paso metropolitan area.  Under the terms of the design-build CDA, the Developer will design and construct a four-lane controlled access facility, of which the majority is on elevated structure.  The Project includes about 5.6 miles of tolled lanes, ramps, interchanges and intersection improvements.  The Project also includes demolition of existing Union Pacific and Burlington Northern Santa Fe railroad mainline and cross-over track, and the design and construction on new alignment of approximately 10,000 feet of Union Pacific Railroad mainline track, approximately 2,000 feet of setout track and approximately one mile of Burlington Northern Santa Fe cross-over track.

The Developer will perform comprehensive maintenance services under the CDA, including routine maintenance, capital maintenance and incident management, for an initial term of five years after completion of construction.  At TxDOT’s option, the Developer’s performance of comprehensive maintenance services may be extended for up to two additional five-year terms after the initial five-year term.

The El Paso area has experienced significant growth over the past several years, resulting in increasing congestion and challenges to safety and mobility.  To address these concerns, the Project will include plans for improving regional travel and connectivity, and enhancing safety on Loop 375.  Improved access to the University of Texas at El Paso, Fort Bliss, downtown and medical centers will provide additional benefits to motorists.

The Project, which is being constructed in collaboration with the Camino Real Regional Mobility Authority (CRRMA), is expected to break ground in early 2015 and is scheduled to be completed by fall of 2017.

Linda Cunningham co-authored this post.

OCTA 91 Express Lanes Bonds Get 2 A's from S&P

In an historic move, Standard & Poor’s upgraded the Orange County Transportation Agency SR91 Express Lanes Toll Revenue Bonds to “AA-”, making it one the highest rated managed lanes projects in the world.  The bonds were issued last year to refund bonds that were issued in 2003 when OCTA acquired the SR91 Express Lanes project from the private consortium that developed the project under California’s prior P3 law.

The 91 Express Lanes is a four-lane, 10-mile toll road built in the median of California’s Riverside Freeway, State Route 91, between the Orange/Riverside County line and the Costa Mesa Freeway, SR 55. “It was the first privately financed toll road built in the U.S. in more than 50 years, the world's first fully automated toll facility, and the first application of value pricing in the U.S.,” according to the S&P report.

S&P analysts cited an expectation that the region's fundamental economic and demographic trends will continue to support growth for the upgrade, and that traffic and revenue performance will meet or exceed projected levels.  Annual traffic volume in the corridor grew to 12.1 million vehicles in fiscal 2013 from 5.5 million in 1996, according to the S&P report.  The availability of high-paying jobs in Orange County combined with the more reasonably priced homes available in Riverside and San Bernardino counties has kept traffic to the managed-lane toll road robust.
 

Secretary Foxx Holds Virtual National Town Hall, Addresses Transportation Policy

Secretary of Transportation Anthony Foxx chaired a “virtual” town hall meeting, entitled “Moving from Uncertainty to Long-Term Transportation Investment,” on August 6, 2014.  The town hall was open to the general public, as well as business leaders, transportation advocates, and state and local government officials.  Secretary Foxx discussed the United States Department of Transportation’s (“US DOT”) vision for the future of transportation, as well as answered questions from attendees about transportation policy.

In his opening remarks, and throughout the question and answer session, Secretary Foxx stressed the importance of a long-term fix for transportation funding and policy, calling for a renewal of the current surface transportation authorization by the end of 2014.  As the Secretary pointed out, the United States is in a transportation crisis that has only been temporarily mitigated by the short-term extension passed last week by Congress.  The Secretary stressed that we “can’t afford to sit on our hands” and wait until May 2015 to pass a new long-term transportation bill, reminding viewers that when the 113th Congress is adjourned, all pending legislation will expire.  Thus, waiting for the next Congressional term to re-focus on long-term transportation will mean waiting for the new Congress to become oriented and start transportation discussions anew.

In addition, Secretary Foxx shared some of the US DOT’s priorities for the next long-term transportation authorization, including:

  • Ensuring that the Highway Trust Fund (“HTF”) is stabilized so projects can be planned and built.
  • Investing in freight movement (highways, rails, and ports), thereby increasing manufacturing and getting more Americans back to work.
  • Speeding up projects through streamlining efforts.
  • Creating more opportunities for private-sector investment in transportation infrastructure.

The Secretary also emphasized the importance of multi-modalism and multi-state connectivity in the nation’s transportation system, specifically speaking to inter-modal and inter-state connections and how those connections will improve freight movement.  Further, the Secretary referred to the lack of a stable funding source for passenger rail, stating that options give commuters the ability to make a choice in transportation modes, making travel times more predictable.

Secretary Foxx went on to encourage the public, and state and local leaders, to continue to speak out about transportation challenges in their communities, especially to their Congressional representation.  The Secretary maintained that there is an inherent lack of understanding of the effects of either short-term transportation extensions or short-term transportation authorizations that have occurred over the decade, preventing state and local governments from planning and delivering transportation projects with certainty that the federal government will be a partner.
 

Port of Miami Tunnel Open for Traffic

On August 3, 2014, the Florida Department of Transportation (FDOT) and the Port of Miami achieved an important milestone when the est. $1 billion Port of Miami Tunnel opened for traffic.  The project consists of twin tunnels under Biscayne Bay linking Port facilities on Dodge Island with a widened MacArthur Causeway and I-395.  One of the first public-private partnerships in the United States to use an availability payment contracting structure, the tunnel improves access for freight trucks and cruise passengers, reducing traffic congestion in downtown Miami and improving air quality.

Under the concession agreement, FDOT made milestone payments to the concessionaire during the construction period, upon the achievement of contractual milestones.  With the operating period now underway, FDOT will make availability payments to the concessionaire, contingent upon lane availability and service quality. The project was awarded to a Concessionaire headed by Meridiam (approx. 90% equity) and Bouygues Construction (approximately 10% equity) and reached financial close in October, 2009, at the height of the recession following the collapse of Lehman Brothers.  

In March, President Obama toured the construction site for the new tunnel while promoting a new initiative intended to encourage more projects like the Port of Miami Tunnel.  The president emphasized the important role of partnerships between public and private sectors as a part of the solution to the critical need to rebuild and upgrade the nation’s roads, bridges and ports. 

Financed with the combination of bank loans and a TIFIA loan, the project has received numerous awards, including The Bond Buyer’s 2010 “Nontraditional Financing Deal of the Year,” “Global Deal of the Year” and “P3 Deal of the Year” from Project Finance Magazine in 2009, Project Finance International’s 2009 “North American P3 Deal of the Year” and the 2007 “Project of the Year” by the American Road and Transportation Builders Association.
 

Six Teams Submit SOQs for UC Merced 2020 P3 Project

The Regents of the University of California (the “Regents”), on behalf of the University of California, Merced (“UC Merced”), announced on August 1, 2014 that it received Statements of Qualifications (SOQs) from six teams in response to a Request for Qualifications for the UC Merced 2020 P3 Project.

The respondents and their equity members are (in alphabetical order):

- Edgemoor Plenary EdR Partners (EP2):  Edgemoor Infrastructure & Real Estate LLC, Plenary Group USA Ltd., and Education Realty Trust, Inc.
- E3 2020:  Balfour Beatty Investments, Inc.
- Gateway2Learn:  HOCHTIEF PPP Solutions North America and Meridiam Gateway2Learn, LLC
- Innovation Partners:  Hunt Development Group LLC and Shikun & Binui, Ltd.
- Merced Campus Collaborative:  Lend Lease (US) Investments, Inc., Macquarie Capital Group Limited and American Campus Communities, Inc.
- Merced 2020 Partners:  Skanska Infrastructure Development Inc. and Fengate Capital Management Ltd.

The complete list of respondent team members may be found at the UC Merced 2020 Project website.

The Project represents the second phase of campus development under UC Merced’s Long Range Development Plan and involves a significant campus expansion to support projected enrollment growth from 6,200 current students to 10,000 students by the year 2020. 

The project consists of the comprehensive development, design, construction, and financing of academic, administrative, research, recreational, student residence and student services buildings, together with utilities and infrastructure, outdoor recreation and open space areas, and associated roadways, parking and landscaping.  The project will also include operations and maintenance of some or all of these facilities.  The Regents intend to make shortlist decisions in November, 2014. 

Tae Yeon Do co-authored this post.
 

Congress Rallies for Short-Term Highway Trust Fund Patch

Congress passed a bill (HR 5021) to provide a short-term funding patch for the Highway Trust Fund (“HTF”), just one day before the United States Department of Transportation was scheduled to begin slowing reimbursements to states for eligible highway, bridge, and mass transit projects.  A failure to act by Congress had the potential to slow-down or stop any number of transportation construction projects across the country in the midst of the construction season.

After volleying the bill back and forth between the chambers over the course of this week, Congress passed a final bill that adopts the House of Representative’s original language, allowing existing surface transportation programs to continue through May 2015 and topping up the HTF with transfers from the General Fund equaling $9.8 billion and $1 billion from the Leaking Underground Storage Tank fund (for a total patch of $10.8 billion).  The General Fund transfer will be offset using pension smoothing and customs user fees over the 2014 to 2024 period.  Congress acted as its members counted down the hours to a five-week recess.

The passage of HR 5021 averts delays in payments from the HTF, delays that were the subject of multiple warnings from Secretary of Transportation Anthony Foxx.  The crisis drew so near that Secretary Foxx released cash management procedures to state departments of transportation in early July 2014.

It is anticipated that President Barack Obama will sign HR 5021 into law.

This short-term funding fix to the HTF is only the first transportation hurdle facing Congress.  In addition, the most recent surface transportation authorization bill (Moving Ahead for Progress in the 21st Century) expires on October 1, 2014.  Congress must act to pass a new surface transportation authorization or an extension of MAP-21 in order to extend surface transportation policy beyond that date.  Additionally, Congress will need to address the federal transportation funding mechanism (which has primarily been the federal gas tax, last raised in 1993), which currently does not raise enough revenue to cover the backlog of transportation projects.

EPA Won't Require Formal Rulemaking for WIFIA Program

During the “Use of WIFIA” breakout session at the NCPPP P3 Connect conference this week in Denver, Elizabeth Corr, Associate Division Director for the EPA, confirmed that the agency will not need to complete the formal federal rulemaking process to implement the Water Infrastructure Finance and Innovation Act.  The Act, or WIFIA, was recently enacted by Congress to make low cost loans and loan guarantees available to public and private sponsors of water projects and is based on the highly successful TIFIA program for transportation projects.  Ms. Corr mentioned that EPA conducted its first listening session and plans several others around the country to hear from interested parties about how to best implement the program.  EPA has also setup a website, wifia@epa.gov, to provide information about the program.  Jordan Dorfman, Attorney-Advisor for EPA, acknowledged that there were unique challenges to implementing the program, including the prohibition on the use of tax exempt financing in conjunction with WIFIA assistance and the need to deal with the so-called “springing lien” provision.
 

National Conference for Public-Private Partnerships Concludes P3 Connect Summit

After a re-boot, the National Conference for Public-Private Partnerships (NCPPP) concluded a three day summit July 30 in Denver, Colorado on all things P3.

NCPPP’s “P3 Connect” annual meeting held programs addressing P3 project delivery in the water/waste water, federal and state disaster recovery, U.S. Department of Defense/U.S. General Service Administration (GSA) and emerging “social infrastructure” spaces, in addition to the more traditional transportation/transit spaces that has seen recent sustained growth in the United States.

Nossaman’s Barney Allison facilitated a panel of state transportation officials discussing the value proposition of the P3 strategy.  Panel members included Dale Witmer, Special Assistant for Finance and Innovation at the Pennsylvania DOT, Doug Koelemay, Executive Director for the Virginia Office of Transportation Public-Private Partnerships and Michael Cheroutes, Director of Colorado’s High Performance Transportation Enterprise (“HPTE”).  Mr. Cheroutes was also awarded NCPPP’s 2014 National P3 Leadership Award for both his work and his colleagues’ work in integrating P3 solutions to Colorado DOT’s booming transportation infrastructure demands.

Several panels and presentations focused on P3 strategies to address the need to update federal and public buildings.  Dan Tangherlini, recent appointee as Administrator of the GSA presented to a general session of attendees on GSA’s successes in Washington D.C. in “swap” arrangements, which he viewed as successful precursors to more fulsome P3 arrangements across the country.  NCPPP recognized the 200 Eye Street SE project - a social infrastructure project - with its “Infrastructure Project Award.” 

Since NCPPP’s relaunch earlier in 2014, the organization has sought to balance state interests and projects with federal interests, projects and policy advocacy, and has expanded beyond transportation infrastructure focus.  Overall, NCPPP exists to educate stakeholders and interested parties in the utility of P3 project delivery solutions.

Arizona DOT Announces Procurement Decision for South Mountain Freeway Project

The Arizona Department of Transportation announced today its decision to deliver the $1.9 billion South Mountain Freeway Project under a single design-build-maintain public-private partnership.  While there will be a long-term maintenance component, ADOT, in collaboration with the Maricopa Association of Governments and the Arizona Division of the Federal Highway Administration, has decided to use available public funds together with public financing to pay for the project.
 
ADOT received an unsolicited proposal for the project more than a year ago.  Under its P3 regulations, it proceeded with a detailed analysis of the unsolicited proposal, concluding that the proposed acceleration of the project through a single contract had merit.  ADOT, with the assistance of its consultants HDR, PFM and Nossaman, then undertook a risk-adjusted cost assessment and value for money analysis, examining and comparing six different project delivery methods ranging from traditional design-bid-build with delivery of the project in separate segments, to a design-build-finance-maintain availability payment approach.  The quantitative results of the value for money analysis were tightly grouped and non-quantitative considerations received considerable discussion and analysis.

Prior to making its decision, ADOT and its partner agencies sought industry input.  ADOT issued a request for information and held an industry forum in February 2014 to garner industry views on a range of pertinent questions.  Weighing this input together with the quantitative and qualitative considerations in the value for money analysis, ADOT and its partner agencies determined that the DBM alternative will provide the best value for Arizona taxpayers, will provide effective mitigation of risk and will be the most efficient delivery option.
 
The environmental work on the South Mountain Freeway Project is ongoing, and the Final Environmental Impact Statement (FEIS) is expected in mid to late September.  ADOT’s announcement makes clear that a Request for Qualifications will only be released if a build alternative is recommended under the FEIS.  If it issues a RFQ, ADOT expects to provide a six-week period to respond, with shortlisting within four weeks after it receives statements of qualifications.

Contact projects@azdot.gov for inquiries about the project and the procurement process.

The Maryland "Purple Line" Transit Project Releases its Final Request for Proposals

On July 28, 2014, the Maryland Transit Administration (MTA) and Maryland Department of Transportation (MDOT) issued the final request for proposals for a public-private partnership to design, build, finance, operate and maintain the “Purple Line” light rail transit project using an availability payment approach.  The Purple Line is a 16-mile route extending from New Carrollton in Prince George’s County to Bethesda in Montgomery County, with 21 stations and three links to the Washington DC, Metro and MARC commuter train systems.  The Purple Line has estimated project value of $2.37 billion, with the private sector expected to invest between $500 million and $900 million.  The winning concessionaire will be expected to operate and maintain the project for 30 years after construction (roughly 35 years overall).

Legislative and regulatory efforts to kick off the procurement began in earnest in mid 2013, with release of a request for qualifications issued in November 2013.  Four consortia were shortlisted and initial industry review of the proposal documents and draft contract began in February 2014.

The Purple Line has, as among its champions, Lt. Governor Anthony Brown.  MTA/MDOT also enjoys considerable federal support for the Purple Line, with the Obama Administration allocating $100 million toward construction costs in its March 2014 budget submission to Congress.  A full funding grant agreement is expected from the Federal Transit Administration and the Purple Line is seeking further federal funding support through FTA’s “New Starts Program.”

Proposals are due in January 2015, with the preferred proposer selected as the concessionaire in spring 2015.  Subject to approval by the Maryland Board of Public Works, the concessionaire would likely begin construction by the end of 2015.

More information can be found on MDOT’s website including the primary RFP documents located under “Public-Private Partnerships.”

Simon Santiago and Katherine Bourdon contributed to this post.

Indiana I-69 Section 5 Availability Payment Project Closes Financing

On July 23, 2014, the Indiana Finance Authority closed financing on its second availability payment P3 project, the I-69 Section 5 highway project, a 21-mile reconstruction project located outside of Bloomington Indiana, the home of Indiana University.  The project is a component of the I-69 Corridor Project which will strengthen connectivity between the northern and southern portions of the state.  After signing the public-private agreement in April of this year, Isolux Infrastructure, a major Spanish infrastructure company, brought in Infra-PSP Canada, an affiliate of the Public Pension Investment Board, a Canadian crown corporation, to take 49% of the equity in the project development company, the first time an international public pension player has made a direct investment in a US P3 project during the construction phase of the project.  The total equity commitment is approximately $40.4 million. 
 
Total project capital costs are expected to be approximately $370 million; in addition to the private equity commitment, funding is coming from a $243,845,000 tax-exempt private activity bonds issued by IFA with Citi and Jeffries as the bond underwriters.  IFA has committed $80 million in milestone payment payments towards project costs.  After application of the interest-rate risk sharing provision of the agreement, and with the rally in the muni bond market since Isolux submitted its winning bid in January 2014, the final base maximum annual payment decreased by $1.5 million per year.
 
The PABs are comprised of a single short-term serial bond maturing March 1, 2017 and several term bonds with maturities ranging from September 1, 2027-September 2046.  Yields on the term bonds range from 3.98% to 5%.
 
The source of repayment of the PABs is anticipated to be availability payments made by IFA under the public-private agreement as consideration for the private developer designing, constructing, financing, operating and maintaining the project.  The availability payments, which commence on substantial completion of the project, are subject to quarterly deductions if the private developer fails to meet certain performance requirements relating to the availability of the project and compliance with the technical requirements.
 
The project is scheduled for completion on October 31, 2016, which, coincidentally is the same date the East End Bridge project, IFA’s first availability payment P3 project, is scheduled to be completed.

Secretary Foxx and PHMSA Release Much-Anticipated Proposed Rule On Crude By Rail Tank Car Standards

The U.S. Department of Transportation Secretary Anthony Foxx and the Pipeline and Hazardous Materials Safety Administration (PHMSA) today released a much-anticipated Notice of Proposed Rulemaking (NPRM) to improve the safe rail transportation of flammable liquids, including petroleum crude oil and ethanol. 

PHMSA also released a companion Advanced Notice of Proposed Rulemaking (ANPRM) on oil spill response plans, seeking comments on current thresholds and their applicability to rail and a summary of a study finding that crude oil from the Bakken field presents greater danger during transport than other types of crude.

There is much to digest in the three documents. Here is a summary of the key elements of the proposed rule.

The Proposed Rule

The proposed rule is based on an advanced notice of proposed rule making published by PHMSA last September and reflects feedback from more than 152,000 commenters.

Generally - The proposed rule includes options for enhanced tank car standards, a phase-out or retrofit of tank cars not meeting the enhanced standards, an expanded classification and testing program for petroleum crude oil and ethanol (and other mined gases and liquids) and new speed restrictions and braking requirements for trains hauling 20 or more carloads of such flammable liquids (which would be defined as a high-hazard flammable train or “HHFT”).

New Tank Car Standard – The proposed rule contains new standards for tank cars constructed after October 1, 2015 that would be used to transport flammable liquids as part of an HHFT.  A number of variations are outlined in the proposed rule, all of which address thermal, top fittings, and bottom outlet protection, and tank head and shell puncture resistance.  The proposed rule would require an HHFT to be quipped with either electronic controlled pneumatic brakes, a two-way end of train device, or distributed power braking, depending in part on tank car standard adopted.

Sunset of DOT-111s – The proposed rule would phase out the use of DOT-111s, the oldest tank cars in use, over 2 years, unless they are retrofitted to the new tank car standard.

Other Current Tank Cars  – The proposed rule would require other existing tank cars used to transport flammable liquids as part of an HHFT be retrofitted to meet the new tank car standard or operated under speed restrictions for up to five years, depending on the flammable liquids transported.

Speed Restrictions – During the time when use is still permitted, flammable liquids moving in an HHFT not meeting the enhanced tank car standard (which means all HHFTs presently) would be subject to a 40-mph speed restriction, although the proposed rule outlines three different options with respect to the geographic scope of this limit. Tank cars meeting the enhanced specifications (once finalized) would be limited to 50-mph in all areas.

Testing & Sampling Procedures; Routing Analysis; SERC Notification - The rule would expand existing flammable liquid sampling and testing procedures, including changes in test frequency, expansion of sampling points in the supply chain and more comprehensive certification.  It would codify the Rail Corridor Risk Management System as an aid in the determination of the safest and most secure routing for HHFTs. The proposed rule also would codify DOT’s May 2014 Emergency Order, which requires trains containing one million gallons of Bakken crude oil to notify State Emergency Response Commissions (SERCs) or other appropriate state delegated entities about the operation of these trains through their States.

What’s Ahead

Both the NPRM and new spill response planning ANPRM will be open for 60 days of public comment and PHMSA has indicated that does not intend to extend the comment period.

Secretary Foxx said “While we have made unprecedented progress through voluntary agreements and emergency orders, today’s proposal represents our most significant progress yet in developing and enforcing new rules to ensure that all flammable liquids, including Bakken crude and ethanol, are transported safely.” 
 

Supreme Court Grants Certiorari to Review D.C. Circuit Decision Hampering Amtrak's On-Time Performance

On June 23rd, the U.S. Supreme Court granted the government’s Writ of Certiorari to review the decision of the D.C. Circuit that many believe may be hampering Amtrak’s leverage with freight railroads and its on-time performance.

According to Amtrak’s most recent issued Monthly Performance Report (May 2014), end station on-time performance (OTP) is approximately 74 percent so far this fiscal year (which started October 2013) down 12 percent from FY 2013, when the same performance measure finished at 85 percent.

While the particularly harsh winter weather may have been a factor, it could not be the whole story.  In July of 2013, the D.C. Circuit ruled that the provision of the Passenger Rail Investment and Improvement Act of 2008 (PRIIA) by which Amtrak and the Federal Railroad Administration (FRA) jointly established metrics to measure Amtrak’s performance, was an unconstitutional delegation of regulatory power to Amtrak. Congress had directed that the metrics be used to (among other things) measure whether the railroads hosting Amtrak service were meeting their long-standing statutory obligation to give priority to Amtrak trains.  Congress also called for Amtrak and its host railroads to incorporate the metrics into their operating agreements to the extent practicable.

As City Lab’s Eric Jaffe has observed, Amtrak end station OTP dropped dramatically shortly after the D.C. Circuit decision.  “What you're seeing is the aftermath of [the D.C. Circuit’s decision which] severely damaged Amtrak's leverage with the freight rail companies whose tracks it shares.” The decision nullified the metrics and, as Jaffe notes, it “likewise triggered the start of Amtrak's on-time performance decline.”

D.J. Stadtler, Amtrak’s VP Operations, made a similar observation in his testimony before the Surface Transportation Board on April 10, 2014, pointing out that Amtrak “saw an immediate drop in on-time performance across the board that was directly attributable to train handling by the host carriers.”

For the railroad industry, the Supreme Court’s review is of vital importance because it could determine whether the metrics will survive and be used to measure whether (and how well) host railroads adhere to their statutory obligation to give priority to Amtrak trains and be incorporated into the contracts governing Amtrak operations.
 

Speculation Mounts Over Impending Crude By Rail Rule

As speculation over the federal government’s forthcoming rule on rail shipments of crude oil grows, two items hit the press last week increasing speculation over the details of the reforms.  

On July 15, 2014, Bloomberg reported that representatives from the American Petroleum Institute (API) and the Association of American Railroads (AAR) met with the Transportation Department at the Office of Management and Budget on July 11 to present a joint plan for the phase-out of older tank cars.  According to Bloomberg, two people familiar with the proposal, who were not identified, said that “the parties agreed to scrap a fleet of thousands of DOT-111s within three years if manufacturers agree they can replace or retrofit the tank cars in that period.”  Bloomberg’s report did not include the specifics of the proposal and, at that time, neither the API nor AAR responded to requests for comments on the proposal.  As of today, no proposal has been made available on the API or AAR website.

In addition, the Associated Press ran an article entitled “Oil, railroad industries moving faster than regulators on tank cars,” which said: “[r]egulations drafted by the Transportation Department to boost the safety of moving oil by rail are believed to lay out a six-year timeline for scrapping those older, legacy tanker cars. . .”  The AP cited the Bloomberg report noting that “the railroads and the oil industry have reportedly advanced a voluntary plan to replace them within three years.”  

Meanwhile, in a letter to the Administrator of the Pipeline and Hazardous Materials Safety Administration, the CEOs of Union Tank Car and GATX Corporation urged action on rail operations rather than tank car specifications.  According to this Businessweek report, the CEOs told PHMSA that “[t]he quickest and most meaningful way to improve crude-by-rail safety is to approve new regulations regarding railroad operating procedures and classification and testing of flammable liquids,” wrote Union Tank Chief Executive Officer Kenneth Fischl and the CEO of lessor GATX Corp, Brian Kenney. 

One thing is certain amid the speculation, the new rule will have significant impact given the dramatic recent growth in U.S. crude by rail shipments. 
 

President Unveils Build America Investment Initiative Today

President Barak Obama today announced the Build America Investment Initiative (the “Initiative”).  According to the Fact Sheet released by the White House in advance of the announcement, the purpose of the Initiative is to “increase infrastructure investment and economic growth by engaging with state and local governments and private sector investors to encourage collaboration, expand the market for public-private partnerships (PPPs) and put federal credit programs to greater use.”

The transportation industry will be the first to benefit from the Initiative.

The Fact Sheet lays out some of the portions of the Initiative, including a “Build America Transportation Investment Center” (the “Center”) to be housed within the United States Department of Transportation (“US DOT”), envisioned to be a “one-stop shop” for both public- and private-sector parties interested in innovative financing and project delivery for transportation projects; a “Build America Interagency Working Group” (the “Working Group”), to be chaired by Secretary of the Treasury Jack Lew and Secretary of Transportation Anthony Foxx (or designees), to address barriers in private investment in industries including water, ports and harbors, communications, and energy; and an “Infrastructure Investment Summit,” to be hosted by the United States Department of the Treasury on September 9, 2014, intended to bring together federal, state, and local officials with project developers and investors to discuss innovative financing approaches for infrastructure.

After the announcement today, the President signed a Presidential Memorandum that uses the President’s executive authority to set policy related to collaboration on infrastructure development and financing, to articulate the requirements for establishing the Center within the US DOT, and to communicate the parameters for the Working Group.

In particular, the Center is subject to the following conditions:

  • The Center must be established within 120 days;
  • The Center must develop and make available tools useful to the establishment of innovatively financed and delivered projects, including case studies, best practices, and analytical tools;
  • The Center must develop a Web site to serve as a source of information for both public- and private-sector entities interested in transportation financing programs; and
  • The Center must coordinate with the Steering Committee on Federal Infrastructure Permitting and Review Process Improvement to provide technical assistance regarding environmental review.