High speed ahead: China seeks US rail role

The world leader in high-speed rail travel, China is ex­port­ing its industry know-how to the United States, which is show­ing signs of adopt­ing the mode of trans­porta­tion, but costs and pol­i­tics re­main hur­dles, re­port and from New York.

China Daily (Canada) - - DEPTH -

In the high-speed rail arms race, the United States is not a su­per­power. That ti­tle is be­ing con­tested by coun­tries such as China, Ja­pan, France, Ger­many and Spain.

Pol­i­tics, cost and the dis­tance be­tween ci­ties are some of the rea­sons why high-speed rail (HSR) in the US hasn’t re­ally got­ten on track.

In April 2009, dur­ing Pres­i­dent Barack Obama’s first year in of­fice, the Depart­ment of Trans­porta­tion is­sued a re­port called Vi­sion for High-Speed Rail­inAmer­ica.

“Af­ter lead­ing the world in rail de­vel­op­ment dur­ing the 19th and early 20th cen­turies, the United States has more re­cently lagged be­hind other coun­tries in de­vel­op­ing mod­ern in­ter­city pas­sen­ger rail,” the re­port said. “Over the last sev­eral decades, many coun­tries in Europe and Asia have de­vel­oped HSR sys­tems.”

The ob­sta­cles to HSR cited in the re­port were lack of ex­per­tise and resources; state fis­cal con­straints; a need for partnerships with pri­vate rail­roads that own some of the track; multi-state partnerships (be­cause some HSR lines will cross state lines) and a need for safety stan­dards.

While the US has been slow to em­brace HSR, China has built the largest HSR net­work in the world with more than 16,000 kilo­me­ters (9,900 miles) of track as of De­cem­ber 2014, fol­lowed by Spain, Ja­pan and France.

Ja­pan is a pioneer in HSR; the Tokaido Shinkansen line, which be­gan op­er­at­ing in 1964, is con­sid­ered the world’s first high-speed rail line.

China has the manufacturing mus­cle to build the track and trains and is ex­port­ing that tech­nol­ogy glob­ally. CRRC Corp Ltd, a state-owned en­ter­prise, be­came the largest train maker in the world in June af­ter a merger be­tween CNR and CSR. CRRC has projects in more than 100 coun­tries and re­gions.

As Pres­i­dent Xi Jin­ping con­tin­ues his state visit to the United King­dom this week, Bri­tish of­fi­cials are so­lic­it­ing bids for an $18 bil­lion HS2 link be­tween Lon­don and north­ern English ci­ties.

CRRC will be com­pet­ing with other world gi­ants such as Ger­many’s Siemens, Ja­pan’s Hi­tachi and France’s Alstom.

Six years af­ter the US trans­porta­tion depart­ment re­port, there are signs of progress. In Jan­uary, Cal­i­for­nia broke ground on a $68 bil­lion HSR net­work to con­nect San Fran­cisco and Los An­ge­les by 2029 and even­tu­ally go from Sacra­mento to San Diego, to­tal­ing 800 miles with up to 24 sta­tions. The line’s top speed will be 220 mph.

On Sept 30, the Cal­i­for­nia High-Speed Rail Author­ity (CHSRA) an­nounced that it had re­ceived 36 re­sponses from pri­vate com­pa­nies in­ter­ested in fi­nanc­ing, build­ing and op­er­at­ing the first 300-mile seg­ment.

“Un­til now we have been say­ing ‘There will be pri­vate-sec­tor in­ter­est.’ Now the pri­vate sec­tor is say­ing ‘ There will be pri­vate­sec­tor in­ter­est,’” CHSRA CEO Jeff Mo­rales said on Oct 2.

Lisa Al­ley, CHSRA chief of communications, told China Daily, that in­ter­views are be­ing held with com­pa­nies that re­sponded, all of which she said have com­pleted high-speed rail and other ma­jor projects all over the world. She said the com­pa­nies con­firmed key parts of the author­ity’s 2014 busi­ness plan re­lat­ing to lever­ag­ing the pri­vate sec­tor to de­velop and op­er­ate the project and drive down costs.

“It is im­por­tant to dif­fer­en­ti­ate be­tween pri­vate-sec­tor fi­nanc­ing for con­struc­tion and main­te­nance of the sys­tem, which would be re­paid sub­ject to the pri­vate party main­tain­ing a high-level of per­for­mance ver­sus pri­vate-sec­tor in­vest­ment based on the rid­er­ship and rev­enue to be gen­er­ated by a long-term con­ces­sion for the op­er­a­tion of the sys­tem,” Al­ley said.

About $13.2 bil­lion of the $68 bil­lion has been pro­vided by state and fed­eral sources, plus a pledge of Cal­i­for­nia’s cap-and­trade pro­ceeds, funds paid by com­pa­nies to off­set car­bon emis­sions, Reuters re­ported.

En­vi­ron­men­tal con­cerns are para­mount in Cal­i­for­nia.

In a Jan­uary 2014 op-ed page ar­ti­cle in the Los An­ge­les Times, Brian P. Kelly, Cal­i­for­nia sec­re­tary of Trans­porta­tion, and Mary D. Ni­chols, chair­man of the Cal­i­for­nia Air Resources Board wrote: “By 2040, it (HSR) could re­duce car miles trav­eled in the state by 3.6 bil­lion miles a year, the equiv­a­lent of tak­ing 317,000 cars off the road daily. And by 2020, the project is es­ti­mated to elim­i­nate be­tween 278,000 and 674,000 net met­ric tons of green­house gases from vol­un­tary emis­sions re­duc­tions, elec­tri­fi­ca­tion of lo­cal rail and other ef­forts.”

The Chi­nese High-Speed Rail De­liv­ery Team was one of the 36 groups ex­press­ing in­ter­est in Cal­i­for­nia’s plans.

Led by China Rail­way In­ter­na­tional, the Chi­nese team said it could pro­vide de­sign, con­struc­tion, equip­ment-pro­cure­ment and rolling stock (trains). It also pro­posed fi­nanc­ing from the Ex­port-Im­port Bank of China.

The team said that pack­ag­ing large pieces of the high­speed rail line to­gether by a sin­gle con­trac­tor would cut the project’s cost and con­struc­tion time­line.

“To the Chi­nese team, a rel­a­tively large-scale con­tract is proper and rea­son­able,” said the let­ter, ob­tained by Reuters via a Pub­lic Records Act re­quest.

The Chi­nese pro­posed that un­der “ap­pro­pri­ate loan con­di­tions” the Ex­port-Im­port Bank of China could “sat­isfy the fi­nanc­ing needs of the project”.

But the Chi­nese also cau­tioned that Cal­i­for­nia should pro­vide more pub­lic fi­nanc­ing and guar­an­tee fu­ture project debt to sat­isfy in­vestors, Reuters re­ported.

“Due to the huge fi­nanc­ing gap of the project, po­ten­tial pri­vate in­vestors and lenders may be cau­tious,” the Chi­nese team wrote.

The Cal­i­for­nia author­ity is ex­pected to seek bids by mid-2016.

“Of course Chi­nese com­pa­nies will be ac­tively in­volved in the bid­ding process once it has started,” Zhang Yong, deputy di­rec­tor of pub­lic af­fairs at CRRC, told China Daily.

“The US has a need for HSR. We be­lieve that one day all the ma­jor ci­ties in the US will be con­nected by high-speed rail.

“CRRC wants to build a win­win re­la­tion­ship with the US, in­te­grate into Amer­i­can so­ci­ety and pro­vide the coun­try with more ad­vanced rail­way equip­ment,” Zhang said.

Zhao Jian, a pro­fes­sor at the School of Eco­nom­ics and Man­age­ment at Bei­jing Jiao­tong Univer­sity, sees high-speed rail en­deav­ors in the US as too costly and risky for Chi­nese com­pa­nies.

“If Amer­i­can gov­ern­ments pay for the high-speed rail project, Chi­nese com­pa­nies should get in­volved,” Zhao told China Daily. “Our prices for train man­u­fac­ture and rail con­struc­tion are very com­pet­i­tive, bet­ter than Ja­pan, Ger­many, France, and so on.

Zhao said “how­ever, if China wants to in­vest in high-speed rail projects in the US and earn money based solely on rid­er­ship and rev­enue, it’s im­pos­si­ble,” he said. “High-speed rail projects in the US will not be prof­itable.

Zhao also won­dered about de­mand.

“Amer­ica does not have a mar­ket for high-speed rail,” he said. “To be prof­itable, the ci­ties con­nected by the HSR must have a very large and dense pop­u­la­tion. The ci­ties in the US are too spread out, and the pop­u­la­tion is far from enough,”Zhao said. “Cur­rently, the pas­sen­ger trains in the US are los­ing money, while only cargo trains are prof­itable. There are no cargo trains on HSR.

Zhao also ques­tioned whether there was de­mand.

“There is al­most no place in the world that has a mar­ket for high-speed rail,” he said. “In Europe, the gov­ern­ments want to do it, and they sub­si­dize it.

“The an­nual rev­enue from the Chi­nese high-speed rail rides can­not even cover the in­ter­est from its debts,” Zhao said. “The only line that’s not los­ing money is the Bei­jingto-Shang­hai HSR, and maybe Bei­jing to Guangzhou in the fu­ture. The only prof­itable HSR line in the world is the Toky­oto-Osaka rail.”

Of a pos­si­ble Ex­port-Im­port Bank role, Zhao said: “Prob­a­bly they didn’t see very clearly and thought they could profit from it, but it’s im­pos­si­ble. Or maybe the bank does it to pro­mote it­self, and Chi­nese com­pa­nies want to go out for the sake of go­ing out.”

XpressWest, a sub­sidiary of Las Ve­gas-based Mar­nell Com­pa­nies, a gam­ing-re­sort de­vel­oper, last month un­veiled plans for a 235-mile high-speed link be­tween Vic­torville, Cal­i­for­nia (and even­tu­ally Los An­ge­les) and Las Ve­gas along In­ter­state 15. It will be built by a con­sor­tium led by China Rail­way, from which it has re­ceived an ini­tial $100 mil­lion in­vest­ment.

Ac­cord­ing to a Sept 17 re­lease on the XpressWest site, that team con­sists of: China Rail­way In­ter­na­tional USA Co Ltd, “a newly formed Ne­vada lim­ited liability com­pany owned by a con­sor­tium of the world’s pre­mier ex­perts in de­sign­ing, build­ing, fi­nanc­ing and op­er­at­ing high-speed pas­sen­ger rail projects, in­clud­ing: China Rail­way In­ter­na­tional Co Ltd, China Rail­way Group Ltd, CRRC Qing­dao Sifang Co Ltd, China Con­struc­tion Amer­ica Inc, CREEC USA and CRSC In­ter­na­tional Co Ltd”.

XpressWest plans to start build­ing by Septem­ber 2016.

“As China’s first high-speed rail­way project in the United States, the project will be a land­mark in over­seas in­vest­ment for the Chi­nese rail­way sec­tor and serve as a model of in­ter­na­tional co­op­er­a­tion,” Yang Zhong­min, chair­man of China Rail­way In­ter­na­tional, told Xin­hua on Sept 17.

“The United States mar­ket is huge be­cause the fact is that their rail­way tracks and fa­cil­i­ties are aging and need up­grad­ing,” Cao Gang­cai, CRRC’s vicechief econ­o­mist, told Reuters in an in­ter­view on Sept 16, be­fore the XpressWest deal was an­nounced.

In Texas, an­other pri­vate ven­ture by Texas Cen­tral Plan­ners is look­ing to raise up to $12 bil­lion to build a 240-mile HSR link be­tween the Hous­ton and Dal­las-Fort Worth metropoli­tan ar­eas. The com­pany expects to break ground in 2017.

Cen­tral Ja­pan Rail­way Co (JR Tokai) has been push­ing for its tech­nol­ogy to be adopted for the project.

“We are com­mit­ted to shinkansen (bul­let train),” Texas Cen­tral CEO Tim Keith told the Ja­pan Times. The Ja­panese tech­nol­ogy has “an un­par­al­leled track record” of safety, he said.

Florida East Coast In­dus­tries, based in Co­ral Gables, has bro­ken ground for All Aboard Florida, a $3 bil­lion ex­press pas­sen­ger train be­tween Mi­ami and Or­lando, ex­pected to roll in mid-2017.

The Sun­shine State’s en­try won’t move much faster than the ca­pa­bil­ity of a typ­i­cal au­to­mo­bile: The train will travel an av­er­age of 81 mph with a max­i­mum speed of 125 mph. (By com­par­i­son, the fastest train in the world, Cen­tral Ja­pan Rail­way’s ma­glev, set a speed record of 366 mph on a test track near Mount Fuji. The gen­er­ally ac­cepted min­i­mum of what con­sti­tutes high-speed rail is 200 mph.)

The HSR back story in Florida was driven by state and na­tional pol­i­tics. The Obama ad­min­is­tra­tion had ded­i­cated $2.4 bil­lion (al­most all of the fund­ing) in Jan­uary 2010 to build a Tampa-to- Or­lando high-speed line. The 84-mile route (which many con­sid­ered too short by HSR stan­dards) would have par­tially tra­versed land do­nated by Dis­ney­world and was sched­uled to roll this year, with a speed of 168 mph.

Florida’s gover­nor at the time, Char­lie Crist, then a Repub­li­can, had re­ceived the fed­eral fund­ing com­mit­ment, but the HSR line was scut­tled when Rick Scott, also a Repub­li­can and still the state’s gover­nor, re­jected the money in Fe­bru­ary 2011, amid con­cerns Florida would be re­spon­si­ble for fu­ture costs, The New York Times re­ported then.

The plan also met re­sis­tance by some Repub­li­cans around the coun­try be­cause it would have given Obama a show­piece in a key state in the 2012 US pres­i­den­tial elec­tion.

Obama even in­cluded the line in his 2010 State of the Union ad­dress: “To­mor­row, I’ll visit Tampa, Florida, where work­ers will soon break ground on a new high-speed rail­road. There is no rea­son why other coun­tries can build high-speed rail lines and we can’t.”

“You ever read The Power Bro­ker?” asked Joseph Shel­horse of the US High-Speed Rail As­so­ci­a­tion, re­fer­ring to Robert Caro book’s about the “master builder” of New York in the mid-20th cen­tury.

“If Robert Moses was in charge (of the Tampa-Or­lando project), even with­out FRA ap­provals … Robert Moses would have sent out dump trucks and just would have guessed where it was go­ing to go and put down a mil­lion loads of fill and graded it and said, ‘Lis­ten, this project is un­der­way.’’’

The US’ fastest train is Am­trak’s Acela Ex­press, which runs from Bos­ton to Wash­ing­ton. Its top speed is said to be 150 mph, but it av­er­ages around 70 mph.

The Fed­eral Rail­road Ad­min­is­tra­tion (FRA), which is part of the US Trans­porta­tion depart­ment, has so­licited ap­pli­ca­tions for more than $10 bil­lion in grants for HSR fund­ing across the US.

So far, 39 states, the Dis­trict of Columbia and Am­trak have re­quested more than $75 bil­lion — far more than avail­able — for projects and cor­ri­dors across the coun­try. Ap­prox­i­mately 99 per­cent of the nearly $10.1 bil­lion al­lo­cated to the HSIPR (High-Speed In­ter­city Pas­sen­ger Rail) Pro­gram has been pledged, ac­cord­ing to the FRA’s web­site.

In an April speech to the USHSR, Sarah Fein­berg, act­ing ad­min­is­tra­tor of the FRA, said: “High speed rail and higher per­form­ing pas­sen­ger rail are fi­nally mov­ing for­ward and de­liv­er­ing re­sults. … We’re push­ing for the growth of Amer­ica’s high-per­for­mance rail net­work — not be­cause high speed trains and in­fras­truc­ture are big-pic­ture projects … but be­cause they are nec­es­sary.

“By the year 2050, 100 mil­lion more peo­ple will need to use our sur­face trans­porta­tion sys­tem,” she said. “We sim­ply must im­prove and build out our rail in­fras­truc­ture to give peo­ple the travel op­tions they need and de­serve.”

To re­al­ize Obama’s goal of giv­ing 80 per­cent of Amer­i­cans ac­cess to high-speed rail over a 25-year pe­riod, Congress made $8 bil­lion avail­able through the Amer­i­can Re­cov­ery and Rein­vest­ment Act of 2009. Congress ap­pro­pri­ated $2.1 bil­lion more in fis­cal years 2009 and 2010.

FRA has in­vested in five “mega-re­gions”: Seat­tle-Port­land, San Fran­cisco-Los An­ge­les, Char­lotte-Raleigh-NC, Mid­west hub and North­east Cor­ri­dor.

The US High Speed Rail As­so­ci­a­tion, based in Wash­ing­ton, says it is the only or­ga­ni­za­tion in Amer­ica fo­cused on ad­vanc­ing a na­tional high speed rail net­work. The in­de­pen­dent, non­profit trade as­so­ci­a­tion has a vi­sion for a 17,000mile na­tional HSR sys­tem built in phases by 2030.

This week, USHSRA hosted a “Tran­sit-Ori­ented De­vel­op­ment and Ur­ban Real Es­tate Con­fer­ence” in Wash­ing­ton, with 45 guest speak­ers from industry and gov­ern­ment.

“We have de­vel­op­ers fo­cused on putting 100-story of­fice tow­ers on top of train sta­tions,” Shel­horse, vice-pres­i­dent of mem­ber ser­vices, told China Daily. “You step off your train and you go up your el­e­va­tor, ready to go.”

Shel­horse sees po­lit­i­cal grid­lock as a ma­jor ob­sta­cle to HSR in the US.

“So much bu­reau­cracy. There’s just an un­will­ing­ness to deal,” he said. “The Repub­li­cans and their vot­ing dis­tricts are all ru­ral and sub­ur­ban. And the Democrats, their cen­ters of power are the big ci­ties.

“You can’t think you’re go­ing to get some­body to fork over bil­lions and bil­lions of dol­lars to up­grade big-city in­fras­truc­ture,” Shel­horse said. He said the op­po­si­tion would say “we need to build some high­ways in the Repub­li­can dis­tricts and come up with some bi­par­ti­san com­pro­mises.”

Shel­horse said he met with of­fi­cials from China’s Min­istry of Trans­porta­tion a few years ago in China.

“They took me on a fancy tour, and I saw all their fac­to­ries. … Sta­tions are just un­be­liev­able. One cor­ner of the sta­tion con­nects to the in­ter­state, one cor­ner con­nects to the air­port, one cor­ner con­nects to the bus. The fact that you can view a dozen dif­fer­ent types of trans­porta­tion and view them all un­der one roof is incredible,” Shel­horse said.

Andy Kunz, pres­i­dent of USHSR, in a Septem­ber in­ter­view on in­verse.com about HSR’s prospects, said: “We have a lot of forces in this coun­try that are try­ing to stop it. Mainly, the big in­dus­tries in trans­porta­tion who are mak­ing money now: big oil, big roads, avi­a­tion. Most of those in­dus­tries do not re­ally want to see a ma­jor roll­out of high-speed rail all over Amer­ica be­cause they see that as a huge threat to their busi­nesses.”

A Septem­ber sur­vey by the Amer­i­can Pub­lic Trans­porta­tion As­so­ci­a­tion found that 63 per­cent of Amer­i­cans would use high-speed rail for busi­ness or leisure if it were avail­able. That num­ber rises to 78 per­cent in the 18-24 age group.

CRRC wants to build a win-win re­la­tion­ship with the US ... and pro­vide the coun­try with more ad­vanced rail­way equip­ment. ”

Con­tact the writ­ers at williamhen­nelly@ chi­nadai­lyusa.com and hez­i­jiang@chi­nadai­lyusa. com

SOURCE:USHIGHSPEEDRAILASSOCIATION

XPRESS WEST

Ren­der­ing of XpressWest high-speed rail line that would con­nect Las Ve­gas (above) and South­ern Cal­i­for­nia.

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