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A Texas clash of public safety and property rights

Before Election Day 2020, the Trump White House, working through the U.S. Department of Transportation, the Federal Railroad Administration (FRA) and the Surface Transportation Board will make one of its most consequential decisions regarding the future of public safety and private property rights in America, beginning in Texas.

The FRA is currently reviewing the draft Environmental Impact Statement to assess the human environmental impact of a proposal to construct and operate a high-speed rail system between Houstonand Dallas. After hearing Transportation Secretary Elaine Chao’s speech on federal infrastructure policy at a June 26 Heritage Foundation event, it is clear the high-speed rail developer, Texas Central, has many hurdles to overcome.

Ms. Chao stressed that the Transportation Department’s overarching priority is ensuring public and passenger safety — “when nothing falls from the sky or off the tracks,” to paraphrase. In just the past six years, several major U.S. train derailments have killed more than 18 Americans and injured hundreds more — many very seriously — across the nation.

In July 2018, R.L. Banks, a Virginia rail engineering firm, released its study of the proposed Texas high-speed rail alignment, concluding that Texas Central had selected the cheapest but most dangerous of several route options connecting Dallas to Houston. The engineering firm concluded that the proposed route’s multiple mini-curved track design would increase the potential for train derailments, a public peril compounded by the steel-rail “heat buckling” that can occur under Houston’s prolonged intensive summer climate.

Texas Central also proposes to build this new corridor next to a natural gas compressor facility that releases gas periodically for testing purposes, as well as accidentally. Like an old-fashioned trolley, the 55-year old Shinkansen system runs on overheard catenary wires, which emit electrical sparks — a significant combustible danger not only to passengers but also to everyone and everything in the immediate vicinity of the natural gas facility.

Union Pacific warned at an April 16 Texas House hearing that the proposed route further endangers public safety due to its “potentially fatal flaw:” High-speed rail’s electromagnetic system can interfere with the freight line’s low-voltage current. Freight railroad’s signaling and traffic control systems for gates at railroad crossings depend on the absolute integrity of Union Pacific’s low-voltage current. Union Pacific engineers and safety experts also warned of massive high-speed rail structures along the proposed route that reduce drivers’ ability to see and react to oncoming trains.

Ms. Chao also emphasized President Trump’s vision for infrastructure projects: “under budget and ahead of schedule.” The proposed Texas high-speed rail project is neither.

Texas Central, the promoter, sponsor and developer of high-speed rail, originally announced in 2015 that the project would be completed in 2021 at a cost of $10 billion. The cost has now ballooned to as much as $18 billion and the Federal Railroad Administration doesn’t even plan to conclude the draft Environmental Impact Statement review on the proposed 240-mile long construction project until March 2020 at the earliest.

Ms. Chao underscored the importance of traditional private U.S. infrastructure investors, such as U.S. pension funds and endowments, in projects such as this.

Texas Central has raised only $450 million (2.5 percent of the current $18 billion estimate) in the past four years, of which only $110 million is from U.S. investors. The remaining $340 million (more than 75 percent of funds raised) has come from sovereign Japanese entities trying to promote the sale of the Shinkansen technology to export markets such as the United States before 21st century technology renders it obsolete. (Notably, Ms. Chao on March 12 announced the creation of the Non-Traditional and Emerging Transportation Technology Council to help fast-track Hyperloop and other innovative transportation advancements). Most of those sovereign funds were deposited in August 2018 as an interest-bearing loan to an offshore Special Purpose Vehicle in the Cayman Islands, to be used to hire an Italian firm to design and construct the system and a Spanish firm to operate it.

Texas Central intends to make up the multi-billion-dollar shortfall by seeking federal loans or credit assistance under two federal programs, the Registered Retirement Income Fund (RRIF) and the Transportation Infrastructure Finance and Innovation Act (TIFIA), neither of which, according to the Reason Foundation, provides adequate safeguards for federal taxpayers against rail project defaults.

To qualify for federal taxpayer assistance and federal pre-emption, Texas Central asked the Surface Transportation Board in 2016 to exercise federal jurisdiction over the project. The board ruled in July 2016 that it did not have jurisdiction because the proposed wholly intra-state project would not be part of the national interstate rail network.

In 2018, Texas Central asked the board to reconsider that decision based on what Texas Central claims is a “through-ticketing agreement with Amtrak.” Last month, the board asked for additional highly detailed information from Texas Central to justify its request, including producing independently verifiable data supporting ridership projections and explaining numerous logistical considerations.

A decision by the board to accept jurisdiction over the project would also mean that Texas state law could not be used to prevent or unreasonably hinder Texas Central’s hotly-contested and robustly-litigated attempts to use eminent domain to gain control of thousands of privately-owned properties between Houston and Dallas. Such a result could have far-ranging negative effects on every American’s private property rights.

As the board’s action continues to unfold, the Federal Railroad Administration must decide whether to approve the Draft Environmental Impact Statement, which includes safety standards for Texas Central’s proposed rail system. The Trump administration, through the Federal Railroad Administration and the Surface Transportation Board, must prudently consider whether the many public and passenger safety problems can be addressed and resolved, as it determines how best to safeguard American lives and protect Americans’ private property rights from this ill-conceived high-speed rail project.

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