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Oliver Wyman's Kuehn: A New Roadmap for High-Speed Rail

  — by Jason Kuehn, Associate Partner, Oliver Wyman

Jason Kuehn is an associate partner in Oliver Wyman’s Surface Transportation Practice. He has more than 23 years of railway experience, with particular expertise in evaluating and designing carload networks and terminal operating plans. Jason previously worked for the Southern Pacific as Managing Director of Network and Corporate Development, responsible for service design, costing, and network planning. As a consultant, Jason has led “zero-based” operating plan projects at Canadian Pacific, Union Pacific Burlington Northern Santa Fe, Norfolk Southern, and other railroads. He recently led the Oliver Wyman Rail Team in developing a new operating plan for Transnet Freight Rail in South Africa. He holds a BS in Engineering from the University of Alaska, Fairbanks, and an MBA from the Amos Tuck School, Dartmouth College.

President Obama has proposed spending an additional $53 billion on high-speed rail (HSR) by 2025, with a goal of making HSR accessible to 80 percent of the U.S. population. The planned approach is that federal grants will be used as seed money to spur state and private investments to build out the network. So far, there is precious little to show for the first $10.5 billion that has been allocated, based on an assessment of HSR on high-profile corridors:

• Only one HSR program is actually underway — in Illinois. Union Pacific Railroad and the state of Illinois reached an agreement, approved by the FRA, using what is essentially a loophole. The Illinois program is targeted at raising passenger train speeds, rather than adding capacity to the line, so many of the onerous requirements in FRA guidelines do not apply to the project.


• Projects to add capacity and thus service or reduce delays in Washington, North Carolina, and Wisconsin (existing Chicago to Milwaukee route, not the new Milwaukee to Madison project) are ready to go. On February 28, 2011, the FRA finally accepted the agreement negotiated by the State of Washington and BNSF Railway Co.; on March 22, 2011, it accepted an agreement between NS and North Carolina, hopefully this signals a pattern which will lead to agreements on the other corridors — assuming the monies do not get rescinded in the battle of the budget.


• New start projects in Ohio, Wisconsin, and Iowa were turned down after a change in governors in the November elections and the money returned to the government. The governors did not want to take on the risks of cost overruns on these projects and did not want to be obligated to underwrite any operating losses, given that their states are facing budget deficits. If the states were to discontinue money-losing services, they would be obligated to repay federal grant money. Ironically, Governor Walker of Wisconsin has decided to ask for some of the money back for Milwaukee-Chicago service, after initially turning it down. The administration’s decision on that will be interesting to watch. Republican legislators in North Carolina have also introduced legislation to decline the federal funds that were just approved, but it has little chance of making it past Governor Perdue.

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