Statewide NewsTransportationFederal Rules for Texas High Speed Rail Project Are Released, Though Financial Questions Remain

The high-speed rail project between Dallas and Houston has overcome one regulatory hurdle, but construction can not yet begin and questions are still being raised about the project's finances.
September 21, 2020
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The Federal Railroad Administration (FRA) issued its final rule regulating the safety of the planned high-speed rail system between Dallas and Houston, Texas Central Railroad.  

The final rule regulates the operating rules and practices, maintenance, and safety practices for Texas Central only, and is not generally applicable to all high-speed rail systems. It also contains the Record of Decision (ROD) related to environmental issues and selects the alignment for the route.

The FRA rules do not grant permission for Texas Central to begin construction, but do allow it to proceed in making an application to the Surface Transportation Board (STB), an independent federal agency charged with the economic regulation of railroads, according to federal law (49 U.S.C. §10901). The application requires public notice and may include conditions for construction.

In a decision this summer, STB declared its jurisdiction over the high-speed rail project, rejecting Texas Central’s request for an exemption from application requirements. An application “is appropriate given the magnitude of the project, the questions about increased costs and funding sources, the substantial public interest, and the potential impact on numerous local landowners,” the board’s decision stated.

STB’s review will include analysis of the economic viability of the project, engineering work, and application of the rules promulgated by FRA.  

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A list of applicable federal, state, and local permits and approvals required before the project can move forward can be found in the federal environmental impact statement issued in May. 

“This is the moment we have been working towards,” Carlos Aguilar, CEO of Texas Central Railroad stated in a press release. “The release of the final [Rule of Particular Applicability] and ROD by the Federal Railroad Administration represents years of work by countless individuals…”

Public officials on both ends of the planned route issued statements regarding the FRA rule which moves Texas Central one step closer to construction.  

Congressman Colin Allred (D-TX-32) expressed his support saying, “I’m proud to have led the Texas delegation in support of this project, and I will continue to work across the aisle from my role on the Transportation Committee to move this project forward.”

Sylvester Turner, mayor of Houston, stated “The City stands with Texas Central and looks forward to continuing our work together to make this project a success for the City of Houston and our state.” 

“This latest achievement, with these two decisions, brings us a step closer to the start of construction on the new railway.” said Chief Executive Pietro Salini of Webuild Group, an Italian company engaged in 2019 for the design and construction of the railroad.

Not all lawmakers are supportive of the continued efforts to build the high-speed railway.

Congressman Kevin Brady (R-TX-8) expressed skepticism stating, “The lawmakers, landowners and rural communities along the route who oppose this project look forward to this application process because we believe it will finally force TCR to publicly disclose their shaky financial projections to the STB, reveal why potential investors have abandoned the project and why taxpayers will likely be on the hook when it ultimately fails.”

“Texas Central can try to spin this however it likes, but the Federal Railroad Administration’s Record of Decision does not give the company permission to construct their project,” said State Representative Ben Leman (R-Brenham).

“The publication of this final RPA and ROD is the beginning, not the end, of TCR’s regulatory journey. In addition, these final agency actions clear the way for legal challenges regarding, among other violations, the FRA’s failure to take the requisite “hard look” at the project’s environmental impacts, reasonable alternatives and financial feasibility,” a statement from Texans Against High-Speed Rail argued.

According to FRA, the Texas Central Railroad will operate similarly to the Japanese high-speed rail, Tokaido Shinkansen, which has been in operation since 1964. 

In its publication, FRA recognized the safety record of the Japanese system which “has moved over 6 billion passengers without a passenger fatality or injury due to trainset accidents such as derailment or collision.”

While Texas Central’s use of Japanese high-speed train technology is noteworthy, its financial connections to Japanese high-speed rail are more controversial.

It appears from filings in several Texas counties along the planned route that Texas Central began transferring property interests, known as deeds of trust, to a Japanese holding company in the Cayman Islands this summer.  

A deed of trust conveys a property interest to a lienholder as security for debt.  

In 2018, Japan Bank for International Cooperation (JBIC) formed a special finance vehicle, Japan Texas High-Speed Railway Cayman LP (JTHSR), which lent $300 million to Texas Central Railroad Holdings, LLC for building the railway project.

Texas Central has conveyed deeds of trust to JTHSR in Harris, Leon, Waller, Madison, and Grimes counties according to Texans Against High Speed Rail. 

Deeds of trust are property interests given to a lender as security for a loan in case of default. 

Rep. Cecil Bell (R-Magnolia) spoke out against this practice. “[Texas Central] also claims to be a Texas company, yet we now know that they deeded Texas properties to the Japanese Government.”  

“If Texas Central had disclosed their intent to deed this property to the government of Japan, lawmakers and landowners most likely would have considered these real estate transactions differently. There are still landowners with pending option contracts with Texas Central…these Texans must be notified immediately that the property Texas Central has acquired is being used as collateral to secure a loan from a foreign government,” Kyle Workman, chairman and president of Texans Against High Speed Rail said in a statement.

Original estimates for the Texas Central were $12 billion, but the website now states the project is likely to cost $20 billion. Texas Central’s chairman Drayton McLane said this spring that the cost of the project has swelled to $30 billion.

As conceived, the project estimates 6 million riders annually, but Texas Department of Transportation’s Statewide Ridershop Analysis report in 2013 put the ridership between 1.5 million and 5.7 million annually. In light of the coronavirus pandemic and significant decreases in public transportation use, the ridership estimates and attendant income could be overstated.  

The company’s website states, “Texas Central is an investor-funded company utilizing a market-led approach to financing, led by a group of primarily Texan investors. The Railroad will not seek grants from the US Government or the State of Texas, nor any operational subsidy once operation begins. The project will be financed with a blend of debt and equity.” 

Recently, Allred suggested that Texas Central could be eligible for some of the $19 billion in PRIME grant funding proposed in H.R. 2, a large infrastructure bill proposed in Congress.   

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Kim Roberts

Kim Roberts

Kim Roberts is a reporter for the Texan in the DFW metroplex area where she has lived for over twenty years. She has a Juris Doctor from Baylor University Law School and a Bachelor's in government from Angelo State University. In her free time, Kim home schools her daughter and coaches high school extemporaneous speaking and apologetics. She has been happily married to her husband for 23 years, has three wonderful children, and two dogs.