Amtrak 2014 Annual Report Download - page 55

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National Railroad Passenger Corporation and Subsidiaries (Amtrak)
Notes to Consolidated Financial Statements (continued)
1509-1694994 47
10. Commitments and Contingencies (continued)
unless Congress extends the December 31, 2015 deadline. Absent an extension of the
December 31, 2015 deadline or an alternative solution to allow continued passenger rail service
over Amtrak’ s rail and host railroad property that is not PTC compliant, Amtrak’ s operations
will be impacted. While the Company is hopeful that the deadline will be extended, it remains
uncertain whether Congress will extend the implementation deadline or whether an alternative
solution which would allow continued passenger rail service will be implemented. It is possible
that Amtrak service could be disrupted in areas where PTC has not yet been fully implemented.
However, the possible impact of any such disruption cannot be estimated at this time.
Kansas City Terminal Railway Co. (KCT) is a Class III railroad whose property is located in and
around Kansas City, Missouri. Currently, Amtrak operates four Missouri state-supported service
trains and two Amtrak long distance trains over KCT’ s rail lines each day. Under federal law,
Class III railroads currently are not required to install PTC unless the railroad carries passenger
trains. Because Amtrak operates passenger service over KCT’ s lines, KCT is required to install
PTC by December 31, 2015. On April 4, 2014, KCT filed a claim before the National Arbitration
Panel (NAP, a standing panel of railroad arbitrators established in 1971) to recover from Amtrak
the full cost of installing PTC on its lines under the terms of Amtrak’ s operating agreement with
KCT. Amtrak moved to dismiss the arbitration action, asserting that federal law, not the contract,
controlled any Amtrak obligation to pay for PTC and that the Surface Transportation Board was
the proper entity to decide such issues. However, the NAP ruled that the dispute fell within the
scope of the Operating Agreement. Upon KCT’ s motion requesting “interim compensation”
(i.e., a portion of KCT’ s ongoing costs for installing PTC), the NAP ruled that Amtrak must pay
KCT a portion of its PTC installation costs, subject to a “true-up” in the final award in the
arbitration proceeding. In response to that ruling, Amtrak sent a letter to KCT, notifying KCT
that it would be forced to discontinue service over KCT’ s rail lines. Settlement discussions and a
stay of the arbitration proceeding followed that notice. On August 7, 2015, Amtrak and KCT
reached a settlement pursuant to which Amtrak paid KCT an agreed upon amount and KCT
acknowledged their obligation to complete installation of PTC on their rail lines.
Other railroads over which Amtrak operates its passenger trains also have indicated they will
assert claims against Amtrak to recover costs of PTC installation. The final outcome of any
additional PTC claims cannot be predicted with certainty, but the Company expects that the
outcome could result in additional accruals that could be material to Amtrak. Any accruals will
be reflected in the periods in which such liability becomes probable and estimable.