Amtrak 2015 Annual Report Download - page 40

National Railroad Passenger Corporation and Subsidiaries (Amtrak)
Notes to Consolidated Financial Statements (continued)
10. Commitments and Contingencies (continued)
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specified in the rule. In October 2015, Congress passed the Surface Transportation Extension Act of 2015,
which included a three-year extension of the PTC deadline. Amtrak is working with federal authorities and
commuter and freight railroads to ensure Amtrak trains are compliant with PTC systems adopted for use by
host railroads. Additional funding to fully comply with PTC requirements is necessary and will be requested.
Compliance with PTC requirements on the host railroads outside of the NEC could result in significant costs
to Amtrak. Amtrak’s contribution to PTC installation and maintenance on host railroad property has not yet
been defined. Accordingly, the accompanying financial statements do not reflect an estimated liability for
the cost of Amtrak becoming fully compliant with PTC.
The NEC rail line owned or controlled by the Company between Boston and Washington was fully PTC
compliant by the original December 31, 2015 deadline, except for a few miles where technical issues are
being resolved. Although all other Amtrak owned and/or operated rail lines, and Amtrak owned and controlled
locomotives, are expected to be in compliance with the PTC requirements by December 31, 2018, it is possible
that Amtrak service could be disrupted in areas on host railroads where PTC has not yet been fully implemented
by the deadline. However, the possible impact of any such disruption cannot be estimated at this time. There
is a provision in the Surface Transportation Extension Act of 2015 allowing railroads making sufficient
progress installing PTC to seek an additional extension to December 31, 2020. As of September 30, 2015,
Amtrak has spent $161.6 million for PTC-related projects on Amtrak owned or controlled rail lines and
equipment. Approximately $28.9 million and $33.1 million of the expenditures were incurred during FY2015
and FY2014, respectively.
Kansas City Terminal Railway Co. (KCT) is a Class III railroad whose property is located in and around
Kansas City, Missouri. Under federal law, Class III railroads are not required to install PTC unless the railroad
carries passenger trains. Because Amtrak operates passenger service over certain KCT lines, KCT is required
to install PTC on those lines. In April 2014, KCT filed a claim seeking to recover from Amtrak the full cost
of installing PTC on its lines. 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.
Certain other host railroads over which Amtrak operates its passenger trains have asserted material claims
against Amtrak to recover costs of PTC installation and maintenance, and other host railroads may assert
claims in the future. Amtrak is in the process of analyzing the documents provided to date by the host railroads
and evaluating the likelihood that Amtrak would be responsible for certain of the costs incurred by the host
railroads in connection with their implementation of PTC on host railroad owned property. Amtrak believes
that it will not be responsible for all costs claimed to date by the host railroads, and is evaluating the claims
to ensure that all exemptions have been obtained and that the claimed costs are required to be paid by Amtrak
pursuant to the terms of the operating agreements in place between Amtrak and its host railroads, and by
statute.
As of September 30, 2015, Amtrak has accrued its best estimate of the liability associated with PTC installation
related to host railroad PTC implementation for the incurred amounts determined to be both probable and
reasonably estimable. Amtrak anticipates that additional accruals, which may be material, could be recorded
in the future once the Company completes its analysis of those claims and its negotiations with the hosts.
Accordingly, Amtrak believes that it is reasonably possible that it may incur additional material liability in