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National Railroad Passenger Corporation and Subsidiaries (Amtrak)
Notes to Consolidated Financial Statements (continued)
1411-1359280 52
11. Commitments and Contingencies (continued)
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. The Surface Transportation Board (“STB”) has the jurisdiction to
“prescribe reasonable terms and compensation” and to determine the “incremental costs of using
the facilities and providing the services” to Amtrak. Accordingly, on June 13, 2014, Amtrak filed
with the NAP a motion to dismiss the contract arbitration for lack of jurisdiction. The NAP held
a hearing on Amtrak’ s motion on July 25, 2014, and denied Amtrak’ s motion in a decision dated
August 29, 2014. However, the NAP reserved the right to decide which, if any, issues “as a
prudential matter should be referred to the STB.” No decision on the merits of KCT’ s claims has
yet been issued by the NAP. At this stage of the litigation and based on events that occurred
subsequent to September 30, 2013, it is Amtrak’ s assessment that an outcome adverse to its
interests by the NAP is probable. The Company estimates that its liability could be as much as
$32 million. The Company’ s financial statements for the year ended September 30, 2014, will
reflect the Company’ s then best estimate of the most likely outcome.
12. Environmental Matters
The Company is subject to extensive and complex federal and state environmental laws and
regulations that can give rise to environmental issues. As a result of its operations and acquired
properties, Amtrak is from time to time involved in administrative and judicial proceedings and
administrative inquiries related to environmental matters. Amtrak’ s policy is to accrue estimated
liabilities and capitalize such remediation costs relating to properties acquired with existing
environmental conditions, and to expense remediation costs incurred on properties for
environmental clean-up matters occurring after acquisition. The liability is periodically adjusted
based on Amtrak’ s present estimate of the costs it will incur related to these sites and/or actual
expenditures made. Some of the Company’ s real estate properties may have the presence of
asbestos-containing building materials. If these properties undergo major renovations or are
demolished, certain environmental regulations that are in place may specify the manner in which
the asbestos-containing materials must be assessed, handled, and disposed. The Company has
identified a number of locations for which major renovations are planned and liabilities have