Government Red Tape against XpressWest High Speed Rail

If the President and Governor support bullet trains, why are they allowing their visions to be obstructed by their own government rules?

Transit Talking Points by: Nicholas Ventrone, Community Engagement Director

DesertXpress Enterprises, the private firm behind the development of the proposed XpressWest high speed rail line between Palmdale and Las Vegas announced Thursday that it will not proceed with outside funding from China Railway International. You may remember that last September, the Chinese offered a $100 million initial investment for the line. But now, that deal is cancelled. High Speed Rail transit advocates and supporters are likely scratching their heads and wondering what the heck happened and how this can be corrected.

All kinds of generalized statements and excuses regarding the disconnect such as "difficulties associated with timely performance" and troubles with "obtaining required authority to proceed" flooded the news media, but there were very little specifics or solutions reported. The good news is DesertXpress Enterprises will proceed in working to complete the project but that's the only general solution I saw publicized in the coverage. Again, no specifics.

As you may know, the XpressWest when completely built out will be very desirable and profitable for rail developers and their operators. The I-15 freeway corridor linking Southern California with the Gambling Capital of the World is clearly a tremendous market for high speed rail investments.

Las Vegas Strip lights at night

Ground transportation bus services are already in high demand and very competitive. Advanced purchase promotional fares between LA and Vegas generally cost the same or just a few bucks more than a day pass to ride the local city bus. That is a fact.

The freeway itself is very heavy during the weekends and holidays. That is a fact.

The speed limit on the I-15 freeway through the Mojave Desert is 70 MPH. That is a fact.

Putting in mass transit infrastructure that can travel twice the speed of the 70 MPH posted I-15 speed limit would certainly draw these tourists from their cars and into the train which would certainly generate profits for the operator. Plus, abundant feeder services are available in Vegas to get travelers from the Vegas station to their destination hotels and locations including the Deuce and SDX Strip/Downtown Express transit routes, local connecting buses, traditional taxis, commercial ridesharing services including Uber and Lyft, and hotel and commercial shuttles.

It's pretty obvious that DesertXpress Enterprises knows this and desires to capitalize on it. Yes, the starting SoCal station is Victorville, but longer range plans calls for a connection to Los Angeles Union Station via Palmdale.

So what the heck is taking so long in getting this investment up and running? Why are outside investors like China Railway backing out? In a statement published in the Los Angeles Times on Friday, DesertXpress pointed to government bureaucracy:

Our biggest challenge continues to be the federal government’s requirement that high-speed trains must be manufactured in the United States. As everyone knows, there are no high-speed trains manufactured in the United States. This inflexible requirement has been a fundamental barrier to financing high-speed rail in our country. For the past 10 years, we have patiently waited for policymakers to recognize high-speed rail in the United States is a new enterprise and that allowing trains from countries with decades of safe high-speed rail experience is needed to connect the Southwest region and start this new industry.

Federal law requires that the trains and all of their components be American-made. That means that the company that ultimately assembles these trains must have a manufacturing plant in the U.S., as well as an American parts-supply chain. That's where the problem lies and exceptions had to be made for the California state to move forward on it's bullet train project.

The feds in 2014 recently granted the California High Speed Rail Authority a waiver of the federal “Buy America” requirements, allowing up to two prototype trains to be foreign-built. “FRA estimates that it could take HSR train set manufacturers a minimum of one and a half to two years to establish the required facilities to support a domestic HSR train set assembly capacity,” the federal agency wrote in its Nov. 24 waiver notification letter published by the Sacramento Bee. That means DesertXpress' statement has some truth.

German train manufacturer Siemens also produces high speed trains and has a plant in California. Parts would need to be domestic for U.S. high speed rail projects. The company currently has a factory in Sacramento to build trolleys, light rail, and regional rail trains. They also assemble electric locomotives for two of Amtrak’s East Coast passenger routes, and plants in Georgia and Ohio for propulsion equipment and motors. They could be a pioneer to manufacture 100% Made-in-USA high speed trains too. So there is some hope the industry will get around red tape and get HSR moving.

But even if DesertXpress' statement is spun, they do have a valid point that the government is getting in the way of HSR progress. And this has happened once before when DesertXpress previously tried to secure a federal loan less than two years ago, but was turned down in part due to this law.

White House Concept: Official Obama Administration HSR future vision.
The irony here is that both Governor Jerry Brown and President Obama are very pro-high speed rail. Just listen to them:

What is important is the connection that we are rooted in our forebears and we are committed and linked to our descendants. The high-speed rail links us from the past to the future, from the south to Fresno and north. This is truly a California project bringing us together today. - Governor Jerry Brown. 

Building a new system of high speed rail in America will be faster, cheaper, and easier than building more freeways or adding to an already over-burdened aviation system - and everybody stands to benefit. - President Obama

However their own respective state and federal government rules which they oversee could very well be obstructing the necessary private investments to make their bullet train visions become a reality.

Unnecessary red tape is very likely the prime obstruction of the XpressWest. Government bureaucracy is more than likely the driving factor of the excessive price tag of the California High Speed Rail project which has grown to levels that is spooking investors and support. Both administrations must know that they cannot fully fund their bullet train master plans quickly with public funds alone under America's free market economic system. The private sector has to invest in it, manufacture the raw parts into trains, and each firm involved must be able to profit, period.

Plus, where exactly are the existing high speed train manufacturers and experience? That is, who makes the raw materials to generate the parts? According to DesertXpress, they're not in the U.S.A. How can high speed rail developers possibly obey the Made-in-USA rule and source their manufacturers of the U.S. high speed trains if no raw HSR manufacturer exists in America? They can't.

Yes, foreign manufacturers like Siemens could transfer HSR manufacturing tasks over to their factories in the U.S.A, but the issue involving the exclusive use of raw domestic parts still has to be addressed. The feds are even aware of this as mentioned in the 2014 waiver letter. But they have to go a step further and make the playing field level and fair for all manufacturers and developers, not just the contracting firms for the CA HSR project. They should not have an exclusivity.

At minimum, all high speed rail developers need to be allowed to work with the foreign factories of the raw parts of the bullet train sets as well as be permitted to import prototype trains and first articles, at least until the industry can set up shop and build up experience in the country. Raw components and parts that should be cleared for import would include materials such as the train's outer panels, interior wall panels, the wheels, glass panels, doors and electronic controls made specifically for high speed rail.

That would better allow Siemens to export parts to the Sacramento plant. Crews there can then assemble them together and perform the necessary quality assurance work to ensure we have top-tier train sets assembled and inspected by U.S. labor. I predict that was the intent of the "Buy America" rule. That would be a fair compromise which would very likely draw better interest and investments from the marketplace while ensuring the finished trains were assembled and quality-checked in this country.

DesertXpress Enterprises and other business investors well know that it's way more difficult to invest and profit in high speed rail infrastructure than it should be. High taxes on businesses and all kinds of unnecessary red tape regulations are choking up private investments on high speed transit to the point that it has scared off even the Chinese.

If you look at the LA Times article in detail, federal records show that DesertXpress Enterprises underwent numerous approvals from several federal agencies, and there's still more regulatory approvals to go including the environmental impact report. That EIR could be a vulnerable target of a trivial environmental lawsuit under existing state CEQA law. But both the Governor and the President envision high speed rail which makes this whole regulatory situation very puzzling. They need to lead the way in streamlining the approval process and get the corridors environmentally cleared and shovel-ready for U.S. developers like DesertXpress Enterprises and their supporting investors. That's where public money and government resources for high speed transit should be spent. Pro-business and pro-economy politicians in Congress may be willing to back this as this would stimulate the market economy in a very conservative way. Pro-union lawmakers may be willing to back this too given the growth in American manufacturing jobs.

Both Obama and Brown need to call on their legislative branches for regulatory reform to make this happen.

If the state and feds want high speed rail, they need to get out the way and allow the private sector to invest and develop it. They have plenty of money to do that. Where's the will?