China will not build L.A.-to-Vegas rail line &#8212; U.S. company calls the deal off

By Julie Makinen

June 8, 2016 9:08 PM PT

Reporting from Beijing — Nine months after announcing that China would help build a high-speed rail line from Los Angeles to Las Vegas, the private U.S. company behind the plan said late Wednesday that the deal was off.

XpressWest said the decision to terminate the relationship with China Railway International was based “primarily upon difficulties associated with timely performance and CRI’s challenges in obtaining required authority to proceed with required development activities.”

XpressWest indicated that its “biggest challenge” was a federal government requirement that high-speed trains must be manufactured in the United States to secure regulatory approvals.

“As everyone knows, there are no high-speed trains manufactured in the United States,” the company said in a statement. “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.”

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The news broke in China on Thursday, a public holiday, and China Railway International representatives were not immediately available for comment.

China launched its domestic high-speed rail service in 2007 and has the world’s most extensive network of such trains, covering more than 12,000 miles. In 2011, two trains collided near the city of Wenzhou, killing 40 people, raising doubts about the quality and safety of China’s trains and operating system, though there has not been a crash since then.

The country is now trying to export its rail technology, vying for contracts in Mexico, Southeast Asia and elsewhere. The L.A.-to Vegas route would have been China’s first such contract in the United States.

China’s high-speed rail lines are owned and operated by the China Railway Corp., a state-run entity formerly called the Railway Ministry.

The XpressWest-China venture was announced suddenly in September just days ahead of President Xi Jinping’s visit to the United States. But details were scant.

XpressWest, formerly called DesertXpress, said it had formed a joint venture with China Railway International USA, a consortium led by China Railway. China Railway International stated that it would provide initial capital of $100 million.

Yang Zhongmin, chairman of China Railway International, said in September that the deal would be a “landmark in overseas investment for the Chinese railway sector and serve as a model of international cooperation.”

A Los Angeles-to-Las Vegas bullet train has long been discussed. XpressWest had been talking about a 185-mile route that would run adjacent to heavily traveled Interstate 15 from Las Vegas to Victorville, 85 miles northeast of downtown Los Angeles.

But in wake of the September announcement, Chinese officials described the project as a 230-mile route with an additional stop in Palmdale and eventual service throughout the Los Angeles area using some of the same track that would be used by the publicly backed California high-speed rail project.

“The team at XpressWest is optimistic CRI and its affiliates will one day succeed in establishing a viable presence in the United States rail market; however, our ambitions outpace CRI’s ability to move the project forward timely and efficiently,” XpressWest said Wednesday after terminating the deal. “XpressWest is undeterred by this development and remains dedicated to completing its high-speed passenger rail project.”

XpressWest would now “aggressively pursue” other available development partnerships and options “expected to result in a more efficient and cost-effective project implementation experience,” Chief Executive Tony Marnell said.

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A ridership study is underway and should be finished in August, the company said.

Federal railroad records indicate that XpressWest had secured approvals and permits from a number of federal agencies for the 185-mile route. Additional permits, approvals and environmental analysis would be needed if the 230-mile proposal were to move forward.

XpressWest said it is awaiting the completion of the final environmental work required for the development of the line connecting the project to Los Angeles through Victorville and Palmdale, with approvals expected no later than September. Once that is finished, the company said, it would renew its request to the federal government for support.

“We are hopeful policymakers in Washington, D.C., will allow the Federal Railroad Administration to adopt a more flexible and realistic approach to support high speed rail,” the company said. “The real question is: do those in Washington, D.C., have the courage and vision to proceed or is our leadership going to force projects throughout the United States to seek financial support for infrastructure in our country from foreign governments?”

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