Bullet train: now more than double original estimates

The most expensive infrastructure project in the country just became significantly more expensive, according to the Los Angeles Times.

The rail authority for California’s bullet train project, which seeks to essentially join Southern California to Northern California via a blazing fast few hours on a train, revised its cost estimates today, announcing the project would need $13 billion more from taxpayers than was estimated two years ago.

Current projections estimate the 520-mile first phase of the project will cost $77.3 billion, as numerous problems assail the plan.

Bullet train problems sound much like pipeline problems

The difficulties faced by the bullet train planners are legion, and most would be familiar to any pipeline company.

Almost immediately after it issued its first construction contract in 2013, the project began having trouble buying property for the route. Counties, cities, water groups and farm bureaus all filed lawsuits against the project, claiming it had not fairly estimated the train’s impact to communities. Environmental reviews are not limited only to pipelines, as the rail authority estimated it will cost $1 billion just to perform the associated reviews for the line.

Further complications included inadequately mapped underground utilities in Fresno, which sharply increased the cost of relocating water, sewer, electrical and communications lines in the city. Freight rail lines have required the project to install massive barriers where the bullet train would run parallel to freight tracks, which will cost hundreds of millions.

Difficulties push realistic in-service date out to 2029

Problems have also significantly delayed completion, and the earliest the train could begin partial operations, from San Jose to just outside Bakersfield, is 2029. This is five years later than the previous estimate and only covers about half the route.

Funding the project gets tricky

Bullet train planners are now left with a significant problem, how to fund such a project.

The original plan, drawn up when the project was expected to cost $33 billion, involved a roughly even split between private investors, California taxpayers and the federal government. However, the federal government has only contributed $3.5 billion so far and congressional Republicans are highly unlikely to approve any further funds. Private investors will not commit to the project unless the state will guarantee they won’t lose money.

If you took the $77.3 billion and invested in the energy industry, here’s what you could get

At Keystone XL’s estimated $8 billion to $10 billion price tag, investors could fund eight of them, totaling about 9,600 miles of 36-inch pipe, for the same cost as the bullet train. We need the takeaway.

Based on an average well cost of approximately $7.5 million, diverting the $77 billion bullet train funds into the Permian Basin could pay for more than 10,000 new shale wells, or about 20 months of full-on drilling and development at current dayrates. Those 10,000 wells would likely have a combined IP30 of 12 million barrels of oil equivalent per day.

If you’d rather invest in oil and gas companies, California’s $77.3 billion would be enough to purchase 58 of the E&P companies tracked by EnerCom Analytics. Those companies produced a combined 4.9 MMBOEPD in Q3 2017. These companies represent roughly half of U.S. production. Alternatively, $77.3 billion would be enough to buy all of ConocoPhillips (ticker: COP) with enough left over to buy Cimarex (ticker: XEC) as well.

Bullet train 51 times as expensive as Dubai’s Burj Khalifa—160 stories

Looking at real estate, the bullet train project is estimated to be more than 50 times as expensive as the Burj Khalifa, which calls itself ‘the tallest of the supertall’ at 2,700 feet tall, and which required a mere $1.5 billion to build.

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