[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
U.S. RAIL CAPACITY CRUNCH
=======================================================================
(109-66)
HEARING
BEFORE THE
SUBCOMMITTEE ON
RAILROADS
OF THE
COMMITTEE ON
TRANSPORTATION AND INFRASTRUCTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
__________
APRIL 26, 2006
__________
Printed for the use of the
Committee on Transportation and Infrastructure
U.S. GOVERNMENT PRINTING OFFICE
28-281 PDF WASHINGTON : 2006
------------------------------------------------------------------
For sale by Superintendent of Documents, U.S. Government Printing
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800;
DC area (202) 512-1800 Fax: (202) 512-2250. Mail: Stop SSOP,
Washington, DC 20402-0001
COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
DON YOUNG, Alaska, Chairman
THOMAS E. PETRI, Wisconsin, Vice- JAMES L. OBERSTAR, Minnesota
Chair NICK J. RAHALL, II, West Virginia
SHERWOOD L. BOEHLERT, New York PETER A. DeFAZIO, Oregon
HOWARD COBLE, North Carolina JERRY F. COSTELLO, Illinois
JOHN J. DUNCAN, Jr., Tennessee ELEANOR HOLMES NORTON, District of
WAYNE T. GILCHREST, Maryland Columbia
JOHN L. MICA, Florida JERROLD NADLER, New York
PETER HOEKSTRA, Michigan CORRINE BROWN, Florida
VERNON J. EHLERS, Michigan BOB FILNER, California
SPENCER BACHUS, Alabama EDDIE BERNICE JOHNSON, Texas
STEVEN C. LaTOURETTE, Ohio GENE TAYLOR, Mississippi
SUE W. KELLY, New York JUANITA MILLENDER-McDONALD,
RICHARD H. BAKER, Louisiana California
ROBERT W. NEY, Ohio ELIJAH E. CUMMINGS, Maryland
FRANK A. LoBIONDO, New Jersey EARL BLUMENAUER, Oregon
JERRY MORAN, Kansas ELLEN O. TAUSCHER, California
GARY G. MILLER, California BILL PASCRELL, Jr., New Jersey
ROBIN HAYES, North Carolina LEONARD L. BOSWELL, Iowa
ROB SIMMONS, Connecticut TIM HOLDEN, Pennsylvania
HENRY E. BROWN, Jr., South Carolina BRIAN BAIRD, Washington
TIMOTHY V. JOHNSON, Illinois SHELLEY BERKLEY, Nevada
TODD RUSSELL PLATTS, Pennsylvania JIM MATHESON, Utah
SAM GRAVES, Missouri MICHAEL M. HONDA, California
MARK R. KENNEDY, Minnesota RICK LARSEN, Washington
BILL SHUSTER, Pennsylvania MICHAEL E. CAPUANO, Massachusetts
JOHN BOOZMAN, Arkansas ANTHONY D. WEINER, New York
JIM GERLACH, Pennsylvania JULIA CARSON, Indiana
MARIO DIAZ-BALART, Florida TIMOTHY H. BISHOP, New York
JON C. PORTER, Nevada MICHAEL H. MICHAUD, Maine
TOM OSBORNE, Nebraska LINCOLN DAVIS, Tennessee
KENNY MARCHANT, Texas BEN CHANDLER, Kentucky
MICHAEL E. SODREL, Indiana BRIAN HIGGINS, New York
CHARLES W. DENT, Pennsylvania RUSS CARNAHAN, Missouri
TED POE, Texas ALLYSON Y. SCHWARTZ, Pennsylvania
DAVID G. REICHERT, Washington JOHN T. SALAZAR, Colorado
CONNIE MACK, Florida JOHN BARROW, Georgia
JOHN R. `RANDY' KUHL, Jr., New York
LUIS G. FORTUNO, Puerto Rico
LYNN A. WESTMORELAND, Georgia
CHARLES W. BOUSTANY, Jr., Louisiana
JEAN SCHMIDT, Ohio
(ii)
SUBCOMMITTEE ON RAILROADS
STEVEN C. LaTOURETTE, Ohio, Chairman
THOMAS E. PETRI, Wisconsin CORRINE BROWN, Florida
SHERWOOD L. BOEHLERT, New York NICK J. RAHALL II, West Virginia
JOHN L. MICA, Florida JERROLD NADLER, New York
SPENCER BACHUS, Alabama BOB FILNER, California
JERRY MORAN, Kansas ELIJAH E. CUMMINGS, Maryland
GARY G. MILLER, California EARL BLUMENAUER, Oregon
ROB SIMMONS, Connecticut LEONARD L. BOSWELL, Iowa
TODD RUSSELL PLATTS, Pennsylvania JULIA CARSON, Indiana
SAM GRAVES, Missouri PETER A. DeFAZIO, Oregon
JON PORTER, Nevada JERRY F. COSTELLO, Illinois
TOM OSBORNE, Nebraska EDDIE BERNICE JOHNSON, Texas
MICHAEL E. SODREL, Indiana JAMES L. OBERSTAR, Minnesota
LYNN A. WESTMORELND, Georgia, Vice- JOHN BARROW, Georgia
Chair (ex officio)
DON YOUNG, Alaska
(ex officio)
(iii)
CONTENTS
TESTIMONY
Page
Boardman, Hom. Joseph H., Administrator, Federal Railroad
Administration................................................. 10
Busalacchi, Hon. Frank, Secretary, Wisconsin Department of
Transportation, Chair, States for Passenger Rail Coalition..... 10
English, Glenn, CEO, National Rural Electric Cooperative
Association.................................................... 48
Hamberger, Edward, President, Association of American Railroads. 10
Keith, Kendell, President, National Grain and Feed Association.. 48
Lipinski, Hon. Daniel, a Representative in Congress from the
State of Illinois.............................................. 6
Martland, Carl D., Senior Research Associate and Lecturer,
Department of Civil and Environmental Engineering,
Massachusetts Institute of Technology.......................... 48
Millar, William W., President, American Public Transportation
Association.................................................... 10
Rose, Matthew K., President and CEO, Burlington Northern Santa
Fe Railway..................................................... 10
Timmons, Richard F., President American Short Line and Regional
Railroad Association........................................... 10
Wallace, Burt, Vice President, Transportation, United Parcel
Service........................................................ 48
White, John, Vice President, Logistics, Buzzi Ubicem USA Inc.... 48
PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS
Brown, Hon. Corrine, of Florida.................................. 83
Costello, Hon. Jerry F., of Illinois............................. 92
Cummings, Hon. Elijah E., of Maryland............................ 94
Johnson, Hon. Eddie Bernice, of Texas............................ 143
Lipinski, Hon. Daniel, of Illinois.............................. 154
Oberstar, Hon. James L. of Minnesota............................. 179
Sodrel, Hon. Mike, of Indiana.................................... 206
Young, Hon. Don, of Alaska....................................... 234
PREPARED STATEMENTS SUBMITTED BY WITNESSES
Boardman, Hon. Joseph H......................................... 71
Busalacchi, Hon. Frank.......................................... 87
English, Glenn................................................... 100
Hamberger, Edward............................................... 107
Keith, Kendell.................................................. 147
Martland, Carl D................................................ 160
Millar, William W............................................... 171
Rose, Matthew K................................................. 181
Timmons, Richard F.............................................. 207
Wallace, Burt................................................... 213
White, John..................................................... 220
SUBMISSION FOR THE RECORD
Hamberger, Edward, President, Association of American Railroads,
response to questions from Rep. LaTourette..................... 22
ADDITION TO THE RECORD
Arkansas Electric Cooperative Corporation, Gary Voigt, President
and CEO, letter to Roger P. Nober, Chairman, Surface
Transportation Board, August 12, 2005.......................... 237
U.S. RAIL CAPACITY CRUNCH
----------
Wednesday, April 26, 2006
House of Representatives, Subcommittee on
Railroads, Committee on Transportation and
Infrastructure, Washington, D.C.
The subcommittee met, pursuant to call, at 10:04 a.m., in
Room 2167, Rayburn House Office Building, Hon. Steven C.
LaTourette [chairman of teh committee] presiding.
Mr. LaTourette. The Subcommittee will come to order this
morning. I want to welcome everybody to our hearing this
morning about the U.S. Rail Capacity Crunch.
In 1980, our Nation's rail industry was in dire straits.
Twenty percent of our Nation's railroads had gone into
bankruptcy in the previous decade, including most of the
railroads in the northeast. Many holders of railroad stocks and
bonds were left with nothing more than worthless pieces of
paper. Competition from trucks had sapped the railroads'
traditional traffic base. New investment was needed to meet
this competition, but the regulatory regime of the old ICC made
this impossible. The ICC forced the railroads to maintain and
operate unprofitable branch lines while the busy main lines
suffered from years of deferred maintenance and neglect.
Just how bad were the tracks back then? Legend has it that
the old Penn Central experience: standing derailments, a
situation where a parked train topples onto its side when the
tracks give way underneath.
The 1970s were dark days for shippers as well. Labor, fuel,
and other costs were rising faster than inflation. But the
railroads had little incentive to improve efficiency. Inflative
costs were merely passed on to the shippers in the form of
higher tariffs blessed by the ICC.
Private investors abandoned the rail system. The remains of
the Penn Central system ended up in Government hands under the
name of Conrail. Likewise, the burden of operating unprofitable
passenger service fell to another Government entity, Amtrak.
Something had to be done or the entire rail system would
have ended up bankrupt or nationalized. The answer to this
immense problem was the Staggers Rail Act of 1980. Staggers
released the railroads from the Government regulatory
stranglehold and helped attract billions in new private
capital. The rail system underwent a drastic restructuring: the
number of employees was drastically reduced; many tracks were
torn up and sold for scrap; excess main line capacity was
eliminated; unprofitable branch lines were sold to
entrepreneurs; cost cutting became a science; new markets such
as premium intermodal service came to the fore.
Rail rates have declined in real terms since the passage of
Staggers, while productivity has tripled. At the same time, the
industry's safety record has improved immensely, with far fewer
injuries or deaths per year than in the 1970s, and we no longer
hear of any standing derailments.
But this success has not come without a cost. Twenty-six
years after the passage of Staggers, our railroads have become
congested, sometimes nearly to the point of gridlock. Shippers
are complaining that it takes longer to move a car across the
Country now than it did 10 years ago. In some cases, our
farmers have been unable to obtain cars to move their products
to market. The demand for coal has soared, but utilities have
reported difficulty in moving coal from the mines to the power
plants.
As incredible as it may seem, railroads are having a
difficult time finding qualified workers to meet these new
service demands. Much of the older generation is near
retirement and it seems that many younger people are put off by
the long hours, mental stress, and physical labor required by
most railroad jobs. Railroad workers might seem to be well
paid, but let me tell you my experience is they earn every
penny that they are paid.
The world has changed since 1980. We no longer have the
option of diverting rail freight traffic onto our highways, and
anybody who has driven the Beltway recently during rush hour
knows why. All across the Country motorists are sick of being
stuck in traffic every day. People are demanding solutions such
as new rail passenger service, but in many cases this is not
really new service, we are only trying to restore what was
abandoned in the 1950s and the 1960s.
In today's hearing, a quarter century after the passage of
Staggers, I hope to learn what it is going to take to build the
new rail system of 2050, a system which will carry both freight
and passengers with speed, economy, and efficiency.
Before yielding to Ms. Brown, I do want to yield to the
chairman of the Highway Subcommittee just for a minute to
welcome one of his constituents, Mr. Busalacchi, who is on our
now second panel; and I will explain how that happened.
Mr. Petri, is there some Wisconsin word of welcome you
would like to--
Mr. Petri. Yes. Thank you very much. It is my pleasure
today to join you in welcoming Frank Busalacchi, someone I have
had the opportunity to get to know because we both work on
transportation issues, and he has been a strong leader in our
State Government and now nationally, and is appearing for a
national coalition in the rail area. We work more on highway
things, but rail things as well. And I am looking forward--I
have been reading his testimony. I am hoping to get back in
time for it.
But, again, welcome, Frank.
Mr. LaTourette. Thank you very much, Mr. Petri.
I want to ask unanimous consent to allow all members to
have 30 days to revise and extend their remarks and to permit
the submission of additional statements and materials by the
witnesses. Without objection, so ordered.
It is now my pleasure to yield to our distinguished ranking
member, Corrine Brown from Florida, for any observations she
would choose to make.
Ms. Brown. Thank you, Mr. Chairman. And thank you for
hosting this Committee meeting. It could not come at a more
appropriate time, because I believe we are on the verge of a
crisis in our Nation railways. Thanks to economic growth and a
sharp increase in international trade, the railroad industry
has more business than it has capacity to handle.
And while the Nation's freight railroads is in much more
financial health today than it was in the 1980s, when we
partially deregulated the industry, the railroads still do not
earn enough to cover the costs of capital. As a result,
railroads have either had to defer maintenance or cut back on
the number of miles served. The size of the freight rail
network has deteriorated to about half of what it was 26 years
ago, but our freight shipments have more than doubled.
We need to find a solution, a permanent solution, to this
problem or the situation will only get worse. According to the
U.S. Department of Transportation, rail traffic is expected to
rise more than 50 percent by the year 2020. A traffic growth,
traffic bottleneck will further impede freight and passenger
rail operation and adversely impact the business of railroad
customers, many of which count on just-in-time delivery.
Moreover, as gas prices rise $3.00 and $4.00 a gallon, recovery
drivers will turn more and more to commuter rail and Amtrak,
putting even more pressure on an already congested system.
I know that there are many ideas out there for helping our
Nation's railroads. Railroads are critically important to our
Nation's economy, health, and development, and they must have
adequate support from the Federal Government, just like we do
for aviation, highways, and mass transit, if they are to
continue to meet the needs of their customers and if they are
to continue to keep truck traffic off of America's highways.
I want to welcome today's distinguished panelists, and I am
looking forward to their insight on ensuring the fairest and
more effective freight rail service for both the railroad and
their customers.
I thank you, Mr. Chairman.
Mr. LaTourette. I thank you very much.
Become of some time constraints, we are next going to yield
to Mr. Miller of California.
Mr. Miller. Thank you, Chairman LaTourette.
This is an extremely important issue in my district. I
represent Southern California. I appreciate the opportunity of
having you here today to hear your testimony, and we are going
to try to deal with a real serious issue, and that is how do
the railroads invest in infrastructure. Not only new
infrastructure, but dealing with the current infrastructure you
have to maintain because, in California, moving goods and
people are extremely important. And, especially in my district,
capacity is something we are having to deal with. I represent
an area that the Alameda Corridor runs through, and the Ports
of Long Beach and L.A., most of materials come through my
district, and it is really scary because if you can't load
containers on trains, they have to go on trucks.
And if you have driven the freeways in Southern California
and you see the amount of trucks, you realize that we don't
have the capacity on freeways to load containers on more
trucks. I mean, they are doing a great job. The trucking
industry has really stepped up and they are trying to do
everything they can to move goods, but there are bulk goods
that need to be moved by rail, and it is becoming more and more
difficult all the time to do that. And the shipping industry
needs to remain competitive, and without timely delivery of
shipments in our Country, the economy is going to be impacted
overall.
I have been in part of the building industry for about 35
years, and there is a tremendous amount of goods in the
industry shipped by rail initially, and then when it gets to
retailers, it tends to be shipped by trucks. But if we can't
put those goods on rail, we are going to add more and more
impact on our roads, and we just don't have the infrastructure
to accommodate that. Not only that, but think about the coal
that is moved, the energy shipment we are dealing with today,
the crisis we are having to deal with and the goods that are
moved by rail.
We have to deal with the situation where shippers and the
railroads need to work together, and how do we do that. How do
we do that in a fair way? I mean, the railroads get beat up a
lot of times because of capacity, but then the railroads are
required to share their lines to move people. And that was not
the initial purpose of building those railroads, it was built
to mainly ship goods for profit. And you are allowing your
rails to be used for other purposes, and that has to happen in
this Country because we need to move people today. But we have
got to find a solution where the funds are available to the
railroads to invest in infrastructure, and at some point in
time Government has to be part of the problem and the solution.
We are the problem in many cases, but we have to be part of the
solution. And we voluntarily become part of the problem often
through regulations and legislation, but we need to voluntarily
become part of the solution of this problem also.
And I am looking forward to the testimony.
Chairman, I think this is timely to do this.
I would encourage you to come to my district sometime and
see the amount of goods being shipped by rail and the amount of
goods being shipped by truck, and you would realize we do not
have the capacity in our highways to put more containers on
trucks, and that leaves us no alternative but to make sure we
do everything we can to make sure the railroads can compete in
a timely fashion and that they can produce as they need to
delivering those goods and services to our Nation.
Thank you. I yield back the balance of my time.
Mr. LaTourette. And I thank you very much, Mr. Miller. And
I think you will find that a lot of the testimony deals with
your part of the Country today, and I thank you for your
participation and your interest.
Ms. Johnson of Texas.
Ms. Johnson. Thank you very much, Mr. Chairman. I want to
thank you and Ranking Member Brown for holding this important
hearing on the issue of rail capacity.
As we all know, our Nation's freight rail system is an
integral component of our Nation's robust economy. Each day,
freight rail delivers tons of raw materials and consumer goods
that support an array of business sectors throughout the
Country. According to a recent report by the Congressional
Budget Office, rail transportation is responsible for the
transport of 70 percent of coal delivered to power plants, 70
percent of domestic manufactured automobiles, and 32 percent of
grain shipments.
As manufacturing has become more global and their supply
chains have become longer and more complex, freight rail has
become a critical component for firms and industries. In the
Dallas-Fort Worth region, exploding intermodal growth, coupled
with increasing international trade with China, is reshaping
the region's economic and freight rail landscapes. In my
district, the evidence of this growth is unmistakable. Union
Pacific has just completed a $100 million intermodal facility
to support the growing intermodal volume and increased trade to
the region, and I appreciate Union Pacific's decision to invest
in my district as the economic impact on the surrounding area
is expected to create 20,000 new jobs and $5 billion in
development over the next 15 years.
Cargo bound for the U.S. from China has grown an average of
34 percent annually since 2002. Much of this traffic filters
through the Tower 55 corridor in the north Texas region, as
China is the world's leading seller of goods to the Dallas-Fort
Worth market. Delays at Tower 55 today exceed capacity.
Significant future growth in freight rail is expected and
addressing this problem remains a top priority. On a busy day,
Tower already sees in excess of 120 trails, and on an average
day it is occupied 70 percent of the time. Obviously, this type
of demand is placing enormous strains on existing rail capacity
in our region and has highlighted the need for additional
infrastructure.
And while I fully understand this need, I am also aware
that, unlike any other mode of transportation, railroads are
responsible for paying for and maintaining their own
infrastructure. This type of arrangement obviously has
implications on infrastructure investment. As a result of this,
I think it is imperative that we be proactive in formulating
policy that supports, not prohibits, the industry in expanding
capacity to avoid a congestion crisis that could endanger or
even cripple our Nation's economy.
As I close, I want to thank our witnesses that are coming
before us today, particularly Mr. Matt Rose of BNSF Railroad
from Fort Worth, Texas. I look forward to that testimony, as I
am particularly interested in learning more about their
thoughts in how we may all work together in addressing current
and future capacity challenges.
Thank you, Mr. Chairman. I yield back.
Mr. LaTourette. I thank the gentlelady very much.
Mr. Bachus from Alabama.
Mr. Bacchus. I thank the Chairman. Mr. Chairman, I will
simply say two things. One is that there is a great need for
more rail infrastructure and capacity, and I think there is a
solution and there is "not-a-solution." I think the "not-a-
solution" is to re-regulate rail. And I think that is, bottom
line, what H.R. 2047 does. I think it would actually have
disastrous consequences. On the other hand, I do believe that
we should give the railroad all sorts of incentives, tax
incentives, and I actually think that what is being proposed is
insufficient and we should go further and be more
comprehensive.
It is an economic issue. It is also a safety issue for any
of us that have traveled the highways. And we can either turn
our highways into rail lines by increasing the size of our
trucks, or we can make the investments that we have been making
on our highways when we should have been making more of an
investment in our rail lines.
But I think that the best solution for the Government is
simply to give the incentives to the railroads and let the
railroads build the lines with as little regulation as
possible.
I yield back the balance of my time.
Mr. LaTourette. I thank the gentleman very much, and I
think you will be pleased by some of the testimony today. Some
of our witnesses will not only talk about some tax structures,
but also ways to set rates and do other things that would
increase the ability of infrastructure dollars.
Mr. Boswell, from my own--no?
Mr. Sodrel, any opening remarks you want to make?
Mr. Sodrel. I don't have any opening statement. Thank you,
Mr. Chairman.
Mr. LaTourette. I thank the gentleman.
As I indicated before, we are going to go a little bit out
of order. We have a request from Congressman Lipinski,
Congressman Lipinski from the Chicago area in Illinois. His
father, of course, is well known to all of us who serve on this
Committee. When I was elected in 1994, Bill Lipinski was the
ranking member of the Aviation Subcommittee, I think, and then
went on to the Highway Subcommittee; instrumental in drafting a
lot of the legislation that this Committee has passed over the
years. His successor and his son now has his seat outside or in
the Chicago area. So the first panel today will be comprised of
the Honorable Dan Lipinski from Illinois.
Thank you, Congressman, for being here, and we look forward
to hearing from you.
TESTIMONY OF THE HONORABLE DANIEL LIPINSKI, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
Mr. Lipinski. Good morning. I would like to start off by
thanking Chairman LaTourette and Ranking Member Brown and the
Committee for giving me this opportunity to come here to speak
on this very important issue, something that is certainly
critical to our Nation, also to my district, the City of
Chicago and the State of Illinois.
While the volume of rail traffic in the U.S. continues to
increase, many of our rail systems are antiquated and cannot
handle the growing demand. Efficient rail transport is
imperative to the economic prosperity of our Nation, so it is
critical that we find more ways to improve rail infrastructure
and that we support the railroad industry's efforts to improve
the movement of goods across our Nation.
As you know, the Chicago area is a perpetual bottleneck for
freight rail moving across the Country. I just was looking up
at the map there. You can see where all the lines come together
very nicely right there in Chicago, producing a very important
regional choke point. And choke points such as this impede the
efficient flow of commerce, which results in economic losses
for businesses and for consumers. And the freight rail
congestion also has a negative impact for passenger and
commuter rail services.
So with freight traffic expected to double by 2025, our
rail infrastructure must be significantly improved or the
problems will continue to mount, making congestion more
difficult to alleviate and increasing the cost of fixing the
situation somewhere down the line. We must continue to provide
Federal support to program initiatives that innovatively
address the capacity shortage.
One of these initiatives is currently beginning in the
Chicago area. While it takes a freight train two days to get
from California to Chicago, it takes two days just to get that
train through Chicago. To address this growing congestion
problem, the Illinois Department of Transportation, the Chicago
Department of Transportation, Metro Commuter Rail, and
Association of American Railroads, including BNSF, CSX, Norfolk
Southern, Canadian National, Union Pacific, and Canadian
Pacific, join together to form a unique public-private
partnership and developed a plan to ease the bottleneck.
The Chicago Regional Environmental and Transportation
Efficiency Project, known as CREATE, is a $1.5 billion 10-year
plan that will make significant strides in reducing congestion
by modernizing the Northeastern Illinois rail network. CREATE
will completely overhaul the system by focusing on 25 new grade
separations and 6 rail-to-rail flyovers which will separate
freight and passenger lines. By fixing the Chicago bottleneck,
this landmark proposal will result in national benefits and set
a precedent for streamlining freight and passenger rail lines.
CREATE will also provide additional benefits: traffic
delays and grade crossing accidents will be reduced; air
pollution from trains and from vehicles on the roads will be
lowered; and the consumption of gasoline and diesel fuel will
be decreased. And infrastructure investments in CREATE will
also create tens of thousands of new good paying jobs.
The National Commission on Intermodal Transportation
recognized the regional bottleneck problem and recommended that
Congress provide Federal funding incentives for intermodal
projects of national and regional significance. The CREATE
program is certainly one of these, and was recognized as such
by the Committee in last year's SAFETEA-LU bill. I would like
to thank the Committee and its leadership for providing the
$100 million as we begin this critical program. Also, I would
like to thank Mr. Ed Hamberger and the AAR for the continued
commitment and support for CREATE throughout this past year.
Study after study has shown us that if we move freight in a
more cost-efficient and time-efficient fashion, it means a more
dynamic economy, more affordable consumer goods, and ultimately
a better quality of life for all Americans. I ask the Committee
to continue to provide the support for CREATE and other
critical rail projects that are essential to reducing the
congestion on our rails in this Country.
Once again, the efforts and commitments of the railroads to
improve the rail infrastructure in this Country are to be
applauded, and we must continue to work on important projects
such as CREATE that will alleviate the increasing congestion
and make rail travel in this Country, both freight and
passenger, more efficient modes of transportation and economic
engines for our Nation.
I think CREATE provides a good framework, public-private
partnership, getting the State, the City of Chicago also to put
in funding, the railroads together. It is a good example of
what we can do, what we should be doing, and the Federal
Government must also continue to fund CREATE and other
important programs such as this to ease congestion that we are
talking about here today
So I would like to thank the Chairman and the Ranking
Member for my time today.
Mr. LaTourette. Well, I thank the gentleman for his
excellent testimony, and, clearly, the CREATE project is one
that both his father and he and Mr. Costello and Speaker
Hastert have done an excellent job of bringing to the attention
of the Committee, and that work was rewarded somewhat in the
passage of SAFETEA-LU. And I thank you for taking your time to
come share your thoughts with us today.
And I want to yield just for a few minutes to Mr. Costello,
who I think may want to talk on the same subject.
Mr. Costello. Mr. Chairman, thank you. I will be very
brief. One, let me say that I do have a formal statement that I
would ask unanimous consent that I be allowed to be enter it
into the record.
Mr. LaTourette. Without objection.
Mr. Costello. And let me commend also the Governor of
Illinois, the State of Illinois, the City of Chicago, and the
railroads that Mr. Lipinski mentioned for their commitment to
the CREATE project. Projects like CREATE, an innovative plan,
will be part of the solution to the capacity crunch not only in
the Chicago area, but these types of projects, in my judgment,
are the solution to the national problem that we face with the
capacity crunch.
Let me also commend our colleague, Dan Lipinski. He was
very involved, as you mentioned, along with his father and
others, in trying to push this project along because of its
importance not only to the Chicago area, but to the Nation. And
I know that he will continue to be committed to this project
and will continue to do everything he can to make certain that
the Federal Government steps up to the plate, along with the
private sector and the City and the State of Illinois.
And with that, Mr. Chairman, I welcome our witnesses and
look forward to hearing their testimony.
Mr. LaTourette. I thank the gentleman very much. The Chair
is anxious to get to the second and third panels, but I do
note--and I don't want to foreclose the opportunity of any
member to make some brief remarks.
Mr. Westmoreland, Mr. Graves, and Mr. Cummings, anything
you would like to say before we get started?
[No response.]
Mr. LaTourette. Okay, that business having been conducted,
we will now go to what has become our second panel. I want to
welcome the six witnesses on the second panel for today's
hearing.
Our first witness will be the Honorable Joseph Boardman,
who is the Administrator of the Federal Railroad
Administration. Before he began at the FRA in 2005, Mr.
Boardman served as the Commissioner of the New York State
Department of Transportation. He has been involved in the
transportation industry at the local, State, and now Federal
level for over 30 years, and, Mr. Boardman, I would note that,
with your appearance today, you have now become the most
frequent witness of this Subcommittee's hearings, and I
congratulate you on that distinction.
Our second witness this morning will be the Honorable Frank
J. Busalacchi, the Secretary of the Wisconsin Department of
Transportation and the Chairman of the States for Passenger
Rail Coalition. The Passenger Rail Coalition is made up of 27
State transportation agencies that support the development and
expansion of intercity passenger rail.
Next will be Mr. Matthew K. Rose, who is the President and
CEO of the Burlington Northern Santa Fe Corporation. He has
been with BNSF since 1993, steadily moving up the executive
ranks since his start. Mr. Rose was named President in 1999 and
in 2000 also assumed the responsibilities of being the Chief
Executive Officer.
Mr. Edward Hamberger, who is also a frequent flier at our
hearings, is the President and CEO of Association of American
Railroads. Mr. Hamberger began his career in transportation in
1977 as General Counsel of the National Transportation Policy
Study Commission. He also served as Assistant Secretary for
Governmental Affairs at the Department of Transportation, where
he implemented the Reagan Administration's legislative strategy
on transportation issues.
Mr. Richard F. Timmons is the President of the American
Short Line and Regional Railroad Association. This Association
represents a diverse group of regional and short line railroads
that make up an important part of the overall rail network in
this Country.
And last but not least is Mr. William W. Millar, the
President of the American Public Transportation Association.
APTA members include public bus, rapid transit and commuter
rail systems, and the private organizations responsible for
planning, designing, constructing, financing, supplying, and
operating transit rail systems. In addition, Government
agencies, metropolitan planning organizations, State department
of transportations, academic institutions, and trade
publications are also part of APTA's membership.
I want to thank each of you for coming. I want to thank
each of you for submitting your testimony so that we can review
it ahead of time. We do have a rather robust schedule for this
hearing today. This panel will be followed by an equally large
panel. If you can, I would ask you to be mindful of our newly
designed light system here, which has sort of a five minute
benchmark for opening statements.
But that having been said, welcome. Thank you for being
here. And, Mr. Boardman, we look forward to hearing from you.
TESTIMONY OF THE HONORABLE JOSEPH BOARDMAN, ADMINISTRATOR,
FEDERAL RAILROAD ADMINISTRATION; HONORABLE FRANK BUSALACCHI,
SECRETARY, WISCONSIN DEPARTMENT OF TRANSPORTATION, CHAIR,
STATES FOR PASSENGER RAIL COALITION; EDWARD HAMBERGER,
PRESIDENT, ASSOCIATION OF AMERICAN RAILROADS; MATTHEW K. ROSE,
PRESIDENT AND CEO, BURLINGTON NORTHERN SANTA FE RAILWAY;
RICHARD F. TIMMONS, PRESIDENT, AMERICAN SHORT LINE AND REGIONAL
RAILROAD ASSOCIATION; AND WILLIAM W. MILLAR, PRESIDENT,
AMERICAN PUBLIC TRANSPORTATION ASSOCIATION
Mr. Boardman. Thank you, Mr. Chairman and Ranking Member
Brown, for having me here today to represent Norman Mineta, the
Secretary of Transportation. In the spirit of being a frequent
flier, I will be very short in my oral remarks and ask that my
written testimony be submitted.
As we have heard here today, the economy is strong. It is
getting stronger. We have also heard here today that Staggers
was a success and made tremendous improvements in efficiency
for railroading in this Nation. But the excess capacity that
was available is now gone, and what we need is greater
investment. It is needed in our physical infrastructure, in our
technology that we operate with today, and in the operational
aspects of the railroads. And, yet, where we are today is with
no agreement on the balance of the investment that is needed
either in railroads or in other freight areas of this industry
and how we might fund it for the future.
I remain available for any questions you might have.
Mr. LaTourette. Well, thank you very much for that concise
set of remarks, Mr. Boardman.
Mr. Busalacchi, thank you for being here. Welcome. We look
forward to hearing from you.
Mr. Busalacchi. Thank you, Mr. Chairman. My name is Frank
Busalacchi. I serve as Secretary of the Wisconsin Department of
Transportation. I am here today as Chair of States for
Passenger Rail Coalition, a group of 27 State transportation
agencies that support U.S. intercity passenger rail
development. Our Coalition was founded in 2000 driven by a
number of factors.
Thirteen States currently provide funding to support
intercity corridor services in partnership with Amtrak. You may
not be aware of the fact that these State-supported services
provide 37 percent of Amtrak's total ridership and about half
of Amtrak's daily trains.
Some 35 States have developed transportation plans that
call for intercity passenger rail improvements.
Finally, widespread public demand for intercity passenger
rail service is reflected in robust increases in intercity
passenger rail ridership throughout the Country. For example,
the Hiawatha Service between Milwaukee and Chicago supported by
the States of Wisconsin and Illinois, set an all-time record in
2005 with more than half a million riders, a 16 percent
increase over the prior year. Similar increases in ridership
are evident in State-supported services throughout the Country.
For example, Pennsylvania's Keystone Service, Illinois'
Chicago-St. Louis Service, Maine's Downeaster, and Oklahoma's
Heartland Flyer also had double-digit increases in 2005.
However, while public demand is growing, rail congestion
throughout the Country has become a significant threat to
States supporting or desiring to implement new passenger rail
service. Virtually all current and planned State-supported
services operate on corridors owned by freight railroads. Many
of these corridors are facing increasing levels of congestion.
This rail congestion is driven by increases in freight traffic,
as well as bottlenecks caused by aging track and
infrastructure.
These rail capacity and congestion problems are reflected
in declining trends in passenger rail on-time performance. On-
time performance for all State-supported and other short
distance trains for fiscal year 2005 was only 70.4 percent.
Some of these statistics disguise even more severe problems
in specific corridors. In January of this year, on-time
performance for the San Joaquin Service in California was only
35.2 percent. For the same period, on-time performance for the
Cascades Service in Washington State was 50.5 percent, and on
the Carolinian in North Carolina it was 19.4 percent.
The members of States for Passenger Rail Coalition do not
view these capacity problems as insurmountable. We all have
extensive passenger rail plans to make improvements in track
and signaling infrastructure that also address capacity issues
on host railroads.
A national survey documented $10.4 billion in track,
signal, and equipment improvements planned by States in freight
corridors, which could be programmed over six years, and a
total of $47 billion in capital needs over a 20 year period.
These corridors are frequently in highly congested urbanized
areas where rail capacity issues are most often severe for both
passenger and freight operations.
With all of this State interest in intercity passenger rail
development, why is on-time performance continuing to decline?
The States for Passenger Rail Coalition firmly believes that
the missing ingredient is a reliable Federal funding partner.
We believe our highly successful Federal programs for highways
and airports offer models for long-needed congressional action
to address the critical passenger rail corridor improvements.
Federal investment in passenger rail improvements can address
freight rail capacity needs, while at the same time showing a
public transportation benefit.
In the past we have supported tax credit bonding authority
for States as one mechanism for ensuring funding continuity for
major corridor development projects, which typically take
several years to complete. We are on record supporting H.R.
1631, known as Ride 21, which provided $12 billion in tax
credit bonding authority to States. We are encouraged by recent
bipartisan Senate action on S. 1516. This legislation provides
an authorization of $1.4 billion and 80/20 Federal/State
funding to States subject to appropriation, which we believe is
a good start.
The States for Passenger Rail Coalition stands ready to
assist the House Rail Subcommittee in developing intercity
passenger rail legislation that can be added yet this year. We
believe the public expects such a program. The public needs
mobility alternatives to congested highways and airports. As
the pump price for fuel continues to march steadily upward, the
public's demand for energy-efficient rail service will continue
to increase. The benefits are there, to the general public, to
the freight railroads, to the shippers they serve, and to the
Nation's economy. What is needed now is congressional resolve
to take action.
Thank you very much.
Mr. LaTourette. I thank you very much, Mr. Busalacchi.
Mr. Rose, welcome to you, and we look forward to hearing
from you.
Mr. Rose. Thank you, Mr. Chairman, Ranking Member Brown. I
appreciate the opportunity to testify before you today. What
you are doing here, quite frankly, is of national significance
for our Country. You are going to hear my views about what I
think are the solutions to the capacity issues, and you are
going to hear some other views that, quite frankly, are in
direct conflict.
The regulatory model has served our Country well.
Tremendous value has been passed to the consumer by
deregulating parts of the pricing model and allowing railroads
to improve efficiency. We now find ourselves in a supply-demand
equilibrium that is causing some capacity shortages. This is
exactly the intent of the Staggers Act. It is actually very
nice to see public policy working out very, very well.
At BNSF, we have experienced unbelievable growth. In 1995,
when we merged our two railroads, we hauled 7 million loads. In
the year 2005, we have hauled 10 million loads. That is 3
million loads that otherwise would have had to have gone on the
highway system. Over the last three years we have added the
volume of an equivalent of a new Class I railroad each year.
That is an average of about 650,000 units, which is really
unprecedented demand for any growth of any railroad.
Well, what is driving this growth? The combined growth of
Transpacific trade specifically fueled by China, highway
congestion, growth in agricultural trade, increased coal demand
due to higher natural gas prices have come together in ways
that, quite frankly, have been foreshadowed five years ago and
never could have been fully comprehended. We have seen almost a
complete reversal in the U.S. supply chain over this period as
we have moved from a production economy to a consumption
economy. In addition, much of what we used to manufacture in
the United States is now returning via containers as imports
through Transpacific trade.
The good news that I share today is that this model can
respond to this ever-required amount of new capacity. In the
next few minutes I would like to outline some public policies
that can assist the private sector in adding the right capacity
at the right time.
Obviously, handling annual increases in volume can be only
done by reinvesting adequately to both maintain the quality of
the infrastructure that we have, as well as to expand
infrastructure to handle more freight at the right time. This
requires that railroads reach a level of return on invested
capital that is greater than our costed capital, and then
continue to improve our returns throughout the business cycle.
Put another way, a railroad that does not earn its costed
capital loses money by reinvesting in itself.
The biggest obstacle to achieving sustained investment in
rail infrastructure has been the fundamental undervaluing of
freight rail transportation in the supply chain. The prices the
industry charged for transportation services fell more than 50
percent between the years 1980 and 2003. Only since the second
half of 2003 have the railroads began to receive more value for
the services provided. This should be viewed very positively
for sustained economic viability of the industry. As you will
see in my written testimony, there is a direct relationship at
BNSF between the rate of return on invested capital and the
amount of capital that is required for reinvestment in the
expansion of our network.
Shippers want more capacity and so do we. Increased
capacity will provide the network with more reliability, as
well as reduce time for recovery for outages, which reduces
operating costs and improved service. Most importantly,
increased capacity will allow us to meet our customers' demand.
BNSF can handle the projected growth if the network can be
expanded in the right ways at the right time,
Further regulatory stability allows us to plan for future
improved returns and for this strong demand. In 2005 and 2006,
about 20 percent of our capital program, or more than $400
million a year, is targeted for network expansion. The key is
not just adding capacity, but the right capacity. BNSF, like
all private businesses, will only add capacity where it is
needed and where we can earn adequate returns from it. I
believe our investments in the coal transportation network are
an example of a prudent approach to capital investment.
I would like to now turn to my final point, which is steps
policymakers such as members of this Committee can take to
induce private freight railroads to invest in the right
capacity enhancements and to do it faster. There are really
three options. The first one is to do nothing and rely on the
current market structure. Certainly, as railroads improve their
returns, they will invest more capital to expand their
networks.
Public policymakers should continue to vigorously defend
any attempts to change the regulatory scheme in a way that will
not allow the railroads the means, the stability, and the
predictability to earn sufficient returns. Passage of
legislation such as H.R. 2047 would fundamentally alter that
regulatory model and have the effect of significantly reducing
private capital investment. But even with no change, capital
expansion may be below what our economy needs.
A second option is for direct Government investment into
the freight railroad system. This can be done through outright
grants or through loan guarantees that will induce investments
that will not be made by private investors alone. BNSF supports
public-private partnerships, but believes that direct
Government investments must be carefully scrutinized so that it
does not compete with private investment.
Direct Government investments which may seem attractive at
first blush could have a significant unintended consequence for
overall rail capacity: rather than increase it, it would reduce
it. Why, you ask? When making investment decisions, private
companies like BNSF will have to consider whether its privately
financed investments will compete against Government subsidized
carriers. The result will be that companies like BNSF will not
invest precious privately raised expansion capital in
competition with nonmarket-driven Government investments, and
there will be overall disinvestment and not increased
investment by the rail industry.
I respectfully submit that the role for public policy is a
new third option to supplement the current model with a
stimulus such as the investment tax credit recently proposed in
the Senate. This kind of tax credit is not enough to make a bad
investment occur, but enough to induce companies like BNSF to
make investments sooner, rather than they otherwise would. Such
an outcome would benefit rail shippers and the public at whole.
This would give real impetus to increasing expansion capital of
the rail industry from around $2 billion to perhaps $3 billion
or maybe even $4 billion a year. That could have a true impact
on the rail industry's fluidity and performance.
In conclusion, I am very, very bullish on the future of
freight railroads, but I want to encourage public policy
initiatives that induce the right investments and recognize the
importance of regulatory stability and creating the right
incentives for continued investment in the rail capacity.
Public policy will play a large role determining whether we
will gain the right amount of capacity and at the right time.
As you have heard and you are going to hear from customers
testifying here today, the number one concern is sufficient
capacity. As I said, the Staggers Act has served this Country
extremely well. America's freight railroads are the standard
for efficiency and excellence, and, quite frankly, the envy of
all the countries around the continent. We need to preserve our
ability to serve our customers and the economy.
Thank you for this opportunity to testify.
Mr. LaTourette. I thank you, Mr. Rose.
Mr. Hamberger, welcome to you, and we look forward to
hearing from you.
Mr. Hamberger. Thank you, Mr. Chairman. On behalf of the
members of the Association of American Railroads, I want to
thank you and Congresswoman Brown for the opportunity to appear
here today. I can't tell you how happy it makes my heart to see
a standing room only crowd and the number of members who are
here today for a hearing on freight rail. I can remember a few
years ago a similar hearing, to put it mildly, was just not
quite as robustly attended. So I think it underscores the
importance of freight rail capacity and freight rail in today's
economy.
In the past few years, numerous major studies have
concluded that our Nation's transportation network is being
stretched to capacity and requires additional investment if we
are to sustain the growth of the economy. ``Every aspect of the
supply chain is stretched,'' noted a West Coast port terminal
operator. ``It is not a question of whether a congestion crisis
is going to happen, it is a question of when.'' Another quote:
``Our highways, waterways, railroad and aviation networks are
simply not keeping up with ordinary demands,'' says Michael
Eskew, CEO of UPS.
To be sure, record levels of freight are still being
delivered. But as these statements make clear, all freight mode
in the United States are facing capacity challenges today. For
U.S. freight railroads, year-over-year quarterly carload
traffic has increased in nine out of the past ten years, and
intermodal traffic has increased in each of the past 16
quarters. As a result, U.S. railroads today are hauling more
freight than ever before.
These traffic increases have resulted in capacity
constraints and service issues at certain junctures and
corridors within the network. In fact, excess capacity has
disappeared from many critical segments of the national rail
system. And as we have heard, demand will continue to increase
by perhaps as much as 70 percent through the year 2020.
To help meet this challenge, railroads must be able to both
maintain their existing extensive infrastructure and build a
substantial new capacity that will be required to transport the
significant new traffic our economy will generate. Where will
that money come from? The Congressional Budget Office recently
noted, ``As demand increases, the railroads' ability to
generate profits from which to finance new investments will be
critical. Profits are key to increasing capacity because they
provide both the incentive and the means to make these new
investments.'' The Committee must understand that two-thirds of
all investments in the freight railroads come from internally
generated dollars, and a strong balance sheet is necessary to
justify going into the capital markets to borrow the additional
third of investment.
Last year was the twenty-fifth anniversary of the Staggers
Act. Since then, rail safety has improved by 66 percent.
Productivity has increased by 168 percent. And as those
productivity increases were passed along to our customers,
average rail rates have dropped 60 percent on an inflation-
adjusted basis. And now, in 2005, railroads themselves are
finally beginning to show tangible signs that financial
sustainability might be within reach. Without question, 2005
was a very good year for railroads. Revenue and net income were
up substantially. But I would point out that the return on
equity for the Class I railroads is still beneath the median
for the Fortune 500 companies in 2005. Improved rail earnings
should be viewed as a welcome development, because it means
railroads are better able to afford the massive investments in
new capacity that need to be made.
Railroads are among the Nation's most capital-intensive
industries, as you know, and even when returns were not where
they were in 2005, from 1995 to 2004 railroads invested an
average of 17.8 percent of all of their revenues back into cap
ex. This compares to 3.5 percent of manufacturers across the
board. And in 2006 a step level increase to $8.2 billion is
planned to be spent on track, locomotive cars, signaling
systems, yards, intermodal facilities, new technology to
increase and maintain our capacity, and we will be spending
millions more to hire and train thousands of new employees.
To maintain and increase that level of investment so that
our Nation's freight transportation can be met, I respectfully
suggest that Congress should consider three policies with
respect to freight railroads. One, do no harm; do not re-
regulate. The primary objective of those seeking re-regulation
is to reduce rail rates. Lower rail rates will mean lower
earnings, and as the CBO report emphasized, lower earnings mean
less investment in rail infrastructure, exactly the opposite of
what the Nation and our customers need.
Two, continue to encourage public-private partnerships for
freight rail infrastructure projects. Public participation in
freight rail infrastructure projects is justified because of
the extensive public benefits that would accrue to the general
public by increasing the use of freight rail. These include
reduced highway congestion, greater fuel efficiency, less
pollution, and improved safety.
I would like to thank this Committee, and especially
Congressman Weller and Congressman Lipinski, for their support
of what Secretary Mineta has called the model public-private
partnership in the Country, the CREATE project in Chicago.
Three, support investment tax credits to bridge the funding
gap between what should be invested in rail infrastructure and
what railroads are likely to be able to invest on their own.
Under the Rail Infrastructure Tax Incentive Program, soon to be
introduced in the Senate, the projects to expand freight rail
capacity--I emphasize only projects and investments that will
expand freight rail capacity--would be eligible for a 25
percent tax credit. The Nation's economic health requires
additional transportation capacity, and we look forward to
working with the Committee and Congress as you develop policies
to meet that need.
Thank you, Mr. Chairman.
Mr. LaTourette. I thank you very much for your testimony,
Mr. Hamberger. I like to think that the size of the crowd is a
direct reflection on the quality and the breadth and depth of
the knowledge of the witnesses testifying today, as well as the
wonderful bipartisan leadership of the Subcommittee.
General Timmons, thank you for coming, and we look forward
to hearing from you.
Mr. Timmons. Thank you, Mr. Chairman and members of the
Committee. I appreciate the opportunity to be here this morning
to talk about the short line railroad industry. As I think you
all know there are some 500 short line railroads operating
nearly 50,000 miles of track across the Country. We serve
shippers that aren't on the Class I main line system,
preserving rail line that otherwise would be abandoned, saving
rail jobs that otherwise be lost, and providing customers with
competitive service that is almost always less costly than
comparable truck transportation.
Just to put our role in the context of the national
transportation system, 23 of the 24 members of this
Subcommittee have a short line in their district. Now, I might
add that we are taking up a collection from those 23 to
purchase a short line in that last remaining district, which is
Congressman Porter's of Nevada.
In the short time I have this morning, let me touch briefly
on three topics that relate to the issue of capacity. First,
the short line industry strongly supports the Class I tax
credit initiative. Ed Hamberger has briefly laid out the facts
and figures, and we think they are compelling. As I will
discuss in a moment, short line infrastructure needs are
different from the Class Is; yet, the capacity improvements
they are addressing are important to us as well. Nearly 90
percent of our traffic originates or terminates on a Class I
railroad. Short lines handle an origination or termination one
out of every four railcars moving on the national rail system.
When the Class I system experiences capacity problems, our
customers can't get cars, can't move their product, and
ultimately can't market their product. This is a particularly
critical condition in rural America, where truck transportation
is more expensive than short line rail and where local roads
certainly cannot accommodate substantial increases in heavy
truck traffic.
Our strong support for the Class I initiative also results
from our own experience with a recently enacted short line
rehabilitation tax credit. 2005 was the first year of the tax
credit, and already it is demonstrating its worth. Our railroad
in Congressman LaTourette's district, the Wheeling and Lake
Erie, is using the tax credit to replace light jointed rail
with heavier welded rail on a line where traffic has increased
some 35 percent in the last five years. The steel, coal, and
utility customers on the line are making major capital
improvements partly due to the competitiveness and improvements
in rail service.
The Kansas & Oklahoma Railroad in Congressman Moran's
district is using the tax credit for an $8 million rehab
project on a line that has 100-year-old rail. Speeds will
increase from 10 to 25 miles per hour and the line will be able
to handle the new heavier 286,000 pound cars which are the
industry standard. It is likely this line would have been
abandoned without the credit.
The Florida Northern and Florida Central Railroads in
Congressman Mica's district are using the credit to support a
$14 million track upgrade which will increase speeds from 25 to
40 miles per hour and allow the short line to handle the
heavier, longer trains that are so important to shippers. The
railroad believes the upgrade will result in a significant
increase in the amount of coal that can be shipped over the
line.
We are collecting dozens of such stories from around the
Country, and they all share a common theme. The tax credit is
allowing light density lines to take on or accelerate projects
that would otherwise fall by the wayside. These projects are
allowing us to handle more traffic, pick up and deliver
heavier, longer trains from the Class I system, and help our
customers reduce their transportation costs.
This obviously is a good news story for many reasons, but
one that is worth highlighting here is the reaction of our
shippers. One such is from the owner of Delta Trading Company,
which ships hazardous materials on the San Joaquin Valley
Railroad in Bakersfield, California, and which operates over a
line that received a $2.7 million upgrade made possible by the
recently passed tax credit.
His comments: ``The track rehabilitation made possible by
the tax credit is directly responsible for my company's
decision to invest nearly $3 million in our facility and almost
triple our number of employees. We now have a short line
railroad partner that can provide the volume and level of
service that allows us to significantly grow our business. The
tax credit was a very smart decision by the Federal Government,
and I suspect it will more than pay for itself as our
experience is repeated on short lines across the Country.''
Mr. Chairman, you and members of this Subcommittee were
strong supporters of this tax credit, and the capacity
enhancement is already abundantly clear. However, as a final
thought, as successful as we believe it has been and will
continue to be, there is one hitch we did not contemplate, and
that is the impact of the Alternative Minimum Tax on the credit
itself. In many cases the AMT is taking up to half the credit,
and in some cases is eliminating it altogether. I would hope
that this Subcommittee would consider this and support some
type of AMT relief for the period of the credit.
I appreciate the opportunity to be here today and will be
happy to answer any and all of your questions that you may have
at the appropriate moment. Mr. Chairman, thank you very much.
Mr. LaTourette. Thank you very much, General Timmons.
Last, Mr. Millar. Thank you for being here, and we look
forward to hearing from you.
Mr. Millar. Thank you, Mr. Chairman and Ranking Member
Brown and all the members of the Committee. I am very pleased
to return before the Committee. And let me congratulate you on
holding this hearing about our rail capacity, both passenger
and freight capacity.
We need only look at today's headlines to see that
Americans' travel patterns are changing due to the price and
availability of gasoline. Public transit in America has had an
unprecedented growth, some 25 percent increase in usage over
the last 10 years; and that was well before gas prices reached
the $3.00 a gallon level.
Now, America has long enjoyed the most extensive and
efficient transportation system in the world, but other
countries are catching up. The critical capacity issues
affecting railroads are a part of an overall capacity crisis in
the whole transportation system that affects airports,
roadways, port facilities, public transportation
infrastructure, and the list goes on. Such congestion is
putting severe stress on America's transportation logistics
network, which has historically given America its economic edge
as globalization increases and the competition of people and
goods around the world increases as well, and maintaining our
edge is critically important to maintaining our lead in the
future.
Railroads, both passenger and freight, must play a greater
role in our transportation network. Earlier this year the
Census Bureau tells us that we are more than 300 million
Americans for the first time. They expect that within 30 years
an additional 100 million people will be in our Country. They
aren't making any more land, so this means we are going to face
an unprecedented challenge, and how do we serve those 100
million additional people, maintain the service to the people
we have, and growth the economy so that all have the proper
opportunities to do what they want in their lives? Most of this
population growth will occur in our metropolitan areas, making
urban transportation corridors more important than ever.
As we examine the options for expanding our transportation
infrastructure, the need for greater reliance on rail becomes
clear. Rail is much more efficient in terms of land use,
energy, and adding rail capacity is imperative. I strongly
agree with the statements we heard just a few minutes ago of
Administrator Boardman, that we need to make more investment in
rail infrastructure. There simply isn't another good choice.
In urban and suburban areas, roads are hopelessly
congested, but most of those roads have already been expanded
to their maximum practical capacity. Adding additional highway
capacity in urban areas is enormously expensive and for just a
fraction of that cost we could expand the availability of
railroads for both freight and passenger purposes.
Now, not surprisingly, many Americans faced with the
choices of higher gas are turning more and more to commuter
rail. Last year, 423 million trips were made on the Nation's
commuter rail network. This is up some 2.8 percent from the
year before. Every one of the almost 20 commuter railroads in
America experienced increased ridership last year.
And thanks to the work of this Committee and others in the
Congress with the SAFETEA-LU legislation last year, there are
opportunities to expand commuter rail. This year we will see
new systems opening in Nashville and Albuquerque. We are in the
advanced planning stages in Minneapolis, Salt Lake, Portland,
Charlotte, Raleigh, and Denver, just to name a few cities that
we expect to see projects come online in the very near future.
Use of public transit, and particularly commuter rail, which
tends to service long distance trips, is the quickest way that
most Americans can beat the high cost of gasoline.
Now, my colleagues on the panel here today have spoken
eloquently of the capacity crunch, and we certainly agree that
it is there. And while all of us are working hard together to
do things about better scheduling, on-time performance becomes
a real challenge, and all passenger and freight interests
involved here are doing what they can to improve on-time
performance, but, as I said, we are going to need additional
capacity. There are some really good success stories, though.
The Baby Bullet South of the San Francisco Bay, for example,
for the same amount of labor input, have succeeded in growing
their ridership by over 20 percent by making better use of the
capacity that they already have.
Now, there are many ideas, and, again, my colleagues have
spoken about some of these ideas, and generally APTA is
favorable towards many of these ideas. Now, about 90 percent of
all the commuter rail trips take place on rail that is owned by
APTA members; however, it is apparent that many of the new
commuter rail systems will need to use rail freight rights of
way. We are prepared to pay our share of that. We agree that
public-private partnerships are a good way to go.
We think, though, that there need to be a series of
principles that guide some of those partnerships. Four that
APTA firmly believes in is that, one, more capacity is needed
in strategic rail corridors; two, these rail corridors must be
available for both passenger and freight purposes; three, that
a cooperative framework must be put in place for negotiating
fair access terms to both the public interests and the private
interests involved; and, finally, that we must come to grips
with the liability issue and that reasonable liability limits
be established. We certainly agree with earlier testimony that
describe that many projects will have public benefit, and
certainly the public needs to be prepared to contribute
financially to that.
Finally, let me say, Mr. Chairman, that I believe America
is also ready for high speed passenger rail transportation. All
other industrialized countries in the world have or are
developing high speed rail networks, and many developing
countries as well. I returned from my first visit to China last
week and, as the phrase goes, had my mind blown away by the
investments that they are making in all forms of their
infrastructure. Their high speed passenger rail system under
construction envisions tying all their provinces and all 30 of
their largest cities together in a national grid. They are
proposing shared use corridors with freight operations, but
then publicly funded dedicated tracks for high speed rail in
those corridors. The Chinese have plans to invest $16 billion
to $20 billion per year on improvements in their rail network.
We certainly need to look there and elsewhere as examples.
Finally finally, the Subcommittee's proposal for a
dedicated fund for high speed rail projects through tax-exempt
and tax credit bonds, such as was proposed in Ride-21, would
create the favorable policy environment for which high speed
systems could evolved and thus providing increasing
opportunities for Americans to travel.
In conclusion, thank you, Mr. Chairman, for including us in
this important hearing. We stand ready to work with you and to
answer any questions that we might. Thank you.
Mr. LaTourette. Thank you very much, Mr. Millar.
And thank all of you for your excellent testimony.
Mr. Boardman, I want to start with you. In your statement
you note, I think correctly, that the Class I railroads have
made a number of investments and expanded capacity to a number
of rail lines and yards. I want to focus my question on the
yards. On the second panel today, Mr. Martland will testify,
and he makes the observation that the railroads have put the
vast majority of their improvement dollars in certain high
return sectors of traffic and have, in effect, written off the
general merchandise traffic, which we know is a major source of
highway congestion.
Of the yard improvements that you mentioned in your
statements, are you aware of any that have been oriented
towards general velocity or dwell time improvement, as opposed
to improvements that are specifically targeted at a specific
sector like intermodal traffic?
Mr. Boardman. Well, I think, as a general response, all of
them would improve the dwell time and improve the velocity of
the railroad. But I do not know the specifics of that, and I
would be happy to investigate that and get back to you.
Mr. LaTourette. Okay. If you would, I would appreciate it.
And I think you correctly point out that in order to devote
specific--it is not a surprise to me that the railroads make a
business decision that those lines where they can make money
are those lines that they are going to make the biggest
improvements in, but it does, I think, then speak to our
discussion of--I think Mr. Bacchus, in his opening remarks, and
others talk about--General Timmons--tax credits and things of
that nature, and it becomes incumbent upon us to figure out a
way how to make additional dollars available, and we've tried
to do that with the RIF loan and the TIFFIA program.
But let me ask you this--and I would like others on the
panel to comment about it. We have talked about RIF, we have
talked about tax credits, we have talked about Section 45(g).
What do you think about the option of having the shippers and
the carriers negotiate contract rates that include a
requirement that a certain portion of the rate be dedicated to
improving the infrastructure that benefits them, not only the
shipper, but also the rail carrier?
Mr. Boardman. Is this the UPS trust fund concept?
Mr. LaTourette. No, it is not. We are going to hear from
UPS on a trust fund. My question, I think, is, in addition to
that testimony that we will hear late, what if we suggested to
the Class I railroads and others that, when they are
negotiating a rate with a shipper, that a portion of that rate
be set aside, dedicated to infrastructure improvements, as
opposed to just the cost of carrying the goods.
Mr. Boardman. I think--I don't have a studied position,
obviously, on that, it is something that those kind of
innovative ideas are hopefully something that the secretary's
new commission is looking at all sorts of ideas on how they
might be able to finance in the future would perhaps give us a
better idea of what that looks like, and we have got two of
those members here on the panel with us today. So while we
could look at that, and will, for you on a more specific
answer, generally I think that would really have to be looked
into and see what it would do to the competition.
Mr. LaTourette. Okay.
Mr. Rose, what do you think about that, as a CEO of a major
railroad?
Mr. Rose. Mr. Chairman, I think, practically speaking, that
that is what the market does, a portion of the profitability of
a certain movement does go to infrastructure. I think if you
got very specific and target it and said that a certain rate
has to put so much infrastructure back in a line, it would be
very difficult. We operate--we own 26,000 miles of track and
operate 33,000 miles of track, and these are long-lived
investments. When you put a new tie in, it is for 30 years. So
I think it is very hard for a piece of that rate to go in and
say, well, we are going to dedicate it to upgrading these ties
on this line segment.
But I think generally that is what the overall economic
theory will do, and where higher returns are in the industry,
that is where reinvestment is going back into the industry. If
you think about our network, we probably generate 40 percent--
we probably generate 70 percent of our net income over about 40
percent of our lines. So to say it the other way, you have got
about 60 percent of our lines are underperforming. You want--
the economic theory will want to drive back those reinvestments
into those lines that are long-term sustainable, and the
Staggers Act--I don't want to sound like a broken record. If
you go back to the 1970s, when it was enacted, railroads were
in chaos and the Government was spending billions of dollars
bailing out Penn Central, Old Milwaukee Road. And the last
thing I think that the industry economy wants to do is to get
back to that time. So I will always come back to let the market
sort this out, and it will and it has done it exactly right so
far.
Mr. LaTourette. Part of the purpose of today's hearing is
what can Congress do, and I have heard the observations about
tax policy and other things and not re-regulating, but I read
someplace the other day that when they built the
Transcontinental Railroad, that they were able to build a mile
of track a day using hand tools. It seems to me--and this is a
question I guess to both Mr. Hamberger and Mr. Rose--it seems
to me that, as BNSF and all the railroads are making
infrastructure across the network at a stepped up rate, that
there are particular challenges when it comes to permitting
with State and Federal agencies and coordination among them.
And I guess my question is is there anything that the Congress
can do in your mind that would better facilitate the
construction of these must-needed projects to expand the
infrastructure which we all agree needs to be expanded?
Mr. Rose. I think that is a great question. When the
transcontinental rail network was built, obviously, we didn't
have the sensitivity to the environment, which is fine, we
ought to be, because we stand on that record as well, that more
rail infrastructure helps the environment very much. The
problem we are finding out, even on our own right-of-way, where
we are running into permitting issues that are taking a year or
18 months to resolve, so these are issues where we are not able
to add capacity on our own right-of-way with our own private
capital to provide needed congestion relief for our customers
because of some of the environmental issues that are out there
now and, quite frankly, in terms of the complexity of the
number of agencies that we have to deal with. We have a very
good relationship with the Corps of Engineers and we feel like
we can work through that group. Yet, sometimes we will get
local people, local authorities who want to get involved, State
authorities, and what it does, it ends up holding back
investment that we are not asking anybody else to make on our
behalf in terms of preventing us from being able to expand
capacity and improve service.
Mr. LaTourette. Maybe as a service, because my time is
short and I do want to ask General Timmons one question, maybe
if you and the other railroads and short lines could provide us
with a list of those Federal regulations that you find to be
most impeding the ability.
Mr. Hamberger?
Mr. Hamberger. I would just like to add one sentence of
praise for Administrator Boardman and Secretary Mineta, who
have assigned a full-time person to work with the CREATE
management Committee to try to cut through the various
environmental regulations that have to be dealt with to take
advantage of the Federal dollars. And there are things that can
b done on the administrative side as well as taking a look at
legislation.
[The information received follows:]
[GRAPHIC] [TIFF OMITTED] 28281.001
[GRAPHIC] [TIFF OMITTED] 28281.002
[GRAPHIC] [TIFF OMITTED] 28281.003
[GRAPHIC] [TIFF OMITTED] 28281.004
[GRAPHIC] [TIFF OMITTED] 28281.005
Mr. LaTourette. Okay. I appreciate that very much.
General Timmons, before I yield to Ms. Brown, I was, I
think, shocked by your testimony that the Alternative Minimum
Tax has reared its ugly head relative to this tax credit, and
it seems to me that what the short line tax credit was designed
to give us the AMT is taking away. Are there some hard numbers
that you can give us relative to the impact that it is having
on the industry?
Mr. Timmons. Mr. Chairman, the taxes were filed generally
just several weeks ago, as you know, and we are just starting
to get a feel for what the implications of that are, but prior
to the actual filings we had a number of members come forward
and say they had taken advantage of the tax credit but the
actual returns, as a consequence of the AMT, were severely
degrading what they thought they were going to get.
Now, I understand that the AMT is an enormously complicated
problem and has broad, broad implications across the Country.
However, in the context of the tax credit, the three year tax
credit, we think that would be enormously valuable for this
Committee and the Congress to consider some kind of relief so
that the intent of the Congress and the point of the tax credit
itself is carried through so that we can actually make the
enhancements and improve the system that needs that attention.
Mr. LaTourette. Sure. I think a lot of us understand where
AMT came from, but a lot of us, given the fact that there has
been no index for inflation, a lot of our constituents are
shocked to wake up and find that they are rich when they fill
out their tax forms, and I imagine you are experiencing the
same thing. When the dust settles, the request I would make of
you is could you poll your members and get some information as
to what the impact is so that we can evaluate that with our
friends in the Ways and Means Committee?
Mr. Timmons. We would be more than happy to do that. And it
begs the--because of the degradation, it begs the issue of
should we extend the tax credit; and obviously we think for
that reason and the obvious success that we are having, that
clearly that is an initiative that we should strongly pursue
and would ask you to consider that.
Mr. LaTourette. I thank you very much.
Ms. Brown. Thank you.
Mr. Boardman, I want to point out that this hearing is not
just about freight rail congestion, it is also about how
freight congestion impacts the passenger and commuter
railroads. The Administration has, time and time again,
criticized Amtrak for poor on-time performance, when it is the
freight railroad and congestion that are causing these delays.
What sort of assistance is available for Amtrak and commuter
railroads to deal with the freight railroads that are delaying
passenger trains? And, secondly, the first proposal, the FRA
proposed using RIF loans to improve railroad infrastructure.
Yet, the Administration zeroed out RIF in the budget. And,
lastly, when you all sent your proposal over, you did not
indicate where you stood on the 25 percent tax credit. Can you
perhaps go on the record here today as to whether or not the
Bush Administration supports the 25 percent tax credit that I
keep hearing people talk about? You know, when I hear that
America is hooked on oil, policies have something to do with
this hook on oil.
Mr. Boardman. Let me address, Congresswoman, each one of
your questions. First of all, the question of whether Amtrak
on-time performance and commuter rail in terms of freight
congestion is a difficult question. Certainly, on a line that
is a lightly used freight line, we don't have any difficulties,
generally, with commuter services operating on that line. But
when there is today the growth that there has been in the
economy, the intermodal traffic, the unit train traffic that is
on an Amtrak line, it becomes much more difficult for the
freight railroads to make the kinds of improvements that they
need to to allow Amtrak to get through on an on-time basis.
We assist as we can in terms of looking at how the
dispatching services go on with the freight railroads and how
we might be able to make sure that they are giving the priority
and checking to make sure that they are giving priority to
passenger services. So we assist in that way.
And your second question was--let us see, your third
question--second question was on the RIF program, which we had
a hearing, one of my frequent flier hearings here that we had
fairly recently here. The Administration believes that under
the RIF program that the kinds of funding that would be
available are available in the private sector and the private
sector would be the way to finance the kinds of improvements
that the RIF program would do. We will, however, carry out the
law, which is what you passed, to make sure that for the time
that the RIF program is available, we will move it as quickly
as we can.
And on the third point, which was the--excuse me, help me.
Ms. Brown. Twenty-five percent tax credit that they keep
talking about.
Mr. Boardman. Right.
Ms. Brown. That I am supportive of but I want to know where
is the Administration on this issue today, on record.
Mr. Boardman. I don't think the Administration at this time
has taken a position on it. Certainly, the sensitivities of a
tax credit really belong in the Treasury Department, as opposed
to the Transportation Department. We know that it is an
important issue for the railroad industry, but the position is
not taken by the Administration at this time.
Ms. Brown. I guess I am confused. What do you mean? The
Congress makes that decision, recommendations from the
Administration. And my question is where is the Administration
on this 25 percent tax credit today.
Mr. Boardman. I understand. But the FRA is not the
appropriate agency to make that recommendation; it is a larger
issue in terms of tax policy, which really belongs with
Treasury.
Ms. Brown. Okay. So the Secretary of Transportation would
not make a recommendation to the Congress on this issue?
Mr. Boardman. Not without the Treasury folks involved in
the process and having a recommendation from Treasury.
Ms. Brown. And the Secretary is a former railroad person. I
would think that he would at least have some knowledge of the
needs of the industry.
Mr. Boardman. I know that I do not speak for Secretary
Snow.
Ms. Brown. Okay. I guess I wanted to ask someone else.
Mr. Secretary, there seemed to be a high degree of urgency
in your testimony. Am I reading that correctly?
Mr. Busalacchi. Yes, Representative, you are. You are
reading the testimony correctly because we believe that it is
urgent that we move forward. You know, we know the capacity
clock is ticking; demand is up; supply is static. Time is of
the essence. New signal systems have to be hand built, all the
improvements have to be built while the system is in operation.
New train sets would take three years to bring online. We must
act now if we are to address these pressing national needs.
Ms. Brown. Mr. Hamberger, my time is running out, but I do
want to ask you about the tax credit. Will it go for
infrastructure expansion to provide benefits to the public or
the rail customer, or will it go to tax credit to use for
infrastructure improvements which yield the highest return? I
guess that is kind of a business decision, but is this business
overall helping the crunch that we are experiencing?
Mr. Hamberger. Yes, it would support only expansion
capital. And you make a very important point, that it is only
to expand our capacity to move more freight that would qualify
for this investment tax credit. And it would also be applied if
a customer wanted to expand capacity at a receiving dock or
wanted to--if a trucking company wanted to build an intermodal
yard, that would also qualify for this expansion of rail
capacity. So I think it would have, because of the public
benefits that increased freight has, as pointed out by the
AASHTO report, it certainly would have public benefits as well.
Ms. Brown. Have you gotten any reading as to whether or not
the Bush Administration supports the 25 percent tax credit?
Mr. Hamberger. We have met with various people within the
Administration. I think it is under consideration, but they
have not told us--made any final decision. In fairness, the
bill has not yet been introduced, so I guess the action, force
and event, where they have to actually issue a statement of
Administration policy, hasn't occurred. But at some point we
will continue to make our case to them and hope that we will be
successful.
Ms. Brown. Mr. Chairman, we will have another round, won't
we? Thank you, sir.
Mr. LaTourette. I thank you very much.
Mr. Oberstar.
Mr. Oberstar. Mr. Chairman, it is a very good idea to hold
these hearings. I appreciate the work that you and Ms. Brown
have undertaken to bring to the fore in this public forum the
needs of rail transportation, the importance of railroading to
our national economy; the significance of railroads in our
ever-increasing congestion in moving goods, as well as people.
And it has afforded the Association of Railroads, Mr. Rose and
others an opportunity to spread upon the public record, as
quaintly say in the legislative process, the investments made
with the new-found revenues that railroads are enjoying.
As we go through this--and for that I certainly commend the
railroads. But as we go through this exercise, I can't help but
think back on 1980 and the intensity of debate--Mr. Hamberger,
you were on the staff at the time, I believe--of debate not in
this Committee, because we didn't have jurisdiction over
railroads, though we should have, at that time--we probably
would have done a better job of deregulation--and I rubbed my
worry beads about whether this was a good thing to do.
Our committee had already done trucking deregulation,
intercity bus deregulation, aviation deregulation, and what
tilted the scale for me was that we were beginning to see the
benefits of taking the Government out of deciding market entry
and rates in aviation. And I thought that that might apply as
well to railroads. So I voted for it, against many objections
from constituents, from user groups, from railroad brotherhoods
who were divided on the subject.
We had 61, roughly, Class I railroads in 1980. No one
envisioned that we would have four today, five; some of you
will say seven. But that is where we went, consolidation.
Aviation went in the other direction for a very long time.
Aviation, at the time, 1980, we already had 10 new entrants
into air competition; in five years we had 22 new entrants. But
then aviation took the same direction that railroading took.
Consolidation, acquisitions and mergers reduced the number of
new entrants to today we have only one of that original 22. I
usually ask people--offer frequent flier miles if they can tell
me which one that was. Almost everybody says Southwest. It was
America West. And they too have merged.
Aviation is going in the other direction: it is losing
money, while railroads now, for the first time in a very long
period of their history, are making money. The Surface
Transportation Board has rarely found that railroads are making
adequate return on revenue, revenue adequacy, but in the 1970s,
when your return on equity was in the one to two percent range,
it is now--Norfolk Southern just recently reported 11.6
percent. On balance, they are running in the 8 to 9 percent
range. And we are seeing those capital investments that BNSF
particularly has worked hard, on course with a very major $2
billion or $3 billion plus investments plan in the late 1980s,
early 1990s, and then had to shelve it because Wall Street said
your return on equity isn't sufficient.
Well, we have not stood by with our finger in our ear in
this Committee. We supported the railroad retirement
recapitulation that was supposed to generate equal benefits for
the Railroad Retirement Fund for the health insurance and for
capital investments. I want you to briefly comment on what you
have done with those revenues.
We also supported 4.3 cent repeal of the fuel tax that in
AAR's own economic policy paper fuel tax, energy policy,
deficit reduction said repeal of the deficit reduction fuel tax
would restore to freight railroads--and, uncharacteristically,
in your paper you mention barges--$200 million a year for
equipment and infrastructure investments. But the FRA has said
that railroads have generated 85 percent of their capital
investments--or directed 85 percent of the capital investments
to maintenance. So what has happened to the money generated
from the Railroad Retirement Fund recapitulation and the 4.3
cent repeal?
Mr. Rose. Congressman, in my testimony there is a chart
that I was hoping we could get up here, but it shows return on
vested capital and then it shows level capital investments, and
it follows economic theory perfectly. As our returns came down,
capital was withdrawn from our railroad. And then as our return
started going back up, capital was infused back into the
railroad.
Mr. Oberstar. Are you attributing that directly to the
Railroad Retirement Fund and the 4.3?
Mr. Rose. Okay, let me give you a perspective on that. We
will generate close to $3 billion in operating income at our
company. Four point three was worth about $60 million. Railroad
retirement was worth about $70 million.
Mr. Oberstar. A year.
Mr. Rose. A year. So $120 million to $130 million of the $3
billion of operating income. So, yes, that relief for diesel
fuel tax went right to our bottom line, which helped our
operating income, helped our return on invested capital, helped
us to where, last year, we had record capital spending. Last
week, at my board meeting, my board agreed to increase our
capital this year by another $100 million. So I think the model
did exactly what you were hoping for, and it has worked exactly
as intended.
I would just--I have got to make this one illustration that
I think you understand more than most because of your
understanding of the airline business. The difference between
the airline business and the railroad business is that the
airlines do not own the airports, and you have basically
publicly supported airports that are off on one track; whereas,
the railroads, we own our own airports. And what was happening
in the--
Mr. Oberstar. Do you own your own locomotives?
Mr. Rose. We own our own locomotives.
Mr. Oberstar. Do you lease any like the airlines do?
Mr. Rose. Or a lease structure. Both.
Mr. Oberstar. A lease structure. I gave a talk some years
ago in which I said why spend $150 million to buy a 747 when
you can buy a whole fleet for $50 million? When Mr. Chechi and
Mr. Wilson pooled their $25 million apiece, bought Northwest
Airlines for $50 million and then leveraged everything else in
the company and turned Northwest from a corporation that had $3
billion in equity and $1 billion in debt to a company with $3
billion in debt and $1 billion in equity. That is what leasing
did for them.
Mr. Hamberger. Could I piggy-back on Mr. Rose's answer on
behalf of--
Mr. Oberstar. That is a good term for a railroader to use.
Mr. Hamberger. Yes, sir. I knew you would pick up on that.
It is difficult to identify specifically where the cash
flow comes from. Obviously, it comes from increased rates, it
comes from improved operating ratio, it comes from not paying
as much taxes. But the fact is, between 1980 and 2004, the
industry put in $360 billion in capital expenditures. Now, not
all of that is expansion capital; there is maintenance capital.
We wear out, you know, several miles of railroad every day,
each one of these companies. But the capital expenditure has
gone up--and I believe it is in my testimony--dramatically over
the last several years, from the $5.4 billion to $6.4 billion,
this year to $8.2 billion, now, new news, $8.3 billion, now
that Matt is in for another $100 million.
So that as the revenue is there, as the returns are there,
the industry makes the commitment to reinvest it and to provide
not just the maintenance capital, but also the expansion
capital.
Mr. Oberstar. Well, I know that we are trying to stick with
a five minute time limit here, Mr. Chairman, but--and many
questions I would like to ask do not admit 30-second responses.
But since money is fungible, it is very difficult to track
where the 4.3 repeal actually went, how much it was distributed
in which categories, and the Railroad Retirement Fund
recapitulation, and that raises questions for the tax credit
proposal and how that can be structured so that we can track
exactly where it goes and what it is used for.
I will conclude, Mr. Chairman, by simply observing that I
feel very privileged that the Association has chosen to
dedicate an entire portion of its testimony to an attack upon
my rail fairness legislation. I know you have had a mobilizing
effort here, you have made a great outreach to Committee staff
and member staff, and you have made quite an assault upon it.
But it is not re-regulation. It is not re-regulation. That is a
very catchy term to use to discredit a piece of legislation.
But just as I have resisted re-regulation outright in aviation,
we are not about to decide market entry and rate determinations
for railroads with this legislation.
But the fairness of filing with the Surface Transportation
Board and the cost of the paperwork to do this, and the right
of access to lines are matters that deserve better treatment
than they are getting now in the railroad industry. And to
understand that, all of you need to listen to your shippers,
because if you are not listening to them, they are telling us
their story, and their stories range from the cement industry
and the grain people who are buying their own cars or trying to
lease them from the rail sector, and then the railroads say we
won't move your cars because you own them and that is a
liability for us.
And there are numerous instances of those evidences of
unfairness in the service, and the reduction from 252,000 miles
of rail line in 1980 to 141,000 or so today may have been good
practice business at the time, but go and ask any one of the
small towns that lost their LCL service, any one of the grain
centers who have been told we won't move grain from your
elevator unless you can fill 1500 ton hopper cars, and ask them
whether that was a good thing. Those are the inequities in the
marketplace that we as members of Congress hear about, that I
hear from my colleagues and that I hear directly from my
constituents.
So while I am an admirer of the rail sector, an advocate
for what you contribute to the national economy, I want to see
you carry more cargo because it is more environmentally
friendly. I want to see more passenger rail moved on commuter
lines that share those lines with the rails, and to that you
have to have double lining. To take cars off the road and
pollution out of the air. Every car we take off the road takes
five tons of CO2 out of the atmosphere a year.
So, on the other hand, there are inequities that, if you
don't address them, we think that the legislative process must
address them. So we will have a continuing dialog on that
subject. Thank you.
Thank you, Mr. Chairman.
Mr. LaTourette. I thank the distinguished Ranking Member.
And, as he knows, the second panel is made up of a number of
the shippers that I think will echo some of his observations.
I think--we are waiting for Mr. Bachus to come back, and I
did promise Ms. Brown we would do a second round, so we will
have a second round. We may not all take the full five minutes,
but I have--
Mr. Hamberger. Mr. Chairman, before Mr. Oberstar leaves--
Mr. Oberstar. I am not going forever.
Mr. Hamberger. Okay. I was just going to say that I
certainly understand and appreciate his view, and really
understand and appreciate the time you have given us to
continue to discuss these issues that we have over the past
several years, and we will continue to take you up on that
offer. Thank you.
Mr. Oberstar. Thank you. I will be back.
Mr. LaTourette. I appreciate that. Just a couple of things.
Mr. Boardman, on the plasma screen--we have now gone to
plasma screens here--is a map of the United States, and I think
this map may have shown up in an edition of Trains magazine,
and it basically highlights the lines that are illuminated in
color, it is my understanding that those are the only lines in
the United States that have at least double track, and, in some
instances, more than that. I would think when you deal with--I
don't see any in big States like--well, very little in Florida
or Texas.
Doesn't this map I think pretty much indicate the
difficulty that faces us as a rail system when we are talking
about the capacity problems either from the railroads'
standpoint or from the shippers' standpoint and really cry out
for some kind of increased investment? The railroads have
indicated and testified to the amount of money that they plow
back into infrastructure improvements.
But doesn't this map really--a little bit like in Florida,
I guess, where the gentlelady is from, I think it is a little
bit like having an interstate highway that only goes one
direction at a time. And I think, to me, at least, would you
agree with me that this map sort of cries out for some sort of
investment in rail capacity in this Country?
Mr. Boardman. Mr. Chairman, I would just make the comment
that all through the 1970s and the 1980s and the early part of
1990s the industry was literally taking up double track, and
the reason is, again, very financially understandable: the
returns were not there and it was all about taking expense
dollars out. So the model worked exactly what it should have,
what the deregulation model said it should have.
And I guess I would tell you the good news is that there is
an awful lot of right-of-way that is still owned by the
railroads that double track can go back into, and on our
railroad, if you look--and that green line, that heavy green
line is our transcontinental main line between Chicago and Los
Angeles. At the end of this year we will be down to 50 miles of
single track railroad on that 1800 mile haul. And we have been
spending--we have spent about $800 million to complete that
double track, and we are continuing to do that. I was just out
on the railroad a couple weeks ago, and as we have that double
track, it really does change the railroad.
But I want to go back to what drove the decline was the
decline in the railroad profitability. And what will drive,
under current regulatory access, what will drive the increase
in capital will be that same financial model.
Mr. LaTourette. And not to beat a dead horse, but I would
go back to the question about permitting that I asked you
before. Take a line where you ripped out the double track. If
you want to put in the same track that you used to have in the
1980s on the same right-of-way that you own, now you have
permitting requirements that you didn't have.
Mr. Boardman. Correct.
Mr. LaTourette. To restore these lines.
Mr. Boardman, is there an observation you would like to
make about this map?
Mr. Boardman. I certainly think that, Mr. Chairman, when
you look at that, it certainly builds a graphic example of what
we need to do to add capacity. I think there is another
interesting thing you can look at here. There are several of
them, I think. Mr. Lipinski is no longer here, but certainly
when you look back at the history of how railroads really came
together, you see where everything did come together at the
Great Lakes in Chicago and why there is such an important need
on that gateway to make sure that we make new investments in
that particular area.
The other thing that I think is interesting that we found
on other studies that we have done in the past is the lack of
north-south movements. You see it here--you identified it in
terms of double track, but you would see it even looking at all
railroads. After the Civil War, it was somewhat difficult from
a communication and improving the trade between the north and
the south. A lot of the growth that would have been there under
other circumstances wasn't there, and now we have 70 percent of
the U.S. population lives east of the Mississippi River, and
you see a lot of that could be improved by additional
improvements along that alignment.
Mr. LaTourette. Sure. I think Ms. Brown or somebody else
mentioned the RIF program, and Mr. Boardman knows that we had a
hearing on that a little earlier, so I don't have any more
questions for you on the RIF program. I think the Subcommittee
made its feelings pretty well known.
But, Mr. Busalacchi, I did want to ask you. In your
testimony I didn't see any reference to the utilization of the
RIF program. It is my understanding that not only State
departments of transportation, but other entities can either
independently apply for the $35 billion that we have set
aside--we hope the Administration will let us set aside in the
SAFETEA-LU program, and I am wondering if you and your
organization has considered the utilization of these highly
favorable 25 year financing provisions as you move forward with
your plans.
Mr. Busalacchi. Yes, we have, Mr. Chairman. Certainly, how
we get to the finish line on this is what we are looking at. We
are looking at somehow getting an investment back into the
system so we can take care of these capacity problems.
Obviously, what we are seeing or what I said here today is that
we have got issues with on-time performance. It is going to be
very difficult to get people that want to use intercity
passenger rail if we can't make these trains on time. And we
need to have that Federal investment; we need to have
investment of some kind for the freight railroad so that we can
decrease the problems that we are having with capacity.
So certainly any vehicle that we can get our hands on that
would help us get to the finish line is certainly something
that we are going to consider. But keep this in mind, Mr.
Chairman. I am a DOT Secretary. I deal with transportation
problems, not just rail problems, every day. And what our State
is experiencing is what all the States are experiencing
nationwide. The needs are astronomical. We don't have the
revenue and we are running into these congestions in our major
metropolitan centers. And that is where we come in and what is
where intercity passenger rail comes in. . You know, we need to
have this Federal partner so that we can decrease this
congestion, get people--some people, not all of them--out of
their cars, using rail.
Mr. LaTourette. I appreciate that. I often think that--not
to highlight one railroad, but we should ask Norfolk Southern
where they got the seats for that tree that takes the
containers off the trucks and puts them onto the railcars.
Mr. Rose, I just want to ask you one question about the RIF
program. I have heard your testimony and I have read your
testimony, and the Subcommittee did have a hearing on the RIF
loan program earlier this year, and, specifically, many of us
expressed our disappointment with the Administration, at least
we thought putting additional impediments into the application
process. We have addressed that with Mr. Boardman and hopefully
we will have some relief from the Administration soon.
But it has been brought to my attention that recently BNSF
circulated to a number of offices at least on the Senate side,
at least, a document that strenuously opposes the application
that has been made by the Dakota, Minnesota, and Eastern
Railroad for a RIF loan. And I assume you have looked at that
question, and my questions would be two. Does that document
accurately state the position of your railroad, and, two, could
you share with us the logic behind, as I read the document,
asking the Executive Branch to ignore a provision basically
that as in SAFETEA-LU, and that is removing this obstacle of
lender of last resort?
I understand your argument why--I believe it is your
feeling that the granting of loans like this would create an
unlevel playing field, but relative to the specific document,
maybe if you could give us your comment.
Mr. Rose. Mr. Chairman, unfortunately, I am not sure
exactly which document you are talking about, but I can speak
specifically, and I want you to clearly understand my position
on RIF loan. First off, we have supported RIF loans. We think
that it is a great way and we think that the short line
industry is a poster child of how we can continue to build out
the short line industry applying market base financing to help
them with the lower financing cost. What I am saying, though,
and I think you pretty much answered your question to me, we
are very concerned that--and so would any economist.
And I think if you ask any economist to look at this issue,
where private market base capital all of a sudden now has to
compete with Government money, I think it has compelling
issues, and it will have unintended consequences that this
Country will not like. You are asking us to compete on an
unfair battleground. And we believe fully that--and I will
speak on the DM&E piece briefly. We supported the DM&E through
an amicus brief for their railroad to be built on the
environmental permitting issue. That was when they were
privately financing it. We welcome all competition that has the
same playing field in which we operate.
When Government money wants to come in on a very specific
target, it is going to send unintended consequences, as we have
to approve, like our board did, billions and billions of
dollars of capital investment.
Mr. LaTourette. I thank you very much.
Ms. Brown.
Ms. Brown. Yes, sir.
Mr. Hamberger, the auto train comes into my district; it
has a 17 percent delay rate. I get a lot of complaints. What is
the freight rail industry doing to address the growing concern
voiced by both freight shippers and Amtrak about service
performance?
And then my question for everyone is how do you feel about
a trust fund like we have for highways and aviation that have
been very, very successful? And I think you and I have had some
discussion on that.
Mr. Hamberger. Yes, ma'am.
Ms. Brown. So will you answer that question? Then I would
like the comments from the rest of the panel on the trust fund.
Mr. Hamberger. Could I answer the one on the trust fund
too?
Ms. Brown. Yes, sir.
Mr. Hamberger. Thank you.
Ms. Brown. You are part of the team.
Mr. Hamberger. With respect to Amtrak and customer service,
of course, one of the main impediments to on-time performance
is capacity, and that is why, led by Class Is and the Class IIs
and Class IIIs, $8.3 billion is being spent in 2006, and that
includes signalization, it includes a new track, new cars, new
locomotives. So that is the first thing.
The second thing, there was a major meeting, it happened
earlier this week, with Amtrak and representatives of the Class
Is, where a reaffirmation was made that, indeed, the Class I
railroads are abiding by the statutory mandate to give Amtrak
the preferred service in dispatching and running over the Class
I railroad lines. So we are trying to address that. We are
trying to improve operating procedures to improve service
across the board.
With respect to the trust fund, I appreciate your giving me
the opportunity to address that, because those people who
support a trust fund are very well meaning, they want to figure
out a way to help us help ourselves help us expand capacity. In
fact, Congressman Lipinski, Bill Lipinski and I had this same
discussion many times when he was on this Committee. We
believe, as an industry, that while it is well meaning, it is
not the answer. Number one, of course, is where does the money
come from. If it comes from a fuel tax, as some have suggested
should have been done, that is money that we, as we just
discussed with Mr. Oberstar, have put back into capital
already. So taking money from us to give back to us didn't seem
to really be any additional revenue there, it is money that we
are already investing.
Alternatively, we could increase the rates of our
customers. I don't think the second panel is going to have a
lot of people saying that they think they are paying rates too
low. I don't think many of them are going to come in and say
they want higher rates. And, in fact, what would happen if
there were higher rates, we would probably have to absorb that
increase or else there would be diversion from rail to truck or
to barge. So, again, we would be impeding the ability of the
industry to earn internal capital to invest.
But assuming that the money somehow occurs, would it get
spent? Mr. Oberstar mentioned that I referred to AWO in my
statement, American Waterway Operators, has a trust fund. They
were paying 4.3 cent deficit reduction fuel tax, and they
testified before this Committee, and anybody who would listen,
they didn't want it go to the trust fund because it never got
spent. And this Committee, above all else, knows the fight that
you have to go through to restore the trust to the trust fund.
So AWO has a trust fund, had the tax, said no, we don't want it
to go into the trust fund.
Third, of course, if it does get spent, if OMB says, all
right, go ahead and spend it, who is going to make that
decision? Isn't it better to have the individual railroads
talking with their customers, taking a look at what traffic
patterns are, what are the projections for more coal coming out
of the Powder River Basin, what are the projections for more
intermodal traffic coming into Charleston, South Carolina? That
is how we determine where the investments need to be made; more
grain going to the Pacific Northwest; working with our
customers, having the ability to put that money where it
belongs, and not having it decided on a political basis either,
with all due respect to Mr. Boardman, at the Department of
Transportation FRA or, with all due respect to members of
Congress, earmarked in appropriations legislation.
And I mention that because, fourth, if it were made on a
political basis, I am afraid that most of that investment would
be targeted toward commuter rail operations. Now, that is a
very important aspect, that there is enough capacity, as Bill
Millar pointed out, there needs to be enough capacity for both
freight and passenger. But I don't think that a tax on freight
rail would be the way to fund passenger rail.
And, finally, this is not an overall argument against it,
but I do find it mildly ironic that it is UPS that is pushing
this idea of a trust fund, when it was their CEO who rated all
of the modes recently, and he didn't give any of us a very good
grade. But I will point out that freight rail got the highest
grade. The lowest grades went to highways, inland waterways,
and aviation, all of which have a trust fund. This is a
different model. We are privately owned, we make the private
sector investments. As I have testified before, we get the
dubious distinction and pleasure of paying taxes on our real
estate. So I think as well meaning and as well intentioned as a
trust fund is, it is not the answer for this industry at this
time.
Ms. Brown. I would like to hear the response from the other
participants. Mr. Hamberger, you are very elegant, but I want
you to understand that we have got a problem and I need you to
get ahead of it.
Mr. Hamberger. And that is why we are hoping that the idea
of public-private partnerships will continue to catch on, why
the idea of investment tax credit will gain support, and why we
hope that you will continue to refrain from allowing us to
continue to try to earn our costed capital. So by doing those
three things, I believe, working together, we can stay ahead of
the curve.
Ms. Brown. Mr. Rose?
Mr. Rose. I would just agree with what Ed said and just
give you one illustration. Again, we operate 33,000 miles of
track, 230,000 cars, 6,000 locomotives. If I had my laptop here
today, I could draw up and show you where every bottleneck from
yesterday's traffic that occurred on our railroad, every delay
that we had.
When I think about trust fund, the question I have is who
is going to be the master planner of where that money is going
to go? I know we have five year plans out in terms of what the
energy sector says. They want to grow. This year we are going
to do 350 million tons. They want to grow to about 410 million
tons next year. We know by milepost, track segment, switch,
interlocker, signal, mask, we know exactly where that capacity
needs to be put in. And for somebody else to have the insight
into our railroad, which we live with 24 hours a day, 7 days a
week, it is just impossible. And I think what would happen,
with all respect, that money that desperately needs to go into
these railroads would be moved into nonmarket-based investments
and it would cripple this industry.
Ms. Brown. Mr. Rose, do you not believe in dedicated
sources of revenue, knowing that we are going to invest X
amount into the railroad industry every year for safety or what
will benefit the overall system?
Mr. Rose. Well, I guess when I think about it, that is what
making a profit does, it allows--if you just allow the free
market model to work--if you go back to Staggers, there were
two parts of Staggers, and one of them was to assure the
financial health of the industry. And that is why, when these
cases come before the STB, that is one of their fundamental
responsibilities they have. And as long as they will do that--
and they always haven't done that, but as long as they will
continue to do that, then the railroads will have financial
help, they will make those investments in infrastructure and
more value will be put into the economy so more people can
utilize the railroad network.
Ms. Brown. Mr. Secretary?
Mr. Busalacchi. Thank you, Representative Brown. A few
months ago we had this conversation with Secretary Mineta, and
the Secretary agreed with our assessment on the 80/20 funding
transportation, rail transportation like we fund highways and
airports. We think, the Coalition thinks that this is really
the way to do it. It is transportation. I know I am kind of in
conflict with my friends over here as to how they feel it
should be done, but certainly we think that once we put this
model together, wherever it arrives at, if we have a long-term
solution, this is where we need to head. Right now we have this
yearly bloodletting over Amtrak, and we go through this
wrangling of whether we are going to fund them, whether we are
not, and everything else, and if we have this six-year plan, or
whatever it ends up being, like we do on highways, I think we
can accomplish a lot and we can get to the capacity problem
that we have.
Obviously, where we want to get to is we want to get to the
intercity passenger rail. As I said earlier, and I will say it
again, the highways are getting congested. I am a DOT
Secretary. Seventy-five, 80 percent of my budget is spent on
highways, and I don't think we need to do that anymore. Once a
highway gets full, it can't get any fuller, it just gets fuller
longer; and that is what is happening. That is what is
happening in the Country and that is why we need to come up
with a program, a plan, because the people want it. The numbers
show that the passengers, people are riding the trains; they
want to ride the trains. We need to provide this for them.
Mr. Hamberger. Can I make a distinction so as not to leave
a misimpression? My response to you, Congresswoman Brown, was
with respect to a trust fund for freight rail and freight rail
investment with a tax on freight rail operations. I am not
intimately familiar with Secretary Busalacchi's idea for high-
speed passenger rail. To the extent that there is an
appropriate Federal role to fund high-speed passenger rail,
that wasn't what I was addressing in my response to you, which
was a trust fund which would, as Mr. Rose pointed out, supplant
the investment decisions of the individual railroads. I was
looking just at the freight side, not at the high-speed
passenger side.
Ms. Brown. And let me be clear. I did not say anything
about tax. We are talking about revenue enhancement and
dedicated sources. And, of course, that is another committee
that decides where the funds would come from.
Mr. Hamberger. Yes, ma'am.
Mr. Rose. I want to say I was not speaking on behalf of
commuter or passenger rail as well. I am only focused on our
little freight railroad.
Ms. Brown. Mr. Millar, we are coming to you.
Mr. Millar. Yes, I will speak on behalf of passenger and
commuter rail, and generally we have been supportive of the
notion of a trust fund. I think particularly in the way the
discussion has gone today, it is very clear all of us see there
are private benefits and there are public benefits, and
certainly a trust fund from some type of dedicated reliable
source to fund the public benefits, I don't think there should
be much disagreement on at all.
I think the magnitude of the problem is likely to be,
though, that it is going to take a trust fund and it is going
to take tax credits, and it is going to take all kinds of other
ideas to make sure we get the kind of investment we can have in
the railroads both for the purpose of carrying freight and
serving passengers. Both are essential to the Country. A trust
fund is something, you know, we would want to know the details,
as they say, but generally we are favorably disposed to it for
the public benefits of passenger transportation.
Ms. Brown. Mr. Boardman, do you have any comments that you
want to make?
Mr. Boardman. Do I want to make? No.
[Laughter.]
Ms. Brown. Speaking for the Administration.
Mr. Boardman. I think just the comments we have had thus
far--and I was kind of waiting for Rich to jump on there to see
what the short lines had to say, but this is a very complex
issue, and I think Ed is right in terms of it is a very
different model here than with the other modes. And, yet,--and
they went back, both Ed and Matt went back and talked a little
bit more specifically about the fact that we in fact do use
some trust fund dollars right now to make investments in
railroads in certain areas, and largely it is as a result of
where the commuters operate and largely within the northeast
corridor. And part of the difficulty and complexity of looking
at the northeast corridor is you have capital plans that come
out of the commuter railroads which may or not be attached to a
larger transit authority in the northeast that has to have
approval about how they spend those dollars from their MPO
locally, and those dollars then generally come out of the trust
fund, although in the transit side of the world that even, in
itself, is a little bit different than what the highway side
is, because the transit piece isn't fully funded through the
trust fund, it also has general fund revenues that come into
its particular funding mechanisms.
And then you have Amtrak in the northeast corridor, which
is funded through direct appropriation from Congress on its
capital projects, and it mixes with, in many cases, the
projects that are on the corridor, for example, the East Side
Access Project and the Access to the Region's Core Project,
which are a New York and New Jersey project that are going to
add additional commuter trains to the line. And there is also
the freight operating on the corridor that has a capital
program, which is a private investment in their capital
program. So it truly is a different model, as most of the modes
do have different models. The passenger facility charges for
airports is operated differently than what the trust funds are.
I think that one of the things that Secretary Mineta wants
to have happen in the commission that he is putting forward on
how we finance for the future is to have some discussion and
dialog, and two of the members up here of this panel are on
that commission, but have that discussion and dialog about the
different mechanisms and the complexities of those to get
financed.
Mr. Timmons. Congresswoman, let me comment about the free
short line and regional railroad concerns on this thing. Ed has
mentioned at least one or two of them previously. The source of
the funds, of course, is of great interest to us, and I won't
dwell on that. Probably more significantly is the distribution
or adjudication of those funds. State by State--for example, in
Pennsylvania you have got 59 small railroads; in Texas you have
got probably 41; in Illinois you have got 39 or 40. As you go
State by State, the density and concentration of these small
railroads and the commodities that they carry is extremely
divergent. So how would you or how you would formulize some
solution to get money to the right place at the right point in
time to really enhance the system would be a real challenge. So
there are some clear difficulties associated with that.
And, finally, the dilemma of what happens to other funding
sources that we currently have. In other words, is there an
impact on the RIF process? Is there an impact on the tax
credits? Clearly, if the Class I tax credit, the 25 percent,
went through--which, under the current rules, we are eligible
for that also--what are the consequences if we are going to get
involved in some kind of a trust fund proposition? The study
and review of all this, I think, is very, very important as we
consider it for the future.
Mr. LaTourette. Okay, I thank you very much.
Now, a new member of the full Committee, and counsel tells
me that we may not have met as a full Committee to ratify his
addition to our Subcommittee, but we are happy to have him on
the case. Just for the bookkeepers, I ask unanimous consent
that Mr. Barrow be a member of the Subcommittee for today's
purposes if he is not.
And we welcome you very much, Mr. Barrow from Georgia.
Mr. Barrow. Thank you, Mr. Chairman. And thank you, Mr.
Chairman and Ranking Member Brown, for scheduling this hearing.
Gentlemen, I can't add much to what has been said so far,
but I do want to kind of give a preview of coming attractions
on a subject that Mr. Hamberger has put on the table and I
think is sort of implicit in what we are talking about, and
that is the subject of rail safety. I agree with the premise
that investing in basic infrastructure is going to have safety
payoffs, but there are some things we could do that are less
reliant on infrastructure and more reliant on systems and ways
of doing things.
For example, I represent the City of Augusta, Richmond
County, Georgia, which, as you know, was right near by
Graniteville, where we had a most unfortunate incident in the
dead of night early last year, and the lion's share of the
first responders to that tragedy came from Augusta, Richmond
County as a result of their participation in a mutual aid
agreement which is a common feature of local Government. Little
communities enter into compacts with their big neighbors. If we
have got something we can't handle, we send out the warning,
you come, you respond, you come help us out. Neighbors helping
neighbors is a fact of life all around the Country.
One of the concerns I have got is that we still, today, are
relying on such incredibly ineffective technology. Let first
responders know what the hell they are up against when they are
responding. The idea of relying on placards on the side of a
container car warning you about what is inside, which I guess
is effective to prevent somebody from causing a puncture, you
know, that they can prevent is one thing, but it doesn't do
anything for the first responder who is coming in the middle of
the night, charging into an area that has been contaminated
with a chlorine cloud. First responders need to know at least
as much as the railroads know about what they are going to
encounter when they charge in the middle of the night. We had
people seriously injured because they did not have as much
information as the railroads had about what they were going up
against that night.
Now, I know that folks in my former walk of life, as county
commissioners and city councilmen, are all pushing rules and
regs that would basically create what may well be criticized as
a system of information overload, telling local governments
everything that is going on, everything that is moving through
while it is moving through, which is not what you need to know
when you need to know it.
What I want to know is what plans are being made, either by
the industry, Mr. Hamberger, or by the Government, Mr.
Boardman, either to do it on your own or to make sure that it
gets done, that we create a system of notification of all of
the parties to mutual aid agreements and all of the folks who
are likely to be affected by a spill when it happens.
I note and I commend you all for the fact that the number
of hazmat releases in trains is much lower than trucks. I think
that is, frankly, to be expected when you consider the
relatively small number of huge combination vehicles that are
closely regulated, closely maintained that is the railroad
freight industry, versus the infinitely large number of
articulated vehicles being driven by everybody and his brother
all over the Country.
I would expect fewer hazmat releases. I would expect a
higher safety record from the railroad industry. At the same
time, though, your vehicles are so big, and the stuff that can
get loose when you have an accident that, despite our best
efforts, can't be prevented, is much larger than many
governments and first responders are capable of dealing with.
So what I want to do is I want you all to tell me what is
the industry doing on its own or what is the regulatory
community going to do to try and make sure that first
responders know what they are up against, they know at least as
much as the railroads know when the railroads know it. Who can
answer that?
Mr. Hamberger. Well, let me try first, Congressman. First
of all, I think you have to know that the industry and the
Government are together in trying to make those kinds of
improvements, absolutely and positively. And in the Government,
my sister agency, which is the FMSA, which actually does the
rulemaking for hazardous materials within DOT--and we enforce
that rulemaking--is working with us, along with the
Transportation Security Administration, especially now that
Robert Jamison, who used to sit in this seat, is over at
Transportation Security. We are making improvements on how we
are communicating and the kinds of information that we would
need on hazardous material, especially TIH, which is the toxic
inhalant, one of them, at least, in the unfortunate situation
at Graniteville.
Mr. Barrow. What kind of improvements are we getting and
when can we expect real-time notice?
Mr. Hamberger. We individually and collectively are making
those improvements to especially first responders, not only in
terms of when the actual event may occur, but also telling the
local communities the types of products that would be moving
through their communities, so that they're prepared for the
kinds of things that they may face.
But we haven't stopped there. We are looking at how do we,
and to use a word that I guess Traffic World told me wasn't a
word, how do we operationalize the FRA so that we know much
sooner what hazardous material is in the train, where it is in
the train, and protect the communities that we are operating
through and protect the national security to make sure that
that information doesn't get out into the wrong locations.
We are actively making improvements on an incremental
basis, and we are hoping that we are trying out some additional
programs, like CSX's NOW program and some of the additional
ones that Ed and Matt may want to talk about that are
coordinated and that work appropriately for the community and
the Nation.
Mr. Barrow. Well, I don't want to trespass on the
Committee's time. But it sounds like what I am hearing is, we
are working on it. What I am looking for is an answer to the
question, what can I tell my fire department chiefs and my
chiefs of police when they can expect to know just what they
are up against when these things happen?
Mr. Hamberger. There is a system in place, Mr. Barrow,
working with our chemical customers, called ChemTrek, which is
a 24/7, been around for many years, and it is supposed to be a
real-time notification for the local responders. We go out, we
work with them, we train them, the industry trains 20,000 local
responders a year, so that they can go to ChemTrek, get experts
on the phone from the chemical companies, the people who know
what this stuff is, how it moves, how it reacts, what is the
atmospherics in the area where the spill has occurred and get
real time expertise and advice. I guess what you're telling me
is that perhaps it wasn't quite as real time as--
Mr. Barrow. Well, Mr. Hamberger, training folks to have the
equipment to deal with the kind of stuff that moves through
routinely, giving them a number to call so they can figure out
what to do with the spill when they find it is not the same
thing as taking affirmative action to contact them and telling
them, in the communities, this is what you're up against. We
have this on this train, this train is derailed in
Graniteville, it's got X number of cars in the consist, they've
got this kind of stuff on it. Govern yourself accordingly. We
are here to help any way we can.
Telling the chief of police in Graniteville who send in the
call to the rest of Richmond County, that giving him an 800
number to call is not really making it, is what I am getting
at. Because these guys are going to get there sooner than that.
And they need to know what the railroad knows when the railroad
knows it. I don't think anything is going to be adequate until
we get that. And I think that's the goal we ought to strive
for.
Mr. LaTourette. I thank the gentleman very much, and I
would indicate to the gentleman that we had a previous hearing
that dealt with some of those issues. But you're going to love
the next hearing that we're going to have, which is going to
focus specifically on tank car safety. I invite the gentleman
to come to that hearing.
Mr. Barrow. That's why I refer to it as a preview of coming
attractions, Mr. Chairman.
[Laughter.]
Mr. LaTourette. In just a second, Ms. Brown. That hearing
will explore a number of important issues that affect not only
communities, the safety of people that live around the rails,
people who work on the rails, but address again the concerns
that shippers of hazardous materials have as well as the
railroads' legitimate concerns relative to their common carrier
obligations to carry materials that create great liability for
their systems with little rewards. So I thank you for those
questions, thank you for being here today, and I look forward
to seeing you at the next hearing.
Ms. Brown?
Ms. Brown. Mr. Chairman, I ask unanimous consent for
members to submit additional questions to witnesses for the
record.
Mr. LaTourette. Without objection.
Mr. Bachus?
Mr. Bachus. Thank you.
Mr. Rose, you discussed increased efficiency and asset
utilization as a way to increase capacity and network velocity.
Could you give us some examples of what Burlington Northern has
done?
Mr. Rose. You bet, Congressman. The industry has made a lot
of progress in terms of creating more electronics on the
railroad, from looking at the locomotive health of the
locomotive to car health to hot box detection. A number of
things on physical track to provide a more reliable
infrastructure.
The next step level of improvements though really comes
when we integrate a GPS type of planning system onto the
railroad industry. And we're still a ways from that. We believe
that there's an interim stage that will go a lot to the
Congressman's concern on hazardous material that can help
prevent a number of the things that cause derailments and train
wrecks to where we basically give the locomotive engineer a
much better view of the railroad and understanding what else is
on that track and whether or not that switch is properly
aligned, all these various things.
The railroad, from that standpoint, really has not had a
lot of investment in technology at that level. These are very,
very expensive investments. We call it PTC, positive train
control. It's kind of at the end of the spectrum. We think that
that number could be in the five, six, seven, $8 billion range.
Mr. Bachus. Just for Burlington Northern, or the industry?
Mr. Rose. No, to fully implement on the entire Class I
railroad industry. So these are major dollars. And again, the
returns that we will work towards of implementation of this we
think can give us both a much safer railroad as well as a step-
level capacity. Right now the ruling distance, if you will, of
a railroad is confined by its signal system. And long term we
believe that we will remove the signal poles and that we will
be getting train instructions into the cab of that locomotive
through differential GPS, which is what the military of course
uses.
Mr. Bachus. How about intermodal facilities? You mentioned
that. You have constructed several, and you have several under
consideration. What do those cost?
Mr. Rose. We are building, most of our intermodal
facilities now are in the hundred million dollar range. And we
are putting a lot of technology in those, from retina scan to
thumbprint scan for drivers to come in and go through the gate.
We have GPS monitoring of containers, lot containers. We have
GPS cranes that literally take the container and take it to the
spot on the location.
So the intermodal side has really modernized quite nicely.
Mr. Bachus. I have read it has quite an economic impact on
the area where you build one of those.
Mr. Rose. We have built several, we call them logistics
parks. Our last one was in Joliet, Illinois. And what we are
finding is, because of the capacity issues that have been
described here is that customers and then supply side, the
whole transportation chain, wants to locate very close to these
intermodal yards. So we've seen literally growth that's been
doubling in a period of two or three years outside of our
facility in Chicago. Wal-Mart just announced a 5 million square
foot warehouse right on that plant.
And you say, well, what does that matter? Well, the reason
it matters is that, if they didn't have their distribution
center right there, these intermodal trains would come in and
then they would have to dray to a different location. And UPS,
one of our most important customers, has a couple of facilities
co-located with us to where the train comes in and literally
the hosteling tractor doesn't even go on the highway, it goes
through the gate, from the railroad gate to the UPS property.
And so where we can tie the supply chain, what it does, it
eliminates highway congestion, eliminates highway miles and
improves environmental air quality.
Mr. Bachus. If I could have one more question, Mr.
Chairman?
Mr. LaTourette. Go ahead.
Mr. Bachus. Administrator Boardman, the proposal on the
DM&E, the new rail line to the Powder River Basin, that's to
create a third rail line competition into Powder River. Is that
the reason that the Government would be making that
expenditure? Because I know you have two right now.
Mr. Boardman. Mr. Bachus, in terms of any RIF loan that we
deal with, it's a loan. If a railroad comes in and makes a
business case for the amount of money that it wants to borrow,
if it meets the conditions of the loan, then it meets the
conditions of the loan and they are granted the loan.
Mr. Bachus. Yes, I guess I am trying to figure out why
there is a lot of discussion about that particular rail line.
There are two rail lines in there, and I just heard Mr. Rose
describe all these things that Burlington Northern could use
money for. And I'm sort of wondering, when you have a rail line
in there, does the Government decide to set up a third
competition or would you--
Mr. Boardman. I think what you have to look at is that the
STB made that decision when they set up the--
Mr. Bachus. Yes. But you understand what I am saying. I am
sort of troubled why they'd say, okay, we have got two rail
lines that could use, that are there, and private--
Mr. Boardman. I am still happy with the question you asked
Mr. Rose about using positive train control to improve
capacity. I mean, it was not that long ago that there was a
question about whether it really would improve capacity. And I
think it is eligible, is it not, in the tax credit?
Mr. Bachus. Of course, you have been on the railroad lots
like I have, and they are spending every dime they can get. I
think that is the bottom line. And I guess they have to
prioritize. And I am just going to say, if we build a third
line into the Powder River and part of the reason we give that
preference is competition, what would prevent one of the
existing railroads from buying that line?
Mr. Boardman. Is that a question to me?
Mr. Bachus. Yes.
Mr. Boardman. I don't know that there is anything.
Mr. Bachus. Yes. So I mean, you could build it in there and
then the Burlington Northern could buy it, or the UP. Right?
There wouldn't be anything to prevent that?
Mr. Boardman. As far as I know, that is not the case. I
would have to, I think STB would be the ones to--
Mr. Bachus. I agree. I guess you would acknowledge, though,
at FRA, that there are rail lines all over this Country that
could use millions of dollars to upgrade the capacity. And a
lot of rail lines where there is, that is the only, the shipper
has to depend on that rail line and that rail line is clogged.
You would almost think you would spend money on that rail line
as far as creating, spending money on that rail line out to the
Powder River Basin.
Do you all have discussions like this between you and the
Surface Transportation Board? Do you all kick these things
around?
Mr. Boardman. Well, I think there is discussions on
specific items at the Surface Transportation Board. I think
your question is really maybe directed more toward General
Timmons or somebody that is looking at whether there are
appropriate expansions that some of the smaller railroads would
like to do using the RIF program.
Mr. Bachus. Sure. There have been almost no RIF loans
approved though, is that right? Or I would ask Mr. Timmons. How
many have been approved?
Mr. Timmons. To date, sir, 12. A total of $517 million and
there are six additional loans that are being considered at the
present time. That is over a space of about eight years.
Mr. Bachus. The one that the DM&E, how much is that
proposal?
Mr. Timmons. I think it is about $2.5 million, maybe $2.8
million, something.
Mr. Bachus. Billion?
Mr. Timmons. Billion, yes, sir.
Mr. Bachus. The RIF loans that have been granted so far,
what is the total for those?
Mr. Timmons. Five hundred and seventeen million.
Mr. Bachus. Okay.
Mr. LaTourette. Thank you, Mr. Bachus.
I want to thank this panel. Obviously I think we could
spend the rest of the afternoon with this panel because of the
quality of the answers you've given us. I want to thank you all
for not only your testimony but also for responding to our
lengthy questions.
Then if you were asked to supply some additional
information, General, for instance, when your members are
finished filing their taxes and all that other business, if you
could give us some information on the AMT.
Mr. Timmons. We certainly will, sir.
Mr. LaTourette. You all go with our thanks, and thank you
very much for being with us today.
It is my pleasure to welcome our third panel of witnesses
today. We are fortunate to be joined by Mr. Carl D. Martland,
who is a Senior Research Associate in the MIT Department of
Civil and Environmental Engineering, where he's been engaged in
rail and freight research since 1971. Mr. Martland has
participated in freight rail research studies both at the State
and Federal level here in the United States and also studies
the freight operations in more than ten foreign countries.
Next will be Mr. Burt Wallace, who is the Vice President of
Transportation for the United Parcel Service. United Parcel
Service is one of the largest customers of Class I railroads,
as we heard in our last panel. Moving trailers and packages
through the Country, UPS delivers over 14 million packages a
day to over 200 countries around the world.
Mr. John White is here today on behalf of the Portland
Cement Association. This trade association's members account
for 98 percent of the cement making capacity in the United
States and have manufacturing plants in 36 States. Mr. White, I
would just mention that I was advised earlier that Congressman
Dent of Pennsylvania very much wanted to be here to introduce
you, but his other duties have taken him away. I am sure that
he would have appreciated the opportunity to welcome you here
today. But I will have to do it on his behalf.
Mr. Kendell W. Keith comes to us from the National Grain
and Feed Association, where he serves as the President. He
earned his B.S. and M.S. and Ph.D degrees in agriculture
economics at Oklahoma State University, before joining the
staff at the National Feed and Grain Association in 1980.
And finally, Mr. Glenn English, from the National Rural
Electric Cooperative Association. Before beginning with the
NRECA in 1994, Mr. English was a member of the U.S. House of
Representatives, where he proudly represented the Sixth
District of Oklahoma for 20 years. I want to thank all of you
gentlemen for coming. You may have noticed from the first panel
that we have this five minute rule. We kind of ignore it
sometimes, but again, because of the number of folks in this
panel, we have read the statements you have been kind enough to
give us and if you could summarize your remarks, we look
forward to hearing from you.
Mr. Martland, welcome, and you are first.
TESTIMONY OF CARL D. MARTLAND, SENIOR RESEARCH ASSOCIATE AND
LECTURER, DEPARTMENT OF CIVIL AND ENVIRONMENTAL ENGINEERING,
MASSACHUSETTS INSTITUTE OF TECHNOLOGY; BURT WALLACE, VICE
PRESIDENT, TRANSPORTATION, UNITED PARCEL SERVICE; JOHN WHITE,
VICE PRESIDENT, LOGISTICS, BUZZI UNICEM USA INC.; KENDELL
KEITH, PRESIDENT, NATIONAL GRAIN AND FEED ASSOCIATION; AND
GLENN ENGLISH, CEAO, NATIONAL RURAL ELECTRIC COOPERATIVE
ASSOCIATION
Mr. Martland. Thank you very much for the opportunity to
speak before a Committee that is truly interested in all
aspects of rail transportation. I am speaking I guess on my own
behalf at the invitation of the Committee, and I am speaking
from the perspective of someone who has been involved in
railroad research, capacity, service and systems issues for
more than 35 years.
I obviously believe that the railroads play an important
role for the system, a role that should be growing, if it could
be growing, but that it's not clear that the railroads will be
able to grow enough to play the role in relieving congestion,
reducing fuel, reducing emissions, providing space for commuter
and Amtrak that the public I think really would like to see.
The capacity crunch. I think that it is real, it is serious
and it can and should be overcome. I see four key symptoms of
the problem. First of course is poor service. Average train
speeds are well under 25 miles per hour. Yard times are
frequently above 30 hours, whereas the benchmarks that I looked
at in the 1970s and 1980s and early 1990s were 16 to 18 hours.
Trip times are commonly 10 days or longer today. When I did
studies in the early 1970s and the early 1990s, the average
trip times for general merchandise freight was six to eight
days. So service clearly has deteriorated and capacity clearly
is the culprit.
Rising rates. For the first time since just after
deregulation, average revenue per ton mile is increasing. This
is a reversal of a 20 year trend, and it is not caused by the
changes in service, obviously. It is caused by the fact that
capacity is limited and basic economics say that's when prices
will go up.
Third, longer hauls is nothing new. It has been going on
for a long time. But it is again evidence that the industry
will focus on the most profitable traffic, which is the long
haul, especially the bulk and intermodal.
Fourth is that the public really is interested. This
hearing is one bit of that evidence, and we have many examples
of public investment.
The causes, I think the causes go beyond the basic
financial ones that we have heard many times. One, we have a
nineteenth century system in many places that is trying to
serve twenty-first century needs. We have most rail managers
growing up in an era when downsizing was the requirement, not
growth. We don't know how to manage well for growth.
Starting about ten years ago, the increases in tonnage and
traffic was no longer masked by the improvements in
productivity. Bigger, heavier trains worked for a while, but
now we just need more space.
Deregulation created intense competition that has reduced
prices. The customers and the public are benefiting to the tune
of about $25 billion per year. The railroads, despite the
claims that things are better, things are a little bit better,
but not much better than they were in say, even the mid-1980s
or even the mid-1960s. The problem is that technology is not
the solution to this, it is a systems problem--systems and
institutions, financing, management, legislation.
The question, can the private sector solve the problem? The
private sector could, but the experience of the last ten years
sets doubt, because we are in a situation where every year or
two for some reason there is a tremendous crisis in terms of
gridlock and service. The public interest calls for more
capacity for commuters. The public interest calls for moving
trucks off the road, shorter haul intermodal, support for
general merchandise. So I think the public wants more than the
private sector is likely to put in on their own.
There's a strong history of public participation. I don't
have an Power Points, I do have a required tie showing the
Union Pacific Railroad constructed as a great public service
project more than 100 years ago, with public funds and a
private participation. We have had many examples of land grants
and innovative financing since then.
And I guess my main recommendations, yes, we should be
exploring and analyzing ways that the public can help the rail
industry to increase capacity. I think any public programs that
provide megabucks for infrastructure should provide something
for planning and research. If the dollars are to be spent,
let's spend some time and money to figure out how best to spend
those dollars.
I think in general there is a greater need for policy
analysis. FRA needs more money and more people to answer the
questions that the Committee is asking. In my paper, I talk
about the freight car utilization program of the 1970s as a
good example of a program that involved the railroads,
Government, customers, and I think even some public agencies in
looking at in that case equipment utilization issues. But that
was a systems problem, much like capacity.
In summary, I think we need a vision for the rail system.
We started today with the Chairman's statement of a vision for
2050. I think we need to define what is an interstate rail
system. I am not talking about a public system, but what is the
rail system for 2050, what would it look like? And I think it
would have 50 mile per hour freight trains. I think it would
have six to eight day service for general merchandise freight,
capacity for coal, capacity for commuters and a smattering of
high speed rail.
And I think that this Committee could do a great service in
providing some of the resources to help the planning, for the
planning and eventual implementation of such a system. Thank
you very much.
Mr. LaTourette. I thank you, Mr. Martland.
Mr. Wallace, welcome. We look forward to hearing from you.
Mr. Wallace. Thank you, Mr. Chairman. At UPS, we believe
the future of the Nation's rail system is at the very heart of
our Nation's ability to compete globally. Right now, from our
experience, there is much that needs to be done to ensure that
future ability.
There is a collective need and there must be a collective
remedy. As a Nation, we recognize the importance of first class
highway and aviation infrastructure. Our rail network must be
placed in that same category. Today commerce and the demand for
efficient transport is global. U.S. companies remain leaders in
innovation and our workers are as capable as any.
Our Nation's infrastructure, however, has failed to keep
pace with the demands of this century. Railroad infrastructure
is an integral and necessary part of a system that increasingly
must be viewed as a single, all-encompassing network. If any
part of that network fails to keep pace, the entire system
suffers along with our ability to compete.
UPS remains among the largest corporate customers of Class
I railroads in the United States. We and our customers,
businesses large and small, homeowners and families all across
America have a vital interest in the efficient operation and
future direction of the North American railroad industry.
In 2005, we spent more than $750 million on freight rail
transportation. And through our supply chain solution
subsidiary, we controlled another $800 million in customers'
railroad transportation spend. On an average day last year, we
moved 3,000 trailers filled with packages on flat cars. We have
been incorporating rail transportation into our network since
the 1960s. It is important to us to understand that every
trailer we put on the railroad represents one less trailer
moving on the highways.
UPS and our customers depend on rail service as a vital
part of our worldwide intermodal transportation network, which
on a daily basis delivers more than 14.8 million packages to
7.9 million customers worldwide. It is estimated UPS delivers
more than 6 percent of the U.S. gross domestic product and 2
percent of the global EDP each and every day.
Allow me to give you an example of how our system interacts
with that of the railroads. A national hair products
manufacturer uses UPS for its nationwide shipping needs. Their
Southern California distribution location supplies products to
much of their West Coast retail beauty salon customers. UPS
uses the rail network to feed these packages to UPS hub
locations in the Pacific Northwest.
This customer has had repeated service problems and delays
in this region and recently stated, taking a week into Oregon
and Washington from California simply does not work. Other
carriers get to these locations in two days via truck. At this
rate, we might be forced to make changes.
Unfortunately, this scenario is all too common on today's
rail network. When our customers confront us with this
feedback, we are left with few alternatives. UPS wants the
railroads to succeed and to continue our mutually rewarding
transportation partnership. But the bleak current service
picture forces us to be responsive to our customers' needs and
find an alternative transportation mode.
Our marketplace dictates a quick and appropriate response.
Along that same vein, we wish the railroads had the ability to
respond to our needs. Whether as a result of the 1990 rail
mergers or other reasons, there has been little new rail
capacity. Given the current state of the industry, UPS remains
opposed to additional Class I rail mergers.
Regrettably, the railroads have been unable to make
adequate capital investments, technological enhancements and
innovative solutions in responding to the new market
conditions. I stress the word adequate. It is not as if the
industry has not been investing, as you have heard today.
Rail performance clearly underscores, however, that it
simply has not been enough. An aside, the proposed railroad
infrastructure investment tax credit legislation is not
sufficient. We need to devise a more comprehensive solution.
Nothing illustrates the current challenges we face more than
time in transit, which remains a significant issue for UPS
customers. Since the passage of the Staggers Act, the
efficiency and speed of our Nation's transportation system
generally has increased. The lone exception, however, is the
railroad velocity, and demands on an already overburdened rail
network are increasing.
In recent years, UPS has invested billions of dollars on
technology, much of which is directly related to embedding
information on each individual package. Today we can provide
our customers a wealth of information regarding the status and
time and transit of a $6 package or an ocean-bound cargo
container. In contrast, the railroads lack the capacity to give
their customers information about trainloads of freight.
As noted earlier, however, this is not only an issue for
the Nation's railroads. UPS strongly believes this is an issue
critical to an array of constituency beyond the railroads
themselves: the major users, such as the Nation's farmers,
retailers, the mining industry and chemical manufacturers.
Looking forward, one concept that should be explored is the
notion of establishing a public-private partnership to help
fund a railroad infrastructure improvement projects.
I would ask the Committee to consider the following. The
Nation's highway system has a highway trust fund to support and
maintain a safe and efficient Federal highway system. The
Nation's airports have a aviation trust fund to support,
maintain and enhance airport infrastructure and provide
necessary capacity. If the existence of these two
transportation trust funds are deemed to be in the public
interest, why not a railroad trust fund or a similar, user-
funded mechanism?
We need a private-public investment plan to address the
serious challenges facing the industry. Wouldn't improving
railroad capacity, safety, infrastructure and technology be in
the best public interest? Yet the user-funded trust fund has
not gained traction, while service levels diminish and rates
continue to rise.
The railroad industry should be challenged to find a
mechanism that does meet its approval, because doing nothing is
not a viable option. Thank you.
Mr. LaTourette. Thank you very much, Mr. Wallace.
Mr. White, welcome. We look forward to hearing from you.
Mr. Wallace. Thank you, Mr. Chairman.
Mr. Chairman and members of the Subcommittee, my name is
John White. I am Vice President of Logistics for Buzzi Unicem
USA. We are a leading manufacturer of Portland cement in the
United States.
I appear today on behalf of the Portland Cement
Association, where I serve as Chairman of the Logistics
Committee. I appreciate the opportunity to testify and look
forward to a constructive dialogue addressing the need for
additional rail capacity and reasonable steps we believe are
necessary to improve--
Mr. LaTourette. Mr. White, could I ask you to move your
microphone a little closer to your mouth? Thank you very much.
Mr. White. Current rail policy and capacity constraints
impede cement manufacturers from effectively and efficiently
delivering an essential commodity needed to build our Nation's
infrastructure. With more than 80 percent of cement
manufacturing plants captive to a single railroad, the current
railroad policy is unnecessarily contributing to higher
construction costs.
The PCA is a trade association representing 31 cement
companies operating 102 manufacturing plants located in 36
States, accounting for 98 percent of the domestic cement-making
capacity. Portland cement is the powder that acts as a glue in
forming concrete. Nearly every construction project requires
Portland cement. In 2005, the U.S. consumed 127 million metric
tons of Portland cement.
Average cement shipments range between 250 and 300 miles.
However, truck transportation is not practical beyond 125
miles. As such, the cement industry is reliant on railroads to
deliver our product beyond the economical range of trucks,
which accounts for at least 50 percent of all shipments by
volume.
Several member companies report that they are charged
substantially higher rates at their captive locations versus
their dual rail serve facilities. Some of the cement industry's
inbound coal and raw materials are also captive, which results
in higher rail rates that add to the cost of cement and
ultimately the cost of construction.
Mr. Chairman, inconsistent service from the Class I
railroads is a serious problem the cement industry confronts in
bringing an affordable and essential product to market. The
rail cars supplied by the railroad are typically old and
frequently a safety concern. They are asking industry to
provide private or company-owned rail cars but cannot guarantee
a minimum level of service to help justify the cost of buying
and operating these cars.
The cement industry has no recourse regarding rates, since
cement is classified as an exempt product from rate regulation
by the STB. Since the STB has done little to address service
issues, we believe Congress should enact legislation expanding
the STB's authority in this area. The modest provisions
included in H.R. 2047 do not constitute re-regulation, a term
used by our friends in the railroad industry to overstate the
perceived negative impact of this legislation.
Mr. Chairman, the PCA believes that the intent of Congress
and the Staggers Act was only to regulate the railroads where
competition existed. Unfortunately, the implementation of the
Act has often resulted in deregulation where there is no
transportation competition.
One example of unintended consequences of the Staggers Act
involves a captive East Coast cement company that must
transport cement 300 miles by rail to its distribution
terminal. The applicable rail rate is so outrageously high, the
cement company concluded that importing cement all the way from
China to the East Coast was less expensive than shipping it 300
miles by rail. Additional examples are provided in our written
statements.
Cement consumption is expected to grow from 127 million
metric tons to 200 million metric tons by 2030. To meet this
demand, our industry currently is engaged in its most
aggressive capacity expansion in the history of the industry.
Despite our concern about captivity, market forces require we
expand existing facilities.
While the industry is committed to providing reliable and
adequate supplies of cement, these efforts are partially offset
by existing rail constraints. As the economy grows and more
cement capacity is put in place, it is likely that existing
rail constraints will be exaggerated, potentially leading to
the repeat of the large rate hikes we experienced in 2005.
PCA obviously supports increasing investment in the
Nation's rail infrastructure. As the Class I railroads report
profit increases, now is the time for them to bolster
investment, to expand capacity and improve their service,
especially to the captive shippers. PCA does not yet have a
position on the 25 percent tax credit proposal, but would be
inclined to support it if Class I railroads are required to
invest in capacity projects providing relief to the captive
shipper. This would be the most prudent use of taxpayer
dollars.
We also urge Congress to further examine the concept of the
railroad trust fund, similar to the highway trust fund, to
finance rail capacity.
Mr. Chairman, contractors utilizing cement in large scale
concrete paving projects, such as those authorized under the
SAFETEA-LU, need a reliable supply of cement to meet
construction timetables. Just as contractors expect timely
shipments of concrete from the cement company, it's the
obligation of the railroad, we believe, to deliver timely
shipments to us.
In conclusion, it is essential that the Portland cement
industry have access to a competitive rail transportation
system to ensure that our product is delivered in a timely and
efficient manner to our customers who are building the Nation's
critical infrastructure, fostering economic expansion. With
more than 80 percent of the cement manufacturing plants, and a
similar ratio to the industry's 400 distribution terminals,
they are held captive with a combined declining service. This
only adds to our Nation's construction costs.
Thank you for the opportunity to testify today, and I look
froward to questions.
Mr. LaTourette. Thank you very much, Mr. White.
Mr. Keith, welcome to you, and we look forward to hearing
your remarks.
Mr. Keith. Mr. Chairman and members of the Committee, rail
transportation is very important to the grain and feed
industry, as about 35 percent of all commercial grain movements
go by rail. The U.S. transportation system in the past has been
a competitive strength for U.S. agriculture in both domestic
and export markets. But it is turning into a competitive
weakness, as globally we are falling behind in infrastructure
investment, compared to our competitors, in particular, in
water and rail.
The current rail capacity shortage has all the signs of a
growing and chronic problem. We believe it is becoming a
serious issue, both for the private and public sectors, as
limitations on transportation capacity could well become an
impediment to growth in the overall U.S. economy.
The railroads of course have acknowledged the capacity
shortage and have announced higher levels of infrastructure
investment. But will it bring new capacity quickly enough?
In the past, Wall Street has punished railroads for
investing in infrastructure. We think, though, that this
current situation is different, as all the transportation
systems, water, rail and highway, are at or near capacity. But
will railroad management and Wall Street analysts correctly
perceive this as an opportunity for railroads to grow their
business with new investments, while still maintaining
profitability? We have our doubts.
The capacity crunch in rail has become most severe in the
last three years, and the various carriers have responded in
different ways, some more successful than others in serving
this new demand. Some carriers are up by as much as 20 percent
in car loads, some are as low as 5 percent gain in the last
three year period.
Clearly, and overall to solve the capacity crunch,
railroads need to invest in more engines, crews, build passing
lanes and double track some areas. These investments are going
to take some time.
We think the railroads might also want to review what they
might do operationally. The Canadian National, for example, has
done, has improved train velocity partly through a balanced
system of incentives and penalties for both the railroad and
the customers. This has resulted in an improved railroad-
customer cooperation and better operational performance.
One concern that we have from an agricultural perspective
is how much new investments will really benefit agricultural
shippers. In the latest capacity crunch, agriculture and food
shipments have not proven to be a high priority for rail
carriers. Intermodal and coal have both received higher
priority than agriculture in general
Also, grain in the past has been viewed as a commodity that
will wait on transportation in a freight shortage situation,
despite the need for grain to be delivered in a timely way to
obtain optimal value.
We are also concerned about how well shippers that are less
than unit train and shuttle size will be treated if the rail
capacity crunch continues or becomes worse. Clearly the unit
trains and shuttles are the most efficient way to move high
volumes. But there are some markets out there that simply
cannot justify those movements and that still need reasonable
rail service. We think there is a common carrier obligation
still under the law.
Some other points that we would like to make toward
possibly improving rail service in addition to infrastructure
investments, we would urge the railroads to reconsider some of
their policies toward shipper owned cars. A number of these
policies are one-sided and distort the incentives for
investment in equipment by rail customers that currently supply
over half the rail cars being used in our marketplace today.
Railroads also need to review their current fuel surcharge
programs to ensure they are fair. Some are clearly excessive.
Many accessorial charges now being imposed by carriers are
simply a drain on manpower in both the railroads' and
customers' business. Both of these issues, frankly, we believe,
are distractions, distractions that take away from the focus
needed by both carriers and their customers to improve rail
service and performance.
In conclusion, our industry remains very dependent on rail
service. We need a market responsive rail system. With the era
of cheap fuel appearing to be forever behind us, fuel efficient
carriers like railroads stand to reap long term benefits if the
necessary investments are made to serve the growing demand
base.
Thank you.
Mr. LaTourette. Thank you very much, Mr. Keith.
My neighbor to the east in Erie, Pennsylvania, is
Congressman English. It is a pleasure to meet another one.
Thank you for coming here today and we look forward to hearing
from you.
Mr. English. Thank you very much, Mr. Chairman. I
appreciate that, and it is certainly a pleasure to be here and
have an opportunity to visit with you a little bit about this
issue.
Last month I visited with some of the folks over at
Homeland Security, talking about the lessons we had learned
from responding to Rita and Katrina and how things might be
done better. One of the officials there made the point to me
that one lesson that they had learned is that the critical
element in the response was electricity. And until you got the
power turned on, a lot of other things didn't work. And I am
afraid far too often, that is something that is not recognized
and I think in the future, that is going to be a priority as
far as homeland security and the way that we respond to some of
these challenges.
As far as that electric power is concerned, roughly half of
all the power in this Country, whether it is electric
cooperatives or the municipals or investor owned utilities, is
generated through the use of coal. Coal is the fuel, and it is
the cheapest fuel. And in fact today, we know that coal is
cheaper to buy than it is to ship to the destinations where it
is used to generate electric power.
Now, 25 years ago, when Mr. Oberstar and I were here, and
the Staggers Act was being passed, we had a far different
situation than we do today. At that time, as Mr. Oberstar
pointed out, we had roughly 60 railroads around this Country
who were delivering that coal to those generating plants. Today
we only have four Class I railroads left, and I think three
others that operate on a regional basis, as I understand it.
That is a far different world than it was 25 years ago.
Twenty-five years ago, Chairman Staggers had it in mind that
the Interstate Commerce Commission was going to be able to deal
with the problem that he understood would come out of the
Staggers Act; namely, that you were going to have a portion of
the shippers in this Country who were in fact not going to have
access to competition. And for that reason, he provided that
authority to the Interstate Commerce Commission, and of course
that has been passed on now to the Surface Transportation
Board.
Twenty-five years ago, Chairman Staggers assumed there
would be competition among all these railroads. And with only
four Class I railroads, there virtually is no competition. What
in fact we are dealing with today are monopolies. And I think
that it is important for the Congress to recognize and to deal
with that.
Now, we have complained for some time about the problems of
shipping, those of us who are captive shippers, shipping where
there is no competition and what that has done to the rates. We
have in some cases rates 300 and 400 percent profits being made
off of captive shippers. And that is abuse.
But today we have an additional problem, and that is
raising the question as to whether or not railroads are going
to be able to meet the demand of moving coal to these plants.
The Vice President has just pointed out about three years ago
in order for electricity to meet the needs of the Country's
rising demand, to meet our growth, that we are going to have a
power plant a week come online in order to meet those needs for
the next 20 years.
Now, the decision for us is this question: should in fact
those plants be coal-fired? Can they be coal-fired? And if they
are not coal-fired, what happens to the rates that the American
consumer is going to have to pay? And we have a serious
question in our mind today, Mr. Chairman, whether there is in
fact going to, those needs are going to be met by America's
railroads, whether they can meet those needs. Because quite
frankly, they are not doing it in a timely manner today.
I would also point out, in the electric utility industry,
we have an obligation to serve. And I would suggest to you with
only four Class I railroads left in this Country, and given the
fact that this has become such a vital ingredient, this is the
only way we can move coal to those generating plants, that if
they do meet the same kind of importance to the economy to this
Nation that the electric utilities do, and that they should
have the same requirement, namely, an obligation to serve.
If the Congress is going to move forward, if the Congress
is going to provide assistance to the railroads to in fact
improve the structure, and there needs to be improvement, I
wholeheartedly agree with that, then I would also suggest to
you, Mr. Chairman, that there is no free lunch and there
shouldn't be a free lunch handed out by the Congress. And in
fact, there should be this obligation to serve as a part of the
understanding.
And that obligation to serve should begin with providing
relief, and I am talking about in the form of transportation,
to those who are captive shippers, as well as to those in the
rest of this Country, the rest of this Nation's economy, before
we give preference to those overseas, namely those cargo
containers that are coming in from foreign countries.
Mr. Chairman, this is becoming a very important thing, and
I think your hearing is very timely. I would also suggest that
this is probably an item on the agenda that is going to reach a
priority that we have not yet seen.
So I commend you for the hearing, and we are ready to help
this Subcommittee in taking care of this problem.
Mr. LaTourette. I thank you very much for your excellent
statement and observation.
I thank all of you for your observations today. I want to
focus on this notion of a trust fund first, that Mr. White and
Mr. Wallace talked about. I assume you were in the room when we
had the first panel, and I not only serve on this Subcommittee,
but also on the Water Resources Subcommittee. There is some
discussion in this Country about whether or not we need to have
a water infrastructure trust fund at this moment in time.
And then you always get to the $64 question: where does the
money come from? I don't know if it is easy or not, but we have
relied in the Highway Trust Fund on the Federal excise tax
since the formation of the system, at 18 and some cents. When
you talk about water trust fund, does it come from the people
that manufacturer flushables? The bottled water people are
scared to death it is going to come from them.
And so when you talk about a rail trust fund, I am
wondering if, and let me throw it open to Mr. Wallace and Mr.
White, and then ask you, Mr. Martland, if you have thought of
this as one of the ways that we could address this problem.
Have you given any thought as to how we are going to raise the
money to go into the trust fund?
And in line with, Mr. Hamberger was here, he talked about
the fact that, and I think that it is right--he is still here--
that if you say, okay, well, let's put an excise tax on fuel, I
don't know how that is putting new money into the system. But
Mr. Wallace, have you given any thought as to how we would fund
a freight rail or a rail trust fund?
Mr. Wallace. Yes, Mr. Chairman. Our thought is that
shippers, like UPS, would contribute via some type of a user
fee. And while we can't give you the specifics at this time,
and certainly that would need to be worked out, this would be
in an effort to create a public-private arrangement to ensure
that we are investing in railroad infrastructure improvement
projects.
Our position at UPS is that we don't have the specifics at
this time, but we would certainly be willing in working with
this Committee to helping to develop that process.
Mr. LaTourette. So Mr. Hamberger, at least in the case of
UPS, is wrong, you would be willing to pay higher rates as long
as some of the higher rates went to infrastructure
improvements, is that right?
Mr. Wallace. We need to improve the fluidity of the
network. We need a solution. So if it came to that, then we
would be willing to pay more fees towards infrastructure
improvement.
Mr. LaTourette. Mr. White, how about you and the cement
folks? How do you feel about that?
Mr. White. I think you will find that the cement industry
is also a heavy user of the inland waterways. Most of the
cement companies belong to the American Waterways Association.
I think like UPS, we don't have a specific funding methodology.
Our idea on the trust fund relies more on the fact that it
would target where that type of funding would be applied. It
would be trackable and it would be discernable to Congress.
And it would allow us to, as an industry on the user side
and as an operator from the railroad side, to target areas
where we think as a group these investments need to be made.
Because some of them are regional, but many of them are on a
very national basis, much like the infrastructure on the locks
and dams. They benefit a large variety of people that don't
even know they touch, that type of improvement.
So whether it is a user fee like we have on the waterways,
some type of tax or even something in the rate. I am getting
higher rates anyway. If I could put some tangible benefit to
that rate, it would certainly be more palatable to sell to my
board of directors than telling them I am paying higher rates
but I don't have a definitive plan on what that is going to get
me.
Mr. LaTourette. Let me ask you both this before I turn to
Mr. Martland for his observations as to whether this is sort of
the public participation he was thinking about. There are two
things that I think haven't been discussed. One is, I think I
asked Mr. Rose about it but the other one I didn't. But the RIF
infrastructure loan program allows currently joint venture loan
applications by a railroad and just about anybody else. And so
have either of your organizations considered partnering with
one of the railroads for a RIF loan application that would
specifically be designed to create improvements that benefit
that carrier and the major shipper?
And secondly, the question I did ask Mr. Rose, is why
can't, in the long term contracts that were first authorized in
the Staggers Act, be used creatively to include a contribution
by the shipper to be dedicated to specific infrastructure
improvements on the lines that you use? Have either of you
given that any thought? Mr. Wallace?
Mr. Wallace. Well, unfortunately in the case of both of
those points, I have not been involved in discussion on either
one of those. Although on your second point in regards to
putting into the rate additional dollars that would go directly
toward infrastructure improvement, I think that would be
something that we would be willing to explore and understand
exactly how that would work, particularly if we were sure it
was going to bring benefit to improving the overall performance
of the network.
Mr. LaTourette. Mr. White?
Mr. White. Our industry has looked at that. We continue to
fall back to the point that where we have the capacity
constraints are not in areas specifically served in the first
60 to 80 miles coming out of our plants. We have 10 plants in
the United States, 5 of them are served by short lines for the
first 15 to 25 miles, until they reach the Class Is. So for us,
we weren't really sure if that type of creative investment did
anything for us. Because what we are seeing, the congestions
are in the major areas, Kansas City, the southern part of the
United States, over toward the East Coast. So it did not
initially look like a mechanism for us that would work.
Mr. LaTourette. Let me ask you this, because you also
raised the issue of captive shippers. My understanding is that
one of the new options by the RIF program that was created
permits captive shippers that are only served by one railroad
to also access the RIF loan program. Have any members of your
association who may have a close proximity to a second railroad
explored that opportunity that you are aware of?
Mr. White. We are only aware of one member company that is
currently trying to do something similar. Since I don't have
the specifics, I think their problem isn't a funding problem. I
think their problem is a right of way problem. They have
another railroad that is within some distance of them, but the
only right of way available without buying private right of way
and creating a new corridor is to put it next to one of the
existing Class Is. I think there is some legal entanglement in
that right now.
Mr. LaTourette. If you would be so kind, after this
hearing, could you may supply this Subcommittee with the
specifics of that example that you are talking about?
Mr. White. I would be happy to.
Mr. LaTourette. And then my last question, Mr. Martland,
when you talk about where we are today versus where we were
before and the increase in wait times and yard times and
everything else, I thought I understood you to say that this is
a legitimate public interest, public sector interest to be
involved in now. What do you envision, how do you envision the
public getting involved? Is it the trust fund? Is it the RIF
loan program? Is it the contract rates? Or is it something else
that you see, a tax?
Mr. Martland. I think I would agree with Administrator
Boardman, who said that there are many possible ways to finance
the improvements. I think that the different ways should be
studied, we should have some analysis with all the different
perspectives included.
The point I would make is that since deregulation in the
last 25 years, there has been a tremendous, tremendous benefit
to the public through the reductions in rates passed on to the
customers. I keep listening carefully, and what I hear are
concerns with equity, inequitable increases in rates, more than
the rate level. The rate levels are much lower than they were,
and the amount of money, $20 billion to $25 billion a year,
according to my studies, is more than enough to fund the
grandest of vision that anybody is talking about.
So I think that it is worthwhile to consider the tax
credits. I think it is worthwhile to consider direct
investment, whatever. But I think the private sector makes a
very strong case that they are the ones who can identify the
bottlenecks and work on the freight and work with the customers
and that why make it more complicated than it is.
What is really lacking is a way to get the public dollars
into the rail system. We have heard people talk for the
commuter rail and the clarification of the urban networks, as
in Chicago. And I think that that is an area where some
mechanism to get general public dollars into the sections of
the rail system that would not necessarily be upgraded by the
freight railroads themselves. And probably the best way to do
that is to have some mechanism for coordination.
Mr. LaTourette. I tend to agree with you on that last
point. I happen to be a huge fan of the Highway Trust Fund. I
think that most members of this Committee would think that
members of Congress are in a better position to identify high
priority highway projects in their districts than perhaps the
Secretary of Transportation or the head of their department of
transportation.
But the one concern that I think I do have about this
freight rail or rail trust fund is that I don't think I am in a
better position to figure out or would be able to say that all
the money for choke points should come to Cleveland, Ohio,
because I happen to be there. I think that the private sector
may be better able to assess that.
But thank you very much. Ms. Brown.
Ms. Brown. Thank you, Mr. Chairman.
I think I am going to yield my time to Mr. Oberstar, but I
do have a question for Mr. Wallace. Mr. Wallace, I understand
recently that UPS has taken some of their business off of the
railroads. Can you talk about that? And briefly, can you all
tell me what you think about the 25 percent tax incentive? Is
it enough, or do you agree with it? Starting with you, Mr.
Wallace.
Mr. Wallace. Yes. We recently rolled out an initiative that
we referred to as fast lane. And basically that is to improve
time and transit from point to point for ground packages. And
in doing so, in order for us to achieve that objective, we did
remove about 300,000 packages per day from the rail network,
simply because the rail network doesn't currently have the
capability to move as fast as we would need them to. So
therefore, we had to go to the ground transportation for that.
Ms. Brown. How many additional trucks did that put on the
road?
Mr. Wallace. That added, on a daily basis, over 600 trucks
per day.
Ms. Brown. That's a problem.
Mr. Wallace. In regard to the tax credit, conceptually it
sounds good. However, the problem is we are not sure what type
of impact it would really make. And financially, the railroads
have had some very good years recently. We think that
additional investment, additional capital investment is where
we need to start in lieu of a tax credit.
Ms. Brown. I thought the 25 percent tax credit would be to
increase the, to expand that investment, it had to go for that.
Mr. Wallace. Well, I have to tell you that I am not
familiar enough with exactly how that would be applied to
acknowledge that.
Ms. Brown. Well, I just want you to know that I am
concerned about this 600 additional trucks that was put on the
road. That is something that I guess the Committee is talking
about how we can resolve some of these issues.
Mr. White?
Mr. White. The PCA has not taken a final position on the
tax credit. It looks like a method that could work. One of the
things again that we are most interested in is, are these
monies going to be applied to relieve some of the congested
areas and give some of the captive shippers some relief. If you
can make a tie to that, I think you would find our organization
could get behind that proposal.
Ms. Brown. I am coming to you, Mr. English. Nice meeting
you, sir.
Mr. English. Thank you very much.
I think there is a little bit of a political problem here
that the Congress may have to wrestle with on this. I think it
is a good idea as has been pointed out, if we are going to deal
with the problems, if in fact we are going to deal with the
infrastructure, if in fact we are going to deal with the whole
question of captive shippers, if we are going to look at making
sure that we are able to make the deliveries on time and meet
capacity needs for the future.
However, I think the railroads have to invest something
too. And I think they have not demonstrated at this particular
point that they are willing to do that. I notice here Business
Week on April 3rd, the top performers, the S&P 500, number 12
was Burlington Northern Santa Fe. One year return of 58.5
percent and a three year return of 230.3 percent. We have the
same thing with Norfolk Southern at number 46, one year return
at 44.5 percent, and a three year return of 179.7 percent.
Well, are they investing this money in infrastructure? Are
they in fact trying to relieve the captive shipper problem? And
is the Surface Transportation Board doing its job when in fact
it takes $4 million with one of our members, spent $4 million
just to get before the Surface Transportation Board and got
dismissed. We had another member that wrote in, complaining
with regard to one of the railroads, to the Surface
Transportation Board, and the people that responded was the
president of the railroad, not the Surface Transportation Board
members.
Now, something is amiss here, and I think these kinds of
issues have to be addressed if in fact the taxpayers are going
to be putting money up. I think that the Congress is going to
have to be able to go to the American people and say, yes, we
are going to clean up these problems and take care of these
problems. And it means that the railroads are going to invest
as well as the American people. It has to be a Wall Street and
Main Street type of effort here.
Ms. Brown. Yes, sir.
I yield back the balance of my time.
Mr. LaTourette. I thank the gentlelady very much.
Congressman English, I just want to insert in the record, we
were obviously, in your testimony, concerned about the letter
going to the STB. I think that the president of BNSF responded.
I am told by Mr. Nober, who is a former associate of all of us,
worked here on the Committee, that his belief is that the
letter was copied to the Surface Transportation Board and did
not go directly to them. But if you have a different set of
facts, if you could get that to the Subcommittee, I know we
would be happy to take it up with Mr. Nober.
Mr. English. I was shocked about this, Mr. Chairman, and we
will be happy to provide that for the record for you.
Mr. LaTourette. Okay. I thank you very much.
Mr. Bachus, did you have some questions?
Mr. Bachus. Thank you.
Mr. Martland, reading your testimony, I notice you
highlighted the delay time in rail yards as being very
significant, and has actually increased since the 1980s and is
now up to 20 or 30 hours.
Mr. Martland. Yes, sir.
Mr. Bachus. You might think that the merger of railroads
would actually have quickened that time. But I mean, it has
not. Is that sort of a surprise? You would think with less
railroads, you would get more efficiency.
Mr. Martland. As you try to consolidate the system, you get
more and more lines going into the same junctions. And you
have, the railroad lines of 1980 were capable of handling maybe
40 or 50 million gross tons per year. And the ones we have
today can handle 100, 150 or more. So the you have even bigger
arteries going into the same heart. I think that's the basic
problem.
Mr. Bachus. Now, just in the last year or two, the
railroads have started spending a lot of money on expanding
their yard capacities, is that correct?
Mr. Martland. I know that they continue to invest very
heavily in intermodal. I don't have specifics about recent
investments.
Mr. Bachus. Let me read for all of you, we have talked
about profits, and Congressman English, you were talking about
the railroads are making record profits recently. I would agree
with you in the last year or two. But on page four of Mr.
Martland's testimony, he actually says, the average revenue per
ton mile declined every year from 1983 to 2001. In constant
dollar terms, average revenue per ton mile began to rise only
in 2004.
So you have actually had declining rates with deregulation
every year from 1983 through 2001.
Mr. English. The 20 percent of us who are customers of the
railroads that are stranded shippers have not seen anything
like that. What we are negotiating now with regard to our coal
contracts, we are seeing huge escalations. That is the issue,
the part of the problem here that we see is, you go back to the
Staggers Act and what was intended, this kind of abuse was
never intended. And we are just not seeing any kind of response
or addressing of that problem, and we are seeing these huge
escalations come once again.
And now we have an energy problem facing this Country. We
have electric rates, you probably heard up here at Baltimore
Gas and Electric, they put caps on that State, and I think
maybe it is the State doing it. But they are going to have a 50
percent increase in rates.
We are going to have cases right now in which deliveries
are not arriving at the generating plants. We have several of
our folks that are in single digits as far as the number of
days supply they have left. And they have to use natural gas or
buy on the open market.
Now, natural gas will run anywhere from 7 to 9 percent, or
7 to 9 times higher in price. So all this stuff I think comes
in and--
Mr. Bachus. Well, now, I agree, obviously there is a
capacity restraint, there is a velocity restraint.
Mr. English. We need to address that.
Mr. Bachus. I guess what I am sort of puzzled by, the
shippers not saying tax incentives would be a great thing.
Mr. English. If you read my testimony, I said that we would
be willing to go along with tax incentives if in fact we are
going to address the problem. We would be supportive of doing
that if the railroads are going to invest their money in this
thing. I think they ought to put something up.
And also, I think we get back to the same issue here, and
Mr. Chairman, I would say that this industry is vital. It is
vital to this Country's economic health and I think that we
have to recognize that and we have to come to grips with it. I
think that is what makes it worth the American people investing
in it.
But along with that, the railroads have an obligation to
help this Country meet its needs, its energy needs and other
needs. And it is vital to us, and we have to come to grips with
that.
So there needs to be an adjustment made. It has been 25
years since Staggers. I hope that this Committee will come to
grips with that. I hope we can get some investment tax credit.
I am hopeful that we are going to see the inequities eliminated
and we see some new structure. And I hope also that we get the
Surface Transportation Board to make some interpretation of the
Staggers Act that allows stranded shippers, when they get to
the point where they can compete, to be given that opportunity.
And they are not given that today.
Mr. Bachus. Seeing Mr. Martland's testimony, he says the
rail industry is investing heavily in capacity, but individual
railroads will concentrate their limited funds on what they
perceive to be the most profitable market segments.
Mr. English. And I think that is a key issue. Because we
get into this question, if this is a vital industry, if we are
down to four Class I carriers in this Country, and this
Country's economic health depends on that, and if the United
States Government is going to assist the railroads in fixing
this infrastructure because it is in the best interest of the
Country, there has to be reckoning that comes to be bear here.
And I think that it is not just in the areas where you can make
the most money, and because of the fact we squeeze this thing
down to where, the heck with those folks that we can't make the
most money, there is an obligation to take care of the--
Mr. Bachus. I understand what you are saying. But you do
get into problems when you start telling industries you will
invest in this as opposed to that. Any time, and I think you
will agree, any time you add regulations or control, you
usually diminish profits.
Mr. English. Well, then, there shouldn't be any assistance
from the United States Government. There is no free lunch. And
if we are getting to the point that the United States
Government is going to take taxpayer money and going to fork
out taxpayer money to help the railroad, but the railroads
don't have to do anything, hey, we want a little of that over
in the electric utility industry. We have obligations. There is
an understanding that is reached.
If this is a vital national interest, if in fact the
taxpayer is going to help out, and if we are going to get this
thing straightened out, then we have an obligation or the
railroads have an obligation then to serve this Country and to
help meet the needs of this Country. Whether it is national
defense, you ought to bring some folks over from the Department
of Defense and see what kinds of difficulties they are running
into in getting their equipment to the shores where they can
ship it overseas. I understand there are great difficulties
over that.
But all this is a national--
Mr. Bachus. I think we all agree that--
Mr. English. Well, let's fix it.
Mr. Bachus.--it is a problem, and we ought to fix it. But I
am just saying that tax incentives, the Congressional Budget
Office has studied this. Now, I just say maybe do you agree or
disagree with this? Because I think this kind of debate is very
helpful. Let me read their statement to you.
``As demand increases, the railroad's ability to generate
profits from which to finance new investments will be critical.
Profits are key to increasing capacity, because they provide
both the incentives and the means to make new investments.''
And I believe in competition. But if there is no
competition, and there is a monopoly, then the question comes
in, a question of abuse. And there is a difference between
making a profit and abusing people who are held captive and
they are held hostage and they are under a monopoly. And we
have a monopoly situation developing here, and that is not in
the best interest of this Country.
Is the main problem--
Mr. LaTourette. Mr. Bachus, could I ask you to make this
your last question?
Mr. Bachus. Yes. Is the problem the rates, the shipping
rates, or is the problem capacity? Those are two different
problems.
Mr. English. I think we have several issues that are coming
together.
Mr. Bachus. And if you are talking about shipping rates,
that would be where they are making a profit. If you are
talking about capacity or velocity--
Mr. English. Right.
Mr. Bachus. That is not because you are a captive shipper.
Mr. English. That is right. Where you have competition, it
is my understanding that the rate return is about 6 to 8
percent. And goodness knows, that is fair. Where yo have
captive shippers, those 20 percent of us that are captive
shippers, with the new contracts that are being negotiated, it
is my understanding you are up to a 400 percent return. Now,
that is abusing folks.
You have a problem with regard to being able to make
deliveries on time, and that is killing us. And that may be
more important than the profits at this point.
So yes, I think we need to respond to that, and that is the
reason we say hey, if we can get this thing straightened out
and take care of the infrastructure of the railroads and the
railroads are willing to invest some money and help us take
care of the economy of this Country, let's do it. Let's help
them.
Mr. Bachus. The rates have declined every year until 2004.
Mr. English. Where there is competition.
Mr. Bachus. They didn't for captive shippers.
Mr. English. And we have had long term contracts with
regard to coal. And those contracts are expiring. That is where
we are really seeing the big jumps.
Mr. Bachus. And could you give us some of those figures?
Mr. English. Be happy to do it. Appreciate your interest.
Mr. Bachus. And you are Jan English's husband, right?
Mr. English. That is who I am known about in this town,
yes, I am known as Jan English's husband.
Mr. Bachus. She is chairman of the First Lady's luncheon
this week, so I would say you are having a very difficult week.
[Laughter.]
Mr. English. Under tremendous stress and strain, you
understand.
Mr. LaTourette. Thank you, Mr. Bachus. Our last questions
today will be asked by Mr. Oberstar.
Mr. Oberstar. Thank you, Mr. Chairman.
I think this last exchange was one of the most productive
all day. I enjoyed listening to the discussion. And again, I
compliment you and Ms. Brown on scheduling these hearings and
the preparation that has gone into their development.
Congressman English, you raised the issue that has been
lurking in the background here for this whole hearing, and that
is, the obligation to serve. The common carrier responsibility.
When in the nineteenth century the Federal Government
created, in effect, the rail industry in America, it was for
public interest service and necessity. Railroads got every
other section of rail, some cases more than that, of land, in
which to run their rail lines. And the mineral rights. And the
wood fiber rights, to log the woodlands to make the railroad
ties. They extracted ballast from gravel pits along the way to
build the trackage.
And they did that out of the public interest, convenience
and necessity, to serve. But what we heard from the railroad
sector testimony was this clash of Wall Street investments,
profitability, return on equity, return on investment, and very
little in the testimony, you have to take a microscope to find
our obligation to serve the public.
Now, each of you witnesses has raised a different aspect of
the service responsibility. In the law, the Surface
Transportation Board, successor to the Interstate Commerce
Commission, provides that rail carriers shall provide any
person on request, carrier's rates and other service terms in
writing, electronically. The transportation of agricultural
products, carriers shall publish, make available, retain for
public inspection the common carrier rate, schedule of service
and other service terms.
There is really very little in the law that says what
quality of service. That was left to the Interstate Commerce
Commission.
Now, further on, in use of terminal facilities, the board
may establish conditions and compensation for use of
facilities. The board has done very little in the obligation to
serve. And in your testimony, Mr. English, Congressman, there
is ``effectively no Government agency to which rail customers
can turn for redress, even when severe rail service problems
are being experienced.''
Now, the bill that I introduced with a number of other co-
sponsors, and that was rather roundly attacked in the rail
testimony earlier today, is not re-regulation. It is just an
attempt to restore the public service content of the
responsibly the railroads have to the public. They have a
responsibility to the public, and not only to the shareholders.
Not only to Wall Street. Wall Street doesn't receive product
from the railroads, but our power companies do. Concrete ready
mix association does. The producers of agricultural products
do.
And when, as the PCA, Portland Cement Association,
testimony says, Class I railroads have refused to add cement
rail cars to their fleets. Isn't that a service obligation?
Isn't that a public responsibility on the part of the
railroads? It is not only profit driving this. Profit is vital
to their operation. But so is public service.
Your members report as much as 15 percent of empty rail
cards delivered to manufacturing plants are being rejected. And
that railroads add tariff provisions, charging for storage,
that is demurrage, of private rail cars and then they refuse to
carry them and move them.
I think we need to further explore, Mr. Chairman, this
common carrier obligation of the railroads, which they don't
like to talk about, but which is their core responsibility.
Mr. English?
Mr. English. Congressman Oberstar, I think there is a
balance to be struck here between Wall Street and Main Street.
And this is a vital industry, just as the electric utility
industry is a vital industry. And I think it is up to the
Congress to deal with the realities of today as opposed to the
way things were 25 years ago.
I have been around this town long enough that, and
certainly on this issue have seen enough of it, I remember how
it was in 1980. And there is no question the railroads needed
help. And it was recognized, they play such a vital role in
this Country that we have to do something.
Deregulation, the district that I represented at that time
was very rural. We lost our airline service with airline
deregulation. We lost our bus services as a result of bus
deregulation. We lost our trucking service because of trucking
deregulation. And I was scared to death when it came up with
regard to this issue what was going to happen to us.
But certainly we all recognized and understood, we
desperately need rail service and we need the railroads and we
need them just as much today as we did back then. And I think
there was a recognition of that throughout the entire
Government--Democrats, Republicans, Congress, the
Administration. And we put in process here a way of rescuing
the railroads. And I think it has been very successful, over 25
years, you look at these returns and you look at Wall Street.
Railroad is on the cover of FOrbes Magazine in February talking
about, this is the best investment going. We hit the promised
land.
If you go back to 1980 and what Chairman Staggers saw and
he was trying to do, not all of it has worked as well as that.
Those of us who are stranded shippers, it hasn't worked the way
he intended. But I think we have reached a new plateau. And I
think we have to understand that our infrastructure is vital
for the railroads. And we have to understand that we need a
very healthy rail system in this Country. And we have vital
industries that are heavily dependent on the railroads, and
they are only going to be able to do their job if in fact the
railroads are healthy and profitable and being successful.
Mr. Oberstar. I agree with that, and you have stated the
case very well. But maximization of profit to the exclusion of
public service is contrary to the concept upon which the
railroad sector was created in the public interest by the
Federal Government.
And one of, what we are trying to address in this
legislation that I have introduced to reinstate competition and
rephrase competition, one of the obstacles is the bottleneck
rule that I am sure each of you in the grain and cement sector
has unfortunately encountered. Mr. Wallace, Mr. White, Mr.
Keith, do you have some examples that you would like to share
with us?
Mr. Keith. Bottleneck issues are an issue at some locations
for agricultural shippers. They are not so severe as in some
other industries, though. We have switching issues that are
competition issues and some other things. But the bottleneck
per se is not as big an issue for ag. But I know it is for some
other sectors.
Mr. Oberstar. What about rail car availability?
Mr. Keith. Rail car service in particular, where there are
captive shippers, has proven to be a difficult situation, in
particular, last year with Katrina and so forth. And really, to
the extent we can't get timely service, it tends to run up
Government costs to farm programs because of our loan
deficiency payments. So we do need to solve that problem.
Mr. Oberstar. Mr. White?
Mr. White. I can speak for my company. What we have done is
we have simply purchased an entire private fleet of rail cars.
We don't rely on the railroad to provide any cars. We currently
own about 1,250 cars. Most of the rest of our industry does
that.
We have determined that that part of the capital investment
in the overall delivery of our products is going to have to be
made by our company. The railroads are investing in rail cars,
just not in cars that haul cement. And we came to a meeting of
minds with that with the railroads. What we need now is, and
part of what we have asked for and the legislation provides is,
if we are going to make this capital investment as a partner
with them, give us some level of service that we can depend on
for the movement of those cars.
You have asked me to make a substantial investment.
Guarantee me that you will move them in a predictable, reliable
and efficient manner. And you won't hear me complain about my
investment in the cars. But don't do that and then I have a
major problem.
Mr. Oberstar. Do you know whether the barge lines partner
with their customers to have a customer acquire a barge?
Mr. White. Yes, sir. Our company also owns about 60 barges.
And it is a very similar relationship. We go to the barge lines
and we come to an agreement on how we are going to move a
product. I do, oddly enough, agree with the railroad on one
side. The river is there for anybody who wants to use it. There
is no barrier of entry. The highways are there, there is no
barrier of entry.
It is expensive to build a piece of railroad. And I know
that, as an industry, we build it. And that is why some of the
creative alternatives, tax credit, the trust fund, I think are
really good ideas. I just want to make sure they are coupled
with some type of service and opportunities to go before the
STB when there is a problem, so that the railroad and the
industry can resolve them together. We don't hate the
railroads. We like the railroads. We need them to be profitable
and we need to have good infrastructure.
On a larger basis, as a Nation, I think the Federal
Government is going to have to help the railroads get to some
level of development that supports the Amtrak and the public
transportation that we are all going to need if we are going to
pay $3.50 a gallon for gas. We are going to need to ride on
trains.
Mr. Oberstar. That is a good, thoughtful, balanced approach
and one that I embrace. Because you equate service and
investment and the need for profitability. The Surface
Transportation Board, along with the railroads, have justified
higher costs and higher rate of return for railroads from bulk
shippers, grain and coal and chemicals. That helps them to
profitability, to be able to provide other service to less,
lower profit centers in their service network.
And we do have to, because of the structure we have
created, the Federal Government does not own the rail beds, but
in creating the railroads, they get an enormous benefit,
mineral rights, land rights, timber rights, over many, many
decades. They have and uniquely shoulder the obligation to
serve. It is a balancing act.
Mr. Wallace?
Mr. Wallace. In terms of bottlenecks, if you are describing
that as the same as congestion, then clearly that is a
significant problem that we have experienced as users of the
railroad. There is a very significant number of service
failures that we experience that are associated with congestion
and bottleneck problems. Certainly that is what we are
interested in seeing improvement in, is increasing the fluidity
of the network, so that we can get back to the service levels
we were achieving and had achieved for 25 years. We are very
dependent upon the railroads and have good working
relationships. We are looking for solutions to help them solve
that issue.
In terms of availability of equipment, such as flat cars,
that is not a problem for us. Although rail trailers has been
more challenging, getting rail trailers, which we use heavily,
has been more challenging. The railroads have a different
strategy as it comes to managing rail trailers. That has
changed how we have to operate and put a little bit of a burden
on us.
Mr. Oberstar. Mr. Martland, do you have any summary
observations on these issues?
Mr. Martland. One thought that has occurred to me is that
as we go back to 1980, or 1970, we had the problem of the light
density lines. There were tremendous battles in the Congress
and the ICC about how to deal with that problem. And the way it
was solved is, Congress said in the 3R4R Act somewhere, okay,
if somebody wants that line to remain in service, put some
money in up. If you don't put the money up, then no line.
And the Federal Government said, well, we will put up some
money that will last for a few years, where the States can buy
the lines or subsidize the lines, and then that money would
come to an end.
Commuter rail, many cases now that the States just, or the
MPOs contract with the railroads or with Amtrak to provide the
service. They are not trying to make a profit out of the fare
box. And I think we, in the discussion of public benefits, I
think the public agencies, at the State, local and Federal
level, have to figure out what are these public benefits worth
and then pay enough to get sufficient benefits to justify the
public investment.
And in that way, the railroads are still doing what they do
best. They would get revenue for certain services, they would
identify the bottlenecks and they would deal with the
bottlenecks.
Mr. Oberstar. Thank you. Mr. Chairman, this has been a
very, very productive session. The written testimony is very
much in-depth, unlike much of what we see over the course of a
hearing here, in not only this but other Subcommittees as well,
and very useful documentation.
And the response has been very substantial. You have been
generous with the time so that we can explore issues at length.
We need to continue this dialogue, and we need to explore
further and dig deeper into how we can unlock this grid that is
choking America. The trucking sector doesn't have enough
capacity to move the goods that are foisted upon it. They are
trying to ship trailers on the rails. The rails don't have
enough capacity to haul the trailers. They want the trucking
sector to take more of its responsibility. The barges can't go
everywhere, because waterways are limited by their pathways.
And more goods are coming into our ports every year. The
Chinese now have launched the Chinese Shipping Company, COSCO,
its 9,000 container vessel, 1,000 footer, that is going to add
to our congestion on the West Coast ports. They can't put in on
the East Coast ports.
The railroads are now in a period of profitability. Clearly
they need some help in making the capital investments that are
required. The public needs help too, with the service issues
that have surfaced. I thank you very much.
Mr. LaTourette. I thank you very much.
One of the reasons that I enjoy serving on this Committee
so much is because you happen to be the Ranking Member of the
full Committee, and there isn't a hearing that goes by that I
don't learn something from your participation. So I thank you
very much.
This was an important hearing, and I want to thank the
Ranking Member of the Subcommittee for making it possible. And
it does add, if it was easy I guess we would have solved the
problem.
At our next hearing, we are going to be dealing
tangentially with the railroads' common carrier responsibility,
and on that subject we are going to be dealing with hazardous
materials and the movements and the economies of scale with
that as well. So I look forward to the gentleman's
participation there, too.
Ms. Brown?
Ms. Brown. I just wanted to say thank you, Mr. Chairman,
and Mr. Oberstar and other members that have come and
participated. And of course, to all the panelists.
In closing let me just say, recently I had a hearing in
Jacksonville, where a lot of the citizens came to see me about
the port, very excited that we are getting a new Asian carrier
that is going to be working out of the Port of Jacksonville. It
is less than a half mile from my house. That will bring about
1,600 huge tractor trailer trucks. And I said, well, what is
wrong with the railroads, which is there, the facilities? They
said, well, it will take them two days to do something that is
15 minutes away.
That is unacceptable. All of those players have to come to
the table and sit down and talk and figure out how we can work
this out. So if we know issues beforehand, how we are going to
best serve the public, then this is one of the reasons why this
Committee may be coming up with some additional funding. But we
certainly have to work to the needs of the community and
provide the--we are all excited about these jobs, it is going
to provide 5,000 new jobs and X amount of income. But 1,600
tractor trailers, trucks, every day, that is unacceptable.
Mr. LaTourette. I thank the gentlelady very much.
I want to thank all the members for participating today. I
want to thank this third panel for your testimony and adding to
our body of knowledge.
Not to single anybody out, but I have been at this only for
12 years, not the number of years Mr. Oberstar has, but Mr.
Martland, I found your testimony to be some of the most
informative I have read in those 12 years. I thank you for your
body of work. I thank you all for coming today, and you go with
our thanks.
[Whereupon, at 1:45 p.m., the subcommittee was adjourned.]
[GRAPHIC] [TIFF OMITTED] 28281.006
[GRAPHIC] [TIFF OMITTED] 28281.007
[GRAPHIC] [TIFF OMITTED] 28281.008
[GRAPHIC] [TIFF OMITTED] 28281.009
[GRAPHIC] [TIFF OMITTED] 28281.010
[GRAPHIC] [TIFF OMITTED] 28281.011
[GRAPHIC] [TIFF OMITTED] 28281.012
[GRAPHIC] [TIFF OMITTED] 28281.013
[GRAPHIC] [TIFF OMITTED] 28281.014
[GRAPHIC] [TIFF OMITTED] 28281.015
[GRAPHIC] [TIFF OMITTED] 28281.016
[GRAPHIC] [TIFF OMITTED] 28281.017
[GRAPHIC] [TIFF OMITTED] 28281.018
[GRAPHIC] [TIFF OMITTED] 28281.019
[GRAPHIC] [TIFF OMITTED] 28281.020
[GRAPHIC] [TIFF OMITTED] 28281.021
[GRAPHIC] [TIFF OMITTED] 28281.022
[GRAPHIC] [TIFF OMITTED] 28281.023
[GRAPHIC] [TIFF OMITTED] 28281.024
[GRAPHIC] [TIFF OMITTED] 28281.025
[GRAPHIC] [TIFF OMITTED] 28281.026
[GRAPHIC] [TIFF OMITTED] 28281.027
[GRAPHIC] [TIFF OMITTED] 28281.028
[GRAPHIC] [TIFF OMITTED] 28281.029
[GRAPHIC] [TIFF OMITTED] 28281.030
[GRAPHIC] [TIFF OMITTED] 28281.031
[GRAPHIC] [TIFF OMITTED] 28281.032
[GRAPHIC] [TIFF OMITTED] 28281.033
[GRAPHIC] [TIFF OMITTED] 28281.034
[GRAPHIC] [TIFF OMITTED] 28281.035
[GRAPHIC] [TIFF OMITTED] 28281.036
[GRAPHIC] [TIFF OMITTED] 28281.037
[GRAPHIC] [TIFF OMITTED] 28281.038
[GRAPHIC] [TIFF OMITTED] 28281.039
[GRAPHIC] [TIFF OMITTED] 28281.040
[GRAPHIC] [TIFF OMITTED] 28281.041
[GRAPHIC] [TIFF OMITTED] 28281.042
[GRAPHIC] [TIFF OMITTED] 28281.043
[GRAPHIC] [TIFF OMITTED] 28281.044
[GRAPHIC] [TIFF OMITTED] 28281.045
[GRAPHIC] [TIFF OMITTED] 28281.046
[GRAPHIC] [TIFF OMITTED] 28281.047
[GRAPHIC] [TIFF OMITTED] 28281.048
[GRAPHIC] [TIFF OMITTED] 28281.049
[GRAPHIC] [TIFF OMITTED] 28281.050
[GRAPHIC] [TIFF OMITTED] 28281.051
[GRAPHIC] [TIFF OMITTED] 28281.052
[GRAPHIC] [TIFF OMITTED] 28281.053
[GRAPHIC] [TIFF OMITTED] 28281.054
[GRAPHIC] [TIFF OMITTED] 28281.055
[GRAPHIC] [TIFF OMITTED] 28281.056
[GRAPHIC] [TIFF OMITTED] 28281.057
[GRAPHIC] [TIFF OMITTED] 28281.058
[GRAPHIC] [TIFF OMITTED] 28281.059
[GRAPHIC] [TIFF OMITTED] 28281.060
[GRAPHIC] [TIFF OMITTED] 28281.061
[GRAPHIC] [TIFF OMITTED] 28281.062
[GRAPHIC] [TIFF OMITTED] 28281.063
[GRAPHIC] [TIFF OMITTED] 28281.064
[GRAPHIC] [TIFF OMITTED] 28281.065
[GRAPHIC] [TIFF OMITTED] 28281.066
[GRAPHIC] [TIFF OMITTED] 28281.067
[GRAPHIC] [TIFF OMITTED] 28281.068
[GRAPHIC] [TIFF OMITTED] 28281.069
[GRAPHIC] [TIFF OMITTED] 28281.070
[GRAPHIC] [TIFF OMITTED] 28281.071
[GRAPHIC] [TIFF OMITTED] 28281.072
[GRAPHIC] [TIFF OMITTED] 28281.073
[GRAPHIC] [TIFF OMITTED] 28281.074
[GRAPHIC] [TIFF OMITTED] 28281.075
[GRAPHIC] [TIFF OMITTED] 28281.076
[GRAPHIC] [TIFF OMITTED] 28281.077
[GRAPHIC] [TIFF OMITTED] 28281.078
[GRAPHIC] [TIFF OMITTED] 28281.079
[GRAPHIC] [TIFF OMITTED] 28281.080
[GRAPHIC] [TIFF OMITTED] 28281.081
[GRAPHIC] [TIFF OMITTED] 28281.082
[GRAPHIC] [TIFF OMITTED] 28281.083
[GRAPHIC] [TIFF OMITTED] 28281.084
[GRAPHIC] [TIFF OMITTED] 28281.085
[GRAPHIC] [TIFF OMITTED] 28281.086
[GRAPHIC] [TIFF OMITTED] 28281.087
[GRAPHIC] [TIFF OMITTED] 28281.088
[GRAPHIC] [TIFF OMITTED] 28281.089
[GRAPHIC] [TIFF OMITTED] 28281.090
[GRAPHIC] [TIFF OMITTED] 28281.091
[GRAPHIC] [TIFF OMITTED] 28281.092
[GRAPHIC] [TIFF OMITTED] 28281.093
[GRAPHIC] [TIFF OMITTED] 28281.094
[GRAPHIC] [TIFF OMITTED] 28281.095
[GRAPHIC] [TIFF OMITTED] 28281.096
[GRAPHIC] [TIFF OMITTED] 28281.097
[GRAPHIC] [TIFF OMITTED] 28281.098
[GRAPHIC] [TIFF OMITTED] 28281.099
[GRAPHIC] [TIFF OMITTED] 28281.100
[GRAPHIC] [TIFF OMITTED] 28281.101
[GRAPHIC] [TIFF OMITTED] 28281.102
[GRAPHIC] [TIFF OMITTED] 28281.103
[GRAPHIC] [TIFF OMITTED] 28281.104
[GRAPHIC] [TIFF OMITTED] 28281.105
[GRAPHIC] [TIFF OMITTED] 28281.106
[GRAPHIC] [TIFF OMITTED] 28281.107
[GRAPHIC] [TIFF OMITTED] 28281.108
[GRAPHIC] [TIFF OMITTED] 28281.109
[GRAPHIC] [TIFF OMITTED] 28281.110
[GRAPHIC] [TIFF OMITTED] 28281.111
[GRAPHIC] [TIFF OMITTED] 28281.112
[GRAPHIC] [TIFF OMITTED] 28281.113
[GRAPHIC] [TIFF OMITTED] 28281.114
[GRAPHIC] [TIFF OMITTED] 28281.115
[GRAPHIC] [TIFF OMITTED] 28281.116
[GRAPHIC] [TIFF OMITTED] 28281.117
[GRAPHIC] [TIFF OMITTED] 28281.118
[GRAPHIC] [TIFF OMITTED] 28281.119
[GRAPHIC] [TIFF OMITTED] 28281.120
[GRAPHIC] [TIFF OMITTED] 28281.121
[GRAPHIC] [TIFF OMITTED] 28281.122
[GRAPHIC] [TIFF OMITTED] 28281.123
[GRAPHIC] [TIFF OMITTED] 28281.124
[GRAPHIC] [TIFF OMITTED] 28281.125
[GRAPHIC] [TIFF OMITTED] 28281.126
[GRAPHIC] [TIFF OMITTED] 28281.127
[GRAPHIC] [TIFF OMITTED] 28281.128
[GRAPHIC] [TIFF OMITTED] 28281.129
[GRAPHIC] [TIFF OMITTED] 28281.130
[GRAPHIC] [TIFF OMITTED] 28281.131
[GRAPHIC] [TIFF OMITTED] 28281.132
[GRAPHIC] [TIFF OMITTED] 28281.133
[GRAPHIC] [TIFF OMITTED] 28281.134
[GRAPHIC] [TIFF OMITTED] 28281.135
[GRAPHIC] [TIFF OMITTED] 28281.136
[GRAPHIC] [TIFF OMITTED] 28281.137
[GRAPHIC] [TIFF OMITTED] 28281.138
[GRAPHIC] [TIFF OMITTED] 28281.139
[GRAPHIC] [TIFF OMITTED] 28281.140
[GRAPHIC] [TIFF OMITTED] 28281.141
[GRAPHIC] [TIFF OMITTED] 28281.142
[GRAPHIC] [TIFF OMITTED] 28281.143
[GRAPHIC] [TIFF OMITTED] 28281.144
[GRAPHIC] [TIFF OMITTED] 28281.145
[GRAPHIC] [TIFF OMITTED] 28281.146
[GRAPHIC] [TIFF OMITTED] 28281.147
[GRAPHIC] [TIFF OMITTED] 28281.148
[GRAPHIC] [TIFF OMITTED] 28281.149
[GRAPHIC] [TIFF OMITTED] 28281.150
[GRAPHIC] [TIFF OMITTED] 28281.151
[GRAPHIC] [TIFF OMITTED] 28281.152
[GRAPHIC] [TIFF OMITTED] 28281.153
[GRAPHIC] [TIFF OMITTED] 28281.154
[GRAPHIC] [TIFF OMITTED] 28281.155
[GRAPHIC] [TIFF OMITTED] 28281.156
[GRAPHIC] [TIFF OMITTED] 28281.157
[GRAPHIC] [TIFF OMITTED] 28281.158
[GRAPHIC] [TIFF OMITTED] 28281.159
[GRAPHIC] [TIFF OMITTED] 28281.160
[GRAPHIC] [TIFF OMITTED] 28281.161
[GRAPHIC] [TIFF OMITTED] 28281.162
[GRAPHIC] [TIFF OMITTED] 28281.163
[GRAPHIC] [TIFF OMITTED] 28281.164
[GRAPHIC] [TIFF OMITTED] 28281.165
[GRAPHIC] [TIFF OMITTED] 28281.166
[GRAPHIC] [TIFF OMITTED] 28281.167
[GRAPHIC] [TIFF OMITTED] 28281.168
[GRAPHIC] [TIFF OMITTED] 28281.169
[GRAPHIC] [TIFF OMITTED] 28281.170
[GRAPHIC] [TIFF OMITTED] 28281.171
[GRAPHIC] [TIFF OMITTED] 28281.172
[GRAPHIC] [TIFF OMITTED] 28281.173
[GRAPHIC] [TIFF OMITTED] 28281.174
[GRAPHIC] [TIFF OMITTED] 28281.175