[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
                             RAIL CAPACITY

=======================================================================

                               (110-119)

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON

             RAILROADS, PIPELINES, AND HAZARDOUS MATERIALS

                                 OF THE

                              COMMITTEE ON
                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 23, 2008

                               __________


                       Printed for the use of the
             Committee on Transportation and Infrastructure




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             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                 JAMES L. OBERSTAR, Minnesota, Chairman

NICK J. RAHALL, II, West Virginia,   JOHN L. MICA, Florida
Vice Chair                           DON YOUNG, Alaska
PETER A. DeFAZIO, Oregon             THOMAS E. PETRI, Wisconsin
JERRY F. COSTELLO, Illinois          HOWARD COBLE, North Carolina
ELEANOR HOLMES NORTON, District of   JOHN J. DUNCAN, Jr., Tennessee
Columbia                             WAYNE T. GILCHREST, Maryland
JERROLD NADLER, New York             VERNON J. EHLERS, Michigan
CORRINE BROWN, Florida               STEVEN C. LaTOURETTE, Ohio
BOB FILNER, California               FRANK A. LoBIONDO, New Jersey
EDDIE BERNICE JOHNSON, Texas         JERRY MORAN, Kansas
GENE TAYLOR, Mississippi             GARY G. MILLER, California
ELIJAH E. CUMMINGS, Maryland         ROBIN HAYES, North Carolina
ELLEN O. TAUSCHER, California        HENRY E. BROWN, Jr., South 
LEONARD L. BOSWELL, Iowa             Carolina
TIM HOLDEN, Pennsylvania             TIMOTHY V. JOHNSON, Illinois
BRIAN BAIRD, Washington              TODD RUSSELL PLATTS, Pennsylvania
RICK LARSEN, Washington              SAM GRAVES, Missouri
MICHAEL E. CAPUANO, Massachusetts    BILL SHUSTER, Pennsylvania
TIMOTHY H. BISHOP, New York          JOHN BOOZMAN, Arkansas
MICHAEL H. MICHAUD, Maine            SHELLEY MOORE CAPITO, West 
BRIAN HIGGINS, New York              Virginia
RUSS CARNAHAN, Missouri              JIM GERLACH, Pennsylvania
JOHN T. SALAZAR, Colorado            MARIO DIAZ-BALART, Florida
GRACE F. NAPOLITANO, California      CHARLES W. DENT, Pennsylvania
DANIEL LIPINSKI, Illinois            TED POE, Texas
DORIS O. MATSUI, California          DAVID G. REICHERT, Washington
NICK LAMPSON, Texas                  CONNIE MACK, Florida
ZACHARY T. SPACE, Ohio               JOHN R. `RANDY' KUHL, Jr., New 
MAZIE K. HIRONO, Hawaii              York
BRUCE L. BRALEY, Iowa                LYNN A WESTMORELAND, Georgia
JASON ALTMIRE, Pennsylvania          CHARLES W. BOUSTANY, Jr., 
TIMOTHY J. WALZ, Minnesota           Louisiana
HEATH SHULER, North Carolina         JEAN SCHMIDT, Ohio
MICHAEL A. ACURI, New York           CANDICE S. MILLER, Michigan
HARRY E. MITCHELL, Arizona           THELMA D. DRAKE, Virginia
CHRISTOPHER P. CARNEY, Pennsylvania  MARY FALLIN, Oklahoma
JOHN J. HALL, New York               VERN BUCHANAN, Florida
STEVE KAGEN, Wisconsin               ROBERT E. LATTA, Ohio
STEVE COHEN, Tennessee
JERRY McNERNEY, California
LAURA A. RICHARDSON, California
ALBIO SIRES, New Jersey

                                  (ii)

?

     SUBCOMMITTEE ON RAILROADS, PIPELINES, AND HAZARDOUS MATERIALS

                   CORRINE BROWN, Florida Chairwoman

JERROLD NADLER, New York             BILL SHUSTER, Pennylvania
LEONARD L. BOSWELL, Iowa             THOMAS E. PETRI, Wisconsin
GRACE F. NAPOLITANO, California      WAYNE T. GILCHREST, Maryland
NICK LAMPSON, Texas                  STEVEN C. LaTOURETTE, Ohio
ZACHARY T. SPACE, Ohio, Vice Chair   JERRY MORAN, Kansas
BRUCE L. BRALEY, Iowa                GARY G. MILLER, California
TIMOTHY J. WALZ, Minnesota           HENRY E. BROWN, Jr., South 
NICK J. RAHALL II, West Virginia     Carolina
PETER A. DeFAZIO, Oregon             TIMOTHY V. JOHNSON, Illinois
JERRY F. COSTELLO, Illinois          TODD RUSSELL PLATTS, Pennsylvania
EDDIE BERNICE JOHNSON, Texas         SAM GRAVES, Missouri
ELIJAH E. CUMMINGS, Maryland         JIM GERLACH, Pennsylvania
MICHAEL H. MICHAUD, Maine            MARIO DIAZ-BALART, Florida
DANIEL LIPINSKI, Illinois            LYNN A. WESTMORELND, Georgia
ALBIO SIRES, New Jersey              JOHN L. MICA, Florida
JAMES L. OBERSTAR, Minnesota           (ex officio)
  (ex officio)

                                 (iii)

                                CONTENTS

                                                                   Page

Summary of Subject Matter........................................    vi

                               TESTIMONY

Daloisio, James, President, Railroad Construction Company........    40
Grenzeback, Lance, Senior Vice President, Cambridge Systematics, 
  Inc............................................................    40
Hamberger, Ed, President and CEO, Association of American 
  Railroads......................................................     3
Hayes, Evan, Chairman, Idaho Barley Commission...................     3
Kummant, Alexander, President and CEO, Amtrak....................     3
Moro, Al, Chief Harbor Engineer, Port of Long Beach..............     3
Sharp, Steve, Principal Engineer, Arkansas Electric Cooperative, 
  Inc............................................................     3
Zehner, Dale J., CEO, Virginia Railway Express...................     3

          PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS

Costello, Hon. Jerry F., of Illinois.............................    51

               PREPARED STATEMENTS SUBMITTED BY WITNESSES

Daloisio, James..................................................    52
Grenzeback, Lance R..............................................    59
Hamberger, Edward R..............................................    75
Hayes, Evan......................................................   104
Kummant, Alex....................................................   114
Moro, Al.........................................................   120
Sharp, Steve.....................................................   128
Zehner, Dale.....................................................   135

                       SUBMISSIONS FOR THE RECORD

Moro, Al, Chief Harbor Engineer, Port of Long Beach, responses to 
  questions from Rep. Napolitano.................................   125

                        ADDITIONS TO THE RECORD

Surface Transportation Board, Charles D. Nottingham, Chairman, 
  letter to the Committee........................................   139
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                        HEARING ON RAIL CAPACITY

                              ----------                              


                       Wednesday, April 23, 2008

                  House of Representatives,
    Committee on Transportation and Infrastructure,
       Subcommittee on Railroads, Pipelines, and Hazardous 
                                                 Materials,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:05 a.m., in 
Room 2167, Rayburn House Office Building, the Honorable Corrine 
Brown [Chairwoman of the Subcommittee] presiding.
    Ms. Brown. Good morning.
    Will the Subcommittee on Railroads, Pipelines, and 
Hazardous Materials come to order?
    The Subcommittee is meeting today to hear testimony on rail 
capacity. Congestion has become a major problem across all 
modes of surface transportation. Current transit studies all 
suggest a growing congestion problem on our passenger and 
freight rail network.
    Since deregulation in 1980, Class I ton miles have 
increased 93 percent while miles of track decreased 40 percent. 
The U.S. Department of Transportation estimated that the 
demands of freight rail transportation will increase 88 percent 
by 2035 with studies estimating that the investment of $148 
billion in infrastructure expansion will be needed over the 
next 28 years to keep pace with economic growth and meet DOT's 
forecasted demand.
    Passenger trains are also seeing increase ridership with 
demand expected to grow. Amtrak ridership is at its highest 
level since the operation began in 1971 with 25.8 million 
passengers in 2007. This is the fifth straight year of record 
ridership for Amtrak.
    Unfortunately, as freight movement has grown, so has the 
conflict between freight and passenger trains. Even under 
existing Federal law, Amtrak trains have priority over freight 
trains. This demand for space on the rail system has also 
caused unintentional consequences for shippers.
    As we begin to develop and reauthorize the next SAFETEA 
bill, it is critical that the needs for additional rail 
capacity for both freight rail and passenger rail be addressed. 
The future of ground transportation is on our rail, whether it 
takes freight off of congested highways or moves people through 
high-speed rail corridors.
    There is no one solution that will solve rail congestion. 
New and creative ideas from both government and the private 
sector must be utilized to increase and improve both freight 
and passenger rail capacity.
    I hope this hearing will help the Committee understand what 
action we can take to ensure our Nation's rail system is 
prepared for the future. With this, I would welcome today's 
panel and thank them for joining us. I am looking forward to 
the hearing.
    Before I yield to Mr. Shuster, I ask the Members to be 
given 14 days to revise and extend their remarks and to permit 
the submission of additional statements and materials by 
Members and witnesses. Without objection, so ordered.
    I yield to Mr. Shuster.
    Mr. Shuster. I thank the Chairwoman and welcome the 
witnesses here today.
    It is an extremely important hearing that we have here 
today and talk about rail capacity and come up with solutions, 
real solutions to the problems we face.
    In 1980, as everyone is aware, our Nation's rail industry 
was in terrible shape, was a mess. Twenty percent of the 
railroads went into bankruptcy, including most of the railroads 
in the Northeast and, of course, my home State of Pennsylvania, 
Penn Central was front and center.
    Derailments were an everyday occurrence. More than 70,000 
route miles or about 25 percent of the total had to be operated 
at reduced rates because of dangerous conditions. Something had 
to be done or the entire rail system would have been in 
bankruptcy.
    Congress was faced with the choice to continue to regulate 
the system and bail out the railroads, using taxpayer money, or 
to deregulate and let the private sector rebuild our Nation's 
railroads. Congress, I believe, chose the right path, and we 
are here today, and that is a testimony to the success.
    By passing the Staggers Act in 1980, deregulation occurred 
and billions of new private capital poured into the system. 
Rates declined, rail productivity tripled, and safety improved. 
Today, we find it is the safest we have seen our railroad 
industry in its history.
    But now the railroads have become victims of their own 
success. Our railroads are becoming congested and sometimes to 
the point of gridlock. We need to add new rail capacity, and we 
need to do it fast.
    A good way to promote that, I believe, promoting new rail 
capacity is with an investment tax credit. That is why I favor 
H.R. 2116 which was introduced by Kendrick Meek of Florida and 
Eric Cantor of Virginia, the Freight Rail Infrastructure 
Capacity Expansion Act.
    Trains use less fuel, producer fewer emissions than other 
modes and, as I think we are all aware of the statistics, 
trains can take off hundred, up to 300, trucks off our Nation's 
highways. By passing an investment tax credit for rail, we can 
reduce our dependence on foreign oil and spur economic growth.
    Madam Chairwoman, I am looking forward to this morning's 
hearing. I appreciate your calling it, and I am sure we are 
going to learn a lot here today, which we always do with a 
distinguished panel like we have before us.
    So, thank you and I yield back.
    Ms. Brown. I am pleased to introduce and welcome our first 
panel of witnesses here this morning. Our first witness is Mr. 
Ed Hamberger of the Association of American Railroads. Our 
second witness is Mr. Dale Zehner of the Virginia Rail Express. 
Our third witness, Mr. Alexander Kummant of Amtrak, I 
understand recently is a new father, and I am sure he is going 
to give us the name of the baby when he gives his presentation.
    And, our fourth witness is Mr. Al Moro of the Port of Long 
Beach. Our fifth witness is Mr. Evan Hayes of Idaho Barley 
Commission. Our final witness on the first panel is Mr. Steve 
Sharp of Arkansas Electric Cooperative.
    Let me remind the witnesses that under our Committee rules, 
oral statements must be limited to five minutes, but the entire 
statement will appear in the record. We will also allow the 
entire panel to testify before questioning the witnesses.
    We are very pleased to have you with us this morning, and I 
recognize Mr. Hamberger for his opening testimony.

 TESTIMONY OF ED HAMBERGER, PRESIDENT AND CEO, ASSOCIATION OF 
   AMERICAN RAILROADS; DALE J. ZEHNER, CEO, VIRGINIA RAILWAY 
EXPRESS; ALEXANDER KUMMANT, PRESIDENT AND CEO, AMTRAK; AL MORO, 
    CHIEF HARBOR ENGINEER, PORT OF LONG BEACH; EVAN HAYES, 
 CHAIRMAN, IDAHO BARLEY COMMISSION; AND STEVE SHARP, PRINCIPAL 
         ENGINEER, ARKANSAS ELECTRIC COOPERATIVE, INC.

    Mr. Hamberger. Thank you, Madam Chairman, Mr. Shuster, Mr. 
Sires, Mr. Space. On behalf of the members of the Association 
of American Railroads, thank you for the opportunity to discuss 
railroad capacity.
    As the National Surface Transportation Policy and Revenue 
Study Commission noted in its recent report, ``Congestion is 
affecting every mode of surface transportation for ever 
lengthening periods of time each day as a result of the 
mismatch between demand and supply of limited capacity.''
    Railroads are not exempt from that assessment. Rail freight 
traffic has increased substantially with 2006 and 2007 standing 
out as the two busiest years in rail history. Railroads today 
carry more than twice as much freight per route mile as they 
did in 1990. This has led to capacity constraints on some 
points along the rail network.
    As you point out, Madam Chairwoman, all forecasts agree 
that the demand for rail freight transportation will continue 
to increase, with the DOT predicting an 88 percent increase by 
2035. To meet this increased demand, it is clear that railroads 
will have to expand their capacity.
    If they don't, nearly one-third of the Nation's 52,000 
miles of primary rail corridors will become so congested by 
2035 that service delays would be persistent and substantial, 
according to a recent report by Cambridge Systematics whom you 
will hear from later this morning.
    Railroads are working hard to meet present and projected 
transportation demands. In my written testimony, I tried to 
give the Committee insight on how the industry works with its 
customers to assess shipping needs, then designs the network to 
optimally meet those needs and finally deals with the 
complexities of traffic mix, weather, changes in demand and new 
traffic flows on a 140,000-mile long outdoor assembly line.
    My testimony also points out that there are indeed many 
ways for the industry to improve its throughput, such as new 
technologies, a growing and well-trained workforce and improved 
operating strategies, but the immutable truth is that capacity 
depends on spending increased amounts on infrastructure and 
equipment. Since 1980, the industry has invested approximately 
$420 billion, more than 40 cents out of each revenue dollar, 
for these purposes.
    Since 1997, the railroads have put an average of 17 percent 
of all revenue into capital improvements. The average for U.S. 
manufacturing is 3 percent.
    Indeed, the two largest U.S. railroads spend more to 
maintain and improve track and roadway than all but three State 
highway departments spend on their respective highway networks. 
The next two largest railroads would also be ranked in the top 
ten in comparison to the States.
    The ability of the railroads to continue investing heavily 
in plant and equipment is heavily dependent upon earnings. As 
the CBO noted two years ago, ``Profits are the key to 
increasing capacity because they provide both the incentive and 
the means to make new investments.''
    Although rail earnings have improved in recent years and 
may now be, in fact, at record levels, it is important to 
remember that those earnings still fall short of the earnings 
achieved by most other industries against which they must 
compete for capital.
    In order to meet the projected demand for rail freight 
service in 2035, Cambridge Systematics estimated that the $148 
billion will need to be invested in capacity expansion alone. 
While much of that money will be generated by the railroads 
themselves, there will remain a considerable gap between what 
should be invested and what could be invested.
    There are substantial public benefits to be realized if the 
railroads are assisted in closing that gap. These include 
improved ability of commerce to reach markets, improved flow of 
international trade and reduced fuel consumption, pollution, 
greenhouse gas emissions and highway congestion.
    I would like to suggest several things that could be done 
to address the rail capacity funding gap.
    First, as Mr. Shuster referenced, enactment of the Freight 
Rail Infrastructure Capacity Expansion Act which provides a 25 
percent tax credit for investments in new track, intermodal 
facilities and other projects that increase capacity. That 
credit would be available not just to railroads but to our 
customers or any entity that invests in rail capacity 
expansion.
    I gratefully acknowledge the support that the Chair and Mr. 
Shuster have given to H.R. 2116.
    Second would be passage of the Short Line Rail Investment 
Act which extends a targeted tax credit for smaller railroads 
that expired at the end of last year. Cross tie replacements, a 
critical element in handling heavier freight cars, increased by 
a half million ties a year, thanks to the short line tax 
credit.
    Third, encouragement of public-private partnerships in 
which the public pays for the benefits it receives and 
railroads pay for the benefits they receive. The Chicago CREATE 
project, which had the support of this Committee, the Heartland 
Corridor and the Alameda Corridor are all examples of such 
projects in which public and private dollars are leveraged 
together to produce public benefits that otherwise would not be 
realized.
    Finally, avoid policies that would impede the industry's 
ability to earn the revenues needed to reinvest in its 
capacity.
    We look forward to working with the Members of this 
Committee in developing programs that will reduce congestion 
and improve transportation mobility.
    Thank you for the opportunity to be here this morning.
    Ms. Brown. Mr. Zehner.
    Mr. Zehner. Chairwoman Brown, Ranking Member Shuster and 
Members of the Subcommittee, thank you for taking on this 
critical issue of railroad capacity.
    My name is Dale Zehner. I am the Executive Officer of the 
Virginia Railway Express which operates commuter service in 
Northern Virginia into Washington, D.C. from Fredericksburg, 
Virginia and Manassas.
    People ask me all the time, why do people take the trains? 
Why does a person take a train? They think because they love 
trains, they take trains. That is not the case at all.
    What a person wants to do is get in their car and drive to 
work, park in the front of the building, walk in and then walk 
out at the end of the day, drive home, uncongested, to their 
house. When they cannot do that, they will take transit. That 
is the only time they will take it. So they are not in love 
with trains for trains' sake.
    The roads are congested--you know that--I-95 in Virginia, 
I-66 in Virginia, and now the commuter cannot get to work in a 
reliable way. When they cannot get reliably use their cars on 
the roads, they shift to transit.
    VRE was started in 1992. We started with 4,000 passengers. 
We are now at almost 16,000 passengers a day, and we continue 
to grow.
    That growth has increased because of investment in the 
railroad. About $100 million has been invested in the last 15 
years by the Federal Government, the State Government and the 
local government.
    However, with that investment, we continue, we are starting 
now to hit capacity again. On the CSX corridor, running south 
to Richmond, 78 trains a day operate a day on that railroad: 
Amtrak, VRE and freights. If a train falls out of slot in their 
time period, delays start to ripple back against the trains 
behind them.
    The management of this railroad has increased drastically 
over the last five years with CSX in their dispatching, signal 
and switch, maintaining the railroad. Amtrak and VRE have 
increased their management of their crews, our mechanical 
operations to ensure that our trains operate on time. Because 
of that, we have seen growth in passengers on all of the modes.
    Demand for the transportation services, both freight and 
passenger, are at record levels and are projected to increase 
into the future. We have requests to go to Charlottesville. We 
have requests to go to Richmond. Continued investment in the 
railroad at the Federal, State and local levels is paramount to 
permit this increased growth.
    The Commonwealth of Virginia now invests $26 million a year 
in the railroad networks within the State of Virginia for both 
freight and passenger services. The Federal Government has been 
a great partner over the last 15 years with us, with 
substantial investment including the Quantico bridge that went 
into service a year ago and cut delays on this corridor by 30 
percent, but we must continue to make those investments over 
the next years to continue the growth in the passenger and 
freight operations.
    Thank you very much, Chairwoman Brown.
    Mr. Kummant. Good morning, Madam Chair, Mr. Shuster, 
Members of the Subcommittee. Thanks for the opportunity today 
to testify on this important subject.
    As you know, Amtrak operates on close to 22,000 miles of 
track in 46 States. In fiscal year 2007, Amtrak generated over 
37 million train miles, and 70 percent of those were on tracks 
owned by 22 freight railroads.
    These railroads span the whole range of American carriers 
from the giant Class I systems down to small short lines. All 
these examples are freight haulers, but Amtrak also operates 
over commuter authority lines such as Metro North in 
Connecticut. It is important to note that 80 percent of the 
host railroad train miles are run over just 4 carriers: BNSF, 
UP, CSX and Norfolk Southern, in order of magnitude.
    I would like to talk a bit about the issue of capacity on 
the freight railroad system in the context of Amtrak's on-time 
performance. It is a tough issue for us.
    Amtrak's system on-time performance (OTP) outside of the 
Northeast Corridor has declined almost every year since 2000. 
Reliability is important to the passenger who expects to arrive 
at his destination on time, and it is also important obviously 
to the taxpayer who subsidizes Amtrak. Poor OTP translates 
directly into greater operating costs and lost revenues for 
Amtrak.
    Just last month, at the request of the Senate Commerce 
Committee, the DOT Inspector General prepared a report that 
measured the cost of poor on-time performance. This report 
notes correctly that on-time performance for long distance 
trains fell from an average of 51 percent in 2003 to almost 42 
percent in 2007 while on-time performance for non-Northeast 
Corridor routes fell by 10 percent from 76 percent to 66 
percent.
    The DOT Inspector General calculated that a 75 percent on-
time performance in 2006 would have had a net positive effect 
on our operating budget of about $122 million.
    If we could raise the on-time performance to 85 percent, 
the net favorable effect for the year would have been $137 
million. This figure reflects increased revenue from better on-
time performance and cost savings associated with late trains, 
and that amounts to almost a third of Amtrak's operating 
losses.
    The DOT Inspector General's report did not address the 
cause of poor on-time performance. But at Amtrak, we obviously 
know this issue well, and there are two principal sources.
    The first is interference with Amtrak trains by freight 
trains. This happens when Amtrak trains are routed into sidings 
or held at rail yards or junctions to let freight trains pass 
or have to slow down to travel behind slower moving freight 
trains, sometimes for many miles.
    The second cause is known as slow orders which are 
essentially restrictions placed on train speed over a stretch 
of track. These instances arise because of ongoing maintenance 
but are usually due to track defects and other maintenance 
issues that host railroads have not been able to prioritize for 
long periods of time.
    Freight train interference delays and slow orders are the 
two biggest components of all the delay minutes for Amtrak 
trains in 2007.
    Let me give you a little more detail on that topic. I would 
like to provide the Committee our monthly system on-time 
performance report for fiscal year 2007. The report shows an 
overall improvement in long distance on-time performance during 
the course of 2007 from 30 percent of trains arriving on time 
to 41.6.
    A long distance train is classified as late if it fails to 
arrive at its destination within 30 minutes of its scheduled 
time, a time that includes a variable number of schedule 
recovery minutes to allow trains to make up for delays. As of 
the end of March, we continue to see improvement.
    I would, parenthetically, also like to mention that we had 
a very good meeting last week brokered by Secretary Peters. It 
was a meeting between the Amtrak Board and the leadership of 
the freight railroads, where we are engaging on this issue.
    So, overall, we have improved 16.7 points on on-time 
performance. This falls into a category, of course, of better 
by comparison, but we are still far below the 80 percent on-
time performance target.
    The numbers I have cited are averages, and I want to start 
by saying that some of the host railroads do a good job of 
handling our trains. Burlington Northern Santa Fe, for example, 
does a good job on the Empire Builder and the Southwest Chief 
across thousands of miles, while the Canadian Pacific 
dispatches 14 Hiawatha trains a day on a busy route between 
Chicago and Milwaukee, trains that were on time 89 percent of 
the time in fiscal year 2007. These are very different 
operations, and they are run over very different pieces of 
railroad.
    While it is fair to point out that the mix of traffic and 
the infrastructure configuration play a large role here, those 
differences highlight a salient point: Good on-time performance 
is possible when host railroads use targeted operating and 
maintenance practices and give appropriate attention to timely 
delivery of Amtrak trains.
    Poor on-time performance has very real, very measurable 
effects on Amtrak ridership, revenue and costs. As on-time 
performance worsens, we need more equipment to protect the same 
schedules, a trend that is reinforced by the maintenance issues 
that come with shortened turnaround and servicing times and 
longer over the road times.
    Those longer over the road times translate directly into 
greater expenses for diesel fuel and labor, both of which are 
becoming more expensive, and this is very hard on our people as 
well in terms of hours of service. It is a classic example of a 
vicious cycle with each event compounding the effects of the 
others.
    Those are the effects of poor on-time performance and the 
principal causes. The issue remains: What is the solution?
    Let me start by addressing the issue that is the central 
topic of this hearing today, congestion and capacity.
    Last year, the Association of American Railroads released a 
report which contains a discussion of the volume of traffic on 
freight railroads. It is noted that about 80 percent the 
national railroad system is operating within its practical 
capacity, 12 percent of it is operating at practical capacity 
and that less than 1 percent of it is over practical capacity.
    So, again, it is not to deny that there are serious 
congestion issues in some spots along Amtrak routes or that 
investment in expanded capacity is a matter of sound public 
policy in everyone's best interest, but congestion is not 
always the primary cause of poor performance. Where congestion 
is an issue, I would argue that there are some immediate steps 
host railroads can take to provide some relief.
    All of us need a cooperative process which focuses on 
individual routes to identify and address the reasons for poor 
on-time performance specific to each route. To be successful, 
the process will need three steps: address poor dispatching 
management, address slow orders and, finally, address capacity 
constraints.
    To start with, we must ensure that host railroads abide by 
their legal obligation to give Amtrak trains preference over 
freight traffic. The U.S. Code requires this.
    The railroads have made progress on this issue in a number 
of our routes. Our experience has been that when top management 
of host railroads focuses on this issue and makes the movement 
of Amtrak trains a priority, the operating discipline of all 
trains on a route improves because a well-run railroad 
naturally expedites its trains as well as our own. This 
benefits not only Amtrak passengers through improved OTP but 
also freight shippers as well.
    Let me close by saying we have seen improved on-time 
performance over the last year. We are still not where we want 
to be or where we need to be. There have been some gains, but 
the job is far from finished.
    We didn't get a 17 percent improvement in on-time 
performance in one year because of massive capital investment. 
We got because a number of the freight carriers made some much-
needed improvements to maintenance and operating practices and, 
at the end of the day, I think we all benefit.
    I hope this pattern of cooperation and joint effort can 
become a general practice, and I look forward to working with 
our freight partners on it.
    Thank you very much.
    Ms. Brown. Thank you.
    Mr. Moro.
    Mr. Moro. Madam Chairwoman, Members of the Committee, thank 
you for the opportunity to speak to this important Committee 
today.
    My name is Al Moro. I am the Chief Harbor Engineer at the 
Port of Long Beach. The Port of Long Beach is the second 
largest seaport in the United States and combined with its 
neighbor, the Port of Los Angeles, we are the fifth largest 
port complex in the world.
    In 2007, the Port of Long Beach handled more than 7.3 
million containers also known as TEUs for 20-foot equivalent 
units. Combined with Los Angeles, both ports handled over 15.7 
million TEUs which represented over 43 percent of the 
containerized goods entering the United States.
    The Ports of Long Beach and Los Angeles, also known as the 
San Pedro Bay Ports, are the leading gateways for trade between 
the United States and Asia. Port operations support 
approximately 1.4 million jobs nationally and provide consumers 
and businesses with billions of dollars in goods each year. 
About $4 billion a year is spent in the U.S. for port industry 
services, and trade valued annually at more than $100 billion 
moved through the Port of Long Beach in 2007.
    Transporting containers via rail has become the optimal 
form of goods movement for a variety of industries and requires 
reliable and dependable shipments of products. The primary 
source of transport for these goods by rail is through the 
Alameda Corridor and out of California by rail systems operated 
by Union Pacific and Burlington Northern Santa Fe Railway.
    As a significant intermodal project, the Alameda Corridor 
is a 20-mile long grade-separated railway connecting the ports 
to the Intercontinental Rail Yard in downtown Los Angeles. In 
its first year of operation, the corridor moved slightly more 
than 14,000 trains and, in 2007, it moved 18,000 trains. We are 
proud to say that the corridor recently celebrated running its 
100,000th train.
    In 2007, the Ports of Long Beach and Los Angeles and the 
Alameda Corridor Transportation Authority commissioned a trade 
impact study which found that the San Pedro Bay Ports have an 
impact on every congressional district in the United States. In 
particular, the study looked at jobs and State and local taxes 
generated directly and indirectly by goods moving through the 
port complex and found that these goods are reaching consumers 
all over the Country including other port cities.
    Both ports are expected to meet the growing demand for 
international cargo which is estimated to increase from 15.7 
million TEUs in 2007 to over 35.3 million TEUs by 2020.
    A combination of insufficient rail capacity due to terminal 
logistics issue as well as community opposition to port 
projects will make it challenging to complete future port-rail 
and terminal capacity enhancement projects.
    Cargo transported via rail has significant environmental 
benefits, and the Clean Air Action Plan adopted by both ports 
in 2006 encourages terminal operators at the port complex to 
place more cargo on rail and rail lines to use new technologies 
and alternative fuels to reduce emission impacts. Every train 
using the Alameda Corridor can eliminate 750 truck trips on 
congested freeways.
    Portions of the existing rail and transportation systems 
within and adjacent to the port complex are slowly becoming 
constrained and will likely worsen due to cargo growth.
    In 2006, both ports completed the San Pedro Bay Ports Rail 
Study Update to address the current and future rail capacity 
issues. The study identified rail system deficiencies, 
substantiated the actions required to meet rail yard demand and 
looked at ways to maximize capacity and utilization of rail 
systems like on-dock rail.
    Even after maximizing the potential on-dock rail yards 
propose, there will be a substantial shortfall in rail yard 
capacity by at least 2010. That is why both ports recommend 
that, in order to develop a more comprehensive rail system, 
rail yard capacity be developed at near-dock facilities in the 
vicinity of the Alameda Corridor.
    At its highest estimated cargo volumes, train volumes 
generated by on-dock rail yards are forecasted to exceed 100 
trains per day, more than double the current 45 trains per day 
handled by the Alameda Corridor. Total train volumes on the 
port-rail network are also expected to exceed 250 trains per 
day and those on the Alameda Corridor by 200 trains per day by 
the year 2030.
    The total estimated cost for rail improvements at or 
adjacent to the ports is estimated at over a billion dollars. 
The Port of Long Beach believes that making investments in rail 
infrastructure is vital to the Nation's economy. In 2006, 
voters in California approved Proposition 1B, a $2 billion 
measure designed to invest in the State's goods movement 
infrastructure.
    In addition to Proposition 1B funds, the Ports of Long 
Beach and Los Angeles recently approved an infrastructure cargo 
fee that will raise a total $1.4 billion to fund critical goods 
movement projects within the port complex. This fee will 
provide funds for upgrades to the ports' aging rail and bridge 
infrastructure, reduce congestion, expedite goods movement and 
improve air quality.
    The ports will levy this fee on each loaded import or 
export container moved through the port terminals by truck or 
rail. It is anticipated that the fee would begin at $15 per 
loaded TEU and will range over a period of 7 years between $10 
and $18 per TEU, depending on the projects that need to be 
funded. The ports will end collection of the fee once the 
approved projects are completed and paid for.
    The ports will use the revenue from this fee to match funds 
from the Proposition 1B and Federal funds to help pay for major 
port-related transportation infrastructure and air quality 
improvements.
    In closing, in order to move goods more efficiently from 
the San Pedro Bay Ports to regions across the Nation, 
additional investments will need to be made to fund regional 
and nationally significant rail projects.
    Additional Federal funding is needed, and the Port of Long 
Beach looks forward to working with the Committee and other key 
stakeholders on the upcoming Transportation Authorization Bill, 
to assist in developing a list of critically needed rail 
projects and discuss alternative sources to fund projects that 
will allow goods that fuel our economy to continue moving.
    We invite you to visit the port to see the rail issues 
firsthand.
    Thank you.
    Mr. Hayes. Chairwoman Brown, Members of the Committee, my 
name is Evan Hayes. I am a barley and wheat producer from 
Southeastern Idaho. I am a real farmer. I am a sit in the seat 
tractor, down playing in the dirt.
    I am not a professional at this, and so I ask for you to 
bear with me. I am going to read my testimony to you, hoping to 
try to stay as straight as I can.
    I am pleased to provide testimony today on behalf of the 
Alliance for Rail Competition, the National Barley Growers 
Association, the Idaho Barley and Wheat Commission, the Idaho 
Grain Producers Association and the agricultural community.
    The members of the Alliance for Rail Competition include 
utility, chemical, manufacturing and agricultural companies and 
agricultural organizations. Producers of commodities as wide-
ranging as soybeans, dry beans, peas, lentils, sugar beets, 
rice, wheat and barley have expressed concerns similar to those 
I will share with you today. Together, these organizations 
represent farm production in more than 30 States.
    Agriculture producers know that an effective rail system is 
necessary for the success of our industry. However, we continue 
to face many problems that are directly tied to the service and 
capacity issues that you are addressing today. Helping our 
members find solutions to their rail freight problems remain a 
top priority for U.S. agriculture producers.
    Captive rail customers continue to be subject to excessive 
freight rates, curtailment and limiting of markets by market 
down the railroads and sub-par service. The railroads continue 
not to live up to their common carrier obligation based upon 
capacity problems. A large portion of our agriculture shippers 
have become captive to a single railroad, which makes them 
particularly vulnerable to rail service problems.
    Since the passage of the Staggers Act in 1980, the degree 
of captivity in many barley and wheat growing regions has 
increased dramatically. Our producers experience both 
unreliable service and higher freight rates. There are 
continuing rail equipment shortages. Today, whole States, whole 
regions and whole industries have become captive to a single 
railroad.
    In the grain industry alone, there are substantial pockets 
of captivity in Texas, Oklahoma, Arizona, Colorado, Kansas, 
Nebraska, Wyoming, Idaho, South Dakota, Minnesota, North 
Dakota, Oregon, Washington and Montana. Because of these 
pockets of captivity, the cost of transporting grain now 
represents as much as one-third of the overall price a producer 
receives for his or her grain. The cost comes directly from the 
producer's bottom line. Unlike other businesses, we cannot pass 
these costs along.
    Some specific examples of rail service failures that have 
directly impacted our producers' bottom line are:
    In the fall of 2007, more than 10 million bushels of 
Colorado wheat had to be stored underground in areas where 
there was a lack of adequate rail service. All of these areas 
are captive to a single carrier. Grain stored underground loses 
quality and thus loses value. Many other States had similar 
service issues and had grain on the ground.
    Similar rail capacity issues are being experienced by the 
U.S. barley industry, resulting in loss of traditional feed 
barley markets in California and the loss of upper Midwest 
malting barley contracts to Canadian competitors as documented 
in my testimony.
    In California, barley historically captured 50 to 60 
percent of the large California dairy feed market. Today, we 
have less than 5 percent of that market due to rail marketing 
decisions.
    California corn producers can't even compete in this market 
in their own back yard because the dominant western railroad 
chose to push Iowa and Nebraska corn into markets with shuttle 
train rates below full rail costs.
    One of my own malting barley customers built a new malting 
plant in eastern Idaho five years ago to supply its Mexican 
breweries. After one and a half years of negotiation to find a 
competitive transportation relationship with the single 
railroad that served this area, the brewing vice president told 
our governor--and I was at that meeting--that if the company 
knew when they planned to build this plant in Idaho what they 
know today about the effects of rail captivity, they would 
never have located in Idaho.
    These wheat and barley examples underscore an economic 
model that encourages railroads to dictate their capacity and 
infrastructure improvements to large single crop intermodal 
movements at the expense of value-added agriculture and other 
commodities.
    As documented in my written testimony, we have experienced 
many instances of rail's failures to meet the service needs of 
grain shippers. It is very timely that you are holding this 
hearing to closely examine rail capacity. In recent years, 
railroads, blaming capacity constraints, have made decisions 
that favor hauling larger and larger movements of a single 
grain commodity from a single origin to a single destination.
    A question for you: Is there a rail capacity shortage on 
the Nation's rail system or are the railroads just using 
alleged capacity shortage to demand concessions from rail 
customers and government?
    I would call your attention, and you have covered this 
somewhat already, to the final report of the National Surface 
Transportation Policy and Revenue Study. The Commission was 
established by Congress in the 2005 highway bill, SAFETEA-LU, 
and charged with assessing national infrastructure needs.
    The Commission's final report suggested the proposition 
that additional rail infrastructure is needed. The Commission 
does not conclude there is a near-term failure in the rail 
system due to the lack of adequate infrastructure nor does the 
Commission urge actions that would give the railroads free hand 
with respect to raising rates and rejecting service.
    On the contrary, the Commission found, and this was used in 
AAR data, the Nation's freight rail network is relatively 
uncongested at current cargo volumes. Eighty-eight percent of 
today's primary freight rail corridor mileage is operating 
below practical capacity. About 12 percent is near or at 
practical capacity, and less than 1 percent is operating above 
capacity.
    If I could, I would like to conclude by saying agriculture 
producers, together with the members of the Alliance for Rail 
Competition, believe that a healthy and competitive rail 
industry is essential to our continued viability.
    Furthermore, current poor service and increase rail rates 
are making it increasingly difficult for agriculture producers 
to remain competitive in the world marketplace. We urge 
Congress to work with us to address these challenges.
    However, we also believe that these claims of rail capacity 
shortage may be overstated and need to be examined very 
closely. Building public policy of investment into future rail 
capacity should be based on factual capacity shortages.
    Thank you for this opportunity to testify.
    Ms. Brown. Finally, Mr. Sharp.
    Mr. Sharp. Madam Chairwoman, Mr. Shuster, Members of the 
Subcommittee, thank you for the opportunity to testify today 
before you on the important subject of rail capacity and 
reliable rail service.
    Arkansas Electric Cooperative has been affected by numerous 
rail service issues over the years, including captive shipper 
pricing, rail build-outs, a paper barrier that prevents a short 
line railroad from serving one of our plants, rail merger 
impacts and major rail delivery shortfalls.
    Since the early 1990s, AECC has experienced three major 
rail service disruptions. We have had other problems too, but 
in these three instances we actually had to reduce the output 
of one or more of our coal-fired plants because of the 
difficulties of getting rail transportation to the plants.
    The severity of each of these disruptions has been 
progressively worse than the previous one. The first disruption 
in 1993 and 1994 was due to widespread regional flooding. That 
was beyond the control of the railroad management.
    The last two major service disruptions have been the direct 
result of railroad management actions. These include the 1997-
1998 merger meltdown that followed the merger of Union Pacific 
and Southern Pacific and the massive problems that stem from 
the Powder River Basin Joint Line throughput problems that 
arose in May of 2005 as a result of deferred roadbed 
maintenance by the railroads operating there.
    Today, almost three years after this latest episode began 
in 2005, AECC's PRB coal deliveries are just about back to pre-
disaster levels. We are not quite at 100 percent, but each year 
since 2005 our deliveries have been improving. As I said, it 
has taken basically three years to get us back to the point 
that we were at before 2005.
    In the aftermath of these initial joint line disruptions, 
Union Pacific railroad imposed an embargo on new PRB business 
that lasted until March of 2007. During this time, Burlington 
Northern Santa Fe, the only other railroad that can move PRB 
coal, was able to engage in monopoly pricing even for movements 
that theoretically could also be served by the UP, except with 
the embargo, UP was not taking on any new business.
    As a result, rates for new PRB movements shot up during 
this period. This has effectively undone the long decline in 
competitive rail rates that we have seen, for coal hauling at 
least, that marked the first 20 years of rail competition for 
PRB coal movements.
    Railroads have tried to create the impression that the 
volume increases they have experienced inevitably have 
exhausted the capacity and caused poorer service and higher 
rates. This may be intuitively plausible, but it is not a valid 
excuse for what has happened.
    During the wave of railroad mergers that followed the 
Staggers Act, the railroads told a different story. Then, heavy 
volumes were good. Shippers were told that high concentration 
in the rail industry was okay because the railroads have 
economies of scale and handle higher volumes more efficiently 
than they can handle lower volumes.
    More recently, the railroads' own study of future capacity 
needs performed by Cambridge Systematics shows how the railroad 
arguments about capacity and congestion require that you ignore 
the way productivity improvements effectively add capacity and 
ignore the greater contribution that is available to support 
infrastructure just from adding traffic volumes at current 
rates.
    Current railroad arguments about capacity constraints are 
also refuted by the railroads' own history of serving PRB coal 
movements. For 20 years, rail competition, productivity and 
economies of scale produced the result that the railroads are 
now trying to claim is impossible, infrastructure investment to 
move higher volumes at lower rates. Especially with the 
railroads now approaching or achieving revenue adequacy, there 
should be no question that they are earning the returns needed 
to support adequate capacity investment.
    The railroads say that the volume and density they have 
been pursuing for decades and that has provided much of the 
rationale for their major mergers is now preventing them from 
providing reliable service at reasonable rates.
    We believe, rather, that the volume and density now being 
enjoyed by the major railroads make it both possible and 
appropriate to place greater reliance on market forces to 
ensure shippers receive reliable service at reasonable rates 
and avoid the types of service problems that we and other 
shippers have been forced to endure.
    AECC is doing everything we can to improve the quality of 
rail service we are receiving. AECC wishes that the major 
railroads, upon whom we and our customers rely, would match our 
efforts. We believe the forces of competition, rather than 
monopoly power, would lead to the reliable rail service at 
reasonable prices that we seek.
    Thank you.
    Ms. Brown. Thank you. Thank you all.
    Mr. Hamberger, recently, I went to Barcelona. I took the 
train from Barcelona to downtown Madrid, 300 miles, 2 hours and 
a half. I mean we in this Country are the caboose, and we don't 
even use cabooses anymore. We have to figure out a way to grow 
our industry.
    I was just in Tallahassee yesterday. We are discussing a 
commuter rail which is very important to central Florida 
because of the congestion, and we are working with CSX. One of 
the major problems that keeps coming up is the feeling we have 
to have this partnership between public and private, but safety 
is also an important issue.
    Is your industry going to sit down with the unions and 
discuss safety and how we can grow the industry together, 
because that keeps coming up?
    Mr. Hamberger. Madam Chairwoman, I appreciate that 
question.
    We have, in fact, worked very closely with this Committee, 
with the House, with the Senate Commerce Committee and 
hopefully with the full Senate and finally get into conference 
a very far-reaching safety bill that would address the issue of 
fatigue, the issue of making sure that those individuals who 
are driving the trains are guaranteed in law the rest that they 
deserve.
    In fact, I would offer that they get that rest today. Only 
5 percent of our employees actually work more than 250 hours a 
month. Only 17 percent work more than 200 hours a month. So we 
are committed to fatigue management. We are committed to 
working with our employees not only to make sure they are 
properly trained but to make sure they are properly rested.
    But you also put your finger on, as you have a wont to do, 
a very important issue, and that is the cooperation that is 
required between both the freight and passenger operators of 
rail systems. I think Mr. Zehner talked about it in his written 
testimony as well as here this morning, the cooperation that he 
is experiencing with CSX in improving and expanding the 
operations between Richmond and Washington.
    Mr. Kummant referenced the meeting that occurred just last 
week between the AAR Board and the Amtrak Board and the 
commitment to sit down and take a look at how to improve on-
time performance. That commitment to partnership is there, not 
only with our employees in the area of safety but also with our 
partners providing the passenger service to make sure that we 
can improve on-time performance.
    Ms. Brown. I will come back with additional follow-up 
questions.
    Mr. Moro, I want you to know that Mrs. Napolitano took me 
to your area. I was in a helicopter. I have seen your entire 
operation and what you have a hope to improve, and it is very 
impressive.
    As we expand port operations and try to be competitive with 
people in different countries around the world, it is so 
crucial that we have the track infrastructure working. We are 
talking about bringing in big containers into Jacksonville, but 
we are talking about if we don't put the infrastructure in 
place with the tracks, we are talking about, what, 3,000 
minimum or up to 10,000 tractor trailers a day, 365 days a 
year. That is not acceptable to any community.
    But to expand the operation is expensive. So how did you 
all do it?
    Mr. Moro. Well, Madam Chair, we agree with you. We think we 
have a pretty impressive port complex. We are very proud of 
that. It is actually built out of need. The consumers are 
consuming, and we are the gateway for all of those goods into 
the Nation.
    We are working on more reliance on rail. Everybody knows 
the freeways and main arterials in southern California are very 
congested. So, reliance on rail is an efficient way to move 
cargo as well as a clean way. It is good for the environment.
    The way we have done is, of course, we have very good 
revenues from our operation that we reinvest in our capital 
improvement projects on our terminals.
    We have had a little bit of difficulty over the last couple 
of years in getting through our environmental document process. 
However, the difficulty has just really been a challenge in 
order for us to provide proper mitigation measures as we 
develop these terminals.
    So on-dock rail, we have a couple of terminal projects 
which are funded by our port revenue that will help the rail 
infrastructure.
    Then, off-terminal, the projects we have underway, and I 
mentioned that we have State Prop 1B funds that we are using 
our local match to leverage, to do these off-terminal projects, 
near-dock projects that really allow us to maximize the 
movement of rail cargo. Because they are an off-terminal yard, 
they are there for a number of terminals to use, the short haul 
rail carrier as well as the long haulers to build up the 
trains.
    So, to answer your question, the way we do, frankly, we 
just reinvest a lot of our revenue into rail. We recognize the 
significance of it, and it is definitely an infrastructure that 
we are going to keep pursuing.
    Ms. Brown. I will come back.
    Mr. Shuster. Thank you.
    Obviously, we have a wide range of issues in front of us. I 
am going to focus first on, Mr. Moro, did you just say you, as 
a port, you invest in rail yourselves?
    Mr. Moro. Yes, sir. Mr. Shuster, that is correct. We use 
port revenues and reinvest those back into capital improvement 
projects for rail, rail yards and rail infrastructure.
    Mr. Shuster. You do that with a partnership with the 
railroads or just on your own?
    Mr. Moro. It is on our own.
    Mr. Shuster. It is on your own.
    Mr. Moro. Yes.
    Mr. Shuster. How many railroads serve your port?
    Mr. Moro. Union Pacific and BNSF, Burlington Northern Santa 
Fe.
    Mr. Shuster. Trucking is not a factor, coming in and out of 
there, or very minimal? You use trains mainly to get things 
out?
    Mr. Moro. No. Well, we use approximately, actually 
primarily trucking. There is a localized consumer there. There 
is, of course, the metropolitan area. The five counties there 
are our big consumers. So, for the local distribution and 
consumption, no, we rely on trucks heavily.
    The Port of Long Beach moved just under 80 percent of the 
goods moved via truck. Only 20 percent in 2007 moved via rail. 
Our hope is to increase, continue to increase that. That is 
usually for destinations.
    Mr. Shuster. Increased rail?
    Mr. Moro. Increased rail, yes, sir.
    Mr. Shuster. It is a lot less expensive to move?
    Mr. Moro. That is correct. It is the most efficient way to 
move the cargo out.
    Mr. Shuster. Mr. Hayes and Mr. Sharp, in your industries, 
do you invest in rail upgrades or do you rely mainly on the 
railroad industry to do that?
    Mr. Hayes. Madam Chairman, Member of the Committee, 
obviously, in the grain industry, in most cases, the rail takes 
care of the infrastructure. However, there are many elevators 
that have their own car-loading tracks, 100 unit circle trains 
or whatever they may be. Obviously, some of our industrial 
partners are very much involved in building their own rail 
infrastructure to load and unload, et cetera.
    But if I were to give it a broad answer, I would simply say 
that yes, the grain industry is very involved because all of 
this investment, all of these loading facilities, this is all 
part of a cost of doing business with a farmer. As I testified 
earlier, we are probably the only American industry that cannot 
pass our costs on to someone else. We are the bottom of the 
feeding chain.
    We ship through industry, but we pay the bill through 
freight rates or handling fees or elevation fees or whatever it 
may be. The cost still falls back onto the back of the American 
farmer.
    Mr. Shuster. Mr. Sharp, does your industry invest in 
railroads, railroad operations or is it mainly left up to the 
rail industry?
    Mr. Sharp. Yes, sir, we do to a certain extent. The coal is 
hauled from the Powder River Basin to power plants like ours in 
unit trains. The customers provide the coal cars.
    So, in our case, we are providing all the coal cars that 
the coal is hauled in, provide those to the railroads for those 
trips, and also the facilities that we have onsite at our power 
plants, the rail loop that is needed. When that rail loop 
needed to be expanded from smaller length train consists to 
larger ones, we made those expansions.
    So, to the extent that we can do anything that helps 
improve the efficiency or speed up the process, we will make 
those investments, yes.
    Mr. Shuster. What about both your industries? The use of 
trucking, is that utilized as a means to transport?
    Mr. Hayes. Madam Chairman, Representative Shuster, never in 
my life have I ever seen a train come to my barley field to 
pick up a load of barley. I have to deliver that barley via 
truck to my marketplace, be it a local elevator or, in my case, 
I am a contract malt producer and I have a 275-mile round trip.
    Of interest to you perhaps today, with the cost of diesel 
fuel, I am a small farmer. I own two semis. That is all I have, 
and obviously they are old. At $4 diesel, it costs me $1 a mile 
for diesel fuel. My trucks run four miles to the gallon.
    So, I hope I answered you question in that obviously trucks 
have to carry, in agriculture, carry the good to the train.
    Mr. Shuster. To the train, but then the train takes it.
    Mr. Hayes. Absolutely, and we cannot make it without the 
train.
    Mr. Shuster. Right. When we talk about re-regulation and 
what we are talking about in a lot of these cases is a great 
concern to me, that when we talk about the increase in costs. 
Definitely over the last couple of years, we have seen a 5, 6, 
7 percent increase. But when you look over the last 28 years, 
we have actually seen, from 1980 when we passed the Staggers 
Act, a 55 percent decrease in the rates to ship in real terms.
    My concern is when we talk about re-regulating, I don't 
know how that is going to solve the problem if, in fact, and I 
think we do have a capacity issue. I don't know how re-
regulation is going to solve that. My concern is the situation 
is going to get worse.
    I know in your industry, I believe, and I am not exactly 
sure, but of course there are peak times in the electric, when 
it comes to when they need coal and when they don't need coal.
    In your industry, when you are shipping your grain, there 
is a period of time when you harvest it in the fall that you 
need increased capacity.
    I guess the question is are you recommending that the rails 
increase significantly to build capacity to handle those peak 
times?
    Mr. Hayes. Madam Chairman, Representative Shuster, it is 
absolutely apparent that we have to have more capacity to move 
our grain movements as the Colorado example I gave you.
    However, I think there is a misinterpretation here a little 
bit. Once the initial harvest onslaught of grain disappears, 
there is a constant movement of grain in large volumes 
throughout the entire year.
    As I said earlier, I am a malt barley contractor, and the 
primary company that I contract with, two years ago, could not 
get cars to move the crop to the East. So we could not move our 
grain from the farm to them. Their facilities were full, and we 
were full, and this happens to be the largest purchaser of 
barley in the North America.
    Anyway, what happened was we ended up with grain in our 
bins as harvest began. We had, if I recall correctly, this 
would have been 2005 grain in our bins as we began harvesting 
in 2006. Now the problem is just compounded.
    What do you do with that grain? Because like I said, I am 
270 miles, and I certainly don't own enough trucks to make that 
movement. So, yes.
    Mr. Shuster. Do you hold any of the grain to get a better 
price at market?
    Mr. Hayes. Absolutely. In my case, no. I am pre-contracted.
    Mr. Shuster. Well, what about across the industry?
    Mr. Hayes. I think across the industry, there is a lot of 
it held, yes.
    Mr. Shuster. They do that because they want to send it to 
market to get a higher price, is that it?
    Mr. Hayes. Obviously, you are going to play the price. 
There is no question about that, as any other business does, 
but also you have to look at it from what you physically can do 
with your operation.
    The large guys have to be able to spread that load out. 
They just don't have the capital to do that.
    Mr. Shuster. I wasn't paying attention the clock. I am way 
over. Could I just ask one quick question or do you want me to 
come back?
    Ms. Brown. We will come again.
    Mr. Shuster. Okay, I will save the question. Thank you.
    Ms. Brown. Mrs. Napolitano.
    Mrs. Napolitano. Thank you, Madam Chair, and I beg your 
indulgence because I do have a markup. There are many issues 
that I have, and I would like to be able to submit some of them 
for the record and thank you for yielding to me.
    One of the really serious areas, and I will talk to Mr. 
Moro on this and the Port of Long Beach because you are 
implementing a cargo container fee. You are using it only in 
the port area, am I correct, the infrastructure?
    However, as we know--we have heard it and we have talked 
about it--most of that cargo goes up into L.A. and then through 
my whole district. I have 54 grade crossings, only 20 grade 
separations. That is going to slow down traffic. Yet, I can't 
get the support to be able, not support, funding I should say 
to be able to increase the number of grade separations to 
increase the speed of those trains to get them out of the area.
    With the increase of--what was it--110 trains a day, that 
is going to be 1 almost every 10 minutes in my district. I need 
help, and I need to be able to ensure that whatever comes out 
of the port is going to be able to go through my area without 
derailments. We had another one just not too long ago in my 
area, about a month ago probably.
    In the infrastructure, the UP has done a great job in doing 
some of the upgrading of the infrastructure, but we are still 
going to have a lot of issues with safety.
    Now, if you are going to be able to speed up, if you will, 
your loading capacity on the rail yard itself at the port, that 
is not going to help us. We are going to need some help.
    Now if you are going to be able to increase and get trucks 
off the road--as you know, 710 is congested out the wahoo--what 
else do we need to do to be able to then, because the price of 
fuel is going to exacerbate the issue of using trucks?
    They are going to put more on your rail cars. How are we 
going to address that?
    I know that you have had banner years. I am rolling 
everything into one, if I can.
    Labor has been part of the concern that I have had in 
making sure the employees have enough rest. You have heard me 
time and again, that they have enough down time, that they have 
enough support to be able to do their job safely. Again, are 
you talking to labor to ensure that all of this happens?
    Whoever wants to take it, I am game.
    Sir, Mr. Hayes, I was in Las Vegas, Nevada, probably 12 
years ago. The same issue was talked about then. So it is not 
really getting any better, is it?
    Mr. Hayes. Madam Chairman, Representative, I don't think it 
has improved significantly. In fact, if anything, perhaps it 
has decreased due to the amount of rail service available to 
us. I live in a captive State. We only have one railroad, and 
so that complicates it for us.
    Thank you.
    Mrs. Napolitano. Thank you, sir.
    Gentlemen?
    Mr. Moro. Well, I think if I could start, you mentioned the 
cargo infrastructure fee. The port has adopted a fee to help 
pay for infrastructure. You are correct. It is.0
    Projects that have been identified are immediately in or 
adjacent to the two ports. We feel that that is a significant 
contribution on our part. It is, again, a reinvestment of the 
port revenue and fees on cargo to improve that infrastructure.
    Mrs. Napolitano. Mr. Moro, excuse me, but wasn't the San 
Gabriel Council of Governments informed that they would be able 
to get some of that revenue to be able to possibly do grade 
separations?
    Mr. Moro. That is correct. It is for roadways and for rail. 
It is not limited to rail, and there have been a lot of 
stakeholders involved in that. By law, there are limitations as 
to where that money can be spent.
    To answer your question, what more do we need to do, I 
think both on the local, State and Federal level, there has to 
be investment of funds to improve, in terms of rail, improve 
the rail infrastructure including grade separations outside of 
the harbor district.
    Mrs. Napolitano. That would increase the percentage of the 
rail participation?
    Mr. Moro. Yes.
    Mrs. Napolitano. Mr. Hamberger?
    Mr. Hamberger. You are placing, again, your finger on an 
important point, the Alameda Corridor East project which is a 
public-private partnership, and I think that our railroads are 
working with your local communities. Hopefully, the Federal 
Government is involved as well, and the State, in trying to 
improve service through the Alameda Corridor East corridor.
    As far as the port fee, we do not have a position on the 
San Pedro port fee, but I know that the national commission 
that just issued its report called for a national fee of some 
sort that would be used and would therefore not be dedicated 
just to the portside facilities.
    But with respect to Mr. Hayes, while you are still here, 
Congresswoman Napolitano, I would just like to point out that 
indeed the one growth area, actually, two growth areas in our 
business right now are not intermodal. Intermodal is down.
    Our two growth areas are grain and coal, and we are moving 
grain and coal at record levels. Coal is trading at $110 a ton 
on the spot market in Europe. Powder River Basin coal is at 
$14.50 up from $5 a ton just a few years ago.
    We are moving more grain and more coal. Export grain is at 
record levels. So I would suggest that we are, in fact, 
providing reliable service at reasonable rates and keeping 
those two industries, the coal producers and the grain 
producers, competitive on world markets.
    Mrs. Napolitano. Well, thank you, Mr. Hamberger, but some 
of my businesses would argue with that because short haul does 
have a problem in my area.
    Madam Chair, thank you much. I will submit some more 
questions for the record.
    Ms. Brown. Thank you.
    Mr. Mica.
    Mr. Mica. Well, first of all, I want to thank you, Ms. 
Brown, for conducting this hearing on the important topic of 
rail capacity.
    When we look at the things that we can do to improve the 
environment, to improve our transportation system, nothing, I 
think, should be higher on the agenda than improving our 
Nation's rail capacity, both for freight and also for passenger 
service and for high-speed service. We need a partnership of 
the freights. We need a partnership of the Federal Government, 
Amtrak and others to make this happen.
    However, I have some concerns. We have a RRIF program. I 
understand it has about a $35 billion capacity of which not a 
lot has been used.
    I would like to know, maybe from Mr. Hamberger and some of 
the others if you would like to comment, how we could make what 
we have work and then how we can craft other programs that 
would partner Federal, State, local and private sector 
resources to get us to the infrastructure and rail capacity 
that we need.
    I know this DME project, I believe it was, went down the 
tubes. That was also to move, I guess, energy resources cost 
effectively.
    But we have a fund that is not utilized. We have had a 
major project go down the tubes. Maybe you can tell us how we 
could do it better or what is wrong, Mr. Hamberger.
    Mr. Hamberger. I would like to respond in more detail on 
the record for that, Mr. Mica. Class I railroads do not view 
the RRIF program as being there for them. It is much more for 
the Class II and Class III railroads. I know General Timmons 
has testified before this Committee on this issue.
    Mr. Mica. But you have access to it.
    Mr. Hamberger. We have access to it, but our chief 
financial officers do not see it as really a major benefit.
    Mr. Mica. Is there something we could do to recraft it so 
that it could be used also? I mean the intent is to help those 
that sometimes may not have the resources of the Class I's, but 
our goal is to increase rail capacity.
    We had another proposal--was it RIDE 21--that proposed $79 
billion or $70 billion in assistance, and that didn't float. 
What would it take for us to partner?
    Mr. Hamberger. Well, the tax revenue bonds I believe that 
were in RIDE 21 were an excellent approach, we believe, and we 
thank you for your cosponsorship of the investment tax credit. 
This credit would encourage more investment and which would 
bring many of the projects that don't quite reach the hurdle 
rate for investment in the private sector to actually now be a 
reasonable investment from an economic standpoint. So we would 
encourage that.
    Then, of course, the public-private partnerships that have 
begun to blossom, really CREATE, the Heartland Corridor, the 
Alameda Corridor is what we are talking about.
    I would like to get back to you for the record on the RRIF 
program if that is possible.
    Mr. Mica. Okay.
    The other thing that I have questions about, there is 
legislation now, Amtrak reauthorization and some other 
proposals that would penalize freight rail for delays for 
passenger service. I believe there is some better way to 
resolve this problem. Would you like to comment, Mr. Hamberger 
or Mr. Kummant?
    Mr. Kummant. I guess I would make a brief comment which is 
I believe the current bill you all are contemplating, I haven't 
seen details of, but I know what on the Senate side it is.
    I am not entirely sure that the STB is honestly equipped 
for dealing with this in terms of the number of issues. We 
certainly are working hard on the engagement front, but I guess 
would echo that we need to take a close look at kicking every 
issue back to the STB.
    I believe there is a provision that said if you fall below 
80 percent or 75 percent OTP for a period of months, that has 
to be reviewed. I think that, at this point, could shut them 
down. So I think we have to take a careful look to see what is 
really a constructive process.
    Mr. Mica. Okay.
    Mr. Hamberger. I would echo that. We have some problems 
with the language as it came out of the Senate. I think we have 
some suggested language that we have submitted to the 
Committee. A lot of this is covered in the contracts between 
the freight railroads and Amtrak in the first place. So I would 
echo what Mr. Kummant said.
    Mr. Mica. Well, thank you. I appreciate your responses.
    Thank you, Madam Chairwoman.
    Ms. Brown. Thank you.
    Mr. Sires is new to the T&I Committee, and I think he 
joined March 11th, 2008. Welcome, and it is your time.
    Mr. Sires. Thank you, Madam Chair, and I look forward to 
working with you and all the Members of the Committee, and I 
want to thank the panelists for being here today.
    I represent the northern part of New Jersey, places like 
New Jersey City and Newark. It is very congested. I have been 
dealing with a problem, and I think it is going to become a 
problem that is growing beyond New Jersey.
    The problem that I am dealing with is obviously we need all 
the alternative fuels that are coming, especially ethanol. We 
are moving ethanol through a lot of areas that are very, very 
congested. I know the demand is going to keep growing, 
obviously, as you are telling me that you are moving more 
grains and so forth. Are we ready for that?
    Is the railroad industry ready to move fuel through all 
these congested areas and how safe is it?
    Mr. Hamberger. I want to say, first, Mr. Sires, thank you 
for your sponsorship and co-sponsorship of H.R. 2116 as well.
    Our industry is working very closely with the ethanol 
industry in trying to make sure that we have the capacity 
available. It burst on the scene a couple of years ago. In 
fact, Mr. Braley is not here from Iowa, but I am told by the 
National Grain and Feed Association that Iowa will soon be a 
net importer of corn, and so you can imagine that that has some 
implications for design of our network and traffic flows and 
traffic patterns.
    So we are working very hard to make sure that we do have 
the crew. The tank cars is another issue. Will there be enough 
tank cars available?
    Then the power, and the fourth issue is at the ethanol 
plant itself. Is there enough capacity to deal with what we 
hope to be a unit train full of ethanol so that it doesn't tie 
up the main line?
    That is a concern in urban environment. Is there enough 
space, just physical geography, for that to occur?
    So there is a lot of planning and discussion going on 
between our members and the ethanol community. For now, the 
head of the Renewable Fuels Association is saying that we are a 
virtual pipeline and that there seems to be adequate service. 
It is something that we are worried about going forward as the 
requirements kick in for more and more ethanol, but we think 
that we will be able to keep up.
    Mr. Sires. One of the concerns of the constituents I spoke 
to is the safety factor because some of these railroad cars are 
going right through residential areas, places like Woodbridge, 
New Jersey, and Carteret. I receive many calls in my office, 
especially because apparently you leave the car running on the 
tracks, waiting for the next.
    I don't know too much about the way it works, but I do know 
that there is a big concern. How safe is it to move all these 
fuels near residential areas?
    Mr. Hamberger. I can give you a generic answer to that, but 
I would like to come in and sit down with you or your staff and 
get to the specific issue with the railroads involved that your 
constituents have concerns about.
    Generically, we move toxic material, hazardous material 
99.997 percent from origin to destination without any 
accidental release. So it is 99.997 percent safe.
    Ethanol itself is not a toxic by inhalation hazard. I am 
not sure where it is in the pantheon of hazardous materials. 
The ones that cause the most concern, of course, are those that 
are toxic by inhalation, something like chlorine or anhydrous 
ammonia.
    Mr. Sires. I have that in my district too.
    Mr. Hamberger. Yes, yes. Those also move safely, but 
obviously a great concern should anything happen. That is a big 
issue for us. We will be testifying later this week over at the 
STB about that.
    But with respect to ethanol, of course, that does not have 
the toxicity or the hazardous quality that something like 
chlorine would have.
    Mr. Sires. One just last question, you said that your 
industry spent $420 billion in investment by all different 
companies?
    Mr. Hamberger. Yes, sir.
    Mr. Sires. The Federal Government, what have we spent?
    Mr. Hamberger. Well, on freight railroads, very, very, 
very, very, very little, almost nothing. There are some 
projects where there is some. For example, now there is $100 
million going into Chicago that was authorized in the last TEA-
LU bill, but basically nothing.
    We are the mode that is privately funded, privately 
maintained and, as I like to say, we also get to pay taxes, 
real estate taxes on our right of way. And so, it is a 
different model than, obviously, highways.
    Mr. Sires. Thank you very much, Madam Chair.
    Ms. Brown. Mr. Michaud.
    Mr. Michaud. Thank you very much, Madam Chair and Mr. 
Ranking Member for having this hearing. Rail capacity is 
extremely important to both freight rail as well as passenger 
rail. I really appreciate having this hearing.
    I have a few questions, the first one for Mr. Hayes. You 
had mentioned that in order to get your product out, that you 
have to use trucks.
    There isn't an equity across the United States on truck 
weights. Some areas have 100,000; others have 80,000. Does your 
area allow 100,000 pounds or 80,000 pounds?
    Mr. Hayes. Madam Chairman, Representative, the State of 
Idaho is capped at 105.5. Our neighboring states, Montana to 
the north is uncapped Federal Formula B as is Utah to the 
south, uncapped Federal Formula B.
    If you are asking for my recommendation, I would say this. 
Congress is very lax. If they do not work on the truck weight 
issue today with the cost of moving freight, with the so-called 
pollution from the trucks on the road, I think it is a very 
foolish error by us, the American public, who do not recognize 
the fact that we can haul products on trucks at much heavier 
weights by simply changing the configuration of the truck, 
actually increasing the safety of the truck and yet we are 
still locked in a primitive 80,000 pound freeze that was put on 
back in the eighties by the same rationale that is happening 
today.
    Mr. Michaud. Thank you.
    My next couple of questions would be to Mr. Hamberger. As I 
mentioned, I am very supportive of rail, freight and passenger, 
and I know there is legislation that actually will help deal 
with the capacity issue but also realizing that you have to 
work in a cooperative effort with all those concerns. It is my 
understanding that the construction trades are concerned about 
H.R. 2116 particularly as it relates to prevailing wage.
    My first question is have you been able to work with the 
construction trades group? If not, will you be able to work 
with them to address the concerns as it relates to prevailing 
wage?
    My second question is Maine is a pretty rural State, 
particularly in my district. The First District is not as 
rural. Maine is not unique when you look at States all across 
the Country. Rail is very important.
    However, there might be some areas, for instance, Maine 
from Portland to Brunswick, that would like to have passenger 
rail. The capacity is not there, but there is also a freight 
line system from Portland to Brunswick.
    What has your association been doing, if anything, to help 
work in a collaborative effort where you can use freight rail 
lines to help out with passenger rail as well?
    Mr. Hamberger. Thank you for both of those questions, and I 
am going to be getting a look firsthand at that area. My son is 
going to Bowdoin next fall. So I will hopefully be spending 
some time in Brunswick.
    Taking the second question first, that is what is the 
cooperative relationship, I think Mr. Zehner's testimony really 
goes to it. As an association, we have not done much because it 
is really a bilateral issue between the passenger operator and 
the freight rail operator to get together and try to figure out 
how to improve service.
    I think Mr. Zehner's testimony here today is that his 
partnership with CSX is exemplary, and I like to think that 
that is the way it is around the Country. It is not always 
smooth going in that there may be difference of opinion on what 
the cost for capacity expansion is, what the need for capacity 
expansion is. But generally speaking, we are committed, and as 
an industry we are committed and understand the importance of 
trying to provide capacity both for freight and for passenger.
    I am sorry. I got carried away with Bowdoin. Your first 
question was?
    Mr. Michaud. Deals with the prevailing wage.
    Mr. Hamberger. I am sorry. Davis-Bacon, exactly. You know 
there is a substantive and a political answer to that.
    Substantively, we already pay the prevailing wage or more. 
I mean we are the prevailing wage when it comes to maintenance 
of way, for example. No one else does it, so we are the 
prevailing wage, and so there is not an economic issue for us.
    It is, to be blunt, a very controversial issue here inside 
the halls of Congress. We are really being guided by our 
supporters and our leaders. Congressman Kendrick Meek, our lead 
Democratic sponsor in the Ways and Means Committee, indicates 
that it is not something that the Ways and Means Committee has 
done very much in the past as a provision on tax incentives.
    So we do not have a substantive problem with it, and we 
would like this to be a bipartisan, as it is so far with about 
60 co-sponsors, way of encouraging investment and really just 
trying to work our way through that at this point.
    Mr. Michaud. Great. Thank you very much.
    Ms. Brown. Mr. Diaz-Balart.
    Mr. Diaz-Balart. Thank you, Madam Chairman.
    I have a couple of questions, and I am not quite sure whom 
to direct them to. It is about specific legislation.
    The first one is obviously we all know about the need for 
infrastructure investment, but in the case of rail it is, 
frankly, private investment. It is a place where, as we all 
know, there is not a lot of government investment. It is all 
private sector investment.
    If you look at the numbers--what is it--17 percent which is 
an incredible number, and yet we still know that there is going 
to be a lot of unmet needs in the future.
    There are two bills out there, the tax incentive bill, H.R. 
2116 which is the Freight Rail Infrastructure Capacity 
Expansion Act, which is a 25 percent tax incentive for all new 
rail infrastructure, and the other one is the Short Line Tax 
Credit. How important are those bills in order to help the 
private sector continue to invest in their infrastructure and 
what other things can we do to help that?
    Number two, and I guess this one would probably be to Mr. 
Kummant, I know that there is another bill out there, H.R. 
5644, to promote the development of high-speed rail. Does 
Amtrak currently have the engineering capacity to do a 
multibillion dollar high-speed rail project in the Northeast 
Corridor or what do we need to be looking at?
    So if you would care to address those questions.
    Mr. Hamberger. I will defer to the member of my board 
first. Go ahead, Mr. Kummant.
    Mr. Kummant. Well, on the first point, look, we support any 
legislation that brings capital into the system. What I would 
say, however, is not to forget that the States have actually 
made dramatic choices in unmatched funds. California, for 
example, has put $1.9 billion into their rail infrastructure in 
partnership with the railroads since 1990, and those are 
unmatched funds.
    So, first, I would say is whatever we can do to create 
structures where matched funds can be made available to the 
States for rail investment is enormous. That has been 
contemplated in a number of different Amtrak approaches to have 
matching funds. I think that is significant.
    As far as high-speed rail, look, high-speed rail is 
something that in our lifetimes clearly has to be here. It is 
what Amtrak does, but I would also suggest that there is no one 
in this Country today that is really configured to manage, say, 
a $30 billion construction project in and of itself. That has 
to be managed in segments.
    I am sure there are some pieces of that we could handle, 
but I don't think you could point to any individual A&E firm or 
rail-oriented firm that is configured today to manage something 
of that magnitude.
    Mr. Diaz-Balart. Thank you.
    Mr. Hamberger. With respect to the two tax bills--and thank 
you, Mr. Diaz-Balart, for your co-sponsorship of H.R. 2116--
addressing the Short Line Tax Credit first, they have three 
years of experience. It works. The incentive actually incents, 
and people go out and they spend more money. As my testimony 
indicated, a half a million more cross ties purchased by the 
short lines.
    Short lines have an incredibly difficult challenge in front 
of them. Getting up to 286,000 pounds per car requires heavier 
steel, better substructure of the right of way. There is a 
study, it is years old now, that shows that $6 billion is 
necessary to upgrade the short line system. About 25 percent of 
all cars either terminate or originate on short line--so, a 
very critical need for the short lines.
    With respect to the infrastructure tax credit, 2116, also 
incredibly important, but let me emphasize that we are going to 
continue to invest. We are going to continue to put 16, 17 
percent back into cap ex as we have done.
    The question for Congress, it seems to me, is do you want 
that to be even higher?
    Do you want that to be even more, not for the benefit of 
the freight railroads, but for the benefit of the public 
because the 280 trucks, at least, on each intermodal train 
takes 280 trucks off the road. We are up to 435 miles per 
gallon, 1 ton of freight moves 435 miles on 1 gallon of fuel. 
Then do you want the concomitant benefits of cleaner air, 
better fuel use? So I think it is important that it be viewed 
in that context.
    Mr. Diaz-Balart. I would imagine that we also have to guard 
from the inverse, which is to make sure that the government 
doesn't do anything to disincentivize that investment. 
Incentivize more and not do something silly or stupid to 
disincentivize that investment, correct?
    Mr. Hamberger. I would not characterize things as silly or 
stupid, but I would say we certainly would not want to see to 
disincent, yes.
    Mr. Diaz-Balart. I want to thank the Chairwoman. As you 
know, nobody is safe when we are in session. Thank you, Madam 
Chairwoman.
    Ms. Brown. Mr. DeFazio.
    Mr. DeFazio. Thank you, Madam Chair.
    Mr. Hamberger, in your testimony, you are pointing out, and 
it has been raised elsewhere, the issue of investment.
    You say on page 22, that Class I's are anticipated to be 
able to generate, through earnings growth from additional 
traffic and productivity gains, only $96 billion of the $135 
billion needed for new capacity identified by the Cambridge 
Systematics study, and that is a problem. You go on to make 
some suggestions, some of which I think merit consideration by 
the Committee as ways to encourage or induce the necessary 
investment.
    I guess the question goes beyond that. I wonder if the $96 
billion is going to be available, and my concern goes to the 
last hearing held. I think it was the last hearing by this 
Subcommittee, which was on the issue of basically investors, 
shall we say. I have a concern, and I am looking for a way to 
deal with this.
    We need people investing long term. We need what we would 
call, roughly, patient capital in rail. We don't need the hedge 
fund speculators, the same people who are unnecessarily driving 
up the cost of gasoline, the same ones who are unnecessarily 
driving up the cost of food, to deprive of critical rail 
capacity.
    I am wondering, since a number of the companies you 
represent are publicly held, do you have any ideas how we might 
deal with this potential problem?
    Mr. Hamberger. No.
    Mr. DeFazio. Okay.
    You know we have over in the aviation sector, we have what 
we call fitness standards. We finally managed to, for instance, 
throw Frank Lorenzo out of the industry when he was trying to 
destroy his fourth airline. I am just wondering whether or not 
we need to look at, what the government needs to look at 
something in those areas.
    I mean rail infrastructure is critical. It is much more 
fuel efficient. We need more capacity. But if we have people 
coming in and speculating on that sector and depriving that 
sector of the capability of making capital investments, I think 
this is a tremendous problem.
    Mr. Hamberger. Let me just say. I was directly answering 
your question if I had any specific recommendations and, 
frankly, we do not have any recommendations.
    Mr. DeFazio. Right.
    Mr. Hamberger. But conceptually what you are saying is 
accurate. That is to say that, while it is always great to see 
that there is private capital interested in our industry 
because, in fact, we need the private capital, we need the 
investment, it is always important that there be a recognition 
of a balance of both short term and long term.
    Our assets are 30, 40-year assets, and so sometimes you 
have to make sure, as you take a look at whether or not to make 
an investment, that you have both a short-term and a long-term 
perspective.
    Mr. DeFazio. This Committee is wrestling with this issue, 
as am I.
    We have had, as you know, dealing with a short line in my 
district, a hedge fund purchase of RailAmerica. Then 
RailAmerica seems to be, in some places at least, walking away 
from its common carrier obligation, particularly in my 
district, but I don't think my district is that unique. I 
expect it will happen elsewhere as pressures grow, these trust 
funds, and other bad debts are going to increase pressure on 
where they have ownership of assets. I am very concerned about 
that.
    Mr. Hamberger. The STB seemed to move aggressively in that 
area.
    Mr. DeFazio. Yes, that seems fairly unprecedented.
    Mr. Hamberger. Yes.
    Mr. DeFazio. You did hear from Mr. Hayes, concerns about 
captive shippers. In particular, he mentioned a company that 
would not have cited a facility. That was the barley 
processing, was it, for malt?
    Mr. Hayes. That is correct. It was the Grupo Modelo 
Company, Mexico City, the largest importer or the United 
States' largest import beer. They have their only malt facility 
in Idaho Falls, Idaho, the only U.S. malt facility in Idaho 
Falls, Idaho.
    Mr. DeFazio. Well, as someone who enjoys beer, we have to 
rectify the situation.
    I am curious, does your association have any response to 
those who raise concerns of the rates imposed on captive 
shippers?
    Mr. Hamberger. Well, there are several responses, if I 
might.
    Mr. DeFazio. I know there are profits, and therefore the 
profits are going to go to the capital that we need for the 
investment, but other than that.
    Mr. Hamberger. And, in fact, the important point that is 
sometimes lost is that we get no business if someone is not 
shipping. So the idea is to price at the market to make sure 
that the product does move. In fact, one of our members has 
just been honored by another brewery as supplier of the year 
because of the great service they are giving in moving barley 
into that brewery.
    I did hear Mr. Hayes indicated in his oral testimony, 
something about corn moving on shuttle trains into California 
at below full rail costs. I am not quite sure where he gets the 
data for that.
    But, in fact, shuttle trains of corn are probably more 
efficient. That is why they have developed. They get about 30 
turns a year, and so if the market has shifted to corn from 
barley, I am not sure that is because of something the 
railroads have negatively done. They have helped the corn 
producers find other markets for their product.
    Mr. DeFazio. You never think there is an instance of sort 
of monopoly?
    Mr. Hamberger. No.
    Mr. DeFazio. I mean there is the whole thing of 
competition. I would suppose you would say the competition is 
trucking, but given the fuel efficiency advantage of rail, if 
rail starts to price very close to trucking, you have to wonder 
either that is a very inefficient rail line or there are other 
factors in play in that pricing.
    We worry about someone who might have competition over 
here, saying, well, gee, we are going to actually compete and 
shave our rates over there, but over here is where we are going 
to be able to get an excess rent or profit because of our 
monopoly capability.
    Mr. Hamberger. The word, excess, of course, is where we 
would probably disagree. That is why the STB has developed its 
small shipper and new rate review cases. I am pleased to see 
that a small shipper, DuPont, has taken advantage of that and 
is the first to file three cases under that against CSX and 
those, I think, will be decided sometime later this summer.
    So I believe that there are avenues for relief if, in fact, 
excess rates are being charged.
    Mr. DeFazio. Mr. Hayes, since he questioned the corn 
example, do you want to tell him where you got those numbers?
    Mr. Hayes. I was looking quickly for those numbers, but I 
did not see where the statistics came from, and I apologize for 
that. I will see that this Committee gets the source.
    I would just like to remind this Committee that prior to 
the inception of the unit trains hauling corn out of the 
Midwest into California, we moved between 60 and 70 million 
bushels of barley, feed barley, into California annually. Well, 
that is about 50 rail cars a month.
    Currently, we move about 200,000 bushels, to give you an 
example of the impact it has on feed barley. Most of this 
barley originated in Idaho and Montana, some out of North 
Dakota.
    Mr. DeFazio. Okay. All right. Thank you.
    Thank you, Madam Chair. Thanks for the generous allowance 
of time.
    Ms. Brown. Mr. Moran.
    Mr. Moran. Thank you, Madam Chairman.
    Mr. Hamberger, one would expect in the economy for capital 
to flow where there is a rate of return that justifies the 
capital moving in that direction. If profits can be made, one 
would expect capital to be available. What is it about the rail 
industry that makes that less likely to occur or not occurring 
insufficient quantities?
    The railroads always talk about the need for additional 
capital, and the market ought to be taking care of that.
    Mr. Hamberger. Well, we are the most capital-intensive 
industry in the Country and the fact that our investments are 
long term and are not very flexible. That is to say once you 
lay the track from Point A to Point B, if the traffic shifts or 
if traffic patterns shift, you have that asset stuck in the 
ground, and so it requires a recognition of the long-term 
aspect of it and a belief that, over time, you will get the 
return on that asset.
    As I say, we will continue, at $95 billion, to invest 16, 
17 percent. So I think we are, in fact, putting our money back 
into the industry. The question is with the shift in traffic_
with the San Pedro ports doubling.
    I know when I first got this job, there was a lot of 
excitement 10 years ago because they hit 300,000 containers a 
month. That was a big milestone, and now I wrote down 15.7 
million a year. So with that shift in traffic, with $4 a gallon 
diesel fuel, there will be an even greater demand to shift to 
rail. The question is can we keep up?
    The Cambridge report, I guess I will defer to Mr. 
Grenzeback on the second panel to get into a little bit more 
detail of how they came up with that delta.
    Mr. Moran. Well, I would assume that rail looks very 
attractive as a future mode of transportation with, again, I 
assume the predictions are an ever escalating price of fuel, 
rail being perhaps more efficient and a growing global economy 
that, as you forecast the future of the rail industry, I assume 
that you would find it positive?
    Mr. Hamberger. Yes, sir, absolutely. I think that is right.
    I think there is a recognition that as the economy and as 
public policy-makers wish to move toward a greener way of 
moving things, at 435 miles per gallon, we provide that 
opportunity. A side benefit of the investment tax credit would 
be more capacity not only for freight, but it would also lead 
to easier negotiations with my friend, Mr. Zehner here, on how 
to provide more capacity for commuter rail as well.
    I think that the future is bright. The question is can we 
invest enough? Can we convince our owners and our investors to 
invest enough to keep up with the growing demand? That is 
really what the Cambridge report is about.
    Mr. Moran. In the eighties, we saw, in my opinion, 
significant concentration or at least additional concentration 
of the rail industry. Is that predicted in the future? Would 
you expect additional acquisition mergers by existing railroads 
of each other?
    Mr. Hamberger. At the Class I level?
    Mr. Moran. At the Class I level.
    Mr. Hamberger. At the Class I level, I have heard members 
of my board opine that that would occur only when and if our 
customers believe that that would be an imperative to provide 
better service. I don't see it happening on the immediate 
horizon, but it is possible somewhere down the line.
    Mr. Moran. Is it safe for me to assume that the economies 
of scale, the size of the Class I carriers today, is such that 
the desired efficiency exists?
    Mr. Hamberger. Well, I think what would be left would be an 
end to end merger, the so-called transcon, and that would 
probably have efficiencies as well, but I think much of the 
efficiency has been achieved.
    Mr. Moran. Thank you, sir.
    Thank you, Madam Chairman.
    Mr. Hamberger. Reduction in redundancy, I should say.
    Ms. Brown. Mr. Hamberger, the expansion of rail 
infrastructure is clearly an important investment issue, and 
the Federal Government should look very closely at providing 
assistance. As you are aware, with Federal assistance, usually 
there are certain requirements like the application of Davis-
Bacon. I think someone mentioned that earlier.
    Is the rail industry prepared to sit down with the 
construction unions and discuss how these two issues intersect 
going forward?
    Mr. Hamberger. Yes, and in fact I believe we have sat down 
with our friends from the construction trades department.
    We have not, I don't believe, reached an accommodation, but 
it is, as I mentioned to Mr. Michaud, both a substantive and a 
political issue. We believe that we already pay the prevailing 
wage rate, but what we are trying to do is figure out how best 
to proceed and get this enacted.
    Ms. Brown. Do you still feel the same about the rail trust 
fund?
    Mr. Hamberger. For the record, we believe that a Rail trust 
fund is not warranted in that we are already investing 17, 18 
percent of our revenues.
    Question number one is where would the revenue come from 
for a Rail trust fund? We assume that it would be some sort of 
a tax either on us, our operations or our customers, which 
could perhaps have traffic diversion and would certainly 
potentially affect the ability for us to achieve the returns 
that we need to have the investment capability that we have.
    Second, would then be where would the decisions be made for 
the investments from the Rail trust fund? We believe that 
working with our customers we have a pretty good idea where 
those investments should be made, and those investments can 
then be made quickly by our companies and not have to go 
through a governmental agency which might be tugged in 
different ways to invest in other places that we and our 
customers may not find to be optimal.
    Ms. Brown. Would you give us, in writing, some of the major 
issues that you think we should be addressing in the next 
Transportation Reauthorization Bill? I mean you can take a 
minute to discuss it, but I want more in depth what you think 
we are doing, particularly how we can forge this Federal-
private partnership to really grow the industry.
    Mr. Hamberger. Indeed, we have been having in-depth 
discussions as an industry to try to come up with a white paper 
along the lines of what you are suggesting.
    Obviously, one of the issues that will be front and center 
next year is the interplay between what Congress decides to do 
with greenhouse gases and what Congress decides to do with 
transportation policy. This Committee will have jurisdiction 
over both of those issues, and to some extent the Senate 
Environment and Public Works Committee has a great deal of 
overlap of jurisdiction.
    So I think the interplay between those two issues is 
something that Congress is going to have to take a look at. As 
we have talked about the 436 miles a gallon that we get, 
somehow it seems to me that recognition of that could come 
through as Congress works its way through those issues.
    Ms. Brown. Thank you.
    Mr. Kummant, you state in your testimony that host 
railroads are legally obligated to give Amtrak trains 
preference over the freight rails. What legal recourse do you 
have when it doesn't work?
    Mr. Kummant. Yes, there are really two avenues.
    One is that it is, in the end, the Justice Department that 
needs to bring suit to enforce preference itself. I believe 
that was only done once with the Southern Pacific quite a few 
years ago. Otherwise, we do have specific contracts with 
individual railroads that guarantee certain performance 
standards such as slow orders and overall velocity. So those 
are really the two avenues.
    Ms. Brown. Also, choking points, can you explain that a 
little bit and more extensively and explain to us when there is 
a disagreement as far as what is this particular area and how 
to rectify it?
    Mr. Kummant. Sure. First, maybe let me give you an example 
of where I think a process is working effectively. We have, 
brokered by Administrator Boardman of the FRA, an I-95 
improvement plan where we have worked with CSX, where there is 
a specific number of identified capital expenditures as well as 
operating practices with specific metrics associated with them. 
Again, I referenced a meeting that Secretary Peters brokered. 
We are going to look to take that process and move it across 
the Country and pick routes around the Country.
    That being said, I do think that most of the real 
constraints that we feel, the freight railroads feel 
themselves, and they are not a mystery to anyone. Around Colton 
Yard, the folks in Los Angeles know well; Porter, Indiana, with 
NS trying to get across their major route between Chicago, 
Detroit and Cleveland; Tower 55 which is Fort Worth, just 
getting through Dallas-Fort Worth is a real challenge.
    So we have a running list that probably is six to nine 
billion dollars in capital, where again it is not a mystery to 
any of us or our host railroad partners, where if we had 
incremental capital we would put that.
    I would reference California's great capital expenditure. 
The States end up being powerful partners in being able to 
bring capital. Virginia has done that with the Quantico River 
bridge, the State of Washington does that effectively, 
Illinois, California. So I think, again, a State-Federal 
matching fund is critical there.
    I would also, if I may, say that going forward it is my 
belief that passenger rail in this Country will really not 
develop as long as we are trapped in an annual funding cycle 
that is always highly politically charged. So I would probably 
part company with my friend, Mr. Hamberger. Perhaps it is not a 
trust fund, but some sort of dedicated funding source has to 
happen in order for us really to progress and not always be 
trapped in the annual appropriation cycle.
    Mr. Hamberger. I would, just for the record, indicate that 
the question I interpreted from the Chair was whether or not 
the trust fund would be for freight investment.
    Mr. Kummant. Okay. Forgive me.
    Mr. Hamberger. It would certainly not in any way.
    Ms. Brown. So you are saying it is okay for passenger rail?
    Mr. Hamberger. A passenger fund? That is really up to Mr. 
Kummant. The difficult question would be where the funds come 
from.
    Your question, Madam Chair, I interpreted to be whether or 
not there should be a Railroad trust fund to invest in freight 
rail capacity, and that was the essence of my answer.
    Ms. Brown. As you all know, we have to figure out how to 
get additional monies into the infrastructure. Private is one 
way, public-private. I have looked at other countries and how 
they are financing their infrastructure. I mean we are just so 
far behind.
    So we really need to come up with some creative ideas about 
how we can move forward. I think some of the bills before the 
Ways and Means would be a step.
    Mr. Hamberger. Indeed, they would.
    I would just offer one further observation that I think you 
also may have seen when you were on your trip looking at rail 
in Europe, and that is that the Europeans have just the flip 
side of the issue that you are talking about with Mr. Kummant. 
That is they move less than 10 percent of their freight by 
rail, and we get visitors every week from Europe wanting to 
know how they can develop a rail freight system in Europe that 
can move freight as efficiently and at such reasonable prices 
as we do here in the United States and in North America.
    Ms. Brown. I agree with you. We're number one, and we are 
the image as far as freight rail is concerned, but they have 
done something that we have not done. They have separate 
tracks, and we have to figure out how to put that 
infrastructure in place so that we can move people too because 
we are behind.
    With gasoline at almost $4 a gallon--you talk about 
diesel--we are talking about regular. People can't go to work. 
I mean it is really a problem. We have to figure it out.
    Fifty years ago, we did the highway system, and it was a 
great investment. Now it is time for us to be creative and come 
up with how we are going to move these people in this Country 
and move them around.
    Mr. Hamberger. For the record, Mr. Kummant and I are both 
nodding yes.
    Mr. Kummant. That is right. We would agree, although again 
I would also say there is an awful lot we can do at 110 miles 
an hour, and we don't have to go 250 miles an hour.
    If you look at the well-established networks in France and 
Germany, for example, high speed is great, but it actually 
moves a fairly modest proportion of the total population. Most 
people who use the train daily are moving a fairly conventional 
speeds. The high speed in that case is sort of the froth on the 
latte.
    I think you need a parallel path approach. Clearly, high 
speed has to happen, but at the end of the day there is awful 
lot we can do with conventional equipment at 100 to 110 miles 
an hour.
    Ms. Brown. Absolutely, but part of the problem, like you 
said before, is reliability, knowing that the train is going to 
be there every day at 8:00 or 12:00. On-time performance is 
just crucial.
    Mr. Kummant. That is right. I agree completely.
    Ms. Brown. Mr. Kummant, what is the status of the Sunset 
Limited, in New Orleans where I had the hearing about service?
    Mr. Kummant. Yes. I don't really see any way to bring that 
service back at this point, given the infrastructure. We have 
no budget for it. It effectively will not run unless there is 
some sort of incremental action.
    It is painful to be in a state of conflict there, but it 
was never very effective service, three times a week, one of 
our worst on-time performances. It came through the towns there 
at night.
    We would very much like to and are putting our energy into 
corridor discussions within Florida, and we would like to look 
at the future of what a corridor would look like between Mobile 
and New Orleans. We just really think that is where growth 
could be, and that in the end could provide the most utility 
for the region.
    Ms. Brown. Mr. Kummant, I will continue to provide a lot of 
pain for you in that area because it is not just 
transportation. In my opinion, it is also homeland security. It 
is safety.
    Of course, it wasn't a good service. It was 2:00 in the 
morning.
    It is just economic development. There should be a way that 
we could innovatively work with the people from New Orleans, 
the different States surrounding, coming up with some kind of a 
service that works. I wish you all would go back to the drawing 
table and think about how we could do that.
    I mean it could be wonderful from New Orleans to Orlando or 
New Orleans to Mobile. I mean it is more than just moving 
transportation. As I said, it is safety. We have to figure out 
how to get people out of harm's way in case of another 
hurricane.
    Mr. Kummant. I understand.
    Ms. Brown. Okay.
    I have one other question. Mr. Sharp, you stated in your 
testimony that Arkansas Electric Cooperative runs about 25 
percent below planning inventory levels due to rail delivery 
shortfalls. Did you reach out the Surface Transportation Board 
for assistance and what was their response?
    Mr. Sharp. Well, we did have one particular situation that 
I would like to highlight where during some of those 
shortfalls, the president of Arkansas Electric Cooperative 
wrote a letter to them, the Surface Transportation Board, Roger 
Nober, explaining to him the problem and the great expense that 
our cooperative members were having imposed on them due to the 
times we could not run our coal plant and more expensive fuel 
that we had to substitute. We never received a response from 
Mr. Nober.
    The letter was not copied to anyone other than the STB 
Chairman, but a couple of months after we sent the letter, we 
got a response from Burlington Northern Santa Fe. Apparently, 
Mr. Nober had given the letter to Burlington Northern Santa Fe, 
and Burlington Northern Santa Fe's response was, the opening 
phrase of it was: We would like to correct the inaccuracies in 
your letter.
    So that was the tone of the letter.
    Ms. Brown. Can we get a copy of the letter?
    Mr. Sharp. Absolutely. I will provide a copy of both 
letters.
    Ms. Brown. Thank you.
    Mr. Hayes, do you participate in a co-op?
    Mr. Hayes. Personally, no, I do not, Madam Chairman.
    Ms. Brown. Is one available in your area?
    Mr. Hayes. There are multiple co-ops across the United 
States.
    In the West, we primarily do our marketing through the 
large corporations. For instance, I am a barley farmer, and our 
primary market is the Anheuser-Busch folks, Great Western 
Malting, Grupo Modelo and so on.
    Ms. Brown. Mr. Shuster.
    Mr. Shuster. Yes. I initially started asking questions to 
Mr. Hayes and Mr. Sharp. I didn't get to my point. I ran out of 
time, unfortunately, but I wanted to ask that now.
    If you are advocating for surplus capacity or, again it can 
be argued, significantly increased capacity in railroads, would 
you also support or advocate for mandatory rates of return 
similar to what I think happens in the other utilities, in the 
electric or in the power industry? Is that something you would 
advocate for?
    Mr. Hayes. I am not really sure I can answer that. Let me 
tell you what we are advocating, and I was hoping you were 
going to get to this in your earlier questioning. You were 
talking about regulation of railroads.
    We are advocating House Bill 2125 which is the Rail 
Competition Act. It is a very simple piece of legislation. 
Basically, what we want is we want the referee that was 
established in the Staggers Act to referee.
    It is kind of like playing football game, and I think you 
are aware of a football game, in which the referee is totally 
biased to your opponent. It is a little difficult when the 
whistle blows to know that the rule is not going to be enforced 
against the opposition. I mean that is a simple way of putting 
it, and maybe it is a difficult way of putting it, but in 
reality it is what happens to us in the captive areas.
    Mr. Shuster. I don't know. I may disagree with your analogy 
because I would think that it is a customer relationship. So, 
in my view, it would be more like the coach deciding maybe what 
play we are going to run.
    It seems to me it is not a head to head competition with 
you with the railroads. Now CSX and UP, that is more of a 
competitive situation, head to head.
    Again, I have great fear that we do what is in that bill, 
and we will wind up pre-1980, and rates will be driven up even 
higher or rates will be driven higher because over the last 25 
years, as I made the point, in real dollars they have gone down 
by 55 percent. What we are seeing now is an increase, but over 
the long haul I think it has been very, very positive for both 
agriculture and all the industries that have utilized rail.
    The other question, I don't have the numbers but the 
investment tax credit, the agriculture industry and, Mr. Sharp, 
your industry, what is your view on the tax credit? Do you 
think that is a positive thing?
    Mr. Sharp. I will address that briefly, Mr. Shuster. We 
would have no problem with an investment tax credit bill 
similar to the one being proposed as long as there were some 
assurances that the investments would actually be made in areas 
that would help some of the problems that we are having.
    Like I said, we have a lot of captive shippers in the 
electric industry, and we have a plant that is captive 
ourselves. We absolutely have no choice. I mean we have to deal 
with the one railroad that delivers to that plant. It is not a 
sit down and negotiate sort of situation. It is kind of a take 
it or leave it situation.
    We don't have really any hope at this point of getting any 
help from the STB, and that is not the situation that was 
intended or proposed or written in the Staggers Act.
    If I may, you previously mentioned re-regulation and the 
competition bill that Mr. Hayes mentioned. We are also 
supporting the antitrust legislation that is kind of a 
companion bill and goes along with that. Really in those, what 
we are asking for is that the Staggers Act really be 
implemented as it was intended and as it was written, where the 
folks who are captive and the folks that are subject to 
monopoly power and excess market power by the railroads would 
have some place to turn and would have some outlet.
    There is nothing in those pieces of legislation that would 
have any great impact on pricing. They are simply measures to 
help shippers be able to access competition and be able to have 
someone to turn to when we do have problems that we can't work 
out with our friends at the railroads.
    Mr. Shuster. A final question, the state of competition in 
the railroad industry over the past 30 years, we have seen the 
consolidation of Class I railroads. Mr. Hamberger, will you 
talk about competition and what the status of competition is 
within your industry?
    Mr. Hamberger. Well, I think the idea that everybody, 25 
years ago, had 3 railroads serving them is incorrect. The fact 
is that the mergers that occurred under the ICC and the STB 
were done in such a way to make sure that any customer who had 
multiple rail service continued to have multiple rail service, 
so that the mergers did not in fact have an anti-competitive 
effect.
    Indeed, the new regulations at the STB for future mergers 
now say that not only can they just not adversely affect 
competition, but they have to positively have a benefit for 
competition. So the fact that there are fewer railroads does 
not translate into fewer choices for the shippers.
    The end result, we believe, of the legislation espoused by 
my friends at the other end of the table would be a compression 
of our ability to earn our cost of capital, a compression of 
our ability to reinvest, and therefore a lack of capacity.
    I draw your attention to Senator Kent Conrad of North 
Dakota who has many constituent shippers who are singly served 
in the agriculture industry, and he took a close look at what 
to do about improving rail freight service in North Dakota. He 
decided to be the lead Democratic sponsor of the investment tax 
credit in the Senate because he believed that an incentive to 
invest and an incentive to expand capacity was the way to 
address the issue.
    So we believe that is the way to go, and I would ask 
permission of the Chairwoman to put into the record a list of 
private sector organizations that support the infrastructure 
tax credit. On the passenger side, I have Virginians for High-
Speed Rail and the National Association of Railroad Passengers 
believe that that is the way to go.
    The Alliance of Automobile Manufacturers, the American 
Association of Port Authorities, the National Mining 
Association that actually provides the coal for the co-ops in 
Arkansas and others, the Portland Cement Association, the U.S. 
chamber of Commerce, and so they believe that the increase in 
investment would help all customers. We are an integrated 
network.
    As far as whether or not it is going to help customers who 
burn coal, I draw your attention to the Powder River Basin 
where the railroads involved there are now quadruple tracking 
the joint line into the southern Powder River Basin so they can 
go from 470 million tons a year up to close to 600 million tons 
a year in 5 years. That is the kind of investment that we are 
making, and that kind of investment would be spurred by the 
investment tax credit.
    Mr. Shuster. Just one more question that has to do with 
passenger rail for Mr. Kummant or Mr. Zehner or both of you, 
the Keystone Corridor at 110 miles an hour, it seems to be 
highly successful and a good partnership between Amtrak and the 
State of Pennsylvania. Is that anything you looked at for 
Washington to Richmond and would that be something there would 
be a demand for?
    Mr. Kummant. Yes, that stretch is clearly one of the most 
congested and difficult pieces of railroad, frankly, in the 
Country with a mix of commuter, intercity passenger, coal 
trains and high-speed UPS style intermodal trains. So, at the 
end of the day, it is all a question of investment dollars, but 
I would defer to the gentleman who knows the area specifically.
    Mr. Shuster. The investment in the Keystone, to my mind it 
comes to $110 million.
    Mr. Kummant. I believe it was about $145 million split 50-
50 between Amtrak and the State. One of the fortuitous pieces 
was it was a pretty good piece of railroad to start with, that 
was well suited for this type.
    Mr. Shuster. Is it about the same distance?
    Mr. Kummant. About 110 miles.
    Mr. Shuster. Is it the same distance from Richmond to D.C.?
    Mr. Kummant. I would have to ask what the specific distance 
to Richmond is.
    Mr. Hamberger. A hundred miles, it is a hundred miles to 
DC.
    Mr. Kummant. Yes, it is. So it is roughly the same.
    Mr. Zehner. From a commuter rail perspective, you stop 
every eight to ten miles at a station. So you are never going 
to get to 110 miles an hour.
    Mr. Shuster. Right.
    Mr. Zehner. So, from that perspective, an 80 miles an hour 
railroad is fine with us.
    We do have a commitment contractually with CSX to provide a 
third rail between Washington and Fredericksburg by contract, 
and we are trying to piecemeal that with the State. The idea is 
that third rail would be down the middle. The two sides would 
have platforms. So, in that case, that third rail could act in 
a way that I don't think it will be designed as high speed, but 
a few stops. Let's put it that way.
    But right now, there is no plan for 110 miles an hour. It 
is extremely expensive to go to 110 miles an hour from 80 miles 
an hour. Right now, we would like to see more improvements to 
allow more trains at 80 miles an hour.
    Mr. Shuster. Thank you very much.
    Ms. Brown. Okay. I think what we will do is give you all 
one minute to say any final remarks that you want to make, and 
I will start with Mr. Sharp.
    Mr. Sharp. Thank you very much, Madam Chairwoman and 
Members of the Committee. I do very much appreciate the 
opportunity to speak to you all today.
    As you have said, this is a very important issue to us and 
the service problems that we have experienced since the 1990s, 
actually we really are concerned that we are going to continue 
to experience problems like this in the future. One of the main 
reasons that we think this is happening is the lack of 
competition in the rail industry.
    So we would like to see the Rail Competition Act and the 
antitrust legislation that has been proposed and introduced, 
passed.
    Thank you very much.
    Mr. Hayes. Madam Chairman, Members of the Committee, again, 
thank you very much for allowing us to come in and visit with 
you.
    I am going to have to say that I endorse the remarks that 
Mr. Sharp has said. For those of us in captive shipper areas, 
we have seen incredible increases in our cost of freight, even 
though some of the records show that there is a 55 percent 
decrease. We are not seeing that at Evan Hayes' farm. I am 
seeing these costs of rail increase drastically.
    Now, don't misunderstand agriculture. I want to make this 
very clear. We are supportive of the rail industry. We rely on 
the rail industry. They are our bread and butter to get our 
product to market.
    However, as you look at the overall rail industry, don't 
forget the little guys. Don't forget those captive shippers out 
there in the hinterlands that do not have access to competitive 
rail.
    Thank you very much.
    Mr. Moro. Madam Chair and Members of the Committee, thank 
you for the opportunity to be here today.
    The cargo growth is real. Clearly, we need more reliance on 
rail and what we would like to see is more public-private 
partnership. We are doing that and leveraging our matching 
share with State funds. We would like to see Federal 
participation.
    Again, the goods are coming and they need to be moved 
throughout the United States through the ports.
    So, thank you.
    Ms. Brown. Just one question for you, how many trucks come 
into your area every day?
    Mr. Moro. We have thousands of trucks every day.
    Ms. Brown. Thousands?
    Mr. Moro. Thousand, yes, ma'am.
    Ms. Brown. I see.
    Mr. Moro. Yes. We have a local market, of course, of 
consumers. We also have near-dock rail yards. So that involves 
a truck trip, sometimes a short truck trip, but nevertheless it 
has to get on the main freeways and arterials. So there are 
thousands of trucks every day, yes, ma'am.
    Ms. Brown. I didn't think that the rail shipping had 
developed as well as it could in your area, like you said, 
thousands of trucks.
    Mr. Moro. Yes, ma'am.
    Ms. Brown. Mr. Kummant.
    Mr. Kummant. Madam Chair, Mr. Shuster, thank you again for 
your time.
    Success for us really depends on three areas. It is 
constructive engagement with our freight railroad partners on 
dispatching and operating practices. There is certainly room 
for improvement there. It is about slow orders reduction which, 
in the end, is capital that they have to deploy. In the end, it 
is also about overall capacity capital.
    Let's say we would be concerned about legislation that may 
reduce capital inflow to the network. Capital inflow can take 
multiple forms in terms of how we get capital, be it investment 
tax credit, a matching fund where States and Amtrak can avail 
themselves of capacity projects in partnership with the 
railroads and, again, some sort of an ongoing funding structure 
for passenger rail that is not dependent on an annual cycle.
    Thank you.
    Mr. Zehner. Madam Chair, the Federal Government has been a 
great partner with the area and the Commonwealth of Virginia. 
It is your duty, your direct investment over the last 15 years 
that I have seen the service levels go up as well as on-time 
performance. With the State now committing $26 million a year, 
we use that money in relation to your money to make an 
improvement.
    I would like to make one comment about competition. You 
talk competition in the sense of railroad providers. You can 
structure things in terms, well, structure your funding in 
terms of being competitive.
    Have the process, and this is what the Commonwealth of 
Virginia has done: $26 million, I have to compete with projects 
along with the two freights that operate in Virginia. The best 
projects, in fact, float to the top.
    I am committed to a 30 percent match as well as the 
railroads. What I have seen over the last two years is those 
best projects that give you the best benefit for that period of 
time and that project do float to the top. I would suggest the 
Feds kind of look at that process.
    This is an incremental game. You are not going to get there 
overnight, but you should incrementally get there, putting your 
money on the best available project that gives you the best on-
time, the best performance, maybe the best service to customers 
whether it be freight or passenger.
    You can get there. It is a long haul but look at funding in 
a competitive process. You have a strong hand and a big hammer 
if you want to use it. The commonwealth is doing that.
    The railroads know how to play the game, and they want your 
money as well as the Commonwealth of Virginia. You make it 
competitive, and they will give you a good deal.
    Mr. Hamberger. Three comments, if I might, Madam 
Chairwoman: Number one, Mr. Sharp, Mr. Hayes, thank you for 
your business.
    It doesn't always come across at these hearings but, in 
fact, as Mr. Hayes indicated, we are mutually dependent upon 
each other. We are in business to serve them. If we don't give 
them good service at reasonable rates, they are not in 
business, and so we have a symbiotic relationship, if you will. 
So, thank you for your business.
    The same with Mr. Moro.
    Mr. Kummant and Mr. Zehner, I offer you my recommitment to 
a recognition and a partnership between freights and 
passengers, which I believe occurs every day across the 
Country, but again my recommitment to that policy.
    Then, thank you to you, Madam Chairwoman and you, Mr. 
Shuster, for your leadership for this industry and your support 
for legislation like H.R. 2116 which will provide, we believe, 
the necessary incentive to get to the capacity we need to 
continue to serve all of our customers here to my left. Thank 
you.
    Ms. Brown. Thank you very much. Thank you all.
    Our second panel, I would like to welcome you today. Our 
first witness is Mr. James Daloisio of the Railroad 
Construction Company and Mr. Lance Grenzeback of Cambridge 
Systematics.
    Let me remind the witnesses that under our Committee rules, 
all statements must be limited to five minutes, but the entire 
statement will appear in the record. We will also allow the 
entire panel to testify before questioning the witnesses.
    You may begin.

 TESTIMONY OF JAMES DALOISIO, PRESIDENT, RAILROAD CONSTRUCTION 
COMPANY; AND LANCE GRENZEBACK, SENIOR VICE PRESIDENT, CAMBRIDGE 
                       SYSTEMATICS, INC.

    Mr. Daloisio. Chairperson Brown, Congressman Shuster, I am 
Jim Daloisio representing the National Railroad Construction 
and Maintenance Association known as the NRC. We are a national 
trade organization representing the independent railroad 
construction and supply industry. The NRC has more than 200 
member companies with employees in all 50 States.
    The NRC members serve every type of railroad owner: Class I 
railroads, regional railroads, short line railroads, industrial 
track, the U.S. Military, ports and terminals, and the rail 
transit agencies with operations such as light rail, street 
cars, elevated rail, metros and commuter rail systems. There 
are now over 650 independent railroad contracting companies in 
the United States, performing over $10 billion of rail 
infrastructure construction and maintenance work every year.
    As we all are well aware, both freight and rail passenger 
play a crucial in taking cars and trucks off of our already 
overcrowded roads. Railroads also play a crucial part in safety 
and security of our Country by providing military transport, a 
safe way of transporting hazardous chemicals and also by 
lessening our dependence on foreign oil.
    Despite all of the benefits of rail transportation, we have 
a major problem facing this Country. We are running out of 
capacity, and it is going to get much worse unless we start 
fixing the problem as soon as possible.
    In the recent study by Cambridge Systematics, it was 
estimated that using today's dollars, that over the next 28 
years the investment of $135 billion for Class I rail 
infrastructure is necessary just to keep up with economic 
growth and meet the U.S. DOT's forecasted demand for rail 
freight, and this is just to maintain their existing market 
share, not taking into account the desired shift in market 
share to rail that would benefit this Country.
    The Class I railroads anticipate that they will be able to 
generate approximately $96 billion of the needed investment 
through internal generated cash flow. This leaves a shortfall 
of $39 billion, $1.4 billion per year to be funded from outside 
sources.
    I would like to note that the railroads' ability to invest 
heavily in their own infrastructure going forward is based on 
the assumption that the present regulatory environment will 
remain stable. If Congress were to increase regulation on the 
railroads, their ability to manage their own businesses and 
produce sufficient return on investment would be hampered, and 
thus their ability to invest back into their networks would be 
decreased.
    The NRC believes that Congress should use the opportunity 
of the next transportation reauthorization legislation to 
completely revamp the transportation law in this Country. As a 
basis of this transformation, we endorse the Transportation for 
Tomorrow framework put forward by the National Transportation 
Policy and Revenue Study Commission.
    Specifically, we support:
    Number one, the adoption of the proposed Freight Rail 
Infrastructure Capacity Expansion Act which provides a 25 
percent tax credit for infrastructure investment.
    Number two, the extension of the Short Line Railroad 
Rehabilitation Tax Credit which provides a 50 percent tax 
credit for money spent on railroad rehabilitation.
    Number three, the creation and funding of a national 
freight transportation program and surface transportation trust 
fund that would be mode-neutral and direct Federal funding 
towards projects on a strictly merit-based approach.
    Number four, strong Federal support of the public-private 
partnership such as the Alameda Corridor, the Chicago CREATE 
and the Orlando commuter rail-CSX deal.
    Number five, a major increase in investment in intercity 
rail with reform of the current Amtrak system.
    Number six, the expansion and improvement of innovative 
financial tools and programs such as TIFIA and RRIF.
    Number seven, the shortening of the project delivery 
process and the time it takes to complete reviews and obtain 
permits. Projects must be designed, approved and built as 
quickly as possible.
    Number eight, grow the current transit program in size 
while maintaining the overall structure and funding guarantee 
system.
    If Congress adopts these proposals, there will be a 
dramatic increase in investment in national rail infrastructure 
and a corresponding expansion of rail capacity.
    The question that naturally arises as to whether the 
railroads and independent construction, maintenance and supply 
industries could handle all the increased work, the answer is 
yes, they can.
    NRC members are large and sophisticated construction 
companies, and we have a large and diverse supplier base 
providing us with necessary materials, tools and equipment. Our 
people are well trained, and we provide good wages and good 
benefits. Many of our members are unionized, and we draw on a 
strong pool from organized labor.
    Railroad contractors are already performing over $10 
billion of rail infrastructure construction and maintenance 
every year, and I believe we could handle double that amount in 
a relatively short period of time.
    I would like to note that the legislative proposals 
mentioned earlier in my testimony and submitted for written 
record do not all need to wait for the next transportation 
reorganization legislation. Some of these programs should be 
implemented now, such as the two tax credit proposals. They 
should be included in the economic stimulus number two package 
or at least a one-year extension of the short line tax credit 
could be included in a tax extenders bill.
    Another program that should be funded in a second economic 
stimulus program is the $50 million capital grants program for 
Class II and III railroads. This program was authorized but was 
not appropriate into 2007.
    Intercity passenger rail reform can be implemented via the 
Amtrak authorization or appropriation process.
    Finally, we strongly urge all rail construction and 
maintenance work that is performed with direct Federal 
assistance or tax benefit be competitively bid. Railroad 
contractors have long and well-documented histories of 
providing quality service at competitive prices. We have 
learned how to do more with less, and the efficiency and 
competency we bring to this task will be of great benefit as we 
all search for ways to improve America's transportation 
infrastructure.
    Thank you.
    Mr. Grenzeback. Madam Chairwoman, Mr. Shuster, my name is 
Lance Grenzeback. I am a Senior Vice President with Cambridge 
Systematics. We provide transportation policy, planning, and 
management consulting services to Federal, State, and local 
transportation agencies and to private sector transportation 
and investment companies.
    I am pleased to appear before you today to describe the 
findings of our National Rail Freight Infrastructure Capacity 
and Investment Study. The objective of the study was to assess 
the long-term capacity expansion needs of the continental U.S. 
freight railroads. The study was commissioned by the 
Association of American Railroads at the request of the 
National Surface Transportation Policy and Revenue Study 
Committee.
    Current demand for rail freight transportation is pressing 
the capacity of the rail system. Ten to fifteen years ago, 
capacity was primarily a problem at the local level with short 
line railroads, but what we are looking at today is a problem 
that covers the entire national network.
    The U.S. Department of Transportation estimates that demand 
for rail freight transportation, measured in tonnage, will 
increase by about 88 percent by 2035. This projected growth is 
not extraordinary, but it comes after two decades of growth 
that have absorbed much of the excess capacity in the system.
    Our study focused on about 52,000 miles of primary rail 
freight corridors, as shown on the slide before you. These 
corridors carry the preponderance of rail freight traffic. 
These corridors represent about half of all Class I operated 
miles in the U.S. and about one-third of the 140,000 miles in 
the U.S. rail freight network.
    The study estimated the need for new tracks, signals, 
bridges, tunnels, terminals, and support service facilities. 
However, it did not estimate the cost of acquiring land, 
replacing track, or maintaining existing track.
    And, finally, the study did not address passenger rail. The 
Commission convened a separate Passenger Rail Working Group to 
estimate passenger rail needs.
    I will try to summarize the findings of the study, using 
the following maps for you.
    The first slide shows a map of current corridor volumes in 
terms of trains per day. The thinnest lines indicate a corridor 
that carries up to 15 trains per day; the thickest line, 
between 100 and 200 trains per day.
    The next map compares current train volumes to current 
capacity. Capacity is measured in terms of the number of 
tracks, the type of signal system, and the mix of passenger and 
freight trains. The volume-to-capacity ratios are expressed as 
level of service grades, as is done in the highway industry, 
and in colors.
    What you are looking at here are the corridors that are 
operating below practical capacity_that is at level of service 
grades A, B or C_are mapped in green.
    Those operating near capacity_at grades C and D, between 70 
and 80 percent of capacity_are in yellow.
    Those that are operating at capacity, at grade E, are in 
orange.
    And above capacity, grade F, in red; those are very 
congested.
    Today, with this kind of a national snapshot, approximately 
12 percent of primary rail corridor miles are operating at or 
near capacity. About 1 percent are operating above capacity in 
highly congested conditions.
    We then projected the anticipated train volumes in 2035. To 
make the smooth a little clearer to you, we provided the next 
slide, Slide 4, which shows the growth in trains per day 
between 2005 and 2035. Here, a thin black line indicates that 
the corridor will carry up to 30 additional trains per day by 
2035; the green line, 30 to 80 additional trains per day; and a 
thick black line, between 80 and 200 more trains per day.
    The next step in the analysis was to compare future volumes 
to current corridor capacity as a measure or a way of 
dimensioning the problem. I do not anticipate we will see 
exactly this pattern on the network, but as you can see 
clearly, without improvements, upwards of 30 percent of the 
primary corridor mileage in the system will be operating above 
capacity. Those are the lines that have turned red in this 
slide.
    That level of congestion would affect nearly every region 
in the Country. If we ever reach that point, it would quite 
likely shut down the system.
    We estimated, as my colleagues noted here, that an 
investment in new capacity_not the replacement of existing 
capacity, but new capacity expansion_of $148 billion over the 
next 20 years would be needed to keep pace with economic growth 
and meet the U.S. DOT's forecast demand.
    The Class I share of that is projected to be about $135 
billion, roughly 91 percent of the total. The short line and 
regional freight railroad share would be approximately $13 
billion.
    Slide 6 compares future corridor volumes to future rail 
capacity, assuming the necessary improvements have been made. 
With the improvements, 97 percent of the primary corridor 
mileage will be operating below capacity, and less than 1 
percent will be operating above capacity. So it is quite 
possible for us to keep up and maintain the capacity of the 
national rail network.
    The Class I capital expenditure for infrastructure 
expansion today averages about 1.5 billion dollars per year. It 
has been creeping up over the last several years from about 1.1 
and going up toward 1.7 billion dollars per year.
    To meet the demand in 2035 that is show for the investment 
here, the Class I's must be investing about $4.8 billion per 
year. These are all in 2007 dollars. So it is a considerable 
investment.
    We looked at what portion they could fund if revenue and 
capital expenditures for expansion follow the growth in rail 
tonnage. So if they match today's investment rates and those 
continue with the growth in tonnage, what could you be 
invested?
    The expectation there is that_over the 30 years_the Class 
I's could realize about $70 billion of the $135 billion from 
their internal capital generation.
    If the Class I's can continue to achieve train productivity 
gains of up to a half a percent per year, the railroads could 
realize savings of about $26 billion that would lower their 
capital requirement. This would leave a balance somewhere in 
the range of $39 billion to $40 billion dollars or about $1.5 
billion per year to be funded either from railroad investment 
tax incentives, public-private partnerships, or other financing 
services.
    The findings of this study are our first approximation of 
investment needs. They provide a starting point for assessing 
future rail capacity and investment requirements.
    It was a hallmark study. It was the first collective 
assessment by the major freight railroads of their long-term 
capacity expansion and investment needs, and I believe its 
findings point clearly to the need for more investment in rail 
freight infrastructure and a national strategy that supports 
that investment in infrastructure capacity.
    I thank you very much for the opportunity to appear before 
today. I would be happy to answer any questions.
    Ms. Brown. Mr. Shuster.
    Mr. Shuster. Thank you very much.
    Mr. Daloisio, I understand that a substantial portion of 
your industry is represented by two unions, laborers and 
operating engineers. The question is to what extent does labor 
support the National Rail Contractors' comprehensive proposal 
to rebuild the rail infrastructure?
    Mr. Daloisio. Right now, we believe that the laborers and 
the operators which are the two unions in question, laborers, 
as you may be aware, are 700,000 strong in this Country, and we 
have been working with them for some time.
    We work together on a group called RAILCET. RAILCET is a 
group composed of laborers, operators and also management for 
construction companies. We believe that they support us on 
these proposals.
    The only question is they have a hang-up over prevailing 
wage. They want prevailing wage language included in every bill 
possible, prevailing wage requirements that any job that is 
done using Federal money or tax credits will have a prevailing 
wage component to it.
    We are meeting with them in a couple weeks, as a matter of 
fact, and are going to prepare a very comprehensive agenda 
which we will be happy to forward to you on those issues.
    Mr. Shuster. Okay. Thank you. Thank you very much.
    You stated in your testimony your support of Mr. Mica's 
request for proposals to solicit those for the Northeast 
Corridor. Can you elaborate on your support of that and what 
your view is and how you think of those?
    Mr. Daloisio. On the Northeast Corridor, as far as 
supporting Amtrak?
    Mr. Shuster. Excuse me?
    Mr. Daloisio. You are referring to the support of Amtrak 
and support of the Northeast Corridor?
    Mr. Shuster. The Northeast Corridor, high-speed rail, yes.
    Mr. Daloisio. Right. Our concept is we support the 
expenditure for intercity rail traffic completely.
    Mr. Shuster. I am sorry?
    Mr. Daloisio. We support the expenditures for intercity 
rail completely. We believe that is something that we should be 
doing. Okay.
    We disagree exactly with how it is being done presently 
with Amtrak. Okay. We believe it should be done differently. We 
believe a lot of the money should go to the States, and the 
States should be setting up their own programs. Okay.
    We view overall, now I am talking for the NRC, not everyone 
else, but the NRC would love to see Amtrak become similar to 
the Corps of Engineers, in the way they operate. Okay. The 
Corps of Engineers, as you know, directs programs, directs 
things to be done but then contracts out that work to be done 
by others. That is the way we think that we would get the best 
value for the dollars spent, best way of using our money 
through the Country.
    Mr. Shuster. So Amtrak would no longer be an operator?
    Mr. Daloisio. Right. They would be an overseer, similar to 
the Corps of Engineers. Correct.
    Mr. Shuster. That is interesting, although the Corps of 
Engineers has its share of problems too, I might point out to 
you, that I have had to deal with up close and personal many 
times.
    Mr. Daloisio. Well, I think everyone has their share of 
problems.
    Mr. Shuster. Well thank you for that answer.
    Mr. Grenzeback, you stated in your testimony that future 
freight capacity did not include the added pressure on the 
increase in passenger service on the rail lines.
    Mr. Grenzeback. You are correct. That is correct.
    Mr. Shuster. Is that something you could talk about?
    Why didn't you include in there and what impact would it 
have, because I think we see that there is a greater demand and 
increase in passenger rail, and how would that impact? Is that 
something you could address?
    Mr. Grenzeback. Certainly. It was not included because the 
Commission had set up a separate Passenger Rail Working Group 
to address that issue, and the AAR and the freight railroads 
did not feel that they should project passenger rail ridership.
    We did make provision in the estimates for maintaining 
capacity for the existing Amtrak services as well as for the 
existing commuter services, and those are simply carried 
forward. There was no projection of growth in those.
    I think if you were to add the types of intercity service 
and the growth in the commuter rail we are expecting, you would 
press the capacity of the system quite significantly. I think 
in many of the corridors that today are shown as operating just 
below or at capacity, we are pressing the ceiling. To expand 
rail into those areas, you are going to have to add 
infrastructure.
    It will depend considerably on the individual line, but you 
are going to have to be adding track. You are going to be 
upgrading signals. In many situations, I think we are fast 
approaching a point where you are going to have separate lines_
and, if you want very high-speed passenger systems, sealed 
separate corridors will be required.
    We have basically absorbed much of the existing capacity, 
and we are right at the point where passenger rail additions 
are certainly possible, case by case. But as I said, on a 
network level, we are right up to the ceiling.
    Mr. Shuster. Right.
    We talked a little bit about it here earlier. I don't know 
if you were here and heard some of the testimony. If the 
Federal government were to re-regulate or become involved, 
significantly more involved in the rate structure of the 
railroad or determining how much a railroad could charge, how 
big an impact would that have on your study and what the 
outcomes were if, in fact, the Federal Government were to 
decrease even small amounts of the revenues or the earnings of 
the railroads?
    Mr. Grenzeback. We did not look in great detail at the 
individual railroads' ability to finance these projects, but 
clearly one of the assumptions we made in the cost estimates 
was that the railroads were going to be able to increase share 
and that prices would go up commensurately. So they would 
continue to generate their own internal revenue and invest in 
these projects.
    If they are restricted, if rates are restricted, if 
earnings are restricted, then clearly these improvements will 
be made at a slower rate and will be targeted to the most 
profitable lines.
    Mr. Shuster. Did you look at the rate increases over the 
last three to five years or over the last twenty-five years? 
Over 25 years, they have actually, in real dollars, gone down.
    Mr. Grenzeback. Prices have been coming down, but I think 
it has reached a turning point. Over the last 20 years, you 
have taken a 19th Century rail network and completely refigured 
it to serve today's markets, and we have slowly absorbed the 
capacity of that reconfigured network.
    At this point, the railroads_probably for the first time 
since the 1930s_are price-setters instead of price-takers. They 
are using pricing as any business would to allocate capacity, 
and that is obviously affecting people's ability to ship at the 
same rates they did before.
    Mr. Shuster. One final question, did you take into account 
any of the new technologies: positive train control or the new 
braking systems?
    I have looked at this and studied it, both positive train 
control and the new braking system could increase capacity 
without adding track in some cases. Is that something you 
considered in the study?
    Mr. Grenzeback. We discussed it at length. We did not 
actually try to make an estimate, but the productivity 
improvements that are included in the study are quite 
straightforward. It is putting more freight on a car, and 
putting more cars on a train; and we were trying to project the 
past trend in doing that.
    There are clearly opportunities to apply technology to 
improve signal systems and positive train control. The time and 
the budget for this study did not allow us to get into that, 
but you are correct, those are obvious areas for productivity 
improvement that would lower somewhat the requirement for 
actual physical capacity to be built.
    Mr. Shuster. With the growth of freight over the next, I 
think I saw 2035, at 80 or 90 percent increase, obviously you 
didn't study it, but you believe that technology would have an 
impact but not enough to significantly curtail the amount of 
investment that you are projecting? Is that a fair statement?
    Mr. Grenzeback. Yes, sir. It would have a big and valuable 
impact, and I would fully expect the railroads to invest 
heavily in it, but I do not believe that technology alone will 
take care of the capacity needs.
    Mr. Shuster. Okay. Thank you very much.
    Mr. Grenzeback. Thank you.
    Ms. Brown. Mr. James Daloisio, you mentioned something in 
your comments. You said something about central Florida, the 
CSX.
    Mr. Daloisio. Yes.
    Ms. Brown. Do you know what could possibly derail that 
project?
    Mr. Daloisio. No, I am not aware of anything going wrong 
with it.
    Ms. Brown. I was in Tallahassee yesterday. It is not using 
labor safety factors.
    I mean if you are using taxpayers' dollars, it is 
important, one, that we have prevailing wage. I mean the idea 
that you would pay under prevailing wage in an area, I would 
never support a bill under any circumstances that did not have 
prevailing wage.
    Mr. Daloisio. We, as railroad contractors, certainly 
support that stand. I totally agree with you.
    Ms. Brown. You all pay more than prevailing wage. So why 
wouldn't it be a part of the package?
    Mr. Daloisio. Absolutely. Absolutely, we do.
    Ms. Brown. The second thing is perhaps you do not know. You 
mentioned the Army Corps, but part of the problem in the 
lawsuit is the Army Corps did not do what they were supposed to 
do as far as the levies are concerned, and that is what is part 
of the problem where thousands of people got killed in New 
Orleans.
    So you could not say we need to model any system behind the 
Army Corps. We need to improve the Army Corps. In fact, I have 
gone and they have improved, but they don't just direct the 
projects. They participate in the projects.
    Mr. Daloisio. Yes. Yes, they provide guidance and other 
things.
    Ms. Brown. No, no, no. They actually build projects, and 
they build projects not just in the United States, all over the 
world.
    Mr. Daloisio. Yes, but primarily what they do is they scope 
and specify projects primarily. Not always, you are right. They 
do get involved in doing some of the work themselves, but they 
do, primarily, specify projects and have projects done by 
outside sources under their direction.
    Ms. Brown. Under their direction, yes, but they do 
operationals also.
    Mr. Daloisio. They do some, yes.
    Ms. Brown. I heard some of the things that you said about 
what we need to do in the next reauthorization, and you talked 
about the recommendations. Some of them, I thought were 
interesting, some of them from the Commission. But some of 
them, as an elected official, I would not be supportive of it 
because the bottom line is that I have to stand to the 
taxpayers and make sure that I feel that we are doing what we 
think is the best deal. And, some of the programs, they want to 
merge.
    I mean did you go through the entire package?
    Mr. Daloisio. Well, we have eight different programs that 
we support. Following listening to you on this panel today, and 
during the previous panel, I don't know why you would be 
against any of those eight programs. I will be perfectly 
honest.
    All eight of them support expansion of the railroad 
industry and expansion of their facilities and infrastructure.
    Ms. Brown. One of the things you said, prevailing wage, you 
said you are not 100 percent in favor of it and you are 
discussing it.
    Mr. Daloisio. I am sorry.
    Ms. Brown. What did you say about prevailing wage.
    Mr. Daloisio. No, no. We support prevailing wage. It would 
be great. No. We are totally in favor of prevailing wage.
    Ms. Brown. Maybe I didn't hear what you said then.
    Mr. Daloisio. Okay. What I said, to clarify it a little 
bit, was that I was asked whether or not the unions agree with 
our positions expressed here today. I said, yes, they do agree 
with them, but they would want included in any law that passes 
a prevailing wage requirement.
    We are not against that. We support that too, but we are 
also realistic and know that that may be a very difficult thing 
to get into law in every case. Okay.
    We would accept it without that, these programs without the 
prevailing wage. The fact that we pay a prevailing wage to our 
own people is a fact, okay, but that doesn't mean that we would 
oppose the law change if they did the things that we requested 
just because prevailing wage language was not in there.
    Ms. Brown. You know I have known lots of programs here in 
the Congress that have just sat here because someone else was 
in charge and that was not a part of the package. So it just 
died.
    There are strong feelings on both sides.
    Mr. Daloisio. I know there are.
    Ms. Brown. If you are spending taxpayers' dollars like in 
New Orleans right after the hurricane, and we passed a bill 
that did not have prevailing wage. Then we had people coming 
in, paying lower than minimum wage. That is unacceptable, and 
certainly I don't think we need to be doing it with taxpayers' 
dollars.
    Mr. Daloisio. I totally agree, totally agree. The companies 
that I am President of are both totally, 100 percent unionized, 
which means we pay prevailing wage or, in many cases, better 
than prevailing wage.
    Ms. Brown. Most of the cases, better than prevailing.
    Mr. Daloisio. Absolutely. Absolutely. Absolutely.
    Ms. Brown. All right, Mr. Grenzeback, one question for you: 
One of the things we have been discussing is the capacity for 
freight and commuter. How should freight rail, passenger rail 
and commuter rail work together to identify and alleviate major 
capacity constraint points?
    Mr. Grenzeback. Thank you, Madam Chairwoman.
    The best example I can recite for you is work we did 
several years ago under the I-95 Corridor Coalition. We worked 
with Amtrak, Norfolk Southern, CSX and the five States from New 
Jersey down through Virginia.
    What we did was basically spend two years looking at the 
network and taking a bottom-up look at all the choke points and 
capacity problems there, worked our way to the point of 
understanding, across all the railroads, what the critical 
problems were and eventually building a program that laid out 
general priorities for fixing those, so we got the greatest 
system benefit out of that.
    It took some time. It took a considerable amount of 
discussion at the neutral table that the I-95 Corridor 
Coalition provided, but it was effective.
    I think you asked earlier in the session what the public 
sector could do to deal with the issues. I would break it down 
into really three sort of categories. One is main line 
capacity. I think in that case the railroads will be able to 
finance and engineer the expansion they need on the intercity 
lines.
    I think we are going to find a number of major choke 
points. The Chicago rail hub is one of them; the Baltimore 
tunnels another. There are a series of them around the Country, 
which are so large and so complex that they probably will 
warrant Federal action to catalyze a solution.
    Ms. Brown. They need upgrading too.
    Mr. Grenzeback. Yes, ma'am.
    Then the third category is really the question of urban 
freight terminals. We are basically moving from a railroad 
system that was retail to a wholesale system, where you are 
hauling from Chicago to New York, and they are really not 
distributing inside the cities. Rebuilding and relocating those 
terminals and providing access is where the freight railroads, 
the intercity and the commuter rail come together, and that is 
very complex.
    I think that there is a role both for the public sector and 
the Federal Government to begin to think about how we fund 
those projects, how you bring the groups together, how you 
clear the community issues that you have talked about, the air 
quality issues, as well as the just pure operations and 
capacity expansion.
    So I would suggest from your earlier comments, that looking 
at the area where the commuter rail, freight and intercity come 
together in the urban areas is probably one of the most complex 
areas and something that would deserve your attention.
    Ms. Brown. We don't have any additional questions. So would 
you all like to make closing statements?
    Mr. Daloisio. First of all, I would like to thank the 
Committee for inviting us to testify today.
    Second of all, I would like to say that the NRC, as a 
group, is both union and non-union. Okay. We are devoted to 
servicing the railroad industry and to work on expansion 
projects and modernization projects for both industry and also 
the railroads. We can provide the additional manpower necessary 
to get these programs accomplished.
    What we need is the money in the system to generate these 
programs for us to go out there and build. It is very simple. 
Hard to get the money, but it is a very simple problem.
    The expansion of our system is something we have to do. If 
we don't expand the system, the infrastructure system, in the 
future, we are going to find ourselves in a real problem. We 
are getting there. We are getting to the point where some of 
the lines are running over capacity.
    In the future, by projections, even if we do not increase 
the freight share that goes on rail, 35 years from now we are 
going to have serious problems, capacity problems.
    So we support the programs as outlined in our presentation, 
and we thank you again for inviting us to testify. Thank you.
    Ms. Brown. Thank you.
    Mr. Grenzeback. Ms. Brown, Mr. Shuster, thank you very 
much.
    I would reiterate the key points: that we are reaching a 
point where the capacity in the rail network is tightening; and 
that we will see over the next years increasing numbers of 
lines in the metropolitan areas light up in red. The costs for 
addressing those are going to be fairly significant.
    I would also add that in addressing the rail issue, you are 
also indirectly addressing the highway issue. We have a highway 
system which, I am sure you are quite aware, is also reaching 
capacity.
    When we look at both long-haul and short-haul trucking and 
the capacity needs on that side, they are quite severe. As 
diesel prices go up, as driver labor gets tighter, the carriers 
are looking to the railroads to make the long-haul move and the 
trucks to do the short-haul operation.
    We are at a point where unless we keep both systems at 
capacity_building and adjusting quite steadily and readily_we 
are going to find ourselves facing very sharp increases in the 
price of moving our goods, both for import and export.
    Thank you very much.
    Ms. Brown. We thank you.
    [Whereupon, at 1:01 p.m., the Subcommittee was adjourned.]

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