[Senate Hearing 110-1165]
[From the U.S. Government Publishing Office]



                                                       S. Hrg. 110-1165

                        KEEPING AMERICA MOVING:
                    A REVIEW OF NATIONAL STRATEGIES
                     FOR EFFICIENT FREIGHT MOVEMENT

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

                                HEARING

                               before the

                 SUBCOMMITTEE ON SURFACE TRANSPORTATION
                  AND MERCHANT MARINE INFRASTRUCTURE,
                          SAFETY, AND SECURITY

                                 OF THE

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 10, 2008

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation












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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                   DANIEL K. INOUYE, Hawaii, Chairman
JOHN D. ROCKEFELLER IV, West         TED STEVENS, Alaska, Vice Chairman
    Virginia                         JOHN McCAIN, Arizona
JOHN F. KERRY, Massachusetts         KAY BAILEY HUTCHISON, Texas
BYRON L. DORGAN, North Dakota        OLYMPIA J. SNOWE, Maine
BARBARA BOXER, California            GORDON H. SMITH, Oregon
BILL NELSON, Florida                 JOHN ENSIGN, Nevada
MARIA CANTWELL, Washington           JOHN E. SUNUNU, New Hampshire
FRANK R. LAUTENBERG, New Jersey      JIM DeMINT, South Carolina
MARK PRYOR, Arkansas                 DAVID VITTER, Louisiana
THOMAS R. CARPER, Delaware           JOHN THUNE, South Dakota
CLAIRE McCASKILL, Missouri           ROGER F. WICKER, Mississippi
AMY KLOBUCHAR, Minnesota
   Margaret L. Cummisky, Democratic Staff Director and Chief Counsel
Lila Harper Helms, Democratic Deputy Staff Director and Policy Director
   Christine D. Kurth, Republican Staff Director and General Counsel
                  Paul Nagle, Republican Chief Counsel
                                 ------                                

      SUBCOMMITTEE ON SURFACE TRANSPORTATION AND MERCHANT MARINE 
                  INFRASTRUCTURE, SAFETY, AND SECURITY

FRANK R. LAUTENBERG, New Jersey,     GORDON H. SMITH, Oregon, Ranking
    Chairman                         JOHN McCAIN, Arizona
JOHN D. ROCKEFELLER IV, West         KAY BAILEY HUTCHISON, Texas
    Virginia                         OLYMPIA J. SNOWE, Maine
JOHN F. KERRY, Massachusetts         JIM DeMINT, South Carolina
BYRON L. DORGAN, North Dakota        DAVID VITTER, Louisiana
MARIA CANTWELL, Washington           JOHN THUNE, South Dakota
MARK PRYOR, Arkansas                 ROGER F. WICKER, Mississippi
THOMAS R. CARPER, Delaware
CLAIRE McCASKILL, Missouri
AMY KLOBUCHAR, Minnesota
















                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on June 10, 2008....................................     1
Statement of Senator Carper......................................    59
Statement of Senator Klobuchar...................................     3
Statement of Senator Lautenberg..................................     1
Statement of Senator Smith.......................................    57

                               Witnesses

Brubaker, Hon. Paul R., Administrator, Research and Innovative 
  Technology Administration, U.S. Department of Transportation...     5
    Prepared statement...........................................     7
Glynn, Hon. Astrid C., Commissioner, Department of 
  Transportation, State of New York; and Chair, Standing 
  Committee on Rail Transportation, American Association of State 
  Highway and Transportation Officials...........................    11
    Prepared statement...........................................    12
Hamberger, Edward R., President and CEO, Association of American 
  Railroads......................................................    24
    Prepared statement...........................................    26
Larrabee, Rear Admiral Richard M., (Ret.), Port Commerce 
  Director, Port Authority of New York and New Jersey............    44
    Prepared statement...........................................    46
Vanselow, Glenn, Executive Director, Pacific Northwest Waterways 
  Association....................................................    48
    Prepared statement...........................................    50

                                Appendix

Collins, Hon. Susan M., U.S. Senator from Maine, prepared 
  statement......................................................    69
Response to written question submitted by Hon. Frank R. 
  Lautenberg to Hon. Paul R. Brubaker............................    69

 
                        KEEPING AMERICA MOVING:
                    A REVIEW OF NATIONAL STRATEGIES
                     FOR EFFICIENT FREIGHT MOVEMENT

                              ----------                              


                         TUESDAY, JUNE 10, 2008

                               U.S. Senate,
         Subcommittee on Surface Transportation and
           Merchant Marine Infrastructure, Safety, and Security,   
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:33 p.m. in 
room SR-253, Russell Senate Office Building, Hon. Frank R. 
Lautenberg, Chairman of the Subcommittee, presiding.

        OPENING STATEMENT OF HON. FRANK R. LAUTENBERG, 
                  U.S. SENATOR FROM NEW JERSEY

    Senator Lautenberg. We know that railroads can be more 
prompt than I was and we're working toward on-time performance 
with freight as well as passenger railroads. So anyway, we 
thank all of you here. Today we're going to take a closer look 
at how our Nation moves its freight by ship, truck, train, and 
barge, and the challenges that we must overcome to keep that 
freight and our economy moving in the future.
    Our country has one of the best freight transportation 
systems in the world. It's the backbone of our economy. It 
carries the products that Americans rely on, such as food, 
clothing, toys, things that go on store shelves. Raw materials 
like coal, lumber, fuel and iron required to manufacture all 
kinds of goods are also moved as freight. Just-in-time delivery 
and real-time tracking of shipments have greatly reduced the 
need for companies to hold huge inventories because we can 
count on goods being there when needed.
    Jobs are at stake also. In my home state of New Jersey, 11 
percent of our 4.4 million workers are involved in the movement 
of goods.
    But our economy is threatened by the current state of the 
transportation infrastructure and its inability to meet future 
demands. The Minneapolis bridge collapse was the Nation's wake-
up call for the current state of our infrastructure. In fact, 
25 percent of our Nation's bridges are still functionally 
deficient. Even when these bridges are repaired, our highways 
along with our ports and railroads will be overwhelmed.
    Congestion on our roads already costs our country nearly 
$80 billion a year. On the rails, some trains take--have I been 
doing that, just talking to myself?
    Senator Klobuchar. It was charming.
    [Laughter.]
    Senator Lautenberg. Somebody was listening.
    On the rails, some trains take a day to just cross the City 
of Chicago.
    Total freight traffic is expected to double in the next 20 
years. To keep getting the goods we need in the future, we've 
got to invest in our transportation infrastructure right now. 
Building roads will not solve all of our problems and in some 
places it's not even possible. Trains and barges can reduce 
highway congestion and wear and tear on our roads and bridges. 
They're also more energy efficient than trucks, which will aid 
our fight against global warming, and help us become more 
energy independent.
    We need to encourage these efficiencies to the maximum 
extent possible. The Federal Government has to step up and play 
a leadership role in planning our future transportation 
network, one which takes these benefits into account. In New 
Jersey we know that we've got to actively plan freight 
transportation solutions in order to keep our region's economy 
moving, and in 2007 the New Jersey Department of Transportation 
published its first comprehensive statewide freight plan. It's 
time for the Federal Government to look to the New Jersey 
program for ideas to build a freight transportation network 
that is ready for the future needs.
    Congress is going to consider these challenges in the next 
year as we reauthorize our surface transportation programs. I 
look forward to hearing from our witnesses how we can meet that 
challenge. I ask now that my colleague from Minnesota, Senator 
Klobuchar, have a chance to make her opening remarks.
    Before that, I attract your attention to what we see in 
display form. Trains and barges are more fuel efficient. Look 
at this. One gallon of diesel can carry a ton of freight if it 
goes by truck 155 miles, by rail 413 miles, and by barge 576 
miles. This tells you about the significant part of what we've 
got to do and the problem that we have if we don't take 
advantage of these time-saving and value-saving changes.



    Senator Lautenberg. Now, please, Senator Klobuchar.

               STATEMENT OF HON. AMY KLOBUCHAR, 
                  U.S. SENATOR FROM MINNESOTA

    Senator Klobuchar. Well, thank you very much, Senator 
Lautenberg, for holding this hearing, and thank you to our 
panelists, witnesses, for being here today.
    I believe that most people involved in freight transport 
agree that our infrastructure and our funding for 
infrastructure is outdated and that we need new thinking for 
how we're going to maintain and expand our infrastructure. 
Senator Lautenberg mentioned the bridge collapse in Minnesota. 
That certainly is something that makes our state particularly 
focused on it, six blocks from my home. But I've also seen it 
when I visit all 87 counties in our state every year. I've 
stood in Renville County as they came out in zero degree 
weather with rail ties that had fallen apart, and I've seen the 
tremendous potential for biofuels in our state, but then see 
that we have a transportation system that's actually worn down 
from the increase in biofuels and from the weight of these new 
products, and yet we aren't keeping up.
    You only have to look at the rest of the world to see the 
fact that the U.S. transportation system is starting to fall 
behind. China is building a 53,000-mile national highway system 
set to rival or exceed the one we created half a century ago. 
India is similarly building thousands of miles of new highways, 
and the European Union is continuing to devote significant 
public resources to the development and upgrade of its 
highways, railways, ports, and waterways.
    To compete with these economies, maintain economic 
prominence, and sustain economic growth, we will need to 
modernize and integrate our freight transportation systems, 
including our waterways, our highways, and our railroads. When 
I get around my State, the things that are most mentioned about 
the transportation system is, first of all, the need for more, 
particularly rail lines, with our new rural economy that is 
revitalizing so much of our rural area.
    Second is the expense, especially for trains, and the issue 
of how the rail companies are pricing some of the routes. 
That's very hard for our captive shippers. Senator Dorgan and I 
have a bill to try to fix that.
    Third is that as the expenses go up, the lack of stops, the 
fact that they can go back and forth across a small town and 
they're not able to get the delivery that they need. Those are 
all things I've heard time and time again in our State.
    In Minnesota and throughout our country, as I mentioned, 
we're at the beginning stage of a new energy and economic 
revolution. But one thing is clear. We will not be able to 
build a 21st century economy by relying on a 20th century 
infrastructure that is both rapidly deteriorating and 
inadequate for our growing needs.
    Our Nation has faced this challenge before, a half century 
ago, and we succeeded in building a new modern transportation 
system for our new modern economy. In his 1963 memoir, 
``Mandate for Change, 1953 to 1956,'' President Eisenhower 
famously said that: ``More than any single action by the 
government since the end of the war, the building of the 
interstate highway system would change the face of America. Its 
impact on the American economy, the jobs that it would produce 
in manufacturing and construction, the rural areas it would 
open up, was beyond calculation.''
    He was right. It is now our responsibility to restore and 
update Eisenhower's vision of a transportation infrastructure, 
including updating our waterways, railroads, and highways, so 
that the system works for all Americans.
    Thank you very much.
    Senator Lautenberg. Thank you, Senator Klobuchar.
    Now I want to formally welcome our panel of witnesses. They 
are: the Honorable Paul Brubaker, Administrator of the Research 
and Innovative Technology Administration at the U.S. Department 
of Transportation; the Honorable Astrid Glynn, who's here as 
Chair of the American Association of State and Highway 
Transportation Officials Standing Committee on Rail 
Transportation, and I note also that Ms. Glynn is also the 
Commissioner of the New York State Department of 
Transportation, and we welcome you here as a neighbor as well 
as an important witness.
    Admiral Rick Larrabee, the Port Commerce Director of the 
Port Authority of New York and New Jersey. As a former 
Commissioner, which is what I was doing when I was elected to 
the Senate--it wasn't my full-time job, but I learned a lot 
about transportation in the few years I was there--I appreciate 
the job that Rick Larrabee is doing.
    And Ed Hamberger, who serves as the President and CEO of 
the Association of American Railroads. Pleased to see you.
    And Mr. Glenn Vanselow, the Executive Director of the 
Pacific Northwest Waterways Association.
    I'm glad that we have all of you here as witnesses before 
our Subcommittee and thanks for bringing the experiences that 
you and the issues that you have reviewed over these few years. 
We look forward to hearing your testimony.
    Administrator Brubaker, if you would start, please, 
honoring the 5-minute rule, and we look forward to hearing you.

       STATEMENT OF HON. PAUL R. BRUBAKER, ADMINISTRATOR,

      RESEARCH  AND INNOVATIVE TECHNOLOGY ADMINISTRATION,

               U.S. DEPARTMENT OF TRANSPORTATION

    Mr. Brubaker. Sure. Thank you. Chairman Lautenberg, Ranking 
Member Smith, Senator Klobuchar, and Members of the 
Subcommittee: I'm grateful for the opportunity to be here 
before you today to testify on national strategies for 
efficient freight movement.
    Today the United States is an integral part of an 
unprecedented global economy. We've seen significant increases 
in freight flow throughout our supply chain here as we look at 
the traffic that flows into the United States. These changes 
are funneling increasing volumes of freight through our major 
gateway ports and to and from our major metropolitan areas, 
concentrating in regions that are already some of the most 
congested in the Nation.
    Our Nation's transportation network moves over 50 million 
tons of freight, worth $36 billion, over highways, roads, 
bridges, rails, ports, and pipelines every day, competing with 
passenger movement for network capacity, and the Department 
anticipates that this figure will almost double by 2035. This 
sheer volume of goods and services is straining the network's 
capacity for supporting the efficient movement of freight, 
threatening America's ability to remain competitive in the 
global economy.
    As a result the cost of moving freight is significantly 
increasing. After 17 years of decline, logistics costs grew by 
$156 billion for U.S. companies between 2004 and 2005, 
accounting for 8.8 percent of the gross domestic product, a 
figure that increased to 9.5 percent a year later.
    The Department must also take into consideration the rise 
in fuel prices and the potential impact those fuel price 
increases have on the performance of supply chains, as what was 
once a fairly stable expense is adding to the cost of 
transporting goods.
    These trends, if left unabated, will continue to drive up 
the cost of transporting goods, significantly impacting our 
economy and our quality of life. The Department believes the 
most effective strategy for addressing this challenge is to 
strengthen and diversify our efforts to collect and analyze 
freight movement data from an intermodal, holistic perspective. 
The Department must have a better understanding of the dynamics 
of freight movement in order to more effectively plan and 
allocate departmental resources. There is a need to expand our 
data collection capabilities to increase the in-transit, 
intermodal visibility of freight flows so that effective 
performance measures can be assessed, bottlenecks identified, 
and models can be developed that will allow us to simulate 
scenarios and predict future system performance.
    Cutting edge technologies that are already on the market, 
such as RFID and differential GPS, can significantly improve 
capabilities in this effort by accurately tracking movements. 
These innovations even extend beyond transportation 
applications and into applications such as freight security 
that contribute to system inefficiencies.
    New freight transportation paradigms such as short-sea 
shipping, or the marine highway, intelligent transportation 
systems, and remote sensing show tremendous potential to reduce 
congestion and enhance freight planning and management. 
Cooperative research is needed to determine the viability and 
effectiveness of these new approaches.
    The multi-state international makeup of supply chains, 
coupled with the fact that much of the infrastructure is owned 
and operated by multiple public and private entities, will 
require the establishment of public-private partnerships, 
cooperations, and better institutional arrangements in order 
for the Department to achieve its goals. Departmental programs 
that invest in partnerships have grown, have shown great 
potential for freight management research and development. Many 
of these programs are the direct result of the mandate provided 
by SAFETEA-LU.
    One of the Department's most significant freight data 
programs is the Commodity Flow Survey, or CFS. The CFS is the 
main data engine that supports the Federal Highway 
Administration's Freight Analysis Framework, or FAF, a key 
resource for forecasting trends in freight movement and 
identifying changing supply and distribution patterns.
    The National Cooperative Freight Research Program, which is 
sponsored by my agency, RITA, brings together freight 
stakeholders from industry, government, academia, and other 
relevant entities to conduct applied research on problems 
facing the freight industry. This group's work began in late 
2006 and we're anticipating significant results from their 
research later this year.
    The Department's Congestion Initiative is a national 
blueprint that encompasses a broad array of congestion-reducing 
programs, including urban partnerships, to test intelligent 
transportation systems and congestion pricing innovations in 
several major cities.
    The Corridors of the Future program is fast-tracking major 
congestion-reducing projects and is looking to implement 
technology and operational improvements to measurably improve 
safety and system performance.
    Programs like University Transportation Centers seek to tap 
into the vast pool of expertise and existing research 
portfolios of our Nation's academic community by funding 
specific transportation studies, including freight management 
and planning.
    These types of strategies, which focus on working with 
regional authorities and private sector stakeholders, are going 
a long way toward meeting the challenges of creating a 
resilient, secure infrastructure for the efficient movement of 
freight, but much more has to be done.
    The key to our national strategy is to have a broader, more 
in-depth understanding of supply chains and the interstate and 
multinational dynamics that impact the flow of goods across our 
Nation's transportation network. This will take greater 
cooperation between stakeholders, better institutional 
arrangements for sharing information, planning and implementing 
multiple State and public-private projects, effective 
performance measures, and operational improvements to the 
transportation system.
    Thank you.
    [The prepared statement of Mr. Brubaker follows:]

 Prepared Statement of Hon. Paul R. Brubaker, Administrator, Research 
     and Innovative Technology Administration, U.S. Department of 
                             Transportation
Introduction
    Chairman Lautenberg, Ranking Member Smith, and Members of the 
Subcommittee, I am grateful for the opportunity to come before you 
today to testify on National Strategies for Efficient Freight Movement.
    The United States (U.S.) freight transportation system is 
efficient, reliable, safe, and secure. The freight system underpins the 
Nation's continued economic growth, and historically the U.S. has led 
the world in freight system design and management. Yet dramatically 
increasing freight flows have created congestion in some sectors of the 
transportation system, imposing costs on shippers, consumers, and the 
environment. This statement will focus on current and future challenges 
facing the efficient movement of freight throughout the Nation's 
transportation system, including in ports, on railroads, and by 
commercial motor vehicles, and will also address new technological 
developments that could help improve the efficiency of freight 
transportation.
    The U.S. transportation system must not only be able to handle both 
growth in the volume of freight and passenger movement, but as new 
markets and trade routes emerge, it must enable increasingly complex 
supply chains to operate. The Interstate Highway System was a critical 
innovation that helped fuel the unprecedented growth of 20th century, 
post-war America, enabling the movement of freight arriving at our 
ports from overseas and goods manufactured in our large cities to small 
towns across the country. The Interstate Highway System provided an 
infrastructure that not only offered the interconnectivity for economic 
expansion, but acted as a catalyst for it. However, the highway system 
we are using today must handle very different dynamics.
    Changes in demographics, manufacturing, and warehousing, and a 
dramatic increase in imported manufactured goods and foods, have caused 
freight funneling at major gateway ports, leading to congestion on the 
highways and at the rail connections as containers are reloaded on 
trucks and rail cars. Private sector changes in inventory management 
and production operations are placing demands on the transportation 
system that go beyond connectivity to speed, reliability, and 
throughput. Logistics costs have been rising for some time. As reported 
by the Council of Supply Chain Management Professionals, logistics 
costs as a percent of gross domestic product have increased 63 percent 
since the beginning of 2004. In 2006, inventory carrying costs jumped 
13.5 percent, while transportation costs were up 9.4 percent over 2005 
levels, and the trends are expected to continue. To make maximum use of 
the entire transportation system, it is imperative to develop better 
and smarter approaches to moving cargo and people through the entire 
intermodal system, from origin to destination.
    The United States is part of an unprecedented, global economy that 
transcends borders. Telecommunications and computing technology have 
evolved to meet the demands of consumers, industry, and government in a 
world that is vastly more connected on a daily basis than when the 
Interstate Highway System was built. Each day, an estimated 50 million 
tons of freight, worth $36 billion, moves over our highways, roads, 
bridges, rail, ports, coastal and inland waterways, or marine highways, 
ports and pipelines. Current analysis clearly shows the predominant 
corridors through which freight is moving, and the connection between 
freight flows and metropolitan areas.
    The Department estimates that the total tonnage of domestic and 
foreign freight traveling along the U.S. transportation system will 
almost double by 2035, with international shipments, most of which move 
by water, growing at a somewhat faster rate than domestic shipments. 
The U.S. freight system faces significant capacity constraints at key 
freight gateways, and it is straining to move the current volume of 
freight quickly, reliably, and economically in order to sustain growth. 
The difficulties posed by increased cargo volumes are compounded by 
environmental challenges, a limited supply of land on which to expand 
transportation facilities, congested road and rail linkages, and 
increasing fuel costs. Effective policy solutions will require 
coordinated and collaborative action by both public and private 
parties. To be credible and achievable, these solutions require input 
and buy-in from the broader freight sector, including both public and 
private sector interests. The Department has begun the process of 
soliciting such input, and DOT looks forward to working with its 
partners to further develop the freight framework.
    It is clear that the public and private sectors will need to 
closely coordinate to address modern freight challenges. The private 
sector owns and operates the mobile assets, controlling when, where, 
and how goods are moved on public and private transportation 
facilities. Trucks, rail cars, and ships are privately owned. Maritime 
terminals are predominantly operated by private entities, with only a 
few publicly operated.
    This largely private-sector ownership of the components of the 
transportation network has been extremely effective in increasing 
transportation productivity and reducing transportation costs to 
shippers. From 1987 to 1999, productivity in rail freight 
transportation--the freight mode (other than pipelines) that is most 
completely in private hands--increased by 48 percent, and rail freight 
rates fell by 18 percent. Trucking productivity rose by 15 percent 
during the same period, and airline productivity rose by 16 percent--
all more than the overall 10-percent increase in U.S. private business 
productivity. Moreover, all the freight modes have responded 
effectively to shipper requirements, providing more frequent service of 
smaller shipments to accommodate their demands for Just-in-Time 
deliveries of freight that allow reductions in inventories and 
logistics costs.
    The Department of Transportation's Framework for a National Freight 
Policy identifies seven objectives for addressing the congestion that 
has been created in the transportation system from dramatically 
increasing freight flows. With regard to capacity, these are to improve 
the operations of the existing freight transportation system, and add 
physical capacity to the freight transportation system in places where 
investment makes economic sense. A third objective is to use pricing to 
better align costs and benefits between users and owners of the freight 
system and to encourage deployment of productivity-enhancing 
technologies. It recommends actions be taken to reduce statutory, 
regulatory, and institutional barriers to improved freight 
transportation performance, and to proactively identify and address 
emerging transportation needs. The sixth objective is to maximize the 
safety and security of the freight transportation system. Last, the 
Framework recommends that actions should be taken to mitigate and 
better manage the environmental, health, energy, and community impacts 
of freight transportation. Effective policy solutions will require 
coordinated and collaborative action by both public and private 
parties.
    Solutions that unlock the constraints of these complex, interwoven 
networks must extend beyond the jurisdiction, or authority, of any one 
entity. Effective solutions to these challenges will necessitate 
coordinated and collaborative efforts of all transportation 
stakeholders.
    Here are some examples that exemplify this level of cooperation:

        The National Cooperative Freight Research Program (NCFRP) is a 
        multi-modal freight research program, guided by an oversight 
        committee of industry representatives, academics, and public 
        officials. Current NCFRP projects now underway, or being 
        initiated, include mobility constraints, measuring operational 
        performance, identifying investment needs, and assessing the 
        environmental and economic impacts of freight transportation. 
        This program is indicative of the potential found in 
        cooperation between stakeholders.

        Likewise, the University Transportation Centers (UTC) program 
        is an investment, and cooperative endeavor, in our Nation's 
        institutions of higher education; to cultivate U.S. expertise 
        in transportation research and technology transfer, offering a 
        wealth of knowledge and innovation to the area of freight 
        movement. Sixty UTC's are currently active, including the Alan 
        M. Voorhees Transportation Center at Rutgers University, which 
        is exploring the establishment of a Freight Transportation 
        Center for Excellence.

        The Freight Performance Measures program, another public-
        private effort, enables the Department to measure travel speeds 
        and travel time reliability across two-thirds of the Interstate 
        Highway System. This data is available through an arrangement 
        with the trucking industry. Many long-distance trucking firms 
        use GPS transponders on their cabs to track their assets; this 
        allows businesses to maintain continual awareness of asset 
        movement. Through a collaborative agreement with the American 
        Transportation Research Institute, we can tap into GPS data 
        from over 350,000 trucks that are traversing our Nation's 
        roadways on any given day. We hope to expand this data to 
        include over 400,000 trucks by 2009. We use this data to 
        calculate travel speed and time reliability throughout twenty-
        five corridors across America. This helps the Department gain 
        insight into system performance, so that we can better focus 
        our efforts in increasing network capacity.

    These system performance measures allow every entity involved in 
transportation, public and private, to better manage its resources. 
Performance measures are driven by data--data that are absolutely vital 
for the Department to conduct accurate analysis, simulation, and 
modeling. The Department's Research and Innovative Technology 
Administration has several programs that have been critical to our 
efforts to collect data and assess our Nation's freight movement 
performance and needs.
    The largest of these data programs, the Commodity Flow Survey 
(CFS), provides primary national and state-level data and forecasting 
on domestic freight shipments and exports by American establishments, 
with the latest data expected to be released at the end of the year. 
The CFS is also the main data engine that supports the Federal Highway 
Administration's Freight Analysis Framework (FAF). The FAF commingles 
the CFS data with a broad array of publicly available freight data to 
create the complete picture of freight flows you see here.
    We are also supporting private sector investment in freight 
transportation through our Private Activity bond program, authorized by 
section 11143 of SAFETEA-LU. This provision allows private investors to 
benefit from tax-exempt financing of transportation infrastructure. We 
have received three applications for intermodal freight transfer 
facilities totaling $2.2 billion, and capable of handling more than 2 
million containers per year.
    As noted earlier, the complexity of supply chains and the multi-
jurisdictional nature of freight movement complicate our institutional 
ability to address stresses on the transportation system. As part of 
its Congestion Initiative, the Department announced the Corridors of 
the Future Program which will challenge agencies to work 
collaboratively to develop dynamic financial and operational mechanisms 
to improve the flow of goods and people.
    The PierPass program in Southern California is an excellent example 
of how congestion pricing can improve to the flow of goods at our 
Nation's ports. The PierPass program charges a traffic mitigation fee 
of $50/TEU (this equals a $100 charge for an average 40-foot container) 
to encourage the pick-up of containers during off-peak hours (6 p.m. to 
3 a.m.). The off-peak shift now handles about 65,000 truck trips a 
week, or 37 percent of the container moves at the two ports. Since its 
inception in July, 2005, over 8 million truck trips have shifted to 
off-peak hours.
    The independent evaluators of this program from the University of 
Southern California noted: ``Like the handful of experiments with 
congestion pricing, it demonstrates that price incentives are powerful 
tools for managing the transportation system.''
    Pipelines are a transportation system that can be used to relieve 
congestion on the railroads. Seventy percent of oil and petroleum 
products and close to one hundred percent of natural gas is transported 
by privately owned pipelines. Large volumes of anhydrous ammonia, 
carbon dioxide, and other chemicals are moved by pipeline. It is 
expected that in the near future, large amounts of ethanol, which is 
currently carried by rail, may be moved by pipeline as well.
    Congestion pricing is an excellent example of how businesses can 
change their patterns to use existing capacity more efficiently. While 
we are on our way to addressing the challenge of maintaining a 
resilient, secure, and efficient transportation system for the movement 
of freight, more has to be done to use our existing resources, and to 
develop innovations that will enable America's transportation system to 
support the growing demand for goods and services.
    One such example is America's Marine highway, which includes our 
coastal waters, our inland waterway system and the Great Lakes. 
Although the United States already transports one billion tons of 
domestic cargo on our domestic waterways each year, this 25,000 mile 
network of navigable waters can help us expand our way out of landside 
congestion. The Energy Independence and Security Act of 2007 directed 
the Secretary of Transportation to establish a Marine Highway Program 
to encourage this transformation and identify the disincentives that 
keep the congestion on the highways and railroads. The Department of 
Transportation's Maritime Administration is working with their many 
stakeholders to implement this promising program as quickly as 
possible.
    The key for our national freight strategy is to have a broader, 
more in-depth understanding of supply chains and the interstate and 
multi-national dynamics that impact the flow of goods across the 
transportation network. This will take greater cooperation between 
stakeholders, better institutional arrangements for planning and 
implementing multi-state projects, effective performance measures, and 
operational improvements to the transportation system.
    Thank you again for inviting me to testify. I would be happy to 
answer any questions that the Subcommittee members might have.
                                 ______
                                 
 Freight in the Safe, Accountable, Flexible, Efficient Transportation 
         Equity Act: Legacy for Users (SAFETEA-LU) P.L. 109-059

 Table 1.--Direct Expenditures for Freight Infrastructure in SAFETEA-LU
------------------------------------------------------------------------

------------------------------------------------------------------------
Projects of National/    $1.779 billion over 5    Rulemaking to solicit
 Regional                 years                    and select new
Significance                                       projects in review;
                                                   20 of 25 originally
                                                   identified projects
                                                   underway or in review
------------------------------------------------------------------------
National Corridor        $1.948 billion over 5    28 of 33 identified
 Infrastructure           years                    projects underway or
Improvement                                        in review
------------------------------------------------------------------------
Coordinated Border       $833 million over 5      Apportioned program to
 Infrastructure           years                    border states
Program
------------------------------------------------------------------------
Freight Intermodal       $30 million over 5       3 of 6 identified
 Distribution             years                    projects underway or
Pilot Grant Program                                in review
------------------------------------------------------------------------
Truck Parking            $25 million over 4       Multiple year funding
                          years                    combined into one
                                                   request for proposals
                                                   and projects
                                                   submitted through the
                                                   Corridors of the
                                                   Future initiative
------------------------------------------------------------------------
Total                    $4.615 billion
------------------------------------------------------------------------
Source: USDOT, 2006 Status of the Nation's Highways, Bridges, and
  Transit: Conditions and Performance, page 14-7, at www.fhwa.dot.gov/
  policy/2006cpr/chap14.htm.


            Table 2.--Other Freight Provisions in SAFETEA-LU
------------------------------------------------------------------------

------------------------------------------------------------------------
Transportation           Eligibility expanded     Examples include Reno
 Infrastructure Finance   for financing freight    rail project ($51
 and Innovation Act       projects                 million) and
 (TIFIA) Program                                   Louisiana highway
                                                   access to water
                                                   terminals ($66
                                                   million)
------------------------------------------------------------------------
State Infrastructure     Program extended         Example includes truck
 Banks                                             diesel retrofits on
                                                   West Coast
------------------------------------------------------------------------
Private Activity Bonds   Tax code modified to     Examples include 3
                          encourage up to $15      intermodal yards
                          billion private          ($2.2 billion) and
                          investment in freight    the Miami port tunnel
                          facilities               ($900 million)
------------------------------------------------------------------------
Freight Professional     $3.5 million over 4      Several courses and
 Capacity Building        years                    distance-based
                                                   learning programs
                                                   initiated
------------------------------------------------------------------------
National Cooperative     $15 million over 4       Current projects
 Freight Research         years                    listed in table 3
 Program
------------------------------------------------------------------------
Hazardous Materials      $5 million over 4 years  Current projects
 Cooperative Research                              listed in table 3
 Program
------------------------------------------------------------------------
Source: USDOT, 2006 Status of the Nation's Highways, Bridges, and
  Transit: Conditions and Performance, page 14-7, at www.fhwa.dot.gov/
  policy/2006cpr/chap14.htm.


 Table 3.--Cooperative Freight and Hazardous Materials Research Projects
                              through 2008
------------------------------------------------------------------------

------------------------------------------------------------------------
NCFRP 01               Review and Analysis of Freight Transportation
                        Markets and Relationships
NCFRP 02               Impacts of Public Policy on the Freight
                        Transportation System
NCFRP 03               Performance Measures for Freight Transportation
NCFRP 04               Identifying and Using Low-Cost and Quickly
                        Implementable Ways to Address Freight-System
                        Mobility Constraints
NCFRP 05               Framework and Tools for Estimating Benefits of
                        Specific Freight Network Investment Needs
NCFRP 06               Freight-Demand Modeling to Support Public-Sector
                        Decision Making
NCFRP 09               Institutional Arrangements in the Freight
                        Transportation System
NCFRP 10               Separation of Vehicles: Commercial Motor Vehicle
                        Only Lanes
NCFRP 11               Current and Future Contributions to Freight
                        Demand in North America
NCFRP 12               Specifications for Freight Transportation Data
                        Architecture
NCFRP 13               Developing High Productivity Truck Corridors
NCFRP 14               Truck Drayage Practices
NCFRP 15               Understanding Urban Goods Movements
NCFRP 16               Representing Freight in Air Quality and
                        Greenhouse Gas Models
NCFRP 17               Synthesis of Short Sea Shipping in North America
HMCRP 01               Hazardous Materials Commodity Flow Data and
                        Analysis
HMCRP 02               Hazardous Materials Transportation Incident Data
                        for Root Cause Analysis
HMCRP 03               A Guide for Assessing Emergency Response Needs
                        and Capabilities for Hazardous Materials
                        Releases
HMCRP 04               Emerging Technologies Applicable to Hazardous
                        Materials Transportation Safety and Security
HMCRP 05               Evaluation of the Potential Benefits of
                        Electronic Shipping Papers for Hazardous
                        Materials Shipments
HMCRP 06               Assessing Soil and Groundwater Environmental
                        Hazards from Hazardous Materials Transportation
                        Incidents
------------------------------------------------------------------------
Source: www.trb.org/CPR/NCFPR/NCFRPProjects.asp and www.trb.org/CPR/
  HMCPR/HMCRPProjects.asp.


    Senator Lautenberg. Thank you very much, Mr. Brubaker.
    Ms. Glynn, please.

        STATEMENT OF HON. ASTRID C. GLYNN, COMMISSIONER,

        DEPARTMENT OF TRANSPORTATION, STATE OF NEW YORK;

             AND CHAIR, STANDING COMMITTEE ON RAIL

   TRANSPORTATION, AMERICAN ASSOCIATION OF STATE HIGHWAY AND 
                    TRANSPORTATION OFFICIALS

    Ms. Glynn. Thank you, Senator. Thank you, Mr. Chairman and 
Senators. My name is Astrid Glynn and I want to thank you for 
the opportunity to be here today on behalf of AASHTO. I would 
like to describe the freight transportation problem as we see 
it, focus on the public sector's role, particularly the Federal 
Government's role, describe some of the states, and then close 
with a brief summary of AASHTO's freight policy 
recommendations, all of which are set forth in greater detail 
in the written testimony.
    As you have said, the United States still has the most 
productive transportation system in the world. But that 
transportation system is starting to show its age and 
limitations. Later in this century, the U.S. economy will no 
longer be the world's largest. Investment in a 21st century 
transportation system is one of the actions we need to 
undertake if we are to avert economic decline.
    Growth in trade and change in freight traffic, combined 
with limited growth in system capacity for all modes, mean more 
congestion, increased costs, and less reliable trip times. This 
in turn means added manufacturing costs, higher import prices, 
and a need for businesses to hold more inventory. Over time 
these costs add up to a higher cost of doing business and a 
higher cost of living for Americans.
    We are starting to see a disturbing rise in total logistics 
costs, the first in 25 years. In 1980 logistics costs were 
approximately 16 percent of the GDP. They had dropped to less 
than 9 percent a few years ago, a significant spur to economic 
growth. Now we are headed in the opposite direction, with 
logistics costs at about 10 percent, and this estimate is prior 
to the recent and dramatic changes in fuel costs.
    Clearly the public sector has an immense social, economic, 
and environmental stake in our freight system. The performance 
of the network directly affects our jobs, our standard of 
living, our community, and our national security. We have 
tremendous responsibilities also because we as the public 
sector own, operate, regulate, or secure much of the system.
    The Federal Government must continue to lead the public 
sector in that role. At each of the transportation policy 
commission hearings held over the last couple of years, Vice 
Chair Jack Shannendorf asked each panel whether the Federal 
Government should continue to have a major role in 
transportation. The answer was a unanimous and unqualified yes, 
and this answer holds even more true for freight since 
America's ability to compete in the global economy is directly 
tied to the health of our freight system.
    States have recognized the need for our action. Four of the 
most notable State initiatives are: the Chicago CREATE Program 
that will help address the transfer time that you alluded to, 
Mr. Chairman; the FAST Corridor in Washington State and the 
Alameda Corridor in California, both to provide improved port 
access; and the I-95 Corridor Coalition that coordinates 
freight information for the East Coast. More information on 
these initiatives are in my written testimony.
    But I'd like to spend a couple of minutes if I may talking 
about some of New York's initiatives, because we are also, like 
many States, working to address exponential growth in freight. 
I'd like to focus on two areas, transit and borders. Transit 
may not seem like it relates to freight, but it does. The 
greatest challenge for freight is the last mile. In areas such 
as Upstate New York, this could be a railhead or a bridge that, 
weight limits willing, allow a farm to ship his apples cost 
effectively or that allows a factory to invest in its workforce 
rather than in extra inventory.
    But the last mile is also a challenge to major metropolitan 
areas, where highway congestion threatens freight mobility. New 
York City is one of the most truck-dependent and transit-
dependent cities in the Nation. The more we are able to move 
people by transit, the more scarce urban highway capacity can 
we make available for trucks. Unfortunately, we lack the rail 
connections that provide us--that might provide us with 
alternatives.
    The relationship between transit and efficient goods 
movement is not unique to New York City. It is a factor in 
every major metropolitan area in the country.
    More than ever, international trade drives demand. So I 
want to focus for a minute on land-side borders. Nearly one-
quarter of all U.S.-Canadian trade, the largest bilateral 
trading relationship in the world, passes through New York 
State's northern and western ports of entry and on to our road 
and rail systems. Nearly 80 percent of this trade either 
originates in or is destined for States outside of New York, 
and this is a story that my sister border States will tell you 
again and again.
    The Federal Government needs to share in the costs of 
maintaining and improving this international access. Localities 
cannot be primarily responsible for this infrastructure. It is 
unrealistic to think that they can bear that burden. We know 
that there is a Federal interest and we hope that that Federal 
interest will be translated into facilitation and support.
    I just want to close briefly by summarizing AASHTO's policy 
recommendations, which focus on not just the need for funding, 
but also a strong Federal partnership and a request that the 
Federal Government help us find ways to address projects that 
have benefits for an area larger than a State and help us find 
ways to work together and address those regional needs that are 
so pressing.
    Thank you, Mr. Chairman.
    [The prepared statement of Ms. Glynn follows:]

Prepared Statement of Hon. Astrid C. Glynn, Commissioner, Department of 
  Transportation, State of New York; and Chair, Standing Committee on 
    Rail Transportation, American Association of State Highway and 
                        Transportation Officials
    Good afternoon, I am Astrid Glynn, Commissioner of the New York 
State Department of Transportation. Thank you for the invitation to 
speak today on an issue of critical importance to the nation--current 
and future challenges facing the efficient movement of freight 
throughout our Nation's transportation system and national strategies 
to address these challenges.
    I am appearing on behalf of the American Association of State 
Highway and Transportation Officials (AASHTO). I chair AASHTO's 
Standing Committee on Rail Transportation and am a member of AASHTO 
Freight Transportation Authorization Policy Team. I will also touch on 
some New York State issues and the activities of the I-95 Corridor 
Coalition.
    Since the publication of the AASHTO Freight Rail Bottom Line Report 
in 2002, AASHTO and its members have worked hard to respond to the 
increasing freight sector demand for safe, reliable, efficient and 
affordable transportation. Despite these efforts, the condition and 
performance of the transportation system is not keeping up with the 
increasing demands of the freight sector.
    AASHTO has undertaken a number of freight transportation 
activities. Specifically, AASHTO has:

   Published America's Freight Challenge, a report with 
        recommendations submitted to the National Surface 
        Transportation Policy and Revenue Study Commission;

   Organized a Transportation Vision Conference in Spring, 2007 
        which included substantial attention to freight transportation 
        needs; and

   Updated the Freight Rail Bottom Line Report to a 
        comprehensive freight report, currently in final draft, which 
        contains analyses of the major freight modes as well as an 
        overview of freight demand and logistics.

    These and other materials will be provided to the Committee staff 
for use by the Committee.
    For the Spring, 2007 Vision Conference, AASHTO convened a 
predominantly private sector group to produce a report. That group's 
report was titled ``The U.S. Freight Transportation System in the 
Global Economy: Anchored in the Past--Adrift in the Future.'' The 
conclusions and recommendations were on two dimensions--the 
improvements needed in the freight transportation system and, changes 
needed in politics and government to accomplish these improvements.
    In the first of these dimensions they recommended:

   Expanded and targeted highway capacity;

   Integration of private supply-chain management and public 
        infrastructure;

   Increased freight rail capacity;

   More efficient port operations;

   Improved intermodal connections;

   Coordinated multimodal/multistate corridors; and

   Strategically located intermodal facilities.

    But, they said, it will not be possible to achieve these objectives 
unless political and institutional obstacles are overcome, including:

   Lack of national leadership;

   A weak Federal role;

   Absence of a clear consensus on a vision of the freight 
        system and its performance;

   Fragmented Congress;

   U.S. DOT modal stove pipes;

   A disconnect between business and government;

   Lack of multi-state collaboration;

   Projects which have a national benefit of transportation 
        projects, but whose costs are borne locally; and

   Local fragmentation and parochialism.

    Business has entered the 21st century, while the U.S. freight 
transportation system that supports it was built for the 18th, 19th, 
and 20th centuries. While the United States still has the most fully 
developed, efficient, and productive transportation system in the 
world, it is showing signs of age, over-use, obsolescence, and 
fragmentation. Although transportation and logistics are fundamental 
elements of the manufacturing and retail sectors, the transportation 
system is not well-integrated with contemporary supply-chain management 
practices.
    Emerging world economies are investing in transportation and 
intending to leap into the future while the United States patches up 
the past. Every mile of highway, railroad, and waterway, every acre of 
seaport is operating in the global economy and, depending on its 
condition and performance, either helps or hinders America's global 
competitiveness.
    Some say that by the middle of this century, the U.S. economy will 
no longer be the world's largest. Is America in decline? Investment in 
a 21st century transportation system is one of the actions needed to 
avert decline. The challenge now is to think differently and to execute 
that new way of thinking effectively and expeditiously.
    For nearly a decade we have been dwelling on the national freight 
transportation problem. By now, everything has been said and everyone 
has said it. We must translate the agreement that there is a problem 
into a commitment to action. Now is the time to solve it. If we don't 
we will pay a high price.
    The demand for freight transportation to support economic growth 
will nearly double between 2005 and 2035 (see chart). Measured in tons, 
freight demand will grow from 15 billion tons today to 26 billion tons 
in 2035, an increase of 89 percent. Measured in ton miles (a ton of 
freight moved a mile counts as one ton-mile), freight demand will grow 
from 6 trillion ton-miles today to 11 trillion ton-miles in 2035, an 
increase of 92 percent. The table attached shows the freight tonnage 
forecast by mode for 2005 through 2035.
    The effects of rapid growth in demand and limited growth in system 
capacity for all modes are increased congestion, increased costs and 
less reliable trip times. This, in turn means increased costs for 
manufacturers, higher import prices, and a need for businesses to hold 
more expensive inventory to prevent stockouts. The effect on each 
individual shipment or transaction is usually modest, but over time 
these costs add up to a higher cost of doing business for firms, a 
higher cost of living for Americans. And it makes it more difficult for 
our Nation to compete in the global marketplace.
    Constraints on freight transportation infrastructure for all modes 
have contributed to a disturbing rise in total logistics costs--the 
first in 25 years. In 1980 these costs totaled about 16 percent of the 
gross domestic product (GDP). Infrastructure investment, deregulation, 
and advanced logistics practices combined to reduce logistics costs to 
less than 9 percent in the first years of this century, reflecting 
increases in efficiency and capital released for other investment that 
produced a significant spur to economic growth. Now we are headed in 
the opposite direction, with logistics costs now at about 10 percent--
before the recent significant increase in the price of diesel fuel.
    The performance of the Nation's freight transportation system is 
critically important. It directly affects:

   Economic Development and Jobs--Cost-effective and reliable 
        freight transportation gives industries and businesses a 
        competitive advantage in the global economy by providing them 
        the ability to deliver products at lower cost and reach larger 
        markets. This translates into more jobs, greater profitability, 
        and better growth prospects. Poor freight transportation 
        performance means smaller markets, fewer jobs, and limited 
        economic development opportunities.

   Standard of Living--The freight transportation system 
        delivers an immense range of food, clothing, tools, materials, 
        and services to our homes and businesses. Consumers enjoy an 
        unprecedented variety and quality of products because producers 
        are able to manufacture, trade, and distribute across local, 
        national, and global markets. Poor freight transportation 
        performance means higher costs, less choice, and a lower 
        standard of living for all citizens.

   Communities--Freight transportation is heavy industry. A 
        well-performing and innovative freight transportation industry 
        means less congestion, fewer air pollutants and greenhouse gas 
        emissions, quieter operations, and greater safety in our 
        communities. Poor freight transportation performance leads to 
        degradation of community health and safety.

   Military Capability--The freight transportation system that 
        supports the Nation's civilian economy also supports the 
        Nation's military. It ensures a ready and reliable supply of 
        material and gives the military the mobility to operate 
        effectively at home and abroad. Poor freight transportation 
        performance means less mobility, higher cost, and greater risk.

    The public sector has a major role in the freight transportation 
system: it owns and operates the highways; owns and manages most of the 
Nation's ports, waterways, and airports; regulates the rail and 
pipeline systems; and oversees the security of all freight 
transportation facilities and freight carriers. It has an immense 
social, economic, and environmental stake in the condition and 
performance of the freight transportation system.
    The nation is entering the early stages of a freight transportation 
capacity crisis. But the public sector is poorly positioned to deal 
with the emerging crisis because there is:

   No clear and consistent description of the national freight 
        transportation system, its performance, and investment needs;

   Insufficient public sector knowledge of freight 
        transportation and supply chain management and their importance 
        to businesses and economic growth;

   Lack of coordinated public and private actions on freight 
        transportation policies, programs, and finance; and

   Lack of public sector focus on transportation operations.

    As a Nation, we rely upon a legacy of 300 or more years of 
transportation investment to deliver the promise of an economy of the 
future. Our most recent major investment, the 50-year old interstate 
highway system, was laid on top of a 19th century rail system. As a 
direct result of that Federal investment, the rail system adapted and 
shrank, leaving thousands of modal disconnects that would be 
unjustifiable and inconceivable if the network were designed today. The 
reduction in rail track mileage, the increase in rail traffic (both 
passenger and freight), and changes in the operating strategy of the 
freight railroads have resulted in more and longer trains operating at 
reduced speeds, creating more conflicts with highway movement, 
increased safety risks, bifurcation of communities, and exacerbation 
the problems of urban traffic circulation. Some of the best-known 
freight projects or programs--the Alameda Corridor, CREATE, and the 
Seattle-Tacoma FAST Corridor--are largely grade separations and 
crossing upgrades that also benefit highway operations and safety. In 
areas fortunate enough to have robust commuter rail and inter-city 
passenger rail, the conflicts are between passenger and rail customers 
each trying to use the same constrained system.
    Most of the Nation's gateway seaports and other major modal and 
intermodal freight traffic generators established over the past three 
centuries are now embedded in densely populated urban areas. Most 
cannot be moved. Their efficiency has been compromised by the 
characteristics of their surroundings which present obstacles to 
linking with these important freight gateways with the national highway 
and rail systems. The lack of connectivity leads to substantial 
negative environmental impacts on local communities. Many of those 
negative impacts can be mitigated by improving the transportation 
connections between these freight gateways and the core national 
transportation system. Deficient intermodal connectors were identified 
at the time the National Highway System was designated in the mid-
1990s. In the decade since there has not been a systematic, national 
strategy to address the local burden of transportation facilities which 
provide national benefits.
    Since the interstate highway system was originally envisioned and 
built in the 1950s, the Nation's population has increased, population 
growth has shifted, the number of vehicles and vehicle miles travelled 
(VMT) has increased disproportionately, and the trucking industry has 
grown and evolved in ways that no one did or could have predicted. 
Today, we have a number of interstate highway chokepoints, principally 
at the intersection of Interstate highways and in major metropolitan 
areas, which produce sizable costs to the economy in the form of delay 
and unreliability in freight shipments. The highway chokepoints also 
affect the movement of people. Individual states and localities cannot 
absorb the full burden of financing the maintenance, operations, and 
improvements to the highway system that is the foundation of interstate 
commerce.
    It is important to note that each of these examples involves both 
freight and passenger mobility. It is impossible to separate the 
freight and passenger transportation issues and our dual-use 
infrastructure compels us to seek solutions that are beneficial to 
both. That is why AASHTO made the following recommendation to the 
National Surface Transportation Policy and Revenue Study Commission:

        Establish a National Rail Transportation Policy. Intercity 
        passenger and freight rail are critical components of the 
        Nation's surface transportation system. Current rail capacity 
        is not sufficient to meet passenger or freight needs. It is 
        imperative that a national rail policy be developed which 
        addresses institutional roles, passenger and freight capacity, 
        and new non-Highway Trust Fund funding and financing options.

    We are competing in the global economy, and the health of our 
national transportation network is critical for our competitiveness.
    Growth in trade volume has been substantial and is continuing (see 
chart). From a transportation perspective, however, what is equally 
important is the changing trade patterns which affect freight movement. 
Trade is not simply growing--it is coming from different origins, bound 
for different destinations, requiring a response to both the growth in 
volume and the shift in trade patterns. A look at the changes in the 
ranking of national economies around the world makes clear the 
challenge of investing in transportation infrastructure that will meet 
import and export needs in the future. (see chart)
    One of the important drivers of the growth of the economies of 
other nations is infrastructure investment. China and Europe, our two 
largest competitors and with very different governmental/political 
systems are carrying out national programs of transportation 
infrastructure investment in support of their economic objectives. 
China, with a population of 1.3 billion, is building a 53,000-mile 
National Expressway System which, when complete in 2020, will rival the 
47,000-mile U.S. Interstate Highway System. India, with a population of 
one billion, is building a 10,000-mile national expressway system. 
Europe, with a population of 450 million, is spending hundreds of 
billions of euros on a network of highways, bridges, tunnels, ports, 
and rail lines.
    The United States must significantly increase its financial 
commitment to her transportation system if we are to remain a world 
economic power.
State Freight Initiatives
    State Departments of Transportation, local governments, and the 
freight transportation industry have collaborated on many important 
projects and programs to nudge the freight transportation system into 
the 21st century. Three of the most notable are the Chicago CREATE 
program, the FAST Corridor and the Alameda Corridor.
    Chicago's CREATE Program--The seven Class I railroads, Amtrak, 
Metra, the City of Chicago and the State of Illinois are cooperatively 
planning and financing a program of projects including 15 new 
overpasses to separate motor vehicles from train tracks, six new 
overpasses to separate freight-rail trains from passenger-rail trains, 
and extensive upgrades to tracks, switches, and signals. The program, 
which costs $1.5 billion will greatly reduce the time needed to 
transfer freight between the eastern and western railroads and will 
address the freight and passenger transportation problems arising from 
19th century infrastructure operating in the 21st century.
    The FAST Corridor--In the Seattle-Tacoma Washington region, the 
FAST corridor network seeks to tie together overcrowded port, highway, 
and rail connections at the Nation's third busiest international 
freight portal. The Puget Sound ports serve the entire nation with up 
to 75 percent of the containers entering its ports moving to rail with 
destinations outside of Washington State. More than $60 billion in 
imports and $12 billion in American exports used the Washington State 
ports in 2004. The Washington State DOT, the Puget Sound Regional 
Council, and the freight industry developed and are carrying out a 
multiyear, multimodal program of projects. Since 1998, the public-
private coalition has invested $568 million of public and private 
funding for strategic freight mobility infrastructure improvements in 
the FAST Corridor. Another $300 million is needed to complete the 
remaining 16 of the 25 of the priority Corridor projects.
    The Alameda Corridor--The Alameda Corridor is the grandmother of 
the intermodal connector projects. The ports of Long Beach and Los 
Angeles handle more than 64 percent of Asian container imports and 
nearly 25 percent of all U.S. imports. The Alameda Corridor project 
built a state-of-the art rail access network to the ports. It consists 
of a 20-mile long rail expressway--basically a large-grade separation 
project--linking the Ports of Long Beach and Los Angeles to the 
Nation's rail network near downtown Los Angeles. It consolidated four 
branch line railroads and eliminated more than 200 at-grade crossings. 
The financing for the $2.4 billion project, which included a $400 
million Federal loan, was backed by a fee on every container moved. 
Traffic exceeded the projections, making it possible to retire the 
original Federal loan 28 years early. Trains moving through Corridor in 
2006 hauled about 5 million TEUs, up by 32 percent from 2005.
New York State Freight Initiatives
    New York exemplifies a multi-modal approach to address to the 
projected exponential growth in freight.
    It is often said that the greatest challenge for freight is the 
last mile. This is particularly true in major metropolitan areas, where 
highway congestion is the greatest threat to freight mobility. New York 
City is one of the most truck dependant major cities in the Nation. 
This is directly attributable to its geography. New York City is an 
archipelago--a series of islands. Of the five boroughs, only the Bronx 
is on the mainland. Goods need to reach this huge consumer market 
through a very constrained highway, transit and rail network serving 
both the consumers and the goods that they want. The more we are able 
to move people by transit, the more scarce urban highway capacity we 
can make available for trucks. The interrelationship between transit 
and efficient goods movement is not unique to New York City--it is a 
factor in every major metropolitan area across the country.
    New York is also working with Class I railroads and shortline 
railroads to improve rail freight service. In our draft statewide rail 
plan, New York is proposing the following goals for 2020:

   Increase freight market share by 25 percent, reducing growth 
        in truck traffic and energy consumption;

   Increase state investment in intermodal facilities and in 
        ``last mile'' connections;

   Allow modern freight cars to access the New York 
        metropolitan area and Long Island, eliminating 300,000 truck 
        trips from the region's highways each year;

   Develop at least three new intermodal facilities/inland 
        ports across the state serving the rapidly growing container 
        segment of freight movement;

   Increase the use of rail to transport hazardous commodities, 
        taking advantage of the well-documented safety benefits of 
        rail; and

   Establish the first ``green'' shortline locomotive fleet in 
        the nation, by deploying a fleet of Low Emission Locomotives. 
        Low emission locomotives have been developed for light duty 
        yard operations. Low Emissions Locomotives can reduce fuel 
        usage by 25 to 35 percent and reduce emissions by up to 80 
        percent.

    New York has a strong commitment to transportation system 
operations to support the movement of freight. New York, working 
through the I-95 Corridor Coalition, is undertaking the first multi-
agency permanent demonstration and deployment of Commercial Vehicle 
Infrastructure Integration (CVII) in the Nation. The Vehicle 
Infrastructure Integration (VII) Program is a cooperative effort 
between the USDOT, State governments and the automobile industry to 
develop and test an information technology that uses the most advanced 
communications technologies to exchange real-time information between 
the roadside and vehicles to improve safety and mobility. VII systems 
can warn a driver when it is not safe to enter an intersection, or when 
a vehicle is following too close behind another vehicle. Vehicles can 
serve as data collectors and anonymously transmit traffic and road 
condition information from major roads in the transportation network. 
Such information can help transportation agencies and emergency 
responders implement active strategies to reduce congestion and save 
lives. New York's CVII project, developed under real-world conditions, 
will involve driver identification and verification using the 
Transportation Worker Identification Card (TWIC) and biometrics 
integrated with the operating system of the truck. It will demonstrate 
and test additional dashboard safety indicators with more direct 
vehicle safety data such as tire pressure and brake status. It will 
also provide real-time safety warning to the truck driver such as work 
zones and speed reduction zones. The New York State CVII will be 
features at the ITS World Congress in New York City this November.
    New York is committed to moving goods safely. Working closely with 
the New York Motor Truck Association, New York State DOT developed the 
One Stop Credentialing and Registration system, known as OSCAR, the 
gateway to New York's motor carrier safety system. Five state agencies 
collaborated to design a one-stop shopping website which allows the 
industry a single point of contact to apply, change, pay for, and 
receive operating credentials for Highway User Tax (HUT), International 
Fuel Tax Agreement (IFTA) , and International Registration Program 
(IRP). OSCAR is also the gateway for truckers to apply for oversize/
overweight permits, and it provides a link to the Department of Motor 
Vehicles for commercial driver's licenses.
    Finally, New York is working with other states, neighboring 
Canadian provinces, as well as Federal agencies to address the impacts 
of land border crossings on the movement of goods within our regional 
marketplace. We are particularly interested in making sure that the 
gains of faster travel and fewer tariffs are not lost to the needs of 
greater security. Transportation supports a global economy. Increased 
Federal support for infrastructure improvements at major ports of entry 
for trade and travel is critical to our Nation's ability to compete in 
the global economy. This includes the major seaports, airports and 
international border crossings that carry global trade to/from the U.S.
    In New York City, the impact of global trade is evident. JFK 
International Airport ranked first in the Nation in a 2004 ranking of 
all U.S. freight gateways with $125 billion in shipments. The Port 
Authority of New York and New Jersey (PANYNJ) handled 4.8 million TEUs 
(twenty foot equivalent units) in 2005--third-largest in the U.S. after 
Los Angeles and Long Beach. Of all the U.S. trade by vessel and air 
($1,773 billion), 16 percent ($283 billion) moves through the New York-
New Jersey region. This trade does not stay within the New York City 
metropolitan area. It travels throughout the region, the country and 
around the world. About half of the international cargo at PANYNJ 
originates from or is destined for locations beyond the 26 county 
PANYNJ region.
    Similarly, nearly one quarter of all U.S. Canadian trade (the 
largest bilateral trading relationship in the world) passes through New 
York State's northern and western ports of entry. Nearly 80 percent of 
this trade either originates in or is destined for states outside of 
New York.
    The Federal Government needs to bear a share in the cost of 
maintaining and improving transportation access through these 
facilities in relation to the benefits that accrue to the national 
economy. Localities should not be solely responsible for the cost of 
infrastructure at these ports of entry. While the direct impacts are 
local, much of the benefit of this trade is received elsewhere. Gateway 
projects can cost hundreds of millions, even billions of dollars. To 
expect states to fund these improvements through existing resources is 
unrealistic. There is a national role in funding national benefits.
Multi-State Freight Initiatives: The I-95 Corridor Coalition
    Freight has always been a multi-state enterprise and New York is 
fortunate to be able to collaborate with transportation agencies along 
the entire Eastern Seaboard on freight issues through the federally-
funded I-95 Corridor Coalition. New York was a founding member of the 
I-95 Corridor Coalition, a coalition of transportation agencies from 
Maine to Florida plus the Canadian provinces of Quebec and New 
Brunswick. The 15 states on the I-95 corridor also contain 40,000 
national highway system miles, 31,000 miles of rail lines, both freight 
and passenger, 46 major seaports, and 103 commercial airports.
    Population growth and economic growth have put an increasingly 
heavy burden on all modes of transportation. In response the I-95 
Corridor was formed, initially as a means of coordinating on 
intelligent transportation systems initiatives across states lines. It 
has evolved into an institution that ``provides a forum for key 
decision and policymakers to address transportation management and 
operations issues of common interest,'' with a high priority for 
relieving congestion on the region's highways by enhancing the 
capability of other modes to shoulder a greater share of freight 
movements in the region. The I-95 Coalition has undertaken a number of 
studies to assess capacity and performance of its highway, rail, and 
maritime modes. The Coalition is an excellent example of a coordinated 
effort to address the transportation challenges arising from increasing 
congestion and constrained capacity in a large region.
    Under the auspices of the I-95 Corridor Coalition all modes of 
transportation within the Corridor have been analyzed. These analyses 
include the following:

   Highway Bottlenecks Study--Analysis currently in progress 
        will identify the passenger and freight highway bottlenecks 
        that are most severely impacting regional, long-distance travel 
        in the Coalition region.

   Mid-Atlantic Truck Operations Study (MATOps)--Will provide a 
        detailed analysis of truck movements through the Mid-Atlantic 
        region and identify bottleneck/chokepoint locations that impede 
        the flow of truck traffic through the Mid-Atlantic region.

   Mid-Atlantic Rail Operations Study (MAROps)--An examination 
        of rail system performance through the Mid-Atlantic Rail 
        Operations Study (MAROps), involving five states (Delaware, 
        Maryland, New Jersey, Pennsylvania, and Virginia), and three 
        railroads (Amtrak, CSX Transportation, and Norfolk Southern).

   Northeast Rail Operations Study (NEROps)--The Coalition is 
        studying the rail network in New York and the New England 
        states (Maine, New Hampshire, Vermont, Massachusetts, 
        Connecticut, and Rhode Island). The NEROps study is describing 
        the current and future demand for freight and passenger rail 
        service in the region as well as examining the current and 
        planned supply of freight and passenger rail service.

   Southeast Rail Operations Study (SEROps)--The Southeast Rail 
        Operations Study (SEROps) is completing the rail picture in the 
        Coalition region by identifying and describing key rail issues, 
        activities, and initiatives as well as the trends and issues 
        affecting freight movements and freight and passenger rail 
        transportation in the Southeastern states (North Carolina, 
        South Carolina, Georgia, and Florida).

   Short-Sea and Coastal Shipping Options Study--Provided to 
        state DOTs and MPOs a better understanding of how short-sea 
        shipping fits within local, statewide, and regional 
        transportation systems. One of the key outcomes was a 
        preliminary identification of commodity types and general 
        traffic lanes that could be amenable to short-sea shipping 
        operations.

   The most substantial and notable of these analyses has been 
        the Mid-Atlantic Rail Operations Study (MAROps) The study 
        identified over 70 major rail choke points within the Mid-
        Atlantic rail system. These included:

     Antiquated and undersized bridges and tunnels.

     Lack of capacity on critical segments of freight and 
            passenger lines.

     Inadequate vertical clearances for double-stack 
            container traffic on freight mainlines.

     Inadequate connections between rail lines. Congested 
            grade crossings, stations, yards, and terminals.

     Outmoded and inadequate information and control 
            systems.

    The MAROps study defined a 20-year, $6.2 billion program of rail 
        improvements aimed at improving north-south rail transportation 
        for both passengers and freight in the Mid-Atlantic region and 
        helping reduce truck traffic on the region's overburdened 
        highway system. In a follow-up study in 2004, the benefits from 
        the MAROps program improvements were estimated at $12.8 
        billion--about a 2-to-1 benefit-cost ratio. The benefits 
        included:

     $2.9 billion in direct shipper benefits due to reduced 
            freight transportation costs;

     $6.3 billion in direct savings due to reduced highway 
            congestion for vehicles still on the road--$0.8 billion for 
            trucks, $0.7 billion for work-related auto trips, and $4.8 
            billion for non-work auto trips; and

     $3.7 billion in indirect economic benefits generated 
            throughout the economy by these transportation savings.
Other State Freight Initiatives
    In addition to these well-known initiatives, virtually every state 
is actively planning, organizing, collaborating and investing to make 
the freight system more efficient and productive. States are planning, 
organizing, collaborating, and investing.
    Planning--States such as Minnesota, Washington, Ohio, Oregon, 
California, New Jersey, Vermont, and Virginia have completed or 
initiated freight transportation to plans as a basis for establishing 
investment priorities.
    Organizing--A number of states have established a unit within their 
departments of transportation through which to develop and carry out a 
freight transportation program. They include Louisiana, Maryland, 
Maine, Pennsylvania, Minnesota, Washington, and Oregon.
    Collaborating--Because freight transportation operations and much 
freight transportation infrastructure lie in the private sector, states 
are initiating freight advisory committees to strengthen the link with 
government. They are well-established in Oregon, Colorado, and 
Minnesota and in the early stages in a number of other states.
    Investing--Florida, New York, Virginia, Mississippi, Pennsylvania, 
Oregon, and California have recently created or expanded freight 
financing programs that either focus on rail or are available for 
investments in all freight modes.
    States are acting to address the challenges of moving freight more 
efficiently, economically, and reliably, but our efforts do not 
aggregate into a national strategy and our resources are not sufficient 
to meet the national need.
AASHTO Policy Recommendations
    We need to move forward as a nation, but to do so with confidence 
we need a better map. The fact that we agree on the problem (i.e., that 
we have severe, costly, constraints on efficient freight movement) does 
not automatically yield a well-funded, strategic nationwide freight 
investment program. AASHTO's Bottom Line work has produced maps that 
show the most serious chokepoints for highway, rail, and port landside 
connections and corridors (maps attached). We need to consolidate this 
and other analyses into a fully-funded nationwide investment strategy 
that identifies and stages the investments that will produce the 
maximum benefit for the national system. This is no small task, but it 
should be undertaken now. A national strategy, involving Federal, 
state, and local Governors and the private sector requires a common 
national understanding to guide investment.
    In closing, I want to outline several of AASHTO's policy 
recommendations.
    Surface transportation investment needs to be increased to the 
levels required to keep the United States competitive in the global 
economy and meet America's 21st century mobility needs. It means 
increasing highway and transit funding toward the ``cost-to-improve'' 
goal estimated by the U.S. DOT. Expressed in ``year of expenditure 
dollars'' the 2025 goal for highways would be $242 billion per year and 
transit would be $49 billion per year.
    The only way those levels of funding can be achieved, is for all 
levels of government--Federal, state, and local--to continue to fund 
their historical shares of what is needed. Over the past decade the 
Federal Government has provided approximately 45 percent of highway and 
transit capital funding, while 55 percent has been provided by state 
and local governments. A significant increase in Highway Trust Fund 
revenues will be required to avert a major cutback in highway and 
transit funding, restore the program's purchasing power, and enable 
future improvements.
    AASHTO also supports an increase in Federal transportation funding 
assistance to states and their local governments through tax credit 
bonding. This mechanism could be particularly helpful new source of 
Federal revenue to allow states to make investments in rail passenger 
and freight improvements.
    AASHTO supports additional Federal Government financing for 
freight-related investments, including freight gateways, connectors, 
corridors, and border crossings. With state involvement, AASHTO also 
supports tax incentives for new investment in freight-rail 
infrastructure by rail companies, with state involvement, and funding 
to states for participation in public-benefit rail improvements.
    As a nation, we must ultimately transition to a diversified 
portfolio of Federal revenue sources. We must examine, analyze, and 
select alternative funding mechanisms to meet the financial needs of 
the Nation's transportation systems into the foreseeable future. A 
comprehensive, sustainable, diversified portfolio of Federal revenue is 
needed to address the diverse investment needs of the Nation's surface 
transportation system, i.e., its highways, transit systems, railroads, 
and ports.
    Because freight moves irrespective of local, state, and national 
borders the Federal Government should provide support for a multi-
state/regional investment mechanism to fund and finance improvements to 
regionally and nationally significant freight projects, where costs are 
in a single state, but benefits accrue to several states.
    The Federal Government should encourage the private sector to 
invest in operational and capacity improvements that can relieve 
freight bottlenecks and improve the flow of goods and services. The 
Federal Government should also provide support for state efforts to 
relieve critical freight chokepoints through investment in projects 
such as truck lanes and intermodal connectors.
    AASHTO's Board has also concluded that the states, in collaboration 
with the freight transportation industry and the Federal Government, 
should investigate the feasibility of regional adjustments in truck 
size and weight in particular corridors that demonstrate important 
economic benefits and meet safety, pavement/bridge impact and financing 
criteria.
    Given the realities of the current state of the Highway Trust Fund 
and the necessity to maintain and improve the existing infrastructure 
through the core programs currently authorized by SAFETEA-LU, revenues 
for major freight investments such as those identified above will 
necessarily be derived from sources other than the current fuel tax. We 
should calculate the value that freight transportation adds to the 
economy and devise means of tapping that value for the needed capital 
investment.
    Mr. Chairman, Members of the Committee, the importance of the 
subject you have under discussion today would be hard to exaggerate. It 
is in the interest of us all to take on the challenge as vigorously and 
effectively as we can. On behalf of the AASHTO member states, I promise 
that we will work with you in that effort.
                                 Charts

                                Freight Demand by Tons and Ton-Miles 2005 to 2035
----------------------------------------------------------------------------------------------------------------
                                                    2005             2015             2025             2035
----------------------------------------------------------------------------------------------------------------
Freight Tons
----------------------------------------------------------------------------------------------------------------
Air, truck, rail, and water                     15.3 Billion     19.0 Billion     23.0 Billion     29.0 Billion
Growth from 2005                                                        23.5%            50.1%            88.9%
----------------------------------------------------------------------------------------------------------------
Modal Shares of Tonnage
----------------------------------------------------------------------------------------------------------------
Air                                                     0.1%             0.1%             0.1%             0.1%
Other (pipeline, multiple modes)                        1.3%             1.3%             1.2%             1.1%
Water                                                   7.4%             7.0%             6.5%             6.0%
Rail                                                   14.2%            14.2%            13.5%            12.8%
Truck                                                  77.1%            77.4%            78.7%            80.1%
Total                                                 100.0%           100.0%           100.0%           100.0%
----------------------------------------------------------------------------------------------------------------
Freight Ton-Miles a
----------------------------------------------------------------------------------------------------------------
Air, truck, rail, and water                    5.84 Trillion    7.12 Trillion    8.70 Trillion   11.23 Trillion
Growth from 2005                                                          22%              49%              92%
----------------------------------------------------------------------------------------------------------------
Modal Shares of Ton-Miles
----------------------------------------------------------------------------------------------------------------
Air                                                     0.3%             0.3%             0.3%             0.3%
Other                                                   2.7%             2.7%             2.4%             2.0%
Water                                                  11.4%            10.6%             9.6%             8.4%
Rail                                                   25.1%            25.7%            25.1%            24.1%
Truck                                                  60.6%            60.7%            62.6%            65.2%
Total                                                 100.0%           100.0%           100.0%           100.0%
----------------------------------------------------------------------------------------------------------------
Source: Global Insight, Inc., TRANSEARCH 2004, with Global Insight economic forecasts.




                                 ______
                                 
   American Association of State Highway and Transportation Officials
Freight Transportation Policy
Basic Propositions
   Efficient and reliable freight transportation is critical 
        for global economic competitiveness and essential for domestic 
        economic prosperity and an improving quality of life.

   International trade as a percentage of the Nation's GDP has 
        doubled in the last two decades and will increase by at least 
        another 50 percent by 2020, adding to the volume of freight, 
        the distance of freight trips, and significant change and 
        volatility in origins and destinations of freight traffic.

   In recent years a number of ``red flag'' events have 
        demonstrated that the Nation's freight transportation system 
        requires immediate, sustained, and significant action.

   The infrastructure capacity--physical and operational--of 
        all modes of transportation has not expanded with increasing 
        demand and will fall far short of meeting future demands of 
        freight transportation.

   Substantial investment and improved operations by both 
        private business and government will be required to avert even 
        more severe capacity constraints.

   State and local transportation officials are confronted with 
        the challenge of providing infrastructure to address large and 
        shifting traffic increases generated by ports, inland terminals 
        and mega-distribution centers.

   States are central to the effort to strengthen the national 
        freight transportation system as a result of their ownership 
        and management of the highway system that carries the largest 
        portion of freight and makes the essential connections to the 
        other modes.

   States are increasingly engaged and active in response to 
        the freight transportation challenge and their efforts should 
        be strengthened and expanded.

   SAFETEA-LU contains a number of authorizations important for 
        freight transportation which should be implemented in a 
        coordinated and energetic fashion.

   Investment in the major elements of the freight 
        transportation system--highway, rail, port, waterway, and air--
        through current programs must be increased, but these programs 
        will not be sufficient to meet the need.

   New sources of revenue and new forms of financing must be 
        developed and deployed.

   The Federal Government should be responsible for the 
        ``national'' benefits share of investment resulting from trade 
        agreements, international ports, border crossings, major 
        national freight transportation gateways, and substantial 
        security requirements mandated for freight facilities.

   New forms of Public-Private and Public-Public Partnerships 
        will be needed to address challenges that do not conform to 
        government jurisdictions, geographic boundaries, or the 
        traditional dividing line between government and business.

   Plans and projects for freight transportation investments 
        must fully incorporate environmental, community-impact, land 
        use and energy considerations.

    Senator Lautenberg. Thank you very much, Ms. Glynn.
    Mr. Hamberger, your testimony, please.

     STATEMENT OF EDWARD R. HAMBERGER, PRESIDENT AND CEO, 
               ASSOCIATION OF AMERICAN RAILROADS

    Mr. Hamberger. Mr. Chairman, thank you, and Members of the 
Subcommittee, thank you for the opportunity to be here on 
behalf of the Association of American Railroads and our member 
rail companies.
    Before I begin, I'd just like to make three points outside 
of my prepared remarks, Mr. Chairman. Number one is--and I do 
this with great sensitivity--I need to correct your chart. We 
just got in the 2007 numbers. In 2007 freight railroads 
averaged 436 miles per gallon. That is to say, we on average 
moved one ton of freight 436 miles on one gallon of fuel. So I 
hate to disagree with the Chairman, but I thought that we 
better update the data.
    Senator Klobuchar. That's always a good way to start.
    [Laughter.]
    Mr. Hamberger. Yes. I was sitting here pondering what to 
do.
    Senator Lautenberg. Correcting the record is not uncommon 
around here.
    Mr. Hamberger. Number two, I would like to point out for 
the subcommittee, if you haven't gotten the news, that the UTU 
has notified me this morning that they did ratify the agreement 
with the freight railroads, so we now have over 95 percent of 
our employees with a contract and we're very pleased that over 
85 percent of UTU members have voted to ratify that contract.
    Third, while this is a hearing about freight, in my written 
testimony I touch on it, but I would be remiss with the House 
right now taking up the Amtrak authorization bill--at least I 
hope right now they're taking it up--and your leadership of 
this Committee has led to the passage of the Amtrak 
authorization bill.
    At $135 a barrel, this country has to take advantage of the 
inherent efficiency of steel wheel on the steel rail. It's 
efficient to get 436 miles per gallon on the freight side, but 
it's just as efficient on the passenger side. We need policies 
that provide enough capacity for both freight and passenger 
rail. I hope in the months and years to come we can talk more 
about that as well. But I've already used up half of my time.
    But anyway, if I can get back to the freight issue and the 
issue of this hearing. The National Surface Transportation 
Policy Commission did note in its recent report that congestion 
is affecting every mode of surface transportation for lengthy 
periods each day as a result of the mismatch between supply and 
demand of limited capacity.
    Freight railroads are not exempt from that assessment. 2006 
was the best year on record, 2007 the second best year on 
record in terms of commodities flowing over the freight rail 
system. Today we carry twice as much freight per route mile as 
we did in 1990. This has led to capacity constraints along the 
rail network and all forecasts project increases in demand. The 
Department of Transportation forecast is 88 percent by the year 
2035.
    To meet that demand, it is clear that we will have to 
invest in expanded capacity, we're going to have to do a number 
of things, and we've already begun doing those. One is hiring 
new employees, 11,000 more employees today than just 3 years 
ago. New technology has been deployed to increase capacity, 
including more sophisticated signaling systems, higher capacity 
freight cars, and more powerful locomotives. We've also entered 
into alliances with our customers and with each other to 
improve utilization and the efficiency of the freight flows.
    But ultimately, at the end of the day it all comes down to 
money. We are going to have to invest to expand capacity, and 
we've been doing that. Since 1980 the industry has spent $420 
billion on infrastructure and equipment. That includes 
maintaining and expanding the infrastructure. That is 40 cents 
out of each revenue dollar goes into capital expenditures or 
maintenance expenditures.
    To place that into perspective, each of the two largest 
freight rail companies spends more to maintain and improve 
their track and roadway than all but three of Secretary Glynn's 
members at AASHTO spend on their State highway programs. The 
next two largest railroads would be ranked in the top ten in 
comparison to what an individual State spends on its highway 
network.
    The ability of the railroads to continue investing 
obviously will depend upon their ability to make an adequate 
rate of return. As the Congressional Budget Office noted in its 
report 2 years ago, profits are key to increasing capacity 
because they provide both the incentive and the means to make 
those new investments.
    In order to meet the projected demand, Cambridge 
Systematics did a study for the Department of Transportation 
report which estimated that $148 billion will need to be spent 
on capacity expansion alone, not maintaining, not replacing, 
capacity expansion, between now and the year 2035, just to 
maintain the freight rail market share.
    The Cambridge Systematics report projects that all of that 
money will probably not be coming from the freight railroads. 
We believe that there is a role for government to play because 
of the public benefits of moving freight by rail. Those 
benefits include fuel utilization, less CO2 
emissions, and obviously congestion mitigation.
    Because of the public benefits, I would like to suggest a 
couple of policies that Congress may consider.
    Senator Lautenberg. Your full statement will be in the 
record and in order to move things along I would ask you if you 
have a few-second summary.
    Mr. Hamberger. I will wrap up very quickly, thank you, Mr. 
Chairman. One would be enactment of the infrastructure tax 
credit, which Senator Smith is a lead sponsor; enactment of the 
short line rail investment tax credit; encouragement of public-
private partnerships, such as the FAST Corridor, the Alameda 
Corridor; and four, do no harm, that is do not enact policies 
that would prevent railroads from earning the very money needed 
to invest at a time we need to invest it.
    Thank you and I apologize for running over.
    [The prepared statement of Mr. Hamberger follows:]

       Prepared Statement of Edward R. Hamberger, President and 
       Chief Executive Officer, Association of American Railroads
Introduction
    On behalf of the members of the Association of American Railroads 
(AAR), thank you for the opportunity to discuss strategies for 
efficient freight movement. AAR members account for 75 percent of U.S. 
freight railroad mileage operated, 92 percent of employees, and 95 
percent of revenue.
    Comprehensive, reliable, and cost-effective freight railroad 
service is critical to our Nation. Today, freight railroads account for 
more than 40 percent of U.S. intercity ton-miles--more than any other 
mode of transportation--and serve nearly every industrial, wholesale, 
retail, agricultural, and mineral-based sector of our economy. And in 
the words of the former Railways Adviser at the World Bank, ``Because 
of a market-based approach involving minimal government intervention, 
today's U.S. freight railroads add up to a network that, comparing the 
total cost to shippers and taxpayers, gives the world's most cost-
effective rail freight service.''
    Looking ahead, the United States cannot prosper in an increasingly-
competitive global marketplace if our freight is not delivered 
efficiently and cost effectively. Having adequate freight rail capacity 
is critical to this effort. Freight railroads must be able to both 
maintain their extensive existing infrastructure and equipment and 
build the substantial new capacity that will be required to transport 
the significant additional traffic our economy will generate.
    I respectfully suggest that Members of this Committee, your 
colleagues in Congress, and other policymakers have critical roles to 
play. Indeed, a primary obligation of policymakers is to take steps 
that assist--and, just as importantly, not take steps that hinder--
railroads in making the investments needed to provide the current and 
future freight transportation capacity our Nation requires.
Capacity is a Challenge Everywhere in Transportation, Including on 
        Railroads
    As the National Surface Transportation Policy and Revenue Study 
Commission noted in a recent report, ``Congestion [is affecting] every 
mode of surface transportation for ever-lengthening periods each day, 
as a result of the mismatch between demand and supply of limited 
capacity.'' \1\
---------------------------------------------------------------------------
    \1\ Report of the National Surface Transportation Policy and 
Revenue Study Commission, Volume 1, p. 4.
---------------------------------------------------------------------------
    To be sure, there is a tremendous amount of strength and 
flexibility in our Nation's transportation systems, and the freight is 
still being delivered by all of the modes. But it is clear that all 
freight transportation modes are facing capacity challenges today.
    Freight railroads face capacity challenges thanks largely to 
substantial and sustained increases in rail traffic. From 1990 to 2007, 
Class I tons originated rose 36 percent, carloads originated rose 47 
percent, and revenue ton-miles rose 71 percent. In each successive year 
from 1998 through 2006, Class I railroads originated more tons than 
ever before. Growth in intermodal traffic--truck trailers and shipping 
containers traveling on rail cars has been especially rapid. Beginning 
with the second quarter of 2002, U.S. rail intermodal traffic rose for 
20 consecutive quarters, sometimes by double-digit amounts compared 
with the same period in the previous year.



    There was a slight decline in rail traffic in 2007, due mainly to 
the severe problems in the housing and automotive sectors. Even so, 
railroads operating in the United States moved more freight in 2007 
than in any previous year except 2006.


    As a result of these substantial traffic increases, average freight 
rail traffic density has increased sharply. Just from 1990 to 2007, 
Class I car-miles per mile of track owned rose approximately 82 
percent; revenue ton-miles per mile of road owned rose some 118 
percent.
    The increase in traffic and traffic density have led to capacity 
constraints on some rail corridors and points on the rail network. 
Railroads may differ in the degree to which their capacity is 
constrained, but there is no question that there is much less room on 
the U.S. rail network today than there was even a few years ago.
    In recent years, solid growth in the economy (the current slowdown 
notwithstanding) and population, improved rail service offerings, 
expanding international trade, increasingly-congested highways, sharply 
higher fuel prices, and other factors have pushed more and more freight 
to railroads. Even when taking into account the current lessened 
traffic demand due to the present economic conditions, analysts 
generally expect market forces to continue to encourage more freight to 
move by rail in the years ahead.
    As a result, the long-term forecast is for freight rail traffic to 
trend steadily higher. For example, Global Insight recently projected a 
28 percent increase in U.S. freight rail tonnage from 2006 through 
2018. The U.S. Department of Transportation recently forecast that 
freight railroad demand will rise 88 percent by 2035. If the increase 
in rail traffic in the 15 years following 2007 simply matches the rate 
of growth over the comparable period prior to 2007, by 2021 Class I 
carriers will be originating more than 41 million carloads--up from 
31.5 million in 2006.


    The magnitude of the looming freight rail capacity issue was also 
borne out by a recent study by Cambridge Systematics, a prominent 
economic and transportation consulting firm. The purpose of the study, 
which focused on 52,000 miles of primary rail corridors, was to 
estimate the cost of the expansion in capacity necessary for U.S. 
freight railroads to handle the 88 percent increase in freight rail 
traffic forecast by the DOT for 2035, assuming no gain in rail's market 
share of intercity freight movements.
    The study found that if rail capacity needs are not properly 
addressed, by 2035 some 16,000 miles of primary rail corridors--nearly 
one-third of the 52,000 miles covered in the study--will be so 
congested that train flows would be unstable and congestion and service 
delays would be persistent and substantial. Because the rail system is 
so interconnected, this outcome would mean that the entire U.S. freight 
rail system would become, in effect, disabled.



    The significance of the network aspects of rail operations cannot 
be overemphasized. As rail lines are operated at or near full capacity, 
efficiency (including operational predictability) becomes more 
critical. Service disruptions caused by inefficient asset utilization 
can have impacts not only on the railroad involved but potentially 
throughout the entire rail network.
    All of this means that the characteristics of the U.S. freight 
railroad industry today are significantly different than they were in 
the past, when traffic levels were much lower and capacity was rarely 
an issue. The rail network faces capacity challenges now and could face 
a capacity crisis in the future if the necessary investments are not 
made. Looking ahead, as their traffic continues to grow, railroads will 
increasingly need to concentrate on building new capacity and finding 
ways to better utilize their existing capacity--while continuing to 
maintain existing capacity at high standards.
Railroad Networks Are Extremely Complex to Plan and Operate
    In 2006 (the most recent year for which data are available), the 
approximately 560 U.S. freight railroads originated 36.5 million 
carloads of freight--equal to approximately 100,000 carloads, on 
average, every day of the year. Each day, dozens of different types of 
freight cars are used to haul a huge variety of products between 
thousands of different origin and destination pairs on journeys that 
might be only a mile or two--or could cover several thousand miles.\2\
---------------------------------------------------------------------------
    \2\ Rail traffic is not uniformly distributed each day, so on some 
days considerably more than 100,000 carloads are originated. In fact, 
the carloadings on the heaviest business day of the busiest season may 
exceed by 40 percent those of the lightest business day of the lightest 
season. The variance is caused in roughly equal parts by seasonal 
demand and the five-day work week of most rail customers. These demand 
variations have a significant impact on rail capacity requirements.
---------------------------------------------------------------------------
    And unlike other network industries which transmit fungible 
products (e.g., electricity is the same, no matter who generates it) or 
products that can readily be routed to particular customers using 
automated equipment (e.g., electronic signals for telecommunications), 
railroads must move specific railcars carrying specific commodities 
from specific origins to specific locations. Railroads can accomplish 
this only because they devote enormous resources to plan and operate 
their networks to meet their customers' needs safely and efficiently.
Different Train Types Create Different Demands on the Rail Network
    Managing the current and future use of rail network capacity is an 
extraordinarily complex process that involves a wide variety of 
elements. These include current and expected traffic volumes; the types 
of trains to be moved (e.g., unit trains vs. manifest trains, passenger 
trains vs. freight trains, etc.), their speed, and priority status; the 
quantity and quality of available assets; the availability of funds for 
new investments; pertinent laws and regulations; and much more. 
Sophisticated analytical processes (e.g., advanced computer modeling) 
help railroads understand and incorporate many of these factors into 
rail decisionmaking. No computer program, though, is sophisticated 
enough to incorporate everything that could impact how well a rail 
network runs at any point in time. Thus, railroads depend critically on 
the experiences and judgment of their employees.
    The mix of train types determines the speed and spacing of trains 
on a track. All else equal, a corridor that serves a single type of 
train can usually accommodate more trains per day than a corridor that 
serves a mix of train types. Trains of a single type can be operated at 
similar speeds and with more uniform spacing between the trains, in 
part because they have similar braking and acceleration capabilities. 
This increases the total number of trains that can operate over a track 
segment each day. When trains of different types--each with different 
length, speed, and braking characteristics--share a track segment, 
greater spacing is required to ensure safe braking distances and 
accommodate different acceleration rates. As a result, the average 
speed drops and the total number of trains that can travel over the 
corridor is reduced.
    Moreover, different train types and customer segments have 
different service requirements. For example, premium intermodal 
movements demand high levels of delivery reliability, timeliness, and 
speed; bulk trains (e.g., coal or grain unit trains) may need 
consistent, managed service with coordinated pick-up and delivery, but 
high transit speed is often less important; customers who own or manage 
their own fleet of freight cars may require railroads to undertake 
network strategies which help them minimize these costs, such as 
maximizing the number of annual loaded trips rail cars make; passenger 
trains require high speed and reliability within a very specific time 
window; and so on. In addition, a railroad must be able to move empty 
freight cars through the network in a manner which positions them to 
provide service based on continually-changing levels of customer 
demand.
    The extent to which all of these sometimes-conflicting demands seek 
to use the same portions of the rail network defines the complexity of 
the management problem. The more complex the demand base, the greater 
the mixture of differing train types; the more complex network 
management will be; and the greater the required capacity investment.
Rail Network Planning
    Like firms in every other industry, railroads have limited 
resources. Their ability to meet customer requirements is constrained 
by the extent and location of their infrastructure (both track and 
terminal facilities); by the availability of appropriate equipment and 
employees where they are needed; and by the availability of funds 
necessary to augment what they already have. The constraints railroads 
face--particularly those involving their physical network--cannot be 
changed quickly. It can take a year or more for locomotives and freight 
cars to be delivered following their order; 6 months or more to hire, 
train, and qualify new employees; and several years to plan, permit, 
and build new infrastructure.\3\
---------------------------------------------------------------------------
    \3\ Railroads typically have a number of projects far enough along 
in the planning process that construction can be initiated quickly if 
funding become available.
---------------------------------------------------------------------------
    In light of these factors and many more, railroads must design 
effective operating plans that meet customer requirements within the 
confines of the physical constraints they face.
    The complexity of such a plan is enormous. For example, it must 
incorporate the differing types of demand placed on various portions of 
a network, as well as the changes in that demand. Sometimes these 
changes evolve over several (or more) years and are based on changes in 
underlying markets--e.g., the emergence of the Powder River Basin as 
the premiere source of domestic coal, the growth of imported goods from 
the West Coast, or the development of ethanol markets. At other times, 
these changes are relatively sudden--brought on, for example, by 
natural events (e.g., floods or hurricanes), economic factors (e.g., 
export surges due to a weaker dollar), or the loss or gain of traffic 
flows of a major customer or group of customers through plant openings 
or closings or the competitive bidding process. Sometimes these changes 
can be foreseen; at other times, they are wholly unexpected.
    A railroad's operating plan must allocate this demand across a 
network that has terminal processing constraints (e.g., the number of 
yard tracks, locomotive facilities, configuration, etc.); line-haul 
capacity constraints (e.g., number of main tracks and crossover points 
between them; location and frequency of sidings; types of signaling 
systems; speed limits; connections with other routes; etc.); locomotive 
availability (e.g., the number, their horsepower, availability of 
support facilities for fueling and maintenance, etc.); and employee 
constraints (e.g., number, location, crew support facilities, equipment 
maintenance and servicing personnel, etc.).
    On every major railroad, all of these factors must be combined to 
develop a plan to move traffic safely and efficiently 24 hours per day, 
every day of the year.
    Sophisticated computer models are available to assist in the 
network planning process. However, these simulation results must be 
interpreted and validated by knowledgeable railroad personnel who use 
their judgment and experience as to what works and what does not.
    Because of its complexity, the development of a new network 
operating plan to accommodate substantially-changed conditions 
typically takes months or years, not days or weeks. (However, 
refinement of an existing plan is a continuous improvement process.) In 
essence, the overall planning process must create a number of ``mini 
plans'' for each of the various train types (such as premium 
intermodal, international intermodal, coal, grain, other bulk, 
automotive, manifest, local, passenger, etc.) that overlay and share 
the physical network. Each network use plan also attempts to bring 
resolution to the thousands of competing customer interests that make 
daily use of the railroad resources.
Managing an Operating Plan
    Implementing and managing an operating plan in the field is also 
challenging. When dealing with networks of this complexity, even the 
best plans will have gaps that must be filled with the managerial 
experience of knowledgeable personnel. Moreover, the operating 
situation is always fluid--day-to-day fluctuations in volume, weather, 
crew and equipment availability, and more can have an enormous impact 
on the ability of a railroad to manage to the dictates of its operating 
plan. Even in the best operation, trains may be late (or early), 
customers may not release cars on time, bad weather may ensue, grade 
crossing accidents may happen, and delays may occur.
    Although operating plans often build in some flexibility, where 
possible, to accommodate these variances, no plan can either predict or 
accommodate all eventualities for all portions of a rail network. 
Moreover, accommodation is much more difficult when capacity is 
constrained. In fact, when capacity is tight, disruptive incidents are 
more common and recovery takes longer than when the network is not 
fully utilized. And because the rail system truly is a network, 
disruptions in one portion of the system can quickly spread to distant 
points.\4\
---------------------------------------------------------------------------
    \4\ Unlike airline networks, where the period after midnight can 
usually be used to recover from the previous day's problems, a rail 
network operates 24 hours a day. Thus, incident recovery must be 
accomplished while current operations are ongoing.
---------------------------------------------------------------------------
    The need for safe operations trumps everything else, and proper 
line maintenance is essential for safe rail operations. However, the 
need for maintenance adds still another level of complexity to rail 
planning. In fact, because of higher rail volumes and a trend toward 
heavier loaded freight cars, the maintenance of the rail network has 
become even more important. Railroads have no desire to return to the 
days when maintenance ``slow orders'' (speed restrictions below the 
track's normal speed limit) were one of the most common causes of delay 
on the rail network. That's why one of the most important parts of any 
railroad operating plan is the accompanying maintenance plan with which 
it is integrated, and minimizing the impact of maintenance disruptions 
on rail operations is one of the major reasons for the additional main 
track capacity that is being added to the rail network today.
    Terminals and their operation are another key consideration for 
preserving fluidity in a rail network. A train may operate without 
delay over a segment of main line. However, if it cannot enter a 
terminal due to congestion, then it must remain out on the main line or 
in a siding where it could block or delay other traffic. The ability of 
a terminal to hold trains when necessary and to process them quickly is 
one of the key elements in preventing congestion and relieving it when 
it does occur. Thus, one of the most important factors in increasing 
capacity for the rail network is enhancing the fluidity of terminals.
    Unfortunately, terminals are often one of the more difficult areas 
in which to add capacity. They are frequently in, or near, urban areas. 
Expansion generally means high land and, potentially, high mitigation 
costs. And as discussed further below, even in less urban areas, a rail 
terminal is rarely considered positive by nearby residents, and its 
development or expansion to accommodate freight capacity growth is 
usually the subject of intense debate.
Four-Stage Railroad Capacity Upgrade Process
    Railroads typically have four stages in the process of upgrading 
their capacity. They are explained sequentially below, but in actual 
practice tend to be used in parallel:

        1. Identify and implement process changes that can enhance 
        capacity. This includes a wide variety of steps, such as 
        redesigning the railroad's transportation and operation plans 
        (described above); redesigning, negotiating, and implementing 
        new interchange plans with connecting railroads; redesigning 
        yard and terminal operations; working with customers to improve 
        their inbound or outbound flow processes; changing a 
        maintenance plan; redesigning the process utilized to inspect 
        and maintain equipment, rethinking and implementing new freight 
        car distribution strategies; and redeploying locomotives for 
        more effective utilization.

        Some of these process improvements can be designed and 
        implemented in weeks or months. Others may require a year or 
        more.

        2. Develop and deploy improved information technology and 
        processes for utilizing that technology. This includes 
        improvements in such areas as dispatching and control systems; 
        terminal management systems; maintenance planning systems; 
        transportation planning systems; work assignments; locomotive 
        and freight car monitoring; track defect identification and 
        diagnostic systems; and locomotive maintenance management 
        systems. Some of these improvements too can be implemented in 
        only a few months, while others are more complex and may take 
        several years to develop and implement.

        3. Acquire and deploy assets that can be used ``flexibly.'' 
        This includes assets such as locomotives, freight cars, and 
        higher-capacity maintenance machinery. These items are not 
        restricted to any particular portion of the rail network, but 
        can be deployed where and when needed. Trained employees are 
        perhaps the most important of the ``flexible'' assets. 
        Equipment usually requires at least 6 months to acquire, often 
        after many additional months of planning and design; employees 
        usually require at least 6 months to train.

        4. Adding more infrastructure, or ``iron in the ground.'' This 
        represents long-term assets that, once in place, cannot be 
        redeployed elsewhere. Usually, they take at least 1 year to 
        deploy, and frequently take three to 10 years to plan, design, 
        permit, and build.

        These include projects such as main line capacity additions 
        (e.g., new main tracks, sidings, and signal systems); new 
        terminal capacity (e.g., intermodal and automotive terminals, 
        freight classification yards, locomotive and freight equipment 
        repair and servicing facilities); large scale upgrades of choke 
        points in urban areas (such as the Alameda Corridor and the 
        series of Kansas City ``flyover'' projects); new customer 
        access routes; major bridge additions or rebuilds; improving 
        tunnel clearances; and improvements in connectivity between 
        different portions of the rail network.
Railroads Are Working on a Variety of Fronts to Increase Capacity
    Railroads are committed to working to meet present and projected 
transportation demands by addressing the host of factors that influence 
the fluidity and resiliency of their operations, as well as the 
operations over the entire rail network. Examples of the railroads' 
efforts are described below.
Spending on Infrastructure and Equipment
    Of the many different factors that affect how well a rail network 
functions, the basic amount and quality of infrastructure and equipment 
are among the most significant. For this reason, U.S. freight railroads 
have been expending, and will continue to expend, enormous resources to 
improve their asset base. In fact, rail spending for these purposes has 
never been higher than in recent years, demonstrating the diligence 
with which railroads are responding to the capacity issue.


    Class I capital spending in 2007 was $9.2 billion. In 2003, by 
contrast, Class I capital spending was $5.9 billion. In addition, in 
recent years substantially higher percentages of rail investments have 
been directed to expanding capacity. If maintenance expenses are 
included in addition to capital spending, from 1980 through 2007, U.S. 
freight railroads have invested approximately $420 billion--more than 
40 cents out of every revenue dollar. In 2006 and 2007, Class I 
railroads alone devoted more than $19 billion per year to these 
purposes.


    The following is just a sampling of the diverse types of capacity-
enhancing investments individual Class I railroads have recently made 
or will soon be making:

   BNSF plans a $2.45 billion capital commitment program for 
        2008, including leasing 200 locomotives at a cost of around 
        $400 million and $200 million in track and facility expansion. 
        The 2008 capacity expansion program comes after a record 
        capacity expansion program in 2007. Major 2008 capacity 
        expansion programs include continuing to double- or triple-
        track the Southern Transcon route, including a second main line 
        across Abo Canyon in New Mexico; continuing to install double-
        track on a major coal route in Nebraska and Wyoming; expanding 
        intermodal facilities in Kansas City, Los Angeles, and Memphis; 
        and adding sidings between Fort Worth and Houston.

   Canadian National plans capital spending of around $1.5 
        billion in 2008, including approximately $1.1 billion on track 
        infrastructure, $140 million on equipment, and approximately 
        $250 million on transload facilities and distribution centers 
        to grow the business. More than $300 million in rail 
        infrastructure projects will be in the United States. Among 
        many other projects, CN plans to complete the multi-year $100 
        million upgrade of the Johnston Yard in Memphis.

   Canadian Pacific plans capital spending of $885 million to 
        $895 million in 2008, about equal to what the railroad spent in 
        2007. Funds will go to freight cars, locomotives, track 
        renewal, and other key areas.

   CSX plans $5 billion in capital spending from 2008 to 2010. 
        The railroad plans to spend some $200 million each year for the 
        next 3 years on new locomotives and more than $100 million per 
        year on freight cars, mainly for coal and automotive traffic. 
        Infrastructure projects include terminal expansions in Atlanta, 
        Buffalo, Charlotte, and Jacksonville, as well as a new 
        intermodal terminal in northwest Ohio.

   Kansas City Southern plans capital expenditures of 
        approximately $500 million in 2008. KCS also plans to spend 
        about $65 million to buy 30 new locomotives for U.S. 
        operations.

   Norfolk Southern plans to spend, in 2008, approximately $1.5 
        billion on capital investments (an increase of $148 million, or 
        11 percent, over 2007). Investments in 2008 will include a new 
        locomotives and freight cars; the construction or expansion of 
        facilities in Columbus and Maple Heights, Ohio; and major 
        investments in expansion projects related to the Heartland 
        Corridor (from the East Coast to the Midwest) and the Crescent 
        Corridor (which will link the Northeast, Mid-Atlantic, and 
        Central Southeast).

   Union Pacific plans to invest a total of $3.1 billion for 
        capital projects in 2008. Major investment categories include 
        $840 million to increase network and terminal capacity, 
        especially on coal, ethanol, and intermodal routes and in the 
        Houston region. UP also plans to invest $1.6 billion to 
        maintain and strengthen track infrastructure; $490 million to 
        upgrade the locomotive and freight car fleet, including the 
        acquisition of 175 high-horsepower locomotives and new covered 
        hoppers; and $170 million to upgrade information technology 
        systems.

    The massive investments railroads must make in their systems 
reflect their extreme capital intensity. Railroads are at or near the 
top among all U.S. industries in terms of capital intensity. In fact, 
from 1997 to 2006 (the most recent year for which data are available), 
the average U.S. manufacturer spent 3 percent of revenue on capital 
expenditures. The comparable figure for U.S. freight railroads was 17 
percent, or more than five times higher. Likewise, in 2006, railroad 
net investment in plant and equipment per employee was $662,000--nearly 
eight times the average for all U.S. manufacturing ($84,000).



    As a further illustration of the magnitude of rail infrastructure 
spending, the four largest Class I railroads spend far more on capital 
outlays and maintenance of track and roadway than the vast majority of 
state highway agencies spend on their respective highway networks. For 
example, only the highway agencies of Texas, Florida, and California 
spend more on roadway capital and maintenance than Union Pacific and 
BNSF each spend on their networks. CSX and Norfolk Southern are in the 
top ten compared with all states.



Hiring New Employees
    In addition to equipment and infrastructure, personnel are a key 
determinant of rail capacity, and railroads have been aggressively 
hiring and training new employees. Class I railroads had 11,000 more 
employees in December 2007 than in December 2003, when the industry 
began to reverse a decades-long trend of fewer employees. The number of 
``train and engine'' employees--mainly engineers and conductors who 
operate trains--was up 11 percent during this period, the number of 
maintenance of track and structures employees was up 5 percent, and the 
number of maintenance of equipment employees was up 7 percent.



Infusion of Technology
    Technology has always played a key role in expanding rail capacity. 
Signaling systems have become more sophisticated; trains have become 
longer and heavier; locomotives have become more powerful and more 
reliable; and track structures have become more robust and thus less 
prone to outages for maintenance or because of failure.
    Freight railroads have always been at the forefront in the use of 
computers and information technology, and today railroads are rapidly 
expanding their use of these technologies to improve overall efficiency 
and the fluidity of their operations, thereby adding capacity without 
adding more infrastructure.
    For example, railroads use advanced computer modeling software in a 
wide variety of rail applications, from automating rail grinding 
schedules and improving customer demand forecasting to optimizing yard 
operations. CN, for example, is implementing what it calls 
``SmartYard,'' complex computer software that identifies and analyzes 
every possible combination and outcome for sequencing cars in a large 
classification yard and simultaneously updates and communicates the car 
processing plan. The result is more efficient, faster yard operations. 
Other railroads are engaged in similar efforts.
    Recognizing that another way to add capacity is to move more trains 
faster over the same length of track, railroads are also working with 
their suppliers to design, implement, and improve innovative 
computerized ``trip planning'' systems. These highly-complex systems 
automatically incorporate and analyze a mix of ever-changing variables 
(e.g., crew and locomotive availability, terminal congestion, the 
different priority status of loads of freight, track conditions, 
maintenance plans, weather, etc.) to optimize how and when cars are 
assembled to form trains, when those trains depart, and how they are 
sequenced across the railroad in conjunction with the other trains that 
are operating.
    Trip-planning systems, electronically-controlled pneumatic (ECP) 
brakes, train control systems, heavy-axle load research, and advanced 
rail car and track defect detector systems are just a few of the many 
technological tools that railroads are using to improve equipment 
``cycle time''--i.e., the total time it takes for a freight car to be 
loaded, hauled to destination, unloaded, returned to the same or a 
different shipper, and loaded again. These tools also increase the 
capacity of rail mainlines by allowing more precise braking, reducing 
the number of rail cars required to move a given amount of freight, and 
dramatically decreasing train delays due to equipment or track 
maintenance problems.
    The benefits of increased efficiency can be seen through the 
results of rail efforts to ``supersize,'' automate, and increase the 
velocity of traffic flows where practical. For example, railroads have 
offered trainload service to grain customers who have built high-speed 
``shuttle loader'' elevators, which dramatically improve the efficiency 
of transporting grain by rail. At BNSF, for example, a typical grain 
car in shuttle service hauls approximately three times as much grain 
over the course of a year as a car in non-shuttle service.
    Expanded over a network, this type of operational efficiency can 
free up substantial capacity for other uses. Union Pacific, for 
example, has estimated that a one mile-per-hour increase in system-wide 
velocity frees approximately 250 locomotives, 5,000 freight cars, and 
180 train and engine employees to move additional traffic.
Cooperative Alliances and Collaborations
    Railroads are also entering into cooperative alliances with each 
other and with their customers to improve capacity utilization, lower 
costs, and improve service.
    As just one example, in October 2007, Norfolk Southern and Union 
Pacific announced new westbound intermodal train service that will 
shorten by a day the trip for standard intermodal freight from the 
southeastern United States to Los Angeles. This shift began with the 
completion of the first phase of improvements on the Meridian 
Speedway--Norfolk Southern's and Kansas City Southern's joint venture 
corridor between Meridian, Mississippi, and Shreveport, Louisiana. In 
establishing this route, the railroads shortened the trip length by 130 
miles compared to moving freight via the Memphis gateway.
Challenges to Freight Mobility and Capacity Expansion
    The preceding section details many of the ways that railroads are 
diligently addressing the capacity issue. However, there are a number 
of serious impediments to meeting the rail capacity challenge which in 
many cases have prevented, delayed, or significantly increased the 
expense of realizing the desired capacity improvements.
    The National Surface Transportation Policy and Revenue Study 
Commission, in its final report released in January 2008, stated that, 
``Simply put, the Commission believes that it takes too long and costs 
too much to deliver transportation projects, and that waste due to 
delay in the form of administrative and planning costs, inflation, and 
lost opportunities for alternative use of the capital hinder us from 
achieving the very goals our communities set.'' \5\ The Commission's 
point often applies to rail infrastructure expansion projects, 
including projects that involve little or no public financial 
participation.
---------------------------------------------------------------------------
    \5\ Report of the National Surface Transportation Policy and 
Revenue Study Commission, Volume 1, page 11.
---------------------------------------------------------------------------
    Under existing law, a comprehensive regulatory regime preempts 
state and local regulations (with the exception of local health and 
safety regulations) that unreasonably interfere with railroad 
operations. Moreover, detailed environmental reviews, when required, 
identify the impacts of railroad infrastructure projects and determine 
necessary mitigation measures.
    Nevertheless, often some members of the affected local communities 
still oppose many rail expansion projects, and their opposition tends 
to be quite vocal and sophisticated. Trains do make noise, rail 
operations may at times be disruptive to those who live or work nearby, 
and the regional or national benefits of rail freight service are often 
not readily apparent to, or deemed important by, the local population. 
Even those who recognize the benefits of rail freight service may 
prefer that railroads run their trains near somebody else's building or 
through some other town. In many cases, railroads face a classic ``not-
in-my-backyard'' problem.
    In the face of local opposition, railroads try to work with the 
local community to find a mutually satisfactory arrangement. These 
efforts are usually successful. When agreement is not reached, however, 
projects can face seemingly interminable delays and higher costs. For 
example, Norfolk Southern had to endure almost 5 years of delay and 
uncertainty before it was allowed to construct and begin operating its 
terminal in Austell, Georgia, needed to handle rapidly-increasing 
intermodal traffic within the region. More recently, Union Pacific 
continues to suffer delays in double-tracking its Sunset Corridor in 
Arizona due to issues with a state agency.
    Often, local communities allege violations of environmental 
requirements to challenge the proposed project. Railroads understand 
the goals of environmental laws, and appreciate the need to be 
responsive to community concerns, but community opposition to rail 
operations can serve as a significant obstacle to railroad 
infrastructure investments, even when the opposition has no legal 
basis.
    These types of delays can have significant negative affects on the 
costs of rail projects, and, in turn, the ability of railroads to 
respond to service requests. Based on railroad cost index data from the 
AAR, just in the 5-years from the first quarter of 2003 through the 
first quarter of 2008, railroad wage rates rose 15 percent, wage 
supplements (fringe benefits, such as health insurance for employees) 
rose 11 percent, and the cost of materials and supplies (which includes 
such items as rail, crossties, and ballast) rose 52 percent.
    Railroads will continue to advocate that the time required for 
these review processes be shortened without adversely affecting the 
quality of that result, but until that happens, rail expansion projects 
will often be delayed unnecessarily.
Today's Earnings Pay for Tomorrow's Capacity
    As described above, the railroads are diligently doing everything 
they believe to be prudent to maintain and expand their capacity to 
provide service, including committing record levels of investment.
    However, it is important to note that because U.S. freight 
railroads are overwhelmingly privately owned and must finance the vast 
majority of their infrastructure spending themselves, capacity 
investments are accompanied by substantial financial risk. As the 
Government Accountability Office noted in a recent report, ``Rail 
investment involves private companies taking a substantial risk which 
becomes a fixed cost on their balance sheets, one on which they are 
accountable to stockholders and for which they must make capital 
charges year in and year out for the life of the investment.'' \6\ 
Accordingly, railroad capacity investments must pass appropriate 
internal railroad investment hurdles--i.e., the investments will be 
made only if they are expected to generate an adequate return.
---------------------------------------------------------------------------
    \6\ Government Accountability Office, Freight Railroads: Industry 
Health Has Improved, but Concerns About Competition and Capacity Should 
Be Addressed, October 2006, p. 56.
---------------------------------------------------------------------------
    For this reason, adequate rail earnings are critical for capacity 
investment. As the Congressional Budget Office (CBO) has noted, ``As 
demand increases, the railroads' ability to generate profits from which 
to finance new investments will be critical. Profits are key to 
increasing capacity because they provide both the incentives and the 
means to make new investments.'' \7\ If a railroad is not financially 
sustainable over the long term, it will not be able to make capacity 
investments to maintain its existing network in a condition to meet 
reasonable transportation demand, or make additional investments in the 
replacement or expansion of infrastructure required by growing demand.
---------------------------------------------------------------------------
    \7\ Congressional Budget Office, Freight Rail Transportation: Long-
Term Issues, January 2006, p. 11.
---------------------------------------------------------------------------
    To be sure, railroads in recent years have achieved financial 
results that are much better than their results since the 1970s. In 
2006, U.S. railroads carried more freight than ever before, and their 
net income was higher than ever before as well. The railroads enjoyed 
relatively good financial results in 2007 as well.
    But these financial results need to be kept in context. Statements 
about railroads' ``record profits'' often ignore the fact that rail 
profitability in earlier years was relatively poor. Thus, an 
improvement from earlier years may be a ``record,'' yet still fall 
short of the earnings achieved by most of the other industries against 
which railroads compete for capital. In fact, that is the case with the 
rail industry. Rail industry profitability has consistently lagged most 
other industries--and that is still the case today.
    Return on equity (ROE) is a common profitability measure. According 
to data compiled by Value Line (a financial information firm), the ROE 
for the U.S. freight rail industry in 2006 was 14.0 percent--possibly 
the best ROE it has ever had. (Value Line's railroad universe includes 
BNSF, CSX, CN, CP, KCS, NS, UP, and Genesee & Wyoming.) By contrast, 
the median ROE in 2006 for the 89 industries (encompassing around 1,700 
firms) for which Value Line calculates ROE was 16.2 percent--16 percent 
higher than the rail figure. In fact, in 2006 railroads ranked tied for 
57th among the 89 industries for which Value Line calculates ROE. Value 
Line data for 2007 indicate that the railroad median (14.0 percent) 
again fell well short of the median for all industries (15.8 percent).



    In other words, while recent years may have been the best financial 
years ever for railroads, they have not been sufficient to bring 
railroads even to the mid-point among all industries, and the need for 
financial sustainability is as pronounced today as ever before--
especially in view of the projected investment requirements the 
industry will be facing.
    According to the Cambridge Systematics study noted earlier, an 
investment of $148 billion in 2007 dollars (of which $135 billion is 
for Class I railroads) will be necessary for rail infrastructure 
expansion to keep pace with economic growth, meet the DOT's forecast 
demand, and maintain (but not grow) rail's current market share. That 
expenditure is in addition to the hundreds of billions of dollars 
necessary over this period to maintain and replace existing rail 
infrastructure, and to maintain and replace locomotives, freight cars, 
and other equipment.
    Class I railroads are anticipated to be able to generate (through 
earnings growth from the additional traffic and productivity gains) 
only $96 billion of the $135 billion needed for new capacity identified 
by the Cambridge Systematics study. That leaves a funding shortfall 
that could be covered by tax incentives for rail infrastructure 
investments, public-private partnerships, or other means.
    Railroads will continue to spend significant amounts of their own 
funds to address the capacity challenges described above. However, they 
are, and will continue to be, unable to pay for all of the capacity 
that would be required to serve all shippers' needs all of the time. 
Since the amount of rail capital available for investment is limited, 
investment decisions in these circumstances focus on which investments 
to choose between, rather than solely whether a specific investment 
should be made. In such cases, those investment decisions should be 
based on projected returns that will most favor the long-term 
sustainability of the rail network.
Public Involvement in Freight Rail Infrastructure Investment
    Freight railroads will continue to spend massive amounts to improve 
and maintain their systems. But even with their improved financial 
performance, funding constraints will likely prevent railroads from 
meeting optimal future rail infrastructure investment needs entirely on 
their own. This funding shortfall means that many rail projects that 
would otherwise expand capacity and improve the ability of our Nation's 
farms, mines, and factories to move their goods to market; speed the 
flow of international trade; relieve highway congestion; reduce 
pollution; lower highway costs; save fuel; and enhance safety will be 
delayed--or never made at all.
    I respectfully suggest that it is in our Nation's best interest to 
ensure that optimal freight railroad capacity enhancements are made. 
Policymakers can help address the rail capacity funding gap in several 
ways:

   Rail Infrastructure Tax Incentives. S. 1125/H.R. 2116 (the 
        ``Freight Rail Infrastructure Capacity Expansion Act of 2007) 
        calls for a 25 percent tax credit for investments in new track, 
        intermodal facilities, yards, and other freight rail 
        infrastructure projects that expand rail capacity. All 
        businesses that make capacity-enhancing rail investments, not 
        just railroads, would be eligible for the credit.

    The budgetary cost of a rail infrastructure tax credit (ITC) would 
        be about $300 million per year, but the stimulatory benefit to 
        the economy would be much greater. U.S. Department of Commerce 
        data indicate that every dollar of freight rail infrastructure 
        investment that would be stimulated by a rail infrastructure 
        ITC would generate more than $3 in total economic output 
        because of the investment, purchases, and employment occurring 
        among upstream suppliers. We estimate that new rail investment 
        induced by a rail ITC would generate approximately 20,000 new 
        jobs nationwide.

    The AAR gratefully acknowledges the support many members of this 
        committee have shown toward S. 1125, and congratulates them on 
        recognizing that a rail ITC addresses the central challenge of 
        how to move more freight without causing more highway gridlock 
        or environmental degradation.

   Short Line Tax Credit. Since 1980, more than 380 new short 
        lines have been created, preserving thousands of miles of track 
        (much of it in rural areas) that may otherwise have been 
        abandoned. In 2004, Congress enacted a 50 percent tax credit 
        (``Section 45G'') for investments in short line track 
        rehabilitation. The focus was on assisting short lines in 
        handling the larger and heavier freight cars that are needed to 
        provide their customers with the best possible rates and 
        service.

    Since the enactment of Section 45G, hundreds of short line 
        railroads rapidly increased the volume and rate of track 
        rehabilitation and improvement programs. For example, the 
        replacement of railroad ties, a key component of handling 
        heavier cars, has increased by half a million ties per year in 
        both 2005 and 2006 as a result of the credit. Unfortunately, 
        Section 45G expired in 2007. Pending legislation in Congress 
        (S. 881/H.R. 1584, the ``Short Line Railroad Investment Act of 
        2007'') would extend the tax credit and thus preserve the huge 
        benefits it delivers.

   Public-Private Partnerships. Public-private partnerships 
        (PPPs) reflect the fact that cooperation is more likely to 
        result in timely, meaningful solutions to transportation 
        problems than a go-it-alone approach. Without a partnership, 
        projects that promise substantial public benefits in addition 
        to private benefits are likely to be delayed or never started 
        at all because it would be too difficult for either side to 
        justify the full investment needed to complete them. In 
        contrast, if a public entity shows it is willing to devote 
        public dollars to a project based upon the public benefits that 
        will accrue, the private entity is much more likely to provide 
        the private dollars (commensurate with private gains) necessary 
        for the project to proceed.

    Partnerships are not ``subsidies'' to railroads. Rather, they 
        acknowledge that private entities should pay for private 
        benefits and public entities should pay for public benefits. In 
        many cases, PPPs only involve the public contributing a portion 
        of the initial invest-ment required to make an expansion 
        project feasible--with the railroad responsible for funding all 
        future maintenance to keep the infrastructure productive and in 
        good repair.

    Perhaps the most extensive rail-related public-private partnership 
        envisioned today is the Chicago Region Environmental and 
        Transportation Efficiency Program (CREATE), a $1.5 billion 
        project involving the State of Illinois, the City of Chicago, 
        and major freight and passenger railroads serving the region. 
        CREATE's goal is to modernize and improve transportation in the 
        region by separating tracks and highways to speed vehicle 
        travel and reduce congestion and delays for motorists; updating 
        track connections and expanding rail routes to reduce transit 
        times; and adding separate, passenger-only tracks in key 
        locations to remove bottlenecks that have slowed passenger and 
        freight movements in the region for decades. The $330 million 
        first stage of CREATE recently got underway.

   Say No to Reregulation. Prior to 1980, decades of government 
        over-regulation had brought U.S. freight railroads to their 
        knees. Bankruptcies were common, rates were rising, safety was 
        deteriorating, and rail infrastructure and equipment were in 
        increasingly poor condition because meager rail profits were 
        too low to pay for needed upkeep and replacement. Recognizing 
        the need for change, Congress passed the Staggers Rail Act of 
        1980, which partially deregulated the rail industry.

    The record since Staggers shows that deregulation works. Since 
        1981, rail traffic is up 95 percent, rail productivity is up 
        163 percent, and average inflation-adjusted rail rates are down 
        54 percent. And rail safety is vastly improved--the train 
        accident and employee injury rates have plunged since Staggers. 
        Our privately-owned, largely deregulated freight railroads 
        competing fairly in the transportation marketplace have 
        produced the best freight rail system in the world. It is the 
        best for shippers in price and service; best for employees in 
        compensation and safety; and best for the public in reduced 
        pollution and highway gridlock.

    Despite the severe harm excessive rail regulation caused prior to 
        Staggers and the enormous benefits that have accrued since 
        then, legislation has been proposed--most recently, S. 953/H.R. 
        2125 (the so-called ``Railroad Competition and Service 
        Improvement Act of 2007'') in the 110th Congress--that would 
        reregulate railroads.

    Reregulation is bad public policy and should be rejected. It would 
        prevent railroads from earning enough to make the massive 
        investments a first-class rail system requires. Under 
        reregulation, rail earnings, and therefore rail spending on 
        infrastructure and equipment, would plummet; the industry's 
        existing physical plant would deteriorate; needed new capacity 
        would not be added; and rail service would become slower, less 
        responsive, and less reliable.

    By perpetuating the myth that service to a shipper by a single 
        railroad is equivalent to unconstrained market power, 
        proponents of reregulation ignore the reality that railroads 
        face extensive competition for the vast majority of their 
        business--including when a customer is served by only one 
        railroad. Railroads do not oppose competition. The truth is, 
        there is plenty of it out there already, either between two or 
        more railroads, from trucks and barges, or from other 
        competitive forces. And where the marketplace cannot support 
        more than single railroad service, legal safeguards exist to 
        protect against anti-competitive railroad behavior.

    The current system of rail regulation works. It allows shippers to 
        pay the lowest possible rates consistent with a privately-owned 
        rail system. It makes no sense to destroy the best freight rail 
        system the world has ever seen in order to move toward a 
        discredited system that failed in the past and would fail again 
        in the future.

    Public investment in freight rail infrastructure projects is 
justified because the extensive benefits that would accrue to the 
general public by increasing the use of freight rail would far exceed 
the costs of public participation. For example:

   Fuel efficiency--Railroads are three or more times more fuel 
        efficient than trucks. In 2007, railroads moved a ton of 
        freight an average of 436 miles per gallon of fuel. If just 10 
        percent of the long distance freight that moves by highway 
        moved by rail instead, fuel savings would exceed one billion 
        gallons per year.

   Greenhouse Gas Emissions--Greater use of freight rail offers 
        a simple, inexpensive, and immediate way to meaningfully reduce 
        greenhouse gas emissions without harming the economy. Because 
        of railroads' fuel efficiency, every ton-mile of freight that 
        moves by rail instead of trucks reduces greenhouse gas 
        emissions by two-thirds or more.

   Highway congestion--Highway gridlock already costs the U.S. 
        economy more than $78 billion per year just in wasted fuel and 
        time, according to a study by the Texas Transportation 
        Institute. But because a typical train takes the freight of 
        several hundred trucks off our highways, freight railroads 
        reduce highway gridlock, the costs of maintaining existing 
        highways, and the pressure to build costly new highways.

   Pollution--The EPA estimates that for every ton-mile of 
        freight carried, a train typically emits substantially less 
        nitrogen oxides and particulates than a truck.

   Safety--Fatality rates associated with intercity trucking 
        are eight times those associated with freight rail 
        transportation. Railroads also have lower employee injury 
        rates.

    The American Association of State Highway and Transportation 
Officials (AASHTO) has noted that ``Relatively small public investments 
in the Nation's freight railroads can be leveraged into relatively 
large benefits for the Nation's highway infrastructure, highway users, 
and freight shippers.'' \8\ The Congressional Budget Office (CBO) has 
also concluded that public investment in rail infrastructure should be 
considered: ``Another way of addressing the underpayment of 
infrastructure costs by railroads' competitors is to provide financial 
assistance to the railroads.'' Echoing AASHTO, CBO observed that, 
``[p]roviding Federal aid for a rail investment might be economically 
justified if the net social benefits were large but the net private 
benefits to railroads were insufficient to induce them to make such an 
investment.\9\
---------------------------------------------------------------------------
    \8\ AASHTO, Freight Rail Bottom Line Report, p. 1.
    \9\ Congressional Budget Office, Freight Rail Transportation: Long-
Term Issues (January 2006), p. 22.
---------------------------------------------------------------------------
Passenger Railroads and Freight Railroad Capacity
    Our Nation's privately-owned freight railroads are successful 
partners with passenger railroads all across the country. Around 97 
percent of the 22,000 miles over which Amtrak operates are owned by 
freight railroads, and hundreds of millions of commuter trips each year 
occur on commuter rail systems that operate at least partially over 
tracks or right-of-way owned by freight railroads.
    Freight railroads recognize the potential national benefits of a 
strong national passenger rail system. The key question is: under what 
circumstances can freight and passenger interests advance this worthy 
goal?
    As noted earlier, because of substantial and sustained traffic 
increases, U.S. freight railroads are moving more freight than ever 
before, and demand for freight rail service is projected to grow 
sharply in the years ahead. Passenger rail growth would come on top of 
growth in freight traffic. That's why, going forward, capacity will 
likely be the single most important factor determining our ability to 
provide the high quality rail service that will be essential for both 
freight and passengers.
    While recognizing existing Amtrak statutory authority regarding use 
of freight railroad-owned facilities, the AAR has developed principles 
which we believe should govern new passenger rail use of freight-owned 
facilities:

   Freight railroads should not be forced to give passenger 
        railroads access to their property; rather, access should be 
        voluntarily negotiated.

   Freight railroads should be fully compensated for the use of 
        their assets by passenger trains.

   Freight railroads should be adequately protected from 
        liability.

   Freight railroads should not be asked to pay for capacity 
        increases needed to accommodate passenger service.

    These principles are grounded in the tremendous importance of 
freight railroads to America's producers and consumers. Freight 
railroads lower shipping costs by billions of dollars each year and 
produce an immense competitive advantage for our farmers, 
manufacturers, and miners in the global marketplace. If passenger 
railroads impair freight railroads and force freight that otherwise 
would move by rail onto the highway, those advantages would be 
squandered. Moreover, highway gridlock would worsen; fuel consumption, 
pollution, and greenhouse gas emissions would rise; and our mobility 
would deteriorate--outcomes that are completely contrary to the goals 
of expanding passenger rail in the first place.
    As part of its work, the National Surface Transportation Policy and 
Revenue Study Commission received a report from the Passenger Rail 
Working Group (PRWG), which provided a long-term vision for passenger 
rail development in this country. The authors of that report should be 
commended for helping policymakers focus on the important issue of 
intercity passenger rail. Freight railroads appreciate that the PRWG 
concurs that passenger rail progress must be complementary to--not in 
conflict with--freight rail development.
    We believe that future passenger rail initiatives, especially on 
the scale envisioned by the PRWG, will increasingly require separate 
assets dedicated to passenger operation, rather than the incremental 
initiatives most typical of past passenger rail expansion. This more 
visionary approach would enable faster and more reliable passenger 
service, and would minimize the substantial operational, engineering, 
legal, and other impediments that often hinder the ability of freight 
railroads to accommodate passenger trains.
    This approach will be costly, but so will any approach to 
meaningfully enhancing passenger rail. Policymakers must understand 
that no passenger system in the world pays for its operating and 
capital expenses solely from the fare box. But there are substantial 
public benefits from high-speed intercity passenger rail. Freight 
railroads believe that the public benefits of a truly attractive and 
competitive national passenger rail capability will exceed public 
costs, and look forward to working with all appropriate parties to make 
those benefits a reality.
Conclusion
    America today has the best freight rail network in the world. 
Still, it is clear that rail capacity will have to increase as the 
economy and population expand in the years ahead. Railroads are working 
hard to ensure that adequate capacity exists to meet our future freight 
transportation needs. Meanwhile, policymakers can help by instituting 
targeted tax incentives for projects that expand rail capacity, 
engaging in more public-private partnerships for freight rail 
infrastructure projects, and ensuring that the legislative and 
regulatory structure under which railroads operate is conducive to 
further investment in rail capacity.

    Senator Lautenberg. Thank you very much.
    Mr. Larrabee?

  STATEMENT OF REAR ADMIRAL RICHARD M. LARRABEE, (RET.), U.S. 
 COAST GUARD; DIRECTOR OF COMMERCE, PORT AUTHORITY OF NEW YORK 
                         AND NEW JERSEY

    Mr. Larrabee. Chairman Lautenberg, Ranking Member Smith, 
distinguished Members of the Committee: Thank you for the 
invitation to testify today. I appreciate the opportunity to 
provide some insight into improving the efficiency of future 
freight movement. My name is Richard M. Larrabee. I'm the 
Director of Port Commerce for the Port Authority of New York 
and New Jersey. In this capacity I'm responsible, along with 
other private and public partners, for the promotion, 
protection, and development of the Port of New York and New 
Jersey, which includes facilities in both New York and New 
Jersey.
    The Port Authority is a bi-state agency which oversees not 
just seaports, but also other transportation facilities, such 
as airports, bridges, and tunnels, and rapid transit commuter 
systems. From this unique perspective, we have the benefit of a 
macro view of how different modes of transportation interrelate 
and work to strengthen the region while moving people and goods 
safely and efficiently. We also recognize the importance of 
increasing costs of modernizing and rebuilding infrastructure 
to ensure continued economic expansion.
    With a 4 percent growth last year, the Port of New York and 
New Jersey outperformed many of the major ports throughout the 
country. We believe our continued growth is due in part to our 
location as a gateway to the largest, most affluent consumer 
market in North America. But location and marine terminals 
capacity alone will not be able to sustain the movement of over 
5 million TEUs a year.
    We link increased cargo movement through our port 
facilities to our strategic investments in port infrastructure, 
investments in dredging, rail, road, and in some cases in our 
terminals themselves.
    Since September 11, 2001, when formulating the Port 
Authority's budget our focus first and foremost has been on 
security. Second is maintaining a state of good repair for our 
facilities. Once funding for these two items is allocated, only 
a small fraction of the budget remains for capital investments 
and new initiatives. We prioritize these projects, focusing on 
alleviating choke points along the supply chain.
    With this in mind, we have embarked on a 10-year $2 billion 
capital plan to continue to ensure that our facilities in the 
port are able to handle the forecasted annual growth of 5 to 7 
percent over the next 10-year period.
    Sustainability, ensuring that we are good stewards of the 
land, is also a driving factor. One of the agency's goals is to 
continue to move more freight from the roads to rail. Although 
approximately 80 percent of the containerized cargo entering 
our port stays within the region, a significant and growing 
portion heads to points west and north. About 13 percent of the 
port's cargo moves by rail today, but we are investing nearly 
$600 million in our on-dock rail infrastructure to increase 
that proportion to about 20 percent over the next decade.
    However, much of our investment is in jeopardy if other 
funding sources, public or private, are not identified to 
expand the freight rail system nationally. According to AASHTO, 
without sufficient investment by 2020 only half of the 
forecasted growth in freight rail tonnage can be accommodated 
by the current freight rail system. Enhancing our Nation's 
freight system should and must be in the forefront of any 
discussion of transportation. It's imperative that port 
authorities and logistics companies have a partner in the 
Federal Government for this effort, as a local or regional 
approach will not completely suffice.
    To assist in the process of organizing trade and cargo 
flows, the Federal Government could map the international 
transportation system from a national perspective and propose 
national corridors to accommodate the anticipated freight 
flows. Regional projects could be measured for their national 
significance, how they would work within that system as a 
whole.
    Such an example can be seen in the Federal Principles and 
Guidelines for Water and Related Land Resource Implementation 
Studies, which describe the analytical and policy framework for 
determining the appropriate participation of the Federal 
Government in dredging projects. At least on a conceptual 
level, we believe a similar approach could work looking at 
regional projects for national benefit.
    New national investments in freight capacity will need 
innovative Federal financing systems. A piecemeal approach is 
not and will not meet the needs of our Nation's crumbling and 
stressed infrastructure. Just as airports and highways have a 
reliable source of funding, so must freight infrastructure. The 
Highway Trust Fund and Passenger Facility Charge at airports 
have provided a reliable funding source for systems investments 
in our Nation's roads and airports. Seaports and intermodal 
connections should have a comparable funding mechanism to 
provide needed systematic investment.
    Our freight transportation system is the blood circulation 
system of our Nation's economy. We don't want congested 
arteries.
    It's going to take time and a great deal of funding to 
maintain and enhance the freight movement system in the Nation. 
While we're working on this, the international trade and demand 
for freight transportation will continue to grow. The world is 
not waiting for us. If our system can't keep up, the Nation's 
economy will become less competitive and we'll suffer. I 
respectfully urge this committee to formulate and recommend a 
workable approach before we are truly overwhelmed with 
congestion and the loss of freight mobility that is so vital to 
our national economy.
    Thank you again for the opportunity to testify this 
afternoon.
    [The prepared statement of Mr. Larrabee follows:]

 Prepared Statement of Rear Admiral Richard M. Larrabee, (Ret.), U.S. 
 Coast Guard, Director of Commerce, Port Authority of New York and New 
                                 Jersey
    Good afternoon. Honorable Chairman Lautenberg and Ranking Member 
Smith and distinguished Members of the Committee, thank you for the 
invitation to testify before you today. I appreciate the opportunity to 
provide some insight into improving the efficiency of future freight 
movement.
    My name is Richard M. Larrabee, and I am the Director of Port 
Commerce for the Port Authority of New York and New Jersey (the Port 
Authority). In this capacity, I am responsible, along with other 
private and public partners, for the promotion, protection, and 
development of the Port of New York and New Jersey, which includes 
facilities in Bayonne, Elizabeth, Jersey City, and Newark, New Jersey, 
as well as in Staten Island, and Brooklyn, New York.
    The Port Authority is a bi-state agency that oversees not just 
seaports, but also other transportation facilities such as airports, 
bridges and tunnels, and a rapid transit commuter system. From this 
unique perspective, we have the benefit of a macro view of how 
different modes of transportation interrelate and work to strengthen 
the region while moving people and goods safely and efficiently. We 
also have direct expertise of the importance--and increasing cost--of 
modernizing and rebuilding infrastructure to ensure continued economic 
expansion.
    With 4 percent cargo growth in 2007, the Port of New York and New 
Jersey outperformed many major ports throughout the country, which 
declined or grew less than 1 percent in the same period. We believe our 
continued growth is due in part to our location as a gateway to the 
largest and most affluent consumer market in North America, with nearly 
100 million consumers within a single day's travel. But, location and 
marine terminals with capacity alone would not be able to sustain the 
movement of 5,097,496 TEUs.
    We link increased cargo movements through our port facilities to 
our strategic investments in port infrastructure, which have increased 
our port's ability to handle future capacity--investments in dredging, 
rail, road, and in some cases in the terminals themselves. Since 
September 11, when formulating the Port Authority's budget, our focus, 
first and foremost, is on security. Second is maintaining a state of 
good repair for our facilities. Once funding for these two items is 
allocated, only a small fraction of the budget remains for capital 
investments and new initiatives. We prioritize those projects, focusing 
on alleviating chokepoints along the supply chain. With this in mind, 
we have just embarked on a 10 year $2 billion capital plan to continue 
to ensure that our facilities are able to handle the forecasted annual 
growth of 5-7 percent over the next 10 years.
    Sustainability, ensuring that we are good stewards of the land, is 
also a driving factor. One of the agency's goals is to continue to move 
more freight from roads to rail. For each container we place on a 
train, we save 1.7 truck trips, reducing emissions and improving 
congestion on our local roads. Although approximately 80 percent of 
containerized cargo entering the port stays within the region, a 
significant and growing portion heads to points west and north. About 
13 percent of the port's cargo moves by rail today, but we are 
investing $600 million in on-dock rail infrastructure to increase that 
proportion to about 20 percent over the next decade. However, much of 
our investment is in jeopardy if other funding sources, public or 
private, are not identified to expand the freight rail system 
nationally.
    According to the American Association of State Highway and 
Transportation Officials (AASHTO), without sufficient investment, by 
2020, only half of the forecasted growth in freight rail tonnage can be 
accommodated by the current freight rail system. The balance would 
likely shift to trucks and the highway system.\1\ This would have a 
detrimental effect on our environment, and increase congestion on roads 
that are shared with local residents.
---------------------------------------------------------------------------
    \1\ AASHTO--Freight-Rail Bottom Line Report, 2003.
---------------------------------------------------------------------------
    We recognize that our port facilities--and the Port Authority's 
bridges and tunnels--are just one link in the global supply chain. The 
Port Authority can partner with others, but has no authority to invest 
infrastructure assets beyond its Port District--a 25-mile zone 
circumscribed around the Statue of Liberty. We are working with our 
tenants and local partners in state and local government to make 
strategic investments outside of the gates of our ports--for roads and 
rail and warehousing--but our efforts alone will not ensure the 
continued efficiency of national freight movement.
    Enhancing our Nation's freight system should and must be at the 
forefront of any discussion of transportation. It is imperative that 
port authorities and logistics companies have a partner in the Federal 
Government for this effort, as a local or regional approach will not 
suffice.
    Working together, as partners, we can develop a consistent policy 
that the industry can rely on for funding and prioritizing projects.
    The Federal Government is providing policy and governance 
leadership to meet our Nation's security needs; similar policy 
leadership is desirable in meeting our country's growing transportation 
needs. The Safe, Accountable, Flexible and Efficient Transportation 
Equity Act--A Legacy for Users (SAFETEA-LU) took a step in this 
direction with the creation of the National Surface Transportation 
Policy and Revenue Study Commission.
    To assist in the process of organizing trade and cargo flows, the 
Federal Government could map the international freight transportation 
system from a national perspective and propose national corridors to 
accommodate the anticipated freight flows.
    Regional projects could be measured for their national 
significance--how they work with the system as a whole. Such an example 
can be seen in the current Federal approach to deepening the channels 
of the Nation's navigable waters. The importance of ports, channels and 
inland waterways has been well established as a major means of 
commercial transportation and as part of national defense. Congress 
uses a disciplined approach to funding the maintenance and improvement 
of the Nation's navigation system. Individual navigation channel 
improvements must be demonstrated to be in the Federal interest before 
becoming eligible for Federal funding. The Federal Principles and 
Guidelines for Water and Related Land Resources Implementation Studies, 
which were approved in 1983, describes the analytical and policy 
framework for determining the appropriate participation of the Federal 
Government in dredging projects. ``Local sponsors'', such as port 
authorities, propose channel-deepening projects and the U.S. Army Corps 
of Engineers determines the costs and expected benefits of proposed 
projects as part of its determination of the Federal interest. In the 
past, the benefits have been almost exclusively determined by 
estimating the transportation cost savings that would result to the 
Nation's economy with the proposed improvement. Projects with a 
positive cost-benefit analysis are eligible for consideration for 
Federal funding, but such projects must subsequently be authorized, and 
funded, by Congress. Additionally, total project costs are typically 
shared between the local sponsor and Federal Government. At least on 
the conceptual level, we believe a similar approach could be developed 
as an equitable framework for determining whether Federal funding 
should be applied to rail and other projects that could have a 
significant benefit to the Nation.
    New national investments in freight capacity will need innovative 
Federal financing systems. A piecemeal approach has not and will not 
meet the needs of our Nation's crumbling and stressed infrastructure. 
Just as airports and highways have a reliable source of funding, so 
must freight infrastructure. The Highway Trust Fund and Passenger 
Facility Charge (PFC) at airports have provided a reliable funding 
source for system investments in our Nation's roads and at airports. 
Seaports and their intermodal connections should have a comparable 
funding mechanism to provide needed systematic investments. The public 
benefits of these investments require some form of acknowledgement and 
compensations. The freight transportation system is the blood 
circulation system of our Nation's economy; we don't want congested 
arteries.
    It is going to take time--and a great deal of funding--to maintain 
and enhance the freight movement system in the Nation. While we are 
working on this, international trade and demand for freight 
transportation will continue to grow. The world is not waiting for us--
if our system can't keep up, the Nation's economy will become less 
competitive and will suffer. This is a very real problem that requires 
a very realistic solution. I respectively urge this committee to 
formulate and recommend a workable approach before we are truly 
overwhelmed with congestion and lose the freight mobility that is so 
vital to the national economy.
    Thank you again for allowing me the opportunity to testify before 
you today.

    Senator Lautenberg. Thank you very much.
    Mr. Vanselow?

   STATEMENT OF GLENN VANSELOW, EXECUTIVE DIRECTOR, PACIFIC 
                NORTHWEST WATERWAYS ASSOCIATION

    Mr. Vanselow. Mr. Chairman, Senator Smith, Members of the 
Committee: Thank you for inviting me to testify. I am Glenn 
Vanselow, Executive Director of the Pacific Northwest Waterways 
Association. PNWA is a nonpartisan, nonprofit. We represent 
ports, towboat companies, steamship operators, agriculture and 
forest products shippers in Washington, Oregon, Idaho, and 
northern California.
    Our Nation's economy relies on safe, efficient, and 
reliable transportation. I will focus on navigation, but please 
note, efficient water transportation requires efficient land-
side transportation. A bottleneck in any one link can prevent 
American producers from connecting with their domestic and 
foreign markets.
    Annually 2.5 billion tons move by water within, to, and 
from the United States. $2 trillion moves in international 
trade and that generates $21 billion in customs revenue to the 
U.S. Treasury each year.
    Pacific Northwest ports ship 90 million tons of cargo worth 
$60 billion. The Columbia River is the Nation's number one 
gateway for the export of wheat and barley. Seattle and Tacoma 
form the country's third largest gateway for containerized 
cargo.
    A typical barge can carry 1,500 tons on the Mississippi and 
3,500 tons on the Columbia and Snake Rivers. That compares with 
100 tons by rail car or 29 tons per truck. For the Columbia 
River, loading a typical grain ship with 55,000 tons of wheat 
for export requires four barge tows or 550 rail cars or 1,900 
trucks.
    Larger carrying capacity translates into energy 
efficiencies. The Chairman has already cited the U.S. Maritime 
Administration's Texas Transportation Institute study comparing 
truck, rail, and barges. If I may say, Mr. Hamberger and I had 
a chance to chat beforehand. 413 ton-miles per gallon, 436 ton-
miles per gallon, why quibble? Why quibble? Navigation carries 
576 ton-miles per gallon. The details are in my written 
testimony.
    Those fuel savings translate into environmental benefits, 
with navigation producing fewer air emissions as well.
    Each year $1.5 billion is collected from inland and deep 
draft navigation user fees. The combined collections are far in 
excess of expenditures. Despite this surplus, navigation needs 
are not being met. There is a backlog of maintenance and new 
construction that is multiple billions of dollars.
    The Harbor Maintenance Tax was designed to fully fund 
dredging of deep draft ports. $1.4 billion is collected each 
year. Only $900 million is spent. The surplus is over $4 
billion today. The GAO estimates that it will grow to $8 
billion in just 3 years, 2011.
    The Inland Waterways Trust Fund collects $80 to $100 
million a year. It provides half of the new construction on the 
inland waterways. That Fund had a surplus for many years, but 
that surplus will be gone by 2009.
    The Administration has proposed a new inland waterway 
lockage fee. It would increase the tax fourfold for barging on 
the Columbia and Snake Rivers. The PNWA opposes this new tax as 
long as the combined navigation user tax collections are in 
excess of expenditures. Rather than propose new taxes, we urge 
the Administration to spend funds that are currently being 
collected.
    Underfunding navigation hurts the country and it hurts the 
Pacific Northwest. The PNWA tracks appropriations for 32 
navigation projects in the Pacific Northwest. Those are 
detailed also in our written testimony. The administration's 
budget adequately funds only three of our region's top 32 
projects. Congressional adds are needed for the other 29, 
including to maintain the Columbia River channels and the locks 
on the inland system, dredging and jetty repair at Oregon 
coastal ports, to meet endangered species requirements at 
Seattle's Lake Washington Ship Canal, to study and prepare 
Seattle's Elliott Bay Seawall, and for a long-term sediment 
management study at Humboldt Bay in California.
    Congress has responded with increased funding in past 
years. Those hard-fought increases are important and they are 
very much appreciated, but they're not sufficient. We urge 
Congress to reinvigorate our Nation's infrastructure by funding 
navigation at levels that match the overall collections of user 
taxes. That would add $500 million annually nationwide. User 
fees were instituted to meet specific funding needs. The funds 
collected must be spent. Congress has the authority. We urge 
you to exercise that authority.
    Thank you for your support. We look forward to working with 
you to ensure that our Nation's transportation infrastructure 
provides a solid foundation for a robust American economy. 
Thank you for this opportunity to testify.
    [The prepared statement of Mr. Vanselow follows:]

       Prepared Statement of Glenn Vanselow, Executive Director, 
                Pacific Northwest Waterways Association
    Mr. Chairman, Members of the Committee,

    Thank you for the opportunity to testify today on the important 
topic of freight mobility. I am Glenn Vanselow, Executive Director of 
the Pacific Northwest Waterways Association. PNWA is a non-partisan, 
non-profit association that represents freight mobility interests, 
including port authorities, towboat companies, steamship operators, 
shippers of cargo, agricultural producers, forest products 
manufacturers and other transportation interests in Washington, Oregon, 
Idaho and northern California.
    Our nation's economy relies on a safe, efficient and cost-effective 
transportation system. That system includes road, rail, water and air. 
My colleagues on the panel are addressing trucking and rail. I will 
focus on navigation. But I do so while noting that efficient water 
transportation requires efficient landside transportation as well. For 
international and domestic trade, intermodal connections are critically 
important. A bottleneck in any one link reduces the strength of the 
supply chain connecting producers with their domestic and foreign 
markets.
Economic Benefits of Navigation
    Annually, more than 2.5 billion tons of cargo move by water within, 
to and from the United States. Nearly 1.6 billion of those tons move in 
international trade, with a value of over $2 trillion. Waterborne 
international trade generates over $21 billion annually in U.S. Customs 
revenue to the U.S. Treasury. The total direct and indirect economic 
impact of waterborne commerce is 8.4 million jobs, and over $300 
billion in personal income.
    In my region, the Pacific Northwest, our ports ship nearly 90 
million tons of cargo worth over $60 billion. The Columbia River is the 
Nation's number one gateway for the export of wheat and barley, and the 
third largest grain gateway in the world. The Ports of Seattle and 
Tacoma are the third largest gateway for containerized cargo in the 
country.
Environmental Benefits of Navigation
    A typical barge can carry 1,500 tons on the Mississippi River 
System and 3,500 tons on the Columbia Snake River System. That compares 
with 100 tons per rail car and 29 tons per truck.
    The modal comparison for the Mississippi River System in Figure 1 
is from a 2008 U.S. Maritime Administration (MARAD) study completed at 
the Texas Transportation Institute at Texas A&M:



    In Figure 2, PNWA prepared the same comparison for the Columbia 
Snake River System.



    For the Columbia Snake River System, delivering cargo to load a 
typical grain ship with 55,000 tons of wheat would require 4 barge 
tows, 550 rail cars, or 1,900 trucks.
    The differences in carrying capacity translate into differences in 
energy efficiency. Below is a chart showing the relative energy 
efficiencies of truck, rail and barge transportation on the Mississippi 
River System, courtesy of the MARAD/Texas Transportation Institute 
study.



    The chart shows ton-miles per gallon, or how many miles a ton of 
cargo can be carried on one gallon of fuel. Fuel efficiencies are 
improving for all three modes, yet navigation continues to move more 
cargo, more miles, for every gallon of fuel.
    The fuel savings translate into proportionate navigation benefits 
for the environment, with fewer emissions of hydrocarbons, carbon 
monoxide, nitrous oxide and particulate matter. Figure 5 is a table 
from the 2008 MARAD study showing a comparison of emissions.



Navigation Funding
    Since 1789, the Federal Government has exerted control over 
navigation channels and channel improvements. In 1824, Congress 
delegated authority over the Nation's navigation system to the U.S. 
Army Corps of Engineers. Operations and maintenance and new 
construction of navigation projects are funded annually in the Energy 
and Water Development Appropriations bill. Since 1978 there has been a 
user fee on the Nation's inland waterways, the Inland Waterways User 
Fee. In 1986, Congress established a user fee for deep draft coastal 
ports and harbors, the Harbor Maintenance Tax.
    Each year, a total of $1.5 billion is collected from the inland and 
deep draft user fees. That is in addition to the $21 billion in Customs 
duties that are collected. Despite the collection of these fees, 
navigation needs are not being met. There is a significant backlog of 
maintenance and new construction.
    The Harbor Maintenance Tax was established to collect fees to 
provide 100 percent of the cost of operations and maintenance, 
primarily dredging, of the Nation's deep draft and coastal ports and 
harbors. Approximately $1.4 billion is collected each year and 
symbolically placed in the Harbor Maintenance Trust Fund, but only 
about $900 million is expended. Currently, the surplus of collections 
over expenditures is over $4 billion. The GAO reports that the surplus 
is expected to grow to $8 billion by 2011. Rather than being used for 
their intended purpose, at least $500 million of these user fees is 
instead used to balance the Federal budget.
    The Inland Waterways Fuel Tax was created to collect fees to 
provide for 50 percent of the cost of new construction and 
rehabilitation of locks on the Nation's inland waterways. It collects 
20 cents per gallon of fuel used by towboats on the inland waterways. 
Each year it collects about $100 million, but that has decreased to 
about $80 million as towboats have become more fuel efficient. The 
Inland Waterways Trust Fund had a surplus for many years, but now, 
expenditures are projected to surpass collections in 2009. The 
Administration has proposed instituting a new inland waterway tax which 
would replace the fuel tax with a lockage fee for each barge. The 
proposal would increase the user tax approximately four-fold for 
barging on the Columbia and Snake Rivers.
    PNWA opposes this new tax. Currently, the combined government 
navigation user tax collections are far ahead of expenditures. That is 
expected not only to continue, but to grow for the foreseeable future.
    Despite collections far exceeding expenditures, the Administration 
does not propose sufficient funding to maintain the existing navigation 
system or to meet future needs. For decades, during both Republican and 
Democratic administrations, we have had to look to Congress for 
increases over and above the inadequate Administration budget 
proposals.
    As an example of how this affects the Pacific Northwest, I have 
attached a copy of PNWA's appropriations request for FY 2009. We track 
32 navigation projects from Humboldt Bay in California, up the Oregon 
Coast, along the entire length of the Columbia Snake River System in 
Oregon, Washington and Idaho, to the Ports of Seattle and Tacoma and 
the northern reaches of the Puget Sound in Washington. Of those 32 
navigation projects, 29 are in need of additional funding. In other 
words, the Administration's budget proposal provides adequate funding 
for only three of our region's 32 navigation projects.
    Additional funding is needed in all categories . . . general 
investigations, new construction and routine operations and 
maintenance. Here are a few examples.
    On the Columbia Snake River System, Congressional adds are needed 
to maintain authorized channel depth throughout the Columbia and Lower 
Willamette project.
    Two of our eight locks need Congressional adds for routine 
operations and maintenance. Five need adds for major maintenance and 
repairs. One needs additional funding for dredging to maintain 
authorized channel depth.
    Oregon's coastal ports need funds added for routine dredging to 
maintain their navigation channels and for jetty repairs.
    In Puget Sound, the Lake Washington Ship Canal needs a 
Congressional add to meet Endangered Species Act requirements. More 
funding is needed for the Elliott Bay Seawall study in Seattle.
    In California, Humboldt Bay needs funding to complete a long term 
sediment management feasibility study.
    Congress has responded in past years. Those hard fought increases 
have been important, and very much appreciated, but they have not been 
sufficient to prevent navigation infrastructure from further 
deteriorating. We encourage Congress to reinvigorate our Nation's 
navigation infrastructure by funding navigation at levels that match 
the overall collection of user taxes. That is what is necessary to meet 
our Nation's vital economic needs. That would equate to an annual 
increase of $500 million nationally.
    Unfortunately, having money in a Federal trust fund does not mean 
that the money is actually available to be spent for its designated 
purpose. That is wrong. User fees were instituted to meet a specific 
funding need. The funds collected from navigation user fees must be 
spent to meet navigation needs. Congress has the authority to make this 
happen. We urge Congress to exercise that authority.
    We appreciate your past and continued recognition of the ways our 
Nation's transportation infrastructure provides a foundation for a 
robust American economy. We look forward to working with you to ensure 
that our transportation infrastructure is capable of meeting our 
Nation's needs.
    Thank you for this opportunity to testify. I am happy to answer any 
questions you may have.
    (Attachment: PNWA FY 2009 Energy and Water Appropriations Requests)
                                 ______
                                 
PNWA FY 2009 Energy and Water Appropriations requests
Deep Draft Navigation
    More than 60 million tons of cargo, worth $36 billion, moves in 
international trade across the docks of Oregon and Washington ports. 
The Puget Sound and Columbia River gateways are some of the largest in 
the country for: containers; wheat, barley and corn exports; and 
automobile imports. PNWA supports continued investment in the 
development and maintenance of the Federal navigation projects that 
support this important economic activity.

------------------------------------------------------------------------
                                                                  Total
                               FY     President's    Support     Request
     Construction (CG)        2008      FY 2009     Additional   for FY
                                     Budget Level     Funds       2009
------------------------------------------------------------------------
Columbia River Channel       14,760  36,000,000    0            36,000,0
 Improvement Project          ,000                               00
------------------------------------------------------------------------
John Day Major Rehab Study   1,000,  2,000,000     0            2,000,00
 (funding is located in dam   000                                0
 safety program)
------------------------------------------------------------------------
Mt. St. Helens sediment      9,247,  1,410,000     ...........  6,410,00
 control                      000                                0
------------------------------------------------------------------------
Evaluate fish passage        ......  ............  5,000,000
 alternatives, dredge to
 maintain flood control
------------------------------------------------------------------------
Lower Columbia River         1,688,  1,500,000     ...........  3,080,00
 ecosystem restoration        000                                0
------------------------------------------------------------------------
Water Resources Education    ......  ............  1,580,000
 Ctr. site, plan/design
 Sandy River Delta site,
 plan Vancouver Lake site
------------------------------------------------------------------------
Lake Washington Ship Canal   0       0             450,000      450,000
 seismic analysis
------------------------------------------------------------------------
Humboldt Bay Long-Term       107,00  0             500,000      500,000
 Sediment Management          0
 feasibility study
------------------------------------------------------------------------


------------------------------------------------------------------------
                                                                  Total
                               FY     President's    Support     Request
General Investigations (GI)   2008      FY 2009     Additional   for FY
                                     Budget Level     Funds       2009
------------------------------------------------------------------------
Elliott Bay Seawall study    590,00  0             1,025,000    1,025,00
 (Port of Seattle)            0                                  0
------------------------------------------------------------------------
Lake Washington Ship Canal   369,00  0             650,000      650,000
 restoration study            0
------------------------------------------------------------------------

    We are pleased to note that the following critical infrastructure 
item was included in the President's budget:

   $675K for plans and specs for the Columbia River jetties 
        major rehab (funding is part of the ``Columbia River at the 
        Mouth'' account)

------------------------------------------------------------------------
                                      President's                 Total
  Operations & Maintenance     FY       FY 2009      Support     Request
           (O&M)              2008      Budget      Additional   for  FY
                                        Level*        Funds       2009
------------------------------------------------------------------------
Columbia River at the Mouth  14,583  14,873,000    ...........  15,273,0
 (MCR)                        ,000                               00
------------------------------------------------------------------------
South jetty beneficial use   ......  ............  400,000
 site study
------------------------------------------------------------------------
Columbia & Lower Willamette  23,461  24,973,000    ...........  27,469,0
 River below Vancouver &      ,000                               00
 Portland (C&LW)
------------------------------------------------------------------------
Maintenance dredging on      ......  ............  2,496,000
 C&WL, at Westport Slough
 ($810K) and the Old Mouth
 of the Cowlitz ($450K),
 major maintenance report
 for pile dikes
------------------------------------------------------------------------
Columbia River between       448,00  640,000       ...........  814,000
 Vancouver & the Dalles       0
------------------------------------------------------------------------
Additional maintenance       ......  ............  174,000
 dredging
------------------------------------------------------------------------
Coos Bay (Port of Coos Bay)  5,609,  4,769,000     ...........  10,852,0
                              000                                00
------------------------------------------------------------------------
Additional maintenance       ......  ............  6,083,000
 dredging, North Jetty
 interim repair, jetty
 major maintenance report
------------------------------------------------------------------------
Yaquina Bay & Harbor (Port   1,247,  1,482,000     ...........  1,972,00
 of Newport)                  000                                0
------------------------------------------------------------------------
Maintenance dredging,        ......  ............  490,000
 engineering analysis of
 north jetty extension
------------------------------------------------------------------------
Lake Washington Ship Canal   5,506,  7,554,000     ...........  8,154,00
                              000                                0
------------------------------------------------------------------------
Design for modification to   ......  ............  600,000
 diffuser well (for
 improved passage of ESA-
 listed fish)
------------------------------------------------------------------------
Humboldt Harbor & Bay (Port  5,181,  5,144,000     ...........  5,600,00
 of Humboldt Bay              000                                0
------------------------------------------------------------------------
Additional maintenance       ......  ............  456,000
 dredging
------------------------------------------------------------------------
* The President's budget only specifies funding for O&M on a regional
  basis. These project amounts were obtained from the U.S. Army Corps of
  Engineers.

Columbia Snake River System Inland Navigation
    Barging on the Columbia Snake River system carries 10-12 million 
tons of cargo worth $1.5-2 billion annually. Barging feeds 50 percent 
of the wheat exports and 25 percent of the containers handled at the 
Lower Columbia ports. It is the lowest cost, most fuel efficient, and 
cleanest mode of cargo transportation. Ongoing support of this inland 
waterway is critical to the health of the regional economy and the 
success of our deep draft ports.
    We are pleased to note that the following critical infrastructure 
needs were included in the President's budget:

   $1.56M for the Lower Monumental downstream lock gate plans & 
        specifications.

   $1M for pintle bearings and $3M for tainter valves at The 
        Dalles.

   $2.5M for tainter valves at John Day.

   $6.7M for the Programmatic Sediment Management Plan for the 
        Lower Snake River.

----------------------------------------------------------------------------------------------------------------
                                                                          President's     Support       Total
              Operations & Maintenance (O&M)                  FY 2008       FY 2009      Additional  Request for
                                                                         Budget Level*     Funds       FY 2009
----------------------------------------------------------------------------------------------------------------
Bonneville Lock & Dam                                      14,040,000    11,701,000                  12,472,000
----------------------------------------------------------------------------------------------------------------
Routine O&M activities                                                                  771,000
----------------------------------------------------------------------------------------------------------------
The Dalles Lock & Dam                                      3,680,000     7,696,000                   8,370,000
----------------------------------------------------------------------------------------------------------------
Routine O&M activities, replace navlock control system                                  674,000
----------------------------------------------------------------------------------------------------------------
John Day Lock & Dam                                        4,336,000     7,049,000                   11,646,000
----------------------------------------------------------------------------------------------------------------
8Design and contract for navlock lift gates friction drum                               4,597,000
 crack repair ($3.5M)0, rehab spillway crane, rebuild
 turbine pumps
----------------------------------------------------------------------------------------------------------------
McNary Lock & Dam                                          5,283,000     1,251,000                   5,509,000
----------------------------------------------------------------------------------------------------------------
8Derrick crane rehabs ($1.1M)0, dredge Ice Harbor Cut,                                  3,216,000
 tainter valve and hydraulic system design, waterstop
 repair
----------------------------------------------------------------------------------------------------------------
Engineering/design for replacement of electrical and       ............  .............  992,000
 mechanical equipment in major maintenance report;
 funding for miter gate actuating arm repair
----------------------------------------------------------------------------------------------------------------
Repair floating mooring bits                                                            50,000
----------------------------------------------------------------------------------------------------------------
Ice Harbor Lock & Dam                                      3,748,000     1,735,000                   3,060,000
----------------------------------------------------------------------------------------------------------------
Planning, engineering and design phase for the                                          700,000
 replacement of the upstream gate and operating machinery
 per major maintenance report
----------------------------------------------------------------------------------------------------------------
Repair leaks in the floating guide wall and rehabilitate                                625,000
 the upstream navlock gate controls
----------------------------------------------------------------------------------------------------------------
Lower Monumental Lock & Dam                                2,962,000     5,241,500      0            5,241,500
----------------------------------------------------------------------------------------------------------------
Little Goose Lock & Dam                                    1,357,000     1,550,000                   4,000,000
----------------------------------------------------------------------------------------------------------------
Navlock waterstop repair, 8downstream gate pintle parts                                 2,400,000
 ($1.5M)0, and plans/specs for major maintenance report
----------------------------------------------------------------------------------------------------------------
Repair floating mooring bits                                                            50,000
----------------------------------------------------------------------------------------------------------------
Lower Granite Lock & Dam                                   3,649,000     5,486,000                   7,801,000
----------------------------------------------------------------------------------------------------------------
Repair waterstops in navlock between monolith 3 and 5;                                  1,215,000
 repair upstream tainter gate; fund major maintenance
 report activities
----------------------------------------------------------------------------------------------------------------
8Dredge federal nav channel near Port of Clarkston                                      1,100,000
 ($1.1M)0
----------------------------------------------------------------------------------------------------------------
Note: Items in 8gray0 represent priority needs on the inland Columbia Snake River System.
*The President's budget only specifies funding for O&M on a regional basis. These project amounts were obtained
  from the U.S. Army Corps of Engineers.

PNWA Member Shallow Draft Commercial and Recreational Ports
    PNWA supports full funding for these critical projects. These 
ports, home to fishing fleets, marinas and significant commercial and 
recreational facilities, are critical to the economic survival of their 
communities. Many have small populations, and the ports provide 
employment for a significant proportion of community.

------------------------------------------------------------------------
                                      President's                 Total
  Operations & Maintenance     FY       FY 2009      Support     Request
           (O&M)              2008      Budget      Additional   for FY
                                        Level*       Funds**      2009
------------------------------------------------------------------------
                                 Oregon
------------------------------------------------------------------------
Tillamook Bay & Bar (Port    1,850,  35,000        ...........  4,932,00
 of Garibaldi)                000                                0
------------------------------------------------------------------------
Jetty repair, major          ......  ............  4,897,000
 maintenance report, plans
 & specs; maintenance
 dredging
------------------------------------------------------------------------
Yaquina River (Port of       580,00  0             632,000      632,000
 Toledo)                      0
------------------------------------------------------------------------
Siuslaw River (Port of       691,00  583,000       ...........  2,650,00
 Siuslaw)                     0                                  0
------------------------------------------------------------------------
Dredging, ocean disposal     ......  ............  2,067,000
 site evaluation, north &
 south jetties major
 maintenance report
------------------------------------------------------------------------
Umpqua River (Port of        1,370,  635,000       784,000      1,419,00
 Umpqua)                      000                                0
------------------------------------------------------------------------
Rogue River (Port of Gold    427,00  587,000       ...........  1,271,00
 Beach)                       0                                  0
------------------------------------------------------------------------
Dredging, evaluate north &   ......  ............  684,000
 south jetties
------------------------------------------------------------------------
Chetco River (Port of        409,00  574,000       448,000      1,022,00
 Brookings Harbor)            0                                  0
------------------------------------------------------------------------
                               Washington
------------------------------------------------------------------------
Swinomish Channel (Port of   467,00  0             691,000      691,000
 Skagit County)               0
------------------------------------------------------------------------
Columbia River at Baker Bay  598,00  3,000         840,000      843,000
 (Port of Ilwaco)             0
------------------------------------------------------------------------
Columbia River b/t Chinook   229,00  6,000         699,000      705,000
 & Sand Island (Port of       0
 Chinook)
------------------------------------------------------------------------
* The President's budget only specifies funding for O&M on a regional
  basis. These project amounts were obtained from the U.S. Army Corps of
  Engineers.
** Unless otherwise specified, additional requested funds are for
  maintenance dredging needs.


    Senator Lautenberg. Thank you all for your important 
testimony.
    I'll start with a question for you, Administrator. The 2005 
SAFETEA-LU highway bill required the Bush Administration to put 
together a comprehensive plan for a national intermodal freight 
policy by last summer. We've not even seen a progress report. 
What's the status of this plan?
    Mr. Brubaker. Mr. Chairman, that is an outstanding 
question. I'm going to have to defer to some of the staff here 
and get an answer for the record for you on exactly where that 
is. I will dive into that, though, as soon as I get back and 
call your staff and find out.
    [The information referred to follows:]

     Status of the Comprehensive Plan for Intermodal Freight Policy
    On Friday, August 15, Thomas Bolle and Jeff Onizuk from the 
Research and Innovative Technology Administration (RITA) staff, met 
with Subcommittee staffer Stephen Gardner as a follow-up to the June 10 
freight hearing. During that meeting, Stephen indicated that in terms 
of the status of the comprehensive plan for intermodal freight policy, 
they would like to know where RITA stands now, with a focus on 
methodology and metrics. He also indicated that following that 
discussion they would like to discuss the scope, structure, and plan 
for intermodal activities and the Office of Intermodalism within the 
Department. It was agreed that the best way to follow-up on these 
issues was to schedule a meeting with RITA Administrator Paul Brubaker 
and Subcommittee staff following the August recess.

    Senator Lautenberg. It's an important program and I would 
hope that your people would have been able to present it to you 
with the start of this meeting.
    Without a comprehensive national strategy for freight 
movement, this administration seems incapable of putting good 
data to use to craft policy and make investment decisions to 
meet our transportation challenges. What have you got by way of 
specific examples of how the data that you collect is being 
used for shaping Federal transportation policy?
    Mr. Brubaker. Yes, sir. That was one of the main points in 
my oral testimony, is the quality of the existing data that we 
currently have around freight movement from a holistic, 
multimodal and intermodal way. We don't have the kind of 
quality complete picture of the existing movement of freight 
flow that we would like. For example, one of the programs 
that's under my responsibility is the Commodity Freight Flow 
Survey and that data by the time we get it, collect it, analyze 
it, and release it is 18 months to 2 years old.
    What we need to have is a real-time picture of the 
performance of the supply chain. We know that data exists. We 
know that there are ways to collect that data, leveraging 
technology. In fact, one of the University Transportation 
Centers that we fund down at Georgia Tech actually collects 
that type of information on a private sector-funded project, 
where they are able to track container shipments across the 
country, across the various modes. They can tell you real-time 
exactly where their shipments that they're tracking for a 
private sector client, like I mentioned, are in the supply 
chain.
    What it's revealing is information that we as a Department 
really need to know in terms of where the bottlenecks are in 
the existing supply chain. That's one piece of it.
    The other piece of it is we know, based on what information 
we do have, that there are some significant choke points in the 
supply chain and we've taken some steps and implemented some 
programs, particularly Corridors of the Future, where we're 
looking at freight flow up and down some of the most 
historically crowded corridors, where you've got freight 
competing with passenger movement, to try to relieve congestion 
in those areas.
    But the bottom line is from our perspective the data that 
we currently collect is inadequate and we are undertaking some 
pretty extensive efforts and reviews to try to assemble the 
right kind of data sets, understanding what's relevant and 
trying to revector, fundamentally revector our data collection, 
so that we can support----
    Senator Lautenberg. It's a bit disconcerting that this 
crisis we're facing has been coming on for some time, and I 
would have thought that someplace in your Transportation 
Department, this information would have been part of routine 
management. Very frankly, it's tough to accept the fact that at 
this point in time that you don't have the facility to do it.
    I'm going to go on to my colleagues and we'll have another 
round of questions. With that, Senator Smith, the Ranking 
Member of the Subcommittee. Senator Smith?

              STATEMENT OF HON. GORDON H. SMITH, 
                    U.S. SENATOR FROM OREGON

    Senator Smith. Thank you, Senator Lautenberg.
    All of you, thank you. Your testimony has been very 
helpful. Admiral Larrabee and Glenn, good to see you. Nice to 
have you. Thank you for coming back here.
    I think we're touching on a very, very important issue. 
Whenever I go to Seattle or Portland or Long Beach--and I'm 
sure it's the same at the Port of New Jersey and New York--the 
infrastructure is operating at near capacity, whether you're 
talking highway, rail, or shipping. I wonder if anyone is 
looking at our navigation system, if you look at the congestion 
we're seeing.
    Do you know of any estimates to the impact on our economy 
of congestion in the maritime system? Is anybody focusing on 
the maritime component? We've talked highway, we've talked 
rail.
    Mr. Larrabee. Senator, I think a good example would be the 
labor issues on the West Coast in 2002, when the southern 
California ports were closed. We estimated that for each day 
that those ports were closed the U.S. economy was losing about 
a billion dollars a day. I think most Americans don't 
understand the vital role that ports play in this logistics, 
very complex logistics system.
    The example that I've given could be substituted by a major 
storm. It could be substituted by a terrorist event or in many 
ports congestion, which simply overwhelms the system. Right 
now, I think from our perspective in New York and New Jersey we 
believe that we'll see a doubling of cargo in the next 10 
years. Our port has taken a very systematic approach to 
improving access through a 50-foot channel which we're in the 
middle of constructing right now, spending a good deal on 
terminals, but primarily right now, from my testimony, spending 
in excess of $600 million on rail infrastructure and another 
$400 million on roadways around the port, only to be able to 
accommodate the kind of growth that we think is coming. Those 
were all investments being made for the most part locally.
    Senator Smith. Well, that's why I wonder if anybody's 
broken down the portion of the cost that is attributable to the 
lack of channel maintenance and port facility expansion. It 
just seems to me that in all of our conversations here, I think 
rail is doing a great job, we're certainly investing a lot in 
highways, and heaven knows we need to do more of both, but the 
shipping component I think is grossly undervalued in terms of 
what it's contributing.
    Glenn, when you talk about the Snake and Columbia Rivers, 
four barges, the equivalent of 1900 trucks. Think of what that 
means in terms of energy use, in terms of congestion on our 
highways, and the cost imposed on our highways where we could 
be investing in these port facilities to the great energy 
advantage of our country.
    Mr. Vanselow. One of the things that I pointed out was an 
administration proposal to create a new lockage fee on the 
inland waterways, which would in our area be about a fourfold 
increase. It seems as though it goes against other 
administration and other national policies to in essence try to 
jack up the cost of moving cargo on the most energy efficient 
and least polluting mode of transportation.
    Senator Smith. As you know, Glenn, every year we get our 
port budget zeroed out for basic dredging. My point is maybe 
some of these monies that we're collecting, in the billions of 
dollars, ought to be used to make sure we're maintaining our 
channels and expanding our port facilities, to the advantage of 
all these other modes of transportation. I just don't know that 
we have a very intermodal kind of planning process.
    When you look at the growth that's projected in all of 
these areas, I think we're leaving out a piece of this. That's 
what my questioning is meant to highlight.
    My point--people say, well, you need to raise some more 
fees, we've got to raise some taxes. The Harbor Maintenance Tax 
is an ad valorem tax. It goes to the value. As those values go 
up, this is going to be creating a tremendous amount of money. 
As those values go up, why do we need a new tax? Why can't we 
direct those increased values at both increased capacity and 
maintenance?
    Mr. Vanselow. For both Republican and Democratic 
administrations we've had the problem that the Administration 
in the President's budget underfunds those collections 
dramatically. Again, we're at $4 billion-plus today. It will be 
growing by approximately a billion dollars a year over the next 
few years.
    Senator Smith. Well, my friend the Chairman--it's easy to 
pick on the Bush Administration. We had the same problem with 
the Clinton Administration. This isn't a Republican or 
Democratic problem.
    Senator Lautenberg. He said that and I heard it. I was 
disappointed to hear it.
    Senator Smith. This is money that we are taking. We're 
already collecting enough taxes and we're just simply spending 
it on other general fund issues. But the point is the 
inefficiencies that flow from this, the energy waste that comes 
from this, is a bipartisan shame and I think we ought to fix 
it.
    That probably goes to the Finance Committee. I happen to be 
on that committee. I'm taking this up there, too.
    Mr. Vanselow. Thank you, sir.
    Senator Smith. But what I would like, my take-home to this 
is that we have not a Republican problem, not a Democratic 
problem, not a tax collection problem. We have a tax allocation 
problem.
    Thank you, Mr. Chairman.
    Senator Lautenberg. Thanks very much.
    Senator Carper?

              STATEMENT OF HON. THOMAS R. CARPER, 
                   U.S. SENATOR FROM DELAWARE

    Senator Carper. Mr. Chairman, thanks very much.
    I'm going to be joined here shortly in the anteroom by the 
President of the University of Delaware, so I'm going to ask 
some questions and then slip out and then come back for the 
second round if I could.
    I appreciate very much your holding this hearing. This is a 
very important hearing for us, not just in the Northeast but 
for our country, and we express our thanks to our witnesses for 
coming today.
    Senator Lautenberg along with former Senator Trent Lott and 
myself and others have worked on legislation for a number of 
years that seeks to find a way for us to coexist between 
passenger rail and freight rail and find ways where the Federal 
Government and State governments would partner in terms of 
expanding availability, not just for passenger rail service, 
but also freight rail service.
    As you know, in my old role as Governor, if we wanted to 
build highways, roads, or bridges, the Federal Government 
usually put up about 80 percent of the funds, the State would 
put up 20 percent of the funds. If we wanted to build a transit 
project, the State would put up about 50 percent, the Federal 
Government would put up another 50 percent. But if inter-city 
passenger rail made sense to meet our passenger needs or meet 
our transportation needs in our state, the Federal Government 
would put up nada, nothing, and the states would be expected to 
fund 100 percent.
    I know we've made decisions to fund in some case roads, 
highways, bridges, or maybe transit when it was really more 
appropriate or more efficient to use intercity passenger rail. 
We have the opportunity, I think the potential, for creating 
some partnerships where the Federal Government will put up some 
money, the states will put up some money, maybe for-profit 
freight railroads will put up some money, and we could add to 
their capacity and their capacity that intercity passenger rail 
could utilize as well.
    Let me just ask you to sort of respond to that notion and 
tell me what you like about it and what you don't.
    Commissioner Glynn?
    Ms. Glynn. Well, I think--particularly when it comes to the 
railroads, which do operate within highly defined and 
constrained rights-of-way, the type of interplay you're talking 
about makes a lot of sense for both passenger and the freight 
rail systems. For this reason, AASHTO has been very interested 
in some of the ideas, tax credit ideas and others, that would 
help functionally both the passenger system and the freight 
rail system.
    It is very important as we look at tax credits and we look 
at benefits to what are private companies that we make sure 
that the public benefits are identified and realized. Intercity 
passenger rail as well as transit are two of the places where 
those benefits can functionally interplay positively with the 
freight rail operators and relieve one of the major sources of 
congestion and choke points that right now are a problem for 
both the freight railroads and the intercity passenger rail 
system, which has so much to give this country.
    Senator Carper. Thank you.
    Others, please? Mr. Hamberger?
    Mr. Hamberger. Thank you, Senator. Let me thank you for 
your leadership, Senator Carper, on the floor last week and 
Beth Osborne, for crafting an amendment that takes recognition 
of the public benefits of moving freight by rail, moving people 
by rail, and trying to reduce the vehicle miles traveled both 
on the passenger side and the freight side.
    I think that conceptually we are really trying to head in 
the same direction. We are supporting the Amtrak bill on the 
floor of the House this afternoon. Our individual companies are 
making an individual bilateral effort, in partnership with 
Amtrak, even as we speak, to pick out individual corridors and 
trying to address on-time performance, some of which can 
certainly be tied to the capacity constraints that are out 
there. Perhaps we can improve operations and get on-time 
performance where it needs to be.
    We are committed to trying to improve on-time performance 
with Amtrak and trying to expand capacity for both. As we say, 
the inherent advantage of moving freight by rail is just as 
true for moving people by rail, and we've got to move both, but 
we've got to have enough capacity for both. It cannot be one in 
lieu of the other.
    Senator Carper. We have something in Delaware we call 
DELTRAC, D-E-L-T-R-A-C. You probably have something like this 
in New York, maybe other states that you are from. But the idea 
is to use technology to better utilize the true capacity of our 
road system, whether it's smart signaling or when there's a 
mishap to clean it up, fix it up, get traffic moving in the 
right away. We call it DELTRAC and the idea is to get better 
capacity out of what we already have.
    My hope is that we can find a way to do that with rail. If 
we're smart, maybe we can pull that off.
    My time has expired. I want to come back for a second 
round. I'm going to go meet with our university president and 
I'll come back. Thank you for responding.
    Anybody else have a quick comment on the issue that I 
raised? Anybody at all? Mr. Brubaker?
    Mr. Brubaker. I just wanted to mention that I think 
innovation is something that we believe very deeply can squeeze 
additional capacity out of existing infrastructure. The comment 
was made earlier about freight movement by sea. We've actually 
got a program called Maritime Domain Awareness, where what 
we're doing is we're actually getting visibility of ships as 
they're entering ports or nearing ports or even en route to 
ports, where we can actually help guide them, much in the same 
way we guide planes into airports, so that they arrive just in 
time, so that we can better manage capacity at ports. That's an 
idea that we're looking at.
    Similar type things with managing rail capacity. The only 
difference there is it requires significant cooperation between 
privately held or quasi-governmental agencies like port 
authorities, as well as the railroads, in order to squeeze that 
additional capacity out.
    You mentioned sort of that tradeoff between highway 
investment and rail investment and some other investments in 
terms of movement of freight. We tend to focus on things we are 
a little bit more in control of. What we're trying to do is 
change the paradigm so that we're taking a more holistic look 
of all the elements of all the modes in the supply chain and 
having a better understanding of how they interact, and then 
work and reach out to the private sector and the port 
authorities to better manage the infrastructure.
    Senator Carper. Thanks for sharing that with us.
    Thanks very much, Mr. Chairman. I'll be right back.
    Senator Lautenberg. Mr. Brubaker, I was a little 
bewildered, to say the least, when I asked you about the 
SAFETEA-LU highway bill that required a comprehensive plan and 
apparently caught you by surprise. The section of the program 
that you handle is I assume the chief Department responsible 
for developing that information.
    What went wrong? This was due in 2005. It was instructed to 
be done by last summer, almost a year ago. Were you surprised 
at all or interested enough to make inquiries about where 
things were without having now--you'll forgive me, sir--having 
to search for staff to report on it?
    Mr. Brubaker. Sir, I will find out exactly what the history 
of this is.
    Senator Lautenberg. So you haven't had a chance to look for 
it before?
    Mr. Brubaker. No, sir, I have not. Just in the interest of 
full disclosure, I've been on this job a little less than a 
year and I've tried to inventory all of my SAFETEA-LU 
requirements, and apparently that one is not one that has been 
brought to my attention. I will promise you I will find the 
answer to that question and get back to you.
    Senator Lautenberg. Please. It's so important because it's 
fundamental to our planning.
    Mr. Brubaker. I agree.
    Senator Lautenberg. I wanted to ask this question 
generally. Some have suggested that we could reduce truck 
traffic on our highways by using barges and ships to move 
freight between two U.S. ports on marine highways. But a 
shipment from overseas that then travels between these two U.S. 
ports, Mr. Vanselow, faces double taxation because it pays the 
Federal Harbor Maintenance Tax twice.
    Now, might removing this tax for the domestic portion of 
this shipment provide incentive for these so-called short-sea 
shipping moves to get more trucks off the road?
    Mr. Vanselow. If you don't mind, Mr. Chairman, I'm going to 
use your question to speak a little more broadly about the 
Harbor Maintenance Tax. First, industry does not object to a 
tax. We do believe that it is necessary to fund navigation. 
These are all Federal channels. They are all maintained by the 
U.S. Army Corps of Engineers. They are all appropriated by 
Congress, and it is the user fee that should be paying for 
that.
    The user fee does have some issues. One we've talked about, 
the surplus. Others, we have had an issue at our north and 
south borders, where Seattle and Tacoma, for example, are 
competing with Vancouver, B.C., and they are advertising no 
Harbor Maintenance Tax here, trying to woo cargo away from U.S. 
ports. This is cargo destined to U.S. importers, but moving 
through a foreign country to get there. So there are other 
issues.
    We do believe that we do need to take care of those kinds 
of movements. If a cargo is taxed once coming into the United 
States, that ought to be all that it is taxed.
    Senator Lautenberg. But also the unavailability of the full 
revenue stream that is developed there has retarded progress.
    Mr. Vanselow. One of the issues that we have is it is the 
largest ports in the country that need the ability to exercise 
short-sea shipping because of their capacity constraints. We 
have a problem through OMB and administration priorities, it is 
the largest ports in the country that are the top priority for 
getting funding for expenditure out of that Harbor Maintenance 
Tax. The smaller ports, which could be the feeder ports, are 
the ones that Senator Smith just remarked are zero in the 
Administration's budget proposal. We have to come to Congress 
to ask for more.
    So if we could more broadly spend that--it's not just L.A. 
and Long Beach that needs money. Their overflow opportunities 
go to Oxnard and Port Hueneme and elsewhere on the California 
coast. We have the same issues in the Pacific Northwest.
    Senator Lautenberg. Mr. Hamberger, we spend some $40 
billion a year on highways, $15 billion on our aviation system, 
but little to none on rail. What do you think we could do 
better to balance the Federal transportation policies, to 
encourage investment in all modes of transportation?
    Mr. Hamberger. Well, the difference, of course, for freight 
railroads is that we are privately owned. So I think it would 
be most appropriate for the Federal Government to provide an 
investment tax credit, an investment tax incentive, to 
encourage even more investment than the industry is already 
undertaking.
    As you know, we spent on average about 17 or 18 percent of 
all revenue over the last 10 years, on capacity expansion. We 
have done a survey of our members and if the legislation co-
sponsored by Senator Conrad and Senator Smith were to pass we 
believe that an additional $1.5 billion would be spent just by 
the railroads on capacity expansion. It's new capacity. That 
would create about 30,000 jobs immediately, not when a 
government agency says it's OK to start building. But these are 
projects that are on the drawing board, ready to go, for which 
capital does not now exist. The tax incentive would move those 
projects forward. We think it would be helpful in job creation, 
but it also provides $1.5 billion of more capacity per year.
    I would point out one of the reasons that a lot of Mr. 
Vanselow's members support that legislation and the American 
Association of Port Authorities supports it is because it would 
also be available to anybody who invests in new capacity. That 
is to say if somebody, a private investor, were to want help to 
finance a new intermodal yard, a land-side facility near a 
port, the rail pieces of it would be eligible for the 
investment tax credit.
    So I think that that is something that could be done 
immediately. The second companion piece, of course, is the 
short line tax credit, which expired at the end of 2007. In the 
first year it was enacted, half a million additional ties were 
purchased in comparison to the number from the previous year. 
And these are short lines that need to upgrade their track to 
be able to get into the heavier service.
    So it works and I think that would be the first thing. The 
second, of course, is the public-private partnerships that 
everybody has referenced. I would echo Commissioner Glynn's 
comments that these are not handouts, this is not a subsidy. 
The private sector should pay for the private sector benefits 
and the public sector should pay for the public sector 
benefits, and in that way it is truly a win-win.
    Mr. Brubaker. Mr. Chairman, if I might.
    Senator Lautenberg. Yes.
    Mr. Brubaker. Just to piggyback on what's been said, there 
are some programs, one of which was authorized under SAFETEA-
LU, which is the private activity bond. We actually received, 
the Department's received, a couple of applications, actually 
three applications, for intermodal freight transfer facilities, 
two of which are in the State of Illinois, with the idea of 
eliminating bottlenecks in and around Chicago. That amounts, 
those three applications, total some $2.2 billion and will, if 
they're fully funded, are going to wind up adding capacity to 
handle over two million containers per year.
    So there are some activities that we're engaged in, as well 
as some TIFIA financing as well.
    Senator Lautenberg. Thank you.
    I'm going to turn over the chairmanship to my distinguished 
colleague from Delaware. Since our interests are so closely 
connected, I feel safe in saying that I'm sure that Senator 
Carper will follow up his interest in railroads and freight 
movement. These two little states of ours represent a lot of 
seagoing business and a lot of important transportation 
facilities. So, please.
    Senator Carper [presiding]. Thank you, Mr. Chairman.
    I was telling Senator Lautenberg earlier today, when we 
were on the floor during a series of votes, that normally I 
take the train from Delaware to Washington almost every day and 
then back at night. Yesterday I took the train the other way, 
from Wilmington to Philadelphia in the morning, and then a bit 
later in the morning from Philly to New York City, and early 
afternoon from New York back down to Wilmington.
    I wasn't surprised--the first train left Wilmington for New 
York, oh, about 8:05 and it was still rush hour and the train 
was full, not surprisingly. We left Philadelphia about 10 
o'clock going to New York and it was not rush hour and the 
train was full. We left New York a little bit after 2 o'clock, 
not rush hour, and the train was standing room only. I thought 
to myself, something's going on here. Something is going on 
here. Amtrak is, especially in the Northeast Corridor right 
now, sort of bursting at the seams in terms of providing 
capacity.
    I know the freight lines throughout the country face a 
similar situation. It would be great if we could be smart 
enough to figure out how to address both of these at least to 
some extent. A friend of mine likes to say ``how to kill two 
stones with one bird.'' Maybe we can find a way to kill two 
birds with one stone.
    Now that I am the Chair of the hearing, I think I'd like to 
call up a couple of bills of mine.
    [Laughter.]
    I'm the only one here, at least for now--six staff just 
jumped me all at once to make sure I didn't do that.
    A question initially for Commissioner Glynn. Do people call 
you ``Commissioner''?
    Ms. Glynn. Yes, sir.
    Senator Carper. All right. That's the same as 
``Secretary,'' like a cabinet secretary?
    Ms. Glynn. It is, sir, yes.
    Senator Carper. Ann Canby used to be our Secretary of 
Transportation in Delaware, but I think she was also once the 
Commissioner of Transportation in New Jersey.
    Ms. Glynn. She has been many things and I'm sure will be 
many more.
    Senator Carper. I loved working for her when I was 
Governor.
    [Laughter.]
    Ms. Glynn. We all do.
    Senator Carper. In fact, she was the person who recommended 
Beth Osborne to us, which was one of the best hires we ever 
made in my Senate office.
    But Commissioner Glynn, I think you mentioned in your 
testimony that government tends to divide transportation 
responsibility by mode. Here in the Senate we have, as you 
probably know, rail and air jurisdiction in this Committee. 
Over in the Committee on Environment and Public Works, we have 
jurisdiction over highways. In the Banking Committee we have 
transit. I serve on all three, so I get to play on all of them. 
I think I'm the only Senator who serves on all three.
    But at the U.S. Department of Transportation, I think each 
agency focuses on the movement of machines, trucks, trains, 
planes, cars, and ships. But I have found that people don't 
necessarily travel in this way. We like to get from point A to 
point B quickly, we like to get there conveniently, we like to 
get there in a way that's affordable.
    Much of the time, we use multiple modes for one trip. In 
Wilmington, a lot of people, until recently and even still, 
will take their car or a bus or a taxi or something to go to 
the Wilmington train station, will get on the train, will 
travel to BWI. We take a shuttle from BWI getting off the train 
to the airport. Then we take an airplane wherever we want to 
go.
    But that's the way people move, and we do that because it's 
so affordable as a result. Freight movement is similar. You 
have businesses and consumers who just want to receive their 
goods quickly, they want to get them safely, they want to 
receive them affordably.
    Here's my question. It's a long lead-in to a fairly short 
question, but how do we break through what we call government 
stovepiping to ensure that we institute policies here that 
facilitate a smooth flow of goods and I suppose of people, too?
    Ms. Glynn. That has been one of the challenges since the 
various TEA's began. And it is one that remains for us. Looking 
at the problem from the standpoint of our customers, looking at 
the problem from the standpoint of functionality, rather than 
our own jurisdictions, has proved very hard for all of us. Yet 
it is something that we need to keep working at.
    Ports are perhaps the best examples of this because ports 
are by nature multimodal and intermodal. That is their 
business. The fact that we have one stream of revenue going to 
dredging, another stream going to rail improvement or not, a 
third one going to truck access, and all of this, each coming 
from an environment where the contribution may be viewed 
against a finite set of purposes and resources, tends to make 
each investment a zero sum game.
    That is one of the problems that we have been striving 
against, and I must say that Ann Canby has been very diligent 
in encouraging us to strive against, so that we do break 
through those stovepipes and that we look at it from the 
standpoint of how can we address all aspects of this choke 
point, not simply the rail aspect, not simply the road aspect, 
not simply the depth of water--all aspects of each choke point.
    If we can address the choke points, that will inure to the 
benefit of the entire system because the entire system is 
interdependent.
    Senator Carper. Anyone else on this particular point?
    Mr. Brubaker. Yes, sir, if I may.
    Senator Carper. Yes, sir, Mr. Brubaker. Do people call you 
``Administrator Brubaker''?
    Mr. Brubaker. Yes, that's fine.
    My office produced a document called ``Transportation 
Vision for 2030'' back in January and the whole notion here was 
that we would begin to focus exactly how you described, on 
origin to destination for passenger movement, origin to 
destination for freight movement and really, because we've got 
the Office of Intermodal within the Research and Innovative 
Technology Administration, really focus on cross-modal 
activities and actually encourage the other modal 
administrators--and they have been very, very receptive, some 
of whom sort of refer to their stovepipes as the ``silos of 
excellence.'' But nevertheless it's important that we break 
down those silos and begin to work across modes, because truly 
it is how we move freight and we move people. It is multimodal, 
as I hope we pointed out here today, and we really need to 
focus on how people move and how freight moves as well, because 
that is in essence how we're going to crack the code.
    Senator Carper. Thank you.
    Yes, sir, Mr. Hamberger.
    Mr. Hamberger. People call me Mister Ed.
    Senator Carper. They've probably called you worse, and 
certainly me too.
    Mr. Hamberger. Yes.
    We have a freight stakeholders coalition that was quite 
active in the last surface transportation bill. The Association 
of American Port Authorities was the honorary chair, and it 
included the American Trucking Association, our association, 
and others. John Horsley of AASHTO, for this upcoming 
authorization, has been very active in trying to get everybody 
in the room together under AASHTO's banner to take a look and 
make some significant contributions to the National 
Transportation Policy and Revenue Commission report that 
Secretary Peters chaired.
    So I think there is a recognition that it's not just inside 
the halls of government, but also those of us in the private 
sector need to make sure that we're cooperating and working 
together as well.
    Senator Carper. All right, thank you.
    We've been joined in the hearing by my Chief of Staff, Jim 
Reilly, and he has with him the President of the University of 
Delaware, Pat Harker. We were just chatting outside the hearing 
when I was in and out of the room, and the last question I'm 
going to ask was actually one that he just raised to my own 
mind.
    I was privileged for a while in the late 1990s to serve on 
the Amtrak Board of Directors. Kind of ironic. I was Governor 
at the time. I was nominated by the President, confirmed by the 
Senate, and served on the Amtrak Board. There is now another 
person named Tom Carper who serves on the Amtrak Board. It's 
not a real common name and it's caused enormous confusion for 
people, who say how can Carper be in the Senate and still serve 
on the Amtrak Board? It's a different guy, a lot smarter guy, I 
think.
    But I was talking with President Harker when I was out 
meeting with him in the conference room and I was sharing with 
him a little bit about what we were discussing here. I 
reflected back on one of the things we tried to do during my 
time on the Amtrak board. We said, Amtrak doesn't do badly in 
terms of paying for its expenses out of the fare box in densely 
populated corridors. They actually do pretty well, including 
the Northeast Corridor. But when running these long distance 
trains in a lot of cases Amtrak loses its shirt, and the 
taxpayers end up subsidizing a fair amount of that.
    We came up with the notion of how do we do a better job of 
covering our costs on long distance trains, by in some 
instances putting on a couple of extra cars on the train, to 
carry, not people, but commodities, in some cases commodities 
that are time sensitive in terms of their delivery. We 
negotiated with the freight railroads to make sure that they 
didn't object and so that we could use their tracks and provide 
this service.
    I left the Board and the idea, which started off with a 
fair amount of fanfare, kind of died out. I thought at the time 
that it was a good idea. I'm still convinced it might be a good 
idea. President Harker said to me that at an earlier time in 
his life--he came to us from Wharton, where he was the 
President of the Wharton School until this past year. But he 
said as an engineer he had worked on a variety of projects 
involving subway transit systems within large cities, and he 
came up with the notion, or folks he was working with came up 
with the notion, of in some cases putting a rail car along with 
transit, maybe at the back of the train, to carry commodities 
from place to place where you have such tie-ups. I saw it 
yesterday in New York City--with trying to move trucks and 
delivering goods, not just the taxis, but just a lot of trouble 
trying to move trucks around the city; and suggested that their 
idea was to use the transit system, get the stuff underground. 
UPS or whoever is providing the delivery could still be there 
and run at the transit stops, run a delivery service once the 
commodities are offloaded from subways.
    Anybody want to take a shot at that, either Amtrak's 
original idea when I was on the Board or what President Harker 
sort of outlined? I probably didn't do justice to your idea, 
Mr. President. But would you just react to either of those 
ideas?
    Mr. Brubaker. If I could, as good an idea as it is, of 
course, Senator, it just did not work in application, for two 
reasons that I'm aware of, and I'll get you more on this. It 
was a few years ago. But if memory serves correct, one is of 
course that people and freight move at different times and at 
different speeds. When the Amtrak train comes into the 30th 
Street Station there in Philadelphia, it's there for about 5 
minutes, which is not nearly enough time to either unload or 
hook up additional cars.
    Senator Carper. We weren't talking about moving freight in 
the Northeast Corridor.
    Mr. Brubaker. Well, in any event, the point being that 
wherever the train and the passenger is moving it is usually at 
a different time and a different speed than the freight.
    Then second, in many cases the station is not configured to 
handle additional cars, and so either it would be hanging out 
onto the main line or they'd have to go somewhere else to pick 
up. It just conceptually sounded good, but out there in 
practice did not work, and I think they consequently pulled the 
plug on it.
    Senator Carper. The stationmaster in Sioux City says: Fred, 
where are we going to put all these bananas?
    Mr. Brubaker. Yes.
    Senator Carper. All right. How about the second half of 
that? This is the idea that I've done a poor job in describing 
of President Harker's, but an idea of maybe using transit and, 
if you will, appending to a subway or a MARC train or 
something, a vehicle or cars that can carry such things other 
than people? Does that resonate or make any sense? Is anybody 
doing it? Maybe somebody's doing it and we don't even know 
about it.
    Ms. Glynn. I'm not aware of anyone who's doing it, but I am 
acutely conscious of the fact that, at least in the New York 
City subway system and I believe in most of the larger ones, 
we're scrounging for track capacity and station capacity. So 
except on off hours--and in off hours, of course, all things 
become possible--to give up that platform capacity to a new use 
would be probably difficult.
    There is of course, particularly on off hours and on 
weekends, a different situation, and I know that some systems 
have, for instance, started offering different things such as 
bicycle cars on weekends, so that people who want to travel 
with their bicycle, go to the beach, whatever, it is easier for 
them to do it. It's not quite the freight issue, but it does 
help give us a little more flexibility when it comes to 
mobility.
    Senator Carper. We have buses in Delaware, people can take 
their bike to the beach, and take it on a bus.
    Yes, sir?
    Mr. Brubaker. We may also want to examine some of the 
safety implications of such an arrangement, because obviously 
passenger rail cars are built for strict safety standards, 
whereas freight cars are built to lesser safety standards, and 
what happens when you combine the two. It could be pretty--
there could be some pretty significant unintended consequences.
    Senator Carper. Fair enough.
    I have one more question. I won't ask it here; I'll ask it 
for the record, and if you'll take a moment and respond to it. 
And I think other colleagues of ours may have questions that 
we'd like to pose to you. If you'd take a few minutes to 
respond to those questions, we'd all be grateful.
    Let me just ask our staff here, any idea how long we leave 
the record open for questions to be posed for our witnesses? 2 
weeks? 2 weeks.
    Again, we appreciate very much your being here and 
responding to our questions. It's been enjoyable and I think 
highly informative, and as it turns out this is important 
stuff. So thank you very much.
    With that, this hearing is adjourned. Thank you.
    [Whereupon, at 3:56 p.m., the hearing was adjourned.]
                            A P P E N D I X

  Prepared Statement of Hon. Susan M. Collins, U.S. Senator from Maine
    Mr. Chairman, the skyrocketing price of diesel fuel is putting an 
increasing strain on our trucking industry. To illustrate the problem, 
consider this fact. In 1999, a Maine truck driver could purchase $500 
of diesel fuel and drive from Augusta, Maine, all the way to 
Albuquerque, New Mexico. Today, a driver who purchases $500 of diesel 
and leaves Augusta would not even make it to Altoona, Pennsylvania, and 
because diesel prices continue to increase, the problem is only getting 
worse.
    I recently met with Kurt Babineau, a small business owner and 
second generation logger and trucker from the Penobscot County town of 
West Enfield, Maine. Like so many of our truckers, Kurt has been 
struggling with the increasing costs of running his operation. All of 
the pulpwood his business produces is transported to Verso Paper in 
Jay, Maine, a 165-mile roundtrip. This would be a considerably shorter 
trip except that current Federal law forbids trucks weighing more than 
80,000 pounds from driving on Interstate 95 north of Augusta. Instead, 
these heavy trucks are forced off the modern four-lane, limited-access 
highway, and onto smaller, two-lane secondary roads that pass through 
cities, towns, and villages.
    This law not only increases the distance that trucks must travel, 
it increases their travel time and results in a higher consumption of 
diesel fuel. In fact, Kurt estimates that permitting his trucks to 
travel on all of Interstate 95 would save him 118 gallons of fuel each 
week. At approximately $4.50 a gallon, and including savings from his 
drivers spending less time on the trip, he could save more than $700 a 
week, and more than $33,000 and 5,600 gallons of fuel each year. These 
savings would not only be beneficial to Kurt's bottom line, but also to 
his employees, his customers, and to our Nation as we look for ways to 
decrease the overall fuel consumption.
    To help provide assistance to our truckers, I recently introduced 
the Commercial Truck Fuel Savings Demonstration Act, with my senior 
colleague Senator Olympia Snowe as the chief cosponsor. Our legislation 
would create a two-year pilot program that would permit trucks carrying 
up to 100,000 pounds to travel on the Federal Interstate system 
whenever diesel prices are at or above $3.50 a gallon.
    Permitting trucks to carry up to 100,000 pounds on Federal highways 
would lessen the fuel cost burden on truckers in three ways. First, 
raising the weight limit would allow more cargo to be put into each 
truck, thereby reducing the numbers of trucks needed to transport 
goods. Second, trucks carrying up to 100,000 pounds would no longer 
need to move off the main Federal highways where trucks are limited at 
80,000 pounds and take less direct routes on local roads requiring 
considerably more diesel and extended periods of idling during each 
trip. Finally, trucks traveling on the interstate system would save on 
fuel costs due to the much superior road design of the interstate 
system as compared to the state and local roads.
    Trucking is the cornerstone of our economy as most of our goods are 
transported by trucks at some point in the supply chain. Some 
independent truckers in Maine have already been forced out of business 
due to rising fuel costs. More businesses are facing a similar fate if 
relief is not provided. The Commercial Truck Fuel Savings Demonstration 
Act offers an immediate and cost effective way to help our Nation's 
struggling trucking industry, and individual drivers like Kurt 
Babineau.
    Thank you for the opportunity to submit my statement, which I hope 
will generate increased awareness of the need to address the problems 
facing the movement of freight by truck throughout the country.
                                 ______
                                 
 Response to Written Question Submitted by Hon. Frank R. Lautenberg to 
                         Hon. Paul R. Brubaker
    Question. The Bush Administration has tried to eliminate one of the 
Federal Government's most powerful public-private partnership tools 
when it comes to freight investment--the Railroad Rehabilitation and 
Improvement Financing (RRIF) program. This program provides low-
interest loans and loan guarantees for rail infrastructure projects and 
could help fund projects to reduce major chokepoints like in Chicago. 
Why has the Bush Administration tried to kill this program, given its 
tremendous potential to help improve our infrastructure?
    Answer. The President's 2009 budget does not propose terminating 
the RRIF program, but instead proposes reforming it to improve its 
effectiveness. Likewise, the Administration has sent authorizing 
legislation to Congress to sharpen the program's focus. The 
Administration continues to accept and process loan applications and 
administer the Railroad Rehabilitation and Improvement Financing (RRIF) 
program.
    However, the Administration questions the program's current design 
and purpose for several reasons. First of all railroads--including 
Class I railroads that generate tens of billions of dollars in annual 
revenue--are fully eligible for credit assistance under the program. 
Privately-owned rail companies that have access to the Nation's 
financial markets have powerful competitive incentives to effectively 
tap into those markets. The Administration has proposed limiting RRIF 
eligibility to small railroads only which are most in need of 
assistance. Second, in the event of a default on a RRIF loan, the 
Federal Treasury would be responsible for covering consequent losses. 
Given that Congress expanded the program's size by 10-fold--from $3.5 
billion to $35 billion--those losses could be substantial. The 
Administration would limit the amount of funds a railroad could borrow, 
corresponding with the focus on small companies. Finally, railroads 
already benefit from several 2004 changes to the tax code, including 
relief from diesel fuel taxes. The Administration has proposed 
legislative reforms for the program to prioritize assistance to meet 
demonstrated needs and to ensure the efficient use of taxpayers' funds 
and to better protect the Federal interest. The Department has also 
recently published a notice of proposed rulemaking as a part of the 
process for administratively addressing some of the concerns with the 
program.

                                  
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