[Senate Hearing 110-1254]
[From the U.S. Government Publishing Office]




                                                       S. Hrg. 110-1254
 
                           GOODS MOVEMENT ON
                         OUR NATION'S HIGHWAYS

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

                                HEARING

                               BEFORE THE

               COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 8, 2008

                               __________

  Printed for the use of the Committee on Environment and Public Works
  
  
  
  
  [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
  
  


      Available via the World Wide Web: http://www.access.gpo.gov/congress.senate

                               __________



                          U.S. GOVERNMENT PUBLISHING OFFICE
85-533 PDF                     WASHINGTON : 2015                         

______________________________________________________________________________________
For sale by the Superintendent of Documents, U.S. Government Publishing Office, 
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center,
U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free).
E-mail, [email protected].  











               COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

                       ONE HUNDRED TENTH CONGRESS
                             SECOND SESSION

                  BARBARA BOXER, California, Chairman
MAX BAUCUS, Montana                  JAMES M. INHOFE, Oklahoma
JOSEPH I. LIEBERMAN, Connecticut     JOHN W. WARNER, Virginia
THOMAS R. CARPER, Delaware           GEORGE V. VOINOVICH, Ohio
HILLARY RODHAM CLINTON, New York     JOHNNY ISAKSON, Georgia
FRANK R. LAUTENBERG, New Jersey      DAVID VITTER, Louisiana
BENJAMIN L. CARDIN, Maryland         JOHN BARRASSO, Wyoming
BERNARD SANDERS, Vermont             LARRY E. CRAIG, Idaho
AMY KLOBUCHAR, Minnesota             LAMAR ALEXANDER, Tennessee
SHELDON WHITEHOUSE, Rhode Island     CHRISTOPHER S. BOND, Missouri

       Bettina Poirier, Majority Staff Director and Chief Counsel
                Andrew Wheeler, Minority Staff Director
                
                            C O N T E N T S

                              ----------                              
                                                                   Page

                          THURSDAY MAY 8, 2008
                           OPENING STATEMENTS

Boxer, Hon. Barbara, U.S. Senator from the State of California...     1
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma...    13

                               WITNESSES

Gallis, Michael, Principal, Michael Gallis & Associates..........     2
    Prepared statement...........................................     5
Responses to additional questions from:
    Senator Carper...............................................    10
    Senator Inhofe...............................................    11
Potts, Charlie, CEO, Heritage Construction and Materials, The 
  Heritage Group, on Behalf of The American Road and 
  Transportation Builders Association............................    15
    Prepared statement...........................................    18
Responses to additional questions from:
    Senator Carper...............................................    37
    Senator Inhofe...............................................    38
Downey, Mortimer L., Chairman, PB Consult, on Behalf of The 
  Coalition For America's Gateways and Trade Corridors...........    40
    Prepared statement...........................................    42
Responses to additional questions from:
    Senator Carper...............................................    47
    Senator Inhofe...............................................    48


                           GOODS MOVEMENT ON 
                         OUR NATION'S HIGHWAYS

                              ----------                              


                          THURSDAY MAY 8, 2008

                                       U.S. Senate,
                 Committee on Environment and Public Works,
                                                    Washington, DC.
    The full committee met, pursuant to notice, at 10 a.m. in 
room 406, Dirksen Senate Building, Hon. Barbara Boxer (chairman 
of the full committee) presiding.
    Present: Senators Boxer, Inhofe, and Barrasso.

           OPENING STATEMENT OF HON. BARBARA BOXER, 
           U.S. SENATOR FROM THE STATE OF CALIFORNIA

    Senator Boxer. Good morning, everybody. I call the hearing 
to order. We welcome you here.
    We are beginning to look at the reauthorization of the next 
highway bill, and this is an important time for us to just hear 
from the experts, from the folks who have ideas, so we are 
looking forward to hearing from our panel.
    I am going to make an opening statement. If my Ranking 
Member arrives, or any other colleagues, they will make an 
opening statement, and then we will call on each of you. We 
will give you 7 minutes each, and then if you need more time we 
will extend that a little bit, and then we will go to 
questions.
    The tragic collapse of a Minnesota bridge in August of last 
year reminded us we need to invest more in the maintenance and 
preservation of our current transportation system. However, 
increased resources to better maintain the highways and bridges 
are not our only need; we face major challenges due to 
increased congestion and goods movement.
    The interState system was designed in the 1950's, when the 
number of vehicle miles traveled was certainly much less than 
it is today. Miles traveled have increased from 600 billion in 
1955 to 3 trillion in 2006. Americans have been on the move. It 
is estimated we could reach 7 trillion miles traveled by 2055.
    Freight handled by trucks is projected to double by 2035, 
and the percentage of freight traffic handled by trucks will 
also increase. Traffic through West Coast ports alone could 
triple over the same period. We are already facing major issues 
in our ports with the quality of the air or lack thereof, so, 
obviously, we have a lot of work to do in this Committee.
    In 2005, the Texas Transportation Institute found that 
congestion resulted in 2.9 billion gallons of wasted fuel--
imagine, wasted fuel at the prices that we are paying now--4.2 
billion hours of extra time, and $78 billion in delay and fuel 
costs. The value of delay and fuel costs per traveler was $710 
in 2005, up from $260 in 1982.
    Similarly, the Department of Transportation has estimated 
that the cost to our economy from traffic congestion is as high 
as $200 billion per year.
    As our economy grows, congestion will continue to worsen 
unless we make major changes to improve goods movement. And 
nowhere is the need greater than in my State, particularly 
Southern California.
    Forty-five percent of all containerized cargo destined for 
the continental U.S. passes through California's ports. We know 
trade is vital, and we want to make sure we continue trade, but 
it does have some adverse impacts: it clogs our roads, fouls 
our air, pollutes our water, it creates safety issues. We have 
to figure out how to mitigate those impacts so we can continue 
to grow.
    We also know the movement of goods has an impact on air 
quality and global warming. Freight transportation is still 
largely driven by fossil fuel combustion, and with that 
combustion comes emission of greenhouse gases.
    As a percentage of all mobile source emissions, heavy-duty 
truck, rail, and water transport together account for more than 
25 percent of CO2 emissions, approximately 50 percent of NOx 
emissions, and 40 percent of particulate matter emissions in 
the U.S.
    According to the California Air Resources Board, 75 percent 
of diesel particulate emissions in California are related to 
goods movement. So we can see all these issues are related. It 
is all a circle. And we know that 2400 premature deaths occur 
due to diesel emissions, and we see this only getting worse if 
we don't act. By reducing congestion, we can improve air 
quality and public health.
    And as I look at the next reauthorization, to me, goods 
movement and air quality, those are going to be very key 
principles of our bill.
    The current highway and transit bill, SAFETEA-LU, will 
expire on September 30th, 2009. Goods movement and its impact 
will be, again, at the top of my list of issues, and today's 
hearing is a first step.
    I appreciate the witnesses for being here. I look forward 
to your testimony and to working with you to ensure that the 
next bill makes real improvements to goods movement that will 
reduce congestion, improve air quality, and help grow our 
economy.
    Senator Boxer. I will keep the record open for 5 days so 
other colleagues can put their statements in the record, but 
why don't we start off with Michael Gallis, Principal, Michael 
Gallis & Associates. Welcome, sir.

            STATEMENT OF MICHAEL GALLIS, PRINCIPAL, 
                  MICHAEL GALLIS & ASSOCIATES

    Mr. Gallis. Thank you, Senator Boxer. It should be no 
surprise to anyone to say that we are living in the midst of 
the greatest change in human history. But what is surprising is 
how fast and how broad these changes are.
    While we are here to discuss roads, we must understand, as 
the Senator has pointed out, that they are components of a 
larger transportation network that is the foundation of the 
U.S. economy. The real question on the table is what kind of 
system the U.S. needs to remain highly competitive within this 
global economy. And a second question starts to arise out of 
that which says why would the Nation with the most developed 
infrastructure in the world face not a problem, but what is 
called by many a crisis, that threatens our competitiveness 
within a world marketplace?
    It is because of the fact of the dramatic changes that took 
place after the collapse of the Soviet Union, leading to global 
market integration and the integration of the global network. 
We must remember that the U.S. system was created in the 20th 
century to serve the economy and trade patterns of a free 
world, not the 21st century to match the trade patterns and the 
economy of the 21st century.
    To put the changes that we are living in to three basic 
categories, I would like to point out these three. So here we 
have an image of the free world, U.S. in the center of that, 
communism on two sides. Here is the integrated global network, 
the first one. What is driving the goods through our ports in 
Southern California, New York, even into Chicago, putting huge 
new pressures is this: more nations connected into a world 
grid, pushing freight through this as production moves around 
the world.
    The second issue, a new global economic geography. It used 
to be the U.S. was the largest nation within a free world 
configuration, largely a domestic economy, only 10 percent 
dependent on foreign trade. Today, over 25 percent. We were, 
had the advantage of economies of scale and a national 
infrastructure. But today China, of course, much larger 
economies of scale and on a continental basis, does not have to 
struggle with cross-national boundary issues in formulating 
strategies.
    The third one, a new economy. We don't really appreciate 
what information technology has done in replacing mass 
standardization. Today we have mass customization and the 
global redistribution of economic activity by which more 
pieces, parts, move more rapidly in more coordinated movements 
to more places than ever before, leading to a flood of goods on 
the freeway.
    This change accelerated after 2050. The world economy grew 
an amazing 52 percent between 2000 and 2006, from $31.9 
trillion to $48.5 trillion--World Bank numbers--which gives you 
a sense of where is all this growth coming from in such a short 
time.
    We like to put the four problems facing the transportation 
into what I call the four other Cs. The trucker associations 
have created the three Cs. They got there first, so mine are 
the four other Cs.
    The first C I will talk about is condition. We know a lot 
about that; the Senator spoke about that. I can't really add 
much to that. We know we have problems and they are huge.
    The second one was capacity. And a lot has been discussed 
about that capacity issue. But I want to talk about 
configuration. I want you to look to this light map for a 
minute. Everybody has seen this; it is on posters, walls. We 
take it for granted. But look at it again. Where is the 
Canadian border? Look at it again? I thought for sure the 
development between Mexico and the U.S. would show up, but 
where is the Mexican border? And where is any State border?
    What you see is dots of light. Those are called economic 
regions. And you can see Denver, you can see Los Angeles, San 
Francisco, New York, Chicago. And then, if you look closely, 
you will see corridors. That is the network of transportation 
that is covering the United States. That is what we are talking 
about investing in. And where should we invest and how should 
we invest in that network?
    If the first C is condition, second C is capacity, the 
third C is configuration. And the way we do it today is this is 
a congestion map. I call it chasing the red. You say put some 
money on this red, put it on that red, and we fight over which 
red to put the money on. But, in fact, this is what is 
happening on a continental basis. There is a huge 
reconfiguration, largely driven by the private sector, that is 
putting huge pressure on key points like Southern California, 
like Chicago, like Memphis, Detroit, New York. Huge pressure as 
the reorganization of the rail network, the seaborne trade, 
airfreight moves across the Country, and this is the 
projections and corridors.
    This issue, the third C, configuration, raises the fourth 
C, constraints. While this reconfiguration is largely driven by 
the private sector, there has been no public sector response. 
There is no policy framework to understand these changes. It is 
not simply a funding problem; it is a national policy question 
of how is the public sector--from Federal, State, and local--
going to respond to the private sector. Huge gap.
    So what is the way to the future? I believe there are three 
things that we must address as we think of reauthorization and 
is it just a financial question. First, what we have done is we 
fund projects. But we don't have a strategy or framework to 
understand how any individual project fits into a broader 
national picture of what it will achieve on a national basis. 
How do we understand the tradeoff?
    Second, transportation planning has been largely reactive. 
That is this: Where is the congestion? Put the money there. It 
hasn't been proactive, saying, What is happening to the Nation, 
the pattern of global trade? What do we need to achieve as a 
Nation to retain our competitiveness? So, as a result, we react 
to situations, we don't proactively say where do we want to go.
    And the last one, strategic partnerships. We talk about the 
private sector reorganizing the grid, moving in new ways, the 
Federal side, the State side. How are we going to create the 
partnerships to create policy and to create the financing 
because of the vast amounts of money?
    And when I am in New York, I love to use this slide because 
I like to say to people are you mission driven? And they say, 
come on, Mike, this is New York; we are big boys, we know what 
we are going. But, in fact, this is the competition in the 
world today.
    So if we are big boys and know what we are doing, and these 
people are mission driven, we are competing in a new global 
economy.
    Thank you very much.
    [The prepared statement of Mr. Gallis follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
          Responses by Michael Gallis to Additional Questions 
                          from Senator Carper

    Question 1. Government usually divides transportation by 
mode. In the Senate, we have highways in this committee, rail 
and air in the Commerce Committee and transit at Banking. At 
the U.S. Department of Transportation, each agency focuses on 
the movement ofmachines--trucks, trains, planes, cars and 
ships.
    But I have found that people rarely look at travel this 
way. They just want to get from point A to point B, quickly, 
conveniently and affordably. Most of the time, they use 
multiple modes for one trip. Freight movement is the same. 
Businesses and consumers just want to receive their goods 
quickly, safely and affordably.
    How do we break through this government stove-piping to 
ensure that we institute policies that facilitate smooth flow 
of goods (and people)?''
    Response. Ossification of bureaucratic structures has been 
one of the hallmarks of decline of empires since Roman times. 
Unless we can address the reformation of our current committee 
structure, we face serious consequences.
    The problem is that our current transportation system was 
created during the past two centuries in response to, first, 
the needs for seaports and canals, mail and military roads in 
the early Republic, and then evolving piecemeal as new 
technologies introduced new transportation modes, starting with 
railroads, then automobiles and trucks (which required roads 
and highways) and airplanes (which required airports). The 
Federal structure that supports transportation also evolved 
piecemeal over the same period.
    As a result, at the opening of the 21st century, while we 
need comprehensive and integrated approaches, what we actually 
have is a structure that is incapable of producing the needed 
response. Fragmented, mode specific improvements, as you so 
clearly point out, are not the real issue, rather moving 
passengers and freight on schedule and cost effectively from 
point A to B is the issue. This can only be achieved through 
integrated responses that involve coordinating planning and 
investments between multiple modes and across multiple 
jurisdictions.
    Transportation planning should function on ``network 
performance''--defined as the way in which all modes function, 
together with communications infrastructure, to effectively 
move people and goods. The regional and global movements of 
people and goods supporting the social and economic activities 
in our nation involve every mode including communications (IT). 
Recently, one of the large automakers told me, in response to 
the question of how we should redefine the infrastructure needs 
for the Detroit region to more effectively compete with foreign 
auto makers, ``Transportation is no longer a separate function 
outside the manufacturing process. The movement of materials, 
parts and finished vehicles has become an integrated part of 
the entire manufacturing process.'' These same sentiments have 
been restated to me from representatives from business service 
companies in the Chicago region to theme park owners in the 
Orlando region to developers in the Portland region. In every 
project we have been involved in across the US, it is on-time, 
cost effective movements, not the mode, that is the key issue.
    Unfortunately, the bureaucratic fragmentation and silo 
mentality that reinforces the mode specific approach is 
defeating our ability to address the freight movement problem. 
This problem can only be solved through creating an integrated 
multi-modal network that can move freight seamlessly from US 
locations to global destinations. While the bureaucratic 
structure we created was effective in moving passengers, it is 
not effective in producing the kind of efficient and more cost 
effective infrastructure this nation needs to remain 
competitive in the 21 11 Century global economy.

    Question 2. ``Drivers are often frustrated by the presence 
of large amounts of truck traffic and truck divers are severely 
impacted by heavy urban traffic in terms of lost time and lost 
fuel sitting in traffic.
    How does the lack of transportation options for people 
movement, such as rail and transit, impact goods movement? ''
    Response. Two macro scale forces have totally changed the 
amount of truck traffic on the nation's roads. The first is the 
emergence of a global economy. The second is the rapid 
acceleration of technology and its application to all phases of 
economic activity from manufacturing to accounting that has 
increased the importance of on-time, scheduled delivery of 
goods and services. These two forces have combined to vastly 
accelerate the total amount of people and goods moving through 
the global and national transportation systems, resulting in a 
dramatic rise of truck traffic and congestion on the nation's 
roads.
    Prior to 1991, the movement of goods (today referred to as 
logistics) was a small component of total demand on the 
nation's transportation system (airports, seaports, roads and 
rails) and especially its highways. Today we essentially have 
two separate components within our transportation system, one 
for the movement of people and the other for the movement of 
goods. These two systems are using the same highways, rails, 
airports and seaports and are in serious conflict as they have 
two separate functions, operate on two different kinds of 
schedules, and have two different kinds of impacts on the lives 
of our citizens.
    More choice is one of the answers, however the real 
challenge is how the two overlapping and parallel systems of 
freight and passengers should be configured to function. How 
should we differentiate the short-term actions from the long-
term and make sure that we do not take actions in the short-
term that preclude the actions that will be necessary in the 
long-term to develop the kind of system we will need. 
Traditionally, we did not have to address the freight issue, 
today we must. This issue further reinforces the need for 
reform that you addressed in your first question, as it is 
difficult if not impossible for a committee that addresses only 
two of the modes to solve the problem that extends across all 
modes within the system.

    Question 3. ``We are dealing with limited funding for 
everything, certainly including transportation. Yet we have 
large maintenance and new capacity needs.
    In terms of competitiveness, how important is funding the 
maintenance of our current road system and smoother intermodal 
connections? How much funding should go to maintenance as 
opposed to new capacity? Should new capacity be evaluated for 
how it will help or hurt the movement of goods?''
    Response. The three interrelated categories of issues we 
face in developing the kind of system we will need in the 21st 
century are condition, capacity and configuration. Condition is 
vital. I four current system begins to deteriorate, we are in 
serious trouble, as we will lose the confidence of our own 
citizens as well as our productive capacity. If we do not 
expand capacity we will choke the system, which will lead to 
growing anger, frustration and increasing costs as productivity 
decreases due to lost time in the movement of people and goods.
    Configuration has not been effectively addressed and not 
sufficiently discussed. The system we now have was created on a 
mode specific basis over the past two hundred years with little 
or no concern for inter-modal efficiency, nor the effects of 
advanced communications infrastructure. As a result, what we 
have today is a highly fragmented system that was designed 
primarily for the movement of people, not freight. Further, the 
system is one that was developed to serve the 20th Century 
``Free World'' economy that America dominated, not the highly 
competitive global economy, covering a much larger geography 
and involving much larger flows of international commodities 
than ever before in history.
    We need funding for each of the three categories. However, 
if we are creative, we should be able to get higher performance 
from the future system if we take the time to plan an 
integrated, multimodal system and demand higher system 
performance from the entire network, rather than continue to 
fund and evaluate performance of our transportation system on a 
mode specific basis. Currently, we only have mode specific 
performance methodologies and would need to create the 
methodologies and metrics to measure system wide performance. 
This would be a key component of a long-term strategy.

          Responses by Michael Gallis to Additional Questions 
                          from Senator Inhofe

    Question 1. ``In your testimony you criticize our country's 
response to infrastructure needs as being too segmented, and 
recommend a more integrated approach. Acknowledging the Federal 
Government cannot solve this problem alone, what 
recommendations would you have in the near term for a strategic 
approach, for policymakers about to reauthorize the Highway 
Bill, for meeting the requirements future freight growth will 
have on the system?''
    Response. There is a need to begin to change direction to 
create the kind of infrastructure this nation needs to remain 
competitive in the global economy. I believe we must develop a 
long-term and short-term strategy. If not, we will go into the 
future with series of short-term measures that will magnify, 
rather than solve, our current problems. The first step in the 
long-term strategy is to define the kind of system the U.S. 
will need in the 21st century. The EU has already done it, 
China has done it, India has done it, and even the Russian 
Federation has done it. We are the only major nation and 
continental trading bloc that has not done it! I believe that 
we need to include funding to create the national framework 
(rather than national plan) needed to define the kind of system 
we will need in new global economy. A network of gateways, 
corridors and inland hubs that are embedded in metropolitan 
areas forms the freight system. States should develop 
compatible regional and local State system plans utilizing 
policies adopted by the national commission on freight 
strategy. This will require the development of innovative 
funding methods, including new national transportation bonds, 
and identification of new revenue sources that benefit from 
transportation investments. As part of this we should also 
define the critical issues that impact how our nation's system 
functions within the context of the three-nation, North 
American trading bloc. Let's get the dialog started.
    As to system capital funding, I believe we will need to 
include much stronger language defining how states should begin 
to address freight (logistics) and create a separate and 
flexible pool of freight system funding allocated on critical 
needs basis, defined by a set of national needs criteria. While 
the kind of massive new funding for the actual projects would 
appear to be impossible, a first step would be to create a pool 
of funds for State and local planning that uses a national 
needs criteria to coordinate those levels of planning with 
national strategies for gateways, hubs and corridors.
    A simple example of the current problem is that we develop 
separate policies and funding for urban transit and roads. We 
do not ask how can they work together to move people and goods 
through a metropolitan area. The current success of the first 
segment of the Charlotte metro system, which initially met no 
Federal transit guide lines, is due to the fact it was planned 
to weave together with the highway system and to create new 
commercial and residential development activity by creating 
corridors of high accessibility. Why are these concepts not in 
the transportation literature? Because transportation planning 
is reactive not proactive, and therefore constantly reinforces 
yesterdays patterns rather than developing the system to 
support future needs.

    Question 2. ``In your testimony you project large growth in 
freight movement on a very specific network of us interstates. 
What analysis have you done to identify the locations of the 
Nation IS most heavily used interstates for goods movement and 
how would you address new and needed corridors?''
    Response. Our analysis is based on three areas of research 
that is focused on what we need in the future as opposed to 
traditional transportation planning that is reactive and 
focused on solving the problems of the past. First, and most 
important, are the direct interviews with major private sector 
transportation (trucking, rail and sea) companies on their 
current patterns and future plans for freight movements like I 
have conducted in places like Houston, Detroit, Chicago, 
Florida, and the West Coast. Second are interviews and 
primarily literature search on new infrastructure developments 
across North American and the other major trading blocs. The 
third are interviews and literature research on how technology 
is changing business processes, from manufacturing to business 
services, and what the implications are for our transportation 
system. These three areas have provided us with the information 
to understand not only where these critical corridors are 
emerging, but why they are emerging.
    In response to the question of who to address the new 
needs, I could, and am willing to offer a lengthy answer, but I 
feel it would be important for the American people to hear and 
understand the real concerns of business that I have heard in 
projects across the country and would be basis for what I would 
propose.
    I would suggest a series of hearings involving a targeted 
set of businesses from a variety of economic sectors to listen 
to their concerns about competing in a global economy and what 
they need from the transportation system. Second I suggest the 
Senate join with the House to commission a major congressional 
study to define what kind of system (everything on the table) 
we would need and what it would look like (include best case 
examples of where we are today) and what the alternative 
funding mechanisms would be needed to achieve such a system.

    Question 3. You spoke of how the current transportation 
network was not designed/configured for the 21st century trade 
patterns. Could the current system be modified to add capacity 
and increase efficiency of the distribution of good from the 
ports (and freight intensive airports) or will we have to think 
more comprehensively and build numerous new interstates/
corridors?''
    Response. Yes, we will have to think and act more 
comprehensively. At the national scale, our system was 
developed to serve the Free World market. What his means is 
that the system was primarily a 'Midwest outbound to the two 
coasts' system in configuration and operations, moving U.S. 
agricultural and industrial products from the heartland to 
foreign destinations. This was reflected in the pricing 
structure that defined the headhaul, the higher value 
direction, as Midwest to the coast and the lower value, 
backhaul, from coast to inland.
    After 1995 this entire system began to change as a massive 
redistribution of global economic activity was driven by the 
emergence of gigantic global corporations that formed to serve 
a global marketplace resulted a redeployment of US 
manufacturing to overseas locations (who would have believed 
that corporations as large as Exxon and Mobile would have to 
merge?). With the new, inbound flow of goods to our air and, 
primarily, sea ports from a vastly expanded global marketplace, 
far beyond the geographic extent of the Free World, our 
transportation system was flooded, as it was never set up for 
this kind and direction of flow. A prime example is Chicago, 
where the rail yards ringed the city but never connected 
through it. As a manufacturing center sending goods out, this 
was not a problem, but as Chicago morphed into a distribution 
center the seamless rail connection through Chicago became a 
vital issue. This is not a question of capacity but 
configuration.
    Unfortunately as Chicago developed its rail plan, the 
truckers refused to come to the table for fear of revealing 
their customers and, therefore, the rail plan is not integrated 
with the highway plan. Oopsl Further problems occur because the 
plan for O'Hare is not connected with the surface system and 
the Port of Chicago is on its own and not part of any plan to 
facilitate the movement of goods.
    We may need new Interstates, but more importantly, I feel 
we to re-engineer and reconfigure the system to wring out more 
efficiency. We could do this by developing more efficient 
network performance through higher levels of integration, 
consolidation and connectivity. I feel this next highway bill 
is the platform to use to start the process. This cannot be 
done in a day, but for over a decade we have watched our nation 
lose position relative to the other trading blocs, and we need 
to get started today. China will finish it first phase of a 
massive multi-modal, power and communications infrastructure in 
2020. We cannot be left behind!

    Question 4. ``During the Questions and Answers portion of 
the hearing, I asked Mr. Potts about the negative perceptions 
associated with what some call the 'NAFTA Super highway'. 
Around the country, my State in particular, people are 
concerned that in many ways we may be losing our sovereignty by 
developing large transportation corridors into neighboring 
countries. Do you think these concerns are warranted? ''
    Response. There are two different issues involved with this 
question. The first is how the emergence of a new global 
economic geography based on trading blocs (EU, Russian 
Federation--China and India) is affecting the U.S. economy and 
transportation system. The second is how the Dallas, Texas 
based initiative, ``NASCO--North American Super Corridor 
Organization,'' is affecting U.S. sovereignty.
    The first issue is key to developing the future of our 
national system. Prior to the collapse of the Soviet Union, the 
U.S. was the largest ``Free World'' economy. In this 
configuration, our nation provided the ``defense shield'' 
against Communist aggression and, in exchange, our allies 
supported our economy. Following the collapse of communism in 
1991, economic integration pulled China and India into the 
global marketplace. With an economy only a fraction of that of 
the U.S., but with a potential workforce and consumer base five 
times our size, China and India drove the creation of a new 
global economic geography, based on creating larger economic 
units, such as NAFTA, the EU and the Russian Federation, that 
could more effectively compete with the new super size nations 
that were now part of the world economy. Without a national 
policy and development framework, the US is unable to negotiate 
with either Canada or Mexico to work out how the transportation 
system that is the foundation for how the North American 
trading bloc can compete. The lack of a negotiated strategy is 
driving both Canada and Mexico to develop national strategies 
that will facilitate their economies, but may be detrimental to 
the US. As a result, North America is the only major trading 
bloc in the world today without a continental scale 
transportation strategy. This represents a very real threat to 
the future of our economic status in the world.
    I feel this is a question that needs to be addressed, and 
that there is too much misinformation and misplaced fear 
concerning global competition that could lead us in a 
protectionist direction that would doom our economy. In 
closing, it is important to note that the U.S. is looking to 
global growth to pull us away from recession. global capital to 
fund our debt and to attract support for our financial system. 
Cut the world offhand we are in serious trouble.

    Senator Boxer. Thank you, sir. That was very interesting.
    Since we have been joined by my Ranking Member, Senator 
Inhofe, I would love to turn to him for an opening statement, 
and then we will continue with the panel.

          OPENING STATEMENT OF HON. JAMES M. INHOFE, 
            U.S. SENATOR FROM THE STATE OF OKLAHOMA

    Senator Inhofe. Thank you, Madam Chairman. I appreciate the 
opportunity to talk about one of the most critical issues that 
we are faced with here. There is no denying that the level of 
commitment to our Nation's infrastructure is directly linked to 
the United States' continued place as the world economic 
leader. And I am pleased, Madame Chairman, that you have 
convened this hearing to examine the role of freight movement 
on our Nation's highways.
    When President Eisenhower first conceived the National 
InterState System over 50 years ago, he could not have imagined 
that the Nation's transportation system, once coveted by the 
world for its innovative planning and connectivity, would be 
struggling to accommodate the exponential growth in people and 
goods movements today. Much of our industrial success and our 
rapidly growing GDP is the result of our ``just in time 
economy,'' which relies heavily on the free flowing 
transportation network.
    I would ask unanimous consent that I put the remainder of 
my statement in the record and just comment that this is a 
problem that we talked about all the time. We went through, in 
2005, a huge bill. At that time the Republicans were the 
majority. I think it went down as the largest non-defense 
spending bill in history, and, yet, it has barely maintained 
what we have today.
    We recognized at that time that we were going to have to do 
some innovative things to resolve this, and it is going to have 
to include everything. A lot of people don't realize, in my 
State of Oklahoma, that we actually have barge traffic. So we 
are going to have to address this thing. It is a serious 
problem, and I appreciate you bringing this to the public's 
attention.
    [The prepared statement of Senator Inhofe follows:]

            Statement of Hon. James M. Inhofe, U.S. Senator 
                       from the State of Oklahoma

    Thank you, Chairman Boxer. I appreciate the opportunity to 
examine the movement of goods on our nation's highways and its 
contributions to our future competitive trade advantage with 
other nations. There is no denying that the level of commitment 
to our nation's infrastructure is directly linked to the United 
States continued place as the world economic leader. Thus, I am 
pleased, Madame Chairman, that you have convened this hearing 
to examine the role of freight movement on our nation's 
highways.
    When President Eisenhower first conceived the National 
InterState System over 50 years ago he could not have imagined 
that the nation's transportation system, once coveted by the 
world for its innovative planning and connectivity, would be 
struggling to accommodate the exponential growth in people and 
goods movement of today. Much of our industrial success and our 
rapidly growing GDP is the result of our ``just in time 
economy,'' which relies heavily on a free flowing 
transportation network.
    Our nation's roads and bridges move close to $40 billion 
worth of goods daily, and with that number expected to rapidly 
increase with the growth in foreign trade and doubling of 
American port capacity, our infrastructure problem will soon be 
a crisis. Our expansive network of highways is operating well 
above its designed capacity, and as trucks continue to be 
delayed by congestion, which DOT estimates as an $8 billion 
loss every year, our economy will suffer.
    As I have said many times before, current funding of our 
highway program is barely enough to maintain the system, let 
alone provide for much needed new comprehensive investment in 
future infrastructure needs. We cannot afford to ignore the 
consequences of barely ``maintaining'' our transportation 
networks while the rest of the world continues to spend heavily 
on bigger and better ways of competing with our once superior 
highway system.
    The rest of the world is financing new ports, highways, and 
sophisticated rail networks to attract new commerce, yet we are 
falling behind. There is no question that there will be a 
negative impact on our own industries if we fail to provide a 
free flowing transportation system. Today, business has moved 
away from a warehousing business model to a ``just in time'' 
model that depends on getting what they need when they need it. 
If we want to encourage our manufacturing industries to stay in 
this country, one of the things we must do is provide adequate 
transportation infrastructure.
    Our neighbors to the North and South are committing 
billions to the construction of new high capacity ports and 
rail systems specifically to divert foreign cargo trade away 
from our heavily congested ports in the Northeast and Southern 
California . The United States ' economy cannot afford to be 
outpaced in infrastructure spending by other rapidly growing 
countries, eager to attract new commerce to their economies.
    The reliable and free flowing movement of goods on our 
nation's highways is, in my opinion, of the strongest Federal 
interest. There is no more important role of Federal Government 
as it relates to transportation than to address the needs that 
affect the vitality of our interState commerce, and our economy 
as a whole. As we gear up for re-authorization of the Highway 
Bill, it is critical that we explore the ideas of a new 
national freight movement program. It is time for a new vision 
on how we address the exponential growth of goods movement, and 
I think it is time to seriously consider a separate program 
dedicated to freight.
    As we begin reauthorization discussions, my hope is that we 
will be able to work together in developing solutions to our 
critical transportation infrastructure needs which may include 
making bold changes to the traditional Federal highway program.

    Senator Boxer. Thank you so much, Senator Inhofe. And I do 
look forward to working with you on our next reauthorization.
    Next we will hear from Charlie Potts, CEO, Heritage 
Construction and Materials, The Heritage Group, on behalf of 
the American Road and Transportation Builders Association. 
Thank you, sir, for being here.

  STATEMENT OF CHARLIE POTTS, CEO, HERITAGE CONSTRUCTION AND 
 MATERIALS, THE HERITAGE GROUP, ON BEHALF OF THE AMERICAN ROAD 
            AND TRANSPORTATION BUILDERS ASSOCIATION

    Mr. Potts. Chairman Boxer, Senator Inhofe, first of all, I 
want to thank you for giving me the opportunity to speak to you 
today and for recognizing the enormous crisis that we as a 
Nation face with America's transportation network.
    The 2009 reauthorization of the Federal Surface 
Transportation Program I think provides the best opportunity in 
more than 50 years to chart a new course for the future of 
America's highway and transit systems. In 2002, The Brookings 
Institution published a book celebrating the Federal 
Government's top 25 accomplishments of the 20th century. Ranked 
number 7 was the 1956 law establishing our interState system. 
It represented a bold vision and it filled an unmet need and 
established a clear Federal responsibility.
    While a national system of highways seems like a foregone 
conclusion today, the 1956 legislation was quite controversial 
and it actually took years to enact. And most of us, I think, 
would agree today that the battles fought and ultimately won to 
create the interState highway system was well worth that 
effort.
    But I think now it is time to wage a transportation battle 
for the 21st century. America's transportation network is 
facing Herculean challenges, as you have already pointed out. 
Highway bottlenecks cause the trucking industry $8 billion per 
year and 243 million hours of lost time annually. Traffic 
congestion drains $78 billion from the United States economy in 
lost productivity and wasted fuel. Federal Government 
projections of expanding freight shipments, increasing 
automobile usage, and growing population over the next 25 years 
pose an even greater threat.
    The debate over a new vision for the Federal role in 
transportation has been waged over the past few years, and 
throughout these wide-ranging discussions there has been one 
overwhelming agreement in all of the comments: there is no 
national strategy for the movement of goods. Yes, there are 
several Federal programs that have a freight component and the 
U.S. Department of Transportation has created a Corridors of 
the Future program. But distributing seed money to a handful of 
projects in a piecemeal fashion does not constitute a national 
plan to help ensure U.S. competitiveness in a global market.
    A U.S. Department of Transportation report shows one-
quarter of the economic activity in each State depends on the 
ability to move goods on the nationwide highway system. As 
such, efficient freight movement is critical for all States and 
warrants a national solution.
    A General Accountability Office report earlier this year 
called for a national freight strategy. The deliberations of 
the National Surface Transportation Policy and Revenue Study 
Commission also underscored the need for bold Federal action to 
ensure reliable goods movement.
    The question then becomes how do we achieve the goal of a 
federally led freight program? Shortly after the enactment of 
SAFETEA-LU, ARTBA members began the process of developing 
specific proposals for the 2009 reauthorization debate. In 
January 2007, ARTBA called for the creation of a new Critical 
Commerce Corridors, or a 3C program.
    Now, while my written testimony describes this proposal in 
much more detail, I would like to at least provide a brief 
overview of the concept.
    Under our proposal, the U.S. Department of Transportation 
would bring together public and private sector stakeholders to 
develop a strategic national business plan for the 3C program. 
It would include a proposed national 3C map that ties together 
regionally developed freight system maps and a proposed short-
and long-range schedule for executing and completing proposed 
3C projects by region.
    We envision the 3C program being financed outside the 
Highway Trust Fund, with new freight-related user fees. The 
concept of user fee financing for transportation programs has 
proven to be an effective and stable source of revenue for 
long-term projects. We think we should build on this successful 
model in developing a national freight program.
    It is essential, however, that existing roads and public 
transportation programs not be shortchanged to support the new 
3C program. As such, we also recommend creating a budget 
firewall to ensure that new 3C revenue are used exclusively to 
enhance freight movement.
    Madam Chairman, over the past decade I have had the 
opportunity to discuss America's transportation challenges with 
industry, business, government, and civil groups across the 
Nation. I am convinced the American public and business 
community will support the future Federal Surface 
Transportation Program that we are proposing. We urge you and 
all Members of Congress to seize the opportunity the 2009 
reauthorization debate presents, and I look forward to working 
with you in this effort.
    Again, I want to thank you for this opportunity to speak to 
you, and I would be happy to answer questions later. Thank you.
    [The prepared statement of Mr. Potts follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
          Responses by Charlie Potts to Additional Questions 
                          from Senator Carper

    Question 1. Government usually divides transportation 
responsibility by mode. In the Senate, we have highways in this 
committee, rail and air in the Commerce Committee and transit 
atBanking. At the U.S. DepartmentofTransportation,each agency 
focuses on the movement of machines--trucks, trains, planes, 
cars and ships.
    But I have found that people rarely look at travel this 
way. They just want to get from point A to point B, quickly, 
conveniently and affordably. Most of the time, they use 
multiple modes for one trip. Freight movement is the same. 
Businesses and consumers just want to receive their goods 
quickly, safely and affordably.
    How do we break though this government stove-piping to 
ensure that we institute policies that facilitate smooth flow 
of goods (and people)?
    Response. I agree with your observation about the unique 
nature of goods movement and how it doesn't fit the current 
structure of the Federal surface transportation program. In 
fact, I would take your analysis one step further. While the 
``stove-piping'' of Federal policies and funds among modes of 
transportation you describe is certainly problematic for 
optimal goods movement, so, too, is the absence of Federal 
priority setting in this area. Providing near total autonomy to 
State and regional transportation officials, with respect to 
how Federal funds are invested, makes achieving national goals 
very difficult.
    Freight, by its nature, is not constrained by the 
geographic boundaries of individual states. As you said, 
``Business and consumers just want to receive their goods 
quickly.'' They don't care how many donor or donee states a 
product had to go through to reach its end point, or if these 
states ``got their fair share'' of Federal dollars. Their only 
concern is whether or not the product was delivered in the most 
efficient and cost effective manner. Even though the structure 
of the current Federal surface transportation program is not 
conducive to maximizing goods movement, enabling interstate 
commerce--i.e., freight movement--is still a clear Federal 
responsibility. Without bold leadership from the Federal 
Government in this area, we can continue to expect a patchwork 
of freight projects in severely congested areas instead of a 
comprehensive approach that yields a true national system.
    ARTBA is proposing to reform and restructure the Federal 
surface transportation program into two separate, but equal 
priorities:

     The existing Federal highways and public transportation 
programs to protect past investments in critical transportation 
infrastructure facilities and to provide regional mobility;
     A new ``Critical Commerce Corridors'' (3C) Program 
exclusively dedicated to building a national, intermodal goods 
movement network.

    The details of the 3C proposal are included in ARTBA's 
written testimony, but the proposal calls for a national 
planning process that would tie together critical freight 
projects identified at the regional level. A separate planning 
process and programmatic structure, however, is not enough. To 
be truly effective, a freight program must have its own unique 
revenue source through freight-related user fees. This would 
ensure goods movement projects are not sacrificed for other 
surface transportation priorities and that existing highway and 
transit needs are not subservient to freight improvements.
    This approach would not create another ``stove-pipe,'' but 
rather it would alleviate state and local authorities from 
having to make a choice between moving goods and moving people. 
The structure we are advocating would ensure both these 
critical priorities are addressed through separate Federal 
initiatives and that the Federal Government is asserting its 
responsibility to meeting the national goal of maximizing the 
efficient movement of goods.

    Question 2. Drivers are often frustrated by the presence of 
large amounts of truck traffic and truck drivers are severely 
impacted by heavy urban traffic in terms of lost time and lost 
fuel sitting in traffic.
    How does the lack of transportation options for people 
movement, such as rail and transit, impact goods movement?
    Response. Webster's New World Dictionary defines holistic 
as ``an organic or integrated whole [that] has a reality 
independent of and greater than the sum of its parts.'' This 
definition is the embodiment of what a national transportation 
system must be and underscores the need for the Federal 
Government to ensure a holistic approach to the nation's 
transportation challenges is implemented.
    The value of one state's road way network or one city's 
public transportation system is greatly diluted if it is viewed 
in isolation. Integrating these facilities into a national 
transportation network, however, can facilitate economic growth 
for a region, provide citizens with unimpeded mobility, and 
ensures national objectives, such as public safety, are 
addressed. For example, a major metropolitan area with a 
successful public transportation system achieves more than just 
mobility for users of that system. Freight shipments to and 
from this area by highway are also greatly enhanced by the 
reduced roadway congestion facilitated by a successful public 
transportation system. As a result, businesses in that area and 
across the nation are more productive due to the opening of 
this market that is realized because of a local transportation 
solution.
    While the importance o fa truly integrated surface 
transportation system cannot be overstated, a lack of options 
is not the root of our problem. The fundamental reason why the 
U.S. transportation network is falling further and further 
behind the growing demands being placed on it is that 
governments at all levels have failed to make adequate 
investment in the upkeep and enhancement to fall modes of 
surface transportation infrastructure. For example, the primary 
mechanism for financing highway and public transportation 
improvements at the Federal level--the motor fuels tax--has not 
been adjusted for 15 years. While some are attempting to claim 
the fuels tax is antiquated, expecting a user fee rate set 
in1993 to accommodate the prices and demands of 2008 lacks all 
common sense.
    Yes, we need to make better transportation policy decisions 
and we need to seek new ways to meet our transportation needs. 
However, without increased investment from all levels of 
government, the nation's surface transportation challenges will 
continue to go unmet.

    Question 3. We are dealing with limited funding for 
everything, certainly including transportation. Yet we have 
large maintenance and new capacity needs.
    In terms of competitiveness, how important is funding the 
maintenance of our current road system and smoother intermodal 
connections? How much funding should go to maintenance as 
opposed to new capacity? Should new capacity be evaluated for 
how it will help or hurt the movement of goods?
    Response. The U.S. surface transportation needs are so 
voluminous that they cannot be approached from a ``this or 
that'' perspective. We are beyond the point of trying to 
balance competing needs. Rather, we must begin a path that 
provides a way to answer these types of question with ``all of 
the above.'' In terms of goods movement, while additional 
capacity to eliminate a choke point may be necessary to ease 
freight shipments in one region, these shipments will also 
inevitably have to travel over existing roadways or bridges. 
Neglecting maintenance needs of these facilities in favor of 
new capacity will ultimately just shift the choke point to 
another location.
    One of the major tenets of ARTBA's recommendations for the 
next surface transportation reauthorization bill is that both 
maintaining the existing transportation system AND enabling the 
safe and efficient movement of goods are critically important. 
We must dramatically increase investment in the core highway 
and public transportation programs to address existing 
maintenance challenges, improve regional mobility, and improve 
safety. The existing Federal motor fuels tax should be 
increased and continue to be devoted to these programs. 
According to the U.S. Department of Transportation's 2006 
Conditions and Performance report, Federal highway investment 
must be increased by an average of $19 billion per year over 
the life of the next surface transportation reauthorization 
bill to maintain current physical conditions and traffic 
congestion levels.
    The second component of ARTBA's vision for a restructured 
Federal surface transportation program is the 3C Program. This 
new federally-led freight program would add new capacity to 
ensure the reliable movement of goods and help maintain U.S. 
competitiveness in the global marketplace. Freight improvements 
would be identified at the regional level by all involved stake 
holders and Federal revenues for these projects would be 
generated from new freight-related user fees. While funds 
generated from these new revenues for the 3C program would be 
used exclusively for goods movement purposes, states are 
allowed to use core Federal highway funds for capacity needs. 
As such, states could still add capacity from their core 
program funds and this capacity would not be required to have 
freight benefits.
    This type of structure would allow both capacity and 
maintenance needs to be fulfilled and avoids the ``zero sum 
game'' mentality that perpetuates the existing transportation 
planning process.

          Responses by Charlie Potts to Additional Questions 
                          from Senator Inhofe

    Question 1. The triple C program envisions a new way of 
planning for freight projects. It is critical to change the 
current planning model to improve freight mobility? Al so, how 
will your proposed planning model ensure the appropriate 
projects are built to improve freight mobility?
    Response. The existing Federal transportation planning 
process has served the nation very well and should be continued 
for a significant portion of Federal surface transportation 
activities. The last three Federal surface transportation 
reauthorization bills have greatly elevated the role of State 
departments of transportation in deciding how to use Federal 
highway funds. While it is entirely appropriate for states to 
be the prime decision makers for projects within their own 
borders, the movement of goods is not constrained by the 
geographic boundaries of an individual state and often times 
will travel through many states to reach a final destination. 
Accordingly, freight improvement projects will likely have 
benefits that accrue outside an individual state and many of 
these projects are regional in nature. As such, freight 
projects are frequently not among the highest priority for an 
individual state--even though they may have major regional or 
national benefits.
    The 3C Program envisions a process by which states, 
shippers, the Federal Government and other relevant stake 
holders develop a national freight plan. This type of process 
would include much broader stakeholder participation than the 
existing transportation process and is reflective of the type 
of input needed to develop an effective freight strategy. The 
trucking industry, general business community and logistics 
experts have significant expertise that must be harnessed to 
maximize the movement of goods.
    Furthermore, the 3C proposal calls for new freight-related 
user fees to be generated to finance this new national program. 
This dedicated funding mechanism is essential to ensure goods 
movement projects are a national priority and provide certainty 
that a national goods movement network will be developed. The 
existing transportation planning process allows states great 
discretion over how Federal funds are allocated. It is 
imperative, however, for the shipping community to have 
confidence the new freight user fees would not be diverted to 
non-freight projects. Only a separate process devoted to the 
new national freight network can achieve this goal.
    By involving relevant stakeholders in the public and 
private sector, the 3C planning process would identify goods 
movement impediments and develop solutions. This process would 
begin at a regional level, utilizing the already established 
AASHTO regional divisions, and these solutions would bubble up 
into a combined national plan. While the planning process would 
identify these solutions, the 3C enabling legislation would set 
criteria for project eligibility and establish performance 
standards that must be achieved for projects financed with the 
3C program's new freight user fee revenues.
    As such, the existing transportation planning process 
should continue for the core Federal highway and public 
transportation program, and a new process should be utilized 
for the 3C Program.
    Question 2. You are calling for the creation of a new 
Federal freight program. What kind of projects would be funded 
under your proposed Critical Commerce Corridors Program?
    Response. There are a wide variety of improvement projects 
that can ease the flow of freight and all should be eligible. 
Logical inclusions for this program would include:

     Projects on the InterState HighwaySystem
     Truck only lanes
     Bottleneck relief
     Intermodal connectors and intermodal projects
     Freight exchange centers
     Technology applications and upgrades

    While these are just examples, the 3C Program planning 
process would bring together public and private sector 
stakeholders under the leadership of the Federal Government to 
strategically identify the specific freight solutions needed on 
a regional level to ensure the safe and reliable movement of 
goods throughout the Nation.

    Senator Boxer. Thank you, sir. And I think your Critical 
Commerce Corridors program is really very clever because it 
does capture what we are facing, and I really appreciate that.
    Mortimer Downey, Chairman, PB Consult, on behalf of the 
Coalition for America's Gateways and Trade Corridors.

   STATEMENT OF MORTIMER L. DOWNEY, CHAIRMAN, PB CONSULT, ON 
   BEHALF OF THE COALITION FOR AMERICA'S GATEWAYS AND TRADE 
                           CORRIDORS

    Mr. Downey. Thank you, Chairman Boxer and Senator Inhofe. 
It is a pleasure to be here today on behalf of the Coalition. 
You have our written testimony and you see on the masthead that 
this group represents a wide variety of public and private 
entities with a concern for the effectiveness of our freight 
system.
    Michael has certainly laid out for us what the challenge is 
in terms of the changing flow of goods and key issues in terms 
of congestion and delays and bottlenecks within that system. It 
is music to our ears to hear that in the next authorization 
bill goods movement will be an important part of your thinking. 
We want to help you with that. If we don't deal well with that 
problem, we really are creating more and more congestion, and 
the environmental problems, the energy problems that come with 
that, but we are also adding to the costs for American 
consumers and we are adding penalties in terms of 
competitiveness for American exporters in terms of moving goods 
in this new world economy.
    Despite everyone's agreement that this is an issue we 
should be addressing, there is not yet a consensus about how to 
do that, but I am sure such will evolve; a way to both design 
funding and design programs that will be tailored to freight 
and will do more for this issue than we have been able to do in 
the past with the existing highway and transportation programs.
    We also recognize that the challenge for you is a tough 
one, given the fact that existing revenue sources are, at best, 
stable, perhaps declining, with the current shortfall in the 
Highway Trust Fund a real indicator of an imbalance between our 
resources and our needs. It is our view, as a Coalition, that 
we must deal with both sides of the issue in looking at the 
future, a revenue side with a form of freight trust fund or 
some other form of dedicated account that would raise funds 
that will benefit the freight system and that will be used only 
for that purpose, and also with programs that will be designed 
to make improvement in the freight system.
    In our written testimony we have laid out some principles 
we think should be followed with respect to both revenues and 
programs. Our belief is that the raising of funds should be in 
a way that has the user and the ultimate beneficiary of the 
freight movement paying for it, assessing in terms of benefit 
with a variety of different charges so that no one entity is 
carrying an excess portion of the weight. The funds should have 
predictable, dedicated, sustained revenues because they will be 
supporting long-term capital investments; and it should be 
firewalled, as Charlie said, in order to be sure that it will 
be used for its purpose.
    In terms of program design, it will be important to be able 
to support a variety of different projects. Some will be large, 
some will be small; some will connect a number of States, some 
will be located in individual metropolitan areas. I think the 
design will need to be more project-focused than our existing 
systems, or I think that can be done. There will need to be an 
overall planning process to design a system that works, to 
design a system that is in fact multi-modal. I think, in the 
words of the Transportation Policy Commission that reported 
earlier this year, it should be mode-neutral and performance-
based. We really have to have something that works.
    We would draw to your attention--I know you are familiar 
with it--the Projects of Regional and National Significance 
Program that was part of the last authorization bill. Within 
that legislation there was a requirement that the Department of 
Transportation, my former agency, is now exercising, which is 
to create through a rulemaking process a method of criteria-
based, performance-based, selection of projects. We hope that 
DOT will complete that effort before a new authorization bill 
comes forward.
    In terms of a freight trust fund, there are a variety of 
ways that such a fund could be provided with money: motor fuel 
user fees, particularly related to those who are moving 
freight; vehicle fees are a potential; indirect user fees; 
perhaps a value added tax or a bill of lading tax on the 
movement of goods; collection of fees against containers; or 
longer term approaches that might relate to the savings of fuel 
costs and energy costs through more efficient use.
    We don't have a single answer; I think the outcome of the 
debate will be a mix and a variety of potential sources. But if 
we look then to the benefits that will be achieved and the 
problems that will be averted for the users of the freight 
system, we are hopeful that there will be consensus on moving 
forward in a way that relates projects to need, relates funding 
to projects, relates funding to beneficiaries, and allows for 
both the public sector and the private sector to be 
participants in this system. Many of the benefits, in fact, do 
flow to the private sector and the private sector can be a part 
of the funding system.
    But dealing with the issue overall is an important matter 
for quality of life, for the strength of our economy, and for 
relating 21st century America to its place in a 21st century 
global system. We certainly look forward to working with you 
over the next year to design a way to move forward on something 
that in fact is a national priority and will add a strong 
national reason for legislation and for Federal activity in an 
area that really affects all of America. So thank you for 
inviting me this morning.
    [The prepared statement of Mr. Downey follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
        Responses by Mortimer L. Downey to Additional Questions 
                          from Senator Carper

    Question 1. Government usually divides transportation 
responsibility by mode. In the Senate, we have highways in this 
committee, rail and air in the Commerce Committee and transit 
at Banking. At the US Department of Transportation, each agency 
focuses on the movement of machines-trucks, trains, planes, 
cars and ships.
    But I have found that people rarely look at travel this 
way. They just want to get from point A to point B, quickly, 
conveniently and affordably. Most of the time, they use 
multiple modes for one trip. Freight movement is the same. 
Businesses and consumers just want to receive their goods 
quickly, safely and affordably.
    How do we break through this government stove-piping to 
ensure that we institute policies that facilitate smooth flow 
of goods (and people)?
    Response. Senator, your point is well taken. People are 
most interested in the seamless trip that takes them from 
origin to destination at reasonable cost and convenience, and 
freight shippers have the same concern. There is a tendency 
toward ``stove-piping'' (what the various modal advocates might 
call ``cylinders of excellence'') and there is a real 
opportunity to overcome this in the upcoming legislation.
    Some of this ``stove-piping'' is the natural result of 
affinity between the governmental interests (congressional and 
Executive) and the transportation modes they have 
responsibility for. But there is also the impact of statutory 
provisions and constraints. Often, even good intentioned 
efforts for better coordination are frustrated because of these 
provisions, which are written at different times, in different 
committees and without consideration of their intermodal 
impact. Attention to this in the next legislative round would 
be very helpful. It may be possible to harmonize some of the 
regulations and procedures, and perhaps also to give the 
Secretary of Transportation authority to take a flexible 
approach in the public interest.
    I would be cautious about organizational changes at the 
USDOT, having tried that on two occasions (1979 and 1995) with 
remarkable lack of success. However, I would offer two 
suggestions. First, it would be helpful to update and reiterate 
the statement of national policy that was a part of ISTEA and 
not repeated in subsequent bills. Second, it is my view that 
the recent USDOT reorganization that downgraded the Office of 
Intermodalism (also a product of ISTEA) was not a good idea. 
The establishment of an Undersecretary for Policy has generally 
worked. Whether or not one agrees with the policies espoused, 
the Department has been thoughtful in terms of process and 
consistent in its advocacy. Reinstating an Office of 
Intermodalism at the Secretarial level would give the 
Department better leverage in terms of making policies 
operational and invoking better intermodal cooperation.

    Question 2. Drivers are often frustrated by the presence of 
large amounts of truck traffic and truck drivers are severely 
impacted by heavy urban traffic in terms of lost time and lost 
fuel sitting in traffic.
    How does the lack of transportation options for people 
movement, such as rail and transit, impact goods movement?
    Response. This is another manifestation of our lack of 
comprehensive vision. With goods movement as an afterthought in 
the planning process, such conflicts are bound to develop. A 
broader view might offer differential facilities or prices for 
use of facilities to reduce conflicts. Optimal routings for 
goods movement don't necessarily have to be the same as those 
for personal travel. As an example, better rail connections and 
the availability of a short sea shipping option for the Ports 
in Newark and Elizabeth New Jersey could dramatically reduce 
truck volumes moving across the George Washington Bridge for 
access to New England destinations.
    On the other side of the coin, better transit services in a 
region could open up highway capacity for truck movement, 
although the current narrow rules for cost-benefit analysis of 
transit projects don't give sufficient credit for such 
improvements affecting non-users.

    Question 3. We are dealing with limited funding for 
everything, certainly including transportation. Yet we have 
large maintenance and new capacity needs.
    In terms of competitiveness, how important is funding the 
maintenance of our current road system and smoother intermodal 
connections? How much funding should go to maintenance as 
opposed to new capacity? Should new capacity be evaluated for 
how it will help or hurt the movement of goods?
    Response. The issues you raise need to be part of the 
debate not only in the upcoming legislation but in the national 
and regional plan development process that hopefully will 
follow. Maintaining and improving our current system has to be 
an integral part of both legislation and plans, and our funding 
sources need to reflect this. At the same time, we must 
recognize that the United States, unlike most other 
industrialized nations, is continuing to grow its population, 
and we must invest to accommodate and optimize this growth. The 
mix between maintenance and new capacity will vary region-by-
region, and this needs to be taken into account in funding 
formulas and program structures.
    When new capacity is under consideration, it should be put 
under careful scrutiny, on a modallyneutral basis, as to its 
impacts and benefits on a variety of issues, including impacts 
on goods movement. This should not be a process that serves to 
delay and diminish investments, but should be the basis for 
economic justification and even the attraction of funding to 
well-justified projects.

        Responses by Mortimer L. Downey to Additional Questions 
                          from Senator Inhofe

    Question 1. I In your testimony you advocate a new 
``Freight Trust Fund'' funded outside current revenue sources. 
Do you think it's better to create a formula to distribute this 
freight money to states or to model a program on Transit's new 
starts full funding agreement model?
    Response. I believe a well designed freight program will 
have elements of both formula and project-specific funding. The 
formula funds would assure wide participation, development of 
sound plans and planning capacity, focusing on smaller-scale 
improvements such as the ``last mile'' problems now plaguing 
our ports.
    But there also needs to be a project-specific source of 
funding to accommodate the larger, ``lumpy,'' investment needs. 
Such a program needs, also, to reflect the diverse nature of 
goods movement projects and the deep and positive involvement 
of private carriers in our freight system. The Transit new 
starts process offers both positive and negative precedents--
positive in terms of careful review and integration of the 
projects, with involvement of both congressional and Executive 
agencies in a merit-based review, negative in terms of the long 
delays and the modal bias that is inherent in applying such 
rules to transit projects only. There are also lessons to be 
learned from some of the financing programs now in place at the 
USDOT. The ability to craft project specific finance plans, 
such as was done for the Alameda Corridor and for certain 
projects under the TIFIA loan program, is a good model for 
future diverse goods movement projects.

    Question 2. As I mentioned in my statement, current funding 
levels for the highway program can barely maintain our current 
infrastructure, let alone address the challenges raised in the 
testimony we've heard today. Assuming that we do not increase 
the gas tax, what is the best way to fund a dedicated freight 
program?
    Response. In my view, there is a need for additional broad 
based revenues to meet ongoing transportation system 
requirements, and this need is currently best served through 
the fuel tax. We recognize, however, both the constraints on 
that tax and the need over time to adapt it to a changing mix 
and efficiency of system users to maintain purchasing power.
    This revenue source can be supplemented, however, by 
targeted contributions for goods movement investments coming 
from the beneficiaries of such investment through measures such 
as a waybill tax, port charges, customs fees, dedication of 
some fuel taxes on freight carriers or other related measures. 
Such charges are certainly not without controversy, but should 
be on the table for debate. Your committee could contribute to 
that debate by encouraging appropriate agencies such as the GAO 
and the CBO to evaluate and recommend an appropriate mix.

    Question 3. Freight railroads have a key role in the 
movement of goods, but are owned and operated by private 
corporations. To make our freight transportation network best 
equipped to handle future freight patterns and volumes, our 
freight rail infrastructure requires investment levels far in 
excess of the capability of the Railroads. At the same time, 
they have considerable suspicion about government involvement 
in their business decisions. What are your thoughts on this 
problem?
    Response. As you note, our freight railroads are firmly 
within the private sector and we should do everything possible 
to maintain that status. That said, we also know that the level 
of investment needed will be significantly higher than what the 
railroads are likely to be able to raise in terms of private 
capital.
    The current proposals for investment tax credits, both for 
short line rehabilitation and for investments to increase 
system capacity is one way to bridge that gap. Such credits are 
a recognized tool for encouraging private investment at a 
somewhat lowered cost, with all of the decisions being made by 
owners in their economic interests, but with public benefits 
such as reduced congestion and energy use accruing to the 
public.
    Beyond such credits, it is my belief that we will see more 
true public-private partnerships, with public funds going to 
provide for specific investment to meet broader social needs, 
such as capacity for passenger rail service in a freight 
corridor through joint improvement. Providing for such 
partnerships on a mutually beneficial basis should be a real 
opportunity to be taken up in this legislation.

    Question 4. During the Questions and Answers portion of the 
hearing, I asked Mr. Potts about the negative perceptions 
associated with what some call the ``NAFTA Super highway''. 
Around the country, my State in particular, people are 
concerned that in many ways we may be losing our sovereignty by 
developing large transportation corridors into neighboring 
countries. Do you think these concerns are warranted?
    Response. Based on my experience, I do not think these 
concerns are warranted, but recognize that such views are held. 
Since 1991 and the passage of ISTEA, followed by the 
congressional approval of the National Highway System in 1994, 
a process has been underway to redesign our roadway network to 
reflect today's economic realities. These realities include a 
significant growth in North-South goods movement brought on by 
the changing trade patterns under NAFTA. America's rail and 
highway networks traditionally devoted more capacity to East-
West movements, perhaps reflecting our heritage as the frontier 
moved from Atlantic to Pacific.
    But the development of 21st century capacity, both road and 
rail, to match a 21st century economy should not be seen as 
risking our sovereignty. The roads under consideration will 
still be controlled and regulated by the respective states. 
Development of this capacity and encouragement of its effective 
use will and should entail improved effectiveness of border 
facilities, including those devoted to better management of 
immigration and goods movement. Making this system work well in 
all respects should not be viewed as a risk, but rather as an 
opportunity.

    Senator Boxer. Thank you, Mr. Downey. Thank all three of 
you. This has been really very helpful to me.
    As Senator Inhofe and I and other members of the Committee, 
grapple with the future here, we really have issues. We know 
that the gas tax is dwindling for a number of reasons and our 
needs are growing for a number of reasons, and we do have to 
look at other ways to keep this Country the strongest economic 
power in the world, and that means a first-class 
infrastructure.
    So I am going to ask you to be a little bit more specific, 
because I like what you have laid out here, all of you, which 
is looking at the whole picture and looking at a way that we 
can pay for a system that is top-notch, and doing it in a way 
that doesn't hurt any one sector.
    And also, I would agree with you, Mr. Downey, that whatever 
we do has to be walled off so that it is only used for the 
purposes that the fees are paid for. That, to me, is absolutely 
critical.
    So I would ask each of you to comment on how we get to fund 
our needs, because, as I see it, you have got heavy-duty 
commerce on one side. When I think about it, I think about 
Southern California ports, Long Beach and LA, where 40 percent 
of the goods come in and then they go all across everybody 
else's States, putting a lot of pressure not only on us, but 
all across America. So everybody has to deal.
    So I would ask you this. If we think of it as heavy 
commerce goods movement on one hand and then the other uses I 
would call family travel, which I would look at as sort of a 
less of a strain because of different weights and all of that 
on our system. How do you see--for example, what if we were to 
say that we would use the gas tax for the family travel part, 
which is lighter needs, but then we would institute a series of 
user fees that wouldn't be overly burdensome? How would that 
work?
    Mr. Downey, you talked about it. Would it be container fees 
that the importers would paid? Would it be a small fee on 
truckers? We hate to do that given what is happening now with 
gas, so how do you all envision this?
    Mr. Downey. It could very well be all of the above. I think 
you are correct, as well, to say that a gas tax collected in 
the way it is now collected can be a fundamental part of our 
overall system, dealing with the broad base of maintaining the 
system we have out there and making it work well, dealing with 
many of the metropolitan issues. That might be supplemented by 
vehicle use fees in parts of the Country where greater capacity 
is needed or greater usage occurs.
    But overlaid on those requirements is the movement of 
freight. And you have to look and say, well, who benefits? The 
ultimate consumer benefits, and we want to see a way in which 
the costs can be imbedded in what they pay. Exporters benefit. 
You want to be able to do the same for them. That could very 
well be raised through a form of freight free, either against 
the freight itself or by container, which might be a more 
manageable approach, since many times you don't know what is in 
the container, but you know it is getting the benefit of the 
transportation system.
    Weight distance taxes, which have been used in some of the 
States, are a potential. Fuel fees, particularly focused on 
those who are benefiting in terms of moving freight, both the 
railroads and the truckers.
    No one will be happy about this. I looked around, coming in 
the building today. The crowds of people surrounding the 
building to say put new taxes on weren't there.
    [Laughter.]
    Mr. Downey. But all the people who will argue about the 
cost of the things they buy or the congestion on the roadways 
that they use are concerned about it, and I think we just have 
to educate that this problem will not be resolved unless all of 
the participants pay some small portion toward a better system 
that benefits all participants.
    Senator Boxer. Mr. Potts, Mr. Gallis, anything to add?
    Mr. Potts. I would like to just add a few comments. First 
of all, Mort has kind of laid out a lot of the funding 
possibilities. One single thing is not going to fund this 
transportation network, and I think everybody recognizes that. 
The other point that he made, and I think we should keep that 
in mind, is the delivery system that we have in this Country, 
whether it is for getting from our house to the grocery store 
or deliver us to school or the freight we get, everybody 
benefits from that, so everybody should share in paying for it 
at the same time. But I think it is something that, as we move 
forward, we need to explore all the possibilities.
    You are also correct, I think a part of this Critical 
Commerce Corridor and freight system is dedicated truck lanes, 
which can be designed and built to different standards than 
those that are carrying primarily passenger cars. And also, 
which we have not talked about here but it is in the detail, 
transfer centers for bringing containers across the Country and 
transferring them to other modes of movement.
    So I think that, as I had suggested in the short version, 
that we do this by region to pull up a national plan, and, in 
doing that, part of that is going to be addressing the 
financing issues too. But I do believe that we need to 
bifurcate the funding. We need to firewall for the freight and 
the core program must be protected. The vehicle we are using 
right now is motor fuel excise tax, and I still think that will 
be the primary way of funding that particular program for the 
near term.
    Senator Boxer. Mr. Gallis, anything? And then we will turn 
to Senator Inhofe and then Senator Barrasso.
    Mr. Gallis. I think your question reveals the very core of 
the problem we are struggling with. I like to envision a 
triangular matrix, and along one side we talk about the shift 
in the U.S. economy from manufacturing to service and the 
demands that puts on the economy. The second side would be the 
scales of movement. As you were talking, there is a global 
scale by which goods move around the world and enter the United 
States. The second scale is continental movements within the 
United States once it is here; third is super-regional. You are 
talking about Southern California, Arizona, that whole zone; 
you are talking regional; and then you are talking local. For 
most people, the transportation problem is the ride to work. 
That is a local movement, it isn't the global movements of 
freight. And as we shifted to a service economy within a global 
economy, more manufacturing moved overseas into new locations. 
That is part of what this diagram shows.
    As that took place, then the freights entering through the 
ports, but our service economy is based here, moving outbound. 
It is also globalized. So thinking of global movements, what do 
those do to our system? What is the continental movements, the 
super-regional, regional, local? Those are all different kinds 
of movements involving combinations of freight and passengers 
moving in different kinds of directions.
    That is putting pressure that even where we are doing 
projects in Detroit, their system wasn't set up for the kind of 
manufacturing in the 21st century----
    Senator Boxer. But my question was who pays to make it 
work.
    Mr. Gallis. Oh, OK. Well, given that complexity of that, 
the pay is this. Where is the money in the world today? Because 
there are two, there is capital expenses and operating 
expenses. And I think we need to distinguish. There is hundreds 
of billions of dollars of equity, but most of the growth in the 
global economy has ended up both in sovereign funds and private 
funds, by which we are looking at huge mountains of private or 
national equity looking for places to go, where our own budgets 
are under stress.
    Senator Boxer. Yes.
    Mr. Gallis. So I think we have to begin to think about how 
do we apply capital--and often times it can be private 
capital--in a public good. Is there a way to do it, an 
effective way? I don't think we have captured totally the 
revolutionary moment we live in and the changes both in capital 
structure and financing, the changes in kinds of movements and 
the shift in our economy.
    Senator Boxer. So you are saying highway bonds is what I 
hear, because that would attract that kind of capital.
    Mr. Gallis. It could be a mechanism. I haven't seen them 
yet worked out.
    Senator Boxer. Well, we do it in California every day of 
the week, but, anyway, let me turn to Senator Inhofe.
    Senator Inhofe. Thank you, Madam Chairman. Let me do this. 
I have someone I have to say hello to. I would like to defer to 
Senator Barrasso and then, when I get back, Mr. Gallis, both 
Senator Barrasso and I were on the floor and had to make 
statements, so we are a little bit late getting here, so I want 
to ask you a couple of questions about what you are showing up 
here. I will be right back.
    Senator Boxer. Good.
    Senator Barrasso. Thank you, Madam Chairman. I appreciate 
this opportunity to visit with the three of you. In Wyoming, in 
the State Senate, I was the chair of our transportation 
committee. I am very focused and interested in all of these 
issues. Wyoming is obviously one of those very large States 
with very few people, half a million people, 100,000 square 
miles; about five people per square mile. But, yet, the 
national commerce relies on Wyoming for I-80, the interState 
running around the center of the State and then running the 
lower portion of the State east to west, and then we have a 
north to south route, I-25.
    Much more truck traffic on I-80, significant damage to our 
interState routes as a result of that, whether it is from 
Portland, Oregon or Los Angeles, things coming from our ports, 
then they come to a pinch point in Utah where those roads come 
together, gets onto I-80, and then every one of those trucks 
heading east goes right through the southern portion of 
Wyoming, does a significant amount of damage to the roads, not 
by Wyoming drivers, clearly, but by playing an important role 
in our national commerce.
    So the question for all three of you is how do we as a 
Nation deal with that funding? The State of Wyoming has stepped 
up, put more State money in the last several years into highway 
funding, but they are not going to be able to do it; there are 
just not enough people there, living there. The distances are 
so vast, but the needs are real and the benefit is to all the 
people of America.
    So I don't know if you want to start, Mr. Gallis, and work 
down, either way.
    Mr. Gallis. Clearly, the funding mechanisms and planning 
processes have focused on individual States and have not 
recognized the flow diagram that takes place across the State 
and how that is occurring. Your State, as you point out, 
occupies a key point between the northwest and the midwest and, 
therefore, that flow diagram across it, but you get an 
allocation based on population, area, etc. It doesn't recognize 
that. Every State has that same problem. New Jersey, goods come 
into the Port of New York. New Jersey feeds 52 million 
dimension markets in the northeast, but they get an allocation 
on a State basis.
    We haven't recognized this overlay of the global and 
continental scales, and how to fund that overlay that every 
State has a differential amount of that pressure put on them 
that is not funded in the normal formulas; and I think until we 
have a framework that demonstrates that--and, as you say, this 
corridor has more than that corridor--and that is everywhere in 
the Country and that is the Critical Commerce Corridor issue--
should we create a policy framework within which we recognize 
national global movements as an overlay on the local system? 
And that is the importance of the scale issue.
    Senator Barrasso. Is someone working on that this you know 
of right now?
    Mr. Gallis. I don't think so.
    Senator Barrasso. But there is a need there, Madam 
Chairman, we just heard.
    Mr. Potts.
    Mr. Potts. But I think Michael has touched on the issue, 
because it is one of the things that needs to be addressed, and 
by firewalling a funding mechanism for freight movement and 
bifurcating the program, you would have a distribution for the 
commerce corridors that, as those projects qualify, then that 
is how you support them.
    I agree with you totally, the demand on those kinds of 
systems and the loads that are put on them our normal funding 
system, and in a lot of other States besides Wyoming, could not 
carry that kind of load. But everybody benefits from it. And if 
you went all the way back to 1956, some of the same debate was 
going on with the interState system because at the time it was 
built there was certainly not the same distribution 
economically that you should see on the map today, there was a 
disproportionate amount in other areas, and at the end of the 
day it worked well.
    The fact that we have to remember in this is talking about 
the tremendous growth in traffic in the last 25 years with 
passenger cars going up 225 percent, trucks 550, and capacity 
only up 6 percent, and then saying it is going to double in the 
next 25 years. The reality of it is unless we do something else 
like the Critical Commerce Corridors, it can't happen, because 
the system today is already at capacity, so you are going to 
have to change our whole mind-set. And a State like Wyoming 
that carries the corridors that it has, those are critical 
commerce corridors coming from coast to coast.
    So I would agree with you totally that it is an issue that 
must be addressed, but I believe that in our written 
description of how you go about it, by bifurcating the program 
and firewalling the freight component, that you can address it 
through the same kinds of formula systems we have done before.
    Senator Barrasso. Thank you.
    Madam Chairman, my time is up, but in the absence of 
Senator Inhofe, would you mind if I ask Mr. Downey to----
    Senator Boxer. Go right ahead, Senator.
    Senator Barrasso. Thank you.
    Mr. Downey, would you mind commenting as well?
    Mr. Downey. I would be very happy to. At a recent 
conference that our Coalition sponsored, Wyoming DOT was there 
and laid out the future for I-80, and it is a pretty bleak 
future. They projected that with the growth of truck traffic 
moving goods across the Country, with the cost of keeping that 
roadway in good condition, this could eat the State's entire 
highway budget within a relatively short period of time.
    I think there are two responses we really need to look at. 
One is providing national support, in a way that Charlie spoke 
of, that allows a spreading of the money to the places where 
the need is greatest, not simply sending it back to the places 
where it was raised; and in the case of freight, that will give 
that opportunity to fund and support a national system.
    It may also be a necessity for States like Wyoming to 
impose tolls on their facilities. I know they have a study 
underway at the moment to look at that. Currently, such tolling 
that is almost impossible under Federal law. And I think it may 
also be useful in reauthorization to look at those constraints 
and say if the need cannot be met through a national program, 
we certainly should not impose it as a burden on a State; we 
should allow a State to fund its own system, and that could 
attract the kind of capital that Michael was talking about in 
terms of investment. So I think we have to come at it from both 
ways.
    Senator Barrasso. Especially if you are looking to try to 
go to a third lane or different options, and not just repair. 
But if Nebraska wants to go to a third lane and Wyoming 
doesn't, it is the same truck traffic, it just goes all the way 
through. So you want to avoid bottlenecks, pinch points and the 
same. So anything that slows down the commerce isn't helpful to 
our economy.
    Thank you, Madam Chairman, for the additional time. I 
appreciate it.
    Senator Boxer. Senator Inhofe.
    Senator Inhofe. Thank you, Madam Chairman.
    Let me start off with you, Mr. Gallis, since we were not 
here when you--you brought your laptop, and I want you to put 
it to use here and kind of explain what it was, if the Chairman 
would excuse the redundancy here.
    Senator Boxer. Go right ahead.
    Mr. Gallis. This diagram was constructed for the purpose of 
trying to demonstrate some of the new flows that are being 
emerging after a global economy. It was constructed out of 
discussions with the auto industries in Detroit, Chicago, the 
northeast, New York, New Jersey, et cetera.
    What it shows, the red line going vertically down is 
something that is talked about as the NAFTA corridor. It is not 
a corridor of highways, it is a corridor of trade largely 
driven by the auto industry and has become the industrial 
backbone of North America. It starts with auto engines and 
parts in Mexico and it terminates in Toronto and London at the 
northern end with also specialty parts for the auto industry 
moving up and down this tremendous corridor with textiles 
entering in the southeast. That is the vertical line; goods go 
up and down, move out.
    The two yellow lines are the traditional north-south lines, 
but what is important to notice here is Chicago and Memphis. 
What has happened is traditionally we had four transcontinental 
hubs down the center of the United States--Chicago, St. Louis, 
Memphis, and New Orleans. What is happening is, because of the 
amount of goods flow, you would think there would be more 
places, but it is not.
    To simplify the management structures, the industry is 
concentrating around Chicago and Memphis; and, of course, you 
have Atlanta and Dallas also in the southeast. But what is 
happening is, in this consolidation, it is also consolidating 
around the ports, where the growth is going to take place. So 
what we have is the continental scale movements driven by the 
global trade patterns.
    Now, I have given you an example of what pressure that is 
putting. As the Senator just spoke, it is not only moving 
across his State, but Chicago, for instance. Our whole system 
was set up midwest, agriculture and manufacturing outbound. All 
of a sudden we have ports inbound. The whole flow diagram just 
reversed on us. Chicago was set up with rail yards all around 
the outside. There is no throughput on a rail. Suddenly they 
have to move through Chicago. The Southern California Alameda 
corridor is not big enough already. New Jersey has a Portway 
program. This is what is driving.
    So what we show here is the Los Angeles ports. Already, 
this year it is about 12 million containers, projected to go to 
40 million. It is impossible. Then we see Seattle growing, New 
York growing. When you normally see it, you get port data, but 
you don't get the corridor data connected with the port. And 
when you see the corridor, as you spoke about Los Angeles 
doesn't serve Los Angeles, it serves the whole continental 
United States. So it isn't only what is happening at the port, 
but the big corridors moving across, where it hits at other 
metropolitan areas of the United States. This is the overlay.
    And I contrasted that with this, because this is 
congestion, you know, the projection of congestion. And if you 
just throw money at the red, Senator Barrasso's State would 
never get anything because his corridor, while it shows up in 
this diagram, does not show up here. So if we just chase--I 
call it chasing the red, then we hand it to the States and say 
do the best you can, but those projects don't add to this.
    And that is where we have to, I think, in the allocation 
formulas that were always based on States within a national 
policy framework, you actually have a bifurcated funding 
mechanism, one that is dedicated on the regular allocation, 
traditional States; the other one is a national application 
that recognizes these change. This is what is driving business 
crazy--whether it be in Detroit, Los Angeles, New York--is this 
is not working.
    As Sealand Maersk said to us when we were trying to do the 
big picture vision for the United States, they said we work 
around the system, not in the system, and if that isn't the 
bottom line of where we are today----
    Senator Inhofe. OK.
    Senator Boxer. I am giving you another 5 minutes.
    Senator Inhofe. OK, that is fine.
    Mr. Potts, of course, you are coming from the road side of 
it here, but I assume that we are all talking about intermodal 
and we are all concerned about moving freight, and it has got 
to include all of the above. And I made a brief comment about 
the barge traffic, and there is a place for everything, rails 
included.
    Two of you have referred to the corridor there. Are you 
having problems dealing with the negative that is out there, 
the misunderstanding, somehow there is a conspiracy that these 
corridors are--that we are losing our--anyway, do you deal with 
that? Has this been a problem as you are developing these 
things, people complaining that somehow we are losing our 
sovereignty through these corridors? If you don't hear it, I am 
surprised, because we sure do.
    Mr. Potts. Are you asking me?
    Senator Inhofe. I am asking anyone. Probably you, Mr. 
Potts, because they are talking about going through my State of 
Oklahoma. A lot of them are talking about the NAFTA corridor as 
if there is something negative there. I just wondered if----
    Mr. Potts. No, I think it is a good point. In responding to 
that, I would also like to comment with Senator Barrasso. All 
the discussion we are having is making the key point that we do 
need a national plan for freight and we do need a strong 
Federal leadership, or it is not going to happen.
    Now, as part of my previous life I spent 16 years in a DOT, 
and I have met with the AASHTO leadership and talked to those 
fellows, and some of my very good friends from Oklahoma also, 
and any DOT, first, has got to look after their own State. But 
when I referred to the regions and developing a regional plan, 
what I was referring to is basically using the five AASHTO 
regions that exist right now and roll those plans up from the 
group of States, because they all recognize that our 
competitive position does not stop at their border.
    Senator Inhofe. OK, I understand that, and I probably 
shouldn't even have brought this up, but this is a problem that 
we deal with in Oklahoma, and I know in Texas it is quite a 
thing.
    Now, on the firewalls we talk about, or the walls--the 
Chairman mentioned this--this is really difficult to do because 
we are talking about getting into some type of innovative 
funding mechanism that is different than what we have been 
doing since the Eisenhower Administration. And when you do 
that, you folks are addressing freight movement. Now, we have 
all the rest of the movements going on at the same time. Have 
you given a lot of thought on how you actually do that? I know 
there could be dedicated corridors and all of this, but are the 
walls a serious problem, as you look at the overall picture?
    Mr. Downey. I would say they are in terms of getting 
support for making the investments, asking people to pay with 
some assurance that they will see what they get. When the 
Highway Trust Fund was created, the Eisenhower legislation, 
there were no such firewalls.
    Senator Inhofe. Well, there didn't really need to be.
    Mr. Downey. Right. In the early years of the interState, in 
fact, they were short of money and additional taxes were added. 
But over time we developed a pattern in which funds were being 
raised and then were not being spent, and the credibility of 
the entire system was called into question. In legislation that 
passed in the late 1990's, we did impose the firewalls and 
really rebuilt credibility when the system put trust back in 
the Trust Fund, and we think that has been extremely 
beneficial. And I don't believe we will be able to convince 
others that they should be charged for the use of the system if 
they don't get the same kind of protection.
    Senator Inhofe. Well, you know, in the short period of time 
we have all been here, we have seen it change. When I first 
came 22 years ago, there really wasn't this problem. In fact, I 
was on the House side, as was the Chairman, at that time, on 
the transportation committees. It looked like what was started 
back in the 1950's was going to continue to work at that time.
    Now we have seen, in the last 10, 15 years, it is a serious 
problem. In the last few authorization bills that we have done, 
we have recognized that we are going to have--we even have a 
committee that is supposed to be--I am not real happy with 
their product, but is supposed to be looking at other ways of 
funding. Now that we have this escalated cost of fuel, now it 
is a crisis and we have to do something to address it.
    Now, we don't have the luxury of time right now, and I 
would ask the three of you to give some thought to this, to 
give an immediate response and maybe some thought and respond 
for the record. We are going to be doing our 2009 
reauthorization bill, at least we want to do that, and I think 
this is where we are going to have to address this. So I don't 
think there is a lot of time to do a lot more studying. I think 
we need specific recommendations as to what each one of the 
three of you thinks that we should do in the 2009 
reauthorization bill specifically for the freight movement 
problem.
    Why don't you start, Mr. Downey.
    Mr. Downey. We have laid out some specifics in our written 
testimony.
    Senator Inhofe. Specifically for 2009?
    Mr. Downey. Yes.
    Senator Boxer. But highlight them for the Senator.
    Mr. Downey. We can provide those, but it is basically a mix 
of direct and traditional user fees. Perhaps some portion of 
what is now collected could be allocated to freight. Other 
ideas include additional charges through value added taxes or 
cargo facility fees or bill of lading charges, which used to be 
collected at the Federal level; or perhaps an allocation of 
some portion of customs fees that are now collected. Customs 
fees are continuing to grow and there is a history of some 
portions of those being allocated for other purposes.
    But anything that will tie directly to improvements and 
benefits on the freight side we think should be considered. We 
would be glad to go further as we build some consensus within 
our Coalition for a specific. I think it would be also helpful 
if your committee would ask GAO and the Congressional Budget 
Office, with the analytical resources that they have, to 
evaluate some of these and to evaluate the impacts of them so 
that we are ready for the debate in 2009 that will have to 
happen.
    Senator Inhofe. Well, I was saying to the Chairman that it 
wouldn't be a bad idea to get--I am really impressed with the 
three of you and your testimony--to maybe get with the 
committee that is supposed to be doing this, to get us prepared 
for 2009, because I think you have some really good ideas.
    Mr. Potts.
    Mr. Potts. Let me clarify.
    Senator Inhofe. Specifically for 2009.
    Mr. Potts. How to pay for it, is that what specifically? 
Well, of course, Mort has laid out a pretty good buffet list of 
things that are there, you know, bill of lading tax, rate 
mileage-based user fees, Federal custom fees, if we build--
which we will build--transfer centers, entrance type fees for 
using those mileage tax on truck travel. Matter of fact, 
American Trucking Association has indicated a willingness to 
support a tax of that type provided it was firewalled and used 
for freight corridors. Public-private partnerships, as 
mentioned before, there are some positions that this would fit 
very well into. Custom fees and, where appropriate that it fit, 
there is the possibility to toll some of those corridors, too.
    So I think to sit down and discuss it--I made a comment to 
some people earlier, it is like some of my business, acquiring 
companies. If you are trying to acquire a company and there is 
a deal to be made, somewhere on the table you will find it. 
This is something that we don't have that choice; we have to 
find the location on the table to pay for it and do it. And I 
think we can do it, but the avenues are available to us and it 
is just a matter of identifying those.
    Senator Inhofe. Well, we do need to--I would almost say 
that we are passed the buffet and we are ready to order from 
the menu now.
    [Laughter.]
    Mr. Potts. And I agree with you. I think it is just a 
matter of sitting down and seeing what are the best options in 
a particular location. It may be a little different as we 
identify the projects and how we pay for one, say, in Wyoming, 
as opposed to Oklahoma or California, but, nonetheless, we do 
the same thing with our core program, too, right now, actually.
    Senator Inhofe. Is there time for him to respond to that, 
too?
    Senator Boxer. Sure. Go ahead.
    Senator Inhofe. Mr. Gallis, specifically for 2009.
    Mr. Gallis. I think Mort and Charlie have spoken directly 
to the funding issue, so I would like to speak to the issue you 
brought up and the perceptual issue, because I think that we 
have not addressed. Politics operates often not in the world of 
reality, but perceptions of reality.
    Senator Inhofe. Really?
    [Laughter.]
    Mr. Gallis. Just an observation. But I would say this. I 
would say this, that to me the biggest gap is there is a lack 
of alignment between the new realities in our transportation 
system and our funding mechanisms. I think we have to, in 2009, 
begin to talk about creating alignment between the new demands 
on the system and the funding--whether or not we are able to do 
it, we need to move toward that--that are driven by new global 
economic considerations.
    So I think we have to start establishing a conceptual 
alignment that there are demands that didn't exist before, 
driven by our global competitiveness, that must be reflected in 
funding. Whether or not we can do it in 2009, I think we have 
to begin to talk about it and get it on the table so that 
people begin to become educated to that. I think that is one of 
our biggest barriers, the reality versus this perception.
    Senator Boxer. Well, thank you, Senator Inhofe. I thought 
that was a really good line of questioning.
    You know, as I think about this, I think that Senator 
Inhofe is right, we are passed the buffet; we are actually 
working toward the dessert, so we really have a problem on our 
hands. And the way I like to think about problems--because it 
helps me see the big picture--is to kind of separate out the 
different issues we are dealing with.
    One is the safety and maintenance of our existing 
infrastructure, and this speaks to your point, Mr. Gallis. 
Things have changed. At one point in time in history that was 
enough. What is our existing structure? How do we keep it safe 
and sound, and that is it. Well, obviously, there is more.
    So it seems to me one source of funding could deal with the 
safety and maintenance of our existing infrastructure. Another 
source of funding, which I think would be the gas tax, because 
as I was speaking with your staff, the gas tax, we are running 
so low, we could probably do a good job if we just limit it to 
that, and not the new kind of projects.
    Then I think there are enhancements to the basic system, 
which would be things like--that I love in my State--bike paths 
and HOV lanes, you know, enhancements to that, which could be 
another fund. And then the third one is I rather call it goods 
movement, because freight says to me somehow railroads. If we 
are talking goods, we are talking trucks, we are talking 
trains, we are talking barges, we are talking everything. So 
then the goods movement corridor projects I think is the third 
piece, and that is the one where I think we really need to be 
extremely creative in terms of how we fund it.
    And I think, Senator Inhofe, if we did have a table and we 
did sit down with our colleagues, with the private sector, with 
the best minds we have, we are going to have to come up with 
something that makes sense; and I think if it is a little of 
this and a little of that, as long as it is put in a fund that 
is absolutely airtight--and we can do that, we can do that, I 
think--I think we are going to be OK.
    But we talked about vehicle miles traveled as one way, and 
at first I thought, well, maybe we could get folks, you know, 
every year, when they send in their registration, I don't know, 
a penny a mile or pay a fee. I don't know if that is workable. 
I don't like the idea of people having some device in their car 
that Uncle Sam can look at every time to know when you are out 
and why you are out. I reject that and I think Senator Inhofe 
and I both felt that way.
    But have you thought about how to do a vehicle miles 
traveled? I think Mr. Potts might have mentioned it in terms of 
truckers who put on a lot of miles, but how can we deal with 
vehicle miles traveled in a fair way that doesn't set up big 
brother is watching you kind of deal? Would it be at the time 
you register your car?
    Mr. Downey. It certainly would be difficult with respect to 
the auto, although a lot of people are looking at that and 
thinking perhaps this is the way to go. My view is it is many 
years off, until a lot of problems are resolved. It may be 
simpler with respect to truck movements. There is an important 
safety and security need and other needs to identify the 
movements the trucks are making, the number of hours that are 
being driven, the number of miles that are being carried, and 
that could be implemented much sooner than some nationwide 
system.
    Senator Boxer. Interesting.
    Mr. Downey. And it wouldn't be welcomed, but probably it 
would be recognized as a significant improvement.
    Senator Boxer. But let me ask about an alternative, and 
tell me if this is just too simple. That we simply ask the 
trucker and we ask the driver every year, when they register 
the vehicle, how many miles did you travel, and you just list 
what your odometer said the year before and the next year, and 
then you can tell it? Why do we need all these fancy ways of 
doing it?
    Mr. Downey. I think a little more than that would be needed 
to really get serious answers. From my DOT experience, I know 
we talked many times about hours of service in truck movement. 
That is a voluntary system, where the truck driver fills in his 
log book on how many hours they have driven, and in the 
vernacular of the trade, they are known as the comic book. I am 
not sure you would get the kind of compliance on a voluntary 
basis that would work.
    Senator Boxer. Well, that is sad.
    Mr. Downey. Yes.
    Senator Boxer. Well, let me say thank you on behalf of all 
of us here. This has been very important. We have a long way to 
go, but we are determined to work across party lines on this, 
and I think Senator Inhofe and I have proven that. Except when 
it comes to the environment and it has to do with 
infrastructure, we really work very well together. So we look 
forward to calling on all three of you in the future, and I 
trust you will be there for us when we call. Yes?
    Mr. Downey. Be happy to do that. And I think if the 
perception is there that you are serious about this effort, 
lots of people will come to the table who now are sort of 
hanging out in the back and saying maybe I won't have to play.
    Senator Boxer. Good. Well, sir, you can spread the word. We 
have no choice. Right now, I think we are $5 billion short. Is 
that right?
    Mr. Downey. For 2009, yes.
    Senator Boxer. By the end of 2009, we could be $5 billion 
just for what we are doing now, and what we are doing now is 
woefully inadequate. So you are right, this is very, very 
serious. It is really a decision we have to make as a Nation if 
we really want to stay competitive and be able to carry 
forward, because I will tell you, at the ports in California 
people are just saying no more, can't take it, it is too hard, 
too hard on our breathing. So we need to figure out how to move 
this, do it cleanly, and this is our challenge. But we can do 
it because this is America, and we can do anything we put our 
minds to.
    Thank you very much, everybody. We stand adjourned.
    [Whereupon, at 11:03 a.m., the committee was adjourned.]
  

                                  [all]