[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
FREIGHT AND PASSENGER RAIL: PRESENT AND FUTURE ROLES,
PERFORMANCE, BENEFITS, AND NEEDS
=======================================================================
(111-4)
HEARING
BEFORE THE
SUBCOMMITTEE ON
RAILROADS, PIPELINES, AND HAZARDOUS MATERIALS
OF THE
COMMITTEE ON
TRANSPORTATION AND INFRASTRUCTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
JANUARY 28, 2009
__________
Printed for the use of the
Committee on Transportation and Infrastructure
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COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
JAMES L. OBERSTAR, Minnesota, Chairman
NICK J. RAHALL, II, West Virginia, JOHN L. MICA, Florida
Vice Chair DON YOUNG, Alaska
PETER A. DeFAZIO, Oregon THOMAS E. PETRI, Wisconsin
JERRY F. COSTELLO, Illinois HOWARD COBLE, North Carolina
ELEANOR HOLMES NORTON, District of JOHN J. DUNCAN, Jr., Tennessee
Columbia VERNON J. EHLERS, Michigan
JERROLD NADLER, New York FRANK A. LoBIONDO, New Jersey
CORRINE BROWN, Florida JERRY MORAN, Kansas
BOB FILNER, California GARY G. MILLER, California
EDDIE BERNICE JOHNSON, Texas HENRY E. BROWN, Jr., South
GENE TAYLOR, Mississippi Carolina
ELIJAH E. CUMMINGS, Maryland TIMOTHY V. JOHNSON, Illinois
ELLEN O. TAUSCHER, California TODD RUSSELL PLATTS, Pennsylvania
LEONARD L. BOSWELL, Iowa SAM GRAVES, Missouri
TIM HOLDEN, Pennsylvania BILL SHUSTER, Pennsylvania
BRIAN BAIRD, Washington JOHN BOOZMAN, Arkansas
RICK LARSEN, Washington SHELLEY MOORE CAPITO, West
MICHAEL E. CAPUANO, Massachusetts Virginia
TIMOTHY H. BISHOP, New York JIM GERLACH, Pennsylvania
MICHAEL H. MICHAUD, Maine MARIO DIAZ-BALART, Florida
RUSS CARNAHAN, Missouri CHARLES W. DENT, Pennsylvania
GRACE F. NAPOLITANO, California CONNIE MACK, Florida
DANIEL LIPINSKI, Illinois LYNN A WESTMORELAND, Georgia
MAZIE K. HIRONO, Hawaii JEAN SCHMIDT, Ohio
JASON ALTMIRE, Pennsylvania CANDICE S. MILLER, Michigan
TIMOTHY J. WALZ, Minnesota MARY FALLIN, Oklahoma
HEATH SHULER, North Carolina VERN BUCHANAN, Florida
MICHAEL A. ARCURI, New York ROBERT E. LATTA, Ohio
HARRY E. MITCHELL, Arizona BRETT GUTHRIE, Kentucky
CHRISTOPHER P. CARNEY, Pennsylvania ANH ``JOSEPH'' CAO, Louisiana
JOHN J. HALL, New York AARON SCHOCK, Illinois
STEVE KAGEN, Wisconsin PETE OLSON, Texas
STEVE COHEN, Tennessee
LAURA A. RICHARDSON, California
ALBIO SIRES, New Jersey
DONNA F. EDWARDS, Maryland
SOLOMON P. ORTIZ, Texas
PHIL HARE, Illinois
JOHN A. BOCCIERI, Ohio
MARK H. SCHAUER, Michigan
BETSY MARKEY, Colorado
PARKER GRIFFITH, Alabama
MICHAEL E. McMAHON, New York
THOMAS S. P. PERRIELLO, Virginia
DINA TITUS, Nevada
HARRY TEAGUE, New Mexico
(ii)
SUBCOMMITTEE ON RAILROADS, PIPELINES, AND HAZARDOUS MATERIALS
CORRINE BROWN, Florida Chairwoman
DINA TITUS, Nevada BILL SHUSTER, Pennylvania
HARRY TEAGUE, New Mexico THOMAS E. PETRI, Wisconsin
NICK J. RAHALL II, West Virginia JERRY MORAN, Kansas
JERROLD NADLER, New York GARY G. MILLER, California
ELIJAH E. CUMMINGS, Maryland HENRY E. BROWN, Jr., South
GRACE F. NAPOLITANO, California Carolina
JASON ALTMIRE, Pennsylvania TIMOTHY V. JOHNSON, Illinois
TIMOTHY J. WALZ, Minnesota SAM GRAVES, Missouri
MICHAEL A. ARCURI, New York JIM GERLACH, Pennsylvania
CHRISTOPHER P. CARNEY, Pennsylvania CHARLES W. DENT, Pennsylvania
ALBIO SIRES, New Jersey LYNN A. WESTMORELND, Georgia
MARK H. SCHAUER, Michigan JEAN SCHMIDT, Ohio
BETSY MARKEY, Colorado CANDICE S. MILLER, Michigan
MICHAEL E. McMAHON, New York VERN BUCHANAN, Florida
THOMAS S. P. PERRIELLO, Virginia ROBERT E. LATTA, Ohio
PETER A. DeFAZIO, Oregon BRETT GUTHRIE, Kentucky
JERRY F. COSTELLO, Illinois AARON SCHOCK, Illinois
BOB FILNER, California ANH ``JOSEPH'' CAO, Louisiana
EDDIE BERNICE JOHNSON, Texas PETE OLSON, Texas
LEONARD L. BOSWELL, Iowa
RICK LARSEN, Washington
MICHAEL H. MICHAUD, Maine
DANIEL LIPINSKI, Illinois
STEVE COHEN, Tennessee
LAURA A. RICHARDSON, California
JAMES L. OBERSTAR, Minnesota
(ex officio)
(iii)
CONTENTS
Page
Summary of Subject Matter........................................ vi
TESTIMONY
Baker, Chuck, President, National Railroad Construction &
Maintenance Association........................................ 47
Boardman, Joseph, President and CEO, National Railroad Passenger
Corporation (Amtrak)........................................... 7
Buffa, Peter, Chairman, Orange County Transportation Authority
(CA)........................................................... 7
Canby, Anne, President, Surface Transportation Policy Project,
and Member, OneRail Coalition.................................. 47
Fenhaus, Leon, Director of Government Affairs, Brotherhood of
Maintenance of Way Employees Division, International
Brotherhood of Teamsters....................................... 47
Grenzeback, Lance R., Principal, Cambridge Systematics, Inc...... 47
Kempton, Will, Chief Executive Officer of CalTrans, on behalf of
the States for Passenger Rail Coalition........................ 7
Longman, Phillip, Schwartz Senior Fellow, Research Director, Next
Social Contract Initiative, New America Foundation............. 47
Simpson, Thomas, Executive Director, Railway Supply Institute.... 7
Stem, James, National Legislative Director, United Transportation
Union.......................................................... 7
Webb, Rick, Chief Executive Officer of Watco Companies, Inc., on
behalf of the American Short Line and Regional Railroad
Association.................................................... 7
Wolfe, Ed, Wolfe Research........................................ 47
Young, James, Chairman, President, and CEO, Union Pacific
Corporation, and Chairman, Association Of American Railroads... 7
PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS
Cohen, Hon. Steve, of Tennessee.................................. 65
Costello, Hon. Jerry F., of Illinois............................. 66
Cummings, Hon. Elijah E., of Maryland............................ 67
Richardson, Hon. Laura A, of California.......................... 72
PREPARED STATEMENTS SUBMITTED BY WITNESSES
Baker, Chuck..................................................... 76
Boardman, Joseph................................................. 84
Buffa, Peter..................................................... 89
Canby, Anne...................................................... 97
Fenhaus, Leon.................................................... 105
Grenzeback, Lance R.............................................. 120
Kempton, Will.................................................... 127
Longman, Phillip................................................. 147
Simpson, Thomas.................................................. 173
Stem, James...................................................... 177
Webb, Rick....................................................... 186
Wolfe, Ed........................................................ 200
Young, James..................................................... 218
SUBMISSIONS FOR THE RECORD
National Association of Railroad Passengers, Ross B. Capon,
President, written statement................................... 228
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
FREIGHT AND PASSENGER RAIL: PRESENT AND FUTURE ROLES, PERFORMANCE,
BENEFITS, AND NEEDS
----------
Wednesday, January 28, 2009
House of Representatives,
Committee on Transportation and Infrastructure,
Subcommittee on Railroads, Pipelines, and Hazardous
Materials,
Washington, DC.
The Subcommittee met, pursuant to call, at 10:00 a.m., in
Room 2167, Rayburn House Office Building, Hon. Corrine Brown
[Chairwoman of the Subcommittee] presiding.
Ms. Brown of Florida. Will the Subcommittee on Railroads,
Pipelines, and Hazardous Materials come to order.
I want to welcome everyone to our first hearing of the
111th Congress. I am proud to say that we are now the second
largest Subcommittee on the Committee on Transportation and
Infrastructure. I think that is due, in large part, to the
increased interest in freight and passenger rail as a solution
to increased gridlock on our national roads and the
environmental and economic problems that our Nation is facing.
I think it is also a reflection of the big achievement that
this Subcommittee made last session.
We have a number of new Members on the Subcommittee joining
us this Congress, and I want to welcome them. Mr. Shuster and I
are hosting a "meet to greet" with the new Members and
representatives of the Railroads, Pipelines, and Hazardous
Materials community on February 3 right here in this room, and
we are asking all of our stakeholders to come out and join us
for this "meet and greet" with the new Members.
However, I am saddened that the new Members will not have
the honor to meet one of our brothers, "Brokenrail," who passed
away on December 19. "Brokenrail" served as the national
legislative director of the United Transportation Union. We
will have a memorial service right here in this room today at
3:00. I hope that you all will join us for that.
The Subcommittee is meeting today to receive testimony on
the role of freight and passenger railroads in the U.S.
economy, the impact of the current economic crisis on the rail
industry, its suppliers and employees, and the benefits of
freight and passenger rail and freight and passenger rail
investment needs.
Congestion has been a major problem across most of our
surface transportation, including railroads. The U.S.
Department of Transportation predicts that the demand for
freight rail transportation will increase 88 percent by 2035.
At the request of the National Surface Transportation Policy
and Review Study Commission, the Railroad Association
Commission has accessed the capacity of the national rail
system to accommodate the estimated increase in freight
traffic. The study found that the cost of improvement needs to
accommodate rail freight demand to 2035 is estimated at $148
billion in 2007 dollars.
Prior to the economic crisis, the Class I railroad
anticipated that they would be able to generate about $96
billion of that $135 billion share through increased earnings
from revenue growth, higher volume and productive improvement,
while continuing to review existing infrastructure and
equipment, leaving a balance in Class I freight rail of $39
billion, or about $1.4 billion per year.
Without this investment, the study estimates that 30
percent of the rail miles and rail corridor will be operating
above capacity by 2035 and that another 25 percent will be
operating near capacity. Yet the economic crisis has hit the
rail industry, and their investment needs may be greater than
previously anticipated.
Funding must also be provided for intercity passenger and
high-speed rail. With concern still high about the dependence
on foreign oil and on greenhouse gas emissions, Amtrak and the
States are looking for opportunities to expand service. H.R.
2095, which was enacted at the end of the last Congress,
authorized about $13 billion for Amtrak and the States to help
bring the Northeast Corridor to a state of good repair and for
capital expenditures of the national rail passenger
transportation system. We need to make sure that these programs
are fully funded, and as we begin to develop and to reauthorize
the next SAFETEA bill, it is critical that the needs for
additional rail capacity for freight and passenger rail be
addressed.
The future of ground transportation is on our rail, whether
it takes freight off congested highways or moves people on
high-speed rail corridors. There is no one solution that will
solve rail congestion or the environmental and engine problems
plaguing our Nation. New and creative ideas from the government
and the private sector must be utilized to increase and to
improve both freight and passenger rail capacity.
With this, I welcome today's panelists, and I thank you for
joining us. I am looking forward to hearing your testimony.
Before I yield to Mr. Shuster, I ask unanimous consent that
Members be given 14 days to revise and extend their remarks and
to admit the submission of additional statements and materials
for Members and witnesses. Without objection, so ordered.
I now yield to Mr. Shuster for his opening statement.
Mr. Shuster. I thank the Chairwoman.
I also would like to welcome everybody to the first hearing
of the Railroads, Pipelines, and Hazardous Materials
Subcommittee. Again, it is an honor for me to be the Ranking
Member on this Subcommittee, and I look forward to working with
Chairwoman Brown as we move through the 111th Congress.
Our government has had a history of supporting the
development of a strong rail network in this country, and we
have reaped the benefits of it over the past 180-200 years,
starting in 1862 with the land grants that made the first
transcontinental railroad possible. The United States has
supported the development of privately owned railroads. Our
national investment in railroads has been repaid many times
over, and I believe the continued investment will provide
future generations with the building blocks for economic
growth.
There is a lot that Congress can do and is doing to help
the railroads. Last year, as the Chairwoman mentioned, we did
pass probably the most important piece of rail legislation in
over a decade, the Rail Safety and Amtrak reauthorization. The
rail safety provisions of that bill will bolster railroads'
already outstanding safety records by the development of new
technologies such as positive train control.
The passenger rail provisions of the bill are also
exciting. We are in the process of soliciting bids for the
development of high-speed rail service on 11 corridors
throughout the country . We also included provisions in the
bill that allow private companies to bid and to operate certain
routes that Amtrak now operates, whether by themselves or in
conjunction with Amtrak. Private companies have a well-
documented ability to lower costs in transit operations,
including commuter railroads, and I expect that we will reap
the same benefits for the U.S. taxpayer with regard to
intercity rail travel.
Unfortunately, the freight rail industry has not avoided
the economic downturn as we are all experiencing. At least one
Class I railroad has been forced to furlough workers. Total
rail volume is off by more than 18 percent this year as demand
for rail service drops. Auto shipments are down 64 percent.
Metals are down 41 percent. The chemical shipments are down 20
percent. This is a critical time for the railroad industry.
We can do more during this Congress to create an
environment where railroads can succeed. We can enact a freight
rail infrastructure tax credit. We can make railroads a bigger
part of the next highway reauthorization bill, and we can fully
fund programs that were authorized in rail safety and in Amtrak
legislation that we passed last Congress.
What we should not do is to interfere with the railroads'
ability to raise capital, which is critical. Railroad
reregulation, I believe, is dangerous policy, and I believe
that we will return the railroads to the dark days of the pre-
Staggers, where dozens of railroads were bankrupted and where
the government was forced to step in and prop up the industry.
Experimenting with policies that inject government further
into pricing negotiations between private parties is a bad
idea, I believe. Furthermore, the STB has taken dramatic steps
to ensure that shippers have recourse in rate disagreements by
reforming the rate case process. We should also oppose the
railroad antitrust legislation. Railroads are already subject
to most antitrust laws, and the limited exemptions are in areas
already regulated by the STB. By allowing Federal courts to
insert themselves into rate disputes, we risk undermining the
STB in creating an unworkable patchwork of core decisions that
would interfere with the national rail network.
Again, I am honored to be serving as Ranking Member. I look
forward to working with Chairwoman Brown as we move into this
Congress and make sure that we are doing the right things to
strengthen the railroads, which I believe in turn will help to
strengthen the economy.
So thank you and I yield back.
Ms. Brown of Florida. Thank you.
I understand that Members would like to make opening
statements. If we could, let's try to hold those statements to
a minute so we can get to the great panel that we have here. We
will start with Mrs. Napolitano.
Mrs. Napolitano. Thank you, Madam Chair. Congratulations to
you and to Chairman Oberstar for the work in the 110th
Congress, as well as to Ranking Member Shuster.
Passing the Amtrak authorization, the railroad bill, made
significant steps, although not as much as needed for our
Nation's safety and passenger rail network.
Welcome, our distinguished guests, especially those from
California.
Mr. Will Kempton, the director of Caltrans, welcome, sir.
Peter Buffa, chairman of the Orange County Transportation
Authority, just south of me. Chairman Young, who I have had the
pleasure of meeting several times in my office, thank you, sir,
for being here and for visiting with my elected officials last
year in August.
Freight and passenger rail provide great service and
benefits, but it also creates a lot of problems for my area.
Some of those burdens really need to be addressed, especially
with the Alameda Corridor going through my whole district. We
look forward to working on being able to continue to invest in
the grade separations in areas all over the United States, to
doing more research in the quiet zones to be able to ensure we
provide sufficient safety, to working on properly training our
employees and on ensuring their safety, and to working
collaboratively to address the needs of our Nation and of our
community to ensure the Nation's economy continues to improve.
With that, I thank you, Chairwoman Brown, as we continue to
work on those issues--track repair, maintenance--and all of the
other stuff that we love dearly on this Subcommittee.
I thank our distinguished panel, and look forward to your
testimony.
Ms. Brown of Florida. Mr. Moran.
Mr. Moran. Madam Chairman, thank you very much. I will
forgo an opening statement at your request so we can proceed
with hearing our witnesses. Thank you.
Ms. Brown of Florida. Mr. Miller.
Mr. Miller of California. Thank you, Chairwoman Brown and
Ranking Member Shuster, for holding this hearing today. I think
it is very important to deal with this issue that tremendously
has impact on our region.
When imports come through the Ports of Los Angeles and Long
Beach, most of these products are transported by rail to other
parts of the Nation.
On that note, I am happy to introduce Peter Buffa. He is
chairman of the Orange County Transportation Authority. He is
one of our witnesses today. It is good to have you here today.
OCT is a multimodal transportation agency serving Orange
County. Mr. Buffa also served as a Costa Mesa city councilman,
and you were the previous mayor over there, I believe. It is
really good to have you here today.
The Committee welcomes the testimony of all of the experts
we have today. It is going to be interesting to hear what you
have to say.
While the use of passenger and freight rail corridors is
critical to facilitating economic growth in southern
California, the increased rail traffic has also imperiled the
safety and quality of life of the surrounding communities. Not
only does the increase in freight traffic cause tremendous
traffic delays at local grade crossings, but it affects the
quality of life for residents surrounding those communities.
A tremendous amount of goods come to the Nation through the
Ports of Long Beach and Los Angeles. We have about 135 grade
crossings in that region that are tremendously impacted by the
ports that do ship goods over the rail. Now, a certain amount
of it goes over our freeways also with truck traffic, but the
bulk of it is on rail. And we have quite a challenge ahead of
us in trying to deal with the emergency vehicles that have to
cross those, the impact on the economy as individuals and
trucks sit there, watching mile-long trains travel on our rails
each day they go by. It is an issue that has to be dealt with.
Billions of dollars of goods come into this Nation through our
ports, and we need to take and to mitigate the impact caused by
those goods.
I look forward to the testimony today.
I yield back. Thank you.
Ms. Brown of Florida. Mr. Miller, would you like to
introduce Mr. Buffa right now, your constituent?
Mr. Miller of California. I just did.
Ms. Brown of Florida. Mr. Walz.
Mr. Carney.
Mr. Carney. Thank you, Madam Chairwoman.
Just briefly, I wanted to congratulate you and my good
friend, the Ranking Member, Mr. Shuster, from Pennsylvania. I
anticipate a great year for this 111th Congress in terms of
what we are going to do for rail and what rail will do for the
Nation. As we work together, we have an enormous opportunity
here to rebuild the rail, to put more freight on the rail and
more passengers on the rail. When we do that, this Nation will
be stronger, healthier and safer, and we look forward to
working with all of you in that regard.
I want to welcome all of the folks here who are testifying
today. I look forward to hearing your testimony and to tossing
around a few questions.
Thank you, Madam Chair.
Ms. Brown of Florida. Mr. Latta.
Mr. Latta. Thank you, Madam Chair. I will waive my opening
statement, and will yield back my time.
Ms. Brown of Florida. Ms. Markey.
Ms. Markey. Thank you, Madam Chairman.
I look forward to working on this Committee. As a new
Member from Colorado, I know that railroads have been the
backbone of our transportation system and have opened the West
to economic development, so I look forward to working with you
on this Committee and on the future role and needs of railroads
in this country. Thank you very much.
Ms. Brown of Florida. Thank you.
Mr. Cao.
Mr. Cao. Thank you, Chairwoman Brown and Ranking Member
Shuster.
At least the southern part of Louisiana has been very much
impacted by Katrina. For the last 3-1/2 years, the railway
system has been one of the instrumental instruments in economic
development in the area. I would hope to work with all of you
in order to provide greater services and also to help the
Second Congressional District redevelop many of its
infrastructure and also the rail systems there in order to
generate more economic development systems.
So thank you very much for being here.
Ms. Brown of Florida. Mr. Boswell.
Mr. Boswell. Thank you, Madam Chair. Thank you for the
intense attention you are giving to this subject.
Just two short things. You have heard me say it before:
Many, many years ago when I returned as a soldier from an
assignment in Europe, I thought somebody has got it wrong. They
are expanding their ability, and we are taking up track. Well,
I thought I knew then who was wrong, and I was right.
Madam Chairwoman, I hope we get into a real solutions
discussion on how we are going to deal with these bottlenecks
we have in Chicago. It is one of our great cities. There is no
question about that, but we have got a problem. I know you know
about it. We have got to deal with that, it seems to me, to
move our economy and to move freight back and forth across our
country. So I commend you for taking all of this on, and I am
looking forward to participating.
Ms. Brown of Florida. Mr. Guthrie, you pass.
Mr. Michaud.
Mr. Michaud. I want to thank you, Madam Chair, and the
Ranking Member, for having this hearing. I also want to thank
the panelists for testifying today, and I look forward to
hearing your testimony. Since we will have votes this morning,
I will yield back the remainder of my time.
Ms. Brown of Florida. Mr. Teague.
Mr. Teague. Yes, Madam Chairwoman. Thank you for allowing
me to be on this Committee.
I am a newly elected Democratic candidate from New Mexico's
Second Congressional District. I am proud to be on this
Committee, and I am anxious to listen to the input of people
who are intimately involved in this industry.
Thank you.
Ms. Brown of Florida. Thank you.
I am pleased to introduce and to welcome our first panel--
our witnesses here this morning.
Our first witness is Mr. Jim Young, who is chair, president
and CEO of Union Pacific Corporation and who is chairman of the
Association of American Railroads. Welcome.
The next is Mr. Rick Webb, CEO of Watco Companies. Mr. Webb
is testifying on behalf of the American Short Line and Regional
Railroad Association.
Of course, Mr. Joseph Boardman, president and CEO of
Amtrak. Welcome in your new capacity.
Also, we have Mr. Will Kempton, CEO of Caltrans. Mr.
Kempton is testifying on behalf of the States for Passenger
Rail Coalition.
We have Mr. Thomas Simpson, executive director of the
Railway Supply Institute.
We have Mr. James Stem, national legislative director of
the United Transportation Union.
I remember that Congressman Miller has already introduced
his person.
Let me remind the witnesses that, under Committee rules,
all statements must be limited to 5 minutes, but your entire
statements will appear in the record. We will also allow the
entire panel to testify before the questioning of the witnesses
begins.
TESTIMONY OF JAMES YOUNG, CHAIRMAN, PRESIDENT, AND CEO, UNION
PACIFIC CORPORATION AND CHAIRMAN, ASSOCIATION OF AMERICAN
RAILROADS; RICK WEBB, CHIEF EXECUTIVE OFFICER OF WATCO
COMPANIES, INC., ON BEHALF OF THE AMERICAN SHORT LINE AND
REGIONAL RAILROAD ASSOCIATION; JOSEPH BOARDMAN, PRESIDENT AND
CEO, NATIONAL RAILROAD PASSENGER CORPORATION (AMTRAK); WILL
KEMPTON, CHIEF EXECUTIVE OFFICER OF CALTRANS, ON BEHALF OF THE
STATES FOR PASSENGER RAIL COALITION; THOMAS SIMPSON, EXECUTIVE
DIRECTOR, RAILWAY SUPPLY INSTITUTE; PETER BUFFA, CHAIRMAN,
ORANGE COUNTY TRANSPORTATION AUTHORITY (CA); AND JAMES STEM,
NATIONAL LEGISLATIVE DIRECTOR, UNITED TRANSPORTATION UNION
Ms. Brown of Florida. I am pleased to have you here. We
will recognize Mr. Young to start.
Mr. Young. Good morning, everyone. I will be using a few
slides today, so watch the screens, please.
Chairwoman Brown, Ranking Member Shuster and Members of the
Subcommittee, my name is Jim Young. I am chairman of the Union
Pacific Corporation. I appreciate the opportunity to testify
today, and I want to commend this Committee for holding this
hearing.
The United States freight rail system is the envy of the
world. It is efficient and cost-effective. One train hauls the
equivalent of 300 trucks at about half the cost. It is vital to
our economy. Over 40 percent of our Nation's freight moves by
train on a private system that costs taxpayers virtually
nothing. It is friendly to the environment. Trains emit about a
third of the emissions per ton compared to that of a truck. In
fact, if your family vehicle were as fuel-efficient as a train,
you would get about 400 miles per gallon. In short, freight
rail is a vital resource for our economy that stands ready to
accelerate the economic recovery that our entire country is
hoping for.
Like many companies, Union Pacific is facing extraordinary
economic challenges. As our company started the fourth quarter
of 2008, what had been a gradual decline in loadings became a
sharp drop-off that surprised, even astounded, us all. In
virtually every segment of our business, from automobiles to
frozen chickens to X-boxes, our customers curtailed their
shipping as credit evaporated, and consumer spending took the
holiday season off.
Today, approximately 1 month into the new year, we are
still searching for a firm base from which we can start to
recover. At today's business levels, Union Pacific has in
storage 1,200 locomotives at $2 million each and over 48,000
railcars. Even more discouraging is that over 3,100 of our
employees are furloughed across our company. About half of
these employees are covered by a new program that allows them
to work 8 days a month and that maintains their full health
care coverage. We have, essentially, stopped hiring until our
furloughed employees can return to work and until the economy
begins to recover.
We are taking prudent steps to protect the financial health
of our economy while being certain that we retain a fast
recovery capability. For example, we have frozen the salaries
of our executives, have canceled meetings, have curtailed
travel, and have sought the help of all of our 47,000 employees
in identifying and in implementing ways to reduce costs.
We need to preserve our investment in the safety and
maintenance of our railroad. That alone is well over $2 billion
per year. We must also continue to invest in future growth that
will make our service even more valuable to our customers.
Financial returns drive growth investment. We are only able to
make infrastructure investments for growth if our investors--
pension funds, mutual funds, ordinary people--have some
confidence that they will earn a satisfactory return on their
investments. If the economy does not begin to rebound, or if we
are somehow prevented from earning enough to pay for growth,
they will take their money elsewhere and we will have to reduce
our investment in new railroad.
There is much more to be done. Even with our record capital
spending, our industry is only investing about half the level
DOT studies say is needed to meet the demands on freight rail
in the future. Clearly, our Nation is facing a monumental
challenge. Railroads, particularly freight railroads, can be an
integral part of meeting that challenge.
We have three suggestions for your consideration:
First, government must nurture policies that enhance the
ability of the freight railroads to attract private investment
and remain competitive. The less we utilize privately funded
rail in this country, the more the taxpayer must subsidize
other modes of transportation.
Second, Congress should enact an Investment Tax Credit for
new rail construction. We have endorsed a proposal that has
been introduced in this Congress that would provide a 25
percent Investment Tax Credit for new rail construction. This
credit will allow us to accelerate our investments in rail,
investments that are critical if we are going to meet the
future demand for rail transportation.
Third, Congress should enact and fund programs that allow
States to partner with freight railroads to move forward with
projects that benefit both the freight railroad and the public.
The best example of this type of project is the CREATE project
in Chicago. This multibillion-dollar project will improve the
fluidity of the freight railroads, will enhance passenger rail
in the city and will reduce congestion on the highways. The
freight railroads are willing to put up the money consistent
with the benefits that we would receive while local, State and
Federal governments put up the resources commensurate with the
public benefits.
These are but three ideas for how our freight rail system
can do even more to strengthen our economy. We stand ready to
work with you to make them a reality. Thank you.
Mr. Webb. Good morning, Madam Chair and Members of the
Committee. My name is Rick Webb. I am chief executive officer
of Watco Companies. We own 19 short lines, operating nearly
4,000 miles of track in 16 States. I am testifying today on
behalf of the American Short Line and Regional Railroad
Association.
The returning Members of this Committee know the short line
story, and I will not repeat it here. For the new Members, let
me just say the importance of the short line industry is in who
and where we serve. America's 500 short lines operate nearly
50,000 miles of track, or almost one-third of the national
railroad network. For large areas of the country and
particularly for small-town America, short lines are the only
connection to the national railroad network. For small
businesses and farmers in those areas, our ability to take a
25-car train 75 miles to the nearest Class I interchange is
just as important as the Class I's ability to attach that block
of traffic to a 100-car train moving across the country. My
Kansas grain customers cannot make the journey to export
markets in the gulf without Class I railroad service, but they
cannot start the journey by rail without short line service.
The talk in Washington today is all about economic
stimulus, and in the time I have this morning, let me make four
points.
First, short line railroads have enormous rehabilitation
needs because they operate the most vulnerable track in the
system. Today, short lines are yesterday's abandonment
candidates. We have been very successful in turning these into
profitable lines on a P&L basis, but we serve small customers
who do not ship in volumes large enough to let us fund the
enormous cost of eliminating deferred maintenance. Every time
the Federal Government has given us a helping hand, either
through the tax credit or through the low-interest, long-term
RRIF loan program, which we appreciate very much, that help has
leveraged significant additional private investment.
On Watco's Kansas and Oklahoma Railroad, for instance, the
tax credit allowed us to undertake a $10 million track
rehabilitation project on a 40-mile segment over which 75
percent of the railroad's traffic moved. We completed that
project in 2006, and it increased speeds, improved safety and
allowed us to increase traffic on the line for our customers.
Without the tax credit, we would have done only 1 to 2 miles
per year for the next 20 years.
Second, short line projects are truly shovel-ready
projects. Short lines are constantly installing new rail ties
and ballasts, the amount limited only by funding availability.
If extra funds became available tomorrow, the work gang that is
currently installing ties and rail between milepost A and B
would be hired to keep going to milepost C. Because virtually
all short line capital investment is made on existing company-
owned rights-of-way, there is no regulatory, engineering, or
environmental delay. The Short Line Association has identified
$781 million in shovel-ready projects.
Third, most short lines do not have the in-house manpower
to undertake rehabilitation projects and must hire contractors
and laborers to do the work. We estimate that the $781 million
in shovel-ready spending would result in the creation of 30,000
jobs during the course of the projects. These are direct jobs
only, and they do not account for any of the economic activity
generated by our purchases of rail ties and rock.
Fourth, at the risk of sounding boastful, short line
railroads are managed by entrepreneurs who have taken
considerable personal financial risk to build new small
businesses, and that is a process our government should be
encouraging.
My father was a unionized car repairman at the Kansas City
Southern before he started our company. In 1983, he took out a
$25,000 bank loan to begin our rail switching operations in
DeRidder, Louisiana. That began Watco Companies. Today, Watco
operates nearly 4,000 miles of short line track. We have a team
of people 2,220 strong, and we move over 500,000 carloads
annually. Hundreds of short lines across the country can repeat
some version of the same story.
I do not begrudge the stimulus dollars the Federal
Government wants to devote to public infrastructure, but I can
tell you that every dollar you devote to short line railroad
infrastructure will leverage significant additional private
investment, and it will allow us to create strong small
businesses that will be an engine for continuing job creation.
I appreciate very much the opportunity to be here, Madam
Chair and Ranking Member Shuster, and I look forward to
answering any questions you may have.
Ms. Brown of Florida. Thank you.
Mr. Webb, I hope you know that Mr. Oberstar had included
$100 million for the short line that, thus far, has not made it
into the stimulus. But we will continue to work toward making
sure that rail is included in the final product that leaves
this Congress and goes to the President.
Mr. Boardman, I know that you cannot comment on Members and
amendments, but there is an amendment on the floor today that
takes out the $800 million--billion--million--million? Yes, it
gets confusing around here with "million" and "billion." The
amendment on the floor takes this out of the bill.
So would you tell us how that would affect Amtrak? I have
an amendment, you know, of $5 billion for the rail industry
that included a substantial amount of more money for Amtrak. So
we are waiting to hear from you. Thank you.
Mr. Boardman. I will do my regular opening? Okay.
Thank you, Madam Chair and Members. I am happy to be here
today and to be given this opportunity.
I have been in front of this Committee in two previous
roles--first, as the commissioner of transportation for New
York State and then, more recently, as the Federal Railroad
Administrator, but on the day before Thanksgiving, I was given
the opportunity to lead the finest group of men and women in
passenger railroading in Amtrak.
Amtrak just finished in the Federal fiscal year that ended
in September of 2008 with a record-setting performance. The
company had an annual ridership record of 28.7 million
passengers, which was an increase of over 11 percent from 2007.
Each of the three rail business lines--the Northeast Corridor,
short-distance corridors, and long-distance trains--grew
markedly.
Both May and July were record months for ridership. Load
factors were rising in the system. In time slots and services,
the existing fleet was very nearly at capacity at the end of
2008. This record gave everyone a great sense of the strong
demand that existed for intercity passenger rail and the
importance of the rail mode in delivering safer, green and
healthier transportation for all Americans. However, in the
first quarter of fiscal year 2009, beginning this past October,
overall ridership has fallen below our expectations by nearly 5
percent and revenue by nearly 7 percent below what we expected.
Our Northeast Corridor business line generally, and
particularly Acela Express, led our decline in both ridership
and in revenue. Acela ridership was down 12 percent below
expectations while revenues were off by 15 percent below the
expectation. We are seeing a mixed result on our short-distance
corridors. Some of those that connect with the Northeast
Corridor, like New York City to Albany, are seeing drops in
ridership.
These circumstances demonstrate a strong need for funding,
especially operations funding, at levels in our currently
authorized bill. The critical need for Amtrak to be ready to
meet the mobility needs of Americans in the United States faces
a future marked by higher energy costs--everyone predicts that
today--and a need to improve our environment.
Congress must help Amtrak with the funding to rebuild, to
replace and to renew its human capital, its passenger and
locomotive fleet, and the critical infrastructure owned by both
Amtrak and the freight railroads that carry 71 percent of
Amtrak's train miles, or they are going to face potential
failure of one or of many of the components of an efficient and
critical rail network. This remarkable network provides surface
connectivity for passengers and freight from coast to coast and
border to border. Congressional interest must make this
investment a national priority for the next decade or beyond if
we are to remain a competitive and healthy economic engine in
the world.
One of the core competencies of our company is the
specialized knowledge of our workforce in operating a
nationwide passenger railroad. The men and women of our
workforce keep this railroad glued together and operating.
Amtrak's workforce looks like many other industries right now--
gray.
More than 60 percent of our managers have been blessed with
more than 50 years of life, and more than half of our total
workforce is of the same vintage. Rail workers are generally
eligible to retire when they reach age 60 and accumulate 30
years of railroad employment. We face the prospect of a major
change in our workforce in just a few years, and we must both
invest in and change our approach to human capital planning to
maintain our core competence.
Our industry, both passenger and freight, is greener than
our competitors'. We have got a smaller carbon footprint, but
we could make a major leap forward by extending
electrification. We should connect our rail network to the
electric grid all over the Nation where it makes sense. That
would go a very long way toward securing our energy future and
in improving our environment. Railroads do not need to depend
on liquid energy when the electric option exists and is
available. This cannot be done, however, without a major policy
decision by Congress.
Programs on this scale are being undertaken elsewhere--in
China, for instance, where they are regarded as the vital
component of a future economic development and as a major
element of funding in their stimulus program. I think it is $88
billion for rail.
I think it is time for us to look for the investment
opportunity that will do for us in this century what the canals
and transcontinental railroads did for the 19th century and
what the highways did for the 20th. This is the kind of
project, the kind of moment, which demands, as the noted
Chicago architect Daniel Burnham once said, that we make no
little plans.
Thank you.
Ms. Brown of Florida. Thank you.
We have a vote, and we have about 10 minutes left on that
vote. So we are going to take an informal recess. It is just
one vote, and then we will come right back.
Thank you very much.
[Recess.]
Ms. Brown of Florida. Will the Committee please come to
order.
Joining us now is the Chairman of the full Transportation
Committee and, as I say, the transportation guru, Mr. Oberstar.
Would you like to give a few words before we get started
back into the hearing?
Mr. Oberstar. Thank you, Madam Chair and Mr. Shuster. I
thank you for the good work that you have done consistently on
the rail issues, and I thank our panel for participating this
morning.
The issue of Freight and Passenger Rail: Present and Future
Roles, Performance, Benefits, and Needs. It is a big subject,
but it is a good one on which to start this first session of
the 111th Congress.
There are so many distinguished members of the panel. I
want to welcome Mr. Boardman, and I want to thank him for
continuing his service in rail and on Amtrak.
Mr. Kempton, if I may. Will, you have been of enormous
service as we move ahead with the stimulus initiative, or the
recovery bill, as it is called. In the teleconference session
we had a couple of weeks ago, your testimony that the State of
California, Caltrans, has been receiving eight bids for every
contract offered and that they are coming in 25 percent below
final design and engineering estimates has been a compelling
argument in favor of our initiative and in favor of retaining
the $30 billion--although, I personally think it should be $60
billion--for the surface transportation portion. It is the
anchor element in our argument with the Congressional Budget
Office that they are talking out of their hats in saying that
the States cannot spend this money and cannot commit the first
half in 90 days, $15 billion in 90 days. It is with this that I
cite your specific experience, the biggest Transportation
Department in the whole country. I thank you very much for your
service and for your contribution.
In that vein, if we are going to make progress on unlocking
the congestion in America--in our major metropolitan areas, in
our extended areas, and into the suburbs and exurbs--we have to
develop far more passenger rail service than we have in America
today. It is the fastest growing segment of transportation. We
ought to be able to do in the United States what is done in
France with the TGV, and in Spain with the Talgo, and in
Germany, with the ICE, and in Italy with the MTV, and move
people at speeds of 184 miles an hour plus. But to do that in
this country, we are going to have to have the participation
and the cooperation of the freight rail sector.
In Europe, there is comparatively very little movement of
freight by rail, which is why the European Council of Ministers
launched a $1.3 trillion infrastructure initiative 5 years ago,
a large portion of which is to develop freight rail service and
to extend their existing high-speed passenger rail to build a
2,000 mile canal across Europe to link the North Atlantic with
the Black Sea--they are about halfway through with that
initiative--to shift freight from highways to water service,
but also to extend their freight rail.
Unlocking that complexity of freight and passenger rail
service on our side of the Atlantic is a challenge that this
Committee has already faced and will continue to do. We passed
the first major upgrade of rail safety in 100 years in the last
Congress. With the participation of our ranking Full Committee
Member, Mr. Mica, and the leadership of Ms. Brown and in
partnership with Mr. Shuster, we passed the first authorization
of Amtrak in 12 years. Now we have to invest in Amtrak.
I have already leaned on the incoming Secretary of
Transportation, that among its top three priorities the first
is to deal with the impasse over the air traffic controller
contract. The second is to get serious about moving Amtrak
ahead. The third is to partner with us in the new authorization
bill.
So I think this hearing lays the groundwork for a great
deal of what lies ahead of us in this country. I want to
express my appreciation to the freight rail witness at this
table and to the freight rail sector for getting serious about
passenger rail and partnership. We have got a long way to go,
but together we will do it. And I mean we will do it in this
Congress, in this Committee.
Ms. Brown of Florida. Thank you, Mr. Chairman.
Now Mr. Kempton.
Mr. Kempton. Thank you, Chairwoman Brown and Ranking Member
Shuster and the distinguished Members of the Committee.
I would like to begin my comments by thanking our
California delegation for their work in transportation--Mrs.
Napolitano, Ms. Richardson, Mr. Filner, and Mr. Miller. Their
Membership on this Committee is testimony to their commitment
to transportation.
Speaking of commitment to transportation, Chairman
Oberstar, no one in this country has the commitment to
transportation that you do. And we appreciate very much the
opportunity to work with you, and we were very impressed that
you reached out to the States to ask our opinion on these
issues, and we stand ready to assist you whenever possible.
I am Will Kempton. I am the director of the California
Department of Transportation. It is also known as Caltrans. I
want to thank you for the opportunity to testify before you
today on the benefits of intercity passenger and freight rail.
Today, in addition to representing Caltrans, I am also
representing the States for Passenger Rail Coalition on behalf
of Secretary Frank Busalacchi from Wisconsin.
I wanted to talk a little bit about the success that this
Committee has had, the Subcommittee and the Full Committee, in
terms of the Amtrak authorization and some of the other actions
that you have recently taken relative to the stimulus.
First of all, the capital matching program that you have
included in H.R. 2095 is a huge benefit to the States that are
spending dollars on their own to try to make sure that they
have a viable intercity passenger rail service. In California,
we have spent over $2 billion of our own money to upgrade our
intercity passenger rail system to make sure we have a viable
service. Moreover, the bill stabilizes financing for Amtrak. We
are hopeful, as we move through the appropriations process,
that those dollars get put out very, very quickly.
I want to congratulate the Subcommittee and the Full
Committee on their work on the stimulus package. As the
Chairman indicated, we have I think crafted a very, very good
package.
In California, on rail alone, we think we can get $342
million of intercity passenger rail work out the door very,
very quickly. Our coalition of 31 States has a total of $1.6
billion of work that is ready to go. California has seen a
resurgence of interest in the use of intercity passenger rail.
For the State fiscal year ending last July, more than 5.3
million passengers rode California's three intercity passenger
rail corridors. That is the San Joaquin service, which runs
from Bakersfield to the Bay Area; that is the Capital Corridor
service that runs from the city of Auburn through Sacramento to
San Jose; and that is the Pacific Surfliner service which runs
from San Diego through Los Angeles up to San Luis Obispo. That
is a jump of 13 percent over the prior year.
California is second only to New York in total Amtrak
ridership with 20 percent of all Amtrak riders, and we have the
second, third and sixth busiest passenger rail routes in the
country. In fact, just a tidbit of information. Last summer,
when the price of gasoline had topped out, our Pacific
Surfliner service was serving more passengers than the
Northeast Corridor, and I am very proud of that fact.
New York, watch out.
The benefits of passenger rail are very, very significant.
Obviously, there are congestion reduction benefits. One example
would be, for the service that goes between Orange County and
Los Angeles, we are taking away the need for an additional lane
of freeway on the Interstate 5 corridor. That is very, very
significant in terms of the congestion reduction benefits of
rail. Passenger rail uses 15 percent less energy per passenger
mile than the airlines, and 21 percent less per passenger mile
than the automobiles. It produces 60 percent fewer greenhouse
gas emissions than automobiles, and that is a significant
environmental savings.
We also want to recognize the importance of freight rail.
As a couple of Members of our delegation have indicated, the
movement of goods through the State of California has a
significant impact not only in our transportation system but
also on the environment in the neighborhood of the ports.
So as Mrs. Napolitano and others have indicated, we need
those grade separations. We need rail improvements so we can
ship more of that freight traffic off of trucks, off of the
roads, onto the rails, and with the grade separations,
eliminate some of those bottlenecks that Mr. Miller talked
about. We want to work with you on reauthorization because we
think that is going to be a very, very significant step forward
in terms of attention on intercity passenger rail.
In addition to the Amtrak authorization legislation, we
think that the upcoming transportation authorization is
important. The Surface Transportation Policy and Revenue
Commission recommended $5 billion to $6 billion a year for
intercity passenger rail. AASHTO, the American Association of
State Highway and Transportation Officials, has suggested $35
billion over 5 years. These are levels we have never seen
before, but these are levels that are needed to support
intercity passenger rail in this country.
In closing, I would like to compare our investments in
intercity passenger rail with other global economic
competitors. In a January 23 article, The New York Times cited
a World Bank report that in 2008 the People's Republic of China
invested $88 billion in its intercity rail program after
spending $44 billion the previous year. This is on top of
massive investments in highways and ports over the past several
years. If you have been to China recently, you can see the
evidence of that infrastructure investment.
The European Union continues to invest heavily in
alternative forms of transportation, notably passenger rail.
Spain, which is similar in population and in gross domestic
product to California, has spent nearly $30 billion over the
last 4 years to upgrade its rail system. That nation intends to
develop a 6,200-mile, high-speed rail network by 2020 at an
estimated cost of approximately $150 billion. That does not
include an additional $13 billion for conventional and commuter
rail.
If we are to truly be competitive in the global
marketplace, we have to address our infrastructure needs. The
improvement of mobility and the development of alternative
systems of transportation are vital--make that essential to our
national economy, to our quality of life and to our standing in
the world community. Intercity passenger rail is an important
part of that solution.
That concludes my remarks, Madam Chairwoman. I am happy to
answer any questions.
Mrs. Napolitano. [Presiding] Thank you so much, Mr.
Kempton, for your testimony.
Now we move on to Mr. Tom Simpson, executive director of
the Railway Supply Institute.
Mr. Simpson. Thank you.
The Railway Supply Institute is a trade association that
represents the Railway Supply Industry. Our members provide
goods and services to our Nation's freight and passenger
railroads and rail rapid-transit systems. There are
approximately 750 railway supply companies in the United
States. In a good year, our sales volume totals somewhere
between $20 billion and $25 billion. The vast majority of these
companies are small, with less than $10 million in annual
sales.
Our members provide locomotives, new railroad freight cars
and passenger cars. As well, they provide communication and
signaling technology and modern maintenance-of-way techniques
to our railroads. RSI member companies also own and provide for
lease around 700,000 freight cars, or almost 50 percent of the
freight cars operated in North America. We build virtually all
of the railroad tank cars operating today, and we own 70
percent of the approximately 300,000 railroad tank cars in
service. There is no safer way to move the hazardous
commodities that our Nation deserves than by railroad tank car.
I had a boss who used to say, when railroads sneezed, we
caught a cold. I think that when railroads sneeze now, we catch
pneumonia.
Our economic record is decidedly mixed. As long as
railroads continue to reinvest in their rights-of-way, then
maintenance-of-way and communication and signaling industries
do well and have reported a relatively good year in 2008. They
are worried about 2009. New locomotive manufacturers have
enjoyed strong orders in recent years, but deliveries in 2009
may be halved from those deliveries in 2008. Railcar leasing
firms, those companies that own those 700,000 cars, have seen
cars returned from lease and cars idled. One of my member
companies has reported that miles of cars have been idled
because of the economic downturn.
There are six major freight car manufacturers in North
America that belong to RSI, and we have compiled order and
delivery statistics. I just have compiled the 2008 numbers
today, so this is relatively new news. Orders last year were on
the magnitude of 22,000 new freight cars. Deliveries were on
the magnitude of 48,000. Backlog freight cars ordered but not
yet delivered were at 32,000. We have not seen orders of that
magnitude since the early 2000s. Analysts I have talked to
recently are predicting perhaps a 50 percent reduction in
orders for 2009. We have not seen orders of the magnitude of
10,000 to 11,000 since the early 1980s. You may not be
surprised to find out that not only are freight car
manufacturers furloughing employees, but so are the leasing
companies and so are the component suppliers.
Congress can help. I ask you to pass the stimulus
legislation, not only funding for Amtrak but also funding for
infrastructure for the materials moved by freight car. I urge
you to pass an infrastructure tax credit providing a 25 percent
tax credit for certain freight-rail capital expenditures. You
should extend a short line tax credit. You should fund Amtrak
at the levels contained in the Amtrak reauthorization
legislation you passed last year.
Because of the uncertainty of the appropriations process,
we must find an alternative funding source for intercity and
high-speed passenger rail. Remember that these steps that you
take are preserving and are creating jobs in my industry.
I am an optimistic person. I wondered how I was going to
end this today, but I am deeply concerned and am worried about
the future of the railway supply industry. Thank you.
Mrs. Napolitano. Thank you so very much for your testimony,
Mr. Simpson.
We will move on to Mr. Buffa, chairman of the Orange County
Transportation Authority.
Welcome, sir, my neighbor.
Mr. Buffa. Thank you, Madam Chair, Ranking Member Shuster
and Chairman Oberstar. Thank you very much for giving me the
opportunity to testify before you today.
My name is Peter Buffa. I am chair of the Orange County
Transportation Authority, a multimodal transportation agency
which was formed in 1991 with the consolidation of seven
separate highway, bus and rail agencies.
I will give you a little background on Orange County. It is
like nothing you have seen in the OC or have heard on the
Desperate Housewives of Orange County. Do not believe any of
that. It is the fifth largest county in the Nation, with over
3.2 million residents. More importantly, when combined with the
other counties of southern California, we represent 25 million
people, about 10 percent of the population of the United
States.
Keeping those 3.5 million people in Orange County moving
requires a multimodal transportation system that includes the
12th largest bus system in the Nation and the 91 express lanes,
a highly successful 10-mile toll road that has become an
international model for fully automated toll collection and
congestion price management.
What surprises some people who visit Orange County is that,
even though southern California is the land of the freeway and
the car is king, we also have a vibrant regional rail network,
both passenger and freight. Our commuter service is called
Metrolink. It carries over 4 million rail passengers annually.
The peak-hour ridership on Metrolink is so successful that
without it we would have to build two more lanes on Interstate
5 from south Orange County to downtown Los Angeles to
accommodate that peak-hour demand.
Our rail service runs along two major corridors. The first
is the BNSF, the Burlington Northern Santa Fe corridor, which
runs from the ports of Los Angeles and Long Beach--which Mrs.
Napolitano is very familiar with--through Orange County and
east to the San Bernardino and Riverside Counties, ultimately
to the remainder of the United States.
The second major rail corridor is the passenger corridor
called the LOSSAN corridor, LOSSAN being Los Angeles to San
Diego. Ridership in the LOSSAN corridor has grown 500 percent
since 1990, from 1.6 to 8.5 million trips today. Some 10
percent of Amtrak's trips nationally take place in the LOSSAN
corridor.
A critical element in this system is the Anaheim Regional
Transportation Intermodal Center, or ARTIC, which will be a
multimodal gateway to Orange County and to southern California
and a transfer station from the LOSSAN corridor to the planned
California high-speed rail and to the planned California-to-
Nevada super-speed rail system. Although private participation
will be sought for this project, public funding is needed now
to build the foundational transportation elements of the
project.
I would like to focus the rest of my remarks on the rail
capacity opportunities and challenges, because that is what
they represent, presented by these two nationally significant
rail corridors. OCTA hopes that we can join with the Federal
Government as a funding partner in addressing these challenges.
The BNSF corridor is one of the Nation's major goods movements
corridors because it serves the Port of Los Angeles-Long Beach,
which is the largest port complex in the United States and the
fifth largest in the world.
To give you some idea of how we define "largest," it
carries 16 million cargo containers a year. That is more
container traffic than the ports of Oakland, Ventura, San
Diego, Portland, and Seattle combined. Just under half of the
imports to the United States travel through the Port of LA-Long
Beach.
If you look at the graphic on your screen right now, it
illustrates the goods movement flow in southern California to
local, regional and national markets. Let me hasten to add that
we have nothing against goods movement. We really like it
because it means business, it means jobs. There are 700,000
jobs in southern California related to goods movement, 107,000
of them in Orange County. Those jobs generate a payroll of more
than $6 billion. Regionally, those ports have delivered $256
billion in international trade to the rest of the country,
which we think is a wonderful thing. It also creates some
challenges for us.
So we are interested both in improving the capacity of rail
but also in mitigating the impacts of rail. The present levels
are challenging our system, particularly in terms of the
interaction of rail with roads in major arterials. Grade
separations are a major, major issue to us, particularly when
you think that by 2010--just 1 year away--freight train traffic
will increase substantially. Orange County alone will result in
road traffic delays of up to 206 minutes.
If you look at the second graphic, that will give you an
idea of how many grade separation projects are underway in
Orange County but are not fully funded for which we very much
need assistance in funding.
So, Madam Chair, if I were to make just one point today, it
is that a dedicated funding source at the Federal level, both
to improve goods movements capacity and to address congestion
mitigation, is badly needed. We very much thank this Committee
for their leadership on this issue. There have been a number of
proposals for a container bill, one by Ms. Richardson. At the
State level, there was a proposal last year for a $15 per
container fee, which unfortunately the Governor vetoed. To give
you an idea of how critical the issue is, the ports themselves
have now volunteered to impose a fee which would be turned over
to the MPOs, the local Metropolitan Planning Organizations, to
apply to that issue of increasing capacity and goods movement.
In summary, significant as the benefits of freight and
passenger corridors are to OCTA in Orange County, the
challenges they present cannot be fully addressed without the
Federal Government as a strong and financially involved
partner. And we hope that that will become a dedicated source
of funding through the reauthorization process this year. And
we very much appreciate this Subcommittee's leadership on that
issue. Thank you very much, Madam Chair.
Mrs. Napolitano. [Presiding] Thank you, Mr. Buffa, for your
eloquent testimony. And I can attest that is a big issue, not
only in the BNSF line, but the Union Pacific line, the rail
crossings, the grade separations.
Now we have Mr. James Stem, National Legislative Director
for the UTU, United Transportation Union. Welcome, sir. And
thank you for your continued effort to keep our employees safe.
Mr. Stem. Thank you Madam Chairman. We appreciate the
opportunity to speak. We are specially appreciative of the
honor that Ms. Brown bestowed upon Mr. Bruckenhaver. We thank
you for the opportunity to speak.
Chairman Oberstar, Ranking Member Shuster, I first want to
start my remarks by thanking this Committee for their
leadership and their guidance in the creation of the Rail
Safety Bill of 2008. That culminated a 10-year process for the
United Transportation Union and most of rail labor. In trying
to move those issues to the forefront, your leadership was much
appreciate. The process of implementing the requirements of
that new law have just begun. We will keep the Committee posted
on the application of the provisions in the law, and we will
work with you on further improvements in safety. The new law
addressed many significant safety issues and there remain some
areas that need attention.
We would also like to take this opportunity to offer our
encouragement and support for the full funding of the Federal
Railroad Administration. The new safety bill contained many
mandates that will require additional resources. Our message
this morning is focused on safety of the operation for rail and
passenger railroad.
I also want to make sure that my remarks include our strong
encouragement for inclusion of buy American provisions in all
stimulus activity. The Federal Transit Administration currently
has that. We encourage you to continue to support the buy
American provisions.
Freight and passenger rail service in the U.S. economy have
played a central role in the development of our Nation. From
providing the spine for westward population settlement and
commercial and industrial development in the latter half of the
19th century to transporting troops, arms, supplies during
World War II, the Korean War, the Vietnam War, the Persian Gulf
crisis, the rail industry formed the central core of the
country's transportation system.
As we look forward, a balanced transportation policy serves
our Nation's needs best. A national policy that demands the
best use of our fuel resources, while providing sustainable and
environmentally friendly transportation must take priority over
expediency. The environmental link to national transportation
policies find that railroads provide the greatest option, both
freight and passenger.
Historically the rail industry has provided hundreds of
thousands of middle class jobs. The passenger and freight rail
industry, by its very definition, provided jobs in many rural
areas all over our Nation. As we discuss ways to both stimulate
our economy and also to provide middle class jobs, including
rail at the core of the infrastructure piece of the recovery
plan is a sound investment.
The role of Amtrak and high speed rail services in the
future of transportation needs is integrally woven into our
balanced and environmentally sound transportation policy.
Amtrak is an essential component of our national transportation
system and must be properly funded to allow the system to grow
with the demand for service. Our Nation needs redundancy and
reliability in our transportation system.
The impact of the current economic crisis has been
significant for railroad employees. While the current economic
crisis has already taken a severe toll on railroad workers,
particularly operating employees, the overall health of the
industry is sound, especially among Class I railroads.
Financial reports for the fourth quarter of 2008 indicate that
our Class I railroads and many other railroads enjoy
significant growth, both in their net profits and in the
reduction of their operating ratio.
As of this writing, an average of 12 percent of our
operating workforce is in furlough status. We have heard from
Mr. Young this morning that that figure is expected to go up by
the end of this month. The unfortunate reality of moving
employees around during these furlough periods, of eliminating
some employees and requiring new job functions of other
employees, is an inevitable compromise in safety because of the
lack of experience in existing work force and the unfamiliar
surroundings. We are expecting and have already seen the first
signs of an increase in personal injuries as a result of this
economic crisis and the reduction of forces in our industry.
Many of these furloughed employees will be needed by mid
summer in order to meet the requirements from changes on the
hours of service law, which were included in the new rail
safety bill. Moreover, there will be strong demand for highly
trained and highly skilled railroad workers when the economy
begins to turn around and consumer demand is again on the rise.
I now want to talk momentarily about a significant safety
issue that also is involved in our economic recovery issue.
Some railroads are demanding from their employees and the
Federal Railroad Administration the authority to operate trains
with only one person on the locomotive, thereby, elimination of
thousands of middle class jobs that are there today, willing to
compromise the safety of the public and the safety of the
operation.
When the demand was first made, during national
negotiations the industry provided assurances and indicated
that the safety of the operation could be authorized with only
one person because of a pending development in positive train
control. When research revealed that system wide implementation
of any PTC system was many years and many billions of dollars
away, the carriers continued with their demand.
Single person operation of freight trains involves a
completely different analysis of the rail safety equation and a
complete reassessment of the overall safety of operations that
extends far beyond consideration of this specific issue.
Responsibilities of the railroad to operate safely over public
crossings, to inspect the moving train at every opportunity, to
open public crossings quickly when stopped, and to interact
with emergency responders are issues that are not addressed by
any positive train control system.
Historically, each train has been considered as a self
contained operating unit that had the capability of moving
safely in and out of terminals and sidings and moving on main
track, utilizes a variety of train control systems and
methodologies. Each train was able to set out effective cars en
route to provide self inspection and repair for dragging
equipment, shifted lading, hot journals, broken coupling
devices.
Mrs. Napolitano. Mr. Stem, would you wrap it up, sir?
Mr. Stem. Yes, ma'am.
Mrs. Napolitano. Thank you.
Mr. Stem. New computer and rail transactions have attempted
to skirt the Railway Labor Act in some areas. We encourage the
Committee to continue to insist on the application of current
laws that exist today for railroads.
And my summary comment is about rail accident
investigations. The National Transportation Safety Board is
charged with the responsibility of investigating transportation
accidents. We encourage and know that this Committee has no
authority over the internal operations of the National
Transportation Safety Board. However, when bureaucratic
decisions are made not to investigate fatal accidents, we
cannot understand the cause of those accidents or make
corrective safety actions.
I thank you for the opportunity to speak.
Mrs. Napolitano. Thank you so much for your testimony, sir.
We will begin the questions, and I will start with the
questions.
Mr. Oberstar. Madam Chairman, if I might just intercede for
a moment so I can run off to another Committee function. I want
to observe for Mr. Buffa reference railroad grade crossings. I
would like to read, "amounts allocated from the appropriation
made herein for the elimination of existing hazards to life at
railroad grade crossings, including the separation or
protection of grades at crossing, reconstruction of existing
railroad grade crossings and relocation of highways to
eliminate grade crossings shall be apportioned." That is not in
the current recovery bill. That was in the WPA order and the
law signed by President Roosevelt in 1935. I tried to include
that in the current language, but it was considered new
authority.
Mr. Buffa. Don't give up, Mr. Chairman.
Mr. Oberstar. Don't worry. We are not giving up.
Buy America is in every feature of our Committee's
jurisdiction. It was reaffirmed in the stimulus initiative. I
want you to understand that.
The two-man crew issue, Mr. Stem, that you raised, the
Federal Railroad Administration has assured us that they would
have to approve a decrease and they have not done so, and they
will not do so without an extensive review of the matter and
consideration of the recommendations of the National
Transportation Safety Board.
Mr. Kempton, your comments about ridership in California
are right on. America's memory, however, is very short. As soon
as gas prices went down, people started shifting to those big
ugly SUVs. They will be running back to the rails as soon as
the OPEC folks figure out how to jack the price of oil back up
to $140 a barrel. But I assure you that this Committee is going
to stay on top of our Amtrak legislation. The 11 corridors,
Secretary of Transportation is on full notice to continue the
work begun already in the previous Congress by the previous
administration, but more vigorously, to implement those
provisions; and we look forward to working with you on
imaginative, creative financial solutions. And Mr. Boardman,
will welcome that, I am quite sure.
There are many other comments. I just want to make those
observations before I go off to other Committee business. Thank
you.
Mrs. Napolitano. Thank you, Mr. Chairman. And I certainly
hope that we will also include a consideration of extension of
the 90-day shovel ready project to 120 because that would give
the locals the ability to be able to move on those projects.
States could do it but I don't think cities would be in a
position in 90. 120, yes.
Mr. Oberstar. My amendment will be in order on the floor
some time in the course of today and I expect it to pass.
Mrs. Napolitano. Thank you, sir. Thank you very much for
your leadership.
Let's start off with Mr. Young. I have some questions that
the Chairwoman left and I will infuse some of my own into the
questions. To Mr. Young, when the economy was growing the
railroads were having a difficult time making capital
improvements to their infrastructure. You needed track time to
do it. This was difficult given the increase in train traffic.
Now that business has slowed, this is the time you should be
making those investments because business is going to pick up
again. It is not the time for cutting back.
What would it take for Union Pacific and the industry, as a
whole, to start aggressively investing in capital expansion
now? That is question number one.
Number two, and I will lead into it. A recent study found
the cost of improvements needed to accommodate future freight
and rail demand is estimated at $148 billion. Class I freight
rail, which shares the cost is projected to be $135 billion,
while the short line and regional freight railroads share is
projected to be $13 billion. Prior to the economic crisis,
Class I railroads anticipated they would be able to generate
approximately $96 billion of their $135 billion share, leaving
a balance of $39 billion or about $1.4 billion a year to be
funded from other sources.
Given the state of the economy, do you believe that Class I
railroads will be able to generate the $96 billion? If not, how
much of the $135 billion will the Class I railroads be able to
generate?
Mr. Webb, how much of the $13 billion will the short lines
be able to generate?
And I will leave it to you two gentleman.
Mr. Young. Congresswoman Napolitano, let's start with the
first question. They are both related. While you have heard
from the industry that there is some cut back in capital this
year, we still have a relatively healthy capital investment
program. And I will talk about Union Pacific specifically. Last
year we spent $3.1 billion on new capital or on capital. Of
that 3.1, about a billion is new investment. What we are
looking at this year is around $2.8 billion. We have slowed
down some of the investment. And you hit it right. Track time,
now is the time to do it. Price of goods. You think about
steel, the raw materials. This is the time to do it.
So we are going to continue our program. But there is a
reality that we have to deal with in our business. This
industry consumes a tremendous amount of cash. The credit
agencies, Moody's, Standard and Poor's that rate our bonds, and
that is our ability to go borrow in the markets, our industry
is rated one notch above junk bonds. And the issue is that the
huge capital investment that comes in is so substantial we have
to look very carefully at our debt rating. So we are going to
have a good, a healthy capital program, although I would also
tell you that if things continue to deteriorate, we may have to
hair cut it even more.
In response to the second question, what would it take to
incent more aggressive capital, you know, we have got a
proposal for an investment tax credit out on the table and I
think that has, can make a real difference in terms of the
financial returns and cash flow. And as a consequence, we would
expend our capital investment.
Mr. Webb. Madam Chairman, thank you for the question. And
from a short lines regional railroad standpoint, that 13
billion is an absolutely impossible number, I believe, that is
my opinion, without the type of assistance that the Federal
Government has given to the short lines over the last 5, 4
years. With the short line tax credit that was passed in 2005,
we have seen hundreds of millions of dollars of investment into
the short line industry that would not have been made without
that.
So I believe it is absolutely imperative that we continue
programs like that. And we have several other ideas along with
that. But the short line tax credit is a proven process that
works.
And if I may, I would love to thank Congressman Moran
because he was the guy that actually wrote the first short line
tax credit bill back in 2005. And so I believe, without a
doubt, you go to anybody, railroad contractors, customers,
Class I partners and customers, they would say that the short
line tax credit has been a huge success. But that can only take
us so far. That is why, in the testimony that I gave, we have
found another $780 million worth of projects that could move
quickly.
And the last point I will make on that is the alternative
to a lack of capital investment in the short line industry is
abandonment. And from what I am hearing today, that is an
alternative that would benefit no one. And so we ought to work
together with you, with our customers, with our partners and
make sure that we find the best solution possible to fund that
$13 billion gap.
Ms. Brown of Florida. [Presiding] Well, you know, Mr.
Oberstar is still here and I wanted to mention that he included
$100 billion for the short line in the bill.
Mr. Oberstar. 100 million, not billion.
Ms. Brown of Florida. I get confused by those numbers, Mr.
Oberstar. But $100 million in the bill for the short line. And
we will continue to work to try to get some inclusion for the
short lines.
I am going to let Mr. Shuster go on, but let me just say
that what we need to start thinking about and one of the
purpose that we had when we started this hearing was to think
about the reauthorization bill and what we would like to see in
that bill. And so that would be a question that I will follow
up on. But now, Mr. Shuster.
Mr. Shuster. Thank you very much. I have a number of
questions so I am going to try to package them together and if
you would be brief and to the point I would appreciate that.
The first one, follow up with Mr. Webb on that. In the 100
million that the chairman proposed that didn't make it in
there, you said you could move quickly to get that out there. I
want to know how quickly, what does quickly mean?
And also, along the same lines, the investment tax credit,
if we were to put that in the stimulus, how fast could Union
Pacific move to put those projects in for creating jobs and
getting things moving? So if you both could take a shot, Mr.
Webb first, with the 100 million if you would.
Mr. Webb. We believe, without a doubt, that we can do all
projects; we can start all projects within 90 to 120 days, and
most projects, because they are time projects that can be
extended, we could actually start in less than 30 days.
Mr. Young. Congressman, again in our industry I would see
the same kind of relationship here. You have excess resources
today in terms of people ready to go, equipment, engineering
design is done. In many cases, these projects are an extension
of programs that you have today that you had cut off and you
would keep them going.
Mr. Shuster. Quickly, Mr. Webb, how many jobs do you think
that would create? 100 million? Do you have any idea?
Mr. Webb. We estimated about 30,000 jobs is what we thought
is what we, direct jobs that we estimated for that investment.
And one other thing, to briefly touch on a point that was made
earlier, all the materials that we would use would be made in
America.
Mr. Shuster. Mr. Kempton, the stimulus, we are debating the
90 days, the 180. I guess the chairman's going to offer to
squeeze that down to obligate the funds. I have heard from
states, my own in particular, that said it is very difficult,
it is going to be very difficult to do that. Pennsylvania, for
instance, will let about a billion dollars in bids and obligate
about a billion dollars in the first 6 months and they are up
to receive about 1.2 billion; half of that has to be moved
forward, and they have told me and a couple of States have said
it is a manpower issue.
At the Department of Transportation, we just don't have
enough people to review and go through the process to do that.
How does California view that and compressing the time frame
are you going to be able to obligate those dollars?
Mr. Kempton. Well, Mr. Shuster, we think we will be able to
under the chairman's proposal. I will say it is more difficult,
obviously the shorter the time frame, and I think Mrs.
Napolitano made a very good point when she talked about local
governments not being able to utilize those funds in those
short time frames. That is problematic because there is
federalization issues involved and work that was not planned to
be federalized in the first place. There are staffing needs at
the Federal agencies, the Federal Rail Administration, Federal
Transit Administration, Federal Highway Administration in terms
of processing those dollars through, and there are, as you have
indicated, Mr. Shuster, staffing concerns at the state levels.
We are in a unique position. Because of our bond program,
we think we are going to be able to spend our share of those
dollars in those shortened time frames, but I think it will be
problematic for other States, as well as for some of our local
partners.
Mr. Shuster. And I even hear you saying you are going to
try. I appreciate that to be a positive, but there is a----
Mr. Kempton. Let me rephrase that. We will do it.
Mr. Shuster. I hope so. And I will be pleasantly surprised
if this all goes forward as quickly as we hope it does.
Mr. Boardman, if I could ask you, on the high speed rail
initiative that we put in the last Amtrak reauthorization, if
you would talk a little bit about where that is and how that is
moving forward.
Mr. Boardman. Certainly. I know that it was about 60 days
after the enactment there was a requirement for the DOT to come
out and talk about it and that is exactly what happened. On
December 15, I think they came out and began to talk about the
concept of high speed rail. It has been a little over a month
since then, and I don't think there is anything that is firmed
up in terms of proposals at this point in time. But there are a
lot of people right now, Congressman, that are looking at what
does that really mean. And there is about a 9-month period from
here on that it has been set in the law for people to really
get together with a more serious proposal, so we expect that
that may occur but we don't see anything real at this time.
Mr. Shuster. You see some action, you feel it is moving
forward, though, in general?
Mr. Boardman. I think most of the action for the last
months or so has been on our part has been trying to get ready
for the stimulus and doing all the other things in the Recovery
Act at this point in time necessary to do those kinds of
things. So there hasn't been a great deal of discussion on the
high speed rail, but there is a potential for that.
Mr. Shuster. Okay. Thank you very much. Mr. Buffa, in your
testimony you talked about the goods moved by rail from the
ports of Long Beach and Los Angeles and the projections of
increased loads. Is the situation improving there? Do we need
to do more? What can the Committee do to support this?
Mr. Buffa. Mr. Shuster, the situation certainly is not
improving, and our concern is, you know, there has been
something of a lessening because of the economic downturn. But
this is going to come back. And no one responsible is going to
predict when. But this will come back. And when we get back to
some of projections that we have seen in the last year of what
that freight traffic is going to become, it is a huge increase
that is projected.
And again, we don't, we are not opponents of that process.
We are very supportive of it. But we desperately need Federal
help and a dedicated funding source for the mitigation measures
for that freight traffic and to increase rail capacity on those
lines that we have some control over. So it is definitely not
getting better, other than whatever you might consider as
something as part of the economic downturn.
But in the future, and we very much hope in the
reauthorization bill, that we have your support in getting that
funding source in place because we are going to need it.
When I have to explain the impact of goods movement on
Southern California to someone, I invite them to come ride with
me on a freeway that Mrs. Napolitano is very familiar with
called the 710, the Long Beach Freeway. It is a constant 24-
hour a day parade of trucks going from the ports to points east
and back. And frankly, it is frightening to be on that freeway
in a car because you are surrounded by tens of thousands of
trucks at every turn and every time of day. So it very much
needs your help.
Mr. Shuster. Thank you very much. I seem to have endless
time here on my clock. Is that because I have been good and you
are giving me more time? I have one more question----
Ms. Brown of Florida. Okay. One more question.
Mr. Shuster. To Mr. Kempton on positive train control. Are
you familiar with the mandate we placed?
Mr. Kempton. Yes.
Mr. Shuster. Can you tell us what is going on in
California? Are you preparing to implement that? And can you
give us a little update?
Mr. Kempton. We are. As you know, we have had a couple of
serious accidents in the recent past in the Southern California
area, primarily, so we are working very closely with our local
partners, with Amtrak, with the private railroads to meet the
mandates contained in the safety bill. And we look to have
implementation underway by 2012. I would have to say that there
are obviously some issues, funding being one of them, and so we
are working collaboratively with those partners that I
outlined. It is going to have to be literally a public/private
partnership, a contribution of private dollars, along with our
local partners, Amtrak and the States in terms of coming up
with that system, and we are gearing up for that and
coordinating with those folks.
There is also an issue of technology. Clearly, we do not
want to get out ahead in California with a technology that
doesn't match up well with what is being done in other parts of
the country, and we are working with our private rail partners
in that regard as well.
I would say it is even going so far to the point where we
are loaning some of our intercity passenger rail equipment to
BNSF so that they can look at the braking characteristics of
our equipment as we work together to implement the system. Very
important to us. We are very aware of the mandates and we
intend to meet them.
Mr. Shuster. Thank you.
Ms. Brown of Florida. I see Mr. Clement is with us, the
former Member. Welcome. And Mr. Teague.
Mr. Teague. Thank you, Madam Chairman. I am Harry Teague
from New Mexico. And this is my first term and I am picking up
on a lot of things here. But I had a few questions that I did
want to ask. How many people can we put to work, and how many
contracts can we get committed before the price starts going up
and the value of the money we have appropriated starts coming
down?
And then also, for Mr. Webb, is the cost for building and
replacing a line on a short line, a mile of track, the same as
it is on a heavy traffic line like Union Pacific, or is more
reasonable? Do they have different standards that they have to
meet?
And then also, all of the money that you receive in the
short line rehabilitation tax credit, does that have to be
private money, or can you go get State and local governments to
help you with that match?
Mr. Webb. Well, first of all, thank you, Congressman. From
a short line standpoint, I will answer the last one first. We
have to spend a dollar of private investment before we get
anything back from the Federal Government. So it is really an
accountability feature. We are not going to spend the money, we
are not going to put our own dollar into it in order to get the
50 cents back if we don't believe it is a good project.
In terms of how quick we can put people to work, we can put
people to work very quickly. And if we do the $780 million
worth of projects that we talked about, we estimated that to be
30,000 direct jobs, many more jobs associated with that.
In terms of costs from a short line standpoint for
rehabilitation, it generally costs less because our volumes are
lower and we maintain our railroads to acceptable Federal
Railroad Administration standards, but generally, they are much
lower standards because we are not, number one, handling the
same volume that our Class I partners and customers are; and
number two, we are not traveling at the same speeds. And so, I
hate to make any comparisons because you are really talking
about two different maintenance standards. But the short line
maintenance standards fits our rural America, small town
America customers very well.
Mr. Teague. And I understand that, and I wasn't trying to
make an unfair comparison. But I mean, the speed limits and the
weight limits and everything is different on the short line
than they are on the cross country line, right?
Mr. Webb. The speed limits for the most part are, for
example, the majority of our 4,000 miles of track is at 25
miles an hour. I think that is vastly different for Mr. Young's
railroad and every Class I railroad. But the weight limits are
a major issue because our weight limits have to be the same in
order for our cars to fit into the national network.
Mr. Teague. Okay. Yeah. I was just wanting an explanation.
I wasn't trying to create a rift between the short lines and
the cross country.
Mr. Webb. Believe you me, neither am I. They are a good
customer.
Ms. Brown of Florida. Mr. Moran.
Mr. Moran. Thank you, Madam Chairperson.
Mr. Young, first of all, your testimony about government,
embrace government policies, actually you are asking government
to embrace policies that enhance the ability of freight
railroads to attract private investment dollars. I also know
that you are supportive, as am I, of the 25 percent tax credit.
Is this a separate request? Is there something more that
government policies can include that, beyond the tax credit?
Mr. Young. Congressman, I think it covers the whole
spectrum of areas. The investment tax credit is a piece of
that, but I would also point out that there is not modal equity
between highway and rail today when you look at paying a fair
share, and that is a government policy that has been in place
for a long time.
Now, truckers are my partners here, so I am not picking on
them because we work together on a lot of projects here. But I
think we want to be careful, we don't incent more business to
the highway. That would be a mistake.
Environmental policies, permits. Today, it is interesting.
We could build a bridge in Minnesota in, I think, about half
the time. And yet, when you look at the time line today to
permit a project, it has been elongated over the years. It is
not unusual today that it is a minimum 2 years before you can
get to construction on some of these projects.
Preemption, I think, at least I use that word, you may call
it uniformity. When you are in the rail business and you
operate in all these States, we can't pick up our track and
move to Mexico. We have been there for many years and we have
to be careful about policies that force us to operate under
different rules in different States. That would be a disaster
for our industry.
A simple example would be you think about emissions
policies. If you have one State that has one criteria, another
has a different, I mean, in the real world you would be
changing locomotives at the borders. So those are the types.
And then obviously, we need to be careful on new economic
regulation in this industry.
Mr. Moran. Thank you very much. Mr. Webb, you were very
complimentary of me earlier, and I appreciate that. It is your
company, its leadership is one reason that I am an advocate for
short line railroads because you run a railroad that takes care
of customers and that is something I would like for you to
explore with the Subcommittee. I am not an advocate necessarily
for railroads or for short lines or for Class I carriers. I am
an advocate for the people they serve. And how would increased
Federal support for short line rail improvements improve the
lives, the economy, the benefits that your customers enjoy?
Mr. Webb. Well, I think that is a great question. The short
line industry serves roughly 13,000 customers. And when we came
to you with the idea of Federal support, we have lined up over
1,000 customers that believe railroad infrastructure investment
can benefit them because it will allow the short lines, I think
I have heard a lot of talk about safety, it will allow the
short lines to operate more safely. It can increase transit
times. Excuse me. It can increase cycle times. I will get it
right. It can increase velocity, reduce transit times, reduce
cycle times. And why that is important is because the short
line side of the business really does feed the Class I network,
and we are mainly competing against truck.
And so our customers that are out there generally have at
least two options, sometimes three if they have access to the
waterway. And if one of those options gets weaker, for whatever
reason, then it puts the other option or mode of transportation
at a distinct advantage. And so even though I couldn't say it
very well, it is definitely something that the customers can
benefit from because they get safer, more efficient, more
timely service.
Mr. Moran. What percentage of today's short line railroads,
the rail and the bed, are in the condition that they should be
to run a railroad efficiently? You talked a moment ago in
response to the gentleman from New Mexico's question about
short line maintenance standards. How close, I don't know what
the right standard is, but are most of our lines, most of our
tracks at the standard they should be, or a significant portion
are not?
And then I hope that the short line tax credit as you
indicated has been something that has been very helpful in
meeting those kinds of standards. It expires again. It is an
unending challenge, battle here to make certain that it has
longevity. The fact that it will expire in 2009, what does that
do to your investment decisions and your ability then to get
the rest of the rail to the standards that they should be at?
Mr. Webb. I can just tell you, from our example, that
without the short line tax credit over the last 5 years, we
would not have invested 50 percent of the capital that we
invested, and right now we invest very similar to the rest of
the industry. We will invest somewhere in the neighborhood of
12 to 15 percent, maybe 18 to 20 percent in good years and when
we have the short line tax credit of our revenue. If we had not
had that, then a bigger part of our network would be at slower
speeds because, unfortunately, the fact of the matter is the
short line system has a lot of deferred maintenance in it. And
one of the biggest issues we have got facing us that we haven't
addressed was what we brought to you today, the bridge issues
that are out there from a short line standpoint. So I, without
a doubt, believe that the short line tax credit has been a huge
success. It has allowed us to get our track speeds, I would
say, a number off the top of our head, our track speeds up in
the neighborhood of 20 to 40 percent of our network has
improved because of the short line tax credit. But there is a
huge amount still left.
Mr. Moran. Thank you, Mr. Webb for being here for your
testimony, and thank you for running a good railroad. I
consider you a Kansas railroad, but I know that you operate in
16 States, and I know from my constituents, grain elevators and
others, that the services you provide are appreciated. Thank
you, Madam Chairperson.
Ms. Brown of Florida. Mr. Nadler.
Mr. Nadler. Thank you, Madam Chairperson, and thank you for
holding this very important hearing. I have a number of
questions for several of our witnesses. First, Mr. Buffa, you
said, you talk about that your movement action plan has
identified $50 billion in needed projects to address capacity
improvements and mitigation projects on freight just in your
area. And you talk about either a container fee, and then say
even if this local fee can be successfully implemented, more
needs to be done and should be done at the Federal level to
address this issue of national significance. And certainly, it
is an issue of significance in terms of the ports on the West
coast as well as the East Coast. You say more should be done on
the Federal level. Could you suggest what?
Mr. Buffa. Simply because up to this point there has been
no dedicated funding source at the Federal level for these
types of projects.
Mr. Nadler. And you think there should be.
Mr. Buffa. I think there should be.
Mr. Nadler. Could you suggest one?
Mr. Buffa. Well, it is not our job to get involved in the
mechanics of it. The most common that has been suggested so far
is a container fee and there has been some conflict between the
State and the Federal Government about who actually should be
imposing a container fee.
Mr. Nadler. Not both?
Mr. Buffa. It could be both. That is for you and the State
to sort out. We think there is plenty of justification for the
State because those impacts are localized. But while they are
localized in our area, they are part of a national process, so
certainly it could also be implemented by the Federal level, as
was suggested in Ms. Richardson's bill. So it needs to be
figured out. But again, as a sign of, I hate to use the word
desperation, but it is a sign of the importance of when you get
down to the point where the ports themselves are suggesting
look, if nobody can figure this out, we will impose a fee, that
is quite an indication.
Mr. Nadler. Thank you. Mr. Young, you talk about Congress
should enact and fund programs that allow States to partner
with freight railroads to move forward with projects that
benefit everybody. Obviously, I agree with you. But first of
all, I don't know why we have to tell the States that they can
do this. They should be able to do it without our permission.
My real question is the following: Obviously the railroads,
since the Staggers Act, and you have probably heard me say this
on prior occasions, the railroads have invested an enormous
amount of money in plant and equipment, and yet they have taken
it out of their own internal capital and raised money on Wall
Street, and yet the system is still shrinking. We have fewer
miles of Class I railroad, although the need for railroad
miles, for rail is greater than ever for rail freight
especially, and yet we have fewer miles of Class I railroad
every year and fewer miles of even Class III railroads. The
system is shrinking. It is less than half the size it was after
the war. We are clearly putting in far too little in capital
investment in the railroads.
Now, the railroads have historically opposed a Federal role
in the sense of a Federal, major Federal funding for capital
investment the way we do for highways and so forth. Would you
think that it might be time to consider a Federal role and not
just in loans, but in grant programs in addition to what the
railroads raise on their own?
Mr. Young. Well, Congressman, I believe, and what I talked
about in my testimony here was public/private partnerships
where if the government is going to get involved it should help
in the local communities in terms of maybe helping with some of
the grade separations, the projects that we have in there. In
terms of funding specific freight rail corridors, Union Pacific
has not been in support of that over the years because of the,
whatever you want to call it, strings that are attached.
Mr. Nadler. Well, for example, the I-81 corridor which goes
from northern New York down to Tennessee through Virginia,
Pennsylvania, is way over capacity. I-81 is way over capacity
on trucks. It is going to increase incredibly. And yet you have
got two not very well used old Norfolk Southern rail lines
paralleling it, which, if greatly improved, for that entire
carrier could take a heck of a lot of traffic and mode shift
from highway to rail. And yet it would cost a heck of a lot of
money to do that, probably a lot more than Norfolk Southern can
afford to put into that. What should our policy be with respect
to getting a major mode shift from highway to rail over a long
stretch, which is clearly in the national interest to do?
Mr. Young. The policy needs to incent more freight
business, moving trucks off the highway, and that is a great
example. You look at a specific project. We have not had many
when you look at this.
Mr. Nadler. Have not had what?
Mr. Young. We have not had many where it has been a
specific government. I know that Norfolk Southern, I think, has
had maybe one or two that look at it in the context of direct
government investment in the railroad business. The benefits,
as you have said, are tremendous. You can build a mile of
railroad less than a mile of highway. It is probably five to 10
times the cost to build a mile of new highway. We know the
energy benefits, the safety benefits that are there. Most of
the programs and discussions that we have had where we have
looked at this at the government level, unfortunately, in some
cases, bring different requirements that, for example, expanded
commuter rail on some locations that you look at.
Mr. Nadler. Well, that is a different problem and, frankly,
one that if I had more time, I would go into because the last
thing we want to do is burden freight railroads with commuter
rail. Those are two separate problems. In fact, there are three
problems. There is long haul passenger rail, Amtrak, there is
commuter rail, there is freight rail, and we don't want them to
get in the way of each other, frankly. And so I would never
suggest that.
But it seems to me that we ought to be taking a lot of
money that we are now spending on the highways and be spending
them on rail instead, not just, I mean, certainly we ought to
do the tax credits and those things but we ought to be having a
major modal shift from highways to rail, and I don't hear an
interest from you on that.
Mr. Young. Well, Congressman, I guess I was maybe trying to
be realistic from my perspective on what might happen on new
money flowing into the rail network. And I think when you look
at the needs in these communities and public/private
partnerships, like the Chicago Create program, that is a $2
billion project alone. It has great benefits for the
communities.
Mr. Nadler. It is a great project.
Mr. Young. That are out here. If we can even partially
start funding some of those projects it is pretty significant.
Now, if we have enough money left over, that we can move it to
a direct rail investment, I would sure like to look at that.
Mr. Nadler. Well, let me ask my last question, because my
time is running over. One thing we clearly ought to be doing is
what Congress was looking to do before Reagan was elected,
which is major rail electrification, especially now where
energy efficiency and getting off is so much more important,
and how are we ever going to fund something like that if we
don't have a major Federal component with major dollars in
there?
Mr. Young. Well, I think our first step, again,
electrification is a significant investment, as you have said.
We have a long ways to go with current technology. Latest
generation locomotives that are being designed today will add
another substantial reduction in emissions and increased fuel
efficiency. So before we jump----
Mr. Nadler. But nothing can match electrification. I don't
care what you are doing with locomotive.
Mr. Young. No, but if you think about trying to take a
railroad and convert it to electrification, in fact, I will be
honest with you, I don't think it can be done.
Mr. Nadler. It can't be done?
Mr. Young. I don't believe so.
Mr. Nadler. Or it can't be done for what you consider a
reasonable cost?
Mr. Young. It can't be done for a reasonable cost.
Mr. Nadler. Well, definitions differ on reasonable,
obviously. My time is over. Thank you very much.
Ms. Brown of Florida. Mr. Cao.
Mr. Cao. Thank you, Madam Chairwoman. This is just a
question to the panel. I want to know whether or not, does any
one of you have any plans for expansion in the New Orleans
metropolitan area? This is for any Members.
Mr. Young. Well, Congressman, Union Pacific obviously
operates through the whole Louisiana area. We have been
expanding for several years in terms of our capacity. There are
targeted projects really along that whole southern corridor. In
fact, one of our very important routes is moving business from
L.A., Long Beach, along our southern corridor through to New
Orleans, where we interchange with the CSX. But there is, I
don't have the specific numbers, but when you look at our
railroad infrastructure, you have got to have balanced capacity
throughout the infrastructure. It doesn't do any good to build
capacity in Arizona without recognizing you have got to get it
all the way through to another State. So I have no question in
my mind that we are spending money in the State of Louisiana
this year.
Mr. Simpson. Sir, one of my member companies, Union Tank
Car, through the generosity of the State of Louisiana has
opened a tank car building facility in Louisiana and not in New
Orleans, but nevertheless, in Louisiana.
Mr. Cao. Thank you.
Mr. Kempton. Congressman, we have partnered with the Kansas
City Southern and ExxonMobil to build a storage facility near
Baton Rouge, Louisiana, and again, it is to help improve
throughput on the main lines and take the storage function into
a storage function that you need into a more efficient, be
handled in a more efficient manner in the Baton Rouge area.
Mr. Boardman. Congressman, Amtrak, as a part of the
requirement under PRIA will be doing a study on the Sunset
Limited east of New Orleans into Florida at the request of the
Chair.
Mr. Cao. And for those of you who are looking at expanding
your businesses in the State of Louisiana, what are some of the
obstacles that the New Orleans metropolitan area presents to
you all? Are there any obstacles down there?
Mr. Young. Well, Congressman, in terms of the freight
railroad, you are always going to have some obstacle in terms
of just your ability to expand the right of way to build new
railroad. Again, many of these areas are residential on both
sides. You have some challenges with permitting in terms of
accelerating permitting for new projects. And again, to me it
is one of those, does it make economic sense? We have a very
large, as you know, chemical industry that we serve down there
that they are struggling right now. So I think one of the
challenges you have when you look long term is what is the
outlook for that industry in terms of future growth.
Mr. Webb. With our investment, there is a time frame to get
it done. It is a substantial investment. I think we have 270
days to make the investment and the State and local
governmental agencies have worked with us very well to meet
that time frame.
Mr. Cao. Mr. Boardman, I have a question directly to you.
Do you have--what are the plans that you have for emergency
evacuations during a situation of crisis like hurricanes, and
what are your plans for the future?
Mr. Boardman. Our plans are directly related to how we work
with FEMA. For example, in the evacuation where we moved over
2,000 people in the last cycle of hurricanes, we worked those
plans out directly with FEMA. And each time that we have
provided assistance, the plans have changed somewhat, depending
on the host communities or how people needed to be moved. But
again, we are available to work with FEMA and the emergency
responders in both Louisiana and the entire gulf area to make
those plans.
Mr. Cao. Thank you. That is all the questions I have.
Ms. Brown of Florida. Ms. Napolitano.
Mrs. Napolitano. Thank you, Madam Chair. I would like to
first address my first question to Mr. Young in regard to the
stimulus. Many of the projects in my district, as you well
know, are seeking stimulus for the grade separation
specifically. Congress has directed States to spend the money
quickly or else the projects will not be funded. My question is
that grade separation projects may not get the funding because
of delays caused by railroads or other rail issues that come up
that allow for this to happen. What can the rail industry or
specifically, Union Pacific, do to ensure that these projects
are constructed quickly in order to meet the time requirements
that are going to be set by Congress?
Mr. Young. Congresswoman, if you get the money, I can
assure you that----
Mrs. Napolitano. Everybody heard it.
Mr. Young. Union Pacific will not be a barrier. Now, where
you can help is in the permitting process, particularly in
California, that there is a lengthy permitting process that we
need to accelerate. We need to approach it the same way the
interstate bridge was approached in Minnesota. But we have
resources. We will commit them in terms of making certain that
the railroad industry is not the barrier.
Mrs. Napolitano. Great. Great. That is great news. And Mr.
Kempton you heard that.
Mr. Kempton. I did Ms. Napolitano, and I agree with Mr.
Young on that point, I think it is an issue at the Federal
level as well as at the State level that we need to streamline
these permits. We need to obviously provide for the appropriate
environmental protections, but we need to make this process
work faster. And we are doing our best in California to make
that happen.
Mrs. Napolitano. But we need to make it and making our best
leads to what? What are we doing? What have you done to ensure
that you begin once this goes through, that the moment that
that bill is signed, that that is going to begin working the
process, that the projects are being cleared, that the
permitting is being done and not waiting until it goes down and
then begin the process?
Mr. Kempton. We have in California, Ms. Napolitano, already
underway a discussion with the members of the legislature on
streamlining our State permitting process. And that hopefully
will be approved as part of the budget which we expect to be I
am hopeful is adopted in the next several days. We have also,
the governor has also talked to the Obama administration about
the possibility of applying similar streamlining mechanisms to
the Federal process. But Mr. Young is absolutely right. We, on
an emergency basis, like on the I-35W bridge in Minnesota, what
we did on the MacArthur maze and the tunnel down on I-5 in Los
Angeles, in those emergency situations, that is, we have an
economic emergency and we need to react accordingly.
Mrs. Napolitano. Thank you. And Director Kempton, the State
of California may be getting $2.8 billion in highway funds and
one billion in transit and then of course some of it into
intercity passenger rail. The bill gives the States the
authority to disburse of these funds. How will you be
prioritizing and I am asking the question of some others, is
who is going to get to it? How fast are we going to get these
people back to work, that money working, which is the intent of
Congress?
Mr. Kempton. Well, if you look at the total amount that is
coming to California, we use a very conservative number for the
amount of jobs created per billion dollars worth of capital
investment. It is 18,000 jobs. The Federal Highway
Administration uses $33,000. So if you do the calculations,
that means the Federal stimulus money that is coming to
California will create between 72,000 and 132,000 jobs. 27
percent of those jobs will be created in the first year.
Mrs. Napolitano. But where?
Mr. Kempton. They will be created all over the State. And
it will be, in large measure, driven by projects that are ready
to go. So we have been gearing up in California working with
the local partners, with the regions because a big share of
these dollars, as you know, goes to the regions. We have been
working with all these partners to get these projects ready to
go. We have begun the federalization projects where those
projects have not been federalized we are gearing up with our
Federal Highway Administration and other Federal agencies to
make sure that process flows smoothly; and we are talking about
doing a new way of doing business in California so those
dollars can go through much more quickly.
Mrs. Napolitano. But are you targeting any of the areas
that are economically depressed?
Mr. Kempton. We absolutely do want to look at focusing and
targeting these dollars to the extent possible. But again, for
the first 90 days, depending on whether these provisions go
into effect, and we have good reason to believe that they will,
that those dollars will primarily be focused on delivery. The
longer term, going beyond the 90-day time frame, et cetera, we
will be looking to try to target that more with respect to
where the jobs are needed.
Mrs. Napolitano. Okay. Because we received a list from
COGS, the Councils of Government, where they have outlined
that. I don't know if you have received it, but I would be glad
to put it in your hands.
Mr. Kempton. I have seen it.
Mrs. Napolitano. Okay. And also, States play an important
role in assisting the FRA. And last year I tried to pass this
particular amendment. I agree the current Federal law should
continue to prohibit States from creating regulations that
burden interstate commerce. But States should be allowed to
regulate railroads in order to protect against local safety
hazards. Do you agree with the California Public Utilities
Commission that States should be allowed to regulate railroads
in areas where the Federal Government has not acted?
Mr. Kempton. I do. From a safety perspective, I think it is
important.
Mrs. Napolitano. Thank you, Madam Chair.
Ms. Brown of Florida. Mr. Arcuri.
Mr. Arcuri. Thank you, Madam Chair. Thank you, gentlemen,
all for being here. Mr. Boardman, my constituent, thank you for
being here again.
Just really quickly, I think Mr. Nadler was spot on when he
talked about the rail lines that run along the 81 corridor.
That happens to be in my district and it is my colleague's
district in Pennsylvania just south of that. Mr. Young, a
question that I had, you said that it cost five times as much
to produce a mile of rail line as it does a mile of road?
Mr. Young. No, the other way around.
Mr. Arcuri. Oh. Five times as much for road as rail.
Mr. Young. Minimum.
Mr. Arcuri. Thank you. Mr. Boardman, one question for you.
And thank you for attending the meeting that we had on rail in
New York not too long ago. You have seen it all. You have seen
it from the small transit authority, State and now as Amtrak.
Some of us have grand ideas about what we would like to see
rail do. But as a practical matter, as you pointed out, some of
the things are achievable. Some of them are great things to
wish for but much more difficult to achieve. What steps should
we take incrementally to try to get us to the point where we
want to get to, and that is to eventually have maybe high speed
rail if we can. But what steps should we be taking as
Congressmen to try to get us to the point that we want to be in
a practical way?
Mr. Boardman. We actually had some discussion, Congressman,
and after the meeting we had the other day, how do we relate to
the caucus up in New York? What would be the best way to move
forward? In fact, I had a discussion a few minutes ago with
Will, telling him that some of the California model and the way
that they have done things may be applicable in New York
because they don't just use rail in California and ignore all
other modes. They have a very strong component in what they do
in California involving bus connections.
So, for example, in upstate New York, if we were dealing
with a bus connection, whether it be to Watertown or to
Binghamton or wherever it would be, it would be coming out from
the main spine of rail, through the center part of New York
State. We also talked to staff that it probably would be useful
for the caucus as well to get a tour of the line. In other
words, ride one of our trains or CSX's trains to really
understand what are the difficulties here, what are the
crossings that we are dealing with, what is the characteristics
of the line itself, which then gives you an ability to
understand what it is that you could do to make real
improvement. Because incrementally, if we can move from 79
miles an hour to 90 miles an hour, maybe even as far as 110_one
of things that I think Rick was really talking about needs to
be understood by Congress and by those who want faster speeds
is, if 79 works for the freight railroad and they deliver what
they need to deliver in terms of freight, as they move up, as
we move up speed, there is a higher cost below the rail to
maintain that railroad.
So there probably is a necessity at that point in time, if
public policy decides that we are going to run at 110, to
understand that difference and invest in that difference on a
regular basis to ensure that we can keep that railroad at that
speed, one of the difficulties we are having right now in
Michigan, as Norfolk Southern is considering eliminating their
use of that line in Michigan.
Mr. Arcuri. So it is not just the initial cost but it is
the maintenance cost if we choose to employ that?
Mr. Boardman. Yes.
Mr. Buffa. Madam Chair, could I add a brief remark to that?
In Orange County, the Orange County Transportation Authority is
providing seed money--there are 34 cities in Orange County--to
begin planning local feeder systems that will get their
citizens to our metro link stations. That is a major problem in
Southern California. The rail lines are expanding but there
aren't sufficient feeder systems to get people to the station
from their homes or their businesses.
So we have done a first round where we have spent a couple
of million dollars, and the next round we will spend 6- to $8
million to assist all the cities that want to participate in
planning how are you going to get your people in your
community, business and residents to the next metro link
station.
Mr. Arcuri. Mr. Buffa, are these primarily computer lines?
Mr. Buffa. Yes.
Mr. Arcuri. Thank you, gentlemen, very much. I appreciate
it.
Ms. Brown of Florida. Mr. Brown.
Mr. Brown of South Carolina. Thank you, Madam Chair, and I
know I will be brief with the bells ringing which means we have
got votes before us.
Mr. Young, as part of your statement you said that the
railroad industry will need to invest over $135 billion in rail
capacity by the year 2035. And I know Mr. Buffa mentioned that
they are almost at capacity over in Los Angeles. But I know
that y'all are aware that we are in the process, as we speak,
to enlarge the Panama Canal. And I know that is going to make
some freight differentials between the East Coast and the West
coast. And I was just wondering if y'all are planning what the
new capacity is going to be influenced by that change?
Mr. Young. Congressman, I think we do look at the
expansions at the canals, and it will be limited. Again, you
could project out with not only what they are doing on their
size, but on the size of ship that can move through the canals.
It will take some of the growth off, but at the end of the day
if you look particularly at the Ports of L.A. and Long Beach,
they have grown at about an 8 percent rate in the last 10
years. You may cut that in half, but it is still growth.
I also believe, if you look at business moving on the
highway where we want to incent more moving on freight
railroads, that has nothing to do with, say, the canals; that
has everything to do with what we are doing domestically here.
So the challenges are very, very high here, and the costs are
very significant.
Ms. Brown of Florida. We have four more Members, and we
need to finish with Mr. Brown. So we have got a vote on. I know
you all have been very generous with your time.
We have two votes. Then we will come right back so we can
finish up with the other Members. Thank you very much. It is
only 8 minutes.
Mr. Brown of South Carolina. I would like to ask Mr. Webb a
question.
Mr. Webb, I noticed you stated in your presentation that
you are actually losing ridership in the Northeast Corridor, so
I guess those routes are not profitable at this time.
I am sorry. I meant Mr. Boardman.
Mr. Boardman. No, none of the routes have been profitable
for Amtrak, and they never really have been. We have come
closest in the Northeast Corridor to covering our operating
costs.
What is happening in the Northeast Corridor is a result of
the business, especially the financial services industry,
downturn and the reduction in the price of fuel. We are seeing
much less use in the Northeast Corridor right now. There is
also a flattening of the connections to the Northeast Corridor.
Yet there are other areas, and I think Will Kempton said it
well; in the San Joaquin, for example, we are still seeing
growth in ridership. When you look at services out of Chicago,
we are still seeing a growth in ridership, not as much as we
sustained last year, but we are still seeing that growth.
Mr. Brown of South Carolina. I thought you said, in the
Northeast Corridor you are actually losing revenue and
passenger load.
Mr. Boardman. Yes. As our passengers go down--and about
half of our ridership is in the Northeast Corridor--our
revenues drop as well.
Mr. Brown of South Carolina. Do you still have the connect
route between the East Coast and the West Coast?
Mr. Boardman. We have several connections between the East
and the West, all emanating from Chicago. There is the northern
route, which is our Empire Builder service. There is our Zephyr
service. There is the Texas Eagle. Then there is the Southwest
Chief.
Mr. Brown of South Carolina. Thank you.
Mr. Webb, just one quick question of you.
On the short line railroads, are you all looking at
expanding the passenger service in the short lines or are you
just focusing primarily on freight?
Mr. Webb. We are focusing primarily on freight, but on a
couple of our lines, we have actually been asked to take over
the freight portion of a commuter line. In Austin, Texas, for
example, we do that. Then out in southern California, we do
that as well.
So there is a role for freight railroads and for commuter
lines to play. From a short line standpoint, we think we can
provide that freight service in conjunction with commuter lines
where it makes sense.
Mr. Brown of South Carolina. Thank you.
Thank you, Madam Chair.
Ms. Brown of Florida. We are in a temporary recess.
[Recess.]
Ms. Brown of Florida. This is such a high-powered panel,
and the information is so important to where we want to move
the industry, so I want to thank you again.
Mr. Lipinski has a question.
Mr. Lipinski. Thank you, Madam Chairwoman. I thank Mr.
Carney for letting me butt ahead here, and I thank the panel
for sticking around.
I have to run to the floor to testify on an amendment that
Mr. Nadler has, to give $3 billion more to transit in this
bill. Unfortunately, Chairwoman Brown's amendment to have $5
billion for rail infrastructure was not made in order by the
Rules Committee. Her amendment is certainly something that I
strongly support, and I hope that we can make some changes to
the bill before we are finished with it.
I wanted to very quickly respond to Mr. Stem.
Mr. Stem, you talked about Buy America. We have good,
strong Buy America provisions. We have had for iron and steel
and for transportation projects.
I had tried myself to get an amendment in the stimulus bill
to have a strong Buy America provision for all materials and
products in this bill. Unfortunately, as of now, that amendment
was not accepted by the Rules Committee. We are still working
on that in the stimulus bill, but that is something that is
very important in that if we are going to spend all of this
money, we should be spending it here in America.
Mr. Kempton and Mr. Buffa had mentioned grade separations.
I was talking last week to the new Transportation Secretary,
Ray LaHood from Illinois. We were talking about the problems,
especially in Illinois, but also in other States across the
country--certainly in California, in New York and in Ohio.
There are other States that have major problems with trains
that are blocking roadways and that are causing congestion. It
is part of the CREATE program in Chicago, but while CREATE is
under way, that part unfortunately we have not gotten moving.
Well, there is one grade separation that was done, but there is
more to be done.
One of the problems is that Illinois right now only
receives $10 million a year from the Federal Government for
funding for grade separations, and this is something that I
really think that we need to change. I am very hopeful in the
upcoming highway bill that we will see that change. I know that
certainly there is the support from some of our witnesses here
today for that.
Now, there is one thing I wanted to ask. I worked last year
on that Amtrak bill with Chairwoman Brown and Ranking Member
Shuster and Chairman Oberstar and Ranking Member Mica. I was
very happy they were able to add language to help advance--to
give grants--for Positive Train Control. Also, there is
something very important in there from Amtrak in terms of
putting money in there to help improve on-time performance and
to get rid of some of the problem areas that Amtrak has with
congestion.
I took the train a few months ago from Chicago down to
Springfield--to the State capital. Unfortunately, as everyone
told me, we had problems. That is the Heritage Corridor there,
and that is near the top of the list that Amtrak put out of
congested areas that Amtrak wants to put money into fixing. It
would make a great difference for Amtrak and also for metro
commuter rail.
I just want to ask Mr. Boardman if he has any information--
any ideas right now--about the time frame. I want to know
whether you have any information right now--and you can get
back to me--on a time frame for improving efficiency there
along the Heritage Corridor.
Mr. Boardman. I do not have it, Mr. Lipinski, right this
minute, but we will get back to you with a plan for what we are
going to do there. I do not know.
Mr. Lipinski. Does anyone want to add anything else to the
grade separation? Actually, there is money there for grade
separations that the Federal Government sends to the States,
but it is so small--$10 million in Illinois. $10 million is not
going to get you one grade separation.
Does anyone have any comments on this?
Mr. Kempton. Mr. Lipinski, in California, we had the voters
of our State approve a $20 billion bond issue for
transportation back in November of 2006. This measure was
sponsored by the governor, approved by the legislature and
presented to our voters, who saw the wisdom in that measure and
who approved it by a 60 percent-plus vote.
I have to say that, as we divided a piece of that money,
the Trade Quarter Infrastructure Fund piece of that, there was
a significant amount of attention, in large measure from our
partners in southern California, to focus some of those dollars
on grade separations. There was also a separate component in
the package for grade separations--something on the order of
$250 million, as I recall--which is not as significant an
amount of money given the grade crossing needs that we have in
California. But for the piece of the Trade Quarter
Infrastructure Fund that went to southern California, the
members of the group that decided on how those dollars should
be spent--including the Orange County Transportation Authority,
which Mr. Buffa is representing--did, in fact, dedicate a
significant portion of their dollars for those projects as
well.
So we have a good pot of money. We would welcome more. It
is obviously critical from an air quality perspective, critical
from a congestion reduction perspective and critical to getting
that modal shift that Mr. Nadler talked about accomplished as
well.
Mr. Buffa. Mr. Lipinski, as you know, it is an enormously
expensive undertaking. $11 million for the State of Illinois
was not going to buy you one grade separation.
As Mr. Kempton said, this is finally on the public's radar
screen. It is such, kind of an arcane matter that the public
has not been plugged in, but they have finally realized that it
is like a three-legged stool.
It certainly makes their lives better. It makes their lives
safer because of the interaction of rail lines with major
arterials. It is better for the rail system. It significantly
increases through-put for them. So it is a hugely important
issue. It just does not have a lot of sex appeal for the
public.
At least in California they have finally figured out "my
daily life, my daily commute is really affected by this issue."
As Mr. Kempton said, they supported a substantial bond issue
which was called Proposition 1B to pay for it. So, yes, it is
usually expensive, but it is also hugely important to
metropolitan areas across the Nation.
Mr. Boardman. Mr. Lipinski, if I could just add, one of the
difficulties that we have with this is that the grade crossing
money generally comes out of the highway side of the world. I
cannot remember the particular section of that, but it is
identified for grade crossings.
Some of the difficulty that the highway folks have in
regard to this is when they are losing 40,000 or 50,000 people
on the highway itself in terms of their safety difficulties,
when they look at the highway-rail grade crossing, it is a very
low number in comparison to that. Less than 1,000 is where we
are at this point in time. So that huge amount of loss on the
regular highway overwhelms the grade crossing parts of this
thing.
I think one of the things that really could happen in the
reauthorization is for Congress, for the policy to really be
understood, to get 90-mile-an-hour or 110-mile-an-hour rail
service, we need the funding necessary to seal a corridor,
which is some of the things that are being looked at at this
point in time; and that is just a rational high speed, not a
super high speed where you are going to have to totally grade
separate.
So there is real need out there. Amtrak operates all over
this country where we could make some improvements and could
increase speeds even on existing freight track if those dollars
were made available.
Mr. Simpson. Mr. Lipinski, the program that Mr. Boardman is
talking about is the Section 130 Grade Crossing Safety Program.
In the decade of the 1990s, back in ISTEA days, $160
million a year was set aside for the Section 130 Grade Crossing
Program. That is allocated to each of the States. Hawaii gets
money, Puerto Rico gets money, the District of Columbia gets
money, and States like Illinois that really, really need the
money are part of the allocation process. We argue that when
you reauthorize SAFETEA-LU that you ought to take a look at
that Section 130 Program and put some real money in that.
Mr. Lipinski. Thank you very much. I could not agree more.
I thank the Chairwoman, and I thank Mr. Carney.
Ms. Brown of Florida. Mr. Carney.
Mr. Carney. Thank you, Madam Chair.
I think when we were leaving, Mr. Boardman and Mr. Webb, we
were talking about the profitable or the close-to-profitable
Amtrak lines. Where are those? It is not in the Northeast
anymore, or it is still the Northeast? Is it getting worse in
the Northeast?
Mr. Boardman. No. There has been a decline in the Northeast
since the end of the fiscal year last year. It is not a
question of, I think, getting worse. What is really going to
happen here is that we are going to be in the same situation
again in just a few months. As the economy rebounds or as the
price of energy increases, there is going to be a shifting
again to the Northeast Corridor. So part of our difficulty is
short term in some ways.
Part of my point was that we need to make sure that we get
the operating assistance, because we talk about capital; and we
are very thankful for the $800 million, and we are very
thankful for the $500 million in our normal appropriation for
capital for stated good repair.
But our difficulty at this point in time is, because our
revenues are down and we are trying to demonstrate where that
was happening and why that was happening, we are in a situation
where, in order to maintain our services, we are going to need
additional assistance.
Mr. Carney. This is for everybody. How much thought has
gone into the notion of intermodal transportation connected to
rail?
Mr. Boardman. Well, I think connected transportation today
is being talked about more and more by many folks, whether it
is Will here in California or whether it is perhaps Anne Canby
later when she speaks on the next panel.
Part of the need here today and part of the concept that I
think even the freight railroads understand and that everybody
understands is, we need to work together whether we are in the
freight business or whether we are in the passenger business or
whether we are in the bus business. If we are going to move
people or if we are going to move freight onto the railroads,
we have got to have trucking as partners on the freight side.
We have got to have buses and light rail and commuters as
partners.
Mr. Carney. I could not agree more. I am asking, how far
down the road are you in this discussion with bus folks and
with truckers and things like that.
Mr. Boardman. I will let Will answer that. There are
tremendous improvements in California, and we are making them
in other places as well.
Mr. Kempton. We have a great partnership with the bus
services in California, and I will use the San Joaquin service
which, as you may recall, Mr. Carney, is the service from
Bakersfield into the Bay Area.
We have a number of connecting routes that provide for
service over the Tehachapis to Los Angeles, as an example, and
connections to other parts of California, too. It is absolutely
integral to the success of our rail system.
You also talked about intermodal activities. As Mr. Buffa
spoke earlier on the ARTIC project in Anaheim, we are proposing
to build and are working together to build a regional
intermodal transportation center in Anaheim. That will bring
high-speed rail, intercity rail, bus operations together, the
Transbay Terminal in the San Francisco area, which is the
granddaddy of them all perhaps, maybe next to Union Station in
New York.
We are really making an effort to tie our services together
where you can come in on an intercity rail service and go
cross-platform to a commuter rail service, and you can have a
rail-to-rail pass, a ticket structure that will allow the
passenger to step off one train and get onto another so that
there is an ease of interface.
These are all things to accomplish the intermodal goal that
you are talking about.
Mr. Boardman. If I could just add for a minute, one of the
places in Pennsylvania, which you are familiar with, is with
the 110-mile-an-hour service into Harrisburg. At this point in
time, there is tremendous growth on that particular corridor.
So many of the other corridors connected to the Northeast
Corridor have had a flattening and a reduction in ridership.
The Keystone Corridor has not. There are additional
announcements today. I do not know exactly how the bus service
out of Pittsburgh to Harrisburg is working, but it is one of
the things that is attracting attention and activity by the
private sector.
Mr. Carney. From Pittsburgh to Harrisburg?
Mr. Boardman. Yes.
Mr. Carney. It is kind of a long bus ride.
Mr. Boardman. It is, but it is a high-quality, Megabus-type
service, just like is operating out of Washington, DC.
Mr. Carney. We do it well in Pennsylvania.
I submit you would probably increase your Northeast
ridership if you would tap into the Northeast part of
Pennsylvania, frankly. We have a lot of folks in my district
along the Delaware River who work in New York City every day
and who would love a train to get into work rather than to clog
I-80.
Mr. Boardman. There is a study right now going on in that
area that involves Binghamton into Scranton, so we understand
that.
Mr. Carney. Yes. We want to see that come on line as
quickly as possible.
This is a larger question for all of us to ponder: How do
we change the culture in this country so people want to get on
a train again? I think that is the fundamental root of this
whole discussion.
Mr. Buffa. Mr. Carney, could I take a shot at that? Will
and I were discussing that. Particularly in California but in
the West, it is a huge problem.
We are talking about a cultural issue. I happen to be a
former New Yorker. I grew up with trains. I had no desire to
drive a car until I was 18, and that is only because I was
leaving to go to Arizona to go to college. I would not have
done it then.
Californians, in their heart of hearts, still kind of
think, if you get on a train, you ain't coming back. They are
scared of them. They are not sure how they work. That is a huge
cultural issue for us to deal with. So, in addition to all of
the infrastructure problems we have been talking about--I
mentioned earlier this go-local problem where we, as an agency,
are going to spend tens of millions of dollars to encourage
communities to come up with these feeder lines.
The big problem is a psychological one. Californians are
married to their cars. They are very reluctant to get out of
their cars. They have to be convinced that, yes, you will
return home.
More important are the people who are parents, who are
worried during the day about getting that call about their kids
at school or, you know, that your husband has had appendicitis
and he is in the hospital. They are frantic about, how can I
deal with that if I begin to use public transit?
Easterners are very used to that. They know how to do that.
Now, they have the infrastructure to support it.
We need to greatly expand the infrastructure. That
psychological element, that cultural element, is a huge barrier
that we are not close to solving in the western United States.
Mr. Carney. I am not sure we are close to solving it in
most of the country, frankly, with the exception of New York
and the Northeast. But it does, I think, get to the heart of
this entire issue of passenger rail, which I think everyone in
this room would agree we have to promote. We have to do more to
ease congestion and to clean the environment and to be
efficient in how we move folks around.
I appreciate your time. I am late for another meeting, but
I really appreciate all of your insights, and I look forward to
working with you closely in the coming years. Thank you.
Thank you, Madam Chair.
Ms. Brown of Florida. Mr. Schauer.
Mr. Schauer. Thank you, Madam Chair. It was certainly worth
the wait.
I represent the Michigan Seventh. To put it in Amtrak
parlance, it includes the Wolverine line and the Blue Water
line. I have worked with CN, with Norfolk Southern and with
Watco to tackle a number of freight issues.
I want to talk mostly about passenger here, and I
understand there is a clear relationship with, I think, an
entirety of leased lines within my district. There is a lot of
interest in my district in expanding passenger rail. Maybe you
can help me distinguish what I think of as a traditional
intercity passenger Amtrak service, which we have now. The
Detroit-Chicago corridor has been designated as a high-speed
rail corridor. There are a number of other commuter rail
projects kind of percolating up.
I think one of the reasons that this is important to my
district is that times are tough in Michigan. I have a number
of smaller, urban core communities as well as smaller rural
communities that I think would like to see the economic impact
of being connected, for example, to Jackson, Michigan, which
has a station that I think Amtrak owns and that we are trying
to repair and turn into an intermodal hub.
Jackson, for example, would very much like to hook up with
Ann Arbor with some kind of high-speed commuter service. So how
do we do this?
I am certainly interested in the Chair's support and in
Chairman Oberstar's support as to the resources that it would
take to do this. I guess, to all of you: What do we need to do
to make this happen in a way that helps create jobs in the
short term, but helps create economic stimulus over the longer
haul?
Mr. Boardman. I will take a start at answering the question
you have asked.
I think it has been a question that has been asked in the
past, not about Michigan so much, but about other places. How
do we get these things done? There is usually a different way
to get it done in every community that you operate in or in
every State that you operate in.
One of the things that the Federal Government and this
Committee and the Senate did 2 years ago was to begin to
establish a program of matching with State governments for
improvements in rail. It was a small program to begin with, and
we are on a continuing resolution right now, but we believe
that we will have a program out of normal appropriation that
will come forward again this year. It allows the States and the
Federal Government to work together to make those kinds of
improvements, the ones that you are really talking about.
I think what you are talking about is, there is almost a
no-man's land between the transit program of commuter rail and
the need or the request. Part of what I think Mr. Webb was
talking about in Austin was, it is related both to the transit
side, and it is also a commuter-freight kind of a connection,
so it takes a relationship with either a short line or with one
of the Class I's.
It a commitment from the State. The State puts forward the
dollars necessary. It takes a Federal program, as you have
already produced here, to make that happen. Then, if it is an
Amtrak that operates this, it takes Amtrak's being involved
from early on to figure out where the equipment is going to
come from. How do we get the crews in place? What is the
commitment to really provide that service?
Mr. Carney, who is gone now, really talked earlier about
the need for connectivity so there is enough ridership here
that it is a success in the end.
So it really does fit together. There is a program here.
There is a way for Michigan and for the people who are involved
to get the right parties at the table to make this happen.
Mr. Schauer. Madam Chair, I would look forward to working
with you and with the Committee and with all of you to make
that corridor a priority. I mean, I just saw an estimate of the
time. If we can make that line between Detroit and Chicago more
efficient, I think the sort of door-to-door time would be
something like 3 hours and 45 minutes. It is 5 hours-plus now.
I think that would have an incredible economic stimulative
impact for all of the communities there.
So it is a high priority in the short run in terms of the
jobs. And we can create, obviously, any new equipment; we have
the capacity in Michigan in terms of plants and people. But for
me, this is all about creating jobs and helping communities
become more healthy economically.
Mr. Boardman. I think Michigan is a member of the Midwest
Rail Coalition as well.
Mr. Schauer. Thank you, Madam Chair.
Ms. Brown of Florida. Thank you.
Mr. Young, Mr. Nadler asked about providing Federal funds
for freight rail. The Senate stimulus bill provides $5.5
billion to States to use on highways, bridges or freight and
passenger rail.
When we look at the SAFETEA-LU reauthorization, or whatever
we are going to call it, don't you think that this type of
funding is needed for freight rail?
Mr. Young. I think it has the potential to be a great
program, and we are going to take a hard look at it in terms of
how it works and how quickly it can be used. But we will see;
it still needs to get out there, and I am looking forward
potentially to taking advantage of it.
Ms. Brown of Florida. I guess, if freight is competing with
highways and bridges, it is going to be very difficult.
Mr. Young. It will. Although I think that is the program
that is set for high-impact projects that I believe--when you
look at high-impact projects that include the freight, I think
they will clearly be at the top of that list in terms of
priorities.
Ms. Brown of Florida. Mr. Boardman, you don't have to
answer this question. I just want you to think about it.
What is it that we need to do to get passenger rail up and
operating efficiently and effectively and competitively? Where
do we need to be?
Mr. Boardman. I will come back and meet with you on that.
Ms. Brown of Florida. Yes, sir.
Mr. Kempton, there is an amendment that I was just talking
to Mr. Shuster about that is on the floor, which is about Mr.
Oberstar's amendment pertaining to 90 days, that the money has
to be spent in 90 days.
Is that going to be a problem for the States to obligate
this money? By its very nature, a "stimulus" means that you are
going to be able to spend that money to kick-start the economy.
Mr. Kempton. Madam Chair, as I responded earlier, I think,
in an exchange with Mr. Shuster, California as a State will
meet that requirement if that is deemed to be appropriate by
the Congress.
It will be difficult for some States, and it will be
difficult for local governments. I think that was the point I
made earlier, that some of them will have difficulty in terms
of federalizing projects and in going through the steps that
will be necessary to be able to spend those dollars.
I believe we are going to be ahead of the game in
California because we do have a bond program that has been
stalled by our State's budget problems, and we will be able to
move those dollars out very, very quickly.
Again, I think there will be issues in other localities
around the country.
Ms. Brown of Florida. Mr. Stem, a question about the
layoffs in the industry now:
What do you think we need to do in the stimulus to get the
industry to bounce back so that we can put people back to work?
Mr. Stem. Find a way to generate freight. Find a way to
generate projects on the railroads. As for those projects that
were discussed here earlier and as Mr. Young and as Mr.
Oberstar referred to, those people are in place. They are at
home, wishing they had a job; and they are ready to go back to
work tomorrow once they have funding for those projects and
once they have a need for the employment.
Ms. Brown of Florida. Now, there was one person there. I
went out to see him in Orange County, and he actually had an
earthquake arranged so that I could know the urgency of having
that rail project out there.
Mr. Buffa. Madam Chair, Mayor Pringle of Anaheim is quite
proud of that. You have become a legend in Orange County
politics because you were the Congresswoman who came to visit
us and who had the bad misfortune of being on the seventh floor
of the Anaheim City Hall when a 5.2 earthquake hit.
Not only that, but you were apparently the coolest head in
the room. Some of my Orange County compatriots were either
under the table or in a doorjamb.
Ms. Brown of Florida. Definitely under the table.
Mr. Buffa. You stood your ground, so you are famous in
Orange County.
Ms. Brown of Florida. We will forever bond.
I want to thank you all so very much. This has been so
timely, particularly while we are dealing with this stimulus
and are getting ready to start the TEA-LU process. I am hoping
that everyone in this capital is listening to what you are
saying, because I do think that you all are the engine that
will really move this country forward.
Thank you very much for the time that you have given us
today.
I want to welcome you all. Sorry that the first panel went
so long, but I understand that we are on a real time frame
because we are having the memorial here this afternoon, so we
will get through this quickly. I would like to welcome and
introduce our second panel.
We have Mr. Ed Wolfe from Wolfe Research; Mr. Lance
Grenzeback of Cambridge Systematics; Ms. Anne Canby, President
of the Surface Transportation Policy Project and member of the
OneRail Coalition--you are going to tell us about that; I
understand you all had a major announcement recently.
We have Mr. Phillip Longman, Research Director of the Next
Social Contract Initiative at the New America Foundation. We
have Mr. Chuck Baker, President of the National Railroad
Construction and Maintenance Association. Finally, we have Mr.
Leon Fenhaus, Director of Government Affairs for the
Brotherhood of Maintenance of Way Employees Division of the
International Brotherhood of Teamsters.
TESTIMONY OF ED WOLFE, WOLFE RESEARCH; LANCE R. GRENZEBACK,
PRINCIPAL, CAMBRIDGE SYSTEMATICS, INC.; ANNE CANBY, PRESIDENT,
SURFACE TRANSPORTATION POLICY PROJECT, AND MEMBER, OneRAIL
COALITION; PHILLIP LONGMAN, SCHWARTZ SENIOR FELLOW; RESEARCH
DIRECTOR, NEXT SOCIAL CONTRACT INITIATIVE, NEW AMERICA
FOUNDATION; CHUCK BAKER, PRESIDENT, NATIONAL RAILROAD
CONSTRUCTION & MAINTENANCE ASSOCIATION; AND LEON FENHAUS,
DIRECTOR OF GOVERNMENT AFFAIRS, BROTHERHOOD OF MAINTENANCE OF
WAY EMPLOYEES DIVISION, INTERNATIONAL BROTHERHOOD OF TEAMSTERS
Ms. Brown of Florida. Let me remind the witnesses that
under our Committee rules, all statements must be limited to 5
minutes, but your entire statements will appear in the record.
We will also allow the entire panel to testify before the
questioning begins.
I will begin with Mr. Wolfe.
Mr. Wolfe. Thank you, Madam Chairman and Ranking Member
Shuster, as well as the other distinguished Members and your
staffs, for the invitation to present today.
My name is Ed Wolfe. I am the Managing Member of Wolfe
Research, which is the leading boutique research firm on Wall
Street focused on freight transportation and the macro economy.
Our clients are the shareholders and debt holders of the
public and some private railroads and other transport
companies. My slides and testimony are available outside, and
they also should be up on the screen.
I see they are. That is good. They are also on our Web
site.
In my 13 years on Wall Street as well as my several years
prior as an attorney, I have never before seen the U.S. or
global financial markets and the economy deteriorate in such a
broad-based manner or at such a rapid pace. These are truly
unprecedented times.
The following slides show how quickly freight
transportation demand has fallen off by mode and, more
specifically, for the railroad-by-end-user segment. I have also
added some slides on rail and truck pricing, on rail capital
spending, returns and recent stock performance, as well as your
estimates for rail volumes, yields, revenue, and EPS for the
rails in 2009 relative to 2008.
Am I going to have to change these slides? Okay. Well, you
are going to need good eyes.
Slide 1 lists several of the key reasons why rail
infrastructure is critical and is becoming more so for our
Nation's transportation needs. Railroads comprise only about 7
percent of total freight transportation spent in the U.S., but
they have become an increasingly critical line-haul component
of moving bulk commodities and consumer goods to businesses
and, ultimately, to consumers throughout the U.S. and between
Canada and Mexico.
This has been accelerated over the past decade with the
rise of global trade and offshore Asian imports into the U.S.,
which lend themselves to large, less expensive, non-time-
sensitive, long-haul moves on railroads rather than other modes
of transportation. We estimate that rails are more than three
times more fuel efficient than trucks.
With increasing highway congestion, the rails are one of
the few alternatives for truck freight with meaningful
potential capacity to help decongest highways and make America
more productive, safe and environmentally responsible.
Slide 2 lists some of the major multiyear U.S. capacity
expansion projects currently under way by each of the major
railroads. These are some of the questions that have come up
already. Someone mentioned I-81. Norfolk has a project, for
instance, on the Crescent Corridor, but they are listed on
slide 2.
I will now turn to some thoughts on the freight macro
economy generally and on Chairwoman Brown's request for an
update on how railroads are faring in the current economic
crisis.
Our sense is that the recent further freight downturn since
Thanksgiving reflects a material inventory drawdown and
extended production shutdowns around and since the holiday as
freight has seemingly ground to a halt. Based on our channel
checks, we expect these very weak freight trends to continue
well into the first quarter of 2009; hence, our expectation for
minus 5 percent GDP during both the fourth quarter 2008 and the
first quarter 2009.
Beyond extended shutdowns from the Big Three auto makers,
we have seen announced production curtailments from a broad
array of companies and industries. We expect these shutdowns to
further negatively impact already weakened freight volumes, as
we have seen in December and January.
Slide 3 summarizes 13 freight data series that we track
each month. As shown in the column on the right, only one of
those 13 series improves sequentially in the most recent month
of available data from November or December versus the prior
month. The one positive trend of truck bankruptcy showing
relative improvement likely reflects the recent plunge in oil
prices, keeping the small truckers in the game a bit longer
than normal, given how weak demand is.
Slide 4 shows the Cass Freight Index, which has plummeted
recently, including a 23 percent year-over-year drop in
December, the sharpest decline in the 18-year history of the
index, which is now at its lowest absolute level since January
2004. This shows how bad freight is currently in December and
January.
Slide 5 shows monthly year-over-year changes in freight
volumes for the past 3 years for domestic truck, airfreight and
rail volumes as well as West Coast ocean import and export
volumes. Each of these modes of transportation fell materially
in November and December from recent trends. Notably, export
ocean volumes were up 20 percent on average in the first 8
months of 2008, but were down almost 20 percent year over year
in November and were down over 27 percent during December. That
is quite a swing.
Slide 6 breaks out the eight major rail product segments
showing annual year-over-year growth for the past 6 years on
the left side of the slide and data for the past eight quarters
on the right side. Fourth quarter 2008 and full year 2008 total
rail volumes were down 9 percent and down 4 percent
respectively. This marks the worst quarter since at least 1990
and the worst full year since 1985. Note that in the fourth
quarter, as was the case for full year 2008, seven of eight
segments were negative year over year with only coal volumes
positive. In the fourth quarter, automotive, metals, paper, and
lumber volumes were the worst-performing volume segments for
the rail--down 30 percent, 25 percent and 16 percent--while
coal volume, up three, remained the only positive segment
during the fourth quarter, although it turned negative in
December and remains weak thus far in January amidst the
shutdown of several mines and a weaker demand generally.
Slides 7 and 8 show the 62 percent correlation between U.S.
GDP and rail carload volumes and the even higher, 68 percent,
historical correlation between industrial production and rail
volumes.
Slide 9 tracks rail and truck pricing over the past 32
years. Since rail deregulation in 1980, the spread between
truck and rail pricing has widened, in part driven by trucks
being less fuel-efficient and requiring higher fuel surcharges
as oil prices have risen.
Slide 10 highlights rail capital spending as a percentage
of total rail revenue for each of the Class I railroads since
1995, compared to the average capital expenditures as a
percentage of revenue for the Dow Jones 30 industrials.
On average, over the past 5 and 10 years, as reflected at
the bottom of the table, railroads have spent 16.5 and 16.8
percent of their total revenue on capital spending. This is
almost three times higher than the spend by the average Dow
Jones 30 company during these periods.
Slide 11 looks at each rail's return on capital relative to
the rail industry's cost of capital as published each year by
the STB. While the rails' returns have, on average, improved
from a low of about 6 percent in 2000 to 10.7 in 2007, they
remained below the industry's cost of capital during 2007.
Norfolk Southern was the only U.S. railroad to return its cost
of capital in 2007. While rail returns were likely higher in
2008, they will be materially lower in 2009.
Slide 12 lists our current forecasted volume, yield,
revenue, and EPS declines for the railroads in 2009. Our
numbers have been coming down quickly over the past 6 months.
While we think we are getting closer to a bottom, at least for
2009, we are not yet confident our estimates have bottomed.
In our current assumptions, we are assuming about a 6
percent decline in volumes, on average, for the four major U.S.
rails next year despite easy comparisons of minus 4 and minus
3, on average, in the previous 2 years. In the prior 3 years
from 2004 to 2006, the four U.S. railroads averaged volume
growth of nearly 4 percent. These significant volume declines,
along with slower real pricing gains and materially lower fuel
surcharge revenue, should translate to about a 14 percent
revenue decline on average in 2009. This is down from 10
percent revenue growth on average in the previous 5 years
through 2008.
Combined with negative operating leverage for the high
fixed-cost rail networks, we anticipate about a 16 percent drop
in rail earnings per share next year down from a 27 percent
earnings growth on average over the previous 5 years.
Finally, slide 13 reflects recent annual and quarterly
stock performances of the rails relative to truck and
airfreight and logistics stocks, as well as the S&P 500. While
the rails outperformed the other transports in the market over
most of the past 8 years, in 2008 during the past fourth
quarter and thus far in January, the rail stocks have
underperformed as prospects have become less positive,
reflected by our expectations on Slide 12.
In conclusion, the rails are vital to the North American
transportation network and will be increasingly important to
infrastructure in order to alleviate highway congestion and to
promote a more efficient and environmentally conscious
transport grid. While the group has seen strong earnings and
stock performance in recent years, this is the most capital-
intensive industry of which we are aware.
2009 looks to be very challenging for volumes, yields and
profitability, yet the group intends to minimally reduce their
strong spending initiatives. Given low financial returns, if
the downturn lasts beyond 2009, we would expect shareholders
would demand more substantial capital plan reductions and
shippers would demand some pricing rollbacks.
I thank you for your time, and I look forward to answering
your questions.
Ms. Brown of Florida. No signal? Okay. We are ready.
Mr. Grenzeback. Thank you.
Madam Chairman and Mr. Petri, my name is Lance Grenzeback.
I am Senior Vice President with Cambridge Systematics. We
provide transportation, policy planning and management
consulting services. We authored the Freight-Rail Bottom Line
Report for AASHTO and, more recently, the National Rail Freight
Infrastructure Capacity and Investment Study for the AAR and
the National Transportation Policy Commission.
Freight rail is a critical part of the freight
transportation spectrum. Intermodal rail competes with trucking
to move international and domestic containers. Rail carload
service carries thousands of products from lumber in bulkhead
flatcars to chemicals in tank cars, and unit trains haul
enormous quantities of bulk commodities, including 30 percent
of the Nation's grain harvest and some 65 percent of the coal
used to generate electricity.
Rail productivity and cost effectiveness have improved
significantly. Rail rates are about half of what they were in
1980. Freight tonnage has doubled; today, it accounts for about
30 percent of all ton-miles of freight movement and over 40
percent of the long-distance intercity ton-miles. Rail reduces
the cost of maintaining public highways and bridges by keeping
the equivalent of 100 million trucks and 1.5 trillion ton-miles
of freight off the highways.
Rail is more than twice as energy efficient as trucking on
a ton-mile basis. In a world worried about climate change, rail
accounts for less than 3 percent of all U.S. transportation
petroleum use and greenhouse gas emissions.
However, rail traffic has not grown significantly since
2005, in part because of growing rail system congestion. Rail
traffic is now dropping. As Mr. Wolfe noted, volumes in 2008
were the fourth highest in history, but in December, rail
carload traffic fell 14.2 percent, intermodal 13.7 percent. The
decline continued in January, and all indications are that it
will continue through the rest of the year.
In the AASHTO and the AAR studies, we reported that the
economy would grow at about 2.8 percent per year, resulting in
a 70 percent increase in rail tonnage between 2005 and 2035.
With the economy now estimated to grow at 2.5 percent or lower
over that same period, we expect that forecast to be delayed at
least 3 to 5 years.
More importantly, the recession will reduce revenue for new
capacity expansion. Investment in new capacity has been
increasing from about $1.1 billion in 2005 to $1.9 billion in
2007, but this performance will not be replicated in 2009 and
in 2010.
Maintenance and replacement will be cut back, and
investment in new capacity expansion will largely cease. We
will not see investment to untangle congestion at major rail
hubs, such as Chicago, or to add track or to rebuild and expand
rail terminals.
As a result, when the recession eases and the demand for
rail freight picks up, we will likely find ourselves with less
capacity than we have today and well behind what we will need
for tomorrow.
What might that look like? In 2007, we estimated that about
13 percent of the primary rail corridor miles were operating
near or above capacity. This is shown in the slide in the red
and yellow. We projected that without capacity expansion
improvements totaling nearly $150 billion over the period, 30
percent of mileage would be operating above capacity by 2035.
If we delay improvements to the freight rail system, we may
find ourselves closer to this hypothetical 2035 situation than
we anticipated.
Two events could and will likely accelerate the need for
rail capacity. If oil prices increase again, as is likely with
an economic recovery, we can expect to see freight shift from
truck to rail, which will quickly absorb any available
capacity. If we follow through on our promises to make much-
needed improvements to our intercity passenger rail services,
we will need to add capacity to many, already congested,
freight lines. Five to 8 years from now, we could find
ourselves out of capacity and struggling to catch up.
In closing, we have an opportunity now to prepare for the
recovery and to position the freight rail industry to absorb
future growth. To do this, we need to establish a national rail
policy and outline the future of a national rail system. We do
not need a detailed blueprint, but we do need a broad consensus
on when and where we must make major improvements.
We should increase the public and private investment, as
has been much discussed today, in both freight and passenger
rail, but we also need to agree on how we will share the
benefits, costs and risks of doing so.
We should create a mechanism, such as a national
infrastructure investment bank, to finance freight and
passenger rail improvements_those projects of national
significance where the costs are too high for a single railroad
or State to undertake, but where the improvements benefit many
States and industries.
Finally, we should look to expand State and local rail
programs to coordinate freight and passenger services, to build
grade separations_which are going to be critically important as
the volumes and speeds increase_and to mitigate the community
impacts of more train traffic.
I thank you for the opportunity to appear before you today,
and I would be happy to answer questions later.
Ms. Canby. Thank you very much, Madam Chair and
Representative Petri.
My name is Anne Canby. I am head of the Surface
Transportation Policy Partnership and am the founding member of
OneRail, a new coalition dedicated to advancing rail as a
critical element of our national transportation system.
Earlier this month, 10 organizations came together to form
the OneRail Coalition. Our goal is to promote the benefits of
rail, both passenger and freight--which is the first time these
interests have come together--as an essential element to the
future of the economic growth and well-being of our Nation.
In our principles, which are attached to my statement, my
OneRail colleagues and I propose and recommend to you three
major areas of activity:
One, expanding and strengthening the Nation's passenger
train network and ensuring capacity for both passenger and
freight growth in the years ahead;
Two, enacting policies and programs that expand public and
private investment in rail freight mobility;
Three, supporting a dedicated funding source for intercity
passenger train expansion.
We must maximize the transportation options that enhance
our mobility, achieve energy efficiency, reduce greenhouse gas
emissions while boosting economic growth and improving the
quality of life for all Americans.
Working separately on intercity passenger rail or freight
makes no more sense than looking independently at highway
corridors. As we identify critical corridors, we must create
the institutional capability for all interests to work in
concert to identify the optimal investment regardless of mode.
With regard to the economic recovery proposals pending,
OneRail has urged the Congress to recognize rail as a full
partner in the economic recovery measure; and we greatly
appreciate this Committee's effort, under the leadership of
Chairman Oberstar, for the $5 billion, and we share your
disappointment that the figure is considerably less than that.
We are, however, pleased with the Senate appropriations actions
yesterday, allocating substantial amounts to rail as well as
expanding eligibility for rail projects.
Our preference is that currently authorized programs for
both passenger and freight, such as the rail-freight
relocation, Positive Train Control, capital grants for Class II
and III railroads be fully funded. In the case of Amtrak, our
view is that their capital investments should be augmented with
additional funding for major catch-up investments.
Our second proposal is to permit funds allocated to States
and localities to be used for investments in passenger and
freight transportation. Because the source of these stimulus
funds will be general funds, broad eligibility should apply.
Even if the stimulus funds are allocated pursuant to Title 23
provisions, the recipients should be able to invest in projects
with the highest payback in terms of job creation and
environmental benefit without regard to mode. We are encouraged
so far by the progress in both the House and the Senate, and
are ready to work with you to ensure that rail receives its
full due in the final economic recovery program.
The benefits of rail have been well stated today, and I
have also highlighted them in my testimony. Let me speak for a
moment to my experience when I ran the Transportation
Department in Delaware.
It was troubling to me that our Federal funds could be used
for commuter rail, but not for intercity rail service on the
Northeast Corridor, which is a critical link for my State of
Delaware. Because we were funding commuter rail, we were able
to use our Federal funds. However, many States do not have this
option today. Federal funds, in our view--in my view--flowing
to the State DOTs should be eligible for both intercity freight
and passenger improvements.
Also, while I was in Delaware, we recognized the growing
truck volumes along I-95 between Washington and Delaware, and
actually asked Mr. Grenzeback to help on a study to determine
what rail improvements in that corridor would enable us to
improve both the performance on the highway as well as on the
rail network. This resulted in the Mid-Atlantic Rail Operations
Study, which identified over $6 billion worth of improvements,
including the Howard Street tunnel in Baltimore, supported by
five State DOTs and three railroads. These projects remain
basically unfunded.
In terms of the authorization that your Committee will be
dealing with later this year, since we have just gotten
organized, OneRail is still considering the specific proposals
that we will make, but let me make a few comments from my
position at STPP:
First, we need a clear national purpose and strong
provisions for accountability and measurable outcomes that
reflect the national interest. The new law must, in my view,
incorporate all forms of surface transportation, and that means
rail. We have one system that is made up of several modes. Each
of them plays a very important role in the moving of both
people and goods, but we have not really put this together into
a systematic and integrated network.
We must do so.
Finally, the Federal policy and programmatic framework that
emerges from this next authorization should reshape our
transportation systems to meet the goals of energy independence
and a dramatic reduction in the level of greenhouse gas
emissions, while assuring that we are positioned to meet both
passenger and freight travel in a safe, economically and
efficient way. These are not separable goals. We must meet them
all. And I thank you for this opportunity to testify.
Ms. Brown of Florida. Mr. Longman.
Mr. Longman. Madam Chairman, Members of the Committee, my
name is Phil Longman. Good afternoon. I am a senior fellow at
the New America Foundation, which is a public policy institute
here in Washington. And I am also the author of a cover story
in the current issue of the Washington Monthly that addresses
what is for many folks a rather novel idea, and I am grateful
to have the opportunity to sketch it out for you. It is a
proposal that offers stunning improvements in highway safety,
maintenance and congestion costs, energy use, greenhouse gas
emissions, public health, shipping costs, and plenty of
economic stimulus as well. If it was fully implemented, it
would get 83 percent of all long-haul trucks off the road by
2030. It would reduce carbon emissions by 39 percent and reduce
energy consumption by 15 percent.
The best way to explain this project is to use a concrete
example that has been alluded to several times in this hearing;
that is, I-81. This is a highway that starts in northern New
York, Canadian border, goes down through the Shenandoah valley
into Roanoke and on into Tennessee. It is a rather obscure
interstate as they go, because it doesn't connect much of any
big population center.
Nonetheless, the road is being pounded to pieces by trucks.
One out of every four vehicles on this road is a long-haul
truck. And people in Virginia have been trying to figure out,
what should we do? What can we do? Most of these trucks are not
even stopping in Virginia. They are on their way to somewhere
else. So the conventional idea would be, you know, add more
lanes. That is what highway departments do. But it turns out
that is incredibly expensive. So the next conventional wisdom
thing to do is let us put tolls on their road. And that idea
was floated early last year, created a political firestorm.
Thankfully, there is a better way and some progressive-
minded folks in Virginia, particularly Virginia Rail Solutions
advocacy group and Virginia DOT, have had the idea of, instead
of taking the money--take the money that would have gone to
adding lanes on I-81 and put it into rail infrastructure. There
happens to be two parallel lines owned by Norfolk Southern
going along the same route as 81. Norfolk Southern says they
can divert 2 million trucks off the road with this
infrastructure.
Now, I don't aim to tell you all the advantages that come
from that, the improvements and congestion. You know, trucks
kill 5,000 people a year nationally. But I do want to add that
there is the opportunity here for something much broader, using
that I-81 example as a beginning point.
There has been some allusions to railroad electrification.
One hundred years ago there was a railroad called the Chicago,
Milwaukee, St. Paul and Pacific that took 100-car freight
trains over the Rockies and Cascade Mountains using electricity
generated entirely by hydropower, which is abundant in the
region. You think about what that is. That is zero-emissions
freight transportation.
The Millennial Institute, which is best known for its work
on modeling environmental scenarios, has calculated that for an
investment of about $250 billion, we could, by electrifying
major Class 1 mainline railroads, bring all these tremendous
reductions in carbon emissions and gas use that I alluded to
before.
It is work that can start right away. Importantly, too, it
is work that doesn't beg any questions about what kind of
energy you use. You can use wind. In fact, wind power, the most
sensible use for it in many ways is for powering passenger
trains, because you don't have any transmission laws; solar
where it is appropriate; hydro where it is appropriate; coal;
nuclear, if you want to go there. But this is an opportunity to
do something truly dramatic about a whole host of problems. It
is kind of like the Swiss Army knife of public policy proposals
in that we just solve so many problems.
My feeling is that some of the Class 1 railroads are a bit
reluctant to take this on; it sounds like pie in the sky. But I
think dramatic national interests are at stake here, and it may
be even appropriate to think about compelling some
electrification, because when you look into the details, there
are just tremendous opportunities here.
Thank you, ma'am.
Ms. Brown of Florida. Mr. Baker.
Mr. Baker. Madam Chairman, Congressman Petri, and Members
of the Committee, good afternoon. I am Chuck Baker, the
president of the National Railroad Construction and Maintenance
Association, known as the NRC. Norm Jester, who is a vice
president of Herzog Contracting Corporation and a member of the
board of the NRC, was scheduled to testify, but the winter
weather caused his flight into D.C. to be cancelled, so I will
be your witness today.
I am speaking on behalf of the NRC and RAILCET. The NRC is
the trade association representing the independent railroad
construction and supply industry. RAILCET is a group of 30 NRC
member companies that have signed a national labor agreement
with the Laborers International Union of North America and the
International Union of Operating Engineers. LIUNA is supporting
this testimony.
We believe that freight and passenger railroads provide
important benefits to the American economy and environment. Our
freight-rail system is widely regarded as the world's most
efficient, and it is a major contributor to the economic
competitiveness of American industry.
Railroads are three to four times more fuel efficient than
trucks on a freight-ton mile basis. Passenger rail also
benefits the environment, and investments into rail transit
systems encourage more efficient and environmentally sound land
use patterns.
Freight and passenger rail play a crucial role in removing
cars and trucks from the road. A typical freight train takes
over 200 18-wheelers off the road. And last year alone there
were over 4 billion trips taken on rail transit systems.
Without these rail systems, highway congestion would become
even more intolerable.
Railroads also play a crucial role in the safety and
security of our country by efficiently transporting military
personnel and equipment, lessening our dependence on foreign
oil, providing disaster evacuations and safely transporting
hazardous materials.
Given the economic, environmental, safety and security
benefits of rail, it should be a goal of public policy to shift
more freight and passenger traffic to rail. To do that,
additional capacity must be added to the system. The rail
network is currently constrained by a lack of capacity, which
causes higher prices for shippers and decreased efficiency for
carriers.
An investment of $148 billion for rail infrastructure
expansion over the next 28 years is required just to keep pace
with economic growth and meet the forecasted demand from
shippers. Freight railroads will be able to supply much of this
capital through internally generated cash flow, but a
significant amount will need to be funded from outside sources.
The economic stimulus package being debated right now is an
excellent and timely opportunity to direct funding and
improvements into the rail network.
Investing in rail infrastructure is an efficient way to
stimulate the domestic economy. These investments create well-
paying, local construction and permanent operating jobs that
cannot be outsourced, and the effect is immediate. Shovel-ready
rail projects are constructed on existing company-owned right
of way and require no additional permitting or review.
Beyond the stimulus, the NRC believes the Congress should
use the opportunity of the next transportation reauthorization
to revamp transportation law in this country. As many of the
leaders of this Committee have stated, the next reauthorization
should not be incremental in nature; it should be
transformational. As a basis for this transformation, we
endorse the Transportation for Tomorrow framework put forward
by the National Surface Transportation Policy and Revenue Study
Commission.
Specifically, we recommend, in the stimulus bill, invest at
least $12 billion into the rail transit system as proposed by
Chairman Oberstar, and we do support the Nadler-DeFazio-
Lipinski amendment being offered on this topic today.
Congress should adopt the proposed 25 percent freight-rail
infrastructure capacity expansion tax credit with Davis-Bacon
provisions.
Congress should extend the Short line Railroad
Rehabilitation Tax Credit through 2015 and raise the credit cap
from $3,500 per mile to $10,000.
Congress should appropriate at least $100 million for
capital grants to Class 2 and 3 railroads, as proposed by
Chairman Oberstar.
Congress should provide $1.5 billion for capital grants to
Amtrak, as proposed by Chairman Oberstar.
We can also leverage additional private investment into
rail by improving the RRIF loan program by setting an interest
rate of 1 percent and deferring initial principal repayment by
up to 6 years.
We recommend strong Federal support of public/private
partnerships, such as Chicago CREATE and CSX's National
Gateway.
And finally, Congress should invest $3.4 billion into high-
speed and intercity passenger rail capital grants, as proposed
by Chairman Oberstar and Chairwoman Brown.
In the reauthorization we do support increased investment
into intercity passenger rail, with reform of the current
Amtrak system.
We believe that the Alternate Passenger Rail Service Pilot
Program and the High-Speed Rail Corridors program provided in
last year's Passenger Rail Investment and Improvement Act is a
good start towards reform, and that efforts such as this to
encourage greater private participation in the intercity
passenger rail network should be expanded.
Thank you.
Ms. Brown of Florida. Mr. Fenhaus.
Mr. Fenhaus. Madam Chairman, my name is Leon Fenhaus, and I
am the Director of Government Affairs for the Brotherhood of
Maintenance of Way Employes/International Brotherhood of
Teamsters. BMWED represents over 35,000 men and women who
perform the infrastructure work on the Nation's Class 1
railroads and many regional and short line carriers as well.
The BMWED is a member of the Teamsters Rail Conference, which
includes the Brotherhood of Locomotive Engineers and Trainmen,
representing the interests of over 40 percent of the Nation's
railroad employees. Railroads have played a major role in the
U.S. economy since the Baltimore & Ohio Railroad began
operations in 1830.
Railroad industry employee productivity increased by 42
percent between 1997 and 2006, compared to 12 percent in
trucking. Rail transportation is efficient due to a highly
skilled and productive professional workforce that is vital to
the U.S. economy.
No nation's economy is strong if those who toil within its
industries do not receive wages and benefits sufficient for
them and their families to thrive. The railroad industry
provides such solid middle-class jobs. As of 2007, collective
bargaining resulted in an $11.6 billion payroll for the 167,000
overwhelmingly unionized employees of the Nation's Class 1
railroads, employees with disposable income. In 2008, the
medical plan will pay out $1.7 billion in benefits. This
collectively bargained benefit supports the U.S. economy
because railroad employees do not forego medical care and do
not rely on financially strapped local and State governments
for health care.
Additionally, all railroad employees in the United States
participate in the Railroad Retirement System, which provides,
in essence, a financially sound and solvent defined benefit
retirement annuity. Given the great influx of employees to the
industry during the 1970s, an entire generation of railroaders
are nearing retirement age. The ability of those long-serving
workers to retire with a secure pension will open up positions
for younger workers, especially those workers who have become
unemployed in other industries.
Investment in passenger rail is a necessary part of any
coherent national energy and transportation policy. Rail
passenger operations are the only intercity transportation mode
that delivers passengers directly to the heart of cities.
The BMWED commends the hard work performed by this
Subcommittee that resulted in the passage of the Passenger Rail
Investment and Improvement Act of 2008. That commitment helps
preserve existing jobs and should create new employment
opportunities.
The major Class 1 railroads performed well in 2008 and
remain in strong financial shape. However, it must be noted
that the slowing down of the U.S. economy is being felt by the
railroads as reflected in lower car loadings. Historically,
freight railroads have been responsible for the investment in
their infrastructures, but today there appears to be a
perceptible slowing of private investment in infrastructure by
the major railroads.
It is in our Nation's and the railroads' interests to
continue to perform maintenance and capacity work, especially
during the current economic downturn, for the inevitable
rebound of the economy, but in order to accomplish this, the
industry must keep all of its current workforce employed and
immediately hire new employees to learn the skills and acquire
the experience necessary to seamlessly transition through the
imminent retirement of the baby boomers.
BMWED supports further investment in the expansion of
passenger rail and new investment in freight rail, but Congress
should ensure that it is not done on the cheap with unqualified
workers, with contractors who lack experience and do not have
overall responsibility for all rail operations.
Congress should act to ensure that owners of rail lines in
the Interstate Rail System and that the persons who perform
rail work, especially work involved with the movement of
people, are the professional, qualified railroad workers
already employed in the industry, and that they must be subject
to the Federal laws created for railroads and railroad workers.
BMWED continues to study the various proposals and
suggestions for ways freight railroads can invest in improving
and expanding their infrastructure. We can offer no specific
proposal at this time, but we intend to continue to study the
matter and hope the Subcommittee will hold additional hearings.
I thank you for the opportunity to express BMWED's issues.
Ms. Brown of Florida. Thank you.
And thank all of the panelists.
Question for the panelists. What specific actions should
the Federal Government take in the short term and the long term
to increase rail capacity, reduce congestion and improve
service and reliability? Let us start with Mr. Wolfe, and
anyone can respond.
Mr. Wolfe. I think it is pretty clear, since deregulation
in 1980, that the railroads respond best to the carrot relative
to the stick. So I would say the 25 percent tax credit as a way
to stimulate investment is probably the best measure that I
have seen.
At the same time, you have got the issue of captive
shippers and pricing, so I think that is an area that needs to
be addressed as well, but not by reregulation, by stimulating
through incentive. And I think that is very clear. So I think a
tax credit during this period of highway reauthorization and
infrastructure is something that is tied in and comprehensive,
involves rail, highway and port, and looking from a Federal
Government standpoint of the needs of all those, I think the
railroads look very good. And yet we don't see any dollars for
other than the 100 million for the short line railroads right
now in the stimulus bill. I would like to see the tax credit
get in there. I think that would be very important and
effective. I'll leave the specifics of how to spend the funding
to the railroads and policymakers
Mr. Grenzeback. Madam Chairman, I would suggest perhaps we
focus on three areas. One would be projects of national and
regional significance. The Chicago CREATE program was a good
example. There are Mississippi River bridges and other projects
out there which are simply too large for a single railroad or
State to risk taking on at the time, whether you use grants or
loans or loan credits for those. There are good examples in the
TIFIA program of how that could be done.
I think there is a second tier of work that needs to be
done, which is on the corridors that are going to be sharing
freight and rail, passenger rail, we are going to--in most of
those areas, we are going to be looking at either adding track
or adding right of way. And in many areas of the country, we
have done the easy work now. When we go from one- to two-track
and then existing right of way, it is not a problem. When you
go to a third one, you have to sort of add bridges and improve
the systems considerably. That is going to be a very expensive
area.
The third area is a very quiet, hidden one. The railroads
do a very good job of investing in upgrading the lines, the
long-haul lines between cities. But when we get into the
cities, particularly in our very densely developed urban areas,
we are going to have terrible problems and a lot of expense
sorting out the rerationalization of rail lines, upgrading rail
terminals, sorting out truck access. We are seeing in the rail
industry a tendency to consolidate long haul, move it to the
outskirts of the city, and then worry about the city--let the
State and the city figure out how to manage the traffic
inbound. I think that is a third-tier program where Federal
action and State action combined will be very, very helpful.
Ms. Canby. Madam Chair, I would just reiterate what I said.
First, broadening eligibility so that States are able to make
an intelligent decision as to the best investment on intercity
transport versus the highway programs that they might normally
do. As a former DOT director, we didn't have that flexibility.
Secondly, ensuring that there are clear outcomes that are
expected from the investment of these funds, and particularly
focusing on the energy and the climate emissions issues; and as
Lance suggested, using potentially the program that is in the
Senate proposal now for major corridors, to take advantage of
the discretion that is there. Longer term, clearly, at the
State level, we have to find ways in the current safety law to
have much better integration across modes and to rationalize a
system that has just been piled one on top of the other without
thinking about how they work together.
Mr. Longman. In the short term, there are a few small
projects that would make an enormous difference. CREATE is one
example. Another example is just a few feet from us actually,
literally. Why are there so many trucks on I-81? It is because
I-95, going from Maine to Florida, is so overwhelmed with
trucks that other trucks divert to get around it. The railroads
only have 2 percent market share on that lane. And why is that?
It is because the Virginia Avenue tunnel right over here is too
narrow to let double-stack trains through, and it is because
the Howard tunnel in downtown Baltimore, which is listed on the
Register of Historic Places, is too old and too antiquated to
let these trains through.
So, just focusing on those little projects has an enormous
bang for the buck. And this is very different than with the
highway projects because typically you can't do anything to
increase the capacity of a highway except add new lanes. With
rail you can often do that.
The other thing I would say in the slightly longer term is
that many studies were done in the 1970s of rail
electrification. People like Governor Milton Schapp of
Pennsylvania got very involved. These studies are sitting on
shelves. They are ready. We would have to update them somewhat,
but it is not entirely pie-in-the-sky stuff. The business of
putting up cantonary involves special skills, but it is not
something that a laid-off auto worker couldn't learn in short
order.
Thank you.
Mr. Baker. I think if you are looking at short term, you
obviously have to focus on the stimulus, which is the only real
opportunity, you know, today. I think there is three
categories. First, you have got to make sure that on the House
side you guys keep the good stuff that you have already
achieved in the bill. That would be the intercity passenger
rail program, although we wish it was more; the Amtrak grants;
and then all the transit funding.
I think then you have to look at--in the inevitable
conference committee that is coming with the Senate, you have
to try to take what was good about the Senate packages,
especially that $5.5 billion Competitive Surface Transportation
Grants program; and also the $2 billion High-Speed Rail
Corridors program is excellent. And then I would love to see
both the 25 percent capacity expansion tax credit and the 50
percent short line tax credit added in. I think those would
both provide an excellent carrot to the railroads.
Mr. Fenhaus. As I stated earlier, we have no specific
proposals at this time; however, any of the number of proposals
that have been presented today, we would take a critical look
at them from the standpoint of, first, what is the impact on
rail labor; secondly, certainly the impact on the carriers; and
finally, at a minimum, analysis of the impact to the Federal
Treasury. But that would be our start point.
Ms. Brown of Florida. The safety bill that we passed had
language in there to ensure that we have qualified people to
run the trains, to make sure that safety provisions are taken
care of. Did you have any comments about that?
Mr. Fenhaus. No, I do not.
Ms. Brown of Florida. Mr. Petri.
Mr. Petri. Thank you very much. Thank you all for the
testimony that you have spent.
I have lots of questions. I will only ask one or two. And I
think the first was of Mr. Wolfe, and that has to do with
investment in the rail industry from private sources. There,
for years, there was disinvestment in the industry. More
recently, I guess is it because mainly high energy prices,
there has been--smart money has been moving into the rail
industry, Warren Buffett and other long-term investors. Is that
trend continuing? And how is anything that we do in terms of
public/private partnerships or infrastructure investment at the
Federal level likely to affect private support of the rail
industry?
Mr. Wolfe. Thank you for the question.
We have seen what on Wall Street is referred to as a
railroad renaissance, and I showed some levels where the stocks
really since 2000 have outperformed the market and done very
well. And there has been increased investing by some very high-
profile people; as you say, Mr. Buffett. Some well-known hedge
funds as well have entered into railroads, something they have
never invested in before. I think it is a combination of a
sense long term that the need for infrastructure, and being
fuel efficient, and generally a push towards commodities and
everything that moves them or touches them.
The most recent downturn has been particularly harsh for
commodities and everything that moves them. And in the last
quarter, as I noted, in fourth quarter and so far in January,
the rail stocks have underperformed, and we have seen a lot of
capital leave this space.
At some point, while the rails have grown earnings, the
valuations of the railroads have really not accelerated. They
are still trading at the same valuations that they traded at,
the same multiples of earnings and cash flow that they traded
at all the way back in the 1980s and 1990s.
What has grown has been the earnings. The railroads have
done a better job through productivity, through mergers, and
through some pricing recently that they haven't had. The reason
investors haven't yet given them higher multiples is because
the returns on capital and the asset intensity is so great. So
I showed slides that show that CapEx is 17 percent of revenue,
and for most industrials it is only 6 or 7.
That is a real issue longer term, and I think the only
thing that is going to increase investing ultimately long term
in the railroads is if we can improve those returns. In
trucking, there has always been the Federal Government, through
taxes and tolls and gas taxes paying for the maintenance of the
highways. The railroads pay all of the maintenance of their own
track and facilities. So when Jim Young was testifying that he
is going to spend $2.8 billion, down from $3 billion, you know,
2 billion of that is maintenance of his way, and to spend more
is going to require a carrot and some infrastructure, I think.
Interestingly, last night Canadian Pacific filed for a $500
million equity deal. What is interesting about that is after
the railroads have pulled back so much, to offer equity to
dilute shareholders and not offer debt is a sign that they
don't feel comfortable they can find debt. So we did some math,
and if they had--based on the amount of equity they issued, to
be equally dilutive they would have been paying a coupon of
about 14 percent on their debt, which is very high cost to do
business. So I think that the credit markets and those issues
are a further issue for railroads if this downturn continues as
we go on.
Mr. Petri. Thank you. I would like to explore that, but I
only have a limited time. And I have a question I wonder if Ms.
Canby and maybe Mr. Grenzeback would like to comment on, and
that has to do with both what the Senate is working on in their
economic package is a $5.5 million pot of money for
infrastructure, and your testimony about possibly national
infrastructure bank. You were talking about the CREATE project
in Chicago and the need for--the difficulty of local people
doing some of these projects.
We did not cover ourself with glory in the last
transportation bill where we had projects of national
significance, and it all kind of got hijacked or earmarked.
Could you comment on how we can do that? If we turn it over to
the Secretary, there is this big risk going down the road that
it tends to be a--the Secretary's discretionary funds
historically end up getting earmarked somewhere in the process
or allocated by Congress, congressional people or whatever, so
there doesn't seem to be a pristine way of doing this in the
real world. Could you just expand a little bit about what we
can do in this area, or should be doing in this area, besides
just sort of laying out a broad plan, but to actually make
things happen?
Ms. Canby. Mr. Petri, let me try and give you a few
thoughts on this. I would say, first, hope springs eternal that
we might get it right one of these days, you know? Our sense is
that if we are able to establish a clear national purpose in
this law, which in our view has been somewhat absent in the
past, and have also very clear outcomes that we are seeking,
then it might be possible to structure a discretionary program
around meeting those particular objectives with clearly a
feedback loop to see whether or not it is happening. I mean,
the more light we can shed on potential projects and then the
outcomes, I think, helps keep within more reasonable bounds the
tendency to earmark without any concern about the outcomes.
So I would say that this is the first instance where we
have really had an across-all-modes opportunity to look at a
range of potential investments and to pick the ones that make
the most sense from a clear set of objectives, and that is what
I would hope we could come out with.
The points you raise are very well taken, and history does
not necessarily bode overly well for it to work, but I think we
need to keep trying because I think this will spur competitive
and creative thinking that may be missing now, absent having
this kind of a competitive process.
Mr. Grenzeback. I have a colleague who keeps telling me
that earmarks are really a symptom of a failed program; that
earmarks are money looking for solutions that aren't coming out
of a program. And I think that very broadly what in the next
authorization you might attempt to achieve is to balance that
by building up the programs.
If we take a look at the national freight network,
including rail, the kind of problems out there that are really
very big, expensive problems pop up pretty quickly. There were
a number of them cited here today. What we have now done to
date is to collect that into a national vision of what we have
to fix and where we have to go.
We know something about the capacity of the railroads to
invest. We know demand patterns, we know where the population
growth is. We can pretty well estimate where our needs are and
where the bottlenecks are. That needs to be elevated to the
point where, when people say there is money in a program, but
by the way, I would like to earmark it somewhere else, it
becomes very visible and very difficult to earmark it to other
needs.
You want people to say: what happened to Chicago? What
happened to the east coast problems? I don't know that there is
a clear and obvious answer, but I think it is the failure on
the program side and a failure of the national mandate for the
last years that have been the problem. We haven't had to worry
about investment in rail because we have had a mandate and a
consensus to invest in highways as the practical engine for
economic development.
We basically filled up both the highway and the rail
systems, and now we are going to have to make a series of very
specific choices about where to invest to improve pieces of
those systems. I think the demand will be there, the revenues
will be there, but there are going to be some projects that are
simply going to pop up and be very visible, and it would help
to make them very visible, to target the money and set
criteria_which Congress can do_and then to say we don't want to
waste it. Why isn't it going to that project? It will take
continual oversight by Congress to force us to behave
logically.
Mr. Petri. Thank you. Thank you all very much.
Ms. Brown of Florida. Mr. Grenzeback, you were making great
points until you started talking about earmarks. In this
Committee, we call it Members' priority.
Mr. Grenzeback. Well, when I get them, I call them
wonderful.
Ms. Brown of Florida. We will talk about that later.
But I had a question for Ms. Canby. Given that the freight
railroads are privately and profitable to some extent, Congress
has been reluctant to provide funding for freight
infrastructure improvement. We have always believed that they
are able to help themselves and improve their infrastructure. I
personally think it is a bit shortsighted, since the railroads
have different priorities than the Federal Government does when
it comes to rail expansion. They look at the bigger bang for
the buck, and we are looking at opportunities for public
benefits, reduced congestion, increased passenger rail service,
et cetera.
The Committee will reauthorize the surface transportation
program in Congress. As president of the Surface Transportation
Policy Project, what role shall rail play in reauthorization?
Should we provide funds in the bill for rail? If so, why?
And, Mr. Longman, you may want to respond to that also.
Ms. Canby. Thank you, Madam Chair.
We definitely believe that rail should be a part of the
next authorization because it is such a critical part of
addressing some clear national objectives that have come to the
forefront. And so the challenge is going to be to figure out
how do we integrate the public and private aspects of our rail
network and the public benefits that it brings in ways that can
enhance the overall performance of the transportation system,
both on the road side as well as on the rail side, passenger
and freight, intercity as well as metro area.
And so there is a lot to sort out. And as Lance suggested,
there are probably a need of some overhaul of the overall
program structures as we think about this so that we can
incorporate rail and have the kind of partnership that benefits
both the private sectors needs and what they are able to
provide as well as then having it augmented by the public
sector.
But I definitely think that as we move forward, we have got
to find creative ways to incorporate the public and private
interests into a collective strategy, which now doesn't
particularly exist. We don't have the institutional structures
which we need to give some thought to, and I am hoping that
this is one of the areas where OneRail can contribute and
advance the conversation and the thoughts in terms of how we
would move forward.
Ms. Brown of Florida. Okay. Mr. Petri, did you have
another? You could have 1 minute if you want to have a closing
statement before I close.
Anyone?
Mr. Longman. Well, I would just amplify, think big, big
enough to capture the public's imagination. In my limited time
in working this issue, I have found that what gets people's
attention is trucks off the road; whether or not you believe in
the global warming or all the rest, trucks off the road.
Ms. Brown of Florida. Anyone else?
Well, in closing I want to thank the witnesses for their
testimony and the Members for their questions. Again, if the
Members of this Subcommittee have additional questions for the
witnesses and ask a response, the hearing record will be held
open for 14 days, and Members wishing to make additional
statements or to ask further questions will have the
opportunity to do that.
Ms. Brown of Florida. At 3 o'clock today we are going to
have a memorial for "Mr. Brokenrail" here in this room. And on
February 3rd, at 5 p.m., we are going to have a meet and greet
for the new Members of the Committee to meet with our
stakeholders.
With that, if there are no additional questions or
comments, thank you very much for your time, and we are looking
forward to moving rail forward.
[Whereupon, at 2:30 p.m., the Subcommittee was adjourned.]
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