[Senate Hearing 111-345]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 111-345
 
                   FREIGHT TRANSPORTATION IN AMERICA:
                       OPTIONS FOR IMPROVING THE
                            NATION'S NETWORK

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

                                HEARING

                               before the

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

                                 of the

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 18, 2009

                               __________

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



                  U.S. GOVERNMENT PRINTING OFFICE
52-750                   WASHINGTON : 2010
-----------------------------------------------------------------------
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512ï¿½091800  
Fax: (202) 512ï¿½092104 Mail: Stop IDCC, Washington, DC 20402ï¿½090001

       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

            JOHN D. ROCKEFELLER IV, West Virginia, Chairman
DANIEL K. INOUYE, Hawaii             KAY BAILEY HUTCHISON, Texas, 
JOHN F. KERRY, Massachusetts             Ranking
BYRON L. DORGAN, North Dakota        OLYMPIA J. SNOWE, Maine
BARBARA BOXER, California            JOHN ENSIGN, Nevada
BILL NELSON, Florida                 JIM DeMINT, South Carolina
MARIA CANTWELL, Washington           JOHN THUNE, South Dakota
FRANK R. LAUTENBERG, New Jersey      ROGER F. WICKER, Mississippi
MARK PRYOR, Arkansas                 JOHNNY ISAKSON, Georgia
CLAIRE McCASKILL, Missouri           DAVID VITTER, Louisiana
AMY KLOBUCHAR, Minnesota             SAM BROWNBACK, Kansas
TOM UDALL, New Mexico                MEL MARTINEZ, Florida
MARK WARNER, Virginia                MIKE JOHANNS, Nebraska
MARK BEGICH, Alaska
                    Ellen L. Doneski, Chief of Staff
                   James Reid, Deputy Chief of Staff
                   Bruce H. Andrews, General Counsel
   Christine D. Kurth, Republican Staff Director and General Counsel
              Brian M. Hendricks, Republican Chief Counsel
                                 ------                                

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

FRANK R. LAUTENBERG, New Jersey,     JOHN THUNE, South Dakota, Ranking 
    Chairman                             Member
DANIEL K. INOUYE, Hawaii             OLYMPIA J. SNOWE, Maine
JOHN F. KERRY, Massachusetts         JOHN ENSIGN, Nevada
BYRON L. DORGAN, North Dakota        JIM DeMINT, South Carolina
BARBARA BOXER, California            ROGER F. WICKER, Mississippi
MARIA CANTWELL, Washington           JOHNNY ISAKSON, Georgia
MARK PRYOR, Arkansas                 DAVID VITTER, Louisiana
TOM UDALL, New Mexico                SAM BROWNBACK, Kansas
MARK WARNER, Virginia                MIKE JOHANNS, Nebraska
MARK BEGICH, Alaska

                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on June 18, 2009....................................     1
Statement of Senator Lautenberg..................................     1
Statement of Senator Thune.......................................     2
Statement of Senator Klobuchar...................................     3
Statement of Senator Udall.......................................    41

                               Witnesses

Richard W. Roper, Director, Planning Department, Port Authority 
  of New York and New Jersey.....................................     4
    Prepared statement...........................................     6
Matt Rose, Commissioner, National Surface Transportation Policy 
  and Revenue Study Commission and Chairman, President and Chief 
  Executive Officer, BNSF Railway................................     8
Prepared Statement...............................................    11
Larry ``Butch'' Brown, Executive Director, Mississippi Department 
  of Transportation on Behalf of the Coalition for America's 
  Gateways and Trade Corridors...................................    18
    Prepared statement...........................................    19
John P. Clancey, Chairman, Maersk Inc............................    23
    Prepared statement...........................................    24
Rick Gabrielson, Director, International Transportation, Target..    27
    Prepared statement...........................................    28

                                Appendix

Article entitled, ``AAPA Surface Transportation Authorization 
  Guiding Principles'' dated February 4, 2009, from the American 
  Association of Port Authorities................................    45
Letter, dated June 16, 2009, from Paul H. Bea, Jr., Chairman, 
  Coastwise Coalition, to Hon. Frank Lautenberg..................    47
Letter, dated November 10, 2008, from Paul H. Bea, Jr., Chairman, 
  Coastwise Coalition, to Hon. Charles Rangel....................    48
Response to written questions submitted by Hon. John D. 
  Rockefeller IV to:
    Matt Rose....................................................    50
    Larry ``Butch'' Brown........................................    52
    John P. Clancey..............................................    53

 
                   FREIGHT TRANSPORTATION IN AMERICA:


 
                       OPTIONS FOR IMPROVING THE


 
                            NATION'S NETWORK

                              ----------                              


                        THURSDAY, JUNE 18, 2009

                               U.S. Senate,
Subcommittee on Surface Transportation and Merchant 
       Marine Infrastructure, Safety, and Security,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:35 p.m. in 
room SR-253, Russell Senate Office Building, Hon. Frank 
Lautenberg, Chairman of the Subcommittee, presiding.

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

    The Chairman. I call this hearing to order, and it was very 
nice of the witnesses to all be sitting at attention when I 
came in the room. It reminded me that I was a couple of minutes 
late, and I'm glad to see you, thank you for your promptness.
    I want to welcome everyone to today's hearing. From the 
barges and the ships that bring goods to our ports, to the 
trains and trucks that get those goods to our stores and 
factories, our country has good freight transportation.
    Every day consumer products like televisions and produce, 
and essential raw materials like lumber and iron are moved 
across America as freight. My home state of New Jersey moves 
more than 600 million tons of freight each year. Freight 
movement contributes to more than 500,000 jobs for New 
Jerseyans, making up almost 11 percent of our state's 
workforce, and I mention that just to show the perspective that 
we develop on freight transportation.
    But the strength of our freight transportation system is 
being threatened by our fragile and overwhelmed infrastructure, 
putting people's jobs, our economy, and our ability to stay 
competitive in the world at risk. It has been nearly 2 years 
since the terrible accident, the bridge collapse in 
Minneapolis. But still, 25 percent of our Nation's bridges are 
deficient. In New Jersey, the number is even higher, at 34 
percent. And congestion on our roads costs our country precious 
time and money.
    Freight chokepoints can put huge delays and additional 
costs on the transportation of goods--these are felt across the 
country. For example, some trains can take as long as 2 days to 
cross the City of Chicago.
    To keep goods moving in the future, we must invest in our 
freight infrastructure now. Simply building roads will not 
solve all of our problems, and in some places it's not even 
possible. We need to focus our resources to move goods more 
efficiently and reduce congestion and emissions. We can achieve 
these goals by making better use of rail and barges.
    One freight train, for example--and we've seen the ads 
stating the case--one freight train can take 280 trucks off the 
highway, off the road, while one barge can take 1,800 trucks 
off the road. It just shows you the volume of freight that can 
be handled by those means.
    Trains and barges are also more energy efficient than 
trucks. One gallon of fuel will transport one ton of cargo 70 
miles by truck, 457 miles by rail and 575 miles by barge. One 
gallon of fuel.
    Now let's be clear. We're not saying trucks are not 
important. We are saying that trains and barges need to become 
as important in the trade mechanism. Unfortunately, Federal 
investment has focused almost exclusively on highways while 
neglecting our railroads and our seaports. Chairman Rockefeller 
and I have introduced a bill that would take a long-term and 
large-scale approach to transportation planning. But when it 
comes to freight, our bill would encourage reduced emissions, 
reduced congestion, and reduced transportation costs.
    Two years ago, the New Jersey Department of Transportation 
published its first comprehensive statewide freight plan. The 
Federal Government needs to follow suit.
    I look forward to hearing from our witnesses on how we can 
make that happen. And with that, I turn to our Ranking Member, 
Senator Thune.

                 STATEMENT OF HON. JOHN THUNE, 
                 U.S. SENATOR FROM SOUTH DAKOTA

    Senator Thune. Thank you, Mr. Chairman, for holding today's 
hearing on freight transportation and efforts to improve 
freight mobility throughout the Nation's transportation system. 
The topic is far-reaching, encompassing all modes of 
transportation, all of which are key economic drivers. I hope 
that this hearing today will be a catalyst for our Committee's 
thorough examination of Federal transportation policies, and 
help to inform our Committee's surface transportation 
legislative agenda.
    Coming from a rural State whose economy is dependent on 
first-class transportation to get its products to the world, 
I've long taken an interest in transportation issues, 
particularly rail and trucking.
    As a former State Rail Director, I have a real appreciation 
for what the witnesses here today work to accomplish every day. 
And in my new role as Ranking Member of this Subcommittee, I 
already have a newfound appreciation for issues concerning our 
Nation's ports--not that there are many of those in South 
Dakota.
    But I don't think we should underestimate the importance of 
efficient freight transportation on the overall economy. The 
last great national transportation infrastructure project was 
the construction of the Interstate Highway System which, as we 
all know, began back in 1956. Some have called it the largest 
public works project in history. Today it stretches over 44,000 
miles.
    Trucks on the Interstate carry 50 percent of all freight, 
when measured by value. Some studies have shown that for every 
$1 invested in the Interstate, the Nation's economy realized $6 
in increased productivity.
    The Interstate replaced a lower capacity, a lower speed, 
and a less-safe system of roads. Today's 65-mile-per-hour 
system replaced travel times that only operated at 20 to 40 
miles-per-hour.
    Similar productivity gains in the freight rail sector have 
occurred since the 1980 Staggers Act, and like highways, the 
rail network is facing capacity constraints. I worry that if 
congestion on our highways, rails, and in our ports reaches the 
levels forecast by the Federal Highway Administration, 
transportation will actually become a drag on the economy, 
rather than adding to our productivity.
    It is, I think, appropriate for this Committee to explore 
the proper role of the Federal Government in ensuring our 
transportation system can safely and efficiently move freight 
throughout the country. I'm particularly interested in hearing 
any proposals on ideas from today's witnesses for improving 
mobility that don't involve large commitments of financial 
resources. In other words, how can we do things better and 
smarter?
    While too often we find the Senate increasingly partisan, 
the issue of transportation is one of the bright spots that 
remains of bipartisan interest and helps to unite us, and I 
thank the Chairman and other members for their dedication to 
improving our Nation's transportation system, and look forward 
to hearing from our panelists today.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Senator Klobuchar asked if she might say a couple of words, 
and we're pleased to do that at that point in time.

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

    Senator Klobuchar. Well, thank you very much, Mr. Chairman, 
for holding this important and timely hearing on the challenges 
facing freight transportation. As you know, I'm not a member of 
this Subcommittee, but like you, I care very much about the 
infrastructure of our country. As you mentioned, the bridge in 
Minneapolis, and particularly, the ability of our country to 
effectively and efficiently move goods. And I thank you for 
your leadership in this area.
    The reason I'm here is to welcome our special guest, Rick 
Gabrielson, at the end, here, who's a Minnesotan, and he serves 
as Director of International Transportation for Target, a great 
Minnesota company, with approximately 1,700 retail stores in 49 
states.
    Just this last week, my daughter--who is turning 14 
tomorrow--was tutoring a little girl on how to read, and she 
asked me, what was the first word she ever read? And I had this 
memory of her in the backseat in a car seat, and pointing out 
``Dayton's'' and ``Target.''
    [Laughter.]
    Senator Klobuchar. And it may be more of a statement of our 
family's shopping, than anything else, but those were the first 
words that she ever read.
    In addition to his position at Target, overseeing the 
movement of Target's products, Mr. Gabrielson serves as the 
President of the Coalition for Responsible Transportation, and 
he is the Vice-Chairman of the Maritime Transportation System 
Advisory Council. He's here today to talk about Target's 
experience moving goods and products from our ports, to our 
railroads, to our highways and into our stores.
    He knows a thing or two about our Nation's infrastructure 
and the challenges we face. And as Senator Thune talked about 
the ideas that can come out of this panel, I'm very hopeful 
that Mr. Gabrielson will share some good ideas about how to 
improve our transportation system.
    Welcome, and welcome to all of the witnesses.
    Thank you.
    The Chairman. Thank you.
    Senator Johanns, do you have a statement? Good for you. 
That's what I like, efficiency.
    Well, let me welcome today's witnesses.
    First, Richard Roper, Director of Planning at the Port 
Authority of New York and New Jersey and, as you know, I was a 
member of the Port Authority, Commissioner of the Port 
Authority, which kind of induced me into the idea of public 
service. And I didn't realize how long and how interesting it 
was going to be.
    We look forward to hearing your perspective.
    Mr. Matt Rose has two roles, very important, one as 
Commissioner of the National Surface Transportation Policy and 
Review Study Commission, but also the Chairman and President 
and CEO of BNSF Railway. And we welcome you.
    Mr. Butch Brown also has two roles--Executive Director of 
the Mississippi Department of Transportation, a Member of the 
Coalition for America's Gateways and Freight Corridors.
    Mr. John Clancey, who is the North American Chairman for 
Maersk Shipping. We've had some contact over the period of 
time. Maersk is a very efficient carrier, and giant, by the 
way, and does its job very well, and we're pleased to have you 
here, Mr. Clancey.
    And Mr. Gabrielson, we've already heard how big your 
company is, and how delicate it must be to do all of the 
planning to move the goods and the material that you have to. 
And we're interested in what--what each of you has to say.
    Mr. Roper, if you would take 5 minutes to present your 
testimony, we're interested in hearing what you have to say.

                 STATEMENT OF RICHARD W. ROPER

                 DIRECTOR, PLANNING DEPARTMENT

           PORT AUTHORITY OF NEW YORK AND NEW JERSEY

    Mr. Roper. Thank you.
    Good afternoon, Chairman Lautenberg, Committee Members, and 
Staff.
    I am Richard Roper, Planning Director for the Port 
Authority of New York and New Jersey.
    Mr. Chairman, on behalf of our Chairman, Anthony Coscia, 
and the entire agency, I would like to thank you for your 
leadership on freight issues, not only in order to ensure 
efficient goods movement in this country, but to make security 
of those goods a priority, as well.
    However you do it, Congress must assure that the law 
replacing SAFETEA-LU adds a new focus on freight. A specific 
freight title offers the surest option.
    Freight is at the heart of the Port Authority's mission. In 
1921, New York and New Jersey created the Port Authority to 
improve freight movement at a regional level. We developed the 
region's largest port facilities, its major airports, vital 
river crossings and bi-state transit links.
    Between 2002 and 2007, the Authority and our marine port 
tenants provided $2.4 billion to begin channel deepening to 50 
feet, to modernize port terminals and to make major rail 
improvements. Access will be given special emphasis in our Port 
Department's current $1.9 billion 10 year capital plan; and our 
Aviation Department's $6.4 billion capital plan targets over 
$1.2 billion for passenger and freight landside access.
    Multi-modalism and regional cooperation are not abstract 
concepts for us. They are our reason for being and, I might 
say, at times no small challenge to sustain.
    Congress has made great strides toward more integrated 
surface transportation policy. The Federal Surface 
Transportation Policy and Planning Act of 2009, introduced by 
Chairman Rockefeller and yourself, Mr. Chairman, promises that 
the next bill surely will continue this evolution.
    Many ideas are in play to integrate freight into the next 
stage of Federal transportation policy. Here are a few that 
would have broad national benefits: mandate development of a 
National Freight Transportation Plan; expand Federal support 
for freight investment by all levels of government and business 
partners, adding resources to baseline levels of support 
already in place; encourage multi-state and multi-modal 
corridor planning initiatives like those of the I-95 Corridor 
Coalition; authorize a comprehensive national freight data 
collection program, crucial for choosing cost-effective freight 
investment and measuring performance; and support development 
and demonstration of new technologies to enhance safety, 
enforcement of weight limits, and freight-focused ITS 
applications.
    The imperative for moving people and goods are deeply 
entwined. Chokepoints, for example, where shared tracks require 
freight trains to wait for commuter trains, low highway 
overpasses prevent trains from stacking intermodal containers, 
and trucks are forced to share limited roadways with local auto 
traffic, all impede shippers' ability to provide reliable 
service.
    SAFETEA-LU addresses the Nation's truck-carrying highways. 
However, by one estimate only 2 percent of SAFETEA-LU funds are 
targeted to freight improvements. Federal oversight guides 
marine, air and rail operations, but with too little heed to 
their links with the surface network.
    Aligning national strategies and local initiatives--like 
many states and regions, we are making major investments that 
enhance freight flows in our gateway region. But getting the 
full benefit for the Nation depends heavily on whether those 
upgrades are leveraged up and down the line in the Northeast 
and beyond.
    For example, the Port Authority's continuing expansion of 
on-dock rail service at our container points has taken five 
million truck trips off the highways. The rail share grows 
every year. However, the ultimate benefit of the Authority's 
$600 million investment to provide rail service to markets 
outside our region, will be deeply dependent on whether inland 
rail routes and distant intermodal terminals are positioned to 
accommodate that shift to rail.
    New Jersey and New York's transportation departments are 
straining to fund critical ``last-mile'' road links between our 
container terminals and the interstate highway system.
    Congressional action prompted New York to prepare a 
statewide rail plan that reveals the challenges of competing 
demand for both rail freight and passenger service. But there's 
no Federal framework--much less enough funding--to fully 
address both goals.
    A thoughtful freight title and national strategy can fill 
the policy and knowledge gaps for planning transportation 
investments, improving operations, and funding effective multi-
modal solutions.
    Thank you, again, Mr. Chairman.
    [The prepared statement of Mr. Roper follows:]

Prepared Statement of Richard W. Roper, Director, Planning Department, 
               Port Authority of New York and New Jersey

    Good afternoon, Chairman Lautenberg, Committee Members, and Staff.
    I am Richard Roper, Planning Director for the Port Authority of New 
York and New Jersey. Mr. Chairman, on behalf of our Chairman Anthony 
Coscia and the entire agency, I would like to thank you for your 
leadership on freight issues, not only in order to ensure efficient 
goods movement in this country, but to make security of those goods a 
priority as well.
    However you do it, Congress must assure that the law replacing 
SAFETEA-LU adds a new focus on freight. A specific freight title offers 
the surest option. I'll explain the need for a clear Federal role, and 
what it means for leveraging state and local investments. Federal 
leadership can support innovative freight strategies, as I'll 
illustrate.
Regional and Multi-Modal Imperatives
    Freight is at the heart of the Port Authority's mission. In 1921, 
New York and New Jersey created the Port Authority to improve freight 
movement at a regional level. We developed the region's largest port 
facilities, its major airports, vital river crossings and bi-state 
transit links.
    Between 2002 and 2007 the Authority ($1.4B) and our marine port 
tenants ($1B) provided $2.4 billion to begin channel deepening to 50 
feet, to modernize port terminals and to make major rail improvements. 
Access will be given major emphasis in our Port Department's current 
$1.9 billion 10 year capital plan; and our Aviation Department's $6.4 
billion capital plan targets over $1.2 billion for passenger and 
freight landside access.
    Multi-modalism and regional cooperation are not abstract concepts 
for us. They are our reason for being and, I might say, at times no 
small challenge to sustain.
    But the states' wisdom in making this partnership has served the 
region and nation well, with important lessons for the issue at hand. 
The Port Authority's mission is to support regional trade and commerce, 
never confined to a single mode. Its operating boundary, 25 miles 
around the Statue of Liberty, roughly matches our economic region, not 
its state borders. And we are self-financed without tax-levy funding. 
Through the years the agency has conceived, built and operated 
pioneering transportation facilities without competing for public funds 
from local and state governments.
A Federal Freight Role
    Congress has made great strides toward more integrated surface 
transportation policy. ISTEA, TEA-21, and SAFETEA-LU each moved away 
from mode-specific funding and planning toward emphasis on results, 
performance, and sustainability. The Federal Surface Transportation 
Policy and Planning Act of 2009, introduced by Chairman Rockefeller and 
yourself, Mr. Chairman, promises that the next bill surely will 
continue this evolution.
    Many ideas are in play to integrate freight into the next stage of 
Federal transportation policy. Here are a few that would have broad 
national benefits:

   Mandate development of a National Freight Transportation 
        Plan;

   Expand Federal support for freight investment by all levels 
        of government and business partners, adding resources to 
        baseline levels of support already in place;

   Encourage multi-state and multi-modal corridor planning 
        initiatives like those of the I-95 Corridor Coalition;

   Authorize a comprehensive national freight data collection 
        program, crucial for choosing cost-effective freight investment 
        and measuring performance; and

   Support development and demonstration of new technologies to 
        enhance safety, enforcement of weight limits, and freight-
        focused ITS applications.

    The imperatives for moving people and goods are deeply entwined. 
Chokepoints, for example, where shared tracks require freight trains to 
wait for commuter trains (Lehigh line outside of Newark, New Jersey), 
low highway overpasses prevent trains from stacking intermodal 
containers (National Docks line in Jersey City, New Jersey), and trucks 
are forced to share limited roadways with local auto traffic (Van Wyck 
Expressway, approaching Kennedy Airport in New York), all impede 
shippers' ability to provide reliable service. And, in turn, plans that 
neglect vital freight flows needlessly worsen conflicts on roads and 
rails.
    SAFETEA-LU addresses the Nation's truck-carrying highways. However, 
by one estimate only 2 percent of SAFETEA-LU funds are targeted to 
freight improvements. Federal oversight guides marine, air and rail 
operations, but with too little heed to their links with the surface 
network.
    Defining freight transportation strategies and performance goals at 
the Federal level promises two major benefits: First, to align policies 
and investments across government and industry; second, to spur freight 
innovations best framed at a national level.
Aligning National Strategies with Local Initiatives
    Like many states and regions, we are making major investments that 
enhance freight flows in our gateway region. But getting the full 
benefit for the Nation depends heavily on whether those upgrades are 
leveraged up and down the line in the Northeast and beyond.
    For example, the Port Authority's continuing expansion of on-dock 
rail service at our containerports has taken five million truck trips 
off the highways. The rail share grows every year. However, the 
ultimate benefit of the Authority's $600 million investment to provide 
rail service to markets outside our region, will be deeply dependent on 
whether inland rail routes and distant intermodal terminals are 
positioned to accommodate that shift to rail.
    New Jersey and New York's transportation departments are straining 
to fund critical ``last-mile'' road links between our container 
terminals and the interstate highway system. Senator Menendez's Liberty 
Corridor program suggests that targeting Federal attention and dollars 
can help D-O-Ts give a higher priority to easing these local 
bottlenecks. The North Avenue Corridor Improvement Project is a multi-
agency effort to improve a critical mixed-use link between the 
interstate highway system and New Jersey's seaport. Federal 
participation in the amount of $10 million helped align local and 
national considerations and close a funding gap, however the Port 
Authority's $159 million contribution to the project required shifting 
limited funds away from other local priorities.
    Congressional action prompted New York to prepare a statewide rail 
plan that reveals the challenge of competing demand for both rail 
freight and passenger service. But there's no Federal framework--much 
less enough funding--to fully address both goals. The Authority 
partnered with New York in providing $25 million for projects to help 
bring an aging system to a state of good repair. However, a history of 
stovepipe investments in a predominantly commuter system has hindered 
freight and commuter service by a lack of support infrastructure such 
as shipper sidings and intermodal yards.
    A thoughtful freight title and national strategy can fill the 
policy and knowledge gaps for planning transportation investments, 
improving operations, and funding effective multi-modal solutions. More 
total Federal financing support is needed. New help for freight should 
be added to baseline aid levels available to the states.
    As with overall transportation financing, more flexibility makes 
everyone's dollars go farther, to cross modal lines, and to meld 
Federal grants and loans with local public and private resources.
    The Port Authority is about to undertake a regional plan that 
mirrors the intent of a freight title. In cooperation with New York and 
New Jersey State DOTs, the Regional Goods Movement Plan will provide 
the region with the vision, strategy, and project concepts required to 
create an effective regional goods movement network by 2035, 
emphasizing a multimodal approach for accommodating current and 
forecasted increases in freight volumes. The plan will assess the 
current regional freight network system, analyze emerging and long-term 
freight trends, describe the major obstacles to effectively move 
freight through the region by 2035, and, finally, provide a 
comprehensive strategy to meet the region's long-term freight vision 
and goals. This strategy will be reinforced by a set of investment, 
pricing, and regulatory actions set in place collectively by regional 
transportation providers.
    Thank you again for this opportunity.

    The Chairman. Thank you very much, Mr. Roper.
    Mr. Rose, if you would, you've got 5 minutes to present 
your testimony.

        STATEMENT OF MATT ROSE, COMMISSIONER, NATIONAL 
SURFACE TRANSPORTATION POLICY AND REVENUE STUDY COMMISSION AND 
                 CHAIRMAN, PRESIDENT AND CHIEF 
                EXECUTIVE OFFICER, BNSF RAILWAY

    Mr. Rose. Thank you, Chairman Lautenberg, Ranking Member 
Thune, Senator Johanns. Thank you for inviting me to testify 
before the Subcommittee today on freight policy. I've labeled 
my presentation, ``A Look Into The Supply Chain.''
    The supply chain is integrated and intermodal and national 
transportation policy in Washington, D.C. should be, as well. 
The Committee clearly understands this. I look forward to 
working with you on achieving your vision for a national 
transportation policy.
    I brought some slides today to hopefully explain the supply 
chain, and maybe perhaps a little different view than 
previously demonstrated.
    Reviewing the supply chain's importance to the U.S. economy 
and global competitiveness, I also want to explore what I'm 
calling ``mode optimization'' within the supply chain.
    This is what Chairman Rockefeller and you, Senator 
Lautenberg, seek to achieve in the bill, S. 1036, the Federal 
Surface Transportation Policy and Planning Act of 2009. That 
bill calls for increasing non-highway market share by 10 
percent by the year 2020.
    The National Surface Transportation Policy and Review Study 
Commission I served on called for the exact same thing, and 
I've thought a lot about what's required to make this happen. I 
can assure you this is not going to be an easy task, but it can 
be done.
    The most important thought I would like for you to take 
from this slide, is that when the U.S. supply chain is more 
efficient than other U.S. inputs, such as labor, technology, 
and material, we can be more competitive in the global economy. 
In other words, this just means more jobs and more job growth.
    Now, more than ever, the government's role in providing a 
vision and funding for freight mobility is so important.
    Just to also lay it out for you, the supply chain itself, 
at $1.4 trillion, is nearly three times the size of the Defense 
Department budget. This slide shows the relative efficiency of 
the supply chain, over time. We achieved enormous efficiencies 
with deregulation in the early eighties. Costs were wrung out, 
I can attest to my own industry, productivity increased about 
160 percent over this last 25-year period--rates went down 
about 50 percent, while freight volumes increased, actually, 
over 90 percent during this same time.
    However, starting in 2003, supply chain costs began to 
increase. Essentially, the economy had outgrown capacity.
    The statistics on this slide speak for themselves, and 
you're, no doubt, familiar with them. The outlook is, with more 
population growth, more congestion, and more demand, increasing 
the need to move more things around. The number one challenge 
is no Federal vision for freight.
    Canada has a vision. It has leveraged more than $3 billion 
to create successful freight rail corridors for the benefits of 
its West Coast ports.
    China gets this. This year, China Railway Cap X will nearly 
double from $45 to $50 billion to more than $88 billion in U.S. 
dollars. A great deal of China's stimulus package will fund 
freight rail projects aimed at China's logistics industry.
    The supply chain challenges around capacity, environmental 
requirements, and even fuel costs can be managed if there's a 
coherent, multi-modal, Federal policy framework.
    This is simply a view of the supply chain by ton miles, 
seeing that rail accounts for about 40 percent, trucks account 
for 28, pipeline 20 and water 12. This slide looks at the ton 
miles available to both trucks and rail for what we call inter-
city freight, in other words, going between cities, or between 
markets. It doesn't include the kind of traffic that's heavy-
haul, rail-only, such as coal and grain, or very short-haul 
trucking or local distribution.
    In other words, there are about 2 trillion ton miles in 
medium- to long-haul lanes which would be between 500 and 1,000 
miles, that could go on a truck or a train. Railroads currently 
carry about 35 percent of the market in this area, and truck 
share is about 65 percent of the overall market.
    You can see here that trucking dominates the short-haul 
markets, lanes and distribution services around these markets, 
as it should. I'd also like to point out that freight rail is 
an important feeder of these short-distance services.
    This slide demonstrates what I call ``mode optimization,'' 
moving freight from those 2 trillion ton miles in the middle, 
into the green part of the chart, onto the freight rail. Price-
per-ton for market diversions is key. I'll talk about the 
economics of mode optimization further.
    Largest diversions will naturally occur in the 500 to 
1,500-mile lanes. Adequate capacity is obviously essential to 
be able to accommodate that. Adequate capacity improves 
service, velocity and through-put, expanding the freight rail 
market coverage which is exactly what customers want when they 
make supply chain decisions.
    You both are very familiar with the environmental and 
energy benefits of freight rail, so I won't spend any time on 
that, but rail issues are somewhere between 2.3 and 5 times 
more fuel efficient to move a ton of freight than trucks.
    The key to mode optimization, obviously, is capacity. For 
the first time ever, the freight rail sector formally analyzed 
the Nation's rail capacity in key corridors and projected its 
capacity requirements in the years to come. We can achieve most 
of the needed investment over the next 28 years, but there is a 
projected shortfall of about $40 billion, which is what we 
advocate in our expansion investment tax credit.
    The Commission developed a policy roadmap of what's needed. 
First, a national vision. The benefits of multimodal freight 
projects can be planned and put into a national context for 
funding and permitting beyond.
    Second, rational economic regulation permits freight 
railroads to continue to invest sufficiently to meet market 
share goals.
    Third, railroads should be incentivized through investment 
tax credits to push forward investment spending for capacity.
    Fourth, Federal policy should facilitate public/private 
partnerships to achieve projects that provide public benefits, 
like the Alameda Corridor, and there are many more. The 
Recovery Act points the way, especially as general funds 
increasingly are being used in transportation. Transportation 
dollars should be performance-based, and multimodal. Metro-
mobility means freight mobility too. Intermodal freight 
facilities and distribution should be an important part of an 
urban mobility program.
    The Chairman. Mr. Rose, we have the rest of your 
presentation here, if you could wrap up.
    Mr. Rose. You bet, just a couple of more points. As 
somebody who has worked as a rail CEO for awhile, and also in 
the trucking industry, I can tell you that even if the freight 
railroad network is built out, this is still going to be very 
difficult to move 10 percent of the tons from the highway over 
to the railroad.
    While rail does enjoy a cost advantage at higher fuel 
prices, higher fuel prices are good for our business only to a 
point.
    A final word about carbon policy--whether carbon is priced, 
capped or offset, freight rail may see some mode optimization 
benefits.
    With that, I look forward to your questions.
    [The prepared statement of Mr. Rose follows:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    The Chairman. Thank you very much.
    We have a vote on, and I would ask you to just excuse us 
for about 5 minutes, and we'll go vote and come right back.
    [Recess.]
    The Chairman. We're set to go with you.

               STATEMENT OF LARRY ``BUTCH'' BROWN

         EXECUTIVE DIRECTOR, MISSISSIPPI DEPARTMENT OF

         TRANSPORTATION ON BEHALF OF THE COALITION FOR

             AMERICA'S GATEWAYS AND TRADE CORRIDORS

    Mr. Brown. Thank you, Mr. Chairman, thank you, Senator. 
I'll forego thanking all of the other members, and my Senator 
from Mississippi, inasmuch as they're out voting.
    Thank you, again.
    My name is Larry L. ``Butch'' Brown, I'm the Executive 
Director of the Mississippi Department of Transportation. I'm 
also the incoming President of AASHTO, the American Association 
of State Highway Transportation Officials.
    Today, I'm testifying on behalf of the Coalition for 
America's Gateways and Trade Corridors. The Coalition was 
established in 2001 to promote adequate funding and Federal 
legislation for trade corridors, gateways, intermodal 
connectors, and freight facilities. The Coalition has asked me 
to testify on their behalf today, not only because of my 
responsibility running a multi-modal transportation program, 
critical to the movement of our Nation's goods, but also of my 
hands-on business experience in transportation, warehousing, 
real estate, wholesaling, and the hotel trade. In the interest 
of time, I will briefly summarize the written statement that we 
have presented.
    During the 2009 Surface Transportation Authorization, the 
Coalition is calling upon Congress to create a new 
discretionary Federal program and Freight Trust Fund and a 
partnership with the private sector. Based on my experience, 
both in public, and the private sector, this call is urgently 
needed.
    Freight movements, whether by rail, truck, ship or air, are 
a crucial link in the $7 trillion commodity flow fueling the 
United States economy today. The rapid and cost-efficient 
movement of goods throughout our U.S. supply chain, and 
particularly through our trade gateways and corridors is vital 
to securing America's economic future and maintaining our 
competitiveness in the world markets. Failure to respond to 
these strains will put a chokehold on our economic growth.
    We must focus on the system as a whole, rather than viewing 
the Nation's transportation infrastructure as several different 
systems that occasionally interact. We must think in terms of 
the entire network, interconnected and interdependent. Only 
then can we begin to discuss real solutions of supply chain 
infrastructure issues this Nation faces.
    Let me say a few words about the program and vision by the 
Coalition, and then how it could be finessed.
    There is a wide and growing belief that a new Federal-aid 
program, with dedicated funding, to address multimodal goods 
movement infrastructure needs should be an important element of 
this authorization process. Under the current Federal aid 
program, passenger and freight projects compete for an 
inadequate supply of Federal funds. Both suffer.
    Funds should be available to support projects of various 
size and scope, but with special priority for projects of 
national significance. Eligible projects should include: Title 
23 eligible highway and bridge projects, to the extent they 
carry freight; intermodal connectors and freight transfer 
facilities; separations of at-grade road and rail crossings; 
freight rail improvements and projects, to the extent there is 
an identifiable public benefit; port infrastructure investment, 
to--all port infrastructure investment--the extent there is an 
identifiable public benefit; and, other infrastructure that is 
predominantly used for the movement of goods.
    Projects, regardless of their mode, should be judged on 
objective evaluation metrics established through criteria 
similar to the new Projects of National and Regional 
Significance selection criteria.
    The good news is that many freight users have indicated a 
willingness to support increased fees if they are dedicated to 
goods movement projects where the results are tangible and 
cost-effective. The Coalition is calling for a separate account 
within the Highway Trust Fund, or a separate freight trust 
fund, whose revenues are predictable, sustained, firewalled 
from other uses, and committed to new freight infrastructure 
program that enhances the movement of goods.
    Contributions to support the new freight program should 
come from new sources in a way that fairly share the burden of 
cost for system development and for maintenance of those 
programs. We believe that a small, thin fee, broadly assessed 
across all freight would raise substantial revenue for that 
infrastructure, with little impact on the consumer.
    While there is no unanimity over the right fee, 1 percent 
fee on all bills of lading would raise $7 to $10 billion 
needed--just an idea. We believe that that idea will work.
    Sustainable goods movement lies at the center of our 
quality of life, not only for the availability of consumer 
products, but because of transportation's impact on land use, 
energy consumption, and environmental quality.
    Investments and improvements in freight infrastructure can 
result in reduced congestion, better air quality, and less time 
and fuel wasted. The new, anticipated acceleration of trade, 
combined with domestic growth, has created millions of new job 
opportunities and a higher standard of living for all 
Americans. But these benefits will last only if we are able to 
keep moving goods.
    [The prepared statement of Mr. Brown follows:]

   Prepared Statement of Larry ``Butch'' Brown, Executive Director, 
Mississippi Department of Transportation on Behalf of the Coalition for 
                 America's Gateways and Trade Corridors

    The Coalition for America's Gateways and Trade Corridors (CAGTC) 
was established in 2001 to bring national attention to the need to 
significantly expand U.S. freight transportation capabilities and to 
work toward solutions for this growing national challenge. Comprised of 
more than 50 members, its sole purpose is to raise public recognition 
and Congressional awareness of this need and to promote sufficient 
funding in Federal legislation for trade corridors, gateways, 
intermodal connectors and freight facilities.
    During the 2009 Surface Transportation Authorization, the CAGTC is 
calling upon Congress to create a new discretionary Federal program and 
Freight Trust Fund (FTF) and partnership with the private sector.
    Larry ``Butch'' Brown, Executive Director of the Mississippi 
Department of Transportation (MDOT) is presenting testimony on behalf 
of CAGTC and as one of its active members. Mr. Brown is a native of 
Natchez, Mississippi, a long-time businessman and the former Mayor of 
Natchez. Mr. Brown has hands-on experience through his business 
ventures in transportation, warehousing, real estate, wholesaling, and 
the hotel trade.
    Mr. Brown's public experience in transportation comes from both 
public and private sector roles. Brown is a long-time businessman and 
the former Mayor of Natchez, Mississippi. He serves as President of the 
Southeastern Association of State Highway and Transportation Officials 
(SASHTO) and Vice President of the American Association of State 
Highway and Transportation Officials (AASHTO). Other appointments 
include Co-Chairman of the International Trade and Transportation 
Institute, Chairman of the Mississippi Transportation Institute, the 
Advisory Board of the Mississippi State University School of 
Engineering, and Ex-Officio Board Member of Mississippi Mainstreet. He 
has also served on the Executive Board of Directors of the Mississippi 
Business Finance Corporation, the White House Conference on Small 
Business, the U.S. Department of Commerce Industry Sector Advisory 
Committee on Trade Policy, and as former Chairman of the Mississippi-
Louisiana Bridge Authority, responsible for funding construction of the 
Natchez/Mississippi River Bridge.
America's Freight Challenge
    The rapid and cost efficient movement of goods throughout the U.S. 
supply chain, and particularly through our trade gateways and 
corridors, is vital to securing America's economic future and 
maintaining our competitiveness in world markets. Trade, as a 
percentage of the U.S. GDP, has been steadily increasing during the 
past quarter century, rising from 13 percent in the 1990s. Today, it is 
30 percent and it is expected to grow to 35 percent in 2020 and to as 
much as 60 percent by 2035.
    Many factors, including enhanced logistics systems, improvements in 
manufacturing processes and new technology are placing an ever-greater 
strain on the capacity of our goods movement transportation network. 
Failure to respond to these strains will put a damper on our economic 
growth.
    Freight movements, whether by rail, truck, ship or air, are a 
crucial link in the $7 trillion commodity flow fueling the U.S. economy 
today. The chokepoints that are developing along the Nation's highways 
only tell a fraction of the story. That strain on capacity is being 
felt along all of the Nation's major gateways and trade corridors.
    Congestion on these facilities is not only an environmental 
disaster; it serves as a trade barrier as well. Manufacturers and 
agricultural producers across the Nation depend on this infrastructure 
to get their products to international markets. American businesses and 
families rely on the goods movement system to bring products to their 
shelves and homes.
    Before a long-term solution to America's freight challenge can be 
developed, we have to think about the problem differently, as a nation.
    It is not merely the highways that trucks drive on--though those do 
play a very important role. It is also the ports and border crossings, 
the rail lines, the intermodal connectors, and the local roads that 
handle the final delivery. It is less an issue of modal competition--
rail vs. truck vs. barge--and more an issue of modal interdependence. 
We must focus on the system as a whole, rather than viewing the 
Nation's transportation infrastructure as several different systems 
that occasionally interact. We must think in terms of the entire 
network, interconnected and interdependent. Only then can we begin to 
discuss real solutions to the supply chain infrastructure issues this 
Nation faces.
The Emerging, New Consensus
    Despite these compelling facts, we do not have a national freight 
plan or a coherent program to document, anticipate and provide for our 
economy's goods movement needs. Infrastructure that was adequate in the 
first half of the twentieth century is still being relied on today, 
with some facilities utilized well beyond design capacity, while others 
are no longer as useful in today's economic patterns. State departments 
of transportation, such as the one I head in Mississippi, and regional 
transportation planning authorities are working hard to meet the 
maintenance demands of our existing system, while the declining Federal 
funding source--the motor fuels tax--will fail to cover currently 
authorized spending this year.
    A consensus is beginning to emerge, beginning with the two 
organizations I believe to be the thought leaders for the formulation 
of a new freight program--CAGTC and the American Association of State 
Highway and Transportation Officials (AASHTO).
    This emerging consensus has two important elements.

   First, there is a wide and growing belief that a new 
        Federal-aid program, with dedicated funding, to address 
        multimodal goods movement infrastructure needs should be an 
        important element of this authorization process.

   Second, while estimates of the total freight needs vary 
        greatly, there is a minimum funding consensus emerging. We 
        believe a minimum of $7 to $10 billion annually , with 
        flexibility and incentives for participation from other 
        sources, is needed to begin addressing our Nation's goods 
        movement needs.

    This annual funding figure is a level around which we believe many 
organizations will coalesce as the realities of freight's importance in 
this authorization is realized. As the Senate begins consideration of a 
new freight program, we would respectfully request that $10 billion 
annual level be incorporated in the Committee's mark-up legislation for 
a new discretionary freight program.

Part One: The New Program
    Under the current Federal-aid program, passenger and freight 
projects compete for an inadequate supply of Federal funds. Both 
suffer. Establishing a new Federal program can balance and separate 
these competing needs, especially if that program is based on user fees 
from outside the traditional sources. In addition to a program size of 
at least $10 billion annually, other primary tenets that will ensure 
the success of a new, Federal-aid goods movement program include 
provisions addressing:

   Project Eligibility--Funds should be available to support 
        projects of various size and scope, but with special priority 
        for projects of national significance. Eligible projects should 
        include:

     Title 23 eligible highway and bridge projects, to the 
            extent they carry freight;

     Intermodal connectors and freight transfer facilities;

     Separations of at-grade road and rail crossings;

     Freight rail projects, to the extent there is an 
            identifiable public benefit;

     Port infrastructure investment, to the extent there is 
            an identifiable public benefit; and,

     Other infrastructure that is predominantly used for 
            the movement of goods.

    Funds should be available to support multi-jurisdictional and 
        multi-state projects selected on the basis of their 
        contribution to national freight efficiency. Eligible 
        recipients should include:

     State and Local governments;

     Transit agencies;

     Port authorities;

     Other political subdivisions of State and Local 
            government (MPOs, COGs, etc.); and,

     Multi-State/Jurisdictional applicants.

    Projects eligible for funding under multiple Federal programs 
        should be allowed to combine freight fund monies with other 
        sources, including Highway Trust Fund monies.

   Fund Allocation--The Office of Intermodalism, or a new 
        office for multimodal freight, should be reestablished within 
        USDOT to administer the new freight mobility program working in 
        concert with the DOT modal administration(s) with the most 
        expertise in the relevant project area. Projects, regardless of 
        mode, should be judged on objective evaluation metrics 
        established through criteria similar to the new Projects of 
        National and Regional Significance selection criteria, and in 
        consultation with Congressional leaders.

   Long-Term Funding--Because goods movement projects are 
        generally large, and carried out over multiple years, monies 
        should be made available through Full-Funding Grant Agreements 
        to ensure that, once a project is approved, funds will flow 
        through to project completion and allow the widest array of 
        financing options.

   Private Funds--Private participation should be encouraged to 
        provide transportation planners with the largest toolbox of 
        financing options possible to move freight projects forward 
        quickly and efficiently. Among the tools Federal policy should 
        enable are tolling of new facilities, innovative financing, 
        private investment and public-private partnerships. Creative 
        solutions are needed to increase capital sources.

    In addition, general fund allocations are an important tool at the 
state and local levels and Federal FTF funding should be structured to 
incentivize and reward state and local investment. This is vital to 
support the development of local projects and connectors, in addition 
to the necessity of raising funds to match Federal FTF monies.

Part Two: The Fees and Funding Mechanism
    The other core issue the Senate needs to address in establishing a 
new freight program is the source of revenue and how those funds are 
reserved for goods movement.
    The good news is that many freight users have indicated a 
willingness to support increased fees if they are dedicated to goods 
movement projects where the result is tangible and cost-effective. Any 
effective solution to the goods movement problem is predicated upon 
addressing these concerns, but also on the establishment of a dedicated 
Federal fund, such as a an account within the HTF or a separate Freight 
Trust Fund (FTF), whose revenues are predictable, sustained, firewalled 
from other uses, and committed to new freight infrastructure program 
that enhances the movement of goods.
    The FTF should be comprised of largely of new revenue sources. 
While some of the traditional HTF sources might be allocated if a 
solution is found to the well-known problem of HTF solvency, additional 
monies must come from beneficiaries of freight infrastructure 
improvement--essentially freight system users, which are the beneficial 
cargo owners--and be based on the following principles:

   The price of goods should support and internalize some 
        portion of the cost of expanding related infrastructure, such 
        that growth in demand for moving goods delivers proportional 
        funding for related infrastructure improvement.

   All potential funding mechanisms and sources should be 
        considered and fees assessed on user benefit.

   Revenue sources should be predictable, dedicated and 
        sustained.

   No one user group should be disproportionately affected, 
        with the recognition that the consumer is the ultimate 
        beneficiary.

   While the current Federal gasoline tax should continue to be 
        dedicated to the traditional core programs, a small percentage 
        of any future increase in the gas tax should be dedicated to 
        the FTF, reflecting the real benefit to the driving public from 
        freight projects that relieve highway congestion.

    Contributions to support the new freight program should come from 
one or more new sources in a way that will fairly share the burden of 
cost for system development and maintenance among users/beneficiaries 
commensurate with their use of facilities. All users of the freight 
transportation system should be required to contribute to and revenue 
streams should be as diverse as practicable to ensure FTF income is 
resistant to economic cycles and will grow to keep pace with demand for 
infrastructure and inflation.
    We believe a small, ``thin'' fee broadly assessed across all 
freight would raise substantial revenue for infrastructure, with little 
impact on the consumer, while remaining neutral to the market for goods 
movement transportation. While there is no unanimity over the ``right 
fee'', a 1-percent fee on all bills of lading would raise the $7 to $10 
billion needed, according to estimates by the Eno Foundation. In 
addition, because a bill of lading fee effectively measures ``freight 
consumption'' more accurately than many other options discussed, we 
would respectfully recommend this receive serious consideration.
    Finally, private participation in the Nation's freight 
infrastructure is vital to system expansion. The establishment of an 
advisory council made up of freight industry members and system users 
could assist and partner with USDOT in optimizing results from 
planning, coordination and evaluation processes.

Conclusion
    Sustainable goods movement lies at the center of our quality of 
life, not only for the availability of consumer products, but because 
of transportation's impact on land use, energy consumption and 
environmental quality. Improvements to freight infrastructure can 
result in reduced congestion, better air quality, and less time and 
fuel wasted. The anticipated acceleration of trade, combined with 
domestic growth, has created millions of new job opportunities and a 
higher standard of living for Americans. But these benefits will last 
only if we are able to keep moving the goods.

    The Chairman. Thank you very much.
    Mr. Brown. Thank you, Mr. Chairman.
    The Chairman. Thank you very much. And at this moment I 
call on Mr. Clancey. I mentioned before that he's the President 
of Maersk, North America. And it was the Maersk, Alabama that 
was taken up by pirates, and the crew and the captain reacted 
with remarkable equanimity, making sure that their moves were 
the right ones, and we salute them.
    And I'd like you to pass our compliments along, Mr. 
Clancey.
    Thank you.

      STATEMENT OF JOHN P. CLANCEY, CHAIRMAN, MAERSK INC.

    Mr. Clancey. The fact that you are including maritimes 
suggests that we are progressing toward a comprehensive, 
multimodal freight mobility system, so thank you for including 
us.
    Improving the intermodal freight network in the United 
States is of paramount interest to us. With 2,300 vessel calls 
at 18 U.S. ports loading and unloading over 2 million 
containers annually, Maersk Line is the largest carrier serving 
this economy. And we are one of the largest purchasers of 
intermodal transportation in the United States. And the point 
is that thousands of America's importers and exporters that we 
serve have much to lose if this effort to develop an improved 
system is not successful.
    Over the last 30 years, efficient and economical 
international transportation costs have been a key driver in 
developing our consumer economy. And today, now, 70 percent of 
our GDP is driven by that.
    At the same time, the system has allowed our exporters 
access to foreign markets, utilizing a transportation system 
that provided them with competitive pricing. But what will the 
future look like?
    American importers and exporters depend on an efficient 
transportation system, but it is our exporters who have played 
a key role in the last several years, increasing exports by 22 
percent over that period of time. But without an efficient 
transportation system, our exports become more expensive and 
non-competitive, leading to a reduction in our balance of 
payments, with negative influences on the value of the dollar, 
and inevitable loss of jobs.
    Other countries, our competition, are investing billions 
more than the U.S. to create efficient freight-moving national 
infrastructure systems, and they are completing them in a 
fraction of the time. Many of our competitor countries don't 
have to demolish old infrastructure, and they are developing 
their projects without the cumbersome, politically charged 
process that burdens us in the U.S.
    From our experience moving freight around the country, we 
offer a few suggestions, and hope you consider improvement of 
the Nation's transportation network.
    In 2000, as an example, our company conceived the largest--
and only--private marine container terminal in the United 
States, built on 600 acres in Portsmouth, Virginia. The 
terminal has new technology which has improved productivity, 
while improving safety and cutting emissions and costs. It has 
on-dock rail corridor that will connect to the Heartland 
Corridor.
    We invested a half a billion dollars into the project; and 
the States of Virginia, West Virginia and Ohio--as well as 
Norfolk Southern--invested an additional $360 million. The 
project was completed in 7 years where similar projects take up 
to 17 years. Importantly, half of the cargo supporting the war, 
though, is cargo that is going to the theaters of Iraq and 
Afghanistan. So, it can be done, but what must we do to move 
forward?
    First, we need a mobility plan to guide and integrate the 
infrastructure expenditures our country is about to undertake, 
and we thank the Subcommittee for pursuing a real, multimodal 
plan. Although this off--and to ensure that the strategy will 
be carried out, through an execution, we support the idea of 
resurrecting the Office of Intermodalism within DOT.
    Although this Office actually existed during the early 
phase of our Portsmouth project, we found that it really did 
not have any real authority.
    Second, as I indicated earlier, most conversation and 
policy about ``surface transportation'' don't include maritime 
considerations. This omission reflects a limited understanding 
of how our economy connects to the rest of the world, and 
ignores the fact that 90 percent of the things we eat, wear, or 
drive manufactured outside the United States travel to our 
country by ocean and it excludes a greener transportation 
alternative that our waterways, ports and maritime 
transportation can provide.
    Third, speed is a competitive advantage, yet our 
infrastructure construction process is ponderous and 
discouraging, and we suggest that WRDA 86, the Act that governs 
the Army Corps of Engineers, should be re-engineered.
    And finally, two points about paying for these 
improvements. First, there is private equity available to help, 
and Portsmouth demonstrated that. A lot of it requires the 
right vision and most importantly, a legislative platform to be 
in place to provide predictability and fairness. Private 
funding goes where it is treated well, and our current 
development process is not very friendly.
    And finally, we urge Congress to move ahead with the 
increase in the gas tax as recommended by the National Surface 
Transportation Revenue and Policy Commission last year. This 
funding mechanism has been in place for years and we know it 
works. The American Trucking Association, The National 
Industrial Transportation League, and even a great segment of 
the public support raising the gas tax to fund infrastructure 
improvements. And a higher fuel price would serve a secondary 
goal of encouraging more fuel efficiency and less driving.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Clancey follows:]

      Prepared Statement of John P. Clancey, Chairman, Maersk Inc.

    Mr. Chairman and Members of the Committee, I am John Clancey, 
Chairman of Maersk Inc. First of all, I want to thank you for inviting 
me here to be a part of this hearing on improving the freight 
transportation network in America. The fact that you are including 
maritime in this hearing suggests that the debate has finally caught up 
with the reality of the globalized freight network that is already at 
work in the world today. It means that our collective thinking has 
progressed very far toward the actual development of a comprehensive, 
multimodal freight mobility system. So for including us, we applaud 
your approach and thank you for the opportunity to offer a few comments 
as you appropriately work to ensure that America's economy will be 
enabled by a 21st century freight mobility strategy.
    Improving the intermodal freight network in the United States is of 
paramount interest to our company. With 2,284 vessel calls at 18 U.S 
ports loading and unloading 2,170,966 containers annually, Maersk Line 
is the largest container shipping company serving the U.S. economy. We 
are the largest U.S.-Flag fleet operator and we are the largest marine 
terminal operator in the United States. Additionally, we are one of the 
largest purchasers of intermodal freight service in the United States. 
The point is not that we're big . . . the point is that the thousands 
of American importers and exporters that we serve have much to lose if 
this effort to develop a competitive intermodal system is not 
successful. So I hope to illuminate some of the key issues from our 
perspective and to offer some component pieces of a systemic solution 
to America's freight-moving requirements.
    The import and export freight that transits at our ports every day 
includes every conceivable consumer good from electronics to fashion. 
In fact, it is arguably cheap transportation costs--enabled by the 
ocean container--that has played a key role in the development of the 
U.S. consumer economy--now 70 percent of our GDP--over the last 30 
years.
    But, as we all recognize, the economy of the next 30 years will not 
look the same. The headwinds we are now encountering suggest a more 
modest future. Instead of the 9-11 percent annual growth rates of 
international containerized cargo of the last 20 years, we may be 
looking at growth rates more in the 2 to 3 percent annual range . . . 
when we at last begin to grow again. And of course we're concerned 
about the economic consequences of rising energy costs, environmental 
costs, security costs, land use costs, and capital costs.
    If used wisely, this breather in infrastructure capacity demand 
that has accompanied the economic downturn could turn out to be a 
blessing in disguise. Our best guess is that the recovery will be long 
and slow. But although cargo growth rates will be modest, the actual 
freight volumes will still overwhelm our current infrastructure 
capacity in just a few years. Even with a more modest growth rate of 3 
percent in international freight, our national intermodal system will 
be dealing with a million more containers annually by 2015. So perhaps 
a bright side to the economic crisis is that we have a second chance to 
restore America's competitiveness with an infrastructure system that 
will no longer impose an ``inefficiency tax'' on our economy.
    It is a fact that China, Japan, Russia, India . . . and many other 
countries are investing billions more than the U.S. to create efficient 
freight-moving national infrastructure systems including ports, 
highways, rail, and airports. The infrastructure projects in other 
countries are astounding (for example, 10 years ago China finished an 
airport to accommodate 90 million people per year in 2,000 feet of 
ocean!) and they are completing them in roughly the same amount of time 
it takes to get the initial environmental impact study done for a 
project in the U.S.
    Just as importantly, many of our competitor countries don't have to 
demolish infrastructure (like the U.S. does) before they even reach a 
new starting point. They are developing their projects from greenfield 
sites without the cumbersome, politically charged process that burdens 
us in the U.S.
    This all points to a picture of mediocrity that, as the leading 
economy in the world, is simply unacceptable.
    In 2000, our company conceived the largest--and only--private 
marine container terminal in the United States. Built on 600 acres in 
Portsmouth, Virginia, the terminal has radical new technology that 
improves productivity and safety while cutting emissions. It has on-
dock rail that, when completed, will connect to the Heartland Corridor, 
a public-private intermodal project that moves freight to the mid-Ohio 
valley faster on less fuel and with fewer emissions. We put a half 
billion dollars into the project; the states of Virginia, West Virginia 
and Ohio--as well as Norfolk Southern and other commercial users--threw 
another $360 million in the hat and the project was completed in 7 
years when similar projects take up to 17 years to finish. Importantly, 
almost half of the materiale and goods supporting the war theaters of 
Iraq and Afghanistan have gone through this efficient port.
    From this project and our hands-on experience moving freight around 
the country and the world, we have learned a little that perhaps could 
be helpful to the Committee as you consider the improvement of the 
Nation's freight transportation network.
    First, we need a freight mobility plan to guide and integrate the 
infrastructure expenditures our country is about to undertake and we 
thank the Subcommittee for pushing to get a real, multimodal freight 
plan established. It is very gratifying to see the momentum behind this 
idea finally taking off. And to ensure that the strategy will be 
carried through in execution we support the idea of resurrecting an 
Office of Intermodalism within DOT and believe that is an important key 
to breaking the silo-thinking and funding of infrastructure projects.
    Although an Office of Intermodalism actually existed during the 
early phase of our Portsmouth project it didn't have any real authority 
and it eventually melted away and was of no help. With the appropriate 
authority from Congress, however, the office could have more 
efficiently helped sell the vision of the project across its 1,000 
miles, multiple modes and 5 states. It could have helped bring the 
principals and funding together even sooner. If DOT's Office of 
Intermodalism truly has authority to assign funding values, break 
logjams and manage across modes it will be of great benefit to the 
Nation's consumers and competitiveness.
    Second, as I indicated at the beginning of these remarks, most 
conversations and policies about ``surface transportation'' don't 
include maritime considerations. This omission reflects a limited 
understanding of how our economy connects to the rest of the world. It 
ignores the fact that 90 percent of everything we eat, wear, live in or 
drive is manufactured outside the U.S. And it excludes a greener 
transportation alternative that our waterways, ports and marine 
transportation can provide.
    Maritime--our inland waterways and coastal shipping--offers an 
immediate, cost-effective solution to freight movement challenges in 
our country. As you know, our rivers need lock and waterway 
improvements. Also, there are various concepts on short sea shipping 
floating around but the fundamental problem with all of them is making 
it cheap enough to attract commercial customers. With a little 
creativity and willingness to think about things differently, I believe 
maritime can contribute much more to the domestic freight movement 
system in America. And we stand ready to work with domestic companies, 
Congress and others to see this concept become a reality.
    Third, speed is a competitive advantage and our infrastructure 
construction process simply doesn't have it. In fact, America's project 
approval and funding process is badly broken. Perhaps, WRDA '86, the 
Act that built the box in which the Army Corps of Engineers operates 
for maritime projects, should be re-engineered. The Corps wants to 
build projects. But the process, as prescribed by current law, is 
ponderous and discouraging. The only way we managed to build the 
Portsmouth terminal in a third of the normal time was by paying for 
things ourselves and not waiting on the standard Congressional 
appropriations timetable. It was more expensive that way, but on the 
other hand, we're already up and running and earning back our invested 
capital.
    The same inefficiency problem is true of inland projects for 
railroads, highways and bridges. Congress must find a way to get the 
national-interest projects identified, approved, funded, permitted and 
built faster.
    Finally, two points about paying for these improvements:

        First, there is private money available to help . . . a lot of 
        it--if the right vision and legislative platform is in place to 
        provide predictability and fairness. Obviously, private 
        participation isn't appropriate for every project or situation. 
        But public private partnerships should not be summarily 
        dismissed when discussing freight mobility. And if private 
        funding is appropriate in certain situations, then a degree of 
        legislative re-engineering needs to be done on that front as 
        well. Private funding goes where it is treated well. That means 
        predictability and a fair rate of return. Our current 
        development process does not rate very highly on those 
        standards but we stand ready to work with staff on specific 
        recommendations.

        And finally, we urge the Committee, all of Congress and the 
        Obama Administration to move ahead with an increase in the gas 
        tax as recommended by the National Surface Transportation 
        Revenue and Policy Commission last year. This funding mechanism 
        has been in place for years and we know it works. The American 
        Trucking Association, The National Industrial Transportation 
        League, even (according to surveys cited by Governor Rendell 
        representing the Building America's Future Coalition) the 
        public supports raising the gas tax to fund infrastructure 
        improvements. And a higher fuel price would serve a secondary 
        goal of encouraging more fuel efficiency and less driving. This 
        should be an easy one for Congress to get behind and it is 
        difficult to understand the reluctance to step up and get this 
        tax increase done now. We urge your serious consideration of 
        this point.

    I hope these comments have been helpful to the Committee. Again, I 
thank you for including maritime in this hearing and for insisting on a 
multi-modal, system solution to our freight-moving challenges. I look 
forward to answering any questions the Committee may have.

    The Chairman. Thank you very much, Mr. Clancey.
    And now, Mr. Gabrielson, we look forward to hearing from 
you.

     STATEMENT OF RICK GABRIELSON, DIRECTOR, INTERNATIONAL 
                     TRANSPORTATION, TARGET

    Mr. Gabrielson. Chairman Lautenberg, and--thank you for 
inviting Target to testify before you today.
    Target is a member of the Retail Industry Leaders 
Association, and on behalf of the industry, I would like to 
thank you for giving us this opportunity to have a retailer's 
voice at the table to discuss the need for a national freight 
policy.
    My name is Rick Gabrielson and I am responsible for 
overseeing the global flow of Target's direct imports from the 
manufacturing markets overseas into the U.S. As Director of 
International Transportation for Target, my testimony will 
specifically address some of the challenges Target experiences 
in today's supply chain and our recommended solutions to ensure 
that our Nation's freight corridors remain fluid.
    Target is a $62 billion U.S.-based retailer with 
approximately 1,700 stores operating in 49 states with more 
than 350,000 team members. Target is the second-largest 
importer of containers in the United States, and we have 37 
distribution centers throughout the country.
    Product that ultimately ends up on the shelves in our 
stores flows into Target's network from direct imports, and 
domestic purchases. Every year, our distribution centers will 
collectively process more than 790 million cartons of product 
from these two sources.
    Target is a customer of the entire system. We use the 
carriers, the ports, and the surface transportation corridors, 
both truck and rail. My responsibility is to deliver goods to 
our guests flawlessly, ensuring we achieve the lowest cost, 
meeting shipping grid timelines, and maintain adequate capacity 
to meet our network volume needs. Congestion, delays and 
capacity shortfalls greatly increase the risk of not having 
full shelves at our stores.
    Shippers need a reliable and consistent supply chain. 
Inconsistency drives increases in inventory and lead time which 
drive increased costs. Supply chain cargo flows are driven by a 
need to minimize variable costs such as fuel, port fees and the 
threat of proposed container fees. These are all factors we 
consider when selecting gateways.
    As we look at our Nation's transportation policy, it is 
important to note there has been only a small level of Federal 
involvement in goods movement despite the economic significance 
of efficient freight movement to our Nation.
    Therefore we advocate that the Office of Intermodalism be 
re-established within the Office of the Secretary of 
Transportation. While specific projects are identified and 
funded, it is also vital that we look at the complete 
connectivity of the supply chain including the last mile 
connectors. If the connectors are not addressed, congestion 
will increase, and cause significant delays in moving cargo out 
of the port to its final destination point. It will become a 
weak link in the system, raising shipping costs, and reducing 
the productivity and competitiveness of U.S. businesses.
    Using more rail and short sea shipping rather than trucks 
is frequently mentioned as an alternative to address capacity 
and congestion issues. They are also cited as more 
environmentally sound which is something that is very important 
to Target. While there are opportunities to use our railroads, 
inland waterways, and smaller regional ports to move goods, 
there are barriers that prevent the concept from gaining 
broader acceptance with some cargo shippers.
    To become effective, on-dock or near-dock rail facilities 
are needed to improve the flow of cargo out of the ports. Also, 
certain provisions of the Jones Act must be modified to benefit 
short sea shipping. From a shipper's perspective, the handling 
costs and transit time differences must outweigh those of other 
modes. With these obstacles yet to be addressed, the concept 
warrants additional consideration.
    Our Nation needs a long-range comprehensive goods movement 
strategy that encompasses all modes of transportation. Target 
strongly believes that legislation should provide dedicated 
funds for goods movement. These dedicated funds should aim to 
support capital investment in critical freight transportation 
infrastructure which in turn will provide higher productivity 
and enhanced global competitiveness.
    As legislation continues to develop, Target, as a large 
retailer, would like to have a seat at the table as financing 
options are discussed. Like you, we are aware of the current 
revenue mechanisms and understands the challenges we face in 
increasing such fees. Target understands that as a user of the 
system, we will have to pay increased user fees to maintain and 
expand current infrastructure. However, we strongly believe 
that some revenue methods fall disproportionately on the 
retailer and we hope that an all-inclusive national freight 
policy would focus on raising revenues on all the users of the 
system.
    Before I conclude, I would like to commend Chairman 
Rockefeller and Subcommittee Chairman Lautenberg for 
introducing legislation that seeks to establish a new approach 
and a new standard for the next surface transportation 
reauthorization.
    I am grateful for your ideas and look forward to working 
with you as the next reauthorization bill develops.
    Thank you for the opportunity to speak to you today and we 
welcome any questions at this time.
    Thank you.
    [The prepared statement of Mr. Gabrielson follows:]

           Prepared Statement of Rick Gabrielson, Director, 
                  International Transportation, Target

Introduction
    Chairman Lautenberg, Ranking Member Thune, and Members of the 
Subcommittee, thank you for inviting Target to testify before you 
today. Target is a member of the Retail Industry Leaders Association, 
and on behalf of the industry, I want to thank you for giving us this 
opportunity to have a retailer's voice at the table to discuss our 
Nation's transportation system and the need for a national freight 
policy. My name is Rick Gabrielson and I am responsible for overseeing 
the global flow of Target's direct imports from the manufacturing 
markets overseas into the U.S. As the Director of International 
Transportation for Target, my testimony will specifically address some 
of the challenges Target experiences in today's supply chain and our 
recommended solutions to ensure that our Nation's freight corridors 
remain fluid.

Background
    For background, Target is a $62 billion U.S.-based retailer with 
approximately 1,700 stores operating in 49 states with more than 
350,000 team members. Target is the second largest importer of 
containers in the United States and we operate 37 distribution centers 
throughout the country.
    Each year our distribution centers will collectively process more 
than 790 million cartons of product from direct imports and domestic 
purchases.
    To demonstrate the complexity of our supply chain, let me 
illustrate the process that Target goes through to route an imported 
tee-shirt. Once an order is placed, the tee-shirt begins its journey at 
an overseas factory, where we have strict compliance regulations; it is 
then stuffed into a container and moved by truck to a foreign port to 
be placed on an ocean vessel. The ocean vessel carries it to one of six 
major port gateways in the United States that Target utilizes. These 
gateways include: LA/Long Beach, Oakland, and Seattle/Tacoma on the 
West Coast and Savannah, Norfolk, and NY/NJ on the East Coast. Once it 
reaches a U.S. port, the tee-shirt is then processed through third-
party facilities which combine it with similar clothing items arriving 
from a number of other countries. This completed order is then carried 
by domestic trailers that travel to our distribution facilities by a 
combination of truckload and intermodal services.
    At the same time our imported tee-shirt and other imported items 
are making their way to the distribution center, Target has products 
like toothpaste or tissue paper that are sourced from our North 
American vendors. Our domestic products move by either truckload or 
intermodal services based on the distance from each distribution 
center. Smaller shipments are combined into truckload shipments when 
feasible through our third-party domestic consolidation network.
    Once the trailers carrying the tee-shirt and our tissue paper have 
reached our distribution center, both imported and domestic product 
categories are processed in the warehouse by individual store 
assignments and shipped by truck to the stores. This ultimately 
concludes the tee-shirt and tissue papers' delivery as it has finally 
reached the store shelf. When taking into account the productivity 
issues, security concerns, and potential weather conditions that may 
exist during the course of the above actions, it is easy to understand 
why our supply chain relies on a well connected and fluid 
transportation network.
    As a retailer, we are a customer of the entire system--we utilize 
the carriers, the ports, and the surface transportation corridors, both 
truck and rail. My responsibility is to leverage this system to deliver 
goods to our guests flawlessly, ensuring we achieve the lowest possible 
cost, meet shipping grid timelines and maintain adequate capacity to 
meet our network volume needs. Congestion, delays and capacity 
shortfalls greatly increase the risk of disappointing our guests by not 
providing full shelves of product to meet their needs.

Current Conditions
    Shippers are facing a number of challenges today. We are in need of 
a reliable and consistent supply chain. Inconsistency drives increases 
in inventory and lead time which drive increased costs. Supply chain 
cargo flows are driven by a need to minimize variable costs such as 
fuel, port fees and the threat of proposed container fees. These are 
all factors we consider when selecting gateways. Like many shippers, 
Target and our core providers currently experience a number of 
bottlenecks or inefficiencies as a result of infrastructure not keeping 
pace with demand.
    We are all aware of the impact the global downturn has had on our 
economy and the world markets. An estimated 12 percent of the world's 
container fleet is sitting idle. While this may be a grim fact, there 
is actually a silver lining in this cloud.
    The depressed volumes as a result of the global economic downturn 
have actually secured more time to develop the infrastructure needed to 
sustain our longer range growth. This is vital to our economic well 
being. If we do not capitalize on this grace period, we will not be 
prepared to meet our Nation's infrastructure needs which will 
significantly impact our economy. We must have a solid plan to move 
forward and we must know where to prioritize our vital resources.
    Currently, approximately 50 percent of cargo that moves into the 
west coast ports from Asia is discretionary cargo and flows to portions 
of the Midwest, Mid-Atlantic and the East Coast. One of the significant 
trends taking place is the diversification by shippers to use 
alternative gateways into the U.S., such as Savannah and Norfolk to 
serve mid-Atlantic markets and Houston and Prince Rupert in Canada to 
serve the Midwest. This industry shift is driven by costs, ease of 
conducting business, and minimizing risk.
    Once the widening of the Panama Canal is completed in 2014, the 
landscape of how cargo moves from Asia will change even more 
dramatically. Today's largest post-Panamax vessels will be able to move 
through the canal to the East Coast thereby increasing capacity. This 
potential shift illustrates the need to have a strong connection to 
industry stakeholders and to maintain accurate data to adequately 
determine what the current infrastructure needs are and what they will 
be in the future. Without this vital information, changes to 
infrastructure could take place only to determine that the optimum 
infrastructure solution was not achieved.

Re-defining the National Focus
    As we look at our Nation's transportation policy, it is important 
to note there has been only a small level of Federal involvement in 
goods movement despite the economic significance of efficient freight 
movement to our Nation. Therefore, we advocate that the Office of 
Intermodalism be re-established within the Office of the Secretary of 
Transportation and that it hires modal freight specialists with the 
office of policy to support the effort. Policies that promote 
international trade and increase goods moving through ports and onto 
railroads, highways and waterways, for example, could be coordinated 
within this office to make sure sufficient capacity exists. It could 
help determine those regional and national infrastructure projects that 
impact goods movement such as the CREATE Project in Chicago, the Gerald 
Desmond Bridge in Southern California, and the Bayonne Bridge in New 
York instead of the compartmental approach that currently takes place 
at the Department. Target recognizes that funds are limited but it is 
imperative that we develop a centralized office within the Secretary's 
Office that can help prioritize the most vital projects with insight 
from the industry stakeholders.
    While specific projects are identified and funded, it is also vital 
that we look at the complete connectivity of the supply chain including 
the last mile connectors. Completion of projects like the deepening of 
the channel at the port of Savannah or the replacement of the Gerald 
Desmond Bridge in California will not maximize productivity and reduce 
overall congestion if we don't examine the last mile connectors. These 
are the short, local or state roads that allow for the efficient 
movement of shipments to major roadways and rail links. The last mile 
connectors provide for a smooth transition to the final destination 
point. A great example is the need for the widening of State Highway 21 
in Savannah, Georgia, which is a designated route out of the Port. 
Increased volumes in and out of the region have placed a great deal of 
congestion on this road. As the Panama Canal is widened, larger vessels 
will call this port on a more frequent basis. However, if the 
connectors are not addressed, congestion will increase and cause 
significant delays in moving cargo out of the port to its final 
destination. Virtually all major gateways have similar situations and 
potential roadblocks to growth. As we look at major infrastructure 
projects, we must also examine their related connectors for 
improvement. If connectors are a weak link in the system, they will 
most certainly raise shipping costs, as well as reduce the productivity 
and competitiveness of U.S. businesses.
    Using more rail and short sea shipping rather than trucks is 
frequently mentioned as an alternative to address capacity and 
congestion issues. This is also cited as more environmentally sound 
which is something that is very important to Target as we move forward 
with the crafting of this legislation. While there are opportunities to 
use our railroads, inland waterways, and smaller regional ports to move 
goods, there are barriers that prevent the concept from gaining broader 
acceptance with some cargo shippers. To become effective, on-dock or 
near-dock rail facilities are needed to improve the flow of cargo out 
of the ports. Also, certain provisions of the Jones Act must be 
modified such as double taxation of the Harbor Maintenance Tax to 
benefit short sea shipping. From a shipper's perspective, the handling 
costs and transit time differences must outweigh those of other modes. 
With these obstacles yet to be addressed, the concept does warrant 
additional consideration as we look forward to creating a more national 
approach to goods movement.

Financing
    Our Nation needs a long-range comprehensive goods movement strategy 
that encompasses all modes of transportation with respect to goods or 
freight movement; this inevitably includes ports, port connectors, 
intermodal rail connectors, highways and waterways. As the next surface 
transportation authorization bill is written, Target strongly believes 
that legislation should provide dedicated funds for goods movement. 
These dedicated funds should aim to support capital investment in 
critical freight transportation infrastructure which in turn will 
provide higher productivity and enhanced global competitiveness. Our 
competitors, such as China, Canada, and emerging markets such as 
Vietnam have made, and are continuing to make, significant financial 
investments in their infrastructure in order to move their goods more 
quickly. The U.S. must make a similar investment in order to remain 
competitive in a global economy.
    The concepts of public private partnerships, Federal tax 
incentives, and bonds to promote private investment in funding 
infrastructure projects must also be embraced. Candidly, we have more 
projects than we have available funding at the Federal, state, and 
local levels. Not only would these concepts bring additional funding to 
the table, but a 2008 Department of Transportation report found that 
states and localities can reduce project costs and accelerate project 
delivery through well-balanced public private partnership concession 
agreements. Bringing more funding to the table through private 
investment options should be considered to develop a competitive 
national transportation system.
    As mentioned earlier, the Panama Canal is scheduled to be completed 
in 2014. A specific focus needs to take place on how to potentially 
help fund the east coast ports as they begin their efforts of 
expansion. Target is supportive of isolating the Harbor Maintenance Tax 
in a firewalled account to be used for its original intended purpose of 
harbor maintenance and dredging projects. This is necessary to keep our 
inland waterways, locks and dams and ports in good working order and 
capable of handling capacity well into the future.
    As legislation continues to develop, Target, as a large retailer, 
would like to have a seat at the table as financing options are 
discussed. Like you, Target is aware of the current revenue mechanisms 
and understands the challenges we face in increasing such fees. Target 
understands that as a user of the system, we will have to pay increased 
user fees in order to maintain and expand current infrastructure. 
However, we strongly believe that some revenue methods fall 
disproportionately on the retailer and we hope that an all inclusive 
national freight policy would focus on raising revenues on all the 
users of the system.

Conclusion
    Before I conclude, I would like to commend Chairman Rockefeller and 
Subcommittee Chairman Lautenberg, for introducing legislation that 
seeks to establish a new approach and a new standard for the next 
surface transportation reauthorization. Our country is in need of a 
national focus that looks at the current system in a comprehensive 
manner and seeks to address policy involvement from the Federal level.
    One of the stated objectives of your proposed legislation is to 
address the reduction of carbon-related emissions. At Target, we are 
continuing to take more control of our supply chain, especially in the 
area of sustainability. Target is a founding member of the Coalition 
for Responsible Transportation (CRT). CRT is an industry lead solution 
aimed at replacing older fuel inefficient, high emissions trucks with 
cleaner alternative fuel or clean diesel trucks using a creative 
financing model that doesn't disenfranchise independent owner 
operators. To date, this group has replaced in excess of 1,500 older 
high emissions vehicles with cleaner lower emissions vehicles.
    I am particularly grateful for your ideas and look forward to 
working with you as the next surface transportation reauthorization 
bill develops. I want to thank you for the opportunity to speak to you 
today and would welcome any questions.

    The Chairman. Thank you very much. The case is well-made 
among the five of you that if we want to keep up with the 
demand and the opportunity, that we better start thinking about 
investments pretty quickly, if we're to get it done.
    Mr. Gabrielson, as I look at the statistics for Target, all 
I can do is say, ``Wow.'' Three hundred and fifty thousand 
employees?
    Mr. Gabrielson. Yes.
    The Chairman. Makes me think back about the company I used 
to run called ADP. I was a founder of that company, and we did 
payroll. And if my salesman weren't calling on you----
    [Laughter.]
    The Chairman. But, there's no intent to intimidate.
    Transportation costs have increased, Mr. Gabrielson, for 
five straight years, even in the current economic downturn. 
This is due, in part, to increasing congestion and fuel costs.
    How do you place a value on the effects of this to your 
company? It sounds like you've been responding--how so?
    Mr. Gabrielson. Mr. Chairman, we place a lot of emphasis on 
our supply chain. We look at having a fluid supply chain 
without delays, if you will. Any delays that we see in our 
supply chain, adds additional time. Additional time means that 
we increase our inventory, which means we increase our costs.
    So, we spend a great deal of time looking at the 
connectors, to make sure that they're fluid, and looking at a 
number of different modes on how we bring our product in.
    The Chairman. When you bring goods in from out of the 
country, whether or not you go to rail or truck depends on the 
precise location of the port that you're dealing with?
    Mr. Gabrielson. Mr. Chairman, our network is large, as you 
pointed out, and fairly diverse. And with as much cargo as we 
bring into the U.S., we use a multitude of different gateways 
and different modes.
    We use, as I mentioned, in my comments, we use all modes. 
So, we use six different gateways, or ports, on our imported 
product coming into the U.S. We will go through and use 
truckload and intermodal to deliver it to one of our 37 
different distribution centers.
    The Chairman. Mr. Rose, your company is one of the very 
well-run companies that carry a lot of freight, and the 
Commission has recommended that creation of a national freight 
transportation program to fund improvements in our Nation's 
freight transportation system.
    Current Federal investments are focused on highways and 
aviation, you and I have talked about this, while very little 
Federal investment has been made in rail and port 
infrastructure.
    Now, looking forward, what do you think is the best way for 
the Federal Government to obtain a balance in its investments, 
and include all modes of transportation, and ensure the value 
of its investments in freight projects?
    Mr. Rose. Thank you, Mr. Chairman. I think, starting with 
making sure that the model for the railroads, rational 
regulation allows for private investment to continue to come 
in. Right now the railroads spend about $10 billion a year in 
capital. The United States spends about $85 to $90 billion a 
year on the highway system, Federal, State and local--so making 
sure that enough private investment can continue to come into 
the railroads is very important.
    The second is that, again, if you look at the holistic 
supply chain of all of the gross ton miles, and your bill 
clearly articulated your vision to move X percent of tons off 
the highway, then you have to incentivize, I think, more 
capacity to handle it.
    It's the same question of, why can't we get more people to 
use public transportation, and generally we don't have good 
public transportation networks. Now, there are exceptions to 
that rule, but with freight, what we've got to do is provide 
customers--such as Target--world-class service and low-cost 
facilities to be able to use the railroad more.
    And you can do that through tax incentives, you can do it 
through other incentives, you also might do it through carbon 
management, cap and trade. You also have to make sure that 
there's no cross-subsidizing for more use of the highways.
    Again, right now, if you look at the Highway Trust Fund 
every time some Commission does a report, we know we're not 
getting enough money into the Trust Fund. The Trust Fund is 
technically going bankrupt--as it was intended to do. The 
Congress is going to be asked to step up another $6 to $8 
billion this year, so over a period of time you're going to be 
looking at 10 to 12 percent of cross-subsidies from the General 
Fund, thus violating one of the major issues of user-pay in the 
Highway Trust Fund.
    So, there are a series of carrots and sticks you can use 
that will eventually get more freight rail capacity, and then 
customers like Target--you're not going to have to require 
them--will want to move more of their freight to the railroad, 
because it's going to be good service, and low cost.
    The Chairman. How--if you're looking ahead 25, 30 years as 
to what--the opportunities, and the obligations might be for 
moving freight, how does the current economic downturn fit into 
that computation?
    Mr. Rose. I think it, realistically, it pushes the need for 
capacity out by several years. You'd have to answer, first, how 
fast is the recovery going to be over how many years, but 
clearly on both the highway, the airport system, the waterway 
system, the freight rail system--this recession is causing 
capacity.
    I think it also, quite frankly, has the emotional trap, if 
you will, that we're all going to feel comfortable that, ``Yes, 
there is capacity out there.'' But we know that population 
growth is going to happen, this economy will get back to some 
sort of nominal growth--2, 3, 4 percent of GDP--and when that 
happens, units in gross ton miles are going to load this system 
up more, and I think it's going to be harder to make the 
improvements longer term, than it would be at a time like now 
when traffic is down.
    So, it definitely--has a short-term, I think, relaxation of 
the need, but I don't see anything that tells me long-term----
    The Chairman. You've got to look beyond that----
    Mr. Rose. Right. It's a very short-term phenomenon.
    The Chairman. You share that view in your industry, with 
the need to improve the port functioning?
    Mr. Clancey. Yes, I concur 100 percent.
    You've got some breathing room now. If imports and exports 
had continued at the pace that they were just 18 months ago, on 
the West Coast, we would not have capacity to move any 
additional cargo. And we would be telling Target, ``You need to 
go to the Gulf, you need to go to the East Coast, you need to 
go through Canada,'' because there simply wouldn't be capacity.
    And then, on top of that you need a landing zone, if you're 
going to connect with the BNSF, you need land on the ground, 
which is near most of the large cities, to move the containers, 
to put on the rail beds to move in.
    So, the opportunity is now, we've been given a 2- or 3-year 
hiatus, and we should take advantage of it.
    Senator Thune. Thank you, Mr. Chairman.
    Mr. Rose, I'm not sure if this is the study that you 
referenced, but there was a 2008 Department of Transportation 
forecast that projected that the tonnage carried by U.S. 
freight railroads would double between 2002 and 2035. And I 
think, as you mentioned, currently all investment in freight 
rail infrastructure comes from private sources.
    My question is, how will your industry meet the challenge 
of literally doubling the freight that it carries over that 
timeframe?
    Mr. Rose. So, I think there are, again, a couple of ways. 
One is in that same study, the Cambridge Study, we identified 
about $37 billion worth of investments, which would be about $3 
to $4 billion more a year to be able to meet those needs.
    And when you think about $3 or $4 billion a year over a 
$1.4 trillion supply chain, it's not a lot of money. The 
problem is, for public policy you all have a very publicly-
funded highway system, and a very privatized rail network, 
which you don't always control financially. There's probably a 
half of 1 percent of public funding that leaks into the 
railroad a year, and that's about it.
    And so, I think you've got to do it through policy. You've 
got to do it through incentives, and certainly the carbon 
legislation is an opportunity, there's risk and rewards for 
that. You do it through, long-term, looking at our National 
Energy Policy, and just having, perhaps, incentives to use more 
freight rail.
    And then, on the defensive side, Senator, you've got to 
make sure that the current way that the railroads make enough 
money to reinvest doesn't get harmed. Also there's going to be 
a silent issue, here, the real challenge, I think that John 
mentioned, is going to be the environmental permitting. The 
``not in my backyard'' syndrome that we face, as well as just 
the hurdles to be able to permit any facility these days for 
transportation--and you all also see it on the highway system--
it could be 12 to 14 years to get a highway permitted--we see 
the same thing on the rail system.
    And so, we're going to have to have a national vision that 
says, ``We need efficient transportation systems,'' just like 
the Eisenhower presidency did. This is a national issue that's 
going to require sacrifices from everybody, including the 
facilitation of permitting for environmental reasons.
    Senator Thune. And is that environmental permitting issue 
all dealing with Federal EPA, EIS-type stuff? Are you running 
into any of those barriers at the State level?
    Mr. Rose. Absolutely, we get it at the State every day. And 
it's the State, or the Federal, and a lot of times the Corps--I 
mean, there are multiple bites at the apple.
    Senator Thune. We certainly see that in a lot of different 
areas when it comes to the Federal process and how lengthy that 
can be. And it would be nice if there was a way of harmonizing 
that with what the States require. It's hard to do that, as you 
know, States are very particular about maintaining that 
control, too. But it does complicate things, I think, in terms 
of the delays that you run into at every different level.
    And if you kind of roll them all together, you might be 
able to shorten or compress the time-frame enough to where it's 
reasonable. But, if you have to wait for a delay at one level, 
and another delay at another level, it just all seems to 
contribute to a growing problem that does delay these projects, 
significantly.
    In his testimony, Mr. Brown recommended slightly increased 
fees that would generate revenue for projects that improve the 
movement of goods. Is that something that you might support?
    Mr. Rose. Yes, so on the Surface Transportation Policy 
Commission, we recommended a 5 to 8 cent-a-gallon fuel tax 
increase over the next several years, and of course that wasn't 
well-received. We understand, it was during record-high fuel 
prices.
    So, on the highway side, the Commission felt like the user-
fee approach is the right approach. And we're seeing in the 
Highway Trust Fund having to be bailed out. It just shows you 
the lack of money that goes into that.
    On container fees and freight fees, there's probably only 
one area that we can point to a successful program, and that's 
in the Alameda Corridor, where there was a container fee 
placed, and customers such as Target pay that, and in this case 
there was very tight governance, and everybody saw that those 
monies actually went into the facility.
    What drives customers crazy, and I think rightly so, is 
when fees are collected and they go off-property for various 
programs. And so I think that everybody is highly reluctant to 
accept any type of container fee or freight bill fee, because 
they suspect that it will go off and do something else.
    I would recommend if, as a country, what we really ought to 
do to start with, and call it a pilot program, for 5 years, 
take a quarter of the customs fees--because customs fees are 
really a great surrogate for freight movement--take a quarter 
of the customs fee, and create a freight fund, and give it to 
the local MPOs to manage. Give them guidance on how they should 
spend that money on freight projects. And then look back on it 
in 5 years and decide, if it doesn't work out, if the money's 
going to other than real freight mobility projects, pull it 
back in.
    And, if it does work then, I think, again it's a great 
collection mechanism, collection's already in place, and 
customs fees really do escalate with freight movements.
    Senator Thune. I want to ask Mr. Gabrielson the same 
question, about the proposal Mr. Brown made regarding these 
fees--bills of lading-type fees--and whether or not that's 
something you would support.
    Mr. Gabrielson. Senator, it's a very creative funding 
measure, but there are concerns about how the program would be 
implemented. Currently, there is no method to uniformly collect 
waybill information. Some users of the system don't even use 
waybills.
    But the concept does warrant additional consideration, and 
we would welcome the opportunity to have a seat at the table to 
discuss it further.
    Senator Thune. Mr. Gabrielson, do you have any estimates on 
how much current system inefficiencies and congestion cost 
Target, in a given year?
    Mr. Gabrielson. Senator, I do not have that information at 
my fingertips--I could get back to you with it.
    Senator Thune. Well, maybe it's not something you keep, but 
it would be interesting to know how much of your cost structure 
is driven by just these types of congestion and capacity 
problems that we were referencing earlier.
    Mr. Gabrielson. It is--the way that I would respond to that 
is that we, as a shipper, like a lot of shippers, we look for 
predictability. And when we don't have that predictability, we 
oftentimes go through and add additional time into our supply 
chains.
    And so, one effective way of measuring that is the 
additional time that you have in your supply chain of those 
bottlenecks, is what adds to your inventory, and that, in turn, 
adds to your costs. And we watch that very carefully. And with 
that, we look for a diverse network where we're able to 
minimize, and spread our risk out. We look at our transit times 
very closely, and that is something that is concerning to us, 
that as we move forward with a development of a policy, we look 
for the opportunities to develop, not just the projects, but 
also those connectors.
    Because if we work on a given project, and we don't take 
care of the connectors that go along with them--whether it's a 
near-dock rail opportunity, or it's a non-dock rail--we really 
haven't reduced congestion, we haven't taken trucks off the 
road we haven't, you know, capitalized on using rail or other 
activities, so to us that's very important, and we look at it 
all the time.
    Senator Thune. What's your split right now, in terms of how 
you move freight, truck versus rail? Do you happen to know that 
off the top of your head?
    Mr. Gabrielson. I do, Senator. Approximately 60 percent of 
all of the truckload activity that we move is intermodal.
    The Chairman. Mr. Brown, under the current Harbor 
Maintenance Tax, maritime freight shipments may be taxed 
twice--once when the cargo first enters the country, and again 
if it's transferred to a second U.S. port.
    How has the Harbor Maintenance Tax affected your efforts to 
increase the use of the inland waterways for moving freight? 
Should we eliminate this competitive disadvantage for marine 
maritime shippers?
    Mr. Brown. Senator, I think that upon investigation you 
would find that probably less than 2 percent of all cargo is 
now moved on inland waterways, which does leave us a lot of 
room for improvement, as you can imagine.
    The other thing is, is that each individual State seems to 
have its own set of rules and regulations pertaining to 
taxation, and/or harbor maintenance or harbor management, or 
whatever.
    The Corps of Engineers, for example, do a great job. 
They've got 1,100 ports that they maintain--ports and harbors 
that they maintain--on inland waterways and coastal ports. Of 
that, probably--there are probably less than 60 of those ports 
that are actually really good, viable, commercial ports of 
operation.
    That's not to say that the other 1,000 are not being 
utilized, but they're just not being utilized to the extent 
that they could or should be.
    I think some of the problems with coastal shipping, 
container-on-barge operation, not having scheduled services, 
rather than having scheduled services, it's a demand service, 
when and if they get a load, they'll move it, that sort of 
thing. But, scheduled service, State regulations--there are 
several other factors other than just the Harbor Maintenance 
Tax that influence those charges along the inland waterways.
    The Chairman. Mr. Roper, the Port Authority of New York, 
New Jersey--a unique body, I don't know how many ports around 
the country have more than one State with decisionmaking. And I 
think the Port Authority is a terrific agency, it has the 
profile of the State, directly in their view, but they have to 
take care of the things that affect the bi-State activity.
    We're looking at an expansion of traffic coming in as a 
result of the widening of the Panama Canal. Does the Port 
Authority expect to see significant traffic coming in as a 
result of that? And what, if anything, are they doing to 
prepare for it?
    Mr. Roper. Mr. Chairman, we do, indeed, anticipate that 
there will be an expansion in goods movement in the region. As 
a matter of fact, we have put in place a planning process that 
focuses on goods movement--comprehensive goods movement--in the 
region, looking to the year 2035.
    We are working collaboratively with both New York and New 
Jersey in framing this plan to sort of map out what the 
network--the goods movement network--ought to look like, where 
the bottlenecks are and how we might address those bottlenecks.
    While we're working with New York and New Jersey, we've 
also enlisted the aid of Pennsylvania and Connecticut in the 
planning process, they provide ongoing consultation, as we try 
to structure something that all four States will find 
responsive to their needs.
    But this is good, only as far as it goes, or will go, 
because the plan really needs to be part of a national strategy 
that looks at goods movement as a nationwide, a system wide 
issue.
    So, the Port Authority wants to play, and will play, a 
leadership role in trying to frame, if you will, a regional 
response to the needs for improved goods movement, but we 
really will depend upon the Federal Government to help us put 
it in a national context.
    The Chairman. Having the five of you on this panel is a 
very positive thing, because there are those who are dependent 
on intermodal transportation to satisfy their needs, and those 
who individually carry a significant part of the picture.
    And here we have a quasi-government agency that's very 
involved. I noted in your comments before that between 2002 to 
2007, the Port Authority and Marine Port tenants provide $2.4 
billion to begin channel deepening to 50 feet to modernize port 
terminals and make major rail improvements. In order to be 
competitive, and you're competitive with one another, it's 
reasonable competition--do other ports around the country have 
the same availability of resources to make improvements? And if 
not, what do you think should happen with a Federal subsidy of 
these projects?
    Mr. Roper. Well, I think other parts of the country may not 
be as well-positioned as the Port Authority of New York and New 
Jersey. We think that like the transportation program, 
generally, that meeting the Nation's needs will require a range 
of resources, if you will, resource commitments.
    And where freight is concerned, those resources would 
involve Federal aid, it would involve Federal credit 
assistance, and perhaps incentives, that's right.
    But there's also a component that has to be addressed in 
the form of user fees, and those fees, we believe, are 
appropriate when they are targeted at those parts of the system 
that are of benefit to the firms, the individuals, the 
institutions that benefit from them.
    The Chairman. Just as a point of interest, what are the 
sources of revenue for the Port Authority of New York and New 
Jersey?
    Mr. Roper. All of our revenue comes from the----
    The Chairman. Fees that----
    Mr. Roper.--individuals who use our facilities. Fees----
    The Chairman. But, you have the transportation accesses, in 
between the----
    Mr. Roper. New York and New Jersey.
    The Chairman.--the States, you've got toll bridges----
    Mr. Roper. Correct.
    The Chairman. You've got several toll road operations 
coming into the area.
    Mr. Roper. And our tenants at the ports, and at the 
airport.
    The Chairman. I just mention that for the general interest, 
here.
    Mr. Roper. We receive no tax dollars.
    The Chairman. I'm glad to hear you say that.
    [Laughter.]
    The Chairman. In any event, Senator Thune, do you have 
anything else?
    Senator Thune. I'm glad you asked a question about the 
Panama Canal, Mr. Chairman, because that's also something that 
I wanted to get some reaction to.
    The Chairman. You want a canal to South Dakota?
    Senator Thune. Yes, that would be great.
    [Laughter.]
    Senator Thune. You don't know how many problems that would 
solve if we could do that, but--actually, I'm sort of 
interested in just maybe a generic question for the entire 
panel.
    As you know, around here we're always looking for things to 
do, but I think the important thing is that we do no harm. But, 
if you had to suggest one thing that Congress could do as a 
matter of public policy to help ease the congestion and the 
capacity challenges that we face in our freight transportation 
system. Maybe it's hard to narrow that down to one thing, so 
feel free to elaborate if you'd like to, but just give your 
thoughts about what we might be able to do, here, as a matter 
of policy that would help provide some relief, while making 
sure that we aren't creating inefficiencies or contributing to 
inefficiencies in the system that are causing or creating big 
losses in productivity.
    Mr. Brown. Senator, if you don't mind, I'd like to go first 
on that.
    As a Director of Transportation, and involved with the 
Association of Transportation Officials, we're not limited to 
one mode. Our mission is to serve all five modes of the 
transportation industry.
    Intermodalism, and multimodalism is the key and the 
backbone to moving goods and freight, for goods movements and 
all freight movements, as we all know.
    In addition to that, this backbone that we have, called a 
highway system, is inevitably a part of every one of those 
goods movements. Highway congestion, largely, is compounded by 
the word freight.
    Today, when we build a highway, unlike in the 1930s and the 
1940s when the CCC and the WPA mobilized in a stimulus program 
to build highways, the capacity of the loads were quite low. 
Many of those roads, most of those roads--particularly in my 
part of the country, in Southwest Mississippi, we still have an 
enormous amount of use of those concrete roads that were put in 
by that stimulus program.
    Now, the reason that they're still there and functional is 
because they've not been carrying 80,000 and 90,000-pound loads 
of freight, day in and day out. They carried small, lightweight 
vehicles for so many years.
    Today, in today's environment, if we wanted to build a 
system of highways for passenger cars and light trucks, we 
could build those roads today, instead of $10 to $12, $15 
million-per-mile, we could duplicate that for a million-and-a-
half to $2 million-per-mile.
    We would do maintenance on that same roadbed about every 40 
years, instead of spending $15 billion to $30 billion-a-mile 
with interchanges and connections, and grade crossings and 
separations, and all of the things that we see in a 
transportation highway network today, because of freight and 
heavy loads, you will see that we build those roads and we have 
a maintenance schedule every 8 to 10 years.
    The problem that I'm pointing to is that in every case--
regardless of the mode--it always ends up, inevitably, on a 
highway. And those loads are doubling, and--the amount of 
transportation needed for that freight backbone is doubling, 
you know, in rapid-pace time. You know, some people say every 
20 years, some people are saying 30 years--it doesn't matter, 
they're doubling. And the weights are getting bigger, the loads 
are getting longer, and it's costing more and more and more to 
duplicate what we had early on.
    When I say duplicate it, it's not a duplication, it's a 
very widely expanded role that our transportation network, or 
people--and vision for people--is now providing. It's a freight 
system, now, it is not a passenger car system, or a light truck 
system.
    This gentleman's movement into the--from the maritime 
market, into ports and harbors, along with the transfer of 
containers, which is now the largest user of rail freight in 
our country today. I guess, I don't know, is it out--it may 
have not out-run coal, yet, but--it has out-run coal, he has 
confirmed that. So, all of this transportation that we talk 
about in the intermodal and the multimodal connections that are 
involved, come back to one thing, sir. And that--to address 
your question, congestion is caused by the rapid rising number 
and doubling of the need of freight on our highway network.
    The Chairman. If I can jump in here with a question that 
your statement has provoked, do you think that load weights 
ought to be carried differently? Would you advocate for an 
increase?--I caution you in advance that I have taken a stand 
against the expansion of triple trucks, that were grandfathered 
in some States, but they sit there, just like that. But the 
wear and tear function--how much deterioration or wear comes 
from heavier loads?
    Automobile traffic is one thing. But when you put trucks 
that are longer than, what's it? Fifty-eight feet is the 
maximum singles, I think--you get quite a difference in the 
depreciation of the road bed.
    Mr. Brown. Senator, I'm not an engineer, I should tell you 
that on the front end, and--although in the last 8 years, since 
I've been at the Department of Transportation in Mississippi, 
some of my good friends are engineers. Prior to that I wasn't 
so sure.
    But, I will tell you, you don't have to be an engineer to 
ride down a road bed and to see ruts on a rainy day. How many 
terms have you heard of hydroplaning in an automobile, or 
hydroplaned yourself, during a rainstorm on a highway? That 
rutting is not caused by light passenger vehicles and pickup 
trucks. It's caused by the enormous weight limits that we're 
imposing on that road bed.
    Where we used to put a 6-inch road base in the State of 
Mississippi, now we're putting 16 inches. We're trying to 
preclude the need for this maintenance, over maintenance, or 
maintenance, because of the freight of the freight of the 
freight.
    We're not trying to eliminate freight, by any stretch of 
the imagination. Freight is critical and we believe in a 
freight program--national freight program for our country--and 
we believe in providing a strong, integrated freight multimodal 
network.
    But we've got to be reasonable in what we impose in the way 
of weight limits and truck lengths onto that infrastructure.
    Mr. Clancey. If I could come back to--Senator, to your 
question about, you know, our suggestions, I would use one 
word: priority.
    We are becoming a trading nation, much more so every day, 
and the percentage of GNP in international trade is growing. 
And our competition, the people that make our cars and our 
clothes and our electronics and every day it seems another 
product. In countries like Hong Kong, all of these cities--
Shanghai, Singapore, Bremen, Antwerp, Liverpool--they 
understand that international trade is a priority.
    So, when they want to expand a rail yard or a port or the 
interconnection of both, the people in the country understand 
it's a priority, and they're able to move and get their things 
done quickly, whereas this country you deal with a city, then a 
county, then the State, and there are many branches of the 
Federal Government that goes on and on and on.
    And you might say, ``Well how would it affect South 
Dakota?'' Well, if we increase the cost of transportation in 
our intermodal system because of congestion, the price of your 
grain and the price of your beef is going to go up, and America 
will become less competitive and less competitive.
    So, we just have to understand, if we want to compete, we 
need to be efficient.
    Mr. Rose. Mr. Chairman, I'd just like to, Senator Thune, 
you asked Rick a question of how much inefficiency costs? And 
if you just think about 1 percentage tick-up on the supply 
chain cost, that's about $14 billion. And we've seen that 
number move into two to three points. So, $14 billion for every 
hundred basis points, and yet that's really just the scratching 
point.
    Because what John was saying is, what's really important, 
here are the tens and tens of millions of jobs that are 
created, because we do trade globally. Because of the amount of 
exports we do, and as our supply chain costs go up, that's the 
real economic damage to this economy. It is going to be in the 
lack of competitiveness for our society.
    And that's why China, you know, our--I said earlier, our 
supply-chain cost is a percentage of our GDP, roughly 10 
percent--China is almost double that. And that's why they are 
spending hundreds of billions of dollars of infrastructure 
investments, really just taking a page out of what we did in 
the 1950s and the 1960s, because they see it as an imperative 
to be able to put their people to work.
    Mr. Roper. Senator Thune, I would offer a couple of things 
only. One would be that we add a freight policy and program 
element to the new transportation bill, one that--that promotes 
expansion of our goods movement system. And second, to create a 
Federal framework within which that's done.
    Mr. Gabrielson. Senator, I would respond by saying that we 
need the--a priority in the last mile connectors. In order for 
this country to remain competitive, we need to make sure that 
we have a fluid integrated supply chain, and part of that means 
that we have to have a fluid connection, from the moment it 
comes into the country, until it gets to its final destination 
point, whether that's on rail, or whether that's on the 
interstate system, we need to make sure that that's in place.
    The Chairman. Define that, I'm not sure I understand 
exactly what a fluid----
    Mr. Gabrielson. Fluid, yes, integrated fluid supply chain. 
Mr. Chairman, an example that I would use might be in Southern 
California, where there's a proposal to put an international 
gateway, it's called SCIG. It just happens to be with BNSF, but 
there's an opportunity to move forward with the development of 
that near-dock rail system, which would really allow truck 
users to--take more trucks off the road, moves the containers 
and the--the containers closer to the railhead and allows you 
to go through and really reduce congestion on the freeways in 
Southern--in this particular case--Southern California. And 
most gateways have examples like that.
    The Chairman. Mr. Rose, you would agree?
    Mr. Rose. No, he laid it out very well. The alternative is 
that we drag these containers 19 miles to a place called Hobart 
Yard, I appreciate the communities that are impacted by that. 
We must have a more national transportation vision of 
imperatives, to be able to say this is really important for the 
citizens of South Dakota, or this is important for the citizens 
of Ohio and New Jersey.
    That's the thing people don't understand, is that the 
trade--the efficiency of trade benefits--it not only benefits 
the coastal cities, but it benefits the middle part of the 
United States as much.
    The Chairman. Unless you have anything.
    I'm now going to turn the gavel over, the silent gavel 
here, I note, to Senator Udall, and he'll continue the hearing.

                 STATEMENT OF HON. TOM UDALL, 
                  U.S. SENATOR FROM NEW MEXICO

    Senator Udall [presiding]. Thank you very much, Mr. 
Chairman, before you slip out the door or as you're slipping 
out the door, I just want to compliment you on your Surface 
Transportation Bill. I think you're really looking forward for 
the country.
    I'm sure some of the answers you've heard from this panel 
and from the testimony I've heard is that we need to be more 
competitive. So I think what you're really telling people is we 
have to be more efficient, we have to look at the rails, we 
have to look at barges, we have to look at truck traffic, and 
we have to do this in the most efficient way possible. And so I 
compliment you on your bill and I want to work with you on it.
    The Chairman. Thank you very much. It's not entirely 
unselfish, because if we don't do that, I may have to stay here 
two, three more terms.
    [Laughter.]
    Senator Udall. We want to celebrate your 100th birthday in 
the Senate, OK? So that would get three terms, wouldn't it, Mr. 
Chairman?
    OK, so I've got the silent gavel. I don't actually have the 
gavel, but Senator Thune and I will do all right here, I think.
    Let me ask you, and I know that you've already responded in 
some sense to this, but when you all use the word competitive, 
the representative target here, talking about competitive. To 
me, that means being more energy efficient, and taking our 
system that we have now and trying to move forward and be more 
efficient with it, whether it's moving things on barges, which 
is apparently more efficient than rail and truck, or moving 
things better on rail, which is more efficient than trucks. 
And, when you're doing the short-term, the trucking has a key 
role to play, when you get into the inner-city and that kind of 
thing.
    And, what I want to ask you is, with the--the system that 
we've grown into today, what do you all recommend that we do in 
order to try to encourage you to be as efficient as possible in 
your area, and then looking outside your particular area, how 
do we do it in the overall system, in order to stay competitive 
as Mr. Gabrielson said? You know, he's looking at trying to 
stay competitive with many other companies around the world, 
and how do we do that? I'm happy to hear from any of the 
panelists here.
    Mr. Rose. I think it's obvious that we've never harmonized 
our energy policy with our transportation policy. And, really 
only over the last few years we've begun thinking about that. 
And then of course, inserting itself, now into the debate is 
climate policy.
    If you think about the challenge of harmonizing all three 
of those, that's really what's going to have to be done. But 
the practical reality--you have to identify the most efficient 
routes and the most efficient modes of transportation. And then 
you have to remediate those bottlenecks that stand in the way 
of allowing those efficient routes to occur. If you don't--what 
happens is, the freight's always going to move. Target's always 
going to find a way to get the next box into this country. The 
last box will be incredibly inefficient, it will be inefficient 
probably from a carbon standpoint and from an energy 
standpoint, but that's what they must do to sell stuff to their 
customers.
    And the lack of a national vision to harmonize all those 
things, will just allow bottlenecks and inefficient routes to 
occur in our society. And we see it, what you have to do is 
look at the congestive costs on this society. The people who 
study it now say that we're incurring $60 to $80 billion a year 
of just congestive costs. And that doesn't even begin to 
address some sort of carbon cost, as we think about our energy 
programs going forward.
    Senator Thune. But Mr. Rose, you're going to support us 
when we put a price on carbon and try to move ourselves into 
this renewable future that President Obama has been talking 
about?
    Mr. Rose. I have a--I have a different view on how to 
manage carbon in this country, respectfully.
    Senator Thune. Please, please go ahead, tell us.
    Mr. Rose. I think when--the cap and trade programs that 
have been discussed, and when government starts picking winners 
and losers and allocating credits, I think it's dangerous. 
And,--and to me, if you really want to address carbon, you do 
it through a carbon tax. You would see a change in behavior 
with the carbon tax.
    Senator Thune. But, you would----
    Mr. Rose. That's my only--that's my personal opinion, not 
representing anybody.
    Senator Thune.--not even representing your company?
    Mr. Rose. No.
    Senator Thune. No, OK.
    I don't want to cut you off on that earlier question, but 
I'd also be interested in hearing from the others on the second 
question I asked Mr. Rose.
    Mr. Brown. I'd just--just jump in right here, Senator, and 
just pad--the congestion mitigation, you know, that Mac 
referred to in the end of his comment, is something that's a 
broad, broad range. I mean, congestion mitigation, you think of 
it in terms of idling time, you think of it in terms of the 
last mile that Mr. Gabrielson talked about at the port 
intermodal connector highways. You know, anything that's going 
to move this freight faster through New Orleans, through, you 
know, going east to west, or off of Long Beach, you know, 
through the Alameda Corridor, and--and what do you do about the 
congestion of empty containers.
    You know, that's the thing that--that I'm sure the 
steamship lines can speak on, and would love to talk about more 
and more. You know, what are we doing about the amount of 
empties that we are accumulating in this country. You know, our 
country right now is covered with--with mobile home housing, 
and now there--auxiliary buildings are becoming merch 
containers. Everything is, you know, out there with a box 
that's been sold rather than returned. But all of those cost 
of--of handling inefficiently can contribute to the problem of 
then carbon tax, you know, inefficiency, congestion is where--
is what we're going to have to deal with in order to keep the 
freight moving, rather than stopping and starting.
    Mr. Roper. Senator Udall, I've been sitting here trying to 
think of something to say that was insightful, that transcended 
what Mr. Rose has already offered. And quite frankly, he's put 
it in a nutshell. I can't think of a better way of articulating 
what needs to be done, in order to improve the efficiency and 
address the issue of competitiveness. And that's addressing the 
bottlenecks and reducing their impact.
    Senator Udall. Any other panelists there?
    Mr. Clancey. I concur with what's been said.
    Senator Udall. OK, thank you.
    Senator Thune, do you want another round here to jump in. I 
want to give you an opportunity here.
    Senator Thune. I've probably had my opportunity to ask 
questions, Mr. Chairman, and now that we have Mr. Rose on 
record supporting higher taxes----
    [Laughter.]
    Senator Thune. We may have done enough damage today, I'm 
not sure.
    Senator Udall. OK.
    But, Mr. Rose, I don't know how much you've studied this 
whole idea of a carbon tax, but I want to emphasize one thing. 
We went through this with the power plants and sulfur dioxide. 
And, you know, there were two big approaches then. One was, 
just like you say, everybody said the only way you're going to 
get it to work is with a tax. And what they did is what's 
similar to this cap and trade. We capped sulfur dioxide and 
then by capping it, and saying that we were going to move down 
in those emissions, the industry came in much more cheaply and 
quicker than we ever thought it could happen. And all the folks 
at the end of the show, that were arguing a carbon tax, 
realized that the--they were arguing for such a high tax, that 
it really wouldn't have done the job.
    And so, I think there's a real argument on cap and trade. 
The allocations, you're right, are tricky, but if you actually 
do cap emissions and, as a result of capping emissions, put a 
price, a significant price on carbon emissions, across the 
board, you know, not treat favorites like you're talking about.
    If your carbon dioxide emissions, per ton, wherever they 
are, they--at, you know, upstream of the system, way up in the 
system, you put those on. I think we would unleash an 
incredible amount of creativity and ingenuity in American 
business, and I think we would end up finding it to be much 
cheaper, I really do.
    I'm hoping we'll persuade Senator Thune to come around to 
this free market idea. I mean, that's really one of the reasons 
that I like the idea of a cap and trade, is because you're 
using the market, and we have the option of persuading some of 
our Republican friends to maybe say, ``Well, this is a better 
way than a carbon tax,'' especially with that sulfur dioxide 
history there.
    So, we appreciate you weighing in on a personal basis, and 
unless Senator Thune has some other questions here, I think I'm 
going to gavel this to a close. We're all running a little late 
because we went long on the floor, and I think our meetings are 
backing up. We really appreciate all of you being here and 
appreciate your testimony. And any statements that need to go 
on the record, I'm sure that will happen.
    So, I'll just use this as a gavel. Thank you all.
    [Whereupon, at 4:16 p.m., the hearing was adjourned.]


                            A P P E N D I X

  American Association of Port Authorities Editorial--February 4, 2009

      AAPA Surface Transportation Authorization Guiding Principles

    Seaports continue to be a critical link for access to the global 
marketplace. Each year, seaports throughout the Western Hemisphere 
generate trillions of dollars of economic activity, support the 
employment of millions of people, and import and export more than 4.5 
billion tons of cargo, including food, clothing, medicine, fuel, and 
building materials, as well as consumer electronics and toys. The 
volume of cargo shipped by water is expected to dramatically increase 
by 2020 and the number of passengers traveling through our seaports 
will continue to grow. To meet these demands, American Association of 
Port Authorities and its members are committed to keeping seaports 
navigable, secure and sustainable. AAPA supports the creation of a 
national freight program that includes:

   Funding for projects and corridors of national and regional 
        economic significance based on cost/benefit analysis which 
        considers externalities (including environmental impact) and 
        encompasses all modes and existing corridors as well as new 
        ones.

   The American Association of State and Highway Transportation 
        Officials (AASHTO) recommended the State Freight Transportation 
        Program and National Freight Corridors Investment Fund with the 
        stipulation that port authorities are a key part in the 
        planning process in both the Federal and state programs.

   Port Authorities should be eligible to apply directly for 
        project funds through the aforementioned Federal and state 
        freight programs.

   Funding for intermodal freight connectors (highway, 
        maritime, rail) which are vital to port efficiency and cargo 
        mobility.

   Investments in rail and the development of marine highways 
        (more specifics on these below).

   Expertise at the state/metropolitan planning organization 
        (MPO) level on marine highway alternatives/benefits as well as 
        dedicated freight offices with coordinators, programs, and 
        funds that support what is devolved down from the Federal 
        level.

    With regard to program reform, AAPA supports a performance-based 
approach which consolidates the existing 108 surface transportation 
programs into 10 programs (one of which is freight transportation) as 
recommended by the National Surface Transportation Policy and Revenue 
Study Commission and AASHTO. AAPA also supports establishment of a 
multimodal freight office that reports to the Office of the Secretary 
at the United States Department of Transportation.
    AAPA supports improving project delivery by addressing environment 
review inefficiencies and National Environmental Policy (NEPA) 
redundancies that cause project delays and cost overruns, including 
delegating NEPA responsibilities to appropriate state agencies.
    AAPA supports investments in freight rail that make the system 
safer and more efficient, improve environmental sustainability and 
encourage competitive rail access to ports. The Federal surface 
transportation program should:

   Provide tax credit incentives for main line and short line 
        railroads to invest in port access.

   Include a grant program with cost-share (Federal/railroad) 
        for projects with both public and private benefits.

   Define freight corridors of national significance that would 
        be eligible for rail investment (Increase expertise in state 
        departments of transportation and MPOs on rail access issues).

    AAPA supports the development of marine highways that alleviate 
highway congestion and improve environmental sustainability through:

   Harbor Maintenance Tax exemptions for certain U.S. port-to-
        port cargo.

   Federal funding support for short sea shipping services.

   Establishing a new program similar to the ferry boat 
        discretionary program and encouraging more utilization of 
        current Federal programs--such as Congestion Mitigation and the 
        Air Quality (CMAQ) Improvement Program to fund projects for 
        short sea shipping services.

   Incentives for shippers (ex: green tax credit).

   Development of expertise at the state/MPO level on marine 
        highway alternatives/benefits.

   Reassessment of Federal shipbuilding programs exploring how 
        they could support marine highway development.

    AAPA believes that a combination of funding mechanisms will be 
necessary to address freight mobility needs in the U.S. These funding 
mechanisms should not disadvantage U.S. ports in their ability to 
remain competitive. Supported funding mechanisms include:

   A share of revenue from customs duties devoted to funding 
        freight mobility infrastructure improvements.

   An increase in the gas tax and a future indexing mechanism 
        as recommended by the National Surface Transportation Policy 
        and Revenue Study Commission with a percentage of the new 
        proceeds dedicated to funding freight mobility infrastructure 
        improvements.

   An increase in the diesel tax, and a future indexing 
        mechanism with a majority of the new proceeds dedicated to 
        freight mobility infrastructure improvements.

   A portion of any carbon tax or climate change program 
        revenues be made eligible for investments made by freight 
        transportation to reduce its carbon footprint.

   Public-Private Partnerships (PPP) where each sector pays in 
        proportion to the benefits they derive from the capacity 
        generated by the infrastructure.

    AAPA believes that if a freight trust fund is created under this 
surface transportation authorization, it should be fully spent on 
freight transportation and not used for deficit reduction. Appropriate 
projects that are freight-related should still be eligible to compete 
for other Federal funding sources.
    Some have proposed adopting a port cargo fee to pay for freight 
projects. If adopted, it must be levied equitably over all types of 
cargo including imports and exports, and not solely based on 
containerized cargo, which AAPA strongly opposes because it is 
inequitable. Freight projects benefit the movement of all types of 
cargo. If a broader port cargo fee is adopted by Congress, the 
structure of the fee should reflect the following recommendations:

        1. for port authority cargo all revenues collected should be 
        returned to the port authority where the fee was collected to 
        be used for projects directly benefiting freight mobility;

        2. be levied equitably over all types of cargo, including both 
        imports and exports;

        3. assessed at all international ports entry (air, land and 
        sea);

        4. provide ports the discretion to ``opt-out'' from the fee 
        program and

        5. the fee should not negatively affect the Nation's bulk or 
        breakbulk export products (e.g., grain, coal, paper products), 
        making these commodities uncompetitive in international 
        markets.
                                 ______
                                 
                                        Coastwise Coalition
                                      Washington, DC, June 16, 2009
Hon. Frank Lautenberg,
Chairman,
Subcommittee on Surface Transportation and Merchant Marine 
            Infrastructure, Safety, and Security,
Senate Committee on Commerce, Science, and Transportation,
Washington, DC.

Dear Mr. Chairman:

    The Coastwise Coalition is a diverse group of ports, shipping 
companies, labor unions and others who have been working together to 
advance increased use of the fuel efficient marine mode in our national 
transportation system.
    As the Subcommittee prepares to meet on June 18 to hear witnesses 
address ``Freight Transportation in America: Options for Improving the 
Nation's Network,'' we take this opportunity to highlight one such 
option that deserves the Committee's attention and support. Our 
objective is in keeping with some of the goals expressed in S. 1036, 
which you and Chairman Rockefeller introduced, including to increase 
the proportion of freight transportation provided by non-highway and 
multimodal services.
    The Coalition affirms its support for legislation such as you have 
introduced, Mr. Chairman, to exempt non-bulk cargoes moving between our 
Nation's ports, or between Great Lakes ports, from the Harbor 
Maintenance Tax. That legislation, S. 551, could serve to foster the 
marine highway option and thus ease the traffic burden on certain of 
our highways and reduce freight related fuel consumption and air 
pollution, while strengthening the U.S.-Flag Merchant Marine--at 
virtually no cost.
    Today, the movement of containers or trailers or other non-bulk 
cargo by vessel between continental U.S. ports, and in non-export moves 
between ports on the Great Lakes, is subject to the Harbor Maintenance 
Tax (HMT). This tax is the responsibility of the shipper of the cargo, 
not the vessel operator. It creates two discouragements to moving cargo 
by water between, for example, Boston and Jacksonville, or Oakland and 
the upstream ports of Stockton and Sacramento, compared to moving that 
cargo by truck or rail. Shippers must complete and file forms (with 
U.S. Customs and Border Protection) and pay the tax. If there is any 
question as to how the HMT is a disincentive one need only observe how 
the Detroit-Windsor Truck Ferry returns empty from Canada.
    At least in part as a result of these disadvantages in cost and 
customer convenience (compared to land movement of the cargo), few 
maritime services in these commercial lanes have emerged. Thus there is 
little of this maritime commerce to subject to the HMT. The few 
existing operations are generally viewed as serving niche markets. 
However, compare that to the potential for additional lanes of 
``highway'' along crowded metropolitan corridors and even the entire 
East Coast. Legislation such as you introduced, Mr. Chairman, with 
Senator Vitter and other senators would eliminate those barriers and 
help unlock the potential of this efficient option for moving freight.
    The potential benefits of eliminating this barrier to development 
of the marine highway are considerable. The legislation has 
considerable potential to:

   Ease landside congestion.

   Ease need for expensive new landside corridor capacity.

   Ease air pollution through increased use of the fuel 
        efficient, low polluting maritime mode.

   Encourage construction of new and more efficient vessels.

   Create U.S. citizen port maritime jobs and strengthen the 
        active base of U.S.-flag vessels and mariners for national 
        security.

    Moreover, it is our understanding that the Joint Committee on 
Taxation and the Congressional Budget Office are familiar with 
proposals such as S. 551 and have indicated that the score for such 
relief would be minuscule--approximately $2 million annually. This is 
not surprising given that the administrative and financial obstacles to 
short sea shipping posed by the HMT have thwarted its use. Thus, there 
is little or no cause for budgetary objections to the legislation.
    Before closing, I note that while our coalition has focused much of 
its energy in support of legislation such as S. 551, there are 
additional means by which the Senate can support the development of 
domestic marine freight transportation as an important element in the 
national surface transportation system. We encourage the Committee to 
look for policy opportunities to create incentives and in other ways 
advance marine highway development and improve marine transportation in 
this country.
    A final note: Not having an opportunity to collect signatures for 
this letter I have attached for the Committee's reference a recent 
letter to another congressional committee on the subject of the HMT. 
The listed signatories indicate the breadth of support for the change 
we advocate and contained in S. 551.
    Thank you for your consideration of our views.
            Sincerely,
                                          Paul H. Bea, Jr.,
                                                          Chairman.
Attachment
                                 ______
                                 
                                        Coastwise Coalition
                                                  November 10, 2008
Hon. Charles Rangel,
Chairman,
Committee on Ways and Means,
U.S. House of Representatives,
Washington, DC.

Dear Mr. Chairman:

    As the Congress considers elements for the economic recovery/
stimulus legislation, the Coastwise Coalition recommends that any such 
legislation create an exemption from the Harbor Maintenance Tax for 
carriage of domestic and Great Lakes non-bulk cargo. Doing so would 
remove a barrier to use of U.S. flag shipping and thus foster job 
creation in the maritime sector.
    The Coastwise Coalition is a diverse group of public and private 
sector organizations and individuals including ports, maritime labor 
unions, shipyards, transportation professionals, vessel operators and 
other transportation providers, and others in the maritime industry and 
workforce.
    The Coalition's purpose is to promote the use of waterborne 
transportation as a safe, economical, energy efficient, environmentally 
beneficial, and sustainable means to meet a growing need for reliable 
transportation options and capacity. Congestion on our land routes is a 
fact of life in many major corridors and most metropolitan areas of the 
country. Greater use of marine transportation on domestic ocean and 
water routes and on the Great Lakes can relieve part of the increasing 
demands on the Nation's major highways and rail system by providing 
additional routings for cargo.
    Increasing domestic coastwise and inland shipping services would 
stimulate job creation in the maritime industry while providing cargo 
owners, transportation intermediaries, trucks, and rail carriers a 
safe, reliable, and cost competitive transportation option. In the 
process, our transportation system can improve in terms of energy 
efficiency, environmental impact, and reduced stress on corridor 
communities.
    To achieve these short and long-term benefits, Congress should 
promptly enact legislation that would exempt carriage of non-bulk 
domestic and Great Lakes cargo from the Harbor Maintenance Tax. This is 
cargo currently moving largely on congested and aging highways that can 
have the option of moving on water routes. There are some exemptions to 
this tax already, notably when the vessel movement in question pays the 
inland waterways fuel tax, for passenger ferries, and for certain 
shipping that serves Hawaii, Alaska and U.S. possessions. However, 
absent applicability of exemptions, or an unusually strong special 
niche market, the HMT is a serious barrier to moving these non-bulk 
cargoes on water in domestic or Great Lakes service, as we explain.
    The Harbor Maintenance Tax is an ad valorem charge--0.125 percent--
on international cargo entering this country, on domestic cargo moving 
between U.S. ports, and cruise passenger tickets. The tax, which is 
paid by the cargo owner, discourages the use of marine transportation 
by intermodal cargo in several ways.
    First, at a time when all business is extremely cost conscious, the 
charge itself can be a major barrier. It is a charge not imposed on 
land transportation moves. Second, there is an administrative barrier. 
A considerable amount of the freight moving on the congested 
Interstates and major corridors is in consolidated shipments such as 
you would find in a UPS trailer. Use of the marine highway alternative 
would obligate the owners of goods with a value over $1,000 in the 
truck to file separately the appropriate HMT payment with Customs and 
Border Protection, the collecting agency. That, of course, assumes that 
the shipper knows that the truck opted for the water route.
    Similarly, if an international containership operator wanted to 
consider routing import cargo to its destination via a coastal shuttle, 
new charges and customer paperwork would apply that does not apply if 
land carriers were used. Further, in this context, where the import 
cargo is already assessed the HMT for the transportation to the entry 
port in the U.S., using the marine highway can result in the cargo 
having to pay the HMT twice. This is the case even though the coastal 
vessel has a far shallower draft than the importing vessel. In the 
larger gateways the harbors are being dredged to maintain depth 
principally for the large transoceanic vessels. There the shallower 
vessel is not causing the need for the dredging that is paid for by the 
proceeds of the HMT.
    In short, when one is trying to persuade potential customers to try 
a new solution to their transportation problems, it doesn't help to say 
that extra charges and paperwork would be a part of the new approach. 
The HMT is a serious barrier to success for vessel operators trying to 
establish new services and attract non-traditional customers of marine 
transportation.
    Because of these barriers, however, these marine services have had 
difficulty being developed at all. As a result, the Treasury collects 
very little revenue from the HMT in the context of carriage of non-bulk 
domestic and Great Lakes cargo (including cargo carried on rolling 
stock such as trucks, trailers and rail cars, as well as cargo in 
containers or in the form of vehicles). Further, these barriers 
discourage shipbuilding plans for these services, with the attendant 
lost opportunity for American shipbuilding jobs. So, enacting the 
exemption will provide stimulus and longer term economic and societal 
benefits with little if any cost to the Treasury.
    This is well illustrated by the facts regarding the Detroit-Windsor 
Truck Ferry, which operates between the U.S. and Ontario and primarily 
serves trucking carrying hazardous cargo. It provides an essential 
alternative to the heavily traveled Ambassador Bridge and long distance 
alternatives. The operator of this barge service testified on February 
15, 2007, before the Coast Guard and Maritime Transportation 
Subcommittee that hazmat trucks use the service in the direction of 
Canada but that trucks bearing cargo and originating in Canada do not 
use the service expressly because of the Harbor Maintenance Tax. Thus, 
the most desirable route for hazardous cargo--away from the crowded 
international bridge and a significantly shorter distance than other 
route alternatives--is discouraged by current law.
    In summary, there is an opportunity for innovative, new maritime 
service that would:

   create U.S. citizen maritime jobs, strengthening the active 
        base of U.S.-flag vessels and mariners for national defense;

   stimulate shipbuilding, with the associated jobs;

   ease landside congestion;

   ease the need to construct new, expensive landside capacity;

   utilize an energy efficient, less polluting mode; and,

   involve very little cost to the Treasury.

    The merits are compelling, short and long term.
    Accordingly, we strongly urge the Committee and the Congress to 
enact now legislation to exempt carriage of domestic and Great Lakes 
non-bulk cargo from the Harbor Maintenance Tax. We thank the Committee 
for its consideration of our views and we respectfully request that 
this letter be included in the record of the Committee's hearing of 
October 29, 2008.
            Sincerely,

Paul H. Bea, Jr., Chairman
Coastwise Coalition

James Henry
Transportation Institute

David Sanford
American Association of Port Authorities

Karen Myers
American Maritime Officers Service

Joseph J. Cox, President
Chamber of Shipping of America

Horizon Lines, LLC

Crowley Maritime Corp.

Peter Drakos, President
Coastal Connect LLC

Captain Timothy A. Brown
International Organization of Masters, Mates & Pilots

Arthur W. Moye, Jr., Exec. Vice President
Virginia Maritime Association

David C. White, Chairman
South Atlantic Marine Transportation System Organization

Ron Silva, CEO
Westar Transport

Rosemary Lynch, Exec. Director
Atlantic Intracoastal Waterway Association

Roberta Weisbrod, Ph.D.
Partnership for Sustainable Ports LLP

Thomas Bethel, National President,
American Maritime Officers

Gregg M. Ward, Vice President
Detroit-Windsor Truck Ferry

Vice Adm. Albert J. Herberger, USN (Ret) Vice Chairman,
American Ship Management and Former Maritime Administrator

John Horsley, Executive Director
American Association of State Highway and Transportation Officials

Richard Hughes, President
International Longshoremen's Association

C. James Patti, President
Maritime Institute for Research and Industrial Development

Richard Blouse, Jr., President/CEO
Detroit Regional Chamber

Steven A. Fisher, Executive Director
American Great Lakes Ports Association

Matthew Paxton, President
Shipbuilders Council of America

Stephen Flott, Chairman
SeaBridge USA, Inc.

Bruce Fenimore, Owner
Columbia Coastal Transport, LLC

Matt Dwyer, Legislative Representative
American Maritime Congress

Torey Presti, President
National Shipping of America

Tom Adamski
New Jersey Motor Truck Association, Bi State Harbor Carrier Conference

Joseph A. Riccio, Executive Director
Bridgeport Port Authority

Hank Hoffman, President and CEO
SeaBridge Freight, Inc.

Stan Wheatley, Director
Center for the Commercial Deployment of Transportation Technologies
California State University, Long Beach

Jeanne Cardona, Executive Director
Association of Ship Brokers and Agents

Dennis Rochford, President
Maritime Exchange for the Delaware River and Bay

Raymond R. Barberesi, President
Marine Transportation Specialists Corporation

Stuart H. Theis, Executive Director
United States Great Lakes Shipping Association

Mark Yonge, Managing Member
Maritime Transport & Logistics Advisors, LLC

H. Clayton Cook, Jr., Counsel
Seward & Kissel LLP

Alan Gray
MetroMarine Holdings

George E. Duffy, President/CEO
NSA Agencies, Inc
      
                                 ______
                                 
Response to Written Questions Submitted by Hon. John D. Rockefeller IV 
                              to Matt Rose

    Question 1. Chairman Lautenberg and I recently introduced S. 1036, 
the Federal Surface Transportation Policy and Planning Act of 2009. S. 
1036 embodies many of the recommendations made by the Commission and 
sets an overall surface transportation policy to guide Federal 
transportation investments and possible parameters for performance-
based objectives. Does the Commission support S. 1036?
    Answer. The Commission has not formally met to consider legislative 
proposals that have been introduced since the Commission issued its 
report. However, in my informal discussions with various Commission 
members, it is clear that many of them agree with me that S. 1036 is an 
important bill because it is the first reauthorization proposal that 
specifically seeks to integrate environment and energy goals into the 
Nation's transportation policy, to the extent of the Senate Commerce 
Committee's jurisdiction.
    Consistent with S. 1036, the Commission specifically endorsed the 
principle of expanding freight rail market share. The Commission 
requested input and made findings on what investment would be necessary 
to expand freight rail market share by 20 percent through 2055, in 
addition to those investments it identified as necessary to maintain 
current market share during that period of projected growth in freight 
volumes. The Commission supported the goal of expanding freight rail 
market share as a means of helping freight mobility be more fuel and 
emissions efficient and to yield congestion mitigation for highway 
users.
    In addition, the Commission report called for a comprehensive, 
multi-modal policy and planning process that is backed by performance-
based metrics to track progress toward meeting the goals of the 
national policy. There can and should be debate around how the targets 
outlined in the bill are set and met, but the aims of the legislation 
are consistent with many of the findings of the Commission's report.
    Above all, the Commission was unanimous in its belief that Federal 
policy should create a clear and unified mission for Federal surface 
transportation programs. S. 1036 seeks to do that.

    Question 2. One of the goals of S. 1036 is ``to increase the 
proportion of national freight transportation provided by non-highway 
or multimodal services by 10 percent by 2020.'' What steps could the 
freight railroads take to help make sure this goal is achieved?
    Answer. Freight railroads will invest in the infrastructure that is 
necessary to deliver the capacity needed to meet the goal of moving 
freight off of the highway if they are able to earn an appropriate 
return for our owners. Our record is clear: capital spending tracks 
returns. Freight rail revenue and profitability is a function of the 
health of the economy. However, it is also directly related to the 
economic regulatory system that determines whether the industry can 
afford to expand. Thus, the most important step to help make sure the 
bill's goals are met is to ensure that railroads earn fair returns. 
Since our merger in 1995, BNSF Railway's ROIC has been between 6 and 11 
percent. So even in our best year we were in the mid-range of the S&P 
500.
    As the Commission's report points out, railroad investment and 
increasing productivity will not be enough to cover the scope of the 
investment necessary. While railroads will make the vast majority of 
the investment themselves, it will have to be leveraged by some public 
investment to achieve the goal of modally optimizing 10 percent of the 
highway freight. The scale and timing of the needed investment makes 
100 percent private funding too risky to accomplish without the 
partnership of the public.
    What kind of capacity is needed? To succeed, railroads will need to 
deliver truck-like frequency, reliability, transit-times and trouble 
free execution. Essentially, we need to zero in on key domestic freight 
lanes between ``megapolitan'' markets to get the biggest bang for the 
investment buck. Partnering with the public sector, we will need to 
establish corridors, much like Canada has done, to target lanes and 
develop facilities, configured on market fundamentals and incorporating 
efficient truck-dray service to access market areas. Significant up-
front capacity investment is needed for railroads to execute and 
deliver line-capacity in targeted 500-1,000 mile lanes to facilitate 
expedited, high speed double stack service on-top of existing bulk, 
manifest and hosted passenger train network. Part of this investment 
will include removal of legacy chokepoints such as Tower 55 in Fort 
Worth, the Burlington Bridge in Iowa, and CREATE in Chicago. It will 
require crown clearing on various tunnels across the network, siding 
extensions, double tracking, and high speed cross-overs on targeted 
lines across the network.
    It also will require facility expansion in strategic locations that 
support density economics required for frequent, reliable service. This 
includes the development of new or expanded intermodal facilities in 
major Megapolitan locations, such as the one BNSF is proposing in 
Kansas City. It also will require additional transload facilities to 
consolidate carload networks. Transload facilities allow for the 
transfer of bulk or industrial product shipments between truck and 
rail. It's important to note that rail facilities have a positive 
economic generator effect for the communities in which they are cited.
    On the trucking side of the equation, construction or improvement 
of an extensive network of the intermodal connectors that serve these 
facilities will be required, along with fuel efficient, high service, 
dray-networks. It's important that metromobility goals not only include 
passenger options but facilitate freight distribution as well. Without 
the ability to cite transportation facilities within urban markets and 
ensure enough road capacity in those areas to distribute freight on 
trucks, the intermodal model is not as effective. In sum, freight must 
be planned for, accommodated and not discriminated against in urban 
areas.
    As Congress works to change surface transportation policy and find 
ways to fund it, it is important to ensure that it does not exacerbate 
the modal policy preference of current policy toward highways at the 
expense of the railroads. According to the May 2000 Addendum to the 
1997 Federal Highway Cost Allocation Study Final Report, FHWA estimates 
that combination trucks on average, pay 80 percent of their Federal 
highway cost responsibility through user fees, and the heaviest 
combinations, those over 80,000 pounds, pay only half of their cost 
responsibility. This modal subsidy distorts the freight economics where 
trucks and trains compete.
    Eliminating a subsidy is always difficult. But it's equally 
important not to make it worse. Dwindling revenues from the gas tax 
have required the use of General Funds for transportation funding, 
which means that the subsidy that other transportation users used to 
provide to the heaviest of trucks is now being provided by the general 
taxpayer. This cross-subsidy by the taxpayers makes it all the more 
important that transportation policy not continue to wall off freight 
rail projects from Federal surface transportation program eligibility.
                                 ______
                                 
Response to Written Questions Submitted by Hon. John D. Rockefeller IV 
                        to Larry ``Butch'' Brown

    Question 1. Mr. Brown, you advocate for the creation of a new 
Federal program dedicated to funding freight projects, with ``special 
priority [given] for projects of national significance.'' As you know, 
Congress established in SAFETEA-LU a program that funds projects of 
national and regional significance, but without a priority for freight 
projects. How do you see this program as different from the one 
established in SAFETEA-LU?
    Answer. The Projects of National and Regional Significance (PNRS), 
created in SAFETEA-LU, is fundamentally different from the Coalition's 
proposal. PNRS was created specifically to fund individual projects 
that are considered to be national and/or regional is scope. In 
practice, PNRS funds were earmarked for specific projects. The 
Coalition's proposal, in contrast, focuses on the developing nation's 
multimodal, interconnected freight system and would establish a trust 
fund and a program to support that system.
    Further, PNRS funds are only available to projects that meet Title 
23 requirements. However, the freight system is broader than Title 23, 
and the Coalition's proposal would expand eligibility to encompass all 
modes of freight movement to create the most efficient, effective 
network along which to move goods.
    PNRS focuses on funding ``critical high-cost transportation 
infrastructure facilities'', which tends to mean large scale `mega 
projects'. However, the connections between the modes are key and our 
program provides for smaller scale projects that, while not necessarily 
`nationally significant' are still vital to the efficient flow of goods 
across the country, providing vital linkages and access to larger 
freight facilities.
    Also, the system approach that CAGTC is promoting requires the 
creation of a freight user fee in order to fund the improvements. As we 
envision this fee being assessed against all users of the freight 
system, the broader eligibility discussed above becomes more 
appropriate.
    Finally, while both PNRS and CAGTC's proposal call for the merit-
based distribution of funds, PNRS was earmarked entirely. Once DOT 
finished developing distribution criteria, there were no funds left. 
The U.S. Congress and Obama Administration have emphasized making the 
right investments in infrastructure. Those investments should be in 
areas with the greatest potential for generating growth, jobs, and 
providing the best public benefit. Making investments for the 
betterment of the economy will not come solely from our congressional 
leaders, even though the designation of `earmarks' to fund research or 
projects have benefited states in the past. We suggest that earmarking 
bypasses the role of `merit review' and `competition' in ensuring 
quality and reduces the ability of funding agencies to carry out a 
coherent investment strategy.

    Question 2. Do you see an opportunity to shift freight from the 
surface transportation network to the waterways? How could Congress 
encourage these opportunities?
    Answer. If greater investment is made in the Nation's water 
infrastructure, there is certainly opportunity to shift some freight 
off the highways and on to the waterways. However, the goal should not 
be to advantage one mode over the other, but instead to fund and build 
an efficient network, interconnected and interdependent. Congress 
should make dedicated funding available to all modes of freight 
projects and allow regional geography and community factors determine 
the best solutions for goods movement in any given area.

    Question 3. Are the waterways prepared to handle additional freight 
capacity?
    Answer. In today's economy, meeting the transportation requirements 
of the 21st century require a much larger modal mix with both Federal 
and state involvement. This means adopting a regional system 
perspective between the modes, i.e., rail, truck, marine vessel, 
aviation and pipeline, that works to improve modal performance by 
utilizing corridor operations. Too often we study specific modes, 
taking a narrow approach to one industry and service. Transportation 
plays a central role in linking regions and the world. The Southeast, 
and the Nation for that matter, depend on a transportation system that 
functions seamlessly. Transportation connects people to jobs, family, 
medical care, entertainment, education and the goods needed for 
everyday life.
    A multimodal approach is recommended since there is no single 
Federal agency to interconnect and consolidate all the issues involving 
the different modes of transportation. This is why the Mississippi 
Department of Transportation created the Freight, Rails, Ports & 
Waterway Division, a unique branch of the department and one of only a 
handful of state departments of transportation that operate a 
multimodal program. Its mission is to create a comprehensive and 
coordinated state multimodal program to facilitate freight movement 
between local, national, and international markets. The division was 
formed to address the growing demand for freight transportation, to 
review and to improve the capacity of the state's rail and water 
transportation systems. Combined, this division has acted as a 
mechanism, to better connect, develop, and assure a program that will 
maximize use of the existing facilities and optimize integration and 
coordinate modes of transportation. This includes the combined 
utilization of both government owned and privately owned resources. 
Other states in the region have other multimodal programs intended to 
provide necessary funding and support for multimodal projects.

    Question 4. What are the benefits of increasing the use of waterway 
transportation to help to move freight?
    Answer. By investing in the Nation's waterways, the Congress will 
be providing another option for shippers to use when moving goods. Use 
of various inland water routes can provide more economical routes for 
the movement of goods. It can also provide a more logical path from 
point A to point B. When shipments can travel by water, and the 
infrastructure is available to do so, trucks are moved off the highways 
and onto the country's inland waterways, reducing congestion and 
emissions. However, the Nation's inland waterways system is only a 
piece of a larger puzzle. Without investments in roads, railroads, and 
intermodal connectors, shifting freight to the Nation's waterways will 
only reroute congestion to newly discovered chokepoints along the 
supply chain.
                                 ______
                                 
Response to Written Questions Submitted by Hon. John D. Rockefeller IV 
                           to John P. Clancey

    Question 1. As the U.S. increases its waterborne international 
trade, are you seeing any negative effects of the increased demand on 
our ports and freight system? If yes, what are you seeing and what can 
be done to improve the situation?
    Answer. But for the recent economic recession, our U.S. west coast 
ports were on track to be at maximum capacity by 2012. And the pressure 
on intermodal rail service to the mid-west and east coast had already 
caused problematic and costly service interruptions and delays in 2006-
7. This meant that U.S. importers were already diverting traffic around 
the traditional but heavily congested west coast ports through Canada, 
Mexico, and using the all-water service through the Suez Canal to the 
East Coast.
    Global growth should eventually return, albeit at lower rates, than 
we had grown accustomed to over the previous 2-3 decades. But even 
moderate economic growth could easily max out the U.S. freight moving 
capacity by 2015. So to address this critical concern and prevent the 
drag on our economy that an inefficient freight infrastructure system 
would cause we need:

   A national freight strategy that designates a limited number 
        of infrastructure corridors/projects as assets of national 
        significance, allowing them to be built quickly and efficiently 
        outside the normal funding and developmental process;

   A thorough integration of maritime and intermodal projects 
        into the overall national transportation strategy. The 
        resurrection of an Office of Intermodalism within DOT that has 
        authority and funding to see that the national freight strategy 
        is implemented would be an excellent first step.

   The encouragement of maritime and waterway solutions (like 
        coastal shipping) that reduce highway use and congestion while 
        reducing the impact of freight movement on the environment.

    Question 2. How important is investing in our Nation's port 
infrastructure to your business and what are the costs associated with 
putting it off?
    Answer. Judicious investment in America's ports is a critical 
component of an efficient freight movement strategy in America. But the 
investment must be guided by a well-reasoned national strategy instead 
of the current inefficient competition among ports and their political 
representatives. Indeed, not every port in America needs a 50' draft to 
accommodate the larger vessels being built today. But we do need a 
couple of ports on the west coast and a couple on the east coast that 
can take vessels requiring 50-55, of water. Similarly, we need highly 
efficient, high-capacity connecting intermodal infrastructure to those 
key ports . . . but not to every port.
    The costs of deferring these projects will disadvantage the 
American economy as it tries to recover from the global economic 
malaise. Additionally, infrastructure projects are an effective way to 
stimulate the creation of jobs not only in port cities but across the 
country.

    Question 3. What types of port facility modernization efforts do 
you recommend in order to improve the efficiencies of our freight 
transportation system?
    Answer. As mentioned above, the need for government designated 
freight-moving corridors should specify requirements for:

   a limited number of strategically positioned deep-water 
        (50,+) ports with efficient intermodal connections to rail and 
        highway corridors;

   on-dock rail facilities;

   lift-off/lift-on and roll-off/roll-on facilities for maximum 
        coastal shipping flexibility.

                                  
