[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]


 
    HOW THE CHANGING ENERGY MARKETS WILL AFFECT U.S. TRANSPORTATION

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

                                (114-3)

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                       RAILROADS, PIPELINES, AND
                          HAZARDOUS MATERIALS

                                 OF THE

                              COMMITTEE ON
                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                            FEBRUARY 3, 2015

                               __________

                       Printed for the use of the
             Committee on Transportation and Infrastructure
             
             
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             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                  BILL SHUSTER, Pennsylvania, Chairman

DON YOUNG, Alaska                    PETER A. DeFAZIO, Oregon
JOHN J. DUNCAN, Jr., Tennessee,      ELEANOR HOLMES NORTON, District of 
  Vice Chair                         Columbia
JOHN L. MICA, Florida                JERROLD NADLER, New York
FRANK A. LoBIONDO, New Jersey        CORRINE BROWN, Florida
SAM GRAVES, Missouri                 EDDIE BERNICE JOHNSON, Texas
CANDICE S. MILLER, Michigan          ELIJAH E. CUMMINGS, Maryland
DUNCAN HUNTER, California            RICK LARSEN, Washington
ERIC A. ``RICK'' CRAWFORD, Arkansas  MICHAEL E. CAPUANO, Massachusetts
LOU BARLETTA, Pennsylvania           GRACE F. NAPOLITANO, California
BLAKE FARENTHOLD, Texas              DANIEL LIPINSKI, Illinois
BOB GIBBS, Ohio                      STEVE COHEN, Tennessee
RICHARD L. HANNA, New York           ALBIO SIRES, New Jersey
DANIEL WEBSTER, Florida              DONNA F. EDWARDS, Maryland
JEFF DENHAM, California              JOHN GARAMENDI, California
REID J. RIBBLE, Wisconsin            ANDRE CARSON, Indiana
THOMAS MASSIE, Kentucky              JANICE HAHN, California
TOM RICE, South Carolina             RICHARD M. NOLAN, Minnesota
MARK MEADOWS, North Carolina         ANN KIRKPATRICK, Arizona
SCOTT PERRY, Pennsylvania            DINA TITUS, Nevada
RODNEY DAVIS, Illinois               SEAN PATRICK MALONEY, New York
MARK SANFORD, South Carolina         ELIZABETH H. ESTY, Connecticut
ROB WOODALL, Georgia                 LOIS FRANKEL, Florida
TODD ROKITA, Indiana                 CHERI BUSTOS, Illinois
JOHN KATKO, New York                 JARED HUFFMAN, California
BRIAN BABIN, Texas                   JULIA BROWNLEY, California
CRESENT HARDY, Nevada
RYAN A. COSTELLO, Pennsylvania
GARRET GRAVES, Louisiana
MIMI WALTERS, California
BARBARA COMSTOCK, Virginia
CARLOS CURBELO, Florida
DAVID ROUZER, North Carolina
LEE M. ZELDIN, New York

                                  (ii)

  
     Subcommittee on Railroads, Pipelines, and Hazardous Materials

                   JEFF DENHAM, California, Chairman

JOHN J. DUNCAN, Jr., Tennessee       MICHAEL E. CAPUANO, Massachusetts
JOHN L. MICA, Florida                CORRINE BROWN, Florida
SAM GRAVES, Missouri                 DANIEL LIPINSKI, Illinois
CANDICE S. MILLER, Michigan          JERROLD NADLER, New York
LOU BARLETTA, Pennsylvania           ELIJAH E. CUMMINGS, Maryland
BLAKE FARENTHOLD, Texas              RICK LARSEN, Washington
RICHARD L. HANNA, New York           STEVE COHEN, Tennessee
DANIEL WEBSTER, Florida              ALBIO SIRES, New Jersey
TOM RICE, South Carolina             RICHARD M. NOLAN, Minnesota
SCOTT PERRY, Pennsylvania            ELIZABETH H. ESTY, Connecticut
TODD ROKITA, Indiana                 GRACE F. NAPOLITANO, California
JOHN KATKO, New York                 JANICE HAHN, California
BRIAN BABIN, Texas                   PETER A. DeFAZIO, Oregon (Ex 
CRESENT HARDY, Nevada                Officio)
MIMI WALTERS, California
LEE M. ZELDIN, New York
BILL SHUSTER, Pennsylvania (Ex 
Officio)

                                 (iii)

                                CONTENTS

                                                                   Page

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

                               WITNESSES

Jason M. Thomas, Ph.D., CFA, Managing Director and Director of 
  Research, The Carlyle Group:

    Testimony....................................................     4
    Prepared statement...........................................    40
Jack N. Gerard, President and Chief Executive Officer, American 
  Petroleum Institute:

    Testimony....................................................     4
    Prepared statement...........................................    47
Edward R. Hamberger, President and Chief Executive Officer, 
  Association of American Railroads:

    Testimony....................................................     4
    Prepared statement...........................................    50
    Responses to questions for the record........................    73

        Letter to Illinois Department of Transportation regarding 
          the 
          CREATE Program.........................................    86
        PTC Timeline.............................................    88
        Association of American Railroads, ``AAR Calls for 
          Regulations to Enhance the Safety of Flammable Liquids 
          Transport and Keep the Network Efficient''.............    89
Andrew J. Black, President and Chief Executive Officer, 
  Association of Oil Pipe Lines:

    Testimony....................................................     4
    Prepared statement...........................................    92
Greg Saxton, Senior Vice President and Chief Engineer, The 
  Greenbrier Companies:

    Testimony....................................................     4
    Prepared statement...........................................   101
    Responses to questions for the record........................   109

        Cambridge Systematics, Inc., ``Analysis of Tank Car Fleet 
          Options and Retrofitting Capacity in Connection with 
          Docket No. PHMSA-2012-0082 (HM-251)'' Technical Report, 
          March 20, 2015.........................................   113
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    HOW THE CHANGING ENERGY MARKETS WILL AFFECT U.S. TRANSPORTATION

                              ----------                              


                       TUESDAY, FEBRUARY 3, 2015

                  House of Representatives,
               Subcommittee on Railroads, Pipelines
                           and Hazardous Materials,
            Committee on Transportation and Infrastructure,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:04 a.m. in 
Room 2167, Rayburn House Office Building, Hon. Jeff Denham 
(Chairman of the subcommittee) presiding.
    Mr. Denham. Good morning. The subcommittee will come to 
order. Before we begin I have an administrative item to cover. 
I would like to ask unanimous consent that Representative Sean 
Patrick Maloney be permitted to join the subcommittee for 
today's hearing and ask questions.
    [No response.]
    Mr. Denham. Without objection, so ordered.
    Good morning, and welcome to the first hearing of the 
Subcommittee on Railroads, Pipelines, and Hazardous Materials. 
I want to welcome the new members to our committee, as well as 
Representative Capuano. He is not here yet. They are facing 
still some challenges in the Northeast. But he and I will have 
a great partnership in moving this subcommittee forward.
    We have a full plate ahead of us with passenger rail, 
pipeline safety, and hazmat reauthorizations all up this year. 
I look forward to working on all of these issues with each of 
the members of this committee. We are going to be very busy in 
a very, very bipartisan fashion.
    Over the last decade, this country has undergone an 
unprecedented energy renaissance. Due to American technology 
and construction advances, we are unlocking previously 
unavailable gas and oil resources. This means we no longer have 
huge domestic problems with energy, while also creating good-
paying jobs right here in the United States.
    Oil production in this country is now approaching levels 
not seen since the 1970s, and natural gas production is 
projected to continue its recent growth trends. This helps 
consumers with lower energy prices, and makes America more 
secure by relying less on energy from other countries. However, 
to continue this momentum, our infrastructure needs to keep 
pace with the advances of the energy sector.
    Just about all modes of transportation are ultimately 
involved in the movement of energy products, but railroads and 
pipelines are especially critical. Our freight rail system is 
the envy of the world, transporting over 40 percent of our 
intercity freight, more than any other mode of transportation. 
Freight railroads have long been key to America's energy needs, 
supplying most of the coal used for domestic electricity 
production. However, in the last few years, railroads have also 
been called upon to transport more crude, as pipeline capacity 
has not kept pace with production.
    Like railroads, pipelines have long supplied our Nation's 
energy needs. America's pipeline network is immense: 2.6 
million miles of pipe, transporting natural gas, oil, and 
hazardous materials. This system takes product from the 
production field to refining facilities, and then to the 
American consumer or for export.
    Over the last 25 years, the volume of energy products 
transported by pipelines has increased by one-third. However, 
the rapid development that oil and gas plays in this country 
has outpaced the pipeline network.
    We want to hear today from our witnesses about the 
investments they are making to increase the capacity of our 
rail and pipeline network. We also want to understand how 
Government can be supportive of their efforts, and if there are 
roadblocks, what we can do to remove them.
    In closing, I look forward to hearing from our witnesses.
    At this point I would like to go to Mr. DeFazio for any 
opening statement he may have.
    Mr. DeFazio. Thank you, Mr. Chairman. Mr. Capuano, up in 
Boston, they don't know how to deal with snow, it is such an 
infrequent occurrence. And so he is unduly delayed. But I will 
sit in for a while.
    I want to thank the chairman for calling this hearing. The 
safe transport of oil and gas from the production sites, which 
are becoming more and more dispersed in the U.S. with fracking 
technology, both to refineries and to consumers, is critical.
    Obviously, we have two major means of transport. A massive 
pipeline network, which, at this point, much of it is pretty 
aged: 1950s, 1960s, 1970s major construction booms. It has been 
updated, it has been added to, but there are identified 
problems. We had the Enbridge failure with tar sands crude, a 
Canadian company, exempt from paying into the Oil Spill 
Liability Trust Fund, because it is oil sands, tar sands: a 
stellar ruling by the Internal Revenue Service, that doesn't 
constitute crude oil. And they are still cleaning that one up, 
4 years later. And it was quite some hours before it was known.
    We had the spectacular and very deadly gas explosion in 
California. Subsequently, Congress adopted legislation, the 
Pipeline Safety Regulatory Certainty and Job Creation Act of 
2011.
    Unfortunately, the Pipeline and Hazardous Materials Safety 
Administration has been incapable of implementing any of the 
ordered regulatory reforms. Likewise, even though we have known 
that DOT-111 tank cars are not adequate or safe since 1993, 
PHMSA has yet to promulgate a rule for a new standard. In fact, 
the industry itself is so frustrated that they proposed a new 
standard to the agency. But the agency couldn't even look at 
that and act quickly. It got lost somewhere in the bowels of 
the administration between the agency and the trolls over at 
the Office of Management and Budget who will further delay the 
ruling.
    We need a new standard for railcars, so we can move ahead 
with production. They have managed to mangle the rule by 
merging it together with operational issues, which are much 
more difficult to deal with, and controversial. I have asked 
them to sever the rule. Let's just have a standard for tank 
cars, get it done, get it done now, start the production, 
create jobs here in America, transport the oil more safely. And 
also, by the way, do your job in implementing the 2011 law.
    So, with that, I look forward to hearing from the witnesses 
about how we can more safely transport oil and gas, which is so 
critical to our economy.
    Mr. Denham. Thank you, Mr. DeFazio. I now call on the full 
chairman--full committee chairman, Mr. Shuster.
    Mr. Shuster. Thank you, Chairman Denham. And welcome to our 
witnesses here today. I echo much of what has been said by the 
chairman and the ranking member, so I will keep my statement 
very, very brief.
    As we all know, in production, we are outpacing the world, 
and are the leading producers of oil and gas in the world. And 
that continues to grow. And with that growth, we have to make 
sure that we have the modes of transportation available to move 
those products, and the infrastructure that moves those 
products, whether it is rail, whether it is pipelines, that 
they do it in a very safe manner.
    We will continue to push safety to make sure that that is 
the number-one issue for us. We want to make sure that these 
things move--especially after we have seen a couple of 
incidents--even with those incidents, you still look at the 
safety record, and it is very good. But, as I said, I think we 
can do better.
    My State of Pennsylvania has Marcellus shale gas 
production, which continues to increase. Slowed down now, but 
part of the slowdown is not just the price, but we don't have 
the pipeline in place to move the quantity of gas that is 
necessary. And if we don't make sure that these private 
companies making private investments are able to invest their 
money without Government interference, without Government 
slowdown in many cases, we are not going to have the modes of 
transportation we need to continue to move this energy 
throughout the country.
    I know that the freight rails last year hired 17,000 
people, and there is more growth to come. As we study the 
pipeline needs, if we are making--if those companies are making 
those kinds of investments in the future, they will create 
80,000 to 100,000 jobs a year, as we move forward.
    So, today I am looking forward to hearing from our 
panelists, hear what they have to say, hear how their 
investments are going to be made, and how they are looking at 
the safety that we need to continue to push, and ensure that 
the rail and pipeline network are meeting the needs and, as I 
said, with safety being at the forefront.
    And, with that, I yield back.
    Mr. Denham. Thank you, Mr. Chairman. Now I would like to 
welcome once again our witnesses that are here today: Jason 
Thomas, managing director and director of research for The 
Carlyle Group; Jack Gerard, president and CEO, American 
Petroleum Institute; Ed Hamberger, president and CEO, 
Association of American Railroads; Andrew Black, president and 
CEO, Association of Oil Pipe Lines; and Greg Saxton, senior VP 
and chief engineer of The Greenbrier Companies.
    I ask unanimous consent that our witnesses' full statements 
be included in the record.
    [No response.]
    Mr. Denham. Without objection, so ordered.
    Since your written testimony has been made part of the 
record, the subcommittee would request that you limit your oral 
testimony to 5 minutes.
    Mr. Thomas, you may proceed.

TESTIMONY OF JASON M. THOMAS, PH.D., CFA, MANAGING DIRECTOR AND 
   DIRECTOR OF RESEARCH, THE CARLYLE GROUP; JACK N. GERARD, 
   PRESIDENT AND CHIEF EXECUTIVE OFFICER, AMERICAN PETROLEUM 
 INSTITUTE; EDWARD R. HAMBERGER, PRESIDENT AND CHIEF EXECUTIVE 
 OFFICER, ASSOCIATION OF AMERICAN RAILROADS; ANDREW J. BLACK, 
PRESIDENT AND CHIEF EXECUTIVE OFFICER, ASSOCIATION OF OIL PIPE 
    LINES; AND GREG SAXTON, SENIOR VICE PRESIDENT AND CHIEF 
               ENGINEER, THE GREENBRIER COMPANIES

    Mr. Thomas. Thank you very much. Thank you for the 
opportunity to testify----
    Mr. Denham. Can you pull it closer?
    Mr. Thomas. Thank you. Thank you for the opportunity to 
testify this morning. I am director of research at The 
Carlyle----
    Mr. Denham. So close that it feels really uncomfortable.
    [Laughter.]
    Mr. Thomas. I am sorry, I thought it was immovable. Thank 
you very much for the guidance; I appreciate that.
    So, I am the director of research at The Carlyle Group, 
which is the--one of the largest global alternative asset 
managers. We have about $203 billion under management.
    From our perspective, an investor's perspective, the 
domestic energy revolution has three related, but distinct 
layers.
    The first and most obvious is direct investment in energy 
resources, energy exploration and development companies. These 
investments generally involve the purchase and development of 
acreage or mineral rights.
    The second layer involves investments in the infrastructure 
necessary to transport energy from where it is produced to 
where it is consumed. These investments can be direct 
investments in specific transportation or storage----
    Mr. Denham. Mr. Thomas?
    Mr. Thomas. Yes?
    Mr. Denham. Pull that mic really close to you; I am having 
trouble picking up----
    Mr. Thomas. I am sorry, Mr. Chairman. So, the second, as I 
mentioned, is investments in infrastructure projects to move 
the energy from where it is produced to where it is consumed. 
These can be investments in specific projects, or investments 
in the debt or equity of companies that operate in this space.
    Finally, the third layer--I think that is 
underappreciated--that we focus on is investments in companies 
that are energy-intensive, companies for whom energy accounts 
for a large share of value-added or total costs.
    Carlyle is active in all three layers, through our 
strategic relationship with NGP Energy Capital Management. And 
through our Energy Mezzanine Opportunities Fund, we intend to 
invest $7 billion over the next 3 to 4 years to develop energy 
resources and invest in E&P companies.
    Carlyle invests in energy infrastructure projects and 
companies that own energy infrastructure through our Energy 
Mezzanine Opportunities Fund and our Carlyle Power Partners 
funds.
    Finally, Carlyle invests in energy-intensive businesses 
through our U.S. buyout and growth capital funds. Of special 
note, in 2012 Carlyle Funds partnered with Sunoco to form 
Philadelphia Energy Solutions, which is the longest 
continuously operating oil facility in the U.S., and the 
largest oil refining complex on the U.S. eastern seaboard. And 
since 2013, PES has undertaken a number of capital projects to 
diversify oil supplies, reduce energy cost inputs, and improve 
efficiency. Foremost among those was a high-speed unloading 
rail facility capable of receiving 160,000 barrels of 
domestically produced crude oil per day.
    So, quickly, right now I think the decline in the price of 
oil has a lot of complex origins. And I think that it is 
difficult to make forecasts about how quickly the price is 
going to adjust backward up towards an equilibrium level, and 
it is difficult to know what that equilibrium level happens to 
be.
    But right now I think it is clear that most of the 
attention among the E&P players is focused on reducing costs to 
make production economical, even in light of the decline in the 
price of crude. And also, among investors, looking at the 
potential for distressed opportunities. There is about $730 
billion of bonds outstanding that are linked to E&P companies 
or energy, more generally. And there is a concern that the 
compressed cash flows, in light of the decline in the price of 
oil, and the decline in the collateral value of the acreage, is 
going to create the potential for many bankruptcies, many 
distressed securities. And I think that, for the most part, the 
E&P space is--investors in that space are very focused on 
identifying those opportunities in the next several years.
    As a consequence, I think most of the investment in new 
capacity, new fixed investment, is likely to transition to the 
transportation infrastructure, and then also continued 
investment in companies that make use of low-cost energy. 
Whereas the attractiveness of developing resources, of course, 
depends on the price of the resources, the midstream 
transportation infrastructure can be invariant to the price.
    And then, of course, the returns on new fixed capital among 
companies that burn energy actually increase as the price 
declines. So the dramatic decline in the price of oil, natural 
gas liquids, and then, of course, natural gas, actually 
increases operating profits of energy-intensive businesses, 
petrochemical manufacturers, et cetera. And I would note that 
the master limited partnerships in the midstream space actually 
have a--their returns have a lower correlation with the price 
of oil than the S&P 500, as a whole. So there is no reason to 
suspect that the price of oil is going to dramatically reduce 
their--the interest and attractiveness of investment in that 
space.
    Finally, given time constraints and my inability to use the 
microphone correctly, I would just like to say that the number-
one issue that we would focus on, in terms of transitioning 
investors' focus from E&P and development towards 
infrastructure, would just be a concern for the time associated 
with permitting. From a very investor-centric perspective, an 
additional year-and-a-half actually would reduce the internal 
rate of return for a typical project by about 36 percent. So 
you could take projects that, for a provider of discretionary 
risk capital, look quite attractive, and turn them into a 
project whose returns do not meet your investors' expectations 
and, as a consequence, have to be passed on.
    So, again, I think time is a very important consideration, 
and it can make the difference between attracting capital and 
building interest early in the process, and actually not being 
able to identify capital providers. Thank you very much, Mr. 
Chairman.
    Mr. Denham. Thank you, Mr. Thomas.
    Mr. Gerard, you may proceed.
    Mr. Gerard. Thank you, Mr. Chairman, and Chairman Shuster, 
Ranking Member DeFazio. It is a pleasure to be here with you 
today.
    America's 21st-century energy reality is far different than 
it was just a few short years ago. Gone are the days of 
American energy scarcity and insecurity. Today, the United 
States is the world's leading producer of natural gas, and 
leading refiner of petroleum. And soon our Nation will be--or, 
as some experts already assert, will be the world's number-one 
producer of oil.
    There is a growing awareness that this is a unique American 
moment. It is a moment that marks the transition from endemic 
energy dependence to energy security and global energy 
leadership, both of which have been public goals of every 
President and every Congress since 1970. But to be clear, to 
secure this unique American moment will depend heavily on our 
ability to build necessary infrastructure to achieve our 
Nation's full energy potential.
    Investing in our Nation's infrastructure means more: more 
jobs, more revenue to State, local, and Federal Governments; a 
more dynamic and efficient economy; and an improvement in our 
Nation's trade balance. On the jobs front, an analysis from the 
IHS consulting group found that essential infrastructure 
improvements in just the oil and natural gas area could, over 
the next decade, encourage as much as $1.15 trillion in new, 
private capital investment, support 1.15 million new jobs, and 
add $120 billion, on average, per year to our Nation's GDP.
    This level of potential infrastructure investment eclipses 
the pending highway bill. But if they were to occur together, 
could mean thousands of well-paying jobs, improve our Nation's 
global economic competitiveness at a time we need it most. That 
is why decisions to improve our Nation's electrical grid, 
roads, pipelines, rail freight lines--particularly those built 
by the private sector--should be driven by what is best for the 
American energy consumer, our Nation's economy, and status as a 
global energy superpower.
    In this year of American energy abundance, we must think 
differently when it comes to how and where we invest in our 
Nation's infrastructure. The past year of energy scarcity 
required a silo approach to energy policy, each mode considered 
in isolation and competition with the other modes. In this era 
of energy abundance, we need more of all.
    Investing in our Nation's infrastructure means that 
products from all industries move more efficiently within our 
Nation, which lowers costs to consumers and gives our 
businesses and manufacturers a competitive edge in the global 
marketplace. Given the integral part America's infrastructure 
plays in job creation and economic growth, and our Nation's 
role as an energy leader, globally, our efforts must transcend 
political philosophies and partisan wrangling. Infrastructure 
investment and improvements benefit us all, regardless of our 
political persuasion.
    We agree with what the President said just a few short days 
ago during his State of the Union speech that, ``21st-century 
businesses need 21st-century infrastructure.'' The oil and 
natural gas industry stands ready to work with anyone 
interested in safely and responsibly improving our Nation's 
energy infrastructure so that it supports our Nation's game-
changing energy opportunity to benefit all Americans.
    It is our view that we should adopt policies that sustain 
and expand, not pull back our Nation's drive towards energy 
security, and reject policies that would result in a return to 
scarcity and uncertainty. Together, we have a once-in-a-
generation opportunity to show the world how energy abundance 
can be used as a positive force, and expanding and modernizing 
our infrastructure will be essential to our success.
    As you and your colleagues deliberate on how best to 
improve our Nation's infrastructure, I urge you to consider the 
historic opportunity before us, and to support policies that 
transform this unique American moment into an enduring legacy 
of American energy security and global energy leadership.
    Thank you for the opportunity to testify, and I look 
forward to answering your questions.
    Mr. Denham. Thank you, Mr. Gerard.
    Mr. Hamberger, you may proceed.
    Mr. Hamberger. Thank you, Mr. Chairman, Chairman Shuster, 
Ranking Member DeFazio. And a special recognition to the new 
Members who won their struggle to get a seat on the most 
powerful subcommittee in the House of Representatives.
    As you pointed out, Mr. Chairman, America's freight 
railroads are indeed the envy of the world. They move vast 
amounts of goods, connecting consumers and businesses over a 
140,000-mile network. Importantly, they are privately owned, 
operating almost exclusively on infrastructure that they own, 
build, maintain, and overwhelmingly pay for themselves. That is 
in stark contrast to trucks and barges, who compete against 
railroads for freight traffic, but mainly use infrastructure 
supplied and paid for by the taxpayer.
    The global superiority of U.S. freight railroads is a 
direct result of a balanced economic regulatory system that 
relies on market-based competition to establish rate and 
service standards with a regulatory safety net available to 
rail customers who need it. This balanced regulation has 
allowed our freight railroads to improve their financial 
performance and condition from once very poor conditions to 
much healthier levels today.
    That, in turn, has allowed railroads to pour massive 
amounts of money back into the locomotives, freight cars, 
tracks, bridges, tunnels, and other infrastructure and 
equipment that keep our economy moving. In fact, just 
yesterday, we were able to announce that Class I railroads 
planned to invest $29 billion in 2015. That is on top of the 
$27 billion mentioned by the chairman in 2014, $25 billion in 
2013. Private capital going back into the system. They 
announced that we will plan to hire 15,000 new employees, of 
whom we expect 1 in 5 will have served in the armed forces.
    All told, freight railroads have spent $575 billion of 
private capital since 1980 on improving the performance of 
their infrastructure and equipment. It is often said that our 
Nation's infrastructure is crumbling. But, thanks to their 
massive spending back into the networks, Class I freight 
railroad infrastructure today is in its best overall condition 
ever. As our service challenges of last year indicated, 
however, we just need more of it.
    The challenge for railroads is to ensure that the current 
high quality of rail infrastructure is maintained, and that 
adequate capacity exists in the future to meet our Nation's 
growing needs. This committee has a particularly crucial role 
to play. At a time when you are wrestling with how to fund 
other surface modes, it makes no sense to enact public policies 
that would discourage these private investments in rail 
infrastructure that boost our economy and enhance our Nation's 
economic competitiveness.
    Turning to energy, the huge growth in domestic oil and gas 
production has moved our Nation closer to energy independence. 
The benefits are clear: tens of billions of dollars in reduced 
oil imports from unstable countries whose interests don't 
always match our own; increased economic development, including 
manufacturing jobs; thousands of new well-paying jobs; and, in 
recent months, a sharp decline in gasoline and heating oil 
prices that is the functional equivalent of giving the average 
American household hundreds of dollars in additional spending 
money.
    Railroads have played a key role in delivering these 
benefits. In 2008, Class I railroads originated 9,500 carloads 
of crude oil. Final numbers for 2014 are not yet in, but we 
estimate about 500,000 carloads in 2014. This growth is largely 
because railroads offer capacity where there is none, and the 
flexibility to transport product quickly to different places in 
response to market needs.
    In addition, rail facilities can almost always be expanded 
much more quickly than pipelines or refineries. And, in some 
areas, the ability of a railroad to serve a refinery can make 
the difference between that refinery continuing to operate or 
closing down.
    Railroads devote enormous resources to safe operations, no 
matter what we carry. That said, railroads recognize that more 
work must be done to ensure public confidence in the 
transportation of crude oil, specifically. From 2000 through 
2014, when U.S. railroads originated a total of approximately 
1.33 million carloads of crude oil, 99.995 percent of those 
carloads arrived at their destination without a release caused 
by an accident. In 2014 alone, exactly 7 cars were in an 
accident that released crude oil out of about 500,000. That is 
99.999 percent safety.
    We are not standing still. Addressing accident prevention, 
accident mitigation, and emergency response, railroads, in 
concert with our customers, are helping to ensure that our 
Nation is able to safely and reliably utilize the tremendous 
national asset that domestic crude oil represents. Railroads 
provide a vital link for our farmers, manufacturers, and 
resource producers to both the domestic and global 
marketplaces.
    But the challenges of creating, maintaining, and operating 
a rail system capable of meeting present and future needs will 
require the benefit of effective public policy. We look forward 
to working with this committee to help assure this outcome.
    Thank you, Mr. Chairman. I apologize for running late.
    Mr. Denham. Thank you, Mr. Hamberger.
    Mr. Black, you may proceed.
    Mr. Black. Good morning, Chairman, Ranking Member. I am 
Andy Black, president and CEO of the Association of Oil Pipe 
Lines, AOPL. We represent transmission pipeline operators who 
deliver crude oil, refined products like gasoline, diesel fuel, 
and jet fuel, and natural gas liquids, such as propane and 
ethane. Our pipelines extend 192,000 miles across the U.S., 
safely delivering 14.9 billion barrels of crude oil and energy 
products in 2013.
    Americans benefit when our pipelines deliver the gasoline 
they need to drive to work, commute; the propane they use for 
rural heating, crop drying, and livestock; and the raw 
materials like ethane used for manufacturing. As domestic oil 
production has grown, American pipelines have responded by 
delivering 1.35 billion additional barrels of crude oil per 
year over the last 5 years, with 10,000 miles of new pipeline 
added into service in just the last 4 years.
    Still more pipeline capacity is needed to bring the full 
benefits from increased North American production of crude oil 
to American workers and consumers. In many cases, our existing 
pipeline network needs more capacity to move crude oil from 
producing regions to where it can be manufactured into refined 
products, such as gasoline, and sent to communities that would 
benefit from new supply options.
    And our existing pipeline network needs more capacity to 
move increasing amounts of natural gas liquids, such as ethane, 
to petrochemical plants, where good-paying manufacturing jobs 
produce plastics, chemicals, containers, and a host of other 
consumer products.
    While our Nation needs additional pipeline capacity 
greatly, this is a difficult time to expand pipeline capacity. 
First, pipelines must secure long-term agreements with shippers 
to provide financial support for expansion projects. Second, 
pipeline operators need prompt decisions from Government 
agencies for environmental permits and approvals needed for 
pipeline routes and border crossings. While the multiyear 
delays imposed on the Keystone XL project are well known, some 
other State and Federal permitting decisions are also taking 
longer, growing more complicated, and resulting in unnecessary 
delays.
    While pipeline operators know there is a role for rail 
delivery of crude, pipelines are the best way to transport 
large volumes. A single pipeline can deliver 800,000 barrels 
per day, all day, every day. As much as crude by rail has 
increased over the last few years, the 8.3 billion barrels of 
crude oil delivered by pipeline in 2013 were more than 20 times 
the volumes delivered by rail. Pipelines are also the lowest 
cost way to transport petroleum products, with rates only a 
fraction of other modes.
    Not only are pipelines the safest mode of transportation, 
they are getting safer. Since 1999, the number of releases from 
liquid pipelines is down 50 percent. Incidents due to corrosion 
are down 76 percent since then. These pipeline safety 
improvements are the result of hard work and resources spent by 
pipeline operators.
    In 2013, pipeline operators spent over $2.1 billion 
evaluating, inspecting, and maintaining their pipeline 
infrastructure. Pipeline operators also conducted 1,455 in-line 
inspections covering 47,000 miles of pipeline with so-called 
``smart pigs'' to scan and survey the inside of their 
pipelines.
    Pipeline operators conducted more than 12,000 excavations 
of pipeline segments for further inspection or maintenance in 
2013. Our industrywide safety improvement efforts are embodied 
in the API-AOPL Pipeline Safety Excellence initiative, which 
reflects the shared values and commitment of pipeline operators 
to building and operating safe pipelines.
    Pipeline operators share an industrywide goal of zero 
pipeline incidents. It drives us to constantly examine our 
performance results and continue to improve overall safety.
    Pipeline operators also have a long history of working 
together on safety. Our members may be commercial competitors, 
but they work together to improve safety. Today we are 
releasing the ``2015 API-AOPL Annual Liquids Pipeline Safety 
Performance Report and Strategic Plan.'' It represents the top 
initiatives approved by the leadership of the pipeline industry 
for executive-level attention, support, and resources. This 
year's plan has industrywide goals to, one, improve inspection 
technology capabilities; two, enhance safety threat 
identification and response; three, expand safety culture and 
management practices; and, four, boost response capabilities.
    In 2015 we will undertake strategic initiatives to improve 
cracking inspection technology, and implement new industrywide 
recommended practices for finding and managing pipeline 
cracking, managing leak detection programs, and improving 
emergency planning and response. We would be happy to meet with 
any member of the committee or other staff to review these 
efforts.
    The ongoing North American energy production renaissance is 
bringing tremendous benefits to the American public. Pipelines 
are the best way to transport these benefits, and we will 
continue expanding and working hard to make them even safer. 
Thank you.
    Mr. Denham. Thank you, Mr. Black.
    Mr. Saxton, you may proceed.
    Mr. Saxton. Chairman Denham, Ranking Member DeFazio, 
members of the subcommittee, thank you for the opportunity to 
testify today at this important hearing. My name is Greg 
Saxton, and I am the senior vice president and chief engineer 
for The Greenbrier Companies, a leading supplier of 
transportation equipment and services to the railroad industry. 
I am responsible for all tank car and freight car engineering 
for the four manufacturing facilities Greenbrier operates in 
North America. I also chair the Association of American 
Railroads' Equipment Engineering Committee, and am a member of 
the RSI and AAR Tank Car Committees.
    In recent years the rail supply industry has experienced a 
significant increase in the demand for railcars. Responding to 
the needs of our customers, Greenbrier has made significant 
investments in capital in our manufacturing and repair 
facilities. We have tripled our capacity to perform repairs and 
retrofits. We have 39 railcar repair and retrofit shops, 
including a shop in Modesto, in the chairman's home district. 
And we built 4,000 tank cars last year; we expect to build 
8,000 tank cars this year.
    A key driver in the increased demand for railcars is the 
surge in the volume of crude oil moving by rail. In 2013, U.S. 
rail systems transported over 400,000 carloads of crude oil, up 
from just 9,500 carloads in 2008.
    The rail industry has a very good record of providing safe 
transportation of crude oil. However, the increased volumes and 
demands placed on the network have come with significant safety 
and environmental risks. These risks are highlighted by a 
number of major incidents involving crude oil being transported 
by rail, including a catastrophic fire that caused 47 
fatalities and destroyed part of Lac-Megantic, Quebec, in 2013.
    Contributing to this risk are the tens of thousands of 
outdated legacy DOT-111 tank cars that carry this volatile 
crude oil. The rail industry has acknowledged the need to 
update this rail tank car standard. Nearly 4 years ago, the 
industry and the AAR petitioned the U.S. Government to mandate 
a more robust design, and the industry voluntarily adopted this 
robust standard we call CPC-1232.
    Unfortunately, the Federal Government has still not acted 
on this petition to mandate standards requiring stronger, safer 
tank cars, and the DOT-111 specification remains the 
Government-specified design in the United States. This lack of 
Federal action continues to allow oil to be transported in tank 
cars lacking the latest safety ideas, causing the NTSB to say, 
``the current tank cars moving these flammable liquids are not 
up to the task. It is crucial to strengthen these existing rail 
tank cars.''
    Greenbrier agrees. We strongly urge the Pipeline and 
Hazardous Materials Safety Administration, PHMSA, to adopt its 
proposed option number two contained in the notice of proposed 
rulemaking. Adopting option two as the fixed and final standard 
for new tank cars placed in service after October 1, 2015, is 
key. This should be combined with requiring retrofit of all 
existing tank cars by 2020. This is an aggressive timeline, but 
we believe it is achievable.
    Greenbrier has not waited on the Federal Government to 
design a safer tank car. We are already making major capital 
investments to address this need. We are investing in our 
production capacity to support strong demand for our Tank Car 
of the Future. This car has features that inhibit discharge of 
contents during derailment, to reduce the penetration of the 
tank car shell, and to limit pool fires that can result when 
hazardous contents of the car escape and are ignited. With this 
design, the likelihood of tank car spills in a derailment at 50 
miles per hour can be improved by up to approximately seven to 
eight times, compared to the majority of cars now operating in 
hazardous service in the North American fleet.
    Customer response to the Tank Car of the Future has been 
very positive. We currently have orders for more than 3,500 of 
these cars, and we have begun delivering them to customers. In 
fact, a unit train of more than 100 of these tank cars built to 
this highest safety standard received its initial cargo in 
Bakken crude in the fields of North Dakota very recently. This 
is the option number two car that we would like to see PHMSA 
adopt.
    A final rule establishing clear, robust standards for new 
tank cars and timelines for retrofitting of existing cars will 
permit the industry to make the necessary upgrades to these 
facilities that will make these cars possible.
    Mr. Chairman, thank you for allowing Greenbrier the 
opportunity to share our views on this important topic. We are 
proud to be a player in the Nation's energy renaissance. Thank 
you, sir.
    Mr. Denham. Thank you, Mr. Saxton. Time permitting, we 
should be able to have two rounds of questions here. I will 
start this afternoon--or this morning out.
    Mr. Thomas, despite the recent drop in the price of oil per 
barrel, will there still be a need for significant investment 
in midstream infrastructure?
    Mr. Thomas. Yes. I would say the scale of the opportunity 
is really unchanged. When you think about the risk of--facing 
midstream operators, it is volume-metric, not really related to 
price. It is how much the resource actually goes through the 
pipelines, goes through the rail. And at this stage, I think 
that even the development is slowing, the amount that is 
actually anticipated to go through pipelines, rails, over the 
next few years is unchanged. I think the development cycle is 
likely to be elongated. So the same amount of resources will 
ultimately be developed, it is just going to be over a longer 
period of time at current prices. So, again, I don't see any 
reason to suspect that the needs are changed.
    Also, when you think about the basic economic opportunity, 
it is really related to basis differentials. The notion that 
you are paying--you are receiving prices for gas, for natural 
gas liquids, at the place it is produced that are substantially 
below the market price, and that the profit that can come from 
developing the infrastructure is from reducing those basis 
differentials, that you are actually able to receive what is a 
market-clearing price in other parts of the country.
    Mr. Denham. And, based on where the products are being 
extracted and where they actually need to go, where do you view 
the greatest need in infrastructure improvements, as well as 
new infrastructure?
    Mr. Thomas. Well, first, with the natural gas liquids, most 
of the production, the cracker facilities that actually produce 
the end chemicals, are located in Louisiana, Texas, other parts 
of the Southwest. But then you have most of the wet gas that is 
being produced in Bakken, Marcellus, certainly. So I think that 
connecting those areas is paramount.
    Secondly, just with natural gas, you have prices for 
natural gas in the Northeast that are still quite high, 
relative to where they should be, so you have the connecting 
Marcellus natural gas to the Northeast for households, for 
businesses, that energy infrastructure is greatly needed.
    Again, one final point. With natural gas liquids, I think 
that this is really a national issue, because there just hasn't 
been really much in the way of investment over the last 20 
years, and natural gas liquids really cannot be transported 
over the existing natural gas infrastructure. So that is more 
national. The other two, again, I think it is connecting 
Marcellus and Bakken to the Southwest, Louisiana, Texas, where 
most of the processing facilities lie.
    Mr. Denham. So what type of infrastructure? Rail? 
Pipelines?
    Mr. Thomas. Well, yes, both. But certainly, I think, you 
know, there is going to be an emphasis on the construction of 
pipelines for--prospectively. But, again, I think that--you 
know, we owned a company for a period of time--we were an 
investor in a company, I should say--Genesee & Wyoming, which 
was a short line rail, and that helped with getting the 
Marcellus and Utica shales, transporting liquids and crude. And 
I think that this is going to continue.
    I think, you know, in the fullness of time you would expect 
pipelines--you know, perhaps 12,000 to 15,000 miles of 
pipelines--to account for the natural gas liquids 
transportation. Right now we have about $125 billion of fixed 
investment planned for petrochemicals in the United States. And 
a lot of this is international players moving here because of 
lower feed stock prices. And this is going to be serviced 
largely by pipeline development, in my opinion.
    Mr. Denham. And currently we have 2.6 million miles of 
pipeline. We have added about 10,000 more miles in the last 
year. I mean, how much more is needed? How much capacity is 
needed with that current infrastructure that we have today?
    Mr. Thomas. Well, again, I do want to----
    Mr. Denham. The question is, do we ever catch up?
    Mr. Thomas. Well, I think we have the opportunity to catch 
up, because, again, my impression of the E&P market is focused 
on, now, cost reduction and distress. So there is going to be 
less fixed investment related to development. Now is the 
opportunity for the investment in midstream infrastructure to 
catch up to the past resource development that has occurred. So 
that is the opportunity today.
    And again, I do want to emphasize that natural gas liquids, 
the pipelines associated with the transport for petrochemical 
production, do require a--they cannot simply be transported 
over the existing natural gas infrastructure; they require 
quite a bit of construction on their own. And that market is, 
again, completely dependent on development of transportation 
infrastructure, going forward.
    The investment in the end production is there, it is coming 
online. It is growing this year--the amount--the value of 
facilities the petrochemical space put online has grown by 70 
percent. So it is the--the downstream is there, it is a 
question of whether the midstream and infrastructure will 
ultimately be developed to support that.
    Mr. Denham. Thank you. Mr. DeFazio?
    Mr. DeFazio. Thank you, Mr. Chairman. Is there anybody on 
the panel who disagrees with the need for a more robust rail 
tank car than the DOT-111s?
    [No response.]
    Mr. DeFazio. OK, good. We start there. Now, let's talk 
about how quickly we can move there.
    Now, Mr. Thomas, I assume some of your people are looking 
at investments in railcars, since most railcars are not owned 
by the railroads, they are owned by investors. Is regulatory 
uncertainty regarding a new design holding people back from 
making those investments?
    Mr. Thomas. The problem with uncertainty is that it is very 
difficult to calibrate, in terms of your investment model. So 
you don't know what it ultimately means for----
    Mr. DeFazio. Right. So if we have a--if we had a known 
design, and a time period in which to phase it in, you know, 
people could figure out, you know, how they're going to 
amortize that investment, what the investment is, and decide 
whether or not, rationally, to be in the tank car business or 
not. Right? But right now, without knowing what the design is 
going to be, that is probably causing some hesitation.
    Mr. Thomas. And I would also note that, very often, you can 
have--when you assume a certain level--degree of risk aversion 
among managers, that you could actually have less investment 
because of uncertainty than you do with an almost bad outcome 
with the regulatory.
    Mr. DeFazio. OK, excellent.
    Mr. Hamberger, in--you know, with the rule that is 
proposed, we have both a mix of operations. Has to do with 
braking and speeds and design. Now, do you think--are the 
operations and braking issues going to raise concerns? Have 
they raised concerns?
    Mr. Hamberger. Indeed they have, Mr. DeFazio. But let me 
just expand, if I can, on your first question. I am aware of a 
manager of at least one major tank car leasing company who has 
been told by her lawyers 2 years ago not to spend any money to 
replace the DOT-111s until there is a final rule on what is--
out of PHMSA. So----
    Mr. DeFazio. OK. Thank you.
    Mr. Hamberger [continuing]. To Mr. Thomas's point----
    Mr. DeFazio. That is very helpful.
    Mr. Hamberger [continuing]. That lack of certainty has, in 
fact, reduced----
    Mr. DeFazio. OK. Let me put it this way. Could we expedite 
the rulemaking if it was divided between a design criteria and 
operations issues?
    In fact, when I have asked, ``Why are they combined?'' I am 
basically told, ``Well, we think we are going to have trouble 
with those two, so we want to move it through on the back of 
the tank car.'' Well, I want to get the tank cars in process.
    Mr. Hamberger. If memory serves, I testified in the Senate 
last fall, and recommending exactly that.
    Mr. DeFazio. OK.
    Mr. Hamberger. We need certainty. We have already adopted 
voluntary speed limits. We have already adopted improved 
braking systems. So I think that what Mr. Saxton has indicated 
as well is we need certainty so that the new tank cars can----
    Mr. DeFazio. Right. I mean you are never supposed to ask a 
question you don't know the answer, but, Mr. Saxton, you went 
to Lac-Megantic. Those were DOT-111s, I understand.
    Mr. Saxton. Yes, sir.
    Mr. DeFazio. Do you think there would--I mean that was a 
pretty high-speed incident. Do you think a new tank car design 
would have made a difference in the destruction and the deaths?
    Mr. Saxton. I do believe it would have made a difference. I 
think there would have been fewer breaches. We put 1.6 million 
gallons of crude oil on the ground up there, and I think we 
would have put significantly less amounts of crude on the 
ground if we had had a more robust car.
    Mr. DeFazio. OK. And you used a statistic. I think you said 
at 50 miles per hour. What factor of additional safety did you 
get out of the improved design?
    Mr. Saxton. Seven to eight times.
    Mr. DeFazio. Seven to eight times?
    Mr. Saxton. Less likely to breach----
    Mr. DeFazio. So what does that mean, in terms of 
probability of rupture? One-seventh, one-eighth probability of 
rupture, then?
    Mr. Saxton. Yes, sir. That is exactly right. I definitely 
believe we would have breached a lot fewer cars.
    Mr. DeFazio. OK, great.
    Now, Mr. Black, I just--I think you briefly mentioned it in 
your testimony--I couldn't find it in the written testimony--
but an issue I have is why does it take so long to detect 
leaks? Because we have a number of incidents listed where 
pressures went down, and they actually increased input, because 
they thought maybe there was a problem other than a leak. In 
the case of the Enbridge in Marshall, Michigan, it was 17 
hours. Another Enbridge incident was 3\1/2\ hours. Why do we 
have so much trouble detecting leaks?
    Mr. Black. Well, the Marshall, Michigan, incident was an 
exception. The leak detection system that was in operation 
detected the signs of the leak, but the operators did not 
recognize it was a leak. They thought, in the NTSB 
investigation, it was something else. So they tried to increase 
the pressure in a pipeline to address what they thought it was, 
and they magnified the----
    Mr. DeFazio. So is that operator education? Operator error? 
Is it a problem with the detection system?
    Mr. Black. Control room training. And our industry has 
embarked on a recommended practice for leak detection and 
recognition and response, learning from that incident.
    Mr. DeFazio. OK, thank you. My time has expired. Thank you, 
Mr. Chairman.
    Mr. Denham. Thank you, Mr. DeFazio. Mr. Shuster?
    Mr. Shuster. Thank you very much, Mr. Chairman.
    Mr. Gerard, are there areas of this country that oil and 
gas exploration and extraction have been hindered because of 
the lack of infrastructure? Could you give us a few examples, 
if they are out there?
    Mr. Gerard. Well, clearly, today, Mr. Chairman, as we look 
at this significant expansion that we have occurred, up to 3 
million barrels a day more in oil production, significant 
increases in natural gas, I think, as Mr. Thomas pointed out, 
when you look at the Northeast, you look at your good State and 
the Marcellus shale play, if we could move a lot more of that 
natural gas up into that area, I think you would see the 
impacts to the consumers reduced, and consumers would benefit.
    So, what does that do to production? Well, the production 
is going to stay where, obviously, the market allows it to go, 
just like we are seeing today, in terms of the price of crude 
oil. But fundamentally, that infrastructure, that network to 
move it, makes the system far more efficient.
    So, yes, it does have some impacts, based on investment 
judgments. Where will those dollars go? They will go to the 
road of least resistance. And that is why we are hopeful we can 
move more of the Bakken on the oil side, more of the natural 
gas out of Marcellus to the Northeast and then down to our 
major facilities in the gulf, et cetera.
    Mr. Shuster. Thank you.
    Mr. Black, you said 10,000 miles of pipe in the last 4 
years. Mr. Thomas, you mentioned 12,000 to 15,000 miles of more 
pipelines. What time period is that? In the next 5 years, both 
of you, either of you, how many miles of pipeline do we need to 
build?
    Mr. Thomas. Well, I would say that would be over about a 5- 
to 10-year period. And again----
    Mr. Shuster. A 12,000 to 15,000----
    Mr. Thomas. That is right. And I think that depends on the 
pace of growth.
    I think one of the good things about the decline in the 
price of oil is that you are going to have much greater asset 
utilization. For a period of time it was--you know, if you got 
one anchor shipper that you could just build the pipeline, and 
that--you wouldn't really worry about how much was being used. 
Now there is going to be more attention paid to the amount of 
the asset that is being used, and that is going to lead to less 
risk of overbuilding.
    Mr. Black. The stats that I have for you in terms of 
barrels per day of crude oil and liquids to move towards 
consumers and workers, we have got more than 8 million barrels 
per day of new pipeline capacity. Right now that is either 
under construction, under firm agreements with pipeline 
shippers, or in open season. So pipeline operators continue to 
expand capacity to move these liquids to where they need to go.
    Mr. Shuster. Thanks. Mr. Thomas, you mentioned in your 
written testimony about the delays and the permitting process 
and the costs that can be incurred. Can you talk about some of 
those, the significance those costs can make?
    Mr. Thomas. Sure. When there is a potential investment 
opportunity, and there is interest from a provider of 
discretionary capital, and the--if you have to put the upfront 
money, the amount--the delay is going to be quite considerable. 
Again, if you have a 3-year project, a delay of a year-and-a-
half on top of that is a 36-percent decline in the return.
    Mr. Shuster. What 36-percent decline?
    Mr. Thomas. In the internal rate of return associated with 
that project.
    So, when you are thinking about targeting a 12- to 15-
percent per year return for your investor, a delay could be the 
difference between whether this is an attractive opportunity or 
not. Alternatively, if you want to wait to actually make the 
cash outlay into the future, that means you have to segment 
part of your fund for a future opportunity that may not 
ultimately materialize. That is very difficult to do, because 
you are under pressure from investors, your investors, to put 
as much of the capital to work as quickly as possible.
    So, if you raise money today with the expectation of 
investing over 3 years, it is very difficult to wait 18 months 
for a potential project. So it is just a complication.
    Mr. Shuster. So streamlining the permitting process helps 
those private dollars get into the field and----
    Mr. Thomas. It can----
    Mr. Shuster [continuing]. Build pipeline----
    Mr. Thomas. It can be--again, for a marginal investment, it 
can be the difference between whether it is something that you 
wish to pursue and something that you prefer not to.
    Mr. Shuster. Mr. Hamberger, you mentioned $29 billion, and 
that is a lot of money.
    Mr. Hamberger. Yes, sir.
    Mr. Shuster. But I think that, in perspective, what 
percentage of the rail industry's revenues or profits does that 
$29 billion make up? I think it gives--at least for me, it 
gives me a better understanding of how----
    Mr. Hamberger. I appreciate that. The CAPEX is about 18 
percent of revenue. When you combine the two, it is about 40 
percent of all revenue back into----
    Mr. Shuster. Out of your revenue, not your profits.
    Mr. Hamberger. Out of revenue. Yes, sir.
    Mr. Shuster. Yes. And how does that compare to other 
industries? Utilities industries, the----
    Mr. Hamberger. With respect to CAPEX, per se, the average 
in America is 3.5 percent for all manufacturing. For the last 
decade we have been around 17 to 18 percent.
    Mr. Shuster. Significant amounts----
    Mr. Hamberger. Yes, sir.
    Mr. Shuster. OK, thank you. And I yield back.
    Mr. Denham. Thank you, Mr. Shuster.
    Mr. Larsen, you are recognized for 5 minutes.
    Mr. Larsen. Thank you, Mr. Chairman. I just want to remind 
the panelists. People on the west coast use natural gas and 
oil, too. And we have refineries. You make it sound like 
everything is east of the Mississippi, or at the mouth of it. 
So we got five refineries in Washington State, alone. And in 
the last 2 years, we have gone from zero gallons of crude oil 
transported on rail lines through Washington State to nearly 1 
billion gallons. And that same time, we have seen a decrease in 
oil, crude oil, by tanker by about the same amount. So it is 
almost a one for one. In that same amount of time, the 
pipeline--crude oil from pipelines to the refineries has stayed 
about the same. So we have sort of seen its replacement.
    As a result--and I have talked to several of you about 
this--as a result, we have seen an increase in crude by rail, 
and an increase in the community's knowledge of it, and 
insistence that something be done about it to ensure safety. 
And so, I have a couple of questions on that line.
    And, first, is for Mr. Hamberger. And kind of how would you 
characterize this relationship between your capital investment 
and your maintenance and repair investment in safety? How do 
you talk about the return on investment from the safety 
investment that you make?
    Mr. Hamberger. There is a direct correlation, and I will be 
glad--I think it may actually be in my written testimony, of 
the amount of money spent and the accident rate. A direct 
correlation between a well-maintained railroad and a safe 
railroad.
    Now, it is not just the maintenance, it is also the 
training of the employees. But new equipment is safer. So 
that--and if you go back to the bad old days when we were 
owned--25 percent of the track was in--owned by companies in 
bankruptcy, the Interstate Commerce Commission actually kept 
track of something called standing derailments. Deferred 
maintenance was the hallmark of the day. Deferred maintenance 
is a euphemism for not getting out and taking care of your 
railroad. We don't have deferred maintenance now. And so, there 
is a direct correlation between that spending and safety.
    Mr. Larsen. Yes, thanks. And, Mr. Saxton, the discussion 
Mr. DeFazio and others have brought up about the tank car 
design and such, obviously, if you all are either building new 
tank cars, the ``Tank Car of the Future,'' or retrofitting tank 
cars, that is putting people to work. As well, people who 
aren't currently working today, I assume, and you have to hire 
up.
    In your opinion, can your side of the industry ramp up fast 
enough to do retrofits and to build a ``Tank Car of the 
Future'' to address concerns about a potential shortage of tank 
cars to move crude?
    Mr. Saxton. The short answer to that question is yes. Of 
course, what you are alluding to is the fact that the PHMSA 
document, or proposal, has certain dates by which events have 
to occur. And they are aggressive, but we believe they are 
doable.
    Mr. Larsen. So why do you believe they are doable, and some 
folks say they are not doable?
    Mr. Saxton. Well, for example, last year we built 4,000 
tank cars. This year we will be building 8,000 tank cars. That 
is a lot more to do.
    I have this deep abiding faith in the American economy. But 
I also believe that if we set the bar low, we will not quickly 
do things that we need to do to build safer tank cars. And I 
think it is really incumbent on us to do that. Because, as a 
railroad person, or as someone in the rail industry, if we were 
to have additional derailments that caused more fatalities, I 
think we could lose our franchise, the trust that the American 
people put in us to do this. So I think it is really important 
for us to get on with it. Give us a bar, let us get over it.
    Mr. Larsen. I think if we set it low enough, you will be 
sure to hit it.
    Mr. Saxton. You have it.
    Mr. Larsen. Yes. That is good enough for me. Thanks. Thank 
you, Mr. Chairman.
    Mr. Denham. Thank you, Mr. Larsen.
    Mr. Hanna, you are recognized for 5 minutes.
    Mr. Hanna. Thank you, Chairman.
    I am curious. You mentioned, Mr. Thomas, that if we had a 
better pipeline system, we would have cheaper natural gas in 
certain areas. And you said that, specifically, the price was 
higher than it should be. Natural gas is trading about 2.68 
today, something like that. In those areas that you might be 
speaking of, what would you expect the marginal cost to be to 
the consumer without those improvements?
    Mr. Thomas. Well, I mean, they can be a multiple of the 
Henry Hub price. So, again, it is--the economic potential value 
added for infrastructure investment is not the price so much as 
the differential between the price at Henry Hub and the price 
that you pay at the end market. And you could have a savings 
that actually, in today's market, are three to four times the 
actual spot price.
    So, it can be quite dramatic. And, again, I think that as 
long as those----
    Mr. Hanna. So it is a direct cost to the consumer that 
could be helped with infrastructure.
    Mr. Thomas. Yes.
    Mr. Hanna. Mr. Hamberger, you mentioned that you have 99.95 
percent, seven cars, thousands and thousands of cars out there. 
And yet, it sounds like, from the ridiculous to the sublime, 
with all due respect to Mr. Saxton, that the urgency associated 
with his line of testimony and the actual on-the-ground, 
knowing that you have improved speed, you have improved braking 
conditions on your own, and--what am I missing, here?
    How much, Mr. Saxton, do you think you are going to reduce 
those seven cars with forcing an industry to expedite something 
the way you think it should? And I am not arguing with the idea 
that it needs to be done, just that I am--have a problem with 
the urgency associated with the conversation here.
    So, Mr. Hamberger, would you like to----
    Mr. Hamberger. Let me start. It is a coordinated effort of 
prevention, mitigation, and response, and the tank cars in the 
mitigation piece, when the accident does happen, you want to 
have as safe a tank car that still allows the efficient 
movement of the product.
    As some of us mentioned, we took the initiative in 2011--in 
March of 2011, we petitioned PHMSA to adopt a standard which we 
submitted to them. They delayed. In October of 2011, Jack and 
his members and other shippers agreed to adopt that on a 
voluntary basis, because we wanted to get to the next level of 
safety. We have now agreed to take that even a little bit 
further, from a safety standpoint. And I think where we are--
where I am, at least--is tank car owners don't know what to 
order. And so, instead of ordering even the new voluntary 
agreement that we reached, they are waiting for PHMSA to decide 
what the regulatory standard is going to be.
    And so, meanwhile, the 2011s are still being used. The 
number I have is that if the tank car that API and AAR 
recommended in our joint comments in the regulatory process 
last fall is adopted, it would reduce the probability of a 
release in an accident by 81 percent. That is a pretty good 
safety improvement, and we just need to know that that is the 
standard that DOT----
    Mr. Hanna. To be fair to Mr. Saxton, maybe you would like 
to weigh in. I----
    Mr. Saxton. Well, first, I want to agree with everything 
Mr. Hamberger has said. I want to point out a couple nuances 
here.
    It has already been testified that at least one major 
leasing company will not order any of these new cars until 
regulatory certainty occurs. It is important to realize the 
railroads are common carriers. When a shipper--and, Mr. 
Hamberger, correct me if I get any of this wrong--when a 
shipper presents a properly packaged commodity to the 
railroad--in this case, often crude oil, for example--if it 
meets DOT standards, the railroad has to move it.
    So, you have got to get beyond this uncertainty regarding 
the car that will be required in the future. Because economic 
forces, the market, will crush an overpackaged commodity, 
eventually. It will have to go to the cheapest commodity car. 
So that is what we are here, asking you for.
    For over 20 years, we have been doing this dance, according 
to NTSB, and I agree.
    Mr. Hanna. Sure. I just want to mention, too, that the 
House passed H.R. 161, the Pipeline Reform Act, which seeks to 
take from 558 days, which is the current permit process, down 
to under a year. So what you are asking for is in the works 
right now, in the House.
    So, thank you. My time has expired.
    Mr. Denham. Thank you, Mr. Hanna.
    Mr. Sires. No?
    Mr. Cohen.
    Mr. Cohen. Thank you, Mr. Chair. Mr. Hamberger, you have 
testified that railroads are 99.99 percent safe. And Mr. Black 
said that the most--the safest way to transport is by pipeline. 
Is he 100 percent safe, or is he somewhere between 99.99 and 
100, or is he just wrong?
    Mr. Hamberger. We have statisticians that are taking a 
look, and I think we are arguing about decimal points here. The 
fact of the matter is we are safe, pipelines are safe, and this 
product has to move, and is a good news story that is leading 
this country to energy independence.
    And so, we are not quibbling over thousandths of a percent. 
I think we are both very safe and trying to get safer.
    Mr. Cohen. If something happens with the railroad, and you 
have a train derail, you have got a limited amount of oil that 
is at risk. But--could risk the public, if so many cars lose 
their load. Pipeline has a problem, it is unlimited, is it not?
    Mr. Black. In the event of a pipeline release, the operator 
turns off power to the pump stations and isolates--and turns 
off valves to isolate the amount of the release, limiting the 
amount that can be released. When a pipeline operator responds 
properly to an incident, it is a small amount of barrels that 
are released.
    Mr. Cohen. Is that what happened in the Enbridge spill? Was 
there a limited amount of oil? Obviously, it was limited, 
because it is still not going on. But was it not a great 
quantity?
    Mr. Black. Correct. Pipeline operators want to properly 
detect the release and begin to respond. In that case, they did 
not. That is the exception. A lot of learnings have occurred 
from that. We have had a lot of investments in leak detection 
technologies and recommended practices being developed at API 
on several different issues to minimize pipeline releases and 
improve responses.
    Mr. Cohen. Mr. Black, the EPA has stated that tar sands 
poses serious environmental risks, and more serious than other 
crude oils. Do you agree or disagree that tar sands is a more 
serious environmental risk than other crude oils?
    Mr. Black. I disagree. It is like any heavy crude oil. 
National Academy of Sciences is studying that issue right now. 
They have already studied one issue about whether it is more 
corrosive inside a pipeline. An expert review panel concluded 
that it was not.
    Mr. Cohen. So you don't agree with the opinion that tar 
sands, environmentally, are more likely to affect the 
environment if there is a spill.
    Mr. Black. Behaves like any other heavy crude oil.
    Mr. Cohen. Do you believe tar sands--right now they have an 
exemption from contributing to the fund that we have on--Oil 
Spill Liability Trust Fund. Do you think that liability is 
appropriate?
    Mr. Black. Well, I want to reassure you that any pipeline 
operator is responsible for any release, and the Oil Spill 
Liability Trust Fund will apply in any release.
    Now, the IRS, the ruling that Mr. DeFazio mentioned, has 
apparently given a private ruling that some importers of crude 
oil don't pay into the Oil Spill Liability Trust Fund. But, 
regardless of what is carried, if there is a release from a 
pipeline, the pipeline operator is financially responsible, and 
the Oil Spill Liability Trust Fund is there, as a backup, for 
that on-scene Federal coordinator, or for any claims. There is 
no exemption of that. It is just a question of what importers 
pay the per-barrel excise tax into the fund. I don't have a 
position on that.
    Mr. Cohen. Mr. Hamberger, there are several cities in this 
country that are significant railroad centers. Which one is the 
best city for railroads?
    [Laughter.]
    Mr. Hamberger. I feel confident in saying that Memphis 
ranks right up there, sir.
    Mr. Cohen. Exactly. That is what I thought. Absolutely, 
positively. I yield back the balance of my time.
    Mr. Denham. Thank you, Mr. Cohen.
    Mr. Hardy, you are recognized for 5 minutes.
    Mr. Hardy. Thank you, Mr. Chair.
    Mr. Thomas, thank you for supplying your expert analysis on 
the energy markets. In your testimony you stated that there are 
roughly five reasons for the drop in oil prices. You state that 
the current spot price is roughly about $45. I was wondering if 
you could expand on your analysis of and discuss how the 
decrease in prices might be affecting natural gas.
    Mr. Thomas. Yes. Well, let me--first, I think that the--
there is lots of moving parts. And that is why I think it is so 
difficult to make a judgment as to where the price is 
ultimately going to end up, or how quickly it is going to get 
there.
    One of the issues with respect to natural gas is that, very 
often, in wet plays you have economies of scope, so that the 
price of natural gas, the--is less--it has less of an impact on 
your interest in continuing the development, because you are 
also getting liquids associated with that. And then the liquids 
can be sent to different end markets. There is also associated 
gas that you can get with oil production, so that there is, 
again, economies of scopes that you are--you are getting more 
than a single product. The total revenue you are getting out of 
the resource development is greater than any one product.
    Right now, I think that the increase in the foreign 
exchange value of the U.S. dollar, which has increased by about 
12 percent over the last year, is playing a big role, and 
perhaps a role that is less appreciated by market participants. 
And if you look at the price of iron ore, copper, natural gas, 
other commodities, you see a decline. The price of diamonds is 
another example, which has declined by 9 or 10 percent, again, 
roughly in line with the decline with the increase in the 
foreign exchange value of the dollar.
    So, I would say that that seems to be playing a role, as 
well. And then, again, just to the extent that the decline in 
some of the natural gas liquids, you see about a 60 percent 
decline in some of the spot prices with natural gas liquids 
that has come down with the price of oil, as well. So these 
markets are very closely related.
    Mr. Hardy. Thank you. Followup on that question, you state 
in your testimony that credit spreads on energy-related high-
yield bonds have doubled over the past year, and that there is 
a potential for a significant default risk. A 5-percent 
reduction in the GDP is not a small number.
    Mr. Thomas. No, 50 basis points, excuse me. Five-tenths of 
a percent.
    Mr. Hardy. Five-tenths of a percent?
    Mr. Thomas. Yes. No, I think that it is a real risk. If you 
look at--there was about $30 billion of annual high-yield bond 
issuance to support energy development. So E&P companies have 
now about $205 billion high-yield bonds outstanding. The total 
market for E&P-linked credit is about $730 billion. This credit 
was underwritten at prices that are obviously very different 
than those today. I think, in most cases, probably expectations 
for a barrel of oil of $80.
    So, you know, if you think about a 70 loan-to-value ratio, 
that there is a lot of acreage that is potentially under water, 
where the decline in the value of oil has--means that the 
underlying collateral is worth less than the face value of the 
outstanding loan. And if prices continue to be $50 per barrel 
for the next 2 years or so, I think the potential for defaults 
is very, very high.
    Mr. Hardy. Thank you. I want to change direction just a 
little bit, and discuss the regulatory process. You mentioned 
that in the GAO report, the case that the interstate natural 
gas pipelines averages about 558 days between pre-filing 
certification. This seems burdensome and unruly, I guess. Is 
there anything that we can do in this process to help speed 
that up? And I don't know whether you would like to answer 
that, or Mr.--thank you.
    Mr. Thomas. I would defer to other panelists. I would just 
say that, you know, to the extent that you can eliminate 
sequential reviews and have them concurrent would, to me--just 
to make sure that you have the same degree of supervision and 
the same degree of oversight, but that it doesn't occur 
sequentially to delay the ultimate approval or denial.
    Mr. Black. That legislation applies to natural gas liquids, 
not the liquids pipelines that I represent. But the spirit is 
the same. We need decisionmaking, whether it is Federal or 
State, to be more timely, so that pipeline operators can 
respond, and not have these unnecessary delays.
    Mr. Hardy. Thank you, Mr. Chairman.
    Mr. Denham. Thank you, Mr. Hardy.
    Mrs. Napolitano?
    Mrs. Napolitano. Thank you, Mr. Chairman. And I have 
multiple questions, so I will try to be fast as I can.
    One of the things that I have encountered in my area, with 
the Alameda Corridor, of course, is the grade separations. How 
much do you invest in grade separations?
    Mr. Hamberger. I don't have an overall number for that. 
Under the highway and DOT regulations, we are required to pay 
up to 10 percent.
    Mrs. Napolitano. Up to 10 percent.
    Mr. Hamberger. Yes.
    Mrs. Napolitano. Currently, how much of that percentage is 
the norm?
    Mr. Hamberger. I don't have an answer for that.
    Mrs. Napolitano. I can give you one. Three percent. And 
that is because the Alameda Corridor, which has 24 grade 
separations, have been working on them for a couple of decades.
    And one of the things that has come up here is the--Mr. 
Saxton, you talked about the 3,500 cars that are being ordered. 
Are those 1232s?
    Mr. Saxton. They are--actually, but I would call them Super 
1232s. They include additional features that would be required 
under option number two.
    Mrs. Napolitano. OK. So they are better than----
    Mr. Saxton. Yes, they are PHMSA's option number two.
    Mrs. Napolitano. OK. And, Mr. Hamberger and Mr. Saxton, on 
page 13 you indicated there were 60,000 new--the 1232s. Yet I 
understand there are 228,000 DOT-111s. Is that correct, 
roughly? I am looking at page 13 of Mr. Hamberger's statement.
    Mr. Hamberger. I am sure it is correct, Mrs. Napolitano, 
yes. But not all of those are in crude service. The DOT-111 is 
the workhorse of the fleet, and carries all sorts of 
commodities.
    Mrs. Napolitano. Mr. Saxton?
    Mr. Saxton. That sounds about right, according to my 
numbers, too, yes.
    Mr. Hamberger. What I have is that there are 19,680 
nonjacketed DOT-111s currently in crude oil, and 3,337 jacketed 
DOT-111s, for a total of 23,000 moving crude right now.
    Mrs. Napolitano. Is there a way to prioritize these when 
you are moving some of the more flammable, or the more----
    Mr. Hamberger. We, unfortunately, pull what the customers 
present to us.
    Mrs. Napolitano. Who owns the cars?
    Mr. Hamberger. The cars are owned either by a leasing 
company, or by the individual shippers.
    Mrs. Napolitano. Not by the railroad?
    Mr. Hamberger. Not by the railroads.
    Mr. Saxton. But there is a way to prioritize this, 
certainly. These--we are talking Class III flammables, and 
there are three packing groups. And Packing Group I is the most 
flammable, Packing Group II, Packing Group III----
    Mrs. Napolitano. Are the Class I railroads the only ones 
that carry it, or Class II and III also carry?
    Mr. Hamberger. Class II and III also carry, yes.
    Mrs. Napolitano. OK. The human error is the leading cause 
of most of train accidents, 38 percent, anyway. Have you done a 
breakdown of what some of those human errors entail? And what 
are you doing to train your staff, your operators, your people, 
to maybe reduce the amount?
    Mr. Hamberger. Well, you put your finger on it. It is a 
matter of training. It is a matter of focus. It is a matter of 
having daily safety briefings. Each railroad is working on 
fatigue management systems. Clearly, fatigue is a part of human 
error. And then, of course, we also are installing Positive 
Train Control, which is there to----
    Mrs. Napolitano. Which is one of my subjects. You mentioned 
in--that the Security and Emergency Response Training Center in 
Pueblo, you are training firefighters. What are you doing to 
train firefighters, or give the information to the handling of 
railroad emergency contact phone numbers to the fire 
department, to the 911s in the areas where you operate heavier 
transportation of these oil--crude oil, et cetera, especially 
coming from the ports and other areas that have a high volume 
of these liquids?
    Mr. Hamberger. We have been moving hazardous material for 
quite some time. This is not new, just because of the crude oil 
development. And so, we have working relationships with the 
communities in which we operate. They have the numbers----
    Mrs. Napolitano. Real time. Real time. Real time. Because 
you--according to this, you let the locals know, but not in 
real time. It is upon request, a general list of the hazards 
transported through the communities, but the information is not 
in real time.
    Mr. Hamberger. The information is not in real time. We have 
just rolled out an AskRail app, where an emergency responder 
can type in the number of the tank of the car, find out what is 
in it, what is the contact, what is the recommended practice--
--
    Mrs. Napolitano. Has that been available--I am sorry, my 
time is short--has that been made available to all those that 
not only train----
    Mr. Hamberger. Yes, it is being made available to the 
emergency responders in the communities in which we operate. By 
April 1st we will have an ability, if you put in one carload, 
one car number, you will know what the entire--contents of the 
entire train----
    Mrs. Napolitano. I would love to have that information, 
sir.
    Mr. Hamberger. Yes, ma'am.
    Mrs. Napolitano. Because we have heavy use of that. We had 
a derailment, a hairline rail fracture, in my area years ago. 
Has that been improved? Have you gotten technology that is 
going to help you determine if there is a chance for derailment 
because of a hairline fracture on the rail?
    Mr. Hamberger. It is something--we are continuing to try to 
develop new technologies. We have been working with Mr. Gerard 
and his members who have similar issues of--steel cracking in 
the North Sea, for example, taking a look at what kinds of 
technologies are there. More inspections, more railcar 
inspections----
    Mrs. Napolitano. Could this be shared with this committee?
    Mr. Hamberger. Of course.
    Mrs. Napolitano. And thank you, Mr. Chair.
    Mr. Denham. Thank you, Mrs. Napolitano.
    Mr. Katko?
    But, real quickly, Mr. Hamberger, can you just clarify? 
There is 125,000 tank cars out there in the fleet. You used a 
23,000 number. What is that number you----
    Mr. Hamberger. Let me submit for the record, but what I 
have is that there are a total number of DOT-111s of 228,000. 
But those in crude oil is 19,680, and for nonjacketed DOT-111s, 
jacketed DOT-3337. These are cars making at least one loaded 
shipment in 2013 through the second quarter of 2014.
    Mr. Denham. Thank you.
    Mr. Katko?
    Mr. Katko. Thank you very much. Mr. Saxton, the CPC-1232 
standard which you are advocating for, is that considered by 
you to be the state of the art for the industry?
    Mr. Saxton. No, sir. We are definitely advocating for the 
option number two car, which PHMSA has proposed. And it is a 
step up from the CPC-1232.
    Mr. Katko. OK. What, in your mind, would be considered 
probably the state of the art for rail transport of crude oil?
    Mr. Saxton. Well, we definitely want option number two. 
That is the best car that we think is available. We do not 
believe the CPC-1232 car is what we want to go with in the 
future. It is better than the plain DOT-111 car, but we need to 
step our game up.
    Mr. Katko. OK. And I have heard a lot of discussion between 
yourself and Mr. Hamberger about the rail industry themselves 
taking it upon themselves to do these improvements. And you 
have done that, is that correct?
    Mr. Saxton. Yes, sir.
    Mr. Katko. Mr. Hamberger?
    Mr. Hamberger. And, to be fair, we have done it in 
conjunction with our customers, including API.
    Mr. Katko. Correct. And I believe you said you spent about 
$28 billion in the last couple years in security improvements. 
Correct?
    Mr. Hamberger. Not security, just----
    Mr. Katko. Safety.
    Mr. Hamberger. Well, in maintenance and capital 
expenditures, which has a direct correlation.
    And, to answer Mr. Larsen's question, I do have in my 
testimony that since 2004 we have increased spending by 40 
percent, and our accident rate has gone down by 40 percent.
    Mr. Katko. Right.
    Mr. Hamberger. So it is a direct correlation.
    Mr. Katko. And that is a good thing, because nobody wants 
liability, correct?
    Mr. Hamberger. We want safety, sir.
    Mr. Katko. That is right. That is right. So I guess that is 
my question. We have a vehicle out there that is available that 
is seven times safer. And I think you said it was 81-percent 
reduction in chances of spillage. So why do you need the 
Government to tell you to do that? It sounds like you are doing 
it yourselves, right?
    Mr. Hamberger. The problem is that the Government--this is 
a voluntary standard. The Government can override that. And if 
they have a rulemaking in which they are considering doing 
something different, if you are buying a tank car to the 
voluntary standard, you are concerned that your investment may 
be--your investment timeline may be cut short if the Government 
declares that that car is no longer----
    Mr. Katko. I understand that. They can move the goal post, 
in effect, correct?
    Mr. Hamberger. And so, what we need is for them to 
establish that goal post, so that the tank car owners can know 
what they are expected to buy.
    Mr. Katko. OK. But perhaps just my background as a former 
litigator for 20 years or 25 years, but isn't there an 
incentive, anyway, regardless of what the Government does, if 
you have a vehicle that is seven times safer, to get that on 
the tracks as soon as possible, regardless of what the 
Government tells you to do?
    Mr. Hamberger. Exactly why we have been doing it since 2011 
on a voluntary basis. Yes, sir.
    Mr. Katko. OK. I yield back my time. Thank you.
    Mr. Denham. Thank you, Mr. Katko.
    Mr. Maloney? You are recognized for 5 minutes.
    Mr. Maloney. Thank you, Mr. Chairman. I want to thank the 
chair and ranking member for allowing me to participate in 
today's hearing.
    I don't sit on this subcommittee; I sit, of course, on the 
full committee. But I do represent an area of New York, in the 
Hudson Valley, which sees an enormous volume of oil being 
moved, both by rail and by barge, down the Hudson River. I want 
to thank Mr. Hamberger for working with my staff.
    In the past you have been so responsive and helpful to us. 
I appreciate that very much. I also appreciate your comments on 
the emphasis you place on safety, and the statistics are 
obviously impressive. Of course, you know, to those of us who 
are concerned about safety, the issue is not the number of 
times it moves safely. The issue is the possibility that one 
train won't. And, in that case, the overwhelming statistics 
don't mean much if it happens in the wrong place and the wrong 
way. And I know you appreciate this very much.
    I just want to direct your attention to the issue not of 
accidents for a moment, but to terrorism. And, of course, 
before 9/11 it had never happened, as far as I know, that 
terrorists had taken control of an aircraft and used it as a 
directed weapon to inflict mass casualties. What concerns me 
very much is the possibility that an oil train could be 
similarly taken and directed and used as a weapon of mass 
destruction.
    These trains move, as you know, through highly populated 
areas. They move through sensitive military assets. I represent 
the U.S. Military Academy at West Point. The train goes right 
under the main building. Can you comment for a minute, please, 
on the steps you are taking to guard against an intentional act 
with respect to one of these trains?
    In particular, what concerns me very much, just the 
extraordinary amount of unguarded track where a shaped charge, 
an IED, could be placed and remotely detonated. And, if that 
were done in the right place at the right time, the results 
could be catastrophic, through no fault of the operator. Not 
through human error, not through an accident. And I am 
interested in the degree to which the upgrades in the cars 
could mitigate that.
    But could you comment for a minute on this issue?
    Mr. Hamberger. Yes, sir. In 2001 we put together a security 
plan for the freight railroads. We have four levels of alert. 
We weren't very creative. We called them alert levels one, two, 
three, and four, instead of a color code. But each level of 
alert is based on information received from the Government.
    We have, and have had since 2002, a full-time railroad 
employee sitting over at the National Joint Terrorism Task 
Force desk, helping analyze data that comes in. We are 
connected, we have an operations center at the AAR here in 
Washington, connected through secure phones to all of the 
dispatch centers of the Class I's. And, of course, the only way 
to--not the only way, but the best way to prevent that is by 
having information and intelligence. Is there a threat? Is 
there a risk? And so that is why we take that very seriously, 
to stay in touch with the agencies.
    The issue of hijacking a train, given the control from the 
dispatch centers, you know, it could happen, but we think that 
we would be able to disable that train before, you know, it 
was----
    Mr. Maloney. Let me just pick up on that point. I mean--and 
just--and I appreciate your answer, I really do. But if, while 
we are speaking, somebody in a small boat travels alongside the 
side of the Hudson River and hikes up a short distance onto the 
rail embankment and digs a trench and puts a shaped charge in 
it and slides back off into the river and detonates by cell 
phone, is there anything to prevent that right now at any point 
along the Hudson River? How would anyone know in time? How 
would anyone prevent it----
    Mr. Hamberger. I cannot speak----
    Mr. Maloney [continuing]. Where and when they wanted. Isn't 
that true?
    Mr. Hamberger. I cannot speak to the specifics of the 
Hudson River bridges. I do know, when we went into Iraq and 
Afghanistan, that we had a very specific plan with the 
Department of Homeland Security to guard certain bridges, rail 
bridges around the country. I don't know whether----
    Mr. Maloney. I am not even speaking about a bridge, but 
just, really, anywhere along the track.
    But just on your last point--and, Mr. Chairman, my--here it 
is. I didn't realize--I don't have the time in front of me, so 
I am sure I will be gaveled down if I exceed it, and deserve to 
be, but the question I have is, with respect to the 
implementation of Positive Train Control, it is an issue I am 
very interested in, following the crash which occurred near my 
district, and it took the life of someone from my home town of 
Cold Spring.
    The fact of the matter is that PTC implementation, which we 
are trying to enhance through measures like opening up Railroad 
Rehabilitation and Improvement Financing, you know, the RRIF 
funds.
    Mr. Hamberger. Yes, sir.
    Mr. Maloney. Isn't it the case that that would be very 
helpful in the situation where we are discussing, where you had 
an instant where a train was being hijacked, or being taken 
control of by a terrorist? Wouldn't we be able to stop that 
train remotely?
    Mr. Hamberger. That would provide another level, another 
layer of control at the dispatch center.
    We are--again, I am sure we will have a hearing on this 
before too long--we have spent over $5 billion trying to 
implement Positive Train Control. We are not dragging our feet 
in any way. We are not going to make the deadline of the end of 
this year, but we are committed to getting it done, and we will 
get it done right.
    Mr. Maloney. I appreciate that. I see my time has expired.
    Thank you, Mr. Chairman.
    Mr. Denham. And thank you, Mr. Maloney. I would like to 
point out that, as he brought up the Passenger Rail Reform and 
Investment Act, which we are going to be seeing here shortly, 
we do address RRIF funding, being able to use that, and PTC-
eligible. So any time we can shout out PRRIA, we like to do so.
    Mr. Maloney. Well, I appreciate that, Mr. Chairman, very 
much. It is very important. Thank you.
    Mr. Denham. Thank you. Now recognize Mr. Webster for 5 
minutes.
    Mr. Webster. Thank you, Mr. Chair, for putting this on. I 
have a question of Mr. Hamberger.
    When you--in your submitted testimony there was a list of--
I think they are sort of do's and don'ts of how we could 
support rail investments. And one of those was public-private 
partnerships.
    Mr. Hamberger. Yes, sir.
    Mr. Webster. And in there you stated that arrangements 
under this, private freight railroads and Government entities 
could combine resources to a project, offer mutually beneficial 
ways to bring about critical transportation problems and solve 
them.
    And I guess, in order to do these mutually beneficial 
critical transportation problems and solve them, there appears 
to be maybe one opportunity, and that is through Railroad 
Rehabilitation and Improvement Financing. Are you familiar with 
that?
    Mr. Hamberger. Yes, I am.
    Mr. Webster. Can you tell me if it has lived up to its 
potential?
    Mr. Hamberger. It has clearly not lived up to its 
potential, Mr. Webster. I must say that the Class I freight 
railroads do not see much benefit and value in the RRIF 
program. They have a balance sheet that enables them to finance 
investments without resorting to RRIF. But it is very important 
for the Class II and Class III railroads.
    What I am told is that the process to go through to get a 
loan approved, the default premium that you have to pay, it 
just makes it very difficult and, actually, more expensive. And 
so, I believe not very many RRIF loans have occurred in the 
life of the program.
    Mr. Webster. How would you retool it to make it work?
    Mr. Hamberger. I would--if I might, sir, respond on that to 
the record, I know there are some specific thoughts, 
particularly that the American Short Line and Regional Railroad 
Association has developed. I don't have those off the top of my 
head, but there are some very specific ways to improve the 
process and lower that risk premium burden.
    Mr. Webster. Well, in your testimony you talked about the 
fact that the dollar amount spent by each entity, the public 
and private, would be based on the benefit that they would 
receive.
    Mr. Hamberger. Yes, sir.
    Mr. Webster. Could you give me an example of benefits for 
both? I know they would not be necessarily mutual--I mean the 
same, but both would have benefits. What would they be?
    Mr. Hamberger. Well, in honor of Mr. Lipinski having just 
arrived, I will use the CREATE program in Chicago, which is one 
of our best public-private partnerships. We actually used a 
model out of UC Berkeley, I believe, which--this is about 10 
years ago--went through and identified public and private 
benefits. We have put a couple of hundred million dollars in, 
the State of Illinois has. There has been some TIGER grant 
money that has gone there. And what that has done is one of the 
best projects. It has taken a passenger track and run it over 
the freight track, so that it is like a grade crossing 
separation, if you will, but for railroads.
    So that--in this particular case, there was a--up to over 
100 trains a day which had to stop, as they--sort of like a 
four-way stop sign intersection, and that has been eliminated, 
and that has helped immensely, both for passenger and for 
freight rail.
    Mr. Webster. Do you think they would be best administered 
by a State, as opposed to the Federal Government? Maybe the 
Federal Government ponies up the money, instead of TIGER 
grant----
    Mr. Hamberger. Yes, sir.
    Mr. Webster [continuing]. Federal money. Would it be better 
that way?
    Mr. Hamberger. Well, in this case, that is exactly the way 
it is run. It is a partnership among the State of Illinois, the 
city of Chicago, and the freight railroads operating in Chicago 
through the AAR. And we have a very close working relationship, 
and, you know, ground rules laid out as to how to go forward, 
if we are going to do other projects.
    And so, it is--the Federal Government has regulatory 
authority, we have got to get approvals from EPA and Federal 
highways. And, because of the TIGER grant, we did get some 
Federal money. But they are not part of the partnership.
    Mr. Webster. Of all of the investment do's that you had in 
here, what percentage do you think public-private partnership 
would play? If we just did them, OK? We just adopt all these. 
Which--what--do you have a percentage of how much----
    Mr. Hamberger. Well, let me put it in this perspective. 
Through the first four years--that is to say 2009 through 2012, 
$600 million of Federal money, through the States, went into 
Federal rail projects. A lot of money, $600 million in 4 years. 
During that same 4-year period, freight railroad spent $90 
billion of their own money--$90 billion private, $600 million 
Federal, in the course of 4 years. So whatever that percentage 
works out to be.
    Mr. Webster. Thank you very much.
    Mr. Hamberger. Thank you.
    Mr. Webster. Yield back.
    Mr. Denham. Thank you, Mr. Webster.
    Mr. Lipinski. And, Mr. Lipinski, before you start, I would 
like to point out that Mr. Webster did mention the RRIF 
process, which, again, in PRRIA we will be streamlining. That 
bill will be coming up here shortly. Any time we get an 
opportunity to talk about PRRIA in our bipartisan work on this 
committee we like to do so. We are looking forward to 
streamlining that, and forcing quicker decisions. Mr. Lipinski?
    Mr. Lipinski. Thank you, Mr. Chairman. And, yes, it is 
great to see bipartisan cooperation here. We are continuing 
that into this Congress. So hopefully we can continue that in a 
lot of things here, on this committee.
    I certainly--I will leave some time at the end for another 
area of questioning, but since we are talking about Chicago--
and I know Mr. Hamberger wasn't serious when he said Memphis 
was the best rail town----
    [Laughter.]
    Mr. Hamberger. Let the record show. I said Memphis is right 
up there.
    Mr. Lipinski. So, CREATE. We have now made a tremendous 
amount of progress on CREATE. But a lot of the big projects are 
left undone. And for me, as someone who has to go home and talk 
to my constituents who are stuck at rail crossings all the 
time--and that is their biggest concern--that is a big--you 
know, that is something I hear about all the time. And we have 
not made great progress on, you know, grade separations.
    The other part of it that is a big thing that is left to 
do, other big projects, are the rail flyovers. So it is the big 
projects, the really big projects, that aren't done yet.
    So, I just wanted to ask you, Mr. Hamberger, what your--if 
you have any particular suggestions for how we get these big 
projects done. Because everybody knows, when it comes to the 
big projects, you have got to have all that money. We got the 
Englewood Flyover project done. It was part of high-speed rail 
funding. I think high-speed rail funding is going to be--we are 
not going to have a whole lot of money there, to say the least, 
I believe, going into the future, unfortunately.
    But--so how are we going to get these big projects done, 
and what are the railroads willing to do, you know, both for 
the flyovers, which are important, but also the grade 
separations? I want you--will you talk about both of those?
    Mr. Hamberger. I will submit for the record a letter I sent 
to the former Secretary of Transportation of the State, making 
a commitment to live up to our obligations on all of those 
grade crossings, as well as to increase the amount of money 
that we had committed to the 75th Street CIP.
    To me, the big question is--your question is tied up in the 
bigger question of what will be the funding for the overall 
surface transportation bill. We are committed to continuing to 
work with the State and with the city.
    We continue to spend our own money in Chicago, as you know, 
so----
    Mr. Lipinski. But to get the big projects done, you are 
going to need big chunks of money. It is not going to--if money 
is just coming in formula funds from the--through the State, 
for example, the State is not going to put huge chunks of money 
towards these projects. So we are going to need big chunks of 
money to get these projects done.
    I mean do you have any recommendations for that, as we move 
forward? What can the Federal Government do? Let me ask you 
that.
    Mr. Hamberger. Well, as I say, to me that is tied up in 
what is the funding level of the bill going to be, whether it 
be a TIGER program, whether it be a project of national 
significance, like there was. And so that really would be 
dictating whether or not there would be big dollars available.
    Mr. Lipinski. Yes, and I certainly think the projects of 
regional national significance--we really need to move forward, 
get that into this next----
    Mr. Hamberger. Yes, sir.
    Mr. Lipinski [continuing]. Next bill that we are working 
on.
    The other thing I want to talk about is, you know, safety 
questions. You know, we have the three-legged approach of 
prevention, mitigation, response for crude-by-rail safety. And 
with regards to response, as you know, I have introduced 
legislation in this Congress that I had put in last Congress to 
move us towards a modernized shipping paper system by 
establishing standards to help both users and responders.
    I appreciate the railroads have put--what you have put 
forth to develop this technology, the paperless system, 
electronic system. Of course, we still aren't at the point 
where we can move away from physical paper, but we are making 
progress to ensure that first responders can access the 
information they need without necessarily having to board a 
locomotive there, in an emergency, which we know could be 
difficult.
    Moreover, the more we develop the technology, the greater 
the opportunity we have to deploy it for other modes. Can you 
tell me at what point you expect the railroads to have a system 
in place that will allow first responders to input the 
identification number of a car for the train?
    Mr. Hamberger. Yes, sir. It is an app we call AskRail. We 
started rolling it out, I guess, last October to communities. 
Currently, it only allows inputting the car number, and it will 
tell you what is in that car, how to deal with the contents of 
that car, and emergency contact information. By April 1st--that 
is, in the next 2 months--we hope to be able to roll out--and 
it is in beta testing now--that if you put in one car number, 
it will give you the entire consist, what is in each car, how 
to deal with that, from a hazardous materials response, and, 
again, the contact information.
    So, that would be just another level. We would still have 
the paper, of course, the telephone number, if you know it, the 
railroad to call the dispatch center. But this would then be a 
third way to get that information to the emergency responder in 
real time.
    Mr. Lipinski. Thank you. I know it is important across the 
country, but especially in the Chicago area, in my district. So 
thank you.
    Mr. Hamberger. Yes, sir.
    Mr. Denham. Thank you, Mr. Lipinski.
    Mr. Barletta?
    Mr. Barletta. Thank you, Mr. Chairman. Last winter my 
constituents suffered severe propane shortages and very high 
heating costs during one of our coldest winters. At the same 
time, in Pennsylvania we have more than 1,000 shut-in wells. 
These Marcellus shale wells are already drilled, and they are 
ready to be tapped. But they are waiting for the infrastructure 
to move the gas.
    Mr. Thomas, what steps does Pennsylvania, this Congress, 
and industry need to take to make sure that we can catch up on 
our infrastructure needs?
    Mr. Thomas. Well, again, I think, just from the perspective 
of a provider of capital for prospective projects, it is to 
ensure that they--the projects can be--that the process of 
permitting can be done in an expeditious manner, so that when 
you are contacted about a potential investment opportunity, 
that there is some certainty about when the construction can 
begin, when it can be completed, and you can make judgments 
about the relative attractiveness of that investment 
opportunity, based on hard numbers with regard to ultimate 
timing.
    Mr. Barletta. And this question is going to go to Mr. Black 
and Mr. Gerard. In my district we have a local steel 
manufacturer, Dura-Bond. They produce pipeline. I have been to 
their facility, and I was very, very impressed by all the 
double and sometimes triple checks that are done to make sure 
that each segment of the pipeline is safe.
    Now, I know that the Chinese steel manufacturers are trying 
to sell their steel pipe here, in the United States, Mr. Black 
and Mr. Gerard. How are we making sure that every segment of 
imported pipe is meeting the same safety inspections and 
standards as United States manufacturers?
    Mr. Black. Well, the quality of the steel is very 
important. A lot of pipeline operators participate in the API 
monogram process that Mr. Gerard's organization runs, where, 
globally, there are specifications on the manufacturing of that 
steel. I know pipeline operators buy a lot of American steel. I 
know in the Keystone XL, it is a majority of American steel.
    Mr. Gerard. I will just add to that. As Andy talked about, 
is we at the API, we were originally established as a standard-
setting organization. So, clearly, the industry will look for 
those with our label or monogram on them, where we actually go 
out and audit manufacturing facilities and give them our 
monogram, if you will, based on their ability to produce to the 
criteria or the requirements necessary to make sure it is good-
quality steel.
    So, we do that, as an industry. And, typically, in 
contractual obligation amongst the various providers and all, 
they will make sure they achieve that standard.
    The other thing I would just add, Mr. Barletta, if I could, 
in response to what you asked Mr. Thomas, the other thing I 
would suggest is we--and back to my earlier opening statement--
when we think about the energy equation in the United States 
today, you talk about your shut-in wells in Pennsylvania and 
elsewhere, we need to think more broadly now, because we need 
to look for the global markets. If we start looking at LNG 
exports--we need to get back to crude export issues--our 
capacity in the United States today is such that we really have 
the ability to be the dominant superpower.
    So, if we want domestic production job creation here at 
home, by allowing for LNG exports, permitting, and all the good 
things you are working on to date, it makes a big difference, 
because it translates right back to the local community, where 
we will produce that steel, we will put those people to work, 
and produce it for a new market that we haven't been in before.
    Mr. Barletta. I agree with you. Pennsylvania can be a 
leader----
    Mr. Gerard. Absolutely.
    Mr. Barletta [continuing]. With all the gas we have there. 
And in my district alone, four major pipelines are being built 
under the backyards and farms of my constituents.
    Mr. Black, what are the pipeline companies doing to ensure 
that these pipelines are safe on my constituents' property?
    Mr. Black. Well, there is a comprehensive series of PHMSA 
construction codes that pipeline operators are expected to 
comply with. Pipelines today are using the high-quality steel, 
most of which, perhaps, is from your area of Pennsylvania. And 
they are employing inspectors to inspect the construction 
activities in pipeline.
    Pipeline operators are x-raying the welds that are done 
there in the trench at a far greater rate than is required by 
Government regulations, to make sure that these pipelines are 
constructed safely. We are embracing a new construction quality 
management system in liquids pipelines. And, before any liquids 
pipeline goes into service, it is subject to a hydrostatic 
pressure test, where the pipeline is pumped to a greater degree 
of pressure than whatever it operated at, commercially, to make 
sure that the manufacturing and construction is solid before 
that pipeline goes into service.
    Mr. Barletta. Thank you.
    Thank you, Mr. Chairman.
    Mr. Denham. Thank you, Mr. Barletta.
    Mr. Hamberger, $25 billion in private capital expenditures 
you have spent--your companies have spent on different types of 
projects. How many jobs has that created? What types of jobs?
    Mr. Hamberger. Well, last year we projected this time that 
we would hire 12,000. I believe we exceeded 15,000 direct jobs. 
But each one of our jobs is responsible for about 4.5 other 
jobs, the Department of Commerce data show.
    And in our own industry, we are hiring across the board, 
whether it is--of course, about 80 percent of them are in the 
operations and maintenance and signal systems, about 20 percent 
would be in the management side of the house. All in, a 
railroad employee benefits and salary--$109,000. So they are 
very good jobs, they are secure jobs. And we have, over the 
years, noticed that when an employee joins the rail industry, 
he or she ends up making it a career, not just a job.
    Mr. Denham. Thank you, Mr. Hamberger. And PRRIA--that is 
the Passenger Rail Reform and Investment Act that we are going 
to be seeing here shortly, a great bipartisan bill that this 
committee has been working on for quite some time--that has a 
number of streamlining provisions in there. Could you explain, 
when that bill is passed, if it were implemented today, what 
those streamlining provisions would--how those would affect the 
dollars that you spend?
    Mr. Hamberger. Indeed. Let me commend you, as the chair of 
the subcommittee and, of course, Mr. Shuster, chair of the full 
committee, for your bipartisan effort to get that out of 
committee last year. Look forward to it moving again this year.
    I think it is a great step. You are directing the Secretary 
to take actions to improve the permitting process. Frankly, 
what Congress did in MAP-21 was actually take those steps. And 
we would urge you to consider that, as well. But what it does 
is it would say that each agency, with review, has to look at 
it simultaneously, not in the seriatim way, not consecutively, 
that there are timelines, that there is a lead agency, and it 
has paid a great return in the highway and transit side.
    My example, if you look out the window, perhaps, you will 
be able to see the Virginia Avenue Tunnel, CSX's main line 
north/south. It is one of two choke points left on their main 
line. The other is the Baltimore and Potomac Tunnel. And it is 
a 100-year-old tunnel. It is a single track, and cannot 
accommodate the double-stack intermodal trains that can take 
300 trucks off the road at one time. They started the 
permitting process 7 years ago. Not one penny of Federal 
dollars. The reason they need an environmental impact statement 
or review is because they are going to close the ramp to 395 
for a week during construction. So that is the Federal 
interest.
    Because of that, it has taken 7 years. They finally got a 
record of decision. You will be surprised. They have been sued. 
They are in court. But they did get their first permit just 
last week. They had $140 million set aside for this project. It 
is now $210 million. So that is $70 million that could have 
gone into other projects.
    And, of course, just the opportunity cost of not having 
that tunnel--and I see it, we look out on the main line every 
day from our office--you will see a train stopped until the--
southbound, until the northbound train--and then it can go 
through. It is a tremendous drag on the fluidity of their 
network. And I think that your permitting reforms would have 
made that be in existence today, rather than still going 
through the permitting process.
    Mr. Denham. And the PRRIA bill that is the bipartisan bill 
that will be coming before this committee here shortly, that--
--
    Mr. Hamberger. Yes, sir. I think that would have helped 
immensely, sir, that bipartisan PRRIA bill. Yes.
    Mr. Denham. And, real quickly, Mr. Gerard and Mr. Black, 
the permitting processes can be a big burden on your members' 
ability to deliver projects. What types of streamlining would 
help your industry? Mr. Gerard first.
    Mr. Gerard. Well, at the risk of stating the obvious, we 
have a similar example that Ed just referenced, called the 
Keystone XL Pipeline.
    [Laughter.]
    Mr. Gerard. I am sure nobody has heard of this before. 
However, we are now in our seventh year of permitting that 
pipeline. It is an $8 billion project, 42,000 jobs are 
dependent upon that final approval, and we are hopeful that 
eventually happens.
    So, when you come back to the broader permitting issues, 
let me suggest one other thing, Mr. Chairman. I would ask you 
to think about it, I know the jurisdiction doesn't necessarily 
lie here. What we are seeing across the country today is there 
is a small group of individuals who are using permitting 
processes and infrastructure as surrogates to stop economic 
activity that they disagree with. And we see this often in the 
energy production arena, particularly the development of oil 
and natural gas, where others have decided, and we hear this 
clearly on the Keystone XL Pipeline. It is not really about the 
pipeline, it is about oil sands production coming out of 
Canada.
    And so, I would just suggest, as you think about 
streamlining the permitting process, which are critically 
important to all of us, that we recognize there are some who 
abuse the processes to accomplish other means. And so we have 
got to tighten up timeframes, we have got to bring certainty to 
the process, so those that are willing to invest the private 
capital Mr. Thomas talked about, holding out for 6, 7, 8 years, 
just like Ed talked about, can come to some conclusion as to a 
go/no-go decision in such a way that we can take that risk 
capital and put it somewhere else.
    So, we would like to work with you and work with some of 
your colleagues and other committees in the Congress. This is 
the big deal, and it directly impacts our ability in the 
broader role of our energy leadership to assert our dominance, 
because we have got to have systems in place that operate 
efficiently.
    Mr. Denham. Thank you, Mr. Gerard.
    Mr. Black?
    Mr. Black. You have heard us talk about this North American 
energy renaissance. As great as it is, there are workers and 
consumers that are not fully benefitting from it, because we 
haven't been able to expand the pipeline infrastructure 
necessary.
    Border crossings, Keystone XL is the poster child for the 
problems we have had right now in getting timely decisions on 
border crossings. After Keystone gets its permit, it may be 
time to revise this process. The House has passed good 
legislation to change what the review is, to--just that border 
crossing facility.
    Second, these Federal agencies that are a part of 
environmental permits, they need to be resourced properly, and 
they need to get the signals from Washington that they can 
approve permits where they are due.
    Mr. Denham. Thank you. And, lastly, Mr. Saxton, I just 
wanted to touch on something that I know that you have a PR 
staff that is very active in working with a lot of op-ed boards 
around the country. So, as they continue to have those 
discussions, I want to make sure they deal in some factual 
information: 125,000 fleet cars, tank cars in the fleet 
currently today. You have the capacity to build, how many, 
8,000 a year?
    Mr. Saxton. Yes, sir. We will build 8,000 this year.
    Mr. Denham. So, if you are building 8,000 a year, the 
backlog would be about a decade to replace the fleet?
    Mr. Saxton. Well, we are not the only builder, sir. We are 
one of----
    Mr. Denham. But you are well ahead of your competition.
    Mr. Saxton. I like to think that, but, from a numbers 
standpoint, we----
    Mr. Denham. According to your previous testimony, you are 
looking forward to seeing a quick 3-year implementation versus 
some of your competitors, who would like to see a 10-year 
implementation. That would lead me to believe that they are 
significantly behind.
    But let me address it from a different standpoint. Canada 
also--I have talked to my counterparts in Canada. They are 
looking at a very similar rule. Would Greenbrier be willing to 
take the position that an American company would sell to 
American companies first, and make sure that, as we are 
expanding across the United States, we actually have the safest 
tank cars?
    Mr. Saxton. Well, you are probably talking to the wrong 
person about that, because I am chief engineer----
    Mr. Denham. I am making sure that the wrong people are not 
talking to the ed boards across the country that would give a 
wrong perception of our current situation.
    I, just like many others, would like to see the 
administration move quicker. And we certainly want to work with 
them. But I want to make sure, as the administration drags 
their feet, or reorganizes, or does some shuffling, that there 
is not a misperception out there in the American public that 
our current tank cars are not safe; that our industry does not 
have a safe record; and, most importantly, that there is not 
a--some magic, quick, fast track to get all of these new tank 
cars online very, very quickly. So I just want to make sure we 
are all singing the same tune, that we have a very safe 
industry, and we want to work together in improving that 
industry.
    Mr. Saxton. Well, sir, we do have a very safe industry. 
What I do want to say is that the dates in the PHMSA proposal 
for both retrofit and new cars, I believe, are doable. And I 
don't think we will have to do just Canada and the United 
States. I think that would be a nightmare. I think we can make 
those goals happen in both countries.
    Mr. Denham. I would like to see the numbers to back that 
up, so that we can make sure that, as we both go out and talk 
to ed boards, that we are making sure that they are hearing the 
correct information.
    We are short on time on finishing this hearing. I will 
allow very quick last lightning round. Mr. Maloney, if you have 
got a couple of things that you would like to add or get 
answered----
    Mr. Maloney. Appreciate that, Mr. Chairman, and appreciate 
the comments about the bipartisan PRRIA legislation that many 
of us are interested in moving through this committee.
    Won't keep you long, gentlemen. I am interested in the 
displacement of oil shipments from pipelines to rail, because 
of delays in permitting or other factors. In the Hudson Valley 
of New York we have seen a massive increase in the amount 
moving by barge and by rail. Is it fair to say that that is--
and each of you could answer, if you choose, or any of you--is 
it fair to say that that is because of an inadequate supply of 
pipelines to move that same crude?
    Mr. Hamberger. I can't speak to the pipeline on capacity on 
the Hudson Valley, but I assume that it is--I don't know if it 
is displaced from current pipeline capacity, but I believe what 
it is doing is replacing what would--used to serve those 
refineries by maritime. And so it is domestic energy coming 
through by rail, because the rail capacity is there, and we 
were able to adjust and adapt to it to move it quickly. But I 
don't know what the----
    Mr. Black. I mean, generally, my understanding is many of 
those refineries were getting Atlantic Basin crude, rather than 
crude from the mid-continent. Railroads have first mover 
advantage in moving new supplies of crude oil to an area.
    So, what you have seen in these early stages is railroads 
moving Bakken crude over to that area. Operators, as they make 
long-term agreements with their customers, may expand pipeline 
capacity and compete with those railroads for the business.
    Mr. Maloney. And so, it is fair to say that the volume 
being moved by rail is related to the volume being moved by 
pipelines, and could either increase or decrease, relative to 
how much we invest in those pipelines in the future.
    Mr. Black. Yes.
    Mr. Maloney. Isn't that a point you just made?
    Mr. Black. Yes.
    Mr. Maloney. Mr. Saxton, real quickly, is there an 
additional benefit in the case of the option two cars, in the 
event of an intentional disrailment, or a derailment, or in 
terms of an explosive charge that is set off? I mean it really 
would make an impact, not just in accidents, but in decreasing 
the damage caused by an intentional terrorist act against one 
of these trains, wouldn't it?
    Mr. Saxton. Well, yes, there is. And the benefit, quite 
frankly, is it utilizes thicker steel. It is that simple. You 
have got more between you and the commodity.
    Mr. Maloney. It is also really not quite that simple. The, 
I believe, major safety and security step up is the requirement 
for a \1/8\-inch jacket and thermal protection, combined with 
the high-capacity pressure-relief valve. What has made these 
accidents--and if there was a security attack--so severe is 
that one car breaches, it catches on fire, it heats up the next 
car, it explodes, and so on.
    And what this new car is designed to do is, as it heats, 
the oil turns into a vapor, it will be spouted through the 
high-capacity pressure-relief valve, the thermal protection 
will keep it from heating too quickly, so that there won't be 
another thermal tear, as they call it. It won't explode, so 
that the only product that will spill is that that occurs in 
the first incident, the first rupture. And that then limits the 
severity. And, to me, that then limits the effect, whether it 
is an accident or a security breach.
    I will yield back.
    Mr. Denham. Thank you, Mr. Maloney.
    Mr. Webster?
    Mr. Webster. Thank you, Mr. Chairman. I just had a followup 
with Mr. Hamberger.
    You had talked about a number, $90 billion, versus $600 
million. I think that was what it was.
    Mr. Hamberger. Yes, sir.
    Mr. Webster. My question is, if we were to increase that, 
or make it a little more balanced, the amount of investment, is 
there a number of return on investment of the money that is put 
up, versus what the economic benefit is?
    Mr. Hamberger. Each railroad, of course, has its own hurdle 
rate as to what they want to get in return for their 
investment. We are an incredibly asset-heavy industry, and so 
we have got about $2.40 of assets out there for every dollar of 
revenue. But that is--again, each company, as it takes a look 
at its CAPEX plan and its maintenance plan, has its own return 
on investment rate. I don't know what it is.
    Mr. Webster. OK. Thank you very much.
    Mr. Denham. Thank you, Mr. Webster.
    Ms. Brown?
    Ms. Brown. Thank you. And thank you, Mr. Chairman. Just one 
quick question.
    First of all, Mr. Hamberger, how are you?
    Mr. Hamberger. I am----
    Ms. Brown. And secondly----
    Mr. Hamberger [continuing]. Glad to see you here.
    Ms. Brown [continuing]. Can you give us--first of all, let 
me just say that I am committed that the Department come up 
with the final rule as soon as possible. And I know that we 
will work together to make sure that happens.
    And can you give us a brief update on the status of 
Positive Train Control?
    Mr. Hamberger. Yes, I can. Thank you, Congresswoman. We--I 
will submit for the record the exact numbers. But we have 
exceeded $5 billion in money spent trying to implement that. We 
are about--between a third and halfway done in actually 
installing on the right-of-way, installing back in the back 
offices and on the locomotives.
    We will not make the 2015 deadline and, as you are well 
aware, one of the unforeseen hurdles that we had there was the 
Federal Communications Commission. We had about a 15-month 
period where we could not actually install antennas. And then, 
to their credit, they now have a process in place. But it is--
takes about 50, 60 days to get an antenna permitted.
    And so, if you count all of that, it is about a 2-year 
delay right there. And so, we would be looking to this 
committee to change the statutory deadline before the end of 
the year by 5 years. And that would allow time to complete the 
installation, but, just as importantly, allow time for the 
continued testing, particularly in places like Chicago--and I 
will say Memphis--where a number of railroads are operating: 
short lines, passenger, Amtrak, commuter rail, Class I's. They 
all have to be able to talk to each other, as they move from 
one track to another with run-through power. You have to make 
sure it works right. If it doesn't work right, it can have a 
safety--negative safety impact, as well as, of course, a 
negative impact on the operation of the network.
    Ms. Brown. Thank you. I yield back my time.
    Mr. Denham. Thank you, Ms. Brown. I would like to thank 
each of our panelists today for their testimony. Your comments 
have been very helpful.
    If there are no further questions, I would ask unanimous 
consent that the record of today's hearing remain open until 
such time as our witnesses have provided answers to any 
questions that may be submitted to them in writing, and 
unanimous consent that the record remain open for 15 days for 
any additional comments and information submitted by Members or 
witnesses to be included in the record of today's hearing.
    [No response.]
    Mr. Denham. We will have a number of questions that we 
would like answers to, as well as the ones that were asked 
today, and we will, as a committee, be reaching out to each of 
you before we have our safety hearing. We will have a number of 
questions that we would like answered prior to that hearing, as 
well.
    Without objection, so ordered. Again, I would like to thank 
our witnesses again for their testimony. If no other Members 
have anything to add, the subcommittee stands adjourned.
    [Whereupon, at 12:04 p.m., the subcommittee was adjourned.]
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