    [Senate Hearing 114-386]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 114-386

                             KEEPING GOODS MOVING
                             IN AMERICA'S HEARTLAND

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

                                  FIELD HEARING

                                   BEFORE THE

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

                                     OF THE

                             COMMITTEE ON COMMERCE,
                          SCIENCE, AND TRANSPORTATION
                              UNITED STATES SENATE

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                  MAY 2, 2016

                                   __________

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

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                           U.S. GOVERNMENT PUBLISHING OFFICE
    22-130 PDF                     WASHINGTON : 2016

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           SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 FIRST SESSION

                       JOHN THUNE, South Dakota, Chairman
    ROGER F. WICKER, Mississippi         BILL NELSON, Florida, Ranking
    ROY BLUNT, Missouri                  MARIA CANTWELL, Washington
    MARCO RUBIO, Florida                 CLAIRE McCASKILL, Missouri
    KELLY AYOTTE, New Hampshire          AMY KLOBUCHAR, Minnesota
    TED CRUZ, Texas                      RICHARD BLUMENTHAL, Connecticut
    DEB FISCHER, Nebraska                BRIAN SCHATZ, Hawaii
    JERRY MORAN, Kansas                  EDWARD MARKEY, Massachusetts
    DAN SULLIVAN, Alaska                 CORY BOOKER, New Jersey
    RON JOHNSON, Wisconsin               TOM UDALL, New Mexico
    DEAN HELLER, Nevada                  JOE MANCHIN III, West Virginia
    CORY GARDNER, Colorado               GARY PETERS, Michigan
    STEVE DAINES, Montana
                           Nick Rossi, Staff Director
                     Adrian Arnakis, Deputy Staff Director
                        Rebecca Seidel, General Counsel
                     Jason Van Beek, Deputy General Counsel
                     Kim Lipsky, Democratic Staff Director
                  Chris Day, Democratic Deputy Staff Director
           Clint Odom, Democratic General Counsel and Policy Director

                                     ------

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

    DEB FISCHER, Nebraska, Chairman      CORY BOOKER, New Jersey, Ranking
    ROGER F. WICKER, Mississippi         MARIA CANTWELL, Washington
    ROY BLUNT, Missouri                  CLAIRE McCASKILL, Missouri
    KELLY AYOTTE, New Hampshire          AMY KLOBUCHAR, Minnesota
    JERRY MORAN, Kansas                  RICHARD BLUMENTHAL, Connecticut
    DAN SULLIVAN, Alaska                 BRIAN SCHATZ, Hawaii
    RON JOHNSON, Wisconsin               EDWARD MARKEY, Massachusetts
    DEAN HELLER, Nevada                  TOM UDALL, New Mexico
    STEVE DAINES, Montana

                               C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on May 2, 2016......................................     1
    Statement of Senator Fischer.....................................     1

                                   Witnesses

    Kyle Schneweis, Director, Nebraska Department of Roads...........     4
        Prepared statement...........................................     6
    Donald E. Overman, Chairman of the Board, Airport Authority,
      County of Scottsbluff, Nebraska................................     9
        Prepared statement...........................................    10
    Deb Cottier, Executive Director, Nebraska Northwest Development
      Corporation; Member, Board of Directors, Heartland Expressway
      Association; and Member, Ports-to-Plains Alliance..............    11
        Prepared statement...........................................    13
    David Freeman, Senior Vice President, Transportation, BNSF
      Railway Company................................................    27
        Prepared statement...........................................    28
    Kevin Kelley, President, Kelley Bean Company.....................    37
        Prepared statement...........................................    39
    Richard B. Brent Holliday, Jr., Chief Executive Officer, Nebraska
      Transport Company..............................................    40
        Prepared statement...........................................    42

                                    Appendix

    Addendum to Statement of Deb Cottier on Behalf of Nebraska
      Northwest Development Corporation, a member of the Heartland
      Expressway
      Association and the Ports-to-Plains Alliance...................    63

                       KEEPING GOODS MOVING IN AMERICA'S HEARTLAND

                                  ----------

                              MONDAY, MAY 2, 2016

                                   U.S. Senate,
             Subcommittee on Surface Transportation and
                Merchant Marine Infrastructure, Safety and Security,
            Committee on Commerce, Science, and Transportation,
                                                       Scottsbluff, NE.
        The Subcommittee met, pursuant to notice, at 10:01 a.m. in
    the Plex Room, the Harms Advanced Technology Center, 2620
    College Park, Western Nebraska Community College, Hon. Deb
    Fischer, Chairman of the Subcommittee, presiding.
        Present: Senator Fischer [presiding].

                OPENING STATEMENT OF HON. DEB FISCHER,
                       U.S. SENATOR FROM NEBRASKA

        Mrs. Fischer. Good morning, everyone. I am so pleased to be
    here in beautiful Scottsbluff, Nebraska for today's Surface
    Transportation and Merchant Marine Infrastructure, Safety and
    Security field hearing.
        Our hearing is entitled ``Keeping Goods Moving in America's
    Heartland.'' I am grateful to the Senate Commerce Committee
    Chairman, John Thune, our neighbor in South Dakota, for
    providing me with the opportunity to convene this hearing and
    bring the U.S. Senate here to Scottsbluff.
        Western Nebraska values safe, efficient, and reliable
    infrastructure, which is critical to the local economy. A
    robust transportation system requires well-maintained roads,
    bridges, railways, and highways to bring our goods to market.
    Without it, manufacturers, agriculture producers, and
    businesses of all sizes cannot offer their products
    domestically or around the world.
        As many of you are aware, Congress passed an important
    five-year highway bill at the end of last year known as the
    Fixing America's Surface Transportation, or the FAST Act. I was
    proud to work with my colleagues on this bipartisan legislation
    and usher in the first multi-year transportation bill in over a
    decade. Accomplishing a long-term highway bill was one of my
    key goals since joining the United States Senate, and I am
    proud to see this victory achieved for the American people.
        The common theme regarding the highway bill is certainty.
    For nearly a decade, Congress was forced to pass 36 short-term
    extensions. Congress kicked the can down the road for 8 years,
    leaving infrastructure projects across the country in limbo.
    With the passage of the FAST Act, states and localities will
    now have certainty to plan and implement projects for the next
    5 years.
        Since my time in the Nebraska Unicameral, I have made
    funding of transportation infrastructure a top priority. Two of
    my accomplishments in the Unicameral were the Build Nebraska
    Act and the State/Federal Dollars Buy-Back Program. Both of
    these laws have led to increased investment for Nebraska's
    infrastructure and have helped local communities start and
    complete vital transportation projects such as the Heartland
    Expressway.
        I brought those Nebraska commonsense solutions with me to
    help craft the Senate's highway bill. I was pleased that
    Nebraskans played a strong role by providing important guidance
    to my office. I have also encouraged key stakeholders from
    Washington to visit Nebraska. Last year I welcomed U.S.
    Transportation Secretary Anthony Foxx to Lincoln, where we
    convened a roundtable at the University of Nebraska Lincoln's
    Transportation Research Center. We were joined there by local
    transportation stakeholders representing the railroad, highway,
    construction, trucking, passenger automobile, and aviation
    industries.
        At this important meeting and at my many listening sessions
    across the state, the message from Nebraskans was loud and
    clear: Our businesses, consumers and families wanted a long-
    term highway bill. They advocated for legislation that reduces
    regulatory burdens, strengthens safety, and increases
    flexibility for our state and our local officials.
        I was pleased to be appointed as a member of the Highway
    Bill Conference Committee, which worked to combine the House
    and the Senate versions in order to craft that final bill. The
    bill includes several provisions which I was proud to author
    and enact in the final legislation. For example, as Chairman of
    the Surface Transportation Subcommittee, I drafted provisions
    to reform the regulatory framework at the Federal Motor Carrier
    Safety Administration, or the FMCSA, which has jurisdiction
    over commercial vehicle safety and operations.
        Commercial carriers and businesses across our state will
    benefit from increased participation, clarity, and also
    transparency within the obscure and the often controversial
    regulatory process at the FMCSA.
        The FAST Act, it also corrected a flawed FMCSA truck safety
    scoring program that stakeholders, including law enforcement
    organizations, were sharply criticizing. Erroneous scores had
    prompted frivolous litigation and caused carriers to lose
    longstanding business contracts.
        Another provision will provide more career opportunities
    for military veterans. Under a new commercial driver pilot
    program, younger returning veterans with commercial driver's
    licenses, those CDLs, will be allowed to operate commercial
    freight vehicles across state lines. This will help to address
    our Nation's serious truck driver shortage while also providing
    work opportunities for those who have served our Nation.
        The FAST Act also offers regulatory relief for agriculture
    producers who transport diesel fuel for equipment. It offers an
    exemption for agricultural retailers, employees, and producers
    from obtaining a hazardous materials driver's license. They
    will no longer require this license when transporting 1,000
    gallons or less of diesel fuel if the container is clearly
    marked ``diesel fuel.''
        Nebraskan families, workers and businesses will soon see
    new highway projects up and running at a faster pace as well.
    This is due to provisions that I championed in the FAST Act
    that will enable stronger coordination between the Nebraska
    Department of Roads and the Federal Highway Administration. In
    key elements of our infrastructure such as rail at grade
    crossings and bridges, they will also see increased investment
    at a faster pace.
        Under this legislation, rural communities in our state will
    have additional opportunities for resources to maintain bridge
    infrastructure through a new streamlined discretionary freight
    grant program. It includes a 20 percent rural and small-project
    set-aside. According to the Department of Roads, Nebraska has
    nearly 3,000 rail grade crossings eligible for public funding.
    The FAST Act will strengthen the resources flowing to states
    like Nebraska to enhance the safety of at-grade rail crossings.
    The FAST Act will assist our railroads and rail workers by
    providing additional oversight of the Federal Railroad
    Administration, or the FRA, as it works with railroads on
    positive train control implementation. The FRA will also be
    required to clarify the safety benefits of the multi-billion-
    dollar electronic braking mandate that was released last year.
        The FAST Act will provide vital transportation resources
    for localities throughout our country, including our rural
    communities here in Western Nebraska. Specifically, it includes
    a new national strategic freight program which will help our
    state prioritize freight traffic and increase safety. The
    program provides states with discretion to direct new funds to
    rural and urban freight corridors with higher commercial
    traffic.
        As states work to develop their freight plans and designate
    corridors, local public and private transportation stakeholders
    across all modes will have the opportunity to participate and
    to provide that valued feedback. First and last mile connectors
    for freights at airports, trucking facilities and rail yards
    will also be eligible for increased investment under this
    national freight program.
        There is still much more work ahead for us as the FAST Act
    takes effect. During our hearing this morning, we will focus on
    the implementation of the highway bill. I hope we can spend
    time focusing in particular on rural transportation and the
    multimodal freight policy program.
        I'm eager to hear your ideas about how Congress can
    continue to strengthen our Nation's transportation system not
    only for our cities and our urban areas but also for rural and
    small communities.
        I would like to thank each member of our panel for taking
    the time out of your work week to be here at this Senate
    hearing. It is an honor to have you before this committee to
    discuss these important matters.
        Our strong panel includes public and private-sector
    representatives from the infrastructure, trucking, agriculture,
    and railroad sectors. We will hear from Nebraska's Director of
    the Department of Roads, Kyle Schneweis--I never get that
    right--Director Schneweis. Mr. Schneweis has worked on a number
    of key initiatives to strengthen Nebraska's transportation
    system. I would also like to point out that the Director and
    his team were critical in guiding my staff as we worked on the
    FAST Act. Thank you.
        We also welcome Deb Cottier, who is currently the Director
    of the Northwest Nebraska Development Corporation in Chadron.
    She has been a strong advocate of completing the Heartland
    Expressway in Western Nebraska, and I am grateful for the
    advice she has provided to my office. We've enjoyed a strong
    working relationship, particularly in developing the highway
    bill. Thank you.
        Grant Holliday is the Chief Executive Officer of the
    Nebraska Transport Company in Gering, Nebraska, which is a
    member of the American Trucking Association. In 1973, the
    Nebraska Transport Company was started with one truck. Today it
    operates with terminals across the Midwest and elsewhere, and I
    look forward to hearing from Mr. Holliday this morning
    regarding the challenges and opportunities facing the trucking
    industry. Thank you.
        Don Overman is the Chairman of the Scottsbluff Western
    Nebraska Regional Airport, and I want to thank Don for his
    crucial insight as we worked on the Senate's bill to
    reauthorize the Federal Aviation Administration. That
    legislation passed the Senate last month. Thank you. Together,
    we were able to secure critical funding for Nebraska's rural
    airports, including a vital provision to ensure that
    Scottsbluff continues to receive airport improvement program
    dollars despite downturns in the annual enplanements. I look
    forward to hearing Don's perspective regarding the airport's
    economic impact for passengers and cargo movements.
        Agriculture stakeholders are being represented today by Mr.
    Kevin Kelley, the President of Kelley Bean Company. Kelley Bean
    was founded in 1927 and sells dry edible beans to global
    markets. Reliable and efficient transportation is critical to
    the company's business model, and it is a privilege to hear
    your perspective as a client of our nation's freight
    transportation system. So, welcome.
        The railroad industry is represented this morning by David
    Freeman, Senior Vice President for Transportation at Burlington
    Northern Santa Fe Railway. Railroads are integral to Nebraska's
    heritage and critical to both the national economy and our way
    of life in this country. We are truly blessed to have the
    world's finest freight rail network. With two major freight
    railroads operating here in Nebraska, I am especially glad to
    hear your remarks about the state of railroads today. Thank
    you.
        Thank you all again for your attendance, and with that I
    would like to begin with your testimonies.
        And we will begin with you, Mr. Director. Welcome.

                STATEMENT OF KYLE SCHNEWEIS, DIRECTOR,
                      NEBRASKA DEPARTMENT OF ROADS

        Mr. Schneweis. Thank you, Senator Fischer. I am Kyle
    Schneweis, Director of the Department of Roads here in
    Nebraska. Thank you for the opportunity today to testify
    regarding the impact of freight transportation on rural
    economies.
        As I traveled Nebraska in my first year as director, I
    heard a lot of excitement about the FAST Act, and this
    legislation really puts America's surface transportation on
    sound footing for the next 5 years. It's a real testament to
    our congressional leaders and a commitment to infrastructure in
    our country.
        Here in Nebraska we are particularly proud of your tireless
    efforts on the Commerce, Science and Transportation Committee
    and the Environment and Public Works Committee. So, thank you,
    Senator Fischer.
        We also appreciate Chairman Thune's interest in promoting
    freight improvements by holding the Subcommittee field hearing
    here in Nebraska today.
        The FAST Act is truly significant in that for the first
    time, formula funding for state DOT freight programs will be
    provided. Over $1 billion is being distributed annually to
    states by the Federal Highway Administration. Here in Nebraska,
    we will receive $8.2 million this Fiscal Year alone. In
    accordance with Federal regulations, these new funds will be
    applied to a wide range of projects and improvement on our
    highway system, including highway and rail grade separations,
    bridge improvements, other capacity projects, and operational
    needs.
        The FAST Act also provides discretionary funding with the
    Nationally Significant Freight and Highway Projects program,
    dubbed ``FASTLANE'' by USDOT. This provides further
    encouragement to us here in Nebraska of Congress's commitment
    to improving our infrastructure, and we at NDOR have taken the
    necessary steps to try to benefit from these advancements.
        These national advancements come at a time where, in
    Nebraska, NDOR is working to improve its strategic approach to
    how infrastructure advancements are made at the state and the
    local level. The Build Nebraska Act, the Transportation
    Innovation Act, both of these include increased emphasis on
    innovation and finding ways to link economic development and
    improve partnerships to positively impact customer satisfaction
    here in Nebraska.
        For the first time we are incorporating public input and
    economic impacts into our project prioritization process. In a
    way, we are rewriting the book on project selection to ensure
    that there is local buy-in, which specifically helps draw out
    the rural concerns that can impact the flow of freight in our
    communities.
        As you know, Senator Fischer, everything is local in
    Nebraska, and most of these local concerns are impacted by the
    challenges in our rural communities. And when it comes to
    freight challenges, we don't have the same sorts of challenges
    that some of our friends in more urban and coastal states face.
    We don't have the congestion and the bottleneck issues. What we
    have are access issues and activity issues. Safety is always a
    concern. We have the challenge of preserving a very large and
    extensive transportation network.
        So we are in the process of developing a freight plan for
    our state that will help provide a way forward and guide us as
    we look to improve our freight network to better meet these
    challenges. We don't need a freight plan, though, to know how
    important Nebraska is to the nation's transportation network
    with our geographic central location and our resources. We play
    a key role in the movement of freight in our country. We have
    I-80 running east and west for the length of states providing
    coast-to-coast travel for trucks and commodities. UP, the Union
    Pacific and BNSF Railroad main lines serve the nation, with
    arteries right through our state. We have an extensive highway
    network outside of I-80 and short-line rail networks that
    provide connectivity. We have barge terminals on the Missouri
    River and Eastern Nebraska that connect to the Mississippi
    River system. We have inland waterways and ports. And finally,
    we have the headquarters of major freight companies, like the
    Union Pacific and Werner Enterprises Trucking, and many other
    transportation companies.
        For a state where agriculture is our number-one industry
    and the manufacturing sector has over 1,800 establishments,
    transportation flow and commodity mobility are at the heart of
    our economic growth. As our economy grows, we must be able to
    handle the new demands on transportation. National freight
    tonnage is projected to grow by 42 percent by 2040. Preparing
    for this growth will take a thoughtful and focused approach.
        Thanks to the FAST Act and the recent state initiatives
    like the Build Nebraska Act, the Transportation Innovation Act,
    we are really laying the pavement for exciting new advancements
    in freight mobility.
        The emphasis on access and connectivity really stresses our
    understanding of the rural landscape here in Nebraska and the
    commitment to growth through partnerships and economic
    opportunities.
        So thank you again, Senator Fischer, to the Subcommittee on
    Surface Transportation and Merchant Marine Infrastructure,
    Safety and Security, and my fellow stakeholders, for the
    opportunity to share NDOR's path forward with regard to the
    FAST Act. As we move forward, we are confident that our unique
    assets will align well with the key national networks such as
    the primary highway freight system and the national highway
    freight network.
        The Nebraska way is to take a right-sized approach to
    involving all of our partners from industry, agriculture,
    state, local, and Federal partners, and we look forward to
    implementing the FAST Act and other policies as we move
    forward. So, thank you for the opportunity.
        [The prepared statement of Mr. Schneweis follows:]

                Prepared Statement of Kyle Schneweis, Director,
                          Nebraska Department of Roads
        Senator Fischer, members of the Committee, thank you for the
    opportunity to testify today regarding the impact of freight
    transportation on rural economies.
        As I traveled Nebraska in my first year as Director of the Nebraska
    Department of Roads (NDOR), I heard excitement from Nebraskans about
    the recent enactment of the Fixing America's Surface Transportation
    Act, or FAST ACT. This legislation put America's surface transportation
    on sound footing for five years. It's a real testament to our
    Congressional leaders' commitment to infrastructure. Here in Nebraska
    we are particularly proud of Senator Deb Fischer's tireless work on the
    Commerce, Science and Transportation Committee and the Environment and
    Public Works Committee. We also appreciate Chairman Thune's interest in
    promoting freight improvement by holding this Subcommittee field
    hearing in Nebraska today.
        The FAST Act is truly significant in that for the first time,
    formula funding for State DOT Freight programs will be provided. Over
    $1 billion is being distributed to States annually by the Federal
    Highway Administration. The NDOR will receive $8.2 million in Fiscal
    Year 2016. In accordance with Federal regulations, these new funds will
    be applied to a wide range of improvements to our highway system,
    including railway-highway grade separations, bridge improvements and
    many other freight capacity and operations enhancements.
        The FAST Act also provides discretionary funding through the new
    Nationally Significant Freight and Highway Projects program, dubbed
    ``FASTLANE'' by U.S. DOT. Nebraska is encouraged by Congress'
    commitment to improving our Nation's infrastructure and is taking the
    necessary steps to benefit from these advancements.
        These national advancements come at a time where NDOR is also
    working to improve its strategic approach to how infrastructure
    advancements are made at the state and local level. The Build Nebraska
    Act and the Transportation Innovation Act both include increased
    emphasis on finding innovative ways to examine how economic development
    and partnership alliances can positively impact stakeholder and
    customer satisfaction. For the first time, we are incorporating public
    input and economic impacts into our project prioritization process.
        In a way, we are rewriting the book on project selection to ensure
    there is local buy-in which specifically helps draw out rural concerns
    that can impact the flow of freight within our communities. As Senator
    Fischer knows, everything is local in Nebraska and most of those local
    concerns are impacted by rural challenges.
        When it comes to freight challenges, we don't face the congestion
    and bottleneck issues that more urban coastal states face. Our
    challenges are related more to access, connectivity, safety, and
    preservation of an expansive transportation network. NDOR is in the
    process of developing a state freight plan that will provide a guide
    forward as we look to improve our freight network to better meet these
    challenges.
        A freight plan isn't required, however, to recognize that Nebraska,
    with our geographically central location and resources, plays a key
    role in the movement of freight in our country. For example:

       Nebraska has the I-80 corridor running east-west through the
            length of the state for coast-to-coast trucking and travel.

       The Union Pacific and BNSF railroads' main lines likewise
            serve the Nation with arteries through Nebraska.

       We also have important north-south highway and rail service
            as well, along with short-line rail networks.

       Barge terminals on the Missouri River in eastern Nebraska
            connect to the Mississippi River System's inland waterways and
            ports.

       Finally, Nebraska features the headquarters of major freight
            companies like the Union Pacific, Werner Enterprises trucking,
            and many other transportation and logistics companies.

        For a state where agriculture is our number one industry and the
    manufacturing sector has over 1800 establishments in the state,
    transportation flow and commodity mobility are at the heart of our
    economic growth.\1\ As our economy grows, we must be able to handle new
    demands on transportation. National freight tonnage is projected to
    grow 42 percent by 2040--preparing for this growth will take a
    thoughtful, focused approach.\2\ Thanks to the FAST Act and recent
    major state initiatives like the Build Nebraska Act and the
    Transportation Innovation Act, Nebraska is laying the pavement for
    exciting new advancements in freight mobility. The emphasis on access
    and connectivity stresses Nebraska's understanding of its rural
    landscape and commitment to growth through partnerships and economic
    opportunity.
    ---------------------------------------------------------------------------
        \1\ Nebraska Department of Economic Development, 2014 General
    Manufacturing Statistics
        \2\ National Freight Strategic Plan (Draft), U.S. DOT (2015)
    ---------------------------------------------------------------------------
        Thank you again to Senator Fischer, the Subcommittee on Surface
    Transportation, Merchant Marine Infrastructure, Safety, and Security,
    and my fellow transportation industry stakeholders for the opportunity
    to share NDOR's way forward in regards to the FAST Act. As we move
    forward, we are confident that Nebraska's unique assets will align well
    with key national networks such as the Primary Highway Freight System
    (PHFS) and the National Highway Freight Network (NHFN). The ``Nebraska
    way'' is to take a right-sized approach and to involve our partners
    from industry, agriculture, academia and state and local government.
                                   Background
    FAST Act Freight Funds
       Nebraska will have $8.2 million in FY16, the first year of
            this on-going program. These new funds can be applied to a wide
            range of improvements to our highway system, including railway-
            highway grade separations, bridge improvements and many other
            freight capacity and operations enhancements.

       The Act directs States to have a State Freight Plan in place
            by December 2017.
    FASTLANE Application
       NDOR filed an application on April 12, 2016 for FASTLANE
            funding for grade separations along the Union Pacific mainline
            in Columbus, a thriving industrial and commercial center in
            northeast Nebraska that is served by expanding expressways
            along US-81 and US-30.

       This application falls under the Small Projects category of
            FASTLANE and the improvements will resolve safety issues and
            bottlenecks on local thoroughfares in Columbus. Even though the
            State Highway System won't be the beneficiary, we at NDOR are
            proud to partner with the city and the railroad to bring about
            those improvements for the benefit of the community, the region
            and the freight network.
    State Freight Plan
       In general; Nebraska must have a freight plan to receive
            various freight formula funds. A plan also increases possible
            eligibility for freight grants. A freight advisory committee is
            not required but encouraged. The State Freight Plan will be in
            place by December 2017 to comply with FAST Act mandates.

       Nebraska has and continues to be proactive in the
            transportation industry. I am looking forward to building upon
            our team's base of freight policy knowledge as we move forward
            with drafting and implementation of the plan.

       Requirements for a freight plan include:

         Freight system trends, needs, and issues

         A description of the freight policies, strategies, and
                performance measures that will guide the freight-related
                transportation investment decisions of the State

         A description of how the plan will improve the ability
                of the State to meet the national freight goals

         Consideration of innovative technologies and
                operational strategies

         Description of improvements that may be required to
                mitigate the deterioration of roadways that are projected
                to substantially deteriorate due to heavy vehicles
                (including mining, agricultural, energy cargo or equipment,
                and timber vehicles)

         An inventory of facilities with freight mobility
                issues, such as truck bottlenecks, and a description of the
                strategies to mitigate.
    Nebraska Department of Economic Development
       Is a strong partner to NDOR's efforts. Looking ahead, NDOR
            and its partners will soon take a more coordinated approach to:

         Statistically profiling Nebraska's freight
                infrastructure across modes

         Defining our core state-level freight network

         Generating state-level information on key commodity
                flows and forecasts

         Developing state goals, objectives, strategies and
                performance measures

         Mapping ideas for enhanced policies and programs to
                support freight, and

         Developing an overall implementation plan for those
                activities.
                                   Witnesses
    Michael Smythers, Assistant Vice President, Federal Government Affairs,
            BNSF
        Smythers most recently served as Special Assistant to the President
    in The White House Office of Legislative Affairs. From April 1999
    through February 2004, when he joined The White House, he was assistant
    vice president, Federal Affairs, in the Washington office of CSX
    Corporation. He worked in the U.S. Senate from August 1994 through
    April 1999. Smythers is a graduate of the College of William and Mary.
    Andersen comes to BNSF from the Gallatin Group, which he joined in
    February 2005 as a principal after working for eight years with U.S.
    Sen. Max Baucus (D-Mont.). He was the senator's legislative director
    from September 2000 through October 2002 and chief of staff from
    December 2002 through January 2005. A Montana native, Andersen is a
    graduate of the University of Montana.
    Kevin Kelley, Kelley Bean
        Kelley Bean traces its roots back to the founding of the Chester B.
    Brown company in 1927 where Robert L. Kelley Sr. was plant manager of
    the Morrill, Nebraska facility. In the early 1940s, Robert Kelley was
    promoted to President of the company, a position he held until 1969. In
    1970, Robert L. Kelley Sr. left Chester B. Brown to form Kelley Bean
    Company. His son's Gary, and later Bob, joined him to help run the
    family's new business. In 1982, under Gary Kelley's leadership, the
    Kelley Bean and Chester B. Brown companies merged to form a reunited
    Kelley Bean Co., Inc. In 2006, under Bob Kelley's leadership, Kelley
    Bean acquired ConAgra's dry bean operations. Eleven other acquisitions
    over the years have formed one of the largest originators and
    processors of dry beans in the U.S. Today, a third generation led by
    Kevin Kelley, is in place and poised to grow the company well into the
    future. Ask any of the Kelley's and they will tell you that none of
    this would have been possible without the dedication and hard work of
    the world's best group of employees and growers.
    Brent Holliday, Chief Executive Officer
        When my father, Richard B. Holliday Sr., acquired Nebraska
    Transport Company in 1973, he was determined to give our customers the
    best freight service possible at competitive rates and provide the
    employees with the knowledge and incentives to work toward that goal.
    Today, we operate NTC based on those same principles, committed to
    operating only top quality equipment and employing the finest people
    available--committed enough to be the first Nebraska-based LTL carrier
    to achieve the ISO 9000 Certification. I'm proud of the effort ``Team
    NTC'' puts forth every day to consistently provide our customers with
    the best transportation service anywhere. We have a great team, a team
    of winners, who all understand what our team has to do to grow and
    continue to be a leader in our industry, all the while remembering that
    the single-most important part of their job is--and always will be--to
    serve you, our valued customer.
    David Freeman, Vice President, Engineering/Transportation, BNSF
    Deb Cottier, Executive Director, NW Nebraska Development Corporation

        Mrs. Fischer. Thank you, Director.
        Mr. Overman?

    STATEMENT OF DONALD E. OVERMAN, CHAIRMAN OF THE BOARD, AIRPORT
               AUTHORITY, COUNTY OF SCOTTSBLUFF, NEBRASKA

        Mr. Overman. Well, first of all, Senator Fischer, I want to
    thank you for coming to Western Nebraska to hold this important
    hearing. I want to thank you also for your leadership in
    securing passage of the FAA reauthorization bill. As you have
    so well stated, it is critical to the rural airports across the
    United States, and it allows us to continue to receive our $1
    million funding for safety improvements that we so badly need.
    The fact that you put an amendment in that would allow us to
    receive that for the next 2 years because of the number of
    hours pilots have to have now, that creates great improvement
    for not only Scottsbluff but North Platte and Kearney and
    Alliance.
        It is important to know that Western Nebraska Regional
    Airport is a diversionary airport for DIA in Denver, very
    important to us, and to them too. We support airlines such as
    United, Delta, Alaska and Southwest. We have had as many as
    seven diversions of 727s and 737s on our tarmac at one time in
    a line. It is quite a sight.
        I have been associated with rural transportation issues for
    the past 42 years, including the Heartland Expressway from the
    very, very beginning, as well as being a national spokesman for
    the national EAS program, having appeared before the Senate
    Commerce Committee twice in Washington, D.C., as I was the
    national spokesman for essential air service throughout the
    country.
        Scottsbluff is a true regional transportation center, and
    we need that airport. Our regional airport is a host to major
    corporations to provide air and ground deliveries of products
    throughout this entire trade area. FedEx is based on airport
    property and has one airplane per day into our airport, and
    sometimes two, as well as one semi-truck per day for ground
    FedEx. They serve an area that stretches up to 150 miles in
    every direction. UPS has one plane per day, along with UPS
    Ground, which serves an area of 120 to 150 miles in every
    direction.
        Good roads are essential for the economic development of
    our area, and we are happy to have Kyle here from the
    Department of Roads today to show us his input and what has
    happened at the state level.
        We also have at our airport an air ambulance company,
    EagleMed, that has served over 1,000 patients in this past
    year, sending patients to advanced hospitals in Wyoming,
    Colorado, and Nebraska.
        Not to be forgotten, of course, is the United States Postal
    Service, which needs safe roads for their trucks that deliver
    mail all over this area. Our local area trucking company, NTC,
    is here to support that issue.
        We want to thank you again for your leadership in the
    Nebraska Unicameral, on the roads, and in surface
    transportation, and now in the U.S. Senate, providing improved
    road funding for the state of Nebraska, and certainly most
    recently the FAST Act, which gives us five years of receiving
    $1.5 billion to Nebraska's highways, railroads, and bridges.
    The figure is monumental, and what you have done for
    transportation in the state of Nebraska is fantastic, and we
    thank you for your leadership. Thank you.
        [The prepared statement of Mr. Overman follows:]

    Prepared Statement of Donald E. Overman, Chairman of the Board, Airport
                   Authority, County of Scottsbluff, Nebraska
        Good morning Senator Fischer, my name is Donald E. Overman. I am
    the Chairman of the Board of the Airport Authority of the County of
    Scottsbluff. I thank you for holding this United States Senate Commerce
    hearing on transportation in Scottsbluff, Nebraska.
        I also thank you for your leadership in securing passage of the FAA
    Reauthorization Bill in the Senate. This bill is so critical for rural
    airports across the country and it allows us to continue to receive $1m
    in funding for airport safety improvements for each of the next two
    years.
        It is important for all to know that Western Nebraska Regional
    Airport is a diversionary airport for DIA in Denver and we support
    airlines such as United, Delta, Alaska and Southwest. We have had as
    many as seven diversions on our tarmac at one time.
        I have been associated with rural transportation issues for the
    past 42 years including the Heartland Expressway from its inception, as
    well as being the National spokesman for the EAS program. I know how
    important transportation is to the economic development of our area.
    Scottsbluff is a true regional transportation hub for Western Nebraska
    and Eastern Wyoming.
        Our regional airport is host to major corporations that provide air
    and ground deliveries of products in our entire trade area.
        FedEx which is based on airport property has one plane per day into
    our airport and sometimes two, as well as one semi-truck per day for
    Fedex ground. They serve our area that stretches up to 150 miles in
    each direction. UPS has one plane per day and along with UPS ground
    which serves an area of 120 to 150 miles in each direction.
        Good roads are essential for the economic development of our entire
    area. We are pleased that the Director of Roads for the State of
    Nebraska has joined us today.
        We also have based at our airport an air ambulance company,
    EagleMed, that served over 1,000 patients sent to more advanced
    hospitals in Wyoming, Colorado and Nebraska in the last year.
        Not to be forgotten, the United States Postal Service. Which needs
    safe roads for their semi's that deliver our mail throughout our entire
    region. Our local area trucking company (NTC) is here also to support
    safe roads.
        Thank you again, Senator Fischer for your leaderships both in the
    Nebraska Unicameral and now in the United States Senate providing
    improved road funding for the State of Nebraska and now the entire
    country.

        Mrs. Fischer. Thank you.
        Ms. Cottier?

             STATEMENT OF DEB COTTIER, EXECUTIVE DIRECTOR,

              NEBRASKA NORTHWEST DEVELOPMENT CORPORATION;

            MEMBER, BOARD OF DIRECTORS, HEARTLAND EXPRESSWAY

           ASSOCIATION; AND MEMBER, PORTS-TO-PLAINS ALLIANCE

        Ms. Cottier. Hi. I'm Deb Cottier. I'm the Executive
    Director of the Nebraska Northwest Development Corporation,
    which is in Chadron, Nebraska, about 100 miles north of here, a
    beautiful morning to drive in here this morning.
        I want to start by adding my appreciation and my thanks to
    Senator Fischer for all of her work, not only in the Nebraska
    legislature but also for holding a hearing here in Nebraska and
    giving us a chance to come share our views on rural
    transportation. We also want to thank her for leading the
    effort in the Senate to include a robust freight program in the
    recently enacted FAST Act.
        I'll be testifying today on behalf of NNDC, but also on
    behalf of the Heartland Expressway, which is also part of a
    larger organization called the Ports-to-Plains Alliance. This
    alliance is actually a grassroots effort of communities, over
    275 communities and businesses whose mission it is to advocate
    for international transportation infrastructure, and by
    international we're speaking specifically of the four routes
    that come together that create this corridor.
        The Ports-to-Plains corridor comes from the Texas/Mexico
    border to Denver, the Heartland Expressway, which comes through
    the entire state of Nebraska north to south, through Chadron,
    through Scottsbluff. That's the Heartland Expressway. The Teddy
    Roosevelt Expressway, which goes from Rapid City north through
    the Bakken oil fields up to Canada, as well as the Camino Real,
    which connects Canada through existing interstate systems.
        Freight movement across rural North America is critical to
    connecting the natural resources of agriculture and energy to
    the urban populations and the economy of the United States. I
    have submitted a written record which is much more in-depth,
    but my comments today will actually highlight three points.
        First, the prosperity of America's heartland depends on
    four-laneing critical rural freight corridors like the Ports-
    to-Plains corridor. Northwestern Nebraska is effectively
    isolated from interstate highways. The closest to the north is
    110 miles; to the south it's 137 miles. Moreover, there is only
    one way to get to interstates from Chadron, Nebraska, and
    that's on two-lane roads. There is nearly a 500-mile-wide gap
    between I-25 in the west in Wyoming and the I-29 corridor in
    Iowa in the east, between which there are no four-lane, north-
    south highways that fully traverse the state of Nebraska. This
    is a missing link in our national highway network.
        As a result, our two-lane roads carry a large agriculture
    and energy business. Other business trucks, local cars and
    delivery vans, and a lot of out-of-state tourists who find
    themselves mixed in with that whole variety of utility vehicles
    are all on narrow two-lane roads, which actually limits the
    ability for the safe movement of people to and from places like
    the Black Hills of South Dakota.
        Upgrading the Ports-to-Plains corridor to a four-lane
    divided highway would create significant benefits for America's
    heartland and is critical for the efficient movement of goods
    and people, the economic development of the region, and for the
    safety of the traveling public. Furthermore, the corridor
    provides an uncongested alternative to I-35 coming out of Texas
    and to I-25 to the west. If four lane, the Alliance corridor
    would provide a cost-effective alternative for trucks to avoid
    that urban congestion.
        And that brings me to my second point, upgrading the
    critical rural freight corridors, especially the multi-state
    corridors that we've been speaking of, and this requires a
    strong Federal partner, as we've heard the Senator say numerous
    times. Both in terms of leadership and resources, the states
    and localities cannot do the job alone.
        As Congress was considering the transportation bill, you
    and your colleagues were often under pressure from some to
    devolve the transportation programs back to the state and local
    governments. Devolution would have a devastating effect on our
    national service transportation system, and we commend Congress
    for rejecting the idea.
        We would sound, however, one note of caution. If the
    Federal Government is to continue to be the strong partner in
    the future, Congress must find a permanent fix to the Highway
    Trust Fund, and it should not necessarily wait until the next
    transportation bill to do so. It should seize the first
    opportunity, which could come in the next Congress in the form
    of a budget initiative and tax reform.
        My third and final point is that the new freight programs
    within the FAST Act are a huge step forward, but they will
    require careful oversight to ensure that the adequate resources
    are made available to upgrade the critical rural freight
    corridors.
        With respect specifically to the FAST Act, it says that
    critical rural freight corridors are eligible for both freight
    planning and funding opportunities. Whether a particular route
    such as the Heartland Expressway is designated will depend on
    how FHWA and the states interpret the implementation of the
    FAST Act requirements, and there is some reason for concern.
        The guidance, which was just put out, basically says that
    the first and last mile connectivity is essential to an
    efficiently functioning freight system, and that it encourages
    the states to consider first or last connector routes for the
    high-volume freight corridors. The language itself is a little
    troubling, for if the guidance or FHWA forces or leverages
    states into following just that piece of it, then much of the
    funding that's available for critical rural freight corridors
    would be directed to a series of spurs off high-volume
    corridors rather than to the entire rural freight corridor like
    the Heartland Expressway. Based on our initial review of the
    guidance of the FAST Act, this does not appear to be what
    Congress intended, and we urge Congress to closely monitor the
    implementation.
        In conclusion, we want to thank you for the opportunity to
    appear today and for your effort to bring together those people
    who can speak about transportation on this level, and we
    appreciate the opportunity to be included. Thank you.
        [The prepared statement of Ms. Cottier follows:]

        Prepared Statement of Deb Cottier, Executive Director, Nebraska
        Northwest Development Corporation; Member, Board of Directors,
     Heartland Expressway Association; and Member, Ports-to-Plains Alliance
        Chairwoman Fischer--Honored members of the Senate Committee on
    Commerce, Science and Transportation, thank you for allowing me to
    testify on an issue as important to Nebraska, the Heartland Expressway
    and the states included in the Ports-to-Plains Alliance as rural
    transportation and intermodal freight policy.
        For the record, my name is Deb Cottier, Executive Director of
    Nebraska Northwest Development Corporation and a member of the Board of
    Directors for the Heartland Expressway Association, a member of the
    Ports-to-Plains Alliance.
        The Ports-to-Plains Alliance is a grassroots alliance of over 275
    communities and businesses, including alliance partners Heartland
    Expressway, Theodore Roosevelt Expressway and Eastern Alberta Trade
    Corridor Coalition, whose mission is to advocate for a robust
    international transportation infrastructure to promote economic
    security and prosperity throughout North America's energy and
    agricultural heartland including Mexico to Canada. In the United States
    the primarily rural Alliance includes four congressionally designated
    High Priority Corridors on the National Highway System. The Ports-to-
    Plains Corridor connects the Texas/Mexico border to Denver, CO via
    Interstate 27 in Lubbock and Amarillo, TX. The Heartland Expressway,
    which includes my home community of Chadron, NE, connects Denver, CO to
    Rapid City, SD and to the Camino Real (Interstate 25) in Wyoming via
    Scottsbluff, NE. The Theodore Roosevelt Expressway connects Rapid City,
    SD to the Montana/Canada border at the Port of Raymond via Williston,
    ND. The Camino Real Corridor from its connection with the Heartland
    Expressway at Interstate 25 west of Torrington, WY continues north the
    Montana/Alberta Canada border at the port of Sweetgrass.

        This entire nationally significant rural freight corridor provides
    an uncongested alternative to Interstate 35 with its chokepoints at San
    Antonio, TX, Austin, TX, Dallas/Fort Worth, TX, Oklahoma City, TX and
    Kansas City, MI and to Interstate 25 through the Colorado Front Range
    and Cheyenne, WY for the movement of critical natural resources from
    rural areas to domestic and international markets.
        My statement today focuses on three items:

      1.  Importance of Transportation System to Rural Economic Development

      2.  Strong Federal Role Required in Improve Movement of Freight

      3.  Building Rural Economies Together through the FAST ActrURA

        Freight movement across rural North America is critical to
    connecting the natural resources of agriculture and energy to the urban
    populations and the economy of the United States. The interstate system
    provided significant impacts serving an economy that primarily moved
    freight east and west. Growing population centers along that interstate
    system are now creating significant chokepoints along the system and
    continuing the same transportation policies, adding to the congestion,
    results in increased transportation costs and environmental impacts.
    Importance of Transportation System to Rural Economic Development
        Chadron, NE is an excellent example of a rural community currently
    served by only two-lane highways. Chadron is located 102 miles south of
    Interstate 90 at Rapid City, SD and 148 miles north of Interstate 80 at
    Kimball, NE. Research shows that economic strength of communities is
    strongly affected by proximity to an interstate highway or at minimum a
    four-lane highway.
        POLICOM Corporation is an independent economic research firm which
    specializes in analyzing local and state economies. From its research,
    it determines if an economy is growing or declining, what is causing
    this to happen, and offers ideas and solutions to improve the
    situation. A recent evaluation of the role of highway infrastructure on
    economic strengths of the top 50 Strongest and Weakest Micropolitan
    areas was made by POLICOM and presented to the Ports-to-Plains
    Alliance. Micropolitan Statistical Areas are typically quasi rural
    areas. A Micro must have an urbanized area (city) with a population of
    at least 10,000 but less than 50,000 population and must be at least
    one county and most are.

    ------------------------------------------------------------------------
                    Top 50 Micropolitan Area                   Strong   Weak
    ------------------------------------------------------------------------
    Located on an Interstate                                       31      7
    ------------------------------------------------------------------------
    Located on a four-lane limited access                          10      5
    ------------------------------------------------------------------------
    Located near a four-lane within the area                        0     11
    ------------------------------------------------------------------------
    Not Located on a four-lane roadway                              9     27
    ------------------------------------------------------------------------

        Forty-one of the Top 50 Strongest Micropolitan Areas in the United
    States are located on an interstate or four-lane divided highway.
    Twenty-seven of the Top 50 Weakest Micropolitan Areas in the United
    States are not located on an interstate or four-lane highway.
        In case the nine strong Micropolitan Areas that are not located on
    a four-lane roadway, there is a unique reason for their success that is
    not available to most rural communities. Two are in Alaska--Ice Roads;
    one is an island; one is a wealthy tourist destination, two are related
    to energy (Williston and Dickinson, ND); one is a town with livestock
    slaughter facilities as its main economic driver (Garden City, KS) and
    one is a military base.
        The development of four-lane rural freight corridors is a positive
    economic impact to communities like Chadron, Alliance and Scottsbluff,
    NE as well as rural communities from Texas to North Dakota and Montana
    along the Ports-to-Plains Alliance corridor. This conclusion is further
    supported by recent studies that evaluate economic benefits within the
    ten-state region.
        Beginning with Nebraska, the Heartland Expressway Corridor
    Development and Management Plan, Final Report (2014), published by the
    Nebraska Department of Roads summarized significant economic national
    benefits from the development of this primarily rural corridor to a
    four-lane profile. It stated:
        ``The Heartland Expressway Corridor will provide many national,
    regional, and local benefits. Some of the most noteworthy national
    benefits include:

       Connection of metropolitan cities and regional trade centers

       Develops a significant North American Free Trade Act (NAFTA)
            corridor

       Provides an alternative to avoid urban congestion and delay
            along Interstate 25

       Completes an integral segment of the PTP Alliance Corridor,
            a trans-national corridor

       Enhances the national freight network and freight movements

       Provides safer travel

       Provides a north/south high speed corridor

       Enhances delivery capacity and efficiency to Great Plains
            markets

       Provides essential economic development infrastructure to
            the Great Plains

       Develops a significant tourism corridor''
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        In 2004, the Ports-to-Plains Corridor Development and Management
    Plan, evaluating the rural corridor in Texas, Oklahoma, New Mexico and
    Colorado, found similar results.
        In November 2015, the Texas Department of Transportation published
    the Initial Assessment Report for the Extension of I-27/Ports to Plains
    Corridor. The Assessment was an initial look at the opportunities
    presented by the expansion of the existing corridor in Texas to an
    interstate profile. The report stated:

        ``The I-27/P2P corridor is viewed as a gateway for commerce with
    the potential to redirect traffic from congested corridor across Texas.
    Planned and programmed projects aim to:

       Increase corridor capacity and enhance safety;

       Reduce congestion at ports of entry along the Texas-Mexico
            border by dispersing freight to multiple border crossings (in
            addition to the heavily-used Laredo crossings);

       Provide travel alternatives to the state's most congested
            corridors located through major metropolitan areas (e.g., I-
            35);

       Provide alternatives to other congested north-south
            corridors that run through major metropolitan areas (e.g., I-
            25);

       Help to facilitate trade between the U.S., Mexico and
            Canada; and

       Provide facilities that can effectively meet the traffic
            volumes and vehicle types that are traversing the corridor.''
            [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    Strong Federal Role Required in Improve Movement of Freight
        Our rural communities support modernizing our Nation's surface
    transportation network, including the upgrading of multi-state rural
    highway corridors, to meet the challenges of the 21st century.
        Given the urgency and magnitude of this undertaking, it is
    imperative that the Federal Government be the strong partner that it
    has been in the past. From the First Congress' support of lighthouses,
    buoys and public piers to make navigation ``easy and safe;'' to Henry
    Clay's support for internal improvements; to President Lincoln's
    support for the transcontinental railroad; to President Teddy
    Roosevelt's support of the Panama Canal; to President Franklin
    Roosevelt's support for a cross-country, high-level road system; to
    President Eisenhower's support of the Interstate Highway System and the
    Federal Highway Trust Fund; and to President Reagan's support for
    increased motor fuel user fees to preserve and modernize the Federal-
    aid highway network; the Federal Government has been instrumental in
    the development of our Nation's surface transportation system.
        This system unifies our country by providing for the easy movement
    of people and goods. As President Eisenhower noted, without it, ``we
    would be a mere alliance of many separate parts.'' The Federal
    Government must provide the leadership and resources to help preserve
    and modernize the national surface transportation network for the 21st
    century.
        With a few minor exceptions, the federal-aid highway program
    targets Federal highway investment on the network of roads most
    important to regional and interstate travel. There are four million
    miles of roads in the United States. Only 25 percent of these roads are
    eligible for federal-aid highway funding. This network of roads is
    known as the federal-aid highway system. It carries 85 percent of the
    total vehicle-miles travelled in the United States annually. The
    remaining seventy-five percent of the Nation's roads (roughly 3 million
    miles) are the responsibility of state and local governments.
        Even more importantly, the vast majority of federal-aid highway
    investment (about 75 percent) is dedicated to the National Highway
    System (NHS), a portion of the federal-aid highway system.
        The NHS, which includes the Interstate Highway System, makes up
    only 5 percent (about 220,000 miles) of the Nation's road mileage but
    carries 55 percent of total vehicle-miles traveled and over 90 percent
    of truck miles. It is the backbone of the federal-aid highway system as
    well as America's intermodal transportation network. The Ports-to-
    Plains Corridor, the Heartland Expressway, the Camilo Real and the
    Theodore Roosevelt Expressway are part of the NHS.
        By fostering an interconnected network of roads in uniformly-sound
    condition, the federal-aid highway program serves an important national
    purpose. This purpose can only be achieved by a certain amount of
    redistribution, which the federal-aid highway program achieves through
    its structure and formulas.
        Without redistribution, certain states--typically large, sparsely-
    populated states--would not be able to develop and maintain their
    portion of the network. A network is only as strong as its weakest
    links.
        It is also important to note that modernizing the federal-aid
    highway system, especially the major highways that make up the National
    Highway System, will require significant, sustained investment over a
    considerable period of time. The investment level needed is
    considerably higher than current levels of funding.
    Multi-state Rural Freight Corridors Are a Federal Interest
        A critical part of the national network is the multi-state rural
    highway corridors that are essential to the development of America's
    energy and agricultural resources. The antiquated two-lane highways
    that currently serve most of these corridors were not designed to carry
    the number of trucks, especially heavy trucks, currently being
    experienced up and down these corridors.
        Moreover, these roads are not geometrically designed to accommodate
    the large trucks being used today by the energy and agricultural
    industries.
        Nowhere is this more evident than in the Ports-to-Plains Alliance
    Corridor. The north-south movement of goods and persons through this
    ten-state economic region relies on an existing 3,088-mile network are
    two-lane highways. The good news is that almost 54 percent of this
    corridor has been upgraded to four-lane or better.
        To promote economic security and prosperity throughout America's
    energy and agricultural heartland, the Ports-to-Plains Alliance
    Corridor must be upgraded and modernized. Other multi-state rural
    highway corridors important to energy and agricultural production must
    also be improved.
        Only in this way will the United States be able to realize the full
    potential of its energy and agricultural resources. By doing so, it
    will take an important step toward energy self-sufficiency and
    increased international competitiveness of U.S. agriculture.
    Overview of the Agriculture Regional Economy
        As indicated in the Texas Freight Mobility Plan agriculture is the
    largest user of freight transportation in the United States. Nebraska
    agriculture reflects the importance of agriculture to the economy of
    the ten-state Ports-to-Plains region. The Nebraska Agriculture Fact
    Card, a cooperative effort of the Nebraska Department of Agriculture,
    USDA, NASS, Nebraska Field Office, and the Nebraska Bankers Association
    highlights Nebraska's Top National Rankings. The state ranks first in
    the Nation in beef and veal exports, 2014 ($1,128,700,000); cash
    receipts from meat animals, 2014 ($13,885,411); commercial red meat
    production, 2015 (7,470,600,000 lbs.); commercial cattle slaughter,
    2015 (6,575,100 head); all cattle on feed, January 1, 2016 (2,520,000
    head); Great Northern bean production, 2015 (763,000 cwt.); popcorn
    production, 2012 53,711,118 lbs.); and irrigated acres of cropland,
    2012 (8,225,973 acres).
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Nebraska ranks as the second state in the Nation for All cattle and
    calves, January 1, 2016 (6,450,000 head); Pinto bean production, 2015
    (1,878,000 cwt.); Proso millet production, 2015 (3,298,000 bushels);
    Light red kidney bean production, 2015 (298,000 cwt.); and Bison,
    December 31, 2012 (23,152 head).
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        For corn for grain production, 2015 (1,692,750,000 bushels); cash
    receipts from all farm commodities, 2014 ($24,942,122,000); and corn
    exports, 2014 ($1,212,400,000), Nebraska ranks as the third state in
    the Nation.
        Nebraska agriculture relies on the nationwide transportation system
    for both inputs and outputs of its agriculture production. Interstate
    and international commerce is critical to Nebraska agriculture and that
    is a reflection of the entire Ports-to-Plains Region. This ten-state
    region produces over $111 billion of agricultural goods, or 28.22
    percent of the U.S. total. The region boasts three of the top ten farm
    states: Texas, Nebraska and Kansas.
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Movement of agriculture products from the primarily rural areas
    across the Ports-to-Plains region to urban domestic markets and to
    export markets on the coasts requires infrastructure investments that
    connect production to consumers. Canada and Mexico are the second and
    third top export markets for U.S. farm products. The agriculture
    production regions in the U.S. often are not located near major urban
    areas or coastal export facilities. A strong Federal interest is
    required to ensure the agriculture resources can safely and efficiently
    reach domestic and global markets.
    Overview of the Energy Regional Economy
        While agriculture has been and will continue to be the economic
    base for Nebraska and the entire ten-state Ports-to-Plains region,
    energy has emerged as a significant economic driver across the region.
    Energy production, including conventional resources like oil and
    natural gas, combined with strong renewable energy including wind
    development, use resources in rural areas to meet the growing needs of
    urban areas and a global market.
        The Ports-to-Plains Alliance tagline says ``Securing the Benefits
    of Commerce to North America's Energy & Agricultural Heartland.'' The
    highway system connects a region that includes significant conventional
    and renewable resources. Energy security is provided by North America's
    energy development and the Ports-to-Plains region provides the
    connections needed to develop those resources including world class
    oil, gas and wind resources.
    Oil and Natural Gas
        From an oil and gas viewpoint the corridor connects Alberta, Canada
    and Texas, both the production and reserve leaders in the world. The
    highway system moves the people and equipment needed to develop these
    resources. The Bakken in North Dakota, Montana, Saskatchewan and South
    Dakota; the Niobrara in Wyoming, Colorado and Nebraska; and the Barnett
    and Permian in Texas; and the Eagle Ford in Texas are connected by the
    Ports-to-Plains Corridor. The Corridor provides the connection between
    the Houston, Denver and Billings. To summarize the oil and gas role of
    the region:

       Seven of top ten and eight of the top fifteen oil producing
            states, producing over 1.667 billion barrels annually in 2013

       Alberta ranks third, after Venezuela and Saudi Arabia, in
            terms of proven recoverable global crude oil reserves

       Five of the top eight and seven of the top fifteen natural
            gas producing states that produced over 57.5 percent or
            13,966,836 million cubic feet in 2012

       Oil and natural gas accounts for three million jobs or 35.8
            percent of the Nation in the region, generating incomes of over
            $208.5 billion or 40.5 percent of the entire nation's oil and
            gas jobs and income
            [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        There are those who will point to a bust in the U.S. energy boom.
    They cannot wait to share stories of job losses and bankruptcies, but
    while the boom has stopped, the reality is that the production
    continues. The following from North Dakota shows that energy will be
    returning to its boom days. ``North Dakota's top oil regulator had a
    message for Williston leaders this week: Get ready . . . When--not if--
    oil prices increase, drilling crews will be back in the Bakken eager to
    make up for lost time,'' said Director of Mineral Resources Lynn Helms.
    ``The industry is preparing for the world's oil supply to come into
    balance by the end of 2016 or the first half of 2017,'' Helms said.
    ``He anticipates that once that happens, the price could double
    `virtually overnight.' ''
        Energy development is reliant upon moving employees and large
    equipment across the north-south region, often on narrow two lane
    highways and bridges. As an example, U.S. Highway 85 of the Theodore
    Roosevelt Expressway saw 72,000 permits for oversize and overweight
    trucks in 2014. Energy security for the United States is dependent upon
    a transportation system that again connected rural America where the
    resources are located and the labor force, the technology and ultimate
    markets for U.S. energy. A strong Federal role is required to provide
    the resources needed to build and maintain infrastructure from lower
    population areas to urban areas.

    Renewable Energy/Wind
        Renewable wind resources are also abundant throughout the region.

       Four of the top ten and seven of the top twenty U.S. States
            for Installed Wind Capacity

       The region accounts for 48.9 percent of the total current
            wind generation in the U.S.

       Top six nationwide, eight of the top 10 U.S. states for
            Potential Wind Energy Generation, nearly 76.9 percent of the
            U.S. potential
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        These wind resources are resulting in the addition of manufacturing
    facilities for nacelles (turbines), blades and towers in Texas,
    Colorado, Kansas, Wyoming and North Dakota. Production and
    manufacturing creates jobs and tax base for many of our communities.
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        The electricity being generating is being transmitted to urban
    areas for primary use of urban populations. Once again a strong Federal
    interest will be required to support the needed infrastructure across
    the rural production areas.
    Rural Corridors: An Alternative to Freight Chokepoints
        One largely unexplored role of rural freight corridors requiring a
    strong Federal interest is the opportunity presented by multi-state
    rural corridors like the Heartland Expressway and its partners in the
    Ports-to-Plains Alliance to address congestion and its accompanied
    environmental impacts in urban areas. State departments of
    transportation are often forced to look only at the expensive solutions
    of expanding already congested urban highway corridors. Historically,
    these expansions have only provided temporary relief.
        The National Strategic Freight Plan indicates that this trend will
    continue.

            The U.S. economy is expected to double in size over the next 30
            years. By 2045, the Nation's population is projected to
            increase to 389 million people, compared to 321 million in
            2015. Americans will increasingly live in congested urban and
            suburban areas, with fewer than 10 percent living in rural
            areas by 2040 (compared to 16 percent in 2010 and 23 percent in
            1980).

        The question looking for an answer is: can primarily rural multi-
    state freight corridors provide a safe, cost-effective opportunity to
    address growing congestion in urban areas? The maps below reflect the
    current peak period congestion using 2011 data and then projected to
    2040.
        Within the Ports-to-Plains region, peak period congestion, creating
    freight choke points, existed in 2011 along Interstate 25 along the
    Colorado Front Range and along Interstate 35 including San Antonio,
    Austin and Dallas/Fort Worth in Texas, Oklahoma City, OK and Kansas
    City, MI.
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        The peak period congestion, and thus freight choke points, grows
    significantly by 2040 based on current policy and investments combined
    with doubling the economy, significant population increase and shifts
    from rural to urban areas.
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        The Interstate Highway System, especially in the west addressed
    east-west movement of people and goods. It was an economic driver of
    great proportion. In the West the interstate system included
    Interstates 15, 25 and 35. As you can see, each of these corridors is
    growing significant congestion.
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        The Ports-to-Plains Corridor, with its target of a minimum
    development of four-lane divided highway can assist rural communities
    becoming more economically competitive and reducing the number of
    trucks creating freight choke points on the congested existing
    interstates.
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Agriculture, energy and alternative corridors will require a strong
    Federal interest to guide a future that does not result in those shown
    in the 2040 projections.
    Building Rural Economies Together through the FAST Act
        As a rural economic developer and advocate for improved rural
    freight infrastructure, I would like to join the Heartland Expressway
    Association and the Ports-to-Plains Alliance in appreciation of the
    National Freight Policy included in the Fixing America's Surface
    Transportation Act. It provides an opportunity for an improved future
    in both rural and urban communities. The question that remains is how
    the FAST Act is implemented.
        I and my partners in the Ports-to-Plains Alliance believe that the
    implementation of Critical Rural Freight Corridors under the FAST Act
    is a key to the opportunity for an improved future. USDOT/FHWA posted
    the guidance on designating and certifying Critical Rural Freight
    Corridors on April 27, 2016. USDOT/FHWA guidance now moves the
    implementation to state department of transportation. The USDOT/FHWA
    guidance did result in one concern about how USDOT/FHWA will view
    Critical Rural Freight Corridors for eligibility for both freight
    planning and funding opportunities offered by the FAST Act. The
    guidance includes the following statement:

            First and last mile connectivity is essential to an efficiently
            functioning freight system. These public roads provide
            immediate links between such freight generators as
            manufacturers, distribution points, rail intermodal and port
            facilities and a distribution pathway. FHWA encourages States,
            when making CRFC designations, to consider first or last mile
            connector routes from high-volume freight corridors to key
            rural freight facilities, including manufacturing centers,
            agricultural processing centers, farms, intermodal, and
            military facilities.

        As our partners review the FAST Act, the emphasis on ``first and
    last mile connectivity'' seems to be a priority of USDOT/FHWA and not
    Congress. Our review of the FAST Act results in the only place that
    ``first and last mile'' appears in the legislation is as a portion of
    one twelve items to be considered by the Secretary in designating or
    re-designating the National Multimodal Freight Network. Even that
    consideration was described as ``major distribution centers, inland
    intermodal facilities, and first-and last-mile facilities. ``First and
    last mile connectivity'' is not mentioned in relationship to Critical
    Rural Freight Corridors in the FAST Act. We wish to be sure that
    ``first and last mile'' is not prioritized above corridors in future
    decisions under the FAST Act.
        Below, I will outline the relationship of Critical Rural Freight
    Corridors to two planning networks and two funding programs.
        Congress had the foresight to finalize the National Highway Freight
    Network including 41,518-mile Primary Highway Freight System identified
    during the designation process under MAP-21, Critical Rural Freight
    Corridors, Critical Urban Freight Corridors, and the portions of the
    Interstate System were not designated as part of the primary highway
    freight system. Once a Critical Rural Freight Corridor is designated
    and certified it is added to the National Highway Freight Network.
        In addition to the National Highway Freight Network, Congress also
    required the designation of the National Multimodal Freight Network.
    The stated purposes of the National Multimodal Freight Network includes
    assisting States in strategically directing resources toward improved
    system performance for the efficient movement of freight on the
    Network; to inform freight transportation planning; to assist in the
    prioritization of Federal investment; and to assess and support Federal
    investments to achieve the national multimodal freight policy goals and
    the national highway freight program goals.
        Included in the goals of this program are to strengthen the
    contribution of the National Multimodal Freight Network to the economic
    competitiveness of the United States; reduce congestion and eliminate
    bottlenecks on the National Multimodal Freight Network; to improve the
    short-and long-distance movement of goods that travel across rural
    areas between population centers; travel between rural areas and
    population centers; and to improve the flexibility of States to support
    multi-State corridor planning and the creation of multi-State
    organizations to increase the ability of States to address multimodal
    freight connectivity. These are clear goals that certainly address the
    rural freight opportunities and importance described earlier in the
    statement above.
        The FAST Act requires the Interim National Multimodal Freight
    Network to be established by June 1, 2016 and a Final Network of the
    National Multimodal Freight Network to be designated by December 4,
    2016. The Under Secretary of Transportation for Policy is responsible
    to establish an Interim National Multimodal Freight Network not later
    than 180 days after the passage of the FAST Act. The second deadline,
    within the FAST Act, states that the Final Network of the National
    Multimodal Freight Network be established by the Undersecretary not
    later than one (1) year after passage of the Act. This Final Network is
    established after soliciting input from stakeholders, including
    multimodal freight system users, transportation providers, metropolitan
    planning organizations, local governments, ports, airports, railroads,
    and States, through a public process to identify critical freight
    facilities and corridors, including critical commerce corridors, that
    are vital to achieve the national multimodal freight policy goals.
    Critical Rural Freight Corridors need to be considered throughout this
    process. This National Multimodal Freight Network will not be re-
    designated for up to five (5) years after the establishment of the
    Final Network. Once again, designated Critical Rural Freight Corridors
    are eligible components of this Network.
        With the guidance provided by USDOT/FHWA for the designation and
    certification of Critical Rural Freight Corridors, the process of state
    departments of transportation is able to move forward. If state
    departments of transportation act quickly, Critical Rural Freight
    Corridors may be considered by the Undersecretary for the Interim
    National Multimodal Freight Network. As of this date, that window of
    opportunity is very narrow. After June 1, 2016, Critical Rural Freight
    Corridors will have up to six months to engage in the stakeholder
    process for the establishment of the Final Network of the National
    Multimodal Freight Network. The opportunity to include Critical Rural
    Freight Corridors as a component of the National Multimodal Freight
    Network now rests with the state departments of transportation.
        Critical Rural Freight Corridors within the FAST Act seem designed
    to address the need to connect the importance of agricultural
    production to the domestic and global markets requiring food and fiber.
    Congress recognizes the Critical Rural Freight Corridors provide access
    or service to grain elevators; agricultural facilities; and intermodal
    facilities including connections to international ports of entry.
        Critical Rural Freight Corridors within the FAST Act also seem
    designed to address the importance of access or service to energy
    exploration, development, installation, or production areas to the
    domestic and global markets requiring energy resources. The Heartland
    Expressway in Nebraska is one link in the infrastructure required to
    safely make those connections. Implementation of Critical Rural Freight
    Corridors by state departments of transportation will be a major factor
    in the region remaining competitive economically.
        The National Highway Freight Program provides for the first-time
    formula funds to states to improve the efficient movement of freight on
    the National Highway Freight Network. Nebraska is authorized for $58.8
    million over the five years of the FAST Act. This amount is above what
    has already been distributed to Metropolitan Planning Organizations for
    the same purposes. States are allowed to obligate these formula funds
    to Critical Rural Freight Corridors. The April 27, 2016 guidance on
    designating and certifying Critical Rural Freight Corridors indicates
    that National Highway Freight Program can be authorized once the FHWA
    Division Office verifies that the certification from the state
    department of transportation is valid.
        Additionally, the FAST Act established a Nationally Significant
    Freight and Highway Projects program as a competitive grant process
    (FASTLANE) with dedicated funding specifically for freight projects.
    The competitive grant program includes $4.5 billion nationally from
    2016 through 2020, an annual average of $900 million. Each fiscal year,
    at least 25 percent of all Nationally Significant Freight and Highway
    Projects funds are reserved for projects--either large or small
    projects--in rural areas, defined as an area outside a U.S. Census
    Bureau designated urbanized area with populations over 200,000.
    Eligible projects include a highway freight project carried out on the
    National Highway Freight Network. In relationship to Critical Rural
    Freight Corridors, the April 27, 2016 guidance indicates that
    designated and certified Critical Rural Freight Corridors will be
    eligible for funding under the Nationally Significant Freight and
    Highway Projects program (FASTLANE).
        Congress through the FAST Act provided a framework and funding to
    assist with improved freight movement and especially rural freight
    movement in the United States. Congressional oversight, however, will
    be important as individual state departments of transportation like
    Nebraska Department of Roads, and the administration of USDOT/FHWA have
    been given major decision-making authorities on how the funding of
    freight programs are allocated.
    Conclusions
        As I conclude, let me summarize. There is significant importance of
    the transportation system to rural economic development. Research shows
    that economic strength of communities is strongly affected by proximity
    to an interstate highway or at minimum a four-lane highway. Significant
    economic national benefits from the development of primarily rural
    corridors to a four-lane profile is demonstrated through benefit/cost
    analysis in the Corridor Development and Management Plans for the
    Heartland Expressway in Nebraska and the Ports-to-Plains Corridor in
    Texas, Oklahoma, New Mexico and Colorado.
        Second, if improvements are to be made in the rural movement of
    freight, it will require a strong Federal role. Historically, that has
    been the case. A critical part of the national network is the multi-
    state rural highway corridors that are essential to the development of
    America's energy and agricultural resources. A strong Federal interest
    will be required to improve existing corridors but also to implement
    programs which look to alternatives to the already congested interstate
    system.
        Finally, the FAST Act has provided a policy and funding framework
    for Building Rural Economies Together. At the very core of that
    framework for multi-state rural corridors is the role of Critical Rural
    Freight Corridors. State departments of transportation hold the reins
    to the timing and priority of Critical Rural Freight Corridors.
        Thank you, Chairwoman Fisher. I ask that a copy of this statement
    be included in the hearing record.

        Mrs. Fischer. Thank you very much.
        Mr. Freeman, welcome.

          STATEMENT OF DAVID FREEMAN, SENIOR VICE PRESIDENT,
                  TRANSPORTATION, BNSF RAILWAY COMPANY

        Mr. Freeman. Good morning again, Senator Fischer. My name
    is David Freeman, and I am the Senior Vice President of
    Transportation for BNSF. Thank you for inviting me to testify
    today.
        Congress has enacted several significant pieces of
    legislation that affect the supply chain. BNSF is pleased to
    have this opportunity to thank the members of the Committee for
    the balanced and effective approach in passing these
    transportation laws which are particularly important to the
    rural economy.
        The economic value of rail is well known in Nebraska, and
    railroads are the workhorse of the economy. They deliver
    approximately 40 percent of inner-city freight volume, more
    than any other mode of transportation, and shippers pay less
    because of rail's efficiency.
        BNSF is wholly owned by Nebraska-based Berkshire Hathaway.
    It has approximately 42,000 employees, including more than
    5,000 here in Nebraska. We operate about 1,200 trains per day,
    and our total volumes last year were about 10.3 million units,
    the most of any railroad.
        BNSF operates major rail facilities at Alliance, Lincoln,
    McCook, Omaha and Haslett, and operates more than 1,400 miles
    of track in Nebraska. We move more than 2 million carloads of
    freight through the state annually. Much of it is coal from the
    Powder River Basin, which drives rail employment and investment
    here in Nebraska. More than 1,000 employees in Alliance
    inspect, repair, and overhaul equipment mostly associated with
    coal transportation.
        Rail volumes are a good indicator of how the economy is
    performing. While my written testimony details concerns about
    the current freight outlook, particularly with respect to coal,
    the good news is that BNSF has the capacity to grow with our
    customers. Volumes peaked for NBSF in 2006. Then we lost 20
    percent of the units by 2009 to the Great Recession. After
    that, freight volumes grew twice as fast as the economy through
    2014, and the industry struggled to handle that.
        Throughout this period, the rail freight industry,
    especially BNSF, increased investment with volumes. Since 2000,
    BNSF has invested more than $53 billion in its network.
    Unfortunately, volumes in 2016 are now trending downward. By
    January, volumes had fallen by about 9 percent. We do not see a
    lot of growth in the near to mid-term outlook. At the moment,
    BNSF has about 4,500 transportation employees on furlough and
    more than 1,800 locomotives in storage. My written testimony
    contains more detail about volumes across BNSF business units.
        The economy is running on two tracks. The consumer economy
    is stable but not growing quickly, and the industrial economy
    is slowing, if not in recession. A strong U.S. dollar, changes
    in energy markets, and regulation are a drag on growth. There
    is no better place to see that than coal volumes. This year,
    coal traffic in the U.S. has decreased more than 30 percent
    year over year. Markets are at work here. Falling demand has
    reduced coal utilization, but EPA regulations will ensure that
    coal will not likely grow again.
        Coal's steep decline means a significant downshift for
    investment in infrastructure, manpower, and other resources
    that support coal movements. BNSF, of course, must match costs
    to reduce volumes, and we are working on that. But cost is not
    the only element in the equation. We are also committed to
    generating growth.
        Turning to freight policy, from BNSF's perspective, the
    extension of the PTC deadline was one of Congress' most
    significant legislative accomplishments. BNSF expects that by
    the end of 2018 PTC will be installed as required on its
    network.
        Enactment of the FAST Act was a significant legislative
    achievement that will benefit the Nation's supply chain. The
    law prioritizes freight projects in a way no previous highway
    bill has done, and provides more Federal funding to mitigate
    public roadway conflicts with railroads' rights of way.
        Significantly, the FAST Act streamlined environmental and
    historic preservation reviews for railroad projects. Almost
    weekly at BNSF, negative decisions from courts or permitting
    authorities at all levels of government demonstrate that our
    growth is limited by permitting processes.
        Finally, Congress does not authorize or appropriate
    railroad capital budgets. However, Federal economic regulatory
    policy directly impacts investment decisions. BNSF appreciates
    the bipartisan effort to achieve balanced regulatory oversight
    in the reauthorization of the Surface Transportation bill. The
    virtuous cycle of growth in volume, revenues and reinvestment
    has brought us to where we are now. BNSF infrastructure is in
    the best shape it has ever been to meet customer needs, and its
    safety record is at an all-time best. The Nebraska division is
    amongst the top three safest on our network. Nowhere is
    efficient freight rail more important than places like Western
    Nebraska, and Senator Fischer and members of the Senate
    Commerce Committee have understood that.
        Thank you, and I look forward to answering any questions
    you may have.
        [The prepared statement of Mr. Freeman follows:]

          Prepared Statement of David Freeman, Senior Vice President,
                      Transportation, BNSF Railway Company
        Good Morning Chairwoman Fischer. My name is Dave Freeman and I am
    the Senior Vice President--Transportation for BNSF Railway Company
    (BNSF). In this role I have responsibility for all train movement on
    the BNSF network in addition to capacity planning, and service
    performance. Thank you for inviting me to testify today. In addition to
    providing an overview of Nebraska's role in BNSF's business and
    operations, my testimony will discuss BNSF's perspective on the state
    of the freight economy, as well as the importance of good public policy
    for an efficient supply chain.
        Several significant pieces of legislation that affect the supply
    chain have been enacted by this Congress. BNSF is pleased to have this
    opportunity to thank Senator Fischer and the Members of the Senate
    Commerce Committee for the balanced and effective approach undertaken
    in passing these laws on important transportation policy issues, which
    include railroad economic regulation, safety rules and surface
    transportation policy. These laws are particularly important to the
    rural economy, where freight rail and roads play a large role in the
    movement of goods.
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    Rail Industry & BNSF Overview and Outlook
        The economic value of rail is well known in Nebraska, where
    generations of family histories are linked to that of the railroads.
    Railroads in the U.S. operate across a nearly 140,000 mile network and
    are the workhorse of the economy. They deliver approximately 40 percent
    of intercity freight volume, more than any other mode of
    transportation. And because railroads do it more efficiently than most
    other transportation modes, shippers pay less for transportation by
    rail.
        Freight rail also lessens the environmental impact of the supply
    chain. For example, BNSF can move a single ton of freight almost 500
    miles on a single gallon of fuel, reducing greenhouse gas emissions by
    75 percent. One double-stack intermodal train of consumer products
    removes more than 250 long-haul freight trucks from the highway,
    helping to reduce traffic congestion and wear and tear on the Nation's
    highways.
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        BNSF is wholly owned by Nebraska-based Berkshire Hathaway, which
    completed its acquisition of the railroad in early 2010. At the time of
    purchase, Berkshire CEO Warren Buffett proclaimed it ``an all-in wager
    on the economic future of the United States.'' BNSF operates one of the
    largest freight rail systems in North America with approximately 32,000
    route miles in 28 states and also operates in three Canadian Provinces.
    BNSF has approximately 42,000 employees and operates about 1,200 trains
    per day.
        Total volume for all types of freight hauled by BNSF last year was
    10.3 million units, the most of any railroad. BNSF is the leading
    intermodal transportation provider, handling millions of shipments
    every year that could travel exclusively by truck but are carried on
    the railroad. BNSF hauled more than 4.8 million containers and trailers
    in 2015, representing close to half of all the freight units that BNSF
    handled for the year. BNSF hauls the most grain and coal and also has a
    large industrial products franchise, which includes crude oil and
    drilling inputs.
        BNSF's network serves all major ports along the west coast and Gulf
    of Mexico. Freight flows through several key transcontinental
    corridors--the Southern Transcon, which connects Southern California
    and Chicago; the Great Northern Transcon, which is the Pacific
    Northwest to Chicago and beyond; and the Midcon Corridor, which
    includes the lines that essentially move freight north and south.
    Nebraska is part of the Midcon Corridor.
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        For more than a century, BNSF and its predecessor railroads have
    played an important role in Nebraska's economy. BNSF's footprint across
    Nebraska dates back to the late 1860s when the Burlington & Missouri
    River Rail Road (B&MR) began planning its westward expansion from Iowa
    across the Missouri River at Plattsmouth. By the summer of 1870, the
    B&MR had built a new railroad from the west bank of the Missouri River
    to the newly designated state capital of Lincoln. By 1882, the new
    Nebraska line had crossed the entire state and into Denver, Colorado.
    Eventually, more railroad was built across the state, running northwest
    to Billings, Montana and beyond.
        BNSF employs more than 5,000 people in Nebraska with an annual
    payroll of almost $385 million, and operates major rail yards in
    Alliance, Lincoln, McCook and Omaha. We also operate shops in Lincoln,
    Havelock and Alliance. BNSF currently owns and operates more than 1,400
    miles of track in Nebraska, moving more than two million carloads of
    freight through the state on annual basis.
        BNSF delivers fertilizer from plants around the country to grow
    yields for Nebraska's crops. It links the state's agricultural
    industry, including its emerging ethanol industry, to markets
    domestically and around the world. BNSF also delivers a wide variety of
    consumer products to Nebraska retailers and businesses along with
    lumber and other building materials from the Northwest and the
    Southeast to satisfy construction demands throughout the state.
        A significant percentage of BNSF's traffic moving across the state
    is cleaner-burning Powder River Basin (PRB) coal from Montana and
    Wyoming, headed not only to Nebraska where its citizens rely on coal
    for their energy needs, but to electricity generators and consumers
    around the country. Coal freight traffic drives much of the rail
    employment and investment in Nebraska. More than 1,000 employees work
    at Alliance, where loaded and empty coal trains, along with mixed
    freight trains, are processed and rail cars and locomotives are
    inspected, repaired and overhauled.
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        Rail volumes are a good indicator of how the economy is performing.
    Freight rail volumes peaked in 2006 and then bottomed out during the
    Great Recession, when freight railroads lost 20 percent of their
    volume. BNSF carried 10.6 million units of freight in 2006 but
    plummeted to 8.4 million units in 2009.
        Coming out of the Great Recession, consistent growth in rail
    volumes did not begin again until 2010. Then, as the economy limped its
    way out of the recession, rail volumes actually grew at double the 2.1
    percent rate of economic growth from 2009 to 2014. The industry
    struggled with handling the volume growth during 2013 and 2014 and,
    while the number of units on the railroad never quite got back to peak,
    BNSF exceeded its peak in gross ton miles which reflected a shift in
    traffic mix to heavier commodities like coal, crude oil and grain.
    Throughout this period, the freight rail industry, especially BNSF,
    increased volume and investment.
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Since 2000, BNSF has invested more than $53 billion in its network;
    all railroads invested heavily during this period. BNSF had all-time
    record capital programs in 2014 and 2015--totaling more than $11
    billion. We added almost 200 miles of double-track, approximately 1,000
    miles of centralized traffic control, 16 new sidings and more than 20
    extended sidings. In Nebraska last year, BNSF's $245 million capital
    plan for the state included, among other things, construction of two
    double track segments on the Ravenna subdivision between Bradshaw and
    Aurora and Pleasant Dale and Milford totaling 18 miles. These projects
    improve capacity on the Midcon Corridor, currently the heaviest
    trafficked coal route.
        In 2016, BNSF plans to invest approximately $110 million in its
    network in Nebraska, continuing a robust capital program which has seen
    investment of more than $500 million in Nebraska infrastructure over
    the last five years. In 2016 BNSF plans include approximately 1,760
    miles of track surfacing and/or undercutting work, the replacement of
    about 40 miles of rail and more than 160,000 ties, as well as signal
    upgrades for federally mandated positive train control (PTC).
        While my testimony will detail some concerning news in the current
    freight outlook, particularly with respect to coal, the good news is
    that BNSF has the capacity available to continue to grow with our
    customers and facilitate development within the region. These
    investments give us expanded capacity for improved service--our
    performance was strong in 2015 and we are carrying that momentum
    through 2016. BNSF infrastructure is in the best shape it has ever been
    to meet customer needs and operate safely.
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        As BNSF's Executive Vice President for Operations Greg Fox shared
    in testimony before this subcommittee last summer on the role of
    technology in improving safety, BNSF and the rail industry are
    currently experiencing the safest years on record, showing significant
    improvement over the past decade.
        During this time, safety improvements have occurred even as volumes
    increased, including volumes of hazardous materials and the growth in
    crude-by-rail. Continued robust investment in infrastructure has played
    a direct role in this success, along with the deployment of technology
    and safe operating practices, which involve rules compliance and a
    commitment to safety by BNSF's employees.
        I am pleased to report that the Nebraska Division is currently one
    of BNSF's top three safest divisions. Its 2015 reportable employee
    injury frequency ratio, at 0.82 reportable injuries per 200,000
    employee hours, is even better than BNSF's system-wide average of 0.95
    (which would be a best ever measure for any year on the railroad).
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Unfortunately, volumes in 2016 now are trending well off the recent
    ``peak'' volume levels realized in 2014. In 2015, industry volumes
    decreased about three percent versus 2014. The last two months were
    especially challenging as we saw the traffic decline accelerate. In
    December, volumes were down about nine percent versus 2014. This
    downward trend has continued into 2016 and we do not see a lot of
    growth in the near to mid-term outlook. At the moment, BNSF has 4,500
    transportation employees on furlough and 1,800 locomotives in storage.
    All railroads are undertaking efficiency efforts in order to reduce
    costs to match volumes, aligning resources with the current business.
        The economy is running on two tracks--the consumer economy is
    stable but not growing quickly, and the industrial economy is slowing,
    if not in recession. There is a structural change occurring in the
    traditional volume mix of railroad traffic, and the dynamics have been
    changing at a pace that I have not seen in my career. Coal volumes are
    at the heart of it, but volumes related to the industrial economy are
    also suffering. A strong U.S. dollar, changes in energy markets and
    regulation are a drag on growth. The consumer economy--consumer goods
    and automobiles--continues to grow at a modest pace. The ongoing change
    in railroad volume, mix and revenue currently underway will impact the
    freight rail industry for some time to come.
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        There is no better place to see that than coal volumes. At the
    beginning of 2015, we saw strong customer demand focused on rebuilding
    inventories--due to the underperformance in 2014. Continued service
    improvements and a mild winter have driven stock piles to historic
    highs; combined with low prices for natural gas, coal demand is at a
    historic low, as a fundamental shift in electricity generation is
    taking place. The Energy Information Administration is now forecasting
    that 2016 will be the first year that natural gas-fired electricity
    generation will exceed coal generation in the U.S. on an annual basis.
        In 2013, coal was still about 40 percent of tonnage and nearly 20
    percent of rail revenue for U.S. Class I railroads. This year, coal
    traffic in the U.S. has decreased more than 30 percent (31.7) year-
    over-year. Markets are at work here; falling demand has reduced coal
    utilization. But Environmental Protection Agency regulations will
    ensure that coal will not likely grow again.
        Coal's steep decline means a significant downshift for the
    investment in infrastructure, manpower and other resources that
    supported coal movements. BNSF, of course, must match costs to reduced
    volumes, and are working on that. But cost is not the only element in
    the equation. We also are committed to generating growth across all of
    our business units in order to diversify Midcon Corridor utilization.
        Agriculture shipments--primarily corn, soybeans and wheat, as well
    as ethanol--represent about 10 percent of BNSF volumes. Approximately
    34 percent of BNSF's annual agricultural shipments are exported outside
    of the U.S. Of BNSF grain shipments, 60 percent move to export markets.
    In 2015, agriculture products made up more than 85 percent of BNSF
    shipments originated in Nebraska, almost half of which were corn and
    ethanol. Of the agricultural units originated in Nebraska, the majority
    are destined for Texas (37 percent), California (23 percent) and
    Washington (16 percent).
        Growth in agricultural products over the last several years has
    been steady due to increased plantings, improvements in crop yields, as
    well as continued expansion of grain facilities. In fact, the last
    three years of U.S. grain production have been the highest on record.
    Planting conditions indicate another big crop year in 2016 and BNSF
    will be ready to meet our customers' needs. As U.S. crop yields have
    increased, BNSF has expanded its capacity and efficiency in kind.
    Railroads are a factor in the U.S. producer's competitive position as a
    least cost producer in the world market. An efficient and low cost rail
    network is particularly important to Nebraska agricultural producers.
    Every load of agricultural products starts in a truck and, then if
    loaded on rail, has the optionality to move to end markets both
    domestic and international.
        For the first quarter 2016, agricultural products on BNSF are up
    1.5 percent, driven by record soybean exports through the Pacific
    Northwest ports and increased ethanol shipments. However, U.S.
    agricultural exports continue to face headwinds from global
    competition, low commodity prices and the strong U.S. dollar, which has
    grown more than 19 percent since July 2014. This is impacting many of
    BNSF's export segments.
        Turning now to industrial products, BNSF volumes in this segment
    for the first quarter 2016 are down 9.2 percent, due mainly to business
    related to crude drilling and production. Year-over-year, industrial
    products were down just under 6 percent (5.9) in 2015 versus 2014;
    crude volumes decreased 10.6 percent in 2015 as a result of lower oil
    prices. In 2014, we were averaging about 750,000 barrels of crude oil
    per day and that volume declined to an average 620,000 barrels per day
    in 2015. This trend worsened throughout 2015 and currently we are
    averaging around 360,000 barrels per day in 2016. Not surprisingly,
    other input commodities such as minerals and frac sand were also down
    in 2015, about 20 percent (21.3) versus 2014, and down in the first
    quarter 2016 over 25 percent (25.3).
        Plastics, on the other hand, are poised to grow given the more than
    $1 billion expansion of the petrochemical and refining complex along
    the Gulf Coast, fueled by low cost American oil. We expect oil-related
    shipments to by cyclical, while coal's downturn appears to be systemic,
    and likely permanent.
        Rounding out a review of BNSF business units, we end on a positive
    note. BNSF's largest business unit is intermodal--consumer products
    that move on trucks and rail, and sometimes also from a ship. BNSF
    intermodal volumes increased slightly in 2015, about 0.5 percent. Those
    volumes are almost 70 percent back from the recessionary trough.
        In 2015, international volumes were down almost 2 percent (1.8) as
    shippers diverted freight from U.S. West Coast Ports, responding to
    disruptions by the International Longshore and Warehouse Union (ILWU)
    labor negotiations. BNSF's Vice President of Consumer Products, Katie
    Farmer, testified before the Subcommittee about those impacts on the
    freight rail network last year. As you know, an agreement was reached
    in late February 2015, and pent-up demand began to clear in March. It
    is hard to tell exactly how much, but we know a certain percentage of
    that freight did not come back. It went permanently to other ports in
    Canada or on the East Coast.
        On a brighter note, BNSF domestic intermodal volumes, converting
    truck to rail, were up 2.4 percent year-over-year. Looking forward, we
    see additional growth potential and opportunities to take more truck
    miles onto the railroad. Looking longer-term, this will continue to be
    one of BNSF's best business growth propositions. We work hard to
    provide the service that converts truck miles to the railroad; trucking
    companies are BNSF's largest customers.
    Public Policy Review
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Turning to freight policy, the interests of Nebraska shippers and
    the freight industry were well served by several important pieces of
    legislation that this Congress has passed. From BNSF's perspective, the
    extension of the PTC deadline was one of the most significant of these
    legislative measures. Freight rail traffic was poised to effectively
    stop before the end of 2015 if Congress did not act. The deadline was
    responsibly extended by Congress, and BNSF expects that by the end of
    2018, PTC will be installed as required on its network. BNSF has
    completed more than 80 percent of the necessary signal work and
    equipment of locomotives to support PTC implementation, and as of today
    is running trains in Revenue Service Demonstration (RSD) across 14 of
    its subdivisions. To date, we have operated more than 60,000 PTC trains
    in revenue service. We continue to work through challenges that the RSD
    is helping expose, including overall reliability of a complex system of
    systems, initialization of the locomotive onboard computer system prior
    to train departure, and en route failures and braking performance that
    relies on complex braking algorithms.
        Enactment of the Fixing America's Surface Transportation (FAST) Act
    was a significant accomplishment that will benefit the Nation's supply
    chain. The law prioritizes freight projects in a way no previous
    highway bill has done. It provides funding for not only freight-related
    roadway projects, like intermodal connectors and highway-rail grade
    separations, but also potentially port projects and some freight rail
    projects, such as port facility freight rail access projects, critical
    bridge infrastructure and railroad relocations. Throughout the laws
    various programs and policy provisions, special emphasis is placed on
    providing Federal funding to state and local efforts to reduce road and
    highway conflict with freight railroad rights-of-way.
        Significantly, the FAST Act continued and expanded upon project
    delivery and permitting reforms enacted as part of the reauthorization
    bill's predecessor--MAP-21. Of particular interest to railroads, the
    bill directs the U.S. Department of Transportation (DOT) and Federal
    Railroad Administration (FRA) to streamline and improve rail-related
    environmental and historic preservation reviews, either through
    internal process changes or by rulemaking. Permitting reform is
    critical at all levels of government. At BNSF, almost weekly, negative
    decisions from courts or permitting authorities at all levels of
    government demonstrate to BNSF and its customers that our growth,
    especially at origins and destinations, is limited by the inability to
    receive required permits.
        I would like to point out that the Senate version of the Water
    Resources Development Act (WRDA) contains additional provisions which
    BNSF considers important to continued permit reform. Section 1021 of
    the bill would expand the authority contained in Section 214 of the
    statute to cover railroad projects. Section 214 presently authorizes
    the Secretary of the Army to accept and expend funds from non-federal
    public entities, public utilities and natural gas pipeline companies to
    expedite the evaluation and processing of permit applications that fall
    under the jurisdiction of the Department of the Army. Amending the
    Corps' Section 214 authority to expedite the evaluation and processing
    of permits to include rail initiatives would streamline the industry's
    ability to deliver critical infrastructure projects that benefit the
    communities in which railroads operate and the customers they serve.
    Importantly, the new provision would not make any substantive or
    process changes and all environment rules and protections would
    continue to apply. We encourage enactment of this important provision.
        In addition, there is also a bipartisan legislative effort underway
    in the Senate to provide for a limited railroad exclusion from FCC
    review for safety-related equipment in railroad rights-of-way that rely
    on wireless communications. We strongly support this proposal which
    builds on the reforms established in the FAST Act, and hope it will
    move forward in the legislative process. Permitting reforms like those
    described above are critical to BNSF operations as continued permitting
    delays effectively cap growth and access to markets, which not only
    hurts the railroad but Nebraska's shippers.
        The FAST Act also followed and improved a recently released DOT
    rule related to rail transportation of certain flammable liquids,
    including crude. The DOT's rule established design standards for tank
    cars, along with operating requirements for High Hazard Flammable
    Trains (HHFT), including a mandate for the installation of
    Electronically Controlled Pneumatic (ECP) Brakes. Congress refined
    several important aspects of the rule's provisions, including
    strengthened requirements for new tank cars and calling for a data-
    driven analysis for ECP brakes, thereby improving safety outcomes and
    the overall regulatory process.
        Congress does not authorize or appropriate railroad capital
    budgets; however, Federal freight railroad economic regulatory policy
    directly impacts the investment decisions of freight railroads.
    Adequate freight railroad investment, driven by appropriate returns, is
    an important factor in Nebraska's competitiveness in the world economy.
    BNSF and the rail industry did not oppose the passage of S.808, the
    Surface Transportation Board Reauthorization Act, which reauthorized
    the Surface Transportation Board, the agency which exercises economic
    regulatory authority over freight railroads. This legislation made a
    number of important process changes at the Board, and BNSF is carefully
    watching implementation of its provisions. Committee Chairman John
    Thune (R-SD), Chairwoman Fischer and other members of the Commerce
    Committee worked in a bipartisan fashion to craft legislation that
    sought to strike a balance between regulatory oversight of the
    railroads with the industry's need to earn sufficient revenues to allow
    for reinvestment. As we have stated many times since passage of the
    Staggers Rail Act in 1980, balanced regulatory oversight is critical to
    the health of the freight rail industry and its customers who depend on
    us to deliver consistent and cost-effective rail service.
    Conclusion
        In conclusion, the freight rail industry has never been more
    prepared to take on freight volume and provide service to customers
    than it is right now. The ``virtuous cycle'' of growth in volumes,
    revenues and reinvestment has brought us to this place. However,
    Congressional action has also been part of this; Congress prioritized
    the supply chain within infrastructure policy, made important project
    delivery reforms and judiciously balanced the needs of supply chain
    participants. Most importantly Congress deftly prevented over-
    regulation. It is impossible to overstate how important that is to the
    ongoing availability of necessary capital and the efficiency of
    railroad operations.
        In the current economy, it is difficult to know the ``what'' or the
    ``when'' growth will return. But we believe that improvement will come.
    Earlier this year, the DOT released new 30-year freight projections.
    They are showing that freight tons moving on the Nation's
    transportation network will grow 40 percent in the next three decades.
        We have invested to handle it, and we have the workforce--in
    Nebraska and elsewhere--to move the additional freight that America
    will need. The current period is difficult, and BNSF and all the
    Nation's railroads are working to manage it in the most responsible way
    possible.
        Whatever the future brings, BNSF expects to continue to be able to
    support the economy of rural America. We will not just move its grain
    to market, coal to power its electricity generation, consumer goods to
    provide its consumers with the same choices as urban consumers, we also
    will work as a partner to develop and diversify the rural economy. From
    2013 to 2015, BNSF was instrumental in locating 414 new or expanded
    facilities across the network; in Nebraska alone BNSF helped create
    more than $300 million in investments and 100 jobs over that period.
    Nowhere is efficient freight rail more important than places like
    Western Nebraska, and BNSF appreciates that Senator Fischer and Members
    of the Senate Commerce Committee have understood that.

        Mrs. Fischer. Thank you very much.
        Mr. Kelley, welcome.

                 STATEMENT OF KEVIN KELLEY, PRESIDENT,
                          KELLEY BEAN COMPANY

        Mr. Kelley. Again, I'd like to thank you. I'm honored to be
    here today, and thank you for having the hearing here in
    Scottsbluff at WNCC, Senator Fischer. I'm looking forward to
    sharing this with you. I could talk for hours, but I'll keep it
    quick. We are thankful for the opportunity to present testimony
    before this committee.
        Kelley Bean is involved in the organization and marketing
    of dry edible beans. We are tied to both the grower and end
    users. It's our job to move the grower's production into the
    domestic and export markets. In a given year we utilize
    approximately 700 rail cars and 3,000 trucks for shipments that
    we are responsible for the transportation. Transportation
    logistics are crucial to our business.
        With rail transportation, we were classified under
    specialty commodities. We rely on single and small-quantity
    rail car placements at our plants, as opposed to unit trains
    used in grains and coal. This necessitates frequent spotting of
    empty rail cars to keep the flow of production moving during
    times of high-volume shipments.
        We have now been limited to one rail car switch a week at
    many locations. This situation is compounded when an empty rail
    car is delivered that is unsuitable for use and cannot be
    replaced until the next switch. This slows our production flow
    and delays delivery to the end customer. With this limited
    placement of rail cars, we also believe that railroads need to
    address their merged schedules to fit the rail car delivery
    situation.
        As the economy improves and demand for transportation
    increases, we fear that the service level can only suffer and
    that specialty commodities will feel a large impact on service
    levels as railroads focus on their primary high-volume and
    high-profit customers. We have seen and experienced this in the
    past when the railroad capacity was stretched and service
    levels dropped.
        As an example would be 2 years ago with Great Northern bean
    shipments to be exported to the Port of Houston. Service was
    very poor and railroads were not being supplied as needed. Due
    to rail delays, we were forced to ship the product by truck to
    Houston in order to comply with our sales contract terms. This
    was a great expense for our company in higher freight and cost
    and lost sales.
        Railcar Despacho Previo, pre-documentation of railcar for
    export to Mexico, was implemented in the early 1990s to
    alleviate congestion at the border and to comply with Mexican
    customs law requiring documentation and payment of duties prior
    to the railcar entering Mexico. The reason behind the
    implementation was a situation of a lack of engines at the
    border to cross the railcars in an orderly manner, creating a
    5,000 railcar backup that spread through several states,
    sidelining railcars destined for the border crossing.
        That situation does not exist today. Current Despacho
    Previo rules, as spelled out in BNSF Rules Book 6100-A, Item
    3140E, only allow 48 hours from release of the railcar at the
    origin shipping point for delivery to the border of the
    required export documentation. After the expiry of the 48
    hours, a documentation demurrage is charged by the railroad on
    a daily basis. This is an exceedingly short period of time to
    deliver the documents to the border, especially considering
    that a USDA Phytosanitary Certificate must be issued by a
    government agency after the railcar is loaded and released to
    the BNSF. In many cases, the railcar is still sitting alongside
    the shipping warehouse after the 48-hour period expires and has
    not physically moved or has only progressed a short distance in
    transit. This does not lead to congestion at the border.
        With the current situation, this appears to be more of a
    revenue generator than a legitimate mechanization for
    preventing congestion at the border. We would request a longer
    Despacho Previo period to give the shipper adequate time to
    accumulate the needed documents and dispatch those documents in
    an orderly fashion to the forwarding agent at the border. If
    shippers are given at least 96 hours, it would aid the shipper
    and would likely have no impact on border congestion.
        We would also like to say that we support the Highway
    Transportation Bill. It is a step in the right direction for
    funding a highway system that is essential to our industry and
    to the Nation as a whole. We need to have an extensive, safe,
    well-maintained highway infrastructure to convey the commerce
    of the United States for now and into the future.
        In order to accomplish this, we need to allocate greater
    funds than are earmarked to expand the capacity and quality of
    our highway system, not just maintain and patch to keep them
    usable. As the economy expands, the volume of truck freight
    will increase and require more trucks and qualified drivers and
    higher capacity highways. Since the highway system is shared by
    both commercial and private vehicles, highway safety must be a
    major component. This pursuit of highway safety should not be
    based on restrictive rules, regulations, and mandates to create
    a sense of safety, but with actual improvements to capacity,
    quality, and safeguards of the highways themselves.
        I'd like to thank you for allowing me to present today.
        [The prepared statement of Mr. Kelley follows:]

       Prepared Statement of Kevin Kelley, President, Kelley Bean Company
        We are thankful for the opportunity to present a testimony before
    this board.
        Kelley Bean is involved in the origination and marketing of Dry
    Edible Beans. We are tied to both the growers and the end users. It is
    our job to move the grower's production into the domestic and export
    markets. In a given year, we will utilize approximately 700 railcars
    and 3,000 trucks for shipments that we are responsible for the
    transportation. Transport logistics are crucial to our business.
        With rail transportation, we are classified under Specialty
    Commodities. We reply on single and small quantity railcar placements
    at our plants as opposed to unit trains used in grains and coal. This
    necessitates more frequent spotting of empty railcars to keep the flow
    of production moving during times of high volume shipments. We have now
    been limited to one railcar switch a week at many locations. This
    situation is compounded when an empty railcar is delivered that is
    unsuitable for use and cannot be replaced until the next switch. This
    slows our production flow and delays delivery to the end customer. With
    this limited placement of railcars, we also believe that the railroads
    need to address their demurrage schedules to fit the railcar delivery
    situation.
        As the economy improves and demand for transportation increases, we
    fear that the service level can only suffer and that Specialty
    Commodities will feel a large impact on service levels as the railroads
    focus on their primary high volume and high profit customers. We have
    seen and experienced this in the past, when the railroad capacity was
    stretched and service levels dropped. An example would be 2 years ago
    with Great Northern Bean shipments to be exported from the Port of
    Houston. Service was very poor and railcars were not being supplied as
    needed. Due to rail delays, we were forced to ship the product by truck
    to Houston in order to comply with our sale contract terms. This was at
    a great expense to our company on higher freight cost and lost sales.
        Railcar Despacho Previo (Pre-documentation of railcar for export to
    Mexico) was implemented in the early 1990s to alleviate congestion at
    the border and to comply with Mexican Customs law requiring
    documentation and payment of duties prior to the railcar entering
    Mexico. The reason behind the implementation was a situation of a lack
    of engines at the border to cross the railcars in an orderly manner;
    creating a 5,000 railcar backup that spread thru several states
    sidelining railcars destine for the border crossing. That situation
    does not exist today. Current Despacho Previo rules, as spelled out in
    BNSF Rules book 6100-A, Item 3140E, only allow 48 hours from release
    the railcar at origin shipping point for delivery to the border of the
    required export documentation. After the expiry of the 48 hours, a
    documentation demurrage is charged by the railroad on a daily basis.
    This is an exceedingly short period of time to deliver the documents to
    the border especially considering that a USDA Phytosanitary Certificate
    must be issued by a government agency after the railcar is loaded and
    released to the BNSF. In many cases, the railcar is still sitting
    alongside the shipping warehouse after the 48 hours period expires and
    has not physically moved or has only progressed a short distance in
    transit. This does not lead to congestion at the border. With the
    current situation, this appears to be more of a revenue generator for
    the railroad than a legitimate mechanization for preventing congestion
    at the border. We would request a longer Despacho Previo period to give
    the shipper adequate time to accumulate the need documents and dispatch
    those documents in an orderly fashion to the forwarding agent at the
    border. If shippers are given at least 96 hours, it would aid the
    shipper and would likely have no impact on border congestion.
        We would also like to say that we support the Highway
    Transportation Bill. It is a step in the right direction for funding a
    Highway System that is essential to our industry and to the Nation as a
    whole. We need to have an extensive, safe, well maintained highway
    infrastructure to convey the commerce of the United States for now and
    into the future.
        In order to accomplish this, we need to allocate greater funds than
    are earmarked to expand the capacity and quality of our highway system,
    not just maintain and patch to keep them usable. As the economy
    expands, the volume of truck freight will increase and require more
    trucks and qualified drivers and higher capacity highways. Since the
    highway system is shared by both commercial and private vehicles,
    highway safety must be a major component. This pursuit of highway
    safety should not be based on restrictive rules, regulations, and
    mandates to create a sense of safety, but with actual improvements to
    capacity, quality and safeguards of the highways themselves.

        Mrs. Fischer. Thank you very much.
        Mr. Holliday.

     STATEMENT OF RICHARD B. BRENT HOLLIDAY, JR., CHIEF EXECUTIVE
                  OFFICER, NEBRASKA TRANSPORT COMPANY

        Mr. Holliday. Good morning again, Senator Fischer.
        Mrs. Fischer. Good morning.
        Mr. Holliday. I'd like to thank you and the Committee for
    hosting this hearing today and for the opportunity to testify.
        My name is Richard B. Brent Holliday, Jr., and I am the
    owner and the CEO of Nebraska Transport Company based here in
    Nebraska. My son Phillip represents the third generation of our
    family owned business. We serve greater Nebraska and the
    Midwest, and most of our revenue sources derive from our less
    than truckload or LTL operations, and supplemental income
    supplied through our truckload brokerage and expedited
    services. We operate 10 terminals nationally, six of which are
    located in Nebraska, and we currently have 225 employees.
        I want to begin my testimony today with a quote from a man
    that I've admired all my life, one of my heroes. He once told
    me--and this is a true statement--``Brent, sometimes it's
    better to be a pup on the porch than a big dog out in the
    street.'' That man was Richard B. Holliday, Sr. He was my
    father. He ended up in Scottsbluff because this is where he ran
    out of gas and money when he was 18 years old, and he worked
    odd jobs until he secured a job on a freight dock and later
    became a truck driver. He went on to work for a local company
    with numerous promotions in his 26-year tenure at that company.
    He ultimately held the title of VP of Operations. The company
    he worked for sold to a national carrier, and shortly
    afterwards he bought the ICC authority of a dormant company,
    and the story of NTC started in 1973.
        Now, that doesn't have a lot to do with what we're doing or
    talking about today, but trucking has been a family business,
    and most of the carriers that serve Nebraska are small
    carriers. It's very important to the future of our network.
        In Nebraska, there are 13,500 interstate carriers
    registered. That makes us second only to Texas, and per capita
    we are actually first. That does not include private or
    intrastate carriers. The majority of these carriers are small
    carriers. Eight-hundred-fifteen-thousand pieces of equipment
    over 26,000 pounds are registered in the state of Nebraska. The
    local and regional economic impact is evident.
        Regardless of the different modes of transportation
    required to move goods from Omaha to North Platte or Beijing to
    Gering, trucks represent the first and last mile in a worldwide
    freight chain. Much of the last-mile service is provided by
    smaller carriers. For an effective local and regional
    transportation network, we have to have an ample supply of safe
    and financially strong carriers, large and small.
        Regardless of fleet size, regulation has impacted everyone
    financially. The burden for smaller carriers, the carriers that
    serve communities such as Scottsbluff on a regular basis, is
    even more profound. There's not a road in the state of Nebraska
    that one of our trucks has been on, and not everyone is just
    dying to have service to Venango, Nebraska, but it's important
    to the people of Venango, Nebraska.
        Other industry headwinds such as the driver shortage,
    turnover, and escalating equipment costs pose a real threat.
    According to a recent article in Transport Topics, 3,585 trucks
    were sidelined in the first quarter of 2016. That is three-and-
    a-half times the amount of trucks removed from operation than
    in the first quarter of 2015. New, revised, and future
    regulation will continue to put pressure on carriers
    financially.
        Now, let me say this: regulation is not a bad thing. It has
    made our industry as safe as it ever has been and ensures our
    drivers are trained and tested to make sure that they are
    physically and mentally fit to share the roads with our
    families. Things such as EOBs and standardized safety scoring
    system for trucking is not only beneficial, it is a must. But
    it has to be consistent state to state and community to
    community when it comes to enforcement and measurement.
        We are not afraid of regulation, and we're not afraid of
    managing regulation. Management of regulatory consistency is
    attainable. However, consistent regulatory changes are not. In
    other words, tell us what you want. We'll manage it. We'll make
    it right. We'll get it right, and we'll train our people.
    Revisions that require network and system changes are expensive
    and confusing to employees, and it affects service to rural
    communities.
        The implementation of the FAST Act is a very good start,
    and we really want to thank you for your work on that. Things
    like requiring the FMSCA to specify how it intends to evaluate
    future rules to measure their intended outcomes using a wider
    scope and selection of motor carriers and its cost/benefit
    analysis, listening to public concern for potential regulatory
    action, and requiring data on how safety initiatives will be
    quantified are all very positive steps.
        The FAST Act hopefully moves us into a more interactive and
    commonsense approach to future regulation. Real world versus
    regulation will never be understood in Washington without an
    interactive and collaborative approach with those being
    regulated. Increased regulation needs to be balanced and
    statistically data based. Thanks again for what you've done.
        The day of the pup staying on the porch where it's safe is
    over. Carriers of all sizes need to be prepared to be in the
    street, and we need to know we can survive when we get there.
    If we don't, the communities we serve will be held hostage to
    ``you get it when you get it'' due to a cost structure that
    means extreme efficiency at the expense of service. We need
    your help, Senator Fischer, and we are certainly willing and
    prepared to help you. Thank you again.
        [The prepared statement of Mr. Holliday follows:]

     Prepared Statement of Richard B. Brent Holliday, Jr., Chief Executive
                      Officer, Nebraska Transport Company
    1. The Driver Shortage is Bad and Getting Worse

      a.  The driver shortage is currently 48,000 and growing

      b.  There are many reasons for the driver shortage, including
            lifestyle and other local job alternatives.

      c.  The biggest reason appears to be driver age. The average driver
            is 8-10 years older than the average American worker. Hence,
            retirements will disproportionately affect our industry.

      d.  We need to begin identifying ways to attract more individuals to
            our industry

    2. We Need Stability/Consistent Regulations

      a.  Trucking has struggled to plan and adapt under changing
            regulations (like hours of service) and the uncertainty of
            future ones (sleep apnea).

      b.  We appreciate Senator Fischer's regulatory reform language in the
            FAST ACT which requires FMCSA to prioritize rulemakings.

      c.  We also urge greater Congressional oversight with respect to the
            necessity of rules (i.e., is there a compelling need and will
            they have a net safety benefit?).

      d.  Regulation needs to be balanced and statistic based. What is real
            world vs. Regulation

      e.  A study for George Mason University finds that since 1980 $4
            Trillion dollars has been lost in economic growth due to
            growing regulations and our economy would be 25 percent larger
            if regulation would have been frozen in 1980

      f.  Management of regulatory consistency is attainable, constant
            regulation changes create hardship to the carrier, drivers, and
            customers

    3.  The New Electronic Logging Device Mandate Should Apply to All

      a.  FMCSA's new ELDs mandate exempts several groups of carriers.

      b.  Those using pre-model year 2000 trucks and those operating
            locally (i.e., within a 100-mile radius) are generally exempt.

      c.  These exemptions create safety implications and establish an un-
            level competitive playing field.

      d.  FMCSA should correct for this inequity and refuse exemptions for
            carriers and industry segments that will, inevitably, request
            them.

      e.  ELD's eliminate a layer of ability to alter actual on duty
            violations.

    4. Highway Investment is Insufficient

      a.  While the FAST Act increased highway funding by about 5 percent,
            this is not sufficient to make up the $740 billion backlog in
            needed highway capital investments to improve highway and
            bridge maintenance and address capacity needs (the Federal
            share is about half).

      b.  Two-thirds of roads are in poor or mediocre condition and 63,000
            bridges are structurally deficient.

      c.  Congestion costs the trucking industry $50 billion annually,
            including more than $200 million in Nebraska.

      d.  In 2014 truck drivers sat idle in traffic for 728 million hours,
            equivalent to 265,000 drivers sitting in their trucks and not
            moving for an entire year.

      e.  The best way to address the funding shortfall is to increase and
            index the Federal fuel tax.

    5. Smaller carriers struggle to survive in today's Environment

      a.  National carriers have eroded personal relationships with
            national pricing and created a commoditized pricing environment
            at the expense of service.

      b.  3 PLs or National logistics providers have commoditized pricing
            and compromised regional customer/carrier relationships

      c.  Logistics providers do not have regulatory costs, asset costs,
            management costs, or risk

      d.  National carriers have a lower proportional costs associated with
            regulation.

      e.  Small carriers are the first mile and last mile in worldwide
            freight chain If small carriers can't survive rural America
            will be at the mercy of a ``you will get it when you get it''
            environment

        Mrs. Fischer. Thank you very much.
        Any written testimony that you have will be included into
    the record.
        Now we get to the fun part of the hearing. I'm going to ask
    a number of questions for you folks, and I really hope you'll
    have an open conversation with me so that we can really drill
    down on some of these issues.
        And I'd like to begin with you, Director. Could you
    elaborate on how NDOR is working with the U.S. Department of
    Transportation to develop a statewide freight plan? What are
    some of the opportunities and the challenges that you foresee?
        Mr. Schneweis. Sure. So, the FAST Act requires a freight
    plan be in place in order to get some of the funding. For us
    it's a first-generation freight plan, so the first time we've
    done one, and I think it's long overdue for us to have an
    understanding of the supply chains in our state and understand
    how the network supports freight movement.
        So as a first-generation plan, that's really the approach
    that I think we're taking to it in terms of trying to establish
    that priority freight network and understand how goods move
    across that network. Our partnership with Federal Highway and
    USDOT is critical as we think about the freight plan and
    implementation of whatever recommendations come out of that.
        I think another piece of it, there are a couple of other
    things that we're thinking about. We're such an agriculture-
    heavy state, and our network is so large, so how we can get
    those goods to market across what starts as our local network,
    all the way out to the interstate or to the railroad or however
    it ends up getting to market, understanding that local network
    and how it feeds in I think is an important piece. And that
    network is, as you know---- many of our bridges are over 50
    years old, and understanding how that all works together is an
    important part of the freight plan.
        The local bridge piece is an important part of it, and then
    I think just understanding those supply chains work and looking
    for opportunities to understand how our highway network and
    other pieces of the multi-modalities can provide better
    connection, better access, better safety, that's what we're
    after.
        Mrs. Fischer. Agriculture is the economic driver for the
    state of Nebraska, so I appreciate you recognizing the
    importance of setting those priorities to include that.
        Have you looked ahead at trying to determine how you're
    going to make up your group as stakeholders as you look at
    working on a freight plan for the state? Do you have any kind
    of outline on who you're going to reach out to, or if it's
    going to come from the Department or the Administration? Are
    you going to look for any kinds of grassroots input as well?
        Mr. Schneweis. I think the partnerships that we have --in
    my view, we have a responsibility as government to reach out to
    the folks that we're trying to serve, our customers, and that's
    the people of Nebraska. It's the folks who are delivering the
    goods on our network. So we have to involve those folks whether
    they're railroads or shippers, growers. All of these folks need
    to be involved in our thinking and in our freight plan. So,
    absolutely.
        We don't have a freight advisory council like some states
    have. That will be a part of this group, of our freight plan at
    some point. We will engage that sort of group and carry it
    forward. But it is critical that we include those stakeholders.
        Mrs. Fischer. And as you look at stakeholders, I know
    you'll be seriously considering this area of the state and
    local Chambers or local economic development groups. But there
    are a number of small communities in Nebraska that are truly
    disconnected. Senator Davis is here today. He represents a lot
    of those counties that are out there that don't have really a
    connection. There aren't that many highways even going through.
        So how would you try to include them, and what would you
    say to these areas of the state that are looking at losing
    population, about their involvement in trying to stimulate any
    kind of development?
        Mr. Schneweis. Well, we know that transportation plays a
    role in supporting economic growth, and that means all across
    the state. So even just as we think about the Build Nebraska
    Act and some of our capital improvement projects that we're out
    planning for, we very much believe in getting out into the
    communities and talking about what's important to the regions.
    I believe we'll make better decisions in government if we ask
    people what they think, and that's something that I think has
    been a piece that we're trying to improve at the Department of
    Roads. I think it plays a role in everything we do, whether
    it's our state projects or the freight plans that we're working
    with USDOT on. So, absolutely, we need to work with those folks
    and the people that live in Nebraska and that work in these
    communities and that own these companies. They can help us make
    better decisions, and so that's what we're trying to do.
        Mrs. Fischer. Well, thank you, and I'd like to once again
    welcome you to the state. I appreciate the job you're doing and
    the enthusiasm.
        Mr. Schneweis. Thank you.
        Mrs. Fischer. So, thank you, sir.
        Deb, you have always been a tremendous advocate for
    transportation in Western Nebraska. I mean, I remember meeting
    you a long time ago about the Heartland Expressway, and you
    were relentless.
        [Laughter.]
        Mrs. Fischer. Which was a good thing.
        Would you provide more details for everyone here today
    regarding the status of the project for the expressway, the
    timeline and any challenges that you anticipate as the project
    moves forward?
        Ms. Cottier. Well, I appreciate the length of time that
    we've all been involved in this. I can remember when there was
    a group called the Western Nebraska United Chambers of
    Commerce, and former Senator Joyce Hillman and I sat as Chamber
    directors on that committee when we actually held a contest to
    name the Heartland Expressway, so it goes back a year or two.
        So that actually began as an effort from the Scottsbluff-
    Gering area to try to figure out how to better connect our
    businesses to the front range of Colorado, frankly, and then
    worked with South Dakota in a joint venture to try to then
    ultimately connect Rapid City with Denver and all of the
    communities in-between that wanted to be a part of this
    process. That includes Alliance, Nebraska. There are folks here
    from Alliance, from Kimball, from the whole region, and so it's
    extremely important.
        The status of that so far is that we have obviously one of
    the promises from the state government to connect I-80 to the
    next town of the largest size, from Kimball to Scottsbluff. It
    has been four lanes for a number of years. We've gotten several
    pieces that help move that traffic around and through
    communities. We're headed east on 26 and 92, about 10 or 12
    miles. Eventually that will be four-laned all the way to
    Highway 385 on what we call the L-62A spur.
        Right now, the Department of Roads is in the process of
    letting bids and doing right-of-way work to try to do the next
    piece of this, which is from that junction--we call it the
    Baird Turnoff in general vernacular terms--on U.S. 385 to the
    city limits of Alliance up to Highway 2. So that will be
    another very important piece which currently has a lot of
    traffic, ag traffic and difficulty with seeing around and
    passing and all of that.
        The piece, of course, that is nearest and dearest to my
    heart is from Alliance through Chadron to the Nebraska-South
    Dakota state line. Those of you that have come from South
    Dakota probably know, they have finished their portion of the
    Heartland Expressway four-lane project, and when you get to the
    Nebraska state border it goes back to two lanes on the Nebraska
    side of that imaginary line. That's a visual that we can all
    see every time we have to go to and from Rapid City, but it
    really is sort of what we're talking about. It then creates
    this bottleneck and this traffic hazard, if you will.
        So the Heartland Expressway Association, withheld from our
    partners at the Federal level, and the Nebraska Department of
    Roads, leading the charge, have actually conducted a number of
    years ago the Corridor Development and Management Plan, which
    literally broke the remainder of the Heartland Expressway into
    four phases to be finished. We are now going to turn dirt on
    the first of those four remaining phases this coming year.
        So I have to say, without the Build Nebraska Act in the
    Nebraska legislature, we would not have had the wherewithal to
    convince the Nebraska Department of Roads that that should be a
    project, and that also allowed us to have better input with the
    Director's direction to say we need to figure out how to best
    use that Build Nebraska Act funding. And now with the
    Transportation Innovation Act, we have even a better
    opportunity to really plan how those work.
        So that's where we are, and we're hopeful that those three
    remaining phases will be finished in my lifetime, I guess is
    the way I put it.
        Mrs. Fischer. Do you have any numbers on the direct
    economic impact that this would have on local communities or
    that you've even seen in the past when this is opened? And I
    would ask you and then open it up to other members of the panel
    if they would like to speak on that.
        Ms. Cottier. In terms of dollars, the best number that we
    have been able to use, which comes from an official study,
    which makes it true, of course, is that this investment would
    bring about a two-to-one payback, if you will. So for every
    dollar invested in road improvements, we would see a two dollar
    return in the economics of it.
        Interestingly enough, back in the day when the Federal
    Highway Administration was requiring quarter development and
    management plans before they would consider earmarking funds,
    there were not a lot of economic development criteria included
    in those RFPs that we had those studies done. We fought, and a
    couple of the members of the Heartland Expressway Association,
    as well as staff from Ports-to-Plains, fought hard to get some
    economic development data included in that study that was done.
    So that's the best number that I have that we use, and
    Department of Roads may have some other criteria.
        Mr. Schneweis. Well, we are studying it. As we think about
    our highway investments and our transportation investments in
    the future, the economic impacts of these investments have to
    be understood, and that's a layer that we've brought into our
    prioritization process in the last year. So not only public
    improvements were stressed but also economic impacts. We also
    understand that economic impacts vary depending on where you
    are. Job creation is what we're after. GDP growth is what we're
    after. But the definition of that and what impact that has on a
    community varies depending on where we are.
        So we're trying to understand what that means, and then
    we're trying to put the project through some sort of economic
    screening so that we can help inform our decisions and make
    better ones. It has always been about engineering, which it
    should continue to be, largely based on engineering, traffic
    and safety, these things. But economic impacts, what they mean
    to communities, that's really how we can make the best
    decisions with our limited resources.
        So we've been working with Deb and her group to try and
    understand the economic impacts of the Heartland, and certainly
    it's going to be a heavy factor in our prioritization process.
        Mrs. Fischer. Have you ever seen any studies, or do you
    plan to look at this on what the impact is? Because it does
    vary across the state. What the impact is of an interchange in
    Scottsbluff County compared to what the impact would be of an
    interchange in more rural areas in the state? Because it is a
    big difference.
        Mr. Schneweis. Yes. I think you have to understand it not
    only in terms of job growth and opportunity and those things,
    but also put it in the context of the situation where you are,
    the geographic location where you are. A job is not a job is
    not a job across our state. So understanding that and
    understanding those differences is critical for us to make
    smart decisions. It's the Build Nebraska Act, not the Build
    Eastern Nebraska Act or Build Western Nebraska Act. It's for
    the whole state.
        Mrs. Fischer. And that was the intent.
        Ms. Cottier. I would point out one thing. In the printed
    statement that we submitted, there are some great statistics in
    there about rural economic development and how locating next to
    an interstate, next to a four lane, next to a two lane, the
    difference in how those micropolitan areas perform, a nice
    chart in there that shows that obviously the strongest
    performance are those on the interstate. The weakest is not
    even on a four-lane highway. But the improvement that you get
    by having a four-lane is significant.
        And the only other thing I would mention about the criteria
    is what we have come to realize and what we hope folks
    understand in Western Nebraska, as I know you do, is that roads
    are not always based on vehicles traveled. The need for roads
    out here is every bit as critical as the really urban congested
    areas, probably more so, because we have so many fewer options.
    But the number, the count of how many wheels go across a little
    ticker tape is not as important as how those interact with the
    types of traffic that's on them.
        Mrs. Fischer. Right. And, Director, would you say that it
    is still the number-one priority of the Department to look at
    safety as the first indicator for any expenditure of taxpayer
    dollars?
        Mr. Schneweis. Yes, absolutely.
        Mrs. Fischer. Thank you.
        And did anyone else have anything to add on that?
        Mr. Overman. I'd like to give a little bit of historical
    perspective on what politics does. We all know that's what
    makes the wheels turn, and you do such a good job of it.
        Mrs. Fischer. Never.
        [Laughter.]
        Mr. Overman. Statewide and nationally.
        But in the early 1990s, I was on the steering committee for
    transportation and communication for the National League of
    Cities for 6 years. We made the Nation's priorities to present
    to Congress. When Deb and I were involved early on with the
    Heartland Expressway, I met one morning with the Chairman of
    our committee. His name was Jim Bell from San Jose, California.
    Over breakfast, on a napkin, I drew the Heartland Expressway,
    and I said we need some money in the upcoming bill. He said let
    me talk to Norm Manetta, who was Chairman of the Committee. He
    said Mr. Manetta is on his honeymoon in Florida, but he's a
    good friend, I'm going to call him. He called him on his
    honeymoon.
        To make a long story short, when the bill came out, we had
    $29.6 million in the highway bill, of which half was to go to
    South Dakota and half to Nebraska. I will tell you, it would
    never have happened if I had not been there, just like you were
    there now to make things happen. That was the first money ever
    received by the state of Nebraska for the Heartland Expressway.
        Mrs. Fischer. Good job.
        Mr. Holliday, if we could talk a little bit about some
    concerns that you expressed in your written testimony, and it
    was with regard to some trucking regulations. I know that you
    said that you can handle regulations, you just need to have
    that consistency that's out there. But in your testimony you
    mentioned the FMCSA, the 2013 revisions to longstanding hours
    of service regulations. You mentioned that briefly again in
    your testimony here.
        The changes essentially mandated that drivers sleep at
    night, and it caused severe disruptions to our nation's supply
    chain and threatened the safety on our roads, I think, by
    pushing more trucks out on the road during the morning commutes
    that we saw.
        So given the supply chain that we have, and time is money,
    what's the cost of that regulatory uncertainty that we see in
    Washington now on your business? What's the cost, and I guess
    what does Washington need to do?
        Mr. Holliday. Sure. I appreciate your question. To put down
    a dollar figure, I can't give that to you today. I could
    certainly do the research on that. But for us, in the LTL
    environment especially, we have to travel at night because our
    trucks are consolidating shipments in places like Kansas City,
    Denver, Chicago, Des Moines during the day. They bring those
    back to the terminal. That freight moves at night so that it's
    in the communities where those consignees are the next morning.
    That's not an option.
        As far as our long haul, our 48-state operation, I would
    just as soon have our drivers operate during the daytime,
    daylight hours only, for obvious safety reasons. We'd like for
    them to go on the same roads all the time. That also is
    impossible.
        So for us, especially with an LTL or regional LTL operation
    like we are, we can adjust to hours of service rule changes a
    lot easier than a truckload carrier, and those truckload
    carriers--and we have a truckload division, but it's smaller.
    But a lot of those truckload carriers are the very carriers
    that Mr. Kelley is relying on at times to get product to the
    end user. The hours of service limit you to a time on the road
    that I believe is safe and I think has been studied to be safe,
    but there are times when it requires a driver to stop when he
    may be 100 miles from destination. So the cost of that is
    another day to the consignee before they can get the product to
    the carrier, because that carrier then has to secure a
    backhaul, so you may miss out. If you can't unload until a
    Friday afternoon, it means that truck is going to sit wherever
    he's at over the weekend until he can get a backhaul, or he's
    going to deadhead home, which means zero revenue to that truck.
        So if you hold the truck, you've just taken a capacity
    situation that's already tight throughout the Nation and you've
    compounded it.
        Mrs. Fischer. When you work with businesses in delivering
    product, do you hear very often from businesses that they're
    concerned with the amount of time it may take to get that
    product--or especially I think with commodities, with ag
    commodities, there is a certain time limit you have to get them
    delivered. But do you hear from businesses where they're
    worried about it, they complain about it, they question it?
    Does it add cost to them, too?
        Mr. Holliday. Every day. You know, it's never there soon
    enough, especially in the LTL environment, once again, which is
    the majority of our revenue stream. We have customers that,
    because of economics today--and this changed probably 10 or 15
    years ago. What you used to hear is these companies operating
    on a just-in-time mode. That was something for the bigger
    companies or warehousing. It's across the board now.
        People don't warehouse stock like they used to. They have
    to have the flexibility of a carrier that can literally get
    freight from Kansas City to Scottsbluff overnight, Chicago to
    Denver in 2 days, and they rely heavily on that because their
    inventory is so low that if a customer comes in and needs
    something or a customer has a furnace go out, they may not have
    that in stock. We hear that all the time.
        Truckload and commodities are somewhat, actually a little
    easier than it is in the LTL environment. If Kelley Bean calls
    us and tells us that they're going to have three loads out of
    their Morel facility that needs to be in Houston, that's
    normally a week ahead of time that they can offer us that
    information, minimum, and we can adjust to that quickly. But in
    the LTL environment, and obviously the expedited environment,
    that becomes a lot harder to do.
        Mrs. Fischer. Thank you very much.
        Mr. Overman, what's the importance of a cargo business at
    the airport? We talk about the passenger business, and the
    cycles go up and down and you're always threatened with losing
    that funding for the essential air service, which I give
    Congressman Smith a round of thanks there. He has been a
    tireless advocate for essential air service for our rural
    communities. But what's the importance of cargo service, not
    just at the airport out here but all over?
        Mr. Overman. The cargo services are tremendously important
    to people in the corridor from all these companies all over the
    United States, and they want tomorrow service. They get it
    through the airport, part of it through FedEx and UPS. Both
    have planes come in every day. And as I stated earlier, FedEx
    goes out 150 miles in every direction from here. We had one
    route that goes to Hyannis from here, and it comes in on a
    plane. Some comes in on a truck. We just built a new truck
    depot at the airport and, of course, we already had the air
    there.
        But at Christmastime, and maybe Thanksgiving, some times
    like that, they may have to send in extra airplanes because
    they have so much coming in from--whether it be Amazon or some
    other major company across the country, and they want it
    overnight. We're an overnight society now, and a lot of it
    comes in by air. The ground transportation is there as well,
    and the UPS doesn't go out quite as far. They go out about 120
    miles, generally speaking. They have a lot of trucks all over
    the panhandle of Nebraska and Eastern Wyoming, and it all comes
    out of that airport.
        Mrs. Fischer. The second hearing that I had last year as
    Chairman of the Subcommittee, it was on our ports, and it
    happened to coincide with the disruption that we were seeing in
    the West Coast ports at the time. We have three folks on here
    that I think were affected by that, our airports, our rail, and
    our trucks. I had a lot of people say to me you're a senator
    from Nebraska, why are you doing this?
        Well, first of all, it's under the jurisdiction of our
    committee. But I think it really drove home that our ports
    affect everyone in this country.
        Would any of you like to just briefly speak to that?
        Mr. Freeman. Just to jump in from a railroad perspective,
    just to give you an idea about the ports of Southern
    California, we typically operate 50-plus trains a week out of
    the ports of L.A. and Long Beach. We have similar lesser-scale
    dynamics at the port of Oakland, the ports in Seattle and
    Tacoma up in the Pacific Northwest.
        When we went through the dynamics a year ago of what was
    going on out there and the impact, the numbers dropped. There
    clearly were many, many less containers of stuff, and you could
    pick your stuff, from furniture to electronics to tennis shoes
    or whatever, that were being moved and therefore, obviously,
    available for consumption at any point in the U.S., which is
    basically where that stuff moves over time.
        Clearly, when it was all settled out, it came back to
    normal. There is today a little bit of a downturn in terms of
    what's actually coming through the ports given some of the
    world economy situations that are out there and things of that
    sort. But when you look at the sheer number of containers, when
    I talk about 50 trains, we average anywhere from 250 to 275
    boxes per train to a high number of up around 350 on some of
    the longer trains we'll run. So clearly you'll understand how
    much stuff comes through the ports that ends up at any place in
    the U.S., and frankly is even bridged to other countries in
    some of the bridge operations that work across the U.S. as part
    of their transportation plan.
        Mrs. Fischer. Any other comments on that?
        Mr. Holliday. Yes. I think from a trucking perspective--and
    I don't do a lot of business out in California, but trucks have
    wheels. As I spoke about earlier, just 13,500 carriers in the
    state of Nebraska alone, most of those guys are small carriers.
    They have truck payments, they have overhead. They can't afford
    to have a truck sitting. So when they hear that there are
    problems with a shipping location, some of that is reacting as
    quick as a storm, but especially in the situation in
    California, they don't send the trucks there because they know
    there's not going to be the freight that they need.
        We see some of that with seasonality out of California with
    produce. When it's the high shipping season for produce, we're
    offered a lot more loads of steel and things like that because
    we don't have any refrigerated trailers. But a lot of the
    carriers out there will switch to refrigerated when produce
    season comes into play.
        Just here again, it shows that smaller carriers need to be
    very agile and very diversified to stay in today's world. I
    often say you'll see some of our t-shirts on a little league
    team here in Scottsbluff, but you'll never see one of my ads on
    the Super Bowl. We are competing with carriers that have ads on
    the Super Bowl. So their resources allow them, I guess, to go
    through slowdowns regionally a little bit easier than what we
    can. It allows them perhaps some engineers taking a look at
    predicting things that we are sometimes not as good at doing.
    So we have to be as agile as we can on any given day and really
    pay attention.
        I think that from a capacity standpoint, it once again
    compounds what's happening here in rural Nebraska when trucks
    are diverted to areas where the grass is greener for a short
    period of time.
        Mrs. Fischer. My question you responded to on the ports
    with things coming in and being able to transport that. What
    about things going out? What about exports? When you see a
    shutdown on the ports, I mean, obviously not only is there a
    backlog there that we can't get things out, but have you seen
    an impact on our markets now? Have we lost export partners
    around the world because of the congestion that happened in the
    shutdown we saw on the West Coast?
        I guess I'll start with you, Mr. Kelley, because I hear a
    lot about it from ag producers, about issues that they had
    really with product just rotting. Has that affected you, and
    has it affected your export dealings now?
        Mr. Kelley. I think Mr. Freeman alluded to it. The railroad
    has a huge responsibility, and we're a small part of that. But
    we rely totally on the railroad in most export situations,
    using trucking as a secondary. Because, as you said, railroad
    has the value, and we appreciate that and recognize that.
        I want to emphasize that my speech sounded like I was
    picking on the BN, and I didn't mean that, to do that. I had
    some help writing my speech and----
        Mrs. Fischer. Railroads get used to being----
        Mr. Freeman. Thick skin. Not to worry.
        [Laughter.]
        Mr. Freeman. I think, just to pile on or add to the point
    of your question on the export side, clearly the flows through
    the ports of exports--as an example, we run traffic from Omaha
    in a modal facility there that goes to the port. We do assorted
    different things from all parts of the U.S. headed for the West
    Coast in various exports. There is no doubt that it has impact
    on export flows of agricultural commodities or industrial
    equipment or whatever. There are clearly impacts.
        Mrs. Fischer. Have we lost partners?
        Mr. Freeman. I don't know that I'm in a position to be able
    to talk about lost partners, but I hear----
        Mrs. Fischer. Have you seen a decrease in moving products?
        Mr. Freeman. Over time, there are clearly impacts by port
    flows on the movement of products, recognizing that the
    strength of the dollar and other economic issues are part of
    the equation as well. But there is no doubt that the
    effectiveness of port operations working in concert with
    truckers, the railroads, et cetera, is a big part of economic
    growth in Nebraska, the U.S. as a whole, and over time we have
    to do things such as, as an example, some of the FAST projects
    with freight corridors, intermodal connectors, things of that
    sort, that clearly are and should be a big part of our economic
    future going forward.
        Mr. Kelley. I thank you, Mr. Freeman.
        We saw a tremendous loss of business as a result--and I'm
    talking about the dry edible bean business, and we're only a
    part of that. But certainly Western Nebraska is one of the
    leaders in exports. And politics is involved, world peace is
    involved, because we used to export 50 percent of our Great
    Northerns worldwide, and that doesn't happen anymore. A lot of
    it has to do with the bean. Consumers have theoretically been
    at war with us through the problems with ISIS and the different
    things that have happened overseas.
        There are so many things that affect us as Americans. But
    the ports themselves, if the Administration in Washington would
    have reacted to the strike, which they didn't call it a
    strike--they played around with the words, because if they
    called it a strike, the President could have reacted and played
    with that. They played it to the tune of billions and billions
    of U.S. dollars were lost in that process, while people were
    asking for a raise on the Coast and not doing their job. It's
    an economic impact that we'll be suffering for generations.
        We saw traffic flow go from the West Coast to the ports of
    Houston, and then the ports of Houston couldn't handle it
    because you've got to predict, you've got to build railroads
    and you've got to build infrastructure. You have to have
    employees and you have to have trucks, and all these things
    just don't happen overnight.
        But in our opinion, the problem started when our
    Administration, primarily the White House, did not react to the
    seriousness of the ports being shut down on the West Coast. It
    rippled for months and it cost our economy billions of dollars,
    and that can be proven. It was probably in the trillions, if I
    had to guess.
        Our country relies on flow of product, and we're such a
    huge, huge economy, and so spread out, that it's so important
    that the government, especially the White House, reacts to
    situations and doesn't try to placate unions. That's exactly
    what was going on.
        Mrs. Fischer. Yes. How do we gain back that lost market
    share? I want to focus on the transportation part. There are a
    lot of other issues out there to deal with when we talk about
    this, but how do we gain that back through transportation?
        Mr. Freeman. I think your earlier question to Director
    Schneweis around inputs from assorted parties and trying to
    understand, first off, what are the requirements that
    businesses, customers, people have in terms of what has to move
    and what has to flow, and taking those inputs, be it highway,
    be it rail, be it ports, be it water, rivers, whatever it
    happens to be, put those together and have a freight policy, if
    you will, that clearly the FAST Act is a step in the right
    direction for some number of years into the future. We'll see
    what comes about with other opportunities that are out there.
        But I think that framework is essentially taken to a bigger
    scale as we try to figure out what will be the growth in our
    state, in our country, the world as a whole, and what markets
    can people play in, Mr. Kelley with the bean market, others who
    obviously are in different businesses and things of that sort.
    We will need to understand what's out there.
        We'll need to make sure that the landscape amongst rail and
    water and trucks and highway are essentially managed
    effectively and appropriately. We'll need to have an effective
    policy around permitting and historic preservation activities
    that is timely and consistent and, to some degree, effective,
    if you will, around understanding that there has to be
    decisions made, what are we going to build, what are we going
    to be part of for the overall system of freight transportation
    going forward.
        And I think starting with the comment that he provided in
    response to your question, I'm taking that to a clearly larger
    scale, be it local, state, Federal, international, I think is
    the direction we have to go.
        Mrs. Fischer. We're going to put a lot of pressure on you,
    Director, and the NDOR to come up with a good stakeholder
    council, then, right?
        Mr. Schneweis. It's critical. You spoke to business and how
    important it is that you're nimble and flexible. That's not
    something you think of when you think of government policy. So
    it's on us to be able to make sure that we have a good
    understanding of supply chains and opportunities and can react
    quickly to the speed of business. I think it's a challenge.
        Then I think technology is changing so fast, and we have to
    be able to understand as government and in partnership with the
    private sector how to invest in things like truck platooning.
    These things are being studied, do we need to have staging
    opportunities here in Nebraska to be able to experiment,
    research, and take advantage of those things. I think if we're
    not doing it and we're not thinking forward, then we are losing
    opportunities to grow.
        Mrs. Fischer. Great. Thank you.
        Don, I wanted to get back to you on the FAA bill. You had
    talked about the importance of the essential service and
    keeping the funding here for Scottsbluff. Can you talk about
    what that means to a rural community like Scottsbluff, and not
    just this community but the region? If I could ask you, do you
    know how the airport is going to use those dollars to update
    infrastructure?
        Mr. Overman. Well, in the past, of course, notwithstanding
    the bank crisis of 2008 and 9/11 and all the things that have
    happened since then, and the change in the law for pilots going
    from 500 hours to 1,500, it has tremendously affected us to the
    effect that at the beginning of 2013 Great Lakes had 300
    pilots, and at the end of 2013 they had 78. That speaks to why
    service is so bad, not only here but all across the country,
    but especially with the rural airports.
        When they get off the airplane, the first thing they see is
    the monument, and they see that this is a vibrant community.
    It's the first impression, whether it's medical people coming
    in here or business people coming in here to set up a new
    business. If you look out the front door of this building,
    across the street there's about a $35 million building sitting
    over there. It would never be there if we didn't have an
    airport. I mean, I was involved in bringing the initial company
    here, and they would not have been here.
        There's another one down on the corner, across from the
    YMCA, which now houses state offices. But it was a KN energy
    company that we got through negotiations with myself and Mr.
    Ruschall, who many of us know and respect, in the background.
    Without the city manager even knowing it, we were negotiating
    to get them to move their corporate headquarters from Hastings
    to Scottsbluff.
        When the smoke cleared, they moved a great number of their
    people out of Hastings to Scottsbluff. Larry Hall was the
    President at that time, and he said that we'd never have done
    it if we didn't have an airport.
        Being a past President of Nebraska Diplomats, of course, I
    understand how all the cities try to get more business in their
    cities. We just have to have that airport from an economic
    development standpoint. We just would not be able to do it.
        Now, you asked where we're going to spend the money. Well,
    this year we had enough money carried over. We can carry money
    over for 2 years, and we needed a new snow blower because we
    had to keep the runways clear for the planes to land from here,
    and also from DIA. I think we got $800-and-some-thousand
    dollars. When you get a new snowplow as big as they are, you've
    got to build a new building. So we needed money this year, and
    we got it from discretionary funds from the DOT, which comes
    from other airports that don't use all their money.
        We're faced with, in the next three to 4 years, our plan
    that the Department of Transportation suggested--actually
    mandates that we do--we've got to re-do both runways. The
    estimated cost is $20 million. The million dollars we get
    cannot be used to run the airport. It can only be used for
    safety purposes, and that's what we used it for, for all the
    years. When the airport authority took over, I think in 2004 or
    something like that, since then we have added $23 million of
    improvements to that airport, and most of that came from
    Federal funding, the million dollars and/or special projects
    that we were able to get back. They don't happen very often
    anymore.
        Anyway, we need that money. If you look at it right now,
    we're faced with $20 million. If we get $1 million and you can
    carry it over 2 years, you've got $2 million. Where are you
    going to get the other $18 million? Not only that, but the DOT
    in their ultimate wisdom recently, last year, we're supposed to
    get 98 percent of the money, and we have to pay 10 percent for
    any safety purpose.
        They changed the rules a little bit, and now they only give
    us 80 percent up front, and then they don't give us the other
    10 percent until the project is completed by the DOT and signed
    off. So we become their banker for 10 percent. It's a mess, and
    it presents terrible problems to all the airports just with
    that one change.
        But the money will be used, as I've said, probably the next
    project is going to be airport runway improvement.
        Mrs. Fischer. I know you've worked on improving that
    airport for many, many years, and I understand that a new
    terminal is going to be named in your honor. Is that correct?
        Mr. Overman. It was in 2004.
        Mrs. Fischer. Oh. I'm slow.
        Mr. Overman. Or 2005.
        Mrs. Fischer. OK.
        Mr. Overman. But it was. I had a brother-in-law that came
    to visit us from Missouri. A couple of months later my wife
    called and said they were going to name that airport the Donald
    A. Overman Terminal. And he said I didn't know he was sick.
        [Laughter.]
        Mrs. Fischer. Thank you.
        Mr. Holliday, you mentioned the driver shortage. I worked
    on language in the highway bill hoping to allow younger drivers
    to be able to drive interstate, between states, which they
    cannot currently do. Even though we have 18 and 19-year-olds
    driving trucks in Nebraska, they can't cross from Omaha, the
    bridge in the Council Bluffs. That's an issue that I think we
    need to keep presenting out there.
        I had some people say they didn't want to be on the road
    next to an 18-year-old driver, and I said, well, you already
    are. If you drive from San Diego to San Francisco, you're on
    the road with an 18-year-old truck driver. These are
    professional people. They're doing their job.
        In the bill we were able to get some language in that would
    allow veterans, younger veterans to be able to drive
    interstate, and hopefully we'll be able to have some data that
    we can work with because there haven't been studies on that.
        But can you tell me how your company is working to meet
    that driver shortage challenge that's out there? Have you felt
    any impact from the shortage?
        Mr. Holliday. Have I felt any? Absolutely. I will say it
    has eased a little bit with some of the layoffs from some of
    the industries around us. We've had some drivers show up,
    especially out here in Western Nebraska, that are going back to
    truck driving, which is something they used to do.
        But we try everything. We use social media, Facebook. We
    have a full-time person in our office that does nothing but
    recruit because we need a vast array of different types of
    drivers. We need drivers that will go to 48 states over the
    road. We need city pick-up and delivery drivers that will stay
    in Omaha or Kansas City. And we have flatbed drivers. All of
    those take a special skill set.
        One thing that I did read in your proposal is that they
    have to have 30 hours of instruction, which I think is good. I
    think after 30 hours you're going to be prepared. I did notice
    that there's no classroom time specified presently, but I think
    most companies, including ours, we have probably eight hours'
    worth of classroom instruction that we mandate from them
    anyhow. So by the time you have a driver out there in a truck
    for 30 hours, he's going to encounter a lot of things;
    certainly not everything. Some weather-related issues may be,
    depending on when that driver trains, something that he hasn't
    encountered, but it's going to prepare him.
        Going back to ancient history, the first time I drove a
    truck across the state I was 18 years old and my cocker spaniel
    and I went to Omaha and back. You know, times were different
    then. But what we have found in the past, especially in rural
    Nebraska, is some of our best drivers, they're kids who started
    driving a truck at 16 years old on their dad's farm. It may be
    a beet truck, what we call a straight truck. But they just have
    that skill set to take somebody that says I'm going to get into
    truck driving because I hear they can make $30,000 to $50,000 a
    year, and they show up at truck driving school. I'd rather have
    that 18-year-old farm kid than perhaps a 25 to 28-year-old guy
    that's gone through a truck driving school.
        Now, truck driving schools are good. There are some good,
    some better. But for us, the 30 hours I think is a good move. I
    think that's going to be adequate training. I don't have a lot
    of fear of that because all good companies and all companies
    that are responsible to the health of the public--my family is
    out there on those roads, too. I've seen what can happen if
    it's not done right. Responsible companies are not going to let
    a driver, regardless of their age, 18 or 48, get behind the
    wheel of their truck and drive down the road because there's
    too much at stake.
        Once again, I stress responsible companies. There are some
    companies that are in such need of drivers right now that,
    unfortunately, I think that maybe their standards aren't quite
    the same.
        Mrs. Fischer. Thank you.
        Mr. Freeman, I have a number of questions for you on some
    rail issues that maybe a lot of folks in the audience here
    haven't heard that much about, but they're very newsworthy on
    the Federal level, and you know what's coming here.
        From what I understand, BNSF is on schedule to be one of
    the first Class I railroads to fully implement its positive
    train control system. Can you share some of the lessons that
    your railroad has learned as that implementation has
    progressed, particularly any technical issues, interoperability
    challenges, workforce training issues that you've seen in
    trying to get this implemented?
        Mr. Freeman. Sure. Just to sort of set a little bit of a
    foundation context in terms of what's going on, we are well
    down the road of essentially what will be a $2 billion project
    over the better part of 10 years from the time we started when
    the mandate was first developed back in the 2008 timeframe. We
    are, as you pointed out with your comment, fully expecting to
    be installed by the end of 2018, per the mandate. At present,
    we are at this point--just numbers--14 subdivisions out of 80-
    ish that are mandated under the law, already turned on,
    functional and operating. We are running approximately 600
    trains a week with PTC right now, various parts of our network,
    and expect that to continue growing. We will add three more
    subdivisions between now and the end of May, and we'll be on
    essentially a three to five subdivisions per month plan going
    forward until we're completed.
        From a learning standpoint, I guess I would offer several
    different parts of an answer. First of all, from a software/
    hardware standpoint, I think we would admit BNSF, and I frankly
    think our industry colleagues would be the same--it is a very
    hard project. It is essentially new technology from a software
    standpoint. It is a monstrous installation/construction project
    in terms of what has to go in, not only in terms of the back
    office for servers and technology workstation kind of stuff,
    but also with communications towers and all the various pieces
    and parts that have to be in place with our signal system out
    in the field, and it is a significant undertaking by our
    mechanical team working to have the locomotives modified such
    that our roughly 5,000 to 5,500 locomotives will be fully
    equipped to run with PTC as we go forward into the future.
        So a large project, lots and lots of things going on in
    different parts of our world.
        From a people standpoint, we clearly are well equipped in
    terms of people to install signal telecomm. We use a small
    contractor group to supplement our own folks, but we fully
    believe that we are well down the road in terms of the
    capabilities of those folks. They are moving forward on plan.
    Essentially, our construction activities, if you will, in the
    field on the mandated subdivisions will be done by the end of
    2017--I'm sorry, end of 2016 or early 2017. In fact, we'll have
    some additional subs that we are adding to our project,
    activities ongoing during the course of 2017.
        From a train operations standpoint, we have seen what I'll
    call strong success in terms of work with our train crews. I
    daresay that if I wanted to put out a shout-out to our
    Brotherhood of Locomotive Engineers and Trainmen members, and
    our smart TD, the old UTU members, engineers and conductors
    have been marvelously supportive in terms of, one, learning;
    and two, serving as mentors and trainers for their fellow
    employees as we startup the systems on different parts of the
    network. That set of activities will be growing as we move
    forward with many, many more subdivisions over the next couple
    of years.
        So that part is clearly a big deal as well for us, and I
    think has been very positive for us in terms of not only what's
    been accomplished in the project but, frankly, relationships
    with our employees and union and their involvement in getting
    the process going, getting the system up and running.
        From an overall standpoint, I think going forward you
    mentioned interoperability. We are scheduled in the second
    quarter here in the next couple of months to start
    interoperability testing with the Union Pacific and their
    locomotives, and they with ours. We have not yet planned or
    scheduled yet with the CSX, but that will have to take place
    over time in order to set up an interoperable system, if you
    will. We handle trains and locomotives across the different
    carriers, so UP will run with our locomotives and vice versa
    and that sort of thing.
        It's a key part for us, still a significant question, but
    we feel right now that we are on the right path to getting that
    accomplished.
        Aside from that, as I said, hard work, still a lot of
    things to get done, but we are very confident that we are on
    plan for year-end 2018.
        Mrs. Fischer. OK. Thank you. I understand that BNSF has
    conducted a pilot program for the ECP brakes, which are the
    electronically controlled pneumatic brakes. You've done that on
    a limited number of cold trains; is that correct?
        Mr. Freeman. Yes. I'm sorry. I thought----
        Mrs. Fischer. You were banging the table.
        Mr. Freeman. I'm sorry.
        Mrs. Fischer. That's OK.
        Mr. Freeman. My fault. Yes. At this point, there are two
    trains----
        Mrs. Fischer. For the record, he was not banging the table
    in any kind of show of frustration.
        [Laughter.]
        Mr. Freeman. No, no. No meaning of emphasis or frustration.
        Mrs. Fischer. Exactly. But what's been the result of that
    pilot program?
        Mr. Freeman. There are presently two trains operating in
    BNSF, and as I reported earlier in my opening comments, we are
    essentially roughly 1,200 trains on the network in any given
    time with today's business level. So it's a very, very small
    subset of trains. They are both cold sets, so they are
    operating from the Powder River Basin to a particular power
    plant in the Southeast, or two different power plants in the
    Southeast, same company.
        At this point I would tell you that our results would say
    that there are clearly reliability issues with the ECP systems.
    We continue to see service interruptions on our network where
    the reliability issues on those two trains are multipliers of
    what we see on normal cold sets of normal freight trains. In
    other words, 2X, 3X, 5X in terms of actual outages given the
    technology that's on the train. We also see in terms of the
    fixes to those service interruptions--that is to say, trying to
    deal with the reliability issues--that it takes longer to deal
    with those systems than it does with routine service
    interruptions on today's braking technology, if you will.
        Just to give you an idea, these systems have a big plug
    connector type piece of the technology, and it is almost like,
    to take a little bit of liberty, if the Christmas light goes
    out on your string of lights on your tree or on your home, you
    almost have to pull out light bulbs to try to figure out where
    is the disconnect and what is causing the issue.
        So overall reliability, and then the ability to fix the
    issue are clearly concerns of ours.
        All of that said, from a train operating standpoint, I
    don't know that I necessarily can speak to exactly how the
    analytics were done relative to some of the safety statements
    that have been made. I don't think we necessarily see a
    difference in numbers of cars being derailed and that sort of
    thing. We haven't had the incidents to make those sort of
    assessments. So we would be concerned with those sort of
    impacts.
        I think overall we would say significant questions on
    reliability, significant questions working with them, and then
    I think we would compound that with some cost dynamics that we
    view are high relative to the potential benefits as we see them
    in operation.
        Mrs. Fischer. In the FAST Act, you know we included in that
    a requirement for the GAO to have a study on the data and the
    methodology that underlies the Department of Transportation
    rule that requires the ECP brakes on certain unit trains, and
    the FAST Act also required real-world testing of the mandate
    from the National Academies in order to contrive the possible
    safety benefits of the methodology.
        So based on your experience, and you referred to this in
    your previous comments, but I would just like to know your
    insights that you would share to inform the GAO study and the
    Academies' evaluation.
        Mr. Freeman. I think I would, in response to your question,
    essentially repeat some of my comments relative to what we are
    seeing relative to the issues and the specifics of those
    issues. I think we would look forward to the opportunity to, as
    a team--our mechanical group that has to deal with the issues,
    the locomotives that are critical to the operation of ECP, the
    cars and that sort of thing--I think we would look forward with
    that group, as well as our operating group, to be part of a
    study and be part of providing feedback and some of our
    experiences as part of the study going forward.
        Mrs. Fischer. Do you believe that the real-world testing is
    needed instead of data that is brought about based on modeling
    done by the FRA?
        Mr. Freeman. I would not want to push aside modeling, and
    I'm not aware of the models that are being used by the various
    agencies and entities that are part of the study. I clearly
    think we should include everything in the conversation, but
    that the real-world data of what's being assessed over time
    have been party to either as the car owners or as the railroads
    that are operating these types of equipment. We clearly have
    something to offer, and we would want to be part of that, but I
    would not want to necessarily shove aside the modeling as
    something to look at.
        Mrs. Fischer. Thank you.
        This question is for the entire panel. While we recognize
    the need for consistency in our lives, I've heard from many
    Nebraskans all around this state about over-regulation from
    Washington, and that is one of their major concerns. As I said
    in my opening statement, we passed language in the FAST Act to
    make the regulatory process more transparent. I think that was
    of utmost importance.
        So to build on that, I'm interested in hearing about how
    these regulations affect your work, if any of you would like to
    comment on that, if you think of regulations and what you have
    to change or basically just how does it affect what you do.
        Director, I'm going to start with you because my office has
    worked with the Department of Roads on a number of items with
    the categorical exclusions and environmental impact statements.
    Would you like to talk about that a little bit?
        Mr. Schneweis. Thank you for the support you've given the
    Department.
        Mrs. Fischer. No, thank you for all the information you've
    shared with us.
        Mr. Schneweis. Regulations and accommodating regulations
    are a huge part of our delivery timeframe. It takes eight to
    ten years sometimes to deliver on a project, especially when
    we're talking about a new corridor or going from two to four
    lanes, and a lot of that is due to regulation.
        We've seen a growth in the number of regulations, and we
    don't question the intent. I think what we question is the
    level of risk sometimes. We don't necessarily do a good job, I
    think, with our regulators assessing risk when it comes to
    whether or not to delay or whether or not to reassess or
    whether or not to continue working on the regulatory piece.
    That's something that we talk a lot about with our Federal
    partners to try and assess the true risks of the issues that
    we're talking about.
        I talk a lot about flexibility, and I want flexibility in
    the rule because we understand the rule is there for a good
    reason, and we need to understand that intent and then assess
    the risk of whether or not we're going to have any issues with
    that intent. So I want the flexibility to be able to understand
    and appropriately assess risk from project to project. But we
    also need consistency. We need things to be the same in every
    state. So I want the flexibility consistently, and I know
    that's almost impossible. We're asking for two things that are
    diametrically opposed to each other, but I think it's
    important. It's something that we have been talking a lot about
    with all of our Federal partners.
        A partnership is always--if you know the people and you
    trust the people that you're being regulated by, I think you
    have a lot of opportunity to make progress in these areas. So
    that's another area for us, trying to build that trust up so
    they trust us and we trust them, and it takes time to do that.
    It's a continuous challenge for us.
        Mrs. Fischer. Thank you.
        Ms. Cottier. I don't think it's always just about
    regulations that either a Federal agency has perhaps taken
    advantage of or is pushing a little more than others, but there
    are also items relative to road construction that we hear
    anecdotally from people, like why on earth do you have to have
    this gigantic engineered whatever you've done when a simple
    corridor overpass or whatever would do. So the frustration and
    part of the challenge that we have as part of the Heartland
    Expressway Association is trying to educate the public, educate
    even our elected officials.
        We had a conversation with Congressman Smith about why is
    this built the way it is. We could say, well, because Roads
    said it had to be, or we could say because engineering-wise it
    needs this. So there's a high level of knowledge that has to be
    gained either by the people who are paying for it or, at the
    very least, those elected officials and those of us who are
    advocating for it to be able to share that information. I think
    it's really important. We don't want to muddy the waters of the
    United States, and we don't want to impact particular animals
    any more than anyone else does, but we also need to understand
    what it takes to have a safe road as well. So, two pieces, the
    environmental stuff and the engineering stuff.
        Mrs. Fischer. Thank you.
        Anyone else?
        Mr. Freeman. I think from a railroad standpoint, I think we
    would look at a couple of different things. First off, the
    oversight relative to, if you will, the ability to do public-
    private partnerships, the things that are needed and frankly
    have to happen if we're going to have economic growth in
    Nebraska, the U.S. as a whole. There's a framework that's set
    up that clearly has moved us forward in terms of where we are
    today relative to economic growth, to being able to do the
    highway/rail interfaces, the intermodal connectors, things of
    that sort that are clearly going to be needed going forward.
        I think the Act has also provided for us some positive in
    terms of the conflicts of highway and railroad relative to road
    crossing interactions and that sort of thing. There are 24,000
    crossings on the BNSF alone, public and private, not to mention
    pedestrian crossings and overpasses and underpasses that we
    deal with, and other interactions and that sort of thing. Those
    dynamics are clearly something we need to be working on, and
    that's part of FAST and some of the things that are going on
    forward.
        So there's a safety piece. There's an economic dynamic that
    we clearly want to be part of. I think the other side for us,
    and I mentioned in my earlier comments about the ability to
    generate growth, working in concert with customers and with
    other modes of transportation to facilitate the move of goods
    and freight and pieces and parts of whatever is moving,
    agricultural goods and things of that sort. Having a
    consistent, timely process around permitting and those kind of
    dynamics, and doing anything you can do to make that a better
    situation than where we are today is a plus.
        To the point that Ms. Cottier made relative to muddy waters
    and that sort of thing, we want to do stuff that is helpful for
    the overall system of business, but at the same time we also
    recognize that there is an effective environmental and economic
    process that needs to take place, and we want to be part of
    that, and I think this has taken another step of improvement in
    that world.
        Mrs. Fischer. Great.
        With that, I would like to thank the panel for being here
    today. I really appreciate the information that you have
    provided to the Committee. I appreciate the extent of the
    conversation that we've been able to have. Thank you very much.
        I would also like to thank members of the community for
    coming and sharing a Senate hearing here in the state of
    Nebraska. It's important that you are here as well.
        For the record, I would say that the hearing record will
    remain open for 2 weeks. During this time, Senators are asked
    to submit any questions for the record. Upon receipt, the
    witnesses are requested to submit their written answers to the
    Committee as soon as possible.
        Again, I thank you, and the hearing is adjourned.
        [Whereupon, at 11:55 a.m., the hearing was adjourned.]

                                A P P E N D I X

     Addendum to Statement of Deb Cottier on Behalf of Nebraska Northwest
         Development Corporation, A Member of the Heartland Expressway
                  Association and the Ports-to-Plains Alliance
        Chairwoman Fischer--Honored members of the Senate Committee on
    Commerce, Science and Transportation, Again, I would like to thank you
    for the opportunity to submit an additional statement for the record in
    response to your question regarding economic impacts of rural freight
    corridors.
        For the record, my name is Deb Cottier, Executive Director of
    Nebraska Northwest Development Corporation and a member of the Board of
    Directors for the Heartland Expressway Association, a member of the
    Ports-to-Plains Alliance.
        This information is gleaned from two Corridor Development and
    Management Plans that provided a Benefit Cost Analysis for various
    states including Nebraska, Texas, Oklahoma, New Mexico and the southern
    portion of Colorado. In October 2014, the Nebraska Department of Roads
    issued the Heartland Expressway Corridor Development and Management
    Plan. This Heartland Expressway Corridor Development and Management
    Plan (HECDMP) is focused on the portion of the Heartland Expressway
    within the State of Nebraska. The HECDMP was prepared in compliance
    with Section 1118(d) of TEA-21 which is similar to the work previously
    completed for the Port to Plains corridor in 2005. The Ports-to-Plains
    Corridor Development and Management Plan (PTPCDMP) was published in
    2005 complying with the same Section 1118(d) of TEA-21. The PTPCDMP
    covered the multi-state corridor including Texas, Oklahoma, New Mexico
    and the southern portion of Colorado. This Plan was completed in
    partnership between the states of Colorado, New Mexico, Oklahoma, and
    Texas. At the top of the next page is a graphic showing the entire
    Ports-to-Plains Corridor including the High Priority Corridors of
    Ports-to-Plains, Heartland Expressway and Theodore Roosevelt
    Expressway. These studies did not directly include the portions of the
    Heartland Expressway in Colorado, Wyoming and South Dakota or any of
    the Theodore Roosevelt Expressway in South Dakota, North Dakota or
    Montana.
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    Ports-to-Plains Alliance Corridor Development and Management Plan
        Of the two Corridor Development and Management Plans, the PTPCDMP
    provided significantly more specific economic impact data. In the
    section below on the HECDMP, the reasons for this will be explained.
    The PTPCDMP provided a Benefit Cost Analysis for several elements that
    improve the transportation network's ability to move people and goods.
    Nearly 1,400 miles long, the corridor consisted of 511 miles of 4- to
    6-lane roadway, 755 miles of 2-lane roadway, and 113 miles of roadway
    in metropolitan areas. The Ports to Plains Corridor includes the
    following construction elements:

       Widening 755 miles of 2-lane roads to 4-lane divided roads;

       Constructing 15 relief routes around larger towns;

       Adding amenities needed by commercial vehicle operators;

       Improving or constructing connective interchanges;

       Improving or constructing overpasses for railroad crossings;

       Replacing obsolete or deficient bridges;

       Installing corridor-specific signs; and

       Integrating an intelligent transportation system.

        In the PTPCDMP there were two major sections addressing the benefit
    of the highway expansion construction elements described above:
    Transportation User Benefits and Economic Benefits. Transportation User
    Benefits addressed the historical engineering basis for evaluating
    infrastructure improvements: travel time savings, vehicle operating
    cost savings, and savings associated with increased safety; that is,
    crashes, including property damage, injuries, and fatalities that are
    avoided. Using these criteria, the PTPCDMP showed the total
    Transportation User Benefits as shown in the table below.

                     Summary of Transportation User Benefits
    ------------------------------------------------------------------------
                             Benefits (Millions  of   Benefits (Millions  of
         User Benefit            2004 Dollars)          2004 Dollars @ 7%)
    ------------------------------------------------------------------------
    Safety                                   $381.2                   $114.3
    ------------------------------------------------------------------------
    Vehicle Travel Time                      $541.9                   $151.5
    ------------------------------------------------------------------------
    Vehicle Operation Cost                   -$11.1                    -$3.1
    ------------------------------------------------------------------------
    Total                                    $912.0                   $262.7
    ------------------------------------------------------------------------
    Source: AECOM Consult, Inc.

        Using these criteria only, the multi-state Ports-to-Plains Corridor
    in the four-state region would not have met the Benefit Cost Analysis
    threshold required for justification. It was the analysis of the
    economic benefits that justified the improvements to the Corridor and
    that economic analysis identified four potential sources of economic
    benefits. As a result the total economic benefits measured by income to
    residents would exceed the project cost by a ratio of 3.15.
        The economic benefits analyzed include construction benefits,
    roadside services benefits, increased manufacturing and distribution
    benefits, tourism benefits from seasonal travel, and the fiscal
    benefits attributable to the expansion of this economic base.
        Construction Benefits: These are one-time benefits that stem from
    the construction work needed to improve the existing road.
        Roadside Service Benefits: The improved road will attract more
    travelers, increasing the spending at roadside establishments. The
    roadside service benefits analysis examines the hiring and associated
    wage and salary gains generated to meet this increased demand.
        Manufacturing and Distribution Benefits: Given its southern
    terminus at the Port of Laredo, Texas and the Corridor's significance
    as an international trade route, much of the economic development
    potential of the Corridor stems from economic activity related to North
    American Free Trade Agreement (NAFTA) trade, namely manufacturing and
    distribution activities. This analysis projects the potential growth in
    these industries that would occur if development unfolds as it has
    along other more established NAFTA trade routes in the region.
        Tourism: Winter seasonal migration is a growth industry in southern
    Texas and the Corridor lies along a feasible route for travelers from
    the Western U.S. The improved road opens up access to this travel
    market, permitting Ports to Plains communities to compete for a small
    share of this rapidly growing market. The expenditures made by these
    travelers generate demand in the local economy for food, entertainment,
    health and travel services.
        The economic benefit from the 20-year development of the Ports-to-
    Plains Corridor was measured across a period ending in 2030. It showed
    an economic benefit of slightly over $4.5 billion and was projected to
    create 43,600 new jobs across the four-state region. It is important to
    recognize that while these job impacts were only measured through 2030,
    these jobs are recurring beyond 2030.

                          Summary of Economic Benefits
              (Millions of 2004 Dollars Discounted at 7.0 Percent)
    ------------------------------------------------------------------------
                                                              Total Income
                  Benefit Category                  Jobs       2006-2030
    ------------------------------------------------------------------------
    Construction (person years)                     1,700                $28
    ------------------------------------------------------------------------
    Distribution & Manufacturing (2030)            39,600             $4,258
    ------------------------------------------------------------------------
    Roadside Services (2030)                        2,000               $216
    ------------------------------------------------------------------------
    Tourism (2030)                                    300                $27
    ------------------------------------------------------------------------
    Total                                          43,600             $4,529
    ------------------------------------------------------------------------
    Source: AECOM Consult, Inc.

        The PTPCDMP also projected that the expansion of the multi-state
    Ports-to-Plains Corridor, based on the original construction elements
    described in page two of this statement, would draw traffic from the
    already congested Interstate 35 and Interstate 25 corridors.
        Adding to the economic benefits described above, the 2030 Build
    travel demand model results indicate that when all improvements have
    been made, additional traffic will be attracted to the Ports-to-Plains
    Corridor from surrounding facilities, including Interstate 35 and
    Interstate 25. The model indicates a twelve percent (12 percent)
    increase in Corridor vehicle miles traveled over the 2030 No-Build
    scenario. In addition to these attracted trips, the 2030 Build forecast
    also reflects a significant shift of travel demand from Dumas, Texas to
    the north. Because of improvements to the U.S. 287 Corridor through
    eastern Colorado and increasing congestion on Interstate 25 south of
    Denver, the model forecasts a shift from I-25 to the improved U.S. 287
    Corridor.
    Heartland Expressway Corridor Development and Management Plan
        The HECDMP was faced with a different interpretation of Section
    1118(d) of TEA-21 by the Federal Highway Administration (FHWA) Division
    Office in Nebraska. FHWA determined that the economic benefits that
    played a significant role in the PTPCDMP could not be used in
    identifying a final Benefit Cost Analysis for the Nebraska Heartland
    Expressway Corridor. The FHWA position was that expenditures of Federal
    transportation funds would have the same economic benefit no matter
    where and on what types of projects in the country they were committed.
    Both the Heartland Expressway and the Ports-to-Plains Alliance opposed
    this view.
        In addition to the FHWA policy change on economic benefits, there
    was also a significant policy shift when evaluating the benefits
    associated with Transportation User Benefits. The HECDMP stated:

            ``Typically, these benefits are comprised of travel time
            savings, which may occur as motorists experience reduced travel
            times; increased safety, which may occur as the number of
            accidents that take place on the corridor are reduced; and
            operating cost savings that may occur as the distances driven
            by motorists on parallel facilities are reduced . . . ``Because
            improvements along the corridor, in accordance with the
            Heartland Expressway Vision, typically involve expansion from
            two-lane facilities to four-lane facilities, it is assumed that
            there are no operating cost benefits for travelers. However,
            there would be operating cost savings associated with reduced
            maintenance costs for parallel roadways as travelers divert to
            the Heartland Expressway Corridor, thereby reducing the
            pavement wear and tear on parallel roadways. As a result, the
            transportation benefits associated with Heartland Expressway
            Corridor improvements in Nebraska are comprised of travel time,
            accident reduction, and pavement cost savings only.''

        Additional economic benefits are that were not allowed in the
    HECDMP included job creation and expanded payrolls from construction,
    operation and maintenance of the proposed improvements as well as
    benefits from purchases of goods and services necessary to operate and
    maintain the project.
        Travel Time Savings included the reduction in travel times for
    autos and trucks that could be expected in 2035 due to the improved
    transportation infrastructure along Nebraska's portion of the Heartland
    Expressway Corridor was calculated for Existing Users--those vehicles
    and passengers currently using the Heartland Corridor roadways without
    the improvements and Diverted Users--those vehicles and passengers
    currently using parallel routes who divert to the improved Heartland
    Corridor roadways.
        Accident Reduction Savings measured another transportation benefit
    of the Heartland Expressway Corridor improvements is the potential to
    reduce the number of accidents that could occur along the corridor due
    to roadway widening and the introduction of Intelligent Transportation
    Systems (ITS) variable message boards for incident management.
        Pavement Cost Savings in Neighboring States evaluated the potential
    reduction in Vehicle Miles Travelled along parallel routes, as
    travelers divert to Nebraska's Heartland Corridor roadways.
        Transportation Efficiency was the one economic indicator allowed in
    the HECDMP. It included road improvements that reduce travel times and
    improve reliability for truck freight improve the productivity of the
    logistics chain through the ability to use truck fleets more
    efficiently resulting in a reduction of inventory cost and organize
    production more efficiently. If shipments are more reliable, then
    distribution facilities can be more centralized and enjoy greater scale
    economies in many cases. Collectively, this allows the economy to be
    more economically competitive. Because of its economic measurement our
    statement points out that the four-lane improvements of the Heartland
    Expressway is projected to create a total inventory savings of $215.4
    million across all alternatives results from applying a discount rate
    of 7 percent.
        As shown in the graphic below, these limited Transportation User
    Benefits resulted in a 1.88 Benefit Cost Analysis for Nebraska for just
    the improvements in Nebraska and reach 1.98 for Nebraska when the
    entire Ports-to-Plains Corridor is improved.

        While FHWA would not allow other economic benefits to be included
    in the Benefit Cost Analysis, the HECDMP did include a section on
    Economic Benefits that summarized construction impacts, roadside
    services impacts and competitiveness impacts. While not added to the
    Benefits Cost Analysis, these economic benefit findings are certainly
    important to the question regarding economic impacts of rural freight
    corridors. These impacts are summaries in the graphic on page 8.

       Construction impacts. Construction of the project would
            create jobs and expand payrolls for the duration of the
            project's construction cycle.

        For the four-state Heartland Expressway region the effects of the
            Nebraska component of the Heartland Expressway Corridor
            construction would result in $285.3 million in earnings ($2012)
            and 6,754 person-year jobs for the 2016-2037 construction.
            These are one-time impacts that last for the duration of the
            construction period only. One job is defined as a job for one
            person during a one year's duration. As an example, a job for
            one person for three years would be defined as three person-
            year jobs.

       Operation and maintenance impacts. Since the project adds
            new lane miles, there would be hiring associated with the
            operation and maintenance of these new lane miles as well as
            the local purchases of goods and services necessary to operate
            and maintain the project. Unlike the one-time construction
            impacts, these new operations jobs and local purchases required
            to operate the project would be recurring impacts.

        For the four-state Heartland Expressway region the effects of the
            Nebraska component of the Heartland Expressway Corridor
            maintenance and operations would result in $46.9 million in
            earnings ($2012) and 1,146 person-year jobs for the 2016-2054
            analysis period. Similarly, for the Nebraska Heartland Corridor
            counties, the effects would results in $40.2 million in
            earnings ($2012) and 1,108 person-year jobs for the 2016-2054
            analysis period. These jobs and earnings consist of operations-
            related employment in industries whose jobs and services are
            purchased directly to operate and maintain the new lanes as
            well as the secondary demand for goods and services across a
            broader spectrum of industrial sectors that support the
            industries providing the operations and maintenance services.

       Economic development impacts. Economic development would
            increase with the market's response to the operation of the
            improved facility. The improved road will improve travel times
            and reliability, which improves the productivity of the
            logistics chain through the ability to use fleets more
            efficiently. If shipments are more reliable, then businesses
            can reduce their inventories and organize their production
            processes to be leaner. Collectively, this allows the Heartland
            Corridor economy to be more economically competitive. In
            addition, traffic in the corridor would increase, increasing
            demand for roadside services in the corridor.

         Roadside services impacts. Since the project attracts
                new long distance users to the corridor, demand for
                roadside services, including lodging, food, fuel, and other
                retail purchases would increase. The increase in demand
                would result in additional hiring and wages earned along
                the corridor. These would be recurring impacts.

          Traffic along the Nebraska portion of the Heartland Expressway
                Corridor is expected to increase by at least 3.6 percent
                with the completion of the transportation improvements due
                to the attraction of new users and diversions from parallel
                routes with slower travel times. The impacts of roadside
                services are largely a transfer from parallel routes to
                Nebraska's portion of the Heartland Expressway Corridor.
                For the Nebraska Heartland Expressway Corridor region the
                effects of the roadside services expenditures associated
                with the Heartland Expressway Corridor travel scenario
                would result in $73.5 million in earnings ($2012) and 3,175
                person-year jobs for the 2016-2054 analysis period.

          As shown in the graphic on page 8, Roadside Services Impacts were
                measured for several other scenarios including improvements
                and impacts outside of Nebraska. These scenarios, however,
                measured the economic impacts in Nebraska and demonstrate
                the importance of developing the entire Ports-to-Plains
                Corridor. Roadside Services expenditures associated with
                the Heartland Expressway Corridor Heartland and Intensified
                Energy Resource Development travel scenario would result in
                $330.9 million in earnings ($2012) and 14,374 person year
                jobs for the 2016-2054 analysis period.

          For the Entire PTP Corridor the travel scenario would result in
                $370.8 million in earnings ($2012) and 16,079 person-year
                jobs for the 2016-2054 analysis period and for the Entire
                PTP Corridor and Intensified Energy Resource Development
                travel scenario, travel scenario would result in $655.0
                million in earnings ($2012) and 28,468 person-year jobs for
                the 2016-2054 analysis period.

         Competitive response. It is not possible to predict
                the exact type of business relocation that might occur in
                response to the productivity improvement; likely expansions
                would include food processing manufacturing to take
                advantage of the corridor's significant agricultural assets
                and distribution facilities that take advantage of the
                corridor's low costs and proximity to the larger urban
                areas.

          This total economic impact was not summarized but gave an
                estimate for the typical impact of food processing and
                distribution expansions in the Heartland Expressway
                Corridor. Based on recent food processing relocations to
                the region such as KYS Foods and industry trends, the
                typical food processing plant employs between 20 and 50
                employees directly. The estimation assumes an average
                industry wage of $29,000 for food processing, an average
                wage of $35,000 for distribution activities, and an average
                wage of $40,000 for other services.

          The impact of a typical relocation of a food processing facility
                result in $3.431 million in earnings ($2012) and 114 new
                jobs in Nebraska. Similarly, the impact of a typical
                relocation of a distribution facility result in $1.425
                million in earnings ($2012) and 40 new jobs in Nebraska.
                The initial statement highlighted the importance of a four-
                lane highway in locating these types of facilities.

          The heading Other Services was provided in the HECDMP because
                over time, as the nearby Denver region continues to develop
                into the dominant urban economy in this region of the
                country, industries will increasingly seek lower cost
                locations with good access to this dense urban market. The
                expanding manufacturing base, combined with low cost
                proximity to Denver, offers opportunities to expand the
                range of services (and employment opportunities) in the
                corridor over time.

          The relocation of one of these Other Services would result in
                $1.668 million in earnings ($2012) and 42 new jobs in
                Nebraska. The completion of the improvements on the
                Heartland Expressway and the addition of many of these
                competitive impacts can add significant jobs and earning to
                the economy of Western Nebraska.
    Conclusion
        The potential economic impact of both the four-state Ports-to-
    Plains Corridor and the Nebraska portion of the Heartland Expressway
    demonstrate the positive economic impacts presented by rural freight
    corridors. In the Ports-to-Plains region over 43,000 jobs across the
    four-state region with $4.529 billion in earnings is certainly
    significant to a largely rural area of the United States. In Nebraska
    the creation of 10,000 to 36,000 new jobs and $362 million to $943
    million in earnings, without the addition of any specific expansion in
    primary jobs being measured due to FHWA restriction, is equally as
    significant to Western Nebraska.
        Thank you, Chairwoman Fischer. I ask that a copy of this statement
    be included in the hearing record.

                                      [all]

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