[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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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
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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
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
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.
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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.
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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.
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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.
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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).
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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.
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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
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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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