[Senate Hearing 114-132]
[From the U.S. Government Publishing Office]
S. Hrg. 114-132
KEEPING GOODS MOVING
=======================================================================
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
FIRST SESSION
__________
FEBRUARY 10, 2015
__________
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
David Schwietert, Staff Director
Nick Rossi, 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 \1\
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
\1\ On March 3, 2015 the Committee finalized Member assignments for
its subcommittees. The list below reflects March 3, 2015 assignments.
When this hearing was held, on February 10, 2015, formal assignments
had not yet been made.
C O N T E N T S
----------
Page
Hearing held on February 10, 2015................................ 1
Statement of Senator Fischer..................................... 1
Statement of Senator Blumenthal.................................. 2
Statement of Senator Daines...................................... 28
Statement of Senator Klobuchar................................... 29
Statement of Senator Cantwell.................................... 31
Statement of Senator Thune....................................... 37
Statement of Senator Blunt....................................... 39
Witnesses
Norman Bessac, Vice President, International Sales, Cargill Pork. 3
Prepared statement........................................... 5
Katie Farmer, Group Vice President, Consumer Products, BNSF
Railway Company................................................ 7
Prepared statement........................................... 9
Dr. Walter Kemmsies, Chief Economist, Moffatt & Nichol........... 13
Prepared statement........................................... 14
John E. Greuling, President and CEO, Will County Center for
Economic Development, and Board Member, Coalition for America's
Gateways and Trade Corridors................................... 20
Prepared statement........................................... 21
Appendix
Comments submitted by William J. Rase III, Executive Director,
Lake Charles Harbor And Terminal District...................... 41
Response to written questions submitted by Hon. Richard
Blumenthal to:
Norman Bessac................................................ 45
Katie Farmer................................................. 46
Dr. Walter Kemmsies.......................................... 47
John E. Greuling............................................. 48
KEEPING GOODS MOVING
----------
TUESDAY, FEBRUARY 10, 2015
U.S. Senate,
Subcommittee on Surface Transportation and
Merchant Marine Infrastructure, Safety, and Security,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:01 a.m. in
room SR-253, Russell Senate Office Building, Hon. Deb Fischer,
Chairman of the Subcommittee, presiding.
Present: Senators Fischer [presiding], Thune, Blunt,
Daines, Blumenthal, Cantwell, and Klobuchar.
OPENING STATEMENT OF HON. DEB FISCHER,
U.S. SENATOR FROM NEBRASKA
Senator Fischer. The hearing will come to order. Good
morning. I am pleased to convene the Senate Subcommittee on
Surface Transportation and Merchant Marine Infrastructure,
Safety, and Security for our second hearing, which is entitled
``Keeping Goods Moving.''
To grow the economy and create new jobs, we need an
efficient and reliable intermodal transportation network.
Today's hearing allows us to explore this issue with a
particular focus on infrastructure and maintaining operations
at our Nation's ports.
America's intermodal transportation network is the
foundation upon which U.S. businesses along all segments of the
supply chain produce goods and get them to market.
At our last hearing, Cabela's outlined how disruptions or
inefficiencies along our Nation's just-in-time shipping network
cost companies through lost sales, increased costs, and poor
customer service.
Deepwater ports represent a key element of the U.S.
transportation network, and are vital to our economic growth.
In fact, America's seaports often serve as the key connection
point for all modes of transportation.
Our West Coast ports alone move 12.5 percent of U.S. GDP
per year. A shutdown of America's West Coast ports even for a
short period of time would have devastating economic
consequences. According to a recent report by the National
Retail Federation and the National Association of
Manufacturers, in the most severe case, a 20 day West Coast
ports' closure would disrupt 405,000 jobs, reduce U.S. GDP by
almost $50 billion, and cost the U.S. economy $2.5 billion per
day.
I have heard from businesses and consumers in my state
expressing grave concerns about service disruptions at West
Coast ports. Just last week, my office heard from an Omaha
based company that manufactures electric conductors with inputs
from Asia. This company is seeing its import time frame double
and costs triple because of current slowdowns.
For many businesses, changing shipping routes or modes is
cost prohibitive. Unfortunately, whether they export
agricultural goods or import retail, businesses are being
forced to opt for air freight or are re-routing products to
avoid losing market share due to missed shipments. Port
congestion also impacts truckers and freight rail, as well as
the competitiveness of the ports themselves.
Everyone has a stake in seeing the ongoing negotiations
between PMA and ILWU resolved quickly. Members of Congress and
the Administration must pay close attention to these ongoing
negotiations and the economic impact of service disruption at
our ports.
This is particularly important as we face the potential for
ports on both coasts to be negotiating simultaneously in 2018,
which is when the current East Coast labor contract expires.
I am pleased that today's panel will represent a wide array
of perspectives on the effect of recent disruptions in our
Nation's supply chain. I am eager to hear further details from
our panelists on the challenges that slowdowns at our Nation's
West Coast ports have posed to their industries and their
consumers.
I am also looking forward to hearing about opportunities
for Congress, state and local governments, and the private
sector to work toward modernizing and enhancing our Nation's
ports' infrastructure for businesses, workers, and consumers.
We need to explore the policy options to support port
growth and future volumes of freight to keep goods moving.
I would like to now invite my colleague, Senator
Blumenthal, to make any opening remarks. Senator?
STATEMENT OF HON. RICHARD BLUMENTHAL,
U.S. SENATOR FROM CONNECTICUT
Senator Blumenthal. Thank you, Madam Chairwoman, Senator
Fischer. Thanks to our witnesses for being here today, coming
long distances, and contributing your insights to one of the
critical challenges that our country faces, not always the most
glamorous or noticed, but one of the most profoundly important
to our economy, to jobs, and to our quality of life. We thank
you for being here.
In the remainder of this decade, the Department of
Transportation estimates that freight will grow at least 10
percent in volume, not to mention the value of that volume to
our economy.
Far from diminishing the importance of moving goods, the
topic which brings us here today will only increase
dramatically, and that estimate in my view is a conservative
one.
No individual part of the country, no city or town and
certainly no region is an island. All depend on transportation
working together to move goods. We tend to focus on passengers
as we did last week in a tragic collision in Valhalla, New
York, a tragedy that was preventable and avoidable with proper
safety procedures.
The same is true in moving goods and moving freight. Safety
has to be made the number one priority, but we are all
dependent on freight transportation just as we are on moving
people, moving goods is equally important. We all depend on all
of the modes of transportation, all the types of transit,
whether it is roads and bridges, rail, water, all working
together and all fulfilling their vital functions.
I join in the hope that the parties to the West Coast
ports' dispute can find a reasonable, mutually agreeable
solution as fast as possible, time is not on our side, and that
the businesses impacted by the slowdown, including many in
Connecticut, are able to weather this and the impact
economically.
Looking beyond this immediate issue are the broader
challenges of investing and making sure that we build the
infrastructure that is vital to moving goods and people.
As one example, Connecticut has a freight infrastructure
that is very much in need of that investment, upgrading certain
sections of our freight rail network, so they can accommodate
286,000 pound weights in moving goods and services by rail,
which is the North American Rail Network standard, very, very
important.
Most freight railroads in the country are able to sustain
freight cars weighing 286,000 pounds, and this weight limit
includes the weight of the car plus about 110 tons of cargo or
220,000 pounds.
If Connecticut does not upgrade its weight limits, then our
state could become a freight island, but of course, if we are a
freight island, the rest of America cannot reach us moving
goods. That is just one example of how clogged arteries can
stymie economic progress and job creation.
I am very much looking forward to the testimony that we are
going to hear today and to hopefully the initiatives that it
will enable us to take in the interest for all America.
Thank you again for being here.
Senator Fischer. Thank you, Senator Blumenthal. Welcome to
the panel today. I appreciate you taking time out of your
schedules to be here at this hearing and to provide the
Senators with more information on this very important topic.
I would like to get right to it. Our first witness is Mr.
Norman Bessac. Mr. Bessac is the Vice President of
International Sales of Cargill. Welcome.
STATEMENT OF NORMAN BESSAC, VICE PRESIDENT, INTERNATIONAL
SALES, CARGILL PORK
Mr. Bessac. Thank you, Chairman Fischer and members of the
Committee, the Subcommittee, for inviting me to testify.
Trade maximizes the value of products U.S. farmers and
ranchers produce and our employees process because we are able
to sell them to the domestic and international markets where
they have the most value. This creates the best opportunities
for Cargill, our customers, our farmer and rancher suppliers,
our hard working employees, and the communities where we
operate.
Ports are an integral part of a dependable supply chain.
Let me outline the beef and pork supply chain I work with every
day and detail the challenges that occur when there are
problems with product flow through the ports.
Cargill procures livestock from farmers and ranchers to be
processed into fresh beef and pork in our plants located
predominately in Nebraska, Kansas, Texas, Iowa, Pennsylvania,
Illinois, Colorado, and California. Customers from around the
world depend on high quality fresh U.S. beef and pork to sell
in supermarkets, restaurants, and food processing plants.
Fresh meat has a relatively short shelf life. It must be
quickly packaged and shipped in temperature controlled trucks,
rail cars or containers to ensure product integrity and safety,
and to allow enough shelf life to sell or process once the
product arrives.
Under normal circumstances, a container of fresh pork
destined for Asia usually arrives with more than 25 days shelf
life. The industry is currently experiencing delays of two to 3
weeks on chilled product due to the congestion in West Coast
ports.
With this delay, our Asian customers cannot count on a
dependable supply of U.S. beef and pork, so they are canceling
orders and are looking to suppliers in Chile, Australia, and
the European Union to meet their needs.
Yesterday, Japanese customers canceled next week's chilled
pork shipments. I assume many of our competitors are facing
similar cancellations.
Needless to say, the current situation has created a
tremendous amount of uncertainty. Today, the industry is faced
with three choices. First, continue to ship product despite the
current uncertainty. This can result in shorter shelf life and
increased risk of potential spoilage and even complete product
loss.
Second, we can air freight the product at a tremendous
expense, often three to five times the normal cost. Third, do
not manufacture export products and adjust operations and
procurement accordingly.
If you take nothing else away from my testimony today,
understand that any of these choices result in negative effects
to everyone in the chain, in particular, farmers, ranchers,
customers, and plant employees.
Today, about 10 percent of U.S. beef and 25 percent of U.S.
pork is exported. The U.S. Meat Export Federation estimates
that the global demand for U.S. beef and pork will reach 17.6
billion pounds in 2024.
That is up 50 percent for beef and 42 percent for pork,
with most of that growth coming from the Pacific Rim. Future
growth to serve these markets depends on an effective,
efficient, and reliable supply chain capable of moving 162,000
incremental containers per year.
For reference, this is enough to provide 29.2 billion more
four ounce servings of beef or pork.
Our nation's advantage has always been having a fair,
robust, competitive transportation system that ensures we can
compete in the global market. We must look at our situation not
simply as manufacturers, shippers, labor, and capital, but
through the lens of global competition. We ignore it at our
collective peril.
Ports where the goods we make are loaded and exported for
the world's consumers--functioning ports are imperative from
both a labor and operational perspective. When ports do not
operate, the supply chain backs up causing long term problems
for us, our industry, our farmer and rancher suppliers, our
customers, and our employees.
We ask you to take the steps needed to address the
challenges I have outlined today so that we can continue
helping the world thrive by meeting the needs of consumers
around the globe.
I look forward to your questions. Thank you.
[The prepared statement of Mr. Bessac follows:]
Prepared Statement of Norman Bessac, Vice President, International
Sales, Cargill Pork
Thank you, Senator Fischer and Members of the Committee and
Subcommittee, for inviting me to testify.
Cargill provides food, agriculture, financial and industrial
products and services to the world. Together with farmers, customers,
governments and communities, we help people thrive by applying our
insights and 150 years of experience. We have 143,000 employees in 67
countries committed to feeding the world in a responsible way, reducing
environmental impact and improving the communities where we live and
work.
At Cargill, we believe the world will always raise the most food
the most economically if farmers plant the right crop for their soil
and climate, and then engages in trade with others. In essence, grow
and produce what you are good at and export the surplus. Honoring
comparative advantage and trade is fundamental to ensuring abundant and
secure food for the growing world's consumers.
This is also the way to maximize value for the products U.S.
farmers and ranchers produce and our employees make. We sell the food
and food ingredients that we produce to the domestic and international
markets where they are most valued. This creates the best long-term
opportunities for Cargill, our customers, our farmer and rancher
suppliers, our hard working employees, and the communities where we
operate.
It takes infrastructure and a complex supply chain to achieve this.
Ports are an integral part of this supply chain. Let me outline the
beef and pork supply chain I work with every day and detail the
challenges that occur when there are problems with port operations.
Cargill procures livestock from farmers and ranchers to be
processed into fresh beef and pork in our plants located predominately
in Nebraska, Kansas, Texas, Iowa, Pennsylvania, Illinois, Colorado and
California. Customers from around the world depend on high quality
fresh U.S. beef and pork to sell in supermarkets, restaurants, and food
processing plants. Fresh beef and pork have a relatively short shelf
life (60 days for fresh beef and 45 days for fresh pork) and must be
quickly packaged and shipped in temperature controlled trucks, railcars
and/or containers to ensure product integrity and safety and to allow
enough shelf life to sell or process the product once it arrives. Under
normal circumstances, a container of fresh pork destined for Asia is
usually trucked to the west coast (2-3 days), loaded onto a container
ship (3-6 days), in transit on the water (15-18 days), unloaded/clears
customs (1-2 days) and then delivered to customer's warehouse for
distribution. In this case, our customer would have approximately 25
days shelf life left on the product.
Recently, the industry has been experiencing delays of 2-3 weeks on
chilled product as ships and product have backed up in the West Coast
Ports. With this delay, our Asian customers cannot count on a
dependable supply of U.S. beef and pork, so they have started to cancel
orders and are looking to suppliers in Chile, Australia and the
European Union to meet their needs.
Customers usually have a month's supply of product in inventory and
another month's supply in the distribution pipeline. Delays or
temperature changes in the distribution chain devalue the product and
can easily make it worthless to customers. A timely supply chain is
critical to our business.
Today, about 10 percent of U.S. Beef is exported and 25 percent of
U.S. Pork is exported. These exports increase the market value of U.S.
farmers' and ranchers' products. Additionally, the revenue added by
many exported items--such as hides and skins which are processed abroad
and some variety meats which do not have a high-valued market in the
US--increase the value to farmers and ranchers while helping hold down
the cost of beef and pork to U.S. consumers.
The North American Meat Institute estimates that the current West
Coast Port situation has had the following impact upon the meat and
poultry industry as a whole:
The cost to meat and poultry companies losing sales or
facing unanticipated port charges is in excess of $40 million
per week on top of initial losses which exceeded $50 million.
These estimates are on the low side because of limited
industry-wide data.
Also, lost hides and skins export sales alone are
estimated at an additional $40-45 million per week.
Increase in transportation and port-related charges include:
Removing chilled product containers from terminals and
sending by air increases shipping costs dramatically and
reduces profit margins.
Cold storage while the backlog continues also adds
costs.
Exporters are facing container plug in charges, truck
waiting time, truck dry runs, truck detention, and chassis
usage charges.
Exporters are additionally charged ``demurrage'' or
rent for every day a container sits, unshipped, at the
terminal.
Steamship line costs are at a premium due to
``congestion surcharges'' imposed at the present time.
Chilled meat/poultry is most at risk. More than 10,000 MT of
U.S. beef and 16,000 MT of U.S. pork is exported as chilled to
Asia each month. Product sales are stalling under the current
situation.
Some U.S. exporters report they have containers held
up that were there at Christmas. The short shelf life of
chilled beef and pork make timely delivery critical.
Unfortunately, despite strong and growing export demand for U.S.
meat protein, the long-term negative impact of these delays falls on
the producers who supply the livestock and the employees who process
the livestock into meat.
The U.S. Meat Export Federation (USMEF) estimates that the global
demand for U.S. beef and pork will reach 17.6 billion pounds in 2024,
up 50 percent for beef and 42 percent for pork, with most of that
growth coming from the Pacific Rim. Future growth to serve these
markets depends on an effective, efficient and reliable supply chain
capable of moving an incremental 162,000 containers per year (3,115/
week).
Cargill exports many other products that have also been recently
delayed. These products include cotton, canola meal, soybean meal,
whole grains, syrups, sweeteners, distillers dried grain, food
ingredients and others. The impact has been significant. We ship in
excess of 1,000 containers per month through the West Coast depending
on the season, market conditions and other factors.
It is important for policymakers to understand the decisions and
decision making process that a firm confronts during disruptions to a
supply chain. The more protracted a transportation disruption, for any
reason, the more prolonged and extensive the damage may be. Commerce
does not automatically go back to normal as soon as the disruption
ends. That is because the disruption likely caused impacts throughout
the domestic and international supply chain during its duration.
Individuals likely changed their behavior to account for the
disruption. Truckers that had hauled goods to the port may have changed
their routes to avoid long wait times and to ensure a more reliable
income. Railroads may have adjusted their schedules to keep their cars
from getting stuck in port. Companies that manufacture goods may have
changed how they ship and to whom they sell. Most importantly, buyers
may have changed to suppliers with more predictable logistics. Ship
owners may avoid certain ports altogether. The longer the disruption
lasts, the more behavior and patterns of shipments change and the
longer it takes for normalcy to return. This makes it hard for one to
be a long-term reliable supplier to customers when confronted with
uncertain supply chains, particularly for perishable products.
This has severe implications for companies desiring to make long-
term sales to customers whose contracts are normally predicated on
shipping in the most efficient means possible but now are facing
expensive and extensive congestion and disruption. Consider the
following: When will the ports return to normal? Will the situation get
worse before it gets better? Can the buyer count on the product
arriving on time? In the case of uncertainty, the customer may choose
to purchase from a competitor or a supplier in a competing country who
has a more reliable supply chain.
Shipping through alternative ports may not be a viable option
either. A Washington state supplier cannot easily nor cost effectively
ship product to the Gulf Coast of Texas for shipping through the Panama
Canal when the normal best option is direct from Washington to Asia. In
this case, the business may simply be lost. Additionally, there are not
enough days to allow perishable product like meat to be shipped to Asia
via East Coast or Gulf Coast ports. These are simply not options. For
all these reasons, we urge Congress to do what it can to resolve the
current dispute affecting West Coast Ports.
It takes infrastructure to gets our nations' goods to market. If we
want to continue moving the bounty of America from the cornfields of
Nebraska or Iowa, from the ranches of South Dakota, or the
manufacturing plants of the Northeast, we need to continue focusing on
infrastructure. If we do not, our international competitors will serve
our global consumers faster and more efficiently.
The U.S. has challenges when it comes to the quality and longevity
of our infrastructure. We are appreciative of the bold step taken by
Congress last year to pass the Water Resources Development Act and the
user fee for the Inland Waterways Trust fund. Nonetheless, the inland
waterways system is living on borrowed time. It needs investment to
ensure it can serve the needs of our country for the rest of this
century. With the now completed expansion of the Panama Canal, ports
must be dredged so that the larger ships that transit the canal can
dock at many of our Gulf Coast and Atlantic ports. The impact of the
Panama Canal is not the only challenge at our ports. Maersk has a new
ship called the ``Triple-E'' that routinely travels between China and
Europe, but because of its draft reportedly cannot dock at a single
U.S. port. This is a huge advantage to Asia and Europe who have access
to such efficient transportation. Efficient highways are also critical
and some countries have addressed these in unique ways. For example,
Changdong province in China is building interstate quality truck-only
lanes that have weight limits of 200,000 pounds.
Our nation's advantage has always been having a fair, robust,
competitive transportation system with access to truck, rail,
waterways, air, and inter-modal options with a connection to well-
functioning ports. This ensures we can compete in global markets. We
must look at our situation not simply as manufacturers, shippers, labor
and capital, but through the lens of global competition. We ignore it
at our collective peril.
Ports are where the goods we make are loaded and exported for the
world's consumers. Functioning ports are imperative from both a labor
and operational perspective. When ports don't operate, the supply chain
backs up causing long-term problems for us, our industry, our farmer
and rancher suppliers, our customers, and our employees. We ask you to
take the steps needed to address the challenges I have outlined today
so that we can continue helping the world thrive by meeting the needs
of consumers around the globe. I look forward to your questions.
Senator Fischer. Thank you, Mr. Bessac. Ms. Katie Farmer.
Ms. Farmer is the Vice President of Consumer Products at BNSF.
Welcome.
STATEMENT OF KATIE FARMER, GROUP VICE PRESIDENT, CONSUMER
PRODUCTS, BNSF RAILWAY COMPANY
Ms. Farmer. Thank you. Good morning, Chairman Fischer and
members of the Subcommittee. Thank you for the opportunity to
be here to discuss BNSF's perspective on the importance of our
Nation's ports to the U.S. supply chain.
I would like to begin by explaining rail's role in the
international supply chain. Intermodal is the movement of
shipping containers and trucks by rail, combined with the
shorter truck movement at one or both ends. Growth over the
last decade is attributable to a number of factors, including
fuel efficiency, highway congestion, trade growth, and truck
driver shortages.
There are two kinds of intermodal movements on a freight
railroad. The first is domestic intermodal, which is the
movement of 53 foot long containers or trailers within the U.S.
The second is international intermodal, in which goods
manufactured overseas are shipped in 20 and 40 foot long
containers.
These containers arrive on a container ship at a port and
those that are not distributed locally are loaded onto trains
on dock or trucked a short distance to an off dock or near dock
intermodal yard, where they are sorted and loaded for movement
to markets in the interior of the country.
The containers are owned by the steamship lines and we work
together to balance the flows of eastbound traffic and match
back the empties with full loads of U.S. goods westbound to a
ship destined for Asia or other international markets.
Last year on our railroad, we handled post-recession record
volume levels of freight. Our service was challenged and we did
not deliver the service that customers have come to expect from
BNSF.
We have moved quickly to add capacity and implemented a
record $4 billion capital program in 2013, followed by a $5.5.
billion program in 2014, and we have announced a $6 billion
capital budget this year.
With this investment, we have permanently expanded the
capacity of our network, which we believe will continue to
maintain the U.S. supply chain advantage.
The San Pedro Bay port complex, comprised of the ports of
Los Angeles and Long Beach, is the busiest container port
complex in the western hemisphere and a top gateway for U.S.
trade with Asia.
BNSF transports more than half the international shipments
that go by rail out of these ports, and about 75 percent of
these units carried by BNSF are loaded on dock. The remaining
are handled off dock at BNSF's Hobart Yard in East Los Angeles.
The facility is 24 miles by highway from the ports.
BNSF has been working for well over a decade to build a
near dock facility only four miles from the ports called the
Southern California International Gateway or SCIG, which would
be the greenest intermodal rail facility ever constructed and
eliminate millions of truck miles on the I-710 Freeway between
the ports and downtown Los Angeles.
Our efforts to permit and build this facility have been
challenged for years by local opposition groups and the permit
is currently tied up in the courts.
We think this project will create operational efficiencies
for the ports. West Coast ports are facing challenges due to
congestion. Growing freight volumes are not the whole story,
however, since overall freight levels to the West Coast ports
have not returned to levels seen before the recession.
There are several factors that are contributing to growing
congestion at these ports including inadequate port
infrastructure needed to handle the larger ships, limited
infrastructure adjacent to the ports, operating restrictions
from local communities, as well as operating inefficiencies.
By far and away, the most disruptive aspect to the supply
chain over the last several months has been the reduction in
port productivity as a result of the ongoing negotiations
between the PMA and the ILWU. Port productivity has declined by
as much as 50 percent during this period. The result is year
over year reductions in BNSF's eastbound weekly train counts of
as much as 20 to 30 trains per week carrying a minimum of 250
containers that are not being processed through the supply
chain.
This also impacts the return movement of freight westbound
for exports. This is causing significant delays and increased
costs for our customers. BNSF has taken numerous actions to
serve its customers and ensure the fluidity of our network in
the face of these challenges, including establishing controls
at our intermodal facilities and equipment management.
During the 11 day shutdown of port operations that occurred
in 2002, freight permanently migrated away from the West Coast.
This is certainly a potential long-term consequence from the
current situation.
Congress can play a role in keeping goods moving through
sound infrastructure policy and permitting reform. My written
testimony details BNSF's thoughts on those areas.
Thank you, and I look forward to your questions.
[The prepared statement of Ms. Farmer follows:]
Prepared Statement of Katie Farmer, Group Vice President,
Consumer Products, BNSF Railway Company
Introduction
Good Morning Senator Fischer and members of the Subcommittee. My
name is Katie Farmer and I am Group Vice President for the Consumer
Products business unit of BNSF Railway Company (BNSF). I want to thank
you for inviting me to be here with you today to discuss BNSF's
perspective on the importance of our Nation's ports to the U.S. supply
chain.
BNSF is a wholly-owned subsidiary of Berkshire Hathaway, Inc. BNSF
serves 28 states in the western two-thirds of the United States and
employs approximately 48,000 people. In 2014, BNSF handled more than 10
million units, each representing one carload. BNSF moves more freight,
and carries more rail shipments in international trade, than any other
railroad.
BNSF's role in the international supply chain spans all our
business sectors-coal, agricultural products, industrial products and
consumer products, encompassing both imports and exports. My remarks on
port operations will be from the company's perspective on intermodal.
And since the largest share of the Nation's and BNSF's trade-related
intermodal business comes from the West Coast ports, my focus today is
there and on the challenges they face. I would like to explain rail's
role in the international intermodal supply chain and emphasize the
nationwide economic impact of port operations and infrastructure.
Finally, I will offer some suggestions on ways that policy makers can
support the port growth that will be necessary to handle future volumes
and keep freight moving.
Overview of the International Intermodal Freight Supply Chain
In my role at BNSF, I have responsibility for leading all of BNSF's
sales and marketing efforts for consumer products--the domestic and
international intermodal segments as well as our automotive business.
Consumer Products is the largest market segment within BNSF. In 2014,
it accounted for about half of BNSF's 10.3 million total annual units.
What is commonly referred to as ``intermodal'' is the movement of
shipping containers and truck trailers by rail, often combined with a
shorter truck movement at one or both ends (a ``dray''). Intermodal
movements capture the inherent efficiency of freight rail and are ideal
for containerized freight moving several hundred miles or more between
markets with large concentrated volumes and delivers service equivalent
to or better than single-driver all truck transportation. Intermodal
has been growing rapidly for more than 25 years, and demonstrates a
strong partnership with the trucking industry. The U.S. rail industry
originated a record 12.3 million intermodal units in 2006 but volumes
fell sharply during the recession, rebounding to 13.5 million units in
2014. Intermodal is the railroad industry's largest business segment.
Its growth is attributable to a number of factors, including fuel
efficiency, highway congestion and truck driver shortages.
There are two kinds of intermodal movements on a freight railroad.
The first market segment is ``domestic intermodal,'' which is the
movement of 53 foot long containers or trailers within the U.S. It may
surprise you to know that domestic intermodal, which is BNSF's largest
volume growth area since 2006. The second is ``international
intermodal,'' in which goods manufactured overseas are shipped in 20
and 40 foot long containers and move from ports to inland destinations.
It is international intermodal which we are discussing here today.
Inbound international container shipments arrive on a container
ship at a port and those that are not distributed locally are loaded
onto a train headed for the interior of the country. Containers may be
loaded onto trains ``on dock'' or trucked a short distance to an ``off-
dock'' or ``near-dock'' intermodal yard where they are sorted and
loaded onto trains. The containers are owned by the steamship lines and
every effort is made to balance the flows of east and west bound
traffic to ``match back'' the empties with full loads of U.S. goods
headed back to a ship destined for Asia or another international
market. U.S. industries from agriculture to manufacturing take
advantage of the full cycle of intermodal containers in the intermodal
supply chain.
The Critical Economic Impact of Ports in the Supply Chain
In 2014, nearly a third of the U.S. economy was tied to
international trade. The consumer economy, which is about 70 percent of
Gross Domestic Product (GDP), is heavily dependent on the international
trade-based intermodal supply chain. So while many of the products U.S.
consumers rely upon depend on the international intermodal supply
chain, the biggest impact of this trade-based activity is on the
overall health of the Nation's economy. The international supply chain
is also an important element of U.S. competitiveness. The U.S. has
historically had the lowest relative supply chain costs versus our
global competitors. Along with low energy prices, our supply chain
provides U.S. manufacturers, agricultural producers and miners with a
competitive advantage in world markets.
We at BNSF know first-hand the importance of efficiently meeting
growing freight demand. Although last year we carried record levels of
freight since the recession, our service was challenged and we did not
deliver the level of service that our customers have come to expect
from BNSF. We have moved quickly to add capacity and efficiency, and
implemented a record $4 billion capital budget in 2013, followed by
$5.5 billion in 2014, and an announced $6 billion capital budget this
year. With this investment, we have permanently expanded the capacity
of our network, which we believe will contribute to maintaining the
U.S.'s supply chain advantage.
Ensuring that U.S. ports also are able to meet growing freight
demand is a national economic imperative. BNSF serves 40 U.S. ports--
which includes every major port along both the West Coast and Gulf of
Mexico--however, the West Coast ports are our largest port partners.
From the West Coast, BNSF has key transcontinental routes between
Southern California (PSW) and Chicago, the PNW and Chicago and beyond.
More than 15 million loaded Twenty foot Equivalent Units or TEUs move
through West Coast ports each year. West Coast ports support more than
9 million U.S. jobs, with a domestic business impact of $2.1 trillion.
Almost 13 percent of U.S. GDP is tied to goods moving through West
Coast ports. The success of these ports is critical to the Nation's
economy; they need to be able to meet demand and remain competitive.
The Pacific Southwest (PSW) and Pacific Northwest (PNW) ports each
serve different market segments and geographies and have different
challenges, but fundamentally each port region is subject to
competition from their NAFTA neighbors to the north and south. They are
also subject to competition from East and Gulf coast ports through the
Panama and Suez canals as shippers and retailers continually seek less
expensive and more efficient access to key markets in the U.S. To the
extent that West Coast freight is displaced to NAFTA ports, the
regional and national economic value that goes with that traffic is
permanently lost. And to the extent that West Coast port traffic is
diverted from these ports to ports in other domestic geographies that
require expansion or mitigation, public and private sector costs
increase.
The San Pedro Bay port complex--comprised of the ports of Los
Angeles and Long Beach--is the busiest container port complex in the
western hemisphere and the top gateway for U.S. trade with Asia. BNSF
is a key part of the logistics network in the San Pedro Bay ports--we
transport more than half the international shipments that go by rail
out of these San Pedro ports. At the San Pedro Bay ports, about 75
percent of the units carried by BNSF are loaded on-dock. The remaining
are handled off-dock at BNSF's Hobart Yard in East Los Angeles. Hobart
Yard is the largest inland intermodal facility in the world capable of
handling over 1 million units in 2014. The facility is 24 miles by
highway from the ports.
BNSF has been working for well over a decade to build a ``near-
dock'' facility only four miles from the ports, called the Southern
California International Gateway, or SCIG, which would be the greenest
intermodal rail facility ever constructed and eliminate millions of
truck miles annually on the freeway between the ports and downtown Los
Angeles, the I-710. Our efforts to permit and build this facility have
been challenged for years by local opposition groups and the permit is
currently tied up in Court.
Our PNW port service is divided among a number of ports in
Washington and Oregon, including Seattle, Tacoma, Vancouver, Portland
and a number of smaller ports, and facilitates bulk imports and
exports, automotive imports and container traffic.
Collectively, PNW ports face strong competition from Canada which
is exacerbated by some policy challenges. For PNW container ports
competing with Canada, the U.S. Harbor Maintenance Tax creates a
competitive disadvantage. Not only are PNW ports disadvantaged because
of the added cost of the tax, they receive little or no benefit from
the authorized use of the tax. In addition, Canada has a long-standing
successful national port infrastructure and corridor program that not
only assists with port development but funds projects in the corridors
connecting to the ports. At BNSF, we stand ready to work with Federal,
State and local public policy makers to similarly support our PNW port
partners.
Nationwide Impact of Port Challenges
I would like to now turn to the challenges faced by our ports and
the impact of those challenges on our supply chain.
In many ways, BNSF believes that in 2015, the biggest challenge
facing ports in general, and West Coast ports in particular, is
congestion. Growing freight volumes are an obvious source of congestion
at ports but volume alone is not the whole story since overall freight
levels through the West Coast ports have not returned to levels seen
before the recession. There are several factors that are contributing
to growing congestion at these ports, including the effect of
inadequate port infrastructure needed to handle larger ships, growing
commercial and residential development around the ports, limited
infrastructure adjacent to the ports, port operating restrictions from
local communities and operating inefficiencies. All of these factors,
if they continue into the future, will cause congestion as West Coast
ports grow faster than actual volumes.
As you and other policy makers appropriately consider how to
facilitate and pay for port growth and for ways to mitigate the impact
of port operations, consideration must also be given to how ports can
become more efficient as well.
West Coast Port Situation and Port Productivity
Modern port activity remains fundamentally dependent on skilled
workers. And as you are aware, in recent months there has been an
unprecedented decline in productivity at West Coast ports resulting
from the negotiations between the Pacific Maritime Association (PMA)
and the International Longshore and Warehouse Union (ILWU). Port
productivity has declined by as much as 50 percent. And as you are also
aware, this situation--which BNSF and its customers hopes is resolved
soon--is having a significant economic impact across the country.
Intermodal shippers are highly dependent on efficient movement of
their cargo through the supply chain. Many of our customers in this
market segment use ``just-in-time'' inventory methods that require
timely and dependable delivery of retail products and manufacturing
parts to stock their stores and keep their manufacturing operations
running efficiently. The congestion has resulted in a major disruption
of goods movement from the West Coast causing significant delays and
increased costs.
As the largest intermodal carrier from the West Coast ports, BNSF's
operations have been negatively impacted by the port congestion. BNSF
has taken numerous actions to serve its customers and ensure the
fluidity of our network in the face of these challenges including
establishing controls at our intermodal facilities and equipment
management. We have had to restrict the flow of westbound containers to
the ports. In some places, empty container availability for westbound
shipments, once in oversupply, have become difficult to find and match
back. As you can understand, this congestion is impacting many of
BNSF's intermodal customers.
BNSF stands with the thousands of customers we serve through these
ports in voicing our concern about the severe impact of the current
situation. Shippers and rail carriers are directly impacted by the lack
of productivity but it has the potential for longer-term negative
economic consequences to the U.S. West Coast and the broader economy,
and to the competitiveness of the ports themselves. More fundamentally,
this strife related to collective bargaining at the ports is a
recurring problem; history tells us that the current PMA-ILWU structure
of negotiating labor contracts is disruptive and negatively impacts the
U.S. economy. The 11-day shutdown of port operations in 2002 had a
cumulative effect on the entire supply chain of the U.S. with an
estimated cost of $15.6 billion. Freight permanently migrated away from
the West Coast after this incident, a potential ongoing consequence
from this vulnerability.
We are hopeful that the labor issues at the West Coast ports will
be resolved in the short term, however in the long run, the issue of
U.S. port efficiency remains to be addressed. Improving efficiency will
be as important as infrastructure expansion, and certainly less costly,
in achieving the throughput that the Nation requires from its ports.
U.S. port efficiency is among the lowest of world trading powers. While
the efficiency issues at each port are slightly different, in general
the most significant operational factors contributing to inefficiency
include chassis shortages, limited gate hours, and truck capacity. New
alliances between ocean carriers have added complexity to port
operations. For example, at the San Pedro Bay ports, these new
partnerships are spreading out vessel calls over multiple terminals,
adding complexity for truckers, marine terminals and the railroad's
operations.
Surface Transportation Policy Discussion and Recommendations
Infrastructure Policy
Expected freight growth and congestion at the ports must be met
with facility expansion, just as on the railroads. At BNSF, freight
volumes continue to recover and by some measures, BNSF is already back
to pre-recession levels of freight. If there is one thing that we are
sure of at BNSF, it is that the demand for freight movements is only
going to increase. At the ports, capacity expansion will be necessary
to handle increased volume, bigger ships, and the trucks and trains
that are essential to expedite that freight. The largest of these port
projects have a national impact and in BNSF's view will have to be
permitted, financed and funded with the help of federal, state and port
resources. Over the past few years, BNSF has supported its port
partners in a variety of Federal TIGER Grant applications; however, as
we look to the future, a more robust and sustainable program with port
eligibility should be considered.
Congress is currently considering how to assure the long-term
solvency of the Highway Trust Fund. If Congress takes the Highway Trust
Fund farther afield from the ``user pays'' paradigm and continues to
fund it with revenues not generated by users, the call on Highway Trust
Fund budget authority for a broader range of projects is unavoidable.
BNSF supports strengthening the user pays concept because of its
fairness; it allows users to pay more of their costs on the highway
network.
Whatever transportation funding framework Congress establishes in
the next transportation bill, a Federal share of funding for nationally
or regionally significant high-cost infrastructure projects, like port
projects which facilitate international trade and relieve congestion,
must be considered.
We have developed strong public-private partnerships across our
network--as have other railroads. The Alameda Corridor in Southern
California, FAST Corridor in Washington State, Connect Oregon, Tower 55
in Texas and the CREATE program in Chicago have freight mobility
benefits to which the railroad contributed its share, and publicly
funded mitigation to address the impacts of freight movements, such as
grade separations. We regularly work with communities across our
network on grade separations. However, resources within U.S. DOT, State
DOTs, local governments and railroad capital budgets are scarce for
projects like these. We coordinate with states and local governments to
ensure that road crossings at rail lines are safe.
Permitting Reform
Federal permitting reform is an important priority not just for
BNSF, but the Nation as a whole. While we understand a permitting
process is necessary, we have encountered increased costs associated
with extended permitting timeframes for facility and track projects
across our network. Our experience with the $500 million Southern
California International Gateway project, in addition to roadblocks
encountered with bulk export facilities elsewhere, tells us that
Federal permitting challenges are only part of the problem. Organized
local opposition, whether to increased freight traffic or to the
content of the shipments, has had veto power on projects that serve
important national objectives. We believe at BNSF that, through good
faith discussion and mitigation negotiation, the reasonable concerns of
citizens who are impacted by increasing freight volumes usually can be
addressed. However, as the permitting process operates today, there is
significant delay and cost which, multiplied throughout freight rail
networks, quickly become noneconomic. We support efforts to improve the
project permitting process.
Railroad Investment
This Subcommittee is very familiar with the important role of
private capital investment in the freight rail network. I want to re-
emphasize that the private capital being reinvested into the Nation's
freight rail network should not be taken for granted. Today's rational
regulatory model has allowed us not only to reinvest, but also to
expand our network so we can move the products our economy needs, while
reducing the environmental impact of freight transportation. Our
capital investment strategy depends upon reasonable earnings and a
constructive regulatory environment that acknowledges the costs and
capital intensity of our business and the on-going need to maintain and
expand our infrastructure.
Conclusion
In the short term, we believe that if the West Coast port situation
can be resolved quickly, we can help the ports clear the backlogs and
reset their operations. We urge Congress to adopt policies that support
the growth and efficiency of U.S. ports, which are a critical part of
the supply chain, the economy and our Nation's long-term
competitiveness.
Senator Fischer. Thank you, Ms. Farmer. Next we have Dr.
Walter Kemmsies. Dr. Kemmsies is the Chief Economist at Moffatt
& Nichol. Welcome.
STATEMENT OF DR. WALTER KEMMSIES, CHIEF ECONOMIST, MOFFATT &
NICHOL
Dr. Kemmsies. Good morning. It is well recognized that
international trade is increasingly important to the U.S.
economy and that this trade mostly utilizes ocean going
vessels, particularly container vessels, due to the versatility
of containers for handling a range of cargo, from dry goods to
refrigerated goods, refrigerated perishables, to liquids and
gases.
Ports have an important role in the movement of overseas
freight because they are major intermodal exchange points
transferring cargo between ships, trucks, and rail. They are
essentially the very embodiment of intermodalism.
Ocean liners are adapting to growing trade volumes, and I
would agree with Senator Blumenthal that the estimates for
trade volume growth are probably low, and we should likely see
much higher growth rates, provided that the infrastructure is
there.
The ocean liners are responding to this, to not only the
larger trade volumes but also to rising fuel costs and to
stricter environmental impact regulations by investing in
larger vessels. The larger vessels mean more cargo on fewer
ships and in fewer ports because the time it takes to load and
unload the ships is time vessels do not earn revenues, and
given the cost of these very large ships, it is important they
minimize the time they spend stationary, particularly sitting
in ports.
The ports are adapting to this change in the global ocean
vessel fleet. They are investing in dredging the access
channels, investing in dredging the berths and removing air
draft restrictions. They have been acquiring larger ship to
shore cranes that have greater reach and much greater lift
capacity. They are densifying their terminals so you can stack
the containers higher, and also by automation.
The investments made by the ocean liners at ports are often
not matched by the land site investments outside the ports'
gates. Larger vessels and increasing cargo handling capacity at
ports has created congestion problems in port gateways around
the world and in some parts of the U.S., in locations where
land site planning and investing is not exactly in line with
what is happening on the water sites, being the ports, and what
is happening in the access channels and the global fleet of
vessels.
The shorter term issues such as the severe weather last
year and the transition of ocean carriers moving away from
providing chassis' to their customers and allowing the
financial sector to step in and lease these, has not been very
smooth. To some extent, this has impacted the effect of the
larger vessels on congestion issues.
To that, we would include the productivity losses that have
occurred at the ports during the contract negotiations, but
from my perspective, we see the shorter term issues as masking
some of these longer term trends driven by the larger vessels,
and therefore, causing concern about the long-term congestion
problems that we would expect to see in the U.S. supply chain.
It is likely that foreign ports in locations where
intermodalism characterizes freight movement and planning will
be gaining at the expense of U.S. ports, and therefore, the
U.S. logistics industry.
To sum up, I believe that failure to cut costs across U.S.
ports, by which I do not mean just cutting costs in ways that
create competition between U.S. ports, but rather cutting costs
for the entire port system is required. Otherwise, U.S. ports
will not be the winners in competition with the foreign ports.
The spotlight on this is on the inland segment of the
product flow path, on railroad lines in order to improve
service to markets close to the port, and truck freightways to
improve access to markets further away.
To defend our exports and imports, we need to focus our
attention on the inland segments of the product flow path. On
the railroad lines, the grade crossings, the container transfer
facilities, and for trucks, we need to start thinking about
dedicated freightways. These types of investments will make
U.S. exports more competitive.
Thank you.
[The prepared statement of Dr. Kemmsies follows:]
Prepared Statement of Dr. Walter Kemmsies, Chief Economist,
Moffatt & Nichol
Author's Background
Dr. Walter Kemmsies is the Chief Economist at Moffatt & Nichol, a
marine infrastructure engineering and advisory company founded in 1945
that currently has over 650 employees in offices located near major
ports throughout the Americas, Europe and the Pacific Rim. Dr. Kemmsies
directs market assessment studies, financial analyses and global trade
forecasts for projects ranging from strategic development and capital
improvement plans for ports through financial transactions involving
leases and sales of marine terminals. He is an advisor to executives at
various port authorities and major transportation and manufacturing
companies. Prior to joining Moffatt & Nichol, he was the Head of
European Strategy at JP Morgan and before that the Head of Global
Strategy at UBS.
1. Key Issues Related to ``Keeping Goods Moving''
The hearing is focused on the importance of a reliable and
efficient supply chain, particularly shipments to and from U.S. ports,
including opportunities and challenges in decreasing delays and
congestion throughout the supply chain. To that end my focus is on four
points described in the following subsections of this written
testimony.
1.1. Supply Chains or Product Flow Paths
Supply chains are characterized by intermodalism in that they
consist of the combination of highway and railway segments, as well as
ports and marine trade lanes which are the routes and services operated
by ocean carriers. For cargo that is traded internationally a flow path
consists of truck drayage from manufacturing/processing/refining
locations to ports or to railheads for intermodal transportation to
ports, transfer to ships at the ports, the ocean carrier routing to the
foreign destination port and transfer to truck, barge or rail for
delivery at the final destination.
Although the same roadways, railways, barges and ports are used to
handle a range of different cargo types, the equipment and
infrastructure needed to handle types of cargo is varied. The
infrastructure includes facilities such as warehouses, crossdock
facilities for repackaging freight and storage facilities. Dry goods
can be moved in variety of container types and sizes or in large bulk
vessels as well as rail hopper cars. Liquid goods such as petroleum,
gases, and chemicals are carried in different types of vessels, barges,
rail cars and trucks.
Since the type of products that the U.S. tends to import is
different than the type of products it exports, different types of
infrastructure are needed to support imports and exports. At or near
ports the imported freight infrastructure is generally oriented towards
deconsolidating cargo that arrives on tightly packed ships and
airplanes while that for exports supports consolidation in order to be
loaded on to ships and airplanes.
It appears that most of the investment in infrastructure and
equipment for freight movement in the U.S. in the last few decades has
been more oriented towards imports than exports. Evidence to support
this hypothesis includes the substantial goods trade deficit that the
U.S. has developed as well as the nature of large scale freight
movement projects that have been executed and those that have suffered
from under-investment such as the Mississippi Inland River System.
The types of equipment and consolidation/deconsolidation
infrastructure are important elements of their respective supply
chain(s) For example, the availability of empty international
containers for U.S. agricultural exports is such a significant issue
that the U.S. Department of Agriculture publishes a weekly report
called Ocean Shipping Container Availability Report (OSCAR) based on
its polling of ocean carriers. The report provides details of the types
of containers that ocean borne freight and their locations.
In 2014, for example, The U.S. imported an estimated 16.7 million
TEU, mostly containing consumer goods and finished products. To keep
the containers in circulation, the U.S. exported an estimated 11.5
million TEUs, mostly containing waste paper, agricultural products in
both dry and refrigerated containers, and industrial goods. The U.S.
exports empty dry containers but tends to import refrigerated
containers so as to support agricultural exports.
The containers are owned by the ocean carriers and cost $5,000 for
a new dry container and $18,000 for a refrigerated container. Ocean
carriers track their containers very carefully in an attempt to
minimize the amount of time they are empty and therefore not generating
revenue. These containers are generally not interchangeable between
ocean carriers as they need to make sure that they can provide their
customers with the needed equipment to ship their goods.
Analysis of the OSCAR data indicates that the Midwest suffers from
a consistent shortage of available containers to support containerized
grain shipments. Most international containers imported into the U.S.
carry consumer and industrial goods which are destined to urban
locations. Therefore there is a mismatch between where containers are
available and where they are needed for exports. Therefore, exporters
have to pay a higher cost for containers that need to be repositioned.
For example, a major exporter of non-genetically modified soybeans
to Asia commands a price premium since they are most suitable for human
consumption but need to be packaged in a way that preserves the ability
to trace the product back to its geographical production location,
which is referred to as identity preservation or more commonly referred
to as ``IP''. To do this the product is packaged close to the farm and
containerized. An upper Midwest producer has to pay trucking costs that
exceed $900 for a single container to be brought to its packaging
operations. In addition to the cost, the producer often has to wait,
sometimes months, for containers to be delivered.\1\
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\1\ Based on information provided by Bob Sinner, CEO of SB&B Foods
in Casselton, ND
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The time delay is a serious issue because agricultural goods are
traded sometimes under quota systems set up in free trade agreements.
If a shipment does not arrive and clear customs in the foreign location
during the current calendar year then it accrues to the following
calendar year. Foreign importers are allowed to grow their import
quantities at a set rate based on the previous year's import levels.
Therefore delayed shipments reduce their imports in the current
calendar year and can ultimately reduce them in the following calendar
year as well. More importantly, global food companies rely on ``just-
in-time'' service and in the current environment soy producers can lose
customers due to shipment delays.
Almost all countries can produce agricultural commodities but only
those that have efficient production and transportation can compete in
the global market place. Exporters have to allocate significant time,
expense, and energy to manage these logistics issues which reduces the
resources they need to consistently produce a high-quality product that
is competitive in the global market.
Import container rates are higher than export container rates,
often by a factor of 3 or 4. Therefore ocean carriers prefer their
containers to be emptied near the ports and immediately put on a ship
to be returned to foreign import locations so as to minimize the time
they spend empty and therefore not generating revenue. Recent
congestion at U.S. ports is likely to have negatively impacted
container yield management and exporters' ability to obtain the
containers they need to export their product.
There do not appear to be the same level of congestion issues at
port gateways that handle non-containerized cargoes such as grains
shipped on bulk vessels, petroleum and refined products, and vehicles.
However there are issues concerning the rail movement of those goods,
as others will testify today.
1.2. U.S. and International Port Gateway Congestion Issues
To some extent the stevedore contract negotiations which began in
2014 on the West Coast have resulted in container handling delays that
are masking some of the longer term issues that underlie the worsening
congestion problems at ports. The underlying cause is increasing
concentration of cargo on fewer but larger vessels and in fewer ports.
However other short term factors have exacerbated the difficulties of
adjusting to the industry's shift towards larger and more concentrated
freight shipments.
It is worth reviewing the short term factors before considering the
longer term issues. Short term factors include chassis supply issues,
severe weather impacts and stevedore contract negotiations.
Ocean carriers began announcing in 2009 that they would no longer
include a chassis for the shipper to use when their container was
delivered at a U.S. port. This was motivated by financial necessity but
also brought industry practices in the U.S. in line with those in the
rest of the world. The U.S. was the only market where ocean carriers
provided chassis as part of the service they provided their customers
The process of disengaging from provision of chassis by ocean
carriers is ongoing. In some regions ports have been able to organize
``grey'' chassis pools operated by the private sector. The term
``grey'' refers to the concept of any chassis being used at any port or
terminal covered by the chassis pool operator. In some areas, Southern
California and New York, in particular, there were various chassis pool
operators that supplied equipment to carry containers only for specific
carriers or carrier alliances. (A carrier alliance is technically
called a vessel sharing agreement, which comes about when some carriers
agree to supply vessels to cover a trade route and that any carrier
receiving a customer order can send the container on an alliance
carrier's ship.)
The problem with non-grey pools is that a trucker may bring an
empty container to a terminal for a certain carrier or alliance and
have a request to pick up a container from another terminal for another
carrier. Upon entering the port authority area, the trucker has to drop
off the empty container at the terminal, then drop off the chassis,
then pick up a chassis assigned to the other ocean carrier or alliance
and finally pick up the loaded import container. Each of these steps
takes time and can create congestion in the port area.
Besides the grey chassis issue, some ports had to contend with a
shortage of suitable chassis. In 2009 the Roadability rule was enacted
by the Federal Motor Carrier Safety Administration. Each chassis had to
be checked for safety issues such as working brake lights. During the
economic downturn in 2009 container volumes declined by 12 percent and
chassis that were not in working order were mostly cast aside. In 2014
container volumes handled at U.S. ports exceeded the 2007 peak level
and many of the neglected chassis required either extensive repair or
replacement. This contributed to the problems resulting from the
transition from containers provided by ocean carriers to independent
chassis providers.
The severe winter weather that impacted the Northeast and Midwest
created significant problems for the U.S. freight movement industry.
Unusual cold weather and frequent snow storms made it difficult for the
industry to recover. Inventories piled up in warehouses and in
manufacturer facilities. On the West Coast the stevedore union contract
negotiations are adding to the chassis issues and the slowing the
recovery from the severe winter weather.
As international and domestic freight movement continue to grow,
the capacity of the system is challenged in two ways. The first is that
a higher average daily volume of traffic on the roadways and railways
will require more capacity. The second effect is a result of ocean
carriers operating larger vessels.
It is worth noting that once the Panama Canal expansion is
completed (recently announced for the first half of 2016), it will be
able to handle vessels about 13,200 to eventually 14,000 TEUs.
In 2007 the largest container vessel was the Emma Maersk, which can
carry approximately 13,500 TEUs. In 2013 Maersk began using the first
of its EEE class vessels, Maersk McKinney M On railroad lines in order to improve service to markets
close to the port or extend service to more distant markets.
Grade separations, major sidings to allow for longer unit
trains, and leadership to resolve the tangle of rail
operational issues surrounding every major port in the US, as
well as major regional rail hubs such as Chicago or Atlanta.
On highways and bridges to increase capacity, reduce
community conflicts, introduce innovations such as truck
freight-ways to improve access to distant markets and allow the
safe trucking of heavier goods to more distant markets. The
introduction of LNG fuel to long-haul trucking routes could
allow for a more robust domestic supply chain, allowing new
industries to flourish in new locations.
On inland and intracoastal waterways that allow for the most
efficient movement of the liquid and solid bulk building blocks
of the U.S. economy. Whether supporting the movement of rock
salt to the Northeast or highly refined petroleum products
along the Gulf Coast, the economic value of inland and
intracoastal waterway improvements can be fairly immediate and
quickly amplified throughout the U.S. economy.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Fischer. Thank you, Dr. Kemmsies. Next, we have Mr.
John Greuling. Mr. Greuling is a Board member of the Coalition
for America's Gateways and Trade Corridors. Welcome, sir.
STATEMENT OF JOHN E. GREULING, PRESIDENT AND CEO, WILL COUNTY
CENTER FOR ECONOMIC DEVELOPMENT, AND BOARD MEMBER, COALITION
FOR AMERICA'S GATEWAYS AND TRADE CORRIDORS
Mr. Greuling. Thank you, Madam Chairwoman, members of the
Subcommittee. Thank you for this opportunity. Today, I am
representing both the Will County Center for Economic
Development and the Coalition for America's Gateways and Trade
Corridors, which is a diverse group of 60 public and private
organizations dedicated to increasing Federal investment in
America's multimodal freight infrastructure.
I am also here as the CEO of the Will County Center for
Economic Development. Our responsibility today is marketing the
largest inland international container port in North America.
Will County is crossed by six Class I railroads, five
interstate highways, and several commercial water ports on our
Nation's largest inland waterway.
Last year, we processed over three million containers
containing $65 billion worth of goods that are grown,
manufactured, assembled, and delivered throughout the United
States and the world.
Our first and last mile infrastructure requirements today
total $3.6 billion of new investment just in our county, and
that does not include bringing our existing road infrastructure
up to a state of good repair.
Our needs extend far beyond roads. Increased utilization of
freight by rail as we have heard is resulting in more at grade
rail crossings and it is impacting commerce and public safety.
We need at the local level more grade separation structures
and first and last mile interstate connectors to accommodate
the freight of the future. The growth of freight has been
stated. We believe by 2045 that increase will be about 45
percent, putting more pressure on both existing and future
infrastructure for freight.
Meanwhile, 95 percent of the international consumers are
now outside of the United States, so being at the beginning and
the end of a major global supply chain, U.S. companies have to
understand and the Government needs to understand that we need
good infrastructure to reach those markets.
U.S. Government infrastructure investment as a percentage
of GDP is currently less than 2 percent. Our trade partners,
our biggest ones, Canada, China, Mexico, are spending two to
five times more than that on their infrastructure, and it
cannot be just one mode that we are focused on when we are
talking about funding infrastructure. We have to look at all
modes, and we need to make those modes work better together--
rail, truck, air, and water are today the key components of the
global supply chain.
The global situation is getting worse in a lot of respects,
but we have the opportunity to take advantage of what is going
on internationally in the economy.
The Coalition for America's Gateways and Trade Corridors
asks Congress to take the following steps in the upcoming
surface transportation authorization. First, we would like you
to establish a freight program containing dedicated and
flexible funding.
Freight should not compete with other mobility needs. It is
integral to other mobility needs. Freight movement occupies a
special place in our transportation system as the element
supporting commerce, competitiveness, and that all important
word, ``jobs.''
We should have a dedicated funding such as a Freight Trust
Fund, that is committed to stoking our economic engine by
improving efficiency, safety, reliability, and speed at which
goods are moved.
Second, fund at a minimum level of $2 billion a year a
competitive multimodal freight infrastructure grant program.
Projects of national or regional significance or a similar
freight specific competitive grant program is needed to
prioritize Federal funding of projects that meet certain
performance criteria to advance economic goals of this country.
By prioritizing projects, we can identify important public
benefits as well as non-Federal support. A $2 billion grant
program could leverage many times that amount in private
investment in infrastructure.
Third, ensure robust public investment in all modes. Where
public benefit is derived, public investment must be made. It
is often when modes come together that public assistance is
needed to close the funding gaps.
Examples include highway rail grade crossings, rail spurs
to access cargo, logistics or transfer facilities, tunnels and
bridges for port access, and border crossing capacity
enhancements.
Finally, modify the national freight transportation policy
to make it multimodal. Create an Office of Intermodalism in the
USDOT Secretary's Office, and give freight the significant
attention it needs in this country to keep our economy healthy.
Thank you.
[The prepared statement of Mr. Greuling follows:]
Prepared Statement of John E. Greuling, President and CEO, Will County
Center for Economic Development and Board Member, Coalition for
America's Gateways and Trade Corridors
It is my pleasure and honor to testify before the Senate Committee
on Commerce, Science and Transportation's Subcommittee on Surface
Transportation and Merchant Marine Infrastructure, Safety, and
Security. Today I am representing both Will County Center for Economic
Development and the Coalition for America's Gateways and Trade
Corridors (the Coalition), a diverse coalition of more than 60 public
and private organizations dedicated to increasing Federal investment in
America's multimodal freight infrastructure. I thank the Chairwoman,
Ranking Member and Members of this Subcommittee for the opportunity to
share my views with you. Our nation's ability to move goods is tied to
the success of our economy and I thank the Committee for holding a
hearing on this critically important topic.
The organization I work for, the Will County Center for Economic
Development, is a private economic development corporation that today
is responsible for marketing the largest inland international container
port in North America. Located 30 miles southwest of Chicago, Will
County is crossed by six Class I railroads, five interstate highways,
including I-80 and I-55, and several commercial ports served by our
Nation's largest inland waterway. You might say we are at Main and Main
of the transportation, distribution and logistics hub of the country.
Last year over three million twenty-foot equivalent containers moved
through our port system carrying international and domestic products
that are grown, manufactured, processed, assembled and delivered
throughout the United States and the world. Over $65 billion in imports
and exports utilize this intermodal transportation hub annually,
arriving by way of truck, train, plane, ship, and barge. To support
this regionally and nationally significant freight movement, Will
County Center for Economic Development has a state and Federal project
list that adds up to over $3.6 billion--and that's just road projects.
As a nation, we're rebounding from a recession that will remain in
our minds for years to come. The economy is trying to grow--the North
American manufacturing base is growing, folks are beginning to buy new
cars and clothes, and our farmers are producing record-volume crops. As
a result, U.S. freight volumes are expected to increase 45 percent by
2045.\1\ Meanwhile, 95 percent of the market for goods lies outside of
U.S. boundaries.\2\ As demand grows, both within and outside of the
United States, the pressure on our goods movement network significantly
increases, this growth and the economic value it brings to our economy
will be stunted if investment in our freight system is left to wither.
Consumers' ability to buy goods at a competitive cost is directly
linked to a producer's ability to move those goods across the country
in a manner that is safe, efficient, reliable, and expedient. Supply
chains will keep growing regardless of what we do as a nation--but they
will not grow comparably within our country unless we maintain a world
class infrastructure network to move commerce and attract business.
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\1\ U.S. Department of Transportation, Beyond Traffic, February
2015.
\2\ U.S. Department of Commerce, Build it Here, Sell it Everywhere:
Why Exports Matter, May 2012.
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Currently, U.S. government infrastructure investment as a
percentage of GDP is less than 2 percent,\3\ the lowest level of
infrastructure investment at any point since World War II \4\. Our
trading partners are doing much more: Canada invests 4 percent,\5\
Mexico 4.5 percent,\6\ Europe 5 percent,\7\ India 8 percent,\8\ and
China 9 percent.\9\ Simply put, our largest trading partners and
competitors are investing at twice to five times the rate we are.
---------------------------------------------------------------------------
\3\ The White House, An Economic Analysis of Transportation
Infrastructure Investment, July 2014.
\4\ Financial Times, US public investment falls to lowest level
since war, November 2013.
\5\ Canadian Chamber of Commerce, The Foundations of a Competitive
Canada; The Need for Strategic Infrastructure Investment. December
2013.
\6\ Bloomberg, ICA CEO Sees Mexico Infrastructure Spending Rising
56 percent, September 2012. http://www.bloomberg.com/news/articles/
2012-09-17/ica-ceo-sees-mexico-infrastructure-spending-rising-by-56-
\7\ The Economist, Life in the Slow Lane, April 2011.
\8\ The Economist, The Half-Finished Revolution, July 2011.
\9\ The Economist, Life in the Slow Lane, April 2011.
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It's not just a matter of investment, though. The investment needs
to be strategic and it needs to cut across traditional modal barriers.
Some of freight infrastructure's largest, most complex, and most
desperately needed improvements occur where multiple modes come
together. These instances often require a partnership at the Federal
level to help unsnarl a chokepoint that clogs our communities and
commerce. An increase in targeted infrastructure investment from public
and private sources over 15 years would pay dividends by growing jobs
by almost 1.3 million at the onset and it would grow real GDP 1.3
percent by 2020 and 2.9 percent by 2030.\10\
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\10\ National Association of Manufacturers, Catching Up: Greater
Focus Needed to Achieve a More Competitive Infrastructure, September
2014.
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Freight congestion is more than a hindrance to economic growth--it
is also a threat to public health and safety. Congestion from any mode
of transport diminishes air quality and impacts essential community
services such as police and EMS response times. In so many instances,
local communities are bearing the environmental and social burden of
nationally-significant freight movement, but they are unable to foot
the bill on large-scale infrastructure projects that would alleviate
negative impacts. The benefits of freight movement accrue nationally,
and as such, there is a Federal responsibility to be a partner in
making improvements, and in many instances, there is an opportunity for
private sector contributions. State and local governments cannot
shoulder the burden alone, nor can this lift be expected entirely by
the private sector.
Will County holds the largest inland container port in North
America, and while our residents contribute through traditional state
and local taxes as well as through an additional Regional
Transportation Authority sales tax, the state of Illinois and county
residents cannot be the sole financial contributors for this nationally
significant freight movement.
The current condition of highways in Illinois is 82 percent
acceptable; assuming the Federal contribution remains stagnant through
2020, conditions are expected to deteriorate making highways 61 percent
acceptable.\11\ The Interstate System was designed to accommodate
fleets of the 1950s, not the much larger trucks that occupy our
highways today. Increased truck size paired with the growth in truck
volume produces congestion at first and last mile connectors, where
trucks have difficulty merging with traffic on under-sized ramps,
resulting in freight bottlenecks and safety concerns. These intermodal
connectors are critical in Will County--not only are they a necessity
for truck freight movement, but they are also critical for rail
intermodal operations.
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\11\ Transportation for Illinois Coalition, State of Illinois'
Transportation and State Funding Challenges, January 2015. < http://
www.transportation-for-illinois-coalition.com/publications/other-
transportation-reports/>
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Continued growth of both passenger and freight traffic frequently
combined on congested, old urban rail corridors will continue to
produce chokepoints and problems for throughput of freight movement.
While the Chicago CREATE program is working to deal with that in the
Chicago area, there are many urban areas that are not able to develop
mega-project approaches to alleviate this problem.
As I mentioned, six Class I railroads move through Will County.
There is an increased utilization of freight by rail, which means more
at-grade rail closings, hurting road commerce and public safety. We
need new grade separation structures to meet this demand.
Most of the locks and dams along the Illinois, Mississippi and Ohio
rivers were built in the 1930s with a 50-year design life. These locks
and dams are now in desperate need of rehabilitation and repair. An
analysis by the Illinois Farm Bureau contends that delays at navigation
locks cost Midwestern farmers $500 an hour. Average delays at locks are
estimated to be six hours, with some as long as 12 hours or more. In
many places along our inland waterway system, modern fifteen barge
1,200-foot long tows must split loads to pass through outdated 600-foot
locks.\12\ This procedure requires uncoupling barges at midpoint, which
triples the time needed to lock the 15-barge tow and increases accident
rates among deckhands.
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\12\ Illinois Section ASCE, 2014 Report Card for Illinois
Infrastructure, April 2014.
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Will County is a key intermodal logistical area for transfer of
rail, port, and truck freight between modes, which adds substantial
trucking demand throughout the region. As regional highway traffic
volumes have increased, the associated congestion has resulted in
travel delays with substantial economic impacts to industries that
depend on the ability to efficiently move freight within and through
the region. To alleviate this congestion, the Illinois and Indiana
Departments of Transportation are working in concert to develop the
Illiana Corridor, a new 50-mile access controlled highway that would
allow traffic to bypass Chicago, thus taking 46 million miles of truck
traffic off local roads. We are exploring public-private partnership
(P3) opportunities, detailed project design, environmental permitting
and land acquisition. The project will improve regional mobility and
create thousands of short-term and long-term jobs, amounting to over a
billion dollars in wages over a 30-year period. It will serve as a
major trucking corridor and boost the region's long-term economic
output by $4 billion. Given the national significance of this project,
we need a partner at the Federal level to help our states, local
governments, and private partners make this improvement.
The upcoming surface transportation authorization presents an
opportunity to begin making the type of strategic investments we
urgently need. The Coalition for America's Gateways and Trade Corridors
asks Congress to take the following steps in the upcoming
reauthorization:
Establish a freight program containing dedicated and
flexible funding: Freight should no longer compete against
other mobility needs and programs such as traffic and
pedestrian safety. Freight movement occupies a special place in
our transportation system as the element that supports and
enables national commerce and global competitiveness. In
recognition of this critical role, it should receive dedicated
funding such as a Freight Trust Fund that is committed to
stoking our economic engine by improving the efficiency,
safety, reliability, and speed at which goods move. Recognizing
that freight needs vary by state and metro region, and there is
no one-size-fits all approach to freight planning and
investment, states and localities should be engaged and
afforded flexibility in applying a certain amount of these
funds on a regional basis.
Authorize dedicated funding at a minimum level of $2 billion
per year for a multimodal competitive Federal freight
infrastructure grant program with broad applicant and project
eligibility: Dedicated, sustainable funding for a multimodal
freight-specific Projects of National and Regional Significance
(PNRS), or a similar freight-specific competitive grant program
is needed to prioritize and fund projects that meet clear
measurable criteria to advance economic goals. By prioritizing
projects with demonstrably important public benefits and
supported by non-federal funding, a $2 billion merit-based,
competitive grant program could leverage many times itself in
economic value. Established under SAFETEA-LU, PNRS assists in
funding large-scale infrastructure projects, spanning modes and
jurisdictional borders, which are difficult, if not impossible,
to fund through traditional distribution methods such as
Highway Trust Fund formula programs.
Ensure robust public investment in all modes: Freight does
not move on highways alone--where public benefit is derived,
public investment must be made. In the case of highways,
increased investment is necessary, particularly for National
Highway System intermodal connectors, which bridge highway
freight to ports, distribution centers and other modes and are
the conduits for the ``synergistic'' use of combined modes.
Intermodal freight is one of the fastest growing sectors of the
freight market \13\, and it is often in the places where
various modes come together that need public assistance to
close the funding and infrastructure gaps, which result in
capacity inefficiencies and bottlenecks. Examples include
highway-rail grade crossings, rail spurs to access cargo,
logistics or transfer facilities, tunnels and bridges for port
access, border crossing capacity enhancements, and air-freight
connectors.
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\13\ U.S. Department of Transportation, Beyond Traffic, February
2015.
Modify the national freight transportation policy to make it
multimodal and designate a national, multimodal freight
network: Freight policy and planning should incorporate the
many modes of transportation that move goods. Freight is a
national priority and it is the Federal role to take a holistic
look at our multimodal network when determining where public
investment can yield the greatest return. A national ``vision''
and investment strategy that shapes and guides the Nation's
freight infrastructure system with active coordination among
states, regions and localities is needed. The Office of
Intermodalism, or a new office for multimodal freight should be
reestablished within USDOT's Office of the Secretary to
administer the new freight mobility program with a particular
focus on projects of national significance. Planning horizons
should endeavor to anticipate freight needs extending over
multiple decades and seek to smooth the path for economic
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growth, both domestically and internationally.
We are not alone in making these recommendations; other
transportation interest groups and even the House Transportation &
Infrastructure Committee's Special Panel on 21st Century Freight
Transportation have come to the same conclusion: freight transportation
needs dedicated funding. The planning groundwork for highway freight
introduced in MAP-21 pointed us in the right direction, but it
addresses only one slice of a much larger system. We follow this path
at our peril--ignoring our complementary modes of transport is ignoring
the essential services offered by multimodal and intermodal
transportation. In so doing, we will fail our citizens' needs both in
terms of quality-of-life and economic competitiveness.
I thank the Committee for its time and look forward to working with
you on the surface transportation authorization.
Senator Fischer. Thank you very much. We will begin with a
first round of questions, 5 minutes. I will start.
Mr. Bessac, you talked about competing in a global market
and the effect that has. Being with Cargill and the emphasis
you have with pork, can you tell me what percentage of pork in
this country goes for exports?
Mr. Bessac. Certainly, Senator. Pork is much larger than
beef, between 20 and 25 percent depending upon the year, and
about 10 percent of beef is exported.
Senator Fischer. When you are looking at delays at our
ports and you see other countries stepping forward and being
able to fulfill some of those orders, do you know what share of
the market your company has lost and how you see that rippling
effect throughout the industry?
Mr. Bessac. Well, I guess going to Cargill's share gets to
be a bit difficult, but if you look at the U.S. pork industry
or the U.S. beef industry, we certainly have been the largest
exporter around the globe.
As we have dealt with the congestion in the ports, also
issues like currency and other forces in play in the market, we
have seen a substantial increase just in the past year to
countries, the EU, Chile, and I think certainly in the last
couple of months have seen a substantial decline in our
volumes.
Senator Fischer. Do you think that will be a permanent
decline? Will we be able to get that market back once these
customers are used to having new trading partners?
Mr. Bessac. I think any time you disappoint a customer, it
takes time to build trust back. As I referred to in my
testimony, there is a tremendous amount of potential for both
beef and port exports on the global scale. We have a product
that the world is looking for in values.
I certainly believe that growth potential remains, but
there is no doubt that we have disappointed our customer base,
primarily Japan, Korea, and China, over the last couple of
months, and that will take some time to rebuild trust.
Senator Fischer. In disappointing our customer base, what
has been the loss in dollars to pork producers and the economy
here in this country?
Mr. Bessac. Well, I do not know that I would be the best
one. I think the North American Meat Institute estimated $40
million to $50 million per week. I could probably give you a
better example.
Just this morning, we have about 15 containers of chilled
pork product in route to Japan that our customers are either
asking can you guarantee us it will arrive in an useful form
with shelf life or not. For me, that is about $1 million, I
have to decide whether I am going to put that into a port
system and either slow down or potentially close, closing being
a complete loss. I hope that gives you some perspective.
Senator Fischer. Yes, thank you. Ms. Farmer, with BNSF, I
am sure you have to look at the possibilities of a shutdown,
and a shutdown that would last for possibly an extended period
of time. How does that affect the railroad in planning, and
what impact does that have on your customers and the thousands
of employees you have?
Ms. Farmer. Sure. An example of this would be this weekend
we were notified by the PMA that vessel gangs would not be
working. The effect that has on our railroad is that in an
average week during this period of year, we would be moving
somewhere in the neighborhood of 60 trains off our docks in
Southern California. That number has been reduced to 30 trains
per week.
The impact that has is that we cannot move the freight that
wants to move off the West Coast, so we will move a limited
amount of that freight off the West Coast into the interior of
the U.S. It will then limit the ability for us to accept
freight at our inland hubs, so we will have to turn freight
away at those inland hubs that wants to move back to the West
Coast.
In addition to this, I talked about our capital
expenditures that we have made, we are now having to store
locomotives and equipment that we have added to our fleet to be
able to handle this country's supply chain growth, store that
across our railroad, because we can no longer continue to send
this volume out to the port.
When we do that, it sits on the main line and it causes
ripple effects across our network which impacts other customers
in addition to our intermodal customers.
The impact for us really, Senator Fischer, is that we
cannot move the freight through and we are not using the
valuable resources that we have.
Senator Fischer. That impact when you see the freight
migrate from the West Coast, what impact does that have on a
local community?
Ms. Farmer. Absolutely. I think when we look back at
history and we know during 2002, freight has permanently
migrated away from that, to Canada, to Mexico. We know that
because of that, the local freight is not ending up in those
communities, and additional expenditures need to be made
somewhere else when a port is there that could be used for that
freight to be moved through the country.
Senator Fischer. Thank you very much. Senator Blumenthal?
Senator Blumenthal. Thank you, Madam Chair. There seems to
be no doubt among any of our panel members that solving this
threatened impasse or crisis on the West Coast is necessary to
America's near term and longer term competitiveness; is that
correct?
Moving on to the broader issue. Let me go to Mr. Greuling's
really excellent testimony about our ongoing failure, and it is
kind of a slow motion implosion of American competitiveness,
the ongoing failure to spend more than 2 percent of our GDP on
infrastructure investment, which is compared to 9 percent by
China, 8 percent in India, 5 percent in Europe, even in Mexico,
four percent.
It extends not only to roads and bridge, which are
crumbling, decaying and decrepit, but also to areas of our
infrastructure as simple as rail grade crossings.
In Valhalla, New York, just days ago, we saw the
consequences of possibly--we do not know the causes yet--
possibly a rail grade crossing that could have been made safer
and could have prevented the deaths and injuries that occurred
there.
The fact of the matter is that there are more than 2,000
crashes and collisions every year at our rail grade crossings,
causing more than 230 deaths and more than 700 injuries, not to
mention the economic costs of those collisions, which are very
difficult or impossible to calculate. That is just one example
of our failure to invest in infrastructure.
Let me ask you as to the $2 billion that you recommend as a
fund for investment, would it make sense to do it through a
public financing authority or infrastructure bank, such as has
been proposed and advocated by myself and other members of this
committee, a very bipartisan proposal, that would make
available not just $2 billion, but very possibly more?
Mr. Greuling. I think the concept of a set aside through a
public infrastructure bank, broader utilization of public and
private activity bonds and along with some other finance
mechanisms. I think we need to bundle these together.
I think anything that costs a lot of money these days is
going to take more than one source or resource to make it
happen.
Back in Illinois, we do not like to talk about gas tax, but
we think in Illinois to solve some of the state road and
infrastructure problems, a gas tax is something we should be
looking at.
I do believe in loan guarantees, broader use of some of the
existing bonding programs, TIFIA and RRIF, I think both would
help in meeting this demand that we have, and I do believe
multiple solutions are going to be necessary.
Senator Blumenthal. My understanding is that both TIFIA and
RRIF are under utilized. In fact, billions of dollars have been
left on the table in effect as a result of internal problems
highlighted by the Inspector General of the Department of
Transportation very recently. Would you agree?
Mr. Greuling. I would agree with that. I think the time it
takes to process, going through the pre-application, going
through that review, the uncertainty, quite frankly, that comes
about when there are long delays in public financing tools, all
of a sudden, a hot project becomes not so hot a project and
they start looking at other infrastructure pieces to
accomplish.
Expedited review, broadening of the utilization of those
funds, and certainly making sure that we are using our full
complement every year would go a long way to helping us.
Creating new programs is fine, but I think better
utilization of existing programs makes a lot of sense.
Senator Blumenthal. RRIF in fact is a multibillion
opportunity that is lost literally every day to American
intermodal transportation. I welcome the emphasis that all our
panel has put on intermodal transportation. As you have well
expressed, it is the transportation growth opportunity of the
future.
Mr. Greuling. That is right.
Senator Blumenthal. Do any of you have any differences with
the points that Mr. Greuling has just made?
Ms. Farmer. I would say from BNSF's perspective, certainly
as you well know, we are privately funded, but we certainly
have a vested interest in making sure the supply chain runs
efficiently.
Therefore, we fully support a Federal focus on freight. We
think that is a good thing.
Senator Blumenthal. Through an infrastructure bank?
Ms. Farmer. Again, we do not necessarily want to drive that
decision, but we certainly want to be part of the conversation.
Senator Blumenthal. Thank you. My time has expired. Thank
you all.
Senator Fischer. Thank you, Senator Blumenthal. Senator
Daines?
STATEMENT OF HON. STEVE DAINES,
U.S. SENATOR FROM MONTANA
Senator Daines. Thank you, Madam Chair. I represent the
State of Montana, and in Montana, our number one industry is
agriculture. It is about a $5 billion industry, just last year.
As we know in ag, you have to be able to export.
Like Senator Fischer, we do not have a lot of ocean front
property in Montana. I do not think Nebraska does either. The
supply chain becomes critically important. In fact, 80 percent
of Montana's wheat is exported. Nearly a billion dollars in
2013, and primarily through the West Coast ports. We are very
proud of our ranchers and our farmers who not only feed
America, but feed the world now.
For Ms. Farmer, I heard concerns certainly from our
producers in Montana about the backlog we had, I think, 3,400
cars past due in the region. Could you tell us what the current
status of the rail backlog is now in Montana?
Ms. Farmer. As I have responsibility for intermodal, I
would be happy to follow up with specific statistics around the
backlogs, but what I can tell you is that like any measurement
on a year over year basis, because of the capital that we have
invested, because of the milder winter that we have, by any
metric that you look at, we are far improved from where we were
last year.
We are making significant progress toward delivering the
service that your constituents in the State of Montana have
come to expect from us, and we will continue to make progress
along those lines.
What I would say is concerning to us is that one of the
ways agricultural products get to the West Coast, as we have
discussed, is through the use of containers, it can move in
hopper cars or containers, and what I can say is as we limit
the inbound flow of containers into the interior of the
country, it makes it more difficult for me to be able to move
that product for export. That is certainly of concern to us.
Senator Daines. I can tell you, too, last summer, our
Montana ag producers were not so concerned about the rail
backlog, it was the issues going on at the West Coast ports.
I used to be a supply chain guy myself. I worked for
Procter & Gamble for 12 years and was in the supply chain. I
have an appreciation that the chain is only as good as its
weakest link. If we cannot get the harvest to market, then we
really cannot realize the great potential of our ag industry.
At the Port of Vancouver, the port and labor dispute we had
going on there, that now we see going on in Long Beach and
L.A., it is having a great impact and creating dwindling
confidence, I think, on our global markets of the ability for
us to deliver.
In thinking about a global opportunity, as our competitors
continue to improve in their products, the differentiator for
us long term to win will be in excellent customer service, the
ability to ensure that when we say the product is going to be
there, it will be there.
As has been said, and as Senator Fischer mentioned, when we
lose the ability to deliver, our customers will look elsewhere
to find those same products.
In fact, I just got a rather haunting e-mail from the
president of an outdoor products company that manufactures in
Montana, they have leading global market share, in fact, they
are the only producer of some of these products that are still
produce in the United States, the rest are producing over in
China.
This U.S. manufacturer, the president of the company e-
mailed me about his concerns of what is going on as we speak
today about the West Coast port slow downs, the International
Longshore and Warehouse Unions are putting their interests, he
said, not on their customers, and he said if something does not
happen soon, we will have no choice but to reduce our current
hiring plans and potentially lay off some of our current staff.
In your view, what if anything can be done as we look at
these challenges right now with these West Coast ports being
virtually either slowed down or shut down?
Ms. Farmer. Certainly, we are not party to the negotiations
between the PMA and the ILWU, but it is clear to us there needs
to be some speedy resolution of this.
The biggest opportunity that I think is in front of us is
it is going to take us several weeks to work off the backlogs
that exist once some type of resolution comes to bear.
We have an opportunity in front of us, and that is that
Chinese New Year is upon us, and that will give us several
weeks of reduced freight inbound to the West Coast that will
allow us to catch up.
I could not agree with you more that it is very concerning,
we need to find a way to be able to resolve this, but again, we
are not a party to those negotiations, and as such, the urgency
is really where we are focused.
Senator Daines. Thank you.
Senator Fischer. Thank you, Senator Daines.
Senator Klobuchar?
STATEMENT OF HON. AMY KLOBUCHAR,
U.S. SENATOR FROM MINNESOTA
Senator Klobuchar. Thank you very much. I am losing my
voice here, but I want to thank everyone for coming, and
especially Mr. Bessac from Target--from Cargill, which is a
great Minnesota company, biggest private company in the
country. We have worked extensively with them on these
transportation issues, so thank you for being here.
I am very glad that we were able to pass the user fee
increase from the River Act, and I appreciate all the work that
people who transport on the river did to get that bill done. As
you know, it was part of the ABLE Act.
Can you talk, please, about what the increased revenue will
mean for upgrading locks and dams on our nation's inland
waterways system?
Mr. Bessac. Senator, I am sorry. My area of expertise is in
pork exports. I know Cargill is very interested in building a
strong infrastructure so that we can compete on the global
scale. I would be happy to get you a written answer from our
Corporate Affairs' staff so we can answer that.
Senator Klobuchar. But you are glad we passed the bill to
see infrastructure improvements?
Mr. Bessac. I am, yes.
Senator Klobuchar. OK. That was supposed to be an easy
question, but that is OK.
[Laughter.]
Senator Klobuchar. Could you talk about how this works and
why it is such a problem if you are able to get things out, as
Mr. Daines points out, we are states that are not on an ocean.
We are on Lake Superior, so the port matters a lot.
I was once placed on the Oceans Subcommittee of the
Commerce Committee. I remember Frank Lautenberg giving me a
note when I told him I was the only Senator that did not have
an ocean on the Oceans Subcommittee. He came back and said,
``well, next year, just come back and ask for one.''
In any case, could you talk about how inland states depend
more on this river traffic?
Mr. Bessac. Absolutely. As you know, the demand for safe,
wholesome food products around the world continues to increase
as population increases. We need very effective, reliable modes
of transportation, whether it be a river, a railroad, truck, or
ocean vessel, to efficiently move those products to their best
value consumer.
Our farmer and rancher suppliers depend upon us to be able
to take those crops and move them efficiently and get the best
value so that we can in turn pay them a strong value for the
hard work they do raisings those crops and livestock.
Senator Klobuchar. Thank you. Dr. Kemmsies, could you talk
about the interrelationship with the ports--we do have the Lake
Superior Port--rail and intermodal issue?
Dr. Kemmsies. Well, over the last 15-20 years, the number
of hours of outage, unscheduled outage, at America's locks and
dams, particularly on the Mississippi waterway, has increased
substantially. It has made large traffic less predictable, and
agricultural shippers have been finding alternative routes.
Perhaps the easiest way to see this is when you look at the
Port of New Orleans' share of U.S. agricultural exports. It
used to be close to 65 percent about 10-15 years ago, and
today, it is about 45 percent. It is an impediment for farmers
to get product down the river reliably and loaded onto the
Handymax vessels.
This does create permanent damage. Rather than look at
threats of job cuts or not making investments, there are actual
quantitative facts that can be assessed here.
Under a free trade agreement, there are quotas for the
trade of agricultural goods, corn, soy, and other grains and
oil seed. If a shipment is delayed beyond the calendar year,
then the quota for that year is not made. The importer on the
other side of the trade is normally allowed some small growth
rate, say two to 3 percent, but if they do not make their quota
the year before, the two to three percent growth rate is
applied to a lower base rate. The excess amount is actually
filled by other countries that do have reliable systems.
Senator Klobuchar. Exactly, and it is going to hurt us
competitively internationally. Mr. Greuling, one last question
on public/private partnerships. Exporting of the goods to our
neighbors to the north and south and bringing goods in from
Mexico and Canada is really important. Canada is the biggest
trading partner that we have, and people do not seem to always
realize that.
We are having some huge problems at the borders with
delays. In places like International Falls, Minnesota, there is
an issue with a bridge that I am not going to get into, which
we hope is soon solved, and the winds are from Michigan. I have
been working on this as head of the Interparliamentary Group
with the Canadians.
On the Mexican border, our country has started to do a lot
of public/private partnerships with building up the
infrastructure at the ports of entry. Do you think this is a
smart way to go? I want to get it rolled out on the northern
border as well.
Mr. Greuling. We definitely think it is a smart way to go.
In our own case, we are looking at privately built bridges
connecting modes of transportation, highway with rail, highway
with water ports, knowing that the users will pay their way,
their fair share, knowing that money is being invested into
that specific infrastructure.
We cannot afford to build $150 million bridges without some
infusion of private equity. That is being used in North Africa.
It is being used----
Senator Klobuchar. Canada.
Mr. Greuling.--in Canada. In the Middle East. We have a
great example down on the Ohio River of a toll bridge that was
built with private equity funding, and one of the construction
companies actually paid part of the bill to keep their people
employed. It is a good approach.
Senator Klobuchar. Thank you. Just to be clear, this
project is more about the Customs, to try to speed up the back
and forth between the countries with a new dawn in North
America. Thank you.
Mr. Greuling. Thank you.
Senator Fischer. Thank you, Senator Klobuchar. Senator
Cantwell?
STATEMENT OF HON. MARIA CANTWELL,
U.S. SENATOR FROM WASHINGTON
Senator Cantwell. Thank you, Madam Chair, and thanks for
having this important hearing on movement of freight. When I
think of this issue, I think so much of Washington State and
all the products that come through on their way to Asia. We
have in a short period of time seen something like a doubling
in the size of the ships over the last five years. Yes, we have
a lot more capacity, and we obviously have a rising middle
class in Asia, and they want more U.S. product.
The question is, what are we going to do to meet that
demand as it relates to improving our infrastructure? One of
the things that has occurred is the recommendations of the
Freight Mobility Board, which was chaired by Mort Downey,
somebody you are familiar with, I think, Mr. Greuling. I think,
Ms. Farmer, somebody from the railroad association at least
participated in that.
The question is, how do we move forward on those
recommendations and would you support a dedicated funding
source to freight so we could raise the importance of why
moving this product is so critical to our economy and
infrastructure, and that TIGER alone just is not going to get
it done?
Ms. Farmer or Mr. Greuling, or anybody else who wants to
jump in on that.
Ms. Farmer. Certainly, we support anything to make our
ports more competitive. We are excited about working together
at Seattle and Tacoma. We will certainly stand together to work
with them. We believe the TIGER grants were a good thing, but
we need more funding around those kinds of issues.
From our perspective, anything we can do to make them more
competitive, we are certainly in favor of that as well.
Mr. Greuling. Senator, certainly our four points with the
Coalition, number one was to establish a fully funded dedicated
freight program. We believe that needs to be at least $2
billion a year.
This is not a program that is going to pick winners and
losers in the transportation field. This money should be spent
on what makes the most economic sense in terms of performance
for the entire system.
We believe setting priorities on a national scale for the
projects of national and regional significance is one of the
mechanisms to do that, and also the establishment of a separate
freight office within USDOT, again, to strictly focus on these
multimodal needs nationally.
Senator Cantwell. What do you think we need to do to get
people to understand this from either an economic impact or
some of the things your organization has done in studying the
economic development associated with this?
Mr. Greuling. A lot of what we do at the Center and through
the Coalition is education. You may see this brochure that we
recently produced through the Coalition, ``Follow That
Almond.'' It shows the supply chain of an almond from a
California grower to the Port of Hamburg in Germany delivering
almond butter. We will have more of those in the future.
I think that helps. I also think local and state
jurisdictions need to understand and look at freight more on a
national level and think in terms of interconnectivity, not
just what is good for Elm Street or what is good for my river,
but look at the whole national system, and make sure they are
aware that what we do at the national level and the local level
interconnect, and we really need to make sense of that when it
comes to funding.
Senator Cantwell. Mr. Bessac, did you have something you
wanted to add to that?
Mr. Bessac. I guess more of a comment, Senator. You hear
lots of numbers talked about, $2 billion for infrastructure. I
go back to the number Senator Fischer mentioned in if the ports
were closed today, it would be $2.5 billion per day to the U.S.
economy.
I would submit we are very close, although they are not
officially closed, I think we are very close to that at this
moment.
I guess my comment is simply it seems like a very wise
investment and an expense that the U.S. taxpayers and consumers
are paying today daily, because we do not have the free flow of
goods.
Senator Cantwell. I think we learned the lesson in
Washington, because we are at the tip of the spear, so that
congestion caused so many problems that we learned that if we
were going to be competitive and not lose that business, that
we had to make the improvements.
Now we need the improvements made all along the system, not
just right there. I think we just have to prioritize for people
to understand that we will actually lose the economic impact,
it is not just the up side, there is a huge up side, but there
is a down side if we do not act as well, and that is that
people will go to other ports or start buying product somewhere
else just because they can get more predictable timeframes for
delivery.
We really do need to make an investment. Thank you, Madam
Chair.
Senator Fischer. Thank you, Senator Cantwell. I believe we
have some more time. I know members have more questions. We are
going to do a second round.
I am interested, Mr. Bessac and Ms. Farmer, when we look at
freight transportation systems and we look at the Midwest and
some of the challenges that we have with containers, how would
you address those challenges where we have that lack of
containers to move our product? Other members of the panel, if
you would like to jump in on that as well.
Ms. Farmer. Certainly. I will go ahead and start, Chairman
Fischer. I think what you will see is that we have proven in
normal times that we had sufficient containers to be able to
move the product that wants to move export. In fact, last year
we moved 236,000 units of grain in a box back to the West
Coast.
We work very closely with the ocean carriers and the
trucking companies, and they are able to scale relatively
quickly to be able to meet the demands.
What BNSF has been very focused on is improving our
velocity. As you well know, when we look at the speed with
which we can turn these assets, we can create more capacity for
the supply chain and the market, if we invest in our
infrastructure, if we have expansion in our infrastructure.
We have a very thoughtful approach to investing so that we
can get the velocity that we need which will generate the
capacity for the Midwest to be able to have the containers that
they need.
Senator Fischer. Anyone else?
Dr. Kemmsies. There is a structural deficiency in that for
the exports, and our exports tend to be agriculture, large
scale capital goods and energy products, and these come from
places where not a lot of people live, and therefore, not a lot
of containers arrive full of imported goods, so there is a
structural gap that has to be addressed.
From where I sit and what I have seen in the data, I do not
think it will be addressed very simply by trying to match or
reposition containers, because every time you have these
congestion issues, things do get paralyzed.
It may be necessary to pursue an alternative solution such
as using 53 foot domestic containers, and then doing cross dock
operations, like we do with the imports, but in reverse so we
can compress these onto the container ships.
Senator Fischer. Thank you. Mr. Greuling?
Mr. Greuling. Senator, the demand is clearly there. Empty
containers quite frankly are at a premium in certain locations.
In our case, we are receiving grain, dry distillers' grain,
corn, and soybean meal from six different states that are being
trucked in, trans-loaded into containers and then shipped out
on the BNSF and UP to the West Coast.
When you think about the cost of that transportation just
to get to an empty container, it shows clearly that we have
this very high demand, and really, we cannot afford to build
more ports. We just need to use the existing ports as
efficiently as we can. I think that applies to both inland
ports and water ports.
That is going to be the solution, and tie it altogether
with highways and railroads, and then we have a winning
situation.
Senator Fischer. That ties into what I want to ask Dr.
Kemmsies with making our ports efficient, what role do you see
for automation? Is that going to help make our ports more
efficient, more competitive, and what success do you see us
having in that regard?
Dr. Kemmsies. Well, I do not think it is possible to
operate the ports with the larger vessels coming without some
degree of automation, if not eventually full automation.
These ships, as I mentioned in testimony earlier, they have
to be on the water as much as possible, not sitting at ports.
If you were to look at an 18,000 TU vessel, which is the
largest size that is really currently operating, it takes four
and a half days if you can do 35 gross moves an hour on a 24/7
basis.
To maintain productivity like that without some form of
automation, I think, is impossible. I have yet to see it
demonstrated. We seem to have to move in that direction.
If we do that, then I do see U.S. ports being able to
maintain an ability to compete with foreign ports, particularly
those to our north and to the south.
Senator Fischer. Thank you, Doctor. Senator Blumenthal?
Senator Blumenthal. Thank you. What is the cause of the
shortage of container cars in this country? I will ask that
question to whomever or all of you if you want to answer.
Mr. Greuling. Senator, I think from our perspective, I am
not sure there is a net shortage. I think the real issue is
where the empty containers are versus where the demand for the
containers is.
Senator Blumenthal. What accounts for that imbalance?
Mr. Greuling. Well, a lot of it has to do with the system
that we have set up, the intermodal system today. We can handle
over three million containers at our yard, a million and a half
coming in and a million and a half going out. Places in down
state Illinois or in Minnesota or Indiana do not have that kind
of inbound capacity. Therefore, they do not have the available
containers to ship out.
It is a market balance to some degree. I am not sure that
is fixable in the short term. Building more containers is not
necessarily the answer, and I would defer to my rail colleague
here to maybe respond to that.
Senator Blumenthal. Ms. Farmer?
Ms. Farmer. Senator Blumenthal, what I would say is that I
do not believe there is a net shortage of containers, but what
we need to challenge ourselves with is how do we efficiently
get them into the interior of the country.
With that, what BNSF and the Western roads have done is
that we have found ways to find the ability to load those
containers, consolidate grain loading around our intermodal
hubs in the interior of the country.
Where there is a surplus of empty containers that is
naturally made by the goods that come off the West Coast, for
example, at our Logistics Park, Kansas City facility, the
majority of grain that gets loaded out or a very large
percentage of the grain that gets loaded out comes from the
State of Kansas.
As we can draw that closer to our Logistics Parks, we then
have the empty containers there that can then be loaded out. In
addition to that, we have to keep continuing to invest so that
our velocity is good, so the containers are there.
I do not think in total there is a net shortage. The issue
is about how do we stay competitive through the ports over the
railroads into the right places to be able to get those
containers into the interior of the country.
Senator Blumenthal. The ports are just one key to a
multimodal system?
Ms. Farmer. Absolutely.
Senator Blumenthal. Where rail is obviously very important
to moving a lot of those containers to the right places so they
can be there at the right time.
Ms. Farmer. Absolutely.
Senator Blumenthal. Let me ask you, going back to the
infrastructure investment issue, Mr. Bessac mentioned this
figure of $2 billion, the possible loss of $2 billion if this
impasse or crisis continues, which would be very, very, very
unfortunate, but it strikes me as an example of how possibly
there are costs to lack of recognizing the importance of
investment and smart policy.
What somewhat perplexes me is why the folks who run our
transportation system, including your railroad and others who
are here, have not been more vociferous or vehement advocates
for specific solutions to these infrastructure problems in the
way that maybe will move policymakers, including folks who are
sitting on this panel, to take some action.
In other words, we would welcome you to be more vigorous
advocates for a system that is your responsibility and trust to
run and ultimately your shareholders have very significant
investments in.
Ms. Farmer. Absolutely. As I mentioned earlier, Senator
Blumenthal, we agree from the standpoint that we absolutely
have to continue to manage our network, invest in capital
expenditures that make sense going forward. We also want to--we
have a vested interest in remaining engaged in that
conversation. We believe that a national transportation policy
is a good thing with a focus on freight.
I think we have been very active relative to those
discussions and participation in national transportation policy
planning.
Senator Blumenthal. Thank you. Thank you all for being here
today.
Senator Fischer. Thank you, Senator Blumenthal. Senator
Daines?
Senator Daines. Just a follow-up question, and thank you,
Madam Chair, regarding infrastructure investment. Senator
Blumenthal, I completely agree that we need to continue to
invest if we are going to maintain our global competitiveness.
I think, Ms. Farmer, you mentioned some of the roadblocks
of the proposed export facilities on the West Coast. I was out
at one of those proposed facilities last summer, the Gateway
Pacific Terminal. I was standing there with a member of the
Rail Union from Montana. I was standing there with a Tribal
member from Montana that would benefit from expanded exports.
We see both the jobs as well as the tax revenues that would
be created by expanding exports, and yet, it is delay after
delay after delay, trying to get this port built. It is
literally right in between two existing ports, it is zoned
properly. It is environmentally sound.
Yet, there is great concern of how in the world are we ever
going to move forward here on infrastructure investment with
these endless delays and uncertainty.
I am looking for help here around what we can do to try
to--I am not suggesting there is not a thorough review process
but one that provides some degree of certainty and
reasonability in that process.
Ms. Farmer, any comments on those thoughts?
Ms. Farmer. I would say, Senator, we certainly agree. We
are working very closely, as you know, with the State of
Montana, to put together our export platform. We, like you, are
anxious to have the ability to continue to grow, to be able to
export.
We believe there needs to be some improvement, whether it
is around permitting reform. We have talked about that multiple
times in the past. We believe that extending the environmental
review position of MAP-21 to the railroads would be helpful,
and further expediting the process, looking at these things
concurrently, basically reducing the time line that these
things take.
In general, what I would say is we completely agree that we
are anxious to export product to continue to grow, to improve
the competitiveness of the U.S. supply chain, both through
exports and what we have talked about here as well, imports as
well.
Senator Daines. I think we talked about the need for state-
of-the-art productivity and automation and so forth. This
proposed port would be exactly that. Mr. Greuling, what are
your thoughts? I know you are somewhat of an expert on this
issue.
Mr. Greuling. Senator, I think much like we suffer from
multiple ``jurisdictionitis'' with three, four, five or six
governmental units controlling roads and infrastructure, the
Federal Government has the same issue for these major projects,
the number of agencies that these projects have to touch, the
time it takes to go through the NEPA process, the environmental
review.
In fact, I would comment that we have actually seen some
improvement on that under leadership from Congress and the
Administration. We applaud that.
It should not take 10-12 years to do an EIS statement on a
bridge. Clearly, that is an issue.
Multiple agencies maybe working a little closer together on
collaboration, and again, we think a national freight office
could help sort of quarterback that initiative, especially for
these major important freight projects.
Senator Daines. I think what is highlighted today in some
of the testimony is what has happened with these choke points
on our West Coast ports, allowing more optionality and so forth
to resolve these issues when they come up.
If we only have one way out, it is nice to have multiple
choices here and so forth to ensure we protect our economic
interests and are able to compete globally.
Thank you. That is all the questions I have.
Senator Fischer. Thank you, Senator Daines. We have been
joined by the Chair of the Committee, Senator Thune. Do you
have questions, please?
STATEMENT OF HON. JOHN THUNE,
U.S. SENATOR FROM SOUTH DAKOTA
The Chairman. Thank you, Madam Chair and Senator
Blumenthal, thanks for holding this hearing. It is a very
important subject. I appreciate the fact that your subcommittee
is focused on this.
A reliable and efficient supply chain is critical to our
global competitiveness and to our economy, and the ports are an
absolute vital link in that chain.
What is frustrating is that some of these things are things
sometimes you cannot control. These things, I guess, I would
say are self-imposed problems. They are really kind of unforced
errors. If you try to quantify this, it is having a profound
impact on the economy.
I know some of you on the panel have already testified to
that effect, and Cargill, 40 million a week. I have talked with
Tyson in my State of South Dakota, and they have shared with me
that we have beef and pork sitting in freezers near the ports
instead of heading to Asian markets, while we have all these
large container ships sitting off the coast waiting to export
our nation's products.
It affects jobs. Tyson employs 41,000 people. USDA
estimates there are a million jobs associated with agricultural
exports in this country. It has a profound impact on the
economy, not just on the West Coast, but all across the
country, workers in South Dakota and other places that are
dependent upon, like I said, a reliable supply chain.
Outdoor Gear, Inc., family owned business in South Dakota.
They are a wholesaler. Receives 95 percent of its inventory
from West Coast ports, has been forced to miss deadlines, pay
for late delivery penalties, and pass up important sales
opportunities, including in December, which of course is the
holiday peak season.
This is an issue that just really needs our focus. It is a
huge drain on the economy. I just urge all sides to come to a
resolution in this dispute to find a solution as soon as
possible. We just cannot afford to drag this on and have our
economy pay this kind of a price. If we can get this behind us,
we can start focusing our energy and creativity on a lot of the
other long term infrastructure challenges that desperately need
our attention as well.
In that light, I wanted to ask a question. I think all of
you have attempted to kind of quantify what some of the
financial and economic impacts of this have been, but the
question I would like to pose is once this is resolved, how
long will it take to unwind this and to get those networks
working in an efficient way again, and where things are sort of
normalized. What are we talking about once we get hopefully--
which will be very soon--a resolution to this issue?
Mr. Bessac. Senator, I would answer from our side as the
exporter, I think it is an excellent question. Our best
estimate is on chilled shipments, it will take at least a month
to get back into a normal flow when we can get those products
moving through to the high value markets in Japan and Korea, at
least a month.
If you move over to the frozen side, the products we would
send to Japan, Korea, China, Mideast, all around the globe, our
best estimate is three to four months before we are back to a
normal flow, we have moved through the backlog of goods that we
have. That number continues to increase every day.
Ms. Farmer. Senator Thune, from our perspective at the
railroad, we certainly stand ready to be able to help the
backlog, but what I would say is because of the challenges that
we face with not being able to move freight, we have had to
store locomotives and equipment across our network. There will
be some period of time it will take for us to be able to go and
get those assets, reposition them at the ports, be able to be
in a position to handle that.
What I would tell you is that we are anxiously awaiting the
ability to do that. We will be ready to do that. We have an
unique opportunity, as I mentioned earlier before you stepped
in, in that Chinese New Year is coming. When Chinese New Year
hits, we will see less vessels that will be headed toward the
West Coast. It would give us an opportunity if there was a
speedy resolution to this current PMA/ILWU negotiations, that
we could use that time then to work off the backlog that exists
at the ports.
The Chairman. I guess I would just reiterate, Madam Chair,
and again thank you for having this hearing, that this is not
something that is confined to the West Coast. This has a ripple
effect throughout our entire economy.
Having an efficient transportation system is really one of
the keys to our advantage, our competitive advantage in the
global economy. When you see this kind of thing happen and
recognize the impacts that it has, I would just again encourage
all the parties to create a new sense of urgency and build some
intensity behind coming to a resolution.
We just cannot continue to keep this going on and not
expect that it is going to have some very, very detrimental and
adverse impacts on a whole range of sectors of our economy and
all the jobs that go with it.
Madam Chair, thank you, and thank the panel for your great
testimony today.
Senator Fischer. Thank you, Chairman Thune. Senator Blunt?
STATEMENT OF HON. ROY BLUNT,
U.S. SENATOR FROM MISSOURI
Senator Blunt. Thank you, Senator Fischer, for holding this
hearing, and you and Senator Blumenthal for drawing attention
to this issue.
I know a lot of questions have already been asked. Dr.
Kemmsies, in your written testimony, you mentioned that the
under investment in the Mississippi ports, the inland ports,
indicates that we have been more import oriented than export
oriented, expand for a few minutes on the significance of the
inland ports, particularly with the Panama Canal development
and agricultural opportunities and trade, as well as
manufacturing.
Dr. Kemmsies. Most of the growth in trade was on the import
side, and when we look at the various segments of the freight
movement industry in the U.S., the larger projects that were
done by rail, by highway, and at the port level, they were
focused on being able to handle the imports more efficiently.
A lot of the dredging, for instance, is not really done
because we were trying to export more goods. Our goods are very
heavy. They require deeper vessels.
The motivation, when you read the economic analysis or the
cost/benefit analysis, was essentially focused on the import
side. Maybe you can look at it from that side to say well, this
is an import bias in our investments, but if we look at the
projects or where we have not had funding for infrastructure,
you get the same message.
That is what I meant in the testimony about the Mississippi
waterway. We have seen chronic and consistent under funding and
we have seen a deterioration of the infrastructure there.
Senator Blunt. I think from the locks to the ports
themselves, obviously, I would be very focused on the
Mississippi River because of where I live and where I have
grown up and where we are today, but the inland ports also
serve a geographic area logically twice as big as the coastal
ports. You serve a geographic area both ways. I hope we can
begin to focus more on those ports.
The other question I had, Chairman, for Ms. Farmer, I think
you all have been trying at BNSF for a long time to do a
California project, the California International Gateway.
Permitting delays have been a big problem there.
I am working on some legislation now to try to streamline
permitting for railroad projects. Do you want to talk about how
the kind of problems you have had trying to serve that market
in a better way?
Ms. Farmer. Absolutely. The Southern California
International Gateway would be, as I mentioned, the greenest
intermodal facility in the world when built. We have been
working for a decade to try to do this. We have faced local
opposition.
What I would say is that is indicative of projects that we
see across our network. It is not just the Southern California
International Gateway project.
We really are in favor of permitting reform, and I know and
I appreciate your leadership in this area. As I spoke to
earlier, we really believe extending the environmental review
position of MAP-21 to the railroads would be a great first
step. We believe it is important to shorten the timeframes.
We know we are not trying to eliminate the review process,
we are just asking there be a reasonable time. We need to
shorten the timeframes that the agencies could possibly look at
the things concurrently as opposed to sequentially.
It is just important for us that we are able to move
forward the projects that will add capacity to the supply
chain.
Dr. Kemmsies. May I make a comment on that?
Senator Blunt. Yes.
Dr. Kemmsies. We are the program managers for the Jasper
Ocean Terminal on the Savannah River. In the report we gave the
Board last year, we pointed out that if we were to start the
application process then, it would be 13 years before the port
could become actually turn key operational.
We have to justify this on the basis of analysis, so I had
the unfortunate position of having to forecast what volumes
will go through a port that does not exist in 13 years.
I think this is an example of how far the process has
basically gotten off kilter.
Senator Blunt. Do either of you want to comment on that
topic? Mr. Greuling?
Mr. Greuling. Senator, thank you. What is interesting about
this discussion about freight movement and the problems we have
in this country, it is all about choke points, whether it be a
problem at the ports, whether it be congestion on the highways,
whether it be an at grade closing for a rail crossing, whether
it be an extended period of time to get permitted for a
project. Those are all choke points.
What is unfortunate about that is America has a distinct
and very unique advantage in this global marketplace, and to
think that our transportation system is one of the primary
reasons that we are being held back on imports, but more
importantly on exports, it is almost criminal. It is a shame.
I think there is a lot we can do better to help with that
situation.
Senator Blunt. Thank you. Thank you, Chairman.
Senator Fischer. Thank you, Senator Blunt. Any other
questions from the Senators?
[No response.]
Senator Fischer. With that, I would say this hearing record
will remain open for two weeks, and 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.
With that, I conclude the hearing. I thank the witnesses
for just great responses and the information you have provided
us today. Thank you so much. The hearing is closed.
[Whereupon, at 11:22 a.m., the hearing was adjourned.]
A P P E N D I X
Comments Submitted by William J. Rase III, Executive Director,
Lake Charles Harbor and Terminal District
The Port of Lake Charles is the 13th largest port in the country by
tonnage, 80 percent of which is energy related. In the past several
years, $68 billion in new facilities--most energy related--have been
announced for the Calcasieu Ship Channel, which serves the Port. The
construction on several facilities has begun.
Despite its current and future importance to the national economy--
more fully explained below--Congress and successive Administrations
have ignored the dredging needs of the Port of Lake Charles and other
vital ports around the country.
Located on the U.S. Gulf along a 68 mile Federal channel on the
Calcasieu River, the Port of Lake Charles extends 32 miles into the
Gulf and 36 river miles inland from the Louisiana coast. The channel is
located roughly half way between the ports of New Orleans and Houston.
The channel's present configuration was completed in 1941. Since that
time it has been widened and deepened to its present congressionally
authorized dimensions of 400 feet wide by 40 feet deep on the inland
reach and 800 feet wide and 42 feet deep in the Gulf of Mexico.
The Port of Lake Charles currently serves facilities engaged in
international trade at which deep-draft ocean going vessels call. Some
$68 BILLION in new development has been announced along the channel.
Major energy developments and others chose southwest Louisiana because
of the Port's access to international markets, its access to domestic
markets through the Gulf Intercostal Waterway and the area's extensive
pipeline infrastructure.
Figure 1 below shows that the Port of Lake Charles is at the
confluence of the U.S. natural gas pipeline infrastructure. Figure 2
shows a more detailed view and illustrates why a major liquefied
natural gas facility chose to locate on the Calcasieu Ship Channel.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The national infrastructure for crude oil and refined products is
shown on Figure 3.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Please note that a product pipeline Figure 3 runs from Louisiana,
through several southern states and into the northeastern part of the
county. This is the Colonial Pipeline, shown in more detail in Figure
4.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Current and future facilities on the Calcasieu Ship Channel expect
the Port's Federal channel to be reliably maintained at its authorized
width and depth as shown in the rendering in Figure 5.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Otherwise operating costs increase dramatically. Because of
shoaling, vessels on the main channel are currently limited to a 38
foot operating draft (rather than 40 feet). A major link between the
main channel and existing/planned energy facilities has a 34 foot
operating draft. The difference between the channel maintained at
congressionally authorized dimensions and a channel impacted by the
current severe shoaling is shown by a comparison of the renderings in
Figures 5 and 6.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Historically, the Presidents have not budgeted and Congress has not
appropriated sufficient funds for the Corps of Engineers to reliably
maintain the channel at federally authorized dimensions. The difference
between funding needs and budgeted amounts are shown in Table 1. While
the channel has received both emergency supplemental and Corps
discretionary funds, these sources are not dependable in timing or
amount.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Nor is underfunding the Corps O&M budget unique to the Port of Lake
Charles. Most U.S. ports are not funded sufficiently to reliably
maintain their congressionally authorized channel dimensions.
International trade through America's deep-draft ports accounts for
30 percent of the U.S. economy, and growing. To support this important
and expanding economic sector, the country's deep-draft channel
infrastructure must be a national priority with consistent, adequate
funding. A national commitment to shipping, global trade and navigation
infrastructure is absolutely necessary as these factors are a key
component of America's transportation system and indispensable for the
country's energy development and job growth. Current O&M funding levels
for deep draft channels are grossly inadequate. Congress and the
Presidents must provide the necessary funds to maintain the Nation's
deep-draft maritime infrastructure, which includes fully using Harbor
Maintenance Fund collections for their intended purpose.
From a national perspective, the LNG developments planned for the
Calcasieu Ship Channel support the Nation's economy by providing export
facilities for the country's newfound natural gas resources. The export
of LNG will reduce the Nation's balance of payments, support job growth
in other areas of the country, contribute to an increase in Gross
Domestic Product and help reduce the national debt. However, without a
reliable shipping channel, these facilities may not locate in southwest
Louisiana. They were attracted to the area by the substantial energy
infrastructure of pipelines, shallow water shipping routes, access to
international trade routes, refineries and existing LNG import
facilities. Despite the abundance of inexpensive U.S. natural gas,
these facilities will not simply relocate to another U.S. port if the
Administration and Congress does not adequately maintain the Nation's
deep-draft channels. The most likely candidate for relocation is
Canada.
But the issue goes well beyond the Port of Lake Charles. The
American Association of Port Authorities reports that in 2010, long
before the country's natural gas boom, 7,579 oceangoing vessels made
62,747 calls at U.S. ports, of which 35 percent were by tankers
carrying oil and gas used to power U.S. cars and heat U.S. homes. Those
vessels calling at most U.S. ports transited Federal channel that were,
and continue to be, inadequately maintained.
An independent traffic study commissioned by the Lake Charles
Harbor and Terminal District has determined that by 2023 the Port of
Lake Charles alone will add another 1,000 deep draft ships to the
vessel count cited above, the majority of which will be carrying U.S.
natural gas for export. But without adequate, reliable funding to
maintain the Nation's strategic energy channels at authorized
dimensions the promise of that growth may evaporate.
______
Response to Written Questions Submitted by Hon. Richard Blumenthal to
Norman Bessac
Question 1. While the labor dispute at the Nation's West Coast
ports continues, the consistent movement of cargo from these ports has
stalled and slowed down dramatically. This issue has created a serious
problem for perishable items that will expire if an agreement isn't
soon reached.
Commodities like liquid gases have a shelf life of forty days
before they return to a gaseous state and can no longer be used. One
example of a perishable gas, helium, has numerous and significant
commercial applications, most notably for the biomedical industry; the
gas being necessary for the operation of MRI machines. Any disruption
in supply will have tremendously negative consequences. Companies that
are a part of the liquid gas industry or the industry of any other
perishable good are losing millions of dollars as delays continue.
While this dispute continues, are there any procedures in place to
identify perishable items and route them by the delays and onward
through the supply chain?
Answer. Thankfully, both sides reached agreement and we are
starting to see goods flow at a more normal rate. Pork exporters
certainly reviewed several options to serve our customers during the
slowdown, but the only other alternative to serve Japan and S. Korea
markets with chilled product was to air freight at significant premium
that resulted in a loss. Mexico was able to take some of our chilled
business by shipping from two Mexican ports that were not affected by
the slowdown. So the only real alternative for the industry was to sell
the product into the US, Mexico, or Canadian markets during the port
slowdown, which increased available supply pushing prices for meat and
hogs downward.
Question 2. The National Freight Advisory Committee (NFAC)
recognized the importance of security to the movement of freight. Too
often, however, conversations about homeland security revolve around
threats to the aviation space. While that's certainly important--we
can't have a thorough conversation about homeland security without
discussing our Nation's surface transportation system as well--
especially our railroads and our ports. These require our attention as
much as any other form of movement.
An attack on our freight network could injure tens of thousands and
disrupt an economy depended upon by millions.
Are there additional steps you suggest we take to ensure the
security of goods moving across our country?
Answer. I believe the industry working with the railroads have come
up with an appropriate level of measures to provide safe passage of
cargo. The only suggestion I could make would be to have an independent
safety audit group to review the railroad's measures to provide
security. I would have them key in on the most hazardous products and
the protocols that are currently in place. I think the railroads have
done a pretty good job of providing security to date. However, an
independent review might highlight deficiencies.
______
Response to Written Questions Submitted by Hon. Richard Blumenthal to
Katie Farmer
Question 1. While the labor dispute at the Nation's West Coast
ports continues, the consistent movement of cargo from these ports has
stalled and slowed down dramatically. This issue has created a serious
problem for perishable items that will expire if an agreement isn't
soon reached.
Commodities like liquid gases have a shelf life of forty days
before they return to a gaseous state and can no longer be used. One
example of a perishable gas, helium, has numerous and significant
commercial applications, most notably for the biomedical industry; the
gas being necessary for the operation of MRI machines. Any disruption
in supply will have tremendously negative consequences. Companies that
are a part of the liquid gas industry or the industry of any other
perishable good are losing millions of dollars as delays continue.
While this dispute continues, are there any procedures in place to
identify perishable items and route them by the delays and onward
through the supply chain?
Answer. The shipment of perishable gases on the BNSF network is
negligible. The movement of perishable goods in intermodal service, for
which I am responsible, is governed by the BNSF Intermodal Rules and
Policies Guide found at http://www.bnsf.com/customers/pdf/intermodal-
r-and-pg.pdf.
When confronted with challenges such as the recent West Coast port
slowdown, BNSF's first priority is to communicate and work closely with
all potentially impacted customers, perishable or otherwise, along with
terminal operators to minimize delays and keep resources and freight
moving. As port congestion began impacting the BNSF network last year,
we regularly reviewed our transportation service plans and established
controls as necessary to better manage freight flows. These controls
included exercising caution in originating or accepting westbound
traffic that could not be processed in a timely manner at certain
marine terminals. These actions helped to mitigate potential
bottlenecks in the network that could have rippled throughout the
system creating slowdowns for all traffic flows. Importantly, each
significant action taken by BNSF during this challenging time was
accompanied by clear communication with our customers.
Question 2. The National Freight Advisory Committee (NFAC)
recognized the importance of security to the movement of freight. Too
often, however, conversations about homeland security revolve around
threats to the aviation space. While that's certainly important--we
can't have a thorough conversation about homeland security without
discussing our Nation's surface transportation system as well--
especially our railroads and our ports. These require our attention as
much as any other form of movement.
An attack on our freight network could injure tens of thousands and
disrupt an economy depended upon by millions.
Are there additional steps you suggest we take to ensure the
security of goods moving across our country?
Answer. BNSF and the Nation's freight railroads take safety and
security extremely seriously and work cooperatively with various
federal, state and local agencies to help ensure the safe and secure
transport of goods across the rail network. At the Federal level this
includes the Pipeline and Hazardous Materials Safety Administration
(PHMSA), the Federal Railroad Administration (FRA), the Transportation
Security Administration (TSA), the Federal Bureau of Investigation
(FBI) and the Federal Emergency Management Agency (FEMA).
BNSF employs a highly trained Resource Protection Team that is
directly responsible for the security of BNSF personnel, property, and
assets which include our customers' lading. Resource Protection is
comprised of several components including Homeland Security and Police.
Protecting the railroad relies on a multi layered approach, including:
Collaboration with federal, state and local law enforcement
agencies for intelligence and resource sharing.
Community and employee security awareness programs to report
crime and trespassing on railroad property.
A BNSF police force consisting of 200 fully certified state
law enforcement officers who carry full police and arrest
powers in 28 states and which includes 26 K9 (police dog)
teams.
Facility security supplemented by more than 100 contract
personnel.
Automated gate systems, biometric fingerprint readers and
site-specific security procedures, processes, and physical
security deliver a high degree of protection at rail
facilities.
BNSF has been C-TPAT certified for more than a decade and
continues to build beyond these measures to protect our
customers' shipments.
BNSF provides consist specific information to first
responders, who have the obligation to ensure that routing,
consist and any other information related to key train
operations does not compromise the public's interest in
homeland security.
BNSF would ask for continued strong support from the various
agencies with which we work closely on safety and security issues,
including importantly in the area of threat analysis and information
sharing. For further information and specific examples of rail industry
cooperation with the Federal Government in the areas of safety and
security, please see AAR President and CEO Ed Hamberger's June 19, 2013
testimony before the Committee (http://www.commerce.senate.gov/public/
?a=Files.Serve&File_id=fc4fe590-9862-4121-843c-4783f5a2fdc6).
______
Response to Written Question Submitted by Hon. Richard Blumenthal to
Dr. Walter Kemmsies
Question. The National Freight Advisory Committee (NFAC) recognized
the importance of security to the movement of freight. Too often,
however, conversations about homeland security revolve around threats
to the aviation space. While that's certainly important--we can't have
a thorough conversation about homeland security without discussing our
Nation's surface transportation system as well--especially our
railroads and our ports. These require our attention as much as any
other form of movement.
An attack on our freight network could injure tens of thousands and
disrupt an economy depended upon by millions.
Are there additional steps you suggest we take to ensure the
security of goods moving across our country?
Answer. Thank you for the opportunity to expand on the points I
sought to make in my recent testimony to the Subcommittee. In response
to your question, I recommend focusing on steps surrounding the
following three themes:
1. Continue and expand port security grants. In recent years there
have been large cuts in the Federal Emergency Management
Agency's (FEMA) preparedness grant programs, and in particular
to the Port Security Grant Program. Natural disasters,
terrorist attacks, and other crises cause billions of dollars
in infrastructure damage and lost economic activity when they
hit seaports. Programs at DHS and other Federal agencies, that
include information sharing and training, increase port and
therefore economic security and resiliency, by helping them
create effective disaster implementation plans for restoring
normal operations. The importance of this is particularly
evident in light of the hurricanes and severe winter weather
conditions that have impacted ports in the Northeast.
If ports have to impose additional fees to cover unfunded costs of
these programs it will increase the cost of moving freight. If
these programs are not sustained then the productivity of the
freight movement industry, and therefore its ability to support
economic activity will be diminished.
2. Ensure sustained and expanded freight movement security. Proper
infrastructure maintenance means periodic inspections and
repairs and aids the cause of homeland security and risk
reduction. So standards and adequate funding for maintenance of
existing infrastructure is important.
It is not clear if Customs and Border Protection and the Domestic
Nuclear Detection Office do have a plan for continuing
maintenance, replacement, or funding for these machines (e.g.,
Radiation Portal Monitors, Vehicle and Cargo Inspection
System--VACIS, etc.). Ports should not be required to fund this
security program, initiated by the Federal Government in order
to secure international borders.
A policy is needed to clarify how the agency should pay for the
future use of scanning equipment, when such equipment must be
modified and moved due to port facility expansion or
reconfiguration, and for disposition of current scanning
machines reaching the ends of their useful lives.
Additionally, a funded On-Dock Rail (ODR) radiation detection
program, is also needed to efficiently scan containers moving
directly from ships to rail.
3. Export security must also be considered. At some point, as global
freight security standards are developed, it is likely that
other nations will require 100 percent scanning of our exports.
Scanning exports is also in our Nation's best interest, not
just for security but also to protect our increasingly
important food exports from contamination. It is well
established that the U.S. needs to increase exports in order to
regain economic prosperity. Policies and funding for port
securities should thus focus on more than imports, but include
exports as well. However, further costs imposed on the shipper
makes our exports less competitive and supporting them is in
our general economic interest, so there is a critical balance
between security and the amount we spend to provide it.
______
Response to Written Questions Submitted by Hon. Richard Blumenthal to
John E. Greuling
Question 1. While the labor dispute at the Nation's West Coast
ports continues, the consistent movement of cargo from these ports has
stalled and slowed down dramatically. This issue has created a serious
problem for perishable items that will expire if an agreement isn't
soon reached.
Commodities like liquid gases have a shelf life of forty days
before they return to a gaseous state and can no longer be used. One
example of a perishable gas, helium, has numerous and significant
commercial applications, most notably for the biomedical industry; the
gas being necessary for the operation of MRI machines. Any disruption
in supply will have tremendously negative consequences. Companies that
are a part of the liquid gas industry or the industry of any other
perishable good are losing millions of dollars as delays continue.
While this dispute continues, are there any procedures in place to
identify perishable items and route them by the delays and onward
through the supply chain?
Answer. The ripple of West Coast congestion is being felt, and will
continue to be felt, across the supply chain and nation for many months
as the backlog of delay is reduced over time. Thus, we will not know
the full extent of the damage to various industries, including those
involved with the movement of perishables, for a long time to come.
As you wisely point out, perishable goods are particularly
vulnerable to the negative impacts of congestion and the consequence of
delay cannot be undone. These instances illustrate the need for a
national freight system that is strategic, redundant, and equipped with
the most advanced technologies available to enhance the flow of goods.
While we are currently focused on West Coast ports, they are just a
symptom of the larger congestion problem that we face in the United
States in varying degrees as a result of insufficient and uncoordinated
investment in our freight network. If left unaddressed, congestion will
continue to worsen and spread across the country, while supply chain
managers remain frustrated in the face of unnecessary risk and loss.
Question 2. The National Freight Advisory Committee (NFAC)
recognized the importance of security to the movement of freight. Too
often, however, conversations about homeland security revolve around
threats to the aviation space. While that's certainly important--we
can't have a thorough conversation about homeland security without
discussing our Nation's surface transportation system as well--
especially our railroads and our ports. These require our attention as
much as any other form of movement.
An attack on our freight network could injure tens of thousands and
disrupt an economy depended upon by millions.
Are there additional steps you suggest we take to ensure the
security of goods moving across our country?
Answer. A sound freight transportation system, with consistent
steady-state capacity, is fundamental to the Nation's security,
economy, and prosperity. Both the threat of human attacks and natural
disasters stand to disrupt the movement of American commerce.
Our national freight network is ``a system of systems'' that allows
the efficient flow of goods across modes and large geographic areas.
Within these systems, infrastructure is owned and operated by a variety
of both public and private interests with varying degrees of protection
and defense. Identifying and reinforcing vulnerable aspects of this
network should be a Federal priority with particular concern for
potential ``single points of failure'' where disruptive events can be
particularly devastating. The Department of Homeland Security and the
Department of Transportation should work together in this effort.
However, it is clear from experience with recent events such as
Superstorm Sandy, severe winter weather and the current West Coast
congestion that our national freight transportation system lacks
redundancy and is so thinly stretched that goods cannot pivot
effectively in the event of disruption. To address this, we need a
national, coordinated approach to build resiliency and redundancy into
our transportation infrastructure. This resiliency principle--the
ability to reduce the severity of disruptive impacts on service and
allow rapid service recovery--should become a foundational precept in
our planning, design, engineering and construction of new and
rehabilitated transportation infrastructure. There is additional cost,
a resiliency premium, so to speak, to this higher standard of design,
but it is a very worthwhile investment compared with the cost of life,
property and disruption of service during catastrophic events. This is
particularly true for our multimodal freight infrastructure, whose
interrelationship places entire supply chains at risk.
The Coalition for America's Gateways and Trade Corridors has long
advocated for a well-funded Federal freight infrastructure investment
program and we believe that the resiliency premium, in addition to
capacity enhancement, is part of the Federal responsibility to keep our
Nation's commerce moving.
Question 3. According to a 2010 study of the maritime industry in
Connecticut, my state is one of just 12 states with three or more
deepwater ports. Each of Connecticut's ports handles tens of millions
of dollars in trade and over 90 percent of shipping entering the Long
Island Sound uses a Connecticut port as opposed to a New York port. But
these Connecticut ports haven't grown as much as there potential would
allow.
A lot of the discussion here and the Administration's freight
proposal has centered on the Nation's largest ports.
How can we ensure that some of the country's smaller ports with
very large regional economic benefits receive the attention and
infrastructure investments they need?
Answer. According to USDOT, over the next 25 years U.S. freight
volume will grow by 45 percent in tonnage. As this occurs, ports will
continue to be our most important international gateways. However,
ever-larger container ships and consolidation in the shipping industry
means that smaller ports may be challenged to maintain regular service.
Cargo owners are looking for routes that provide reliable, efficient
service at the lowest ``landed cost''--that is, the full cost of the
trip, not just the maritime segment. Ports with good landside
connections to final destinations will be most advantaged in future
decades.
Further, the advent of megaships is a producing a cascading effect,
whereby all ports are receiving calls from bigger vessels than they
were previously and the smallest ships are being retired from fleets.
Strong landside infrastructure at all ports--regardless of size--is
required to ensure these efficiencies are realized. Our largest
seaports are typically located in highly urbanized areas with limited
room for growth.
Again, I would like to stress the importance of a freight network
with built-in redundancy. We should recognize that ports that are
smaller in size hold an important place in our transportation network.
Even when the freight network is fully functional, smaller ports
provide a relief valve for their larger counterparts. And, they provide
alternative gateways to shippers and supplies in the event of
disruption.
[all]