[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\
---------------------------------------------------------------------------
    \1\ Based on information provided by Bob Sinner, CEO of SB&B Foods 
in Casselton, ND
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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. 
---------------------------------------------------------------------------
    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. 
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \10\ National Association of Manufacturers, Catching Up: Greater 
Focus Needed to Achieve a More Competitive Infrastructure, September 
2014. 
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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/>
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \12\ Illinois Section ASCE, 2014 Report Card for Illinois 
Infrastructure, April 2014. 
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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 
---------------------------------------------------------------------------
        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]