[Senate Hearing 115-65]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 115-65

                         KEEPING GOODS MOVING:
                    CONTINUING TO ENHANCE MULTIMODAL
                   FREIGHT POLICY AND INFRASTRUCTURE

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

                                  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 FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 4, 2017

                               __________

    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 FIFTEENTH CONGRESS

                             FIRST SESSION

                   JOHN THUNE, South Dakota, Chairman
ROGER F. WICKER, Mississippi         BILL NELSON, Florida, Ranking
ROY BLUNT, Missouri                  MARIA CANTWELL, Washington
TED CRUZ, Texas                      AMY KLOBUCHAR, Minnesota
DEB FISCHER, Nebraska                RICHARD BLUMENTHAL, Connecticut
JERRY MORAN, Kansas                  BRIAN SCHATZ, Hawaii
DAN SULLIVAN, Alaska                 EDWARD MARKEY, Massachusetts
DEAN HELLER, Nevada                  CORY BOOKER, New Jersey
JAMES INHOFE, Oklahoma               TOM UDALL, New Mexico
MIKE LEE, Utah                       GARY PETERS, Michigan
RON JOHNSON, Wisconsin               TAMMY BALDWIN, Wisconsin
SHELLEY MOORE CAPITO, West Virginia  TAMMY DUCKWORTH, Illinois
CORY GARDNER, Colorado               MAGGIE HASSAN, New Hampshire
TODD YOUNG, Indiana                  CATHERINE CORTEZ MASTO, Nevada
                       Nick Rossi, Staff Director
                 Adrian Arnakis, Deputy Staff Director
                    Jason Van Beek, General Counsel
                 Kim Lipsky, Democratic Staff Director
              Chris Day, Democratic Deputy Staff Director
                      Renae Black, Senior Counsel
                                 ------                                

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

DEB FISCHER, Nebraska, Chairman      CORY BOOKER, New Jersey, Ranking
ROGER F. WICKER, Mississippi         MARIA CANTWELL, Washington
ROY BLUNT, Missouri                  AMY KLOBUCHAR, Minnesota
DEAN HELLER, Nevada                  RICHARD BLUMENTHAL, Connecticut
JAMES INHOFE, Oklahoma               TOM UDALL, New Mexico
RON JOHNSON, Wisconsin               TAMMY BALDWIN, Wisconsin
SHELLEY MOORE CAPITO, West Virginia  TAMMY DUCKWORTH, Illinois
CORY GARDNER, Colorado               MAGGIE HASSAN, New Hampshire
TODD YOUNG, Indiana
                            
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on April 4, 2017....................................     1
Statement of Senator Fischer.....................................     1
Statement of Senator Booker......................................     3
    Prepared statement...........................................     3
Statement of Senator Hassan......................................    43
Statement of Senator Wicker......................................    45
Statement of Senator Inhofe......................................    47
Statement of Senator Duckworth...................................    49
Statement of Senator Udall.......................................    51
Statement of Senator Blunt.......................................    53
Statement of Senator Blumenthal..................................    55
Statement of Senator Cantwell....................................    59

                               Witnesses

Derek J. Leathers, President and Chief Executive Officer, Werner 
  Enterprises....................................................     4
    Prepared statement...........................................     6
Lance M. Fritz, Chairman, President, and Chief Executive Officer, 
  Union Pacific Corporation......................................    15
    Prepared statement...........................................    16
Michael L. Ducker, President and Chief Executive Officer, FedEx 
  Freight Corporation............................................    30
    Prepared statement...........................................    32
James Pelliccio, President and Chief Executive Officer, Port 
  Newark Container Terminal; President, Atlantic Division, Ports 
  America; and Member,Coalition for America's Gateways and Trade 
  Corridors......................................................    35
    Prepared statement...........................................    38

                                Appendix

Response to written questions submitted to Derek J. Leathers by:
    Hon. Amy Klobuchar...........................................    63
    Hon. Richard Blumenthal......................................    64
Response to written question submitted to Michael L. Ducker by:
    Hon. Todd Young..............................................    65
    Hon. Amy Klobuchar...........................................    66

 
                         KEEPING GOODS MOVING:
   CONTINUING TO ENHANCE MULTIMODAL FREIGHT POLICY AND INFRASTRUCTURE

                              ----------                              


                         TUESDAY, APRIL 4, 2017

                               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 2:30 p.m. in 
room SR-253, Russell Senate Office Building, Hon. Deb Fischer, 
Chairman of the Subcommittee, presiding.
    Present: Senators Fischer [presiding], Booker, Wicker, 
Cantwell, Blunt, Klobuchar, Blumenthal, Udall, Inhofe, 
Duckworth, Capito, Hassan, Young, and Gardner.

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

    The Chairman. Good afternoon. The hearing will come to 
order. I thank you all for being here today for our third 
hearing of the 115th Congress. Today's hearing is titled, 
``Keeping Goods Moving: Continuing to Enhance Multimodal 
Freight Policy and Infrastructure.''
    I am pleased to bring together a panel of leaders who work 
each and every day to strengthen America's transportation 
system. I am particularly proud that we have representation 
from two of our Nation's largest transportation companies: 
Werner trucking and Union Pacific railroad. Both happen to be 
headquartered in Omaha, Nebraska.
    Today's topic is freight policy. This is an issue that's 
important to every state, including urban and rural 
communities, and advances a wide array of transportation 
projects across the country.
    Enhancing the flow of commercial freight across our country 
grows our economy, reduces costs for families and businesses, 
and, most importantly, increases safety for all Americans.
    Everyone here today knows that the White House and Congress 
have been discussing a major infrastructure package. In fact, 
recent news reports suggest the Administration is considering a 
legislative strategy to pair tax reform and infrastructure 
together. Combining these objectives makes sense, and I support 
using a portion of tax reform revenues to fund our 
infrastructure investments.
    Infrastructure is a core duty of the Federal Government. 
These are investments, and investments in infrastructure 
strengthen our economy, public safety, and national security. 
But as we think about an infrastructure package, we should 
avoid falling into the trap of a stimulus style spending just 
for its own sake. States know best their own transportation 
needs, not the Federal Government. And there is no need to 
create a new program that works for various transportation 
projects in urban and rural states. We already have one.
    In 2015, Congress passed the Fixing America's Surface 
Transportation, or the FAST Act, and President Obama signed it 
into law. The FAST Act was the first long-term highway bill in 
more than a decade. In it, Congress established a formula 
freight program that provides every state with annual, 
guaranteed funding.
    Because of the freight program, states will have greater 
flexibility to work with key stakeholders and local officials 
to develop long-term strategic investments in transportation. 
The program funnels transportation funds to states, and allows 
them to decide on their terms how to use it. The only 
stipulation: projects must somehow be connected to enhancing 
freight transportation movements. Railway-highway grade 
separations, truck-only lanes, and highway or bridge projects 
are examples of possible uses.
    By dedicating funding for rural and urban freight 
corridors, the program enhances the flow of commercial traffic 
and increases safety on our Nation's roads for all travelers.
    The true beauty of this program is it offers states the 
opportunity to make critical investments that best meet their 
specific geographic and infrastructure needs. For example, 
Nebraska can elect to invest in a rail-grade crossing, or a 
truck parking lot along a rural road. At the same time, 
California could choose to invest in on-dock rail projects at 
our Nation's largest port complex, located just outside of Los 
Angeles. The national freight program works for all states 
without leaving any behind.
    The national freight policy also has robust bipartisan 
support. For example, I know my colleague and friend, Senator 
Cantwell, has been a strong proponent and advocate of the 
freight program.
    As Congress and the Trump administration work to address 
our Nation's infrastructure needs with revenue from tax reform, 
expanding the national freight program should be an idea that 
is on the table. I believe it would be a wise investment in 
America's future.
    Along with investing in infrastructure, Congress must keep 
in mind how unintended regulatory consequences can impact our 
freight network, whether it's a delay to a critical highway 
project or a new requirement that negatively alters the supply 
chain, burdensome regulations can hinder progress.
    States need certainty, they need predictability, when 
initiating key transportation projects. Transportation 
stakeholders in the private sector are constantly innovating to 
enhance efficiencies along the supply chain using real-time 
data and novel technologies.
    There's a real opportunity to work together and facilitate 
greater innovation across our nation's transportation network. 
I look forward to today's discussion and how we can bolster our 
Nation's freight infrastructure.
    And I now turn to my colleague and Ranking Member, Senator 
Cory Booker, for his opening remarks.

                STATEMENT OF HON. CORY BOOKER, 
                  U.S. SENATOR FROM NEW JERSEY

    Senator Booker. Madam Chairwoman, even though my colleagues 
relish in hearing me speak, especially Senator Inhofe, who 
likes my comments, I'm going to actually just submit my 
comments for the record.
    I just do want to say, in the hallway, I met Larry 
Liberatore. I just want to point him out. He is one of the many 
residents of our country that come here because of grief that 
drives them, and I can see the grief still in his eyes as they 
weld up, him telling me about his son. It has been 20 years 
since Nick's death on our highways. He was actually going to 
New Jersey, going to Great Adventure, from where he lived in 
Maryland.
    Public safety is something I'm going to still continue at 
just about every hearing to talk about--40,000 motor vehicle 
deaths last year alone. It's a number that's actually 
increasing. We are a great nation. We can do better than this, 
and we cannot accept this level of carnage. So I just want to 
thank Larry for coming here.
    I'll submit the rest of my testimony to the record. And I 
can pass this down to Senator Inhofe if you would like to read 
it now.
    Senator Inhofe. Sure.
    Senator Booker. OK.
    [Laughter.]
    [The prepared statement of Senator Booker follows:]

  Prepared Statement of Hon. Cory Booker, U.S. Senator from New Jersey
    Thank you, Chairman Fischer for holding this hearing. Thank you to 
the witnesses for being here today.
    Our country's economic competitiveness depends on the movement of 
freight. Ports, rails, and roads all work together to move goods in and 
out of the country. This is critical in New Jersey, which is home to 
the Port of New York and New Jersey--the largest port on the East Coast 
of North America, and the third-largest in our Nation. And home to Port 
Newark Container Terminal, which is critical to moving goods through 
our region.
    In 2014, the Port of New York-New Jersey handled nearly 5.8 million 
twenty foot equivalent containers, which carried over 42 million tons 
of bulk cargo. The port supports more than 300,000 jobs representing 
more than $21 billion in annual wages and $7 billion in tax revenues. 
It's a critical part of our economy.
    The same is true for the railroads, trucks, and waterways that move 
the goods from the port to their final destinations. Each of these 
transportation systems is critical to our Nation's economy. That's why 
I have been a strong supporter of investing in our freight system.
    But we have sadly not done enough. While our freight network is the 
true economic engine of our country, the Federal Government is woefully 
underinvesting in our infrastructure. The American Society of Civil 
Engineers (ASCE) released their 2017 report card and again the United 
States received a grade of D+. Our infrastructure investments are at a 
22-year low. Europe spends 5 percent of its economy on infrastructure. 
China spends 9 percent while the United States spends less than 3 
percent. For the United States to get a B grade overall, ASCE projects 
we need over four trillion dollars in investment over the next eight 
years.
    In 2014, the cost of Americans stuck in traffic alone was a 
staggering 160 billion dollars. On the other hand, every dollar 
invested in our national infrastructure, increases economic output by 
at least 2 dollars. We must drive investment toward key corridors that 
have a major impact on the national economy.
    FASTLANE and TIGER are critical parts of that effort. These grants 
allow ports to increase efficiency, help businesses move goods quicker, 
and reduce air pollution. It is critical that we increase funding for 
these popular programs that have received strong interest from our 
communities.
    Beyond investing in our infrastructure, it's also critical that we 
improve safety. Whether that's on our rails or roads, safety continues 
to be a serious problem. According to the National Safety Council, 
preliminary 2016 data estimates that as many as 40,000 people died in 
motor vehicle crashes last year. That marks a 6 percent increase over 
2015, and a 14 percent increase over 2014--the most dramatic two-year 
escalation since 1964. This trend is heading in the wrong direction. We 
must do more to prevent these tragic crashes from happening. These are 
not just statistics. Each crash is a devastating tragedy for a family.
    I want to recognize Larry Liberatore who is here today. This year 
marks the 20th anniversary of the tragic accident involving a tired 
truck driver that took his son Nick's life on his way to Great 
Adventure in New Jersey. Thank you Larry for your two decades of 
advocacy including your current work serving on the board of Parents 
Against Tired Truckers. I am concerned by any efforts to undermine 
safety and am hoping to find areas where we can work in a bipartisan 
manner to improve safety.
    The same is true on our railways, where we have seen accidents that 
have caused serious problems. Just yesterday, a New Jersey Transit 
train derailed in Penn Station. Luckily, according to reports, the 
derailment was relatively minor, but several individuals were injured 
and thousands more were severely delayed. This is the second derailment 
at New York Penn station in the last two weeks. This is an important 
reminder that we must invest in safety as well.
    I look forward to hearing from the panelists about how we can work 
together to improve our Nation's economy and increase public safety.
    Thank you.

    The Chairman. Thank you, Senator Booker. Maybe light 
reading for tonight, Senator Inhofe.
    With that, I would like to start with our panel discussion. 
And our first witness today is Derek Leathers, who is President 
and Chief Executive Officer of Werner Enterprises. Werner is 
one of the largest truckload motor carriers in the United 
States, and as I said, it is headquartered in Omaha.
    Mr. Leathers has 25 years of experience in the 
transportation and logistics industry, having started his 
career as a dispatcher. His transportation experience has 
included roles covering multiple facets of the industry, 
including operations, safety, driver training, and intermodal.
    Welcome, Mr. Leathers.

           STATEMENT OF DEREK J. LEATHERS, PRESIDENT 
        AND CHIEF EXECUTIVE OFFICER, WERNER ENTERPRISES

    Mr. Leathers. Thank you. Chairman Fischer, Ranking Member 
Booker, and members of the Subcommittee, thank you for the 
opportunity to testify on enhancing multimodal freight policy 
and infrastructure.
    My name is Derek Leathers. I am President and Chief 
Executive Officer of Werner Enterprises, proudly headquartered 
in Omaha, Nebraska. Werner is among the five largest truckload 
carriers in the United States, with 7,200 and 12,000 combined 
professional drivers and associates worldwide.
    I commend the Congress for recognizing the importance of 
the safe and efficient movement of freight in our nation's 
economy. Congress and the Administration can utilize Werner as 
a resource on helping improve the freight system. It is 
essential the Federal Government supports a safe, uncongested, 
and reliable highway system as a fundamental element of an 
integrated global supply chain. Our nation's vast network is 
critical to this effort, especially roads.
    Trucks move more than $10 trillion worth of freight each 
year, comprising more than 70 percent of the U.S. freight 
tonnage. Trucks and our professional drivers are tasked with 
the increasingly more complicated task of being the connectors 
between rails, ports, cities, and rural communities each day. 
Truck tonnage is projected to increase 28 percent from 2015 to 
2027.
    To meet freight capacity challenges, it will take combined 
forces of multimodal coordination, strategic highway 
investments, and regulatory environment that allows for 
improved efficiencies to be successful. Congress should 
concentrate investment in major freight bottlenecks and 
congestion that hamper the efficient movement of both freight 
and passenger travel.
    The additional freight demand combined with increased 
congestion, insufficient parking, and a patchwork of state 
regulations only add needless stress to our driver workforce 
and distract from the focus on safely and efficiently 
delivering our Nation's goods.
    It is essential we provide safe and structurally sound 
roads and bridges for our professional drivers, and the 
motoring public. Congress should explore all viable options to 
invest significant resources into our highway system. And we 
support a variety of revenue sources to avoid overreliance on 
just one single option.
    We commend Senator Fischer's leadership in introducing the 
Build USA Infrastructure Act. The trucking industry supports 
higher user fees to provide better roads if the revenues are 
dedicated to projects and programs that benefit goods movement 
on the Nation's highways. Increasing and indexing the Federal 
fuel tax is the most efficient revenue source, with no 
additional collection costs. It has the largest transport 
segment of the freight market. We believe surface 
transportation should receive a strong portion of this 
investment.
    In order to move the Nation's freight, we also need to 
continue to invest in a strong workforce. Drivers keep America 
moving and our company moving forward every day, yet we and 
other trucking companies continue to struggle to find 
qualified, professional drivers, as the industry faces a 
significant driver shortage. These men and women are the 
backbone of our economy, delivering our Nation's freight each 
and every day.
    Over the next 10 years, the trucking industry will need 
890,000 more drivers to keep pace with expected growth. Simply 
put, the trucking industry is hiring. An aging workforce and an 
inability to recruit younger drivers provides additional 
challenges to the industry.
    The industry and Congress need to collaborate to find 
workable solutions that connect individuals to jobs while 
improving safety, matching the growing freight demand, and 
addressing the significant shortage of drivers today.
    At Werner, we invest over $50 million annually on direct 
safety, technology, and training. Werner believes training, 
technology, and safety are vital to empowering drivers with the 
tools and culture to drive safely.
    We appreciate the Subcommittee's work in moving the truck 
safety agenda forward and the provisions included in the FAST 
Act. Addressing deficiencies and reforming the regulatory 
development process of FMCSA improves coordination between 
government and business. We appreciate Congress's efforts to 
prioritize critical rulemakings like hair testing guidelines, 
entry level driver training requirements, and electronic 
logging devices.
    In the last 20 years, Werner drivers have driven over 17 
billion miles using electronic logging devices in our trucks. 
This is done to make our roads safer for the motoring public. 
As new technologies are introduced, the trucking industry 
should have an active role in advancing market-driven automated 
vehicle technologies that improve the areas of safety, driver 
wellness, productivity, efficiency, and the environment.
    We encourage the Congress to engage the industry as the 
development of policy and regulatory framework that will govern 
these new technologies. Collectively, Werner drivers travel 
over 3 million miles a day. In order to guarantee that we 
deliver on the demands of the American economy, we must ensure 
a fair and uniform application of interstate commerce rules. We 
continue to see an increase in patchwork regulations, hampering 
our ability to efficiently and reliably move goods across our 
country while increasingly burdening the life of the driver.
    Thank you again for the opportunity to share the industry's 
perspective. It is essential we continue to jointly address the 
challenges of the infrastructure investment, the driver 
shortage, and the development of safety technologies to enhance 
freight movement and the lives of our professional drivers.
    We look forward to working with the Subcommittee to provide 
the necessary tools to modernize America's transportation 
network.
    Thank you.
    [The prepared statement of Mr. Leathers follows:]

          Prepared Statement of Derek J. Leathers, President 
            and Chief Executive Officer, Werner Enterprises
Introduction
    Chairman Fischer, Ranking Member Booker, and members of the 
Subcommittee, thank you for the opportunity to testify today about 
continuing to enhance multimodal freight policy and infrastructure. My 
name is Derek J. Leathers and I am the President and Chief Executive 
Officer of Werner Enterprises, headquartered in Omaha, Nebraska.
    Since 1956, Werner has grown from a one-truck operation to be among 
the five largest truckload carriers in the United States with more than 
7,200 trucks and 12,000 combined professional drivers and associates 
worldwide. Werner's transportation and logistics portfolio includes 
freight management, truck brokerage, freight forwarding, intermodal, 
and international services throughout the world.
    I commend the Subcommittee for recognizing the importance freight 
plays in our Nation's economy. A safe, efficient system of highways 
connecting America's cities, towns, and rural areas is essential to our 
country's economic well-being, national security, and overall quality 
of life. It is essential that the Federal Government craft policy that 
promotes the safe, clean and efficient movement of goods, and Werner 
stands ready to act as a resource to our congressional and agency 
partners on this front.
Background
    A safe, uncongested, and reliable highway system is the key to a 
fluid global supply chain, which is a fundamental element of our 
growing and prosperous economy. Each day thousands of trailers and 
containers, carrying everything from food, fuel, raw materials, and 
finished products flow through our ports, across our borders, and on 
our highways, railroads, air, and waterway networks. The highway system 
connects these modes to manufacturing centers, assembly plants, 
warehouses, retail outlets, and homes. Our nation's vast freight 
network is critical to this effort, especially roads. Trucks move $10.1 
trillion worth of freight each year, which makes up more than 70 
percent of U.S. freight tonnage. Combined, this freight represents 56 
percent of the U.S. economy,\1\ and 81 percent of domestic freight 
revenue.\2\
---------------------------------------------------------------------------
    \1\ U.S. Census Bureau, 2012 Commodity Flow Survey, Dec. 9, 2014
    \2\ Global Insight, U.S. Freight Transportation Forecast to . . . 
2027, 2016
---------------------------------------------------------------------------
    This dynamic system of a complex goods movement network is made 
possible by the work of millions of Americans, utilizing trucks, 
trains, ships, barges, planes, and logistics operations. In fact, we 
all owe a debt of gratitude to the men and women who are professional 
truck drivers, who do a fantastic job, who do that job conscientiously 
and safely, and who are all too often taken for granted. Simply put, 
the work of the trucking industry and other aspects of the freight 
industry, make our way of life possible by providing consumer choices 
for a broad array of products in stores and online. Trucking employs 
millions of Americans, plus creates new and expanding markets for U.S. 
businesses. In order to ensure we deliver on the demands of the 
American economy, we must ensure a fair and uniform application of 
interstate commerce rules. In recent years, we have seen an increase in 
patchwork regulations hampering our ability to efficiently and reliably 
move goods across our country. We encourage Congress to take steps to 
eliminate this patchwork of regulations and preserve the efficient 
system on which the United States was built.
    Congress plays an important role in protecting interstate commerce, 
and most recently, supported the industry by including critical reforms 
and safety provisions in the Fixing America's Surface Transportation 
(FAST) Act. Policymakers can continue to do this by supporting 
nationally uniform Federal rules and regulations that promote the safe, 
efficient, and competitive movement of freight throughout the country 
rather than a state-by-state patchwork that undermines these goals. As 
Congress looks to new opportunities to support the trucking industry, I 
offer the following proposals for the Subcommittee's consideration:

  1.  Invest in our Nation's highway infrastructure.

  2.  Develop the trucking workforce by addressing the driver shortage.

  3.  Support efforts to improve highway safety.

  4.  Support efforts to advance automated vehicle technologies.

  5.  Support tax reform.

  6.  Support the movement of multimodal freight.

  7.  Support trade.
Need For Increased Infrastructure Investment
    Our highways, bridges, and roads are the lifeblood of the trucking 
industry. Unfortunately, the current infrastructure system increasingly 
feels the strain of long-term underinvestment at all levels of 
government. Nearly one-third of major urban roadways are in substandard 
condition, and the average motorist in the United States is losing $523 
annually--$112 billion nationally--in additional vehicle operating 
costs as a result of driving on roads that are in need of repair.\3\
---------------------------------------------------------------------------
    \3\ TRIP, Bumpy Roads Ahead: America's Roughest Rides and 
Strategies to make our Roads Smoother, Nov. 2016.
---------------------------------------------------------------------------
    As our highway system ages, many bridges, including those on the 
Interstate System, are beginning to deteriorate to the point where they 
need major repairs or replacement. For example, nearly 7,000 bridges in 
New Jersey--35 percent of the total--are structurally deficient or 
functionally obsolete. Approximately 4,000 state and local bridges in 
Mississippi are in need of repair or replacement. Without a significant 
increase in Federal funding, states will find it very difficult to 
undertake these projects. This is particularly concerning for the 
trucking industry. Sixty-seven thousand bridges are closed or 
posted.\4\ Poor bridge conditions force trucks to seek alternative 
routes because they cannot cross a bridge on the most direct route. 
This increases the cost of freight transportation, which impacts 
businesses and consumers. Re-routing traffic creates additional safety 
concerns due to increased mileage and additional congestion as traffic 
is concentrated on fewer routes. Moreover, the additional mileage and 
congestion unnecessarily add frustration for our country's professional 
truck drivers, who already sacrifice so much to safely keep America 
moving.
---------------------------------------------------------------------------
    \4\ FHWA National Bridge Inventory.
---------------------------------------------------------------------------
    Traffic congestion is further increased by underinvestment and 
creates additional costs to the country. Congestion on the Interstate 
System alone cost the trucking industry nearly $50 billion in 2014 and 
wasted more than 728 million hours.\5\ This was equivalent to 265,000 
drivers sitting idle for a full working year. It is important to note 
that 88 percent of National Highway System congestion occurred on only 
18 percent of the network. Therefore, we should focus our attention on 
addressing the bottlenecks.
---------------------------------------------------------------------------
    \5\ ATRI. Cost of Congestion to the Trucking Industry, April 2016.
---------------------------------------------------------------------------
    Unfortunately, very little is being done to address these problems. 
The latest report card from the American Society of Civil Engineers 
(ASCE) found that the United States is projected to spend $941 billion 
on surface transportation infrastructure over the next decade, which is 
less than half of what is needed to address maintenance and capacity 
investment requirements.\6\ ASCE estimates by 2025 this funding gap 
will result in gross domestic product losses of nearly $1.2 trillion, 
more than a million lost jobs and $2.2 trillion in lost business sales. 
While funding must continue to come from federal, state and local 
governments, approximately half of the capital investment in the 
highway system is provided by the federal-aid highway program. Without 
a significant infusion of additional Federal revenue, the safety and 
efficiency of our surface transportation system will continue to 
deteriorate.
---------------------------------------------------------------------------
    \6\ American Society of Civil Engineers, 2013 Report Card for 
America's Infrastructure, 2016.
---------------------------------------------------------------------------
    The Administration's renewed focus on improving the Nation's 
infrastructure systems presents an exciting opportunity to make an 
investment in our country's economic future, prevent thousands of 
needless accidents and injuries, and improve human health through a 
reduction in emissions. Congress should explore all viable options to 
significantly invest resources into our highway system. As the largest 
transport segment of the freight market, we believe surface 
transportation should receive a strong portion of this investment. 
Congress' first priority should be to ensure the solvency of the 
Highway Trust Fund (HTF), which is projected to have insufficient 
revenue to cover likely authorized spending levels beginning in Fiscal 
Year 2020.
Highway User Fees
    Federal investment in the highway system is essential, and while 
state and local governments, as well as the private sector, must assume 
a degree of fiscal responsibility for its upkeep, the Federal role is 
both indispensable and a responsibility that is delineated by the 
Constitution. We support Federal investment in highways through, 
primarily, user fees on the beneficiaries of the system. The sources of 
revenue should:

   Be efficient and inexpensive to pay and collect;

   Have a low evasion rate;

   Be tied directly to highway use; and

   Avoid creating impediments to interstate commerce.

    Werner believes fuel taxes meet all of these criteria and we 
support an increase in, and indexation of, the Federal fuel tax. The 
fuel tax is the most efficient revenue source, and increasing it will 
produce no additional collection costs and minimal evasion. Indexing 
can limit the negative revenue impacts of inflation and improved 
vehicle fuel efficiency.
    The trucking industry will consider support for any funding 
proposals that are likely to induce investment in highway 
infrastructure, and we support a broad mix of revenue sources in order 
to avoid over-reliance on a single option.
    Werner strongly opposes tolls on existing lanes of the Interstate 
System. Tolls cause diversion of traffic to alternative routes that 
were not built to handle the additional traffic, and this diversion 
poses a threat to safety. Compared with fuel taxes and other user fees 
in common use, a significant share of toll revenue is diverted from 
infrastructure investment and is wasted on administrative costs. While 
just one to two percent of fuel tax revenue goes toward collection 
costs, for example, even on toll roads using the most advanced systems, 
approximately 12 percent of revenue is spent on collection, enforcement 
and capital expenses. This is highly inefficient and a waste of 
taxpayer money. We urge Congress to oppose and eliminate provisions 
that provide tolling authority for existing Interstate Highways, 
including the existing pilot programs, and to refrain from authorizing 
additional tolling flexibility.
    Finally, we have concerns about mileage-based user fees, which 
would be inefficient and difficult to administer. While we recognize 
that in the future a replacement for the fuel tax as the primary source 
of revenue for highway funding will be necessary due to changes in 
vehicle technology that future is likely at least two decades away. 
Currently available options for implementing vehicle miles traveled 
(VMT) fees are limited. These options have extremely high collection 
costs and could experience a very high level of evasion.
    The fuel tax is collected from a few hundred fuel supplier 
taxpayers, while the VMT fee would have to be collected from tens of 
millions of individual taxpayers. In 2015, there were nearly 264 
million registered vehicles in the United States. Therefore, a 
bureaucracy would have to be established to deal with the same number 
of individual accounts. Compare this with the Internal Revenue Service 
(IRS), which processes approximately 150 million individual income tax 
returns each year. The physical and bureaucratic infrastructure 
necessary to effectively collect a VMT fee would have to be massive and 
the unproductive collection and administrative cost to both government 
and taxpayer would be enormous. Furthermore, because a VMT fee would 
have to rely on technology for monitoring and collection, significant 
enforcement challenges resulting from system tampering and equipment 
malfunction should be expected.\7\ The challenges facing fuel tax 
revenue over the next 20 years can be addressed by indexing the rate. 
Substituting an untested, highly inefficient revenue collection 
mechanism for an efficient revenue mechanism that is already in place 
would be illogical and irresponsible, and would receive significant 
resistance from the trucking industry and other highway users.
---------------------------------------------------------------------------
    \7\ Texas Department of Transportation. Vehicle Mileage Fee Primer, 
p. 16. Dec. 2009.
---------------------------------------------------------------------------
Strategic Highway Investment
    Federal investment in infrastructure for the Interstate System, the 
larger National Highway System (NHS), and the National Highway Freight 
Network must be the top priorities. The NHS contains only 5 percent of 
the Nation's total route mileage, but carries 55 percent of all vehicle 
miles traveled and 93 percent of truck VMT. Federal resources should be 
focused primarily on these systems. In addition, Congress should 
concentrate investment in major freight bottlenecks. Significant steps 
were taken in the FAST Act toward ensuring that federal-aid dollars are 
invested wisely through the creation of the National Highway Freight 
Program and Nationally Significant Freight and Highway Projects 
program. In addition, Congress in recent years established requirements 
for national and state freight plans and performance measurement. These 
actions will significantly improve the ability of transportation 
agencies to better focus investment.
    A future authorization bill, or infrastructure investment 
legislation such as the initiative supported by the Administration, 
should provide the sufficient, stable, long-term resources needed to 
fix the bottleneck projects that hamper the efficient movement of both 
freight and passenger travel. For example, the American Transportation 
Research Institute identified the top 100 freight bottlenecks in the 
country.\8\ These bottlenecks, which are located in 28 states and the 
District of Columbia, are an outsized source of freight transportation 
inefficiencies and should be a Federal priority. For example, the 
number one bottleneck is the I-85 at I-285 interchange in Atlanta. 
Fixing that bottleneck, and addressing other congestion problems on 
those two Interstates within the region could save nearly $42 million 
each year in congestion costs and prevent over 600,000 hours of delay 
annually. However, congestion is not limited to large metropolitan 
areas. Congestion is added expense even in a mostly rural state like my 
own state of Nebraska, where the trucking industry absorbed over $200 
million in congestion costs in 2014. New Jersey has the second worst 
freight bottleneck in the country--I-95 at SR 4 in Fort Lee. Congestion 
in the Garden State cost the trucking industry nearly $3 billion in 
2014. The bottom line is that the top 25 bottlenecks alone cause the 
trucking industry 5.6 million hours of delay annually at a cost of 
$382.5 million per year. Therefore, out of the $9.5 billion in annual 
congestion costs to the trucking industry, 25 projects out of the 
thousands that are funded each year nationwide could reduce highway 
freight congestion costs by four percent.
---------------------------------------------------------------------------
    \8\ ATRI. The Nation's Top 100 Bottlenecks 2017.
---------------------------------------------------------------------------
Truck Parking
    Research and feedback from carriers and drivers suggests there is a 
significant shortage of available parking for truck drivers in certain 
parts of the country. Given the projected growth in demand for trucking 
services, this problem will likely worsen. Investing in truck parking 
results in significant safety benefits. Insufficient truck parking can 
add needless stress to the daily lives of our driver workforce, and can 
take away from their focus on safely and efficiently delivering our 
Nation's goods. Funding for truck parking is available to states under 
the current federal-aid highway program, but truck parking has not been 
a priority given a shortage of funds for essential highway projects. 
Therefore, we support efforts to address the truck parking shortage, 
including the creation of a new discretionary grant program with 
dedicated funding from the federal-aid highway program for truck 
parking capital projects.
Support Efforts to End the Driver Shortage
    Werner and other motor carriers continue to struggle to find 
qualified, professional drivers. An ATA study found that 90 percent of 
for-hire truckload carriers reported difficulty in recruiting drivers 
capable of meeting Department of Transportation (DOT) driver 
qualification requirements. ATA estimates that in 2015 the industry 
experienced a shortage of 48,000 qualified drivers, and this figure 
could balloon to more than 175,000 by 2024.\9\ Over the next 10 years 
Werner anticipates it will need to hire well over 100,000 professional 
drivers to meet demand and grow the company. Furthermore, the trucking 
industry will need to hire 890,000 new drivers over the next decade.
---------------------------------------------------------------------------
    \9\ American Trucking Associations, Truck Driver Shortage Analysis 
2015.
---------------------------------------------------------------------------
    Two factors stand out as primary contributors to the shortage: 
driver demographics and the Federal requirement that a Commercial Motor 
Vehicle (CMV) driver must be at least 21 years old to drive a truck 
across state lines. The median age of an over-the-road truck driver is 
49 and at Werner, our driver median age is 42. Unfortunately, 
recruiting younger drivers is challenging. Often candidates have 
already settled on a career when they reach the minimum age to drive a 
truck across state lines. Without a steady pool of new drivers, motor 
carriers' growth will be restricted. The cost of employing a driver can 
increase as well, which impacts freight pricing.
    To ensure a stable flow of highly trained, professional drivers in 
a time when the entire industry is facing a significant driver 
shortage, Werner acquired two truck driving training schools, the 
American Institute of Trucking in 2013 and Roadmaster Driver Schools in 
2014. These investments help further Werner's long-standing commitment 
to securing the success and safety of the next generation of 
professional drivers. Werner and the schools have a vested interest in 
putting safe, professional drivers on the road. We believe 
incorporating the most modern strategies, techniques, and technologies 
through specialized training for commercial truck drivers is needed to 
improve overall safety on America's highways. It is equally important 
to have a legislative and regulatory environment that allows workforce 
development and job placement opportunities.
    Werner has made additional efforts to invest and grow the workforce 
by partnering with the Department of Labor and the Department of 
Veterans Affairs in 2006 to start the industry's first Professional 
Truck Driver Apprenticeship program to further invest in the 
development and training of professional drivers. Civilian and veteran 
drivers under 24 months of experience can enroll into our program. 
Earlier this year, Werner was proud to hire its 25,000th military 
veteran driver. Our veteran hiring has increased significantly over the 
past few years, and veterans now comprise about 20 percent of Werner's 
driver workforce.
    There are numerous ways to help alleviate the driver shortage, 
including: (1) decrease significant CDL skills testing delays and wait 
times; (2) provide additional Federal funds for driver training 
programs and removing barriers to students seeking Federal aid to 
attend truck driving schools; (3) direct the Department of Labor to 
establish truck driving as a national in-demand occupation, which would 
free up resources devoted to filling vacant truck driving jobs; (4) 
implement the Entry-Level Driver Training rule; and (5) require DOT to 
conduct a comprehensive study of efforts to streamline the licensing 
requirements between DOT and the Department of Defense.
    The FAST Act took a step in the right direction by encouraging DOT 
to conduct a pilot program to study the safety of allowing younger 
drivers to operate in interstate commerce. However, this provision 
restricted participation in the pilot to military personnel under the 
age of 21 whose military occupation classification is driving a truck. 
This pilot should be expanded to allow civilian drivers under the age 
of 21 to participate, which will provide a significantly improved 
understanding of the benefits of allowing drivers between the ages of 
18 to 21 to drive in interstate commerce. In addition, Federal law 
should be changed to establish graduated Commercial Driver's License 
standards to allow commercial motor vehicle drivers ages 18 to 20 to 
engage in both intrastate and interstate commerce in a safe, controlled 
manner.
Support Efforts to Improve Highway Safety
    Safety is the trucking industry's top priority. Werner along with 
the approximately five hundred thousand carriers, vehicle 
manufacturers, and other suppliers who comprise the industry invest 
nearly $10 billion in safety initiatives annually. These investments in 
safety have yielded impressive dividends for the industry and our 
company. At Werner alone we spend approximately $53 million annually on 
safety, some of it to meet a myriad of regulatory requirements, but 
much of it on voluntary, progressive safety initiatives. This includes 
driver training, compliance initiatives (e.g., hair testing), and the 
adoption of emerging accident prevention technology such as forward 
collision warning and lane departure devices.
    Over the past decade, the number of truck-related fatalities has 
decreased by 22 percent despite steady growth in the overall number of 
trucks and truck-miles traveled. Furthermore, we have improved the 
fatality- and injury crash-rates over this period. While the number of 
industry crashes and the crash rate increased in the most recent 
reporting period (2014-2015) it is too early to determine whether this 
indicates a trend.
    Much of this improvement is due to progressive safety initiatives 
supported by Werner and our fellow industry members. It is the motor 
carrier's responsibility to put the professional driver in the best 
position to be as safe as possible. Technology, training, and placing 
safety as a company core value are vital to providing the driver with 
the tools and culture to drive safely.
    We appreciate the Subcommittee's work in moving the truck safety 
agenda forward in provisions included in the FAST Act. Some of the 
critical improvements included:

   Addressing deficiencies with the Federal Motor Carrier 
        Safety Administration's (FMCSA) Compliance, Safety, 
        Accountability (CSA) Program.

   Reforming FMCSA's regulatory development process to ensure 
        new regulations are based on sound science.

   Prioritizing the establishment of critical hair testing 
        standards.

   A pilot program to test the safety of allowing military 
        drivers between the ages of 18 and 21 to operate in interstate 
        commerce.

    Additionally, we are grateful that the FAST Act instructed FMCSA to 
expedite completion of several important rulemakings required under 
MAP-21, including:

   Creation of a national drug and alcohol clearinghouse.

   Mandatory adoption and use of electronic logging devices 
        (ELDs).

   Establishing entry-level driver training requirements.

    Furthermore, following passage of the FAST Act, Congress adopted a 
requirement that FMCSA demonstrate the effectiveness of the existing 
hours-of-service (HOS) restart rule or revert to the previous 
requirements. FMCSA recently found that it could not demonstrate the 
safety of the restart provision and reinstated the previous restart 
rule, eliminating concerns about putting a significant number of trucks 
on the road during peak congestion periods.
    Congress can build upon these successes by supporting 
implementation of the following:
Hair Testing
    As mentioned above, Congress mandated that hair testing be 
developed as an alternative to urinalysis for Federal drug testing 
requirements in the FAST Act. However, this mandate has not been 
completed. Federal law requires trucking companies to drug test new 
drivers and randomly test existing drivers using methods established by 
the Department of Health and Human Services' (HHS) Substance Abuse and 
Mental Health Services Administration (SAMHSA). Section 5402 of the 
FAST Act requires HHS ``to issue scientific and technical guidelines 
for hair testing as a method of detecting the use of controlled 
substances for purpose of section 31306 of Title 49, United States 
Code'' by December 4, 2016. Completion of this mandate will unlock 
tremendous safety benefits by providing employers a longer detection 
window, ease of collection, and make it more difficult for testers to 
adulterate than urinalysis.
    SAMHSA has long expressed an interest in recognizing hair testing 
as a federally-accepted drug testing method, but the lack of action is 
having real impacts on the industry. Werner is using the urinalysis 
test to meet the Federal requirements while also paying the additional 
cost to conduct hair testing. In 2016, hair testing identified 664 
prospective Werner driver hires that tested positive for a controlled 
substance. Only 48 of those same prospective drivers also tested 
positive for controlled substances on their urine drug screen. While we 
were able to prevent 616 controlled substance users from driving our 
trucks, the inability to share the results with other carriers leads to 
an undesirable situation where those disqualified drivers might gain 
employment elsewhere, while circumventing the return to work process.
    We are concerned that HHS failed to meet the statutory deadline, 
and we encourage the Subcommittee to take appropriate steps to ensure 
that the agency meets its statutory obligations. Doing so will pave the 
way for trucking companies to more fully utilize this pro-safety 
testing method and identify a greater number of safety-sensitive 
employees who violate Federal drug testing regulations.
Electronic Logging Devices (ELDs)
    Werner is particularly thankful for the Subcommittee's efforts on 
ELDs to manage compliance for HOS and encourage oversight of its 
implementation. Werner is the recognized industry leader in ELD systems 
and was the first carrier to utilize electronic logs. In 1996 Werner 
proactively developed and implemented ELD software using GPS technology 
installed in our trucks. In 1998 we received approval from FMCSA to 
utilize this proprietary system to electronically manage and monitor 
our drivers' HOS, in accordance with Federal regulations. ELD 
regulations are now going into effect for virtually all trucking 
companies in December of this year. Werner drivers have already driven 
over 17 billion miles in the last 20 years with our ELD technology to 
make our roads, highways, and interstates safer for the motoring 
public.
Safety Technologies
    Another area where Congress can support highway safety is 
incentivizing new vehicle safety technologies. Connected and automated 
vehicle technologies have the potential to dramatically impact nearly 
all aspects of the trucking industry. The potential of automation 
benefits to the trucking industry is significant. Research into the 
safety impacts of automated or assisted braking and steering will 
likely show significant improvements in mitigating crashes and 
injuries. As vehicles are able to communicate with one another and the 
surrounding infrastructure, safety is also expected to improve 
exponentially. We would like to look for opportunities to advance 
safety technologies through tax incentives or utilizing FMCSA's pilot 
program authority to review the safety performance of new technologies.
Support Efforts to Advance Automated Vehicle Technologies
    Werner believes the trucking industry should have an active role in 
advancing market driven automated vehicle technologies that improve 
safety and reduce environmental impacts. These technologies can bring 
benefits in the areas of safety, the environment, productivity, 
efficiency, and enhance driver health and wellness. While the 
widespread adoption of highly automated trucks is years away, 
development of the policy and regulatory framework that will govern 
this technology is already underway.
    A number of precursor systems like automatic emergency braking 
systems, automated manual transmissions, electronic stability control, 
lane departure warning and forward collision warning systems are 
working their way into the marketplace, both for commercial and 
passenger vehicles. Werner's new equipment in the fleet is Level 2 
driving automation, which integrates systems on the truck, including 
safety technologies. These technologies will provide real-world proof 
that not only can more comprehensive automated vehicle packages work, 
but they provide a return on the investment carriers make in the form 
of improved safety and efficiency. Vehicle connectivity to other 
vehicles and to infrastructure will enhance the benefits of automation, 
supplementing vehicle sensors with additional information about road 
conditions ahead and other vehicles outside sensor range.
    The DOT has taken the regulatory lead and issued the Federal 
Automated Vehicles Policy in September 2016. This Policy sets the 
framework for the safe and rapid deployment of automation technologies. 
However, the Policy was developed without the input of the trucking 
industry, including truck manufacturers. While DOT is expected to issue 
automated guidelines for trucks later this year, it is important for 
the trucking industry to continue to work with Congress and the 
appropriate regulatory agencies as policies are developed. One current 
issue at the forefront is preservation of spectrum for transportation. 
It is vitally important that the 5.9 GHz spectrum that has been 
reserved by the Federal Communications Commission exclusively for 
vehicle-to-vehicle and vehicle-to-infrastructure communications be 
preserved against encroachment from other uses such as Wi-Fi. If it is 
not, many of the important promises of automation will be lost.
Support Tax Reform
    The current tax structure inhibits many trucking companies from 
investing in their drivers, equipment, safety technologies, and 
improvements in productivity. Since the trucking industry is 
responsible for moving a considerable amount of domestic freight, those 
tax burdens are passed along to consumers nationwide. Any tax reform 
package should encourage trucking companies to invest in new, safer, 
environmentally friendly equipment, critical safety technologies, their 
drivers, and promotion of the safe and efficient movement of our 
Nation's goods. Werner supports comprehensive tax reform and urges 
Congress to consider key tax provisions by simplifying the Tax Code, 
reducing corporate income tax, protecting interstate carriers from a 
patchwork of discriminatory state taxation, and retaining safe harbor 
for independent-contractor relationships in trucking. These goals can 
be achieved through several policies, including:

   Lowering the Income Tax Rate on all Business Income: Many 
        small carriers are organized for tax purposes as pass-throughs 
        (that is, businesses whose profits are taxed directly to their 
        owners). Tax reform should not result in the income of such 
        businesses being taxed at a higher rate than that of 
        traditional corporations.

   Simplifying the Tax Code: The U.S. tax code is unacceptably 
        lengthy and complex. Therefore, simplifying the tax code should 
        be a key priority of any reform effort.

   Retaining Section 1031 of the Internal Revenue Code or 
        allowing immediate expensing of capital equipment (tractor and 
        trailer) purchases: Section 1031 allows businesses to replace 
        capital goods employed for business or investment with like-
        kind property without recognizing capital gains. This 
        arrangement is critical to the trucking industry because it 
        allows carriers to purchase newer and safer equipment and 
        invest in critical facility improvements. Any limitation or 
        repeal of this section would lead to slowing in U.S. economic 
        growth, a decline in job creation, and less competition in the 
        marketplace unless immediate expensing of capital equipment 
        purchases replaced Section 1031.

   Eliminate/Replace the Federal Excise Tax (FET) to Encourage 
        Investment in Safe and Clean Technologies: Werner has made 
        significant investments in new equipment (primarily trucks and 
        trailers) of nearly $1 billion in the last 2 years. Werner 
        prioritizes the deployment of cleaner and more fuel efficient 
        trucks to be in compliance with the Environmental Protection 
        Agency's Phase I and Phase II emissions standards. The tax code 
        should encourage trucking companies to invest in the newest 
        equipment with the most advanced safety technologies, best fuel 
        efficiency, and most up-to-date emissions systems. Eliminating 
        the FET and replacing it with a comparable increase in the 
        diesel fuel tax would encourage new truck and trailer sales, 
        while creating much-needed, well-paying jobs for truck 
        manufacturers, dealers, and suppliers.
Multimodal Integration
    Werner encourages cooperation across transportation modes. Rail, 
ocean, air, and trucking industries serve different markets, and 
although at times we are competitors, we work together to ensure 
efficient delivery of goods. The industry continues to head towards 
logistics integration as customers and consumers demand a more 
simplified, single-user experience. The industry is adapting by 
adjusting to a different supply chain mode and prioritizing 
efficiencies by pairing goods to the right mode.
    All modes are likely to experience increases in demand. Truck 
tonnage is projected to increase 28 percent from 2015 to 2027. To meet 
freight capacity challenges, multimodal coordination, strategic 
investment in the highways that carry significant truck volumes, and a 
regulatory environment that allows for improved efficiencies must be a 
priority. Intermodal rail service volumes and truck traffic will 
continue to be virtually imperceptible. If rail volumes grow at twice 
the rate of projections over the next decade, the trucking industry's 
market share would dip by only 1 percent. While the vast majority of 
truck freight does not move as part of an intermodal delivery, 
intermodal freight is an important and growing part of the supply 
chain. It is also where significant bottlenecks occur.
Intermodal Connectors
    The trucking industry encourages dedicated funding of last-mile 
intermodal connectors: those parts of the highway system that link 
ports, rail intermodal terminals, and airports with the National 
Highway System. Many of these links have been described as ``orphan 
roads'' because while they are critical segments of the freight 
transportation system, they are often overlooked by the state or local 
governments responsible for them because many of the benefits accrue 
far beyond their borders.
Intermodal Equipment Safety
    A barrier to the efficient movement of intermodal freight has to do 
with the condition and safety of chassis. Legislation enacted by 
Congress in 2005 established a statutory framework requiring intermodal 
chassis providers to ensure that their equipment (which is integral to 
the movement of millions of international freight containers 
transported in the intermodal sector each year) is in a safe 
``roadable'' condition before it is used for transport.
    Unfortunately, implementation of the law has been slow, and overall 
compliance with the program's key legal mandates has not yet reached a 
level where the chassis that are moving on the highway system can be 
considered to be systematically maintained and repaired, and are in a 
roadable condition, as the law requires. The lack of roadable equipment 
slows down the movement of intermodal freight when equipment is taken 
out of service or drivers are forced to find new roadable equipment 
when they fail a pre-trip inspection.
    Moreover, intermodal drivers are still being charged during 
roadside inspections with equipment violations on the chassis that we 
believe should instead be assigned to the equipment provider, who under 
law is now supposed to be the responsible party. As a result of these 
regulatory enforcement practices, intermodal motor carrier/driver CSA 
scores are negatively and unfairly inflated by chassis deficiencies. 
With rising scores, we are seeing drivers leave the intermodal 
transport side of the business in order to avoid having their scores 
elevated by chassis deficiencies. This is exacerbating the intermodal 
driver shortage problem.
    This failure to achieve the law's mandates is in large part due to 
FMCSA's decision to not require the driver's mandated pre-trip chassis 
inspection to be documented and thereafter to not aggressively audit 
equipment provider operations, nor fine or shut down operators who do 
not have effective systematic maintenance and repair programs in place. 
The only way to generate data on whether an equipment providing 
facility has an effective systematic maintenance and repair system, as 
required by law, is to document the roadable condition of chassis prior 
to interchange with drivers. That is, does the provider have a ``ready 
line'' of chassis available at its facility that meet the law's safety 
requirements before the equipment is interchanged with the trucker? 
Since that ``ready-roadable'' status is not routinely being identified 
and required, we believe the agency does not have the requisite 
equipment provider system performance records needed to perform the 
required Roadability audits to actually measure and evaluate program 
performance. This lack of measurable progress has gone on for far too 
long. We urge the Subcommittee to review the chassis Roadability 
program, and work with FMCSA to ensure that the statutory changes 
Congress put in place in 2005 are being implemented effectively.
Support Trade \10\
---------------------------------------------------------------------------
    \10\ All data from Bureau of Transportation Statistics North 
American Transborder Freight Data
---------------------------------------------------------------------------
    Werner supports free trade, including the North American Free Trade 
Agreement (NAFTA) and the DOT's cross-border trucking program. Trade 
and trucking are synonymous, and the increased movement of freight 
yields good paying jobs and growth in American companies. Since 1995, 
the United States has been in a trade bloc agreement with Mexico and 
Canada through NAFTA. Data shows that the U.S. trucking industry is a 
large beneficiary of NAFTA. Since 1995, the value of goods traveling 
via truck across both the northern and southern borders jumped 168 
percent and totaled nearly $712 billion in 2015. This increase in trade 
has created or supported tens of thousands of jobs in the United 
States. Total trade via truck has increased by 80 percent since the 
enactment of NAFTA. In 2015, truck transported exports to Canada, as 
measured by the value of the goods, was 56 percent of total truck 
transported trade with the country. U.S. truck transported exports to 
Mexico, as measured by the value of the goods, was 43 percent of total 
truck transported trade across the southern border.
    Furthermore, the value of goods traded with Canada transported by 
truck equaled $335 billion in 2015, 80 percent more than in 1995 when 
NAFTA was enacted. Today, trucks haul 70 percent of the value of goods 
moving across the Canadian border. Nearly 5.8 million truck trips were 
required to move these goods. In 2015, trucks moved $377 billion in 
merchandise across the Mexican border which equates to 337 percent more 
than in 1995. Today trucks haul 83 percent of the value of goods moving 
across the southern border. In 2015, it required 5.5 million truck 
movements across the U.S.-Mexican border to haul those goods. Any 
change in restricting trade between Mexico and Canada could be 
detrimental to the trucking industry. Furthermore, we will oppose any 
restrictions on the ability of Mexican carriers to cross the border and 
access U.S. highways, as agreed to by both parties under NAFTA, unless 
compelling and statistically significant evidence can be produced that 
demonstrates the current system presents a safety hazard to U.S. 
motorists.
Conclusion
    Thank you for the opportunity to testify today. Werner and the 
trucking industry look forward to working with this Subcommittee to 
provide the necessary tools to modernize America's transportation 
network. Furthermore, we encourage the Subcommittee to invest in and 
promote a strong Federal highway program, including the provision of 
significant additional resources to address the challenges of moving 
freight on a poorly maintained and unreliable highway system. We look 
forward to collaborating with you to find solutions to alleviate the 
driver shortage. Finally, we encourage Subcommittee members to work 
with Senate colleagues to promote tax and trade policies that support 
freight transportation efficiency and economic growth.

    The Chairman. Thank you, Mr. Leathers.
    Also from my home state is Lance Fritz, President and Chief 
Operating Officer of Union Pacific railroad. UP celebrated its 
150th anniversary in 2012. UP links 23 states in the western 
two-thirds of the country by rail, providing freight solutions 
and logistics expertise to the global supply chain. Mr. Fritz 
also serves as Chairman of the Board of Directors for the 
Association of American Railroads.
    Welcome.

             STATEMENT OF LANCE M. FRITZ, CHAIRMAN,

            PRESIDENT, AND CHIEF EXECUTIVE OFFICER,

                   UNION PACIFIC CORPORATION

    Mr. Fritz. Thank you. Good morning, or good afternoon, 
Chairwoman Fischer, Ranking Member Booker, and members of the 
Subcommittee. Thank you for the opportunity to testify today 
about freight programs and how to improve the performance of 
the transportation network.
    In just a few words, the best way to improve performance in 
the rail industry is to ensure we have policies that support 
investment, safety, service, and efficiency. These four things 
are foundational to one another. My written testimony goes into 
much more detail about how to achieve these goals, so in the 
limited time I have, I will be briefly touching on four key 
things that we believe will help us maintain and excel with the 
development of these core tenets.
    Fundamental to the rail industry's ability to perform is 
the ability to invest in our network. For us to do this, we 
need an economic regulatory policy that recognizes we must have 
the opportunity to charge market-based rates and earn market-
based returns to attract the private capital needed to make 
investments in our business.
    Railroad capital investments are risky because they are 
long-term and expensive, and even if successful, they may not 
generate positive returns for years. In the interim, markets 
can change in the ways that reduce the investment's return. As 
physically--as publicly traded companies, we cannot justify the 
inherently risky investments required to grow our network and 
respond to ongoing transportation market changes unless the 
potential upside gain from those investments are high enough to 
offset the potential downside risk associated.
    As we compete for capital in the marketplace with other 
businesses, investors will only be willing to provide capital 
to us if they believe future returns will be as high as the 
investor can receive after accounting for risk from alternative 
opportunities.
    As the Surface Transportation Board, our economic 
regulatory agency, and you, in Congress, contemplate our 
economic regulatory structure, this should be foremost in your 
thoughts.
    Second, we need to be able to take advantage of technology 
and innovation that allows us to improve safety and create 
efficiencies. As it stands today, we have a heavy command-and-
control type of regulatory structure. It isn't nimble, nor does 
it easily adapt to technology enhancements. We need to create 
regulatory process improvements that allow for performance-
based approaches as well as a more robust waiver process that 
allows us to take advantage of the technologies that we are 
currently pursuing and those we will be pursuing in the future.
    Third, while I know it isn't in your Subcommittee's 
jurisdiction, we have to get our tax and trade policies right 
to ensure U.S. competitiveness. The U.S. has the highest 
corporate tax rate in the developed world. The disparity 
between the United States and the rest of the world has become 
even larger in recent years. Since capital moves freely across 
international borders, the higher U.S. rate makes it harder for 
firms to justify investing in the United States and harder for 
U.S. firms to attract capital.
    Getting trade policies correct is equally important. Trade 
plays a massive role in the U.S. economy. Exports and imports 
combined are equivalent to around 27 percent of U.S. GDP, which 
is up from around 17 percent 30 years ago. For railroads, at 
least 42 percent of carloads and more than 35 percent of our 
revenue is directly associated with international trade.
    Today, there's a lot of talk about NAFTA. To bring NAFTA 
into the 21st century, we should work with our trading partners 
to strengthen it and its provisions on the environment and on 
labor, and update it to address e-commerce and cross-border 
data flows, things that didn't exist when NAFTA was first 
written over 2 decades ago. But we should not withdraw from 
NAFTA.
    Finally, just a few words on public-private partnerships. 
Congress has done great work in developing and fostering 
public-private partnerships, whether it's the FASTLANE program 
or TIGER grants, these are excellent programs that allow 
projects to move forward that otherwise would never get off the 
ground. They allow each party to participate commensurate with 
their benefits.
    As you debate what to do on an infrastructure package, I 
encourage you to continue these programs, as they're a great 
way to leverage private investment.
    That concludes my testimony, and I'm looking forward to 
answer your questions.
    [The prepared statement of Mr. Fritz follows:]

      Prepared Statement of Lance M. Fritz, Chairman, President, 
         and Chief Executive Officer, Union Pacific Corporation
    Thank you for the opportunity to be here today. I am Lance M. 
Fritz, the Chairman, President, and Chief Executive Officer of Union 
Pacific Corporation, the parent company of Union Pacific Railroad. 
Officially, I'm testifying today on behalf of Union Pacific, but most 
of what I have to say is applicable to other U.S. freight railroads as 
well.
    Union Pacific Railroad was born when President Abraham Lincoln, who 
was a railroad attorney earlier in his career, signed the Pacific 
Railway Act of 1862. The main goal of the Act was to facilitate 
constructing a transcontinental rail line all the way to the Pacific, 
thereby allowing dispersed areas of a growing nation to be bound 
together economically, socially, and politically. Today, Union Pacific 
directly serves approximately 10,000 customers in 23 states in the 
western two-thirds of the United States (see Figure 1), but through 
connections with our transportation partners, we deliver products in a 
safe, reliable, and environmentally responsible manner to consumers in 
every state and throughout the world.
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Railroads Are the Transportation Backbone of America
    Whenever Americans grow something, mine something, or make 
something; when they send goods overseas or import them from abroad; 
when they eat their meals or take a drive in the country, there's an 
excellent chance that railroads helped make it possible.
    Approximately 600 freight railroads operate in the United States. 
Each of the seven ``Class I'' railroads, including Union Pacific, 
typically operates in many different states over thousands of miles of 
track. Class I railroads focus mainly (though not exclusively) on long-
haul, high-density intercity traffic lanes. Meanwhile, hundreds of 
short line and regional railroads fill out our Nation's rail network, 
often providing crucial first-mile and last-mile service to customers. 
Non-Class I railroads range in size from tiny operations handling a few 
carloads a month to multi-state operators not far from Class I size.
    Together, freight railroads operating in the United States form an 
integrated, nearly 140,000-mile system that provides the world's 
safest, most productive, and lowest-cost freight rail service. This 
extensive network pays for itself since nearly all of America's freight 
railroads are privately owned and operated. The U.S. freight railroad 
industry is the envy of the world, an irreplaceable national asset that 
enhances our Nation's standard of living and our Nation's 
competitiveness in the tough global economy.
    Unlike trucks, barges, and airlines, our freight railroads operate 
almost exclusively on infrastructure that they own, build, maintain, 
and pay for themselves, a crucial point I will return to later in this 
testimony.
What Railroads Haul
    Union Pacific and America's other freight railroads transport a 
huge variety of goods. Historically, coal has been the single largest 
commodity carried by rail. Cost-effective electricity generated by coal 
delivered to power plants by railroads has been crucial to our Nation's 
economic and industrial development. Railroads also carry enormous 
amounts of corn, wheat, soybeans, and other grains. We carry 
fertilizers, plastic resins, and a vast array of other chemicals. 
Cement, sand, and crushed stone to build our highways make the trip on 
rail, as does lumber and drywall to build our homes. We transport autos 
and auto parts, animal feed, canned goods, corn syrup, flour, frozen 
chickens, beer, countless other food products, and much more.
    Rail intermodal is moving shipping containers and truck trailers by 
rail. Just about everything you find on a retailer's shelves may have 
traveled on an intermodal train. Intermodal now accounts for 
approximately 20 percent of revenue at Union Pacific and about 24 
percent of the total industry's revenue, more than any other rail 
revenue source.
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The Right Track for the Economy
    Since the industry's founding more than 185 years ago, freight 
railroads have been indispensable to America's economic development. 
America's freight railroads connect producers and consumers across the 
country and the world, expanding existing markets and opening new ones.

   A June 2016 study from Towson University's Regional Economic 
        Studies Institute found that, in 2014 alone, the operations and 
        capital investment of America's major freight railroads 
        supported approximately 1.5 million jobs (1.1 percent of all 
        U.S. workers--nearly nine jobs for every railroad job), nearly 
        $274 billion in economic output (1.6 percent of total U.S. 
        output), and $88 billion in wages (1.3 percent of total U.S. 
        wages). Railroads also generated nearly $33 billion in tax 
        revenues. In addition, millions of Americans work in industries 
        that are more competitive in the tough global economy thanks to 
        the affordability and productivity of America's freight 
        railroads.

   The approximately 170,000 U.S. freight railroad employees 
        are among America's most highly compensated workers. In 2015, 
        the average U.S. Class I freight railroad employee earned wages 
        of $86,300 and fringe benefits of $34,600, for total average 
        compensation of $120,900. By contrast, according to the Bureau 
        of Economic Analysis, the average wage per full-time equivalent 
        U.S. employee in domestic industries in 2015 was $59,400 (just 
        69 percent of the comparable rail figure) and average total 
        compensation was $73,300 (61 percent of the rail figure).

   Average rail rates (measured by inflation-adjusted revenue 
        per ton-mile) were 45 percent lower in 2015 than in 1981 (see 
        Figure 3). This means the average rail shipper can move close 
        to twice as much freight for about the same price it paid more 
        than 35 years ago.
        
        
   Several years ago, the American Association of State Highway 
        and Transportation Officials (AASHTO) estimated that if all 
        freight rail traffic were shifted to trucks, rail customers 
        would have to pay an additional $69 billion per year. Adjusted 
        for increased freight volume and inflation, it's probably close 
        to $100 billion today.
Safe and Working Hard Every Day to Get Even Safer
    For Union Pacific--and I'm sure I can speak for other railroads 
here too--nothing is more important than safety. At Union Pacific, a 
commitment to world-class safety is the very first of six ``value 
tracks'' designed to guide us as we work through the daily challenges 
of operating our 32,000-mile rail network.
    We recognize we have not yet reached our goal of zero accidents and 
injuries, but we're encouraged by the progress we've made. I'm pleased 
to report that Union Pacific had a record safety year in 2016, with our 
reportable employee injury rate improving 14 percent compared to 2015.
    For the rail industry as a whole, based on data from the Federal 
Railroad Administration (FRA), the overall train accident rate in 2016 
was the lowest in history and down 44 percent from 2000; the employee 
injury rate in 2016 was down 47 percent from 2000; and the grade 
crossing collision rate in 2016 was down 39 percent from 2000. By all 
of these measures, recent years have been the safest in rail history 
(see Figure 4).
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    Railroads today have lower employee injury rates than most other 
major industries, including trucking, airlines, agriculture, mining, 
manufacturing, and construction--even lower than food retailers.
    Safety improvements extend to hazardous materials too--over 99.99 
percent of rail hazmat shipments reach their destination without a 
release caused by a train accident.
Essential to a Greener, Less-Congested Future
    Freight railroads are the environmentally friendly way to move 
freight. Consider:

   In 2015, U.S. railroads moved a ton of freight an average of 
        473 miles per gallon of fuel.

   On average, railroads are four times more fuel efficient 
        than trucks. That also means that moving freight by rail 
        instead of truck reduces greenhouse gas emissions by an average 
        of 75 percent.
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   Emissions of particulate matter and nitrogen oxides per unit 
        of freight volume are significantly lower for railroads than 
        for trucks.

   Because a single train can replace several hundred trucks, 
        railroads help reduce highway gridlock and the need to spend 
        scarce taxpayer dollars on highway construction and 
        maintenance.
Changing Markets Present a Serious Challenge to Railroads
    In testimony to this committee in July of last year, my counterpart 
at Kansas City Southern, Patrick Ottensmeyer, explained that freight 
railroads are what economists call a ``derived demand'' industry. This 
means that demand for rail service is a function of demand elsewhere in 
the economy for the products railroads haul. Mr. Ottensmeyer used 
automobiles as an example: automakers' demand for rail service rises 
when consumers are buying more cars, but dries up if consumers stop 
buying cars.
    Therefore, what affects the broad economy affects railroads too. 
It's no secret that the economy has not been doing as well the past few 
years as we all hoped it would, and rail traffic has suffered 
accordingly.
    Moreover, while railroads obviously care about the state of the 
overall economy, demand for rail service is determined mainly by how 
well the goods-related sectors of the economy (as opposed to services-
related sectors) are doing. If consumers are buying more services like 
travel, data plans, or health care, that doesn't really impact our 
business. We want consumers to buy a house and fill it with appliances 
and furniture. We want manufacturers to expand their factories so they 
need more inputs delivered to them and have more finished goods heading 
out their doors. Unfortunately, in 2016 the goods side of the economy 
had its worst year since 2009 (see the bars in Figure 5). Rail traffic 
followed suit (see the line in Figure 5).\1\
---------------------------------------------------------------------------
    \1\ The rail traffic line in Figure 5 does not include carloads of 
coal and grain because their traffic volumes tend to rise or fall for 
reasons that usually have little to do with the condition of the 
overall economy. That's not the case for most other rail traffic 
categories.
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    Railroads are also affected by what's happening within specific 
industries. Electric utilities are a good example. Thanks to extremely 
difficult market conditions (due largely to cheap and plentiful natural 
gas) and increasingly stringent environmental restrictions, electricity 
generation from coal has been falling for several years. In 2016, coal-
based electricity generation was down 8 percent from the same period in 
2015, down 22 percent from 2014, and down 33 percent from 2010. Coal's 
share of total U.S. electricity generation was 50 percent as recently 
as 2005, but it fell to 45 percent in 2010, 39 percent in 2014, and 
just 30 percent in 2016 (see Figure 6).
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    The effect on rail coal traffic has been predictable. In 2016, U.S. 
Class I railroads originated 4.2 million carloads of coal, down 1.1 
million carloads (21 percent) from 2015, down 1.9 million carloads (31 
percent) from 2014, and down 3.5 million carloads (46 percent) from 
2008, which was the peak year for U.S. rail carloads (see Figure 7).
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    Likewise, recent slowdowns in crude oil production and other 
factors have led to reduced rail carloads of crude oil and associated 
products such as sand used in fracking, steel pipes used at drilling 
sites, and scrap iron and metallic ores used to create steel used in 
energy industries.
    On the other hand, Union Pacific and other railroads are benefiting 
right now from strong U.S. grain sales, and are working with chemical 
firms as they build and expand petrochemical facilities in the Gulf 
Coast and elsewhere in the United States to take advantage of low-
priced natural gas used as a raw material. As housing markets continue 
to improve and if there is a near-term boost in infrastructure 
spending, railroads should see construction markets firming up. 
Consumer and business confidence appear to be growing, potentially 
creating additional opportunities for Union Pacific and other 
railroads.
    The foregoing discussion about rail traffic illustrates--as Mr. 
Ottensmeyer noted in his testimony--that the U.S. and global economies 
are constantly evolving. Firms, even entire industries, can and do 
change rapidly and unexpectedly, and railroads must be able to deal 
with that flux. These broad, often unanticipated economic changes are 
reflected in changes not only in the volumes but also in the types and 
locations of the commodities railroads are asked to transport. When 
traffic changes occur in different areas--as is usually the case and 
has certainly been the pattern in recent years--the challenges to 
railroads become magnified. To successfully adapt to these challenges, 
railroads must be flexible and innovative while improving the 
efficiency and productivity needed to maintain their long-term 
financial health. Railroads may also have to invest in additional 
capacity to meet changing demand. Public policies that hamstring 
railroads by preventing or limiting this flexibility and innovation are 
sure to have a negative impact on railroads and on their ability to 
meet the transportation needs of our evolving economy.
The Importance of Appropriate Public Policies
    Prior to passage of the Staggers Rail Act of 1980, excessive 
regulation put our Nation's freight railroads in a huge financial and 
operational hole. By enacting Staggers, Congress recognized that 
regulation prevented railroads from earning adequate revenues and 
competing effectively. Survival of the railroad industry required a new 
regulatory scheme that allowed railroads to establish their own routes, 
tailor their rates to market conditions, and differentiate rates on the 
basis of demand.
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    One of the fundamental principles of the Staggers Act was something 
that had been essentially ignored for decades prior to it: if our 
Nation is to have a viable, efficient, privately owned freight rail 
system, someone has to be willing to pay for it, and the market is far 
superior to the government in determining who should pay.
    By giving railroads the opportunity (the Staggers Act guaranteed 
railroads nothing) to earn revenues sufficient to sustain and grow the 
rail network, deregulation sparked an industry transformation. In the 
more than 35 years since Staggers, rail income has increased, and with 
that has come the ability to invest anew in rail infrastructure and 
equipment. Since Staggers was passed, U.S. freight railroads have spent 
more than $635 billion on their tracks, signals, bridges, tunnels, 
locomotives, freight cars, and other infrastructure and equipment. 
Higher rail spending has led, in turn, to greater efficiency, improved 
safety, better service, and sharply lower average rates for rail 
customers.
    Importantly, the Staggers Act did not completely deregulate 
railroads. In addition to retaining authority over a variety of non-
rate areas, the Interstate Commerce Committee, and now its successor, 
the Surface Transportation Board (STB), retained the authority to set 
maximum rates if a railroad is found to have ``market dominance'' and 
to take other actions if a railroad engages in anticompetitive 
behavior.
    Congress affirmed the appropriateness of the existing balanced 
regulatory structure when it passed the Surface Transportation Board 
Reauthorization Act of 2015. Members of this committee were 
instrumental in the development and ultimate passage of this 
legislation, and I thank and congratulate you for your efforts. This 
legislation provides common sense process improvements that will allow 
the STB to work more efficiently. At the same time, it recognizes the 
need for freight railroads to earn revenues that allow for billions of 
dollars in private spending each year to build, maintain and grow the 
nationwide rail network.
    Nevertheless, some rail shippers, under the misleading guise of 
calling for more ``competition,'' support legislative and regulatory 
changes that would re-impose excessive and counterproductive regulation 
on railroads. It is beyond the scope of this testimony to discuss the 
various proposals in detail, but all of them would, in one way or 
another, force railroads, through what amounts to price controls, to 
lower their rates to a favored group of rail customers at the expense 
of all other rail customers, rail employees, and the public at large.
    Unlike trucks and barges, which travel on heavily subsidized 
highways and waterways, U.S. freight railroads must finance nearly all 
of their infrastructure and equipment spending themselves. If the 
existing balanced regulatory structure were overturned, rail earnings 
would necessarily fall. This would make it far more difficult for 
railroads to make the massive investments they need year after year to 
meet current and future freight transportation demand.
    It would be a mistake to let this happen. A fundamental tenet of 
the economics of competition says that where competition exists, there 
should be no regulatory intervention. Because the vast majority of rail 
freight movements are subject to strong competitive forces--including 
competition from trucks and barges, product competition \2\, and 
geographic competition \3\--the vast majority of rail movements should 
likewise be free of governmental oversight. Moreover, no amount of 
rhetoric about ``competition'' can change the fact that if Union 
Pacific or any other railroad cannot cover its costs, it cannot 
maintain, replace, or add to its infrastructure and equipment. Nor can 
it provide the services upon which its customers depend. Simply put, if 
the existing balanced regulatory structure were changed, either 
taxpayers would have to make up the difference or the industry's 
physical plant would deteriorate, needed new capacity would not be 
added, and rail service would become slower, less responsive, and less 
reliable.
---------------------------------------------------------------------------
    \2\ Substituting one product for another in a production process--
for example, generating electricity from natural gas (which is not 
carried by railroads) instead of coal (which is).
    \3\ The ability to obtain the same product from, or ship the same 
product to, a different geographic area. For example, clay is used for 
taconite pelletization in Minnesota. This clay is available from 
Wyoming mines served by one railroad and from Minnesota mines served by 
another. Iron ore producers can play one railroad against the other for 
clay deliveries.
---------------------------------------------------------------------------
    Remember too that back in 2006, the Government Accountability 
Office noted that, ``Rail investment involves private companies taking 
a substantial risk which becomes a fixed cost on their balance sheets, 
one on which they are accountable to stockholders and for which they 
must make capital charges year in and year out for the life of the 
investment. A railroad contemplating such an investment must be 
confident that the market demand for that infrastructure will hold up 
for 30 to 50 years. This is in sharp contrast to other modes such as 
highway infrastructure, which is paid for largely by public funds.'' 
\4\ Accordingly, at Union Pacific, as at other railroads, new 
investments will be made only if they are expected to generate an 
adequate return over a long period of time. For this reason, adequate 
rail earnings--again, over the long term--are critical for capacity 
investment.
---------------------------------------------------------------------------
    \4\ Government Accountability Office, Freight Railroads: Industry 
Health Has Improved, but Concerns About Competition and Capacity Should 
Be Addressed, October 2006, p. 56.
---------------------------------------------------------------------------
    Major freight railroads face additional constraints because they 
are either publicly traded or are subsidiaries of publicly traded 
companies. As such, they must provide their shareholders a return 
commensurate with what those shareholders could obtain in other markets 
with comparable risk. No law or regulation can force investors to 
provide resources to an industry whose returns are lower than what the 
investors can obtain elsewhere. If railroads are viewed as returning 
less to shareholders, for whatever reason, than comparable 
alternatives, then capital will flee the rail industry or will only be 
available at much higher costs than we see today.
    It is true that freight railroad financial performance in recent 
years has been better than it once was. At Union Pacific, we will 
continue to work very hard to see that those improvements continue so 
that we can return more value to our shareholders. However, 
policymakers should not view these improvements as a reason to cap rail 
earnings through price controls, artificial competitive constraints, or 
by other means, since it would cause capital to flee the industry and 
severely harm railroads' ability to reinvest in their networks.
    Today, our Nation faces a number of serious transportation related 
problems, many of which this committee, to its credit, is working hard 
to address. It makes no sense to add to that list by trying to fix 
something that isn't broken. The current rail regulatory system is 
working well. At a time when the pressure to reduce government spending 
on just about everything--including transportation infrastructure--is 
enormous, it makes no sense to enact public policies that would 
discourage private investments in rail infrastructure that would boost 
our economy and enhance our competitiveness.
Technology and Process Streamlining
    New technologies are changing transportation. For example, 
widespread efforts are underway today--including extensive research 
subsidized by taxpayers--to develop autonomous motor vehicles, 
including autonomous trucks that would compete directly with railroads. 
Autonomous vehicle technologies and other technologies impacting 
transportation vary in their stage of development, but they are 
challenges that railroads must be prepared to confront.
    This means railroads must themselves look to new technologies to 
make their operations safer and more efficient. The use of technology 
to improve safety and efficiency is nothing new for railroads, but it's 
taken on a new urgency as transportation markets have evolved and as 
technology has become more advanced.
    I'm proud to say that Union Pacific is at the forefront of the 
innovation-through-technology effort. I mentioned earlier that a 
commitment to world-class safety is the first of six ``value tracks'' 
that guide our company. ``Innovation'' is another of the value tracks. 
It can encompass small, incremental improvements that we call ``Little 
I'' innovations--an example might be something as seemingly simple as 
ensuring that signs at rail yards are located in the most advantageous 
positions for rail crews to notice and act on them.
    Innovation can also encompass larger innovation efforts--what we at 
Union Pacific call ``Big I'' innovations. The use of ``machine vision'' 
is a good example of a ``Big I'' innovation.
    Before a train departs, each rail car generally requires a 13-point 
inspection. Trains can be 100 or more cars long, so these inspections 
can take several hours. Union Pacific operates hundreds of trains per 
day, so the time adds up.
    Several years ago, our engineering teams realized that lasers could 
be used to inspect trains as they pass. The idea resulted in what's now 
called machine vision--in essence, an MRI for a rail car. As a train 
passes through a machine vision imaging area, lasers and cameras 
quickly provide a three-dimensional model of each piece of train 
equipment, identifying actual and potential defects. The model and 
images can be viewed remotely from any Union Pacific computer, so that 
these ``in advance'' inspections can be conducted rain or shine, day or 
night, from the comfort of a desk chair. It allows our mechanical team 
to know what repairs are needed before a train arrives in the rail 
yard. This speeds the repair process, reduces the time trains have to 
spend in rail yards, reduces costly system delays, and improves our 
reliability and customer service. So far, our system can identify and 
measure 22 components of a train, and it's been successfully 
implemented near rail yards in Nebraska, Iowa, and Arkansas.
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    Many of UP's technology initiatives are managed by our Technology 
Steering Group, comprised of leadership representatives from 
departments where innovative ideas are most likely to bubble up: 
operations, engineering, mechanical, safety, and information 
technologies. The group's goal is to validate, or invalidate if 
appropriate, technology projects that could benefit our customers, 
shareholders, employees, and the communities we serve. Among other 
projects currently under review are the use of gaming simulators to 
train engineers, 3D printing to speed equipment repair and maintenance, 
and the use of drones to improve the speed and accuracy of track and 
bridge inspections.
    The efforts of Union Pacific and other railroads to harness the 
power of technology to improve their operations and drive innovation 
will not be as effective as they should be if legislative and 
regulatory processes and requirements fail to keep up, or are not well 
grounded in evidence-based, scientific understanding.
    The current debate over the number of crew members inside a freight 
train's locomotive cab is a case in point. Legislation and regulations 
have been proposed that would mandate that all over-the-road freight 
trains must operate with a certified locomotive engineer and a 
certified conductor in the locomotive cab.
    Existing FRA regulations do not mandate minimum crew staffing 
requirements. Some non-Class I railroads have long operated with just 
one person in the locomotive cab, and thousands of Amtrak and commuter 
passenger trains, carrying hundreds of thousands of passengers, operate 
every day with just one person in the locomotive cab. On Union Pacific 
and other Class I railroads, the subject of crew size has typically 
been addressed as part of the collective bargaining process with rail 
labor. For Class I railroads, industry practice to date has been to 
have two-person crews for over-the-road mainline operations. That said, 
it is important for Class I railroads to retain the flexibility to seek 
agreement with labor, at the appropriate time, to operate over-the-road 
mainline trains with one crew member.
    The major reason offered by proponents of a two-person crew mandate 
is that it would enhance rail safety. Yet no one--not the FRA, not 
sponsors of the legislation in Congress, not rail labor--can point to 
hard data that support this contention: there is no evidence that 
trains with one-person crews have accidents at a higher rate than 
trains with two-person crews. The FRA itself, after its own review, 
stated in 2009 that it found no ``factual evidence to support the 
prohibition against one-person operations.''
    Railroads believe that the forthcoming implementation of positive 
train control (PTC) potentially presents an opportunity to move to one-
person crews with no degradation of safety. PTC describes technologies 
designed to automatically stop a train before certain accidents caused 
by human error occur. As such, PTC advances rail safety through the use 
of advanced technology, while at the same time potentially eliminating 
the need for ``a second set of eyes'' in locomotive cabs. Neither Union 
Pacific nor other Class I railroads seek the ability to impose one-
person crews unilaterally or haphazardly. Rather, we seek the 
flexibility to continue to work with rail labor under the existing 
collective bargaining framework to identify when the presence of PTC, 
or other technologies, allow a reduction in the number of crewmembers 
in a locomotive cab without jeopardizing rail safety.
    There are many other areas in which outdated regulations 
unnecessarily hinder rail innovation and progress. The use of machine 
vision discussed earlier is just one of many different technologies 
railroads use to improve their ability to identify defects in 
infrastructure and equipment. Many additional technologies are under 
development.
    As Matt Rose of BNSF explained to this committee back in February, 
new railroad technologies must be overlaid upon railroads' existing 
regulatory compliance activities. As Mr. Rose explains, ``Advances in 
locomotives, signal systems, grade-crossing warning devices, and track 
inspection made possible by technology in some ways are marginalized 
for purposes of regulatory compliance because they exist outside of the 
current regulatory construct, which recognizes only the safety value of 
prescribed practices. Existing [FRA] regulations which prescribe 
physical inspection at specific intervals for equipment and facilities 
now make less sense because of the advances in equipment, which is 
itself continuously self-diagnostic and self-reporting in the event of 
defects. Technology based inspection can also reduce the safety 
exposures related to frequently putting people in, under and between 
equipment or out on the line of road to perform physical inspections 
for the same conditions. Technology driven operational advancements, 
like electronic delivery of mandatory train orders and directives in 
lieu of required paper versions which will enable other technologies, 
should be incentivized.''
    Union Pacific agrees with Mr. Rose's assessment. We also agree with 
Mr. Rose that a greater use of the FRA's broad waiver authority 
represents a great opportunity to modify FRA regulatory directives in 
light of changed circumstances, while retaining appropriate regulatory 
oversight. Unfortunately, as Mr. Rose notes, the timeline for even the 
simplest waivers are measured in months or years, and often come with 
conditions that largely negate the value of the waiver or innovation 
being sought.
    More broadly, in light of the growing role of technology to enhance 
rail safety and operational efficiency, the FRA should shift its focus 
away from command-and-control design-based standards towards the use of 
performance based standards. Command and control standards specify the 
precise characteristics of workplace rules, while performance-based 
standards define the desired result rather than mandating the precise 
characteristics that a workplace must exhibit. The point of a 
performance based goal is to focus attention and effort on the outcome, 
not the method.
    For example, an FRA regulation mandates that locomotive brakes 
undergo a certain prescribed inspection every 1,000 miles. The 1,000-
mile limit was last changed in the early 1980s, when it was updated 
from an earlier 500-mile standard that dated from the era of steam 
locomotives--an era that largely ended decades earlier. Since the early 
1980s, there have been tremendous advances in locomotive, brake and 
defect detection technology, but railroads have not been able to 
persuade the FRA to update the 1,000-mile standard.
    There is little evidence that rigid design-based standards, such as 
the 1,000-mile locomotive standard, have a positive impact on railroad 
safety. They are, however, very costly for both railroads and the FRA 
to administer and maintain and tend to impede innovation because they 
``lock in'' existing designs, technology, and ways of thinking. 
Reliance instead on a performance based approach would allow the FRA 
the best opportunity to ensure the attainment of desired safety rates 
at lower cost for the FRA as well as for railroads.
Promoting Economic Growth Through Corporate Tax Reform
    Today more than ever, countries around the world are competing to 
attract new businesses and investments to help their economies grow and 
create jobs. One step many countries have taken--but not the United 
States--is reducing their corporate income tax rate. The United States 
should follow their example.

   A lower rate would improve U.S. competitiveness. The U.S. 
        rate of 35 percent is the highest statutory corporate income 
        tax rate in the developed world. The disparity between the 
        United States and the rest of the world has become even larger 
        in recent years as dozens of countries have cut their corporate 
        income tax rates. Since capital moves freely across 
        international borders, the higher U.S. rate makes it harder for 
        firms to justify investing in the United States and harder for 
        U.S. firms to attract capital.
        
        
   A lower rate would encourage greater investment in the 
        United States. By improving returns on investment and 
        encouraging the repatriation of funds kept abroad by U.S. based 
        firms, a lower rate would lead to more investment in the United 
        States and increased domestic production. More investment means 
        safer workplaces, more innovation, higher productivity, less 
        pollution, and a higher standard of living.

   A lower rate would enhance the prospects for long-term 
        growth and job creation. Experts consider the corporate income 
        tax to be among the most harmful for long-term economic growth. 
        Moreover, because a major portion of corporate income taxes are 
        ultimately borne by consumers through higher prices and by 
        employees through lower wages, reforming corporate income taxes 
        would benefit all Americans.

   Tax reform would sharply reduce deadweight costs to the 
        economy. Inefficiencies and misallocation of resources caused 
        by the complex U.S. tax structure impose huge costs that all of 
        us pay, but sensible reform would reduce these costs 
        considerably.
Promoting Economic Growth Through International Trade
    Virtually no one in the world today is self-sufficient. Put another 
way, we all trade. Our trading partners might be across the street or 
on the other side of the world, but the principle is the same: we trade 
because we produce some goods or services at costs lower than the costs 
our trading partners would incur to produce those same goods or 
services. By trading, we play to our strengths, leading to more goods 
and services to go around. Trade makes the world richer.
    Moreover, trade is not a zero-sum game in which one side ``wins'' 
and the other ``loses.'' Instead, both sides benefit. Because trade is 
almost always voluntary, people and firms gain from it, or else they 
wouldn't do it. The flip side is that increased barriers to trade 
prevent people from making exchanges they want to make and make people 
pay more for what they want. That helps explain why international trade 
plays a massive role in the U.S. economy. Exports and imports combined 
are equivalent to around 27 percent of U.S. GDP, up from around 17 
percent 30 years ago.
    For railroads, international trade plays an even greater role: at 
least 42 percent of the carloads and intermodal units our Nation's 
railroads carry, and more than 35 percent of rail revenue, are directly 
associated with international trade (see Figure 8).


    Rail movements associated with international trade include 
virtually every type of commodity railroads carry and involve every 
region of the country--coal for export out of ports in Maryland, 
Virginia, the Gulf Coast, and the Great Lakes; paper and forest 
products imported from Canada to the Midwest; imports and exports of 
Canadian and Mexican automotive products to and from auto factories in 
dozens of U.S. states; plastics shipped by rail from Texas and 
Louisiana to the East and West Coasts for export to Europe and Asia; 
iron ore mined in Michigan and shipped by rail to Great Lakes ports; 
grain grown in the Midwest and carried by rail to the Pacific Northwest 
and the Gulf Coast for export to Asia. The list goes on and on.
    The fact is, railroads are inexorably tied to our Nation's trading 
system. Without railroads, American firms and consumers would be unable 
to participate in the global economy anywhere near as fully as they do 
today. Conversely, without trade, America's freight railroads would be 
a fraction of what they are today.
    To be sure, trade has always been a sensitive political issue in 
American politics because of its real and perceived impact on jobs. 
Policymakers should consider assisting those who have not shared in the 
gains from trade. Assistance might take the form of improved training 
and educational options that enhance domestic opportunity and social 
mobility. Even better, policymakers can implement pro-growth economic 
policies that lead to a robust economy where those who are displaced 
from a job for any reason are more likely to be able to find another 
one. Increased protectionism, on the other hand, is not the way to go 
because it would entail costs that greatly exceed the benefits.
    Robust international trade means more jobs for railroaders. 
Approximately 50,000 rail jobs, worth over $5.5 billion in annual wages 
and benefits, depend directly on international trade. This does not 
include other significant job-related impacts including employees at 
ports who handle shipments moving by rail, jobs at firms that supply 
goods and services to railroads and others in support of trade-related 
rail movements, and secondary and tertiary job impacts derived from the 
expenditures of railroad employees, port employees, and their 
suppliers.
Public-Private Partnerships
    Public-private partnerships--arrangements under which private 
freight railroads and government entities both contribute resources to 
a project--offer a mutually beneficial way to engage in infrastructure 
improvement projects where the fundamental purpose of the project is to 
provide public benefits or meet public needs.
    Without a partnership, many projects that promise substantial 
public benefits (such as reduced highway congestion by taking trucks 
off highways, or increased rail capacity for use by passenger trains) 
in addition to private benefits (such as enabling faster freight 
trains) are likely to be delayed or never started at all because 
neither side can justify the full investment needed to complete them. 
Cooperation makes these projects feasible.
    With public-private partnerships, the public entity devotes public 
dollars to a project equivalent to the public benefits that will 
accrue. Private railroads contribute resources commensurate with the 
private gains expected to accrue. As a result, the universe of projects 
that can be undertaken to the benefit of all parties is significantly 
expanded.
    Since railroads contribute funding commensurate with the benefits 
they receive, public-private partnerships are not ``subsidies'' to 
railroads. In some partnerships, public entities and private railroads 
both contribute to a project's initial investment, but the railroads 
alone fund future maintenance to keep the project productive and in 
good repair.
    Perhaps the most well-known public-private partnership involving 
railroads is the Chicago Region Environmental and Transportation 
Efficiency Program (CREATE), which has been underway for several years. 
CREATE is a multi-billion dollar program of capital improvements aimed 
at increasing the efficiency of the region's rail infrastructure. A 
partnership among various railroads, the City of Chicago, the state of 
Illinois, and the Federal Government, CREATE includes approximately 70 
projects, including 25 new roadway overpasses or underpasses; six new 
rail overpasses or underpasses to separate passenger and freight train 
tracks; 35 freight rail projects including extensive upgrades of 
tracks, switches and signal systems; viaduct improvement projects; 
grade crossing safety enhancements; and the integration of information 
from dispatch systems of all major railroads in the region into a 
single display. As of the end of January this year, 27 projects have 
been completed, 5 are under construction and 17 are in the design 
phase.
    Railroads are confident that, as CREATE proceeds, rail operations 
in Chicago will become more fluid and better able to withstand shocks 
such as those presented by extreme weather.
Conclusion
    At Union Pacific, our goal is to provide a customer experience that 
is as safe, efficient, and cost effective as possible. I know that 
other railroads share these goals. We are always willing to work 
cooperatively with you, other policymakers, our employees, our 
customers and all other interested parties to advance our shared 
interests in moving our Nation forward with the help of our best-in-
the-world freight railroads.

    The Chairman. Thank you, Mr. Fritz.
    Michael Ducker is President and Chief Executive Officer of 
FedEx Freight. He provides strategic direction for FedEx's 
less-than-truckload companies throughout North America as well 
as for FedEx Custom Critical, a leader character--carrier--
probably character, too--of time-sensitive shipments.
    Mr. Ducker. There are a few there.
    The Chairman. So welcome, Mr. Ducker.

 STATEMENT OF MICHAEL L. DUCKER, PRESIDENT AND CHIEF EXECUTIVE 
               OFFICER, FEDEX FREIGHT CORPORATION

    Mr. Ducker. Thank you very much, Chairwoman Fischer and 
Ranking Member Booker. I appreciate the opportunity before all 
you Subcommittee members to testify here today.
    I know you all understand how critical today's freight 
transportation system is to this country's economy. My 
colleagues have discussed it. And as you noted, my written 
statement is in the record, so I'll focus on a few key points.
    At FedEx, we believe we're uniquely positioned to comment 
on these matters. FedEx is an engine for job growth and 
economic growth. Through our group of transportation companies, 
we have 450,000 team members worldwide. We utilize all major 
modes of transportation to serve our customers. We do that with 
four operating companies: FedEx Express, Ground, Freight, and 
FedEx Trade Networks.
    Now, I'm here today to talk about surface transportation, 
so I want to quickly provide some additional background on 
FedEx Freight, our less-than-truckload operating company, of 
which I'm the CEO.
    We employ about 40,000 team members and operate 20,000 
vehicles that collectively transport on average 100,000 daily 
shipments. FedEx Freight has long been on the leading edge of 
safety, innovation, and technology. We continue to deploy the 
most advanced safety systems available on our truck fleet, 
including collision mitigation, speed limiters, lane departure 
warning, roll stability, and the latest telematics, cameras, 
and electronic logging devices, the majority of which will be 
100 percent deployed by the end of the year.
    FedEx Freight, along with other transportation and 
logistics companies, pumps the lifeblood of commerce through 
our transportation of goods across the Nation. Without improved 
surface infrastructure and wise policy decisions, we cannot 
continue to help grow the U.S. economy and increase jobs. The 
need for significant investment in our infrastructure has never 
been more critical.
    So let me mention three areas that I believe should be 
priorities for this committee: number one, enhancements to the 
national highway system and funding sources; number two, 
innovation; and number three, modernization.
    First, our interstate system is now over 60 years old and 
is in desperate need of repair. Along with the American 
Trucking Association, FedEx supports Federal investment in 
highways primarily funded by user fees. We must identify 
revenue sources for long-term funding for the Highway Trust 
Fund.
    In order to avoid overreliance on a single option, FedEx 
supports a broad mix of revenue sources, including increasing 
and indexing fuel taxes, a vehicle-miles-traveled or other 
direct user-based fee, a reduction in the U.S. corporate tax 
rate, and territorial system adoption and congestion pricing.
    Second, national uniformity in areas of innovation. 
Regarding this, emerging technologies such as vehicle-to-
vehicle and vehicle-to-infrastructure communications and 
autonomous vehicles would benefit from having an infrastructure 
that allows innovations that drive productivity. FedEx supports 
Federal efforts to encourage national uniformity with 
reasonable and flexible guidelines, as innovation offers 
solutions for our transportation needs.
    And, last, modernization. I want to mention three primary 
areas. The first is modernizing trucking equipment standards, 
which haven't been changed in over 25 years. FedEx strongly 
supports a new Federal standard to change the twin-trailer 
limits from 28 feet to 33 feet with no--repeat no--change in 
the Federal weight limit.
    The highway networks are being overwhelmed with e-commerce. 
Twin 33-foot trailers will make more efficient use of our 
existing infrastructure because it takes fewer trucks to haul 
the same amount of freight. Twin 33s are currently allowed in 
20 states, and we have been operating them for many years 
without a single accident. They are safer than the current Twin 
28s. When widely adopted, Twin 33s will improve safety, reduce 
congestion, reduce wear and tear on highways and bridges, 
increase productivity, save millions of gallons of fuel, and 
reduce billions of pounds of carbon emissions. That solution 
will result in near instant infrastructure benefits with zero 
Federal funding required. It's a common sense policy solution.
    The second area of modernization consists of reducing 
unnecessary regulatory burdens while also ensuring that 
appropriate regulations keep pace with innovations.
    And, last, we need to ensure the broad adoption of the most 
modern and advanced safety systems on our vehicles. That is 
critical to ensure the safety of not only our employees, but 
also of the motoring public.
    In conclusion, we must upgrade our transportation 
infrastructure. It is long overdue. The private sector 
investment in updating safety and efficiency technologies needs 
to be complemented with government policies that support long-
term funding and innovation. The time for us all to act is now. 
Thank you.
    [The prepared statement of Mr. Ducker follows:]

          Prepared Statement of Michael L. Ducker, President 
         and Chief Executive Officer, FedEx Freight Corporation
    Chairman Fischer, Ranking Member Booker, and members of the 
Subcommittee, thank you for inviting me to testify before you today.
    I know that you all understand the critical importance of the 
freight transportation system in today's cost-and time-driven economy, 
particularly in this era of explosive e-commerce growth and increasing 
digital connectivity. Every day we are all reminded of the unfortunate 
state of disrepair of our Nation's highways and bridges, as well as the 
lost productivity for businesses and individuals caused by traffic 
congestion.
    The nation's freight network continues to experience strain. Our 
nation's transportation system moved 18.1 billion tons of goods, worth 
$19.2 trillion in 2015, according to a Bureau of Transportation 
Statistics document titled ``DOT Released 30-year Freight projection'' 
(March 2016). The U.S. Department of Transportation projects that 
freight volume will increase by 45 percent by 2045.
    In order to address these challenges, we must work together on 
policy and solutions that will modernize our surface transportation 
system and drive our economy forward. Infrastructure investment cannot 
be limited to road and bridge improvements. A holistic modern 
transportation system needs to be established combining physical and 
digital infrastructure enhancements with sound transportation policies, 
including incentives for improved safety and fuel efficiency. And, of 
course, stable and sustainable sources of funding for the Highway Trust 
Fund will be essential for success.
FedEx Operations
    At FedEx, we are an engine for job and economic growth. Through our 
group of transportation companies with more than 400,000 team members 
worldwide, we utilize all major modes of transportation to serve our 
customers.

   Our FedEx Express air-ground system is a global network, 
        offering time-definite air express, ground and freight shipping 
        within the U.S. as well as linking the American economy to 99 
        percent of the world's GDP.

   Our FedEx Freight and FedEx Ground networks use both road 
        and rail for our business-to-business as well as business-to-
        consumer services, which are essential in these days of 
        Internet shopping.

   Our FedEx Trade Networks business provides freight 
        forwarding services around the world, combining ocean shipping 
        options with air and ground tailored to meet the varying needs 
        of our customers.

    Intermodality allows transportation services to be offered to 
American customers in the most efficient way, providing transport 
services that vary as to speed, price and mode. A critical component of 
intermodality is the Nation's surface transportation system, which is 
our focus today. So, I want to give you a bit more perspective on the 
surface transportation company for which I am the CEO: FedEx Freight, 
our less-than-truckload operating company.
    FedEx Freight includes 40,000 team members and operates more than 
20,000 vehicles from 370 service center locations that collectively 
transport, on average, more than 100,000 daily shipments. To give you a 
few more numbers about the size and scope of our LTL operation:

   FedEx Freight road and city operations, along with our 
        purchased transportation motor and rail use, total more than 5 
        million average daily miles traveled.

   This highly engineered network moves on average more than 
        250 million pounds in daily loaded weight.

    FedEx Freight, along with other transportation and logistics 
companies, pumps the lifeblood of commerce, transporting goods from 
manufacturers, warehouses and retailers to business end-users and 
consumers. Without improved surface infrastructure and wise policy 
decisions from Washington, FedEx and other companies cannot continue to 
help grow the U.S. economy and increase jobs. The need for significant 
investment in our infrastructure has never been more critical.
Interstate Road System
    The building of the U.S. interstate highways fundamentally changed 
our country and the way we work together as Americans. It took 17 years 
to create and fund the idea of the interstate, beginning with a 1939 
Report to Congress and culminating with President Eisenhower signing 
the Federal-Aid Highway Act of 1956.
    Our interstate system is now over 60 years of age and it is in 
desperate need of updating. We need both short and long term 
investment. Short term, we must stop the deterioration in many 
interstate roads and bridges that have long suffered from neglect. Long 
term we need a plan to modernize, improve, and expand the entire 
system.
    Currently, more than 40 percent of major U.S. highways in urban 
areas are congested. On average, a typical American commuter loses 34 
hours sitting in traffic each year. According to the American Society 
of Civil Engineers (ASCE), over 30 percent of U.S. interstates are in 
poor or mediocre condition. These substandard roads result in drivers 
paying $67 billion, or $324 per motorist, annually in vehicle repairs 
and operating costs. The ASCE rates U.S. roads 19th in the world, 
behind Namibia.
    Left unaddressed, future demand will continue to challenge our 
bridges and roads for years to come. As previously mentioned, the U.S. 
Department of Transportation projects that by 2045 freight volume will 
increase by 45 percent and currently there are 20 new proposed 
interstate highway segments. The expected volume growth will add even 
more pressure on freight bottlenecks throughout the country and further 
hamper the performance of our highway system and the transportation 
industry alike by adding delays to truck freight. We must build this 
modern interstate highway system, as the current situation can no 
longer be tolerated.
    Along with the American Trucking Associations, FedEx supports 
Federal investment in highways primarily funded by user fees. The 
trucking industry--which currently pays more than 40 percent of Federal 
highway user fee revenue--supports an increase in highway user fee 
payments if they perceive value in the form of road and bridge 
improvements from the expenditures. The sources of revenue should:

   be easy and inexpensive to pay and collect;

   have a low evasion rate;

   be tied to highway use; and

   avoid creating impediments to interstate commerce.

    We must identify revenue sources that provide sufficient long-term 
funding for the Highway Trust Fund. We must recognize that due to 
changes in vehicle technologies, fuel taxes cannot alone fund the 
system. Alternative vehicles such as electric and natural gas need to 
also pay a user fee. This can now be easily done through technology. 
Consequently, FedEx supports a broad mix of revenue sources in order to 
avoid over-reliance on a single option. The recent, bipartisan effort 
to adequately fund the Inland Waterways Trust Fund can serve as an 
example.
Increase Freight Program Funding
    The FAST Act created a new National Highway Freight Program to 
provide funds across all states for needed highway-specific freight 
improvements, but only funded it at about $1.24 billion a year. The 
legislation also created a new Nationally Significant Freight & Highway 
Projects Program, funded at $900 million per year distributed to every 
state by formula. Any infrastructure package moved through Congress 
going forward needs to significantly increase funding for FAST Act 
freight programs so states will have sufficient funding to begin 
addressing their needs over the remaining years of that legislation.
National Uniformity in Areas of Innovation
    With the explosive growth of e-commerce, the Nation's supply chains 
are quickly adapting to American consumers' expectation of fast and 
efficient delivery of consumer products. Supply-chain programs are 
moving from an inventory-based ``manufacture-to-supply'' model to a 
``manufacture-to-order'' model. Emerging technologies such as vehicle-
to-vehicle and vehicle-to-infrastructure communications and autonomous 
vehicles need to have a transportation and digital infrastructure able 
to allow innovations that drive productivity and results toward 
maximizing the efficiency of transportation networks.
    New technological advancements are changing the way we look and 
think about our transportation needs. These technological advancements 
must be factored into what kind of infrastructure we need now in the 
21st Century. It is critical the U.S. have policies that encourage 
national uniformity in areas of innovation as we advance into the next 
century. A good example is in the area of autonomous vehicles.
    The National Highway Traffic Safety Administration (``NHTSA'') 
recently issued the Federal Automated Vehicles Policy, the first 
Federal policy on automated vehicles. Focused on ``highly automated 
vehicles'' (HAV), the guidelines show that the Federal Government sees 
automated car technology as a safer alternative to cars driven by 
humans. Importantly, the NHTSA establishes a Model state policy. The 
model policy seeks to promote consistency in state autonomous vehicle 
regulations. It allows a manufacturer to focus on developing a single 
HAV fleet, rather than 50 different versions to meet individual state 
requirements. Because State regulations vary widely, a lack of national 
uniformity creates difficult issues for manufacturers and service 
providers.
    FedEx supports Federal efforts to encourage national uniformity as 
innovation offers solutions for our transportation needs However, 
Federal guidelines need to be reasonable and flexible with respect to 
technology developments, and not become overly restrictive, in order to 
allow technology to grow without hindering advances. If guidelines err 
too much on the side of caution, or are too broadly or indiscriminately 
applied, it could slow innovative solutions necessary to overcome the 
Nation's transportation challenges.
Modernization
    Given the state of our country's current infrastructure and the 
projected growth in freight volumes, FedEx supports the modernization 
of trucking equipment standards. FedEx is part of Americans for Modern 
Transportation (AMT), a diverse group of American shippers, deliverers, 
and retailers working to improve transportation infrastructure and 
policy. Fast, safe, and reliable shipping needs to be a top priority in 
building an American economy geared for the future. We can make 
smarter, more effective use of existing infrastructure now, while also 
leveraging technologies and solutions that bring about greater safety 
and efficiency.
    Around 70 percent of all U.S. domestic freight tonnage moves by 
truck--that is 10.5 billion tons of freight. As transportation demand 
has increased over the years, equipment standards for other 
transportation modes have adjusted to accommodate the increased 
capacity--such as rail utilizing double-stacked containers.
    Less-than-truckload (LTL) carriers, including FedEx Freight, rely 
primarily on twin trailers to haul freight. In 1982, Congress fixed a 
standard of 28 feet for twin trailers that States must allow on their 
highways. Capacity expansion has not been adjusted for over two and a 
half decades due to the Federal Government freeze on truck size and 
weight under the Intermodal Surface Transportation Efficiency Act of 
1991 (ISTEA).
    FedEx and AMT strongly support increasing the national standard for 
twin trailers from 28 feet to 33 feet. The adoption of a 33-foot twin 
trailer standard would allow a carrier, on any given lane, to increase 
the volume carried up to 18.6 percent before having to add incremental 
trips. Importantly, 33-foot twin trailers would be subject to the same 
Federal law that applies to 28-foot twin trailers today, which limits 
their operation to the National Highway System (NHS) and gives states 
wide discretion to determine the appropriate segments of the NHS on 
which the equipment can safely operate. Additionally, this solution 
requires no increase in the Federal gross vehicle weight limit of 
80,000 lbs., and therefore, it would not increase wear-and-tear on the 
highway system. In fact, with fewer truck trips, there would be less 
stress on the road system. According to a 2015 U.S. DOT study, if a 
national standard of 33-foot twin trailers had been widely adopted in 
2014, it could have already resulted in over 3 billion fewer miles 
traveled, saved $2.6 billion in operational costs for the LTL industry 
and provided congestion-relief savings for all motorists of nearly $1 
billion.
    Fewer trucks on the road also means significant saving on fuel and 
emissions. By increasing the length of twin trailers by just five feet, 
fuel consumption is reduced by 255 million gallons every year, with a 
concomitant annual reduction of 2.9 million tons of 
CO2 emissions.
    Most importantly, studies have shown 33-foot twin trailers are 
stable and safe. They perform equal to or better than current 28-foot 
trailer combinations in four critical safety measurements: static 
rollover threshold, rearward amplification, load transfer ratio, and 
high speed transient off tracking. FedEx and other trucking companies 
have been operating 33-foot twin trailers for years in states like 
Florida. Our drivers tell us repeatedly they find them to be more 
stable than 28s. In addition to improved stability with the 33-foot 
trailers, safety would be enhanced by simply reducing the number of 
truck trips and miles driven.
FedEx Freight Safety Investment
    FedEx Freight has long been at the leading edge of safety 
innovation and technology in the LTL industry and has an industry-
leading safety record. The following advanced safety systems are 
currently deployed on 80 percent of our road fleet: Collision Warning/
Collision Mitigation, Lane Departure Warning, and Roll Stability. Our 
road fleet will be 100 percent equipped with these systems by June 
2018.
    In addition, our entire fleet is equipped with electronic speed 
limiters, which limit our vehicles to speeds of 65 mph or less. 
Approximately 87 percent of our fleet now has the latest telematics, 
cameras and electronic logging device systems installed and 
operational. That number will soon be 100 percent, well ahead of the 
December 2017 compliance date. FedEx Freight is leading the industry on 
implementation of these safety technologies, and we support an FMCSA 
rule mandating that proven safety systems be in all commercial motor 
vehicles.
Conclusion
    The time is now to modernize our country's transportation 
infrastructure. Freight volumes and roadway congestion are increasing. 
Continued private sector investment in updated safety and efficiency 
technologies should be complemented with Federal and state policies 
that support long-term transportation funding and innovation. 
Collaboration and sustained commitment to modernization will be vital 
to ensuring a reliable transportation system for American consumers, 
businesses and the growing e-commerce marketplace.

    The Chairman. Thank you, Mr. Ducker.
    Next we have Mr. James Pelliccio.
    Did I pronounce your name correctly?
    Mr. Pelliccio. Yes, Chairman.
    The Chairman. And you are the President and CEO of Port 
Newark Container Terminal. That would be in New Jersey.
    Mr. Pelliccio. Yes.
    [Laughter.]
    The Chairman. Mr. Pelliccio is also the President of East 
Coast Operations at Ports America. Port Newark Container 
Terminal is located in Port Newark, New Jersey, and handles 
over 700,000 containers annually.
    Welcome, sir.

       STATEMENT OF JAMES PELLICCIO, PRESIDENT AND CHIEF

       EXECUTIVE OFFICER, PORT NEWARK CONTAINER TERMINAL;

        PRESIDENT, ATLANTIC DIVISION, PORTS AMERICA; AND

            MEMBER, COALITION FOR AMERICA'S GATEWAYS

                      AND TRADE CORRIDORS

    Mr. Pelliccio. Thank you, Chairman Fischer, Ranking Member 
Booker, and distinguished members of the Subcommittee for 
inviting me to appear before you today and share my views on 
multimodal freight policy from a marine terminal perspective. 
I'm representing both Ports America and Port Newark Container 
Terminal as well as the Coalition for America's Gateways and 
Trade Corridors. The Coalition is a diverse group of more than 
60 public and private organizations dedicated to increasing 
Federal investment in America's multimodal freight 
infrastructure.
    Ports America is the largest marine terminal operator in 
North America. We manage operations in more than 42 ports and 
80 locations. In a typical year, Ports America handles more 
than 13 million 20-foot equivalent units, 2.6 million vehicles, 
10.5 million tons of general cargo, and 1.5 million cruise 
passengers.
    Ports America maintains focus in key areas, including 
terminal concessions, joint venture partnerships, 
infrastructure funding, public-private partnerships, labor 
management, and relationships with the world's leading shipping 
lines.
    Above all is our commitment of a culture of safety. The 
health and safety of our employees are our single highest 
priority. Since the 17th century, our harbors and rivers have 
connected North America to the world. Ports, by their nature, 
are intermodal hubs and magnets for trade.
    Sixty years ago, the world's first containership carrying 
58 35-foot trailers from Port Newark, New Jersey, to Houston, 
Texas, launched a new era in cargo transportation. To create 
some perspective, last year, a vessel carrying 18,000 
containers from Shanghai called on the Port of Long Beach, 
California. Changes in the global supply chain, including the 
widening of the Panama Canal, shifts in manufacturing, and 
increasing liner capacities associated with ultra-large 
container vessels add to the urgency of strengthening aged and 
inadequate infrastructure.
    The ability to move freight safely, reliably, and 
expeditiously provides a competitive advantage to U.S. 
exporters and importers in the global marketplace. I applaud 
the members of this committee for prioritizing freight 
infrastructure investment under the FAST Act. This landmark 
legislation is a down payment on our nation's infrastructure 
needs and will begin making improvements necessary to keep pace 
with demands of a growing global economy and population.
    It's not simply a matter of spending. Investment must be 
strategic and cut across traditional modal barriers. Some of 
freight infrastructure's largest, most complex, and most 
desperately needed investments occur where multiple modes come 
together. These instances often require a partnership at the 
Federal level to help disentangle chokepoints, which place a 
multitude of burdens on our communities and inhibit commerce.
    The FAST Act contains criteria written into law that 
focuses on freight movement infrastructure. The goals of the 
program include increasing global economic competitiveness, 
improving connectivity between freight modes, and improving the 
safety, efficiency, and reliability of the movement of freight 
and people.
    Competitive grant programs, such as FASTLANE, assist in 
funding large-scale infrastructure projects. These programs 
span modes and jurisdictional borders, which are difficult, if 
not impossible, to fund through traditional distribution 
methods such as formula programs. These competitive grant 
programs foster public-private partnerships, which are required 
on critical multimodal infrastructure projects.
    By way of example, as part of a restructured long-term 
leasing agreement with the Port Authority of New York and New 
Jersey, Port Newark is undergoing one of the largest privately 
funded transportation projects in the region. This project will 
complement improvements by the Port Authority and Federal 
investments in rail, road, channel, and bridge infrastructure. 
PNCT alone has spent over $200 million in upgrades since 2011 
and will spend between $500 million and $600 million at 
completion of the project.
    Last December, Essex County, New Jersey, submitted a 
FASTLANE application for $29 million for its $112 million PNCT 
Wharf Revitalization project. If awarded, FASTLANE Funding 
would accelerate the reconstruction of an unusable 1,200-foot 
berth. In addition, the project will upgrade an adjoining 
substandard 1,200-foot berth to enable ultra-large container 
vessels to call the port at Newark and support the expansion of 
PNCT's Marine Highway barge service. Seventy-three percent of 
this project would be privately funded.
    FASTLANE, coupled with private capital investments, will 
fast-track Port Newark's development plans years ahead of 
schedule and will allow PNCT terminal operations to coincide 
with the raising of the Bayonne Bridge, the expansion of the 
Panama Canal, and the completion of the New York Harbor and 
Kill Van Kull deepening projects.
    In addition to FASTLANE, TIGER grants are critical for 
transportation projects that are difficult to fund through 
traditional distribution methods. Whereas the FASTLANE program 
was developed with freight-focused investment criteria, the 
TIGER program can address many types of mobility needs, 
including freight, mixed-used infrastructure, and transit.
    While traditional formula programs invest to a standard 80 
percent Federal, 20 percent non-Federal match, under 
competitive grant programs, such as TIGER and FASTLANE, states 
and localities are encouraged to bring their best deals to the 
table, driving innovation and creative funding and financing 
arrangements and frequently reducing the Federal funding share.
    This is exemplified in the Essex County, New Jersey, TIGER 
award at Port Newark Access Improvement, which flipped the 
traditional model, 80/20 formula model, on its head: thirty 
percent of the funding came from Federal Government, and 70 
percent was from private industry.
    According to the USDOT, for every one dollar of Federal 
monies distributed through the TIGER program, $3.50 is 
leveraged through other sources, including private funds. The 
first round of FASTLANE yielded similar results. The grants, 
totaling $800 million, will be combined with other funding 
sources to support $3.6 billion in investment.
    In closing, the Coalition for America's Gateways and Trade 
Corridors recommends Congress take the following steps: develop 
a national strategy that guides long-term planning; provide 
dedicated, sustainable, and flexible funding, a minimum of $2 
billion annually through multimodal, freight-specific 
competitive grant programs; implement a set of merit-based 
criteria for funding allocations; and encourage partnerships 
with the private sector.
    Chairman Fischer, Ranking Member Booker, and distinguished 
members of the Subcommittee, thank you for the opportunity to 
testify today.
    [The prepared statement of Mr. Pelliccio follows:]

 Prepared Statement of James Pelliccio, President and Chief Executive 
Officer, Port Newark Container Terminal; President, Atlantic Division, 
 Ports America; and Member, Coalition for America's Gateways and Trade 
                               Corridors
    I would like to thank you for allowing me the opportunity 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 Ports America/Port Newark Container 
Terminal as well as 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 
Chairman Fischer, Ranking Member Booker and Members of this 
Subcommittee for the opportunity to share my views with you. It is a 
pleasure to sit before the Subcommittee's Ranking Member, Senator 
Booker, and I thank him for his commitment to improving goods movement 
in our home state of New Jersey.
    At the turn of the Century in America, port cities fueled the 
growth of a new nation. Dockworkers built New York into the busiest 
harbor in the Western Hemisphere. Then on April 26, 1956, shipping and 
the supply chain changed forever, as the first containership set sail 
from Port Newark. In the 1960s, the first marine container terminals in 
the world were built on Newark Bay.
    Port Newark Container Terminal, or PNCT, is located at the heart of 
the Port of New York and New Jersey (``PONYNJ''), the largest port on 
the East Coast of North America and second largest port complex in the 
Nation. In 2016, the PONYNJ handled 6.3 million 20-foot equivalent 
units (TEUs) and captured approximately 30 percent of North American 
East Coast market share. PNCT has a substantial imprint in the region, 
occupying roughly 300 acres and handling over 1.2 million TEUs or 20 
percent of the container market share in the Port of New York and New 
Jersey.
    The Port of New York and New Jersey supports 190,100 direct jobs 
336,000 total jobs; $21.2 billion in personal income; nearly $53.5 
billion in business income; and almost $7.1 billion in federal, state 
and local tax revenue across a 31-county region.\1\ Moreover, for every 
job that Port Newark Container Terminal creates, another indirect job 
is created in Essex County, the county in which PNCT is located.
---------------------------------------------------------------------------
    \1\ New York Shipping Association, The Economic Impact of the New 
York-New Jersey Port Industry, July 2014. < http://nysanet.org/wp-
content/uploads/NYSA_Economic_Impact_2014V2>
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    The ability to move freight safely, reliably, and expeditiously 
provides a competitive advantage to both exports and imports in the 
global marketplace. I applaud the efforts made by the Members of this 
Committee in prioritizing freight infrastructure investment under the 
FAST Act. This landmark legislation is a downpayment on our Nation's 
infrastructure needs. It is paramount that we acknowledge that much 
more is needed in order to maintain and improve aging and insufficient 
infrastructure in order to keep pace with the demands of a growing 
global economy and population.
    The multimodal freight network of the United States directly 
supports 44 million jobs and impacts every American's quality of life. 
Moreover, it is a critical force in the world's largest economy: the 
system moves 55 million tons of goods daily, worth more than $49 
billion. That's over 63 tons per capita annually; meanwhile, the U.S. 
population is expected to increase by 70 million by 2045.\2\ Such 
population growth presents both challenge and opportunity--to 
capitalize on a growing consumer base, our infrastructure network must 
be up for the task.
---------------------------------------------------------------------------
    \2\ U.S. Department of Transportation, National Freight Strategic 
Plan, October 2015. 
---------------------------------------------------------------------------
    Every sector of our economy depends on highly-efficient freight 
infrastructure in order to be competitive in the global marketplace, 
and businesses are taking note of deficiencies. According to a 2014 
study by the National Association of Manufacturers, 65 percent of 
members surveyed do not believe that infrastructure, especially in 
their region, will be able to respond to the competitive demands of a 
growing economy over the next 10 to 15 years.\3\
---------------------------------------------------------------------------
    \3\ Horst, Ronald and Jeffrey Werling, National Association of 
Manufacturers, ``Catching Up: greater Focus Needed to Achieve a More 
Competitive Infrastructure,'' September 2014. 
---------------------------------------------------------------------------
    According to the U.S. Department of Transportation, the annual cost 
of congestion, including passenger car delay on roads shared with 
trucks, is estimated at $1 Trillion, roughly seven percent of U.S. 
economic output.\4\ To foster economic growth, retain U.S. businesses, 
and attract new industry, the U.S. needs freight infrastructure which 
provides a safe and competitive platform for the U.S. market. Unique 
from other types of infrastructure wide investment, investment in the 
Nation's multimodal freight network is an economic multiplier. Not only 
are jobs created immediately in the construction phase, but an 
efficient goods movement system will attract and retain U.S. 
businesses, support exports, and benefit the economy for future 
generations.
---------------------------------------------------------------------------
    \4\ U.S. Department of Transportation, National Freight Strategic 
Plan, October 2015. 
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    It's not just a matter of spending. Investment must be strategic 
and 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 disentangle 
chokepoints which place a multitude of burdens on our communities and 
inhibit commerce.
    The FAST Act created a much-needed competitive grant program 
designed to target investments in large freight and highway projects. 
The Nationally Significant Freight and Highway Projects Program, or 
FASTLANE program, contains criteria written into law that focuses on 
goods movement infrastructure. The goals of the programs include, 
increasing global economic competitiveness, improving connectivity 
between freight modes, and improving the safety, efficiency and 
reliability of the movement of freight and people. Competitive grant 
programs, such as FASTLANE, assist 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 formula programs.
    As part of a restructured long-term leasing agreement with the Port 
Authority of New York and New Jersey, PNCT is undergoing one of the 
largest privately funded transportation infrastructure projects in the 
state of New Jersey. Leveraging other multimodal transportation 
projects in the region, funded by the Port Authority and Federal 
investments in rail, road, channel and bridges infrastructure, PNCT has 
spent $200 million in upgrades since 2011 and will spend between $500 
and $600 million by 2030 to complete the project. These upgrades will 
double the capacity of the terminal allowing PNCT to adequately handle 
forecasted increased volumes while improving efficiency and resiliency. 
However, this progress would not be possible with private investment 
alone.
    The County of Essex, New Jersey submitted a FASTLANE application 
under the second round seeking $29.7 million for its $112 million PNCT 
Wharf Revitalization and Improvement Project. Of note, 73 percent of 
this project is privately funded. If awarded, FASTLANE funding will 
accelerate the reconstruction of a decommissioned and unusable 48-year 
old 1,200-foot berth. In addition, the project will upgrade an 
adjoining substandard 1,200-foot berth to enable Ultra Large Container 
Vessels (ULCVs) to call at Port Newark following the completion of the 
raising of the Bayonne Bridge. Additionally the upgrade will support 
the expansion of the Marine Highway barge service system. These 
projects are linked to support a more efficient marine transportation 
system in the region.
    These projects would not be completed in a timely manner using only 
traditional funding. While traditional formula funds complement a grant 
funding approach and provide state departments of transportation a 
funding stream to carry out construction, maintenance and preservation 
of the Nation's highways, their ability to fund non-highway freight 
projects is severely limited. Freight mobility--on all modes--requires 
added capacity and improved efficiency to keep pace with growing 
demands. Connectivity among the modes is key to the efficient movement 
of goods. These large-scale infrastructure projects, spanning modes and 
jurisdictional borders are not funded via traditional methods; 
therefore, we must continue to support non-traditional methods of 
funding in order to ensure the implementation of these key multi-modal 
projects.
    In addition to the Nationally Significant Freight and Highway 
Projects program, TIGER grants, are critical for transportation 
projects that are difficult to fund through traditional distribution 
methods, however the two are not interchangeable. Whereas the 
Nationally Significant Freight and Highway Projects Program was 
developed with freight-focused investment criteria, the TIGER program 
can address many types of mobility needs--including freight, mixed use 
infrastructure, and transit.
    While formula programs invest through a standard 80 percent Federal 
to 20 percent non-federal match, under competitive grant programs, 
states and localities are encouraged to bring their best possible deal 
to the table, driving innovative and creative funding and financing 
arrangements.
    Competitive grant programs frequently drive down the Federal share 
through creative financing arrangements, private sector participation, 
and strong non-federal matching. This is exemplified through Essex 
County, New Jersey's TIGER award for the Port Newark Terminal Access 
Improvement Project, which flipped the traditional 80/20 formula match 
on its head. Thirty (30) percent of funding came from the Federal 
Government, and 70 percent was from private industry. According to the 
U.S. Department of Transportation, for every $1 of Federal monies 
distributed through the TIGER program, $3.50 is leveraged through other 
sources, including private funds. The first round of Nationally 
Significant Freight and Highway Projects program yielded similar 
results: the grants, totaling nearly $800 million, will be combined 
with other funding from federal, state, local, and private sources to 
support $3.6 billion in infrastructure investment.
    As Congress contemplates its Fiscal Year 2017 budget, I urge you to 
retain and robustly fund the TIGER competitive grant program. It has 
been a critical program for freight infrastructure, including ports.
    It is important to note that 95 percent of the market for U.S. 
goods lies outside of U.S. boundaries,\5\ and more than 90 percent of 
global trade is waterborne.\6\ Ports are critical to moving goods 
produced in the U.S. to foreign markets. Decreasing investment in 
transportation and infrastructure is not a choice which supports 
economic growth.
---------------------------------------------------------------------------
    \5\ U.S. Department of Commerce, Build it Here, Sell it Everywhere: 
Why Exports Matter, May 2012. 
    \6\ International Chamber of Shipping. 
---------------------------------------------------------------------------
Federal Role for Freight Investment
    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 to be borne 
entirely by the private sector.
    Without a campaign of strategic investment to expand capacity and 
increase efficiency, U.S. productivity and global competitiveness will 
suffer, costs will increase and investment will lag. As Congress 
considers steps to meet these needs, perhaps through a large-scale 
infrastructure investment proposal, we respectfully ask that the 
following steps be considered:

    Develop a national strategy that guides long term planning: A 
national ``vision'' and investment strategy that shapes and guides the 
Nation's freight infrastructure system with active coordination among 
states, regions, localities is needed. A focus on multimodal freight 
should be established within the U.S. Department of Transportation's 
Office of the Secretary to guide freight mobility policy and 
programming with a particular focus on projects of national 
significance that aid in the movement of commerce.
    Project planning horizons for freight needs extend over multiple 
decades, therefore planning and financing approaches must be 
facilitated to support these long-term projects that enable economic 
growth, both domestically and internationally.
    A unique mix of public and private infrastructure and specialized 
knowledge at the Federal level is required to understand the 
operational and economic differences between the various types of goods 
movement infrastructure. For example, port infrastructure development 
challenges will be different from challenges presented by highways and 
roads. This investment strategy should include innovative and flexible 
approaches to structuring Federal financial assistance in a manner that 
encourages private sector investment.
    Existing and undersubscribed programs such as TIFIA, which hold the 
potential to provide leverage to grant programs and private investment 
need to be retooled from a platform to support public entity partners 
to a platform of public-private partnerships. Over the past two years 
PNCT has continued to work with the Build America Bureau at the U.S. 
DOT to establish creative financing initiatives through the TIFIA 
program in support of infrastructure development in Port Newark.
    Provide dedicated, sustainable, and flexible funding: Federal 
funding should incentivize and reward state and local investment and 
leverage the widest array of public and private financing. In addition 
to current programming, a minimum annual investment of $2 billion 
dedicated to multimodal freight infrastructure, and distributed through 
a competitive grant program is needed. We encourage Congress to provide 
oversight for the existing Nationally Significant Freight and Highway 
Projects Program and the Freight Formula Program to ensure this funding 
is used to improve freight infrastructure.
    Implement A set of merit-based criteria for funding allocation: A 
goods movement funding program, such as the Nationally Significant 
Freight and Highway Projects Program grant program, should select 
projects through merit-based criteria that identify and prioritize 
projects with a demonstrable contribution to national freight 
efficiency. Long-term funding must be made available to ensure that, 
once a project is approved, funds will flow through to project 
completion. Funds would be available to support multi-jurisdictional 
and multi-state projects, regardless of mode, selected on the basis of 
objective measures designed to maximize and enhance system performance, 
while advancing related policy objectives.
    A partnership with the private sector: Private participation in the 
Nation's freight infrastructure is vital to system expansion. Federal 
funding should leverage private participation and provide 
transportation planners with the largest toolbox of financing options 
possible to move freight projects forward quickly and efficiently. The 
establishment of an advisory council made up of freight industry 
members and system users could assist and partner with USDOT in order 
to foster such partnering with the private sector.
    Our nation's ability to move goods is tied to the quality of our 
multi-modal infrastructure, a key component of U.S. economic growth.
    I would like to thank the Committee for their time and attention to 
this critically important topic.

    The Chairman. Thank you, sir.
    And thank you to the panel for your opening statements. 
With that, I will begin the first round of questioning.
    Mr. Fritz, you discussed the importance of a balanced 
regulatory structure for freight railroads which invest 
billions in their own infrastructure. Can you provide us with 
any details as to the consequences of an unbalanced or 
overreaching with Federal regulations for our nation's 
railroads?
    Mr. Fritz. Certainly, Chairwoman. As you recognized, it's 
very important for us to be able to earn a return, and part of 
that is the regulatory environment. We invest something like $3 
billion or $4 billion a year, and we own and maintain our own 
right-of-way.
    Our safety regulatory, the Federal Railroad Administration, 
has recently put forward a potential rule to, for instance, 
mandate two people in a cab of a locomotive. We just heard from 
several panels here exhorting this Committee to support 
autonomous vehicles, both a partner in some cases, and a 
competitive mode in others. It strikes the rail industry and me 
personally as extremely ironic that our primary safety 
regulator would mandate staying frozen in time for the 
railroads versus actively supporting our competitive mode in 
pursuing autonomous vehicles.
    Our point is let technology take us where technology is 
going to take us. I think the regulatory environment that would 
make most sense is one where it's performance-based as opposed 
to command-and-control based. It uses waivers as an excellent 
way to test technology and test out new regulation, and also 
would allow us to test technology with a little bit more 
encouragement as opposed to exhorting us to live in the past.
    The Chairman. If I can follow up with you in that you're 
talking about moving away from the command-and-control style 
regulations, and you talked about performance-based and 
utilizing technology so that you can see even greater safety. 
Give me an example of how that would work exactly and why you 
think it would be safer.
    Mr. Fritz. Sure. So right now we have--Union Pacific has 
three or four installations on our railroad where trains go 
through these installations. Think about them as a portal, a 
gantry, a portal of devices, and at 60 or 70 miles an hour, it 
takes 50,000 images per second of every car on the train. And 
it uses laser infrared imaging, high-speed digital imaging, and 
onsite, it crunches those 50,000 images to determine if that 
car or that intermodal box is in good operating condition. If 
it's not, it identifies where the possible defect is and sends 
that image on to the terminal where the train is going to 
ultimately terminate so that the carmen working in that 
terminal can fix the defect as opposed to spend really 
unproductive time searching for defects.
    What that does is it helps us find more defects than the 
human eye can find, we get it fixed more rapidly, it enhances 
the customer experience, and it removes people from 
environments where there is significantly more risk to them, 
i.e., walking in and around equipment while in a terminal. 
That's something that we would love to be able to advance as a 
methodology for inspecting cars as opposed to forcing our 
carmen to do it by eye.
    The Chairman. Thank you.
    And, Mr. Leathers, I share your concerns about addressing 
the commercial driver shortage. And you mentioned several 
potential ways to address the challenge, including decreasing 
testing delays or requiring the U.S. Department of Labor to 
designate truck driving as a national in-demand occupation.
    How do you believe that greater training or any kind of 
innovative technologies can help us to be able to address that 
shortage?
    Mr. Leathers. So I think, Senator, there's a gamut of 
things that we could and should be doing. I think the first 
thing I'd like to start with is more of a statement. I think 
the men and women that drive, the professional drivers 
delivering our Nation's freight every day, deliver over 70 
percent of the tonnage, and they're doing it in our nation's 
service. And these folks out there work diligently every day to 
try to do it safely.
    What we have to do is find ways, innovative ways, as you've 
mentioned, to allow them to focus all of their efforts 
unfettered on safety and safely delivering of freight, and 
remove any obstacles that aren't directly tied to that specific 
benefit.
    As it relates to driver testing, we've seen driver CDL 
delays. So we take a driver, a driver goes to a truck driving 
school, they graduate from that school, and they want to be 
tested. They have a job waiting for them. So you talk about 
shovel-ready. This is wheel-ready, and we're awaiting their 
employment.
    Well, they may take 2 to 4 weeks in some states before we 
can get them a test. By the time that test takes place, those 
skills have eroded. We need to be able to be quick on the draw, 
be able to eliminate bottlenecks where they exist, and get 
these folks tested.
    Once they test out, we and others like us, still put them 
in a finishing program. So they're not done yet. They come to 
Werner, they go through 6 to 8 weeks of additional training. 
That's necessary. That's something we're committed to, to make 
sure the driver we put on the road is truly professional and 
able to do it as safely as possible.
    But anything we can do, from arbitrary restrictions on CDL 
permitting, where we can't cross state lines where a school may 
exist to be able to get your CDL permit, so you can engage in 
your education and get back to work sooner, those are things 
that we need to focus on.
    I want to correct the record a bit. We're not one that's 
proposing that autonomous trucks are going to solve this 
problem. I do believe that autonomous truck technology solves a 
different problem, which is it allows the driver to have a 
better way of life.
    If we can take the technologies that we're gaining today 
already, what's called Level 2 autonomy, which are integrated 
into trucks today--collision mitigation, integrated collision 
mitigation, forward braking, forward cameras, lane departure 
technology--we can eliminate or greatly reduce accidents on our 
Nation's roadway. We want to see a focus on that type of 
investment, and that kind of investment be better rewarded for 
those people that are taking it.
    You know, I mentioned in my testimony $50 million of 
investment in safety technology, but that's the cost of 
admission. To get that technology, we spent $980 million in the 
last 2 years in capital expenditures for a company that's much, 
much smaller than some of my competitors up here, because to 
get the new technology, you need a new truck to go with it, and 
we're buying those trucks in great volume to try to ensure a 
better lifestyle for our drivers.
    The Chairman. Thank you. Senator Booker and I are 
interested in working on partnerships when it comes to the use 
of technology, and I happen to think transportation is a really 
viable area where we're going to be seeing that in the future. 
So thank you very much.
    Senator Booker.
    Senator Booker. With your permission, Chairman, I would 
like to pass my time on to Senator Hassan.
    The Chairman. OK. Senator Hassan.

               STATEMENT OF HON. MAGGIE HASSAN, 
                U.S. SENATOR FROM NEW HAMPSHIRE

    Senator Hassan. Thank you, Madam Chairman and Ranking 
Member Booker. And thank you for passing your time on to me.
    And good afternoon to all of our panelists. Thank you so 
much for being here.
    I wanted to start with you, Mr. Ducker. We know what a 
critical role the trucking industry plays in our economy and 
certainly in my home state of New Hampshire. And you referenced 
a little bit the things that FedEx have done. You've really 
demonstrated exceptional leadership, as I understand it, in 
using new technology and promoting safety across your fleet. I 
know there is more work that needs to be done to ensure safety, 
and we've been talking about it, and Mr. Leathers was just 
speaking about it. But I'd like to give you an opportunity just 
to elaborate a little bit more on what FedEx is working on and 
what additional measures you hope to see taken in the future to 
improve safety on our highways.
    Mr. Ducker. Well, thank you, Senator Hassan. And you're 
absolutely right. And to Ranking Member Booker's comment, any 
accident is one too many, so improving safety has always been a 
focus for us. That's why we've always been at the top of the 
charts in terms of safety performance.
    So there are a lot of things that I think we could do. We 
are working right now and will have within the year 100 percent 
of our employee road fleets, we're also incenting any of our 
independent service providers, to have the following 
technologies, and Derek mentioned some of them in his 
testimony: collision mitigation; lane departure mitigation; 
roll stability; telematic event recorders, which help inform 
you about the future; electronic logging devices. One hundred 
percent of our fleet is already speed limited at 65 miles per 
hour and has been for many years. Our drivers go through 
extensive training, 100 to 200 hours of one-on-one instruction 
before they ever go out on the road on their own.
    We have a top-notch research and development division at 
FedEx where we look at every new safety technology that's 
coming on the marketplace. If it's out there, we've seen it. We 
take it in, we test it, we determine its viability for the 
operation, and then we seek driver feedback and employee 
feedback on all of those. And once approved, then, as Derek 
said, we spend the capital and we put it to work in all of our 
systems because nothing is really more important.
    I think we have to continue to look at all of those kinds 
of new innovations because the markets out there are changing 
rapidly, supply chains are, and we have to meet those 
challenges with technology where we can. Automated vehicles is 
just one example of that.
    Senator Hassan. Thank you.
    Mr. Pelliccio, I wanted to touch on the Marine Highway 
project with you. Through the Maritime Administration, the 
Department of Transportation is working to better integrate our 
Marine Highway vessels and ports into the Nation's surface 
transportation system. Better integration will help alleviate 
freight congestion and provide additional benefits, such as 
alleviating the impact of shipping on our environment.
    So what is your assessment of the need for this program and 
the feasibility of it?
    Mr. Pelliccio. Thank you. We have spent a considerable 
amount of time studying the 23,000 miles of Marine Highway 
capability that exists in the United States and that are 
underutilized. I have worked closely with the Maritime 
Administration in these discussions, and we're focused on areas 
of the country where we believe this is best served. One 
example is the Northeast Corridor.
    We are currently--we were currently appointed a Marine 
Highway System and began running services on an ad hoc basis 
between Port Newark Container Terminal and Brooklyn Red Hook 
Terminal. If you look at that particular corridor, we refer to 
it as the Liberty Corridor, up through Massachusetts, there is 
a great opportunity to begin to consider through the supply 
chain how overweight hazardous material, refrigerated material, 
can be handled within that corridor.
    We're looking now at different possibilities regarding 
placing of equipment chasses, potential locations, and we're 
studying the feasibility from an economic standpoint on how 
that can compete.
    I see this as complementary to the other modes of 
transportation currently as a marine terminal. We're an 
intermodal function where we turn cargo over to rail, truck, 
and now barge. We're doing it throughout the country to 
different degrees, but in our most congested areas of the 
country, it follows considerable logic, it makes sense for us 
to think about what the future will look like with the change 
in container vessels that will approach many of the gateway 
cities in the United States. Today, we may handle a vessel that 
carries 9,000 containers, but will discharge 2,500 or 1,500 
containers on a particular move. In tomorrow's environment, 
we'll handle ultra-large container vessels that will discharge 
as many as 6,000 and 7,000 containers in that same window and 
will put further pressure on the supply chain.
    So the Marine Highway is, I think, a reality for the future 
of our industry. It's certainly a reality relative to the 
roadway infrastructure that we feed today. The environmental 
impact is inarguable. It makes significant sense for us from an 
environmental perspective. We are working with Labor, we are 
working with the port authorities, and we're working with the 
states to develop a schematic that will allow us to launch that 
program, and we're in the midst of that now.
    Senator Hassan. Well, thank you. And I see that I've gone 
over time. I appreciate very much your work on that, and we'll 
follow up with you about what more could be done to move that 
initiative forward.
    Mr. Pelliccio. Thank you.
    Senator Hassan. Thank you all very much.
    The Chairman. Senator Wicker.

              STATEMENT OF HON. ROGER F. WICKER, 
                 U.S. SENATOR FROM MISSISSIPPI

    Senator Wicker. Thank you, Mr. Chairman.
    And thank you all. I appreciate what each of your companies 
is doing with regard to moving product around the country. I 
hope we get an infrastructure bill. I hope you're all 
enormously successful because that will mean the economy is 
successful.
    As my colleagues know, I've taken a strong position, 
though, against the idea of forcing the Twin 33 trailers on 
states, on the 30 states, that have opted out of this. And 
there are huge concerns, safety concerns, as expressed by 
sheriffs, by the AAA, and by safety advocates that have come to 
see me.
    But my question today, Mr. Fritz, is with regard to whether 
the large-scale implementation of Twin 33s would tilt the 
playing field in terms of competition. Would large-scale 
implementation of Twin 33s negatively affect the railways?
    Mr. Fritz. Senator, we're in the process of evaluating that 
exact question amongst other aspects of the Twin-33 initiative. 
Our historic position has been one where we have not taken a 
position; we have essentially been neutral on the topic. We're 
in the process of reevaluating that, and I do not have a direct 
answer for you today.
    Senator Wicker. OK. You know, there have been a number of 
entities that have reevaluated. For example, the American 
Trucking Association last year lobbied extensively in favor of 
moving to a twin-33 mandate, and they announced in January of 
this year that they do not plan to push in this session for an 
extension length of twin trailers beyond their current legal 
limit. As a matter of fact, the ATA website says, ``We support 
a reformed Federal truck size and weight regime that gives 
states more flexibility,'' and of course, that's what I 
support, ``to authorize safer, cleaner, and more productive 
vehicles, and that retains Federal regulations designed to 
promote interstate commerce.'' So this is the ATA reevaluating 
their position.
    Do you know, Mr. Fritz, if the Association of American 
Railroads has taken a position on twin-33 trailers or increases 
in truck length?
    Mr. Fritz. The Association reflects its membership on the 
topic, which is largely neutral and also in the process of 
evaluating that position.
    Senator Wicker. OK. Well, let me shift briefly in the 2 
minutes I have to this issue of on-dock railway access. And 
this is a concern to my state of Mississippi, because we are 
interested in multimodal and intermodal access with our ports.
    So to Mr. Pelliccio and Mr. Fritz, what suggestions do you 
have to improve transportation efficiency between the railways 
and the ports? And how much does on-dock railway access at 
ports increase the efficiency of intermodal transportation?
    And, Mr. Pelliccio, I'll go to you first.
    Mr. Pelliccio. Well, thank you. And it's actually an 
excellent question. It's critical. When you think about port 
infrastructure, you think, you have to recognize, that we are 
the entry point and the exit point. Our responsibilities to the 
Midwest and non-coastal cities outside of the immediate gateway 
is critical for the supply chain.
    In the case of--and I'll give you one example: We recently 
connected on-dock rail in our Newark operations where we 
brought what was previously a rail yard less than a quarter 
mile from our operation with a rail flyover bridge. We took 
1,000 truck moves a day off the busiest roadway connecting the 
ports of New York and New Jersey from the north end to the 
south end of the port. We took 1,000 truck movements a day 
through that intersection off and connected them directly to 
the rail. We've quadrupled productivity of containers, their 
ability to move containers to that rail yard. And we've 
increased the capacity of that rail yard, lowering the 
environmental footprint caused by moving trucks through a 
public roadway to access that rail yard. That's one example. 
There are many, many examples. If you go to ports throughout 
the tri-coastal footprint, you will see opportunities to 
upgrade port infrastructure.
    Another very good example is the on-dock rail in the port 
of Seagirt, Maryland, where we're working with the Maryland DOT 
and the Maryland Port Authority and CSX to raise the Howard 
Street Tunnel to allow double stacking for rail from the port 
of Seagirt, which will again increase capacity in the North 
Atlantic and the northeastern United States.
    So I don't think you can overstate the importance of 
bringing rail and ports together as the supply chain continues 
to grow. The requirement to feed rail from the ports 
efficiently is paramount.
    Senator Wicker. Madam Chair, I wonder if we could get a 
brief answer from Mr. Fritz on this issue.
    Mr. Fritz. Thank you, Senator. I couldn't agree more with 
Mr. Pelliccio. Likewise, adding in, in the intermodal products 
space, which generates I'll call it 13.5 million units of 
volume annually for the railroad industry, there's that 
critical connectivity between ports, trucks, and the railroads 
where the railroads are part of the solution to much of what 
we've been discussing here today as the potential problem, 
which is, how do you create more capacity in the states' 
highway system and allow for more robust, safer transportation 
via highway?
    Intermodal product is great, and you hit it right on the 
head, Senator, from the standpoint of the connectivity of ports 
to rail to highway is critically important because ultimately 
the last mile or last 50 miles or sometimes the last 150 miles 
are executed by a truck. And so railroads very much support 
robust infrastructure investment. And we love it when you 
perceive that as being critically important in the connection 
points for intermodal product.
    Senator Wicker. Thank you.
    The Chairman. Senator Inhofe.

                 STATEMENT OF HON. JIM INHOFE, 
                   U.S. SENATOR FROM OKLAHOMA

    Senator Inhofe. Thank you, Madam Chairman.
    It's going to be interesting. This Committee and the 
Committee that I chair, and the Environment and Public Works 
Committee, the Transportation Committee, we're all going to be 
working real close together and keeping pretty busy, I think.
    Mr. Ducker, first of all, let me thank you because you 
opened up a big station in Oklahoma City. In fact, you came out 
for the dedication, and I did, too. And I just think it's--let 
me ask you one question about it. I know you have a hundred C&G 
trucks. Is this also, the station, going to be servicing the 
public, too, or just your trucks?
    Mr. Ducker. Just our trucks.
    Senator Inhofe. OK, we'll talk about that.
    Mr. Ducker. Yes, sir. OK.
    [Laughter.]
    Senator Inhofe. All right. No, I was going to ask the same 
question that Senator Hassan asked about some of the innovative 
things that you have done, but you already answered hers.
    Let me, Mr. Leathers, mention one other thing having to do 
with CDLs. The way it used to be, and I know you know this, but 
some of the members of the Committee may not know this, that 
you could go ahead and get a learner's permit or get a driver's 
permit in your home state or in another state, and then when 
you come back to your home state, that would be honored. Then 
the Federal Motor Carrier Administration implemented a rule 
that would prevent that from taking place.
    First of all, I don't understand why they did that. And, 
second, is there a solution to that to accommodate people who 
want to go back to the old system?
    Mr. Leathers. Senator Inhofe, that's a great question. And 
so from our perspective, if we are going to take driver 
training seriously and get best-in-class training out there for 
men and women entering this industry, we are better served with 
larger scale, centralized operations with the best in 
technology, driver simulators, all of the ability that we can 
to invest to make sure that we give them the highest quality 
training. If we were to have----
    Senator Inhofe. Which you could not do with all of the 
states----
    Mr. Leathers. Which you could not do--you could not do 
across 50 states. And so realistically speaking, it is a far 
more cumbersome system we have today for somebody to have to 
get a CDL permit in their home state----
    Senator Inhofe. All right. What is a solution?
    Mr. Leathers. I think we have to allow them to get CDL 
permitting in the state of their school, where they're going to 
be taking their education, just like certification in other 
fields would take place the same way, some sort of Federal 
standard on a CDL learner's permit so that they can go to 
school, be educated, and be prepared for a career where there 
are jobs waiting.
    Senator Inhofe. OK. Well, I will be helpful to you in that 
endeavor.
    Mr. Leathers. Thank you.
    Senator Inhofe. So stay in touch.
    The FAST Act, when we passed the FAST Act, I was Chairman 
of the Environment and Public Works Committee. It was the 
biggest thing that we have done since 1998, and the first time 
that we had a provision in there for a national freight 
program. And it also provided for FASTLANE grants. In fact, we, 
in Oklahoma, had a FASTLANE grant, Mr. Fritz, that was very 
helpful in accommodating people to get by the railroad 
crossings. And I think you probably had some pretty good 
results like we have in Oklahoma. It's kind of a win-win 
situation because it helps the community with their congestion 
and it helps the railroads. Any comments about that?
    Mr. Fritz. Yes. The kind of spending that you've just 
outlined, which in a pure sense is public-private partnership--
--
    Senator Inhofe. Yes.
    Mr. Fritz.--is a perfect way to target those freight 
dollars. We see the benefit when communities want to step into 
an investment with a freight railroad like Union Pacific that 
we couldn't justify the project on our own, but we'll receive 
some benefit from as well in terms of a more fluid network and 
a better service product for the customer base. Grade crossing 
separations are an example of that. So can be last-mile 
investment, like Senator Wicker mentioned. So we are very 
supportive of what you just talked about.
    Senator Inhofe. Yes. Well, it's worked out very well in my 
state of Oklahoma. In fact, you, Mr. Ducker, you cite the 
congestion in our Nation's highways and in our cities as a 
major issue that you face daily. What are some of the proposals 
that you recommend out there that might reduce that congestion?
    Mr. Ducker. Well, I think there are a number of things that 
can. I brought up one in my oral testimony, putting less trucks 
on the road by increasing the capacity of the trucks that are 
already on the road with Twin 33s as opposed to Twin-28 
trailers, as one. Congestion pricing is another thing that 
could be considered. Perhaps new roads that are built around 
congestion areas paid for by tolls. That sometimes has a 
public-private partnership element to it. I think there are a 
number of things.
    Using the technology that my colleagues have talked about 
here early in terms of connecting customers with our vehicles 
and with the delivery schedules that we're on is another 
example of that as well. So those are just a few thoughts that 
come to mind on that.
    Senator Inhofe. That's good.
    Thank you, Madam Chairman.
    The Chairman. Thank you, Senator Inhofe.
    Senator Duckworth.

              STATEMENT OF HON. TAMMY DUCKWORTH, 
                   U.S. SENATOR FROM ILLINOIS

    Senator Duckworth. I want to thank the Chair and Ranking 
Member for convening today's hearing. And I want to thank our 
witnesses for participating in this very important 
conversation.
    Mr. Fritz, as Union Pacific knows, any serious effort to 
improve our Nation's freight rail system must prioritize 
Illinois, the busiest rail hub in America. Can you remind us 
how much freight rail traffic passes through Illinois every 
year?
    Mr. Fritz. Yes. So if I narrow that down to Chicago, it's 
hard for me to speak to the full state, but roughly 25 percent 
of the Nation's freight traffic wants to move through Chicago.
    Senator Duckworth. I like how you say ``wants to move 
through Chicago.''
    [Laughter.]
    Senator Duckworth. We're going to get to that part.
    In your testimony, you touched on the CREATE program, a 
first of its kind public-private partnership to improve our 
region's rail network. In Illinois, we have already experienced 
benefits of the CREATE program. However, I strongly believe 
that CREATE could serve as a model to be copied throughout the 
Nation.
    As a CREATE participant, would you be able to elaborate on 
the program's benefits and share your view on whether Congress 
should consider expanding this model for other important rail 
hubs around the country?
    Mr. Fritz. Absolutely, Senator. And the short answer is I 
am very supportive, and we've had a very positive experience. 
For the rest of the Committee, CREATE was birthed in the early 
2000s, call it about 2002, and it was a partnership between all 
of the freight railroads that serve Chicago, plus Amtrak, state 
and local government, and the Federal Government, and it was 
designed to leverage private dollars, railroad dollars, 
investment dollars, with public spending to benefit both 
Chicago area residents and the Nation's freight rail network. 
It's had tremendous benefit.
    A couple of touch points. The time it takes for a car to 
get through Chicago has been reduced by about a third. That's a 
big lift when you consider how much traffic is trying to make 
it through Chicago. And it's also a big benefit when you 
consider how much traffic moves through Chicago.
    So we've also had an opportunity to reduce emissions in the 
city and in the state because now we have freight trains moving 
more fluidly through. And we've improved safety because what 
you don't want to do is have freight traffic dwell and get a 
community lulled into thinking freight trains aren't moving as 
opposed to moving through routinely.
    So it's had many, many benefits, and we are very supportive 
of finding ways to expand that concept in other locations. And 
we are making small steps in that area in other metropolitan 
cities.
    Senator Duckworth. Thank you. I think the data point that 
people are always astonished to hear--I'm speaking to your 25 
percent trying to get through Chicago--is that it takes freight 
cargo 48 hours to get from the Port of LA to Chicago, and then 
another 30 hours just to get from one side of Chicago to the 
other. And so the 75th Corridor Project, Improvement Project, 
which you talked about under CREATE, is critical not just to 
Chicago and Illinois, but the entire Nation's freight supply 
system. So I thank you for your answer.
    Would you also concur that this project is a textbook 
example of the type of investments Congress intended to support 
when it created the FASTLANE program in late 2015?
    Mr. Fritz. I would say certainly it is. It benefits the 
public, it benefits the Nation's ability to move freight, and 
it benefits our economy by enhancing our ability to produce and 
ship goods.
    Senator Duckworth. Thank you. I want to further expand on 
freight, Mr. Ducker. Would you agree with Mr. Fritz, that 
improving freight reliability benefits companies like FedEx? 
And also I would be interested in your perspective on the 
importance of improving freight efficiencies on the national 
economy and all the different modes of travel as well.
    Mr. Ducker. Yes, I would absolutely agree. With the rapid 
growth of e-commerce in the country, it has really overtaken 
the networks that have been created for many, many years. And 
so we're not modernizing these networks fast enough. Regulation 
is not keeping up with the pace of innovation and automation. 
And so I absolutely agree that it's a crucial issue for our 
country as we go forward.
    I think by some estimates, we'll have a 15 percent 
compounded annual growth rate in freight traffic over the next 
5 to 6 years, and so a lot of that is driven by e-commerce. So 
investment in the infrastructure and also the technology that 
enables the infrastructure has to be a key part of our future.
    Senator Duckworth. Thank you. Would you speak to aviation 
as well? We talked about rail here, but would you like to put 
in your two cents on things like the O'Hare Modernization 
effort?
    Mr. Ducker. Well, absolutely. As one of the larger airlines 
in the world serving 220 countries with a fleet of 655 planes, 
this is near and dear to our hearts. And we've done some pretty 
creative, innovative things with Federal Aviation, but we 
certainly are always looking for ways to innovate and improve 
the aviation sector.
    O'Hare is certainly one of the busiest airports in the 
world. We have a huge facility there with a large number of 
employees. So we're supported. We've already moved our facility 
once in O'Hare to make it a much more smooth-flowing, 
productive, and efficient freight terminal. But certainly those 
projects are very important to us as well, and an updating of 
the architecture and the infrastructure of the Nation's 
aviation system in total is very important to a company like 
ours, as it is to Chicago.
    Senator Duckworth. Thank you.
    I yield back. And I thank the Chair.
    The Chairman. Thank you.
    Senator Udall.

                 STATEMENT OF HON. TOM UDALL, 
                  U.S. SENATOR FROM NEW MEXICO

    Senator Udall. Thank you, Madam Chairman, and thank you, 
Senator Booker, for this hearing. Very good panel. Good to see 
all of you here today.
    Mr. Fritz, we've heard a lot about the border from 
Candidate Trump, and now President Trump, about building a 
wall, about raising tariffs on products coming from Mexico. And 
this talk has caused a lot of major concerns in my home state 
of New Mexico, concerns about whether the President's economic 
policies could hurt jobs and business opportunities. And I 
believe New Mexico could be one of the most hardest hit by a 
trade war.
    New Mexico, most people here probably don't know it, but 
New Mexico exports $1.6 billion in goods to Mexico every year, 
so we have significant trade going on there. I'm headed down to 
the border in a few weeks to celebrate a new port of entry--we 
have several along the border--in Columbus and to highlight 
international trade in nearby Santa Teresa. And as you know, 
Mr. Fritz, you have a substantial operation down there that I'm 
going to talk about in a bit, but I hope maybe you'll join us 
in that trade discussion down there.
    Union Pacific has invested more than $400 million in a 
Santa Teresa rail center. This multimodal complex is located 
along the border near Las Cruces, El Paso, and Ciudad Juarez. 
This center can move tremendous amounts of freight in both 
directions across the border.
    And this week we expect President Trump to formally start 
the process of renegotiating the North American Free Trade 
Agreement. Many folks are on edge wondering how disruptive any 
negotiation process or resulting agreement will be. And one 
thing I feel quite strongly about is that any updated NAFTA 
agreement should be submitted to Congress for approval.
    And so, Mr. Fritz, what does the renegotiation of NAFTA 
mean for Union Pacific, especially at the Santa Teresa facility 
there where you have made such significant investments? And 
what advice do you have for Congress and the Administration to 
ensure that any NAFTA renegotiation is as smooth as possible 
and avoid significant business disruption?
    Mr. Fritz. Thank you, Senator.
    Senator Udall. You bet.
    Mr. Fritz. As I mentioned in my testimony, international 
trade is critical to America's freight railroads. It's critical 
to the U.S. economy.
    Just a couple of touch points. One in three acres in the 
United States is grown for export. Exports supports, or 
international trade supports, something north of 14 million 
U.S. jobs. Our trade relationship with Canada and Mexico is 
really inextricably linked in the supply chains for most, if 
not all, of U.S. industry.
    When I look at the renegotiation of the NAFTA agreement, as 
I mentioned, there are some obvious opportunities for 
enhancement. We've made significant progress, as individual 
countries, on environmental law and regulation on labor law, on 
the development of e-commerce, on the development of complex 
data flows. Those are not reflected adequately in the current 
agreement. So those are all opportunities I think.
    I think there's opportunity for enhanced language on border 
security. My admonition to the Administration, or suggestion, 
is that we tread deliberately and thoughtfully into the 
negotiation, that we do so--I think it would be most effective 
in a tripartite conversation as opposed to two bilateral 
conversations. And I think ultimately the administration talks 
a lot about helping the economy grow at 3 to 3.5 percent and to 
create great U.S. jobs, and NAFTA supports both. NAFTA and the 
trade that is enabled both helps the economy, and the jobs 
related to our international trade in the United States tend to 
pay 15 to 20 percent more than the average. So that's how we 
speak to NAFTA when we talk about it publicly.
    Senator Udall. Mr. Leathers, do you have any thoughts on 
kind of what's swirling around here and how that might impact 
trade there on the border?
    Mr. Leathers. Yes. I mean, for us, it's pretty 
straightforward. Trucking and trade are inseparable. I mean, we 
pay very close attention, Werner in particular. We're the 
largest trucking--truckload company doing business to and from 
Mexico. I've lived and worked in Mexico, in the interior, prior 
in my life. I even ran a Mexican trucking company.
    I agree there are things with a 22-, 23-year-old agreement 
that the time has probably come to look at, but tread lightly 
and be careful and think about what's at stake. This agreement 
has refutably brought a robust trade arrangement between 
ourself and our trading partners. And we're all in the North 
American neighborhood. I mean, we are inextricably linked.
    I think we have to be careful of how we proceed. But we're 
open-minded to the idea of improvements that could be made, but 
look forward to continuing to serve our customers both in the 
U.S., as well as Mexico and Canada, which we do happily today 
at very large volume levels.
    Senator Udall. Thank you both and thanks to the whole 
panel.
    Thank you, Madam Chair.
    The Chairman. Senator Blunt.

                 STATEMENT OF HON. ROY BLUNT, 
                   U.S. SENATOR FROM MISSOURI

    Senator Blunt. Thank you, Chairman.
    Mr. Fritz, in the last Congress in the long-term 
transportation package we call the FAST Act, we had a provision 
in there that I wrote that streamlined the permitting process 
for railroads just like we had tried in an earlier version of 
the transportation bill to streamline permitting for highways. 
Do you have any sense of the implementation of that so far? Or 
if not, how important it is we're able to get to the work that 
we need to do?
    Mr. Fritz. Senator Blunt, I do not have a good answer for 
you as regards the current implementation of that. I can tell 
you that we applauded the inclusion of that language. When 
you're trying to invest $3 billion or $4 billion a year as a 
company or tens of billions of dollars a year as an industry 
into your private network, it's shockingly hard.
    I think the vast majority of the American public would not 
recognize how difficult it is to put a dollar in the ground in 
the United States if you're a railroad. So being able to 
streamline that process and bring a little bit of sensibility 
to it helps us. It helps us because, as I mentioned in 
testimony, we make very large, very long-term dollar bets. And 
when that time-frame is extended on the front end, once you've 
made the decision that an investment makes sense, all you're 
doing is enhancing the risk, most likely increasing the cost, 
and you probably haven't done anything to increase the 
benefits.
    So it just makes a risky investment all the more risky. And 
the bottom line of those investments is so that we can provide 
a much better experience for our customer base, which is 
building America, which is essentially the fabric of the 
American economy.
    Senator Blunt. Thank you for that. As we look down the road 
of what comes next, we're seeing this great opportunity, and 
world food demand doubling in 35 years or so, world food need 
will double, and 10 years longer than that, we think the demand 
comes even quicker. You've got at the table people who really 
have a sense of the intermodal from air freight to truck to 
train.
    What do we need to be thinking about that makes that 
intermodal competition work better for us than it's working 
now, and hopefully better for us than it works anywhere else? 
But give me a sense of how we maximize what we do and the ways 
we do it so that we maximize our competitive opportunity.
    Mr. Ducker, do you want to start?
    Mr. Ducker. Certainly, Senator Blunt. Thank you for the 
question. And interestingly enough, we all three work together 
to deliver that today. We use each other's networks. We're each 
other's partners and customers. And so it's a very important 
concept for the growth of the transportation network long term.
    I think probably the most important thing that we have to 
do is to find a method of funding and get started. There are 20 
or so projects. I have a list of them here with me today that 
are ready to go as soon as we can. They've been highlighted as 
real congestion and chokepoints. So I think that's one thing.
    And I think finding a sustainable source of funding, one 
that doesn't run out year one. But how do we fund it for the 
future so that we can secure these networks for the long haul?
    And then, third, what kind of regulation do we create that 
allows for greater innovation, greater use of the technology, 
to connect those kinds of networks together?
    Senator Blunt. And you've got the 20 places we ought to 
start? Is that what you're telling me?
    Mr. Ducker. Well, I've got a list. It's not my personal 
list, but it is one that certainly has received some widespread 
attention.
    Senator Blunt. If you haven't offered it already, I would 
hope you're sure to leave it with us before you leave. I would 
like to look at that.
    Mr. Ducker. I will definitely leave it here. There are real 
chokepoints.
    Senator Blunt. Mr. Leathers, same concept.
    Mr. Leathers. Well, I concur. I mean, I think when you 
think about a national highway system that represents 5 percent 
of the road miles in America but carries 93 percent of truck 
vehicle mile traveled, we've got some work to do on that 
infrastructure. But to the intermodal point, we do business and 
work with everybody at this table on a daily--or a monthly, if 
not daily, basis.
    I think what you will find is that freight transportation 
is becoming increasingly complex, people want everything 
tomorrow, and we can't allow ourselves or our organizations to 
be petty about what mode it moves. Our expectation is to find 
and be mode-neutral, find a way to get it to them most 
efficiently.
    And so where the investment dollars are needed is in these 
intermodal connected facilities, these bottlenecks that have 
been identified clearly by the American Transportation Research 
Institute. And some of those are highway-specific. Some of 
those are truck-centric. Many are not. Many are intermodal hubs 
where we're all interacting together.
    And so I think if we're able to be mode-neutral on those 
investment dollars and put them where the pain is, we can go a 
long way in a short time with releasing some of this congestion 
that's out there tearing up the American public's cars. I mean, 
one of the estimates has average damage to a vehicle today at 
$523 a year in just road damage wear and tear. That's avoidable 
expenses if we get after funding.
    And I agree with Mr. Ducker that it's an ``and'' 
proposition. There's not a single silver bullet. But we need to 
explore all options. We certainly have preferences of some over 
others. And simply stated, our preference for fuel tax is just 
that it has the highest percentage of dollars raised going to 
the actual fund versus being diverted to administration of the 
actual collection activity itself.
    Senator Blunt. Thank you. I'm out of time. I may have a 
couple of questions to submit for the record, Mr. Pelliccio, to 
you and others on that same topic. So thank you.
    Mr. Pelliccio. Thank you, Senator.
    The Chairman. Senator Blumenthal.

             STATEMENT OF HON. RICHARD BLUMENTHAL, 
                 U.S. SENATOR FROM CONNECTICUT

    Senator Blumenthal. Thank you, Madam Chair.
    I'd like to ask each of you, how far away do you think 
driverless trucks are? I assume that it's in years, not months.
    Mr. Leathers. I guess I'll start. Obviously, technology is 
evolving very rapidly. What we like about it is that we get the 
safety benefits in the short term. I think we're a long, long 
way away from true driverless trucks going down America's 
roadways and hauling 80,000 pounds of gross vehicle weight 
without a driver in the cab.
    Planes have been able to take off and land for a long time. 
None of us got here today in a pilotless plane. I think these 
professional men and women do many other tasks other than just 
driving, and the anticipation and professionalism they bring to 
the job can't be underestimated.
    Senator Blumenthal. So maybe I misheard. A long ways away?
    Mr. Leathers. So I believe, and if you speak to some of the 
autonomous companies themself, there's rhetoric around 5 to 10 
years from being able to reliably go from exit to exit, which 
means you'd still have a driver in the cab even then. I believe 
those estimates may prove to be optimistic. But we need to 
embrace their endeavors because from their endeavors, we 
receive today collision mitigation technology, lane departure 
technology, lots of benefits that our drivers are able to 
enjoy, and more importantly, the motoring public is able to be 
made safer.
    Senator Blumenthal. Mr. Fritz?
    Mr. Fritz. Senator Blumenthal, I'll leave the timing 
question to my trucking expert panelist partners. But one thing 
that I would add to the discussion is there is not a lot of 
conversation about the necessary infrastructure that's not 
truck-based that would enable true autonomous vehicles 
traveling around the country. They need well-defined lanes. 
They need lots of communication infrastructure.
    And in your mind's eye, you think about the roads that you 
travel on, that you see trucks on. Do all of them have 
excellent lane designation? Are they all uniform? Do they have 
excellent signage? Do they have excellent signal? So there's a 
lot of infrastructure that goes into enabling a nationwide 
network of autonomous vehicles----
    Senator Blumenthal. And we're nowhere near that.
    Mr. Fritz. Not very close.
    Senator Blumenthal. Mr. Drucker--Ducker, I'm sorry.
    Mr. Ducker. Yes, sir, Senator. Thank you for the 
opportunity to comment. You said, is it months or is it years? 
And it is years away from that. But I do believe we should 
embrace the technology. These driver-assisted systems----
    Senator Blumenthal. But when you say ``years''--and I'm not 
holding you to your estimate--I don't think you're under oath. 
In the Judiciary Committee, we swear every witness in, but not 
here.
    Mr. Ducker. Yes.
    [Laughter.]
    Senator Blumenthal. So I'm looking for, as a complete 
layman in this area, 5 to 10 years. It's not 5 to 10 decades, I 
assume. But I will just say as a layman and as a driver, I have 
some severe apprehension about the idea of driverless trucks. 
And so I'm looking for just a general estimate.
    Mr. Ducker. Well, I think Derek stated it quite well. We 
have one of the most modern fleet of aircraft available in the 
world today, and we still have a pilot behind the wheel of that 
airplane. And so I think total autonomy is years and years 
away. I think you can get to a situation where you have 
platooning, and that quite possibly is a driver-assisted system 
that would--is safer. The reaction time on those, one-tenth of 
a second compared to a second for human interaction.
    So I think you will progress over time, but I think we 
should embrace it in order to improve the overall freight 
transportation network. And certainly I think a driver's job, 
to the shortage problem, would be enhanced greatly with these 
automated systems over the course of time, not, as some have 
stated, replace the driving job. I don't believe that's going 
to happen anytime soon.
    Senator Blumenthal. Thank you. I'm happy to let you off the 
hook because I'm about to run out of time, Mr. Pelliccio, but 
please answer if you----
    Mr. Pelliccio. Senator, our paradigm is different. Four and 
five thousand mile networks as opposed to four and five hundred 
acres. Technology plays a very important part for safety and 
productivity in our operations, and automation in many cases is 
much closer to being a bigger part of our operation in the 
future. But it is a different paradigm, but it plays a critical 
role.
    Senator Blumenthal. Well, I just want to make the point 
that last year the National Highway Traffic Safety 
Administration issued guidance, only guidance, for automated 
passenger vehicles, also known as driverless cars. Later this 
year, the Federal Motor Carrier Safety Administration, the 
agency that oversees the trucking industry, is expected to 
issue similar guidance as to driverless trucks.
    And I believe, going especially to Mr. Fritz's point--and I 
agree wholeheartedly--that there is a need for real rules of 
the road, literally rules of the road, if we are ever to change 
the current model of how trucks are driven, in other words, 
without human beings driving them. Someone has to drive them.
    And even with drones--and we're just developing the rules 
of the road for drones, and a lot of it's being done at the 
state level, as I know from my own state of Connecticut--there 
still have to be drivers. They are automated to the extent 
they're up in the air without someone actually in them, but 
someone is actually driving them in the sense of determining 
where they go. So I appreciate your answers because I think 
they illuminate the work still to be done apart from the 
technology because even with the best technology, you're still 
going to need rules, and I hesitate to use that program 
regulation, but you're going to need regulation. This is an 
area where regulation is going to be important. So thank you 
for your testimony.
    Thanks, Madam Chair.
    The Chairman. Thank you.
    Senator Booker.
    Senator Booker. Thank you very much, Chairman.
    So, Mr. Pelliccio, thank you very much for being here and 
representing the great state of New Jersey.
    Mr. Pelliccio. Thank you, Senator.
    Senator Booker. Do you feel some Jersey pride right now?
    Mr. Pelliccio. I do. Thank you.
    Senator Booker. I'm grateful for that, sir. I'm really 
grateful for that.
    Mr. Pelliccio. All right. Maybe we can have dinner in 
Newark.
    Senator Booker. And listen to some Bruce Springsteen at the 
same time.
    Mr. Pelliccio. All right. We'll do that.
    Senator Booker. Good.
    [Laughter.]
    Senator Booker. So you talked about the importance of these 
grants that we've been applying to really--I was pleased one of 
the first things we were able to get done as a Senator, was get 
a TIGER grant for the port area. But can you help me understand 
why these competitive grants are important as opposed to just 
giving money through the states in accordance to sort of the 
freight formula? Can you sort of--are there ways that we can 
improve these programs? Do you have any ideas or thoughts on 
that?
    Mr. Pelliccio. You know, Senator, the competitive platform 
for TIGER and FASTLANE really provides an environment for 
individual projects, complex multimodal projects, in the case 
of supply chain, to be able to get on the table and combine 
both private sector capabilities and dollars with public grants 
to really accelerate projects, projects that are--we've spoken 
a lot today about the supply chain and the connectivity of the 
supply chain--projects that would otherwise be delayed or go 
unfunded. And you find that very much in the port network.
    We know that the FASTLANE grants and the TIGER grants have 
been oversubscribed significantly. And we understand that. But 
to me, it's really a leading indicator relative to just how 
important they are and how many critical projects are out 
there, fully recognizing that you cannot solve every problem 
every day.
    But if you look at the traditional models, the 80/20 model 
for federally-funded projects, every project that I've engaged 
in or at least put on the table had a 70/30 share with private 
dollars coming in, and significantly reducing the Federal share 
of those grants.
    So I think it puts our best ideas forward. It allows us to 
rank projects. It's a bottoms-up process that comes from the 
state and project level, and it's a very, very effective 
platform.
    Senator Booker. And I will just emphasize what you said, 
it's very effective, and, frankly, for those taxpayer dollars 
invested, there's a huge multiplier effect in terms of economic 
growth, job opportunities, and the like.
    Mr. Leathers or Mr. Ducker, can you just comment on the 
fact that we're talking about a massive infrastructure 
investment in this country, and there are different 
philosophies, let's say, about the ways to do it? Some folks 
want to do it just from tax breaks to the private sector, which 
I imagine would mean more tolls. As opposed to direct 
investment, just doing it through tax breaks, what effect would 
that have on your industry?
    Mr. Leathers. Do you want to go first?
    Senator Booker. D comes before L, so let's go with Ducker.
    [Laughter.]
    Mr. Ducker. OK. I think it's going to require a variety of 
methods, but we have said we believe the most direct method, 
the quickest method, the easiest to collect, has been the index 
of fuel tax or vehicle user fees.
    Senator Booker. Right.
    Mr. Ducker. And so some of the other items that have been 
stated should be considered as alternatives. That's the most 
direct----
    Senator Booker. If I can cut you off, direct payments?
    What about you, Mr. Leathers?
    Mr. Leathers. Well, so similarly. I mean, the fuel tax we 
think is the easiest, most efficient, cleanest, in terms of 
administration to get funds into the private place. There's a 
place for private-public partnerships at certain bottlenecks, 
but that's a small----
    Senator Booker. What would tolls do to your----
    Mr. Leathers. Tolls, we are averse to tolls on existing 
highways in a very significant way. I mean, these roads are 
built. We would like to see them repaired and funded through 
alternative methods. Tolls, in the best case scenario, use 12 
to 14 percent of the cost of the toll in the administration of 
the booth, you know, of the tolling process; worst case, 30 
percent. That's an inefficient use of funds. Just the 
administration of it alone.
    Senator Booker. They create bottlenecks, environmental 
issues----
    Mr. Leathers. They create bottlenecks. They create 
environmental issues.
    Senator Booker. So real quick, you mentioned a lot about 
the technology from automated cars.
    Mr. Leathers. Yes.
    Senator Booker. This is one way that we should be pursuing 
for safety, right? Because there's a lot of, let's just say, 
electronic logging devices, crash-avoidance technologies. These 
are things that you realize that we should be deploying more in 
the industry, correct?
    Mr. Leathers. We are 100 percent supportive of electronic 
logging devices. We are placing, as I mentioned earlier, $980 
million of CAPEX in the last 2 years in integrated safety 
technologies. We believe the dollar in the investments there--
nothing we do is worth getting hurt or hurting others, 
obviously, but there's an investment, there's a return on 
investment in these safety dollars and these integrated 
systems.
    Senator Booker. OK. So speaking, Mr. Fritz--I didn't want 
to leave you out here, and it's good to see you here, I'm 
grateful that you are--when it comes to truck size and weight, 
we have a very complex intermodal industry. Every aspect, 
trucks, air, all of that is integrated into one. I just want to 
ask you, most people don't think about what impact increasing 
truck size and weight would have on the rail industry. Can you 
tell me what impact it would have on your industry really 
quickly if you can?
    Mr. Fritz. Yes. Potentially, it would take freight that's 
traveling on trains and put it back on the highway potentially. 
Our perspective on increasing truck size and weight is, first, 
let's make sure user pays for the consumption of what's being 
consumed today before we start growing beyond current 
consumption. And we're agnostic as to exactly how user pays; 
fuel tax, weight fees, we really don't care.
    Senator Booker. And then last question, Mr. Leathers, I'm 
going to treat you as a hostile witness, just yes or no, 
please. Is it true that you played football for Princeton 
University?
    Mr. Leathers. Yes.
    Senator Booker. And it is true that Princeton University is 
located in which state, sir?
    Mr. Leathers. New Jersey.
    Senator Booker. Thank you very much.
    [Laughter.]
    The Chairman. Do you all see what I have to put up with?
    [Laughter.]

               STATEMENT OF HON. MARIA CANTWELL, 
                  U.S. SENATOR FROM WASHINGTON

    Senator Cantwell. Thank you, Madam Chair. And thank you and 
the Ranking Member for holding this important hearing.
    I think what I would like to do is see if I can get the 
witnesses on record about what we need to do to continue our 
investment in freight mobility and our port infrastructure. I 
notice that Canada is investing about $2 billion annually, and 
while we did a good job in the FAST Act, I don't know that the 
``skinny budget'' has any numbers or anything on this thus far. 
So I wanted to get a sense from you of what kind of--not a 
number, but the commitment to continue to make these 
investments and the notion that the ports aren't really able to 
do all this landside investment to help us.
    Second, about the last mile, we obviously have lots of port 
railroad infrastructure that is just the last mile. What do we 
need to do to make sure that we are recognizing this as a key 
freight mobility issue as well?
    So any of the witnesses who want to----
    Mr. Fritz. I'll start and then turn it over. Thank you, 
Senator Cantwell.
    So a two-part question. The first part is, are we investing 
enough and what should we be investing in our port facilities? 
I would encourage you all, I just had an opportunity about 3 
months ago to go visit a facility in LA, it's called--actually 
Long Beach--Long Beach Container Terminal, LBCT. The owner of 
that terminal is in Phase 2 of a three-phrase build-out. This 
particular installation in the port by itself is going to be 
capable of handling 2 million TEUs by the end of Phase 2 and up 
to 3 million if it goes through all three phrases. And it's a 
completely automated terminal. That's the kind of investment 
that the terminals of the future are going to have to be in 
order to compete globally to attract the freight that wants to 
move.
    Whatever we can do to encourage technology investment like 
that, automated vehicles onsite, all battery-powered, not much 
interaction from once the container ship is docked to when the 
container is on a dray chassis and heading out the dock. As a 
matter of fact, they've cut in half the amount of time it takes 
a drayman to pick up a box and leave.
    So in the port facilities, there are examples, they do 
exist, and we can be globally competitive with that kind of 
investment.
    In terms of the last mile, again, we've talked about it 
several times today, investing in the connectivity between 
modes is a win for the United States. We are the envy of the 
world when it comes to our freight network. Anything we can do 
to help ease bottlenecks and lubricate the system--and that 
usually needs to happen at interchange points--is a win for the 
U.S. economy.
    Mr. Leathers. I would just like to echo some of Mr. Fritz's 
comments. I think one of the misnomers out of hearings like 
this, and inevitably comments that come thereafter, are, you 
know, people thinking truckers, for instance, are looking to 
keep everything on the highway. The fact of the matter is when 
we get a bid in from a customer, the first thing we do is look 
to see what's the best modal solution. And seldom do we touch 
freight that didn't originate at a port or isn't destined on 
the other end at a port.
    And so putting money into bottlenecks around the country is 
critically important. And again I'll restate, on occasion, that 
may be a bottleneck in an urban market like Atlanta or Dallas 
or a metropolitan area that isn't directly related to a major 
freight hub as it relates to intermodal. Other cases are 
clearly identifiably intermodal in nature. But if we focus our 
efforts on the 14 to 15 largest bottlenecks in this country and 
really put the medicine where the pain is, we can go a long way 
toward eliminating the congestion that this industry has been 
suffering from for a long time.
    Senator Cantwell. So there isn't any magic that says that 
Canada--that we can be so efficient that we can invest less 
than they're investing, is there?
    Mr. Leathers. Not in the current conditions of our 
infrastructure.
    Mr. Pelliccio. Senator, I would suggest from a port 
perspective, automation is certainly a critical part of our 
future, and we are investing in automation on a number of 
levels across the portfolio. But I think it's an important 
question because we need to be sure that there are dollars 
secured for the physical infrastructure that has at times in 
many cases in our gateway cities has deteriorated. We are 
putting significant private dollars into these ports now. And 
we spoke quite a bit about FASTLANE and TIGER grants and other 
opportunities to work in partnership with the Federal 
Government to bring the physical infrastructure up. With the 
widening of the Panama Canal and the shift in manufacturing to 
Southeast Asia, you'll see more and more--you'll see larger 
vessels coming to our ports over the next couple of years, and 
the port infrastructure has to be prepared to handle that.
    I can say we're making gains, but there is much more work 
to do. The fact that we're having this hearing today and ports 
are at the table. Oftentimes we find ourself in a different 
room when we're discussing transportation dollars because we're 
somewhat isolated and our business is run separately from what 
the average citizen sees every day on the roads until something 
goes wrong.
    So be assured that technology is important, it is for our 
future. Available dollars for infrastructure investment in our 
key ports is critical.
    Senator Cantwell. Thank you. I couldn't have said that 
better in the context of this is why we wanted the freight 
policy to begin with. And I think what you're alluding to is 
that we actually could lose business if we don't keep at this 
task. We definitely could get in a position where our delivery 
of products and services could be choosing different routes 
because of our level of congestion.
    Mr. Pelliccio. Clearly. And I'll leave you with this, 
Senator. Our exporters are most sensitive to costs in our 
transportation network and the supply chain for the markets 
that they will sell to and market to around the world. And our 
ports are the beginning of the first mile and the beginning of 
the final mile, and they're in significant need of attention. 
And we're working hard to get there. There are a lot of good 
news stories out there, but it's a void that needs to be 
filled.
    Senator Cantwell. Thank you.
    Senator Booker. Chairman, can I just--I want to reiterate 
that point because it was something I saw when I was Mayor, 
that literally we could be losing business to other countries 
because of the inadequacies of our ports as they stand today.
    Mr. Pelliccio. No question. And quite honestly, Senator, 
the transportation logistics and distribution opportunities 
that exist in our urban cities that serve as gateways for many 
of these ports are--we haven't spoken about that, but if you 
look at how cargo moves today and how the Internet has changed, 
how people buy, the goods, the final mile of goods, is moving 
closer to the actual consumer, and cargo in ports, consumers 
have wrapped themselves historically around ports. Our cities 
have grown from port cities. That infrastructure is critical to 
the development of the supply chain moving forward.
    Senator Booker. Thank you. Thank you.
    The Chairman. My thanks to everyone today. I appreciate the 
comments from the panel.
    The hearing record will remain open for 2 weeks, and during 
that time, Senators are asked to submit any questions for the 
record. Upon receipt, the witnesses are requested to submit 
their written answers to the Committee as soon as possible.
    Again, thank you to our panel. We are adjourned.
    [Whereupon, at 4:07 p.m., the hearing was adjourned.]

                            A P P E N D I X

   Response to Written Questions Submitted by Hon. Amy Klobuchar to 
                           Derek J. Leathers
    Question 1. Several of my colleagues noted before I had to leave 
the hearing that as we explore options for modernizing America's 
infrastructure we will need multiple strategies. However, we cannot 
understate the critical role of direct Federal funding for 
infrastructure projects especially in rural communities.
    Mr. Leathers, you note in your testimony that freight bottlenecks 
create costly delays. These bottlenecks are located in both rural and 
urban areas. How could direct Federal investment in rural areas improve 
the flow of freight?
    Answer. The Department of Transportation (DOT) is projecting that 
congestion will worsen in both urban and rural areas if investment in 
highway capacity continues to fall short of needs. Investments in 
reducing bottlenecks and identifying key freight networks will improve 
all aspects of freight movement and the economies in rural and urban 
areas. For instance, the rural economy has a significant stake in an 
efficient freight transportation system because transportation accounts 
for a large share of the production costs for goods such as 
agriculture, mining, and energy products that are the economic 
foundation of many rural communities. Addressing the capacity needs of 
rural roads will prevent increases in the costs of freight 
transportation, making U.S. products more competitive in global 
markets, and lowering prices for American consumers throughout the 
Nation for essentials such as food, fuel, and home energy needs. It 
should be noted that rural highway investment challenges will not be 
solved by the private sector because the greater density of traffic in 
urban areas will always be more attractive to investors. Therefore, 
direct public investment by local, state, and Federal Government 
agencies is critical to improving the safety and efficiency of rural 
highways. Werner commends Congress for the significant steps taken in 
the Fixing America's Surface Transportation (FAST) Act toward ensuring 
that federal-aid dollars are invested wisely through the creation of 
the National Highway Freight Program and Nationally Significant Freight 
and Highway Projects program. These actions and programs will 
significantly improve the ability of transportation agencies to better 
focus investment in rural and urban areas.

    Question 2. Apprenticeships provide workers an opportunity to stay 
in the labor market, earn a living wage and pursue a recognized 
credential. For employers, apprenticeships provide a custom-trained 
workforce and improved safety outcomes. That's why I introduced the 
American Apprenticeship Act with Senator Susan Collins to provide 
funding for tuition assistance programs to help participants in pre-
apprenticeship and Registered Apprenticeship programs.
    Mr. Leathers, Werner Enterprises started the industry's first 
Professional Truck Driver Apprenticeship program. Has the 
apprenticeship program improved recruitment and retention of new 
drivers? What incentives could be helpful for other companies to start 
their own apprenticeship program?
    Answer. Thank you for placing a priority on introducing legislation 
with Senator Collins to improve opportunities for workforce development 
and connecting workers to jobs. Werner has made significant efforts to 
grow the driver workforce by partnering with the Department of Labor 
(DOL) and the Department of Veteran Affairs to start the industry's 
first Professional Truck Driver Apprenticeship program to further 
invest in the development and training of professional drivers. Werner 
partners significantly with truck driving training schools to ensure a 
stable flow of highly trained, professional drivers in a time when the 
entire industry is facing a significant driver shortage. Werner has a 
student driver program that provides tuition reimbursement for 
professional drivers in truck driving training schools. Werner believes 
incentives should be considered for providing additional Federal funds 
for driver training programs and removing barriers to students seeking 
Federal aid to attend truck driving schools. The DOL should be directed 
to establish truck driving as a national in-demand occupation, which 
would free up resources devoted to filling vacant truck driving jobs. 
It is important to have a legislative and regulatory environment that 
allows workforce development and job placement opportunities.
                                 ______
                                 
 Response to Written Questions Submitted by Hon. Richard Blumenthal to 
                           Derek J. Leathers
    I understand that excessive wait times during the loading and 
unloading process are a serious problem in the trucking industry, 
particularly for small companies who don't have the negotiating power 
to charge for detention time, which is the time drivers must 
excessively wait during loading and unloading. Some argue that many 
truck drivers give away dozens of hours each week waiting for their 
truck to be loaded or unloaded.

    Question 1. Do you perceive excessive wait times during the loading 
and unloading process as being a problem for the industry?
    Answer. Yes, excessive wait times can adversely impact efficiency 
in trucking operations. Carriers cannot plan for unexpected delays at a 
customer facility, which means tying up capacity while waiting for the 
opportunity to load or unload. This has a negative impact on safety, is 
part of the reason why the industry experiences high driver turnover 
rates, and raises the cost of shipping goods for consumers as it lowers 
overall productivity. The trucking industry takes any type of wait time 
or delay on our ability to move freight in a serious manner. This is a 
concern that is felt across the entire industry, whether the company is 
large or small. Our industry aims to service our customers with 
consistent reliable service that the American economy demands. Due to 
the ongoing concern of wait times, Congress has instructed that DOT 
complete an audit of detention time issues through the FAST Act. The 
audit is currently underway, and the industry is awaiting its findings. 
It is our hope that the audit will be a catalyst for action, and 
Congress will have to determine what steps, if any, it should take to 
protect efficient good movement from excessive wait times.

    Question 2. Is the lengthy detention of drivers a problem for your 
company?
    Answer. It is definitely still a challenge for our drivers, however 
Werner has worked extremely hard to partner with our core base of 
shippers to create as many drop trailer opportunities as possible to 
limit and reduce wait times for our drivers. This is one of our top 
priorities from a freight characteristics perspective as we onboard new 
freight opportunities. Our goal is to move our customer's goods in a 
safe and efficient manner. Certainly any lengthy times when our drivers 
are not moving goods is a concern, because that is an indicator of a 
lack of productivity. We closely monitor all aspects of our drivers' 
productivity, whether that be detention time concerns or even delays 
caused by congestion on our Nation's roadways.

    Question 3. Is this a problem in the industry?
    Answer. Yes, it is a challenging issue for the industry.

    Question 4. Is this a problem for independent drivers?
    Answer. Excessive wait times are a significant problem for all 
drivers of the industry, whether independent owner-operators or 
professional drivers of large companies like Werner Enterprises.

    Question 5. How should it be addressed?
    Answer. There is no easy answer on how to address wait times on a 
holistic level across the trucking industry due to the diverse nature 
of operations in the goods movement sector. For example, wait times at 
our Nation's port facilities may have specific mitigation needs as 
compared to wait times that drivers experience at a warehouse or 
traditional shipper. However, the market demands efficiency and it is 
likely that market forces will eventually solve any obstacles standing 
in the way of the American consumer. Since this problem is not uniform 
in nature, we do not see any ``one size fits all'' solution. The 
industry will continue to address the problem through agreements 
between carriers and their customers. The implementation of Electronic 
Logging Devices will also have a vital impact illustrating the use of 
time by a driver and will be a tool for collaboration amongst the 
industry. As DOT continues its audit of detention time, the Agency will 
hopefully undercover some common trends that the industry and our 
government partners can address. The research will provide a better 
understanding of the magnitude and implications of the detention time 
problem, and any attempts to address it through legislation or 
regulation would be premature before that research is completed.
                                 ______
                                 
     Response to Written Questions Submitted by Hon. Todd Young to 
                           Michael L. Ducker
    Question 1. Mr. Ducker, revitalizing our Nation's infrastructure is 
an important part of the agenda for this committee and this 
administration. As we build infrastructure, it is important that we 
consider future growth trends and the intermodal needs of tomorrow. I 
know FedEx spends a tremendous amount of time looking ahead. Indiana is 
home to one of the largest FedEx transit hubs that employs thousands of 
Hoosiers. Can you speak to where are you seeing future growth, not just 
in Indiana but more broadly? Where should Congress be investing not 
only to repair existing infrastructure needs, but also to efficiently 
invest in needs ten and twenty years from now?
    Answer. We must maximize our existing infrastructure. Our 
interstate system is now over 60 years of age, and it is in desperate 
need of updating. We need both short and long term investment.
    Short term, we must stop the deterioration of many interstate roads 
and bridges that have long suffered from neglect. There are over twenty 
interstate highway projects that are engineered and could move forward 
now if funding were available. Long term we need a plan to modernize, 
improve, and expand the entire system.
    Freight volumes are projected to increase 45 percent by 2045, and 
this increase will add pressure to existing freight bottlenecks across 
the country, further slowing the performance of our highway network and 
the transportation industry.
    One immediate solution to our current infrastructure issues is a 
Federal increase in the national standard for twin trailers from the 
current 28 feet to 33 feet. FedEx strongly supports this modernization 
of equipment standards, which would result in an 18 percent capacity 
gain without any change to the gross vehicle weight limit. Twin 33-foot 
trailers would reduce the number of trucks on the road, thereby 
enhancing safety, decreasing wear and tear on the highways, and 
reducing fuel consumption and carbon emissions. This common sense 
solution requires no Federal investment and has near immediate 
benefits.
    We must identify revenue sources for long-term funding for the 
Highway Trust Fund. As I said in my testimony, in order to avoid over-
reliance on a single option, FedEx supports a broad mix of revenue 
sources, including:

   increasing and indexing fuel taxes;

   a vehicle-miles-driven fee or other direct user-based fee;

   a reduction in the U.S. corporate tax rate; and

   congestion pricing.

    In addition to infrastructure investment and equipment 
modernization, FedEx supports a reduction of unnecessary regulatory 
burdens, which make it hard for our small and medium-sized business 
customers to grow. We need appropriate and uniform national regulations 
that reflect advances in new technology, including the broad adoption 
of advanced driver assist safety systems for vehicles.
    Modernized infrastructure and policies that support innovation will 
drive efficiency, enhanced safety, technology upgrades, and 
sustainability improvements, all of which will jumpstart the American 
economy. The time to act on infrastructure is now.

    Question 2. Mr. Ducker, as consumers and businesses buy more and 
more goods via e-commerce, your resources will be strained. Could you 
tell me about the various technologies that FedEx and other logistics 
companies are utilizing to deliver goods to more efficiently and 
economically serve consumers?
    Answer. The boom in e-commerce has changed consumer behavior and 
increased demands on our Nation's transportation infrastructure. Global 
growth in e-commerce has changed the retail landscape, and it has also 
highlighted the importance of a modern infrastructure to keep pace with 
consumer demand.
    We must work together on policy and solutions that will modernize 
our surface transportation system and drive our economy forward. 
Infrastructure investment must not be limited to road and bridge 
improvements. A holistic modern transportation system will combine 
physical and digital infrastructure enhancements with sound 
transportation policies, including incentives for improved safety and 
fuel efficiency. A broad mix of sustainable funding sources for the 
Highway Trust Fund is essential for long term success.
    We must also modernize our equipment standards, which haven't been 
updated in over 25--35 years. FedEx strongly supports the proposal to 
increase the national standard for twin trailers from the existing 28 
feet to 33 feet, which is a sensible and immediate solution with proven 
gains in safety, efficiency, capacity and sustainability.
    Emerging technologies, such as vehicle-to-vehicle and vehicle-to-
infrastructure communication platforms; autonomous vehicles; and 
platooning show great promise for increased efficiencies and 
sustainability, but most importantly for increased safety.
    FedEx supports more research into artificial intelligence and 
advanced autonomous technologies and just as important, uniform and 
reasonable regulatory guidelines to allow these technologies to 
continue improving efficiency and safety while also addressing our 
Nation's transportation and infrastructure challenges.
                                 ______
                                 
    Response to Written Question Submitted by Hon. Amy Klobuchar to 
                           Michael L. Ducker
    For the last five decades, traffic fatalities on our roads had been 
declining. However, data recently released by the National Highway 
Traffic Safety Administration (NHTSA) show that from 2014 to 2015 there 
was a seven percent increase in traffic fatalities. We know that 
distractions behind the wheel played a part in this rise. I included a 
provision in the FAST Act to help more states qualify for Federal 
grants to fight distracted driving.

    Question. Mr. Ducker, what does FedEx do to educate its drivers 
about the dangers of distracted driving?
    Answer. At FedEx, the safety of our employees, our customers and 
the public is always our first priority. A culture that values ``Safety 
Above All'' starts with our Chairman and is engrained throughout all 
FedEx operating companies and employees.
    Prior to any employee taking the wheel of FedEx Freight equipment, 
he/she must meet a number of minimum requirements, including possession 
of a current, valid commercial driver's license as well as certain 
experience and physical requirements. FedEx Freight also conducts an 
extensive background check including a review of the individual's 
driving safety record and experience through his/her Motor Vehicle 
Record and criminal background checks. Additionally, all drivers must 
successfully complete FedEx Freight's Driver Development Course which 
involves 364 hours of education and training, including observation 
rides; video and computer-based education; yard skills development; and 
160 hours of on-the-road/behind-the-wheel training. Even experienced 
commercial driver's license holders hired by FedEx Freight as drivers 
must complete 156 hours of FedEx Freight's Driver Development Course 
education and training. The Course includes education and training 
specifically directed at the dangers of distracted driving, and our 
company policy also prohibits use of wireless devices while the vehicle 
is in motion.
    All FedEx Freight over-the-road trucks are equipped with the 
following safety systems, which also assist in reducing the dangers of 
distracted driving:

   Lane Departure Warning systems;

   Collision Mitigation System with Adaptive Cruise Control;

   Electronic Stability Control; and

   Electronic Speed Limiters.

    FedEx Freight trucks are also equipped with telematics systems 
which include cameras for the detection of safety-related events in 
order to provide more effective ongoing training and education for our 
drivers. We advocate for the broad adoption of the most modern and 
advanced safety systems for the trucking industry.
    In our on-boarding and annual recurrent training, we review the 
dangers of distracted driving and reaffirm our commitment to driving 
distraction free. Items addressed include the following:

   Cell Phone/Texting--prohibited use while vehicle is in 
        motion

   Eating--prohibited while vehicle is in motion

   Drinking--awareness

   Securement of items in cab--awareness

   Construction zone--heightened awareness

   Smith System 5 Keys--Safe Driver Training

     Aim high in steering

     Get the big picture

     Keep your eyes moving

     Leave your self an out

     Make sure they see you

    In addition, all company-provided electronic devices lock out while 
the vehicle is in motion.
    Please let me know if you need any additional information.

                                  [all]