[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
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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\
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\1\ U.S. Census Bureau, 2012 Commodity Flow Survey, Dec. 9, 2014
\2\ Global Insight, U.S. Freight Transportation Forecast to . . .
2027, 2016
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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\
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\3\ TRIP, Bumpy Roads Ahead: America's Roughest Rides and
Strategies to make our Roads Smoother, Nov. 2016.
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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.
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\4\ FHWA National Bridge Inventory.
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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.
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\5\ ATRI. Cost of Congestion to the Trucking Industry, April 2016.
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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.
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\6\ American Society of Civil Engineers, 2013 Report Card for
America's Infrastructure, 2016.
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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.
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\7\ Texas Department of Transportation. Vehicle Mileage Fee Primer,
p. 16. Dec. 2009.
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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.
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\8\ ATRI. The Nation's Top 100 Bottlenecks 2017.
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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\
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\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.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
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.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
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).
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
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.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
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.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
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).
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
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).
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
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.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
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.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
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.
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\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.
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\2\ U.S. Department of Transportation, National Freight Strategic
Plan, October 2015.
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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\
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\3\ Horst, Ronald and Jeffrey Werling, National Association of
Manufacturers, ``Catching Up: greater Focus Needed to Achieve a More
Competitive Infrastructure,'' September 2014.
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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.
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\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.
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\5\ U.S. Department of Commerce, Build it Here, Sell it Everywhere:
Why Exports Matter, May 2012.
\6\ International Chamber of Shipping.
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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]