[Senate Hearing 116-563]
[From the U.S. Government Publishing Office]
S. Hrg. 116-563
CONNECTING AMERICA: EXAMINING
INTERMODAL CONNECTIONS ACROSS OUR SURFACE TRANSPORTATION NETWORK
=======================================================================
HEARING
before the
SUBCOMMITTEE ON TRANSPORTATION AND SAFETY
of the
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
FEBRUARY 26, 2019
__________
Printed for the use of the Committee on Commerce, Science, and
Transportation
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available online: http://www.govinfo.gov
_________
U.S. GOVERNMENT PUBLISHING OFFICE
52-566 PDF WASHINGTON : 2023
SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
ROGER WICKER, Mississippi, Chairman
JOHN THUNE, South Dakota MARIA CANTWELL, Washington,
ROY BLUNT, Missouri Ranking
TED CRUZ, Texas AMY KLOBUCHAR, Minnesota
DEB FISCHER, Nebraska RICHARD BLUMENTHAL, Connecticut
JERRY MORAN, Kansas BRIAN SCHATZ, Hawaii
DAN SULLIVAN, Alaska EDWARD MARKEY, Massachusetts
CORY GARDNER, Colorado TOM UDALL, New Mexico
MARSHA BLACKBURN, Tennessee GARY PETERS, Michigan
SHELLEY MOORE CAPITO, West Virginia TAMMY BALDWIN, Wisconsin
MIKE LEE, Utah TAMMY DUCKWORTH, Illinois
RON JOHNSON, Wisconsin JON TESTER, Montana
TODD YOUNG, Indiana KYRSTEN SINEMA, Arizona
RICK SCOTT, Florida JACKY ROSEN, Nevada
John Keast, Staff Director
Crystal Tully, Deputy Staff Director
Steven Wall, General Counsel
Kim Lipsky, Democratic Staff Director
Chris Day, Democratic Deputy Staff Director
Renae Black, Senior Counsel
------
SUBCOMMITTEE ON TRANSPORTATION AND SAFETY
DEB FISCHER, Nebraska, Chairman TAMMY DUCKWORTH, Illinois, Ranking
JOHN THUNE, South Dakota AMY KLOBUCHAR, Minnesota
ROY BLUNT, Missouri RICHARD BLUMENTHAL, Connecticut
JERRY MORAN, Kansas EDWARD MARKEY, Massachusetts
CORY GARDNER, Colorado TOM UDALL, New Mexico
SHELLEY MOORE CAPITO, West Virginia GARY PETERS, Michigan
TODD YOUNG, Indiana TAMMY BALDWIN, Wisconsin
RICK SCOTT, Florida
C O N T E N T S
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Page
Hearing held on February 26, 2019................................ 1
Statement of Senator Fischer..................................... 1
Statement of Senator Duckworth................................... 2
Statement of Senator Klobuchar................................... 33
Statement of Senator Blumenthal.................................. 34
Witnesses
Chuck Baker, President, American Short Line and Regional Railroad
Association (ASLRRA)........................................... 4
Prepared statement........................................... 5
Dr. Noel Hacegaba, Deputy Executive Director, Port of Long Beach,
on Behalf of the Intermodal Association of North America....... 11
Prepared statement........................................... 13
Donna Lemm, Advisory Board Member, Agriculture Transportation
Coalition; and Executive Vice President, IMC Companies, Inc.... 16
Prepared statement........................................... 18
Joseph Szabo, Executive Director, Chicago Metropolitan Agency for
Planning; and Board Member, Coalition for America's Gateways
and Trade Corridors............................................ 22
Prepared statement........................................... 24
Appendix
Response to written questions submitted to Chuck Baker by:
Hon. John Thune.............................................. 41
Hon. Maria Cantwell.......................................... 43
Response to written questions submitted to Dr. Noel Hacegaba by:
Hon. Maria Cantwell.......................................... 43
Response to written question submitted to Donna Lemm by:
Hon. John Thune.............................................. 45
Hon. Maria Cantwell.......................................... 46
Response to written questions submitted to Joseph Szabo by:
Hon. Maria Cantwell.......................................... 49
CONNECTING AMERICA: EXAMINING
INTERMODAL CONNECTIONS ACROSS OUR SURFACE TRANSPORTATION NETWORK
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TUESDAY, FEBRUARY 26, 2019
U.S. Senate,
Subcommittee on Transportation and Safety,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:33 p.m. in
room SD-562, Dirksen Senate Office Building, Hon. Deb Fischer,
Chairwoman of the Subcommittee, presiding.
Present: Senators Fischer [presiding], Duckworth,
Klobuchar, and Blumenthal.
OPENING STATEMENT OF HON. DEB FISCHER,
U.S. SENATOR FROM NEBRASKA
Senator Fischer. I call this hearing to order. I am pleased
this afternoon to convene the Senate Subcommittee on
Transportation and Safety.
Our hearing today, titled Connecting America: Examining
Intermodal Connections across our Surface Transportation
Network, is an opportunity to better understand the state of
our surface transportation infrastructure.
First, I would like to welcome the new Ranking Member of
the Transportation and Safety Subcommittee, Senator Tammy
Duckworth. I look forward to working with her closely on
finding bipartisan solutions to the pressing challenges of our
transportation system.
This hearing today will focus on the state of intermodal
transportation. As the world becomes more interconnected, we
rely more on intermodal transportation to import and export
goods as well as to move freight domestically.
The United States Department of Transportation estimates
that freight tonnage will increase by 40 percent by the year
2045. In 2015, DOT forecasted the shipments of freight across
multiple modes will double by 2045. We've seen this trend play
out over the last several years.
The Association of American Railroads reported that
shipments of intermodal containers and trailers by rail
increased 5.5 percent last year. This is the fifth time in the
last 6 years that the intermodal sector has set a new record,
according to John Gray of AAR.
Considering the impact of intermodal transportation is an
important part of addressing the future needs of our Nation's
surface transportation system. This includes intermodal
infrastructure, such as inland ports and intermodal facilities
and new freight-related technologies, such as GEs, and Port
Optimizers. Support for intermodal should not come at the
expense of maintaining traditional infrastructures, such as
roads and bridges, but in conjunction with it.
Many of us hear from our constituents about the poor state
of infrastructure in the United States. Their concerns have
been confirmed by numerous studies, including the off-cited
Infrastructure Report Card from the American Society of Civil
Engineers, which gave the United States infrastructure a D+ in
2017.
Solutions for maintaining and improving our infrastructure
are vital to discussion on the reauthorization of the FAST Act
and in this Congress, I plan to reintroduce my bill, the Build
USA Infrastructure Act, which aims to address the funding
shortfall and modernize our infrastructure system.
My bill would dedicate an additional $21.4 billion to the
Highway Trust Fund each year for the next 5 years following the
expiration of the FAST Act. Under my solution, states would
have more flexibility to approve the design, construction, and
permitting of infrastructure projects by voluntarily entering
into remittance agreements with the Federal Highway
Administration.
I look forward to working with my colleagues on this
proposal.
In addition to discussing infrastructure, this hearing will
also allow members to consider important issues affecting
intermodal transportation, such as the effects of increased
intermodal transportation, congestion problems, and recent
challenges with access to chassis.
We have several witnesses before the Committee today that I
believe are going to speak directly to the needs of intermodal
transportation and I am especially grateful to Dr. Hacegaba and
Ms. Lemm, Mr. Szabo, for their willingness to travel to
participate in this hearing. I look forward to their testimony.
I also am pleased the other witnesses are here, as well. I
look forward to all of your testimony and right now, I would
invite my colleague, Senator Duckworth, for her opening
remarks.
STATEMENT OF HON. TAMMY DUCKWORTH,
U.S. SENATOR FROM ILLINOIS
Senator Duckworth. Thank you, Chairwoman Fischer. Thank you
so much for holding today's hearing on freight and intermodal
transportation infrastructure.
I am so excited to be Ranking Member on the Surface
Transportation and Safety Subcommittee and I'm looking forward
to working with you on issues important to both our states and
the Nation.
As you know, one of the most critical issues facing our
Nation is the growing need to reinvest in our Nation's
infrastructure. Our economic competitiveness depends on the
efficient movement of freight, whether it's carried on
highways, railways, or waterways.
Every day, our freight system moves 55 million tons of
goods worth $50 billion, supporting 44 million jobs. Most
freight enters our country by ships through ports. It's then
moved to businesses across the Nation by a combination of truck
and rail car.
Intermodal connections become extremely important to ease
the transfer of freight from one mode to another, and
unfortunately, this transition is not always smooth, as we all
know too well in Chicago, in my home state of Illinois.
We often call Northeastern Illinois the crossroads of
America. The Chicago Land Region is the busiest rail hub in the
Nation. For decades, it has been the main transportation hub
for goods moving throughout the United States. Six of seven
major freight rail companies traverse the region daily but the
region's rail infrastructure, built more than a century ago,
has not kept pace with demand.
Fortunately, a diverse group of stakeholders is changing
that. The CREATE Program, the first of its kind public-private
partnership under a project of national significance, will
provide the important investments needed to modernize the
region's rail infrastructure to improve reliability and safety.
I'm very proud that CREATE has received significant Federal
funds, including a $132 million grant in 2018, to be used not
only in the Chicago region but the entire state of Illinois and
the Nation. Federal funding for freight and intermodal projects
is critical to address state, local, and private infrastructure
investment.
This is why I'm a big supporter of Federal funding for
programs, like INFRA and BUILD. The Federal Government must be
a strong partner to spearhead freight projects from which we
all benefit.
Highways and bridges also suffer from underinvestment.
Traffic bottlenecks cost the trucking industry more than $60
billion a year in lost productivity and fuel. This increases
the cost of everything we make, buy, or export.
Too many bridges are in need of repair. According to the
American Road and Transportation Builders Association, more
than 54,000 bridges across the Nation are structurally
deficient, 54,000. In Illinois, 2,300 bridges or essentially 8
percent of all the bridges in our state are structurally
deficient, and Cook County has some of the most traveled
structurally deficient bridges in the state and in the country.
I want to thank all of our witnesses for joining us today.
In particular, I wanted to recognize Joe Szabo, who is here
today. Joe, you've been a real leader on transportation issues
from your time in the rail industry, to village trustee and
mayor, to the FRA Administrator, to CMAP Executive Director.
Few others have the knowledge and experience that you bring to
the table on these issues. Thank you for being here.
I look forward to hearing from the rest of the panel about
how we can improve our freight transportation system. I thank
you each, and I yield back.
Senator Fischer. Thank you.
At this time, I would like to introduce Mr. Chuck Baker. I
am just thrilled he is here today, didn't mean to leave you out
of my opening comments.
Mr. Baker is President of the American Short Line and
Regional Railroad Association.
Would you like to give your opening statement, please, and
we'll have 5 minutes for an opening statement. Your entire
statement, of course, will be included in the record.
STATEMENT OF CHUCK BAKER, PRESIDENT,
AMERICAN SHORT LINE AND REGIONAL RAILROAD ASSOCIATION (ASLRRA)
Mr. Baker. Thank you, Chairwoman Fischer. Thank you, Member
Duckworth, and Members of the Subcommittee.
My name is Chuck Baker, and I'm President of the Short Line
Railroad Association.
We represent the Nation's 603 Class II and III Railroads,
which together operate nearly 50,000 miles of track or
approximately 30 percent of the national rail network.
They operate in every state but Hawaii. In the states
represented by this subcommittee's members, there are 207 short
lines operating 20,000 miles of track.
Short lines are the first mile and last mile of the
Nation's railroad network and they handle one out of every five
rail cars moving on the national system. Although most often
associated with small town and rural America, short lines also
serve large urban areas and many of the Nation's ports.
In fact, short lines provide rail service into four of the
Nation's busiest ports: Miami, Houston, Los Angeles, and Long
Beach. Likewise, various short line railroads operate as
switching carriers for multiple Class I railroads in Chicago,
New Orleans, and St. Louis.
The nation's short lines are much more than a quaint name
on the Monopoly board. The name ``short line'' can create the
mistaken impression that all these railroads are short. In
fact, they come in all sizes.
The Peru Industrial Railroad in Senator Duckworth's state
is three miles long while the Nebraska Central Railroad in
Senator Fischer's state is 340 miles long. Pan Am Railways,
headquartered in Senator Markey's state, is the Nation's
longest short line, operating approximately 1,700 route miles.
Three characteristics define short lines. One, short lines
are small businesses. Their combined annual revenues are less
than the annual revenues of any single one of the Nation's four
largest railroads. The average short line employs fewer than 30
people.
Two, because their task was to bring back to life
previously under-maintained branch lines that were otherwise
headed for abandonment, they invest 25 to 33 percent of their
annual revenues back into their infrastructure, making short
line railroading one of the most capital-intensive industries
in the entire country.
Three, in large areas of the country, and particularly in
rural and small town America, short lines are the only
connection to the National Rail Network for thousands of
agricultural, energy, and manufacturing shippers.
To help short lines meet their investment needs, Congress
enacted the Short Line Rehabilitation Tax Credit in 2004 and
has renewed it six times since through 2017. The credit has
been an important factor in maximizing infrastructure
investment and making the credit permanent is the single most
important thing Congress can do to help short line railroads.
In the last session of Congress, legislation making the
credit permanent was co-sponsored by large bipartisan
majorities in both the Senate and the House but, unfortunately,
action was never taken on the larger tax extenders package.
I know the tax legislation is not the direct jurisdiction
of this committee, but as the Committee most knowledgeable on
rail infrastructure matters, I urge you to take the short line
tax credit message to your Senate colleagues whenever the
subject of transportation or tax is addressed.
Within your direct jurisdiction, I would like to address
the importance of several programs.
We strongly support the CRISI Grant Program as it
specifically provides for short line eligibility and puts a
focus on benefit-cost analysis. With that level playing field,
short line projects will fare well, including PTC
implementation projects.
We support the Federal INFRA Program and the related State
Formula Program, but for both, we would suggest the removal of
the counterproductive limit on how much of the program can be
spent on non-highway projects, especially in the scenario where
the program is not being a hundred percent funded by highway
user fees.
We also support the BUILD Grant Program. Many of you are
likely familiar with the RRIF Loan Program and the many
unsuccessful efforts over the years to improve the program.
RRIF loans, unfortunately, will not be the solution for any
meaningful number of short line railroad projects and we hope
that Congress will not use the RRIF Program to check the short
line box as it puts together an infrastructure package.
On the question of truck size and weight, I will simply
note that short lines and the larger railroads are part of a
broad coalition, including safety advocates, law enforcement
officials, rail labor, truck labor, independent truckers, and
even truck load carriers, who all oppose heavier and longer
trucks.
Finally, we encourage you to continue to examine and, where
appropriate, eliminate unnecessary Federal regulations.
Unnecessary regulations divert precious financial resources
from track rehabilitation and that rehabilitation is the best
way to improve railroad safety.
I appreciate the opportunity to testify today and pleased
to answer any questions.
Thank you.
[The prepared statement of Mr. Baker follows:]
Prepared Statement of Chuck Baker, President, American Short Line and
Regional Railroad Association (ASLRRA)
Thank you Chairwoman Fischer, Ranking Member Duckworth and Members
of the Subcommittee. My name is Chuck Baker and I am President of the
American Short Line and Regional Railroad Association (ASLRRA), the
national trade association representing the Nation's 603 Class II and
Class III railroads (referred to here collectively as ``short lines'').
I appreciate the opportunity to talk about the role short line
railroads play in the national transportation network.
Together, short line railroads operate nearly 50,000 miles of
track, or approximately 30 percent of the national railroad network.
They operate in 49 states and in 36 of those states they operate at
least one quarter of the state's total rail network. In five states,
short lines operate 100 percent of the state's rail network. In the
states represented by this Subcommittee's Members, there are 207 short
lines operating over 20,000 track miles. Short lines are often called
the first mile/last mile of the Nation's railroad system and handle in
origination or destination one out of every five rail cars moving on
the national system.
Although short lines are most often associated with small town and
rural America, they also serve large urban areas and many of the
Nation's ports. Indeed, short line railroads provide rail service into
three of the Nation's busiest ports--Miami, Los Angeles and Long Beach.
Likewise various short line railroads operate as neutral switch
carriers for multiple Class I railroads in Chicago, New Orleans and St.
Louis. The nation's short lines are much more than a quaint name on the
Monopoly Board.
The name ``short line'' can create the mistaken impression that all
of these railroads are very short rail lines. The fact is we come in
all sizes. The Peru Industrial Railroad in Senator Duckworth's state of
Illinois is 3 miles long. The Nebraska Central Railroad in Senator
Fischer's state is 340 miles long. Pan Am Railways, headquartered in
Senator Markey's state of Massachusetts, is the Nation's longest short
line, operating approximately 1,700 route miles, and provides crucial
rail service in much of New England. Our common denominator is that we
operate track that would not be viable under the structure of the
larger national Class 1 railroads.
Short lines have four defining characteristics.
1. Short lines are small businesses. Our combined annual revenues
are less than the annual revenues of any single one of the
Nation's four largest Class I railroads. The average short line
employs 30 people or less, and a significant number are run
with less than a dozen employees. Like all small businesses, we
are forced to do more with less.
2. Our importance is not our size or our total market share, but in
who and where we serve. For large areas of the country and
particularly for small town and rural America, short line
railroad service is the only connection to the national
railroad network. For the businesses and farmers in those
areas, our ability to take a 25-car train 75 miles to the
nearest Class I interchange is just as important as the Class
I's ability to attach that block of traffic to a 100-car train
and move it across the country. While Midwestern grain shippers
could not complete the journey to poultry farm markets in the
southeastern United States without Class I railroad service,
they could not start or end the journey without short line
service.
Short lines serve over 10,000 shippers nationwide and we find
those shippers quite willing to testify to the importance of
this first mile/last mile service. I have included at the end
of my testimony a list of quotes from short line customers. We
have selected a wide variety from across the country to give
you a sense of the important relationship between shippers and
their short lines. In general, they sound like this: ``Our
serving short line railroad is truly a partner for our paper
mill. The services provided, including freight haul in and out,
daily switches, and rail car maintenance help us keep our mill
running successfully day in and day out. It is critical to the
400 plus people employed here that our short line railroad be
able to continue to operate successfully.''
3. The majority of short lines operate track that was headed for
abandonment under previous Class I owners. These were light
density branch lines that could not generate enough profit
under the cost structure of the big national carriers. Because
these were marginal or money losing lines they received little
investment prior to their sale, resulting in significant
deferred maintenance. To be successful, short line owners must
not only eliminate that deferred maintenance but upgrade their
tracks to handle the heavier, longer trains that are becoming
the national standard. To do that, short lines invest on
average from 25 to 33 percent of their annual revenues in
rehabilitating their infrastructure and this makes short line
railroading one of the most capital intensive industries in the
country. To provide some dollar perspective, to rehabilitate
one mile of typical 90-pound track up to the 115-pound rail
needed to handle today's modern railcars costs between $400,000
and $500,000, and we need to do that across much of a 50,000
mile network.
Likewise a single bridge replacement is a multi-million dollar
project. We estimate the total short line cost for what needs
to be done just for track and bridges is $10.8 billion.
4. Without upgrades to short line tracks and bridges, customers
served by short lines face potential competitive disadvantages.
If a short line is not able to handle an industry-standard,
heavier-weight freight car, they must ship or receive rail
shipments in smaller rail cars. This will become a more
pronounced problem with time, as the older, smaller freight
cars used in the national railroad fleets reach their mandatory
retirement age and become unavailable. At that point shippers
will either have to use the newer, more expensive freight cars
and light load them, or divert their shipments to trucks.
Before I discuss the various infrastructure and safety programs
under the jurisdiction of the Commerce Committee, let me emphasize that
the most important and effective infrastructure program for the short
line industry is the Short Line Railroad Rehabilitation Tax Credit,
sometimes known by its U.S. Code section number 45G. Congress enacted
the credit in 2004 and has renewed it six times through 2017. In the
115th Congress a bi-partisan majority in both the House and Senate co-
sponsored legislation to make the credit permanent. In the Senate it
was the most heavily co-sponsored bill of all the tax bills introduced
in that Session of Congress. Unfortunately that legislation, along with
the other tax extenders, didn't pass Congress in 2018 or as of yet in
2019. However, new House and Senate bills, H.R. 510 and S.203, have
been introduced in this session of Congress and have already attracted
21 cosponsors in the Senate and 116 in the House.
While I know there are deep partisan divisions on tax issues I
believe the short line rehabilitation tax credit has characteristics
that are widely supported by both political parties and by most
economists, and that is evidenced by the bipartisan support of both
bills.
The credit maximizes private investment in important transportation
infrastructure. The railroad must spend two dollars for every dollar in
credit up to a credit cap equivalent to $3,500 per mile of track. The
government is not giving these small businesses a dollar, but rather
letting them invest more of their own money in capital improvements.
Since 2005 the credit has leveraged over $4 billion in capital
projects. This additional spending power allows short lines to speed up
projects that are in the works and take on new projects that would
otherwise be unaffordable.
Investing in better track leverages significant additional
investment by railroad customers. For example, in South Dakota the
improvements made by the 670 mile Rapid City, Pierre & Eastern Railroad
since it began operations in 2015 has already attracted over $311
million in new facility investments by 6 South Dakota companies. Those
facilities employ 260 workers. This result is being duplicated in the
49 states that are served by short line railroads.
Railroads are an all-American proposition. They can't take their
operations or their jobs overseas. Virtually everything they buy for
infrastructure improvement--the ties, the steel rail, the ballast, the
locomotives and the freight cars--are made in America. The Railway Tie
Association reports that the 45G credit has resulted in short line tie
purchases of between 500,000 and one million over and above their
normalized annual purchases.
Railroad rehabilitation is a labor intensive effort. As small
businesses most short lines do not have the necessary in-house labor
force or specialized equipment to complete major rehabilitation
projects so they must hire contractors and lease heavy machinery for
the majority of the work. The Federal Railroad Administration estimates
that half of every dollar spent on short line track rehabilitation goes
to pay workers.
We know and appreciate that many of you agree. The majority of this
Subcommittee serving in the last Congress were co-sponsors of the
legislation extending the credit. Likewise full Committee Chairman
Wicker and Ranking Member Cantwell were co-sponsors. We look forward to
newly elected Senator Scott of Florida joining as a co-sponsor in 2019.
I know that tax legislation is not the purview of this Committee
but as the Committee that is the most knowledgeable when it comes to
railroad infrastructure matters, I urge you to take our tax credit
message to your Senate colleagues whenever and however the subject of
transportation infrastructure is addressed in this Congress, and to
address tax extenders expeditiously.
With regard to that which is directly in this Committee's
jurisdiction, let me comment on a number of specific programs and
conclude with some thoughts on infrastructure programs in general.
We strongly support the CRISI program as it specifically provides
for short line eligibility and puts a focus on benefit-cost analysis.
We think with that level playing field, short line projects will fare
well. Further it includes a special category for Railroad Safety
Technology Grants which can potentially be very helpful as we work to
implement and pay for the Positive Train Control mandate. We are
pleased that Congress has provided a robust $255 million for CRISI in
FY 2019 and we hope that at least that level continues in the future.
We believe CRISI can be an important and effective program that you
should incorporate into whatever transportation infrastructure
legislation you are able to advance.
We strongly support the BUILD grant program and are likewise
pleased with the $900m in FY19 funding provided for this program. While
the benefit-cost analysis hurdles are steep for short lines operating
in rural areas and serving relatively small shippers, short lines have
succeeded in securing numerous grants over the life of the program. The
application process is extraordinarily time consuming and the
competition is fierce for these grants, but year after year many short
lines are willing to go through the process and in general we have
found that short line projects stack up pretty well against projects
from other modes when measured on any sort of apples-to-apples basis.
We are also supportive of the INFRA grant program. There is value
in a merit-based discretionary grant program open to multiple modes of
transportation, especially one that is focused on freight and goods
movement. While the main category of INFRA is targeted at mega projects
that exceed the size of most short line work, the small project portion
of the program is of value to us. We would be supportive of a
significant expansion of INFRA in a new infrastructure package, but
would suggest an expanded small project component and also a removal of
the arbitrary and counterproductive limit on how much of the program
can be spent on non-highway projects, especially in a scenario where
the program is not being 100 percent funded by a highway use fee. As
the committee knows, as evidenced by this very hearing, the national
transportation system is multi-modal and intermodal in nature, so
stove-piping of major programs for one transportation mode should be
avoided if at all possible, especially if the funding is not entirely
provided by users of one mode.
Similarly, we are supportive of the state freight program included
in the FAST Act, and similarly we would support an expansion of this
program in the next surface transportation reauthorization bill with a
removal of counterproductive limits on how much of the program can be
spent on rail, port, and other non-highway projects.
Many of you are likely familiar with the RRIF loan program and the
many efforts by Congress and both Republican and Democratic
Administrations over the years to improve the program--efforts that
have met with limited success. I will not repeat all that history here,
but I do want to caution the Committee with regard to RRIF's potential
to address short line infrastructure issues. The RRIF program is just
an authorization for $35 billion in loan authority. It is not contract
authority or authority for an appropriation, it is just a loan that
needs to be paid back. In the 20 year history of the program only $5.3
billion in loans have been approved and the vast majority of that has
gone to Amtrak and public transit agencies. It typically takes over two
years to get a single loan approved and the cost of processing is
extraordinarily high.
RRIF loans are not going to be the solution for any meaningful
number of short line rail rehabilitation projects and we hope that
Congress will not use the large loan authority number to ``check the
short line box'' as it puts together an infrastructure or surface
transportation reauthorization package.
While there appears to be general agreement that Congress should
enact a significant infrastructure funding package, the specifics are
still to be determined. As you consider how to proceed we believe there
are six general provisions that will be important for short line
participation in any major grant program:
1) Short lines should be directly eligible applicants for project
grants, similar to CRISI. Too often in the past, Federal
programs have been only open for application to local units of
government, which in turn requires short lines to create
unnecessarily complex and burdensome applicant structures and
which sometimes favors politically popular projects over
economically beneficial projects.
2) The application process needs to be as simple and transparent as
possible. Short lines are small businesses and generally the
individuals writing and engaging with the government on our
applications are employees with other duties on the railroad.
We don't have full time grant writers or the resources to hire
expensive consulting firms.
3) The analysis used to judge a project should not be a rigid one-
size-fits-all process. For example, the process to apply, the
public planning and the engineering required, and the
appropriate benefit-cost analysis format for incrementally
upgrading a ten-mile segment of existing track serving five
small grain elevators should not be the same as building a new
subway line or adding lanes to an interstate highway.
4) If there is to be an associated environmental approval process,
it has to be completed in a reasonable period of time. Approval
processes that last for years are a deal-killer to those
running a business.
5) Giving preference to grant requests with ``over-matching'' may
appear logical, but can lead to discounting otherwise important
short line projects that from a financial standpoint cannot
provide an overmatch of non-federal funding.
6) Imposing limits on a state DOT's number of grant submissions
allowed in a round of a program forces pre-application
competition between smaller short line projects and other
larger projects, often putting the smaller short line project
at a disadvantage.
Whether it be in the form of a free-standing infrastructure package
or the reauthorization of the FAST Act, infrastructure legislation that
this committee advances will be a target vehicle for those who want to
increase truck size and weight. Short lines are part of a broad
coalition of interests, including safety advocates, law enforcement
officials, rail labor, truck labor, independent truckers, Class I
railroads, and even some truckload carriers, who oppose bigger and
heavier trucks. Bigger trucks mean diversion from rail to truck and
thus more expensive damage to our highways and bridges, more highway
congestion, more environmental damage, and more danger for the motoring
public . The biggest hurdle to enacting new infrastructure funding
legislation is finding the funding. Including a provision that
guarantees higher infrastructure repair costs makes the hurdle all the
more difficult to overcome and that just doesn't make sense.
On many occasions, those who support bigger trucks have attempted
to make that change through the appropriations process. We hope that
any consideration of bigger trucks will be tied to a full vetting by
the appropriate authorizing committee and include a full understanding
of the diversion from rail to highway, the true infrastructure cost of
accommodating larger trucks, and the safety implications of such a
change.
As you know the Surface Transportation Board (STB) now has three
Board Members and may have a full complement of five sooner rather than
later and as such will likely be taking up many substantive issues. The
Board's decisions have a significant impact on the short line industry,
particularly on regulatory matters related to the Staggers Act. In many
respects the short line industry is the child of the economic freedoms
and regulatory flexibility embodied in the Staggers Act of 1980,
allowing railroads to save light density branch lines rather than
abandoning them. The results are quite remarkable. Short lines have
grown from 8,000 miles of track in 1980 to nearly 50,000 today,
insuring that huge areas of rural and small town America stay connected
to the national railroad network. The STB has played an important role
in that outcome and we urge the Committee to pay careful attention to
their deliberations and decisions.
Finally, let me briefly address the subject of government
regulation which has a direct impact on our ability to maximize capital
investment. The short line railroad industry is awash in unnecessary
and expensive regulations that divert precious investment dollars from
infrastructure improvements that are the best way to improve safety.
Most damaging for short lines are the kind of one-size-fits-all
regulations that provide no basis for the presumed benefits and that
don't take into consideration our unique operating characteristics. Two
stand out in particular:
1) The Part 243 minimum training standards rules pursuant to the
Rail Safety Improvement Act of 2008 impose a huge paperwork
requirement on top of what are already substantial training and
qualification requirements. The rules add a Federal requirement
about how to train our employees to meet other already existing
Federal requirements, and are attempting to fix a nonexistent
problem. Congress should repeal this rule or at the very least
require the Federal Railroad Administration (FRA) to retract
this rule and revise it in a much simpler fashion.
2) Mandatory two-person crews are also an attempt to impose a
solution on a non-existent problem. There is absolutely no
evidence of a safety benefit generated by a second crew member.
It is particularly ironic that as the government is spending
billions of dollars to facilitate the move to driverless
vehicles on the complex open architecture of the highway
system, it is considering making the railroads do just the
opposite on the simpler closed architecture of the railroad
system.
We believe that every dollar spent on these kind of excessive
regulatory requirements is a dollar that could be better spent on
improving track, rebuilding bridges or adopting new technologies. Those
are the dollars that do the most to improve safety and make
transportation costs as competitive as possible for the Nation's
shippers.
I know this Committee does not write these rules but you have
jurisdiction over the FRA which does and I urge you be continually
vigilant in your oversight of their work. Chairwoman Fischer introduced
an FRA regulatory reform bill in the last session of Congress and we
would be eager to work with this Committee on an updated version of
such legislation for inclusion in an infrastructure or surface
transportation reauthorization bill.
Over the years this Committee has been diligent in exploring and
understanding what makes for an efficient, seamless multi-modal
transportation network that better connects communities and businesses
across the country. Connecting communities, particularly rural,
industrial, and agricultural communities, to the national rail network
and domestic and international markets is exactly what short lines do
every day, and we very much appreciate the Committee's willingness to
consider our suggestions regarding how to improve our ability to do
that important work.
I'll be more than happy to answer any questions. Thank you.
______
Short Line Railroad Customers Talk about Short Line Service
Dana Shellberg, of Allweather Wood LLC, in Loveland, CO
A customer of the Great Western Railway of Colorado
``Without the Great Western Railway of Colorado we would have to truck
all our lumber in from Oregon, Washington, Alabama, and Arkansas. This
would not allow us to stay competitive in the lumber market.''
Robert Glezen, of Mont Eagle Mills, Inc., in Oblong and Palestine, IL
A customer of the Indiana Rail Road
``Short line railroads are an increasingly important piece of our
Nation's infrastructure. Our business depends upon the Indiana Rail
Road to serve the agricultural base of southeastern Illinois.''
David Doti, of Jadcore, LLC, in Terra Haute, IN
A customer of the Indiana Rail Road
``The Indiana Rail Road is our only connection to the main line. All of
the other carriers have either merged or are out of business. The
plastics industry relies on the railroad for its delivery of finished
products all over the country.''
Daniel Semsak, of Pacific Woodtech Corporation, in Saginaw, MI
A customer of the Lake State Railway
``We depend on short lines to get into our customers' facilities. Rail
access is essential for our company and our customers to be able to
grow. As the Class 1 railroads have focused more and more on unit
trains for inefficiencies, small business has relied on short lines for
survival. We need the short lines for the ``last mile''.''
Brian Arnhalt, of Minn-Kota Ag Products, in Breckenridge, MN
A customer of the Red River Valley & Western Railroad
``Our rail service from the Red River Valley & Western Railroad is
outstanding. The personalized attention to our customer needs is a big
help in the success of our business.''
Curt Warfel, of Akzo Nobel, Inc., in Columbus, MS
A customer of the Alabama and Gulf Coast Railway
``Akzo Nobel has long been supportive of the short line railroad tax
credit. We see this as an excellent way in which short line railroads
may ``stretch'' a dollar to upgrade their railroads and improve service
to rail shippers.''
Chuck Hunter, of PSC Metals, Inc., in St. Louis, MO
A customer of the Terminal Railroad Association of St. Louis
``The six short lines that serve our facilities have and will play a
vital role in the growth of our company. They have worked with us to
add rail service to several of our facilities, issued rates to incent
rail service -vs-truck. Their local presence and willingness to
partnership in problem solving has been a blessing. These service
providers are an essential part of our continued success in the North
American marketplace.''
Levi Ross, of Dead River Company, in North Walpole, NH
A customer of the Green Mountain Railroad
``Our retail petroleum business is dependent on the service of short
lines for a dependable regional supply chain.''
Jason Tininenko, of Freeport McMoRan, in Hurley, NM
A customer of the Southwestern Railway
``There are several short line railroads that are integral to our
business. They provide a consistent, cost effective option for us to
move large volumes of freight both to and from our mining locations.''
Mike Sawyer, of Western Producers Cooperative, in Dill City, Rocky, and
Sentinel, OK
A customer of Farmrail
``Our livelihood depends on railroads shipping our grain. Farmrail does
a great job in taking care of our needs. We need their services!''
Steve Stivala, of MacMillan-Piper, in Tacoma, WA
A customer of Tacoma Rail
``Tacoma Rail is an integral part of our business and overall operation
in Tacoma. The short line railroad provides us with consistent and
reliable service on a daily basis. By meeting our needs and
requirements, we are better able to service our customers. This would
not be possible without the assist from Tacoma Rail.''
Maurice Bohrer, of Michels Materials, in Janesville and Waterloo, WI
A customer of the Wisconsin & Southern Railroad
``Our short line and regional railroad, the Wisconsin & Southern
Railroad, is the only railroad that provides service to our black
granite quarry and without them we would not be able to sell our
granite to many of our customers and the other railroads that use our
ballast!''
Senator Fischer. Thank you, Mr. Baker.
Next, we have Dr. Noel Hacegaba, who is the Deputy
Executive Director of the Port of Long Beach (appearing on
behalf of the Intermodal Association of North America/IANA).
Welcome.
STATEMENT OF DR. NOEL HACEGABA, DEPUTY EXECUTIVE
DIRECTOR, PORT OF LONG BEACH, ON BEHALF OF THE INTERMODAL
ASSOCIATION OF NORTH AMERICA
Dr. Hacegaba. Thank you, Chairwoman Fischer, Ranking Member
Duckworth, and Members of the Subcommittee.
Thank you for the opportunity to comment on the intermodal
freight transportation system.
My name is Dr. Noel Hacegaba. I serve as Deputy Executive
Director, responsible for Administration and Operations at the
Port of Long Beach, but today I'm here on behalf of IANA, the
Intermodal Association of North America, where I serve as a
member of its Board of Directors and also chair its Policy
Committee.
IANA is the only organization in the country that
represents the combined interests of the intermodal freight
transportation industry, the backbone of the American economy.
We appreciate your ongoing dedication and efforts to
prioritize freight infrastructure investment.
I have the privilege of working at the Nation's second
busiest seaport, which is a major gateway for U.S.-Asia trade.
To be successful, ports, like Long Beach, collaborate with five
Class I railroads, 46 shipping lines, 7,000 trucking companies,
and over 10,000 third party logistics providers.
The intermodal freight industry is a good example of what
we call coopetition, where we have competing companies coming
together to provide cargo transportation services.
In 2018, intermodal volumes increased 5.6 percent over
2017, boosted by Chinese imports pulled forward to avoid tariff
increases. As cargo volumes continue to grow, investments in
intermodal connectors have to be a part of the solution to
improve cargo efficiency and freight infrastructure.
The use of on-dock rail will also help us to reduce
congestion and maintain freight velocity in the intermodal
network. That's why the Port of Long Beach is investing over a
billion dollars to improve its on-dock rail capacity, and
Federal funding helps to support these kinds of projects that
benefit America's intermodal network.
For example, the Port, back in 2011, received $17 million
in TIGER grant funds for a green port rail gateway project, and
ports like Long Beach will continue to apply for INFRA and
BUILD grants that support improvements in intermodal rail
efficiency.
Significant Federal investments are needed to improve the
flow of freight through intermodal connectors. U.S. businesses
spend an additional $27 billion each year in extra
transportation costs due to congestion and outdated facilities,
and the total cost to meet freight infrastructure needs in
America is estimated at $3.7 trillion.
New capital investment in freight transportation
infrastructure will lead to improved velocity, enhanced global
competitiveness, and a higher standard of living for Americans.
Integrated planning and funding that addresses the IANA
needs of freight movements will be critical to improving the
Nation's infrastructure system. The FAST Act's discretionary
grant programs, like BUILD, CRISI, and INFRA, have provided
much-needed opportunities to fund freight-related projects, and
innovative financing options, like TFIA, were instrumental in
helping to finance the $1.4 billion replacement of the Gerald
Desmond Bridge in Long Beach, which we call the ``bridge to
everywhere'' because it carries 15 percent of the Nation's
cargo each day.
IANA recommends that the Committee continue to support the
development of a comprehensive freight policy that addresses
funding for and improvements to the Nation's bridge, roadways,
and rail infrastructure. This should include removal of the $50
million cap on freight funding.
IANA and the Port of Long Beach also support fully funding
freight provisions and opportunities for U.S. seaports to apply
for formula and comparative multimodal freight grants. In
particular, IANA strongly recommends that the Committee develop
dedicated funding for intermodal freight connectors, fund
additional freight rail infrastructure, such as on-dock
facilities, allow for enhanced public-private partnerships that
can improve funding opportunities for America's freight
infrastructure, support fuel tax increases to fund freight
infrastructure projects, and form a multimodal freight office
within the Department of Transportation that would report to
the Secretary of Transportation.
IANA further supports permitting reform to reduce timelines
for intermodal infrastructure projects.
IANA and its members are strong supporters of leveraging
technology investments and innovation to enable and enhance
information-sharing across the intermodal supply chain.
Improving information-sharing throughout the supply chain will
also help to improve system efficiencies.
As an example, the Port of Long Beach recently collaborated
with the Port of Los Angeles and General Electric
Transportation to conduct a pilot demonstration of a port
information portal, known as the Port Optimizer, which has the
potential to enhance supply chain performance and
predictability by delivering real-time data-driven insights
through a single portal.
This advanced visibility could benefit the entire
intermodal supply chain and it comes at a critical time as we
face increased competition from ports in Canada and Mexico
where the respective governments have developed national
strategies and the freight stakeholders there are aggressively
working to attract more cargo moving to and from U.S. markets.
I wish to conclude by thanking you again for the
opportunity to discuss critical industry trends, freight
project funding opportunities, and recommendations regarding
the U.S. intermodal freight system.
We stand ready to work with you, members of the Committee
and its staff, to develop innovative legislative, policy,
funding, and infrastructure development solutions to improve
the Nation's intermodal system.
Thank you.
[The prepared statement of Dr. Hacegaba follows:]
Prepared Statement of Dr. Noel Hacegaba, Deputy Executive Director,
Port of Long Beach, on behalf of the Intermodal Association of North
America
Introduction
Thank you, Chairman Fischer and members of the Subcommittee on
Transportation and Safety for the opportunity to speak on the subject
of intermodal stakeholders across the transportation system. My name is
Dr. Noel Hacegaba and I am the Deputy Executive Director responsible
for administration and operations at the Port of Long Beach. Since
joining the Port in 2010, I have also served as Managing Director of
Commercial Operations and Chief Commercial Officer and successfully
managed the Port's commercial activities during a period of significant
industry realignment and collaborated with customers and industry
partners to optimize the supply chain. I also led the swift recovery of
our largest container terminal operation when it was impacted by the
biggest bankruptcy in shipping line industry history.
I am here today on behalf of the Intermodal Association of North
America (IANA), where I serve as a member of its Board of Directors and
chair of its Policy Committee. IANA consists of more than 1,000
corporate members including railroads, ocean carriers, ports,
intermodal trucking companies, over-the-road highway carriers,
thirdparty logistics companies and suppliers to the industry.
As a significant player in the effort to improve the efficiency of
goods movement, IANA is the only organization that represents the
combined interests of the intermodal freight transportation industry.
IANA's mission has been to promote the growth of efficient intermodal
freight transportation through innovation, education and dialogue.
Background
I have the distinct privilege of working at the second busiest
seaport in the United States, which serves as a major gateway for U.S.-
Asia trade. The Port of Long Beach is an innovative provider of state-
of-the-art seaport facilities and services that enhance economic
vitality, supports jobs and improves the quality of life and the
environment. As a major national economic force, the Port supports more
than 51,000 jobs in Long Beach, 576,000 jobs throughout Southern
California and 2.6 million jobs across the United States. In 2018, the
Port of Long Beach moved more than 8.1 million twenty-foot equivalent
units (TEUs) of cargo, also known as containers. Cargo moving through
the Port of Long Beach accounts for nearly 33 percent of the containers
moving through U.S. West Coast ports, and nearly 1 in 5 moving through
all U.S. seaports.
Combined with our neighbor, the Port of Los Angeles, both ports
comprise the San Pedro Bay, the busiest Port complex in the Nation and
the ninth-busiest in the world. Together, the two ports moved $400
billion in containerized trade, representing more than 17 million TEUs
in 2018. This includes almost 40 percent of the Nation's imported
cargo. A 2011 report commissioned by both ports and the Alameda
Corridor Transportation Authority found that cargo moving through the
San Pedro Bay Port Complex made its way to every Congressional district
in the continental United States. As a result of the cargo volume moved
through this complex and transportation-related activities, it is
critical to invest in intermodal connectors that move cargo more
efficiently.
The Port cannot do this work alone. For us to be successful, it
requires working collaboratively with shippers, steamship lines,
railroads, trucking companies and logistics providers. Intermodal by
its nature is complex, and it requires all stakeholders to work
together to move freight in an efficient and timely manner.
Intermodal Transportation Overview
Currently, the intermodal industry in the U.S. includes five Class
1 railroads, 46 shipping lines, more than 7,000 trucking companies and
over 10,000 third-party logistics companies. In 2018, intermodal
volumes increased 5.6 percent over 2017--the strongest growth in five
years. By segment, import container traffic increased 5.4 percent while
domestic container traffic increased 4.9 percent. This growth is
attributed, in part, to the decision by shippers to advance the
movement of imports from China in an effort to avoid tariff increases.
There are 1,274 intermodal facilities and 185 seaports in the
United States that handle import and export cargo. Of note, a Port
complex like the San Pedro Bay has multiple marine terminals in
operation that work directly with the shipping lines, Class 1
railroads, trucking companies and distribution centers. The advent of
``mega-ships,'' some that carry as many as 18,000 TEUs, has put more
stress on intermodal terminals, roadways, bridges and rail
infrastructure. Increased cargo volumes off-loaded at marine terminals
in many port complexes have created backlogs of containers, which has
led many ports to look at ways to improve cargo efficiency and freight
infrastructure. Similar circumstances arose in 2018 at inland
intermodal facilities.
Increasing the reliability of delivery and developing smooth
pathways for the movement of freight is important to the continued
growth of the U.S. economy. Investment in intermodal connectors--the
links that facilitate the transfer of freight between modes--is a major
part of the solution to congestion. The use of on-dock and near-dock
rail is also an important transportation option used to alleviate port
congestion and to help maintain freight velocity on the intermodal
network. On-dock rail is the ability of terminal operators to place
containers onto rail at the terminal site, while near-dock rail allows
for cargo to be moved to adjacent locations and placed on rail for
transportation to inland ports. Both on-dock and near-dock rail have
helped to significantly reduce terminal congestion and also to
alleviate emissions from trucks.
Currently, the Port of Long Beach is investing over $1 billion to
improve on-dock rail capacity, making it a top priority as we pursue a
goal of moving 35 percent of all cargo by rail. Planning and designs
are underway for the Pier B On-Dock Rail Support Facility, which aims
to reconfigure, expand and enhance an existing rail yard. Specifically,
this project will remove rail bottlenecks in the Port and create a rail
hub between the Port of Long Beach and the Alameda Corridor, which
serves rail access to the region and across the Nation. The project
will allow trains up to 10,000 feet long to be loaded and unloaded at
on-dock rail yards at marine terminals to streamline rail operations,
ease roadway traffic congestion and improve air quality as cargo volume
grows.
In 2011, the Port of Long Beach received a $17 million grant from
the Transportation Investment Generating Economic Recovery (TIGER) fund
for the Green Port Rail Gateway rail enhancement project. This project
enabled us to add a third rail line, helping to remove bottlenecks on
the existing mainline track to allow Port terminals to shift cargo from
trucks to trains, which decreased local traffic congestion and air
pollution. It also included the demolition and removal of existing
tracks, laying of 29,000 feet of new tracks and building of 6,000 feet
of retaining walls. These improvements help to minimize derailments and
optimize rail traffic flow. This nationally significant project created
340 construction jobs and will allow the Port of Long Beach to better
achieve its goal of increasing on-dock rail use. The ability of U.S.
seaports, like Long Beach, and other stakeholders in the intermodal
supply chain, to improve the flow of freight through intermodal
connectors and to handle current and future trade volumes, will depend
on significant Federal infrastructure investments.
Transportation Funding Needs
Freight transportation is the backbone of the American economy. The
increasing volume of goods moving through U.S. ports and throughout the
intermodal freight network each year creates additional strains on the
supply chain. It is estimated that U.S. businesses pay $27 billion each
year in extra freight costs due to congestion and outdated facilities.
It is also estimated that it will cost $3.7 trillion in order to meet
all of the infrastructure needs of the freight supply chain. New
capital investment in freight transportation infrastructure will lead
to significant benefits including higher productivity, improved freight
velocity, enhanced global competitiveness and a higher standard of
living for the citizens of our Nation.
The Port of Long Beach is in the midst of a 10-year, $4 billion
capital improvement plan (CIP), the most comprehensive modernization
program of any port in the Nation. In Fiscal Year 2019, nearly $700
million has been budgeted for capital projects, which comprises 71
percent of the total $982 million budget. The road improvements, rail
enhancements, terminal redevelopments and bridge replacements in the
CIP underscore the Port's commitment to moving cargo efficiently and
remaining competitive. Integrated planning and funding that addresses
the end-to-end needs of freight movement will be critical to developing
comprehensive regional and statewide plans to improve the Nation's
infrastructure system. The Fixing America's Surface Transportation
(FAST) Act authorized surface transportation programs through Fiscal
Year 2020. The FAST Act was critical for the intermodal system because
it looked to: expand funding; streamline the environmental review and
permitting process to accelerate project approvals; promote the
deployment of transportation technologies and congestion management
tools; and expand port eligibility in the Congestion Mitigation and Air
Quality Improvement Program.
In addition, discretionary grant programs like Better Utilizing
Investments to Leverage Development (BUILD), Consolidated Rail
Infrastructure and Safety Improvements (CRISI) and Infrastructure for
Rebuilding America (INFRA) have provided much-needed opportunities to
fund freight-related projects. Furthermore, innovative financing
options like the Transportation Infrastructure Finance and Innovation
Act were instrumental in helping to fund the Port of Long Beach's $1.4
billion Gerald Desmond Bridge Replacement Project.
It is recommended that the Committee continue to support the
development of a comprehensive freight policy that not only addresses
funding for and improvements to the Nation's roadway, rail and bridge
infrastructure system, but also allows for significant investment in
projects not directly related to highways. A major aspect of the
comprehensive plan should include removal of the $500 million cap on
intermodal freight funding in the next Federal transportation
reauthorization legislation. Such a cap limits the ability to fund
significant intermodal projects at the levels that are needed. In
addition, IANA, as well as the Port of Long Beach, support fully
funding freight provisions and opportunities for U.S. seaports to apply
for formula and competitive multimodal freight grants.
In particular, IANA strongly recommends the following items to
improve the intermodal freight transportation system: developing
dedicated funding for intermodal freight connectors; building
additional freight rail infrastructure; fuel tax increases to fund
freight projects; enhancing public/private partnerships that improve
and expand infrastructure; and the formation of a multimodal freight
office that would report to the Secretary of Transportation.
IANA also believes intermodal project permitting reform is needed.
Existing permitting regulations can cause significant delays in the
construction of transportation projects, more than double their cost
and prevent their timely completion, the results of which hinder
improvements that increase system fluidity. Reforms are needed to
reduce timelines for infrastructure projects, as they can help to
address bottlenecks on the Nation's freight network while also reducing
total project costs, which would result in the ability to fund more
projects. Reviews should be streamlined and Federal agencies should
coordinate more effectively, particularly for large, intermodal
projects that traditionally require the approval of multiple modal
administrations.
We believe that if Congress takes action on the above items, it
will help demonstrate to the freight industry that our government
understands and supports the important role freight plays in our
economy and our global competitiveness. We also believe it will send an
important message to the private sector to enable additional capital
investment to seed further enhancements to the intermodal network.
Information Sharing
In addition to Federal investments in the national intermodal
transportation system, improving information sharing throughout the
supply chain will help to improve system productivity and efficiencies.
IANA and its members have been a strong supporter of leveraging
technology investments and innovation to enable and enhance information
sharing among all stakeholders in the intermodal supply chain.
As an example of this, the Port of Long Beach recently collaborated
with GE Transportation to conduct a pilot demonstration of its port
information portal. This portal is a cloud-based software program that
has the potential to enhance supply chain performance and
predictability by delivering real-time data-driven insights through a
single portal to stakeholders across the supply chain. Integrating data
from across the port, combining machine learning and deep domain
expertise, Port OptimizerTM is a tool that could help the
supply chain monitor and respond to dynamic conditions, align people
and resources and proactively communicate across functions--enabling
maximum port cargo flow and delivery performance.
Another example of how intermodal stakeholders are leveraging
technology to improve information sharing and, ultimately, port
operations is the pairing of predictive analytics with terminal truck
appointment systems. Such systems allow trucking companies to schedule
appointments for container pick-up up to five days before a ship
arrives at the terminal. This advanced visibility enables terminals and
trucking companies to optimize their operations. The goal of these
programs is to increase supply chain performance.
Trade and Tariffs
The intermodal supply chain delivers vital goods and services to
consumers, creates millions of jobs and supports national economic
growth. By volume, 99 percent of U.S.-overseas cargo travels via
seaports. The Trans-Pacific Trade route, of which Long Beach is a vital
part of, is the most significant trade route in the United States.
U.S. seaports are facing increased competition from Canada and
Mexico, which have each developed effective national strategies to
serve America's heartland. Freight stakeholders in Canada and Mexico
are aggressively working with their governments to attract more cargo
moving to and from U.S. markets. Additionally, Canada has a
multijurisdictional freight partnership with significant Federal
funding committed to addressing the competitiveness of two ports on
each coast. Significant investments must be made in ports and across
the intermodal network to rehabilitate constrained and dilapidated
infrastructure and also implement environmental improvements. We need
to have a national freight strategy and also work more collaboratively
with our neighbors to the north and south to ensure we have a seamless
freight system that effectively services the needs of the citizens of
all three countries.
Investing in the Nation's freight transportation infrastructure is
critical to increasing trade through America's major gateways.
Multimodal freight investments must be a key priority to improve
landside connections to seaports and enhance global competitiveness.
Increased funding for infrastructure projects, including intermodal
facilities, will provide intermodal stakeholders and their customers
with the speed, reliability and reduced costs they need to succeed and
keep U.S. jobs. Trade and tariff policies that maintain U.S.
competitiveness in the global economy, as well as legislation and
regulatory efforts that will increase exports and promote trade, will
be key to improving the Nation's intermodal system.
With respect to tariffs, while affecting a relatively small share
of trade, they have the potential to disrupt supply chains, investment
and employment, particularly in Southern California and other ports
where the goods movement industry is a vital part of the local and
regional economy.
Conclusion
IANA thanks the Committee for the opportunity to share information
about critical industry trends, Federal funding opportunities,
information sharing technologies and recommendations regarding the U.S.
intermodal freight industry. A highly functioning freight system
requires modes to work together seamlessly. IANA and its members, like
the Port of Long Beach, stand ready to work with members of the
Committee and its staff to develop innovative legislative, policy,
funding, and infrastructure development solutions to improve the
Nation's intermodal system.
Senator Fischer. Thank you, Doctor.
Our next panelist is Ms. Donna Lemm, who's the Executive
Vice President of IMC Companies, representing the Agriculture
Transportation Coalition.
Welcome.
STATEMENT OF DONNA LEMM, ADVISORY BOARD MEMBER,
AGRICULTURE TRANSPORTATION COALITION; AND
EXECUTIVE VICE PRESIDENT, IMC COMPANIES, INC.
Ms. Lemm. Chairman Fischer, Ranking Member Duckworth, and
Members of the Subcommittee, thank you for holding this very
important hearing.
I'm honored to speak on behalf of the members of
Agriculture Transportation Coalition, our Nation's farmers,
processors, manufacturers of agriculture and forest products.
I come before you today representing our very hard-working
members. I'm humbled to speak because no one understands better
the importance of this vital economic engine more than you do
as a cattle rancher living and breathing a sector that is so
vital to feeding America and the world.
As you well know, Ag and forest products constitute the
largest segment of our country's exports. It's essential at the
onset of this testimony to just reiterate the daily threat of
global competitive sourcing that confronts all your agriculture
and forest product constituents.
There's nothing that we produce here in agriculture and
forest product shipments that cannot be sourced elsewhere in
the world. If we cannot deliver affordably and dependably to
our customers in Asia and Europe and around the world, someone
else will, and getting those customers back is nearly
impossible.
All over the country, we're faced with bottlenecks, delays,
and handcuffs in our ability to execute within the supply
chain. Surging imports, as you referenced, have clogged our
ports and in turn the trains and the tidal wave has moved
inland.
Motor carriers, already short on drivers, sit idle waiting
for those containers to become available. In sum, our entire
international and domestic transportation supply chain fails.
Our producers have to store or even destroy their production
and obviously lose the sales that they're so dependent on.
U.S. Ag and forest products are produced all over the
country and often the sourcing of the containers is far from
where these products are produced. The very first challenge is
to have adequate supply containers to move our goods. Our
refrigerated shippers, our beef and our poultry shippers suffer
from adequate supply of refrigerated equipment. In turn, our
non-refrigerated Ag shippers often move in rail cars directly
to the ports or to inland hubs where they have access to
equipment.
Today, in our peak season, where we live in Memphis,
Tennessee, shipping cotton, we're already seeing tightening of
equipment, Memphis, Dallas, and here, there are shortages of
equipment in Chicago, as well.
To compound the challenge of marine container equipment
supply, we have another piece of equipment vital to moving ag
exports that's critically short not only in supply but in
quality, in safety, fair access, and accountability, and that
is the chassis.
The chassis, that metal frame and wheels upon which the
container is mounted for movement over the road. The problem
was so critical in Memphis that we came together to form a
Memphis Innovation Supply Chain Team.
We asked Commissioner Dye of the Federal Maritime
Commission because of her success with her national team to
please lead our team and in turn we're happy to share that we
have great collaboration with all segments, our railroads, our
ocean carriers, and our shippers, and we're seeking and
appealing to these chassis providers to please understand our
need for a single grade pool.
We also suffer from rail congestion and scheduling issues.
We have rail cutoffs and schedules that are missing and in turn
as our exports enter our rail terminals, we're being rejected
because of the congestion. We're being turned around.
We've asked to appeal to you for appointment system to look
at it because often there are not enough appointments to meet
the surges of exports that we have and we're not meeting our
vessel cutoff if we cannot meet our rail cutoff.
The agriculture sector certainly has felt the driver
shortage and AgTC members are very grateful for the FMC
support, flexibility, for sensitive Ag shippers and hours of
service exceptions within a 150-mile air radius.
We're currently faced with new ocean carrier street turns,
not all ocean carriers but some, charging fees as we try to
street turn and what that means is we take an import container
that's been emptied and try to utilize the equipment right away
on the street.
These fees are counterproductive and we appeal to you to
help us in our opposition.
Port congestion, as we stated at the onset, very
challenging for our exports to enter the terminals. We have
very narrow windows. We're asked now to bring in those
containers when those vessels are working. We don't know when
they're working. In turn, we're missing windows and missing
sales.
Thank you for allowing me just to share with you a glimpse
of what we face every day. We seek your assistance in creating
more opportunities to collaborate in this multimodal network
that we navigate through to export our products that feed the
world.
Thank you.
[The prepared statement of Ms. Lemm follows:]
Prepared Statement of Donna Lemm, Advisory Board Member, Agriculture
Transportation Coalition; and Executive VP, IMC Companies, Inc.
Chairman Fischer, Ranking Member Duckworth, and members of this
Subcommittee, thank you for holding this important hearing.
I am honored to speak on behalf of the members of the Agriculture
Transportation Coalition: our Nation's farmers, processors,
manufacturers of agriculture and forest products. I come before you
today representing our hard working members. I am humbled to speak
because no one understands better the importance of this vital economic
engine more than you do, as a cattle rancher, living and breathing a
sector that feeds America and the world.
As you well know, agriculture and forest products constitute the
largest segment of our country's exports. The Agriculture
Transportation Coalition (AgTC) has, for 31 years, pursued an
efficient, dependable and affordable transportation supply chain
required to keep our exports competitive in the global marketplace.
Today, I will discuss some of the most pressing transportation
challenges facing agriculture and forest products exporters today.
It is essential to emphasize the daily threat of global competitive
sourcing confronting all your agriculture and forest products
constituents:
There is nothing that we produce in agriculture and forest
products in this country, that cannot be sourced somewhere else
in the world. What is produced in Nebraska and Illinois, for
examples, Brazil, Australia, Argentina, Canada and Mexico are
more than eager to supply.
When we cannot deliver, affordably and dependably, to our
customers in Asia, Europe and around the world, those customers
will find alternative sources.
When our foreign customers go elsewhere, and establish new
sources and new supply chains, it is incredibly difficult to
get those customers back.
Today's hearing is timely, and appropriate, because the
transportation challenges we have today are indeed threatening our
ability to get our Agriculture and forest products to market.
At the outset, I would like to clarify--most of the agriculture and
forest products exported from this country are moving in intermodal
containers. Our overseas customers of U.S. agriculture and forest
products demand that we deliver agriculture in containers, and that our
exports arrive frequently, in manageable volumes, and in good
condition--necessitating containerized shipping. This includes all
refrigerated goods, such as beef, pork, poultry, fresh fruit and
vegetables, eggs, dairy, etc. moving in refrigerated containers;
meanwhile, virtually all of the cotton, lumber, almonds, paper,
specialty grains and top grade soybeans, hay, rice, etc. are
transported in 'dry'' containers. Traditional 'bulk' cargoes have
increasingly migrated to containerized shipping. The Class 1 railroads
are moving hundreds of thousands of these intermodal containers of our
agriculture exports, from inland points, to our seaports on the East,
Gulf and West Coasts. AgTC members are loading hundreds of containers
each week at rail ramps throughout the country, including in Nebraska
and Illinois
All over the country we are faced with bottlenecks, delays and
handcuffs in our ability to execute within the supply chain. Surging
imports have clogged our ports and in turn the trains moving inland
have containers stockpiled. Motor carriers, already short on driver's
sit idle waiting and waiting for availability of containers. In sum,
our entire international and domestic transportation supply chain
fails. Our producers have to store or even destroy their production,
and obviously lose the sales they depend upon.
This hearing is timely, please allow me to highlight as we move
across the supply chain from start to finish. Our system has gaps that
are causing huge challenges that may be visible as we peel this back
looking at the movement of agriculture and forest product exports in
containers from origin to our rails and then to our marine terminal
gateways. There is a real need for a solution that will protect U.S.
agriculture and forest product shipments from falling deep into 6
challenging areas in the system which are currently hindering export
execution.
1. Container shortages
U.S. agriculture and forest products are produced all over the
country and often the sourcing of containers is far from where our
products are produced. The first challenge is to have adequate supply
of containers to move our goods. Our refrigerated agriculture exporters
of beef and poultry often suffer from adequate supply and availability
of refrigerated containers. For our non-refrigerated agriculture
products many of our members will move by rail to transload facilities
that can accommodate large access to containers. Where are the
containers? We depend on availability at ports and our inland hubs like
Chicago, Memphis, Dallas and Kansas City. We send agriculture and
forest products in rail cars to transloading centers near our Nation's
major ports. From the mid part of the country moving often east to
Charleston, Savannah, Norfolk. For our fruit and nuts shippers
depending on our ports for supply of empty containers in Los Angeles
and Long Beach, Oakland, Seattle. Our cotton and forest product exports
looking for sourcing of containers in the interior in Dallas and
Memphis where supply is already short. Looking to the Gulf ports like
Houston, New Orleans and Mobile for sourcing of containers that have to
compete with resin shipments for supply of standard marine containers.
Containers is already tight in our inland locations like Chicago,
Memphis and Dallas where we are moving from fall harvesting into peak
shipping season which is right now.
2. Chassis shortages and the need for quality/roadworthy equipment,
accountability and fair access to chassis
To compound the challenge of marine container equipment supply, we
have another piece of equipment vital to moving ag exports and that is
critically short not only in supply, but in quality and safety, fair
access and accountability and that is the chassis. (The chassis is the
metal frame and wheels upon which the container is mounted for movement
over the road). The challenge of chassis supply and fair access to
chassis on merchant haulage moves have reached headlines across the US.
It is important to note that there currently is no consistent way for
chassis providers to forecast for United States Agricultural exports;
most forecasting for chassis provisioning is done for imports only.
Until a decade or so ago, chassis in the United States were directly
provided by the containership operators, with a clear accountability.
For a number of complicated reasons, including regulatory changes, the
emergence of operator alliances and space-sharing agreements, plus the
financial stresses of the Great Recession combined with emergence of
private equity capital seeking infrastructure-related opportunities,
the operators sold off most of their chassis assets to three outside
firms that now own the vast majority of the Nation's chassis fleet. As
a result, chassis are now controlled and managed by these outside
entities where there is no overall accountability for provision of
adequate quality and quantity of chassis, and short-term commercial
pressures might outweigh the necessity of ensuring supply chain
fluidity.
Please allow me to give you an example of the impact of lack of
chassis to the cotton market in Memphis. In the first quarter of 2018
agriculture exports in Memphis came to a screeching halt. In early
February of 2018 there were 3 chassis available and in good working
order, according to chassis providers' reports, to serve a market
moving over thousands of agriculture exports a week. At the same time
our importers were grounded and piled high at our rails due to this
chassis shortage and compounded by weather. We had had enough and our
team of agriculture and forest product shippers, reached out to other
stakeholders to try and peel back what really was at the center of our
standstill. The Memphis Supply Chain Innovation team was formed, this
is the first regional team of stakeholders that came together to bring
stakeholders together to find actionable resolve. The Federal Maritime
Commission was hosting its Fact Finding 28 meeting in Memphis on
detention and demurrage May 15, 2018 and the next day the team
assembled to step out of their silos to look at the supply chain
process in Memphis and what might be done to assist fluid commerce. The
team comprised of Agricultural exporters, railroads, ocean carriers,
importers and motor carriers agreed unanimously that the single most
actionable solution was a single gray pool in Memphis for chassis. The
team championed action for a single gray pool the following:
1. Interoperability which would immediately increase supply
2. Quality of chassis given the concern for safety, age of chassis
and condition of chassis with so many in maintenance and repair
status
3. Pool manager for accountability of chassis availability, supply
and condition
4. Shipper Board that would assist in a continued voice for an
operating chassis model that would offer resolve to the current
broken chassis model.
This appeal was supported by 4 Major class I railroads, all OCEMA
members, the Memphis Supply Chain Team, AgTC, ATA, Memphis Chamber of
Commerce and today we will hear from Intermodal Equipment providers if
they will indeed embrace the current solution proposed.
The experience in Memphis also gives us insight into how connected
all stakeholders are and how important shared discussion, review, and
accountability to foster commerce really is. The gap between railroads
that count on ocean carriers to supply chassis, who in turn contract
with chassis providers find shippers and motor carrier with no voice.
We also see challenges with rail making decisions regarding capacity
and frequency that should absolutely engage other stakeholders,
including exporters.
3. Rail congestion and scheduling issues
Rail congestion impacts every agriculture and forest product
exporter trying to in-gate loaded exports into the rail terminal.
Severe congestion is reported by our members in Chicago and Memphis at
this time. There is often no room at the terminal and containers are
being rejected at the gate. Motor carriers are forced to turn around.
This congestion is the result of surging imports, lack of chassis
availability which has been compounded by weather. Container grounding
continues to occur in these major inland rail hubs and the result is
rising costs of demurrage and detention paid by the shipper due to no
fault of their own.
It is very important to AgTC members to have reliable rail cut-
offs. Members are reporting that the situations at inland rail hubs are
challenging with specific mention of the NS Memphis ramp. Rail cut-offs
to tender export loads have been unreliable and impacting final missed
delivery of cargo loading in Charleston and Savannah. Truckers have
waited in line between 2-6 hours for various reasons--volume,
congestion and ramp equipment breakdowns. Exporters cannot face these
kind of delays per load and expect to meet inland cutoffs and overseas
customer commitments.
Our agriculture and forest product members do struggle with
appointment systems that often do not accommodate the volume of cargo
that has been booked with ocean carriers. Several of our largest
exporters have shared that the CSX and CN have no volume correlation to
ocean carrier designated ``Earliest Return Date ``(ERD) and Intermodal
Cutoff for specific bookings. There are ``X ``number of appointment
times given out per day by the rail and when they are gone, truckers
need to wait until the following day. As noted, the availability to day
does not appear to be tied to actual bookings with specific shippers
who have been provided specific ERD's and cutoffs. This lack of
alignment also threatens when loads can be picked up.
The net effect is exporters and the truckers they are working with
are getting less loads per driver per day--reducing supply chain
velocity and U.S. surety to meet export customer commitments complete
and as committed = more shipments splits which has downline system
impacts for the marine terminals, ocean carriers and vessels.
The western Class I's--BNSF Railway and UP Marion have made
significant infrastructure investments in Memphis; we need all rail
providers to keep pace with the growth of intermodal volumes.
4. Motor Carrier: Driver Shortages, Hours of Service
The agriculture sector certainly has felt the driver shortage and
AgTC members are grateful for the FMCSA's support of flexibility for
agriculture shippers and Hours of Service exceptions within a 150 mile
radius. 2018 was particularly painful with shippers scrambling to find
drivers to move goods from sourcing locations all over the United
States. It is said that over 50,000 new drivers are needed to serve the
international and domestic markets. The AgTC membership has worked hard
to find ways to accommodate the driver at warehouses, respecting the
drivers time with loading and looking for ways to make the process more
efficient. In the midst of the driver shortage, agriculture exporters
struggle to compete with foreign sourcing, finding equipment, finding
drivers. While there are various causes of the congestion and delay at
our Nation's gateways and rail ramps, much could be gained by
harmonizing our allowable truck weights with the rest of the world,
significantly reducing the number of trucks on the road, or waiting at
rail ramps and marine terminals.
5. New Ocean Carrier ``Street Turn'' Fees challenge efficiency, cost
and emission
reduction for all stakeholders
A particularly counterproductive approach is several ocean
carriers' filings with the UIIA to impose fees for containers that are
interchanged once import devanning has taken place. In other words
these empty containers do not go back to their depots or to terminals,
instead they are interchanged to move on to secure U.S. exports. This
practice is known as street turns. Street turns enhance efficiencies,
save trucking costs, reduce congestion and save emissions. This
practice that helps all stakeholders save time and money now has ocean
carriers imposing fees from $40 to $75 on ``street turns''. We ask this
Committee to assist in gaining ocean carrier rescission of this
appalling action by these 4 ocean carriers
The fees imposed on street turns injures all, including the
carriers themselves, by adding to congestion and delay which already
makes marine terminals at some of our largest ports, the greatest
challenge to the U.S. export/import supply chain. Penalizing street
turns threatens one of the only measures available to shippers,
carriers, terminals, truckers to address the unending congestion. All
parties should be concerned about the detrimental impact on the
environment, particularly in and around the vicinity of port complexes.
At a time when ports are mandating green trucks and reduced emissions,
this street turn fee is already increasing the number of trucks and
emissions.
The Agriculture Transportation Coalition has offered to meet with
these and other carriers to help them understand how the street turn
penalty will impede cargo flow and increase costs and fuel emissions.
6. Port Congestion
Most marine terminals were designed and built to accommodate
container ships that were a quarter the size of the largest container
ships now carrying our Nation's exports and imports. Today ships of
12,000-14,000 TEUs are calling our ports. Ocean carriers have
consolidated their services to for alliances sharing space together on
these mammoth ships. The ships aren't the only requirements that are
getting larger, more berthing space, larger cranes and the immediate
issue of scalability is front and center. The entire supply chain is
scrambling to catch up and in many cases failing to catch up. It begs
to ask the question who is responsible for cramming this huge tonnage
into the supply chain without fair planning or coordination by all
stakeholders? For U.S. exporters this means less frequency of vessel
calls, shorter scheduling windows to ship larger volumes and less
choice of carrier options because of consolidation and alliances.
Container volumes often get cut in half when loading because of
capacity constraints and tonnage maximums on vessels. We have one
member that is the second largest exporter in the country, who shared
that his containers are being shut out and only allowed to load if a
vessel is working.
The congestion at major maritime gateways is such that trucks are
often idling for hours outside the marine terminal gates. Turn times
once on the terminals are unacceptably long, caused frequently by an
overload of containers discharged all at once from the massive ocean
ships whose volumes far outstrip the capacity of terminals built for
the previous generations of container ships. The congestion, combined
with a shortage of available chassis, frequently results in the
exporter or importer being unable to return an ocean carrier container
to the terminal within the set amount of ``free time'' days set forth
in the ocean shipping contract. Typically for exporters this is five
days. Sometimes even shorter. Rarely longer. The penalty for missing
the ``free time'' limit can be $125-$175 per day. The marine terminal
portion of this ranges from $9-$20, with the remainder being remitted
to the ocean carrier. Most U.S. exporters have been subjected to these
fees, with some exporters and their truckers, suffering literally
millions of dollars of such fees. This is obviously a huge drain on the
profitability of our exports which already, due to global competition,
labor under razor-sharp margins.
We appreciate the Federal Maritime Commissioner Rebecca Dye's
initiatives to develop supply chain teams, including all stakeholders,
to address fundamental causes and find solutions to the marine terminal
congestion. Specific questions are being addressed, such as when, under
an ocean shipping contract, a container is considered to be
``tendered'', so that is actually available for the trucker to pick up
from the terminal. These Supply Chain teams are determining how to
address the congestion which exists nationwide, at inland points such
as Memphis and Chicago, to the seaports at all coasts. Several members
of the AgTC are active participants.
7. Preventing imposition of ``Verified Gross Mass''--Thank you to this
Committee, the U.S. Coast Guard and the FMC.
I would like to thank this Committee for your assistance in
supporting the U.S. exporter. Three years ago the ocean carriers
collectively announced an entirely new process by which the exporter
would have to guarantee the accurate weight not only of our cargo
(which we of course always have done), but also the weight of the ocean
carrier's own container! Called ``Verified Gross Mass'', this would
have imposed liability on exporters for information we don't have, and
cannot obtain. It would have required significant changes to the
electronic interface for export documentation, leading to delays in
some shipments, and missed sailings. Fortunately, the U.S. Coast Guard
stepped forward, noting that since the 1990s all loaded containers have
had to be weighed at the marine terminal before loading on the ships,
that our marine terminals were in compliance, and that there does not
exist a need for this additional ``VGM'' requirement. This Committee
conducted a hearing on this subject, conveyed its concerns about the
counterproductive VGM proposal. We thank you, the FMC and the Coast
Guard for taking the initiative to protect the interests of the U.S.
exporter. Since then ocean carriers have largely refrained from
imposing it on U.S. exports, but from time to time, a carrier will
attempt to require it. The AgTC continues to monitor and educate those
carriers that VGM is not to be imposed. We will continue to bring to
this Committee's attention, the FMC, and the Coast Guard when a carrier
attempts to impose a VGM requirement.
Summary
The Agriculture Transportation Coalition has shared with you the
challenges at origin with equipment and chassis shortages, driver
shortages and the heightened challenges given the systemic problems
with rail and terminal congestion. We have given you a glimpse of what
we face every day and we ask for your continued support in creating
programs that support continuity throughout the intermodal network
connecting marine, rail, motor carrier, intermodal equipment providers
and shippers. We seek your assistance in creating more opportunities to
collaborate in this multimodal network that we navigate through to
export our products that feed the world. Our agriculture shippers
supply chain interests must be protected and commerce must seek an
integrated supply chain with visibility, accountability and
productivity for all sectors that embraces the U.S. agriculture
exporter.
Senator Fischer. Thank you, Ms. Lemm.
Next, we have Mr. Joseph Szabo, the Executive Director of
the Chicago Metropolitan Agency for Planning.
Welcome, sir.
STATEMENT OF JOSEPH SZABO, EXECUTIVE DIRECTOR,
CHICAGO METROPOLITAN AGENCY FOR PLANNING; AND
BOARD MEMBER, COALITION FOR AMERICA'S GATEWAYS
AND TRADE CORRIDORS
Mr. Szabo. Well, thank you, Chairman Fischer, Ranking
Member Duckworth, Members of the Subcommittee.
It's an honor to be here to testify today. I'm here today
on behalf of both the Chicago Metropolitan Agency for Planning,
as we say CMAP, and also the Coalition for America's Gateways
and Trade Corridors or CAGTC.
CMAP represents some 284 municipalities with eight and a
half million residents located in the heart of North America's
freight hub, and CAGTC is a diverse coalition of more than 60
public and private organizations that are dedicated to
increasing Federal investment in America's multimodal freight
infrastructure.
Investment in freight infrastructure is critical to the
economy of our country. It's fundamental that no economy that
can ever grow any faster than its transportation network is
going to carry it and so with FAST Act reauthorization around
the corner, I urge you to include a robust freight program.
I applaud the Committee for prioritizing freight investment
in the FAST Act and, you know, this was landmark legislation
that really provided a down payment on our Nation's
infrastructure needs but so much more needs to be done.
We urgently need a strategic freight mobility program that
prioritizes the current economic needs of our country while
also planning for generations to come and without action, U.S.
productivity and global competitiveness is going to suffer.
Years of underinvestment in our national transportation
system have driven up the costs of doing business. As Dr.
Hacegaba mentioned, U.S. companies are spending approximately
$27 billion each year in extra freight transportation expenses
due to congestion and ultimately it's the public that pays the
price.
And so the Federal role is key.
Many of the most complex freight improvements cross local
and state boundaries and occur where multiple modes are coming
together. And so these often require a partnership at the
Federal level to untangle the chokepoints that burden our
communities and slow commerce.
The BUILD and INFRA Programs remain essential. While BUILD
is available to address a multitude of mobility issues of
various sizes, INFRA is aimed at investing in those large-scale
freight- and highway-specific infrastructure improvements.
So both of them fill very important niches, and they've
leveraged a significant amount of non-Federal dollars. Sources
other than BUILD and INFRA have provided 72 percent and 80
percent of funds for projects, respectively.
In my region, U.S. DOT awarded CREATE's 75th Street
Corridor Improvement Project $132 million through INFRA's most
recent round. And these funds will be matched with $342 million
from the CREATE partners to pay for the first portion of the
75th Street Project to separate several freight and passenger
rail lines, untangling one of the most significant bottlenecks
in the country.
It's key to the congestion issues, you know, that you were
just speaking about that stem from Chicago and affect the
entire national network.
And so to address the urgent freight needs and build on
successes, CAGTC respectfully submits four recommendations.
First, we need a national strategy that guides long-term
planning, a focus on multimodal freight should be established
within U.S. DOT's Office of the Secretary to guide policy and
programming, emphasizing nationally significant projects.
Second, we need dedicated, sustainable, and flexible
funding, and that flexibility is key, ensuring that it's
multimodal. The INFRA Program is over-subscribed. In the most
recent round, INFRA saw $12 in requests for every $1 that was
available, and given this level of over-subscription, we
believe that $12 billion annually in multimodal freight
investments through a competitive program is needed.
Congress should also eliminate the caps on non-highway
spending under INFRA and the Freight Formula Program. Freight
doesn't move on highways alone and so we have to invest in the
very best projects, bring the greatest results to the public,
regardless of mode. Simply, where public benefit is derived,
public investment should be made.
Third point, we need merit-based criteria that prioritizes
projects with a demonstrable contribution to national freight
efficiency. And oversight and transparency in the
decisionmaking process is critical to the program's integrity.
And finally, it's key that we have a partnership with the
private sector. Funding should leverage private participation
and provide the largest possible toolbox of financing options.
And with that, I thank the Committee for the time and look
forward to any questions.
[The prepared statement of Mr. Szabo follows:]
Prepared Statement of Joseph Szabo, Executive Director, Chicago
Metropolitan Agency for Planning; and Board Member, Coalition for
America's Gateways and Trade Corridors
Thank you for the opportunity to testify before the Senate
Committee on Commerce, Science and Transportation's Subcommittee on
Transportation and Safety. As Congress considers the possibility of an
infrastructure investment package and approaches the surface
transportation bill's reauthorization in 2020, I appreciate the
Committee's ongoing dedication to freight system investment.
Today I am representing both the Chicago Metropolitan Agency for
Planning (CMAP) 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 Duckworth and Members of this
Subcommittee for the opportunity to share my views.
CMAP is the regional planning organization for the northeastern
Illinois counties of Cook, DuPage, Kane, Kendall, Lake, McHenry, and
Will. We work to help communities prosper by addressing transportation,
housing, economic development, open space, environment, and quality of
life issues for our region through long-range planning. Our most recent
plan, ON TO 2050, calls for bold steps toward a wellintegrated,
multimodal transportation system that seamlessly moves people and goods
within and through metropolitan Chicago. To balance improving our
economic advantage with improving quality of life, freight
recommendations in the plan emphasize strategic investment in the
freight network, improving local and regional truck travel, and
mitigating the negative impacts of freight on adjacent communities.
The CMAP region plays a vital role in intermodal connectivity for
the Nation. Approximately 16.4 million twenty-foot equivalent units
(TEUs) of cargo moved through the region's twenty rail-truck intermodal
facilities in 2016, an increase of nearly 38 percent since 2009.\1\
This represents more TEU lifts than the busiest seaports in the
country. Chicago is also home to the regionally and nationally
significant CREATE program, which includes 70 projects that aim to
invest billions in critically needed capital improvements in our area's
rail infrastructure. Due to our critical location at the nexus of the
North American railroad network, Chicago has been a national rail hub
for almost 150 years, seeing nearly 500 freight trains pass through the
region every day. One-fourth of the Nation's freight rail traffic and
nearly half of all intermodal trains pass through Chicago. But the rail
lines, built over a century ago, were not built for the volumes nor the
types of freight being carried--meaning Chicago is now the Nation's
largest freight rail chokepoint.
---------------------------------------------------------------------------
\1\ Chicago Metropolitan Agency for Planning, Intermodal Lifts.
---------------------------------------------------------------------------
Rail congestion, resulting in delays and unreliable transit times,
can be exacerbated by market conditions and severe weather. Congestion
in Chicago during 2014 caused lingering service disruptions for farmers
across the Upper Midwest. Revenues decreased due to increased
transportation and storage costs and losses caused by spoilage.\2\
Comprised of a partnership between the U.S. Department of
Transportation, the State of Illinois, Cook County, the City of
Chicago, Metra, Amtrak, and U.S. freight railroads, CREATE aims to
address this bottleneck to increase the reliability and efficiency of
the region's rail infrastructure. More than $1.6 billion has been spent
or committed, with an estimated $2.8 billion needed to complete the
full program. To date, Federal sources have provided 39 percent of
spent and committed funds.
---------------------------------------------------------------------------
\2\ U.S. Department of Agriculture, Rail Service Challenges in the
Upper Midwest: Implications for Agricultural Sectors--Preliminary
Analysis of the 2013-2014 Situation, January 2015.
---------------------------------------------------------------------------
Freight transportation is America's economic engine and the ability
to move goods safely, reliably and expeditiously keeps U.S. businesses
competitive in the global marketplace and supports a higher standard of
living for our population. I applaud Members of this Committee for
prioritizing freight infrastructure investment under the Fixing
America's Surface Transportation (FAST) Act. This landmark legislation
made significant improvements to our freight policy and programming. It
is a down payment on our Nation's infrastructure needs, but as you
know, much more is needed to make up for years of underinvestment and
prepare for growing demands. With lawmakers preparing for the FAST
Act's reauthorization in 2020 as well as the potential of a large-scale
infrastructure investment bill, I ask you to include a robust freight
program as the hallmark of both approaches.
According to the Bureau of Transportation Statistics,
``productivity growth in freight transportation has long been a driving
force for the growth of U.S. overall productivity and contributed
directly to the growth of U.S. GDP.'' \3\ The economic importance of
freight infrastructure cannot be overstated. The United States'
multimodal freight network directly supports 44 million jobs and
impacts every American's quality of life.\4\ The system moves 55
million tons of goods daily, worth more than $49 billion.\5\ That's
roughly 63 tons per person annually; meanwhile, the U.S. population is
expected to increase by 70 million by 2045.\6\ Such population growth
presents both challenges and opportunities: the U.S. Department of
Transportation estimates that freight tonnage will increase by an
average of 1.4 percent annually through 2045.\7\ To capitalize on a
growing 21st century consumer base and workforce, our infrastructure
network must be up for the task.
---------------------------------------------------------------------------
\3\ U.S. Department of Transportation Bureau of Transportation
Statistics, Growth in the Nation's Freight Shipments, May 2017,
\4\ U.S. Department of Transportation, National Freight Strategic
Plan, October 2015.
---------------------------------------------------------------------------
Unfortunately, years of underinvestment in our national
transportation system have driven up the cost of doing business. U.S.
companies spend around $27 billion annually in extra freight
transportation expenses due to congestion,\8\ and the total cost of
congestion is estimated at $1 trillion annually--roughly seven percent
of U.S. economic output.\9\ Businesses are taking note. According to a
study by the National Association of Manufacturers, 65 percent of their
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.\10\
---------------------------------------------------------------------------
\8\ U.S. Department of Transportation, National Freight Strategic
Plan, October 2015.
\9\ Ibid.
\10\ 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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Infrastructure deficiency carries a cost, and it is not just
businesses paying the price. According to TRIP, the average U.S.
motorist is losing $599 in additional vehicle operating costs as a
result of driving on infrastructure in need of repair.\11\ INRIX
estimates that congestion costs the average U.S. driver $1,348
annually.\12\ By contrast, an often-cited solution is significantly
less burdensome: an immediate 25-cent increase in the motor fuel tax
would cost the average household $285 annually.\13\
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\11\ TRIP, Bumpy Road Ahead: America's Roughest Rides and
Strategies to Make Our Roads Smoother,'' October 2018.
\12\ INRIX, Congestion Costs Each American 97 Hours, $1,348 a
Year, February 2019.
\13\ U.S. Chamber of Commerce, Here's What You Need to Know About
the Gas Tax, April 2018
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Public investment in our Nation's multimodal freight infrastructure
is chronically inadequate to meet the system's demands. States and
localities have made attempts to increase their infrastructure
funding--since 1993, 39 states have raised their own gas taxes.\14\
However, states and localities cannot, and should not, shoulder the
burden of nationally-significant freight movement alone. Embedded in
the framework of our country, the Commerce Clause of the Constitution
tasks the Federal government with making investments to support
interstate commerce. 77 percent of U.S. freight crosses state lines,
illustrating the need for a Federal role in freight planning and
investment.\15\ At its peak, the Federal government provided 38 percent
of public infrastructure funding but that number has fallen to just 25
percent in recent years.\16\ This places a strain on communities and
local governments, many of whom have already raised their user fees and
are therefore struggling to determine where to dig up additional funds.
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\14\ U.S. Chamber of Commerce, Modernizing America's Infrastructure
Requires Adjusting the Federal Motor Vehicle User Fee, January 2018 <
https://www.uschamber.com/issue-brief/modernizing-america-s-
infrastructure-requires-adjusting-thefederal-motor-vehicle-user>
\15\ Tomer, Adie and Joseph Kane, Brookings and JP Morgan Chase
Global Cities Initiative, Mapping Freight: The Highly Concentrated
Nature of Goods Trade in the United States, November 2014.
\16\ Council on Foreign Relations, The State of U.S.
Infrastructure, October 2017.
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While a variety of Federal funding solutions for transportation
infrastructure have been contemplated by Congress and infrastructure
advocates, our group has coalesced around a waybill fee dedicated to
freight infrastructure improvements. A waybill fee assessed on the cost
of surface transportation movements would not skew the market for
services and would grow along with the demand for freight
transportation. Freight infrastructure needs are significant and
continue to grow; CAGTC remains committed to exploring solutions that
will provide robust and dependable funding.
Many of freight infrastructure's largest, most complex, and most
desperately needed improvements cross local and state boundaries and
occur where multiple modes come together. These instances often require
a partnership at the Federal level to untangle chokepoints that burden
our communities and slow commerce.
The annually-appropriated BUILD, formerly TIGER, competitive grant
program is designed to fund capital investments in infrastructure
projects across all modes, including both freight and mixed use
infrastructure. 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 INFRA program, contains criteria written into law that
focus on goods movement infrastructure, and its goals include:
increasing global economic competitiveness, improving connectivity
between freight modes, reducing congestion and bottlenecks, and
improving the safety, efficiency and reliability of the movement of
freight and people. Both programs are essential: while BUILD is
available to address a multitude of mobility issues of various sizes,
INFRA is aimed at investing in large-scale, freight and highway-
specific infrastructure improvements, both filling important niches.
According to a 2019 study by the Congressional Research Service,
``discretionary grants may be more effective in providing large amounts
of Federal funding for very costly freight-related projects,
particularly those requiring interstate cooperation.'' \17\ Competitive
grant programs, such as INFRA and BUILD, assist in funding large-scale
infrastructure projects, which often span modes and jurisdictional
borders and are difficult, if not impossible, to fund through
traditional distribution methods such as formula programs.
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\17\ Congressional Research Service, Freight Issues in Surface
Transportation Reauthorization, January 2019.
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While formula programs invest through a standard 80 percent Federal
to 20 percent non-federal match, competitive grant programs encourage
states and localities to bring their best possible deal to the table,
driving innovative and creative funding and financing arrangements.
Over the 10 rounds of the TIGER/BUILD programs, $3,577,140,879 has been
awarded to projects with a freight component, yielding a total
investment of $12,685,024,323, meaning sources other than the BUILD
program provided 72 percent of funds.
Similarly, in the INFRA grant program's three rounds, USDOT awarded
$2,057,899,933 to projects with a strong freight component. Those
monies combined with funds from various other sources to result in
$10,072,983,957 in total project investments--meaning 79.6 percent of
funds came from sources other than the INFRA grant program.
In my region, USDOT awarded CREATE's 75th Street Corridor
Improvement Project $132 million through the INFRA program's most
recent funding round. The funds will combine with $342 million from
other CREATE partners to pay for the first portion of this project to
separate several freight and passenger rail lines in the 75th Street
Corridor--improving reliability and travel time for more than 200
freight trains, 30 Metra commuter trains, and 10 Amtrak trains daily.
While benefits will begin to accrue upon completion of the first
portion, $474 million represents less than half the funds needed to
complete both portions of the project. Completion of the full project
will reduce rail and roadway congestion resulting in an anticipated
$3.8 billion of economic benefits.
The INFRA program's ability to leverage the Federal dollar is
impressive, but a small Federal ask, or likewise, a significant private
contribution should not be the primary considerations when deciding to
fund a project. Perhaps more important are project outcomes--we must
consider the regional and national benefits of a project, not just the
source of the matching funds. Projects should first be evaluated on
their ability to meet the program's goals, based on measureable and
objective criteria defined by Congress. Just because a project requires
less Federal investment, it does not mean it is the most valuable
investment for the Nation.
Complementary to the INFRA competitive grant program is the FAST
Act's freight formula program, which allows state departments of
transportation to target freight system improvements, like first and
last mile connectors. Some states, such as California and Illinois,
have distributed the Federal freight dollars through a state-level
competitive program. In Illinois, the program is funding 23 important
projects statewide, including $50 million for a CREATE grade separation
in Chicago that will improve safety and alleviate motorist delay at a
``911 Crossing'' deemed critical for emergency services to access
communities in the area. In order to increase the flexibility afforded
to state departments of transportation, we encourage Congress to
eliminate the cap on non-highway projects, currently set at 10 percent
of total funds, so each state can invest in its most pressing supply
chain needs, regardless of mode. It should be noted, that even
administered as a state-level competitive grant program, the formula
program is not a replacement for INFRA or BUILD, which fund nationally
and regionally significant projects that frequently span multiple
states and jurisdictions. As stated previously, such freight projects
require a federally-administered competitive approach.
Recommendations
We need a strategic freight mobility program that prioritizes the
current economic needs of our country while planning for generations to
come. This campaign of strategic investment should expand capacity and
increase efficiency, regardless of mode or political jurisdiction.
Without such a campaign, U.S. productivity and global competitiveness
will suffer.
To address these needs, we respectfully recommend that Congress:
Develop a national strategy that guides long-term planning: We need
a national ``vision'' and strategy to shape and guide our freight
infrastructure needs. Such a strategy should have active coordination
among states, regions, and localities and should endeavor to anticipate
freight needs extending over multiple decades to allow for a smooth
path for free-flowing freight both today and into the future.
An office of 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.
Because the movement of goods spans different modes of infrastructure,
specialized knowledge at the Federal level is essential. An office of
multimodal freight will allow experts in the unique operational and
economic needs of each mode to work together to make the best
investments in our system. Additionally, this investment strategy
should include innovative and flexible approaches to structuring
Federal financial assistance in a manner that encourages private sector
investment.
Provide sufficient levels of funding that are dedicated,
sustainable, and flexible: An investment program dedicated to
multimodal freight infrastructure is necessary to ensure that public
agencies can invest in their most critical goods movement needs--
regardless of mode. Federal funding should incentivize and reward state
and local investment and leverage the widest array of public and
private financing. Funding should be based on revenue sources that are
predictable, dedicated and sustained. Because they are the primary
beneficiaries of any system improvements, owners of goods should be
part of the revenue user-base.
Existing programs available to freight infrastructure, like the
INFRA competitive grant program, are oversubscribed: in its most recent
FY17/18 round, the INFRA grant program saw $12 in unique requests for
every $1 available. Currently funded at an average of $900 million
annually, given this level of oversubscription, we estimate the need to
be closer to $12 billion in multimodal freight investment annually
through a competitive grant program.
As we approach the FAST Act's reauthorization next year, we
encourage Congress to not only increase the funding levels of both the
freight formula program and the INFRA grant program, but to also
eliminate the caps on non-highway spending under both programs. Freight
does not move on highways alone--where public benefit is derived,
public investment must be made. Intermodal freight is one of the
fastestgrowing sectors of the freight market.\18\ And, it is often in
the places where various modes come together that public assistance is
needed to close the funding and infrastructure gaps, which result in
capacity inefficiencies and bottlenecks. Examples include highway-rail
grade crossings, rail spurs to access cargo, logistics or transfer
facilities, tunnels and bridges for port access, border crossing
capacity enhancements, and air-freight connectors.
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\18\ U.S. Department of Transportation, Beyond Traffic, February
2015.
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Implement a set of merit-based criteria for funding allocation:
Projects should be selected through the use of 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 should 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.
The U.S. Department of Transportation's decision-making process should
be made transparent to ensure the integrity of the evaluation process.
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. We
recommend that Congress consider establishing an advisory council made
up of freight industry members and system users who could assist and
partner with the U.S. Department of Transportation in order to optimize
results from planning, coordination and evaluation processes.
Oversight of existing freight programs: We recommend Congress
oversee execution of the INFRA program to ensure projects are evaluated
against criteria codified in law. We commend Congress' foresight in
mandating that the Government Accountability Office (GAO) publish a
report on the decision making process for the first round of the INFRA
grant program and encourage Congress to continue such oversight to aid
decision-making transparency and adherence to Congressional intent.
I would like to thank the committee for their time and attention to
this critically important topic.
Senator Fischer. Thank you, sir.
We will begin first round of questioning and I will start.
For the entire panel, I would like to ask you a yes or no
question. We've seen the FAST Act be recognized, the importance
of freight transportation by creating that Formula Funding
Program, and the Discretionary Grant Program specifically for
freight that you just referred to, Mr. Szabo.
These programs are authorized between $1 billion and $1.5
billion annually apiece. Each of you touched on that in your
testimony, but I want to follow up on this point, so hopefully
yes or no.
Do you believe it is important for reauthorization of our
Federal surface transportation programs to include those
programs that are focused on freight transportation
infrastructure, such as the Freight Formula Funding Program and
a Discretionary Grant Program, known as INFRA, that was
established in the FAST Act?
Mr. Baker.
Mr. Baker. Yes and yes.
Dr. Hacegaba. Yes and yes, with exclamation marks.
Ms. Lemm. It's a yes.
Senator Fischer. Great.
Mr. Szabo. Yes, definitely, and lift the modal cap.
Senator Fischer. Thank you.
Ms. Lemm, last year, I worked very closely with the
leadership at FMCSA on hours of service flexibility and I was
glad to see that the FMCSA guidance provided flexibility for
the ag haulers, especially for that first 150 air miles of
their haul. You touched on that in your opening statement.
I plan to continue working with the Administrator on the
hours of service flexibility for our ag haulers and the
trucking industry more broadly.
Could you talk to us a little bit about how important it is
for Ag haulers to have those flexible hours? I think a lot of
people don't understand the difference here.
Ms. Lemm. I really appreciate that and our membership
appreciates your support.
I mean, the sensitivity to some of these agricultural
products are so severe that even 30 minutes, can you imagine a
driver who's 30 minutes coming from that farm to that
destination and they're going to have to shut down.
We absolutely need to understand as a nation that there are
some segments that need some understanding and flexibility. We
have livestock, for example, live cattle, and live animals. We
absolutely need to give them that extra waiver, that extra
exemption. So we very much appreciate your support in this
area.
Senator Fischer. We are looking at really the welfare of
livestock when Ag haulers were doing this, correct?
Ms. Lemm. Absolutely, yes.
Senator Fischer. Thank you.
Ms. Lemm. Thank you.
Senator Fischer. Doctor, as you noted in your testimony
last year the Port of Long Beach piloted the GE Port Optimizer
Program.
What results have you seen from that pilot program that you
can share with us?
Dr. Hacegaba. Thank you for the question, Chairman Fischer.
First of all, IANA and the Port of Long Beach both believe
that leveraging emerging technologies could provide a series of
solutions for some of the congestion issues that have been
addressed so far here.
What we learned when we partnered with General Electric on
their Port Optimizer Program is that providing visibility and
transparency across modes within the supply chain could result
in better decisionmaking, better planning, and better
optimization of operations.
Although it was done on a pilot basis in a very limited
sphere with a very limited timeframe, we believe that this
technology and others like it demonstrate a lot of potential
for what we can see across the intermodal supply chain.
So we're very excited about what it presents and looking
forward to continuing partnering to test out these innovative
technologies.
Senator Fischer. Are there a lot of new technologies out
there? Are you seeing a lot available now and in the pipeline
for us?
Dr. Hacegaba. We are. We are seeing many technologies in
other spaces and other industries. What we're trying to do is
look for those technologies that possibly provide solutions in
our space and the fact that we are an interconnected supply
chain with a lot of connection points, that's where we believe
technology can play a critical role by connecting the modes,
making sure that data transfer is seamless, making sure there's
transparency, predictability.
Advanced predictability, just to give you one example,
Chairman, can save the entire supply chain hundreds of millions
of dollars a year just in giving the stakeholders the
opportunity to predict with a high degree of certainty when a
container might be available for pick up, when a container
might be coming to the terminal for drop off.
We definitely see a role for technology. We believe that
technology is a tremendous enabler to provide solutions to the
supply chain.
Senator Fischer. And I would ask if any other panel members
would like to make comments on that and specifically how should
we, here in Congress, address the role of technology when we're
looking at the reauthorization of the FAST Act?
Mr. Szabo, would you like to respond?
Mr. Szabo. Well, I think the key from our work at CMAP is
recognizing the investment that is going to need to be made in
existing infrastructure to have it ready for things like
autonomous vehicles and so to really embrace and capture the
technology is going to take significant capital investment and
so this really does come back to the urgent call for additional
capital investment in freight as well as our broader
transportation system.
Senator Fischer. Thank you.
Any other members? Mr. Baker?
Mr. Baker. For the rail industry, technology is crucial,
whether it's on the operational side. We believe there are a
lot of advancements out there for us to make on being more
transparent for shippers about, frankly, where their freight is
and when it's going to be delivered and that's a huge area for
improvement.
On maintaining our own infrastructure side and running the
railroad, there have been really remarkable advancements in
technology over the years with railroads, whether it's
ultrasonic rail inspection or hot wheel detectors or
continuously welded rail or positive train control.
We like to say it's not your father or your grandfather's
railroad anymore. The railroad looks similar to how it used to
but it really operates at a much higher tech level than it used
to.
As far as what the Senate can do to support that, I would
point back to the same issues we've mentioned. Because the
railroads are largely privately funded and privately operated,
we need a regulatory system that allows us to earn enough money
to invest back into the infrastructure.
On the short line side, we also appreciate the short line
tax credit which allows us to do a little bit more and leverage
our own money even a little bit farther.
Senator Fischer. OK. Thank you very much.
Ms. Lemm, did you have a comment?
Ms. Lemm. If I could comment from a shipper perspective,
the biggest thing that you hear out there is, you know, where's
my freight?
There's just such a big black hole and a lack of visibility
to where that container is. Is that container available? Am I
able to end gate? I've been standing in line for 4 hours. Am I
going to be able to get in?
So we absolutely support an initiative that looks at
integration for all sectors.
Senator Fischer. Thank you.
Senator Duckworth.
Senator Duckworth. Thank you, Chairwoman.
Mr. Szabo, the benefits of increasing investment in freight
and intermodal infrastructure are well known and we've already
been in discussion a little bit today. These projects require
large amounts of money and involve many public and private
players.
Federal funding for these projects is often necessary to
get the projects off the ground. This is why I was a strong
advocate for FAST Act Freight Funding Programs and I've seen
firsthand the project impacts of freight and rail grants in
Illinois.
In your role at CMAP, how important is Federal funding to
getting these projects developed, and would these projects have
moved forward without Federal funding?
Mr. Szabo. Having a reliable Federal partner to participate
in these projects is crucial. It's somewhat fundamental,
particularly understanding that it's about interstate commerce
and so many of the major projects, as I mentioned in my
testimony, transcend states or local jurisdictions. They cross
multiple modes and so having a Federal partner that is able to
provide the leadership, provide funding is critical.
You know, we were incredibly pleased with the FAST Act
provisions and how that allowed several of our projects to move
forward, but I would again come back to the concerns about the
cap on non-highway projects.
We believe in performance-based program management at CMAP
and this means ensuring that funding is completely flexible to
allow us to invest in the very best projects possible that have
the greatest benefits to the public. And when we put our plan
together for the region, it looks out 30 years, and one of the
points I make is that it doesn't make much sense today to focus
on funding in modal silos when modes are changing and we don't
even know what the modes are going to be 30 years from now. So
whatever we do should be completely flexible.
Senator Duckworth. Thank you.
The Federal Highway Administration has reported that the
largest increase in truck traffic will be where interstates
intersect. Two of the 25 most congested segments in the Nation
are in Chicago. Anybody who has driven the Old Circle
Interchange where Dan Ryan and Kennedy meets the Eisenhower
Expressway can tell you what that means. I've spent too many
hours of my life there.
To each of the panelists, what more should we do to focus
attention on the worst, most congested areas in our nation, and
how can we direct Federal funds to focus on alleviating
congestion at these particular freight bottlenecks?
Let me start over with Mr. Baker.
Mr. Baker. We believe that the merit-based competitive
Federal programs that you've instituted in the FAST Act,
including CRISI and INFRA and then also BUILD, are well set up
to address those problems well.
We would support increases in funding for those and
certainly increases in flexibility for, in particular, INFRA
and the state freight formula program, but essentially a
Federal merit-based competitive program ought to be able to be
leveraged to address the biggest bottlenecks and chokepoints of
those projects should rise to the top in a competitive benefit-
cost analysis.
Senator Duckworth. Thank you.
Dr. Hacegaba.
Dr. Hacegaba. Senator, the illustration that you used to
illustrate the state of our highway system, I think, is endemic
of what we're seeing nationwide.
As I noted a moment ago, the total cost in the freight
infrastructure is estimated at approximately $3.7 trillion and
as much as we like to focus on the first mile and the last
mile, I think the focus of this panel here is to understand the
entire intermodal freight network and how it fits together and
so from IANA's perspective, we believe that investing in
freight infrastructure is critical not just to our industry,
our collective industries, but in order to move America
forward, and the downstream impacts on the economy with regard
to jobs, the multiplier effect that we see.
So from our standpoint, we believe in fully funding freight
provisions and opportunities for ports to apply for formula and
competitive multimodal freight grants.
Senator Duckworth. Thank you.
Ms. Lemm.
Ms. Lemm. We absolutely agree. I mean, when we talked
earlier in the testimony about how our ag shipments have to go
to where the containers are and so we'll bring in rail cars and
we'll transload in these huge areas that you're talking about.
They rise to the top. Chicago, Dallas, Atlanta, Memphis. All of
these key inland hub areas are where this traffic is moving
into and so absolutely prioritizing these areas of congestion
is very, very important.
Senator Duckworth. You have the last 20 seconds, Mr. Szabo.
Mr. Szabo. Yes. I think it's already been said. Continue a
merit-based approach. You know, the provisions in the FAST Act
are an excellent place to start. Just lift that non-highway cap
and make it completely mode-neutral and ensure predictable
funding.
Senator Duckworth. Thank you.
Yield back.
Senator Fischer. Thank you, Senator.
Senator Klobuchar.
STATEMENT OF HON. AMY KLOBUCHAR,
U.S. SENATOR FROM MINNESOTA
Senator Klobuchar. Thank you very much. Thank you to all of
you.
A little over a week ago, 40 rail cars derailed in Carlton
County, Minnesota, up north, resulting in a spill. Thankfully
no one was hurt but that's not always the case.
We hear a lot of concerns about derailments and hazardous
material spills. We've had a number of them in our states and,
Mr. Baker, can you explain why investment in railway safety and
infrastructure is critical to prevent these types of accidents?
Mr. Baker. Thank you, Senator, for the question.
We believe and we believe that the data shows that rail is
the safest mode of surface transportation, but I would agree
with you very much that any rail accident is unacceptable and
one accident is too many, and we do acknowledge and it's
obviously a fact that we haul many dangerous materials. We haul
hazardous materials all the time. We are common carriers. We
are obligated to haul what the customer would like to move.
Senator Klobuchar. I understand.
Mr. Baker. We very much appreciate any Federal support that
allows us to invest in infrastructure. We think basic
investment in track infrastructure is the single most important
thing that railroads can do to improve safety.
So some of the programs that I've already mentioned, such
as the short line tax credit and the CRISI Grant Program, are
extremely helpful with improving railroad safety.
Thank you.
Senator Klobuchar. Thank you.
Mr. Hacegaba, last year, our state was awarded a $20
million BUILD grant for the Twin Ports Interchange
Reconstruction and that includes replacing 35 bridges,
reconstructing a high-rise in the Duluth Superior area.
Why are these competitive grants better suited for
addressing multimodal or multi-jurisdictional projects?
Dr. Hacegaba. Thank you for the question, Senator.
I think if you look at the entire national system, the
infrastructure system, you'll see that the need far outpaces
the resources available and to the extent that freight,
investments in freight infrastructure can be prioritized, it
would help us tackle the ongoing challenge of meeting America's
infrastructure needs.
To answer your question very succinctly, investment in
national freight infrastructure is an investment in our overall
economy because economic benefits of investments in
infrastructure will be seen in strong American jobs, higher
standard of living, global competitiveness.
Senator Klobuchar. And it's about getting goods to
market,----
Dr. Hacegaba. Exactly.
Senator Klobuchar.--especially when we look at the fact
that something like 95 percent of the world's customers are
outside of our borders and we're going to have to get them.
All right. But that is an exciting port that we have in
Duluth. It's, I think, the biggest on Lake Superior. So we're
pretty excited about the growth we've seen there.
One last thing, Promoting Rural Exports Act, Senator Hoeven
and I have introduced this and our bill would establish a rural
exports center at the U.S. Commercial Service to provide
support to rural businesses looking to export their products,
something I was just referring to, to international markets.
Ms. Lemm, can you explain how these kinds of programs that
support continuity throughout the intermodal networks would be
helpful to export things from rural areas, whether it's ag,
whether it is timber, you name it?
Ms. Lemm. It's like I was trying to share for our rural ag
shippers literally they could be miles, hundreds of miles from
where they have access to reliable and consistent
transportation modes to get their goods to port and so things
like you're talking about right now would be welcomed.
There are so many of our shippers that struggle every day.
They're looking for innovative ways. They're begging for
equipment and they would be very pleased to hear that there may
be an avenue for support.
Senator Klobuchar. OK. Very good. And then last, Mr. Szabo,
can you talk about how government shutdowns can interfere and
create vulnerabilities in our transportation network? That
would be called like a leading question.
Mr. Szabo. Well, I think anything that creates uncertainty
is not healthy for the system. You know, anything that makes
the processing of environmental reviews, slows down
construction, and increases cost, you know, anything that slows
down the payment of contractors certainly is not healthy and
increases cost and so comes back to a point I made earlier that
the public and private sector need a reliable Federal partner
and so----
Senator Klobuchar. Very good. And I'd also mention, I'm not
going to ask about this, but the Bridge Act that Senators Blunt
and Warner and I and others introduced last year, that public-
private partnership, and we'd really like to see that, if we
can get an infrastructure bill moving.
For me, it's very important. It also includes rural areas,
of course, and that it's done in a way that doesn't gift the
direct Federal investment that has to happen but also sees it
as an element of the solution.
So thank you.
Senator Fischer. Thank you, Senator Klobuchar.
Senator Blumenthal.
STATEMENT OF HON. RICHARD BLUMENTHAL,
U.S. SENATOR FROM CONNECTICUT
Senator Blumenthal. Thank you, Madam Chairwoman.
Thank you all for being here today.
Senator Klobuchar. You broke the glass ceiling by including
you in this hearing.
[Laughter.]
Senator Blumenthal. And as we say in the courtroom, I rest
my case.
Thank you all for being here today, really appreciate this
excellent panel.
I want to follow up on a question that Senator Fischer
asked about positive train control. I'm assuming that nobody on
this panel has any doubts that positive train control is a good
thing to do. All of you agree. If you don't raise your hand or
say no----
Mr. Szabo. Definitely a good thing.
Senator Blumenthal. OK. Thank you.
Mr. Baker. It's a good thing, yes, Senator.
Senator Blumenthal. Anybody on this panel think that the
deadline should be further delayed? As you know, there have
been two delays and I'm eager that we meet this deadline. As
you know, I've been one of the leading proponents of positive
train control.
So let me ask all of you whether you have any reservations
about the present deadline. Mr. Baker?
Mr. Baker. No, sir. We are expecting to meet the current
deadline.
Dr. Hacegaba. IANA has the same position, Senator.
Senator Blumenthal. Ms. Lemm?
Ms. Lemm. No reservation.
Mr. Szabo. The public deserves the highest level of
accountability.
Senator Blumenthal. Thank you.
I want to follow up on a question that Senator Klobuchar
was asking about. Some of the calamities that have occurred,
particularly on the kind of combustible materials that have
been involved in major derailments, fire, explosions of trains
carrying crude oil in Philadelphia in 2014, North Dakota in
2015, Oregon in 2016, Mississippi in 2017, most recently in
Iowa 2018, which leaked 230,000 gallons of crude oil. Those are
just a few and some at least are due to older, more dangerous
tank cars that continue to carry flammable liquids.
I know this issue may have been raised in some of the
testimony and some of the questions, but I'm wondering what the
Federal Government can do to, Number 1, help the industry or
incentivize it to adopt safer tank cars, and I think Canada is
ahead of us in this respect, unless I'm misinformed, but also
prepare communities that may be at risk, including some, by the
way, in the Northeast.
People are unaware of them but they go through very
populated areas and let me pose those two questions to you.
Mr. Baker. On the tank cars themselves, I believe that our
current stance is that we believe that the current transition
plan to the newer tank cars, which the Federal Government
played a very active role in setting those rules, is an
appropriate transition and the industry will be challenged and
stretched to meet it, but we are committed to meeting the law
as it is and transitioning to those safer tank cars over time.
On the preparing communities, we're very proud of the work
that the Transportation Technology Center out in Pueblo,
Colorado, does. The railroad industry has a program where first
responders from throughout the country go out to Pueblo to
learn about responding to those types of hazardous material
releases. They are extraordinarily rare but they do happen.
And as I said to Senator Klobuchar, we would agree with you
that one accident is too many. We are convinced that rail is
the safest mode of surface transportation and for the society,
we are better off with any dangerous shipment on rail than we
are on any competing mode, but nonetheless our goal is zero
accidents and so some of the programs that we talked about,
whether it's the short line tax credit or the CRISI Grant
Program or INFRA, that would help the short lines and larger
railroads improve their infrastructure is the most important
thing we can do to improve railroad safety.
Senator Blumenthal. Thank you.
Dr. Hacegaba. Senator, IANA, which represents the combined
interests of the intermodal supply chain, while we do not have
a position on this specific issue, I can assure you that we
view the issue of safety as paramount to intermodal operations.
The only other comment I would make, as well, is it
furthers the argument why we need to continue to invest in our
infrastructure. While our partners on the rail side, who make
every effort to make their operations safe, will continue to do
that, it's the infrastructure that has to be adequate in order
to support safe operations.
Senator Blumenthal. Thank you.
Ms. Lemm. Senator, I come here today representing ag
shippers mostly in containers and, fortunately, the list of
challenges wasn't hazardous, so I don't have a position on that
today.
Thank you.
Senator Blumenthal. Thank you.
Mr. Szabo. Senator, I mentioned at the opening that I
represent 284 communities and so obviously the emergency prep
piece of this is critical to them. But taking it to the next
step, obviously ensuring continuation of good track safety
standards, maintenance procedures, sound operating practices,
you know, taking a system safety approach and allowing good
root causation analysis when incidents happen to come up with
the best long-term fixes. You know, fundamental, sound
fundamental railroading is the best way to ensure that you
don't have an incident.
Senator Blumenthal. Thank you. Thank you.
Senator Fischer. Thank you, Senator.
We will begin a second round of questions and if any of our
colleagues on the subcommittee would like to join us, they need
to get down to the hearing room so that they can ask questions,
as well.
I will begin now with Ms. Lemm. Regarding your comments on
chassis, how widespread is that shortage for intermodal
freight, and do you think that the Supply Chain Innovation Team
model that was used in Memphis that you alluded to could work
to address the chassis shortage in other parts of the country?
Ms. Lemm. First, the chassis shortage is critical
throughout the United States. You may be reading about it in
L.A.-Long Beach, reading about it in Chicago, and certainly in
Memphis. So to answer the first question, the chassis supply
issue is widespread shortage of supply.
The Memphis Innovation Team was just a group of
stakeholders that came together. We really didn't understand
what the root of the problem may be, if it was actionable, and
it was interesting that the team was made up of rail providers,
ocean carriers, shippers, and motor carriers.
Within a very short period of time, the most actionable
item was this chassis. It's often just taken for granted. When
we started in the industry in containerization, everything was
a unit on wheels and mounted. Many of our rail facilities are
still mounted facilities and therefore requiring a chassis. As
soon as those trains come in, chassis are required.
So the team felt like the most common sense thing was to
have a grade pull, which was the initiative by ocean carriers
where, when they got out of the business 10 years ago, that was
the plan. We're going to have the single grade pull that's
interoperable.
Today, what we find are three captive pulls, three of the
largest chassis providers in lease arrangements, long-term
lease arrangements, and to, I guess, be able to share it with
you--let's just say it's color-coded.
An ocean carrier will take a red chassis, one will take a
purple, one will pick a yellow chassis. Can you imagine that
train coming in and there are no red chassis but there are
hundreds of yellows? Everything goes to the ground. It doesn't
make sense.
What we're asking for is interoperability, gray. If there
are chasses there, let's use them. We're asking for fair access
to them. Today, that's handcuffed. Having to pick red, purple,
or yellow doesn't make sense, not fair, if we're paying the
price. Also not fair in those mounted facilities when those
trains come in. If that proper chassis that was designated by
the carrier, ocean carrier to use isn't there, those containers
go to the ground and therein lies the discussion of detention
and demurrage.
And so the chassis model that we're suggesting in Memphis,
we're very hopeful, is a model for other inland hubs, just like
Memphis, Chicago, Dallas, they have five Class I railroads,
vast geography from one railroad to the next. We as shippers
are using all rails and so we think the model is a basis for
the rest of the Nation. We're hopeful we'll be the first.
Senator Fischer. Thank you.
Dr. Hacegaba and Mr. Szabo, you both recommended the
creation of a multimodal freight office within the Department
of Transportation.
Can you elaborate on what this office would address that is
not currently being addressed by the Department of
Transportation? Doctor, why don't you go first?
Dr. Hacegaba. Sure, Chairwoman Fischer.
I think the key here is to have an office at the
appropriate level that has a broad and holistic view of the
intermodal supply chain.
Right now, what we've seen in the past is the need for
infrastructure investments have been duly noted over the years
but when it comes to the intermodal freight network, we need to
ensure that the last mile, the first mile, and every mile in
between is adequately funded so that that supply chain is
seamless, and we believe that having that office at that level
will bring attention to the needs, the funding needs, and the
infrastructure development needs.
Senator Fischer. Mr. Szabo?
Mr. Szabo. Yes. I would absolutely concur. You know, it is
about that holistic approach to the entire supply chain and
making sure that it's entirely fluid.
Certainly having been a U.S. DOT insider, you know, I was
proud on the work that we were able to do to collaborate on a
multimodal basis. But still, each one of us went in there, you
know, even though we were cooperating with the other modes, we
still were thinking about our own. And so having that one
person that really is responsible for the big picture and
ensuring that this entire network remains fluid I think is
critically important.
Senator Fischer. Thank you.
Senator Duckworth.
Senator Duckworth. Thank you, Madam Chair.
Ms. Lemm, can you speak to the importance of our maritime
highways to the freight network?
Ms. Lemm. Well, again, most of our Ag members are
containerized shippers and not moving or navigating through our
rivers.
So today, I'm really just prepared to talk, if I may, about
containerized exports moving by motor carrier or by rail, as I
mentioned box cars, into those hub centers where they're
transloaded into containers.
Senator Duckworth. Thank you.
You know, in the last couple of years in Illinois and also
our nearby neighbor Iowa, we've had to stockpile corn and
soybeans and our silos are overflowing and, in fact, our
neighbors in the southeastern United States have been
purchasing corn and soybeans from Brazil because it is faster
to move these agricultural products from Brazil to Georgia than
it is--to Atlanta than it is to get it down to Mississippi and
part of this is because of the problems we have with our lock
and dam system, the congestion with our inland waterways, and
certainly it is an important part of the network, and I know
that the rail, for example, have been very supportive of some
of the bridge projects that we have been working on in order to
have railroads come to support bridge projects over the
Mississippi because that's what the barge folks need in order
to get freight.
It truly speaks to the true intermodal nature of freight
traffic in this country and several of you have mentioned the
need to lift the multimodal cap, Mr. Szabo more than once, in
the Freight Program.
Can you provide specific examples of why this is important,
why it's important, and then I'll open it up to the group, but
you want to start?
Mr. Szabo. I think, you know, the easy answer is because
freight doesn't just use the highway system and so again we're
talking about a holistic approach. We're talking about an
entire supply chain, you know, in this fluid system. And so
there needs to be the flexibility to invest in the very best
projects and there shouldn't be any type of mode restriction.
Where's the best return for the public and wherever that
best return is, that highest return, this is where the
investments need to go.
Senator Duckworth. Do you have a specific example of where
this has been a problem?
Mr. Szabo. Well, obviously, I mean, the big one for me is
coming back to the CREATE Program in Chicago, you know, where
we're talking about rail infrastructure that impacts, you know,
the national flow of goods through the Chicago hub, Amtrak,
Metro commuter trains, emergency grade crossings, truck routes,
you know. And all of these are constrained with the antiquated
design that we face today, and so when the FAST Act provisions
were being put together, we were trying to make sure that we
would have a tool that would allow us to untangle this entire
mess and we were able to make it work with the cap, but it was
very concerning and a little bit tenuous. And so for me that's
one great example.
Certainly there are port issues. I think there are wiser
minds at this table than me that can speak to that, but it's
got to be about this system.
Senator Duckworth. Thank you.
Mr. Hacegaba--Dr. Hacegaba? Sorry.
Dr. Hacegaba. Yes, Senator, I would agree a hundred percent
with Mr. Szabo.
The Port of Long Beach, for instance, we're on a $4 billion
capital investment program. We believe that that's what we must
do to maintain our competitiveness going forward and the
narrow, bigger ships, ships bringing more cargo, creating peaks
and surges and creating imbalances on the equipment side, it's
critical that we continue to build out our infrastructure.
One billion out of that $4 billion capital program is all
devoted on-dock rail. The advantage of on-dock rail is that it
allows us to put a container on a train at the port,
eliminating that short haul to an inland destination. It's
safer, it's more reliable, it's cleaner, it's more cost-
effective, and these are some of the projects, for instance,
that would benefit if that cap was lifted.
Senator Duckworth. Mr. Baker.
Mr. Baker. Right. I would simply say that with the point of
the INFRA Program being to solve our Nation's freight
challenges, which are numerous and many, and in a world of
finite resources, to us, it doesn't make sense to limit the
program unnecessarily to one mode and as I said in the
testimony, I would say that's especially true in an era where
these programs are no longer being funded a hundred percent by
the highway user fees.
I believe we're at a $140 billion and counting since 2008
out of General Fund money that has gone to support the Highway
Trust Fund. So we believe that is no longer appropriate.
We would say artificially limit the program to a single
mode or primarily to a single mode.
Senator Duckworth. Thank you.
Senator Fischer. Thank you, Senator Duckworth.
I look forward to working with you on many of these
important issues. It's a pleasure to have you as a Ranking
Member and I thank the witnesses today for your good testimony.
The hearing record will remain open for two weeks. During
this time, Senators are asked to submit any questions for the
record. Upon receipt, the witnesses are requested to submit
their written answers to the Committee as soon as possible.
And with that, the hearing is adjourned.
[Whereupon, at 3:40 p.m., the hearing was adjourned.]
A P P E N D I X
Response to Written Questions Submitted by Hon. John Thune to
Chuck Baker
Question 1. Mr. Baker, according to recent data from the Federal
Railroad Administration, all 41 railroads either met the December 2018
statutory deadline for PTC implementation or have met criteria for the
alternative schedule. However, only 16 percent of host-tenant
relationships--many of which are between shortlines and larger Class I
hosts--have achieved interoperability.
Could you provide an update on the status of PTC implementation
among shortline railroads and describe any challenges short lines may
be facing in achieving interoperability with host railroads?
Answer. The statutory requirements for PTC installation fall on
very few short line railroads. The remainder are being required to
equip by contract with a Class 1 carrier. The statutory deadline for
short line railroads is 2023, so by law they have additional time to
equip. Currently, all short lines that are required by contract have
been working towards the deadlines that their Class I hosts require.
However that has not been without substantial challenges.
One of the early challenges for these short lines involved the
process of determination by the Class I railroads determining which
short lines were going to require to be equipped. During that phase,
there were many changes and iterations regarding which short lines
could find another way to work with their Class I partner. While that
challenge has been resolved, it did cause some delay in determining
which short lines by contract needed to install PTC.
A more recent challenge short lines are facing regarding
interoperability involves situations where a short line is involved
with train movements involving three or more railroads and the short
line is using the power of one of the Class I railroads involved in a
move. For example, if the train originates with a one Class 1 PTC
equipped locomotive and is interchanged with a second Class I and then
with the short line whose crews step on the locomotive to complete the
move, the back office servers have challenges recognizing the territory
in the various PTC systems, thus preventing interoperability until the
downloads for that territory are complete. This process is time
consuming and could occur thousands of times over the course of a year.
The PTC software and hardware suppliers have been attempting to resolve
this issue but it continues to take time.
Another current challenge is that if a short line is using one
supplier's back office server and another server's software, there have
been intellectual property issues causing delays.
Finally, negotiations by short lines with the sole provider of the
software license have proven difficult and have also taken months to
complete.
Overall, short lines are committed to PTC implementation and the
good news is that in the vast majority of cases the short lines are
working collaboratively with their Class 1 partners, vendors, and the
FRA to get this done on time. Challenges do remain though as technical
expertise on these new and ever-developing systems remains limited and
resources are finite.
Question 2. Mr. Baker, you mentioned in your testimony that the
RRIF program in its current form is not a useful tool for shortline
rail infrastructure investment.
a. Could you describe some of the challenges posed by the RRIF
program that deter use by applicants such as shortline railroads?
Answer.
1. The process of applying for RRIF funds is very costly for the
borrower while the outcome of the application--the cost of the
financing--is not known until the end of the process when the
final term sheet is presented to the borrower. USDOT charges
applicants an upfront fee for their external advisors that
starts at $250,000, a charge that the applicant cannot recover.
2. The uncertainty around the final cost of the credit is also a
deterrent. A major component of the cost of the loan is the
credit risk premium, which is a charge that in a private loan
would be built into the interest rate. The government breaks
this out as a fee that is charged upon drawing down loan funds
and is kept by the government to protect against the
probability adjusted loss of a default scenario. While typical
credit risk premiums of loans successfully made have been
around 6-7 percent for short lines, some RRIF loans have had
premiums in the low 20 percent range, and a premium could
theoretically be up to 100 percent. The challenge is that DOT
traditionally has only provided the CRP at the tail end of the
process and not been able to provide an estimate or estimated
range at any point in the process prior to term sheet. Short
line railroads fear that they could spend a large amount of
time and money on an application only to receive a CRP that
makes the loan prohibitive.
3. The entire process is also very time consuming, with the time
from approaching the program to executing a loan agreement
generally exceeding a year, which makes the process unrealistic
for many railroads that are operating in constantly changing
business environments.
4. There is a mismatch between the term of RRIF loans and the
economic lifespan of certain common assets that short line and
regional railroads will seek to finance through the program.
Major railroad civil works and structures, like bridges, yards
and tunnels, can have lifespans of a century or more, while
RRIF is limited to financing up to 35 years. Many short lines
were spun off from large railroads because their traffic levels
were not economic for the large railroad. However, these
smaller railroads are left managing large capital assets that
were originally constructed and maintained by much larger
companies. Beyond this fleet of legacy assets, economically we
expect short line and regional railroads to keep up with the
technical levels of the large railroads to facilitate
interchange with these large railroads. This means investment
in Class I levels of capacity such as the means to handle
286,000 or 315,000-lb railcars, generous clearances, siding
lengths that can handle lengthy unit trains and track geometry
and condition quality that can support modern large
locomotives. These are very expensive investments to make for
small firms; the longer the term of financing they can obtain
the less prohibitive it would be for short lines to keep up
with the ever advancing national network standard.
b. As a follow-up, do you have any suggestions for how the RRIF
program could be improved to make it a more viable option for shortline
infrastructure investment?
Answer.
1. Congress can subsidize RRIF application charges levied by DOT,
either through the annual THUD appropriations process or
through a stable multi-year funding mechanism that could be
included in a surface transportation reauthorization or
infrastructure bill.
2. Congress can subsidize the costs of RRIF credit risk premiums,
also through the annual THUD appropriations process or a multi-
year funding mechanism. This is an approach that has been taken
successfully with the TIFIA loan program.
3. Congress can mandate that USDOT offer more formal and structured
feedback to borrowers on the key credit factors identified in
their application at regular intervals, such as monthly. This
feedback would give applicants a sense of what USDOT sees as
the level of risk for each factor associated with the
borrowing. Such feedback, not dissimilar from a private debt
rating document, would provide an estimated range of the CRP
for that loan, or explain clearly why one can't be provided at
that time and what specific data is required by USDOT to
generate such an estimate.
4. For borrowers and projects that meet certain publicly stated
criteria, the USDOT should initiate a ``RRIF Express Program.''
This program, which has been in development at USDOT for over
two years, would strive to reduce the time period from entry to
receiving a term sheet to a few months.
5. Congress can extend RRIF terms to at least 50 years from a
project's substantial completion, so that very long-lived
capital assets can be more affordably financed, enabling
smaller railroads to maximize cash flow while maintaining their
large legacy assets in a state of good repair. The largest
Class I railroads issue bonds for terms of up to 100 years with
some frequency; such long-dated debt is not unprecedented in
this sector. If a Class III railroad has a legacy Class I scale
asset, or we expect it to have a capital plant capable of
interoperating with Class I's at Class I scale--which we do--it
is in the public interest that the assets can be financed on
Class I terms.
______
Response to Written Questions Submitted by Hon. Maria Cantwell to
Chuck Baker
Freight Investment. I have long been a champion of Federal funds
for freight projects, which for the first time received dedicated
funding in the FAST Act with the implementation of the FASTLANE (now
INFRA) program, which I championed. Trade and the movement of goods is
the backbone of our economy. In Washington state, we know this all too
well as forty percent of our jobs are tied to trade.
Questions 1. Where do you see the main chokepoints that require
multi-modal investments to keep freight moving?
Answer. Safe and efficient movement of freight is critical to the
health of our national economy. Short line railroads provide first and
last mile service for one in five freight rail cars moving each year.
Our small railroads play a vital role in moving goods in and out of
both urban and rural areas, particularly small towns, without further
stressing our nations congested highways, and we do so in an efficient
and environmentally sustainable way. The freight rail network
successfully connects communities and small businesses to bigger
markets and is the best solution for many of our Nation's freight
challenges. Investing in our rail infrastructure must continue to be a
national priority, as rail is an available solution to reduce freight
chokepoints.
Question 2. How can increased investments in the freight program
better address these challenges?
Answer. ASLRRA is very supportive of the INFRA grant program and
the state freight program. We believe that there is value in
discretionary grant programs open to multiple modes of transportation,
especially those focused on freight and movement of goods. When
developing surface transportation reauthorization legislation, Congress
should look to expand the overall size these programs and also remove
the counterproductive limits on rail, port, and other non-highway
projects. ASLRRA believes that the national transportation system is
multi-modal and intermodal in nature, so stove-piping major programs,
particularly those for freight, should be avoided whenever possible.
Allowing more rail projects to successfully compete in these programs
will go a long way to helping relieve congestion on our Nation's
highway system and create a more seamless, safe, and environmentally
sustainable freight network.
Paying for Freight. I think we all know and see the value of
investing freight, but we struggle to find agreement on how to pay for
these investments. Congress has heard support for any number of
proposals--including continuing the existing practice of using highway
trust fund and general fund revenues or dedicating new revenue, such as
the proposed waybill fee.
Question 3. What are your views on how we pay for critical freight
investments?
Answer. ASLRRA advocates for a highway trust fund (HTF) that is
funded by those who benefit from and cause the wear and tear of the
interstate highway system, and we support either an increase in the
diesel tax, a weight-distance tax, or a move to a vehicle miles
traveled (VMT) user fee on commercial trucks. Commercial trucking puts
immense stress on the highway infrastructure they depend on, but under
our current system, they do not adequately contribute to costs of
maintaining our roads and bridges. It is estimated that heavier trucks
are only paying 80 percent of the damage they inflict, sticking all
American taxpayers with the rest of the bill. Investing in our
infrastructure is important, but subsidizing commercial trucking so
heavily is not only bad for the rail industry (it's tough to compete
when your biggest competition is subsidized by more than $10b every
year!), but it is ultimately bad for our Nation's economy and
facilitates undue stress on our Nation's highway system.
Short lines believe that investing in our own infrastructure is
critical and spend around 30 percent of revenues on maintaining and
improving our infrastructure. Critical tools like the 45G short line
tax credit allow that money to go even further and allows for an even
safer, more efficient rail network that benefits both the movement of
freight and sometimes passengers as well.
______
Response to Written Questions Submitted by Hon. Maria Cantwell to
Dr. Noel Hacegaba
The Intermodal Association of North America consists of more than
1,000 corporate members including railroads, ocean carriers, ports,
intermodal trucking companies, over-the-road highway carriers, third-
party logistics companies and suppliers to the industry. As a
significant player in the effort to improve the efficiency of goods
movement, IANA is the only organization that represents the combined
interests of the intermodal freight transportation industry. IANA's
mission is to promote the growth of efficient intermodal freight
transportation through innovation, education and dialogue.
Freight Investment. I have long been a champion of Federal funds
for freight projects, which for the first time received dedicated
funding in the FAST Act with the implementation of the FASTLANE (now
INFRA) program, which I championed. Trade and the movement of goods is
the backbone of our economy. In Washington state, we know this all too
well as forty percent of our jobs are tied to trade.
Question 1. Where do you see the main chokepoints that require
multi-modal investments to keep freight moving?
Answer. The main chokepoints exist at the ports, depots, inland
intermodal facilities and on the highways that access these facilities.
Increasing the reliability of delivery and developing seamless pathways
for the movement of freight is important to the continued growth of the
U.S. economy. Dedicated investment in intermodal connectors--the
highway links that facilitate the transfer of freight between modes--is
a major part of the solution to congestion. While these road segments
make up less than one percent of the total National Highway System
(NHS) mileage, intermodal connectors are critical to the ingress and
egress between intermodal facilities and the NHS. Having dedicated
funds to support investments in alleviating these chokepoints would
greatly reduce congestion and improve freight fluidity and velocity
across the supply chain. In addition, the use of on-dock and near-dock
rail is an important transportation option used to alleviate port
congestion and to improve freight velocity throughout the intermodal
network; these investments also help to alleviate emissions by removing
more trucks from the roads.
Question 2. How can increased investments in the freight program
better address these challenges?
Answer. Freight transportation is the backbone of the American
economy. The increasing volume of goods moving through U.S. ports and
throughout the intermodal freight network each year creates additional
strains on the supply chain. It is estimated that U.S. businesses pay
$27 billion each year in extra freight costs due to congestion and
outdated facilities. It is also estimated that it would cost $3.7
trillion in order to meet all of the infrastructure needs of the
freight supply chain. New capital investment in freight transportation
infrastructure will lead to significant benefits including higher
productivity, improved freight velocity and enhanced global
competitiveness.
Increased funding for freight infrastructure projects, including
marine and rail intermodal facilities and intermodal connectors, will
provide freight stakeholders and their customers with the speed,
reliability and reduced costs they need to succeed and to grow the U.S.
economy.
We also believe increased funding, along with the establishment of
a Multimodal Freight Office in the U.S. Department of Transportation,
would send an important message to the private sector about our
Nation's commitment to freight and enable additional capital investment
to seed further enhancements to the intermodal network.
Intermodal Port Projects. Ports and port terminals are a critical
part of our freight network, but frequently get overlooked when it
comes to Federal funding. The FAST Act included new programs to help
move freight more efficiently. However, I'm concerned that the programs
don't go far enough to help ports.
Question 3. How do limitations on the FASTLANE grants impact the
ability to fund intermodal freight projects? What should be done to
address these limitations?
Answer. Integrated planning and funding that addresses the end-to-
end needs of freight movement will be critical to developing
comprehensive regional and statewide plans to improve the Nation's
freight infrastructure. There are several key items that can be done to
address limitations on the FASTLANE grants. The first is to remove the
$500 million cap on intermodal freight projects. Of the $11 billion in
dedicated freight funding over five years authorized in the FAST Act,
only $1.13 billion is eligible for intermodal freight projects.
Congress should also reinstate a projects of regional and national
significance program, under which freight infrastructure projects would
be eligible. In addition, discretionary grant programs like Better
Utilizing Investments to Leverage Development (BUILD), Consolidated
Rail Infrastructure and Safety Improvements (CRISI) and Infrastructure
for Rebuilding America (INFRA) have provided much-needed opportunities
to fund freight-related projects and need to be expanded.
The FAST Act also provided important support for enhancing the
intermodal network because it looked to expand funding; streamline the
environmental review and permitting processes to accelerate project
approvals; promote the deployment of transportation technologies and
congestion management tools; and expand port eligibility in the
Congestion Mitigation and Air Quality Improvement Program. We need to
build on these successes.
Question 4. Does focusing freight policies largely on highways
impact our ability to move goods efficiently?
Answer. Yes. Focusing freight policies largely on highways ignores
the fact that freight moves across modes--by water, rail and highways.
To ensure that goods can move efficiently throughout the transportation
network, policies should take into account planning for freight
movement from origin to destination, and provide funding for investment
in infrastructure across the modes and in technology that facilitates
freight movements between and across modes. Intermodal by its nature is
complex, and it requires resources that allow all stakeholders to work
together to move freight in an efficient and timely manner
Paying for Freight. I think we all know and see the value of
investing freight, but we struggle to find agreement on how to pay for
these investments. Congress has heard support for any number of
proposals--including continuing the existing practice of using highway
trust fund and general fund revenues or dedicating new revenue, such as
the proposed waybill fee.
Question 5. What are your views on how we pay for critical freight
investments?
Answer. We believe in the development of a comprehensive national
freight policy that not only addresses funding for and improvements to
the Nation's roadway, rail and bridge infrastructure system, but that
also allows for significant investment in projects not directly related
to highways. The following items are, in our view, critical to enabling
America to compete more effectively in an increasingly global economy:
Fuel taxes should be increased to support freight
infrastructure projects.
Introduce Freight railroad infrastructure investment tax
credits to support rail infrastructure projects.
Support and encourage common-sense Public-Private
Partnerships that improve and expand America's freight
infrastructure.
______
Response to Written Question Submitted by Hon. John Thune to
Donna Lemm
Question. Ms. Lemm, you mentioned in your testimony that many
agricultural commodities--including grains and soybeans--are
increasingly migrating from bulk cargoes to containerized shipping.
Could you describe how this transition is affecting the supply
chain, as well as how intermodal infrastructure investment will change
as a result?
Answer. For ocean carrier service to and from the United States,
the international ocean carriers allocate their containers first for
the imported consumer goods coming from Asia and other regions, as
these are the highest volume, and highest value goods, which pay the
highest freight rates. Only a finite number of these containers are,
once the imports are unloaded, allocated for export cargo. Many are
simply returned back to Asia empty, in order to expedite the loading of
additional imports to the US. A finite number of containers are used to
load our agriculture exports, in many cases requiring repositioning to
locations far inland from the ports, to locations where our agriculture
is grown, processed, packed. Once loaded, these containers can return
to the ports, and then return to Asia or other export destinations. For
decades we have seen the conversion of grain and soybean into
containers. Containerized shipments allow smaller, more manageable
quantities for the overseas buyer to manage, as opposed to the massive
quantities in the bulk ships that have traditionally carried soybeans,
grains, wheat. Further, containers allow different varieties of these
products to be segregated, for example GMO from non-GMO, and different
grades of the grain or soybeans. For the ocean carriers, the
containers, if not loaded with our exports, would return empty, meaning
without generating any revenue for the ocean carrier. So even at low
export freight rates, these containers became very attractive to get
goods shipped competitively to foreign markets. As bulk shipping costs
rose, containerized shipping fell and immediately conversion to
containers occurred. Goods are well protected in ocean equipment and
while we still see a tremendous amount of bulk shipping, containerized
freight is favored by many shippers and receivers.
How does it impact the supply chain?
Answer. All agriculture commodities are scrambling to be served
from the same pool of containers. Often there is more agriculture ready
to be shipped, than there are containers available to be loaded. This
is particularly frequent in places where the largest volumes of
agriculture (soybean, grain) are sourced, which are the furthest from
the ports (the Midwest), meaning empty containers must be brought long
distances from the ports or metropolitan areas where the containers
with imported consumer goods are destined. This involves trucking, rail
and inland depots. So when we see a conversion from bulk/barge to
containers, often preferred by the foreign receivers, the impact to the
supply chain is huge--as shippers in the Midwest or other inland points
scramble to get their hands on those containers.
______
Response to Written Questions Submitted by Hon. Maria Cantwell to
Donna Lemm
Freight Investment. I have long been a champion of Federal funds
for freight projects, which for the first time received dedicated
funding in the FAST Act with the implementation of the FASTLANE (now
INFRA) program, which I championed. Trade and the movement of goods is
the backbone of our economy. In Washington state, we know this all too
well as forty percent of our jobs are tied to trade.
Questions 1. Where do you see the main chokepoints that require
multi-modal investments to keep freight moving?
Answer. The main chokepoints that require multi-modal investments
to keep freight moving are at places where the transportation modes
meet. These are the place where cargo must be transferred from one mode
to another. For example, at seaports where our export cargo (largely
agriculture and forest products moving in international marine
containers) arrives by truck or rail and must be transferred onto ship,
for the voyage to foreign customers. Or vice versa--where cargo
arriving from foreign origins, is transferred to truck or rail for
delivery to nearby or distant distribution centers. Another chokepoint
is at the inland rail ramps, where international cargo arriving by rail
from seaports, is transferred to truck for delivery to ultimate
destination. Or vice-versa, where our export cargo, (again, largely
agriculture and forest products) arrives by truck, to be loaded onto
rail for the onward movement to a seaport.
It is the many process inefficiencies and lack of standard supply
chain visibility at our choke points in the United States that require
multi-modal investment. For example, on the West Coast there are 12
terminals in Los Angeles and Long Beach with no standard visibility to
the shipper on where that container is and whether containers are
available for pick-up. To compound the congestion problems, terminals
have added dual transaction requirements for inbound and outbound
freight and appointment systems. The choke points at our ports are
further pained by the lack of chassis supply (the metal frame with
wheels upon which containers are mounted for over the road). When the
system has no wheels for containerized freight movement, the end result
is freight that stands still. In the interior of the United States
these gridlocks are similar. We have a system at our hub locations in
the interior like Chicago, Memphis and Dallas that have multiple Class
1 Railroads serving these geographies. Freight is moving in and out of
these hubs daily and there is a need for visibility to this cargo at
all times. These inland hubs also have congestion problems when there
are no chassis to move freight. During the FMC 2018 Fact Finding
Investigation on Detention and Demurrage led by FMC Commissioner
Rebecca Dye, The Memphis Supply Chain Team was formed to study this
problem in Memphis. The team comprised of industry stakeholders from
the rail, shipper, ocean carrier and motor carrier industry found that
the supply chain could be greatly enhanced by a gray pool chassis model
offering greater supply, interoperability, standard quality and a
manager. While there is debate on the benefits of this gray chassis
model vs private pool model, there are those that argue that chassis
should be treated as a utility model with Federal funding
consideration. The bottom line, chassis are a necessary component of
the supply chain and shippers need fair access to wheels in order to
move their freight. This is an area that needs multi-modal investment
to meet the growing challenges and surges of freight in the US.
It should be noted that we could assist in minimizing congestion at
these choke points, if we could increase the weight limits allowable
for transport in these multi-modal transfer locations. The U.S. has the
lowest allowable weight limits for trucks in the developed world.
80,000 lbs, GVW, compared to 105,500 lbs GVW in Canada and Europe, and
often it is greater. Which means that the U.S. exporter, must hire 3
trucks to haul her products to marine terminals, while the nearby the
Canadian exporter (or the Australian, or Chilean exporter of the same
products -agriculture and forest products) only needs 2 trucks to haul
his hay to their seaports or inland rail ramps. The exporters in those
countries, competing with the U.S. farmer, processor or manufacturer,
therefore enjoy a significant cost advantage. Further, the roads and
transfer points in those countries are less congested, and benefit by
far fewer diesel emissions. In addition, the United States has a
critical driver shortage with the average age of drivers at 55 years
old. We need to take a hard look at how we keep U.S. exports
competitive and moving.
There are some states, such as Washington, Oregon, Idaho that
permit the higher weights allowed in Canada, but this is not uniform
across the country, meaning that interstate trucking must conform to
our lower weight limits for moving our goods regionally and nationally.
Canada and the Western European countries most certainly have
safety and roadway maintenance concerns at least equal to ours. That is
why their higher weight limits require truckers spread the load, by
using an additional axle, which actually reduces the load on the
roadway at each point where the tire is on the pavement. Further,
studies show the truck brakes just as quickly, and the trailer swerves
less than when the truck is only at the lower (80,000 GVW). Washington,
Oregon, Idaho, and other states allowing the higher weight trucks
similarly require the additional axle.
Question 2. How can increased investments in the freight program
better address these challenges?
Answer. The challenge for U.S. transportation infrastructure is
that it is insufficient to carry the dramatically increased volumes of
cargo, beyond that for which the infrastructure was designed to carry.
Dramatic increases in cargo volumes moving both internationally and
domestically are straining our U.S. infrastructure. Unprecedented
volumes of imports into the United States on ships of unprecedented
size, are overwhelming the marine terminals at the gateway seaports.
Roadways connecting the marine terminals to the interstate highway
system aren't sufficient to carry the increased number of trucks,
without quickly becoming congested. Adding complexity, those roadways
must transit urban areas. For example, on the west coast, all the major
gateways are located in urban areas where expanding the size and number
of roads feeding to and from the marine terminals is extraordinarily
expensive and may require exercising eminent domain. Further, cargo is
moving on railroads, which are themselves stressed in terms of their
own capacity to carry all the cargo, particularly during peak periods.
Thus, additional capacity must be built, including more rails ramps,
etc. In other words, while the cargo moving domestically and
internationally has increased, with some exceptions, U.S.
infrastructure to these increased volumes, has not increased.
This leads to the question: who should make those investments and
whether those investments are publicly funded, or whether they are
private? For example, much of the railroad infrastructure needs will be
funded by the railroads, not with Federal tax dollars. The inland rail
service for international containers has seen transit times double over
the past 2 decades. In 2000, U.S. ag and forest product exports would
move from Dallas and Memphis to the the WC in 4-5 days. Today that same
transit time is 8-10 days. It is absolutely unacceptable to have
transit times in the interior double from key intermodal rail hubs to
our ports.
Similarly, marine terminals, particularly at U.S. West Coast ports,
are all private terminal operating companies. In many of those
instances, the marine terminals will have to be improved with
additional cranes, etc. by the terminal operating company itself. In
other cases, the public port authority operates the marine terminals,
such as Georgia and South Carolina. In those cases, they are expanding
the available infrastructure and funding it through both port revenues
and state tax dollars.
On the west coast it is clear that individual marine terminals are
often much too small to handle ships now calling upon them. In the
Nation's largest international trade gateway, Los Angeles and Long
Beach, the marine terminals were built to facilitate the flow of
containers on and off ships ranging in size from 5,000 to 8,000 TEU's.
However, today's ships are more likely to be in the 14,000 to 18,000
TEU's, and that is simply just too much cargo for the older smaller
terminals that were built a generation ago. The gates to those
terminals are insufficient, the footprint of the terminals is
insufficient to handle all the containers stacked there awaiting to be
loaded on the ship. And building additional freeways through Los
Angeles to get cargo on or off a terminal is problematical best. In the
Pacific Northwest, the Port authority has been expanding marine
terminal sizes which is essential. However additional road access and
railroad access is essential and that is expensive, particularly as
they will both have to move through urban areas of Seattle and Tacoma.
Up until approximately 10 years ago, most cargo containers entering
or leaving marine terminals were on rail moving efficiently directly
onto the terminals. Today most containers leaving or returning do so by
truck, requiring tens of thousands of additional trucks on roadways--
adding to congestion and slowing the process of cargo movement. Each
trucking container must move into the terminal through a controlled
gate and there are insufficient gates because there is often
insufficient room on the roads leading into the terminals. Thus,
resources to pay for the infrastructure expansion required. Further,
the public port authority efforts to combine the marine terminals must
have the support of the Federal government. In terms of effort to
expand the size of each of the terminals, will require that the Federal
and state governments develop plans as to how to convert these
privately managed terminals, located on public property, into fewer but
larger terminals.
Serving inland areas, where much of our U.S. agriculture cargo
originates, requires long truck hauling, unless a rail ramp is located
near the farmers, processors, packers. These containerized exports
often get international marine equipment from hub locations in Chicago,
Memphis, Kansas City and Dallas and then move on to our port gateways
by rail. These transit times as discussed have doubled to the coastal
ports and some rails have instituted appointment systems which often
restrict exporters into meeting these windows. A careful review of our
major hub locations and corresponding transits to the port for U.S.
exporters and inefficient processes deserve study. It is also important
to note that often inland rail ramps are far from the agriculture
origins. Additional infrastructure could assist in moving cargo from
rural areas into the Gateway seaports seamlessly without adding to
roadway congestion--if load points could be added in rural areas. This
requires the railroad to be agreeable to the operational challenges,
and may require Federal funding of at least some of the hard
infrastructure to facilitate loading and unloading of containers and
their storage at these inland points. For example, for the railroad
moving between Puget Sound and Minneapolis/Chicago, the addition of
load points in places such as Minot, North Dakota and Tri-Cities in
Washington state would remove hundreds of trucks from the freeways. If
the rail, moving through Eastern Washington could stop add a rail ramp
that would load containers of potatoes, onions, French fries, pulses
etc., that would alleviate the current need to truck all that cargo
from Eastern Washington, Idaho and eastern Oregon on congested highways
to the urban areas Seattle Tacoma and finally to the seaport marine
terminals.
Marine terminal operators lease the terminals (albeit for many
years), thus the port authority has some ability to determine the
future of the terminals, even those leased long term. But for the
railroads, building a rail ramp is only possible if the private sector
entity, in this case in Burlington Northern Santa Fe, is amenable. They
might do because it increases operational efficiency. To make the
actual cost of building the extra sidings, ramp cranes, and other costs
affordable, Federal grants and State funding support could make the
project attractive. This would require another public-private funding
mechanism.
In addition to building intermediate rail ramps along the existing
rail routes,a network of shortline railroads could significantly reduce
transport costs for food, farm and fiber, whether for domestic or
international consumption. This will require coordination with the
Class I railroad and Federal authorities., as the Class I/short line
agreements currently, give the Class I's almost complete discretion to
deny access to shortline cargo. The STB has ruled on many cases
relating to shortline cargo access to the Class 1 trains.
At the international land borders particularly the southern border,
U.S. investment in cross-border cargo infrastructure has lagged behind
Mexico's investment in improving cross border roadways. Under the
USMCA, the massive and growing volumes of trucks crossing the border
require greatly expanded U.S. highway access to the border, as well as
truck waiting areas, and inspection gates. On the U.S. side, projects
that have been on the drawing board for many years are still
languishing.
The bottom line is increased freight volumes, whether moving
domestically or internationally, require increased infrastructure.
Bigger ships require bigger marine terminals, more gates, more rail
access and highway access. More cargo moving from the coast to inland
points requires more rail ramps and improved road access to those rail
ramps. In many cases the current transportation infrastructure is
privately owned or managed, thus requiring public-private partnerships
to plan and fund the required infrastructure
Paying for Freight. I think we all know and see the value of
investing freight, but we struggle to find agreement on how to pay for
these investments. Congress has heard support for any number of
proposals--including continuing the existing practice of using highway
trust fund and general fund revenues or dedicating new revenue, such as
the proposed waybill fee.
Question 3. What are your views on how we pay for critical freight
investments?
Answer. Some funding mechanisms are working, others are not. For
example, to pay for dredging the Nation's waterways and marine
channels, as well as jetties, the Harbor Trust Fund provides sufficient
revenues. The question is not whether there is sufficient revenue, but
rather how funds are distributed. Should they be distributed for land-
side projects to ports which do not necessarily need dredging, but
could wisely improve terminals, or rail access, for instance. That is
an ongoing debate. There has been some discussion of increasing the fee
slightly in order to generate additional revenue dedicated to fund
infrastructure at the so-called ``donor ports'' that is different than
that originally contemplating when the HMTF was enacted (dredging,
jetties). With the current crisis at that major seaports due to massive
volumes of cargo overwhelming the capacity of the seaports, there may
be an appetite for, or at least a willingness to enact a slight
additional HMT in order to generate the revenues needed to make
existing terminals more efficient, and to build new terminals, to
combine existing terminals and take the other measures necessary to
improve cargo flows.
The Highway Trust Fund's ability to fund highways, bridges,
subways, buses, is insufficient now, and diminishing. With better
mileage for cars burning gasoline, with hybrid and electric cars not
burning as much or any gasoline, the Federal gas tax that funds the
Highway trust fund is generating less and less revenue. The existing
funds are barely sufficient to maintain the current highways, subways,
etc, leaving precious little to build additional freight
infrastructure. And if a highway is built or expanded, the freight and
passenger traffic must share it. Congestion remains and a growing
concern. A solution is the Vehicle Miles Traveled--which treats are
cars/trucks equally, regardless of fuel burned, or if electric, LNG,
solar, wind. This is being tested in Oregon, and could lead ultimately
to a carbon free environment.The VMT is discussed further, below.
Transportation planners believe that separate network of highways
dedicated to freight would dramatically increase not only freight
efficiency, but reduce congestion on the highways upon which passenger
traffic would remain dependent. In the recent past the trucking
industry has indicated support for an additional Diesel Fuel Tax to
generate revenue to pay for separate freight infrastructure, ranging
from completely separate highways for truckers, to additional lanes
dedicated to truckers on existing highways. Whether depending on a tax
on diesel fuel at a time when electric and LNG vehicles are becoming
more numerous, and which do not consume much or any diesel, is a
significant question. in such instances, whether a dedicated fee for
freight or generating funds for passenger transport (including urban
transit) a shift to the Vehicle Miles Traveled formula could generate
sufficient revenue by taxing all vehicle regardless of whether they
consume gasoline or not. The trucking community is largely in support
of this, as long as the funds they generate, are dedicated to freight
infrastructure.
Additional infrastructure could assist in moving cargo from rural
areas into the Gateway seaports seamlessly without adding to roadway
congestion--if load points could be added in rural areas. This requires
the railroad to be agreeable to the operational challenges, and may
require Federal funding of at least some of the hard infrastructure to
facilitate loading and unloading of containers and their storage at
these inland points. For example, for the railroad moving between Puget
Sound and Minneapolis/Chicago, the addition of load points in places
such as Minot, North Dakota and Tri-Cities in Washington state would
remove hundreds of trucks from the freeways. If the rail, moving
through Eastern Washington could stop add a rail ramp that would load
containers of potatoes, onions, French fries, pulses etc., that would
alleviate the current need to truck all that cargo from Eastern
Washington, Idaho and eastern Oregon on congested highways to the urban
areas Seattle Tacoma and finally to the seaport marine terminals. This
is only possible if the private sector entity, in this case in
Burlington Northern Santa Fe, is amenable. They might do because it
increases operational efficiency and the actual cost of building the
extra sidings, ramp cranes, and other costs are affordable. If not,
Federal grants and State funding support could make the project
attractive. Another public-private funding mechanism would be required.
Bottom line: the HMT works. It could be expanded, The Highway Trust
Fund may be on its last legs, insufficient revenue coming in from
gasoline sales. Vehicle Miles Tax would capture the VMT tax from all
vehicles on it's road, if so, the passing of the HTF would not be a big
blow.
______
Response to Written Questions Submitted by Hon. Maria Cantwell to
Joseph Szabo
Freight Investment. I have long been a champion of Federal funds
for freight projects, which for the first time received dedicated
funding in the FAST Act with the implementation of the FASTLANE (now
INFRA) program, which I championed. Trade and the movement of goods is
the backbone of our economy. In Washington state, we know this all too
well as forty percent of our jobs are tied to trade.
Questions 1. Where do you see the main chokepoints that require
multi-modal investments to keep freight moving?
Answer. Many of freight infrastructure's largest, most complex, and
most desperately needed improvements occur where multiple modes come
together. These chokepoints must be untangled to unburden our
communities and allow for the efficient flow of commerce. While
multimodal chokepoints occur in communities of varying sizes across the
nation, many of the most costly and critical occur in our Nation's
largest freight hubs. These hubs, like Seattle and Chicago, are tasked
with safely, efficiently, and reliably moving high volumes of freight
and people across many competing modes. The need for investment in
these multimodal chokepoints continues to grow, and for this reason, it
is critical that Congress eliminate the cap on non-highway investment
under the FASTLANE and Freight Formula Programs so states and
localities are able to address their most pressing freight
infrastructure chokepoints, regardless of mode.
The Chicago region is North America's freight hub and a center of
intermodal freight movement. But the region's rail lines--built more
than a century ago--were not configured for the volumes and types of
freight being carried currently, creating the largest U.S. rail freight
chokepoint and also impacting commuter and intercity passenger rail
service. Multi-modal investments in programs such as CREATE, a public-
private partnership to deliver rail grade separations and other
improvements to address this chokepoint, will keep freight moving.
Question 2. How can increased investments in the freight program
better address these challenges?
Answer. Currently, passengers and freight in the U.S. compete for
an inadequate supply of infrastructure capacity and financial
resources. Both suffer. Competitive grant programs, such as FASTLANE,
are critical to funding large-scale freight infrastructure projects,
such as where modes come together, which are difficult to fund through
traditional distribution methods. The FASTLANE program makes
investments in critical freight and highway projects but is currently
oversubscribed. In the combined FY17 & FY18 round of awards, the U.S.
Department of Transportation (USDOT) received $12 in unique requests
for every $1 available. USDOT has received applications for this
program from all 50 states, the District of Columbia, and Puerto Rico,
demonstrating that needs span the Nation. Research also shows that for
every $1 invested through a Federal competitive grant program, an
additional $3.50 is invested in the project, leveraged through other
sources. By increasing program funding to $12 billion annually, and
ensuring that funds are invested in critical freight projects, goods
movement infrastructure will be better positioned to support economic
growth, domestic production and manufacturing, and U.S. competitiveness
and trade in the world marketplace.
Intermodal Port Projects. Ports and port terminals are a critical
part of our freight network, but frequently get overlooked when it
comes to Federal funding. The FAST Act included new programs to help
move freight more efficiently. However, I'm concerned that the programs
don't go far enough to help ports.
Question 3. How do limitations on the FASTLANE grants impact the
ability to fund intermodal freight projects? What should be done to
address these limitations?
Answer. Currently, only $500 million over the five-year duration of
the FASTLANE program can be spent on non-highway projects. This cap
severely limits the ability of intermodal freight projects to receive
necessary funding from the FASTLANE program. Freight projects often
span multiple modes and cross jurisdictional boundaries, making them
expensive and difficult to fund through traditional formula programs.
It is often in the places where various modes come together that public
assistance is needed to close the funding and infrastructure gaps.
Freight movement necessitates cooperation among many modes, and funding
flexibility is required to make investments yielding the highest
return. Therefore, it is critical that Congress eliminate the cap on
non-highway investment under the FASTLANE and Freight Formula Programs
to ensure that states and localities can make investments in their most
pressing freight needs, regardless of mode.
Question 4. Does focusing freight policies largely on highways
impact our ability to move goods efficiently?
Answer. Freight does not move on highways alone--where public
benefit is derived, public investment must be made. Focusing solely on
highways severely limits the effectiveness of any freight program--
intermodal freight is one of the fastest-growing sectors of the freight
market and it is where highways meet other modes that bottlenecks and
inefficiencies frequently occur. Investing in just one mode of the
complex multimodal freight network will not address these bottlenecks
nor will it improve the overall efficiency of the freight system.
Moreover, system redundancies are necessary to meet the needs of a
growing economy, and adding highway lanes is simply not an option in
many of our Nation's most congested regions. For this reason, it is
important that investment spans modes to allow for unfettered freight
movement as populations grow and commuter traffic competes with truck
traffic. Also worth noting is that extreme weather patterns, workforce
shortages, and the simple economics of supply-and-demand challenge
modes disproportionately, making supply chain redundancy and resiliency
necessary to ameliorate negative economic consequences.
Paying for Freight. I think we all know and see the value of
investing freight, but we struggle to find agreement on how to pay for
these investments. Congress has heard support for any number of
proposals--including continuing the existing practice of using highway
trust fund and general fund revenues or dedicating new revenue, such as
the proposed waybill fee.
Question 5. What are your views on how we pay for critical freight
investments?
Answer. The Highway Trust Fund (HTF) and its primary funding
source, motor fuel taxes, have served our infrastructure network for
many years. As noted, in recent years, general fund revenues have been
used to supplement the HTF and continue making investments despite
declining revenue from direct user fees. Should Congress continue this
approach, we maintain that Congress should increase investments in our
multimodal freight network as the system directly supports our Nation's
economic health.
However, certainty and reliability are critical for infrastructure
development. As Congress contemplates long-term solutions to invest in
the freight network, I encourage careful consideration of a waybill fee
assessed on the cost of moving goods and dedicated to multimodal goods
movement infrastructure. The fee, as applied on both road and rail
movements, would raise significant funds and complement existing
revenue sources. Importantly, collections based on a waybill fee will
be resilient to factors such as movement toward alternative fuels, and
the revenues will grow with the demand for services.
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