Testimony of

Jeffrey A. Rosen
General Counsel
U.S. Department of Transportation

Before the

Subcommittee on Regulatory Affairs
Committee on Government Reform
U.S. House of Representatives

June 28, 2005

      Good morning, Chairman Miller, and members of the Committee.  I am Jeffrey Rosen, General Counsel of the U.S. Department of Transportation (DOT or the Department).  I am pleased to have the opportunity to speak with you this morning about the regulatory review and reform efforts of the Department. 

            Your specific interest today involves the Department’s overall progress in response to the request of the Office of Management and Budget (OMB) for “public nominations of specific regulations, guidance documents and paperwork requirements that, if reformed, could result in lower costs, greater effectiveness, enhanced competitiveness, more regulatory certainty and increased flexibility.”  OMB noted its particular interest in addressing the burdens on small and medium-sized manufacturers. The five DOT reform nominations you are interested in were included in OMB’s 2005 Report on Regulatory Reform of the U.S. Manufacturing Sector.

Scope of DOT Regulations

            To fully appreciate DOT’s regulatory review and reform efforts and our response to the specific nominations of DOT rules in the OMB Report, it is useful to understand both the scope of our responsibilities and the many steps we already take to address the possible need to reform our regulations.      

            The Department of Transportation must remain vigilant in the oversight and review of its regulatory activities.  The various components of the Department of Transportation -- ten operating administrations and the Office of the Secretary -- have important statutory responsibility for a wide range of regulations.   DOT has, by some measures, one of the largest rulemaking responsibilities in the Federal Government. Those responsibilities involve a broad range of matters that include safety, security, the environment, and economic development.

            For example, DOT regulates safety in the aviation, motor carrier, railroad, mass transit, motor vehicle, commercial space, and pipeline transportation areas.  We regulate consumer and economic issues in aviation and trucking, and provide financial assistance and rules necessary to implement programs for highways, airports, mass transit, maritime, railroads, and motor vehicle safety.  And we issue regulations carrying out such disparate statutes as the Americans with Disabilities Act and the Uniform Time Act.

            In addition, DOT has responsibility for developing policies that implement a range of regulations that deal with internal programs, such as acquisitions and grants, access for the disabled, environmental protection, energy conservation, information technology, property asset management, seismic safety, and the use of aircraft and vehicles.

            We currently have over 200 ongoing rulemaking entries on our regulatory agenda.  Of these, over 80 are deemed significant under Executive Order 12866 (E.O. 12866) (“Regulatory Planning and Review”), meaning that they are either costly or they have some other important public interest component.  Of these, 10 are economically significant rulemakings, meaning they generally have an economic effect of at least $100 million per year. In the last 12 months of the Regulatory Agenda cycle, DOT issued 28 significant rules and 110 nonsignificant rules (not including routine and frequent rules, such as Federal Aviation Administration (FAA) airspace actions).

DOT’s Periodic Regulatory Reviews

DOT and the industries we regulate have made significant achievements in terms of our regulatory objectives, perhaps best highlighted by the gains in safety statistics in recent years.  DOT is constantly aware of the extraordinary risks faced in industries that annually transport millions of people, tons of hazardous materials, and all forms of raw materials and industrial and consumer goods. We are also responsible for ensuring that the billions of dollars we provide in financial assistance are used in accordance with statutory objectives and mandates. At the same time, we are also aware of the burdens our rules can impose, and in our rulemakings we consider the costs and benefits and determine whether those benefits justify the costs. In addition, we continuously review our existing rules, including any problems the regulated entities are having in complying with a particular rule, to determine whether changes are necessary.

            Indeed, given our wide range of regulatory responsibilities and heavy regulatory docket, it is significant that the Department has a long-standing institutional commitment to regulatory review and improvement. Since 1979, DOT has had in place a formal DOT order on its “Regulatory Policies and Procedures” that requires significant rulemakings to be approved by the Secretary of Transportation before they can be issued.  This oversight and approval process is one that is managed by and is the responsibilities of the General Counsel.

            Simply issuing high-quality rules, which we regard as essential, is not our sole goal.  We also want to ensure that we periodically review rules that the Department has issued previously.  We want to assess whether our existing rules are still necessary, whether they still work well, and whether they can be improved; and we want to examine our overall agenda of planned rulemakings to ensure that we are moving in the right direction, that we have the right priorities in terms of achieving our statutory objectives, and that we are mindful of the costs and burdens involved, so unnecessary costs and burdens can be avoided.

            As far back as our 1979 “Regulatory Policies and Procedures,” the Department required its component agencies to have a program for reviewing existing regulations and revoking or revising those that are not achieving their intended purpose.  This process identifies rules for review by considering such things as whether a rule overlaps or duplicates other regulations, involves internal inconsistencies or conflicts, addresses a problem that continues to exist, involves heavy or unnecessary burdens on regulated parties, is responsive to technological or other changes, or is the subject of numerous complaints or requests for clarification or exemption.

            An important aspect of the Department’s commitment to reviewing existing regulations involves a program DOT established in 1998 for a ten-year “rolling” review of our rules to respond to our responsibilities under our “Regulatory Policies and Procedures,” E.O. 12866, section 610 of the Regulatory Flexibility Act, and a Presidential directive on plain language.  The current schedule, status, and results of the review program are included in each publication of the Department’s semiannual Regulatory Agenda. The FAA conducts its reviews, other than those required by Section 610, in a different manner.  The FAA reviews its rules on a three-year cycle.  Its last one was initiated on February 25, 2004, (69 Fed. Reg. 8575), with a request for comments.  I have submitted for the Subcommittee’s information Appendix D to our May 2005 Regulatory Agenda, which lists the current review status and activity. 

            In appropriate situations, the various agencies of the Department have also undertaken special reviews of their existing regulations, often limited to specific subject areas.  In addition, we recently decided to supplement our existing review program with a special opportunity for informal discussions between -- or written comments from -- those affected by DOT’s rules and senior DOT officials. I would like to give you a little background on that effort.

Current Regulatory Review Efforts

            DOT’s long-term commitment to regulatory review and reform meshes well with the Bush Administration’s strong emphasis on avoiding and reducing unnecessary burdens on the public.  As part of the President's agenda, President Bush established a plan to build an environment that encourages innovation, lowers the cost of doing business, and promotes economic growth.  One part of that plan includes encouraging investment and economic expansion by reducing unnecessary regulation.  In a recent speech the President said:  "People are more likely to find work if the resources of business are not spent complying with endless and unreasonable government regulation from Washington, D.C.  We will meet our duty to enforce laws whether it be environmental protection laws or worker safety laws.  But we want to simplify regulations in this Administration and we are working hard to do so."

            Secretary Mineta has taken this goal to heart as well.  In recent public remarks he gave at the FAA's Forecast Conference, Secretary Mineta emphasized that “President Bush has made reducing unnecessary costs associated with Federal regulations a priority.  In keeping with the President's goal, I have directed our General Counsel to conduct a far-reaching review of the Department's regulations.  This could mean simplifying regulations, or even eliminating those that are no longer necessary, to come up with the least costly, most effective way of carrying out our responsibilities."

            We began this DOT-wide review with a January 26, 2005, Federal Register notice, which I have also submitted for the Subcommittee’s information. In response, we received 66 written comments from groups and individuals.  We also held a public meeting on April 12, 2005, over which I had the opportunity to preside, and at which 14 commenters discussed their thoughts on DOT rules with me and other senior DOT officials.  The Department is now in the process of reviewing all the submissions and deciding what action to take in response to the comments.

DOT Participation in OMB Government-Wide Regulatory Reviews

            The Department has also been a very active participant in government-wide regulatory review and reform efforts led by OMB. In the most recent OMB review of the manufacturing sector of the economy, commenters identified 15 DOT regulations, and OMB asked the Department to focus on action on the following five items:

Federal Motor Carrier Safety Administration (FMCSA) rule on motor vehicle brakes.  The National Association of Manufacturers and the National Marine Manufacturers Association asked FMCSA to consider letting commercial motor vehicles use a certain type of brake (called a “surge brake”) which is now authorized for consumer uses but not commercial uses. FMCSA is currently planning to publish a proposed rule on the subject in September 2005, with a final rule published by September 2006.  Any amendments would be to Part 393 of Title 49 of the Code of Federal Regulations (49 CFR Part 393).  To keep up with this rulemaking, interested persons can review the public rulemaking docket, which is designated number FMCSA-2005-21323; it can be found in the Department’s internet-accessible docket at dms.dot.gov.  The public can sign up on a list serve at this site to get notification with links to copies of any future documents that a DOT agency places in any docket (e.g., a notice of proposed rulemaking).  The Regulation Identifier Number (RIN) is 2126-AA91, which will help identify the rulemaking in the Federal Register, the DOT semi-annual Regulatory Agenda, and other places.

FMCSA rule on hours of service.  The Small Business Administration Office of Advocacy asked that these rules permit drivers who deliver goods locally to operate for more than 11 hours to reduce costs.  FMCSA published a proposed rule February 4, 2005, to revise its entire hours of service rule, with a final rule expected to be published in August 2005.  Any rule on this subject would affect 49 CFR Parts, 385, 390, and 395. The public rulemaking docket is FMCSA-2004-19608.  The RIN for the rulemaking is 2126-AA90.

National Highway Traffic Safety Administration (NHTSA) rule on lighting and reflective devices.  The National Association of Manufacturers and the Motor and Equipment Manufacturers Association asked for clarification and simplification of the existing rule, which is 30 years old and has been amended numerous times. NHTSA is planning to publish a proposed rule in December 2005, with a final rule published in October 2007. Any rule would amend 49 CFR 571.108.  There is currently no Docket or RIN for this rulemaking

NHTSA rule on occupant ejection standard.  Public Citizen asked NHTSA to address such issues as window glazing, side curtain and side impact airbags, and increases in strength of door locks and latches.  NHTSA published a proposed rule on side impact protection on May 17, 2004.  Final action is currently planned for early 2006. Any rule would amend 49 CFR 571.214.  Its docket number is NHTSA-2004-17694.  The RIN is 2127-AJ10.   NHTSA also plans to publish a proposed rule establishing occupant containment performance requirements by December 2006.  Final action is anticipated in 2007.  No docket, RIN, or CFR sections have yet been created. Finally, NHTSA published a proposed rule to increase door latch strength requirements, implementing the first United Nations global technical regulation, on December 15, 2004.  Final action is expected in early 2006. Any final rule would amend 49 CFR 571.206. The docket is NHTSA-2004-19840 and the RIN is 2127-AH34.

NHTSA rule on vehicle compatibility standards.  Public Citizen urged NHTSA to include a standard metric rating to evaluate vehicle mismatch, establish compatible bumper heights, and mitigate harm done by “aggressive design.”  NHTSA is currently finalizing a report to OMB on the status of research in this area, which we will soon submit to OMB. Note that NHTSA published a report in June 2003 on “Initiatives to Address Compatibility,” identifying a number of initiatives to improve vehicle compatibility. To improve side impact compatibility, in May 2004, the agency published a notice of proposed rulemaking to upgrade existing Federal Motor Vehicle Safety Standard No. 214, “Side impact protection.”  A final rule is currently planned for February 2006.  It also initiated a crash test program following the 2003 report to assess the viability of several potential frontal crash compatibility metrics.  The testing to date has not been successful in identifying metrics that could be measured in crash tests and correlated to real-world safety. Further research and development, both by NHTSA and internationally, is being conducted in an attempt to identify viable compatibility metrics.  Results from these tests will not be available until 2006. Subsequently, a decision will be made on whether there is sufficient scientific basis to pursue a regulatory requirement for compatibility.

These items, and the Department’s responses, give a flavor both of the variety of the often technical subjects that DOT rules address and the ability of the Department to respond – and often to anticipate – the concerns of the public.

DOT’s Use of Sunset Provisions in Regulations

            In addition, I would mention one innovative approach that the Department has taken in recent years to ensure review of specific regulations.  On some, limited occasions when we issue a new rule, we include in the text of the rule itself a provision mandating such review.  For example, in 1992, we issued a rule on airline computer reservation systems (CRS) that contained a sunset date.  Before the sunset date, we initiated a review of the rule.  After determining that the on-going changes in the airline distribution and CRS businesses, such as the increasing importance of the Internet, made the rules unnecessary, we decided to allow most of the rules to expire on January 31, 2004, except for two provisions that expired on July 31, 2004.  We also added a sunset date to a 1998 final rule under the Americans for Disabilities Act concerning over-the-road buses.  We are beginning this review in October of this year.  More recently, in the rule revising our disadvantaged business enterprise program for airport concessions, published in March 2005, we included another sunset provision.  This rule will go out of effect in April 2010 unless the Department renews it.  We will conduct a review in 2008 - 2009 to help us determine whether to extend the rule, modify it, or allow it to go out of effect.  I anticipate that we will expand the use of this sunset review process as we go forward.

Other Avenues of Regulatory Review

            It is very important to keep in mind that formal regulatory review programs are not the only way that we determine the need to revise or revoke existing regulations.  Through such actions as our regular review of accident and incident data, the inspections conducted by our field personnel, the concerns we hear through our daily involvement with those affected by our rules, our review of changing technology, and our review of petitions for rulemaking that members of the public may submit to us, we identify rules that need fixing.

            Regulatory review is a very important priority at the Department of Transportation, which gets the personal attention of high level officials.  As General Counsel, I have overall supervision of the entire regulatory process, including reviewing and making recommendations to the Secretary on all significant rules.  In addition, we have weekly regulatory review meetings with the Deputy Secretary and the Secretary’s Chief of Staff. Each week, we meet with a different operating administration usually including the agency Administrator. At those meetings, we discuss every rulemaking action on the operating administration’s agenda. The discussions generally cover the need for the rulemaking, our priorities, and our progress in meeting schedules for each project; these meetings often involve discussions among the senior DOT officials present on important substantive issues. These regulatory review meetings played an important role in the Department’s decisions during the last five years to terminate or withdraw almost 180 potential rulemakings that were deemed unnecessary or unproductive, and a similarly important role in ensuring that useful and necessary rules were issued in a timely way.

DOT’s Use of Technology to Enhance Public Participation

            It is also worthwhile to note that DOT is a leader in the use of electronic technology to increase and improve the opportunities for public participation in our programs for reviewing our existing rules as well as in the rulemaking process in general. The use of this technology is especially valuable for small entities that do not always have easy access to governmental processes and records. Our efforts include creating the first internet-accessible electronic rulemaking docket (dms.dot.gov) in the government, which also offers a list-serve; creating a web page (regs.dot.gov) that provides a monthly update on the substance and status of all of our ongoing significant rulemaking projects; providing detailed guidance, interpretations, question-and-answer sites, and other information on various web sites; and working with researchers to develop even better tools for understanding our proposed and final rules.

Conclusion

            Thank you again for the opportunity to discuss with you the Department’s regulatory review program and the specific nominations affecting DOT in the OMB Report.  We expect to take some form of action on all five nominations in the OMB report in calendar year 2005.  As I know you appreciate, it would be inappropriate for me to discuss specific actions we might take concerning ongoing rulemakings, but, I would be pleased to answer any questions you have about our overall regulatory program or the many positive steps we have taken to ensure the effective, regular review of our regulations.

Statement of

The Honorable Jeffrey A. Rosen
General Counsel,
U.S. Department of Transportation

Before the

Subcommittee on Surface Transportation and Merchant Marine
Committee on Commerce, Science and Transportation
United States Senate

April 21, 2005

Chairman Lott, Senator Inouye, and members of the Committee, I appreciate the opportunity to appear before you today to represent Secretary of Transportation Norman Y. Mineta and the Administration as this Congress takes up the very important issue of reform of intercity passenger rail service.  If my testimony today accomplishes one thing, I hope it is to convince you that fundamental change in the way we support intercity passenger rail service is not only necessary but inevitable.  And that change needs to happen this year, before we spend one more taxpayer dollar to prop up a fundamentally broken system.

The passenger rail service model created by the Federal government in 1970 is not viable in 2005.   The model created in 1970 was a single national monopoly set up to be a private corporation but it has instead become like a government agency relying on federal support to survive, with a legacy system of routes incapable of adapting to market forces and demographic changes.  It has little in common with our other modes of transportation and the deregulatory and market-oriented changes other modes have experienced in the last three decades.  America’s transportation system as a whole—our system of roads, airports, waterways, transit lines, and the mostly private operators who use them—provides excellent mobility, connectivity, and efficiency that have undergirded our economic growth.   Sadly, intercity passenger rail has been a different story.  The supposedly private for-profit corporation set up in 1970 to provide all intercity passenger rail nationally has never once covered its own costs, much less made a profit.  And the federal taxpayers have infused more than $29 billion during the last 34 years as Amtrak has lurched from crisis to crisis without ever achieving a stable and viable business model.   Whatever one thinks of Amtrak or passenger rail more generally, this situation has been good for no one.

To some, perhaps this is old news.   Congress looked for change in the Amtrak Reform and Accountability Act of 1997, and actually indicated that “Federal financial assistance to cover operating losses incurred by Amtrak should be eliminated by the year 2002.”    In fact, the notion that Amtrak should operate free from Federal operating subsidies is codified in the United States Code.  49 U.S.C. §24101(d) states that “Commencing no later than the fiscal year following the fifth anniversary of the Amtrak Reform and Accountability Act of 1997, Amtrak shall operate without Federal operating grant funds appropriated for its benefit.”   In the 1997 Act, Amtrak was afforded new flexibility to get its own house in order.  But by 2002, Amtrak’s situation was no better; to the contrary, it had grown worse, with massive increases in Amtrak’s debt, continuing operating problems, and financial crises in both 2001 and 2002.  Amtrak’s response once again was to turn to the Federal government for even greater federal financial assistance.  In no other functioning service market would rising costs and declining revenues be defined as a “success” if this produced a small increase in the number of customers.  Yet, that is exactly what the defenders of the 1970 approach now say, as if the loss for each rider were “made up in volume”.  In 2004, Amtrak increased its ridership by approximately 4% to a record 25 million passengers, asked for a record $1.8 billion Federal subsidy,  and recorded a financial loss of more than $1.3 billion, of which approximately $635 million was a cash loss.[1]  

Things do not have to be this way.   The Administration has made clear that there is an important role for intercity passenger rail in our transportation system, with a new model that will be responsive to the needs of the traveling public.   But we can only get there by reforming the failed model of 1970, and committing to a new approach.   Happily, Amtrak itself now recognizes the need for reform, and we have reached a time when a new approach may now be possible.  It is from this standpoint that I am pleased to be here today to discuss the future of intercity rail.

In my testimony today I will cover three things.  First, I will provide a summary of the historical trends and current state of Amtrak’s provision of passenger rail service.  Second, I will briefly review some recent history of Amtrak efforts to sustain itself and the events leading up to the near-crisis situation we face today in intercity passenger rail service.  And finally, I will outline the Administration’s approach to saving intercity passenger rail and setting the platform for its viability in the future.

1. RIDING THE RAILS:  AMTRAK’S PAST AND PRESENT.

Amtrak was created in 1970 as a private corporation in a major restructuring of the larger rail industry, which was in a state of major financial distress.  In that restructuring, freight railroads ceased providing passenger service altogether.  Instead, for the first time, there would be a single national provider of intercity passenger rail service to replace the multiple regional systems that reflected the areas covered by each of the freight railroads’ route systems.   The intent was that the national monopoly would  reinvigorate passenger rail by permitting  Amtrak to consolidate operations and achieve efficiencies that, after a very brief period of Federal assistance, would preserve and expand intercity passenger rail service as a for-profit company. 

By now we know that the hopes of Amtrak’s creators have never been realized.   Intercity passenger rail service has not been reinvigorated.  The Department of Transportation (DOT) expects that each and every one of Amtrak’s 15 long-distance trains will this year lose money on a fully allocated cost basis, even excluding depreciation and interest.   On a per passenger basis, with depreciation and interest, the loss for long-distance trains ranges from $47 per passenger to $466 per passenger.  But the long-distance trains are not alone:  with depreciation and interest included, every one of Amtrak’s 43 regularly scheduled routes loses money.  After 34 years and $29 billion in Federal subsidies, intercity passenger rail’s financial performance has not improved, service and on-time performance are below expectations, and passenger rail’s market share relative to other modes has continued to erode.  Last year’s so-called “record” Amtrak ridership amounted to a one-half of one percent share of the total intercity passenger transportation market.  Airlines alone carry more U.S. passengers in three weeks than Amtrak does in a year.

[j1] That also belies one of the frequent arguments of today’s defenders of the 1970 model– that the Federal government supposedly subsidizes other modes of transportation at a much greater rate than Amtrak.  In fact, FY 2005’s appropriated subsidy of $1.207 billion represented approximately 9% of the total discretionary Federal funds for the Department – 9% of the subsidy goes for one-half of one percent of the market. The argument also passes quickly over another important fact:  highways, transit and aviation are, unlike rail, funded substantially by true user fees and also by state investments.  (Even the most ardent rail proponents evince little interest in a new Federal passenger rail ticket tax.)  Perhaps most importantly, however, the argument overlooks that federal financial support for roads, airports, and transit goes to infrastructureand not to operations.[j2]   In other modes of transportation,  federal aid goes to highway and airport infrastructure, for example, but federal taxpayers are not regularly asked to write annual billion dollar checks to private trucking companies,  private bus companies,  private automobile commuters and vacationers,  nor even to private airlines, although the taxpayers have regularly done so with regard to Amtrak.

In considering where we are with Amtrak, it is useful to consider the varied things that Amtrak presently does.   Generally, these can be grouped into activities relating to rail infrastructure, corridor train operations, and long-distance train service.

            Rail Infrastructure

Amtrak owns its own right of way and infrastructure along most of the Northeast Corridor (NEC), except in Massachusetts and part of Connecticut, where the infrastructure is owned by those States.   Amtrak also owns some infrastructure in Michigan, as well as train stations in a number of states.   Otherwise, Amtrak mostly operates trains on infrastructure owned by others.

Within the Northeast Corridor, Amtrak controls the infrastructure not only for its own use, but for use by numerous other railroads and transit agencies. 

These other users of the NEC pay Amtrak for access and associated services, such as train dispatching.   In total, trains operated by other users on the NEC actually exceed the number of trains operated by Amtrak itself on the NEC.

Because of the way the 1970 model of intercity passenger rail was organized,  maintenance and development of infrastructure for passenger rail has been left to Amtrak.  

In FY05, Amtrak plans to spend $215 million on fixed facility infrastructure projects, most of which will come from the  $1.2 billion of federal appropriations to be provided to Amtrak.[2]  None of those funds will be allocated to States, or to infrastructure in locations where Amtrak does not presently operate.

Corridor Services

When viewed from the perspective of moving passengers, and the distance they are moved (passenger-miles), Amtrak can be seen as providing two types of services:  corridor services of approximately 100-500 miles and frequently under contract to States in which these corridors are located; and long-distance, primarily leisure travel services.  Within the category of corridor services, there are two different types:  services on the NE corridor, where Amtrak operates on its own infrastructure, and services on other state corridors, where Amtrak operates on infrastructure owned and controlled by others.

Corridor services, which are trips of five hours or less,  have seen an increase in ridership of 50 percent over the last ten years.  Rail corridor service of three hours or less is very competitive with air service on the same corridors.  Approximately twenty million people,  or 80 percent of all Amtrak riders in 2004, traveled on a corridor service.

THE NEC.  The largest portion of Amtrak corridor trips are on the Washington—New York City – Boston Northeast Corridor.[j3]    This is not surprising since this corridor has a long history of rail travel, a large and mobile population base, and significant public investment has gone into the infrastructure.   NEC travel accounts for almost half of all the people who travel on Amtrak.  If one looks at NEC train operations, separate from the NEC infrastructure,  this is the one area where Amtrak operates at something close to a breakeven basis.

OTHER CORRIDORS.  In addition to the NEC main line,  Amtrak operates trains for corridor service in fifteen other states.

As shown in the chart below,  there are several corridors in which the train service has been able to attract a very significant share of intercity passengers.   In 2004, a total of approximately eight million people (i.e., approximately one-third of the total Amtrak ridership) traveled on these corridor routes.  In many instances, these corridors are subsidized in part by States.  State operating subsidies for these trains totaled ten percent of the combined Federal and State funding of Amtrak.   However, States have not borne the full cost of these routes, and some States that have corridor trains have not paid anything at all, thereby producing issues of equity among the States, as well as market uncertainties about how travelers value the services.

Long-Distance Services

Contrary to the trend line for ridership on corridor services, extended trips have seen  declining revenues and ridership--and increasing costs--over the last ten years.  DOT refers to these services as Transcontinental (more than one night), Overnight (one night) or extended corridor (greater than 500 miles, but with no sleeping accommodations).  Amtrak presently operates fifteen such trains.[3]  Amtrak has continued to lose extended trip customers to an airline industry that is offering a low cost, high quality service, and to automobile drivers who choose to use the highways rather than rail.  Amtrak has had little or no success responding to this competition.  As Amtrak’s presence in this segment of the intercity transportation market has dwindled, Federal subsidies per passenger have continued to grow.   In FY 2004, the average passenger on a long-distance train received a subsidy of approximately $214 per trip on a fully-allocated basis, [4] up from $158 in the year 2000 – a 35 percent increase quintupling the modest 7 percent inflation over the same period. 

Moreover, these long-distance trains have had considerable difficulty with regard to on-time departures and arrivals: 

On-Time Performance of Long-Distance Trains, FY 2004

Overall, the picture of where things stand in intercity passenger rail service is far from what was hoped for when Amtrak was created in 1970. 

II.        RECENT HISTORY AND THE CALL TO CHANGE.

During the 1990’s, there was an increasing recognition that the 1970 model of intercity passenger rail had developed some very serious problems.   Congress sought to redress some of those in the 1997 Amtrak Reform Act.  Unfortunately, the reforms embodied in the 1997 Act did not prove sufficient to solve the problems. 

Many of the reforms in the 1997 Act empowered Amtrak to improve its own performance, and removed impediments to its doing so.   After passage of the 1997 Act, Amtrak’s then-management repeatedly reported that it was it on a “glide path” to self-sufficiency by 2002.   That did not happen.   The problems worsened, and it became increasingly clear that they were not solely the result of business misjudgments, but also involved inherent flaws in the 1970 model.

Instead of a successful “glide path”, Secretary Mineta was greeted with some unwelcome surprises in his initial experiences with Amtrak during the current Administration.  Early in 2001,  instead of Amtrak being months from self-sufficiency as reported, Amtrak’s then-management advised that Amtrak would be insolvent within two weeks unless DOT subordinated the interest of U.S. taxpayers to a foreign bank so that Amtrak could mortgage its rights to use Pennsylvania Station in New York City.  Within a year, Amtrak had lurched to yet another financial crisis, informing the Secretary that if the Department and Congress did not provide the company another $300 million, it would be insolvent within two weeks and would also shut down commuter and intercity services.  In response, to obtain time to assess and identify more long term reforms, DOT provided Amtrak a $100 million loan under the Railroad Rehabilitation and Improvement Financing Program, and Congress provided the remaining $205 million through a supplemental appropriation.

These crises highlighted fundamental problems, some of which needed immediate action by Amtrak, and some of which were revealed to be inherent to the 1970 business model and in need of legislative change.  Among the most urgent for Amtrak itself was the state of its financial books and records.  Indeed, it took independent auditors almost all of FY 2002 to close their audit of Amtrak’s FY 2001 financial performance.  That audit required $200 million in net audit adjustments and found 5 material weaknesses and 12 reportable conditions that needed to be addressed to fix the problems with Amtrak’s accounting practices.  It also revealed that Amtrak had taken on almost $3 billion in new debt in order to pay for (1) costly overruns of poorly managed capital improvements, (2) an unsuccessful foray into the express package business, and (3) day-to-day operational expenses.

Since 2002, Amtrak’s record-keeping has improved.   In 2005, the independent audit was completed in March instead of September and no material weaknesses were found.  While Amtrak’s auditors still find significant areas for improvement, they comment favorably on developments over the last three years.

Through participation on the Amtrak Board, and through changes to the appropriations process that enabled stronger FRA oversight of the grant process to Amtrak, Secretary Mineta and DOT have sought a variety of improvements that Amtrak could make on its own.   That process continues and is ongoing.  Because I anticipate that the improvements instituted since David Gunn assumed leadership of Amtrak will be covered in the testimony to be supplied by Amtrak itself, I will not detail them here, but it should suffice for me to say that Amtrak operates in a more efficient and better way than it did three years ago.

But notwithstanding the very significant management improvements and a much-enhanced and valuable involvement of the Amtrak Board, fundamental difficulties continue to confront Amtrak, because the 1970 model of intercity passenger rail is a framework that is flawed.   Amtrak continues to spend dramatically more money than the revenues it generates, and this year is spending at a pace greater than the appropriation from Congress.   Amtrak estimates that by the end of FY 2005 it will have only $75 to $100 million of cash remaining, with its costs continuing to far exceed its ticket sales.

As shown by the two charts below, the structural problem in Amtrak’s condition is long-term, and is getting worse, not better. 

Further adding to Amtrak’s deterioration is that the company’s debt increased massively in the late 1990’s, from $1.7 billion in 1997 to $4.8 billion in 2002, without adequately increased passenger revenues to pay the debt service.   Because of this increased debt, Amtrak’s repayment requirements (principal and interest) are forecasted to be approximately $273 million in FY 2005 (up from $111 million in 1997).

The FY 2005 appropriation for Amtrak of $1.2 billion represents a 134 percent increase over the appropriation for FY 2001.   Amtrak’s President has said that as presently configured, Amtrak cannot successfully operate through FY 2006 without much larger amounts of taxpayer funds being allocated to this private company.  Indeed, the increase sought by Amtrak -- 256 percent above the 2001 appropriation -- would far outstrip the 22 percent increase in domestic discretionary spending over the same time period.   For the federal taxpayers, that is a spiral in the wrong direction.

Passenger rail is already by far the most heavily subsidized form of intercity passenger transportation. When viewed on a per passenger-mile basis, analysis by the Bureau of Transportation Statistics indicates that the aggregate Federal expenditure for intercity passenger rail is 30 times greater than for commercial aviation.  Likewise, the intercity bus industry, where there are no comprehensive or dedicated Federal operating subsidies, carries as many as 350 million passengers annually (according to Eno Foundation estimates)¾fourteen times Amtrak’s ridership.  So continually increased operating subsidies is not the right answer.

What is more clear now than ever is that the basic business model through which we provide intercity passenger rail service in this country--a single national entity called Amtrak--is unworkable and is not adequately positioned to respond to the changing transportation needs of this country.   Massive increases in funding to merely slow a downward spiral are neither sustainable nor justifiable.  At the same time, doing nothing at all will eventually result in a business failure and a lost opportunity for intercity passenger rail for this country.   A change is needed.

III.       THE ADMINISTRATION’S PLAN FOR REFORM AND PRESERVATION OF INTERCITY PASSENGER RAIL .

As a matter of transportation policy, the Administration supports the availability of intercity passenger rail, but with a very different vision than the failed model of the past.  Secretary Mineta has repeatedly set out the fundamental principles needed to reform intercity passenger rail and place this form of transportation on a sound footing.   These principles are:

• Establish a long–term partnership between States and the Federal Government to support intercity passenger rail:  Partnerships between the States and the Federal Government for the planning, decision-making and capital investment in transportation have been one valuable element in the success of Federal programs for highways and transit to date.   The States, through their multi-modal planning mechanisms, are in a much better position to determine their intercity mobility needs and which form of investment makes the most sense in meeting these needs than a sole supplier company in Washington, D.C.   State-supported intercity passenger rail services in places like the states of Washington, North Carolina, California, and Wisconsin have been one of the bright spots for intercity passenger rail ridership.   The Administration wants to build upon these successes through a new program of Federal/State capital funding partnerships in which the federal government would provide matching grants.

• Require that Amtrak transition to a pure operating company:  Amtrak today is both an operating company and the owner and maintainer of significant infrastructure that forms a key component of the intercity and commuter transportation systems of eight states in the Northeast, as well as many stations and other facilities that have local or regional transportation importance.  These are two very different functions.  By having them both reside in the same entity, the company is faced with conflicting priorities, which the company has found difficult, if not impossible, to balance.  Infrastructure decisions have depended on Amtrak decisions, rather than those of the States and localities who are largely responsible for such planning in other transportation modes such as highways, airports, and transit.  Amtrak, and the nation’s transportation system, would be better off with Amtrak able to focus on one thing—operating trains--and doing it well.

• Create a system driven by sound economics:  One of the flaws of the 1970 model is that intercity passenger rail has sometimes been defined by politics, habit and fear of change.  That is one reason that some routes have stunningly high subsidies, such as the $466 per passenger subsidy in FY 2004 on the Los Angeles to Orlando Sunset Limited.    Intercity passenger rail needs to serve the markets where there is an identifiable demand that intercity passenger rail can meet.   It cannot and should not try to serve every market regardless of the cost and regardless of the revenue.  Just as with other transportation modes and other successful businesses in general, intercity passenger rail needs to have the dexterity to recognize changing business patterns and demand, and that sometimes the services of yesterday are not needed or justified today or tomorrow.  Intercity passenger rail service needs to be designed to cost-effectively meet and support the transportation needs of the traveling public and sponsoring public authorities.

• Introduce carefully managed competition to provide higher quality rail services at reasonable prices:  For the last 34 years under the 1970 model, intercity passenger rail service has not been subject to the discipline of the market place.  On corridor services, for example, States do not have any alternative but to have Amtrak operate the intercity service.  This has resulted in a service that is more costly than one would expect in a competitive situation, and which often has not been responsive to changing transportation patterns, demands or expectations.   In a free market economy, competition leads to improved cost effectiveness, higher quality and innovation, elements that have been sorely lacking in intercity passenger rail for the past generation.  Transition to competition is never easy, but it is necessary for the public to get the service it demands and deserves.

• Create an effective public partnership, after a reasonable transition, to manage the capital assets of the Northeast Corridor:  The Washington-New York City-Boston Northeast Corridor main line is the most heavily utilized rail route in the country, forming an essential link for intercity passenger and freight transportation and commuter access to the major cities of the Northeast.   By some measures, such as the number of persons per day that use this infrastructure, Amtrak is a minority user of this infrastructure – particularly in urban areas.   Transportation services on this corridor need to be insulated from the unpredictable consequences of Amtrak’s own finances and needs at any given time.  At least initially, the ownership of these assets should be in the public sector, and management and control of this asset should reflect significant input from the States that depend on the Northeast Corridor for passenger and freight mobility.

Last week the Administration’s Passenger Rail Investment Reform Act (PRIRA) was transmitted to the 109th Congress.   It sets out and details the Administration’s proposals on specific ways to achieve these objectives.  After a deliberate transition period, intercity passenger rail would become an economically viable and strategically effective mode of transportation, supporting numerous successful rail corridors nationwide.  The Federal role in passenger rail would, however, be revised and strengthened to mirror much more closely the current Federal program supporting mass transit.  As set out in Secretary Mineta’s transmittal letter accompanying PRIRA, we look forward to working with the Congress to discuss and fashion the specifics of legislation in ways that will successfully reform intercity passenger rail for the future.

In addition, this week Amtrak’s own Board of Directors and its Management are releasing strategic initiatives crafted Amtrak to begin the process of reform within the company itself.  That is a timely development, with many positive elements.   Amtrak’s own recognition of the need for reform is a welcome response to Secretary Mineta’s steadfast resolve to address the problems of intercity passenger rail, and create a viable future.  It is encouraging that Amtrak’s own plan adopts many of the Administration’s proposals, though it lacks some provisions and our legislation will still be necessary.  It is critical that we continue to pursue all avenues for reform, including legislation, if we are to avoid a collapse of Amtrak.

Conclusion

My own experience with Amtrak’s Board persuades me that Amtrak itself recognizes the necessity for reform and that time is critical.  Without reform, Amtrak is not sustainable at its current level of funding or at any level Amtrak is likely to receive in these difficult budgetary times.  Moreover, history tells us that merely throwing money at the 1970 model of intercity passenger rail without addressing the problems that have been identified in the subsequent years does not result in any long-term improvements in Amtrak’s finances or quality of service.

The Administration has been clear that it cannot support the failed model of the past, nor support putting more funding into that failed approach.   We have been equally clear that IF meaningful reform is accomplished and implemented, the Administration would support funding of infrastructure and transition needs for train operations and related costs. 

Secretary Mineta has repeatedly expressed the Administration’s support for intercity passenger rail service as an integral part of our overall national transportation system.  Congress, the Administration, and Amtrak itself have a brief window in which to adopt and implement meaningful reform.  If this does not occur, discussions over reforming intercity passenger rail service will be taking place in a severe crisis situation in the not too distant future.  In that unwelcome scenario, no options could be ruled out.  The company faces a depleted cash balance, and a failed 1970 business model.   It is for this reason that we urgently need Congress to address our legislative reform proposal this year.

As you can see, there is much work ahead for all of us as Congress considers these issues.   Secretary Mineta and his team look forward to working with the Congress to assess and implement long-term solutions to the recurrent crisis that plagues the old model of intercity passenger rail.  Thank you for the opportunity to share these observations on Amtrak and intercity passenger rail.  I will be pleased to respond to any questions you may have.

#

STATEMENT OF

THE HONORABLE NORMAN Y. MINETA
SECRETARY OF TRANSPORTATION

BEFORE THE

COMMITTEE ON APPROPRIATIONS
SUBCOMMITTEE ON TRANSPORTATION, TREASURY, HOUSING AND URBAN DEVELOPMENT,
THE JUDICIARY, DISTRICT OF COLUMBIA, AND INDEPENDENT AGENCIES
UNITED STATES HOUSE OF REPRESENTATIVES

OCTOBER 6, 2005

Mr. Chairman, Members of the Committee, thank you for the opportunity to appear before you today to discuss the Department of Transportation’s actions in response to Hurricane Katrina.  Our hearts go out to our fellow citizens affected by Katrina, and my Department will continue to help residents of the Gulf Coast rebuild their transportation infrastructure and help restore their lives.  This storm has presented enormous challenges.  Yet, it has also brought out the best in the public servants at our Department.  I am grateful for their continued service.  Today, I would like to do three things: recount our response to the immediate aftermath of Katrina, our current recovery efforts, and our commitment to prevent wasteful or fraudulent spending of federal funds.

Introduction

The Department of Transportation has specific roles and responsibilities in an event like Katrina. Homeland Security Presidential Directive/HSPD-5, signed by President Bush in 2003, directed that a National Response Plan (NRP) be prepared and designated the Secretary of Homeland Security as the principal Federal official for domestic incident management.  The NRP designates DOT as the lead support agency to DHS/FEMA for Emergency Support Function 1 (ESF-1) / Transportation, and calls for DOT to do the following during and Incident of National Significance:

1. Process and coordinate requests for Federal and civil transportation support;
2. Report damage to transportation infrastructure as a result of the incident;
3. Coordinate alternate transportation services;
4. Coordinate the restoration and recovery of transportation infrastructure;
5. Perform activities conducted under the direct authority of DOT elements such as air, maritime, surface, rail and pipelines; and
6. Coordinate and support prevention/preparedness/mitigation among transportation infrastructure stakeholders at the State and local levels.

The Department also relies on authority under 49 U.S.C. 301, the "Robert T. Stafford Disaster Relief and Emergency Assistance Act," the "Defense Production Act of 1950," and Executive Order 12656 (Assignment of Emergency Preparedness Responsibilities) to fulfill its responsibilities under ESF-1.

With respect to recovery, DOT oversees federal infrastructure programs which support the rebuilding of highway, bridge and airport assets from damage due to an event like Katrina. Our Federal Highway Administration (FHWA) administers the Emergency Relief program, which provides reimbursement to states for expenses related to highway infrastructure damage.  FHWA works closely with state departments of transportation and Federal Land Management Agencies to quickly assess damage and facilitate the necessary repairs. Examples of the type of work eligible for Emergency Relief program reimbursement include repairing pavements, shoulders, slopes, embankments, guard rails, signs, traffic control devices, and bridges, and removing debris from the highway rights-of-way.  The Federal Aviation Administration (FAA) has similar authority to help rebuild airport infrastructure under its Airport Improvement Program (AIP).  In addition, the FAA also is responsible for restoring air traffic control capabilities to facilitate the rapid resumption of flights into and out of the affected region.

DOT also uses its expertise in other modes of transportation to help port authorities, transit agencies, and private rail and pipeline operators assess damage to their infrastructure, identify specific needs, and restore service to their customers.  

DOT Response Efforts

The Department of Transportation has been heavily involved in numerous areas of the federal response to Hurricane Katrina.  In our role as lead agency for transportation under ESF-1, we have provided 11,377 trucks[a1]  to FEMA since the onset of the storm in order to move 14,097 truckloads of goods.  Over 1,350 buses and 15 helicopters were mobilized to support the evacuation and assist in the response.  We have delivered over 19 million meals ready-to-eat (MREs), 25 million liters of water, 13 million pounds of ice, 11 thousand power units and 2 thousand mobile homes. 

The Department’s emergency support staff began responding to Katrina well before the storm made landfall.  On Wednesday, August 24, our ESF-1 staff in Washington and in Region 4 – which includes Florida, Alabama, Mississippi and several other southeastern states – were put on alert as Katrina began strengthening over the Central Bahamas.  On the morning of Thursday, August 25, FEMA activated the National Response Coordination Center (NRCC) here in Washington and the Region 4 Regional Response Coordination Center in Atlanta, mobilizing several Emergency Support Functions, including ESF-1.  DOT staff reported to both locations immediately and began preparations for Katrina’s expected landfall in southeastern Florida.  Those preparations included establishment of the Emergency Transportation Center in Atlanta.  At that time, DOT was tasked with moving 182 truckloads of goods, including generators, ice, water and MREs.

As the storm moved beyond Florida and into the Gulf of Mexico on Friday and Saturday, the Department shifted the focus of its efforts to the Gulf region (Louisiana, Mississippi, Alabama and the Florida panhandle), while continuing to support recovery efforts from the limited damage that occurred in southeast Florida.  To support these preparedness efforts, we continued staffing National and Regional operations centers while helping to establish operations centers in each of the Gulf States. 

By Sunday, August 28, many localities in the region were completing their evacuations.  Shelters began opening away from the coastal areas as well as in neighboring states like Texas, with some transit agencies like the New Orleans Regional Transit Administration (NORTA) running a free shuttle service from ten locations around the city to emergency shelters.  Also in the New Orleans area, the FAA evacuated its tower at Louis Armstrong International Airport (MSY), streetcars were shut down, traffic on the Lower Mississippi River was halted, and Amtrak began terminating its trains short of the city.

On Monday morning, August 29, when Katrina made landfall as a Category 4 hurricane with 145 mph winds, the DOT Crisis Management Center activated its Emergency Response Team (ERT) to ensure that we were mobilizing all possible resources to support the response effort.  The ERT is a scalable structure that provides for instant communication and coordination among senior staff in the Office of the Secretary and our modal administrations.

On Tuesday, I created a special team of senior executives from across the Department to travel to the effected area and assess the damage and help ensure that DOT was mobilizing available resources to assist in the response.  In hindsight, this decision was critical to our ability to respond to this disaster quickly and effectively.  Our team, half of which was deployed to Louisiana and the other half to Mississippi, served as our eyes and ears in those critical days after Katrina hit and provided invaluable information and support.

While there were dozens of tasks that the Department was asked to undertake in the immediate aftermath of Katrina, I would like to highlight three that are particularly noteworthy.  You will not, by the way, find these items in a typical description of the Department’s day-to-day responsibilities.  Instead, they serve a clear testament to the commitment of the Department of Transportation to see a problem and try and provide a response.  It is also evidence of the severity and uniqueness of this storm, and the tremendous challenges it posed. 

First, the day after Katrina hit the Gulf coast our Pipeline and Hazardous Materials Safety Administration (PHMSA) identified a potential major problem.  The Colonial and Plantation pipelines, the only major source of gasoline, jet and diesel fuel for the southeast United States from Alabama to Maryland, had been shut down by the electrical outages due to the storm.  Their customers suggested that they would run out of fuel in just 48 hours.  PHMSA immediately approved the manual operation of facility controls to provide for a low-tech, 1950's style configuration for both pipelines and deployed inspectors to each rural pumping station to assure the safety of these operations.  By Wednesday evening both Plantation and Colonial were able to restore their pipelines to 30% of normal operations.

In the meantime, Colonial had identified a supply of twenty-eight generators.  Through a coordinated effort involving several of our modal administrations, the Department arranged for police escort of Colonial’s road clearing crew and tractor trailers carrying the generators from states in the Midwest, Northeast and Florida to their ultimate destination – rural pumping stations in Mississippi.  In short, both the Colonial and Plantation pipelines were restored to 50% capacity within three days of identifying this problem and were restored to full capacity less than one week after Katrina made landfall.  Once power was restored, we worked with the operators to loan these generators to other locations in support of the relief effort.  Let me underscore the fact that without the prompt action taken by our Department and the pipeline operators, the supply of gasoline, jet and diesel fuel throughout the southeastern and Mid-Atlantic United States would have been significantly reduced.

Later that week, DHS Deputy Secretary Jackson called to ask for DOT’s help in supporting an historic evacuation of the City of New Orleans. Thousands of residents needed to be evacuated quickly, including many in need of food, water and urgent medical care.  The Department immediately organized what became the largest civilian airlift in U.S. history.  In just 24 hours, the Department and its federal and private sector partners turned Louis Armstrong International Airport in New Orleans into an evacuation hub, including a triage unit to support evacuees’ medical needs.  Between September 3 and September 11, we evacuated approximately 24,400 people via airlift, both civilian and military, to sites across the U.S. 

Finally, the Department, through the Maritime Administration, supported the response efforts in New Orleans, through immediate use of two of its Ready Reserve Force (RRF) vessels that were docked at the Port of New Orleans' Poland Street Wharf when Katrina made landfall. We immediately offered these vessels to the President and CEO of the New Orleans Port Authority, Gary LaGrange, who used them to help restore operations at what is the fifth largest port complex in the U.S. Mr. LaGrange used our Cape Knox, for example, as a base of operations for nearly a week until his offices had limited power restored, and he continues to house some of his workers on this vessel. 

DOT Recovery Efforts

It is difficult to overstate the damage that Katrina did to the Gulf region, including major pieces of transportation infrastructure.  All of you have seen on television the destruction left in its wake.  I have now made three visits to the region since Katrina hit and must say that I have been truly awestruck by the scope of the devastation.  Huge pieces of interstate highways weighing many tons were literally picked up off their supports and deposited in Lake Ponchartrain.  Entire buildings, like the casinos along the Mississippi coast, were scooped up by this storm and tossed onto US 90, an important artery for Gulf coast residents that has been literally wiped out in numerous locations.  The Port of Gulfport, Mississippi was left with virtually nothing and must rebuild almost from scratch.  Immediately after the storm, nearly 3 million customers were without power, leaving major pipelines, airports and other facilities unable to function.

The Department has been actively working to support recovery efforts across the region.  Every day we are making more and more progress in assessing and repairing the transportation systems damaged or destroyed by Hurricane Katrina.  Our primary goal is to help restore the stability and quality of life to the people of the Gulf Coast as quickly as possible.  Over the past few weeks we have made remarkable strides across all modes of transportation, and we will continue to build on that success to ensure that the region’s transportation network serves an engine of its economic recovery.    

Aviation

Two weeks ago, I visited Louis Armstrong New Orleans International Airport to announce a grant of $15.2 million to repair and rebuild the airport’s airfield lighting, fencing and other security systems damaged by the hurricane.   Damage assessments at Louis Armstrong are ongoing and the Federal Aviation Administration is continuing its efforts to determine what additional assistance may be needed for the airport.  Commercial passenger services have returned to New Orleans, albeit at reduced levels.  We continue to work with the state and local governments and the airlines to return the airport to its previous level of service.  Our efforts in Louisiana will not be limited only to commercial aviation.  Lakefront, New Orleans’ primary general aviation airport, was totally submerged for one week and sustained extensive damage.  We are continuing to assess those damages and are working with city officials and the airport’s users to develop a plan to resume general aviation operations at the airport.

In Mississippi, Gulfport-Biloxi International Airport is fully operational, and we have issued a $1.6 million grant for terminal repairs and airfield lighting.  A $1.4 million grant has also been provided to Bay St. Louis for airfield lighting and rescue equipment that was damaged during the hurricane.  As these critical repairs occur at the two major commercial airports in the region, the FAA is moving to return all regional facilities, navigation aids and communications equipment to full capability.

Highways

The surveys and aerial pictures of I-10, US 90, and other area roads tell the story of Katrina’s force, but seeing the devastation and destruction in person was shocking.  The Department has made down payments to the States of Louisiana and Mississippi for emergency relief. During my trip to the region, I toured the I-10 Twin Span Bridge which connects New Orleans and Slidell and announced $5 million in immediate relief with the understanding that more funds to support the repair of the bridge and damage to other Federal-aid highways and bridges would be forthcoming through the Emergency Relief program.  A $31 million contract issued by the State of Louisiana will restore two-way, single span access to New Orleans by October 30 and access to both spans within 120 days.  The State is contemplating a replacement bridge that would be constructed to current design standards and criteria, and we will work with them to support those efforts.  I should note that reimbursement under the Emergency Relief program is for the repair and restoration of highway facilities to pre-disaster conditions--Emergency Relief program reimbursement is not for new construction to increase capacity, correct non-disaster related deficiencies, or otherwise improve highway facilities.

In Mississippi, I saw encouraging signs of progress as road crews worked to reopen closed portions of US 90.  A similar release of $5 million in immediate emergency relief funds was made available to the Mississippi Department of Transportation (MDOT) to reimburse the state for repairs to US 90, I-10 and other federally funded roads and bridges. In supporting the local economy, I am pleased to report that three Mississippi firms were selected to handle some of the emergency reconstruction efforts of US 90.  We will continue to work with Governor Barbour and MDOT as they develop their long term vision of the US 90 corridor while ensuring that this temporary fix is completed as soon as possible. 

Contracting incentives have been employed by both Mississippi and Louisiana to provide construction companies and their crews a strong impetus to get the job done as expeditiously as possible.  We strongly support these “incentivized” contracts and our Federal Highway Administration is out in the field working closely with the states to exercise all options and tools available during this rebuilding effort.  For example, Mississippi awarded a $5.2 million contract to repair one of the highest priority roads in the region – the I-10 bridge at Pascagoula – and included not only an incentive if work is completed in less than 31 days, but also a corresponding penalty for finishing late.  I am pleased to report this bridge reopened on October 1 – more than a week ahead of the contract completion date.       

The Administration recognizes that a significant amount of works remains to be done to repair and restore the highway infrastructure damaged by Hurricane Katrina.  I-10, US 90 and other important local roads are the economic lifeline of the region and play a central role in the economy of the Gulf region.  The Department is bringing all its resources to bear to ensure that this region can get moving again.  

Ports and Waterways

The impact on the Gulf region’s port facilities as a result of Katrina has been significant but somewhat varied.  The two largest facilities are the Port of New Orleans, a major import and export point for bulk commodities like steel and coffee, and the Port of South Louisiana, the largest agricultural export facility in the United States.  The good news is that the Port of New Orleans has re-opened for business, and is currently operating at 30% of its normal capacity due to limited power, labor availability and some continuing navigational restrictions on the Lower Mississippi River.  The Port started handling commercial cargo on September 13 and expects to reach full capacity within six months.  Through the continued presence of the Department’s RRF ships and other on-the-ground support, we will help the Port of New Orleans restore its cargo handling capacity as quickly as possible. 

At the Port of South Louisiana, power has been restored to most of the large grain terminals, which are all operable, and through the good work of the U.S. Coast Guard, Army Corps of Engineers and NOAA, the Lower Mississippi River appears ready to handle the surge of agricultural exports expected to begin within the next two weeks.  The timely reopening of these terminals was absolutely critical to our nation’s economy, and is a good example of how federal agencies have coordinated their efforts and worked closely with the private sector to restore key commercial entities that are putting citizens of the region back to work.

Other Gulf ports, while much smaller, do serve important markets.  Prior to Katrina, the Gulfport facility in Mississippi served as an important location for growing Central and South American trade.  Port Fourchon on the southern coast of Louisiana is a major storage and staging facility for oil imports and work on off-shore facilities.  Katrina shut both of these ports down.  With the assistance of generators, however, Port Fourchon is operating on a limited basis.  Gulfport’s physical damage was much more severe and will require close to total reconstruction, but the Department has offered its assistance – working along with other Federal partners – to help the port authority and state and local governments recreate a thriving port facility along the Mississippi coast.    

The Department’s Ready Reserve Force has proven to be an invaluable asset to the Gulf coast’s recovery efforts. The Maritime Administration manages the RRF program, whose primary function is to provide support for military operations. These vessels are typically used to support our military in times of crisis, and they have performed admirably in each phase of Operation Iraqi Freedom.  This, however, is the first time that a Secretary of Transportation has activated RRF vessels in support of a civilian mission.  As a result, we are working with FEMA and the Department of Defense to determine whether the mission of the Department’s RRF fleet should be explicitly changed to ensure the availability of these vessels in future disasters.  

Transit  

In the aftermath of Hurricane Katrina, significant numbers of evacuees need transportation services.  Furthermore, transit agencies serving the region experienced significant damage to their fleets and facilities.  The New Orleans Regional Transit Authority (NORTA), for example, provided over 50 million transit trips per year prior to Hurricane Katrina’s arrival, and in the subsequent flooding had bus and rail vehicles destroyed.  Transit providers in the Gulfport-Biloxi area experienced similar effects.  Small transit agencies and non-profit providers serving the elderly and people with disabilities have seen demand for their services increase dramatically in the aftermath of Katrina.  Rural areas across the Gulf region have experienced an influx of evacuees, and small transit agencies and non-profit providers do not maintain excess operating capacity to meet these surge requirements. 

The Department has also provided support to the Gulf region’s urban transit agencies, especially those in New Orleans, Baton Rouge, and Gulfport-Biloxi, to restore public transportation services.  On September 16, the Department announced that it will allow transit agencies affected by the hurricane to make use of federal funds to buy supplies, repair equipment, or begin reconstruction without having to provide matching funds.  The local match, typically 20 percent, has been deferred for many communities in the disaster area or those that have been significantly impacted by the influx of evacuees. 

This has allowed federal dollars already designated for these areas to flow more quickly, and also permitted new grants to be awarded before local funds can be identified.  The Mississippi Department of Transportation became the first agency to benefit from this action as DOT gave 22 transit bus operators access to a total of $6.1 million in FY 2005 transit formula funds to buy new vehicles, pay salaries or provide other necessities that will facilitate the restoration of service.

The Department has also worked closely with the two largest transit agencies affected by Katrina –in New Orleans and Baton Rouge – to secure $47 million in FEMA Public Assistance Funds for emergency transit services.  These funds will give evacuees in Baton Rouge access to vital social services, jobs, and medical care, and help returning residents of New Orleans reclaim their city.  The Department will continue to work with FEMA to help provide emergency transportation services and restore local infrastructure.

Pipelines

As I mentioned earlier, the Department worked around the clock in the days after Katrina to ensure that the southeast did not experience a major fuel shortage that would have exacerbated the already devastating economic effects of this storm.   While everyone saw a spike in gasoline prices following the hurricane, the situation could have been much worse had the federal government not marshaled its resources so expeditiously.  Within four days of Katrina making landfall and with the Department’s engagement, the Colonial and Plantation pipelines were operating at 50 percent capacity.  About three days later, they were at 100 percent. Similarly, the Capline and the LOOP were operating at close to full capacity within a week after Katrina.

More recently, the Department has worked with Chevron to facilitate the use of its Pascagoula refinery to directly inject refined product into the major pipelines serving the southeast United States.  Tankers are now discharging their product into the pipeline system at the refinery.  The Department also facilitated product movement through other port facilities along the Gulf and mid-Atlantic.  Overall, 95 percent of the nation’s refining capacity was restored within ten days after Katrina hit, and we are once again seeing 100% flow of gasoline, diesel and jet fuel throughout the country. 

Rail

New Orleans is an important gateway for east-west freight rail traffic, and the railroads have made remarkable progress in clearing debris and repairing lines to restore limited service to the city.  In fact, all major railroads except CSX now have operational lines into New Orleans.  While some rail yards inside the New Orleans city area are still under water, interstate traffic is now moving through the city between Florida and states west of the Mississippi River.  About twenty short line railroads operate in the Katrina affected area, and a number of short lines had their track damaged, sustained water damage to rolling stock, or had debris strewn across their right-of-ways.

The CSX line between Pascagoula, Mississippi and New Orleans, a distance of 100 miles, was badly damaged during the storm.  Limited freight rail service has been restored to Mobile and CSX has reached Pascagoula, but the portion of the line between Pascagoula and New Orleans remains closed.  Two bridges and two miles of track sustained major damage between Pascagoula and Biloxi, and three major bridges and 27 miles of track were severely damaged between Bay St. Louis and Gentility Yard in New Orleans. CSX has indicated that it hopes to complete its repairs within six months, but is looking for any and all opportunities to accelerate that schedule.

Moving forward, the Department’s Federal Railroad Administration and the freight railroads will continue exchanging information on freight cars damaged by submersion to assure that they are properly inspected and repaired. Railroads are moving hazardous materials to secured areas and FRA is closely monitoring this process. 

Stewardship of Federal Resources

The third area I would like to discuss is the priority the Department has given the stewardship of the federal funds it will oversee in addressing the Hurricane Katrina response and recovery efforts in the Gulf region. I am mindful of the responsibility we have as stewards of these critical resources.   The American taxpayers deserve to know that each and every dollar dedicated to this tremendous effort is fully justified and properly accounted for every step of the way. 

With that in mind I took several actions in the aftermath of Katrina.  First, on Thursday, September 8th, I directed a Financial Oversight Working Group be created.  My Chief Financial Officer was to chair it and it was to include our senior financial experts from each of the Operating Administrations, a representative from the General Counsel’s office, and –importantly – the Inspector General.  I charged the group with ensuring that Hurricane Katrina spending is thoroughly documented and accounted for properly.  This group, consisting of Chief Financial Officers, Budget Officers, Financial Management Directors, attorneys and procurement specialists are meeting regularly to share information and provide updates on resource needs.  Additionally, I have asked our Inspector General to commit extraordinary resources both to assisting field responses throughout the Gulf States region and audits of expenditures.  I am pleased to see that the IG’s office is announcing a series of coordinated audits in coordination with my office.

It is ironic that Hurricane Katrina required the postponement of a September 12^th meeting with the Assistant U.S. Attorney Paul McNulty and my senior Department Administrators and me.  The purpose of the meeting was to follow up on the Department of Transportation’s close cooperation with Mr. McNulty’s Procurement Fraud Working Group and a set of directives I had issued to my Department in June.  

Outside of DOT, we are working closely with the Office of Management and Budget (OMB) and with FEMA to ensure that our data tracking systems are consistent with those of our other Federal partners.  We have provided OMB with a detailed Hurricane Financial Stewardship Plan that explains for each major DOT program area the existing and additional internal controls that are being used to safeguard Federal funds.  We have also developed a detailed Procurement Control Plan for Hurricane Katrina oversight that is serving as a model for other Federal agencies.  We are including both of these plans as attachments to this written statement.

Conclusion

Let me conclude by saying that I am very proud of the work that the Department of Transportation has done to respond to Hurricane Katrina and assist citizens of the Gulf region begin their recovery.  Under very challenging circumstances the dedicated public servants of our Department have responded and in many cases went beyond their normal scope of duties.  There is no question that much is left to be done and we will continue to improve our emergency response capabilities, but I believe that we have made significant progress thus far and are on our way to ensuring that the Gulf region has a transportation system that will meet its long-term needs.

ATTACHMENT 1

ATTACHMENT 2

STATEMENT OF

THE HONORABLE NORMAN Y. MINETA
SECRETARY OF TRANSPORTATION

BEFORE THE

COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE

JULY 5, 2005

Mr. Chairman, thank you for inviting me to this hearing.  It is a pleasure to join you here in Alaska.  Administrator Blakey, Regional Administrator Poe and I all appreciate this opportunity to discuss with you important issues related to aviation in Alaska.  The U.S. Department of Transportation is well aware of the absolutely critical role that aviation plays in the lives of all Alaskans.  In addition to its important place in Alaskan society, aviation faces unique conditions here that set it apart from the rest of the United States in many respects.  So we are here today to address a number of the aviation issues that matter most to your constituents.  In that regard, Administrator Blakey will testify about the significant work of the Federal Aviation Administration (FAA) in promoting and enhancing safety.  But first, I will speak about the aviation programs within my own office that have a direct, daily impact on aviation and air service in the State of Alaska.

As an initial matter, the Office of International Aviation has worked for many years to liberalize air service markets throughout the world – and we have had considerable success.  Liberalized markets allow for expanded flows of goods and people that benefit our economy and those of our partners.  Recently, we have signed Open Skies agreements with India and Indonesia and obtained much greater access to China.  Our liberalization efforts provide the foundation for the kind of growth in cargo services that have benefited Ted Stevens International Airport, which is a natural transfer hub for routes between the lower 48 states, the booming Asian economies, and Europe.

In connection with the Department’s actions generally to open opportunities for air cargo activities, in 2004, new federal legislation was passed that substantially augments the liberal air cargo transfer rights that existed at Alaskan airports prior to this legislation due to the Department’s earlier actions.  As a result of this legislation, foreign carriers may now transfer and carry international origin or destination cargo between Alaska and other points in the United States that was previously prohibited by federal law

As a result of the above actions by the Department and the Congress, as well as the infrastructure improvements made by the airports, the level of air cargo activity at Anchorage has increased substantially in recent years.  The number of air cargo landings has increased from less than 14,000 in 1988 to more than 42,000 in 2004, a more than three-fold increase.  As these numbers show, when carriers are given liberal opportunities to serve an airport and the airport takes steps to make its facilities attractive, this can lead to substantial increases in the level of operations at that airport.  We will continue to work actively to open international air service markets to the benefit of businesses, communities and consumers in Alaska and everyone else in the United States.

As you know, with respect to programs and activities that are focused within the state, the Department administers the Essential Air Service (EAS) program and sets air transportation rates for Intra-Alaska Bypass Mail.  With regard to both of these responsibilities, I can assure you that the Department is committed to ensuring that air service in Alaska is frequent, safe, and affordable, for passengers and freight shippers, as well as for the Postal Service. 

It is clear that air service in Alaska, as well as the rest of the country, has changed dramatically over time.  In the days before airline deregulation, there was a sign outside a Wien Air Alaska station advising prospective passengers that if they did not arrive within one hour of the scheduled flight, Wien would bump the passenger in favor of delivering an extra 200 pounds of mail or freight from its backlog.  The competitive pressure of deregulation was designed to help address such issues of poor service for passengers, freight, and mail. 

In administering the EAS program, the Department ensures that communities receive a safety-net level of service when they are too small or too remote to receive market-driven service.  Likewise, with the Department setting mail rates in Alaska, the Department ensures that carriers are fairly compensated for transporting the mail, and also that mail, freight, and passenger service work in tandem like the “separate legs of a stool.”

The critical importance of mail and air service to Alaska’s regional hubs and villages will continue for the foreseeable future.  The Department seeks to ensure that there is an integrated transportation system that can provide benefit to all.  This challenge -- and Mr. Chairman, I do not use the word “challenge” lightly -- requires that the federal government wisely manage programs affecting intra-Alaska service. 

Essential Air Service Program (EAS)

The Department has administered the EAS program since deregulation of the airlines in 1978.  The laws governing EAS have not changed significantly since its inception more than 25 years ago notwithstanding the dramatic changes that have taken place in the airline industry.  Under that program, the Department provides a safety-net level of air service to the smallest and most isolated communities.  Given that air service is typically the only access to Alaskan villages, the Department has regarded EAS to these communities as a very high priority. 

Although we take our fiscal responsibilities quite seriously, the Department has not administered the EAS program in a way as to merely minimize our expenditures.  We give great weight to the needs and opinions of the affected communities, as mandated by Congress in section 41733(c)(1)(d) of the statute..  For example, we have just this year increased air service to Akutan from the prior subsidized level, because we recognized that with the growth in that market, traffic could not be reasonably accommodated with the previous, lower level of scheduled service.  Likewise, we selected Alaska Airlines to provide subsidized service at Adak, notwithstanding that there was another proposal for a million dollars less per year in subsidy, because we recognized the extreme isolation of Adak, and the need for jet aircraft to fly the 1,200 miles to Anchorage. 

However, the story is different in the lower 48 states, and I would like your support in working with the Congress in making some much-needed structural changes to the program.  While many communities in the lower 48 are indeed isolated, many others are not.  Many communities are within 40-50 miles of an airport with plenty of jet service but, because it might be categorized as a small hub, those communities are entitled to subsidized air service.  And that can be the case even though many, if not most, air travelers in the community drive to the nearby airport because they prefer its broader array of prices and services.

Under current law, a community’s eligibility for inclusion in the EAS program has been based only on whether it was listed on a carrier's certificate on the date the program was enacted--October 24, 1978.  Once subsidized service was established, there was little incentive for active community involvement to help ensure that the service being subsidized would ultimately be successful.  I can tell you anecdotally that many EAS communities in the lower 48 do not even display their subsidized EAS flights on their homepages, but do show the availability of air service, especially low-fare service, at nearby hubs.  As a result, EAS-subsidized flights are frequently not well patronized and our funds are not being used as efficiently or effectively as possible.

As you know, in 2003 the Administration began proposing significant reforms for the EAS program.  Under the Administration’s proposal, communities are asked to become partners in the financing of their air services.  In exchange, they are given a much bigger role in determining the nature of that service.  As a result, currently eligible communities would remain eligible, but would have an array of new transportation options available to them for access to the national air transportation system.  In addition to the traditional EAS of two or three round trips a day to a hub, the communities would have the alternatives of charter flights, air taxi service, or ground transportation links.  Regionalized air service might also be possible, where several communities could be served through one airport, but with larger aircraft or more frequent flights. 

Under the Department’s proposal, community participation would be determined by the degree of its isolation from the national transportation system.  The most remote communities (those greater than 210 highway miles from the nearest large or medium hub airport) would be required to provide only 10 percent of the total EAS subsidy costs.  Communities that are within a close drive of major airports would not qualify for subsidized air service, but would receive subsidies constituting 50 percent of the total costs for providing surface transportation links to a nearby airport with better service.  Specifically, communities within:  (a) 100 driving miles of a large or medium hub airport, (b) 75 miles of a small hub, or (c) 50 miles of a non-hub with jet service would not qualify for subsidized air service.  All other EAS communities would have to cover 25 percent of the subsidy costs attributable to the provision of air service.

The proposed small-hub and non-hub criteria are important.  Under current law, communities located within 70 miles of a largeormedium hub are not eligible for subsidized air service, on the principle that passengers find driving to such nearby service too attractive an alternative for the subsidized service to compete against.  Our proposal extends that same principle in a measured way to small hubs and non-hubs offering jet service, applying tighter proximity standards in line with the smaller size of the alternate service.  

We believe that this approach would allow the Department to provide the most isolated communities with air service that is tailored to their individual needs.  Importantly, it provides communities in the program greater participation, control, and flexibility over how to meet their air service needs, and a far greater incentive to promote the success of those services.  In this time of fiscal constraint, Congress would be recognizing the need to responsibly trim the costs of the program, while simultaneously protecting the needs of those communities most deserving of support.

I am well aware that the proposed requirement of a local contribution has not been well received by many.  But this is one of the few federal programs that does not have any local contribution.  In the Department’s Small Community Air Service Development Program, we have found that many communities are willing and able to make contributions to improve their local air services.  As with that program, the local contributions in the reformed EAS program would not have to be made by local governments – for example, local businesses or the state government could provide the needed financial support.  Nonetheless, I understand the concerns you have expressed about this in the past.  In that respect, I stand willing to work with you and the Committee on ways we can all make the EAS program better, because it currently is not structured in a way that makes sense for the current state of air transportation in this country.

Rural Service Improvement Act of 2002 (RSIA)

Due to your efforts, Mr. Chairman, Congress passed the Rural Service Improvement Act of 2002, which significantly revamped the mail system within the state.  The two main goals of RSIA were to increase the amount of flying with larger aircraft under Part 121 safety standards and to reduce the Postal Service’s expenditures.  While the industry is still adjusting to the new law, the early returns are that both of your main objectives are being met. 

As background, the Postal Service is responsible for paying for the delivery of mail within Alaska, as well as ensuring that mail is equitably tendered to qualifying carriers, while the Department is charged with setting the rates that the Postal Service pays the airlines.  Under the bypass system, goods bound for the communities, including critical food and medicine moving as mail, bypass the physical facilities of the Postal Service.  Instead, the bypass shipper is directed to deliver the mail shipment directly to a particular airline, where a Postal Service official weighs, tracks, and records the shipment before its embarks. 

RSIA recognized that two central problems with the mail system had developed since its inauguration.  First, a class of carriers had developed that focused on mail to the exclusion of passengers or freight.  RSIA compared air service in Alaska to a three-legged stool.  It recognized that if there was focus by any party on only one leg of the stool, such as mail, the overall stool would be weakened.  For illustration, if there is only enough traffic at a village to support four round trips a week, that village is clearly better off receiving passenger and mail combination service each of those four days, rather than mail-only service on two days and passenger-only service on those other two days.  RSIA encouraged just such a result by establishing two separate pools for passenger and freight carriers for each village.  Passenger carriers transporting more than 20 percent of total passengers in a village were to share 70 percent of the mail, and freight carriers transporting more than 25 percent of the freight in a village were to receive 20 percent of the total mail to that village.  The remaining ten percent of the mail was reserved, for a five-year transition period, for the carriers that did not qualify for either of those two pools.  RSIA contemplated those mail-only carriers would either convert to passenger/freight service or go out of business.  Before RSIA, three carriers relied more heavily on mail than any of the other bush carriers – Bellair, Village Aviation, and Servant Air.  Mail constituted more than 95 percent of each of those carriers’ total traffic, and each carrier has since ceased operations, though Servant is now operating under new ownership and management.  The mail from those three carriers is now available to support combination passenger and freight service by the surviving carriers.  (For a comparison of carrier traffic from calendar year 2000, before RSIA, to that traffic in 2004, see Appendix A.)

Second, RSIA recognized that the longstanding simple mail rate structure of separate bush and mainline classes of mail ignored the increasing development of modern turboprop equipment, and the potential benefits they presented to passengers from their greater speed and safety and to the Postal Service from their lower costs.  To fully realize those advances, RSIA divided the single bush mail rate into three separate classes.  Putting the goals of larger, safer aircraft in conjunction with reduced Postal Service expenditures produced a win-win result.  With respect to saving the Postal Service money, service with larger bush aircraft is more cost efficient in moving larger volumes of mail in larger markets. 

Previously, the Department had set a single bush mail rate for all carriers operating equipment with a payload of less than 7,500 pounds (about 30 seats).  RSIA directed the Department to carve out three separate rates: for 19-seat or larger aircraft operating under the more stringent FAA Part 121 standards; for smaller aircraft operating under Part 135; and a separate rate for seaplane aircraft, recognizing the higher cost of operating to villages accessible only by those aircraft.  The Department has done as RSIA dictated: last year we issued 4 orders establishing these new rates.  In rough terms, the new Part 121 rate developed by the Department is one-half of the former unitary rate, the Part 135 rate is the same as the former unitary rate, and the Seaplane rate is double that earlier single rate.  Because larger Part 121 service is operationally limited to the biggest airports and economically to the largest villages with the most mail, and Seaplane operations to the smallest, the Postal Service is clearly saving significant funds from this restructuring of bush mail rates.  

RSIA also tried to ensure that passengers at larger villages be served with larger 19-seat aircraft operating under more stringent FAA Part 121 operating standards.  With the goals of saving the Postal Service money and encouraging Part 121 service, the Department established another class rate based on the costs of more expensive 19-seat Part 121 aircraft, such as ERA Aviation’s Twin Otters, which have short takeoff and landing capabilities lacking in other 19-seat equipment.  Only Twin Otters and smaller Part 135 aircraft are capable of landing at very short runway airports.  Without the Department creating a mail rate intermediate between the high cost of Part 135 service, and the low cost of regular Part 121 service, those short runway communities served by ERA’s Twin Otters would have lost that service in lieu of less commodious Part 135 aircraft, and the Postal Service would have had to pay more for it as well. 

I should also mention that the Department has recently granted the Postal Service an exemption to pay more than the Part 121 rate, but still less than the Part 135 rate, on a market-by-market basis, in order to ensure that carriers would continue to operate with Part 121 service to many communities rather than remove seats from aircraft to fall within the Part 135 rate.  Although the exemption is currently on appeal, and accordingly I am limited in what I can say about it, I do believe that this decision is consistent with RSIA’s aims and helps ensure that unintended consequences of a three-rate structure do not redound to the detriment of Alaskan consumers or the Post Office.

In closing, Mr. Chairman, let me reaffirm the Department’s commitment to small community, and especially Alaska, air service.  We look forward to working with you and the members of this committee as we continue to work toward these objectives.  Thank you again.  This concludes my prepared statement.  I will now ask that Administrator Blakey discuss a few safety issues.  At the end of her prepared remarks, I will be happy to answer any of your questions.

Appendix A

Page 1 of 2

STATEMENT OF

THE HONORABLE NORMAN Y. MINETA
SECRETARY OF TRANSPORTATION

BEFORE THE

COMMITTEE ON APPROPRIATIONS
SUBCOMMITTEE ON TRANSPORTATION, TREASURY,
HOUSING AND URBAN DEVELOPMENT, THE JUDICIARY,DISTRICT OF COLUMBIA, AND INDEPENDENT AGENCIES
UNITED STATES HOUSE OF REPRESENTATIVES

March 18, 2005

Mr. Chairman, Members of the Subcommittee, thank you for the opportunity to appear before you today to discuss the Administration’s fiscal year 2006 budget request for the Department of Transportation.     The President’s request, which totals $59.5 billion in budgetary resources, includes major investments in our Nation’s highways and roadways, airports and airways, railroads, transit systems, and other transportation programs that move the American economy.  This budget makes a strong commitment to the infrastructure, technology, and research that will ensure that our Nation's transportation network remains a potent and capable partner as our economy continues to grow.    

            I am proud of the considerable progress that the Department of Transportation has made over the past four years in advancing the safety, reliability, and efficiency of our transportation system.  Through the Bush Administration's unprecedented focus on safety, for example, we have achieved the lowest vehicle fatality rate ever recorded and the highest safety belt usage rate ever recorded.  During the same time, we have helped bring about the safest three-year period in aviation history.  

            Enactment of a six-year reauthorization of surface transportation programs is a top priority.  The Administration's reauthorization proposal, the Safe, Accountable, Flexible, and Efficient Transportation Equity Act, or SAFETEA, provides a blueprint for investment that relieves gridlock and ensures future mobility and safety on the Nation's roads and transit systems.  The 2006 budget includes a record investment of $284 billion in Federal resources over the six-year life of the bill - almost $35 percent billion more than funding under TEA-21, the previous surface transportation authorization.  Continued delays in enactment of the reauthorization impedefrustrate proper planning by states and communities and deprive them of the ability to use new flexibilities that the Bush Administration is proposing to encourage private investment and achieve more efficient use of the Nation's highways.

The budget request also reflects the imperative for reform of America's intercity passenger rail system, which Amtrak has been operating at a loss for 34 years.  Amtrak has received more than $29 billion in taxpayer subsidies, including more than $1 billion in each of the last two years, despite the requirement of the 1997 Amtrak Reform Act that after 2002,"Amtrak shall operate without Federal operating grant funds appropriated for its benefit."  In 2003, the Administration sent to the Congress the President’s Passenger Rail Investment Reform Act.  This proposal would align passenger rail programs with other transportation modes, under which States work in partnership with the Federal government in owning, operating, and maintaining transportation facilities and services. 

Deteriorating infrastructure and declining service further the case that, without Congressional action on the Administration's reform proposals, continued taxpayer subsidies cannot be justified.  Consequently, no funding is included in the 2006 budget for Amtrak.  Rather, $360 million is budgeted to allow the Surface Transportation Board to support existing commuter rail service along the Northeast Corridor and elsewhere should Amtrak cease commuter rail operations in the absence of Federal subsidies.  The President’s budget is a call to action:  The time for reform is now.  If the Administration’s management and financial reforms are enacted, the Administration is prepared to commit additional resources for Amtrak – but if, and only if,reforms are underway.  We want to work with the Congress and with Amtrak to make meaningful reforms that will enable intercity passenger rail to achieve success and Amtrak to achieve financial independence.   I am optimistic that these reforms can be accomplished this year.

            The President's FY 2006 budget includes nearly $14 billion for the Federal Aviation Administration to continue our investments both in building new infrastructure and in deploying technology that enhances the capacity and safety of the Nation's aviation system.      The President’s request for the FAA includes funding for the hiring of 1,249 air traffic controllers in FY 2006.  Specially, the operations budget includes nearly $25 million to fund 595 new air traffic controllers in addition to replacing the 654 that are expected to leave the system through attrition. $24.9 million for 595 additional air traffic controllers [Just to be clear, does the $24.9 million only cover the 595 or is it $24.9 million for ALL controller hiring – replacing attrition AS WELL AS additional hires?].  This net increase above the current replacement levels, is a first step in the FAA’s plan announced last December to begin training the staff needed to replace future retirees and meet growing demand for air service. 

Under the President’s plan, the airport improvement program would receive $3 billion.  These resources are sufficient to fund construction of all planned new runways, which are the single-most effective way to add capacity.  This funding level is robust by historical standards.  As recently as 2000, the Airport Grant program was funded at $1.9 billion.  In addition to funds in the airport improvement program, airports can meet infrastructure needs through revenues generated from passenger facility charges.  Many airports do not take full advantage of this legal authority to charge user fees which FAA estimates could produce an additional $350 million annually for airport development needs.      The President’s plan also triples funding to $18 million for the Joint Planning and Development Office.  The work of this office supports the development of plans for transforming the future of the National air space to address growing capacity needs.   

            Our maritime network also finds itself in greater demand, both at home and abroad.  The President proposes to increase funding for the Maritime Security program by $58 million to $156 million.  This increase will fully fund an expanded fleet of 60 ships to provide sealift capacity to carry equipment and supplies to those charged with defending our freedom and expanding liberty.

            We are grateful to the Congress for enacting the Department’s reorganization proposal, and in accordance with that legislation, we have created two new administrations in place of the Research and Special Programs Administration (RSPA).  The new Research and Innovative Technology Administration (RITA) promises to bring new energy and focus to the Department's research efforts and expedite implementation of cross-cutting, innovative transportation technologies.  The new Pipeline and Hazardous Materials Safety Administration (PHMSA), has responsibility for the safe and secure transport of hazardous materials throughout the transportation network.  The 2006 budget provides $130.8 million for PHMSA's first full year of operations and $39.1 million for RITA.  In addition, RITA is expected to receive over $300 million for transportation research conducted on behalf of other agencies on a reimbursable basis.

            Finally, I want to highlight the FY 2006 President’s Budget request for the new Department of Transportation headquarters building project.  We are pleased that the Congress has provided $110 million in funding over the last two years.  Today, construction is well under way,at the Southeast Federal Center and we are requesting your support of $100 million to continue the next phase of this project.  This phase is critical to the success of the project.  DOT’s tenant-responsibilities include initiating a multi-year furniture procurement, acquiring security equipment and the infrastructure to support it, and providing for secure telecommunications within the infrastructure of the new building.  All of this must occur during FY 2006 to coincide with construction and the builder’s delivery schedule.  Any delay in funding could cost the government millions of dollars.  UUnder the terms of our lease, the Department has only until June 2007 to vacate our current building without incurring substantial penalties.  For that reason, fiscal year 2006 funding is critical to ensure a timely and smooth transition for the Department’s more than XX,XXX5,600 headquarters employees.  The result of this will be a building that provides modern office technology, enhanced communications, a quality work environment and updated security systems.

The FY 2006 budget request recognizes that the transportation sector is the workhorse that drives the American economy, providing mobility and accessibility for passengers and freight, supplying millions of jobs, and creating growth-generating revenue.  The President’s budget reflects a fiscally responsible plan for the Department of Transportation to help America better meet its 21st Century transportation needs.  The Federal transportation budget must adequately fund our workforce and our programs despite the continuing funding challenges of national and homeland securityneeds. President Bush and I are committed to working with the Congress, and with our public- and private-sector partners to ensure that our transportation network can keep America moving confidently into the future.

Thank you again for the opportunity to testify today.      I look forward to working closely with all of you, and with the entire Congress, as you consider the FY 2006 President’s budget request and I look forward to responding to any questions you may have. 

* * * * *

STATEMENT OF

THE HONORABLE NORMAN Y. MINETA
SECRETARY OF TRANSPORTATION

BEFORE THE

COMMITTEE ON APPROPRIATIONS
SUBCOMMITTEE ON TRANSPORTATION, TREASURY
THE JUDICIARY, HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES
UNITED STATES SENATE

March 15, 2005

Mr. Chairman, Members of the Subcommittee, thank you for the opportunity to appear before you today to discuss the Administration’s fiscal year 2006 budget request for the Department of Transportation.  The President’s request, which totals $59.5 billion in budgetary resources, includes major investments in our Nation’s highways and roadways, airports and airways, railroads, transit systems, and other transportation programs that move the American economy.  This budget makes a strong commitment to the infrastructure, technology, and research that will ensure that our Nation's transportation network remains a potent and capable partner as our economy continues to grow.    

                I am proud of the considerable progress that the Department of Transportation has made over the past four years in advancing the safety, reliability, and efficiency of our transportation system.  Through the Bush Administration's unprecedented focus on safety, for example, we have achieved the lowest vehicle fatality rate ever recorded and the highest safety belt usage rate ever recorded.  During the same time, we have helped bring about the safest three-year period in aviation history.  

                Enactment of a six-year reauthorization of surface transportation programs is a top priority.  The Administration's reauthorization proposal, the Safe, Accountable, Flexible, and Efficient Transportation Equity Act, or SAFETEA, provides a blueprint for investment that relieves gridlock and ensures future mobility and safety on the Nation's roads and transit systems.  The 2006 budget includes a record investment of $284 billion in Federal resources over the six-year life of the bill - almost 35 percent more than funding under TEA-21, the previous surface transportation authorization.  Continued delays in enactment of the reauthorization impede proper planning by states and communities and deprive them of the ability to use new flexibilities that the Bush Administration is proposing to encourage private investment and achieve more efficient use of the Nation's highways.

The budget request also reflects the imperative for reform of America's intercity passenger rail system, which Amtrak has been operating at a loss for 33 years.  Amtrak has received more than $29 billion in taxpayer subsidies, including more than $1 billion in each of the last two years, despite the requirement of the 1997 Amtrak Reform Act that after 2002, "Amtrak shall operate without Federal operating grant funds appropriated for its benefit."  In 2003, the Administration sent to the Congress the President’s Passenger Rail Investment Reform Act.  This proposal would align passenger rail programs with other transportation modes, under which States work in partnership with the Federal government in owning, operating, and maintaining transportation facilities and services. 

Deteriorating infrastructure and declining service further the case that, without congressional action on the Administration's reform proposals, continued taxpayer subsidies cannot be justified.  Consequently, no funding is included in the 2006 budget for Amtrak.  Rather, $360 million is budgeted to allow the Surface Transportation Board to support existing commuter rail service along the Northeast Corridor and elsewhere should Amtrak cease commuter rail operations in the absence of federal subsidies.  The President’s budget is a call to action:  The time for reform is now.  If the Administration’s management and financial reforms are enacted, the Administration is prepared to commit additional resources for Amtrak – but if, and only if, reforms are underway.  We want to work with the Congress and with Amtrak to make meaningful reforms that will enable intercity passenger rail to achieve success and Amtrak to achieve financial independence.   I am optimistic that these reforms can be accomplished this year.

                The President's FY 2006 budget includes nearly $14 billion for the Federal Aviation Administration to continue our investments both in building new infrastructure and in deploying technology that enhances the capacity and safety of the Nation's aviation system.  The President’s request for the FAA includes funding for the hiring of 1,249 air traffic controllers in FY 2006.  Specially, the operations budget includes nearly $25 million to fund 595 new air traffic controllers in addition to replacing the 659 that are expected to leave the system through attrition. This net increase above the current replacement levels is a first step in the FAA’s plan announced last December to begin training the staff needed to replace future retirees and meet growing demand for air service. 

Under the President’s plan, the airport improvement program would receive $3 billion.  These resources are sufficient to fund construction of all planned new runways, which are the single-most effective way to add capacity.  This funding level is robust by historical standards.  As recently as 2000, the Airport Grant program was funded at $1.9 billion.  In addition to funds in the airport improvement program, airports can meet infrastructure needs through revenues generated from passenger facility charges.  Many airports do not take full advantage of this legal authority to charge user fees which FAA estimates could produce an additional $350 million annually for airport development needs.  The President’s plan also triples funding to $18 million for the Joint Planning and Development Office.  The work of this office supports the development of plans for transforming the future of the National air space to address growing capacity needs.  

                Our maritime network also finds itself in greater demand, both at home and abroad.  The President proposes to increase funding for the Maritime Security program by $58 million to $156 million.  This increase will fully fund an expanded fleet of 60 ships to provide sealift capacity to carry equipment and supplies to those charged with defending our freedom and expanding liberty.

                We are grateful to the Congress for enacting the Department’s reorganization proposal, and in accordance with that legislation, we have created two new administrations in place of the Research and Special Programs Administration (RSPA).  The new Research and Innovative Technology Administration (RITA) promises to bring new energy and focus to the Department's research efforts and expedite implementation of cross-cutting, innovative transportation technologies.  The new Pipeline and Hazardous Materials Safety Administration (PHMSA), has responsibility for the safe and secure transport of hazardous materials throughout the transportation network.  The 2006 budget provides $130.8 million for PHMSA's first full year of operations and $39.1 million for RITA.  In addition, RITA is expected to receive over $300 million for transportation research conducted on behalf of other agencies on a reimbursable basis.

                Finally, I want to highlight the FY 2006 President’s Budget request for the new Department of Transportation headquarters building project.  We are pleased that the Congress has provided $110 million in funding over the last two years.  Today, construction is well under way and we are requesting your support of $100 million to continue the next phase of this project.  Under the terms of our lease, the Department has only until June 2007 to vacate our current building without incurring substantial penalties.  For that reason, fiscal year 2006 funding is critical to ensure a timely and smooth transition for the Department’s more than 5,600 headquarters employees.

The FY 2006 budget request recognizes that the transportation sector is the workhorse that drives the American economy, providing mobility and accessibility for passengers and freight, supplying millions of jobs, and creating growth-generating revenue.  The President’s budget reflects a fiscally responsible plan for the Department of Transportation to help America better meet its 21st Century transportation needs.  The Federal transportation budget must adequately fund our workforce and our programs despite the continuing funding challenges of national and homeland security needs. President Bush and I are committed to working with the Congress, and with our public- and private-sector partners to ensure that our transportation network can keep America moving confidently into the future.

Thank you again for the opportunity to testify today.  I look forward to working closely with all of you, and with the entire Congress, as you consider the FY 2006 President’s budget request and I look forward to responding to any questions you may have. 

* * * * *

Statement of

Christopher J. McMahon, RADM, USMS
Departmental Office of Intelligence, Security, and Emergency Response
United States Department of Transportation

Before the

Subcommittee on National Security, Emerging Threats and International Relations
Committee on Government Reform
United States House of Representatives

March 2, 2005

Good afternoon, Mr. Chairman and Members of the Subcommittee, I am Rear Admiral Christopher J. McMahon, United States Maritime Service,[1] United States Department of Transportation (DOT).  Recently, I returned from serving in Baghdad, where I was appointed by Secretary Mineta as Transportation Counselor and Senior Iraqi Reconstruction Management Office (IRMO) the Transportation Consultant at the American Embassy.  In these positions, I was the principal representative responsible for overseeing transportation infrastructure reconstruction.  Currently, I serve in DOT’s Office of Intelligence, Security, and Emergency Response.  In this capacity, I help oversee the Department of Transportation’s contacts with the intelligence community including the Department of Homeland Security (DHS), and other Federal agencies involved with homeland security.  I am honored to be here to discuss with you how the Department of Transportation is balancing the need for the secrecy necessary to ensure homeland security with the public’s right to know how its Government is carrying out its duties.

At DOT, we adhere to the requirements of the Freedom of Information Act (FOIA) in making determinations about what information sought by the public may be disseminated, and what may be lawfully withheld.  FOIA is a law with which we are all familiar – and yet we rely heavily on a large body of common law and commentary to interpret and explain it.  We use FOIA not only to determine our responses to public information requests, but also to advise our employees on how they should treat the information that they handle.  In the context of protecting information vital to homeland security, we are learning that our principle tool is the authority given to us – and given to DHS – to designate information as “Sensitive Security Information (SSI).”    At DOT, we use the designation only to refer to information that Congress has mandated that we protect.  We also have an administrative safeguarding designation for sensitive information that is not necessarily related to security that we label as, “For Official Use Only (FOUO),” which I will discuss later in my testimony.

For many years, DOT’s Federal Aviation Administration (FAA) had statutory authority to prevent disclosure of information related to aviation security, termed “Sensitive Security Information (SSI).”  In a leading case on SSI, the court set forth three aspects of it:

• SSI may be withheld from public disclosure under FOIA.
• The information may be withheld from the public rulemaking record in an informal rulemaking.
• The information may be withheld from discovery in civil litigation.

In response to the attacks upon the United States on September 11, 2001, Congress enacted the Aviation and Transportation Security Act (ATSA) that created within DOT the new Transportation Security Administration (TSA).  Under section 114(d) of ATSA, TSA, originally part of DOT, has “responsibility for security in all modes of transportation, including . . . security responsibilities over other modes of transportation that are exercised by DOT.”    (This authority transferred with TSA when TSA became part of the Department of Homeland Security.)  ATSA also transferred from FAA to TSA the authority to designate information as SSI and expanded the scope of that authority to all modes of transportation.  When Congress created DHS in the Homeland Security Act of 2002, it not only transferred TSA from DOT to DHS, but also transferred TSA’s SSI authority, and gave similar authority to DOT.

Multiple sections of the U.S. Code require that the agency administering SSI authority promulgate regulations specifying the types of information qualifying for SSI treatment.  FAA’s regulations appeared at 14 CFR Part 191; TSA’s appear at 49 CFR Part 1520, and DOT’s at 49 CFR Part 15, both entitled “Protection of Sensitive Security Information.”

I wish to emphasize that SSI is not a national security classification; hence, individuals need not have formal national security clearances to access SSI.  What they must have is a clear “need to know,” and they must provide assurances that they understand and will comply with regulations related to the possession and permissible use of SSI.  In this way, we can share with other Federal agencies, State, local, and tribal governments, academia, industry, and other persons with a “need to know” information vital to homeland security without fear that we must release that same information to unvetted requestors. 

When Secretary Mineta confronted the question of how SSI authority was to be handled within DOT, he took five affirmative steps:

1. He delegated the authority to designate information as SSI to the heads of all of DOT’s constituent agencies as to their own modes of transportation, but subject to guidance and direction from the Director of Intelligence, Security, and Emergency Response and the Department’s General Counsel (who is the Departmental officer in charge of FOIA). Before the Secretary did this, there was uncertainty about who in DOT could make an SSI determination, with the possibility that virtually anyone would be able to invoke SSI in the Secretary's name. The delegation provides clarity, structure, and accountability to the process, along with a mechanism to ensure consistency and actual security need.

2. The Secretary specifically directed that the Department not use this authority to evade its responsibilities under FOIA, saying that,

             [t]he authority to determine that information is SSI brings with it the responsibility not    only to identify and protect qualifying information, but also not to reduce more than is          truly needed the public’s right to know how this part of its Government is carrying out its   duties.  Finding the right balance between protecting what needs to be protected and             revealing what should be revealed is important.  I expect all of us to give it the attention it           deserves.

3. He further directed that we report to him regularly and review any case in which his authority is used to make a decision either to designate information as SSI or not to do so.

4. He is asking DOT’s Inspector General to review DOT’s implementation of its SSI authority after one year to ensure that the SSI designation process is not being used to improperly exempt information from public disclosure.

5. Finally, he directed that we coordinate with DHS on how our two departments will use their parallel SSI authorities.

My staff is learning day in and day out how truly challenging that charge from the Secretary – to find the right balance between protecting what needs to be protected and revealing what should be revealed -- can be.  However, as we use this authority to protect the American people, I have emphasized to the heads of our operating administrations that they keep in mind that our actions must always conform to the law and, with the Secretary’s admonition, that we not use this authority to restrict unreasonably the public’s right to know how we are carrying out our duties.

As I mentioned, I want to discuss an administrative designation for sensitive information that we use at DOT—For Official Use Only (FOUO).  FOUO identifies for our employees information that is sensitive and, therefore, before it is given to anyone outside the Federal Government, they are required to consult with FOIA staff.  If the information does not qualify for withholding under FOIA, it must be released.[2]

As I stated earlier, this is not an easy area to understand and apply, particularly to the land modes of transportation, for which security concerns are relatively untested. 

One final issue deserves attention. Questions have been raised over whether the Department of Transportation used its authority to classify information in the interest of national security to withhold from Congress and the public portions of a staff monograph of the 9.11 Commission. The answer is no, we did not. Let me explain.

In the Summer of 2004, the Department of Justice asked DOT and other agencies to review a draft of a 9.11 Commission staff monograph solely from the perspective of national security classification. The Federal Aviation Administration (FAA) made recommendations on classification of information relating to civil aviation security. (Since primary responsibility for civil aviation security had, by that time, been transferred to DHS, FAA recommended to Justice that DHS be consulted on FAA’s recommendations.) FAA submitted its recommendations to Justice in mid-September 2004, within the period set by Justice. FAA had no further involvement with the issue of classifying any portion of a 9.11 Commission staff monograph.

In preparation for today’s hearing, DOT’s Office of Security reviewed how many original classification decisions DOT has made since 2001. This was not hard to do, since the authority to make original classification decisions is very tightly controlled at DOT; only seven people in all of DOT have original classification authority: The Secretary; Deputy Secretary; Assistant Secretary for Administration and the Assistant Secretary’s Director of Security; the Departmental Director of Intelligence, Security, and Emergency Response; and the FAA Administrator and the Maritime Administrator. None of these can make an original classification higher than SECRET.

This was also not hard to do since a central accounting is kept at DOT of any decision originally to classify information. According to that accounting, in FY2001, FAA made one SECRET classification and the United States Coast Guard, now part of DHS, made one. In FY2002, FAA made six SECRET classifications and the Coast Guard made one. In FY 2003 DOT made no original security classifications. In FY2004, we also made no original security classifications.

Mr. Chairman, this concludes my prepared remarks.  I would be pleased to respond to your questions.

STATEMENT BY

ROBERT MCGUIRE
ASSOCIATE ADMINISTRATOR FOR HAZARDOUS MATERIALS SAFETY
PIPELINE AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION
UNITED STATES DEPARTMENT OF TRANSPORTATION

BEFORE THE

109^th CONGRESS
COMMITTEE ON HOMELAND SECURITY
SUBCOMMITTEE ON ECONOMIC SECURITY, INFRASTRUCTURE PROTECTION, AND CYBERSECURITY
UNITED STATES HOUSE OF REPRESENTATIVES

November 1, 2005

Mr. Chairman and distinguished members of the Subcommittee: thank you for the opportunity to appear before you today to discuss the Department of Transportation’s ongoing efforts to improve the secure transportation of hazardous materials. 

Introduction

We understand the Committee is currently considering options for modifying background check requirements for Commercial Driver’s Licenses (CDL).  In particular, the Committee is considering narrowing the list of materials required for background checks.  Like our colleagues at the Department of Homeland Security, we believe an opportunity exists to improve the safety and security of hazardous materials movements, by modifying the current requirements.  We believe any such modification should be predicated upon a risk-based analysis rather than a blanket adoption of an environmental and safety list currently used.  We believe modifications to the list, which would require modification of the USA PATRIOT Act, should be developed through the collective efforts of all stakeholders, including DHS, DOT, other interested Federal agencies, States, and the industry. 

DOT has considerable expertise in assessing both the safety and security risks associated with the transportation of hazardous materials and we look forward to working very closely with DHS on this issue.

DOT’s Hazardous Materials Program

The Pipeline and Hazardous Materials Safety Administration (PHMSA), along with other modal administrations at DOT, administers a comprehensive, nationwide program designed to protect our Nation from risks to life, health, property, and the environment inherent in the commercial transportation of hazardous materials.

Hazardous materials are essential to our citizens, and to our economy.  These materials fuel automobiles; heat and cool our homes and offices; and are used in farming, medical applications, manufacturing, mining, and other industrial processes.   More than 3 billion tons of regulated hazardous materials – including explosive, poisonous, corrosive, flammable, and radioactive materials – are transported each year. 

We oversee the safe and secure shipment of over 1.2 million daily shipments of hazardous materials moving by plane, train, truck, or vessel in quantities ranging from several ounces to thousands of gallons.  These shipments frequently move through densely populated or sensitive areas where an incident could result in loss of life, serious injury, or significant environmental damage.  Our communities, particularly the public and workers engaged in hazardous materials commerce, count on the safe and secure transport of these shipments.

The Department’s hazardous materials transportation safety program has historically focused on reducing risks related to the unintentional release of hazardous materials.  Since 9/11, we have moved aggressively, recognizing and addressing safety and security issues associated with the commercial transportation of hazardous materials. 

Hazardous materials safety and security are mutually interdependent activities.  This principle was recognized by Congress in the Homeland Security Act of 2002.  Section 1711 of this act amended the Federal hazardous materials transportation law to authorize the Secretary of Transportation to “prescribe regulations for the safe transportation, including security, of hazardous material in intrastate, interstate, and foreign commerce.”

DOT shares responsibility for hazardous materials transportation security with DHS.  The two departments consult on security-related hazardous materials transportation requirements and matters to assure these requirements are consistent with the Nation’s overall security policy goals and objectives.  We constantly strive to assure our two departments coordinate our efforts so that the regulated industry is not confronted with inconsistent regulations. 

Hazmat CDL and Security Background Checks 

Pursuant to the Commercial Motor Vehicle Safety Act of 1986, commercial motor vehicle drivers transporting placarded hazardous materials under the DOT Hazardous Materials Regulations must have a hazardous materials endorsement.  This endorsement to a basic CDL reflects that drivers transporting hazardous materials are trained and possess the necessary knowledge to safely handle the specific materials they transport.

In the aftermath of the 9/11 attacks, Congress enacted the USA PATRIOT Act.     The PATRIOT Act prohibits a State from issuing a license to operate a motor vehicle transporting hazardous materials in commerce unless the Secretary of Transportation has first determined the individual does not pose a security risk warranting denial of the license.  The responsibility for this determination was subsequently transferred to the Secretary of Homeland Security.   

In 2004, DOT and DHS issued regulations implementing the hazardous materials licensing provisions of the PATRIOT Act.  DHS’s regulation established procedures for determining whether an individual poses a security threat warranting denial of a hazardous materials endorsement for a CDL and for appealing and issuing waivers to such determinations.  DOT issued a companion regulation amending Part 384 of the Federal Motor Carrier Safety Regulations (FMCSRs) to prohibit States from issuing, renewing, transferring, or upgrading a CDL with a hazardous materials endorsement unless the Attorney General has first conducted a background records check of the applicant, and DHS has determined the applicant does not pose a security threat warranting denial of the hazardous materials endorsement.  DOT’s companion regulation also extends the list of hazardous materials for which an endorsement is required to include “select agents” as designated by the Centers for Disease Control and Prevention.  Thus, DHS and DOT regulations work in concert to achieve an interrelated regulatory safety and security framework.

Proposals to Modify Background Check Requirements

As noted earlier, DOT has vast experience in regulating the safe and secure movement of hazardous materials.  Through PHMSA and other modal administrations, our regulations establish a prevention-oriented risk management system focused on identifying and reducing both the probability and quantity of a hazardous material release.  We collect and analyze data on hazardous materials – incidents, regulatory actions, and enforcement activity – to determine the safety and security risks associated with the transportation of hazardous materials and the best ways to mitigate those risks. 

We believe modifications to the list of materials triggering a driver background check must be based upon a qualitative, scientific, risk-based analysis.  Please allow me to briefly discuss some of the issues that should be considered as part of this analysis. 

First, we must analyze the relative risk for diversion and misuse of the hazardous materials being considered for exclusion from the background requirements.  Second, we cannot limit our review to individual materials, but rather must consider all possible safety and security risks which come from instances where various combinations of relatively low risk hazardous materials could result in substantial death, injury, or damage to the environment.  Third, we must consider factors affecting vulnerability to shipments in transport, and finally, we must also carefully analyze the degree to which driver background checks would identify and address those potential vulnerabilities. 

Not to be overlooked is the role fulfilled by our State partners.  It is necessary that any possible modifications to the current regime be done in full partnership with them.  Establishing a new endorsement on the CDL would require costly revisions to the information technology systems in all 50 States and the District of Columbia.  The States have just completed major revisions to implement the current PATRIOT Act background check regulations and other changes to the CDL requirements mandated by the Motor Carrier Improvement Act of 1999.  States are also preparing for implementation of the Real ID Act, requiring yet further substantial changes to their systems.  We believe working closely with our partners, including The American Association of Motor Vehicle Administrators (AAMVA), is critical as we move forward.

Ongoing DOT Hazardous Materials Security Initiatives

In 2003, DOT published a final rule – known as HM-232 – requiring shippers and carriers of certain highly hazardous materials to develop and implement a security plan.  The security plan must include an assessment of possible transportation security risks as well as the appropriate measures being taken to address the assessed risks.  At a minimum, the security plan must address security risks associated with personnel security, unauthorized access, and en route security.  The final rule also requires security awareness training for all hazardous materials employees and in-depth security training for employees of persons required to develop and implement security plans when transporting placarded hazardous material and other select toxins. 

The Department has aggressively pursued enforcement of the security regulations.  To date, the Federal Motor Carrier Safety Administration (FMCSA), the Federal Railroad Administration (FRA), and The Pipeline and Hazardous Materials Safety Administration (PHMSA) have conducted thousands of security reviews and have initiated over 500 enforcement actions. 

We continue to seek ways to enhance the security of hazardous materials shipments.  For example, in consultation with DHS, we are moving forward to examine ways to enhance the security of rail shipments of Toxic Inhalation (TIH) materials.  We are also considering other general requirements for enhancing the security of rail shipments of hazardous materials.  DOT is actively considering whether, and to what extent, communications and tracking systems should be required for motor carriers transporting certain hazardous materials.

Conclusion

The Department of Transportation takes very seriously its responsibility to ensure the safe and secure movement of hazardous materials across our transportation system.  Although we believe the regulatory framework currently in place is a good start, we recognize that there is always room for improvement.  Together with DHS, we seek to achieve the highest level of safety and security possible, while at the same time, minimizing the burden and associated cost to commerce. 

We recognize that there is more work to be done, and look forward to working with the Members of this Subcommittee, the Congress, and our stakeholders as we embark on a serious and open discussion with all interested parties.  We will achieve a workable framework that enhances the safe and secure transportation of hazardous materials. 

Mr. Chairman, I commend you and the members of this Subcommittee for your leadership.  I thank you for the opportunity to be here today and look forward to answering any questions the Subcommittee may have.

STATEMENT OF

DANIEL P. MATTHEWS
CHIEF INFORMATION OFFICER
U.S. DEPARTMENT OF TRANSPORTATION

before the

SUBCOMMITTEE ON THE FEDERAL WORKFORCE AND AGENCY ORGANIZATION
COMMITTEE ON GOVERNMENT REFORM
U.S. HOUSE OF REPRESENTATIVES

on

MITIGATING THE IMPACT OF HIGH GAS PRICES ON
FEDERAL EMPLOYEES AND OTHER WORKERS

NOVEMBER 16, 2005

Mr. Chairman and Members of the Subcommittee, I am pleased to be here today on behalf of the Department of Transportation (DOT) to discuss the issue of mitigating the impact of high gas prices on Federal employees. 

My emphasis will be on the long-term, and our long-standing practice of avoiding fuel consumption among our employees.

One way we encourage this is by offering all Federal employees a mass transit fringe benefit program, where the employee can receive up to $105 a month for taking mass transportation to and from work. This benefit can be used for Metro, buses, and van pools. Within DOT we also publicize shuttle services and other alternative means of mass transit.

My focus today is another way in which DOT discourages gasoline use -- by encouraging the practice of telecommuting by our employees.

According to Government data, some 44 million people go to work by turning on their computers, or by picking up the phone.

And the need to encourage telecommuting has never been greater. Supplies of gasoline are projected to be tight for some time. As the Subcommittee well knows, Hurricanes Katrina and Rita sent the price of gasoline, already high, to well over three dollars in many communities.

Mitigating the impact of disasters is another reason for telecommuting. When disaster strikes, there is less chance of vital government services being disrupted if the employees are geographically dispersed. Telecommuting can thus help maintain continuity of operations for critical governmental functions.

The benefits of telecommuting are many, including reduced gasoline consumption and a related downward pressure on gasoline prices. Employees working from home save on gas, on tolls, and on automobile maintenance. Telecommuting also supports DOT’s number-one priority – safety – because reducing congestion makes traffic management easier and safer.

The 2001 DOT Appropriations Act requires its agencies to establish policies by which employees can telecommute “to the greatest extent possible without diminished employee performance.” In establishing the DOT Telecommuting Policy, Secretary Mineta noted that telecommuting offers “a work flexibility and management tool that can assist all of us in better managing our work, personal, and community lives.”  The goal is to reap the benefits of telecommuting without diminishing workplace efficiency or the work ethic of employees.

In 2004, the Office of Personnel Management conducted a Telework Survey of DOT agencies. The survey tallied the number of personnel in each agency who are eligible to telecommute, and how many actually do telecommute. Of the Department’s 57,000 employees, 46 percent are eligible for telecommuting. The agencies with the highest rates of participation are the Federal Transit Administration (FTA) and the Federal Railroad Administration (FRA). Fully 59 percent of FTA employees are eligible, and of these 55 percent do participate. 57 percent of FRA employees are eligible, and 54 percent of these telecommute. 

Given its high participation rates, let me expand on the FRA program. The FRA field force of over 500 employees, geographically located in eight regions, oversees the safety of a huge U.S. network of railroad lines. The nature of Railroad Safety Inspector work demands spending little time in a traditional office setting. This made it logical to generate savings through the telecommuting effort by closing some field offices and reducing space in existing facilities.

FRA’s telecommuting policy covers all FRA employees.  Participation is based on job content rather than job title, and each office developed its own implementation plan. Telecommuting has also been used:

• By employees with medical problems
• For review of legal documents
• For accounting functions.

DOT actively encourages telecommuting. Various DOT agencies provide users with the necessary equipment. The Federal Motor Carriers Safety Administration (FMCSA) supplies 802.11 wireless networking for its border control offices in Texas, California, and Arizona. The Office of the Chief Information Officer (OCIO) offers PC cards for Internet connectivity on DOT’s virtual private network. The National Highway Traffic Safety Administration (NHTSA), the FAA, the Pipeline and Hazardous Materials Safety Administration (PHMSA), and the FRA all supply wireless cards on laptops for connecting to the Internet.

Much more work needs to be done to encourage telecommuting. Two particular barriers that have hindered its greater use are expanding the technology base, and management adoption of the idea.

Regarding the technology base, we need to address the ability of residential network services to provide sufficiently robust connectivity for home-based teleworkers. This matter relates to the “digital divide” separating computer “haves” from “have-nots”. While 67 percent of urban and suburban residents have Internet access, much of that is in dial-up access, which is quite slow for business purposes. Broadband access is a necessary component to expand telework.

Security is another issue. Any telecommuting program must have strong requirements to protect Government systems and data as networks are “opened up” to accommodate the home-based workplace.

As for management adoption of telecommuting, we need to demonstrate not only that productivity does not suffer when employees work from home, but that work efficiency and employee morale benefit from such a transformation. 

In summary, DOT has an effective telecommuting program in place. It has increased the adoption of telecommuting while enabling eligible employees to perform their work effectively. Moreover, we expect adoption of telecommuting by employees and managers to grow further as broadband capabilities are extended. With this additional connectivity, more employees will spend what used to be their drive time as telework time.

That concludes my remarks.  I would be pleased to respond to any questions the Subcommittee may have.

STATEMENT OF

DANIEL P. MATTHEWS
CHIEF INFORMATION OFFICER
U.S. DEPARTMENT OF TRANSPORTATION

BEFORE THE

COMMITTEE ON GOVERNMENT REFORM
U.S. HOUSE OF REPRESENTATIVES

April 21, 2005

Mr. Chairman and members of the Committee, thank you for the opportunity to appear today to discuss the Office of Management and Budget’s (OMB) “watch list.” 

As the Department’s Chief Information Officer (CIO), I oversee the U.S. Department of Transportation’s (DOT) information technology (IT) investment guidance, cyber security and operational responsibility for the Departmental network and communications infrastructure.  I also serve as the vice-chair of the Federal CIO Council.

As I begin my remarks let me stipulate that the OMB “watch list” is a management tool that DOT uses to gauge the effectiveness of our IT investment program.  DOT recognizes that to comply with the Clinger-Cohen Act and other statutory requirements, external and internal oversight efforts necessitate creating “watch lists” for IT investments.  OMB’s “watch list” happens to be well known throughout the Government, as it uses defined requirements in multiple categories to identify troubled programs and agency-wide challenges.  OMB’s use of a published scoring approach creates a level playing field for Federal Agency initiatives.  Any individual program in any Departmental Agency may have deficiencies in any one or more measurement categories.  Over the last several years, DOT has significantly reduced the number of our programs on OMB’s “watch list.” 

To address how OMB’s “watch list” has affected DOT’s operations, I noted that we use it as one of several critical management and oversight tools.  DOT also uses Federal Information Security Management Act (FISMA) metrics, Inspector General and Government Accountability Office audit reports, and quarterly earned value management data reports to identify “at risk” programs. 

What differentiates the OMB “watch list” and these other tools is that while unique concerns about an individual program may be raised in an audit report, the “watch list” through its use of defined requirements in specific categories provides a “same measure” view from program to program.  In short this “same measure” view allows us to see where we perform well and where we need to concentrate our efforts in order to strengthen our stewardship of the IT investments made in DOT.

DOT’s internal IT management and oversight controls, including the OMB “watch list”, are used to designate under-performing investments as “at risk”.  Either the Departmental Investment Review Board or the operating administration review board must review any “at risk” program.  The reviewing board can direct corrective actions within a required timeframe, and can make a decision to modify, re-baseline, or possibly cancel the program. 

Because the criteria for OMB’s “watch list” are applied across the Department’s investments, they help DOT focus on those critical program management issues that warrant agency-wide attention. For example, two years ago a significant number of DOT’s business cases found their way onto the “watch list” due to security weaknesses.  DOT could have relied exclusively on FISMA-related metrics to increase management attention on our IT investments.  Instead we used an accumulated effect approach, letting the business case scores, FISMA measures, and the weight of the President’s Management Agenda scorecard focus our attention on weaknesses, direct additional resources and guidance to resolve those issues, and ultimately to substantially alleviate the security weaknesses.

The “watch list” provides more than Department level visibility.  Programs in and of themselves benefit from the measures inherent in the tool.  For example the Department’s largest agency and the one with the most IT expenditures,  the FAA, has programs that have been on the “watch list” and have therefore made changes.  In particular, on April 18^th, the Air Traffic Controllers Association (ATCA) kicked off its annual technical conference with a special session on the OMB Exhibit 300, the basis on which capital programs are assessed and by which they make their way either onto or off of the “watch list”. 

At the ATCA meeting, a senior program manager indicated that being on the “watch list” forced him to be clearer about who the program’s customers were and how the program benefited those customers.  That manager had to improve program justifications and results.  Through the scoring process weaknesses identified in earned value management and life cycle costing required improved budgeting and planning.  The manager responded by employing the “useful segments” approach to program planning.  In effect, by being on the “watch list,” the program manager was forced to conduct a total program review – not just improve the business case to get off the “watch list.”  This is an example of the “watch list” having a positive impact on an individual program manager.  If we stack enough of these individual program success stories together we can drive better results from our IT investments across the Government.  

As long as I am mentioning stacking these success stories together I offer the following suggestion, which I intend to pursue with OMB and the Federal CIO Council. 

The Federal CIO Council can use agency-by-agency and subject area information to identify those agencies excelling, for example, in risk management and use those approaches as best practices.  The Federal CIO Council would then focus efforts to help individual agencies struggling in this area implement these best practices.  Programs on the “watch list” should be expected, encouraged and directed to reach out for best practices, adapt and implement them, and be therefore more inclined to operate effectively.

In conclusion, DOT believes OMB’s “watch list” is one important component of an overall management and oversight process which is valuable within the individual agencies and for OMB.  From its cross agency perspective OMB sees the good and the bad.  Let’s keep the “watch list” and capture from that process our best practices.  It is my observation and experience at DOT, that OMB has been a willing and useful partner in helping more effectively manage our IT resources.

Again, I thank you for the opportunity to comment on this important topic and I look forward to answering any questions that you may have.