Statement of

The Honorable Jeffrey N. Shane
Under Secretary of Transportation for Policy
U.S. Department of Transportation

Before the

Subcommittee on Highways, Transit, and Pipelines
Committee on Transportation and Infrastructure
U.S. House of Representatives

June 15, 2006

Chairman Petri, Ranking Member DeFazio, and Members of the Subcommittee, it is my distinct pleasure today to represent Secretary Norman Y. Mineta to discuss with you the Department’s efforts in the areas of freight and passenger intermodalism.

The Vision of ISTEA

In enacting the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA), Congress identified the need for a more coherent approach to address the needs of the Nation’s diverse surface transportation systems.  Congress further recognized that planning and investment in transportation infrastructure were tied to separate funding sources and processes, each having their own constituencies.  ISTEA’s call for a new, systemic perspective in transportation policy and program development provided States and localities with more flexibility to achieve broader surface transportation objectives.

ISTEA also created the Office of Intermodalism within the Office of the Secretary at the U.S. Department of Transportation (DOT), with the responsibility to “... coordinate Federal policy on intermodal transportation and initiate policies to promote efficient intermodal transportation in the United States.”  In the years following enactment of ISTEA, the Office of Intermodalism played an important role in advising the Secretary of Transportation and in coordinating intermodal policies throughout the Department.

The Office of Intermodalism’s activities immediately following ISTEA were primarily focused on policy formulation, program implementation, and project development.  The Department realized that the structure of the Office would be most effective if it reflected the full spectrum of intermodal elements and the organization of DOT itself, and hired staff with expertise in passenger and freight operations from each of the operating administrations (FHWA, FTA, FRA, MARAD, and the FAA). 

Intermodalism and TEA-21

The National Highway System Designation Act of 1995 included a provision that addressed a core mission of the Office of Intermodalism and ultimately reshaped it.

The provision eliminated the requirement that State DOTs develop an intermodal management system called for in ISTEA and instead made the system optional.  The Intermodal Transportation Management System was intended to be a process that improved transportation for people and goods by integrating development of transportation facilities and systems.  While some of the more populated States with larger urbanized areas were able to develop this management system approach and still employ it to this day, making the intermodal management system optional made transportation planning less consistent and implied that a systemic, intermodal vision for transportation might not be that important after all.

Similarly, the mission of the Office of Intermodalism was directly affected by a provision of TEA-21 that directed the Secretary to conduct a review of the National Highway System (NHS) freight connectors that serve seaports, airports, and major intermodal terminals, and report to Congress by June 9, 2000.  The study found that these intermodal connectors -- the critical “last mile” that links freight facilities to the larger transportation system -- had significantly lower physical and operational characteristics, and appeared to be underfunded when compared with all NHS mileage.

The Office of Intermodalism recognized that NHS freight connectors were "orphans" in the traditional State and MPO planning processes.  The lack of supporters to champion connector and other freight oriented initiatives, combined with the lack of understanding in the role these connectors play in the economic health of local communities and regions, made successful intermodal freight development a challenging task.

Setbacks with ISTEA’s management systems and a lukewarm reception to the NHS Connectors report caused the Office of Intermodalism to shift its attention to research studies and operational tests that could document the benefits of intermodal operations and planning activities to transportation and the economy.  State DOTs, MPOs, and the Department itself had become more multi-modal in their thinking, but more needed to be done in research and education to make the case for intermodal applications of data and technology.  The move away from the Office’s original operational focus was also made necessary by budget cutbacks that reduced the number of staff available to provide adequate coverage of the activities taking place in each of the ten Federal regions.

The Office of Intermodalism Immediately Following 9/11

The Office of Intermodalism was working on several data collection working groups and pilot tests of technologies with security applications on September 11, 2001.  Securing our Nation’s domestic transportation system and the international cargo that flows across our borders became the highest priority of the Department and the Office of Intermodalism.  Working collaboratively with DOT’s operating administrations and other Federal agencies, research was undertaken to identify how available and emerging technologies could better safeguard our citizens, infrastructure, and the economy from terrorist incidents. 

Section 215 of Section 215 of the Maritime Transportation Security Act of 2002 (Pub. L. 107-295) created a new position, Under Secretary of Transportation for Policy, within the Department -- the position I now hold -- and eliminated the Associate Deputy Secretary position.  This statute was carried out by integrating the Office of Intermodalism into the Office of Transportation Policy (OST/P), with the Assistant Secretary for Transportation Policy providing direct oversight of this office.  Under OST/P, the Office of Intermodalism assumed leadership role over broad cross-modal initiatives, particularly in the areas of freight and goods movement, security, and inter-Departmental coordination.

While in OST-P, the Office of Intermodalism’s primary mission was to play a coordinating role, combining OST resources with those in the operating administrations, foreign/state/local governments, other Federal agencies, universities, and when appropriate, the private sector.  In almost every case, this included the development and implementation of intermodal solutions to highly complex problems.

For example, in the policy area of proposed Federal rulemaking activities, the Office of Intermodalism worked to ensure that major freight and passenger transportation service providers could achieve significant cost savings through integration of intermodal operations that were not compromised by inconsistent or incompatible modal regulations. Following the publication of an Advance Notice of Proposed Rulemaking announcing the Department’s intent to consider upgraded inspection and maintenance procedures for intermodal container chassis, the Office of Intermodalism led a multi-modal DOT task force that met with over 400 industry representatives to identify challenges and a common strategy to address intermodal truck operations.  As the Federal Motor Carrier Safety Administration pursues a rulemaking on this issue, the Office of Intermodalism continues to provide input to the process along with OST/P, FHWA, FRA, and the Maritime Administration (MARAD).

In the operations area, the Office provided OST support for critical transportation projects both in the field and within DOT headquarters.  To relieve congestion through enhanced intermodal investments and operations in the Ports of Los Angeles/Long Beach, the Office proposed the creation of a field-based “Gateway Office and Ombudsman,” supported by a multi-agency “Intermodal Gateway Group” here in Washington.  Also, multi-modal Departmental task forces led by the Office of Intermodalism were formed to provide OST support for the nationally significant Alaska Way project in Seattle and intermodal improvements at the Port of Anchorage.

The Norman Y. Mineta Research and Special Programs Improvement Act

With passage of the Norman Y. Mineta Research and Special Programs Improvement Act (Pub. L. 108-426), the Office of Intermodalism was transferred to the newly created Research and Innovative Technology Administration (RITA).  The transfer took effect in February 2005.

The establishment of RITA is enabling the Department to coordinate and manage its research portfolio more effectively and expedite implementation of crosscutting innovative technologies.  The statute moved the Office of Intermodalism to RITA when it was established because the crosscutting perspective and research focus of the newest of our operating administrations was fundamentally consistent with the mission of RITA.  Unlike the other modally-focused operating administrations within the Department, RITA is uniquely intermodal in its perspective.  RITA acts in partnership with the operating administrations and OST in addressing transportation initiatives, and the Office of Intermodalism plays a key role in identifying and transportation research priorities.

It has been suggested that moving the Office of Intermodalism from the Office of the Secretary into RITA has somehow downplayed the importance of the Office, and of intermodalism, within the Department.  This is simply not the case.  While the concept of intermodalism has been “mainstreamed” among all of the operating units within the Department, reductions in discretionary RD&T funds have made a more targeted and coordinated RD&T program even more critical for advancing the intermodal transportation network.  In many cases, the Office of Intermodalism has been given the lead on RD&T program development and OST and the DOT operating administrations play subordinate roles.  Given some of the successes and challenges I mentioned, the Department felt it was critical to solidify the intermodal research function under RITA, so that it could produce the research, data, and analysis needed to underpin any subsequent freight policy initiatives.

For example, as part of the implementation of SAFETEA-LU, the Office of Intermodalism is leading the Department’s effort to develop a National Cooperative Freight Research Program (NCFRP).  The NCFRP is an applied, contract research program with the objective of developing information that will be used to improve the efficiency, reliability, safety, and security of the Nation’s freight transportation system. The NCFRP will carry out applied research and other technical activities in a variety of freight system-related areas, including policy, planning, operations, economics, administration, environment, safety, and security.  RITA and the Office of Intermodalism have executed a Memorandum of Agreement with the Transportation Research Board (TRB) of the National Academies to manage the NCFRP, and with input from our freight industry stakeholders, the results from this research program will help shape our freight-related transportation polices and investments for years to come.

In its current research and technology development efforts, the Office works with other Federal agencies that are developing programs with implications for transportation operations and/or information systems.  For example, while in OST/P, the Office of Intermodalism represented the Department on the Board of Directors for the International Trade Data System (ITDS) program being developed by the U.S. Customs and Border Protection Agency.  This responsibility transitioned with the Office when it moved from OST to RITA.  The Office continues to work with DOT’s operating administrations to ensure the ITDS program meets both transportation and trade needs of the Nation.

When fully implemented, ITDS will be the electronic system of record for all international cargo movements and this information will be shared among the 79 Federal entities with responsibilities for clearing or recording these movements.  The ITDS program will enable the Department to better monitor the performance and use of our Nation’s international gateways and domestic transportation network, and will be critical for assessing and responding to congestion, security breaches, and natural disasters.

The Office of Intermodalism is also working to identify solutions to the security challenges facing our transportation system, and serves as a principal advisor on intermodal transportation security research and development. Under RITA, the Office of Intermodalism is working closely with the White House Office of Science and Technology Policy, the Department of Homeland Security, and other agencies to develop and implement the National Critical Infrastructure Protection Research & Development Plan, as well as the R&D Chapter of the Transportation Sector Specific Plan and the National Strategy for Transportation Security. The Office of Intermodalism will continue to focus on coordinating research and development efforts in order to identify, develop and deploy technologies that address both safety and security concerns and enhance passenger and freight mobility.

Intermodalism Under the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU)

While the Office of Intermodalism is an important part of the Department’s intermodal progress, it is just one piece of an overall effort to shift our thinking and approach to the country’s surface transportation systems.  In the area of freight transportation, it is increasingly clear that shippers are indifferent to how a product is delivered through the supply chain so long as reliability and speed can be assured.  A broad deployment of information technologies in the trucking, rail and aviation sectors following deregulation has allowed the country’s intermodal freight system to become the envy of the world.  Several economists have cited the efficiency of this system in research conducted to explain the declining volatility of the U.S. economy.

Recognizing that growing public infrastructure failures represent a threat to this system, the Administration made intermodal freight transportation one of the centerpieces of our proposal to reauthorize the Transportation Equity Act for the 21^st Century (TEA-21).  Specifically, we focused on financial and planning obstacles to intermodal project development.  Among other things, we proposed to expand the eligibility of Federal credit programs to specifically target these projects.  We proposed an amendment to the Internal Revenue Code to allow rapidly proliferating inland rail-truck transfer facilities to benefit from the same tax exempt treatment that applies to similar facilities constructed at seaports and airports.  We proposed to target two percent of National Highway System program funds, one of the largest funding sources administered by DOT, toward the “last-mile” highways that connect the National Highway System to important freight hubs.  We proposed the creation of a freight transportation coordinator in every State to ensure that freight transportation needs are given adequate consideration in the transportation planning process.

On the passenger front, we proposed a deviation from a clear policy of discouraging the creation of new programs in only one area: intermodal passenger facilities.  We asked Congress to dedicate $85 million a year in funding for these facilities.  Equally important, we continue to press for increased State and local flexibility in funding decisions.  This flexibility has been critical to expanding intermodal passenger options. 

While not all of the Department’s legislative proposals were accepted, SAFETEA-LU did include programs that will provide substantial benefits to intermodal freight transportation.  For example, SAFETEA-LU made important changes to the Transportation Infrastructure Finance and Innovation Act (TIFIA) when it lowered the project threshold to $50 million and made more intermodal surface freight facilities eligible.  SAFETEA-LU also amended the Internal Revenue Code by creating $15 billion in tax-exempt private activity bond authority for qualified highway and surface freight transfer facilities.  These two additional tools encourage more innovative financing solutions to freight challenges.  As part of its work on the National Surface Transportation Policy and Revenue Study Commission, the Secretary, as Chair of the Commission, will call on the Department’s freight modeling and analysis capabilities in support of the Commission’s work.

The CREATE project in Chicago is another example of the Department’s efforts to advance intermodal passenger and rail projects under SAFETEA-LU.  CREATE is a proposed $1.5 billion public/private partnership, including the City of Chicago DOT, the State of Illinois DOT and the American Association of Railroads (AAR) representing six freight railroads and Chicago’s commuter railroad, Metra.  The program would create four streamlined freight rail corridors and a commuter rail corridor in the Chicago area.   CREATE received $100M in funding from the Projects of National and Regional Significance program in SAFETEA-LU.

To support the CREATE projects, the Department has established a multimodal team including the Office of the Secretary (OST), the Federal Highway Administration (FHWA), the Federal Transit Administration (FTA), and the Federal Railroad Administration (FRA) to work closely with the CREATE partners and serve on its major committees, including its stakeholder and management committees.  The Department has a designated point of contact in Washington, DC to coordinate and oversee all CREATE-related activities, and FHWA has established a position in its Illinois Division Office to work on a daily basis with the city, the State, and the railroads.

In addition to the important changes made by SAFETEA-LU, the Department has undertaken a significant initiative to work with other governmental agencies and the private sector to improve the performance of the national freight system that includes intermodal cargo movements.  These efforts have coalesced into a National Freight Policy Framework.  The Framework began with the proposition that the Federal Government is but one of many players involved in the U.S. freight transportation system.  Effective policy solutions will require coordinated and collaborative action by both public and private parties.  The Framework lays out objectives to achieve a vision, and then details strategies and tactics that the Department and its partners – both public and private sector – can pursue to achieve those objectives.  We have begun the process of soliciting such input from all parties, and DOT looks forward to working with its partners to continue development of the framework over the coming months and years.

Closing Statement

The Department is working aggressively to develop RITA’s technical and analytical capability to embark on intermodal research and to work with OST and the operating administrations to coordinate Departmentwide intermodal activities.  We are also working with the State DOTs, MPOs, and the private sector to advance the programs and projects called for in SAFETEA-LU..

Thank you for the opportunity to speak today on the topic of intermodalism, and I will be happy to answer any questions that you may have.

Statement of

The Honorable Jeffrey N. Shane
Under Secretary of Transportation for Policy
U.S. Department of Transportation

Before the

Subcommittee on Highways, Transit, and Pipelines
Committee on Transportation and Infrastructure
U.S. House of Representatives

May 10, 2006

Chairman Petri, ranking member DeFazio, and members of the Subcommittee, it is my distinct pleasure today to represent Secretary Norman Y. Mineta, and J. Richard Capka, the Acting Administrator of the Federal Highway Administration (FHWA), to discuss with you issues of highway capacity and freight mobility.

The drivers of freight movement

The past few decades have marked a period of tremendous economic growth for the United States.  Between 1990 and 2003, employment grew by 16 percent, U.S. GDP increased by 46 percent, U.S. foreign trade more than doubled, and the U.S. population grew by 16 percent and is fast approaching 300 million.  This period has also been a very productive one for the U.S. transportation sector.  The Dow Jones Transportation Average (DJTA), composed of 20 stocks that are chosen to represent the transportation industry, is one of the most widely recognized gauges of the strength of the transportation sector.  Between 1990 and 2003, the DJTA doubled; since 2003, it has doubled again.  Today, transportation is woven into the economic fabric of the nation as never before.  Open trade policies have lowered costs for U.S. consumers and promoted U.S. economic growth, but have also resulted in new strains on the transportation system.

That much economic power generates freight movement – a lot of freight movement.  U.S. economic growth is dependent on the efficient and reliable operation of our nation’s freight transportation system, and the logistics system employs well over 2 million Americans.  The volume of freight growth across our country has accelerated over the last 15 years.  Over that time period, freight volume has increased 18 percent and ton-miles increased 23 percent.  The value of commercial shipments increased over 45 percent from 1993 to 2002.  And while freight moves by multiple modes, the predominant mode for freight movement is by truck.  Trucks now carry 60 percent of volume and 70 percent of the value. 

The nation's highways handled over 1.5 trillion ton-miles of commodities in 2002; a substantial share involves long-distance trucking. By 2002, approximately 525,000 commercial trucks traveled 44 billion miles on trips greater than 200 miles and carried nearly 3 billion tons of goods worth over $4 trillion.      

The construction of the Interstate System significantly expanded the reach of efficient truck movement across a much broader and more diversified geographic range than ever before.  Simultaneously, containerization trends increased the velocity and efficiency of goods movement and removed significant transaction costs.

Source: U.S. Department of Transportation

This picture shows current container throughput at major seaport gateways, as well as projected volumes, given current growth rates.   

Deregulation of the trucking and railroad industries unleashed enormous efficiencies in the U.S. transportation sector.  Technological advancements improved information transfer increasing freight visibility.  These changes have dramatically reduced inventory carrying requirements and freed up funds for further productivity gains. Logistics (transportation and inventory) as a percentage of GDP dropped from 16 percent in 1980 to 10 percent in 2000.

SAFETEA-LU’s boost to responding to the challenges of freight mobility

Let me thank the Subcommittee and Committee on Transportation and Infrastructure for all of their work during the last surface reauthorization bill.  The Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) included a number of important freight provisions.  Although the Department will be testifying in the coming months on the implementation of SAFETEA-LU, I would like to highlight a few new and reauthorized programs affecting freight.

Five programs specifically have a freight emphasis or will provide substantial benefits to freight transportation.  Projects of National and Regional Significance, the National Corridor Infrastructure Improvement Program, the Coordinated Border Infrastructure Program, the Freight Intermodal Distribution Pilot Grant Program, and the Truck Parking Facilities Program allocate $4.6 billion over five years to address some of the challenges to freight movement I referred to earlier.

SAFETEA-LU also made important changes to the Transportation and Infrastructure Finance Improvement Act (TIFIA) when it lowered the project threshold to $50 million and made more intermodal surface freight facilities eligible.  SAFETEA-LU also amended the Internal Revenue Code by creating $15 billion in tax-exempt private activity bond authority for qualified highway and surface freight transfer facilities.  These two additional tools encourage more innovative financing solutions to freight challenges.

SAFETEA-LU also invests in research, training, and education in freight professional capacity building to strengthen decision making at State and local agencies.  The Act provides $3.5 million over four (4) years that will be used to support FHWA’s established Freight Professional Development (FPD) Program to support targeted training and technical assistance to States and localities, and we look forward to it moving forward expeditiously.  SAFETEA-LU also created the National Freight Cooperative Transportation Research Program, managed by the Research and Innovative Technology Administration (RITA), to study critical topics related to freight capacity and planning 

Finally, the Department is eager to begin its work on the National Surface Transportation Policy and Revenue Study Commission, which I am pleased to say will hold its first meeting later this month.  The Secretary, as Chair of the Commission, will call on the Department’s freight modeling and analysis capabilities in support of the Commission’s work.

National Freight Policy

In addition to the important changes made by SAFETEA-LU, the Department has undertaken a significant initiative to work with other governmental agencies and the private sector to improve the performance of the national freight system.  These efforts have coalesced into a National Freight Policy Framework.  The Framework began with the proposition that the Federal government is but one of many players involved in the U.S. freight transportation system.  Effective policy solutions will require coordinated and collaborative action by both public and private parties.  The Framework lays out objectives to achieve a vision, and then details strategies and tactics that the Department and its partners – both public and private sector – can pursue to achieve those objectives.  We have begun the process of soliciting such input from all parties, and DOT looks forward to working with its partners to continue development of the framework over the coming months and years. 

A new approach to freight solutions

With that as the backdrop, Secretary Mineta believes it is time to rethink assumptions and challenge conventional thought on how we build, finance, and manage the infrastructure in the United States.  Right now, shippers, manufacturers, and operators are grappling with the costs of congestion – on top of near record energy prices.  The objective of policymakers should be to reduce congestion, not simply slow the increase, through a broader implementation of market-based pricing mechanisms.

Today, in our 13 largest urban centers, drivers spend the equivalent of almost eight workdays each year stuck in traffic.  According to the Texas Transportation Institute, in 2003, congestion caused 3.7 billion hours of travel delay and resulted in 2.3 billion gallons of wasted fuel, for a total cost of $63 billion.  Commercial truck travel doubled over the past two decades.  On one-fifth of the Interstate Highway System, trucks account for more than 30 percent of all vehicles.  The Interstate System is a mixed use system and the congestion that affects our commutes also affects our ability to move freight through the transportation system; communities must work with limited capacity.     

Congestion is not an insurmountable problem, but solutions will require more than physical capacity.   We must do a much better job to improve productivity of existing highway assets.  Fortunately, opportunities have emerged recently to do precisely that. 

First, new technologies and operational improvements have enabled solutions to congestion that only a decade ago would have been impossible to implement.  One such example is PierPass, where pricing has been used to shift truck traffic from peak hours to off-peak hours at the Ports of Los Angeles/Long Beach.  A not-for-profit organization created by marine terminal operators, PierPass has significantly reduced congestion in and around the Ports, including on the previously clogged I-710.  Another example of the use of new technology is the employment of variable and dynamic pricing as tools for congestion management, where pricing fluctuates based on traffic volumes.  We have seen such technology employed in Southern California, specifically on SR-91 and I-15.  In addition to other successful demonstrations, there is little question at this point that market-based pricing mechanisms offer enormous promise to reduce congestion. 

Technology can also be harnessed to explore new ways of supporting infrastructure development and balancing costs and benefits for system users.  Oregon’s experiment to tax highway users based on total vehicle miles traveled instead of gallons of fuel consumed is one such example.  The experiment is funded, in part, by a grant from the Department’s Value Pricing Pilot Program.  Several hundred vehicles in Oregon have been equipped with GPS devices or odometer sensors.  When vehicles refuel at gas stations, summary data on vehicle usage is transmitted to the fuel pump via radio frequency, and the appropriate mileage tax is included in the overall purchase price of the gas.

In addition, the President’s FY 07 Budget proposes a new pilot program to evaluate innovative ways to better finance and manage the Nation's highway system. In this pilot, $100 million will be made available for up to five States to conduct a large scale (State-wide or in an urban/suburban area) field test using specific facility charges, charges based on system-wide use, or some combination.

Beyond innovative financing, operational improvements are critical to addressing congestion.  Approximately half of all congestion is caused by non-recurring incidents such as crashes and mechanical failures, weather, construction and special events.  FHWA’s Office of Operations plays a key role in helping to mitigate freight-related congestion.  FHWA is also working with new technologies, developing intelligent transportation systems (ITS) for both vehicles and infrastructure that help to relieve congestion, improve safety and enhance American productivity.  

Finally, the Department will continuously work to support financing models that respond to market signals and allow for more private investment in transportation infrastructure.  Where appropriate, we will work to facilitate projects that look beyond the traditional funding mechanism of government grants.  Innovative approaches come in many forms, whether public-private partnerships, credit programs such as TIFIA, or tax incentives such as the Private Activity Bonds authorized by SAFETEA-LU.   

SAFETEA LU also created new opportunities for States to use tolling to manage traffic and to finance the construction of more highway capacity.   The law authorized the Express Lanes Demonstration Program, the Interstate Construction Toll Pilot Program, the Interstate System Reconstruction and Rehabilitation Pilot Program, and the extension of the Value Pricing Pilot Program.  These programs are vital to funding additional capacity and rehabilitation of existing facilities.  The Department will continue to explore the use of direct user fee approaches to increase opportunities for private capital investments and improve overall system performance. 

A number of States have enacted “public-private partnership” laws, and a handful of States have comprehensive laws that permit a broad spectrum of private involvement in transportation projects.  Private sector participation can facilitate decisions, bring needed capital to the table and deliver projects faster when projects are being evaluated.  Private investment will also direct resources towards projects that generate the highest returns to both investors and the public.  Two States that should be commended for their expansive public-private partnership laws are Virginia and Texas.  Given these laws, it is not surprising that private involvement in these States has been robust and that considerable new capacity is either in the pipeline or up and running.  We encourage all States to look at these mechanisms closely.

As freight continues to increase, environmental considerations must play an increasingly critical part in the planning, design, construction, and expansion of freight-related infrastructure.  Acknowledging and including environmental mitigation actions early in the planning process could work to minimize resistance and conflict throughout the planning and construction phases.

Understanding the dynamics of freight movement – data and modeling

The volumes of freight movement and their effect on the transportation system and the nation’s economy make a compelling argument for our need to acquire reliable data and accurately model freight movement.  Policy makers, investors, communities, business executives, entrepreneurs, and academics need to understand current and future freight activity to plan for and match infrastructure capacity to demand.

The Department has been developing that analytical capacity for the last five years.  The Department’s principal resource for understanding freight movement is the Freight Analysis Framework (FAF), which was designed, developed, and is maintained by FHWA’s Office of Operations.  The FAF has two main components; an integrated database of commodity (freight) movement, and a geographic information system (GIS) network of highway and rail routes over which the commodities move. 

The Origin Destination (OD) database of freight movement is the foundation upon which the FAF is built.  The bulk of the data that are contained in the current database comes from the Commodity Flow Survey (CFS), which is absolutely vital to the functioning of the FAF.  The CFS provides tonnage and commodity type data on domestic shipments by mode of transport, and is conducted every five years as part of the Economic Census by the U.S. Census Bureau in partnership with the RITA’s Bureau of Transportation Statistics of the U.S. Department of Transportation. The CFS is then augmented by other commodity flow surveys to create an OD matrix of commodity flows and related freight transportation activity among States, regions, and major international gateways.  The data collected are at the national and regional level.

The OD matrix of commodity movement, which represents tonnages of commodities that move between origin and destination, is then converted to truck units and, through modeling, flowed over the GIS transportation network.  The modeling of truck movement over the network generates the graphic representation of the data you see below.

This graph shows the predicted annual average daily freight truck traffic on the Interstate system in 2020.

This graph shows the predicted areas of the Interstate system that will be congested (volume to capacity ratio >.75) in 2020.

FHWA continues to refine and improve its modeling efforts through initiatives such as a September 2006 Conference that they are sponsoring in concert with the Transportation Research Board (TRB).  The goal of this conference is to develop a research agenda to advance the practice of freight modeling. 

The FAF provides a powerful analytic engine to understand current freight movement and to predict future demand.  From each five-year base, freight movement is forecast in five-year increments; for the 2002 base, forecasts will go out to 2035.  The FAF enables “what if” scenarios to be conducted that can look at the effects of proposed capacity expansion, shifts in modal split, or, in the case of disasters, loss of capacity.  FAF links the freight movement demand with infrastructure capacity.  State and local transportation officials can augment the FAF data with local freight data to improve project planning at the local level, and FHWA is currently working with numerous State DOTs to advance this effort.

A new effort within FHWA’s Office of Operations complements current urban traffic performance measures by using trucks as probes to measure the performance of the Interstate System.  This effort is a public-private partnership between FHWA and the American Trucking Research Institute (ATRI).   It provides a way to monitor the velocity and reliability of truck movement on the Interstate System.  All identifying information is cleansed from the data stream so FHWA has no knowledge of which trucks are providing the data points.  The FAF was used to select five freight significant corridors (I-5, I-10, I-45, I-65 & I-70) for study.  Data from these five corridors was collected for the past year from approximately 250,000 trucks.  From this data, FHWA is developing speed and travel time reliability measures for those corridors.

This graph shows the buffer index (BI) for five corridors of the Interstate system in October, 2005.  The BI, a measure of reliability and variability, measures how much extra time one should allow to account for variations in the system.

In April 2006, this effort was expanded to a total of 25 corridors.  FHWA is also establishing performance measures for border crossings using the same methodology and is in the process of developing those metrics. 

We have barely scratched the surface of this new analytic tool.  The data can be analyzed by time of day, direction, between origin/destination pairs, etc.  It provides views into system performance we did not have before and helps us determine where we should be focusing our efforts.  As with the FAF, FHWA is seeking to place this information in the hands of State and local officials for their use in managing the transportation system.  To this end, FHWA is negotiating data sharing agreements and conducting case studies with seven States along the initial five corridors to determine ways States and local officials can utilize this data.

Capacity shortfalls in critical trade corridors and gateways pose a real threat to continued economic prosperity. The FAF is a critical tool for forecasting where demand either currently outpaces supply or soon will.  The Freight Performance Measures (FPM) initiative can focus our efforts by providing a quantifiable metric of system performance.  

The Department is doing everything possible to ensure that all the information derived from its freight modeling efforts is available to State DOTs, planners, academics, and the business community.  Much of this information is now on FHWA’s website, at http://ops.fhwa.dot.gov/freight.  We have provided Subcommittee members and their staff with copies of the most recent edition of Freight Facts and Figures, which contains a wealth of information on the performance of the national freight system, and with FAF profiles of their States.

Conclusion

To some measure, we are victims of our own successes.  In a strong and growing economy inextricably linked to the global marketplace, the demand for freight mobility is challenging the national transportation system’s capacity.  While we are developing and improving our analytic capacity and transferring that capability to State and local transportation decision makers, the public sector has limited funds and the needs are great, despite record funding for surface transportation.  But these are also exciting times.  All of us involved in surface transportation need to be open to new approaches to building, financing, managing, and measuring the performance of the infrastructure that supports freight.   

Thank you for the opportunity to speak today about highway capacity and freight mobility, and I will be happy to answer any questions that you may have.   

STATEMENT OF

JEFFREY N. SHANE
UNDER SECRETARY OF TRANSPORTATION FOR POLICY
DEPARTMENT OF TRANSPORTATION

BEFORE THE

SUBCOMMITTEE ON AVIATION
COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

MAY 9, 2006

Thank you, Mr. Chairman, Members of the Subcommittee.  I am pleased to appear before you today in response to your invitation to review the status of DOT’s rulemaking regarding “actual control” of U.S. air carriers.  As you know, it is unusual for DOT to appear at a hearing concerning an ongoing rulemaking.  Because we are still in the middle of the rulemaking process, having issued a supplemental notice of proposed rulemaking just last week, I cannot tell you what final decisions the Department is going to make because I don’t know.  We are all aware of the importance of this initiative, however, and we recognize the Committee’s interest in it.  For those reasons, I wanted to share, to the extent possible, the Department’s thinking in proposing to refine the administrative policies that guide our citizenship reviews.  Because the comment period for the SNPRM is open, I can only discuss general themes and policies in the rulemaking.  I cannot address substantive issues or comments made to the Notice published last November or to the Supplemental Notice.  But I will say that we carefully reviewed the comments we received, and considered them when drafting the Supplemental Notice, as we will do with any comments we receive in the next two months.  Even though I must be relatively circumspect in my own comments here today, I will do my best to be responsive to you within those parameters.

With the publication of this Supplemental Notice, we are encouraging a thorough and broad-based debate.  We chose to issue a Supplemental Notice because we have made substantive changes to our original proposal in response to comments and concerns expressed by interested parties, including other federal agencies and Members of Congress.  We believe these changes will serve to clarify both our intent and the way the proposed rule would work in practice if we finally adopt it.  We are interested in hearing people’s reactions to those changes.

In the initial Notice published last November, we proposed that, under certain circumstances, DOT would move away from more than sixty years of administrative interpretation of the statute, allowing “no semblance of foreign control” in determining whether U.S. citizens were in control of U.S. airlines.  That interpretation – not required by the words of the statute – has had the effect of relegating foreign investors to a largely passive role in any U.S. airline, unable to participate in the commercial decision-making affecting the value of their own investment.  Despite occasional efforts to introduce some measure of flexibility, the policy has remained essentially intact.

What the Civil Aeronautics Board and DOT have always required – and what the statute now says explicitly after its 2003 amendment – is that U.S. airlines must be under the actual control of U.S. citizens.  What the initial Notice proposed to do was to explore whether more foreign investment (within the numerical limits always allowed under the statute) could be encouraged if we, in applying the “actual control” requirement, adopted a less forbidding, less categorical policy regarding the ability of foreign investors to participate in the commercial decision-making of U.S. airlines.

I want to emphasize that the only decision-making that would be affected by the proposal is commercial decision-making.  Ultimate responsibility for management decisions relating to organizational documents, safety, security, and U.S. airlines’ participation in Department of Defense programs – including CRAF – would be reserved to the U.S. citizen investors only.

The economic benefits at stake are substantial.  Our proposal is primarily designed to enhance U.S. airline access to the global capital marketplace.  Our proposal would have positive and long-term effects on the industry by expanding the pool of qualified investors, introducing new competition among investors to provide U.S. airlines with better terms, and enhancing strategic partnerships between U.S. and foreign airlines.  These changes could lower the cost of capital for U.S. airlines, which would be enormously beneficial for the U.S. industry as it restructures to meet the demands of the global marketplace.  Additional investment opportunities in the airline industry can and will strengthen U.S. airlines.

This proposal does not envision a one-way street for investment, however.  One of the proposal’s most important provisions is a reciprocity requirement designed to encourage further liberalization of aviation markets and offer U.S. citizens opportunities to invest abroad in foreign airlines.  Under the proposal, only foreign investors who are from countries that have open-skies agreements with the United States and that permit similar investment opportunities for U.S. investors in their airlines would be eligible for this approach.  I call this one of the proposal’s most important provisions because it has the potential to encourage a more liberal approach to capital flows in aviation on a global basis.  It would not only afford U.S. carriers the opportunity to tap more global sources of capital; but also under the reciprocity requirement, U.S. carriers, either alone or as part of a larger group of U.S. investors, would be able to enhance their international presence by investing in foreign carriers.

Thus, our proposal carries with it the prospect of far more liberal treatment of airline investments everywhere, resulting in more robust international alliances, a healthier and more efficient global airline industry, more competition for the benefit of travelers and shippers everywhere, and expanded job opportunities for airline employees.

At a February hearing conducted by the House Subcommittee on Aviation, opponents of the rulemaking testified that the proposal will relegate U.S. airlines to mere “feeder” status, and that the lucrative and prestigious long-haul international flights will migrate to the foreign investor airlines.  In contrast to that fearful prediction, I have seen an investment banking report from Europe alleging that, by leaving untouched the statutory 75-percent minimum U.S. voting stock ownership requirement, our proposal is intentionally designed to ensure that U.S. carriers remain dominant players in the global airline industry.

I don’t know whether U.S. carriers will dominate global aviation in the future, but we do believe that our proposal would, in fact, strengthen the U.S. airline industry without undermining any of our important national interests.

What we have done in the Supplemental Notice is to build upon and clarify the ideas we proposed in the initial Notice of Proposed Rulemaking.  In light of the comments and concerns expressed about the NPRM, we consulted with other Executive Agencies, particularly the Departments of Homeland Security and Defense, as well as our own Federal Aviation Administration, to refine our proposal to better ensure not only that U.S. airlines remain under the actual control of U.S. citizens, but also that they remain safe, secure, and available to meet the nation’s defense needs.  The areas that would continue to be scrutinized for exclusive, non-delegable U.S. citizen control – safety, security, and national defense – would require DOT to strictly review the airline’s structure, with particular focus on the carrier’s fundamental organizational documents, which must also remain under exclusive U.S. citizen control.

In the Supplemental Notice, we have refined our previous proposal in part to make it clearer to airlines that might seek to benefit from our revised approach.  Our proposal sets out two prerequisites to a foreign investor’s eligibility to take advantage of this new interpretation:  Does the foreign investor’s home country have an open-skies agreement with the United States?  If it does, then: Does the foreign investor’s home country have a similarly open investment regime in its airlines for U.S. investors?  Only if these two questions were answered in the affirmative would the Department commence a review of the carrier under this new interpretation.  If the answers are “Yes,” then the questions that would be examined are:

• Do the corporate documents – the charter, the by-laws, the basic agreements, etc. – reflect actual control by U.S. citizens of those documents?
• Is the foreign investor delegated any commercial decision-making authority?
• Is this authority ultimately revocable by the U.S. citizen majority owners?

To ensure full control by U.S. citizens of the carrier’s activities in three key areas:

• Are U.S. citizens clearly and completely in actual control of all decisions having to do with the carrier’s policies and implementation with respect to safety?
• Are U.S. citizens clearly and completely in actual control of all decisions and activities having to do with the carrier’s policies and implementation with respect to aviation security?
• Are U.S. citizens clearly and completely in actual control of all decisions having to do with Department of Defense programs?

And remember, the burden of proving all of these requirements would remain with the applicant.  If the applicant could not meet that burden, it could not be licensed as a U.S. air carrier.  Similarly, an already licensed carrier that received a significant offshore investment would be subjected to what we call a “continuing fitness review,” including the same requirements and the same burden of proof.  Failure to meet that burden would call into question the carrier’s continuing eligibility to hold an air carrier certificate.

While U.S. citizens will continue to exercise “actual control” of every U.S. airline, the only areas that could not be delegated to foreign investors would be these four – safety, security, national defense, and the carrier’s organizational documentation.  Pursuant to arrangements with the U.S. citizen majority owners, foreign investors would be permitted to participate in the airline’s commercial decision-making in a more meaningful way.

I want to emphasize several points.  First, the physical safety and security of every U.S. airline would be under the close supervision and control of the FAA, TSA, and other relevant authorities, as they have always been.  CRAF carriers would also be subject to inspection by the military exactly as they are today.  Second, the Department has a long history of closely examining carriers’ structure and operations to ensure that actual control remains in the hands of U.S. citizens; this function should actually be made easier by a narrower focus on the areas of corporate documents, safety, security, and defense activities for investments from citizens of qualified countries.  Third, we think carriers that receive foreign investments as the result of the new rule, if we adopt it, are likely to be more careful than ever to ensure that all CRAF-related functions remain securely in U.S. hands, to avoid any question.

Under DOT’s proposal, U.S. citizens would have to continue to be in “actual control” of a U.S. airline for it to be eligible to retain its certificate.  As the statute dictates – and we are in no way proposing to alter or change the statute – U.S. citizens would have to own 75-percent of the voting stock of the airline, would make up two-thirds of the Board of Directors, and would include the president and two-thirds of the managing officers of the company.  U.S. citizens would ultimately control the decision-making of the airline; any delegation of decision-making authority to the foreign investor would have to be revocable and could not be in the spheres of safety, security, national defense, or organizational documents.

In addition, we are not proposing any change in our criteria for ascertaining “control” for airlines not meeting the conditions for using the proposed interpretation and for those areas that we examine for airlines that do meet the conditions.   The Advance Notice of Proposed Rulemaking published seven non-exclusive criteria that DOT’s Inspector General cited in his report as being generally used by the Department.  We intend to continue to use those criteria. 

The potential benefits of DOT’s proposal go well beyond enhancing the availability of capital to U.S. airlines.  The international alliances that currently exist among U.S. and foreign airlines represent a surrogate for the kind of globalization that occurs around the world in other networked industries through conventional mergers and acquisitions.  New opportunities for liberalized air services agreements bring competition home in the form of competitive prices to consumers and shippers.

I want to emphasize that we have proposed this interpretation because we believe it is justified on its own merits due to the potential benefits for the U.S. airline industry.  However, the European Commission and its 25 Member States have stated publicly that the results of this rulemaking will be a factor in their decision whether to agree or not to a proposed first-phase U.S.-EU Air Services Agreement.  Let me briefly address this Agreement, which is currently pending before the EU Transport Ministers. 

The Agreement has the potential to fundamentally transform the framework for transatlantic air services, dramatically increasing the quality of competition in the market.  It will benefit consumers and communities on both sides of the Atlantic, transcending anything we have yet achieved through our existing open-skies accords.  The Agreement will also enhance the quality of transatlantic cooperation in the areas of safety and security, competition law and policy, and environmental and consumer protection.  Moreover, the Agreement represents only a first stage of opening markets and enhancing cooperation.

Completion of the U.S.-EU Agreement would not only enhance airline competition across the Atlantic, but would also set a new standard for liberalization around the world. This Agreement will enable U.S. and European airlines – singly and in combination – to capitalize on the importance of a newly unified transatlantic market and develop a truly global presence.  Success here can be expected to encourage emulation in other regions, accelerating the attainment of more open markets for international air services.

The globalization of the aviation industry has already begun; it’s time that U.S. airlines are permitted to take advantage of the opportunities waiting for them.

Thank you for the opportunity to share the Department of Transportation’s perspectives with you.  I would be pleased to respond to your questions.

STATEMENT OF

JEFFREY N. SHANE
UNDER SECRETARY OF TRANSPORTATION FOR POLICY

BEFORE THE

HOUSE COMMITTEE ON SCIENCE
SUBCOMMITTEE ON SPACE AND AERONAUTICS

ON

THE STATUS OF THE NEXT GENERATION AIR TRANSPORTATION SYSTEM

MARCH 29, 2006

Good afternoon, Chairman Calvert, Congressman Udall, and Members of the Subcommittee.  I would like to thank you for the opportunity to testify today on such an important subject as the Joint Planning and Development Office, or JPDO, and its vital role in fostering the establishment of the Next Generation Air Transportation System.  The development of the Next Generation Air Transportation System, or NGATS, is a high priority for Secretary Mineta, Administrator Blakey, and all of us at the Department of Transportation.  I am very pleased to be with you today as the Department’s representative. 

The NGATS initiative is unprecedented in its scope, complexity and the challenges it will face.  Our vision of this system is one that encompasses the whole air travel experience -- from the moment the passenger arrives at the departure airport to his or her exit from the destination airport.  The NGATS System includes security, safety, and efficiency of passenger, cargo and aircraft operations.  Aircraft will be able to use information technology in a more robust way, with enhanced capabilities in the cockpit, better navigation and landing capabilities, and far more comprehensive and accurate knowledge of weather and traffic conditions in real time.  And, the users of the system, who will be flying in a far more diverse array of aircraft types, will find the system works with less delay than the current system, with a less intrusive security process, and with increased safety, all while handling significantly increased traffic as compared to the current system.

We have a great air traffic control system today.  But the Next Generation Air Transportation System will be more flexible, resilient, scalable, adaptive, and highly automated than today’s system.  The NGATS operational vision is not just related to the air traffic management system alone, but also includes the preservation and growth of airports, heliports, and other future landing and departure facilities to fully incorporate the emerging NGATS benefits.  This system will be built on a far more robust information network than anything we have seen to date, ensuring that the right information gets to the right person at the right time, while keeping the nation safe and the flow of traffic running smoothly.  We will increasingly cut the cord between ground and air as we put more information directly into the cockpit of intelligent aircraft through sensors and satellites linked together through network communications.

The importance of developing this system of the future is also quite clear to policymakers in Europe, where a comparable effort is well underway.  This presents both a challenge and an opportunity to the United States.  Creating a modernized, global system that provides interoperability could serve as a tremendous boost to the aerospace industry, fueling new efficiencies and consumer benefits.  Alternatively, we could also see a patchwork of duplicative systems and technologies develop, which would place additional cost burdens on an industry already struggling to make ends meet. 

Under the leadership of FAA Administrator Blakey, the JPDO now serves as a focal point for coordinating the research related to air transportation for agencies across the Federal government, including the Departments of Transportation, Commerce, Defense and Homeland Security, as well as NASA.  Early on, we realized that an initiative of this magnitude and complexity could never be successfully completed by DOT alone, especially in a post-9/11 world.  We sought support from others, and they delivered.  NASA has been a close partner from the beginning, and all the other agencies involved have provided invaluable support to the JPDO that has helped us establish a strong, collaborative atmosphere.

Another special feature of this initiative is the high-level participation from each of these organizations.  Secretary Mineta chairs a Senior Policy Committee made up of Deputy Secretary-level officials from the other organizations, and the White House Office of Science and Technology Policy (OSTP).  The Senior Policy Committee directs the effort and will be responsible for its ultimate success or failure.  The participating agencies have been highly engaged from the outset, and we are grateful for their continued support. 

Our overarching goal in the NGATS System initiative is to develop a system that will be flexible enough to accommodate a wide range of users -- very light jets and large commercial aircraft, manned and unmanned air vehicles, small airports and large, business and vacation travelers alike, while handling a significantly increased number of operations with no diminution in safety, security and efficiency.  I must emphasize that not all elements of the NGATS system in 2025 are known today.  Research will continue to help us find the right balance between a centralized ground system and a totally distributed system, where aircraft “self-manage” their flight with full knowledge of their environment.

That research is being undertaken through a close partnership with the research community, industry and other stakeholders.    This process ensures full coordination of research across agency lines and between government and the private sector in ways that have not been done in the past.  The fact is that we already have a sizable amount of resources being spent each year on air transportation-related research.  By better coordinating our actions, avoiding duplication and tying these activities together through a long-term, integrated national plan, we can maximize the benefits of those public and private investments and target our limited resources more effectively.

Existing Federal Advisory Committees will be used to ensure all plans and decisions receive broad review and public comment.  These committees include senior-level executives from across industry empowered to provide advice on strategy and transition issues. 

We need the best minds in America across both the public and private sectors working on the task of creating a NGATS system.  To achieve this, we have established a Next Generation Air Transportation System Institute (the NGATS Institute) that allows stakeholders to get directly involved in the transformation process.  And, while the Aerospace Industries Association (AIA) is the host for the Institute, it is co-chaired by the presidents of the Air Line Pilots Association and the Air Transport Association and open for participation by all segments of the industry.

The Joint Planning and Development Office (JPDO) achieved important milestones in 2005 towards building the NGATS system.  The JPDO completed its internal organization and created eight government/industry Integrated Product Teams (IPTs) to break this large and complex project into manageable strategies.  These strategies focus on those aspects of aviation that hold the keys to capacity and efficiency improvements – airport infrastructure, security, a more agile air traffic system, shared situational awareness, safety, environmental concerns, weather and global harmonization of equipage and operations.  Each agency involved in the initiative leads at least one of the Integrated Product Teams.  The Teams work closely with our stakeholders to ensure that they have an early window into our thinking and that we take full advantage of their expertise every step of the way.  What truly sets this new structure apart is that it eliminates duplication of effort and gets everyone involved in aviation across the Federal government working toward a common goal – creation of a NGATS system.   

The IPTs have already begun the important process of moving from the general to the specific, and from objectives to capabilities.  As of December 2005, nearly 200 industry and private sector participants representing around 70 organizations and companies were actively involved in the IPTs’ planning and development work.  This participation has been a major initial focus of the NGATS Institute.  The NGATS Concepts of Use and Operations, and a preliminary Enterprise Architecture will be released for comment this summer.  In 2005, the JPDO moved ahead with plans to accelerate the development of key NGATS projects, such as Automatic Dependent Surveillance-Broadcast (ADS-B), and System Wide Information Management (SWIM).  In its Fiscal Year 2007 budget proposal, the Administration proposed several targeted investment areas, to promote early implementation of elements of the NGATS system.  The details of these programs will evolve over time as the Enterprise Architecture is fully developed and system requirements are established.  These accomplishments are highlighted in the recently published “2005 Progress Report to the NGATS Integrated Plan” that was transmitted to Congress on March 10^th as required by Vision 100.

One of these very promising initiatives, with potential for broad operational applications, is the Automatic Dependent Surveillance-Broadcast (ADS-B) system, a technology that will replace ground-based radar systems and revolutionize air navigation and surveillance.  For FY 2007, the President’s budget includes $80 million for the FAA for the ADS-B program.  The ADS-B system was the key enabling technology for the Capstone demonstration program in the Alaska Region. 

Capstone is a technology-focused safety program in Alaska that seeks near-term safety and efficiency gains in aviation by accelerating implementation and use of modern technology, in both avionics and ground system infrastructure.  The impetus for the Capstone program was a series of meetings between the FAA and aviation interests to address the exceedingly high accident rate in Alaska for small aircraft operations, which was nearly five times greater than the national average.  Through 2005, the Capstone Program achieved significant safety and efficiency results.  Capstone-equipped aircraft have had a consistently lower accident rate than non-equipped aircraft.  From 2000 through 2005, the rate of accidents for Capstone-equipped aircraft dropped significantly--by 49 percent.  That is real progress.

Another technological innovation, known as Required Navigation Performance, or RNP, adds capacity, improves efficiency and reduces fuel consumption.  RNP uses on-board technology that allows pilots to fly more direct point-to-point routes reliably and accurately.  RNP is extremely accurate, and gives pilots not only lateral guidance, but vertical precision as well.  RNP reaches all aspects of the flight – departure, en route, arrival, and approach.  For example, in January 2005, in partnership with Alaska Airlines, we implemented new RNP approach procedures at Palm Springs International Airport, which is located in very mountainous terrain.  Under the previous conventional procedures in use at Palm Springs, planes could not land unless the ceiling and visibility were at least 2,300 feet and 3 miles.  With these new RNP procedures, approved air carriers can now operate with a ceiling and visibility as low as 734 feet and one mile.  This lower landing minima has allowed Alaska Airlines to “save” 27 flights between January and November, 2005, flights which would have otherwise had to divert to Ontario, California—an added distance of at least 70 miles. 

Given its fundamental importance to the success of the NGATS System, establishing an initial Network-Enabled Operations (NEO) capability is a high priority. Current efforts focus on identifying the network architecture and enacting standards for information and safety data sharing.  This is the situation today:  DoD has already invested considerable resources in information technology and telecommunication research focused on NEO and information access and sharing.  FAA, DHS and Commerce are also committed to developing network-centric information architectures.  The opportunity now exists to synchronize these efforts, especially in the areas of data interoperability and compatible network-to-network interface mechanisms.  Two on-going DoD initiatives – the synchronization of DoD and DHS classified networks and DoD’s development of its Net-Centric Enterprise Services – will serve as templates for this effort. 

In 2005, the JPDO, FAA and an industry team demonstrated how network-enabled concepts developed for the military customers can be applied to Air Traffic Management.  The Joint Network-Enabled Operations Security Demonstration connected seven Air Traffic Management and security systems distributed over 12 different locations.  It showed how sharing information in real time across air traffic, air defense, and law enforcement domains helps agencies respond to a security incident more efficiently.  The exciting part of the NEO demonstration project is that it enabled communication between agencies’ individual, stove-piped networks, eliminating the need to throw out all the individual legacy systems and create a brand new mega-system, which would be prohibitively expensive.

In July 2006, the JPDO will also conduct a demonstration project involving the FAA’s System Wide Information Management (SWIM) program – the beginning of network-centric operation in the National Airspace System.  The President’s budget proposal for Fiscal Year 2007 requests $24 million for FAA’s SWIM program.

Another major change in support of NGATS is the restructuring of the NASA Aeronautics Program.  Under the leadership of Administrator Griffin and Associate Administrator Porter, the program has been restructured with one of its three tenets being to support the development of NGATS.  In fact, one of its four major elements – the Airspace Systems Program, is completely dedicated to the air traffic management requirements of NGATS.  The program will be pioneering automated, high density, trajectory management technologies to completely change the way traffic is managed and controlled in the future.  Automated trajectory management is at the heart of the NGATS operational concept.  NASA has been working in this area of research for years, with notable successes, like the Traffic Management Advisor, which provides time-based metering of aircraft flows.  The Traffic Management Advisor is in operation today and is in the process of being deployed throughout the National Airspace System.

Mr. Chairman, NGATS will require years of hard work and unparalleled coordination among the many Federal agencies and stakeholders involved.  The process has now begun in earnest, however, and by aligning our resources and activities through the JPDO, I am confident we will succeed.  We will, of course, need strong support from Members of Congress, and we therefore look forward to working with all of you on this critical endeavor. 

This concludes my testimony.  Thank you very much for the opportunity to appear before you today, and I look forward to answering your questions. 

STATEMENT OF

JEFFREY N. SHANE
UNDER SECRETARY FOR POLICY
DEPARTMENT OF TRANSPORTATION

BEFORE THE

AVIATION SUBCOMMITTEE OF THE
HOUSE TRANSPORTATION AND INFRASTRUCTURE COMMITTEE

FEBRUARY 8, 2006

Thank you, Mr. Chairman, Members of the Subcommittee.  I am pleased to appear before you today in response to your invitation to review the status of a comprehensive first-step U.S.-EU aviation agreement, with a focus on the Department of Transportation's Notice of Proposed Rulemaking regarding "actual control" of U.S. air carriers.  Since the Department of State's Deputy Assistant Secretary, John Byerly, who led the multi-agency team that negotiated the agreement, is sitting beside me, I will let him review the negotiating dynamics that resulted in an agreement that has the potential to fundamentally transform the framework within which transatlantic air services operate, increasing dramatically the quality of competition in the market and benefiting consumers and communities on both sides of the Atlantic in ways that transcend anything achieved through our existing open-skies accords.  I will focus my testimony on the Department of Transportation's Notice of Proposed Rulemaking. 

As you know, it is unusual for DOT to appear at a hearing concerning an ongoing rulemaking.  Since we are in the middle of the rulemaking process I cannot tell you what the Department is going to do.  However, I recognize the importance of this initiative and this Committee's interest in it.  Therefore, I wanted to share, to the extent possible, the Department's thinking in proposing to refine the administrative policies that guide our citizenship reviews.  I hope that you will also understand that, since the comment period in the rulemaking has closed, I cannot address the substantive issues raised in those comments, other than to say that we will give them careful consideration, and I must be relatively circumspect in my own comments.  I will do my best to be responsive to you within those parameters.

As a preliminary matter, let me clarify, from the Department's perspective, the relationship between the U.S.-EU agreement and the NPRM.  It is no secret that, in reaching a decision on whether to proceed with an EU-U.S. Air Transport Agreement, the European Community and its 25 Member States will consider the results of the NPRM process as expressed in a final rule.  The European side included those very words in the Record of Negotiations that was adopted upon the conclusion of our negotiations and that has been widely circulated.  Nor will I pretend that we don't care whether the proposal, if finalized, will have a positive impact on the U.S.-EU talks.  Of course we do.  We want to conclude the agreement -- not only for the market access that U.S. carriers will achieve, but because it can be expected to enhance the quality of competition across the Atlantic in a dramatic way and provide impetus for further aviation liberalization around the world.  However, I also want to be clear that, although European acceptance of the Air Transport Agreement may be a consequence of adopting a final rule, the decision to initiate this proceeding was based on our assessment that the proposed change in the DOT approach was long overdue and is in the best interests of the United States, its air transportation industry, and those that rely on that industry, not only for transport services, but also directly and indirectly for jobs.  Even if the U.S.-EU talks had collapsed, we would not have abandoned the proposal, but would have seen it through to its conclusion.  However, thanks to the fine work of John and his team, we have a successful negotiating result.

Next let me address what DOT did not propose.  DOT did propose to change the specific tests in the statute for determining that a U.S. airline meets the U.S. citizenship requirement.  Under DOT’s proposal the company would need to be organized under the laws of the United States or a state; 75% of the voting stock would need to be owned or controlled by U.S. citizens; the president and two-thirds of the board of directors and other managing officials would need to be U.S. citizens; and the company would need to be under the actual control of U.S. citizens.  In addition, we have not proposed any change in how DOT would assess the citizenship of the managers or members of the board of directors -- U.S. citizens appointed by, or otherwise beholden to, a foreigner would still be considered foreign.  Therefore, the company would be a U.S. airline by any measure.

Turning to the affirmative, I will summarize what DOT proposed to do.  The NPRM proposed that DOT move away from the subjective test of "no semblance of foreign control" in making decisions about the control of U.S. airlines.  Many years ago, the Civil Aeronautics Board (CAB) added that test to the statutory requirements, at its administrative discretion.  And the "no semblance test" is now buttressed by a long list of subjective criteria that have appeared over the years in CAB and DOT case law, which does not make it easy to predict how DOT might rule on any given foreign control case.  In place of this approach, the NPRM proposed to make our criteria for validating the U.S. control of an airline both simple and explicit.  Under DOT’s proposal we would seek only four objectively verifiable answers:

• Will U.S. citizens be in a position to control decisions having to do with the Department of Defense?
• Will U.S. citizens be in a position to control decisions and activities relating to aviation security?
• Will U.S. citizens be in a position to control carrier policies and implementation with respect to safety?
• Is the corporate documentation - the charter, the certificate of incorporation, bylaws, etc. - under the control of U.S. citizens?

Finally, the only other requirements would be that, for a non-U.S. investor to enjoy the benefits of the flexibility newly available through this proposed policy, there would have to be reciprocity for U.S. investment and an open-skies agreement governing the aviation relations between the United States and the home country of the foreign investor, or other relevant international legal obligations. 

By targeting the analysis of actual control to these four areas, the proposal would allow more meaningful participation of foreign interests in a U.S. airline's commercial decision-making if that is what the U.S. citizens who own at least 75% of the voting stock and the foreigners agree upon.  At the same time, it would continue to protect those features of a U.S. airline's operations in safety, security, and national defense.  These are areas in which, despite economic deregulation, there continues to be significant Federal government regulation and involvement.

Finally, I want to move beyond WHAT the Department has proposed to the central issue of WHY the Department proposed this change.  The Department has a statutory mandate to foster a safe, healthy, and competitive airline industry that will remain capable of supporting U.S. economic growth by meeting the public's transportation needs.  Our regulatory efforts are informed by a simple principle:  that our oversight needs to be limited to those areas in which it adds value.  For that reason, we have been reviewing carefully the entire corpus of DOT regulations in order to ensure that they pass this test.  Where the added-value test is not met, or worse yet, when a regulatory approach actually impedes the ability to secure industry health, we need to make changes.

U.S. aviation policy since deregulation has been to continue to reduce government intrusion in commercial decision-making by airlines, and to recognize and accommodate changes in the marketplace.  In other words, deregulation is a work in progress.  This policy has been successful in areas such as pricing, route selection, fleet acquisition, and marketing, with positive consequences in many aspects of U.S. airline economic activity.  Airlines now provide seamless, end-to-end service through global systems that depend upon webs of contractual networks among airlines, distribution companies, and service providers.  These changes have enabled U.S. airlines to compete more effectively in domestic and international markets.  However, as set out in the Notice of Proposed Rulemaking, substantial structural changes have taken place in global financial markets and we tentatively concluded that our current interpretation of the actual control test has failed to keep pace with changes in the global economy and evolving financial and operational realities in the airline industry itself, to the detriment of U.S. airlines.

Why did we consider it important to catch up?  Because to continue to be effective players, U.S. airlines require significant capital investments in facilities, technology, and a variety of commercial arrangements.  In their efforts to meet these challenges, U.S. airlines should have the broadest access to global capital markets permitted by law.  Furthermore, new U.S. airlines seeking to enter the market should similarly be able to obtain the financial capital necessary to launch their businesses.  Our tentative conclusion was that actual control should not be interpreted in a way that needlessly restricts the commercial opportunities of U.S. airlines, their ability to compete, and their potential to create jobs.

Today, in major industries, capital is allowed to flow freely across national borders so that competitors can establish a global market presence, exploit economies of scope and scale, respond effectively to customer demand and tap market opportunities wherever they arise.  It's a well-established policy, and one that applies even to industries long thought essential to our national and economic security, such as financial services, automobile manufacturing, information technology, steel and pharmaceuticals.  And our proposal, consistent with our statutory mandate of "placing maximum reliance on competitive market forces ... to encourage efficient and well-managed air carriers to earn adequate profits and attract capital," was to open up global investment options to the very industry that facilitated the globalization of all the others.  Today although many U.S. airlines participate in international alliances, we believed that the "semblance test" has chilled cooperation with, and investment by, foreign entities, since it has made it difficult for actual or potential foreign investors to protect their interests -- a situation that caused KLM to withdraw its investment in Northwest Airlines in 1997.  The goal of our proposal is to eliminate that uncertainty with respect to economic decision-making.

Finally, I want to make this as clear as I can.  Under DOT’s proposal, U.S. citizens would still have to be in "actual control" of a U.S. airline for it to be eligible to keep its certificate.  They would own 75 percent of the voting stock in the airline; they would occupy two-thirds of the directorships; the president and two-thirds of the officers would be U.S. citizens.  It would be a U.S. airline by any measure.  What we are saying is that the greater scope we have proposed to allow non-U.S. citizens for participation in the governance of a U.S. airline would no longer be deemed inconsistent with the finding of actual control by U.S. citizens, as it is today, provided that the short list of objective requirements in the proposed new rule are met. 

The potential benefits of the proposal go well beyond our interest in enhancing the availability of capital to U.S. airlines.  The international alliances among U.S. and foreign airlines represent a surrogate for the kind of globalization that occurs in other network industries.  Our thinking was that our proposal, if adopted, would create an environment far more conducive to productive cooperation among airline alliance partners, providing new opportunities for U.S., as well as foreign, airlines.  It could facilitate the further evolution of the world's airline industry into an even more robust and competitive global services sector, by changing the administrative policies that today are significant impediments to that evolution. 

Thank you for the opportunity to share the Department of Transportation's perspectives with you.  I would be pleased to respond to your questions.

Susan E. Schruth
Associate Administrator for Program Management
Federal Transit Administration
U.S. Department of Transportation

before the

Subcommittee on Highways, Transit & Pipelines
Committee on Transportation and Infrastructure
U.S. House of Representatives

"State Safety Oversight Program"

July 19, 2006

Mr. Chairman and members of the subcommittee, thank you for this opportunity to testify on behalf of the U.S. Department of Transportation, about the Federal Transit Administration's (FTA) State Safety Oversight (SSO) Program.  I would also like to take this opportunity to thank Government Accountability Office (GAO) for the thoroughness of the review it conducted over the last year, and for its recommendations to strengthen further the SSO Program.  Finally, I would like to extend my appreciation to the representatives of the agencies here to testify before this Committee today.

In this written testimony, I highlight many accomplishments of the SSO Program, as well as background on how we have developed the program to be the success we believe it is today.

The SSO program affects 26 States and 43 rail transit agencies nationwide.  Collectively, the SSO community has much to be proud of.  Rail transit provides more than 3 billion passenger trips each year, and moves millions of people each day. 

As reported by the National Transportation Safety Board (NTSB) in its Safety Report for 2004, rail transit is responsible for less than 0.1 percent of the 44,870 transportation fatalities that occurred in the United States that year. In addition, rail transit was responsible for less than 0.15 percent of the nation’s 3.5 million transportation-related injuries, and less than 0.06 percent of the nation’s total transportation-related property damage.

Of course, unfortunately, accidents do occur in rail transit, and the potential for a catastrophic event remains.  FTA is committed to continual improvement in the industry, and works everyday to ensure the safety of rail transit passengers, employees, emergency responders, and all others who come into contact with these systems.

This morning, in these few minutes, I would like to discuss the key aspects of the program, including changes to the program in our final rule published last year, the key improvements to the program specified in the Safe, Accountable, Flexible, Efficient Transportation Equity Act:  A Legacy for Users (SAFETEA–LU) and how we are implementing those, and finally, to highlight areas that we are working to improve.

Background on the SSO Program and Changes in the Rule

First, by way of introduction, Mr. Chairman, your committee authorized the SSO program in 1991, in the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA).  FTA published a final rule in 1995, with a phased-in effectiveness period. States and rail transit agencies had to be in compliance with all of the rule’s requirements by January 1, 1998.  Today, the rule remains codified in Title 49 of the Code of Federal Regulations, Part 659.

FTA’s SSO program offers a unique approach to oversight.  This approach was recommended by the (NTSB as the result of their extensive study of oversight options for rail transit. The design of the program places primary responsibility for rail transit safety oversight with the States.  FTA is responsible for setting minimum requirements to be met by the States and rail transit agencies, and for monitoring implementation of the program.  After over a decade of experience with this program, we believe it is an effective model.

The first few years of the program were challenging ones. When the rule was published, only five States had existing oversight programs, and not one of these programs fully met FTA’s requirements.  Between 1995 and 1998, we worked closely with the affected States and rail transit agencies to ensure that resources were devoted to establish the oversight agencies, and that these agencies were led by technically competent managers. In addition, the rail transit agencies did their part to provide familiarization training to oversight personnel regarding their organizations, operations, procedures, challenges and needs.

Through the Transportation Safety Institute (TSI) and the National Transit Institute (NTI), FTA established a comprehensive safety training program addressing a range of technical issues faced by industry.  This training was provided free of charge, and has been given to the majority of SSO agencies and representatives from the affected rail transit safety and security departments. FTA believes this training is critical to ensure that all personnel involved in implementing the SSO program develop core competencies in rail transit safety.

To further fulfill our obligation to monitor the SSO program implementation, FTA initiated compliance audits of SSO agencies in the fall of 1998. This is an extensive program comprised of pre-audit interviews and document reviews, on-site program examination, and generation of a final audit report, delivered in draft form to the SSO agency at the Exit Interview. Through this program, between 1998 and 2005, FTA effectively identified and resolved over 220 findings at the State agencies.

To address the special needs of new States and rail transit agencies joining the program, we also conducted Safety and Security Readiness Reviews (SSRRs). Since 1999, seven States and seven rail transit agencies have joined the program. FTA has worked with each of these States and rail transit agencies to review their programs, evaluate their initial submissions, provide technical assistance, and ensure compliance with the program requirements.

FTA also established an annual report that is submitted by the SSO agencies documenting their oversight activities for the year and collecting detailed information regarding the rail transit accidents occurring in their jurisdictions.

Based on the results of the SSO audit program, the SSRRs and annual reports, as well as input from NTSB and the Federal Railroad Administration (FRA) – with whom we share oversight for several light rail systems with shared use track or limited connections to the general railroad system, FTA initiated work on a revision to its rule in 2003. On April 29, 2005, our revised final rule was published, with an effective date of May 1, 2006.

The revised rule clarifies that program requirements apply in situations where rail transit agencies are built entirely with State and local funds, but plan to receive FTA formula funds during revenue service. Examples of these systems include Houston Metro’s light rail and New Jersey Transit’s RiverLINE. The revised rule also addresses an NTSB recommendation regarding the need for proficiency and efficiency testing for operations and maintenance personnel.  Finally, the revised rule improves oversight of internal safety and security auditing at rail transit agencies; expands the role of the oversight agency in the hazard management process; promotes consistency between FTA’s National Transit Database (NTD) and oversight agency accident notification and investigation thresholds; and clarifies requirements for security.

On May 1, FTA received the required initial submissions from each of the 26 affected SSO agencies.  FTA has completed its evaluation of these submissions, and is now working with the SSO agencies and rail transit agencies to address identified deficiencies and concerns.  FTA anticipates that the SSO agencies will be in full compliance with the revised rule by October 1, 2006.

SAFETEA-LU Changes

Last year, SAFETEA-LU amended the SSO program.  First, SAFETEA-LU requires that the program be extended to rail transit projects that are in the design phases.  Second, SAFETEA-LU clarifies that in those instances where a rail transit agency operates across State lines, the rail transit agency should not be subject to more than one set of safety oversight standards.

FTA is working to address both of these changes, and will be preparing a notice of proposed rulemaking (NPRM) for publication in the Federal Register.   Regarding the role of SSO agencies in projects in the design phase, we have increased coordination with our Regional Offices, and now invite the SSO agencies to all Quarterly Review Meetings conducted for New Starts projects in their jurisdictions.  We are also requiring Safety and Security Management Plans (SSMPs) for all major capital projects.  A critical element addressed in these plans is the grantee’s readiness to comply with SSO requirements with the initiation of revenue service. Finally, our Project Management Oversight (PMO) contractors, using the safety and security technical experts on their teams, interface with SSO agencies and personnel during their monthly visits to the projects to identify and resolve any potential issues.

FTA already addressed the multi-State coordination issue in its revised rule, ensuring that in the event multiple States share oversight responsibility, the rail transit agency “is subject to a single program standard, adopted by all affected states.”

Program Accomplishments and Areas of Improvement

Mr. Chairman, we can cite numerous examples of the positive effect this program has had on safety in the rail transit industry.  I would like to share a few examples with you.

Over the last few years, in Massachusetts, the oversight agency, Massachusetts Department of Telecommunications and Energy (MDTE) has worked closely with the Massachusetts Bay Transportation Authority (MBTA) in Boston to resolve hazards resulting from the introduction of low-floor rail transit vehicles into that agency’s operations.  MDTE activities resulted in a significant re-engineering effort. Retrofitted vehicles are now being tested and phased into service.

In New York, during the late 1990s, the oversight agency, New York State Public Safety Board (PTSB), played a critical role in evaluating New York City Transit’s (NYCT) decision to implement one-person-train operation (OPTO) pilot programs on five shuttle lines.  PTSB worked closely with NYCT to ensure sufficient countermeasures were in place to allow the removal of the conductor from the trains. The next phase of this pilot involves integration of NYCT's new communications-based train control system into OPTO service on the Canarsie Line.

The Utah Department of Transportation (UDOT) played a critical role in overseeing the Utah Transit Authority (UTA) as the designated transportation provider during the 2002 Winter Olympics.  UDOT worked tirelessly with UTA to ensure that service plans and contracts with the Salt Lake City Olympic Organizing Committee addressed safety and security for all Olympic spectators, and that loaned vehicles from Dallas were safely integrated into UTA’s Olympic service plan. During the two weeks of the games, UTA’s Olympic Spectator System carried a total of over 2.5 million passengers without a single safety incident.

New Jersey Department of Transportation (NJDOT), which oversees four rail transit systems, has experienced many successes in its program. NJDOT has established a ground-breaking partnership with FRA regarding the management of track waivers for systems in Newark and southern New Jersey. In addition, NJDOT has provided effective oversight to the nation’s first public transportation public-private partnership using a "DBOM" (design/build/operate/maintain) contract.  The approach used by NJDOT to managing the DBOM process to address safety and security has become a model throughout the country and in other modal transportation projects using DBOM contracts.

Finally, the Colorado Public Utilities Commission (CoPUC) in partnership with the Denver Regional Transportation District (RTD), has worked effectively to overcome resource challenges at both agencies. Colorado PUC proposed combining its three-year safety and security review process with Denver RTD’s internal safety and security auditing process. 

Performance Measures

As you may sense from these examples, it is difficult to quantify the benefits that correlate directly to the SSO program. Developing performance measures has been on our agenda for several years.  Fortunately, as I stated during my introduction, the safety record of rail transit is better than any other mode of transportation.  This good news makes it difficult to measure improvement, especially when the statistics that need to be evaluated are measured in fragments of percentages rather than whole numbers.

Currently we are working to develop performance measures and to establish a performance measurement program that can yield statistical data to document and substantiate anecdotal evidence of success on an industry-wide level. 

Going to the "next level" of performance measures poses some unique challenges. It is difficult to "prove the negative" of an accident or incident that was prevented through the SSO program. Technically, it is also a challenge to achieve statistical significance in performance measures for the rail transit industry based on what is—quite fortunately—a low number of accidents and incidents. Nevertheless, we are committed to documenting industry performance as it relates to specific activities in the SSO program—and we are committed to establishing strategic goals and performance measures for the program by the end of fiscal year 2006.

As a first step we have developed a plan to collect and evaluate existing NTD and data submitted by the States’ Safety Offices, and we will soon release our Rail Transit Safety Action Plan. We plan annual updates of that plan based on ongoing data to report to the SSO community on how well we are collectively doing.

In a more ambitious step, we are conducting a cutting-edge study with Oklahoma State University (OSU) to develop a performance program to assess the benefits of SSO and rail transit program that moves beyond accident data. With the completion of the OSU study we anticipate being able to use performance measures to capture less tangible but no less important safety measures, such as how well rail transit employees are complying with safety rules and procedures; measures of how passengers perceive safety and security; measures of "near misses;” and measures that express the safety benefits from specific design features or operating procedures.

Finally, to assess implementation of the revised rule, we are modifying our SSO compliance audit program to collect additional information to support program performance measures. During the three-year period between October 2006 and September 2009, we will audit each of the 26 SSO agencies. Using a set of web-based tools, we will be able to capture and report critical program information obtained from the States during the audits.  Examples of the types of data we will be able to collect include the following: the level of resources devoted to the program, training and certifications obtained by the SSO program managers, the functions performed by contractors, hazards identified and managed by the program, the development of corrective action plans, and the time required to address them."

Training

Another important issue that we are dedicating thought, resources, and time to concerns the training of SSO staff and program managers. We have always recognized the importance of this training, although we do not have the authority to mandate specific certification requirements or stipulate minimum levels of experience or education.

Since 2000, FTA has encouraged the SSO program managers to complete a Transportation Safety Institute (TSI) safety and security certification program. FTA also provides training on a range of other topics through the NTI.

All in all, staff and program managers have availed themselves of these safety and security training options. The majority of SSO program managers have taken at least three of the TSI courses.

Management training on the conduct of oversight is not yet as robust as the safety and security training options. We are taking several steps to assist States in ensuring the technical expertise of the personnel assigned to manage the program. In recognition of the limited State funds available for management training, FTA is working with TSI to revise its course on Transit Rail System Safety so that it includes several modules specifically for program managers. This course will be piloted in-house in August of this year.

We have also secured funds to continue at least one invitational workshop for program managers each year. Finally, we will be conducting a survey of SSO program managers to identify training gaps and needs. Overall, given the small population of SSO program managers and the specialized, idiosyncratic types of activities they perform, FTA believes that invitational workshops will prove the best forum for management training.

Coordination with the Department of Homeland Security’s Transportation Security Administration (TSA)

Finally, we are working to improve coordination between the SSO agencies and the new TSA Surface Transportation Security Inspection Program (STSIP) and FRA with regard to the rule’s security requirements.  The Federal Government is partnering a select group of SSO agencies and rail transit agencies to develop a “model program” to establish a framework through which the SSO agencies and the Federal Government can work together. In sessions throughout the summer, we will work with our government and industry partners to complete the draft “model program,” which will be presented to the SSO agencies and rail transit agencies for discussion and further refinement during a day-long session at the 10th Annual SSO Workshop in September.  Final guidance will be published to clarify the roles and responsibilities for SSO agencies in the spring of 2007.

Conclusion

Since its inception in 1991, the SSO program has contributed to rail and transit safety, and has proven its merits as a sound, successful oversight program. As with any safety program, it is always a work in progress.  FTA and those with whom we collaborate proactively seek ways to continuously improve and better measure performance. The SSO program had been further improved by FTA's own efforts in April 2005 to clarify the rule and later by SAFETEA-LU’s amendments. Today, we are continuing to refine the program and move it forward by working to implement statistical performance measures, and to improve SSO community training.

And now I'd be happy to answer any questions that you might have. Thank you. 

STATEMENT OF

PHYLLIS F. SCHEINBERG
ASSISTANT SECRETARY FOR BUDGET AND PROGRAMS AND CHIEF FINANCIAL OFFICER
U.S. DEPARTMENT OF TRANSPORTATION

BEFORE THE

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, AND INTERNATIONAL SECURITY
UNITED STATES SENATE

MAY 18, 2006

          Good afternoon.  Thank you for the opportunity to appear before you today to discuss the treatment of unobligated balances by the Department of Transportation (DOT) and how they affect the Department’s budgeting and programming process.  To put this discussion into context, I would like to briefly describe the Department’s programs that are funded with the resources provided by the Congress.

            The President’s fiscal year (FY) 2007 budget request for the Department totals $65.6 billion in budgetary resources to support major investments in transportation nationwide that are vital to the health of our Nation’s economy and the American way of life.  This includes over $41 billion for highway infrastructure investment and for highway safety programs.  An additional $8.7 billion has been requested for Federal transit grant programs that when combined with state and local funding will be used, among other things, to construct new fixed guideway and non-fixed guideway transit projects, purchase bus and transit railcars, and replace, rehabilitate and refurbish existing transit systems.  Over $13.6 billion has been requested to build, maintain, and operate the Nation’s air traffic control system; oversee commercial and general aviation safety through regulation and inspection; and improve the capacity and safety of airports.  Combined, these investments account for over 95 percent of the Department’s FY 2007 budget request.

            Typically Federal operating programs – such as those that fund the salaries and expenses of railroad safety inspectors – are funded year-by-year through the annual appropriations process and these funding resources are outlayed during the same fiscal year.  At DOT such programs constitute a very small portion of our total budget.  Instead, the majority of the Department of Transportation’s program dollars support major capital investment projects – like highway, transit, and airport construction – that generally take several years to complete.  As a result, funding for these programs also needs to be available over multiple years and linked to the project’s overall construction cycle.  As infrastructure projects progress, the specific funds linked to the project are obligated as they are needed to complete construction phases.  Because this often happens over a long period of time, a sizable portion of each year’s funding is likely to remain unobligated and unexpended for several years.

For the Federal-aid Highway Program, the primary reason for large unobligated balances is the application of statutory budgetary controls known as obligation limitations.  These limitations, set in the annual appropriation process control the use of contract authority authorized in the multi-year highway authorization acts.  Typically, the limitation on obligations is lower than the amount of new contract authority each year, so a portion of the contract authority is at least temporarily unavailable for obligation.  At the end of fiscal year 2005, $23 billion of the $34.4 billion in Federal-aid Highway Program unobligated balances reflected the cumulative effect of annual obligation limitations.  This explains why the Department of Transportation had an unobligated balance of over $43 billion at the end of FY 2005, with approximately $34.4 billion of these unobligated balances attributed to the Federal-Aid Highway program alone.  A table that shows the unobligated balances for the Department at the end of FY 2000 through FY 2005 is attached.

            The unobligated balances that result from the slow spending patterns of capital infrastructure projects typically cannot be directed to other funding needs.  Congress has given the Department limited flexibility in shifting funds from one purpose to other purposes within an agency.  Title 31 of the United States Code, Section 1301 – known as the “purpose statute” – states that:

<>···Create a new program;

• Eliminate a program, project or activity;
• Increase funds or personnel for a program, project, or activity for which funds have been denied or restricted by the Congress;
• Result in funds directed for a specific activity by either the House or Senate Committees on Appropriations to be used for a different purpose;
• Augment existing programs, projects, or activities in excess of $5,000,000 or 10 percent, whichever is less;
• Reduce existing programs, projects, or activities by $5,000,000 or 10 percent, whichever is less; or
• Create, reorganize, or restructure a branch, division, office, bureau, board, commission, agency, administration, or department different from the Congressional budget justifications or the table accompanying the Statement of the Managers accompanying the Department’s annual appropriations act, whichever is more detailed.

For designated high-priority items of interest to the House and Senate Appropriations Committees, as reflected in report language and on the reprogramming baseline reports that the Department submits to the Appropriations Committees pursuant to Section 710, any proposed change in funding (even if the change is below the “normal” size thresholds) requires notification to the Appropriations Committees.

            There are a few exceptions to these rules that provide some limited flexibility to shift funds to other programs.  For example, the Secretary of Transportation is authorized to transfer funds appropriated for any part of the Office of the Secretary (OST) to any other part of the Office of the Secretary, provided that no appropriation for any office is increased or decreased by more than 5 percent by all such transfers.   The Federal Aviation Administration (FAA) is authorized to transfer up to 2 percent of funds from any budget activity funded within is Operations appropriation, excluding aviation regulation and certification, to any other budget activity within Operations, provided that no budget activity is increased or decreased by more than 2 percent.  Finally, the Federal Transit Administration’s Administrative Expenses appropriation is authorized to transfer funds appropriated for an office of the Federal Transit Administration, provided that no appropriation for an office is increased or decreased by more than a total of 5 percent by all such transfers.  Any OST, FAA or FTA transfers over these thresholds require formal reprogramming notification.  We have found these tools to be helpful in managing our programs and in addressing small funding needs between programs. 

            In the Federal-aid Highway Program, there is considerable flexibility for States to transfer their apportioned (formula) funds to other formula programs where they would be more useful to the State.  Similar flexibility does not exist for funds statutorily designated for specific projects, except for the flexibility provided by the section 1603 of the “Safe, Accountable, Flexible, Efficient Transportation Equity Act:  A Legacy for Users” (SAFETEA-LU).  Section 1603 provides an exception for projects designated before fiscal year 1991.  Under this provision, funds remaining from a pre-1991 designation, either unobligated or obligated on an inactive project, may be used instead by the State for any project eligible under the Surface Transportation Program, the most flexible of the highway formula programs.

            The Congress has authorized another mechanism to use within the Federal Highway Administration programs that we have found to be very effective.  That process, known as “August redistribution” is provided for in the Department’s annual appropriations acts and allows for redistribution of obligation authority that expires that fiscal year.  If that obligation authority cannot be used by the end of the fiscal year due to schedule slippages, funding changes etc., then it is made available to States that can obligate these additional amounts before the end of the fiscal year.  As a result,  Federal-aid highway dollars are available to support as many projects as possible within the envelope of resources in a given fiscal year.   Given the complex nature of Federal infrastructure projects and the timelines needed to complete them, this redistribution process has been an effective approach for managing highway transportation dollars wisely.   

            Finally Mr. Chairman, you asked me to address whether or not DOT’s unobligated balances expire.  In some cases unobligated balances do expire, based on the number of years Congress has made the funds available in the Department’s annual appropriations act or in authorizing statutes.  Some of our programs have three-year availability and some have no limit to availability.  Unobligated balances that expire may stay within an account for up to five additional years and can be used only to cover upward adjustments of prior-year obligations.  Generally, we adhere to the principle of “first-in-first-out” where our oldest funds are used first.  According to law, after the five-year period, the remaining unobligated resources are returned to Treasury.  For the Federal-aid Highway Program, funds must be obligated within the period of availability.  Funds that are obligated within the availability period but not expended, and no longer required, may be recovered and reobligated pursuant to 23 USC 118(d) and 31 USC 1301(a).

            Thank you for the opportunity to appear before you today.  I would be happy to answer questions.

*****

STATEMENT OF

ANNETTE SANDBERG,
ADMINISTRATOR
FEDERAL MOTOR CARRIER SAFETY ADMINISTRATION

BEFORE THE

HOUSE COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
SUBCOMMITTEE ON HIGHWAYS, TRANSIT AND PIPELINES

MARCH 2, 2006

Chairman Petri, Ranking Member DeFazio, and Members of the Subcommittee, thank you for inviting me today to discuss the Federal Motor Carrier Safety Administration’s (FMCSA) oversight role in curbside bus operations.  I am pleased to appear before you to discuss FMCSA programs that will achieve our goal of improving bus safety on our nation’s highways.

FMCSA was conceived out of the need for stronger commercial motor vehicle (CMV) safety – it is our mandate.  Toward that goal, FMCSA is working to reduce the loss of life on our nation’s highways.

Motorcoaches are one of the safest forms of commercial passenger transportation.  According to FMCSA’s Licensing & Insurance database, which houses information for all registered carriers, approximately 3,900 interstate motorcoach companies operate 35,000 motorcoaches in the United States.  There are approximately 120,000 motorcoach drivers who have commercial driver’s licenses (CDLs) with passenger endorsements.  For the previous 10 calendar years, there has been a yearly average of 22.4 motorcoach occupant fatalities.  For calendar years 2002-2005, each year’s fatalities have been greater than the 10-year average.  We must continue to work to reverse this trend.  In my opinion, even one fatality is too many.

SAFETEA-LU

Safety is the hallmark of the Safe, Accountable, Flexible, Efficient Transportation Equity Act:  A Legacy for Users (SAFETEA-LU) enacted last year.  As a result, our Agency is making changes that will increase all CMV safety on our roads.  They include the new National Registry of Certified Medical Examiners, Medical Review Board, and the revision of standards for diabetic drivers.  Additionally, the medical certification rule required by the Motor Carrier Safety Improvement Act of 1999 (MCSIA) is to be published this summer.  In addition, SAFETEA-LU requires FMCSA to act on several provisions that impact directly on motorcoach operations.  Among these are the following:

• Establishing minimum levels of financial responsibility for all private motor carriers.  Previously, for passenger carriers, a Federal insurance requirement has applied only to for-hire companies.  Now, private motor carriers of passengers will become subject to some minimum level of financial responsibility.  Organizations that operate a motorcoach for private use will now become subject to an insurance requirement. 

• Funding for motorcoach inspections through our Motor Carrier Safety Assistance Program, known as MCSAP, shall only be used to conduct motorcoach inspections at stations, facilities, destinations, and other locations where the operator can make a safe, planned stop.

NATIONAL MOTORCOACH SAFETY PROGRAM

FMCSA has established a National Motorcoach Safety Program with an emphasis on six areas:  (1) increase the number of motorcoach compliance reviews (CRs), which are investigations of a company’s safety practices; (2) develop and implement a separate CR prioritization system for motorcoach carriers; (3) establish formal motorcoach inspection programs within all States; (4) improve safety data; (5) reduce motorcoach fires; and (6) expedite safety audits of new entrant motorcoach carriers.  Addressing each of these areas is essential to improving passenger vehicle safety.

Motorcoach Company Compliance Reviews 

FMCSA has planned an increase in the number of compliance reviews conducted on motorcoach companies.  In FY 2005, FMCSA and our State partners conducted 457 motorcoach CRs, surpassing our established goal of 375.  Our goal for FY 2006 is 450 CRs, a 20% increase from the previous year’s goal.  As in 2005, we have every confidence that we will meet and likely exceed this goal.  Further increases are planned for future fiscal years.

Passenger Carrier Compliance Review Prioritization System

FMCSA has developed a quantitative, analytical system with the Volpe Center to prioritize motorcoach companies for a possible CR.  The initiation of a CR is based on poor safety performance data in one or more of our safety evaluations areas—crashes, driver, vehicle, and safety management.  FMCSA chose to develop a separate system for prioritizing motorcoach carriers for two reasons:  1) the availability of motorcoach safety data is more limited than that of property carriers because of infrequent roadside safety inspections and fewer CRs; and 2) the belief that bus companies should receive more program attention and enforcement resources.  This approach aligns our selection criteria with the National Transportation Safety Board (NTSB) recommendation that FMCSA revise the SafeStat system to compare passenger carriers with one another.  Justification is warranted for a separate system, given the potentially higher risk associated with the transportation of people as opposed to commodities.  FMCSA will implement the passenger carrier CR prioritization system during this calendar year.

Motorcoach Inspections

While all States conduct motorcoach inspections, not every State has a formal motorcoach inspection program.  By way of memorandum, FMCSA will require State agencies that receive MCSAP grant funds to revise their commercial vehicle safety plans (CVSPs) to include a bus inspection program.  The CVSP is the State’s plan to execute MCSAP grant money and defines the State’s inspection and enforcement activities for the coming year.  FMCSA will conduct a meeting with our MCSAP partners in early May to discuss this issue.  States will be encouraged to increase the number of carrier reviews conducted at bus companies as well as roadside inspections, especially inspections that cover both the vehicle and driver.   

Improved Safety Data

Safety data are important for FMCSA to employ our resources effectively and efficiently.  In the past three years, there have been significant improvements in the timeliness and quantity of our motorcoach safety data, largely through a series of recent inspection and compliance review strike forces.  These strike forces are short-term, intensive enforcement activities in a limited area.  These differ from task forces, which coordinate multiple strike force activities across a larger geographic area.  Having accurate and complete data about the bus companies we regulate is vital to our safety mission.  The more plentiful, timely, and reliable the data, the more effective the Agency will be in identifying those carriers with serious safety problems.  We want to develop annual trend data on various types of crashes and highway use.  Presently, we are conducting a Bus Crash Causation Study, mandated by MCSIA, to determine the reasons for and the factors contributing to serious bus crashes.  

Motorcoach Fires

Another important aspect of our safety program relates to the problem of motorcoach fires.  These fires occur nationwide from New York to Texas.  It is likely that the NTSB investigation of the 2005 Hutchins, Texas, motorcoach fire, in which 23 people died, will result in recommendations to FMCSA.  Presently, FMCSA is taking action to address bus fires.  To this end, we have recently approached the National Highway Traffic Safety Administration about a coordinated data sharing program between our two agencies to more quickly identify and correct vehicle safety problems.   Recently, motorcoach fires involving curbside bus companies have received media attention.  FMCSA has found that bus fires are a chronic problem throughout the entire industry and are not limited to curbside bus companies. We are working together with NHTSA to identify the causes of these fires.  Once they are identified our agencies will take appropriate action.

NOTE:  INSERT FROM CHANDLER ON NATIONAL BUS PROGRAM:

New Entrant Passenger Carriers

Addressing new entrant passenger carriers is a major challenge.  Of the 40-50,000 new carriers each year, several hundred of these are new entrant passenger carriers. 

Research has shown that new entrant motor carriers have significantly more non-compliance and a higher crash rate than other motor carriers.  We perform on-site audits of these new carriers to assess their safety status, educate them regarding their safety compliance responsibilities, and, in the case of passenger carriers, inform them of their Americans with Disabilities Act (ADA) accessibility responsibilities.  FMCSA has implemented a new entrant program policy that makes passenger carriers a greater safety priority.  New entrant passenger carriers are now subject to an on-site safety audit within 9 months of beginning operations instead of the usual 18 months for other motor carriers.  Where we have indicators of safety problems, Mr. Chairman, we go in immediately.  Finally, we are working on a proposed rule to strengthen new entrant program standards across the truck and bus industries. 

NORTHEAST CORRIDOR TASK FORCE

FMCSA has taken important steps in enforcing regulations that apply to curbside bus operators that provide fixed-route service among major cities in the northeast such as New York, NY, Boston, MA, Philadelphia, PA, and Washington, DC.  In December 2003, FMCSA organized a task force to examine these companies.  Some were providing for-hire fixed-route bus transportation without proper operating authority and/or adequate insurance.  This marked the first time FMCSA had organized a task force to address a specific sector of the passenger carrier industry.  At present, FMCSA has identified 24 curbside bus companies that are domiciled in the Northeast corridor.  These companies operate approximately 200 motorcoaches.  Sixteen of these curbside companies are assigned a satisfactory safety rating, two are assigned conditional ratings, and six are not rated.  FMCSA plans to conduct compliance reviews and assign safety ratings to these six companies in the near future.

The task force has worked with State and local agencies in addressing curbside bus companies.  As a result of the task force’s work, the City of Boston limited pick-up and drop-off locations for motorcoaches, outlawing curbside pick-ups for fixed-route bus companies in August 2004.  The New York City Police Department organized an inspection strike force that conducted driver and vehicle inspections of these bus companies.  To date, FMCSA has conducted 28 CRs and prepared 15 enforcement cases in connection with the task force.  Our field offices in Massachusetts, New York, New Jersey, Pennsylvania, and the District of Columbia are participating in the task force.

FMCSA investigators have found instances of curbside bus companies doing business for one another using the same trade name.  Often the name on the bus is not the company providing transportation.  When the media and industry access our on-line database using the bus’ trade name, they may find the carrier to be “inactive,” and assume the carrier does not have authority.  We are working with these carriers to update the information in our database so that the carrier providing transportation will be easily identifiable.

In October 2005, FMCSA organized a bus inspection strike force in the Northeast corridor that resulted in 403 inspections.  Many of these inspections were conducted on curbside bus companies.  In December 2005, FMCSA’s Passenger Technical Advisory Group, a specialized group of field investigators, conducted a bus company CR strike force along the Northeast Corridor.  The strike force conducted CRs on 14 bus companies in the States of Massachusetts, New York, Pennsylvania, Maryland, and in the District of Columbia.  Eight of these companies were curbside carriers.  Of the CRs conducted on these curbside carriers, six resulted in satisfactory safety ratings and three in enforcement actions, which can occur simultaneously with a satisfactory safety rating.  The most common violations were related to drug and alcohol testing.  FMCSA has found that some small bus companies do not comply with drug and alcohol testing regulations because this testing is sometimes regarded as unnecessary if the company owner knows the driver personally.  During the CRs, our investigators documented the compliance status with ADA regulations for over-the-road buses.  Documentation was forwarded to the Department of Justice for further action if necessary.  FMCSA has found the use of multi-jurisdictional strike forces to be an effective tool in identifying and apprehending unsafe carriers. 

ADA REGULATIONS FOR OVER-THE-ROAD BUSES

In September 1998, the Department of Transportation amended its ADA regulations to require accessible over-the-road bus service.  The regulations ensure accessible, timely over-the-road bus service for passengers with disabilities, including wheelchair users.  These regulations apply to intercity and fixed route bus operators and to demand responsive or charter operators.  Fifty percent of the fleet of large fixed route bus companies must be accessible by October 2006 and 100% by October 2012.  Small fixed route bus companies have no compliance deadline but must ensure their new buses are accessible and that they provide accessible bus service to passengers with disabilities on a 48-hour advance notice basis.  Demand responsive or charter operators are not subject to the fleet accessibility requirements but must provide accessible service on 48-hour advance notice. 

In short, an accessible bus fleet is the responsibility of large fixed route bus companies but not of other bus companies.  A frequent complaint is that curbside bus companies operate in non-compliance with ADA regulations.  According to MCMIS census data, small fixed route bus companies presently operating are by definition “small bus companies” because they have annual transportation revenues less than $7.2 million.  Only new buses must be accessible for small fixed route bus companies.

Noncompliance with ADA regulations is an issue throughout the bus industry; it is not limited to curbside bus companies.  Based on the hundreds of telephone calls FMCSA receives from bus companies about ADA regulations, we have found they frequently do not understand their responsibility to provide timely, accessible bus service to individuals with disabilities.    

FMCSA’s role under the ADA regulations is quite limited.  The Department’s ADA regulations require over-the-road bus companies to submit multiple reports annually to FMCSA.  These reports include information about the number of requests for accessible bus service, number of times these requests were met, number of new and used buses purchased or leased during the past year, number of accessible buses, and the total number of buses in each company’s fleet.  Overall industry compliance with data reporting requirements has been low in part because there are no penalties for noncompliance.  For the reporting period that ended September 30, 2005, approximately 21% of over-the road bus companies submitted at least one required report, a marked improvement over the 6% reporting rate in the years prior to 2004.  FMCSA attributes this increase to letters we sent in October 2004 and 2005, reminding all known over-the-road bus companies of their reporting responsibilities.  We will continue and strengthen this effort. 

FMCSA does not have any authority to enforce ADA regulations within the industry.  In general, DOJ enforcement of the ADA regulations has been limited to handling complaints.  The number of complaints from disabled individuals has been small since the ADA regulations were promulgated.

While DOJ is the only entity with the power to enforce violations of ADA regulations, the Department of Transportation has done much to assist its efforts.  In addition to reminding motorcoach operators about their annual reporting requirements, FMCSA compiles and submits the industry data to DOJ.  We provide DOJ with ADA bus accessibility complaints. 

DOT’s ADA regulations required the Department to begin reviewing the regulations for demand-responsive or charter bus companies in October 2005.  A review of the ADA regulations for other over-the-road bus companies is required to begin in October 2006.

CONCLUSION

Whether it be a senior citizens’ group traveling to see the Grand Canyon, a scout troop going to Disney World, or a class trip to Washington, D.C., we must ensure our carriers provide the highest possible level of transportation safety.  The traveling public expects motorcoach transportation to be fatality free – the loss of one passenger’s life is unacceptable.  Our safety partnership with the motorcoach industry is vital toward making our highways safer.  Each motorcoach company’s effort is needed to improve the safety of highway passenger transportation.  Mr. Chairman, during my tenure at FMCSA I have worked hard to accomplish the goal of increased safety for our nation’s traveling public.  Thank you for giving me the opportunity to outline the work FMCSA is doing to make this segment of transportation safer.  I would be happy to answer any questions you may have.

STATEMENT OF

NICK SABATINI,
ASSOCIATE ADMINISTRATOR FOR AVIATION SAFETY
FEDERAL AVIATION ADMINISTRATION

BEFORE THE

HOUSE COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE,
SUBCOMMITTEE ON AVIATION

ON

UNMANNED AIRCRAFT ACTIVITIES,

MARCH 29, 2006.

Chairman Mica, Congressman Costello, Members of the Subcommittee.

I am pleased to appear before you today to discuss a subject that serves to remind us that the future is now.  The development and use of unmanned aircraft (UAs) is the next great step forward in the evolution of aviation.  As it has throughout its history, FAA is prepared to work with government and industry to ensure that these aircraft are both safe to operate and are operated safely.  The extremely broad range of UAs makes their successful integration into the national airspace system (NAS) a challenge, but certainly one worth meeting.  To meet this vital need, the FAA has established an Unmanned Aircraft Program Office which has the expressed purpose of insuring a safe integration of UAs into the NAS.

At the outset, you must understand that UAs cannot be described as a single type of aircraft.  UAs can be vehicles that range from a 12-ounce hand launched model to the size of a 737 aircraft.  They also encompass a broad span of altitude and endurance capabilities.  Obviously, the size of the UA impacts the complexity of its  system design and capability.  Therefore, each different type of UA has to be evaluated separately, with each aircraft’s unique characteristics being considered before its integration into the NAS can be accomplished.  FAA is currently working with both other government agencies and private industry on the development and use of UAs.

The number of government agencies that want to use UAs in support of their mandate is increasing.  In addition to the Departments of Defense (DoD) and Homeland Security (DHS), the Department of Interior (DOI), the National Oceanic and Atmospheric Administration (NOAA) and state and local governments are all interested in increasing their use of UAs for a range of very different purposes.  The certification of UAs by government agencies in the NAS is considered a public aircraft operation, the oversight for which falls outside the scope of the FAA.  These public operations are, however, required to be in compliance with certain federal aviation regulations administered by the FAA and the FAA is and must be involved to ensure that the operation of these aircraft do not compromise the safety of the NAS.  FAA’s current role is to ensure that UAs do no harm to other operators in the NAS and, to the maximum extent possible, the public on the ground.

In working with government agencies, the FAA issues a certificate of authorization (COA) that permits the agency to operate a particular UA for a particular purpose in a particular area.  In other words, FAA works with the agency to develop conditions and limitations for UA operations to ensure they do not jeopardize the safety of other aviation operations.  The objective is to issue a COA with terms that ensure an equivalent level of safety as manned aircraft.  Usually, this entails making sure that the UA does not operate in a populated area and that the aircraft is observed, either by someone in a manned aircraft or someone on the ground.  In the interest of national security and because ground observers were not possible, the FAA worked with DHS to facilitate UA operations along the Arizona/New Mexico border with Mexico.  In order to permit such operations, the airspace is segregated to ensure system safety so these UA flights can operate without an observer being physically present to observe the operation.  The FAA is working closely with DHS to minimize the impact of the segregation methods on other aviation operations.  Such operations include DoD training missions, general aviation and commercial operations.  In the past two years, the FAA has issued over 50 COAs.  With the steadily expanding purposes for which UAs are used and the eventual stateside redeployment of large numbers of UAs from the theater of war, the FAA expects to issue a record number of COAs this year.

FAA’s work with private industry is slightly different.  Companies must obtain an airworthiness certificate by demonstrating that their aircraft can operate safely within an assigned flight test area and cause no harm to the public.  They must be able to describe their unmanned aircraft system, along with how and where they intend to fly.  This is documented by the applicant in what we call a program letter.  An FAA team of subject matter experts reviews the program letter and, if the project is feasible, performs an on-site review of the ground system and unmanned aircraft, if available.  If the results of the on-site review are acceptable, there are negotiations on operating limitations.  After the necessary limitations are accepted, FAA will accept an application for an experimental airworthiness certificate which is ultimately issued by the local FAA Manufacturing Inspection District Office.  The certificate specifies the operating restrictions applicable to that aircraft.  We have received 14 program letters for UAs ranging from 39 to over 10,000 pounds.  We have issued two experimental certificates, one for General Atomics’ Altair, and one for Bell-Textron’s Eagle Eye.  We expect to issue at least two more experimental certificates this year. 

Each UA FAA considers, whether it be developed by government or industry, must have numerous fail safes for loss of link and system failures.  Information must be provided to FAA that clearly establishes that the risk of injury to persons on the ground is highly unlikely in the event of failures or loss of link.  Like everything else having to do with UAs, the methods that link the aircraft with ground control can be as simple as frequency line of sight or as complex as multiple ground and satellite paths making up a functional connection.  If the link is lost, it means the aircraft is no longer flying under  control of the pilot.  Because FAA recognizes the seriousness of this situation, we are predominantly limiting UA operations to unpopulated areas.  Should loss of link occur, the pilot must immediately alert air traffic control and inform the controllers of the loss of control link.  Information about what the aircraft is programmed to do and when it is programmed to do it is pre-coordinated with the affected ATC facilities in advance of the flight so that FAA can take the appropriate actions to mitigate the situation and preserve safety.

The COA and Experimental Airworthiness Certificate processes are designed to allow a sufficiently restricted operation to ensure a safe environment, while allowing for research and development until such time as pertinent standards are developed.  They also allow the FAA, other government agencies, and private industry to gather valuable data about a largely unknown field of aviation.  The development of standards is crucial to moving forward with UAs integration in the NAS.  FAA has tasked the RTCA, an industry led federal advisory committee to FAA, with the development of a Minimum Aviation System Performance Standard (MASPS) for sense and avoid, and command, control and communication.  These standards will allow manufacturers to begin to build certifiable avionics for UAs.  It is expected that the MASPS for avionics will take three to four years to develop.  Until there are set standards and aircraft meet them, UAs will continue to have appropriate restrictions imposed.  In addition, the FAA is working closely with DoD and DHS to collaborate on the appropriate approach to certification standards.  

Because of the extraordinarily broad range of unmanned aircraft types and performance, the challenges of integrating them safely into the NAS continue to evolve.  Urgent future ground surveillance needs must be balanced with the ongoing air transportation operations.  The certification and operational issues described herein highlight the fact that there is a missing link in terms of technology today that prevents these aircraft from getting unrestricted access to the NAS.  Currently there is no recognized technology solution that could make these aircraft capable of meeting regulatory requirements for see and avoid, and command and control.  Further, some unmanned aircraft will likely never receive unrestricted access to the NAS due to the limited amount of avionics it can carry because of weight, such as transponders, that can be installed in a vehicle itself weighing just a few ounces.  Likewise, the performance difference with surrounding air traffic can present challenges.  Some UA operate in airspace used primarily by jet aircraft that can fly at twice their speed, thus complicating the control of the airspace.

FAA is fully cognizant that UAs are becoming more and more important to more and more government agencies and private industry.  The full extent of how they can be used and what benefits they can provide are still being explored.  Over the next several years, when RTCA has provided recommended standards to the FAA, we will be in a position to provide more exact certification and operational requirements to UA operators.  As the technology gap closes, we expect some UAs will be shown to be safer and have more access to the NAS.  The future of avionics and air traffic control contemplates aircraft communicating directly with one another to share flight information to maximize the efficiency of the airspace.  This could certainly include some models of UA.  Just as there is a broad range of UA, there will be a broad range of ways to safely provide them access to the NAS.  Our commitment is to make sure that when they operate in the NAS, they do so with no denigration of system safety

In our history, FAA and its predecessor agencies have successfully transitioned many new and revolutionary aircraft types and systems into the NAS.  Beginning in 1937, we completed the U.S. certification for the first large scale production airliner (the DC-3), then went on to certify the first pressurized airliner (the Boeing B-307 in 1940), civil helicopter (Bell 47 in 1946), turboprop (Vickers Viscount in 1955), turbojet (Boeing 707 in 1958), as well as the supersonic transport (Concorde in 1979), and the advance wide-body jets of today (Boeing 747-400 in 1989).  It seems appropriate that, as we begin a new century and new millennium, advances in aviation technology present us with another addition to the fleet with great potential - unmanned aircraft.

Mr. Chairman, FAA is prepared to meet the challenge.  We will continue to work closely with our partners in government, industry and Congress to ensure that the National Airspace System has the ability to take maximum advantage of the unique capabilities of unmanned aircraft.

This concludes my prepared remarks.  I will be happy to answer your questions at this time.

JOINT STATEMENT OF

NICHOLAS A. SABATINI,
ASSOCIATE ADMINISTRATOR FOR AVIATION SAFETY,
AND
MICHAEL A. CIRILLO,
VICE PRESIDENT, SYSTEMS OPERATION SERVICES,
AIR TRAFFIC ORGANIZATION,
FEDERAL AVIATION ADMINISTRATION

BEFORE THE

SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION,
SUBCOMMITTEE ON AVIATION

ON

NEW AIRCRAFT IN THE US AVIATION SYSTEM

SEPTEMBER 28, 2006

Good morning, Chairman Burns, Senator Rockefeller, and Members of the Subcommittee.  It is our pleasure to be here today to discuss with you the introduction of new aircraft in our nation’s air traffic system.  The Federal Aviation Administration is preparing to deal with the challenges presented by these and other new types of aircraft.  Very Light Jets (VLJs) and Unmanned Aircraft (UAs) are examples of the on-going evolution of the aviation industry, and the FAA, working closely with the aviation industry, will develop safety standards and operating procedures to ensure their safe integration into the NAS.

VLJs and UAs are part of the future of aviation, and that future is on our doorstep right now.  The system is in place TODAY to accommodate the entry of new aircraft into the National Airspace System . . . this is nothing new for the FAA.  It is our day-to-day business.  From when FAA’s predecessor agency certified the Buhl Airster in 1927, to the introduction of the Boeing 707 and the dawning of the jet age in the late 1950’s, FAA has always been able to successfully assimilate new aircraft into the NAS.  When the Boeing 707 began its transcontinental flights, the average airspeed of passenger aircraft more than doubled overnight, from about 220 knots to over 500 knots.  And this transition into the jet age took place within an infrastructure that was 50 years old at the time.  The system is more robust today, with better technology, more precision, and greater flexibility, than at any time in our history.  FAA has long established operating procedures that ensure different types and vintages of aircraft are operated at compatible airspeeds in congested airspace or while en-route to and from the high altitude airspace.  From beginning to end, nothing is left to chance.

Relatively inexpensive twin-engine VLJs are believed by many to have the potential to redefine the business jet segment by significantly expanding business jet flying and offering performance that could support a true on-demand air-taxi business service.  FAA forecasters project that up to 5,000 of these jets will be in operation by 2017.

The FAA has established a cross-organizational group to address the issues of safety and system capacity created by the anticipated introduction of thousands of VLJs within the next ten years.  This group includes elements from our Air Traffic Organization (ATO), Flight Standards Service (AFS), Aircraft Evaluation Group (AEG) and Aircraft Certification Office (ACO).  The group has organized its work under separate committees that focus on specific issues:  Pilot Training and checking; Flight Operations; Maintenance; Inspector Training; and Air Traffic. 

Also, to address UAs, we have established an Unmanned Aircraft Program Office to develop guidance and regulations for certification and integration of UAs.  Interest in using Unmanned Aircraft (UAs) for a broad range of purposes is increasing, not only by U.S. governmental agencies, but also by the civil aviation community.  Integrating UAs with manned aircraft in the NAS presents significant challenges for the FAA, and both the public and private sectors.  At the outset, it is helpful to understand that UAs cannot be described as a single type of aircraft.  UAs can be vehicles that range from a 12-ounce hand-launched model to one the size of a 737 aircraft.  They also encompass a broad span of altitude and endurance capabilities.  Obviously, the size of the UA impacts the complexity of its system design and capability.  Therefore, each different type of UA has to be evaluated separately, with each aircraft’s unique characteristics being considered before its integration into the NAS can be safely accomplished. 

The certification of all government agency aircraft, including UAs, in the NAS is considered a public aircraft operation, the oversight for which falls outside the scope of the FAA.  These public operations are, however, required to be in compliance with certain federal aviation regulations administered by the FAA and the FAA is and must be involved to ensure that the operation of these aircraft does not compromise the safety of the NAS.  FAA’s current role is to ensure that UAs do no harm to other operators in the NAS and, to the maximum extent possible, the public on the ground.

In working with government agencies, the FAA issues a certificate of authorization (COA) that permits the various public agencies to operate a particular UA for a particular purpose in a particular area.  In other words, FAA works with the agency to develop conditions and limitations for UA operations to ensure they do not jeopardize the safety of other aviation operations.  The objective is to issue a COA with terms that ensure an equivalent level of safety as manned aircraft.  Usually, this entails making sure that the UA does not operate in a populated area and that the aircraft is observed, either by someone in a manned aircraft or someone on the ground.  For example, in the interest of national security and because ground observers were not possible, the FAA worked with the Department of Homeland Security (DHS) to facilitate UA operations along the Arizona/New Mexico border with Mexico.  In order to permit such operations, the airspace was segregated to ensure system safety so these UA flights can operate without an observer being physically present to observe the operation.  With the steadily expanding purposes for which UAs are used and the eventual stateside redeployment of large numbers of UAs from the theater of war, the FAA expects to issue a record number of COAs.  In fact, the FAA has issued more than 75 COAs this year, compared with a total of 50 for the two previous years combined.

FAA’s work with private industry is slightly different than with government agencies.  The development of guidance and regulations for UAs for civil aviation use will be an evolving process.  Standards development is required for all areas of UAS technology, including the airframe, maintenance procedures, pilot and controller training, powerplant and other areas.  The FAA is working with industry, under the auspices of RTCA, Inc. to develop consensus standards for detect, sense and avoid systems; and command, control and communication systems.  Until standards and minimum requirements are established, the FAA is working closely with companies that wish to operate UAs in the NAS today by applying the Experimental Airworthiness Certificate process.

Today, for civil operation, companies may obtain an Experimental Airworthiness Certificate by demonstrating that their aircraft can operate safely within an assigned flight test area and cause no harm to the public.  They must be able to describe their unmanned aircraft system, along with how and where they intend to fly.  This is documented by the applicant in what we call a program letter.  An FAA team of subject matter experts reviews the program letter and, if the project is feasible, performs an on-site review of the ground system and unmanned aircraft, if available.  If the results of the on-site review are acceptable, there are negotiations on operating limitations.  After the necessary limitations are accepted, FAA will accept an application for an experimental airworthiness certificate which is ultimately issued by the local FAA Manufacturing Inspection District Office.  The certificate specifies the operating restrictions applicable to that aircraft.  To date, we have received several program letters for UAs ranging from 39 to more than 10,000 pounds.  We have issued two experimental certificates, one for General Atomics’ Altair, and one for Bell-Textron’s Eagle Eye.  We expect to issue at least one more experimental certificate this year. 

The COA and Experimental Airworthiness Certificate processes are designed to allow a sufficiently restricted operation to ensure a safe environment, while allowing for research and development until such time as pertinent standards are developed.  They also allow the FAA, other government agencies, and private industry to gather valuable data about a largely unknown field of aviation.  The development of standards is crucial to moving forward with UA integration into the NAS.  Because of the extraordinarily broad range of unmanned aircraft types and performance, the challenges of integrating them safely into the NAS continue to evolve.  The certification and operational issues described herein highlight the fact that there is a missing link in terms of technology today that prevents these aircraft from getting unrestricted access to the NAS. 

So far we have discussed FAA’s current efforts regarding certification and regulation of VLJs and UAs as we enable the safe introduction of these new aircraft into the NAS.  There are still many challenges to be met in these areas before the procedures for certification, licensing, training, inspection, maintenance and operation of these aircraft are standardized and routine.  The question many have is how FAA is going to integrate these new aircraft into the NAS, without adversely affecting safety, or increasing congestion and delays.  The ATO is producing results today that are already improving capacity and efficiency, and in conjunction with the Joint Planning and Development Office (JPDO), laying the foundation for the Next Generation Air Transportation System (NextGen).

In 2005, the ATO implemented a new procedure, known as Domestic Reduced Vertical Separation Minima or DRVSM, which is truly exciting.  DRVSM has significantly increased capacity in the en route airspace by doubling the number of usable altitudes between 29,000 and 41,000 feet.  The procedure permits controllers to reduce minimum vertical separation at altitudes between 29,000 and 41,000 feet from 2,000 feet to 1,000 feet for properly equipped aircraft. 

The User Request Evaluation Tool (URET) is a tool used by the controller to predict potential aircraft to aircraft, and aircraft to airspace conflicts earlier, allowing them to construct alternative flight paths.  URET allows these conflicts to be addressed in a strategic sense rather than a tactical sense, with fewer deviations to the route or altitude.

In August, the FAA approved the update to the Roadmap for Performance-Based Navigation, developed in cooperation with the aviation industry.  The 2006 Roadmap focuses on addressing future efficiency and capacity needs while maintaining or improving the safety of flight operations by leveraging advances in navigation capabilities on the flight deck.  This revision updates the FAA and industry strategy for evolution toward performance-based navigation.  The Roadmap is intended to help aviation community stakeholders plan their future transition and investment strategies.  The stakeholders who will benefit from the concepts in the Roadmap include airspace operators, air traffic service providers, regulators and standards organizations, and airframe and avionics manufacturers.  As driven by business needs, airlines and operators can use the Roadmap to plan future equipage and capability investments.  The strategy rests upon two key navigation concepts: Area Navigation (RNAV) and Required Navigation Performance (RNP).

The ATO is focused on expanding the implementation of advanced RNAV procedures to additional airports.  These RNAV procedures provide flight path guidance that is incorporated into onboard aircraft avionics systems, requiring only minimal air traffic instructions.  This significantly reduces routine controller-pilot communications, allowing more time for pilots and controllers to handle other safety-critical flight activities.  Also, RNAV procedures use more precise routes for departures and arrivals, reducing time intervals between aircraft on the runways, and allowing for increases in traffic, while enhancing safety.  In 2004, thirteen RNAV departure procedures and four RNAV arrival procedures went into full operation at Atlanta Hartsfield-Jackson International Airport – the world’s busiest airport.  Additionally, sixteen RNAV departures were implemented at Dallas/Fort Worth International Airport in 2005.  The FAA published 53 of these procedures in FY2006, and plans to publish at least 50 procedures in FY2007.

FAA is currently implementing additional technological innovations, including a capability known as RNP.  RNP uses on-board technology that allows pilots to fly direct point-to-point routes more reliably and accurately.  RNP is extremely accurate, and gives pilots not only lateral guidance, but vertical precision as well.  RNP potentially reaches all aspects of the flight – departure, en route, arrival, and approach.  As of today, the FAA has published 28 RNP approach procedures this year, and plans to publish at least 25 more in FY2007.

We must also make sure we are using the best technology to maintain a safe and efficient air traffic system.  The en route air traffic control computer system is considered the heart of the NAS.  En Route Automation Modernization (ERAM) provides the basic foundation upon which many of the transforming technologies moving us from the current NAS to NGATS needs.  ERAM replaces the software for the Host Computer System and its backup.  It will enable the FAA to increase capacity and improve efficiency in a way that cannot be realized with the current system, which is a mix of different technologies that evolved over the years and is extremely difficult to expand or upgrade.  In addition to supporting new transformational technologies, ERAM itself can process more than double the number of flight plans, and use almost triple the number of surveillance sources as the current system.  The ERAM system is scheduled to be deployed and operational at all 20 Air Route Traffic Control Centers by 2010. 

Traffic Flow Management (TFM) is the “brain” of the NAS, and is the reason that we could handle more traffic at our major airports in 2005 than in 2000, without the long delays that made the summer of 2000 the worst on record.  The TFM system is the mechanism by which traffic flows across the NAS are orchestrated.  As the NAS is impacted by severe weather, congestion and/or outages, the TFM system provides timely information to our customers to expedite traffic and minimize system delays.  The FAA is currently in the process of modernizing the TFM infrastructure through its TFM Modernization program.  We are currently introducing new Airspace Flow Management technology to reduce the impact of delays incurred during the severe weather season.  FAA estimates show that TFM provides roughly $340 million in benefits to our customers on a yearly basis in reduced direct operating costs through delay reductions.  ERAM and TFM together will enable flexible routing around congestion, weather, and flight restrictions, and help controllers to automatically coordinate flights, during periods of increased workload. 

The JPDO and ATO will work together to analyze the changes that will be needed to both ERAM and TFM so they meet the needs of the Next Generation System.  Today’s flight planning and air traffic paradigms will be transformed into a system that manages operations based on aircraft trajectories, regularly adjusts the airspace structure to best meet customer and security/defense needs and relies on automation for trajectory analysis and separation assurance.

The JPDO serves as a focal point for coordinating the research related to air transportation modernization for agencies across the Federal government, including the Departments of Transportation, Commerce, Defense and Homeland Security, as well as NASA and the Office of Science and Technology Policy. 

At the FAA, our eyes are focused on the NextGen Vision while using existing technology to provide important and tangible operational benefits now.  We are finding ways to make existing capacity work more efficiently through advanced technology and operational improvements.  Research is underway to explore ways of safely achieving reductions in separation standards, allowing for greater density of operations, which the anticipated increase in these vehicles will demand.  We are also examining the Human Factors implications of super density operations and traffic control automation.  Moreover, as-yet unexplored concepts may be expected to play a role.

These innovations provide relief today as well as help to lay the foundation for the Next Generation System.  Successful integration of VLJs and UAs into the NAS will represent a significant step in the process of evolution from the current NAS to the NextGen system.  In order to fulfill the NextGen 2025 vision of handling significant increases in today’s traffic, with improved safety, capacity, and efficiency, we must competently manage the introduction of VLJs and UAs into the NAS.   The impact of these new vehicles on the NAS is addressed in the JPDO Concept of Operations (CONOPS).  One overarching goal of the NextGen initiative is to develop a system that will be flexible enough to accommodate a wide range of users -- very light jets and large commercial aircraft, manned and unmanned aircraft, small airports and large, business and vacation travelers alike, while handling a significantly increased number of operations with a commensurate improvement in safety, security and efficiency.

In 2005, the JPDO moved ahead with plans to accelerate the development of key NGATS projects, such as Automatic Dependent Surveillance-Broadcast (ADS-B), and System Wide Information Management (SWIM).  In FAA’s Fiscal Year 2007 budget request, the Administration proposed several targeted investment areas, to promote early implementation of elements of the NGATS system.  One of these very promising initiatives, with potential for broad operational applications, is the Automatic Dependent Surveillance-Broadcast (ADS-B) system, a technology that will replace ground-based radar systems and revolutionize air navigation and surveillance.  For FY 2007, the President’s budget includes $80 million for the FAA for the ADS-B program. 

Given its fundamental importance to the success of the NGATS System, establishing an initial Network-Enabled Operations (NEO) capability is a high priority for JPDO and its member agencies.  Current efforts focus on identifying the network architecture and enacting standards for information and safety data sharing.  In 2005, the JPDO, FAA and an industry team demonstrated how network-enabled concepts developed for the military customers can be applied to Air Traffic Management.  The FAA’s System Wide Information Management (SWIM) program – the beginning of network-centric operation in the National Airspace System – will continue developing this capability.  The President’s budget proposal for FY 2007 requests $24 million for FAA’s SWIM program.

The FAA has already been working with industry to identify the near-term operational requirements of VLJs in the NAS.  Dayjet, a large Part 135 operation, expects to be operating 100 Eclipse EA-500s by the end of 2007.  Its business plan calls for utilizing regional airports in the southeastern U.S., and Dayjet is working in close cooperation with FAA so we can establish appropriate flight procedures as these jets are introduced.  FAA is also currently working with Eclipse to contract for training for both FAA operations and maintenance inspectors for FY07.  The EA-500 is unlike any other aircraft currently in production, and is unique in that it has highly integrated avionics systems. 

Performance characteristics of VLJs are similar to some other business class aircraft that have operated in the NAS for many years.  VLJs can operate from shorter runways than commercial airliners, and can utilize the 5000+ satellite airports around the United States.  In fact, the advertised business models for the first companies state that they will fly point-to-point among the nation’s smaller regional airports that are situated within a half-hour’s drive of over 90 percent of Americans.  These jets are expected to be delivered from the manufacturers with state-of-the-art avionics, capable of taking advantage of RNAV and RNP procedures and routes.  Manufacturers state that VLJs will be IFR-certified, with glass cockpits, with full RVSM and ADS-B equipage.  They will be capable of flying with single or dual pilots, with 4-10 passenger seats, and will typically operate at intermediate flight levels between 15,000 and 28,000 feet, but capable of 38,000 to 45,000 feet.  Cruising speeds will be between 315 and 450 KIAS or Knots Indicated Air Speed, with a range of 900-1750 nautical miles, although typical legs will be 200-600 nautical miles.

The FAA is conducting training throughout the ATO regarding performance capabilities of these aircraft to help mitigate any problems with blending VLJs with faster jets. 

The FAA’s Cross Organizational Group will continue to work to monitor the safety and impact of these new aircraft, and address any unanticipated problems as they arise. 

These technological and operational improvements are positive steps down the road to building the Next Generation Air Transportation System.  The FAA and the JPDO are continuing to explore near and far term innovations that will enable accommodation of increasing numbers of VLJs and UAs in the NAS.  We know, however, that we continue to face many challenges.  Over the next few years we will work to achieve better cost management; determine the best solution for our aging and deteriorating facilities; plan more effectively for catastrophic events, like hurricanes or terrorist attacks; and, conduct research on convective weather to reduce flight delays associated with summer storms.  Everything in our business – pay, job performance, future technology, the nation’s economy – is linked together.  We strive to improve efficiency, while searching for innovative ways to provide safer services even more efficiently.  As we decide how to wisely invest in our future, we will continue to work closely with our customers, our employees, and of course, Members of Congress. 

Mr. Chairman, this concludes our testimony, and we would be happy to answer any questions the Committee may have.