STATEMENT OF

MICHAEL W. REYNOLDS
DEPUTY ASSISTANT SECRETARY FOR
AVIATION and INTERNATIONAL AFFAIRS
U.S. DEPARTMENT OF TRANSPORTATION

before the

SUBCOMMITTEE ON AVIATION
COMMITTEE ON TRANSPORTATION and INFRASTRUCTURE
U.S. HOUSE OF REPRESENTATIVES

on

Essential Air Service Program and Small Community Air Service Development Program

April 25, 2007

Mr. Chairman, thank you for inviting me to this hearing.  I appreciate the opportunity to discuss with you and the Subcommittee two programs administered by the Department of Transportation that affect air service to small communities, namely the Essential Air Service (EAS) program and the Small Community Air Service Development Program.  I can assure you that the Department is committed to implementing its small community air service programs in the best and most efficient manner and thereby help smaller communities meet the challenges that they face in obtaining and retaining air service. 

It is clear that air service in this country has changed dramatically over the past several years.  Many of these changes have been very positive.  The growth of low-fare carriers, for example, has made affordable air transportation available to millions of people across the country.  The number of air travelers has expanded dramatically, as hundreds of passengers have taken advantage of the low fares that have become more widely available.  While this is a good development overall for consumers, we recognize that it can create new challenges for some small communities.  With a greater number of service choices available, particularly those involving lower fares, many consumers are willing to drive to places with a broader array of air service options, making it more difficult for some individual airports to sustain their own traffic levels.  There are, for example, some communities receiving EAS assistance within ready driving distance of two or three major airports.  This can result in a struggling community airport, but not necessarily consumers who lack access to the national air transportation system. 

Another challenge is the change in aircraft used by carriers that serve small communities.  Many commuter carriers have been replacing their 19-seat aircraft with 30-seat aircraft, due to the increased costs of operating the smaller planes and larger carriers’ reluctance to offer code sharing on 19-seaters.  This trend began at least 10 years ago and has continued.  There are now fewer and fewer 19-seat aircraft in operation as many carriers have upgauged to 30-seat aircraft, and, in some cases, even regional jets.  As a result, many small communities that cannot support this larger size of aircraft are being left without air service.  Additionally, the rise in the cost of aviation fuel has made all carriers more cost-conscious and more selective in initiating new service and maintaining service where yields and traffic are low.  Also, some changes have occurred in response to the terrorist attacks of September 11, 2001.  Many consumers, leisure and business, have changed their travel patterns and carriers have altered the structure of their airline services in both large and small markets.  Finally, the financial condition of the network carriers has added further uncertainty for their regional code-share partner service.

The challenge that we face is one of adjusting the programs, to the extent we are able, to account for these changes in an efficient and effective manner, giving appropriate and balanced recognition to the reasonable needs of the communities, the carriers, the consumers, and the taxpaying public at large.   Mr. Chairman, I do not use the word “challenge” lightly.  All of us -- the federal government that manages programs affecting service at small communities, as well as the States and the communities themselves -- need to reexamine the way we approach small community air service. 

We at the Department of Transportation have recognized for a while now that the way the federal government helps small communities has not kept pace with the changes in the industry and the way service is now provided in this country.  For that reason, we have initiated some important reevaluations of the programs that we manage.  I want to share with you today what we have done and are doing to address this issue.

As you know, the Department administers two programs dealing with air service at small communities.  The EAS program provides subsidies to air carriers to provide air service at certain statutorily mandated communities.  The Small Community Air Service Development Program, which was established by Congress in 2000 under the AIR-21 legislation, provides federal grants-in-aid to help small communities address their air service and airfare issues.  While initially established as a pilot program, it was reauthorized through FY 2008 in Vision 100.

Essential Air Service Program

Let me first address the EAS program.  The laws governing our administration of the EAS program have not changed significantly since its inception 28 years ago, notwithstanding the dramatic changes that have taken place in the airline industry.  As currently structured, the EAS program acts only as a safety net for small communities receiving subsidized air service by providing threshold levels of air service.  While ensuring some service, this approach does little to help communities attract self-sustaining unsubsidized air service, as evidenced by the fact that once a community receives subsidized air service it is rare for an air carrier to come in offering to provide unsubsidized air service.  

The goal of our proposed changes to the EAS program is to focus the program’s resources on the most isolated communities, i.e., those with the fewest driving alternatives.  Our current proposal to accomplish this is quite different from those made in past years.  The first change we propose is to cap EAS communities at those that currently receive subsidized air service.  Second, we would rank all the subsidized communities by isolation, i.e., by driving miles to the nearest large or medium hub airport, with the most isolated getting service first.  Last, we are proposing a maximum $50 million funding level. 

Congress has also recognized the need for reform and created a few pilot programs in Vision 100.  One program is the Community Flexibility Pilot Program.  It allows up to ten communities to receive a grant equal to two years’ worth of subsidy in exchange for their forgoing their EAS for ten years.  The funds would have to be used for a project on the airport property or to improve the facilities for general aviation, but no communities have volunteered for that program.  Another program is the Alternate Essential Air Service Program.  The thrust of this program is that, instead of paying an air carrier to serve a community as we typically do under EAS, communities could apply to receive the funds directly -- provided that they have a plan as to exactly how they would use the funds to the benefit of the communities’ access to air service.  The law gives great flexibility in that regard.  For example, funds could be used for smaller aircraft but more frequent service, for on-demand air taxi service, for on-demand surface transportation, for regionalized service, or to purchase an aircraft to be used to serve the community.  The Department issued an order establishing that program in the summer of 2004, but to date no communities have applied.  I cannot tell you for sure why, but my guess is that part of it is that it is just human nature to resist both risk and change. 

With regard to the EAS program, it is important to note the continued growth of the program’s size and cost to taxpayers over time.  As a point of reference, before the terrorist attacks of September 11, the Department was paying subsidy for 107 communities (including 32 in Alaska).  We are now subsidizing service at 145 communities (including 41 in Alaska).   Further, EAS is often viewed as an absolute entitlement whether the communities invest any time and effort in supporting the service or not.  We have proposed reforms to EAS to better focus its resources on the most isolated communities. 

Small Community Air Service Development Program

The Department is now in its sixth year of administering the Small Community Air Service Development Program (Small Community Program).  Under the law, the Department can make a maximum of 40 grants in each fiscal year to address air service and airfare issues, although no more than four grants each year can be in any one State.  Until 2006, Congress had provided $20 million in each year for this program.  In 2006, the funding for the program was $10 million, and the Revised Continuing Appropriations Resolution, 2007 (P.L. 110-5), provides the Department with $10 million in Fiscal Year 2007 to administer the Small Community Program.  On February 26, the Department issued a Request for Proposals for 2007 applications and proposals are due April 27. 

Given the many and varying priorities facing the Department, this program was not accommodated within the President’s 2008 Budget.  Nonetheless, it is important to note the extensive support that the Department provides for small airports in terms of supporting the infrastructure that make any service possible.  In the last two years (FY2005 and FY2006), the FAA has provided over $4 billion in grants for small airports, or nearly 2/3 of the Airport Improvement Program (AIP).  Furthermore, the Department's reauthorization proposal would continue to direct AIP to small airports.  The reauthorization proposal would also add new AIP eligibility for ADS-B ground stations and expanded eligibility for revenue producing projects at small airports that will help their financial stability.

With respect to the Small Community Program, the Department has made many awards to communities throughout the country and authorized a wide variety of projects, seeking to address the diverse types of problems presented and test different ideas about how to solve them.  Some of these projects include a new business model to provide ground handling for carriers at the airport to reduce station costs, seed money for a new airline to provide regional service, expansion of low-fare services, a ground service transportation alternative for access to the Nation’s air transportation system, aggressive marketing and promotional campaigns to increase ridership at airports, and revenue guarantees, subsidies, and other financial incentives to reduce the risk to airlines of initiating or expanding service at a community.  For the most part, these projects extend over a period of two to four years.

This program differs from the traditional EAS program in a number of respects.  First, the funds go to the communities rather than directly to an airline serving the community.  Second, the financial assistance is not limited to air carrier subsidy, but can be used for a number of other efforts to enhance a community’s service, including advertising and promotional activities, studies, and ground service initiatives.  Third, communities design their own solutions to their air service and airfare problems and seek financial assistance under the program to help them implement their plans. 

Over the past five years, the Department has made more than 180 grant awards.  Overall, more than 90% of the grant recipients have implemented their authorized projects. 

For example, new services have been inaugurated at many communities; others have received increased frequencies or service with larger aircraft.  Several communities have begun targeted and comprehensive marketing campaigns to increase use of the service at the local airport and to attract additional air carrier service.  We have been monitoring the progress of all of the communities as they proceed with the implementation of their projects.   However, because the majority of the projects involve activities over a two-to-four-year period, and many communities have sought and received extensions for their grants, only now are some of them at the point of completion. 

As you know, the Government Accountability Office (GAO) concluded a review of the Small Community Program in 2005.  GAO too recognized that it is difficult to draw any firm conclusions as to the effectiveness of the Small Community Program in helping communities address their service issues because many grant projects are still in process.  Of the grant projects that had been completed, the GAO concluded that the results were mixed because not all of the grants resulted in improvements that were achieved and sustained after the grant funding was exhausted. 

Importantly, however, the GAO also found that the grant recipients were very pleased with the program and many believed that the service improvements would not have been achieved without the benefit of the grant award.  The Department has received similar feedback from grant recipients.  The GAO noted that nearly 80 grants were scheduled to be completed by the end of this year and they recommended that the Department review the results of these grants before the program is considered for reauthorization beyond 2008.  The Department concurred with GAO’s recommendation and indicated that it would conduct such review before the reauthorization process. 

In this regard, since the end of March 2007, the Department’s Inspector General (IG) has been reviewing the outcomes of the limited number of projects that have been completed to date.  Evaluation of the program will consist of two phases including a quantitative and qualitative analysis of a selected sample of all completed projects.

The Federal Government, however, is only one piece of the equation.  States and communities will also need to review their air service in the context of the changed industry structure and service patterns to seek fresh, new solutions to maximize their air service potential, including regional and intermodal approaches and expansion of public/private partnerships to meet these challenges.  In that regard, we are actively engaged in reviewing alternative solutions for assisting small communities address their air service needs.

In closing, Mr. Chairman, let me reaffirm the Department’s commitment to implementing the DOT’s small community air service programs in the best and most efficient manner.  We look forward to working with you and the members of this subcommittee and the full committee as we continue to work toward these objectives.  Thank you again.  This concludes my prepared statement.  I will be happy to answer any of your questions.

STATEMENT OF

MICHAEL W. REYNOLDS
DEPUTY ASSISTANT SECRETARY FOR
AVIATION and INTERNATIONAL AFFAIRS
U.S. DEPARTMENT OF TRANSPORTATION

before the

SUBCOMMITTEE ON AVIATION
U.S. SENATE COMMITTEE ON
COMMERCE, SCIENCE, AND TRANSPORTATION

on

Airline Service Improvements

April 11, 2007

Mr. Chairman, Mr. Vice Chairman, and Members of the Committee, thank you for inviting me to this hearing.  I appreciate the opportunity to testify today on behalf of the Department of Transportation.

I want to emphasize to the Committee at the outset of my statement that the issue prompting this hearing today, which involves the treatment of consumers by airlines during extended on-ground flight delays, commonly referred to as tarmac delays, is being taken seriously by the Department, as evidenced by our prompt action following the recent incidents, which I will discuss shortly.  Before I discuss that action, however, I would like to give you a broad overview of our authority to regulate in matters involving airline consumer protection, including tarmac delays, and our continuing efforts to ensure that passenger carriers meet their obligations to consumers.

Since deregulation of the airline industry nearly 30 years ago, the Department – as well as its predecessor, the Civil Aeronautics Board – has sought to balance the public interest in protecting consumers from unreasonable practices with our statutory mandate to permit market forces to operate to the maximum extent possible in order to determine what services are best provided the public by airlines.  When action has been required, we have tried, wherever possible, to implement measures to enhance the functioning of the marketplace, such as publishing carrier performance data, or requiring the airlines themselves to disclose data to consumers that may be of use in making their choices of which carriers to use.  We continue to believe this approach to be the proper one.

The cornerstone provision for DOT’s consumer protection program covering all economic regulatory matters, as opposed to those involving safety, is section 41712 of Title 49 of the U.S. Code, which broadly prohibits unfair and deceptive practices and unfair methods of competition in air transportation.  The Secretary’s Office of the Assistant General Counsel for Aviation Enforcement and Proceedings (Enforcement Office) acts as the prosecuting office for aviation consumer enforcement cases, including those involving unfair and deceptive practices.  That office may act on its own initiative, and it also reviews formal third-party complaints alleging violations of the statute or the Department’s consumer protection rules and either dismisses them or pursues enforcement action.  It also has the authority to enter into settlements relating to those cases.  Section 41712 is enforceable in its own right, but violations can be difficult to demonstrate.  Even if a prosecution is ultimately successful, such cases are resource intensive, time consuming, and of limited precedential value because each is highly dependent on its own set of facts.  That section is more important as the basis for DOT rulemaking and policy making, where the public interest dictates, to define the extent of its statutory reach.  For example, section 41712 provides the statutory basis for our airline full fare advertising and oversales compensation rules.

The Aviation Consumer Protection Division, within the Enforcement Office, handles all consumer complaints and inquiries involving economic regulatory matters and works with airlines and other companies to resolve informal consumer complaints relating to air transportation.  Complaints filed with that division are often helpful to us in reviewing specific problem areas or industry trends that may need to be addressed through administrative action.  That division also investigates apparent violations of consumer protection requirements, refers matters to the Enforcement Office where appropriate, and performs consumer protection rulemaking functions.  In addition, the Aviation Consumer Protection Division has significant public information, education, and outreach programs, including publications that provide general air travel consumer information, such as the Department’s monthly Air Travel Consumer Report.   That report summarizes data filed with DOT by carriers on flight delays, mishandled baggage, and denied boardings, and also lists by carrier the number of complaints registered in a variety of areas, including baggage, refunds, and flight irregularities.  Complaints filed with the Department over the past several years have trended downward from a high of about 23,000 in calendar year 2000, with about 8,300 being filed with us last year.  However, complaint numbers are starting to increase this year.

Let me now touch upon the incidents of this past winter involving airline passengers being trapped for many hours on aircraft on the ground.   The most highly-publicized events included serious service disruptions and lengthy tarmac delays experienced by American Airlines in late December of last year after severe weather hit the Southwest.  Also, more recently, JetBlue Airways experienced severe flight irregularities and lengthy on-ground delays on Valentine’s Day and the days that followed during a period of adverse weather in the Northeast.  Although American and JetBlue received extensive media attention, virtually all carriers have had problems related to customer service, including, on rare occasion, flights that experience long tarmac delays.

Secretary Peters and the Department were troubled by incidents like these, particularly to the extent that food, water, and other basic needs were not being met by the airlines.  That is why we were pleased to see that the airlines involved in these specific incidents appeared to be taking substantial corrective actions.  In response to its December incident, American Airlines reportedly instituted new guidelines, which included limiting tarmac delays to no more than 4 hours.  JetBlue very publicly accepted responsibility for its shortcomings and took a number of steps to address its customers’ concerns.  Significantly, it adopted what it termed a “Customer Bill of Rights,” by which it promises to (1) provide passengers on lengthy on-board delays with food, water, and medical care, if necessary; (2) compensate passengers for extended tarmac delays; and (3) set a time limit of 5 hours on the maximum duration of any tarmac delay.  This policy has been widely disseminated and made available to the public on the carrier’s web site.  Importantly, JetBlue incorporated its bill of rights into its contract of carriage, providing passengers a legally binding avenue of redress if the carrier fails to follow through on its promises.

Although extended tarmac delays are statistically rare (as I’ll discuss in a moment), airlines must have adequate plans in place to deal with these situations as they arise.  Clearly, stranding hundreds of passengers aboard aircraft sitting on tarmacs for as many as nine hours is not acceptable, and incidents like these raise serious concerns about planning for such events.  Passenger carriers should do everything possible to ensure that situations like these do not occur again.

The Department strongly prefers that the airlines address customer service issues rather than the federal government, but sometimes outside action may be necessary.  That is why Secretary Peters formally asked the Department’s Inspector General (IG) to conduct an investigation into these incidents and further requested that the IG examine how all the major airlines are doing on the commitment they made nearly eight years ago to ensure that the basic needs of passengers are met during long ground delays.  After the IG’s review, we will consider what, if any, further action is appropriate.  This review will also look at whether any “best practices” exist that can afford an opportunity for all carriers to learn from these experiences and ensure they are not repeated.

It is important to keep the issue of tarmac delays in context.  Our Aviation Consumer Protection Division records complaints concerning the number of unreasonable tarmac delays, which have ranged from 753 during the year 2000 to just over 100 last year.  Tarmac delay complaints have not only generally decreased in absolute numbers over the years, but importantly, the number of such complaints as a percentage of total complaints has decreased from 3.2 percent in the year 2000 to only 1.3 percent last year.

Separately, the Bureau of Transportation Statistics collects data regarding taxi-out times for the 20 largest airlines.  With regard to recent tarmac delays, our statistics show that in 2006, out of a total of more than 7.14 million flights, just under 1,300 (1,295) were delayed more than three hours in taking off after leaving the gate.  Excluding flights that were diverted or ultimately canceled (our reporting requirements do not capture data on delays associated with such flights), this means that less than two hundredths of one percent (0.018 percent) of all these flights experienced tarmac delays in excess of three hours after leaving the gate.  Last year, your chances of being on the tarmac for more than five hours after leaving the gate were about 1 in 200,000.  

Of course, we recognize that statistics mean nothing to the passengers who are themselves the victims of unreasonable tarmac delays and therefore statistics cannot be the sole factor to consider in determining what, if anything, we should do to address tarmac delays.  Indeed, the Department is of the firm belief that each carrier should, at a minimum, make clear what passengers can expect with regard to extended ground delays and, in particular, should have in place comprehensive plans to ensure that efforts will be made to get passengers off an aircraft when ground delays, involving either departing or arriving flights, are expected to extend beyond a reasonable period of time.

What the Secretary has asked the Inspector General to do is a challenging task.  I assure the Committee that the Department will review the report carefully and, if necessary, take appropriate actions to ensure that airlines are adequately protecting consumers in relation to the possibility of extended on-ground delays.

As policymakers consider these incidents, it is important to understand that airline networks in the 21st century are extremely complex operations involving myriad operational, mechanical, safety, regulatory, and other constraints.  Unlike many other service industries and despite technological advances, air transportation is still a complicated process that requires close coordination among many different organizations, including various divisions of an airline, an airport, the FAA’s Air Traffic Organization, and many ground service and maintenance providers.  As we have seen, when complex airline operating systems are interrupted by weather or other irregularities, a breakdown in the business or operational practices anywhere in the system can have significant ripple effects from which it becomes increasingly difficult to recover. 

Given this complexity, we believe the facts must be better understood before determining what, if any, action by the government is warranted.  We empathize with passengers delayed on airplanes for long periods of time.  We also empathize with passengers who want to get to their destinations and -- despite weather-induced delays -- would like airlines to make every effort to get them there as quickly as possible.  We first need to understand better the root causes of extended tarmac delays and determine whether the causes are specific to an individual airline’s business and operational procedures or more systemic in scope.  That is why we asked the IG to investigate with a view toward not only understanding the issues, but also exploring industry best practices that may address them. 

A discussion of what today’s aviation passenger faces in our current system would not be complete without a discussion of our plans for transforming the system to the Next Generation Air Transportation System (NextGen).  I know this Committee held hearings last month on the work of the Joint Planning and Development Office (JPDO), but it is worth a brief mention here because unless we lay the foundation today for NextGen, airline passengers will encounter untold delays and service disruptions in the future.  If an overloaded system begins to grind to a halt, it will matter little how well airlines handle customer service.

We already see the impact of the effects of increased demand for service on the air transportation system.  Last year stands as one of the worst on record for delays, with about one in four flights of the 20 largest carriers arriving late.  This year is looking no better.  In February, only 67.3 percent of the domestic flights by those carries arrived on time, making it the 5^th worst month for on-time performance since 1995.  Looking well down the road, we predict delays will increase 62 percent by 2014 without NextGen.  There is simply no way we can overcome congestion of this magnitude without transforming the air traffic management system.  Other issues, ranging from environmental concerns to the complexities of homeland security, are placing additional stress on the system.  It’s a sobering picture.  Without NextGen, some parts of the system will “freeze” first.  Then other areas will follow.  The system will reach its absolute breaking point, and our customers, especially the passengers, will be the ones who suffer. 

The people whom we serve—our customers—don’t deserve to be mired in congestion.  Investing now in NextGen systems will avoid that outcome.  We must replace our outdated air traffic control architecture with a 21st Century satellite-based navigation system.  Such a system will safely handle dramatic increases in the number and type of aircraft using our skies, without being overwhelmed by congestion.  The JPDO released the NextGen Concept of Operations for public comment on February 28^th.  It is now available on the JPDO website for review and comment by aviation stakeholders.  The NextGen Enterprise Architecture and the Integrated Work Plan should be released within the next few months.  These documents provide us with that picture of where we want to go and the plans for how to achieve it. 

As you know, the Administration believes that the current funding system is out of step with critical future needs.  Without a rational funding mechanism that is tied to costs and future infrastructure development needs, the best laid plans for the NextGen system could be wasted, and long delays, on the ground and in the air, will only get worse.  In other words, passenger well-being in the future depends on what the federal government does now as much as what the airlines do.  I know you’ve had hearings on the specifics of our funding proposal, so I won’t repeat them here.  I would, however, like to emphasize the urgent need for a more equitable system of fees that more accurately reflects the true cost of services that various types of users actually consume.

Thank you again for this opportunity to testify.  I would be happy to answer any questions you may have.

Committee on Commerce, Science, and Transportation
United States Senate

“Department of Transportation Activities”

Statement of Mary E. Peters
Secretary of Transportation

Washington, D.C.

October 18, 2007

Chairman Inouye, Vice Chairman Stevens, and distinguished Members, I am pleased to appear before the Committee today to discuss the various activities of the U.S. Department of Transportation. 

The United States has the world’s largest and most capable transportation systems.  Those systems have enabled unprecedented growth in domestic and international trade, have brought our diverse States closer and closer together, and have provided a critical foundation for the amazing wealth creation and economic prosperity that have taken place in the U.S. and around the world in the last 60 years.  

When I returned to Washington last year, I sought to ensure that the Department was focused on the challenges that were most pressing and solutions to those challenges that would have the most impact.  In my view, those challenges are: 1) reversing the decline in overall transportation systems performance that is increasingly imposing costs on American families and businesses, and 2) ensuring a continued reduction in transportation system fatalities and injuries even as traffic volumes grow by emphasizing comprehensive, data-driven approaches and new crash prevention technologies.  The results of this focus are a work in progress, but I believe that the Department has made significant strides forward in the past year. 

To reverse the decline in our transportation systems, we need to look beneath the surface and explore the foundation of the problems we are facing. It is increasingly clear to me that the transportation policies and programs of the past are poorly suited to the economic, environmental and societal challenges of the future.  In order to bring about the type of change that I believe is critical, we must be honest with ourselves and recognize that the financing structure that underpins our aviation, highways, and public transportation systems is failing on multiple levels.  The financing structure prevents us from making efficient investments in maintenance and new construction because it does not allow us to allocate resources based on the highest returns to the taxpayer and the customer.  The financing structure fails to sufficiently reward innovation and technology development.  The failure of this structure can be traced back to the fact that it does not allow us to align prices and charges with true costs.  The failures of our current systems are not a result of poor engineering but of poor economics.

Today's transportation systems suffer from congestion and inadequate maintenance, but these are just symptoms of the fact that investment decisions in these systems are not business decisions, but political ones.  Business from movie theaters to cell phone companies charge less during off-peak periods to maximize the use of available capacity -- but political decisions made in the middle of the last century limit our ability to use variable pricing to maximize the use of our transportation systems.  Similarly, transportation investment decisions are made politically. During my many years in transportation, I don't recall one ribbon-cutting after a much needed maintenance investment.  Transportation spending decisions are frequently not based on estimated return on investment, but on the hometown of the governor or committee chairman.  During the course of the next year, I hope we can work together to improve the economics of transportation investments.

As the Members of this Committee well know, there is a pressing need to overhaul the Nation’s aviation system infrastructure to improve economic efficiency and maintain an impressive record of safety performance.  We operate the world’s largest and most complex air traffic system, one that controls aircraft transiting the domestic United States and millions of square miles of international airspace.  By any measure, this is the safest period for aviation operations since the dawning of the jet age and the enactment of the modern-era Federal Aviation Administration Act in 1958, with a 65 percent decline in the commercial aviation fatal accident rate over the last decade.

While we have made great strides in safety, we project tremendous growth in the system.  We expect over a billion passengers to be flying on U.S. commercial carriers by 2015, partly as a result of the success we have had in gaining access to international aviation markets around the world.  This increased demand will bring new airlines, aircraft, flight crew, and controllers into the system.  That is clearly a safety challenge, but it also is an increased burden on system performance.  More and more, our skies and our airports are choked with aircraft, passengers are badly delayed in reaching their destinations, and the inefficiencies that we see are hampering growth across the economy.  Simply put, today’s air traffic management system is incapable of meeting the challenges presented by projected air travel demands in the future. 

That is why the Administration in February offered a comprehensive proposal to reform the way we finance air traffic control operations and infrastructure to capitalize on market-based tools to ease the congestion that characterizes air travel in more and more of the country today.  Rather than settling for a status quo extension of the existing program, our proposal would create a new funding structure that would link what users pay when they fly to the actual costs that they impose on the system. 

Numerous bipartisan commissions have recommended cost-based funding for the FAA over the last two decades, and air traffic control providers in virtually every other developed country have it.  This reform is necessary to support our efforts to make the Next Generation Air Transportation System – NextGen – a reality.  Failure to adopt a cost-based system will hinder the implementation of NextGen, and for the first time in history we will risk placing the United States behind other countries that are moving towards the future of aviation. 

The Administration’s proposal also includes market-based mechanisms, such as auctions or congestion pricing, to allocate scarce airspace and airport resources more efficiently.  Charges for flying into congested airspace or airports should more closely reflect the true societal costs of those decisions.  To the extent they do not, the cost of delays will continue to accelerate and ripple throughout our aviation system. 

While many economists have stressed the potential demand-side impacts of market pricing policies, such as peak period spreading and increased overall passenger throughput, we believe the revenues generated in connection with any form of market pricing can and should be re-invested to expand aviation capacity at or near these bottlenecks.  In addition, just as excessive delays send signals about where capacity expansion is most critical, the signals sent by market mechanisms are even clearer.  Congestion pricing has worked exceptionally well in other areas of our economy such as highways, electricity and telecommunications, and we believe the time has arrived to pursue similar approaches in the aviation sector.  

We commend this Committee for taking the actions that it has taken to date and for appreciating the seriousness of the aviation challenges before us. We look forward to working with the Congress as the legislative process continues, and we urge that any further action remain consistent with our February proposal.

As the reauthorization process progresses, the Department continues to move forward on several fronts to improve system performance in aviation and to ensure that consumers are treated fairly when they fly.  We issued the Record of Decision for a thorough redesign of airspace over New York City, New Jersey, and Philadelphia.  This redesign alone will reduce delays by 200,000 hours annually.  We have convened an aviation rulemaking committee that is focused specifically on the New York City area and that is considering numerous solutions – including market-based tools – to ease the congestion that ripples out from the Tri-State area to airports across the Nation. A third of the Nation’s air traffic moves through New York airspace, and two-thirds of the Nation's air traffic can be affected when the New York area experiences delays.

We can respond to aviation congestion in the New York region in one of three ways -- (1) continue with current policies and accept the fact that the region will be congested; (2) re-regulate air traffic in this region and have the federal government decide who can fly in this airspace and when; or (3) use some form of pricing to optimize the use of existing capacity.  Some have suggested re-imposing slots in the region.  That would be a mistake for a variety of reasons.  As we have learned, slots limit competition and increase prices for consumers, and I am always leery of any proposal that relies on the federal government picking winners and losers in a market.

In addition to trying to improve the economics of our aviation system, we also have pledged to improve the fairness and transparency that passengers experience when they choose to travel.  And we have continued to enforce the Department’s existing consumer protection regulations vigorously.  As the President put it when I met with him several weeks ago to discuss this issue, “We've got a problem, we understand there's a problem, and we're going to address the problem.”  I certainly look forward to continuing to work with the President and the Committee to do just that.

The priorities that I mentioned earlier apply to more than aviation.  The Department, of course, plays a major role in sustaining and improving the Nation’s highways and transit systems.  Here, too, system performance is wanting.  Indeed, we are suffering what can only be called an intolerable decline in performance in the form of travel delays and unreliability.  This deterioration in our surface transportation system is acute and widespread, and it affects both passenger travel and freight movement.

The numbers tell the tale.  In the past 20 years, hours of delay and wasted fuel have each increased by more than 400 percent.  In 2005, highway and transit congestion wasted 4.2 billion hours of time and 2.9 billion gallons of fuel.  The cost for this wasted time and fuel was over $78 billion – about 5 times the amount in 1982.  If we add the extra time people must allow in planning for congestion delay and the lost productivity associated with it, the annual costs exceed $170 billion.  

Even as it has been deepening, this problem has also broadened, to cover more and more travelers and freight operations.  Highway congestion increased from affecting 33 percent of travel in 1982 to nearly 70 percent of travel in 2005.  Rush hours increased in duration from 4.5 hours per day in 1982 to 7 hours per day in 2005.  And the delay associated with the average rush hour driver’s trip increased nearly three-fold – from 11 percent of normal trip time in 1982 to 30 percent in 2005.  The cost to the trucking industry alone is estimated to be $10.7 billion every year, and if the indirect but very real costs to shippers are included, the total rises to about $20 billion. 

This problem now affects the transportation of waterborne freight, too, as several of our leading ports have become chokepoints for intermodal container traffic, with others not far behind.  Seattle/Tacoma, Galveston/Houston, LA/Long Beach, New York/New Jersey – nearly all our major ports are projected to experience enormous growth in volumes within several years. In calendar year 2006, approximately 27 million cargo containers were unloaded at U.S. ports and reloaded onto vessels, trucks, and railroad cars.  Since many container ports are near or at capacity, the Department is addressing freight and passenger transportation issues from a system-wide perspective to support improved port efficiency and intermodal connections to better enable ports to handle increased volume and maintain growth.

Congestion is not merely an irritant to one’s morning commute; it has real ramifications for American economic competitiveness.  The efficient networks that we as a Nation have come to rely on have allowed businesses freedom of location and the ability to quickly reach customers across the Nation and around the world.  Large U.S. firms that depend on the international supply chain tell us that growing system failures are propelling them to make inefficient decisions in the form of facility re-locations, delivery time shifts, and building in more and more expensive buffer time.  The trend poses a real threat to a "just-in-time" inventory management revolution that has helped smooth business cycles and reduce economic volatility.  And with the costs of building new capacity growing far more quickly than inflation, the challenge is not getting any easier.

The good news is that we are focused on the problem as never before.  The initiative that we have undertaken is aimed at identifying and then attacking in a targeted way existing and projected traffic congestion.  Our urban partnership program will provide over $800 million to support tolling and other congestion-relief demonstration projects in Seattle, San Francisco, Minneapolis, Miami, and New York City.  New York’s congestion pricing plan, if fully authorized by legislation now before the General Assembly in Albany, will help incentivize off-peak travel in Manhattan and finance substantial upgrades to the Nation’s largest transit system.  The other cities plan to partner with us as well to experiment with tolling and transit improvements that we believe can have tremendous impact.

Through our Corridors of the Future program, we have identified six critical multistate corridors that together carry nearly 23% of the Nation’s traffic, and have begun to work with applicants on making improvements to these facilities.  Elements of the program include building new capacity, adding lanes to existing roads, building truck-only lanes and bypasses, and integrating real-time traffic technology such as lane management that can match available capacity on roads to changing traffic demands.  These advances offer the hope of reduced congestion, reduced emissions, and greater value to the users.

As a former state transportation chief, I know that in some circumstances there is no substitute for expanding physical capacity.  But, in other situations, it is simply not possible to build our way out of the problem.  The Department, therefore, also is focused on bringing technological advances to bear on congestion.  Let me offer several examples.

In aviation, we have recently taken several major steps forward in the deployment of what is known as ADS-B capability, a NextGen technology that will give pilots real-time awareness of the location of nearby aircraft and other information essential to improved operations in crowded corridors.  At our airports, we have continued to expand the use of procedures such as area navigation (RNAV) and required navigation performance (RNP) – advances that allow aircraft to fly more precise routes for takeoffs and landings, thus reducing congestion and emissions at crowded hubs and affording airlines greater flexibility in point-to-point operations.

In our surface transportation programs and regulations, we are seeing similar progress.  Intelligent transportation systems technologies are recognized as valuable tools not only to reduce traffic congestion, but also to improve safety.  We are witnessing a rapid proliferation of real-time traffic information that is giving drivers more choices and more awareness of system conditions.  New traffic signalization technologies can help to increase throughput and provide smoother operating conditions in metropolitan areas.   

Technological advances are in some circumstances primarily about safety.  In April, we finalized a rule requiring automakers to equip their vehicles with electronic stability control (ESC), a technology designed to improve the driver’s ability to retain control of a motor vehicle under certain adverse conditions.  This technology is expected to dramatically reduce the frequency of crashes due to the driver’s loss of control, particularly rollover crashes.  We estimate that, once all vehicles are equipped with ESC, the technology will prevent 5,300 to 9,600 highway deaths and 156,000 to 238,000 injuries every year.

In addition, new technology is now on-board trucks to help the motor carrier industry automate the process of recording its drivers’ duty status, technology that eventually will allow for real-time transmission of a vehicle's location and other operational information.  This technology has the potential to help reduce driver fatigue and allow trucking companies to keep better information about far-flung routes across the country. Also, DOT works closely with State and local-level highway organizations to assure that effective life-saving strategies and comprehensive, data-driven programs are advanced.  The touchstone for all these efforts, of course, is to reduce the number and rate of fatalities on our highways, so that Americans can confidently and safely take to the roads.

Earlier this year, the Federal Railroad Administration announced approval of the first Positive Train Control system capable of automatically controlling train speed and movements to prevent certain accidents, including train collisions.  The approved system, which includes both digital communications and a global positioning system, utilizes an in-cab electronic display screen that will first warn of a problem and then automatically engage the train’s braking system if a locomotive engineer fails to act in accordance with operating instructions. This is an encouraging preliminary development, and DOT will work with industry and other stakeholders to consider cost-effective options for broader implementation of PTC.

Turning to fuel economy, I was pleased that this Committee responded to the President's proposal in his State of the Union address to improve the fuel economy program for passenger automobiles.  This Administration demonstrated through its innovative light truck rule that fuel economy can be increased while preserving consumer choice, maintaining safety and not needlessly sacrificing jobs.  We achieved these goals by emphasizing that the path to greater fuel efficiency is through utilizing fuel saving technologies. Following the President's directive, we continue to address our Nation's energy security policy goals and to reduce carbon dioxide emissions from vehicles by improving fuel economy and displacing gasoline with alternative fuels.  Working with EPA and other agencies, the Department intends to propose new standards for fuel economy and carbon dioxide emissions from vehicles before the end of this year.  These standards will be based on sound science and a cost-benefit analysis.  This will ensure that for every dollar in a fuel saving technology cost added to a vehicle, motorists and society in general would see a dollar or more returned in benefit.  However, as the President stated, our efforts are not a substitute for effective legislation. Accordingly, the Administration has articulated clear principles to move America toward a strong, cleaner energy future, and we continue to want to work with Congress as it moves ahead with its fuel economy legislation.

The Administration also looks forward to working with the Committee and Congress to improve the nation's intercity passenger rail system, not with technological advances but with financial reform.  We currently have a flawed model for providing intercity passenger rail service that does not encourage innovation or emphasize accountability.  The Administration's goal is to create sustainable, demand-driven service by, among other steps, empowering States and localities to direct rail investment and fostering opportunities for participation by alternative rail service providers.  I think these are goals that everyone can agree on, and I urge Congress to collaborate with the Administration to develop a common vision for this important mode of transportation.

The challenges that lie ahead are difficult, though they are not difficult to identify.  Our transportation networks need improvement, but as I and many others have made clear, the challenge is not to simply spend more and more money, but to insist that we utilize Federal resources with an eye to the performance improvements that we urgently need.  As the President has noted, we need innovation and creativity.  We should embrace real solutions, such as advanced technologies, market-based congestion tools, private sector financing, and flexibility for state and local partners.  If we do this, the potential for improving system performance and safety – and in the process to aid the Nation’s continuing economic vitality – is enormous.

My message today is simply that the time has come to acknowledge that the financing structure that underpins our aviation, highways, and public transportation systems is failing on multiple levels, prevents us from making efficient investments in maintenance and new construction, and needs fundamental reform at the statutory level.

Mr. Chairman, I appreciate this opportunity to appear before the Committee today, and I would be pleased to respond to questions that you or other committee members may have.

STATEMENT OF

THE HONORABLE MARY E. PETERS
SECRETARY OF TRANSPORTATION

Before the

COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS
UNITED STATES SENATE

SEPTEMBER 20, 2007

Chairman Boxer, Ranking Member Inhofe, and Members of the Committee, I am honored to be here today.  Accompanying me is Frederick G. (Bud) Wright, Executive Director of the Federal Highway Administration.

America was stunned on the evening of August 1, 2007, when the Interstate 35 West (I-35W) bridge over the Mississippi River in Minneapolis, Minnesota, collapsed.  Numerous vehicles were on the bridge at the time and there were 13 fatalities and 123 people injured.  We extend our deepest sympathy to the loved ones of those who died and to the injured.

We do not yet know why the I-35W bridge failed.  Something went terribly wrong.  Bridges should not fail, and no one who is using them responsibly should be hurt because of an infrastructure failure.  Our Department is working closely with the National Transportation Safety Board (NTSB) as it continues its investigation to determine the cause or causes of this failure.  In the interim, we are taking every step to ensure that America’s infrastructure is safe.  I have issued two advisories to States in response to what we have learned so far, asking that States re-inspect their steel deck truss bridges and that they be mindful of the added weight construction projects may bring to bear on bridges. 

Immediately upon learning of the collapse, at the direction of President Bush, I deployed a team, led by Federal Highway Administrator J. Richard Capka, to coordinate the Federal response on-site in Minneapolis.  The morning of August 2, I was at the scene with them.  The DOT team, including the continuous on-site support of the FHWA Minnesota Division Office and Deputy Federal Transit Administrator Sherry Little, is providing expertise in bridge engineering and construction, environmental assessments and planning, transit programs, and Federal contracting, to assist State and local officials in the recovery, debris removal, temporary traffic rerouting, and restoration of transportation services.  This team is also working with the State to expedite the process for reconstructing the bridge.  Administrator Capka continues to visit with officials in Minneapolis to ensure that progress is being made.

Federal support has included a quick release of $5 million in Emergency Relief Federal-aid Highway funding to the State of Minnesota to initiate recovery operations.  Those funds were made available the day after the disaster to help restore the traffic flow, to clear the debris, to set up detours, and to begin the repair work. 

President Bush signed legislation on August 6 authorizing $250 million for the replacement of the bridge.  The legislation also made available $5 million to reimburse Minneapolis for increased transit operations to serve commuters until highway traffic service is restored on the bridge.  Fifty million dollars in Emergency Relief funds were released on August 9 to ensure the State's recovery efforts can proceed without delay.  As the State completes the assessment of the total damage and the ultimate cost to replace this bridge, we stand ready to ensure that appropriate funding is made available to replace it.  Indeed, with Congress' assistance, we are committed to making funds available to the State as they are needed to ensure that the bridge is rebuilt as quickly as possible.

While not part of the emergency response funding, we have also provided an additional $13.2 million in immediately available transit funds in connection with our announcement of Minneapolis as an “Urban Partner” under our Congestion Initiative, a broad initiative for managing surface transportation in the Minneapolis area.

The I-35W bridge over the Mississippi River in Minneapolis originally opened in November 1967 and became one of the critical facilities in a vital commercial and commuting corridor.  The bridge was an 8-lane, steel deck truss structure that rose 64 feet above the river before its collapse.  The main span extended to 456 feet to avoid putting piers in the water, which would have impeded river navigation.  As of the 2004 count, an estimated 141,000 vehicles traveled per day on the bridge.

FHWA is assisting the NTSB as they conduct a thorough investigation, which includes a structural analysis of the bridge. Within days of the collapse, development of a computer model based upon the original design drawings for the bridge began at FHWA's Turner Fairbank Highway Research Center in McLean, Virginia.  This model can run simulations to determine the effect on the bridge of removing or weakening certain elements to recreate, virtually, the actual condition of the bridge just prior to and during its collapse. 

By finding elements that, if weakened or removed, result in a bridge failure similar to the actual bridge failure, the investigators' work is considerably shortened.  While examination of the physical members of the bridge being recovered from the site provide the best evidence of why the bridge collapsed, the analytical model allows the evaluation of multiple scenarios which can then be validated against the physical evidence.  This work is expected to take several months and my forensic experts have been on site continuously since the day after the collapse providing their expertise and assistance.  We need to fully understand what happened so we can take every possible step to ensure that such a tragedy does not happen again.  Data collected at the scene, with the help of the Federal Bureau of Investigation's 3-D laser scanning device, are being used to assist in the investigation.

On August 2, the day after the collapse, I requested that the DOT Inspector General conduct a rigorous assessment of the Federal-aid bridge program and the National Bridge Inspection Standards (NBIS).  The NBIS, in place since the early 1970s, generally requires safety inspections at least every two years for all highway bridges in excess of 20 feet in total length on public roads.  Safety is enhanced through hands-on inspections and rating of components, such as the deck, superstructure, and substructure, and the use of non-destructive evaluation methods, and other advanced technologies.  The composition and condition information is collected in the national bridge inventory (NBI) database, maintained by FHWA.

The I-35W bridge has been inspected annually by the Minnesota Department of Transportation (MNDOT).  The most recent inspection was begun by MNDOT on May 2, 2007.  No imminent dangers were observed and MNDOT planned to continue inspecting the bridge in the fall following completion of construction work on the bridge.

Federal, State, and local transportation agencies consider the inspection of our nearly 600,000 bridges to be of vital importance and invest significant funds in bridge inspection activities each year.  We strive to ensure that the quality of our bridge inspection program is maintained at the highest level and that our funds are utilized as effectively as possible.  The Inspector General will be monitoring all of the investigations into the collapse and reviewing our inspection program to decide and advise us what short- and long-term actions we may need to take to improve the program.  Although we will have to wait for the NTSB's report before we can conclude if the inspection program played any role in this collapse, we must have a top-to-bottom review to make sure that everything is being done to keep this kind of tragedy from occurring again.

In the aftermath of this tragedy, a necessary national conversation has begun concerning the state of the Nation’s bridges and highways and the financial model used to build, maintain and operate them.  It is important to understand that, while we must do a better job of improving the Nation’s transportation systems, we do not have a broad transportation infrastructure “safety” crisis.  We agree that the condition of our infrastructure requires on-going attention, but I want to emphasize that we will not allow the public safety to be put at risk.  We would limit the use of a bridge or close a bridge rather than let the public safety be put at risk.

Since 1994, the percentage of the Nation’s bridges that are classified as “structurally deficient” has declined from 18.7% to 12.0%.  The term "structurally deficient" is a technical engineering term used to classify bridges according to serviceability, safety, and essentiality for public use.  The fact that a bridge is classified as "structurally deficient" does not mean that it is unsafe for use by the public.  Since 1995 the percentage of travel taking place on roads that are considered “good” has increased from 39.8% to 44.2%.  Overall, approximately 85% of travel takes place on pavement that is considered “acceptable.” 

FHWA estimates that if we pursued a cost beneficial investment strategy, it would cost approximately $40 billion a year to maintain the physical condition of our Nation’s highways and bridges and approximately $60 billion a year to substantially improve the physical condition of current roads and bridges.  In 2005, Federal, State, and local governments together made over $75 billion in capital investment to rehabilitate highways and bridges in the U.S. and improve their operational performance.  If we include operational, administrative, and debt service costs in addition to capital investments, the U.S. spent nearly $153 billion on highways and bridges in 2005. 

These infrastructure quality numbers should and can be improved with more targeted investment strategies, but it is inaccurate to conclude that the Nation’s transportation infrastructure is unsafe.  We have quality control systems that provide surveillance over the design and construction of bridges.  We have quality control systems that oversee the operations and use of our bridges.  And we have quality control over inspections of bridges to keep track of the attention that a bridge will require to stay in safe operation.  These systems have been developed over the course of many decades and are the products of the best professional judgment of many experts.  We will ensure that any findings and lessons that come out of the investigation into the I-35W bridge collapse are quickly learned and appropriate corrective actions are institutionalized to prevent any future occurrence. 

A more accurate description of our current and broader problem is that we have an increasingly flawed investment model and a system performance crisis.  Many are calling for a renewed national focus on our Nation’s highway infrastructure.  And while I agree that our infrastructure models need to be reexamined, it is imperative that we actually focus on the right problem. 

When faced with an underperforming division, the response of any credible business organization is to assess the cause of underperformance and to implement policies and practices intended to reverse performance declines.  In my assessment, the underperformance in the highway sector is fundamental, not incremental.  In other words, increases in Federal taxes and spending would likely do little, if anything, without a more basic change in how we analyze competing spending options and manage existing systems more efficiently. 

Because tax revenues are deposited into a centralized Federal trust fund and re-allocated on the basis of political compromise, major decisions on how to prioritize investments--and thus spend money--are made without consideration of underlying economic or safety merits.  The degree to which one capital investment generates more returns than a competing investment is the most basic question asked in virtually every other capital intensive sector of the economy.  Yet, when it comes to some of our largest and most critical investments we make as a Nation – highways and bridges – there is virtually no analysis of this question.  There is no clearer evidence of this failure to prioritize spending than the disturbing evolution of the Federal highway program.  This program has seen politically-designated projects grow from a handful in the surface transportation bill enacted in the early 1980s to more than 6,000 enacted in SAFETEA-LU.  The cost of these earmarks totaled $23 billion – a truly staggering figure.  

The real cost of these earmarks is much higher.  Looking at a sample of various recent earmarks, we found that the Federal earmark amounts themselves comprised on average only 10% of the total project cost.  Because of this, State departments of transportation will typically either delay the earmarked project indefinitely or re-allocate resources from higher priorities to fill the funding gap.  In addition, earmarks present extra administrative burdens for States that must dedicate scarce personnel resources to managing lower priority projects that are subject to earmarking.  In short, earmarks ripple through the entire Federal-aid program structure. 

In addition to earmarks, there are more than 40 special purpose programs that provide funding for projects that may or may not be a State or local priority.  The statewide and metropolitan planning processes are comprehensive and inclusive, and a proliferation of categorical programs further reduces State and local ability to best use available funds to meet the priorities identified through those processes.  As a former State DOT director, I have had first-hand experience with the difficulties created when Washington mandates override State priorities.

While many of these investments may have worthy purposes, virtually no comparative economic analysis is conducted to support these spending decisions.  No business could survive for any meaningful period of time utilizing a similar investment strategy.  Not surprisingly, new economic literature reveals that the returns on our highway investments have plummeted into the low single digits in recent years.  

The Department is working with States to encourage them to regularly use benefit cost analysis (BCA) when making project selection decisions.  Currently, approximately 20 States make some use of BCA, while 6 States use the technique regularly.  The Government Accountability Office (GAO) recently conducted two studies to identify the key processes for surface transportation infrastructure planning and decisionmaking, with a particular emphasis on the role of economic analysis methods and the factors that affect the use of such methods.  

These studies are Highway and Transit Investments:  Options for Improving Information on Projects’ Benefits and Costs and Increasing Accountability for Results (GAO-05-172); and Surface Transportation:  Many Factors Affect Investment Decisions (GAO-04-744).  The former report noted that “the increased use of economic analytical tools, such as benefit-cost analysis, could improve the information available to decision makers and, ultimately lead to better-informed transportation investment decision making” (GAO-05-172, p. 6). 

Among other reasons, GAO cited “political concerns” for why BCA is not more widely utilized in U.S. public sector surface transportation decisionmaking.  GAO observed that a project may be important for a particular interest group or constituency even though it is not efficient from an economic standpoint.  At a minimum, BCA would provide additional transparency to decisions that are less cost-beneficial.  Ideally, BCA would actually begin to prevent inefficient decisions from being made in the first place.

GAO also noted that BCA results are rarely reviewed in light of actual project outcomes.  In other words, not only is BCA underutilized in the project planning process, but it is also rarely utilized to assess the efficacy of previous investments.  This is in stark contrast to typical capital investment models employed in the private sector.  It is important that Congress and the Department work together to establish far more productive means to ensure that scarce resources are flowing to projects that benefit the public the most.  BCA is likely to be one of our most effective tools to advance that objective.

Moreover, since Federal transportation funding levels are not linked to specific performance-related goals and outcomes, the public has rightfully lost confidence in the ability of traditional approaches to deliver.  Performance-based management can help establish and maintain accountability.  As former Washington State DOT Secretary Doug MacDonald noted, “transportation agencies need to demonstrate to taxpayers that they get a dollar’s worth of value for a dollar’s worth of tax.”  The use of performance measures, by helping to identify weaknesses as well as strengths, can improve the transportation project selection process and the delivery of transportation services. 

In addition to an insufficient performance and cost-benefit focus, the current gas tax-dependent model does virtually nothing to directly address the growing costs of congestion and system unreliability.  Indirect taxes on gasoline, diesel fuel, motor vehicles, tires, property and consumer products – the dominant means of raising revenues for transportation -- are levied regardless of when and where a driver uses a highway.  This leads to a misperception that highways are “free,” which in turns encourages overuse and gridlock at precisely the times we need highways the most.  Consistent with the views of almost every expert that has looked at the issue, GAO recently released a report arguing that gas taxes are fundamentally incapable of balancing supply and demand for roads during heavily congested periods. 

The data simply do not lie in this case.  Relying extensively on gas and motor vehicle taxes, virtually every metropolitan area in the U.S. has witnessed an explosion in traffic delays over the last 25 years.  Meanwhile, in recent years, the increase in surface transportation funding has significantly outpaced the overall growth of non-defense, non-homeland security Federal discretionary spending.  And, since 1991, capital outlays for surface transportation at all levels of government have nearly doubled.  Economists have long understood the connection between payment mechanisms and system performance, but technology and administrative complexities limited the ability of policymakers to explore alternatives.  Today, those barriers no longer exist.

This is one of the main reasons that our Department has been strongly supporting States that wish to experiment with electronic tolling and congestion pricing.  Nationwide, the majority of projects in excess of $500 million currently in development are projected to be financed at least in part with electronic tolls.  In the middle of August, we announced Federal grants in excess of $800 million to some of the country’s largest cities to fully explore the concept of electronic tolling combined with expanded commuter transit options and deployment of new operational technologies.  Nationwide, the trends are encouraging. 

We believe that to the extent feasible, users should finance the costs of building, maintaining and operating our country’s highways and bridges.  It is increasingly clear that directly charging for road use (similar to the way we charge for electricity, water, and telecommunications services) holds enormous promise to both generate large amounts of revenues for re-investment and to cut congestion.  Equally important, however, prices send better signals to State DOTs, planners, and system users as to where capacity expansion is most critical.  Prices are not simply about demand management, they are about adding the right supply. 

Congestion pricing can also provide substantial environmental and energy benefits, conclusively demonstrated by recent evaluations of cordon-pricing programs in Stockholm and London.  

In London, motor vehicle-related emissions of urban air pollutants declined by 13-15 percent in the year following the introduction of congestion pricing, while fuel consumption and emissions of the greenhouse gas carbon dioxide declined by 16.4 percent.

In Stockholm, emissions of vehicle-related urban air pollutants declined by 10-14 percent, while fuel consumption and greenhouse gas emissions declined almost 3 percent.

British authorities estimate that 46-87 percent of the reduction in fuel consumption and emissions are attributable to vehicles traveling at higher, steadier, and hence more efficient speeds.  Urban air pollutant reductions are particularly valuable, because they reduce emissions inside large urban areas where large populations are exposed to the highest concentrations of pollutants.

More than 40 percent of the vehicle miles traveled in the United States are driven in the 85 largest urban areas, and likely more than half of gasoline and diesel fuel consumption.  Potential reductions in fuel consumption and emissions from congestion pricing programs in major urban areas could contribute to achieving our energy, environmental, and public health goals.

While the traveling public's saving of time is the single largest benefit, gasoline savings could also help to offset the cost of tolls, and the potential environmental benefits could yield private and public health dividends.

The current financial model is also contradictory to other critical national policy objectives.  As a country, we are rightfully exploring every conceivable mechanism to increase energy independence, promote fuel economy in automobiles, stimulate alternative fuel development, and also to reduce emissions.  President Bush has urged Congress to pass laws that will substantially expand our alternative energy capabilities and increase Corporate Average Fuel Economy requirements for automobiles and light trucks.  The Federal Government should be strongly encouraging States to explore alternatives to petroleum-based taxes, not expanding the country’s reliance upon such taxes.

The current highway and bridge financial model also fails to provide strong incentives for technology development and deployment, particularly when contrasted to other sectors of the economy.  It is imperative that we find more effective means to ensure that the rewards of a given advancement – for example, in extended life pavements or more sophisticated traveler information systems – can accrue in part to those firms or individuals that come forward with creative ideas.  It is no coincidence that we are seeing a technology boom in markets that have pricing structures that reward innovation.  Pricing infrastructure usage more closely to its true costs will not only reduce congestion and more appropriately target resources, it will also provide new incentives for innovation.

Finally, from a Federal investment policy perspective, it is also important to understand that States may simply react to higher Federal spending by reducing their own spending.  A 2004 GAO report entitled Federal-Aid Highways: Trends, Effect on State Spending, and Options for Future Program Design looked at this exact issue and found that “significant substitution has occurred and that the rate of grant substitution increased significantly over the past two decades, rising from 18 percent in the early 1980s to about 60 percent during the 1990s—the periods that ISTEA and TEA-21 were in effect.”  The report also concluded that “the structure of the federal grant system as a whole may encourage substitution.” 

The I-35W bridge collapse was both a tragedy and a wake-up call to the country.  We have a duty to ensure a safe transportation system for all who use it.  Moreover, our country’s economic future is tied in large part to the safety and reliability of our transportation infrastructure.  Before reaching the conclusion that additional Federal spending and taxes are the right approaches, we should critically examine how we establish spending priorities today.  We need a data-driven, performance based approach to building and maintaining our Nation’s infrastructure assets – a process where we are making decisions based on safety first, economics second, and politics not at all.  And we need an underlying framework that is responsive to today’s and tomorrow’s challenges, not those of the 1950s.

I look forward to working with you and would be pleased to answer any questions you may have.

STATEMENT OF

THE HONORABLE MARY E. PETERS
SECRETARY OF TRANSPORTATION

Before the

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
U.S. HOUSE OF REPRESENTATIVES

SEPTEMBER 5, 2007

Chairman Oberstar, Ranking Member Mica, and Members of the Committee, I am honored to be here today.  Accompanying me is J. Richard Capka, the Federal Highway Administrator.

America was stunned on the evening of August 1, 2007, when the Interstate 35 West (I-35W) bridge over the Mississippi River in Minneapolis, Minnesota, collapsed.  Numerous vehicles were on the bridge at the time and there were 13 fatalities and 123 people injured.  We extend our deepest sympathy to the loved ones of those who died and to the injured.

We do not yet know why the I-35W Bridge failed, and our Department is working closely with the National Transportation Safety Board (NTSB) as it continues its investigation to determine the cause or causes.  In the interim, we are taking every step to ensure that America’s infrastructure is safe.  I have issued two advisories to States in response to what we have learned so far, asking that States re-inspect their steel deck truss bridges and that they be mindful of the added weight construction projects may bring to bear on bridges. 

Immediately upon learning of the collapse, at the direction of President Bush, I deployed a team, led by Administrator Capka, to coordinate the Federal response on-site in Minneapolis.  The morning of August 2, I was at the scene with them.  The DOT team, including the continuous on-site support of the FHWA Minnesota Division Office and Deputy Federal Transit Administrator Sherry Little, is providing expertise in bridge engineering and construction, environmental assessments and planning, transit programs, and Federal contracting, to assist State and local officials in the recovery, debris removal, temporary traffic rerouting, and restoration of transportation services.  This team is also working with the State to expedite the process for reconstructing the bridge. 

Federal support has included a quick release of $5 million in Emergency Relief Federal-aid Highway funding to the State of Minnesota to initiate recovery operations.  Those funds were made available the day after the disaster to help restore the traffic flow, to clear the debris, to set up detours, and to begin the repair work. 

President Bush signed legislation on August 6 authorizing $250 million in emergency relief funding.  The legislation also made available $5 million to reimburse Minneapolis for increased transit operations to serve commuters until highway traffic service is restored on the bridge.  Fifty million dollars in Emergency Relief funds were released on August 9 to ensure the State's recovery efforts can proceed without delay.  As the State completes the assessment of the total damage and the ultimate cost to replace this bridge, we stand ready to ensure that appropriate funding is made available to replace it.  Indeed, with Congress' assistance, we are committed to making funds available to the State as they are needed to ensure that the bridge is rebuilt as quickly as possible.

While not part of the emergency response funding, we have also provided an additional $13.2 million in immediately available transit funds in connection with our announcement of Minneapolis as an “Urban Partner” under our Congestion Initiative, a broad initiative for managing surface transportation in the Minneapolis area.

The I-35W bridge over the Mississippi River in Minneapolis originally opened in November 1967 and became one of the critical facilities in a vital commercial and commuting corridor.  The bridge was an 8-lane, steel deck truss structure that rose 64 feet above the river before its collapse.  The main span extended to 456 feet to avoid putting piers in the water, which would have impeded river navigation.  As of the 2004 count, an estimated 141,000 vehicles traveled per day on the bridge.

FHWA is assisting the NTSB as they conduct a thorough investigation, which includes a structural analysis of the bridge. Within days of the collapse, development of a computer model based upon the original design drawings for the bridge began at FHWA's Turner Fairbank Highway Research Center in McLean, Virginia.  This model can run simulations to determine the effect on the bridge of removing or weakening certain elements to recreate, virtually, the actual condition of the bridge just prior to and during its collapse. 

By finding elements that, if weakened or removed, result in a bridge failure similar to the actual bridge failure, the investigators' work is considerably shortened.  While examination of the physical members of the bridge being recovered from the site provide the best evidence of why the bridge collapsed, the analytical model allows the evaluation of multiple scenarios which can then be validated against the physical evidence.  This work is expected to take several months and my experts will be there, on the ground, to provide assistance. We need to fully understand what happened so we can take every possible step to ensure that such a tragedy does not happen again.  Data collected at the scene, with the help of the Federal Bureau of Investigation's 3-D laser scanning device, are being used to assist in the investigation.

On August 2, the day after the collapse, I requested that the DOT Inspector General conduct a rigorous assessment of the Federal-aid bridge program and the National Bridge Inspection Standards (NBIS).  The NBIS, in place since the early 1970s, generally requires safety inspections for all highway bridges in excess of 20 feet in total length on public roads at least every two years.  Safety is ensured through hands-on inspections and rating of components, such as the deck, superstructure, and substructure, and the use of non-destructive evaluation methods, and other advanced technologies.  The composition and condition information is collected in the national bridge inventory (NBI) database, maintained by FHWA. 

The I-35W bridge has been inspected annually by the Minnesota Department of Transportation (MNDOT).  The most recent inspection was begun by MNDOT on May 2, 2007.  No imminent dangers were observed and MNDOT planned to continue inspecting the bridge in the fall following completion of construction work on the bridge.

Federal, State, and local transportation agencies consider the inspection of our nearly 600,000 bridges to be of vital importance and invest significant funds in bridge inspection activities each year.  We strive to ensure that the quality of our bridge inspection program is maintained at the highest level and that our funds are utilized as effectively as possible.  The Inspector General will be monitoring all of the investigations into the collapse and reviewing our inspection program to decide and advise us what short- and long-term actions we may need to take to improve the program.  Though we will have to wait for the NTSB's report before we can conclude if the inspection program played any role in this collapse, we must have a top-to-bottom review to make sure that everything is being done to keep this kind of tragedy from occurring again.

In the aftermath of this tragedy, a necessary national conversation has begun concerning the state of the Nation’s bridges and highways and the financial model used to build, maintain and operate them.  It is important to understand that, while we must do a better job of improving the Nation’s transportation systems, we do not have a broad transportation infrastructure “safety” crisis. 

Since 1994, the percentage of the Nation’s bridges that are classified as “structurally deficient” has declined from 18.7% to 12.0%.  The term "structurally deficient" is a technical engineering term used to classify bridges according to serviceability, safety, and essentiality for public use.  The fact that a bridge is classified as "structurally deficient" does not mean that it is unsafe for use by the public.  Since 1995 the percentage of travel taking place on roads that are considered “good” has increased from 39.8% to 44.2%.  Overall, approximately 85% of travel takes place on pavement that is considered “acceptable.”  FHWA estimates that it will cost approximately $40 billion a year to maintain the physical condition of our Nation’s highways and bridges and approximately $60 billion a year to substantially improve the quality of current roads and bridges.  In 2005, Federal, State, and local governments together made over $75 billion in capital investment to rehabilitate highways and bridges in the U.S. and improve their operational performance.  If we include operational, administrative, and debt service costs in addition to capital investments, the U.S. spent nearly $153 billion on highways and bridges in 2005.

These infrastructure quality numbers should and can be improved with more targeted investment strategies, but it is inaccurate to conclude that the Nation’s transportation infrastructure is subject to catastrophic failure.  We have quality control systems that provide surveillance over the design and construction of bridges. We have quality control systems that oversee the operations and use of our bridges.  And we have quality control over inspections of bridges to keep track of the attention that a bridge will require to stay in safe operation.  These systems have been developed over the course of many decades and are the products of the best professional judgment of many experts.  We will ensure that any findings and lessons that come out of the investigation into the I-35W bridge collapse are quickly learned and appropriate corrective actions are institutionalized to prevent any future occurrence. 

A more accurate description of our current and broader problem is that we have an increasingly flawed investment model and a system performance crisis.  Many are calling for a renewed national focus on our Nation’s highway infrastructure.  I applaud Ranking Member Mica for starting the conversation about a multimodal National Strategic Transportation Plan.  And while I agree that our infrastructure models need to be reexamined, it is imperative that we actually focus on the right problem. 

When faced with an underperforming division, the response of any credible business organization is to assess the cause of underperformance and to implement policies and practices intended to reverse performance declines.  In my assessment, the underperformance in the highway sector is fundamental, not incremental.  In other words, increases in Federal taxes and spending would likely do little, if anything, without a more basic change in how we analyze competing spending options and manage existing systems more efficiently. 

Because tax revenues are deposited into a centralized Federal trust fund and re-allocated on the basis of political compromise, major decisions on how to prioritize investments--and thus, spend money--are made without consideration of underlying economic or safety merits.  The degree to which one capital investment generates more returns than a competing investment is the most basic question asked in virtually every other capital intensive sector of the economy.  Yet, when it comes to some of our largest and most critical investments we make as a Nation – highways and bridges – there is virtually no analysis of this question.  There is no clearer evidence of this failure to prioritize spending than the disturbing evolution of the Federal highway program.  This program has seen politically-designated projects grow from a handful in the surface transportation bill enacted in the early 1980s to more than 6,000 enacted in SAFETEA-LU.  The cost of these earmarks totaled $23 billion – a truly staggering figure.  

The real cost of these earmarks is much higher.  Looking at a sample of various recent earmarks, we found that the Federal earmark amounts themselves comprised on average only 10% of the total project cost.  Because of this, State departments of transportation will typically either delay the earmarked project indefinitely or re-allocate resources from higher priorities to fill the funding gap.  In addition, earmarks present large administrative burdens for States that must dedicate scarce personnel resources to managing lower priority projects that are subject to earmarking.  In short, earmarks ripple through the entire Federal-aid program structure. 

In addition to earmarks, there are more than 40 special interest programs that have been created to provide funding for projects that may or may not be a State and local priority.  As a former State DOT director, I have had first-hand experience with the difficulties created when Washington mandates override State priorities. 

While it is true that not all of these investments are wasteful, it is also true that virtually no comparative economic analysis is conducted to support these spending decisions.  No business could survive for any meaningful period of time utilizing a similar investment strategy.  Not surprisingly, new economic literature reveals that the returns on our highway investments have plummeted into the low single digits in recent years.   

The Department is working with States to encourage them to regularly use benefit cost analysis (BCA) when making project selection decisions.  Currently, approximately 20 States make some use of BCA, while 6 States use the technique regularly.  The Government Accountability Office (GAO) recently conducted two studies to identify the key processes for surface transportation infrastructure planning and decisionmaking, with a particular emphasis on the role of economic analysis methods and the factors that affect the use of such methods.  

These studies are Highway and Transit Investments:  Options for Improving Information on Projects’ Benefits and Costs and Increasing Accountability for Results (GAO-05-172); and Surface Transportation:  Many Factors Affect Investment Decisions (GAO-04-744).  The former report noted that “the increased use of economic analytical tools, such as benefit-cost analysis, could improve the information available to decision makers and, ultimately lead to better-informed transportation investment decision making” (GAO-05-172, p. 6). 

Among other reasons, GAO cited "political concerns" for why BCA is not more widely utilized in U.S. public sector surface transportation decisionmaking.  GAO observed that projects may be important for a particular interest group or constituency even though it is not efficient from an economic standpoint.  At a minimum, BCA would provide additional transparency to decisions that are less cost-beneficial.  Ideally, BCA would actually begin to reverse inefficient decisions from being made in the first place.

GAO also noted that BCA results are rarely reviewed in light of actual project outcomes.  In other words, not only is BCA underutilized in the project planning process, but it is also rarely utilized to assess the efficacy of previous investments.  This is in stark contrast to typical capital investment models employed in the private sector.  It is important that Congress and the Department work together to establish far more productive means to ensure that scarce resources are flowing to projects that benefit the public the most.  BCA is likely to be one of our most effective tools to advance that objective.

Moreover, since Federal transportation funding levels are not linked to specific performance-related goals and outcomes, the public has rightfully lost confidence in the ability of traditional approaches to deliver.  Performance-based management can help establish and maintain accountability.  As former Washington State DOT Secretary Doug MacDonald noted, “transportation agencies need to demonstrate to taxpayers that they get a dollar’s worth of value for a dollar’s worth of tax.” The use of performance measures, by helping to identify weaknesses as well as strengths, can improve the transportation project selection process and the delivery of transportation services. 

In addition to an insufficient performance and cost-benefit focus, the current gas tax-dependent model does virtually nothing to directly address the growing costs of congestion and system unreliability.  Indirect taxes on gasoline, diesel fuel, motor vehicles, tires, property and consumer products – the dominant means of raising revenues for transportation - are levied regardless of when and where a driver uses a highway.  This leads to a misperception that highways are “free,” which in turns encourages overuse and gridlock at precisely the times we need highways the most.  Consistent with the views of almost every expert that has looked at the issue, GAO recently released a report arguing that gas taxes are fundamentally incapable of balancing supply and demand for roads during heavily congested periods. 

The data simply do not lie in this case.  Relying extensively on gas and motor vehicle taxes, virtually every metropolitan area in the U.S. has witnessed an explosion in traffic delays over the last 25 years.  Meanwhile, in recent years, the increase in surface transportation funding has significantly outpaced the overall growth of non-defense, non-homeland security Federal discretionary spending.  And, since 1991, capital outlays at all levels of government have nearly doubled.  Economists have long understood the connection between payment mechanisms and system performance, but technology and administrative complexities limited the ability of policymakers to explore alternatives.  Today, those barriers no longer exist. 

This is one of the main reasons that our Department has been strongly supporting States that wish to experiment with electronic tolling and congestion pricing.  Nationwide, the majority of projects in excess of $500 million currently in development are projected to be financed at least in part with electronic tolls.  In the middle of August, we announced Federal grants in excess of $800 million to some of the country’s largest cities to fully explore the concept of electronic tolling combined with expanded commuter transit options and deployment of new operational technologies.  Nationwide, the trends are inescapable and encouraging. 

We believe that to the extent feasible, users should finance the costs of building, maintaining and operating our country’s highways and bridges.  What is increasingly clear is that directly charging for road use (similar to the way we charge for electricity, water, and telecommunications services) holds enormous promise to generate large amounts of revenues for re-investment and to cut congestion.  Equally important, however, prices send better signals to State DOTs, planners, and system users as to where capacity expansion is most critical.  Prices are not simply about demand management, they are about adding the right supply. 

The current financial model is also contradictory to other critical national policy objectives.  As a country, we are rightfully exploring every conceivable mechanism to increase energy independence, promote fuel economy in automobiles, stimulate alternative fuel development, and reduce emissions.  President Bush has urged Congress to pass laws that will substantially expand our alternative energy capabilities and increase Corporate Average Fuel Economy requirements for automobiles and light trucks.  The Federal Government should be strongly encouraging States to explore alternatives to petroleum-based taxes, not expanding the country’s reliance upon them.

Finally, the current highway and bridge financial model fails to provide strong incentives for technology development and deployment, particularly when contrasted to other sectors of the economy.  It is imperative that we find more effective means to ensure that the rewards of a given advancement – for example, in extended life pavements or more sophisticated traveler information systems – can accrue in part to those firms or individuals that come forward with creative ideas.  It is no coincidence that we are seeing a technology boom in markets that have pricing structures that reward innovation.  Pricing infrastructure usage more closely to its true costs will not only reduce congestion and more appropriately target resources, it will also provide new incentives for innovation. 

The I-35W bridge collapse was both a tragedy and a wake-up call to the country.  We have a duty to ensure a safe transportation system for all who use it.  Moreover, our country’s economic future is tied in large part to the safety and reliability of our transportation infrastructure.  Before reaching the conclusion that additional Federal spending and taxes is the right path, we should critically examine how we establish spending priorities today.  We need a data-driven, performance based approach to building and maintaining our Nation’s infrastructure assets – a process where we are making decisions based on safety first, economics second, and politics not at all.  And we need an underlying framework that is responsive to today’s and tomorrow’s challenges, not those of the 1950s.

I look forward to working with you and would be pleased to answer any questions you may have.

STATEMENT OF

THE HONORABLE MARY E. PETERS
SECRETARY OF TRANSPORTATION

BEFORE THE

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
U.S. HOUSE OF REPRESENTATIVES

MAY 11, 2007

Chairman Oberstar, Ranking Member Mica, and Members of the Committee, I am grateful for the opportunity to come before you today to testify on Climate Change and Energy Independence.  These are topics of great importance to the President and to the American people.  I would like to discuss the President’s agenda briefly, and then turn to a discussion of how our Department and this Committee can work together to help achieve these objectives.

In 2002, the President said “addressing global climate change will require a sustained effort over many generations.”  We are making that effort today, and the President’s climate change strategy has three key elements:

• Collect the facts we need to make informed decisions;
• Invest in long-term technologies; and
• Take practical, cost-effective, near-term steps to reduce petroleum use and carbon dioxide emissions without damaging the U.S. economy.

In order to meet these goals, the President has requested, and Congress appropriated, some $35 billion in funding since 2001 for climate-related science, technology, observations, international assistance, and incentive programs.

Addressing the need for long-term technology investment, the President launched the Hydrogen Fuel Initiative and, subsequently, the Advanced Energy Initiative.  The President’s FY 2008 budget includes a request for $2.7 billion for the Advanced Energy Initiative, a 26 percent increase over the FY 2007 budget.  The Advanced Energy Initiative includes funding for hydrogen research, and key nearer term enabling technologies that will help us solve our energy and environmental dilemmas.  Specific research and development (R&D) targets include:  Better batteries to make plug-in hybrids a reality, and cellulosic ethanol production that offers the promise of a renewable, home-grown transportation fuel.

In this year’s State of the Union Address, the President addressed two Department of Transportation-led initiatives that can significantly reduce our Nation’s dependence on foreign oil and help to curb greenhouse gas emissions.  In his remarks, the President urged reform of the Corporate Average Fuel Economy (CAFE) program for passenger cars and directed the Department “to work with States and cities to explore ways to reduce traffic congestion, help save fuel, and reduce commute times.”

I urge you to support these initiatives.

The Administration has a long-standing commitment to strengthening CAFE.  In 2002, Congress granted Secretary Mineta’s request to remove appropriations riders that blocked rulemakings for many years.  Subsequently, the National Highway Traffic Safety Administration issued rulemakings raising fuel economy standards for light trucks in 2003 and 2006, saving 14 billion gallons of gasoline. That savings means that there will be   107 million fewer metric tons of  carbon dioxide emitted by those vehicles.

The 2006 light truck rulemaking introduced an innovative new size-based approach to setting CAFE standards that more equitably distributes compliance responsibilities among the full-line and other vehicle manufacturers.  For the first time, virtually all manufacturers will be required to install more fuel saving technologies.  This will produce greater fuel savings, and at a reduced cost.  Further, the size-based approach will improve safety by reducing the incentive that existed under the old CAFE standards to downsize vehicles. 

We have requested the legal authority to pursue similar reforms for passenger cars.  Increasing CAFE standards for passenger cars in the absence of reform would increase costs, while reducing fuel savings, environmental benefits, and safety.  I ask Congress to support CAFE reform for passenger cars, and want to work with you in fashioning legislation that will ensure that future fuel economy standards will be based on sound science and economics.

The Department has also embarked on an environmentally-friendly congestion initiative, designed to curb fuel consumption while combating the gridlock plaguing our cities today.  I would like to explore with you how this Committee and the Department of Transportation can work together on shaping transportation infrastructure to enhance energy security and reduce greenhouse gas emissions.  The key contributions that we can make to reducing petroleum consumption and greenhouse gas emissions are:

• Optimizing the use and fixing the bottlenecks in our transportation systems;
• Helping shape our transportation infrastructure to accommodate new fuels and new technologies as they are introduced; and
• Establishing sustainable funding for transportation infrastructure based on pricing scarcity. 

We need to find ways to increase the efficiency of our existing road system and direct limited investment capital to where it is most needed.  This is the fundamental rationale for the Congestion Initiative and Next Generation Finance Reform Initiative.  Both endeavors can be powerful tools for reducing petroleum consumption and greenhouse gas emissions as well as saving time and money for travelers.

While the Congestion Initiative involves a number of different elements, today I would like to particularly focus on those elements most relevant to saving fuel, and therefore reducing greenhouse gas emissions. The first element I would like to discuss is the Urban Partnership Agreement (UPA).  In December, with the help of this Committee, the Department issued a request for proposals from metropolitan areas that wished to become “Urban Partners” with the Department.  As an Urban Partner, a metropolitan area will commit to implementing a comprehensive policy response to urban congestion, including a congestion pricing demonstration, enhanced transit services, increased use of telecommuting, and advanced technology deployments.  In exchange for this commitment, the Department will support its Partners with available financial resources (using current approved budget authority), regulatory flexibility, and Departmental expertise.  We have received some thirty UPA applications, which we are in the process of reviewing.  We plan to “short-list” a set of preliminary urban partners in early June, then announce our final partners by early August.

The Department has requested an additional $175 million in the President’s FY 2008 budget to extend and expand this program.

The heart of the UPA is congestion pricing.  When applied appropriately, pricing can reduce congestion and save drivers substantial amounts of time and fuel.  Pricing can incentivize mass transit use and enable the provision of high-speed, reliable bus rapid transit service.  It can improve in-service fuel economy and reduce criteria pollutant and greenhouse gas emissions from individual vehicles by cutting out stop-and-go movement and allowing vehicles to operate at closer-to-optimal speeds.  By charging drivers a price closer to the costs that they impose on the system, pricing can have beneficial land use impacts – reducing distortions in housing markets.

Congestion pricing has been in the news lately – most recently with the proposal by New York Mayor Michael Bloomberg to consider implementing a “cordon pricing” program in which drivers would pay a fee to enter downtown Manhattan during the workday.  Notably, he called for pricing not simply as a stand-alone effort, but rather as part of a broader sustainability plan to create “the first environmentally sustainable 21st century city,” saying,

“We can’t talk about reducing air pollution without talking about congestion … the question is not whether we want to pay but how do we want to pay.  With an increased asthma rate?  With more greenhouse gases?  Wasted time? Lost business? And higher prices? Or, do we charge a modest fee to encourage more people to take mass transit?”

Mayor Bloomberg’s proposal is the kind of bold thinking leaders across the country need to embrace if we hope to win the battle against traffic congestion and climate change.  I am not necessarily suggesting that cordon pricing will work for all U.S. cities – though it may for some.  I commend Mayor Bloomberg, however, for recognizing that tackling traffic congestion is not just good transportation policy – it is also good environmental policy.

We are also working to reduce aviation congestion.  The Federal Aviation Administration has saved millions of gallons of jet fuel and over 6 million tons of carbon dioxide emissions over the past two years by implementing Reduced Vertical Separation Minimums (RVSM), permitting aircraft flying in U.S. air space to operate at more efficient altitudes.  FAA has achieved further improvements in system performance through the related reforms of Area Navigation (RNAV) and Required Navigation Procedures (RNP) – both of which allow for the more efficient routing for commercial air traffic and more reliable service during marginal weather conditions, particularly at congested airports such as Atlanta Hartsfield.  If we want to reduce jet fuel consumption and aircraft emissions without discouraging air travel, we must transform our aviation system and continue to optimize our air traffic control system.  We need a reauthorization bill passed by the Congress that provides for the next generation air transportation system—NextGen for short.

At the core of NextGen are infrastructure and operational capabilities to optimize air traffic management—which, in turn, reduce congestion and delays in the system, save travel time for the public, and improve energy conservation and emissions.  NextGen includes the development of environmentally-beneficial engine and airframe technologies.  Historically, the bulk of environmental improvements in aviation have come from new technologies, and NextGen is essential to continuing that progress.

Several elements of the Congestion Initiative deal with freight traffic, including the Department’s Corridors for the Future and Southern California freight congestion efforts.  Programs that permit freight to travel via the most cost-effective mode will generally produce emissions and fuel savings benefits.  In addition, significant increases in the use of ethanol or other alternative fuels will inevitably have impacts on our freight infrastructure.  We need to understand these impacts better, ensure that the freight infrastructure needed to support new fuels works effectively, find ways of applying new technologies, and incorporate this knowledge into the implementation of our freight-related congestion mitigation efforts.

In addition, advanced vehicles, including plug-in electric hybrids, dedicated ethanol vehicles, and hydrogen vehicles may require specialized infrastructure in order to be successful.  We need to explore ways of integrating specialized infrastructure into our current systems.

In addition to these two major fuel savings programs, the Department has multiple ongoing programs that address climate change and energy security concerns.  Let me list several of them now.

As part of the Administration’s Climate Change Science Program, we are undertaking a special study of the impacts of climate change on transportation infrastructure in the Gulf Coast.  The Department invests billions of dollars every year in long-lived vital infrastructure, and we need to understand how the changing climate will affect this infrastructure, and how we need to adapt. 

DOT has a Center for Climate Change made up of representatives from each of the modal administrations.  Through strategic research, policy analysis, partnerships and outreach, the Center creates comprehensive and multi-modal approaches to reduce transportation-related greenhouse gases and to mitigate the effects of global climate change on the transportation network.

Through the Federal Highway Administration’s Congestion Mitigation and Air Quality Improvement (CMAQ) and innovative finance programs, DOT is working with States and local governments on a range of programs to improve urban air quality within the transportation sector. One of our most interesting and successful programs has been undertaken in conjunction with the Environmental Protection Agency's SmartWay Program:  a program of grants and innovative loan programs  to retrofit trucks and truck stops with on-board and off-board auxiliary power to run vehicle lights and air conditioning and reduce truck idling. This program has been successful in reducing fuel consumption, criteria pollutant emissions, and greenhouse gas emissions.  This initiative has expanded to include idling emissions from marine, agricultural, rail, and off-road heavy-duty engines.

The Federal Transit Administration funds the development and deployment of alternative fuel buses, including hydrogen fuel cell buses, and diesel-electric hybrid buses, as well as alternative fuels infrastructure for transit systems across the United States.

Through the Federal Aviation Administration, we have two important programs: 

• The Voluntary Aviation Low Emissions (VALE) program assists in the deployment of low emissions ground vehicles and aviation support equipment at airports in air quality nonattainment areas. 
• Last year, the FAA launched the Commercial Aviation Alternative Fuel Initiative (CAAFI) in coordination with the Departments of Defense and Energy, and with U.S. airlines, airports, and manufacturers.  This initiative is focused on the near-term development and deployment of “drop-in” alternative aviation fuels; that is fuels that can directly supplement or replace petroleum-derived jet fuels.  It is also exploring the long-term potential of other fuel options.

Through the National Highway Traffic Safety Administration, the Research and Innovative Technology Administration, and the Pipeline and Hazardous Materials Safety Administration, we have modest programs to undertake safety research required for the development of safety standards for future hydrogen vehicles and infrastructure. 

The Maritime Administration is focused on new technologies to reduce the harmful emissions from marine diesel engines through research on alternative fuels like biodiesel and reduced ship stack emissions.

I commend the Committee for holding today’s hearing.  We all share the enormous responsibility of ensuring that future generations can experience the freedom of an efficient and vital American transportation system.  I look forward to answering your questions.

STATEMENT OF

THE HONORABLE MARY E. PETERS
SECRETARY OF TRANSPORTATION

BEFORE THE

COMMITTEE ON APPROPRIATIONS
SUBCOMMITTEE ON TRANSPORTATION, HOUSING AND URBAN DEVELOPMENT,
AND RELATED AGENCIES
UNITED STATES HOUSE OF REPRESENTATIVES

March 14, 2007

Chairman Olver and Members of the Subcommittee, thank you for the opportunity to appear before you today to discuss the Administration’s fiscal year 2008 budget request for the U.S. Department of Transportation.   Transportation lies at the core of the freedom we enjoy as Americans – freedom to go where we want, when we want…freedom to live and work where we choose…and freedom to spend time with our families.  Our goal is to deliver a transportation system that frees all of us to make daily decisions confident that we can reach our destinations safely without worrying about how we will get there, or if we can make it on time.  To reach that goal, President Bush is requesting $67 billion for America’s transportation network in the next fiscal year including the continuation of funding for the department’s mandatory programs.  

For those who fly, the President’s budget includes $14 billion for the Federal Aviation Administration (FAA).   The budget includes $175 million to support the transition to a 21^st Century satellite-based navigation system that will replace the current dated air traffic control architecture and over $900 million for ongoing capital projects that will also support the move to this Next Generation system.  For the flying public, this investment is critical if we are to deploy the state-of-the-art technology that can safely handle dramatic increases in the number and type of aircraft using our skies, without being overwhelmed by congestion.

Technology is critical, but the budget also includes significant resources to hire and train the people that keep the system safe.  The fiscal year 2008 budget supports a total of 1,420 new air traffic controllers, which will help replace controllers leaving the system due to retirements and other attrition.  Based on our current projections this will result in a net gain of 144 controllers.  

            Most importantly, the fiscal year 2008 budget provides the framework of the Next Generation Air Transportation System Financing Reform Act, a new proposal that will make flying more convenient for millions of travelers.  As air traffic is expected to nearly triple by 2025, our aviation system requires a more reliable and dynamic source of revenue to fund the modern technology required to manage this expanded capacity. The investment in NextGen will allow the FAA to not only handle more aircraft, but also to maintain high levels of safety, reduce flight delays, and cut noise near airports.

            From a finance perspective, our proposal replaces the decades-old system of collecting ticket taxes with a stable, cost-based funding program.  Based on a combination of user-fees, taxes and general funds, it creates a stronger correlation between what users pay to what it costs the FAA to provide them with air traffic control and other services.  The incentives our plan puts in place will make the system more efficient and more responsive to the needs of the aviation community.  

Without reforms to help finance increased air traffic control capacity and modernization, we can all expect to spend more time waiting in airports or strapped in an airplane seat, sitting at the end of a runway.  We hope that there will be a vigorous debate about the structure of the system, and we look forward to working with the Congress to enact legislation later this year.  

For drivers, the budget proposes a record $42 billion, consistent with the funding envisioned in the Safe, Accountable, Flexible, Efficient Transportation Equity Act:  A Legacy for Users (SAFETEA-LU) for highway construction and safety programs.     

Building on our safety accomplishments over the last six years, this budget will allow us to target problem areas that contribute to the unacceptably high vehicle fatality rate.  The total number of persons killed in passenger vehicles has declined every year since 2002, an accomplishment in which we all can take pride.  However, the overall fatality rate actually increased in 2005, due to a rise in motorcycle crashes and pedestrian fatalities.  In addition to addressing these important safety issues, the President’s budget funds State incentive grants that counter drunk driving and encourage primary seat belt laws.

Crashes not only cost precious lives, but also precious time for everyone waiting for the road to be cleared and re-opened.  So our budget supports aggressive development of “Intelligent Transportation Systems,” which put the latest technologies to work both to help eliminate crashes and to cut congestion.  We believe that technology has a central role to play in reducing the growing costs of congestion and system unreliability. 

In a recent editorial, USA Today opined that congestion pricing is a “fair and effective idea for fighting gridlock” that helps finance road expansion and encourages public transportation. We are proposing $175 million to support congestion pricing and other elements of the Department’s comprehensive National Strategy to Reduce Congestion announced last year.  We hope to target these funds to support some of our most congested cities and explore cutting edge demonstrations of concepts such as congestion pricing, flexible transit systems, real-time traffic information, and improved incident management strategies. 

We also propose to accelerate development capacity and operations projects along our most congested trade and travel corridors through our Corridors of the Future program.  We must get ahead of freight and travel trends along our most critical corridors to ensure that our interstate system continues to support the country’s economic growth. 

Accessible and cost-effective transit projects also help fight congestion, and the budget provides $9.4 billion for transit programs.   The President’s budget includes $5.8 billion to help meet the capital replacement, rehabilitation, and refurbishment needs of the existing transit system.   Also included is $1.3 billion for major New Starts projects,   which provides full funding for eleven commuter rail projects that are currently under construction, as well as proposing new funding for four additional projects.  Another $100 million will be used to implement the new Small Starts program by funding all four projects that have been approved into project development.

But even as we make these substantial investments, we realize that a business-as-usual approach to funding these surface transportation programs will not work much longer.  There is – and will continue to be – money coming into the Highway Trust Fund from gasoline taxes, and the revenues are growing every year.  But so is spending, and at an even faster rate.  We are living beyond our means, and we have nearly run through the balances that had built up in the fund.     

We continue to be concerned in particular about the solvency of the Highway Account in the Highway Trust Fund.  Our projections suggest that spending may outpace receipts before the end of fiscal year 2009.  Because we do not want to burden the trust fund further, the budget proposal does not include $631 million for revenue aligned budget authority – or RABA.  As we go through this budget process, I pledge to keep the Congress informed of the Administration’s revenue projections, and work closely with you to ensure that we do not outspend our resources. 

We are not alone in our concern.   In January of this year, the Government Accountability Office (GAO) for the first time added “Financing the Nation’s Transportation System” to its High Risk Series.  The GAO recommendation called for a complete reassessment of (a) the federal role in funding, selecting and evaluating transportation investments, (b) mechanisms to seek alternative revenue sources, including private investment, and (c) methods of allocating funds to ensure equity, efficiency, accountability and performance of transportation investments.

Long-term, we do need serious reform of our approaches to both financing and managing our transportation network to win the battle against congestion.  As suggested by GAO, we must fully explore the variety of mechanisms available to us to pay for transportation, as well as analyze the relationship between each mechanism and overall system performance. Serious reform must include reform of the legislative process itself.  The explosive growth of earmarks in recent years has hit transportation programs especially hard.  The law that funds highway, transit, and safety projects had over 6,000 of them, a practice that takes away from the freedom that States have to put the money where it will do the most good.  I want to reiterate the President’s call to cut the number and cost of earmarks in half this year – which is vitally important if we are to maintain a transportation network responsive to our customers’ needs.

We also urge action on making needed reforms to the Nation’s Intercity Passenger Rail system.  The President’s FY 2008 plan provides a total funding level of $900 million for intercity passenger rail.  Included in this total is $100 million for a new matching grant program that will enable State and local governments to direct capital investment towards their top rail priorities.

Our “safety first” priority includes ensuring the safe and dependable transport of hazardous materials throughout the transportation network.  The President’s plan provides $75 million for the Pipeline and Hazardous Materials Safety Administration’s pipeline safety programs specifically for this purpose.

Finally, we are requesting $154 million to support a fleet of 60 vessels in the Maritime Security Program – ensuring ships and crews to assist the Department of Defense with mobilization needs.  Our support is critical in supporting our military as they give so much to protect our way of life.  

Freedom is at the core of our American values.  But we lose a little more freedom each time we venture into traffic.  This budget proposal takes a big step in helping us get our freedom back.

Thank you for the opportunity to appear before you today.  I look forward to working with the Congress and the transportation community to ensure a safe transportation system that helps America break free of stifling congestion.

# # #

STATEMENT OF

THE HONORABLE MARY E. PETERS
SECRETARY OF TRANSPORTATION

AND

JOHN H. HILL,
ADMINISTRATOR OF THE
FEDERAL MOTOR CARRIER SAFETY ADMINISTRATION

BEFORE THE

SENATE APPROPRIATIONS SUBCOMMITTEE FOR
TRANSPORTATION, HOUSING AND URBAN DEVELOPMENT, AND
RELATED AGENCIES

MARCH 8, 2007

INTRODUCTION

Chairman Murray, Ranking Member Bond, and Members of the Subcommittee, thank you for inviting me today to discuss the Department of Transportation’s (DOT’s) demonstration project to implement the long-delayed trucking provisions of the North American Free Trade Agreement (NAFTA).  I am pleased to describe to you what the Department has done to implement Section 350 of the Fiscal Year 2002 Transportation and Related Agencies Appropriations Act (P.L. 107-87; 115 Stat. 833, 864) and the additional steps we have taken to ensure that we safeguard the safety and security of our transportation network even as we strengthen trade with a close neighbor and important partner.

Fourteen years ago, the United States pledged to allow the free flow of commerce across the North American continent.  Three U.S. Presidents and the Congress have considered and ultimately supported NAFTA’s trucking provisions and the Supreme Court has rejected unanimously a challenge to the Department’s implementation of those provisions, allowing us to make that pledge a reality.  Unfortunately, the delay in fully implementing NAFTA’s trucking provisions has impeded the efficient movement of goods to the markets on both sides of the southern border to the detriment of the nation’s economy.  This demonstration project begins a process that will remove this impediment, creating new opportunities, new hope, and new jobs north and south of the border.

BACKGROUND

President George H. W. Bush signed NAFTA in 1992, it was enacted by Congress and signed into law by President William J. Clinton in 1993, and it became effective on January 1, 1994.  Now, 13 years after we began implementing the agreement, its economic benefits are clear.  U.S. merchandise exports to NAFTA partners have grown more rapidly than our exports to the rest of the world.  Real Gross National Product Growth for NAFTA partners for the period 1993 to 2005 has been 48% for the United States, 49% for Canada, and 40% for Mexico.  Over that 13-year period, U.S. goods exports to Mexico and Canada have increased nearly twice as fast as our exports to the rest of the world.

Americans are reaping the benefits of this success.  Each day, nearly 2.4 billion dollars in trade flows among the United States, Mexico, and Canada, offering consumers greater choices and strengthening trade and investment ties with two democratic nations and longtime allies.  U.S. employment has increased substantially as well, rising from 112.2 million in December 1993 to 134.8 million in February 2006.  The jobs these exports support are particularly valuable to American workers, as they pay between 13 and 18 percent more than the U.S. national average.  All of this helps to explain why, between 1993 and 2006, the nation’s real Gross Domestic Product has nearly doubled.  This record demonstrates that we must move forward to fully implement NAFTA.

One of the agreement’s few remaining provisions to be implemented is the cross-border trucking provision.  Originally planned to commence in December 1995 with transportation between Mexico and the four Border States (Arizona, California, New Mexico, and Texas), it was to have been fully implemented by January 1, 2000.  In December 1995, Transportation Secretary Peña announced an indefinite delay in “opening” the border to long-haul Mexican commercial trucks to address legitimate concerns about the safety of Mexican trucks that would be traveling on our highways. 

Twelve years later these concerns have been addressed and, now that safety and security programs are in place, the time has come for us to move forward on a long-standing promise with Mexico and Canada by taking the trucking provisions of the North American Free Trade Agreement off hold. 

DEMONSTRATION PROJECT

Over the last twelve years, there has been a long, on-going conversation about the safety, security, environmental, and economic issues involved with allowing trucks from Mexico to operate in the U.S. beyond the border zones.  This conversation has occurred between DOT and Mexico’s Ministry of Communications and Transport; it has occurred between the Presidents of our nations; it has occurred in the House and Senate chambers; it has occurred in the media; it has occurred in front of a NAFTA dispute settlement panel, a U.S. Court of Appeals, and even the United States Supreme Court.  What this conversation made clear is that there were a number of important and difficult issues that had to be addressed before we could move forward with a graduated border opening. 

For that reason, the Administration is implementing a limited one-year demonstration project to authorize up to 100 Mexican trucking companies to perform long-haul operations within the U.S.  These companies will be limited to transporting international freight and will not be authorized to make domestic deliveries between U.S. cities.  Likewise, under this program, Mexico will grant authority to an equivalent number of U.S. companies to make deliveries between the U.S. and Mexico.  This will be the first time that American trucks have been allowed to make deliveries in Mexico in over twenty-five years.  The U.S. and Mexican governments have established two groups to provide oversight for the demonstration project.  The first, a bi-national group, will provide continuous monitoring of the project and identify and resolve any implementation issues as they arise.  The second, an evaluation group composed only of U.S. representatives knowledgeable with the issue, will be tasked with measuring and evaluating the results of the demonstration project.  We believe that this combination of monitoring and oversight will both provide the means for addressing implementation issues in a timely fashion and also an independent means for objective evaluation of the project once it is complete.

By granting authority to a limited number of Mexican carriers and monitoring them closely throughout the duration of the project, we will be able to monitor and evaluate the adequacy of the safety systems we have developed to address the concerns raised since 1995.

There are no exceptions to safety regulations for trucks from Mexico.  Mexico’s trucks and drivers must meet all U.S. safety requirements before they cross the border now, and before they will be allowed to drive beyond the border region.  All drivers must have a valid commercial driver’s license, proof of medical fitness, and verification of compliance with hours-of-services rules.  They must be able to understand and respond to questions and directions from U.S. inspectors, undergo drug and alcohol testing, and cannot be under the influence of drugs or alcohol.  All trucks must be insured by a U.S. licensed insurance company and meet U.S. safety standards.

Let me put the magnitude of this demonstration project in context.  Today, over 700,000 interstate trucking companies and approximately 400,000 intrastate companies are registered to operate in the U.S.  Over 8 million large trucks are registered in the United States.  We expect that the 100 Mexican trucking companies in this program will operate approximately 1,000 trucks in the U.S.

It is also important to note in the demonstration project there will be no trucks authorized to transport hazardous materials, no bus transportation of passengers, and no authority to operate longer combination vehicles on U.S. highways.  

SAFETY

Safety is at the heart of all we do at DOT and it has been foremost in our thoughts as we prepared to change the way trucks from Mexico operate in the U.S.  We appreciate this subcommittee’s guidance and commitment to highway safety by enacting provisions to ensure safe operation of vehicles involved in cross-border trucking.  Development of our safety programs has been guided by, but not limited to, the 22 requirements that Congress included in the 2002 Act.  I can assure you that the Federal Motor Carrier Safety Administration (FMCSA) has addressed each of these requirements and I have attached to my written testimony a table of these requirements and the actions FMCSA has taken to satisfy them. 

Two weeks ago, I traveled to Monterrey, Mexico, to visit a Mexican trucking company.  There, I witnessed FMCSA personnel conducting a pre-authorization safety audit required by Section 350 on the motor carrier.  Under the law, 50 percent of these audits must take place at the carrier’s place of business in Mexico.  For this demonstration project, FMCSA will conduct 100 percent of pre-authorization safety audits in Mexico.  These audits ensure that Mexican carriers wishing to operate in the U.S. beyond the border zones have systems in place to comply with all DOT regulations, including driver qualification, drug and alcohol testing, hours-of-service, vehicle maintenance, and insurance. 

During the pre-authority safety audit, FMCSA inspectors also conduct vehicle inspections of trucks a company wishes to use in the U.S.  The inspection is a comprehensive 37-step process that involves checking the vehicle from front to back and top to bottom.  At the conclusion of this inspection, if no defects are discovered, the vehicle is issued a 90-day Commercial Vehicle Safety Alliance (CVSA) safety decal.  All trucks operating in the test program will be required to display a current decal at all times while operating in the U.S., which means they will be inspected at least once every 90 days.   

This safety audit is merely the beginning of the Department’s oversight.  All Mexican trucks operating beyond the border zones will have a unique identifier, an X at the end of the DOT number marked on the vehicle.  This is so it is easily visible to FMCSA and State inspectors.  When these trucks reach the border, they will be subjected to additional vehicle inspections and license checks.  Under Section 350, FMCSA is required to check the validity of licenses for 50 percent of the drivers entering the country. 

Since 1995, FMCSA has spent more than $500 million to improve border inspection stations and hire more than 600 new Federal and State inspectors to enforce truck safety on the border.  FMCSA has deployed 125 inspectors and an additional 149 auditors and investigators along the Southern Border at all truck crossings.  Our State partners in Arizona, California, New Mexico, and Texas have deployed an additional 349 inspectors.  These safety professionals oversee the safety of Mexican trucks providing transportation in the existing border commercial zones and have made noteworthy progress in establishing the safety foundation for this demonstration project.  These inspectors conducted more than 210,000 driver and vehicle inspections of Mexico-domiciled carriers in the commercial zone during fiscal year 2006 and performed over 250,000 automated, real-time, checks of Mexican drivers’ licenses.  Their efforts are paying off.  Ten years ago, the out-of-service rate for Mexican trucks was 59 percent.  Since the increased enforcement that resulted from hiring the additional FMCSA and State staff, the rate dropped to 21 percent last year, which is comparable to the out-of-service rate we typically observe when we select U.S. trucks for inspection. 

I also want to highlight that while these inspectors have been effective and will assist the Department in satisfying its Congressional requirements, we are already looking toward more comprehensive and effective screening methods for the future.  FMCSA is working with Customs and Border Protection (CBP) to have motor carrier safety integrated into the International Trade Data System, or ITDS, which is part of the Automated Commercial Environment development effort.  When this initiative becomes fully operational, every Mexican company will have its authority and insurance checked and every Mexican driver will have his or her license checked each time the driver crosses the border, whether the vehicle is operating within the commercial zone or involved in long-haul transportation.  In fact, since these computer checks occur prior to a carrier’s arrival at the Southern Border, if we discover a problem, we will actually send notice back to the company or broker entering the information so issues can be addressed before the truck even reaches our Southern Border points of entry.  If the truck does arrive at the Border, the CBP agent will receive notice that there is an issue with the truck and direct it for further inspection by FMCSA or our State partners. 

While in the U.S., the performance of these Mexican carriers will be closely monitored.  We have established, through rulemaking, a list of seven safety problems related to driver licensing, operating unsafe vehicles, drug and alcohol testing and insurance – we call them the 7 deadly sins – which would lead to action by FMCSA up to and including revocation of a carrier’s provisional authority if not promptly addressed. 

FMCSA has worked with State and local law enforcement officials so they can assist in ensuring Mexican trucks operate safely and within the limits of their authority.  In 2002, FMCSA established regulations prohibiting all carriers from operating beyond the scope of their authority.  Since that time, every State has adopted and begun enforcing these provisions.  The Commercial Vehicle Safety Alliance (CVSA) has incorporated this violation into its Out-of-Service criteria, meaning that a Mexican truck discovered operating beyond the scope of its authority will be stopped and not allowed to continue.  FMCSA incorporated these new regulations into the training it gives to all commercial vehicle inspectors. 

FMCSA and the International Association of Chiefs of Police have developed a commercial motor vehicle awareness training program.  We have trained over 200 law enforcement officers to instruct other law enforcement officials about how to identify a Mexican motor carrier, how to verify the validity of a Mexican driver’s commercial license, how to determine the carrier is operating within its authority, and who to call if they need additional assistance with truck-specific issues.  Through this program, we are reaching out to the more than 500,000 State and local law enforcement officers in the U.S. 

In addition to the Federal safety requirements, the Mexican trucks operated in this demonstration project will be required to adhere to the same State requirements as U.S. trucks, including size and weight requirements and paying the applicable fuel taxes and registration fees.  In preparation for this project, FMCSA has worked with the four Border States to develop the capability for these States to register Mexican trucks in the International Registration Plan and International Fuel Tax Agreement. 

SECURITY AND ENVIRONMENT

While safety is the highest priority, the issues involved in this demonstration project are not limited to safety.  For this reason, the Department has coordinated closely with other Executive Branch agencies, particularly with the Department of Homeland Security (DHS) on border security matters and with the Environmental Protection Agency (EPA) to address environmental issues.  While these agencies can better speak to their programs in detail, let me share with you an overview of what is being done to address these areas. 

The majority of vehicles Mexican trucking companies will use for long-haul operations have been manufactured to meet both U.S. and Mexican emission standards.  In fact, most commercial motor vehicles now entering the U.S. from Mexico were manufactured in the U.S. or Canada, meaning that they were manufactured to U.S. emissions standards.  As breakdowns are costly for shippers, we expect that the fleet of trucks used for long-haul cross-border transportation will be newer and cleaner.  We anticipate that Mexican companies will maintain or expand their use of equipment that is manufactured to meet U.S. standards.  Mexico has also upgraded its domestic vehicle emission requirements in the last three years and now has regulations similar to those currently in effect in the United States.  EPA is working with the Mexican government to encourage full adoption of new U.S. truck and fuel standards. 

On a yearly basis, CBP processes about 4.5 million trucks through the U.S.-Mexico Border.  It is estimated that the 100 carriers in this demonstration project will account for approximately 1,000 trucks, a very small percentage of the CBP workload.   Implementing this demonstration project will not change our border security or immigration security posture.  

Current Processing

All commercial truck cross-border traffic must stop at a designated border crossing.  As required by statute and regulation, each truck will be processed at the border, using automated systems to assist in determining whether the cargo, truck, and driver are admissible and whether any of the elements pose a security, immigration, agriculture, or smuggling risk.  

If the CBP officer determines that further inspection is necessary, the driver, truck, and cargo are referred for a secondary inspection.   In a secondary inspection, CBP officers have many inspection tools at their disposal, including access to commercial, criminal and law enforcement databases, forensic document equipment, agricultural experts, and large scale scanning systems.  

If the CBP officer performing primary or secondary inspections determines that the driver, truck, and cargo are admissible and do not pose a risk, then the driver is allowed to proceed into the United States.  The Mexican carrier is then able deliver the cargo to a location within the commercial border zone, which can range up to 25 miles from the border (or 75 miles from the border within Arizona).  The cargo remains within the commercial zone until it can be picked up by a U.S. driver and truck.

Current CBP inspections are in addition and separate from motor carrier inspections.  The current CBP inspections and the current motor carrier inspections will continue under the demonstration project.

Demonstration Project
Under the demonstration project, processing of Mexican nationals and commercial trucks will continue according to CBP guidelines.  All cross-border commercial truck traffic will continue to be required to stop at a designated border crossing.  Mexican drivers will be required to present an entry document, and if traveling outside the 25-mile commercial zone (or 75-mile limit within the state of Arizona), the drivers will be issued a Form I-94 pursuant to regulations and in accordance with US VISIT procedures that include biometric and security requirements.
 
CBP processing of drivers, cargo, and conveyances for security screening and trade enforcement will remain consistent for truck carriers participating in this demonstration project.  Participants will continue to provide advanced cargo information as required under the Trade Act of 2002.  Participants will remain subject to immigration entry requirements for the driver and crew and to the import requirements of other government agencies in order to gain entry into United States commerce.

DOT and DHS will continue to partner in this effort to ensure safety and security requirements are completely addressed and satisfied prior to a carrier being allowed to proceed to an interior location in the United States.

CONCLUSION

Trucks from Mexico have always been allowed to cross the U.S. border.  Until 1982, they could travel anywhere in the United States.  For the last 24 years they have been restricted to specific border areas in Arizona, California, New Mexico, and Texas.  Every day, thousands of trucks from Mexico enter the United States.  Every day, drivers from Mexico operate safely on roads in major U.S. cities like San Diego, El Paso, Laredo, and Brownsville.  And every day, Federal and State inspectors ensure trucks are safe to travel on our roads. 

We have developed a limited program to demonstrate the effectiveness of the systems we have deployed to satisfy Section 350 of the 2002 Appropriations Act and to ensure the safety of the U.S. traveling public.  And now, we are ready to change the way trucks from Mexico operate in the United States.

Thank you for the opportunity to appear before you today.  I look forward to working with this Committee and the transportation community to ensure a safe transportation system for the citizens of the United States and to strengthen our trade with Mexico.

STATEMENT OF

THE HONORABLE MARY E. PETERS

SECRETARY OF TRANSPORTATION

BEFORE THE

COMMITTEE ON

TRANSPORTATION AND INFRASTRUCTURE

UNITED STATES HOUSE OF REPRESENTATIVES

February 8, 2007

Chairman Oberstar, and Members of the Committee, thank you for the opportunity to appear before you today to discuss the Administration’s fiscal year 2008 budget request for the U.S. Department of Transportation.   Transportation lies at the core of the freedom we enjoy as Americans – freedom to go where we want, when we want…freedom to live and work where we choose…and freedom to spend time with our families.  Our goal is to deliver a transportation system that frees all of us to make daily decisions confident that we can reach our destinations safely without worrying about how we will get there, or if we can make it on time.  To reach that goal, the President Bush is requesting $67 billion for America’s transportation network in the next fiscal year.  

For those who fly, the President’s budget includes $14 billion for the Federal Aviation Administration (FAA).   The budget includes $175 million to support the transition to a 21^st Century satellite navigation system that will replace the current dated air traffic control architecture and over $900 million for ongoing capital projects that will also support the move to this Next Generation system.  For the flying public, this investment is critical if we are to deploy the state-of-the-art technology that can safely handle dramatic increases in the number and type of aircraft using our skies, without being overwhelmed by congestion.

Technology is critical, but the budget also includes significant resources to hire and train the people that keep the system safe.  The FY 2008 budget supports a total of 1,420 new air traffic controllers that will help replace controllers leaving the system due to retirements and other attrition.  Based on our current projections this will result in a net gain of 144 controllers.  

Most importantly, the fiscal year 2008 budget provides the framework of a new proposal that the Administration will announce shortly to tie what users pay to what it costs the FAA to provide them with air traffic control and other services.  Our plan puts incentives in place that will make the system more efficient and more responsive to the needs of the aviation community.  Without reforms to help finance increased air traffic control capacity and modernization, we can all expect to spend more time waiting in airports or strapped in an airplane seat, sitting at the end of a runway.  We hope that there will be a vigorous debate about the structure of the system, and we look forward to working with the Congress to enact legislation later this year.  

For drivers, the budget proposes a record $42 billion, consistent with the funding envisioned in the Safe, Accountable, Flexible, Efficient Transportation, Equity Act:  A Legacy for Users (SAFETEA-LU) for highway construction and safety programs.     

Building on our safety accomplishments over the last six years, this budget will allow us to target problem areas like motorcycle crashes and drunk driving.  The President’s budget includes $131 million for alcohol impaired driving countermeasures incentive grants as well as $124.5 million for Safety Belt Performance grants to encourage States to enact primary seat belt laws for all passenger motor vehicles.  

Crashes not only cost precious lives, but also precious time for everyone waiting for the road to be cleared and re-opened.  So our budget supports aggressive development of “Intelligent Transportation Systems,” which put the latest technologies to work both to help eliminate crashes and to cut congestion.  We believe that technology has a central role to play in reducing the growing costs of congestion and system unreliability.  We are proposing $175 million to support specific elements of the comprehensive, department-wide National Strategy to Reduce Congestion announced last year.  We hope to target these funds to support some of our most congested cities and explore cutting edge demonstrations of concepts such as time of day pricing, flexible transit systems, real-time traffic information, and improved incident management strategies.  We also propose to accelerate development capacity and operations projects along our most congested trade and travel corridors through our Corridors of the Future program.  We must get ahead of freight and travel trends along our most critical corridors to ensure that our interstate system continues to support the country’s economic growth. 

Accessible and cost-effective transit projects also help fight congestion, and the budget provides $9.4 billion for transit programs.   The President’s budget includes $5.8 billion to help meet the capital replacement, rehabilitation, and refurbishment needs of the existing transit system.   Also included is $1.3 billion for major projects that will help provide new commuter rail and other transit projects in large metropolitan areas.  Another $100 million will be used to implement a new program with a simplified funding process to help provide smaller scale transit alternatives such as rapid transit, to relieve congestion in both urban and suburban locations.     

But even as we make these investments, we realize that a business-as-usual approach to funding these programs will not work much longer.  There is – and will continue to be – money coming into the Highway Trust Fund from gasoline taxes, and the revenues are growing every year.  But so is spending, and at an even faster rate.  We are spending more than we take in, and we have nearly run through the balances that had built up in the fund.     

We continue to be concerned in particular about the solvency of the Highway Account in the Highway Trust Fund.  Our projections suggest that spending may outpace receipts before the end of fiscal year 2009.  Because we do not want to burden the trust fund further, the budget proposal does not include $631 million for revenue aligned budget authority – or RABA.  As we go through this budget process, I pledge to keep the Congress informed of the Administration’s revenue projections, and work closely with you to ensure that we do not outspend our resources. 

Long-term, we need serious reform of our approaches to both financing and managing our transportation network to win the battle against congestion.  We must fully explore the variety of mechanisms available to us to pay for transportation, as well as analyze the relationship between each mechanism and overall system performance. Serious reform must include reform of the legislative process itself.  The explosive growth of earmarks in recent years has hit transportation programs especially hard.  The law that funds highway, transit, and safety projects had over 6,000 of them, a practice that takes away from the freedom that States have to put the money where it will do the most good.  I want to reiterate the President’s call to cut the number and cost of earmarks in half this year – which is vitally important if we are to maintain a transportation network responsive to our customers’ needs.

We also urge action on making needed reforms to the Nation’s Intercity Passenger Rail system.  The President’s FY 2008 plan provides a total funding level of $900 million for intercity passenger rail.  Included in this total is $100 million for a new matching grant program that will enable State and local governments to direct capital investment towards their top rail priorities.

Our “safety first” priority includes ensuring the safe and dependable transport of hazardous materials throughout the transportation network.  The President’s plan provides $75 million for the Pipeline and Hazardous Materials Safety Administration’s pipeline safety programs specifically for this purpose.

Finally, we are requesting $154 million to support a fleet of 60 vessels in the Maritime Security Program – ensuring ships and crews to assist the Department of Defense with mobilization needs.  Our support is critical in supporting our military as they give so much to protect our way of life.  

Freedom is at the core of our American values.  But we lose a little more freedom each time we venture into traffic.  This budget proposal takes a big step in helping us get our freedom back.

Thank you for the opportunity to appear before you today.  I look forward to working with the Congress and the transportation community to ensure a safe transportation system that helps America break free of stifling congestion.

# # #

STATEMENT OF

THE HONORABLE MARY E. PETERS
SECRETARY OF TRANSPORTATION

BEFORE THE

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

February 8, 2007

Madam Chairman, and Members of the Subcommittee, thank you for the opportunity to appear before you today to discuss the Administration’s fiscal year 2008 budget request for the U.S. Department of Transportation.   Transportation lies at the core of the freedom we enjoy as Americans – freedom to go where we want, when we want…freedom to live and work where we choose…and freedom to spend time with our families.  Our goal is to deliver a transportation system that frees all of us to make daily decisions confident that we can reach our destinations safely without worrying about how we will get there, or if we can make it on time.  To reach that goal, the President Bush is requesting $67 billion for America’s transportation network in the next fiscal year.  

For those who fly, the President’s budget includes $14 billion for the Federal Aviation Administration (FAA).   The budget includes $175 million to support the transition to a 21^st Century satellite navigation system that will replace the current dated air traffic control architecture and over $900 million for ongoing capital projects that will also support the move to this Next Generation system.  For the flying public, this investment is critical if we are to deploy the state-of-the-art technology that can safely handle dramatic increases in the number and type of aircraft using our skies, without being overwhelmed by congestion.

Technology is critical, but the budget also includes significant resources to hire and train the people that keep the system safe.  The FY 2008 budget supports a total of 1,420 new air traffic controllers that will help replace controllers leaving the system due to retirements and other attrition.  Based on our current projections this will result in a net gain of 144 controllers.  

Most importantly, the fiscal year 2008 budget provides the framework of a new proposal that the Administration will announce shortly to tie what users pay to what it costs the FAA to provide them with air traffic control and other services.  Our plan puts incentives in place that will make the system more efficient and more responsive to the needs of the aviation community.  Without reforms to help finance increased air traffic control capacity and modernization, we can all expect to spend more time waiting in airports or strapped in an airplane seat, sitting at the end of a runway.  We hope that there will be a vigorous debate about the structure of the system, and we look forward to working with the Congress to enact legislation later this year.  

For drivers, the budget proposes a record $42 billion, consistent with the funding envisioned in the Safe, Accountable, Flexible, Efficient Transportation, Equity Act:  A Legacy for Users (SAFETEA-LU) for highway construction and safety programs.     

Building on our safety accomplishments over the last six years, this budget will allow us to target problem areas like motorcycle crashes and drunk driving.  The President’s budget includes $131 million for alcohol impaired driving countermeasures incentive grants as well as $124.5 million for Safety Belt Performance grants to encourage States to enact primary seat belt laws for all passenger motor vehicles.  

Crashes not only cost precious lives, but also precious time for everyone waiting for the road to be cleared and re-opened.  So our budget supports aggressive development of “Intelligent Transportation Systems,” which put the latest technologies to work both to help eliminate crashes and to cut congestion.  We believe that technology has a central role to play in reducing the growing costs of congestion and system unreliability.  We are proposing $175 million to support specific elements of the comprehensive, department-wide National Strategy to Reduce Congestion announced last year.  We hope to target these funds to support some of our most congested cities and explore cutting edge demonstrations of concepts such as time of day pricing, flexible transit systems, real-time traffic information, and improved incident management strategies.  We also propose to accelerate development capacity and operations projects along our most congested trade and travel corridors through our Corridors of the Future program.  We must get ahead of freight and travel trends along our most critical corridors to ensure that our interstate system continues to support the country’s economic growth. 

Accessible and cost-effective transit projects also help fight congestion, and the budget provides $9.4 billion for transit programs.   The President’s budget includes $5.8 billion to help meet the capital replacement, rehabilitation, and refurbishment needs of the existing transit system.   Also included is $1.3 billion for major projects that will help provide new commuter rail and other transit projects in large metropolitan areas.  Another $100 million will be used to implement a new program with a simplified funding process to help provide smaller scale transit alternatives such as rapid transit, to relieve congestion in both urban and suburban locations.     

But even as we make these investments, we realize that a business-as-usual approach to funding these programs will not work much longer.  There is – and will continue to be – money coming into the Highway Trust Fund from gasoline taxes, and the revenues are growing every year.  But so is spending, and at an even faster rate.  We are spending more than we take in, and we have nearly run through the balances that had built up in the fund.     

We continue to be concerned in particular about the solvency of the Highway Account in the Highway Trust Fund.  Our projections suggest that spending may outpace receipts before the end of fiscal year 2009.  Because we do not want to burden the trust fund further, the budget proposal does not include $631 million for revenue aligned budget authority – or RABA.  As we go through this budget process, I pledge to keep the Congress informed of the Administration’s revenue projections, and work closely with you to ensure that we do not outspend our resources. 

Long-term, we need serious reform of our approaches to both financing and managing our transportation network to win the battle against congestion.  We must fully explore the variety of mechanisms available to us to pay for transportation, as well as analyze the relationship between each mechanism and overall system performance. Serious reform must include reform of the legislative process itself.  The explosive growth of earmarks in recent years has hit transportation programs especially hard.  The law that funds highway, transit, and safety projects had over 6,000 of them, a practice that takes away from the freedom that States have to put the money where it will do the most good.  I want to reiterate the President’s call to cut the number and cost of earmarks in half this year – which is vitally important if we are to maintain a transportation network responsive to our customers’ needs.

We also urge action on making needed reforms to the Nation’s Intercity Passenger Rail system.  The President’s FY 2008 plan provides a total funding level of $900 million for intercity passenger rail.  Included in this total is $100 million for a new matching grant program that will enable State and local governments to direct capital investment towards their top rail priorities.

Our “safety first” priority includes ensuring the safe and dependable transport of hazardous materials throughout the transportation network.  The President’s plan provides $75 million for the Pipeline and Hazardous Materials Safety Administration’s pipeline safety programs specifically for this purpose.

Finally, we are requesting $154 million to support a fleet of 60 vessels in the Maritime Security Program – ensuring ships and crews to assist the Department of Defense with mobilization needs.  Our support is critical in supporting our military as they give so much to protect our way of life.  

Freedom is at the core of our American values.  But we lose a little more freedom each time we venture into traffic.  This budget proposal takes a big step in helping us get our freedom back.

Thank you for the opportunity to appear before you today.  I look forward to working with the Congress and the transportation community to ensure a safe transportation system that helps America break free of stifling congestion.

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