Statement of

King W. Gee,
Associate Administrator for Infrastructure

And

Gary Henderson,
Director, Office of Infrastructure Research and Development
Federal Highway Administration
United States Department of Transportation

Hearing on

Highway Bridge Inspections

Before the

Committee on Transportation and Infrastructure
Subcommittee on Highways and Transit
United States House of Representatives

October 23, 2007

            Mr. Chairman and Members, thank you for the opportunity to testify today on the Federal Highway Administration's (FHWA) bridge inspection program, and FHWA research work on bridge technology and inspections.  This is a very important hearing topic in the wake of the tragic collapse of the Interstate 35 West (I-35W) bridge over the Mississippi River in Minneapolis, Minnesota.

            We do not yet know why the I-35W bridge collapsed, and the Department of Transportation is working closely with the National Transportation Safety Board (NTSB) as it conducts a thorough investigation, including a structural analysis of the bridge, to determine the cause or causes.  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 (TFHRC) in McLean, Virginia.  Since then, the model has been improved to include the actual condition of the bridge, actual loads on it, and other factors that need to be considered in the assessment of the bridge.  This model can perform simulations, to determine the effect on the bridge, by removing or weakening certain elements to recreate, virtually, the actual condition of the bridge just prior to and during the bridge's collapse.  By finding elements that, if weakened or removed, result in a bridge failure similar to the actual bridge collapse, the investigators' work is considerably shortened. 

In addition, our forensic experts continue to provide onsite assistance to the NTSB and the Minnesota Department of Transportation during recovery of the key components of the bridge that are required to complete the forensic investigation.  Several components of the bridge have now been shipped to the TFHRC to continue the forensic investigation by conducting material characterization studies; other components will be shipped shortly.  We need to fully understand what happened so we can take every possible step to ensure that such a tragedy does not happen again.

While examination of the physical members of the bridge being recovered from the site provides 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 forensic evidence.  We are committed to helping NTSB complete its work as quickly as possible, but the process is expected to take a number of months. 

            As we await the NTSB findings, the Department is taking every step possible to reassure the public that America’s infrastructure is safe.  The Department has issued two advisories to States in response to what has been 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 add on bridges.  On August 2, the day after the collapse, Secretary of Transportation Mary Peters requested the Department of Transportation’s Inspector General to conduct a rigorous assessment of the Federal-aid bridge program and the National Bridge Inspection Standards (NBIS), and this assessment is underway.

National Bridge Inspection Program

            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 National bridge inspection program was created in response to the collapse, in 1967, of the Silver Bridge over the Ohio River between West Virginia and Ohio, which killed 46 people.  At the time of that collapse, the exact number of highway bridges in the United States was unknown, and there was no systematic bridge inspection  program to monitor the condition of existing bridges.  In the Federal-aid Highway Act of 1968, Congress directed the Secretary of Transportation in cooperation with State highway officials to establish: (1) NBIS for the proper safety inspection of bridges, and (2) a program to train employees involved in bridge inspection to carry out the program.  As a result, the NBIS regulation was developed, a bridge inspector’s training manual was prepared, and a comprehensive training course, based on the manual, was developed to provide specialized training.  To address varying needs and circumstances, State and local standards are often even more restrictive than the national standards.

            The NBIS require safety inspections at least once every 24 months for highway bridges that exceed 20 feet in total length located on public roads.  Many bridges are inspected more frequently.  However, with the express approval by FHWA of State-specific policies and criteria, some bridges can be inspected at intervals greater than 24 months.  New or newly reconstructed bridges, for example, may qualify for less frequent inspections.  Approximately 83 percent of bridges are inspected once every 24 months, 12 percent are inspected annually, and 5 percent are inspected on a 48 month cycle. 

The State transportation department (State DOT) must inspect, or cause to be inspected, all highway bridges on public roads that are fully or partially located within the State's boundaries, except for bridges owned by Federal agencies.  Federal agencies perform inspections through other processes beyond those performed by the State DOTs.  Privately owned bridges, including commercial railroad bridges and some international crossings, are not legally mandated to adhere to the NBIS requirements; however, many privately owned bridges on public roads are being inspected in accordance with the NBIS.  States may use their Highway Bridge Program funds for bridge inspection activities. 

            For bridges subject to NBIS requirements, information is collected on bridge composition and conditions and reported to FHWA, where the data is maintained in the National Bridge Inventory (NBI) database.  The NBI is essentially a database of bridge information that is "frozen" at a given point in time.  This information forms the basis of, and provides the mechanism for, the determination of the formula factor used to apportion Highway Bridge Program funds to the States.  A sufficiency rating (SR) is calculated based on the NBI data items on structural condition, functional obsolescence, and essentiality for public use.  The SR is then used programmatically to determine eligibility for rehabilitation or replacement of the structure using Highway Bridge Program funds.  Ratings of bridge components such as the deck, superstructure, and substructure assist States in prioritizing their bridge investments.

            Bridge inspection techniques and technologies have been continuously evolving since the NBIS were established over 30 years ago and the NBIS regulation has been updated several times, as Congress has revised the inspection program and its companion program, the Highway Bridge Program (formerly Highway Bridge Replacement and Rehabilitation Program).  The most recent NBIS revision took effect in January 2005.  The bridge inspector's reference manual has been updated as well, and we have developed, through our National Highway Institute (NHI), an array of bridge inspection training courses.

There are five basic types of bridge inspections--initial, routine, in-depth, damage, and special.  The first inspection to be completed on a bridge is the “initial” inspection.  The purpose of this inspection is to provide all the structure inventory and appraisal data, to establish baseline structural conditions, and to identify and list any existing problems or any locations in the structure that may have potential problems.  The “routine” inspection is the most common type of inspection performed and is generally required every two years.  The purpose of “routine” inspections is to determine the physical and functional condition of a bridge on a regularly scheduled basis.  An “in-depth” inspection is a close-up, hands-on inspection of one or more members above or below the water level to identify potential deficiencies not readily detectable using routine inspection procedures.  A “damage” inspection is an emergency inspection conducted to assess structural damage immediately following an accident or resulting from unanticipated environmental factors or human actions.  Finally, a “special” inspection is used to monitor, on a regular basis, a known or suspected deficiency.

            Visual inspection is the primary method used to perform routine bridge inspections, and tools for cleaning, probing, sounding, and measuring, and visual aids are typically used.  On occasion, destructive tests are conducted to evaluate specific areas or materials of concern, or to help identify appropriate rehabilitative work.  Type, location, accessibility, and condition of a bridge, as well as type of inspection, are some of the factors that determine what methods of inspection practices are used.  When problems are detected, or during the inspection of critical areas, nondestructive evaluation (NDE) methods and other advanced technologies are employed.

            Commonly used methods for evaluating concrete elements during “routine” inspections include mechanical sounding to identify areas of delamination (the separation of a layer of concrete from the reinforcing steel in the concrete member) and other forms of concrete degradation.  Similarly, for the “routine” inspection of steel members, methods include cleaning and scraping, and the use of dye penetrant and magnetic particle testing to identify cracking and areas of significant corrosion.

            State-of-the-art methods utilized during “in-depth,” “damage,” and “special” inspections include impact echo, infrared thermography, ground penetrating radar, and strain gauges for concrete structures and elements, and ultrasonic, eddy current, radiography, acoustic emissions, strain gauges, and x-ray technology for steel structures and elements.

            There are numerous other technologies under development that have the potential to substantially advance the practices used for bridge inspection.  Some of these technologies are also being developed or are in limited use by other industries, such as the aerospace and nuclear power industries.  But, there is no one-size-fits-all approach in the use of nondestructive evaluations and testing; each technology is designed for a specific purpose and function.  Although these developing technologies have the potential to augment and advance bridge inspection practice, the challenge is to find a way to make them efficient, effective, and practical for field use.  FHWA, industry, academia, the Transportation Research Board (TRB), and State DOTs continue to investigate and improve the practicality of many of these technologies.  As a result of these efforts, a number of systems have recently become available that can assist an inspector in the identification and quantification of such things as reinforced concrete deterioration, steel tendon distress, and the displacement or rotation of critical members in a bridge.

            There are also a number of monitoring systems that can be used to provide real time data and alert the bridge owner to such things as failure of load carrying members, excessive rotation or displacement of an element, overload in a member, growth of a crack, or scour around a bridge pier.  The type of information provided by these systems is either very specific and provides detailed information on isolated areas or members of the bridge, or rather generic and provides general bridge behavior information.  The most practical of these systems are being used by owners following an “in-depth” or “special” inspection, to monitor the performance of the element or the bridge, when some specific concern has been raised but the concern is not considered to be a short-term safety hazard.  However, the effectiveness and costs associated with monitoring systems must be weighed against the benefits gained.  Like any emerging technology, changes and updates in monitoring systems can become a big challenge to maintain economically over the long haul.  Today, bridges are being built to last 75 to 100 years and installing any new monitoring systems and expecting them to be durable and serviceable for such a long period has never been done before.  Monitoring systems that are available today require routine maintenance and repair and continuous assessment to ensure that they are working correctly.  In addition, they do not eliminate the need for regular visual inspections.  In many circumstances, it is more effective to increase the inspection frequency, repair or retrofit areas of concern, or replace the structure.

            Since 1994, the percentage of the Nation’s bridges that are classified as “structurally deficient” has declined from 18.7% to 12.1%.  The term "structurally deficient" is a technical engineering term used to classify bridges according to serviceability and essentiality for public use.  Bridges are considered "structurally deficient" if significant load-carrying elements are found to be in poor or worse condition due to deterioration or damage, or the adequacy of the waterway opening provided by the bridge is determined to be extremely insufficient to the point of causing intolerable traffic interruptions.  The fact that a bridge is classified as "structurally deficient" does not mean that it is unsafe for use by the public.  Classification as "structurally deficient" may mean that the bridge is not capable of safely carrying its originally designed load, but is safe to remain in public use with a lower capacity restriction.  If a bridge is unsafe, it is closed to public use.      

            The infrastructure quality numbers for bridges should, and can, be improved, 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. 

Bridge Research and Technology Programs

            The current FHWA bridge research program is focused on three areas:  (1) the “Bridge of the Future,” (2) effective stewardship and management of the existing bridge infrastructure in the United States, and (3) assuring a high level of safety, security, and reliability for both new and existing highway bridges and other highway structures.

The “Bridge of the Future” is intended to be a bridge that can last for 100 years or more and require minimal maintenance and repair, while being adaptable to changing conditions such as increasing loads or traffic volumes.  FHWA's bridge research and technology (R&T) programs seek to improve the long-term performance of our Nation’s highway bridges--both those exposed to normal everyday traffic and use and those exposed to the damaging effects of extreme natural and man-made hazards--in an effective yet economical way.

            In the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU), Congress authorized and funded research in 5 program areas:  long-term bridge performance, innovative bridge delivery, high performance and innovative materials, nondestructive inspection technology, and seismic research.  The specific programs authorized by SAFETEA-LU are summarized in the following:

Long-term Bridge Performance

Long-Term Bridge Performance Program (LTBPP) – The LTBPP has been designed as a 20-year effort that will include detailed inspections and periodic evaluations and testing on a representative sample of bridges throughout the United States in order to monitor and measure their performance over an extended period of time.  The program will collect actual performance data on deterioration, corrosion, or other types of degradation; structural impacts from overloads; and the effectiveness of various maintenance and improvement strategies typically used to repair or rehabilitate bridges.  The resulting LTBPP database will provide high quality, quantitative performance data for highway bridges that will support improved designs, improved predictive models, and better bridge management systems.  The program has been underway for approximately one year.

Innovative Bridge Delivery

Innovative Bridge Research and Deployment (IBRD) Program – The IBRD program encourages highway agencies to more rapidly accept the use of new and innovative materials and technologies or practices in highway structure construction by promoting, demonstrating, evaluating, and documenting the application of innovative designs, materials, and construction methods in the construction, repair, and rehabilitation of bridges and other structures.  This will increase safety and durability and reduce construction time, traffic congestion, maintenance costs, and life-cycle costs of bridges. 

High Performance and Innovative Materials

High-Performance Concrete (HPC) Research and Deployment Program – The HPC program is a subset of the IBRD program.  It continues the advancement of HPC applications through targeted research that addresses needed improvements in design, fabrication, erection, and long-term performance in order to achieve the Bridge Program strategic outcomes.  HPC research focuses on material and casting issues, including improved performance criteria, lightweight concrete, curing, and test methods; structural performance concerns, including compression, shear, and fatigue behavior for both seismic and non-seismic applications; and concepts related to accelerated construction and bridge system design and performance. 

High-Performing Steel (HPS) Research and Technology Program – The HPS research and technology transfer program is focused on resolving a number of issues and concerns with the design, fabrication, erection, and long-term performance of both conventional and High Performance steels.  The program focuses research and technology transfer and education in the areas of materials and joining (for example, optimized welding processes and procedures); long-term performance (including advanced knowledge on performance limitations of weathering steels and the potential development of a 100-year shop-applied permanent steel coating system); innovative design (including testing and deployment of modular steel bridge super- and substructure systems); and fabrication and erection tools and processes.

Ultra-High-Performance Concrete (UHPC) Research and Technology– UHPC is a unique material which is reinforced with short steel fibers, but requires no conventional steel reinforcing.  Prior FHWA research on UHPC focused on basic material characterization, and the development of optimized structural systems using this very high performance, but costly, material.  Under the UHPC program, additional work will be conducted to further understand the unique structural properties of this material and assess its corrosion-resistance properties, while addressing its use in other structural components including precast bridge deck panels and prestressed I- and bulb-tee girders.

Wood Composite Research – The University of Maine is conducting a research program focused in the development and application of wood/fiber reinforced polymer (FRP) composite materials for potential use as primary structural members in highway bridges.

Nondestructive Inspection Technology

Steel Bridge Testing Program – This program is focused on the further development and deployment of advanced NDE tools that can be used to detect and quantify growing cracks in steel bridge members and welds.  As described in section 5202(d) of SAFETEA-LU, the NDE technology should ultimately be able to detect both surface and subsurface cracks, in a field environment, for flaws as small as 0.010 inches in length or depth.

Seismic Research

Seismic Research Program – The University of Nevada, Reno, and the State University of New York at Buffalo are conducting a seismic research program intended to increase the resilience of bridges and reduce earthquake-induced losses due to highway damage.

In addition to FHWA, numerous other entities conduct bridge research and technology development, including State DOTs, industry, other Federal agencies, and academia.  The railroad industry, for example, conducts limited bridge research.  FHWA works with these stakeholders and partners to actively coordinate a National research program for agenda-setting, to carry out research, and to deploy new innovations to improve the safety, performance, and durability of highway bridges. 

FHWA staff participate in numerous national and international organizations and serve on committees focused on bridge research, development, and technology transfer.  We organize formal technical advisory groups and technical working groups, comprised of Federal, State, and local transportation officials; bridge engineering consultants and industry groups; and academia to assist in the design, conduct, and delivery of the program. 

An important R&T partner for FHWA is the University Transportation Centers (UTC) Program, managed by the Research and Innovative Technology Administration (RITA).  RITA also consolidates bridge technology information from all of the Department's modal administrations to assist us in having the best available technologies.  FHWA works with the UTCs to identify opportunities for collaboration that will increase knowledge and skills among State and local highway agencies.  We sponsor a variety of events that bring together researchers and practitioners from FHWA, State DOTs, TRB, and UTCs to learn about each others’ interests and capabilities, new research opportunities, and technologies under development.  Activities include annual workshops showcasing the results of UTC research on particular topics, and numerous conferences, seminars and workshops co-sponsored with specific UTCs.  For example, the Northwestern University Infrastructure Technology Institute in Evanston, Illinois--a National UTC--works directly with infrastructure practitioners from across the country, particularly in nondestructive testing and evaluation, to solve problems and develop innovative technology applications in response to specific requests.  FHWA also utilizes its highly successful Local Technical Assistance Program (LTAP) as a mechanism for transferring technologies developed through the UTC Program to State and local highway agencies, and tribal governments. 

In addition, FHWA is an active participant with the American Association of State Highway and Transportation Officials (AASHTO) in technology transfer such as the AASHTO Technology Implementation Group and the Joint AASHTO/ FHWA/National Cooperative Highway Research Program International Technology Exchange Program, more commonly known as the International Scanning Program.  Recent scans have included a scan on bridge management, and a follow-on scan in 2007 on Bridge Evaluation Quality Assurance.   The 2007 scan identified and explored bridge inspection processes in use in European countries.

            Ultimately, a key measure of success of any highway technology depends on its acceptance by stakeholders on a national scale.  FHWA’s responsibilities for R&T include not only managing and conducting research, but also sharing the results of completed research projects, and supporting and facilitating technology and innovation deployment.  FHWA's Resource Center is a central location for obtaining highway technology deployment assistance. (The multiple services offered by the Resource Center are listed at www.fhwa.dot.gov/resourcecenter/.)  Education and training programs are provided through the FHWA NHI (www.nhi.fhwa.dot.gov).

            There are a number of barriers to technology deployment by State and local highway agencies and their contractors that may explain the relatively slow adoption of highway technologies that appear cost effective.  Lack of information about new technologies is one barrier that may be overcome with information and outreach programs.  Long-standing familiarity with existing technologies gained through education or experience also may hamper the adoption of newer technologies.  Education and training programs provided through the NHI often help to transcend these types of barriers.

            It also may be difficult for stakeholders to envision the long-range benefits of a new technology relative to initial investment costs, especially if the payback (break-even) period is long.  Even if stakeholders are aware of eventual cost savings from a more efficient or effective highway technology, they may have more confidence in traditional ways of, for example, assessing pavement performance.  Demonstration projects that provide hard quantitative data can help tip the scales so that stakeholders are more willing to try and eventually regularly use innovative technologies.

            Despite these efforts, technology deployment is also slowed by residual uncertainties about performance, reliability, installation, and maintenance costs; availability of the next generation of the technology; and the need for the necessary technical and physical infrastructure to support the technology in question.  These persistent barriers can be addressed with outreach programs and collaborative efforts with stakeholders, ranging from the TRB to researchers within State DOTs, as well as other incentives to enhance the cost effectiveness of new technologies.  Taken together, these initiatives often encourage earlier and broader adoption of highway technologies by increasing stakeholder familiarity with new technologies.

            FHWA’s Highways For LIFE  (http://www.fhwa.dot.gov/hfl/hflfact.cfm) is one example of such an initiative.  The purpose of Highways for LIFE is to advance long lasting highways using innovative technologies and practices to accomplish fast construction of efficient and safe pavements and bridges, with the overall goal of improving the driving experience for America.  The program includes demonstration construction projects, stakeholder input and involvement, technology transfer, technology partnerships, information dissemination, and monitoring and evaluation.  The innovative technologies that the Highways for LIFE program promotes include prefabricated bridge elements and systems, road safety audits, and tools and techniques for "Making Work Zones Work Better."

Perhaps the main barrier to technology deployment is the general lack of incentive mechanisms to encourage the deployment of new technologies.  We need to develop better incentive mechanisms in the way the Federal-aid highway program is designed, the way we procure, and the extent to which we rely on the private sector.

The Missouri Safe and Sound Bridge Improvement Project provides an example of a potentially innovative way to improve incentives and encourage innovation and private sector participation.

On May 25, 2007 the Department of Transportation approved a $600 million allocation of Private Activity Bonds to the Missouri DOT for the Missouri Safe and Sound Bridge Improvement Project.  The allocation will be made available to two short-listed bidders who are competing for a contract to bring 802 of Missouri’s lowest rated bridges up to satisfactory condition by December 2012 and keep them in that condition for at least 25 years.  The contract will be awarded largely on the basis of the lowest level of “availability payments” that the bidder will accept to improve and maintain the 802 bridges.  Missouri DOT will use Federal formula funds to pay the availability payments. SATETEA-LU authorized $15 billion in Private Activity Bonds.  These bonds provide tax-exempt financing for private firms to carry out highway and surface freight transfer projects.  Using this innovative financing approach will allow Missouri to complete these much needed bridge improvements more quickly and, it is hoped, at a lower cost.  Other States, including Pennsylvania and North Carolina, are also interested in this innovative approach.

            Through these and other mechanisms, FHWA supports the development and implementation of innovative technology deployment practices and processes throughout the highway community.

Conclusion

            The I-35W bridge collapse was both a tragedy and wake-up call to the country.  The Department's Inspector General will be monitoring all of the investigations into the collapse and reviewing our inspection and funding programs to decide and advise us what short- and long-term actions we may need to take to improve the bridge program.  Though we will have to wait for the NTSB's report before we really know the cause of the collapse, a top-to-bottom review is underway to make sure that everything is being done to keep this kind of tragedy from occurring again.  The public deserves to know and trust that our Nation's highways are safe.

            Thank you again for this opportunity to testify.  We will be pleased to answer any questions you may have.

Statement of

Tyler D. Duvall
Assistant Secretary for Transportation Policy
U.S. Department of Transportation

Submitted for the Record

Committee on Transportation and Infrastructure
U.S. House of Representatives

September 25, 2007

Rail Competition and Service

The U.S. Department of Transportation appreciates the opportunity to submit this statement for the record for the House Committee on Transportation and Infrastructure’s hearing on Rail Competition and Service.

In April of this year, Under Secretary for Policy Jeffrey Shane testified before the Surface Transportation Board that congestion and capacity limitations continued to be a problem on the Nation’s railroad network, despite record levels of investment in new capacity.  The miles-of-road owned by the Nation’s railroads have fallen by almost 20 percent since 1990, primarily because of the high cost of maintaining track at a time that traffic demand did not appear to warrant such a large network.  Similarly, railroad employment levels were static.  Nevertheless, significant increases in productivity (measured in freight revenue ton mile per employee hour) allowed the railroads to realize record traffic gains – from 1985 to 2005, rail productivity grew nearly 240 percent, while traffic, measured in ton miles, grew by 93 percent. 

However, the cushion provided by these productivity increases has been exhausted, and traffic continues to increase, partly because high fuel costs and a shortage of truck drivers has increased costs for truckers and made rail freight a more attractive option for shippers.  At the same time, crew shortages have also limited capacity; only in the last few years have railroads begun to boost employment.  As a consequence, the system is significantly constrained.  Average train speeds have fallen by nearly 22 percent, to 18.6 train-miles per train-hour in 2006, the lowest level in 16 years, accompanied by network congestion and deterioration in service reliability.

This has happened despite record levels of investment in rail capacity.  Capital investment by Class I railroads rose from roughly $3.5 - $4 billion annually during the early 1990s to $6 - $7 billion in the late 1990s to over $8 billion last year.  Railroads operate in a competitive capital marketplace.  They must be able to promise a competitive rate of return on the debt they incur and the equity investments their stockholders make in order to raise capital resources.  If railroads are to make further investments in rail capacity and improved service, the regulatory framework within which they operate must permit them to earn competitive rates of return.

The Surface Transportation Board has worked hard within the existing statutory framework to balance the needs of the railroads for adequate revenues to support investment in new capacity with the needs of shippers to be protected from the high rates that lack of rail competition might bring.  Changes to the existing statutory framework may weaken the ability of railroads to raise the capital they need in a competitive capital marketplace.  As long as we expect the railroad industry to finance its own capital investment and to innovate, we must give the industry the pricing flexibility it needs to serve as many customers as possible and to generate the revenues that will provide for competitive returns on its capital investment. 

The railroad industry has enormous fixed costs relative to most other industries.  Railroads invest 17.8 percent of their revenues in capital projects, compared with 3.7 percent for the average manufacturing firm.  Railroads must charge more than their variable costs in order to cover these enormous costs of capital.  In some rail service markets, where rail service is closely competitive with truck or barge service, railroads can only charge rates that barely cover their variable costs, and make little contribution to their capital costs.  Railroads must charge higher rates on “captive” traffic, where they face less competition, in order to cover their high capital costs.  If railroads could not charge higher rates on traffic where they face less competition, they would have to reduce the size of their networks even more, reducing the range of customers they could serve, thus increasing their costs for each customer served and probably increasing the rates that they would have to charge in the long run.

The statutory framework that has been in place since the Staggers Act was enacted in 1980 has worked exceptionally well to rationalize the nation’s rail networks - while also meeting the needs of shippers.  The flexibility permitted by the Staggers Act has allowed railroads to increase their productivity by nearly 48 percent between 1987 and 1999 (based on the Bureau of Labor Statistics multifactor productivity measure), which in turn has allowed a real, inflation-adjusted reduction in rail rates of 1.3 percent per year between 1990 and 2003, allowing more shippers to enjoy the benefits of low-cost rail service.  This has resulted in huge amounts of truck traffic being carried by rail, reducing the wear and tear on our Nation’s highways and bridges, and generating significant environmental benefits. 

Moreover, as the U.S. Government Accountability Office pointed out in a report last year, the percentage of rail traffic that moves at rates in excess of 180 percent of variable cost (and hence, by statutory standards, potentially captive) has declined since 1985 from 41 percent of all traffic to 29 percent in 2004.  While there may be isolated instances of shippers paying excessive rates, we believe those instances are rare.  The GAO report found that only 6 percent of all rail tonnage was moved at rates in excess of 300 percent of variable costs.  Changes in the rate structure to benefit a relatively small number of shippers could have unintended consequences for the overall rate structure, undermining the railroads’ ability to earn reasonable returns on their investment, and threatening the improvements in rail capacity and efficiency that we have experienced since the Staggers Act. 

The railroad industry has undergone and continues to undergo substantial changes.  Economic de-regulation has been a tremendous success story.  It provided the foundation for substantial efficiency improvements in the sector, and it is no coincidence that the U.S. freight rail system is by far the most productive in the world.  For these and other reasons, we believe that economic re-regulation of the railroad industry is unwarranted at this time.  We appreciate this opportunity to share our views with the Committee. 

Statement of

Tyler D. Duvall
Assistant Secretary for Transportation Policy
U.S. Department of Transportation

Before the

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

February 13, 2007

Public-Private Partnerships

Chairman DeFazio, Ranking Member Duncan, and Members of the Subcommittee:

I greatly appreciate the opportunity to appear before you today to talk about one of the most important trends in transportation, Public-Private Partnerships.  Under the leadership of Secretary Peters and Secretary Mineta before her, the U.S. Department of Transportation (USDOT) has made the expansion of public-private partnership a key component in the Department’s on-going initiatives to reduce the high and growing costs of congestion and improve transportation system performance.

The combined public and private sector interest in forming various transportation-infrastructure-related partnerships is growing every year.  Based on a recent internal Federal Highway Administration survey, the majority of States are either participating in —or exploring the creation of — a public-private program.  Currently, 23 States have some form of legislation that authorizes public-private partnerships in transportation.   The 2005 Safe, Accountable, Flexible, Efficient Transportation Equity Act – a Legacy for Users (SAFETEA-LU) also took important steps to further encourage development of public-private partnerships by expanding state tolling flexibilities, allowing up to $15 billion in private activity bonds to be issued outside state volume caps for highways and intermodal freight facilities, and directing USDOT to streamline design-build regulations. 

While the private sector is keenly interested in investing in a broad range of infrastructure systems in the U.S., my testimony will focus on highways and public transportation facilities with an emphasis on four areas:  1) why have public-private partnerships become an attractive financing option; 2) what are the various forms that public private partnerships can take; 3) what are the public policy implications; and 4) the Federal government’s role.

WHY HAVE PUBLIC-PRIVATE PARTNERSHIPS BECOME AN ATTRACTIVE FINANCING OPTION?

The Demand for Private Sector Finance

As with any major economic trend, there are a variety of factors that have come together at the same time to propel us to this point.  The willingness of public authorities to go beyond the traditional government approach to providing highways and public transportation systems has been driven largely by four distinct, but related trends: 1) growing resource scarcity; 2) declining system performance; 3) emergence of contract mechanisms to reduce government risk; and 4) growing public acceptability of direct user fees.     

Growing Resource Scarcity

Governments today (Federal, State, and local) are experiencing financial difficulty in keeping up with the demand for transportation investment.  Transportation-related taxes are being increasingly absorbed by rising costs and the need to dedicate ever more resources to system preservation and maintenance. 

Over time, the growth in gasoline consumption has been and will continue to be limited by increases in fuel economy for cars.  In this year’s State of the Union address, the President called for reducing gasoline consumption by an additional twenty percent in the next ten years by expanding alternative fuel production and increasing the average fuel economy of new cars and light trucks.  In addition, vehicle miles traveled trends in the U.S. appear to have flattened out in recent years after tracking closely.

Political resistance to fuel tax increases has grown at both the state and federal levels.  Results of a recent survey by Washington State’s DOT indicate 58 percent prefer the collection of tolls to fund future transportation improvements.  Only 26 percent would rather see an increase in the gasoline tax. 

At the same time, the costs of highway construction and rehabilitation have been growing faster than prices generally.  As construction activity has taken off in China and India, competition for scarce construction materials has caused materials costs to explode, rising 8.5 percent in 2004 and 12.6 percent in 2005.  Overall, construction costs since 1998 have risen 35 percent, more than twice as much as the GDP deflator.

Construction costs are particularly high in urban areas where congestion is most severe.  Even without land acquisition costs, building a lane-mile of uncomplicated new highway in an urban area now costs about $11.2 million – adding land acquisition brings it to $15 million.  But often there are complications that add to the costs, such as tunneling and overpasses, and these can push the cost of building a lane-mile of new highway to anywhere between $40 million and $300 million.   Environmental mitigation is also a growing portion of project costs, amounting to between 5 and 27 percent of project costs.

Declining System Performance

Deteriorating performance in the Nation’s surface transportation infrastructure is acute and widespread, and it affects both passenger travel and freight movement.  For many years, the U.S. enjoyed substantial amounts of excess capacity along many sections of our transportation systems.  Quite clearly, that era is over.  In the past 20 years, hours of delay and wasted fuel have each increased by more than four times.  The cost of wasted time and fuel for travelers in 2003 was over $60 billion, about 5 times the level 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 rise to roughly $170 billion.   These costs have been growing at about 8 percent per year – almost triple the rate of growth of the economy.  The extent, duration, and intensity of delay associated with these costs have all skyrocketed over the past two decades. 

For example, between 1982 and 2003 U.S. highway congestion:

      •     Increased from affecting 33 percent of travel in 1982 to 67 percent of travel in 2003;

      •     Increased in duration from 4.5 hours per day in 1982 to 7 hours per day in 2003; and

      •     Tripled the delay for the average rush hour driver’s trip from 13 percent of normal trip time in 1982 to 37 percent in 2003.

For the trucking industry, the increases in delay time, wasted fuel, and other increased operating costs that congestion imposes costs them about $10.7 billion annually.  The cost to shippers of delays in deliveries of shipments has been estimated at another $9.4 billion, so the total costs to truckers and their customers is about $20 billion per year.  Productivity losses and costs of unreliability are in addition to those costs.   

Emergence of Contract Mechanisms to Reduce Government Risk

Over the past decade, states and the private sector have gained valuable experience with new contractual mechanisms, including various types of design-build contracts, long-term management contracts and concession arrangements.  These new contractual structures allow the government to efficiently manage the various risks associated with infrastructure development and operation without compromising other policy objectives.  Because of these successful experiences, state legislators have given state transportation authorities broader leeway to experiment with ever more sophisticated arrangements. 

Growing Public Acceptability of Direct User Fees

The introduction of the first motor vehicle fuel tax in the U.S. was in Oregon in 1918, however, that was not the preferred option.  As transportation expert Martin Wachs, now with the Rand Corporation wrote in 2003 for the Report of the Committee for the International Symposium no Road Pricing, “The legislature had preferred a toll-based system of finance, but at the time it was rejected because of the cost of constructing toll booths and collecting tolls.  So a practical limitation, rather than a policy-based one, dictated the starting point for our system of paying for road infrastructure.”  Similarly, when President Eisenhower created the Interstate Highway System in 1956, he had originally preferred a toll-based system, but reluctantly agreed to go along with the recommendation of the Clay Commission to use fuel taxes as the financing mechanism instead.

By the 1960s, some visionaries were already anticipating a time when administrative costs would no longer force us to rely only on indirect charges such as the fuel tax.  In 1963 the economist William Vickrey, who later won the Nobel Prize, wrote:

“Talk of direct and specific charges for roadway use conjures up visions of a clutter of toll booths, an army of toll collectors, and traffic endlessly tangled up in queues. . . . However, with a little ingenuity, it is possible to devise methods of charging for the use of city streets that are relatively inexpensive, produce no interference with the free flow of traffic, and are capable of adjusting the charge in close conformity with variations in costs and traffic conditions.  My own fairly elaborate scheme involves equipping all cars with an electronic identifier which hopefully can be produced on a large-scale basis for about $20 each.  These blocks would be scanned by roadside equipment at a fairly dense network of cordon points, making a record of the identity of the car; these records would then be taken to a central processing point once a month and the records assembled on electronic digital computers and bills sent out. . . . Cameras can be arranged at some locations to take pictures of cars not producing a valid response signal.”[1]

Twenty-five years before E-ZPass, and 40 years before the London and Stockholm congestion pricing systems, Vickrey had anticipated exactly how congestion charging would be carried out and enforced.  Needless to say, with technology reducing the costs of electronic toll collection to a fraction of what it would have been in the 1960’s, administrative feasibility is no longer a problem.

Public opinion has also turned around.  The American Automobile Association recently published a national opinion poll that found that 52 percent of respondents favored tolls as a revenue source for expanded highway investment, while only 21 percent favored an increase in fuel taxes.  A survey by the Colorado DOT found 66 percent in favor of tolls as a way of financing new highway capacity, while only 16 percent favored fuel taxes.  A 2005 Washington Post survey for the D.C. area similarly found 60 percent in favor of tolls, compared with 30 percent in favor of fuel taxes.  A 2004 poll by the Minneapolis Star Tribune found 69 percent in favor of express toll lanes, but only 23 percent in favor of increases in fuel taxes.  A 2006 poll for the Richmond-Times Dispatch found that 59 opposed an increase in fuel taxes, while tolls were supported by a 49-45 margin. 

Although indirect taxes on gasoline, diesel, general sales, motor vehicles, property and income still dominate the transportation revenue landscape, it is important to observe the trends closely.  From 2000 to 2004, toll revenues grew 21.1% in the U.S. compared to 2.5% and 0.1% for fuel and vehicle taxes, respectively.  The majority of new highway projects over $500 million that are currently in the development phase in the U.S. will be toll roads.   In many cases, they will be toll roads constructed using some form of public-private partnership and whose prices will vary based on congestion levels. 

The Supply of Private Sector Finance

From a supply standpoint, the surge in private sector interest in investing in U.S. highways and public transportation systems is driven by four entirely different factors: 1) investment returns at rates higher than long-term government debt with risks lower than real estate; 2) confidence in the stability and predictability of U.S. legal systems; 3) a belief that the U.S. economy will continue to grow as quickly as any industrialized economy in the world; and 4) increased facility operating and management expertise.

Investment Returns

In order to fully understand current infrastructure trends both in the U.S. and around the globe, one must have some appreciation for the current forces at work in international capital markets.  With long-term interest rates continuing to hover near record lows, a substantial amount of savings has been organized to invest in low to medium risk assets with low to medium returns.

As then Federal Reserve Governor Ben Bernanke said in April 2005,

“One well-understood source of the saving glut is the strong saving motive of rich countries with aging populations, which must make provision for an impending sharp increase in the number of retirees relative to the number of workers. With slowly growing or declining workforces, as well as high capital-labor ratios, many advanced economies outside the United States also face an apparent dearth of domestic investment opportunities. As a consequence of high desired saving and the low prospective returns to domestic investment, the mature industrial economies as a group seek to run current account surpluses and thus to lend abroad.”

Many of the same forces that have driven international managers of large pools of savings to seek new investment opportunities are now driving U.S. fund managers to do the same.   The California Public Employees’ Retirement System, for example, is now the majority investor in a major intermodal transportation facility developer.  More than 50 percent of the investors in Macquarie Infrastructure Partners, a recently formed infrastructure fund, are Americans, including substantial commitments from the retirement funds of several labor unions.  Various other financial services firms in the U.S. have reported the speedy formation of large investment funds with an infrastructure focus.  Private-sector infrastructure investments globally have grown from $52 billion in 2000 to $145 billion in 2006.

Confidence in U.S. Legal System, Economy, and Demographics

Growing interest in U.S. infrastructure reflects not only a large pool of long-term lenders, but also great confidence in the U.S. legal system.   Public-private partnerships have been commonplace in the developing world for many years, but the recent emergence of infrastructure investment funds in the developed world that allow the diversification of infrastructure investment portfolios has greatly reduced investment risk.  As a result, investors are willing to tolerate significantly lower returns, which lower the costs born by the public sector in connection with the execution of a public-private agreement. 

Given the scope of our infrastructure networks, our demographic advantage over most of the industrialized world, and our economic growth potential, there is little question that a substantial wave of investment in U.S. infrastructure across multiple sectors is possible.  A 2004 survey by the Global Business Council ranked the United States as the second leading destination country for foreign direct investment. 

Increased Expertise

At the same time that macroeconomic and external forces are driving private investors to the U.S. transportation system, private toll road operators have gained valuable operating experience in the U.S. and around the world.  Several European firms each operate more than 2,000 miles of toll roads.  France, Spain, Portugal, Italy and Australia have all moved extensively to private operators to run large parts of their national motorways.  Through efficient capital investments and a strong focus on throughput and operational performance, these companies generate higher operating margins than their public sector counterparts.   This trend is a throwback to the 19^th century in which over 2,000 private companies operated toll roads in the U.S.

WHAT FORMS DO PUBLIC-PRIVATE PARTNERSHIP TAKE?

There has been a great deal of discussion and interest in the lease transactions that took place in Chicago and Indiana, but it is important to bear in mind that the opportunities for public-private partnerships extend well beyond long-term lease agreements.  The basic opportunity for the public sector is to allocate various project risks to private sector entities that may be in a better position to efficiently manage and reduce those risks.  Those include design risk, financial risk, construction risk, operations and maintenance risk, and revenue collection risk, among others.  The ability to shift these various risks to private investors increases the public sector’s ability to manage a large number of projects, while also reducing strains on government budgets and the taxpayer. 

No two projects are identical and, as a result, the scope of risk transfer can vary substantially from transaction to transaction.  At one end of the risk transfer spectrum is the basic design-build contract, whereby the public agency transfers various cost and design risks to the private sector, but retains virtually all other risks.  At the other end of the risk transfer spectrum are contracts to build/re-build, own, and operate.  In these agreements, the public sector can insist on various performance requirements and rate schedules, but provides the private sector with broad discretion to operate and invest in the facility in the most cost-effective manner.

In the middle of this spectrum are variations on these contracts, including contracts to build, operate, and transfer, as well as long-term concession/franchise agreements.  In both of these arrangements, the private sector bears virtually all the operating and maintenance risk.  In the concession arrangement, the private sector also bears financing and revenue risk for the term of the contract. 

While relatively new to the United States, particularly in the post-interstate highway era, these various arrangements have become commonplace around the world.  According to a 2005 Federal Highway Administration synthesis that relied on information from Public Works Financing, there were 1,121 public-private infrastructure partnerships completed around the world between 1985 and 2004.  Eighty percent of these projects were in the transport sector, representing a value in excess of $360 billion. 

In a recently released design-build study, FHWA found that, among responding agencies that had design-build programs, more than a quarter of total project costs were incurred in connection with design-build contracts.  For large-scale highway projects, particularly bridges and tunnels, design-build has become a standardized procurement technique in many states.  Some of the most comprehensive analysis of the benefits of public-private partnerships has been conducted by the United Kingdom’s Treasury department.   Among other findings, the UK found that 88 percent of PPP projects were delivered on time or early, and with no cost overruns on construction born by the public sector while non-PPP projects were delivered late 70 percent of the time and over budget 73 percent of the time.

Intermodal freight facilities are an emerging area of public-private partnership interest.  The Alameda Corridor project in Southern California was one of the earliest examples of a successful public-private partnership.  With the passage of the intermodal freight transfer private activity bond provision in SAFETEA-LU, USDOT is expecting several large intermodal facility developments to proceed as public-private partnerships in the next two years.  While such projects often have a freight transportation focus, they often have spillover benefits for passenger transportation as well. 

As the country’s public-private partnership experiences grow, we can expect that our public transportation systems will increasingly explore creative partnerships with the private sector.   The majority of empirical studies in both the U.S. and abroad find that the private operation of public transportation lowers costs, increases operational efficiency, produces a more efficient allocation of resources, and enhances innovation in comparison with the public sector.[2]

According to a comprehensive analysis of data from all major UK bus companies, private firms are technically and organizationally more efficient than public companies.[3] Evidence indicates that bus deregulation in the UK decreased operating costs by 30 percent, largely due to productivity and efficiency improvements.[4]  Similarly, in Sweden, competitive tendering led to cost savings of 8 -15 percent.[5]  In Greece, controlled competition led to 40 percent reduction in total costs and a 15 percent increase in ridership and productivity; and in Spain private firms provided public transportation at a cost 42 percent lower than that of public providers.[6] 

Although public transportation agencies in the U.S. have far less experience with private involvement in recent decades than their European counterparts, these agencies have experienced similar reductions in cost through private sector involvement.  In Indianapolis, for example, cost efficiency increased by 15 percent over a five-year period after its transit agency contracted all bus routes to private operators.[7]  Researchers indicate that U.S. public transportation agencies with competitive contracting regimes experience cost savings between 5.5 and 14 percent.[8]

A small but growing number of Federally-supported public transportation projects have experienced reduced costs, shortened project delivery, improved project quality, or enhanced revenues by transferring risks and responsibilities to private partners. The Federal Transit Administration hopes to demonstrate the advantages of PPPs for new fixed guideway capital projects through its newly created Public-Private Partnership Pilot Program, which was formally established on January 19, 2007.[9]

Although no transaction has taken place to date, the Department also expects that creative arrangements involving multiple facilities, including highway and public transportation systems will emerge.  Multiple facility transactions would permit the pooling of low and high risk facilities, as well as revenue positive and revenue negative facilities.

PUBLIC POLICY ISSUES

Any analysis of the policy merits or pitfalls of public-private transportation partnerships is only appropriately discussed in comparison with the predominant approach of sole government provision.  In other words, the burden on proponents of the public-private model is to articulate how such a model improves on our current policy framework.  In that regard, I believe there are five critical (and related) policy failures that have emerged. 

First and foremost, as discussed earlier, we are suffering an intolerable decline in system performance in the form of travel delays and unreliability.  Sadly, we are far too tolerant of this obvious deterioration, choosing to assume that there are few, if any, solutions.  Transportation system decline poses a threat to our continued economic prosperity, to our quality of life, and to our environment.  An increased private sector role can help reverse these trends.  Because congestion is an internal cost to a private operator, there are powerful incentives for the private entity to take aggressive steps to reduce it.  A decline in vehicle throughput caused by congestion or an inability to effectively operate and manage a facility will reduce revenues and encourage customers to seek alternate routes.   

Second, current planning and project selection processes are not adequately investing in projects that generate high returns.  According to Clifford Winston from the Brookings Institution, “It would be expected that as the road system matures, the payoff from investments would decline, but inefficient highway policies also appear to have significantly reduced the rate of return from highway infrastructure investments.  Shirley and Winston found that during the 1970’s annual returns exceeded 15 percent, but that returns have fallen to less than 5 percent during the 1980’s and 1990’s.”  FHWA is working with states to develop mechanisms to analyze the economic costs and benefits of major investments; however, substantial work remains.  Because private investors have little interest in investing in low return projects, resources are far more likely to flow where they are most critical.  Most often, these will be major congestion relief projects in some of our largest metropolitan areas.  In turn, this frees up public resources to invest in socially desirable transportation projects that would not rate highly on purely economic grounds. 

Third, due to various budget and political constraints, highway capitalization has been sub-optimal.  The majority of pavements in the U.S. interstate and primary systems were designed on the basis of a 20-25 year initial service life.  The original design life of many of these assets is now over, and a growing percentage of Federal and state resources are being directed to preservation and maintenance activities.  Current materials and technologies are widely available in the U.S. and around the world for much longer lasting pavement.  Improved management practices, using timely preservation actions, can also significantly extend the life of existing infrastructure.  In addition to providing substantial amounts of new investment resources, a long-term contract with the private sector can reverse some of the incentive challenges inherent in the current approach to government budgeting.  As with congestion, an under-capitalized asset is an internal cost to a private concessionaire and its lenders.  Over time, the operating and maintenance costs of such an asset will grow at rates far faster than would have been the case with a larger up-front investment.  Equally important, more efficient investment schedules will lower the costs to users. 

Fourth, as with any asset or service provided solely by government agencies, the current policy framework provides weak incentives for innovation and competition.  Because the rewards of a given advancement – for example, in extended life pavements or more sophisticated traveler information systems – accrue broadly and not to specific creative individual firms or individuals, the current approach is unlikely to deliver the pace of breakthroughs that we are seeing in other critical infrastructure sectors like telecommunications and energy.  Public-private partnerships can greatly improve the incentives to innovate, as well as the level of competition in the highway and public transportation sectors.

Finally, accountability to customers in transportation lags other infrastructure sectors.  The current policy framework largely disconnects highway users from the ownership, operation and management of highway assets despite the fact that users depend on these facilities and indirectly finance their existence.  This disconnect weakens the facility owner’s incentive to provide superior customer service, as well as reduces opportunities for customers to voice complaints.   Because the health of transit systems is in part dependent on satisfied customers, customer interaction tends to be much more frequent and sustained than can be observed with highway systems. 

Public Policy Risks

Despite the clear opportunities that PPPs present to address some of the most pressing policy failures, it is also critical that public authorities, policymakers, and elected officials protect the public interest by fully understanding and analyzing the risks to the general taxpayer and transportation system user that can arise in connection with these transactions.  The most important risks are: monopoly pricing risk, corruption risk, thin market risk, system distortion risk, financial risk, and inexperience risk. 

Monopoly Pricing Risk

To the extent that the government views the leasing of existing transportation assets as a potential income source, there is an inherent tension that must be addressed.  Contractual terms that provide substantial degrees of pricing power and protection from competition can substantially increase the discounted present value of the revenue stream associated with the asset.  Obviously, there are other critical assumptions that go into asset valuations, such as traffic growth projections, the ability to control costs, and the cost of long term borrowing.  However, there is little question that pricing flexibility in a potentially constrained market will be a major driver of facility value. 

As a result, it is important that public agencies analyze closely the potential for prices that do not bear a close relationship to costs plus some reasonable return commensurate with the level of risk being assumed.  Around the world, we have witnessed a trend in utility infrastructure toward price cap regulations that provide the regulated entity the authority to increase prices at a rate not to exceed the consumer price index plus or minus some X factor related to productivity improvements and changes in costs.   

Another form of economic regulation is rate of return regulation.  Rate of return regulation was the traditional form of economic regulation in the U.S. for many years.  It has increasingly fallen out of favor because it provides perverse cost incentives and encourages overcapitalization.   Given the complexity of these matters, it is important that public sector officials without regulatory experience gain a better understanding of the various penalties and incentives that are unlocked in connection with any economic regulatory decision.

A related issue is the treatment of competing facilities in the concession agreement.  Contract provisions that limit the prospect of competition will increase the up front lease value of a highway, but may run counter to the public interest if such a provision is not commensurate with the private sector’s risk.  The emerging trend in this area appears to be the inclusion of either a limited provision or no protection at all.   As with economic regulations, public sector officials must fully understand the implications of the various forms that these provisions can take prior to entering into any agreement. 

Despite the monopoly risks, economists ask the more salient question:  how do inefficiencies in a privatization compare to the inefficiencies of sole government provision?  As Nobel Prize winning economist Gary Becker wrote recently on his internet site, in the context of a discussion about highways:

“Still, I generally strongly support privatization, even when privatized companies have monopoly power in setting prices and other conditions of the sale.  The reason is that other companies are more likely to find ways to compete against private monopolies than against government ones.  A very important part of this argument is that technological progress is faster with private monopolies than with public monopolies.  For example, ATT was a private regulated monopoly before the breakup of the Bells in the early 1980’s into competing entities.  The breakup was desirable, but still ATT was much more efficient than were the government run companies that dominated the telephone industry in the rest of the world.” 

Facility characteristics differ greatly across the country, and a uniform pricing policy at the national level is not appropriate.  The Department hopes to conduct research into this economic regulatory question so that we can provide helpful guidance to State and local governments considering these transactions. 

Corruption Risk

In any public-private contractual arrangement, there is always a risk of corruption, and the risks must be particularly managed when the agreement is for a large amount of money and for a lengthy period of time.  An open and transparent process is the single most effective means to combat corruption.  It is important that clear selection criteria are established, and that the qualifications of the various competitors are fully disclosed.  Rarely, even with such transparency, an inappropriate concession award may be made.  In these cases, public authorities should protect themselves and their constituents with provisions that allow a contract award to be cancelled if it can be proven that the award was corruptly made.

Thin Market Risk

In the past, the number of investors capable of bidding on major infrastructure projects was limited, and this raised the risk that the market for investors in such projects was so thin that the public authority could not be assured that fair value for the public was being received.  In a thin market, and with a public agency focused on short-term returns, an agency might fail to receive returns commensurate with the long-term value of an asset.  To a large extent, this risk has now receded, as the capital funding available to invest in such projects has multiplied several-fold over the past few years.  With multiple U.S. investment firms entering this market, and foreign investment funds expanding their capacity, the risk that a thin market will fail to provide fair market value to the public is lessening year by year. 

System Distortion Risk

The national highway system is a well-developed network, and we want to ensure that the system continues to work efficiently even when some parts of the system have been privatized.  Of course, we already have substantial experience with operating a system that has multiple owners – the current national highway system is owned by 50 different states and numerous other highway, bridge, and tunnel authorities.  For the most part, this multiple ownership of the system has not been a problem, and we do not expect that private ownership of part of the system would present an operational problem.  Private owners have a financial incentive to maintain their facilities to a high standard and to ensure that construction activities, inclement weather, and other potential service disruptions do not interfere with continuous operations.  The fact that part of the system is subject to tolls and part is not is an issue that has been with us for many years.  This creates a distortion primarily when the prices charged do not reflect the real value of the facility to the user (as when prices do not reflect levels of congestion).  Public authorities should ensure that the pricing structure established by private operators reflects congestion and other characteristics affecting the value that the user receives, so that traffic is not inappropriately diverted from one part of the system to another.

Financial Bailout Risk

Public authorities that use private sector finance will want to ensure that, if a private sector project encounters financial difficulties, the operations of the project will not be interrupted and that unforeseen financial liability does not transfer to the public sector.  The public partner will also want to ensure that control of operations on the facility will not be tied up in bankruptcy proceedings.  We have extensive experience in private sector ownership of essential facilities, such as railroads and power plants, so these issues are not novel and the means to ensure uninterrupted service are well-established.

Inexperience Risk

Finally, given the novelty of some of these concepts, there is risk that public agencies will lack the capability to successfully administer public-private programs in the public’s interest.  An inexperienced public agency, for example, might underestimate the value of an asset and lease it for too little.  As a result, it will often be necessary for these agencies to procure legal and financial expertise to assist them.  As experience grows across the country, the sharing of best practices and lessons learned from state to state will also grow, thereby helping to minimize some of these risks.  In addition, it will be necessary for States to acquire different types of in-house skills.  

WHAT IS THE FEDERAL ROLE?

The approach to federalism that we have historically adopted in highways and transit delegates most of the responsibilities to the states.  The federal government sets certain kinds of performance standards for highway and transit facilities, but leaves most of the decisionmaking to the states and their agencies.  We see no reason to alter that fundamental division of responsibility.  The federal government must focus more closely on ensuring that national transportation objectives are being achieved.  This includes ensuring that freight and passenger traffic can flow easily across state and international boundaries, and that the national connectivity of the highway system is maintained.  We believe that public-private partnerships, by bringing more market-oriented perspectives into transportation planning, will help to ensure that both private and public transportation dollars are allocated more efficiently.  And our top priority, as always, is safety.  As an integral part of the roadway network, it is essential that privately financed and operated highways be a full partner in the goal of improving safety, through being engaged as part of the Strategic Highway Safety Planning process being led by State DOTs and other means.

In general, the advent of privately operated highway and transit infrastructure does not alter that division of responsibilities.  Privately operated highways that are part of the Interstate system must still meet Interstate standards set by the Federal Highway Administration.  Buses used in a privately operated transit system must still meet federally established standards for access by people with disabilities.  Privately operated highways will still be subject to patrol by state police forces.  Highways built with private sector financing should still be included on state transportation plans.   

The fact that public financing is not at risk in a privately financed project will alter the nature of the planning process somewhat, because the public partner does not need to do the same kind of assessment of costs and benefits that it would do if it were committing its own funds to the project.  It still needs to ensure that the project will be, on balance, beneficial to the public, including effects on land use and the environment, but this analysis will be somewhat simplified as compared with the analysis required for a publicly financed project. 

In general, we believe that the planning and regulatory framework in place now is sufficient to protect the public interest as it is affected by public-private partnerships.  But we welcome review by advocates of various kinds of public sector concerns, and we will all need to be sensitive to cases in which important public sector concerns may not be adequately protected.  As those cases come to light, we can make adjustments in our regulatory and planning processes to take account of them.

I appreciate your attention to my testimony, and I would be happy to answer any questions that you may have.

STATEMENT OF

VICTORIA COX,
VICE-PRESIDENT FOR OPERATIONS PLANNING SERVICES,
AIR TRAFFIC ORGANIZATION,
FEDERAL AVIATION ADMINISTRATION,

BEFORE THE

HOUSE COMMITTEE ON SCIENCE,
SUBCOMMITTEE ON SPACE AND AERONAUTICS,

ON THE

FAA’S FY 2008 BUDGET REQUEST FOR RESEARCH AND DEVELOPMENT,

MARCH 22, 2007

Good morning, Chairman Udall, Congressman Calvert and Members of the Subcommittee.  I am Victoria Cox, Vice-President for Operations Planning Services in the Air Traffic Organization of the Federal Aviation Administration.  I am honored to be here this morning to testify on the FAA’s FY08 budget request for Research and Development (R&D) activities. 

Aviation is a vital national resource for the United States.  It provides support for business, jobs, economic development, law enforcement, emergency response, and personal travel and leisure.  It attracts investment to local communities, and opens up new domestic and international markets and supply chains.  As a result, the United States must have an aviation system that is second to none – a system that can respond quickly to its changing and expanding transportation needs.  This can only be achieved through the introduction of new technologies and procedures, innovative policies, and advanced management practices. 

Our nation’s air transportation system has become a victim of its own success.  We created the most effective, efficient and safest system in the world.  But we now face a serious and impending problem:  today’s system is at capacity and demand for air services is growing rapidly. 

The FAA is committed to reducing congestion in our nation’s air transportation system and thereby maintaining and facilitating increases in the economic benefits afforded by the system.  Future congestion can only be alleviated by transforming the system we have today -- our current system is not capable of being “scaled up” to meet future demand. We must transform the current system to the system envisioned by the Joint Planning and Development Office (JPDO) - the Next Generation Air Transportation System or NextGen.  NextGen includes performance targets for the year 2025 that, if achieved, will reduce congestion by providing far greater capacity than our current system with higher efficiency levels than we have today, while maintaining safety. 

The FAA is integrating NextGen into its planning activities, including its five-year strategic Flight Plan.  In addition, the FAA is using the Operational Evolution Partnership, the new OEP, to guide our transformation to NextGen.  In the past the Operational Evolution Plan successfully provided a mid-term strategic roadmap for the FAA that extended ten years into the future.  The new OEP will include strategic milestones through 2025, and its participants will include representatives from JPDO. 

OEP is the FAA’s way to plan, execute and implement NextGen in partnership with private industry.  Through OEP we are seeking stakeholder input, evaluating available technologies, defining and prioritizing research and development requirements, establishing milestones and commitments, and providing status, context and guidance for initiatives related to NextGen. 

OEP will provide a single entry point for new NextGen initiatives to enter the FAA capital budget portfolio.  It ties these initiatives directly to our budget process, and it is the way that the FAA will implement the JPDO’s vision of the future system.   It will provide an integrated view of the programs, systems and procedures that are critical to transforming the system; and it will let us see them in the framework of the steps that must be taken by all FAA lines of business in order to achieve timely implementation.    It also allows us to understand the near-term steps and mid-term goals that we must accomplish to sustain and improve the National Airspace System (NAS) on our way to the NextGen system of 2025.

Research is absolutely critical to FAA operations today and for NextGen.  FAA has recognized this fact by proposing funding increases in R&D totaling $280 million over the next five years.  These funding increases are enabled by the financing reforms contained in the Administration’s proposal to reauthorize the FAA.  Among other reforms, H.R. 1356, the NextGen Financing Reform Act of 2007, adopts cost-based user fees (or offsetting collections) for the costs of air traffic control services for commercial aviation users.  FAA’s annual spending of these user fees would be fully offset by the user fee collections.  Therefore, FAA’s spending would rise or fall based on FAA’s costs and would not compete with any other discretionary budget priorities (as spending Trust Fund revenues do today).

The FAA uses R&D to achieve its near- and long-term goals and objectives.  In the past, the R&D program was driven by the near-term operational needs of the aviation system, and a large share of the agency’s R&D was focused on specific near-term safety and capacity issues.  The FAA’s R&D program is being adapted to be more flexible, balanced, and dynamic so we can respond simultaneously to the critical near-term needs of the system while providing for the NextGen system.  The OEP is the mechanism by which the FAA will assess R&D requirements for supporting NextGen, and new initiatives will be reviewed and prioritized before inclusion in Agency budget planning.

Research and Development will help FAA achieve NextGen by identifying challenges, understanding barriers, and developing solutions across the parameters of safety, environment, air traffic management, human factors, systems integration and self-separation.  To better manage our R&D program, we have developed the National Aviation Research Plan(NARP), which describes the FAA R&D programs that support both the day-to-day operations of the National Airspace System and the vision for NextGen.  The projects identified in the NARP enable the FAA to address the current challenges of operating the safest, most efficient air transportation system in the world while building a foundation for NextGen.  Research makes known the unknown.  It identifies constraints and barriers, separates solutions that are effective from those that are not, and will help transform our nation’s air transportation system.

Even before NextGen and the new OEP, we have not been developing our R&D goals and portfolio in a vacuum.  We continually assess our research program in conjunction with our stakeholders and customers to ensure we keep our R&D resources focused on the most critical tasks.  The R&D program receives expert advice and guidance from the Research, Engineering and Development Advisory Committee (REDAC).  Established by Congress in 1989, the REDAC reports to the FAA Administrator on research and development issues, and provides a liaison between our R&D program and industry, academia, and other government agencies.  The R&D program benefits significantly from the recommendations provided by the REDAC.  The committee, its subcommittees and working groups work hand-in-hand with us to develop our R&D program.  As our advisory committee members will probably tell you, one of our greatest challenges is our ability to define what the future system will look like.  Of what technologies will it be comprised?  JPDO has just within the last few weeks released the NextGen Concept of Operations, and in the next few months will publish the NextGen Enterprise Architecture.  The significance of these documents should not be understated.  They are essential to understanding the transformed operational environment; will allow us to more precisely develop a plan for achieving it; and will provide the basis for architecture-based, quantitative resource planning. 

In fiscal year 2008, the FAA plans to invest a total of approximately $259 million in Research and Development.  $140 million of this total is for Research, Engineering and Development (RED), which breaks down as $123 million from the Airport and Airways Trust Fund, and $17 million from the General Fund. 

The RED budget request includes $91.3 million in RED for continued research on aviation safety issues. This request supports critical safety research in the areas of: continued airworthiness of aging aircraft, fire safety, advanced aircraft materials and structural safety, catastrophic failure prevention, atmospheric hazards, propulsion and fuel systems, and weather.  Aviation safety research is essential to meeting FAA Flight Plan safety objectives and NextGen performance targets.   The potential of the NextGen system to handle tremendous growth in air traffic compels us to maintain our vigilance in safety research.  We must continue to invest in aircraft safety to reduce accident rates to insure that an increase in accidents does not accompany the increase in traffic.

An investment in safety R&D has and will continue to result in critical safety improvements for the flying public.  Our scientists and engineers, for example, are developing a fire proof airline cabin, improving aviation maintenance programs, developing better weather forecasts, ensuring the safety of composite aircraft components, reducing runway incursions, and creating new, more effective ways to train pilots, controllers, dispatchers, and crews.

In addition to safety programs, RED funding includes environmental issues, wake turbulence projects, unmanned aircraft systems, and human factors studies. 

As we look at the NextGen system we are working hard to ensure that we meet the increasing demand for flying in an environmentally sound manner.  The focus of the environment and energy research program is making aviation quieter, cleaner, and more energy efficient – which has the added benefit of reducing climate impact.  We are investing in research and development, and demonstration projects that will help us better understand aviation’s environmental health and welfare impacts and bring new technologies, operational innovations, and other capabilities on line to address and reduce these impacts.  In FY08 we are requesting $15.5 million in environment and energy research as well as $3 million for environment projects under the Airports Cooperative Research Program, funded under the Airport Improvement Program.

The FAA is also requesting funds to support wake turbulence research, the results of which will help us increase capacity while maintaining safety.  This program provides a better understanding of the swirling air masses, or wakes, trailing downstream from aircraft wingtips.  It will help us to safely reduce separation distances between aircraft, support the efficient use of closely spaced parallel runways, and allow airports to operate closer to their design capacity.  FAA is requesting an increase in funding for wake turbulence research from $4 million in fiscal year 2007 to $13.7 million in fiscal year 2008, including $3 million in the ATO Capital request.

In addition, FAA is requesting funds to further research on unmanned aircraft systems.  The program ensures the safe integration of unmanned aircraft systems into the National Airspace System.  This research provides information to support certification procedures, airworthiness standards, operational requirements, maintenance procedures, and safety oversight activities of unmanned aircraft system civil applications and operations.  FAA is requesting an increase in funds for unmanned aircraft systems research to $3.3 million for fiscal year 2008.

Human Factors projects will develop procedures, training and decision support approaches that mitigate human error while exploiting the innovation and problem-solving capacity that is the hallmark of human behavior. We will also develop system performance metrics that include people as critical elements of system performance while evaluating the impact of new technologies and procedures on human decision-making through integrated demonstrations. In fiscal year 2008, FAA is requesting $19.9M for human factors research and engineering efforts.

The R&D request includes $18 million to continue supporting the JPDO ($14.3M in RED and $3.5M in ATO Capital).  As the unit that spearheads NextGen for the federal government, JPDO will continue defining the future operating environment, identifying demonstration opportunities, and working with the relevant agencies who will implement the JPDO vision.  

$90 million in the ATO Capital account request is intended for research and development work.  This includes $23 million for the R&D work at the MITRE Center for Advanced Aviation System Development (CAASD). Other requests for Capital funding include the  NextGen demonstration projects.  We are requesting $20 million to stage NextGen Demonstration projects that will be used to lower risk; identify early implementation opportunities; refine longer-term objectives; demonstrate compatibility with other JPDO agencies; and, if results dictate, eliminate certain concepts from further consideration. 

We are requesting $28 million for research and development under the Airport Improvement Program.  The two key elements of the AIP program are increasing the capacity of our nation’s airports and improving the safety of aircraft operating from these airports.  As the tempo of operations at our airports continues to rise, AIP research projects include the development of technologies that insure safe transit of aircraft on taxiways and runways, improved runway designs that insure the safe control of aircraft landing in ice and snow conditions, and the development of state-of-the-art crash and rescue equipment to minimize the loss of life and injury in the event of an accident.  In addition to our in-house airport research, the Airport Cooperative Research Program, funded through AIP, helps us leverage outside R&D expertise by providing grants to research institutions to help us solve real-world airport safety and capacity issues.

Given expected demand growth, it is important to improve operations well in advance of 2025 so we can avoid gridlock, especially since we expect one billion passengers per year traveling in the system by 2015.  With that in mind, we are conducting research to support mid-term capabilities that must be in place to address demand forecasted for that time frame.  The OEP is helping us to define projects that deliver mid-term results and also provide the stepping stones to NextGen. 

We believe that a timely and efficient transition to NextGen requires us to participate in concept development and validation, prototyping and field demonstrations.  Such involvement will give us in-depth understanding of required NextGen operational improvements and hasten our ability to implement NextGen systems in the National Airspace System.  The President’s budget request for FY08 includes an estimated $4.6 billion for NextGen investments over the next five years.  That number includes increases in funding for SWIM from $21 million to approximately $52 million, while funding for NAS-wide implementation of ADS-B goes from $86 million in FY08 to an estimated $156 million in FY12.

We have been working closely with the JPDO on defining mid and long-term R&D activities that support seven solution sets that are key to NextGen:  initiation of trajectory-based operations; increased arrivals/departures at high density airports; increased flexibility in the terminal environment; improved collaborative air traffic management; reduced weather impact; increased safety, security and environmental performance; and transformed/networked facilities. 

Trajectory-based operations, or management by trajectory, will allow aircraft to fly trajectories negotiated with air traffic control as opposed to today’s practice of managing aircraft sector by sector and requiring them to fly routes specified by air traffic control.  NextGen demonstrations in fiscal year 2008 will test various aspects of trajectory-based management in the oceanic environment and demonstrate how oceanic flights using tailored routes can avoid congestion and take advantage of shorter routes.  

High density airports are those where demand for runway capacity is high, there are multiple runways with airspace and taxiing interactions, or there are other airports in close proximity that create the potential for airspace interference.  Airspace redesign coupled with new concept validation work will support this solution set.

Flexible terminals and airports will apply technologies that enhance both pilot and controller situation awareness and improve service on the ground.  Wake turbulence research will support reduced separation standards that will contribute to this theme. 

Collaborative air traffic management will consist of strategic and tactical interactions between air traffic controllers and customers.  It will include flow programs as well as collaboration on procedures to shift demand to other routings, altitudes, times, etc. 

Enhanced weather forecasts as well as improved use of forecasts will contribute to a reduction in weather impacts.  Weather plays a critical role in air traffic congestion and delays in today’s system.  As much as sixty percent of today’s delays and cancellations for weather stem from potentially avoidable weather situations.  For fiscal year 2008 and beyond, FAA is focusing on capabilities to help stakeholders at all levels make better decisions and better react to avoidable weather situations thus minimizing their impact.

Safety, security and environment enhancements will result from deployment of new procedures and systems that support NextGen objectives.   The Runway Status Lights program, for example, under our Runway Incursion Reduction funding supports this safety theme.  R&D funded environment and energy programs also contribute significantly here.  The estimated $4.6 billion in NextGen investments over the next 5 years also includes several initiatives to deal with aviation environmental issues.  Historically, new technology accounts for 90 percent of environmental footprint reduction.  Our prototype Continuous Descent Approach (CDA) has the double benefit of reducing noise and emissions. We are seeking to expand on this work in fiscal year 2008 and beyond to develop and prototype air traffic and ground procedures to reduce aircraft noise and fuel burn and emissions.  And we are seeking to advance Environmental Management Systems by developing noise, local air quality and climate impacts metrics and decision support tools that will allow us to dynamically manage the environmental impacts of the NextGen system.

Human Factors considerations overlie all of these themes.  NextGen systems will dramatically alter the roles and responsibilities of key players in the National Airspace System:  pilots will take on more separation responsibilities; automation will enable air traffic controllers to manage larger numbers of aircraft while improving safety; network-enabled operations will provide broader situation awareness to stakeholders throughout the system and enable a new level of air-ground cooperation. Human factors research is needed to define the changing responsibilities of humans in the system, to allocate function to people or automation and to design automation so it serves the information needs of the people who are accountable for system performance. We are requesting funding increases in fiscal years 2008-2012 for human factors R&D in both the RE&D and ATO capital programs. 

Proposed Research and Development in support of the seven NextGen solution sets will be outlined in the publication of OEP Version One in June 2007.  The OEP will lay out the path from concept development to implementation in the National Airspace System, ensuring that our R&D is indeed focused on achieving NextGen capabilities.

Our planning is also in line with the Administration’s National Aeronautics Research and Development Policy published in December 2006.  As outlined earlier in this testimony, we propose to conduct research in areas that support safety, the environment and air traffic management; we plan to conduct research to support certification of safety and environmental performance of aircraft systems; we are working and plan to continue to work to bring our requirements in line with NextGen; and through the OEP, we are aligning our efforts with NextGen. 

To succeed in maintaining safety and ensuring sufficient capacity in the future, we do need a stable funding stream that will enable the FAA to launch the NextGen system.  This is critical, as Secretary Peters stated "if we are to deploy the state-of-the-art technology that can safely handle the dramatic increases in the number and type of aircraft using our skies.”  As outlined in the H.R. 1356, the NextGen Financing Reform Act of 2007, research will be funded to allow critical safety and capacity R&D to continue at a pace necessary to field NextGen technologies by 2025.  These increases in research funding are linked to and dependent on this proposal.  We are enthusiastic about and focused on the opportunity to direct our R&D efforts toward the realization of the Next Generation Air Transportation System, and look forward to working with this committee to make the NextGen vision a reality.   

This concludes my testimony, and I thank you for the opportunity to appear before the committee.  I would be happy to answer any questions the committee may have.

Written Statement of

Grady C. Cothen, Jr.,
Deputy Associate Administrator
for Safety Standards and Program Development,
Federal Railroad Administration,
U.S. Department of Transportation

before the

Subcommittee on Railroads, Pipelines, and Hazardous Materials,
Committee on Transportation and Infrastructure,
U.S. House of Representatives

March 16, 2007

Federal Railroad Administration
1120 Vermont Avenue, N.W.
Washington, DC 20590
(202) 493-6302

Written Statement of

Grady C. Cothen, Jr.,
Deputy Associate Administrator
for Safety Standards and Program Development,
Federal Railroad Administration,
U.S. Department of Transportation

before the

Subcommittee on Railroads, Pipelines, and Hazardous Materials,
Committee on Transportation and Infrastructure,
U.S. House of Representatives

March 16, 2007

Subcommittee Chairwoman Brown, Ranking Committee Member Shuster, Representative Gonzales, and other Members of the Committee, I am very pleased to be here in San Antonio today, on behalf of the Secretary of Transportation and the Administrator of the Federal Railroad Administration (FRA), to discuss the specific topic of this hearing, the “Role of Human Factors in Rail Accidents,” as well as other issues that relate to some recent, fatal rail accidents in the San Antonio region and to highway-rail grade crossing accidents in the State.  To start, I will briefly describe FRA’s railroad safety program in general.  Then, I will revisit subjects that FRA’s Administrator

Joe Boardman addressed, at least in part, in his testimony earlier this year before this Subcommittee:  first, the status of implementation of the aspects of FRA’s National Rail Safety Action Plan that relate to human factors and certain accidents in the State; and, second, the need for enactment of provisions in FRA’s new rail safety bill that address the same issues.  Finally, I will close with a focus on what is being done to remedy human-factor problems particularly in the San Antonio region.

I.  FRA’s Railroad Safety Program

            FRA is the agency of the U.S. Department of Transportation (DOT) charged with carrying out the Federal railroad safety laws.  These laws provide FRA, as the Secretary’s delegate, with very broad authority over every area of railroad safety.  In exercising that authority, the agency has issued and enforces a wide range of safety regulations covering a railroad network that employs more than 232,000 workers, moves more than 42 percent of all intercity freight, and provides passenger rail service to more than 500 million persons each year. 

            FRA’s regulations address such topics as track, passenger equipment, locomotives, freight cars, power brakes, locomotive event recorders, signal and train control systems, maintenance of active warning devices at highway-rail grade crossings, accident reporting, alcohol and drug testing, protection of roadway workers, operating rules and practices, locomotive engineer certification, positive train control, and use of train horns at grade crossings.  FRA currently has active rulemaking projects on a number of important safety topics, many of which will be described later in this testimony.  FRA also enforces the Hazardous Materials Regulations, promulgated by DOT’s Pipeline and Hazardous Materials Safety Administration (PHMSA), as they pertain to rail transportation. 

            FRA has an authorized inspection staff of about 400 persons nationwide, distributed across its eight regions.  In addition, about 160 inspectors employed by the approximately 30 States that participate in FRA’s State participation program also perform inspections for compliance with the Federal rail safety laws.  Each inspector is an expert in one of five safety disciplines: Track; Signal and Train Control; Motive Power and Equipment; Operating Practices; or Hazardous Materials.  FRA also has 18 full-time highway-rail grade crossing safety positions in the field.  Every year FRA’s inspectors conduct thousands of inspections, investigate more than 100 railroad accidents, investigate hundreds of complaints of specific alleged violations, develop recommendations for thousands of enforcement actions, and engage in a range of educational outreach activities on railroad safety issues, including educating the public about highway-rail grade crossing safety and the dangers of trespassing on railroad property. 

            FRA closely monitors the railroad industry’s safety performance, and the agency uses the extensive data gathered to guide its accident prevention efforts.  FRA strives to continually make better use of the wealth of available data to achieve the agency’s strategic goals.  FRA also sponsors collaborative research with the railroad industry to introduce innovative technologies to improve railroad safety.  Finally, under the leadership of the U.S. Department of Homeland Security (DHS), FRA actively plays a supportive role in Federal efforts to secure the Nation’s railroad transportation system. 

II.  The National Rail Safety Action Plan (Action Plan)

A.  Genesis and Overview of the Action Plan

            As detailed in the appendix to my testimony, the railroad industry’s overall safety record has improved during recent decades, and most safety trends are moving in the right direction.  However, significant train accidents continue to occur, and the train accident rate has not shown substantive improvement in recent years.  Moreover, several major freight and passenger train accidents in 2004 and 2005 (such as those at Macdona, Texas;[1] Graniteville, South Carolina; and Glendale, California) raised specific concerns about railroad safety issues deserving government and industry attention.

            In May 2005, DOT and FRA announced the National Rail Safety Action Plan, a blueprint to comprehensively address critical safety issues facing the railroad industry with the following strategy:

•     Target the most frequent, highest-risk causes of train accidents;
•     Focus FRA’s oversight and inspection resources on areas of greatest concern; and
•     Accelerate research efforts that have the potential to mitigate the largest risks.

The causes of train accidents are generally grouped into five categories: human factors; track and structures; equipment; signal and train control; and miscellaneous.  In the five years from 2001 through 2005, the great majority of train accidents resulted from human factor causes or track causes.  Accordingly, human factors and track are the major target areas for improving the train accident rate.  The Action Plan includes initiatives intended to--

•     Reduce train accidents caused by human factors;
•     Address fatigue;
•     Improve track safety;
•     Enhance hazardous materials safety and emergency preparedness;
•     Strengthen FRA’s safety compliance program; and
•     Improve highway-rail grade crossing safety.

Today, given the purpose of the hearing, I will focus on only four of the Action Plan initiatives:  reducing human factor accidents; addressing fatigue (which is, of course, a human factor); enhancing hazardous materials safety and emergency preparedness; and improving highway-rail grade crossing safety.

B.  Implementation of Action Plan Initiatives to Reduce Human Factor Accidents, Address Fatigue, Enhance Hazardous Materials Safety and Emergency Preparedness, and Improve Highway-Rail Grade Crossing Safety

1.  Reducing Train Accidents Caused by Human Factors

            Accidents caused by human factors constitute the largest category of train accidents, accounting for 37 percent of all train accidents in the five years from 2001 through 2005.  As you will remember, FRA last testified on the full range of human factors before this Subcommittee in July 2006 and provided an update in January on the human factor initiatives pursuant to the Action Plan.  Today, I will provide a further update on the Action Plan human factor initiatives.

a. Development of Rulemaking to Address Leading Causes of Human Factor Accidents

            Some human factors are addressed squarely by FRA regulations.  For example, FRA’s regulations on alcohol and drug use by operating employees were the first such standards in American industry to incorporate chemical testing, and they have been very successful in reducing accidents resulting from the use of illicit substances.  FRA also has regulations on locomotive engineer certification, and enforces the Federal hours of service restrictions, which are wholly governed by statute.  However, FRA has been concerned that several of the leading causes of human factor accidents are not presently covered by any specific Federal rule, and these causes can have serious consequences.  

            In May 2005, FRA asked its Railroad Safety Advisory Committee (RSAC) to develop recommendations for a new human factors rule to address the leading causes of human factor accidents.  This effort helped lead to FRA’s issuance of a notice of proposed rulemaking (NPRM) in October 2006, to Federalize core railroad operating rules governing the handling of track switches, leaving cars in the clear, and shoving rail cars.  See 71 FR 60371.  Overall, the rule proposes to establish greater accountability on the part of railroad management for the administration of railroad programs of operational tests and inspections, and greater accountability on the part of railroad supervisors and employees for compliance with those operating rules that are responsible for approximately half of the train accidents related to human factors.  FRA believes this will contribute positively to railroad safety, by emphasizing the importance of compliance with fundamental operating rules and providing FRA a more direct means of promoting compliance.  The final rule is expected to be issued later this year.  

            The final rule is intended to supersede Emergency Order No. 24, which FRA issued in October 2005, in response to an increasing number of train accidents caused by hand-operated, main track switches in non-signaled territory being left in the wrong position and the potential for catastrophic accidents, such as the one in Graniteville, South Carolina, in January 2005, which resulted in nine deaths.  The emergency order requires special handling of hand-operated main track switches in non-signaled territory, as well as instruction and testing of employees in railroad operating rules pertaining to such track switches, and is expected to remain in place until the final rule addressing the major causes of human factor accidents is promulgated and becomes effective.

b.  Launch of “Close Call” Pilot Research Project

            “Close calls” are unsafe events that do not result in a reportable accident but could have done so.  FRA is working to better understand these phenomena.  In March 2005, FRA completed an overarching Memorandum of Understanding (MOU) with railroad labor organizations and management to develop pilot programs to document the occurrence of close calls.  In other industries, such as aviation, adoption of close-call reporting systems that shield the reporting employee from discipline (and the employer from punitive regulatory sanctions) has contributed to major reductions in accidents.  In August 2005, FRA and DOT’s Bureau of Transportation Statistics (BTS) entered into an MOU stipulating that BTS will act as a neutral party to receive the close-call reports and maintain the confidentiality of the person making the report.  Four railroads have expressed interest in taking part in this project, and participating railroads will be expected to develop corrective actions to address the problems that may be revealed.  Union Pacific Railroad Company (UP) has signed an Implementing MOU for its North Platte Service Unit to be the first site for this project. Data collection at UP began on February 1, 2007, and more than 40 reports have been received as of last week.  Discussions are also underway with BNSF Railway Company (BNSF) and Canadian Pacific Railway for second and third sites for this project. 

c.  Development and Implementation of Promising Technologies to Improve Safety through Redundant Safety Systems

Technology can be a tremendous aid to safety, providing a safety net when human beings make a mistake or become incapacitated. 

Positive Train Control (PTC) Systems.  PTC systems are capable of automatically preventing train collisions (with positive stop protection), preventing overspeed derailments, and protecting roadway workers within their authorities.  Recognizing the safety benefits of PTC systems, as well as their potential to improve rail efficiency by safely increasing the capacity of high-density rail lines, FRA issued a final rule in 2005 entitled, “Performance Standards for Processor-Based Signal and Train Control Systems.”  See 49 CFR part 236.  Earlier, FRA worked with Amtrak and other stakeholders to assist in the development of PTC systems in support of high-speed passenger rail.  The results included the Advanced Civil Speed Enforcement System, which, combined with cab signals and automatic train control, safeguard operations up to 150 mph on the Northeast Corridor.  In addition, the Incremental Train Control System was deployed on Amtrak’s Michigan line and currently supports operations up to 95 mph (planned for 110 mph when validation and verification work is complete on the final system).

In January 2007, FRA approved operational use of the first PTC system intended for general use, BNSF’s Electronic Train Management System. The rail industry is actively advancing the implementation of PTC technology as other railroads—among them, UP, Norfolk Southern Railway Company, CSX Transportation, Inc. (CSX), and the Alaska Railroad—are all making significant strides to develop PTC systems.  The Association of American Railroads (AAR) will play a critical role in finalizing interoperability requirements for these technologies.

Switch Point Monitoring System and Other Systems.  There are steps that can be taken short of PTC to reduce risk in non-signalized territory while PTC systems are deployed.  In November 2005, FRA partnered with BNSF through a $1 million Switch Point Monitoring System pilot project.  The main objective of the project is to develop a low-cost system that electronically monitors for, and reports, a misaligned switch on main line track located in dark (non-signaled) territory.  The project involves the installation of wireless communication devices at 49 switches along a 174-mile section of non-signaled BNSF track between Tulsa and Avard, Oklahoma.  Train dispatchers at an operations center in Fort Worth, Texas, are monitoring the devices to detect when the hand-operated switches are set in the wrong position.  If a switch is misaligned, the dispatcher directs a train to slow down or stop until railroad crews in the field confirm it is safe to proceed.  Along with the human factors rulemaking, this new switch monitoring system may prevent future train accidents such as the one at Graniteville, which resulted from an improperly lined main track switch in non-signaled territory.

* BNSF is also demonstrating rail integrity circuits, which can detect broken rails and alert the dispatcher much in the same way as the switch point monitoring technology.  Both of these technologies are “forward-compatible” with PTC, meaning that they can be integrated into PTC as it is deployed on the subject territories. 

Electronically Controlled Pneumatic (ECP) Brakes.  In 2005, 14 percent of human-factor accidents on main track involved improper train handling or misuse of the automatic braking system.  A significant number of these events might have been avoided if locomotive engineers were given a more suitable air brake system to use as a tool.  During the 1990s, the AAR led an industry effort to develop ECP brakes, which use an electronic train line to command brake applications and releases.  ECP brakes apply uniformly and virtually instantaneously throughout the train, provide health-status information on the condition of brakes on each car, respond to commands for graduated releases, and entirely avoid runaway accidents caused by depletion of train-line air pressure.  ECP brakes shorten stopping distances on the order of 40 to 60 percent, depending on train length and route conditions.  In turn, shortened stopping distances mean that some accidents that occur today might be avoided entirely and  that the severity of those that do occur in the future might be reduced.  (I would hasten to add that our ongoing safety analysis confirms that most grade crossing accidents, in particular, could not be prevented by ECP brakes, because motorist actions become manifest only seconds before the collision.)

*          FRA commissioned a study released last year that identified and quantified significant business benefits that could be realized with this technology through greater operational efficiencies and suggested a migration plan that would start with unit train operations, logically focused initially on the Powder River Basin coal service.  Since then, FRA has been working with the AAR, railroads, vendors, and the coal sector to generate momentum toward implementation of this cost-saving and, potentially, life-saving technology.  In this regard, ECP brakes are one of the key features of FRA’s Advanced Concept Train, a research-and-development prototype train specially designed and equipped with other improvements that is helping to demonstrate the potential of these new technologies across the Nation.  FRA is also planning to develop a revised set of requirements for train air brakes that are more suitable for this new technology, by issuing a notice of proposed rulemaking sometime in the near future.  Until a final rule is issued amending the train air brake requirements, we remain ready to review and respond to requests for relief from railroads interested in proceeding with ECP technology, and are currently reviewing such a request.

d.  Safety-Related Training for Employees

            Obviously, training is another important component of any human-factors effort.  Just last week, FRA convened the final meeting of a joint labor-management-FRA group that has reviewed standards for training operators of remote control locomotives and has identified the need for more precise qualification standards, conditions for learning, and documentation of proficiency.

2.  Addressing Fatigue

            Fatigue has long been a fact of life for many railroad operating employees, given their long and often unpredictable work hours and fluctuating schedules.  Train crews may legally work an enormous number of hours in a week, month, or year.  While commuter train crews often have some predictability in their work schedules, crews of freight trains rarely do.  The long hours, irregular work/rest cycles, and lack of regular days off, combined, have a very deleterious effect on employee alertness.  Railroads are necessarily 24-hour businesses, and the effects of “circadian rhythms” challenge the alertness of even well-rested employees, particularly in the early morning hours.  The hours of service law, originally enacted in 1907 and last substantially amended in 1969, sets certain maximum on-duty periods (generally 12 hours for operating employees) and minimum off-duty periods (generally 8 hours, or if the employee has worked 12 consecutive hours, a 10-hour off-duty period is required).  However, the limitations in that law, although ordinarily observed, do not seem adequate to effectively control fatigue.

            FRA’s Administrator testified in some detail about fatigue at the Subcommittee’s hearing on this subject last month.  As a result, I will not take up the Subcommittee’s time on this issue at today’s hearing, except for covering FRA’s hours of service reform legislation, later in my testimony, and mentioning sleep disorders now.  The National Transportation Board has emphasized the role of sleep disorders in transportation accidents, and FRA recognizes that providing fatigue management information alone may not be sufficient.  In October 2004, FRA published a safety advisory in the Federal Register, urging railroads to address sleep disorders through progressive company policies.  This past September, FRA’s Railroad Safety Advisory Committee adopted a task to develop recommendations on medical standards for safety-critical railroad employees.  Management of sleep disorders is among the important elements of that effort, which is now well underway.

3.  Improving Hazardous Materials Safety and Emergency Response Capability

            The railroad industry’s record on transporting hazardous material (hazmat) is very good.  The industry transports nearly two million shipments of hazmat annually, ordinarily without incident.  However, the Macdona accident in 2004 and the Graniteville accident in 2005, which together involved 12 deaths as the result of chlorine releases, demonstrate the potential for catastrophic consequences from train accidents.  The agency is actively engaged in a variety of activities intended to reduce the likelihood that a tank car may be breached if an accident does occur, complementing our effort to reduce the likelihood of train accidents.  Realizing that we cannot prevent all accidents, FRA has developed initiatives to ensure that emergency responders will be fully prepared to minimize the loss of life and damage when an accident or release does occur. 

            It is important to emphasize that these safety initiatives are in addition to, and complement efforts by, FRA, DHS and its Transportation Security Administration (TSA), and PHMSA to provide for the security of hazmat transported by rail.  A major component of this effort has been PHMSA’s March 2003 regulation requiring each shipper and carrier of significant quantities (placardable amounts) of hazmat to adopt and comply with a security plan.  See 49 CFR § 172.800 et seq.  Last December, in consultation with FRA and TSA, PHMSA published an NPRM to revise current requirements for the security of hazmat transported by rail, with particular focus on toxic inhalation hazard materials, such as chlorine and anhydrous ammonia.  See 71 FR 76833.  This proposal would require consideration of both safety and security in evaluating routing of hazardous materials and the mitigation of hazards on the routes selected.  PHMSA and FRA held two public meetings, one on February 1, in Washington, D.C., and the second on February 9, in Dallas, Texas, to obtain oral comments on the proposed requirements, with a view to issuing a final rule.  The comment period closed on February 20, and PHMSA and FRA are in the process of reviewing all of the comments received and anticipate issuing a final rule by the end of the calendar year.

The safety and security of hazmat transported by rail are often intertwined, and I would be glad to provide the Subcommittee with additional information concerning the many security initiatives in this area. 

a.  Enhancements to Emergency Response Readiness

            Emergency responders presently have access to a wide variety of information regarding hazmat transported by rail.  Railroads and hazmat shippers are currently subject to the hazard-communication requirements of the Hazardous Materials Regulations.  In addition, these industries work through the American Chemistry Council’s Transcaer® (Transportation Community Awareness and Emergency Response) program to familiarize local emergency responders with railroad equipment and product characteristics.  PHMSA publishes the Emergency Response Guidebook, with the intention that it may be found in virtually every fire and police vehicle in the United States.

            In March 2005, with FRA encouragement, the AAR amended its Recommended Operating Practices for Transportation of Hazardous Materials (now Circular No. OT-55-I) to expressly state that local emergency responders, upon written request, will be provided with a list ranking the top 25 hazardous materials transported by rail through their communities.  This is an important step to allow emergency responders to plan for, and better focus their training on, the type of rail-related hazmat incident that they could potentially encounter.

In July 2005, again with FRA encouragement, CSX and CHEMTREC (the chemical industry’s 24-hour resource center for emergency responders) entered into an agreement to conduct a pilot project to see if key information about hazmat transported by rail could be more quickly and accurately provided to first responders in the crucial first minutes of an accident or incident.  The project is designed so that if an actual hazmat rail accident or incident occurs, CHEMTREC watchstanders, who interact with emergency response personnel, will have immediate access to CSX computer files regarding the specific train, including the type of hazmat being carried and its exact position in the train consist.  CSX has advised that there has been sufficient use of the current system to begin evaluating the project, and that is scheduled to being early this year.  FRA is also working through the AAR to encourage the other major railroads to participate in a similar project. 

Finally, another pilot project is underway to evaluate the use of Railinc Corporation’s Freightscope, a program that provides equipment search capabilities for hazmat shipments.  The system was installed at CHEMTREC in December 2006, and it has the potential to more rapidly provide information about hazmat shipments on shortline and regional railroads to CHEMTREC watchstanders to improve information availability and reduce delays in emergency response.  The pilot project is scheduled to last a year, and includes various tests to determine the system’s effectiveness.  Two tests have already been conducted with good results. 

b.  Improvements in Tank Car Integrity through Research and Development

Before the August 2005 enactment of the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users, FRA had initiated tank car structural integrity research stemming from the circumstances of the 2002 derailment in Minot, North Dakota, which involved the release of anhydrous ammonia from tank cars punctured during the derailment.  Current research being conducted for FRA at Southwest Research Institute in San Antonio involves a three-step process to assess the effects of various types of train accidents (e.g., a derailment or collision) on a tank car.  The first phase is the development of a physics-based model to analyze the kinematics of rail cars in a derailment.  The second phase is the development of a valid dynamic structural analysis model; and the third phase is an assessment of the damage created by a puncture and entails the application of fracture mechanics testing and analysis methods.  DOT’s Volpe National Transportation Systems Center (Volpe Center), part of the Research and Innovative Technology Administration (RITA), is doing the modeling work now, and FRA will dovetail this ongoing research with the requirements of the statute.  FRA, in conjunction with PHMSA, hopes to develop new hazardous material tank car safety standards in 2008. 

In addition to focusing on strengthening the structural integrity of the tank car to reduce the probability that a collision will result in release of a hazardous commodity, the project is also evaluating technology such as pushback couplers, energy absorbers, and anti-climbing devices designed to prevent a train derailment in the first place.  We are currently consulting with railroads, shippers, and car manufacturers and have solicited public comments in this initiative. 

To further these efforts, FRA just signed a Memorandum of Cooperation with Dow Chemical Company, UP, and the Union Tank Car Company to participate in their Next Generation Rail Tank Car Project.  The agreement provides for extensive information-sharing and cooperation between ongoing FRA and industry research programs to improve the safety of rail shipments of hazardous commodities, such as toxic inhalation hazards and high-risk gases and liquids. 

Finally, in September 2006, FRA awarded $200,000 to test sample tank car panels with various coatings to determine their ability to prevent penetration from small arms fire, as well as their ability to self-seal and, thereby, mitigate the severity of any incident.  FRA developed the project in coordination with the AAR and DHS, which came up with the idea of applying to tank cars a protective coating like that used to enhance the armor protection of military vehicles in Iraq.

4.  Fostering Further Improvements in Highway-Rail Grade Crossing Safety

            Deaths in highway-rail grade crossing accidents are the second-leading category of fatalities associated with railroading.  (Trespasser fatalities are the leading category.)  The number of grade crossing deaths has declined substantially and steadily in recent

years.  However, the growth in rail and motor vehicle traffic continues to present challenges.

a.  Issuance of Safety Advisory 2005-03

            In May 2005, FRA issued this safety advisory, which describes the respective roles of the Federal and State governments and of the railroads in grade crossing safety.  It also specifically reminds railroads of their responsibilities to report properly to FRA any accident involving a grade crossing signal failure; to maintain records relating to credible reports of grade crossing warning system malfunctions; to preserve the data from all locomotive-mounted recording devices following grade crossing accidents; and to cooperate fully with local law enforcement authorities during their investigations of such accidents.  FRA is also committed to providing technical assistance to local authorities in the investigation of crossing accidents where information or expertise within FRA control is required to complete the investigation.  FRA has extensively distributed this advisory through national law enforcement organizations and through contacts with local agencies.

b.  Development of State-Specific Grade Crossing Safety Action Plans

            In June 2004, DOT and FRA issued an “Action Plan for Highway-Rail Crossing Safety and Trespass Prevention” that sets forth a series of initiatives in the areas of engineering, education, and enforcement to reduce and prevent highway-rail grade crossing accidents.  As one of these initiatives, FRA began working with the State of Louisiana in March 2005 to develop its own action plan for grade crossing safety, to address high numbers of grade crossing accidents and deaths at the State level.  The action plan focuses on reducing collisions between trains and motor vehicles at grade crossings where multiple collisions have occurred.  After a cooperative effort between the Louisiana Department of Transportation and Development, Federal Highway Administration, FRA, and other stakeholders, the State approved the action plan in April 2006.  FRA is encouraging other States with high numbers of grade crossing accidents and deaths to do the same, and we are in preliminary discussions with the Texas Department of Transportation regarding preparation of a State action plan.

c.  Focus on Pedestrian Safety

            In addition, FRA will work with the grade crossing safety community to determine appropriate responses to pedestrian fatalities at grade crossings.  Early in 2006, the Transportation Research Board devoted an entire session of its annual meeting to pedestrian grade crossing safety issues in order to capture information on how to improve safety in this area.  By this spring, FRA will publish a compilation of information on existing pedestrian safety devices currently being used in the Nation so that those making decisions on methods to improve pedestrian safety may have resource material available.

d.  Inquiry on Safety of Private Grade Crossings

In June 2006, FRA initiated an inquiry into the safety of private grade crossings.  Approximately 10 percent of grade crossing collisions occur at privately-owned crossings.  However, there is little governmental safety oversight of these crossings, at either the State or Federal level.  As a result, in cooperation with appropriate State agencies, FRA has been soliciting oral statements at a series of public meetings throughout the Nation on issues related to the safety of private grade crossings, including current practices concerning responsibilities for safety at these crossings, the adequacy of warning devices at the crossings, and the relative merits of a more uniform approach to improving safety at private crossings.  The next and final meeting will be held in Syracuse, New York, on April 26.  FRA has also opened a public docket on these issues, so that interested parties may submit written comments for public review and consideration.  The statements made and comments received will help inform decisions on what action needs to be taken to address the safety of private grade crossings. 

II.   FRA’S NEW RAIL SAFETY BILL AND ITS MAJOR PROVISIONS THAT DIRECTLY ADDRESS THE ISSUES OF THIS HEARING

            The Bush Administration’s rail safety reauthorization bill, the Federal Railroad Safety Accountability and Improvement Act, which was transmitted to Congress last month, would reauthorize appropriations for FRA to carry out its rail safety mission for four years and proposes a number of other measures that would significantly advance rail safety.  I will describe some major provisions of that legislation that bear on fatigue and  human factors generally, on grade crossing safety, and on hazardous materials safety.

            In order to enhance the accountability of railroads for their own safety, the bill would authorize appropriations for the addition of a safety risk reduction program to FRA’s current safety activities.  Since rail-related accidents, injuries, and deaths are already at low levels, FRA needs to supplement its traditional behavior-based and design-specification-based regulations with a robust safety risk reduction program to drive down those key measures of risk at a reasonable cost.  In the safety context, a risk reduction program is intended to make sure that the systems by which railroads operate and maintain their properties are adequate to meet safety objectives.  This approach focuses on both entire systems and management-level decisions, and it improves these systems by eliminating or minimizing processes that cause, or tend to allow, employees to make mistakes that lead to accidents, injuries, or deaths. 

            To implement this new program, FRA will need to acquire new skills and adapt to new ways of thinking.  FRA will also put greater emphasis on developing models of how railroads can systematically evaluate safety risks, in order to hold railroads more accountable for improving the safety of their own operations, including implementing plans to eliminate or reduce the chance for workers to make mistakes that can lead to accidents or near accidents.   To encourage railroads to produce thorough, as opposed to superficial, risk analyses, a companion provision in the bill bars public disclosure by FRA of records required under the safety risk reduction program, except for Federal law enforcement purposes.  Also in order to encourage thorough risk analyses by railroads, the provision forbids discovery by private litigants in civil litigation for damages of any information compiled or collected under the program, and forbids admission into evidence of same information in civil litigation by private parties for damages.

To help improve the alertness of railroad operating personnel, the bill would permit FRA, as the Secretary’s delegate, to replace the hours of service laws (49 U.S.C. chapter 211) with scientifically based regulations, after first seeking consensus recommendations from the agency’s Railroad Safety Advisory Committee.  The hours of service laws, first enacted in 1907 and currently delegated to FRA to administer, contain no substantive rulemaking authority over duty hours.  FRA’s lack of regulatory authority over duty hours, unique to FRA among all the safety regulatory agencies in the Department, precludes FRA from making use of almost a century of scientific learning on the issue of sleep-wake cycles and fatigue-induced performance failures.  FRA’s general safety rulemaking power under chapter 201 of title 49 would provide ample authority to deal with the entire subject of maximum work periods and minimum rest periods in light of current research on those subjects; however, the hours of service laws effectively bar such a rational regulatory initiative because the chapter 201 authority may be used only to supplement the pre-1970 railroad safety statutes, not to supplant them.  Where the hours of service laws set a rigid requirement, e.g., maximum on-duty and minimum off-duty periods for train crews, a regulation could not lawfully vary from them.  FRA would refrain from adopting new requirements relating to fatigue if the agency determines that voluntary activities are adequately addressing topics of concern, and the agency would be authorized to allow a railroad to comply with an approved fatigue management plan as an alternative to compliance with the usual regulatory regimen.   The regulations would be subject to review under the Congressional Review Act (5 U.S.C. 801) as the sole and exclusive means of review. 

            In addition to taking important steps to combat operating employee fatigue, the bill seeks to prevent highway-rail grade crossing collisions, which cause more than a third of all rail-related deaths each year.  To make crossings safer, the bill proposes two major provisions.  One  measure would improve the Department’s National Crossing Inventory (Inventory), a large, online database containing vital safety information on the identification, location, physical characteristics, and other salient features of at-grade and grade-separated highway-rail crossings nationwide.  FRA is the custodian of the National Crossing Inventory.  Currently, reporting to the Inventory by both States and railroads is voluntary; some information is missing, and some is very outdated.  The bill would require initial reports on all previously unreported crossings and periodic updates on all crossings, so that each crossing can be accurately ranked according to its relative risk.  These improved rankings will assist States in identifying which of the crossings are the most hazardous and in channeling Federal safety improvement funds to the most hazardous crossings first and will help the Department and the transportation research community to identify the most promising strategies for further reducing largely preventable traffic collisions and casualties at crossings.  A second provision of the bill would encourage the development and use of new safety technology at highway-rail grade crossings by establishing a Federal policy to support the development of new crossing safety technology and providing relief from tort liability for an accident at a crossing based upon selection of that technology if the Secretary has approved the use of the technology and if the technology has been installed at the crossing in accordance with the conditions set by the Secretary.

            Finally, another provision would expand FRA’s existing disqualification authority to reach individuals who are unfit for safety-sensitive service in the railroad industry because of a violation of the Hazardous Materials Regulations related to transporting hazardous material by rail.  Currently, FRA may disqualify an individual only for a violation of the rail safety laws or regulations, not the Hazardous Materials Regulations, even though violation of the Hazardous Materials Regulations may involve a greater accident risk or consequence (in the event of an accident)..

            In summary, enactment of the Federal Railroad Safety Accountability and Improvement Act would promote safety in five main ways:  by allowing FRA (1) to launch a safety risk reduction program that will make railroads more accountable for their safety performance; (2) to issue scientifically sound rules on hours of service that will reduce the fatigue of safety-critical employees; (3) to get vital, up-to-date data on all highway-rail crossings; (4) to foster the development of new crossing-safety technology; and (5) to disqualify railroad personnel from safety-sensitive service based on their violation of the Hazardous Materials Regulations.

III.  Concerns in the San Antonio Region                                                                     

FRA recognizes the special circumstances that prompted the Subcommittee to hold this hearing in San Antonio.  Beginning in late 2003, UP experienced several serious accidents in south Texas, including the collision at Macdona on June 28, 2004, which resulted in the release of chlorine gas and the death of a railroad employee and two local residents.  Although simple explanations are always inadequate to fully describe the many factors that result in specific events, we believe that several of the respective accident investigations did reveal the influence of a severe rail service crisis.  During that period, UP was impacted by short staffing and congested facilities as a result of unanticipated traffic demand during a period of sustained employee attrition.  This resulted in long hours and difficult working conditions, as everyone concerned worked to get on top of the situation.

Since that time, numerous public and private actions have been taken to restore safe and fluid operations.  UP has continued aggressive hiring of agreement employees, particularly in the transportation department, and has enhanced facilities, so that basic switching operations can be accomplished more readily, and thus with greater safety.  Both of these actions have reduced stress and fatigue that adversely affect safety performance.

As a result of Macdona and other accidents, FRA entered into safety compliance agreements with UP on November 12 and December 2, 2004, addressing three geographical UP service units of concern (the San Antonio, Houston, and Livonia Service Units).  The agreements required UP to re-instruct all of the testing managers in these service units on the railroad’s program of operational tests and inspections.  Thereafter, UP was to formulate monthly plans and conduct operational tests and inspections in order to improve its employees’ compliance with the railroad’s operating rules.  Subsequent FRA inspection of UP’s entire southern region indicated that the railroad was making progress implementing the requirements of the agreements.  On its own initiative, the railroad extended elements of the agreements to the balance of its system to strengthen management oversight of its program of operational tests.  In part as a result of these compliance agreements between the railroad and FRA, the railroad has revitalized the management of its program of operational tests and restored rules compliance to more acceptable levels.  The railroad has also strengthened its cadre of experienced supervisors. 

Here in San Antonio, FRA is assisting the railroad and its employees in implementing “peer-to-peer” observations that endeavor to build a positive safety culture through grass-roots-level leadership.  Since mid-2004 FRA’s Research and Development Office (R&D) has been providing funding and evaluation support for a peer-to-peer accident-prevention program on the UP Southern Region in Texas.  This innovative demonstration program is designed to prevent train accidents and incidents similar to those described earlier and to evaluate the safety impact of this approach for its potential effectiveness and application to other work practices in the railroad industry.  This program grew out of private efforts that began in early 2004, when UP management and local labor unions initiated a collaborative safety effort called Cab Red Zone (CRZ).  The UP’s CRZ effort focuses attention on improving in-cab safety practices, such as proper radio communications, calling signals, and maintaining vigilance.  In May 2004, FRA R&D funded a consultant, Behavioral Sciences Technology, Inc., to develop an objective behavior-based safety and continuous improvement process to support CRZ safety, which became known as C.A.B., or Changing At-risk Behaviors.  Its focus is to clarify, enable, and encourage safe in-cab behaviors related to CRZ.  Since then, a similar pilot program using the same peer-to-peer observation process, called Safety Through Employees Exercising Leadership (S.T.E.E.L.), has been implemented in Livonia, Louisiana, to help reduce the risks of accidents in switching operations.

Key driving forces of both the C.A.B. and S.T.E.E.L. accident-prevention process include peer-to-peer observations with immediate non-confrontational feedback, and strong labor-management relations that include a barrier-removal and corrective-action process.  This risk reduction approach emphasizes the systematic collection, analysis, and objective reporting of risk exposure, followed by barrier removal and corrective actions to reduce the probability of personal injury, collisions, or other accidents.  It complements existing FRA audits, rules, and other compliance-based oversight and enforcement activities.  It is preventive in that it seeks to find and reduce risks before they can lead to accidents and incidents.  It also includes extensive training in safety leadership for supervisors, managers, and senior safety leaders in both union and management ranks. 

Currently, both the C.A.B. and S.T.E.E.L. demonstration projects at UP are still in the implementation phase.  An evaluation plan has been developed to evaluate the overall impact on safety, safety climate, and the overall culture of this accident-prevention process, and its potential benefit and application to the railroad industry.  Early evaluation results suggest a significant decrease in at-risk behaviors associated with the risk of collisions since beginning the C.A.B. process.  Over the last 13 months, the proportion of observed at-risk behaviors, for example, has been cut about in half.  This decrease has been found in both the behavioral data collected by workers and in the operations field testing conducted by management concerning CRZ-related practices.  Local management at the site also reported a 60-percent decrease in locomotive engineer de-certifications associated with the same type of CRZ at-risk behaviors.  In addition, the October 4^th edition of UPOnline, an online newsletter produced by UP, reported human factor derailments in the San Antonio Service Unit down 25 percent from this time last year and personal injuries down by 18 percent.  While these reports have not been corroborated statistically with the FRA’s evaluation team, it is promising that a number of safety outcomes are showing positive improvement.

            Despite strong efforts by all concerned, we continue to experience some mishaps, and each one is magnified in public perception because of the increased appreciation for potential consequences gained from prior accidents.  For instance, on October 17, 2006, UP experienced a significant derailment in the San Antonio area that resulted in damage to two residences.  This accident resulted from use of excessive dynamic braking.  Dynamic braking uses traction motors, which would normally take electrical energy and rotate the locomotive axles, to generate electricity that is used to slow the train.  The electric current is then dissipated as heat in resistor banks.  In order to prevent the build up of excessive compressive (“buff”) forces within the train, railroads limit the number of axles of dynamic brakes that are permitted to be operative, and FRA requires that locomotive engineers be advised of how much dynamic braking effort they have.  In the case of this accident, neither requirement was met.  The locomotive consist was improperly set up at Ft. Worth, and neither the crew at the time of the accident nor the two prior crews noted the problem.  FRA is processing recommendations for civil penalty assessments to drive home the point that compliance is not optional.  UP has instituted procedures to highlight available dynamic brake axles on it train consists, and checks have been made to determine that information and actual brake status match up.  We will continue to monitor this issue, among many that can affect the safety of train operations.

IV.  Looking Ahead

            FRA is very aware that risk attends transportation functions today, as it has in the past.  Together with participating States, including the Texas Department of Transportation, we work with railroads and labor organizations every day to drive down risk and add layers of protection.  In the field of human factors, we should take courage from the fact that every day railroad workers perform hundreds of thousands of tasks safely; and systems are designed, as much as possible, to mitigate occasional but highly consequential failures.  New technologies are coming on line that will help to provide additional safety nets, and other steps we are taking at the National level will contribute to safer operations here in San Antonio.  Building on our strengths, we can look to better days ahead.

The Railroad Industry’s Safety Record

The railroad industry’s overall safety record is very positive, and most safety trends are moving in the right direction.  While not even a single death or injury is acceptable, progress is continually being made in the effort to improve railroad safety.  This improvement is demonstrated by an analysis of the Federal Railroad Administration’s (FRA) database of railroad reports of accidents and incidents that have occurred over the nearly three decades from 1978 through 2006.  See 49 CFR part 225.   (The worst year for rail safety in recent decades was 1978, and 2006 is the last complete year for which preliminary data are available.)  Between 1978 and 2006, the total number of rail-related accidents and incidents has fallen from 90,653 to 12,833, an all-time low representing a decline of 86 percent.  Between 1978 and 2006, total rail-related fatalities have declined from 1,646 to 915, a reduction of 44 percent.  From 1978 to 2006, total employee cases (fatal and nonfatal) have dropped from 65,193 to 5,035, the record low; this represents a decline of 92 percent.  In the same period, total employee deaths have fallen from 122 in 1978 to 16 in 2006, a decrease of 87 percent.

            Contributing to this generally improving safety record has been a 74-percent decline in train accidents since 1978 (a total of 2,834 train accidents in 2006, compared to 10,991 in 1978), even though rail traffic has increased.  (Total train-miles were up by 8.5 percent from 1978 to 2006.)  In addition, the year 2006 saw only 28 train accidents out of the 2,834 reported in which a hazardous material was released, with a total of only 69 hazardous material cars releasing some amount of product, despite about 1.7 million movements of hazardous materials by rail.

            In other words, over the last almost three decades, the number and rate of train accidents, total deaths arising from rail operations, employee fatalities and injuries, and hazardous materials releases all have fallen dramatically.  In most categories, these improvements have been most rapid in the 1980s, and tapered off in the late 1990s.  Causes of the improvements have included a much more profitable economic climate for freight railroads following deregulation in 1980 under the Staggers Act (which led to substantially greater investment in plant and equipment), enhanced safety awareness and safety program implementation on the part of railroads and their employees, and FRA’s safety monitoring and standard setting (most of FRA’s safety rules were issued during this period).  In addition, rail remains an extremely safe mode of transportation for passengers.  Since 1978, more than 11.2 billion passengers have traveled by rail, based on reports filed with FRA each month.  The number of rail passengers has steadily increased over the years, and since 2000 has averaged more than 500 million per year.  Although 12 passengers died in train collisions and derailments in 2005, none did in 2006.  On a passenger-mile basis, with an average about 15.5 billion passenger-miles per year since the year 2000, rail travel is about as safe as scheduled airlines and intercity bus transportation and is far safer than private motor vehicle travel.  Rail passenger accidents–while always to be avoided–have a very high passenger survival rate.

            As indicated previously, not all of the major safety indicators are positive.  Grade crossing and rail trespasser incidents continue to cause a large proportion of the deaths associated with railroading.  Grade crossing and rail trespassing deaths accounted for 97 percent of the 915 total rail-related deaths in 2006.  In recent years, rail trespasser deaths have replaced grade crossing fatalities as the largest category of rail-related deaths.  In 2006, 530 persons died while on railroad property without authorization, and 362 persons lost their lives in grade crossing accidents.  Further, significant train accidents continue to occur, and the train accident rate per million train-miles has not declined at an acceptable pace in recent years.  It actually rose slightly in 2003 and 2004 (to 4.05 and 4.38, respectively) compared to that in 2002 (3.76), although it dropped in 2005 (to 4.08) and 2006 (to 3.47).  As stated in the main testimony, the causes of train accidents are generally grouped into five categories:  human factors; track and structures; equipment; signal and train control; and miscellaneous.  The great majority of train accidents are caused by human factors and track.  In recent years, most of the serious events involving train collisions or derailments resulting in release of hazardous material, or harm to rail passengers, have resulted from human factor or track causes.  Accordingly, the National Rail Safety Action Plan makes human factors and track the major target areas for improving the train accident rate.

DEPARTMENT OF TRANSPORTATION

STATEMENT OF

MARITIME ADMINISTRATOR
SEAN T. CONNAUGHTON

BEFORE THE

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
SUBCOMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION
OF THE
UNITED STATES HOUSE OF REPRESENTATIVES

ON

MARINER EDUCATION AND WORKFORCE

OCTOBER 17, 2007

Good morning, Mr. Chairman and Members of the Subcommittee.  It is indeed a pleasure to be here today to discuss an issue as important as mariner education and workforce.  The Maritime Administration appreciates the opportunity to discuss the challenges and opportunities facing the maritime industry in the recruitment, training and retention of qualified mariners.

This is an issue I am familiar with. I graduated from the U.S. Merchant Marine Academy at Kings Point, New York almost 25 years ago.  I still remember the excitement of passing my license exam and looking forward to graduation.  After four years of school, my fellow classmates and I were anxious to graduate and sail on our merchant marine licenses.  However, there turned out to be one significant problem with this expectation: there were almost no seagoing jobs available due to a downturn in the U.S. economy and maritime industry.  As a result, I, along with many others, either entered the service or sought whatever maritime-related positions were available.

A tremendous amount has changed since then.  Now, U.S. maritime employers are actively recruiting and hiring new graduates from Kings Point and the state maritime academies at California, Great Lakes, Maine, Massachusetts, New York, and Texas.  Salaries are up and many seafarers are receiving multiple job offers.  Employment opportunities are particularly robust in the offshore energy industry, the inland river system, and in the coastwise trades. The largest single employer of American mariners, the Military Sealift Command, is also aggressively seeking seafarers. 

Only months since graduation, approximately 85% of the USMMA and state schools’ Class of 2007 is either employed afloat or in the Armed Services and another 12% is employed in the maritime industry.

This is positive news but we are aware that the industry is still facing challenges in recruiting and retaining personnel.  Addressing these challenges as well as taking advantage of the opportunities being presented in the international arena are the dual challenges before us today.

Current Maritime Administration Programs

The education of merchant mariners is an essential Maritime Administration responsibility.  We must provide the highest quality personnel possible for the complex responsibilities of vessel operations and the demands of economic competitiveness in world shipping, as well as to meet national security needs and to maintain defense readiness.  The Maritime Administration meets that need by educating and training young men and women for service in the U.S. merchant marine, in the U.S. Armed Forces, and in commercial activities related to intermodal transportation.  The Maritime Administration has several maritime education and training programs.

The Maritime Administration operates the U.S. Merchant Marine Academy (USMMA).  USMMA is located at Kings Point, New York.  With a total student body of approximately 1000, USMMA graduates around 210 entry level deck and engine merchant marine officers a year.  Graduates are obligated to maintain a license as an officer in the merchant marine of the United States for at least six (6) years following the date of graduation from the USMMA as well as serve in the foreign or domestic commerce and the national defense of the United States for at least five (5) years following the date of graduation from the Academy.

In addition, the Global Maritime and Transportation School (GMATS) at USMMA is an education and training arm of the Maritime Administration and a U.S. Department of Transportation (DOT) Learning Center.  The mission of the school is to provide advanced education and training for professionals from the maritime community, private sector, government and military. GMATS provides significant Army and Navy training, including the simulation center for the Navy’s surface warfare officers. No appropriated funds are used for GMATS; rather, fees are charged for the courses and the school is self-supporting.

The Maritime Administration also supports mariner training at state maritime academies.  These schools are located in California, Michigan, Maine, Massachusetts, New York, and Texas. These schools produce a steady stream of almost 700 new licensed officers a year, a number that could grow to take advantage of the increased demand for seafarers. The Maritime Administration provides training vessels to each of the state maritime academies for use in at-sea training and as seagoing laboratories.  The Maritime Administration also provides direct financial support to the state maritime academies for their operations and Student Incentive Payments (SIP) to those students willing to undertake service obligations similar to those of graduates from USMMA.

The Maritime Administration owns and operates a Fire Training Facility in Swanton, Ohio.  This facility is available for use by the industry and government entities for basic and advanced firefighting training.

Growing Demand for Mariners

There are reasons for a growing need for mariners.  First and foremost is the strong American economy, which continues to need the raw materials, energy and manufactured goods the maritime industry transports so cheaply and effectively.  That strong economy has created tight labor markets nationwide and drawn mariners ashore. 

We are also experiencing a major recapitalization in practically every segment of the U.S. merchant fleet.  The new double-hulled tankers and tank barges, offshore services vessels, ferries and cruise ships, and inland tugs and barges require personnel with advanced training and certifications.  This has contributed to increased demand for trained and licensed seafarers to operate these vessels.

While our Nation has a large pool of highly trained licensed and unlicensed mariners, the towing, passenger, and offshore “brown water” operators are reporting shortages of mariners who are qualified and willing to work in these sectors of the industry.  However, despite this increased demand, experienced mariners are also retiring or leaving the mariner workforce at a rapid rate due in part to the rising costs imposed on them to upgrade their licenses or advance their qualifications.  The passenger industry is also reporting personnel shortages due to the rising costs (merchant mariner documents, drug tests, physicals) of entering the industry as well as from the exodus of qualified mariners who cannot justify the costs of remaining in a heavily regulated industry. 

This labor market imbalance is not unique to the United States.  The rapid growth in global trade has dramatically increased the worldwide demand for seafarers.  Shifting demographics and decreasing interest in sailing have limited the number of new officers from Europe, Korea and Japan.  Some industry associations estimate that the licensed officer shortage is currently at 10,000 and will grow as more ships enter the marketplace. Even India, a traditional source of licensed officers for the world’s merchant fleets, is examining the use of foreign officers for its domestic fleet because of an acute officer shortage.   This international demand has a dual impact on the available mariner labor pool in the United States. On the one hand, it provides new opportunities for U.S. mariners. We want U.S. mariners to be regarded as the best qualified in the world and to be sought after, as they should be.  On the other hand, worldwide mariner demand can attract U.S. mariners away form domestic employment.

Maritime Administration Initiatives

The Maritime Administration is taking action to identify the magnitude of the mariner shortage problem. We are going to conduct a survey of the entire U.S. vessel operating industry to determine where shortages exist. This will serve to verify the anecdotal information we have received and will identify the specific sectors where we need to focus our attention.  We are currently awaiting approval to send the survey to the industry for response.

In 2006, the agency established the Mariner Outreach System (MOS), which provides a systematic way to monitor the adequacy of our nation's deep sea qualified merchant mariner pool and to track and maintain contact information and qualifications of mariners. The Maritime Administration has partnered with the U.S. Coast Guard National Maritime Center (NMC) to utilize data from the USCG Merchant Mariners Licensing and Documentation (MMLD) system which is critical to analyze and monitor trends in the mariner population.  MOS is an invaluable tool that enables the Maritime Administration and its partners to make valid vessel and human resources projections, identify potential mariner shortfalls, and facilitate crewing of vessels should a mariner shortage occur.

Over 41,000 licensed and unlicensed U.S. mariners have consented to participation in MOS.  Additionally, MOS now provides the following capabilities:

We intend to expand MOS to include other industry sectors in addition to deepsea. This will enable us to better track mariner availability and qualifications in the brownwater area and to disseminate information and communicate with mariners in that sector.

We are also meeting with industry groups to hear firsthand their labor experiences.  In fact, we just conducted a meeting with the Offshore Marine Services Association (OMSA). They shared their assessment of the current labor situation and their forecast of future demand in the offshore sector. OMSA is very concerned about mariner shortages and welcomed the opportunity to discuss possible approaches to this issue with the Maritime Administration. On our part, we appreciated their insights and will add their information to our ongoing analysis of the potential shortage problem.

As a related matter, the shipbuilding industry is also experiencing significant labor shortages. The same industry recapitalization with new vessel construction that is creating a demand for mariners is also creating a demand for shipyard workers. The Maritime Administration held a conference in July to which it invited every shipyard in the United States. The attendees overwhelmingly identified worker shortages as a major issue. In response, we reached out to the Department of Labor (DOL) to obtain information about apprenticeship programs and other forms of assistance. We then facilitated a meeting with DOL, the Shipbuilders Council of America and the American Shipbuilding Association. As a result, we are hopeful that the shipbuilding community has a promising avenue to explore which will assist them in meeting their workforce challenges.

We also plan to expand our discussions with DOL into the mariner arena in order to address brownwater shortages. We believe that training opportunities can be developed which could not only reduce the cost to companies for entry level employees but also significantly reduce the cost burden to a mariner of acquiring additional necessary skills.

As a proactive step to address the brownwater mariner demand, we have instituted a policy allowing our maritime academy graduates to fulfill their service obligations to the Government in the brownwater sector of the industry. Previously, service in this sector of the industry did not meet the service obligations for maritime academy graduates.  By changing this policy, we have increased the pool of mariners available for service in the inland and offshore industries.

We are active participants in major working groups that focus on mariner issues. For example, we participate in the NDTA working group on unlicensed engineers and various USCG advisory committees that address a myriad of mariner issues facing the industry.  We are also exploring an initiative to work with USCG to obtain credit for Navy sailors for their Navy training which will allow them to transition easily into a merchant marine career once they retire from the Navy.

We have embarked on an effort to increase cadet billets on vessels.  These billets are essential to our training programs because without sufficient sea time cadets cannot take the examination to become a merchant marine officer.  This last Monday, I signed, on behalf of the Maritime Administration, an agreement with Overseas Shipholding Group, Inc, (OSG) that will provide training opportunities for American maritime academy cadets on board OSG’s international vessels.  This public-private partnership is the first formal agreement to make available on-board training billets in the international commercial fleet for U.S. maritime academy cadets.  Under the terms of the agreement, cadets from the U.S. Merchant Marine Academy and all six state maritime academies will be able to obtain work experience and training on board OSG vessels.  OSG is a market leader in global energy transportation services for crude oil and petroleum products in the U.S. and International Flag markets.  OSG’s owned, operated and newbuild fleet totals 144 vessels.

In its recently completed realignment, the Maritime Administration created the Office of Maritime Workforce Development.  This office is responsible for the management and development of policy and plans for the recruitment, training and retention of maritime workers both ashore and afloat. As well as working with DOL on programs to alleviate the current shortage of shipyard workers, the office is developing secondary school programs to introduce young Americans to the opportunities presented by a career in the maritime industry.

I would like to address this further. It is important to recognize that career opportunities in the maritime industry are not widely known among youth and young adults.  Therefore, the Maritime Administration has embarked on a campaign to raise awareness about career and employment opportunities in the industry.  Through the years, we have developed and implemented initiatives with a youth and young adult focus to familiarize them with maritime career paths, educational institutions, and potential resources in order to attract them to career opportunities in the maritime industry.  To achieve this, we participate in a number of school events and activities, including career fairs and trade expositions. 

Most recently, my staff participated in a discussion group at the Baltimore City Maritime Industries Academy.  Chairman Cummings and representatives from various maritime industry organizations were also there. The group came together in June of this year to discuss ways to best structure the USMMA’s curriculum with a specific focus on maritime related studies.  As a result, Maritime Administration staff members as well as members of the maritime community will serve as guest speakers through the 2007-2008 school years to raise awareness among students about the importance of the maritime industry and the employment and training opportunities for U.S. merchant mariners.  As members of the maritime community, we are committed to further assist the Maritime Industries Academy, in coordination with Chairman Cummings’ office, in formalizing the Academy’s structure to support a strong maritime curriculum for our future young leaders.

The Maritime Administration has also been involved for many years in supporting the interest and training of young men and women who desire to go to sea as a career after high school.  A number of new programs and training institutions have developed around the country to train and assist younger students in pursuing maritime careers.  The agency is supporting the Ship Operations Cooperative Program in its research study to identify middle and high school maritime institutions and programs around the world to document the successes and failures of various programs, develop best practices and link industry, government and local schools for future support.

The Maritime Administration also plays a major role in the development and certification of mariner security training standards which have become so critical as part of the war on terror.  Training courses for security must be approved by the Maritime Administration, and we regard this as a vital part of our responsibilities.

Most recently, we have begun to develop proposed revisions to the regulations governing the USMMA and the state academies. These regulations have not been updated in over 20 years, and we expect to propose significant changes, particularly in allowing graduates to meet their service obligations in the brownwater sector.

LNG Opportunities

I’d now like to focus on a specific area of opportunity, the expanding Liquefied Natural Gas (LNG) market and highlight some recent successes we have experienced.  By the year 2030, the United States’ demand for natural gas is projected to increase by 20 percent to 26.1 trillion cubic feet per year.[1]  Industry analysts also project that as demand increases, domestic production will decrease and account for only 79 percent of consumption.  To accommodate this shortfall, the U.S. will need to increase the amount of natural gas imports to 4.4 trillion cubic feet per year in 2030, an increase of 750 percent.[2]

The importation of LNG will serve to relieve the nation’s growing energy needs by diversifying energy sources.  Deepwater ports are necessary to enhance the nation’s ability to import LNG from worldwide sources by oceangoing LNG tanker vessels.  Notably, advances in LNG tanker size, the increased number of LNG carriers in the worldwide fleet, and improvements in LNG transfer technology have made importing LNG increasingly more efficient and cost effective.  Increased consumer demand for LNG will clearly require new and expanded terminal infrastructure as well an increase in the nation’s pool of U.S. mariners to serve on these sophisticated vessels.

Strong competition from China, Japan, and Korea for both energy resources and mariners has led to intense competition within the LNG industry.  It has also led to the lack of a single U.S.-flagged LNG vessel.  Consequently, few U.S. mariners have the opportunity to gain vital hands-on experience in this growing industry.  Recent industry reports have concluded that the number of mariners with LNG experience is rapidly declining.  It is estimated that as many as 3,700 to 5,000 additional mariners may be needed by the year 2008.[3]  If the shortage of mariners is not addressed, the magnitude of this problem could negatively impact the LNG industry’s excellent safety record. 

This shortfall problem is not unique to the LNG shipping industry, but is rather a reflection of the manpower crisis which faces the global shipping industry that I referred to earlier.  Analysts have further asserted that the loss of experienced LNG officers is expected to be a worldwide problem by 2010.  This loss of experienced mariners coincides with the growth of the global LNG carrier fleet.  Over the last 5 years, the LNG carrier fleet has grown by 73 percent, from 128 to 222 vessels[4]; and by the year 2010, an approximate 130 additional LNG vessels are scheduled for delivery to service the global LNG trade industry.[5]  This expanded fleet will require as many as 10,000 additional seafarers, of whom almost 3,000 will be licensed officers.[6] 

The world’s maritime community must meet this growing challenge without compromising safety and competency levels.  The competence level of mariners is the most critical element in the transportation of LNG.  As such, there is an immediate need to educate and train qualified U.S. LNG officers to meet the demands of this expanding industry.

Recognizing the need to increase the presence of U.S.-flag vessels and U.S. mariners in our worldwide LNG industry, Congress amended the Deepwater Port Act through the Coast Guard and Maritime Transportation Act of 2006, directing the Secretary of Transportation to develop and implement a program to promote the transportation of LNG to the United States on U.S.-flag vessels.  Under this amendment, the Maritime Administrator, by delegated authority from the Secretary, must give top priority to all deepwater port applicants that commit to utilize U.S.-flag vessels in their port operations. The Maritime Administration interprets this requirement to include both domestic and foreign-flag LNG vessels providing gas to deepwater port facilities licensed by the Agency.

The Maritime Administration supports the premise that U.S. mariners should play an integral role in the importation of LNG to ensure and provide the highest level of safety and security to our nation’s ports.  Because of this, and in response to these legislative directives, the Maritime Administration has developed a voluntary Deepwater Port U.S. Manning Initiative to encourage the employment of highly trained and skilled U.S. mariners to meet the current and forecasted demand for professional mariners in the international LNG shipping industry.  The agency strives to ensure that reliable supplies of U.S citizen mariners are available to serve on LNG vessels calling at all U.S. ports. 

Currently, the Maritime Administration is working with the USMMA, state maritime academies, and other training facilities to develop and expand innovative educational programs for U.S. mariners.  The goal is to provide immediate employment opportunities for entry-level mariners, both licensed and unlicensed, into the LNG industry upon graduation, and to participate in course development for the retraining and/or recertifying of current mariners who are sailing on vessels other than LNG – thus enabling the transition into LNG service.

Over the past year, we have begun to see tangible results from our efforts to establish innovative public-private partnerships with deepwater port license applicants.  In December 2006, the Agency announced a partnership with SUEZ Energy – the first official collaboration of its kind in the international LNG industry.  Under this agreement, SUEZ committed to train and employ U.S. citizen officers, cadets, and unlicensed mariners aboard their tanker fleet and at both their planned deepwater ports proposed for construction and operation off the coasts of Boston and Florida.  Another recent deepwater port applicant, Excelerate Energy, entered into a similar agreement for its planned Northeast Gateway deepwater port to be located in Massachusetts Bay, and its existing LNG deepwater port, Gulf Gateway, located in the Gulf of Mexico.  Additionally, Excelerate has established a partnership with Texas A&M University to place students and instructors on Excelerate Energy's ships for training and educational purposes.  Further, in January 2007, the Louisiana-based applicant, Freeport-McMoRan Energy, committed to work with the Maritime Administration to develop programs to train and employ U.S. mariners on LNG vessels that will service the Main Pass Energy Hub port planned for construction and operation off the coast of Louisiana.

More recently, the Maritime Administration entered into an agreement with Woodside Energy to register two new LNG regasification vessels under the U.S.-flag national ship registry.  Although the vessels will be constructed overseas, they will be fully manned with U.S. citizen crews upon delivery to the United States.  These vessels will service the OceanWay deepwater port terminal planned for construction and operation off the coast of Southern California.  More than 90 American officers and crew will be employed on each of the vessels calling at the OceanWay port.  Woodside Energy has also made additional commitments to provide training and employment opportunities for U.S. officers, cadets, and unlicensed mariners aboard their entire tanker fleet.

It is important to note that from an economic and competitive perspective, the growing worldwide shortage of trained and qualified LNG ship officers has created an opportunity for U.S. officers to work aboard foreign-flag LNG vessels.  International vessel operators are dramatically increasing the wages and benefits offered to foreign officers to keep or attract their services, thus narrowing the gap between the wages and benefits paid to Americans and those paid to their foreign counterparts.

The Maritime Administration will continue to reach similar voluntary agreements with our pending and future deepwater port applicants and all energy companies serving the nation’s international maritime markets.  It is our ultimate goal to provide adequate job opportunities for Americans while ensuring the safe, secure and efficient importation of LNG to our Nation’s shores.

Conclusion

Mr. Chairman and members of the Subcommittee, we are now seeing a perfect storm in which the demand for mariners, particularly those who are licensed, is increasing while the supply may not be keeping pace.  This provides incredible opportunities to the young men and women who are just beginning their careers as well as those who are already in the industry.  We welcome the career paths open to our young people but, at the same time, recognize that they may contribute to shortages in industry sectors such as brownwater 

The Maritime Administration stands ready to pursue other initiatives to address mariner issues such as developing training courses necessary for brownwater operation and analyzing the tax inequities facing U.S. mariners in the international trade

I look forward to assisting you in addressing an issue that is vital to our economic and national security.  I would like to thank the members of the Committee and Chairman Cummings for your leadership in recognizing the importance of this issue and in holding this hearing today.  I will be happy to answer any questions that you might have.

##

DEPARTMENT OF TRANSPORTATION

STATEMENT OF

MARITIME ADMINISTRATOR
SEAN T. CONNAUGHTON

BEFORE THE

SUBCOMMITTEE ON SEAPOWER AND EXPEDITIONARY FORCES OF THE
COMMITTEE ON ARMED SERVICES
UNITED STATES HOUSE OF REPRESENTATIVES

ON THE

TITLE XI PROGRAM

MARCH 15, 2007

Good morning, Mr. Chairman and Members of the Committee. It is indeed a pleasure to be here today to discuss the Title XI program, which is administered by the Maritime Administration (MARAD).

As most of you know, the Title XI program provides for a full faith and credit loan guarantee by the federal government of private sector debt incurred for the construction or reconstruction of ships in United States shipyards. Loan guarantees can also be issued for the modernization of American yards to make them more competitive. The Government can provide a guarantee up to 87 ½ percent, depending on the type of project.  Companies must provide equity for the remainder and security to the Government. The company has to meet strict financial requirements and the project has to be economically sound.

The Title XI program was created to promote the growth and modernization of the U.S. merchant marine and U.S. shipyards by enabling eligible companies to obtain long-term financing on terms that would otherwise be available only to the most creditworthy concerns. The term of a Title XI loan guarantee can extend to 25 years and the Government backing of the financing makes it possible for a company to lock in an attractive interest rate for this period.

At this time, the Administration does not request funding for Title XI because it believes this program is a form of corporate subsidy, and that shipowners and shipyards should rely on their own creditworthiness to obtain financing in the private sector. Further, the taxpayers should not bear the risk of default by private companies.

However, I want to emphasize at this point that our position on the Title XI program should in no way be misconstrued as a lack of support for the U.S. shipbuilding industry or U.S. shipowners. This Administration is on record as staunchly championing the Jones Act in order to protect their interests. We simply believe that Title XI is an unwarranted intervention in the credit market.

Although the Administration has not requested funding for new loan guarantees since 2001, Congress has periodically appropriated money for this purpose. In implementing Congressional direction, we have used these funds to finance projects that we believe will yield the greatest benefits to our economic and national security. The most recent project we approved was two passenger and vehicle fast ferries for Hawaii SuperFerry. The total cost was $180 million for both with Title XI guarantees at $140 million. The ferries are under construction at Austal Shipyard in Mobile, Alabama. The first will be delivered at the end of this month and the second in February of 2009. We financed a similar vessel, which began operating in 2004 across Lake Michigan.

These ferries are state of the art and highly suitable for use on America’s Marine Highway system. In choosing to finance the ferries, MARAD is promoting a vessel type that can be used to relieve highway congestion by providing an attractive marine transportation alternative. The ferries are also militarily useful and TRANSCOM has expressed an interest in them. The Hawaii SuperFerry vessels will be offered for enrollment in the Voluntary Intermodal Sealift Agreement, or VISA, program.

At present, we have an outstanding portfolio of $2.9 billion in loan guarantees covering the modernization of American shipyards as well as a wide variety of vessels: ferries, tankers, drill rigs, passenger vessels, dredges, supply vessels, tugs, RO/ROs, containerships, tugs and all kinds of barges. Title XI is represented in just about every market segment in the maritime industry.

We are very proud of the fact that we have notably improved our management of the Title XI program since audit reports were issued in 2003 and 2004 by the General Accounting Office, now the Government Accountability Office, and the Department of Transportation’s Office of the Inspector General. MARAD has taken the steps we believe are necessary to address the audit recommendations. Let me highlight some of the major areas of improvement:

We have established requirements for an independent outside application review when necessary;

We have instituted a formal financial monitoring process with a credit watch report for regular financial monitoring of Title XI borrowers;

We have developed a regular physical condition report system for Title XI vessels;

We have revised our credit risk methodology;

We have tightened our fund disbursement procedures; and

We are in the process of implementing an electronic financial monitoring system, which will significantly enhance management of the existing portfolio and future financing activities in the Title XI program.

In addition to the steps MARAD itself has taken, the Department of Transportation has instituted a Credit Council to provide financial oversight for all of the Department’s credit programs, including Title XI. This has provided another valuable avenue of review for loan guarantee applications, significant financial transactions with existing borrowers, and portfolio monitoring.

We are very pleased to report that our program improvements have been recognized. In his November 15, 2005 report on the top management challenges facing the Department of Transportation, the DOT Inspector General stated that the "Title XI loan guarantee program is functioning effectively." He went on to note that MARAD now systematically monitors its loan portfolio and that creditworthiness overall has improved.

In addition, the Title XI program went through a PART assessment last year, as mandated by the Office of Management and Budget.  PART stands for Program Assessment Rating Tool, and is a stringent diagnostic process that OMB uses to assess the performance of Federal programs. Title XI received a final PART score from OMB that indicates that the program is considered to be moderately effective.

In conclusion, the DOT Inspector General’s comments and the PART score clearly demonstrate MARAD’s diligence in implementing recommendations for improved program management.  Moreover, I am confident that MARAD is now positioned to continue to administer the program in such a way as to maximize the benefit to our national and economic security while protecting the Government’s financial interest.

I want to thank the Members of this Committee and Chairman Taylor for holding this hearing today. I will be happy to answer any questions you might have.

##

DEPARTMENT OF TRANSPORTATION

STATEMENT OF

MARITIME ADMINISTRATOR
SEAN T. CONNAUGHTON

BEFORE THE

SUB-COMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION OF THE
COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
UNITED STATES HOUSE OF REPRESENTATIVES

ON THE

DEVELOPMENT OF SHORT SEA SHIPPING

FEBRUARY 15, 2007

Good morning, Mr. Chairman and Members of the Committee.  It is indeed a pleasure to be here today to discuss the Department of Transportation’s efforts to build a public-private maritime partnership that will both improve our transportation efficiencies and grow our economy.  Today’s hearing initiates a dialogue that will lead to the expansion of the Nation’s marine transportation system.  I think that it is fitting that my first Congressional hearing as Maritime Administrator is on the topic of short sea shipping[1] or, as I have begun to call it, America’s Marine Highway.  I believe this term more accurately describes the nation’s waterborne transportation system and the promise of its extensive capacity.  

I would first like to provide you with some of the history of America’s Marine Highway initiative, and discuss with you some of our plans for the future.  Early this decade, the Department of Transportation’s leadership recognized the need to address landside congestion through the expanded use of waterborne transportation alternatives, specifically through the use of the marine highway.  When moving high volume and bulk freight, short sea shipping is more cost effective, is more fuel efficient per cargo ton mile, and is a vital alternative transportation mode in a natural disaster.  When fully integrated into the Nation’s transportation system, the marine highway will facilitate enhanced freight flow, expand freight capacity, reduce congestion, and improve air quality. 

As a former County Executive in Northern Virginia, I am keenly aware of how surface transportation congestion adversely impacts our daily lives.  The impact on our productivity is enormous.  We lose 44 billion person hours a year due to transportation delays[2] – translating into billions of dollars of lost productivity.  And, I also know first hand that we cannot pave ourselves out of this situation.  

A robust U.S. economy depends on the efficient movement of freight to stimulate domestic production and satisfy consumer demand.  Consider these facts – since 1995, container growth has increased by at least 10% every year and this growth is expected to continue.  By 2020, every major U.S. container port is expected to double the volume of cargo it must process, with East Coast ports tripling in volume and some West Coast ports quadrupling in volume.  The United States is expected to import 30 million containers in 2010 and 40 million in 2020.  The domestic tonnage of freight carried by all U.S. systems will increase by 67%, while international trade is expected to at least double. Presently, this domestic freight is carried almost exclusively by road or rail -- coastal shipping handles only two percent of our domestic freight, even though coastal counties hold more than half of the Nation’s population.

This massive growth means that our Nation must expand its overall port volume capacity by 10% yearly just to sustain this expected growth – an annual capacity growth greater than the overall size of the ports of Seattle and Tacoma combined.  As Maritime Administrator, I am one of the people responsible for finding a solution to our growing congestion problems and I look forward to working with the Committee to determine “where we go from here” in our quest to find solutions to a capacity crisis that threatens to overwhelm our existing transportation system.    

Clearly, the Nation’s marine highway can help mitigate this congestion.  The world’s waterways are an infinite system, and our marine highways have infinite capacity.  Unlike rail and roads, there are no fixed infrastructure costs to develop transportation routes, and ships can carry more cargo per dollar than any other method of transport.  The full scope of America’s Marine Highway – a system that includes not only our coastal waters, but our inland waterway system and the Great Lakes, is enormous – and, if properly utilized and integrated, can help us expand our way out of the crises before us. That is why I am here today and, why I am so pleased that the Members of this Committee have made the decision to investigate the advantages of our marine transportation system.

It is my hope that your discussions will lay the groundwork for legislative initiatives that will add new, permanent capacity to our Nation’s freight delivery systems and grow our economy.  Now, I am not naive enough to think that our marine highway will solve our congestion problems overnight – after all, much of the vessel capacity we will need to accommodate our projected trade growth is still on the drawing board.    \

However, a minimal reduction in the anticipated growth of trucks on highways can make a significant difference.  For example, one 80,000 pound tractor-trailer truck does as much damage to pavement as 9,600 cars.  Alternatively, the use of America’s Marine Highway would reduce the costs of road maintenance and possibly extend the Present Serviceability Rating (PSR) of roadways.  Accordingly, this will benefit the public, as well as State and Federal entities – and assist our transportation planners to properly allocate vital public resources.

America’s Marine Highway has existed since our Nation’s founding.  It is used today to transport over 1 billion tons of domestic cargo on an annual basis, and clearly has room to grow.  Transporting freight by water has traditionally been for the movement of bulk commodities such as coal, petroleum, grain, and lumber. Current waterway operations thrive along the Mississippi and Ohio River systems, across the Great Lakes, through the St. Lawrence Seaway, and along some coastal routes.  They already accommodate 13% of the national cargo tonnage for less than 2% of the national freight bill.

An excellent illustration is the use of barges in the Mississippi River system. The river transports over 312 million tons of cargo per year between its upper reaches in Minnesota and its lower parts into the Gulf of Mexico.[3]  If this system had to be replaced, it would require over 12.4 million semi-trucks or 3.12 million rail cars to make up the capacity difference.[4]  Annually, in rail capacity alone this would consist of 31,000 trains pulling one hundred cars each.[5] 

In an attempt to develop our own water transportation initiative, we looked to Europe.  The European Union (EU) moves approximately 40% of all its freight on the water.  The EU Commission has vigorously supported the concept of an integrated marine highway system for over twenty years, and has recently set aside over one hundred million euros in a multi-year program to provide incentives to shift freight from the congested landside modes to the water.  In October 2006, the Commission awarded 16 projects totaling 21.7 million euros in an effort to divert truck growth (134,000 truck loads) to the water.

As educational tools to facilitate a public dialogue on the issue of increased waterborne freight movement, the Maritime Administration (MARAD) has sponsored annual industry-wide conferences and initiated or participated in a number of studies to examine the viability of alleviating surface transportation congestion through increased waterborne freight movements.  Three major short sea shipping conferences, sponsored by MARAD, were designed to create awareness and open opportunities for the commercial industry regarding the use of the marine highway. The 2002-2004 conference series emphasized the advantages of short sea shipping to transportation planners and the maritime stakeholder community as a means to accommodate trade growth.  The conferences catalogued the business dynamics of successful and failed domestic waterborne services.  The meetings also addressed issues of facility design, workforce development, the identification of potential research and development needs, expanded freight planning, integration of short sea shipping services into the transportation planning process, and public awareness. 

In 2003, as a direct result of stakeholder requests made at the Agency’s first Short Sea Shipping Conference, MARAD founded the Short Sea Shipping Cooperative Program (SCOOP).  SCOOP is an industry-centered organization which provides a forum for industry, labor, government, and related transportation stakeholder groups to share resources and information in the development of the Nation’s marine highway services.

In September 2006, MARAD, in cooperation with SCOOP, hosted the first in a nation-wide series of domestic shipper and short sea shipping operator workshops.  The workshop facilitated opportunities for discussion among domestic shippers, third party logistics companies, truckers, and domestic marine operators to engage in dialogue regarding the feasibility and development of specific short sea shipping services in the United States.  Another in this series of workshops is scheduled later this month in St. Petersburg, Florida.  

One outcome of this series is the realization that large shippers are currently not in a position to utilize inter-coastal shipping as those services are currently configured.  Transportation cost and “just-in-time” delivery have been a major deterrent to any real commitment to the use of waterborne transportation by the Nation’s shipper community. But, while time sensitive performance is important, it was determined that shippers will utilize water transportation alternatives as long as the marine operator can meet pre-agreed delivery times at a lower cost.  (Generally, smaller niche market shipping companies handle less time sensitive cargo, such as hazardous materials, more suitable to waterborne transportation services.)  

Therefore, workshop participants have suggested an expanded outreach emphasis on attracting mid-sized shippers to inter-coastal marine operations.  Participants also had a clear understanding that freight congestion will ultimately require a larger share of the nation’s freight to move from the surface transportation system to water.   The workshops are generating a greater interest by industry in the mitigation of congestion, improving safety, and the development of greater efficiencies within the transportation system.  It is important to note that the workshop series is also attracting significant interest by the nation’s marine operators.  The ultimate goal of this effort are successful shipper-operator business arrangements that more fully utilize the promise of our marine highway – business arrangements that begin to break the shipper “truck addiction.”

In the spring of 2006, the Maritime Administration and Transport Canada jointly sponsored the North American Short Sea Shipping Conference in Vancouver, Canada.  At this meeting, our NAFTA trading partners expressed interest in viable alternatives to reduce congestion, improve reliability, increase capacity, efficiency, economic performance, and extend the environmental sustainability of the transportation system.  A Trilateral Declaration was signed at the Vancouver Conference among Canada, Mexico and the United States, committing the three nations to expand marine highway operations in North America by establishing a Steering Committee focused on the creation of a trilateral strategy. 

The Trilateral Conference participants also agreed to foster the use of short sea shipping operations by developing an interactive website that will provide information and encourage business communications among North American shippers and marine operators. To this end, MARAD is developing the North American Short Sea Shipping Electronic Information Clearinghouse (Clearinghouse), an interactive website, to provide information and encourage business communications between shippers and operators.  In addition to providing updates on current short sea shipping events, and other useful information links, the Clearinghouse will permit shippers to electronically request assistance in locating qualified marine carriers for the movement of domestic freight.  When fully operational, the webpage will be available to thousands of North American shippers and marine operators to facilitate the increased utilization of waterborne transportation sources in the movement of freight. 

Since 1999, MARAD has initiated or participated in studies to examine the condition of the Nation’s marine transportation system (MTS) with the prime purpose of addressing surface transportation congestion through the development of waterborne transportation alternatives for the movement of freight.[6]   The input for this particular report came from regional listening sessions, a National Conference on the Marine Transportation System, and through the MTS Task Force.  The “needs assessment,” the first of its kind, and the regional listening sessions, laid the groundwork for the creation of the Secretary of Transportation’s Marine Transportation System National Advisory Council (MTSNAC) and the overall MTS initiative.  The MTSNAC provides a structured approach for non-Federal stakeholders to provide input on national-level issues.[7] 

The U.S. Chamber of Commerce (Chamber) released a study in March 2003, which outlined the ability of the national transportation system to respond to changing and increasing trade patterns.  This study was one of the first to call for a national freight policy within the Department to include a national intermodal planning and development initiative, a coherent environmental regulatory process, up-to-date freight data collection, and the integration of the modes and labor into the planning equation.[8]   The Chamber report was also one of the first studies to clearly document the dangers of ignoring the dramatic increase in trade and the resulting impact on the Nation’s transportation system.  The study clearly supports the conclusion that the Nation cannot build itself out of this impending capacity crunch.  

In 2005, the Government Accountability Office (GAO) submitted a report recommending that the Department of Transportation and MARAD “develop a more thorough understanding of short sea shipping issues before defining a Federal role involving substantial investment and, to encourage other public-decision makers to use a systematic approach to investment decisions involving freight mobility projects.”[9]  The study, produced at the request of the ranking Members of both the Senate Commerce and House Transportation and Infrastructure Committees, essentially recommended further analysis of the issue of short sea shipping before significant public resources were committed to the development of this type of marine transportation system.[10]  Our efforts to investigate and promote the idea of short sea shipping have not required a large expenditure of public monies.   MARAD has, instead, focused on the development of a public-private partnership to investigate, educate, and recommend proposals to ease our growing freight capacity issues. 

By way of example, MARAD, in November 2005, consulted in the production of the I-95 Corridor Coalition’s “Short Sea-Study and Coastal Shipping Options Study.”   The I-95 Corridor Coalition is a public-private partnership composed of State DOT agencies and transportation planning organizations along the Eastern seaboard, and the study assessed commodity flows and attempted to determine the viability and sustainability of a short sea shipping service along the Maine to Florida transportation corridor. 

Phase II of the study commenced in late 2006 and sought to incorporate the participation of metropolitan planning organizations (MPOs) to bring water-based transportation, especially short sea shipping services, into the overall local transportation planning process. 

The Coalition study found:

The I-95 Northeast and Mid-Atlantic corridor is physically suited for short sea operations.[11]  Congestion drives the business model for short sea shipping.[12]  In less than 15 years, the Corridor transportation system will be strained beyond capacity -- truck traffic on the I-95 Corridor is expected to increase from 32,000 trailers daily in 2004 to 58,000 trucks per day by 2020.  State and MPOs must play a critical role in waterborne transportation development.[13] 

Additionally, the Department’s Office of the Secretary (OST) recently completed a study assessing the feasibility of short sea shipping operations along four potential domestic U.S. traffic lanes or corridors and determining if such services could serve as an economically viable alternative to overland freight transportation.  The study was specific to the U.S. domestic market and excluded Canada and Mexico water transportation routes.  The study found that the primary economic advantage of short sea shipping is its ability to generate significant economies of scale by moving large numbers of highway trailer-loads on a single vessel providing numerous labor, energy, environmental, and infrastructure advantages. 

The OST study found:

There are significant perceived opportunities for short sea services in the domestic freight transportation market.  Short sea shipping, as MARAD defines it, is currently in operation in the contiguous domestic trade. Short sea shipping can be particularly competitive for heavy and/or hazardous shipments currently moving over the road such as chemicals (a recurring finding in many studies). There are also significant interregional container flows (10 million container shipments per year from the Gulf to the New York region).  Interviews with truckers revealed “interest with healthy skepticism” about short sea shipping, but ports and vessel operators were “supportive” or expressed “strong interest” in the concept.

Of the corridors studied, short sea shipping appears to be competitive with other modes for service across Lake Michigan (above Chicago), and from the Gulf to the East coast, especially for chemical and bulk products.   The study concluded by recommending that DOT encourage and facilitate short sea shipping by taking on a role similar to that of a “business development” department in a large corporation (e.g., market research and strategic plan development).

If the right incentives are offered to the maritime industry and its supporting agencies, every citizen from our dockworkers to the American consumer will benefit.  Removing a significant portion of container freight from the highways and railroads would have the effect of increasing capacity on our surface modes as they exist in their present size and operating methods. 

Coastal shipping operators and those contemplating start-up services have identified the Harbor Maintenance Tax (HMT) as a major impediment to profitable domestic waterborne freight movements (notably goods moving in containers).  The maritime industry has consistently pointed out that the HMT is particularly burdensome for container feeder services since the tax is assessed twice, once for the international movement and again on the domestic waterborne leg of the trip.  Trucks and trains do not pay the HMT.  As such, potential marine highway operators envision themselves at a competitive disadvantage when considering a new service (since any potential business plan must include the payment of a tax that may or may not be ultimately collected).  Further, the elimination of the HMT for the domestic movement of cargo containers would have negligible impact on our nation’s Treasury.  A SCOOP commissioned study dated October 2005, ”Short Sea Shipping and the Harbor Maintenance Tax” found that domestic container HMT movements only yielded the Treasury $1.7 million - $1.9 million per year.[14] 

As you know, legislative proposals to waive the HMT have been introduced in Congress.  In the last Congress, Congressmen Philip English (R) of Pennsylvania, Chris Shays (R) of Connecticut, Dave Weldon (R) of Florida, and Congresswoman Stephanie Jones (D) of Ohio introduced legislation to exempt either truck cargo, containerized cargo carried between mainland U.S. ports or certain geographic areas from the tax.  No committee action was taken on any of these proposals.  However, Congresswoman Jones re-introduced HMT exemption legislation this week.    

Recent interest in eliminating the Great Lakes region HMT is shipper and port driven due to the desire to stimulate cross-lake services that avoid the additional hours necessary to move cargo around the Lakes on a crowded surface transportation system.   This type of industry interest and activity may serve as a catalyst for Congressional action, especially if a possible proposal can be crafted to carve-out an affordable “first step” in eliminating the HMT for a specific market.  Any related development of new Great Lake marine highway services will ultimately provide this Committee with a “test case” model to gauge the impact of HMT relief on industry growth.  The expansion of marine highway services on the Great Lakes will ease surface congestion, improve “just-in-time” delivery, and grow the Midwest economy.

A related effort to eliminate certain customs fees to achieve some type of modal shift in the Gulf of Mexico might also serve as a stimulant for start-up cross Gulf marine services. 

Any new proposal to eliminate all, or a portion, of the HMT will require significant stakeholder support to achieve ultimate passage.  Waiving the HMT, in specific markets, as well as eliminating certain custom fees, will clearly encourage greater use of the marine highway, reduce landside congestion, and ultimately enhance just-in-time delivery.

The Maritime Administration seeks a larger role in the development of new North American marine highway services designed to mitigate congestion (especially border and corridor related congestion).  Expanding waterway use is the only policy choice that offers this unique and direct outcome, short of constructing new capacity. Accordingly, the Maritime Administration seeks to identify and catalogue obstacles to waterborne trade and explore viable legislative and policy proposals for the elimination of those obstacles.  We will also seek to integrate the marine highway into the national, state, and local transportation planning process.  Specific efforts are underway to facilitate a series of national “one on one” dialogues between transportation users and providers in an ongoing effort to, identify impediments to the expanded utilization of waterborne transportation, accelerate the modal shift from surface to waterborne transportation, and build consensus support for a policy reform package.

MARAD is also actively working to highlight existing marine highway services that illustrate, in a practical way, the promise of the marine highway.  For example, Columbia Coastal Transport is a reliable U.S.-flag barge operator that works in close cooperation with carriers, ports, and labor to provide essential containerized cargo feeder services linking ports in North America.  Its five barge services link the ports of New York, New Jersey, and Boston; New York, Baltimore, and Norfolk; Norfolk and Baltimore; and, Charleston, Savannah and Miami.  Recently, the company announced a new service linking the ports of Baltimore and Philadelphia.  They offer complete transportation services for project cargo including: heavy lift truck hauls; rail coordination; lift-on/lift-off service; roll-on-roll-off barges with access to shallow and undeveloped ports; and, a full array of port logistics services.  Columbia Coastal services by-pass much of the I-95 surface corridor and offer shippers a reliable, cost-effective, and environmentally-friendly transportation alternative to a congested surface transportation system. 

Osprey Lines is another prime example of a marine operator that plays a vital transportation role, in this case moving agricultural products in the country’s heartland.  Osprey first initiated services between Memphis and New Orleans in 2004.  The company now offers container-on-barge services to ports in the Gulf of Mexico and along the U.S. inland waterway system including Houston, Lake Charles, New Orleans, Baton Rouge, Memphis, Chicago, Pascagoula, and Mobile.  Its primary customers are ocean carriers who use Osprey’s container on barge services to re-position containers for their customers at various locations on our Nation’s inland waterways.  These containers are then loaded mostly by agricultural shippers who use Osprey’s services to return them to deep water ports in the Gulf of Mexico.  Osprey, like Columbia Coastal, uses the marine highway to offer a low-cost transportation alternative to product providers and shippers – and, to the benefit of the American consumer. 

The increased use of water to move cargo is evident along many crowded coastal transportation corridors and border crossings.  Cargo ferry services are coming on-line to avoid choke points along the coasts and in the Great Lakes.  These services have sprung up out of economic necessity to avoid land-based obstacles that inhibit the timely and cost efficient movement of cargo and passengers.  I believe it is the role of government to provide these emerging services with the tools to succeed and expand.  It is clear, that given the proper tools, many other successful niche market marine services can emerge, not only as a solution to some of our freight flow and congestion issues but, as a catalyst for the development of our Nation’s underutilized port capacity. 

Maritime community stakeholders have sent the message that the time for talk is now at an end.  They want affirmative action that focuses on the expansion of America’s marine highway -- action to achieve a true modal shift that will ease landside congestion problems, improve transportation efficiencies, and grow our economy.  Clearly, our freight congestion problems will not be solved without an active public-private partnership that focuses on initiatives designed to eliminate obstacles to the expansion of our transportation choices -- a marine stakeholder driven partnership that begins at the local level and ensures an integrated transportation planning process.  This partnership will build on the successful marine highway services I have discussed before the Committee today and fulfill the vision of a truly intermodal National transportation system.  Congress plays an integral role in this partnership – the way forward in solving our freight congestion problems begins here in this Committee.

I stand ready to assist you in addressing an issue that is vital to our continued economic security – the development of America’s marine highway.   I want to thank the Members of this Committee and Chairman Oberstar for their leadership in holding this hearing today.  I will be happy to answer any questions you might have.

##

STATEMENT OF

VINCENT CAPEZZUTO,
DIRECTOR OF SURVEILLANCE AND BROADCAST SERVICES PROGRAM OFFICE,
EN ROUTE AND OCEANIC SERVICES,
AIR TRAFFIC ORGANIZATION,
FEDERAL AVIATION ADMINISTRATION,

BEFORE THE

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE,
SUBCOMMITTEE ON AVIATION

ON

NEXTGEN:  THE AUTOMATIC DEPENDENT SURVEILLANCE-BROADCAST CONTRACT,

ON

OCTOBER 17, 2007.

Chairman Costello, Congressman Petri, Members of the Subcommittee: 

Thank you for holding today’s hearing on the Federal Aviation Administration’s (FAA) contract for the Automatic Dependent Surveillance-Broadcast (ADS-B) system.  My name is Vincent Capezzuto, and as the Director of Surveillance and Broadcast Services in the Air Traffic Organization at the FAA, I have responsibility for oversight of this performance based contract.  ADS-B is a new service for the FAA and this vehicle will allow the FAA to deploy the equipment and service far more quickly and easily than traditional methods, which in turn will increase efficiency and capacity in the National Airspace System (NAS), and most important, enhance aviation safety.

As you know, this system is vital to building the Next Generation Air Transportation System (NextGen).  In order to ensure the success of ADS-B while maintaining the safest aviation system in the world, the FAA has crafted an innovative and closely monitored contract with the ITT Corporation for the development of ADS-B.  We appreciate the role that Congress has already played in developing this contract.  In fact, our confidence in the contract is directly due to Congress’ oversight and input, as well as contributions from other government entities, which have been invaluable to this process.  We welcome the Members’ continued oversight to help us manage the contract moving forward.

ADS-B:  Description and Benefits

While some of the Members have been able to see ADS-B in action, I wanted to give some brief background as to ADS-B’s capabilities and how it fits into the FAA’s longer-term NextGen goals.  ADS-B uses signals from the international Global Navigation Satellite System to provide air traffic controllers and pilots with much more accurate information that will help keep aircraft safely separated in the sky and on runways.   Aircraft avionics receive satellite signals and transmit the aircraft’s precise locations to air traffic controllers and pilots.  The avionics convert that position into a digital code and combine it with other unique data from the aircraft’s flight monitoring system — such as the type of aircraft, its speed, its flight number, and whether it is turning, climbing, or descending.  The code containing all of this data is automatically broadcast from the aircraft’s avionics once a second or more, as compared to the current five to twelve second refresh from today’s radar.  While a time savings of four to eleven seconds may seem brief to some, this savings actually allows for far greater accuracy in determining aircraft position.

ADS-B equipped aircraft as well as ADS-B ground stations up to 200 miles away from the originating ADS-B aircraft will receive these broadcasts.  Air traffic controllers will see the ADS-B surveillance information on displays they are already using, so little additional training will be needed for the controller workforce.  The ADS-B ground stations also transmit data to aircraft.  These stations send radar-based targets for non-ADS-B-equipped aircraft up to ADS-B equipped aircraft — this function is called Traffic Information Service-Broadcast (TIS-B).  ADS-B ground stations also send out textual and graphical information and forecasts from the National Weather Service and flight information, such as Notice to Airmen or temporary flight restrictions — this is called Flight Information Service-Broadcast (FIS-B).  Pilots can see the ADS-B, TIS-B and FIS-B information on their certified cockpit traffic display screens.  

When properly equipped with ADS-B, both pilots and controllers will, for the first time, see similar real-time displays of air traffic.  Pilots will have much better situational awareness because they will know with greater accuracy where their own aircraft are, and their displays will show them all the aircraft in the air and on the ground around them.  Pilots will be able to have better situational awareness of other aircraft with fewer instructions or advisories from ground-based controllers.  At night and in poor visual conditions, pilots will also be able to see where they are in relation to the ground using on-board avionics and terrain maps.  In addition to improved safety in the sky, ADS-B can help reduce the risk of runway incursions.  Both pilots and controllers will see the precise location on runway maps of each aircraft and equipped ground vehicles, along with data that shows where they are in relation to each other.  These displays are clear and accurate, even at night or during heavy rainfall.

ADS-B also has the potential to increase capacity significantly, because more accurate tracking using satellite based positioning means aircraft will be able to fly safely with less distance between them.  Because the better accuracy available with ADS-B also means greater predictability of aircraft movement, air traffic controllers will be able to manage the air traffic arriving and departing from congested airports with greater precision, resulting in even more gains in efficiency.  Eventually, with ADS-B, we envision that pilots can play a more active role in keeping safe distances between aircraft, if they have the certified displays on the aircraft pinpointing all the air traffic around them, along with local weather displays.

Although radar technology has advanced, it is essentially a product of World War II technology.  Radar occasionally has problems discriminating airplanes from migratory birds and rain “clutter.” Secondary surveillance radar systems can determine the identity of the aircraft because they interrogate transponders on-board the aircraft; however, both primary and secondary radars are very large structures that are expensive to deploy, need continuous maintenance, and require the agency to lease large plots of land on which to situate them.  ADS-B, on the other hand, does not have problems with clutter because it receives data directly from aircraft transmitters rather than passively scanning for input like radars do.  Also, ADS-B provides superior accuracy and timeliness of information in comparison to secondary radars.  ADS-B ground stations are inexpensive compared to radar, and are the size of mini-refrigerators that can go essentially anywhere, so they minimize the required real estate.  In addition, ADS-B also provides greater coverage, since ADS-B ground stations are much easier to place than radar.  Remote areas where there is currently no radar, such as the Gulf of Mexico and parts of Alaska, will have precise surveillance coverage with ADS-B.

The ADS-B Contractor:  ITT Corporation

As you know, in August 2007, the FAA selected ITT Corporation as the prime contractor for the development and deployment of ADS-B.  The contract requires ITT to have the system ready for use by 2010 and expand coverage nationwide by 2013.  The first stage of the contract is worth $207 million, with options worth an additional $1.6 billion.  With a system as important as ADS-B, and the price tag that comes with it, we want to make sure that we are working responsibly with the taxpayers’ dollars.

The FAA believes that we have a strong contract in place and that ITT, as a proven systems architect and integrator, has the experience and expertise to fulfill that contract.  The ITT team has deployed ADS-B equipment for use in aircraft separation in Australia and has worked with the FAA previously on the Telecommunications Engineering Operations and Management contract.  Additionally, the contract accounts for risk mitigation, which requires ITT to work with the FAA to identify any risks within the program along with applicable mitigation plans to execute together in partnership.

To help achieve the goals of the contract, ITT has a team of subcontractors that includes:

• AT&T – to create, manage and secure our telecommunications networks and infrastructure;
•  Thales North America (formerly Wilcox Electronics, which provided most of FAA’s instrument landing systems) – to provide expertise as a leading provider of ADS-B ground stations;
•  WSI – to continue as a trusted weather provider to the FAA;
• SAIC – to provide scientific, engineering, systems integration, and technical services and solutions;
• PriceWaterhouseCoopers – to validate and support the business aspects of the contract;
• Aerospace Engineering – to provide prototyping and metrics of the benefits of ADS-B-enabled systems, operational procedures, and air traffic control (ATC) concepts;
• Sunhillo – to help integrate ADS-B information seamlessly into the NAS with existing and future automation systems;
• Comsearch – to perform radio frequency interference and coverage analysis for ADS-B;
• Mission Critical Solutions of Tampa – to assemble ADS-B equipment racks and perform critical field installations; and
• Pragmatics, Washington Consulting Group, Aviation Communications and Surveillance Systems (ACSS), and NCR Corporation.

These corporations provide additional and complementary expertise and capabilities to ITT’s core abilities in aviation, avionics, and service maintenance. In addition, ITT has partnered with L-3 Avionics Systems and Sandia Aerospace to develop low cost avionics for ADS-B and secondary radar transponders.  We believe that these strategic partnerships will result in a better product that is seamlessly and reliably integrated into the NAS while providing increased capacity, enhanced services, and maximum benefits for aviation safety.

The ADS-B Contract:  Milestones and Safeguards

As mentioned above, ADS-B is a serious investment.  In order to protect that investment, we have designed the contract to include several required milestone events that will help us track progress and test the system as each piece is completed.  Further, we have created additional incentives and disincentives throughout the contract to maximize the contractor’s commitment to success.  Finally, we have a building block plan for the contract; first we build, then we test, while we create the appropriate procedures for use, and only after the groundwork has been laid do we deploy the technology nationwide.   

We are keenly aware of the risks inherent to new technology and new procedures, and we are safeguarding against them as best we can.  ADS-B’s potential is enormous; it is integral to our ability to achieve NextGen and to handle the doubling of today’s air traffic predicted by 2025.  But, we do not want to oversell these capabilities, and the only way we can present a realistic picture of our goals is to double-check our accomplishments along the way. 

Just this month, we achieved a major goal for our ADS-B program, by publishing a Notice of Proposed Rulemaking that allow only aircraft equipped with ADS-B avionics to access certain controlled-airspace.  Equipage of aircraft is obviously essential to the FAA’s future ability to perform applications such as self separation of aircraft as well as encourages ITT to develop cost-effective hardware to maximize its investment.  We anticipate a Final Rule will be issued in late 2009.

Currently, we are targeting the following goals:

• Testing ground infrastructure and continuing voluntary avionics equipage by April 2008;
• Rolling out initial operating capability by October 2009;
• Deploying NAS-wide ground infrastructure between 2010-2013;
• Completing avionics equipage between 2010-2020.

We have set “default” milestones for key accomplishments in the contract; if the contractor is unable to achieve the milestones, the FAA may consider it in default of the contract, and may cancel the remainder of the contract.  With the first milestone set for May 2008, when the contractor is to test the up-linking of traffic and weather information to pilots (Key Site Initial Operating Capability).  With this aggressive timeline, it is clear we are not wasting any time in requiring our contractor to deliver.  Additional milestones are set for March, April, June, August, and October of 2009.  These milestones give us concrete measures of the contractor’s progress and, if needed, allow the FAA to adjust the program early on or redirect resources as needed.  Our goal is not only to test technical performance, but also to test business performance.

Other oversight measures include preliminary design reviews and critical design reviews, which enable us to track the contractor’s progress and success.  As previously mentioned, we also have risk mitigation built into the contract, which requires ITT’s full participation.  By no means is the FAA a passive entity in this contract.

As noted above, some of the major incentives for our contractor are embedded in the additional $1.6 billion options that the FAA can choose to exercise or not.  Depending on proven contractor performance or if FAA does not receive the benefits anticipated in a particular area, these options would allow the FAA to unilaterally stop the contract in whole or in part.  Additionally, the contractor is allowed, subject to FAA approval, to develop the data for other aeronautical uses, which would result in a reduction of the cost of the contract to the FAA while allowing the contractor to recoup its investment.

We are confident that this system of “carrots and sticks” will afford the FAA considerable oversight of the contract, encourage the contractor to excel in performance, and allow seamless integration of this important new technology.  The contract is structured to place responsibility and ownership of hardware with the contractor or other third parties, thus ensuring long-term buy-in by the contractor and the industry, while the FAA retains control over system performance and data transmitted.  The FAA also retains ownership and control of the “paper design” of the system as reflected in the final design review and any subsequent activities that might impact the design or the safety and security of the system.  Finally, all data will be certified by the FAA, to guarantee its integrity prior to use for air traffic control purposes.  FAA is a safety oversight agency first and foremost, and the certification of the data is critical to our mission to ensure safety is maintained and enhanced for the flying public.

The ADS-B User Community

A necessary component of all our planning and efforts has been the input of the ADS-B user community – the pilots, the controllers, the airlines, the engineers, the manufacturers – all the interested stakeholders have a place at the ADS-B table.

The FAA has formed the Air Traffic Management Advisory Management Committee (ATMAC) ADS-B Work Group, which includes representation from government and industry, including the Air Transport Association, the Air Line Pilots Association, and Helicopter Association International, to name a few.  The objective of the Work Group is to collaboratively plan and expedite NAS-wide implementation of ADS-B and to offer solutions to implementation issues.

Further, we have formed an Aviation Rulemaking Committee (ARC) to assist the agency in coordinating responses to the previously mentioned NPRM.  In addition, the ARC was formed to help us encourage avionics equipage even before the rule’s compliance date to speed the safety and efficiency gains possible with ADS-B.  ARC participants include many of the same participants from the ADS-B Work Group, as well as the General Aviation Manufacturers Association, the Department of Defense, the National Air Traffic Controllers Association, as well as many others.  Now that the NPRM has been published, the ARC will make specific recommendations to the FAA concerning the proposed requirements, based upon comments received in response to the NPRM.

Stakeholder participation is vital to the success of the ADS-B contract and overall program.  We are committed to continuing to receive input from the aviation community in order to create a better service product and optimize the ways that service is applied.  In that vein, we welcome Congress’ continued interest in and oversight of this program; we have already made good use of your input in framing our issues and addressing our shared concerns.

Mr. Chairman, this concludes our prepared statement.  We would be happy to answer any questions that you or the other Members of the Committee may have.

Statement of

Joseph H. Boardman,
Administrator,
Federal Railroad Administration,
U.S. Department of Transportation,

before the

Committee on Transportation and Infrastructure,
U.S. House of Representatives

October 25, 2007

Chairman Oberstar, Ranking Member Mica, and other members of the Committee, I am very pleased to be here today, representing Secretary of Transportation Mary E. Peters, to discuss “The Impact of Railroad Injury, Accident, and Discipline Policies on the Safety of America’s Railroads”.  The Federal Railroad Administration’s (FRA) statutory mission and primary focus are to promote the safety of America’s freight and passenger railroads, including protecting the employees who keep them running. 

My testimony today will focus on harassment and intimidation of, and retaliation against, railroad employees who report or attempt to report on-duty injuries.  As I begin this testimony, I want to emphasize that, in the vast majority of instances, employees promptly report injuries to their supervisors on the railroad, and those supervisors make sure that employees receive proper medical attention and that the injuries are correctly reported to the FRA.  When they are not, late reports are filed and penalties are levied.  Most of the time, the system works; and it usually works without our intervention.  But careful and seasoned students of railroad economics know that the system works most of the time through the good will and integrity of individuals.  Railroads, supervisors and employees are under pressure to show good results – the absence of injuries – and that is a reality that everyone in the industry lives with daily.

The underlying motivators driving harassment and intimidation are varied and powerful, and deeply engrained in railroad culture.  FRA is working hard to combat harassment and intimidation within FRA’s jurisdiction, not only through regulatory enforcement actions, but through efforts to effect positive culture change in the railroad industry. 

FRA appreciates the efforts of the Committee in addressing this issue and in developing FRA’s rail safety reauthorization proposals in H.R. 2095, The Federal Railroad Safety Improvement Act of 2007.  I look forward to working with you on these proposals as the legislative process moves forward. 

I.  FRA’s Railroad Safety Program

            FRA is the agency within the U.S. Department of Transportation (DOT) charged with carrying out the Federal railroad safety laws.  These laws provide FRA, as the Secretary’s delegate, with very broad authority over every area of railroad safety.  In exercising that authority, the agency has issued and enforces a wide range of safety regulations covering a railroad network that employs more than 232,000 workers, moves more than 42 percent of all intercity freight, and provides passenger rail service to about 550 million riders each year. 

            FRA’s regulations address such topics as accident reporting, track, passenger equipment, locomotives, freight cars, power brakes, locomotive event recorders, signal and train control systems, maintenance of active warning devices at highway-rail grade crossings, alcohol and drug testing, protection of roadway workers, operating rules and practices, locomotive engineer certification, positive train control, the use of locomotive horns at grade crossings, and many other subject areas.  This body of regulations is based upon knowledge and experience acquired over more than a century of railroading in America.  FRA currently has active rulemaking projects on a number of important safety topics, and is continually examining existing regulations to ascertain whether updates or amendments are necessary or desirable.  FRA also enforces the Hazardous Materials Regulations, promulgated by DOT’s Pipeline and Hazardous Materials Safety Administration, especially as they pertain to rail transportation. 

            FRA has an authorized inspection staff of about 400 persons Nation-wide, distributed across its eight regions.  In addition, 165 inspectors are employed by 28 States that participate in FRA’s State participation program who are authorized to perform inspections for compliance with the Federal rail safety laws.  Each inspector is an expert in one of five safety disciplines:  Track; Signal and Train Control; Motive Power and Equipment; Operating Practices; or Hazardous Materials.  FRA also has 18 full-time highway-rail grade crossing safety and trespass prevention specialist positions in the field; these specialists focus on these critically important issues, which account for the overwhelming number of railroad-related deaths.  Every year FRA’s inspectors conduct tens of thousands of inspections, investigate hundreds of complaints of specific alleged violations of safety laws and regulations, develop recommendations for thousands of enforcement actions, perform full investigations of more than 100 of the most serious railroad accidents, and engage in a range of educational outreach activities on railroad safety issues, including educating the public about highway-rail grade crossing safety and the dangers of trespassing on railroad property.  FRA also works closely with DOT’s Federal Highway Administration and Federal Motor Carrier Safety Administration to improve highway-rail crossing safety and with DOT’s Federal Transit Administration to improve commuter rail safety.

            FRA carefully monitors the railroad industry’s safety performance, and uses the National Inspection Plan and extensive data gathered through routine oversight to guide the agency’s accident prevention efforts.  FRA strives to continually make better use of the wealth of available data to achieve the agency’s strategic goals.  FRA, often in coordination with DOT’s Research and Innovative Technology Administration, also sponsors collaborative research with the railroad industry to develop and introduce innovative technologies to improve railroad safety.  Finally, under the leadership of the U.S. Department of Homeland Security, FRA plays an active role in supporting Federal efforts to secure the Nation’s railroad transportation system.

II.        The National Rail Safety Action Plan 

            As detailed in the appendix to my testimony, the railroad industry’s overall safety record has improved dramatically over the past few decades, and most safety trends are moving in the right direction.  However, serious train accidents still occur; and, as we assessed this situation in early 2005, the train accident rate had stagnated.

As a result of these concerns, in May 2005, the U.S. Department of Transportation (DOT) and FRA, as the agency charged with carrying out the Federal railroad safety laws, initiated the National Rail Safety Action Plan (Action Plan), a comprehensive and methodical approach to address critical safety issues facing the railroad industry.  The Action Plan’s goals broadly stated are:

•     Target the most frequent, highest-risk causes of train accidents;
•     Focus FRA’s oversight and inspection resources on areas of greatest concern; and
•     Accelerate research efforts that have the potential to mitigate the largest risks.

            As I have previously testified, the causes of train accidents are generally grouped into five categories: human factors; track and structures; equipment; signal and train control; and miscellaneous.  From 2002 through 2006, the vast majority of train accidents resulted from human factor causes or track causes.  Accordingly, human factors and track have been our primary focus to bring about further improvements in the train accident rate.  Overall, the Action Plan includes initiatives intended to:

•     Reduce train accidents caused by human factors;
•     Address fatigue;
•     Improve track safety;
•     Enhance hazardous materials safety and emergency preparedness;
•     Strengthen FRA’s safety compliance program; and
•     Improve highway-rail grade crossing safety.

            In testimony before this Committee and the Subcommittee on Railroads, Pipelines, and Hazardous Materials, FRA has detailed the substantial progress made in attaining Action Plan objectives, and the improvements that have been made.  We are encouraged that human factor accident/incident rates have been in decline during 2006 and the current period.

            Safety begins with good rules, good training and supportive technology.  It is supported by firm expectations with respect to rules compliance and by systems of accountability that ensure expectations are met.  FRA will continue to press for the basic accountability that says, “we will follow the rules and we will report our failures honestly.” 

            My basic message to you today is that, while we can hold individuals accountable to some extent, whether they are managers or employees, or FRA officials, in the end we will do best if we can find ways of moving beyond mere accountability and towards collective responsibility for outcomes that rests on mutual respect for one another as colleagues.

            So let’s talk about the most elemental feature of safety programs—the collection of data on accident injuries and other forms of societal loss.  Let’s talk about why, when the system of disincentives is wrongly aligned, railroads and their employees have great difficulty as an industry getting it righted.

III.      Accident/Incident Reporting

A.Statutory Background

Laws governing the monthly reporting by railroads of “all collisions, derailments, or other railroad accidents resulting in death or injury to any person or damage to equipment or roadbed” date back to 1910, when the Accidents Reports Act was enacted.[1]  In 1994, the Accidents Reports Act, along with other early railroad safety statutes was recodified at 49 U.S.C. 20901.  This testimony refers to the current, recodified version of the Accidents Reports Act (49 U.S.C. § 20901).

Currently, each railroad carrier is required to file a monthly report with the Secretary of Transportation, under oath, listing “all accidents and incidents resulting in injury or death to an individual or damage to equipment or a roadbed arising from the carrier's operations during the month.”[2]  The carrier is required to describe the nature, cause, and circumstances of each accident or incident included in the report.[3]  The Secretary's enforcement authority under the Act includes the power to impose civil and criminal penalties.[4]  The penalty for a violation ranges from $550 to $27,000.[5]  The Act does not address harassment and intimidation of railroad employees. 

Both the Accident Reports Act and the Federal Railroad Safety Act of 1970,[6] confer broad powers on the Secretary of Transportation to implement the provisions of the Accident Reports Act, including the authority to issue regulations and investigate accidents or incidents resulting in serious injury to an individual or to railroad property.[7]  These functions have been delegated to the FRA Administrator.[8] 

B.  FRA’s Accident Reporting Regulations in General

FRA's accident reporting regulations, set forth at 49 C.F.R. Part 225 (Part 225) require that each railroad submit monthly reports to FRA summarizing collisions, derailments, and certain other accidents and incidents involving damages above a periodically revised dollar threshold, certain injuries to passengers and other persons, as well as certain occupational injuries to and illnesses of railroad employees.[9] 

The reporting requirements of Part 225 concerning an employee injury are triggered, generally, when an event involving the operation of a railroad results in an employee dying, requiring medical treatment (beyond first aid), missing at least one day of work, being placed on restricted work activity or receiving a job transfer, or losing consciousness due to the injury.[10]  The regulations also require that railroads keep records of so-called “accountable injuries.”[11]  These injuries are defined as “any condition, not otherwise reportable, of a railroad worker . . . which condition causes or requires the worker to be examined or treated by a qualified health care professional.”[12] 

C. Anti-Harassment Provision

FRA’s current accident reporting regulations prohibit railroad actions calculated to discourage or prevent proper medical treatment or reporting of an accident/incident to FRA.  While other actions by a railroad or railroad official may constitute harassment or intimidation, it is important to note that only actions calculated to prevent medical attention or accident reporting are violations of FRA’s regulations. 

FRA issued the anti-harassment provision of its accident reporting regulations after a notice-and-comment rulemaking proceeding that addressed the quality of information that FRA received relating to railroad accidents and incidents, as well as illnesses, injuries, and deaths of railroad employees, passengers, and other persons on railroad property.  In pertinent part, this rulemaking required railroads to adopt internal control procedures to ensure accurate reporting of accidents, fatalities, injuries, illnesses, and highway-rail grade crossing accidents.[13]  In the notice of proposed rulemaking (NPRM), FRA noted that its ability to develop inspection strategies and measure comparable trends of railroad safety is dependent upon the accuracy of railroad injury and accident data.[14] 

FRA also noted that the proposed rule was an outgrowth of a General Accounting Office (GAO) study that had reviewed FRA’s safety programs to determine if they were sufficient to “protect railroad employees and the general public from injuries associated with train accidents.”[15]  Based upon its review of FRA’s railroad injury and accident reporting data, GAO had concluded that the audited railroads were violating FRA’s accident reporting regulations by under-reporting and inaccurately reporting injuries and accidents.[16]  As a result of these findings, GAO made several recommendations, including that FRA require railroads to establish injury and accident reporting internal control procedures.[17]  

Rail labor testified during the rulemaking proceeding that intimidation and harassment of railroad employees exists and manifests itself as follows:

First, due to the railroads’ desire to reduce the number of reportable injuries and illnesses, many railroad employees are reluctant to seek needed medical attention for fear of possible discipline or retaliation by their employer.  Second, many employees who are injured on the job fail to report their injury to the railroad within the prescribed time period because, at the time the injury was incurred, they believed it was minor or insignificant.  If and when the injury worsens, the employee is reluctant to report the injury because he or she may be subject to investigation or discipline, or both, for reporting late.  Third, other employees request medical treatment that would render the injury or illness nonreportable to FRA, such as requesting that they be given nonprescription medication, because of intimidation or harassment by the employer.[18]  

FRA’s final rule (effective January 1, 1997) amended the railroad accident reporting regulations in several ways in order to enhance the quality of the injury and accident data relied upon by FRA in carrying out its rail safety programs.[19]  Among other things, FRA adopted an Internal Control Plan (ICP) requirement mandating that each railroad develop, adopt, and comply with an ICP in order to “ensure that complete, reliable, and accurate data is obtained, maintained, and disclosed by the railroads.”[20]   

In the final rule, FRA stated that “many railroad employees fail to disclose their injuries to the railroad or fail to accept reportable treatment from a physician because they wish to avoid potential harassment from management or possible discipline that is sometimes associated with the reporting of such injuries.”[21]  Accordingly, the regulation requires that each ICP include a policy statement that not only declares the railroad's commitment to complete and accurate reporting, but also to the principle, in absolute terms, that harassment or intimidation of any person that is calculated to discourage or prevent such person from receiving proper medical treatment or from reporting such accident, incident, injury or illness will not be permitted or tolerated and will result in some stated disciplinary action against any employee, supervisor, manager, or officer of the railroad committing such harassment or intimidation.[22]

FRA also provided that a railroad failing to adopt an ICP is subject to the assessment of a civil penalty and that any individual who willfully causes a violation of or noncompliance with any provision of Part 225, including the anti-harassment provision, may also face civil penalties.[23]  In addition, FRA stressed that criminal penalties, including imprisonment, may be imposed upon any individual who knowingly and willfully makes a false entry in a report required by the accident reporting regulations.[24] 

IV.  Other Legal Protections Relevant to Allegations of Harassment or Intimidation.

Discriminating against an employee for (among other things) notifying, or attempting to notify, the railroad carrier or FRA of a work-related personal injury or work-related illness of an employee is prohibited under 49 U.S.C. 20109, as amended by section 1521 of the Implementing Recommendations of the 9/11 Commission Act of 2007.[25]  The employee’s whistleblower rights are enforced under the procedures set forth in 49 U.S.C. 42121(b) by the Department of Labor (DOL).  FRA and DOL have already begun the process of coordination with respect to the administration of this new Executive Branch function.

V.  Legislative Proposals to Address Harassment and Intimidation.    

Section 606 of H.R. 2095 would prohibit a railroad from denying, delaying, or interfering with the medical or first aid treatment of an employee who is injured on the job.  If an injured employee requests transportation to a hospital, the railroad is required to promptly arrange to have the injured employee transported to the nearest medically appropriate hospital.  Section 606 also prohibits a railroad or other person covered under the statute from disciplining, threatening, or threatening to discipline an employee for requesting medical treatment, or for following orders or a treatment plan of a treating physician.

VI.      Harassment of Employees and Safety Culture in the U.S. Railroad Industry

A.  Influences on Company and Worker Behavior

            The issue of harassment and intimidation occurs against a much broader background than the rather narrow scope within which FRA works to promote full reporting of accidents and incidents.  In addition to the personal animosity sometimes encountered in any workplace, that background includes the possible effects of other Federal laws such as the Federal Employers’ Liability Act,[26] the Railroad Unemployment Insurance Act,[27] and the Railway Labor Act (RLA),[28] which govern recovery for personal injuries, compensation for lost time, resolution of labor disputes, tort law in general, and bonuses and other rewards for avoiding injuries.  All of those well-intended things have the unintended consequence of motivating people to find ways to avoid reporting injuries because significant financial consequences attend the reporting of injuries.

            Rail labor relationships are complex and often involve conflicts.  These conflicts are for the most part subject to the jurisdiction of the courts and RLA boards of adjustment.  Employer actions that are perceived as harassment or intimidation may result from personal hostility or dislike, retaliation for actions taken by the employee, possibly including actions taken as a member or leader of a labor organization, normal discipline, normal investigations intended to identify how and why an injury occurred so recurrences can be prevented, ordinary investigative techniques intended to protect the corporation from what may be perceived as the potential for inappropriate claims, and even actions intended to mitigate damages for injuries that have already occurred. 

            Personal injuries, or the potential for such injuries and associated risk to the employee and liability to the company, may be involved to a greater or lesser degree in many of these conflicts.  With the discrete exceptions of actions calculated to prevent proper medical attention or reporting of an accident/incident to the FRA, these are matters clearly outside the responsibility of the FRA and clearly beyond the ability of the FRA to prevent or remediate.  Even where obstruction of proper medical care or an attempt to prevent required accident/incident reporting is involved in a case of harassment or intimidation, FRA’s role is to promote future compliance with FRA’s reporting requirements set forth in Part 225, rather than to provide a specific remedy for the employee.

            As noted above, the Congress, through Public Law 110-53, has amended 49 U.S.C. § 20109 to provide a broader remedy that is personal to the railroad employee, and administered by the U.S. Department of Labor, for discrimination related to the employee’s action in reporting an accident or safety violation or taking other specified actions.  This provision provides significant protections against alleged actions of the sort that prompted this hearing.  FRA has already begun working with the Department of Labor to ensure that our respective activities are well coordinated.

B. Impact on Railroad Safety  

A safety culture that reacts to accidents and injuries by assigning blame to “bad actors” discourages full examination of the conditions and circumstances that lead to accidents and injuries.

Moreover, the quality of the injury and accident data relied upon by FRA in carrying out its rail safety programs is compromised.

C. Changing to a “Culture of Risk Reduction”

A culture of risk reduction uses precursor data in a collaborative, non-punitive way to reduce the risk of future accidents, and FRA believes it to be the most cost-effective way to significantly improve railroad safety.  In order to create a culture of risk reduction, FRA is working to establish programs that will encourage employees to fully disclose information regarding precursors to accidents, or near accidents, without fear of blame.  Such programs will allow FRA to gain a more complete picture of how and why accidents occur, and thus identify and reduce risks before accidents occur.  

To date, two FRA-led demonstration projects in cooperation with the Union Pacific Railroad Company (UP) have been launched in an effort to support a positive change in safety culture in the railroad industry: the Close Call Confidential Reporting System (C3RS) and Clear Signal for Action (CSA) program. 

            C3RS aims to reduce the number of human factor accidents by cooperatively obtaining railroad employees’ own reports on “close calls” (near accidents), analyzing the reports and getting at the causes of the near accidents that involved human factors so that, having been identified, the causes can be eliminated or reduced.  This project is pertinent to this hearing for at least two reasons.  First, the project collects the precursor data on a voluntary and confidential basis, so that data on the near accidents flows freely from employees without fear of discipline.  Second, the project has identified various aspects of railroad culture as having an impact on safety.  The pilot location has been on-line since February 1, 2007, so no firm conclusions may be drawn yet. 

CSA is a peer-to-peer observation, feedback, and communication process that identifies and helps correct systemic safety issues.  Both projects shield employees from discipline when errors or at-risk behaviors are reported or observed.  Both projects are designed to collect information, find sources of risk, and take corrective actions to reduce risks and proactively prevent accidents.  Both projects are being conducted with UP and require coordination, communication and cooperation between labor, management, and government to achieve results, thereby discouraging blame and replacing blame with ways to proactively and cooperatively improve safety.

Additionally, FRA intends to launch a comprehensive Risk Reduction Program to   stimulate the development of new industry efforts designed to proactively collect, manage, and respond to safety-critical risks before accidents or unsafe conditions occur.  This initiative will aim to reduce accidents and injuries, and build strong safety cultures, by developing innovative methods, processes, and technologies to identify and correct individual and systemic contributing factors using “upstream” predictive data, helping to augment FRA’s traditional behavior-based and design-specification-based regulations.  This is analogous in many ways to a company having both a quality control program and a quality assurance program; both are needed to produce the best products in today’s competitive environment.  By having more of a safety focus up front before an accident or injury occurs, FRA believes that railroad employees and managers will work in a more cooperative way, without the punitive concerns that can follow actual occurrences.  FRA believes that this will engender greater trust, reduce the atmosphere of conflict, and promote positive safety changes.  Consequently, while continuing to strengthen its regulatory enforcement program, FRA will also include strong collaboration and partnership with the industry in pilot risk reduction demonstration projects.

FRA’s 2008 appropriation request funds key elements of the Risk Reduction Program including risk reduction projects, such as close calls, as well as projects which use precursor data, such as collision hazard analysis or other high-level system safety programs.  Additionally, the Administration has asked that language (from H.R. 1516) protecting certain information generated in carrying out risk reduction programs be added to H.R. 2095 so that a full and careful analysis of hazards is possible.  Without this protection of companies’ risk assessments, efforts to conduct meaningful risk assessments and bring about real risk reduction will fail.  FRA is hopeful that these types of projects will demonstrate that the railroad industry is capable of changing the nature of the discussion of safety to one that is positive and open, much as the aviation industry did with the near miss program.  FRA believes that, to reach our goal of zero injuries and fatalities, these efforts are necessary.

VII.     FRA Enforcement Activities

The FRA enforces compliance with the accident/incident reporting regulations, including the provisions against harassment and intimidation, through a variety of means, including regular inspections, audits and complaint investigations.  Instances of non-compliance are documented and civil penalties actions are recommended to the Chief Counsel’s office as appropriate.

Since the beginning of FY 03, FRA and participating State inspectors have conducted 13,993 inspections to assess industry compliance with FRA’s accident/incident reporting regulations.  These inspections resulted in the discovery of 15,364 alleged acts of non-compliance with these regulations by the Nation’s railroads.   As a result of these findings, FRA’s Office of Safety recommended that appropriate enforcement action be taken by the Chief Counsel’s office in 2,139 of these cases.  As is standard practice, if the Chief Counsel’s office accepts the recommendation and initiates enforcement action, the railroad or individual cited will have the opportunity to present mitigating information or information refuting the alleged violations before further action is taken. 

            Each of the seven “Class I”[29] railroads and Amtrak is audited by an FRA headquarters-led team of inspectors on a rotating basis every three years.  These audits are comprehensive and involve an extensive review of each railroad’s accident/incident recordkeeping and reporting records and practices for all reportable groups of accidents/incidents:  highway-rail grade crossing; rail equipment; and death, injury, and occupational illness.[30]  As part of the comprehensive audit, FRA also reviews the adequacy of each railroad’s ICP, and each of its 11 required components.[31] Audits of the more than 600 shortline railroads, regional railroads and commuter railroads are conducted by FRA Regional office-led teams of inspectors. 

Each allegation of harassment and intimidation received by FRA from railroad employees is assigned to one of FRA’s eight regional offices and investigated by a local inspector.  In investigating complaints from railroad employees alleging they were subjected to harassment and/or intimidation, FRA‘s Office of Safety recommends that appropriate enforcement action be taken by the Chief Counsel’s office, after finding that managers did harass and/or intimidate injured employees.  Again, as is standard practice, when the Chief Counsel’s Office accepts the recommendation and initiates enforcement action, the railroad or individual cited has the opportunity to present mitigating information or information refuting the alleged violations before further action is taken.  FRA is vigorous in its enforcement of these actions.

VIII.   Conclusion

            Harassment and intimidation calculated to avoid reporting of employee on-duty injuries create barriers to proper medical care and potentially threaten the integrity of FRA’s safety data.  But, more fundamentally, this conduct is symptomatic of an atmosphere of conflict that makes positive safety change very difficult. 

            Although courage shown by organizations and individuals provides a very important defense against falsification of safety data, we also recognize that it is important to address both the symptoms of the underlying malady and its causes.  We address the symptoms through aggressive actions on complaints, regular audits of accident/incident data, and civil penalty actions where warranted.  We seek to address the underlying causes through safety programs that provide a counterweight to forces motivating people to underreport injuries.  FRA will remain aggressive in its efforts to promote accountability and will seek to plant the seeds of cooperative programs that may help reduce risk while engendering greater trust. 

            We look forward to further discussions with the Committee on reauthorization of the Federal railroad safety program, to bring about the enactment of the Administration’s railroad safety bill, and to increase the accuracy of the data relied upon by FRA in carrying out its rail safety program by reducing injury-related harassment and intimidation of railroad employees to make our Nation’s railroad system even safer.  Thank you. 

Attachment

APPENDIX

The Railroad Industry’s Safety Record

The railroad industry’s overall safety record is generally positive, and most safety

trends are moving in the right direction.  While not even a single death or injury is acceptable, progress is continually being made in the effort to improve railroad safety.  An analysis of FRA’s database of railroad reports of accidents and incidents that have occurred over the nearly three decades from 1978 through 2006 dramatically demonstrates this improvement.[32]  (The worst year for rail safety in recent decades was 1978, and 2006 is the last complete year for which preliminary data are available.)  Between 1978 and 2006, the total number of rail-related accidents and incidents has fallen from 90,653 to 13,237, an all-time low representing a decline of 85 percent.  Between 1978 and 2006, total rail-related fatalities have declined from 1,646 to 909, a reduction of 45 percent.  From 1978 to 2006, total employee cases (fatal and nonfatal) have dropped from 65,193 to 5,193, a decline of 92 percent; the record low was 5,065.  In the same period, total employee deaths have fallen from 122 in 1978 to 16 in 2006, a decrease of 87 percent.

            Contributing to this generally improving safety record has been a 74-percent decline in train accidents since 1978 (a total of 2,925 train accidents in 2006, compared to 10,991 in 1978), even though rail traffic has increased.  (From 1978 to 2006, overall train-miles (including passenger and smaller freight carriers) were up by 7.8 percent, but train-miles for Class I railroads have increased 29.9 percent.  Additionally, Class I railroad ton-miles were up by 106.5 percent.)  Further, the year 2006 saw only 28 train accidents out of the 2,925 reported in which a hazardous material was released, with a total of only 69 hazardous material cars releasing some amount of product, despite about 1.7 million shipments of hazardous materials by rail.

            In other words, over the last almost three decades, the number and rate of train accidents, total deaths arising from rail operations, employee fatalities and injuries, and hazardous materials releases all have fallen dramatically.  In most categories, these improvements have been most rapid in the 1980s, and tapered off in the late 1990s.  Causes of the improvements have included a much more profitable economic climate for freight railroads following deregulation in 1980 under the Staggers Act (which led to substantially greater investment in plant and equipment), enhanced safety awareness and safety program implementation on the part of railroads and their employees, and FRA’s safety monitoring and standard setting. (Most of FRA’s safety rules were issued during this period.) 

            In addition, rail remains an extremely safe mode of transportation for passengers.  Since 1978, more than 11.2 billion passengers have traveled by rail, based on reports filed with FRA each month.  The number of rail passengers has steadily increased over the years, and since 2000 has averaged more than 500 million per year.  Although 12 passengers died in train collisions and derailments in 2005, none did in 2006.  On a passenger-mile basis, with an average about 15.5 billion passenger-miles per year since the year 2000, rail travel is about as safe as scheduled airlines and intercity bus transportation and is far safer than private motor vehicle travel.  Rail passenger accidents–while always to be avoided–have a very high passenger survival rate.                                                                

            As indicated previously, not all of the major safety indicators are positive.  Grade crossing collisions and railroad trespassing cause virtually all of the deaths associated with railroading.  Taken together, grade crossing and rail trespassing deaths accounted for 97 percent of the 909 total rail-related deaths in 2006.  In recent years, grade crossing deaths were the greatest single group of rail-related deaths; in 1978, for example, 1,064 people died in grade crossing accidents, compared to 403 who died in rail trespass incidents.  Since 1997, rail trespasser deaths have replaced grade crossing fatalities as the largest category of rail-related deaths; in 2006, 369 persons lost their lives in grade crossing accidents, and 517 persons died while on railroad property without authorization.   Further, significant train accidents continue to occur, and the train accident rate per million train-miles has not declined at an acceptable pace in recent years.  After increasing to 4.39 in 2004, the train accident rate declined to 4.11 in 2005 and 3.61 in 2006.  The latter is near the all-time low despite significant increases in the volume of train traffic.

            The causes of train accidents (e.g., derailments and train-to-train collisions) are generally grouped into five categories:  human factors; track and structures; equipment; signal and train control; and miscellaneous.  The great majority of train accidents are caused by human factors and track.  In recent years, most of the serious events involving train collisions or derailments resulting in release of hazardous material, or harm to rail passengers, have resulted from human factor or track causes.  Accordingly, FRA’s National Rail Safety Action Plan, initiated in May 2005, focuses heavily on human factors and track as the major target areas for improving the train accident rate.