STATEMENT OF

JOHN PORCARI
DEPUTY SECRETARY
U.S. DEPARTMENT OF TRANSPORTATION

BEFORE THE

SUBCOMMITTEE ON EMERGENCY MANAGEMENT,
INTERGOVERNMENTAL RELATIONS, AND THE DISTRICT OF COLUMBIA
COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
U.S. SENATE

HEARING ON

One Year Later: Examining the Ongoing Recovery from Hurricane Sandy

November 6, 2013

Chairman Begich, Ranking Member Paul, and Members of the Subcommittee:

Thank you for inviting me to appear before you today to highlight the Department of Transportation’s (DOT) role in assisting communities devastated by Hurricane Sandy just over one year ago.

This historic storm triggered the worst public transit disaster in the history of the United States.  At the height of the event, it disrupted more than half of our nation’s transportation services, and impacted more than one-third of the nation’s transit ridership in the days following the storm.  The storm affected 24 states, including the entire eastern seaboard from Florida to Maine and west across the Appalachian Mountains to Michigan and Wisconsin.

We worked with our state partners and the private sector to proactively address the challenges posed by the impending superstorm—and these efforts made a tremendous difference in our ability to respond swiftly and responsibly, with the goal of helping the region restore access to vital transportation services for the millions of people who depend on them daily.

New York City’s subway system was shut down on October 28, a day in advance of the storm surge, and remained closed through November 1. Washington DC Metro service, both rail and bus, were cancelled, as well as Maryland Transit buses, light rail, Amtrak, and MARC train service. 

The storm also caused widespread disruptions to the nation’s air traffic, particularly at airports located from Washington, DC to Boston, MA.  The ripple effects of Hurricane Sandy contributed to the cancellation of nearly 19,000 commercial flights nationwide scheduled for October 28-29^th.  The storm also caused significant damage to navigational aids and other critical aviation infrastructure, particularly in the New York City metropolitan area.

Initial Response Efforts

Immediately following the storm, we worked closely with our federal and state partners to ensure fast, efficient transport of power sources, fuel, and supplies to speed recovery efforts. Working with other agencies and the White House, we administered a host of waivers, special permits, and other regulatory flexibilities to expedite operations in the aftermath of the storm.  

Despite the storm’s significant impact on the nation’s aviation system, the Department’s Federal Aviation Administration (FAA), working with the affected airlines, airport authorities, and other key aviation stakeholders, was able to return air traffic in the impacted areas to normal operations by Wednesday morning, October 31, except at the NYC metropolitan airports, which were the hardest hit.  The agency and its partners were able to largely resume normal air traffic operations at NYC’s major airports by Friday, November 2.  In parallel, the FAA also worked with the Federal Emergency Management Agency (FEMA) and other federal and State interagency partners to facilitate response and recovery air missions using numerous flight advisories addressing airspace stretching from Florida to Maine.

In addition to deploying staff to the region to begin damage assessments, our Federal Transit Administration (FTA) worked closely with FEMA and the General Services Administration (GSA) to secure as many as 350 buses to replace lost commuter rail and transit service in New Jersey. Working with FEMA, FTA engaged its staff and project management oversight contractors to conduct continuing damage assessments and cost-validation work for both operating and capital costs associated with restoring and rebuilding transit capacity.

The Department’s Maritime Administration (MARAD) was able to dispatch vessels for emergency relief. The Federal Highway Administration (FHWA) initially provided $59 million in quick-release emergency relief funds within weeks of the storm to get roads, bridges, and tunnels on the path toward recovery. 

The Disaster Relief Appropriations Act

On January 28, 2013, Congress passed the Disaster Relief Appropriations Act, which authorized $60.4 billion to fund federal resources for response, recovery, and hazard mitigation assistance in all affected states. The appropriation included funding for flood insurance payments, repairs to homes and public infrastructure, and funds to help affected communities prepare for future storms.  Of this amount, the Department of Transportation’s programs received $13.1 billion.  This funding was further reduced by about $650 million due to sequestration reductions required by the Budget Control Act.

The Disaster Relief Appropriations Act provided $10.2 billion to FTA for a new Public Transportation Emergency Relief Program authorized last year as part of Moving Ahead for Progress in the 21^st Century Act (MAP-21).  This new program provided a critical framework for addressing the devastation caused by the Hurricane Sandy disaster.  Of the total amount provided to FTA’s Emergency Relief program, up to $4.7 billion may be used for mitigation activities that would strengthen the damaged infrastructure to withstand similar events in the future.  In order to ensure proper management of these funds, $5.7 million of the total provided is to be transferred to the Office of the Inspector General for oversight activities.  FHWA’s Emergency Relief Fund received $1.9 billion from the Disaster Relief Act.  $612 million is available for Hurricane Sandy relief and $390 million for other events.  Approximately $919 million is available for future emergency relief needs. 

The Federal Railroad Administration’s (FRA) received $112 million from the Disaster Relief Act in funding to assist Amtrak.  Of the total amount, $30.4 million was provided for repairs related to the consequences of Hurricane Sandy. The remaining $81.7 million was provided to address needed resilience efforts to better protect Amtrak infrastructure from the impacts of future storms. 

The FAA received $28.5 million in Facilities and Equipment funds from the Disaster Relief Act to repair damage to FAA facilities, power systems, and equipment at eighteen locations that include three of the Nation’s top 3 airports – LaGuardia, John F. Kennedy International, and Newark Liberty International.  

Progress to Date

Since Hurricane Sandy, we have allocated almost $7 billion across four DOT-operating administrations and have been coordinating closely with our federal, state, and local partners to speed the restoration of transportation mobility in affected states.

To date, the FHWA has provided $672 million in emergency relief funding to states and for federal lands impacted by the storm.  This includes funding to replace all the docks at Liberty Island destroyed by the storm and allowing the park to reopen in time for Independence Day.  Critical coastal routes such as 15 miles of Ocean Parkway on New York’s Long Island and 12 miles of Route 35 along the coast of New Jersey were heavily damaged.  Ocean Parkway was fully reopened on April 25.  Route 35 in New Jersey opened to traffic in February with temporary lanes and is progressing well with permanent repairs, including features to protect it against future storms.

Thus far, FTA has allocated $5.7 billion to affected transit agencies for Sandy recovery activities and anticipated resilience projects.  None of these rapid, early accomplishments to restore service would have been possible if FTA did not have the proper mechanism in place to facilitate action. The Emergency Relief Program is that mechanism, and I commend the Committee for granting our request in the Moving Ahead for Progress in the 21st Century Act to establish this essential program. When we proposed this program in the President’s FY2012 budget, we envisioned it as an important mechanism for strengthening FTA’s authority, on par with FHWA, to provide timely disaster assistance to transit agencies whose assets are damaged or destroyed. The program has more than proved its purpose in the wake of Hurricane Sandy, and with your support, the FTA’s response stands as a model for federal disaster assistance and a powerful reminder of what our nation can accomplish when we all work together.

FRA provided $30.4 million to Amtrak to repair damage along its heavily-traveled Northeast Corridor, as well as $185 million in resilience funding to the Hudson Yards Right-of-Way Preservation project to help pave the way for two flood-resistant tunnels under the Hudson River, connecting New York and New Jersey. These efforts are significant not only in the recovery, rebuilding, and strengthening of the critical infrastructure of not just New York and New Jersey, but also to the entire Northeast Corridor. However, it is important to note that Amtrak cannot use approximately $81.7 million of funding for Northeast Corridor recovery and resilience due to a requirement that prohibits Amtrak from using any funds for capital and debt service grants for operating expenses, even temporarily. The practical effect of this provision is that Amtrak must forgo the completion of critical mitigation projects in order to fund operations.

The FAA has allocated $28.5 million in emergency relief funding in states impacted by Sandy to repair critical FAA infrastructure, relocate equipment above the flood zone where practical, and take additional steps to protect National Airspace System (NAS) infrastructure from future floods. Additionally, the FAA worked closely with the Port Authority of New York and New Jersey and the Connecticut Department of Transportation to assess the damage and make recommendations for repair of the Engineered Materials Arresting System (EMAS) at John F. Kennedy International Airport, LaGuardia Airport, and Groton-New London Airport. As a result, each airport is currently in the process of replacing or repairing the EMAS beds.  EMAS beds are an important safety system designed to safely stop aircraft from overrunning a runway.

Other Accomplishments

Our Senior Advisor for Accessible Transportation worked closely with FEMA to ensure that timely repairs and upgrades to public transportation and paratransit services were made in order to meet the needs of people with disabilities.

We established a “One-Stop Shop” Information Website during the hurricane response to expedite oversize/overweight vehicle permitting and assist with toll information, waivers, and other transportation related issues. Based on the success of this website, we developed a Department-wide Emergency Preparedness, Response, and Recovery Information Website that can be accessed at www.dot.gov/emergency.  During emergency situations, we will post information related to transportation permits, waivers, and other regulations and authorities that are applicable during an emergency to assist all public and private transportation organizations.  The website contains links to each of our operating administration’s emergency websites and the Emergency Support Function – 1 (Transportation) Partner agencies.  During emergencies, a link to the website will be located on our main webpage (www.dot.gov). 

Coordination with Hurricane Sandy Rebuilding Task Force

As a result of the extreme devastation caused by the storm, President Obama convened a Hurricane Sandy Rebuilding Task Force, composed of the leaders of federal agencies responsible for various aspects of the recovery.  Housing and Urban Development Secretary, Shaun Donovan, chairs the Task Force and we were an active participant.  We worked with the other Task Force agencies to issue the Hurricane Sandy Rebuilding Strategy report in August 2013, laying out key principles for recovery, as well as recommendations for federally supported recovery efforts.  Those recommendations will be incorporated in our forthcoming competitive resilience funding program.

We were proactive in implementing the Federal Flood Risk Reduction Standard adopted by the Task Force for all Sandy-related transportation repairs and resilience projects funded by the supplemental spending bill. FTA has included the standard in its interim final rule for its Emergency Relief Program. The implementation of this standard means that all transportation infrastructure built in the Sandy impacted region will adhere to a higher standard, which accounts for the latest floodplain and sea level rise data. One example of how we are implementing this standard is elevating mechanical equipment so it is not damaged by future flooding.  We have also extended the resilience principles to our efforts responding to and recovering from the Colorado floods. Rebuilding in a resilient manner will be our standard for all future events.

Improving Infrastructure Resilience

Hurricane Sandy and other recent disasters underscore the nation's vulnerability to extreme weather events under current climate conditions. Scientific evidence indicates climate change is already altering the intensity, duration, and timing of extreme meteorological events in some regions of the U.S., including floods, droughts and heat waves, and these effects are expected to intensify over time.

Our first and highest priority for fostering resilience among transit systems is to better protect existing transit facilities and equipment from the impact of the next disaster. Taxpayers should not be asked to pay for the restoration and recovery of public transportation assets a second or third time. And transit riders should not have to put up with the stress, cost, and inconvenience of having the same transit facilities destroyed by one storm after another.

We issued a report just before Hurricane Irene and more than a year before Hurricane Sandy: “Flooded Bus Barns and Buckled Rails: Public Transportation and Climate Change Adaptation.” This report provides professionals with information and analysis relevant to making U.S. public transportation assets and services more resilient to climate change impacts.  The report provides examples of adaptation strategies and discusses how transit agencies might incorporate climate change adaptation into their organizational structures and existing activities, such as asset management systems, planning, and emergency response.

Our first allocation of emergency relief funds provided $2 billion to help protect, repair, reconstruct, and replace public transit equipment and facilities. The second allocation included an additional $3.7 billion in funds to four of the area’s most affected transit agencies, of which $1.3 billion has been allocated for locally prioritized resilience projects.  This funding is primarily targeted to resilience improvements that could be accomplished in tandem with investments to repair infrastructure damaged in the storm, thereby better preparing them to withstand future disasters. We will soon issue a Notice of Funding Availability for capital projects that will reduce risk of damage from future disasters in the region impacted by Hurricane Sandy. This funding will be available on a competitive basis and allocated consistent with all relevant regional and local planning efforts. 

These new competitive resilience grants will be modeled in part on our successful Transportation Investment Generating Economic Recovery (TIGER) program and evaluated based on published criteria. We are taking appropriate elements of the TIGER model and addressing the Infrastructure Resilience Guidelines, and other resilience principles, to develop a specific program for the Sandy-affected region. The overall goal of the new program is to ensure the region’s transportation systems can continue to serve their critical function in the face of future disasters and the impacts of climate change.

The President’s Climate Action Plan describes our efforts to enhance resilience as part of the rebuilding process following Hurricane Sandy and we will continue to build upon these efforts as directed in the November 1, 2013 Executive Order on Preparing the United States for the Impacts of Climate Change. Federal investment in the improved resilience of public transportation systems is intended to reduce the economic and social consequences of future disasters, including both the potential cost of rebuilding after the next storm and the social and economic consequences of suspended or inoperable transit service on the public.  In the New York-New Jersey region, it is particularly important to focus on regional investments that protect the larger transit network—a network that serves more transit passengers than any other region of the country. Absent adequate regional coordination and planning, investments to protect one rail yard against rising waters might only serve to flood a neighboring rail yard that supports services to an even greater number of passengers.  As such, we will be particularly supportive of regional solutions that address the protection of the transit network on the whole.

We have already coordinated funding development and implementation with FEMA, and will continue to do so with the development of our competitive program. The NOFA will provide for consultation with FEMA and other members of the Task Force in the review of project proposals, and we will be working with our state and local partners to implement a full spectrum of mitigation methods to secure roadways and transit systems from extreme weather events in the future, and to explore creative solutions to addressing flood and storm risks in locations vulnerable to repetitive loss, as well as evaluating existing transportation infrastructure for latent defects.

In collaboration with state and local transportation agencies in Connecticut, New Jersey, and New York, we have launched an initiative that will assess the damage from Hurricane Sandy on the region’s transportation systems and help learn how to enhance the region’s resilience to extreme weather in the long term. The initiative will leverage lessons learned from Sandy and other recent storms, as well as future climate projections, to develop feasible, cost-effective strategies to reduce the transportation system’s vulnerability to future extreme weather events. To date, FHWA has established a group of state and local project partners and, in coordination with FTA and FRA, this group is currently working to collect and analyze information on transportation assets damaged by Hurricane Sandy and to identify specific assets for further study.

In summary, significant resources were authorized in the Disaster Relief Act to fund resilient transportation infrastructure investments. Even so, the need for resilience investments exceeds the resources available. As a result, the Federal Government has an interest in the limited resources available being targeted to those projects that offer the greatest possible benefits--disaster resilience prominent among these.

Next Steps

As discussed in his Climate Action Plan and his resulting November 1, 2013 Executive Order on Preparing the United States for the Impacts of Climate Change, President Obama directed federal agencies to identify and remove barriers to making climate-resilient investments; identify and remove counterproductive policies that increase vulnerabilities; and encourage and support smarter, more resilient investments through agency grants, technical assistance, and other programs, in sectors from transportation and water management to conservation and disaster relief.

First, we need to build our transportation systems so that they are more resilient in the face of high winds and storm surges. As the most significant damage was to tunnels, we need to design highway, rail, and subway tunnels so that they are more resistant to flooding, permit safer egress of those that are in the tunnels at the time of the event, and make it easier to rebound and reopen quickly after an event. New York’s Metropolitan Transportation Authority (MTA) had taken some steps, in response to past flooding due to intense rainstorms and Hurricane Irene in 2011, to make subway tunnels more flood-proof. These efforts have included raising station entrances and ventilating grates, improving pumps, and pre-deploying pumps and personnel to speed MTA’s emergency response capability. Unfortunately, these efforts were clearly not enough and we need to do more.

Second, as a next step, we need to provide transportation agencies with better information, new designs, and tools to enhance the resilience of their infrastructure. We are conducting research to help identify vulnerable infrastructure and ways of increasing resistance to damage. For example, throughout 2013, the FHWA is working with 19 state and regional partners and other federal agencies to test approaches for assessing vulnerability of local transportation infrastructure to climate change and extreme weather and how to improve resilience. Additionally, our Turner Fairbank Highway Research Center has a focused research and development program to develop hazard mitigation technologies and methodologies to improve the capability of our highway bridges and structures to resist flooding, storm surges and wind hazards.

We also need to design and plan for more redundancy into our transportation system, to enhance regional resilience so that when one part of the system goes down, other parts can pick up the slack. We could see the importance of this in the reaction to Hurricane Sandy. When the subway tunnels went down, we were able to deploy more transit buses. We enhanced the effectiveness of transit buses by creating more bus-only lanes. We relied more on ferry service, and established dedicated transit bus lines to transport passengers to the ferry terminals.

Third, we need to address these problems in a regional way. Particularly for the New York metropolitan area, which extends across parts of three states, the need for a regional approach is critical. Local agency collaboration occurred only in the aftermath of the storm. The Port Authority of New York and New Jersey, the North Jersey Transportation Planning Authority, and the New York Metropolitan Transportation Council, of course, provide venues for regional planning and coordination. Such regional planning and coordination must address regional concerns so that joint applications for the competitive grant awards can be developed such that an investment in protection and resilience could cross local jurisdictional boundaries. Other coordinating mechanisms, such as the Northeast Corridor (NEC) Commission, the I-95 Corridor Coalition, and the Coalition of Northeastern Governors, provide additional opportunities to coordinate transportation and resilience planning.

One promising effort is our NEC FUTURE program – an effort to define, evaluate, and prioritize future investment alternatives for the Northeast Corridor through the year 2040. This program will develop a Passenger Rail Corridor Investment Plan to guide investments in the Northeast Corridor over the next 30 years. NEC FUTURE gives us the opportunity to develop a more resilient rail network in this corridor that provides redundancy for other passenger modes and grows out of a regional dialogue with states and other stakeholders in the corridor.

Part of that regional effort is the Gateway Project to expand rail capacity from New Jersey into New York Penn Station. This project, which would double passenger rail capacity between Newark and New York and expand capacity at Penn Station by 50 percent, is vital to meeting the future transportation needs of the New York region and to building in the redundancy needed to preserve transportation capacity in the face of events such as Hurricane Sandy. It would involve building a new tunnel under the Hudson River that would be designed to prevent flooding and to permit rapid recovery from emergencies and disruptions. It would also help protect Penn Station and other rail tunnels against future flooding.

An important caution is in order, however. Hurricane season is once again upon us. And, at present, the FTA has only those emergency relief funds that were made available exclusively for Hurricane Sandy. The President’s FY 2013 and 2014 budget requests each sought $25 million to capitalize the Emergency Relief program for disasters throughout the country. To date, Congress has not appropriated those funds. I strongly encourage the Congress to appropriate those funds so, when the next disaster strikes and takes public transportation systems offline, FTA will be in a position to respond immediately.

Conclusion

The bottom line is that we have resources available to identify at-risk infrastructure and fund resilient transportation investments. There is extensive collaboration among federal, state and local agencies to implement strategic resilience investments in tandem with the primary investment goal of providing for the recovery and rebuilding of the Hurricane Sandy region.

These investments will help reduce the need for a future recovery bill. Research has shown that every dollar spent by FEMA on actions to reduce disaster losses saves the nation almost $4 in avoided impacts. We are hoping to realize similar cost savings to the American taxpayer by ensuring that our transportation infrastructure is built to withstand future storms.

We look forward to continued efforts to make meaningful progress with our transportation partners as they propose essential public transportation projects to further expedite recovery from Hurricane Sandy and lay the foundation for a more resilient future. We stand ready to provide the funds appropriated for this purpose as expeditiously as possible, while maintaining stringent oversight of taxpayer dollars. As we prepare the launch of our competitive resilience funding program, we will continue to work with our local, state, and federal partners to ensure that we rebuild Sandy-impacted infrastructure in a resilient manner.

I thank the Subcommittee for inviting me to testify today and would be happy to respond to any questions that you have.

STATEMENT OF

JOHN D. PORCARI
DEPUTY SECRETARY
U.S. DEPARTMENT OF TRANSPORTATION

BEFORE THE

HOUSE COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
SUBCOMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION

Maritime Transportation:  The Role of U.S. Ships and Mariners

May 21, 2013

Chairman Hunter and Ranking Member Garamendi, thank you for the opportunity to present testimony to the Subcommittee regarding the role of the U.S.-flag maritime fleet, the maritime workforce, and shipbuilding to protect the Nation's commercial and defense requirements.  The Department of Transportation (USDOT) has the responsibility for promoting the U.S.-flag fleet including U.S. cargo preference requirements for Federal agencies.  I am John Porcari, Deputy Secretary of Transportation, testifying on behalf of U.S. Transportation Secretary Ray LaHood.

RECENT TRENDS AND CURRENT CHALLENGES FOR THE U.S. MERCHANT MARINE

To understand the role of ships and mariners, it is necessary to understand U.S. maritime policy in its two primary dimensions, coastwise or cabotage trade and international trade.  Since the enactment of U.S. cabotage law in 1817, our national policy for coastwise commerce is to reserve this trade for U.S. ships and U.S. mariners.  Contemporary cabotage policy continues under the Merchant Marine Act of 1920, commonly referred to as the Jones Act, with coastwise trade also referred to as Jones Act trade.  The Jones Act was designed to encourage development of a national flag fleet and to protect that fleet from anti-competitive practices by foreign carriers.  The national policy for international maritime commerce was set forth in the Merchant Marine Act of 1936 which included the premise that a substantial portion of our foreign trade should be carried on U.S. ships.  Intersecting all of this is our national security policy which stipulates that our domestic merchant marine, both ships and mariners, shall serve as a naval auxiliary in times of war or national emergency.

There are many complex factors that influence current conditions and the long-term outlook in the domestic oceangoing trades of large self-propelled vessels, with some factors for Jones Act ships indicating that the industry is trending toward a growth phase in the oceangoing segment.  Self-propelled oceangoing vessels of 1,000 gross tons or more each in the Jones Act trades experienced a net decrease of 15 vessels since the beginning of 2010, with 91 vessels currently operating, primarily because of the retirement of older tankers as a result of the Oil Pollution Act of 1990.  At the same time, there has been an offsetting increase in large oceangoing tank barges, most in the form of articulated tug-barges (ATBs) that function in much the same way as self-propelled oceangoing vessels but with smaller crews and slower speeds.  Importantly, the recent surge in domestic crude oil production has increased demand for new domestic self-propelled tanker vessels.  One recent industry projection foresees roughly 10 to 14 new oceangoing tankers entering the fleet by 2018, and demand for even more vessels.  Recent announcements of new containership orders to work in the Jones Act trades are also encouraging signals for industry growth.  These containerships would be powered by U.S.-produced liquefied natural gas (LNG) and would be among the most environmentally friendly form of freight transportation on earth.  Of course, the numbers above do not include the many thousands of other smaller vessels, such as tugs, smaller barges, service boats, and others described below that are part of the inland and coastal waterway trades.

Jones Act commerce also encompasses the Great Lakes and inland waterways.  A recent MARAD study on the Great Lakes dry bulk fleet indicates that the fleet has weathered the recession and is generally healthy, although the drop in coal cargoes transported on the Lakes due to inexpensive natural gas and other factors is a concern to the industry.

The Bureau of Labor Statistics reports that the number of mariners involved in coastal and inland transportation has been holding constant or increasing slightly during the last several years, reaching almost 37,000 as of 2012.  A smaller pool of approximately 15,000 actively sailing mariners who hold the necessary U.S. Coast Guard (USCG) credential and international endorsement to sail in the commercial oceangoing U.S.-flag shipping industry is the primary source of mariners to crew the sealift ships that our Nation relies on in times of war, national emergencies, natural disasters, and other contingencies. 

The sufficiency of this mariner pool to support a large-scale activation of the DOD and USDOT sealift fleet depends upon the health and size of the commercial U.S.-flag oceangoing merchant fleet.  A fleet that is sufficiently sized will result in a critical mass of merchant mariners with the necessary credentials to meet the crewing requirements of both the commercial and sealift fleets during national emergencies.  As of today, the mariner pool is adequate for both of these sealift needs.  However, we are concerned that, the costs of operating under U.S. registry may result in continued reductions in the oceangoing commercial fleet.  MARAD is working closely with DOD and industry to support the U.S.-flag fleet and to facilitate the retention of these mariners including the establishment of a working group to develop a national sealift strategy that ensures the long term viability of the U.S. Merchant Marine as a naval auxiliary and as a U.S. presence in international trade.

Over 97% of our foreign trade is carried on foreign-flag vessels, particularly the growing number of larger containerships that are being widely deployed on the world’s oceans.  These large vessels, which exceed 5,000 twenty-foot equivalent unit (TEU) containers are already arriving at U.S. West Coast and East Coast ports.  As the expansion of the Panama Canal nears completion, some East Coast and some Gulf Coast ports are investing in the necessary infrastructure to compete for a share of this market.  The major West Coast ports already have channel depths and pier-side cranes that can service these vessels, as do two East Coast ports, and other major East Coast and Gulf Coast ports will be prepared for vessel calls by post-Panamax ships by the time the expanded Panama Canal is fully operational.  The American Association of Port Authorities reports that U.S. seaport agencies and their private-sector partners plan to invest a combined $46 billion over the next five years in capital improvements to their marine operations and other port properties.  MAP-21 directs USDOT to establish a national freight planning process that will, among other objectives, identify needs for improved intermodal connections between ports and the surface transportation system.

Not long ago there was a concern that two major U.S. commercial shipyards would be laying off employees, but the new construction projects are creating the prospects of much stronger employment in the future, replacing some of the void left from a reduction in U.S. Navy shipbuilding contracts.  Gulf Coast shipyards are now very busy building offshore platform supply vessels to support the oil and gas industry.  It is important to note that the U.S. shipyard industry is benefitting greatly from the Jones Act, which requires ships in the domestic trades to be built in U.S. shipyards.  Commercial orders filled by these yards also benefit the U.S. Navy as a result of increased shipyard efficiency associated with greater shipyard utilization and commercial production methods.  Smaller shipyards are also benefiting from investments made under the Small Shipyard Grant Program, enabling them to produce or service vessels more efficiently.

USDOT/MARAD ROLE IN SUSTAINING THE VIABILITY OF THE INDUSTRY

USDOT and MARAD have been working on many initiatives to provide support to the marine transportation system.  The initiatives include support to our foreign and domestic trading fleets, innovations in support to U.S. ports, assistance to shipyards, and strengthening of our nation’s ability to train new mariners.  Even so, we acknowledge that much of the progress and innovation in the U.S. maritime sector is driven by commercial companies and port authorities that handle the day-to-day investment in and operation of the marine transportation system.

International Trade:  Ensuring U.S. Maritime Capabilities to Meet National Security and Economic Needs

MARAD administers the Maritime Security Program (MSP), a fleet of 60 active, commercially viable, militarily useful, privately-owned vessels available to meet national defense and other security requirements.  On January 2, 2013, President Obama signed the Fiscal Year (FY) 2013 National Defense Authorization Act (NDAA) that authorizes the Secretary of Transportation to extend existing MSP operating agreements through September 30, 2025.  The current annual stipend payment per ship of $3.1 million was extended through FY 2018, increasing to $3.5 million in FY 2019-FY 2021 and $3.7 million in FY 2022-FY 2025.  

During the coming months, MARAD intends to make promulgating cargo preference related regulations a priority, but the timeframe to accomplish this is uncertain. These regulations will serve as implementing regulations, encompassing recent changes in the cargo preference program, including those enacted by MAP-21.   The regulations will also aim to eliminate ambiguity in current procedures and compliance requirements.

With regard to sealift, MARAD has made significant progress in improving the readiness and efficiency of the government-owned sealift fleet over the last several years.  In particular, it has restored the readiness of eight Fast Sealift Ships and brought these ships into the MARAD Ready Reserve Force (RRF) fleet, saving the government roughly $20 million per year in readiness costs.  MARAD has also identified efficiencies capable of producing an additional savings in federal vessel management and is working with the U.S. Navy on implementation.  MARAD demonstrated the national and homeland security values of this fleet through the quick-response activation and use of RRF and National Defense Reserve Fleet (NDRF) vessels during the relief effort for the earthquake in Haiti and during the response to Superstorm Sandy.

The President’s FY14 Budget proposes restructuring the P.L. 480 Title II food aid program to allow local and regional procurement of food and to improve the ability of U.S. food aid to reach emergency needs quickly and with less adverse impacts on markets and farmers in countries receiving the food aid.  Under the President’s proposal, 55 percent of Title II food aid funds would still be spent in the United States in FY 2014 and of that, 50 percent of the cargoes would move on U.S.-flag vessels.  DOD has stated that its initial assessment is that changes to the Food Aid Program will not impact the maritime industry’s ability to crew the surge fleet and deploy forces and cargo.  Furthermore, to mitigate any impact on vessels and mariners, the Administration is proposing a $25 million targeted operating subsidy for military-useful vessels.  Preliminary planning for this funding envisions a three-pronged approach whereby some of the funding would provide a stipend for militarily useful vessels not enrolled in the MSP, other sums would be used to reimburse eligible costs for mariners to retain and or renew active U.S. Coast Guard issued merchant mariner credentials, and some funds would provide apprentice training for key merchant mariner skills.  MARAD will work with stakeholders and our Federal partners on how best to use this funding to minimize any impact.

Domestic Trade:  Furthering U.S. Shipbuilding and Jones Act Trade

MARAD strongly supports and will continue to support compliance with the Jones Act.  In some cases, emergencies, national defense, or other circumstances may require limited waivers to U.S. carriage requirements of some cargoes, such as during the recent response to Superstorm Sandy.  Even in these situations, however, the use of Jones Act-eligible vessels must be maximized.  Accordingly, MARAD has developed an improved Jones Act Waiver Process to achieve greater transparency and U.S. stakeholder participation during times of emergency or national defense needs.  With regard to releases of oil from the Strategic Petroleum Reserve (SPR), MARAD has established precedent to avoid automatic large-scale blanket waivers of Jones Act requirements.  In a first for any Administration, MARAD specifically arranged for U.S.-flag participation in the SPR release of September 2011. 

MARAD has also obtained agreement with the Department of Energy to ensure U.S.-flag tank vessels and barges will have an opportunity for greater participation in any future drawdown.  In the past year, Congress has passed two pieces of legislation with the goal of improving communication and transparency in the Jones Act waiver and SPR crude oil transportation process.  In order to meet these new requirements, USDOT and MARAD have made preparations for better information sharing with industry and have developed a plan to reach out to industry leaders on Jones Act tank vessel availability whenever a drawdown of the SPR is imminent.  During the Superstorm Sandy fuel shortages, MARAD implemented innovative reporting requirements to provide transparency of Jones Act waiver utilization. [1]

USDOT and MARAD have undertaken numerous initiatives to help support the U.S. domestic maritime trades.  One source of support to the U.S. shipyard industry and U.S.-flag carriers is the Maritime Guaranteed Loan Program, widely referred to as the Title XI program.  MARAD is authorized to guarantee up to 87.5 percent of the obligations on private sector debt financing for ships constructed, reconstructed, or reconditioned in the United States.  Over the last four years, Title XI has enabled more than $650 million in new investments in U.S. shipbuilding.

The Title XI program has never had to disapprove a creditworthy application due to a lack funding.  There is currently enough budget authority to guarantee approximately $420 million worth of shipbuilding projects while the Title XI program currently has applications pending for over $500 million in loan guarantees.  However, no determination on the creditworthiness of the pending applications has been completed.  MARAD recognizes the need to expedite responses to Title XI applications.  As a result, reform actions are being implemented including reevaluating application timing procedures and issuing guidance to improve the efficiency of the process. 

The Small Shipyard Grant Program, established under the FY 2006 NDAA, supports capital improvements to qualified shipyards.  Since 2009, USDOT has provided more than $149 million for more than 120 projects to help modernize U.S. shipyards located in 28 states and Guam.  These grants have been helpful to shipyards in obtaining new contracts, including contracts to export vessels, and have contributed to the U.S. being a net exporter of commercially built vessels six out of the last 10 years, with a surplus of nearly $410 million.

MARAD has made major progress in establishing the America’s Marine Highway Program, which, over the long run, offers an important new market for Jones Act vessels.  Under this program, MARAD supports and promotes the movement of freight in containers and trailers between domestic U.S. ports, helping to relieve congestion on the Nation’s highways and railroads.  Over the last four years, MARAD established the formal program by issuing a final rule, designated 18 Marine Highway Corridors, issued a report to Congress on the status and outlook of the America’s Marine Highway Program, invested $129.7 million in 16 projects supporting Marine Highway objectives (largely through Transportation Investment Generating Economic Recovery (TIGER) grants), created concept designs for a potential new marine highway vessel, and undertook three market analyses of potential marine highway services.  MARAD is currently in the process of coordinating the designation of additional Marine Highway Corridors, which will facilitate the ability of companies to establish services and to qualify for project grants.  TIGER funds were appropriated and were in the FY 2014 budget.

First Time Funding for Ports

USDOT and MARAD have supported port investment through the award of TIGER grants to port authorities.  Of those, 10 (totaling $122 million) were for Marine Highway projects and 15 (totaling $226.6 million) were awarded to improve and modernize ports and rail infrastructure serving ports, expand commerce, create jobs, and increase exports.  These Federal funds were the first ever competitively awarded by USDOT for port infrastructure.  MARAD also sponsored two National Port Summits that brought together the Nation's port directors for policy discussion with the Secretary of Transportation regarding the integration of waterborne transportation into the Nation’s overall transportation system.

Merchant Marine Academy Improvements:

The U.S. Merchant Marine Academy (USMMA) at Kings Point, NY is a national asset and a top priority for USDOT and MARAD.  The mission of the Academy is to educate and graduate licensed merchant mariners and leaders who will serve America’s marine transportation and defense needs in peace and war.  Along with the six State maritime academies, Kings Point plays a central role in preparing the Nation’s licensed maritime workforce.

Strengthening Capabilities to Assist Industry with Maritime Operational Issues

MARAD has been providing important assistance to the maritime industry on issues that will reduce the cost of operating under the U.S.-flag.  To do so, it has developed a comprehensive strategy for environmental, safety, and security initiatives.

The Act to Prevent Pollution from Ships implements the provisions of the International Convention for the Prevention of Pollution from Ships (known as MARPOL), including the annexes to MARPOL to which the U.S. is a party.  MARPOL provisions address pollution from ships in the course of their normal operations, including in respect to oil, noxious liquid substances, garbage, and air emissions.  Compliance with these provisions can impose significant costs on vessel owners.  MARAD is working to assist U.S. vessel owners in their efforts to comply with these requirements.  In concert with other federal, state and industry stakeholders, it is also assisting in the development of improved shipboard air pollution control technology, investigating the use of pier-side fuel cells to enable vessel cold ironing while in port, and exploring the possible use of renewable fuels, such as biofuel, in commercial vessels.  In other work relevant to protecting the marine environment, MARAD has advanced a ballast water testing initiative and funded the first U.S. Coast Guard-certified lab for ballast water testing.   

Organizational Outreach

MARAD will continue to push for improvements in its support to industry and the public through a variety of initiatives pertaining to organizational excellence.  In FY 2010, MARAD, in collaboration with USDOT, re-established the Marine Transportation System National Advisory Council (MTSNAC) to advise the Secretary of Transportation on MTS issues, paying specific attention to the expansion and development of the Nation’s marine highway and port system through its marine highway subcommittee and the Secretary’s Port Advisory Council.

Thank you for the opportunity to discuss the role of U.S. ships and mariners in meeting our Nation’s commercial and defense needs. I am happy to respond to any questions you have.

STATEMENT OF

VICTOR M. MENDEZ
ADMINISTRATOR,
FEDERAL HIGHWAY ADMINISTRATION

BEFORE THE

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
SUBCOMMITTEE ON HIGHWAYS AND TRANSIT
UNITED STATES HOUSE OF REPRESENTATIVES

Implementing MAP-21:  Progress Report from U.S. DOT Modal Administrators

MARCH 14, 2013

Chairman Petri, Ranking Member DeFazio, Members of the Subcommittee, thank you for the invitation to appear before you today to discuss the Federal Highway Administration’s (FHWA’s) progress in implementing the Moving Ahead for Progress in the 21^st Century Act (MAP-21).  Immediately after President Obama signed MAP-21 in July last year, FHWA moved quickly to effectively carry out its provisions, and I am pleased to highlight our extensive efforts to date on behalf of the American people.

Transportation moves our economy, and the bipartisan support for MAP-21 is a recognition of the national priority to keep America’s transportation network operating safely and reliably.  Since it took effect, MAP-21 has given States and localities the certainty they need to move forward with projects that employ people and strengthen our transportation system.  It sustains our Highway Trust Fund (HTF) and provides State and local communities with a two-year horizon of funding for the roads, bridges, tunnels, and transit our economy needs to stay competitive.  That means contractors and construction companies are able to plan for big projects and make the kind of employment decisions that will put hard-working Americans back on the job.

MAP-21 builds on the Department of Transportation’s (DOT's) efforts to improve safety across all forms of transportation and offer people safe transportation choices.  MAP-21 supports DOT's efforts to shorten project delivery times while protecting the environment.  MAP-21 also includes provisions reflecting the importance of freight movement to our economy, streamlines and transforms the Federal-aid program into a performance-based program to better target investment and increase transparency and accountability, and contains a major expansion of the TIFIA program. 

As we continue to implement MAP-21’s critical provisions and improve our infrastructure, the President wants to build upon this momentum.  In his State of the Union address last month, the President called for $50 billion in increased transportation infrastructure investment to spur economic growth.  The President proposed a “Fix-It-First” Program that would direct $40 billion toward reducing the backlog of deferred maintenance on highways, bridges, transit systems, and airports nationwide and put U.S. workers on the job, along with $10 billion for innovative transportation investments.  President Obama also proposed a Partnership to Rebuild America to attract private capital to upgrade what our businesses need most—efficient roads, rails, mass transit systems, waterways, and ports to move people and goods; and safe and modern energy and telecommunications systems.

FHWA MAP-21 IMPLEMENTATION PROGRESS

Under MAP-21, Congress provided for an investment of $40.4 billion for Fiscal Year (FY) 2013 and $41.0 billion for FY 2014 for critical highway infrastructure programs.  MAP-21 streamlined and consolidated many of FHWA’s programs and made a number of other reforms to existing programs and provisions that required our immediate action to ensure that Federal, State, local, and tribal transportation partners were ready when the Act became effective on October 1.  Through our aggressive outreach to partners, development of guidance and rulemakings, and establishment of financial management procedures, FHWA has met and exceeded Congress’ challenge.  As a result, MAP-21 is having its intended effect nationwide.

Conducting Outreach to Partners and Stakeholders

Very shortly after enactment of MAP-21, FHWA established a MAP-21 website to help link FHWA employees, stakeholders, and the public to the new Act and provide related resources as they became available.  Prior to October 1, FHWA developed and delivered 26 informational webinars for FHWA staff, State Departments of Transportation (State DOTs), Metropolitan Planning Organizations (MPOs), local governments, and other stakeholders.  FHWA estimates that approximately 10,000 individuals participated in these webinars, which does not include the many others who subsequently have viewed webinar recordings on FHWA’s MAP-21 website.  These webinars focused on a wide array of topics covering all of FHWA’s programs, including safety, project delivery, freight, performance management, planning, environment, innovative finance, transportation alternatives, tribal transportation, and research.

In addition to webinars, we conducted extensive outreach with stakeholders by hosting numerous listening sessions and roundtables.  For example, in the freight area, the Department held a National Online Dialogue in September 2012 and a “Talking Freight” webinar in November 2012 attended by more than 300 people.  DOT is continuing to hold freight-related roundtables with stakeholders across the country regarding MAP-21 deliverables, including freight performance measures and the National Freight Strategic Plan.

With respect to performance management, last summer, FHWA held a series of webinars, listening sessions, and meetings with stakeholders.  In September 2012, we held a National Online Dialogue with more than 8,000 visitors, who contributed 228 ideas for our consideration.  In addition, we have held targeted sessions on traffic congestion and National Highway System (NHS) performance with attendance of nearly 1,000 stakeholders, and we recently held a focused listening session with States, MPOs, and transit agencies on target setting where we connected 16 locations around the country using video and web conferencing technologies.  This type of outreach is critical as we implement the MAP-21 provisions that, collectively, will transform many elements of our programs to focus on the achievement of performance outcomes. 

Issuing Guidance and Rulemakings

The timely development and issuance of guidance and rulemakings is a central component to FHWA’s implementation efforts.  In order to ensure implementation could begin on October 1, we developed and posted on the MAP-21 website guidance documents and other information, including a bill summary, fact sheets, funding tables, and questions and answers (Q&As) on a wide range of program and policy changes.  FHWA continues to issue guidance and other information to help the Nation’s Federal, State, local, and tribal transportation agencies implement MAP-21 programs and provisions and to highlight opportunities available under the new law.

We also took swift action to implement MAP-21 provisions requiring regulatory changes.   Many of these requirements provide important changes in the areas of improving safety, accelerating project delivery, achieving performance outcomes, and rebuilding infrastructure.  I am pleased to report that FHWA is on track to meet or surpass statutory deadlines for nearly all of the required rulemakings under MAP-21.  We have already met statutory deadlines for two final rules and two proposed rules and are actively working on the remainder.  For example, jointly with the Federal Transit Administration, FHWA completed a final rule well ahead of the statutory deadline implementing the exclusion from requirements under the National Environmental Policy Act to prepare an environmental impact statement or environmental assessment for actions following declarations of emergency.  FHWA and FTA also published a notice of proposed rulemaking for new categorical exclusions related to actions within the operational right-of-way and for projects with limited Federal financial assistance.

In the area of performance management, FHWA is using a comprehensive approach to develop rulemakings that will help States and MPOs make data-driven decisions and efficient use of limited resources.  We are planning to publish proposed rules in three phases to establish performance measures:  (1) safety; (2) infrastructure; and (3) freight, traffic congestion, and air quality.  FHWA is also planning to issue program-related rulemakings that have performance components in a timeframe coinciding with the three phases.  This approach will provide a comprehensive overall approach to implementation of the MAP-21 performance requirements.

Providing Needed Resources

Mindful of the need to give States ample time to plan for projects under the newly structured Federal-aid highway apportioned programs, FHWA moved promptly upon MAP-21’s passage to provide States needed funding information.  Less than two weeks after passage, FHWA issued an Advance Notice of Federal-aid Highway Funds to be Apportioned for FY 2013, which provided States anticipated amounts of funds to be apportioned under MAP-21 in FY 2013.  FHWA also provided funding tables for our MAP-21 website as well as guidance and Q&As on a number of related topics, including the apportionment structure and the program codes necessary to obligate funding.

On October 1, 2012, as required by law, FHWA issued a Notice of Apportionment of Federal-aid Highway Program Funds for FY 2013, which apportioned approximately $37.5 billion to the States under the new MAP-21 structure.  Two days later, FHWA issued the Notice of Distribution of Federal-aid Highway Program Obligation Limitation for FY 2013, which provided approximately $19.1 billion in obligation limitation, the maximum available under the Continuing Resolution.  FHWA’s actions allowed the States to prepare, plan, and begin obligating the MAP-21 apportionments immediately upon the Act taking effect.

In addition to our efforts related to Federal-aid highway apportioned programs under MAP-21, we have moved quickly to make Emergency Relief funds available to States to help repair the damage to highways and bridges caused by Hurricane Sandy and other disasters.  To date, we have made $548 million available to States affected by Hurricane Sandy alone.  Additionally, we have issued implementing guidance and conducted outreach to help States utilize additional authorities provided under MAP-21, including the delivery of needed supplies to areas affected by disasters.

KEY PROGRAMS AND PROVISIONS

MAP-21 makes great progress in improving safety, rebuilding highways and bridges, expanding the TIFIA credit program, focusing on freight policy, accelerating project delivery, ensuring better transportation planning, and moving us toward a more performance-driven system.

Program Features

MAP-21 consolidated a complex array of programs into a smaller number of broader programs, with the eligibilities generally continuing under such programs.  This new program structure is helping to provide our grantees with flexibility to deliver projects more efficiently. 

MAP-21 ensures we are investing in the Nation’s most important highways.   The NHS constitutes only 5 percent of our Nation’s 4 million miles of public roads, but it is the network that ties together major points of population and commerce, supporting our economy.  The NHS carries more than 55 percent of all highway travel and a significant amount of truck-borne freight.  Recognizing the vital service that the NHS provides, MAP-21 authorized the National Highway Performance Program (NHPP), devoting 58 percent of the apportioned highway funds to the improvement of this critical network.  The NHPP provides support for the condition and performance of the NHS, for the construction of new facilities on the NHS, and to ensure that investments of Federal-aid funds in highway construction are directed to support progress toward the achievement of performance targets set by a State using an asset management planning process for the NHS.

The Surface Transportation Program (STP) provides funding that may be used by States and localities for projects to preserve and improve the conditions and performance on any Federal-aid highway, bridge and tunnel projects on any public road, pedestrian and bicycle infrastructure, and transit capital projects, including intercity bus terminals.  The STP directs funding to maintain and improve Federal-aid highways and bridges on public roads in urban and rural areas, while giving States flexibility to make transportation decisions.

At DOT, where safety is our number one priority, we were excited to see a transportation plan that builds on our aggressive safety efforts, including doubling funding for FHWA’s successful Highway Safety Improvement Program (HSIP).  With broad eligibilities to achieve a significant reduction in fatalities and serious injuries on all public roads, an increased focus on performance, and new data system and improvement provisions, States have an opportunity to make strategic, data-driven investments that will continue to provide safety benefits long after HSIP funds are expended.  FHWA works closely with the National Highway Traffic Safety Administration and the Federal Motor Carrier Safety Administration to coordinate our respective efforts to improve safety on a system that is common to all three agencies.  

FHWA programs are also helping to improve the environment and provide safe transportation choices.  The Congestion Mitigation and Air Quality Improvement Program provides funding to State and local governments for transportation projects and programs to help meet the requirements of the Clean Air Act.  The new Transportation Alternatives Program provides for a variety of alternative transportation projects previously eligible under separately funded programs, including projects for recreational trails and safe routes to school.

MAP-21 included programs designed to improve transportation to and within Federal and tribal lands.  The Tribal Transportation Program provides funding for transportation facilities that are located on or provide access to Indian Country.  In many cases, these facilities provide tribal members with access to basic community services such as health care or educational centers.  The Federal Lands Transportation Program provides funding for Federal land transportation facilities that provide access to the most popular recreational destination points within the Federal estate.  The Federal Lands Access Program provides funds for facilities that are owned by State and local agencies and are located on, or provide access to, Federal lands, with preference given to facilities that provide access to high-use Federal recreation sites or Federal economic generators.

In addition to these programs, MAP-21 enhanced flexibility to conduct innovative highway-related research, development, deployment, and training activities to address current and emerging needs facing our Nation’s transportation system.  At our Turner-Fairbank Highway Research Center Facility, we are providing the highway community with advanced and applied research and development related to new and existing highway technologies.  The center reviews, tests, studies, researches, and finds solutions to complex technical problems through the development of more economical, environmentally sensitive designs; more efficient, quality controlled construction, operational, and safety practices; and more durable materials. These efforts result in a safer, longer-lasting, and more reliable highway transportation system.

MAP-21 also reauthorized important programs designed to foster the training and development of surface transportation-related workforces and to support disadvantaged business enterprises.  FHWA continues to work collaboratively with our State partners to ensure that small businesses owned and controlled by socially and economically disadvantaged individuals are provided fair opportunities to compete for highway construction contracts.  FHWA also supports State DOT and local agency workforce development through our National Highway Institute and Local Technical Assistance Program.

Accelerating Project Delivery

Three years ago, I launched the “Every Day Counts” innovation initiative to present new technologies, new ideas and new ways of thinking about shortening project delivery time and expediting the deployment of new and proven technologies into the marketplace.  I am pleased that the accelerating project delivery provisions in MAP-21 complement the successes of our initiative by providing an array of provisions designed to further increase innovation and improve efficiency, effectiveness, and accountability in the planning, design, engineering, construction and financing of transportation projects.  These provisions will move projects from concept to completion more efficiently to yield broad benefits nationwide, saving time and money, and allowing the public to enjoy the benefits of upgraded infrastructure more quickly. 

Immediately after passage of MAP-21, we began working aggressively to implement these provisions by conducting outreach sessions with stakeholders, issuing guidance, and working collaboratively with other Federal agencies.  In order to meet the aggressive statutory deadlines and challenges presented by these provisions, we worked extensively with the Transportation Rapid Response Team, composed of representatives from more than 10 Federal agencies and components of the Executive Office of the President, to facilitate the interagency coordination needed to advance rulemaking and guidance documents in accordance with statutory deadlines and to identify and resolve concerns from agency partners.  This collaborative effort enabled us to publish two rulemakings ahead of the statutory deadline and issue guidance in a timely manner.  Additionally, States such as Illinois, for example, have already utilized our guidance to apply the provision that allows for the consolidation of a final Environmental Impact Statement and Record of Decision in order to expedite the environmental review process.

In addition to our rulemaking and guidance efforts, we also recently concluded a survey of stakeholders to meet the statutory mandate to consider additional categorical exclusions that could be created to help sponsors advance their transportation priorities without unnecessary delays.  We are currently assessing the survey results.  Going forward, we will continue to engage in a number of activities to implement important provisions and technologies to further improve the efficiency of infrastructure project delivery.

Freight

At DOT, we have taken the lead on improving our Nation’s freight movement because we know that in order to compete in a global economy, we need to move quickly and efficiently more than 48 million tons of goods each day, worth nearly 46 billion dollars.  MAP-21 provided DOT with unprecedented opportunities to improve freight movement throughout our Nation.  MAP-21 establishes a national freight policy, requires the Secretary to establish a National Freight Network (NFN), calls for the creation of a National Freight Strategic Plan, and directs the Secretary to encourage States to develop comprehensive State Freight Plans that include both immediate and long-range freight planning activities and investments.

Last summer, Secretary LaHood announced the creation of our Freight Policy Council.  The Council, chaired by Deputy Secretary Porcari, brings together senior leadership, including modal administrators as well as policy, budget, economic, and research experts, to oversee the implementation of MAP-21’s freight provisions, including development of the National Freight Strategic Plan.  Secretary LaHood also announced the creation of the National Freight Advisory Committee to engage both the public and private sector as we implement MAP-21 provisions, including the development of the National Freight Strategic Plan, and we want representatives from across the transportation spectrum to help us improve the way we move freight.  The Department is accepting nominations for committee members until March 21.

Designating the NFN will help us better focus attention on the highways that are most critical to the movement of goods.  The NFN will include three components:  the Primary Freight Network (PFN) designated by the Secretary, portions of the Interstate System that are not designated as part of the PFN, and critical rural freight corridors.  The Secretary will designate up to 27,000 miles of the Nation’s most critical existing Interstates and other roads as part of the PFN and will consider adding as many as 3,000 miles of existing and planned roadways necessary for the efficient movement of goods in the future.  In February 2012, FHWA issued a notice regarding the process for designation of the NFN to assist States in strategically directing resources toward improved system performance for the efficient movement of freight.  We have established a multi-modal technical advisory team with representatives from DOT and the U.S. Army Corps of Engineers to undertake preliminary analysis for the PFN.  This Spring, FHWA will release a draft PFN map for review and comment.  We are also developing guidance and technical assistance for critical rural freight corridors and will request submission of such corridors from States this Fall.

The Department issued interim guidance and requested comments in the Fall of 2012 on State Freight Plans, and we expect to publish final guidance this Spring.  FHWA is actively working through our Division Offices in each State to encourage States to develop freight plans and establish freight advisory committees.  We have asked the American Association of State Highway and Transportation Officials to let States know that we are eager to receive and review their freight plans and that we are available to serve as a technical resource.  On March 18, we will conduct a webinar with State DOTs on developing State Freight Plans.

TIFIA

To support infrastructure efforts and job creation, MAP-21 offered a significant boost to our TIFIA program.  MAP-21 transforms TIFIA into the largest transportation infrastructure loan program in history, providing communities across America yet another great resource to help them invest in major transportation projects and create jobs in the process.  The $1.75 billion Congress has made available for TIFIA, assuming the same general subsidy level as for the present portfolio, can lead to $17 billion in loans for needed transportation projects around the country.  And those loans can then lead to billions more in private sector and other investments.

That is a very effective multiplier, and there is no shortage of good projects that can use the needed resources TIFIA provides.  In the past, TIFIA has supported signature projects like the Presidio Parkway Project in California, which is replacing the structurally and seismically deficient access road to the Golden Gate Bridge and will connect San Francisco and Marin Counties with a safe and modern roadway.  

Shortly after enactment of MAP-21, on July 31, DOT published a notice inviting project sponsors to submit letters of interest (LOIs) for TIFIA credit assistance.  The Notice also outlined important process changes that we have implemented within the Department to review LOIs on a rolling, first-come, first-served basis.  To date, we have received 29 LOIs from project sponsors requesting credit support under the MAP-21 authority.  DOT has engaged with all of the project sponsors and is prepared to move expeditiously in advancing eligible projects.    

To help the transportation community better understand the new TIFIA process, we have conducted several broad-based webinars and on-site workshops.  We posted updated Q&As on the TIFIA and MAP-21 websites, focusing largely on changes in the application process. DOT also is developing an updated TIFIA Program Guide and updated standard Loan Agreement Template. 

Performance Management

The cornerstone of MAP-21’s Federal highway program transformation is the transition to a performance and outcome-based program, which will provide a means to more efficient investment of Federal transportation funds by focusing on national transportation goals, increasing the accountability and transparency of the Federal highway programs, and helping States and MPOs make targeted investments through performance-based planning and programming. 

Over the past several years, FHWA has taken a number of proactive steps to prepare the Agency to move toward a more performance-based Federal highway program.  Beginning in 2009, we formed a Performance Management Transition Team to recommend how FHWA could be better prepared to carry out the Federal role of performance management in the Federal highway program.  In 2011, we created a new Office of Transportation Performance Management within FHWA to lead, guide, coordinate, and develop the cross-cutting aspects of a performance-related highway program.  Taking these steps has enhanced our ability to lead the move toward a more performance-based Federal highway program immediately upon the passage of MAP-21.

In addition to our continued outreach and rulemaking efforts highlighted above, last month, FHWA created a Transportation Performance Management website that serves as a complementary resource to the FHWA MAP-21 website.  This new site provides a common place for our partners and stakeholders to share and find resources and information on transportation performance management.  For example, the website includes information on the implementation schedule for performance provisions under MAP-21, noteworthy practices from States and local governments, a library of resources including presentations and other tools from FHWA and our partners, and news and events hosted by both FHWA and our partners related to transportation performance management.  This site will be a key tool for engaging with our partners and stakeholders.  In addition, as the site grows, it will become a forum for collaboration, ensuring that our stakeholders have a place to work with one another and dialogue with FHWA on advancing the state of practice for transportation performance management.

CONCLUSION

Thank you again for the invitation to appear before you today to highlight our achievements in implementing MAP-21.  We look forward to working with you as we make continued progress toward full and effective implementation of these critical and important programs and provisions.

STATEMENT OF

DAVID T. MATSUDA
MARITIME ADMINISTRATOR
MARITIME ADMINISTRATION

BEFORE THE

HOUSE COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
SUBCOMMITTEE ON COAST GUARD AND MARITIME TRANSPORTATION

The Maritime Administration’s
Fiscal Year 2014 Budget Request

April 16, 2013

Good afternoon Chairman Hunter, Ranking Member Garamendi, and Members of the Subcommittee.  Thank you for the opportunity to discuss the President’s Fiscal Year (FY) 2014 budget priorities and initiatives for the Maritime Administration (MARAD).  I am pleased to appear before you to highlight how the President’s budget request will support maritime transportation and its contributions to the U.S. economy, national security and resiliency, and environmental sustainability.

MARAD’s mission is to foster a merchant marine that meets both the economic and security needs of the Nation.  The scope of our mission includes port and intermodal infrastructure, capable vessels and shipbuilding facilities, national policies which encourage a sustained investment in U.S. shipping, and of course, maritime education, training, and other support for the skilled men and women who have developed maritime careers in this vital industry.

We accomplish this primarily through a mix of Federal readiness programs, some of which sustain government-owned reserve sealift ships crewed by civilian mariners and some which provide operating stipends to commercial maritime companies.  Each of these programs help to ensure that the transportation services our Nation requires at a moment’s notice will be available to us when needed.  Late last year, a major milestone was reached when the President signed into law legislation requested by the Administration effectively extending the Maritime Security Program (MSP) from 2015 to 2025.  This law helps provide long-term stability to ensure a militarily-useful U.S. flag fleet and provides increasing stipend levels over the next 10 years.  I thank the Subcommittee for supporting the passage of this legislation.

FY 2014 BUDGET REQUEST

The President’s FY 2014 budget request for MARAD is $365 million, which will support the agency’s coordinated program of activities and initiatives advancing Departmental and national maritime transportation objectives.  The budget request highlights new initiatives for port infrastructure development and a mariner retention incentive program. 

KEY PRIORITIES

The U.S Merchant Marine Academy (USMMA) continues to be an area of focus for the agency and is a top priority for the Department.  Raising the profile and prestige of the USMMA in conjunction with improving the institution both administratively and academically is a management imperative.  MARAD has made important progress in shaping the course and direction of the USMMA, including the appointment of new leadership, Superintendent Rear Admiral James Helis and Deputy Superintendent Rear Admiral Susan Dunlap, and issuance of a new Strategic Plan to guide Academy strategic management and program development.  The President’s FY 2014 budget request continues the Department’s commitment to maintenance and improvement of Academy facilities that helps to create an enriching educational environment.

Another key priority for MARAD is fulfilling its role in meeting the economic and security needs of the Nation.  Defense sealift relies heavily on the U.S. commercial sector and MSP funding is essential for the maintenance of a U.S. presence in ocean-borne foreign commerce.  In addition to providing employment for 2,700 U.S. merchant mariners, the MSP fleet also ensures the military’s ability to obtain assured access to commercial vessels and intermodal networks and mariners.  The President’s FY 2014 budget also includes $25 million for a new initiative aimed at mitigating the impact on sealift capacity and mariner jobs resulting from food aid program reform. 

The President’s budget request will also advance the agency’s contribution to environmental sustainability by supporting the disposal of obsolete National Defense Reserve Fleet (NDRF) vessels, preservation and license activities for retention of the Nuclear Ship SAVANNAH, maritime environmental technology assistance, and advancements in ocean policy.  The National Ocean Policy coordinates and aligns coastal and ocean-related actions of the Federal agencies to bolster our ocean economy, improve ocean health, support local communities, strengthen our security, and access the best available information to ensure we are using our ocean resources to the maximum benefit of all Americans.  Because the Policy is implemented through agency action under existing authorities and missions, there is no separate line item for the National Ocean Policy in the President’s Fiscal Year 2014 budget. 

Other priorities for MARAD in FY 2014 include the continued oversight and stewardship of Transportation Investment Generating Economic Recovery (TIGER) grant funding for maritime projects, and improving the management of our human, information, and financial resources.

ECONOMY

Maritime transportation is a vital industry, contributing roughly $15 billion per year to the national economy, in terms of value added.  U.S. waterborne commerce exceeds 2 billion metric tons per year.  MARAD programs help strengthen and improve the Marine Transportation System, relieving pressure on highways by helping to increase the use of our Nation’s waterways.  Because waterborne transport provides a cost-effective transportation alternative, it can help mitigate congestion in other transportation modes, and significantly reduce fuel consumption per ton-mile, with a related carbon footprint reduction.  

MARAD’s mariner training activities focus on preparing individuals for maritime careers while developing and maintaining a vital and viable U.S. merchant marine for commerce, emergency response, and national security.  The USMMA and State Maritime Academies educate and graduate merchant marine officers ready to serve the maritime industry and Armed Forces.  In addition, MARAD’s work with shipping, shipbuilding, and port and vessel operations supports the maritime industry, which comprises more than 250,000 jobs.

United States Merchant Marine Academy

The President’s FY 2014 Budget requests $81 million for the Academy.  Of this, $67 million will support Academy Operations and $14 million will fund the Capital Improvement Program.  The FY 2014 request will enable the Academy to effectively achieve its core responsibility of providing the highest caliber academic study with state of the art learning facilities for the Nation’s future merchant marine officers and maritime transportation professionals.  The Academy anticipates graduating 248 licensed merchant marine officers for service in the maritime industry and the Armed Forces in 2014.

The agency’s strong commitment to improved Academy facilities is reflected in the FY 2014 request for $14 million for the Capital Improvement Program.  The funding, together with carry-over funds, will support four priorities identified in the Academy’s Five-Year Capital Improvement Plan, including architectural and engineering designs for renovation of Samuels Hall/Bowditch Hall academic buildings, Samuels Hall renovation and construction, Zero Deck construction, and initiation of repairs to the seawall to help protect against further erosion.

We have made significant progress in improving institutional management, oversight and controls at the Academy.  In the last eight months, we have appointed a new Superintendent and Deputy Superintendent, issued new policies, completed a reorganization reflecting a better functional alignment, and issued a new Strategic Plan, establishing objectives for academics, leadership, facilities management, and outreach. 

As a result of our emphasis on oversight and strengthening controls at the Academy, we have provided the Government Accountability Office (GAO) with documentation for corrective actions and process improvements addressing all of their recommendations for the Academy.  GAO has confirmed closure of 33 recommendations in the 2009 audit report, and we have indications from GAO that additional closures are expected to be confirmed shortly.  We also have provided documentation of our improvements to Academy capital improvement program management and oversight, addressing the concerns identified in GAO’s 2012 audit report.  Congress’ assistance has been instrumental to guiding our efforts to provide the funding and leadership the Academy needs to train and prepare the next generation of midshipmen to meet the country’s rapidly-evolving defense and maritime transportation needs.

State Maritime Academies

The President’s FY 2014 budget requests $17.1 million, unchanged from FY 2012, for the State Maritime Academy (SMA) program.  This $17.1 million request includes $2.4 million to fund the Student Incentive Payment (SIP) program, enabling enrollment of 300 students to be able to meet identified Armed Forces reserve requirements; $3.6 million for annual direct payments to the six SMAs to provide for operational support; and, $11.1 million to fund maintenance and repair costs for Federally-owned training ships on loan to the SMAs.

The state academies regard the SIP program and support for their training ships as among the most important recruiting tools to encourage potential state maritime academy cadets to pursue careers as merchant marine officers.  MARAD anticipates approximately 650 students in the license program will graduate from the academies in 2014.  Annually, the six SMA training vessels provide for approximately 123,000 cadet sea days, opportunities for important hands-on technical training.  Maintaining the operating condition of these NDRF training vessels is important as the ships can also be called up to respond to emergencies or relief efforts. 

In November and December 2012 the Training Ship (TS) EMPIRE STATE and TS KENNEDY were deployed to provide support to FEMA for Hurricane Sandy relief efforts.  Combined with the NDRF vessel WRIGHT, a Ready Reserve Force (RRF) aviation support ship, these three ships housed nearly a thousand emergency responders and relief workers daily at a highly cost-effective rate during a critical time when warm beds, hot meals, and places to recharge communications devices all came at a premium given the dearth of local hotel space.

Additionally, the National Maritime Heritage Act authorizes 25 percent of sales from recycling of obsolete NDRF ships to be provided to the SMAs.  In the past fiscal year, MARAD provided approximately $2.3 million to the SMAs from the vessel scrap sales, capping a four-year period in which Federal support to the state maritime academies by MARAD was increased 83 percent.

Maritime Security Program (MSP)

The MSP is the agency’s largest appropriated program.  The primary purpose of the MSP is ensuring the military’s access to a global intermodal system with sealift capacity and ready U.S. mariners, while also maintaining a U.S.-flag fleet capable of supporting a U.S. presence in foreign commerce.  MSP vessel participants have the global, multi-modal reach that delivers cargoes supporting overseas deployments of U.S. forces.  MSP ships are carrying the bulk of military supplies and equipment in support of U.S. forces in and out of Afghanistan.  Presently, 90 percent of the cargo transported to and from Afghanistan is carried by MSP carriers.  As of April 1, 2013, 60 vessels were enrolled by 13 U.S. operators. 

For FY 2014, a total of $208 million in new budget authority is requested for the Maritime Security Program (MSP) account.Within the total, $183 million is included for the base MSP program, $3 million less than the authorized level.  The difference is projected to be funded by program recoveries of unpaid obligations (funds obligated but unpaid and recovered in 2014).  Funding at this level will enable DOT to continue to maintain a U.S.-flag international trade merchant fleet crewed by U.S. citizens to serve the Nation’s economic, homeland and national security needs.

The President’s FY 2014 request also shifts $25 million of the efficiency savings in a new food aid program reform initiative to help preserve mariner employment on militarily useful vessels not enrolled in the MSP fleet with priority given to eligible vessels under 46 U.S.C. 53102(b) in consultation with the Department of Defense.These funds will provide a means to help sustain a qualified pool of citizen merchant mariners through vessels’ stipends, mariner credentialing, and apprentice training.This will also help sustain an adequate labor pool to be readily available to support crewing government RRF sealift ships when needed.MARAD will work with stakeholders to best leverage these resources to gain viable alternatives on ways to preserve U.S.-flag ships and mariners available to support government sealift vessels.

Port Infrastructure Development

The President’s FY 2014 budget request highlights a new Port Infrastructure Development Program, with a request for $2 million.  The 2010 National Defense Authorization Act (P.L. 111-84) directs the Department to implement a Port Infrastructure Development Program.  Consistent with the legislation, the new program will support development of guidelines and planning for port infrastructure improvements and master plans, including implementation of a pilot grant program to help ports determine optimally effective investment strategies.  Of the request, $1.7 million would be devoted to a pilot program for competitive matching grants advancing sophisticated port infrastructure and investment planning methods, and providing an incentive for close coordination among state transportation authorities.  The balance of the funding will be allocated to partnering with stakeholders to develop guidance and performance measures for evaluating marine transportation benefits and guidelines for the development of port investment plans. 

Maritime Guaranteed Loan Program (Title XI)

Title XI offers loan guarantees for shipyard modernization projects and for building vessels in U.S. shipyards for operation under U.S.-flag registry.  The loan guarantees enable applicants to secure long-term financing at favorable interest rates, sustaining facilities for shipbuilding and ship repair within the U.S., and promoting system capacity and jobs.  The current Title XI subsidy balance for new grantees is $38 million. This will support approximately $421 million in shipyard projects assuming average risk category subsidy rates.  The President’s FY 2014 budget requests $2.7 million for administration of the Title XI guaranteed loan portfolio to ensure agency compliance with the Federal Credit Reform Act, borrower compliance with loan terms, and to process new loan applications.  The current portfolio is $1.8 billion, covering approximately 325 vessels and we are currently evaluating two applications totaling more than $400 million.

ENVIRONMENT

MARAD environmental programs are aimed at reducing pollution and the adverse environmental effects of maritime transportation and facilities on communities and livability; with a focus on obsolete vessel disposal, reducing marine air emissions, and treating ballast water. 

Ship Disposal

The President is requesting a total of $2 million for the Ship Disposal Program in FY 2014.  The FY 2014 request will support the continued steady progress in the removal of obsolete ships from the NDRF for disposal, with emphasis on vessels that are a high disposal priority, most of which remain in the Suisun Bay Reserve Fleet (SBRF). 

There currently are 32 total non-retention ships remaining in MARAD’s three fleet sites awaiting disposal, which is an historic low. With the requested funding level, and available carry-over balances, MARAD will be able to continue the disposal momentum with the expedited removal for recycling of approximately 15 obsolete ships from all three fleet sites in 2014, which will include approximately six SBRF vessels.  The requested funding level is consistent with the requirements of the court-ordered settlement with California.  The agency has already seen to the disposal of 39 of the 57 vessels in the consent decree, and is essentially a year ahead of expectations.

Funding in the President’s request will also cover the costs related to risk mitigation for compliance with the National Invasive Species Act (NISA) and Clean Water Act (CWA), as well as lessen the environmental risk at the fleet sites and recycling facilities.

Nuclear Ship SAVANNAH

The President’s FY 2014 request includes $2.8 million for the inactive Nuclear Ship SAVANNAH, providing for the continuation of support activities including nuclear license compliance, radiological protection, ship husbandry and custodial care, decommissioning planning and preparation, and historic preservation.  

Though management and custodial care of the legacy asset, which is both licensed and regulated as a nuclear power facility and designated as a National Historic Landmark, remains with MARAD’s Ship Disposal Program, the FY 2014 budget requests funding in the agency Operations and Training account to focus on the Nuclear Regulatory Commission’s required nuclear reactor core decommissioning activities, which must be initiated by 2026 and completed by 2031. 

Maritime Environment and Technology Assistance

The most pressing environmental issues facing the maritime industry are invasive species in ballast water, energy use, and air emissions.  The President’s FY 2014 budget requests $2 million for environmental sustainability efforts for these areas. 

MARAD has been called upon by industry and government agencies to help address these environmental pollution issues, and we recognize that more must be done to transition toward a greener maritime future.  The budget request will continue to advance critical research to develop a ballast water discharge standard, advance infrastructure and methodologies for certifying and verifying ballast water technologies, and improve vessel emissions data.

These represent the key policy proposals and initiatives highlighted in the President’s FY 2014 budget.  We will continue to keep this Committee apprised of the progress of our programs in these areas in the coming year, including our continuing USMMA management improvements.

Mr. Chairman, I wish to express my appreciation for the opportunity to present and discuss the President’s FY 2014 request for MARAD, and for the Committee’s continuing support for maritime programs and those that benefit from them, including the maritime industry, employees, shippers, travelers, and consumers of goods.  I look forward to working with you on advancing maritime transportation in the United States, and am happy to respond to any questions you and the members of the Committee may have. 

Thank you.

STATEMENT OF

THE HONORABLE RAY LAHOOD
SECRETARY OF TRANSPORTATION

BEFORE THE

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

April 16, 2013

Introduction

Chairman Latham, Ranking Member Pastor, and Members of the Subcommittee thank you for the opportunity to discuss the Administration’s fiscal year (FY) 2014 Budget request for the U.S. Department of Transportation.  Since day one, President Obama and all of us at the Department of Transportation have been committed to putting people back to work rebuilding and repairing our infrastructure.  The President is requesting $77 billion for Transportation in FY 2014 -- a 6 percent increase above FY 2012 funding levels. 

In addition, the President’s plan includes an additional $50 billion in immediate transportation investments to generate new jobs and economic growth here at home and improve our transportation infrastructure for future generations.  $40 billion of this funding will be targeted on “Fix-It-First” investments that will improve America’s roads, bridges, transit system, border crossings, railways, and runways.  The remaining $10 billion will be used to encourage State and local governments to use innovative strategies, foster best practices, and develop multimodal solutions in infrastructure development planning.  

Investing in our Nation’s Rail Systems

First and foremost, the President’s budget puts people to work upgrading our nation’s rail infrastructure—building the next generation of transportation.  Four years ago, President Obama laid out his vision for high-speed intercity passenger rail in America. And we’ve worked hard to fulfill that vision—building or improving 6,000 miles of rail and upgrading 40 train stations nationwide.  Today, we have trains hitting 110 MPH in Midwest, and the nation’s first 220 MPH high-speed rail network is set to break ground in California this year. We have broken ground on multi-modal train stations in communities across the country—creating jobs and revitalizing downtown districts in the process.

The President’s 2014 budget builds on our hard work so far—and continues to fulfill his vision to build a high-speed intercity passenger rail system for all Americans.

The President’s budget includes a bold rail reauthorization proposal that would provide $40 billion over five-years to invest in projects that will strengthen and enhance rail services.  Of the total requested, $6.4 billion would be used in FY 2014 to significantly improve existing intercity passenger rail services, develop new high speed rail corridors, and strengthen the economic competitiveness of our freight rail system.

$2.7 billion of the FY 2014 funds would improve our current passenger rail service.  This funding targets areas such as the Northeast Corridor where investments in infrastructure and equipment would improve service levels and set the stage for future growth.   Funding is also requested to help Amtrak address needed improvements in its rail facilities and operations, to implement positive train control along Amtrak routes and commuter rail systems, and to bring rail stations and facilities into compliance with the American Disabilities Act (ADA). 

$3.7 billion of the FY 2014 funds would be used to develop new passenger rail corridors and to improve the Nations freight network by adding capacity and removing bottlenecks that lead to congestion.   Funds requested for comprehensive network planning will help guide decision-making on future investments that benefit both our passenger and freight rail systems.

All together, these investments will ensure that America’s rail systems continue to provide reliable transportation services  while at the same time laying the groundwork for future system growth and a whole new level of service.  Investments in these kinds of transportation infrastructure improvements spur economic development in local communities, provide businesses with opportunities to expand, and create needed jobs across the Nation.

Continued Investment in Surface Transportation Infrastructure and Safety

The President’s FY 2014 budget fully supports the authorized funding levels, program structure, and performance based investment approach set forth in the “Moving Ahead for Progress in the 21^st Century” (MAP-21) surface transportation legislation in its final year.  

The President is requesting $53 billion in resources for our highway and transit programs in FY 2014.   This funding ensures needed highway and transit infrastructure improvements continue while at the same time underscoring our commitment to highway and transit safety as a top priority.  The Budget also reserves[U1]  funding in future years (after the expiration of MAP-21) for a robust, long-term surface transportation reauthorization program beginning in FY 2015.  Our reauthorization funding plan, includes a proposed 25 percent increase above the FY 2014 funding levels for several years.  

The[U2]  budget also includes increased investments in Highway Traffic Safety.  Over $560 million is provided for the National Highway Traffic Safety Administration (NHTSA) to support State highway safety initiatives.  These grants will help fund seat belt, drunk driving, and distracted driving education and enforcement.  In addition, increased funding is provided to expand our bus and truck safety enforcement efforts to put unsafe operators out of business and reduce bus and truck crashes.  

Finally, we are continuing our efforts to improve the safe transport of petroleum products and hazardous materials.  The President’s request includes $155 million for the Pipeline and Hazardous Materials Safety Administration to enhance our oversight in this area.   A major portion of this increase will fund 40 more pipeline safety inspectors as part of an initiative to double the number of pipeline inspectors nationwide.  These additional inspectors will work with the States in ensuring that pipelines are inspected frequently and that pipeline operators follow strict safety standards.  

Continued Modernization through FAA’s NextGen Initiative

The President’s plan provides $18.5 billion for the FAA to support continued operation of the National Airspace.  Nearly $10 billion of this funding supports the operation, maintenance, communication, and logistical support of the air traffic and air navigation systems.   

For several years FAA has been moving forward to modernize the management of the National Airspace System through the NextGen initiative.   When completed, NextGen will enable the FAA to build upon current capabilities and lay the groundwork for future technologies.  NextGen advancements will improve the safety, capacity, and efficiency of air travel by replacing ground-based radar surveillance with a modern satellite-based system.  NextGen also capitalizes on the latest state-of-the-art capabilities in modern aircraft technology.  The FY 2014 President’s Budget request includes $1 billion to continue to advance NextGen initiatives.  This includes $282 million to implement satellite-based surveillance capabilities, $115 million to advance text-based communications, and $32 million to fund consolidation of the databases used to develop new arrival and departure procedures at airports.  The advances provided by NextGen will help FAA move from a system of air traffic control to a system of modern air traffic management.

The President’s request includes a new approach for funding the Grants-In-Aid for Airports program.  The Budget provides $2.9 billion for the Airport Improvement Program.  At the same time, the budget enables airports to raise the Passenger Facility Charges (PFCs) from $4.50 to $8.00 as an alternative means to invest in airport projects.. 

Conclusion

We became the greatest country in the world, because generations before us had the courage and the foresight to invest in a better future.

Today, we have a duty to invest in a modern transportation network that will create jobs, encourage businesses to expand and help us compete in a global economy.

The President’s 2014 budget will help us put people to work rebuilding and upgrading our nation’s infrastructure—and it will help us continue to invest in a transportation network that will meet the needs of 21st century America.

Thank you for the opportunity to appear before you today to present the President’s FY 2014 budget proposal for the Department of Transportation.   Your support of this plan will help address the transportation needs of today as well as those of  future generations of Americans. 

 I will be happy to respond to your questions.

# # #

Statement of

Susan L. Kurland
Assistant Secretary for
Aviation & International Affairs
U.S. Department of Transportation

before the

COMMITTEE ON COMMERCE, SCIENCE, & TRANSPORTATION
U.S.  SENATE

June 19, 2013

Chairman Rockefeller, Ranking Member Thune, and Members of the Committee:

Introduction

I appreciate the opportunity to appear before you to discuss the state of the airline industry and the role of the Department of Transportation (DOT) in the review of the proposed American Airlines / US Airways merger. 

State of the Airline Industry

Let me begin by providing a broader historical context for this transaction.   In the more than 30 years since airline deregulation, consumers have reaped enormous benefits, as market forces have determined airline fares and services.  During this period, air transportation was transformed from a luxury that few could afford, to an affordable and indispensable service that connects families and businesses across America and the globe.  The new entrant carriers brought innovative business models and substantial price competition to a marketplace dominated by the incumbent, high-cost legacy carrier business model, just as the architects of deregulation had predicted. 

While deregulation brought enormous benefits for consumers, the results were not as positive for the airline industry, particularly the legacy carriers.  The legacy airline industry has been characterized by highly cyclical periods of profits and losses and, when profits were made, they were at extremely thin margins.  Even as most low-cost carriers continued to profitably grow through most of the challenges of the last decade, the legacy carriers suffered significant losses and have restructured their businesses through the bankruptcy process. Following several consecutive years of losses from 2001 to 2005, the industry returned to modest profitability in 2006 and 2007, only to confront rapidly increasing fuel costs and then a global recession.  2008 and 2009 were some of the most challenging years in the history of U.S. aviation, primarily due to the global recession.  Analysts began to question the financial sustainability of an industry that chased market share rather than profits and consistently failed to earn its cost of capital.  Airlines began aggressively taking corrective action by reducing capacity and moving toward more fuel-efficient aircraft and operations.

In the years since the steep rise in oil prices during the summer of 2008 and the global economic recession that followed, the U.S. airline industry took steps to operate more successfully in a seemingly permanent high-cost environment.  Airline managements, at legacy, hybrid, and low-fare carriers, have prioritized financial performance over gains in market share by cutting capacity, executing several mergers, and unbundling certain products and services for sale resulting in billions of dollars in ancillary revenue.  They also focused on significantly reducing non-fuel related expenses in a number of ways and began to manage their networks more efficiently.  As a result of these structural changes in the industry, the balance sheets and bottom lines for many airlines are showing significant improvement.  Airline managements credit mergers as having played a key role in the industry’s climb to financial sustainability. 

As recently as five years ago, there were six major U.S. network carriers.  Since then, Delta has acquired Northwest, and Continental merged with United.  US Airways, having joined forces with America West in 2005, is now seeking to merge with American.  Consolidation has also taken place in the low-fare carrier segment of the industry as a result of the combination of Southwest and AirTran.  Mergers are, however, very difficult for the companies, their employees, and the customers they serve as varying fleets, systems, corporate cultures, and route networks are blended and rationalized into viable business plans.  These changes take years to accomplish, especially on the network side and occur while the marketplace continues to evolve. 

Given the importance of the airline industry to the economy and economic growth, consumers benefit from having a financially healthy industry.  However, the consolidation and capacity cuts that are part of the industry’s restructuring efforts raise questions about their effect on consumers both in the short- and long-term.  They put upward pressure on airfares, as load factors continue to surge past historical highs.  While inflation-adjusted fares remain low relative to recent decades, they have increased 16% since 2009.  The economic effects of the current transformation of the industry have been further reinforced by persistently high and volatile fuel costs and have been exacerbated by the restructuring of the regional airline industry as well. 

In a deregulated industry, airlines are free to determine the routes they will serve and the prices they will charge, disciplined by competition.  Mergers often produce shifts in management focus, changes in relationships with regional airlines, and significant network restructuring that can have an impact on cities used to a particular level of air service.  As some airline managements have argued, larger airline networks will sustain service to more communities, especially small- and medium-sized communities.  While some of the recently merged carriers have maintained or added service to these types of communities, others have substantially cut service, choosing instead to concentrate on larger markets.  As a result, various stakeholders and analysts have expressed concern that mergers can lead to troubling cuts to small communities.

Airlines seek financial sustainability and good returns for their shareholders; consumers seek lower fares and better service.  While these interests are not necessarily diametrically opposed as airlines benefit when more people travel and consumers benefit from the product and service options of larger global carriers, it is competition that determines the appropriate balance between firm and consumer interests in a deregulated market.  As the industry continues its transformation and adapts to a dynamically changing economy, the Department is committed to doing what it can to foster an economically viable air transportation industry -- including entry into air transportation markets by new and existing air carriers -- and to prevent unfair and deceptive practices in the airline industry. 

DOT’s Authority to Review Merger Transactions

While I am sure you can understand that I am not able to discuss the specifics of the proposed American / US Airways merger, or any proposed transaction that is before us for review, I will briefly describe DOT’s role in this process. 

The Department of Justice (DOJ) has the lead role in reviewing proposed airline mergers, given its statutory authority to enforce the antitrust laws.  This practice is consistent with Congress’ determination that the deregulated airline industry should generally be subject to the same application of the antitrust laws as other unregulated industries.  DOT does have a role, however.  Utilizing its special aviation expertise, DOT typically confers with the Antitrust Division.  Each transaction we review is considered on a case-by-case basis consistent with antitrust principles and practice.

Both the antitrust laws and the transportation statutes governing DOT strive to ensure that consumers receive the benefits of competition.  This is the prism through which the Department analyzes airline mergers.   I can therefore assure you that the Department is committed to fostering an environment that embraces competition and provides consumers of all types with the price and service benefits that competition brings. 

We also recognize that the airline industry is dynamic. Cyclical economic conditions, the competitive environment, infrastructure access and capacity, and industry innovation all need to be taken into account to allow the industry to adapt to rapidly changing economic conditions.

Should DOJ decide not to challenge a particular transaction on antitrust grounds, DOT would then address follow-on issues that fall within its jurisdiction, including international route transfers, economic fitness, code-sharing, and possible unfair or deceptive practices.    

As to international routes, the carriers must apply to DOT for approval to consolidate the international routes they individually hold under one certificate, which is part of the merger process.  By statute (49 U.S.C. 41105), DOT may approve a transfer of such routes only if we find that it is consistent with the public interest.  As part of that analysis we must examine the transfer's impact on the viability of each airline party to the transaction, competition in the domestic airline industry, and the trade position of the United States in the international air transportation market. 

We would only decide an international route transfer case after we had established a formal record and given all interested persons the opportunity to comment.  If DOT determines that the transfer would be contrary to the public interest on competitive grounds or for another reason, DOT could disapprove the transfer in whole or in part. 

DOT may also review any code-share arrangements concluded between the merging carriers.  In DOT’s experience, code-share arrangements would likely be necessary during the early phases of integration after the transaction is closed.  

Finally, at DOT, we take our responsibility for consumer protection seriously. For example, if carriers in pursuing or implementing a merger were to engage in unfair or deceptive practices, we have ample authority to protect affected consumers based on our unfair and deceptive practices statute (49 U.S.C. 41712).

Conclusion

Civil aviation plays a critical role in the U.S. economy amounting to $1.2 trillion in 2009 and generating more than 10 million jobs, with earnings of almost $394.4 billion. Airlines connect national and global communities – linking friends and family, suppliers and producers, retailers and manufacturers, facilitating business partnerships, and fostering educational and cultural exchanges of all types.  Every American has both a personal and an economic interest in access to safe and affordable air travel.  It is therefore easy to understand why so many people take an interest in airline mergers. 

Our consideration of aviation economic policy focuses on what is best for a healthy and a competitive industry, for its workers, and for the communities and consumers that it serves.   Our goal must be to strike what is often a very difficult balance in the face of a complex and dynamically changing industry.  Importantly, in doing so we must also consider the longer term, collective impact on all stakeholders, most importantly America’s traveling public.  

Mr. Chairman, this concludes my testimony.  I would be happy to answer any questions you may have.

STATEMENT OF

MICHAEL P. HUERTA,
ADMINISTRATOR,
FEDERAL AVIATION ADMINISTRATION,

BEFORE THE

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE,
SUBCOMMITTEE ON AVIATION, ON

CAUSES OF DELAYS TO FAA’S NEXTGEN PROGRAM,

JULY 17, 2013.

Chairman LoBiondo, Congressman Larsen, Members of the Subcommittee:

Thank you for the opportunity to testify today before the subcommittee on the progress the Federal Aviation Administration (FAA) has made on the Next Generation Air Transportation System (NextGen).  NextGen is the largest single aviation infrastructure project in history.  This fundamental transition allows us to best utilize new and existing technology, including satellite-based and digital technology, to ensure that we meet the future demands for safe and efficient air travel.

As demand for our nation’s increasingly congested airspace continues to grow, NextGen improvements are enabling the FAA to guide and track aircraft more precisely on more direct routes.  This allows us to cut flight miles and reduce fuel burn, making air travel more convenient, predictable, and environmentally friendly. 

Our goal as an agency is to manage our national airspace in the safest and most efficient way possible, and NextGen plays a central role in this effort.  We are delivering concrete benefits to users of the national airspace through NextGen.  As of this very moment, air carriers that take advantage of precision routing get into and out of airports more quickly and efficiently, which reduces fuel use, saves money, and decreases aircraft exhaust emissions. Airlines flying into Dulles International and Reagan National have started using NextGen procedures and we estimate they will save $2.3 million in fuel per year and cut greenhouse gas emissions by 7,300 metric tons.  In Atlanta, the precision of NextGen navigation means we can safely allow jets to take off on headings that are slightly closer together. This small change has resulted in an increase of 8 to 12 planes departing per hour, saving valuable time.  It is also better for the environment because those jets spend less time on the ground with their engines running. This expected initial benefit of the new procedure is $20 million in Atlanta this year alone.  We expect to bring this type of efficiency to other major airports as well.

General aviation pilots and other small-aircraft operators are also seeing benefits under NextGen, which allows them  greater access to more airports nationwide, particularly in poor weather conditions, thanks to enhanced satellite navigation capabilities.  Air traffic controllers now have a wider array of tools at their disposal to help them make the critical decisions necessary to bring about more efficiency in the world’s busiest airspace system.  The flying public is enjoying shorter flight times and fewer delays.  We are realizing these benefits because of NextGen.

Michael Whitaker, who assumed the role of Deputy Administrator on June 3, 2013, will serve as Chief NextGen Officer.  This is a role of great importance.  Effectively leading the agency through the next phases of NextGen implementation will require working with many organizational components within the FAA, collaborating with industry and labor, and understanding the complexities of the NextGen program.  Mr. Whitaker is a seasoned aviation executive with extensive business, regulatory, legal, and international experience.  He is well-versed in general aviation, as well as commercial aviation, and has led collaborative efforts and joint ventures to promote aviation safety and enhance performance and profitability.  In his career he has fostered alliances and improved corporate governance.  I am confident that NextGen will flourish under his leadership.

NextGen would not be as successful as it is without collaboration and investment by a wide range of participants and the support of Congress.  We are listening to the aviation community, including operators, bargaining unit representatives, and international colleagues, and we have adjusted our plans accordingly to create benefits for the maximum number of stakeholders.  We carefully consider the audits, reports, and recommendations from the DOT Office of the Inspector General and the Government Accountability Office when evaluating our programs and we consistently review our own progress to measure success and identify areas where we can improve. 

Collaboration is Key to the Success of NextGen

The FAA has a long history of engaging with industry to develop consensus around policy, programs, and regulatory decisions.  NextGen is arguably the best example of that collaboration.  We have worked closely with industry partners, built consensus, and incorporated important recommendations from industry in our NextGen planning.  We are working with our partners through the NextGen Advisory Committee, NextGen Institute, RTCA, and the Joint Planning and Development Office.

Our primary vehicle for industry collaboration is the NextGen Advisory Committee (NAC). Its advisory role includes facilitating industry participation in NextGen, providing recommendations, and reviewing performance objectives. The NAC’s involvement is intended to ensure a positive business case for those who must invest in NextGen, and to provide a venue for tracking progress and sustaining joint commitments.

We believe the NAC has been successful in providing guidance and input into the current plans for the development and implementation of NextGen.  For example, we consulted extensively with the NAC to establish metrics that focus on post-implementation operations at locations where the agency has deployed NextGen systems and capabilities.  They are reported on the FAA’s new NextGen Performance Snapshots website.^[1]

One of our most successful collaborations with the NAC was on a recommendation involving city pairs. The NAC was instrumental in identifying sets of city pairs that can help measure the progress made by NextGen technologies once implemented.  Specifically, we track fuel burn, average distance flown and actual versus filed flight times between key city pairs.  In selecting city pairs, the NAC and the FAA took into consideration airports that were slated to receive various NextGen improvements, for example new PBN procedures or new surface management capabilities. These city pairs reflect a variety of important factors for the airline industry, such as passenger volume and traffic mix, among others.

We have, however, faced some challenges to achieving consensus via the NAC.  For example, in order to evaluate fuel efficiency gains under NextGen in accordance with Section 214 of the reauthorization, we discussed fuel burn with our industry partners participating in the NAC.  Some of our industry partners expressed reluctance about providing fuel burn data  out of a concern that releasing this information would provide proprietary data to the public and their competitors.  The activity underscored for us and for our partners on the NAC the true complexities that we deal with in trying to gather the information necessary to implement this interdependent set of initiatives in an airspace that operates 24 hours a day, seven days a week.  Furthermore, this challenges our ability to establish a reliable baseline measure from which improvements can be assessed over time.  While collaboration is vital, true consensus among all stakeholders isn’t always possible. To gather the necessary information, the FAA and the NAC are moving forward in partnership wih a number of operators who are interested in sharing fuel use data.

Despite these challenges, continued collaboration is a critical component of NextGen development.  Even if it takes more time, developments that take into account the needs and contributions of industry will allow us to better serve all those who use the national airspace. Through NextGen, we are transforming an entire system, even as it continues to operate.  We must continuously evaluate our progress and collaborate with industry to ensure that operations run smoothly as we proceed. We are building this system one step at a time and our partnerships with industry are vital to its success.

Our partnerships with labor are just as crucial.  The FAA has learned the lesson that you must involve the system operators on the front end, and the earlier the better, because they are the subject matter experts on our airspace and air traffic management system. The success of NextGen depends on the collaboration of talented experts working together to build it, which includes engineers, scientists, mathematicians, technicians, and air traffic controllers.

Because of our relationship with labor, these subject matter experts are an integral part of our major NextGen initiatives.  To date, we have more than 600 NATCA representatives, and 90 front-line managers, participating in 90 discrete events. The controllers are not just collaborating, they are shaping NextGen. They are at the heart of what we are doing, and they are embracing NextGen implementation.

While we have a well-constructed enterprise architecture and implementation plan for NextGen, it is critical that we maintain a level of flexibility, scalability, and responsiveness that allows us to evaluate each stage of implementation and adjust our plans to accommodate new technology and economic changes.  The FAA employs an integrated approach to track NextGen program costs, schedules, and performance milestones.  This includes a framework of several complementary tools that, together, address these issues and detail the planning, development, and delivery of NextGen.   The FAA continues to work on an Integrated Master-Schedule (IMS) to strengthen its enterprise-level management tool.  This tool is being designed to show how changes in programs’ schedules will impact the delivery of NextGen capabilities.  The IMS will draw upon the information contained in the roadmaps of the NAS Enterprise Architecture and captures key program activity and milestones for operational improvements.  The NAS enterprise architecture is a strategic planning tool that depicts the evolution of the NAS architecture over time.  The NAS enterprise architecture is a set of working documents that provide significant detailed planning information to implementing offices.  The FAA publishes an executive level overview of the agency’s progress annually in the NextGen Implementation Plan. 

The 2013 NextGen Implementation Plan

I am proud to announce the recent release of the 2013 NextGen Implementation Plan.  The plan provides an updated roadmap of the FAA’s ongoing transition to NextGen.  It also provides a wealth of information on the current state of NextGen programs.^[2]  

We have been transparent, from the beginning, about what we intend to accomplish with NextGen.  The Implementation Plan describes what success looks like in our operational vision.  We are publicly holding ourselves accountable, and we are proud of the progress we have made.

Successes and Benefits of NextGen

We report regularly on our success in achieving the milestones established in our Implementation Plans. 

We have met a majority of the milestones identified in the previous edition of the Plan, having completed 82 percent of the site-specific implementations we promised in 2012.  We are on track and fully committed to these programs and the capabilities they bring.  That’s on top of meeting an equally high percentage of the 340 implementation and work activity commitments we made in the 2009-11 editions of the Plan. We are delivering NextGen on time and on target.  We continue to make consistent progress in the following key areas:

• Automatic Dependent Surveillance–Broadcast (ADS-B) – To date, the FAA had installed more than 500 ADS-B ground stations, 445 of which were operational.  This system changes the nation's air traffic control system from one that relies on radar technology to one that uses global satellites, which can provide more precise location data. ADS-B ground stations provide traffic and weather information to more than 1,400 properly equipped aircraft and supporting air traffic control separation services at eight En Route and 37 Terminal facilities.
   
• United Parcel Service (UPS) in Louisville has been an early adopter of ADS-B technology; they have equipped aircraft with ADS-B and have seen both increased efficiency and lower fuel burn in their operations. 
   
• JetBlue has equipped 35 aircraft with ADS-B Out avionics.  In June 2013,  the airline was re-routed across the Gulf of Mexico to avoid weather-related delays.  This shaved off about 100 miles from the flight’s initial path and resulted in hundreds of gallons of fuel savings.
   
• Helicopters equipped with ADS-B have been able to increase flight hours during periods of low visibility from 1,500 to almost 20,000 in the Gulf of Mexico.
   
• To date with ADS-B, more than 500 operational radios are providing traffic and weather information to more than 1,400 properly equipped aircraft on the East Coast, West Coast, and in Alaska, with supporting air traffic control separation services at 8 En Route and 37 terminal facilities and supporting surface advisory services at 24 airports.
   
• The optimization of airspace and procedures in the Metroplex program has seven active teams in various phases of development. Additional sites were expected to complete their design and implementation in 2013, but may be delayed due to budget sequestration.
   
• Equipage Incentives – The FAA is considering operational and financial incentives to influence owners and operators to equip their aircraft to use NextGen capabilities and gain NextGen benefits and has engaged in a number of public meetings to engage industry and gain their input. Under the program name AirPASS (the Aircraft Priority Access Selection Sequence), the agency is developing plans for operations designed to benefit owners and operators who complete NextGen equipage early to implement “best-equipped, best served” strategies that are under consideration.
   
• The FAA has awarded the Data Comm Integrated Services contract, which will provide for data communications between airport towers and appropriately equipped aircraft in 2016. Operational Data Comm trials are underway in Memphis and Newark with FedEx and United Airlines.
   
• Over the last two years, System Wide Information Management (SWIM) infrastructure investments have enabled significant advancement in the access and distribution of airport surface movement information.  The surface movement data from 27 major airports is now available through a single portal to a broad range of external consumers.  Today there are 19 external consumers, including many cargo and passenger airlines, vendors, and aviation research institutions, receiving surface movement data through this single portal.  This allows operators to make better-informed decisions that improve their efficiency.
   
• During a Collaborative Departure Queue Management demonstration, FedEx saved several hundred minutes of taxi time during each bank of departures from Memphis International Airport. FedEx at Memphis has seen a 20 percent increase in departure runway throughput capacity, which has eliminated their departure gate holds and departure queues that were always present for their early morning departure rush - resulting in fuel savings, and being able to have additional minutes, if needed, in their package sort.  Called arrival and departure rates have been raised from about 77 per hour to 99 per hour.  Louisville, San Francisco, Houston, Miami and Philadelphia are scheduled to implement this change through the end of this calendar year and early next year.
   
• Performance Based Navigation (PBN) - which facilitates more efficient design of airspace and procedures which collectively result in improved access, capacity, predictability, operational efficiency, and environment - is providing greater operational flexibility.  Some examples of PBN success are: 
   
• US Air reduces its carbon footprint by 51,000 tons per year by flying Optimized Profile Descents into Phoenix Sky Harbor International Airport.
   
• As early as 2008, flights at Hartsfield-Jackson Atlanta International Airport were saving up to 60 gallons of fuel per flight by using more efficient Optimized Profile Descent procedures. That also equates to a 380 kg reduction in CO2 emissions.
   
• Flights at Las Vegas and Henderson that used RNAV area navigation routes spent about 10 fewer minutes in the airspace within 200 miles of the airport. There were 14 percent fewer interactions between McCarran traffic and Henderson arrivals. 
   
• At Dallas-Fort Worth, RNAV departure procedures enabled additional diverging departures from the same runway yielding capacity increases of between 11-20 additional operations per hour resulting in approximately $8.5 million to $12.9 million in delay savings per year.
   
• The use of Required Navigational Performance (RNP) AR approaches at Chicago Midway allows aircraft landing RY13C to de-conflict with aircraft simultaneously departing Chicago O’Hare  RY22L.  Previously a one-in, one-out method was used to separate these operations.
   
• There are other examples of advantageous RNP AR use, such as approaches to Bishop, CA, that avoid terrain and provide access that previously didn’t exist and approaches into Ronald Reagan Washington National Airport that use precise paths to avoid prohibited areas.

We work very hard to calculate and report the benefits that we accrue.  We are projecting that NextGen will reduce overall delays by 41 percent by 2020, compared with what would happen if we did not implement any additional NextGen improvements.^[3]  These delay reductions will provide an estimated $38 billion in cumulative benefits through 2020. We estimate 16 million metric tons in cumulative reductions of carbon dioxide emissions through 2020, and 1.6 billion gallons in cumulative reductions of fuel use.

We have expanded our public reporting of NextGen performance through success stories and performance snapshots on our website.  The FAA publishes NextGen-specific metrics at the local level in order to isolate and identify NextGen improvements at site-specific locations.  Core airports, key city pairs, distance/time/fuel reduction, runway safety, the implementation and use of NextGen technology and procedures will continue to be important to understanding the value and benefits of modernization.  Taken together, these metrics reveal the nationwide impact of NextGen development, which has already been shown to provide tremendous benefits to efficiency and the environment.

Challenges

A key limitation to measuring NextGen improvements is data availability. The FAA is working diligently on closing internal and external data gaps.  In May 2013, the FAA launched the PBN Dashboard, a web-based tool that provides deployment and usage data on RNAV and RNP airport procedure in the NAS.  This dashboard details procedure availability usage by runway and airport. The information collected and published on the Dashboard will support current and future analysis. 

Another, more significant challenge we face is the uncertainty brought about by sequestration.  The FAA reauthorization laid out a vision to address the future needs of our nation’s aviation system. These needs have not gone away. It is important for us to work together to protect the great contribution that civil aviation makes to our economy.

The sequester and future funding unpredictability requires the FAA to make sizeable budget cuts that affect our operations and our future. While we are grateful that Congress passed budgetary flexibility for FAA to provide for a temporary solution to the FAA furloughs, this stop-gap measure does not end the ongoing challenges the sequester presents.  We will not enjoy the benefits or the stability that reauthorization was intended to provide until we end the sequester and its fiscal consequences and find a sensible long-term funding solution.  Without a predictable funding source, our ability to confidently develop long-range plans is compromised.  I sincerely hope that we can work together to ensure that America continues to lead the world in the development and implementation of aviation technology and operates the safest and most efficient aviation system in the world.

Mr. Chairman, this concludes my prepared remarks. I would be pleased to answer any questions you may have. 

STATEMENT OF

MICHAEL P. HUERTA,
ADMINISTRATOR,
FEDERAL AVIATION ADMINISTRATION,

BEFORE THE

COMMITTEE ON COMMERCE, SCIENCE AND TRANSPORTATION, ON

FAA’S PROGRESS ON KEY SAFETY INITIATIVES,

APRIL 16, 2013.

Chairman Rockefeller, Senator Thune, members of the Committee:

Thank you for the opportunity to speak to you today.  This is the first time I am testifying before you as the confirmed Administrator of the Federal Aviation Administration (FAA).  I appreciate your support for my candidacy.  It is a privilege to hold this position and I welcome the challenges that will come with it.  I hope to enjoy a long and effective relationship with you and this Committee. 

There are a number of important ongoing aviation safety-related initiatives that I know are of interest to this Committee.  We are working hard to meet the future demands of aviation.  From transitioning to the Next Generation of Air Transportation System (NextGen) to integrating Unmanned Aircraft Systems (UAS) into the national airspace system (NAS), the goals we are striving to meet are challenging, especially in light of the existing fiscal constraints.  But our workforce is dedicated and very aware that achieving these goals are vital to FAA’s ability to continue leading the world in aviation safety and innovation.

Just over a year ago, Congress passed and the President signed the Federal Aviation Reauthorization Modernization and Reform Act of 2012 (Reauthorization).  As the returning members of this Committee may recall, passage of the bill followed a long odyssey that involved 23 extensions before a comprehensive bill was passed.  During that period, I spoke with Members individually about the impact the short-term extensions were having on our programs.  The Airport Improvement Program (AIP) was adversely impacted without the stability of a long-term authorization.  Airports across the country delayed the start of important capital projects due to the concern that funding was being authorized in very small amounts because of the short length of the extensions. As a consequence, during extension periods, airports were uncertain about committing to projects of all sizes, ranging from safety improvements to crucial infrastructure preservation to environmental impact mitigation, including sound insulation projects.  Another impact to airport projects, as a result of multiple extensions was the inability of engineers, construction contractors, and material and equipment suppliers to place orders and conduct work.  Reduced amounts of funding were made available in accordance with the short-term extensions, so committing to long-term investments was problematic.  We very much appreciated the passage of a comprehensive authorization that promised important stability and predictability. 

Sequestration

Now, just over one year later, the benefits of reauthorization are in jeopardy due to the budget reductions imposed by sequestration.  It is essential to the effective management of FAA’s programs to have stability and predictability that can be relied upon.  Sequestration places us in the position of even greater uncertainty than the days of multiple extensions.  Our agency has been working hard to plan for and implement the required cuts in a way that does not materially jeopardize our ability to ensure the highest levels of safety. Seventy percent of FAA’s Operations budget is dedicated to employee salaries and benefits, so they will bear a significant portion of the cuts.  I can assure you that safety is the FAA’s top priority.  If sequestration means fewer flights can be safely accommodated in the NAS, then there will be fewer flights. 

On April 10, I issued final furlough decision letters to over 47,000 employees.  The furloughs generally will be on discontinuous days, approximately one day per bi-weekly pay period, for a maximum of 11 days between April 21 and September 30.  We are also planning to eliminate midnight shifts in over 60 towers across the country starting this summer; cease federal funding at 149 air traffic control towers at airports with fewer than 150,000 flight operations or 10,000 commercial operations per year starting June 15, and reduce preventative maintenance and equipment provisioning and support for all NAS equipment.  All of these changes will be finalized as to scope and details through collaborative discussions with our users and our unions. 

As a result of employee furloughs and prolonged equipment outages resulting from lower parts inventories and fewer technicians, travelers should expect significant delays.  We are aware that these service reductions will adversely affect commercial, corporate, and general aviation operators and the travelling public.

Beyond the impacts to air traffic, aviation safety employees will also experience furloughs that will impact airlines, aviation manufacturers, and individual pilots who need FAA safety approvals and certifications.  While the agency will continue to address identified safety risks, slowed aircraft certification and operations approval processes due to furloughs could negatively affect all segments of the aviation industry.

It is unfortunate that many of the positive benefits of the long-term reauthorization are being undermined by sequestration. 

FY 2014 Budget

The President released his FY 2014 Budget last week.  The FAA’s FY 2014 Budget request of $15.6 billion strikes a balance between maintaining current infrastructure while deploying key NextGen benefits to our stakeholders, upholding our critical safety programs, and modernizing our aviation infrastructure.  Our request is $351 million lower than FY 2012.  This 2.2 percent decrease supports the President’s effort to reduce the deficit.  Approximately half of our funding request is devoted to maintaining and improving the agency’s safety programs. This includes the ability to perform safety inspections and carry out rulemaking and certification activities to move NextGen and commercial space initiatives forward.

The budget requests $9.7 billion to provide the operation, maintenance, and support of our air traffic control and air navigation systems, ensure the safe operation of the airlines and certify new aviation products, ensure the safety of the commercial space transportation industry, and provide overall policy oversight and management.  This represents an increase of just 0.6 percent from the FY 2012 enacted level. This includes $1.2 billion to continue to promote aviation safety by regulating and overseeing the civil aviation industry and continued airworthiness of aircraft, as well as certification of pilots, mechanics, and others in safety management positions.  The $2.8 billion Facilities & Equipment (F&E) request enables FAA to meet the challenge of both maintaining the capacity and safety of the current national airspace while keeping a comprehensive asset modernization and transformation effort on track.  The $166 million requested for Research, Engineering, and Development (RE&D) supports the continuation of work in both NextGen and other research areas such as environmental research, safety research in areas such as fire research, propulsion and fuel systems, unmanned aircraft, advanced materials research, and weather research. And the $2.9 billion request for Grants-in-Aid for Airports focuses Federal grant funding on smaller commercial and general aviation airports that do not have access to additional revenue or other outside sources of capital. This is coupled with a proposed increase to Passenger Facility Charges, from the current maximum of $4.50 to $8.00, thereby giving commercial service airports greater flexibility to generate their own revenue.  Finally, in the Operations, F&E and RE&D requested amounts, we have included $1.002 billion for the NextGen portfolio, an increase of $67.2 million, or approximately 7 percent, above the FY 2012 enacted level. This level of program funding enables the FAA to continue to support near-term NextGen commitments in a budget-constrained environment.

Boeing 787

Turning to another matter that has received a great deal of attention, I would like to update you on the status of the review of Boeing 787’s lithium batteries.  On March 12, FAA approved Boeing’s certification plan for the 787 battery system redesign.  This was done after a thorough review of the proposed modifications, as well as the company’s plan to demonstrate that the modified system will meet FAA requirements.  Approval of the certification plan was the first step in the process to evaluate the 787’s readiness for return to flight. It required Boeing to conduct extensive testing and analysis to demonstrate compliance with the applicable safety regulations.

The battery system improvements include a redesign of the internal battery components to minimize risk of a short circuit within the battery, better insulation of the cells, and the addition of a new containment and venting system.  These added protections are expected to help prevent and contain smoke and fumes in the event that a battery does malfunction.

Boeing flew limited non-passenger test flights of two aircraft that had the prototype versions of the new battery containment system installed.  The purpose of the test flights included validation of the aircraft instrumentation for the battery and testing of the battery enclosure, in addition to product improvements for other systems.  Boeing completed all required tests and analysis to demonstrate that the new design complies with FAA requirements.  The FAA is reviewing the test reports and analysis and will approve the redesign once we are satisfied Boeing has shown the redesigned battery system meets FAA requirements.

Aviation, from its very beginning, has stretched technological boundaries.  Technological change in aviation comes in waves.  For more than five decades, the FAA has compiled a proven track record of safely introducing new technology and new aircraft.  As we continue to do this, I want to make one thing crystal clear.  The FAA takes very seriously its responsibility to establish aircraft safety standards and certify new products and technologies.

As you know we are moving forward with a review of the critical systems of the Boeing 787.  When we have a concern, we will analyze it until we are satisfied.  I am confident that the FAA has the expertise needed to oversee the Dreamliner’s cutting edge technology.  We have the ability to establish rigorous safety standards and to make sure that aircraft meet them.  The best way to do this is to bring together the best minds and technical experts in aviation to work on understanding how these new systems work and how to establish and meet appropriate safety standards.

We enhance safety by keeping the lines of communication open between industry and government – by fostering the ability and willingness to share information about any challenges we might be facing.  We want to create an atmosphere where people feel they can share what they know, all in the pursuit of safety.

We all want the same outcome.  We want to harness advances in technology to produce safe aircraft.  We will never lose sight of our respective roles, but that does not mean that there is not a seat at the table for bright minds from industry to help inform the best way to navigate the complex technological issues we encounter.  It would be short-sighted to overlook anyone’s valuable expertise.

Reauthorization

As noted above, we were very happy when a comprehensive FAA reauthorization was passed last year.  Reauthorization required over 200 separate deliverables, nearly half of which were due within the first year of enactment.  FAA is on track to meet or has met approximately 80 percent of those action items.  We have fully completed about half of the deliverables in the law.  Now, as I’m sure you can appreciate, all action items are not created equal.  Some are very complex and require a good deal of input from our workforce and industry partners.  I believe that meaningful collaboration is the only way to achieve a workable path forward. Doing what we need to do to get the most effective work product is our goal, even if it means that certain deadlines are not met. 

Safety

Safety is FAA’s number one mission.  Nothing is more important.  Our system has never been safer.  There has not been a fatal commercial passenger accident in the United States since 2009.  I am proud of the hard work that has gone into providing a basis for achieving this level of safety.  We need to make aviation safer and smarter through risk based approaches.  The only way to prevent accidents before they happen is to accurately identify risk areas and work to mitigate them.  That is the reason we are working hard to improve runway safety areas (RSAs) at commercial service airports.  Some of the RSA improvements include the installation of the Engineered Materials Arrest System (EMAS).  This soft concrete block system has been installed in RSAs at 45 airports in the U.S.  These EMAS systems have already stopped eight overrunning aircraft with no fatalities or serious injuries to passengers.  Voluntary reporting for both FAA and industry employees, safety management systems (for both FAA and industry) and the creation of the Aviation Safety Whistleblower Investigation Office have also helped to prevent accidents.  All of these efforts have been providing the agency with data and information to which we have never before had access.  More information results in FAA being able to see trends and take action to mitigate the associated risks.  Adjusting the safety culture to ensure employees that they can provide information without fear of reprisal is a cornerstone of our approach to safety.

Prior to Reauthorization, we had been working on the requirements of the Airline Safety and Federal Aviation Administration Extension Act of 2010.  That act mandated rulemakings to revamp flight and duty time regulations to better address the issue of pilot fatigue, to increase the required number of hours of flight experience before a pilot can qualify to be a commercial pilot, and to revise pilot training to better simulate challenging conditions so that pilots can better handle serious, but rare situations.  We completed the flight and duty time rulemaking just over a year ago, and plan to complete our work on the final pilot qualification rulemaking (the “New Pilot Certification and Qualification Requirements Final Rule”) by August 2013 and pilot training (the “Qualification, Service, and Use of Crewmembers and Aircraft Dispatchers Final Rule”) by October 2013.  Reauthorization has since added a number of rulemaking requirements that we are also pursuing. 

With respect to other safety directives in Reauthorization, FAA commissioned an Aviation Rulemaking Committee (ARC) to develop recommendations to improve our aircraft certification process: we delivered our Report to Congress on that effort in August of last year and have begun implementation of the report’s recommendations.  We also established an ARC consisting of government and industry experts to develop recommendations on improving the consistency of regulatory interpretations.  We are in the process of finalizing a report informing Congress of the recommendations presented to the FAA.

Reauthorization also required a number of safety-related reports.  We have delivered the report required on runway safety alert systems and the first annual report of the Aviation Safety Whistleblower Investigation Office summarizing the disclosures the office has received and how they were handled. In the upcoming weeks, we expect to issue reports on the National Service Air Carrier Evaluation Program, night vision goggles for helicopter pilots, improved pilot licenses, and limiting access to the cockpits in all cargo aircraft.  We are also finalizing a report to Congress on common sources of distraction on the flight deck.

Pursuant to Congressional direction, we have also worked with the Occupational Health and Safety Administration (OSHA) to draft a statement of policy which permits some OSHA standards to be applied to improve workplace safety for aircraft cabin crew.  We published a draft policy statement in the Federal Register in December of 2012 for comment, and are in the process of reviewing those comments.

Also in accordance with reauthorization, in October of last year, the FAA, in conjunction with the Department of State, issued a cable regarding international drug and alcohol standards for foreign repair stations.  An advanced notice of proposed rulemaking (ANPRM) is currently in executive review. 

Delivering Technology

Our goal in the area of delivering technology is to efficiently and sustainably deliver benefits to our stakeholders and society.  One of the responsibilities of the Deputy Administrator is to serve as our Chief NextGen Officer, so that is one of many reasons I hope to appoint a Deputy relatively quickly.   

Throughout Title II of the Reauthorization, there is a theme that modernization of the system must be done in collaboration with our industry partners.  FAA wholeheartedly agrees with this concept.  Imposing technological changes without the input of the users would be a recipe for failure. We continue to engage through our work with Optimization of Airspace and Procedures (OAPM) initiatives, which are being done in close collaboration with industry and stakeholders.  OAPM is actively working in nine of the 13 metroplexes identified in Phase 1 of the program.  Of these, one of the metroplexes (Houston) is currently in the implementation phase with two additional sites (Washington, DC, and North Texas)  planned to start implementation of the new procedures later this summer, depending on how sequestration impacts this plan.  The metroplex initiative optimizes procedures in a geographic area where there are a number of airports, rather than focusing on each airport separately.  Through this initiative, we are untangling our busiest airspace and creating more direct routes, cutting fuel, and becoming more environmentally friendly.  In the congested airspace in the skies above our busiest metropolitan areas, these new modifications are being put in place in three years, much more quickly than the five to ten years it had taken previously.  We are also actively engaged with our industry and government partners in the development of NextGen through the NextGen Advisory Committee (NAC).  This group is helping to guide many aspects of our air traffic modernization work.  The NAC also works with FAA on developing and tracking performance metrics and advising on the technical challenges of one of the new categorical exclusion provisions included in Reauthorization. 

Reauthorization also provides FAA with the ability to consider using operational and financial incentives for commercial and general aviation operators to equip their aircraft with NextGen technology.  We are actively engaging aircraft operators and potential private partners to assess interest and receive feedback on equipage incentive programs and how use of this authority could attract additional investment in NextGen technologies and training.

FAA has completed a departure queue management pilot program that was required in the statute in order to continue to advance plans to enhance surface management at airports.  Also, in accordance with Reauthorization, we have issued guidance for AIP funding eligibility that supports the importance of sustainability initiatives in the way that airports do business, and we expect to issue further guidance in 2013.  We have also initiated a new study on the National Plan of Integrated Airport Systems, which is a long-established process for identifying strategic investments.  The new study will ensure we are making the best use of available data in supporting our decisions to advance safety, capacity, efficiency, and sustainability initiatives.

Finally, in February, pursuant to Reauthorization, the FAA requested proposals for interested state and local governments, eligible universities, and other public entities to develop six Unmanned Aircraft Systems (UAS) test sites around the country, which will gather information to help inform research, development, operational and privacy issues.  We expect to select the six sites by the end of the year.  These sites will conduct critical research that will help determine how best to integrate UAS into the NAS.  Once the sites are operational, we expect to learn how UAS operate in different environments and how they impact air traffic operations.  I know this Committee is very interested in UAS integration.  Use of the six sites will provide us with essential information to facilitate integration of UAS into the NAS and to address outstanding issues, such as privacy.  Prior to finalizing the FAA’s UAS five-year “Roadmap”, the FAA is coordinating the roadmap with other UAS stakeholder agencies and ensuring alignment of that roadmap with the Joint Planning and Development Office’s Interagency Comprehensive UAS Plan.

Empower and Innovate FAA’s Workforce

In the current fiscal climate, we have to find a way for FAA’s employees to work smarter and enhance our productivity. You tasked us to undertake a thorough review of each program, office, and organization within the agency.  Our report on FAA Review and Reform highlights 36 initiatives to improve and update processes, eliminate duplication and waste, and make the agency more efficient and effective.  The initiatives identified cover many aspects of our operations and include improvements to cost analysis, governance, acquisition processes, standard operating procedures, and human resources.  Of the 36 initiatives, 16 have been implemented and 20 are in progress.  In addition, we are actively engaging our employees in the development of recommendations for facilities consolidation and realignment.

At your direction, we are looking closely at improvements to staffing and training for our employees.  Four studies are underway looking at frontline manager staffing, technical training and staffing, air traffic controller staffing and air traffic training and scheduling.  Due to the requirement to produce the plan by March 31, 2013, the interim workforce plans we submitted last month do not reflect the potential effects of sequestration.  The FAA will adjust the actual staffing and hiring forecasts to reflect future funding levels as they become available.  Finally, in accordance with Reauthorization, we developed staffing standards and scheduling plans for New York City and Newark air traffic control facilities.  We are in the process of considering impacts of sequestration to staffing concerns.

Develop and Fund the Efficient FAA of the Future

FAA must not only meet our day to day responsibilities, we must also look to the future and figure out how to shape the agency to meet the demands and opportunities of the future.  As noted earlier, the U.S. aviation system is going through significant, even revolutionary changes.  NextGen is a major transformation which will increase our efficiency and safety, reduce delays and reduce fuel consumption.  UAS have the potential to change the face of aviation.  In the midst of these changes, budget pressures are making us ask hard questions about what the FAA needs to deliver in the coming years to ensure the safety and efficiency of the NAS and how to do it most cost-effectively.

In addition, we will face major changes in our workforce in the coming years.  About one third of FAA employees will be eligible to retire starting in 2014.  So for us, succession planning remains a crucial aspect of the agency’s focus, and we realize that we will begin to lose a vast amount of corporate knowledge in the coming years.  To prepare for that, we must impart this knowledge to today’s emerging leaders and experts to ensure a successful agency in the 21^st century.  We need to embrace innovation and to work efficiently.

Efficiencies are not just for the future.  Given the economic challenges we are facing, FAA has worked very hard to find cost savings and we have been quite successful.  In fiscal year 2012, FAA efficiencies and cost cutting resulted in $81 million in savings.  Prior to sequestration, we have set a target of $91 million in cost savings for fiscal year 2013.  We recognize that the status quo is not an option and we will continue to strive to achieve additional efficiencies moving forward.

Finally, we must chart innovative and collaborative ways to engage with all segments of the aviation sector, from airlines to association groups, to general aviation, to unions.  We must embrace the opportunity to make long-lasting changes together that ensure a vital and vibrant aviation industry that serves the needs of this nation.

Advance Global Collaboration

The world is increasingly interdependent, so international collaboration is essential if we want to move forward effectively.  FAA needs to continue to work with international partners to improve global aviation safety and sustainability.  This effort will require us to improve the harmonization and interoperability of new technology with international aviation standards and procedures to improve safety on a global basis.  We need to work to ensure the roadmaps agreed to by the International Civil Aviation Organization (ICAO) to advance communications, navigation, and surveillance improvements for global air navigation are compatible with our NextGen concepts and implementation and our domestic regulatory plan.  We are working at ICAO to find practical and collaborative solutions to address aviation’s greenhouse gas emissions and are encouraged by the European Union decision to “stop the clock” on application of their emissions trading system on foreign airlines.  Our international partnership will require us to develop and begin to implement a strategic plan for technical assistance, training, and other activities to maximize the value of FAA’s expertise and United States resources.  The FAA is committed to working proactively with countries around the world to create the initiatives and achieve the outcomes we need in the areas of safety, air traffic management, and the environment to foster a safe, efficient and sustainable global aviation sector. 

Conclusion

Let me conclude by saying that it is essential to the effective management of FAA’s programs to have stability and predictability that can be relied upon.  The many extensions over the last few years took a toll on FAA’s work in certain areas.  Now we face an even more extreme uncertainty under sequestration.  All of us in this room want the same things.  We want to get better at what we do, think smarter, improve safety, streamline processes, and remain the agency that can work collaboratively with the world to develop safer and more efficient practices.  Sequestration will not stop us from trying to attain these goals, but it will make it much, much harder.

Mr. Chairman, this concludes my statement.  I will be happy to take questions at this time.

STATEMENT OF

MICHAEL P. HUERTA,
ADMINISTRATOR,
FEDERAL AVIATION ADMINISTRATION,

BEFORE THE

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE,
SUBCOMMITTEE ON AVIATION ON

A LOOKBACK ON REAUTHORIZATION – ONE YEAR LATER,

FEBRUARY 27, 2013.

Chairman LoBiondo, Congressman Larsen, Members of the Subcommittee:

Thank you for the opportunity to speak to you today.  This is the first time I am testifying before you as the confirmed Administrator of the Federal Aviation Administration (FAA).  It is a privilege to hold this position and I welcome the challenges it presents.  I also want to acknowledge that, while I am a newly confirmed Administrator, this is also my first hearing before the new Chairman and Ranking Member of this Subcommittee. I hope to enjoy a long and effective relationship with you and this Subcommittee. 

Today is just over a year after the passage of the Federal Aviation Reauthorization Modernization and Reform Act of 2012 (Reauthorization).  As the returning Members of this Subcommittee may recall, passage of the bill was a long odyssey that involved 23 extensions before a comprehensive bill was passed.  During that period, I spoke with Members individually about the impact the short-term extensions were having on our programs.  The Airport Improvement Program (AIP) was adversely impacted without the stability of a long-term authorization.  Airports across the country postponed important capital projects due to the concern that funding was being authorized in very small amounts due to the short length of the extensions. As a consequence, there was always uncertainty about committing to projects of all sizes, ranging from safety improvements to crucial infrastructure preservation to environmental impact mitigation, such as sound insulation.  During extension periods, those impacts  affected the ability of engineers, construction contractors, material and equipment suppliers to place orders and conduct work.  Only small amounts of funding were made available in accordance with the short-term extensions, so committing to long-term investments was problematic.  We very much appreciated the passage of a comprehensive authorization that promised important stability and predictability. 

It is, therefore, a bit ironic that I have been asked to testify before you just two days before sequestration goes into effect.  The stability and predictability that is so essential to the agency’s ability to meet the current demands of both air traffic and aviation safety.  Our agency has been working hard to plan for the required cuts if Congress does not act. Seventy percent of FAA’s Operations budget is dedicated to employee salaries and benefits, so they will bear a significant portion of the cuts.  I can assure you that safety is the FAA’s top priority.  If sequestration means fewer flights can be safely accommodated in the National Airspace System (NAS), then there will be fewer flights. 

I have notified FAA’s employees that they should be prepared to be furloughed one or two days per by-weekly pay period during the sequestration.  We are also planning to eliminate midnight shifts in over 60 towers across the country, close over 100 air traffic control towers at airports with fewer than 150,000 flight operations or 10,000 commercial operations per year, and reduce preventative maintenance and equipment provisioning and support for all NAS equipment.  All of these changes will be finalized as to scope and details through collaborative discussions with our users and our unions.  We will commence furloughs and start facility shut-downs in April.

As a result of employee furloughs and prolonged equipment outages resulting from lower parts inventories and fewer technicians, travelers should expect delays.  Flights to major cities like New York, Chicago, and San Francisco could experience delays of up to 90 minutes during peak hours because we will have fewer controllers on staff.  We are aware that these service reductions will adversely affect commercial, corporate, and general aviation operators.  We also expect that, as airlines estimate the potential impacts of these furloughs, they will change their schedules and cancel flights.

Beyond the impacts to air traffic, aviation safety employees will also experience furloughs that will impact airlines, aviation manufacturers, and individual pilots who need FAA safety approvals and certifications.  While the agency will continue to address identified safety risks, a slowed certification and approval process due to furloughs could negatively affect passengers and all segments of the aviation industry.

The threat of sequestration has been hanging over us for quite some time and, in some respects, it has been more unsettling than the short-term extensions.  Many of the positive benefits of the long-term reauthorization are being undermined by the threat of sequestration.  I know I speak for all of FAA’s workforce when I say that it is vital that Congress remove the uncertainty of sequestration and allow our dedicated employees to continue to do the important work that they want to perform. 

Turning to the topic of today’s hearing, Reauthorization required over 200 separate deliverables, nearly half of which were due within the first year of enactment.  FAA is on track to meet or has met approximately 80% of those action items required to date in the law.  We have currently completed about half of the deliverables in the law.  Now, as I’m sure you can appreciate, all action items are not created equal.  Some are very complex and require a good deal of input from our workforce and industry partners.  I believe that meaningful collaboration is the only way to achieve a workable path forward. Doing what we need to do to get the most effective work product is our goal, even if it means that certain deadlines are not met. 

Safety

Safety is FAA’s number one mission.  Nothing is more important.  Our system has never been safer.  There has not been a fatal commercial passenger accident in the United States since 2009.  That represents approximately 39.7 million flights that were operated safely.  I am proud of the hard work that has gone into providing a basis for achieving this level of safety.  We need to make aviation safer and smarter through risk based approaches.  The only way to prevent accidents before they happen is to accurately identify risk areas and work to mitigate them.  This is possible due, in part, to voluntary reporting for both FAA and industry employees, safety management systems (for both FAA and industry) and the creation of the Aviation Safety Whistleblower Investigation Office.  All of these efforts have been providing the agency with data and information to which we have never before had access.  More information results in FAA being able to see trends that could lead to accidents, and mitigate the associated risks to prevent accidents from happening.  Adjusting the safety culture to ensure employees that they can provide information without fear of reprisal is a cornerstone of our approach to safety.

Prior to Reauthorization, we had been working on the requirements of the Airline Safety and Federal Aviation Administration Extension Act of 2010.  That act mandated rulemakings to revamp flight and duty time regulations to better address the issue of pilot fatigue, to increasing the required number of hours of flight experience before a pilot can qualify to be a commercial pilot, to revising pilot training to better simulate challenging conditions so that pilots can better handle serious, but rare situations.  We completed the flight and duty time rulemaking just over a year ago, and we are committed to completing our work on the final pilot qualification rulemaking by August 2013[1] and pilot training by October[2].  Reauthorization has since added rulemaking requirements that we are currently pursuing. 

With respect to other safety directives in Reauthorization, FAA commissioned an Aviation Rulemaking Committee (ARC) to develop recommendations to improve our aircraft certification process: we delivered our Report to Congress on that effort in August of last year and we are evaluating these recommendations to determine next steps.  We also established an advisory panel of government and industry experts to develop recommendations on improving the consistency of aviation safety inspections.  We are in the process of finalizing a report informing Congress of the recommendations presented to the FAA.

Reauthorization also required a number of safety-related reports.  We have delivered the report required on runway safety alert systems and the first annual report of the Aviation Safety Whistleblower Investigation Office summarizing the complaints the office has received and how they were handled. In the upcoming weeks, we expect to issue reports on the National Service Air Carrier Evaluation Program, night vision goggles for helicopter pilots, improved pilot licenses, and limiting access to the cockpits in all cargo aircraft.

Pursuant to Congressional direction, we have also worked with the Occupational Health and Safety Administration (OSHA) to draft a statement of policy which permits some OSHA standards to be applied to improve workplace safety for aircraft cabin crew.  We published a draft policy statement in the Federal Register in December of 2012 for comment, and are in the process of reviewing those comments.

Delivering Technology

Our goal in the area of delivering technology is to efficiently and sustainably deliver benefits to our stakeholders and society.  As an aside, one of the responsibilities of the Deputy Administrator is to serve as our Chief NextGen Officer.  Now that I have been confirmed, I hope to appoint a Deputy relatively quickly.  This should be made easier now that the Deputy no longer has to be confirmed by the Senate. 

Throughout Title II of the Reauthorization, there is a theme that modernization of the system must be done in collaboration with our industry partners.  FAA wholeheartedly agrees with this concept.  Imposing technological changes without the input of the users would be a recipe for disaster. We continue to engage through our work with Optimization of Airspace and Procedures (OAPM) initiatives, which are being done in close collaboration with industry and stakeholders.  OAPM is actively working in nine of the 13 metroplexes identified in Phase 1 of the program.  Of these, one of the metroplexes (Houston) is currently in the implementation phase with two additional sites planned to start implementation of the new procedures later this summer (DC and North Texas).  The metroplex initiative optimizes procedures in a geographic area where there are a number of airports, rather than focusing on each airport separately.  Through this initiative, we are untangling our busiest airspace and creating more direct routes, cutting fuel, and becoming more environmentally friendly.  In the congested airspace in the skies above our busiest metropolitan areas, these new modifications are being put in place in three years, much more quickly than the five to ten years it had taken previously.  We are also actively engaged with our industry and government partners in the development of NextGen through the NextGen Advisory Committee (NAC).  This group is helping to guide many aspects of our air traffic modernization work.  The NAC also works with FAA on developing and tracking performance metrics and advising on the technical challenges of one of the new categorical exclusions included in Reauthorization. 

Reauthorization also provides FAA with the ability to consider using operational and financial incentives for commercial and general aviation operators to equip their aircraft with NextGen technology.  We are actively engaging aircraft operators and potential private partners to assess interest and receive feedback on equipage incentive programs and how use of this authority could attract additional investment in NextGen technologies and training.

FAA has completed a departure queue management pilot program that was required in the statute in order to continue to advance plans to enhance surface management at airports.  Also, in accordance with Reauthorization, we have issued interim guidance for AIP funding eligibility that supports the importance of sustainability initiatives in the way that airports do business, and expect to issue further guidance in 2013.  We have also initiated a new study on the National Plan of Integrated Airport Systems, which is a long-established process for identifying and prioritizing strategic investments.  The new study will ensure we are making the best use of available data in supporting our decisions to advance safety, capacity, efficiency, and sustainability initiatives.

Finally, less than two weeks ago, pursuant to Reauthorization, the FAA requested proposals for interested state and local governments, eligible universities, and other public entities to develop six Unmanned Aircraft Systems (UAS) research and test sites around the country.  We expect to select the six sites by the end of the year.  These sites will conduct critical research that will help determine how best to integrate UAS into the NAS.  Once the sites are operational, we expect to learn how UAS operate in different environments and how they impact air traffic operations.  I know this Committee is very interested in UAS integration.  Use of the six sites will provide us with essential information to facilitate integration.  Prior to finalizing the FAA’s UAS five-year “Roadmap”, the FAA is coordinating the roadmap with other UAS stakeholder agencies and ensuring alignment of that roadmap with the Interagency Comprehensive UAS Plan.

Empower and Innovate FAA’s Workforce

In the current fiscal climate, we have to find a way for FAA’s employees to work smarter and enhance our productivity. You tasked us to undertake a thorough review of each program, office, and organization within the agency.  Our report on FAA Review and Reform highlights 36 initiatives to improve and update processes, eliminate duplication and waste, and make the agency more efficient and effective.  The initiatives identified cover many aspects of our operations and include improvements to cost analysis, governance, acquisition processes, standard operating procedures, and human resources.  Of the 36 initiatives, 16 have been implemented and 20 are in progress.  In addition, we are actively engaging our employees in the development of recommendations for facilities consolidation and realignment.

At your direction, we are looking closely at improvements to staffing and training for our employees.  Four studies are underway looking at frontline manager staffing, technical training and staffing, and air traffic controller staffing and air traffic training and scheduling.  We also delivered and implemented a staffing model for safety inspectors that was documented in the Aviation Safety 2012 Workforce Plan.  Finally, in accordance with Reauthorization, we developed staffing standards and scheduling plans for New York City and Newark air traffic control facilities.

Develop and Fund the Efficient FAA of the Future

FAA must not only meet our day to day responsibilities, we must also look to the future and figure out how to shape the agency to meet the demands and opportunities of the future.  As noted earlier, the U.S. aviation system is going through significant, even revolutionary changes.  NextGen is a major transformation which will increase our efficiency and safety, reduce delays and reduce fuel consumption.  UAS have the potential to change the face of aviation.  In the midst of these changes, budget pressures are making us ask hard questions about what the FAA needs to deliver in the coming years to ensure the safety and efficiency of the NAS and how to do it most cost-effectively.

In addition, we will face major changes in our workforce in the coming years.  About one third of FAA employees will be eligible to retire starting 2014.  So for us, succession planning remains a crucial aspect of the agency’s focus, and we must realize that we will begin to lose a vast amount of corporate knowledge in the coming years.  To prepare for that, we must impart this knowledge to today’s emerging leaders and experts to ensure a successful agency in the 21^st century.  We need to embrace innovation and to work efficiency.

Efficiencies are not just for the future.  Given the economic challenges we are facing, FAA has worked very hard to find cost savings and we have been quite successful.  In fiscal year 2012, FAA efficiencies and cost cutting resulted in $81 million in savings.  We have set a target of $91 million in cost savings for fiscal year 2013.  We recognize that the status quo is not an option and we will continue to strive to achieve additional efficiencies moving forward.

Finally, wemust chart innovative and collaborative ways to engage with all segments of the aviation sector, from airlines to association groups, to general aviation, to unions.  We must embrace the opportunity to make long-lasting changes together that ensure a vital and vibrant aviation industry that serves the needs of this nation.

Advance Global Collaboration

The world is increasingly interdependent, so international collaboration is essential if we want to move forward effectively.  FAA needs to continue to lead the charge to improve global aviation safety and sustainability.  This effort will require us to improve the harmonization and interoperability of new technology with international aviation standards and procedures to improve safety on a global basis.  We need to work to ensure the roadmaps agreed to by the International Civil Aviation Organization (ICAO) to advance communications, navigation, and surveillance improvements for global air navigation are compatible with our NextGen concepts and implementation and our domestic regulatory plan.  We are working at ICAO to find practical and collaborative solutions to address aviation’s greenhouse gas emissions and are encouraged by the European Union decision to “stop the clock” on application of their emissions trading system on foreign airlines.  Our leadership role will require us to develop and begin to implement a strategic plan for technical assistance, training, and other activities to maximize the value of FAA’s expertise and United States resources.  The FAA is committed to working proactively with countries around the world to create the initiatives and achieve the outcomes we need in the areas of safety, air traffic management, and the environment to foster a safe, efficient and sustainable global aviation sector. 

Conclusion

Let me conclude by saying that it is essential to the effective management of FAA’s programs to have stability and predictability that can be relied upon.  The many extensions over the last few years took a toll on FAA’s work in certain areas.  Now we face an even more extreme uncertainty with the specter of sequestration looming.  All of us in this room want the same things.  We want to get better at what we do, think smarter, improve safety, streamline certification, and remain the agency that can work collaboratively with the world to develop safer and more efficient practices.  Sequestration will not stop us from trying to attain these goals, but it will make it much, much harder.

Mr. Chairman, that concludes my statement.  I will be happy to take questions at this time.

STATEMENT OF

MARGARET M. GILLIGAN,
ASSOCIATE ADMINISTRATOR,
FEDERAL AVIATION ADMINISTRATION,

BEFORE THE HOUSE COMMITTEE ON
TRANSPORTATION AND INFRASTRUCTURE,
SUBCOMMITTEE ON AVIATION,

THE CERTIFICATION OF THE BOEING 787 AIRCRAFT AND THE LESSONS LEARNED,

JUNE 12, 2013.

Chairman LoBiondo, Congressman Larsen, Members of the Subcommittee:

Thank you for the opportunity to appear before you today to discuss the Federal Aviation Administration’s (FAA) certification of the Boeing 787 airplane.  There were two widely reported incidents earlier this year involving the malfunction of one of the Lithium-Ion batteries on in-service 787s that resulted in the FAA grounding the fleet and initiating a comprehensive safety review of the 787 critical systems, including design, manufacturing, and assembly.  Today, after extensive design and certification work, 787s are once again part of the commercial fleet, flying passengers safely around the world.  The comprehensive review will be completed this summer.

FAA Certification Process

The FAA certifies aircraft and components that are used in civil aviation operations.  Some version of our certification process has been in place and served us well for over 50 years.  This does not mean the process has remained static. Since 1964, the regulations covering certification processes have been under constant review.  As a result, the general regulations have been modified over 90 times, and the rules applicable to large transport aircraft, like the 787, have been amended over 130 times.  The regulations and our policies have evolved in order to adapt to an ever-changing industry that uses global partnerships to develop new, more efficient and safer aviation products and technologies.

As this committee knows, the FAA is using a risk based approach to improving aviation safety.   The FAA focuses its efforts on those areas that have the highest risk.  The FAA type certification team members, who I will discuss in more detail below, must review the applicant’s design descriptions and project plans, determine where their involvement will derive the most safety benefit, and coordinate their intentions with the applicant.  When a particular decision or event is critical to the safety of the product or to the determination of compliance, the FAA must be involved either directly or through the use of our designee system.  

The designee program was originally authorized by Congress in 1938 and is critical to the success and effectiveness of the certification process.   In aircraft certification, both individual and organizational designees support the FAA.  The FAA determines the level of involvement of the designees and the level of FAA participation needed based on many variables.  These variables include the designee's understanding of compliance policy; consideration of any novel or unusual certification areas; or where adequate standards may not be in place.  

There are some issues that will always require direct FAA involvement, including rulemakings required to approve special conditions and equivalent level of safety determinations.  The FAA may choose to be involved in other project areas after considering factors such as our confidence in the applicant, the applicant’s experience, the applicant’s internal processes, and confidence in the designees. 

Something that is not well understood about the certification process is that it is the applicant’s responsibility to ensure that an aircraft conforms to FAA safety regulations.  It is the applicant who is required to develop the plans and specifications and perform the inspections and tests necessary to establish that an aircraft design complies with the regulations.  The FAA is responsible for determining that the applicant has shown that the design meets the standards.  We do that through review of data and by conducting risk based evaluations of the applicant's work.  

When a new design of aircraft is being proposed, the designer must apply to the FAA for a type certificate.  While an applicant usually works on its design before discussing it with the FAA, we encourage discussions with the FAA well in advance of presenting a formal application.  Once an applicant approaches us, a series of meetings are held both to familiarize FAA with the proposed design, and to familiarize the applicant with the applicable certification requirements.  A number of formal and informal meetings are held on issues ranging from technical to procedural.  Once the application is made, issue papers are developed to provide a structured way of documenting the resolution of technical, regulatory, and administrative issues that are identified during the process. 

The applicant must show that its design meets applicable existing airworthiness requirements.   Title 14 of the U.S. Code of Federal Regulations Part 25 comprises the safety requirements for transport category airplanes.  The regulations also provide for the issuance of special conditions when the FAA finds that the existing airworthiness standards do not address new or novel design features.    

When the FAA proposes to apply special conditions to an airplane design, a notice of proposed special conditions is published in the Federal Register and the public has an opportunity to comment.  As is the case with other rulemakings, those comments are considered and addressed before the special condition is finalized.  This process is intended to allow important innovation, while maintaining the level of safety consistent with the existing regulations.  Special conditions address the unique risks associated with a particular new technology.  They do not replace general safety requirements, they supplement them. 

Once the certification basis is established for the proposed design, the FAA and the applicant develop and agree to a certification plan.   In order to receive a type certificate, the applicant must conduct a series of tests and reviews to show that the product is compliant with existing standards and the special conditions. This includes analysis, lab tests, flight tests, conformity inspections, and detail-and airplane-level compliance findings, all of which are subject to FAA oversight.  If the FAA finds that a proposed new type of aircraft complies with safety standards, it issues a type certificate. 

FAA Certification of the Boeing 787

Using the framework described for obtaining a type certificate for a proposed airplane design, I would like to provide some information about the certification of the Boeing 787.  Boeing first applied for a type certificate for this aircraft on March 28, 2003.  The FAA formed a certification team comprised of certification engineers, inspectors, flight test pilots, flight test engineers, human factors specialists, technical advisors, specialists from the FAA Technical Center, and several of our Chief Scientists in various disciplines.  The team was supplemented by experts from other aviation authorities, industry technical organizations such as RTCA and SAE, and government, such as the DOT’s Volpe Center.  As a result of regular meetings between the FAA and Boeing teams, FAA identified a number of design features of the proposed airplane where the current standards did not address the new or novel features, including the lithium ion main and auxiliary power unit (APU) batteries.  At that time, there was a general standard – an FAA regulation - for the design of nickel cadmium and lead acid batteries, but these standards did not fully address the safety issues associated with lithium-ion battery systems.  Therefore, the FAA developed a special condition to establish a comparable level of safety with the standards that were in place at the time of certification.

In order to develop the special conditions necessary to achieve the equivalent level of safety required for certification, we reviewed the available lithium battery literature.  This also included consideration of the hazards of other battery technologies, such as nickel cadmium batteries.  This review and analysis resulted in an issue paper, which led to publication in the Federal Register of proposed special conditions on April 30, 2007.  The special conditions identified requirements to produce a level of safety equivalent to existing requirements in place for other types of batteries.  The special conditions became effective in November 2007 and supplemented the existing part 25 requirements.

The development and approval of the special conditions focused on two related safety concepts; the function the system performs, and the hazards associated with its failure.  The primary governing rule, part 25.1309, establishes general requirements for system safety.  There is also an Advisory Circular that accompanies the rule that describes methods applicants can use to describe and analyze systems to demonstrate compliance. System descriptions and functional hazard assessments help us understand what happens to system functions when failures occur. 

With respect to the lithium ion batteries, from a functional standpoint, they were not critical because they were only intended to provide power if some of the six generators on the airplane failed. 

In summary, the certification of the Boeing 787 required extensive FAA involvement over an eight year period.  A total of 150 issue papers were developed.  Engineers spent thousands of  hours on the certification.  There were over 900 hours of flight testing during the process.    The certification process was detailed and thorough, but, as is the case with newly certified products, we often learn more about the product after it is certified and gains service experience.  As we obtain pertinent information, identify potential risk, or learn of a system failure, we analyze it, we find ways to mitigate the risk, and we require operators to implement the mitigation.  And that is what happened in the case of the 787.

787 Incidents and the Decision to Ground the Fleet

New products and technologies, in all industries, often have operating failures when they first go to market.  Aviation is no different, but the consequences of failure can be so much more significant, that mitigations of potential failures are built into the certification process.  On January 7, 2013, when a battery on the 787 operated by Japan Airlines (JAL) overheated and started a fire on an empty aircraft at Boston Logan Airport, FAA immediately investigated the incident.  On January 11, 2013, FAA announced a comprehensive review of the 787’s critical systems, including the design, manufacture and assembly of the aircraft.  The Japan transport ministry and the National Transportation Safety Board also opened investigations. On January 16, an All Nippon Airways (ANA) 787 made an emergency landing at Takamatsu Airport after flight crew received a computer warning that there was smoke inside one of the electrical compartments.  ANA said that there was an error message in the cockpit indicating a battery system malfunction. 

Far and away the most important fact concerning these incidents is that no one on board the aircraft was injured.  Even when the battery system failed in flight, the incident did not result in injury to anyone on board.  This is in part because the FAA certification process requires manufacturers to assume that system failures will occur and to design mitigations for those failures to protect the aircraft so that no injury occurs to persons on board the aircraft.  From a certification standpoint, that goal was met.

After the second event, we gathered all the data we had.  Given the limited operational experience we had with the airplane, the fact that the two battery events occurred in quick succession, and that one of the events occurred in flight, we decided to ground the fleet.  This would allow us to take the time necessary to develop and implement the right safety solution without compromising safety.

Prior to January, the FAA had not grounded an aircraft fleet since the DC-10 in1979, so this is not an action the agency takes lightly.  Unlike that previous fleet grounding, the 787 was grounded, despite the fact that the incidents, thankfully, did not result in death or injury to passengers or crew. 

The accident rate for commercial aircraft operations is at an all time low.  Neither the public nor the FAA has the tolerance for that accident rate increasing.  Failures of systems on airplanes with hundreds of thousands of flight hours provide us with a tremendous amount of service data we can use to put an operational incident into the appropriate context and determine the corresponding mitigation.  When the number of flight hours that can be evaluated is limited, FAA’s ability to develop an appropriate mitigation is more challenging.

Grounding the 787 fleet gave the FAA the ability to consider necessary mitigations without compromising passenger safety.  The fact that the incident was limited in nature helped us focus our analysis and agree upon a mitigation that could be implemented. 

Post Grounding Review

The comprehensive review of the Boeing 787 and the root cause analysis of the two battery incidents was a data driven process.  Based on past accident investigations, we know that, while it is sometimes not possible to determine the actual cause of an incident, that does not prevent us from developing effective mitigations to prevent further malfunctions. 

Boeing, with support from industry and government battery experts, conducted a comprehensive review of the design of the battery systems.  Based on the information obtained from the review, the focus of mitigation efforts was on the possible causes that could result in an internal short within the cells and the battery.  The changes Boeing proposed addressed the initiation of a short, propagation of the malfunction from one battery cell to another, and containment of the event should another propagation occur.  FAA specialists were involved in developing the mitigation effort throughout the process. 

On April 19, 2013, after Boeing completed the certification plan and demonstrated compliance with the standards, the FAA approved Boeing’s design for modifications to the 787 battery system.  The changes were designed to address risks at the battery cell level, the battery level, and the aircraft level.  A team of FAA certification specialists observed the rigorous tests we required Boeing to perform.  They devoted weeks to reviewing the detailed analysis of the design changes.

On April 26, 2013, the FAA issued an Airworthiness Directive (AD) superseding the previously issued AD mandating that operators install of the main and auxiliary power (APU) unit battery enclosures and environmental control system ducts; and replacing the main battery, APU battery, and their respective battery chargers.  This AD also requires revision of the maintenance program to include an airworthiness limitation reflecting a requirement to replace certain parts related to the battery enclosure.

To assure proper installation of the new design, the FAA closely monitored modifications to the U.S. fleet and staged teams of inspectors at modification locations.  Further, as the certifying authority, FAA continues to provide support to other authorities around the world as they finalize their own acceptance procedures.

Lessons Learned from the 787 Certification Process

The FAA has a standard review of the process of every design we certify.  Short term, we often find administrative and procedural issues that are immediately evident and can be implemented for the next certification.  For example, with respect to the 787, while the “multi-tiered supplier” dynamic is not new to industry, the FAA has determined that we need to spend more time overseeing communication and ensuring a clear line of accountability of all required changes down the supplier chain.  We also look for ways to improve the integrity of the process with the addition of independent review of the work done.

While understanding the lessons learned as the result of a technical failure can take time because the root cause is not readily evident, the FAA has demonstrated its ability to develop mitigations which ensure the safety of passengers and crew.  In cases such as the flammability of the center fuel tank or the 737 rudder malfunctions, mitigations had to be developed that we were confident protected the passengers and crew without knowing the exact root cause of the particular problem. For example, it was not possible to know what caused the spark that caused the explosion in the center fuel tank and brought down TWA Flight 800.  The safest path to mitigation was to find a way to inert the center fuel tank, so that, regardless of what caused the spark, no harm could result.  With respect to the 737 rudder system, which was the cause of two fatal accidents in the 1990s, operational, procedural, training and design changes were implemented to protect flights from potential malfunctions. 

Technical Expertise

Finally, I would like to address the concern expressed by some that FAA’s use of aviation experts who do not work for the FAA suggests that we do not have the requisite expertise to resolve technical problems as they arise.  Such concerns are unfounded.  The aviation industry is filled with intelligent, innovative people.  Certification of aviation products and systems is not limited to the participation of a single certifying entity and a single manufacturer.  It is a worldwide industry and any new airplane design contains parts and products made by hundreds of companies in dozens of countries.  Certification of an airplane, in the United States or abroad, requires the efforts of the best and brightest minds.  FAA seeks the participation of industry experts who can add a level of safety or knowledge that can improve the process or the product.  Likewise, when, as an industry, we face a problem, bringing together the best and the brightest minds to work on solving the problem and making industry-wide safety improvements, should be considered a best practice.  Limiting the use of technical experts because of who they work for is the equivalent of imposing limitations on problem solving.  That is not a limitation that FAA would ever support.

Mr. Chairman, I hope this hearing helps the Committee understand the complexity of the certification process and the commitment of industry and FAA to support both the certification of new and innovative technologies and work to resolve problems as they arise.  I am proud of the safety record we have achieved together.  I am confident we have the best people in place to meet the challenges ahead.

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