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NATIONAL INDUSTRIAL TRANSPORTATION LEAGUE
SPRING POLICY FORUM
Remarks of
Jeffrey N. Shane
Under Secretary for Policy
U.S. Department of Transportation
Arlington, Virginia
April 3, 2006
(Click here for Presentation)
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**Slide 1 – Cover slide**
Before I start my comments on the National Freight Policy Framework, let me
first sincerely thank all of you in the audience, since you are the ones that
keep goods flowing throughout this nation and the rest of the global economy.
“Globalized economy” is quite the cliché, but it is this audience who really
understands the front line of a globalized economy and what trade partnerships
are really about. In the U.S. context, thank you for managing the flow of over 2
billion tons annually, generating $729B of the nation’s GDP, and facilitating
1.1 million direct and indirect U.S. jobs. This NITL meeting is about talking to
Washington leaders, but Washington leaders also need to thank you folks who
actually move product around the globe.
Last year when I had the pleasure of addressing this group, I spoke to you about
the Department’s plans to address freight network issues and lamented the
inaction from Congress on the SAFETEA legislation. Well, a year has passed, and
the bill has passed, and I am again pleased to be before this group. And so as
not to disappoint you, I’ve brought a few new things to lament, including some
of the key freight provisions that did not make the cut in reauthorization, and
a few things – like 6,000 earmarks – that did make it through. My first lament
is that the SAFETEA-LU bill did not include dedicated funding for intermodal
connectors. While the bill did provide funding for Projects of National and
Regional Significance (PONRS), all of that funding was earmarked for specific
projects, leaving USDOT little funding discretion. My second lament is that
clearly neither the Department nor industry has successfully communicated the
urgency of freight needs to Congress or the general public. But the central
theme of my remarks today is less about laments than about challenges. Over the
past year John Ficker and the NIT League have challenged USDOT to step up and
provide federal freight policy leadership. I’m here today to present our
response to your challenge – DOT’s National Freight Policy Framework – and to
offer you a challenge in return.
One of the greatest lessons that I took from the reauthorization process over
the last three years is the importance of communicating the freight story, and
of making sure that Congress, the White House, and the American public
understand the degree to which the U.S. position as the largest trading nation
on earth is dependent upon the adequacy, efficiency, safety, and robustness of
our transportation infrastructure.
** Slide 2 – Dramatic increases in projected freight demand
So what is the real freight story? It’s clearly much too broad to be boiled down
into a couple of slides, and I don’t want to stand here and tell this group what
you already know, but I think it’s worth reiterating the scope of the changes
that we’re currently experiencing. It’s not an understatement to suggest that we
are in the midst of a freight revolution. Globalized production and distribution
continue to grow dramatically – particularly on the part of key trading partners
such as China – and the resulting escalation in the volume and velocity of both
domestic and international goods movement now challenges the global pre-eminence
of the U.S. freight system. What you see here is a graphic depiction of the
expected growth in containerized trade at selected U.S. ports between now and
2020. This growth will demand focused and sustained attention, and the
Department and the freight community need to work together to systematically
address this wave of international goods entering and exiting our country.
**Slide 3 – Pie chart of stakeholders in freight**
This schematic diagram demonstrates the paradox that Federal freight
transportation policymakers face. As you know, freight sector challenges call
for Federal leadership. However, as the slide indicates, the vast majority of
freight capacity issues – a good guesstimate is 75% – are controlled elsewhere
in the public and private sectors. The private sector operates the vast majority
of the freight transportation system, and most public infrastructure investments
are made by state DOTs and MPOs. Consequently, any meaningful freight policy
will require efforts by both the public and private sectors. We’ll need your
help, your buy-in, and your critique, because this will only work with your
support.
**Slide 4 – Communication is critical **
An effective freight policy – or, for that matter, any wise and well-managed
change – must start with communication. A big communication gap currently exists
between the freight industry and public transportation officials. Few of today’s
policymakers fully understand the industry’s supply chain logistics practices
and the needs and challenges that you face on a daily basis, and few in industry
fully understand the role and capabilities of the public sector in relation to
freight. We need to close that gap and seek opportunities for mutual
give-and-take in planning and financing our joint freight future.
**Slide 5 - Partnering for our Collective Future**
We recognize that the Department can’t solve all of the nation’s freight
challenges alone, and we’ve learned a lot from industry throughout this process.
While developing our national freight policy, we worked not only with the
carriers of freight, but also with the shippers – the people who most
fundamentally drive supply chain logistics. You folks have been and will
continue to be vital in this discussion. If you do not know already, I am
pleased to tell you that NITL was one of the first trade associations to step
forward and offer a letter of support on our Freight Policy Framework. And much
more importantly, your League and the people who represent your interests in
Washington have offered their time to work with my staff to make this Framework
take life, allowing it to not only fully reflect the outstanding accomplishments
of U.S. shippers and carriers, but also to help us inform Congress of work that
needs to be undertaken. Let me offer my sincere gratitude to John and his fine
staff all of whom represent your interests very well.
**Slide 6 – A draft framework**
In trying to better understand the challenges of freight policy, we learned how
leading shippers such as Johnson & Johnson approach performance-based change.
What you see here is our first draft of a performance-based framework for a
national freight policy. It includes a shared vision and a set of objectives,
followed by strategies, tactics, and finally specific projects, tasks and
responsibilities. I have repeatedly stressed performance-based framework for a
good reason. When we initially discussed with the Roundtable our previous work
at the Federal and state level, our industry friends immediately reminded us of
the obvious: “All these plans and studies are interesting and commendable, but
without performance-based accountability very little will get done.” An obvious
and seemingly simple admonition from industry, but a good directive for those of
us in government! We’ve gotten the message, and have been working with the
Roundtable to develop a draft framework for a national freight policy, which I’m
happy to walk you through today.
**Slide 7 – DOT’s vision for the freight system**
Let’s start with the framework’s vision. As you can see, our vision is of no
less than “a U.S. freight transportation system that will ensure the efficient,
reliable, safe, and secure movement of goods and support the nation’s economic
growth while improving environmental quality.”
**Slide 8 – Freight Policy Objectives
The framework contains seven broad objectives:
1. Improve the operations of the existing freight transportation system;
2. Add physical capacity to the freight transportation system in places where
investment makes economic sense;
3. Use pricing to better align all costs and benefits between users and owners
of the freight system and to encourage deployment of productivity-enhancing
technologies;
4. Reduce or remove statutory, regulatory, & institutional barriers to improved
freight transportation performance;
5. Proactively identify and address emerging transportation needs;
6. Maximize the safety and security of the freight transportation system; and
7. Mitigate and better manage the environmental, health, energy, and community
impacts of freight transportation.
None of the seven objectives stand alone. There are synergies between them, and
improvement against one objective can produce benefits in others. Similarly,
lack of attention in one area can negatively impacts other areas as well. As one
example, we have evidence that pricing stimulated off-peak moves at the Port of
L.A./Long Beach through an off-peak pricing initiative called Pier Pass. This
program has reduced congestion on I-710, and intuitively we believe it has some
offset on emissions from trucks that are not operating under congested
conditions.
I’d like to quickly walk you through each of the objectives, highlighting a few
of the strategies and tactics that we feel hold particular potential.
**Slide 9 – Objective 1: Improve the operations of the existing freight
transportation system**
What you are looking at here is a Maher Terminal Gate – which represents the
state-of-the-art in the U.S. – heavily instrumented to improve gate flow. As
this picture demonstrates, technology is critical to improving operations. We
collectively must embrace technology in every aspect of the supply chain; this
applies to management, to labor, and to public agencies. We also need to focus
on choke points at bottlenecks and connectors. We know where they are, and now
the challenge becomes how to work with industry, states and municipalities to
create some hybrid financing solutions. The much celebrated public-private
partnership model has to move from a nice phrase to active examples.
**Slide 10 – Objective 2: Add physical capacity to the freight transportation
system in places where investment makes economic sense**
Looking ahead, technology and operations can’t do it all; we simply need more
physical capacity in some areas. Since 1980 the Federal government has put over
$500 billion into the national highway system, which is the backbone for
over-the-road freight movement. As I mentioned, the SAFETEA-LU transportation
reauthorization bill called for Projects of National and Regional Significance,
and we plan on working with local leaders to get these built. The picture behind
me shows the Alameda Corridor in southern California – a prime example of this
type of project. In areas where earmarked funds are not readily available for
freight related investments, there are a number of other Federal programs that
can be used, in combination with more pricing innovations, to help finance the
construction of new freight infrastructure.
**Slide 11 – Objective 3: Use pricing to better align all costs and benefits
between users and owners of the freight system and to encourage deployment of
productivity-enhancing technologies**
Pricing is economics 101. When demand exceeds supply, prices can be adjusted in
order to manage and meet that demand. Freight policy solutions should capitalize
on that value proposition through the use of pricing mechanisms.
What we see in the picture behind me is the Pier Pass operation at the Ports of
Los Angeles and Long Beach. At L.A. and Long Beach the terminal operators
collaborated to charge more for peak gate moves than for off-peak gate moves,
and it’s been quite a success story. About one-third of the total port complex
traffic – 10,000 truck trips per day – now moves during the off-peak hours,
reducing peak hour freight-related congestion on I-710, the main artery into the
ports. Through a broader use of pricing mechanisms, we think that this success
could be replicated at other congested terminals and freight facilities.
**Slide 12 – Objective 4: Reduce/remove statutory, regulatory, &
institutional barriers to improved freight transportation performance**
Guess what? We’re not perfect at DOT.
Please take a moment to revive from that admission.
When the Department was formed in 1967, combining several different modal
activities under one roof, its institutional setup was a great improvement over
the status quo. Since then, times have changed, and so must the Department.
We’re working hard to become more multi-modal and intermodal through activities
such as gateways teams that cut across the modes. We have Gateway teams in place
to respond to freight issues in Chicago (CREATE), in LA/Long Beach, and in
Seattle, and we soon will be responding to a request for a Gateway team to focus
on freight activities at the Port Authority of New York and New Jersey. We’re
also taking a look at other statutory and regulatory barriers to freight system
performance.
**Slide 13 – Objective 5: Proactively identify and address emerging
transportation needs**
What you are looking at in this map is one of the real DOT successes in freight.
This map was generated by the Freight Analysis Framework, a Federal Highway
Administration effort that has done a great job of consolidating data on freight
flows into images such as this.
But, I have to pose some tough questions for ourselves at DOT. Do we have
adequate freight data and perfect freight forecasting tools? The answer is an
unequivocal no. Do we have the right freight research, and is it being done in a
timely manner? There is ample room for improvement here, too. We know that we
must do better in these areas, which was part of the impetus behind the
Secretary’s wisdom in creating the new Research and Innovative Technology
Administration (RITA). We can and must do a better job with freight data and
freight forecasting. And, I might say to our industry friends here today, we are
fully cognizant that we are going to need substantial help from your side on
this new initiative. John, I am putting you on notice that this year we are
going to reach out to NITL in search of deeper insights into shipper practices
and shipper trends. I want to challenge NITL to tell us about the costs of
congestion with specific examples. Are inventory/supply ratios escalating? Are
delivery times expanding due to hours lost in traffic? Is the logistics bill a
rising or diminishing component of your corporation’s bottom line? If the
Department wants to validate policy actions to Congress, we need to make sure
that we fully understand the underlying economics of freight systems.
**Slide 14 – Objective 6: Maximize the safety and security of the freight
transportation system**
Let’s be clear, objectives 1-5 we think are new ground for the DOT, though
certainly not for the private sector. In contrast, safety and security are
collectively job #1 for all of us, all day, and every day. In relation to
freight, we must maximize safety and security without compromising efficiency.
For example, the Federal Motor Carrier Safety Administration is currently in the
process of its Intermodal Equipment Roadability Rulemaking, which will help to
ensure safe chassis in and around our terminals. This puts us in active
partnering with the trucking, rail and containership industries, and we will
strike the right balance between commerce and safety. DOT is also fully engaged
with the industry on Operation Safe Commerce, which is aimed at increasing both
security and productivity at our ports. Our private partners labor diligently to
accommodate new DHS regulations in every part of the supply chain, and we are
clearly making progress. It may be challenging at times, but the system is
working.
**Slide 15 – Objective 7: Mitigate and better manage the environmental,
health, and community impacts of freight transportation**
The importance of environmental stewardship almost goes without saying, and it
is critical that DOT remains a steward of the environment while still keeping
people and goods moving. Yet, as freight volumes grow, there is a clear and
growing correlation to environmental impacts. More trucks, more trains, and more
congestion add up to new environmental, health, and community management
challenges. We must and we will offset vehicle idling around terminals. What you
see here is a “green,” low-emissions locomotive that the rail industry is using
for switching in and around busy freight terminals. Similarly, noise and
dredging impacts must be checked and offset. Communities must be assured that
freight can be a good neighbor, and frankly at major freight hubs I think we
face a steeper challenge on environmental issues that we do on infrastructure
construction.
**Slide 16 – An example: the promotion of idle reduction opportunities**
A national framework for freight policy is just another document on the shelf
without accountability. The private sector has made this point to us very
clearly.
Let’s drill down on an illustrative example of a specific tactic within the
Freight Policy Framework: the promotion of idle reduction policies and projects.
First, we need to raise awareness that some of these activities are already
underway.
• Trucks are allowed a 400lb exemption in size and weight restrictions for idle
reduction equipment, allowing them to reduce their emissions without sacrificing
their ability to carry cargo.
• Railroads such as Union Pacific are beginning to utilize “green goats” –
locomotives with more fuel-efficient engines, such as the picture that I showed
a moment ago – to reduce emissions during movements within their rail yards.
• Some terminals are looking at compressed natural gas (CNG) as a more
environmentally-friendly method for fueling their yard equipment.
Right now we’re working with various stakeholders to address market based
approaches to retrofit legacy diesel engines, and we look forward to innovative
demonstration projects of this nature. We’re also looking at the MARPOL annexes
addressing ship stack emissions, new diesel standards in 2007 for trucks, and
ways to use DOT’s Congestion Mitigation and Air Quality (CMAQ) program to fund
pilot projects that reduce emissions. Finally, I would be remiss if I didn’t
point out the fact that the private sector has already played a huge role in
addressing idle-related emissions. All of these initiatives are valuable, but
there’s more work to be done.
**Slide 17 – Overarching themes and how to get more information**
In closing, I’d like to reiterate the four overarching themes that carry
throughout the framework:
1. This is a national freight policy, not a Federal freight policy or a DOT
freight policy.
2. Investment is crucial. There is no substitute. Jawboning can be effective,
but there are limits.
3. There is a continuing – and growing – need for public-private collaboration.
The days of the Federal government building infrastructure through grants and
entitlements are over, and the public and private sectors must work together to
achieve freight policy solutions.
4. And finally, this is a living document. In contrast to many Federal policies,
I don’t envision this framework ever being fully “complete.” Instead, it will
continually evolve to guide both public and private freight policy efforts over
the coming years.
Going forward, I want you to know that John will be meeting with Departmental
staff to start put the shipper’s perspective into this Framework, and I think
that happens in the next two weeks.
I realize that I’ve just presented you with a lot of information, and I’m sure
that some of you would like to read more about the specifics of our freight
policy framework. As you can see on the screen behind me, we’ve made a copy
available at our new Departmental freight webpage –
www.dot.gov/freight – and we encourage
and welcome any feedback that you would like to provide. We’ve also set up an
email inbox at freight@dot.gov, to which
you should send any thoughts on the framework. This is a work in progress, so I
look forward to your thoughts.
Again, thank you for all the good work you do, and for your support of the
Department and this Framework effort. I’d be happy to take a few questions if
time allows.
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