```

[Senate Hearing 111-490]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 111-490

                   ADDRESSING SURFACE TRANSPORTATION 
                         NEEDS IN RURAL AMERICA

=======================================================================

                             FIELD HEARING

                               before the

                 SUBCOMMITTEE ON SURFACE TRANSPORTATION
                  AND MERCHANT MARINE INFRASTRUCTURE,
                          SAFETY, AND SECURITY

                                 of the

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                            AUGUST 10, 2009

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation

                  U.S. GOVERNMENT PRINTING OFFICE
53-062 PDF              WASHINGTON : 2010
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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

            JOHN D. ROCKEFELLER IV, West Virginia, Chairman
DANIEL K. INOUYE, Hawaii             KAY BAILEY HUTCHISON, Texas, 
JOHN F. KERRY, Massachusetts             Ranking
BYRON L. DORGAN, North Dakota        OLYMPIA J. SNOWE, Maine
BARBARA BOXER, California            JOHN ENSIGN, Nevada
BILL NELSON, Florida                 JIM DeMINT, South Carolina
MARIA CANTWELL, Washington           JOHN THUNE, South Dakota
FRANK R. LAUTENBERG, New Jersey      ROGER F. WICKER, Mississippi
MARK PRYOR, Arkansas                 JOHNNY ISAKSON, Georgia
CLAIRE McCASKILL, Missouri           DAVID VITTER, Louisiana
AMY KLOBUCHAR, Minnesota             SAM BROWNBACK, Kansas
TOM UDALL, New Mexico                MEL MARTINEZ, Florida
MARK WARNER, Virginia                MIKE JOHANNS, Nebraska
MARK BEGICH, Alaska
                    Ellen L. Doneski, Staff Director
                   James Reid, Deputy Staff Director
                   Bruce H. Andrews, General Counsel
   Christine D. Kurth, Republican Staff Director and General Counsel
              Brian M. Hendricks, Republican Chief Counsel
                                 ------                                

      SUBCOMMITTEE ON SURFACE TRANSPORTATION AND MERCHANT MARINE 
                  INFRASTRUCTURE, SAFETY, AND SECURITY

FRANK R. LAUTENBERG, New Jersey,     JOHN THUNE, South Dakota, Ranking
    Chairman                         OLYMPIA J. SNOWE, Maine
DANIEL K. INOUYE, Hawaii             JOHN ENSIGN, Nevada
JOHN F. KERRY, Massachusetts         JIM DeMINT, South Carolina
BYRON L. DORGAN, North Dakota        ROGER F. WICKER, Mississippi
BARBARA BOXER, California            JOHNNY ISAKSON, Georgia
MARIA CANTWELL, Washington           DAVID VITTER, Louisiana
MARK PRYOR, Arkansas                 SAM BROWNBACK, Kansas
TOM UDALL, New Mexico                MIKE JOHANNS, Nebraska
MARK WARNER, Virginia
MARK BEGICH, Alaska

                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on August 10, 2009..................................     1
Statement of Senator Thune.......................................     1

                               Witnesses

Darin Bergquist, Secretary, South Dakota Department of 
  Transportation.................................................     4
    Prepared statement...........................................     5
Larry Anderson, President, A&A Express, Inc. On Behalf of the 
  American Trucking Associations, Inc............................    13
    Prepared statement...........................................    14
Jack Parliament, President, D & I Railroad.......................    23
    Prepared statement...........................................    25
Lisa Richardson, Executive Director, South Dakota Corn Growers 
  Association....................................................    27
    Prepared statement...........................................    29
Matthew K. Rose, Chairman, President and CEO, BNSF Railway 
  Company........................................................    30
    Prepared statement...........................................    32

                                Appendix

Response to written questions submitted by Hon. John D. 
  Rockefeller IV to:
    Darin Bergquist..............................................    55
    Larry Anderson...............................................    55
    Jack Parliament..............................................    56
    Matthew K. Rose..............................................    57

 
        ADDRESSING SURFACE TRANSPORTATION NEEDS IN RURAL AMERICA

                              ----------                              

                        MONDAY, AUGUST 10, 2009

                               U.S. Senate,
         Subcommittee on Surface Transportation and
            Merchant Marine Infrastructure, Safety, and Security,  
        Committee on Commerce, Science, and Transportation,
                                                   Sioux Falls, SD.
    The Subcommittee met, pursuant to notice, at 9:35 a.m. at 
City Hall, Commission Room, 224 W. 9th Street, Sioux Falls, 
South Dakota, Hon. John Thune, presiding.

             OPENING STATEMENT OF HON. JOHN THUNE, 
                 U.S. SENATOR FROM SOUTH DAKOTA

    Senator Thune. Good morning. This hearing of the 
Subcommittee will get underway.
    I want to welcome members of the public who are here today, 
as well as our distinguished panel. I very much appreciate your 
willingness to participate this morning to talk about 
transportation issues and their impact on the economy in South 
Dakota.
    What I want to do is start with an opening statement, and 
then turn to our panel for their opening statements, and then 
we'll hopefully get an opportunity to ask some questions and 
probe a little deeper into some of the issues.
    And I would say, by way of introduction--and I will try and 
adhere to this--but, there's a light, here, that will trigger 
you at the 5-minute mark. We're going to try and confine, as 
much as we can, the oral part of your presentation to that. 
Obviously, there's some flexibility there. But, I did read 
through your presentations, the testimony that you submitted, 
and it's thoughtful and thorough, and long.
    [Laughter.]
    Senator Thune. So, I don't think you'll get those 
statements all on the record in 5 minutes, but I say that 
simply to let you know that your entire statement, whether or 
not you deliver it all in the form of oral testimony, will be 
made a part of the entire public record. And I will introduce, 
in just a moment, the members of our panel this morning.
    First, I want to thank all of you for being here today. As 
the Ranking Member of the Surface Transportation and Merchant 
Marine Subcommittee of the Senate Commerce Committee, I'm 
pleased to chair this field hearing addressing surface 
transportation needs in rural America.
    I want to welcome our distinguished panel of witnesses, and 
thank each of you for participating in today's hearing and 
sharing your perspective on rural transportation.
    Rural states, like South Dakota, face unique challenges 
when it comes to transportation. That is why I wanted to hold 
this field hearing, to ensure that the surface transportation 
issues affecting rural states are not overlooked as Congress 
works to improve our Nation's overall surface transportation 
system. I think it's important to explore the proper role of 
the Federal Government in ensuring our transportation system 
can safely and efficiently move freight and passengers 
throughout the country. State and local governments must also 
play an important role, as they understand best each state's 
particular needs. I'm especially interested in hearing any 
proposals or ideas from today's witnesses for improving the 
movement of people and goods that don't involve large 
commitments of financial resources. In other words, I'm 
interested in your ideas about how we can do things better and 
smarter.
    One of the most important issues facing the Congress is 
reauthorization of the multiyear transportation bill that funds 
highway construction, safety, and transit programs. The current 
law expires at the end of September, at which time we will also 
face a multibillion-dollar shortfall in the Highway Trust Fund, 
which just received $7 billion in short-term funding to prevent 
insolvency this month. While the Commerce Committee has 
jurisdiction over rail and safety programs, including highways, 
motor carriers, HAZMAT, and boating safety, I'm also interested 
in hearing the witnesses' views in how best to ensure rural 
transportation needs are addressed in the comprehensive bill. 
While we can expect Congress to enact short-term extensions 
until an agreement can be reached on the comprehensive bill, 
much work lies ahead, and your input is important.
    Keep in mind, the last highway reauthorization bill that 
was finally enacted in August of 2005 required 22 months of 
extensions before it was finalized. South Dakota, like our 
neighboring states, plays a vital part in the national 
transportation system. Our highways serve as connectors for 
traffic and commerce that benefit citizens from other states. 
In fact, more than two-thirds of the truck traffic on highways 
in South Dakota neither begins nor terminates in our state. Our 
roads also provide access to many of our Nation's world-
renowned national parks, and are essential in transporting 
agricultural goods to market. So, there's a real national 
interest in facilitating interstate commerce and mobility that 
requires first-rate highways in, and connecting across, rural 
states.
    Our state's rail network also deserves discussion today. 
There are approximately 2,000 rail miles in South Dakota, with 
BNSF owning 890 of those miles; the DM&E Railroad is the second 
largest owner, with 586 miles; and the state is close behind, 
with roughly 526 miles of rail line. Without question, we're 
also fortunate to have short-line operators to provide service 
to rail shippers across the state.
    Today, we will get to hear the perspective of not only the 
largest Class I carrier in the country and the state, but also 
from a short-line operator. We will also receive testimony from 
the South Dakota Secretary of Transportation, a representative 
of the trucking industry, and a witness providing the 
agricultural community's point of view on rural transportation 
needs.
    Finally, I'd like to talk briefly about the significant 
need that exists when it comes to Federal funding for 
transportation infrastructure across the country. Since being 
elected to Congress, I've had the opportunity to work on the 
past two transportation reauthorization bills, in both the 
House and the Senate, which has allowed me to ensure that South 
Dakota's infrastructure needs are not forgotten. South Dakota 
relies on the Highway Trust Fund for over 75 percent of its 
highway construction budget on an annual basis. The Federal gas 
tax is the primary funding source for the Highway Trust Fund, 
which provides funding to all the states to address road and 
bridge infrastructure improvements. However, revenue generated 
for the fund has been outstripped by demand and the dramatic 
increase in constructions costs over the past 15 years.
    Because of the dwindling amount of revenue deposited into 
the Highway Trust Fund, due to the weakening economy and the 
fact that the gasoline tax hasn't been changed since 1993, I've 
been working to develop additional funding options that could 
be used by the states. I've joined with Senator Ron Wyden in 
introducing the Build American Bonds Act, which enjoys 
bipartisan support. Our legislation would provide $50 billion 
in new funding for transportation projects, such as roads, 
bridges, transit, rails, and ports. In turn, Build American 
Bonds would create jobs, spur economic recovery, and ultimately 
help to save lives by making needed improvements to our 
Nation's transportation system.
    While this legislation is not a substitute for other 
important funding, such as from the Highway Trust Fund, it 
would provide valuable supplemental funding for transportation 
projects, and I would appreciate very much hearing the 
witnesses' views on this proposal, as well.
    Congress certainly has a great deal of work to do in 
crafting the next transportation reauthorization bill. And I 
want to welcome today's witnesses, and look forward to hearing 
from you.
    And I want to point out, for those who can see the pie 
charts up here, of the truck traffic that moves across the 
country--56 percent of its moves across rural areas and rural 
roads in the country; compared to 44 percent in urban areas. If 
you look at the total amount of road mileage in the entire 
country, 75 percent of that road mileage--actual highway miles, 
road miles--is in what we would call rural areas of the 
country; only 25 percent is in urban areas. And these are 
Federal Highway Administration sources.
    And then, over here, if you look at bridges, 77 percent of 
all the bridges in the country are found in rural areas of the 
country; only 23 percent are found in what we would 
characterize as urban areas.
    And then, I think the last chart is somewhat telling, in 
that, in spite of the fact that the roads and the bridges, and 
a lot of the traffic, occurs in rural areas of the country--a 
majority, or a large percentage, of the traffic--still you look 
at where the money is spent, and it's only 40 percent of the 
money is spent in rural areas, as opposed to urban areas.
    And the point of all that is that when people want to get 
to and from their destinations, when you want to move freight 
across the country, a lot of that has to cross rural states. 
And so, having a national transportation system is critically 
important to our country's future and to our economic 
competitiveness, going forward.
    So, I want to, again, thank our panelists for being here 
today. And I want to start--we'll go left to right, here. Darin 
Bergquist, the Secretary of Transportation for the State of 
South Dakota--welcome, nice to have you here. Larry Anderson, 
who's representing the trucking industry here today--Larry, 
thank you for being here. And Jack Parliament, representing 
short-line railroads--thank you for being here. Lisa Richardson 
represents one of the biggest commodity groups in South Dakota, 
the corn growers, and obviously the shipping interest--it has a 
very deep interest in transportation issues. And Matt Rose, who 
is the CEO of the largest Class I railroad in this country, the 
Burlington Northern Santa Fe. So, thank you for being here, 
Matt. And I welcome all of you.
    And I want to start with Darin. So, please feel free to 
proceed with your oral remarks.

           STATEMENT OF DARIN BERGQUIST, SECRETARY, 
           SOUTH DAKOTA DEPARTMENT OF TRANSPORTATION

    Mr. Bergquist. Thank you, and good morning, Senator Thune.
    Before starting, Senator, I want to say that we very much 
appreciate your efforts to improve transportation in South 
Dakota.
    My full statement addresses many ways Congress should 
improve transportation in the rural states, and I want to 
highlight a few of those before you this morning.
    Congress is now shaping legislation that would fund highway 
and transit programs for the next 6 years. It is a foremost 
priority for us that the share of the overall highway and 
surface transportation program for rural states like South 
Dakota be at least as large as our current share of the present 
program. This is appropriate, because our highways in rural 
areas benefit the Nation in many ways. They are a bridge for 
through traffic to other parts of the country. They benefit 
tourism, providing access to scenic wonders, such as Mount 
Rushmore. They enable agricultural products and other resources 
to move to market. They help serve the Nation's energy 
industry, such as new wind energy facilities and ethanol 
production plants, which are located largely in rural areas. 
And finally, they ensure that our rural Native Americans are 
connected to the Nation's transportation network.
    Yet, a rural state like South Dakota faces severe 
transportation funding challenges. We can't provide these 
benefits to the Nation without strong Federal help because we 
are geographically large, we have extensive highway networks, 
and we have low population densities. We have relatively few 
people to support each lane mile of Federal-aid highway in 
South Dakota. The national average is 129 people per lane mile. 
In South Dakota, that number is 19, less one-sixth the national 
average. Yet, South Dakota's per-capita contribution to the 
highway account, of the Highway Trust Fund, is above average, 
$160 per capita, compared to a national average of $114. So, we 
are doing our share to fund transportation in South Dakota.
    For these reasons, the Federal surface transportation bill 
should provide strong funding for transportation in rural 
states, yet some proposals seem unlikely to sufficiently 
emphasize rural transportation.
    The House Transportation and Infrastructure Committee has 
posted position papers and reported a partial draft surface 
transportation bill. Included is $337 billion for highways, an 
increase of $110 billion over the prior 6 years. Though the 
bill is incomplete at this time, we, in South Dakota, are 
basically ineligible for at least $75 billion of this increased 
funding, such as the $50 billion being set aside for metro 
areas greater than--500,000 population, and another $25 billion 
that's reserved for huge projects. There are large needs in 
South Dakota and other rural states that must be met in the 
national interest. All states need a significant increase.
    It is not appropriate if most of the funding increase is 
for programs we can't access, especially if there is no 
corresponding large program reserved for rural states, which 
there currently is not.
    Instead, Congress should take the approach to this issue 
offered by AASHTO, that at least 90 percent of all highway 
program funding be distributed by formula to states. This 
approach, combined with a formula providing South Dakota at 
least its current share of formula funds, is the way to address 
the national interest in improving transportation in both rural 
and urban areas.
    Under SAFETEA-LU, about four times as much funding has been 
provided for the highway program as for transit. The draft 
House bill disproportionally increases transit funding, which 
is directed mainly to large urban areas. The Federal Government 
should continue the current ratio of highway-to-transit 
funding, but allow states to transfer funds to transit, if they 
desire.
    In September, Congress should pass legislation to ensure 
that the highway account of the Highway Trust Fund can continue 
to support at least current funding levels. Congress must also 
extend highway and surface transportation programs beyond 
September 30 of this year. These steps will allow continued 
transportation investments while Congress works on a multiyear 
transportation bill.
    In conclusion, there are many actions Congress should take 
to improve transportation in rural America. I hope I've made 
clear that our biggest concerns revolve around funding.
    I'll close as I opened, emphasizing that it is in the 
national interest for South Dakota to receive at least its 
current share of the overall highway and surface transportation 
program under new legislation.
    Thank you, Senator, for the opportunity to testify this 
morning. I'd be pleased to respond to any questions.
    Thank you.
    [The prepared statement of Mr. Bergquist follows:]

           Prepared Statement of Darin Bergquist, Secretary, 
               South Dakota Department of Transportation
    Senator Thune:

    Good Morning. I am Darin Bergquist, Secretary of the South Dakota 
Department of Transportation. Thank you for the opportunity to appear 
before the Subcommittee today to address surface transportation needs 
in rural America.
    We are pleased that the Subcommittee is holding this hearing, as 
the importance to the Nation of good transportation in and across rural 
states sometimes is underappreciated.
    In my statement today I'll address a number of transportation 
issues important to rural America and to South Dakota.

   I'll discuss why rural states like South Dakota must receive 
        a significant increase in Federal transportation funding and 
        participate at least proportionately in future growth of the 
        Federal highway and surface transportation program.

   I'll address a variety of issues that have been raised in 
        the context of proposals to reauthorize highway and surface 
        transportation programs, including program structure issues and 
        proposals to increase Federal regulation of states through plan 
        approvals, Federal performance targets, and otherwise.

   I'll also address:

     safety and transit issues;

     the impact of restrictions on the ability of rail 
            short lines to access large rail carriers; and

     the challenges of funding the proposed Harrold, SD 
            transload, rail to truck facility.

   Before closing, I'll also emphasize the importance of 
        maintaining the ability of the Highway Account of the Highway 
        Trust Fund to support at least current funding levels and 
        remain solvent and the importance of passing extension 
        legislation to ensure continuity of the highway program in 
        South Dakota and the Nation.
Highway and Transportation Reauthorization Legislation Must Provide at 
        Least Proportionate Funding Growth for Rural States Like South 
        Dakota, As Well As Increased Funding
    At the outset I want to stress that Federal investment in South 
Dakota's highways is in the national interest. It is imperative that 
legislation reauthorizing the Federal highway program continues to 
provide significant investments in highways in and across rural states, 
allowing us to continue to meet the demands being placed on our highway 
network, including from interstate travel.
    I think it is also important to note that all regions of the 
country have significant transportation needs. There is a broad 
consensus, at least in the transportation community, that increased 
investment would serve the national interest. For example, the American 
Association of State Highway and Transportation Officials (AASHTO) has 
proposed a $375 billion in Federal highway program funding and $93 
billion in Federal transit funding for the six-year period 2010-2015. 
These levels would represent significant increases over the roughly 
$290 billion in Federal funds provided for highway, transit, and safety 
programs in the 2004-2009 period.
    Many ideas have been advanced in recent years and Congress is now 
starting to shape multi-year surface transportation funding 
legislation. Certainly our department and others from rural states have 
clearly stated to Congress and various Commissions that this next 
reauthorization bill must provide a rural state like South Dakota at 
least its current overall share of Federal formula funding and other 
funds. That result would be in the national interest, as my testimony 
explains later on. Yet, it is not a foregone conclusion that Congress 
will agree to provide such support to South Dakota and similar states.
Early Thoughts on Legislative Proposals
    We have concerns about the reauthorization legislation under 
development in the House of Representatives. While legislation with 
specific funding levels has not yet been introduced, the House Highways 
and Transit Subcommittee has reported to the full Transportation and 
Infrastructure Committee a partial draft bill and Committee leaders 
have released related position papers outlining their proposal. It 
apparently calls for an increase in Federal highway program 
authorizations from the Highway Trust Fund of about $110 billion over 
the next 6 years compared to the last 6 years (roughly $337 billion 
compared to $227 billion).
    According to position papers distributed by the Committee 
leadership, the bill would provide $50 billion of that $110 billion to 
a new program only for metropolitan areas with a population of 500,000 
or more. We understand that traffic congestion is an issue in many 
cities. But we disagree with committing so much of the overall increase 
to a program that will benefit only large metropolitan areas. The 
proposal also includes another program where $25 billion is reserved 
for very large projects to be selected by USDOT. The eligible costs of 
those projects would have to be at least $500 million or 75 percent of 
a state's most recent annual highway apportionment. In South Dakota, 
that means a single project of more than $150 million would be needed 
just to be able to apply for these discretionary funds.
    So, we see $75 billion of the $110 billion in additional trust fund 
authorizations for highways dedicated to two programs that are not 
available to our State in any practical way. In addition, the draft 
bill includes a $50 billion non-trust funded program for high-speed 
rail for which our state is not eligible.
    We, like AASHTO, support a different approach, under which not less 
than 90 percent of highway program funds would be distributed by 
formula to the states. Further, it is essential to recognize the 
importance of investment in highways in and across rural states like 
ours in the final formula and funding package. Our state's share of the 
overall highway and surface transportation reauthorization program 
should be at least as large as our share of the present program in 
order to ensure national access and connectivity and provide other 
national benefits, as I will describe.
    We know you understand this, Senator Thune, both from your work on 
transportation issues through the years and from your recent work. For 
example, we appreciate that you are a co-sponsor of S. 308 and S. 309, 
bills introduced by Senator Baucus that would strengthen Federal 
funding for investment in highways in and across rural states.
    Also of concern, the House draft bill would provide a 
disproportionately small share of its overall funding increase to the 
highway program, even though it is highway users who pay for the 
program in user taxes. Instead, the draft House proposal would provide 
an increased share of its overall funding to transit, relative to 
highways. South Dakota's share of Federal transit dollars is far less 
than its share of Federal highway dollars. Transit is a small portion 
of the transportation need in our state. We, like AASHTO, support 
keeping the ratio between the highway and transit programs at 4-1, with 
four times as much funding going to the highway program as going to the 
transit program from all sources of funding. Let me add that this 4-1 
ratio is before any adjustments reflecting transfers of funds from 
highways to transit, which have regularly been in the range of a 
billion dollars annually. We support continuing such flexibility, which 
allows each state to better address its own needs.
    In addition, the House Committee's position papers regarding the 
draft bill state that it will include an infrastructure bank, probably 
supported from outside the Trust Fund. We are not certain how much 
public governmental funding will be committed to the bank's activities 
but we do foresee these funds as not being easily accessible to a rural 
state like ours. An important consideration for any new Federal 
transportation financing mechanisms like an infrastructure bank is to 
ensure all areas of the country, both rural and urban, are not only 
eligible, but can compete on a level playing field. Also, funding 
sources for the bank should not compete for funding against sources for 
the regular surface transportation program.
    In contrast, the Build America Bonds bill (S. 238) that you are co-
sponsoring would ensure that both rural and urban areas of the country 
participate in its program. We greatly appreciate your leadership in 
developing a proposal that would benefit both rural and urban areas.
    In short, even without knowing the details of any proposed formula 
changes in the draft House bill, we are concerned over the structural 
changes in the highway program that we do see. Those changes would 
emphasize funding for new, non-formula programs for the benefit of 
large metropolitan areas. This approach will dramatically reduce our 
state's share of the overall program. So, while details of the House 
bill are not set, we currently expect that the House legislation would 
provide South Dakota with a reduced share of the transportation bill's 
programs compared to current law, perhaps a considerably reduced share.
    In addition to preserving our share of overall funding, I would 
like to address some additional highway program issues.

   Don't Put New Restrictions on the Use of Federal Funds. The 
        current highway and transportation program is complex. We would 
        like to see processes streamlined so we can deliver projects 
        more efficiently. The role and authority of states in 
        delivering the highway and surface transportation program 
        should be respected and not diminished. We see proposals for 
        additional requirements as counterproductive, adding time and 
        cost to the project delivery process.

    The draft House bill includes restrictions on the ability to use a 
        considerable portion of the bill's funding for investments that 
        would add capacity or strengthen roads. States and local 
        governments are in the best position to know which projects 
        should be implemented. Restricting the ability of states to add 
        capacity and strengthen roads is not the correct approach, at 
        least in rural America.

   Transportation-related Climate Change Provisions May not 
        Make Sense in Rural States. Both the climate change legislation 
        that has passed the House of Representatives and the draft 
        legislation reported by the House Highways and Transit 
        Subcommittee would require all states to develop targets to 
        reduce transportation-related greenhouse gas (GHG) emissions. 
        States will be required to make efforts to increase transit 
        ridership, walking, and bicycling. While South Dakota has made 
        great strides in this area, our state is very rural in nature 
        and there is only so much we can do to cost-effectively promote 
        walking, bicycling, and transit ridership. Performance 
        requirements would be imposed and under some proposals states 
        not meeting performance targets could have funds withheld. 
        There are several proposals with new planning requirements that 
        would compel states to reduce GHG emissions. These proposals 
        may be viable options in metropolitan areas, but due to our low 
        population density, great distances, and harsh winters, they 
        are not practical transportation options for rural states like 
        ours. We believe that the proper, national interest approach is 
        to ensure that any such statute would not force, or allow an 
        agency to force a state like ours to undertake unrealistic 
        efforts to reduce transportation-related GHG emissions. We 
        generate very little GHG from transportation compared to other 
        states and we will do our part to remove GHG emissions using 
        modern, no-till agricultural practices.

   Do Not Agree to Increased Regulation Through National 
        Performance Measures, Targets and Plan Approvals. Performance 
        measures are important, and the South Dakota DOT uses them in 
        making project selections and in other aspects of program 
        delivery. However, we are concerned that national performance 
        measures established by the Federal Government will not be 
        sensitive to all states' needs and may result in reduced 
        emphasis on funding projects in rural states. The House 
        legislation has the Federal Government, not states, 
        establishing certain performance targets and gives the Federal 
        Government authority to impose sanctions for failure to meet 
        certain performance targets.

    We believe that national performance measures should be general in 
        nature and that each state should be allowed to establish its 
        own specific measures and targets. Deference should be shown to 
        the owners and operators of the Nation's transportation system. 
        States, local governments and transit providers have decades of 
        success in delivering transportation and such success should be 
        respected. The role and authority of states in the delivery of 
        highway and surface transportation should be enhanced, not 
        diminished, compared to present law. Simply, we don't see 
        increased Federal regulation, even if cloaked in the new 
        terminology of ``performance,'' as a way to achieve increased 
        efficiency in program delivery. Reduced regulation should be 
        the goal.

   Highway Safety Provisions Should Provide Flexibility to 
        States. Transportation safety is a critical concern in South 
        Dakota, as it is in all states. Contrary to the House draft 
        legislation, states, not the USDOT, need to have control and 
        approval authority over their safety plans. Inflexible Federal 
        requirements in safety planning and specific program 
        requirements can be counterproductive. For example, the draft 
        House bill includes a provision that would withhold some 
        highway funding from a State if it does not have a law that 
        requires ignition interlocks to be installed in the cars of 
        first time drunk drivers. Ignition interlock devices do not 
        always work very well in cold climates like we have in the 
        Dakotas. The South Dakota Attorney General has developed 
        another approach to dealing with convicted drunk drivers that 
        requires them either to be tested twice a day to ensure zero 
        alcohol consumption or to wear a continuous alcohol sensing 
        bracelet. Both of these approaches have been found to be very 
        effective at reducing repeat offender drunk driving. States 
        need to be able to choose the most effective methods to promote 
        safety. Top down mandates, funding restrictions and specifying 
        the use of particular technologies is not an approach that 
        provides incentives for state innovation and successful program 
        outcomes.

   Do Not Agree to Increased Regulation Through Comprehensive 
        Street Design Policy. The draft House legislation would 
        significantly restrict state flexibility, project design and 
        project selection by inviting significant new and prescriptive 
        USDOT regulation and potential litigation regarding issues such 
        as whether states have ``balanced'' costs with the 
        ``necessary'' scope of a project and adequately preserved 
        ``aesthetic resources'' and ``adequately'' accommodated all 
        users. Defining and interpreting such terms may broaden project 
        scopes substantially and increase project costs while delaying 
        project delivery.

    So, a state like South Dakota faces both funding and regulatory 
challenges in this legislation. However, the way to improve 
transportation in this country is to pass reauthorization legislation 
that, among other things, ensures that rural states like South Dakota 
receive at least their current share of transportation dollars without 
undue regulatory burdens.
    Let me turn now to some of the reasons why the reauthorization 
legislation should continue to provide rural states like ours with at 
least their current share of funding under the Federal highway and 
surface transportation programs.
The Nation Benefits from Federal Transportation Investment In and 
        Across Rural States
    Federal-aid highways in our state, not just those on the National 
Highway System, provide many benefits. Among other things, they:

   Serve as a bridge for truck and personal traffic between 
        other states, advancing interstate commerce and mobility;

   Support agricultural exports and serve the Nation's ethanol 
        production and energy industries, which are located largely in 
        rural areas;

   Are a lifeline for remotely located and economically 
        challenged citizens, such as those living on tribal 
        reservations;

   Enable people and business to traverse the vast tracts of 
        sparsely populated land that are a major characteristic of the 
        western United States; and

   Provide access to scenic wonders and facilitate tourism.

    The Federal-aid system extends beyond the NHS and allows enhanced 
investment to address safety needs on rural routes.
    Further, Federal investment in rural transit helps ensure personal 
mobility, especially for senior citizens and people with disabilities, 
connecting them to necessary services. Federal public transit programs 
must continue to include funding for rural states and not focus 
entirely on large metropolitan areas. Let me amplify a few of these 
points.
Bridge States Serve a National Connectivity Interest for People and 
        Business
    Highway transportation between our country's major metropolitan 
areas is simply not possible without excellent roads that bridge those 
vast distances. This connectivity benefits the citizens of our Nation's 
large metropolitan areas because air or rail travel frequently will not 
be the best option for moving people or goods across the country. The 
many commercial trucks on our rural interstate highways demonstrate 
every day that people and businesses in the major metropolitan areas 
benefit from the Nation's investment in highways in rural states.
    The most recent FHWA data on tonnage origins and destinations shows 
that just over 68 percent of the truck traffic using South Dakota's 
highways does not originate or terminate within the state. This is well 
above the national average of about 45 percent, underscoring that South 
Dakota highways help connect the Nation in a way that benefits other 
states and the Nation.
Essential Service to Agriculture
    A significant portion of the economy in our state is based on 
agriculture. Agriculture is one sector of the economy where the United 
States has consistently run an international trade surplus, not a 
deficit. Over the last two decades roughly 30 percent of all U.S. 
agricultural crops were exported.
    Apart from its value to the state, there is a strong national 
interest in ensuring that value-added agricultural products and natural 
resources have the road network needed to deliver products to markets, 
particularly export markets. A key part of that total road network is 
the roads below the National Highway System, where export crops begin 
their journey from point of production to their final destination.
    South Dakota is a major contributor of energy production in the 
Nation. Our state is currently fifth in the Nation in ethanol 
production and has nearly a one billion gallon a year production 
capacity. Good roads throughout the state allow grain to be harvested 
and delivered to ethanol production facilities by truck. These roads 
are paramount to the Nation becoming energy independent and providing 
agricultural products to feed a hungry world.
    It is also worth noting that, over the last three decades, tens of 
thousands of rural rail branch lines have been abandoned nationwide. 
Since 1980 in South Dakota over 152 miles of railroad branch lines have 
been abandoned or rail banked. The reduced reach of the rail network 
means that many areas, particularly rural areas, must rely more heavily 
on trucks to move goods.
    These trucks are subject to spring load restrictions. The 
underlying reason for spring load restrictions is inadequate road base 
strength and roadway thickness. During the spring thaw, the ground is 
waterlogged and can't support a fully loaded 18-wheeler on many 
highways. Given their current funding, many northern states have little 
choice other than to limit axle weights on highways during those times. 
Like congestion, load restrictions slow down commerce and add greatly 
to the cost of doing business.
    To better serve agriculture and the nation, projects that 
facilitate truck to rail transfers at grain elevators and other 
locations should be an eligible activity to be funded by direct grants 
and broader formula programs in the next reauthorization at the 
national level. Freight bottlenecks in metropolitan areas and access to 
ports or other waterborne freight locations are not the only freight 
activities that should be eligible for funding.
Tourism Access
    Without a strong highway network in rural states, citizens from 
across the country as well as visitors from abroad would have limited 
access to many scenic destinations. Tourism is vital to the economy of 
South Dakota and tourism is enhanced by a good highway network. 
Badlands National Park, Mount Rushmore National Monument, Wind Cave and 
Jewel Cave National Parks, the Spearfish Canyon and Peter Norbeck 
National Scenic Byways are important tourist destinations and they and 
many other state attractions are served by the non-interstate highway 
network. Continuing access to such destinations remains a strong 
national interest and must be backed up by funding for rural states and 
areas.
Rural States Face Transportation Funding and Financing Challenges that 
        Require Federal Financial Assistance
    Rural states like South Dakota face a number of serious obstacles 
in preserving and improving the Federal-aid highway system within their 
borders. We:

   are geographically large;

   have low population densities; and

   have extensive highway networks.

    Our large road network has few people to support it. In South 
Dakota there are about 19 people per lane mile of Federal aid highway. 
The national average is approximately 129 people per lane mile. Our per 
capita contribution to the Highway Trust Fund also exceeds the national 
average. The per capita contribution to the Highway Account of the 
Highway Trust Fund attributed to South Dakota is $160 compared to the 
national average of $114 per person.
    These factors make it very challenging for rural states to provide, 
maintain, and preserve a modern transportation system that connects to 
the rest of the Nation. Our low population and traffic densities also 
mean that tolls are not an answer to funding transportation needs in 
rural areas.
Rural Transit
    I have explained earlier that we support proportionate increases in 
the Federal highway and Federal transit programs and we continue to 
support flexibility to transfer funds between the highway and transit 
programs. This allows many of the more heavily populated states to make 
additional investments in transit.
    Within that context we do want to emphasize that transit is not 
just for large metropolitan areas. Our larger cities, Sioux Falls and 
Rapid City, have transit needs. Our more rural and smaller cities and 
Indian reservations also have needs for public transportation. 
Accordingly, we offer a few thoughts on transit program legislation.
    We support the Rural Transit Improvement and Flexibility Act, S. 
1144, introduced by Senator Johnson with four co-sponsors. One section 
of that legislation would ensure a slightly increased share of rural 
transit funds for very rural states. That is appropriate given the 
special transit challenges facing a very low population density state 
like ours.
    Consider that in rural areas transit is usually provided via small 
bus and van service. Frequently, it is on demand service for the 
elderly and disabled, such as non-emergency trips to the hospital, 
pharmacy, or clinic, or trips to a grocery store. This is especially 
challenging in the very low population density states, where the one-
way trip to a medical facility for one or two riders can be 50 miles or 
more.
    There are some basics needed for transit service regardless of 
population or traffic density. Service requires a bus (or van). It 
requires qualified drivers. It requires a well-maintained and well-
equipped vehicle. It requires vehicle parts. These elements are 
essential whether a bus is carrying 4 people and has to travel 50 miles 
(big state, low density) or is carrying 15 or more people in towns with 
a population of 45,000. Simply, there are diseconomies of geographic 
scale in providing essential public transit connectivity in extremely 
rural areas. We appreciate that S. 1144 would try to respond to those 
challenges.
    Another section of that bill would provide additional flexibility 
in the use of funds under the elderly and disabled transit program, by 
allowing a small portion of those funds to be used for operating 
expenses. Given funding pressures on state and local governments, to 
help ensure continued transit services for the elderly and disabled, it 
is appropriate to provide the flexibility to use at least a portion of 
section 5310 funds for operating expenses. The bill would provide that 
flexibility by allowing--but not requiring--up to 25 percent of section 
5310 apportionments to be used for operating expenses. This proposal 
will provide states both rural and urban increased (but limited) 
flexibility to ensure that there are funds to operate transit service 
for the elderly and disabled.
    The draft House bill would completely exclude rural states from 
eligibility for discretionary transit grants (eliminating bus and bus 
facilities from the program under 49 USC 5309). This would eliminate a 
source of funding that has benefited citizens throughout South Dakota, 
including Indian tribes, in recent years.
    We have outlined above some of the special challenges of providing 
transit service in rural areas and hope the Congress can help us meet 
them.
NHTSA and FMCSA Programs
    The Commerce Committee has jurisdiction over programs of the 
National Highway Traffic Safety Administration and the Federal Motor 
Carrier Safety Administration. These are important safety program areas 
and South Dakota's participation in them is administered by our State's 
Department of Public Safety. Our broad concern with these programs is 
that any changes that are made to current law should be done in a way 
that does not adversely impact South Dakota's eligibility to receive 
funds under the programs or reduce its share of funds from the 
programs. To the extent that is not the case, our state's ability to 
invest in safety enforcement and education and related safety programs 
would be impaired. As the legislative process advances with respect to 
these programs, we would welcome the opportunity to work with you and 
the Committee to ensure that the needs of rural states like ours are 
taken into account.
Rail Issues--Barrier Rates When Short Lines Access a Large Rail Carrier 
        Can Adversely Impact Rural Shippers
    When a large railroad decides a branch line is not profitable, it 
is often not abandoned but, instead, sold to a short line carrier. The 
sales of these lines usually will include terms referred to as ``paper 
barriers,'' which restrict the short line from interchanging freight 
with carriers other than the seller. These restrictions often work to 
the detriment of the shippers on the line. South Dakota shippers might 
be able to access new markets or have more competitive shipping rates 
if rates between short lines and major carriers improved. In South 
Dakota, the sale of the core rail system and the settlement agreement 
with the BNSF eliminated many of these paper barriers. In any case, a 
large carrier should not be discouraged from selling lines to short 
line carriers as an alternative to abandonment but some improvements in 
rates between short lines and major carriers may be possible.
    Where paper barriers have been eliminated and other carriers can be 
reached, or where rail freight competition exists, we see much lower 
freight rates. These lower freight rates are a direct benefit to the 
shippers and producers in the state and to the economy of the state as 
a whole.
    In addition, we support programs, funded from outside the Highway 
Trust Fund, that encourage rail freight infrastructure improvements to 
lessen the traffic and wear on our state highways.
Harrold Transload Facility
    A very exciting project has been proposed for Harrold, South 
Dakota, but there are real challenges finding a way to fund it. This 
project will construct an intermodal handling facility, rail to truck, 
for wind power components. Many of these oversize and overweight 
components are currently trucked long distances causing interference 
with normal traffic and additional stress on the roads. Use of the 
railroad will create a shorter freight haul over the highway and reduce 
road damage.
    The project will include engineering, property acquisition, 
grading, and gravel surfacing for the rail yard area, installation of 
switches and construction of 5,800 feet of railroad track. The 
completed project will allow wind power generating equipment to be 
shipped into Harrold, South Dakota, by rail and then loaded onto trucks 
and shipped to its final destination. It is expected that these 
components will be trucked as far as southern North Dakota and northern 
Nebraska. Total estimated project costs are $3 million.
    We believe the project is eligible under the Transportation, 
Community, and System Preservation Program (TCSP), within the Federal 
Highway program. However, we have not received confirmation of that 
from USDOT. Further, that is a very small discretionary program that is 
often oversubscribed. Further, the program would be terminated under 
the draft House bill. So, there is no reliable way to fund it under the 
current program.
    If TCSP funding is to be used, the plan is for the non-Federal 
match to be loaned by the State of South Dakota to the Hughes County 
Regional Railroad Authority. The Hughes County Regional Railroad 
Authority will lease track to the DME Railroad. The DME Railroad will 
repay the loan.
    The new legislation needs to provide a clear path that enables this 
kind of project to be funded.
Ensure Highway Trust Fund Solvency and Program Continuity
    Before closing, I also want to emphasize that, when the Congress 
returns in September, it should promptly enact legislation to ensure 
the solvency of the Highway Account of the Highway Trust Fund and to 
extend highway and surface transportation programs.
    Even though the Congress just passed welcome and sorely needed 
legislation to transfer $7 billion into the Highway Account, that 
merely prevented serious financial problems for the Account, at present 
funding levels, from happening this month. The Highway Account could 
still reach a zero balance around the end of September or shortly 
thereafter. It will be highly disruptive to states if FHWA begins to 
delay payment of state claims to reimburse costs. As a zero balance 
gets closer, states will begin to curtail bid openings and take steps 
to avoid the risk of not having funds to pay for the work. Compounding 
the situation, South Dakota, like other states, already has contracts 
in place for which the Federal Highway Administration may not be able 
to reimburse funds. This would create a financial crisis for the SDDOT. 
For the public at large, the jobs and transportation benefits of the 
program would be denied, or at least delayed, if the program is 
disrupted.
    Therefore, we hope the Congress will pass legislation in September 
providing the highway Account of the Highway Trust Fund with the 
resources to pay for highway work funded at least at current funding 
levels. USDOT and AASHTO have estimated that an additional $8-$10 
billion must be added to the Account in order to continue current 
highway program levels through FY 2010. This is needed just to continue 
programs at current levels, avoid disruption to the program, and avoid 
job losses and cutbacks in construction. We note that S. 1474, recently 
introduced by Senator Baucus with Senators Rockefeller and Menendez, 
would provide sufficient funding to ensure program continuity for the 
highway, transit, and safety programs funded from the Highway Trust 
Fund for a period of time that hopefully will facilitate development 
and enactment of a multi-year reauthorization of these programs.
    Another matter that we hope can be addressed by Congress in 
September is the need to pass legislation that would repeal the 
rescission of some $8.7 billion in highway contract authority that is 
scheduled to take effect in late September. Rescissions on this scale 
will reduce the programming flexibility available to every state DOT 
and make it harder for states to pursue priority projects.
    Further, there is no question but that highway, transit and highway 
safety programs need to be extended before the end of September to 
avoid program disruption. Various Senate committees, including the 
Commerce Committee, have reported ``clean'' extension legislation. We 
think that is the appropriate course, as we have concerns with respect 
to a number of the ``reforms'' some would have included in extension 
legislation. Enactment of an extension is necessary to continue 
transportation investments while Congress works on multi-year 
authorization legislation. The clean extension is needed to continue 
investments--which means jobs, highway and transit mobility, and 
safety--while work on a multi-year bill continues.
Conclusion
    In conclusion, we consider it essential that Congress pass 
legislation reauthorizing the highway and surface transportation 
programs that recognizes that significantly increased Federal 
investment in highways and surface transportation in rural states is, 
and will remain, important to the national interest. The citizens and 
businesses of our Nation's more populated areas, not just residents of 
rural America, benefit from a good transportation network in and across 
rural states like South Dakota. With such legislation, we will be 
better equipped to address transportation needs in our state to the 
benefit of South Dakotans and all Americans.
    That concludes my testimony. I'd be happy to respond to any 
questions you may have.

    Senator Thune. Thank you, Mr. Secretary.
    Mr. Anderson?

              STATEMENT LARRY ANDERSON, PRESIDENT,

               A&A EXPRESS, INC. ON BEHALF OF THE

              AMERICAN TRUCKING ASSOCIATIONS, INC.

    Mr. Anderson. Senator Thune, thank you for the opportunity 
to testify on behalf of the American Trucking Association.
    My name is Larry Anderson. I'm the President of A&A 
Express, a trucking company located in Brandon, South Dakota. 
We provide transportation for food service industry throughout 
the United States. I am the former Chairman of the South Dakota 
Trucking Association, and currently serve on the ATA's Board of 
Directors.
    Rural communities are very dependent on the highway 
transportation for the movement of both people and goods. More 
than 70 percent of South Dakota communities, for example, rely 
exclusively on trucks for the movement of their freight and 
deliveries.
    Over the past three decades, farmers and their customers 
have become increasingly dependent on trucks to move their 
products. As of 2004, trucks hauled nearly half of the Nation's 
grain. The future success of rural economies rests on the 
ability of the trucking industry to move natural resources 
efficiently. Therefore, the next Federal highway bill must 
ensure adequate investment in rural highways, and make changes 
to the Federal law which allow trucking industry to operate 
more efficiently and more safely.
    The highway bill should dedicate a significant share of the 
highway user-fees revenues to the improvement of the national 
Highway system. There is a 162,000-mile network of highways 
that make up just 4 percent of the country's roads and carry 75 
percent of U.S. truck traffic and 45 percent of the total 
vehicle traffic. While the highway improvements are very likely 
to carry a significant cost, it is possible to improve freight 
transportation efficiencies with a very small investment if 
trucking companies are allowed to run their safest, most 
productive equipment. Increasing the carrying capacity of 
trucks will allow the trucking industry to move the country's 
freight, while making fewer trips. This reduces our accident 
exposure, allows us to burn less fuel and emit fewer emissions, 
and lower freight costs for our customers, making them more 
competitive in the world market.
    Unfortunately, the Federal freeze on increasing truck size 
and weight limits prevents states from making commonsense 
changes. For example, here in South Dakota, Highway 37 and 
Highway 12 have been upgraded to four-lane roads, yet Federal 
freeze forces trucking companies to run longer combinations on 
less-safe two-lane roads. Even worse, the prohibition against 
running LCVs on Highway 12 forces trucks to drive 220 miles out 
of their way. The Federal freeze makes no sense for South 
Dakota and other states facing similar problems, and we urge 
Congress to reform Federal law so states can make sensible 
changes to their size and weight regulations.
    Finally, the ATA is recommending several changes to the 
Federal safety regulations that we believe will go a long ways 
toward reducing injury and fatalities on our highways. These 
proposals are outlined in our written testimony, but I would 
like to focus on one of them: the creation of a national 
clearinghouse for positive drug and alcohol test results. A 
loophole in the Federal drug and alcohol testing requirements 
for commercial drivers is being exploited by some drug-abusing 
drivers. When a driver moves from one trucking company to 
another, some positive drug and alcohol test results are not 
being discovered by the hiring company, because these results 
are self-reported and not centrally tracked. As a result, the 
hiring company may not be aware of the driver's past drug test 
results, and could hire a driver who has been--who has not been 
evaluated, treated, and cleared to return to work. A 
centralized clearinghouse for drug and alcohol testing results 
would eliminate these loopholes and allow companies to avoid 
hiring unsafe drivers. We hope Congress will create a 
clearinghouse in the highway bill.
    Senator the ATA is looking forward to working with you and 
other members of the Subcommittee, during the highway 
reauthorization bill, to promote policies that contribute to 
safer and more efficient rural transportation system.
    Thank you once again for this opportunity. I'm looking 
forward to your questions.
    [The prepared statement of Mr. Anderson follows:]

  Prepared Statement of Larry Anderson, President, A&A Express, Inc. 
         On Behalf of the American Trucking Associations, Inc.
    Chairman Lautenberg, Senator Thune, Members of the Subcommittee, my 
name is Larry Anderson, and I am President of A&A Express, Inc, located 
in Brandon, South Dakota. I am appearing here today on behalf of the 
American Trucking Associations (ATA). ATA is the national trade 
association for the trucking industry, and is a federation of 
affiliated state trucking associations, conferences and organizations--
including the South Dakota Trucking Association, of which I am a past 
Chairman--that together have more than 37,000 motor carrier members 
representing every type and class of motor carrier in the country. I 
currently serve as the ATA State Vice President for the State of South 
Dakota. Thank you for the opportunity to testify.
    Mr. Chairman, almost all of the United States' natural resources 
and food production are located in rural areas. These products must all 
be transported to processing plants, warehouses and, ultimately, to 
population centers in the U.S. and abroad for consumption. The future 
economic security of rural areas and the Nation as a whole requires 
these industries to have efficient transportation connections that 
ensure good mobility for both employees and freight. The highway 
system, which the vast majority of rural businesses and residents rely 
on exclusively for their transportation needs, is the key to good 
mobility, and must take precedence when rural transportation priorities 
are determined. In South Dakota, for example, trucks transported 86 
percent of manufactured tonnage in 2007.\1\ Over 70 percent of South 
Dakota's communities rely exclusively on trucks to move their goods.\2\
---------------------------------------------------------------------------
    \1\ American Transportation Research Institute. South Dakota Fast 
Facts, 2009.
    \2\ Ibid.
---------------------------------------------------------------------------
    Rural economies--particularly the agricultural sector--are 
increasingly dependent on truck transportation for movement of freight. 
Between 1978 and 2004, grain producers increased their truck shipments 
by 157 percent, while rail grain tonnage rose by 16 percent and barge 
volumes increased by 31 percent.\3\ This increased dependence on trucks 
by grain farmers and their customers produced a structural shift in the 
grain transportation market. Trucks' market share increased from 31 
percent to 48 percent, while rail share declined from 48 percent to 35 
percent and barge share dropped from 21 percent to 17 percent of grain 
movements.\4\ While the decision about which mode to use ultimately 
rests with the farmer or customer, clearly the shedding of freight rail 
trackage since passage of the 1978 Staggers Act has shifted a greater 
share of natural resources transportation to the trucking industry. 
This undoubtedly led to a higher cost to shippers and, in particular, 
small communities and small farmers who no longer have direct rail 
access. Improved trucking industry efficiencies are essential to their 
economic survival. This issue became so critical in South Dakota, in 
fact, that the State legislature passed a law allowing the State 
Department of Transportation to authorize the use of trucks with 
greater carrying capacity to serve the freight transportation needs of 
communities affected by abandoned rail service.
---------------------------------------------------------------------------
    \3\ U.S. Department of Transportation. Transportation of U.S. 
Grains: a Modal Share Analysis, 1978-2004, Oct. 2006.
    \4\ Ibid.
---------------------------------------------------------------------------
Invest in Rural Highways
    Every day thousands of trailers and containers, carrying everything 
from grain to machine parts, flow through our ports, across our 
borders, and on our rail, highway, air and waterway systems as part of 
a global multimodal transportation logistics system. It is a complex 
array of moving parts that provides millions of good jobs to Americans, 
broadens the choices of products on store shelves and creates new and 
expanding markets for U.S. businesses. Highways are the lynchpin of 
this system. Trucks move 69 percent of our Nation's freight tonnage, 
and earn 83 percent of freight revenue; the trucking industry is 
expected to move an even greater share of freight in the future.\5\ In 
addition, trucks transport 69 percent of the value of freight moved 
between the U.S. and our Canadian and Mexican trading partners.\6\
---------------------------------------------------------------------------
    \5\ Global Insight, U.S. Freight Transportation Forecast to . . . 
2020, 2009.
    \6\ U.S. Department of Transportation, Bureau of Transportation 
Statistics Transborder Freight Data, 2007.
---------------------------------------------------------------------------
    However, trucks are also crucial to freight moved on rail, in the 
air and on the water. The highway system connects all of these modes to 
manufacturing and assembly plants, retail outlets, homes, farms, mines 
and warehouses. An efficient highway system is the key to a fluid 
global supply chain, which in turn is a fundamental element of a 
growing and prosperous economy.
    While the condition of our highways and bridges has steadily 
improved in recent years, our infrastructure is aging and large 
sections will have to be repaired or replaced in the coming years, at 
an enormous cost. More than 11,500 miles of rural Interstate and 
arterial highways are in less than acceptable condition.\7\ Nearly 
60,000 rural bridges are structurally deficient and almost 47,000 are 
functionally obsolete.\8\ In 2007, 34 percent of South Dakota's major 
highways were in poor or mediocre condition, and in 2008, 21 percent of 
the State's bridges were structurally deficient.\9\ In addition, while 
highway congestion is generally considered to be a uniquely urban 
phenomenon, the Federal Highway Administration has projected that by 
2020 approximately 9 percent of rural highways with heavy freight 
densities will be severely congested.
---------------------------------------------------------------------------
    \7\ Federal Highway Administration, Highway Statistics 2007.
    \8\ Transportation Statistics Annual Report, U.S. Department of 
Transportation, Bureau of Transportation Statistics, 2008
    \9\ Future Mobility in South Dakota, The Road Information Program, 
Feb. 2009
---------------------------------------------------------------------------
    Furthermore, rural highways will require large expenditures to 
address highway safety needs. In 2007 rural roads accounted for 34 
percent of vehicle miles traveled, yet 56 percent of highway fatalities 
were on rural roads.\10\ According to a new report, roadway condition 
is a contributing factor in more than half of roadway fatalities, and 
these crashes cost the Nation more than $217 billion each year.\11\ In 
South Dakota alone, these crashes cost the State $717 million in 2006.
---------------------------------------------------------------------------
    \10\ Federal Highway Administration, Highway Statistics 2007.
    \11\ On a Crash Course: The Dangers and Health Costs of Deficient 
Roadways. Pacific Institute for Research and Evaluation, May 2009.
---------------------------------------------------------------------------
    Given the significant investments that will have to be made in 
rural highways, it is critically important to make sure that the next 
Federal surface transportation bill does not limit or take away the 
flexibility of State Departments of Transportation to invest in rural 
highway maintenance and new capacity projects. Nor should the 
legislation shift the ratio of funding toward alternative 
transportation investments at the expense of money needed simply to 
fund a basic highway program.
    Mr. Chairman, incremental solutions will not allow us to meet the 
Nation's current and future transportation needs. The Federal surface 
transportation program in its current form will not suffice. While more 
resources than are currently available will be necessary to finance the 
transportation improvements needed to get our country out of traffic 
gridlock and to make driving less hazardous, we can no longer afford to 
spend limited Federal resources on projects that do not meet our most 
important national needs. Therefore, Federal funds must be invested in 
a manner that will most effectively address these requirements.
    ATA believes that limited Federal resources must be focused on the 
most critical highways. The National Highway System (NHS), which 
comprises just 4 percent of total road miles, yet carries 45 percent of 
all traffic and 75 percent of truck traffic, is critical to the 
Interstate movement of people and goods, and should receive a 
significant amount of dedicated funding in the next surface 
transportation bill. It is important to note that nearly 69 percent of 
NHS mileage is rural. Furthermore, ATA supports a dedicated fund to 
address the most critically congested highway freight bottlenecks.
Reform Federal Truck Size and Weight Laws
    Mr. Chairman, these challenges will be difficult to address, and 
many of the solutions will be expensive. Clearly, there is no single 
answer to the problem and we will need to be creative in our approach. 
However, there is a very simple way for rural states to make great 
strides toward reducing freight transportation costs, with a very low 
investment. If states are permitted, under Federal law, to reform their 
regulations governing the weight and length of trucks, the trucking 
industry can significantly reduce its costs, lower its energy 
consumption and output of criteria and greenhouse gas emissions and, 
most importantly, reduce the number of truck-involved crashes. While 
many rural states--particularly those in the West--currently benefit 
from more productive vehicle configurations, Federal law prevents 
states from making logical changes to these regulations, artificially 
inflating freight costs, forcing the trucking industry to burn more 
fuel than is necessary, and needlessly putting lives at risk.
    Today's size and weight regulations evolved over the course of many 
decades to meet economic demands, satisfy engineering standards and 
fulfill other objectives. The simplest description of size and weight 
regulation is as follows: the Federal Government has assumed the role 
of establishing both minimum and maximum weight limits on Interstate 
Highways to satisfy both interstate commerce and infrastructure 
preservation goals; in order to promote interstate commerce, the 
Federal Government has also established minimum truck length and width 
regulations on a nearly 210,000-mile long federally designated National 
Network (NN) and on reasonable access routes which serve the NN. The 
States' role is to govern weight regulations off the Interstate System 
and to establish maximum length and height limits on all roads.
    However, the system is much more complex than this simple 
description would suggest. Through a series of grandfather rights and 
exemptions, 38 states allow weight limits in excess of the Federal 
standard on at least some portion of their Interstate Highway Systems. 
In total, 48 states allow weight limits in excess of Federal maximums 
on some portion of their highway systems. Furthermore, all states 
except Hawaii allow trailers longer than the 48' minimum Federal 
standard on substantial parts of their highway networks.
    Where these exceptions in law exist, there is little uniformity 
from one state to another in terms of weight limits, routing 
requirements, equipment specifications, commodity exemptions, whether a 
permit is required and the details of the permit. While this can be 
problematic, in many cases these exceptions are designed to meet a 
specific need within a narrow geographic region and, sometimes, within 
a limited time-frame. For example, many exceptions are granted to 
assist farmers who must rapidly transport their crops from the field to 
storage facilities, processing plants or intermodal transportation 
facilities during harvest season before spoilage occurs.
    Often these needs can be satisfactorily fulfilled under the current 
legal framework. However, in too many cases Federal restrictions on 
size and weight limits force the state to make a difficult decision: 
put businesses and jobs at risk or allow trucks to use secondary roads 
that were not built to accommodate larger or heavier vehicles. This 
issue has been most prominently illustrated in Maine, where the state, 
in order to protect the viability of critical jobs-producing industries 
with high freight transportation costs and significant international 
competition, has made the difficult decision to allow heavier trucks to 
use the secondary road system despite the fact that Interstate 
highways, which were built to standards that can better accommodate 
these vehicles, run parallel to these routes and would make a far 
better, much safer alternative. Unfortunately, Federal restrictions on 
Interstate Highway operations prevent the state from shifting trucks to 
these safer, more efficient and better engineered highways. There are 
many other examples similar to Maine's situation. For example, the 
Minnesota legislature recently changed State regulations to allow 
heavier trucks to support the state's agriculture and timber 
industries. However, Federal law prevented the State from allowing 
these trucks to operate on Interstate Highways. This situation repeats 
itself throughout the country. South Dakota, for instance, has an 
increased weight tolerance for vehicles hauling agricultural products, 
but these heavier vehicles are limited to secondary roads due to 
Federal restrictions governing Interstate Highway weight limits.
    Despite these challenges, thanks to strong minimum Federal size and 
weight standards and Federal preemption of State law, most trucks have 
access to major highways throughout the United States. These Interstate 
commerce protections are absolutely critical to an efficient freight 
transportation system and must continue. However, Federal law in this 
area was last updated in 1982. Both the trucking industry and the U.S. 
economy have changed substantially over the last 26 years. Since the 
early 1980s, the U.S. population has grown by 32 percent, real GDP has 
increased by 82 percent, and since 1990 truck tonnage has increased by 
39 percent.
    While other modes have adapted their equipment to meet these 
growing demands, the capacity of the trucking industry's cargo-carrying 
equipment has remained essentially stagnant due primarily to Federal 
restrictions on truck size and weight limits. One comparison of 
productivity changes in various modes due to equipment improvements 
\12\ found that trucking industry improvements have lagged far behind 
other freight modes since 1980. The author found that ocean intermodal 
vessel capacity has increased by 300 percent; rail intermodal capacity 
by 200 percent; grain train capacity by 93 percent; and aircraft 
capacity (weight) by 52 percent. In the meantime, the cubic capacity of 
a truck has increased by just 18 percent and the weight by 9 percent. 
The author also found that U.S. truck weights were lower than what is 
currently allowed on a broad scale in Canada, Mexico and the European 
Union. Federal restrictions have prevented the trucking industry from 
adapting to new economic realities as other modes have, and the U.S. is 
falling behind other countries who have recognized the benefits of more 
productive vehicles and have allowed their trucking industries to use 
safer, cleaner and more economical vehicles.
---------------------------------------------------------------------------
    \12\ Berndt, Mark, Wilbur Smith Assoc., Are Highways Failing to 
Enable a Seamless Intermodal Supply Chain? Transportation Research 
Board Annual Meeting, Jan. 13-17, 2008. Session 502 Presentation.
---------------------------------------------------------------------------
    Mr. Chairman, modernization of Federal size and weight regulations 
should be a priority in the next highway reauthorization bill. Decades 
of experience and volumes of research indicate that more productive 
vehicles can be operated without a detrimental effect on safety or the 
condition of highways and bridges.\13\
---------------------------------------------------------------------------
    \13\ See for example Transportation Research Board, Truck Weight 
Limits--Issues and Options, 1990, and New Trucks for Greater 
Productivity and Less Road Wear, 1990.
---------------------------------------------------------------------------
    Here are just a few examples illustrating why Federal regulations 
must be reformed:

    South Dakota Highway Access for LCVs

    Since the 1991 Federal freeze on longer combination vehicles (LCVs) 
took effect, several 2-lane highways were upgraded to 4-lane highways 
in South Dakota, including Highway 37 from Mitchell to Huron and 
Highway 12 between Aberdeen and Interstate 29. However, due to the 
freeze, LCVs cannot use these highways and instead must use less safe 
2-lane routes. This restriction adds many miles to a carrier's route. 
If trucks could use Highway 12 this would cut their trips by 
approximately 220 miles, while using Highway 37 would save about 28 
miles. Furthermore, transportation costs for the communities of Fort 
Pierre and Pierre could be substantially reduced by allowing LCVs to 
operate on a 32-mile section of 4-laned U.S. 83 from I-90, on which 
LCVs can currently operate.
    These common-sense changes to LCV routes would reduce truck-
involved crashes, save fuel, lower emissions and reduce transportation 
costs. The route changes are supported by State officials and the South 
Dakota trucking industry. However, Federal law stands in the way of 
these very beneficial reforms.

    Oregon, South Dakota, Ohio and Montana Overall Length Restriction

    The 1991 ISTEA freeze on LCVs froze not only the length, weight and 
routes of operation of LCVs, but also any other State regulations 
pertaining to LCVs. The comprehensive nature of the freeze gives States 
almost no flexibility to make changes, even when they are consistent 
with Congress' larger objective of ensuring that LCVs do not operate 
beyond their current dimensional, weight or geographic limits.
    The legal length limits for Montana and Oregon, as codified under 
23 CFR 658, Appendix C, place an overall length limit on triples (i.e., 
from the front of the tractor to the rear of the last trailer). For 
Montana the limit is 110, for a conventional tractor and 105, for a 
cabover (a tractor with a flat face). In Oregon, the overall length 
limit is 105,. Federal law also imposes overall length limits on South 
Dakota (110,) and Ohio (105, for Turnpike operations).
    Some carriers would like to use sleeper cabs for their triples 
units to improve driver comfort and safety, and standardize operations. 
The Montana law would allow the use of some sleepers, but sleepers with 
a longer wheelbase would exceed the 110, limit. Oregon's length limit 
only allows triples to be operated with cabovers. However, U.S. 
manufacturers no longer build cabovers.
    In 2001, Montana asked the Federal Highway Administration (FHWA) 
for permission to move from an overall length limit to a cargo-carrying 
length limit, provided that trailer length did not increase. FHWA 
agreed on the basis that Congress intended only to limit trailer 
length, not tractor length. In late 2004, Oregon asked FHWA for the 
same dispensation. This time, FHWA refused, citing ISTEA's freeze on 
all LCV-related regulations. Subsequently, FHWA threatened Montana with 
sanction of the State's Federal highway money if the State did not 
revert to an overall length limit on triples, and Montana responded by 
making the change.
    Congress' intent when enacting the LCV freeze was not to limit 
tractor length. However, that is the effect in this case. A statutory 
change is needed to eliminate this unintended consequence of the 
freeze.

    Washington State Triples Access and Weight Increase

    Both Oregon and Idaho allow triple trailer trucks to operate on 
their highways. While Washington State allows LCV doubles operations, 
triples are prohibited under Federal law. Allowing triples to access 
very short stretches of highway into Washington would allow the 
communities of Spokane and Vancouver, among others, to realize 
significant economic benefits resulting from reduced freight 
transportation costs.
    Furthermore, the Washington State legislature has passed 
legislation authorizing a weight increase on Interstate Highways. 
However, Federal law prevents this change in law from taking effect.
Benefits of Size and Weight Reform
    The following information describes the many benefits of truck size 
and weight reform. Additional details regarding the potential 
advantages of specific reforms are discussed later.
Safety Benefits
    While it would not make sense from a safety or economic standpoint 
to allow larger or heavier trucks to operate on every highway, Congress 
should not continue to ignore the growing body of evidence that 
supports the fact that the use of more productive trucks can improve 
highway safety. The use of more productive vehicles offers two safety 
benefits. First, carriers need fewer trucks to haul a given amount of 
freight, reducing accident exposure. Second, studies have consistently 
found that certain trucks with greater carrying capacity have a much 
better safety record than trucks that are in common use today. A study 
sponsored by the Federal Highway Administration found that the accident 
rate for LCVs is half that of other trucks.\14\ Specifically, the study 
found the following crash rates (expressed in crashes per million miles 
traveled):
---------------------------------------------------------------------------
    \14\ Scientex. Accident Rates For Longer Combination Vehicles, 
1996.

---------------------------------------------------------------------------
        Single tractor-semitrailers (non-LCV): 1.93

        Double 28, trailers (non-LCV): 1.70

        Rocky Mountain Doubles (LCV) (e.g., 48, + 28,): 0.79

        Turnpike Doubles (LCV): (e.g., 48, + 48,): 1.02

        Triples (LCV): 0.83

    These figures are borne out by carriers' own experience. For 
example, one large operator of triple-trailer trucks reports that in 
2007 the accident rate for triples was 0.43 per million miles traveled, 
while the comparable figure for the company's non-LCV doubles fleet was 
1.95 accidents per million miles traveled.
    Canada, which has similar roadways, vehicles and operating 
environments to the U.S., has produced a significant body of research 
on the safety of more productive vehicles. That research has 
conclusively and consistently found a safety benefit from the use of 
these vehicles.\15\
---------------------------------------------------------------------------
    \15\ See for example: Woodrooffe and Assoc. Longer Combination 
Vehicle Safety Performance in Alberta 1995 to 1998, March 2001.; 
Barton, R. & Tardif, L-P., Literature Review of the Safety Record of 
LCV in Canada, Canada Safety Council, 2003.
---------------------------------------------------------------------------
    While lower accident rates are obviously beneficial, reducing 
accident exposure can also have a significant impact on the number of 
truck-involved accidents. FHWA's Western Scenario study \16\ found that 
expanding the use of LCVs in the western States where they currently 
operate, and making the regulations more uniform, will reduce truck 
miles in those States by 25.5 percent. Therefore, even if the accident 
rates for LCVs and non-LCVs were the same, a 25.5 percent reduction in 
truck-involved accidents can be expected in those States. In addition, 
FHWA found that allowing 6-axle, 97,000 pound trucks nationwide would 
reduce truck miles--and therefore accident exposure--by 11 percent 
nationwide.\17\
---------------------------------------------------------------------------
    \16\ U.S. Department of Transportation. Western Uniformity Scenario 
Analysis, 2004
    \17\ U.S. Department of Transportation, Comprehensive Truck Size 
and Weight Study, August 2000.
---------------------------------------------------------------------------
    Another important factor is the type of road that is being used. 
Because Federal law restricts heavier trucks from using the Interstate 
System, many States have allowed heavier trucks to operate on non-
Interstate roads, which are inherently less safe than Interstate 
highways. Maine allows 5-axle trucks weighing 88,000 pounds and 6-axle 
trucks weighing 100,000 pounds to operate on the Maine Turnpike. A 
study looking into the impacts of shifting that traffic from the 
Turnpike to secondary roads found that the fatal accident rate on the 
secondary roads was 10 times higher than on the Turnpike, and the 
injury accident rate was seven times higher.\18\
---------------------------------------------------------------------------
    \18\ Wilbur Smith Assoc., Study of Impacts Caused by Exempting the 
Maine Turnpike and New Hampshire Turnpike from Federal Truck Weight 
Limits, June 2004.
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Infrastructure Benefits
    While ATA recognizes that significant resources will be needed to 
improve the condition of our highways and address highway congestion 
with or without size and weight reforms, the use of more productive 
trucks will allow Congress and the States to avoid some of these costs. 
Gross weight can be increased and not cause additional pavement damage 
as long as axle weight is controlled. This is why, for example, a 
turnpike double (typically twin 48' trailers) that weighs 126,000 
pounds can cause half the damage of an 80,000 pound tractor-semitrailer 
on a ton-mile basis.
    While increased weight may in some cases increase bridge 
maintenance costs, these costs are generally lower than the pavement 
savings and other benefits, such as lower shipper costs, less energy 
use and lower emissions.\19\ Proper bridge management can mitigate the 
impacts of heavier trucks on bridges. Unfortunately, some studies have 
exaggerated the effects on bridges by wrongly assuming that these 
trucks would have full access to the highway system and that any bridge 
not designed to handle multiple loadings of these vehicles would have 
to be replaced. In reality, the trucks would in almost all cases either 
be prohibited from using these bridges or the bridge would be 
strengthened, at much lower cost. For example, a study by the National 
Academy of Sciences found that allowing heavier trucks on California 
highways would overstress only 6 percent of the State's bridges. Nearly 
all of these bridges were on secondary routes that could easily be 
restricted by the State DOT without a significant impact on the heavier 
trucks' operations.\20\
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    \19\ Transportation Research Board, New Trucks for Greater 
Productivity and Less Road Wear, 1990.
    \20\ Transportation Research Board Special Report 267, Regulation 
of Weights, Lengths and Widths of Commercial Vehicles, 2002.
---------------------------------------------------------------------------
Energy and the Environmental Benefits
    Size and weight reform is an effective strategy for mitigating the 
impacts of carbon dioxide on climate change and addressing the health 
effects of air pollution due to a reduction in fuel use as a result of 
fewer trips needed to deliver a given amount of freight. A recent study 
found that more productive vehicles could reduce fuel usage by up to 39 
percent, with similar reductions in criteria and greenhouse gas 
emissions.\21\ In fact, the Environmental Protection Agency identified 
the use of double and triple trailer trucks as an effective emissions 
reduction strategy as part of its Smartway Transport Partnership 
program.\22\ In addition, a recent ATA evaluation of strategies to 
reduce the trucking industry's carbon footprint identified greater use 
of more productive trucks as the single most effective technique to 
lower the industry's greenhouse gas output.\23\
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    \21\ American Transportation Research Institute, Energy and 
Emissions Impacts of Operating Higher Productivity Vehicles, March 
2008.
    \22\ Environmental Protection Agency.
    \23\ American Trucking Assns., Strategies for Further Reduction of 
the Trucking Industry's Carbon Footprint, Oct. 2007.
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Economic Benefits
    A number of studies have been conducted to determine the potential 
economic impacts of increasing size and weight limits. All generally 
predict a net positive economic return. The largest study to date was 
the U.S. DOT's Comprehensive Truck Size and Weight Study (2000), which 
looked at the potential impacts of various changes in size and weight 
regulations. Economic impacts are expressed as a change in shipper 
costs. According to the study, allowing heavier trucks to operate 
nationwide would produce savings of 7 percent and extensive use of LCVs 
would reduce shipping costs by 11 percent. Expanded use of LCVs in the 
western States alone would reduce costs by more than $2 billion per 
year.
    A 1990 Transportation Research Board study found that simply 
lifting the 80,000 pound gross weight cap (and retaining bridge formula 
and axle weight limits) nationwide would reduce truck costs by 2.1 
percent, or net overall savings of 1.4 percent. Adopting Canadian 
limits would reduce costs by 11.7 percent, and 8.8 percent on a net 
basis. These are averages--savings differ substantially depending on 
commodity, configuration and other factors.\24\
---------------------------------------------------------------------------
    \24\ Transportation Research Board, Special Report 225--Truck 
Weight Limits: Issues and Options.
---------------------------------------------------------------------------
    A study by Oak Ridge National Labs for FHWA concluded that the use 
of LCVs in a truckload operation could reduce a shipper's logistics 
costs by between 13 percent and 32 percent, depending on the truck's 
weight and configuration, the difference in the price charged between 
an LCV shipment and a single-trailer truck, and the lane volume and 
length.\25\
---------------------------------------------------------------------------
    \25\ Middendorf, David P. and Michael S. Bronzini. Oak Ridge 
National Labs for Federal Highway Administration. The Productivity 
Effects of Truck Size and Weight Policies, Nov. 1994.
---------------------------------------------------------------------------
    Cornell University studied the economic benefits of New York 
State's overweight divisible load permitting system, and found that it 
produced direct benefits of up to $708 million annually, with 
additional infrastructure costs of no more than $35 million.\26\
---------------------------------------------------------------------------
    \26\ Meyburg, Arnim H., et. al., School of Civil and Environmental 
Engineering, Cornell U., Impact Assessment of the Regulation of Heavy 
Truck Operations, Sep. 1994.
---------------------------------------------------------------------------
    A Montana State University study of the impacts on that State's 
economy if size and weight limits were brought down to the Federal 
limits found a projected reduction in Gross State Product of 0.4 
percent. However, different economic sectors would suffer 
disproportionately. For example, transportation costs for dairy 
products would increase 54 percent, wood chips 37 percent, cement 31 
percent, and fuel 40 percent.\27\
---------------------------------------------------------------------------
    \27\ Hewitt, Julie, et. al. Montana State University, 
Infrastructure and Economic Impacts of Changes in Truck Weight 
Regulations in Montana, July 1998.
---------------------------------------------------------------------------
Congestion Benefits
    According to the most recent report on congestion from the Texas 
Transportation Institute, in 2005 drivers in metropolitan areas wasted 
4.2 billion hours sitting in traffic, burning 2.9 billion gallons of 
fuel.\28\ ATA views size and weight reform as a key component of a 
long-term strategy to address highway congestion, along with our 
proposals to address critical freight bottlenecks. Reducing truck VMT 
through changes in size and weight limits could allow states to avoid 
costly, disruptive highway expansion projects. Furthermore, some states 
have explored the possibility of building truck-only lanes on corridors 
with high levels of congestion and significant truck traffic. Allowing 
trucking companies to operate more productive vehicles on these lanes 
would attract truck traffic away from general purpose lanes and help 
offset additional costs if toll financing is used. However, the 
rigidity of Federal size and weight regulations would, in many cases, 
prevent states from allowing more productive vehicles to operate on 
these separate lanes.
---------------------------------------------------------------------------
    \28\ Texas Transportation Institute, 2007 Urban Mobility Report.
---------------------------------------------------------------------------
Proposed Reforms to Federal Truck Size and Weight Regulations
    Mr. Chairman, ATA recommends several reforms to Federal truck size 
and weight regulations. It should be noted that other than 
recommendations 5, 6 and 7, none of these proposals would require 
states to make changes to their regulations. Instead, Federal law would 
simply give states the flexibility to change their own regulations. The 
proposed changes would give states the authority to require a permit, 
limit the routes on which the vehicles can operate, specify gross and 
axle weight and vehicle length limitations, restrict the new authority 
to specific commodities, or impose any other regulation or limitation 
allowed under Federal and State law. In short, Mr. Chairman, ATA's 
proposals would give states significant flexibility, while retaining 
restrictions designed to ensure safe operations and preservation of 
highway infrastructure.
1. Allow western States to harmonize longer combination vehicle laws 
        and regulations.
    In April 2004, the Federal Highway Administration released its 
``Western Uniformity Scenario Analysis.'' The report looked at the 
impacts of allowing uniform western State longer combination vehicle 
(LCV) use, including the impacts if LCV use was expanded to the entire 
western region's Interstate Highway System (excluding California, 
Arizona, New Mexico and Texas).
    The report found a 25.5 percent reduction in total truck vehicle 
miles, and little impact on rail market share or profitability. The 
study found a slight reduction in pavement maintenance costs, but 
estimated that bridge costs would more than double. Overall, 
infrastructure costs would rise by between $43 million and $133 million 
per year in the study region. The reduced VMT would result in 12 
percent lower energy consumption, 10 percent less noise, and 12 percent 
lower emissions. Shipper savings would total just over $2 billion per 
year, about a 4 percent cost reduction.
2. Allow States to authorize 6-axle, 97,000 pound tractor semi-
        trailers.
    ATA recommends the authorization of single-trailer trucks with a 
GVW of 97,000 lbs, provided the truck has six axles, including a tridem 
axle on the rear of the trailer. Maximum weight on the tridem axle is 
limited to 51,000 lbs. While current single and tandem axle weight 
limits would continue, this vehicle would exceed the GVW allowed under 
the current bridge formula.
3. Remove gross weight limit on 5-axle combination vehicles.
    Maintain current Federal axle weight and bridge formula limits, but 
lift the artificial 80,000 lbs GVW cap. This will have two benefits. 
First, for those trailers with tandem axles that slide independently, 
spreading the axles 96 inches or more allows the axles to be weighed 
independently as single axles, thus allowing up to 20,000 lbs on each 
axle, for a maximum GVW of 86,000 lbs. Another benefit is that the 
absence of a GVW cap will help to compensate for the increased weight 
of tractors due to Federal emissions regulations and State and local 
idling restrictions.
4. Allow limited expansion of LCVs beyond western scenario States.
    Longer Combination Vehicles operate on a limited basis in States 
beyond those in the western uniformity scenario. LCV doubles and 
triples are currently allowed on the Ohio Turnpike and Indiana Toll 
Road. LCV doubles are also allowed on the Florida Turnpike, New York 
Thruway and Massachusetts Turnpike. In addition, LCV doubles and 
triples operate on a short section of I-15 in Arizona and in Alaska. 
Limited expansion in States that are interested in allowing these 
configurations can help relieve congestion, improve air quality, reduce 
crashes, and reduce fuel usage. Additionally, Transportation Research 
Board Special Report 267 recommended nationwide operation of double 33, 
trailers with weight limits governed by current axle weights and the 
Federal bridge formula.
5. Standardize 53-foot trailer length.
    Current Federal law establishes 48, as the minimum trailer length 
on the National Network (NN). There is no Federal maximum limit on 
trailer length, and all States impose length restrictions. Trailer 
length on the Interstate System is limited to 53, except in the 
following States, which allow trailers longer than 53,: Alabama, 
Arizona, Arkansas, California, Colorado, Florida, Kansas, Louisiana, 
Mississippi, Missouri, Montana, Nevada, New Mexico, Oklahoma, Texas, 
Washington, and Wyoming. In addition, 53, trailers are not allowed on 
I-95 in New York City or on I-295 in Washington, DC. Some jurisdictions 
restrict the movement of trailers longer than 48, on National Network 
highways that are not part of the Interstate System.
    While national trailer uniformity is federally protected for 48, 
trailers, 53, trailers have become the industry standard. Federal law 
should be brought up to modern standards to ensure the continued 
protection of the flow of interstate commerce by changing minimum 
trailer length limits to 53,. In addition, ATA supports capping trailer 
length at 53, except in States where longer trailers are currently 
allowed.
6. Allow a 10 percent axle and gross weight tolerance for auto 
        transporters.
    In 2007, more than 52 percent of the motor vehicles sold in the 
United States were either minivans, pick-up trucks, or sport utility 
vehicles. Because these vehicles are heavier than passenger cars, many 
auto haulers cannot legally load their equipment to maximum capacity 
and also meet the 80,000 pound gross weight limit. In many instances, 
there is space on the truck for one or two additional vehicles, but 
adding additional vehicles would make the truck overweight under 
Federal law.
    While larger vehicle sales are declining in the face of higher fuel 
costs, sales of hybrid vehicles are increasing substantially. A large 
hybrid SUV can weigh up to 1,900 pounds more than the non-hybrid 
version of the same vehicle, while the weight of a hybrid passenger car 
can exceed its non-hybrid counterpart's weight by more than four 
hundred pounds.
    A 10 percent axle and gross weight tolerance would allow auto 
transporters to reduce the number of trips needed to deliver passenger 
vehicles, reducing accident exposure, fuel use and emissions. Fewer 
trips also mean lower transportation costs for the automobile 
manufacturing industry.
7. Ensure nationwide adoption of weight exemption for Alternative Power 
        Units.
    One highly effective way to reduce fuel use by the trucking 
industry is to limit the amount of fuel burned by idling the main 
engine through installation of an alternative power unit (APU). 
Unfortunately, the weight of these units are a disincentive to some 
carriers, who want to avoid the productivity loss they would experience 
by trading off the loss of cargo capacity for the energy efficiencies 
gained by installing the APU. To address this issue, Congress included 
in the Energy Policy Act of 2005 (Public Law 109-58 Section 756(c)), a 
400 pound weight exemption for APUs. Congress' intent was to override 
State law and mandate the weight tolerance. However, according to the 
Federal Highway Administration's Final Rule issued February 20, 2007 
(72 FR 7741), the tolerance is permissive rather than prescriptive. 
This means that while States may allow the tolerance without risk of 
Federal sanction for exceeding Federal gross or axle weight limits, 
they are not required to grant the exemption.
    This presents a number of problems. First, States would have to 
adopt the exemption individually, a process that has been underway 
since 2005, and 50-state authorization will likely take many years 
longer. Second, even a single hold-out would present a problem for an 
Interstate carrier, who would be reluctant to install the APUs knowing 
that they risk a ticket if they enter a State that does not allow the 
tolerance.
    Based on conversations with Congressional committee staff and the 
Member of Congress who sponsored and supported the tolerance language, 
ATA strongly believes that Congress' clear intent was to override State 
law and mandate the weight tolerance for APUs. In fact, some carriers 
installed the units following passage of the Energy Bill based on this 
assumption, and have been surprised when states have issued citations 
for an overweight violation. We urge Congress to revise the statute to 
ensure immediate nationwide adoption of the APU weight exemption.
Truck Safety Initiatives
    Finally, Mr. Chairman, ATA would like to recommend several 
initiatives designed to improve the safety of trucks and reduce the 
number of crashes and fatalities involving all vehicles. Today's trucks 
and truck drivers are safer than ever before. In 2007 the large truck 
fatality rate dropped to 2.12 fatalities per 100 million miles driven, 
the lowest rate ever recorded.\29\ However, we believe more can be done 
to make our highways safer. ATA urges the Subcommittee to support the 
following initiatives in the next surface transportation bill:
---------------------------------------------------------------------------
    \29\ Federal Motor Carrier Safety Administration, 2009.
---------------------------------------------------------------------------
    Drug and Alcohol Testing Clearinghouse--ATA supports the creation 
of a national clearinghouse for positive drug and alcohol test results. 
There is a well known loophole in the Federal drug and alcohol testing 
requirements for commercial drivers that is being exploited by some 
drug-abusing drivers. When a driver moves from one trucking company to 
another, some ``positive'' drug and alcohol test results are not being 
discovered by the hiring company because these ``positive'' results are 
self-reported, and not centrally tracked. Prior to hiring an employee, 
employers would be required to check with the clearinghouse for an 
applicant's failed tests and previous refusals to test.
    National Employer Notification System--ATA supports a mandatory 
national employer notification system and recommends development of a 
standard protocol specifying type, format, and frequency of information 
required to be transmitted from the states. Violations/offenses to be 
reported to the states should also be standardized. States should be 
required to fully participate in this national system and provide 
information in a timely fashion. The retention period for violations/
offenses on a driver's motor vehicle record should be left to the 
state's discretion.
    New Carrier Training--ATA recommends that new motor carrier owners, 
both interstate and intrastate, should be required to satisfactorily 
complete a safety training class before commencing operation. Safety 
training curricula should meet uniform standards nationwide. The 
Federal Motor Carrier Safety Administration (FMCSA) safety inspection 
of new carriers should be conducted at 6 months rather than at the 
current 18 months. Further, new carriers should be required to attach 
proof of training to their application for a DOT number.
    Truck Speed Governing and Speed Limit--ATA believes the speed of 
all electronically governed class 7 and 8 trucks manufactured after 
1992 should be governed at a maximum speed not to exceed 65 mph. Speed 
limiters on newly manufactured class 7 and 8 trucks should be made more 
tamperproof. ATA also supports a national maximum speed limit of 65 mph 
for all vehicles.
    Truck Crashworthiness Standards--ATA supports research into crash-
worthiness standards for newly manufactured class 7 and 8 trucks, and a 
relative scale against which to measure a truck's crashworthiness.
    Tax Incentives for Advanced Safety Technologies--ATA supports tax 
incentives to encourage motor carriers to voluntarily adopt advanced 
safety technologies, including collision avoidance systems, lane 
departure warning systems, vehicle stability systems, brake stroke 
monitors, electronic on-board recorders (EOBRs), and automated 
transmissions/automated manual transmissions.
    Additional information about these safety proposals is available 
from ATA upon request.
Conclusions
    Thank you for giving ATA the opportunity to address rural 
transportation issues. An efficient rural highway system is critical to 
the future mobility and economic success of rural communities. The high 
freight transportation costs involved in moving natural resources over 
vast distances means that all modes must be as efficient as possible in 
order to maintain the global competitiveness of these industries. Given 
the dominant role played by the trucking industry in moving 
agricultural products, ensuring an efficient highway system must be the 
highest priority. ATA believes that making improvements to major 
highway freight routes, reforming Federal truck size and weight 
regulations, and making needed changes to Federal truck safety laws and 
regulations, as described above, are the keys to a cost-effective and 
safe rural freight transportation system.
    Mr. Chairman, we look forward to working with the Subcommittee to 
address these issues during authorization of the Federal surface 
transportation bill. Thank you for the opportunity to testify.

    Senator Thune. Thank you, Larry, very much.
    Mr. Parliament?

           STATEMENT OF JACK PARLIAMENT, PRESIDENT, 
                         D & I RAILROAD

    Mr. Parliament. Thank you, Senator, for allowing me to 
speak here today on behalf of the short-line railroads and D&I.
    I'm going to address a couple of topics of concern and 
challenges that we are facing within the short-line industry; 
and the D&I, specifically.
    Short Line Railroad Tax Credit was originally enacted in 
2005, and then was extended for 2 years in 2008. The credit 
expires at the end of this year, and it needs to be extended, 
and there's still a lot of work to be done.
    Senate Bill 461 and House Bill 1132 have provisions to 
extend the credit for another 3 years, and it allows new short 
lines to benefit from the credit, as well. The extender bills 
increase the limitation from $3,500-per-mile to $4,500-per-mile 
to account for increased costs associated with rail 
improvements.
    On the D&I Railroad in South Dakota and Iowa, we've used 
these tax credits, totaling approximately three-quarters of a 
million dollars over the last 4 years, to help upgrade over 50 
bridges and re-lay 35 miles of rail with new welded rail. Our 
shippers have also contributed to the investment in the line, 
with loans from the South Dakota Rail Trust Fund. This 
investment has brought our track structure up to the 286,000-
pound standard. We've attracted new business to the line 
because of the upgrades. Poet Ethanol at Hudson, Ash Grove 
Cement, and Sioux Energy Transload are customers that are 
directly benefiting from the improvements and investment that's 
been made on the line.
    The best reason for extending the tax credit is that fact 
that the shippers benefit firsthand because they receive more 
reliable, safer, and cost-effective service. In today's 
competitive market, that's important. In rural South Dakota and 
Iowa, the D&I Railroad provides the first-mile or last-mile 
service to producers of corn, ethanol, dry distiller grains, 
cement, aggregates, and building products. We're a vital link 
to the Class I railroads for these shippers.
    Another reason for extending the tax credit: jobs. Most 
short-line railroads do not have the personnel or the equipment 
to make major improvements on their lines. They hire 
contractors; that creates jobs. Therefore, I ask Congress to 
extend the tax credit and to continue the work that's been done 
on the Nation's short lines.
    And thank you, Senator Thune, for your continued support of 
the bills.
    Senator Thune. Thank you, Jack.
    Mr. Parliament. Well----
    Senator Thune. Ms. Richardson?
    Mr. Parliament. Mr. Thune? If I may continue----
    Senator Thune. Yes.
    Mr. Parliament.--on hot-button number 2. I don't think I'm 
over my time.
    Senator Thune. No, you've still got time. I'm sorry, I 
thought you were wrapping up.
    Mr. Parliament. Thank you.
    Senator Thune. My apologies. Continue.
    Mr. Parliament. Last year, the Congress passed the Rail 
Safety Improvement Act. That brought a lot of changes to the 
railroad industry. There were a lot of good provisions in the 
law. But, in the essence of time, I'd like to address one 
problem, which is the requirements of the new hours of service. 
They were enacted with the intent of battling crew fatigue 
issues on the railroads. Now, fatigue can be an issue when 
train service employees operate on a 24/7 basis. However, this 
law is not addressing the problem, and it's not the answer.
    Here's the main points of the new law. A train crew must 
have 10 hours of uninterrupted rest after each shift. That 
means, if they are subject to call, the railroad cannot contact 
them. If an employee works 6 days in a row, they must now have 
48 hours off duty. If they work 7 days in a row, they must now 
have 72 hours off, or 3 days. And no employee in covered 
service may work more than 276 hours per month.
    Here's the problem. On the D&I, and then on many other 
railroads, train crews--some train crews actually do work with 
scheduled hours and specified rest days. Typical local freight 
service job goes to work on Monday, lays over that night, 
returning home on Tuesday; and then, the same, likewise, 
Wednesday, Thursday, Friday, Saturday, with Sunday as a day of 
rest. This type of dependable service to the shippers is now in 
jeopardy, as small railroads that work on thin margins are less 
likely to increase their operating expense to maintain that 
same level of service. So, are we really battling fatigue? No. 
All we're doing is limiting the service to the shippers. And 
then, the train crews' paycheck is affected, as well. One of 
the reasons that the railroad unions have supported the Short 
Line Association's efforts to get a waiver from the FRA is to 
allow short lines to be exempted from this legislation.
    So, what needs to be done? First of all, the FRA does need 
to grant the short-lines' waiver request for small Class II and 
Class III railroads without further delay. Congress needs to 
work with the railroads and the unions to come up with a remedy 
before it has a negative effect on the short-line railroads, 
their employees, and shippers.
    There are ways to battle crew fatigue, but the new hours-
of-service requirements have created more problems than they 
intended to fix. Longer rest periods and less work days do not 
eliminate unexpected report-to-work calls. This law does 
nothing to address the root problems of crew fatigue.
    Now, I do have some specific ideas, and I'd be glad to 
share them with you or your staff, if you wish.
    Thank you for hosting this hearing, sir, and allowing me to 
speak.
    [The prepared statement of Mr. Parliament follows:]

    Prepared Statement of Jack Parliament, President, D & I Railroad
Short Line Railroad Challenges
    What Are Our ``Hot Buttons?''

   Infrastructure Funding

   Hours of Service

     Infrastructure funding for Short Line Railroads remains a top 
priority for American Short Line and Regional Railroads. Many 
shortlines sprung from meager beginnings; when tracks were either 
abandoned or maintenance was deferred to the point that service was no 
longer feasible on some of these lines. In the case of the D&I 
Railroad, we were fortunate that the State of South Dakota stepped up 
and purchased some of the rail lines that were being abandoned when the 
Milwaukee Road went bankrupt in the early 1980s. Since then, the State 
and the shippers on the D&I have joined forces and invested millions of 
dollars to preserve and improve our vital link to the Nation's Class I 
railroads. On the D&I, improvements costing roughly $16.5 million (over 
the past 5 years) have been invested to upgrade bridges and to relay 
century old rail with new continuously welded rail with funding 
provided by South Dakota's Rail Trust Fund and administered by South 
Dakota's Department of Transportation.
    Over the years, millions of dollars have been invested to preserve 
service and to enhance the infrastructure on our Nation's short line 
railroads. There is still a lot of work to be done on the Nation's rail 
feeder system, which is of course, the Short Line railroad. In rural 
America, the short lines provide the ``first mile'' or ``last mile'' 
service to our Nation's producers of corn, ethanol and dried distillers 
grains, and building products. We need to continue improving the 
infrastructure to be able to continue to provide service over a safe 
and efficient network. Today with newer cars having the ability to 
handle 115 tons-per-car, as opposed to the prior standard of 100 tons-
per-car, the weight limits of many of the bridges would be exceeded, 
without a funding mechanism to maintain and/or rebuild the 
infrastructure.
    One of the major funding mechanisms available for this purpose has 
been the short line railroad tax credit which provides an incentive for 
short lines to invest in track rehabilitation projects by providing a 
tax credit of 50 cents for every dollar spent on track improvements. In 
South Dakota and Iowa, those tax credits have amassed to about $750,000 
in actual tax savings, which is allowing the D&I to continue the 
investment in our track infrastructure. This year we are relaying an 
additional thirteen miles of rail and constructing an 8,000 foot 
siding. Continued investment in the short line railroads' track 
infrastructure benefits the shippers firsthand and creates jobs. When 
shortlines upgrade their track, shippers receive more dependable, safer 
and even profitable service. When a track is able to handle today's 
heavy axle loads, the shippers can ship more tons per car which is an 
overall savings in freight costs. Most short lines do not have the 
equipment and manpower to handle major rehabilitation projects, 
therefore contractors are hired to perform the work, thus creating 
jobs.
    H.R. 1132 and S. 461 extends Section 45G for 3 years to cover tax 
years 2010, 2011 and 2012. In addition, the legislation in these two 
bills allows new short lines railroads created after January 1, 2005, 
to participate and qualify for the credit. The proposed legislation 
also increases the limitation from $3,500 to $4,500 per-track-mile to 
account for increased costs since the credit was originally passed in 
2004.
    Over the past couple of years, revenues have decreased on many 
short lines as industries like cement, lumber and other sectors of our 
manufacturing base have struggled, but they are poised to make a 
comeback. The railroads must be ready when that happens. Private and 
government studies estimate that it will cost $13 billion to bring the 
national short line system up to the necessary level of efficiency. 
Please support H.R. 1132 and S. 461. You can do so by signing on as a 
cosponsor. Your short line railroads will thank you and your shippers 
will thank you.
Hot Button Number Two
    On July 16, 2009 a new Hours of Service law went into effect for 
the Nation's railroads. The intention of Congress when the Rail Safety 
and Improvement Act (RSIA) of 2008 was passed was to battle crew 
fatigue in the industry. Unfortunately, that is not what is happening. 
There are provisions in the RSIA that do meet the intentions of 
Congress. Positive Train Control (PTC), conductor certification, the 
hiring of 200 additional safety inspectors, medical attention of 
injured workers protection, bridge safety and grade crossing 
improvements are amongst the many good components of the legislation. 
However, the new hours of service provisions of the RSIA are not having 
the impact on crew fatigue that Congress had hoped for. In fact, what 
is happening is that freight is being delayed as the railroads' ability 
to move the freight is being limited by the new rules. In addition, 
train service employees are earning less due to the number of days per 
week and hours per month they can legally work.
    The new Hours of Service Law now states that if an employee works 
six consecutive days, the must have 48 hours of uninterrupted rest. If 
they work 7 days straight, 72 hours rest is required. The legislation 
created a new 276-hour cap per month on the number of hours a train 
service employee may work This legislation was put into effect 
primarily for the Class I railroads that operate 24 hours-a-day, 7 
days-a-week. These crews often work on an ``on-call'' basis and they 
typically do not have specified rest days. Their schedules are 
unpredictable and they are called for service at odd hours with only a 
couple hours of notice. Then they may work 12-hour shifts, layover at a 
hotel for an unpredictable amount of time and are subject to call at 
any time. Unexpected report to work calls and reporting to work after a 
minimal amount of rest is what causes crew fatigue. The Federal 
Railroad Administration (FRA) has now imposed these new rest laws as 
Congress dictated. Although the FRA has said they were sympathetic to 
the short lines' claim that fatigue is not a short line problem, but 
they have no recourse but to impose these new requirements.
    The unintended result of these new restrictions is putting a real 
hardship on small operators such as the D & I and can potentially 
reduce service to shippers along their lines. Picture this; a crew goes 
to work on a regular schedule at 6 a.m. Monday, works a full shift of 
8-12 hours, takes his mandatory period of rest then goes back to work 
on Tuesday at 6 a.m. and works another shift. This cycle repeats on 
Wednesday and Thursday, and Friday and Saturday, with Sunday as a day 
of rest. This is a typical operation for many freight crews which 
service industries on the railroad. Now, with the new law, the crew 
will need 2 days of rest. Is there really a fatigue issue here? No it 
now has become a service issue. The railroad is now forced to make some 
hard decisions concerning service to these industries.
    What are our options?

        1. Eliminate the 6-day local freight service and reduce service 
        to those industries. This is counter productive, especially in 
        times of high volume, such as during harvest. On the D & I, our 
        ethanol plants and every customer, for that matter, depend upon 
        our reliable service. We do not want to be forced into 
        eliminating service and not have the flexibility to work our 
        crews an occasional weekend to provide our customers with cars 
        or to pull their freight to market.

        2. Hire more crews, but only allow them to work the 2-days a 
        week that the other crew is now unable to work. Does this 
        really benefit anyone? Surely not the railroad that now has 
        increased cost, not the first crew who have just took a 33 
        percent cut in their pay. And surely not the second crew who 
        only works part time, likely with no benefits.

    The demand of operating a 24/7 railroad can create the potential 
for crew fatigue. However, this new law does nothing to address the 
problem. Longer rest periods and less work days do not eliminate 
unpredictable and unexpected report to work calls from the employing 
railroad.
    The American Short Line and Regional Railroad Association (ASLRRA) 
has applied for a waiver to the Federal Railroad Administration (FRA) 
for small Class II and Class III railroads. One of the requirements 
from the FRA is that any railroad that requests inclusion in the 
waiver, must participate in a pilot program that analyzes crew 
schedules to determine potential fatigue issues. This waiver needs to 
be granted without further delay. The Brotherhood of Locomotive 
Engineers & Trainmen (BLET) and the United Steelworkers Union have 
expressed their support of the waiver. The BLET and the United 
Transportation Union have jointly filed comments asking the FRA to 
clarify its interim policies related to, and interpretations of, the 
new hours of service regulations. The requested clarifications and 
simplifications fall into three categories: the RSIA prohibition of 
communication with employees during statutory off-duty periods; the 
RSIA's provisions pertaining to mandatory off-duty time following the 
initiation of an on-duty period for a specific number of consecutive 
days; and the maximum number of hours that may be worked in a calendar 
month.
    Congress needs to work with the railroads and the unions and come 
up with an alternative to these new requirements. There are ways to 
battle crew fatigue; let's create a law that does so. The new Hours of 
Service requirements in the RSIA have created more problems than it 
intended to fix. It is now up to Congress to come up with the remedy.

    Senator Thune. Thank you, Mr. Parliament.
    Mr. Parliament.--and the extra time.
    Senator Thune. OK.
    Now Ms. Richardson.

STATEMENT OF LISA RICHARDSON, EXECUTIVE DIRECTOR, SOUTH DAKOTA 
                    CORN GROWERS ASSOCIATION

    Ms. Richardson. Thank you, Senator Thune, for the 
invitation to visit with you this morning.
    It's interesting that you called and asked to talk about 
something that makes our industry the most competitive in the 
world, and that's our transportation system.
    Good morning, I'm Lisa Richardson. I'm the Executive 
Director of the South Dakota Corn Growers Association, a 
grassroots commodity group which represents 12,500 corn growers 
from South Dakota. As I visit with you today, I'm happy to 
report that we are getting ready to produce our state's largest 
corn crop. They're getting ready to haul it on the roads, the 
bridges, and put it on the rail.
    Agriculture is our state's biggest industry. We create a 
$21-billion impact to South Dakota's economy. Already today, 
our agriculture resources and production ability are outpacing 
our transportation capacity, causing delays and efficiency 
challenges.
    Let me put this into perspective for you, Senator. Last 
year, South Dakota produced 172 million bushels of wheat, 585 
million bushels of corn, 138 million bushels of soybeans, close 
to 8 million tons of hay, a billion tons of sunflowers, and a 
billion gallons of ethanol. Simply put, we don't have the 
luxury of calling the United States--U.S. Postal Service or UPS 
and say, ``We have a sales call in Taiwan. Can you help us get 
our product to market?'' We simply need to use this 
infrastructure.
    Let's follow kernel corn from a typical South Dakota field. 
South Dakota has 83,744 miles or roads to go along with its 
75,885 square miles of space. Ninety-one percent of those roads 
are city, county, and township roads. These are the roads where 
grain transportation begins as producers truck the grain from 
fields along these roads to their nearest grain-handling 
facility.
    Years ago, a typical load of corn traveled in a single-axle 
truck containing 350 bushels of corn. With ever-increasing 
yields, a producer today is using multiple-axle trucks and 
semis to deliver their corn to the nearest facility. With the 
bulk of these bushels traveling on townships and county roads 
that were designed for 50 bushels-per-acre corn, versus today's 
yields of 125 bushels-per-acre. These roads also haul all our 
production to market, whether it be the chemicals or in the 
livestock arena, where they also haul our feedstocks, such as 
distillers grain to feed our livestock industry.
    Senator Thune, no industry is more dependent on a good, 
viable transportation infrastructure than agriculture. If South 
Dakota didn't have rail, South Dakota industries wouldn't be 
competitive in grain production. Last year, as a Nation, we 
exported 2 billion bushels of grain around the world. A 
competitive rail system narrows the basis, because you can have 
greater efficiency in your energy means. Without rail access, 
the expense to raise a crop would increase significantly.
    But, for agriculture to remain competitive, balance must be 
brought into the game. Here's the deal with rail. We need it to 
be consistent. We deserve to know what it's going to cost. And 
we simply need competition.
    The Senate Commerce Committee is currently developing 
legislation to make the rail industry more competitive and to 
provide an even playing field for shippers. Senator Thune, I 
want to thank you for your brilliant leadership in negotiating 
this legislation. Once again, Senator, you're stepping up for 
South Dakota agriculture needs.
    The goal of the rail competition legislation should be to 
provide more balance at the Surface Transportation Board 
between the interest of shippers and carriers. Historically, 
the STB has sided with the railroads in cases pertaining to 
rates and access. Small- and medium-sized shippers that are 
commonly found within the agriculture distribution chain have 
been shut out of the rate challenge process, because it is 
prohibitively expensive and the chance of success is relatively 
low.
    A case-in-point is the Basin River Electric versus BNSF 
rate case, which took over 4 years and $7.5 million before 
initial ruling. And today, that decision is ongoing, pending 
appeals. This is a classic example of what the--of how the 
process doesn't work.
    Clearly, the process is broken, and can only be fixed 
through reform. A rewriting of rules as how to--to handle rate 
disputes are brought to the STB is imperative. We have to make 
it simpler, less cost prohibitive, and provisions for smaller 
shippers must be answered.
    We are in a global economy, and our competitiveness and 
access to those markets are becoming increasingly important. 
Today, for us to go to the Pacific Northwest with corn, the 
typical path takes that corn first east, then up north, and 
finally west again. As we work to find solutions to our 
transportation challenges in our state and Nation, one thing is 
clear: efficient and competition transportation has never been 
more important to the future of our state's economic health and 
our Nation's energy security. When the last kernel of corn 
flows out of the grain cart, it begins a journey that is 
dependent on an infrastructure at the township, county, state, 
interstate rail, and rivers to make it to a destination in a 
worldwide economy.
    Thank you, Senator Thune.
    [The prepared statement of Ms. Richardson follows:]

      Prepared Statement of Lisa Richardson, Executive Director, 
                 South Dakota Corn Growers Association
    Thank you, Senator Thune, for the invitation to visit with you 
today about something critically important to South Dakota and what 
makes the agriculture industry competitive in the world: Transportation
    Hello, I am Lisa Richardson, Executive Director of the South Dakota 
Corn Growers Association, a grass roots commodity organization which 
represents 12,500 corn producers from South Dakota. As I visit with you 
today, South Dakota corn growers are preparing to bring in the largest 
corn crop in our history.
    Agriculture is our state's biggest industry creating a $21-billion 
impact to our economy. Already today, our agricultural resources and 
production ability are outpacing our transportation capacity, causing 
delays and efficiency challenges.
    Let me put into perspective the importance of transportation in 
agriculture. Last year, South Dakota produced 172 million bushels of 
wheat, 585 million bushels of corn, 138 million bushels of soybeans, 
close to 8 million tons of hay, a billion tons of sunflowers and a 
billion gallons of ethanol. We simply can't call the U.S. postal 
service or UPS to please pick up 100 million bushels of corn and take 
it to the Pacific Northwest because we have a sales call in Taiwan.
    Let's follow a kernel of corn from a typical South Dakota field.
    South Dakota has 83,744 miles of road to go along with its 75,885 
square miles of space. Ninety-one percent of these roads are city, 
county and township roads. These are the roads where grain 
transportation begins as producers truck the grain from fields along 
these roads to their nearest grain handling facility.
    Years ago a typical load of corn traveled in a single axle truck 
containing 350 bushels of corn. With ever increasing yields, a producer 
today is using multiple-axle trucks and semis to deliver their corn to 
the nearest facility. With the bulk of these bushels traveling on 
township and county roads that were designed for 50 bushel-per-acre 
corn versus today's yield of 125 bushels-per-acre. These roads also 
haul feedstocks such as distillers grain to our livestock producers.
    Now if the nearest grain handling facility doesn't have rail 
access, that truck either keeps going to a processing facility . . . or 
right out of state to a top paying market which means South Dakota 
processing facilities and agribusiness are losing money in missed 
opportunities in addition to the added pressure placed on our local 
roads by greater transportation distance.
    At a five location Central South Dakota grain cooperative, they 
handle 22 million bushels of grain annually including wheat, corn and 
sunflowers. It takes roughly 220,000 truck loads on our state highway 
system just to get those bushels one point to a grain facility. Again, 
if that facility doesn't have rail access, it would have to be loaded 
out by truck a second time, doubling the truck loads for just that one 
area of the state, to nearly 450,000 truck loads annually, and, in 
turn, a financial impact on local roads.
    Senator Thune, no industry is more dependent on a good viable 
transportation infrastructure than agriculture.
    If South Dakota didn't have rail, South Dakota industries wouldn't 
be competitive in grain production.
    A competitive rail system narrows the basis because you can have 
greater efficiency in your energy need. Without rail access, the 
expense to raise a crop would increase significantly.
    As ethanol and grain production continues to increase, the 
availability of economical transportation has become a growing issue. 
Currently, trucks are used for short hauls, but are prohibitively 
expensive for long distances. The rail system is utilized for long-
distance transport, but is suffering from lack of infrastructure to 
handle the increasing volumes.
    But for agriculture to remain competitive, balance must be brought 
into the game. Here's the deal with rail: we need it to be consistent, 
we deserve to know what it's going to cost. Rail customers don't want 
fluctuation. Elevators have already bought a lot of grain for future 
delivery and today they still don't know what the rail rates are for 
2010.
    The Senate Commerce Committee is currently developing legislation 
to make the rail industry more competitive and to provide an even 
playing field for shippers. The efforts by this committee are 
critically important and will have a significant impact on growers who 
are most affected by commodity prices and the ability to move grain.
    The goal of rail competition legislation should be to provide more 
balance at the Surface Transportation Board (STB) between the interests 
of shippers and carriers. Historically the STB has sided with the 
railroads in cases pertaining to rates and access. Small and medium 
size shippers that are commonly found within the agricultural 
distribution chain have been shut out of the rate challenge process 
because it is prohibitively expensive and the chance of success is 
relatively low.
    Since 1980, the STB has allowed the railroad industry to 
consolidate to four major railroads that carry more than 90 percent of 
all freight shipped by rail in the United States. A recent study by the 
STB revealed that over 44 percent of all rail freight by tonnage is 
captive to a single railroad. Yet the STB has provided meaningful 
relief for these rail customers in less than 20 percent of the rate 
challenges brought before the Board since 2000. No rail rate for the 
movement of an agricultural product has even been contested since 1982.
    Congress should provide other forums for adjudication of complaints 
regarding unreasonable practices by railroads and also provide 
assurance that cases will be handled expeditiously. In 1995, 
legislation was adopted ``to establish a simplified and expedited 
method for determining the reasonableness of challenged rail rates''; 
however, the goal has never been fully achieved. In some instances, STB 
decisions have taken longer than 5 years, which is unacceptable.
    There are other problem areas that specifically need to be 
addressed. Unreasonable switching charges have substantially increased 
the cost of shipping grain via rail. Switching charges are fees that 
railroads use when providing access to competing rail lines. If the 
switching is open but the price for switching is exorbitantly high, it 
acts as a barrier to competition. Many railroads are increasing 
switching rates to such high levels that it is having an impact on the 
agricultural sector. In some instances, switching charges are more than 
$500 per car, which has no reasonable comparison to the costs of 
providing the switch, and accomplishes nothing more than capturing more 
exclusive traffic for the carrier, while substantially narrowing the 
range of potential customers available to our growers.
    There has also been concern in recent years regarding the question 
of liability for the transport of anhydrous ammonia by rail. At least 
one railroad has placed in its tariff a requirement that the shipper 
fully indemnify the carrier for any personal injury property damage or 
death resulting from the carrier's transportation of the shipper's 
goods regardless of whether the carrier was at fault. It is important 
that the fertilizer industry and the railroads come to a consensus on 
how to share liability for anhydrous ammonia shipments so that growers 
have uninterrupted access to this important agronomic product. Congress 
should explore avenues to address liability for the shipment of 
hazardous materials, particularly compounds that are toxic by 
inhalation.
    We are in a global economy and our competitiveness and access to 
those markets are becoming increasingly important. Today for us to get 
to the Pacific Northwest with corn, the typical path takes that corn 
first east and then up north and finally west again. As we work to find 
solutions to our transportation challenges in our state and nation one 
thing is clear: Efficient and competitive transportation has never been 
more important to the future of our state's economic health and our 
Nation's energy security.
    When the last kernel of corn flows out of the grain cart, it begins 
a journey that is dependent on an infrastructure at the township, 
county, state, interstate rail, and river to make it to its destination 
in a worldwide economy.

    Senator Thune. Thank you, Ms. Richardson.
    Mr. Rose?

STATEMENT OF MATTHEW K. ROSE, CHAIRMAN, PRESIDENT AND CEO, BNSF 
                        RAILWAY COMPANY

    Mr. Rose. Good morning, Senator Thune. It's a pleasure to 
be here in Sioux Falls with you this morning.
    As you know, railroads are a very important part of South 
Dakota's economy and transportation network, and South Dakota 
is certainly very important to BNSF.
    Over the past 3 years, BNSF has invested more than $80 
million for capacity expansion and maintenance. Senator Thune, 
you and I have talked about how important it is to connect and 
protect rural America's economy and quality of life. The 
Commission I served on also made this a priority of its 
findings.
    Rural America, like everywhere else, benefits from an 
efficient supply chain, probably more so than other places, 
because it relies on transportation to connect to the world 
markets. The more efficient the U.S. supply chain is, the more 
competitive U.S. jobs and inputs, like agricultural products, 
can be in the global economy.
    But, the U.S. supply chain is becoming less efficient. In 
the 1980s, we recognized tremendous efficiencies through the 
deregulation of transportation industries. However, starting in 
2003, supply chain costs began to grow. As a percent of GDP, 
supply chain costs have increased about 15 percent since 2003. 
This is due to several factors, including higher fuel costs, 
but it's essentially a function of diminishing capacity across 
all modes.
    We've been blessed, for years, with overcapacity on both 
the rail and the highway networks, but now the economy has 
outgrown the infrastructure, and when that occurs, costs and 
prices go up.
    The economic slowdown may provide a little bit of breathing 
room here, but the disequilibrium between capacity and demand 
truly is systemic and long-term. Population growth will require 
more transportation solutions in rural America, as well.
    As you know, there's a call for moving at least 10 percent 
of the Nation's highway freight to reduce the carbon footprint 
and fuel intensity of freight movements, and potentially 
improve on the cost-effectiveness of payment expansion and 
maintenance expenditures. It's estimated that if 10 percent of 
the freight that currently moves by truck were diverted to 
rail, fuel savings would exceed 1 billion gallons a year. Think 
of it as a three-legged stool, reducing our dependence on 
foreign oil, reducing our carbon footprint, and improving 
congestion on our Nation's highways. This is also good for 
rural America. Expanding the freight rail network in this 
country will take pressure off the highway networks, mitigating 
the impact of heavy long-haul trucks on rural state 
transportation budgets, shifting more freight to the rail. 
Increasing freight volumes may not reduce truck traffic, but it 
will certainly mean that the impact of growth will be reduced.
    In addition, strengthening the overall network to handle 
growing highway freight will mean a strong ag supply chain. 
Expanding capacity will benefit all shippers.
    I've been asked specifically about what it will take to 
move freight off the highway and onto the rail network. It's 
all about price per ton, and the greatest market opportunity 
lies here in the 500- to 1,000-mile segments. Currently, 
however, public policy incents freight to the highways, 
primarily through subsidies to the largest and heaviest of 
trucks, and underleveraging the substantial private investment 
in freight rail for the benefit of the public.
    There are about 2 million ton-miles of freight that could 
go on either a truck or a train. Trucks currently have about 65 
percent of the market, and trains have about 35 percent. 
There's no doubt in my mind that this market share has the 
origins in the competitive advantage that the largest and heavy 
truck experience because they don't pay the full direct and 
indirect cost of the use of the highways.
    There's even a bigger issue, because gas tax revenues, as 
you're aware, are going down, and the Highway Trust Fund is 
being bailed out by taxpayer dollars. The 20-percent-or-greater 
cross-subsidies of the heaviest of trucks, that used to come 
from other motorists, now comes from the U.S. taxpayer. 
Eliminating a subsidy is always difficult, but it's equally 
important not to make it worse.
    A ballpark industry estimate of what it would take to carry 
10 percent of the freight currently on the highway indicates 
that we would have to double the existing freight-rail 
intermodal network. More analysis of that is currently being 
done.
    But, we currently are investing in capacity, based on 
returns, and that investment is substantial. As an industry, 
we're currently spending about $10 billion in the freight rail 
network. But, if policy leveraged those investments with public 
partnerships, these investments would happen more quickly, and 
with more certainty.
    One of the key proposals offered by the freight industry is 
the investment tax credit, which provides a 25-percent tax 
credit for expansion, investment in the freight railroad 
networks by railroads, or by their customers. This incentive 
would help worthwhile projects get built sooner, but would not 
be enough to cause economically unjustifiable projects to go 
forward. It would help fund investments, like ``positive train 
control,'' which predominantly benefits the public.
    I'd like to underscore my comments with an important 
caveat. Freight railroads will not be able to achieve the 
expansion necessary to increase market share if the economic 
regulatory system is not also in sync with this goal. Railroad 
regulation must allow the industry to achieve the returns 
necessary to make the investments that I've outlined in this 
testimony. Our record of reinvestment is a good one. As 
revenues have increased, so has investment. Therefore, 
maintaining freight railroad profitability is a key part of 
meeting the policy goals that Congress seeks to achieve in the 
surface transportation policy.
    I look forward to our continuing dialogue.
    [The prepared statement of Mr. Rose follows:]

  Prepared Statement of Matthew K. Rose, Chairman, President and CEO, 
                          BNSF Railway Company
    Good morning, Senator Thune. It is a pleasure to be in Sioux Falls 
with you this morning to address surface transportation needs in rural 
America. Railroads are an important part of South Dakota's economy and 
transportation network, and South Dakota is important to BNSF. BNSF has 
invested more than $83 million in South Dakota for capacity expansion 
and maintenance, over the past 3 years. With rail yards in Aberdeen, 
Edgemont and Sioux Falls, we handle more than 1.4 million carloads 
within the state each year. About 100,000 carloads of wheat, soybeans, 
beets and other agricultural products from South Dakota are moved on 
BNSF each year for both export and domestic use. Signs are pointing to 
a pretty good year for agriculture. I hear harvest is wrapping up here 
with pretty good yields.
    In addition to a very good business partnership with South Dakota's 
agricultural industry, the State of South Dakota has a unique 
relationship with BNSF that very few other states historically have 
had. We have a track record of public private partnership that goes way 
back, which says good things about the state's understanding of the 
importance of freight rail.
    For those who do not know, BNSF purchased right of way from the 
state (called the ``Core Line'') in 2005. This 368-mile line runs from 
Aberdeen to Mitchell to Canton to Sioux Falls and Sioux City. This has 
allowed BNSF to increase hauling capacity to better serve South Dakota 
producers and businesses.
    As the top Republican on the Senate's Surface Transportation and 
Merchant Marine Subcommittee, Senator Thune has begun a thorough review 
of the Nation's surface transportation policies in anticipation of re-
writing them soon. He and I discussed the findings of the National 
Surface Transportation Policy and Revenue Study Commission, to which I 
was appointed, when its report came out. During the Commission 
deliberations, a lot of time was spent discussing how to connect and 
protect rural America's economy and quality of life. Senator Thune and 
I also recently discussed freight policy and the importance of the U.S. 
supply chain before his Subcommittee.
    It is very important that the U.S. supply chain remain a relatively 
low percentage of GDP. The more efficient the U.S. supply chain is, the 
more competitive U.S. jobs and inputs--like agricultural products--can 
be in the global economy. The scale of the U.S. supply chain is 
impressive. Its value is more than $1.4 trillion, which is nearly three 
times the size of the Defense Department budget, and approaches the 
size of the Gross Domestic State Product of California (which is $1.8 
trillion). The role of the U.S. supply chain in global competitiveness 
and its size and value to the U.S. economy should make freight mobility 
one of the most important elements of surface transportation policy--
but, to date, it has not been.
    In fact, the U.S. supply chain is becoming less efficient. In the 
early 1980s, we recognized tremendous efficiencies through the 
deregulation of transportation industries. In the freight rail 
industry, productivity increased about 163 percent and rates went down 
about 53 percent. In addition, lower fuel costs, and excess capacity in 
all modes contributed to the cost-effectiveness of the supply chain.
    However, starting in 2003, supply chain costs began to grow. As a 
percentage of GDP, supply chain costs have increased about 15 percent 
since 2003. This is due to several factors, including higher fuel 
costs, but it is essentially a function of diminishing capacity across 
modes. Between 1980 and 2005, volumes, or vehicle miles traveled on the 
highway grew by 96 percent and lane miles grew by only 5.7 percent. 
Rail revenue ton miles grew by 87 percent and rail miles decreased by 
39 percent. We have been blessed for years with over-capacity on both 
the rail and highway networks, but now we've reached a supply/demand 
crossroads and, in many places, tipped over it. Basically, the economy 
has outgrown the infrastructure and when that occurs, costs and prices 
go up. The economic slow down may provide a little breathing room, but 
the disequilibrium between capacity and demand is systemic and long-
term. Population growth will require more transportation solutions.
    Continued efficiency gains across all transportation systems are an 
important part of the solution for the future. The railroad industry 
continues to make gains in productivity. For example, at BNSF, we've 
improved agriculture network velocity such that moving 2008 volumes at 
2007 productivity levels would have required the operation of 320 more 
trains. Many of our customers, including agricultural businesses, have 
seen improved transit times. However, ultimately, capacity will have to 
be added--mainline, facilities and terminal expansion.
    This is a challenging time for transportation policymaking. The 
outlook is for more congestion and, therefore, increasing supply chain 
and other related economic costs. The Texas Transportation Institute 
estimates the cost of highway congestion in the Nation's urban areas 
has increased 60 percent, from $39.4 billion to $63.1 billion, from 
1993 to 2003. The U.S. DOT estimates that the cost of congestion across 
all modes of transportation could be three times as high--approaching 
$200 billion-per-year--if productivity losses, costs associated with 
cargo delays, and other economic impacts are included. If you factor in 
all modes and forecast to 2020, it is clear that the cost of congestion 
will be well over $200 billion.
    At the same time, transportation revenues are down. How do you grow 
transportation networks for the future, which requires more investment 
today? Quite simply, transportation investment--and its resulting job 
creation and economic generation and benefit to global 
competitiveness--must become more of a policy and funding priority. 
Also, the U.S. needs a comprehensive vision for transportation that 
integrates its energy and environmental objectives. Other countries 
have understood and responded to these transportation priorities.
    For example, in China, railway capital expenditure will nearly 
double from $44-58 billion USD to more than $88 billion USD. A great 
deal of China's stimulus package will fund rail projects aimed at 
China's logistics industry. Canada has targeted billions of dollars in 
recent years for priority freight rail corridors that serve their west 
coast ports, in an effort to compete with the U.S. West Coast ports and 
move more freight by rail.
    U.S. private freight rail capital expenditures total more than $10 
billion annually, which is an impressive amount, and represents capital 
reinvestment of almost twenty percent, making the railroad industry one 
of the most capital intensive. BNSF and the Union Pacific Railroad each 
have annual capital expenditures that are larger than the annual 
highway expenditures of every state in the country except Florida, 
California and Texas. Public policy should recognize that a relatively 
small public investment in freight rail greatly leverages the 
proportionately larger private capital investment and yields benefits 
for not only the supply chain and freight mobility, but also for 
highway users and energy and emissions reduction goals.
    In the context of surface transportation reauthorization 
legislation, there is an increasing call for moving more freight off of 
the Nation's highways to reduce the carbon footprint and fuel intensity 
of freight movements and, potentially, improve upon the cost-
effectiveness of pavement expansion and maintenance expenditures. There 
is a bill pending before the Senate Commerce Committee, which calls for 
moving 10 percent of gross ton miles off the highway (S. 1036).
    It's estimated that if 10 percent of the freight that currently 
moves by truck were diverted to rail, fuel savings would exceed one 
billion gallons a year. As the Committee is aware, rail accounts for a 
fraction of total U.S. greenhouse gas emissions (2.6 percent, as 
compared to 21 percent for trucks). To give you an idea of what impact 
this has, in 2008, BNSF moved 4.7 million containers and trailers, 
reducing potential Greenhouse Gas emissions by more than 7 million 
metric tons. Industry-wide, rail moved 11.5 million containers and 
trailers, reducing potential Greenhouse Gas emissions by more than 17.2 
million metric tons. The congestion benefits are substantial, as well. 
One BNSF intermodal train removes more than 280 long-haul trucks from 
the highways.
    I believe S. 1036 is a good bill. It is certainly the first surface 
transportation reauthorization bill introduced in Congress that 
integrates national energy and environmental goals in a truly 
multimodal way. It represents the thinking of many I have spoken to in 
Congress who believe that freight rail can play a larger role in 
transportation congestion and emissions solutions. If Congress acts on 
the principles outlined in the bill, it will succeed in making freight 
a more important consideration in Federal transportation policy and 
freight networks more robust and seamless.
    This will be good for rural America. Expanding the freight rail 
network in this country will take pressure off the highway networks, 
mitigating the impact of heavy long-haul trucks on rural state 
transportation budgets. Shifting more freight to rail in an environment 
of increasing freight volumes may not reduce truck traffic, but it will 
certainly mean that the impact of the growth rate will be reduced. In 
addition, in states like South Dakota where the agriculture freight 
rail network is an important part of the state's economy, strengthening 
the overall network to handle growing highway freight will mean a 
stronger Ag supply chain. Like all network businesses, capacity for all 
customers is only as large as the network's chokepoints.
    I've been asked specifically what it will take to move more freight 
off the highway and onto rail. The key is what I call ``mode 
optimization''--which is where trucks and trains divide up the Nation's 
freight in the way that best optimizes the strengths of each mode and 
results in the best cost, fuel and carbon efficient outcome. If public 
policy is geared effectively toward mode optimization, I believe that 
the transportation marketplace will respond and more highway freight 
would migrate to the rails. It's all about price-per-ton, and the 
greatest market opportunity lies in the 500 to 1,000 mile segments. 
Currently, however, public policy incents freight to the highway--
primarily through subsidies to the largest of trucks--and under-
leveraging the substantial private investment in freight rail for the 
benefit of the public. I will address this shortly.
    To achieve mode optimization, it's important to understand how much 
of the supply chain could migrate from truck to train. The supply chain 
is made up of the movement of more than 4 trillion ton miles of freight 
annually. When you eliminate from the calculation heavy haul freight 
that generally only goes by train (such as grain and coal) and freight 
in short-haul, less-than-500 mile all-truck distribution markets, there 
are about 2 trillion ton miles of freight of all kinds that could go on 
either a truck or a train. Trucks have about 65 percent of the current 
market; trains have 35 percent.
    There is no doubt in my mind that this market share has its origins 
in the competitive advantage the largest trucks experience because they 
don't pay the full direct and indirect costs of their use of the 
highways. I want to qualify these remarks with the fact that BNSF 
supports the trucking industry. Our top customers are truckers, and 
over the years, we have developed strong partnerships that have 
improved service and allow much more intermodal freight to move via 
rail.
    Nevertheless, it is a fact that according to the May 2000 Addendum 
to the 1997 Federal Highway Cost Allocation Study Final Report, FHWA 
estimates that combination trucks on average, pay 80 percent of their 
Federal highway cost responsibility through user fees, and the heaviest 
combinations, those over 80,000 pounds, pay only half of their cost 
responsibility. This modal subsidy distorts the freight economics where 
trucks and trains compete. Typically, railroads are better suited for 
long-lengths of haul, due to our advantages such as fuel economy and 
the fact that our core lines are less congested than major interstates. 
I believe any of the Class I railroads will tell you that subsidies for 
motor carriers increases the minimum length of haul where we can be 
competitive and that without the subsidy, the railroads' market share 
of over the road traffic would probably be higher than it is right now.
    Eliminating a subsidy is always difficult. But it's equally 
important not to make it worse. Some in the trucking industry are 
calling for heavier trucks as a way to increase their productivity. If 
Congress changes the truck weight policy, those trucks must pay not 
only the cost of their additional weight, but also make up the subsidy 
they receive at current weights. The question of truck weights and 
subsidies will no doubt come up in the context of the surface 
transportation reauthorization, especially if Congress considers an 
increase in the gas tax, and as General Funds are directed to the 
Highway Trust Fund. Dwindling revenues from the gas tax has required 
the use of General Funds for transportation funding, which means that 
the subsidy that other transportation users used to provide to the 
heaviest of trucks is now being provided by the general taxpayer.
    Expanding freight rail capacity is the other significant factor in 
achieving mode optimization. Currently, there is no Federal policy 
aimed at encouraging or partnering with freight railroads to expand 
capacity. Capacity became very tight in the freight rail industry from 
about 2003 until last year, and we saw some of the negative 
consequences of it--even with record capital expansion expenditures 
during that period. Railroad capital expenditure has remained 
relatively high, even in light of current decreased volumes. Adequate 
railroad capacity means increased network velocity and throughput, 
which allows for more volume and better service. It also improves 
market coverage, allowing for more truck-like service between the 
origins and destinations that customers want.
    The National Policy and Revenue Commission wanted to determine 
freight rail capacity in key corridors and project its capacity 
requirements in the years to come. In sum, the Class I freight 
railroads, through capital expenditures based on expected revenues from 
the marketplace and through productivity, can achieve almost all of the 
needed investment over the next 28 years, but there is a projected 
shortfall of almost $40 billion. However, this analysis did not take 
into account what the freight railroads will have to do to facilitate 
increasing levels of passenger service on their networks, nor the 
expenditures necessary to comply with the Rail Safety Improvement Act 
of 2008 (RSIA).
    This legislation mandates that positive train control (PTC) be 
installed on all rail main lines used to carry passengers or certain 
highly hazardous materials by December 31, 2015. Railroads--private 
freight and public passenger railroads--are responsible for nearly all 
of the almost $10 billion in installation and maintenance costs for 
this technology. The Federal Railroad Administrator has found only $700 
million in PTC safety benefits, given the existing high level of safety 
that already exists in the industry. If the railroads must fully bear 
the cost of this mandate, it will certainly come at the expense of 
capacity expansion and, potentially, other maintenance or safety 
technology expenditures.
    The National Policy and Revenue Commission also asked what level of 
investment would be needed to expand the freight rail market share of 
the growing freight volumes anticipated in the future--the goal 
proposed by S. 1036. The Commission found that to increase freight rail 
market share by 10 percent, an additional $700 million in annual 
investment would be necessary. More research is being done on this 
question, which will look also at the impact of increasing passenger 
service on freight line investments.
    What kind of capacity is needed for mode optimization? To succeed, 
railroads will need to deliver truck-like frequency, reliability, 
transit-times and trouble free execution. Essentially, we need to zero 
in on key domestic freight lanes between ``megapolitan'' markets, much 
like Canada has done. Significant up-front capacity investment is 
needed for railroads to execute and deliver line-capacity in targeted 
500-1,500 mile lanes to facilitate expedited, high speed double-stack 
service on top of existing bulk, manifest and hosted passenger train 
network. Part of this investment will include removal of legacy 
chokepoints such as Tower 55 in Fort Worth, the Burlington Bridge in 
Iowa, and CREATE in Chicago. It will require crown clearing on various 
tunnels across the network, siding extensions, double tracking, and 
high speed cross-overs on targeted lines across the network.
    It also will require facility expansion in strategic locations that 
support density economics required for frequent reliable service. This 
includes the development of new or expanded intermodal facilities in 
major megapolitan locations, such as one BNSF is proposing in Kansas 
City. It will require additional transload facilities to consolidate 
carload networks to make it more efficient. Transload facilities allow 
for the transfer of bulk or industrial products shipments between truck 
and rail. Rail facilities have an economic multiplier for the 
communities in which they are cited.
    However, locating facilities in and around urban areas poses one of 
the single biggest challenges to realizing increased benefits of more 
freight rail. Transportation facilities regularly encounter permitting 
difficulties in the face of communities' occasional ``Not-In-My-
Backyard'' responses. Our experience has been to successfully work 
closely with the neighborhoods and organizations representing them to 
implement state-of-the-art environmental mitigation and to integrate 
transportation facilities as organically as possible into an area. 
However, permitting processes can be abused in light of citing 
concerns. Permitting can be improved to remain responsive to community 
interests while ensuring that project costs and timelines are not 
unduly attenuated. In addition, I believe local governments, with the 
encouragement of Federal policy if necessary, should be aggressive in 
developing land use regulations and utilizing community planning to 
ensure citing of needed transportation facilities in the future, and 
that facilities are not encroached upon by incompatible development.
    On the trucking side of the equation, construction or improvement 
of an extensive network of the intermodal connectors that serve these 
facilities will be required, along with fuel efficient, high service, 
dray-networks. In addition, it's important that freight distribution be 
a part of metromobility. Without enough road capacity in urban areas to 
distribute freight, the intermodal model is not as effective. Freight 
must be planned for, accommodated, and not discriminated against in 
urban areas.
    The timing of the railroad investments needed, and the magnitude, 
to modally optimize 10 percent of the highway freight makes 100 percent 
private investment too risky to accomplish without the partnership of 
the public. Public investment that leverages focused private investment 
can bring sufficient capital to the table, accomplishing national goals 
more quickly. One of the key proposals offered by the freight rail 
industry is the Investment Tax Credit (ITC), which provides a 25 
percent tax credit for expansion investment in the freight rail network 
by railroads or their customers. This incentive would help worthwhile 
projects get built sooner, but would not be enough to cause 
economically-unjustified projects to go forward. It would help fund 
investment, like PTC implementation, for which the benefits are 
predominantly public benefits. It's also significant to note also that 
each $1 billion of new rail investment induced by the tax incentive 
would create 20,000 jobs. As Congress considers how to leverage the 
freight railroad's extensive private investment to achieve mode 
optimization, the ITC should be carefully considered.
    The use of Public Private Partnerships (PPPs) on freight railroads 
is an important tool in achieving a modally optimized freight network. 
For years, states have partnered with freight railroads to complete 
projects that benefit both the railroad and the public, as Senator 
Thune knows from personal experience as South Dakota State Railroad 
Director. The benefits that the public can realize from freight rail 
projects include economic development, reduced vehicular congestion and 
emissions at grade crossings, reduced truck traffic and related 
impacts, and improved commuter or intercity passenger rail service. 
However, there has not been an appreciable Federal role in these PPPs, 
except for Congressional earmarks. The transportation spending in the 
recently-passed American Re-Investment and Recovery Act (ARRIA) 
provided states the flexibility to use the General Funds provided under 
the Act on freight rail and port projects.
    ARRIA also established a grant program at DOT for projects of 
national significance, for which freight rail projects are eligible. A 
program of this nature, which is adequately funded and performance-
based, can substantially contribute to reducing chokepoints and 
expanding freight rail capacity for the benefit of the public. These 
efforts point the way to increased use of PPPs, which the long-term 
reauthorization legislation should build upon.
    In sum, the Commission developed a policy roadmap of what an 
authorization bill needs to create a balanced, multi-modal 
transportation system in which ``mode optimization'' is possible. Below 
is a high-level overview of what the Commission found is required of 
Congress to achieve it, from a freight rail perspective:

   a national transportation vision that encompasses the 
        benefits of multimodal freight projects for planning, funding 
        and permit approval;

   rational economic regulation that permits freight railroads 
        to continue to invest sufficiently to meet market share goals;

   leveraging and incentivizing private freight rail 
        expenditures, through a tax credit which will pull forward 
        expansion spending sooner;

   federal public private partnerships for freight rail 
        projects; and

   freight mobility in metropolitan areas--including freight 
        planning and capacity in urban areas.

    I'd like to make two additional policy points. First, freight 
railroads will not be able to achieve the expansion necessary to 
increase their market share if the economic regulatory system is not 
also in sync with this goal. Railroad regulation must allow the 
industry to achieve the returns necessary to make the investments that 
I have outlined in my testimony. Our record of reinvestment is a good 
one; as revenues have increased, so has investment. Therefore, 
maintaining freight railroad profitability is a key part of meeting the 
policy goals that Congress seeks to achieve in surface transportation 
policy.
    Second, I'd like to comment on carbon policy. It can incentivize 
use of freight rail and freight rail investment. Whether carbon is 
priced, capped, or off-set, there will be pressure on the supply chain 
to become more fuel and emissions efficient. However, Congress 
specifically will need to consider how to encourage more use of freight 
rail to achieve mode optimization to meet environmental goals.
    Having said that, my belief is that the most important factor for 
Congress to consider is the economic calculus of what a carbon policy 
will do to the economy and all of our customers. Whatever Congress 
votes to do, or not to do, freight rail will be an important part of 
managing carbon emissions and reducing energy dependence in the future.
    If Congress focuses on desired outcomes--lower costs, energy 
efficiency, environmental mitigation, reduced highway congestion and 
enhanced global competitiveness--public partnerships with privately 
funded freight railroads will be a more significant policy option for 
optimizing the Nation's surface transportation network. I look forward 
to continuing the dialogue we at BNSF have with you, Senator Thune, and 
your colleagues in the Commerce Committee and across Congress as you 
work to enact a reauthorization bill that moves America, and its Supply 
Chain, forward.
    I welcome the opportunity to respond to your questions.

    Senator Thune. Thank you, Mr. Rose.
    Thank you, all of you, for your comments. And, as I said, 
your full statements will be included as a part of the record.
    I appreciate many of the suggestions that were made. I 
guess what I'd like to start by doing is directing some 
questions to the entire panel, and this first one is more of an 
overall state-of-the-economy type question. My question has to 
do with what impact the current economic downturn has had on 
shipping and freight transportation. Larry, from the trucking 
standpoint, railroads, agriculture--how are we looking out 
there, in terms of freight transportation and the impact of the 
economic downturn?
    Mr. Anderson. Well, I can speak for my own company. And for 
the last 5 years, we've grown at a rate of about 15 percent a 
year. And this year, we will not see any growth. It's--actually 
went down a little bit. But, we're looking forward--towards the 
future, and hoping--we were hoping, for the fourth quarter of 
this year, to see an increase, but I'm beginning to think it'll 
be the first quarter of next year.
    Senator Thune. Anybody else want to comment on----
    Mr. Rose?
    Mr. Rose. I just--I was going to say, I think, in terms of 
policy, it's a very dangerous time, because, for the first time 
ever, we're seeing a reduction of VMT on the highway system, as 
well as the railroad system. So, it's going to create this 
sense of overcapacity of these networks, when, in reality, we 
know that the economics--markets will return, and, when those 
happen, of course, gross ton miles come back to both the 
highway system and the freight railroad network. And so, you 
could make an argument that now is the time, more than ever, 
when you've got the excess capacity; we ought to be making 
these capacity expansions on the highway and the freight rails.
    As far as the economic situation, we watch about 30 
businesses, and we really have seen very little direction that 
says we're going to see a second-half recovery. And we would 
really expect, into late 2010.
    Senator Thune. Ms. Richardson?
    Ms. Richardson. With the worldwide recession that we 
believe we're in, we're seeing significant decreases in our 
experts with every commodity group. On the ethanol front, 
obviously, since we're driving less, there's less opportunity 
of going to that market, so everything has been down 
substantially. From corn's perspective, last year, in July, we 
were talking $7 corn, we're talking--and our basis, our rail 
rates, have substantially increased. And we used to talk 60--30 
cents-a-bushel, and we're over 60 to 70 cents-a-bushel for us 
to get to the Pacific Northwest, currently.
    Senator Thune. Jack?
    Mr. Parliament. Well, I'd kind of reiterate Matt's comments 
about improving on the infrastructure now, while we have a 
chance to do so. It's projected out into, oh, 10, 15 years from 
now, that freight traffic could nearly double--and so, we need 
to be able to keep up with the infrastructure. And that means, 
on the Class I's the short lines, and, quite frankly, on the 
roads and highways, also. So, infrastructure funding, I think, 
is probably a key thing for the surface transportation 
industry.
    Senator Thune. Good. And most of you don't see anything, 
probably, turning on this until--you said, Mr. Rose, sometime 
next year. Larry, maybe last quarter this year, but more likely 
next year, projecting out there into the future.
    One of the big issues that's being debated nationally right 
now, and certainly being debated in the Congress, is the issue 
of climate change. And I'm just wondering--sort of a general 
question again for anybody on the panel--about what you see as 
the economic impacts on your industry of some of the climate 
change proposals that are currently being debated in the 
Congress. And obviously there isn't a final bill, at this 
point, but there is a bill that has passed the House of 
Representatives, which I think a lot of people have reacted to. 
So, how do you see that playing out? What impact do you see 
that having on the freight industry in this country?
    Secretary Bergquist?
    Mr. Bergquist. If I might, Senator. From the department's 
perspective, we have--sorry--have some concerns with regard to 
the climate change legislation----
    Senator Thune. There you go.
    [Laughter.]
    Mr. Bergquist.--including what's in the House bill. Part of 
that would require each state to establish targets for 
reduction of transportation-related greenhouse gases. And 
primarily, that means that states will need to do things to 
increase transit ridership, biking, walking, and those type of 
things, to eliminate some of the vehicle traffic.
    In South Dakota, with the rural nature of our state, with 
the harsh winters we have, with the significant distances we 
often have to travel, there are really practical limits to how 
much we can do in order to promote transit and walking and 
biking. And we're concerned that pursuing some of these options 
unwisely may have the side effect of having a negative impact 
on our transportation investments, taking funds away from what 
we need to invest in our system, and diverting them to some of 
these other purposes.
    So, we, as a department, feel strongly that if such climate 
legislation is to pass, either separately or as part of any 
future reauthorization, it should not result in a rural state, 
like South Dakota, being required to take impractical steps to 
reduce greenhouse gas emissions that would negatively impact 
our transportation systems.
    Senator Thune. Anybody else want to take a stab at that?
    Larry?
    Mr. Anderson. I think we, as a company, have, each year for 
about the last 4 years, upgraded our equipment. We went, I 
believe it was 3 years ago, to putting a particulate trap to 
catch the emissions. And now, in--the 2010 engines coming out 
will have SCR on them, which is urea, that's going to make the 
gases less. We're running our trucks slower, so we don't burn 
as much fuel. And all this is at a substantial cost to us. This 
new deal, the SCR, is going to add between $8- and $10,000 per 
cost per truck. And I think, with things like that, and we've 
put APUs on, so we're not idling our trucks--these are all 
things that we've done. And now, after putting all these APUs 
on, now they want to particulate traps on them; and we have one 
state, in particular--California--that just doesn't care what 
it costs. I mean--but, they're used to spending money out 
there.
    [Laughter.]
    Mr. Anderson. So, that's the trucking industry. I think 
we're taking a lot of steps to burn less fuel. We've seen it in 
our company. There are--it's gone down, the consumption. And I 
think a lot of trucking companies are doing that.
    Senator Thune. Good.
    Jack? Matt?
    Mr. Rose. I guess, from our standpoint, there are some 
positives and negatives. The positives are that rail is very 
fuel efficient, three to four times more so than trucks. And 
so, if there is mobile source carbon cap-and-trade of some 
sort, we're going to give more traffic to the railroad. The 
downside is, the coal franchise has a big risk to it.
    And, you know, at the end of the day, the railroad will 
survive it. It certainly will have a big hole in its boat, but 
it's--I think it's really much more of what the unintended 
consequences will be to the remaining manufacturing sector of 
our economy. And it's just--net-net, the only bill we can look 
at is the House bill, because that's the one we know. But, if 
we just continue to raise the inherent cost of manufacturing in 
this society, all that's going to do is push this stuff more 
and more offshore, and provide fewer and fewer jobs in this 
country. And, at the end of the day, what nobody is really 
talking about is the fact that this is called ``global 
warming'' for a very specific purpose. It's not ``U.S. 
warming,'' it's ``global warming'' that needs to be solved for.
    Senator Thune. Anybody else?
    Jack?
    Mr. Parliament. Yes. From my perspective, if we emit more 
carbon, we need to have the technology to make it a payback for 
us. There are certain technologies that we implement ourselves 
that reduce our idle times, and things like that, and it saves 
fuel, and it also eliminates emissions. So, so long as the 
technology stays up with whatever restrictions and programs 
that we, as railroads, and, I think, probably even the trucking 
industry--as long as those--the technology stays up with what 
we have to do, then I think it's an OK deal. But, you've got to 
be able to pay it back, too, and not just cost everybody money.
    Senator Thune. Lisa?
    Ms. Richardson. Manufacturing and efficiency. In today's 
market, a producer in South Dakota is very concerned what the 
cost of fertilizer is. And most of our fertilizer actually 
comes from China. And so, technology has changed our yields. We 
are still the most aggressive, efficient producer in the world. 
Now, what makes us competitive is getting our product to 
market, but the manufacture of the imports is all going 
overseas. So, watching that, and understanding that, and how 
that affects our prices, is something very, very important.
    We also think there is opportunity--the green economy, in 
agriculture, with ag offsets. If we get ethanol done right, we 
think that there's opportunity to grow. But, there's a great 
misunderstanding, some uncertainty out there. And we have some 
real valid concerns of what this means, long term, for 
agriculture, too, as we export significant amounts of every 
piece of it. It's the one part in the world, we--we surpass 
everyone else out in efficiency, and we want to continue to do 
that.
    Senator Thune. Well, I think one of the practical problems 
we'll run into with the push to more fuel-efficient vehicles 
and many of the steps that the railroads and trucking 
industries are taking to reduce the amount of fuel use and 
amount of emissions, are all good things, all things we ought 
to be doing. But, we do have a revenue source for our 
infrastructure in this country. It's based upon fuel, gallons 
of fuel used. And so, you're going to have an ever-shrinking 
revenue source, which points to some of the long-term problems 
that I think Secretary Bergquist has identified, too, and that 
we're all going to have to be focused on in the next highway 
bill. And the current highway bill expires at the end of this 
Fiscal Year, which is September 30. My guess is, the current 
one will be extended for some time, and that a complete 
rewriting of the current highway bill won't occur right away. I 
hope that we get to work on it, but there are lots of other 
things, right now, on the congressional agenda that, I think, 
may push it down the road. But, when that debate is engaged, 
it's going to be a very different debate, I think, for some 
obvious reasons.
    Secretary Bergquist, you mentioned, in your testimony, that 
projects that facilitate truck-to-rail transfers at grain 
elevators and other locations should be an eligible activity to 
be funded by direct grants and broader-formula programs in the 
next reauthorization, when we get to it. I think that's a very 
good suggestion. I'm interested in hearing what any of the 
other panelists think about that idea as a source of using 
highway funds, discretionary funds, grant funds, formula funds, 
to better facilitate some of these transfers that occur at 
loading facilities.
    Mr. Parliament. The railroads and the companies that ship 
on railroads have looked at many of the different transload 
operations, and most transloading-type operations seem to do 
very, very well, from our own company perspective. That's been 
a major part of our business.
    So, taking the--using the trucks for the short haul, 
bringing it on to rail, and then getting the long haul out of 
it just is, quite frankly, sort of a no-brainer, and it makes a 
lot of sense. And if we use some infrastructure funding to 
accomplish--to help accomplish that, I think that's a good 
thing.
    Ms. Richardson. Senator, South Dakota is one of the few 
states in the Nation that doesn't have a container loadout 
facility, and--we don't have substantial amounts of people, and 
so, taking a look at how many containers come in--from our 
perspective, a lot of those containers go back empty, and we 
think that's a great opportunity to put distillers grain in 
those containers. And if there is an opportunity to put 
infrastructure with the container loadout facility, which would 
help the entire manufacturing industry, as well as our 
industry, I think that's a great opportunity.
    On our front, there has been significant increases in our 
unit train loadouts--105; and most of our ethanol plants now 
are hooking up and using unit trades at 95, as well. But, a 
container loadout facility is something that is critically 
needed here.
    Senator Thune. Mr. Rose?
    Mr. Rose. Senator, this has always been a very emotional 
issue with, specifically, our friends in the highway area, and 
the truckers, to some degree. You have to look at it in 
different stages. Certainly, with the Highway Trust Fund having 
to be bailed out every 12 to 18 months, $7 to $10 billion, we 
know that that money is coming from general funds. If we were 
collecting enough dollars for the trust fund, we wouldn't have 
to be bailing it out. So, I think, kind of, all rules are off 
when that happens, and we do believe that, as long as there are 
general funds coming into the Highway Trust Fund, that there 
ought to be flexibility for expenditures on more than just 
concrete highway projects.
    When the stimulus money came out, there was an important 
question, and in this last stimulus bill, flexibility was 
allowed. We have a lot of states that have decided, ``You know, 
I can make some modest rail-truck loadout investments, rail-
truck investments, rail intermodal investments, connectors, 
things like, and net-net.'' It's better for our state. And we 
applaud that flexibility very much.
    Senator Thune. All right, great.
    Secretary Bergquist, you mentioned in your testimony, 
coming back to the reauthorization of the highway bill, a 
concern over placing new restrictions on the use of Federal 
funding, mentioning that you'd like to see the processes 
streamlined so that you can deliver projects more efficiently. 
And I guess I'd like to, if you can, drill down a little bit on 
that, and maybe give some specific examples of how the highway 
program could be streamlined.
    Mr. Bergquist. Certainly, Senator. And my reference to the 
processes in my written testimony really refers to everything 
involved in delivering a project from concept to construction. 
And I'll give you one example of what I'm talking about--the 
processes that are involved, and that we go through as a 
department, in the project delivery phase for environmental and 
historical review and consultation. This is, right now, a very 
open-ended process with virtually no deadlines on completion of 
the process. And, as such, it can tend to drag out for an 
extended period of time. It greatly slows project delivery, and 
is often the cause of delay in completion of a project.
    And I'm certainly, Senator, not suggesting to you today 
that we should delete any of the substance that goes into those 
processes; rather--I do believe that, by streamlining the 
processes and putting in some deadlines, and bringing some 
definition to the processes, we can greatly improve the 
efficiency of delivering our projects. And certainly, we would 
hate to see any additional regulation or processes that would 
go in place that would continue to slow that project delivery 
process and our ability to deliver a program.
    Senator Thune. Have you seen any stimulus monies that have 
come into South Dakota that haven't been able to be programmed 
because of some of these delays that you've talked about--
getting permitting and such.
    Mr. Bergquist. Actually not, Senator. And this is why. The 
stimulus funds that we did receive were directed toward 
projects that were, by definition, shovel-ready. So, those 
shovel-ready projects have already completed this process, and 
they're ready to go. So, it has not impacted any of the 
stimulus projects.
    Senator Thune. Has most of the stimulus money that's come 
into South Dakota that's gone into infrastructure been used as 
if they were formula funds? How are you guys using stimulus 
dollars?
    Mr. Bergquist. Our highway stimulus funds, we used to 
supplement our formula funds----
    Senator Thune. Formula money, OK.
    Mr. Bergquist.--and do additional preservation-type work on 
our system.
    Senator Thune. OK.
    Mr. Rose, there's a Department of Transportation forecast 
from 2008, entitled ``Freight Facts and Figures,'' that 
projects that the tonnage carried by U.S. freight railroads is 
going to double between 2002 and 2035. And, as you mentioned, 
currently all the investment in freight rail infrastructure 
comes from private sources. My question is, how is your 
industry going to meet the challenge of doubling the amount of 
freight that it carries? And assuming that that projected 
growth occurs, how will the industry ensure that the needs of 
agricultural shippers are not overlooked?
    Mr. Rose. So, in the Commission study, we took those four 
paths, and it's really all about population growth going from 
200 million people in this country to 300 to 350 by the year 
2035. Population growth begets people buying things. People 
buying things begets transportation requirements. We did a 
study that talked about current level of capital we currently 
spend in this business, again, about $10 billion annually and 
looked at how much more capital we need to spend. We'll need to 
spend about $150 billion over the next 30 years, and, of that, 
the railroads, left to their projected investment ability, 
would spend about $100 billion, so we have a shortfall of about 
$48 to $50 billion. We have proposed a series of things to 
bridge that funding gap. An investment tax credit would help a 
lot. Also, so would more public-private partnerships.
    But, you know, the basic model of railroads in this country 
today is very different than the highway model, which is a very 
publicly driven model. Ours is all about private industries 
creating enough profitability to reinvest. And, it hasn't been 
a perfect system, Senator, as you know. But, since Staggers, 
there has been a long-term sorting out, if you will. And again, 
it hasn't been perfect. And, as Ms. Richardson said earlier, 
you know, one of the desires is to have more rail competition.
    But I don't have to remind you, there was more rail 
competition in the past; it was called the Rock Island Railroad 
in this state. It went bankrupt. And so, when we think about 
the level of investment that the railroads are going to have to 
make, part of it is, we've got to make sure that the railroads' 
profitability stays at a certain level to make those 
reinvestments.
    And so, your next question should be, ``Well, are the 
railroads making too much?'' And when you look at railroad 
profitability as a percent of the S&P 500, we've never been 
above the median. If railroads were to become less profitable, 
this question of do you want to see a significant change in the 
way that we fund railroads? You could make a case for that. I 
personally think that it would be a bad track to go down. You 
asked earlier, your question about the Federal program today. 
We have 108 different Federal programs under the Federal 
highway bill. I would make an argument that there are a lot of 
inefficiencies in that, in terms of how funds are distributed.
    Railroads are very much free-market capitalists. And when 
you look at the investments that have been made in South 
Dakota, which are substantial and market-based and how those 
will translate into global marketing opportunities for South 
Dakota shippers, you know, it is clear that market-based 
principles have worked well here and across the freight 
railroad network.
    So, we think that about two-thirds of the investments 
that's going to need to be made will come through the normal 
``make money, spend money back on the railroad; make more 
money, spend more money back on the railroad,'' and then that 
there's about a third of it that we are going to need help 
with. And if we don't, you know, what will happen is, you'll 
need to fund more money to the highway system, because the 
freight--will continue to grow in this country, and we can't 
get faked out by this recession that we're in, seeing the VMT 
fall. I guarantee you, in 3 or 4 or 5 years, we're going to be 
right back to the same sorts of concerns that people have 
expressed about needing more capacity on the railroads and the 
highways.
    Senator Thune. On that point, Ms. Richardson, have you 
ever, sort of, quantified or been able to figure out, when you 
talk about some of the inefficiencies and what that costs South 
Dakota agricultural shippers on an annual basis?
    Ms. Richardson. Well, currently, a recent study by the STB 
says that over 44 percent of all rail freight, by tonnage, is--
44 percent is captive shippers. We're down to four railroads in 
this country. And I looked at the tariffs recently, and 7 years 
ago a bushel of corn cost us 62 cents to get to the Pacific 
Northwest. That is why we built our ethanol industry. We 
decided to develop our markets here at home. Well, remember, we 
still--now we need to get our ethanol to California or New 
York. And our basis, the cost of getting our product to market, 
has increased significantly. We've seen no increase in rail 
capacity across this country. We call it the 300-bushel-per-
acre. Senator, we're going to be there in 15 years. We used to 
talk about 60, 70-bushels-per-acre. And South Dakota is not 
going to use this product; it's going to go around the world as 
India, China, and the rest of the world gets hungrier. The 
importance of agriculture to get to our--to those markets is 
critically important. And so if there is any opportunity to put 
competition, rail infrastructure--but we're down to 4 
railroads.
    Senator Thune. But, some of the ideas under consideration, 
I think, would involve more dialogue between shippers and 
railroads so they at least would have a way of resolving some 
of these problems without having to try to bring a case to the 
Surface Transportation Board in Washington, which, as you 
mentioned, is very expensive, very time consuming.
    In your view, is there currently a viable avenue for 
shippers to bring their concerns first to the railroads and 
attempt to find a resolution before having to go to the STB? 
Would mediation, for example, be a good first step? And I'd 
be----
    Ms. Richardson. We----
    Senator Thune.--interested in Mr. Rose's comment on that, 
too.
    Ms. Richardson. We need some steps in the process. 
Currently, even though agriculture is substantial, we're 
considered medium shippers; we're not large shippers. And, to 
my understanding, no rail rate case has happened since 1982. 
And so, the process of bringing it in--and mediation would be a 
great example--but some mechanism that isn't so timely and so 
costly that there would be opportunity for shippers, through 
the whole entity, to get involved--would be something we'd be 
very, very open to.
    Senator Thune. Mr. Rose, a comment on that?
    Mr. Rose. So, I'd like to clean up a couple of things. One 
is, there's not four Class I railroads, there are seven in the 
United States. There are 500 short-line railroads and Class II 
railroads.
    Point two is that if you look at the big-game-changer in 
cost between the dates Ms. Richardson noted and where we are 
today, it's really all about fuel. And anybody who looks at our 
rail costs, adjusted for inflation, would actually see 
decreases.
    There has been tremendous capacity actually reduced from 
the system. But, again, it's through the bankruptcies and the--
and the only reason a railroad would ever go bankrupt is 
because the railroad wasn't making enough to return its cost of 
capital.
    So, in terms of the rate process, another one that Ms. 
Richardson mentioned was the Basin Electric case. Clearly, not 
a small shipper. It did take 5 years. And there's no doubt that 
they probably did spend $6 or $7 million. But, the outcome in 
that case was a $300-million decision. I would tell you that 
that's not a--that's not a type of case that you would want to 
send to an arbitrator that doesn't understand anything about 
the railroad industry or mediation.
    So, you know, what we've said, Senator, all along is that 
this regulatory regime that we're in, it's not perfect, and 
that's why we have tried some new things, such as in Montana, 
where we've come forth with an arbitration process for grain 
rates.
    Senator Thune. Could you describe, a little bit, how that 
works?
    Mr. Rose. So, it's not through the STB. And, of course, 
that's point number one. It allows the producers to actually 
select a--along with the railroad, from a pool of arbitrators. 
We've done this for years through the NGFA, in terms of 
equipment and service, things like that. And we're testing it. 
We're seeing what works.
    You know, we don't at all believe that the current system 
works for all shippers. And we know that, at the end of the 
day, if people don't have access to the process, that's where 
people get frustrated. And then they end up calling their 
Congressman or their Senator. And so, we do believe that there 
needs to be reform. We think that there has also already been a 
lot of reform at the STB with the new small-shipment rates 
cases. And there have been a number of those cases that have 
been started in that process. And, so far, several of them 
been--have then been settled through mediation.
    So, we don't--we know that there's frustration with the 
smaller shipper. We think, for the larger shipper, when you--
when you're talking hundreds of millions of dollars, we do 
believe that we ought to have people that live and breathe 
railroad regulatory policy overseeing those cases.
    Senator Thune. Go ahead, Ms. Richardson.
    Ms. Richardson. I do agree that there are seven railroads, 
Matt. And I appreciate that. But, 90 percent of everything runs 
on four railroads. In South Dakota, 80 percent of our corn is 
on your railroad. And I appreciate all of this, and I agree, 
the fuel has increased, but I think, per carload, there's a 
$600 fuel surcharge that has remained, regardless of what the 
price of fuel is doing currently. And so, the process of how to 
bring that rate case, what we do with it--there currently is a 
process in place, and it's something we would be open to. Would 
you?
    Mr. Rose. Yes, you know, Senator, facts are stubborn 
things. Our fuel surcharges change with the price of fuel. So, 
I can provide you with that detail. It's just not--it's just 
not the case.
    Senator Thune. Well, let me ask you this, because the 
Montana arbitration program that you're doing, it sounds like 
that's something that the railroad has sort of done on its own 
volition. And I'm wondering what your thoughts would be about 
establishing some sort of an arbitration process within the STB 
that would be, at the national level? And maybe, Ms. 
Richardson, what you would think about that, as well--to 
provide some recourse, short of the millions of dollars that 
are necessary to go into this big, protracted standalone 
railroad model that you have to construct to take a case to the 
STB.
    Mr. Rose. I would just say that the industry doesn't have 
agreement on this yet, and they're going to look to how the 
BNSF model is going. We continue to have dialogue with his and 
your staff, and it has been a very rich dialogue. I think you 
can appreciate that Senator Rockefeller had a re-reg bill for 
the past 24 years, and, when he became Chairman, he called us 
all in and said that he wanted to move this legislation to 
change the railroad regulatory system. And we've met with staff 
a number of times, and it's been a very thoughtful dialogue. 
And, you know, while it sounds so simple, ``Just change this or 
change access here or change bottleneck rates here,'' what I 
think everybody who is involved in the situation has grown to 
appreciate is the issue of the law of unintended consequences. 
And certainly, people in the State of South Dakota might say, 
``Well, let's just have--let's just put another Class I 
railroad in here,'' and yet, I tell you--I would tell you that 
shippers who have seen this would be very hesitant to go down 
that path, because, at the end of the day, maybe two railroads 
can't make enough to make those reinvestments. At BNSF we've 
had tremendous capital programs for our agricultural shippers. 
We've bought more ag cars in the last decade than any other 
Class I railroad. We've created tremendous efficiencies through 
the shuttle network. We have the ability to handle more 
agricultural products out of this State than we've ever had, 
the capital we're spending to make sure that we have a vibrant 
and healthy railroad network. And so, the process balancing is 
where all the time is being spent. And if arbitration is a 
piece of that, then you'll see that go forward. If it's not, 
then obviously we'll find something else.
    But, you know, we don't--I don't sit here before you today 
and say that this thing's perfect. But, I would also say, look 
at other industries that have gone through deregulation. The 
railroad industry is a shining star of this category. You're 
not putting bailout money into the U.S. railroad industry, and 
yet, the quality of the physical plant today, versus what it 
was in 1980, is magnificent. You look at the capital investment 
that we're making, of $10 billion a day--a year--that 
replenishes this, verse other industries, like the automobile 
industry, like the airline industry, like the steel industry; 
and again, while it's not perfect, it's worked very, very well.
    Senator Thune. Ms. Richardson, in the Montana example that 
Mr. Rose refers to, are you familiar with that and how that's 
worked with shipper groups?
    Ms. Richardson. I have one question. How many railroads go 
through Montana? How many Class I's?
    Mr. Rose. Just one.
    Ms. Richardson. Just one. I am not familiar with that 
specific issue. We've had several shippers call us when we 
found out we were doing a hearing on this, and the interesting 
part of this is, we always say we're a landlocked state, we 
don't have access to the river market with one Class I 
railroad, who carries our product and carries it very well. 
But, the opportunity of bringing a rate case--bringing a 
concern--the entire--whether it be a wheat shipper, a sunflower 
shipper, an ethanol shipper, the process is very long and very 
expensive. And so, we would be open to taking a look at that. 
It hasn't happened here in South Dakota, to my understanding, 
but it's something we would look at.
    Senator Thune. Well, we ought to get the rest of you guys 
in this discussion, right?
    [Laughter.]
    Senator Thune. What happened to the highways guys over 
here?
    I do have a question for Mr. Parliament. And I don't know 
if you have anything you want to add to the discussion on rates 
and service. But, I do want to discuss the issue that you 
raised with regard to hours of service.
    Mr. Parliament. Right.
    Senator Thune.My understanding is, from what you said, you 
do have some application in at the FRA for a waiver for Class 
II's and Class III's and short-line railroads. Has there been 
any action on that? What would be the distinction between 
fatigue experienced at a Class II or Class III short-line 
railroad, versus a Class I railroad? I mean, why would that 
issue be any different----
    Mr. Parliament. Yes.
    Senator Thune.--between Classes?
    Mr. Parliament. Well, first of all, there is a--the 
American Short Line Association has applied for a waiver for 
the small Class II and Class III railroads. The reason that the 
so-called new hours-of-service model, or law, doesn't really 
apply to most short lines is the fact that we--most short lines 
do operate on a schedule-type basis. When a crew works 6 days 
in a row, that's a lifestyle choice, not necessarily a demand. 
And so, the Short Line Association has applied for this waiver. 
There are some restrictions within the waiver, that, if it's 
granted, short lines will have to adhere to the study, which, 
quite frankly, in my opinion, has a lot of extra baggage with 
it. It seems like a kind of a one-size-fits-all type of 
legislation that was put in, and it, quite frankly, isn't 
working on the actual crew fatigue.
    The difference between a short-line and a Class I or, for 
that matter, any railroad that is running a 24/7 operation, 
that's when you run into the fatigue issues. It tried to--tried 
to legislate, ``OK, if that's--fatigue is an issue, let's 
restrict how many days or how many hours they can work.'' Well, 
all that has done is affected the paychecks. They don't get as 
many hours, they have longer rest periods. So, now freight is 
being delayed, and we're seeing delays like that all over, on 
the Class I's and on the short lines, too, because that they 
don't have the rested crews. The crews are available to work, 
they're just not rested, because they have to have a longer 
rest period. And so, just throwing more crews out there really 
isn't the idea, either; that doesn't solve the problem, either. 
They work less hours, and it's not really a good, quality job 
in that regards.
    So, there is--there are some things that can be done on 
crew fatigue. I think Matt would agree that crew fatigue occurs 
when you have a crew that's expecting to go to work, is not 
called at a--you know, when he's expected to go to work; so he 
gets his rest, he takes his, you know, nap or his--power naps 
or gets his full rest, then doesn't get called to work. Twenty-
four hours later, he finally gets called, and it's unexpected.
    The other--flip side of that is that they work over and 
over and over, just right at--what we call ``on their rest,'' 
every 8 to 10 hours. That does buildup fatigue.
    So--but, there are ways around that, and I'm just saying 
that you've got to have 10 hours off, or, if they work 7 days 
in a row--many times, that's a lifestyle choice, that they have 
to have 3 days off. Well, that affects the railroad's ability 
to move the freight and to keep everything reliable to the 
shippers.
    Senator Thune. Do you know, does the FRA have a timeframe 
in which they're going to make a decision about this?
    Mr. Parliament. They haven't given the timeframe. They say 
they're sympathetic to our needs. I guess we'll see where that 
goes. I'm hopeful that they act soon, but we haven't heard 
anything out of the--of them, that they are going to act soon, 
either. So, as it is right now, we're--as of July 16th is when 
the new law went into effect, and we're all struggling with it. 
The smallest short lines and the largest Class I's are 
struggling with it right now.
    Senator Thune. Yes.
    Mr. Rose. Senator, I would just say, again, I think it's 
difficult for any Member of Congress to get it right when we're 
talking about something that has been collectively bargained 
for 100 years and has the oversight of the FRA. These are very 
complicated crew rest/fatigue cycles.
    Another part that was in that bill was positive train 
control. That is something that I think you ought to pay a lot 
of attention to. It was the law--the safety bill was enacted 
out of the horrific commuter accident in Southern California; 
26 people died. Very difficult crash. So, the law was passed to 
require PTC on the entire Class I railroad industry by the year 
2015.
    The FRA, the regulator, has done a cost-benefit analysis. 
They have forecasted $10 billion worth of cost to implement 
PTC, and a $700-million safety benefit. And so, what everybody 
ought to be asking is: How about this $9.3-billion investment 
that has zero cost benefit? And there could be a lot of 
unintended consequences. Quite frankly, it has potential to 
have unintended consequences for our agricultural shippers, 
because of the commodities that are hauled--specifically, the 
fertilizers; specifically, the ammonias that are classified as 
a TIH/PIH and the cost that those commodities will engender on 
the railroad for installing PTC. I would urge you to just read 
the government's own report, the headline of this cost-benefit 
analysis, and just ask the question: What is the unintended 
consequence of requiring the railroads to spend $10 billion 
without a commensurate benefit, here? Will it impact the amount 
of rail or ties or ballots that's put into the railroad system, 
chasing inefficient capital dollars because of a new law that's 
been passed?
    Senator Thune. Is there a rationale, if that happens, for 
having a carve-out for Class II's and III's?
    Mr. Rose. Well, on the PTC piece, there was a carve-out, 
and, again, the reason there was a carve-out, because the FRA 
did a cost-benefit analysis and figured out that if the FDAF of 
II's and III's were--have to make this level of capital 
investment, they'd go out of business.
    Senator Thune. Yes.
    Mr. Rose. And that's really all we're asking, is that, with 
every regulation, there ought to be--it ought to be supported 
with a reasonable cost-benefit analysis. And in the case of 
PTC, the answer was no, as it appears to be implemented now.
    In terms of fatigue, it's really a mixed bag. I would tell 
you that, you know, again, putting this thing into the 
legislative hopper was really the first mistake. It should have 
been driven back to the FRA and said, you know, ``You guys tell 
us how you're going to fix this, as the regulator, the safety 
regulator.''
    Senator Thune. Mr. Anderson, moving over to trucking for 
just a minute, you proposed six different options for changes 
to Federal laws that govern truck size and weight. And I would 
just be interested in knowing, based on your experience in 
running a trucking company in South Dakota, which of those 
options would be the most useful for truckers here in South 
Dakota, in our state.
    Mr. Anderson. Well, for us, as a--our company, personally, 
it would make no difference. But, I think, for the people that 
run LCVs, to have some uniformity so that they could go--
especially in the West, where there's very little population--
they can move freight more efficiently by using these, and have 
less trucks on the road. I think that's the huge benefit that 
the ATA sees on that. And much more information than that, I 
would have to get that and send it to you, Senator.
    Senator Thune. Good.
    Senator Thune. Mr. Bergquist, is there anything in terms of 
trends in transportation in South Dakota that you'd like to 
call to our attention? Have you seen anything, in terms of, you 
know, traffic that deviates from things that we've seen 
historically?
    Mr. Bergquist. I have probably three things that I'd 
comment on, Senator. One, in terms of traffic, we've been 
fortunate--and we've heard some testimony throughout the 
morning about the decreases in VMT that we've seen across the 
country--we've been fortunate, in South----
    Senator Thune. You said ``fewer decreases''?
    Mr. Bergquist. There have been decreases----
    Senator Thune. There has been, OK.
    Mr. Bergquist.--nationwide. In South Dakota, we have not 
seen nearly----
    Senator Thune. OK.
    Mr. Bergquist.--the degree of decrease that many other 
parts of the country have seen.
    Let me note a couple of other trends on South Dakota 
highways. One is in the area of safety; we've made tremendous 
strides in highway safety over the last couple of years in 
South Dakota. As an example, we've reduced highway fatalities 
in South Dakota by 36 percent over the last 2 years. We had 191 
fatalities in 2006, and that was down to 121 in 2008. So, I 
think we've made great----
    Senator Thune. Do you have anything in particular you 
attribute that to?
    Mr. Bergquist. I would attribute it primarily to education 
and behavioral changes. I think you're seeing fewer drinking 
drivers and those types of things. Obviously, we like to think 
that we are constructing safer highways and improving the 
safety of our highways, from a physical standpoint. But, I'd 
have to admit that I believe the biggest chunk of that is a 
result of behavioral changes that come through education.
    The final trend I guess I'd identify for you, Senator, is 
with the limited resources that we have available, both on a 
state and a Federal level, we're really focused on what we 
refer to as ``preservation mode.'' We're trying to just 
preserve the condition of, and preserve our existing investment 
in our system.
    The downside to that is, during a period of difficult 
economic times, that puts us in a very difficult spot of being 
unable to respond, in terms of additions and expansions or 
enhancements to our system to support any economic development, 
or to respond to economic development in the state. So, while 
we're trying to take care of what we've got, we're woefully 
short, I would say, in meeting growth needs within the state.
    Senator Thune. And the next highway bill, my guess is, is 
going to be, as is usually the case, a huge fight between large 
states and small states, donor states and donee states. And, as 
we mentioned earlier, it's sort of a shrinking pot of money, 
which is now being subsidized by general-fund revenues, when 
the Highway Trust Fund comes up short, which is going to create 
some really, really interesting challenges, in terms of 
funding. And maybe it's not fair to ask this question of you, 
but, do you have any thoughts about how we would go about 
coming up with new ways, perhaps innovative ways, of funding 
infrastructure in this country?
    Right now, we rely on the gas tax, obviously. South Dakota 
has a 22-cent tax. And you couple that with the Federal tax, 
and that's how we put together the highway program here in 
South Dakota. But, as we look at this reauthorization, how can 
we keep up with that backlog of demand, with the shrinking 
amount of revenue coming into the trust fund?
    Mr. Bergquist. Sure. And one part of the answer to that 
question, you indicated in your opening statement, when you 
welcomed comments on your Build America Bonds program. I think 
that's an example of one innovative approach to increasing our 
investment in our system. And we appreciate your leadership in 
bringing that forward.
    We're strong supporters of the Build America Bonds program, 
a $50-billion increase in transportation funding across the 
country. We see that as a balanced bill that provides states a 
lot of flexibility. It's balanced, from the standpoint that 
every state benefits from it, at least 1 percent going to every 
state. It's multimodal, gives states a lot of flexibility in 
using those funds to address needs, whether for highways, 
bridges, transit, rail, ports, or any of those things. And one 
of the things we also like about it as, a small state, is that 
there is no minimum project size, and that enhances state 
flexibility.
    You know, South Dakota doesn't do the mega projects that 
many other states, and more urban states, do. So, with no 
minimum project size, that helps us out a lot in South Dakota.
    There are other mechanisms that are being discussed 
currently to enhance funding into the Highway Trust Fund. 
Crediting the trust fund back with the interest that it hasn't 
received since 1999, crediting the trust fund back with the 
emergency appropriations that were taken out of the Highway 
Trust Fund over the last 20 years or so, those are some 
additional options for increasing the amount of funding that we 
have available for infrastructure in this country.
    You know, we believe that the highway program is vitally 
important. We've heard, today, some of the benefits, to the 
country, of our highway program. Obviously, it certainly 
warrants and deserves an increased level of investment as we go 
forward.
    Senator Thune. All right. We need to wrap up, here, in a 
minute, and I want to ask one final question. Before I do that, 
I'm curious in knowing more about the amount of freight that 
moves across South Dakota. Obviously, agriculture is a big part 
of that. But, what have carloads done? Given the fact that 
we're sort of in an economic downturn, I'm sure it has impacted 
shipping, as we've already mentioned--but, just say, over a 10-
year period, what have been the trends? Is it flat? What are 
you seeing, in terms of just the amount of freight moving? And 
that may have a lot to do with the corn harvests from year to 
year, too, or how many acres we're putting into corn. But, what 
do you see, in terms of tonnage?
    Mr. Rose. So, if you go back to 1996--big, big year for 
ag--you know, our tonnage has really grown every year out of 
this state, probably 3 to 5 percent gross ton miles units--
we've seen some dips with harvests--all the way up to 2007, 
when we started seeing the freight recession, 2007. From 2006 
being the full year through 2009, we're down probably 25 
percent.
    Senator Thune. Jack?
    Mr. Parliament. Our levels were increasing--slowly 
increasing through the 1980s and 1990s, mostly grain. Then, in 
the 2000s, things changed on our line. And that was basically 
the ethanol industry. Planning an ethanol plant changed the 
demographics a little bit. We shipped a lot less corn, but a 
lot more ethanol and DDG. But, so that shot up the carloads. 
And then, as we started to improve the track, we landed other 
shippers. Having additional access to other Class I railroads, 
now, in Sioux City, that landed a third shipper. So, over the 
last 3 years, the nonaggregate side of our business, which is 
about 35 percent of the business, has increased. And for this 
year, I expect it to be level. And I think that's OK, in the--
this recession.
    The aggregate side of things, we've had some up-and-down 
years. This year is really looking to be close to level. And 
that's about 65 percent of the business. So, we're--overall, 
for the year, we're hoping to be level at the end of June, and 
we were just under June numbers from last year.
    Senator Thune. And do you hand off to anybody besides BNSF?
    Mr. Parliament. Yes. Yes. We have access to two other Class 
I's.
    Senator Thune. OK.
    Ms. Richardson. In South Dakota?
    Mr. Parliament. Out of South Dakota, into Iowa, yes. So, we 
do that in Sioux City, to the Canadian National and the Union 
Pacific in Sioux City.
    Senator Thune. How many short lines does BN interface with?
    Mr. Rose. Probably 100.
    Senator Thune. And you said there are 105 short lines?
    Mr. Rose. 500.
    Senator Thune. Oh, I'm sorry. 500, 500, OK.
    Mr. Rose. Seven Class I's, 500 other----
    Senator Thune. 500, OK. Yes.
    And the biggest thing, in terms of short lines, is this tax 
credit, getting that extended.
    Mr. Rose. Right.
    Mr. Parliament. Definitely. It has done a lot of good for a 
lot of the railroads that didn't have any other way to 
funding--into funding. The RIF loans, they've done well for 
some of the larger short lines, but for years that was pretty 
tough to get into the loan system. You could just----
    Senator Thune. Yes.
    Mr. Parliament. The red tape involved. We have been 
fortunate here in South Dakota with the Rail Trust Fund, that 
Darin's well aware of, where the shippers were able to invest 
back into the line themselves, too. So, that's been a big help 
to us, as well.
    Senator Thune. Well, let me just, in closing, say there's 
no question this is a hugely important issue to South Dakota. I 
mean, not only is it getting people across our state and, you 
know, the travel industry, which is a big impact on our 
economy, but freight transportation, because we're an ag-based 
economy--and hopefully that will continue to grow, and if we 
see the biofuels industry continue to develop--these are issues 
that we just have to keep, I think, a very intense focus on.
    And I appreciate all of your suggestions, your thoughts, 
and your interaction, this morning. And I guess I just want to 
ask one final question and it may be hard to think about this 
and in a short amount of time, to give me an answer, but, from 
your perspective, what would be the one thing that Congress 
could or should do that would improve the freight 
transportation industry in this country. I'm interested, more 
specifically, in South Dakota. Some of you have footprints all 
across the country. But, if there's one example, one thing that 
the Congress ought to be doing right now that would improve--
and I'm sure Secretary Bergquist would say ``reauthorize the 
Federal highway bill, and do it in a way that increases South 
Dakota's share,'' but--so, maybe that's an intuitively obvious 
answer, there.
    [Laughter.]
    Senator Thune. But--and I said, in fairness, I know it's 
hard to narrow your answer down, because we've thrown a lot of 
topics around this morning. But, if you could, try and perhaps 
give a little bit of focus. What's the most important thing 
that Congress should be focused on?
    I'll let anybody who wants to--and if you----
    Mr. Bergquist. I don't know that I can----
    Senator Thune.--refrain from answering----
    Mr. Bergquist.--respond any further----
    Senator Thune.--that's OK.
    Mr. Bergquist.--on the answer you gave for me, Senator.
    [Laughter.]
    Mr. Anderson. I guess, for the State of South Dakota, I 
would reiterate, the amount of money they spent on highways 
that the trucking industry cannot utilize to their ability, 
they need to get that perspective taken care of so we can use 
these highways. I mean, why spend all the money if you're not 
going to use them to the best of their ability?
    Mr. Parliament. Well, I think I'd touch on the hours-of-
service deal. That's----
    Senator Thune. Is that a bigger deal to you than getting 
the tax credit extended?
    Mr. Parliament. You know, Mr. Thune, I think it's--they're 
equals. And that's why I wanted to touch on both topics----
    Senator Thune. OK.
    Mr. Parliament.--today. They're both high priorities. The 
tax credit has been a high priority within the short-line 
industry. But, this hours-of-service deal is really starting to 
handcuff, not just the Class II's and III's, it's handcuffing 
the Class I's, as well, right now, and there needs to be some 
sort of a fix that Congress is going to have to do.
    Unfortunately, Congress put the law in without a lot of 
consult with the FRA, and the FRA's going to have to deal with 
the law. So, that needs a--it needs some sort of a patch to it, 
I believe.
    Senator Thune. Good.
    Lisa?
    Ms. Richardson. Thank you, this morning, for your time, 
Senator. In one-word, ``competition.'' We're a ``landlocked 
state''--there's one place we have competition in South Dakota. 
It's Wolsey, South Dakota, and our basis are the NARS. We're 
the last place in the world grain is sold. It is the cheapest 
place in the world to buy our product. And we are very--we are 
all captive shippers. And getting access to the market, and a 
fair rate. And whether you're talking about healthcare reform, 
competition is a magical, invisible hand.
    Senator Thune. And the basis, right now, you said, is about 
60 cents?
    Ms. Richardson. It--correct, it's about 60--last I checked, 
on Friday, it was 62 cents a bushel.
    Senator Thune. Got it.
    Mr. Rose. Senator, I always look at it holistically, 
thinking about our infrastructure in this country. And if you 
were the king of all infrastructure, you owned the highways and 
the railroads and the waterways, the ports----
    Senator Thune. And you could wave a magic wand.
    Mr. Rose.--you could wave a magic wand--you know you've got 
population growth coming at you. You know that global trade is 
so important. You know you've got a highway surface bill that's 
not working, it's not collecting enough, it's inefficient in 
the way it's distributed. You'd look down on this thing, and 
the first thing you'd say is, ``We've got to get more of the 
heavy stuff to the railroads and the heaviest of stuff off the 
highways.'' And you do that through lots of ways. You do that 
through carrots and sticks. You do it through transportation 
policy, though. You make sure that you protect the vibrancy of 
the railroads. And then, as you go through this 
reauthorization, if there's not real reform, I think it'll be a 
missed opportunity for the future of the highway system, as 
well.
    Senator Thune. And I know you had a lot of study of that 
subject, as well. Any particular one thing, in terms of 
reforms?
    Mr. Rose. Well, I think it starts----
    Senator Thune. I mean, more money is----
    Mr. Rose. Yes. I mean, I think it starts with, you know, 
three or four legs of the stool. First off, 108 Federal 
programs; we recommend it going down to about 10. You've got to 
get more focus on them. You've got to set the pathway to get 
away from cents per gallon. It's going to take 10 years, 15 
years, to go to VMT, because we want more fuel-efficient cars. 
And so, the revenue's only going to decline, coming into the 
trust fund. Net-net, you know, we believe that it's got to be 
indexed--whatever collection has got to be indexed. The current 
Fed tax at 18 and a half cents a gallon really plays to more 
like about 12 cents, with inflation. And we're not keeping the 
highway up to a state of good repair. And so, it's just like 
the railroad, it wears out with tons.
    And this is a--you know, I think you're really at a 
critical moment here, because the highways have always been on 
a per-for-use basis, and that's worked, you know, really pretty 
well. And now, what I think we're seeing is just population 
growth, is saying we've got to have a different approach to 
this.
    Senator Thune. All right, very good.
    Well, we will keep the record open for--how long?--until 
the 21st. So, if any of you have additional comments or 
anything that you want to submit for the record, please do. So, 
thank you all very much and with that the hearing is adjourned.
    [Whereupon, at 11:05 a.m., the hearing was adjourned.]
                            A P P E N D I X

 Response to Written Question Submitted by Hon. John D. Rockefeller IV 
                           to Darin Bergquist
    Question. One national goal of S. 1036, the Federal Surface 
Transportation Policy and Planning Act of 2009, which Senator 
Lautenberg and I introduced, is to increase the proportion of national 
freight transportation provided by non-highway or multimodal services 
by 10 percent by 2020. What could Congress do to encourage the use of 
non-highway transportation modes for freight transportation in rural 
states like South Dakota?
    Answer. At the outset, I note that the water freight alternative is 
not available within South Dakota. Further, air freight is not a viable 
alternative to the highway mode for moving most freight in South 
Dakota. Our limited air freight movements mainly occur at our regional 
airport hubs in Rapid City and Sioux Falls and are low volume.
    Since grain, other farm products, and natural resource commodities 
are the predominant freight shipped from South Dakota, the main non-
highway mode that could increase its share of freight carried within 
South Dakota is rail. Making rail more attractive to South Dakota 
shippers than it is today would be one way of achieving the goal to 
increase the non-highway share of freight.
    To increase rail's modal share, rail needs to be efficient, 
convenient and reliable. To improve rail's share, one could legislate 
regulatory changes or incentives that could be expected to make rail 
more to appealing to shippers, whether through lower rates, better 
service, or some combination of rate and service changes that make rail 
more attractive.
    In addition, rail could be made more attractive if investments are 
made that would improve highway connections to our State's main rail 
facilities, like grain unit train loading facilities, including 
improvements to roads that connect to highway/rail transfer locations. 
In my testimony I noted that one helpful legislative change would be to 
more clearly provide, within the Federal highway program, the ability 
to use Federal funds for facilities transferring freight between the 
highway and rail modes.
    I would not support a mandate for states to make such investments 
as this could potentially result in the inefficient and ineffective use 
of public funds. Rather, providing states the flexibility to make such 
investments when appropriate, timely and efficient would be positive, 
allowing states to address the amount of freight transported by non-
highway means.
                                 ______
                                 
 Response to Written Question Submitted by Hon. John D. Rockefeller IV 
                           to Larry Anderson
    Question. You advocate for Federal investment in rural highways in 
your testimony. What role should shippers play in financing our freight 
transportation network?
    Answer. Depending on market conditions, trucking companies pass on 
at least a portion of the various highway user fees that they pay to 
their customers. Therefore, shippers indirectly play a role in 
financing freight transportation projects. A number of options for more 
direct funding of freight transportation projects by shippers have been 
suggested by Congressional commissions and Members of Congress. These 
include, for example, container fees, freight bill of lading or waybill 
fees, additional revenue from an increased Harbor Maintenance Tax, and 
a tax on the value of imported and exported goods. ATA is willing to 
consider supporting these types of fees under certain conditions. 
First, the burden should not be on truck drivers or trucking companies 
to pay, collect or enforce payment of the fees. Second, the fees should 
not carry significant administrative burdens for either the payer or 
the collecting agency. Third, if the revenue is to be used for a 
multimodal program, all shippers using modes that benefit from the 
program should pay the fee. Finally, certain industry segments should 
not face a disproportionate financial burden due to, for example, 
shipping origin or destination, the nature of the cargo or the type of 
transportation that is used.
    Currently, none of the proposals under consideration pass all of 
these tests. Furthermore, most face significant legal challenges. The 
primary concern is with collection costs. The fuel tax, which currently 
provides the majority of funding for surface transportation projects, 
has an extremely low collection cost and a relatively small evasion 
rate. This is primarily because there are only a few hundred taxpayers. 
Directly taxing shippers would potentially require an agency to collect 
money from millions of individual taxpayers, resulting in much higher 
collection costs and greater tax evasion. Therefore, ATA firmly 
believes that an increase in the fuel tax is likely to remain the best 
way to generate additional funding for freight projects. However, this 
revenue must be dedicated to highway projects only to avoid 
subsidization of competing modes.
    Thank you for the opportunity to respond for the record. Please let 
me know if you have additional questions or require clarification.
                                 ______
                                 
 Response to Written Question Submitted by Hon. John D. Rockefeller IV 
                           to Jack Parliament
    Question. Earlier this year, Senator Lautenberg and I introduced S. 
1036, the Federal Surface Transportation Policy and Planning Act of 
2009, which would establish a national goal of increasing the 
proportion of freight transportation provided by non-highway or 
multimodal services by 10 percent by 2020. What steps should Congress 
take in the next reauthorization bill so that the short line industry 
can help meet this goal?
    Answer. Chairman Rockefeller, I commend your efforts, and those of 
Chairman Lautenberg to set a meaningful benchmark for measuring 
America's progress toward improving our utilization of non-highway 
transportation services. I am confident that an objective analysis of 
our transportation network and government program priorities, as 
envisioned by your bill, would recognize the environmental benefits of 
rail transportation and the strong public policy arguments behind 
supporting that mode of transportation.
    In the next reauthorization there are many things that you and your 
colleagues could do to help small freight railroads meet your goals for 
non-highway transportation. Some of those areas are highlighted below:

        1. Preserve and Extend the Section 45G Railroad Track 
        Maintenance Credit--The ``short line railroad tax credit'' is 
        enormously helpful in maintaining and improving the first and 
        last mile of rail transportation provided by the roughly 550 
        short line railroads like the D & I Railroad. This credit helps 
        leverage over $300 million in private sector rail improvements 
        each year by providing roughly $165 million in tax incentives 
        for rail improvements. It allows short lines to make 
        improvements that might not otherwise be economically possible 
        or to immediately complete projects that would otherwise be 
        done in very small pieces over many years. The more efficient 
        our service becomes the more traffic we will attract to rail.

    This credit preserves jobs on railroads and in the timber and steel 
industry, as well as improving service for our customers. The credit 
also creates an incentive for railroads to partner with customers to 
improve their lines, and tens of million of dollars in rail 
improvements have been funded by rail customers, including those on the 
D&I. Too often we hear about the contention between railroads and rail 
customers, and the 45G credit is a bright spot that highlights what can 
be accomplished by railroad and customer cooperation.

    While this issue rests in the jurisdiction of the Senate Finance 
Committee, the transportation reauthorization is a logical vehicle for 
its extension.

        2. Allow States be Innovators in Funding Rail Improvements--Too 
        often when people speak of reauthorizing the transportation 
        bill, they speak of the ``highway bill.'' While I am sure that 
        the majority of Federal transportation spending will (and 
        should) remain focused on public highways and transit, I also 
        believe that creating unnecessary ``silos'' for funds inhibits 
        innovation at the state level.

        The importance of freight railroading varies geographically 
        across this country. For heavy bulk goods, rail transportation 
        is critical. States should be granted greater flexibility in 
        the reauthorization in areas where using traditional 
        ``highway'' dollars to fund rail improvements can further a 
        highway related goal such as decreasing congestion, preventing 
        wear and tear, or improving motorist safety.

        The American Recovery and Reinvestment Act allowed this to 
        happen, and a relatively large number of states took advantage 
        of the opportunity to fund rail improvements with money that 
        would have been traditionally limited to highway uses. (see, 
        ``Highway Infrastructure Investment'' in P.L. 111-5, ``. . . 
        and for passenger and freight rail transportation and port 
        infrastructure projects eligible for assistance under 
        subsection 601(a)(8) of such title . . .''). States understand 
        their specific infrastructure needs, and allowing this kind of 
        flexibility will allow state DOTs to determine if moving 
        freight by rail better serves their transportation policy. The 
        20 words cited above funded millions of dollars in freight rail 
        improvements with a public benefit. Such efforts should be 
        continued and encouraged.

        3. Preserve and Improve the Railroad Rehabilitation and 
        Improvement Financing Program--The ``RRIF'' program has not 
        been utilized by the D & I, but for a large number of small 
        freight and passenger railroads, this program could be 
        critically important. Unfortunately, the program is 
        underutilized. The RRIF loan program has the ability to provide 
        an additional $34 billion in immediate infrastructure 
        improvement--a bigger and more immediate economic stimulus than 
        that provided by the Highway Infrastructure component of the 
        Recovery Act.

        This $34+ billion pool of potential stimulus projects would not 
        require: (1) increasing the national debt; (2) appropriating 
        Federal dollars; (3) decreasing or offsetting other spending 
        priorities in a ``pay-for'' environment; or (4) giving handouts 
        to corporations; while (5) taxpayers would be guaranteed their 
        money back with interest. Given these facts, it is 
        exceptionally difficult to understand why this program has not 
        been more heavily utilized in the past 10 years.

        The underlying problem appears to be one of willpower. For a 
        number of years across numerous Administrations this program 
        has been opposed and undermined by unelected officials who do 
        not fully appreciate the contribution small railroads make to 
        huge segments of rural and small town America. The FRA is 
        committed to making this program work, but their remains 
        institutional opposition to this program from various 
        transportation policymakers. I would encourage both you and 
        Chairman Lautenberg to strongly urge the Administration to end 
        the roadblocks that have stopped this program from maximizing 
        the kind of private sector investment that creates immediate 
        jobs and strengthens an important part of the national railroad 
        network.
                                 ______
                                 
Response to Written Questions Submitted by Hon. John D. Rockefeller IV 
                           to Matthew K. Rose
    Question 1. Many important commodities, such as agricultural goods 
and coal, come from our Nation's rural communities. What should 
Congress do in the next surface transportation reauthorization bill to 
help improve rural communities' access to freight rail transportation?
    Answer. At the outset, there is nothing more important to 
preserving rural communities' access to freight rail than Congress and 
the regulatory agencies continuing the public policies that allow 
freight rail providers to operate the rail lines that serve rural 
communities in a rational, market-based manner. Policy changes that 
would alter the regulatory model and dis-incent investment by the 
freight rail industry will ultimately hurt rural communities, which 
often rely on the sustainability of low density rail lines. Policies 
that do not allow railroads to recover the revenue needed to support 
their entire system will eventually result in lower investment and 
smaller systems.
    The best example of such policies are those that the railroad 
industry has labeled ``re-regulation'', which is a shorthand label for 
legislative or regulatory changes to the freight rail system that re-
impose heightened regulation on rail rates. An example of such would be 
statutorily determining that certain individual shippers are to be 
advantaged in rail rate litigation; such changes would ultimately 
disadvantage the other users of the network and create new hurdles to 
freight railroads earning adequate revenues. I appreciate the 
opportunity that you have given BNSF and the rail industry to work with 
you and the Committee to find a balanced approach to rail regulatory 
legislation and appreciate your efforts to find a reasonable compromise 
to this difficult problem and I hope that if there is railroad 
regulatory legislation that it will be true compromise legislation. But 
if the legislation is not a compromise, then rural areas should 
consider and understand their interests in the debate, which lie in 
fair regulatory processes and greater investment.
    Turning to surface transportation reauthorization legislative 
proposals, on May 14 of this year, you and Subcommittee Chairman 
Lautenberg, introduced S. 1036, the Federal Surface Transportation 
Policy and Planning Act of 2009,which has a goal of removing 10 percent 
of the freight from our highways to other modes of transportation, 
including rail. This legislation is of interest to the freight 
railroads and should benefit rural areas. While trucks are a necessary 
rural connection to markets, the impacts of much of the long-haul truck 
traffic that traverses highways in rural states is overhead traffic, 
which passes through, rather than originating or terminating in rural 
states. I had the privilege of testifying before your Committee on this 
subject on June 18, 2009, and as I indicated in my testimony, BNSF 
believes there is a great deal of that freight traffic that, with the 
proper incentives, could shift back to the freight rail network.
    How can the objectives of this bill be realized? Apart from the 
economic slow-down that has idled assets in both the trucking and 
freight rail industry, the answer largely depends on analyzing the 
types of goods being shipped, their origins and destinations and how 
far they are moving. Freight rail has the most promise for movements 
that are at least 500 miles, and ideally 1,000 miles. In many 
instances, to make rail service more efficient and ``truck-like,'' 
there is a need for more investment in underlying freight capacity, 
yards or facilities (often in urban areas) or intermodal connectors.
    In additional to improving the freight rail system's capacity and 
efficiency, a large part of achieving ``mode optimization'' lies in 
addressing the embedded subsidies that larger trucks enjoy, which serve 
to economically disadvantage railroads. Heavier trucks pay only about a 
third or more of their full share of their impact on roads and bridges. 
Other highway users have covered these costs through their payments 
into the Highway Trust Fund. As you are aware, however, the Highway 
Trust Fund has been bailed out by the General Fund, and now general 
taxpayers cover the heavy truck cross-subsidy.
    As I said in my testimony, it is important not to make a subsidy 
worse. That is one of the reasons we think that surface transportation 
policy and programs ought to now recognize and fund freight rail 
projects that have a public benefit. In addition, we also believe that 
if the United States integrates energy and environmental policy into 
its transportation vision, freight rail will need to be more important 
to policymakers, given freight rail's fuel efficiency and emissions 
profile. I am hopeful that Congress will have that ``big picture'' 
debate whenever it decides to reauthorize the surface transportation 
programs. Therefore, I respectfully submit that Congress should 
consider the following policy recommendations which benefit rural 
states and, I believe, deserve your support.
    First, enacting an investment tax credit (ITC) to incent railroads 
to invest in capacity expansion projects. A well-designed ITC would be 
an excellent opportunity to improve rural communities' access to 
freight rail transportation. As freight rail capacity fills up again, 
as it inevitably will, rural communities need the overall ``pipeline'' 
to grow so that all customers who want to use rail can be accommodated 
reasonably, reducing the risk that adding new traffic will negatively 
impact existing traffic.
    Second, you should apply this principle to programmatic provisions 
in surface transportation legislation as well. Rural interests directly 
benefit from many of the freight rail projects submitted for funding 
through a program for projects of national significance (perhaps 
modeled after the recent stimulus TIGER grant program). At BNSF, we 
have proposed several large Public Private Partnerships for 
consideration in the TIGER grant process, as have all classes of 
freight railroads, which have rural benefits. Rural support for this 
kind of program for projects of national significance would help 
achieve enhanced network capacity and, in some cases, specific line 
capacity that directly benefit rural areas.
    Third, rural areas also should support policies that provide States 
the flexibility to use their Federal transportation dollars to partner 
with freight railroads. This recognizes that many of the States' 
Departments of Transportation (DOTs) (South Dakota, for example) are 
already progressively multi-modal. In the stimulus bill, State DOTs 
were provided flexibility to obligate General Funds on port and freight 
rail projects, in addition to highway uses. The same principle should 
apply in SAFETEA-LU reauthorization.
    In sum, rural areas have a lot to gain from public policy that 
maximizes the use and expansion of the freight rail network. This does 
not discount or ignore the importance of trucks; trucks currently and 
will continue to carry the majority of freight and highway investments 
will continue to be important in both urban and rural areas. However, 
rural areas have an especially large stake in a financially healthy 
freight rail industry that continues to expand. BNSF will work closely 
with rural leaders to support transportation policies that support the 
common goal of growing the rural economy.

    Question 2. As a member of the National Surface Transportation 
Policy and Revenue Study Commission, you recommended the establishment 
of a national access program for smaller cities and rural areas that 
would include national accessibility goals. Are you still supportive of 
such a program? Have the key elements for the creation of an effective 
program changed since the Commission issued those recommendations?
    Answer. I certainly still do support the Commission's findings and 
recommendations regarding rural mobility. All of the objectives that 
the Commission established for an effective transportation program 
apply to both urban and rural areas. These include making goods more 
convenient and accessible, improving international competitiveness, 
developing markets within the United States, enhancing personal 
mobility, supporting national defense and homeland security, reducing 
energy use and improving transportation safety. The Commission's 
recommendations for rural accessibility are important to meeting those 
transportation policy objectives.

                                  
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