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93–069 PDF 2015

HOW THE CHANGING ENERGY MARKETS WILL 

AFFECT U.S. TRANSPORTATION 

(114–3) 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

RAILROADS, PIPELINES, AND 

HAZARDOUS MATERIALS 

OF THE

COMMITTEE ON 

TRANSPORTATION AND 

INFRASTRUCTURE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

FEBRUARY 3, 2015 

Printed for the use of the 

Committee on Transportation and Infrastructure 

( 

Available online at: http://www.gpo.gov/fdsys/browse/ 

committee.action?chamber=house&committee=transportation 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE 

BILL SHUSTER, Pennsylvania, Chairman 

DON YOUNG, Alaska 

JOHN J. DUNCAN, JR., Tennessee, 

Vice Chair 

JOHN L. MICA, Florida 

FRANK A. LOBIONDO, New Jersey 

SAM GRAVES, Missouri 

CANDICE S. MILLER, Michigan 

DUNCAN HUNTER, California 

ERIC A. ‘‘RICK’’ CRAWFORD, Arkansas 

LOU BARLETTA, Pennsylvania 

BLAKE FARENTHOLD, Texas 

BOB GIBBS, Ohio 

RICHARD L. HANNA, New York 

DANIEL WEBSTER, Florida 

JEFF DENHAM, California 

REID J. RIBBLE, Wisconsin 

THOMAS MASSIE, Kentucky 

TOM RICE, South Carolina 

MARK MEADOWS, North Carolina 

SCOTT PERRY, Pennsylvania 

RODNEY DAVIS, Illinois 

MARK SANFORD, South Carolina 

ROB WOODALL, Georgia 

TODD ROKITA, Indiana 

JOHN KATKO, New York 

BRIAN BABIN, Texas 

CRESENT HARDY, Nevada 

RYAN A. COSTELLO, Pennsylvania 

GARRET GRAVES, Louisiana 

MIMI WALTERS, California 

BARBARA COMSTOCK, Virginia 

CARLOS CURBELO, Florida 

DAVID ROUZER, North Carolina 

LEE M. ZELDIN, New York 

PETER A. DEFAZIO, Oregon 

ELEANOR HOLMES NORTON, District of 

Columbia 

JERROLD NADLER, New York 

CORRINE BROWN, Florida 

EDDIE BERNICE JOHNSON, Texas 

ELIJAH E. CUMMINGS, Maryland 

RICK LARSEN, Washington 

MICHAEL E. CAPUANO, Massachusetts 

GRACE F. NAPOLITANO, California 

DANIEL LIPINSKI, Illinois 

STEVE COHEN, Tennessee 

ALBIO SIRES, New Jersey 

DONNA F. EDWARDS, Maryland 

JOHN GARAMENDI, California 

ANDRE ́ CARSON, Indiana 

JANICE HAHN, California 

RICHARD M. NOLAN, Minnesota 

ANN KIRKPATRICK, Arizona 

DINA TITUS, Nevada 

SEAN PATRICK MALONEY, New York 

ELIZABETH H. ESTY, Connecticut 

LOIS FRANKEL, Florida 

CHERI BUSTOS, Illinois 

JARED HUFFMAN, California 

JULIA BROWNLEY, California 

(II) 

SUBCOMMITTEE ON RAILROADS, PIPELINES, AND HAZARDOUS MATERIALS

JEFF DENHAM, California, Chairman 

JOHN J. DUNCAN, JR., Tennessee 

JOHN L. MICA, Florida 

SAM GRAVES, Missouri 

CANDICE S. MILLER, Michigan 

LOU BARLETTA, Pennsylvania 

BLAKE FARENTHOLD, Texas 

RICHARD L. HANNA, New York 

DANIEL WEBSTER, Florida 

TOM RICE, South Carolina 

SCOTT PERRY, Pennsylvania 

TODD ROKITA, Indiana 

JOHN KATKO, New York 

BRIAN BABIN, Texas 

CRESENT HARDY, Nevada 

MIMI WALTERS, California 

LEE M. ZELDIN, New York 

BILL SHUSTER, Pennsylvania (Ex Officio) 

MICHAEL E. CAPUANO, Massachusetts 

CORRINE BROWN, Florida 

DANIEL LIPINSKI, Illinois 

JERROLD NADLER, New York 

ELIJAH E. CUMMINGS, Maryland 

RICK LARSEN, Washington 

STEVE COHEN, Tennessee 

ALBIO SIRES, New Jersey 

RICHARD M. NOLAN, Minnesota 

ELIZABETH H. ESTY, Connecticut 

GRACE F. NAPOLITANO, California 

JANICE HAHN, California 

PETER A. DEFAZIO, Oregon (Ex Officio) 

(III) 

(V) 

CONTENTS Page 

Summary of Subject Matter .................................................................................... vi 

WITNESSES 

Jason M. Thomas, Ph.D., CFA, Managing Director and Director of Research, 

The Carlyle Group: 

Testimony .......................................................................................................... 4 

Prepared statement .......................................................................................... 40 

Jack N. Gerard, President and Chief Executive Officer, American Petroleum 

Institute: 

Testimony .......................................................................................................... 4 

Prepared statement .......................................................................................... 47 

Edward R. Hamberger, President and Chief Executive Officer, Association 

of American Railroads: 

Testimony .......................................................................................................... 4 

Prepared statement .......................................................................................... 50 

Responses to questions for the record ............................................................. 73 

Letter to Illinois Department of Transportation regarding the 

CREATE Program ................................................................................. 86 

PTC Timeline ............................................................................................. 88 

Association of American Railroads, ‘‘AAR Calls for Regulations to 

Enhance the Safety of Flammable Liquids Transport and Keep 

the Network Efficient’’ ........................................................................... 89 

Andrew J. Black, President and Chief Executive Officer, Association of Oil 

Pipe Lines: 

Testimony .......................................................................................................... 4 

Prepared statement .......................................................................................... 92 

Greg Saxton, Senior Vice President and Chief Engineer, The Greenbrier Companies: 

Testimony .......................................................................................................... 4 

Prepared statement .......................................................................................... 101 

Responses to questions for the record ............................................................. 109 

Cambridge Systematics, Inc., ‘‘Analysis of Tank Car Fleet Options 

and Retrofitting Capacity in Connection with Docket No. PHMSA– 

2012–0082 (HM–251)’’ Technical Report, March 20, 2015 ................. 113 

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(1) 

HOW THE CHANGING ENERGY MARKETS 

WILL AFFECT U.S. TRANSPORTATION 

TUESDAY, FEBRUARY 3, 2015 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON RAILROADS, PIPELINES

AND HAZARDOUS MATERIALS, COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, Washington, DC. 

The subcommittee met, pursuant to notice, at 10:04 a.m. in Room 

2167, Rayburn House Office Building, Hon. Jeff Denham (Chairman of the subcommittee) presiding. 

Mr. DENHAM. Good morning. The subcommittee will come to 

order. Before we begin I have an administrative item to cover. I 

would like to ask unanimous consent that Representative Sean 

Patrick Maloney be permitted to join the subcommittee for today’s 

hearing and ask questions. 

[No response.] 

Mr. DENHAM. Without objection, so ordered. 

Good morning, and welcome to the first hearing of the Subcommittee on Railroads, Pipelines, and Hazardous Materials. I 

want to welcome the new members to our committee, as well as 

Representative Capuano. He is not here yet. They are facing still 

some challenges in the Northeast. But he and I will have a great 

partnership in moving this subcommittee forward. 

We have a full plate ahead of us with passenger rail, pipeline 

safety, and hazmat reauthorizations all up this year. I look forward 

to working on all of these issues with each of the members of this 

committee. We are going to be very busy in a very, very bipartisan 

fashion. 

Over the last decade, this country has undergone an unprecedented energy renaissance. Due to American technology and construction advances, we are unlocking previously unavailable gas 

and oil resources. This means we no longer have huge domestic 

problems with energy, while also creating good-paying jobs right 

here in the United States. 

Oil production in this country is now approaching levels not seen 

since the 1970s, and natural gas production is projected to continue 

its recent growth trends. This helps consumers with lower energy 

prices, and makes America more secure by relying less on energy 

from other countries. However, to continue this momentum, our infrastructure needs to keep pace with the advances of the energy 

sector. 

Just about all modes of transportation are ultimately involved in 

the movement of energy products, but railroads and pipelines are 

2 

especially critical. Our freight rail system is the envy of the world, 

transporting over 40 percent of our intercity freight, more than any 

other mode of transportation. Freight railroads have long been key 

to America’s energy needs, supplying most of the coal used for domestic electricity production. However, in the last few years, railroads have also been called upon to transport more crude, as pipeline capacity has not kept pace with production. 

Like railroads, pipelines have long supplied our Nation’s energy 

needs. America’s pipeline network is immense: 2.6 million miles of 

pipe, transporting natural gas, oil, and hazardous materials. This 

system takes product from the production field to refining facilities, 

and then to the American consumer or for export. 

Over the last 25 years, the volume of energy products transported by pipelines has increased by one-third. However, the rapid 

development that oil and gas plays in this country has outpaced 

the pipeline network. 

We want to hear today from our witnesses about the investments 

they are making to increase the capacity of our rail and pipeline 

network. We also want to understand how Government can be supportive of their efforts, and if there are roadblocks, what we can do 

to remove them. 

In closing, I look forward to hearing from our witnesses. 

At this point I would like to go to Mr. DeFazio for any opening 

statement he may have. 

Mr. DEFAZIO. Thank you, Mr. Chairman. Mr. Capuano, up in 

Boston, they don’t know how to deal with snow, it is such an infrequent occurrence. And so he is unduly delayed. But I will sit in for 

a while. 

I want to thank the chairman for calling this hearing. The safe 

transport of oil and gas from the production sites, which are becoming more and more dispersed in the U.S. with fracking technology, 

both to refineries and to consumers, is critical. 

Obviously, we have two major means of transport. A massive 

pipeline network, which, at this point, much of it is pretty aged: 

1950s, 1960s, 1970s major construction booms. It has been updated, it has been added to, but there are identified problems. We 

had the Enbridge failure with tar sands crude, a Canadian company, exempt from paying into the Oil Spill Liability Trust Fund, 

because it is oil sands, tar sands: a stellar ruling by the Internal 

Revenue Service, that doesn’t constitute crude oil. And they are 

still cleaning that one up, 4 years later. And it was quite some 

hours before it was known. 

We had the spectacular and very deadly gas explosion in California. Subsequently, Congress adopted legislation, the Pipeline 

Safety Regulatory Certainty and Job Creation Act of 2011. 

Unfortunately, the Pipeline and Hazardous Materials Safety Administration has been incapable of implementing any of the ordered regulatory reforms. Likewise, even though we have known 

that DOT–111 tank cars are not adequate or safe since 1993, 

PHMSA has yet to promulgate a rule for a new standard. In fact, 

the industry itself is so frustrated that they proposed a new standard to the agency. But the agency couldn’t even look at that and 

act quickly. It got lost somewhere in the bowels of the administraVerDate Aug 31 2005 14:26 Jun 11, 2015 Jkt 000000 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 P:\HEARINGS\114\RR\2-3-15~1\93069.TXT JEAN
3 

tion between the agency and the trolls over at the Office of Management and Budget who will further delay the ruling. 

We need a new standard for railcars, so we can move ahead with 

production. They have managed to mangle the rule by merging it 

together with operational issues, which are much more difficult to 

deal with, and controversial. I have asked them to sever the rule. 

Let’s just have a standard for tank cars, get it done, get it done 

now, start the production, create jobs here in America, transport 

the oil more safely. And also, by the way, do your job in implementing the 2011 law. 

So, with that, I look forward to hearing from the witnesses about 

how we can more safely transport oil and gas, which is so critical 

to our economy. 

Mr. DENHAM. Thank you, Mr. DeFazio. I now call on the full 

chairman—full committee chairman, Mr. Shuster. 

Mr. SHUSTER. Thank you, Chairman Denham. And welcome to 

our witnesses here today. I echo much of what has been said by 

the chairman and the ranking member, so I will keep my statement very, very brief. 

As we all know, in production, we are outpacing the world, and 

are the leading producers of oil and gas in the world. And that continues to grow. And with that growth, we have to make sure that 

we have the modes of transportation available to move those products, and the infrastructure that moves those products, whether it 

is rail, whether it is pipelines, that they do it in a very safe manner. 

We will continue to push safety to make sure that that is the 

number-one issue for us. We want to make sure that these things 

move—especially after we have seen a couple of incidents—even 

with those incidents, you still look at the safety record, and it is 

very good. But, as I said, I think we can do better. 

My State of Pennsylvania has Marcellus shale gas production, 

which continues to increase. Slowed down now, but part of the 

slowdown is not just the price, but we don’t have the pipeline in 

place to move the quantity of gas that is necessary. And if we don’t 

make sure that these private companies making private investments are able to invest their money without Government interference, without Government slowdown in many cases, we are not 

going to have the modes of transportation we need to continue to 

move this energy throughout the country. 

I know that the freight rails last year hired 17,000 people, and 

there is more growth to come. As we study the pipeline needs, if 

we are making—if those companies are making those kinds of investments in the future, they will create 80,000 to 100,000 jobs a 

year, as we move forward. 

So, today I am looking forward to hearing from our panelists, 

hear what they have to say, hear how their investments are going 

to be made, and how they are looking at the safety that we need 

to continue to push, and ensure that the rail and pipeline network 

are meeting the needs and, as I said, with safety being at the forefront. 

And, with that, I yield back. 

Mr. DENHAM. Thank you, Mr. Chairman. Now I would like to 

welcome once again our witnesses that are here today: Jason 

4 

Thomas, managing director and director of research for The Carlyle 

Group; Jack Gerard, president and CEO, American Petroleum Institute; Ed Hamberger, president and CEO, Association of American Railroads; Andrew Black, president and CEO, Association of 

Oil Pipe Lines; and Greg Saxton, senior VP and chief engineer of 

The Greenbrier Companies. 

I ask unanimous consent that our witnesses’ full statements be 

included in the record. 

[No response.] 

Mr. DENHAM. Without objection, so ordered. 

Since your written testimony has been made part of the record, 

the subcommittee would request that you limit your oral testimony 

to 5 minutes. 

Mr. Thomas, you may proceed. 

TESTIMONY OF JASON M. THOMAS, PH.D., CFA, MANAGING DIRECTOR AND DIRECTOR OF RESEARCH, THE CARLYLE 

GROUP; JACK N. GERARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER, AMERICAN PETROLEUM INSTITUTE; EDWARD R. HAMBERGER, PRESIDENT AND CHIEF EXECUTIVE 

OFFICER, ASSOCIATION OF AMERICAN RAILROADS; ANDREW 

J. BLACK, PRESIDENT AND CHIEF EXECUTIVE OFFICER, ASSOCIATION OF OIL PIPE LINES; AND GREG SAXTON, SENIOR 

VICE PRESIDENT AND CHIEF ENGINEER, THE GREENBRIER 

COMPANIES 

Mr. THOMAS. Thank you very much. Thank you for the opportunity to testify—— 

Mr. DENHAM. Can you pull it closer? 

Mr. THOMAS. Thank you. Thank you for the opportunity to testify 

this morning. I am director of research at The Carlyle—— 

Mr. DENHAM. So close that it feels really uncomfortable. 

[Laughter.] 

Mr. THOMAS. I am sorry, I thought it was immovable. Thank you 

very much for the guidance; I appreciate that. 

So, I am the director of research at The Carlyle Group, which is 

the—one of the largest global alternative asset managers. We have 

about $203 billion under management. 

From our perspective, an investor’s perspective, the domestic energy revolution has three related, but distinct layers. 

The first and most obvious is direct investment in energy resources, energy exploration and development companies. These investments generally involve the purchase and development of acreage or mineral rights. 

The second layer involves investments in the infrastructure necessary to transport energy from where it is produced to where it 

is consumed. These investments can be direct investments in specific transportation or storage—— 

Mr. DENHAM. Mr. Thomas? 

Mr. THOMAS. Yes? 

Mr. DENHAM. Pull that mic really close to you; I am having trouble picking up—— 

Mr. THOMAS. I am sorry, Mr. Chairman. So, the second, as I 

mentioned, is investments in infrastructure projects to move the 

energy from where it is produced to where it is consumed. These 

5 

can be investments in specific projects, or investments in the debt 

or equity of companies that operate in this space. 

Finally, the third layer—I think that is underappreciated—that 

we focus on is investments in companies that are energy-intensive, 

companies for whom energy accounts for a large share of valueadded or total costs. 

Carlyle is active in all three layers, through our strategic relationship with NGP Energy Capital Management. And through our 

Energy Mezzanine Opportunities Fund, we intend to invest $7 billion over the next 3 to 4 years to develop energy resources and invest in E&P companies. 

Carlyle invests in energy infrastructure projects and companies 

that own energy infrastructure through our Energy Mezzanine Opportunities Fund and our Carlyle Power Partners funds. 

Finally, Carlyle invests in energy-intensive businesses through 

our U.S. buyout and growth capital funds. Of special note, in 2012 

Carlyle Funds partnered with Sunoco to form Philadelphia Energy 

Solutions, which is the longest continuously operating oil facility in 

the U.S., and the largest oil refining complex on the U.S. eastern 

seaboard. And since 2013, PES has undertaken a number of capital 

projects to diversify oil supplies, reduce energy cost inputs, and improve efficiency. Foremost among those was a high-speed unloading 

rail facility capable of receiving 160,000 barrels of domestically produced crude oil per day. 

So, quickly, right now I think the decline in the price of oil has 

a lot of complex origins. And I think that it is difficult to make 

forecasts about how quickly the price is going to adjust backward 

up towards an equilibrium level, and it is difficult to know what 

that equilibrium level happens to be. 

But right now I think it is clear that most of the attention among 

the E&P players is focused on reducing costs to make production 

economical, even in light of the decline in the price of crude. And 

also, among investors, looking at the potential for distressed opportunities. There is about $730 billion of bonds outstanding that are 

linked to E&P companies or energy, more generally. And there is 

a concern that the compressed cash flows, in light of the decline in 

the price of oil, and the decline in the collateral value of the acreage, is going to create the potential for many bankruptcies, many 

distressed securities. And I think that, for the most part, the E&P 

space is—investors in that space are very focused on identifying 

those opportunities in the next several years. 

As a consequence, I think most of the investment in new capacity, new fixed investment, is likely to transition to the transportation infrastructure, and then also continued investment in companies that make use of low-cost energy. Whereas the 

attractiveness of developing resources, of course, depends on the 

price of the resources, the midstream transportation infrastructure 

can be invariant to the price. 

And then, of course, the returns on new fixed capital among companies that burn energy actually increase as the price declines. So 

the dramatic decline in the price of oil, natural gas liquids, and 

then, of course, natural gas, actually increases operating profits of 

energy-intensive businesses, petrochemical manufacturers, et 

cetera. And I would note that the master limited partnerships in 

6 

the midstream space actually have a—their returns have a lower 

correlation with the price of oil than the S&P 500, as a whole. So 

there is no reason to suspect that the price of oil is going to dramatically reduce their—the interest and attractiveness of investment in that space. 

Finally, given time constraints and my inability to use the microphone correctly, I would just like to say that the number-one issue 

that we would focus on, in terms of transitioning investors’ focus 

from E&P and development towards infrastructure, would just be 

a concern for the time associated with permitting. From a very investor-centric perspective, an additional year-and-a-half actually 

would reduce the internal rate of return for a typical project by 

about 36 percent. So you could take projects that, for a provider of 

discretionary risk capital, look quite attractive, and turn them into 

a project whose returns do not meet your investors’ expectations 

and, as a consequence, have to be passed on. 

So, again, I think time is a very important consideration, and it 

can make the difference between attracting capital and building interest early in the process, and actually not being able to identify 

capital providers. Thank you very much, Mr. Chairman. 

Mr. DENHAM. Thank you, Mr. Thomas. 

Mr. Gerard, you may proceed. 

Mr. GERARD. Thank you, Mr. Chairman, and Chairman Shuster, 

Ranking Member DeFazio. It is a pleasure to be here with you 

today. 

America’s 21st-century energy reality is far different than it was 

just a few short years ago. Gone are the days of American energy 

scarcity and insecurity. Today, the United States is the world’s 

leading producer of natural gas, and leading refiner of petroleum. 

And soon our Nation will be—or, as some experts already assert, 

will be the world’s number-one producer of oil. 

There is a growing awareness that this is a unique American moment. It is a moment that marks the transition from endemic energy dependence to energy security and global energy leadership, 

both of which have been public goals of every President and every 

Congress since 1970. But to be clear, to secure this unique American moment will depend heavily on our ability to build necessary 

infrastructure to achieve our Nation’s full energy potential. 

Investing in our Nation’s infrastructure means more: more jobs, 

more revenue to State, local, and Federal Governments; a more dynamic and efficient economy; and an improvement in our Nation’s 

trade balance. On the jobs front, an analysis from the IHS consulting group found that essential infrastructure improvements in 

just the oil and natural gas area could, over the next decade, encourage as much as $1.15 trillion in new, private capital investment, support 1.15 million new jobs, and add $120 billion, on average, per year to our Nation’s GDP. 

This level of potential infrastructure investment eclipses the 

pending highway bill. But if they were to occur together, could 

mean thousands of well-paying jobs, improve our Nation’s global 

economic competitiveness at a time we need it most. That is why 

decisions to improve our Nation’s electrical grid, roads, pipelines, 

rail freight lines—particularly those built by the private sector— 

should be driven by what is best for the American energy conVerDate Aug 31 2005 14:26 Jun 11, 2015 Jkt 000000 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 P:\HEARINGS\114\RR\2-3-15~1\93069.TXT JEAN
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sumer, our Nation’s economy, and status as a global energy superpower. 

In this year of American energy abundance, we must think differently when it comes to how and where we invest in our Nation’s 

infrastructure. The past year of energy scarcity required a silo approach to energy policy, each mode considered in isolation and competition with the other modes. In this era of energy abundance, we 

need more of all. 

Investing in our Nation’s infrastructure means that products 

from all industries move more efficiently within our Nation, which 

lowers costs to consumers and gives our businesses and manufacturers a competitive edge in the global marketplace. Given the integral part America’s infrastructure plays in job creation and economic growth, and our Nation’s role as an energy leader, globally, 

our efforts must transcend political philosophies and partisan 

wrangling. Infrastructure investment and improvements benefit us 

all, regardless of our political persuasion. 

We agree with what the President said just a few short days ago 

during his State of the Union speech that, ‘‘21st-century businesses 

need 21st-century infrastructure.’’ The oil and natural gas industry 

stands ready to work with anyone interested in safely and responsibly improving our Nation’s energy infrastructure so that it supports our Nation’s game-changing energy opportunity to benefit all 

Americans. 

It is our view that we should adopt policies that sustain and expand, not pull back our Nation’s drive towards energy security, and 

reject policies that would result in a return to scarcity and uncertainty. Together, we have a once-in-a-generation opportunity to 

show the world how energy abundance can be used as a positive 

force, and expanding and modernizing our infrastructure will be essential to our success. 

As you and your colleagues deliberate on how best to improve our 

Nation’s infrastructure, I urge you to consider the historic opportunity before us, and to support policies that transform this unique 

American moment into an enduring legacy of American energy security and global energy leadership. 

Thank you for the opportunity to testify, and I look forward to 

answering your questions. 

Mr. DENHAM. Thank you, Mr. Gerard. 

Mr. Hamberger, you may proceed. 

Mr. HAMBERGER. Thank you, Mr. Chairman, Chairman Shuster, 

Ranking Member DeFazio. And a special recognition to the new 

Members who won their struggle to get a seat on the most powerful 

subcommittee in the House of Representatives. 

As you pointed out, Mr. Chairman, America’s freight railroads 

are indeed the envy of the world. They move vast amounts of 

goods, connecting consumers and businesses over a 140,000-mile 

network. Importantly, they are privately owned, operating almost 

exclusively on infrastructure that they own, build, maintain, and 

overwhelmingly pay for themselves. That is in stark contrast to 

trucks and barges, who compete against railroads for freight traffic, 

but mainly use infrastructure supplied and paid for by the taxpayer. 

8 

The global superiority of U.S. freight railroads is a direct result 

of a balanced economic regulatory system that relies on marketbased competition to establish rate and service standards with a 

regulatory safety net available to rail customers who need it. This 

balanced regulation has allowed our freight railroads to improve 

their financial performance and condition from once very poor conditions to much healthier levels today. 

That, in turn, has allowed railroads to pour massive amounts of 

money back into the locomotives, freight cars, tracks, bridges, tunnels, and other infrastructure and equipment that keep our economy moving. In fact, just yesterday, we were able to announce that 

Class I railroads planned to invest $29 billion in 2015. That is on 

top of the $27 billion mentioned by the chairman in 2014, $25 billion in 2013. Private capital going back into the system. They announced that we will plan to hire 15,000 new employees, of whom 

we expect 1 in 5 will have served in the armed forces. All told, freight railroads have spent $575 billion of private capital since 1980 on improving the performance of their infrastructure and equipment. It is often said that our Nation’s infrastructure is crumbling. But, thanks to their massive spending back into 

the networks, Class I freight railroad infrastructure today is in its 

best overall condition ever. As our service challenges of last year 

indicated, however, we just need more of it. 

The challenge for railroads is to ensure that the current high 

quality of rail infrastructure is maintained, and that adequate capacity exists in the future to meet our Nation’s growing needs. This 

committee has a particularly crucial role to play. At a time when 

you are wrestling with how to fund other surface modes, it makes 

no sense to enact public policies that would discourage these private investments in rail infrastructure that boost our economy and 

enhance our Nation’s economic competitiveness. 

Turning to energy, the huge growth in domestic oil and gas production has moved our Nation closer to energy independence. The 

benefits are clear: tens of billions of dollars in reduced oil imports 

from unstable countries whose interests don’t always match our 

own; increased economic development, including manufacturing 

jobs; thousands of new well-paying jobs; and, in recent months, a 

sharp decline in gasoline and heating oil prices that is the functional equivalent of giving the average American household hundreds of dollars in additional spending money. 

Railroads have played a key role in delivering these benefits. In 

2008, Class I railroads originated 9,500 carloads of crude oil. Final 

numbers for 2014 are not yet in, but we estimate about 500,000 

carloads in 2014. This growth is largely because railroads offer capacity where there is none, and the flexibility to transport product 

quickly to different places in response to market needs. 

In addition, rail facilities can almost always be expanded much 

more quickly than pipelines or refineries. And, in some areas, the 

ability of a railroad to serve a refinery can make the difference between that refinery continuing to operate or closing down. 

Railroads devote enormous resources to safe operations, no matter what we carry. That said, railroads recognize that more work 

must be done to ensure public confidence in the transportation of 

crude oil, specifically. From 2000 through 2014, when U.S. railVerDate Aug 31 2005 14:26 Jun 11, 2015 Jkt 000000 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 P:\HEARINGS\114\RR\2-3-15~1\93069.TXT JEAN
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roads originated a total of approximately 1.33 million carloads of 

crude oil, 99.995 percent of those carloads arrived at their destination without a release caused by an accident. In 2014 alone, exactly 

7 cars were in an accident that released crude oil out of about 

500,000. That is 99.999 percent safety. 

We are not standing still. Addressing accident prevention, accident mitigation, and emergency response, railroads, in concert with 

our customers, are helping to ensure that our Nation is able to 

safely and reliably utilize the tremendous national asset that domestic crude oil represents. Railroads provide a vital link for our 

farmers, manufacturers, and resource producers to both the domestic and global marketplaces. 

But the challenges of creating, maintaining, and operating a rail 

system capable of meeting present and future needs will require 

the benefit of effective public policy. We look forward to working 

with this committee to help assure this outcome. 

Thank you, Mr. Chairman. I apologize for running late. 

Mr. DENHAM. Thank you, Mr. Hamberger. 

Mr. Black, you may proceed. 

Mr. BLACK. Good morning, Chairman, Ranking Member. I am 

Andy Black, president and CEO of the Association of Oil Pipe 

Lines, AOPL. We represent transmission pipeline operators who 

deliver crude oil, refined products like gasoline, diesel fuel, and jet 

fuel, and natural gas liquids, such as propane and ethane. Our 

pipelines extend 192,000 miles across the U.S., safely delivering 

14.9 billion barrels of crude oil and energy products in 2013. 

Americans benefit when our pipelines deliver the gasoline they 

need to drive to work, commute; the propane they use for rural 

heating, crop drying, and livestock; and the raw materials like ethane used for manufacturing. As domestic oil production has grown, 

American pipelines have responded by delivering 1.35 billion additional barrels of crude oil per year over the last 5 years, with 

10,000 miles of new pipeline added into service in just the last 4 

years. 

Still more pipeline capacity is needed to bring the full benefits 

from increased North American production of crude oil to American 

workers and consumers. In many cases, our existing pipeline network needs more capacity to move crude oil from producing regions 

to where it can be manufactured into refined products, such as gasoline, and sent to communities that would benefit from new supply 

options. 

And our existing pipeline network needs more capacity to move 

increasing amounts of natural gas liquids, such as ethane, to petrochemical plants, where good-paying manufacturing jobs produce 

plastics, chemicals, containers, and a host of other consumer products. 

While our Nation needs additional pipeline capacity greatly, this 

is a difficult time to expand pipeline capacity. First, pipelines must 

secure long-term agreements with shippers to provide financial 

support for expansion projects. Second, pipeline operators need 

prompt decisions from Government agencies for environmental permits and approvals needed for pipeline routes and border crossings. 

While the multiyear delays imposed on the Keystone XL project are 

well known, some other State and Federal permitting decisions are 

10 

also taking longer, growing more complicated, and resulting in unnecessary delays. 

While pipeline operators know there is a role for rail delivery of 

crude, pipelines are the best way to transport large volumes. A single pipeline can deliver 800,000 barrels per day, all day, every day. 

As much as crude by rail has increased over the last few years, the 

8.3 billion barrels of crude oil delivered by pipeline in 2013 were 

more than 20 times the volumes delivered by rail. Pipelines are 

also the lowest cost way to transport petroleum products, with 

rates only a fraction of other modes. 

Not only are pipelines the safest mode of transportation, they are 

getting safer. Since 1999, the number of releases from liquid pipelines is down 50 percent. Incidents due to corrosion are down 76 

percent since then. These pipeline safety improvements are the result of hard work and resources spent by pipeline operators. In 2013, pipeline operators spent over $2.1 billion evaluating, inspecting, and maintaining their pipeline infrastructure. Pipeline 

operators also conducted 1,455 in-line inspections covering 47,000 

miles of pipeline with so-called ‘‘smart pigs’’ to scan and survey the 

inside of their pipelines. 

Pipeline operators conducted more than 12,000 excavations of 

pipeline segments for further inspection or maintenance in 2013. 

Our industrywide safety improvement efforts are embodied in the 

API–AOPL Pipeline Safety Excellence initiative, which reflects the 

shared values and commitment of pipeline operators to building 

and operating safe pipelines. 

Pipeline operators share an industrywide goal of zero pipeline incidents. It drives us to constantly examine our performance results 

and continue to improve overall safety. 

Pipeline operators also have a long history of working together 

on safety. Our members may be commercial competitors, but they 

work together to improve safety. Today we are releasing the ‘‘2015 

API–AOPL Annual Liquids Pipeline Safety Performance Report 

and Strategic Plan.’’ It represents the top initiatives approved by 

the leadership of the pipeline industry for executive-level attention, 

support, and resources. This year’s plan has industrywide goals to, 

one, improve inspection technology capabilities; two, enhance safety 

threat identification and response; three, expand safety culture and 

management practices; and, four, boost response capabilities. 

In 2015 we will undertake strategic initiatives to improve cracking inspection technology, and implement new industrywide recommended practices for finding and managing pipeline cracking, 

managing leak detection programs, and improving emergency planning and response. We would be happy to meet with any member 

of the committee or other staff to review these efforts. 

The ongoing North American energy production renaissance is 

bringing tremendous benefits to the American public. Pipelines are 

the best way to transport these benefits, and we will continue expanding and working hard to make them even safer. Thank you. 

Mr. DENHAM. Thank you, Mr. Black. 

Mr. Saxton, you may proceed. 

Mr. SAXTON. Chairman Denham, Ranking Member DeFazio, 

members of the subcommittee, thank you for the opportunity to testify today at this important hearing. My name is Greg Saxton, and 

11 

I am the senior vice president and chief engineer for The 

Greenbrier Companies, a leading supplier of transportation equipment and services to the railroad industry. I am responsible for all 

tank car and freight car engineering for the four manufacturing facilities Greenbrier operates in North America. I also chair the Association of American Railroads’ Equipment Engineering Committee, 

and am a member of the RSI and AAR Tank Car Committees. 

In recent years the rail supply industry has experienced a significant increase in the demand for railcars. Responding to the needs 

of our customers, Greenbrier has made significant investments in 

capital in our manufacturing and repair facilities. We have tripled 

our capacity to perform repairs and retrofits. We have 39 railcar 

repair and retrofit shops, including a shop in Modesto, in the chairman’s home district. And we built 4,000 tank cars last year; we expect to build 8,000 tank cars this year. 

A key driver in the increased demand for railcars is the surge in 

the volume of crude oil moving by rail. In 2013, U.S. rail systems 

transported over 400,000 carloads of crude oil, up from just 9,500 

carloads in 2008. 

The rail industry has a very good record of providing safe transportation of crude oil. However, the increased volumes and demands placed on the network have come with significant safety 

and environmental risks. These risks are highlighted by a number 

of major incidents involving crude oil being transported by rail, including a catastrophic fire that caused 47 fatalities and destroyed 

part of Lac-Me ́gantic, Quebec, in 2013. 

Contributing to this risk are the tens of thousands of outdated 

legacy DOT–111 tank cars that carry this volatile crude oil. The 

rail industry has acknowledged the need to update this rail tank 

car standard. Nearly 4 years ago, the industry and the AAR petitioned the U.S. Government to mandate a more robust design, and 

the industry voluntarily adopted this robust standard we call CPC– 

1232. 

Unfortunately, the Federal Government has still not acted on 

this petition to mandate standards requiring stronger, safer tank 

cars, and the DOT–111 specification remains the Government-specified design in the United States. This lack of Federal action continues to allow oil to be transported in tank cars lacking the latest 

safety ideas, causing the NTSB to say, ‘‘the current tank cars moving these flammable liquids are not up to the task. It is crucial to 

strengthen these existing rail tank cars.’’ 

Greenbrier agrees. We strongly urge the Pipeline and Hazardous 

Materials Safety Administration, PHMSA, to adopt its proposed option number two contained in the notice of proposed rulemaking. 

Adopting option two as the fixed and final standard for new tank 

cars placed in service after October 1, 2015, is key. This should be 

combined with requiring retrofit of all existing tank cars by 2020. 

This is an aggressive timeline, but we believe it is achievable. 

Greenbrier has not waited on the Federal Government to design 

a safer tank car. We are already making major capital investments 

to address this need. We are investing in our production capacity 

to support strong demand for our Tank Car of the Future. This car 

has features that inhibit discharge of contents during derailment, 

to reduce the penetration of the tank car shell, and to limit pool 

12 

fires that can result when hazardous contents of the car escape and 

are ignited. With this design, the likelihood of tank car spills in a 

derailment at 50 miles per hour can be improved by up to approximately seven to eight times, compared to the majority of cars now 

operating in hazardous service in the North American fleet. 

Customer response to the Tank Car of the Future has been very 

positive. We currently have orders for more than 3,500 of these 

cars, and we have begun delivering them to customers. In fact, a 

unit train of more than 100 of these tank cars built to this highest 

safety standard received its initial cargo in Bakken crude in the 

fields of North Dakota very recently. This is the option number two 

car that we would like to see PHMSA adopt. 

A final rule establishing clear, robust standards for new tank 

cars and timelines for retrofitting of existing cars will permit the 

industry to make the necessary upgrades to these facilities that 

will make these cars possible. 

Mr. Chairman, thank you for allowing Greenbrier the opportunity to share our views on this important topic. We are proud to 

be a player in the Nation’s energy renaissance. Thank you, sir. 

Mr. DENHAM. Thank you, Mr. Saxton. Time permitting, we 

should be able to have two rounds of questions here. I will start 

this afternoon—or this morning out. 

Mr. Thomas, despite the recent drop in the price of oil per barrel, 

will there still be a need for significant investment in midstream 

infrastructure? 

Mr. THOMAS. Yes. I would say the scale of the opportunity is 

really unchanged. When you think about the risk of—facing midstream operators, it is volume-metric, not really related to price. It 

is how much the resource actually goes through the pipelines, goes 

through the rail. And at this stage, I think that even the development is slowing, the amount that is actually anticipated to go 

through pipelines, rails, over the next few years is unchanged. I 

think the development cycle is likely to be elongated. So the same 

amount of resources will ultimately be developed, it is just going 

to be over a longer period of time at current prices. So, again, I 

don’t see any reason to suspect that the needs are changed. 

Also, when you think about the basic economic opportunity, it is 

really related to basis differentials. The notion that you are paying—you are receiving prices for gas, for natural gas liquids, at the 

place it is produced that are substantially below the market price, 

and that the profit that can come from developing the infrastructure is from reducing those basis differentials, that you are actually 

able to receive what is a market-clearing price in other parts of the 

country. 

Mr. DENHAM. And, based on where the products are being extracted and where they actually need to go, where do you view the 

greatest need in infrastructure improvements, as well as new infrastructure? 

Mr. THOMAS. Well, first, with the natural gas liquids, most of the 

production, the cracker facilities that actually produce the end 

chemicals, are located in Louisiana, Texas, other parts of the 

Southwest. But then you have most of the wet gas that is being 

produced in Bakken, Marcellus, certainly. So I think that connecting those areas is paramount. 

13 

Secondly, just with natural gas, you have prices for natural gas 

in the Northeast that are still quite high, relative to where they 

should be, so you have the connecting Marcellus natural gas to the 

Northeast for households, for businesses, that energy infrastructure is greatly needed. 

Again, one final point. With natural gas liquids, I think that this 

is really a national issue, because there just hasn’t been really 

much in the way of investment over the last 20 years, and natural 

gas liquids really cannot be transported over the existing natural 

gas infrastructure. So that is more national. The other two, again, 

I think it is connecting Marcellus and Bakken to the Southwest, 

Louisiana, Texas, where most of the processing facilities lie. 

Mr. DENHAM. So what type of infrastructure? Rail? Pipelines? 

Mr. THOMAS. Well, yes, both. But certainly, I think, you know, 

there is going to be an emphasis on the construction of pipelines 

for—prospectively. But, again, I think that—you know, we owned 

a company for a period of time—we were an investor in a company, 

I should say—Genesee & Wyoming, which was a short line rail, 

and that helped with getting the Marcellus and Utica shales, transporting liquids and crude. And I think that this is going to continue. 

I think, you know, in the fullness of time you would expect pipelines—you know, perhaps 12,000 to 15,000 miles of pipelines—to 

account for the natural gas liquids transportation. Right now we 

have about $125 billion of fixed investment planned for petrochemicals in the United States. And a lot of this is international players 

moving here because of lower feed stock prices. And this is going 

to be serviced largely by pipeline development, in my opinion. 

Mr. DENHAM. And currently we have 2.6 million miles of pipeline. We have added about 10,000 more miles in the last year. I 

mean, how much more is needed? How much capacity is needed 

with that current infrastructure that we have today? 

Mr. THOMAS. Well, again, I do want to—— 

Mr. DENHAM. The question is, do we ever catch up? 

Mr. THOMAS. Well, I think we have the opportunity to catch up, 

because, again, my impression of the E&P market is focused on, 

now, cost reduction and distress. So there is going to be less fixed 

investment related to development. Now is the opportunity for the 

investment in midstream infrastructure to catch up to the past resource development that has occurred. So that is the opportunity 

today. 

And again, I do want to emphasize that natural gas liquids, the 

pipelines associated with the transport for petrochemical production, do require a—they cannot simply be transported over the existing natural gas infrastructure; they require quite a bit of construction on their own. And that market is, again, completely dependent on development of transportation infrastructure, going forward. 

The investment in the end production is there, it is coming online. It is growing this year—the amount—the value of facilities the 

petrochemical space put online has grown by 70 percent. So it is 

the—the downstream is there, it is a question of whether the midstream and infrastructure will ultimately be developed to support 

that. 

14 

Mr. DENHAM. Thank you. Mr. DeFazio? 

Mr. DEFAZIO. Thank you, Mr. Chairman. Is there anybody on the 

panel who disagrees with the need for a more robust rail tank car 

than the DOT–111s? 

[No response.] 

Mr. DEFAZIO. OK, good. We start there. Now, let’s talk about 

how quickly we can move there. 

Now, Mr. Thomas, I assume some of your people are looking at 

investments in railcars, since most railcars are not owned by the 

railroads, they are owned by investors. Is regulatory uncertainty 

regarding a new design holding people back from making those investments? 

Mr. THOMAS. The problem with uncertainty is that it is very difficult to calibrate, in terms of your investment model. So you don’t 

know what it ultimately means for—— 

Mr. DEFAZIO. Right. So if we have a—if we had a known design, 

and a time period in which to phase it in, you know, people could 

figure out, you know, how they’re going to amortize that investment, what the investment is, and decide whether or not, rationally, to be in the tank car business or not. Right? But right now, 

without knowing what the design is going to be, that is probably 

causing some hesitation. 

Mr. THOMAS. And I would also note that, very often, you can 

have—when you assume a certain level—degree of risk aversion 

among managers, that you could actually have less investment because of uncertainty than you do with an almost bad outcome with 

the regulatory. 

Mr. DEFAZIO. OK, excellent. 

Mr. Hamberger, in—you know, with the rule that is proposed, we 

have both a mix of operations. Has to do with braking and speeds 

and design. Now, do you think—are the operations and braking 

issues going to raise concerns? Have they raised concerns? 

Mr. HAMBERGER. Indeed they have, Mr. DeFazio. But let me just 

expand, if I can, on your first question. I am aware of a manager 

of at least one major tank car leasing company who has been told 

by her lawyers 2 years ago not to spend any money to replace the 

DOT–111s until there is a final rule on what is—out of PHMSA. 

So—— 

Mr. DEFAZIO. OK. Thank you. 

Mr. HAMBERGER [continuing]. To Mr. Thomas’s point—— 

Mr. DEFAZIO. That is very helpful. 

Mr. HAMBERGER [continuing]. That lack of certainty has, in fact, 

reduced—— 

Mr. DEFAZIO. OK. Let me put it this way. Could we expedite the 

rulemaking if it was divided between a design criteria and operations issues? 

In fact, when I have asked, ‘‘Why are they combined?’’ I am basically told, ‘‘Well, we think we are going to have trouble with those 

two, so we want to move it through on the back of the tank car.’’ 

Well, I want to get the tank cars in process. 

Mr. HAMBERGER. If memory serves, I testified in the Senate last 

fall, and recommending exactly that. 

Mr. DEFAZIO. OK. 

15 

Mr. HAMBERGER. We need certainty. We have already adopted 

voluntary speed limits. We have already adopted improved braking 

systems. So I think that what Mr. Saxton has indicated as well is 

we need certainty so that the new tank cars can—— 

Mr. DEFAZIO. Right. I mean you are never supposed to ask a 

question you don’t know the answer, but, Mr. Saxton, you went to 

Lac-Me ́gantic. Those were DOT–111s, I understand. 

Mr. SAXTON. Yes, sir. 

Mr. DEFAZIO. Do you think there would—I mean that was a pretty high-speed incident. Do you think a new tank car design would 

have made a difference in the destruction and the deaths? 

Mr. SAXTON. I do believe it would have made a difference. I think 

there would have been fewer breaches. We put 1.6 million gallons 

of crude oil on the ground up there, and I think we would have put 

significantly less amounts of crude on the ground if we had had a 

more robust car. 

Mr. DEFAZIO. OK. And you used a statistic. I think you said at 

50 miles per hour. What factor of additional safety did you get out 

of the improved design? 

Mr. SAXTON. Seven to eight times. 

Mr. DEFAZIO. Seven to eight times? 

Mr. SAXTON. Less likely to breach—— 

Mr. DEFAZIO. So what does that mean, in terms of probability of 

rupture? One-seventh, one-eighth probability of rupture, then? 

Mr. SAXTON. Yes, sir. That is exactly right. I definitely believe we 

would have breached a lot fewer cars. 

Mr. DEFAZIO. OK, great. 

Now, Mr. Black, I just—I think you briefly mentioned it in your 

testimony—I couldn’t find it in the written testimony—but an issue 

I have is why does it take so long to detect leaks? Because we have 

a number of incidents listed where pressures went down, and they 

actually increased input, because they thought maybe there was a 

problem other than a leak. In the case of the Enbridge in Marshall, 

Michigan, it was 17 hours. Another Enbridge incident was 31⁄2

hours. Why do we have so much trouble detecting leaks? 

Mr. BLACK. Well, the Marshall, Michigan, incident was an exception. The leak detection system that was in operation detected the 

signs of the leak, but the operators did not recognize it was a leak. 

They thought, in the NTSB investigation, it was something else. So 

they tried to increase the pressure in a pipeline to address what 

they thought it was, and they magnified the—— 

Mr. DEFAZIO. So is that operator education? Operator error? Is 

it a problem with the detection system? 

Mr. BLACK. Control room training. And our industry has embarked on a recommended practice for leak detection and recognition and response, learning from that incident. 

Mr. DEFAZIO. OK, thank you. My time has expired. Thank you, 

Mr. Chairman. 

Mr. DENHAM. Thank you, Mr. DeFazio. Mr. Shuster? 

Mr. SHUSTER. Thank you very much, Mr. Chairman. 

Mr. Gerard, are there areas of this country that oil and gas exploration and extraction have been hindered because of the lack of 

infrastructure? Could you give us a few examples, if they are out 

there? 

16 

Mr. GERARD. Well, clearly, today, Mr. Chairman, as we look at 

this significant expansion that we have occurred, up to 3 million 

barrels a day more in oil production, significant increases in natural gas, I think, as Mr. Thomas pointed out, when you look at the 

Northeast, you look at your good State and the Marcellus shale 

play, if we could move a lot more of that natural gas up into that 

area, I think you would see the impacts to the consumers reduced, 

and consumers would benefit. 

So, what does that do to production? Well, the production is 

going to stay where, obviously, the market allows it to go, just like 

we are seeing today, in terms of the price of crude oil. But fundamentally, that infrastructure, that network to move it, makes 

the system far more efficient. 

So, yes, it does have some impacts, based on investment judgments. Where will those dollars go? They will go to the road of 

least resistance. And that is why we are hopeful we can move more 

of the Bakken on the oil side, more of the natural gas out of 

Marcellus to the Northeast and then down to our major facilities 

in the gulf, et cetera. 

Mr. SHUSTER. Thank you. 

Mr. Black, you said 10,000 miles of pipe in the last 4 years. Mr. 

Thomas, you mentioned 12,000 to 15,000 miles of more pipelines. 

What time period is that? In the next 5 years, both of you, either 

of you, how many miles of pipeline do we need to build? 

Mr. THOMAS. Well, I would say that would be over about a 5- to 

10-year period. And again—— 

Mr. SHUSTER. A 12,000 to 15,000—— 

Mr. THOMAS. That is right. And I think that depends on the pace 

of growth. 

I think one of the good things about the decline in the price of 

oil is that you are going to have much greater asset utilization. For 

a period of time it was—you know, if you got one anchor shipper 

that you could just build the pipeline, and that—you wouldn’t really worry about how much was being used. Now there is going to 

be more attention paid to the amount of the asset that is being 

used, and that is going to lead to less risk of overbuilding. 

Mr. BLACK. The stats that I have for you in terms of barrels per 

day of crude oil and liquids to move towards consumers and workers, we have got more than 8 million barrels per day of new pipeline capacity. Right now that is either under construction, under 

firm agreements with pipeline shippers, or in open season. So pipeline operators continue to expand capacity to move these liquids to 

where they need to go. 

Mr. SHUSTER. Thanks. Mr. Thomas, you mentioned in your written testimony about the delays and the permitting process and the 

costs that can be incurred. Can you talk about some of those, the 

significance those costs can make? 

Mr. THOMAS. Sure. When there is a potential investment opportunity, and there is interest from a provider of discretionary capital, and the—if you have to put the upfront money, the amount— 

the delay is going to be quite considerable. Again, if you have a 3- 

year project, a delay of a year-and-a-half on top of that is a 36-percent decline in the return. 

Mr. SHUSTER. What 36-percent decline? 

17 

Mr. THOMAS. In the internal rate of return associated with that 

project. 

So, when you are thinking about targeting a 12- to 15-percent 

per year return for your investor, a delay could be the difference 

between whether this is an attractive opportunity or not. Alternatively, if you want to wait to actually make the cash outlay into 

the future, that means you have to segment part of your fund for 

a future opportunity that may not ultimately materialize. That is 

very difficult to do, because you are under pressure from investors, 

your investors, to put as much of the capital to work as quickly as 

possible. 

So, if you raise money today with the expectation of investing 

over 3 years, it is very difficult to wait 18 months for a potential 

project. So it is just a complication. 

Mr. SHUSTER. So streamlining the permitting process helps those 

private dollars get into the field and—— 

Mr. THOMAS. It can—— 

Mr. SHUSTER [continuing]. Build pipeline—— 

Mr. THOMAS. It can be—again, for a marginal investment, it can 

be the difference between whether it is something that you wish to 

pursue and something that you prefer not to. 

Mr. SHUSTER. Mr. Hamberger, you mentioned $29 billion, and 

that is a lot of money. 

Mr. HAMBERGER. Yes, sir. 

Mr. SHUSTER. But I think that, in perspective, what percentage of the rail industry’s revenues or profits does that $29 billion make 

up? I think it gives—at least for me, it gives me a better understanding of how—— 

Mr. HAMBERGER. I appreciate that. The CAPEX is about 18 percent of revenue. When you combine the two, it is about 40 percent 

of all revenue back into—— 

Mr. SHUSTER. Out of your revenue, not your profits. 

Mr. HAMBERGER. Out of revenue. Yes, sir. 

Mr. SHUSTER. Yes. And how does that compare to other industries? Utilities industries, the—— 

Mr. HAMBERGER. With respect to CAPEX, per se, the average in 

America is 3.5 percent for all manufacturing. For the last decade 

we have been around 17 to 18 percent. 

Mr. SHUSTER. Significant amounts—— 

Mr. HAMBERGER. Yes, sir. 

Mr. SHUSTER. OK, thank you. And I yield back. 

Mr. DENHAM. Thank you, Mr. Shuster. 

Mr. Larsen, you are recognized for 5 minutes. 

Mr. LARSEN. Thank you, Mr. Chairman. I just want to remind 

the panelists. People on the west coast use natural gas and oil, too. 

And we have refineries. You make it sound like everything is east 

of the Mississippi, or at the mouth of it. So we got five refineries 

in Washington State, alone. And in the last 2 years, we have gone 

from zero gallons of crude oil transported on rail lines through 

Washington State to nearly 1 billion gallons. And that same time, 

we have seen a decrease in oil, crude oil, by tanker by about the 

same amount. So it is almost a one for one. In that same amount 

of time, the pipeline—crude oil from pipelines to the refineries has 

stayed about the same. So we have sort of seen its replacement. 

18 

As a result—and I have talked to several of you about this—as 

a result, we have seen an increase in crude by rail, and an increase 

in the community’s knowledge of it, and insistence that something 

be done about it to ensure safety. And so, I have a couple of questions on that line. 

And, first, is for Mr. Hamberger. And kind of how would you 

characterize this relationship between your capital investment and 

your maintenance and repair investment in safety? How do you 

talk about the return on investment from the safety investment 

that you make? 

Mr. HAMBERGER. There is a direct correlation, and I will be 

glad—I think it may actually be in my written testimony, of the 

amount of money spent and the accident rate. A direct correlation 

between a well-maintained railroad and a safe railroad. 

Now, it is not just the maintenance, it is also the training of the 

employees. But new equipment is safer. So that—and if you go 

back to the bad old days when we were owned—25 percent of the 

track was in—owned by companies in bankruptcy, the Interstate 

Commerce Commission actually kept track of something called 

standing derailments. Deferred maintenance was the hallmark of 

the day. Deferred maintenance is a euphemism for not getting out 

and taking care of your railroad. We don’t have deferred maintenance now. And so, there is a direct correlation between that 

spending and safety. 

Mr. LARSEN. Yes, thanks. And, Mr. Saxton, the discussion Mr. 

DeFazio and others have brought up about the tank car design and 

such, obviously, if you all are either building new tank cars, the 

‘‘Tank Car of the Future,’’ or retrofitting tank cars, that is putting 

people to work. As well, people who aren’t currently working today, 

I assume, and you have to hire up. 

In your opinion, can your side of the industry ramp up fast 

enough to do retrofits and to build a ‘‘Tank Car of the Future’’ to 

address concerns about a potential shortage of tank cars to move 

crude? 

Mr. SAXTON. The short answer to that question is yes. Of course, 

what you are alluding to is the fact that the PHMSA document, or 

proposal, has certain dates by which events have to occur. And 

they are aggressive, but we believe they are doable. 

Mr. LARSEN. So why do you believe they are doable, and some 

folks say they are not doable? 

Mr. SAXTON. Well, for example, last year we built 4,000 tank 

cars. This year we will be building 8,000 tank cars. That is a lot 

more to do. 

I have this deep abiding faith in the American economy. But I 

also believe that if we set the bar low, we will not quickly do things 

that we need to do to build safer tank cars. And I think it is really 

incumbent on us to do that. Because, as a railroad person, or as 

someone in the rail industry, if we were to have additional 

derailments that caused more fatalities, I think we could lose our 

franchise, the trust that the American people put in us to do this. 

So I think it is really important for us to get on with it. Give us 

a bar, let us get over it. 

Mr. LARSEN. I think if we set it low enough, you will be sure to 

hit it. 

19 

Mr. SAXTON. You have it. 

Mr. LARSEN. Yes. That is good enough for me. Thanks. Thank 

you, Mr. Chairman. 

Mr. DENHAM. Thank you, Mr. Larsen. 

Mr. Hanna, you are recognized for 5 minutes. 

Mr. HANNA. Thank you, Chairman. 

I am curious. You mentioned, Mr. Thomas, that if we had a better pipeline system, we would have cheaper natural gas in certain 

areas. And you said that, specifically, the price was higher than it 

should be. Natural gas is trading about 2.68 today, something like 

that. In those areas that you might be speaking of, what would you 

expect the marginal cost to be to the consumer without those improvements? 

Mr. THOMAS. Well, I mean, they can be a multiple of the Henry 

Hub price. So, again, it is—the economic potential value added for 

infrastructure investment is not the price so much as the differential between the price at Henry Hub and the price that you pay at 

the end market. And you could have a savings that actually, in today’s market, are three to four times the actual spot price. 

So, it can be quite dramatic. And, again, I think that as long as 

those—— 

Mr. HANNA. So it is a direct cost to the consumer that could be 

helped with infrastructure. 

Mr. THOMAS. Yes. 

Mr. HANNA. Mr. Hamberger, you mentioned that you have 99.95 

percent, seven cars, thousands and thousands of cars out there. 

And yet, it sounds like, from the ridiculous to the sublime, with all 

due respect to Mr. Saxton, that the urgency associated with his line 

of testimony and the actual on-the-ground, knowing that you have 

improved speed, you have improved braking conditions on your 

own, and—what am I missing, here? 

How much, Mr. Saxton, do you think you are going to reduce 

those seven cars with forcing an industry to expedite something the 

way you think it should? And I am not arguing with the idea that 

it needs to be done, just that I am—have a problem with the urgency associated with the conversation here. 

So, Mr. Hamberger, would you like to—— 

Mr. HAMBERGER. Let me start. It is a coordinated effort of prevention, mitigation, and response, and the tank cars in the mitigation piece, when the accident does happen, you want to have as 

safe a tank car that still allows the efficient movement of the product. 

As some of us mentioned, we took the initiative in 2011—in 

March of 2011, we petitioned PHMSA to adopt a standard which 

we submitted to them. They delayed. In October of 2011, Jack and 

his members and other shippers agreed to adopt that on a voluntary basis, because we wanted to get to the next level of safety. 

We have now agreed to take that even a little bit further, from a 

safety standpoint. And I think where we are—where I am, at 

least—is tank car owners don’t know what to order. And so, instead 

of ordering even the new voluntary agreement that we reached, 

they are waiting for PHMSA to decide what the regulatory standard is going to be. 

20 

And so, meanwhile, the 2011s are still being used. The number 

I have is that if the tank car that API and AAR recommended in 

our joint comments in the regulatory process last fall is adopted, 

it would reduce the probability of a release in an accident by 81 

percent. That is a pretty good safety improvement, and we just 

need to know that that is the standard that DOT—— 

Mr. HANNA. To be fair to Mr. Saxton, maybe you would like to 

weigh in. I—— 

Mr. SAXTON. Well, first, I want to agree with everything Mr. 

Hamberger has said. I want to point out a couple nuances here. 

It has already been testified that at least one major leasing company will not order any of these new cars until regulatory certainty 

occurs. It is important to realize the railroads are common carriers. 

When a shipper—and, Mr. Hamberger, correct me if I get any of 

this wrong—when a shipper presents a properly packaged commodity to the railroad—in this case, often crude oil, for example— 

if it meets DOT standards, the railroad has to move it. 

So, you have got to get beyond this uncertainty regarding the car 

that will be required in the future. Because economic forces, the 

market, will crush an overpackaged commodity, eventually. It will 

have to go to the cheapest commodity car. So that is what we are 

here, asking you for. 

For over 20 years, we have been doing this dance, according to 

NTSB, and I agree. 

Mr. HANNA. Sure. I just want to mention, too, that the House 

passed H.R. 161, the Pipeline Reform Act, which seeks to take from 

558 days, which is the current permit process, down to under a 

year. So what you are asking for is in the works right now, in the 

House. 

So, thank you. My time has expired. 

Mr. DENHAM. Thank you, Mr. Hanna. 

Mr. Sires. No? 

Mr. Cohen. 

Mr. COHEN. Thank you, Mr. Chair. Mr. Hamberger, you have testified that railroads are 99.99 percent safe. And Mr. Black said 

that the most—the safest way to transport is by pipeline. Is he 100 

percent safe, or is he somewhere between 99.99 and 100, or is he 

just wrong? 

Mr. HAMBERGER. We have statisticians that are taking a look, 

and I think we are arguing about decimal points here. The fact of 

the matter is we are safe, pipelines are safe, and this product has 

to move, and is a good news story that is leading this country to 

energy independence. 

And so, we are not quibbling over thousandths of a percent. I 

think we are both very safe and trying to get safer. 

Mr. COHEN. If something happens with the railroad, and you 

have a train derail, you have got a limited amount of oil that is 

at risk. But—could risk the public, if so many cars lose their load. 

Pipeline has a problem, it is unlimited, is it not? 

Mr. BLACK. In the event of a pipeline release, the operator turns 

off power to the pump stations and isolates—and turns off valves 

to isolate the amount of the release, limiting the amount that can 

be released. When a pipeline operator responds properly to an incident, it is a small amount of barrels that are released. 

21 

Mr. COHEN. Is that what happened in the Enbridge spill? Was 

there a limited amount of oil? Obviously, it was limited, because it 

is still not going on. But was it not a great quantity? 

Mr. BLACK. Correct. Pipeline operators want to properly detect 

the release and begin to respond. In that case, they did not. That 

is the exception. A lot of learnings have occurred from that. We 

have had a lot of investments in leak detection technologies and 

recommended practices being developed at API on several different 

issues to minimize pipeline releases and improve responses. 

Mr. COHEN. Mr. Black, the EPA has stated that tar sands poses 

serious environmental risks, and more serious than other crude 

oils. Do you agree or disagree that tar sands is a more serious environmental risk than other crude oils? 

Mr. BLACK. I disagree. It is like any heavy crude oil. National 

Academy of Sciences is studying that issue right now. They have 

already studied one issue about whether it is more corrosive inside 

a pipeline. An expert review panel concluded that it was not. 

Mr. COHEN. So you don’t agree with the opinion that tar sands, 

environmentally, are more likely to affect the environment if there 

is a spill. 

Mr. BLACK. Behaves like any other heavy crude oil. 

Mr. COHEN. Do you believe tar sands—right now they have an 

exemption from contributing to the fund that we have on—Oil Spill 

Liability Trust Fund. Do you think that liability is appropriate? 

Mr. BLACK. Well, I want to reassure you that any pipeline operator is responsible for any release, and the Oil Spill Liability Trust 

Fund will apply in any release. 

Now, the IRS, the ruling that Mr. DeFazio mentioned, has apparently given a private ruling that some importers of crude oil don’t 

pay into the Oil Spill Liability Trust Fund. But, regardless of what 

is carried, if there is a release from a pipeline, the pipeline operator is financially responsible, and the Oil Spill Liability Trust 

Fund is there, as a backup, for that on-scene Federal coordinator, 

or for any claims. There is no exemption of that. It is just a question of what importers pay the per-barrel excise tax into the fund. 

I don’t have a position on that. 

Mr. COHEN. Mr. Hamberger, there are several cities in this country that are significant railroad centers. Which one is the best city 

for railroads? 

[Laughter.] 

Mr. HAMBERGER. I feel confident in saying that Memphis ranks 

right up there, sir. 

Mr. COHEN. Exactly. That is what I thought. Absolutely, positively. I yield back the balance of my time. 

Mr. DENHAM. Thank you, Mr. Cohen. 

Mr. Hardy, you are recognized for 5 minutes. 

Mr. HARDY. Thank you, Mr. Chair. 

Mr. Thomas, thank you for supplying your expert analysis on the 

energy markets. In your testimony you stated that there are roughly five reasons for the drop in oil prices. You state that the current 

spot price is roughly about $45. I was wondering if you could expand on your analysis of and discuss how the decrease in prices 

might be affecting natural gas. 

22 

Mr. THOMAS. Yes. Well, let me—first, I think that the—there is 

lots of moving parts. And that is why I think it is so difficult to 

make a judgment as to where the price is ultimately going to end 

up, or how quickly it is going to get there. 

One of the issues with respect to natural gas is that, very often, 

in wet plays you have economies of scope, so that the price of natural gas, the—is less—it has less of an impact on your interest in 

continuing the development, because you are also getting liquids 

associated with that. And then the liquids can be sent to different 

end markets. There is also associated gas that you can get with oil 

production, so that there is, again, economies of scopes that you 

are—you are getting more than a single product. The total revenue 

you are getting out of the resource development is greater than any 

one product. 

Right now, I think that the increase in the foreign exchange 

value of the U.S. dollar, which has increased by about 12 percent 

over the last year, is playing a big role, and perhaps a role that 

is less appreciated by market participants. And if you look at the 

price of iron ore, copper, natural gas, other commodities, you see 

a decline. The price of diamonds is another example, which has declined by 9 or 10 percent, again, roughly in line with the decline 

with the increase in the foreign exchange value of the dollar. 

So, I would say that that seems to be playing a role, as well. And 

then, again, just to the extent that the decline in some of the natural gas liquids, you see about a 60 percent decline in some of the 

spot prices with natural gas liquids that has come down with the 

price of oil, as well. So these markets are very closely related. 

Mr. HARDY. Thank you. Followup on that question, you state in 

your testimony that credit spreads on energy-related high-yield 

bonds have doubled over the past year, and that there is a potential for a significant default risk. A 5-percent reduction in the GDP 

is not a small number. 

Mr. THOMAS. No, 50 basis points, excuse me. Five-tenths of a 

percent. 

Mr. HARDY. Five-tenths of a percent? 

Mr. THOMAS. Yes. No, I think that it is a real risk. If you look at—there was about $30 billion of annual high-yield bond issuance 

to support energy development. So E&P companies have now about 

$205 billion high-yield bonds outstanding. The total market for 

E&P-linked credit is about $730 billion. This credit was underwritten at prices that are obviously very different than those today. 

I think, in most cases, probably expectations for a barrel of oil of 

$80. 

So, you know, if you think about a 70 loan-to-value ratio, that 

there is a lot of acreage that is potentially under water, where the 

decline in the value of oil has—means that the underlying collateral is worth less than the face value of the outstanding loan. And 

if prices continue to be $50 per barrel for the next 2 years or so, 

I think the potential for defaults is very, very high. 

Mr. HARDY. Thank you. I want to change direction just a little 

bit, and discuss the regulatory process. You mentioned that in the 

GAO report, the case that the interstate natural gas pipelines averages about 558 days between pre-filing certification. This seems 

burdensome and unruly, I guess. Is there anything that we can do 

23 

in this process to help speed that up? And I don’t know whether 

you would like to answer that, or Mr.—thank you. 

Mr. THOMAS. I would defer to other panelists. I would just say 

that, you know, to the extent that you can eliminate sequential reviews and have them concurrent would, to me—just to make sure 

that you have the same degree of supervision and the same degree 

of oversight, but that it doesn’t occur sequentially to delay the ultimate approval or denial. 

Mr. BLACK. That legislation applies to natural gas liquids, not 

the liquids pipelines that I represent. But the spirit is the same. 

We need decisionmaking, whether it is Federal or State, to be more 

timely, so that pipeline operators can respond, and not have these 

unnecessary delays. 

Mr. HARDY. Thank you, Mr. Chairman. 

Mr. DENHAM. Thank you, Mr. Hardy. 

Mrs. Napolitano? 

Mrs. NAPOLITANO. Thank you, Mr. Chairman. And I have multiple questions, so I will try to be fast as I can. 

One of the things that I have encountered in my area, with the 

Alameda Corridor, of course, is the grade separations. How much 

do you invest in grade separations? 

Mr. HAMBERGER. I don’t have an overall number for that. Under 

the highway and DOT regulations, we are required to pay up to 10 

percent. 

Mrs. NAPOLITANO. Up to 10 percent. 

Mr. HAMBERGER. Yes. 

Mrs. NAPOLITANO. Currently, how much of that percentage is the 

norm? 

Mr. HAMBERGER. I don’t have an answer for that. 

Mrs. NAPOLITANO. I can give you one. Three percent. And that 

is because the Alameda Corridor, which has 24 grade separations, 

have been working on them for a couple of decades. 

And one of the things that has come up here is the—Mr. Saxton, 

you talked about the 3,500 cars that are being ordered. Are those 

1232s? 

Mr. SAXTON. They are—actually, but I would call them Super 

1232s. They include additional features that would be required 

under option number two. 

Mrs. NAPOLITANO. OK. So they are better than—— 

Mr. SAXTON. Yes, they are PHMSA’s option number two. 

Mrs. NAPOLITANO. OK. And, Mr. Hamberger and Mr. Saxton, on 

page 13 you indicated there were 60,000 new—the 1232s. Yet I understand there are 228,000 DOT–111s. Is that correct, roughly? I 

am looking at page 13 of Mr. Hamberger’s statement. 

Mr. HAMBERGER. I am sure it is correct, Mrs. Napolitano, yes. 

But not all of those are in crude service. The DOT–111 is the workhorse of the fleet, and carries all sorts of commodities. 

Mrs. NAPOLITANO. Mr. Saxton? 

Mr. SAXTON. That sounds about right, according to my numbers, 

too, yes. 

Mr. HAMBERGER. What I have is that there are 19,680 nonjacketed DOT–111s currently in crude oil, and 3,337 jacketed DOT– 

111s, for a total of 23,000 moving crude right now. 

24 

Mrs. NAPOLITANO. Is there a way to prioritize these when you 

are moving some of the more flammable, or the more—— 

Mr. HAMBERGER. We, unfortunately, pull what the customers 

present to us. 

Mrs. NAPOLITANO. Who owns the cars? 

Mr. HAMBERGER. The cars are owned either by a leasing company, or by the individual shippers. 

Mrs. NAPOLITANO. Not by the railroad? 

Mr. HAMBERGER. Not by the railroads. 

Mr. SAXTON. But there is a way to prioritize this, certainly. 

These—we are talking Class III flammables, and there are three 

packing groups. And Packing Group I is the most flammable, Packing Group II, Packing Group III—— 

Mrs. NAPOLITANO. Are the Class I railroads the only ones that 

carry it, or Class II and III also carry? 

Mr. HAMBERGER. Class II and III also carry, yes. 

Mrs. NAPOLITANO. OK. The human error is the leading cause of 

most of train accidents, 38 percent, anyway. Have you done a 

breakdown of what some of those human errors entail? And what 

are you doing to train your staff, your operators, your people, to 

maybe reduce the amount? 

Mr. HAMBERGER. Well, you put your finger on it. It is a matter 

of training. It is a matter of focus. It is a matter of having daily 

safety briefings. Each railroad is working on fatigue management 

systems. Clearly, fatigue is a part of human error. And then, of 

course, we also are installing Positive Train Control, which is there 

to—— 

Mrs. NAPOLITANO. Which is one of my subjects. You mentioned 

in—that the Security and Emergency Response Training Center in 

Pueblo, you are training firefighters. What are you doing to train 

firefighters, or give the information to the handling of railroad 

emergency contact phone numbers to the fire department, to the 

911s in the areas where you operate heavier transportation of 

these oil—crude oil, et cetera, especially coming from the ports and 

other areas that have a high volume of these liquids? 

Mr. HAMBERGER. We have been moving hazardous material for 

quite some time. This is not new, just because of the crude oil development. And so, we have working relationships with the communities in which we operate. They have the numbers—— 

Mrs. NAPOLITANO. Real time. Real time. Real time. Because 

you—according to this, you let the locals know, but not in real 

time. It is upon request, a general list of the hazards transported 

through the communities, but the information is not in real time. 

Mr. HAMBERGER. The information is not in real time. We have 

just rolled out an AskRail app, where an emergency responder can 

type in the number of the tank of the car, find out what is in it, 

what is the contact, what is the recommended practice—— 

Mrs. NAPOLITANO. Has that been available—I am sorry, my time 

is short—has that been made available to all those that not only 

train—— 

Mr. HAMBERGER. Yes, it is being made available to the emergency responders in the communities in which we operate. By April 

1st we will have an ability, if you put in one carload, one car numVerDate Aug 31 2005 14:26 Jun 11, 2015 Jkt 000000 PO 00000 Frm 00038 Fmt 6633 Sfmt 6633 P:\HEARINGS\114\RR\2-3-15~1\93069.TXT JEAN
25 

ber, you will know what the entire—contents of the entire 

train—— 

Mrs. NAPOLITANO. I would love to have that information, sir. 

Mr. HAMBERGER. Yes, ma’am. 

Mrs. NAPOLITANO. Because we have heavy use of that. We had 

a derailment, a hairline rail fracture, in my area years ago. Has 

that been improved? Have you gotten technology that is going to 

help you determine if there is a chance for derailment because of 

a hairline fracture on the rail? 

Mr. HAMBERGER. It is something—we are continuing to try to develop new technologies. We have been working with Mr. Gerard 

and his members who have similar issues of—steel cracking in the 

North Sea, for example, taking a look at what kinds of technologies 

are there. More inspections, more railcar inspections—— 

Mrs. NAPOLITANO. Could this be shared with this committee? 

Mr. HAMBERGER. Of course. 

Mrs. NAPOLITANO. And thank you, Mr. Chair. 

Mr. DENHAM. Thank you, Mrs. Napolitano. 

Mr. Katko? 

But, real quickly, Mr. Hamberger, can you just clarify? There is 

125,000 tank cars out there in the fleet. You used a 23,000 number. 

What is that number you—— 

Mr. HAMBERGER. Let me submit for the record, but what I have 

is that there are a total number of DOT–111s of 228,000. But those 

in crude oil is 19,680, and for nonjacketed DOT–111s, jacketed 

DOT–3337. These are cars making at least one loaded shipment in 

2013 through the second quarter of 2014. 

Mr. DENHAM. Thank you. 

Mr. Katko? 

Mr. KATKO. Thank you very much. Mr. Saxton, the CPC–1232 

standard which you are advocating for, is that considered by you 

to be the state of the art for the industry? 

Mr. SAXTON. No, sir. We are definitely advocating for the option 

number two car, which PHMSA has proposed. And it is a step up 

from the CPC–1232. 

Mr. KATKO. OK. What, in your mind, would be considered probably the state of the art for rail transport of crude oil? 

Mr. SAXTON. Well, we definitely want option number two. That 

is the best car that we think is available. We do not believe the 

CPC–1232 car is what we want to go with in the future. It is better 

than the plain DOT–111 car, but we need to step our game up. 

Mr. KATKO. OK. And I have heard a lot of discussion between 

yourself and Mr. Hamberger about the rail industry themselves 

taking it upon themselves to do these improvements. And you have 

done that, is that correct? 

Mr. SAXTON. Yes, sir. 

Mr. KATKO. Mr. Hamberger? 

Mr. HAMBERGER. And, to be fair, we have done it in conjunction 

with our customers, including API. 

Mr. KATKO. Correct. And I believe you said you spent about $28 

billion in the last couple years in security improvements. Correct? 

Mr. HAMBERGER. Not security, just—— 

Mr. KATKO. Safety. 

26 

Mr. HAMBERGER. Well, in maintenance and capital expenditures, 

which has a direct correlation. 

And, to answer Mr. Larsen’s question, I do have in my testimony 

that since 2004 we have increased spending by 40 percent, and our 

accident rate has gone down by 40 percent. 

Mr. KATKO. Right. 

Mr. HAMBERGER. So it is a direct correlation. 

Mr. KATKO. And that is a good thing, because nobody wants liability, correct? 

Mr. HAMBERGER. We want safety, sir. 

Mr. KATKO. That is right. That is right. So I guess that is my 

question. We have a vehicle out there that is available that is 

seven times safer. And I think you said it was 81-percent reduction 

in chances of spillage. So why do you need the Government to tell 

you to do that? It sounds like you are doing it yourselves, right? 

Mr. HAMBERGER. The problem is that the Government—this is a 

voluntary standard. The Government can override that. And if they 

have a rulemaking in which they are considering doing something 

different, if you are buying a tank car to the voluntary standard, 

you are concerned that your investment may be—your investment 

timeline may be cut short if the Government declares that that car 

is no longer—— 

Mr. KATKO. I understand that. They can move the goal post, in 

effect, correct? 

Mr. HAMBERGER. And so, what we need is for them to establish 

that goal post, so that the tank car owners can know what they are 

expected to buy. 

Mr. KATKO. OK. But perhaps just my background as a former litigator for 20 years or 25 years, but isn’t there an incentive, anyway, regardless of what the Government does, if you have a vehicle 

that is seven times safer, to get that on the tracks as soon as possible, regardless of what the Government tells you to do? 

Mr. HAMBERGER. Exactly why we have been doing it since 2011 

on a voluntary basis. Yes, sir. 

Mr. KATKO. OK. I yield back my time. Thank you. 

Mr. DENHAM. Thank you, Mr. Katko. 

Mr. Maloney? You are recognized for 5 minutes. 

Mr. MALONEY. Thank you, Mr. Chairman. I want to thank the 

chair and ranking member for allowing me to participate in today’s 

hearing. 

I don’t sit on this subcommittee; I sit, of course, on the full committee. But I do represent an area of New York, in the Hudson Valley, which sees an enormous volume of oil being moved, both by 

rail and by barge, down the Hudson River. I want to thank Mr. 

Hamberger for working with my staff. 

In the past you have been so responsive and helpful to us. I appreciate that very much. I also appreciate your comments on the 

emphasis you place on safety, and the statistics are obviously impressive. Of course, you know, to those of us who are concerned 

about safety, the issue is not the number of times it moves safely. 

The issue is the possibility that one train won’t. And, in that case, 

the overwhelming statistics don’t mean much if it happens in the 

wrong place and the wrong way. And I know you appreciate this 

very much. 

27 

I just want to direct your attention to the issue not of accidents 

for a moment, but to terrorism. And, of course, before 9/11 it had 

never happened, as far as I know, that terrorists had taken control 

of an aircraft and used it as a directed weapon to inflict mass casualties. What concerns me very much is the possibility that an oil 

train could be similarly taken and directed and used as a weapon 

of mass destruction. 

These trains move, as you know, through highly populated areas. 

They move through sensitive military assets. I represent the U.S. 

Military Academy at West Point. The train goes right under the 

main building. Can you comment for a minute, please, on the steps 

you are taking to guard against an intentional act with respect to 

one of these trains? 

In particular, what concerns me very much, just the extraordinary amount of unguarded track where a shaped charge, an IED, 

could be placed and remotely detonated. And, if that were done in 

the right place at the right time, the results could be catastrophic, 

through no fault of the operator. Not through human error, not 

through an accident. And I am interested in the degree to which 

the upgrades in the cars could mitigate that. 

But could you comment for a minute on this issue? 

Mr. HAMBERGER. Yes, sir. In 2001 we put together a security 

plan for the freight railroads. We have four levels of alert. We 

weren’t very creative. We called them alert levels one, two, three, 

and four, instead of a color code. But each level of alert is based 

on information received from the Government. 

We have, and have had since 2002, a full-time railroad employee 

sitting over at the National Joint Terrorism Task Force desk, helping analyze data that comes in. We are connected, we have an operations center at the AAR here in Washington, connected through 

secure phones to all of the dispatch centers of the Class I’s. And, 

of course, the only way to—not the only way, but the best way to 

prevent that is by having information and intelligence. Is there a 

threat? Is there a risk? And so that is why we take that very seriously, to stay in touch with the agencies. 

The issue of hijacking a train, given the control from the dispatch centers, you know, it could happen, but we think that we 

would be able to disable that train before, you know, it was—— 

Mr. MALONEY. Let me just pick up on that point. I mean—and 

just—and I appreciate your answer, I really do. But if, while we 

are speaking, somebody in a small boat travels alongside the side 

of the Hudson River and hikes up a short distance onto the rail 

embankment and digs a trench and puts a shaped charge in it and 

slides back off into the river and detonates by cell phone, is there 

anything to prevent that right now at any point along the Hudson 

River? How would anyone know in time? How would anyone prevent it—— 

Mr. HAMBERGER. I cannot speak—— 

Mr. MALONEY [continuing]. Where and when they wanted. Isn’t 

that true? 

Mr. HAMBERGER. I cannot speak to the specifics of the Hudson 

River bridges. I do know, when we went into Iraq and Afghanistan, 

that we had a very specific plan with the Department of Homeland 

28 

Security to guard certain bridges, rail bridges around the country. 

I don’t know whether—— 

Mr. MALONEY. I am not even speaking about a bridge, but just, 

really, anywhere along the track. 

But just on your last point—and, Mr. Chairman, my—here it is. 

I didn’t realize—I don’t have the time in front of me, so I am sure 

I will be gaveled down if I exceed it, and deserve to be, but the 

question I have is, with respect to the implementation of Positive 

Train Control, it is an issue I am very interested in, following the 

crash which occurred near my district, and it took the life of someone from my home town of Cold Spring. 

The fact of the matter is that PTC implementation, which we are 

trying to enhance through measures like opening up Railroad Rehabilitation and Improvement Financing, you know, the RRIF 

funds. 

Mr. HAMBERGER. Yes, sir. 

Mr. MALONEY. Isn’t it the case that that would be very helpful 

in the situation where we are discussing, where you had an instant 

where a train was being hijacked, or being taken control of by a 

terrorist? Wouldn’t we be able to stop that train remotely? 

Mr. HAMBERGER. That would provide another level, another layer 

of control at the dispatch center. 

We are—again, I am sure we will have a hearing on this before too long—we have spent over $5 billion trying to implement Positive Train Control. We are not dragging our feet in any way. We 

are not going to make the deadline of the end of this year, but we 

are committed to getting it done, and we will get it done right. 

Mr. MALONEY. I appreciate that. I see my time has expired. 

Thank you, Mr. Chairman. 

Mr. DENHAM. And thank you, Mr. Maloney. I would like to point 

out that, as he brought up the Passenger Rail Reform and Investment Act, which we are going to be seeing here shortly, we do address RRIF funding, being able to use that, and PTC-eligible. So 

any time we can shout out PRRIA, we like to do so. 

Mr. MALONEY. Well, I appreciate that, Mr. Chairman, very much. 

It is very important. Thank you. 

Mr. DENHAM. Thank you. Now recognize Mr. Webster for 5 minutes. 

Mr. WEBSTER. Thank you, Mr. Chair, for putting this on. I have 

a question of Mr. Hamberger. 

When you—in your submitted testimony there was a list of—I 

think they are sort of do’s and don’ts of how we could support rail 

investments. And one of those was public-private partnerships. 

Mr. HAMBERGER. Yes, sir. 

Mr. WEBSTER. And in there you stated that arrangements under 

this, private freight railroads and Government entities could combine resources to a project, offer mutually beneficial ways to bring 

about critical transportation problems and solve them. 

And I guess, in order to do these mutually beneficial critical 

transportation problems and solve them, there appears to be maybe 

one opportunity, and that is through Railroad Rehabilitation and 

Improvement Financing. Are you familiar with that? 

Mr. HAMBERGER. Yes, I am. 

Mr. WEBSTER. Can you tell me if it has lived up to its potential? 

29 

Mr. HAMBERGER. It has clearly not lived up to its potential, Mr. 

Webster. I must say that the Class I freight railroads do not see 

much benefit and value in the RRIF program. They have a balance 

sheet that enables them to finance investments without resorting 

to RRIF. But it is very important for the Class II and Class III railroads. 

What I am told is that the process to go through to get a loan 

approved, the default premium that you have to pay, it just makes 

it very difficult and, actually, more expensive. And so, I believe not 

very many RRIF loans have occurred in the life of the program. 

Mr. WEBSTER. How would you retool it to make it work? 

Mr. HAMBERGER. I would—if I might, sir, respond on that to the 

record, I know there are some specific thoughts, particularly that 

the American Short Line and Regional Railroad Association has developed. I don’t have those off the top of my head, but there are 

some very specific ways to improve the process and lower that risk 

premium burden. 

Mr. WEBSTER. Well, in your testimony you talked about the fact 

that the dollar amount spent by each entity, the public and private, 

would be based on the benefit that they would receive. 

Mr. HAMBERGER. Yes, sir. 

Mr. WEBSTER. Could you give me an example of benefits for 

both? I know they would not be necessarily mutual—I mean the 

same, but both would have benefits. What would they be? 

Mr. HAMBERGER. Well, in honor of Mr. Lipinski having just arrived, I will use the CREATE program in Chicago, which is one of 

our best public-private partnerships. We actually used a model out 

of UC Berkeley, I believe, which—this is about 10 years ago—went 

through and identified public and private benefits. We have put a 

couple of hundred million dollars in, the State of Illinois has. There 

has been some TIGER grant money that has gone there. And what 

that has done is one of the best projects. It has taken a passenger 

track and run it over the freight track, so that it is like a grade 

crossing separation, if you will, but for railroads. 

So that—in this particular case, there was a—up to over 100 

trains a day which had to stop, as they—sort of like a four-way 

stop sign intersection, and that has been eliminated, and that has 

helped immensely, both for passenger and for freight rail. 

Mr. WEBSTER. Do you think they would be best administered by 

a State, as opposed to the Federal Government? Maybe the Federal 

Government ponies up the money, instead of TIGER grant—— 

Mr. HAMBERGER. Yes, sir. 

Mr. WEBSTER [continuing]. Federal money. Would it be better 

that way? 

Mr. HAMBERGER. Well, in this case, that is exactly the way it is 

run. It is a partnership among the State of Illinois, the city of Chicago, and the freight railroads operating in Chicago through the 

AAR. And we have a very close working relationship, and, you 

know, ground rules laid out as to how to go forward, if we are going 

to do other projects. 

And so, it is—the Federal Government has regulatory authority, 

we have got to get approvals from EPA and Federal highways. 

And, because of the TIGER grant, we did get some Federal money. 

But they are not part of the partnership. 

30 

Mr. WEBSTER. Of all of the investment do’s that you had in here, 

what percentage do you think public-private partnership would 

play? If we just did them, OK? We just adopt all these. Which— 

what—do you have a percentage of how much—— 

Mr. HAMBERGER. Well, let me put it in this perspective. Through 

the first four years—that is to say 2009 through 2012, $600 million 

of Federal money, through the States, went into Federal rail 

projects. A lot of money, $600 million in 4 years. During that same 

4-year period, freight railroad spent $90 billion of their own 

money—$90 billion private, $600 million Federal, in the course of 

4 years. So whatever that percentage works out to be. 

Mr. WEBSTER. Thank you very much. 

Mr. HAMBERGER. Thank you. 

Mr. WEBSTER. Yield back. 

Mr. DENHAM. Thank you, Mr. Webster. 

Mr. Lipinski. And, Mr. Lipinski, before you start, I would like to 

point out that Mr. Webster did mention the RRIF process, which, 

again, in PRRIA we will be streamlining. That bill will be coming 

up here shortly. Any time we get an opportunity to talk about 

PRRIA in our bipartisan work on this committee we like to do so. 

We are looking forward to streamlining that, and forcing quicker 

decisions. Mr. Lipinski? 

Mr. LIPINSKI. Thank you, Mr. Chairman. And, yes, it is great to 

see bipartisan cooperation here. We are continuing that into this 

Congress. So hopefully we can continue that in a lot of things here, 

on this committee. 

I certainly—I will leave some time at the end for another area 

of questioning, but since we are talking about Chicago—and I know 

Mr. Hamberger wasn’t serious when he said Memphis was the best 

rail town—— 

[Laughter.] 

Mr. HAMBERGER. Let the record show. I said Memphis is right 

up there. 

Mr. LIPINSKI. So, CREATE. We have now made a tremendous 

amount of progress on CREATE. But a lot of the big projects are 

left undone. And for me, as someone who has to go home and talk 

to my constituents who are stuck at rail crossings all the time— 

and that is their biggest concern—that is a big—you know, that is 

something I hear about all the time. And we have not made great 

progress on, you know, grade separations. 

The other part of it that is a big thing that is left to do, other 

big projects, are the rail flyovers. So it is the big projects, the really 

big projects, that aren’t done yet. 

So, I just wanted to ask you, Mr. Hamberger, what your—if you 

have any particular suggestions for how we get these big projects 

done. Because everybody knows, when it comes to the big projects, 

you have got to have all that money. We got the Englewood Flyover 

project done. It was part of high-speed rail funding. I think highspeed rail funding is going to be—we are not going to have a whole 

lot of money there, to say the least, I believe, going into the future, 

unfortunately. 

But—so how are we going to get these big projects done, and 

what are the railroads willing to do, you know, both for the flyVerDate Aug 31 2005 14:26 Jun 11, 2015 Jkt 000000 PO 00000 Frm 00044 Fmt 6633 Sfmt 6633 P:\HEARINGS\114\RR\2-3-15~1\93069.TXT JEAN
31 

overs, which are important, but also the grade separations? I want 

you—will you talk about both of those? 

Mr. HAMBERGER. I will submit for the record a letter I sent to 

the former Secretary of Transportation of the State, making a commitment to live up to our obligations on all of those grade crossings, as well as to increase the amount of money that we had committed to the 75th Street CIP. 

To me, the big question is—your question is tied up in the bigger 

question of what will be the funding for the overall surface transportation bill. We are committed to continuing to work with the 

State and with the city. 

We continue to spend our own money in Chicago, as you know, 

so—— 

Mr. LIPINSKI. But to get the big projects done, you are going to 

need big chunks of money. It is not going to—if money is just coming in formula funds from the—through the State, for example, the 

State is not going to put huge chunks of money towards these 

projects. So we are going to need big chunks of money to get these 

projects done. 

I mean do you have any recommendations for that, as we move 

forward? What can the Federal Government do? Let me ask you 

that. 

Mr. HAMBERGER. Well, as I say, to me that is tied up in what 

is the funding level of the bill going to be, whether it be a TIGER 

program, whether it be a project of national significance, like there 

was. And so that really would be dictating whether or not there 

would be big dollars available. 

Mr. LIPINSKI. Yes, and I certainly think the projects of regional 

national significance—we really need to move forward, get that into 

this next—— 

Mr. HAMBERGER. Yes, sir. 

Mr. LIPINSKI [continuing]. Next bill that we are working on. 

The other thing I want to talk about is, you know, safety questions. You know, we have the three-legged approach of prevention, 

mitigation, response for crude-by-rail safety. And with regards to 

response, as you know, I have introduced legislation in this Congress that I had put in last Congress to move us towards a modernized shipping paper system by establishing standards to help both 

users and responders. 

I appreciate the railroads have put—what you have put forth to 

develop this technology, the paperless system, electronic system. Of 

course, we still aren’t at the point where we can move away from 

physical paper, but we are making progress to ensure that first responders can access the information they need without necessarily 

having to board a locomotive there, in an emergency, which we 

know could be difficult. 

Moreover, the more we develop the technology, the greater the 

opportunity we have to deploy it for other modes. Can you tell me 

at what point you expect the railroads to have a system in place 

that will allow first responders to input the identification number 

of a car for the train? 

Mr. HAMBERGER. Yes, sir. It is an app we call AskRail. We started rolling it out, I guess, last October to communities. Currently, 

it only allows inputting the car number, and it will tell you what 

32 

is in that car, how to deal with the contents of that car, and emergency contact information. By April 1st—that is, in the next 2 

months—we hope to be able to roll out—and it is in beta testing 

now—that if you put in one car number, it will give you the entire 

consist, what is in each car, how to deal with that, from a hazardous materials response, and, again, the contact information. 

So, that would be just another level. We would still have the 

paper, of course, the telephone number, if you know it, the railroad 

to call the dispatch center. But this would then be a third way to 

get that information to the emergency responder in real time. 

Mr. LIPINSKI. Thank you. I know it is important across the country, but especially in the Chicago area, in my district. So thank 

you. 

Mr. HAMBERGER. Yes, sir. 

Mr. DENHAM. Thank you, Mr. Lipinski. 

Mr. Barletta? 

Mr. BARLETTA. Thank you, Mr. Chairman. Last winter my constituents suffered severe propane shortages and very high heating 

costs during one of our coldest winters. At the same time, in Pennsylvania we have more than 1,000 shut-in wells. These Marcellus 

shale wells are already drilled, and they are ready to be tapped. 

But they are waiting for the infrastructure to move the gas. 

Mr. Thomas, what steps does Pennsylvania, this Congress, and 

industry need to take to make sure that we can catch up on our 

infrastructure needs? 

Mr. THOMAS. Well, again, I think, just from the perspective of a 

provider of capital for prospective projects, it is to ensure that 

they—the projects can be—that the process of permitting can be 

done in an expeditious manner, so that when you are contacted 

about a potential investment opportunity, that there is some certainty about when the construction can begin, when it can be completed, and you can make judgments about the relative 

attractiveness of that investment opportunity, based on hard numbers with regard to ultimate timing. 

Mr. BARLETTA. And this question is going to go to Mr. Black and 

Mr. Gerard. In my district we have a local steel manufacturer, 

Dura-Bond. They produce pipeline. I have been to their facility, and 

I was very, very impressed by all the double and sometimes triple 

checks that are done to make sure that each segment of the pipeline is safe. 

Now, I know that the Chinese steel manufacturers are trying to 

sell their steel pipe here, in the United States, Mr. Black and Mr. 

Gerard. How are we making sure that every segment of imported 

pipe is meeting the same safety inspections and standards as 

United States manufacturers? 

Mr. BLACK. Well, the quality of the steel is very important. A lot 

of pipeline operators participate in the API monogram process that 

Mr. Gerard’s organization runs, where, globally, there are specifications on the manufacturing of that steel. I know pipeline operators 

buy a lot of American steel. I know in the Keystone XL, it is a majority of American steel. 

Mr. GERARD. I will just add to that. As Andy talked about, is we 

at the API, we were originally established as a standard-setting organization. So, clearly, the industry will look for those with our 

33 

label or monogram on them, where we actually go out and audit 

manufacturing facilities and give them our monogram, if you will, 

based on their ability to produce to the criteria or the requirements 

necessary to make sure it is good-quality steel. 

So, we do that, as an industry. And, typically, in contractual obligation amongst the various providers and all, they will make sure 

they achieve that standard. 

The other thing I would just add, Mr. Barletta, if I could, in response to what you asked Mr. Thomas, the other thing I would suggest is we—and back to my earlier opening statement—when we 

think about the energy equation in the United States today, you 

talk about your shut-in wells in Pennsylvania and elsewhere, we 

need to think more broadly now, because we need to look for the 

global markets. If we start looking at LNG exports—we need to get 

back to crude export issues—our capacity in the United States 

today is such that we really have the ability to be the dominant 

superpower. 

So, if we want domestic production job creation here at home, by 

allowing for LNG exports, permitting, and all the good things you 

are working on to date, it makes a big difference, because it translates right back to the local community, where we will produce that 

steel, we will put those people to work, and produce it for a new 

market that we haven’t been in before. 

Mr. BARLETTA. I agree with you. Pennsylvania can be a leader—— 

Mr. GERARD. Absolutely. 

Mr. BARLETTA [continuing]. With all the gas we have there. And 

in my district alone, four major pipelines are being built under the 

backyards and farms of my constituents. 

Mr. Black, what are the pipeline companies doing to ensure that 

these pipelines are safe on my constituents’ property? 

Mr. BLACK. Well, there is a comprehensive series of PHMSA construction codes that pipeline operators are expected to comply with. 

Pipelines today are using the high-quality steel, most of which, perhaps, is from your area of Pennsylvania. And they are employing 

inspectors to inspect the construction activities in pipeline. 

Pipeline operators are x-raying the welds that are done there in 

the trench at a far greater rate than is required by Government 

regulations, to make sure that these pipelines are constructed safely. We are embracing a new construction quality management system in liquids pipelines. And, before any liquids pipeline goes into 

service, it is subject to a hydrostatic pressure test, where the pipeline is pumped to a greater degree of pressure than whatever it operated at, commercially, to make sure that the manufacturing and 

construction is solid before that pipeline goes into service. 

Mr. BARLETTA. Thank you. 

Thank you, Mr. Chairman. 

Mr. DENHAM. Thank you, Mr. Barletta. 

Mr. Hamberger, $25 billion in private capital expenditures you 

have spent—your companies have spent on different types of 

projects. How many jobs has that created? What types of jobs? 

Mr. HAMBERGER. Well, last year we projected this time that we 

would hire 12,000. I believe we exceeded 15,000 direct jobs. But 

34 

each one of our jobs is responsible for about 4.5 other jobs, the Department of Commerce data show. 

And in our own industry, we are hiring across the board, whether it is—of course, about 80 percent of them are in the operations 

and maintenance and signal systems, about 20 percent would be in 

the management side of the house. All in, a railroad employee benefits and salary—$109,000. So they are very good jobs, they are secure jobs. And we have, over the years, noticed that when an employee joins the rail industry, he or she ends up making it a career, 

not just a job. 

Mr. DENHAM. Thank you, Mr. Hamberger. And PRRIA—that is 

the Passenger Rail Reform and Investment Act that we are going 

to be seeing here shortly, a great bipartisan bill that this committee has been working on for quite some time—that has a number of streamlining provisions in there. Could you explain, when 

that bill is passed, if it were implemented today, what those 

streamlining provisions would—how those would affect the dollars 

that you spend? 

Mr. HAMBERGER. Indeed. Let me commend you, as the chair of 

the subcommittee and, of course, Mr. Shuster, chair of the full committee, for your bipartisan effort to get that out of committee last 

year. Look forward to it moving again this year. 

I think it is a great step. You are directing the Secretary to take 

actions to improve the permitting process. Frankly, what Congress 

did in MAP–21 was actually take those steps. And we would urge 

you to consider that, as well. But what it does is it would say that 

each agency, with review, has to look at it simultaneously, not in 

the seriatim way, not consecutively, that there are timelines, that 

there is a lead agency, and it has paid a great return in the highway and transit side. 

My example, if you look out the window, perhaps, you will be 

able to see the Virginia Avenue Tunnel, CSX’s main line north/ 

south. It is one of two choke points left on their main line. The 

other is the Baltimore and Potomac Tunnel. And it is a 100-yearold tunnel. It is a single track, and cannot accommodate the double-stack intermodal trains that can take 300 trucks off the road 

at one time. They started the permitting process 7 years ago. Not 

one penny of Federal dollars. The reason they need an environmental impact statement or review is because they are going to 

close the ramp to 395 for a week during construction. So that is 

the Federal interest. 

Because of that, it has taken 7 years. They finally got a record 

of decision. You will be surprised. They have been sued. They are 

in court. But they did get their first permit just last week. They 

had $140 million set aside for this project. It is now $210 million. 

So that is $70 million that could have gone into other projects. 

And, of course, just the opportunity cost of not having that tunnel—and I see it, we look out on the main line every day from our 

office—you will see a train stopped until the—southbound, until 

the northbound train—and then it can go through. It is a tremendous drag on the fluidity of their network. And I think that your 

permitting reforms would have made that be in existence today, 

rather than still going through the permitting process. 

35 

Mr. DENHAM. And the PRRIA bill that is the bipartisan bill that 

will be coming before this committee here shortly, that—— 

Mr. HAMBERGER. Yes, sir. I think that would have helped immensely, sir, that bipartisan PRRIA bill. Yes. 

Mr. DENHAM. And, real quickly, Mr. Gerard and Mr. Black, the 

permitting processes can be a big burden on your members’ ability 

to deliver projects. What types of streamlining would help your industry? Mr. Gerard first. 

Mr. GERARD. Well, at the risk of stating the obvious, we have a 

similar example that Ed just referenced, called the Keystone XL 

Pipeline. 

[Laughter.] 

Mr. GERARD. I am sure nobody has heard of this before. However, we are now in our seventh year of permitting that pipeline. 

It is an $8 billion project, 42,000 jobs are dependent upon that final 

approval, and we are hopeful that eventually happens. 

So, when you come back to the broader permitting issues, let me 

suggest one other thing, Mr. Chairman. I would ask you to think 

about it, I know the jurisdiction doesn’t necessarily lie here. What 

we are seeing across the country today is there is a small group 

of individuals who are using permitting processes and infrastructure as surrogates to stop economic activity that they disagree 

with. And we see this often in the energy production arena, particularly the development of oil and natural gas, where others have 

decided, and we hear this clearly on the Keystone XL Pipeline. It 

is not really about the pipeline, it is about oil sands production 

coming out of Canada. 

And so, I would just suggest, as you think about streamlining the 

permitting process, which are critically important to all of us, that 

we recognize there are some who abuse the processes to accomplish 

other means. And so we have got to tighten up timeframes, we 

have got to bring certainty to the process, so those that are willing 

to invest the private capital Mr. Thomas talked about, holding out 

for 6, 7, 8 years, just like Ed talked about, can come to some conclusion as to a go/no-go decision in such a way that we can take 

that risk capital and put it somewhere else. 

So, we would like to work with you and work with some of your 

colleagues and other committees in the Congress. This is the big 

deal, and it directly impacts our ability in the broader role of our 

energy leadership to assert our dominance, because we have got to 

have systems in place that operate efficiently. 

Mr. DENHAM. Thank you, Mr. Gerard. 

Mr. Black? 

Mr. BLACK. You have heard us talk about this North American 

energy renaissance. As great as it is, there are workers and consumers that are not fully benefitting from it, because we haven’t 

been able to expand the pipeline infrastructure necessary. 

Border crossings, Keystone XL is the poster child for the problems we have had right now in getting timely decisions on border 

crossings. After Keystone gets its permit, it may be time to revise 

this process. The House has passed good legislation to change what 

the review is, to—just that border crossing facility. 

Second, these Federal agencies that are a part of environmental 

permits, they need to be resourced properly, and they need to get 

36 

the signals from Washington that they can approve permits where 

they are due. 

Mr. DENHAM. Thank you. And, lastly, Mr. Saxton, I just wanted 

to touch on something that I know that you have a PR staff that 

is very active in working with a lot of op-ed boards around the 

country. So, as they continue to have those discussions, I want to 

make sure they deal in some factual information: 125,000 fleet 

cars, tank cars in the fleet currently today. You have the capacity 

to build, how many, 8,000 a year? 

Mr. SAXTON. Yes, sir. We will build 8,000 this year. 

Mr. DENHAM. So, if you are building 8,000 a year, the backlog 

would be about a decade to replace the fleet? 

Mr. SAXTON. Well, we are not the only builder, sir. We are one 

of—— 

Mr. DENHAM. But you are well ahead of your competition. 

Mr. SAXTON. I like to think that, but, from a numbers standpoint, 

we—— 

Mr. DENHAM. According to your previous testimony, you are looking forward to seeing a quick 3-year implementation versus some 

of your competitors, who would like to see a 10-year implementation. That would lead me to believe that they are significantly behind. 

But let me address it from a different standpoint. Canada also— 

I have talked to my counterparts in Canada. They are looking at 

a very similar rule. Would Greenbrier be willing to take the position that an American company would sell to American companies 

first, and make sure that, as we are expanding across the United 

States, we actually have the safest tank cars? 

Mr. SAXTON. Well, you are probably talking to the wrong person 

about that, because I am chief engineer—— 

Mr. DENHAM. I am making sure that the wrong people are not 

talking to the ed boards across the country that would give a wrong 

perception of our current situation. 

I, just like many others, would like to see the administration 

move quicker. And we certainly want to work with them. But I 

want to make sure, as the administration drags their feet, or reorganizes, or does some shuffling, that there is not a misperception 

out there in the American public that our current tank cars are not 

safe; that our industry does not have a safe record; and, most importantly, that there is not a—some magic, quick, fast track to get 

all of these new tank cars online very, very quickly. So I just want 

to make sure we are all singing the same tune, that we have a very 

safe industry, and we want to work together in improving that industry. 

Mr. SAXTON. Well, sir, we do have a very safe industry. What I 

do want to say is that the dates in the PHMSA proposal for both 

retrofit and new cars, I believe, are doable. And I don’t think we 

will have to do just Canada and the United States. I think that 

would be a nightmare. I think we can make those goals happen in 

both countries. 

Mr. DENHAM. I would like to see the numbers to back that up, 

so that we can make sure that, as we both go out and talk to ed 

boards, that we are making sure that they are hearing the correct 

information. 

37 

We are short on time on finishing this hearing. I will allow very 

quick last lightning round. Mr. Maloney, if you have got a couple 

of things that you would like to add or get answered—— 

Mr. MALONEY. Appreciate that, Mr. Chairman, and appreciate 

the comments about the bipartisan PRRIA legislation that many of 

us are interested in moving through this committee. 

Won’t keep you long, gentlemen. I am interested in the displacement of oil shipments from pipelines to rail, because of delays in 

permitting or other factors. In the Hudson Valley of New York we 

have seen a massive increase in the amount moving by barge and 

by rail. Is it fair to say that that is—and each of you could answer, 

if you choose, or any of you—is it fair to say that that is because 

of an inadequate supply of pipelines to move that same crude? 

Mr. HAMBERGER. I can’t speak to the pipeline on capacity on the 

Hudson Valley, but I assume that it is—I don’t know if it is displaced from current pipeline capacity, but I believe what it is doing 

is replacing what would—used to serve those refineries by maritime. And so it is domestic energy coming through by rail, because 

the rail capacity is there, and we were able to adjust and adapt to 

it to move it quickly. But I don’t know what the—— 

Mr. BLACK. I mean, generally, my understanding is many of 

those refineries were getting Atlantic Basin crude, rather than 

crude from the mid-continent. Railroads have first mover advantage in moving new supplies of crude oil to an area. 

So, what you have seen in these early stages is railroads moving 

Bakken crude over to that area. Operators, as they make long-term 

agreements with their customers, may expand pipeline capacity 

and compete with those railroads for the business. 

Mr. MALONEY. And so, it is fair to say that the volume being 

moved by rail is related to the volume being moved by pipelines, 

and could either increase or decrease, relative to how much we invest in those pipelines in the future. 

Mr. BLACK. Yes. 

Mr. MALONEY. Isn’t that a point you just made? 

Mr. BLACK. Yes. 

Mr. MALONEY. Mr. Saxton, real quickly, is there an additional 

benefit in the case of the option two cars, in the event of an intentional disrailment, or a derailment, or in terms of an explosive 

charge that is set off? I mean it really would make an impact, not 

just in accidents, but in decreasing the damage caused by an intentional terrorist act against one of these trains, wouldn’t it? 

Mr. SAXTON. Well, yes, there is. And the benefit, quite frankly, 

is it utilizes thicker steel. It is that simple. You have got more between you and the commodity. 

Mr. MALONEY. It is also really not quite that simple. The, I believe, major safety and security step up is the requirement for a 1⁄8- 

inch jacket and thermal protection, combined with the high-capacity pressure-relief valve. What has made these accidents—and if 

there was a security attack—so severe is that one car breaches, it 

catches on fire, it heats up the next car, it explodes, and so on. 

And what this new car is designed to do is, as it heats, the oil 

turns into a vapor, it will be spouted through the high-capacity 

pressure-relief valve, the thermal protection will keep it from heating too quickly, so that there won’t be another thermal tear, as 

38 

they call it. It won’t explode, so that the only product that will spill 

is that that occurs in the first incident, the first rupture. And that 

then limits the severity. And, to me, that then limits the effect, 

whether it is an accident or a security breach. 

I will yield back. 

Mr. DENHAM. Thank you, Mr. Maloney. 

Mr. Webster? 

Mr. WEBSTER. Thank you, Mr. Chairman. I just had a followup 

with Mr. Hamberger. You had talked about a number, $90 billion, versus $600 million. 

I think that was what it was. 

Mr. HAMBERGER. Yes, sir. 

Mr. WEBSTER. My question is, if we were to increase that, or 

make it a little more balanced, the amount of investment, is there 

a number of return on investment of the money that is put up, 

versus what the economic benefit is? 

Mr. HAMBERGER. Each railroad, of course, has its own hurdle 

rate as to what they want to get in return for their investment. We 

are an incredibly asset-heavy industry, and so we have got about 

$2.40 of assets out there for every dollar of revenue. But that is— 

again, each company, as it takes a look at its CAPEX plan and its 

maintenance plan, has its own return on investment rate. I don’t 

know what it is. 

Mr. WEBSTER. OK. Thank you very much. 

Mr. DENHAM. Thank you, Mr. Webster. 

Ms. Brown? 

Ms. BROWN. Thank you. And thank you, Mr. Chairman. Just one 

quick question. 

First of all, Mr. Hamberger, how are you? 

Mr. HAMBERGER. I am—— 

Ms. BROWN. And secondly—— 

Mr. HAMBERGER [continuing]. Glad to see you here. 

Ms. BROWN [continuing]. Can you give us—first of all, let me just 

say that I am committed that the Department come up with the 

final rule as soon as possible. And I know that we will work together to make sure that happens. 

And can you give us a brief update on the status of Positive 

Train Control? 

Mr. HAMBERGER. Yes, I can. Thank you, Congresswoman. We— 

I will submit for the record the exact numbers. But we have exceeded $5 billion in money spent trying to implement that. We are 

about—between a third and halfway done in actually installing on 

the right-of-way, installing back in the back offices and on the locomotives. 

We will not make the 2015 deadline and, as you are well aware, 

one of the unforeseen hurdles that we had there was the Federal 

Communications Commission. We had about a 15-month period 

where we could not actually install antennas. And then, to their 

credit, they now have a process in place. But it is—takes about 50, 

60 days to get an antenna permitted. 

And so, if you count all of that, it is about a 2-year delay right 

there. And so, we would be looking to this committee to change the 

statutory deadline before the end of the year by 5 years. And that 

would allow time to complete the installation, but, just as imporVerDate Aug 31 2005 14:26 Jun 11, 2015 Jkt 000000 PO 00000 Frm 00052 Fmt 6633 Sfmt 6633 P:\HEARINGS\114\RR\2-3-15~1\93069.TXT JEAN
39 

tantly, allow time for the continued testing, particularly in places 

like Chicago—and I will say Memphis—where a number of railroads are operating: short lines, passenger, Amtrak, commuter rail, 

Class I’s. They all have to be able to talk to each other, as they 

move from one track to another with run-through power. You have 

to make sure it works right. If it doesn’t work right, it can have 

a safety—negative safety impact, as well as, of course, a negative 

impact on the operation of the network. 

Ms. BROWN. Thank you. I yield back my time. 

Mr. DENHAM. Thank you, Ms. Brown. I would like to thank each 

of our panelists today for their testimony. Your comments have 

been very helpful. 

If there are no further questions, I would ask unanimous consent 

that the record of today’s hearing remain open until such time as 

our witnesses have provided answers to any questions that may be 

submitted to them in writing, and unanimous consent that the 

record remain open for 15 days for any additional comments and 

information submitted by Members or witnesses to be included in 

the record of today’s hearing. 

[No response.] 

Mr. DENHAM. We will have a number of questions that we would 

like answers to, as well as the ones that were asked today, and we 

will, as a committee, be reaching out to each of you before we have 

our safety hearing. We will have a number of questions that we 

would like answered prior to that hearing, as well. 

Without objection, so ordered. Again, I would like to thank our 

witnesses again for their testimony. If no other Members have anything to add, the subcommittee stands adjourned. 

[Whereupon, at 12:04 p.m., the subcommittee was adjourned.] 

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Æ 


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