[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
PERSPECTIVES FROM USERS OF THE NATION'S FREIGHT SYSTEM
=======================================================================
(113-36)
HEARING
BEFORE THE
PANEL ON
21st-CENTURY FREIGHT TRANSPORTATION
OF THE
COMMITTEE ON
TRANSPORTATION AND INFRASTRUCTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
OCTOBER 1, 2013
__________
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COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
BILL SHUSTER, Pennsylvania, Chairman
DON YOUNG, Alaska NICK J. RAHALL, II, West Virginia
THOMAS E. PETRI, Wisconsin PETER A. DeFAZIO, Oregon
HOWARD COBLE, North Carolina ELEANOR HOLMES NORTON, District of
JOHN J. DUNCAN, Jr., Tennessee, Columbia
Vice Chair JERROLD NADLER, New York
JOHN L. MICA, Florida CORRINE BROWN, Florida
FRANK A. LoBIONDO, New Jersey EDDIE BERNICE JOHNSON, Texas
GARY G. MILLER, California ELIJAH E. CUMMINGS, Maryland
SAM GRAVES, Missouri RICK LARSEN, Washington
SHELLEY MOORE CAPITO, West Virginia MICHAEL E. CAPUANO, Massachusetts
CANDICE S. MILLER, Michigan TIMOTHY H. BISHOP, New York
DUNCAN HUNTER, California MICHAEL H. MICHAUD, Maine
ERIC A. ``RICK'' CRAWFORD, Arkansas GRACE F. NAPOLITANO, California
LOU BARLETTA, Pennsylvania DANIEL LIPINSKI, Illinois
BLAKE FARENTHOLD, Texas TIMOTHY J. WALZ, Minnesota
LARRY BUCSHON, Indiana STEVE COHEN, Tennessee
BOB GIBBS, Ohio ALBIO SIRES, New Jersey
PATRICK MEEHAN, Pennsylvania DONNA F. EDWARDS, Maryland
RICHARD L. HANNA, New York JOHN GARAMENDI, California
DANIEL WEBSTER, Florida ANDRE CARSON, Indiana
STEVE SOUTHERLAND, II, Florida JANICE HAHN, California
JEFF DENHAM, California RICHARD M. NOLAN, Minnesota
REID J. RIBBLE, Wisconsin ANN KIRKPATRICK, Arizona
THOMAS MASSIE, Kentucky DINA TITUS, Nevada
STEVE DAINES, Montana SEAN PATRICK MALONEY, New York
TOM RICE, South Carolina ELIZABETH H. ESTY, Connecticut
MARKWAYNE MULLIN, Oklahoma LOIS FRANKEL, Florida
ROGER WILLIAMS, Texas CHERI BUSTOS, Illinois
TREY RADEL, Florida
MARK MEADOWS, North Carolina
SCOTT PERRY, Pennsylvania
RODNEY DAVIS, Illinois
MARK SANFORD, South Carolina
------ 7
Panel on 21st-Century Freight Transportation
JOHN J. DUNCAN, Jr., Tennessee, Chairman
GARY G. MILLER, California JERROLD NADLER, New York
ERIC A. ``RICK'' CRAWFORD, Arkansas CORRINE BROWN, Florida
RICHARD L. HANNA, New York DANIEL LIPINSKI, Illinois
DANIEL WEBSTER, Florida ALBIO SIRES, New Jersey
MARKWAYNE MULLIN, Oklahoma JANICE HAHN, California
CONTENTS
Page
Summary of Subject Matter........................................ iv
TESTIMONY
Tom Kadien, Senior Vice President, Consumer Packaging, IP Asia
and IP India, International Paper.............................. 4
F. Edmond Johnston, III, Transportation Policy Leader, DuPont.... 4
Rob Roberson, Materials and Logistics Manager, Nucor Steel
Berkeley--a Division of Nucor Corporation...................... 4
Bill J. Reed, Vice President, Public Affairs, Riceland Foods,
Inc............................................................ 4
PREPARED STATEMENTS SUBMITTED BY WITNESSES
Tom Kadien....................................................... 39
F. Edmond Johnston, III.......................................... 44
Rob Roberson..................................................... 51
Bill J. Reed..................................................... 55
SUBMISSIONS FOR THE RECORD
Bill J. Reed, Vice President, Public Affairs, Riceland Foods,
Inc.:
Slide component to prepared statement........10, 12, 14, 16, 18, 20
Response to infrastructure funding and bridge maintenance
questions from Hon. Corrine Brown, a Representative in
Congress from the State of Florida......................... 29
Tom Kadien, Senior Vice President, Consumer Packaging, IP Asia
and IP India, International Paper, response to request from
Hon. John J. Duncan, Jr., a Representative in Congress from the
State of Tennessee, for specific suggestions to modernize and
increase the competitiveness of the U.S. freight network....... 36
ADDITION TO THE RECORD
Edward R. Hamberger, President and CEO, Association of American
Railroads, written statement, including prepared statement from
the June 26, 2013, hearing of the Panel on 21st-Century Freight
Transportation................................................. 60
[GRAPHIC] [TIFF OMITTED] T5056.001
[GRAPHIC] [TIFF OMITTED] T5056.002
[GRAPHIC] [TIFF OMITTED] T5056.003
PERSPECTIVES FROM USERS OF THE NATION'S FREIGHT SYSTEM
----------
TUESDAY, OCTOBER 1, 2013
House of Representatives,
Panel on 21st-Century Freight Transportation,
Committee on Transportation and Infrastructure,
Washington, DC.
The panel met, pursuant to call, at 2:02 p.m., in Room
2167, Rayburn House Office Building, Hon. John J. Duncan, Jr.
(Chairman of the panel) presiding.
Mr. Duncan. We will go ahead and call this meeting to order
here. And I apologize for the delay, but as everyone can
understand, everybody's schedule has been changed. And on the
Republican side, we are having a conference at this time that
Mr. Hanna and I have been a part of. But we won't have as many
Members, I don't believe, as we usually do at these hearings,
but we are certainly honored to have our distinguished panel
here. And I want to welcome everyone to this hearing before the
Panel on 21st-Century Freight Transportation of the Committee
on Transportation and Infrastructure.
This special panel was created at the request of Chairman
Shuster and Ranking Member Rahall of the full committee to
examine the current state of freight transportation in the
United States and how improving freight transportation can
strengthen the U.S. economy. As everyone knows, we have a lot
of competition from around the world that many years ago we
didn't have. And we have always got to be looking at ways to do
more and do it better and more efficiently, if we are going to
remain globally competitive as all of us want.
The purpose of this panel, of course, is to modernize the
freight network and, as I said, make the U.S. more competitive.
We have been working hard toward this goal, and we plan to
issue our report to the full committee by the end of this
month.
The purpose of today's hearing is to hear from those who
are actually producing and growing the goods that are shipped
on the Nation's freight transportation system. The
manufacturing and agriculture industries represent almost one-
fifth of the Nation's annual gross domestic product. Both of
these industries rely on a highly functioning, efficient, and
safe freight transportation network. For manufacturing and
agriculture businesses to be successful and remain competitive
with international competitors, we must maintain and improve
our infrastructure to keep pace with growth in these very
important sectors.
I am glad that we have this opportunity to discuss the
specific freight transportation needs of these two parts of our
economy. We have an excellent panel of witnesses before us
today. I am confident that they will be able to help us
understand the unique freight transportation challenges facing
urban areas and how those issues impact the rest of the Nation.
We have Tom Kadien, who is the senior vice president for
consumer packaging at International Paper; Eddie Johnston, who
is the sustainability manager at DuPont; Rob Roberson, who is
materials and logistics manager at Nucor Steel Berkeley; and
Bill Reed, vice president of public affairs for Riceland Foods.
Four very important companies. I thank the witnesses for being
here, and I look forward to your testimony.
I now recognize Ranking Member Nadler for his opening
statement.
Mr. Nadler. Thank you, Mr. Chairman. And Mr. Chairman,
thank you for scheduling this hearing to hear testimony from
major manufacturing and agriculture industries that rely on the
Nation's freight transportation system to move their goods to
market. Whether transporting steel, rice, chemicals, or paper,
each of our witnesses today will testify about the importance
of a safe, efficient, and reliable freight transportation
network to their business's ability to remain competitive and
successful in the global marketplace. We will learn of the
logistics analysis that these businesses use to determine which
mode of transportation is best for their bottom line and long-
term growth.
Our witness testimony on the importance of rail to DuPont's
$500 million investment in Charleston, South Carolina, and
barge transportation to Riceland Foods at New Madrid, Missouri,
on the Mississippi River illustrate the critical role that
infrastructure plays in the growth of these businesses. These
businesses and the United States more generally continue to
reap the benefits of past infrastructure investments. However,
these industries recognize that the Nation's current failure to
invest adequately in our Nation's infrastructure is ceding our
advantage for our global competitors. A recent survey of U.S.
manufacturers found that the Nation's infrastructure is not
keeping pace.
According to this survey, 70 percent of manufacturers
believe that our infrastructure is in fair or poor shape and
needs improvement, 65 percent do not believe that our
infrastructure's position to respond to the competitive demands
of a growing economy over the next 10 to 15 years, and none of
the manufacturers surveyed believe that our freight
infrastructure is in good shape and needs no improvement. With
freight transportation measured by tonnage expected to increase
by 88 percent by 2035, it is clear that the crisis facing our
freight transportation network will worsen unless we begin to
make the necessary investments in our infrastructure to ensure
safe, efficient, and reliable transportation and to enable
these major industries to continue to compete and grow.
Finally, I hope the irony is not lost on my colleagues that
these witnesses are testifying about the importance of the
Federal Government in the middle of a Republican Government
shutdown. These witnesses discuss the importance of the Army
Corps of Engineers and the Service Transportation Board while
those agencies are now shutting down because of the Republican
leadership's insistence on stopping the Affordable Care Act at
the expense of everything else.
This committee has been one of the brightest spots in this
Congress, working together in a bipartisan manner again
including on this panel. But all of the work of this committee
will be for nothing unless these political shenanigans stop and
we get back to doing the business of the American people.
I would like to thank the witnesses for coming here today
under difficult circumstances. I look forward to your testimony
and hope that some day, perhaps hopefully soon, the Government
will not just reopen but will return to creating jobs and
investing in infrastructure upon which you and we all rely. I
thank you and yield back the balance of my time.
Mr. Duncan. Thank you very much. I understand Mr. Crawford
wants to further introduce one of our witnesses. And, Mr.
Crawford, you have the floor.
Mr. Crawford. Thank you, Mr. Chairman. It is my honor to
introduce vice president of corporate communications and public
affairs of Riceland Foods, Bill Reed. Riceland is probably the
most important farmer-owned cooperative in my district,
providing marketing services for tens of thousands of farmers
in Arkansas and throughout the rice-producing region. Bill has
a distinguished career entirely dedicated to American
agriculture. He started at Riceland more than 30 years ago, and
Riceland's success can be attributed in large part to Bill's
leadership. Riceland not only markets agricultural products all
over the country, but throughout the entire globe.
It goes without saying that freight transportation is a
critical aspect of getting agricultural products to market. And
I look forward to Bill sharing his story about the success of
Riceland and the need for improvements to freight
infrastructure so that American agriculture will continue to
lead its competitors in a global economy.
Mr. Duncan. Thank you very much.
Mr. Lipinski, you have any statement?
Mr. Lipinski. I am looking forward to hearing the testimony
of--of all our witnesses today. Again, thank the chairman and
ranking member for putting together this--this hearing. It is
certainly important to hear from those who are--who are doing
the--the shipping, about what needs to be done. We all know
it--what it really comes down to in the end is how are we going
to pay for this. We know that we certainly need the--the
investment.
So if--I know that is not specifically the topic here, but
if any of our witnesses want to address that in their opening
statements, I would certainly appreciate that because that is
what we are all here struggling with. But that is it. Thank you
and yield back.
Mr. Duncan. Thank you very much. Mr. Hanna.
All right. Ms. Hahn.
Ms. Hahn. Thank you. Thank you, Mr. Chairman. Looking
forward to the testimony of our witnesses. Thanks for being
here.
You would think with this Government shutdown we might shut
down this air conditioning a little bit.
Mr. Duncan. Thank you.
Mr. Webster.
Mr. Webster. Thank you, Mr. Chairman. Just glad you are
having this hearing and look forward to hearing what everyone
has to say. Have questions later.
Mr. Duncan. Thank you, Mr. Mullin.
Mr. Mullin. Thank you. And thank you, panel, for being
here. Unfortunately, you are here at a, I would think a pretty
historical time. But we do have something important facing us,
and that is our infrastructure needs. We all know to keep this
country moving forward, of course, it takes Government to put--
you know, move forward, but at the same time it is our
infrastructure. And I think it is a great opportunity that we
have to get true opinions, bipartisan approach that we are
going to move the ball forward. I think T&I has shown that they
are willing to do that. And Chairman Duncan has done a
wonderful job putting this panel together. So, as I would say,
let's roll and let's get this thing moving forward.
Mr. Duncan. Thank you very much.
Previously, in my opening statement, introduced the very
distinguished panel that we have, and so we will start with our
first witness, Mr. Tom Kadien of International Paper.
Mr. Kadien.
TESTIMONY OF TOM KADIEN, SENIOR VICE PRESIDENT, CONSUMER
PACKAGING, IP ASIA AND IP INDIA, INTERNATIONAL PAPER; F. EDMOND
JOHNSTON, III, TRANSPORTATION POLICY LEADER, DUPONT; ROB
ROBERSON, MATERIALS AND LOGISTICS MANAGER, NUCOR STEEL
BERKELEY--A DIVISION OF NUCOR CORPORATION; AND BILL J. REED,
VICE PRESIDENT, PUBLIC AFFAIRS, RICELAND FOODS, INC.
Mr. Kadien. Thank you, Chairman Duncan and all the other
committee members. I am Tom Kadien.
Mr. Duncan. Get a little closer to the mic.
Mr. Kadien. My name is Tom Kadien. I am a 35-year employee
of International Paper and a senior vice president. And I am
responsible for our consumer packaging businesses here in North
America as well as our Asia business, our India business, and
our North American transportation organization. IP is the
largest paper and packaging company in the world. We have
70,000 employees around the world, and here in the United
States, we have 38,000 employees who work at over 300
facilities in 43 States. And many of the members of this
committee have district--excuse me, have International Paper
facilities in your districts. I know a number of you have
visited, and you are all certainly welcome.
IP is a leader in--of major consumer of freight and
logistics here in North America. We spend about $2 billion. We
are the number one shipper of boxcars on the rail system. We
export almost 4 million tons of product outside of North
America. Two million tons goes out in containers and over a
million goes out breakbulk. So ports are very important to us.
And we also ship products over 155 million miles around the
North America system by truck. So we are here to ask for your
help in addressing the freight transportation needs here in
North America. I am going to cover two areas of competitiveness
for truck and ports. I am not going to talk about rail, but
we--it is very important to us, and I know some of my
colleagues on the panel will.
Paper is heavy. Our trucks typically weigh out before we
cube out. And with 300,000 trucks going over the road, it does
not make a lot of sense to us to ship trucks with 10 feet of
empty space when there are safe alternatives to increased
truck--truck weight here in the United States. So we are here
to--I am here to talk about SETA, the Safe and Efficient
Transportation Act, which would allow trucks with a sixth axle
and braking system to increase the truck weight up to 97,000
pounds at the option of the States on interstate highways. That
would enable us to take about 20 percent of our trucks off of
the road as well as make us more competitive.
International Paper, like my colleagues at DuPont, safety
is very, very important to us. And the research supports that
97,000-pound trucks equipped with a sixth axle and brake system
stop in the same distance as an 80,000-pound truck with five
axles. This has been proven over years in the U.K., it has been
studied here in the United States. And shippers like IP are
willing to pay higher over-the-road fees. Annual permits can go
up from $550 per truck per year to $800 per year, per truck.
And we would gladly pay that if we could use the full capacity,
to safely use the full capacity of the trucks.
I will give an example. For our mill in Valliant, Oklahoma,
in Representative Mullin's district, if the Oklahoma DOT opted
in, we could reduce our truck trips by over 5,000 trucks a
year, reduce vehicle miles by 1.8 million miles, and CO2
emissions by 6.8 million pounds annually.
So we are very much in favor of this. It is not a rail-
versus-truck issue. Those are two different fact patterns.
Trucks are for, in our case, under 400 miles; rail averages
over 800 miles. So we simply want to make trucking more
competitive.
I would like to move on to the issue of cargo going out of
ports. We ship 70 percent of our exports out of the ports of
Charleston and Savannah. And in 2015, the Panama Canal will be
reopened and be able to handle wider ships. And both of these
harbors have to be dredged to accommodate the draft of the
larger ships, they have to pick up an extra 3 to 7 feet. Both
are important to us, with over 2 million tons. If we cannot use
these harbors, we are going to have to put product on rail and
truck and ship further, either to Miami in the south or Norfolk
in the north.
And harbor deepening is important to the health of the U.S.
economy as well as the movement of goods. And it is important
to industry who wants to export out of the United States. So we
urge the panel to support the harbor dredging projects at those
ports.
And that is it for me, Chairman Duncan.
Mr. Duncan. Well, thank you very much. And let me just ask
you, I was told that you pronounce your last name Kadien, but
sounded like you said Kadien.
Mr. Kadien. My mother said Kadien, yes.
Mr. Duncan. Well, I like to try to get people's names as
close as possible. Thank you very much.
Next, we will hear from Mr. Edmond Johnston from DuPont.
Mr. Johnston. Good afternoon, Chairman Duncan and Ranking
Member Nadler. My name is Eddie Johnston. I have worked for
DuPont for 33 years, the first 8 of which were in the State of
Tennessee, where two of my children were born. I am here to
testify today on behalf of DuPont, a leading science company,
and as a member of the American Chemistry Council. I appreciate
the opportunity to appear before you today.
DuPont has been bringing market-driven science to the
global marketplace in the form of innovative products,
materials, and services since 1802. The company serves markets
as diverse as agriculture, electronics, automotive, aerospace,
and defense. DuPont operates more than 70 manufacturing
facilities in the United States, and employs thousands of
Americans while purchasing $550 million in transportation
services each year. The chemical industry employs 800,000
Americans and produces 12 percent of U.S. exports. The chemical
industry and its associated suppliers are major users of our
Nation's freight system and some of the largest customers for
many modes of transportation. The industry ships a wide variety
of materials that are used to produce more than 96 percent of
all manufactured goods.
I would like to address three critical freight
transportation issues. First, funding for infrastructure. Much
of our transportation infrastructure is old. If America's
manufacturers are to continue to move goods safely and reliably
over the country's freight infrastructure, upgrades are sorely
needed. I want to thank this committee for the work you did to
pass the Water Resources Reform and Development Act. I commend
you for addressing a major transportation issue. I appreciate
that this is an era of tight budgets with competing priorities.
But a robust and reliable transportation infrastructure is the
cornerstone to healthy U.S. economy.
Second, hazardous materials transportation. A small yet
important share of chemical shipments involves hazardous
materials. According to the Association of American Railroads,
rail HAZMAT accident rates have declined 91 percent since 1980
and more than 99.99 percent of rail HAZMAT shipments reached
their destination safely. However, DuPont and ACC members
acknowledge that even one incident is too many. And our
industry is committed to continuous improvement.
Working with our transportation partners, DuPont and ACC
member companies have invested billions of dollars to improve
safety, and we will continue to do so in the future. ACC and
its member companies also have worked hard to establish a
strong partnership with the emergency response community.
The Federal Government continues to play an important role
through the Hazardous Materials Transportation Act. This
legislation has been extremely effective in establishing
uniform national rules. Reauthorization of the Act will ensure
that important progress continues. Third, rail policy reform.
Congress last undertook comprehensive rail legislation 33 years
ago with the Staggers Act. In 1980, America's railroads were
struggling to maintain a viable business, and the Staggers Act
has been effective in helping the industry not only survive but
thrive. In fact, the policy embodied in the Act has been so
successful that the question in 2013 is not whether America
will have a viable transportation system, but whether that
system will threaten the competitiveness of the railroad's
customers and become an inhibitor of economic growth.
An unintended consequence of the Staggers Act has been
virtual elimination of rail-to-rail competition. Chemical
producers report that 73 percent of their facilities with
inbound and 65 percent with outbound transportation are captive
shippers, meaning they are only served by one railroad. Our
industry is not asking for more regulation of the rail
industry, but for more robust competition in the rail industry
so that American farmers and manufacturers are more competitive
on the world stage. It is time to re-examine decades old policy
to meet the needs of the 21st century.
In conclusion, I respectfully request that the panel
consider the following recommendations: First, Congress should
support improvement of our Nation's transportation
infrastructure. Second, Congress should reauthorize the
Hazardous Materials Transportation Act. And, third, Congress
should reform Federal rail policy to promote greater access to
rail competition and improve the efficiency and effectiveness
of the surface transportation board. Thank you again for the
opportunity to speak today.
Mr. Duncan. Thank you very much.
Next we have Mr. William Roberson from Nucor Steel. Mr.
Roberson.
Mr. Roberson. Chairman Duncan and Ranking Member Nadler,
thank you for the opportunity to testify before you today. I am
William Roberson, materials and logistics manager for Nucor
Steel Berkeley, a division of Nucor Corporation. Nucor
Corporation is the Nation's largest steel manufacturer and
recycler, operating 23 scrap-based steel mills. Nucor has the
capacity to produce more than 27 million tons of steel
annually. Last year, our company recycled more than 19 million
tons of scrap steel. Nucor also has several wholly owned
subsidiaries, including Harris Steel, the David J. Joseph
Company, and Skyline Steel. Together we are a company of over
22,000 teammates, primarily in the U.S. and Canada.
The freight transportation system is vitally important to
Nucor's success. We rely on water, rail, and truck
transportation to move millions of tons of scrap steel and
other raw materials to our steel mills and finished products to
market. For this reason, disruptions in the freight
transportation system can have significant negative economic
impacts on our business. Waterways play a particularly
important role for a number of our Nucor divisions. We have
several steel mills located on rivers, and some of these mills
bring in more than 90 percent of their raw materials by river.
Nucor scraps steel business, the David J. Joseph Company,
transports approximately 3,500 barges per year of scrap steel.
When assessing our waterways system, we believe that more
frequent maintenance dredging is needed to maintain adequate
drafts. Unfortunately, inadequate drafts levels are becoming an
all too common occurrence. For every 1 inch decrease in draft,
you lose 17 tons of cargo on a barge. This forces companies
like ours to use more costly alternatives.
Barges are a safe, efficient, environmentally friendly, and
cost-effective way to move goods. Each barge moves 15 to 1700
tons of cargo compared to 80 to 100 tons on railcars or 20 to
22 tons on trucks. Considering the importance of our waterways
system, we are encouraged to see both Houses in Congress
advance the Water Resources Development Act. Nucor supports
this legislation, particularly dedicating more revenue in the
Harbor Maintenance Trust Fund for the purpose of maintaining
our Federal navigation channels.
We hope that Congress will also strengthen revenues for the
Inland Waterways Trust Fund to make necessary investments in
this critical component of our U.S. supply chain by advancing
the industry-supported user fee increase. Like our waterways,
our roads and bridges are in serious need of investment. The
Interstate Highway System, built after World War II, is aging,
and we need a new, long-term commitment to invest in our roads
and bridges. The gas tax is not providing adequate revenue to
further this goal. We need to look for new alternatives,
including more public-private partnerships. Also enacting
legislation giving States the option to increase the weight of
six-axle trucks operating on select Federal interstates would
allow more cargo to be moved safely and efficiently over our
Nation's railways.
With regard to our Nation's rail system, the biggest
challenge that we face is that we are served by a single major
railroad. Several Nucor facilities are captive shippers in that
they pay a premium to move their products because of the lack
of rail competition. In recent years, the rail industry has
seen significant private investment. However, these investments
are often passed on to the rail industry's customer base,
resulting in higher premiums and costs for our captive shippers
who are still without the ability to choose which rail carrier
we use.
We cannot pass these increased costs on to our customers.
We have to absorb them because we compete in a steel market
that is being flooded with illegally subsidized foreign
products that are often already sold below cost. While it is
true that we have the ability to use less costly modes of
transportation, it is not always feasible logistically.
Given these circumstances, we support action to address the
need for more rail competition for rail service in many parts
of the country. The creation of this special panel acknowledges
that our freight infrastructure works collectively as one
system. We cannot look at each in isolation. Businesses across
the country rely on all modes of transportation working
together to get products to market.
Keeping American businesses globally competitive requires
investment in the entire system. Businesses succeed when there
is certainty. We can create certainty by providing the proper
funding for maintenance and much-needed upgrades. We must also
streamline the permitting system so projects do not drag on for
years in endless reviews. For example, we support legislation
that would exempt routine highway safety and transportation
upgrades that already exist within the current right-of-ways
from costly Federal permitting requirements. As the National
Association of Manufacturers recently noted, manufacturing
produces 12 percent of America's GDP, but the U.S. is only
investing about 1.7 percent of our GDP back in infrastructure.
Many of the countries we compete against are investing between
5 to 10 percent of GDP in their infrastructure. In short,
others are modernizing while we are struggling to maintain a
failing system that is decades old. However, with the proper
investment and governance, we can give American businesses the
tools they need to remain globally competitive. Thank you.
Mr. Duncan. Thank you very much, Mr. Roberson.
Next we have Mr. Bill Reed of Riceland Foods.
Mr. Reed. Thank you, Mr. Chairman and members of the panel.
I appreciate the opportunity to offer our perspective on the
freight transportation system. I am Bill Reed, vice president
of public affairs at Riceland Foods, a cooperative of family
farmers headquartered at Stuttgart, Arkansas.
U.S. rice is produced in three primary areas: California;
the Texas and Louisiana Gulf Coast; and the Midsouth, which
includes parts of Arkansas, Missouri, Mississippi, and
Louisiana.
[Slide 1 follows:]
[GRAPHIC] [TIFF OMITTED] T5056.004
And, we do have 600 to 800 acres of rice in west Tennessee,
Mr. Chairman.
[Slide 2 follows:]
[GRAPHIC] [TIFF OMITTED] T5056.005
Half of the Nation's rice crop is produced in the Midsouth,
where farmers plant about 1\1/2\ million acres each year.
After struggling to find a viable market, a group of
farmers met in Stuttgart in 1921 to form a co-op to market
their rice. Riceland farmer-members today number about 6,000
and account for about half of the rice produced in the
Midsouth.
[Slide 3 follows:]
[GRAPHIC] [TIFF OMITTED] T5056.006
Each fall, Riceland members harvest their crops and deliver
them to local grain elevators, where the crops are dried and
stored until transported to processing facilities for milling
and packaging. Storage facilities are scattered throughout the
region, as are our processing facilities, which are indicated
by the red stars on the map. Riceland is the largest rice
miller and marketer. The co-op also markets soybeans, corn, and
winter wheat that our farmers produce. Each year we handle 100
to 125 million bushels of grain.
Our rice products are sold across the country in retail and
club stores and to food service establishments and food
companies. Riceland is a direct exporter, selling rice to 50
foreign destinations. In our last fiscal year, we moved more
than 9 billion pounds of products, commodities, and supplies.
We did this with nearly 140,000 truck and intermodal shipments,
6,300 rail shipments, more than 1,000 export containers, and
more than 200 river barge loads.
With the Nation's focus on a fresh, safe, and abundant food
supply, we must have a reliable and efficient transportation
system. I know members of the committee and this panel are well
aware of the challenges of maintaining our Nation's highway
system. So are Arkansans. In 2011, Arkansas voters supported a
$575 million bond program for interstate improvements. And in
2012, they approved a half cent sales tax to fund $1.8 billion
in additional highway improvements.
Of course, these efforts aren't enough. It was reported in
September that 156 bridges in Arkansas had been found
structurally deficient. Many are in east Arkansas where our
Riceland farmers grow food.
Railroads focus on long hauls now, and they are certainly
important to us. We ship railcar loads of rice all over the
country and unit trains of wheat to Mexico. River
transportation is critical to our export business.
[Slide 4 follows:]
[GRAPHIC] [TIFF OMITTED] T5056.007
Our New Madrid, Missouri, facility, on a good day, can
receive rice from our farmers, mill the rice, and convey it
directly to a barge for shipping down the Mississippi River.
In 2011, however, flood waters on the Mississippi made it
impossible to load barges.
[Slide 5 follows:]
[GRAPHIC] [TIFF OMITTED] T5056.008
In fact, water was within a foot of entering the processing
facility. In 2012, and again this year, it is a whole different
story.
[Slide 6 follows:]
[GRAPHIC] [TIFF OMITTED] T5056.009
With silt naturally flowing into the harbor and displacing
water, we can load less rice into each barge. The harbor now
looks more like a mud puddle than a harbor.
The New Madrid harbor is not scheduled to be dredged this
year. We expect low water levels in the harbor next summer to
eliminate practically all of the economic benefit of using the
facility for bulk barge shipments. We export from that facility
to the Caribbean and will be under pressure from suppliers of
rice out of Asia to fill those orders.
I have one more example. As corn harvest was underway in
early August last year, we had thirty 18-wheelers carrying corn
scheduled to unload directly into barges at the Port of Yellow
Bend, Arkansas. Then we learned that silt had filled the
harbor, making it unusable. The dredge was heading from upriver
at Rosedale, Mississippi, down to Lake Providence, Louisiana,
without stopping at Yellow Bend, Arkansas.
Building temporary corn storage and forfeiting sales
contracts would have cost our Riceland farmers at least $1
million. As many as 200 farm families would have been impacted,
15 port employees would have lost their jobs, and the port
would lose $500,000 in revenue.
Thanks to Congressman Rick Crawford and Senators John
Boozman and Mark Pryor of Arkansas, the Army Corps of Engineers
redirected the dredge to Yellow Bend. In just a few days, the
harbor was open and those corn barges were filled.
I share these examples to illustrate the importance of
keeping all segments of our transportation system, highway,
railroads, and rivers operating in efficient and effective
manner. The U.S. transportation system is critical to U.S.
competitive advantage in moving agricultural and food products
across the country and around the world. It benefits every
American. And I appreciate the panel's focus on this important
issue.
Mr. Duncan. Well, thank you.
I want to thank all of the panel for a very helpful and
informative testimony. And let me say, I mentioned earlier that
we are in sort of an unusual situation here. It is a very busy
day for everyone. And so I am amazed that--and very pleased
that 9 of the 11 members of this panel are here at this point.
And I know several probably have to leave shortly. The first
one that has told me that he needs to leave is Mr. Mullin. By
he wants to ask a question before he goes, so I will go to Mr.
Mullin. I yield to Mr. Mullin at this time.
Mr. Mullin. Thank you, Chairman. And I will try not to take
up my whole 5 minutes so I can be respectful to everyone else's
time.
What I want to focus on is the truck weights. Tom, you and
I have had an opportunity to visit a little bit about this. And
this is something that is pretty close to my heart, considering
I got a CDL in my back pocket. I was driving just not too long
ago--I mean, when I say not too long ago, in the last few
weeks--had to go through the whole poke and prod, get my
medical card. That is an embarrassing situation. But I had to
go through that process because its required. And now we are
talking about something else. And increasing truck weights.
And obviously the more trucks we can take off the road,
honestly, the safer it is. But how are we going to be able to
go past one concern from FMCSA and move forward on the truck
capacity weights? We have talked about direct routes, we have
talked about the placement of where the sixth axle should be.
And, Tom, I would like to get kind of your perspective of where
we are going with this and then also understand that I truly
believe that this is a State's issue, not a Federal issue, this
is a State's issue. I don't think we need the Federal
Government stepping in any farther than what they already have
over States rights. So, Tom, I am going to throw that question
out to you then we will have a conversation, hopefully.
Mr. Kadien. Sure. Thank you. I couldn't agree more that it
is a State's issue. And that is what we are advocating and what
SETA's all about is to give States the choice to opt in. And
they can opt in on some or all or none of the interstate
highways in their State. So the idea is that they will pick the
roads that make the most sense, that would make the best
utilization of the heavyweight trucks and be the safest for
that State. You know, the law is written so that it doesn't
dictate whether the axle goes on the front or the back. To me,
that is where the State DOTs have to weigh in on what they want
to do in their particular locale.
Mr. Mullin. Which this is something that I have interjected
in before, is that right now the discussion is putting it on
the trailer if we were to increase the weights. As a driver, I
can tell you the first place typically you lose brakes is on
the trailer. So if we are talking about safety here, we would--
and my opinion, Chairman, we would be--need to be talking about
moving that underneath the rig itself. Not to mention we had
the capacity there to build a--raise that axle when we are not
needing it, when we are able to bring it off the ground. But
when we are really talking about stopping, I would say--I don't
know the statistics, but I am just going to go by my own self,
90 percent of the time if I were to lose brakes it would be on
the trailer.
Mr. Kadien. And I--I don't have my license. I am not going
to take issue with anything you said. I will say on the
statistics, the State of Maine has done a pilot and the
statistics say that there are fewer fatalities since they have
gone to a sixth axle allowing up to 97,000 pounds. The U.K. has
got this. This is not a new issue. We have 15 States that allow
heavyweight trucks on 5-axle configurations right now. And this
gives the States the right to configure those trucks, to
configure which roads are on or not allowed to do this in their
Interstate Highway System. In the U.K., over a 5-year period,
fatalities were down 35 percent.
So I think I should let the engineers decide where the
load--based on where the load is in the truck, where the axle
belongs. But it has been proven to be a safe way to make
trucking more efficient.
Mr. Mullin. Right. And just to clarify, with me wanting to
see the States have an opinion on this, once again I am going
to refer back to the fact that I drove these trucks and I have
hit the exits that I shouldn't have hit. And if we do this as a
Federal--we let the Federal Government come in, and let's say
they do raise them. And you are driving down the interstate and
you hit an exit by mistake. I mean, all of us have taken wrong
turns. I know most of us guys, we wouldn't admit to it, but
truth is it is true. But you hit the exit and all of a sudden
you find yourself on a county road. It is not easy to turn
these things around. And the States know their systems better
than the Federal Government does.
I understand what the opposition is about this too. But the
fact is that if we are really going to listen to what FMCSA
says, and they are fine the word of ``safety,'' then the best
way to do that is to look at the truck weights, understand that
that actually works, work with intermodal system, work with the
rail, work with the ports, and find out what is the best
option. If one of those options--Tom, and you and talked
about--was having a direct route, like they to in Louisiana.
Where it is a designated route if we want to take product from
point A to point B.
So, Chairman, I appreciate the opportunity that you have
given me. And thank you for jumping over to me because I know I
am the bottom of the barrel here.
Mr. Duncan. Thank you very much.
Mr. Nadler.
Mr. Nadler. Thank you, Mr. Chairman.
Mr. Roberson, in your testimony, you specifically support a
user fee increase for the Inland Waterways Trust Fund to make
the necessary investments in this critical component of our
U.S. supply chain. You are a shipper advocating for an increase
in fees that you will have to pay. Could you explain why it is
important to your business for the Inland Waterways Trust Fund
to have more revenue, why you are willing to pay a larger fee?
Mr. Roberson. Yes, sir, Mr. Nadler. We just feel that at
Nucor, the return on that additional cost far outweighs
whatever liabilities will be associated.
Mr. Nadler. I can't hear you. Is what?
Mr. Roberson. I apologize. Can you hear me now? Yes, sir.
We at Nucor are willing to support the increase, even if it
means an increase in our costs because of the return is
reasonable and provides value to our company.
Mr. Nadler. OK. Thank you.
Mr. Kadien, in your testimony, you advocate for dramatic
increase in truck weights to 97,000 pounds. Now, we know that
interstate bridges cannot withstand the stress that 97,000
pounds will cause, even with the addition of a sixth axle.
These trucks will accelerate the depreciation of and further
worsen the condition of our Nation's bridges. Your testimony
mentions a mill in Valliant, Oklahoma. I would like to recall
comments made at a field hearing in 2011 by Oklahoma DOT
Secretary Ridley and former Oklahoma Secretary McCaleb. They
each made the point that we must proceed with caution in higher
truck weights because the potential damage to bridges. To quote
Secretary McCaleb, ``No matter how many axles you put under
that essential point, loading will increase the stress
repetition and the rate of stress repetition and will reduce
the life of the bridge. I am an advocate of heavier loads,'' he
said, ``but you have to design for those heavier loads. You
can't just superimpose those heavier loads on a system that
wasn't designed for them.''
According to the Federal Highway Administration, Oklahoma
has 5,382 bridges that are structurally deficient.
Do you dispute the fact that heavier trucks will cause
accelerated damage to bridges?
Mr. Kadien. Absolutely don't dispute that. And that is why
this is really a States rights issue. It is for the States to
decide which roads and which bridges will handle the 97,000
pounds.
Mr. Nadler. So you agree that it will--it will increase the
stress to bridges, and that you think it is a State's issue?
Mr. Kadien. I think the bridges have to be designed for the
97,000-pound weights.
Mr. Nadler. But the existing bridges haven't been designed.
So you only allow this on new bridges?
Mr. Kadien. Not in all cases. In the cases you have
identified, that is probably the case. But, you know, in the
State of Maine, they found no evidence of bridge fatigue or
steel fatigue due to the heavier weight trucks. That is why I
think it depends, really is a States rights issue.
Mr. Nadler. Do you believe--let me just comment. I find it
very difficult to accept that any of these questions are
primarily States issues, given the fact the Federal Government
spent--paid 90 percent of the cost of the construction of the
interstates and pays a very large proportion of the ongoing
maintenance costs of the interstate. So I think it is certainly
a Federal as well as a State's issue.
Now, do you believe the citizens of Oklahoma and elsewhere
across the country are willing to accept the risk that heavier
trucks pose to these already troubled bridges, most of which in
the country were not designed for 97,000 pounds?
Mr. Kadien. I don't believe any State should accept higher
risk associated with the 97,000--97,000-pound limit, no. If
there is a risk, we shouldn't be doing that.
Mr. Nadler. So you think that the 97,000-pound truck should
only be allowed on bridges specifically designed for 97,000-
pound trucks?
Mr. Kadien. Yes.
Mr. Nadler. OK. What percentage of the bridges in the
United States were specifically designed for 97,000-pound
trucks?
Mr. Kadien. I don't know the answer to that question.
Mr. Nadler. It is rather small, I would assume.
Mr. Kadien. Thank you. Fifteen States allow the heavyweight
trucks right now.
Mr. Nadler. But the fact that a State follows a foolish
policy doesn't mean that we should. Because I asked what
percentage of the bridges were specifically designed for 97,000
pounds.
Now, in the--the truck safety study in Vermont, the pilot
study shows that applying Vermont truck weight added to the
national average cost, it was determined that a fully loaded
80,000-pound, five-axle combination truck incurs 21.5 cents of
pavement cost per mile on the interstate system and 32.9 cents
per mile on other highways. A typical 99,000--this is 99, not
97, but I don't know that there is much difference--a typical
99,000-pound, six-axle pilot vehicle requires pavement
expenditures of 34\1/2\ cents per mile of travel on the
interstate system compared to 21\1/2\ cents for 80,000 pounds,
and about 53.6 cents per mile of travel on noninterstate roads.
In other words, this is about 63 percent more per vehicle mile
and 32 percent more per ton-mile than a fully loaded five-axle
vehicle.
Do you think that we should up the--the 97,000-pound truck
should pay a 34\1/2\ cents--I am sorry--a 63-percent more tax
than an 80,000-pound vehicle? And if not, why not?
Mr. Kadien. Mr. Nadler, I am not familiar with the study.
But, no, I don't think so.
Mr. Nadler. Well, if you are not familiar--why--assuming
the study is correct, assuming that the cost imposed on the
roads is 63--just is 63 percent more than--than an 80,000-pound
vehicle, then why shouldn't they pay a 63-percent higher tax,
if that is--if the underlying fact were to be correct?
Mr. Kadien. I understand your point. But I don't believe
that--I don't understand the basic premise of why it would be
so much more expensive if the weight is more evenly distributed
on the 97,000-pound truck.
Mr. Nadler. The study in Vermont, which you say you are
unfamiliar with, which I assume you are unfamiliar with, says
it is. Let's assume for the sake of argument that the study is
correct--let's assume it is not correct. My question is--let's
assume it is only 50 percent or 40 percent. Should a 97,000-
pound truck that imposes a heavier burden on--a heavier cost
burden on maintaining that highway pay a proportionate extra
tax, whatever that proportion might be? And if not, why not?
Mr. Kadien. I think you have to balance the proportional
increase you are speaking of with making the truck
uncompetitive versus the 80,000-pound truck.
Mr. Nadler. Well, if it is uncompetitive, that would argue
that you shouldn't allow it.
Mr. Kadien. That is correct.
Mr. Nadler. OK. So maybe we shouldn't allow it. But my
question is, if we do allow it, why shouldn't it pay its fair
share? If it imposes an extra cent higher cost on the highway
maintenance than the 80,000-pound truck, why shouldn't it pay
an X-percent higher tax so it is paying its own way in that--to
the same extent as the existing trucks?
Mr. Kadien. I think paying its fair share makes sense.
Mr. Nadler. Yes. But would that be a fair share?
Mr. Kadien. Well, depends on the statistics, I guess.
Mr. Nadler. Again, whatever the statistic is, if we do the
study and find the statistic is 20 percent or 40 percent or 60
percent, that would be fair, then, to impose an extra tax of 20
percent or 40 percent or 60 percent if those are the facts?
Mr. Kadien. If those are the facts and you propose that
kind of proportional increase, I suspect the math will say that
you will never have a 97,000-pound truck on the road and you
will have 20 percent more trucks on the road than you do if you
allowed it.
Mr. Nadler. Well, that may be. And maybe that the market is
telling us something in that in that case.
I thank you. I yield back.
Mr. Duncan. Thank you very much.
Mr. Crawford.
Mr. Crawford. Thank you, Mr. Chairman. I appreciate that. I
would just again like to thank the panelists for being here. I
know you came here on your own dime, on your own time, and I
appreciate that.
Mr. Reed, I would direct my first question to you. You
mentioned in your testimony we--and I remember we had some
serious trouble securing the dredging for Yellow Bend, Yellow
Bend Port, and I am glad we were able to resolve that
situation. But there was a supplemental disaster funding from
the 2000 flood where that came from. Can you comment on, speak
to the level of uncertainty that--that exists over annual
dredging of our ports and how that impacts Riceland farmers?
Mr. Reed. Yes, Mr. Crawford. I would say that it is
critically important to be able to rely on the ports. And, I go
back to the New Madrid, Missouri, example. We know that we will
not be able to load barges; certainly not full. We don't know
how much we will be able to load in them this coming year, but
we know it is certainly going to be complicating our export
operations. So we will be making arrangements to try to shift
production to other facilities in order to accommodate that
situation in the harbor.
Mr. Crawford. Transportation costs are obviously one of
most significant factors that impact a farmer's bottom line.
And I know that other countries are making significant
investment in infrastructure. Have you noticed, are we losing
our edge globally with respect to our freight system here in
the United States, and are the international competitors
closing the gap?
Mr. Reed. Well, that is certainly a fear of U.S.
agriculture. We are seeing, as you know, rice from Asia moving
into this hemisphere, into Central America, the Caribbean, even
into the United States. And that is a concern because of their
lower cost of production. We are also watching South America.
If those fellows had the opportunity to have the type of
delivery system that we have in the U.S., American agriculture
would be in trouble. As you know, the production in Brazil is
just amazing. But where we have the advantage is in our
transportation system. But we are going to have to continually
improve it and, hopefully, enhance it in order to stay
competitive and keep our farmers in business.
Mr. Crawford. Thank you, sir.
I am going to direct this question to Mr. Roberson. In your
testimony, you made the point that many of the Nucor facilities
only have access to a single major railroad and that results in
higher costs. Is there currently an effective remedy at the
Surface Transportation Board for bringing those rates down to a
more affordable level?
Mr. Roberson. Mr. Crawford, not currently. Think there is a
redress that needs to occur based on the current criteria used
to make rate cases. So if we could relook at that, I would
think that we would be better.
Mr. Crawford. What would you suggest or how might the STB
be strengthened to help address that issue?
Mr. Roberson. Again, just relooking at the criteria
associated with rate cases and reciprocal switching and access
to multiple railroads.
Mr. Crawford. Thank you. I don't have any further
questions. Again, I just want to extend my appreciation to each
of you in recognizing you contributing your time to help us
make the case for improving, enhancing, and investing in our
freight transportation infrastructure. I appreciate each of you
being here. Thank you.
Mr. Duncan. Thank you very much.
Mr. Crawford. Ms. Brown.
Ms. Brown. Thank you, Mr. Chairman.
Mr. Kadien, I have a question as far as States rights is
concerned. I am a bit confused. What do you mean by States
rights when the Federal Government pays 90 percent of the
bridge--building the bridge and the maintenance and the State
put up 10 percent. And in 2012, 6,749 bridges rated as
structurally deficiency?
Mr. Kadien. What I mean by States rights is to allow the
State to decide based on the traffic and the industry in that
State, and the studies of their own departments of
transportation is to choose which State highways that they
would allow the 97,000-pound, six-axle truck to travel on.
Ms. Brown. So you don't think the Federal Government should
play a part in deciding?
Mr. Kadien. No, I think--I think H.R. 612 is a Federal
decision to allow the States that flexibility. I am not saying
it is one versus the other. But I think the States are in the
best decision, or in the best position to decide which roads
and bridges should or should not be part of the program.
Ms. Brown. Do you think they should make that decision
without the input of the Federal Government? The Federal
Highway Administration?
Mr. Kadien. No, I don't.
Ms. Brown. So it should be a joint decision?
Mr. Kadien. Yes. I would agree with that.
Ms. Brown. You mentioned something about, I guess, trucks
in Europe. And in many of the places that I have gone to Europe
where trucks is concerned, they make them piggyback, they put
them on trains and take them different places.
Mr. Kadien. Yes, ma'am. I was referring to a 5-year study
in the U.K. that allowed six-axle, 97,000-pound trucks and saw
35-percent reduction in fatalities. I wasn't referring to
piggyback or other truck configurations that exist elsewhere in
Europe.
Ms. Brown. I see. I have other questions for other members
on the committee.
Mr. Johnston, you mentioned that DuPont made a $500 million
investment in the Cooper River facility, and their freight
travel has doubled. Why did you all decide to Cooper River
facility?
Mr. Johnston. Congresswoman Brown, our investment at Cooper
River is a significant investment here in the U.S.----
Ms. Brown. Thank you.
Mr. Johnston [continuing). That has created jobs for
American workers and provides materials that are important to
the defense industry and to police and other folks who we rely
on for our safety and security every day. This was the best
place to make that investment is the short answer to your
question.
Ms. Brown. Was it the logistical location? I mean, that is
great. I mean, we----
Mr. Johnston. Logistics did not drive the decision.
Ms. Brown. It was just the best place to make the
investment, the workforce and other factors?
Mr. Johnston. That is correct.
Ms. Brown. Thank you.
Mr. Roberson, you mentioned that because of the lack of
competition, shippers pay a higher premium. And that you
thought how those boards should be set up to resolve the
issues. Can you expand on that a little bit?
Mr. Roberson. I am sorry. I couldn't hear the last part of
your question.
Ms. Brown. As far as coming up with solutions to solve the
competition question, the shippers are sometimes captive, you
know, it is only one line and they don't have a choice.
Mr. Roberson. Thank you, ma'am. As my colleagues on the
panel mentioned, having access to multiple major railroads
provides the competition. There is always an alternative for us
to ship other modes, but there is not an alternative to ship
the railroad A versus railroad B, and that is what we are
advocating.
Ms. Brown. Thank you. As we meet today, one of my bridges
has been taken out because of a ship that hit it. So the
question about bridges is a major question: How are we going to
maintain them? How are we going to keep them safe? And how are
we going to fund the infrastructure? Do you all have any ideas
as to how we can fund the infrastructure as far as those kinds
of investments? And, of course, those are the kinds of
investments that would actually put American people to work.
Just briefly. How do you recommend funding the bridges that
are structurally damaged?
Mr. Kadien. I will take a crack at that. There is a fair
amount of money that is collected for the gas tax that goes
into the Highway Trust Fund. And not all of those funds are
actually used on infrastructure. That would be an opportunity.
Mr. Johnston. Congresswoman, I don't have a specific
recommendation on this. I understand the dilemma here. DuPont
and the chemical industry would be happy to work with this
committee in thinking through ideas that--that might promote
the exact thing that you are talking about.
Ms. Brown. Thank you.
Mr. Roberson. Congresswoman, we would echo those comments.
We would be glad to work with this committee on solving that
issue, but we don't have the answer today. I think that is why
we are here and having this good discussion.
Ms. Brown. We don't have it either.
Yes, sir. Mr. Reed.
Mr. Reed. Yes, Congresswoman. You raised an interesting
point. The rehabilitation of those bridges would be part of the
highway system funding. But I would have to work on that some
to come up with a better answer for you.
[The information follows:]
Most projects are funded by a combination of Federal
funds (80 percent) and State funds (20 percent). Under
MAP-21, our Arkansas Highway and Transportation
Department doesn't have more money to spend on
projects, including bridges, but the State has more
flexibility in using Federal funds.
Ms. Brown. Thank you. Thank you, Mr. Chairman.
Mr. Duncan. Thank you, Ms. Brown.
Mr. Hanna.
Mr. Hanna. Thank you, Mr. Duncan.
I would suggest that the problem of paying for it belongs
to this committee and this Congress. Since 1993, we haven't
raised the gas tax, haven't raised the diesel tax. We have had
lots of opportunities to do that.
I would also like to thank everyone here because to the
person you have all indicated that you are willing to pay more
for what you get. And I would also like to point out that
lighter truck weights create more repetition of travel, not
less.
So that the small points of how much or what percentage or
how all of that works out, all of that adds to the greater good
of the entire economy. All of us depend on trucks. And it
shouldn't necessarily fall on the individual trucker to pay the
full freight of the use of the highway. I mean, it trickles
through the entire economy and we all benefit.
I wanted to speak to you, Mr. Kadien. You indicated that
this wasn't a rail-versus-truck issue. And, you know, I think
in many ways it is. And I don't mean it in a pejorative way,
necessarily. It is more about the simple nature of competition.
A railroad would allege that if you were to pay the full cost
of what it costs to build, buy, and maintain roads that your
cost per gallon would be substantially more. I have heard
upwards of a dollar.
Is that right, Mr. Nadler?
Mr. Nadler. Right.
Mr. Hanna. He is my facts guy over here.
So that someplace we realize that it is probably entirely
impractical. We also know that, everyone here has indicated
that monopolies, or oligopolies, if you will, are part of what
railroads have going for them, just the nature of the business.
Everybody says you would like to fix that. Maybe someone here
could tell me what that would look like and how much that adds
to your cost. Because clearly, if someone has the ability to
cost push and they don't stop and you just keep paying the
bill, there is no end. So if you would like to talk to anyone
about that, I would be interested to hear.
Mr. Kadien. Well, for International Paper up to about 40
percent of our locations in the U.S. are, quote, ``captive'' to
one Class I railroad. And we have very good relationships with
all of the Class I's, and I think for the most part we would
say we are fairly treated. On the other hand, we do see more, I
will say, more frequent and higher increases on the 40 percent
where we are captive.
Mr. Hanna. So the higher weight limit would necessarily
give you a little bit of an opportunity, roughly 20 percent
lower average cost to help you offset that, if you will,
advantage.
Mr. Kadien. Our fact pattern would be different than that.
We are not trying to get our rail shipments to compete with our
truck shipments. We just want competitive rail increases where
we have captive carriers. Our truck shipments are 400 miles or
less. Our rail is 800 or more. Our trucks usually have to be
there next day or second day. It is really two entirely
different customer destinations that we are shipping to, and we
don't often mix or compete rail versus truck.
Mr. Hanna. Sure. And I live in a State, New York, where
they don't have the sixth axle, but we do have the higher
weight without that. So in my State's case, to add that axle
would actually make our roads safer, not less safe. And by your
own study, and I have read the studies, there is every
indication to believe that it is a marginal thing, add the
weight and add the axle.
And I think it is proper to assume that States have the
ability--they all have engineers and DOTs--to decide what
roads, what routes, and what is safe and what is not and where
to invest money to fix those bridges appropriately that will
allow for whatever they decide. I know that is what they do in
New York.
So I am not sure it is really a States rights issue in your
case. Isn't it just a matter of allowing them to decide?
Mr. Kadien. Yes, I would agree with that 100 percent.
Mr. Hanna. Mr. Reed?
Mr. Kadien. But I do think, if I could add, I do think, you
know, a benefit maybe to the cost issue that was brought up
earlier, I think the reduction in accidents, truck traffic and
the improvement in safety is worth something in this argument
as well.
Mr. Hanna. So to Mr. Nadler's point, and I respect all of
his opinions, I enjoy listening to him, tell you the truth,
that reducing trips, reducing repetitiveness over bridges,
lowering the average cost per trip because of the additional
percentage of weight benefits more than just the trucker. It
has to ultimately make the product you sell marginally less
expensive and make you more competitive, to repeat the obvious.
Mr. Kadien. Yes, I would agree with that.
Mr. Hanna. Thank you. My time is expired.
Mr. Duncan. Thank you very much.
Mr. Webster.
Mr. Webster. Thank you, Mr. Chairman. I have enjoyed the
questions and responses here. I appreciate you doing this.
I had a similar question. Maybe I will ask it of Mr.
Johnston, I think your point three was the fact that there were
certain areas where there was a monopoly of sorts, and you gave
a large number of your shipments, I don't recall what they
were, inbound and outbound, but it just seemed like the
percentage was pretty high.
Is there a specific recommendation where we would start? I
wouldn't want to steal somebody else's infrastructure, if you
put two different types of freight trains on the same route.
Somebody owns those and somebody would not. But is there a
specific recommendation you have in that area?
Mr. Johnston. Thank you for the question, Congressman. As
you may know, the Surface Transportation Board has held
hearings off and on over the last 2 years, or thereabouts, to
consider ways to increase competition in the rail industry. A
variety of proposals have been presented to the Board by
industry. At present, the Board is still taking those matters
under consideration.
But I would highlight just a few things, and then I will
come to one specific. In 1980, when the Staggers Act was
passed, there were 26 Class I railroads in the United States.
Today there are seven, and four of those carry 90 percent of
the traffic in the United States. Two of those are dominant
east of the Mississippi River and two of them west of the
Mississippi. And so those are the dimensions of the issue here.
Furthermore, the premise under which the Surface
Transportation Board acts, even today, is the same premise that
was actually true in 1980 but is no longer true in 2013. And
that is that the railroads stand on the brink of bankruptcy.
They simply don't any longer. They are healthy. They are making
money. And, frankly, we want them to be that way. I don't want
there to be any misunderstanding about that. We need them to be
healthy and profitable.
One of the impediments that the Surface Transportation
Board is simply that because of the fact that there are only
three Commissioners, they can't confer with one another and
discuss matters that are before them for consideration. A
simple solution to that might be to increase the number of
Commissioners at the Surface Transportation Board. That might
be one specific idea that I would leave with you today.
There are a number of other proposals that DuPont and the
American Chemistry Council have that, I won't take time now,
but we would be delighted to sit with you and your staff, other
members of this panel, or members of the full committee and
review those specific policy recommendations with you.
Thank you.
Mr. Webster. OK. Well, I would love to get some pre-
information if you have. It if you can get it to me, that would
be awesome.
Mr. Johnston. Yes, we will.
Mr. Webster. Thank you. I yield back.
Mr. Duncan. All right, thank you very much.
Mr. Kadien, MAP-21 included very significant environmental
streamlining provisions, shortening the project delivery times
for highway and transit projects, and Mr. Roberson mentioned
approvals for projects within the established or existing right
of ways. Do you believe that similar provisions should be
codified for all other modes of transportation as well?
Mr. Kadien. I am sorry, I am not familiar with MAP-21.
Mr. Duncan. Well, what we are talking about, you don't have
to be familiar with MAP-21, what I am asking, has your company
seen delays because of environmental rules and regulations and
red tape, and would it make any difference to your company if
we could speed up some of these approval projects?
Mr. Kadien. Thank you for the explanation. Absolutely, and
yes. Permitting is, you know, the schedule on a return on any
investment severely impacts, schedule delays severely impact
the returns, and we see long scheduling delays, getting
approvals on construction, engineering, building projects here
in North America, and that would be very helpful if we could
expedite those.
Mr. Duncan. Are you familiar with any particular examples
of that, of projects that have been delayed or taken longer. Or
you said in North America----
Mr. Kadien. I meant the United States of America,
primarily.
Mr. Duncan. Can you do things faster in some of these other
countries?
Mr. Kadien. Yes. In some of these countries you can. That
doesn't mean they are better and there aren't other issues
there as well. Environmental permits for a new pulp and paper
facility in North America is a multiyear process. I am familiar
with investments that were not made in this country because of
the environmental process, and it often lacks clarity, it is
often combative, and it is often just easier to go ahead and
produce the project in another country.
All that said, I think we also have the best set of
environmental regulations from around the world that I am
familiar with. So I think we end up at a right place in terms
of, you know, the laws that we pass. But just as an example, we
just went through MACT, which took several years to get to a
conclusion and, you know, I think it probably took us 4 years,
and if we could have done that a lot quicker we would have been
able to get the environmental benefit and plan our capital
spending a whole lot better and more efficiently.
Mr. Duncan. Thanks very much.
Mr. Johnston, you talked about the competition within the
railroad industry or the lack of competition, but it seems to
me it is something that is easy to say, but difficult to
achieve because you also testified you don't want to increase
the regulations on the railroad industry. So do you have any
ideas or suggestions about how we go about that since these
companies, you know, take care of their own tracks and it is
difficult, if not almost impossible, to lay new tracks in some
places? So what do you have to say about all that? How do we go
about achieving what you want to achieve, more competition
within the railroad industry?
Mr. Johnston. Thank you, Mr. Chairman. It is not an easy
problem and we don't want people building new railroads
necessarily. That is expense that is not going to be
beneficial. So that is not the solution, as you clearly know
and point out there.
However, giving railroads who don't have immediate access
to one of my plants, for example, but might be only a short
distance away and allowing them to use a portion of another
railroadsystem, or interchanging traffic at the closest point
available from one railroad to another are some simple sort of
ideas that would create additional competition if you look at
the full route that the traffic carries on the railroads.
Mr. Duncan. You mentioned the four Class I railroads that
carry 90 percent of the rail traffic in this country, but there
are a much larger number of short line railroads. Are you able
to make much use of the short line railroads?
Mr. Johnston. Short line railroads do serve some of our
facilities. They are generally hooked into a single Class I
railroad, as I am sure you are aware.
Mr. Duncan. Yes, sir.
Mr. Johnston. And so that really doesn't solve the problem.
It is simply another railroad that we are dealing with on the
front end of the transaction.
Mr. Duncan. All right.
Mr. Roberson, you mentioned that Nucor uses several
different modes of transportation. I think just about all of
you on the panel have said that. In which ways do you think
current transportation funding can be better used, or what area
of transportation do you feel is the most neglected or the most
underfunded at this time? Where does Nucor have its biggest
problems?
Mr. Roberson. Well, I think it is a, Mr. Chairman, I think
it is a very comprehensive issue. It is all modes. If you look
at our inbound supply chain, clearly that is heavily leveraged
on the waterways for a lot of our mills. However, if you were
to flip that over to our outbound shipments, those go about 60
percent rail, 40 percent truck for many of our facilities. So
it is really all modes. It is not one particular one that would
make a big difference.
Mr. Duncan. Mr. Reed, what do you say about that? You know,
the government, both at the Federal and State levels, really
first got into transportation primarily to help farmers to get
their products to market. Where do you see the biggest
chokepoints or the biggest impediments to freight
transportation?
Mr. Reed. Well, Mr. Chairman, you are absolutely right, and
much of the transportation system was built to move products to
market. In fact, our facilities were located on rail lines, and
at one time the crops were actually railed to processing
facilities from the grain storage facilities out in the
countryside. None of that is done today because of the emphasis
on the long hauls.
As far as our largest concern, we have learned to cope with
trucking grain from the farm to our facilities. Our farmers are
responsible for doing that. It is fast, and that is important
for them during harvest when they are facing weather issues. We
move products in all forms.
But I would say our biggest concern is those harbor
situations where we just cannot load barges to move rice into
the export market. That is done by barge down the Mississippi
River to New Orleans and then put on the large oceangoing
freighters, but we have got to get the product out of the port.
In the case of our New Madrid facility, which is the only
processing facility we have on a river, we have no storage for
a processed product. So it is one of those situations where you
got to keep it flowing, and so that becomes a key bottleneck
for us if we can't move the product out.
Mr. Duncan. All right. Well, thank you very much.
Just out of curiosity, you know, I meet with people all the
time from every business, every industry. I met, I guess last
week or a couple of weeks ago, with some car dealers from
Tennessee, and they said that while they are doing good
business right now, it all seems to be pent-up demand, that
people are driving cars now 100,000, 200,000 miles, not trading
as often, and that they went for several years during the
downturn without trading in a car. In other words, they are
saying they don't think the economy is as strong as current
sales might indicate.
And I read all these business publications and, you know,
you can find some articles saying that things are going pretty
good. You can find many that say they are not going pretty
good. Our unemployment is too high. Our underemployment is
much, much higher.
Mr. Kadien, what about International Paper? How are you
doing? What do you see in the near term for your company and
the overall economy?
Mr. Kadien. You know, we are in several lines of businesses
that are pretty good barometers of economic activity. We are
the largest producer of corrugated packaging that moves goods,
consumables, durables around the country, and typically runs
about half of the GDP rate of the country. And right now we
would say that the economic activity is pretty underwhelming,
that, you know, we are looking at 0.5 to 1 percent kind of
growth rates across the industry, and that is really not
reaching our potential. I have got a consumer packaging
business, you know, food processors are seeing, you know, flat
to no growth in their business. We are a big supplier to
restaurants. They are seeing slow traffic compared to prior
years.
So it is, I would say, it feels like we are moving sideways
right now instead of gaining any momentum.
Mr. Duncan. Mr. Johnston.
Mr. Johnston. Yes. DuPont also is in a wide variety of
businesses. Our agriculture-related businesses are very strong
today, both here in the United States and around the world. I
would say many of our chemical businesses are seeing slow but
steady growth here in the United States, but we are not seeing
those same trends in other parts of the world, particularly in
Europe and in Asia where their economies are simply in the
doldrums and have not shown signs of recovery yet.
Mr. Duncan. Mr. Reed, how much of Riceland's, how much of
your rice goes to other countries? How much is export?
Mr. Reed. Mr. Chairman, we export about a fourth to a third
of our rice production every year at Riceland. For the U.S.
industry as a whole, about half of the crop is exported each
year to about 75 countries. Rice is a staple for at least half
of the world's population. They eat it every day if they have
it. We have all seen the numbers of population growth. By 2050
we may expect about 9 billion people, which are a lot of mouths
to feed, and rice does that very efficiently.
So we have seen a period of several years here of good
prices for agricultural commodities really across the board. We
certainly hope that continues. But there is always competition
from other countries. Asia, for instance, had been deficit of
rice. Now, many of the Asian countries are exporting rice. In
fact, when I started with the co-op we were the number one
exporter, we as in the U.S. were the number one exporter of
rice. Today that spot would be filled by India, and followed by
Vietnam and Thailand and other southeast Asian countries which
have picked that up.
Many of those are moving rice around the world at heavily
subsidized prices, which makes it very difficult to compete.
And, again, our transportation infrastructure is one thing that
keeps us in the hunt for some of that business, especially the
higher valued business.
Mr. Duncan. I have gone way over my time and I apologize.
You probably didn't notice, but I said in my opening statement
that we are facing competition that we never had before because
for many, many years so many other countries were following
Socialist and Communist governments and were very weak
economically. And now in many countries around the world, even
some former Communist countries, they are allowing almost more
free enterprise than we are in this country.
Mr. Nadler, any other questions?
Mr. Nadler. No, I have no other questions.
Mr. Duncan. Any other questions?
All right. Well, thank you very much. You have been very
helpful. If you think of anything, we are looking for specifics
to go in this report. We don't have much time left in the time
limit that was imposed, the special rule that we are operating
under, so if you have some specific suggestion that you think
might be helpful to us, then get in touch with us here in the
next week or two.
[The information follows:]
[GRAPHIC] [TIFF OMITTED] T5056.010
[GRAPHIC] [TIFF OMITTED] T5056.011
Thank you very much. That will conclude this hearing.
[Whereupon, at 3:25 p.m., the panel was adjourned.]