FEDERAL RAILROAD ADMINISTRATION : PRESS ROOM

Introduction

· I’m very happy to have the opportunity to meet with you today. It’s always a pleasure to be before a group like NIT League to discuss our dynamic American freight transportation industry.

· I came here directly from the Hill where I was testifying before the Senate Commerce, Science, and Transportation Committee on rail security issues.

· As everyone in this room is well aware, rail security—for both passengers and freight--is a serious matter and one that has received increased attention and scrutiny in recent days as a result of the tragic events in Spain.

· I will speak more about this issue later in my talk.

· Let me say here that despite the new ‘security environment’ we find ourselves in today, the business of America—YOUR business—continues to operate every day.

· As shippers and carriers you have concerns about the economy, the nation’s transportation infrastructure system, and the railroad industry in particular that are well beyond the physical security of the rail network.

· I will address all of these issues in my remarks, but I will start by stating something that may seem obvious to everyone assembled here today.

· I think it’s important for us to remind ourselves that the nation’s freight transportation industry is critical to the nation’s economy.

· In many ways, it is also an indicator of the state of the economy.

· Yesterday, you heard from my boss, Transportation Secretary Mineta, who spoke about the new thinking going on at the Department of Transportation to make sure that we have the strong transportation system we need to support a strong economy. Much of that thinking focuses on moving goods and products safely and efficiently

· President Bush recognizes that improving the transportation infrastructure of America is of vital importance to revitalizing the economy.

· His SAFETEA proposal—the Safe, Accountable, Flexible, and Efficient Transportation Equity Act--is a $256 billion transportation investment program.

· It represents a 21 percent increase over the funding levels found in TEA-21 and maintains a focus on the movement of freight, including the need to improve intermodal connections.

· For example, we propose targeting investment on the so-called critical “last-mile”—that is, road connections from the National Highway System to important intermodal freight facilities.

· Seamless connections between trucks, trains and ships are critical to alleviate current congestion problems--and future bottlenecks-- as freight volumes increase in coming years.

Public-Private Collaboration/CREATE

· The SAFETEA legislation also makes financing tools available for intermodal freight projects, including projects involving improvements to privately-owned facilities that offer public benefits.

· The Transportation Infrastructure Finance and Innovation program provides financing options for surface transportation projects of national or regional significance that cost in excess of $50 million—a threshold that is half of what it was under TEA-21.

· The program leverages Federal funds by requiring private sector participation in project financing.

· This program can be used for any highway, transit, or rail project and can include intermodal facilities, border crossing infrastructure, and expansion of multi-State highway trade corridors.

· A project worth highlighting in this regard is coming together in Chicago—a part of the country of great interest to shippers and carriers alike.

· Every day, about one-third of all freight rail traffic in the United States converges on Chicago. This includes five hundred freight trains with 37,000 cars and 20,000 intermodal containers. Toss in the 700 daily passenger trains and congestion becomes a major issue.

· This congestion not only has a regional impact. It can, and does, adversely affect the movement of freight on a national level.

· Government and railroads in Chicago have been innovative in their approach to freight and transportation policy by coming up with a plan to address the congestion problem. This builds on efforts by former STB Chair Linda Morgan to engage the railroads in considering coordination for common purposes.

· Called CREATE—the Chicago Regional Environmental and Transportation Efficiency program—it can become a national model for public-private cooperation.

· The $1.5 billion project involves the City of Chicago, the State of Illinois, and six Class 1 railroads. The railroads will pay for the business benefits they receive from the improvements and the governmental agencies will pay for the public benefits.

· The plan calls for the creation of five rail corridors, including one for passenger trains. Also included are 25 highway-rail and six rail-rail grade separations.

· This has obvious benefits for congestion reduction and the efficient movement of freight across the nation--particularly as freight rail volume is expected to increase in Chicago by as much as 80 percent by 2020.

· Secretary Mineta believes this is a project with national significance and has given it his strong support.

· In addition, the US Department of Transportation is creating a Chicago Intermodal Team to coordinate activities throughout the department.

Current Railroad Level of Service

· As Administrator of the Federal Railroad Administration (FRA), I obviously have an interest in the knowing how the railroads are providing service to its customers—which includes many of you sitting in the audience here today.

· As shippers, you may have seen strains in rail service beginning in the late summer of 2003. The initial contributing factor was a demand for export grain movement that far exceeded levels of the past six years or so.

· Then, as the economy rebounded, some railroads were not sufficiently positioned to handle the increasing demand.

· Particularly hard hit were the Western railroads, but the Eastern railroads also experienced some problems.

· Today, performance metrics show that rail system velocity is down and terminal dwell time is up for some, but not all, of the major railroads. This indicates to me that the system has not yet reached the level of service efficiency it is capable of.

· The railroads have been, and continue to, hire and train new train crews. In time, this should alleviate the recent service issues.

· With the economy continuing to improve, and demand from shippers likely to increase, I am hopeful the level of service will rise to meet the needs of the market.

· The STB has primary responsibility on this issue, and we are working closely together to monitor this situation. We are not seeing any evidence that these issues are a widespread problem for rail safety.

Viability of Carload Service

· Even under normal circumstances, rail service for merchandise carload traffic has lacked the shipment reliability needed by a large segment of shippers—many of whom have shifted their business to the trucking industry.

· Carload business has also been a concern for the railroads. Over the past three years that concern has generated substantial debate about its future.

· FRA is interested in this issue because of the possible consequences to the railroad industry if carload service proves not to be viable in the long run.

· We commissioned a consulting study to look into this question and I received the final report just last week.

· I am relieved to report the study concluded that, while carload service is not now self-sustaining, focused management implementation of carload scheduling systems has the potential to make carload service more than cover its cost of capital.

· Carload scheduling is an operational plan for moving each car from an origin siding, through two or more classification yards, to a siding at the final destination.

· This is what distinguishes it from trainload service—both bulk and intermodal—that move direct from origin to destination with little or no requirement for intermediate handling.

· Interwoven in this operation is scheduled train service at each step of the process.

· The full benefits for scheduled carload service would be attained only if all the major railroads fully coordinated their scheduling systems. However, sufficient benefits can be achieved from separate systems to make scheduling worthwhile.

· There is one word of caution: researchers report that due to competition, approximately 80 percent of railroad productivity gains since 1980 have been passed through to shippers via rate savings or more service per rate dollar.

· That shippers have received some benefits from deregulation does not imply that all shippers are uniformly advantaged, or that all shippers have no complaints about rates or service.

· Yet if the majority of the productivity gains from carload scheduling could be passed through to shippers, the railroads would be left again with insufficient contribution to earn the cost of capital for providing the service.

· As someone who carefully monitors the extent to which the railroads keep their physical plant, rolling stock and operating practices in compliance with our extensive regulations, I am concerned about the railroads having sufficient income to re-invest in the substantial costs of maintaining safety.

· The full report will be posted on the FRA web site in the near future.

Need for Collaboration

· This issue shows the challenges of working on issues that advance the interests of better railroading while sharing resulting gains between carriers and shippers alike.

· Another example is the expansion of technologies that offer wayside monitoring of railcar mechanical conditions.

· While we have no regulatory role thus far, we are watching how these technologies are being rolled out and how railroads and private car owners are sorting out how this diagnostic information affects frequency of and payment for car repairs.

· We trust that all participants will be able to work constructively, as this and other new technology have potential to make substantial advances in mechanical diagnostics, which may have long-term effects on our safety regulations and enforcement.

· We have similarly high hopes for safety and operational improvements that are possible through the implementation of positive train control technologies.

· We are working on completing an analysis of the benefits of PTC as requested by Congress.

· We are still not in a place where we can justify mandating such systems, even if there were technologies available for nation-wide application, which there aren’t.

· The future of PTC too may lie in what these benefits may be and how the benefits are shared between carriers and shippers.

· I have faith that shippers and carriers will be able to work out these issues, because you do it each and every day, as new services are launched and shipments are increased.

· This kind of collaboration is necessary if railroads are to play the role in our transportation system that they have to in the future. This is more than just marginal improvement in market share or taking business from another rail carrier—this future challenge is to accommodate some of the 80% growth in freight traffic expected in the next 20 years!

· I would challenge all those present to consider that while people are looking down as you fight for a piece of a freight logistics pie, you may be ignoring the big, Monty Python-sized 16 ton weight of increased traffic heading from above.

· It is a crude analogy, revealing my own entertainment influences (using cartoon imagery rather than a quote from Shakespeare), but the point is made: we all have work to do.

Rail Security

· And, finally, I come back to where I started my day—rail security.

· FRA continues to work with the Department of Homeland Security’s Transportation Security Administration and other entities to enhance railroad security.

· Even before 9/11, we recognized that regulations alone are not sufficient to counter the actions of terrorists who may strike without prior warning.

· FRA promotes the security of the freight railroad network by working in partnership with other Federal agencies and the rail industry. One of our primary roles is protecting the security of hazardous materials shipments.

· We do this by administering and enforcing a regulation from our sister agency RSPA—the Research and Special Programs Administration--requiring hazardous materials shippers and carriers to develop and implement security plans.

· The security plans must describe the measures that are in place to protect the security of these shipments while in transit and also while in storage. In addition, appropriate employee training is required.

· We are still working out details between DOT and DHS on how this and other security related directives would be monitored for compliance.

· Our agency is also participating in joint efforts to conduct a review and security risk assessment of hazardous materials shipments through major metropolitan areas for the purpose of preventing potential terrorist attacks involving these commodities.

· Just last week, I joined DHS in meeting with leaders from the City Council of Washington, DC, and representatives from the Mayor’s office, the police department, the fire department-- to discuss plans to carry out a risk assessment of hazardous materials rail shipments in our nation’s capital.

· A risk assessment team with rail safety and security experts from FRA participating has already begun its activities.

· We hope that this effort will serve as a precursor and model for similar risk assessments in other metropolitan areas around the nation with significant volumes of hazardous materials shipments.

· As you can tell from yesterday’s activities at DHS and at this morning’s hearings and those to come, we will be working on these issues with much more public interest.

· A blanket of security should not be so heavy as to restrict our breathing or range of motion, to offer yet another tortured analogy.

· We will strive to balance the need for security of the nation’s railroad system with maintaining its functionality.

Closing

· I hope you can sense from my remarks that I feel there are challenges and opportunities for the freight transportation industry.

· I, for one, am an optimist. I believe the challenges can be overcome and I hope the opportunities will be maximized.

· I want to express my thanks to NIT League for inviting me to speak today and I wish you all the best for the remainder of this conference and in your individual endeavors.