For freight providers and shippers alike, the landscape is pitted with hazards. There's a multitude of measures that will degrade service and send costs soaring if they aren't properly addressed. Even worse is the fallout from congressional inaction, as lawmakers continue to dither over the federal budget, ignoring the damage being wrought by sequestration.
Where to start? Leslie Blakey, president and executive director of the Coalition for America's Gateways & Trade Corridors, provided a rundown of pending legislation and regulations on surface transportation, at the Journal of Commerce's annual Trans-Pacific Maritime Conference in Long Beach, Calif. All of them, she said, carry significant risk factors for the industry.
It's a jungle of acronyms. There's WRDA, the Water Resources Development Act, which was last reauthorized in 2007 (over a veto by President Bush). Unanswered questions include whether Congress will restructure the Harbor Maintenance Trust Fund, which is supposed to pay for dredging and maintenance of the nation's ports and harbors. Blakey said there's currently no rational process for getting projects done in a timely manner, or deciding which ports get funding. Equally critical is the state of the corresponding Harbor Maintenance Tax, which collects $1.5bn a year, although only half the money is going to the U.S. Army Corps of Engineers for its designated purpose.
On the rail side, two proposed bills could hurt or help the industry, depending on which direction they take. PRIIA, the Passenger Rail Investment and Improvement Act of 2008, is primarily concerned with authorizing Amtrak, but also encourages freight rail planning and sets out guidelines for resolving track disputes with passenger services. The current bill expires Oct. 1, 2013, and failure to pass a new authorization "could be very damaging from an efficiency point of view for freight," Blakey said.
Also expiring on that date is RSIA, the Rail Safety Improvement Act of 2008, which covers dozens of rulemakings and safety elements, including full implementation of a Positive Train Control system by 2015. Many industry experts believe that's not a realistic goal, despite major railroads having already spent more than $2.7bn of an estimated $5bn price tag on the technology.
Pending regulations on surface transport are plentiful, if not rampant. Probably the most controversial are stricter limits on hours of service for truck drivers, under a final rule issued in 2011 by the Federal Motor Carrier Safety Administration. Slated to take effect July 1, 2013, the mandate promises to cost industry an additional $1bn a year in reduced driver productivity, Blakey said. Other new regs include one that requires the installation of electronic on-board recorders in truck cabs, and another that identifies the riskiest commercial drivers through the new FMSCA program known as Compliance, Safety, Accountability, or CSA.
But the biggest question mark of all remains the future of surface transportation funding. The current law known as >MAP-21 was enacted last July and runs until Oct. 1, 2014. It authorized some $109bn in transportation projects during that period, but failed to raise the federal gas tax, which is the only sensible way to prop up the woefully inadequate Highway Trust Fund. Blakey's coalition is already gearing up for the next funding bill, hoping that it will include such elements as a national freight plan, designated freight network and means for streamlining major projects. But a gas tax rise? Don't count on it.
Kurt Nagle, president and chief executive officer of the American Association of Port Authorities, made the case at TPM for pumping up federal investment in seaport-related infrastructure. At a time when countries such as Canada, Brazil and Panama are spending billions to improve their port and waterways networks, the U.S. must act now in order to stay competitive, he said. What's more, American ports need to prepare for the wave of larger containerships that will be entering into service over the next few years. Many ports lack the water depth, berthing facilities, cranes and intermodal yards to handle the new behemoths.
MAP-21 is a good start, said Nagle, "but more needs to be done." He would like to see ports get at least 25 percent of the money issued under the Department of Transportation's TIGER< grants program. And he wants all of the funds collected under the Harbor Maintenance Tax to go toward water-related projects. Nagle was heartened by President Obama's mention of ports in the 2013 State of the Union address, in particular his support for a "fix-it-first" policy for infrastructure investment. But these are empty words without the money to back to them up.
To which one might reply, what money? Sequestration is the word of the day, forcing $1.2tr in federal spending cuts over 10 years because Congress failed to act on a reasonable budget plan. JPMorgan economist Mike Feroli has predicted that the $85bn of cuts scheduled for 2013 will result in real GDP growth of just 1.9 percent in the fourth quarter over the same period of 2012, versus 2.1 percent in the year prior. Federal programs affecting transportation, including TIGER grants, the Highway Trust Fund, Harbor Maintenance Fund, Inland Waterways Trust Fund and Corps of Engineers, face a total of $1.7bn in cuts.
The damage to transportation, and the U.S. economy in general, has only begun to be felt. But it didn't have to be this way. TPM panelist Susan Kohn Ross, an international trade attorney with Mitchell Silberberg & Knupp LLC, placed the blame squarely on Capitol Hill. Congress's recent actions on the budget, she said, "will affect transportation horribly. It has clearly gone off the rails."
Ross made particular mention of the coming cuts at U.S. Customs and Border Protection, which has been without a permanent commissioner for some 15 months. As a result, she said, the agency lacks the political clout "to go up on the hill and make things happen that need to happen." Expect serious backups of freight at the ports, as Customs inspectors are denied the overtime necessary to clear out the containers that remain at the end of a workday. Rulings and protests, too, will take even longer to get resolved. Said Ross: "It's going to make a mess."
One can always hope that sanity will somehow prevail, and that lawmakers and the Administration will find a way to deactivate those mines that stand in the way of a safe and efficient transportation system. Given the extremism that grips today's Congress, however, I wouldn't hold out too much hope.
As Ross put it: "We are in an impossible situation that is totally unforgivable."
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