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1 SUMMARY Impacts of Public Policy on the Freight Transportation System The nation's freight transportation system is largely invisible to most Americans, includ- ing many public officials. Not only is the freight system little known or understood, there is even less understanding of the many links through which government actions, whether related to transportation or not, can affect the movement of freight. This research is intended to address this shortcoming by examining freight system impacts relative to a wide range of public policies. The study focuses on recently enacted policies as well as some policies cur- rently being debated but not yet adopted. Through an extensive literature review, numerous interviews with freight industry experts, and some new analysis, this report reveals the numerous ways that government policy deci- sions have affected (or could affect) the freight system. Potential effects include changes in costs and revenues to freight carriers and shippers, changes in freight volumes or shifts in mode, changes in freight service quality, and changes to freight system operations and safety. In addition to highlighting freight system impacts, the report assesses the extent to which such impacts were unexpected by the relevant decisionmakers. Finally, the report considers the opportunity to improve public policy decisions through access to better information about freight system impacts. What Public Policies Can Affect the Freight Transportation System? Many government policies have affected or could affect the freight system. Most policies relate to one of the following topics: Safety Security Land Use Environmental Energy and Climate Change Infrastructure Operations and Maintenance Infrastructure Investment Infrastructure Finance Trade and Economic Regulation Table S-1 provides examples of policy decisions at all three government levels that may affect the freight system.

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2 Table S-1. Examples of public policies that may affect the freight system. Policy Federal State Local/Regional Category Safety Truck, railroad, and aviation HOS rules Highway speed limits A few local railroad Interstate speed limits Enforcement of FMCSA speed limits Truck electronic onboard recorder rules truck rules Parking and truck NHTSA rules for trucks Restrictions on access restrictions FRA inspection of tracks and vehicles locomotive horns FAA rules for aircraft design Hazmat rules Coast Guard rules for barges Security Transport. worker iden. credential (TWIC) Some routing and Some routing and Truck driver background checks infrastructure access infrastructure access U.S. exit fingerprinting rules restrictions restrictions Chemical facility anti-terrorism standards Screening cargo on passenger aircraft Customs rules/programs (FAST, CTPAT) Land Use Brownfields programs Land use planning Zoning and planning requirements Redevelopment Truck parking limits Environmental Emission standards Air quality programs Truck idling limits Fuel standards CA in-use truck Airport noise limits Air quality standards standards Vessel speed limits CMAQ Program CA MOA on Tier 2 Vessel shore power Management of dredging spoils locomotives and idling requirements Water pollutant discharge rules for vessels Port dray truck rules Energy and Requirements or subsidies for alt. fuels Requirements or Investment/ Climate GHG cap and trade subsidies for alt. fuels incentives for Change CAFE standards for trucks GHG cap and trade alternative fuel CA truck fuel efficiency infrastructure and Programs and incentives to improve fuel vehicles efficiency (e.g., SmartWay) requirements Infrastructure Truck size and weight rules Highway operations and Truck routing limits Operations COE maintenance dredging maintenance decisions Truck parking and COE lock and dam maintenance Enforcement of size and restrictions Maintenance weight rules Port and airport COE decisions on water levels Hwy seasonal load limits operations Truck routing restrictions Infrastructure Level of highway funding Level of highway Local roadway Investment Support for large, targeted projects funding funding Highway design standards Project selection and Project selection and Some aid for RR infrastructure design design Level of inland waterway investment Infrastructure Fuel taxes (on-road) Fuel taxes (on-road) Tolls Finance Fuel taxes (inland towing) Other taxes Local taxes Approval for tolls and other user charges Tolls and other user Privatization of Airport peak pricing policy charges roads Privatization of roads Port fees (e.g., TEU Port fees fee, gate pricing) Trade and NAFTA, other trade agreements None None Economic Jones Act Regulation Agricultural subsidies STB rules on railroad rates How Do Public Policies Affect the Freight Transportation System? To illustrate freight system impacts, this report reviews more than 25 government policy decisions. Table S-2 summarizes some of the potential effects of different types of policy. Although this is a summary, it illustrates the diversity of impacts and complexity of the issue.

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3 Table S-2. Examples of freight system impacts. Type of Policy Potential Impacts Direct taxes or charges to carriers (fuel taxes, vehicle excise Change in carrier costs taxes, tolls) Change in shipper costs Shifts in modal share between truck and rail Change in freight volumes in corridors Environmental regulations that increase equipment or fuel prices Change in carrier capital and operating costs Change in shipper costs GHG cap and trade Loss of rail carrier revenue Increase in carrier fuel costs Renewable fuel standards Potential increase in rail carrier revenue Increase in carrier fuel costs Air-cargo screening on passenger flights Degraded service in air cargo Shift to all-cargo carriers Fingerprint rules for outbound ships and planes Increase in carrier costs Rules that directly change operations (truck route restrictions, Increase in carrier costs parking restrictions, restrictions on rail operations) Change in freight volumes in corridors Degraded service Land use policies that affect location of freight facilities Increase in carrier costs Increase in shipper costs Possibly degraded service Dredge spoil disposal policies Increase in shipper costs Shifts to other ports Driver hours of service rules Increase in costs for some carriers Truck size and weight rules Change in fuel use Change in shipper costs Truck speed limits and speed governor rules Decrease in fuel costs Increase in capital costs for some carriers Change in profitability for some carriers Availability of Information on the Effects of Policies Information on the effects of various policies on the freight system is ultimately useful only if it improves future policy decisions. There is great variation in the quality and depth of analysis of freight system impacts done in advance of a policy decision and the degree to which results are available to decisionmakers. Many of the policy examples reviewed in this study involve rules and regulations established by Federal agencies that apply directly to freight carriers. Most of the safety, security, and environmental policies fall in this category. The Federal rulemaking process typically requires that freight industry impacts are analyzed in these instances. Although these analyses may not be perfect, they provide an opportunity for decisionmakers to consider freight system impacts and for stakeholders to comment on the analyses. There are other regulations that apply directly to freight carriers for which an analysis of freight system impacts is generally not performed for various reasons. For example, if the regulation applies to a much broader segment of the transportation sector than just freight (e.g., all motor vehicles or all aircraft), then the analysis may not consider those effects that are freight-specific. Alternatively, if the regulation is enacted at the state or local level, or imposed by Congress, there may be no requirement for any analysis of industry impacts. Finally, freight system impacts may not be analyzed simply because they are (1) not recog- nized, (2) considered negligible, or (3) too difficult to quantify. Then there are all the policies that do not involve regulations directly applicable to freight carriers. Most decisions about infrastructure investment, pricing, trade, land use, and energy/climate change fall in this category, as do some environmental, safety, and security regulations. These types of policy decisions rarely receive a forward-looking analysis

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4 Table S-3. Classification of policy examples--availability of impact information. Regulations that Apply Directly to Freight Other Public Policies Carriers Hours of Service for Drivers Truck Speed Limits and Governor Rules Freight System Aircraft Fuel Tank Flammability Rules Impacts Analyzed TWIC for Ports and Inland Towboats Emissions Standards for Diesel Engines Int'l Air Emissions Regulations for Vessels Federal Truck Size and Weight Rules Alien Fingerprint Rules for Outbound Planes Local Land Use Policies and Ships Restrictions on Disposal of Port Dredging Spoil Air Cargo Screening Requirements Local Policy to Oppose a Railroad Acquisition Idling Restrictions for Trucks and Highway Infrastructure Investment Freight System Locomotives Inland Waterway Infrastructure Investment Impacts Water Pollutant Discharge Rules for Vessels Highway Tolls and Other User Charges Generally Not Analyzed State Truck Route Restrictions Lockage Fees for Inland Waterways Local Truck Access and Parking Policies Peak Pricing for Port Trucks Local Restrictions on Locomotive Horns Peak Pricing for Airports State Truck Size and Weight Rules GHG Cap and Trade Renewable Fuel Standards, Incentives of freight system impacts; however, they may have the largest and most far-reaching impacts on the freight system. Table S-3 shows these three categories of policies with examples of each. Note that these are necessarily generalizations and numerous exceptions exist. For example, although most state and local governments do not perform a systematic analysis of the industry impacts of truck idling regulations, California undertook such an analysis. Decisionmaker Constituencies The other element of the decision context concerns the institutional and political set- ting in which decisions adverse to the freight system are made. In some cases, good infor- mation on freight system impacts would make little difference in a policy decision because the decisionmakers are driven by other imperatives. One example of this would be restric- tions on truck traffic on local roads, imposed by local or state governments. From the point of view of a city council or county board, by far the dominant issue may be quality of life in the affected area. Concerns about the efficiency of freight movement probably will carry little weight in such decisions. An exception might occur if a significant local employer were damaged to the extent that it might consider moving its facility. In these cases, state gov- ernments may be taking a broader economic view, but decisionmakers must also answer to voters for whom quality of life is an immediate, palpable issue, and the efficiency of the national freight system is a distant abstraction. The point is not that these governments are making "good" or "bad" decisions, but that differing levels and differing types of governments have different concerns and priorities, and one has to bear these in mind when analyzing policy choices. It is generally true that the lower the level of government, the more officials are concerned with purely local impacts and the less concern they have for national effects. It is also true that, the lower the level of government, the less the impact on the national system of the decisions of any single gov- ernment. But similar decisions by many local governments can affect the national system.

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5 One example of local government decision is local parking restrictions coupled with local and state failure to provide adequate truck rest stop and parking facilities. Decision Context Framework The decision-making context reveals three general cases in regard to understanding the freight system, the potential effects of the policy, and the priority accorded to effects on the freight system: Case 1 Policymakers have a good understanding of the freight system and the potential effects of a policy decision. Policymakers have a relatively high level of concern for freight system efficiency. Additional information on freight impacts may be helpful to policymakers, but is unlikely to change decisions in most cases. Case 2 Policymakers have a limited understanding of the freight system and the potential effects of a policy decision. Policymakers have some concern for freight system efficiency. Additional information could change decisions. Case 3 Policymakers have a poor understanding of the freight system and potential effects of a policy decision. Policymakers have little or no concern for freight system efficiency. Additional information probably would not change decisions. Table S-4 summarizes how these three cases apply to the policy examples covered in this report. Conclusions The research indicates the following: 1. A wide variety of public policies can affect the freight transportation system. In many cases, this potential for impacts is obvious, as in the case of investment and operations decisions concerning freight system infrastructure or environmental and safety regulations affecting freight equipment. In other cases, the potential to affect the freight system is less obvious. This is particularly true in the case of policies enacted to achieve goals unrelated to transportation (e.g., land use policies or dredge spoil disposal policies) and policies that affect the entire transportation system, both passenger and freight (e.g., highway investment policy, alien finger- printing rules, or renewable fuel standards). 2. There are relatively few examples of recent public policies that have had unexpected impacts on the freight transportation system. Among the more than 30 individual policies exam- ined in this study, only a handful have resulted in impacts on the freight system that were not recognized by the decisionmakers. These few examples include highway and waterway investment and finance policies, as well as some local government decisions regarding land use and truck access. When they have occurred, unexpected impacts have been relatively minor in many instances. For example, the magnitude of the 2006 truck "pre-buy" that resulted from new EPA emis- sion standards was unexpected, but its effects on the freight system were minor. Nearly all of

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6 Table S-4. Decision context of policy examples. Level of Implementation Category Policy Federal State Local Safety Hours of Service Rules for Drivers Case 1 Truck Speed Limits and Governor Rules Case 1 Case 2 Aircraft Fuel Tank Flammability Rules Case 1 Restrictions on Locomotive Horns Case 1 Case 3 Security TWIC for Ports and Inland Towboats Case 1 Alien Fingerprint Rules for Outbound Planes, Ships Case 2 Air Cargo Screening Requirements Case 2 Land Use Local Land Use Policies Case 2 Environment Emissions Standards for Diesel Engines Case 1 Case 1 Idling Restrictions for Trucks and Locomotives Case 3 Case 3 Restrictions on Port Drayage Trucks Case 2 Restrictions on Disposal of Port Dredging Spoil Case 2 Case 2 Case 3 Water Pollutant Discharge Rules for Vessels Case 2 International Air Emissions Regulations for Vessels Case 1 Energy and GHG Cap and Trade Case 2 Climate Change Renewable Fuel Standards, Incentives Case 2 Operations and Truck Route Restrictions Case 2 Case 3 Maintenance Local Policy to Oppose a Railroad Acquisition Case 3 Local Truck Access and Parking Policies Case 3 Truck Size and Weight Case 2 Case 3 Infrastructure Highway Infrastructure Investment Case 1 Case 1 Investment Inland Waterway Infrastructure Investment Case 2 Infrastructure Highway Tolls and Other User Charges Case 2 Case 2 Finance and Lockage Fees for Inland Waterways Case 2 Pricing Peak Pricing for Port Trucks Case 2 Peak Pricing for Airports Case 1 the safety, environmental, and operations policies the research team examined have had either minimal freight system impacts or impacts that were fully anticipated by policymakers. Some of the policies reviewed, particularly those related to security, had not been in place long enough to assess their effects at the time of the research. Some of these policies, such as the TWIC rules, may eventually have significant and possibly unexpected freight system impacts. 3. Significant unexpected freight system impacts are unlikely to occur in a short time frame for policies recently adopted or currently debated. The lack of unexpected impacts is not surprising, given our focus on recent (primarily since 1990) policies and the nature of the pol- icy issues during that period. One can certainly identify older policy decisions that have even- tually resulted in major freight system impacts. Examples include the Federal-Aid Highway Act of 1956 that established the Interstate system or the Jones Act of 1920 that affects coastal shipping. But the major freight system impacts of these policies were not felt for decades. Other historic examples, such as the Motor Carrier Act of 1980 that deregulated trucking, have resulted in major freight system impacts in a relatively short time frame. But no current or recent policies involve such a major restructuring of the freight industry. 4. There are few situations in which better information on freight system impacts could change policy decisions. In many cases, government decisions that affect freight transporta- tion are made in the context of either (1) good information on potential impacts and a con-

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7 cern for the freight system or (2) a lack of concern about freight system impacts. In the latter situations, providing policymakers with better information about freight system impacts will make little or no difference. Examples of policy decisions that could potentially be influenced by better information include Truck speed limits Some Federal security regulations (e.g., air cargo screening) Local land use decisions Environmental regulations on dredge spoil disposal and vessel water pollutant discharge GHG cap and trade and alternative fuels regulations State truck route restrictions Road pricing for trucks Investment and finance decisions for inland waterways These are the Case 2 examples. In all of these cases, more or better information on the freight system could potentially improve policy decisions at the Federal, state, or local levels. The key to bringing about better decisions--better in the sense that effects on freight are considered--is greater awareness of freight on the part of relevant officials. There is no single way to bring this about. It is probably easiest to achieve at the Federal level, where executive agencies could ensure that they give freight impacts full consideration when analyzing effects of proposed rules. An information program with the goal of calling the attention of state officials to non-transportation policy areas where decisions can affect the efficiency of freight movement could also be considered. Perhaps this might best be done by state DOTs making other elements of their own state governments more aware of potential effects on freight. Table S-4 shows that, among the policies reviewed in this report, only three of the Case 2 examples are at the local level, and two of those are concerned with truck movements at ports. These are instances where state DOTs or other state agencies could offer useful informa- tion in some cases. If local authorities perceive a state DOT as encroaching on their respon- sibilities, such efforts could be counterproductive. However, freight industry executives have pointed out that state economic development agencies have sometimes been effective in showing local governments how, for example, new intermodal terminals can bring jobs and tax revenues. There is no single or simple way to bring a higher level of freight aware- ness to relevant officials, but there are many possible ways that could be effective in differ- ent contexts.