Impacts of Public Policy on the Freight Transportation System (2011)

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72 Information on the impacts of various policies on the freight system is ultimately useful only if it improves future policy decisions. The previous chapters offer examples of how pub- lic policy decisions have affected the freight transportation system and the extent to which those impacts were unexpected. It is also useful to consider the context in which policy decisions are made in order to understand how better information on impacts might improve policy decisions. For our purposes, decision context has two significant ele- ments: (1) the information about, and understanding of, the freight system impacts that is available to the decision- makers; and (2) the constituency to which the decision- makers must answer and what that constituency expects of the decisionmakers. Availability of Information on Impacts of Policies As illustrated in Chapters 4 and 5, 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 poli- cies fall in this category. The Federal rulemaking process typically requires that freight industry impacts be analyzed in these instances. These analyses may not be perfect. For exam- ple, they often estimate only cost to an industry segment and do not extend the analysis to impacts on systemwide per- formance, modal competition, and so forth. Nonetheless, such analyses provide an opportunity for (1) decisionmakers to consider freight system impacts and (2) stakeholders to comment on the analyses. Other regulations 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 impacts that are freight-specific. Alter- natively, 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 not recognized or are considered negligible or too difficult to quantify. Then there are all the policies that do not involve regula- tions 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 envi- ronmental, safety, and security regulations. Although these types of policy decisions rarely benefit from a forward-looking analysis of freight system impacts, these decisions may have the greatest and most far-reaching impacts on the freight system. Table 6-1 shows these three categories of policies with examples of each. These categories are necessarily generaliza- tions and numerous exceptions exist. For example, although most states and local governments do not perform a system- atic analysis of the industry impacts of truck idling regula- tions, California did undertake such an analysis. Decisionmaker Constituencies The other element of the decision context concerns the institutional and political setting in which decisions adverse to the freight system are made. In some cases, good information on freight-system impacts would make little difference in a policy decision because the decisionmakers are responding to other imperatives. One example of this would be restrictions on truck traffic on local roads imposed by local or state gov- ernments. 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 move- ment will likely carry little weight in such decisions. An excep- tion might occur if a significant local employer were damaged C H A P T E R 6 Conclusion

73 to the extent that it might consider moving its facility. In these cases, state governments 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. Rather, it is that differing levels and differ- ing types of governments have different concerns and priori- ties, and one has to bear these in mind when analyzing policy choices. It is generally true that the lower the level of govern- ment, 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 government. But similar decisions by many local governments can affect the national system. One example of this is local parking restrictions coupled with local and state failure to provide adequate rest and parking facilities. Decision Context Framework Combining these two elements of the decision-making con- text, the research team can identify three general cases in regard to understanding the freight system, the potential impacts 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 impacts 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 impacts of a policy decision. • Policymakers have some concern for freight system effi- ciency. • Additional information could change decisions. Case 3 • Policymakers have a poor understanding of the freight sys- tem and the potential impacts of a policy decision. • Policymakers have little or no concern for freight system efficiency. • Additional information would not likely change decisions. These cases can be summarized as follows: In Case 1, policy- makers understand the freight system, and they care about it. In Case 2, they have partial freight system knowledge; they care some and might care more, if they knew more. In Case 3, they have little or no knowledge of the freight system and are unlikely to care about adverse impacts. Figure 6-1 illustrates the relationship between concern about adverse impacts relative to an understanding of impacts. Table 6-1. Classification of policy examples—availability of impact information. Regulations that Apply Directly to Freight Carriers Other Public Policies Freight System Impacts Analyzed HOS for Drivers Truck Speed Limits and Governor Rules Aircraft Fuel Tank Flammability Rules TWIC for Ports and Inland Towboats Emissions Standards for Diesel Engines Int’l Air Emissions Regulations for Vessels Federal Truck Size and Weight Rules Freight System Impacts Generally Not Analyzed Alien Fingerprint Rules for Outbound Planes and Ships Air Cargo Screening Requirements Idling Restrictions for Trucks and Locomotives Water Pollutant Discharge Rules for Vessels State Truck Route Restrictions Local Truck Access and Parking Policies Local Restrictions on Locomotive Horns State Truck Size and Weight Rules Local Land Use Policies Restrictions on Disposal of Port Dredging Spoil Local Policy to Oppose a Railroad Acquisition Highway Infrastructure Investment Inland Waterway Infrastructure Investment Highway Tolls and Other User Charges Lockage Fees for Inland Waterways Peak Pricing for Port Trucks Peak Pricing for Airports GHG Cap and Trade Renewable Fuel Standards, Incentives

74 Summary Discussion This section briefly discusses how these three cases for decision-making context apply to the public policies reviewed in this report. The application of this framework is inherently subjective, and others might argue with the case category applied to some policy examples. Nonetheless, this frame- work illustrates that a significant portion of policy decisions (those identified as Cases 1 or 3) would not likely change as a result of better information on freight system impacts. Safety Policy Safety policy areas are primarily at the Federal level, with the exception of state speed limits and local restrictions on loco- motive horn use, which involve both local governments and the USDOT. For HOS (trucking and rail) and horn restric- tions, considerable information is available to the USDOT and Congress, and both entities are aware of impacts on the freight system. At the Federal level, these are Case 1 policy areas. This is also true, to a degree, for speed limits and gov- ernors, although it may be that both Congress and the Exec- utive Branch could benefit from a better understanding of freight impacts. States do not likely understand the impacts of differential speed limits for trucks and might change their policies with more information; the research team considers this policy a Case 2. Local restrictions on locomotive horns at grade crossings are a Case 3 issue. Presented with abundant data on the crashes that result from banning horns, localities have persisted with bans (see Section 4). Grade-crossing crashes impose some cost on railroads in dealing with legal issues that might arise and temporary effects on operations. Also, the rule that the USDOT finally issued allows horn bans to remain in place under cer- tain conditions, one of which is reduced train speed. Addi- tional information for local governments on costs to railroads would not change their policy preferences. Security Policy Security policies, nearly all Federal, present a somewhat mixed picture. By the time DHS issued its final TWIC rule, it had acquired a great deal of information and heard industry concerns in detail. Much of industry concern was addressed when DHS dropped the requirement for a real-time cardreader from the final rule. DHS acted in full knowledge of the con- sequences; this was a Case 1 policy choice. When considering the fingerprinting requirement for outbound ships and planes, it appears that DHS was largely focused on passenger carriers and simply did not think about effects on air cargo or ocean carriage. Better information might have changed the policy decision, so this is a Case 2 example. The requirement for 100 percent screening of belly cargo for passenger planes came from Congress. The effect is likely to be significant changes in the way domestic air cargo moves, as cargo shifts away from passenger carriers. As illustrated in the case study in Section 5, it is unlikely that these impacts were fully expected. The research team considers this a Case 2 choice; more infor- mation on the consequences might or might not have resulted in a different regulation. Land Use Policy Land use issues are in the domain of local governments; these are issues in which city councils, county boards, and plan- ning commissions are responding to quality-of-life concerns and the desire for local economic development. But some of them are also issues where additional information may be helpful. One example relates to truck terminals. From the interviews, the research team learned that local governments will sometimes encourage a cluster of distribution centers— sources of taxes and jobs—but be unwilling to allow a truck terminal in the same cluster because of its perceived negative impacts. This is a case where the authorities could be shown that trucks must bring goods to and from the distribution centers in any event and forbidding a truck terminal in the distribution center cluster may actually increase truck traffic, noise, and emissions on local roads. Recent history suggests that, in the face of demand for residential, office, and retail redevelopment, preservation of harborfront land for port and related freight uses will be a hard sell in many cities. However, the case study in Section 5 shows how local officials’ understanding of freight system impacts can sometimes lead to a solution that satisfies the competing interests. On balance, the research team categorizes land use decisions as Case 2; additional information on the freight sys- tem and policy impacts can make a difference. Figure 6-1. Three cases for decision-making context. Low High Understanding of Freight System and Impacts of Policy on System Co nc er n ab ou t A dv er se Fr ei gh t S ys te m Im pa ct s Case 3 Case 2 Case 1 Lo w H ig h

75 Environmental Policy Environmental policy decisions occur within various con- texts. At the Federal level, EPA rules that directly affect freight carriers almost always involve an attempt to quantify freight industry impact. This has been the case for air quality regula- tions, such as diesel engine emissions standards and the pro- posed sulfur oxide Emission Control Area for ships. Inland waterway towing company executives commended EPA for its handling of these policies, and industry experts in all modes believe the negative impacts of these rules to date have been minimal. There remains uncertainty about the potential impacts of the most stringent standards for locomotives and marine engines (Tier 4). Nonetheless, this is clearly a Case 1 example. EPA’s policy decisions have been informed by an understanding of freight system impacts and a desire to minimize adverse impacts where possible. Disposal of dredging spoil can involve all levels of govern- ment, as discussed in Section 4. Local authorities have protested and filed lawsuits to delay dredging projects. In many cases, the prolonged resistance of local authorities has made it clear that they are indifferent to any economic gains for their region that might come from a deeper channel. On the face of it, one would suppose that local officials would be open to the economic- development argument, especially in light of competition among ports. But the record suggests otherwise, so the research team considers this a Case 3 example. When Federal and state policymakers get involved in these decisions, there is clearly a need for better information about freight system impacts, and such information could influence decisions. Vessel-discharge rules are an oddity. This is a case where a Federal court extended existing rules to cover inland waterways, although EPA had always construed the law not to cover inland barges and towboats. Better information on the freight system would not have changed the judge’s mind. Barge-industry executives believed that EPA needed more information on tow- ing operations before applying discharge rules to them. So the research team considers this a Case 2 choice for EPA. State and local idling restrictions are generally a Case 3 exam- ple. Truck and locomotive idling is considered a nuisance and largely unnecessary. Information about freight system impacts would not likely change these decisions. Moreover, many observers of both the truck and rail industries believe the idling restrictions work to the long-run benefit of both industries because of fuel savings. In the case of California’s truck idling regulation, it appears that policymakers did ana- lyze impacts of the rule. Energy and Climate Change Policy The energy and climate change policy developments have been occurring at both the Federal and state level. Regarding national or regional GHG cap and trade policies, it appears that the potential for negative impacts on railroads has not, thus far, been given much consideration. Whether it would make a difference in a final decision is unclear, but this is an example where additional information could make a differ- ence. So this is a Case 2 example. Renewable fuel standards and incentives also fall in the Case 2 category. These include ethanol and biodiesel man- dates as well as fuel-neutral low carbon fuel standards. To date, the Federal policy decisions have mostly been made in Congress, where support for agriculture appeared to be a main driver in decisions, action was taken with little information on the impact on the freight system. Although the research team’s interviews suggest that there have been no negative freight system impacts to date, the potential for such impacts, such as higher fuel costs or engine maintenance costs, clearly exists. Both state and Federal policy-making in this area could benefit from more information on freight system impacts. Operations and Maintenance Policy State-imposed route restrictions on trucks appear to be a Case 2 example. In devising these restrictions, state govern- ments (e.g., New Jersey and New York) are clearly focused on quality-of-life issues. It also appears that they have given some consideration to the economic effects of restricting truck oper- ations and believe they have struck the right balance between quality of life and the efficiency of freight movement. Nonethe- less, it is possible that additional or better information might lead to some adjustment in their choices. With regard to local government restriction on truck routing and parking and resistance to increased rail traffic, these are clearly Case 3 exam- ples. Additional information would not change decisions. Federal size and weight rules for trucks were revised in 1982 after lengthy debate and were somewhat revised again in 1991. Abundant data were available to inform these debates. Since then, the U.S. DOT conducted a major size and weight study in 2000, and TRB has conducted several studies at the request of Congress and recommended pilot tests of increased limits. Although these studies further the understanding of potential freight system impacts, Con- gress has taken no additional action since 1991 that has made any real change to size and weight rules. This appears to be a Case 2 example at the federal level and a Case 3 example at the state level. The research team’s interviews showed industry concern about state size and weight rules in the western states. The concern is not about the absolute levels of the limits but about variations among states. It is likely that state governments have only limited concern about the system effects of these rule variations, since their main focus is on conditions and operational requirements in their own states. Better information on the costs of dif- fering rules would probably not affect these states’ choices.

76 Infrastructure Investment Policy The USDOT and Congress have both a high level of con- cern for the condition of the highway system and a great deal of information on the issue, although little of that informa- tion is specifically on freight. Overall fiscal issues and the lack of adequate financing devices account for inadequate invest- ment, not lack of information or lack of concern. Thus, this is a Case 1 example. The research team believes the same is true at the state level. The highway system is ubiquitous, but the inland waterways are not; their role in the freight system is not widely known or understood in Congress. USACE understands the importance of the waterways but has found it difficult to get its message across effectively. Waterway investment is a Case 2 example. More and better information could make a difference in policy choices in Congress and, indeed, within the Executive Branch. Infrastructure Finance and Pricing Policy Finance and pricing issues are somewhat more complex than questions about the level of infrastructure investment. In Con- gress, highway and (potentially) waterway pricing issues are perceived largely as getting the right level of revenue to support the programs. Questions about economically efficient prices and potential costs of distorted relative prices do not generate a high level of interest in Congress, state legislatures, or in the Executive Branch outside a fairly narrow circle. As the examples illustrate (see Appendix B), roadway pricing can have signifi- cant freight system impacts, and this information could influ- ence decision-making. Thus, the research team considers Federal and state infrastructure pricing to be Case 2 examples. Peak pricing for trucks at the Ports of Los Angeles and Long Beach was instituted with limited information about potential impacts. In this instance, the local program was implemented to avoid what was perceived to be a less desirable state man- date. The decisionmakers in these types of policy debates have a concern about freight system impacts, and, at least in future policy decisions, their decisions would be influenced by a better understanding of impacts. This is a Case 2 example. Airport peak pricing appears to be a Case 1 example. FAA has a high degree of system understanding and appears to have considered the impacts of its recent rulemaking on the air cargo industry. Table 6-2 summarizes how the three cases of decision con- texts apply to the policy examples covered in this report. Conclusions This study examined how public policy decisions can affect the freight transportation system. Using interviews with industry experts and an extensive review of documents, the research team identified current and recent policy issues with potential freight system impacts, evaluated the magnitude of the impacts, and assessed the extent to which the impacts have been unexpected. The research team drew the following general conclusions based on this research. 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 infra- structure or environmental and safety regulations affecting freight equipment. In other cases, the potential to affect the freight system is less obvious. This is partic- ularly true for policies enacted to achieve goals unrelated to transportation (e.g., land use policies or dredge spoil disposal policies) and policies that affect the entire trans- portation system, both passenger and freight (e.g., high- way investment policy, alien fingerprinting rules, or renewable fuel standards). 2. There are relatively few examples of recent public poli- cies that have had unexpected impacts on the freight transportation system. Among the more than 30 individ- ual policies examined in this study, only a handful have resulted in impacts on the freight system that were not rec- ognized 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 emission standards was unexpected, but its effects on the freight system were minor. Nearly all of 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 the research team reviewed, par- ticularly those related to security, had not been in place long enough to assess their impacts at the time of the research. Some of these policies, such as the TWIC rules, may 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 the research team’s focus on recent (prima- rily since 1990) policies and the nature of the policy issues during that period. One can certainly identify older policy decisions that have eventually resulted in major freight sys- tem 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

77 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 restruc- turing of the freight industry. 4. There are a limited number of situations in which better information on freight system impacts could change pol- icy decisions. In many cases, government decisions that affect freight transportation are made in the context of either (1) good information on potential impacts and a concern for the freight system or (2) a lack of concern about freight system impacts. In these situations, providing policymakers with better information about freight system impacts would likely make little or no difference. Examples of policy decisions that could 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 improve policy decisions at the Federal, state, or local levels. The key to bring- ing about better decisions—better in the sense that impacts 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 deci- sions can affect the efficiency of freight movement could also be considered. Perhaps this might best be done by state DOTs Table 6-2. Decision context of policy examples. Level of Implementation Category Policy Federal State Local Safety HOS Rules for Drivers Case 1 Truck Speed Li mi ts and Governor Rules Case 1 Case 2 Aircraft Fuel Tank Flam mab ility Rules Case 1 Restrictions on Locomotive Horns Case 1 Case 3 Security TW IC 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 Emissions Standards for Diesel Engines Case 1 Case 1 Idling Restrictions for Trucks and Locom otives Case 3 Case 3 Environm ent 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 GHG Cap and Trade Case 2 Energy and Climate Change Renewable Fuel Standards, Incentives Case 2 Truck Route Restrictions Case 2 Case 3 Local Policy to Oppose a Railroad Acquisition Case 3 Local Truck Access and Parking Policies Case 3 Operations and Maintenance Truck Size and Weight Case 2 Case 3 Highway Infrastructure Investm ent Case 1 Case 1 Infrastructure Invest me nt Inland Waterway Infrastructure Investm ent Case 2 Highway Tolls and Other User Charges Case 2 Case 2 Lockage Fees for Inland Waterways Case 2 Infrastructure Finance and Pricing Peak Pricing for Port Trucks Case 2 Peak Pricing for Airports Case 1

78 making other elements of their own state governments more aware of potential impacts on freight. Table 6-2 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 information in some cases. If local author- ities perceive a state DOT as encroaching on their responsi- bilities, such efforts could be counterproductive. However, freight industry executives have pointed out that state eco- nomic development agencies have sometimes been effective in showing local governments how, for example, new inter- modal terminals can bring jobs and tax revenues. Clearly, there is no single or simple way to bring a higher level of freight awareness to relevant officials, but there are many ways that could be effective in different contexts.