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81 APPENDIX B Details on Impacts of Selected Policies For a subset of the policies considered as part of this re- tances, which helps truck drivers avoid accidents. However, search, the research team performed a more in-depth explo- there is also a relatively strong consensus among researchers ration of freight system impacts. In some cases, this involved and practitioners that a higher variance in vehicle speeds (i.e., original analyses; in others, the research team merely syn- speed differential) increases the risk of accidents by increas- thesized and reported on impacts analyzed by others. This ing the number of vehicle interactions.2 There is no clear con- appendix presents this information for the following five pol- sensus as to whether the net impact of these factors is positive icy examples, all of which were introduced in Section 4. or negative. Analysis of crash data has provided mixed evidence on the Truck Speed Limits and Governors safety impacts of lower speed limits for trucks. In a 1991 report, Truck Size and Weight Rules NHTSA found that more than 90 percent of combination-unit Inland Waterway Infrastructure Investment truck crashes and 95 percent of single-unit truck crashes oc- Highway Tolls and Other User Charges curred on roadways where the speed limit was less than 65 mph Lockage Fees for Inland Waterways and where the incidence of truck speeding in excess of 65 mph was low.3 This analysis, although dated, suggests that speed governors could help prevent only a small portion of truck Truck Speed Limits crashes. and Governor Rules In the United Kingdom, all large combination trucks were Efforts to rein in the top speeds traveled by heavy trucks on speed limited after 1993. Between 1993 and 2005, the accident U.S. highways have taken two approaches: differential speed involvement rate for this vehicle class fell from 40 to 30 per limits and truck speed governors. The use of differential speed hundred million vehicle-kilometers. During the same period, limits has been driven largely by concern for public safety, the accident involvement rate for all heavy goods vehicles whereas the use of speed governors on trucks has been moti- increased slightly from 18.5 to 18.8 per hundred million vated by both public safety and an interest in achieving better vehicle-kilometers.4 Although this data does not isolate the fuel economy. The two approaches have similar impacts in that effect of mandatory speed governors, it supports the hypoth- they result in trucks traveling more slowly and usually at speeds esis that they improve highway safety. lower than those of the cars around them. TRB's 2008 synthesis found a lack of relevant published research on how speed governors affect safety and instead Safety Impacts The safety impact of creating differential speed limits for 1TRB. CTBSSP Synthesis 16: Safety Impacts of Speed Limiter Device Installations cars and trucks (either through lower posted speed limits for on Commercial Trucks and Buses. 2008. trucks or the use of speed governors) has been the subject of 2Johnson, Steven L. and Naveen Pawar. Cost-Benefit Evaluation of Large Truck- much debate among researchers and policymakers. Research Automobile Speed Limit Differentials on Rural Interstate Highways. For the Research clearly finds that lower vehicle speeds reduce the severity of and Special Programs Administration, U.S. DOT. November 2005. 3NHTSA. Commercial Motor Vehicle Speed Control Safety. Report # DOT-HS- crashes and the incidence of fatalities. This is because impact 807-725. May 10, 1991, p. ES-1. force during a vehicle crash varies with the square of the ve- 4TRB. CTBSSP Synthesis 16: Safety Impacts of Speed Limiter Device Installations hicle speed.1 Lower speeds also improve truck braking dis- on Commercial Trucks and Buses. 2008.

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82 Table B-1. Estimated cost of vehicle retrofits for mandatory speed governors. Non-Recurring Vehicle Cost Per Truck Manufacturer Cost Use existing electronic control module (ECM) $100 $0 Modify and deploy ECM software to make maximum road speed a factory password-protected feature $300 $100 million Replace ECMs with ones that are "hard wired" to prevent tampering with maximu m road speed $2,000 $400 million Install mechanical speed governors on older trucks $1,000 - $1,500 $0 Source: TMA. conducted a small survey of fleet safety managers. For those control systems. Hard wiring the ECM to make tampering fleets using speed governors, safety was selected as the primary even more difficult would entail the design of both new hard- consideration for selecting the maximum speed, followed ware as well as software. Trucks built from 1990 to around by fuel economy. Roughly 56 percent of those surveyed said 1995 do not have the same type of programmable ECM as that the use of speed governors had reduced the frequency of newer trucks. According to TMA, if these trucks were subject crashes; 27 percent indicated that speed governors had had to a speed governor requirement, they would have to be out- no impact, and 14 percent said that they could not deter- fitted with a mechanical speed governor at a cost of $1,000 mine whether governors had had any impact. This response to $1,500 per truck.5 was not as conclusive as the responses fleet managers provided The USDOT has reported that in 2002 there were about regarding the impact of speed governors on fuel economy and 2.6 million Class 7 or 8 trucks in the U.S. fleet.6 If, as men- number of speeding violations. tioned previously, 75 percent of those trucks already have maximum speed settings in place, that would leave at least Operational Impacts 0.6 million trucks without speed governors. In its submission to the NHTSA docket, TMA provided data on the maximum By limiting the top speed at which trucks travel, speed gov- speeds set for a sample of truck purchasers in 2005. Of the ernors can affect many aspects of a carrier's operations. For vehicles sold with maximum speed limits that year, roughly example, a lower maximum speed improves fuel economy 45 percent had maximum speeds set at 69 mph or higher.7 and likely reduces truck maintenance costs. At the same time, Assuming this proportion holds true for the entire fleet, an- however, a lower maximum speed can result in trucks travel- other 0.9 million trucks would need to have their maximum ing fewer miles per day, which can affect revenues and labor speed limit adjusted downward if the Federal government costs. This section explores the impact of truck speeds on var- were to set the maximum truck speed at 68 mph (as requested ious aspects of a carrier's operations. by ATA and the other petitioners). Therefore, at a minimum, a speed governor mandate could cost $150 million (1.5 mil- Vehicle Modification Costs lion trucks at $100 per truck). This cost could be reduced by grandfathering older vehi- Obviously, trucks do not need any new equipment to com- cles. For example, the nine large U.S. carriers that petitioned ply with posted speed limits. However, to comply with a speed the Federal government for a mandatory speed governor rule governor mandate, owners of late-model trucks (mid-1990s requested that the rule apply to trucks of model year 1990 or or later) would, at a minimum, need to access the engine's elec- newer. In its petition, ATA requested that the rule apply only tronic control module and change its maximum speed setting. to new trucks, which would eliminate the need to retrofit the Fleet maintenance personnel would be able to do so with the existing fleet. correct electronic service tool. In a submission to a NHTSA rulemaking docket, the Truck Manufacturers Association (TMA) estimated the cost of this operation at $100 per truck. 5Robert Clarke, President, Vehicle Manufacturers Association, submission to As shown in Table B-1, TMA also estimated that making Docket No. NHTSA-2007-26851, March 27, 2007. it harder for the maximum speed setting to be changed by 6U.S. DOT, BTS, National Transportation Statistics, Table 1-21: Number of drivers or vehicle owners would increase the cost per truck. Trucks by Weight, http://www.bts.gov/publications/national_transportation_ statistics/html/table_01_21.html It would also require vehicle manufacturers to redesign and 7Robert Clarke, President, Vehicle Manufacturers Association, submission to redeploy ECM software for approximately 40 different engine Docket No. NHTSA-2007-26851, March 27, 2007.

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83 Effect on Fuel Efficiency Driver Retention There is consensus that reducing the top speed of trucks im- The common perception is that truck drivers are strongly proves fuel economy, but the estimated amount of savings opposed to the mandatory use of speed governors, especially varies. The research team used EPA's Physical Emission Rate when they are paid by the mile or by the trip. A 2007 OOIDA Estimator (PERE) model to estimate fuel consumption rates of survey of 3,400 members who are company drivers found motor vehicles under different driving conditions. Modeling that 82 percent would prefer to work for a company that does of a "typical" tractor-trailer produced a fuel-efficiency penalty not use speed governors, all other things being equal. Only of about 0.08 mpg for every mph increase above 55 mph. 4 percent said they would choose a company using speed Johnson and Pawar estimated that each mile-per-hour increase governors.13 in speed beyond 55 mph decreases fuel efficiency by 0.03 to In contrast, in a 2008 survey of fleet safety managers, 64 per- 0.08 mpg, depending on the type of road and the speed vari- cent said that driver attitudes toward speed limiters were ance of traffic flow.8 ATA's 1996 estimate of the fuel efficiency largely neutral, and 23 percent said driver attitudes were pos- penalty of higher speeds was slightly higher. ATA estimated a itive. Seventy-seven percent of the managers said that the penalty of 0.10 to 0.14 mpg for each mile-per-hour increase in impact of speed limiters on driver hiring and retention was speed beyond 55 mph.9 Another study estimated that reducing neutral.14 It may be that driver opposition is softening as the the freeway driving speed of a typical long-haul combination voluntary use of speed governors becomes more widespread truck from 70 mph to 65 mph would reduce fuel use per truck among carriers. by 972 gallons per year, a 6 percent savings.10 Driver Compensation Effect on Equipment Maintenance Costs Because some drivers are paid by the number of miles they A 1996 ATA publication indicated that operating equip- drive, reducing the maximum speed of trucks could result ment above 55 mph generally decreases component service in loss of income for those drivers. The amount of reduction life and shortens preventive maintenance intervals.11 How- would depend on what percentages of miles were driven at ever, in 2005, Johnson and Pawar found no support for more speeds exceeding the new limit. Drivers who log many miles frequent maintenance intervals. Regarding tires, Johnson and in western states where speed limits are higher would stand Pawar found no objective research data related to the effect of to lose more income than other drivers. speed on tire wear at the speeds commonly traveled on rural In its rulemaking petition to NHTSA and FMCSA, ATA interstates. However, the majority of maintenance managers suggested that, because of the chronic shortage of long-haul surveyed by the authors said that tire wear increases beyond drivers, carriers would need to compensate drivers for any a 65 mph operating speed. Several studies also attributed lower loss of income.15 However, there is very little in the literature brake maintenance costs to lower maximum speeds. about how the voluntary adoption of speed governors has affected driver compensation thus far. Insurance Costs Profitability Studies found that when setting premiums, insurers do not offer "front-end" premium discounts to carriers using speed Johnson and Pawar found that the profitability of oper- governors. Rather, insurers look only at a company's experi- ating a fleet at higher truck speeds (specifically, 70 mph vs. ence ratings.12 Instead, insurers will reduce premiums for car- 65 mph) was highly dependent on the characteristics of the riers with the best demonstrated safety records. Therefore, it fleet and various external variables such as the price of fuel. is possible that speed governors eventually generate insurance The authors were able to construct a plausible scenario in which savings for carriers that use them, but there is no data avail- operating trucks at the higher speed of 70 mph increased able to estimate the amount of savings. profits, but fuel was assumed to cost $2.00 per gallon.16 At higher prices, it would presumably be more difficult to con- struct scenarios where operating at higher speeds actually 8Johnson and Pawar, pp. 128129. increased profits. 9ATA (The Maintenance Council). 55 vs. 65+: An Equipment Operating Costs Comparison. 1996, p. 13. 10Jeffrey Ang-Olson and Will Schroeer, "Energy Efficiency Strategies for Freight Trucking: Potential Impact on Fuel Use and Greenhouse Gas Emissions," Trans- 13TRB, 2008, p. 14. portation Research Record 1815, 2003. 14TRB, 2008, p. 33. 11ATA, 1996. 15ATA, rulemaking petition to NHTSA and FMCSA, October 20, 2006. 12Johnson and Pawar, p.127; TRB, 2008, p. 32. 16Johnson and Pawar, p. 119.

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84 Table B-2. Hours of delay per heavy vehicle Truck Size and Weight Rules crash, 2000. The regulations of truck size and weight have a multitude of Property impacts on the truck industry as well other modes. Truck size Road Class Injury Fatality Damage Only Urban and weight regulations can also affect overall highway safety, Interstate 2,260 7,344 21,749 traffic operations, fuel consumption, and emissions. When Other Freeway 1,766 5,737 16,990 the first Federal limits were imposed in 1956, a grandfather Major Arterial 949 1,929 9,127 clause allowed states to retain any truck size and weight lim- Rural Interstate 814 2,646 7,835 its exceeding the Federal limits as long as these limits were in Other Freeway 416 1,350 3,999 place at that time. As a result, the current size and weight lim- Major Arterial 255 829 2,454 its reflect a patchwork of Federal and state limits, with many Source: NHTSA, 2002. situations in which equipment acceptable in one state cannot be used in neighboring states. In 2000, the USDOT completed a 6-year, comprehensive Given the highly competitive nature of the trucking indus- study of truck size and weight policy options. This study in- try, one could reasonably conclude from the widespread vol- cluded modeling of a "uniformity scenario" (later referred to untary adoption of speed governors that they probably increase as the "Federal uniformity scenario") in which the grandfather profits and, at worst, have no impact at all on profits. provisions in Federal law would be revoked and states would be required to adopt the Federal weight limit of 80,000 pounds on all Interstates and National Network highways.19 In a Other Types of Impacts follow-on study published in 2004, the USDOT analyzed a Two other potential impacts of lower speed limits for trucks "western uniformity scenario" in which the maximum gross are worth mentioning. First, lower speed limits could affect the vehicle weight limits of the grandfathered western states would amount of congestion experienced on the nation's highway be harmonized at 129,000 pounds. (This limit is near the high system. Second, how the truck speed limits are applied and end of the range among the grandfathered states.) Thus, the enforced could affect competitiveness. USDOT has looked at the likely impacts of harmonization at the high end and low end of the range of possible choices. The impacts modeled by these two studies are compared below. Traffic Flow In comparing the impacts of the two studies, one should note that the two studies did not use the same time periods for Lower speed limits for trucks have a mixed effect on con- their analyses. For its 2000 comprehensive study, the USDOT gestion, and it is not yet clear whether the net impact is posi- used 1994 as the base year and compared policy impacts in tive or negative. On the one hand, some studies suggest that the year 2000. For the later study of the western uniformity lower speed limits for trucks can increase congestion, because scenario, the USDOT used the year 2000 as the base year and trucks end up clustering together and impeding the flow of compared policy impacts in 2010. Despite this disparity, it is traffic.17 On the other hand, if differential speed limits or worth comparing the direction of policy impacts (increases speed governors reduce the frequency and severity of crashes vs. decreases) and the percentage changes projected. involving trucks, then they also reduce the hours of delay asso- ciated with such crashes. A 2002 study for NHTSA estimated the hours of delay caused by heavy vehicle crashes in the year Changes in Freight Distribution 2000. The results are shown in Table B-2.18 by Type of Truck and Mode The study valued hours of delay at $13.86 in urban areas and $16.49 in rural areas; the difference is due to the differ- As shown in Table B-3, in the Federal uniformity scenario, ences in average vehicle occupancy in the two settings. Using the imposition of the Federal size and weight rules on the these estimates of dollar values and hours, a fatal crash on an grandfathered states would result in a projected increase in urban interstate causes more than $300,000 in time delays, total truck VMT of 3.5 million miles. This increase in over- while an accident with property damage only on a rural major all VMT is caused by shifting freight traffic from longer and heavier vehicles to 5-axle tractor semitrailers. More of the arterial causes $4,200 in time delays. 19 A few states have weight limits below Federal limits on non-Interstate portions 17Johnson and Pawar, p. 93. of the National Network. Under the uniformity scenario, those states would be 18NHTSA, The Economic Impact of Motor Vehicle Crashes 2000. May 2002. required to bring weight limits up to Federal limits on those highways.

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85 Table B-3. VMT by vehicle configuration: Federal uniformity scenario versus policy baseline, 2000 (national level). Base Case Federal Uniformity Scenario Vehicle Configuration VMT VMT Percent (millions) (millions) Change 5-axle Tractor Semitrailer 83,895 91,205 +9% 6- or 7-axle Tractor Semitrailer 6,605 3,660 -45% 5- or 6-axle Double 5,994 5,986 -- 5- or 6-axle Truck Trailer 2,358 2,455 +4% 7-axle Double 632 290 -54% 8- or more axle Double 759 198 -74% Triple 126 54 -57% Total 100,369 103,848 +3.5% Source: USDOT Comprehensive Truck Size and Weight Study Final Report, Vol. 3, Ch. 4. smaller vehicle combinations are needed to transport the same size and weight rules affect safety in several ways. First, these amount of freight. rules affect the total number of miles traveled by trucks, which For this scenario, the USDOT did not attempt to estimate in turn affects the exposure of the overall truck fleet to crashes. the diversion of freight from truck to rail. Second, these rules affect vehicle performance, such as mini- In the western uniformity scenario, total truck VMT in the mum braking distance and the propensity to roll over. Many region is estimated to decrease by 4.8 million (25 percent). other aspects of truck trips also affect safety, including driver Currently, LCVs are not often used for shipments for which performance, roadway design, vehicle maintenance, traffic one or both trip ends are outside the 13-state region. About conditions, and weather. Because of the many factors, isolating half the VMT within the region for such shipments is pro- the effect of truck size and weight rules has proven difficult. jected to shift to LCVs. This shift would require carriers to as- In its 2000 comprehensive study, the USDOT did not semble and disassemble the twin and triple trailers for travel present quantitative assessments of the safety impacts of the outside the region. Despite the extra cost this would impose various scenarios that it analyzed. Instead, the agency pre- on carriers, the USDOT concluded that the net cost savings sented data on the crash rate history of different vehicle would still be attractive to carriers. types and findings from engineering studies of vehicle safety For shipments entirely within the region, the percent performance. Regarding crash rates, the agency compared of VMT in LCVs was projected to increase from about 9 to the fatal crash rates of single-trailer combination trucks and 78 percent. Less than one-tenth of 1 percent of rail traffic multi-trailer combination trucks during the period 1995 to in the region was estimated to divert to LCVs. 1999. As shown in Figure B-1, for most roadway classes, the fatal crash rates for single-trailer and multi-trailer combination trucks did not differ greatly. The one exception was the road- Safety Impacts way class of "other rural roads," on which multi-combination The issue of safety is probably the most studied and most trucks had a much higher fatal crash rate.20 controversial aspect of truck size and weight policy. Truck The 2000 study did not draw clear conclusions regarding the safety impacts of each scenario under scrutiny. However, from the information presented, one can conclude that, all Table B-4. VMT by vehicle configuration--western other things being equal, the increase in heavy truck VMT uniformity scenario versus policy baseline, 2010 resulting from the Federal uniformity scenario would result (13-state level). in more fatal truck accidents. At the same time, the shift of freight traffic from multi-combination trucks to single-trailer trucks might reduce the number of fatal truck accidents. The net impact is unclear. Like its predecessor study, the USDOT's 2004 analysis did not offer a quantitative assessment of the net safety impacts 20It is worth noting that only 5 percent of the VMT by multi-combination trucks was accumulated on that type of road. U.S. DOT Comprehensive Truck Size & Source: USDOT, Western Uniformity Scenario Analysis, Table ES-2. Weight Study, Vol. 3, Ch. 8, p. VIII-4.

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86 Figure B-1. Fatal crash rates by vehicle type and road type, 19951999. of the western uniformity scenario. Instead, the agency con- For the western uniformity scenario, truck VMT was pro- cluded that the fatal crash and travel data did not allow a jected to decrease by 4.8 million miles (25 percent) because the detailed examination of LCVs separately from the 28-foot use of longer, heavier trucks would translate into fewer truck double trailers currently allowed on the National Network trips. The 25 percent reduction in truck VMT was estimated under Federal rules. According to the USDOT, the measure- to result in a reduction in fuel consumption of 613 million gal- ment problem was threefold: (1) fatal accidents are rare occur- lons (12 percent). Fuel savings were not directly proportional rences, (2) there are few LCVs currently operating, and to the reduction in VMT because fuel economy decreases as (3) there is only limited travel data collected on them. Regard- vehicle weight increases.23 ing this last point, the agency noted that there is no Federal For both studies under consideration, the U.S. DOT assumed requirement to collect data for specific types of multi-trailer that total truck emissions would vary directly with changes combination vehicles and, at the time of publication, only 2 in fuel consumption. DOT did not attempt to quantify how of the 13 states actively collected separate VMT for different changes in emissions would translate to changes in air quality. types of multi-trailers.21 In the end, the agency concluded that, The research team calculated the change in greenhouse gas even though the reduction in VMT by heavy trucks would (GHG) emissions, shown in Table B-5. Total U.S. GHG emis- lower crash exposure, there were too many other uncertain- sions from heavy trucks are approximately 386 million metric ties regarding other safety impacts of LCVs to reach a firm tons of CO2-equivalent. So the Federal uniformity scenario conclusion on the net safety impact of the western uniformity would increase this total by 1.6 percent, while the western scenario.22 uniformity scenario would decrease U.S. heavy-truck GHG emissions by 1.5 percent. Fuel Consumption and Air Emissions Traffic Operations Under the Federal uniformity scenario, truck VMT was es- timated to increase by 4 million miles, because more truck Because of the shift of freight from heavier and longer vehi- trips would be required to move the same amount of freight. cles to 5-axle semitrailer combinations at 80,000 pounds, the This increase in VMT translated into increased fuel consump- Federal uniformity scenario was projected to increase traffic tion of 635 million gallons. congestion and associated costs in the year 2000 by 100 mil- lion vehicle-hours (0.4 percent). 21 Western Uniformity Scenario Analysis, p. VII-20. 22 Western Uniformity Scenario Analysis, p. ES-6. 23 USDOT, WUSA, p. ES-8.

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87 Table B-5. Impacts of scenarios on fuel consumption and GHG emissions. Federal Uniformity Scenario Western Uniformity Scenario Fuel Consumption +635 million gallons -613 million gallons (-12%) GHG Emissions 6.2 million metric tons CO2-eq 6.0 million metric tons CO2-eq Table B-6. Impacts of scenarios on traffic operations. Federal Uniformity Scenario Western Uniformity Scenario Traffic Delay +100 million vehicle-hours (+0.4%) Small decrease Congestion Costs +$1.9 billion Small decrease Table B-7. Impact of scenarios on shipper costs. Federal Uniformity Scenario Western Uniformity Scenario ($2000) Shippers Using Trucks +6.4 billion (+3%) -$2 billion (-4%) Shippers Using Rail Not estimated -$30 million (<1%) Unfortunately, the congestion model used in the compre- provisions in Federal law would affect more than the 13 west- hensive study published in 2000 was not applicable to the west- ern states analyzed in the USDOT's 2004 study. ern uniformity scenario because the model does not allow for For the Federal uniformity scenario, the USDOT did not es- analysis at less than a national level. In its analysis of the west- timate the impact on rail shippers, but the agency surmised ern uniformity scenario, the USDOT made only qualitative that the impact would be small because most of the potentially assessments of the likely impacts on traffic flow. The agency affected freight trips were of relatively short distances.24 For concluded that because of the shift of the reduction in total the western uniformity scenario, the USDOT was able to esti- truck VMT, one could expect a slight decrease in delay in the mate savings for shippers using rail. The agency estimated that 13 western states. the increased competition of the longer, heavier trucks would generate minor savings of about $30 million per year for ship- pers using rail. Of this amount, $3 million in savings would Shipper Costs and Railroad Revenues accrue to shippers who actually switch from rail to trucking; Changes in truck size and weight regulations affect the trans- the rest would accrue to rail shippers through lower rates.25 portation costs incurred by freight shippers. If the regulations become more restrictive, then amount of payload per truck Level of Investment in Inland will decrease and the cost per ton-mile of transportation will Waterway Infrastructure increase. Conversely, if the regulations become more permis- sive, then the amount of payload per truck will increase and Lack of investment in inland waterway infrastructure in- the transportation cost per ton-mile will decrease. Changes creases the probability of a lock or dam failure. There is no in truck size and weight regulations affect rail shipper trans- information to reliably estimate how this policy decision affects portation costs as well, because some shippers will divert their the probability of failure. But the research team can estimate freight to trucking or will obtain reduced rates from the rail- the cost of a failure. roads as they compete with lower truck rates. Complete quantification of the cost of a lock or dam failure As shown in Table B-7, in the Federal uniformity scenario, would require data on the actual delay and the value of the the USDOT estimated that the transportation cost for shippers particular goods being moved. In the case of a total failure and using trucks would increase by $6.4 billion per year, or about a forced mode shift, one would need to know the actual reduc- tion in transit time and the difference between barge and rail 3 percent. For the western uniformity scenario, the USDOT rates for the specific cargo involved, as well as the value of that estimated savings to shippers of about $2 billion annually, or cargo. Given that the research team is examining a hypotheti- about 4 percent of total shipper costs for moves by truck in cal case, we rely on the average value of goods moving by barge and through the region. These additional costs estimated for the Federal uniformity scenario are higher than the projected savings in the western 24 USDOT, Comprehensive TS&W Study, p. XII-3. uniformity scenario, because the removal of the grandfather 25 USDOT, Western Uniformity Scenario Analysis, p. ES-9.

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88 and the difference between average barge rates and average rail Table B-8. Cost of a lock failure. rates. We also know tonnage moving on the Upper Mississippi Nature of cost Possible range of cost and the Ohio Rivers. This allows us to say something about Cost of delay $300,000 to $1.5 million the potential magnitude of the costs of a structure failure. Cost of mode shift $12 million to $60 million Delay Costs Average value per ton for shallow-draft, domestic water Missouri.30 We assume a lock fails at or near the mid-point carriage is $250.26 Delays, as opposed to complete stoppages, between the mouth of the Missouri and Minneapolis and that are far more likely to occur on the Ohio River than on the it affects half the total tonnage, or 35.5 million tons. Assum- Upper Mississippi, because all the Ohio River locks are ing, again, 2 months for lock repairs, affected tonnage would be approximately 6 million tons (35.5 6 = 5.9). doubles. In 2006, 241.5 million tons moved on the Ohio.27 There could be various responses to the blockage. Blocked Thus, the total value of this traffic was $60.4 billion. For sim- traffic could move between a point downstream from the plicity in developing an approximation, we assume that the failed lock and origins and destinations to the north by rail traffic was evenly distributed over the 20 locks on the Ohio. or truck. Some traffic could be transferred to rail or truck Thus, the value of the annual traffic moving through any one for portage around the blockage and put back on the river. lock was also $60.4 billion. To offer some rough sense of the magnitude of impact, we All but three of the locks have 1,200-foot main chambers; assume a scenario in which traffic moves 100 miles by rail of these, all but one has 600-foot auxiliaries. A 15-barge tow when it would otherwise have been on the river, and we assume can pass through a 1,200-foot lock in about 30 minutes.28 no change in distance, only change in mode. With a 600-foot auxiliary, the tow has to be broken up, moved In 2007, average rail rates were $0.03 per ton-mile and in two passes, and put back together. We assume this proce- barge rates were $0.014 per ton-mile, a difference of $0.016.31 dure adds 1 hour to the time for locking through. There are For our scenario, we assume a greater difference for several often queues at locks, so waiting time would also increase. We reasons. A rail carrier might be in a strong bargaining posi- assume an average of 3 hours of extra waiting time, so 4 hours tion because of the blockage. Also, extra costs for transload- is added to the transit time for each tow. We now assume that ing would be spread over a relatively short move. It is reason- it takes 2 months to repair the failed lock (1/6th of a year). able to use a difference of $0.02 per ton-mile. Thus, shipping Assuming no seasonal variations, $10.1 billion worth of goods cost for each ton would increase by $2.00. Given that 6.0 mil- will experience a 4-hour delay (60.4 billion 6 = 10.1 billion). lion tons are affected, the total cost is $12 million ($2.00 We assume the owners of the cargo are paying annual inter- 6.0 million = 12 million). est at 6.5 percent.29 The result is a delay cost of $300,000 ((0.065 365 6) $10.1 billion). This value is offered strictly to give a rough sense of order of magnitude. If, as is likely, Cost Summary we have underestimated the effect of queuing, the value would These cost estimates are clearly rough and are intended only be greater but still not large. An increase by a factor of 5 would to give a sense of the order of magnitude of impact. If any- bring the amount to $1.5 million. This reflects the low value thing, they are probably low. For example, the assumption of per ton of traffic moving on the rivers. 2 months to fix a failed lock could be optimistic. It may be use- ful to think of a range in which the above estimates are the low Forced Mode Shift end and the high estimate is greater by a factor of five. This is shown in Table B-8. A total blockage, forcing a shift of cargo to rail or possibly truck, could occur from a lock failure on the Upper Missis- sippi where only 3 of 29 locks are doubles. In 2006, 71 mil- Highway Tolls and lion tons moved on the Mississippi above the mouth of the Other User Charges Tolls affect which roads truckers use, because tolls change 26Calculated from 2007 Commodity Flow Survey, Preliminary, December 2008, the relative costs of the roads available for a given move. The Table 1. most direct impacts on the freight system are the costs to 27Waterborne Commerce of the United States, USACE, 2006, Part 2, p. 61. 28Michael Bronzini, "Inland Waterways: Still or Turbulent Waters Ahead?" Annals of the American Academy of Political and Social Science, Vol. 553, p. 70, Septem- 30Waterborne Commerce of the United States, USACE, 2006, Part 2, p. 203. ber, 1997. 31Rail rate from AAR, Railroad Facts, 2008, p. 30. Barge rates calculated using a rev- 29Federal Reserve Board, data on business lending in November 2007. http:// enue amount extrapolated from the 2002 Economic Census to 2007 and ton-miles www.federalreserve.gov/releases/e2/200712/default.htm from the CFS, Preliminary, December 2008, Table 1.

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89 trucks diverting to alternate routes to avoid tolls. These are some traffic from highway to rail but not a large amount. the costs and operating problems of switching to different ATA supports a fuel-tax increase to improve highways and roads or different times from those otherwise preferred. But is not concerned about possible loss of traffic. Regarding these are not the only impacts. Other users of the roads to tolls, our discussions with rail executives suggest they do not which trucks divert may be affected by the increase in truck expect much of an impact on mode share simply because traffic on those roads. Also, reduction in truck traffic on the tolls only apply to a small portion of traffic. Higher fuel taxes tolled road may affect, positively, other users of that road. or a general VMT-based tax would have a stronger effect in Highway tolls can also affect railroads. All charges to truck- this view. ers affect the total cost of highway freight carriage and, there- There is a widespread view among rail managers, rail- fore, the relative costs of highway and rail carriage. The relative industry analysts, and shippers that the quality, especially costs of these modes determine, in part, their relative shares of reliability, of rail service is a far more important factor than freight traffic. This affects the revenues and earnings of truck price in determining shipper choice of mode in markets where and rail carriers. there is significant rail-truck competition. In particular, these Beyond that, the efficiency of the freight system is affected markets are rail-intermodal service and carload service. (Rail if freight movement on highways is mispriced. If truckers are carload service is movement in shipments of one or a few cars paying less (or more than) marginal cost, the freight system at a time, as opposed to shipments that require a full train.) It will not function at maximum efficiency, and the effects will is also worth noting here that some large truckload carriers be felt throughout the economy. that offer rail intermodal service are making a deliberate effort Accordingly, the following are the four principal areas of to shift more of their long-haul traffic (over 1 day's drive) to impact from highway pricing: rail intermodal. Costs to trucks that divert from a tolled road Impacts on trucks that stay on a tolled road Wider Impacts on the Freight System Impacts on mode share between highway and rail and the Economy Effects on the whole economy and society from an ineffi- As a matter of economics, there is no question that the cient freight system freight system would be more efficient if the inputs used for providing freight service were correctly priced. Where inputs Potential for Quantification of Impacts are purchased in open markets, and there is no monopoly power, we can assume relative prices of inputs accurately re- Diversion Effects flect their relative costs, and there are no significant distortions. Regarding costs to trucks that divert to alternate roads, Highway use is not priced in an open market, and the providers there is enough information to permit estimates of changes of highways, the Federal and state governments, have monop- in crash rates, fuel consumption, and speed. This allows us oly power. There is no alternative to buying fuel and paying the to estimate crash costs, fuel and other operating costs, and Federal tax, and the same is true for many state taxes. Although delay costs per diverted truck VMT. Two available estimates trucks and other motor vehicles can switch to alternate routes, of diversion rates, one based on an actual tolled road, give toll authorities have a high degree of market power. us a basis for making a plausible approximation of total There is consensus among economists and others who study costs to diverted trucks from similar roads. Details on these transportation that use of highways is not optimally priced. To cost estimates are presented below. We cannot make com- our knowledge, there are no usable data or analyses that would parable estimates of the effects on other traffic on the roads provide a basis for estimating the value of the efficiency gain to which trucks divert or the roads from which they divert. that would ensue if highways were correctly priced. We know We can, however, offer some speculation as to whether such there would be gains, possibly significant gains, but we have impacts would be noticeable. No data support a national no way for making a plausible estimate of their magnitude. aggregate estimate of the costs (or benefits) of diversion. The same observation applies to any benefits from congestion pricing, whether to trucking or to the wider economy. Effects on Truck/Rail Mode Share Estimate of Costs to Diverted Trucks We are not aware of any useful data or analyses that would permit a quantitative estimate of revenue impact on rail car- Although we cannot establish a national estimate for costs riers related to a given change in the overall price of high- to diverted trucks, we can estimate a range of costs for what way carriage. The prevailing view in both the trucking and might be a typical tolled highway. In order to do this, we need rail industries is that higher costs for truckers would shift to estimate diversion rates and the changes in crash, fuel,

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90 and other operating costs, as well as speed and delay costs that Table B-9. Estimate of truck diversion on I-81 in trucks would incur from taking sub-optimal routes. response to tolls. We focus the analysis on combination trucks, which account Toll (dollars per mile) Percentage of truck VMT diverting for almost all of non-local highway carriage. Five-axle truck- 0.05 09.0 trailer combinations with 18 wheels are, by far, the preponder- 0.10 14.0 0.12 16.0 ant configuration. We are looking at inter-city traffic, so we 0.15 23.0 concentrate on rural roads. Diversion rates will be much lower 0.18 31.0 for short, urban trips where switching to alternate routes may 0.20 36.0 0.30 67.0 cause a disproportionate increase in distance and where alter- 0.40 81.0 nate roads in a feasible distance are unlikely to be Interstates Source: Bryan, J., et al., Reebie Associates and Atherton, Mease & Company. or high-quality freeways. "The Impact of Tolls on Freight Movement for I-81 in Virginia"; prepared for Virginia Department of Transportation, 2004. Diversion Rates There have been two recent systematic attempts to esti- manufacturing state with several large metropolitan areas, it mate the degree of diversion of truck traffic from a road after is likely that higher proportions of moves have either origins or a toll is imposed: a study of potential diversion from a toll on destinations in Ohio or are entirely intrastate. Longer moves I-81 in Virginia and an empirical study of the diversion im- are more likely to divert than shorter ones, because more alter- pact of tolls on the Ohio Turnpike.32, 33 The I-81 study was nate routes are feasible. based on estimating costs to truckers of diverting from I-81 There is no reason to expect that these two studies would with estimates for various classes of traffic, including varying yield closely similar results; they used different methods applied lengths of haul. For this study, the authors assumed truckers to quite different traffic. It is reasonable to suppose, however, would compare costs of staying on I-81 with costs of diverting that the very high diversion rates for I-81 at $0.20 per mile and and choose the least-cost alternative. The authors of the Ohio higher would not often be found on short tolled segments with Turnpike study used data on Class-8 truck VMT nationally, higher percentages of local trips. for Ohio, and for the Ohio Turnpike to estimate a demand To get a sense of actual toll rates in addition to the Ohio curve as a function of the toll rate and speed. Turnpike, we looked at rates for 5-axle trucks imposed in Indi- These two efforts led to somewhat different results, but we ana and Illinois. For the Indiana Toll Road (157 miles), the rate can use them together to establish a plausible range for diver- is $0.17 per mile.36 Rates are higher on the Illinois toll roads.37 sion effects. The I-81 study yielded toll division impacts The low end of the range is $0.21 for night rates and $0.28 shown in Table B-9.34 The results of the Ohio Turnpike study for day rates on the longer segments--I-90 (76 miles) and I-88 are shown in Table B-10. (96 miles). The high end is day rates of $0.42 to $0.53 on the We have already noted the difference in method between shorter segments--I-94 and I-355 (both 30 miles). these studies. The I-81 diversion estimate is based on estimates In summary, this gives us the following per mile truck toll of comparative costs between a tolled I-81 and alternate routes rates in these states: for loads with various origins and destinations. The Ohio study is based on an empirical demand curve applied to rates Ohio: $0.13 and speeds. The Reebie estimate of diversion is much higher Indiana: $0.17 than the one offered by Swan and Belzer. One reason is that the Illinois: $0.28$0.53 (day rates) trips are probably longer on I-81. The Reebie study states that average length of haul for trucks on the Virginia segment of Toll authorities, whether public or private, do no set prices I-81 is 1,000 miles.35 This is through freight moving between at levels that lead to high diversion rates; they lose revenue if the Southeast and the Northeast. We do not know average trip they do that. The Reebie study suggests that the maximum length for the Ohio Turnpike, but, given that Ohio is a major revenue rate for I-81 would be in the range of $0.12 to $0.15.38 Reference to the above table with the Reebie results suggests maximum diversion rates, at these prices, of 15 percent to 32Bryan, J., et al., Reebie Associates and Atherton, Mease & Company. "The 25 percent. The Ohio case shows that toll authorities will not Impact of Tolls on Freight Movement for I-81 in Virginia"; prepared for Virginia Department of Transportation, 2004. 33Swan, Peter, Pennsylvania State University, and Michael Belzer, Wayne State University, "Empirical Evidence of Toll Road Traffic Diversion and Implications 36Indiana Toll Road website, https://www.getizoom.com/index.jsp for Highway Infrastructure Privatization," 2007. 37Illinois Tollway toll calculator, http://www.illinoistollway.com/portal/page?_ 34Values in table are from Bryan, et al., p. 9. pageid=133,1397406&_dad=portal&_schema=PORTAL 35Memorandum from Reebie to VDOT, February 11, 2004. 38Bryan et al., p. 10.

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91 Table B-10. Estimate of truck diversion on Ohio turnpike in response to tolls. Year Actual toll (dollars per mile) Percentage of truck VMT diverting 2001 0.18 13.62 2002 0.18 13.68 2003 0.18 13.56 2004 0.18 13.00 2005 0.13 05.01 Source: Swan, Peter, and Michael Belzer, "Empirical Evidence of Toll Road Traffic Diversion and Implications for Highway Infrastructure Privatization," 2007. Note: The speed limit on the turnpike was raised from 55 mph to 65 mph in early September of 2004. always price to maximize revenue. This suggests that we can als and urban "Other" facilities are also very close: 2.1 and 1.8, think of $0.15 to $0.25 as a likely range for tolls on longer respectively.41 Crash rates on rural "Other" are much higher, roads; and we can think of 5 percent to 25 percent as a plau- 4.4, but only 17.0 percent of rural VMT for combination sible range for diversion rates. trucks is on "Other" roads.42 For these reasons, we believe that these data on divided and undivided highways give us a plau- sible approach to an estimate. Crash Costs FMCSA's definition of large trucks includes all trucks over Estimating crash costs requires values for 10,000 pounds. Thus, the FMCSA data on large-truck crashes include many vehicles in addition to the combination vehi- Cost per crash for 5-axle trucks and cles doing most of the hauling of highway freight. (FMCSA Increment in crashes per VMT for shift from Interstate to puts out data on combination trucks' fatal crashes but does lower quality roads. not relate them to type of road.) This is a potential distorting factor, but we note that trucks over 26,000 pounds account We assume the cost per crash for combination truck (trac- for a disproportionate share of large-truck crashes, espe- tor and one trailer) to be $164,000.39 This is the average over all cially the more severe ones. Crashes involving trucks over crash types: fatality, injury, and property-damage only (PDO). 26,000 pounds are 89 percent and 58 percent, respectively, of Estimating change in crash rate due to diversion poses some large-truck fatal and injury crashes.43 (This particular data set difficulty, because of the nature of the data. FMCSA reports does not provide full information on PDO crashes.) We con- fatal crash rates for large trucks by FHWA road class but clude that using data for large-truck crashes will not unduly not rates for other crashes. (This is because available data distort our estimates. on fatal crashes are better than data on other crashes.) One The divided highways should be roughly comparable to way to deal with this problem is to find a way to scale up Interstates and Non-Interstate Principal Arterials in FHWA's from fatal crashes to all crashes. FMCSA does provide data classification of rural highways, and the undivided highways on all large-truck crashes broken out by crashes on divided should be comparable to rural "Other" roads. Therefore, we highways and on highways not divided.40 These data show can use fatal-crash percentages of all crashes on undivided that fatal large-truck crashes, as a percentage of all large- and divided highways, 1.3 percent and 1.4 percent, respec- truck crashes, are virtually the same on these two road types: tively, as the basis for scaling up to all crashes. For this pur- 1.3 percent on undivided highways and 1.4 percent on divided pose, we take the reciprocals of 0.13 and 0.14 as scaling fac- highways. tors to obtain rates for all crashes from the reported rates for These data do not separate rural and urban crashes. This fatal crashes. These factors are, respectively, 77 for undivided diminishes their accuracy for our purposes but does not elim- roads and 73 for divided highways. inate their usefulness. For one thing, fatal crash rates on rural We apply these factors to FMCSA's reported fatal crash and urban Interstates are almost the same: 1.3 and 1.2, respec- rates per 100 million VMT for three classes of rural roads: tively, per 100 million VMT. Fatal crash rates on rural arteri- Interstate, Non-Interstate Principal Arterials, and Other.44 Table B-11 shows the results. 39Eduard Zaloshnja and Ted Miller, "Unit Costs of Medium and Heavy Truck Crashes," prepared for F MCSA, December 2006, p. 8, Tables 3 and 5. The value in Table 3 for quality of life (QALY) was adjusted using the number in Table 5 41Fatal crash rates are from FMCSA LTCF, Table 19. for QALY when value of a statistical life (VSL) is $5.75 million. DOT's estimate 42VMT data are from FHWA, "Highway Statistics," Table VM-1. of VSL was increased to $5.8 million in a directive from OST of February 5, 2008. 43FMCSA LTCF, Table 39. 40FMCSA, "Large Truck Crash Facts 2005," (LTCF), 2007, Table 30. 44FMCSA LTCF, Table 19.

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92 Table B-11. Estimated crash rates by rural road type Table B-12. Combination-truck per 100 million VMT. VMT by rural road type. Road Type Fatal Crashes Scaling Factor All Crashes Road Type Percent of VMT Interstate 1.3 73 95 Interstate 52.2 Non-I-S Principal Arterials 2.1 73 153 Non-I-S Principal Arterials 31.0 Other Roads 4.4 77 339 Other Roads 16.8 Table B-13. Road types used by diverted trucks. Road Type I-81 Percentage of VMT Ohio Turnpike Percentage of Trucks Interstate 69.0 55.9 All Non-Interstate 4-lane 2-lane Non-Interstate 31.0 44.1 22.8 21.3 Source: I-81 values calculated from Bryan et al., p. 14; data in Figure 6. Ohio Turnpike values calculated from Swan and Belzer, p. 18, Table 10. To estimate change in crash rates due to diversion, we have trucks is the average of the crash rates of the three road types to know the distribution of diverted truck traffic over road weighted according to the distribution of the diverted traffic. classes. The current distribution of combination-truck VMT The diverted crash rate is 155, so the change in crash rates is over rural road types is shown in Table B-12.45 60 crashes per 100 million VMT. (Diverted crash rate is cal- In the I-81 study, Reebie estimated the percentage of VMT culated as: 0.6 95 + 0.2 153 + 0.2 339 = 155.) diverted to Interstates and to all other roads and found 69 per- With a cost per crash of $164,000, this yields a crash cost of cent diverted to Interstates. Swan and Belzer estimated num- approximately $10 million per diverted 100 million VMT ber of trucks diverted by road type. The findings are shown in (164,000 60 = 9,840,000). Table B-13. The high percentage of diversion to Interstates from I-81 Fuel and Other Operating Costs surely reflects the long average length of haul on I-81 in Virginia. The estimated truck diversions from the Ohio Turn- Fuel, maintenance, and tire costs will vary directly with the pike show percentages by road type not dissimilar to the actual change in road types. To estimate fuel costs of diversion, it is VMT percentages from FHWA data. (If average length of haul necessary to make assumptions about average speed of com- for combination trucks on the Ohio Turnpike is close to the bination trucks by road type and to obtain data on variation national average length of haul, the percentage of trucks divert- in fuel consumption with truck speed. ing is an acceptable proxy for percentage of VMT.) It is reason- Discussions with people in the trucking industry suggest able to assume that the 4-lane non-Interstate is roughly that large trucking firms tend to set governors in the 60 to comparable to non-Interstate arterials and the 2-lane non- 65 mph range, so their trucks average less than 60 mph on Interstate is roughly comparable to "Other" roads. Both of Interstates. Owner-operators and small firms that do not use the estimates suggest that truckers choosing alternate routes governors would have somewhat higher speeds. We assume do not use 2-lane roads if they can possibly avoid it. From speeds by road type as shown in Table B-15. these estimates we may infer that diverted combination-truck Because of the lower speeds and our focus on rural roads, VMT will be distributed over road types, with some adjust- fuel consumption per mile drops for the diverted trucks. ment, in essentially the same way as all combination-truck Given the assumed distribution of diverted traffic over road VMT. For purposes of this analysis, we assume the following types, fuel consumed per mile is 0.157 gallons (0.6 0.172 + distribution of diverted-truck VMT (see Table B-14). 0.2 0.146 + 0.2 0.126 = 0.157). We assume $2.50 per gal- We assume, for all cost-estimation purposes, that the tolled road is an Interstate or a freeway of comparable quality. There- fore, the pre-diversion crash rate is 95 per 100 million VMT as Table B-14. Assumed distribution of shown in the above table of crash rates. The rate for diverted diverted truck VMT. Road Class Percentage of VMT Interstate 60.0 Non-I-S Principal Arterials 20.0 45 "Highway Statistics," Table VM-1. Other Roads 20.0

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93 Table B-15. Assumption for speed and fuel economy by road type. Road Class Average Speed46 Miles per Gallon47 Gallons per Mile Interstate 62 5.83 0.172 Non-Interstate Principal Arterials 50 6.83 0.146 Other 40 7.95 0.126 lon for the price of diesel fuel.48 The result is a reduction in Table B-16. Summary of annual cost fuel cost of $.035 per mile. changes per 100 million diverted VMT. Costs of maintenance and tire wear are currently a little less Cost Component Cost (million) than 20 percent of fuel cost per mile.49 We assume that ratio Crashes $10.0 to hold for this analysis; therefore, we can increase the change Fuel and operating costs $-04.2 Delay $12.0 in fuel cost by 20 percent to obtain an estimate of $0.042 as Total $17.8 the reduction in operating cost per mile. This is equal to Total adjusted for added distance $18.0 $4.2 million per 100 million VMT. Delay Costs hours is $11,590,307, which we may round to $12 million for We estimate delay costs with the same average speeds as- our estimate. sumed above and the same distribution of diverted trucks over road types. The result is an average speed of 55.2 mph Cost Summary for diverted trucks (0.6 62 + 0.2 50 + 0.2 40 = 55.2). This leads to an increase in trip time of 0.002 hours per mile (pre- Table B-16 summarizes the annual cost changes per 100 mil- diversion mile).50 This yields approximately 200,000 addi- lion diverted VMT. Some of the alternate routes chosen will re- tional hours per 100 million VMT without allowing for any sult in longer distances. The Reebie paper estimates the increase additional miles. at 1.1 percent.52 This yields the adjusted total of $18 million per For cost per hour of delay, we look at the revenue that 100 million VMT. tractor and driver generate in an average hour. If it takes a Table B-17 shows the amount of VMT diversion esti- load an extra hour to reach its destination, the firm has lost mated for I-81 and the Ohio Turnpike under different pric- an hour's use of the tractor and, hence, the revenue it would ing scenarios. For I-81, tolls of $0.12 and $0.15 were cho- generate in an average working hour. Approximately a year sen because the Reebie paper suggested that these are the ago, industry executives in private conversations with us indi- maximum-revenue toll rates. For the Ohio Turnpike, diver- cated an average revenue per day for a tractor in truckload sion amounts for 2004 and 2005 were chosen because of the service of about $700 to $725. In today's market, that could change in toll rates: $0.18 in 2004 and $0.13 in 2005 and the be somewhere from $600 to $650. Current market condi- change in the speed limit in September of 2005 (55 mph to tions are not typical, however, so we assume $700. Available 65 mph). data tells us that 12 hours is an acceptable estimate of the av- This cost estimate does not include increased mainte- erage working day of a long-haul driver.51 On this basis, lost nance costs on roads to which trucks divert. It is based on revenue is $58.33 per hour. The cost of 200,000 additional some reliable data and some plausible assumptions based on reliable data. It could be adjusted up or down to some degree. Nonetheless, it gives a rough sense of the magnitude of the direct costs from diverted trucks in some typical toll 46Speeds are based on ICF team's own expertise and e-mails from two trucking scenarios. executives. One executive stated that his company expected an average speed The estimate does not include impacts on other traffic on of 45 mph off the Interstate. Thus, we assigned 50 mph to higher-quality non- Interstate roads and 40 mph to other non-Interstate roads. roads to which trucks divert and from which trucks divert. 47ATRI data. We do not have sufficient data to estimate quantities for such 48Transport Topics, March 23, 2009, gives current price just over $2.00, but these impacts. It appears, however, that impacts on other traffic are abnormal conditions. One year ago, the price was $3.97, and that may have been an extreme. We assume $2.50, for this estimate. could be significant, at least for some segments. The Reebie 49ATRI, "An Analysis of the Operational Costs of Trucking," December 2008, estimate for I-81 suggests 15 percent to 25 percent of truck p. 21, Table 4. 50Change in time per mile is the difference between time required to travel one mile at new speed and one mile at old speed. (155.2) - (160). 51FMCSA Field Survey. 52 Bryan et al., p. 13.

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94 Table B-17. Truck VMT diversion and associated annual cost. Toll Rates VMT Diverted (millions) Annual Cost (millions) I-81 $0.15 82 $14.8 $0.12 56 $10.0 Ohio Turnpike $0.18 133 $23.9 $0.13 54 $09.7 VMT diverting at revenue-maximizing tolls. Depending on a factor of 1.19.56 This leads us to an estimate of 2007 rev- the amount of other traffic on a segment, this could have enue of $2,356 million.57 some effect on level of service. The Swan and Belzer estimate It is desirable to estimate industry revenue for three refer- for the Ohio Turnpike shows 13 percent of VMT diverting ence years: 2004 and 2013 in addition to 2007. Industry tax at the toll of $0.18 per mile. This could be noticeable on burden in 2004 is relevant because that was the last year in some segments but would likely have little impact on most which the full deficit-reduction tax of $0.043 per gallon was segments. Regarding roads to which trucks are diverted, levied on towboats. The Office of Management and Budget Swan and Belzer present data showing that some segments (OMB) has projected revenue from the proposed lockage could see increases of several thousand trucks per day.53 fee out to 2013. We can therefore compare total tax payments That is certainly enough to degrade the level of service on to industry revenue in 2004, 2007, and 2013. Industry revenue some segments. declined from 2002 to 2007 at an annual rate of 1.63 percent. Assuming a constant rate of decline over that period, revenue in 2004 would have been $2,474 million.58 In projecting fuel- Lockage Fees for Inland Waterways tax revenue out to 2013 (as a baseline), OMB assumes that the There have been recent proposals to phase out the fuel tax decline in barge traffic in recent years stops and fuel tax revenue to towboats and replace it with a lockage fee. The most signif- grows at a very slight rate from 2007 to 2013: 0.36 percent.59 We icant impact of such a policy would be the increase in the tax use this growth rate to project from 2007 revenue and obtain burden on inland towing, which might cause an increase in 2013 revenue of $2,407 million.60 barge rates and have some effect on mode shift. We estimate We obtained tax payments data for 2004 and 2007 from the the change in the tax burden on the inland towing industry Congressional Budget Office, Tax Analysis Division. Estimated that would result from the proposed lockage fee. For this pur- tax payments for 2013 are available from the FY 2009 Presi- pose, we compare projected revenues from the lockage fee dent's Budget, cited above. Table B-18 shows the relative bur- with current and projected payments on the fuel tax. We can den of tax payments in the three reference years, assuming the then compare the new tax burden and the change in tax bur- implementation of the lockage fee in FY 2009. den with projected towing-industry revenue. We see that the highest burden is for the lockage fee in 2013, The latest published estimate of towboat revenues is from 5.2 percent of industry revenue. (The burden is actually higher the 2002 Economic Census: $2,557 million from inland in 2012, but the fee does not stay at the 2012 level; it drops towing.54 Published data from the 2007 Economic Census do back because of the balance in the trust fund.) The second not yet include revenues from inland towing. Available data highest burden was in 2004 when the industry was still paying from the Commodity Flow Survey (CFS) do, however, include the full deficit-reduction tax of $0.043 per gallon in addition ton-miles of shallow-draft water carriage in 2007. By compar- to the user tax of $0.20 per gallon. The burden was lightest in ing this figure with ton-miles carried in 2002, we obtain the 2007 when the deficit-reduction tax was zero. change in the amount of freight carriage sold. Over this period, The most meaningful measure of the increase in burden is ton-miles decreased from 212 billion to 164 billion, by a the tax increase as a percentage of revenue. This tells us how factor of 0.77.55 If we also adjust for the change in the price much the industry would have to increase its prices in order of inland carriage, we can obtain a reasonable estimate of to recover fully the tax increase. And this, in turn, tells us 2007 revenue from inland towing. Price indices for water transportation show a price increase from 2002 to 2007 by 56BEA, Gross Domestic Product by Industry, indices for water transportation http://www.bea.gov/industry/gpotables/gpo_action.cfm?anon=94425&table_ id=23984&format_type=0 53Swan and Belzer, p. 18, Table 10. 57Calculation: 0.77 1.19 2,557 = 2,356 542002 Economic Census, Product Lines, Transportation and Warehousing, 58Calculation: 2,557 (1-0.0163)2 = 2,474 Table 1, p. 7 (NAICS 483211 [coastal and inland freight, product codes 44010, 59Calculated from OMB projections in FY 2009 President's Budget, Analytical 44030]). Perspectives volume, Table 17-3 (p. 266) and Table 17-4 (p.269). 552002 CFS, Table 1a, p. 1; 2007 CFS, Preliminary Release. 60Calculation: 2,356 (1.0036)6 = 2,407

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95 Table B-18. Inland waterway towing revenue and tax payments. Fiscal year Industry revenue Tax payment Tax % Change in tax as (million) (million) of revenue % of revenue 2004 fuel tax with $0.043 $2,474 $110.0 4.4% NA 2007 fuel tax without $0.043 $2,356 $87.3 3.7% NA 2013 fuel tax projected $2,407 $93.0 3.9% NA 2013 lockage fee projected $2,407 $126.0 5.2% 1.4% Change in tax as a percentage of revenue is only relevant for 2013; we do not have an estimate of what the revenue from the lockage fee would have been in the earlier reference years. the degree to which the tax increase would have an impact although it is not likely a large share of total movement. Let on mode share and on total movement of freight. It cannot us assume as an upper bound that one-third of the total rev- be assumed, of course, that the towing industry would, or could, enue would come from non-lock traffic. If one-third of the raise rates by enough to fully offset the tax increase. But the traffic pays no tax, the percentage of revenue coming from amount of a 100-percent passthrough shows us the maximum lock-using traffic would be 1.5 times the percentage coming possible effect on mode share. from all traffic. As shown in Table B-18, the 2013 tax increase ($33 mil- So the extreme case would be that the lockage fee would lion) is 1.4 percent of total revenue. For the traffic using locks, mean a tax increase of 2.1 percent of the revenue of lock-using the tax increase would be more than 1.4 percent, because traffic. A 2.1 percent increase in average rates of lock-using the traffic not using locks would not pay the fee at all. The barge traffic is unlikely to have a significant impact on mode Economic Census data on revenue from inland towing show share between barge and rail. It is not likely that all of the a very small share, less than 10 percent, coming from coastal increase could be passed through, so the real effect would be carriage.61 Some inland river traffic also does not use locks, a slight increase in barge rates and a slight decrease in earn- ings from carriage using locks. The aggregate impact would 61 2002 Economic Census, cited above. likely be negligible.