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

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18 Chapter 2 introduced the role of government at the Federal, state, and local level in funding, operating, and regulating the freight transportation system. Many government policies were developed with the intent to directly affect freight carriers or shippers. Although the magnitude of freight system effects may be different than expected, and the policies may have other unintended spillover effects, the primary cause-effect relationship for these policies is usually clear. Other govern- ment policies affect the freight system more indirectly, in that the intent of the policy was not to cause a freight system effect. An example of such an indirect impact is the growth in rail- road transport of Power River Basin coal resulting from the Clean Air Act. In this section, the research team illustrates the many gov- ernment policies that have had or could have freight system effects. The research team has organized this review around the following nine policy categories: • Safety • Security • Land Use • Environmental • Energy and Climate Change • Infrastructure Operations and Maintenance • Infrastructure Investment • Infrastructure Finance • Trade and Economic Regulation Safety Policy Safety is a broad area with significant policy-making roles for both the Federal government and states. Much of the reg- ulatory decision making is at the Federal level. FMCSA, for example, sets safety rules for trucking, including the hours- of-service (HOS) rules for drivers and rules for electronic on-board recorders. The National Highway Transportation Safety Administration (NHTSA) sets vehicle-design standards. The primary safety functions of the Federal Railroad Admin- istration (FRA) are inspection procedures and standards for equipment (cars and locomotives), track, and signals. These include standards to be met for different track speeds. In the past, Congress legislated some safety rules, such as requiring that brakes be in operating condition, but most of these (except HOS) are now managed by FRA. Standards for materials and the design of equipment, track, and signals are set by an indus- try body for equipment (the Association of American Railroads [AAR]) and by a professional association of engineers for track and signals (the American Railway Engineering and Mainte- nance Association [AREMA]). HOS rules for train crews are, for the most part, set by Congress. Hazardous materials transport is the focus of much Federal policy debate, including the safety of hazmat transportation in general, liability costs to carriers, safety and security risks, and community concerns over hazmat passing through localities. FAA sets safety policy for aircraft that can affect the air cargo industry. Coast Guard safety rules affect barge operations. The states make decisions regarding highway speed lim- its (albeit they are constrained by Federal laws) and play an im- portant role enforcing size-and-weight rules for trucks, FMCSA rules regarding truck operations, speed limits, and other reg- ulations. State and local governments have recently been in- volved in policy decisions affecting the use of locomotive horns at grade crossings and funding for grade-crossing improve- ments using Federal grants. Local governments may establish truck parking policies or other access restrictions in the name of improving pedestrian or vehicle safety. Table 3-1 lists exam- ples of safety policies that may affect the freight system. Security Policy Following the events of 9/11, the Federal government has proposed and implemented new rules and regulations related to transportation security, some of which affect freight. Many of these policies focus on screening workers and restricting C H A P T E R 3 What Public Policies Can Affect the Freight Transportation System?

19 Table 3-1. Examples of safety policies that may affect the freight system. Federal State Local/Regional Truck HOS rules Railroad HOS rules Aviation HOS rules Interstate speed limits Truck speed governor rules Truck electronic onboard recorder rules Other FMCSA rules for drivers and carriers NHTSA rules for trucks FRA inspection of tracks and vehicles FAA rules for aircraft design; inspection of aircraft Hazmat rules Coast Guard rules for barges and barge operations Highway speed limits Enforcement of FMCSA truck rules Restrictions on locomotive horns A few local railroad speed limits Parking and truck access restrictions Table 3-2. Examples of security policies that may affect the freight system. Federal State Local/Regional TWIC Truck driver background checks U.S. exit fingerprinting rules MARAD foreign crew ID requirements TSA airport security protocol Chemical facility anti-terrorism standards Screening cargo on passenger aircraft Screening of import containers Customs rules/programs (FAST, CTPAT) Some routing and infrastructure access restrictions Some routing and infrastructure access restrictions freight-terminal access to authorized persons. Examples include the driver background checks required under the PATRIOT Act, the Transportation Worker Identification Credential (TWIC) program for access to secure areas of port facilities and vessels, and rules for fingerprinting aliens exiting the United States on cargo planes and ships. Other Federal rules focus on the security of cargo (e.g., requirements for screening cargo carried on passenger planes). Some state and local government agencies have imple- mented freight access restrictions, primarily for security purposes. For example, trucks were prohibited from using some New York City tunnels following 9/11. The District of Columbia adopted a ban on railroad hazmat shipments through the city center, although the rule was blocked by a court decision. Table 3-2 lists examples of security policies that may affect the freight system. Land Use Policy Land use policy occurs almost exclusively at the state and local level. States (in some cases) set policies that affect local land use planning practices, and states may also be involved in actions that affect state land (e.g., open space protection) and economic development. Most land use decisions are made at the local level. Policies regarding zoning, planning, redevel- opment, and property taxes can all have important indirect effects on the freight system. Policy choices in these areas can, for example, affect locations of warehouses and truck and rail terminals. Local governments make many other types of decisions regarding the development and use of land with potential freight impacts (e.g., requirements for noise barri- ers, truck parking, truck routing, truck idling, street geomet- rics, and signalization). In a few cases, Federal policies and programs can influence land use patterns in ways that affect freight. For example, EPA’s Brownfields Program has led to redevelopment of land in freight-intensive areas. Table 3-3 lists examples of land use policies that may affect the freight system. Environmental Policy As with safety, environmental policy is a broad area in which all three levels of government have an active role. The most significant environmental policies affecting freight concern air quality. EPA sets national engine emission standards for new trucks, locomotives, marine vessels, and aircraft and reg- ulates transportation fuels to achieve emission reductions. (The California Air Resources Board [CARB] has similar authority in California.) These policies are closely related to energy and climate change policies. EPA also establishes

20 ambient air quality standards and related air quality plan- ning rules, which can affect transportation planning and in- frastructure investment. Other Federal environmental regu- lations that may affect the freight system include those related to water quality, toxic substances, and solid waste. Govern- ment agencies at all levels may be involved in decisions on the disposal of harbor dredging spoils, which directly affect ports. States (and, in some cases, regional agencies) develop and implement air quality plans. Local governments can enact restrictions on freight operations (primarily trucks) in the name of environmental quality. For example, many states and cities have adopted regulations on truck (and occasion- ally locomotive) idling. Local governments can set regula- tions on noise or the visual impacts of freight facilities (e.g., lighting). Some port authorities (particularly the Ports of Los Angeles and Long Beach) are pursuing various environ- mental policies, including vessel speed limits, requirements for vessels to use shore power, clean fuels rules, and port truck emissions limits. Table 3-4 lists examples of environmental policies that may affect the freight system. Energy and Climate Change Policy Historically, energy policy was almost exclusively the pre- serve of Federal policymakers. Recent concern about global climate change has recast many energy policy issues in terms of greenhouse gas (GHG) emission reduction. This is a policy category where states (and sometimes local governments) have pursued policies that promote alternative energy sources and reduce GHG emissions ahead of Federal action. Federal programs, such as the EPA’s SmartWay Transport Partnership, currently provide incentives to improve freight fuel efficiency through public recognition and funding for improvements (e.g., truck stop electrification). EPA may soon establish heavy- duty truck fuel efficiency standards. Both the Federal government and some states have set stan- dards for use of renewable fuels, including blending ethanol with gasoline and use of biodiesel. California has adopted a low-carbon-fuel standard that mandates a reduction in fuel carbon-intensity; several other states are considering similar policies. Congress is debating comprehensive climate change legislation that would establish a national GHG cap and trade program covering transportation fuels, following the lead of three different state consortia: the Western Climate Initia- tive (WCI), the Midwest GHG Reduction Accord (MGGRA), and the Regional Greenhouse Gas Initiative (RGGI) in the Northeast. California is pursuing several rules to reduce GHGs from freight movement, including requirements for fuel effi- ciency equipment on trucks. Both state and local government help to promote alternative fueling infrastructure and vehicles, sometimes affecting freight. Concern about climate change is also prompting some state and local governments to enact policies and programs to reduce freight GHG emissions by improving system efficiency. Table 3-5 lists examples of energy and climate change policies that may affect the freight system. Infrastructure Operations and Maintenance Policy States are primarily responsible for highway operations and maintenance decisions. The principal policy decisions relate to spending levels, but include policies such as seasonal Table 3-3. Examples of land use policies that may affect the freight system. Federal State Local/Regional Brownfields programs Land use planning requirements Zoning Land use planning Redevelopment Property taxes Truck parking Truck routing Table 3-4. Examples of environmental policies that may affect the freight system. Federal State Local/Regional Emission standards Fuel standards Air quality standards and planning requirements CMAQ Program Management of dredging spoils Water pollutant discharge rules for vessels Oil spill prevention rules (e.g., double hulls) Plan and enact air quality programs CA in-use truck standards CA MOU on Tier 2 locomotives CA MOU on locomotive idling Drayage truck rules at ports Restrictions on truck idling Airport noise restrictions Restrictions on visual impacts (e.g., lighting) Ocean vessel speed reduction Vessel shore power requirements Port drayage truck rules Port fuels rules

load limits on highways as well as restrictions on truck routing. USACE is directly responsible for operation and maintenance of locks and dams on navigable rivers and for channel dredging in rivers and ocean harbors. Local gov- ernment policies regarding truck routing and parking affect infrastructure operations, as do local decisions to oppose railroad acquisitions that might increase rail traffic. Local authorities also control many port and airport operational decisions. For example, hours for gate access to ports and for port operations are often set by local authorities. The Fed- eral truck size-and-weight rules were established in part to limit highway pavement damage as well as for highway safety reasons. Other Federal and state government safety policies affect freight system operations—these were discussed under Safety Policy. Table 3-6 lists examples of infrastructure op- erations and maintenance policies that may affect the freight system. Infrastructure Investment Policy Federal government policy regarding infrastructure in- vestment includes the level of aid to states for highways and direct investment in river and harbor navigation facilities. Rarely, the Federal government may provide investment aid to freight railroads; examples include Federal support for the Alameda Corridor Project and a few rail projects through the Congestion Management and Air Quality Improvement (CMAQ) Program. The amount of Federal funding and the types of improvement projects have major implications for the performance of individual facilities and the freight system as a whole. The distribution of funding across modes affects the costs and performance of each mode and the potential for competition among modes. At the state, MPO, and local government level, relevant policy decisions concern the level of investment and project selection. State, MPO, and local decisionmakers lead decisions regarding roadway access to freight terminals (e.g., airports, seaports, and rail yards). Again, these investment decisions can directly affect the performance of the freight system and, consequently, the cost of freight transport. The modal dis- tribution of state and local freight infrastructure investment is in part determined by the modal split at the Federal level, because Federal funding typically requires a local match. Table 3-7 lists examples of infrastructure investment policies that may affect the freight system. Infrastructure Finance Policy Both the Federal government and states impose fuel taxes in order to build, operate, and maintain the highway system. States may also adopt other user charges (e.g., tolls) to finance highways; Federal approval is required for Interstate highways. Other regional authorities, local governments, and private facility operators can also set highway and bridge tolls in Table 3-5. Examples of energy and climate change policies that may affect the freight system. Federal State Local/Regional Requirements or subsidies for renewable fuels (ethanol, biodiesel) GHG cap and trade Clean Air Act regulation of GHGs CAFE standards for trucks Invest me nt and incentives for alternative fuel infrastructure and vehicles Progra ms and incentives to improve fuel efficiency (e.g., Sm artWay) Requirements or subsidies for renewable fuels (ethanol, biodiesel) Low-carbon-fuel standard GHG cap and trade CA truck fuel efficiency requirements Invest me nt and incentives for alternative fuel infrastructure and vehicles Invest me nt and incentives for alternative fuel infrastructure and vehicles Table 3-6. Examples of infrastructure operations and maintenance policies that may affect the freight system. Federal State Local/Regional Truck size and weight rules Corps of Engineers maintenance dredging Corps lock and da m ma intenance Corps decisions on water levels and flows on rivers Highway operations and maintenance decisions Enforcem ent of size-and- weight rules Seasonal load li mi ts on highways Truck routing restrictions Truck routing restrictions Truck parking restrictions Opposition to railroad acquisitions Port and airport operations 21

22 Table 3-7. Examples of infrastructure investment policies that may affect the freight system. Federal State Local/Regional Level of highway funding Support for large, targeted projects Highway design standards Some aid for railroad infrastructure Level of inland waterway investment (for repair/construction of locks and dams) Modal split of funding Level of highway funding Project selection Design and build highway projects Modal split of funding Local roadway funding Project selection Design and build roadways Modal split of funding Table 3-8. Examples of infrastructure finance policies that may affect the freight system. Federal State Local/Regional Fuel taxes (on-road) Fuel taxes (inland towing) Approval for tolls and other user charges Other finance program s (e.g., TIFIA) Airport peak pricing policy Fuel taxes (on-road) Other taxes Tolls and other user charges Other finance program s (e.g., infrastructure banks) Privatization of roads Port fees (e.g., TEU fee, gate peak pricing) Tolls Local taxes Privatization of roads Port fees (e.g., TEU fee, gate peak pricing) some cases. The policy decisions in this category concern which mechanisms to use and how much money is required from each. Recently the policy decision-making process has expanded to include means for drawing in private funds— the Transportation Infrastructure Finance and Innovation Act (TIFIA) program and outright privatization of highways are two examples. The Federal government can also impose user charges to finance waterway infrastructure and avia- tion systems. The level and type of fuel taxes, tolls, and other user charges affect freight carriage in numerous ways. These charges directly affect carrier operating costs and therefore influence the price of freight transport and the decisions of shippers. Tolls or other user charges on individual freight facilities can affect routing choices and, in some cases, time-of-day decisions. Table 3-8 lists examples of infrastructure finance policies that may affect the freight system. Trade Policy and Economic Regulation The Federal government establishes U.S. trade policy (e.g., the North American Free Trade Agreement [NAFTA] and other trade agreements), which affect the flow of goods both over land borders and through seaports and airports. Fed- eral (and California) policy also affects the extent to which foreign trucking firms and drivers operate on U.S. highways. Federal subsidies for agricultural products and other com- modities influence freight flows. Closely related is economic regulation, carried out exclusively at the Federal level. The principal example is Surface Transportation Board (STB) regulation of railroads, primarily for grain and coal. (Con- gress preempted state economic regulation of trucking in 1994.) The Jones Act is, in effect, another form of trade pol- icy, requiring that coastwise maritime freight be carried in U.S.-flagged vessels. These policies can affect the aggregate level of freight trans- port, shipper mode choice, carrier routing decisions, and the use of individual freight corridors and terminals, as well as ef- ficiency of freight system components. For example, trade agreements that lower tariffs can stimulate freight movement between some nations, sometimes at the expense of others. By lowering the cost of international trade, trade policy can also stimulate total trade and encourage U.S. companies to rely more on foreign suppliers. Economic regulation, or the removal of it, can affect the freight system profoundly. A prime example is the deregu- lation of trucking. The Motor Carrier Act of 1980 led to ex- plosive growth in the truckload sector and the emergence of the competitive, low-cost truckload carriers we know today. Much of current U.S. logistical patterns—especially the wide use of just-in-time delivery, using fast and reliable trucking to hold down inventory costs—are built on the innovations in trucking that followed deregulation. Table 3-9 lists examples of trade policies and economic regulations that may affect the freight system.

Table 3-9. Examples of trade policies and economic regulation that may affect the freight system. Federal State Local/Regional NAFTA, other trade agreements Jones Act Agricultural subsidies Customs regulations STB rules on railroad rates None None 23