National Industrial Transportation League's (NITL) Spring Policy Forum notebook: Are longer, heavier trucks the solution to freight capacity crisis?

By John D. Schulz, Contributing Editor -- Logistics Management, 3/28/2007

WASHINGTON—There is a growing pile of freight forecasts over the next decade or so and the bottom line on all those reports is simple.

“It is up and up and up,” said Bill Graves, president of the American Trucking Associations, told a group of 75 shippers at the National Industrial Transportation League's (NITL) Spring Policy forum held just outside of Washington earlier this week. “There’s going to be enough freight for everybody. How the pie is sliced up really doesn’t matter. We’re obviously going to have a lot more trucks out on the road.”

Here are some of the forecasts: Commercial trucks to grow by 40 percent over the next 10 years. Intermodal growth forecast to increase by 80 percent over the next decade. ATA forecasts a need for 110,000 new drivers by 2014, with about half of those needed just to keep up with economic growth. Railroads are hiring 60,000 new workers to keep up with demand over the next three years. Over the next decade, there are forecasts of 30 percent increases in freight demand across all modes.

NITL President John B. Ficker said by 2035 there might be a doubling of freight volume. Even if that forecast is only half right, that will strain today’s current freight capacity system beyond its limit.

“We need to face the reality of what’s out there,” Ficker said. “Shippers and carriers are some of the most creative people out there. The creativity of these people is stellar. It’s like pulling rabbits out of a hat. But how many rabbits are still in the hat?”

One way to magically improve truck productivity is through longer and heavier trucks. ATA is quietly backing a bill introduced that would increase truck weights from 80,000 to 97,000 pounds. The key question, Graves said, is where those trucks could run.

“If we could do that, it would be very healthy to take a look at that,” Graves said. “Our number one priority is capacity. Maybe two or three things down the list is productivity.”

Ed Hamberger, president of the Association of American Railroads, said his group was against such a move. But in a concession, Hamberger said truck size and weights “should be on the table,” as well as the taxes the truckers pay, but said he was concerned about the economic disparity about such vehicles.

“We have a respectful disagreement,” ATA’s Graves said. “If we all give a little, we can gain a lot. We are just asking for an opportunity to discuss productivity [gains] as a way to move freight. That’s a conversation we think ought to occur. But it’s not an issue that we are obsessed with.”

Yet, a strange thing is happening as all these forecasts call for ever more freight on the road, rails, oceans and air.

“Productivity in trucking is actually falling,” Graves said. “Congestion is very counterproductive. Hours-of- service, the driver shortage, environmental regulations. It makes it challenging to get the kind of productivity out of every truck that we need.”

Congress needs to commit itself to a national program to improve freight transportation, Graves said. The trucking industry is even backing a higher fuel tax, providing the proceeds are dedicated to transportation improvements exclusively.

“Yes, we are.” Graves said. “ATA very clearly has found support among its membership for a fuel tax increase.”

The ATA’s Graves said there is “definitely” a sense within the shipping community in all modes “to get our act together to collectively go to Congress in next reauthorization to do things that advance our ability to move freight.”

“It’s a global supply chain,” Graves said.

AAR’s Hamberger said capacity is strained across all modes, and will only worsen. All studies are predicting nearly a doubling of freight growth over the next 10 years.

“The thrust of every one of these studies is we have more demand for freight movement, which is a good thing because it shows a growing economy,” Hamberger said.

“At its heart, capacity is about money and capital investment,” he said. Rails would continue to invest in equipment and capacity as long as they’re convinced they will get adequate returns on investment, Hamberger said.

Rails had a great year in 2005 but only got a 14.1 percent return on investment, which Hamberger said was below the level of all Fortune 500 industries. He warned that any attempts of “re-regulation” of freight railroads—such as giving commuter freights priority over freight trains--would serve as a disincentive for rails to invest in capacity.

Rails are backing a bill that would give a 25 percent investment tax credit for infrastructure improvements, and Hamberger asked shippers to support such a measure.

Chris Koch, president of the World Shipping Council, a pro-maritime group, said his industry has invested “tens of billions of dollars” to keep up with demand. He said shortage of capital is not the issue as much as getting environmental permitting and getting rails to invest enough fast enough is a challenge. The Port of Long Beach and Los Angeles have proposed a container fee as a way to help pay for congestion costs and environmental concerns.

“All these things are going to cost you and me a lot of money,” he said. “It’s not a crisis. We can’t afford to be complacent. These (annual) growth rates of 7 or 8 percent a year put enormous pressure on our ability to perform.”

Ficker wants Washington to take a “holistic” view of freight. “Not regional, not federal. We need a national program,” Ficker said. “We have a capacity problem.” Solutions will require serious leadership, collaboration and recognition that there is no such thing as a free lunch, he said.

“We’re all going to have to pay for it,” Ficker said. “I don’t care what you call it. We’re going to need more money in the pot.”

Ficker said the lines between shippers and carriers have blurred. “Resolving today’s issues will not be done in a confrontational environment,” he said. “They will be done in a collaborative manner.”

David Heymsfeld, Democratic staff director on the House Committee on Transportation and Infrastructure, told the NIT League that the federal fuel tax no longer is adequate to fund major infrastructure improvements. That tax – currently 23.3 cents on diesel and 18.3 cents on gasoline, has not changed since 1993 and has been eroded by inflation.

“Revenue for the Highway Trust Fund is falling greatly relative to the needs,” Heymsfeld said. “The highway tax is less and less adequate.”

Heymsfeld said by FY 2009 the Highway Trust Fund “will be unable to support” current funding levels. Transportation Secretary Mary Peters is chairing a blue ribbon committee on highway funding. But Democrats are wary that the Bush administration’s aversion to tax increases will doom any chance of increasing the fuel tax.

“We (Democrats) don’t consider adjustments for inflation a tax increase,” Heymsfeld said. “They (Republicans) do.”

Laying out goals aimed at bringing the United States' surface-transportation system into the 21st Century, the American Association of State Highway and Transportation Officials (AASHTO) and the U.S. Chamber of Commerce recently release surface transportation policy recommendations calling for greater investment in infrastructure.

“The last time American had a national vision for transportation was when the Interstate System was launched in 1956," said AASHTO Executive Director John Horsley. "Since 1950, our population has increased by 130 million, highway travel has increased five-fold … what it will take to meet America's surface-transportation needs for the future will require a different approach than was taken in the past.

AASHTO is called for "multi-modal and an intermodal approach” that go beyond transportation improvements alone and include policies addressing land use, energy, global climate change and the environment.”

AASHTO is backing an increase in federal highway funding from $43 billion a year to $73 billion a year, and to increase funding for transit from $10.3 billion a year to $17.3 billion a year, by the year 2015. It would also favor doubling the current 47,000-mile Interstate Highway System and preserving it so it lasts for another 50 years.

AASHTO outlines the wide variety of financing approaches various levels of government can deploy, and urges creation of a Presidential Commission on Highway Safety and a new panel, the Transportation Revenue Advisory Commission, that would make impartial and objective assessments of the needs of the surface-transportation system.

AASHTO is calling on Congress to avoid a reduction of $11 billion or more in federal highway assistance in 2009. It proposed an increase in the federal gasoline tax (or equivalent) of 3 cents by 2009 and of another 7 cents or equivalent by 2015.