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Volume 101 Number 19
May 11, 2001
Executive Digest

Congress
Information
Details

Gas Prices Spiral, Pressure Mounts

    Rising gasoline prices have again prompted demands for a rollback of the federal fuel taxes that pay for improvements to the nation's highways. The White House said this week that the President does not favor it, but would not rule it out if it would help to secure enactment of the Administration's energy package.

    The Associated Press reported this week that gasoline prices nationwide had climbed to $1.76 per gallon nationwide, an increase of five percent in little more than two weeks. The Energy Department released estimates on Monday that the average price of regular gasoline this summer would range between $1.50 and $1.75 per gallon. However, spot checks around the country showed prices of $2.02 per gallon in Chicago and $2.00 per gallon in San Francisco. Some petroleum industry analysts are predicting, however, that prices are now peaking and will decline over the summer. Analysts also note that, when adjusted for inflation, prices are a dollar less per gallon than motorists paid in 1981.

    Nonetheless, the prices at the pump are again raising the specter of attempts to reduce the federal fuel tax to ease costs to consumers. According to the May 7 Washington Post, House Majority Whip Tom Delay (R-TX) has scheduled a series of "energy listening sessions" in his office for House members to discuss concerns about energy prices and possible solutions.

    In the Senate, Minority Leader Tom Daschle (D-SD) has called for the appointment of a bipartisan emergency commission to investigate the causes of the rising fuel prices.

    Energy Policy to be Unveiled

    The recommendations of the Administration's Energy Task Force, chaired by Vice President Dick Cheney, are to be released on May 17. Information on the proposals is trickling out, however, including statements from Administration officials. In a speech last week, Cheney emphasized the need for new generating capacity, more production of fossil fuels and nuclear energy. The report is expected to call for the construction of 1,300 new power plants over the next 20 years, as well as exploration for domestic oil reserves in Alaska.

    But the Administration has also indicated that it is focusing not on fuel prices, but on "long-term" solutions to capacity needs.

    Transportation advocates are concerned that a public outcry over energy costs could result in an attempt, as surfaced last year, to roll back federal fuel taxes either temporarily or permanently. White House spokesman Ari Fleischer told the Post that the President has not ruled out possible support of a fuel-tax cut, but has not supported one in the past.

    During a hearing before a Senate subcommittee this week, Secretary of Transportation Norman Mineta reiterated the Administration's current opposition to eliminating or reducing the federal motor-fuel tax. "At this time, the Administration hopes to keep the status quo: no increase or reduction of the fuel tax," he said. "I would be in opposition to a repeal, given the needs we have."

    Sen. Max Baucus (D-MT), Chairman of the Senate Finance Committee which would have jurisdiction over a tax reduction, called a repeal "a big mistake." He said that a repeal would adversely affect Highway Trust Fund revenues, and would do little to push gasoline prices down.


Mineta Questioned on Status of Streamlining Regulations

    During a hearing before the Senate Transportation and Infrastructure Subcommittee this week, Secretary of Transportation Norman Mineta said the Administration is committed to improving the environmental approval process for transportation projects. But he said it is still premature to comment on the status of proposed regulations issued last year.

    Mineta appeared before the Subcommittee on Thursday to discuss the Administration's FY 2002 budget proposal. The subject of streamlining the environmental review process arose throughout the hearing, as did future funding needs given the congestion of the nation's transportation system. Members also solicited the Secretary's views on efforts to reduce the federal motor-fuel tax in response to increasing gasoline prices (see preceding article).

    Sen. James Inhofe (R-OK), the new Subcommittee chair, said that environmental streamlining was among the biggest concerns of the panel. Mineta responded that with current capacity challenges, trying to get projects completed in an expedited manner is a top priority of the Administration. He said that the Department would look for ways to improve the approval process through administrative means, particularly in coordinating and conducting state and federal environmental reviews simultaneously.

    Mineta was questioned about the status of the notice of proposed rulemakings, which were issued last May by the Federal Highway Administration and Federal Transit Administration in response to TEA-21's provisions on streamlining the NEPA and environmental review process. He said it is "a little premature" to provide a report on the status of the NPRMs, saying he was not then fully conversant on specifics. "We are taking a look at the whole issue of regulations for streamlining," he added.

    In his written statement, Mineta provided the following status on the NPRMs: "I will be reviewing the NEPA NPRM, along with the companion NPRM on transportation planning, to decide how best to implement the congressional intent to reduce project development time. I value your comments highly and I will keep this Subcommittee and the leadership of the Committee fully informed."

    Sen. Robert Smith, chairman of the full Environment and Public Works Committee, said that a number of concerns were voiced regarding the NPRMs during the comment period. He added it was the intention of the drafters of TEA-21 to introduce concurrent reviews, dispute resolutions, and time frames for approval into the project review process.

    Part of the problem, Mineta said, is that different federal agencies with different missions are included in the review process, and there was no lead agency. Smith responded that he hoped the Department of Transportation could serve in that capacity.

    "I hope the future Federal Highway Administrator nominee will take streamlining seriously," Smith added.

    Cool Reception to RABA Change

    While praising the overall funding levels of the Administration's FY 2002 transportation budget, concerns were raised over the President's proposal to allocate $201 million in RABA funding for border infrastructure improvements and a new initiative to provide transportation services to disabled people.

    Sen. John Warner (R-VA) admonished the Administration for straying from the RABA distribution formula contained in TEA-21. "While these programs may have great value, they ultimately reduce funding for the states," he said. He added that such policy initiatives should be taken up in separate legislation.

    Mineta Questions Influx of Funding

    Mineta and subcommittee members discussed congestion on the nation's highways, and how future demand will be met. Mineta stressed the need for more efficient use of existing capacity through intelligent transportation system (ITS) technology. He said the Administration would focus on deployment of such technology rather than additional research and development.

    More capacity must be added to relieve congestion, Mineta said. "More concrete is needed in many regions," he said, adding that funding is falling behind the growth in congestion.

    However, when Sen. Lincoln Chafee (R-RI) asked if more funding should be dedicated in the near future for transportation projects rather than tax cuts, Mineta questioned whether industry, states and localities would be able to effectively use the additional funding should it become available. "The needs are there -- the question is whether industry can absorb the funding, including states and localities," he said.

    Chafee said that with additional resources, the Department should be able to better administer federal funding for projects. Mineta said that possibility will pose an interesting question for reauthorization.

House Subcommittee Marks Up Railroad Track Modernization Act

    The Subcommittee on Railroads of the House Transportation and Infrastructure Committee Wednesday marked up the Railroad Track Modernization Act of 2001 (H.R. 1020), approving the Chairman's substitute without amendment or discussion beyond opening statements.

    If enacted, the program would provide $350 million annually for three years for capital grants to be used "for rehabilitating, preserving, or improving track used primarily for freight transportation to a standard ensuring that the track can be operated safely and efficiently." The goal is to make it possible for class II and III lines to handle 286,000-pound rail cars, which are becoming the class I industry standard.

    Prior to the markup, Joseph H. Boardman, Commissioner of the New York State Department of Transportation and Chairman of AASHTO's Standing Committee on Rail Transportation, wrote to Subcommittee Chairman Jack Quinn (R-NY) expressing AASHTO's strong agreement with the intent of the legislation and stating AASHTO's position that "in most cases the State should be the eligible applicant for capital grants under the proposed program."

    In the bill, as reported by the Subcommittee, grants may be provided directly to a class II or class III railroad or, "with the concurrence of the class II or class III railroad, to a state or local government." In the state cooperation provision, the bill reads, "Class II and class III railroad applicants for a grant under this chapter are encouraged to utilize the expertise and assistance of state transportation agencies in applying for and administering such grants. State transportation agencies are encouraged to provide such expertise and assistance to such railroads."

    At the markup, Rep. Quinn said that the substitute "enhances the role of state transportation agencies in the program." Congressman James Oberstar, (D-MN) ranking Member of the full committee, said that it "encourages state transportation agencies to work with short lines" and for this and other reasons it is "vastly improved."

    The bill reported by the subcommittee does not include the repeal of the Local Freight Rail Assistance program, a provision included in the original bill. It also allows grants to supplement direct loans or loan guarantees provided through the Railroad Rehabilitation and Improvement Financing (RRIF) program and to be used in connection with that program for "paying credit risk premiums, lowering rates of interest, or providing for a holiday on principal payments."

    The next step for H.R. 1020 will be full committee markup, which is scheduled for Wednesday, May 16. No changes, other than technical, are expected. Senate Subcommittee Hears Testimony

    Members of the Senate Surface Transportation Subcommittee on Wednesday heard testimony on issues concerning the rail freight industry, including its current financial condition, infrastructure capacity, and long-term capital funding needs.

    Testifying before the subcommittee, Richard Davidson, Chairman and CEO of the Union Pacific Corporation, said the rail industry is the most capital-intensive industry in the United States. Davidson noted that although the industry invests more than 20 percent of its revenue back into the system, that level of funding is still not adequate to meet all capital needs.

    Also appearing before the subcommittee was Dr. Allan Zarembski, President of ZETA-TECH Associates, Inc. Dr. Zarembski contended that Class I railroads will require approximately $8 billion a year to maintain track and structures. He expressed concern that the downturn in economic activity may force railroads to scale back their capital investments. Dr. Zarembski noted that short lines and regional railroads are not meeting their minimum investment needs to maintain fixed plant.

    The witnesses testifying before the subcommittee voiced support for H.R. 1020, the Railroad Track Modernization Act of 2001. During the hearing, Walter Brickwedel, President of the Central Oregon and Pacific Railroad, called on the Senate to support similar legislation. Senator Gordon Smith (R-OR), chair of the subcommittee, expressed his support for such a measure, and noted that similar legislation would soon be introduced in the Senate.

Bill Calls for Smart Growth Study

    Legislation has been introduced in the House calling for a study on urban sprawl and "smart growth," and requiring urban sprawl to be considered by federal agencies in environmental reviews under the National Environmental Policy Act (NEPA).

    The bill (H.R. 1739) was sponsored by Rep. Mark Udall (D-CO). In a statement, Udall said that "this bill is designed to shine a bright light on the influence of federal actions on urban sprawl and development and to ensure that these impacts are addressed in major federal actions of projects." He said that state and local governments are best suited to determine where growth should occur, but that "a well-developed plan by a local community can be swept aside by the routing of a major highway or the construction of a poorly sited post office."

    The bill would require a more intensive environmental review of a federal project, if requested by a state, local or tribal official, including an evaluation by the Environmental Protection Agency of the impacts of the project on sprawl. It also calls for a study by the Council on Environmental Quality to evaluate how well federal agencies analyze sprawl impacts when conducting environmental reviews.

Budget Passes House and Senate

    The House of Representatives and Senate passed a FY 2002 budget agreement that provides 4 percent in increased funding and $1.35 trillion in tax relief.

    The votes come off of intense negotiations between House and Senate Republican leadership over spending levels and the size of a future tax cut. The House on Wednesday approved the measure by a 221-207 vote, while the Senate voted 53-47 for adoption. Five moderate Senate Democrats voted for the resolution, while two Republicans refused to support the measure.

    Work is now underway to divide $661 billion in non-mandatory spending and determining future tax cuts. The Senate Finance Committee hit a snag on Thursday in trying to introduce a bipartisan tax cut proposal as early as next week, which will likely adhere to the $1.35 trillion level set in the budget resolution. To date the House has already cleared $1.5 trillion in tax cuts.

Fuel Prices Small Part of Drop in VMT

    While higher fuel costs play a partial role in the recent decline in highway travel, analysts indicate that the economic downturn is a more significant factor, and that travel growth is likely to rebound as the economy improves.

    Travel trends are tracked on a monthly basis by the Federal Highway Administration, based on data reported by state departments of transportation from about 4,000 observation points nationwide. According to the FHWA analysis, vehicle miles traveled (VMT) began lagging from historic growth rates last June. In December travel was actually 8 percent below what would have been expected based on average growth rates from the previous year. Because growth had occurred as expected in the first half of the year, the estimated total mileage for the year was only slightly below that of the prior year, with 2.688 trillion miles reported in 2000, as compared to 2.69 trillion in 1999.

    Travel growth in January, 2001 increased by more than 3 percent over the previous January, but then declined again below historic levels in February according to preliminary reports.

    Although some observers had speculated that fuel prices were affecting travel, data indicates that while fuel prices increased over 40 percent between January 1999 and December 2000, fuel prices began falling at about the same time travel began its biggest decline. Analysts concluded that rising fuel prices are not the major factor behind the slowdown in VMT growth.

    A more relevant factor, they believe, is the impact of the economic slowdown. Charted on a month-by-month basis, statistics show a close correlation between changes in the index of leading economic indicators and changes in VMT. Leading economic indicators include such items as plant and equipment orders, building permits, stock prices, unemployment levels and consumer expectations.

    Another relevant correlation is the relationship between VMT and freight tonnage. For 2000, freight tonnage was down more than five percent, and in December freight shipping was down 8.4 percent from the prior month, and 15 percent from December of the prior year. Freight tonnage increased in January, corresponding to the increase reported in VMT. The travel slowdown was most pronounced, according to FHWA in rural areas, which would be consistent with reductions in freight tonnage.

    A look at travel growth over a 25-year period shows other periods of leveling-off, or slight decline, based on economic cycles. Other factors said to affect travel volumes include weather conditions, such as the ice storms that hit the South last December, and reductions in discretionary travel.

    Funding Impact Possible

    The travel slowdown may ultimately have implications for the amount of federal funding for state transportation programs. Most specifically, the amount of highway funding made available under the Revenue Aligned Budget Authority provisions of TEA-21 is related to the amount of fuel-tax revenue collected in the Highway Trust Fund compared with TEA-21 estimated revenues. Reductions in travel mean reductions in fuel use, and reductions in tax revenue. Observers believe that the impact may only serve to reduce the steady growth in RABA funding that has increased from $1.5 billion in FY 2000 to $4.5 billion in FY 2002.

    Since VMT is also a factor in the formulas used to calculate such funding as Interstate Maintenance, National Highway System, and Minimum Guarantee, should a sharper reduction in VMT occur from one state to another, the drop may also affect individual state apportionments.

    Growth Forecasts Revised

    The FHWA has recently revised its projections for travel growth trends. They now expect passenger travel to grow at 1.9 percent a year though 2020. At that time, travel is expected to decline, based upon demographic changes, such as the aging of the Baby Boomers. The increase in combination truck traffic is projected at 3 percent per year through 2020.

    The monthly report on Travel Volume Trends, produced by FHWA's Office of Highway Policy, may be accessed on the Internet at www.fhwa.dot.gov/ohim. A copy of the FHWA analysis on the VMT relationship to other key economic factors is enclosed for members of the AASHTO Board of Directors.

Taylor Named U.S. DOT Deputy Chief of Staff; Jackson Confirmed as Deputy Secretary

    U.S. Department of Transportation Secretary Norman Y. Mineta on Monday appointed Vincent T. Taylor as Deputy Chief of Staff for the department.

    "Vince brings a broad range of federal experience that will serve the country well. He is an important addition to my leadership team at the department," Mineta said. Taylor was previously employed at the State Department, most recently as the program manager for counter-narcotics, law enforcement, and terrorism in the Office of the Inspector General.

    Taylor has a bachelor's degree from the University of Maryland, College Park; a master's degree in criminal justice from California State University, Long Beach; and a master's degree in Public Administration from Shippensburg University, Shippensburg, Pa. He is also a graduate of the United States Army War College. Jackson Confirmed

    The Senate last week confirmed Michael P. Jackson as Deputy Transportation Secretary at U.S. DOT. Previously, Jackson served U.S. DOT as Secretary Andrew Card Jr.'s chief of staff from 1992-1993. He later worked as vice president and general manager for business development at Lockheed Martin IMS Transportation Systems and Services.

    Jackson graduated with honors from the University of Houston and received a Ph.D. in political science from Georgetown University.

Annual Congestion Study Issued


Chicago's the Site for New Boeing Headquarters

    Corporate officials at the aircraft manufacturer Boeing announced Thursday (May 10) that they have selected Chicago from among three cities in contention to be the company's new headquarters site.

    Chairman and Chief Executive Officer Phil Condit said in a statement that "we looked at all the data and made what we believe is the right choice for Boeing." The aircraft maker, headquartered for 85 years in Seattle, surprised the business world and its home city late in March with the announcement it would relocate its corporate headquarters while maintaining manufacturing operations in Seattle, St. Louis and southern California.

    The other two metro areas in contention for the move were Denver and Dallas-Fort Worth. The headquarters move is expected to be completed by September 4, Boeing officials said.

    At the time the move plan was announced, Boeing officials cited a restructuring of the company to give division heads more autonomy combined with a need to be more rapidly accessible to the money and political centers on the East Coast.


Northwest Mechanics Agree to Contract; Lufthansa Pilots call for Strike

    Northwest Airlines' mechanics and cleaners approved a contract proposal that followed four years of negotiations on Wednesday, giving the airline the highest-paid mechanics in the industry with pay increases averaging 24.4 percent over four years, the Associated Press reported. Meanwhile, pilots at Lufthansa, in Germany, said they would start a 24-hour strike at midnight, AP reported. Only flights originating in Germany were to be affected by the Lufthansa job action.

    The Northwest contract approval, due to be formally signed May 11, gives cleaners and custodians in the same union pay increases averaging 13 percent. The contract, approved by more than 82 percent of union members voting, is for four years.

    At Lufthansa, pilots earlier this week rejected a 26-percent wage increase in the first year of a four-year package, with pay raises in the ensuing years based on inflation and profit-sharing. Pilots said basing raises on inflation and profit sharing would make raises uncertain.

    The pilots' union, called Vereinigung Cockpit, has sought a pay raise of between 30 percent and 35 percent, and would prefer renegotiating the contract yearly. Company officials have said such a raise would undermine Lufthansa's competitiveness.

Iowa DOT Safety Project Featured on AASHTO Web Site


Deadline Extended for FMCSA Senior Executive Positions




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