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Transportation News Bulletins - Logistics

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DOT calls on Congress for $20 billion to keep surface transportation funded through March 2011
Thursday, 02 July 2009 00:00

WASHINGTON—At a time when funding for surface transportation programs is scarce, the Obama administration released a plan to keep programs in the black until March 2011, according to various media reports.

The main takeaways of the plan include a request to take $20 billion in revenue from the United States General Treasury Fund into a federal trust for highway and transit infrastructure projects, according to a Reuters report.

This news follows reports from last month indicating that the Highway Trust Fund (HTF) is again on the verge of insolvency and will require up to $7 billion to remain fully funded through 2009.
The HTF is the federal government’s primary source for financing highway, bridge, and transit projects, and it is largely funded by the motor fuel federal tax, which is 18.4 cents per gallon for gasoline and 24.4 cents for diesel and has not been raised since 1993. One main reason for the HTF’s dwindling financial resources is that Americans are driving fewer miles, as evidenced by Americans driving 90 million fewer miles year-over-year in fiscal 2008.

In mid-June, Department of Transportation Secretary Ray LaHood called on Congress to propose an immediate 18-month highway reauthorization bill that would replenish the HTF. He said at this time that if this does not happen the HTF could be out of capital by the end of next month, with states facing the prospect of losing key transportation funding.

This news comes on the heels of the recent release of a six-year surface transportation bill introduced by House Transportation and Infrastructure Committee Chairman James L. Oberstar (D-Minn.) that will likely cost $450-$500 billion. The current bill—SAFETEA-LU—expires on September 30. A main theme of Oberstar’s bill calls for a national transportation policy, as opposed to DOT’s current policies, which were established and are administered by separate DOT departments—each focusing on a single mode of transportation.

Oberstar’s plan, which includes multiple freight-focused components, was approved in a House
subcommittee last week. And he has said that he opposes the plan for an 18-month extension of the existing bill.

Along with the request for $20 billion, the Obama plan also calls for $300 million to help states and metropolitan planning organizations evaluate their transportation systems, and provide $10 million to help DOT develop performance goals and establish guidelines for states and localities on project evaluation, according to a report from CQ Politics.

Also included was Obama’s plan for a national infrastructure bank. When he was running for President last year, Obama said this effort would invest $60 billion over a 10-year period for highways, technology, and related projects. And in this week’s release, Reuters reported it would be an independent entity within the DOT and focus on rail, highway, bridge, and waterway projects, as well as energy, water, and telecommunications infrastructure in the future. And Obama is asking for a combined $7 billion over the next two years to establish the bank that would give grants and make loans for projects that cross state lines or combine different transportation modes, added the report.

Regardless of the timeframe for surface transportation initiatives, where the funding will come from looms large.

“The major point here is to come up with a way to reach that funding target,” said Payson Peabody, of counsel, at Washington, D.C.-based law firm Dykema Gossett PLLC. “[A] short-term fix is not necessarily going to solve the short-term problems we have.

Peabody added that in the current fiscal environment, the additional spending proposed by Chairman Oberstar must be paid for. And he explained there are really only two choices: a broad-based tax increase; or tolling and expanded use of public private partnerships.

Direct user fees to pay for new infrastructure will allow leveraging of private capital to help pay for
transportation investment, said Peabody, and it will reduce budget costs and make each project
accountable to investors as well as to voters.

Direct user fees to pay for new infrastructure will allow leveraging of private capital to help pay for
transportation investment, said Peabody, and it will reduce budget costs and make each project
accountable to investors as well as to voters.

“The 18-month proposal is encouraging, because it does not contain the anti user-fee and anti publicprivate partnership provisions in the Oberstar bill, said Peabody.

Peabody also noted that a recent report from the Energy Information Administration indicated that
domestic fuel consumption has gone down to 2000 levels, which he said suggest a structural problem with how the HTF is funded.

Logistics Management, 7/2/2009

U.S. Domestic Shipping Looks Ahead
Thursday, 02 July 2009 00:00

Consumer market’s tight, budgets are trimmed, but U.S. operators look to opportunities ahead.

With consumers tightening up on discretionary purchases such as cars and home electronics, shipping lines in the U.S. domestic trades are reporting drops in cargo volumes to the non-contiguous states and territories, and they’re trimming costs to keep pace with the resulting revenue declines.

One of the bright spots is Guam, where a massive military build-up promises a boost for Matson
Navigation Co. and Horizon Lines, the only container carriers in the trade linking that island and Hawaii with the mainland.

In Alaska, a pair of consortia aims to build pipelines that will move natural gas from the North Slope to the U.S. Midwest via southwestern Canada starting in 2018.

Puerto Rico wrestles with recession, statehood

Puerto Rico’s recession predates the mainland’s by two years, the result of partisan bickering between then-Gov. Aníbal Acevedo Vilá and the commonwealth’s legislature that prevented some economic programs from moving forward, said Rob Grune, senior vice president and general manager of Puerto Rico and Caribbean operations for Crowley Maritime Corp. (one of a handful of ocean carriers active in the mainland-Puerto Rico trade).

Vilá belongs to the Popular Democratic Party, which opposes statehood. He lost last November—amid graft accusations on which he was ultimately acquitted—to Luis Fortuño of the pro-statehood New Progressive Party.

With the legislative and executive branches controlled by the same party, “there are some chances things will get accomplished,” though there is scant hope of a major turnaround this year, Grune said.

Numerous challenges persist, including 16 percent unemployment, 11 percent inflation and a projected budget deficit of $3.5 billion that could force some 30,000 layoffs by the commonwealth government in July, he said. During the Vilá administration, a six-week shutdown of the government threw 100,000 employees permanently out of work, he said.

Puerto Rico gets 75 percent of its merchandise volume from the mainland, he said. Grocery items are moving steadily; in fact, grocers are faring reasonably well because consumers are dining out less than usual, he said. Traffic in department store merchandise and consumer goods such as TV sets and handheld electronic devices is down, and new-auto shipments have plunged 85 percent during the past three years, he said.

The next Alaska pipeline

Similarly, Alaska “is not immune from the economic downturn that the world is experiencing,” said a wellplaced source who spoke on condition of anonymity. Officials with shipping lines active in the mainland-Alaska trade could not be reached for comment. The source said consumer staples traffic was “steadystate” and that the volume of discretionary purchase items was “softer” than that of the staples.

The pipeline projects are in the procedural and marketing stages; the consortia are going after funding and permits, and expect to begin soliciting customers in 2010.

One, comprising BP and Conoco-Phillips, intends to rely entirely on private funding sources. The other consortium plans to use a combination of private and public funding, the latter under the Alaska Gasline Inducement Act (AGIA). Its participants are TransCanada Alaska Co. and Foothills Pipe Lines Ltd., both wholly owned subsidiaries of TransCanada Corp.

If all goes according to plan, BP-CP will start construction of its pipeline “2015-ish” and will pump “first gas” three years later, consortium spokesman David MacDowell said. Trans-Canada Alaska expects to begin construction in 2016 and to start delivering gas in 2018, according to a report that the consortium released last April 30.

Military buildup in Guam attracts cargo

While commercial cargo volumes to Hawaii and Guam are down, carriers serving the latter island stand to benefit from traffic growth to Guam stemming from an expanding military presence there, Matson spokesman Jeff Hull said.

Besides hauling military supplies and equipment, the shipping lines are carrying personal effects and household items such as furniture and appliances as troops and their families move between the island and the mainland, he said.

Fingers crossed that Hawaiian market’s at bottom

Matson, which moves autos and containerized goods, posted a $500,000 operating loss during the first quarter of this year after gaining $15.9 million a year earlier, according to its corporate parent, Alexander & Baldwin, Inc. The carrier saw its container and auto totals in the Hawaii trade drop during the period, respectively to 32,500 from 37,900 and to 14,400 from 25,600. Container traffic to and from Guam held steady at 3,400.

Pasha Hawaii Transport Lines, which vies with Matson in the auto sector, “is keeping its fingers crossed that the market has bottomed out and will improve in the coming months,” company spokeswoman Joelle Vossbrink said.

“There has been an uptick in requests for its services, and the company continues to diversify its cargo and customer mix,” she said. Pasha’s ship Jean Anne, which carries cars, trucks and other rolling stock, “is ideally suited to carry military cargoes—from personally owned vehicles to household goods to large rolling stock. The Jean Anne also carries equipment and supplies that support the construction industry—a bright spot in the local economy in Hawaii at the moment,” Vossbrink said.

Steering towards brighter Horizon?

For Horizon, the only carrier to ply all three domestic ocean trades, the first-quarter operating result tumbled to an $800,000 loss this year from an $11.6 million gain in 2008, but the weakened economy wasn’t the only culprit. The recent quarter’s loss reflected expenses of $4.4 million in legal costs stemming from an antitrust investigation and $800,000 related to a restructuring, the company said in its quarterly report issued last April 24.

Shipping lines are taking various steps to trim their operating costs, mindful that they need to continue meeting their customers’ needs, Crowley’s Grune said.

Crowley has introduced fuel-saving measures such as installing new “work-wheel” propellers and fuelinjection systems, and coating its vessels with new anti-fouling agents that reduce drag during sailing, he said.

“We have had some schedule changes,” i.e., service frequency reductions, he said.

The anonymous source said that notwithstanding current difficulties, the carriers in the Alaska trade “are in it for the long term.”

Horizon “received a revenue-per-container rate increase of 3.3 percent, net of fuel, helping to partially offset the soft volume and contractual expense increases,” chief executive Chuck Raymond said in a news release that accompanied the quarterly report. “As we look forward, we expect continued modest container rate increases, lower fuel prices and other cost reductions to help offset anticipated slight volume declines for the year,” he said.

Cargo Business News, 7/2009

ISM report shows slow but steady economic improvement
Thursday, 02 July 2009 00:00

TEMPE, Ariz.—PMI up to 44.8 percent in June; Inventories trending down.

According to the Institute for Supply Management (ISM), the economy is slowly improving, and it likely will continue to grow, based on its latest industry report.
Norbert Ore, chairman of ISM’s manufacturing business survey committee, said many economic
indicators are still below 50 on the 0-100 scale, meaning they are technically “contracting,” but there are signs of steady improvement. Ore said June marked the second month in a row that “the overall economy has experienced some slight growth.”

For example, Ore noted that seven out of 18 industries—Petroleum and Coal Products; Printing & Related Support Activities; Wood Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Chemical Products; and Primary Metals—reported growth in June.

In addition, the Purchasing Managers Index (PMI) rose two percentage points to 44.8 percent in June, according to the report. Production and prices both rose sharpest of all, by 6.5 points each. Even employment, which traditionally lags behind everything else, rose 6.4 percentage points to 40.7 percent.

“The worst of the worst is over,” Ore said. “Everything is moving in the right direction.”

Ore also noted good news in inventories. Raw materials inventories continued to drop, this time by 2.1 percentage points to 30.8 percent, while customers’ finished goods inventories also went down, by 2.5 points, to 43.5 percent.

Dropping inventories has been one of the first and strongest signs of recovery, as it shows companies are depleting their inventories by making and selling products, which leads to new orders.

“It indicates a very strong liquidation still taking place,” he said.

Within a few months, both categories will likely level off in the upper 40s Ore said, but not before these drops give the economy a shot in the arm.

“The de-stocking phase is just about over,” he said.

Earlier this year, Ore and ISM predicted the economy would be showing strong signs of recovery, yet still have a long way to go, in the third or fourth quarters this year. These predictions, Ore said today, are still on track. In the next few months, Ore said he will be watching to see if the employee and inventory indices continue to rise, and that new orders and production indices stay above 50.

All of those conditions will add up to an improving economy, and Ore said he believes that will keep happening.

“I think those trends are fairly deeply embedded,” he said.

Logistics Management, 7/2/2009

Digital TV Switch Opens Up New Service
Wednesday, 01 July 2009 00:00

Abandoned bandwidth could host new applications for trucking, rural net access.

The transition of broadcast television to digital technology from analog is freeing up a wide swath of the nation’s commercial airwaves, part of which could be devoted to wireless data transmission and other applications suitable for local and regional fleets.

The frequencies tucked into the voids between UHF TV channels—called white spaces—became available last month when the nation’s broadcast television stations adopted digital-only operations.

The Federal Communications Commission, regulator of U.S. airwaves, is creating an open service band with the newly available bandwidth. The objective is to expand broadband Internet access to rural areas, but other applications could fit in, too.

“There is a lot of momentum to create an unlicensed environment for mobile and fixed devices,” said Mark Crosby, president of the Enterprise Wireless Alliance, an advocacy group for wireless companies based in McLean, Va. “Politically, I think the new administration thinks this is good.”

The absence of licensing suggests the bandwidth would be open to anyone who can meet the technical challenges.

Crosby said companies such as Motorola, Google and Microsoft have been testing devices and studying interference challenges. Although much of the focus is on the consumer market, he said, commercial applications also might emerge.

A coalition representing broadcasters is working to ensure its members’ TV signals don’t suffer undue interference in the process, and they have taken their argument to court. That battle may take some time to resolve, but it’s unlikely new white-space services would be completely blocked. However, success depends largely on whether the kind of technological innovation some advocates forecast actually occurs.

“Could there be companies that put together . . . solutions for local or regional trucking companies? Absolutely,” Crosby said. “It all depends on the technology and what you’re trying to get done.”

He listed vehicle monitoring and on-site billing as examples of services that eventually could come about, but he noted that the delivery technology isn’t there yet.

“It is a viable thing, and it’s going to take a while to realize economies of scale, but I think all of this will take place,” Crosby said.

Some liken the potential of white-space signals to Wi-Fi on steroids.

Crosby said it’s “highly unlikely” white-space devices could function from the confines of a traveling vehicle, but they could be used at stops along the way.

“I would think that would work,” he said, noting that all white-space devices will be required to have geolocation and sensing capability that could detect nearby transmissions.

“The units have to be smart enough to know” what’s going on around them, he said.

Motorola, for one, has been studying the potential for commercial fleet applications, said Steve Sharkey, senior director of regulatory and spectrum policy in the company’s global government affairs office in Washington, D.C.

“White space could really provide a home for them to expand into data service,” he said. “There is a lot of spectrum available for mobile services.”

Sharkey said the technology is well-suited to environments that are not “line-of-sight,” such as urban areas replete with tall buildings, but he noted that channel capacity could be reduced in more densely populated areas.

In particular, he said, opportunities may exist for utilities in rural areas, where bandwidth demands aren’t as great.

“A lot of utilities operate in more rural areas where you don’t have a lot of television or use by other services,” Sharkey said. “We think that it will be reliable and that there will be spectrum available in those areas.”

He added that the unlicensed devices don’t require the same level of infrastructure as traditional licensed wireless systems that serve many regional fleets. The new systems are intended to augment, not replace, current communication needs.

“We don’t view this as a real competitor to the traditional commercial mobile cellular providers,” Sharkey
said. “It’s a little bit different. Those kinds of systems require a lot of infrastructure and a lot of management, which is probably not what you would find in an unlicensed environment.”

However, Sharkey insists, that doesn’t mean the devices will be unreliable.

“The technology has advanced so much,” he said. “We’re talking about cognitive, intelligent radios that
can work around protection requirements that they have to provide. It should be very reliable.”

White-space devices will operate alongside television stations and unlicensed frequencies used for wireless microphones and other equipment. Proponents say the operations won’t cause interference with existing services, but a group that represents broadcasters is not convinced.

The National Association of Broadcasters, which lobbies on behalf of television and radio broadcasters, has filed an appeal of the FCC’s approval on grounds that the service will cause harmful interference to TV stations.

“All of this looks good on paper, but every time they have flipped the switch on one of these devices, something bad has happened,” said Kristopher Jones, communications director for NAB.

“In theory, these things would be wonderful,” Jones said. “Making that transition from theory to actuality is here all of the kinks have arisen, and that’s what the broadcasters are concerned with.”

The legal wrangling could stall rollout of white-space service, but product development still has a ways to go.

“Usually, you have a bunch of consumer applications that can evolve into commercial ones, but there is nothing that we have heard of yet, said Meghan Henning, a senior communications manager of the Consumer Electronics Association, Arlington, Va.

Henning said that she hadn’t heard of any specific applications geared toward trucking, but the opportunity for technology companies to develop new applications is there.

“The potential is not limited,” she said. “We think this is a huge win for innovation and innovators to come up with something. It gives them more room to play around with the vast capabilities the white spaces can deliver. We are very hopeful that we will see lots of cool and interesting devices that come out of this.”

Light & Medium Truck, 7/1/2009

TSA Deploys Canine Teams
Monday, 29 June 2009 00:00

Explosive detection teams enhance cargo security in Florida

The Transportation Security Administration deployed two canine teams to enhance explosives detection at Orlando International Airport air cargo facilities.

Each team consists of one dog and a TSA Transportation Security Inspector Canine Handler. They will primarily search cargo bound for passenger-carrying aircraft. The Orlando teams completed a rigorous 10-week training course at Lackland AFB. They are certified in their local environment and are now fully operational. They went to work June 25 in a Visible Intermodal Protection and Response Operation at LYNX (Central Florida Regional Transportation Authority).

"Canine teams are one of the quickest, most efficient means of detecting explosives," said John Daly, Orlando Federal Security Director. "The two new TSA teams provide flexibility in searching air cargo and the ability to surge resources in other modes of transportation such as seen today at LYNX during our VIPR - Visible Intermodal Protection and Response - operation."

TSA canine handlers are non-law enforcement employees and complement the more than 600 TSAcertified state, local and federal law enforcement teams currently deployed nationwide to more than 90 airports and mass transit systems.

The Journal of Commerce, 6/29/2009

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