according to a new report released by the General Accounting Office (GAO). The report serves as a forum for state, local and private sector complaints that the federal government’s efforts to beef up transportation security are leaving others with mixed signals on what to do and forced to pay the bill on their own. It again highlights the dilemma that neither Congress nor the Executive Branch has been willing to confront: how to pay for high-cost fixes to traditionally open systems for moving freight and people within U.S. borders.

GAO was asked by lawmakers to examine the challenges in securing the transportation system. The report was written after GAO spent four months seeking input from state and local government and transportation officials (see below). Meanwhile, a California appeals court ruled that the Environmental Protection Agency (EPA) must reconsider the state’s request for a waiver from ethanol requirements (see below).

Representatives from several states, local governments and industry associations told GAO officials that their members are receiving different messages from the various federal agencies involved in transportation security. For example, one industry representative noted that both Transportation Security Administration (TSA) and DOT asked the industry to implement additional security measures when the nation’s threat condition was elevated to orange at the beginning of the Iraq War, however, TSA and DOT were not consistent in what they wanted done—that is, they were asking for different security measures. Moreover, many representatives commented to GAO that the federal government needs to better coordinate its security efforts. These representatives noted that dealing with multiple agencies on the same issues and topics is frustrating and time consuming for the transportation sector.

Trying To Define DOT’s and TSA’s Role. The GAO says the roles and responsibilities of Department of Transportation (DOT) and Department of Homeland Security (DHS) in securing the transportation system have not been clearly defined, which creates the potential for overlap, duplication and confusion as both entities move forward with their security efforts. GAO recommends that DHS and DOT use a memorandum of agreement, to clarify and delineate DOT’s and TSA’s roles and responsibilities in transportation security matters.

DOT modal administrations and TSA had worked for months to develop memorandums of agreement, which would have defined the roles and responsibilities of the different agencies as they relate to transportation security and address a variety of issues, including separating safety and security activities, interfacing with the transportation industry and establishing funding priorities. The draft agreements were presented to senior DOT and TSA management for review in early spring of this year. However, rather than execute memorandums of agreement, the DOT Secretary and the Administrator of TSA exchanged correspondence that commits each entity to continued coordination and collaboration on security measures. TSA and DOT officials stated that they believe memorandums of agreement are a good strategy for delineating roles and responsibilities and they would be open to using memorandums of agreement in the future.

DHS and DOT generally agreed with the report’s findings; however, they disagreed with the recommendation. Based on the uncertainty in the entities’ roles and responsibilities that transportation stakeholders surfaced, GAO continues to believe its recommendation is valid and would help address transportation security challenges.

State and Local Governments Have Taken Steps To Improve Security. Since 9/11, state and local transportation officials have undertaken a variety of security-enhancing actions including developing counter terrorist plans, participating in training and security-related research, participating in transportation operators’ emergency drills; and table-top exercises, conducting vulnerability assessments of transportation assets and participating in emergency planning sessions with transportation operators. Some state and local governments have also hired additional law enforcement personnel to patrol transportation assets.

Funding Seen As Key Challenge. According to state and local governments, funding is the most pressing challenge to securing the nation’s transportation system. The federal government, which promised to pay for security improvements after the 9/11 terrorist attacks, has yet to adequately fund transportation security needs other than at the nation’s airports. The current economic environment makes this a difficult time for the private industry or state and local governments to make security investments. According to industry representatives, most of the transportation industry operates on a very thin profit margin, making it difficult to pay for additional security measures. For example, the National Governors Association estimates that states are facing a total budget shortfall of $80 billion this upcoming fiscal year. Given the tight budget environment, state and local governments and transportation operators must make difficult trade-offs between transportation security investments and other needs, such as service expansion and equipment upgrades. Many state and local governments are planning to defer some maintenance of their transportation infrastructure to pay for some security enhancements.

The GAO report said although each mode of transportation is unique, they all face some common challenges in trying to enhance security. The common challenges stem from the extensiveness of the transportation system, the interconnectivity of the system, funding security improvements and the number of stakeholders involved in transportation security. According to the GAO report, the size of the transportation system makes it difficult to adequately secure. The report said that state and local transportation managers are in charge of a majority of the nation’s transportation system, which includes about 3.9 million miles of roads, over 100,000 miles of rail, about 600,000 bridges, over 300 ports, 2.2 million miles of pipeline, 500 train stations and more than 5,000 public-use airports.

Conclusion. Transportation security experts and association representatives that GAO interviewed believe that the federal government should provide funding for needed security improvements. The report said that while an overall security strategy is a prerequisite to investing wisely, providing adequate funding is essential. Industry and state and local government officials concluded that federal funding should accompany any federal security standards; otherwise these standards will be considered unfunded mandates that the industry and state and local governments have to absorb. The debate over how to fund transportation security has surfaced the broader issue of whether national security costs should be paid by users, states or the federal government. The cost of airport security upgrades already has state and local authorities complaining that Uncle Sam should be willing to pick up the check for security upgrades.

The State of California last week again asked U.S. EPA for a waiver from Clean Air Act requirements for oxygenated fuels, this time armed with a recent federal court order. A Ninth U.S. Circuit Court of Appeals ruling last month gave California another shot at avoiding an ethanol mandate, when a three-judge panel ruled that the EPA must reconsider the state’s request for a waiver from reformulated gasoline requirements. Not wanting to use one additive, MTBE, the state contends that ethanol, the only alternative oxygenate that satisfies the law’s mandate for 2 percent oxygen for reformulated fuels, brings a different set of problems, both economic and environmental. Environmental matters aside, state officials are also worried about the impacts of future price spikes in an ethanol market to which they would have no alternative without a waiver. The court and regulatory struggle has huge implications for the ethanol industry, should the state be forced to require oxygenated fuel. In fact, with a once-delayed phaseout of MTBE due to take effect next January, refiners have already been switching to the use of ethanol additives.

Background. In a 2-1 ruling, the court said the EPA had ignored the state’s evidence that ethanol would interfere with efforts to reduce one type of air pollution, caused by fine particles of soot. Judge William Canby Jr. said the EPA abused its discretion when it refused to consider the effect on particulate matter pollution-along with the effect on ozone levels-of the state’s request for a waiver of oxygen level requirements under the federal reformulated gasoline program. Canby noted in the decision that the gasoline program provisions of the Clean Air Act allow the agency to waive the requirement of two percent oxygen content if compliance would “prevent or interfere with the attainment by the area of a national primary ambient air quality standard.” The EPA ruled in 2001 that since California had not shown the waiver would help reduce ozone levels, it was unnecessary for the agency to consider whether it might reduce particulates. Canby’s majority opinion drew a dissent from Judge Diarmuid O’Scannlain, who said the court was “forcing the EPA to engage in...a speculative enterprise in an area far beyond judicial expertise.”

The federal oxygenate requirement requires California to use either MTBE or ethanol. The state has banned MTBE because of serious groundwater concerns. As a result, ethanol is the only oxygenate available to the State. The California Air Resource Board (CARB) studied the impacts of the switch from MTBE to ethanol and found that ethanol would have detrimental economic and environmental impacts on the state. CARB’s studies concluded that using ethanol to achieve the two percent oxygenate requirement would prevent or interfere with California’s attainment of the federal ozone and particulate matter standards.

Court Orders EPA To Review Request. The court ordered the EPA to review California’s request for a waiver from the ethanol rules because of its particulate argument. California had argued that gas can be made to burn as cleanly without ethanol as with it, and the governor’s new waiver request renews that argument. The EPA disputed that, but now must more carefully study whether ethanol makes smog and soot pollution worse. Last week, Sen. Dianne Feinstein (D-CA) raised the ante, saying the ongoing switch to ethanol “is one of the main culprits” for a spike in smog levels this year in some parts of California. The EPA hasn’t decided whether to appeal the case. Lisa Fasano, spokeswoman for EPA Region IX in San Francisco, told Bureau of National Affairs Daily Report for Executives (BNA) the agency’s attorneys are “still looking over the court’s ruling to determine what exactly is expected of EPA, because it is not entirely clear what the court has remanded.”

For more than a decade, the federal Clean Air Act has required California refineries to add to gasoline either ethanol, a product made from fermented corn, or a chemical called MTBE. California originally chose MTBE, which was later linked to groundwater pollution. These additives provide additional oxygen so that gas burns more cleanly. However, because of harm to the water supply, Gov. Gray Davis (D-CA) had originally ordered that the methanol-based additive MTBE be banned, and a December 31, 2002 deadline had been set to eliminate its use. But after the EPA turned down the state’s waiver request, Davis extended the MTBE phase-out deadline to December 31, 2003.

Meanwhile, Feinstein in a letter urged the EPA to review and grant California’s request for a waiver to a federal mandate that requires the State to add oxygenates such as MTBE or ethanol to its gasoline. She said, “In light of the decision issued by the U.S. Court of Appeals for the Ninth Circuit, which stated that the EPA abused its discretion in refusing to consider and weigh the effect of the proposed waiver on particulate matter pollution along with its effect on ozone levels, I am writing to strongly urge the EPA to immediately review California’s request for a waiver of the federal oxygenate requirement and grant the state’s request in an expeditious manner.”

State Officials React To Ruling. The ethanol requirement could send gasoline prices soaring — by $450 million a year statewide, according to Davis — if supplies of the additive run short. The state says a mandate that California continue to require an oxygen additive would overwhelm the nation’s ethanol production capacity — though producers say they could meet the increased demand — and would simply transfer wealth to the Midwest. In a statement, Feinstein said, “The fact of the matter is that California’s own clean air and reformulated fuel requirements are the most stringent in the nation and do not mandate the use of oxygenates except in limited areas during winter months. So I would hope that those in Congress seeking to triple the amount of ethanol used in gasoline would also take notice of this ruling and drop their support of an unnecessary and problematic mandate.” She added, a waiver from the oxygenate requirement is good for the environment and a broad-based EPA Blue Ribbon Panel concluded in 1999 that the oxygenate requirement is not necessary for clean air. Environmentalists said the decision will help shed some light on the true effects that ethanol has on air quality. “The question is still out there — is ethanol one of the factors in this big summer smog in the Los Angeles area?” said Frank O’Donnell, executive director of the Clean Air Trust told Greenwire. He added, “The ball is back in EPA’s court.”

Ethanol Provisions In Energy Bill. Under the provisions of the energy bill that the Senate passed last week, the United States would be required to use 5 billion gallons of ethanol by the year 2012. California, however, asserts it can meet clean air standards without ethanol or MTBE and that the proposed Senate ethanol mandate could be even worse for California’s air quality. Senator Feinstein is seeking an investigation by the state of California to find out what role increased ethanol use is having on current higher smog levels. Since ethanol’s volatility increases smog, particularly in the summer, Feinstein called for a careful look at its impact on air quality. Since the energy bills in both the House of Representatives and the Senate include an ethanol mandate almost tripling the amount of ethanol used in the nation’s gas supply, “I strongly believe that we should know more about ethanol’s impact on air quality in California,” said Feinstein.

Ripple Effects. The California court’s ruling opens the door for other states, particularly those on the East Coast, to seek a wavier. Maine, Massachusetts, New Hampshire, and New York filed friend-of-the-court briefs in the case. Last week, Governor John Rowland (R-CT) signed legislation aligning his state’s MTBE ban with New York, and New York state legislators ignored last-ditch efforts by MTBE industry lobbyists to delay the state’s MTBE ban. Both states now have MTBE bans effective January 1, 2004. Ethanol demand in New York and Connecticut alone could exceed 400 million gallons in 2004. With 73 plants online and 13 more under construction, the ethanol industry claims it is ready to meet the demand for a safe, clean replacement for MTBE. U.S. ethanol production set a record one-month high in June of 181,000 barrels per day (bpd), according to the Renewable Fuels Association. Production was up 47 percent compared to June 2002, when 123,000 bpd were produced.

California isn’t the only state worried about economic impacts of an ethanol mandate. The State of Alaska, reports BNA, dropped its oxygenated fuel program for the Anchorage area July 1, in line with a new state budget that made the change. Say state officials primarily for money. The state saves direct program costs of $80,000 and stands to reap additional gasoline taxes of $2.5 million as motorists buy regular gasoline instead of the partially tax-exempt ethanol blend. State officials say that fleet modernization, the growing proportion of late model cars, has reduced ozone pollution, and dropping the requirement will not boost emissions enough to exceed ozone standards that Anchorage has been meeting since 1996.

New data released by the Federal Motor Carrier Safety Administration (FMCSA) indicates that truck-involved fatalities have fallen for a record fifth straight year. According to figures released by the National Highway Traffic Safety Administration (NHTSA), the trucking industry recorded its best highway safety improvement in nearly a decade as the number of truck-involved crash fatalities dropped below 5,000 for the first time since 1995. The 2002 toll of 4,897 fatalities marks a 4.2 percent decline from the 2001 figure. The drop in truck-related highway deaths came as overall traffic fatalities in the U.S. increased from 42,196 in 2001 to 42,815 in 2002, reaching the highest level since 1990. However, fatalities involving alcohol, motorcycles, and young drivers each showed an increase, the government figures indicate. Deaths among children age seven and under decreased to extraordinary low levels, with 968 children in that group killed compared with 1,059 in 2001. Also pedestrian deaths declined by 1.9 percent to 4,808 for 2002.

Additional Highway Safety Spending Proposed In SAFETEA. DOT Secretary Norman Mineta was pleased to see the downward trend in truck-related fatalities, but he re-emphasized his commitment to further reducing deaths and injuries on the nation’s highways. The Safe, Accountable, Flexible and Efficient Transportation Equity Act of 2003, (SAFETEA), the Bush Administration’s surface transportation legislative proposal, would provide more than $15 billion over six years for highway safety programs. This is more than double the amount provided by its predecessor, TEA-21. The majority of this funding would be through a new core highway safety infrastructure program instead of the existing Surface Transportation Program safety set-aside. SAFETEA would provide increased funding for commercial vehicle safety and research programs enhancing the quality, stability, continuity and uniformity of state commercial vehicle safety and enforcement programs.

In addition, SAFETEA would expand and improve auditing of “new entrant” motor carriers. After being issued a new entrant registration, the carrier will be subject to an 18-month safety-monitoring period. During this safety-monitoring period, the carrier will receive a safety audit and have their roadside crash and inspection information closely evaluated. The carrier will be required to demonstrate it has the necessary systems in place to ensure basic safety management controls. Failure to demonstrate basic safety management controls may result in the carrier having its new entrant registration revoked. The FMCSA has a safety goal of reducing the large truck fatality rate by 41 percent from 1996 to 2008. This reduction translates into a rate of 1.65 fatalities in truck crashes per 100 million miles of truck travel.

Trucking Industry Reaction. “The highways are our workplace--our drivers travel over 400 billion miles a year. We recognize and accept the special safety responsibility that this brings,” said Bill Graves, President and CEO of the American Trucking Associations (ATA). In addition, the ATA’s Highway Watch program — in conjunction with FMCSA —trains truck drivers to spot aggressive drivers and dangerous highway situations and report them to authorities. Graves credited the public education efforts with helping to produce the low fatality numbers.

Just before closing up Shop for August, the Senate confirmed the nomination of Annette Sandberg as the new administrator of the Federal Motor Carrier Safety Administration. Sandberg, as deputy, has been acting head of the agency pending confirmation. She previously served six years as head of the Washington State Patrol, the first woman in the nation to head a state police agency.

Sen. Mark Dayton, (D-MN), has vowed to bring the Senate to a halt until a Northwest Airlines-backed clause restricting noise-abatement efforts near the Twin Cities airport is dropped from the Federal Aviation Administration (FAA) conference report. The conference report, which will come before the Senate after the August recess, appears to be in serious jeopardy. In remarks on the floor of the Senate, Dayton assailed Northwest for a “sneaky, slimy and sordid shenanigan” in lobbying for the measure. The conference report would prohibit federal funds from being used for noise insulation of homes or apartment buildings where the airplane noise ranges from 60 to 64 decibels. Dayton said he was “enraged” at what he called a “backdoor attempt” by Northwest to block expansion of a $208 million noise-insulation program to additional neighborhoods. He said the amendment appeared directed at Minnesota because few if any other airport agencies are planning to insulate houses below the 65-decibel threshold.

Several Democratic and Republican aides told Congressional Quarterly (CQ) the provision was inserted in the conference report by Mississippi Republican Trent Lott, chairman of the Senate Commerce panel’s Aviation Subcommittee. Dayton has retaliated by placing holds on 15 executive branch nominations. He added that holds are on nominees come from states of Senators or Members of the House of Representatives who have signed the FAA conference report. Dayton was quoted in CQ as saying, “I will object to every procedure after the prayer and pledge of allegiance, and I will not yield on these matters until that language is removed from the conference report.” Dayton’s opposition could be serious because if the conferees agree to deal with his concern, it could open up the air traffic controller privatization issue (See Aug 4, 2003 issue) as well.

New State Law Would Penalize Truckers Who Don’t Use Designated Routes. New York Governor George Pataki (R-NY) signed into law legislation that will significantly increase penalties for state drivers who choose to ignore posted truck route signs. The new law, according to the governor’s staff, will help cut down on the heavy truck traffic that many residential neighborhoods across the State, and particularly in New York City, have faced due to drivers who fail to use highways and designated truck routes. In a written statement Pataki said the use of residential roadways by trucks endangers pedestrians and motorists alike, as these roadways are not designed to handle this type of traffic. Under the law, the maximum fine for a first violation will increase from $100 to $500; while the maximum fine for repeat offenders will be raised from $300 to $2,000. In addition, drivers who violate the law will have points added to their driving record.

Assemblyman Joseph Lentol said, “The current fine has done little to deter these violations. The $50 fines are simply treated as the cost of doing business, like tolls or gas. Meanwhile, communities are disrupted as 18-wheelers speed down quiet tree-lined streets that serve as conduits to industrial areas.” But William Joyce, executive director of the New York State Motor Truck Association, told The Business Review that the stiffer penalties will simply make it harder for the industry to do business in New York. The new law takes effect on November 1, 2003.

States Increase Taxes To Pay For Transportation Projects. The states that have balanced their budgets amid this fiscal crisis - the worst in decades - have done so largely without relying heavily on broad tax hikes, according to the National Conference of State Legislatures’ (NCSL) latest fiscal report, State Budget and Tax Actions 2003. Forty-three of the 49 states required to balance their budgets have completed the process, and they’ve turned first to their reserves, specific fee increases and cost-cutting measures, the report shows. The survey found that of the states grappling with spending crises, Massachusetts imposed more fee hikes than any other state in the nation this year — at least $500 million. Massachusetts was one of 30 states that enacted fee increases this year to cover budgetary shortfalls in many popular programs, including transportation.

Republican Gov. Mitt Romney and the legislature, faced with a multibillion dollar shortfall, made it more expensive to get a marriage license or a divorce, file a court case, buy a house, renew a driver’s license (to help offset the costs of transportation projects), or tap into a host of other state services. Eleven states delayed capital projects or shifted them from pay-as-you-go projects to debt. Lawmakers in six states raised motor fuel taxes by more than $340 million. Taxes went up automatically in Maine as a result of legislation passed late in 2002 that indexed gas taxes for inflation. Kansas, North Carolina, Ohio and Washington raised tax rates on motor fuel. West Virginia changed the way the taxes are calculated. The study found of the 30 states to raise fees this year, only nine are bringing in $100 million or more from those fee hikes. Massachusetts reported $501.5 million in fee hikes; the second biggest fee increaser was New York, with $367 million.

Georgia Legislator Wants To Hike Gas Tax By Five Cents To Pay For Transit Projects. Georgia’s motor fuel tax should be raised and the state constitution amended to allow the new funds to pay for sidewalks, buses, passenger trains and other transit measures, said Democratic State Senator Liane Levetan, who serves on the Metropolitan Atlanta Rapid Transit Authority (MARTA) advisory panel. Levetan told the Atlanta Journal-Constitution that a gas tax hike of up to 5 cents a gallon could be used to build what she calls a “seamless transportation system.” She envisions a metro Atlanta resident driving to a MARTA station and riding a train that would connect with a passenger rail line linked to other parts of the state. The current state gas tax is 7.5 a gallon and has not been increased since 1971. Georgia’s motor fuel tax is the lowest in the country and can only be used for road and bridge projects. However, another member of the MARTA panel said the proposal would be dead on arrival. David Chesnut, a lawyer from DeKalb, GA who helped create the current MARTA rail system, said he recommends raising the gas tax 5 cents a gallon to subsidize the state’s general fund to pay off money borrowed for roads built through the Governor’s Road Improvement Program. According to Chestnut such a move would free about $135 million a year for transit projects.

California Budget Includes Tripling Of Vehicle License Fees. The $99.1 billion budget that embattled California Democratic Governor Gray Davis signed includes a $4.2 billion tripling of vehicle license fees, costing the average motorist $158. The Davis administration used a five-year-old law to increase the fees, effective October 1st. Opponents of the user fee increase have vowed to challenge the makeshift fiscal arrangement either legally or through a ballot initiative. The California Department of Motor Vehicles has collected the Vehicle License Fees (VLF) since 1935. Legislation passed in 1998, allowed for the VLF to be offset by monies from the general fund beginning with fees due on or after January 1, 1999. The VLF revenue is distributed to the cities and counties to help offset the cost of highway and transit projects.

Hollings Announces Retirement. Sen. Ernest Hollings (D-SC), ranking member on the Senate Commerce Committee, said last Monday he will not seek re-election and will retire when his term expires in January 2005. “With all of this attention, radio, TV and press, I’m constrained from changing my mind,” said Hollings in making the announcement. Hollings may be best remembered for his sharp tongue and quick wit, but his clout in the halls of Congress will be missed by South Carolinians. The impact of Hollings’ departure will be felt immediately. Although he still has 17 months left to his term, he is now a lame duck, which could limit his influence on the important issues of TEA-21 reauthorization and Amtrak. His retirement means South Carolina’s congressional delegation will have to work harder to bring the pork home. Hollings is 81 years old. He was first elected to the Senate in 1966 and has been involved in South Carolina politics for 55 years. Possible Senate Commerce Committee successors include Sen. Daniel Inouye, (D-HI), and Sen. Jay Rockefeller, (D-WV).