Lengthy environmental reviews and other approvals hinder large infrastructure projects improvements.
The Obama administration has addressed the need for infrastructure to support freight movement more than any administration in recent memory, but industry officials say a quick way to get important projects from the drawing board to reality is to finish reforms designed to speed up the permitting process.
Passing legislation in a divided Congress to fund the nation’s surface transportation system has proven to be a lengthy, unpredictable process the past decade. Stop-gap appropriations have provided enough money to maintain the status quo, but experts say the system is rapidly deteriorating, congestion is worsening in many metro areas and the construction backlog continues to mount.
According to the American Society of Civil Engineers, the annual cost to businesses and consumers from wasted time and fuel stuck in traffic, damage to vehicles from poor road conditions and taxes to pay for fixing facilities after they have crumbled rather than preserving them in good condition, will reach $912 billion by 2020. There is a 50 percent funding gap across all levels of government that by 2020 will manifest itself in a $756 billion shortfall for highways alone.
Speeding up the federal permit process isn’t a panacea, but it would help get many projects of national importance off the ground and serve as a magnet for private investors to get involved, Dean Wise, vice president of network strategy at BNSF Railway, argues.
“If we can reduce the permitting uncertainty, the private funds that would flow into infrastructure investment are massive. So the permitting delay is really hurting,” he said at a June 24 meeting in Washington.
Wise is a member of the Department of Commerce’s Advisory Committee on Supply Chain Competitiveness (ACSCC), which is comprised of industry representatives and tasked with recommending ways the department can help improve goods movement and the economic benefits it generates. The Commerce Department is the voice of business within the government and one of its top missions in this administration is to increase exports. President Obama won’t reach his goal of doubling exports by 2015 because of the strengthening U.S. dollar and other factors. It was an aspirational target designed to jump-start action across the government to help American companies find new business in overseas markets. Efficient highways, rail, seaports, and airports are all needed to get goods to market at competitive prices, so the department works with other agencies to encourage trade, customs facilitation, job training and infrastructure development.
At its next meeting in early October, the ACSCC is expected to adopt recommendations for Commerce Department officials on how to speed up project delivery through permit reform.
BNSF sees itself as the poster-child for permitting delay with its proposed international container transfer facility in Los Angeles still stalled after 10 years.
The $500 million intermodal terminal would be near the ports of Los Angeles and Long Beach, eliminating the need to truck 1 million containers a year 24 miles to downtown Los Angeles and helping to relieve congestion on the 710 Freeway and reduce diesel emissions.
“All we have to show for it are $50 million in legal and consulting fees and 20 lawsuits,” Wise complained, noting that community and environmental activists are taking advantage of the rules to throw up procedural challenges at every step.
BNSF says the 153-acre Southern California International Gateway (SCIG) would be the most environmentally-responsible truck-rail transfer facility in North America, with mitigation features such as zero-emission electric cranes and ultra-low emitting hostler vehicles on site, green berms and requirements for liquefied natural gas or equivalent emission trucks.
The Los Angeles Harbor Commission and City Council approved the SCIG in 2013, but the City of Long Beach is lined up in opposition with environmentalists, regional air regulators, the state of California and some businesses that would be forced off leased property to make room for the facility.
A trial is scheduled for November, according to public radio station KPCC.
Rail yard opponents contend the project violates the California Environmental Quality Act and will create more international container business, resulting in more unhealthy smog. Long Beach officials say not enough has been done to ensure neighborhoods near the brownfield site are protected from noise and harmful diesel emissions from trucks, although BNSF has offered to erect sound walls. The South Coast Air Quality Management District has testified that the SCIG’s environmental impact report overstated the project’s benefits and understated its harms, KPCC reported.
Wise urged administration officials to follow through on a 2011 goal of cutting in half the amount of time it takes for major projects to go through the interagency approval process.
In a presentation prepared for the committee, he noted the Hoover Dam was built in five years, the Empire State Building in three years, the Pentagon in 1.5 years and the New Jersey Turnpike in four years.
Today, projects can take 10 to 15 years to get local, state and federal approvals—before the first shovel of earth is turned. The Army Corps of Engineers this year began work on the Port of Savannah dredging project, which took 13 years to review. It took Port Everglades 19 years to get federal approval in June for its harbor deepening.
And it’s not just port projects that take a long time in the permitting pipeline. The Cape Wind offshore wind farm in Nantucket Sound took 10 years to get the go-ahead from regulators.
Fed Streamlining Effort. President Obama in 2011 directed five departments to identify high-priority projects with the potential to quickly create jobs and fast-forward them through the system by managing collaboration and communication between agencies. The exercise advanced 14 projects and resulted in lessons learned — such as ensuring early consultation with project sponsors and designating a lead coordinating agency — that could be replicated and applied to other large federal projects.
A 2012 executive order expanded on the new workflow process by instructing agencies across the government to speed up permit and environmental reviews for important infrastructure projects and create mechanisms for them to be accountable. The executive order required the formation of a steering committee to identify important regional and national projects, adoption of a federal action plan on how to cut red tape and plans from each agency about how they intended to achieve the federal goals. The effort led to the identification of 50 projects where red tape could be reduced, including dredging shipping channels for the ports of Jacksonville, Miami, Savannah, Charleston and New York/New Jersey.
Beyond the harbor-deepening projects at the five ports, the administration gave priority to the rebuilding of the Bayonne Bridge between New York and New Jersey so that large ships can pass beneath it and construction of a new intermodal container transfer facility in Jacksonville. It also is coordinating agencies reviewing the $3.5 billion replacement of the bridge that carries traffic over the Columbia River on Interstate 5 between Washington and Oregon.
The White House guidelines are intended to make the permitting and review process transparent, consistent and predictable. Agencies are expected to set and adhere to timelines and schedules for completion of reviews, set clear permitting performance goals and track progress against those goals.
The Office of Management and Budget (OMB) created an online reporting system, or “dashboard” — www.permits.performance.gov — that provides an update on all major permits in the federal pipeline.
Officials insist no corners are being cut with regard to making sure projects are designed and constructed in accordance with public health, safety and environmental standards, or gathering public input.
Federal permits and environmental approvals are not the only factors that hold up infrastructure improvements. Projects can be delayed due to poor project design, incomplete applications, uncertain funding or state and local reviews.
Driving the process is a Permits Rapid Response Team led by the Department of Transportation and the White House. In addition to speeding up delivery of specific projects, the team reengineered the approval process to reduce redundant steps and institutionalize the best management practices.
The environmental go-ahead for replacing the Tappan Zee Bridge in New York, for example, was completed in less than 18 months using the new process rather than the typical four to five years.
Doing multiagency and multi-government reviews simultaneously rather than consecutively and adding categorical exclusions have sped up decisions and saved money from inflation.
In mid-2013, President Obama signed another presidential memorandum directing all relevant agencies to institutionalize and implement the best practices for efficient review and permitting for all projects. The White House also released a report showing the federal permitting and review processes had been completed for more than 40 percent of the Big 50 projects.
The White House’s six-year transportation proposal to Congress last year included a competitive freight program to provide $18 billion for freight and encourages states to do a better job at freight planning.
The White House also launched the Build America Investment Initiative in July 2014 as a way to bring more private capital to bear on infrastructure development in the absence of a long-term funding plan for surface transportation from Congress.
The Transportation and Treasury departments are working together to encourage greater collaboration between the public and private sectors, expanding the market for private infrastructure financing, and better utilizing federal credit programs.
A key part of the initiative is the creation of the Build America Transportation Investment Center (BATIC) at DOT to serve as “a one-stop shop” that matches cities and states with private developers and investors; provide guidance on how to structure deals involving private financing; and improve access to federal credit programs, such as TIFIA, private-activity bonds, and Railroad Rehabilitation and Improvement Financing loans. RRIF’s complex bureaucratic requirements, for example, have dissuaded many railroads and shippers from taking advantage of the loan program.
Institutional investors are sitting on hundreds of billions of dollars and have expressed great interest in building, maintaining and operating infrastructure in exchange for collecting revenue from users or payments from public entities. But the political and legal framework for long-term leases of public infrastructure is not as mature in the United States as it is in other countries. The initiative is designed to make it easier and more appealing for the private sector to get involved in public-private projects.
“The United States is behind other countries in attracting private investment that allows us to leverage federal dollars in public-private partnerships,” Leslie Blakey, president of the Coalition for America’s Gateways and Trade Corridors and a member of the supply chain competitiveness committee, said in an interview.
“Institutional money is looking for infrastructure because it’s a relatively good return and low risk,” but the U.S. policy environment carries too much risk at the moment for fund managers to commit, she said. Factors that make it difficult to get project certainty include extensive regulations, a federal system with 50 states that have their own private investment rules, an unusual federal highway aid system for states compared to the rest of the world and the uncertainty of the permitting process, according to those involved in private equity.
Private capital is discouraged, Blakey said, “because there are so many ways that a project can get stopped. So the question is, how can we provide some parameters to get to a ‘go/no-go’ decision—that would allow cities, states and the private sector to feel confident about putting money into investments that way?”
The investment center is supposed to offer hands-on support for states and local governments trying to access federal programs and assemble public-private funding packages, as well as tools and resources for interested private partners. It serves as a clearinghouse for best practices from states that have experience with private investment in public assets.
The new investment center is also supposed to coordinate with the permitting center to ensure projects are designed and financed to move quickly through the permitting process.
The Transportation Investment Center has received keen interest from ports trying to identify alternative financing mechanisms for expansion, but so far the White House is still in a listening mode trying to better understand the challenges facing the port system, such as congestion at container terminals, Nate Loewentheil, who is the subject matter expert on transportation infrastructure at the White House’s National Economic Council, said.
He added the OMB’s permit plan has not been fully implemented yet and would be a White House priority in the coming months, but cautioned that not all capital investments are candidates for private money.
In mid-June, the Treasury Department released a request for proposals to conduct an independent report identifying the most significant transportation and water projects under consideration across the country based on their potential economic impact. It’s the administration’s way of saying there are some objective truths about which projects are more important and that they should be prioritized accordingly.
Loewentheil noted Australia has a federal office that rates federal projects to guide national investment, but any similar arrangement here would require an act of Congress.
“If we can open up the process, there’s a lot of private funding out there and it wouldn’t be constrained as much by limits on federal funding, such as TIGER grants or short-term highway bills,” Wise said.
Loewenthiel said a challenge for private investment in infrastructure is that pension funds are looking for much higher rates of return than they can get on the municipal bond market currently.
BNSF’s Wise countered that OMB’s expedited project list seems to have lost some momentum. “They’ve taken the foot off the gas. We want them to go faster and translate the dashboard into best practices for all projects,” he said.
Possible recommendations for Commerce Secretary Penny Pritzker include having an upper-level Commerce official detailed to the BATIC and adding projects to the dashboard identified by the Supply Chain Advisory Committee for their ability to reduce supply chain bottlenecks.
Experts have identified many best practices for making the permit process more efficient, but it is unclear which, if any, the advisory committee will incorporate in its recommendations. There may be legal impediments, for example, to implementing some best practices, such as setting finite windows of time for opponents to challenge projects.
This article was published in the October 2015 issue of American Shipper.