TCCRI Staff

Sep 7, 2022

Truck Transportation: House Committee on Transportation

The testimony below was submitted to the Texas House Committee on Transportation on September 8, 2022, by the Texas Conservative Coalition Research Institute (TCCRI).

Texas Conservative Coalition Research Institute

House Committee on Transportation

September 8, 2022

Regarding the Committee’s Charge: Study policies impacting truck transportation, a key link in the supply chain, including utilizing state property and right-of-way for natural gas fueling stations and truck parking, the potential shortage of drivers and sellers of commercial trucks, the shortage of truck parking options to accommodate hours of service regulations, and ways to reduce border crossing wait times. Examine regulatory and statutory impediments to connected vehicle and autonomous technologies aimed at improving the safety and efficiency of trucking in Texas.

Examine the ability of the state’s seaports to promote the public purposes of state economic growth, diversification, and commerce through development of port-owned properties within their boundaries. Review the investments needed for Texas ports to remain competitive in handling increased cargo volumes and ensuring a resilient supply chain.

Introduction

Texas currently faces a number of problems in the field of transportation and supply chain logistics. The COVID-19 pandemic caused massive supply chain disruptions around the world, but even if the pandemic had never happened, Texas’ ports and trucking industry would still face challenges. These challenges, of course, are exacerbated by Texas’ ever-growing economy and population; more people and more businesses mean more demand for goods. While that same growth makes Texas the envy of other states, it means continuous infrastructure improvements are necessary. These improvements are costly and it can be a number of years before they are completed and provide benefits. This testimony examines different parts of the supply chain and makes a number of policy recommendations that will contribute to a well-functioning supply chain.

A. Truck Parking

Trucks play a crucial role in the nation’s supply chain, and Texas plays an outsized role here. According to the U.S. Census Bureau’s Commodity Flow Survey that is done every five years, in 2017 trucks moved 71.6 percent of the goods shipped in the United States.[i] Texas led the nation in the total weight of truck shipments that year, more than double the nearest state (California).[ii] As the state's economy grows, so will its need for trucking.

Although it receives little attention in public policy discussions, an essential part of trucking logistics is parking availability. The Texas Department of Transportation (TxDOT) released a comprehensive report on this topic in April 2020 (“the Report").[iii] The Report is a valuable resource for the Legislature and this portion of this testimony incorporates much of it.

Several factors create demand for truck parking. First, long-haul truck drivers undertake journeys of hundreds of miles or even more and need to park their trucks when they stop for rest. Second, truckers who drive for hours and arrive at the applicable facility before the window of time in which their drop-off and/or delivery is to take place often are not permitted to simply arrive early at the facility and park on those grounds. Driving around the facility until the window opens wastes fuel and is not feasible given the risk of traffic congestion, particularly because many shipping drop-off and pickup facilities are located in large urban areas with heavy traffic.

Third, the Hours of Service (HOS) regulations issued by the federal Motor Carrier Safety Administration (FMCSA) impose various limitations on truckers, such as taking a minimum 30-minute break after 8 hours of driving; working no more than a 14-hour shift in a day (with time spent on breaks included in calculating the 14 hours); not driving more than 11 hours in any 14-hour shift; and limiting the number of hours that may be driven during periods of both seven consecutive days and eight consecutive days.[iv] The HOS regulations cannot be avoided by dishonesty; most commercial motor vehicles in the U.S. are subject to the FMCSA’s electronic logging device mandate. These devices track truckers’ activity and enable law enforcement to examine this activity.[v]

In addition to the above factors creating strong demand for truck parking, the supply of parking is heavily constrained by the variety of local, state, and federal laws generally preventing truckers from parking in many locations, such as the shoulders of highways in non-emergency situations. Surveys of truck drivers indicate that more than half admit to parking in unauthorized locations at least once a week, with adherence to HOS regulations being a key motivation.[vi]

According to the Report, there are approximately 27,000 truck parking spaces at truck parking locations in Texas, with 96 percent of them being located within one mile of an interstate or U.S. highway.[vii] More than 90 percent of these spaces are provided by the private sector; private entities offer almost 25,000 spaces, spread over approximately 650 locations, while TxDOT and other public entities offer about 2,300 spaces at approximately 175 locations.[viii]

Despite these thousands of spaces, it is clear that truckers still struggle to find adequate parking. The statewide average peak hour for truck parking is from 1:00 AM to 2:00 AM.[ix] During this hour, privately-owned truck parking facilities see an average of 92 percent of their spaces used.[x] Notably, the majority of these facilities have 100 percent of their spaces used at peak hour, but the average utilization rate is “only” 92 percent because some outliers with a low utilization rate drive down the average. Publicly owned facilities have lower utilization rates at peak hours, although the facilities with the best amenities see an average utilization rate of 86 percent. Again, that figure of 86 percent obscures the fact that many of these facilities are at 100 percent utilization.

Surveys of truck drivers reveal that a parking facility’s amenities heavily influence demand for its parking spaces. Amenities that truckers particularly value include restrooms, lighting, trash cans, food options, showers, internet service, and laundry. Of the state’s roughly 175 public parking facilities, more than half of them lack restrooms.[xi]Private facilities tend to offer better amenities, but again, there is fierce demand for their parking spots.

A lack of parking capacity for trucks is important for two reasons. First, it creates inefficiencies in the supply chain. Given the uncertainty of obtaining parking, truckers may be forced to cut their shifts short to secure parking for their off-duty rest periods. Or, given the lack of parking around many drop-off and delivery locations, truckers may be forced to arrive early and secure whatever nearby parking they can while they wait for their window of time for delivery or pickup window to arrive. A 2016 survey by the American Transportation Research Institute, the nonprofit research organization for American Trucking Associations, found that a trucker on average spends about one hour a day looking for parking, which effectively results in lost wages for the trucker and contributes to overall supply chain inefficiency.[xii]

Second, and more importantly, a lack of parking for trucks creates serious safety hazards for the public. Truckers who are experiencing fatigue, or who have reached their HOS limits for the day but cannot find a place to legally park, may park in unauthorized locations, such as the shoulders of highways. From 2013 to 2017, there were more than 2,300 crashes in Texas involving parked trucks, in which 138 people died.[xiii] Moreover, during the same time period, there were over 1,500 accidents in Texas involving truckers who were driving while fatigued or possibly fatigued. Truckers who feel compelled to park due to fatigue and/or HOS limitations but cannot find truck parking are forced to drive with fatigue or park illegally, thereby risking fines and creating a public safety threat.

Texas risks serious supply chain failures if stakeholders fail to address the shortage of truck parking spaces in Texas. By 2050, peak demand is expected to be 170 percent of current capacity.[xiv] To preempt threats to the supply chain, the state should consider the following steps.

Policy Recommendation #1: Collect data from public parking facilities for trucks, including the number of trucks parking per day, broken down by time of day. Gathering parking data can be done at a low cost (e.g., with cameras), and will help policymakers gauge the effectiveness of their efforts.

Policy Recommendation #2: Explore a truck parking availability system (TPAS), which displays in real-time available parking at public facilities in the state. This idea is extremely popular with truck drivers. Notably, a pilot TPAS project is being overseen by TxDOT on behalf of four states in the I-10 corridor (Arizona, California, New Mexico, and Texas). This pilot program covers 37 different public parking facilities along the corridor in these states.

Policy Recommendation #3: Make the data from a TPAS available to the private sector so that it can continue to improve upon existing mobile applications showing parking space availability for trucks.

Policy Recommendation #4: Encourage TxDOT to consider provision for truck parking when it purchases a new right-of-way.

Policy Recommendation #5: TxDOT should work with municipalities and state agencies to identify public property which could be made available to truckers, especially those that are not heavily utilized at night.

Policy Recommendation #6: Similarly, TxDOT should identify private parties that may have excess parking capacity. Fairgrounds and stadiums, for example, often have excess capacity. It is unclear whether private parties would have sufficient incentive to permit truck parking on their grounds, but if necessary, the state could examine the provision of a tax incentive to such private parties.

Policy Recommendation #7: Build new truck-dedicated parking facilities. The Report notes that 32 sites have already been identified as feasible targets for new facilities.

B. Truck Driver Shortage

In 2021, the American Trucking Association (ATA) reported a shortage of 80,000 truck drivers nationally, with potential for that shortfall to double by 2030.[xv] This claim echoes its 2015 claim that there was a shortage of 50,000 truck drivers and that the shortage could increase to 175,000 by 2024.[xvi] The U.S. Bureau of Labor Statistics (BLS) stated that, as of July 2021, there were 33,000 unfulfilled truck driver positions compared to pre-COVID-19 levels.[xvii]

Government response to the pandemic disrupted the economy in countless ways, including federal action that made it more lucrative for people to claim unemployment benefits rather than work. But aside from the pandemic’s effects, there appear to be factors that are contributing to an insufficient supply of truck drivers. A considerable amount of evidence points to difficult working conditions and low pay as key reasons for the shortfall.

Nationwide, median pay for tractor-trailer truck drivers in 2021 was about $23 an hour.[xviii] In Texas, the annual compensation for a truck driver is about $48,000.[xix] For reference, a 2016 article in Money stated that the average trucker’s compensation in 1980, adjusted for inflation to 2016 dollars, was more than $110,000.[xx] As the Comptroller notes, many truckers work as independent contractors and are paid by the mile, so congestion or waiting for shippers to unload and/or load their trucks is unpaid time.[xxi] The job can entail long hours, the stress of driving, time away from home, pressure on personal relationships, and various health challenges (such as difficulty obtaining healthy food).

Amid claims of a trucker shortage, a 2019 BLS paper entitled “Is the U.S. Labor Market for Truck Drivers Broken?” examined that same question. The paper noted that annual turnover rates in the trucking industry tend to be quite high.[xxii] However, the paper also noted that there was a “tight” labor market, and that “employment in the occupation has been resilient, and nominal annual wages have persistently exceeded those of other blue-collar jobs with similar human capital requirements.”[xxiii] The paper concluded that, despite claims by industry stakeholders of chronic truck driver shortages, “the market for truck drivers works about as well as that for other blue-collar occupations, and that, broadly speaking, we should expect that if wages rise when the labor market for truck drivers is too tight, the potential for any long-term shortages will be ameliorated.”[xxiv] Some companies have evidently come to the same conclusion. Wal-Mart, for example, boosted its pay for its long-haul drivers earlier this year, increasing starting salaries to up to $110,000.[xxv]

The state’s ability to alleviate any truck driver shortage pales in comparison to what trucking companies can do. The good news is that demand for commercial drivers licenses (CDLs) is soaring. The Comptroller notes that the state has over 100 CDL schools, including community colleges such as San Jacinto College in Pasadena.[xxvi]Enrollment in this school’s program increased by 250 percent from the Fall 2020 to Fall 2021.[xxvii] Unfortunately, the school must cap each class size at 12 students, because only 12 trucks are available. Buying more trucks for class instruction is currently very difficult because supply chain problems have reduced the number of trucks on the market, and there is fierce competition for them.

Last June, the Texarkana College Professional Driving Academy reported having to turn away applicants for its CDL classes due to soaring interest, although again the number of vehicles available for training effectively capped how many students it could accept.[xxviii]

More CDL holders in the pipeline can only help. In January 2022, the FMCSA announced the creation of a pilot program to permit CDL holders aged 18-20 to operate in interstate commerce under strict conditions.[xxix] Texas permits CDL holders to be 18, but outside of this pilot program, federal law prohibits them from interstate operation.

There are some indications that the demand for trucking may be easing, whether due to supply chain recovery or a slowing economy. An article in the Harvard Business Review in May 2022 stated that demand for freight services began to decline in March of that year.[xxx] Consistent with that observation, The Wall Street Journal has reported declining demand for freight services in April,[xxxi] July,[xxxii] and August.[xxxiii]

In short, the scarcity for truck drivers appears to be a problem that is easing in the short term, as the economy slows, the supply chain recovers, applicants for CDLs soar, and salaries for drivers increase. In the long term, the solution to a truck driver shortage should be left to the private sector. The private sector will likely address it through a combination of hiring more truck drivers and developing self-driving trucks (on the latter point, see the discussion in Section E below).

Policy Recommendation #1: The state should limit its involvement to ensuring that community colleges that wish to add a CDL curriculum are able to do so. If a truck driver shortage persists, the state could consider increasing appropriations to community colleges with CDL programs so that they can purchase more trucks for training and expand their class sizes. However, as TCCRI has noted before, community colleges have seen skyrocketing property tax collections over the last decade in the face of sometimes stagnant enrollment. Therefore, the presumption should be that they can absorb the costs of expanding CDL programs.

C. Natural Gas Fueling Stations

Over the last decade, compressed natural gas (CNG) and liquified natural gas (LNG) have emerged as commercially viable alternatives to diesel fuel in the trucking industry. Each type of fuel has its advantages and disadvantages, as illustrated by the table below:

Table 1: Comparison of Diesel and Natural Gas Alternative Fuels

Sources:[xxxiv]

As the table indicates, CNG and LNG differ in important ways from the diesel fuel that traditionally has fueled large trucks. The cost of a gallon of diesel currently exceeds the cost of the diesel gallon-equivalent (DGE) of each of CNG and LNG. For the period from April 1-15, 2022, the U.S. Department of Energy (DOE) reports that diesel cost $5.06 per gallon, whereas a DGE of CNG and a DGE of LNG cost $2.59 and $3.16 respectively. This price discrepancy existed before Russia’s invasion of Ukraine, although it was much smaller; in January 2022, diesel cost $3.62 per gallon, whereas a DGE of CNG and a DGE of LNG cost $2.49 and $3.02, respectively.[xxxv]

As long as diesel is considerably more expensive than CNG or LNG, trucking companies may consider converting their fleets to CNG and/or LNG. There is a possibility that a large price discrepancy will persist; CNG and LNG are usually cheaper than diesel.[xxxvi] Moreover, CNG and LNG prices are less volatile than that of diesel. As the DOE noted in a January 2022 report, “Historically, the prices of CNG, LNG and propane have been much more stable, with minimal up and down swings in price, when compared to gasoline or diesel.”[xxxvii]

Although the upfront costs of natural gas-fueled trucks are greater than their diesel-fueled counterparts, the former can still be superior investments for trucking companies due to the much greater costs of diesel. A 2013 news article reported that the “recovery” period for natural gas-fueled vehicles could be as short as two years.[xxxviii] A 2016 study by the DOE placed made a much higher estimate, about 10 to 14 years.[xxxix] These estimates, however, have to be taken with caution because different trucking companies make different assumptions about fuel costs and annual miles driven. In any case, if trucking companies wish to use natural gas-fueled trucks, they need not purchase such trucks. Instead, they can purchase conversion kits to make their diesel trucks able to run on natural gas.

At least in the past, the state in the natural gas fuel context has faced the challenge of what one then-Railroad Commissioner in 2014 described as a “chicken or egg” problem.[xl] That is, building natural gas fuel stations depends on the number of natural gas vehicles on the road, but people may be reluctant to buy natural gas vehicles if there are not enough natural gas fuel stations.

It is unclear whether the state’s supply chain is suffering from a shortage of natural gas fueling stations. Today there are just over 100 compressed natural gas (CNG) fueling stations in the state (67 public and 35 private) and just 15 liquified natural gas (LNG) fueling stations (11 public, 4 private).[xli] [1]But these stations are not uniformly distributed throughout the state. LNG stations are relatively common in the Dallas-Fort Worth (DFW) area. CNG stations are relatively common in Houston and DFW, and Austin to a lesser but still considerable extent.[xlii]

What is clear is that the state has subsidized the building of alternative fueling stations. Under the Texas Emissions Reduction Plan (TERP),[xliii] the Texas Commission on Environmental Quality (TCEQ) dispenses grants under the Alternative Fueling Facilities Program (AFFP). These grants are utilized by businesses constructing fueling stations using alternative fuels, including natural gas and electricity, in certain parts of Texas (much of the eastern half of the state, and the large metropolitan regions within it). As of May 2022, there was $12 million available for grants under the AFFP,[xliv] although all of the funds have now been awarded.[xlv] TCEQ also disburses grants to trucking companies seeking to upgrade or replace diesel vehicles with alternative-fueled vehicles: $16 million in 2022.[xlvi]

There are some hints that the trucking industry is conflicted in its views on the future of natural gas. In 2022, a CEO of a transportation and energy consulting firm opined that natural gas was becoming a more viable option in long-haul interstate trucking due to engine improvements. While that bodes well for the short or mid-term future of natural gas vehicles, he also stated that: “The big picture: there’s no question we’re moving more and more into the electrification of transportation…Fundamentally, my hypothesis is that we’ll probably get there sometime in the next two to three decades.”[xlvii] Paul Rosa, an executive at a truck leasing company, expressed similar thoughts in a 2021 interview, indicating that he viewed CNG as a logical and environmentally-friendly bridge from the trucking industry’s diesel past to its electric future.[xlviii]

These nuanced views make it difficult to gauge the state’s need for more natural gas fueling stations. Some factors indicate that natural gas trucks will become more popular. Obviously, lower fuel costs are a consideration. But as more companies adopt policies supporting lower emissions, demand for natural gas fuels will likely rise. On the other hand, the upfront costs of natural gas-fueled trucks remain considerable, and their long-term utility is not entirely certain, especially given the possibility of electric trucks in the future.

D. Reducing Crossing Times at the Texas-Mexico Border

The Texas-Mexico border has 28 vehicle border crossings. In addition, there is a border crossing in Santa Tereas, New Mexico that is within the El Paso Metropolitan Planning Organization’s (MPO) planning area boundary. Fourteen of these border crossings can process commercial motor vehicles (CMVs).[xlix] Notably, while over half of the border crossing locations can process passenger motor vehicles for more than 20 hours a day, not a single one can process commercial motor vehicles for that period of time.[l] A trucker entering the United States must pass through Customs and Border Protections as well as Texas Department of Public Safety (DPS) checkpoints.

A few statistics highlight the enormous importance of Texas-Mexico trade for each region’s economy. Between 1994 and 2019, the value of annual trade through the Texas-Mexico border quadrupled to more than $450 billion.[li] This figure represents approximately 68 percent of the value of annual trade between Mexico and the United States.[lii]

In 2019, 51 cents of every one dollar in U.S.-Mexico trade was carried across the Texas-Mexico border by commercial vehicles (e.g., tractor trailer trucks).[liii] Also in 2019, the value of goods traded between Texas and Mexico was four times higher than the value of goods traded between Texas and China.[liv] Cross-border trade involves goods of all types: plastics, food, petroleum, among others.[lv] As TxDOT notes, the three largest categories of goods traded by value are technology goods, motor vehicles, and manufacturing. Production of these goods generates high-paying jobs and is subject to intense competition from manufacturers in Asia.[lvi]

Given the magnitude of Texas-Mexico trade, it is in the state’s interest to ensure that crossing the border is as seamless as possible. Unfortunately, in its 2021 Texas-Mexico Border Transportation Master Plan, TxDOT stated that, delays in crossing the border are the top-cited issue by stakeholders “due to continued growth in the movement of people and goods, operational efficiency issues (i.e., staffing shortages), and capacity constraints.”[lvii] The crossing time[2] is generally longer for traffic entering the U.S. than it is for southbound crossings.[lviii] Of course, crossing times crossing the border are effectively a cost to the carriers and producers; as TxDOT acknowledges, these costs are ultimately passed on to consumers.[lix]

Commercial motor vehicle traffic over the border is expected to nearly triple by 2050, with a projected 12.35 million commercial motor vehicles crossing the border in 2050.[lx] Similar dramatic growth is expected for non-commercial traffic. The table below illustrates the 2019 average and 90th percentile[3] crossing times wait time for inbound commercial motor vehicles, and the projected average and 90th percentile crossing times in 2050 assuming no action is taken:

Table 2: 2019 Average and 90th Percentile Crossing Times, and 2050 Projections (for inbound traffic)

Source[lxi]

As the table illustrates, crossing times for commercial vehicles will become impractical at the vast majority of locations by 2050 if no improvements are made. The economic loss from the projected 2050 crossing times would be staggering. In 2019, delays at the border for just the northbound movement of commercial goods alone totaled 1.6 million hours, resulting in a $1.1 billion blow to U.S. gross domestic product (GDP).[lxii] TxDOT estimates that by 2050 border delays could decrease U.S. GDP by $75 billion.[lxiii]

The factors that contribute to the delays that truckers experience in crossing the border are largely due to lack of capacity and under-staffing, whether by Customs and Border Protection (CBP) or the Texas Department of Public Safety (DPS). Conversations with private sector stakeholders in the past have suggested that delays could best be resolved by measures such as having more inspection bays, lanes, and staff at the crossing points, and consolidating federal and state inspections into one inspection.[lxiv]

Both the federal and state governments have made strides in modernizing the border crossing process. The federal government allows commercial truck drivers to apply for a Free and Secure Trade (FAST) pass, which allows for expedited processing at the border.[lxv] A FAST pass is valid for five years and costs only $50.[lxvi] The Texas A&M Transportation Institute oversees the Border Crossing Information System (BCIS), which provides the public with real-time expected crossing times for northbound traffic at seven border crossings,[lxvii] including those for FAST passholders.[lxviii]

But despite these strides, the basic problem- a lack of capacity and staffing- remains prevalent. The state is somewhat constrained in the actions it can take, because the federal government is responsible for hiring CBP personnel.

Policy Recommendation #1: The Legislature should instruct TxDOT to undertake feasibility studies regarding the expansion and/or upgrade of existing border crossing stations that process commercial motor vehicles.

Policy Recommendation #2: The Legislature should instruct TxDOT to study the logistics of constructing new roads, including roads funded through public-private partnerships, that would encourage northbound commercial vehicles to alter their typical routes so that they pass through under-utilized border stations.

Policy Recommendation #3: The state should conduct an outreach program to educate all motor vehicle operators of the various passes allowing for expedited passing at the border (FAST, SENTRI, READY). All routine crossers of the border who are eligible to apply should be encouraged to do so.

Policy Recommendation #4: The state should collaborate with the federal government to increase staff at border crossing locations, as well as the hours of operation. If commercial motor vehicles could be processed at least 20 hours a day, and seven days a week, many truckers could presumably adjust their driving schedules to ensure they reach the border during low-traffic periods. Although the federal government generally controls CBP personnel, some exceptions have been made. For example, the city of El Paso has previously entered into a pilot program with the federal government in which it paid the overtime costs of CBP personnel to staff lanes at the border crossing station at peak hours.[lxix]

Policy Recommendation #5: The state should examine all sources of available funding for the upgrade or expansion of border crossing stations. The 2021 Texas Mexico Border Transportation Master Plan lists several federal financing options, such as TIFIA (the Transportation Infrastructure Finance and Innovation Act) loans.

Policy Recommendation #6: The state should engage with stakeholders to determine the feasibility of a public-private partnership (P3) constructing an additional border crossing station, perhaps one that would be reserved for commercial vehicles only. P3s have been used to improve infrastructure at the border. For example, in 2019 a P3 added a pavement expansion that decreased crossing times for commercial vehicles. Impressively, the project was completed in just 15 months.[lxx] At the end of 2021, U.S. Senator John Cornyn helped pass a bill into law that will extend the Donation Acceptance Program. The press release states that “The program allows for public-private partnerships at U.S. Ports of Entry and allows U.S. Customs and Border Protection (CBP) to accept donations of property and technology to more efficiently secure the border and process trade.”[lxxi]

E. Regulatory Obstacles to Developing Autonomous Technologies that Will Improve Trucking Safety and Efficiency

In 2017, the Texas Legislature passed Senate Bill 2205 (85R; Sen. Hancock) into law. This bill permitted automated motor vehicles to operate in the state, regardless of whether a person is inside the vehicle or whether the vehicle is being used for a commercial purpose. An automated vehicle must comply with federal law, be equipped with a recording device installed by the manufacturer, and its owner must carry liability insurance in the amounts required by state law for human drivers. Additionally, SB 2205 preempted local governments from regulating automated vehicles. In 2021, the Legislature made a sensible follow-up change to state law with House Bill 3026 (87R, Rep. Canales) and exempted vehicles designed to be to be operated exclusively by an automated driving system for all trips from usual safety regulations.

Texas’ encouragement of innovation and its sensible regulation have paid dividends. A June 2022 Reuters article reported that several companies, including Aurora Innovation and TuSimple, plan to make use of automated trucks (with no human present) on Texas highways at some point in 2023.[lxxii] As one company’s state policy manger stated in explaining the affinity the industry has for Texas, “There are other states that have really great ports or connections, but they don't have the same regulatory environment that Texas has.”[lxxiii]

The article notes that the state has attracted autonomous driving technology companies, but quotes critics who express safety concerns about driverless vehicles. However, as the article acknowledges, there is no known instance of an automated vehicle crashing in Texas.

The only potential threat of over-regulation at this time is from the federal government. Officials with the FMSCA stated in June that federal regulations on automated heavy trucks could be issued as early as late 2022.[lxxiv] To date, however, the federal government has signaled its desire to work with private sector stakeholders.[lxxv] For example, in May 2019, the FMSCA solicited comments on automated commercial vehicles, inviting commenters to opine on questions such as how hours-of-service regulations should apply to humans riding inside a fully automated truck. As long as automated vehicles prove to be safer than human drivers- as they should- onerous regulation at the federal level is unlikely.

F. Seaport Development

Texas’ seaports are a necessary ingredient for the Texas Miracle. From 2015 to 2019, the average annual value of goods passing through Texas ports was more than $240 billion.[lxxvi] Many Texans fail to recognize the magnitude of the state’s port system: in 2018, Texas had five of the country’s top 20 ports by tonnage:[lxxvii] Houston, Corpus Christi, Beaumont, Texas City, and Port Arthur.[lxxviii] In 2019, Texas had three of the five fastest growing ports in the country, as measured by year-over-year growth in export revenue: Houston, Beaumont, and Corpus Christi.[lxxix]

The state has 20 seaports.[lxxx] Of these, 12 are deep-draft,[lxxxi] meaning they have a depth of at least 30 feet and can accommodate larger ships (although even deep-draft ports sometimes need to be expanded to accommodate the largest ships). The remainder are shallow-draft ports,[lxxxii] which serve smaller vessels. The distinction between deep-draft and shallow-draft is critical because shipping companies obtain economies of scale by using larger ships.[lxxxiii] In 2016, the Panama Canal was expanded to allow larger ships to pass through.[lxxxiv]The most efficient shipping route between Asia and Texas entails passing through the Panama Canal.[lxxxv] As a result of the expansion, there will be more large ships arriving to Texas ports, and this traffic will flow to the deep-draft ports. Thus, a large number of port projects in the future will consist of upgrading port facilities and increasing the depth of port channels to accommodate the much larger ships coming through the Panama Canal.

The state’s port system can be divided into three components: (1) its waterways or channels; (2) its port facilities, which include equipment such as docks and mechanized equipment; and (3) the infrastructure that connects the ports to the wider state. This last component includes pipelines, roadways, and railroad tracks. Any problem in one of the three components will affect the other two components.

Unlike some states such as Georgia and Florida, Texas does not direct significant state revenue to ports. As a 2021 multi-state study on port financing by the Texas A&M Transportation Institute stated, “There is a wide range in the level of ongoing funding support provided to port authorities by state governments. They range from Florida, which has the most active and structured program, to several states [e.g., Texas] that provide little or no ongoing direct support.”[lxxxvi] However, the state does permit ports to make use of tax reinvestment zones (TRZs), a form of tax increment financing. As of 2021, four ports created TRZs, but none have since 2013.[lxxxvii] Moreover, it appears that these four ports have yet to fund any major projects with TRZ revenue.[lxxxviii] The Texas Mobility Fund, which issues bonds for transportation projects that are secured by future revenues, has been able to disburse funds to ports since a constitutional amendment was approved by voters in 2014. It has funded a number of port projects since then, but they are relatively minor in terms of cost, with the funds for a given project rarely exceeding $5 million.[lxxxix]

Given the modest state investment in ports, the burden of financing is shouldered primarily by private parties, local funding, and federal funding. The Comptroller noted in a 2018 report that “The state’s largest ports typically receive about half their funding from public sources (federal grants and local bond issues) and half from user fees; smaller ports often depend on tax subsidies as well.”[xc]

In 2001 (Senate Bill 1282, 77R), the Legislature created the committee that today is known as the Port Authority Advisory Committee (PAAC), which is governed by Chapter 55 of the Transportation Code. The PAAC has nine members; of these nine, six represent their respective Texas port and one is from the Port of Houston Authority. TxDOT describe the PAAC as “provid[ing] a forum for the exchange of information between the [Texas Transportation] commission, TxDOT, and representatives of the port industry in Texas.”[xci]

Before December 1 of each even-numbered year, the PAAC must submit a report- the Port Mission Plan (PMP)- with suggested improvements to the state’s ports. To select these improvement projects, the PAAC solicits suggestions from the state’s ports, and a panel of engineers ranks the strategic value of these suggested improvements. Ultimately, the PAAC makes recommendations based on several factors, including the projected economic impact, operational impact (e.g., faster cargo movement), and enhancement of connections to other aspects of the state’s supply chain. The PAAC is currently working on the PMP to the 88th Legislature, but the PMP to the 87th Legislature provides a useful overview of the types of improvements the state’s ports need.

The PMP to the 87th Legislature contained the following three sub-reports.

1) The Port Capital Investment Report (PCIR). This sub-report listed 31 projects, the total cost of which was an estimated $2.18 billion.[xcii] The PAAC requested $130 million in funding from the state, and the Texas Transportation Commission used that amount in its legislative appropriations request.[xciii] An example of a proposed project in the PCIR is the addition of a sub-surface retaining wall in Port Arthur that will match the increased depth of the channel that is achieved through an earlier project. This will allow larger ships and heavier cargos to make use of the port.

2) The Ship Channel Improvement Report (SCIR). This sub-report focuses exclusively on the improvement of port waterways, such as creating greater depth in waterways to allow for larger ships. The U.S. Army Corp of Engineers oversees these waterways, but ports are responsible for funding a portion of improvements. Channel improvements are quite expensive; the PAAC requested just over $2 billion for five projects in the 2022-23 PMP, but the Transportation Commission requested only $330 million in its legislative appropriations request.[xciv] A key problem with SCIR projects is that the federal funding process is facing a tremendous backlog: the congressional authorization process and the subsequent appropriations process can take decades, which has led to a $98 billion backlog for federal water resources projects nationwide.[xcv]

3) Port Connectivity Report (PCR). This sub-report focuses on projects, mainly improving roadways, that facilitate the movement of goods to a port facility. Most of these projects were relatively minor on a per-project cost basis: 43 projects costing a total of $258 million.[xcvi] As the PMP notes, funding for improvements to roads near ports is challenging because they do not fall under TxDOT’s traditional processes and funding sources (e.g., these roads are not highways). Senate Bill 1 (87R), the General Appropriations Bill, continued the trend in recent years of appropriating proceeds from the Texas Mobility Fund- $40 million over the 2022-23 biennium- for improving connectivity to Texas ports.[xcvii]

The PCR focuses on roadway improvements for the most part, but it should be emphasized that port connectivity challenges go well beyond that. For example, railroads play a key role in moving freight from many ports in Texas. The Port of Houston has attempted to keep up with surging demand by adding additional rail,[xcviii] but the challenge remains. At least one private company is attempting to fill that void, but the cost makes purely private sector solutions difficult.[xcix]

The PMP makes the point that “resiliency of the Texas maritime system is often overlooked until emergencies and disasters occur.”[c] But it opens with a blunt statement on the need for more funding for ports: “Despite the strong position of the maritime industry in Texas, the single greatest challenge common to all Texas ports is the need for additional funding for capital improvements.”[ci]

The discussion above deals largely with the PMP submitted to the 87th Legislature. Although the PMP to the 88thLegislature is not yet finished, there are some indications of what its content will be. A presentation at a PAAC meeting in June 2022 indicated that the 2024-25 PMP will request legislative funding of $150 million in the PCIR, and $400 million in the SCIR.[cii] If those appropriations requests were granted, and an appropriation of $258 million were made for the PCR projects (the same $258 million listed for PCR Projects in the previous PMP), the total appropriation for projects proposed by the PAAC would be $808 million for the 2024-25 biennium. While that is a significant appropriation, the Legislature will have sufficient funds to make such an appropriation if it so chooses.

The state should take the following steps:

Policy Recommendation #1: The Legislature should examine the reasons for the failure of ports to make use of TRZs. While TRZs may not be able to single-handedly solve the funding challenges for ports, they are a useful tool. The creation of only four TRZs by ports since doing so became possible, and the relative inactivity of those four TRZs, suggests that ports are not making use of all the tools at their disposal.

Policy Recommendation #2: The Legislature should examine making an appropriation to the Ship Channel Improvement Revolving Fund and Loan Program (SCIRF). This fund was created by Senate Bill 28 (85R, Sen. Creighton) but has not received appropriations to date. The Texas Transportation Commission is authorized to lend money from the SCIRF to ports for projects that would deepen or widen a ship channel and have been approved by Congress. The PMP emphasizes the usefulness of a funded SCIRF, and the above-mentioned presentation in June 2022 indicates that the $400 million request for channel improvement is entirely for the SCIRF.

Policy Recommendation #3: The federal government provided states with a tremendous amount of aid during the pandemic. In addition, the federal government in May 2022 was accepting applications for $684 million in grants for port improvements.[ciii] If resources witnesses are available, the Committee should question them as to the amount of unspent federal funds Texas and its political subdivisions have for port and infrastructure improvements. A threshold question for the Committee is what funds the state has available for port and infrastructure spending, and the prioritization of these funds for port infrastructure projects.

ENDNOTES

[1] A map of Texas showing CNG and LNG fueling station locations is available at https://afdc.energy.gov/stations/#/analyze?region=US-TX&fuel=CNG&fuel=LNG&access=public&access=private&show_map=true [2] In TxDOT terminology, “crossing time” is the period needed to cross the border. “Wait time” is a portion of crossing time. Because crossing time provides a more accurate view of the time a trucker must allot for crossing the border, this testimony focuses on crossing times. [3] 90th percentile wait times are those that exceeded only 10 percent of the time.

Truck Transportation: House Committee on Transportation

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