Joe Biden rode into the White House on campaign promises of building up climate resiliency, pledges to mitigate decades of transportation inequity, and assurances that his administration would take bold action to build back better with sustainable long-term investments in infrastructure. The nation’s crumbling infrastructure has been a prominent concern and front-burner policy issue for years, but the devastation and disruption of the COVID-19 pandemic highlighted a number serious deficiencies crippling our freight and logistics network.
With unprecedented demand for imported goods and capacity issues abound, the pandemic effectively uncovered major issues for the maritime and freight logistics industries with respect to port capacity and congestion. An overwhelmed freight network, exasperated by marked shifts in travel and consumer habits, stalled our networks, and precipitated fleets of container ships awaiting berths at traffic-heavy ports like the Los Angeles-Long Beach complex.
Some of the country’s busiest ports experienced unprecedented levels of traffic. In January 2021 alone, there were year-over-year increases of 21.9 percent at the Port of Long Beach; 21.7 percent at the Port of Savannah; 19.2 percent at the Port of Virginia; and 9.3 percent at the ports of Seattle and Tacoma. Longer lines for containerships, slower turn times at terminals, and overwhelmed distribution centers all led to serious disruptions to overall capacity and the timely flow of containers back to Asia.
Responding to the crisis, the Federal Maritime Commission (FMC) issued an order authorizing Commissioner Rebecca Dye to identify operational solutions to these cargo delivery challenges. The FMC order noted the economic urgency of responsive port and terminal operations to the effectiveness of the U.S. freight delivery system and identified a compelling need to convene Supply Chain Innovation Teams to address the challenges. The research and findings of this FMC initiative will likely inform any legislative, regulatory, or even commercial fixes related to port congestion and freight efficiency.
Addressing Key Issues
As the White House’s legislative approach becomes more clear with regard to infrastructure, there is an expectation that the administration will use the broader package to address key issues affecting the U.S. supply chain, including funding to dredge deeper shipping channels, addressing labor shortages and improving overall terminal turn times.
The narrowest of majorities in both the U.S. House of Representatives and the U.S. Senate have made legislative successes more challenging, but five months into his first term, President Biden is poised to push forward with a multitrillion-dollar infrastructure package that promises to modernize 20,000 miles of highways, repair 10,000 structurally deficient bridges, revitalize American manufacturing, invest in freight rail services, and improve ports, waterways and airports.
The Biden administration put down its initial marker in the push for a trillion-dollar infrastructure package with the introduction of the American Jobs Plan in March 2021. The President’s plan called for nearly $2.25 trillion in investments over eight years, funded over a 15-year period by a corporate tax rate increase and other reforms to the tax code. The plan did not address reauthorization of surface transportation programs or the solvency of the Highway Trust Fund, which would still have to be considered in a separate bill before the September deadline.
The original White House framework promised some $571 billion in transportation funding, including: $115 billion to improve bridges, highways, and roads; $20 billion for road safety; $85 billion to modernize existing transit; $80 billion to address Amtrak’s repair backlog and support passenger and freight rail safety; $174 billion to invest in the electric-vehicle market; $25 billion for airport infrastructure; $17 billion for inland waterways, coastal ports, land ports of entry, and ferries; $50 billion for dedicated investments to improve infrastructure resilience; $111 billion for safer drinking water; $100 billion for high-speed broadband; and $100 billion to upgrade the power grid.
After a series of high-profile Oval Office meetings, Senate Republicans offered up a counterproposal to the American Jobs Plan. The first Republican proposal, which was introduced by Senators Shelley Moore Capito, John Barrasso, Roger Wicker and Pat Toomey, called for $568 billion in total funding over five years, including: $299 billion for roads and bridges; $61 billion for public transit systems; $20 billion for rail; $13 billion for safety programs; $35 billion for drinking water and wastewater infrastructure; $17 billion for inland waterways and ports; $44 billion for airports; $14 billion for water storage; and $65 billion for broadband infrastructure.
Subsequent discussions with the White House resulted in multiple counterproposals, including a pared down $1.7 trillion offer from the President, as well as a follow-up offer of $928 billion over eight years from Senate Republican negotiators, which proposed an estimated $22 billion for U.S. ports and waterways. The latest proposal, however, still leaves a sizable gap between the two sides, and pressure is mounting on President Biden to proceed without Republican support, and pass a Democrat-only bill via the budget reconciliation process, which requires only 50 votes and the Vice President casting the deciding vote.
Moving Forward
While the White House continues to push forward on infrastructure, a separate package is also being developed in the House centered on efforts from Peter DeFazio, Chairman of the House Transportation and Infrastructure Committee. It is anticipated that DeFazio will use his Moving Forward Act from the 116th Congress as the basis for this year’s legislation, but the Committee has yet to release text for a new bill. We anticipate that the bill will be moving through the House by the time of publication.
Introduced in June 2020, the Moving Forward Act originally proposed: $300 billion for roads and bridges; $100 billion for public transit; $70 billion for renewable energy; $25 billion for drinking water programs; $40 billion for wastewater infrastructure; $35 billion for health care infrastructure; $100 billion for broadband; $25 billion to modernize postal infrastructure; and $100 billion for affordable housing infrastructure. The bill also included several provisions that would impact ports and freight mobility. Specifically, the measure would:
- Create a $500 million per year zero emissions ports infrastructure program to assist ports and port users with zero emissions equipment and technology;
- Authorize an additional $50 million per year for the Diesel Emissions Reduction Act to help reduce port emissions;
- Assist ports in the development of clean energy microgrids onsite to power their facilities and equipment and to provide ship-to-shore power to vessels in port;
- Amend the National Multimodal Freight Network to include ports that have a total annual cargo value of at least $1 billion;
- Remove the cap on funding multimodal freight projects in the National Highway Freight Program;
- Establish a joint task force between the DOT and the Internal Revenue Service to study the establishment and administration of a fee on multimodal freight surface transportation services;
- Provide $10 billion to the Army Corps of Engineers Construction account, including $3 billion for the Inland Waterways System;
- Establish a $250 million grant program to reduce traffic gridlock in large metropolitan areas;
- Guide research efforts through a national cooperative multimodal freight transportation research advisory committee; and
- Repeal the Port Performance Freight Statistics Program.
A path forward for an infrastructure bill gets considerably more complicated in the upper chamber. The fragile political calculus of a 50-50 Senate makes legislating a challenge in a normal atmosphere, but slim margins combined with a hyper-partisan environment makes the job that much more difficult. To add to the confusion, there are also jurisdictional overlaps to consider. On surface transportation alone there are four different standing committees with responsibility over portions of the bill (Commerce, Environment, Banking and Finance).
Remarkably though, the Senate Committee on Environment and Public Works was able to advance the first section of a larger surface transportation bill through committee markup in late May with unanimous support. The bill is largely focused on traditional roads and bridges surface transportation, but it does include language that would address port emissions, including provisions directing the Transportation Secretary to study how ports would benefit from electrification, coordinate and fund projects through competitive grants that reduce port-related emissions, and submit a report to Congress detailing the status and effectiveness of the program.
The progress of the highway bill is encouraging, but as we saw in the previous Congress, the more contentious parts of an infrastructure package fall largely in other committee jurisdictions, namely the Senate Finance and House Ways and Means Committees, which are charged with addressing crucial pay-fors related to the bill. For any bipartisan infrastructure to reach the finish line, it would first have to unlock the puzzling question of how to pay for it without raising taxes.
The President has bold ambitions for investing in infrastructure, but at this moment in time, the path forward is worryingly punctuated by more questions than answers. It is hard to imagine how the legislative morass will be traversed, but regardless of the chosen path, the level of partisan consensus, or the robustness of topline spending numbers, there is widespread agreement that the issue is ripe for action and will be advanced sooner rather than later.
What that means for industry stakeholders remains to be seen, but what we do know is that issues like port congestion, terminal productivity, and environmental justice in port communities will all continue to be front and center on the President’s and Congress’ legislative agenda. We believe that legislation will be enacted in the 117th Congress that addresses the infrastructure and transportation needs of the nation, but the outstanding question remains: will the package do enough to meet outstanding needs?
While we suspect the answer is no, it still presents an opportunity for Pacific ports and maritime interests to secure support for critical projects that will improve freight mobility and infrastructure that is so vital to local communities.
Darrell L. Conner is a Government Affairs Counselor at K&L Gates LLP. Brody Garland is a Government Affairs Analyst at K&L Gates LLP. They advise clients on maritime and transportation policy matters.