Goods Movement Projects Must Candidly Account for Environmental Concerns

Southern California faces a challenging set of competing objectives related to the expansion of the goods movement sector and the economic growth it portends as well as the environmental impacts of that growth. From a federal regulatory perspective, what sort of challenge is Southern California dealing with?

Leon G. Billings: The challenge for Southern California is actually no different than what it has been for 50 years – to accommodate economic development and growth with protection of public health. The federal government and the state of California have both placed a very high priority on achieving health-based air quality standards at the same time that Southern California, as well as other major regions in the country, has been trying to expand to meet a growing demand for goods and services. Southern California's challenge – and it's not just a Southern California challenge just as goods movement in California is not just a Southern California issue – is to meet the fundamental air quality standards by 2010, and in order to do that there have to be significant improvements in the very activities that goods movement conduct in the areas where growth is desired.

Wally, what's the magnitude of trade/goods movement growth facing Southern California?

Wally Baker: The growth that we will have and must try to accommodate is a tripling of our current capacity. This last year we did 14.1 million containers. So, do the math – three times that is a big number.

LB: The fundamental issue is a belief, and I think it's probably correct, that the growth in goods movement will occur. Much of it will occur in Southern California. But, it will occur because of the globalization of the economy. So, the question is, "If that outcome is predestined, how do you accommodate the need to achieve healthy air?"

Will failure to achieve air standards expose the region to federal and state sanctions from the Clean Air Act?

LB: Having been around environmental regulations for the better part of 40 years, I have seen the tension between growth and environmental protection. In some cases environmental protection has won out, and in more cases growth has won out. Sanctions are not necessarily predestined, but it is very important to understand that there is a huge amount of popular and political support for clean air in Southern California. So, it is more likely that limitations will be placed on growth, or kinds of growth, or the way growth takes place if the ports and the transportation people don't take the lead in trying to find solutions.

Does not the policy challenge of accommodating goods movement growth and achieving a clean environment portend either greater public/private collaboration or unending confrontation in the years ahead?

WB: I think what we've seen is a "deer in the headlights strategy" on both the environmental side and business sides so far. Business hasn't done an awful lot to solve this problem, and I don't even think the communities and environmentalists can do a lot because they aren't the ones doing the polluting. So, I've seen nothing. It's just not working. I think that's the part that everybody needs to realize – this strategy where you're just frozen and not doing anything ends up with the growth just piling on. Do I think there will be confrontation? Yes. There's going to be some because there are going to be some people who don't think we can do this.

LB: The track record is not particularly good, and that's not entirely the fault of the folks that are interested in profiting from goods movement in Southern California or elsewhere. Part of the fault is the incredible resistance of the federal government in doing its job with respect to pollution from ships, boats, and locomotives. We're making progress with trucks, but that's going to be a while too. The federal government hasn't done its job, which makes it much more difficult in Southern California, and there hasn't been the kind of pressure from the goods movement industries nationwide to force the federal government to do its job.

Leon, let's hone in on that, because you've been connected to the policies of the Clean Air Act for most of your professional life. Is the Clean Air Act perfect?

LB: No, nothing is perfect, and the Clean Air Act did not anticipate the resistance of the railroad industry and the vessel industry to cleaning up their pollution. When we preempted to the federal government the authority to regulate those sources of pollution, we assumed that the federal government would regulate emissions from those sources. It hasn't. That's a huge weakness in the law.

WB: Worse than that, federal law is controlling many assets and we can't do a thing with the assets as a result. For instance, they control the freeways. We couldn't put in a green lane and do that because it's a violation of federal law. We can't just go out there and demand that ships clean up their act because that's federal law. Not only do they preempt it, they control freeways and assets and the whole ruling process, and they've locked us out.

LB: But it is important to understand that communities and states may have been locked out of these decision-making processes, and those same forces haven't been knocking loudly on the door of the federal process. Neither the ports nor the railroads nor the shipping industry nor the trucking industry have gone to Washington and asked them to make highways more conducive to clean trucks. They asked to be left alone.

We've had proposals to change the Clean Air Act's command and control regulatory provision by including market-based emission reductions and emission credits and pollution trading. Leon, are those real reforms or do they just mask a continuation of the either/or debate?

LB: They are a mechanism for avoidance. Like somebody once said, if something sounds to good to be true, it probably is. Market-based pollution controls are a perfect example of that. Market mechanisms like pollution trading and credits are intended to reduce or avoid compliance costs. And Southern California cannot accomplish the clean air objectives required if pollution controls are premised on cost avoidance.

WB: I think the thing that makes them even more difficult is the health component. That causes the sense of urgency. That's what's changed. If health wasn't at issue, I think business would look at this as a pain. And we know if business triples, it's going to have serious consequences. So that really changes the whole game of how you go about this as a business.

LB: Yesterday the organization that represents state and local air pollution control officials released a study that showed that 4,400 excess deaths occur a year from pollution attributed directly to locomotives and to vessels. That's unacceptable. It doesn't include the asthma attacks or the discomfort or property loss or anything else.

Please expand on the solutions that this region can begin to press for. What can be done? What can both the public and private stakeholders collaborate on?

LB: Number one, the California congressional delegation has a history of not acting in a bipartisan way when it comes to California projects. It's an extraordinarily partisan delegation. Pollution control started out as a non-partisan issue. The Clean Air Act and Clean Water Act were supported by huge bipartisan majorities. That ethic needs to be restored, and the way to do that is for the business leaders of Southern California to go to their extremely powerful and influential delegation – the chairman of the Finance Committee, the chairman of the Rules Committee, the chairman of the Appropriations Committee – and put down a list of priorities, whether it's vessel controls, locomotive controls, or changing the way the highway program works. Those priorities need to become priorities of California's congressional delegation. There are 53 members of Congress. These guys can make it happen.

WB: I completely agree. If we stand back and see that our delegation cannot agree on this issue at the federal level, then there's really nothing they're ever going to agree on. This is hopeless. This is not about being a Republican or Democrat or red state or blue state. It's about getting this worked out.

WB: When I look at the business side of this, it's interesting. I think business generally in California doesn't see things the way businesses from the East Coast or the way national retail chains do. I think business in Southern California sees pollution as a really big problem. They realize that we can't accept it. But I think they've seen it as just a little debate, not in terms of its real consequences. What's been happening in the last year and what goods movement has done for the whole state is to bring forward this debate about air pollution, because it's one of the key ingredients for the industry to grow. I think business just needs to be rallied together. This is something labor, community, and local business can agree upon. They need to step up to the plate and solve this aspect of the problem. I think it comes back to the public health component. I don't think business will want to game the system either because diesel pollution hurts tourism, real estate values, public health, and everything that business people treasure.

What steps must the business community, the environmental community, and the delegation take in the near term to make this a cooperative effort rather than a confrontation between the environment and the economy?

LB: I guess the first and easiest thing to do would be to blast out of the environmental protection agencies the regulations on vessels and locomotives that they've been sitting on the for the last several years. That wouldn't take any great effort. There needs to be greater priority given to federal government meeting its obligation to fund the necessary programs that are already on the books. That's an area in which there could be cooperation. Quite frankly, this delegation working together on something would send such a powerful message around the country that it could get some traction for a more vigorous regulatory effort.

WB: When I looked at this the other day at the Faster Freight, Clean Air conference, I basically decided there were three things that we could do. There are the public projects, which include a lot of grade separations, highway improvements and those kinds of things. Those are the things you should be bonding with state general obligation bonds. The there are the private projects where we know infrastructure is going to have to be tripled, and that's going to be what the private sector needs to do. Then there's the third piece, which is the diesel pollution. The challenge of pollution is that ARB and South Coast AQMD can't reduce it. The private sector has to come up with a plan to reduce it, and then the regulators can watch and monitor it.

Fundamentally, business is involved in all three of these transactions. They, not the public sector, have to come up with a plan that substantially reduces the pollution. They have to invest in their own infrastructure, create permanent jobs and make a profit, which sends new sales and income taxes to the state, and those tax receipts pay off the public bonds.

Somebody once told me, "Wow, business has to do everything!" And I said, "Welcome to the United States. That's how it works."