NAS 2015 report on how to fix our falling-apart inland waterway system

[After reading two congressional hearings, one in 2008, and another in 2013, about how the inland waterway system was falling apart, and had been for 30 years, I was curious to know why such an important asset would be let go to waste. In the testimony, it was said that more money was collected in fees by the government than doled back out in capital and maintenance expenses (true from 1991 to 2006 it appears from Figure 3-2, but not true since then).

At the 2013 hearing witnesses said that the Army Corps of Engineers has a set budget, so if the money put into the Inland Waterway Trust Fund was actually given to ports and rivers, other inland projects would not be funded.  This is probably why the waterway system was given less money back for over 15 years than fees paid into it.

As the study below states: “The selection of waterways projects for authorization has a long history of being driven largely by political and local concerns”.

This report shows what an irrational, byzantine mess the approval and funding process is, the details of which you need to read in the 157 page report, since mainly overviews are extracted below. Read the report yourself to see how the waterways projects might be improved (ranked by need, how to assess what needs to be done, getting more money to O&M, etc).

National energy policy is not based on energy efficiency. There were no café standards for decades. While the rest of the world strove to make and use fuel-efficient cars, rail, trucks, and ships, In America we’ve allowed massive, polluting gas guzzling vehicles that pummeled the hell out of our bridge and road infrastructure, wasting decades of oil that future generations will wish still existed when the next, permanent oil crisis arrives.

It’s tempting to blame local, state, and federal politicians for treating us like babies and not explaining the energy crisis, or car makers, but the truth is, energy efficient cars have existed for a long time, but American consumers chose to buy wasteful SUVs and light trucks.

This document chides government policy as well, but in bureaucratese: “A national freight system perspective on the efficiency of the nation’s freight network is generally lacking, and no mechanism exists for prioritizing spending across modes”.

Now that we’re at peak oil, a lot more attention and funding ought to go to the waterway system.

Alice Friedemann, www.energyskeptic.com]

NAS. 2015. TRB special report 315: funding and managing the U.S. inland waterways system: what policy makers need to know. Transportation research board, National Academy of Sciences. 157 pages.

Inland waterway system stats:

  • The inland waterways system moves 6 to 7 percent of all domestic cargo in terms of total ton-miles, mostly coal, petroleum and petroleum products, food and farm products, chemicals and related products, and crude materials.
  • Inland waterways include more than 36,000 miles of commercially navigable channels and roughly 240 working lock sites.
  • Barges mostly carry energy: coal, crude petroleum, petroleum products, and natural gas based fertilizers

2013 Commodities carried by USACE at http://www.navigationdatacenter.us/wcsc/pdf/pdrgcm13.pdf

  • Tons
  • Millions     Commodity
  • 312.3     Coal                      
  • 418.9     Crude petroleum
  • 508.6     Petroleum products
  • 39.9       Chemical fertilizer
  • 140.6      Chemicals excluding fertilizers
  • 53           Lumber, logs, wood chips, pulp
  • 163.5      Sand, gravel, shells, clay, salt, and slag
  • 85.4        Iron ore, iron, and steel waste and scrap
  • 29.5        Non-ferrous ores and scrap
  • 45           Primary non-metal products
  • 72           Primary metal products
  • 270         Food and food products
  • 121         Manufactured goods
  • 62.3        Unknown and not elsewhere classified products
  • 2,275      TOTAL

The inland waterways system provides for the domestic barge shipping component of the nation’s freight transportation system. The system infrastructure is managed by the U.S. Army Corps of Engineers (USACE) and funded through the USACE inland navigation budget. The United States established and funded the federal inland waterways system early in the nation’s history to promote commercial shipping and the U.S. economy. Commercial shipping continues to drive federal economic interest in the system. The Executive Committee of the Transportation Research Board (TRB) initiated this consensus study of the inland waterways system because of reports of deteriorating and aged infrastructure combined with inadequate capital investment, a growing backlog of capital needs, and declining federal funding for inland navigation.

The primary concern of this report is funding for lock and dam infrastructure on rivers or river systems. Locks and dams are the main mechanism for enabling cargo movements and the most expensive component in maintaining the inland waterways for barge transportation, although other activities such as dredging are necessary and can be costly. The Great Lakes and the Saint Lawrence River are part of the larger inland marine transportation system but not a focus of this report because of the small number of locks and dams they contain.

Beyond the Scope. Issues related to ports and harbors are beyond the scope. USACE is responsible for deep draft harbor dredging to ensure that harbor channels can accommodate flows of freight carried on large vessels for international commerce. However, ports and harbors are managed and funded differently from the inland waterways and are not a focus of this report. Panama Canal expansion also is not addressed in this report except to the extent that it relates to arguments for the building of larger locks on parts of the inland waterways system. Broader water resource management and funding challenges and opportunities for the nation are beyond the scope of this report. USACE has three primary mission areas: navigation for freight transportation, flood control and damage reduction, and ecosystem restoration. Other activities performed by USACE include safety and disaster relief, hurricane and storm damage reduction, water supply, hydroelectric power generation, and waterborne recreation. This report focuses on funding for the inland waterways system with regard to the freight transportation mission;

The main cost in providing for barge service is maintaining locks and other infrastructure that enables cargo movements. While many locks are more than 50 years old, age is not a useful indicator of their condition. Many locks have been rehabilitated, and lock performance correlates poorly with age. The large backlog of capital projects also is not a reliable indicator of funding required for maintaining reliable freight service. The navigation share of these projects is modest, maintenance costs are not included in the backlog, and Congress has authorized more projects than can be funded.

The most critical need for the inland waterways system is a sustainable and well-executed plan for maintaining system reliability and performance that ensures efficient use of limited navigation resources. Time lost due to delays at locks and locks out of commission for repairs is a cost to shippers and an important consideration in deciding on future investments to maintain reliable freight service. System-wide, about 20% of time lost in transportation is caused by scheduled and unscheduled outages. A more targeted operations and maintenance (O&M) budget would prioritize facilities that are most in need of maintenance and for which the economic cost of disruption would be highest.

In contrast to the need to focus on system reliability, much of the policy discussion about the inland waterways system centers on the user charges to support the Inland Waterways Trust Fund, which is dedicated to capital improvement projects.

The passage of an increase in the barge fuel tax by the 113th Congress only heightens the urgency of settling on a plan for maintenance, since under federal law any new revenues from the barge fuel tax can be used only for construction and not for O&M, for which the federal government pays the full cost. Because funds for capital projects raised by the barge fuel tax must be matched by the federal government, O&M competes directly with construction for federal general revenues. O&M now accounts for about 75% of the requested inland navigation budget (roughly $650 million annually). Without a new funding strategy that prioritizes O&M and repairs, repairs may continue to be deferred until reaching $20 million (the point at which they become classified as a capital expenditure), which would result in further deterioration and in an inefficient and less reliable system.

More reliance on a “user-pays” funding strategy for the commercial navigation system is feasible, would generate new revenues for maintenance, and would promote economic efficiency. In a climate of constrained federal funds and with O&M becoming a greater part of the inland navigation budget, it is reasonable to examine whether beneficiaries could help pay for the system to increase revenues for the system and improve economic efficiency. Indeed, Congress, in the 2014 Water Resources Reform and Development Act (Section 2004, Inland Waterways Revenue Studies), called for a study of whether and how the various beneficiaries of the waterways might be charged. A reconceived system of user charges would focus policy attention on a sustainable plan for system performance and efficiency. Since users are not responsible for the cost of O&M, strong incentives exist to overcapitalize the system. Dedicating revenues from users to O&M instead of only capital expenditures would focus maintenance spending on the assets that users most value and result in a system that is more cost-effective and efficient.

Commercial navigation is the primary beneficiary of the inland waterways, and commercial carriers impose significant marginal costs on the system. Charging commercial navigation beneficiaries for the costs associated with their use of the system is feasible. User charges may be restructured in a variety of ways. There is no single best option; the preferred choice for achieving a policy goal may be to combine one or more of the options, such as an increase in the barge fuel tax with user fees. Charging user fees on the basis of facility and segment usage would identify the parts of the waterways most valued by shippers and warranting maintenance. Multiple criteria would apply in choosing among the user charge options: ease of administration, revenue potential, distribution of burden across user groups, and design components that would reinforce the efficient use of resources and cost-effective expenditures. A trust fund for maintenance would ensure that all new funds collected are dedicated to inland navigation while providing greater latitude for USACE to disburse funds for maintaining the system according to criteria approved by Congress and with the involvement of the Inland Waterways Users Board, whose current advisory role is limited to capital spending.

Asset management can help prioritize maintenance and ascertain the level of funding required for the system. A standard process for assessing the ability of the inland waterways system to meet demand for commercial navigation service and for prioritizing spending for maintenance and repairs is lacking. For reasons explained in this report, the capital projects backlog and age of inland waterways infrastructure are not reliable indicators of the needs of the system or the amount of investment required. Regardless of who pays for the system, a program of economically efficient asset management (EEAM), fully implemented and linked to the budgeting process, would prioritize maintenance spending and ascertain the funding levels required for reliable freight service.

OVERVIEW OF U.S. INLAND WATERWAYS

The inland waterways navigation system is part of the U.S. marine transportation system (MTS), which provides for both passenger transport and domestic freight transportation infrastructure and coastal gateways for global trade (TRB 2004). The MTS includes navigable waterways and public and private ports on three coasts (Atlantic, Pacific, and Gulf) and the Great Lakes as well as a network of inland waterways (CMTS 2008). It includes, by extension, inland highway and rail connections between ports and inland markets that ensure access to the water for shippers and customers in all 50 states (AASHTO 2013; CMTS 2008). The inland and intra-coastal waterways directly serve 41 states (Clark et al. 2012). The inland waterways system comprises navigable rivers linked by a series of major canals. Lock and dam infrastructure is the chief mechanism in enabling the upstream and downstream movement of cargo, and its installation is the most expensive component in providing for navigation service (McCartney et al. 1998).

Waterways are categorized as deep draft, shallow draft, both (allowing both shallow and deep draft vessels), or non-navigable, as the inland and intra-coastal waterways are access routes for deep draft vessels; with those included, the committee counts 41 (43 including the District of Columbia and Puerto Rico). Some are coastal states (e.g., California, Delaware, New Jersey, Maryland) with minor inland or intra-coastal waterways outside of the committee’s charter. For example, 12 states, ranked by ton-miles, account for 80% of ton-miles and 74% of tons moved by inland waterway.

Because of shallow drafts and seasonal changes in navigable depths, fixed infrastructure is required in many parts of the river system to maintain open navigation for commerce.

Most of the navigable channels are rivers located in the central and eastern half of the country. The largest river system is the Mississippi, which is navigable for about 1,800 miles from New Orleans, Louisiana, to Minneapolis, Minnesota, and has a large tributary system. In the western part of the country the largest inland waterway is the Columbia–Snake River system.

Water transportation contributes nearly $115 billion in value added to U.S. GDP, compared with nearly $120 billion from truck transportation, more than $60 billion from air transportation, more than $30 billion from rail transportation, and $15 billion from pipeline transportation

Upper Mississippi River

The Upper Mississippi River flows south from Minneapolis, Minnesota, 858 miles to the mouth of the Ohio River at Cairo, Illinois. The navigation channel above Saint Louis, Missouri, is maintained at a minimum depth of 9 feet by a system of 27 locks and dams. Agriculture-related products dominate the commodity flows on this river. Farm products, primarily grain bound for export through the Gulf Coast deepwater ports, account for 32 percent of the tonnage. The Upper Mississippi also is the top regional source for corn and soybean exports. The second-ranked commodity is coal, which accounts for 22% of the tonnage. Much of the chemical tonnage (10 percent of the total) consists of fertilizers shipped upbound back to the farm belt. The dominant flows on the Upper Mississippi illustrate the modal competition and cooperation aspects of much waterborne commerce. For example, much of the grain is shipped by truck or rail to waterside grain elevators for transloading to barges, which then transload again to deepwater vessels in southern Louisiana for export to world grain markets. Trains also bring grain to the Gulf Coast, so for some farms there is at times a genuine modal choice between rail and water transport. However, grain transactions turn on margins as low as cents per bushel, so most shippers are essentially heavily dependent on one mode or the other. During the height of the harvest season, the capacities of both the rail and the inland waterways systems are stretched to keep up with shipping demand. The coal traffic on the system consists largely of low-sulfur coal that is shipped by unit train from the western coal fields to large transloading facilities at places like Cora and Metropolis, Illinois, where it is loaded onto barges for movement to waterside electric power plants on the Ohio and Mississippi Rivers. Usually, competition among transport modes to serve a major shipper facility occurs when the facility site is being selected. Once the decision is made to locate a facility on a particular mode (e.g., a grain elevator or power plant is located on a river), goods movement tends to depend on that mode.

Lower Mississippi River

The Lower Mississippi River flows 956 miles from the mouth of the Ohio River at Cairo, Illinois, to the Mouth of Passes in the Gulf of Mexico. There are no navigation locks on this portion of the inland waterways system. Navigation depth is maintained by river training works such as groins and revetments and by periodic maintenance dredging of shoals. Operations on this segment typically feature large tows, since the size of tows is not constrained by lock sizes. Table 2-3 shows the commodity tonnages on the 720-mile stretch from Cairo to Baton Rouge, Louisiana. The commodity mix there is similar to that on the Upper Mississippi, but the quantities are 50 to 100 percent greater.

Ohio River System

The Ohio River begins at the junction of the Allegheny and Monongahela Rivers at Pittsburgh, Pennsylvania, and flows in a southwesterly direction 981 miles to its mouth at Cairo, Illinois, where it empties into the Mississippi River. Navigation is maintained at a minimum 9-foot channel depth by 20 locks and dams on the Ohio River (Olmsted Lock will replace two older locks near the lower end of the river). Table 2-3 shows the commodity flow on the entire Ohio River system, which includes the Ohio mainstem and its tributaries. The Monongahela, Kanawha, and Tennessee Rivers contribute significant flow to the Ohio. Coal is the dominant commodity on the system, making up 59 percent of the tonnage in 2012. Most is steam coal, which moves both inbound and outbound on the system. Coal mines in Appalachia send coal to the river via conveyor belt, truck, and rail for shipment to river-located electric power generation plants. Those power plants also receive upbound coal from other sources, and there is still considerable movement of metallurgical coal on the Ohio and its tributaries. The second-ranked commodity group, crude materials (nearly 22 percent of the total), consists primarily of sand, gravel, and limestone. While rail lines run parallel along most of the Ohio, they are primarily part of the nation’s extensive east–west manufactured products and foodstuffs distribution system. As a practical matter, the large quantities of coal and crude materials moving on the Ohio could not easily be diverted to rail. Coal alone would require the railroads to handle more than 1 million additional carloads annually and to provide in excess of 26 more train movements per day (Kruse et al. 2012). Furthermore, most of the shipping and receiving facilities for this traffic are designed and operated specifically to handle barge shipments. Thus, as was the case for the Upper Mississippi, rail, truck, pipeline, and conveyor belts are complementary to water transport.

Gulf Intracoastal Waterway

The GIWW provides a protected route along the Gulf Coast from Saint Marks, Florida, to the Mexican border at Brownsville, Texas. The total distance is 1,109 miles, and the maintained minimum channel depth is 12 feet. The system includes 10 locks, which serve a variety of purposes. The Inner Harbor Navigation Canal lock at New Orleans connects the Mississippi River to the GIWW and overcomes elevation differences between the river and the canal. The lock is currently one of the most congested on the entire inland waterways system. As would be expected in view of the GIWW’s location in the largest petrochemical region of the United States, petroleum and chemicals dominate the system’s commodity flow. Together they made up 76.5 percent of the tonnage in 2012. Crude materials ranked third, at nearly 15 percent. Within these broad groups a wide variety of specific commodities are moved, in keeping with the region’s complex industrial base. Pipelines are the main competing and complementary mode, but the circumstances of individual plant locations and outputs defy any easy generalizations.

Illinois River

The Illinois extends 292 miles from Lockport, Illinois, to its mouth at the Mississippi River at Grafton, Illinois, just above Saint Louis. Above Lockport, various channels connect the Illinois River and the Mississippi River system to Lake Michigan at Chicago, Illinois. The Illinois has a minimum maintained channel depth of 9 feet and seven lock sites with single chambers 600 feet long by 110 feet wide. These dimensions require the typical tow of 15 jumbo barges to double lock, and the lack of auxiliary chambers means that any lock outage will shut down navigation. The Illinois is a typical moderate-use waterway. It moved 31 million tons in 2012. The commodity mix was similar to that on the Mississippi, but with a smaller proportion of coal and a greater proportion of petroleum and chemicals.

Columbia River System

The Columbia River has the longest inland navigation channel on the U.S. West Coast. The Columbia provides a shallow draft waterway (14-foot depth) from Kennewick, Washington, to Vancouver, Washington, and Portland, Oregon, a distance of approximately 225 miles. Below Portland, a deep draft channel (40 feet) extends approximately 100 miles to the river’s mouth at the Pacific Ocean. There are four navigation dams on the shallow draft section. Above Kennewick, the Snake River allows navigation for 140 miles upstream to Lewiston, Idaho. The Willamette River drains northwestern Oregon and flows into the Columbia near Portland, where it forms part of that city’s deep draft harbor. Agriculture dominates flows on the Columbia. Food and farm products constituted 53 percent of the tonnage in 2012. About 76 percent of these agricultural products were grain and soybeans shipped for export. The Columbia River is the top gateway for U.S. wheat exports. It accounts for about 16 percent of all food and farm products moved on the inland waterways and about 3 percent of all food and farm imports and exports. Crude materials, largely forest products and sand and gravel, made up another 20 percent of the tonnage. The river also plays an important role in distribution of petroleum products throughout the region. There are rail lines along both the north and the south shores of the Columbia River. They are running at or near capacity, with much of that capacity devoted to serving the intermodal container trade.

Commodity Trends by Corridor

  • Coal: Ohio River system, including the Allegheny and Monongahela Rivers;
  • Food and farm: Upper Mississippi and Illinois Rivers to New Orleans, Louisiana
  • Petrochemical: Mississippi River from Saint Louis, Missouri, to New Orleans
  • Manufactured goods: Mississippi River from Saint Louis to New Orleans
  • Crude materials: Ohio and Upper Mississippi Rivers (from Saint Louis) to New Orleans
  • Food & farm: Columbia River system, including Columbia, Snake, and Willamette Rivers;
  • Chemical goods: Gulf Intracoastal Waterway (GIWW)
  • Petroleum goods: GIWW.

As shown in Table 2-3, the principal commodities carried on inland waterways system corridors are coal, petroleum and petroleum products, food and farm products, chemicals and related products, crude materials, manufactured goods, and manufactured equipment. Examination of annual commodity trends for several of the chief commodities on most of the primary corridors during the period 2000 to 2013 indicates adequate capacity in the system. Aside from petroleum products moving on the Lower Mississippi, commodity movement appears to be stable or declining for more than a decade for most corridor segments

Modal Shift to Road or Rail Resulting from Loss of Waterway Corridor

The Transportation Research Board’s Executive Committee wanted this study to cover possible impacts of a major diversion of freight from water on highway systems should a waterway fail because of deferred maintenance. In view of the volume that can be moved by one barge being equal to the payloads of many trucks, state officials have expressed concern about the consequences of massive numbers of heavy trucks replacing shipments that had moved by water for highway congestion and pavement and bridge infrastructure.

Age of Locks

Figure 2-8 shows a map of inland waterways lock infrastructure by original construction date. Figure 2-9 shows the average age of lock and dam infrastructure in comparison with other federal and state infrastructure and transportation assets. The average age of the locks in 1940 was less than 10 years; in 1980 the average age of the locks was about 30 years (whether or not major rehabilitation work was considered); in 2014 the average age was 59 years.

 

After rehabilitation is accounted for, in 2014 more than 50 percent of the locks were more than 50 years old

76% of barge cargo (in ton-miles) moves on just 22% of the 36,000 inland waterway miles. About 50% of the inland waterway ton-miles moves on 6 major corridors that represent 16% of the inland waterway miles—the Upper Mississippi River, the Illinois River, the Ohio River, the Lower Mississippi River, the Columbia River system, and the GIWW.

Some inland waterways segments have minimal or no freight traffic.

With shrinking resources for the system and growing demands on the USACE O&M budget, targeting commercial navigation investments mainly to portions of the system important for moving freight would be prudent.

Lost transportation time due to delays and lock unavailability (outages) is a cost to shippers and an important consideration in deciding on future investments. Systemwide, about 80 percent of lost transportation time is attributable to delays. On average, 49 percent of tows in 2013 were delayed across the 10 highest-tonnage locks, with an average length of tow delay of 3.8 hours. Some delay is expected for routine maintenance, weather, accidents, and other reasons, but delays can be affected by maintenance outages caused by decreases in the reliability of aging machinery or infrastructure. About 12% of lost time on the inland waterways system is due to scheduled closures and about 8% is due to unscheduled closures, which indicates that up to 20% of lost time could be addressed with more targeted O&M resources. Targeting O&M resources toward major facilities with frequent lockages and high volumes and where the lost time due to delay is significantly higher than the river average could improve navigation performance. Most lost service due to delay occurs at high-demand locks used for agricultural exports and so may be caused by congestion related to peaks in seasonal shipping. Data are not available to explain the causes of delay at locks, which makes up 80 percent of lost transportation hours. Delays might be attributable to seasonal peak volumes due to weather, harvest, under-capacity, or other causes. Collection of data and development of performance metrics would enhance understanding of whether delay problems could be most efficiently addressed by more targeted O&M, traffic management, capacity enhancement, or some combination of these measures. Some high-use locks are located on waterways designated as low or moderate use, which has implications for how to allocate funds across parts of the system. This situation can occur because of seasonal peaks in the movement of certain commodities, such as harvested food and farm products, or from navigation closures caused by annually recurring weather conditions, such as ice or flooding. The tonnage moved through each lock during peak demand periods, as well as the type and value of the cargo, could be considered in funding allocations instead of considering only average annual waterway ton-miles. Likewise, some rivers and waterborne corridors may move as much or more tonnage on a seasonal basis as rivers classified as high use but receive low-use classification on the basis of annual ton-miles of transport rather than seasonal peak ton-miles.

The advanced age of lock and dam infrastructure is often used to communicate funding needs for the system. Age is not a good indicator of lock condition. A substantial number of locks have been rehabilitated, which would be expected to restore performance to its original condition if not better. Dating the age of assets from the time of the last major rehabilitation, as is done for highway infrastructure such as bridges, would be more accurate. Furthermore, with some exceptions, little correlation exists between the age of locks and their performance as measured by delay experienced by system users. A more useful approach for targeting funds to improve system performance than focusing on age as a proxy for lock functioning would be to identify waterway segments and facilities where the lost time due to delay (based on millions of tons delayed) is substantially higher than the system average.

Federal Role in the Inland Waterways System

The inland waterways infrastructure is managed by the U.S. Army Corps of Engineers (USACE) and funded from the USACE budget.

USACE, under its Civil Works Program headed by the Assistant Secretary for Civil Works, plans, constructs, operates, and maintains a large water resources infrastructure that includes locks and dams for inland navigation; maintenance of harbor channel depths; dams, levees, and coastal barriers for flood risk management; hydropower generation facilities; and recreation. The primary USACE Civil Works mission areas are support of navigation for freight transportation and public safety; reduction of flood and storm damage; and protection and restoration of aquatic ecosystems, such as the rebuilding of wetlands and the performance of environmental mitigation for USACE facilities. Hydropower generation is an important activity of USACE, although it has not been considered a primary mission. Other USACE responsibilities include recreation, maintenance of water supply infrastructure (municipal water and wastewater facilitates), and disaster relief and remediation beyond flood disaster relief (e.g., remediation of formerly used nuclear sites

Whereas some federal agencies have broad authorities, Congress authorizes each capital investment for capacity expansion, facility replacement, or major rehabilitation of USACE water infrastructure projects. A construction project generally originates with a request to a congressional office from communities, businesses or other organizations, and state and local governments for federal assistance.1 Since 1974, the process for authorizing federal water resources projects, including infrastructure for freight transportation, has been the omnibus bill typically called the Water Resources Development Act (WRDA).2 On the basis of this legislation, Congress authorizes individual capital projects and numerous other USACE activities and provides policy direction in areas such as project delivery, revenue generation,

Benefit–cost analysis is the primary criterion used in selecting capital expenditures projects for funding. Projects that pass a minimum threshold for determining that the benefit exceeds the cost are eligible for congressional authorization and funding.

Two types of congressional authorizations are required for a construction project—one for investigation and one for project implementation.3 First, authority is provided for a feasibility study in which the local USACE district investigates engineering feasibility, formulates alternative plans, conducts benefit–cost analysis, and assesses environmental impacts under the National Environmental Policy Act.4 The study results are conveyed to Congress through a Chief of Engineers Report (Chief’s Report) that contains either a favorable or an unfavorable recommendation for each project. Study results also are submitted to the executive office of the Office of Management and Budget (OMB), which applies its own fiscal, benefit–cost, and other criteria to assess whether projects warrant funding according to executive branch objectives. Congress considers USACE study results, recommendations of OMB, and other factors in choosing projects to authorize. Thus, both the projects selected for initial study and the project authorizations are at the discretion of Congress.

After Congress authorizes a project, it becomes eligible to receive implementation funding in annual Energy and Water Development appropriations acts. The appropriations process begins with the submission of the annual President’s budget. To be included in the President’s budget, authorized projects must compete within the overall USACE program ceiling not only for initial funding but also for continued annual funding throughout the project’s life cycle

Once Congress receives the President’s budget request, it is “marked up” by the House and Senate Appropriations Committees, where project funding levels are adjusted in response to congressional priorities. Even if an authorized project has received initial construction funding, there is no assurance that it will receive sufficient appropriations each year to provide for an efficient construction schedule. The actual funding for the project over its life cycle may be much less suitable.

  1. At this early stage, USACE typically engages in an advisory role to answer technical questions or to assess the level of interest in possible projects and the support of nonfederal entities (state, tribal, county, or local agencies and governments) that may become sponsors.
  2. The 2014 authorizing legislation is titled the Water Resources Reform and Development Act (WRRDA).
  3. If the geographic area was investigated in previous studies, the study may be authorized by a resolution of either the House Transportation and Infrastructure Committee or the Senate Environment and Public Works Committee.
  4. According to WRRDA 2014, at any point during a feasibility study, the Secretary of the Army may terminate the study when it is clear that a project in the public interest is not possible for technical, legal, or financial reasons.
  5. After a project is authorized, modifications beyond a certain cost and scope require additional congressional authorization. A previous National Research Council (NRC) report (2012) encouraged less reliance on WRDA as the main vehicle for authorizing projects for USACE infrastructure. The traditional focus on WRDA for authorizing large new construction projects in particular is less relevant to a system that is mostly “built out” and for which the main concern is a sustainable source of funding for ongoing operations and maintenance (O&M) and major repairs. Although WRDA drives capital funding for freight transportation on the inland waterways, it is largely disconnected from federal legislative processes and efforts related to other freight modes. Similarly, the goal of the USACE planning process is to determine whether a navigation project is eligible for funding, not to assess whether the project will be the most efficient option for meeting national freight transportation needs and economic interests given the availability of other modes. (The benefit–cost analyses required for the authorization of navigation projects must consider other modes to a degree, as described later in this chapter.)

A national freight system perspective on the efficiency of the nation’s freight network is generally lacking, and no mechanism exists for prioritizing spending across modes.

Operations and Maintenance O&M projects can be authorized under WRDA, but it has not often been used for this purpose (see NRC 2012, Table 2-2, for exceptions in WRDA 2007). USACE headquarters sets priorities for O&M investments as part of the budgeting process on the basis of information gathered from USACE districts and divisions. Eight USACE divisions coordinate projects and budgets in 38 district offices across the United States. Districts develop plans, priorities, and rankings for investigations, construction, and O&M and submit them to USACE divisions. Divisions prioritize projects across their districts and provide division-wide rankings of projects to USACE headquarters. USACE headquarters considers division priorities and rankings, administration budget priorities, and other factors in ranking requests.6 The number of projects funded each year depends on the annual budget appropriation by Congress.

The local assessment of assets and maintenance needs follows general guidelines, but it has many local variations. For example, districts may develop their own asset management systems for assessing and communicating the condition of infrastructure and level of service being provided for navigation and O&M and repair needs. According to a past NRC report, with respect to water resources funding, “neither the Congress nor the administration provides clear guiding principles and concepts that the USACE might use in prioritizing OMR [operations, maintenance, and repair] needs and investments” (NRC 2012, 11). Full benefit–cost analysis is applied only to construction and not to O&M,7 which is appropriate given the costs of conducting benefit–cost analysis relative to the cost of O&M projects.

Distinctions Among O&M, Major Rehabilitation, and Construction USACE separates projects labeled as “major rehabilitation” from its O&M budget. Major rehabilitation projects meet the following criteria established in a series of Water Resources Development Acts from 1986 to 2014.8 ? Requires approval by the Secretary of the Army and construction is funded out of the Construction General Civil Works appropriation for USACE. ? Includes economically justified structural work for restoration of a major project feature that extends the life of the feature significantly or enhances operational efficiency. ? Requires a minimum of 2 fiscal years to complete. ? Costs more than $20 million in capital outlays for reliability improvement projects or more than $2 million in capital outlays for efficiency improvement projects. These thresholds are adjusted annually by regulation and are subject to negotiation.

Major rehabilitation projects are treated as capital projects for new construction in the budgeting process instead of being considered an expense of maintaining the system. The decision to classify major rehabilitations a capital expenditure instead of as an O&M expense is arbitrary.9

FUNDING FOR THE INLAND WATERWAYS NAVIGATION SYSTEM

Cost-Sharing Rules Before 1978, the inland navigation system was funded almost entirely through general revenues collected from taxpayers. Congress transformed funding for the inland waterways by passing two pieces of legislation: the Inland Waterways Revenue Act of 1978 and the Water Resources Development Act of 1986, which created the funding framework followed today. This legislation established a tax on diesel fuel for commercial vessels paid by the barge industry and an Inland Waterways Trust Fund (IWTF) to pay for construction with fuel tax revenues. It also increased the nonfederal cost-sharing requirements for inland navigation construction projects.

The required cost share depends on whether the navigation project is classified as a capital cost or as O&M. For single-purpose navigation projects and multiple-purpose projects assigned to the navigation budget, the federal government pays 100 percent of O&M costs, 50 percent of capital costs (including capacity expansion, replacement, and major rehabilitation), and 100 percent of rehabilitation costs up to $20 million (costs for a single repair or set of repairs that exceed this amount are considered major rehabilitation and a capital cost). The waiving or adjustment of cost-sharing requirements for individual projects is infrequent and typically requires authorization by Congress. The federal share for commercial navigation is paid via general revenues. The commercial users’ share is paid for with a diesel fuel tax per gallon via the IWTF; the tax is collected by the Internal Revenue Service. The fuel tax was initially set at $0.04 per gallon and is not indexed to inflation. In 1986 legislation, the tax was set to rise to its current level of $0.20 per gallon, where it has remained until 2014, when the 113th Congress approved an increase in the barge fuel tax to $0.29 per gallon. In contrast to the cost share for navigation, the O&M costs for nonnavigation projects are paid for partly by sponsors. The federal share depends on the type of water resource project (see Table 3-1). For many project types (e.g., levees), the nonfederal sponsor is responsible for O&M once construction is complete. Furthermore, inland waterways feasibility studies to determine the eligibility of a navigation project for funding are entirely a federal expense; in contrast, for deepwater navigation and nonnavigation projects, the federal share for feasibility studies is 50 percent.

Patterns and Trends in Funding for the Inland Waterways System

In terms of constant dollars, funding for construction and O&M for lock and dam facilities is at its lowest point in more than 20 years and is on a downward trajectory (see Figures 3-1a and 3-1b). The balance of the IWTF, which is used to pay 50 percent of construction costs, has declined. The fund was at its highest level, $413 million, in 2002 (see Figure 3-2). The balance fell sharply between 2005 and 2010 as expenditures for inland waterways exceeded fuel tax collections and interest on the trust fund balance. Reasons for the decline include increased appropriations, lower fuel tax revenues than in previous years, large construction costs, and construction cost overruns. Capital projects are funded incrementally by Congress through the annual budgeting and appropriations process. Incremental federal funding, an increasingly common procedure in which only a portion of the total budget for a project is appropriated, contributes to project delivery delays and higher costs (NRC 2011; NRC 2012, 29, gives another example on the Lower Monongahela River). Between 2005 and 2010, Congress made a conscious effort to “spend down” the IWTF to accelerate project completions and reduce the size of the backlog of authorized projects.

Capital Projects Backlog

A substantial number of water resources projects that have been authorized by Congress via WRDA remain unfunded through the appropriations process. These projects are known as the

Congress considers the recommendations of USACE and OMB, but the selection of waterways projects for authorization has a long history of being driven largely by political and local concerns (Ferejohn 1974).

While concerns about the backlog have been expressed, its size is not a reliable indicator of the funding needed for the inland navigation system for at least three reasons. First, O&M spending is not reflected in the backlog. With the aging of the system, maintenance has become a higher priority. Second, navigation projects make up only a portion of the backlog ($4.1 billion) (CRS 2011); most of the backlog relates to waterways infrastructure serving other purposes such as flood control.

Third, not all of the projects in the navigation backlog are priorities. In contrast to its practice for other modes, Congress authorizes and appropriates funds on a project-by-project basis. Benefit–cost analysis is used to determine whether a construction projects meets a minimum threshold of eligibility for pursuing authorization and appropriations and is generally suitable for this purpose,16 but the lack of a prioritization process based on a formal assessment of system needs has resulted in the authorization of more projects than can be funded within the constraints of the budget. The current practice is for OMB to set a minimum benefit–cost ratio that projects must meet to be included in the President’s annual budget request.17 While benefit– cost analysis is used in determining whether a project meets a minimum threshold for authorization, there is no indication that projects are further ranked against each other during the authorization process (GAO 2010). Because more projects are authorized than can be funded, priorities are sorted out in the budgeting and appropriations process, in which both the executive branch and Congress participate. IWUB, as part of a capital projects business

For these reasons, a method for prioritizing projects on the basis of the service needs of the system may be more useful than an attempt to estimate and seek funding for the entire backlog. As for O&M, a standard process is needed for prioritizing spending for capital projects for construction and major rehabilitation and to ascertain the level of funding required across the system to maintain reliable freight service. (Prioritization is discussed in Chapter 4.) A number of temporary measures have been

FEDERAL INVOLVEMENT COMPARED WITH OTHER TRANSPORTATION MODES

States and private enterprise led the initial building of inland waterways infrastructure and charged for use of the waterways. Federal involvement in the inland waterways system began in the 18th century, when the scope and scale of inland waterways projects grew beyond what any private entity or state could or would take on, especially without the ability to realize a monetary return on investment. Congress made these federal investments to promote inland waterways commerce, which was central to the economic development of the United States. This history has led to a unique federal role in the inland waterways system among all the freight transportation modes. Today, waterborne transportation is the only freight mode for which Congress authorizes and appropriates funds (for construction and O&M) on a project-by-project basis. Federal management and decision-making responsibilities for freight transportation generally are fragmented across jurisdictional lines in Congress, multiple federal agencies, and different silos of funding. Whereas USACE and the U.S. Coast Guard (part of the Department of Homeland Security) manage the marine and inland waterways systems, the U.S. Department of Transportation has responsibilities for highway, aviation, rail, and pipeline. Various congressional committees are responsible for authorizations and appropriations for the different modes. Decisions about inland waterways investments, including ports, channels, and infrastructure, are made largely at the federal level.18

 

However, most decisions about highway investments are made at the state and metropolitan levels. For ports, investment decisions are made mainly by independent private entities and sometimes by state or bi-state port authorities. As private transport industries, railroads and pipelines make their own decisions about investments.

Public and private shares of funding also differ across modes. Highways, aviation, ports (harbor and channel dredging and maintenance), and the inland waterways all receive federal aid for capital costs. In addition, the inland waterways, harbors, and channels receive federal general revenues support for O&M.

Rail and pipeline, with which the inland waterways system competes to some degree, are almost entirely private enterprises, with minimal federal assistance for infrastructure.

For highways, the federal government pays a significant share for new construction, but O&M is a state and local financial responsibility.

The federal government, through general revenues, pays more for water transportation as a percentage of total O&M and construction costs compared with federal contributions to highways and rail. For the inland waterways system, federal support is used to cover a large shortfall between the fees paid by users and total system costs.

In contrast, fees paid by the users of highway and rail modes cover a much greater share of the capital and O&M costs of those transportation systems. General federal tax revenues pay about 90% of total inland waterways system costs

This compares with virtually no federal general revenue support for rail system users and pipeline, and historically only about 25 percent federal support for highways, which are primarily derived from user fees.

Federal Subsidies for the Various Freight Transportation Modes

Federal subsidies for the various freight modes are complicated and contested among advocates for the modes, in part because of disagreements about (a) direct subsidies that are funded by various public sources and (b) indirect subsidies that result from costs imposed on the public (externalities) that are not part of market transactions between shippers and carriers. No authoritative study has estimated either direct or indirect subsidies across the various freight modes, although a previous Transportation Research Board study (TRB 1996) developed and pilot-tested a methodology for estimating freight external costs.

 

Assessing direct subsidies is more straightforward among the modes with which water competes (rail, pipeline, and, to a much lesser degree, trucking). Freight railroads are private entities that fund the vast bulk of their operations and capital and maintenance spending from their own funds. Limited federal funds are available for grade separation projects (to separate traffic for safety and mobility), a modest federal loan guarantee program is available (principally for short lines), and state governments occasionally provide public funding for such purposes as raising bridges or tunnels for double-stack trains or to improve rail access to state ports. Although public funding is minimal in proportion to the $20 billion to $25 billion railroads have invested in capital stock annually since 2007,22 railroad modal competitors point out that many railroad rights-of-way were initially given in the 19th century by the federal government and states to encourage railroad development. Because pipelines are entirely private, the evaluation of subsidies is easier than for rail. Although long-distance truck–barge competition is unlikely because of the much higher cost of truck movements per ton-mile, there may be short segments in which truck and barge would compete. The trucking assessment of competitive subsidies is most complex because trucks use highways that are shared with passengers. Although both freight and passenger operators pay fuel taxes and other user fees, there is continued debate about whether the largest and heaviest trucks pay their share of the costs of building and maintaining highways (GAO 2012). Moreover, after decades of relying almost exclusively on federal and state user fees to fund interstate and intercity highways, in the past decade Congress has used general funds to supplement user fee revenues to the Highway Trust Fund (HTF) for the federal share of highway capital spending (CBO 2014). (Improved fuel economy and political opposition to raising fuel taxes have resulted in insufficient user fees into the HTF to pay for the federal share of highway capital improvements.)

Trucking is involved in at least one segment of all freight moves and often two,

Whereas trucks can serve almost all O-D pairs because of the ubiquity of roads and highways, and railroads reach many OD pairs as well, waterways are far more limited.

DECISIONS ABOUT FEDERAL FUNDING AND BENEFICIARY PAYMENTS FOR THE COMMERCIAL INLAND WATERWAYS SYSTEM

In a climate of constrained federal funds and with O&M becoming a greater part of the inland navigation budget, a pressing policy issue is how to pay to preserve the inland waterways system for commercial navigation. The structures (locks and dams) built and maintained for freight transportation have resulted in beneficiaries beyond commercial navigation. It is reasonable and, from an economic perspective, potentially efficiency enhancing to consider whether these beneficiaries could help pay for the system. Congress, in the 2014 WRRDA (Section 2004, Inland Waterways Revenue Studies), called for a study of whether and how the various beneficiaries of the waterways might be charged. The sections below assess the available evidence on benefits of the inland waterways used for freight transportation and the economic and practical considerations in charging for the benefits received.

Commercial navigation is the primary beneficiary of the inland waterways system. Benefits beyond commercial navigation may include hydropower generation, recreation, flood damage avoidance, municipal water supply, irrigation, higher property values for property owners, sewage assimilation, mosquito control, lower consumer costs because the availability of barge shipping may result in more competitive railroad pricing (referred to as water-compelled rates), and environmental benefits associated with lower fuel emissions of barge compared with other modes.

A possible national benefit of investing in the inland waterways is the environmental advantage that barge may have over other modes: barge’s lower fuel usage per ton-mile than other transportation modes may result in lower air emissions. Whether barge or rail is the more energy-efficient mode (measured as fuel use per ton-mile) depends in large part on the water

The total federal share of the cost of the inland waterways system is estimated to be about 90 percent (TRB 2009). The federal share is roughly 25 percent for the highways used by motor carriers and 0 percent for pipelines and nearly so for railroads (both private industries for which the federal role is primarily one of safety and environmental regulation). Whereas federal general revenues cover all O&M expenses for the inland waterways, states pay 100 percent of the O&M expenses, mostly from user fees, for intercity highways used by motor carriers. O&M expenses for railroads and pipelines are paid for by the private industries responsible for these modes.

Examination of whether beneficiaries could help pay for the system is rational and would improve economic efficiency. Commercial navigation beneficiaries are a viable option, since commercial carriers impose significant marginal costs.

A benefit–cost analysis prepared by USACE is the primary source of technical information that Congress uses during the authorization process in deciding when spending is justified for capital projects. While benefit–cost analyses have been used for determining whether a project meets a minimum threshold for funding, they have not been used to rank projects, and the result has been far more projects being authorized than can be afforded within the constraints of the budget. A method for prioritizing projects on the basis of the service needs of the system would be more useful than an attempt to estimate and seek funding for the existing backlog.

As mentioned, USACE’s primary mission with respect to navigation is to provide conditions that enable the passage of commercial traffic. The main cost of providing these conditions is the maintenance of lock and dam infrastructure, but the maintenance of channels and pools is part of the cost. USACE has developed a conceptual framework (described in more detail below) that considers the age of infrastructure and other elements consistent with EEAM to prioritize repairs that would cost-effectively extend the life of an asset or critical component of the asset and achieve a reliable navigation system. The elements include the probability of failure of the infrastructure; infrastructure usage (demand), defined as whether the waterway has low, moderate, or high levels of freight traffic; and the economic consequences of failure to shippers and carriers. This approach recognizes the importance of economic consequences for strategic investment instead of assuming that all navigation infrastructure needs to be maintained at its original condition. For USACE, the goal of prioritizing investments is to produce the greatest national economic development benefit, which for commercial navigation has meant maximizing reductions in the cost of cargo transported by using USACE waterway infrastructure. In practical terms, this means reducing the risk of physical failure and maintaining a target level of delays.

Although the specific procedures of the approach are just beginning to be implemented and refined and often are not clear, the framework is being applied at program, district, and headquarters levels to guide the identification of maintenance needs and funding requests. USACE intends to use the framework to implement a standardized assessment of assets across the system (outcomes-based assessment). The assessment is planned to cover all important aspects of asset management. However, USACE has not fully developed a set of measures or a standard methodology for assessing risk across all assets in the inland waterways system. Additional considerations that would need attention are described in the section of this chapter on implementation.

FINDINGS AND CONCLUSIONS

A standard process is lacking for assessing the ability of the inland waterways system to meet demand for commercial navigation service and for prioritizing spending for maintenance and repairs. An asset management program focused on economic efficiency, fully implemented and linked to the budgeting process, would prioritize maintenance spending and ascertain the funding levels required for reliable freight service. A well-executed program of asset management would promote rational and data-driven investment decisions based on system needs and minimize the broader influences that affect the budgeting process. USACE has adopted a generally appropriate framework for asset management that is mostly consistent with EEAM, but it is not yet fully developed or deployed across districts. The framework recognizes the importance of economic consequences for strategic investments and does not assume, as in the past, that all navigation infrastructure needs to be maintained at its original condition. The approach appropriately includes assessment of three main elements that follow from EEAM: the probability of failure of the infrastructure; infrastructure usage (demand), defined as whether the waterway has low, moderate, or high levels of freight traffic; and the economic consequences of failure to shippers and carriers.

This chapter discusses funding options for the inland waterways commercial navigation system other than reliance for the most part on federal general revenues. The immediate users of the inland waterways are the companies operating the barge tows that move commercial freight. They are the focus of this chapter. However, the burden of payments by the barge industry is not borne fully by the operators, and they do not enjoy all the benefits. The industries that use barge shipping benefit from the low cost of shipping their products, mostly commodities that are low in value relative to their weight such as coal, petroleum and petroleum products, food and farm products, chemicals and related products, crude materials, and to a lesser degree manufactured goods and equipment. These commodities are sold for a price that is set by the market. If barge companies become the direct payers of a new user charge, their cost may be passed on in whole or in part in the form of increased costs to the shippers of these commodities and, in turn, to the producers and consumers of the commodities. The first section below describes the taxes or fees that might be paid by companies operating the barge tows that move commercial freight. The options could be used alone or in various combinations.

In recent years, proposals have been made to add to or replace the inland waterways barge fuel tax with user-specific fees. In contrast to a tax, user-specific fees are direct charges paid by an identifiable user in exchange for the opportunity to pass through a lock or use a portion of the waterways. Failure to pay the fee results in being excluded from the use of a service (i.e., denial of passage through a lock, use of a particular segment, or passage during times of peak traffic).

Direct Promotion of Efficient Use of Waterway Resources

The design of a user payment strategy can promote a waterways system that uses resources more efficiently (CBO 1992). The requirement that users of the system pay for its costs generates signals concerning the value of the system to the users and whether the benefits of the system justify the costs. In the private sector, payments by purchasers of a good or service send a clear signal concerning whether the purchasers are willing to pay the costs associated with providing it. Similarly, if users of the inland waterways system pay for the costs of navigation service on the various parts of the system (on a river segment or at a lock and dam facility), the payments show which parts of the system are cost-effective components of the national freight transportation system and should be maintained (GAO 2008). Parts of the system for which shippers are not able or willing to pay may be discontinued or justified under revenue streams other than federal navigation funding, as discussed later.

Conclusions

Debates about funding for the inland waterways system have long centered on the level of funding required, the roles of the federal government and users in paying for the system, and how users and other beneficiaries could be charged. These issues deserve renewed attention in light of shrinking federal budgets, declining appropriations for the inland waterways system, and increasing maintenance needs for its infrastructure.

SUMMARY OF MAJOR CONCLUSIONS AND FINDINGS

The policy context in which these issues were considered and the committee’s conclusions are summarized below. Three main messages emerge, as follows:

  1. Reliability and performance of the inland waterways freight system are the priorities for funding.
  2. Reliability and performance will depend more on investments in operations and maintenance (O&M) than on capital expenditures for larger locks.
  3. More reliance on a user-pays approach to funding the inland waterways for commercial navigation is feasible, would provide additional revenues for maintenance, and would promote economic efficiency for the system.

POLICY CONTEXT. The infrastructure of the federal inland waterways system is managed by the U.S. Army Corps of Engineers (USACE) and funded through USACE’s navigation budget. The nation’s inland waterways include more than 36,000 miles of commercially navigable channels and roughly 240 working lock sites. The chief and most expensive component of providing for navigation service is the installation and maintenance of lock and dam infrastructure to enable the upstream and downstream movement of cargo. Historically, the federal government invested in the building of the inland waterways system to aid in the physical expansion of the United States and the growth of the U.S. economy by facilitating cargo shipments. Before 1978, the federal government paid all costs associated with construction and maintenance of the inland waterways. Legislation passed in 1978 and 1986 established the current funding and cost-sharing framework. Today, 11,000 miles of the inland waterways are subject to a federal fuel tax paid by the barge industry via the Inland Waterways Trust Fund to cover up to 50% of the cost of construction and major rehabilitation of lock and dam infrastructure.

 

The federal government pays 50 percent of construction costs from general revenues and 100 percent of the cost of O&M (by budgetary definition, O&M includes repairs up to $20 million; repairs that exceed $20 million and meet other criteria are considered major rehabilitation and classified as a capital expenditure). Although policy debates about funding for the inland waterways have focused on capital projects, O&M, which is paid for entirely with federal general revenues, now accounts for three-fourths of the annual budget request for inland navigation.

Because of historical precedent, the federal role in the management and funding of the inland waterways for commercial navigation is greater than for other freight modes. The total federal share of the cost of the inland waterways system is estimated to be about 90%t. The federal share is roughly 25% for the highways used by motor carriers and 0 percent for pipelines and nearly so for railroads (both private industries for which the federal role is primarily one of safety and environmental regulation). Whereas federal general revenues cover all O&M expenses for the inland waterways, states pay 100% of the O&M expenses, mostly from user fees, for intercity highways used by motor carriers. O&M expenses for railroads and pipelines are paid for by the private industries responsible for these modes.

With the exception of a one-time infusion of funds from federal economic stimulus legislation in 2009, the funds appropriated for inland navigation have declined over the past decade in terms of constant dollars for both O&M and construction. The level of funding required to sustain a reliable inland waterways system is not clear. The level of service required from the system, and therefore the parts of the existing system that need to be maintained, has not yet been defined. USACE does not have established systemwide guidance and procedures for the assessment of inland waterways infrastructure and the prioritization of maintenance and repair spending for reliable commercial navigation. In view of stagnant federal appropriations, system users have recognized that they need to pay more and supported an increase in the barge fuel tax by the 113th Congress. However, the increase will not be sufficient to maintain the system and only heightens the urgency of settling on a plan for maintenance, since under federal law any new revenues from the barge fuel tax can be used only for construction and not for O&M. Moreover, because funds raised by the barge fuel tax for capital projects must be matched by the federal government, O&M competes directly with construction for federal general revenue funds. Without a new funding strategy that prioritizes O&M, maintenance may be deferred until it reaches $20 million (the point at which it becomes classified as a capital expenditure), which would result in further deterioration and in a less cost-effective and less reliable system.

USACE has missions and management responsibilities that extend beyond providing for commercial navigation. With the authorization of Congress, USACE, under its Civil Works Program headed by the Assistant Secretary for Civil Works, plans, constructs, operates, and maintains the following: lock and dam infrastructure for commercial shipping; channel depths required for ports and harbors; dams, levees, and coastal barriers for flood risk management; and hydropower generation facilities. Other USACE responsibilities include maintenance of water supply infrastructure (municipal water and wastewater facilitates) and provision of waterborne recreation (i.e., boating). For the most part, these missions are independent of one another, since most projects are authorized for a single purpose. However, for many navigation projects, the availability of pools behind dams has allowed others to benefit from water supply for municipal, industrial, and farming purposes and for recreation. Any decisions about funding for navigation will need to consider the implications for this broader range of beneficiaries.

CONCLUSIONS

The following considerations warrant particular attention in decisions about funding for the inland waterways system.

  1. The Inland Waterways System Is a Small but Important Component of the National Freight System

The role of the inland waterways system in national freight transportation has changed significantly since the system was built to promote the early economic development of the nation. Today barges carry a relatively small but steady portion of freight, mainly bulk commodities that include in rough order of importance coal, petroleum and petroleum products, food and farm products, chemicals and related products, crude materials, manufactured goods, and manufactured equipment. Annual trends in inland waterways shipments show that freight traffic is static or declining. Overall demand for the inland waterways system is static, whereas demand for the rail and truck modes is growing. In recent years, the inland waterways system has transported 6 to 7 percent of all domestic cargo (measured in ton-miles). The truck mode has carried the greatest share of freight, followed by rail, pipeline, and water.

  1. The Most Critical Need for the Inland Waterways System Is a Sustainable and Well-Executed Plan for Maintaining System Reliability and Performance That Ensures Efficient Use of Limited Navigation Resources Lost transportation

The time due to delays and lock unavailability (outages) is a cost to shippers and an important consideration in deciding on future investments. System-wide, about 80 percent of lost transportation time is attributable to delays. On average, 49 percent of tows in 2013 were delayed across the 10 highest-tonnage locks, with an average length of tow delay of 3.8 hours. While some delay is expected for routine maintenance, weather, accidents, and other reasons, lost transportation hours (delays and unavailabilities) can be affected by maintenance outages related to decreased reliability of aging machinery or infrastructure. Lost transportation hours also can be affected by capacity limitations, which may be intermittent or seasonal. About 12 percent of lost time on the inland waterways system is due to scheduled closures and about 8 percent is due to unscheduled closures. Thus, 20 percent of lost transportation time could be addressed with more targeted O&M resources. Directing O&M resources toward major facilities with frequent lockages and high volumes and where the lost time due to delay is significantly higher than the river average could improve navigation performance. Data are not available on the reasons for delay. Delays might be attributable to intermittent or seasonal peaks in volume due to weather, harvest, undercapacity, or other causes. Most lost time due to delay is at locks with periods of high demand often related to peaks in seasonal shipping, mainly for agricultural exports.

Furthermore, the inland waterways cover a vast geographic area, but the freight flows are highly concentrated. Seventy-six percent of barge cargo (in ton-miles) moves on just 22% of the 36,000 inland waterway miles. About 50 percent of the inland waterway ton-miles moves on six major corridors—the Upper Mississippi River, the Illinois River, the Ohio River, the Lower Mississippi River, the Columbia River system, and the Gulf Intracoastal Waterway—which represent 16 percent of the total waterway miles. Some inland waterway segments have minimal or no freight traffic. The nation needs a funding strategy that targets funds to waterway segments and facilities essential to freight transportation and away from places that are not as important. This “triage” is already occurring in USACE’s budgeting process.

  1. More Reliance on a User-Pays Approach to Funding the Commercial Navigation System Is Feasible and Could Generate New Revenues for Maintenance While Promoting Economic Efficiency

In a climate of constrained federal funds, and with O&M becoming a greater part of the inland navigation budget, it is reasonable to examine whether beneficiaries could help pay for the system to increase revenues for the system and improve economic efficiency. Indeed, Congress, in the 2014 Water Resources Reform and Development Act (Section 2004, Inland Waterways Revenue Studies), called for a study of whether and how the various beneficiaries of the waterways might be charged. Federal general revenues presently cover most of the cost of the inland waterways system. Commercial navigation users, the primary identifiable beneficiaries of the system, pay a share of the construction costs through a barge fuel tax, but none of the costs of O&M.

A system more reliant on user payments would provide needed revenue for maintenance and promote economic efficiency. It also would be more consistent with the federal posture toward other freight transportation modes. Setting user charges to move the inland waterways system closer to economic efficiency would provide for more adequate maintenance for the important parts of the system and contribute to a more efficient national freight transportation system. Economic efficiency is promoted when user charges are first used to recover the O&M costs of the inland waterways and when user fees relate directly to the service provided. In the long run, user payments structured properly to include O&M and depreciation could also provide enough revenue to replace components of the system as they wear out. User charges for the inland waterways system can take the form of a dedicated tax such as the current fuel tax, a user fee, or some combination. The fuel tax can be an important source of revenue, but revenue potential alone is not sufficient for judging a funding strategy. User fees (segment- or facility-specific) instead of or in addition to the fuel tax are an option to consider as part of a comprehensive funding approach. Criteria for choosing among the user payment options include the following: promotion of efficient use of waterway resources, distribution of burden, ease of administration, promotion of user support for cost-effective expenditures, and requirements for congressional authorization. No single payment alternative offers a perfect choice; for example, the preferred option for achieving a policy goal may combine an increase in the barge fuel tax with other user fees.

To gain support from commercial navigation users, any additional revenues from users would be dedicated to the inland waterways system to ensure a source of funds for meeting system priorities and to respond to concerns of users that new payments intended for navigation could be reappropriated for other purposes. A revolving trust fund for maintenance would help ensure that all new funds collected are dedicated to inland navigation. Rules and conditions for managing the fund would be set by Congress if such a fund were authorized. The fund would be administered by USACE, and the Inland Waterways Users Board’s advisory role, which is currently limited to capital spending for construction, could be broadened to include spending for O&M and repairs. Amounts from the Inland Waterways Trust Fund are disbursed through congressional appropriations under current practice, which can result in delays in funding and deferred maintenance with increased costs. Direct administration of the trust fund would allow the spending of O&M funds as needed to provide reliable freight service and avoid the increased costs associated with deferred maintenance.

Because of constraints on its budget, USACE has already begun identifying waterways and facilities where commercial navigation is essential to national freight transportation or where significant commercial traffic continues. A policy and a process for identifying the components of the system essential for freight transportation are needed. A path to removing the cost of parts of the system not essential for freight service presently charged to the federal inland navigation budget may further the prospect of shifting to a user-based funding approach for commercial navigation service. Alternative plans and potential funding mechanisms are available for segments and facilities that are deemed not essential to freight transportation but that may provide other benefits.

Deciding the amount beneficiaries would need to pay for the commercial navigation system and how to allocate the costs among beneficiaries would be complex tasks. The economic value of parts of the system to commercial navigation beneficiaries would need to be identified, and a systemwide assessment of the assets required to achieve a reliable level of freight service would need to be made (see next conclusion).

  1. Asset Management Can Help Prioritize Maintenance and Ascertain the Level of Funding Required for the System

Regardless of who pays for the system, a standard process for prioritizing spending of available funds is needed. The capital projects backlog is not a reliable indicator of the amount of funding required for the system. A modest amount of the backlog is for navigation projects. A portion of the navigation backlog includes major rehabilitation to maintain the system, but it does not include O&M. Furthermore, the navigation backlog may include projects that are a lower priority for spending. Congress has long authorized and appropriated USACE capital projects on a project-by-project basis. A benefit–cost analysis prepared by USACE is the primary source of technical information that Congress uses during the authorizations process in deciding when spending is justified for capital projects. While benefit–cost analyses have been used for determining whether a project meets a minimum threshold for funding, they have not been used to rank projects, and the result has been far more projects being authorized than can be afforded within the constraints of the budget. A method for prioritizing projects on the basis of the service needs of the system would be more useful than an attempt to estimate and seek funding for the existing backlog.

The advanced age of locks is often used to communicate funding needs for the inland waterways system. Age, however, is not a good indicator of lock condition. A substantial number of locks have been rehabilitated, which would be expected to restore performance to its original condition if not better.

A general framework of locks and their performance as measured by delay experienced by system users. Dating the age of assets from the time of the last major rehabilitation, as is done for highway infrastructure such as bridges, would be more accurate. USACE does not publish consistent records of rehabilitation dates for its various lock and dam assets, however. Making such information available to policy makers, alongside information about the reliability and performance of the system, could improve the efficient allocation of available resources.

An asset management program focused on economic efficiency, fully implemented and linked to the budgeting process, would prioritize maintenance spending and ascertain the funding levels required for reliable freight service. A well-executed program of asset management would promote rational and data-driven investment decisions based on system needs and minimize the broader influences that affect the budgeting process. USACE has adopted a generally appropriate framework for asset management that is mostly consistent with the economically efficient asset management (EEAM) concept described in Chapter 4, but it is not yet fully developed or deployed across USACE districts. The framework recognizes the importance of economic consequences for strategic investment instead of assuming that all navigation infrastructure needs to be maintained at its original condition. The approach appropriately includes assessment of three main elements that follow from EEAM: the probability of failure of the infrastructure; infrastructure usage (demand), defined as whether the waterway has low, moderate, or high levels of freight traffic; and the economic consequences of failure to shippers and carriers.

Whereas maintenance is a priority for the system, decisions about whether to invest in construction for capacity expansion at key bottlenecks and how to prioritize these investments against other investments for the system will continue to arise. Decisions about whether investments in construction to expand capacity at the corridor level are economically justified would require more information about delays and the ability of nonstructural alternatives or smaller-scale structural improvements (to increase processing time) to achieve the desired level of service. Collection of data and development of performance metrics would enhance understanding of whether delay problems could be most efficiently addressed by more targeted O&M, traffic management, capacity enhancement, or some combination of these. Once an asset management approach was fully developed and applied, it could be used to prioritize allocation of resources for O&M and indicate areas where major rehabilitation or other capital spending should be considered.

Miscellaneous

Total barge  %
coal 182.7 24.77
petroleum and petroleum products 252.4 34.22
chemicals 70.4 9.54
crude materials 111.5 15.12
primary manufactured goods 31 4.20
food and farm products 76.1 10.32
all manufactured equipment 12.2 1.65
other 1.3 0.18
737.6

 

Apalachicola, Chattahoochee, and Flint River System: A Multiple-Purpose River System Not Reflecting Today’s Economic and Environmental Values

The Apalachicola–Chattahoochee–Flint Rivers basin originates in northeast Georgia, crosses the state boundary into central Alabama, and then follows the Alabama state line south until it terminates in Apalachicola Bay, Florida. The basin covers 50 counties in Georgia, 10 in Alabama, and eight in Florida. Extending a distance of approximately 385 miles, the basin drains 19,600 square miles. The Apalachicola, Chattahoochee, and Flint River Waterway consists of a channel 9 feet deep and 100 feet wide from the mouth of the Apalachicola River to the head of navigation at Columbus, Georgia, for the Chattahoochee River and at Bainbridge, Georgia, for the Flint River. The total waterway distance is 290 miles, with a lift of 190 feet accomplished by three locks and dams. Provision of navigation services is just one of several purposes for which the system’s operations are authorized; others are water supply, flood control, hydropower generation, recreation, and management of water releases for several nonfederal power generation dams. Commercial use of the waterway has declined steadily over time and now is minimal, mainly haulage of sand and gravel. According to the Waterborne Commerce Statistics Center, no commercial traffic occurred over the 5 years from 2008 to 2012. Nevertheless, channel maintenance of the lower reaches of the waterway requires dredging and clearing, which has severe adverse impacts on the ecological health of Apalachicola Bay, one of the most economically productive water bodies in the United States. While these efforts have been strongly opposed by the state of Florida through regulatory and other measures such as not providing dredged material disposal areas, USACE has found ways to provide navigation services. In addition to the financial outlays by the federal government for navigation, operation of the upstream reservoirs to provide navigation “windows” uses releases of water that are highly valued by other users, including municipalities and lake recreationists. Because the cost of O&M assigned to navigation is borne by federal taxpayers, opposition to continued provision of navigation services comes largely from the environmental organizations and Florida. Furthermore, the lack of navigation benefits is only a small issue in the conflicts over the operation of this major multiple-purpose reservoir system. Growing demands for municipal water supply in Georgia have led to “water wars” among the states for decades, which have not been successfully addressed administratively by USACE or by Congress.

 

 

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