Funding and Managing the U.S. Inland Waterways System: What Policy Makers Need to Know: What Policy Makers Need to Know (2015)

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Transportation Research Board Special Report 315

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Copyright 2015 by the National Academy of Sciences. All rights reserved.

Printed in the United States of America.

NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the National Academy of Medicine. The members of the committee responsible for the report were chosen for their special competencies and with regard for appropriate balance.

This report has been reviewed by a group other than the authors according to the procedures approved by a Report Review Committee consisting of members of the National Academy of Sciences, the National Academy of Engineering, and the National Academy of Medicine.

This study was sponsored by the Transportation Research Board.

Cover and page design by Beth Schlenoff, Beth Schlenoff Design

Cover photos (clockwise from top): Emsworth Locks and Dams, Ohio River, USACE Pittsburgh District (Chris T. Hendrickson); Starved Rock Lock and Dam, Illinois Waterway, Utica (USACE); Mississippi River Lock 15, between Rock Island, Illinois, and Davenport, Iowa (Joe Ross); and barges on the Mississippi River near St. Louis, Missouri, December 2012 (USACE).

Typesetting by Circle Graphics, Inc.

Library of Congress Cataloging-in-Publication Data

National Research Council (U.S.). Committee on Reinvesting in Inland Waterways:

What Policy Makers Need to Know, author.

  Funding and managing the U.S. inland waterways system : what policy makers need to know / Committee on Reinvesting in Inland Waterways: What Policy Makers Need to Know, Transportation Research Board of the National Academies of Sciences, Engineering and Medicine.

    pages cm — (Transportation Research Board special report ; 315)

  ISBN 978-0-309-29568-0

  1. Inland water transportation—United States—Finance. 2. Inland water transportation—United States—Management. 3. Inland water transportation—Government policy—United States. 4. Federal aid to transportation—United States. I. National Research Council (U.S.). Transportation Research Board. issuing body. II. Title. III. Series: Special report (National Research Council (U.S.). Transportation Research Board) ; 315.

  HE627.N38 2015

  354.780973—dc23

2015024124

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Committee on Reinvesting in Inland Waterways:
What Policy Makers Need to Know

Chris T. Hendrickson, Carnegie Mellon University, Pittsburgh, Pennsylvania, Chair

Leigh B. Boske, University of Texas at Austin

Michael S. Bronzini, George Mason University, Fairfax, Virginia

James J. Corbett, Jr., University of Delaware, Newark

G. Edward Dickey, Independent Consultant, Baltimore, Maryland

C. James Kruse, Texas A&M Transportation Institute, Houston

B. Starr McMullen, Oregon State University, Corvallis

Leonard A. Shabman, Resources for the Future, Washington, D.C.

Thomas H. Wakeman III, Stevens Institute of Technology, Hoboken, New Jersey

NATIONAL RESEARCH COUNCIL STAFF

Stephen R. Godwin, Director, Studies and Special Programs, Transportation Research Board

Melissa Welch-Ross, Study Director

Amelia Mathis, Administrative Assistant

Claudia Sauls, Program Coordinator

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Preface

This report was authored by the National Research Council (NRC) Committee on Reinvesting in Inland Waterways: What Policy Makers Need to Know. It is the culmination of an 18-month consensus study by a committee of nine diverse experts appointed by NRC to carry out the statement of task. The committee thanks the following individuals, who attended public meetings of the committee as guest presenters and helped the committee to gather the information needed to address its charge: Mark Hammond, James Hannon, Keith Hofseth, W. Jeffrey Lillycrop, Jeffrey McKee, David Moser, Mark Pointon, Burton Suedel, and Wesley Walker, U.S. Army Corps of Engineers (USACE); Rolf Schmitt and Jack Wells, U.S. Department of Transportation; Gretchen Benjamin, Nature Conservancy; Ted Coombes, Southwestern Power Resources Association; Mortimer Downey, Mort Downey Consulting, LLC; Stephen Ellis, Taxpayers for Common Sense; Robert Gallamore, Gallamore Group, LLC; John T. Gray II, Association of American Railroads; Marty Hettel, AEP River Operations; Steven M. Kramer, Association of Oil Pipe Lines; Amy W. Larson, National Waterways Conference, Inc.; Ryck Lydecker, BoatU.S.; Kristin Meira, Pacific Northwest Waterways Association; Daniel Murray, American Transportation Research Institute; Craig Phillip, Ingram Barge Company; Melissa Samet, National Wildlife Federation; Michael Steenhoek, Soy Transportation Coalition; and Michael J. Toohey, Waterways Council, Inc. The committee also thanks Christopher Dager, University of Tennessee, and Mark Sudol, USACE, for responding to requests for data and other information on inland waterways infrastructure, expenses, and funding.

The third meeting of the committee included a site visit to the Emsworth Locks and Dams facility in the USACE Pittsburgh District. The committee thanks Mark Ivanisin and Donald Zeiler for helping to arrange this visit; Richard Lockwood and John Peukert at the USACE Pittsburgh District for information concerning operations and

procedures used in identifying spending priorities at the district level; and Craig Philip, Bill Porter, and Richard Kern of the Ingram Barge Company for facilitating travel to Emsworth on a company tow and providing the committee with information from the perspective of tow operators on the system.

The committee thanks Edward Carr of the University of Delaware for his assistance in analyzing public data and statistics related to inland rivers waterborne commerce, infrastructure usage, and economics and in analyzing other transportation statistics. The committee also thanks Claudia Sauls, who ably assisted with manuscript preparation, and Amelia Mathis, who assisted with meeting arrangements and logistics for committee members. The committee is grateful for the oversight and guidance of Stephen Godwin, Director of Studies and Special Programs of the Transportation Research Board. Jeffrey Jacobs, Director of the Water Science and Technology Board, provided background helpful to the study and to the committee formation process. The committee acknowledges Norman Solomon, who edited the report; Juanita Green, who managed the production; Jennifer J. Weeks, who prepared the manuscript for prepublication web posting; and Javy Awan, Director of Publications, under whose supervision the report was prepared for publication.

A draft version of the committee’s report was reviewed by individuals chosen for their diverse perspectives and technical expertise in accordance with the procedures of NRC’s Report Review Committee (RRC). The report review was managed by Karen Febey, Senior Report Review Officer for the Transportation Research Board, and Maureen Mellody, Senior Report Review Officer for the RRC. The purpose of this independent review is to provide candid and critical comments that will assist NRC in making its published report as sound as possible and to ensure that the report meets NRC institutional standards for objectivity, evidence, and responsiveness to the study charge. The review comments and draft manuscript remain confidential to protect the integrity of the deliberative process. The committee thanks the following individuals for their reviews of this report: Michael Babcock, Kansas State University; Lillian C. Borrone, Port Authority of New York and New Jersey (retired); Mark Burton,

University of Tennessee; Ken Casavant, Washington State University; Gerald Galloway, University of Maryland; Michael Hanemann, University of California at Berkeley; Gerard McCullough, University of Minnesota; Craig Philip, Vanderbilt Center for Transportation Research and Ingram Barge Company (retired); Kyle Schilling, U.S. Army Corps of Engineers Institute of Water Resources (retired); and Jack Wells, U.S. Department of Transportation (retired).

Although the reviewers provided constructive comments and suggestions, they were not asked to endorse the report’s conclusions, nor did they see the final draft of the report before its release. The review of this report was overseen by Charles Manski, Northwestern University, and Henry G. Schwartz, Jr., Jacobs/Sverdrup Civil, Inc. (retired). Appointed by NRC, they were responsible for making certain that an independent examination of this report was conducted in accordance with NRC institutional procedures and that all review comments received full consideration. Responsibility for the final content of this report rests entirely with the authoring committee and NRC.

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Glossary

Ancillary (incidental) benefits. Benefits of a U.S. Army Corps of Engineers (USACE) project not considered or relied on to justify the investment when the project was authorized by Congress.

Contributed funds. Funds beyond any nonfederal cost contribution required by statute that may be provided voluntarily by a state or political subdivision for any project purposes, including navigation. (For example, states and private entities such as waterways users can voluntarily contribute funds for any water resource project or study beyond the required cost share, according to the Water Resources Reform and Development Act of 2014.)

Cost allocation. A process for assigning specific costs and then a share of joint costs to each beneficiary.

Cost-effective. Receipt of the greatest possible benefit for the amount paid.

Cost recovery. A requirement that all costs for construction, operation, maintenance, and repair incurred over a period of time be matched by general tax revenues and receipts from user fees in dedicated taxes. Since benefits are realized over time, payments toward cost recovery may be received over several years. Up-front costs will typically require sale of bonds; repayment of bond debt would be spread over some period of project life.

Cost sharing. A legally mandated sharing of the costs between the federal government and a nonfederal entity.

Cross-subsidy. The charging of higher prices to one group of consumers relative to the benefit received to charge (or that results in) lower prices to another consumer group relative to that group’s benefit.

Dedicated tax. A required payment to a government entity to pay for a specific benefit.

Economic efficiency. Attainment of the most highly valued use of resources (or of maximal benefit relative to cost).

Financing. The advancement of funds from a public, quasi-public, or private entity to an entity initially responsible for the costs; the responsible entity then uses a combination of general revenues, user fees, and dedicated taxes to repay the incurred debt.

Freight corridor. A pathway of freight transportation used heavily by one or more modes.

General revenues. Funds received by governments from taxes or other sources of revenue that may be used for any purpose.

Inland waterways commercial navigation. Vessel movements for freight transport.

Inland waterways navigation. Vessel movements for freight transport.

Inland waterways navigation budget. Funds appropriated by Congress to USACE to provide for commercial navigation service on the inland waterways.

Project (USACE project). A USACE Civil Works infrastructure installation or activity whose scope is defined in the authorizing legislation that approves the project and that may include one or more installations or activities in one or more waterway locations. The project has passed through a feasibility study and has been approved by the Secretary of the Army before being authorized as a federal project by Congress. A USACE project has a defined purpose (or possibly more than one purpose) specified in authorizing legislation and is eligible for funding during the normal federal appropriations process.

Revolving trust fund. An account established and managed by government that is used for accumulating the revenues from user charges dedicated by law for a specific purpose and for tracking receipts and spending.

River segment. A portion of a river that may be bounded by geographic features, population centers, or trade flows.

Subsidy. A payment made or benefit provided by the federal government where the benefit exceeds the cost for the beneficiary; subsidies are designed to support the conduct of an economic enterprise or activity.

Tax. A required payment imposed to pay for a government service. (Unlike a user fee, taxes arise from the government’s sovereign power to raise revenue and need not be related to receipt of a specific benefit. Unlike a fee, the tax is enforced by threats of sanction for nonpayment rather than by denial of use, as is the case for a user fee.)

Tow. A barge or group of barges (as many as 60 on the Lower Mississippi River) lashed together and propelled by a push boat (commonly called a tow boat).

User-based funding. An approach in which each beneficiary pays an amount for a good or a service equal to the benefit received.

User charge. A payment in the form of fees or taxes based on benefits received from the federal government or that in some way compensates for costs imposed on society or its resources.

User fee. A charge assessed to users of goods or services provided by the federal government normally related to the cost of the goods or services provided. The degree to which fees can be considered voluntary depends on the availability of reasonable substitutes; user fees may also be collected through a tax such as an excise tax.

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Contents

Summary

1 Introduction

Reason for This Report

Committee’s Approach

Organization of the Report

Intended Audiences

2 Role of the Inland Waterways System in National Freight Transportation

Overview of U.S. Inland Waterways

Inland Waterways Traffic

Condition and Performance of Inland Waterways Infrastructure

Findings and Conclusions

3 Federal Role in the Inland Waterways System

USACE Missions and Activities

Overview of the USACE Water Resources Authorization, Planning, and Budgeting Process

Funding for the Inland Waterways Navigation System

Federal Involvement Compared with Other Transportation Modes

Decisions About Federal Funding and Beneficiary Payments for the Commercial Inland Waterways System

Findings and Conclusions

4 Prioritizing Maintenance for the Inland Waterways Freight System

Economically Efficient Asset Management

Current State of Maintenance Prioritization

Decisions About Capital Investments for Capacity Expansion

Implementation

Findings and Conclusions

5 Options for a User-Based Approach to Funding Operations, Maintenance, and Rehabilitation for Commercial Navigation

Options for Increasing User Payments for Commercial Navigation

Criteria for Assessment of Options

The Revolving Trust Fund

Segments and Facilities with Minimal or No Commercial Traffic

Findings and Conclusions

6 Conclusions

Summary of Major Conclusions and Findings

Policy Context

Conclusions

Appendixes

A Fuel-Taxed Inland Waterways

B Major Commodity Corridors

C Documentation of Original Construction and Major Rehabilitation Dates for Mainstem Inland Waterways System Locks

D Age Detail for Infrastructure on Each Major River System

E Illustrations of Delay and Possible Metrics by Major River System 185

F Summary of Correlations Between Lock Performance and Lock Age (in 2014) Calculated from the Date of Known Major Rehabilitation Construction

G Energy Intensity Comparisons for Water, Rail, and Highway

H USACE Description of the Status of Implementation of Its Asset Management Program

Study Committee Biographical Information