Finding the money to undertake needed dredging projects is becoming a more daunting task.
To keep the flow of barges and vessels moving on the country’s waterways requires regular maintenance, including dredging. Failing to ensure there is enough depth in a particular waterway could force a shipper to either lessen the weight of the cargo being transported or even halt the flow of material.
More than 566 million tons of freight valued at $180 billion moved through inland waterways in 2010, including 60 percent of U.S. grain exports, 22 percent of domestic petroleum and 20 percent of the coal used to generate electricity, according to the Waterways Foundation.
This flow of traffic, however, could be negatively affected by failing to dredge many key spots. Glen Nekvasil, vice president of the Lake Carriers’ Association (LCA), Rocky River, Ohio, an association representing vessels operating on the Great Lakes, sees the failure to dredge as one of the most critical issues for the waterways industry.
For example, he says a vessel that could ship around 71,000 tons of cargo may only be able to ship 64,000 tons because of low water levels caused by the failure to dredge, resulting in a much higher per-ton transportation cost.
On the inland waterways, the situation is even more challenging. During the peak of the summer of 2012 drought, between Memphis, Tenn., and Vicksburg, Miss., there were reportedly close to 100 towboats and 2,000 barges tied up on the Mississippi riverbank waiting for the channel to be cleared and dredged.
At the same time, by Congressional mandate, the U.S. Army Corps of Engineers (USACE) is required to maintain a minimum navigation channel that is nine feet deep and 300 feet wide on the Mississippi River south of Cairo, Ill. However, at the end of August, a portion of the lower part of the Mississippi recorded a depth of just 6 feet 9 inches.
Gaining “Trust”
Recognizing the importance of funding for dredging operations, shippers created a program called the Harbor Maintenance Trust Fund (HMTF), which was created ostensibly to pay for dredging the country’s waterways. The fund, created by Congress in 1986, was designed to raise revenue to maintain the ports and waterways in deepwater ports, Great Lakes waterways and some ports connected to the inland waterways system.
The funding has been designed to mostly dredge harbor channels to their authorized depths and widths. The tax is levied on importers and domestic shippers using coastal or Great Lakes ports. The tax is assessed at a rate of 0.125 percent of cargo value, with the revenue generated deposited into the HMTF from which Congress appropriates funds for harbor dredging.
According to the LCA, money from the fund is projected to reach a surplus of around $7 billion by the end of the 2012 fiscal year. However, less than half the money earmarked for improvements to the waterways system, including dredging, is being spent for that purpose.
A host of shippers complain that the trust fund, which was considered a “lock box” to be used only to finance maintenance for various waterways, has been tapped by the federal government on a regular basis to pay for other programs unaffiliated with the waterways industry.Bill Hanson with Great Lakes Dredge & Dock, Oak Brook, Ill., says if the money raised through the trust fund was used for that purpose, ports big and small could be taken care of properly. However, far less is used for its actual purpose.
The USACE, which is in charge of handling and awarding all contracts for dredging services at U.S. ports and waterways, estimates that full channel dimensions at the nation’s busiest 59 ports are available less than 35 percent of the time. This situation can increase the cost of shipping as vessels carry less cargo to reduce their draft or wait for high tide. It also could increase the risk of a ship grounding or of a collision, possibly resulting in an oil spill.
The Significance of Dredging
The USACE and contractor-owned dredges removed 221.7 million cubic yards of material from USACE-constructed and maintained channels in 2010 at a cost of $1.465 billion, a 15.9 percent decrease from 2009.
In fiscal year 2010, maintenance dredging accounted for 75 percent of the quantity dredged. An additional 14.9 percent of the total yardage was attributed to the post Hurricane Katrina cleanup. New construction (channel deepening) at 8.3 percent and emergency dredging at 1.7 percent accounted for the remainder of the dredging volume.
Despite a large surplus in the trust fund, many shippers say that the busiest U.S. harbors are currently under-maintained. In fact, Nekvasil estimates that only one out of every two dollars in revenue generated through the fund is used for maintenance on the country’s waterways.
Hanson concurs, saying that dredging and maintenance expenditures have lagged behind revenues into the HMTF for several years.
Another revenue source, this one earmarked for the inland waterways, is the Inland Waterways Trust Fund. The fund, created under the Water Resources Development Act (WRDA) of 1986, was put together to help fund the maintenance of the inland waterways. The revenue generated through this trust fund is meant to pay for one-half of the cost of new construction and major rehabilitation of locks and dams, and not dredging operations. The contributions are generated by a $.20 per-gallon diesel fuel tax that is deposited into the Trust Fund. The other half of the fund, reflecting the broad distribution of all those who benefit from the other uses of the waterways like national defense, water supply, flood control and recreation, is paid from general revenues.
Growing Problems
Barry Holliday, the executive director for the Harbor Maintenance Trust Fund Fairness Coalition and the Dredging Contractors of America, says the USACE recently reported that almost 30 percent of commercial vessel calls at U.S. ports are constrained because of inadequate channel depths. This means vessels cannot carry all they are capable of holding because they cannot get through channels that are not being adequately maintained. As well, ships with imports for the U.S. market cannot enter many ports fully laden. This drives up the cost of our nation’s exports and imports and increases the risk of vessel grounding and associated oil spills.
Charging maritime commerce this tax while failing to provide the service for which it was established is grossly unfair, Holliday says.
To remedy this, a number of legislators have introduced bills that seek to boost the amount of money allocated to perform dredging and repair services on the waterways.
To ensure that HMT revenue is spent for its intended purpose, Congressmen Charles Boustany (R-LA) and Joe Courtney (D-CT) introduced H.R.104, bipartisan legislation cosponsored by more than 100 members of the House. The bill, called The Realize America’s Maritime Promise (RAMP) Act, ensures that funds brought into the HMTF are used for the intended purpose.
In testimony when the bill was introduced, Boustany said, “Louisiana’s economy depends on our waterways. Dredging and maintaining coastal harbors and ports is absolutely critical to bolstering trade, creating jobs and strengthening American competitiveness. This bill creates the fully-funded, long-term dredging plan necessary for realizing our economic potential not only in Louisiana, but across the country.”
Similar language regarding dredging was also included in the Transportation and Infrastructure Committee’s six-year Surface Transportation bill.
In the Senate, a similar bill, S. 412, has been introduced that seeks legislation to ensure that all the funding available in the HMTF is dedicated to harbor maintenance projects. HR-104 currently has 118 cosponsors, while S 412 has 25 cosponsors.
While the waterways industry has been calling on the federal government to provide funding for the necessary repairs of the inland waterways, Hanson says with the budget cutbacks it is becoming even more difficult to get USACE funding allocated for dredging. He also says issues bonds are an option that more ports and port authorities are considering, although the costs can be significant. “We haven’t seen a lot of them, although we are hearing a lot of talk about them,” he says.
Debra Colbert, senior vice president of the Waterways Council Inc., Arlington, Va., says the issue over bonds and establishing public/private partnerships has been raised before.
One shipper says a sticking point to further development of public/private partnerships is the different parties involved being able to figure out the return on investment.
Holliday says that with access to the HMTF challenging right now, some ports are considering issuing bonds on the open market and then turning around and paying off the bonds when they receive financing for the dredging.
This summer, because of the low water levels, the USACE’s Vicksburg, Miss., location announced plans to spend close to $7 million to dredge six key ports in the lower half of the Mississippi River.
The funding for this emergency project came through the Disaster Relief Appropriations Act for fiscal year 2012, which made the $6.4 million in port dredging possible. The funds are part of the larger effort to repair and restore the Mississippi River and tributaries system from the damage that occurred during the historic flood of 2011. The original fiscal year 2012 federal budget had allocated $87,600 for port dredging, which only allowed for limited surveys of the shallow draft ports.
Despite all the challenges, Hanson is bullish on the future of the inland waterways and the ability to get the funding needed to ensure the proper flow of cargo on the waterways.
“The dialog has changed. Now ports and waterways are a part of every conversation,” he says.
The author is senior editor of Waterways Today and can be contacted at dsandoval@gie.net.