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The Marine Transportation System and the Federal Role: Measuring Performance, Targeting Improvement - Special Report 279 � � � � � � Appendix B Statement of James R. McCarville INTRODUCTION In addition to describing mechanisms to measure marine transportation system (MTS) performance, the committee was asked to review projections of future freight demand, assess plans for public and private MTS maintenance and expansion, and describe the likely impact on the MTS over the next two decades if federal funding remains constant. I, along with some of the resource speakers, have brought to the committee’s attention several disconcerting trends about system capacity that I believe were not sufficiently addressed in the main report. I am providing this supplementary report to address these issues, including the following:

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The Marine Transportation System and the Federal Role: Measuring Performance, Targeting Improvement - Special Report 279 � � � � � � The growing gap between the aging inland waterway infrastructure, the increasing maintenance and replacement requirements, and the limited resources available to repair or replace them; The need to more fully address the intermodal connector issue; and Support for the issues related to navigation capacity; the incredibly long time it takes to plan, authorize, and build navigation projects; the need for accurate hydrographic data; the decline in the overseas U.S. fleet in the past 50 years; and the changes in business ownership of liquid bulk carriers in the past 10 years. Many of these issues have been identified in Appendix A but are applicable to the inland system as well. Taken together, these issues present a picture of an industry in a state of serious deficiency and crisis that is not otherwise conveyed by the report. AGING INLAND INFRASTRUCTURE AND CONGESTION The U.S. Army Corps of Engineers (USACE) builds and maintains the infrastructure on the U.S. inland river system. According to information published by the corps, our inland water resources infrastructure, particularly our locks and dams, is aging. Reinvestment in USACE infrastructure has declined over time, resulting in more frequent scheduled and unscheduled closures for repairs, reducing system performance, and adding costly delays to customers. Half of all USACE lock chambers now exceed their 50-year design lives. By 2010, this will grow to 57 percent, including many critical high-use projects on key waterways. Old locks require more maintenance. Downtime due to closures more than doubled in the 1990s and exceeded 120,000 hours systemwide in 1999. Repairs are taking longer, and unscheduled closures due to emergencies are more frequent. Scheduled service interruptions cost private industry customers time and money, but unscheduled closures are much more disruptive since customers have not planned for the outages. In neither case, however, are the costs to industry recorded in detail, nor are

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The Marine Transportation System and the Federal Role: Measuring Performance, Targeting Improvement - Special Report 279 � � � � � � they used to justify maintenance priorities or budgets. Increases in traffic, currently projected at about 1 1/2 percent per year, will increase the use of the lock system and the need for maintenance and maintenance downtime, and they will add to congestion and system unreliability. If the economy meets expectations and traffic congests other modes of transportation (with many commodities doubling by 2020), but federal investment in the MTS remains constant, the implication is that waterway infrastructure will continue to decline. This will impose a demand for additional road and railway infrastructure, which may come at an even higher social cost. On the other hand, if additional reliability were invested in the inland waterway system, then the waterways would be positioned to take some of the lower- to moderate-value container traffic off of the then even more congested roadways. The Columbia–Snake River system already has significant containers-on-barge traffic, and similar services are growing along the Gulf Intracoastal and North Atlantic ports. Failure to strategically provide solutions will add more unreliability to the entire transportation system and pass the inefficiency costs on to customers and the nation as a whole. MEASURING DELAYS USACE measures average annual delays. But this measure hides the real impact of seasonal highs, peak periods, and delays caused by scheduled and unscheduled closures for maintenance or repairs. These can grow to 12, 24, or 36 hours or more—adding uncalculated costs to the navigation industry and its customers. A recent closure of the main chamber at Greenup Lock on the Ohio River (unexpectedly extended when the problems exceeded expectations) resulted in 80-hour delays for downbound tows. It is estimated to have cost power utilities millions of dollars to reroute coal by rail. While USACE measures the length and frequency of delays, it also needs to quantify the impact such delays have on industry and the nation. Congress should then be informed of all the costs, including those costs passed on to the private sector.

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The Marine Transportation System and the Federal Role: Measuring Performance, Targeting Improvement - Special Report 279 � � � � � � OUTMODED LOCK SIZE, DELAYS, AND BUDGET CONSTRAINTS Projects constructed in and before the 1930s, most of them with 600-foot chambers, are showing not only their age but also their capability limits. They are not designed for modern tow sizes. Therefore, the common 15-barge tow of today must be “broken” to pass through, tripling lockage times for tows and, in times of congestion, adding immensely to the backup queue. For example, above St. Louis, before the new 1,200-foot Mel Price Lock replaced the 600-foot Lock and Dam No. 26, delays of several days were common. While Lock and Dam No. 26 has been replaced, it took the better part of a generation to plan, authorize, and build those improvements. Similar bottlenecks occur in other small lock chambers, with similar delays in scheduling repairs. In 1994, USACE began a 10-year Lower Monongahela River improvement project. Now, 10 years later, they are only one-third of the way through the project, due solely to inadequate budgetary allocations. This slow allocation of funding has doubled the cost of the project in terms of inflation and benefits forgone. A lack of multiyear budgeting, and conflicting messages from the administration and Congress, leads to fits of starts and stops in project implementation. The delays inherent in this process mean that projects studied today need to solve problems 25 to 35 years in the future. Therefore, the 50-year life of a project is really a time span starting from 25 to 35 years and running to 75 to 85 years in the future. USACE NAVIGATION BACKLOGS USACE projects that there is a $10 billion navigation infrastructure backlog to complete all authorized projects and active preauthorized projects in planning, engineering, and development. This includes harbor and waterway construction projects and the benefits forgone because of delays. It does not include another $6 billion for inactive and deferred projects. USACE also projects a critical operations and maintenance (O&M) backlog of $1.01 billion. In addition, the corps has identified about

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The Marine Transportation System and the Federal Role: Measuring Performance, Targeting Improvement - Special Report 279 � � � � � � $1.9 billion of unfunded work to preserve the value of its assets that is not as time sensitive as the critical backlog. USACE believes that its vast and aging infrastructure, coupled with deferred O&M, will accelerate performance inefficiencies and require major reductions in service. This will hinder its ability to maintain even current levels of operation. In addition to the types of performance measurements recommended in this report, USACE has undertaken internal improvements to streamline project process, measure performance, prioritize budgets, and improve benefit–cost analysis (on the basis of recommendations from the Oak Ridge Laboratories). While this should improve the process, the changes are only now under way and were not evaluated. In any case, even with better prioritization, the current levels of funding are unlikely to be sufficient to address these issues. FUNDING NEEDS Measured in constant dollars, USACE civil works construction has declined to about a third of what it was in the 1970s (from over $3 billion to just over $1 billion). O&M constant dollar funds for inland waterways have remained basically static (between $400 million and $500 million)— even as the portfolio of projects increased significantly, as the system aged, and as USACE was asked to include more environmental concerns in the projects. Currently there are nine lock and dam projects under various stages of construction, including new locks already in operation at the Robert C. Byrd and Winfield projects (while dam rehabilitation and other work continue) and “high gear” new construction at Olmsted, Montgomery Point, and Braddock Dam. Work is in earlier stages at four other projects— McAlpine, Kentucky, Inner Harbor, and Marmet. There are also major rehabilitations under way at four sites on the Upper Mississippi and at London Locks and Dam. Adding to the funding challenge is the need for emerging investments. There are two new authorizations for lock extensions at Greenup and Myers on the Ohio (Water Resources Development Act of 2000). The current shutdown at Greenup shows the urgency of this project. On the

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The Marine Transportation System and the Federal Role: Measuring Performance, Targeting Improvement - Special Report 279 � � � � � � Gulf Intracoastal Waterway (GIWW) there are possible lock improvement projects needed at Bayou Sorrel in Louisiana and channel improvements along the Texas coast (Matagorda Bay reroute). Also, the 2003 omnibus bill authorized replacement of the Tennessee Valley Authority’s Chickamauga Lock, where serious concrete deterioration is occurring. Further studies are under way for the Upper Mississippi and Illinois Waterway; for Emsworth, Dashields, and Montgomery Locks and Dam, and for the Ohio River main stem; for the Texas reach of the GIWW; for the Arkansas River; and for other major rehabilitations. FUNDING SOURCES AND PROJECT IMPACTS OF CONSTANT LEVEL FUNDING It was not in the committee charge to indicate where additional funding might come from, and it is not the purpose of this supplementary report to address that question. The charge did ask, however, for implications for the MTS if current funding remains constant. If funding for inland navigation remains at current levels, the system will continue the present trend of experiencing increasing outages. While it will require increased maintenance, it is unlikely to get it, possibly leading to the loss of a valuable asset. If this happens, the system will become less reliable, more costly, and less likely to be able to play a role in alleviating the rest of the nation’s congestion. COMPARING THE SOCIAL COSTS OF WATERWAY INVESTMENTS Currently USACE must justify a benefit–cost evaluation for the 50-year life of new projects. Aside from the questions of whether this is a higher standard than most transportation projects or if anything economically meaningful can be said about what will happen 50 years in the future, there is an important way that this tool can be improved. Specifically, the current tools measure the transportation benefits of a project, but they do not compare those benefits with the costs of providing alternative transportation improvements. For example, if traffic is expected to grow by any given percent and such traffic is not provided for

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The Marine Transportation System and the Federal Role: Measuring Performance, Targeting Improvement - Special Report 279 � � � � � � by waterway or intracoastal transportation, then what would be the social cost of providing for that traffic via additional highway lanes or railway construction? Congestion on Interstate 95 would be a good illustration. Credible measurements need to be developed to evaluate the comparative social costs of providing for projected traffic via waterway, intracoastal, and alternative road or rail transportation means. INTERMODAL CONNECTORS Just as the age of intermodalism has made it easier to move international cargo quickly through ports to inland destinations, it has placed new burdens on the relationship of ports, highways, and inland points. The Intermodal Surface Transportation Efficiency Act and the Transportation Equity Act for the 21st Century acknowledged this concept but did not provide significant funding to address the issue. Arguments regarding the use of gas tax money will likely restrict federal funding to facilities that directly affect highway maintenance and improvements. Highway maintenance is also accomplished by preserving highway infrastructure. But we lack the mechanisms to measure how a nonhighway project can preserve highway infrastructure. Until such metrics are developed, the creation of a freight gateways program, similar to that in the administration’s Safe, Accountable, Flexible, and Efficient Transportation Equity Act of 2003 (SAFETEA) proposal, would help correct these deficiencies. Some portion of the Surface Transportation Program funding could be set aside for those highway-related freight connectors, especially the last mile connector between ports and the National Highway System, intermodal freight transfer facilities, and intelligent transportation innovations linking ports with the broader transportation infrastructure. And the use of water highways, or short-sea shipping, on the intracoastal and inland waterway systems should become eligible for Congestion Mitigation and Air Quality Improvement Program funds, provided they meet the other requirements of that program to mitigate congestion and air quality problems. December 1, 2003