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3
Corps of Engineers Water Resources
Infrastructure and Mission Areas
The U.S. Army Corps of Engineers constructed, operates, and maintains a vast water re-
sources infrastructure across the U.S. that includes dams, levees, and coastal barriers for flood
risk management, locks and dams for inland navigation, ports and harbors, and hydropower gen-
eration facilities. Much of this infrastructure faces considerable maintenance and rehabilitation
needs. Federal investments in civil works infrastructure for water management have been declin-
ing since the mid-1980s, and today there are considerable deferred rehabilitation and mainte-
nance needs (NRC, 2011).
Operation, maintenance, and rehabilitation (OMR) of its existing water resources infra-
structure is a primary challenge for the Corps today. These activities include repair and up-
grades, carried out at many different scales, from routine to major (major projects usually require
a separate construction budget). For each Corps mission area, there are generally separate annual
budgets for operation and maintenance (O&M) and construction. Most minor and routine reha-
bilitation is funded through annual O&M budgets, while major rehabilitation and replacement
generally is funded through annual construction budgets. The process of prioritization for the an-
nual O&M budget takes place largely at the division and district level and follows general guide-
lines, but has many variations depending on local needs (for further details on budget guidance
see USACE, 2011c).
Corps of Engineers maintenance responsibilities do not apply to all water infrastructure
the agency has built, and maintenance duties for many portions of Corps-built water infrastruc-
ture have been turned over to state and local entities. This especially has been the case with
many levees and other flood protection structures that have been built by the Corps, then subse-
quently turned over to levee districts or municipalities that assume OMR responsibilities. Fur-
thermore, appropriations for operations and maintenance (and some rehabilitation) typically are
not part of the project-by-project authorization process within the federal Water Resources De-
velopment Act (WRDA) process described in Chapter 2.
The needs for OMR of Corps water infrastructure are great, as funding from Congress for
OMR has been inadequate and declining for decades. Further, periodic WRDA bills are focused
on new project construction and major rehabilitation, rather than more routine, but important,
OMR activities. Not all aging and degraded infrastructure necessarily merits continued opera-
tion and investment, but there are legal, regulatory, and other obligations that inhibit the Corps
from easily divesting, privatizing, or decommissioning existing infrastructure.
24
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Corps of Engineers Water Resources Infrastructure and Mission Areas 25
As mentioned, this report focuses on Corps of Engineers' "hard" infrastructure--locks,
dams (both navigational and multi-purpose), other navigation infrastructure (e.g., river control
structures, federal harbor and port facilities), hydropower plants, and levees and other flood pro-
tection infrastructure. Although this chapter does not include a section on ecosystem restoration,
the Corps hard infrastructure discussed herein often is integral to restoration efforts. This re-
port's focus is on maintenance, upgrades, and modernization of hard infrastructure, not on relat-
ed ecological resources. The committee viewed this interpretation as consistent with its charge
to consider "...navigation, flood risk management, hydropower, and related ecosystem infra-
structure managed by the Corps."
A prominent theme in this chapter is the considerable diversity across Corps mission ar-
eas in terms of enabling legislation, taxation and revenue sources, clients, and relations with the
private sector. For example, inland navigation facilities are predominately federally-owned,
while many harbor and port facilities are operated under partnerships led by states in partnership
with private entities, with the Corps playing supporting roles. There are separate taxes and funds
to provide revenue for inland navigation, and for harbor maintenance. Dams with hydropower
generating facilities have a direct base of paying customers (although in most cases the revenues
do not come back to the Corps). Some levees constructed with federal funds, in whole or in part,
have been turned over to local levee districts that are responsible for maintenance and that raise
local funds to cover repair costs.
Distinctions among Corps mission areas are rooted in the historical development, and ex-
pansion, of Corps of Engineers activities. The Flood Control Act of 1936 specified the circum-
stances for federal involvement in flood control, and elevated the Corps' flood control activities
to the same level as its navigation program. In 1996, Corps responsibilities were expanded fur-
ther when ecosystem restoration was added as a formal, primary mission. Newer mission areas
were not always fully consistent with the agency's original missions of navigation and flood con-
trol. Moreover, there have not been any specific congressional initiatives or activities to promote
coordination and consistency across the Corps' mission areas, or any guiding principles for broad
Corps responsibilities such as water resources infrastructure maintenance and rehabilitation.
NAVIGATION
The Corps has constructed, and operates and maintains, a large portion of the infrastruc-
ture that supports the nation's commercial inland waterways, and ports and harbors. Corps-
maintained waterways and ports support commercial navigation in 41 U.S. states. In considering
the current state of the Corps' navigation infrastructure, and options for rehabilitating and up-
grading that infrastructure, it is important to recognize several distinctions between infrastructure
for inland navigation, and for harbors and ports. Important differences between these systems in
terms of taxation, public and private funding and facilities ownership, companies that use the fa-
cilities, and other factors will affect the direction of future infrastructure rehabilitation and up-
grades.
Inland Navigation
The commercial inland navigation system includes roughly 12,000 miles of maintained
river channels, and 191 locks sites with 238 navigation lock chambers. Figure 3-1 shows the
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26 Corps of Engineers Water Resources Infrastructure: Deterioration, Investment, or Divestment?
scope of the Corps-maintained inland waterways system. The U.S. inland navigation system is
used to ship bulk commodities such as corn and soybeans, coal, fertilizer, fuel oil, scrap metal,
and aggregate (sand and gravel). Some of this cargo may transit nearly the entire length of the
system. For example, corn and soybeans are shipped from across the midwestern U.S. down the
Ohio, Illinois, and Mississippi Rivers to the Port of New Orleans and international export. By
contrast, some portions of the system are used primarily for local transport. For example, of total
commodity tonnage shipped on the Missouri River between 1994 and 2006, 83 percent was es-
timated to originate and/or terminate in the state of Missouri, with 84 percent of the shipments
consisting of sand and gravel (GAO, 2009). The Atlantic and Gulf Intracoastal Waterways also
provide commercial transportation corridors. All portions of the inland navigation system also
serve recreational uses, but commercial use is what primarily justifies and helps fund the system.
The system is used primarily by U.S. based, domestic shipping companies. Lock and dam facili-
ties on the inland navigation system are federally-owned, operated, maintained, and rehabilitated
by the Corps of Engineers. Some portions of the Atlantic and Gulf Intracoastal Waterways,
however, are operated and maintained by the states they border.
There have been major changes to the U.S. economy, patterns of trade, and other cargo
transportation alternatives since much of the inland navigation system was constructed several
decades ago. Before the nation had its current, extensive rail and highway systems, "inland wa-
terways were a primary means of transporting bulk goods" (Stern, 2012). Today, alternative
modes for shipping inland navigation goods--namely roads and rail--are in a more advanced
state of development than during the period when the lock and dam projects were constructed.
Although they remain important transportation modes for some sectors in some areas, "inland
waterways are a relatively small part of the nation's overall freight transportation network"
FIGURE 3-1 U. S. Fuel-Taxed Inland Waterway System.
SOURCE: Courtesy of Bruce Carlson, U.S. Army Corps of Engineers.
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Corps of Engineers Water Resources Infrastructure and Mission Areas 27
(Stern, 2012). The topics of relative costs, energy uses and efficiencies, and environmental im-
pacts of rail, road, and barge transport make for lively debate among users of these respective
modes.
Another important aspect of the inland navigation system is that its locks and dams create
extensive, upstream navigation pools. These navigation pools often affect river ecosystems up
and downstream for tens of miles. The inland navigation system thus affects many public re-
sources and many private system users beyond commercial cargo carriers. There are impacts on
floodplain lands overseen by federal government agencies (such as the U.S. Fish and Wildlife
Service), private landowners, and recreational users including boaters and anglers. The naviga-
tion pools are sources of both beneficial and negative effects.
Ports and Harbors
The Corps of Engineers maintains 926 coastal, Great Lakes, and inland harbors (Figure
3-2). U.S. harbors and ports operate in a very different setting than the inland navigation system.
For example, U.S. harbors and ports handle a wider variety and higher volume and value of car-
go, than the inland navigation system. Many more shippers use U.S. harbor and port facilities
compared to the inland navigation system, and these shippers include both U.S. domestic and in-
ternational companies. Docking and (un)loading facilities at the harbors and ports generally are
operated as public-private partnerships, and do not depend on direct federal resources. Corps re-
FIGURE 3-2 Major U.S. Ports and Harbors.
SOURCE: U.S. Army Corps of Engineers.
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28 Corps of Engineers Water Resources Infrastructure: Deterioration, Investment, or Divestment?
sponsibilities in ports and harbors are focused on dredging to maintain desired navigation and
docking depths. The Corps also maintains wave/surge protection structures at some ports and
harbors. This division of responsibilities and limited role for the federal government allows har-
bors and ports to pursue a broader range of partnerships and financing options. The Port of Bal-
timore (Box 3-1) and the Port of Miami (Box 3-2) provide good examples that involve states and
private entities, with the Corps of Engineers having a limited support role.
There generally are fewer cost-effective alternatives to maritime transport for interconti-
nental or trans-ocean shipment for larger, heavier bulk goods such as coal and petroleum. This
provides strong incentives for all port and harbor users and beneficiaries to be interested in port
and harbor maintenance.
Distinctions Between Inland Navigation, and Harbors and Ports
These differences outlined above entail advantages and flexibility in options that harbors
and ports possess in terms of financing infrastructure improvements. In the past, the inland nav-
BOX 3-1
PARTNERSHIPS FOR WATER RESOURCES INFRASTRUCTURE:
PORT OF BALTIMORE
The Port of Baltimore is among the busiest deep-water ports in the U.S. Commerce in 2011 totaled
37.8 million tons of cargo valued at $51.4 billion (MPA, 2012a). Managed by the Maryland Port Admin-
istration (MPA) and a private sector partner, Ports America Chesapeake, the Port of Baltimore encom-
passes both public marine terminals and private marine terminals. The Seagirt Marine Terminal, for
which a major expansion was completed in 2012, is the primary container facility at the Port. It is operat-
ed by Ports America Chesapeake under a 50-year agreement established with MPA in 2010.
The Port of Baltimore has been expanding shipping capacity in response to increasing globalization
of commerce and to the Panama Canal widening which is scheduled for completion in 2014. When the
Panama Canal widening project is completed, larger container ships from Asia will be able to access East
coast ports, including Baltimore. Accommodation of "Panamax" ships will require 50-ft berths and 50-ft
deep channels. The Port of Baltimore has installed 50-foot berths and larger cranes for cargo handling at
the Seagirt Marine Terminal, and, in partnership with the Corps of Engineers, has dredged 50-ft deep
channels and anchorages. Changes to the Seagirt Terminal, valued at more than $200 million, are being
financed and managed by Ports America Chesapeake (MPA, 2012b). In addition, MPA has worked
closely with the State of Maryland and the railway company, CSX Corp., on development of an intermodal
terminal facility near the Port where containers can be double-stacked on railcars, and with CSX Corp. on
their National Gateway Project which will raise bridges and lower tracks in 50 locations to permit rail
transport of double-stacked containers from Maryland into the Midwest (MDR, 2011). The National
Gateway project cost is about $850 million, of which CSX has committed $575 million (MDR, 2011)
The Corps of Engineers has had a well-defined role in the expansion of shipping capacity at the Port
of Baltimore through Baltimore Harbor Anchorages and Channels project. At the request of Congress,
the Corps performed reconnaissance and feasibility studies in the 1990s for expanded commercial navi-
gation capacity. The Water Resources Development Act of 1999 authorized construction of a 50-ft deep
turning basin, deepening and widening of several anchorages in the harbor, widening of the Seagirt Ma-
rine Terminal channel and others, and construction of a new loop channel. The project was completed in
2003 at a total cost of $30.5 million, of which the federal share was $22.3 million and the MPA share was
$8.2 million. Maintenance dredging is performed by the Corps annually, at a cost ranging from approxi-
mately $16-18 million.
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Corps of Engineers Water Resources Infrastructure and Mission Areas 29
BOX 3-2
PARTNERSHIPS FOR WATER RESOURCES INFRASTRUCTURE:
PORT OF MIAMI
The Port of Miami, managed by Miami-Dade County, is a man-made waterway in Biscayne Bay that
was initially dredged in the early twentieth century. It was significantly expanded into a deep channel wa-
terway and a man-made island during the 1960s and 1970s. Today the Port is the number one passen-
ger cruise port in the world, the ninth largest cargo port in the U.S. and the largest cargo port in Florida.
Despite the high level of activity, the Port's current waterway and harbor are 42 feet deep and would not
be accessible by post-Panamax megaships that require 50-foot clearance. The Corps, with responsibility
for maintenance of navigation depths in the Port, was authorized by Congress in 1999 to study the feasi-
bility of deepening the port. Dredging to deepen the port was authorized by Congress in 2008 and
scheduled to be completed by 2014, coincident with the scheduled completion of the Panama Canal ex-
pansion. It is the only harbor project south of Norfolk, VA authorized to dredge to depths that can ac-
commodate Panamax ships.
Total costs for the Port of Miami project were estimated to be $170 million (including environmental
mitigation) in 2004. The local sponsor, Miami-Dade County, has provided funding for the non-federal cost
share requirement. The federal contribution has not been committed, however, due to the current Con-
gressional moratorium on earmarks and exclusion of the project from the President's 2012 budget pro-
posal for dredging projects (Clark, 2011).
In response to the lack of federal funding to proceed with the project, Florida Governor Rick Scott re-
directed $77 million in state transportation funds to cover the federal share (Wright, 2011). Dredging for
the Port was initiated in summer 2012. This project coincides with additional infrastructure investments
that state and local governments have initiated to expand overall capacity at the Port. A public-private
partnership was established in 2009 to build a $1 billion tunnel beneath the harbor that will connect the
Port's inner roadways to a nearby interstate highway (Port of Miami, 2010). Short-term funding for com-
pletion by 2014 will be provided by the private concessionaire (MAT Concessionaire, LLC) who will also
maintain the tunnel and roadways for 30 years.
igation system enjoyed more consistent federal support for maintenance and repair of its facili-
ties. With declining federal resources available, this increasingly represents a barrier for inland
navigation in trying to raise funds for OMR. Harbors and ports have opportunities to employ
new financing arrangements with numerous private sector carriers, and state and local govern-
ments, but inland navigation generally faces more limits in its ability to employ similar options
and private sector partnerships (as discussed further below).
Taxation and Financing
Some portion of Corps infrastructure maintenance and rehabilitation activities is support-
ed through taxes levied directly on facility users. For inland waterways, an Inland Waterways
Trust Fund (IWTF) was established in 1978 and reauthorized as part of the 1986 WRDA. For
harbors and ports, a Harbor Maintenance Trust Fund (HMTF) was first authorized in the 1986
WRDA. Prior to authorizations for these trust funds, waterway and harbor infrastructure and
maintenance expenditures were funded almost entirely through general revenue from the U.S.
Treasury (Carter and Fritelli, 2004). The IWTF is based on a commercial fuel tax of $0.20 per
gallon (collected by the IRS), which has remained constant since 1995. A proposal for increas-
ing the IWTF has been put forward by the inland waterways commercial shipping industry and is
under discussion (see Box 3-3). The HMTF is based on a 0.125 percent ad valorem tax imposed
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30 Corps of Engineers Water Resources Infrastructure: Deterioration, Investment, or Divestment?
on imports, domestic shipments, and cruise line passenger tickets at designated ports (collected
by U.S. Customs).
The Inland Waterways Trust Fund is designated for construction and major rehabilita-
tion of inland waterways, while the HMTF is limited to operation and maintenance of federally
authorized channels for commercial navigation in deep-draft harbors and shallow-draft water-
ways that are not subject to the IWTF fuel tax (Carter and Fritelli, 2004). This is a crucial dis-
tinction between these two sources of funding and is important to understanding likely future
maintenance options. Projects are performed under the IWTF at a 50-50 cost share between the
federal government and the inland waterways shipping industry.
In recent years, balances in the IWTF and HMTF have taken very different trajectories.
In 2003, the IWTF was $412.6 million. Annually, expenditures from the IWTF exceeded reve-
nues even though Congress appropriated funds for inland waterway modernization. Coupled
BOX 3-3
OPERATIONS, MAINTENANCE, CONSTRUCTION, AND MAJOR REHABILITATION
COSTS ON THE INLAND WATERWAYS
Two pieces of legislation are largely responsible for the current framework of inland waterways fi-
nancing: the Inland Waterways Revenue Act of 1978 and the Water Resources Development Act of
1986. These laws together established a fuel tax on commercial barges, cost-share requirements for
inland waterway projects, and a trust fund to hold these revenues and fund construction (Stern, 2012).
This legislation created more financial and decision-making responsibilities for commercial operators on
the inland waterway system. Today, expenditures for construction and major rehabilitation projects on
inland waterways are cost-shared on a 50-50 (federal-user) basis through the Inland Waterways Trust
Fund (IWTF). Operations and maintenance costs for inland waterways projects typically exceed these
construction costs; these O&M costs are 100 percent federal responsibility.
The IWTF currently is supported by a $0.20/gallon tax on barge fuel. The balance in the IWTF
has declined significantly due to a combination of decreased appropriations, cost overruns, and de-
creased revenues from previous years (see Figure 4-2). To help offset this declining balance, both the
Bush and Obama administrations recommended replacing the IWTF with one or more user fees. Both
the U.S. Congress and the navigation industry have rejected these proposals.
In 2010, the Inland Waterways Users Board (IWUB), a federal advisory committee that advises
the Corps on inland waterways, endorsed an alternative proposal that called for increase in the fuel tax
of $0.06-08/gallon. The proposal also called for the federal government and taxpayer to pay the full
cost of some projects that now are cost-shared. Inland navigation shippers argue that changes are
necessary to shore up the trust fund, improve infrastructure, and distribute costs more equally among
those that benefit from the system. Other groups, such as Taxpayers for Common Sense, argue that
an increased share of waterway costs should be borne by the user, and that routine O&M costs also
should be a user responsibility.
In a letter dated December 21, 2010, Assistant Secretary of the Army for Civil Works, Ms. Jo-
Ellen Darcy, provided some of the administration's views on the IWUB proposal. The letter noted that
the IWUB recommendations "would transfer a significant responsibility from the users . . . to the general
taxpayer. Such a major shifting of costs is inconsistent with the user-pay principle that helps to guide
Civil Works investment decisions" (emphasis added).
More specifically, the letter also noted "The Board's recommendation to increase the revenue to
the IWTF is an increase in the level of the existing diesel fuel tax of 30 percent (and potentially an in-
crease of up to 45 percent) over the current fuel tax rate of $0.20 per gallon. This would be the first
such rate increase since 1996. The Army notes that this level of revenue increase would not be suffi-
cient to support efficient investment in the inland waterways . . ." This is to say, the proposed increase
in fuel tax would do little to address the OMR funding shortfall that confronts the navigation system.
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Corps of Engineers Water Resources Infrastructure and Mission Areas 31
with declining tax revenues due to reduced barge transport in the mid-2000s, the balance in the
IWTF declined below $35 million at the end of FY 2011 (Figure 3-3). A large portion of IWTF
expenditure recently has been for a single project, the Olmsted Lock and Dam Replacement on
the Lower Ohio River (see Box 3-4). On the other hand, the HMTF balance has increased
steadily, reaching over $5 billion at the end of FY 2010. Annual HMTF expenditures (approxi-
mately $1.0 billion) were approximately equal to revenue collected over the past decade (Fritelli,
2011).
Both the IWTF and HMTF face concerns about the need for higher revenues and expend-
itures in the future. In the case of the IWTF, the Inland Waterways User Board (IWUB) 2 identi-
fied investment needs for the next 20 years totaling $18.0 billion, at an annual average of nearly
$900 million, for new construction (67 percent) and major rehabilitation (33 percent; IMTS
Capital Investment Strategy Team, 2010). For the HMTF, revenues have been adequate to meet
annual maintenance costs for dredging to maintain congressionally-authorized depth and width
requirements (Fritelli, 2011). Although the HMTF generally has been adequate to meet dredging
needs of current major ports, there is concern about the overall adequacy of the nation's port sys-
tem in a changing international trade environment (ASCE, 2012b).
Pending completion of the new Panama Canal locks in 2014, ships transiting the canal
will be larger, moving from pre-Panamax size (110 feet wide, 41 feet draft), to `post-Panamax'
FIGURE 3-3 Federal Inland Waterway Projects: Financing Trends.
SOURCE: Stern, 2012.
2
The Inland Waterway Users Board is a federal advisory committee that was established in the 1986 Water Re-
sources Development Act.
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32 Corps of Engineers Water Resources Infrastructure: Deterioration, Investment, or Divestment?
BOX 3-4
OLMSTED LOCKS AND DAM
The Olmsted locks and dam project will replace 1920s-era Locks and Dams 52 and 53, the first
two on the Ohio River above the confluence with the Mississippi River. These two aged facilities handle
about 90 million tons of cargo annually, the highest cargo tonnage in the entire inland waterways system.
Completion of the Olmsted Locks and Dam project, first authorized in the Water Resources Development
Act of 1988, is the highest priority inland waterways project for the Corps of Engineers. The project is lo-
cated about 20 miles upstream of the Mississippi River, near Olmsted, Illinois. The project includes two
110-foot wide by 1,200 - foot long lock chambers, and a 2,500-foot dam with navigable pass located near
the Illinois shoreline.
When the Olmsted project was authorized by Congress in 1988, the estimated cost was $775 mil-
lion and the estimated completion date was 2000, but subsequent design changes, dam construction dif-
ficulties, and inadequate, start-stop funding have increased the cost estimate to $3.1 billion and extended
the projected completion date to 2024 (Boselovic, 2012b). The twin 1200-foot locks were completed in
2002 at a total cost of approximately $430 million, including the costs of the cofferdam and approach
walls. The contract for the dam was awarded in 2004 and construction of the dam commenced in 2005.
In 2004, the total project cost estimate was revised to $1.4 billion and the completion date to 2014; by
2011, the project cost estimate was revised to $2.1 billion and the completion date to 2018; and in March
2012 budget hearings the Corps revised the cost estimate to $3.1 billion and the completion date to 2024
(Boselovic, 2012b).
The Olmsted project is being funded by the Inland Waterways Trust Fund (IWTF), which collects
about $75-85 million per year from a $0.20 cent per gallon tax on diesel fuel used by commercial river us-
ers, and by matching funds from the federal government. The IWTF funds plus the federal match thus
provide about $150-170 million per year for inland waterways rehabilitation work.
In 2011, the Olmsted project received $143 million of the IWTF funds, i.e., most of the IWTF
funds went to this one high priority project (Bruggers, 2011). Even with this dominant share of the IWTF
funds, plus an additional $11 million in stimulus funding from the American Reinvestment and Recovery
Act in 2011, the funding for the Olmsted project was insufficient to keep the project on schedule. The
IWTF funding is insufficient for even one high priority project, and the concentration of the IWTF funding
on this one project leaves essentially no funding for deployment on other rehabilitation projects in the in-
land waterways system.
cargo ships (160 feet wide, 50 feet draft). East coast and Gulf ports that wish to accommodate
all types of ships from Asian harbors and markets will need to have 50-foot draft channels and
harbor depths. Candidates for ports that would have to be deepened include Charleston, New
York/New Jersey, Miami, and Savannah. The Port of New York/New Jersey is being deepened
to post-Panamax depth as authorized by WRDA 2000. The Port of Miami is proceeding with a
deepening project using funds from the State of Florida (Box 3-2). It is not clear which of the
other ports, and when, might be deepened to post-Panamax depths. This issue is a major point of
discussion and contention in the U.S. port and harbor community (see USACE, 2012a).
The Harbor Maintenance Fuel Tax does not cover costs of new construction, but only on-
going maintenance. Major port construction thus relies on some combination of congressional
appropriations and local cost-sharing. In addition, many local governmental entities will incur
expenditures for infrastructure improvements that are not covered by federal funding, but are de-
pendent on continuing Corps' channel construction and maintenance. For example, the Port Au-
thority of New York and New Jersey are increasing vertical clearance of the Bayonne Bridge be-
tween Staten Island, NY and Bayonne, NJ to allow for passage of post-Panamax ships, at a cost
to the port authority of $1.3 billion (PANY & NJ, 2011).
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Corps of Engineers Water Resources Infrastructure and Mission Areas 33
In summary, the inland navigation system has a stronger reliance on federal support for
major maintenance than do ports and harbors, which rely more heavily on fees from private
shippers and investments from state and local governments. In an era of steady reduction of fed-
eral investments in civil works infrastructure, these distinctions may have sobering implications
for prospects of future inland navigation infrastructure repairs and upgrades. The December
2010 letter from the Assistant Secretary of the Army for Civil Works to the chairman (Rep.
James Oberstar) of the House Committee on Transportation and Infrastructure (also see Box 3-3)
noted this distinction:
Over the past three years, for example, receipts from the inland waterways fuel
tax covered approximately 8 percent of the total costs that the Corps incurred on
behalf of the companies that move goods on these waterways in these years, in-
cluding costs for both capital investment and operation and maintenance. By con-
trast, our non-Federal partners in the coastal navigation program have paid about
80 percent of the costs of construction, operation and maintenance activities sup-
porting coastal harbors and channels (Darcy, 2010).
Infrastructure Status Inland Navigation
Large portions of this infrastructure were constructed in the first half of the twentieth cen-
tury. Many dams on the Ohio River, for example, were built in the early 1900's, with some of
them being constructed over one hundred years ago. The Upper Mississippi River 9-foot chan-
nel navigation project was authorized in the Rivers and Harbors Act of 1930 and completed by
1940. The Missouri River mainstem dams were authorized with passage of the 1944 Flood Con-
trol Act, and the Missouri River Bank Stabilization Project (BSNP) was authorized in the 1945
Rivers and Harbors Act. Officially completed in 1981, many revetments and other BSNP chan-
nel works were built during the 1950s and 1960s.
Much of this navigation infrastructure is nearing the end (or has exceeded) its design life
and is in various states of disrepair. Investments in routine maintenance, upgrades, and rehabili-
tation for the infrastructure have lagged since the mid-1980s. Portions of the navigation infra-
structure, at select sites, have been repaired and rehabilitated, and the Corps undertakes mainte-
nance activities at priority sites in greatest need of repair. To help identify priority sites and pro-
vide the basis for a systematic repair schedule, the Corps of Engineers has initiated an Asset
Management Program to identify locks and dams in greatest need of repair. For example, the
Corps' Pittsburgh District has developed an infrastructure asset management system of district
assets (Hawkins, 2011).
Funding Inland Navigation Maintenance, Repair, and Rehabilitation
Prospects for Divestment and Partnerships
Gradual deterioration of Corps lock and dam and other navigation facilities, combined
with inadequate federal revenue streams to cover repair, presents the Corps with limited options.
The Corps is not authorized, for example, to implement unilaterally fee increases for users of its
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34 Corps of Engineers Water Resources Infrastructure: Deterioration, Investment, or Divestment?
inland navigation facilities. The Corps likewise does not have authority to privatize or otherwise
divest portions of the inland navigation infrastructure. Moreover, Corps inland waterway infra-
structure and its operations affect large volumes of interstate commerce, and often have far-
reaching, interstate effects on downstream aquatic resources. These conditions are especially
important on large, interstate rivers like the Mississippi, Missouri, and Ohio rivers. They are
likely to affect prospects for privatization of inland navigation infrastructure, as discussed in a
2001 National Research Council report that reviewed plans for lock extensions on the Upper
Mississippi River:
...almost all investment in navigation enhancement and river-training facilities is
public and almost all use of the waterway is private. No federal agency would
want to assume direct control over the multiple uses of inland waterways. Privat-
izing these facilities and services is an even less attractive option. A company
that controlled commercial navigation would find itself making decisions that af-
fected not only navigation, but also municipal water supply, recreation, irrigation,
flood damage reduction, and environmental quality. Privatization would not work
well unless the controlling firms faced the proper incentives regarding each possi-
ble use of the waterway. There are also disagreements over the goals to be
achieved in managing a waterway . . . (NRC, 2001).
Divestment of inland navigation infrastructure long operated by the Corps of Engineers
has been achieved in some circumstances, however. For example, the Corps of Engineers has
transferred ownership of many locks and dams on Wisconsin's Fox River to the state. These
transfers took place because the volume of commercial navigation traffic through these facilities
had declined over time. The reduced need to provide facilities and service to support commer-
cial navigation prompted the Corps to close some of these facilities and transfer ownership to the
state (the river today is operated by Wisconsin as primarily a recreational waterway, along with
some hydropower generation). Similar conditions of diminished commercial waterway traffic
exist at other Corps facilities, which might offer additional divestment prospects. Ownership
transfer of facilities that support large volumes of commercial traffic would be much less feasi-
ble. Additional partnerships could be explored for the operations of inland navigation infrastruc-
ture. Such public-private partnerships have worked well for some ports and harbors, and for
some highway systems (Istrate and Puentes, 2011). For inland navigation infrastructure, system-
wide oversight, especially on large, interstate rivers likely would have to remain with the gov-
ernment.
Prospects for Decommissioning
Decommissioning of a dam entails full or partial removal of an existing dam and its asso-
ciated facilities, or significant changes to its operations thereof. In the U.S., the process of dam
decommissioning includes many of the same considerations as project construction and is subject
to the same federal laws such as the National Environmental Policy Act. Dam decommissioning
is typically considered in instances where a dam's original purposes and values have diminished
or greatly changed over time, and where a dam may inhibit values such as enhanced fish passage
or downstream transport of sediment resources (see Box 3-5). Dam decommissioning is not a
simple process, nor is it without costs. Especially for larger dams, substantial advance planning
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48 Corps of Engineers Water Resources Infrastructure: Deterioration, Investment, or Divestment?
FIGURE 3-5 Average Annual U.S. Flood Damages.
SOURCE: Data from the National Weather Service, 2012.
late with levels of protection and in some cases encourages more floodplain development, which
in turn can increase flood losses.
The Corps of Engineers has more fully embraced the notion of non-traditional alterna-
tives in flood risk management. Figure 3-6 is a chart used frequently in Corps of Engineers
presentations of national flood risk management. The chart shows clearly that flood risks cannot
be fully eliminated or managed by structural measures alone; rather, numerous other `nonstruc-
tural' factors such as land use practices, zoning regulations, building codes and others affect
flood risk. The chart also shows that even an optimal array of traditional and nontraditional ap-
proaches cannot fully eliminate flood risks in vulnerable areas.
The Corps often uses Figure 3-6 to explain that adequate flood risk management cannot
simply be accomplished only through civil works structures built with federal funding, but rather
requires a mix of measures and actions taken at the federal, state, and local levels. The chart also
reinforces the point that flood infrastructure conditions do not necessarily reflect levels
of protection, and that reduced levels of federal funding for large structures need not represent a
barrier to reducing risk, and in a way may represent opportunities (also see NRC, 2012).
The size, extent, and configuration of the U.S., and federal, levee systems, dams, and
coastal protection infrastructure that serve flood control purposes, defy simple categorization of
overall level of protection provided, condition, and priority maintenance and repair needs. Con-
gress has authorized the Corps to work with FEMA on a dam safety program and on a levee safe-
ty program. Over one-half of the dams managed by the Corps today are older than 50 years
(USACE, 2012b). The Corps and FEMA have made progress on initial inventory, but more
work needs to be done to more accurately inventory, evaluate, and classify the roughly 14,000
miles of federal levees. Improved inventories of flood risk management dams and levees are
critical components of asset management and portfolio planning.
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Corps of Engineers Water Resources Infrastructure and Mission Areas 49
FIGURE 3-6 Shared Flood Risk Management: "Buying Down Risk".
SOURCE: Riley, 2008.
Lessons from Flood Risk Infrastructure and Policy
In considering national flood protection infrastructure needs and priorities, the Corps of
Engineers plays an important leadership role, but the Corps is only one of numerous federal,
state, local, and other actors in national flood protection policies and activities. Levees and
floodwalls protect communities, private structures, key infrastructure and an extensive mix of
public and private resources. These structures provide many benefits to tens of thousands of
U.S. communities. However, despite varying levels of protection provided by these structures,
even well-designed and maintained engineering structures can be overtopped by floods. Flood
damage risk also involves policies such as zoning, land use practices, building codes, and other
`nonstructural' approaches. Federal investments in flood protection structures will be enhanced
to the extent that local land use policies behind levees are designed to limit residual risks in lev-
eed areas. Currently, there is no provision in Corps programs or sponsorship agreements that en-
courages or requires local sponsors to implement nonstructural measures (e.g., land use zoning)
that could help reduce the consequences of structural failure or overtopping.
There will be fewer federal resources available for the Corps of Engineers to continue its
leadership role in flood control via construction of large, new civil works projects. The Corps al-
so acknowledges that a wide range of community-level decisions and practices are major--
perhaps the primary--factors in reducing flood risks. The future of U.S. national flood man-
agement will feature less federal-centered and top-down projects with large civil works struc-
tures, and more local-driven, community-centered, and less expensive alternatives that reflect the
dynamic nature of river-floodplain systems and allow rivers to move more freely into their
floodplains during high flows. Recent changes in the National Flood Insurance Program under
the Biggert-Waters Flood Insurance Reform Act of 2012 will increase public awareness of flood
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50 Corps of Engineers Water Resources Infrastructure: Deterioration, Investment, or Divestment?
risks by strengthening requirements for flood insurance, improving flood mapping, and allows
insurance premiums to reflect eventually full actuarial risk.
In the future, the Corps will be more of a flood risk management partner in providing
technical advice and support to local communities. Those local communities will be looked up-
on to assume a more active role in all aspects of managing floods, including local funding for
maintenance or even select relocations of structures out of hazardous flood zones. Many com-
munities have made explicit decisions to employ less traditional, nonstructural approaches to
managing floods, such as zoning regulations and flood insurance. Strategies such as allowing
rivers to occasionally overflow into floodplains that have only minimal infrastructure not only
reduce risks of property and financial losses of flooding, but also allow floodplains to serve as
storage areas to reduce downstream flood peaks. These nonstructural actions can be used to
guide development in a growing community, and they can be employed in floodplain areas be-
hind levees and other hard infrastructure that are difficult to properly maintain Moreover, these
strategies generally enhance environmental and related social benefits. These types of practices,
which harken back to the work of Gilbert White several decades ago, hold promise in moving the
nation toward flood risk management that is less expensive, puts fewer lives and less property at
risk from floods, and provides greater environmental benefits and contributes to community re-
silience and sustainability. They also provide opportunities for the Corps of Engineers to transi-
tion from its previous leadership role primarily through civil works construction, to a leading
federal partner in flood risk management via more technical support and collaboration with states
and communities.
HYDROPOWER GENERATION
Hydropower generation is not among the primary missions of the Corps of Engineers, but
the Corps has developed numerous hydropower projects in conjunction with its flood risk man-
agement and navigation missions and is a national leader in generating hydroelectric power.
Hydropower facilities represent an important component of the Corps "hard infrastructure"
which is the focus of this report. These facilities are important because of their large number,
and their unique role as a revenue generator for the Corps and the federal treasury. Federal hy-
dropower resources involve projects built and operated by three agencies: the Corps, the Bureau
of Reclamation, and the Tennessee Valley Authority (TVA). The national hydropower industry
is approximately one-half federal and one-half non-federal in terms of generating capacity. Of
these three agencies, the Corps has the most projects. It operates 75 power plants with a total
rated capacity of 20,500 MW (Sale, 2010). In addition, there are another 90 non-federal hydro-
power plants located at Corps dams with a total capacity of 2,300 MW (Sale, 2010).
Power generated at the federal projects is sold and distributed by four Power Marketing
Administrations (PMAs) which are part of the Department of Energy and responsible for market-
ing federal hydropower. The four PMAs--Bonneville, Western, Southwestern, and Southeastern
market power to much of the continental U.S. Bonneville Power Administration is the PMA
with the most Corps project generating capacity, and the Corps' largest hydropower facilities are
on the Columbia River.
As in its other mission areas, the Corps hydropower facilities are facing the challenges of
an aging infrastructure, and limited access to sources of revenue for adequate maintenance and
repair. There are important legal and contractual issues at play that limit the Crops' ability to ac-
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Corps of Engineers Water Resources Infrastructure and Mission Areas 51
cess revenue generated at most of its power facilities, with those of the Bonneville Power Ad-
ministration being a notable exception. The Corps hydropower program also is affected by pres-
sures to reallocate reservoir storage to non-power uses.
This section exams the status of the Corps hydropower program, challenges it faces, and
unique opportunities that it has relative to other water resources infrastructure because of inher-
ent revenue generation in the program. A primary source of information and perspective for this
section was the comprehensive and critical evaluation of the Corps hydropower program by Sale
(2010).
Infrastructure Status
Through its 75 hydropower plants and installed generation capacity of 20,500 megawatts
(MW), the Corps owns and operates approximately one-fourth of the nation's hydropower capac-
ity. Most of its generating capacity is in the Federal Columbia River Power System (FCRPS),
with much of the remaining capacity in its Missouri River dams. The Corps' Columbia (and
Snake River) and Missouri River hydropower generation capacity combined represents about 75
percent of the Corps' national generating capacity (USACE, 2012a). Average annual energy
generation from Corps projects is approximately 70 billion kWh (worth approximately $5 billion
at current wholesale prices for power), and annual revenue to the U.S. Treasury from Corps hy-
dropower sales is in the range $2-3 billion per year (Sale, 2010). This represents over half the
size of the entire Corps' annual appropriation.
As of 2010, the median age of all Corps hydropower projects was 47 years, and 90 per-
cent of the projects were 34 years old or older (Sale, 2010). Given the ages of the facilities,
OMR needs and failure rates are increasing, along with associated decreases in performance. As
an example, total hours of forced outages across all Corps hydropower projects have been in-
creasing steadily since at least 1999 (Figure 3-7).
FIGURE 3-7 Total hours of forced outages over all Corps hydropower projects for 1999-2008.
SOURCE: Sale, 2010.
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52 Corps of Engineers Water Resources Infrastructure: Deterioration, Investment, or Divestment?
In an era of heightened interest in energy policies and sources, electricity generation from
Corps hydropower projects has been decreasing steadily due to insufficient equipment mainte-
nance and rehabilitation. Total electric power generation from Corps hydropower projects de-
creased from 73.6 TWh in 2000 to 61.7 TWh in 2008 (Sale, 2010), a decrease of 16 percent. At
some Corps hydropower projects, none of the original equipment has been replaced since the fa-
cilities were constructed 30 or more years ago.
Annual budgets for repairs and upgrades of most of the Corps hydropower equipment
have been inadequate for a long time (Sale, 2010). This not only has resulted in degraded infra-
structure and less efficient operation, but has also meant missed opportunities for utilizing tech-
nological developments through upgrading to newer, higher-performing technology. Recent de-
velopments in hydropower generating technologies and materials offer opportunities to upgrade
to more efficient operations with less water use and less environmental impact, but fiscal con-
straints have largely inhibited upgrades. Developments in turbine design, runner configuration,
and generator efficiency make it possible for existing dams to make modifications that can either
produce 15-25 percent more with the same water flows and hydraulic heads that currently exist,
or produce the same amount of power as is currently possible but with 15-25 percent less water
flowing through the turbines. Through a hydropower generation efficiency program in the 1980s
and early 1990s, the Tennessee Valley Authority (TVA) achieved a 34 percent increase in power
generation with the same water availability (Sale, 2010).
In 2009, the Corps initiated a Hydropower Modernization Initiative (HMI), which is us-
ing risk assessment and net present benefit methods to identify the most pressing investment
needs for hydropower rehabilitation efforts, and the potential for energy generation increases at
particular facilities (Sale, 2010). From the evaluation of the first six Corps facilities, an average
energy increase potential of 8 percent was identified and investments to achieve the increases
were deemed cost effective. Funding the investments will generally be difficult for facilities out-
side the Bonneville system, however, as discussed below.
Although there is much interest in increasing domestic hydropower production, there are
challenges confronting hydropower production beyond just finding the resources to replace, re-
habilitate, and upgrade equipment. The fate of hydropower in entwined with the opposition to
large dams based on economic, social, and environmental factors. Dams change river flows and
the fish runs that depend on them, alter river chemistry, change riverine landscapes, and inundate
large areas that can include scenic canyons and valleys (Moore et al., 2010). There is growing
interest in dam removal in the U.S., which could affect some Corps hydropower projects in the
future, though likely not the largest projects. In addition, climate change adds concerns about re-
liability and predictability of hydropower development. Hydropower production also faces in-
creasing competition for use of the water and for reservoir storage space. Many Corps dams and
reservoirs are part of multiple purpose projects so that hydropower must compete with other uses
such as flood protection, irrigation, water supply, efforts to protect fish, and efforts to restore
aquatic ecosystems. There is growing interest in sustainable reservoir operation (Jager and
Smith, 2008). Some or all of these varied factors enter into discussions about the future of hy-
dropower at particular project locations.
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Corps of Engineers Water Resources Infrastructure and Mission Areas 53
Funding Issues and Options
Hydropower is provided only modest funding in Corps budgets. In the Fiscal Year 2013
proposed Corps budget, for example, hydropower is allotted $180 million, with $178 million for
operation and maintenance, and only $2 million for construction (USACE, 2012d). By contrast,
the FY2013 budget includes $1.41 billion for flood risk management, $1.75 billion for naviga-
tion, $512 million for aquatic ecosystem restoration, and $252 million for recreation (USACE,
2012d). The Corps hydropower budgets in 2010, 2011, and 2012 were $230 million, $207 mil-
lion, and $182 million, respectively (USACE, 2009, 2010, 2011b). These budgets are far below
what is needed for adequate operation and maintenance, even before consideration of replace-
ment and rehabilitation needs. Sale (2010) points out that the international organization Electric
Utilities Cost Group has provided a best-practices estimate of $50/MWh for annual operation
and maintenance costs at hydropower facilities. For Corps hydropower production of 70 TWh
per year, the FY2013 budget of $180 million corresponds to $2.57/MWh. According to the
Phase 2 HMI report issued in 2010, in which 54 Corps hydropower projects were evaluated, if no
action is taken on modernization of these projects they will incur a combined loss of $7 billion of
power revenue benefits over 20 years (Sale, 2010).
In order to realize the full potential for installed hydropower generation capacity at Corps
projects, new approaches to funding OMR for hydropower must be developed and made possible
through legislation. As noted by Sale (2010), PMAs are required by law to sell federal hydro-
power at rates that usually are significantly below market rates. These sales occur under long-
term contracts that cannot easily be changed. The primary customers and beneficiaries of this
power pressure the federal power producers to keep operation and maintenance costs as low as
possible so as to keep power rates low.
Sale (2010) outlines three possible paths forward for Corps hydropower projects: 1) sta-
tus quo, 2) privatization of more facilities, and 3) modernization.
"The Status Quo path would continue the current trajectory of the Hydropower
Program with minimal changes in any aspect. Most importantly, Congressional
budgets would most likely be flat or declining. New legislation authorizing more
direct funding through PMAs would not occur, but limited agreements for direct
funding from federal power customers ... would provide some of the additional
funding needed for O&M and equipment replacements. However, because total
funding would not keep up with program needs, the Status Quo strategy is not sus-
tainable in the long term.
The Privatization path would focus on finding non-federal sources of funding
and, where possible, transferring hydropower assets from the federal to the private
sector. This strategy is ... often suggested as the solution to shortfalls of public
funding. Asset transfers and other aspects of this path are problematic for many
reasons. However, the fact that there are already more than 30 non-federal hydro-
power plants licensed by FERC [Federal Energy Regulatory Commission] and op-
erating at Corps dams means that joint operations are feasible. Nevertheless, some
very contentious legislative and policy changes would be needed if this path were
to be successful.
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54 Corps of Engineers Water Resources Infrastructure: Deterioration, Investment, or Divestment?
The Modernization path may also require significant changes in authorities, fi-
nancing, and management, but it has the best chance of long-term success. The
Corps has already embarked on one modernization initiative, the HMI, ... but the
HMI is only part of the Modernization path envisioned ... Many other aspects are
part of this path, ranging from finding new sources of funding to full implementa-
tion of the new Hydropower [Memorandum of Understanding] with the DOE and
DOI."
A partnership on hydropower was established in March 2009 via a Memorandum of Understand-
ing involving the Corps, the Department of Energy, and the Bureau of Reclamation. The part-
nership includes initiatives on resource assessments, improved regulatory processes, technology
development, and other topics.
The privatization path is impractical given the need to change authorizing legislation and
the complexity of the multiple-use responsibilities of the Corps. Sale (2010) notes that new leg-
islation would be needed to de-authorize hydropower operations at many projects, long-term
federal power contracts would have to be phased out, and the loss of inexpensive federal hydro-
power by primary customers is likely to be strongly opposed.
Modernization of the Corps hydropower program will require new legislation, new au-
thorities, new funding, and modification and expansion of Corps partnerships. With low and de-
clining federal support for Corps hydropower projects, equipment replacement and rehabilitation
needs will have to come from direct funding by Corps hydropower customers. New legislation
will be needed to enable this, such as (Sale, 2010): (1) legislative changes that would allow all of
the PMAs to fund equipment replacement/rehabilitation costs directly from their power revenues,
and (2) legislation that would establish a trust fund within each PMA to provide funding for con-
struction and rehabilitation.
The Bonneville Power Administration has the authority to fund OMR directly from pow-
er revenues, with very positive effect on operations (see Box 3-11), but other PMAs do not (Sale,
2010). Use of power revenues for direct funding of OMR will require more engagement with
and support from power customers. The Corps hydropower program will need to establish ex-
panded, diverse partnerships with federal power customers, the PMAs, and the non-federal pow-
er industry.
The Flood Control Act of 1944 specified that the Corps and the PMAs produce and sell
power "at the lowest possible rates to consumers consistent with sound business practices." As
discussed by Sale (2010), the Corps' responsibility to use sound business practices in managing
its hydropower program provides ample justification for incorporating the funding needs for re-
placement of aging equipment into customer rates for federal hydropower. Interagency discus-
sions involving the Corps, the PMAs, and DOE will be crucial in moving forward on this and
other similar modernization initiatives.
SUSTAINING CORPS OF ENGINEERS WATER RESOURCES INFRASTRUCTURE
Much of the existing water resources infrastructure of the Corps of Engineers, which is
primarily in the mission areas of navigation, flood risk management, and hydropower produc-
tion, is quite aged and has not been adequately maintained. Funding needs for the repair and re-
habilitation of this infrastructure are substantial, and it is clear from the long-term trend of de-
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Corps of Engineers Water Resources Infrastructure and Mission Areas 55
BOX 3-11
THE BONNEVILLE POWER ADMINISTRATION DIRECT FUNDING AGREEMENT
The National Energy Policy Act of 1992 included a provision that allows the Bonneville Power
Administration (BPA) to direct fund the costs of maintenance, operation, and capital projects. The BPA is
the only Department of Energy Power Marketing Administration (PMA) with the authority to finance direct-
ly the OMR costs at Corps projects (Sale, 2010). This procedure eliminates the process of congressional
approval, authorization and funding which can take years or even decades to complete. As a result, the
federal assets in the Bonneville system are among the best maintained and most efficient federally owned
power generating facilities in the nation. Through the direct funding agreements with its hydropower gen-
erators, BPA has been able to make a significant amount of investment across their system, where a
number of the hydropower plants have been partially upgraded or scheduled to be upgraded to increase
the reliability and productivity of the units and reduce the water requirements. Only a few federally owned
hydropower units outside the Bonneville system have been so upgraded. Efforts to expand the direct
funding agreement concept to allow other PMAs to use revenues from the generating units for capital and
maintenance projects were attempted in the early 2000s, but failed to receive congressional approval.
However, some limited Power Marketing Administration (PMA) customer funding agreements have been
developed.
clining funding from Congress for new construction and rehabilitation that new infusions of
funding will not be available in the short term. Parts of the infrastructure are failing, and parts
are being taken out of service due to lack of funding.
Corps of Engineers infrastructure has different OMR needs, ranging from lock repair,
levee monitoring and maintenance, port deepening, and hydropower facility maintenance and
upgrades. There are different means and mechanisms for funding of infrastructure maintenance
and repairs across the mission areas. It thus is difficult for the Corps to manage all water re-
sources infrastructure as one collection of assets. In an earlier era, it was easier to integrate a
smaller number of missions, and to share expertise and experience among them. Today, howev-
er, the larger number of responsibilities makes agency-wide integration more difficult. The
Corps is guided by numerous federal laws and authorizations, a wide mix of clients with differ-
ent goals, and different modes of taxation and sources of revenue. Its distinctive and diverse wa-
ter infrastructure, its specific roles in the national economy, and its clientele and history make the
Corps a unique organization. Many potential approaches and solutions to Corps OMR challeng-
es will be specific to the Corps.
Corps of Engineers water resources infrastructure responsibilities, including navi-
gation, flood risk management, and ecosystem restoration, differ significantly in terms of
enabling legislation, taxation and revenue sources, clients, and relations with the private
sector. The Corps faces challenges in its OMR duties given that its roles, partnerships, and
successes in addressing OMR in one mission area often are not transferred easily to other
areas or activities.
Greater private sector involvement is often raised as one option for increasing revenues
for public agencies or works, and this report discusses some ways in which private sector partici-
pation in Corps OMR activities might be enhanced.
Opportunities for greater private sector involvement in Corps infrastructure opera-
tions and maintenance activities will vary by Corps mission area, and by economic sector.
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56 Corps of Engineers Water Resources Infrastructure: Deterioration, Investment, or Divestment?
In general, these opportunities are greater in the areas of flood risk management, port and
harbor maintenance, and hydropower generation, and less for inland navigation.
Inland Navigation
The inland navigation system presents an especially formidable challenge and set of
difficult choices. There are stark realities and limited options, including:
· Funding from Congress for project construction and rehabilitation has been declin-
ing steadily.
· Lockage fees on users/direct beneficiaries could be implemented. These are resisted
by users and others.
· Parts of the system could be decommissioned or divested and the extent of the sys-
tem decreased.
· The status quo is a likely future path, but it will entail continued deterioration of the
system and eventual, significant disruptions in service. It also implies that the sys-
tem will be modified by deterioration, rather than by plan.
Flood Risk Management
Reductions in resources available for construction of federal flood control works
present opportunities for expanded implementation of nonstructural flood risk manage-
ment options that are more efficient, less costly, and provide greater environmental bene-
fits. Many of these strategies have been used successfully for years, in many parts of the
country. They have not always received full consideration, however, because of a historical
emphasis on large, engineered civil works for flood protection. Today's fiscal realities pre-
sent the Corps of Engineers opportunities to collaborate more closely with local communi-
ties in providing technical information and other types of support.
Hydropower Generation
Future investments in hydropower generation will balance the need for reliance on relia-
ble sources of domestic energy, relative efficiencies and flexibility of hydropower, and environ-
mental implications of reservoir storage and release regimes. The capacity of existing Corps hy-
dropower is not being realized, and in fact is declining.
Because of its revenue-generating potential, hydropower is in an especially good po-
sition to accommodate public-private investments required to increase capacity and relia-
bility. Some modification of operating regulations by the U.S. Congress will be needed to
realize this potential.
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Corps of Engineers Water Resources Infrastructure and Mission Areas 57
Systematic Asset Management
Obligations placed on the Corps for continued safe and efficient operations of the entirety
of its water resources infrastructure, under modern staffing and financial conditions, heightens
the need for asset management efforts within each of its mission areas. A necessary first step
toward this will be comprehensive inventories of existing infrastructure. These inventories will
enhance systematic planning efforts and the prioritization of OMR needs.
Increasing strains placed on the Corps today by decaying infrastructure and associ-
ated fiscal challenges demand a systematic approach to asset management. To its credit,
the Corps has begun an asset management initiative. To further promote these efforts, the
Corps should continue to develop more comprehensive, and publicly accessible, inventories
of infrastructure assets for each of its core mission areas.
Economic Principles and Future Investments
Wise infrastructure investments will not simply repair Corps infrastructure to the same
configuration that existed in the 1940s or 1950s. These investments will be made with clear
recognition of the many national economic changes since much of the Corps infrastructure was
constructed. One major change, for example, is the substantial expansion in international trade
since the WWII era, and the changing nature of the transportation infrastructure to support that
growth. Other major changes include technological advances in, and easier access to, freight
transport options. Today, an extensive interstate highway system provides viable freight option
opportunities in some instances, and rail systems have implemented many technological advanc-
es. Regarding flood risk management, future investments in flood infrastructure will recognize
lessons from relying heavily on engineered structures, and the need to also develop local land use
policies and zoning regulations designed to reduce vulnerability to floods. Many communities
across the nation have learned, and are learning, to accommodate floods in more effective ways
and reduce reliance upon large amounts of federal funding for hard-infrastructure mitigation
measures. Advances in hydropower technology make possible new systems that can generate
similar amounts of power, with less water.
Sound OMR investments also will be guided by principles of economic efficiency and
seek to employ market-based principles when feasible. Wise investments will acknowledge de-
clining availability of federal funding and subsidies, and the need to work with the private sector
and to capture revenue streams from users and beneficiaries. Paralleling conclusions from a pre-
vious report from an NRC Transportation Research Board panel of experts on investment to en-
hance U.S. freight capacity (NRC, 2003), Corps water infrastructure investments should be made
according to a set of principles that help ensure sustained contributions to economic develop-
ment. For Corps projects with important public safety purposes, such as flood control dams,
public safety protection will, of course, take precedence:
Future OMR investments should be guided by a more coherent set of principles that
include strong reliance on economics of infrastructure investment. A 2003 NRC committee
that studied national freight transport offered the following set of investment and economic
principles that merit careful consideration. These principles can be summarized as fol-
lows:
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58 Corps of Engineers Water Resources Infrastructure: Deterioration, Investment, or Divestment?
· Economic efficiency, with investments directed to improvements that yield
greatest economic benefits.
· Limit government involvement to circumstances in which market-based out-
comes clearly would be highly inefficient. Government also is responsible for man-
aging facilities where it has important historical responsibilities that would not be
easily altered, and where institutional complexity necessitates government leader-
ship.
· Limit government subsidies and ensure that facility beneficiaries pay the costs.
· Rely more on user revenues, and the `user pays' principle, along with matching
funds and stronger public-private relationships.
(The complete listing of these principles is on pages 37 and 38.)
This overview of the NRC Transportation Research Board economic principles for infrastructure
(NRC, 2003) merit careful consideration in addressing options and choices in OMR investments
for Corps water resources infrastructure. The following chapter presents some alternative paths
forward for addressing critical OMR needs and modernizing the Corps of Engineers water re-
sources infrastructure.
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