The U.S. Army Corps of Engineers constructed, operates, and maintains a vast water resources infrastructure across the United States that includes dams, levees, and coastal barriers for flood risk management, locks and dams for inland navigation, ports and harbors, and hydropower generation facilities. Much of this infrastructure exhibits considerable maintenance and rehabilitation needs. Federal investments in civil works infrastructure for water management have been declining since the mid-1980s, and today there are considerable deferred rehabilitation and maintenance needs (NRC, 2011).
Operation, maintenance, and rehabilitation (OMR) of its existing water resources infrastructure is a primary challenge for the Corps today. These activities include repair and upgrades, 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 rehabilitation 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 annual O&M budget takes place largely at the division and district level and follows general guidelines, but it 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 infrastructure 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 subsequently turned over to levee districts or municipalities that assume OMR responsibilities. Furthermore, appropriations for operations and maintenance (and some rehabilitation) typically are not part of the project-by-project authorization process within the federal Water Resources Development Act (WRDA) process described in Chapter 2.
The needs for OMR of Corps water infrastructure are great, as funding from Congress for civil works construction and major rehabilitation has been 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 operation and investment, but there are legal, regulatory, and other obligations that inhibit the Corps from easily divesting, privatizing, or decommissioning existing infrastructure.
As mentioned, this report focuses on Corps of Engineers’ “hard” infrastructure— locks, dams (both navigational and multipurpose), other navigation infrastructure (e.g., river control structures, federal harbor and port facilities), hydropower plants, and levees and other flood protection 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 report’s focus is on maintenance, upgrades, and modernization of hard infrastructure, not on related ecological resources. The committee viewed this interpretation as consistent with its charge to consider “navigation, flood risk management, hydropower, and related ecosystem infrastructure managed by the Corps.”
A prominent theme in this chapter is the considerable diversity across Corps mission areas in terms of enabling legislation, taxation and revenue sources, clients, and relations with the private sector. For example, inland navigation facilities are predominantly federally owned, whereas many harbor and port facilities are operated 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 gen-
erating 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 expansion, of Corps of Engineers activities. The Flood Control Act of 1936 specified the circumstances 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 further 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 control. 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.
The Corps has constructed, and operates and maintains, a large portion of the infrastructure that supports the nation’s commercial inland waterways and its 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 its options for rehabilitating and upgrading that infrastructure, it is important to recognize several distinctions between infrastructure for inland navigation and that for harbors and ports. Important differences between these systems in terms of taxation, public and private funding and facilities ownership, companies that use the facilities, and other factors will affect the direction of future infrastructure rehabilitation and upgrades.
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 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 United States down the Ohio, Illinois, and Mississippi Rivers to the Port of New Orleans, then exported. 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 estimated 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 water- ways also provide commercial transportation corridors. All portions of the inland navigation system also serve recreational uses, but it is commercial that primarily justifies and helps fund the system. The system is used primarily by U.S. based, domestic shipping companies. Lock and dam facilities on the inland navigation system are federally owned, operated, maintained, and rehabilitated
FIGURE 3-1 U.S. Fuel-Taxed Inland Waterway System.
SOURCE: U.S. Army Corps of Engineers.
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 currently extensive rail and highway systems, “inland waterways 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” (Stern, 2012). The topics of relative costs, energy uses and efficiencies, and environmental impacts 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 resources 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 navigation 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 setting very different from the inland navigation system. For example, U.S. harbors and ports handle a wider variety and higher volume and value of cargo than does 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 international companies. Docking and (un)loading facilities at
FIGURE 3-2 Major U.S. Ports and Harbors.
SOURCE: U.S. Army Corps of Engineers.
the harbors and ports generally are operated as public-private partnerships, and do not depend on direct federal resources. Corps responsibilities 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 harbors and ports to pursue a broader range of partnerships and financing options. The Port of Baltimore (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 are generally fewer cost-effective alternatives to maritime transport for intercontinental 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.
PARTNERSHIPS FOR WATER RESOURCES INFRASTRUCTURE: PORT OF BALTIMORE
The Port of Baltimore is among the busiest deep-water ports in the United States. Commerce in 2011 totaled 37.8 million tons of cargo valued at $51.4 billion (MPA, 2012a). Managed by the Maryland Port Administration (MPA) and a private sector partner, Ports America Chesapeake, the Port of Baltimore encompasses 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 operated 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 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-foot berths and 50-foot 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-foot 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 the Baltimore Harbor Anchorages and Channels project. At the request of Congress, the Corps performed reconnaissance and feasibility studies in the 1990s for expanded commercial navigation capacity. The Water Resources Development Act of 1999 authorized construction of a 50-foot deep turning basin, deepening and widening of several anchorages in the harbor, widening of the Seagirt Marine 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 approximately $16 million to $18 million.
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 waterway and a man-made island during the 1960s and 1970s. Today the Port of Miami is the number one passenger cruise port in the world, the ninth largest cargo port in the United States 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 feasibility 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 expansion. It is the only harbor project south of Norfolk, Virginia authorized to dredge to depths that can accommodate 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, because of the current Congressional moratorium on earmarks and exclusion of the project from the President’s 2012 budget proposal for dredging projects (Clark, 2011).
In response to the lack of federal funding to proceed with the project, Florida Governor Scott redirected $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 completion by 2014 will be provided by the private concessionaire, MAT Concessionaire, LLC, which will also maintain the tunnel and roadways for 30 years.
Distinctions Between Inland Navigation, and Harbors and Ports
The differences outlined above entail advantages and flexibility in options that harbors and ports possess in terms of financing infrastructure improve-
ments. In the past, the inland navigation system enjoyed more consistent federal support for maintenance and repair of its facilities. The decline of available federal resources 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 with state and local governments, 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 supported 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 increasing 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 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 rehabilitation 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 waterways that are not subject to the IWTF fuel tax (Carter and Fritelli, 2004). This is a crucial distinction between these two sources of funding and is important to understanding likely future maintenance options. Projects are undertaken under the IWTF at a 50-50 cost share between the federal government and the inland waterways shipping industry.
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 financing: 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 decreased revenues from previous years (see Figure 3-3). 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 Jo-Ellen Darcy provided some of the administration’s views on the IWUB proposal. The letter noted that the IWUB “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 increase 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 sufficient to support efficient investment in the inland waterways . . .” That is, the proposed increase in fuel tax would do little to address the OMR funding shortfall that confronts the navigation system.
FIGURE 3-3 Federal Inland Waterway Projects: Financing Trends.
SOURCE: Stern, 2012.
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 revenues even though Congress appropriated funds for inland waterway modernization. Coupled 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 (approximately $1.0 billion) were approximately equal to revenue collected over the past decade (Fritelli, 2011).
OLMSTEAD LOCKS AND DAM
The Olmstead 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 located 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 million and the estimated completion date was 2000, but subsequent design changes, dam construction difficulties, 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 million to $85 million per year from a $0.20 cent per gallon tax on diesel fuel used by commercial river users, and by matching funds from the federal government. The IWTF funds plus the federal match thus provide about $150 million to $170 million per year for inland waterways rehabilitation work.
In 2011, the Olmsted project received $143 million of the IWTF funds; that is, 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 inland waterways system.
Both the IWTF and HMTF face concerns about the need for higher revenues and expenditures in the future. In the case of the IWTF, the Inland Waterways Users Board (IWUB)1 identified 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 system 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-foot draft), to “post-Panamax” cargo ships (160 feet wide, 50-foot 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 and 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 covers only ongoing maintenance, not costs of new construction. 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 dependent on continuing channel construction and maintenance by the Corps. For example, the Port Authority of New York and New Jersey is increasing vertical clearance of the Bayonne Bridge between Staten Island, NY, and Bayonne, NJ to allow for
1 The Inland Waterway Users Board is a federal advisory committee that was established in the 1986 Water Resources Development Act.
passage of post-Panamax ships, at a cost to the port authority of $1.3 billion (PANY & NJ, 2011).
In summary, the inland navigation system relies more heavily on federal support for major maintenance than do ports and harbors, which depend more on fees from private shippers and investments from state and local governments. In an era of steady reduction of federal 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, including costs for both capital investment and operation and maintenance. By contrast, our non-Federal partners in the coastal navigation program have paid about 80 percent of the costs of construction, operation and maintenance activities supporting coastal harbors and channels.
Infrastructure Status – Inland Navigation
Large portions of the inland navigation infrastructure were constructed in the first half of the twentieth century. Many dams on the Ohio River, for example, were built in the early 1900s, with some of them being constructed over one hundred years ago. The Upper Mississippi River 9-foot channel navigation project was authorized in the Rivers and Harbors Act of 1930 and completed by 1940. The Missouri River main-stem dams were authorized with passage of the 1944 Flood Control 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 channel works were built during the 1950s and 1960s.
Much of this navigation infrastructure is nearing the end of (or has exceeded) its design life and is in various states of disrepair. Investments in routine maintenance, upgrades, and rehabilitation for the infrastructure have lagged since the mid-1980s. Portions of the navigation infrastructure, at select sites, have been repaired and rehabilitated, and the Corps undertakes maintenance activities at priority sites in greatest need of repair. To help identify priority sites and provide 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 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 infrastructure and its operations affect large volumes of interstate commerce, and they often have far-reaching, interstate effects on downstream aquatic resources. These conditions are especially important on large, interstate waterways 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:
[A]lmost all investment in navigation enhancement and rivertraining 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. Privatizing these facilities and services is an even less attractive option.
A company that controlled commercial navigation would find itself making decisions that affected 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 possible use of the waterway. There are also disagreements over the goals to be achieved in managing a waterway . . .
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 commercial 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 feasible. Additional partnerships could be explored for the operations of inland navigation infrastructure. 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 government.
Prospects for Decommissioning
Decommissioning of a dam entails full or partial removal of an existing dam and its associated facilities, or significant changes to its operations thereof. In the United States, 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 is required, including analysis of alternatives, preliminary cost estimates, permitting requirements, and consensus-building with affected parties. Economic losses due to discontinuing operation of the dam (i.e., flood control, irrigation, power generation, recreational uses) also must be considered. The Corps of Engineers has some authority for decommissioning and that differs between constructed projects, and those that have been authorized but not built. The Corps has decommissioned some projects, most of which are from the latter category.
Nearly all U.S. dams that have been decommissioned and removed or breached have been small dams; and they include many old mill dams in the northeastern United States. A prominent U.S. example of a larger dam decommissioning was removal of Edwards Dam on the Kennebec River in Maine in 1999. On the Elwha River on Olympic Peninsula in Washington State, the Elwha Dam (105 feet tall) has been removed and the Glines Canyon dam (210 feet tall) currently is being dismantled. Decommissioning of these two dams has been conducted under the 1992 Elwha River Ecosystem and Fisheries Restoration Act (P.L. 102-495). The Elwha River dams constitute the largest U.S. dam decommissioning to date.
A challenge regarding a large portion of the Corps water infrastructure is that the original, and currently authorized, purposes remain important to many parties, such as the commercial navigation sector. Although the users of and social values associated with Corps infrastructure on the nation’s waterways (to a lesser extent in ports and harbors) have broadened, in locales where original project beneficiaries still rely on the infrastructure, the prospects for decommissioning are constrained. Some of the locks and dams on the lower Allegheny River in Pennsylvania provide a good example (Box 3-6). Although essentially no commercial river traffic moves through these locks and dams, this infrastructure has value to recreational boaters and river communities. Such
VALUES OF FREE-FLOWING RIVERS
In setting investment priorities for Corps infrastructure, the potential ecological benefits of removing a dam and restoring a pre-disturbance flow regime are today often integral to the necessary discussions. Hundreds of dams across the United States have been removed in the past 20-30 years. Most of these removals have been where a small dam had outlived its original purposes and where its removal offered opportunities to restore, for example, routes for migratory fish.
The benefits of free-flowing river systems accrue in two main aspects of river ecosystem function: (1) transport of sediments and maintenance of floodplains and coastal wetlands, and (2) maintenance of riverine biodiversity through provision of required flow regimes and habitat characteristics. The benefits of free-flowing rivers have become more fully understood by resource managers and ecologists alike over the past several decades, and there have been useful advances in ecological and hydrologic concepts of stream and river network function that can be applied to assess the potential benefits of dam removal. For example, the “River Continuum” concept put forward in 1980 provides a framework for understanding the impact of anthropogenic modifications of river networks, with dams and impoundments representing discontinuities in the transfer of energy to downstream river ecosystems (Vannote et al., 1980; Ward et al., 2002).
Free-flowing rivers transport and remobilize sediments, especially during high flows associated with spring snowmelt and storm events. Deposition of these sediments on flood-
Interests need to be balanced against benefits of dam removal from rivers, including elimination of O&M costs and ecological benefits. Even in instances where decommissioning may be viable, infrastructure removal could have unanticipated negative effects, such as disturbance and resuspension of toxic sediments and /or large volumes of nutrients (Gray and Ward, 1982).
Corps of Engineers dams that serve flood control purposes are among the nation’s best maintained dams and are not likely candidates for decommissioning in the near future. By contrast, many Corps inland navigation dams have significant maintenance and rehabilitation needs. Without additional funding and appropriate repairs, the condition of those dams inevitably will deteriorate and decommissioning may represent a more serious alternative than in the past.
plains and coastal wetlands renews sediment lost through erosion and maintains the high productivity of these ecosystems, as de-scribed in the “flood pulse” concept. In turn, floodplain ecosystems attenuate floods, decreasing the magnitude of peak flows downstream, and coastal wetlands protect coastal communities from storm surges. In addition, riparian zones and floodplains provide critical habitats for aquatic biota and migratory birds. A controlled flood released from Glen Canyon Dam on the Colorado River in 1996 provides an example of management strategies to alleviate the impact of flow regulation on the erosion of sand bars in Grand Canyon National Park (Webb et al., 1999).
The naturally varied hydrologic regime of free-flowing rivers provides a benefit in terms of maintaining aquatic biodiversity, especially in sustaining populations of endangered fish. Flow regulation can impair the survival of native fish by causing large daily variations in downstream flow to meet power demands and by creating barriers to upstream migration of salmon and steelhead, for example. One hypothesis of the river continuum concept was that native riverine biota are adapted to both the mean and extreme conditions in flow conditions of a river system. According to this concept, restoration of more natural flow regimes by removing dams, or finding alternatives to meet peak power demands improves habitat for native fish. Other benefits to restoring free-flowing conditions by dam removal come from eliminating detrimental water quality changes associated with impoundments on river systems. For example, tailwater reaches below dams are typically cold, clear and nutrient rich, creating habitats in which nonnative species can thrive and outcompete with native fish populations, which may be adapted to turbid conditions.
Transportation Mode Alternatives
There often are alternative transport modes for the cargo that is shipped on the inland navigation system, the primary alternatives being rail and truck. For example, roughly one-third of U.S. grain exports today are shipped via rail to Portland, Oregon, where grain is transferred to ocean cargo ships (Fuller and Attanavich, 2011). U.S. freight rail carriers have in many cases upgraded and modernized their fleets in recent decades and have become more energy efficient and claim reduced environmental impacts (information about modern rail transport and technologies is available at: http://www.csx.com). Large portions of the inland navigation system were built before completion of the U.S. interstate highway system. There may be instances today of trucks offering viable
DEFUNDING BUT NO PATH TO DECOMMISSIONING: LOWER ALLEGHENY RIVER LOCKS AND DAMS 5-9
The locks and dams in the Lower Allegheny River provide a good example of inland waterways infrastructure for which the original commercial justification is no longer present and federal funding for major rehabilitation has declined, but for which there is no legislated authority for the Corps of Engineers to decommission and remove the infrastructure. The Lower Allegheny River once served as an important corridor for moving oil and timber from northwestern and central Pennsylvania to Pittsburgh and markets beyond and for supplying and moving product from some metal manufacturing plants. Eight locks and dams were built on the Allegheny River in the 1920s and 1930s, providing a 9-foot navigation channel for 72 miles from Pittsburgh to East Brady, Pennsylvania. The original purpose of this infrastructure was primarily to support and enhance commerce.
Since the original construction, commercial traffic on the Upper Allegheny River has decreased significantly, while at the same time use by recreational boaters has increased significantly. In 2011, for example, there were only 54 total commercial lockages at Locks and Dams 6, 7, 8, and 9, and 1,583 total recreational lockages. A total of 38,000 tons of commercial goods moved through these four locks in 2011(zero through Lock and Dam 9). By comparison, for just one of the locks at Locks and Dam 2 on the Monongahela River, 13,055,000 tons of commercial goods and 2,627 commercial vessels were locked through in 2011. Recreational vessel lockages through the same lock totaled 53 in 2011.
Due to low commercial use of the Lower Allegheny River navigation system, funding for OMR of the locks and dams has been declining steadily, with concomitant decreasing maintenance and increasing degradation. In fiscal year 2012, the budget for operation and maintenance of the Allegheny River navigation system was cut by 50 percent, to $4 million (Hayes, 2011; Thomas, 2012). That reduction caused the Corps of Engineers Pittsburgh District to cease recreational boat traffic through Locks 8 and 9 beginning in October 2011. Hours of operation were reduced for other locks in the Lower Allegheny system (Thomas, 2012). Available funding is being used for repairs as malfunctions occur. There is essentially no maintenance budget.
The Lower Allegheny River locks and dams are being removed from operation slowly through decreasing funding. There have been community meetings with the Corps to discuss the evolving conditions and concerns about impacts on municipal and industrial water supplies, marinas, and other facilities and activities. The Corps is obligated to keep the facilities running to the extent possible by allocated budget. The navigation system was established by federal legislation and the Corps was charged to build and maintain the facilities.
alternatives for shipment of commodities, fertilizer, aggregate, and other goods, especially in combination with rail infrastructure.
Economic Efficiency and Future Infrastructure Investments
The level of funding available to repair and upgrade the entire U.S. inland navigation to safe and reliable conditions will not be available in the near future. Clearly, the future U.S. inland navigation system will be different from the system of 50-plus years ago. In setting priorities for future investments, Congress and the administration will have to make choices and reach agreements about how the future system might be different. This will be challenging, but it also represents an opportunity to rethink the nation’s inland navigation systems. Efficient future system investments will carefully consider economic conditions and trends, rationale for investments and account for costs and benefits associated with new construction.
In considering the viability and future of the inland navigation system, and the means for financing OMR needs, the following guiding principles for government freight programs as presented in NRC (2003) merit careful consideration:
• Economic efficiency ought to be the primary goal of government transportation policy; that is, those capital improvements and operating practices for public facilities should be selected that yield the greatest net economic benefit, considering all costs.
• Government involvement should be limited to circumstances in which market-based outcomes would be far from economically efficient. These include preventing exercise of monopoly power and dealing with non-market costs. Government also is responsible for management of facilities for which it has historically established responsibility that could not be altered in the near term, and in settings where institutional complexity necessitates government leadership. The federal government is responsible in instances where a conflict exists between nationwide and local interests and for ensuring transportation facilities for national defense.
• A government responsibility to provide facilities or leadership in developing a project does not necessarily justify government subsidy of costs.
Wherever the important benefits of a public-sector freight-related project are the direct benefits that users of the facilities receive in the form of reduced transportation and logistics costs, users should pay the costs.
• Finance provisions in public-sector programs are a major determinant of performance, affecting both the quality of investment decisions and the efficiency of operations. Reliance on revenue from users, and from local matching funds in federal grant programs will increase the likelihood that most worthwhile improvements will be carried out and facilities will be operated and maintained efficiently.
Lockage Fees for Commercial Navigation and Other System Beneficiaries
Despite funds provided through the inland waterways fuel tax, there have been concerns about the subsidy provided by the federal government for the waterways system compared to other commercial transportation modes (see NRC, 2003). One means to increase private sector revenue for the inland navigation system would be to charge fees for vessels when they pass through the locks. Such lockage fees have been proposed by administrations of both national parties, going back to the Franklin Roosevelt administration. Lockage fee proposals remain unpopular with the commercial navigation sector, without considering fees for all other users (e.g., recreational boaters).
Lockage fee proposals from recent administrations of both parties have sought to improve efficiency and equity of waterways funding. Further, the current Inland Waterways Fuel Tax policy leads to imbalances in tax revenues compared to expenditures, across different river segments (Figure 3-4). Other groups, such as a previous committee of the NRC (2001), the National Commission on Fiscal Responsibility and Reform, and the CBO (2011), have noted that increased user fees could bolster funding for system improvements (Stern, 2012).
Proposals for lockage fees as a funding source for construction and maintenance on inland waterway have a long and controversial history. Prior to the Inland Waterways Revenue Act (IWRA) of 1978 and WRDA 1986, all funding for inland waterways was from general revenues based on the precedent established by the Northwest Ordnance of 1787 (Stern, 2012). Sponsors of the IWRA proposed lockage fees to fund construction and maintenance, but barge Inland
FIGURE 3-4 Fuel tax receipts relative to O&M expenditures (units in ton-miles).
SOURCE: Stern, 2012.
Waterways Revenue Act (IWRA) of 1978 and WRDA 1986, all funding for inland waterways was from general revenues based on the precedent established by the Northwest Ordnance of 1787 (Stern, 2012). Sponsors of the IWRA proposed lockage fees to fund construction and maintenance, but barge industry opposition to fees led to an alternative fuel tax that was less directly tied to usage rates of facilities within the system (Stern, 2012). Proposals for lockage fees have been opposed historically by inland navigation system users, such as the Inland Waterways Users Board. The principal concerns are that fees would
disproportionately increase the costs of barge transport and decrease the volume of barge traffic (Dunham, 2000; Stern, 2012).
There are some claims that reduced barge traffic would in turn lead to reduced exports and increased reliance on alternative modes that would be more fuel inefficient and cause more air pollution (AWO, 2009; PNWA, 2012). However, there has been little research on modal substitution for different product shipments on the inland waterways system (Fuller and Attanavich, 2011). Since construction of much of the Corps’ existing water resources infrastructure in the first half of the twentieth century, the social values and beneficiaries of that infrastructure have broadened. When the Corps navigation infrastructure was constructed, especially on the Ohio and upper Mississippi Rivers, the primary beneficiaries were commercial navigation and its clients. Today, the benefits provided by these rivers—and the navigation pools created by locks and dams—are enjoyed by a wider clientele, especially for recreational purposes like boating and fishing. Declining availability of federal resources for new construction and major rehabilitation, deteriorating facilities, and a broadening base of project beneficiaries leads to discussions about which parties will finance future inland navigation system maintenance and rehabilitation. A “user pays” or “beneficiary pays,” principle posits that those parties who benefit from a public good should pay for the good. It has been applied for the provision of a variety of public goods (Box 3-7 contains more detailed discussion).
The beneficiary pays principle would consider direct beneficiaries and users of Corps infrastructure as a potential source of revenue for maintenance and rehabilitation. Moreover, the Department of Army has noted the value of the “user pays” principle in guiding civil works investment decisions (Darcy, 2010; see Box 3-7). For example, locks and dams on the nation’s rivers that create navigation pools for river traffic also support a recreational boating industry that enjoys considerable benefits of reliable navigation channel draft depths. Recreational boaters pay no direct fees to help maintain and repair Corps water infrastructure that supports these channel depths. Recreational boats (and kay aks, canoes, etc.) are allowed to pass through Corps lock facilities with no toll. Further, the relatively easy identification of the beneficiaries using Corps lock facilities would facilitate fee collection.
Levying new fees on system beneficiaries would involve difficult negotiations, congressional approval, and controversy. However, fundamental principles of economic efficiency, in a setting of declining funding from general reve-
BENEFICIARY PAYS PRINCIPLE
Unlike private goods that can be purchased at a market price, public goods such as national defense, highways, street lights, or a flood control dam, do not have an explicit market where prices are determined. With no market price, private suppliers would not be willing to provide the good because there is no way to recoup the costs. Samuelson (1954) was among the first to formulate the principle that the optimal output from a public good depends on consumers’ marginal benefits from that output. Funding for the public good may come from general revenue, or each beneficiary could pay an amount equal to the benefits they receive. The latter approach, also known as ‘a benefits tax,’ ‘user pays’ or ‘user finance,’ is reflected in commonly used payments such as highway tolls for highways and parking fees in congested areas (OECD, 2002).
An important element of implementing the beneficiary pays principle (BPP) is to determine whether potential users can be prevented from receiving the benefits of a good (excludability) and whether use by one user impacts the benefits received by another (rivalry). The beneficiaries of goods that are excludable and rival (as are private goods) such as electricity and municipal water supplies, are the simplest to directly identify. The beneficiaries of goods that are nonrival but from which potential users can be excluded (sometimes referred to as “club” goods) are also easy to identify. Examples would include users of parks and highways (up to the point of congestion).
The most difficult type of good to which one can apply the BPP is ‘true’ public goods that are nonexcludable and nonrival. Dams, for example, provide protection to everyone in the floodplain below the dam, and one property owner’s protection does not reduce that enjoyed by another. Also, wetlands provide ecosystem services such as wildlife habitat and flood control that may benefit many people but one person’s enjoyment does not limit the benefits enjoyed by another. Although it may be another. Although it may be more difficult to identify the benefits and beneficiaries, it is still possible to use the BPP to provide for these goods (Pagliola & Wunder, 2008).
The BPP has been applied for the provision of a variety of public goods. A commonly used approach is to apportion the costs of a public good among the beneficiaries. Costs would include planning and design, construction, operation, maintenance, and mitigation. For example, the separable cost-remaining benefits (SCRB) method has long been advised for water project planning (Inter-Agency Committee on Water Resources, 1958) and issues related to implementation are discussed in a number of studies (e.g., U.S. Department of Interior, 2001; De Souza et al., 2011).
A common reason for adopting BPP is to encourage more efficient investment and maintenance in public projects when general revenue funding is lacking. For example, the Federal Energy Regulatory Commission (FERC) recently adopted reforms for electric
“transmission planning and cost allocation requirement for public utilities to promote more these reforms is the policy objective “that the costs of transmission solutions chosen to meet regional transmission needs are allocated fairly to those who receive the benefits from them” (FERC, 2011). Although no specific cost allocation method is required, the FERC rule creates a framework in which costs and beneficiaries are directly identified to encourage investment and maintenance planning in the future.
The central idea of the BPP that costs should be allocated to those who benefit also has to be considered in the context of other criteria. In the case of user fees for government services, for example, the Government Accountability Office (GAO) recommends that efficiency concerns should also be balanced with equity (ability-to-pay), revenue adequacy, and administrative burden (GAO, 2008). Each type of government service or project may have different weights applied to these criteria, so there is not a specific blueprint for applying the BPP. There is also no clear guidance on what portion of a project costs should be user financed or funded through general revenues.
nues, will lead to the consideration of these beneficiaries being considered as potential sources of additional revenue:
Application of these principles (e.g., economic efficiency) frequently is controversial, and many government investment and operating decisions are not consistent with them. Controversy is especially likely when proposals are made for changing existing practices regarding users fees or funding sources…and when particular industries or local interests argue that a project’s national significance justifies federal or state subsidy instead of funding through project-generated revenues. It is important to economic welfare that resources be concentrated on high-payoff capital investments that are available, rather than diverted to constructing facilities that will be high-cost or underutilized.
Partnerships with States
There are opportunities for partnership of the federal government with states in sharing the costs of the inland waterways system. In the past, the role for state and local governments was to serve as the local sponsor for federal projects. With decreases in available federal funding, state and local governments have recognized the need to fund infrastructure improvements and maintenance. This approach has the advantage that these governmental entities have a broad range of funding mechanism options to generate revenues. These mechanisms could include user fees, fuel or sales taxes, or property taxes. Some portions of the Gulf and Atlantic Intracoastal Waterways are operated and maintained by the states they border. The Florida Inland Navigation District provides an example, as discussed in Box 3-8.
The Corps of Engineers has constructed an extensive infrastructure designed to manage flood risks along rivers and also infrastructure to protect against surges from coastal storms. The Corps has built approximately 11,750 miles of riverine levees across the nation and provides shoreline protection for hundreds of miles of U.S. coastlines. Many of the Corps’ approximately 700 dams also serve flood control purposes. Like its infrastructure for navigation activities, a large portion of Corps of Engineers levees and other protective structures were constructed in the first half of the twentieth century or earlier and face many similar maintenance, rehabilitation, upgrade—and funding— issues.
In the Corps navigation mission area, taxation and trust funds for navigation infrastructure OMR are federally governed and thus directly relevant to Corps operations. By contrast, in the Corps flood risk management mission area, taxation and financing issues for infrastructure OMR are local responsibilities and less germane to Corps programs. This section thus focuses on Corps responsibilities for flood risk management, in particular by discussing nonstructural flood management options on which the Corps can collaborate with local communities, as consistent with the shared responsibility for managing flood risk. Financial OMR responsibilities for flood pro-
FLORIDA INLAND NAVIGATION DISTRICT
An example of alternative funding mechanisms for operation and maintenance of inland waterways is the Florida Inland Navigation District (FIND). Initially created by the Florida Legislature in 1927 to serve as the local sponsor for inland waterways under the River and Harbor Act of 1927, FIND has developed into the principal state government entity with responsibility for management of the Atlantic Intracoastal Waterway in Florida. The FIND is governed by an appointed Board of Commissioners who represent each of the twelve counties along the Waterway that stretches from the Georgia border to the Florida Keys. Funding for the FIND’s activities is provided through a millage assessment (currently 0.0345 mills) on ad valorem property within each county. These activities include dredging operations and waterway maintenance, construction and maintenance of boat marinas and ramps, and Waterway studies and educational programs. In recent years, the FIND has assumed an increasingly larger share of O&M expenses for the Waterway as federal funding has declined. For fiscal year 2011-2012, Waterway O&M amounted to 52.1 percent ($38.9 million) of the total FIND budget.
tection infrastructure differ from those in the Corps navigation support mission, as described in the previous section. Levees constructed by the Corps of Engineers that are locally maintained are eligible under emergency situations for federally funded maintenance under Public Law 84-99, the Flood Control and Coastal Emergency Act. The Act provides federal funding for emergency operations for flood control works threatened or destroyed by a flood or coastal storm, but it is not meant to cover general levee maintenance. All levee systems considered eligible for P.L. 84-99 assistance must be approved by the Corps to be in the Rehabilitation and Inspection Program before the flood event. P.L. 84-99 will repair levees to only pre-event conditions, and no improvements or enhancements are authorized. Outside of P.L. 84-99, riverine and coastal levee OMR costs for non-federal levees are not a federal responsibility. The role of the Corps of Engineers in levee OMR across the nation generally is one of technical support, including levee inspections and providing manuals and training on levee OMR.
Flood risks can be only partly mitigated by protective structures, and levees and coastal structures provide protection from some, but not all,
floods. Flood risks can be also mitigated by many ‘nonstructural’ factors, including measures such as building codes, flood insurance, and zoning. Generally speaking, nonstructural flood risk reduction measures are those that do not affect the flow of flood waters. Rather, they address how and where development might take place or how risks to existing development can be reduced by elevation, relocation, or other mitigation measures. Reduced availability of federal resources for large civil works projects for flood protection thus does not necessarily entail increased risks from flooding and, in some instances, may present opportunities to implement less expensive and more sustainable flood risk alternatives.
In many parts of the nation, there are large numbers of people and extensive amounts of property behind existing levees and other protective structures that have significant maintenance and rehabilitation needs. Proper maintenance and rehabilitation of these structures, especially in large urban areas, presents substantial technical, financing, and other challenges. Flood risks in these settings will not be reduced easily or quickly by implementing nonstructural measures. At the same time, given the limited availability of general funds from the federal government, and financial challenges facing nearly all U.S. state and local governments, there is a pressing need for less costly and more efficient measures to reduce risks to public safety and to reduce flood damages. Communities with substantial flood hazards surely will continue to explore financing and construction opportunities to maintain and rehabilitate traditional flood protection structures. The details of funding, financing, and taxation processes and opportunities are very site specific and typically entail complex collaborations and contracts among federal, state, and local—both public and private— entities. A number of agencies, including the Corps of Engineers, are conducting meaningful evaluations regarding these financing and fiscal opportunities and details. Although careful evaluation of the myriad financing and fiscal opportunities was beyond this project’s limited scope and resources, further interagency collaboration and discussion will be useful in developing some demonstration efforts to advance the concepts.
The Corps of Engineers today owns and operates approximately 700 dams. These dams range in size and purpose from large multipurpose projects to waterways navigation dams. Not all these dams serve flood control purposes. Navigation dams on the upper Mississippi and Ohio Rivers, for example, were not designed for flood protection and do not provide such benefits. Corps dams that provide flood risk reduction almost always support multiple purposes, such as hydroelectric power generation, water supply, and recreation. Approximately 95 percent of the dams managed by the Corps are more than 30 years old, and 52 percent have reached or exceeded nominal 50-year project lives (USACE, 2012b; USACE, 2012c). It must be emphasized, however, that a nominal project life has uncertain meaning for major components of dams, such as large earth embankments or concrete monoliths.
The Corps of Engineers has developed an extensive set of programs and activities as part of its Dam Safety Program, which includes studies and remediation construction (USACE, 2012c). Recent evaluations by the Corps find that half of the Corps’ dam portfolio is actionable for rehabilitation, and that the potential requirements would exceed $20 billion (Halpin, 2009). These dams are widely spread across the nation and exhibit varying degrees of deficiency and life-safety risk. It is important to note that, from a life-safety perspective, high-hazard dams are defined as those whose failure would place one or more lives in danger (Interagency Committee on Dam Safety, 1998).
Many problems associated with levees have come into the spotlight since Hurricane Katrina and since identification of levee reliability issues in the California Bay-Delta region. These problems range from catastrophic failure of some levees and floodwalls in New Orleans, to structural integrity of levees that are owned and maintained by local authority and may be inadequately designed and/or maintained. The problems include difficult questions about how to determine the structural, hydrologic, and other
technical aspects of existing levees, to who has the authority to ensure levees are adequately designed, constructed, and maintained, to responsibilities for the consequences when levees overtop or fail. The complex levee ownership and maintenance issues in the Sacramento District provide a good example (see Box 3-9). A fundamental concern is that there is no comprehensive, easily accessible national listing of all flood-protection levees.
This would provide crucial information in informing decision makers in deciding which levees may be adequate for the areas they protect, which are not, which might be candidates for continued investment, and which are simply piles of dirt created over the years to reduce floods on farmland or other low-lying areas.
As a first step toward an inventory, Congress provided $30 million in emergency supplemental funds to the Corps in 2005 to begin an inventory of levees within the Corps portfolio (which includes federally maintained levees, plus all levees qualified to be included in the Corps rehabilitation program under Public Law 84-99). Some estimates are that the federally owned fraction may be as low as 10 percent of levees across the nation (National Committee on Levee Safety, 2009). Additional funding has been provided so that the Corps now has a listing, location, ownership, and general condition of the roughly 2,000 miles of federally owned and maintained levees, as well as the 12,000 or so miles that were federally built and locally maintained and in the federal “system” (P.L. 84-99 program). Some estimates suggest that there are perhaps another 100,000 miles of levees in the United States whose location, ownership, and condition are largely unknown. The Corps has asked states to seek data to add whatever levee information they might have to the inventory, which may add some more information to the database, but likely will be limited in nature. It is unclear what portion of the 100,000 miles even warrants inclusion in the inventory.
Funding Issues and Options
The Corps program has been undergoing significant changes in response to the National Dam Safety Act (which was passed as part of WRDA, 1996) and
SACRAMENTO-SAN JOAQUIN DELTA LEVEE SYSTEM: RISKS AND REHABILITATION
California’s Central Valley, one of the nation’s highly productive agricultural regions, is drained by the Sacramento River flowing from the north and the San Joaquin River flowing from the south. These rivers converge in the Sacramento-San Joaquin Delta before flowing to Suisun Bay and eventually to the San Francisco Bay and the Pacific Ocean. The Delta region comprises about 738,000 acres of land in six counties. Once dominated by islands, wetlands, and riparian forests, the Delta has been completely reconfigured for agriculture. Beginning in the 1850s, levees were constructed along the Sacramento and San Joaquin Rivers, and many of their tributaries, to make the land usable for both human settlement and agriculture (Kelley, 1989).
The Central Valley today has one of the nation’s most extensive levee systems, with approximately 1600 miles of federal levees and an equal length of nonfederal levees. The Delta region includes approximately 1100 miles of levees, of which 385 levee miles are incorporated into federal flood control projects, mostly along the main-stem Sacramento and San Joaquin Rivers. The 700-plus miles of nonfederal levees, many of which line not rivers but rather channels and prevent tidal inflows, generally do not meet the same design standards as the federal levees (USACE, 2006). Unlike river levees, which experience only periodic water loading during floods, many Delta levees have constant water loading. The aging Delta levee system is fragile and undergoing failure (USACE, 2006; Mayer, 2010). Performance is
recommendations by a specially convened independent, external review panel (ASDSO, 2001). A “risk informed” management approach has been adopted and is being implemented (see USACE, 2012d). The Corps Dam Safety Program is important in the context of this report and its emphasis on setting priorities for infrastructure investments. The Corps is using a risk-based approach to assess the risk status of dams and to prioritize dam safety investments for the dams in need of life-safety risk-reduction actions.
Within its dam safety program activities, the Corps has conducted a screening of all of its nearly 700 dams to identify and classify its highest risk dams in need of urgent and compelling action (USACE, 2012c). The Corps’ Dam Safety Action Classification (DSAC) program is intended to provide consistent and systematic guidelines for appropriate actions to address dam safety issues and of an urgent and compelling situation requiring immediate action for unsafe
degrading because limitations of original design, decreased capacity of flow channels from sedimentation, subsidence, sea level rise, and inadequate maintenance practices. There have been many Delta levee breaches, and there is great concern about multiple levee failures in the event of an earthquake or large storm. The City of Sacramento, now a major urban area with a population of approximately 500,000, is at substantial risk for a catastrophic flood event (Mayer, 2010).
Both federal and nonfederal levees in the Delta region are maintained by local reclamation districts with assistance from the State of California (USACE, 2006). Levee system maintenance historically has been inadequate because funding from reclamation district taxes on predominantly agricultural lands is low.
To begin to address the inadequate and failing levee infrastructure of the Delta, Congress passed the CALFED Bay-Delta Authorization Act in 2004. The CALFED Act directed the Corps to identify and prioritize potential levee stabilization projects that could be carried out with authorized federal funds ($90 million initially and supplemented with $106 million in WRDA 2007) and required matching support. In response, the Corps invited Delta stakeholders to submit project proposals along with commitments of cost sharing. Delta region reclamation districts and flood management agencies submitted 68 project proposals totaling more than $1 billion in estimated project costs (USACE, 2011a). Work has begun on the projects determined by the Corps to be of highest priority. This is just a first step to addressing Delta levee system rehabilitation and redesign needs. A long-term strategy is being developed with the State of California through the Sacramento-San Joaquin Delta Islands and Levees Feasibility Study.
deficiencies of Corps dams (ibid.). The actions range from immediate recognition dams, through normal operations and dam safety activities for safe dams.
Levees and Other Protection Infrastructure
OMR funding for flood protection levees presents its own set of financing challenges. In comparison with dams and their flood control purposes and OMR arrangements, however, levees present a clearer line of relative responsibilities. The roughly 14,000 miles of levees in the federal levee system include, for example, the large Mississippi River levees that are part of the Mississippi River and Tributaries (MRT) project. Such levees are federally owned, and their OMR costs for flood protection improvements generally are 100 percent federal
responsibility. The tens of thousands of miles of other levees across the nation are owned by and are the responsibility of local governments, member organizations (e.g., special levee districts), or private entities. Some of these levees were constructed by the Corps of Engineers and turned over to communities.
For levees constructed by the Corps, the minimum nonfederal (local) share is 35 percent. Local cost-share requirements can represent a considerable challenge to financially struggling communities that are seeking structural flood protection. As a result, many communities consider less expensive alternatives for flood risk management, which could include options such as relocations, zoning restrictions in floodplain areas, building codes, and other ‘nonstructural measures’ (see Box 3-10). Such flood management alternatives are not new. The late geographer Gilbert White, for example, and many other scholars and practitioners, for decades encouraged less intensive floodplain development and alternatives to large civil works structures to combat floods (see White, 1945, 1960).
Despite some successes, these types of alternatives have not always received full consideration. Federal water project planning guidance, for example, may not always have encouraged unconventional, nonstructural alternatives (see Box 3-10; also see NRC, 1999). In any event, a resource constrained environment will cause communities and others to carefully consider less expensive alternatives to flood risk management, which require fewer long-term OMR costs, and which may also enhance environmental benefits. As stated in this committee’s 2011 report, “given current budget realities, the nation may have to consider more flexible, innovative, and lower cost solutions to achieving water-related objectives” (NRC, 2011).
Flood Risks, Infrastructure, and National Flood Policies
Despite billions of dollars invested in flood control structures by the Corps of Engineers, the U.S. Department of Agriculture, and the Department of the Interior, and despite a National Flood Insurance Program enacted in 1968, U.S. flood damage losses increased during the twentieth century (National Weather Service, 2012).
This trend of increasing national flood damage losses over time has continued into the twenty-first century (Figure 3-5). The late geographer Gilbert
COMMUNITY COMPREHENSIVE APPROACHES TO MANAGING FLOOD RISK
Past federal top-down approaches to manage flood risk typically promoted structural measures like levees or dams. Furthermore, prior to passage of the 1986 Water Resources Development Act and a new set of cost-sharing criteria, structural projects built by the Corps were 100 percent federally funded, which made them a favored solution for communities. The Corps approach to managing flood risks was developed by a cadre of Corps engineers trained in hydrology and hydraulics in the early twentieth century. The Corps processes estimating flood control project benefits, such benefit-cost analysis, and estimates of “damages prevented,” were designed around civil works structures.
Starting in the late 1960s, some communities began questioning the strong reliance on structural solutions to flood risks. Questions were raised about the Corps’ apparent inability under federal rules and procedures to identify viable nonstructural alternatives in its flood damage reduction studies. A committee of the National Research Council considered these issues and concluded that “the benefits of flood damages avoided should be explicitly accounted for in calculating project benefits” and recommended further study to determine if systematic biases existed against nonstructural solutions (NRC, 1999).
The city of Napa, California actually had to get congressional authorization for a combined solution, with a setback levee, purchase and restoration of upstream wetlands to store floodwater to lower flood levels, Department of Transportation funding to funding to raise bridges that were blocking flow, and FEMA mitigation buyout grants for some buyouts.
Grand Forks, North Dakota used FEMA buyout grants to buy out structures within a few blocks of the river, then grants from the Housing and Urban Development Authority (HUD) money to buy out a few more houses to make room for a much smaller levee way back from the river, leaving the buyout land for a recreational park that is used for camping but not permanent structures that could be damaged in floods.
Davenport, Iowa, is the largest city along the Mississippi River without a flood control levee. The city decided that it did not want a levee that would wall the city off from the Mississippi River and its aesthetic, historical, and cultural values. Over the years, the city has bought out structures to create parks and open space, limiting development in order to limit possible flood losses.
Today, Cedar Rapids, Iowa, is in the process of recovering from a disastrous 2008 flood of the Cedar River that inflicted considerable damage on structures in the floodplain. The city is working with the Corps of Engineers and is implementing a plan that includes a combination of structural works for higher-value property (some of which has been/is being constructed with private funds), relocations, and changed zoning regulations in vulnerable floodplain areas.
Nonstructural and less traditional approaches to flood risk management often present very complex administrative, real estate, financing, and social and cultural challenges. Satis-
factory policies invariably take years, or decades, to develop and thus require sustained community leadership. These approaches generally enjoy strong citizen support in the long run, as they tend to be economically viable, improve public safety, make the community more resilient in the face of disasters, reduce threats of flood losses to structures, and are compatible and beneficial to local aquatic and riverine ecosystems.
FIGURE 3-5 Average Annual U.S. Flood Damages.
SOURCE: Data from the National Weather Service, 2012.
White was a leading advocate for alternative approaches to U.S. flood risk management and floodplain development. In his doctoral dissertation, which was entitled Human Adjustment to Floods, he promoted the idea that, instead of various concerned entities’ trying to control rivers and waterways with dams, flood-prone areas would be better left undeveloped (White, 1945). In connection with his earlier work as secretary to the Mississippi Valley Committee of the Public Works Administration, White (1939) stated that U.S. national flood policy was one of:
• Protecting floodplain occupants against floods,
• Aiding them when they suffer flood losses, and
• Then encouraging more intensive use of the nation’s floodplains.
Although national floodplain development decisions have generally favored a stronger reliance on civil engineering works than Gilbert White and others might have advised, the dwindling of federal resources available for structural options will cause more states and communities to consider less expensive flood-risk management strategies. Research from White and others demonstrates that the extent and condition of physical infrastructure does not necessarily correlate 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 nontraditional alternatives 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 ‘nonstructural’ 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 approaches cannot fully eliminate flood risks in vulnerable areas.
The Corps often uses Figure 3-6 today 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 United States and the federal levee systems, dams, and coastal protection infrastructure that serve flood control purposes defy simple categorization of overall level of protection provided and the infrastructure’s condition and priority maintenance and repair needs. Congress has authorized the Corps to work with FEMA on a dam safety program and on a levee safety 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
FIGURE 3-6 Shared Flood Risk Management: “Buying Down Risk.”
SOURCE: Riley, 2008.
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.
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 well maintained engineering structures can be overtopped by floods. Flood damage risk also involves policies such as zon-
ing, 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 leveed areas. Currently, there is no provision in Corps programs or sponsorship agreements that encourages 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 also 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 management will feature less federally centered and top-down projects with large civil works structures, 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 risks by strengthening requirements for flood insurance, improving flood mapping, and allow 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 expected 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 communities 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 behind 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 resilience and sustainability. They also provide opportunities for the Corps of Engineers to transition from its previous leadership role, primarily through civil works construction, to being a leading federal partner in flood risk management via more technical support and collaboration with states and communities.
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 management and navigation missions and is a national leader in generating hydroelectric power. Hydropower facilities represent an important component of the Corps “hard infrastructure” that 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 hydropower 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 nonfederal 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 megawatts (MW; Sale, 2010). In addition, there are another 90 nonfederal hydropower 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 marketing federal hydropower. The four PMAs— Bonneville, Western, Southwestern, and Southeastern-market power to much of the continental United States. 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 contractu-
al issues at play that limit the Crops’ ability to access revenue generated at most of its power facilities, with those of the Bonneville Power Administration being a notable exception. The Corps hydropower program also is affected by pressures to reallocate reservoir storage to non-power uses.
This section examines the status of the Corps hydropower program, challenges it faces, and unique opportunities that it has relative to other water resources infrastructure because of inherent 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).
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 capacity. 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 hydropower sales is in the range $2 billion to $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 percent 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 increasing steadily since at least 1999 (Figure 3-7).
In an era of heightened interest in energy policies and sources, electricity generation from Corps hydropower projects has been decreasing steadily as a result of insufficient equipment maintenance and rehabilitation. Total electric power generation from Corps hydropower projects decreased from 73.6 TWh
FIGURE 3-7 Total hours of forced outages over all Corps hydropower projects for 1999-2008.
SOURCE: Sale, 2010.
in 2000 to 61.7 TWh in 2008 (Sale, 2010), a decrease of 16 percent. At some Corps hydro power projects, none of the original equipment has been replaced since the facilities 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 technological developments through upgrading to newer, higher-performing technology. Recent developments in hydro-power generating technologies and materials offer opportunities to upgrade to more efficient operations with less water use and less environmental impact, but fiscal constraints 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 to 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 using 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 outside 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, rehabilitate, and upgrade equipment. The fate of hydropower is 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 water 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 United States, which could affect some Corps hydropower projects in the future, although likely not the largest projects. In addition, climate change adds concerns about reliability and predictability of hydropower development. Hydropower production also faces increasing 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 hydropower at particular project locations.
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 navigation, $512 million for aquatic ecosystem restoration, and $252 million for recreation (USACE,
2012e). The Corps hydropower budgets in 2010, 2011, and 2012 were $230 million, $207 million, 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 replacement 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 in Sale (2010), PMAs are required by law to sell federal hydropower 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) status 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 sustainable 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 hydropower plants licensed by FERC [Federal Energy Regulatory Commission] and operating 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.
The Modernization path may also require significant changes in authorities, financing, 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 implementation of the new Hydropower [Memorandum of Understanding] with the DOE and DOI (Sale, 2010).
A partnership on hydropower was established in March 2009 via a Memorandum of Understanding involving the Corps, the Department of Energy, and the Bureau of Reclamation. The partnership 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 legislation 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 hydropower by primary customers is likely to be strongly opposed.
Modernization of the Corps hydropower program will require new legislation, new authorities, new funding, and modification and expansion of Corps partnerships. With low and declining 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 construction and rehabilitation.
The Bonneville Power Administration has the authority to fund OMR directly from power 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 expanded, diverse partnerships with federal power customers, the PMAs, and the nonfederal power industry.
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 directly 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 generators, 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 they failed to receive congressional approval. However, some limited PMA customer funding agreements have been developed.
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 in Sale (2010), the Corps’ responsibility to use sound business practices in managing its hydropower program provides ample justification for incorporating the funding needs for replacement of aging equipment into customer rates for federal hydropower. Interagency discussions involving the Corps, the PMAs, and DOE will be crucial in moving forward on this and other, similar modernization initiatives.
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 production, is quite aged and has not been adequately maintained. Funding needs for the repair and rehabilitation of this infrastructure are substantial, and it is clear from the long-term trend of declining 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 because of lack of funding.
Corps of Engineers infrastructure has different OMR needs, ranging from lock repair, dam safety, 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 resources 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, however, 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 different goals, and different modes of taxation and sources of revenue. Its distinctive and diverse water 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 challenges will be specific to the Corps.
Corps of Engineers water resources infrastructure responsibilities, including navigation, 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 participation in Corps OMR activities might be enhanced.
Opportunities for greater private-sector involvement in Corps infrastructure operations and maintenance activities will vary by Corps mission area, and by economic sector. 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.
The inland navigation system presents an especially formidable challenge and a set of difficult choices. There are stark realities and limited options, including:
• Funding from Congress for project construction and rehabilitation has been declining 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 system 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 system 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 management options that are more efficient and less costly and provide greater environmental benefits. 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 present the Corps of Engineers opportunities to collaborate more closely with local communities in providing technical information and other types of support.
Future investments in hydropower generation will balance the need for reliable sources of domestic energy, relative efficiencies and flexibility of hydropower, and environmental implications of reservoir storage and release regimes. The capacity of existing Corps hydropower is not being realized, and in fact is declining.
Because of its revenue-generating potential, hydropower is in an especially good position to accommodate public-private investments required to increase capacity and reliability. Some modification of operating regulations by the U.S. Congress will be needed to realize this potential.
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, heighten 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 associated 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 advances. 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 declining 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 previous report from an NRC Transportation Research Board panel of experts on investment to enhance U.S. freight capacity (NRC, 2003), Corps water infrastruc-
ture investments should be made according to a set of principles that help ensure sustained contributions to economic development.
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 follows:
• Promote economic efficiency, with investments directed to improvements that yield greatest economic benefits.
• Limit government involvement to circumstances in which market-based outcomes clearly would be highly inefficient. Government also is responsible for managing facilities where it has important historical responsibilities that would not be easily altered, and where institutional complexity necessitates government leadership.
• 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.
Along with economic development principles, broader social and environmental goals for Corps projects, including public safety purposes, of course need to be considered when prioritizing OMR investments for Corps projects (the complete listing of these principles is on Economic Efficiency and Future Infrastructure Investments).