Debates about funding for the inland waterways system have long centered on the level of funding required, the roles of the federal government and users in paying for the system, and how users and other beneficiaries could be charged. These issues deserve renewed attention in light of shrinking federal budgets, declining appropriations for the inland waterways system, and increasing maintenance needs for its infrastructure. The National Research Council’s Committee on Reinvesting in Inland Waterways: What Policy Makers Need to Know examined the role of the inland waterways in the nation’s freight transportation network and identified issues that policy makers need to consider in decisions about funding for the system. (See Chapter 1 for the committee’s statement of task.)
Summary of Major Conclusions and Findings
The policy context in which these issues were considered and the committee’s conclusions are summarized below. Three main messages emerge, as follows:
- Reliability and performance of the inland waterways freight system are the priorities for funding.
- Reliability and performance will depend more on investments in operations and maintenance (O&M) than on capital expenditures for larger locks.
- More reliance on a user-pays approach to funding the inland waterways for commercial navigation is feasible, would provide additional
revenues for maintenance, and would promote economic efficiency for the system.
The infrastructure of the federal inland waterways system is managed by the U.S. Army Corps of Engineers (USACE) and funded through USACE’s navigation budget. The nation’s inland waterways include more than 36,000 miles of rivers, waterways, channels, and canals, with 241 locks managed by USACE at 195 sites.* The chief and most expensive component of providing for navigation service is the installation and maintenance of lock and dam infrastructure to enable the upstream and downstream movement of cargo.
Historically, the federal government invested in the building of the inland waterways system to aid in the physical expansion of the United States and the growth of the U.S. economy by facilitating cargo shipments. Before 1978, the federal government paid all costs associated with construction and maintenance of the inland waterways. Legislation passed in 1978 and 1986 established the current funding and cost-sharing framework. Today, 11,000 miles of the inland waterways are subject to a federal fuel tax paid by the barge industry via the Inland Waterways Trust Fund to cover up to 50 percent of the cost of construction and major rehabilitation of lock and dam infrastructure. The federal government pays 50 percent of construction costs from general revenues and 100 percent of the cost of O&M (by budgetary definition, O&M includes repairs up to $20 million; repairs that exceed $20 million and meet other criteria are considered major rehabilitation and classified as a capital expenditure). Although policy debates about funding for the inland waterways have focused on capital projects, O&M, which is paid for entirely with federal general revenues, now accounts for three-fourths of the annual budget request for inland navigation.
Because of historical precedent, the federal role in the management and funding of the inland waterways for commercial navigation is
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* See Footnote 3, page 15.
already greater than for other freight modes. The total federal share of the cost of the inland waterways system is estimated to be about 90 percent. The federal share is roughly 25 percent for the highways used by motor carriers and 0 percent for pipelines and nearly so for railroads (both private industries for which the federal role is primarily one of safety and environmental regulation). Whereas federal general revenues cover all O&M expenses for the inland waterways, states pay 100 percent of the O&M expenses, mostly from user fees, for intercity highways used by motor carriers. O&M expenses for railroads and pipelines are paid for by the private industries responsible for these modes.
With the exception of a one-time infusion of funds from federal economic stimulus legislation in 2009, the funds appropriated for inland navigation have declined over the past decade in terms of constant dollars for both O&M and construction. The level of funding required to sustain a reliable inland waterways system is not clear. The level of service required from the system, and therefore the parts of the existing system that need to be maintained, has not yet been defined. USACE does not have established systemwide guidance and procedures for the assessment of inland waterways infrastructure and the prioritization of maintenance and repair spending for reliable commercial navigation. In view of stagnant federal appropriations, system users have recognized that they need to pay more and supported an increase in the barge fuel tax by the 113th Congress. However, the increase will not be sufficient to maintain the system and only heightens the urgency of settling on a plan for maintenance, since under federal law any new revenues from the barge fuel tax can be used only for construction and not for O&M. Moreover, because funds raised by the barge fuel tax for capital projects must be matched by the federal government, O&M competes directly with construction for federal general revenue funds. Without a new funding strategy that prioritizes O&M, maintenance may be deferred until it reaches $20 million (the point at which it becomes classified as a capital expenditure), which would result in further deterioration and in a less cost-effective and less reliable system.
USACE has missions and management responsibilities that extend beyond providing for commercial navigation. With the authorization
of Congress, USACE, under its Civil Works Program headed by the Assistant Secretary for Civil Works, plans, constructs, operates, and maintains the following: lock and dam infrastructure for commercial shipping; channel depths required for ports and harbors; dams, levees, and coastal barriers for flood risk management; and hydropower generation facilities. Other USACE responsibilities include maintenance of water supply infrastructure (municipal water and wastewater facilitates) and provision of waterborne recreation (i.e., boating). For the most part, these missions are independent of one another, since most projects are authorized for a single purpose. However, for many navigation projects, the availability of pools behind dams has allowed others to benefit from water supply for municipal, industrial, and farming purposes and for recreation. Any decisions about funding for navigation will need to consider the implications for this broader range of beneficiaries.
The following considerations warrant particular attention in decisions about funding for the inland waterways system.
1. The inland waterways system is a small but important component of the national freight system.
The role of the inland waterways system in national freight transportation has changed significantly since the system was built to promote the early economic development of the nation. Today barges carry a relatively small but steady portion of freight, mainly bulk commodities that include in rough order of importance coal, petroleum and petroleum products, food and farm products, chemicals and related products, crude materials, manufactured goods, and manufactured equipment. Annual trends in inland waterways shipments show that freight traffic is static or declining. Overall demand for the inland waterways system is static, whereas demand for the rail and truck modes is growing. In recent years, the inland waterways system has transported 6 to 7 percent of all domestic cargo (measured in ton-miles). The truck mode has carried the greatest share of freight, followed by rail, pipeline, and water.
2. The most critical need for the inland waterways system is a sustainable and well-executed plan for maintaining system reliability and performance that ensures efficient use of limited navigation resources.
Lost transportation time due to delays and lock unavailability (outages) is a cost to shippers and an important consideration in deciding on future investments. Systemwide, about 80 percent of lost transportation time is attributable to delays. On average, 49 percent of tows in 2013 were delayed across the 10 highest-tonnage locks, with an average length of tow delay of 3.8 hours. While some delay is expected for routine maintenance, weather, accidents, and other reasons, lost transportation hours (delays and unavailabilities) can be affected by maintenance outages related to decreased reliability of aging machinery or infrastructure. Lost transportation hours also can be affected by capacity limitations, which may be intermittent or seasonal. About 12 percent of lost time on the inland waterways system is due to scheduled closures and about 8 percent is due to unscheduled closures. Thus, 20 percent of lost transportation time could be addressed with more targeted O&M resources. Directing O&M resources toward major facilities with frequent lockages and high volumes and where the lost time due to delay is significantly higher than the river average could improve navigation performance. Data are not available on the reasons for delay. Delays might be attributable to intermittent or seasonal peaks in volume due to weather, harvest, undercapacity, or other causes. Most lost time due to delay is at locks with periods of high demand often related to peaks in seasonal shipping, mainly for agricultural exports.
Furthermore, as described in Chapter 2, the inland waterways cover a vast geographic area, but the freight flows are highly concentrated. Seventy-six percent of barge cargo (in ton-miles) moves on just 22 percent of the 36,000 inland waterway miles. About 50 percent of the inland waterway ton-miles moves on six major corridors—the Upper Mississippi River, the Illinois River, the Ohio River, the Lower Mississippi River, the Columbia River system, and the Gulf Intracoastal
Waterway—which represent 16 percent of the total waterway miles. Some inland waterway segments have minimal or no freight traffic. The nation needs a funding strategy that targets funds to waterway segments and facilities essential to freight transportation and away from places that are not as important. This “triage” is already occurring in USACE’s budgeting process.
3. More reliance on a user-pays approach to funding the commercial navigation system is feasible and could generate new revenues for maintenance while promoting economic efficiency.
In a climate of constrained federal funds, and with O&M becoming a greater part of the inland navigation budget, it is reasonable to examine whether beneficiaries could help pay for the system to increase revenues for the system and improve economic efficiency. Indeed, Congress, in the 2014 Water Resources Reform and Development Act (Section 2004, Inland Waterways Revenue Studies), called for a study of whether and how the various beneficiaries of the waterways might be charged. Federal general revenues presently cover most of the cost of the inland waterways system. Commercial navigation users, the primary identifiable beneficiaries of the system, pay a share of the construction costs through a barge fuel tax, but none of the costs of O&M.
A system more reliant on user payments would provide needed revenue for maintenance and promote economic efficiency. It also would be more consistent with the federal posture toward other freight transportation modes. Setting user charges to move the inland waterways system closer to economic efficiency would provide for more adequate maintenance for the important parts of the system and contribute to a more efficient national freight transportation system. Economic efficiency is promoted when user charges are first used to recover the O&M costs of the inland waterways and when user fees relate directly to the service provided. In the long run, user payments structured properly to include O&M and depreciation could also provide enough revenue to replace components of the system as they wear out. User charges for the inland waterways system can
take the form of a dedicated tax such as the current fuel tax, a user fee, or some combination. The fuel tax can be an important source of revenue, but revenue potential alone is not sufficient for judging a funding strategy. User fees (segment- or facility-specific) instead of or in addition to the fuel tax are an option to consider as part of a comprehensive funding approach. Criteria for choosing among the user payment options include the following: promotion of efficient use of waterway resources, distribution of burden, ease of administration, promotion of user support for cost-effective expenditures, and requirements for congressional authorization. No single payment alternative offers a perfect choice; for example, the preferred option for achieving a policy goal may combine an increase in the barge fuel tax with other user fees.
To gain support from commercial navigation users, any additional revenues from users would be dedicated to the inland waterways system to ensure a source of funds for meeting system priorities and to respond to concerns of users that new payments intended for navigation could be reappropriated for other purposes. A revolving trust fund for maintenance would help ensure that all new funds collected are dedicated to inland navigation. Rules and conditions for managing the fund would be set by Congress if such a fund were authorized. The fund would be administered by USACE, and the Inland Waterways Users Board’s advisory role, which is currently limited to capital spending for construction, could be broadened to include spending for O&M and repairs. Amounts from the Inland Waterways Trust Fund are disbursed through congressional appropriations under current practice, which can result in delays in funding and deferred maintenance with increased costs. Direct administration of the trust fund would allow the spending of O&M funds as needed to provide reliable freight service and avoid the increased costs associated with deferred maintenance.
Because of constraints on its budget, USACE has already begun identifying waterways and facilities where commercial navigation is essential to national freight transportation or where significant commercial traffic continues. A policy and a process for identifying the components of the system essential for freight transportation
are needed.1 A path to removing the cost of parts of the system not essential for freight service presently charged to the federal inland navigation budget may further the prospect of shifting to a user-based funding approach for commercial navigation service. Alternative plans and potential funding mechanisms (described in Chapter 5) are available for segments and facilities that are deemed not essential to freight transportation but that may provide other benefits.
Deciding the amount beneficiaries would need to pay for the commercial navigation system and how to allocate the costs among beneficiaries would be complex tasks. The economic value of parts of the system to commercial navigation beneficiaries would need to be identified, and a systemwide assessment of the assets required to achieve a reliable level of freight service would need to be made (see next conclusion).
4. Asset management can help prioritize maintenance and ascertain the level of funding required for the system.
Regardless of who pays for the system, a standard process for prioritizing spending of available funds is needed. The capital projects backlog is not a reliable indicator of the amount of funding required for the system. A modest amount of the backlog is for navigation projects. A portion of the navigation backlog includes major rehabilitation to maintain the system, but it does not include O&M. Furthermore, the navigation backlog may include projects that are a lower priority for spending. Congress has long authorized and appropriated USACE capital projects on a project-by-project basis. A benefit–cost analysis prepared by USACE is the primary source of technical information that Congress uses during the authorizations process in deciding when spending is justified for capital projects. While benefit–cost
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1 A general framework for considering which parts of the system may warrant inclusion in the navigation system given levels of freight traffic is presented in Chapter 5; however, any distinctions and decisions would require technical data and analysis to support a policy judgment that surely will need to involve the Inland Waterways Users Board. Any drawing of lines for inclusion in the navigation system may be challenged. In view of this reality, one approach may be to have an appeals process under which current commercial users of a segment or a facility in a segment that has been identified as nonessential for freight movements can petition to be included in the federally supported navigation system.
analyses have been used for determining whether a project meets a minimum threshold for funding, they have not been used to rank projects, and the result has been far more projects being authorized than can be afforded within the constraints of the budget. A method for prioritizing projects on the basis of the service needs of the system would be more useful than an attempt to estimate and seek funding for the existing backlog.
The advanced age of locks is often used to communicate funding needs for the inland waterways system. Age, however, is not a good indicator of lock condition. A substantial number of locks have been rehabilitated, which would be expected to restore performance to its original condition if not better. Furthermore, with some exceptions, little correlation exists between the age of locks and their performance as measured by delay experienced by system users. Dating the age of assets from the time of the last major rehabilitation, as is done for highway infrastructure such as bridges, would be more accurate. USACE does not publish consistent records of rehabilitation dates for its various lock and dam assets, however. Making such information available to policy makers, alongside information about the reliability and performance of the system, could improve the efficient allocation of available resources.
An asset management program focused on economic efficiency, fully implemented and linked to the budgeting process, would prioritize maintenance spending and ascertain the funding levels required for reliable freight service. A well-executed program of asset management would promote rational and data-driven investment decisions based on system needs and minimize the broader influences that affect the budgeting process.
USACE has adopted a generally appropriate framework for asset management that is mostly consistent with the economically efficient asset management (EEAM) concept described in Chapter 4, but it is not yet fully developed or deployed across USACE districts. The framework recognizes the importance of economic consequences for strategic investment instead of assuming that all navigation infrastructure needs to be maintained at its original condition. The approach appropriately includes assessment of three main elements that follow
from EEAM: the probability of failure of the infrastructure; infrastructure usage (demand), defined as whether the waterway has low, moderate, or high levels of freight traffic; and the economic consequences of failure to shippers and carriers.
Whereas maintenance is a priority for the system, decisions about whether to invest in construction for capacity expansion at key bottlenecks and how to prioritize these investments against other investments for the system will continue to arise. Decisions about whether investments in construction to expand capacity at the corridor level are economically justified would require more information about delays and the ability of nonstructural alternatives or smaller-scale structural improvements (to increase processing time) to achieve the desired level of service. Collection of data and development of performance metrics would enhance understanding of whether delay problems could be most efficiently addressed by more targeted O&M, traffic management, capacity enhancement, or some combination of these. Once an asset management approach was fully developed and applied, it could be used to prioritize allocation of resources for O&M and indicate areas where major rehabilitation or other capital spending should be considered.
Several elements of the USACE framework would need further attention for implementation (as discussed in Chapter 4). First, there is no single best measure of risk tolerance; a level of risk tolerance will need to be defined for each asset. Second, the approach will need to be implemented systemwide to gain the greatest level of service and economic benefits. Third, whereas the data required to apply the framework are already available for the most part from USACE’s Lock Performance Monitoring System, refinements could be considered. Metrics to assess the location, timing, and reason for delays routinely could be developed and linked to data on the economic consequences of delay to prioritize investments. Under certain investment scenarios it may be necessary to consider the usage level of individual locks when maintenance priorities are established. For example, in some cases, the ability to handle peak periods (and the economic consequences of not being able to do so) needs to be considered rather than relying first on annual average waterway ton-miles. A consistent method
of recording delays across the system would be needed, and perhaps additional information on delays could be recorded. Information on accidents also would be useful. Fourth, EEAM would be most effective if USACE also had the ability to manage and spend O&M funds according to priorities set through the EEAM process at the district level. This would allow USACE to have the greatest impact on the reliability of freight service given the immediate conditions. Funds would still be disbursed through the appropriations process. Policies and procedures would be needed to ensure the consistent application of district- and division-level assessments under the EEAM process.
