Private Funds Needed to Fix Locks and Dams

This Business of Farming

Without outside investment, the Army Corps of Engineers would need decades to complete upgrades

Published on: May 16, 2013

When the U.S. Senate passed the Water Resources Development Act (WRDA), it was a major step toward fixing the gnawing infrastructure problems our country faces now and in to the future. The most glaring may be on our waterways. Without maintenance of our eroding locks and dams, the risk of catastrophic failure grows. Fifty-seven percent (57%) of the locks and dams on the nation’s inland waterways system have exceeded their economic design life expectancy.

WRDA would sanction more than 20 new U.S. Army Corps of Engineers projects, some aimed at making ports more accessible in line with 2015 completion of a widened Panama Canal. It would ensure that more money in the Harbor Maintenance Trust Fund, financed by user fees, actually goes to harbor improvements. It takes steps to expedite the environmental review process and streamline the process for Corps projects and reduce project completion times. It would free up money and increase the capacity of the Inland Waterways Trust Fund (IWTF) by taking the Olmsted Lock and Dam project out of the trust fund account.

What happens if a lock shuts down? You divert to another mode, which is costly, since a typical 15-barge tow equals 216 rail cars or 1,050 trucks. Consider the LaGrange lock and dam, located on the Illinois River. "This is the poster child for problem locks and dams," says Ken Erickson, senior partner at Informa Economics. If the LaGrange lock would be shut down for 90 days during peak soy harvest movement, 341 barge loads would need to be diverted. That's 21,000 truckloads, or 5,200 railcar loads.

"Now you'd get a shock in terms of pricing grain," Erickson continues. "When you interrupt that movement between Chicago and the Gulf, the world falls apart."

According to the Corps' Project Completion Schedule, the LaGrange 1,200-foot lock addition is not scheduled until 2065. The Corps has a backlog of $60 billion in infrastructure projects.

So much to do, so little money to do it with. That's why a public-private partnership may now be the best way to fix river problems.

Getting need maintenance finished now will buy down risk. Every Army Corps project is ready to go; the holdup is money. A public-private partnership would look at volume and key users of river transport for potential funding sources. This could be a bonding effort, tax effort, or fee structure through a waterway authority.

Private interests can provide upfront cash through a bond, providing money to make fixes now. Meanwhile the government can add public monies supplemental to private funding. Then you at least alleviate the chance of catastrophic failure. Such an approach would likely need congressional support and some kind of method to assess and collect fees.

In March the Senate introduced a bipartisan bill, the Water Infrastructure Now Public-Private Partnership Act, to expedite water infrastructure projects, including locks and dams along the Mississippi and Illinois Rivers. The act would create a pilot program to see if a public-private agreement would work. The five-year pilot would identify up to 15 previously unauthorized projects, chosen by a disinterested third party.

Now that bill has been added as an amendment to WRDA.

Another public-private effort is called the Capitol Development Plan, now represented as “WAVE-4: Waterways are Vital for the Economy, Energy, Efficiency, and Environment.” Introduced by Congressman Ed Whitfield (Kentucky), it represents the collaborative efforts of Inland Waterway Users Board members, Corps  officials, agriculture and other stakeholders to address the efficiency of the Corps project delivery system and the need for a more stable funding stream.

The Plan prioritizes navigation projects across entire Inland Navigation System; improves the Corps’ project management and processes to deliver projects on time and on budget; preserves 50% industry/ 50% Federal cost-sharing formula for new lock construction and major rehabilitation lock projects over $100 million; provides that dam construction and smaller lock rehabilitation projects be 100% Federally funded; imposes a cost-share cap on new lock construction projects; and imposes a 30-45% increase (between 6 and 9 cents/gallon) in the existing fuel tax of 20 cents/gallon.

'Magic fairy dust'

Through the ages, efficient transportation has proven to be the unsung hero of a country's export power and global standing. "Most people think it is magic fairy dust the way we move shipments around the world," says Erickson. "But if you've got someone who wants what is being produced here, and you don't have an effective, efficient transportation system that allows those two parties to meet, you have no value for that supply."

Consider also the economic impact of moving a bushel of American grain to another spot on the planet. The industry that makes up the 'second handlers' of grain –  such as feeders and processors – account for 1.5 million jobs, more than $352 billion in U.S. output, and more than $74 billion in value added for the U.S. economy.

A few years ago a major Ag company came out with an ambitious goal to double grain production by 2030. The goal itself is ambitious, but it's doable. However, getting that added production from point A to point B is another question. To accommodate all those extra bushels we will put more trucks on roads, more barges through locks and dams, and more containers on railcars and inside ocean-going ships.

Striving for better transportation to market should be as high a priority for you as striving for higher yields. Without the former, the latter is just wasted effort.