Illinois' Proposed Public-Private Partnership

Last week, the Illinois General Assembly tried to hold a subject matter hearing on aging navigation infrastructure (I say “try” because it was rescheduled for December 2 at 10AM).  The hearing was based on this memo provided by the Illinois Department of Natural Resources.  They propose to establish a new Inland Rivers and Waterways Authority with a scope of work that includes advocacy for lock expansion via the Navigation and Ecosystem Sustainability Program (NESP).  And they propose the General Assembly support an application for an Illinois and Middle Mississippi River Public Private Partnership pilot program (IMMR P5).  The Water Resources Reform and Development Act of 2014 established this pilot program and the Corps of Engineers is accepting applications to designate the pilot projects.  It looks like private interests are seeking NESP funding through this new program. 

American Rivers submitted testimony, along with several Nicollet Island Coalition partners, opposing both of the above mentioned proposals.  Instead, we recommended Illinois abandon pursuit of funding for lock expansion and submit an IMMR P5 designation request for private financing of operations, maintenance, and rehabilitation only, using river coordinating bodies that already exist in statute – instead of creating a new authority.

The rationale behind the lock expansion opposition is detailed in the 2010 report, Big Price – Little Benefit:  Why Proposed Locks on the Upper Mississippi and Illinois Rivers are not Economically Viable.

Our other concerns are more nuanced.  The Inland Waterways System is the most subsidized mode of freight transport in the nation. More than 90 percent of the infrastructure costs are paid by federal taxpayers. While Illinois is trying to identify private investments under the IMMR P5 program, it’s possible much of the federal subsidies will be shifted onto Illinois taxpayers and will not significantly reduce the overall public subsidy for the private navigation businesses.

There are also major problems around the proposed cost recuperation plan outlined in the IMMR P5 Factsheet.  Tonnage tariffs and user fees are the only revenue stream listed from the private sector.  However, the barge industry has routinely fought every effort to incorporate such fees. A May 12, 2009 Press Release from the American Waterways Operators states:

“Replacing the excise tax on fuel that equitably distributes taxes on all commercial waterways users with a lock usage tax would impose disproportionate tax burdens on vessels transiting certain segments of the inland waterways, while other vessels using the system would pay little or nothing. This flawed approach would increase the cost of shipping essential commodities such as grain and petroleum and would undermine the nation’s inland waterways transportation system…”

Basically, the barge industry is saying that the fees Illinois plans to rely on to pay for the infrastructure would eventually drive barge traffic from those segments that have locks. It seems likely that the costs for major construction projects will not be recuperated.

We also opposed the creation of any government body or authority established specifically to pursue state or private funding for the NESP.  NESP has several fundamental flaws, which we detail in Big Price – Little Benefit.  The Corps of Engineers’ own study of the lock expansion component of the program demonstrates that the program is not economically justified, and that increasing barge traffic in the region will increase carbon emissions. There also is no evidence that taxpayer investment by the State of Illinois under the proposed IMMR P5 program will improve the benefits.  Pursuing funds for lock expansion would likely turn into a state financed boondoggle, and while it might benefit the navigation industry, it would certainly not benefit the Illinois taxpayer.

We also pointed out in the testimony that the work of the new “Inland Rivers and Waterways Authority” proposed to be created legislatively would significantly overlap with the already existing Illinois and Mississippi Rivers Coordinating Councils.  These Councils have the authority to make recommendations to the General Assembly and Governor regarding funding and spending in the Illinois and Mississippi River watersheds.  They also have the authority to identify new funding sources for river management needs and serve as a well-established public forum for discussions between all stakeholders on the rivers.  And these Councils are not mandated to pursue projects within any particular authority.

Instead of forming a new authority or submitting a proposal to the Corps of Engineers to expand locks, we recommend the state pursue IMMR P5 designation for private financing of operations, maintenance, and rehabilitation only, using river coordinating bodies that already exist in statute.  Funding under these authorities would remain independent of NESP and its related controversies.  Applications for operations, maintenance and rehabilitation would stand a greater likelihood for federal approval and funding.

Barge Fuel Efficiency Claims are Bogus

If you've been reading this blog for a while, you've probably read the Nicollet Island Coalition 2010 report Big Price – Little Benefit: Proposed Locks on the Upper Mississippi and Illinois Rivers Are Not Economically Viable. In Big Price, the Coalition tackles claims by the Corps of Engineers and navigation industry that expensive new locks on the Mississippi and Illinois Rivers are justified because inland towing is “the most fuel efficient mode of transportation” based on the following data[1]:



In the 2010 report section “Superior Barge Fuel Efficiency Claims are Questionable,” the Coalition discusses 1. How navigation industry conveniently uses inappropriate railroad fuel efficiency data and 2. How circuity reduces the fuel efficiency of navigation. To recap what the Coalition said in 2010:

1. Railroad fuel efficiency

The railroad figure above is actually the average from all railroads and does not accurately represent the railroads in direct competition with inland towing. Unit trains carry bulk commodities long distances and compete with navigation for export traffic. Unit train fuel efficiency is 640 ton-miles per gallon – significantly higher than inland towing.

2. Circuity

Inland navigation is confined to rivers, which are squiggly. Both road and rail can increase their fuel economy by constructing direct routes. The Universities of Illinois[2] and Iowa[3] evaluated how much further barges have to travel to export goods from the Midwest to New Orleans and found that on average, barges travel 1.3 to 1.38 times further than rail.

Adjusted fuel economy data[4]:



Take the above realities into account and you see that navigation is not the most fuel efficient mode of transportation. Since the report was published in 2010, I've found two additional studies to bolster the Coalition’s criticism of navigation fuel economy claims.

The university studies referenced in the 2010 report did not evaluate truck fuel efficiency because trucks do not carry a significant portion of bulk commodities over long distances like trains and barges. But a recent study published by the Maritime Administration[5] does look at carbon emissions between trucks and barges for a hypothetical container-on-barge route between Peoria, IL and New Orleans, LA. They found that, due to circuity, inland towing would emit 23,906 metric tons of carbon dioxide annually. While trucks, carrying the same load to and from the same port, would only emit 13,739 metric tons of carbon dioxide annually.

But, circuity is hard to generalize. This is why the Coalition has been searching for river segment specific fuel efficiency data. Rivers are like roads – your car’s fuel efficiency is better on the interstate than in town. Locked rivers are like driving in town – all the stop and go decreases fuel efficiency. To get regional inland towing fuel efficiency data, I started trying to calculate it from the regional fuel tax revenues provided in a recent National Academy of Sciences report[6] (I know the fuel tax is $0.20 per gallon and I know the ton-miles carried on each river segment). But the revenues were provided as a graph, so I didn’t have accurate figures for a calculation. Like a good academic, I followed the citations in hopes of finding the regional fuel tax receipts. What I found instead: The Tennessee Valley Authority[7] already did this calculation!

The fuel efficiency for the Mississippi River according to the TVA:



275.8 ton-miles per gallon on the locked portion of the Mississippi River! That means the navigation industry has a fuel efficiency error of more than 300 ton-miles per gallon! Holy crap! Just this month, Hyundai and Kia agreed to pay a $360 million settlement because they sold cars with posted average fuel economy 1 to 6 miles per gallon above the actual fuel efficiency. Meanwhile, taxpayers are forking over about $700 million annually to maintain navigation infrastructure – and most of that money goes to locks and dams where towing is the least efficient. If anyone from the Corps is reading this now, I hope you’re doing a face-palm. It’s time to rethink our water resource investments.

---

[1] Texas Transportation Institute – Center for Ports & Waterways, December 2007 (amended March 2009), “A Model Comparison of Domestic Fright Transportation Effects on the General Public Final Report,” prepared for the U.S. Maritime Administration and the National Waterways Foundation.
[2] Anthony V. Sebald, 1974, “Energy Intensity of Barge and Rail Freight Hauling,” CAC Document No.27, University of Illinois.
[3] Baumel, C. Philip, Charles R. Huburgh, and Tenpau Lee, 2008, “Estimates for Total Fuel Consumption in Transporting Grain from Iowa to Mayor Crain Countries by Alternative Modes and Routes,” Iowa State University.
[4] Circuity figures are based on the 576 ton-miles per gallon provided by the industry.
[5] U.S. Maritime Administration, 2013, “America’s Marine Highway Program Draft Programmatic Environmental Impact Statement.”
[6] Committee on U.S. Army Corps of Engineers Water Resources Science, Engineering, and Planning; Water Science and Technology Board; Division on Earth and Life Studies; National Research Council, 2012, “Corps of Engineers Water Resources Infrastructure: Deterioration, Investment, or Divestment?”
[7] Bray, Larry G., et al. July-August 2002, “River Efficiencies, Fuel Taxes, and Modal Shifts: Tennessee Valley Authority Model Assists Policy Makers.” TR News issue 22.

Corps found to be in blatant violation of deauthorization laws

Photo Credit: Olivia Dorothy

This summer, the Government Accountability Office (GAO) evaluated the Army Corps of Engineers (Corps) deauthorization process and found it to be woefully lacking and blatantly in violation of federal statute.

The Corps has been required to identify projects for deauthorization since 1974.  Almost every Water Resources Development Act has new language to prompt the Corps to get old projects off the books.  But guess what… almost no projects have been deauthorized!

The GAO found that the Corps does not even keep a comprehensive list of projects that have been authorized. And when the Corps did try to compile a list of projects for deauthorization, many districts removed eligible projects from the list due to local interest.  This is contrary to clear statutory requirements that deauthorization is based on actual appropriations and obligations, not private interest levels.

I’m not surprised by these findings.  I’ve encountered several instances where the Corps reprograms small amounts of funds to prevent deauthorization.  I’ve also seen the resurrection of projects that haven’t been funded in decades.  The GAO report found both of these strategies to be violations of the deauthorization statutes.

The Corps’ excuse?  They claimed that they could not follow the statute because implementation guidance was never developed for it.  Implementation guidance is the internal policy that guides day-to-day activities within the agency.  Who was supposed to develop that guidance? The Corps.   

The latest deauthorization law was passed in the 2014 Water Resources Reform and Development Act.  Congress is mandating that the Corps provide a list of projects that cost $18 billion to be summarily deauthorized.  Following this initial list, the Corps must provide annual deauthorization lists of projects that have not been funded in the proceeding seven years.  When those lists are provided, there will be a public commenting opportunity. If Congress does not provided funding for any of the projects listed, they are automatically deauthorized.

The Corps is developing a centralized database to track project authorizations and funding and they promise to submit the $18 billion list for deauthorization by March 2015.  I hope the Corps follows the new deauthorization law and not history.  

“Should we build more large dams?”

Photo Credit: Olivia Dorothy

As lock and dam infrastructure on the upper Mississippi River ages, we will be faced with some tough choices.  Ultimately, Congress must decide whether or not to replace the infrastructure.  With this in mind, I found a recent study[1] from Oxford particularly fascinating. 

Published in Energy Policy, researchers looked at the benefits and costs of large dams.  The study focused on large hydropower dams, but included other dams and asked whether large dams are worth it from a purely economic perspective, without evaluating environmental and social costs.

The result: “Even before accounting for negative impacts on human society and environment, the actual construction costs of large dams are too high to yield a positive return.” 

If the costs are so high and uneconomical, why are large dams continuing to be planned and built?  Because project planners, like the Corps of Engineers, are “delusional” and “deceptive” as they routinely fall into the “planning fallacy.”   

The planning fallacy occurs during the project planning process when experts (i.e. Army

Corps of Engineers) focus too much on what constituents (i.e. Congress, barge industries) want to accomplish rather than evaluating similar completed projects.  Rewards (i.e. political incentives) feed a delusional overconfidence, which is exacerbated by “strategic misrepresentation by project promoters” (a.k.a. deception) to obtain funding and approval for the project.

The study shows that the planning fallacy has and continues to drive large dam cost underestimation and delays.  Worldwide, the actual costs of dams were 96% higher than the estimated costs on average – the U.S. had the lowest average cost overrun at 11%. Eight out of every 10 large dams run over their scheduled completion date.  And we haven’t gotten better with time, the magnitude of cost and scheduling inaccuracies have been consistent since the early 1900s. 

What does this mean for planning?  The U.S., like most governments, requires experts to develop benefit to cost ratios to determine whether a project is a good economic investment.  Water resources projects require a minimum 2.5 ratio before the president recommends Congressional funding.  This means that for every dollar invested in water resource projects, at least $2.50 must be returned (for a net profit of $1.50).  The typical pre-construction benefit cost ratio worldwide for large dams is 1.4.  But the authors found that costs for large dams are underestimated by 44-99%!  So, the actual benefit cost ratios for most dams were less than 1, indicating net economic loss. 

If governments were provided more accurate information about dam costs, fewer large dams would be built.  This is why the authors are calling on planners and managers to develop a comprehensive global database to track costs and performance.  Such a database would help planners develop more accurate cost estimates and timelines, prevent unnecessary dam construction, and ultimately protect wildlife, habitat, cultural sites, farmland, and other resources.

---

[1] Ansar, A., et al. 2014.  Should we build more large dams?  The actual costs of hydropower megaproject development.  Energy Policy.  http://dx.doi.org/10.1016/j.enpol.2013.10.069

What will we tell the children?

I know that it's not Friday, but I just have to share this adorable video published by Prairie Rivers Network, a Nicollet Island Coalition member, about the Clean Water Act proposed rules.  Tell the EPA you support the rules today at www.prairierivers.org/cleanwateract

Will Navigation Stop Global Warming?

Barges loaded with coal and frac sand.

Last week I spent several days with the Great March for Climate Action and, while my feet only lasted something like 25 miles, I got a chance to talk with them about the challenges facing the Mississippi River as the climate shifts.  The barge industry claims that navigation is the transportation solution to global warming.  But it is SOOO not true.  Here’s why.

Fuel Efficiency

The barge industry claims that they are to most fuel efficient mode of transportation.  A study by Texas Transportation Institute – funded by the navigation industry – says barges can move 576 ton-miles per gallon and claim rail only moves 413 ton-miles per gallon.  But two separate, independent studies by the Universities of Illinois and Iowa say that the industries figure for train fuel efficiency is flat out wrong – trains moving bulk goods carry 640 ton-miles per gallon.  Trains are way more efficient than barges.

Circuity

What the heck does “circuity” mean?  It’s the different distance traveled by the different modes of transportation with the same start and end point.  The same three studies I mentioned above all concluded that barges have to travel at least 30% further than rail because rivers are squiggly.  Taking those extra miles into account, barge fuel efficiency drops down to, at best, 443 ton-miles per gallon.

So with barges traveling further than and not as fuel-efficiently as trains, we can conclude that barges are emitting more carbon into the atmosphere than trains.  Two strikes against navigation in the climate debate.  Let’s look at the infrastructure because a colleague said the other day that navigation is the most at risk transportation sector as global temperatures increase.  It made me laugh after reading so many reports written by the barge industry that concluded global warming would be a boon for the industry – making the shipping season longer. 

Infrastructure at Risk

In the Upper Mississippi River basin climate change is causing more droughts punctuated by more intense storm events.  This means navigation is facing more frequent river closures from drought and floods and more weather related accidents on the river, like the barges that broke loose in Marseilles last year after the captain tried to move his tow in extremely high water.  The barges damaged the dam at Marseilles and breached the town’s levee, causing tens of millions of dollars in damages.

Fish and Wildlife

The infrastructure navigation relies on, like the locks and dams on the Mississippi River, by themselves cause significant habitat degradation.  The dams on the Mississippi have turned the upper portion of the river into a series of slack water pools, totally transforming the river’s character.  So the native flora and fauna are already struggling to hang on in this new environment and climate change will be another challenge for to survival of all the native wildlife.

So, that’s four strikes against navigation, one more than is necessary to drop them from the list of climate change solutions.  The industry continues to hang on, but we need to move our transportation plans out of the 19^th century on the Upper Mississippi and look at real solutions. 

Pool 2 Channel Realignment

Just above Lock and Dam 2 at Hastings, MN the navigation channel in the Mississippi River makes a tight turn, almost 90 degrees.  According to the navigation industry, 54 groundings have occurred at the site since 1990 and tows cannot move through the turn with a full load of 15 barges. 

In an effort to make navigation more profitable on this stretch of the Mississippi River, the Army Corps of Engineers is proposing to cut a new channel to circumvent the bend through what was known before the dam was built as Boulanger Slough. 

Source:  US Army Corps of Engineers

Is it a good idea?  The navigation industry argues that new channel is necessary to increase profitability.  But the Corps must justify the new channel from an operations and maintenance cost-benefit perspective.  When companies have to pay more to run smaller barge fleets, it’s not a public operations and maintenance expense.  

What are the public expenses of the proposed Boulanger Slough channel?  So far, the public expenses add up to cutting the new channel itself, dredging more sediment downstream, mitigating the environmental impact, and disposing of contaminated sediment

The new channel cut will certainly increase sedimentation downstream, which may increase the cost of operations and maintenance since it will require more dredging downstream.  There may also be costs associated with special handling of contaminated sediment since the site has elevated levels of contaminates including nickel, PAHs, PCBs, and other heavy metals.  But the Corps hopes to dodge environmental mitigation requirements by asking the Upper Mississippi River Restoration program do a restoration project downstream – a program that is not in the mitigation business. 

Even with all these certain costs, the Corps still thinks the project will overall reduce channel maintenance expenses, but they haven't produced the figures for all of it.  If the project moves forward, the Corps will be holding public meetings within the next year.  So stay tuned for opportunities to comment.