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Archive for the ‘Infrastructure’ Category

Europe is Breaking the Egg

In Ports, Infrastructure, MTS Policy, Efficiency, Energy/Environ on October 5, 2014 at 11:16 pm

Before we get to John Graykowski’s “Europe is Breaking the Egg” I would like to pose my own chicken-and-the-egg question as one might ask it here in Wonkington, D.C. Which comes first: the policy or the strategy? One might also ponder how good is a forward looking strategy when the policy is of the past century. The Maritime Administration is preparing a “National Maritime Strategy.” It is a principal objective of Administrator Chip Jaenichen and probably has been encouraged by congressional supporters of the U.S. flag industry who, like most of us, have not liked seeing the merchant fleet decline but who, unlike us, are in a position to redefine U.S. maritime policy. The piece below begs the question whether a new national maritime strategy would benefit by first fixing the national maritime policy that for the most part has been in place while the United States lost its prominent role in world shipping. Certainly it would make it easier on Mr. Jaenichen and the Secretary of Transportation to have an updated national policy framework as a basis for new strategies to get to where we need to be. John Graykowski’s article first appeared in Pacific Maritime Magazine on September 1, 2014. You can find it here. He poses the policy question in the context of a growing American supply of natural gas and the multiple benefits to be realized by fostering a bunker switch to LNG. This is the third in his series for MTS Matters on the subject of developing LNG distribution infrastructure to advance the adoption of LNG as a marine fuel. It also is a recurring theme in these pages.  Pbea

We may soon be able to retire the tiresome “chicken and egg” cliché to describe LNG development, since there has been movement in the last year in Europe and the United States that indicates the circle may be breaking; but it’s too soon to tell whether the movement is temporary or permanent. What is apparent, however, it that Europe has moved forward in a more focused and strategic way, to create LNG infrastructure and markets, which is yielding results. By 2016, permanent LNG bunkering facilities will be in operation in Rotterdam and Antwerp – both among the largest ports in the world – thereby signaling that the supply uncertainties have been resolved. It bears asking, therefore, how Europe has done this, and whether we should consider similar measures here if the goal is to expand LNG as a marine and transportation fuel throughout the United States.

In 2008, Norway effectively made LNG the preferred fuel choice for marine operators through a combination of regulatory mandates relating to Nitrogen Oxide (NOx) and financial incentives covering up to 80 percent of the capital cost of the LNG-related components. Following these actions, the number of Norwegian vessels using LNG as a primary fuel went from 3 to 12 vessels in five years, with more than 50 vessels of various types now under construction along with the supporting LNG infrastructure. Concurrent with this, Norway is addressing the regulatory and operational issues, and is now seen as a leader in marine LNG development.

The European Union (EU) is also pursuing a comprehensive effort to increase LNG as a marine fuel with the goal of developing LNG infrastructure in every major seaport by 2020, and every inland terminal by 2025; a total of 139 ports across Europe. This goal coincides with estimates that by 2020, 1,700 dual fuel vessels will be built or converted worldwide, with many of these operating in, or calling on, the EU.

By 2020, the United Arab Shipping Corporation (USAC) dual fuel container vessels will be operating between the Far East and Europe. This activity will spawn additional interest and movement in Europe and among its global trading partners leading to a rapid transition from diesel to LNG as a major transportation fuel.

The EU is employing a “carrot and stick” approach combining financial support for the conversion and construction of vessels and infrastructure with increased regulation. Projects such as the Trans-European Network for Transport (Ten-T) and the Rhine-Main-Danube initiatives have produced significant results. $139 million has already been allocated to 7 Ten-T projects to support vessel conversion and LNG infrastructure development, with more funding promised. Support of up to 50 percent of project costs is available for vessel conversion, construction and infrastructure, and just recently the first inland dual fuel barge was delivered and will shortly begin operations.

The EU adopted an approach that combines: (1) clear and defined goals that LNG will displace traditional marine fuels; (2) increased environmental regulations; (3) financial incentives to spur the initial transition; and (4) coordination among ports, governments; regulatory agencies and stakeholders to create uniform regulatory structures. Given the intrinsic advantages of LNG, there is recognition that the market would likely drive toward greater adoption of LNG without assistance. However, many vessel owners and gas suppliers are reluctant to be the first to make the investments in LNG vessels and infrastructure regardless of the advantages. The EU has determined that these measures are necessary in order to reduce perceived risks, accelerate market decisions, and attain the stated goals for LNG deployment.

In contrast, the United States does not have a national policy to support LNG as a marine and transportation fuel. Instead, our LNG market is developing project-by-project, driven by first-adopters such as Harvey Gulf, Tote, Matson, and Crowley with no federal support or strategy; despite the tremendous benefits LNG offers to the country. While we have seen some movement in disparate locations, there is not so much as a policy statement that commits this country to the development of LNG as a transportation fuel; and there are certainly no programs to support the construction of vessels and infrastructure to make this possible nor to address regulatory uncertainties and enhance public acceptance of LNG.

The challenges and obstacles that exist here are no different from those in Europe, and LNG is new to everyone. It appears, however, that the EU has tackled this question in a more coherent, direct, and proactive way that is rapidly producing results. To be sure, there are major differences between the US and the EU in terms of governmental structures and processes. The EU can promulgate Europe-wide regulations and implement promotional programs, and has a history of doing so. Here, that role would be shared between Congress and the Executive Branch, and that is yet another challenge given the continuing dysfunction between both branches of government.

A policy declaring that LNG as a transportation fuel is in the national interest, and committing to the support, promotion and encouragement of its development would have several immediate effects:

  • It would be a clear signal to all potential stakeholders that LNG is “real” and has the backing of Congress and Administration;
  • It would put federal agencies on notice – and could require them– to collaborate with industry on practical and uniform regulation, reduced delays and greater certainty; and
  • It could include limited and temporary financial incentives such as loan guarantees or tax incentives to accelerate LNG conversion, because early adopters should be encouraged in order to build a sustaining market that benefits the entire country.

Federal resources are constrained, but without a national commitment, LNG may not gain the critical mass and momentum to create a long-term viable market. Regulatory direction is important, and does not involve direct costs, but if combined with properly structured and managed loan guarantees or tax incentives they would have a greater likelihood of jump-starting this industry at low risk and large benefit to the whole nation in emissions reductions, energy independence, economic activity in shipyards and elsewhere. The promise of LNG is so great it deserves this sort of recognition, attention, and effort. Clearly the EU sees it that way, and we should as well and the risk if we don’t address it in this way is diminished potential for LNG to transform this country and the lost opportunity to lead the world in LNG development and utilization.   John Graykowski

Congress Got It Done

In Congress, Government, Infrastructure, Legislation, Ports, Water Resources on May 23, 2014 at 1:13 pm

While strolling through the park one day
In the merry merry month of May
I was taken by surprise…

Two recent May events are fresh in mind. Maybe not of the surprising sort but perhaps, eventually, capable of the unexpected. On May 6th the Maritime Administration convened its second symposium aimed in the direction of a National Maritime Strategy. And just this week, Congress gave final approval to the first water resources development act legislation enacted in seven years. Both have significance to the maritime sector but, for the time being, we may be able to gauge the significance of just the one.

So, let’s talk WRDA…rather, WRRDA.

You don’t have to have inside-the-beltway know-how to know what “werda” is.  For nearly 50 years, and for more than a century earlier under different names, WRDA has been the path that harbor deepening and inland waterway projects—not to mention flood protection and shore and environmental restoration projects—have taken to Federal approval.

Project ideas graduate from feasibility studies to be authorized for funding by Congress. WRDA is how the Harbor Maintenance Tax and Trust Fund became law in 1986. It is how the near-completed 50-foot deepening in the Port of New York/New Jersey was authorized in 2000. And it is how the Corps of Engineers will be given the go-ahead to deepen and otherwise modify channels in the ports of Boston, Savannah, Jacksonville, Canaveral, Palm Beach, Freeport, and Corpus Christi.

Those ports, and various States and counties, will be relieved when the Water Resources Reform and Development Act of 2014, HR 3080, is signed by President Obama.

Passage of WRRDA 2014 was cheered in the halls of Congress. To be sure, some of the voices heard where those of lobbyists, but more prominent were the self-congratulatory speeches and tweets (#WRRDA) let loose by the legislators, especially those with projects at stake. Even Tea Partiers, who two years ago questioned why Congress should even have a role in public works, voted for the conferenced measure and made floor speeches hailing its importance to their town or to the national economic interest.

No small amount of pride was declared in proving to themselves and to the nation that Congress is capable of agreeing on major infrastructure legislation despite the fractious partisanship and anti-spending sentiment that has come to characterize this town. The bill’s reforms and deauthorization provision, which will dump $18 billion in previously authorized projects, provide the calculated and rhetorical coverage they consider essential to allow them to vote for a bill with an estimated, eventual cost in the neighborhood of $12 billion.

Yes, public works can be costly. Of course, not building such infrastructure also can be costly.

If there is an indicator that the conservatives have been hungry to vote in the affirmative on an [insert favorite jobs creation modifier] infrastructure bill and to show that Congress can do something, it is that only four House members opposed final passage despite it being a Heritage Action “key vote.” Only seven senators—also Republicans—opposed the final bill this week.

It helps that some planned projects—including unsexy port channels for goodness sake!—have in recent years been regularly reported across the country as important to US competitiveness in global commerce. The House Transportation & Infrastructure Committee leadership used it early on to educate colleagues and the public alike. Who hasn’t heard that the Panama Canal is being expanded to accommodate big ships? They must not have been listening to the President, the Vice President, the news media, etc.  Those are the same ships that the aforementioned ports in Massachusetts, Georgia, Florida, New York and New Jersey, among others, hope will come their way.

WRRDA lacks the earmarking that turned some in Congress sour on public works legislation. Instead it prescribes a more detailed process by which the legislature will receive and act on project recommendations. It is a rational process, devised on the House side and intended to be something other than earmarking while reserving the prerogative for Congress to authorize projects i.e., not leave it to the Executive to make the decisions.

The added “R” in the bill is more than for show. Reforms to current law and practice are many. Some are intended to speed the famously bureaucratic civil works process. Others introduce new process and calculus to how Harbor Maintenance Trust Fund monies are budgeted and appropriated. (I may devote some words to that in a future post and so will limit my comment here to wishing “good luck and great wisdom” to the folks at Corps headquarters whose task it will be to interpret and implement the intent of Congress.)

It will have to be seen how well the reforms will enable the Corps of Engineers to meet, and will hold them to achieve, a 3-year study mandate, for example. One test of that will be the extent to which project sponsors are willing to leave the fate of their projects in the hands of Federal planners and analysts. That is because the bill gives more flexibility to project sponsors, such as port authorities, to study, construct and finance their projects. As we have seen in Florida and South Carolina, financial commitments are being made in State capitals in order to get projects constructed and completed well ahead of whenever Federal process and funding get done.

So there is a lot in WRRDA to cheer, not the least of which is the fact that it is done. And should the congressional committees actually live up to the sense of Congress, in Section 1052, to wit, “Congress should consider a water resources development bill not less than once every [two-year] Congress,” there will be even more to cheer in the years ahead.   Pbea

2013: The Year Before the Year of LNG?

In Efficiency, Energy/Environ, Green Transportation, Infrastructure, Ports on December 29, 2013 at 4:51 pm

A year in which U.S. shipyards announced contracts for over twenty new ocean going vessels (with options for several more) is noteworthy, especially given the recent difficult times experienced by the shipbuilding industry.  What makes this fact even more significant is that LNG as a propulsion fuel is a central feature in each of these vessels, either as the intended fuel source upon delivery or at some point in the future.

So does this mean that the U.S. maritime industry in America has reached the LNG tipping point, where a tidal wave of even more marine projects will be announced in the coming year?  My short answer would be a heavily qualified, but nonetheless definite: “maybe.”

A distinction has developed between ships that will be “LNG-ready” as opposed to those that are “LNG-capable,” the difference being those vessels that will use LNG upon delivery and those that can be converted to operate on LNG at some later date.  While certain design modifications are incorporated into these ordered vessels, such as foundations for LNG fuel tanks and dual fuel main engines, they will operate on conventional diesel fuels when they are delivered.

The reasons for taking a half step to LNG rather than making the plunge are several, among them the additional cost of the entire fuel gas system, including the fuel tanks.  However I suspect the greatest reason is uncertainty related to LNG supplies in the ports where these vessels will call.  This is particularly the case with the product tankers that have been ordered that, unlike the LNG-powered container vessels do not operate in a classic point-to-point liner service.  Their deployment is largely dictated by cargo availabilities throughout the United States and thus, until LNG is more widely available, the owners will likely hold back on a full commitment to LNG.

If one is looking for positive signs on the infrastructure front, they are there.  The Port Fourchon terminal project on the Gulf of Mexico in Southern Louisiana is being developed by Harvey Gulf Marine to serve its fleet of LNG-powered offshore service vessels.  It will be the first operational LNG bunkering facility in the United States and is expected to be operational next year.  Clean Energy has announced its intent to construct facilities dedicated to the marine industry in Jacksonville.  Tote, Inc. issued a request for proposal (RFP) to potential LNG suppliers to provide LNG for their vessel operations based in Tacoma, Washington and Jacksonville, Florida.  Each announcement of new LNG-powered ships results in a deluge of phone calls from potential LNG suppliers seeking meetings and making proposals to vessel owners.  So again, there is clear movement, growing interest and some tangible progress; but it is slow and these projects still face regulatory challenges and uncertainty that may result in delays and higher costs.

Given the delivery schedules of the Tote, Inc. ships, in late 2015 and early 2016, and the Crowley vessels in 2017,  it seems that the window for putting bunker infrastructure in place—completing land acquisition, clearing Federal and local permit requirements, and facility construction—is growing very tight.  This raises the possibility of ships being delivered and no LNG being available, which will greatly increase operating costs due to the requirements to use ultra-low sulfur diesel (ULSD) to meet Emission Control Area (ECA) regulations.

So, to offer a slightly more elaborate answer to the tipping point question, the U.S. is closer today than a year ago but one cannot conclude that the LNG revolution has begun.  Of the limited number of Jones Act liner operators, three have already announced projects–Matson being the third–and another has announced intentions to convert existing vessels to LNG. The product tanker market has been effectively replaced over the last ten years so there are limits to the expansion there.  I think the greatest opportunities for achieving critical mass in a marine fuel transformation can be found when and if several large harbor services or tug and barge companies either convert existing tugs to LNG or CNG or acquire new tonnage or the top-tier international liner companies announce new construction programs with LNG-fuelled vessels.  Either – and certainly both – of these developments would be a critical next step to accelerate widespread LNG deployment.

Marine vessels represent the potential for a large concentrated market for LNG/CNG, and a port that has both ocean going and harbor vessels that need LNG for fuel would surely provide sufficient basis for investments in LNG marine terminal infrastructure for bunkering.

While there is still a way to go until we all agree that the breakthrough has occurred we are seeing some decisions and investments that are the necessary predicate to making LNG a common transportation fuel throughout the country.  John E. Graykowski

The Murray-Cantwell Approach to Problem Solving

In Competition, Congress, Infrastructure, Intermodal, Water Resources on September 23, 2013 at 7:05 pm

This past week State of Washington Senators Patty Murray and Maria Cantwell introduced the Maritime Goods Movement Act of 2013 (S. 1905). Their inspiration for legislation came from what I have described as the unintended consequences of the Harbor Maintenance Tax, starting with complaints from the ports of Seattle and Tacoma that the Canadian competition to the north and the shippers, who are obliged to pay the Harbor Maintenance Tax when entering U.S. ports, were taking full advantage of the cost-differential where the HMT does not apply.

It is a complaint that was given some appearance of validity in a Federal Maritime Commission report issued last year and, a bit more convincingly, by data comparisons published by The Journal of Commerce last month.

At the request of the senators the FMC studied the role played by the HMT (0.125% of cargo value) in decisions to use the Vancouver and Prince Rupert gateways. The report, adopted by the FMC commissioners on a party line vote, didn’t make a strong case as to cause and effect. It did suggest that if an equivalent of the tax were applied in Canada “a portion of the U.S. cargo…likely would revert to using U.S. West Coast ports.” The report concluded by suggesting any remedy is in the hands of Congress not the regulatory agency.

The JOC looked at the issue by comparing market share within the PNW and among U.S. West Coast ports, where the HMT is uniformly applied. This is their finding in a nutshell:

Port data collected by The Journal of Commerce shows clearly that while Seattle and Tacoma have lost no market share relative to U.S. West Coast ports, their market share in the Pacific Northwest, a region that includes the Canadian ports of Vancouver and Prince Rupert, has slipped significantly in recent years.

That may not be conclusive of HMT culpability but it is indicative of competitive weakness just south of the 49th Parallel.  The comparative strength in British Columbia could be attributed to the HMT in addition to other factors, among them the efficient intermodal delivery system established as part of Canada’s ongoing Pacific Gateway Transportation Strategy.

Enter the Maritime Goods Movement Act User Fee proposed in the bill. The HMT would be repealed and then, for all practical purposes, recreated as the “MGMA User Fee.” In virtually every respect it would be like the HMT. The principal difference is that it also would be applied to U.S. bound cargo that first enters North America through Canada or Mexico.  Shippers would pay when the cargo crosses the land border.  On this bill rest the hopes of Puget Sound’s largest ports.

But the senators didn’t stop there. They also decided to try to fix the issue that is troubling most U.S. ports—the Harbor Maintenance Trust Fund. The bill would make several changes—including expanded uses of the HMTF such as are found in the Senate-passed WRDA (S. 601)—but let’s here focus on the greatest failing of the law as it now stands. That is the under-spending of HMTF funds.

Unlike the RAMP Act that would rely on a parliamentary mechanism to leverage full funding over the objections of appropriators, and unlike the WRDA bills of the Senate and House that set funding targets at which appropriators might aim, the MGMA bill uses a direct approach. At the bottom of page 10 is this: “[N]o fee may be collected…except to the extent that the expenditure of the fee [for allowable activities] is provided for in advance in an appropriations Act.” It is a rarely used means tying revenue collections to the spending of those revenues. The transaction would occur outside the section 302 allocations that cap appropriations committee spending. In doing so it would remove the incentive for appropriators to limit allocations and would treat the HMTF more like a dedicated trust fund.

This approach is employed in other areas of government where a user fee is collected to support a specific function of government. The only downside is that to meet the requirements of budget rules Congress also would have to identify offsetting revenue to fill the hole that would be created when, as a first step to creating the new MGMA User Fee, the HMT would be repealed, thereby eliminating 10 years of projected revenue.  Yes, it gets murky down deep in the budget process. But the result would be the very easily understood concept of “dollars in, dollars out,” as a Murray aide summarized.

Finding the offset, in the range of billions of dollars, presents a real challenge to the bill sponsors. There is a reason why other attempts at legislative solutions have produced little more than “sense of Congress” statements of principle and funding targets that are…well…just targets. The climb up this legislative Hill is very steep and the obstacles—including leadership objections and the search for offsetting revenue—have been daunting.

While we are noting the degree of incline ahead, let’s add to this particular bill the likelihood of complaints to the State Department from Mexico and Canada, who are major U.S. trading partners, and opposition from shippers and the railroads that carry their cargo into the U.S.

But that doesn’t mean it is the wrong solution to an HMTF problem that has existed since the early 1990s. It is the right one because it would be a more effective and lasting way to link the revenue to the reason for the revenue, which is to keep American harbor channels maintained and our ports competitive.  Pbea

Bottom Line Thoughts on the MTS

In Congress, Federal Government, Infrastructure, Marine Highway, MTS Policy, Ports on September 17, 2013 at 11:30 pm

AASHTO, the association of State DOT chiefs, issued this summer the last of its “bottom line” modal reports. This one–Waterborne Freight Transportation–is a useful addition to the studies and papers that indicate a marine transportation system in great need of policy attention. It is not that the MTS is in failing condition–certainly not that part engaged in international commerce–but “the very success of the MTS has masked serious underlying structural problems” that, if left unaddressed, “pose critical threats to the long-term health of the MTS and the nation as a whole.”

The report notes that unlike the American interstate highway system the MTS “has evolved without larger scale coordinated policy and planning.” Indeed the ports and related infrastructure and services that developed without a “master plan” make the MTS a “collection of competitors.”  Persons who follow action in the ports of Charleston and Savannah, both overseen by State port authorities and championed by their respective State legislatures, can be fascinated watching that competition in real time.

The AASHTO report, the focus of which lands principally on the MTS infrastructure, identifies areas requiring attention. Waterway maintenance needs are not being met, navigation projects often take far too long to accomplish, funding for MTS expansion needs is uncertain, national investments are not being effectively targeted to meet national needs, and responsibility for the MTS in official Washington is widely diffused.  That last item can be easily understood by looking at the “comprehensive matrix” spreadsheet on the CMTS website.

In a statement that could apply to maritime elements of the private sector as much as it most definitely does to government policy, the AASHTO report offers this bottom line thought: “Embracing business as usual will inevitably lead to significant further declines in MTS condition and performance, and to lost opportunities for our transportation system and economy.” Today, former Pennsylvania Governor Ed Rendell, the nation’s inconvenient truth teller on matters infrastructure, and National Association of Manufacturers CEO Jay Timmons used the Philadelphia port as a backdrop for a similar message that is bolstered by a survey of manufacturers. “Improving our ports, highways, and bridges is essentially an economic driver. Modernized ports and transportation systems enable American manufacturers and businesses to export their goods to countries around the world, which strengthens our economy here at home,” said Rendell.

Much of that message in Philly and the AASHTO report is centered on international commerce, understandably. Ports and their modal connectors enable U.S. exports to make it to other markets in competitive fashion. They also speed imported goods to Costco shelves and components to American assembly plants.

One had to look for it, but the AASHTO “bottom line” document also makes the suggestion, however briefly, that the MTS can play an increasingly important role stateside. With reference to the potential for Marine Highway freight transport the document notes that “with growing highway congestion, waterborne transportation becomes an even more attractive transportation alternative.” It concludes with the statement that “[w]aterborne trade and transportation will be cornerstones of the 21st century economy.”

Among the actions called for in the report is the establishment of an office of multimodal freight at USDOT, an oft-made recommendation by various stakeholders and in the reports of appointed and self-appointed commissions. Among the tasks of the office would be to create a “system map and classification of MTS facilities, analogous to the National Highway System and the National Freight Network.” Congress specified in MAP-21 that the designated NFN be highway only, a decision that reflects more the congressional committee jurisdictions and the “highway bill” tradition than it does the multimodal operating freight sector. (A recently introduced House bill, H.R. 2875, grandly named the “Waterfront of Tomorrow Act,” would amend MAP-21 to “ensure that ports and harbors are incorporated into the national freight network.”)

The recommended freight office would also be used to prepare a “long-range vision plan for the national MTS development and investment to meet national transportation and economic development objectives.” The report also calls for full utilization of Harbor Maintenance Trust Fund monies for navigation infrastructure maintenance as well as an exemption from the Harbor Maintenance Tax for “domestic Marine Highway services.”

These recommendations are pointed in a constructive direction. But there is a missing element in the report. More significantly, it also is missing from the national transportation policy discussion on Capitol Hill, in those many departments and agencies tagged on the CMTS spreadsheet, and in the White House, then and now.  What is missing is visible interest in what the national maritime policy need be. The weakest element of the multifaceted American marine transportation system, oddly enough, is marine transportation. The long, sloping trend line representing flagging support for U.S.-flag merchant shipping, an aging Jones Act coastal fleet that frustrates Marine Highway development, and a shrinking ship building sector needs to be reversed.  It’s far from being the cornerstone of the economy that it once was and perhaps still can be.  Pbea

WRDA Words

In Infrastructure, Ports, Water Resources on May 7, 2013 at 12:05 am

The Senate is about to take up the first water resources bill since President George W. Bush signed WRDA 2007 into law.  By the count of many stakeholders–ports, river dependent shippers, flood weary communities–it is around four years late.  So if, for argument’s sake, the Senate passes the bill this month of May will WRDA 2013 spring into House action and to the desk of President Obama before Tidal Basin cherry trees feel the autumn cold and drop their leaves?  There’s reason to doubt it will happen that quick. But rather than peer that far into the legislative fog, let’s take a look at what is before the Senate now.

Committee Chairman Barbara Boxer (D-CA) and Ranking Member David Vitter (R-LA) proudly produced S. 601 with the full support of the Committee on Environment and Public Works. They patterned their WRDA 2013 bill after MAP-21, which emerged from a dysfunctional Congress with bipartisan support. The water resources bill would authorize Army Corps of Engineers civil works projects to move ahead, update and reform parts of the base law dating to WRDA 1986, and attempt to streamline Federal process and delivery (construction) of projects. There is a lot to pick at and find fault with as with most public works bills. Some stakeholders will see more benefit than others. But for an economy that has been going wanting for the stimulus of public works construction the bill’s advancement to the Senate floor is being trumpeted. Five hundred thousand jobs, or so they say.

The bill has run into some buzz-saws. Environmental organizations and “tax-payer” groups have  loudly complained. It might be said that both are traditionally unfriendly to water project bills. The former argues for keeping navigation and other projects to an absolute minimum while favoring “environmental projects,” such as habitat restoration. The latter assumes there will be wasteful spending, which I would argue was certainly more true before the reforms of WRDA 1986 than it is today. The bill will result in “overspending, overcapacity, and substantial and unnecessary damage” to estuaries and harbors, or so they say.

Then there are the complaints made by leaders of the Senate Appropriations Committee who predictably don’t like sections having to do with with the Harbor Maintenance Trust Fund. House and Senate Appropriators don’t like being told they have to fund seaport channel maintenance at the rate of collected Harbor Maintenance Tax revenue. And it’s not just because setting funding levels is their prerogative. It’s the little matter of having to come up with around $700,000,000 in additional funds. That’s a big lift in good fiscal times…and these are not good fiscal times.

Meanwhile Great Lakes senators who want the bill to assure full-use of HMT revenues for port channel maintenance are nervous, on behalf of their generally small-sized port industry, by the wording of the bill. The bill gives “high-use deep draft” ports priority status for HMTF expenditures. They want certainty that all small commercial ports are not “perennially put at the ‘back of the line’.” There are lots of other small ports in the country that would like that assurance spelled out.

Then there are the Washington State senators who have been champions of the ports of Seattle and Tacoma. Budget Committee chairman Patty Murray (D-WA) is in a strong position to say something about how much HMTF funds are budgeted, how the monies are being used and, more parochially, how the collection of the HMT in Pacific Northwest ports can be a reason for U.S. imports to enter North America through Canada.

Let’s not forget the Administration in all this. The White House official view cites reasons why the bill “doesn’t currently support all” of the Administration “key policies and principles” but it is carefully worded not to threaten a veto. It echoes the complaints of environmental organizations in the Statement of Administration Policy released today. The bill’s project streamlining provisions, among other things, undermine “the integrity of several foundational environmental laws.”

In her testimony before the committee where she once worked, Assistant Secretary of the Army for Civil Works Jo-Ellen Darcy told Boxer and Vitter last February that the Obama Administration supports a channel maintenance  spending level that “reflects consideration for economic and safety return of each potential investment” in maintenance as well as taking into consideration “other potential uses of the available funds,” the meaning of which is troubling for ports whose primary concern is ensure the use of “available funds” for harbor maintenance only. The testimony includes a flat statement in opposition to the idea of fully using collected HMT revenue for channel maintenance. Spending “should not be based not the level of receipts from the current tax.”

The SAP has a few odds things in it, including an incorrect description of the proposed change to the cost-sharing requirement that ports have to pay part of the incremental cost of maintenance of  channels deeper than 45 feet. The bill would shift the sharing of costs to apply to channels deepened beyond 50 feet. It is in the bill as recognition of the increasing standard size of vessels and the fact that cost-sharing was to be required only when greater depths are needed exceptionally large vessels, which in 1986 were super tankers and colliers, not container ships.

Senators Boxer and Vitter have been preparing a “manager’s amendment” to serve as a substitute for the version of S. 601 that emerged from their committee. We await its debut because it will reflect the compromises that have been made to address some of those complaints.

Word is that the HMTF full-use provisions were weakened at the appropriators’ insistence in return for a pledge to increase O&M appropriations somewhat. Word is that changes were made to accommodate some concerns of environmental organizations. We now wait to see the words.      Pbea

 

A Red Cape Wish List

In Environment, Infrastructure, Ports, Water Resources on March 17, 2013 at 11:28 pm

The first formal expression of what the Obama Administration is looking for in a water resources bill came to light the other day in a March 14 letter from Assistant Secretary of the Army for Civil Works Jo-Ellen Darcy to Senate Environment & Public Works Committee Chairman Barbara Boxer (D-CA). The letter provides requested “input on the development of a Water Resources Development Act.” It arrives none too soon. The chairman, with ranking Republican David Vitter (R-LA), is about to release their bipartisan recommendations for WRDA 2013.  A Committee mark-up session is scheduled days from now.

Ms. Darcy outlines a sort of policy wish list, one that has familiar themes from current and past Administrations–watershed planning, process improvement, and authorization of projects “most likely to generate a high return to the Nation.”  More notably the letter’s message crosses into territory that knowingly will have the effect of a matadors’ red cape in a dirt-floor arena.

For flood plain communities…the letter suggests that Congress “re-examine the Federal role following a flood in reconstructing public infrastructure including levees and other flood and storm damage reduction features.” It goes on to suggest reconsideration of “law and policies that influence where and how we rebuild.”

For shoreline and other flood prone communities…the Administration view goes further, calling on the legislature to “retroactively revise the stated purpose of all existing [Corps of Engineers] authorities that include flood control, storm or hurricane protection, or shore protection as a project purpose.” Reducing “the risk of flood damage in areas beyond the shore” is one thing; protecting and defending a shoreline alignment “for its own sake” is quite another.  Either way, it’s a timely subject just months after Superstorm Sandy carved its mark on the coastline.

What is driving this call for new water resources policy? Probably not much more than concerns about program cost and environmental consequence, aggravated by a whole lot of meteorological weirdness. Yes, global warming. And while both of those are concerns shared by some folks in Congress the letter’s recommendations run counter to civil works tradition and to the inclination of public officials to say yes to building and repairing solutions to flooding and the disappearance of coastline back home.

The letter doesn’t have a lot new—or reassuring—for the port/navigation community.  The statement on the navigation trust funds may break a few hearts but not new ground. The letter reiterates the Administration’s proposed fix for the broken Inland Waterways Trust Fund including a new fee structure, which the waterway industry has opposed in favor of building on the existing fuel tax regime.

It also expresses an unambiguous view in counter direction to the lobbying by ports and dredgers to increase channel maintenance funding and have full-use made of the Harbor Maintenance Trust Fund. Instead, the Darcy letter flatly states, “spending should not be based on the level of receipts from the current tax.”

That principle could be debated, but it fails to acknowledge the fact that the Corps of Engineers she oversees is on record as saying the annualized national need for port maintenance dredging is in the neighborhood of $1.5 billon, which is a whole lot closer to the HMT annual tax receipts, projected to be $1.659 billion this year, than the roughly $850 million budgeted by the Administration for O&M this year.

It’s hard to understand walking away from the obligation to maintain what you built when the lack of money ain’t an available excuse.  This from the White House that recently announced a “Fix It First” policy for U.S. infrastructure.

Interestingly enough, arriving the same day as ASA Darcy’s letter was an email message with a transcript of a recent meeting at which President Obama talked to mayors, seemingly off-the-cuff, about the need to address port and waterway infrastructure in order to keep the U.S. competitive on the export market. In fact there are faint signs that his next budget (FY 2014) will have a fairly strong channel maintenance budget, but the Darcy letter is a clear indication that we should not look for any structural improvements in policy to guarantee full-use of the HMTF.

The Senate committee will meet soon to take up a WRDA bill. It will attempt to address the HMTF issue, the insufferable slowness of the civil works project planning process, the brutalizing of coastal areas by powerful storms, and a lot of other things in need of attention. But views expressed in the Darcy letter, on behalf of the Administration, may not be represented to any significant degree, in a bill that is a bipartisan product. And it won’t come close to resembling the bill that the Republican dominated House will produce later this year.  Pbea

What’s the Big Deal about Public Works?

In Congress, Federal Government, Infrastructure, Ports, Surface Transportation Policy, Water Resources on March 9, 2013 at 12:04 am

Questions of the Remotely Curious:

  • Why should I care if Congress approves a WRDA bill…and what’s WRDA anyhow!
  • So what if the surface transportation bill expires!
  • What business does Washington have to do with the  sewage treatment plant the county is trying to build!
  • And why the hell does the Army Corps of Engineers have anything to say about clearing the muck from the marina where I keep my boat!

Yeah, and what’s the big deal about public works!

The average person who has no experience with government-at-work might be given a pass if he made such not-really questions.  The average Federal elected official should be expected to know…or at least quickly learn…the answers.

Would it surprise you to learn that too many folks in Congress today don’t know and…judging by the rhetoric…may not care.

Over 200 persons were first sworn into House of Representatives membership in just the past four years.  Many of them came to reside in Congress without prior legislative or other public office experience; many came with the intent to shrink government and cut spending. While those objectives are worthy of debate we are seeing in the fiscal brinksmanship and political gun play (“Call of Duty 6: Fiscal Warfare”?) how the give and take of real debate has been hard to come by here in Washington. (Consensus? Fugetaboutit.) New congressional Republicans, those of the Tea Party strain, have been a particular challenge for their Republican colleagues who came…well…to legislate.

Not too deeply into the last Congress Rep. John Mica (R-FL), then chair of the House Transportation & Infrastructure Committee, came to publicly bemoan how a troubling number of freshman who were assigned to his committee had little interest in producing the aviation and surface transportation bills that were overdue for Hill attention.  Mica publicly would cite the large number of legislative neophytes who–oddly–were poised to vote against the meat-and-potato policy and program of a public works committee. Why? Because they said they took the trip to Washington to gut government and its budget.

So it is to Chairman Mica’s credit that his committee eventually did produce the transportation authorization bills, albeit ones that didn’t adequately address the full cost of tackling the nation’s infrastructure needs.

Today, Rep. Bill Shuster (R-PA) heads the committee.   He faces the same challenge as his predecessor, Mica, and expectations as his father, Bud.  From the get-go he identified his committee objectives, which include the first water resources bill (WRDA) since 2007 and a robust surface transportation reauthorization bill including possible funding initiatives to repair the failing revenue stream for the Highway Trust Fund.

The chairman knows a price tag comes with maintaining and improving American infrastructure but he is all too aware that for some in the House and Senate it is a price they may be unwilling to pay. So before Shuster rushes headlong into bill writing he wants his colleagues on the committee and in the House to learn why it is essential for Congress to take up these issues. He has been conducting “roundtable” sessions for his committee members so they may hear from trade associations and other public and private sector stakeholders. He convened a hearing with a 101 course title–The Federal Role in America’s Infrastructure—and a Peaceable Kingdom kind of witness list.  And he has called on any and all persons who want to see transportation and infrastructure bills to get past third base to start their own education efforts on Capitol Hill.

Maybe, just maybe, the 113th Congress can be the did-something Congress.

Two Trust Funds in Search of a Solution

In Infrastructure, MTS Policy, Ports, Water Resources on October 25, 2012 at 3:31 pm

Yesterday Tennessee Senator Lamar Alexander (R) stood near Chickamauga Lock in Chattanooga and said, “We have two trust funds to deal with waterway infrastructure like the Chickamauga Lock, and neither of them works.”  He tells the truth.

The senator and former governor convened a presser to preview legislation–the American Waterways Act–that he and others will introduce when Congress resumes its session after the November election. The still in draft bill would tackle some financially challenging issues because the Inland Waterways Trust Fund (river system) and the Harbor Maintenance Trust Fund (for the most part coastal ports) are both at the center of current navigation infrastructure problems and the ultimate solutions to those problems.

The IWTF fund, with collections from a fuel tax on commercial vessels operating on the inland system, raises insufficient funds for what is a large, backlogged demand for lock and dam construction and rehab work. The users of the system have proposed changes in cost-sharing as well as increases in the fuel tax.

As has been discussed elsewhere in MTS Matters the Harbor Maintenance Trust Fund is a problem of a different kind. The ad valorem tax on cargo raises sufficient funds to cover the nation’s channel maintenance requirements but the Administration and Congress do not spend O&M funds at a rate commensurate with collections. The crafters of the planned bill are said to be working on how to assure annual appropriations at full-use levels as well as to free the accumulating surplus–now above $7 billion–for port projects.

The greatest challenge in drafting the legislation is the high hurdle presented by congressional budget rules. Based on what we have heard, the drafters intend to enable  the spending of tens of billions of dollars for construction and maintenance work over a 5 to 10 year period.  Even if the existing and future collections from the fuel and cargo taxes can handle that, as is the plan, Congress would have to effectively waive budget rules to get past procedural barriers. That doesn’t happen often. Moreover, it would require consensus among the key actors and probably a majority in the House and a super-majority in the Senate.

And while there has been significant growth in the ranks of advocates on these issues, solutions to the IWTF and HMTF problems have yet to achieve that kind of consensus.

The AWA–if it isn’t premature to assign an abbreviation to a measure not yet introduced–would have other provisions.  Senator Alexander identified these:

  • address regulatory and permit process streamlining projects by adopting the MAP-21 approach to speeding projects;
  • shift the 50/50 cost-sharing requirement for coastal channel maintenance from 45 feet to apply to those channels deeper than 50 feet;
  • open the HMTF to now ineligible port projects, to include landside projects (especially to satisfy ports like Los Angeles that don’t have much in the way of O&M dredging needs);
  • authorize a 5-year construction program to advance projects to deepen ports to accommodate post-panamax ships needing around 50-foot depths (to include Charleston and other planned deepenings that meet the present 3.0 benefit/cost test);
  • make the increasingly expensive Olmsted Lock project on the Ohio River a fully Federal responsibility, which would free IWTF resources to start other waiting construction projects; and
  • require the Federal government to follow the Inland Waterways Capital Development Plan developed by the industry and Corps of Engineers for an increase in the fuel tax and a 20-year schedule for projects.

The guts of the Inland Waterways Capital Development Plan were put into legislative language found in HR 4342, the WAVE 4 Act,  introduced earlier this year byRep. Ed Whitfield (R-KY). Worth noting, the Administration put forward a different proposal to address the ITWF problem and had been at loggerheads with the industry with no agreement in sight.

The likely sponsors of AWA are from both parties and will include principal sponsors Lamar Alexander and Lindsey Graham (R-SC), plus others who may include Dianne Feinstein (D-CA).  Feinstein and Alexander are the lead senators on the appropriations subcommittee that funds the civil works program.

Why are senators talking about introducing a controversial reform bill soon before the 112th Congress comes to a close? There are several answers, one of which is that the House and Senate are preparing to tackle major fiscal and revenue decisions (see “fiscal cliff“). Resolving the navigation trust fund problems could be made easier as part of the larger debate.  Also, as I mentioned in The WRDA Mantra post, an effort may be made to move water resources legislation (WRDA) during lame duck.  The AWA is squarely in WRDA territory and Alexander needs to be ready to jump on-board even if the odds of WRDA advancing are slim to none.  Push come to shove, the senators who introduce the AWA bill this year will be staking claim to the issue in the next congress.

Let’s face it.  The American Waterways Act, as it has been developing in the months leading up to Senator Alexander’s announcement, is an extremely ambitious package.  It will entail getting Congress to approve significant hikes in commercial navigation project spending, increase the fuel tax, venture into the touchy subject of expanding uses of the HMTF, and streamline permitting on some water resource projects that have been a favorite target of environmental conservation organizations…none of which are reasons to put a halt to such ambitious foolishness.

Said Lamar Alexander yesterday, “The Harbor Maintenance Trust Fund collects a lot of money, but doesn’t spend it well. The Inland Waterways Trust Fund doesn’t collect much money, but spends it well. This bill would fix the way our ports and waterways are funded so that we can meet the challenges they face…”

Here’s a challenge for a do-something Congress.  Pbea

FMC on HMT: Unintended Consequences

In Congress, Federal Government, Infrastructure, Ports, Water Resources on October 18, 2012 at 11:52 am

In July the Federal Maritime Commission released a study that claims a relationship between the Harbor Maintenance Tax (HMT) charged in U.S. ports and logistics decisions that result in some imports bypassing U.S. gateways and moving through Canadian ports to American destinations.

Concerns at the Ports of Seattle and Tacoma that the HMT are tilting the competitive field prompted the study.  These are long standing concerns that predate the cargo fee.

In the mid-80s Congress eventually acceded to the Reagan Administration’s insistence that the cost of maintaining Federal coastal channels be recovered through a new user fee.  The main question was how to collect the fee, which at that time was proposed to cover 40 percent of channel O&M.  It is now 100 percent.

The issue of maintenance fees and cost-sharing on improvement projects—another Reagan demand—prompted a split among port authorities. A “small port coalition,” consisting of ports of all sizes, many of which handled cargo that made it easy to find political allies, wanted to avoid a fee that would burden low margin cargo such as export grain and coal.  Some of those ports with outsize channel maintenance requirements fought any suggestion that the new policy require their dredging costs to be supported by fees collected in their ports.  If a port had to rely on its cargo volume to cover its dredging costs the New Yorks, Norfolks, and Oaklands would have an advantage, not to mention those ports with naturally deep water.

Notwithstanding the efforts of the “large port coalition” that dominated the container trade and favored a charge on cargo tonnage, the small port coalition had success in defining the revenue mechanism. Key committee leaders, most notably Chairman Bob Packwood (R-OR) of the Senate Finance Committee, settled on a fee that would go easy on American export commodities and, as it happens, raise a tidy sum for the new Harbor Maintenance Trust Fund. The new HMT would be applied to cargo value, not tonnage.

Seattle and Tacoma (members of the large port coalition, for the curious reader) opposed the HMT provision. They sought to be exempt from the cargo fee, fearing the advantage it would create for nearby Vancouver, B.C. in the container trade. (Did they even imagine a Prince Rupert was in their future?) Their objections to the HMT won them only a section in the new WRDA ’86 law that tasked the Treasury Department, where the Customs Service was located, to study and report to Congress on any effect the HMT had on diverting cargo from U.S. ports.

A year or so later Customs reported back with its conclusion: no effect of diversions.  With no formal report to refer to one wondered how Customs arrived at that determination.

In the 25 years that passed since the HMT became law we have seen the tax increase from 0.04% to 0.125%, the Supreme Court quickly came to a 9-0 decision and voided the HMT on exports, and the Harbor Maintenance Trust Fund’s unexpended and seemingly untappable balance has ballooned to over $7,000,000,000.

Through those years, and with the addition of Prince Rupert to American West Coast woes, the Sea-Tac ports have pressed the argument that the HMT contributes to the loss of cargo. The fact that those ports benefit little by the HMT revenues—they require little in the way of dredging—is salt in the wound.

Enter the Federal Maritime Commission. Washington State senators asked the FMC for analysis of the extent to which the “HMT and other factors impact container cargo diversion from U.S. west coast ports to west coast Canadian and Mexican ports.”

The FMC was fertile ground for such a request. In the 1980s Maryland Port Administration attorney Richard Lidinsky energetically fought “Canadian diversion.”  Today he chairs the FMC.

The FMC inquiry commenced in late 2011, public comments were received, and the resulting “Study of U.S. Inland Containerized Cargo Moving Through Canadian and Mexican Seaports” was released in July 2012.  The conclusion: no FMC related law or regulation is violated in the use of the Canadian ports but the HMT plays a role to the extent that it adds to the cost of transportation.

The FMC study noted that ports compete on “a wide variety of variables.” (Such was the essence of the shipper and carrier comments–easily the most detailed and responsive comments submitted in the public process–that didn’t confirm the report’s presumption that the HMT is a factor in decisions to use Rupert.)  The study found no significant difference in cargo transit times moving through the U.S. and Canadian gateways. It acknowledged that the rates through Prince Rupert are lower but stated that other factors in the supply chain make it “difficult to conclude that transportation costs are significantly lower.”

The study employed a ports elasticity model developed years before by Dr. Robert Leachman. The FMC concluded that if the HMT (estimated to average $109 per FEU) were eliminated in the Sea-Tac ports, or if an equivalent charge were put on the U.S. bound cargo when crossing the land border, “up to half” of the containers “could revert to using U.S. west coast ports.” The report concluded that the HMT “does appear to be one competitive force that is not based on natural competition, but may indeed be a legislative disadvantage on some U.S. ports” i.e., an unintended consequence.

What is one to make of the study?  It is not conclusive in the way we like to have questions settled.  The FMC document has its critics within the agency, with two commissioners voting against its release. One called it “a political policy paper to justify a predetermined conclusion.” The other wondered why, if the HMT is such a discouragement, does Canada-bound cargo use U.S. ports?

After 25 years do we yet know the extent of the problem, assuming it is a problem?

If anything, the study gives Sea-Tac and their advocates in Congress something to quote as they lobby for a fix. One such fix, an exemption from the HMT, is not in the cards. (Why would other ports go along with that?)

Legislation has been drafted to apply an equivalent charge on U.S. cargo when it crosses the land border (a “land border loophole”?), the revenue from which might be put to making freight improvements. But is the FMC study enough to convince Federal policy makers to slap a fee on cargo entering through Canada or Mexico? Dress it up to look like a user fee to support infrastructure improvements but it still will come off as a penalty for not using an American gateway. The cargo interests will fight it, probably the railroads, too. And don’t expect the Commerce and State Departments and the White House Trade Representative to be mute on the question.

The valuable but imperfect HMT (title  for another blog entry?) continues to create problems while feasible solutions elude us.  Meanwhile, look to the east. There on the horizon are Nova Scotia ambitions to establish a Rupert-on-the-Atlantic.

The fight against the HMT is 25 years long and counting.  Pbea

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