LOCKED Out: Aging Locks and Dams Jeopardize Inland Waterways
Is a catastrophic cascading systems failure about to occur along
the Ohio River?
Coal Age Magazine
February 2012
By Lee Buchsbaum, Associate Editor and Photographer
Endless foreign wars, endless Federal budget cuts and endless
political debates are starting to take a collective toll on the
health and viability of our nation’s crumbling infrastructure,
once the envy of the world. While most taxpayers are familiar with
the limitations of the nation’s highway system, far fewer
understand the problems now commonplace along the U.S. inland
waterways system. Traversed daily by thousands of barges and tows
owned by dozens of operators, industry and government stakeholders
are becoming increasingly frustrated as the locks and dams that
comprise much of the waterways infrastructure continue to fail at
accelerating rates. As funds dry up from the Federal level, it
will be left to industry, labor and local governments to shore up
the liquid arteries of commerce that bind this nation together.
Unique among the network of rivers that make up the U.S. inland
waterways, the Ohio River would be considered a major coal river.
Hundreds of millions of tons of coal travel through the Ohio
River’s many locks and dams annually going from mine to power
plant, and increasingly from mine to export facility. As domestic
utilities reduce the collective coal burn, now more than 10% of
the combined steam and thermal coal produced in the U.S. is
heading overseas. With coal traffic patterns changing as a result
of this market shift, larger amounts of river-borne coal are
seeking new outlets, especially as existing rail-served coal ports
become clogged with other traffic.
Complicating transit is the fact that many locks and dams on the
Upper Mississippi and particularly the Ohio River are ancient,
some over a century old, and quite a few are way past their design
life. As each day passes, the threat of a significant or
catastrophic lock or dam failure becomes more imminent. While
America has so far dodged that bullet, the right bolt breaking
lose at the wrong time in the wrong place could wreak havoc on
coal markets.
The Federal Government continues to invest funds in various river
improvement projects. Tremendous amounts of money have been tied
up for years in one of the biggest boondoggles in modern times:
the Olmstead Lock and Dam on the lower Ohio. Initially budgeted at
$775 million, projected costs have today climbed to more than $2.1
billion and there’s no end in sight. Moreover, according to the
way in which money has been allocated and prioritized, under
existing law, dozens of other projects are being held up while
Olmstead is “finished.” Meanwhile, the inland waterways become
more fragile.
According to the Waterways Council, a Washington-based industry
group, moving coal and other freight via barge through the
nation’s river system is the most energy efficient mode of
transportation. On average, barges move a ton of cargo 576 miles
per 1 gallon of fuel. A rail car, by contrast, will move the same
ton of cargo 413 miles per gallon. Trucks are the worst, averaging
only 155 miles travel per that 1 gallon of fuel. One of the
largest river shippers, American Electric Power (AEP) is able to
do better: squeezing an average of over 642 miles traveled per
gallon of fuel used. But in our increasingly carbon constrained
and supposedly “greening” economy, America’s inland waterways are
actually becoming less efficient and reliable. As Congress debates
how much to fund the waterways through this winter, shippers
wonder how the inevitable spring floods will affect them and their
customers later this year.
The Ohio: America’s Real Coal River
In a presentation delivered at the Coal Handling & Storage
conference, which was held during November in St. Louis, Keith
Darling, president of AEP’s River Operations, discussed how
fragile the Ohio River system’s lock and dam infrastructure has
become.
Headquartered in Chesterfield, Mo., AEP’s River Operations
subsidiary is the second largest dry bulk barge company on the
inland waterways transporting more than 71 million tons of
commodities each year. Traversing almost all of the nation’s river
systems, AEP moves about 32 million tons of coal annually into AEP
power plants as well as another 3 million tons of limestone and
urea, which is used in emission control systems, also traveling by
barge.
Throughout the nation’s heartland, the Ohio, Illinois, Green,
Tennessee, and the Upper and Lower Mississippi rivers and other
rivers carry millions of tons of cargo to hundreds of industrial
facilities. While the Lower Mississippi does not have any locks
and dams, some of the oldest in the nation are on the upper
Mississippi. But, in terms of cargo, it’s really a grain river as
is the Illinois. “If you really want to talk about a coal river,
we’re talking about the Ohio,” Darling said. With almost 40 locks
and dams throughout a system comprising both the Monongahela and
Allegheny rivers as well as the Ohio River, Darling explained,
more coal flows over these waters than any where else in the
nation.
For hundreds of miles from Pittsburgh, Pa., to Cairo, Ill., where
it meets the Mississippi, the Ohio River valley is dotted by
factories, chemical plants, power plants and other industrial
facilities. Over the course of a year more than 200 million tons
of cargo move through its locks and dams, and no cargo is more
plentiful than coal.
Lock Outages on the Ohio
As the Inland River system ages, Darling likened the situation
to a form of Russian roulette, pulling the trigger each time the
system locks another tow, and hoping there’s no bullet in that
chamber. Most of the dams’ “design life were exceeded 50 years ago
and it’s heroic to keep those structures operating. As they get
older and we don’t do proper maintenance and we don’t modernize
them, their reliability has become challenged,” said Michael
Toohey, president and CEO of the Waterways Council, the primary
industry group associated with protecting that viability.
As compiled by AEP and the Army Corps of Engineers, since 2000,
more locks are closing for repair or maintenance every year. And
as the system continues to fatigue, the amount of time locks are
out for repairs grows each year as well. “Lock outages have
increased three-fold in a 10-year period. Throughout 2009, there
was a lock out somewhere on the Ohio River roughly 25% of the
year,” said Darling.
Over the next 20 years lock gate failures will continue steadily.
“Lock gate failures will occur at increasing rates over the next
couple decades. Indeed by the year 2020, the Corps predicts that
all 40 lock gates on the Ohio will fail at some point in time.
That’s the Corps’ prediction. And amazingly they’ve been about
100% at predicting lock failures,” Darling said.
Those lock failures have major impacts to the traffic on the Ohio
River. When a main chamber on the Ohio River fails, all traffic
must use an auxiliary lock chamber instead. Generally the
auxiliary chambers are only half the size of the main chambers,
forcing barge lines to break tows in half and move a tow through
in two or more pieces. “This adds time and it creates queues.
Locks you typically drive up to and lock directly through, you’ll
sit at for two, three, even four days while waiting for your turn
to move through. And, time is money,” said Darling. The extra
costs the shippers bear generally translate into higher costs per
delivered ton and increased costs for ratepayers. All of this
translates to higher costs for coal, which only prices it further
out when compared to natural gas.
Using the Corps and AEP’s data, in three years—by 2015—the main
chambers of five dams, which currently lock through a combined
72.2 million tons per year (tpy), will fail (Hannibal L&D,
17.4 million tpy; Willow Island L&D, 17 million tpy;
Belleville L&D, 16.5 million tpy; Lock 52, 17.9 million tpy;
and Lock 53 3.4 million tpy). In fact, by 2020, both the main and
auxiliary locks will have failed on four dams along with the mains
on four others. Millions of tons would be displaced. Essentially,
that amount of cascading lock and dam failures would clog up the
river, perhaps rendering it uneconomical compared to competing
modes as dwell times and costs rise precipitously.
Too much hyperbole? Perhaps. But Darling and AEP believe that even
today, one key installation failure could have tremendous
repercussions. In his presentation, Darling discussed the
ramifications of a hypothetical lock failure at the Belleville
lock and dam, located at milepost 203.9 on the Ohio River. A team
at AEP studied what the system-wide ramifications would be if a
gate failure occurred at Belleville, essentially in middle of the
Ohio River system. Belleville is one of six dams (out of 40) that
has earned a “D” condition rating by the Corps. It is expected to
fail sometime between today and 2015—along with four others.
When, not if, Belleville fails, roughly 16.5 million tons of
throughput could be affected, causing a displacement of well more
than 1.3 million tons. That failure alone could “add about 6.8
cents per kilowatt-hour to the average customer. And the average
customer uses about 100 kilowatts per day. Though $6.80 per day
doesn’t sound like a lot, in a month that’s about $204 more that
every electric utility customer of AEP would have to pay. And AEP
is only one of many utilities along the Ohio River,” said Darling.
Of course, any increased transportation costs will be further
heaped upon the mountain of other costs from a whole slew of
expensive environmental regulations and other burdens conspiring
to drive up the cost of coal-fired generated electricity.
How the Corps of Engineers Spends Its Funds
So why are America’s dams failing and how well has Congress
prepared the country by allocating the resources to prevent this
looming systems failure? Not well. Think “neglect.” But, Darling
cautioned, this long-term neglect “didn’t happen under this
recession. It didn’t happen under Obama. This has been occurring
over decades. Congress is not funding lock and dams,” he said. So
what you have is a system constructed for a 50-year life that,
through neglect, has seen its life expectancy actually decrease.
However, industry will continue to use these same locks and dams
longer than those planned 50 years. “It’s a situation that we
can’t sustain without some investment,” Darling said.
Currently maintenance of the Inland Waterways system comes from
both funds allocated by Congress and from a variety of user fees
administered by the Inland Waterways Trust Fund (IWTF). Currently
the barge industry pays a $0.20/gallon diesel fuel tax into the
IWTF. That adds up. AEP alone paid more than $10.2 million into
the fund in 2010. A cost-sharing formula was established in 1986
so that half the lock and dam construction costs are paid out of
the IWTF and the balance from general revenues. This includes
construction and major rehabilitation initiatives.
The Inland Waterways Users Board was also established in 1986 to
advise Congress and the Secretary of the Army about inland
waterways system priorities and spending levels. Currently the
Trust Fund generates roughly $70-$90 million annually, far less
than what is necessary. The modernization needs of the system, as
projected by both AEP and the Corps, far exceeds the annual IWTF
revenues. And currently far too much of those meager revenues are
being sucked up by just one project: the infamous Olmsted Lock and
Dam.
Olmsted Lock and Dam: Boondoggle on the Ohio
The Olmsted Lock and Dam construction project is actually two
projects at once. One is the actual construction of the new locks
and dam, but also the phasing out of the busy locks 52 and 53.
Located just up-stream of the confluence of the Ohio and
Mississippi at Cairo, Ill., Olmsted replaces these older dams with
the one new one. “It’s just become an enormously expensive
proposition,” said Toohey.
In 1988, Congress authorized the Olmstead project at $775 million
for a 12-year construction period. Because of the cost sharing
formula for the initial funding authorization, about half of the
cost was to come out of the IWTF, roughly $387 million over those
12 years. “What that worked out to was about $32 million a year
spread over 12 years to come out of that fund for one project. But
the fund is still supposed to fund all of the major projects on
all the locks and dams on all the rivers in the U.S.,” Darling
said.
However, the Olmsted project quickly fell behind schedule. After
spending more than $1.3 billion so far, there continue to be
problems, delays, and more delays. Over this time, Olmsted’s
project cost has ballooned to more than $2.1 billion. And now,
instead of a 12-year project, it will take at least 26 years to
complete. Worse for the IWTF, “using the same cost sharing
formula, 50% or $1.05 billion will come out of the fund. That’s
$40.3 million per year for at least 26 years. And the sad part is,
the Corps says it doesn’t think it can meet that. So Olmsted is
going to be higher in cost than even this and it’s going to be a
longer timeline to completion. The business model for financing
our navigation infrastructure just isn’t working,” Darling said.
There’s a growing sense of frustration and almost helplessness in
the industry because no other projects can be prosecuted or
implemented until Olmsted is back on schedule or completed—or the
rules are changed. “We’re very concerned because the project is
commanding all the money for this modernization build out, even
though we have 25 other authorized projects. That’s more than $8
billion of backlogged work that we can’t get to because of the
priority Congress has established for the appropriation of funds,”
said Toohey.
So in essence, as those contractors fritter away the time, and
increase the price of the project, Congress has put all other
major waterways projects on hold. “In its defense, Olmsted has
great benefits. It returns $8 back to the community for every
dollar invested. It’s a good project, but it’s just become an
enormously expensive project. That’s probably because of the use
of experimental engineering technology. They are trying to build a
dam in the wet rather than use traditional structures,” said
Toohey.
Then again, the other projects on the drawing boards would
generate lots of revenue and jobs as well. “In the short term we
have $8 billion of family wage construction work being held up.
The Corps figures 30,000 jobs per every $1 billion spent, so
that’s 240,000 jobs. Those projects are already authorized, but we
need federal funding,” said Toohey. The majority of them will be
located along the Ohio.
Just as importantly, modernization of the waterways will attract
more investments along it, and thus more jobs. “Facilities that
are located along the waterways, precisely because of their
ability to transport goods in a reliable, efficient and
environmentally friendly manner, are now in jeopardy, especially
new build outs. “Shell Oil Co. stated it wants to locate a plant
along the Ohio River. It has announced that it will either be in
Ohio, West Virginia or Pennsylvania to take advantage of the crude
oil production in the Marcellus shale gas. With the multiplier
effect factored in, they estimate this plant, including
construction, will create another 17,500 jobs,” said Toohey.
Solutions to Difficult and Expensive Problems
In an effort to try to fix this failing model, a group of
industry stakeholders including the Coast Guard, the Waterways
Council and others sat down and hammered out a plan. Titled the
“Inland Marine Transportation Systems Capital Projects Business
Model,” the plan “would allow us to complete 25 projects in a
20-year period as opposed to seven projects over a 20-year period
if we go down the current path. And I have serious doubts that
they’ll even be able to accomplish the seven projects at the pace
they’re going,” said Darling.
The new plan provides for additional revenues for the trust fund,
it re-prioritizes the nation’s investments, and recognizes and
accounts for all the beneficiaries of the water systems, and “it
protects commercial users that cost-share the construction
projects,” said Darling.
The development plan has five elements. The first is to increase
Federal funding for the program from the current $160 million a
year to $380 million. Second, it suggests a way to prioritize the
projects so that those that are ready to go and provide the most
benefit would be funded first. Third, it proposes reforming the
core project delivery process that now takes 40 years to achieve
“what we used to be able to achieve in four years. And finally, it
proposes to increase the current diesel fuel tax of $0.20 a gallon
to $0.69 a gallon to help pay for these projects,” said Toohey.
Indeed, the waterways users would “volunteer to pay more money for
an increased fuel tax,” said Toohey. Stakeholders hope that by
taking a page out of the Warren Buffet playbook and showing a
willingness to increase their collective exposure, maybe the
government will follow suit. But so far, as the Great Recession
wanes on, Congress’ reception has been decidedly mixed. “Members
that understand the importance of investment and infrastructure
support it and those that are just, ‘no new taxes,’ of course
oppose this,” said Toohey.
While industry is prepared to raise its stake, the only thing that
can really save the existing system are more Federal funds. “It
really is going to take convincing Congress that we need more
infrastructure investment. This is not a discussion about raising
taxes. It’s about having the resources to invest so that our
economy can thrive. Congressman Ed Whitfield (R-KY) has agreed to
be a champion for the proposal in House of Representatives. For
the sake of the Inland Waterways system and to maintain the health
and viability of our nation’s industrial heartland, we need to
pass the Whitfield bill,” said Toohey.