Underinvestment in Ports and Inland Waterways Imperils American Competitiveness

America’s maritime infrastructure crying out for dollars

Economist
11 February 2013

Who needs trucks?

The Industrial Canal Lock in New Orleans connects two of America’s highest-tonnage waterways: the Mississippi River—which handles more than 6,000 ocean vessels, 150,000 barges and 500m tonnes of cargo each year, as well as much of its grain, corn and soyabean production—and the Gulf Intracoastal Waterway, which runs from refinery-rich south-eastern Texas to Florida. Ships pass from one to the other via a lock that was built in 1921, and is 600 usable feet long, or half the length of a modern lock. Its replacement was authorised in 1956. Construction on the replacement was authorised in 1998, and then stalled by lawsuits. The most optimistic predictions of the Army Corps of Engineers, which maintains America’s inland waterways, see the new lock being completed in 2030.

A few miles upriver from this archaism sits the Port of New Orleans, one of America’s busiest and most diverse. Like its rivals, the port is “intermodal”, meaning that it welcomes not just ships but also barges, trucks and, alone among American deepwater ports, six Class I freight railways. Port activity in New Orleans generates $8 billion in earnings, $17 billion in spending, $800m in statewide taxes and over 160,000 jobs. In the past decade New Orleans has spent more than $400m upgrading its facilities.

But it will take far more than that to get America’s maritime infrastructure in the condition it ought to be. Like much of America’s infrastructure, its ports, locks, dams and inland waterways are old, underinvested in, and too often ignored—to the cost of the businesses that depend on them, and the consumers both in America and abroad who buy things that pass through them. Some 70% of America’s imports and 75% of its exports go through its ports.

The number of ships calling at American ports is rising—by 13% in 2010 after an 8% decline a year earlier—as is those ships’ size: after expansion is complete in 2014, the Panama Canal will accommodate 366-metre-long ships with a 15-metre draft, compared with pre-expansion lengths of 294 metres and 12-metre drafts. The canal’s expansion will make it easier for Asian ships to reach America’s east and gulf coasts—home to five of its ten busiest container ports—and for American commodities to cross the Pacific. By 2030 “post-Panamax” ships are expected to comprise a majority of the world’s container ship capacity. And yet just seven of American container ports stand ready to receive such ships—and only one of these is in the South, where population growth is highest.

Last year the president approved plans to deepen or begin the long review process of deepening ports in Charleston, Jacksonville, Miami, New York/New Jersey and Savannah, but—as the Industrial Canal lock shows—a long and winding road runs between approval and completion. And approval does not necessarily come with funding. Kurt Nagle, who heads the American Association of Ports Authorities, says that in the next five years “public ports and their private partners expect to invest $9 billion in port infrastructure There… is a shared responsibility, and the federal government, we believe, is not upholding its end of the partnership.”

In the past four years America’s transportation department has spent around $357m on infrastructure improvements at 25 ports around the country, which is $40m less than the Port of New Orleans spent on its port alone. The American Society of Civil Engineers (ASCE) estimates that underinvestment in America’s inland waterways cost American businesses $33 billion in 2010, and that without significantly increased investment those costs could rise to $49 billion (in constant dollars) by 2020.

The inland story

As shipping to and from the United States increases, so too will the use of these inland waterways, which are in most cases desperately in need of an upgrade. They offer an efficient mode of transport: a single barge has the dry-cargo capacity of 16 railcars or 70 trucks, and the liquid-cargo capacity of 46 railcars or 144 trucks. Barges also emit less greenhouse gases, use less fuel and occasion far fewer deaths than either trains or trucks. They also tend to be farther from population centres: better a hazardous chemical spill on a remote stretch of canal than on an interstate running through a big city.

In 2009 ASCE estimated a five-year funding shortfall for inland waterways—the primary mode of transport for much of America’s exported commodities—of $20.5 billion. To attempt to remedy this, Lamar Alexander, a Republican senator from Tennessee, introduced the American Waterworks Act in late 2012, which would free up funds for desperately needed inland-waterway improvements. Mr Alexander’s bill would end the requirement that the Inland Waterways Trust Fund—which pays half the costs of lock and dam maintenance and is funded via taxes on commercial users—fund the Olmsted Lock, a notorious white elephant on the Ohio River (authorised in 1988 at a projected cost of $775m, it has so far cost over $2 billion and is incomplete).

Of the 257 locks in operation in 2009, more than one-tenth were built in the 19th century; the average age of federal locks is 60 years, and they were built with an expected lifespan of 50 years. By 2020 more than 80% of American locks will be functionally obsolete. The extended failure of a single crucial lock could cost agriculture exporters up to $45m and barge operators as much as $163m. But inadequate locks delay ships not just when they break, but by their design. The Industrial Canal lock, for instance, is half the size of a modern one, which means that barges transiting in convoy need to be broken up. That boosts costs to the shipper, and, ultimately, the consumer as well.