GIWW Ports Capitalizing On Fracking Boom
19 August 2013
By David Murray
In an “anemic” market environment, with “many headwinds,” a strong
transportation infrastructure is vital to prosperity. Only the
waterways can take full advantage of the energy opportunities
being unlocked by the fracking revolution, according to Ken
Eriksen, senior vice president at Informa Economist.
Those were two of the most important messages at the 108th
convention of the Gulf Intracoastal Canal Association, held August
7–9 in New Orleans at the Westin Canal Place.
Eriksen, a veteran of many inland meetings, reported that liquid
cargoes along the Gulf coast are almost at record levels, thanks
to the Eagle Ford shale. Railroads cannot handle the increased
traffic and are looking for intermodal opportunities. The 20
million annual tons of petroleum-related traffic is now the
largest cargo category on the Gulf Intracoastal Waterway.
The flood of cheap natural gas and oil is having knock-on
effects in many industries. Eriksen said the textile spinning
industry is returning to U.S. shores because cheap natural gas
energy, along with lower transportation costs, now offsets Asia’s
But costs are rising for inland towboats as well, although
accurate figures are hard to come by, said Eriksen.
The latest industry figures estimate costs of about $6,000 per day
to operate a 2,100 hp. boat with two 30,000-barrel tank barges.
This figure differs significantly from the Corps of Engineers
estimate of $5,000 per day that it uses to estimate costs of lock
failures and other shutdowns, showing the need for industry to
keep the Corps supplied with up-to-date figures.
The ‘Missing Mode’
Eriksen displayed a U.S. Dept. of Transportation map that
purported to show “major freight corridors”—but only showed the
Mississippi and Ohio rivers, leaving out such major corridors as
the Tennessee-Tombigbee waterway system. He contrasted this with a
more accurate and detailed map done by Wired magazine in a recent
story about logistics programming.
Eriksen noted that the Tenn-Tom did its own study of cargo moving
through it, and said other systems should do the same, instead of
waiting for the federal government to catch up. The Tenn-Tom study
is only eight pages long, he said—the perfect length to put into
the hands of a member of Congress or staff member.
The logistics data shortfall has created major employment
opportunities, Eriksen noted. Logistics planning and routing
is one of the fastest-growing areas of computer programming.
Anyone who gets a degree in this fast-growing field will “make
more than a finance MBA starting out,” he said.
One problem for waterways interests is the “siloing” of
transportation modes within state transportation agencies, with
one mode knowing little about others.
Kentucky highway officials, said Eriksen, are frequently surprised
by spikes in truck traffic that follow lock failures or shutdowns.
But “awareness is growing” that a multimodal-systems perspective
is needed for state freight corridor investments. Awareness of
waterways and multimodal issues also needs to spread more into
general industry, he said.
Estimating Shutdown Costs
Mark Hammond, senior economist in the Great Lakes and Ohio
River Division of the Corps of Engineers, then explained how the
Corps calculates the cost of shutdowns and delays at locks and
other waterway structures. The model, called the Shipper Carrier
Costs Model, is important because the Corps uses it for its annual
budget list of maintenance priorities.
The Corps studies three kinds of costs: delay costs, or the costs
of using alternate water routes; diversion costs, or the cost of
using another mode of transportation; and rescheduling
costs, the lost time and expense. Hammond said the Corps is trying
to shift from the old model that measures tonnage to one that
measure cargo values.
Hammond displayed a chart that ranked the costliest locks for
delays or shutdowns. Calcasieu ranked first, while Algiers Lock,
which had an emergency shutdown of 112 days this year, ranked 32.
The three types of costs incurred by the Algiers shutdown—in
delays ($21,888,000), diversions ($123,943,000), and rescheduling
($1,000)—were estimated at just under $146 million.
‘Book Of Pain’
In response to a question from the audience, Hammond noted that
this data is based on a survey of shippers and carriers, with a
response rate of 60–75 percent. It includes only direct costs to
shippers and carriers; it does not include the costs of product
re-sourcing (i.e., when customers choose another supplier), or the
impacts on plants that may have to change production schedules or
even shut down temporarily due to transportation delays.
Hammond noted that much of the information the Corps needs, from
the petrochemical industry for example, is both proprietary and
fast-changing. He then turned the tables, asking the audience
whether any of their companies kept a separate account of delay
costs; no one raised a hand. Eriksen said that while he recognized
that responding to surveys is a cost for the industry, it is an
increasingly necessary one.
“Although we think it’s OK” for the Corps’ purposes,” Hammond
said. “We know it’s not a complete picture. We’re especially
limited in our knowledge of the GIWW basin.”
Hammond closed by saying, “We want industry’s help” in improving
the cost model. He suggested that GICA might want to think about
collecting such information as an honest broker. “There’s an
opportunity here for GICA to shepherd these data points into a
useful form” for carriers and shippers, he said.
Charlie Jenkins of the Houston Port Authority said the port faces
similar constraints in asking clients for confidential
information. The port compiles its own estimates of delay and
shutdown costs for shippers and carriers, which it calls its “book
Mike Toohey, president and chief executive officer of Waterways
Council Inc., gave a roundup of news from Washington. The two big
preoccupations of Congress right now are immigration reform and
tax reform, he said, but the current Water Resources Development
Act (WRDA) is expected to pass in some form. It’s up for
consideration in the House of Representatives in the fall, but it
has to compete with a proposed limit on tax increases and the
defense reauthorization bill, both contentious matters. There are
only 12 days of legislative session before the end of September.
To top matters off, Toohey said, the government reaches its debt
limit in November, forcing yet another debate on whether to extend
the government with continuing resolutions or to raise the debt
limit, another hot-button issue. Toohey said he thinks continuing
resolutions are likely. “Unfortunately, Congress is getting used
to bumping along” with continuing resolutions.
The good news is sequestration has not bitten as deeply yet as
many feared, although there was much talk at GICA about cuts in
travel budgets for officials from the Coast Guard and Corps of
Engineers to visit conferences like this.
Toohey said that proposed spending cuts are not targeting the
Corps of Engineers as much as many other government agencies,
reflecting increased bipartisan recognition in Congress of the
importance of the Corps’ missions.
The Senate currently has a version of the Water Resources
Development Act (WRDA) that accepts the industry-proposed
“federalization” (that is, suspending industry contributions from
the Inland Waterways Trust Fund) of the Olmsted Lock & Dam
project for one year. Olmsted currently monopolizes most of the
Corps’ construction budget, to the detriment of other needed work.
The Senate bill contains an increase of $1 billion for the Harbor
Maintenance Trust Fund, the waterways industry-supported RAMP Act.
It also includes a directive that the Corps must perform all
operations and maintenance of authorized navigation projects.
One Senate provision accepts cost sharing of 65–35 for qualifying
hurricane-protection projects; another provides for no
cost-sharing at all (full federalization) for projects below a
50-foot depth. Several of these provisions, Toohey said, were
inspired by Hurricane Katrina.
The Senate WRDA bill also proposes a nine-cents-per gallon
increase to the current fuel tax that supports the IWTF, but since
spending bills can only originate in the House, that bill must
wait to be reconciled with a House-originated bill. It is unlikely
that the Republican-controlled House will agree to nine cents, but
it may accept six cents, he said. Toohey said the increase may
either be made a part of WRDA or be a separate bill.
Meanwhile, the House of Representative’s version of WRDA (called
the Water Resources Reform and Development Act, or WRRDA) is being
guided by Rep. Bill Shuster (R-Pa.), chair of the Transportation
and Infrastructure Committee.
Toohey said the details are being kept secret to help the various
interests hash out compromises—as in the old days when Shuster’s
father, “Bud” Shuster, chaired the same committee when he
represented Pennsylvania’ 9th district.
Shuster has promised, though, that the House’s version will
contain no earmarks; will be transparent; will “emphasize economic
competitiveness and growth”; and will de-authorize as many
projects as it authorizes.
Toohey said one comment he often heard when asking younger members
of the House whether or not they would support an increase in the
user fee is, “What does Grover think?”—referring to influential
anti-tax advocate Grover Norquist, who has gotten many House
members to sign his pledge of no net tax increases.
However, Toohey said that after Sen. David Vitter (R-La.)
explained the user fee, Norquist had no objections to it, scoring
it as not a tax increase. Norquist’s approval frees the junior
House members to vote for it.
The bottom line, said Toohey, is a WRDA is very likely to become
law with most, if not all, of the provisions that the waterways
The next panel focused on tributaries and what they mean for
the GIWW. The panel included Larry Merrihew, president of the
Warrior Tombigbee Waterway Association since 2007; Bruce Windham,
administrator of the Tennessee-Tombigbee Waterway; Roy Holleman,
marketing director of the Red River Waterway Commission; and
Jennifer Stastny, executive director of the Port of Victoria,
Texas, birthplace of GICA.
Merrihew said two locks are scheduled to close for 30 days on the
Warrior-Tombigbee Waterway in 2014 to have their lower miter gates
replaced, but noted that Congress has not yet appropriated the
money for them.
Training Teachers And Students
Windham described the educational efforts of his association,
which has developed a curriculum of 60 lesson plans for primary
and middle school teachers on waterways. The curriculum is tied
into state STEM (science, technology, engineering and math)
programs. This summer, the program trained 100 teachers from eight
counties at a cost of about $343,750, or about $300 per teacher.
The teachers get a truck packed with items for hand-on
exercises that are donated by the waterways industry.
Windham urged other waterways association systems to do similar
projects. Although he said it takes years to see results, the kids
go home and educate their parents, building support for the long
Stastny’s Port of Victoria has enjoyed explosive growth because
it is at the epicenter of Eagle Ford shale activity. She said the
growth rate of the port has been like putting your toddler to bed
and having him wake up the next morning as a teenager. The port
moved its first barrel of oil in May 2011, and today moves 1.7
million barrels per month and 80,000 tons of frac sand per month
(see WJ, January 21, 2013). Two years ago, Caterpillar announced
the building of the largest excavator assembly plant in North
America in Victoria.
Stastny said the 35-mile-long Victoria Barge Canal traverses two
navigation districts, West Side Calhoun County Navigation District
and Victoria County Navigation District.
Stastny, too, urged carriers to share more figures with
decision-making agencies like the Corps. Her port had no O&M
funding for dredging in 2012. The figures that carriers are
required to report to the Corps’ Waterborne Commerce Statistics
Center play an integral part in determining the maintenance
dredging funding allocations to waterways. As a result of what
Stastny said was gross underreporting by carriers on the Victoria
Barge Canal, its O&M funding decreased from $3.5 million per
year to $363,000 for 2012. Carriers reported 2.2
million tons to the Corps, while facilities on the canal reported
and paid the respective Navigation District's wharfage fees on 6.7
million tons. Without accurate reporting of the carrier's volumes,
Stastny said, critical waterways such as the Victoria Barge Canal
will continue to receive inadequate maintenance dredging dollars.
Stastny shared the story of Invista, a company located in her port
that is one of only two makers of a chemical called C-12, a vital
component in many lifesaving medical devices, as well as in the
covering on disposable baby diapers. When the only other plant
making C-12, in Europe, suffered a disastrous explosion and fire
that will close it for at least five years, the resulting shortage
of absorbent diapers made news around the world. The Victoria
plant remains the only one in the world making C-12.
“If Invista has to light-load its barges because of inadequate
dredging, the effects could be felt worldwide,” said Stastny.
Exporting Oil OK
The lunch speaker was freshman Rep. Randy Weber, whose 14th
District in Texas includes many petrochemical plants and five
ports. Weber said his district produces 60 percent of the nation’s
jet fuel. The Keystone pipeline, if built, would terminate in his
Weber said that during a visit to Republican House members in
March, President Obama said that if the Keystone were built, oil
companies “would just export oil.” Weber said he replied, “What’s
wrong with that?” Because of fracking , the U.S. is set to become
a net energy exporter sometime in the next few years.
Weber said he is afraid that unless the Corps receives more
funding, it will establish a new threshold of 2,000 lockages per
year to maintain them. He is in favor of getting Congress back on
track to pass a WRDA every two years, as it used to, he said.
A Tale Of Two Committees
In the afternoon, Tom Marian of Buffalo Marine moderated a
panel on marine federal safety advisory committees. The federal
committees flow out of the 1972 Federal Advisory Committee Act,
which also set up a Committee Management Secretariat.
Cherrie Felder, a maritime organization veteran who was introduced
by Marian as the “diva of the waterways,” since she has held
“almost every leadership position there is to hold,” currently
chairs the Lower Mississippi River Waterway Safety Advisory
Committee (LMRWSAC, pronounced “lomarsac”). LMRWSAC, said Felder,
is currently the only functioning federal advisory committee
empowered to speak officially on maritime safety issues on the
Lower Mississippi. Its 25 members, drawn from various sectors of
the maritime industry, are appointed by the Secretary of Homeland
Security. Its current authorization expires in 2020, but it is
awaiting approval of its charter, which must be renewed every two
Felder explained that although committee members are unpaid
volunteers, they are considered federal employees in some
respects, meaning there is a lot of paperwork to fill out and
burdensome conflict-of-interest rules to follow that can limit
members in many ways. For these reasons, industry veterans are
sometimes reluctant to serve on federally chartered safety
advisory committees. The advantage, however, is that when
federally chartered safety committees issue reports and
recommendations to agencies like the Corps of Engineers and Coast
Guard, the latter are obliged by law to give a formal written
public response. That’s not the case with more informal bodies
that may also advise agencies, such as local harbor safety
committees that may contain many of the same personnel that serve
on the federally chartered committees.
Since the committees typically have to renew their charters every
couple of years, members have frequent chances to reassess whether
to continue in that form. Felder said that LWMRSAC recently chose
to continue as a federally chartered committee. The Houston
Galveston Navigation Safety Advisory Committee (HOGANSAC), on the
other hand, “withered on the vine due to federal regulations,”
according to Marian. It chose to dissolve itself as a federally
chartered committee and re-form as a local harbor safety
committee, called the Lone Star Harbor Safety Committee, created
in February 2011 with 31 members with staggered 2-year terms. It
is “a more informal animal” than a federal committee. Despite not
being federally chartered, it is respected enough that the
National Transportation Safety Board recently asked it for safety
feedback in the wake of a recent accident, said Marian. Lone Star
has recently reactivated plans for the popular “Brown Water
University,” in which Coast Guard and Corps officials learn about
the realities of the inland industry.
The U.S. currently has about 80 harbor safety committees, and
Marian said that there is usually good, close cooperation between
them and the Coast Guard and Corps.