STC explores waterway investment

STC explores waterway investment

Soy industry examines public/private partnership approach to maintain locks and dams on inland waterway system.

AMERICA'S inland waterway system, including the network of locks and dams, has been and continues to be a major contributor to the profitability and competitiveness of U.S. farmers.

For U.S. agriculture, the nation's navigable waterways are unique not because of their ability to accommodate commercial traffic but, rather, their close proximity to the most productive farmland, allowing farmers to connect with international customers in a cost-effective and reliable manner. While other countries have navigable waterways, they are often far removed from the most productive agricultural regions.

Despite the significant contribution of the inland waterway system to the success of the American economy, the condition of the nation's locks and dams continues to degrade due to underinvestment from the federal government. As a result, a recent study funded by the soybean checkoff explored the potential for engaging and accessing private funding to enhance the condition of the inland waterway system.

"Given the continued lack of federal resources toward our lock and dam system, more attention is being devoted to alternative sources of funding, including private equity," said Patrick Knouff, a soybean farmer from Minster, Ohio, and chairman of the Soy Transportation Coalition (STC). "While there is substantial interest in this concept, there is little understanding in how it could work. The goal of this report is to increase the awareness of both the potential advantages and shortcomings of such an approach. As we proceed toward possibly accessing private investment for our locks and dams, we need to make sure we have our eyes wide open."

The STC report, "Proposed Public-Private Partnership Projects for U.S. Inland Waterways Infrastructure Financing, Operations & Governance," was performed by The Horinko Group. The analysis provides an introduction to the concept of public/private partnerships (P3s), suggests likely sites for such an approach and highlights successful P3s in other industries that could serve as a model.

A P3 is a contractual agreement between a public-sector agency and a private-sector entity to deliver a public service. In a future P3, a non-federal entity — either one or more private entities or a public authority — could assume responsibility for the funding, operation and maintenance, replacement and/or major rehabilitation of the locks and dams under a cooperative agreement.

The Army Corps of Engineers has jurisdiction over the lock and dam system and would, therefore, be the federal partner in a P3. The STC research recommends that the U.S. government, under the jurisdiction of the Corps, would retain ownership of any lock and dam site under a P3 arrangement.

The analysis suggests that under such an arrangement, the private sector would probably not have the appetite for investing in the construction of new lock and dam facilities, so the more likely approach would be to devote private investment to proper maintenance of existing sites.

STC "continues to argue that a predictably good inland waterway system is better than a hypothetically great one," STC executive director Mike Steenhoek explained. "Given the reality that the cost of one lock construction project ($376.8 million) is approximately equal to the cost of nine major rehabilitation projects ($40.7 million each), we concur with the recommendation that a P3 project focused on maintenance is more viable than one premised on new construction."

The analysis highlights two possible sites for a P3 pilot project: (1) the Peoria and LaGrange locks and dams on the Illinois River and (2) locks and dams 24, 25, 26 (Melvin Price Locks & Dam) and 27 on the Upper Mississippi River.

The lock and dam sites at Peoria and LaGrange may be appealing due to their location exclusively within the state of Illinois, which could result in a more streamlined and efficient administrative process. The four sites on the Upper Mississippi River may be appealing due to their high volume of barge traffic, along with comparatively lower maintenance costs required in the immediate future, according to the analysis.

It is widely anticipated that the final version of the Water Resources Development Act will authorize the establishment of a series of pilot projects to examine the feasibility of a P3 approach to the inland waterway system. Congress is currently finalizing the legislation, which is expected to be passed by both the House and Senate and signed by the President in May or June.

"In our estimation, a public/private partnership approach for locks and dams could be appealing because of the potential for better project execution and delivery," Steenhoek said. "The private sector often is better able and equipped to deliver the same or elevated services at a lower cost. We believe it is appropriate to examine and investigate alternative methods to finance, operate, maintain and enhance our inland waterway system. We hope this analysis — and soybean farmers, in general — can play a constructive role in this important discussion."

The full results of the study can be accessed at www.soytransportation.org or www.unitedsoybean.org.

Volume:86 Issue:18

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