IF there were ever any doubts about the value of the U.S. inland waterway system, the 2012 drought put the issue to rest.
With low water levels on the Mississippi River threatening to shutter commercial barge traffic, dozens of industries and business interests coalesced to push the federal government into action to avert a potential shipping crisis.
While closure of the river is still a possibility, drought-withered navigation channels are just the latest issue that highlights the importance of the nation's waterway transportation grid to commerce, especially as it relates to agriculture.
For several years, the issue has been an aging lock and dam system that, by many reports, is crumbling day by day.
Last fall, Lock 27 on the Mississippi River closed for five days due to emergency repairs, necessitated, in part, by falling water levels. The U.S. Army Corps of Engineers estimated that an unscheduled closure similar to that of Lock 27 likely costs $2.8 million per day or more, not including the associated economic impact on shippers and customers that are unable to move products.
A recent study commissioned by the soybean checkoff suggested that it may be time for a new approach to funding much-needed improvements to the infrastructure of the river system.
Soybean industry leaders said the inland waterway system is not merely a contributing factor to the success of U.S. soybean farmers but a dominant one. While other nations can produce soybeans at a lower cost, the ability of the U.S. to deliver soybeans to customers in an extremely cost-effective manner has been our competitive advantage for decades.
While dozens of industries rely on barge transportation as the most economical mode of delivering products to export terminals, coaxing infrastructure funding from Congress has been an elusive goal for many years.
Mike Steenhoek, executive director of the Soy Transportation Coalition (STC), said the industry is "gravely concerned" by the continued degradation of the waterway system, and several like-minded stakeholders have concluded that it is time for "fresh thinking" on the funding issue.
The study, conducted by the Texas Transportation Institute at Texas A&M University, highlighted several inadequacies of the current scheme of managing the lock and dam system and how alternative funding and maintenance strategies have the potential to yield better results.
Looking at similar systems in other parts of the world -- the Panama Canal expansion, as one example -- Steenhoek said it is "discouraging to observe how many other countries are able to construct their major infrastructure projects" more efficiently than the U.S. can. Projects elsewhere tended to be completed within budget and on schedule.
Citing the Olmsted Lock & Dam project on the Ohio River near Olmsted, Ill., as an example of the inefficient U.S. system, Steenhoek pointed out that the project originally was estimated to cost $775 million but is now projected to cost more than $3.1 billion and is not expected to be completed until at least 2020.
The much larger Panama Canal project, meanwhile, was approved in 2006 and will likely be completed by April 2015 at an estimated cost of $5.25 billion. The Texas study suggests that the reason for repeated cost overruns and project delays in the U.S. is the piecemeal and unpredictable manner in which such projects are funded.
Another project cited in the study -- the McAlpine Lock & Dam project on the Ohio River near Louisville, Ky. -- faced overruns and delays similar to Olmsted. On average, the project received only 61% of full capability funding levels, resulting in a 38% cost escalation and a project completion delay of 6.5 years. Had the funds been secured up front, or at least with greater certainty, those overruns and delays might have been greatly reduced or avoided completely.
One approach recommended in the study, which was funded by the United Soybean Board's Global Opportunities program, would be to place greater emphasis on maintenance of the existing lock and dam system rather than on new construction. Such an approach could take various forms based on different combinations of routine preventative maintenance and a so-called "fix as fails" strategy.
The ideal situation, the study found, would include providing regular routine maintenance coupled with major rehabilitation. It has been estimated that in the next half-century, major rehabilitation will be necessary at all 171 U.S. lock sites.
Also examined in the analysis was the feasibility of instituting a bonding-style approach to lock and dam funding that grants priority projects more funding up front, potentially decreasing the likelihood of delays and cost overruns.
"The research highlights that how you allocate money is just as important as how much money is allocated," Steenhoek explained. "A bigger check from the government is not the only solution. Better stewardship is also essential."
The study found that the cost of one lock construction project -- roughly $365.8 million -- is approximately equal to the cost of nine major rehabilitation projects, suggesting that if each of the nine new construction projects currently underway were downgraded to a major rehabilitation, the total cost could drop to $366.3 million instead of the $3.2 billion listed at present.