One public policy matter that creates business risk and is not as visible to the public as other issues is the deteriorating condition of our inland waterways infrastructure, which is maintained by the U.S. Army Corps of Engineers (the Corps). In their prime, our nation’s ports and inland waterways system were the envy of the world. But not enough has been done to maintain and update that infrastructure as it has aged.
Through our River Operations business unit, we transported 66 million tons of cargo over inland waterways in 2013.
The Corps estimates that 47 percent of all main or auxiliary locks on the Ohio River will be in poor or failing condition by 2016. Data indicate that this risk will rapidly worsen, especially in light of budget pressures on the Corps’ navigation projects.
Why does this matter so much to AEP? Through our River Operations business unit, we transported 66 million tons of cargo over these waterways in 2013 – and 43 million tons of that cargo touched the Ohio River Basin. Many of our power plants rely on barge transportation for fuel and other consumables and to transport equipment. Over the last eight years, we have experienced several lock failures on the Ohio River that have cost our barge business more than $11 million.
The nation’s inland waterways are of strategic economic and military importance because the commercially navigable waterways connect 41 states, providing the capability to move large amounts of freight cargo. These waterways carry agricultural commodities, chemicals, coal and petroleum products to ports across the United States. It is the most cost-effective delivery system we have for transporting raw materials that enables the United States to compete in a global marketplace. But the infrastructure supporting this commerce is past its 50-year lifespan, according to the Institute for Waterways, a unit of the Corps. And according to the Congressional Research Service, only one lock along the Ohio River has received funding to be replaced through the 2016 fiscal year.
Nine major locks were scheduled for significant closures in 2013 to repair or replace deteriorating equipment. These closures represent 439 days, contributing to significant delays in delivering commodities and creating financial risk. We take actions wherever possible to mitigate these risks. For example, if we know a lock is due for a scheduled outage, we can deliver coal to a power plant in advance of the lock closure.
Funding to fix the problems is inadequate. The Corps has prioritized numerous issues that must be addressed but doesn’t have the funding to fix them. For example, the Olmsted Lock on the Ohio River is a critical project that is devouring virtually all of the congressional and trust fund dollars available for locks and dams today, and it will continue to do so at least through the end of the decade.
The Olmsted project was authorized in 1988 with a projected cost of $775 million and a completion date of 2000. Today, the project is little more than half-way completed with a projected in-service date of 2020 and a completion date of 2024 at an estimated cost of $3.1 billion.
AEP continues to support a 20-year capital development plan proposed by the Inland Waterways Users Board and various trade associations. In addition to process reforms, this plan would increase the fuel charge that commercial users of waterways (regulated and unregulated) would pay to help fund infrastructure improvements. Legislation that includes parts of the capital development plan and important process reforms passed both the U.S. House and the Senate with veto-proof majorities in 2013 and is expected to become law in 2014. Although introduced in Congress in 2013, legislation to increase the fuel charge was not passed by either the House or the Senate. We are working to help ensure that the fee increase will be enacted into legislation in 2014.
Congress’ failure to adequately fund waterways infrastructure would undercut the low-cost transportation required for American businesses to remain competitive in international markets and raise the cost of doing business and living in America.