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Maintaining U.S. Inland Waterways: A Crucial Link in the Coal Transport System
The link between the U.S. inland waterways system and the energy industry is intrinsic: in 2017 fully 20 percent of coal, 22 percent of petroleum products, and 6 percent of crude petroleum was transported on the inland waterways. As such, trends in these commodity shipments are watched closely by carriers and service providers who operate along this system.
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A Tough Year for Coal This year has been a difficult one for the U.S. coal market: shrinking exports, low gas prices, low demand for electricity from the mild winter, and COVID-19 and the related drop in GDP have all suppressed coal demand. High coal inventories present at the start of the year have only recently begun to be drawn down with the heat of the summer kicking in. According to the U.S. Energy Information Administration (EIA)’s July 7, 2020, report, U.S. coal consumption is expected to decrease by 28 percent in 2020 as a result of reductions in coal use for electricity generation—the result of both lower overall electricity
generation and low natural gas prices that make coal less competitive as a generation fuel. The largest drops in coal use for power generation occur in the Midwest, Southeast, and Mid-Atlantic. However, EIA forecasts that U.S. coal consumption will rise by 21 percent in 2021 largely because of an expected increase in natural gas prices that will cause some coal-fueled generation units to become more economic to dispatch.
On the export side, EIA forecasts that U.S. coal exports in 2020 will decrease by 32 percent to 63 million short tons. U.S. Atlantic ports, which handle most U.S. coal exports, are seeing decreased demand because of the global economic slowdown. Based on an assumed increase in global coal demand in 2021, EIA forecasts U.S. coal exports to increase by 7 percent next year. EIA expects the rebound to be modest due to lower demand for U.S. coal in India. India, the top destination for U.S. exports in recent years, has lowered its consumption of both steam and coking coals by nearly 50 percent this year. It has also opened up domestic mining options to private companies.
And yet despite the decline in coal use, which has been displaced by natural gas and subsidized renewables, it still remains an abundant, stable, reliable, affordable source of energy, generating about 30 percent of the electricity used daily in the United States and more than 37 percent of the world's electricity. In addition to being a fundamental fuel source for power generation, coal is also used in the manufacture of steel and cement—cargoes also moved on the inland system. But without efficient infrastructure on the inland waterways, neither coal—nor steel, cement, agricultural products nor aggregate/construction materials—can move efficiently to their domestic or global destinations.
Maintaining an Efficient Inland Waterway System Waterways Council Inc. (WCI) is the national public policy organization that advocates for a modern, efficient, wellmaintained inland waterways and port system. WCI has had great success since its founding in 2003 advocating for steady increases in annual appropriated funding for U.S. Army Corps of Engineers’ Civil Works for the construction and rehabilitation of major capital projects as well as upkeep of the inland waterways. WCI also has been successful pressing for policy improvements, while beating back user fees and bad policy proposals.
The Water Resources Development Act (WRDA) is the biennial policy authorization bill for water resources and the inland waterways, and it is currently moving forward in Congress. If enacted, with WCI’s key recommendation to permanently adjust the construction and major rehabilitation cost-share formula, WRDA 2020 would enhance the process to deliver modern, efficient locks and dams for the transport of coal for electric power generation and industrial use in the United States and around the world.
WCI’s top WRDA 2020 priority is to adjust the cost share for Inland Waterways Trust Fund (IWTF)-financed construction and major rehabilitation projects to require that 25 percent of the project cost be derived from the IWTF and the remaining 75 percent from General Revenues. Currently, the cost share formula is 50-50. Commercial
towboat operators pay a 29-cent-pergallon diesel fuel tax to support revenues into the IWTF and half of the cost of new construction and major rehabilitation on the system. These operators pay the highest surface transportation tax in existence today and are the only user/ beneficiary of the waterways to pay a fee supporting half of the cost of their upkeep and modernization. The waterways, a national system, offer benefits to the entire nation, including municipal and industrial water supply, national security, flood control, hydropower, and vast recreational opportunities.
Current Action on WRDA Reauthorization In early May, the Senate Environment and Public Works (EPW) Committee, the key Senate committee of jurisdiction for the WRDA bill, marked up and passed by a unanimous vote America’s Water Infrastructure Act of 2020 (the Senate’s version of WRDA). EPW’s bill included WCI’s priority to adjust the cost share for construction and major rehabilitation of inland waterways projects, but at 65 percent General Revenues/35 percent IWTF.
In the House, at press time, the Transportation & Infrastructure (T&I) Committee (the House key committee of jurisdiction on WRDA) released its draft WRDA bill and marked it up on July 15. Like the Senate EPW Committee, the House T&I Committee adjusted the cost share to 65 percent General Revenues /35 percent IWTF, but with a sunset provision through fiscal year (FY) 2027.
Beyond WCI’s focus on the costshare adjustment in WRDA, annual appropriations to support the U.S. Army
Corps of Engineers’ work remain a top priority. On July 13, the House Appropriations Committee approved, by a party line vote of 30 to 21, FY 2021 funding for Energy and Water Development (E&WD), which funds the Corps. Overall proposed funding for the Corps is $7.63 billion, $21 million below FY 2020’s record-setting appropriated level, but $1.7 billion above the President’s FY 2021 budget request.
The House bill also provides for the following: • Seven new study starts and seven new construction projects to be selected by the Administration, one of which is for inland waterways lock and dam modernization. • The Corps’ Investigations account funding is $151 million, equal to the FY 2020 enacted
level and $48 million above the FY 2021 request. Funding for the Construction account is $2.62 billion, $61 million below FY 2020’s level, but $447 million above FY 2021’s request. Funding for the Inland Waterways Trust Fund is $90 million, for a total of at least $180 million for construction and major rehabilitation of inland waterways projects. Operations and Maintenance (O&M) funding is $3.84 billion, an increase of $48 million above FY 2020 and $1.8 billion above the Administration’s request. Harbor Maintenance Trust Fund (HMTF) projects receive $1.68 billion, $50 million above the FY 2020 level and $665 million above the Administration’s request. This represents 92 percent of estimated HMTF revenue and is 9 percent above the target set by the Water Resources Reform and Development Act of 2014. The Corps of Engineers will also receive an additional $17 billion in emergency funding to accelerate work on Corps projects. Of that amount, the Construction account will receive $10 billion to accelerate projects across all Corps mission areas, at least $3 billion of which is for inland waterways projects.
The bill also provides $5 billion in O&M emergency funding.
WCI also works with the Corps to ensure scheduled and unscheduled closures on the system are not disruptive to shippers and operators. In fact, from July 1 through October, an unprecedented consolidated major maintenance closure of the Illinois Waterway is underway, with work on five locks expected to add 25 years to their lives. This closure, which shippers and operators have long prepared for, will bring additional reliability to the system’s users.
While the future may seem uncertain—amid COVID-19 and declining coal exports—WCI will continue to advocate for increased certainty and reliability of inland waterways infrastructure to benefit our nation’s coal producers, transporters, and consumers, as well as all shippers and operators.
For more information, visit www.waterwayscouncil.org.
Debra Calhoun is Senior Vice President of Waterways Council Inc. She has been with WCI since its founding in 2003, and with its predecessor organization Waterways Work!, and has been instrumental in managing the Council’s overall portfolio and communicating its successes and priorities.
