Tug and barge industry opposes plan to impose lockage fees

A proposal to gradually replace fuel taxes with lockage fees to pay for upkeep and improvement of the inland waterway system has met with opposition from representatives of the barge and towing industry.

The upbound Hugh C. Blaske passes through the Smithland Locks & Dam at mile 918.5 on the Ohio River. Under a budget proposal, use fees would gradually replace fuel taxes as a source of funding for the waterway system.

The plan, which would more than double the tax private companies pay to help maintain the inland waterway system, is part of the White House’s fiscal 2009 budget for the Civil Works programs of the U.S. Army Corps of Engineers.

Currently, the barge and towing industry contributes $90 million to a fund that pays for upkeep. The fiscal 2009 budget projects that industry would contribute about $190 million.
“We think it’s a terrible idea,” said Dan Mecklenborg, senior vice president and chief legal officer of Ingram Barge Co. of Nashville, Tenn. “We think the lockage fee is fundamentally flawed. We also oppose an increase of any type of tax on inland navigation at this time,” he said.
Mecklenborg is chairman of the industry group Waterways Council Inc. that opposes lockage fees, along with American Waterways Operators (AWO), a national trade group.
The lockage fees proposal means that some users of the inland waterway system would pay a disproportionate share of the cost, while other users might pay nothing at all, according to Mary McCarthy, government affairs associate with the AWO.
There are 186 locks on the 27 shallow-draft waterways across the country that are part of the fuel-tax inland waterway system, according to the Army Corps of Engineers. In 2005, 425,594 barges did not transit a lock, according to figures from the Waterways Council. That’s 49 percent of all barges, hauling cargo or empty, which are now subject to the fuel tax.
In addition, a switch to lockage fees could harm economies of regions that depend on the inland waterways, but are at the end of the inland waterway system. “From a public policy point of view, this clearly makes inland river transportation less competitive — especially in areas where there are more locks like Pittsburgh and the upper Ohio (River),” said Peter Stephaich, CEO and president of Campbell Transportation Co. Inc. of Charleroi, Penn. “What it does, by adding extra costs to our mode of transportation, it would tend to make waterways less competitive” and push cargo to trains and trucks, he said.
Since transport by water is the most efficient means to move cargo nationally, especially with an overburdened road system, barge and towing officials don’t understand this increase. “At a time when we’ve got an economic slowdown and the need for stimulus, it seems even more misguided to hamstring the most efficient mode of transportation with additional taxes,” said Mecklenborg. The cost of moving cargo on the fuel-taxed inland waterway system is about two-thirds that of rail transport and one-tenth that of truck transport, according to 2007 figures from the Corps.
Right now there is a 20-cents-per-gallon tax on diesel fuel used to move cargo on the fuel-tax waterway system. Fuel taxes go into the Inland Waterways Trust Fund. The cost-share formula in place requires commercial users and the federal government to split 50-50 the cost of inland waterways construction for replacement, expansion and rehabilitation.
The fund has steadily declined since its peak in fiscal 2002 of $394.1 million, according to statistics from the AWO. The fiscal 2009 budget estimates that the trust fund will take in $190 million from industry, with $109 million from the lockage fees.
In the proposed fiscal 2009 budget, the lockage fees would be gradually phased in starting Oct. 1, increasing each year through Dec. 31, 2012. The fuel tax would be phased out over this period.
“We think the lockage fee has an advantage in how it places the economic burden of the new construction and the major rehabilitation of facilities on the users of the facilities in the primary instance, and there is a certain fairness to that,” said John Paul Woodley Jr., assistant secretary of the Army for Civil Works, who supervises the Corps’ Civil Works programs, including its budget.
Woodley understands that not everyone shares this viewpoint. “I have heard and understand the concept that it is also desirable on the other hand to have an inland waterway system that is a seamless, interconnected system in which all parts contribute to the whole,” he said. “I think that is also a very compelling concept with a great deal of merit.”
Specific details of the lockage-fee proposal have not yet been released.
There will be many opportunities for comment. However, “I’d hope we could see a sense of urgency once we bring the proposal forward,” Woodley said, acknowledging that it has taken his agency over a year to put the proposal together.
Without the additional revenues from this proposal, the trust fund will not be replenished fast enough to fund the needed waterway projects. “We really have critical needs,” Woodley said. “One of the reasons that the trust fund is where it is, is that this administration has recognized that and has accelerated construction of critical infrastructure projects.”
Barge and towboat operators are also upset with the increase because they believe the system to maintain the nation’s inland waterways is broken. A tax hike or a change in how taxes are collected should not happen until this system is fixed, they say.
Between 1986 and 1996, it took an average of 6.3 years to build seven locks projects, according to R. Barry Palmer, Waterways Council president. From the time of authorization to building, these projects increased in cost an average of 34 percent.
Since then, the average time to complete a project has grown to 17 years, with the cost of these projecting rising 90 to 100 percent.
For example, the Olmsted Lock and Dam was authorized in 1988 at a cost of $775 million and the project was to be completed in seven years. Ground was not broken until 1996 and it will not be finished until 2021 at the earliest, according to the Army Corps of Engineers. The cost is now nearly $2 billion, according to Palmer.
“Let’s get these projects to where they can be built on time and on schedule,” said Palmer. “Let’s limit the exposure of the private sector for their tax burden. Let’s get these things fixed, and then we will discuss the tax issues. Otherwise we’re giving the government a blank check.”
AWO officials say that the way lock projects are authorized, planned and funded should be carefully examined before new taxes are considered. “Inadequate budgeting, planning and project extension are the main reasons for the projected trust fund deficit, not inadequate user fees,” said Tom Allegretti, CEO and president of AWO, in a release. “Increasing user fees at this time would unduly burden the industry to solve a problem that is not our doing.”

Because projects are funded incrementally through the annual federal budget process, “in many cases that has not allowed for the most efficient contracting and construction techniques to be used,” Woodley said. But that is true of every element of the civil works budget. “That is a question of reform of the financing as much as it is anything peculiar to the waterways trust fund,” Woodley said.

By Professional Mariner Staff