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Thursday, October 7, 2010

Inland Waterways: Recent Proposals and Issues For Congress

Charles V. Stern
Analyst in Natural Resources Policy

Inland waterways are a significant part of the nation’s transportation system. Because of the national economic benefits of maritime transport, the federal government has invested in navigation infrastructure for two centuries. As a result, barge shipping has received significant support through federal funding for operational costs, capital expenditures, and major rehabilitation on inland waterways. Since the 1980s, expenditures for construction and major rehabilitation projects on inland waterways have been cost-shared on a 50/50 basis between the federal government and users through the Inland Waterway Trust Fund (IWTF).

Future financing for the inland waterway system is uncertain. The IWTF is currently supported by a $0.20 per gallon tax on barge fuel, but the trust fund’s balance has declined significantly in recent years. Without major changes to recent investment levels or changes to the federal/nonfederal cost-share requirements for construction, it may soon become insolvent.

Previously the Bush and Obama Administrations had submitted legislative proposals to replace the fuel tax with a lock user fee that would have increased revenues and tied user fees to IWTF balances, but Congress and industry interests rebuffed these proposals. The Inland Waterways Users Board (IWUB) recently endorsed an alternative proposal that is supported by many barge industry interests. It would increase the fuel surcharge that funds the IWTF and increase funding for inland waterways as a whole, and would also make several other significant changes to the current system. Among these changes are significant increases for the federal share of inland waterway construction of dams and major rehabilitation costs, which would now be a 100% federal responsibility. Additionally, the IWUB proposes a greater overall investment on inland waterways, including an overall increase in spending on inland waterway projects. Users are also proposing other changes to the current project selection process that aim to codify prioritization criteria and increase user participation in project formulation.

The user industry (including the barge industry and agricultural groups) argues that these changes are necessary to shore up the trust fund, improve the deteriorating state of inland waterway infrastructure, and distribute cost responsibilities more equitably among those who benefit from the system (i.e., more funding by federal taxpayers). The Obama Administration agrees that the trust fund needs increased revenues to meet new infrastructure needs, but argues that these revenues should continue to be shared equally between the IWTF and the federal government. Some have also argued that any tax or user fee levied on the industry should be tied to the balance of the IWTF, which might serve as a disincentive for unnecessary investments, and could prevent future funding shortfalls. Taxpayer and environmental advocacy groups have argued against additional federal support for the IWTF. These groups disagree with many of the justifications for increased investment in inland waterways, and note that the barge industry already benefits from generous federal support.

Major issues for Congress include whether to increase inland waterway funding in the future (and by what amount); the appropriate type of revenue stream (e.g., fuel taxes or lockage fees) for the user-required portion of these projects; division of the cost-share responsibilities between the federal government and commercial users (e.g., 50/50 or some other division); and whether to initiate process-based recommendations that some argue will improve the delivery and efficiency of Corps-led IWTF projects.

Date of Report: September 30, 2010
Number of Pages: 24
Order Number: R41430
Price: $29.95

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