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Thursday, July 21, 2011

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), with operations and maintenance costs remaining a 100% federal responsibility.

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 the current user revenue stream or the federal/non-federal cost-share requirements for construction, future spending on inland waterway projects may be limited.

Previously under both the Bush and Obama Administrations, the executive branch has 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. However, Congress and industry interests rebuffed these proposals. In 2010, the Inland Waterways Users Board (IWUB), a federal advisory committee advising the U.S. Army Corps of Engineers on inland waterways, endorsed an alternative proposal that is supported by many barge industry interests. The proposal would increase the fuel surcharge that funds the IWTF, but would also require an even greater increase to the federal share of inland waterway costs. Some, including the National Commission on Fiscal Responsibility and Reform, have proposed to significantly increase user charges for inland waterway costs, including operations and maintenance costs, without increasing federal outlays.

The user industry (including the barge industry and agricultural groups) argues that 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). They argue that these changes would support jobs for a vital component of the nation’s transportation mix. The Obama Administration has generally agreed that major changes are needed to meet new infrastructure needs, but argues that these revenues should continue to be shared between users and the federal government. Taxpayer and environmental advocacy groups have argued against additional federal support for the IWTF, and in some cases argue for an increased share of costs to be borne by users (i.e., a decreased share for the federal government). These groups often disagree with the justifications for increased investment in inland waterways, and note that the barge industry already benefits from generous federal support in the form of 100% federal funding for operations and maintenance costs on inland waterways.

Congress may consider whether to increase the overall level of inland waterway funding in the future (and by what amount); the appropriate type of user fee to fund the nonfederal share of these costs (fuel taxes, lockage fees, etc.); the division of cost-share responsibilities between the federal government and commercial users; and whether to initiate process-based recommendations that aim to improve the delivery and efficiency of IWTF-funded projects.

Date of Report: July 14, 2011
Number of Pages: 26
Order Number: R41430
Price: $29.95

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