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Friday, October 28, 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 Water Resources Development Act of 1986, 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). Operations and maintenance costs for inland waterways typically exceed these construction costs, and are a 100% federal responsibility pursuant to WRDA 1986.

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, spending on inland waterway projects may be limited.

Previous administrations have recommended replacing the fuel tax with one or more user fees that would increase revenues beyond their current baseline. However, Congress and industry interests have rejected 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 tax by $0.06-$0.08 per gallon, but would also require an even greater increase to the federal share of inland waterway costs (i.e., increased costs borne by the federal government). Recently, the Obama Administration included its own proposal among the recommendations to the Joint Committee on Deficit Reduction. It would increase user fees by levying a two-tiered system of annual fees on waterway users: a fee for all vessels operating on inland waterways, and a separate (greater) fee on vessels that use locks. The Administration estimated that the fees would raise $1.1 billion in new revenue over 10 years. These revenues would be in addition to those received under the IWTF fuel tax.

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 agrees that major changes are needed to meet new infrastructure needs, but argues against increased costs for the federal government. Some taxpayer and environmental advocacy groups call for an increased share of waterway costs to be borne by users (i.e., a decreased share for the federal government), and have also suggested that operations and maintenance costs should also be a user responsibility.

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.); and the division of cost-share responsibilities between the federal government and commercial users for both construction and operations and maintenance costs.

Date of Report: October 17, 2011
Number of Pages: 30
Order Number: R41430
Price: $29.95

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