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Monday, August 26, 2013

Inland Waterways: Recent Proposals and Issues for Congress

Charles V. Stern
Specialist 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. Commercial barge shippers and other waterway users receive 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 commercial users through the Inland Waterways Trust Fund (IWTF). Operations and maintenance costs for inland waterways (which typically exceed construction and major rehabilitation costs) are a 100% federal responsibility.

Future financing for the inland waterway system is uncertain. The IWTF is supported by a $0.20 per gallon tax on commercial barge fuel, but its balance has declined significantly since 2005 due to a combination of increased appropriations, cost overruns, and decreased revenues. Without changes to the current financing system, IWTF spending is likely to be limited.

The Obama Administration recommends replacing the fuel tax with user fees that would increase revenues and potentially allow for more spending on inland waterways projects. Similarly to prior administrations, the Obama Administration submitted proposals to raise inland waterways user fees in each year since FY2010. 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-$0.09 per gallon, but would require the federal government to cover all project costs for dams and rehabilitation that are currently shared with the IWTF. To date, no major changes to the inland waterway financing system have been enacted.

The user industry (including the barge industry and agricultural groups) argues that its recommended changes are necessary to shore up the trust fund, improve deteriorating infrastructure, and distribute costs equitably among beneficiaries (e.g., more funding for dams by federal taxpayer beneficiaries). The Obama Administration agrees that infrastructure upgrades are needed, but argues against shifting these costs to the federal government and instead proposes higher user fees. Some taxpayer and environmental groups favor increasing nonfederal costs not just for construction, but also for operation and maintenance expenses that are not cost-shared.

Changes to inland waterways financing are proposed in the 113
th Congress. S. 601, the Water Resources Development Act of 2013, as passed by the Senate, would authorize changes to the project delivery process, alter the cost-sharing requirements for some inland waterways projects, and exempt from IWTF cost-sharing requirements one project (the Olmsted Project), which has required the majority of IWTF appropriations in recent years. S. 601 would make no changes to the fuel tax. Two other bills, S. 407 and H.R. 1149, would enact much of the aforementioned user proposal, with increases to the fuel tax of $0.09 and $0.06, respectively. As in recent years, the Administration’s FY2014 budget proposed a new, unspecified user fee expected for inland waterways; this proposal has been rejected in the past. In considering inland waterways legislation, Congress may consider the appropriate cost share between the federal government and waterway users for various inland waterways costs, the appropriate type of user fee to fund the nonfederal share, and preferred funding levels for inland waterways.

Date of Report: August 5, 2013
Number of Pages: 30
Order Number: R41430
Price: $29.95

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