In light of the current renaissance occurring in U.S. based manufacturing and their associated supply chains, we were taken back a recent article which describes an important component to increased momentum. The February 2nd edition of the Economist magazine featured an article; Crying Out for Dollars, (paid subscription or free metered view) which drove home the fact that underinvestment in U.S. ports and inland waterways imperils U.S. competitiveness.
The number and size of ships calling on U.S. ports is on the increase. After the widening of the Panama Canal is competed in 2014, larger ships will be able to call upon U.S. Gulf and east coast ports. Yet, just seven U.S. container ports can accommodate larger ships, with only one in the southern portion of the U.S. The boom in new sources of crude and natural gas within the interior U.S. regions of Montana and the Dakota’s increase the dependency on inland waterways to transport bulk crude to Gulf ports. In a prior commentary, Supply Chain Matters noted how Warren Buffet’s acquisition of the Burlington Northern Santa Fe (BNSF) railroad has paid handsome rewards in the ability to take advantage of increased needs for U.S. transportation related to crude oil and other bulk manufacturing.
The Economist article describes how critical U.S. ports and facilities require much overdue investment to sustain broader and more reliable water transport. The Industrial Canal Lock in New Orleans which connects two of largest tonnage waterways: The Mississippi River and the Gulf Intracoastal Waterway, originally built in 1921 is only 600 feet long, half the length of today’s modern lock. Because of its small length, cargo must be divided among a number of small barges to transverse the lock. Its replacement was authorized in 1956, with construction authorized in 1998, only to be stalled by lawsuits. The most opportunistic estimates according to the Economist estimate the completion of construction in 2030.
Last year, President Barack Obama approved plans for deepening ports in Charlestown, Jacksonville, Miami, New York and Savannah but another lengthy approval process is reported, along with requests for funding. By one estimate, a five year funding shortfall for inland waterways, the primary mode of transport for many U.S. commodities, has a shortfall of $20 billion. The article note that of the 257 locks in operation in 2009, more than a tenth were built in the 19th century, with the average lock being 60 years in age. By 2020, 80 percent of American locks will be functionally obsolete. The severe drought that impacted the U.S. Midwest region in 2012 also caused navigational problems on the Mississippi River as a result of low water levels, also disrupting traffic.
In our view, the U.S. Congress remains mired in partisan bickering and inaction, while the renaissance of U.S. based manufacturing and increased supply chain activity remain at the doorstep. Congressional leaders play local favoritism in the approval of port and waterway projects, without a comprehensive investment and long-term funding plan. Federal and state agencies do not seem to be able to practice sound program management practices in existing projects. The Economist makes mention of the Olmsted Lock, a notorious white elephant on the Ohio River which was originally authorized in 1998 for $775 million, and thus far has cost over $2 billion. That type of track record certainly cannot continue.
U.S. Secretary of Transportation Ray LaHood has indicated his intent to not serve a second term in the current administration. Secretary LaHood has served well in his post among a litany of U.S. transportation needs and issues. His successor must, in our view, have a bold vision and strategic perspective on the renewed and prioritized investments in critical U.S. transportation infrastructure. There is a need for a comprehensive plan and strong oversight.
The climate in Washington seems obsessed with the role of government, the debate of big vs. small government presence. In our view, one clear role of government is in insuring modern, world-class transportation infrastructure that supports a vibrant economy. More importantly, there is a need for the U.S. Congress to act responsibly on a multi-year, bi-partisan comprehensive investment plan in U.S. transportation infrastructure that includes both water and multi-modal surface transportation needs.
It would be a shame if a U.S. economic renaissance is stymied by narrow minded thinking and a transportation induced crisis. Now is the time for bold leadership and oversight.
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