Inland Navigation Economics In Progress Report

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Inland Navigation EconomicsIn Progress Report

• David A. Weekly
• David.a.weekly_at_usace.army.mil
• USACE Planning Center of Expertise for Inland
  Navigation (PCXIN)
• Inland Waterway Conference
• 5 March 2009

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Topics

• Waterway Future
• History and Recessions
• Future Uses (MARAD Study)
• National Navigation Economics Product Delivery
  Team (PDT)
• Estimations of Value and Main Chamber Closure
  Costs draft report
• Budget Implications
• Great Lakes and Ohio Division (LRD) Navigation
  Economics PDT
• Input/Output Modeling with REMI
• Pool Loss
• Way Forward

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Economic growth (or decline) affects traffic, but
not dramatically
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Presentation To Maritime Administration, U.S.
Department of Transportation October 3, 2008
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The Five Regional Corridors Evaluated in the
Analysis include 95 percent of the population.
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Water Container potential increases dramatically
in three corridors (Great Lakes, Mississippi and
Gulf) with increasing fuel prices.
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Water bulk traffic also increases dramatically
with increased fuel prices. Example, Mississippi
increases three times if fuel is 7 per gallon.
Critical price is 2 to 4
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MARAD Study Conclusions

• Water and Rail modes are far less affected by
  fuel prices than Truck.
• Because Rail capacity is limited, the potential
  for the Water mode is significantly enhanced.
• Water traffic doubles or triples as diesel fuel
  goes up from 2 to 7 per gallon.
• Great Lakes, Mississippi, and Gulf corridors
  generate sufficient traffic to initiate new water
  service
• East and West Coast generate potential for water
  coastal feeder services for gateway ports

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National PDT Objectives

• Estimate the value of each lock
• Develop a matrix of main chamber closure impacts
  on industry

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Estimate Lock Value

• Develop lock inventory database 198 projects
• Commercial cargo transportation rate savings
  supplemented with savings estimated for the Gulf
  Coast shrimp fleet and oil rig supply vessels
• Value ranges
• 4 locks greater than 1 billion
• 15 locks 500 million - 1 billion
• 76 locks 100 million - 500 million
• 65 locks 1 million - 100 million
• 38 locks less than 1 million

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Rank by Base Savings
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Main Chamber Closure Cost Matrix

• Shipper-Carrier Cost (SCC) Model
• Estimate carrier and shipper costs of unscheduled
  main lock chambers
• Cost depends on response to closure
• Simulate delays at each project for each closure
  duration specified
• Random arrivals of historic number of tows
• Use lock specific processing times
• If delays exceed 30-60 hrs, divert to overland
  route or draw from inventory
• Calculate delay costs
• Estimate overland diversion costs

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Closure Cost Matrix Key Drivers

• Cost of closure
• Duration of closure
• Availability of alternatives
• Auxiliary lock chamber functioning
• Alternate water routes
• Number of transits
• Cost of alternate overland route
• Hourly operating costs
• Remember does not address closure likelihood

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SCC ResultsTop Ten Locks by Tons

• Ranked by
• mtons tons Hr 30-day
• Ohio River LD52 88.9 1 38 33
• Ohio River LD53 78.3 2 20 107
• Smithland 73.7 3 29 105
• Miss River LD27 67.7 4 33 28
• Melvin Price 65.2 5 21 94
• Newburgh LD 65.1 6 31 27
• JT Myers LD 64.6 7 24 43
• Greenup LD 62.2 8 37 46
• Soo Locks Poe 57.5 9 1 1
• Byrd LD 53.9 10 41 83

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SCC ResultsTop Ten Locks by Closure

• Ranked by
• mtons tons Hr 30-day
• Soo Locks - Poe 57.5 9 1 1
• Bowman L, GIWW 41.9 19 122 2
• Calcasieu L,GIWW 41.8 20 143 3
• Miss River LD24 30.1 24 8 4
• Miss River LD22 28.9 26 6 5
• Miss River LD19 25.5 32 7 6
• Miss River LD21 28.5 27 15 7
• Miss River LD18 24.2 35 12 8
• Miss River LD25 30.2 23 25 9
• Lagrange LD 29.0 25 26 10

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Initial SCC ResultsBudget Implications

• High tonnage locks typically have highest asset
  value (most have two chambers)
• Investment packages
• Base operations maintenance pkgs at high
  tonnage locks should rise to the top
• Incremental investment pkgs condition
  assessments being equal, single chamber, high
  transit locks should rise to the top

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LRD PDT Objectives

• Regional Input/Output (IO) Modeling with REMI
• Shipper savings and transportation effects
• Electric rate changes and impacts
• Inability to operate without water
• Pool Loss - estimates basin-wide
• Identify intakes and users
• Estimate water usage value
• Estimate impact on production

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LRD Nav EconomicsRegional IO Model
Work Status
Phase 1 define study area by county and assign
shipper savings to all industries Phase 2
waterway impacts all industries Phase 3
utility rate impacts Phase 4 water captive
impacts
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LRD Navigation EconomicsPool Loss
Step 1 - inventory of water intakes Step 2 -
determine actual and maximum withdrawals and
response to pool loss Step 3 - estimate of the
dollar value of water Step 4 identify
production facilities and employment and sales
data
Study Methodology
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Inventory of Intakes
Preliminary Results
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Municipal and Industrial Withdrawals
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Response to Pool Loss
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Water Value
Preliminary Results
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Companies Affected
Preliminary Results
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LRD Nav EconomicsPool Loss Summary

• Study looked at 3,735 miles of navigable water
  way and 57 L/D projects within the Ohio River
  system.
• Study accounts for 388 intakes currently used to
  withdraw water. 23 billion gallons a day is
  withdrawn. Estimated value is about 1 billion.
• For rivers, the Ohio River has the largest water
  withdrawals and for pools, the McAlpine pool has
  the largest withdrawal.
• Municipal users account for 6 percent of the
  water withdrawn and industrial users for 94
  percent.

BUILDING STRONG!
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Way Forward 1 Improve Data

• Develop non-transportation benefits for locks and
  dams
• Develop regional effect economics
• Develop non-traditional impacts
• Highway congestion, accidents, emissions
• Other shipper responses like production shifts
• Probability and consequence of failure for each
  level of investment for each site chambers and
  dams

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Way Forward 2 Improve Modeling

• Address auxiliary closure impacts
• Incorporate dam performance and impacts
• Calculate expected closures, losses and benefits
  within one model, not in steps within
  spreadsheets
• Calculate net benefits (use investment cost as an
  input to model)
• Optimize investments over a life cycle