WET BOONDOGGLE:Canals with Few Barges

The Army Corp’s canals and canalized rivers cost $700m/yr to maintain yet garner only $90m in revenues via taxes on fuel. This odd civilian branch of the US Army is a racket that survives by pandering to politicians looking for local construction contracts, and the illusion of economic development in their constituency. The Corps routinely produces highly exaggerated projections of prospective shipping to justify its make-work programs, then hopes no-one will notice the results.

Recently it has been put under investigation for instituting a systematic policy of falsifying its benefit cost analyses and hounding at least one analyst who refused to play along.

For example to justify the canalization of the Missouri the ACE predicted 12m tons of traffic annually, while today it carries 1.8m tons – a 85% shortfall. Maintenance costs are 1.7c/ton-mi compared to under a tenth of a cent on the Mississippi. And the Tennessee-Tombigbee canal built in the 1980s at a cost of $2b on the basis that it would carry 27m tons is carrying 1.7m tons – a 93% shortfall. Maintenance costs are 1.1c/ton-mi. The Ten-Tom costs $16m/yr to maintain. If it had been commercially financed investors would expect say 8% return on capital ($2b x 0.08) or $160m so it would need to generate $176m to break even. In fact based on the average fuel tax user fee the barge operators on the canal pay less than $0.5m, so it is $175.5m or 99.7% away from break even. The fees charged are a tiny gesture, pocket money, relative to the costs.

The Red River waterway, a recent $1.5b ditch job in Louisiana is carrying only 150k tons/yr compared to 4m forecast – a 94% shortfall.. It costs almost 5c/ton-mi to maintain. The subsidy on the 0.035c user fees is 4.965c on operating costs alone.

The locks on the Kentucky R waterway cost 37c/ton-mi to maintain. But even that doesn’t get the booby prize. The Pearl River canal in Mississippi last year carried only one barge the whole year. And that’s one barge better than the Ouachita R in Arkansas which was channelized back in 1982 and a port built at Camden with US$s. It has yet to dock a single barge! So the maintenance cost per ton-mi is infinity!

Four systems – the Mississippi, Ohio, and Illinois rivers and the Intra-Coastal Waterway – carry 570m tons or 90% of the total 630m tons of traffic on America’s interior waterways. Similarly these four oldest systems carry 230b of the total 255b ton-mi. They cost $220m to maintain or 0.086c/ton-mi. That is 2.5 times the user fees paid which average 0.035c. Only the busiest leg of the system, the Lower Mississippi comes near to recovering even operating costs in user fees. The rest of the US canal system is a gigantic ripoff of taxpayers. 16 waterways have operating costs over 1c/ton-mi, which is 30 times what users pay. Seven of these have costs over 10c/ton-mi or 300 times operating costs.

“We see a barge every couple of days or so” Joe Franklin the manager at a Red River dock told the POST. “It gets kind of boring up here.”

The locks on these canals are manned 24hr/7days, regardless of barge traffic.

The US Army Corps is operating a Soviet style business worthy of the satire of Krocodil, the Russian cartoonist who mocked Soviet planning with his satire in Moscow in the 1970s. One of his most notable cartoons showed a ceremony in which the plant manager was congratulating the workers for “overfulfilling our plan for nail production” while on a low loader beside the podium was a single nail 70 feet long and 8 feet diameter festooned with a banner proclaiming “Sverdlov Nail Factory Exceeds Plan Nail Tonnage by 12%.”

The POST calls America’s barges “a 5mph anachronism in a just-in-time economy” and the Sec of the Interior Bruce Babbitt says most of the canals are quite unjustified and adds: “It’s an absolute crime.” As well as being very slow they have all the problems of intermodalism - their cargoes almost always have to be gotten off trucks at one end and gotten back onto some other mode at the other end.

J Bennett Johnson (Dem LA) was apparently the Bud Shuster of canals, another corrupt favor-trader of the US Congress. Archer Daniels Midland, recently convicted price-riggers, were among the major vote-buyers for canals. They multiplied millions in campaign contributions a hundred-fold into canal subsidies.

Environmentalists have a powerful case that the channelization of the rivers has exacted a toll on fish and wildlife. Since the economic costs of building and operating the canals and locked rivers so hugely outweighs the economic benefits, the case is overwhelming for getting government completely out of the business, and retiring the anachronistic Army Corps of Engineers from all civilian works. They should specialize in military works. And let the barge companies or other investors run the river locks and canals for tolls without tax subsidy. Or give the rivers back to the fish, and end the ripoff of taxpayers for political payoffs and the Corps bureaucratic aggrandizement. If much of the canal freight moves to rail and road, then that will be a benefit to the economy, since these will be the least-cost modes.