Segment 2 Of 2     Previous Hearing Segment(1)

SPEAKERS       CONTENTS       INSERTS    
 Page 11       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
HARBOR AND INLAND WATERWAYS FINANCING

Wednesday, November 3, 1999
House of Representatives, Subcommittee on Water Resources and Environment, Committee on Transportation and Infrastructure, Washington, D.C.

    The subcommittee met, pursuant to call, at 3:00 p.m., in room 2167, Rayburn House Office Building, Hon. Sherwood L. Boehlert [chairman of the subcommittee] Presiding.
    Mr. BOEHLERT. Good afternoon and welcome to the Water Resources and Environment Subcommittee. Today we will discuss the future of our Nation's harbors and inland waterways. The competitiveness of U.S. goods and commodities in the global marketplace is directly linked to the efficiency of our water transportation system.
    I come to today's hearing with one objective—increasing the resources available for making needed improvements to our Nation's water transportation infrastructure. In the wake of the Supreme Court's decision in U.S. Shoe Corp. Versus the United States, we are now forced to develop a new approach to funding the development and maintenance of our harbors. The Court ruled that the Harbor Maintenance Tax violated the constitution's prohibition on export taxes. We must fund our harbor infrastructure in a manner consistent with this ruling and consistent with our transportation needs.
    The fact that the Harbor Maintenance Trust Fund has accumulated enormous surpluses was also not lost on the Court. Whether we are considering funding for harbors or funding for inland waterways, allowing the buildup of huge surpluses in infrastructure improvement accounts is wrong. As everyone in this room is aware, moving goods and products by water is often the most cost-effective and environmentally benign mode of transportation. And that is why barges carry a significant percentage of all agricultural and energy related products in America today. If we turn our back on water transportation infrastructure, we will jeopardize the economy and our environment.
 Page 12       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    In 1991, President Bush signed into law ISTEA, the Intermodal Surface Transportation Efficiency Act. The concept of intermodalism was born and so was a broad recognition of the linkages between ports, rail lines, highways, and airports. In the 1990's, goods are placed in containers that are placed on trucks which transfer the containers to trains, which deliver the containers to ports where the containers are placed on ships going to markets around the world. Without harbors and inland waterways, intermodalism is a hollow concept. In meeting our harbor financing challenges, there has been increasing interest in the potential use of customs fees on commercial maritime industry as a source of revenue. Though this is a relatively new development, I believe this is an approach worthy of careful examination.
    I would like to recognize the Ranking Member of the subcommittee, Mr. Borski.
    Mr. BORSKI. Thank you, Mr. Chairman; and let me thank you for holding this hearing on the importance of financing our Nation's harbors and inland waterways. I am fortunate to serve as a Representative of a major East Coast port city, and I am well aware of the importance of continued reliable financing of our Nation's harbors and waterways. Every year, hundreds of billions of dollars of goods enter and are moved through this country by means of our water system offering a cost-effective and environmentally friendly alternative to other means of transportation.
    As our economy increasingly moves toward globalization, we will face a corresponding need for safe, efficient, and modern port facilities and waterways to sustain such growth. Expanded use of larger shipping vessels and increased ship traffic at many of our Nation's ports will require a significant investment in increased channel depth and capacity.
    In addition, we must continue to invest in ongoing maintenance of our port facilities and ensure that such measures comply with our existing environmental requirements for disposal of potentially contaminated sediments. The system that currently provides financial resources for these projects has been undermined by a recent Supreme Court decision and is facing additional international challenges.
 Page 13       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    We must assume that future viability of the Harbor Maintenance Trust Fund as a reliable source of financing is in serious trouble, and we must look toward finding alternative sources of funding as expeditiously as possible.
    Mr. Chairman, that is why I, along with the ranking member of the full committee, Mr. Oberstar, and over 40 other Members of the House introduced H.R. 1260, the SHIP Act. This legislation would replace the existing system of financing with funding from the general revenues of the Treasury. I, as well as many of my colleagues, believe that in light of the nationwide benefit that comes from a safe and efficient port system it is only appropriate to fund the construction and maintenance of these programs through general revenues. In fact, as we will hear from GAO, 22 billion dollars in these general revenues are a direct result of our ports and navigation system.
    While today's hearing is not focused on the benefits or drawbacks of any one proposal, I am heartened by the continued debate of this subcommittee on ensuring a consistent and predictable source of revenue to meet our Nation's water infrastructure needs. And I look forward to continuing to work with you, Mr. Chairman, on this issue until we can come to a positive solution.
    Mr. BOEHLERT. Thank you. Dr. Horn.
    Mr. HORN. Thank you, Mr. Chairman. This is a very crucial matter for the southern California region where they have the Port of Los Angeles and the Port of Long Beach as the two major container ports in this country. I have the testimony of Mr. Dick Steinke who is the Executive Director of the Board of Harbor Commissioners, and I would appreciate it being put in the record at this point.
    Mr. BOEHLERT. Without objection, so ordered.
    [The information follows:]

 Page 14       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    [insert here]

    Mr. HORN. Thank you.
    Mr. BOEHLERT. Does anyone else seek recognition? Mr. Lampson.
    Mr. LAMPSON. Thank you, Mr. Chairman. I have six ports in the Ninth Congressional District of Texas that I represent. I know that the economic health of my entire region rests in part upon the quality of service that our ports can provide, both fledgling businesses and growing industry. If our ports are flourishing, our entire region will continue its economic turnaround. The economic benefits generated by our waterway infrastructure are also national in scope. The issue we are discussing this afternoon is critical to every member represented here, whether on the coast or not, because ports are our gateways for trade, and our navigation channels are our water highways.
    I have serious concerns about the Aministration's harbor services fund proposal. This proposal would eliminate the Federal Government's responsibility to share in the financing, the maintenance and improvement of our Nation's Federal navigation channels. They would create nearly a billion dollars a year in new taxes on trade. The viability of this proposal is already in question after the Supreme Court ruled in March of 1998 that the export portion of the tax was unconstitutional. The import portion of the tax currently is being challenged by the World Trade Organization which most experts predict will find this a violation of the GAAP agreement. These proposed taxes which have been disguised as user fees would increase transportation costs and decrease the number of U.S. jobs by pricing bulk exports out of the international markets. I am committed to helping businessmen and women in my district explore new international markets.
    Without question, maintained and efficient navigation channels benefit the entire Nation by serving as vital import-export links to rail, trucking, barge and pipeline operations. Because our ports are so important to the economy, port development and channel maintenance have always been a shared responsibility of the Federal Government and State and local governments, as well as the private sector.
 Page 15       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    For these reasons, I am proud to be a cosponsor of the Support for Harbor Investment Program Act, the SHIP Act, which would end the failed and unconstitutional experiment of the Harbor Maintenance Act and restore the 200-year Federal obligation to adequately fund the operation and maintenance of our Nation's harbors. H.R. 1260 would allow our Nation's ports to continue their own investments of more than $1.5 billion annually in land-side infrastructure while the Federal Government would continue to pay its fair share of this important investment to protect U.S. jobs and keep our goods competitive in global markets.
    I thank you, Mr. Chairman, and look forward to working with the committee.
    Mr. BOEHLERT. Thank you. Is there anyone who seeks recognizing? Mr. Baird.
    Mr. BAIRD. Mr. Chairman, thank you very much. I would like to add my voice to those who have expressed concern about Harbor Maintenance Tax issues.
    When you look at the various maps of the inland waterways that are in need of dredging from time to time, there might be a temptation to suggest that these are local benefits only and they should bear the burden, but you need to expand the map. If you look at Columbia Snake River Waterway, there is grain exported from the entire west of the Rocky Mountain region via that river system. That benefits farmers in many States not adjacent to the river, and it provides essential strategic and economic benefits for the entire region.
    So I want to echo my colleague, Mr. Lampson and others, who have expressed concern about this and make sure that we maintain competitiveness in our ports and affordability of that operation. Thank you, Mr. Chairman.
    Mr. BOEHLERT. Let's go to Panel I which consists of John H. Anderson, Jr. Director of Transportation Issues for the General Accounting Office; Ms. Lillian Borrone, Director, Port Commerce, Port of New York and New Jersey, the American Association of Port Authorities; Water Resources Specialist David Conrad from the National Wildlife Federation; and from the Associated General Contractors of America and the Dredging Contractors of America, Michael Mayeux, Weeks Marine, Incorporated.
 Page 16       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    We will have the panel proceed in the order announced, Anderson, Borrone, Conrad, Mayeux. We would ask each panelist to try to summarize their testimony in 5 minutes. We want to leave time for other witnesses and some spirited questioning.
    With that, let's go first to Mr. Anderson.
    
TESTIMONY OF JOHN H. ANDERSON, JR., DIRECTOR, TRANSPORTATION ISSUES, RESOURCES, COMMUNITY, AND ECONOMIC DEVELOPMENT DIVISION, U.S. GENERAL ACCOUNTING OFFICE; LILLIAN C. BORRONE, DIRECTOR, PORT COMMERCE, PORT OF NEW YORK AND NEW JERSEY, ON BEHALF OF THE AMERICAN ASSOCIATION OF PORT AUTHORITIES; DAVID R. CONRAD, WATER RESOURCES SPECIALIST, NATIONAL WILDLIFE FEDERATION; AND MICHAEL MAYEUX, MANAGER, MECHANICAL DREDGING DIVISION, WEEKS MARINE, INC., ON BEHALF OF THE ASSOCIATED GENERAL CONTRACTORS OF AMERICA, AND THE DREDGING CONTRACTORS OF AMERICA

    Mr. ANDERSON. Thank you, Mr. Chairman and members of the committee. I am very pleased to be here today to testify about assessments which have been levied on the commercial maritime industry, and I will summarize my statement. I ask that the entire statement be entered into the record.
    Mr. BOEHLERT. Without objection, so ordered. All of the statements will be entered in the record.
    Mr. ANDERSON. For some time there have been concerns about the number and amount of user fees, taxes and other charges levied on the industry. In 1993 we reported and testified on this same issue. Prior to our 1993 report, no one knew the nature or total number and amount of these assessments. With the administration's proposal to replace the harbor maintenance tax with a new fee, the nature and amount of these assessments is especially relevant now.
 Page 17       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    As a result, at the request of Chairman Shuster and Mr. Oberstar, we issued a report in September which updated our 1993 work. I will summarize our findings for you:
    Eleven Federal agencies levied assessments of nearly $22 billion on the industry in fiscal year 1998. That was $3.7 billion more than they levied in 1991. A total of 124 different assessments were levied in 1998, up from 119, 7 years earlier. These include customs duties, ship registry fees, commercial fishing fees, and inspection charges.
    The Customs Service collected the lion's share of these assessments, almost $21 billion. The 10 other agencies collected an average of $90 million each in 1998. Most collections are deposited in the Treasury's general fund. Shippers, that is importers and exporters of goods, continue to pay most of these assessments, about $20 billion in 1998. However, assessments on vessel owners and operators have increased by almost 50 percent since 1991.
    Two new assessments are currently being proposed. The largest, the harbor services user fee, is being proposed by the Administration as the replacement for the current harbor maintenance tax. Finally, the balance in the Harbor Maintenance Trust Fund was $1.3 billion at the end of 1998 and could nearly double to $2.5 billion by 2004 barring any legislative or other changes.
    Now just a few details. For 1998, the Customs Service collected the most, about $21 billion; followed by the Panama Canal Commission, 675 million; and the IRS, $136 million. The amounts collected by some agencies changed substantially since 1991. For example, the assessments by the Coast Guard increased almost sevenfold while collections by the IRS and Federal Communications Commission both fell more than 60 percent.
    Most of the amounts collected from these assessments, as I mentioned before, are deposited in the Treasury's general fund for the general support of federal activities. Close to $1 billion more is earmarked to reimburse agencies or private companies for services provided. Another $762 million was generated in 1998 for three trust funds, including the Harbor Maintenance Trust Fund.
 Page 18       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    While the total number of assessments since 1991 only increased from 119 to 124, the intervening years saw considerable change in specific assessments. Since our last report in 1993, 50 new assessments were levied, 45 were deleted, and 44 were changed. Today the agencies with the highest number of assessments are the Coast Guard with 25, NOAA with 23, and the Federal Maritime Commission with 22.
    Shippers still pay the largest share of assessments, nearly $21 billion. This represents a 17 percent increase since 1991. Vessel owners and operators also paid nearly $1 billion in 1998, which was a 46 percent increase since 1991.
    Now, turning to the Harbor Maintenance Trust Fund, its surplus balance could nearly double by 2004 unless legislative or other changes occur. However, as several of you have mentioned in your opening comments, several proposals could change the status of the fund. They include eliminating the fund and replacing it with direct appropriations or with a similar fund. Also, as previously mentioned, the European Union has challenged the Fund's tax on imported goods as a violation of the General Agreement on Tariffs and Trade. Since the export tax portion of the fund has already been declared unconstitutional, there is some concern that the import tax could also be overturned.
    This concludes my prepared remarks and I will be glad to respond to any questions.
    Mr. BOEHLERT. Thank you very much Mr. Anderson.
    And let's proceed. Ms. Borrone.
    Ms. BORRONE. Good afternoon. I am Lillian Borrone, the Director of Port Commerce, Port Authority of New York and New Jersey. And I am testifying today on behalf of the 83 public ports who are members of the American Association of Port Authorities.
    Mr. Chairman, AAPA commends you for calling the hearing on the importance of harbors and inland waterways to the Nation, and the need to provide adequate infrastructure funding both now and in the future. Maintaining and improving access to U.S. ports is critical to this Nation's competitiveness, our economic growth and our ability to deploy the U.S. military. Navigation projects allow our ports to be this Nation's highways to the international marketplace and to the world. We must continue to work together to strengthen that partnership to ensure that the United States has the most efficient, safe, and environmentally responsible marine transportation system in the world.
 Page 19       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    I have submitted testimony for the record and I would like to cover four points. They are the value of trade and ports to the Nation, the importance of the Federal Government providing adequate funding for the dredging required to meet future transportation needs, including support for H.R. 1260, the Support for Harbor Investment Program, the SHIP Act; AAPA's support for H.R. 111, the Truth in Budgeting Act; and the importance of passing a Water Resource Development Act of 2000.
    A large measure of our country's unprecedented economic growth is due to the increased productivity of the American economy and foreign trade. In order to remain competitive in the marketplace, our U.S. businesses must have an efficient and reliable transportation system. And we ports provide just that. Deep-draft commercial ports in the U.S. handle more than $600 billion in international trade, which is 95 percent of the volume and 75 percent of the value of all of the cargo moving in and out of the Nation, and it is projected that trade through ports will double in the next 20 years. To maintain our role as a leading maritime and trading nation, the United States must continue to provide the needed infrastructure.
    Support for this infrastructure has historically been based on a Federal/local partnership. As called for in the Constitution, the Federal Government has sole jurisdiction over this Nation's navigational waterways and it supports dredging of both new projects and maintenance of the current Federal navigational channels. Local port authorities and industry provide for land infrastructure funding. Port authorities are also responsible for dredging berth areas and access channels connecting the port facilities to the Federal navigation channels, and we are responsible for providing any cost-sharing financing of dredging.
    In 1998 alone, local investment in port facilities was near $1.5 billion. An additional $9.1 billion of non-Federal investment is expected by 2003. Despite the significant local financial investment over the years, the Federal Government has slowly and continuously shifted its financial responsibility for funding navigational dredging to others. The latest attempt was the Administration's proposal to establish a harbor services tax that would have allowed the Federal Government to completely abdicate its financial responsibility for maintaining as well as, improving Federal navigation channels.
 Page 20       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    Last May AAPA President Nagle testified before this subcommittee in opposition to this proposal which is also opposed by other elements of our industry and labor. Currently funding for maintenance dredging is provided by the harbor maintenance tax, but, as you have noted, this tax has several drawbacks. First, the Supreme Court called the tax on exports unconstitutional. Subsequently, the import portion of the tax is expected to be brought to the World Trade Organization as an unfair trade practice.
    AAPA has spent 3 years looking at possible alternatives to the harbor maintenance tax. We have been unable to identify any user fee that can equitably raise revenues in relationship reasonably to the distribution of benefits to the Nation. As noted by Mr. Anderson, the commercial maritime industry already pays over $22 billion through 124 Federal assessments. Over $20 billion of that goes directly into the U.S. Treasury. This is far greater than the investment returned.
    That is why AAPA strongly endorses passage of H.R. 1260, the SHIP Act introduced by Representatives Borski and Oberstar, which would repeal this tax and call for the funding and maintenance dredging to revert back to general revenues. General revenue funding we believe is the most appropriate way for the Federal Government to continue to meet its commitments to maintaining U.S. trade. General revenue funding also is supported by the fact that the military is dependent upon ports but does not pay any fees to maintain them.
    AAPA continues to stand ready to review other proposed financing mechanisms, using four criteria described in my written testimony, and we encourage the subcommittee to use these criteria as well.
    Currently the harbor maintenance tax is placed in the Harbor Maintenance Trust Fund. AAPA supports H.R. 111 which would ensure that the money in the trust funds could only be used for transportation improvements and not be used to provide bookkeeping offsets to deficits elsewhere in the unified budget.
 Page 21       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    AAPA greatly appreciates the leadership of Chairman Shuster, Representative Oberstar, you, Mr. Chairman, and the committee, that you have displayed in pressing for such truth in budgeting. I am in an intermodal business and therefore I can personally say that changes made to the Highway Trust Fund as well as those embodied in H.R. 111 for other modes, are very important to the ports of this country.
    I want to end my testimony by encouraging the committee to take early action on the Water Resources Development Act of 2000. Regular and dependable enactment of the Water Resources Development Act is critical to the Nation's economy. One of the real challenges of the future will be the need to accommodate larger vessels in order to continue our trade leadership through the next century.
    AAPA urges Congress to revise the cost-sharing formula in light of the current size of vessels entering the fleets. Such a change to the cost-sharing formula would be consistent with the intent of Congress in 1986 when it set the threshold.
    Finally, AAPA is concerned about recent changes made by the Appropriations Committee that would limit in-kind services and reimbursements to local sponsors. Credits and reimbursements authorized under section 203 and 204 are important mechanisms for expediting navigation projects. The appropriations action would severely limit the use of these provisions.
    Thank you for the opportunity to testify today to ensure our Nation's continued international competitiveness. It is now more than ever important for us to continue to invest in an improved and efficient water transportation system.
    Mr. BOEHLERT. Thank you, Ms. Borrone.
    Mr. Conrad.
    Mr. CONRAD. Thank you, Mr. Chairman.
    The Nation's ports and waterborne transportation system are vital to the Nation's economy and to our position as the world's leading trading nation. The National Wildlife Federation and conservationists recognize the critical importance of this system and the need for some deep water ports to be part of that system. We believe, however, that mechanisms are needed to promote regional port planning and identify the appropriate levels of service that should be provided on a regional or coastal basis in order to avoid overcapacity, waste of taxpayers' funds and unnecessary damage to the environment.
 Page 22       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    I would like to briefly address three major areas relevant to those concerns, the harbor services users fee, deep-draft harbor cost sharing, and budget treatment of the Harbor Maintenance Trust Fund.
    Mr. Chairman, while the Administration has now proposed a new harbor services user fee that is essentially designed to replace and generate the same amount of revenue as the old harbor maintenance tax, we understand that opponents of the user fee would rather turn back broadly-supported user fee reforms from the 1986 WRDA and subsequent legislation and return to funding channel maintenance dredging out of the general funds.
    User fees remain a critically important tool for rationalizing water resource development investments. Years of debate over this principle preceded enactment of comprehensive reforms in 1986. The National Wildlife Federation believes a wisely-crafted user fee will not only ensure the Nation's marine transportation system needs are met, but will also encourage wise port planning and will employ market forces to help mold an efficient transportation system that can minimize harm to the environment.
    While the Administration's user fee may benefit from refinement, we believe this proposal is moving in the right direction. We do not believe that returning to paying for dredging out of the general fund is the appropriate answer. We believe any replacement of the harbor maintenance tax should have elements that would promote logical port development on a regional basis.
    An unfortunate impact of the harbor maintenance tax was that ports that were naturally deep, deeper, or required less maintenance dredging subsidized other less naturally deep ports. This cross-subsidy served to level the port competitive field, but it also meant that in some instances probably more dredging and port development may have occurred than was actually necessary. Such overcapacity hurts both the taxpayer and the environment.
    One concern we would like to raise regarding the proposed harbor services user fee, could add to the concern by providing funds not only for channel maintenance but also for construction. To reduce potential for cross-subsidies, we would urge the subcommittee to consider limiting the user fee to amounts needed to cover only port and harbor maintenance operations and maintenance, and continue to finance new construction or expansions under the present process. We would also urge the subcommittee to consider modifications of the harbor services user fee that would reduce the potential for cross-subsidies and operations and maintenance such as including a factor that even more directly reflects the relative depth, dredging, and disposal costs of each port.
 Page 23       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    Mr. Chairman, we are also concerned that at the same time the port industry is seeking to abolish user fees for port dredging, it is also seeking to reduce the required local cost share for deepening projects and for deep-water port maintenance. During consideration of WRDA 1999, Congress was urged to greatly increase the Federal cost share for constructing and maintaining deep-draft harbors in the United States so ports can better accommodate new mega-ships being constructed and utilized by shipping lines.
    The proposal to return dredging funding to the general fund while decreasing the local cost share for harbor deepening seems to be aimed at leveling the playing field so much that every port would have the opportunity to become a superport. That is a prescription for an environmental disaster and a waste of taxpayer dollars. At present nearly every major port is considering potential expansion out of fear that they will lose business to competition from other U.S. ports. The solution promoted by the port industry is to increase subsidies across the board, which will likely result in considerable overcapacity at taxpayers' expense. We are concerned that such a scenario could launch a race to the bottom among ports and leave a legacy of overcapacity and large amounts of additional dredging and sediment for disposal.
    Mr. Chairman, our testimony discusses to some depth the many impacts of dredging which I won't go into, but while the House approved the additional harbor dredging subsidy in its version of WRDA in 1999, the Senate did not and the provision was removed from the bill in conference. In place, WRDA 1999 authorized a study of the need to deepen the Nation's ports and specifically requested the study review the impacts of changing the cost share on a regional basis. Again we urge the Congress not to rush to change well-thought-out formulas for financing deep-draft harbor dredging from WRDA 1986. I hope the study may be useful in further identifying the financial and environmental implications of such a proposal.
    Finally, Mr. Chairman, we would urge that the harbor services user fee remain on budget. Moving a trust fund off budget reduces accountability of the funding and takes logical port planning decisions out of the hands of taxpayers. We believe the complexities of issues inherent in harbor investments argue for maintaining this trust fund on budget to assure a broadly considered balancing of how, when and where the monies are spent.
 Page 24       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    Once again I want to thank the Chairman and the members of the subcommittee for the opportunity to present our views. Few activities have a more profound and lasting impact on the Nation's precious coastal resources than waterway dredging and port and harbor development. I would be pleased to respond to any questions that the members may have. Thank you.
    Mr. BOEHLERT. Thank you very much, Mr. Conrad.
    Mr. Mayeux.
    Mr. MAYEUX. Mr. Chairman and members of the subcommittee, my name is Mike Mayeux and I am the manager of the Mechanical Dredging Division of Weeks Marine, Incorporated, of Bourg, Louisiana. I am also Chairman of the Associated General Contractors of America Marine Contractors Committee and I am here on behalf of AGC and the Dredging Contractors of America.
    I appreciate the opportunity to present testimony on the need to provide dedicated funding for the Harbor Maintenance Trust Fund and the importance of port and waterway maintenance. In March 1998, the harbor maintenance tax as applied to exports was declared unconstitutional by the Supreme Court. AGC and DCA believe that it is imperative that the harbor maintenance tax be replaced by a secure and dedicated funding mechanism to ensure adequate Federal funds are available for port and harbor development and maintenance. A safe and efficient port system promotes international trade, increases national security, and helps prevent environmental disasters such as oil spills.
    Maintenance of deep-draft navigation channels is an essential component of an efficient national transportation system, particularly as the mega-containerships become more numerous. Mega-containerships were first used in 1996 and are a growing sector of the containership fleet.
    These ships require ports to have depths of about 50 feet. Currently 6 of America's 10 largest container ports which handle 80 percent of the cargo have depths of less than 50 feet. Because they cannot handle these large ships, many ships are choosing to land at foreign ports such as Halifax and the Bahamas. This hurts American business by increasing shipping costs and jeopardizing thousands of American jobs.
 Page 25       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    Today, constant maintenance of U.S. ports is necessary. Ports are becoming much more aggressive about the need to maintain the full authorized channel dimensions 100 percent of the time. In the past, the Corps of Engineers would allow shoaling to accumulate in order to create a bank of material that could be removed at a lower unit cost. Today because mega-ships are pushing authorized channel limits, ports are demanding that dredging occur in more frequent cycles in order to maintain authorized and advertised depths. Dredging less material more frequently, however, is less efficient and increases the cost of harbor maintenance and also the demand for dredges.
    According to the American Association of Port Authorities, more than 90 percent of the Nation's top 50 ports require regular maintenance dredging. If these ports are not dredged, most of these port facilities and navigation channels would be draft-limited in less than 1 year. Maintenance dredging also keeps shipping safe. When sediments accumulate, ships can ground, which leads to environmental pollution, particularly oil spills.
    Another disadvantage that arises when waterways are draft-limited is that ships must either run at less than maximum capacity or unload a portion of their cargoes so that the vessel is light enough to move in and out of the harbor safely. This increases the cost of shipping and the likelihood of accidents and spills. It also increases the likelihood that the shipping industry will move its business to a more dependable port.
    With the increased demands for better and deeper maintained ports, it is imperative that the Harbor Maintenance Trust Fund be funded with a secure, dedicated revenue source. AGC and DCA strongly endorse H.R. 111, the Truth in Budgeting Act, which removes the Harbor Maintenance Trust Fund from the unified Federal budget. We have long been leading advocates for taking the transportation trust funds off budget.
    We commend all of the members of this subcommittee for cosponsoring this legislation. We believe that next year should be the year of ocean shipping. That is the year that the Harbor Maintenance Trust Fund is taken off budget so that the revenues will be used only to maintain and improve our Nation's harbors and ports.
 Page 26       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    Currently the Corps of Engineers has a $27 billion construction backlog. Funding for many of these backlog projects could be addressed if the Corps had access to all of the funds in the Harbor Maintenance Trust Fund, funds that are now withheld to offset unrelated government spending.
    Establishing a dedicated revenue source and ensuring that the funding will be spent on maintaining and improving our harbors and ports will provide certainty and predictability to a highly specialized industry. Companies in this specialty construction business must own the equipment needed to undertake this type of work. Therefore, expensive and long-term capital investments must be made based on assessments of future markets. A reliable and stable source of funding for harbor maintenance will boost the investment incentive while reducing the investment risk in an already risky business.
    In conclusion, AGC and DCA believe that a secure and dedicated revenue source needs to be established, and we believe that the Harbor Maintenance Trust Fund should be taken off budget so that these dedicated funds will be spent to maintain and improve our Nation's harbors and ports. I thank you for this opportunity to testify.
    Mr. BOEHLERT. Thank you very much, Mr. Mayeux.
    Let me start with a question for Mr. Anderson. Do you see any legal problem with diverting some of the Customs duties collected from the maritime commercial industry to a fund for maintaining or improving our harbors?
    Mr. ANDERSON. No, I don't think that there are any problems at all. It has been done, I think, in three cases. Currently, about 30 percent of the Customs duties are offset or shielded for an agriculture program, and there are a couple of other programs where it is done.
    Mr. BOEHLERT. No legal problems and there is a precedent?
    Mr. ANDERSON. Right.
 Page 27       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    Mr. BOEHLERT. Do any other panel members care to address that question?
    All right, if not let me ask Mr. Mayeux, why is a dedicated source of funds preferable to just relying on the general Treasury? That is a softball question.
    Mr. MAYEUX. Yes. A new dredge today can cost as much as $40 million, and we feel like without assurances that we have a firm market to justify our investment, that we would prefer to have a dedicated fund.
    Mr. BOEHLERT. Let me ask you, Mr. Conrad, you are concerned about a trend leading to overcapacity of deep-water ports. You have articulated that quite well. How should we go about determining how many deepwater ports are needed and where should they be located? How do we determine that?
    Mr. CONRAD. Well, I think the concept of the user fee and some kind of mechanism which internalizes costs and allows the market to help respond to the need and define those needs is a valuable tool to get there.
    Obviously Congress has to decide what projects to authorize for construction. Everyone can make their case. We have a planning process at the Corps of Engineers that considers all of the economic arguments. But I guess our argument for a user fee is that that is one more important tool to help have a signal to help keep other factors from just overwhelming the decisionmaking process, political factors maybe, and causing projects to be undertaken that are beyond what is actually necessary.
    So I think there could be a lot of additional data developed both in the course of the planning process and also there probably ought to be more thought put to Federal planning for port needs. In fact, the Administration began a study recently that only went to a certain level of depth in order to try to anticipate needs. I think there is a need for more port planning than we have so far.
 Page 28       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    Mr. BOEHLERT. Ms. Borrone, let me ask you the same question.
    Ms. BORRONE. As I understand our industry today, there are about 21 ports that have depths over 45 feet and probably another dozen that need to get there or even deeper in order to be able to accommodate the kind of traffic moving in and out of this country.
    I do think that the Army system that is in place today is a very important governing mechanism. We do embrace rational port planning. In fact in my own harbor we have gone through a very intensive master plan. I think there are some specific factors that are already embodied in that system that are really relevant to the national consideration. It is not just a cost-benefit analysis, but looking at the reduced cost of transportation through the use of larger vessels, the increased net return to producers from access to new sources of lower-cost material or to more profitable markets, and the increased production or the greater production opportunity that new economic activities through the movement of new commodities offer.
    Benefits that shift from one region to another are viewed only as transfers and they don't get counted in the Corps' decisionmaking as they come forward with their recommendations to the Congress. I don't think that it is necessarily going to drive every port in the country to look for deep water. What it is going to do, particularly since many of us serve regional or niche markets, it is going to probably give us a greater emphasis on the need, as Mr. Conrad suggests, to look comprehensively at our master plan. We talked about the fact that we know that commerce is going to double. We need to be able to accommodate it.
    Mr. BOEHLERT. The cost-sharing formula is sort of a disincentive for everybody just to say we want our deepwater port because they have to cough up a good share of the cash and they have constituencies that they have to respond to. But most of us are deeply concerned that too much of the traffic that should come our way is going to Halifax or the Bahamas or someplace else. My time is up.
 Page 29       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    I will go to our distinguished Ranking Member, Mr. Borski.
    Mr. BORSKI. Thank you, Mr. Chairman.
    Mr. Anderson, let me start with you. If we are collecting some $22 billion in fees from the maritime industry and only spending $500 million, it seems to me that there is a fairness question to that, first of all.
    Secondly, in response to the Chairman's question, you said there are no difficulties with using some of the fees and dedicating them to harbor maintenance.
    Mr. ANDERSON. There wouldn't be any problem with earmarking some of the fees, but you would have to pass legislation to do it; but there wouldn't be any problem. There has been a precedent established.
    Mr. BORSKI. What about the pay-go provisions? Would we have to find offsetting dollars?
    Mr. ANDERSON. That is a very good question. We usually try to leave that determination up to CBO and OMB. There is a possibility that it would affect it, but I don't know for sure.
    Mr. BORSKI. Could you tell me again the difference, the increase of monies that we are bringing in either yearly or since your last report?
    Mr. ANDERSON. I believe, overall, the collections increased by $3.7 billion, and I believe the amount that shippers paid increased by about 17 percent. And the payments that vessel owners and operators made increased by 46 percent. So, the total collections went up to $22 billion in 1998.
    Mr. BORSKI. Would you know, is that a place for us to potentially look? Could we get around our pay-go provisions if we could do the increases that perhaps are coming in in future years?
    Mr. ANDERSON. I think that is something to look at. Some of the subcommittee staff asked a question prior to the hearing about reasons why Customs duties have been going down, and we tried to follow up with some Customs officials to find out. The officials do expect Customs duties to continue to drop because the rates are becoming more competitive as new trade agreements are being negotiated.
 Page 30       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    But, I believe taking a look at the collections that seem to be going up in other areas is something to look at. Obviously, other panel members here today have indicated that a significant need exists for additional funds. So, I think there is a need to look at all possible alternatives about how you might go about doing that.
    Mr. BORSKI. Ms. Borrone, do you want to comment on that?
    Ms. BORRONE. Yes, I certainly think that this is an opportunity to focus on the growth element as we look at the future, especially if first we consider inflation and then take everything over that, for example.
    Mr. BORSKI. Could you elaborate briefly on the military use of harbors?
    Ms. BORRONE. Well, there are 50 ports in our system that have arrangements with the military right now. My own port is a military outload port. We have, I think, nine times this year moved both troops as well as equipment out of our port areas overseas. We are responsible for assuring that not only the terminals are available when the government or military needs them, but also that we are capable of providing deepwater access as well as land infrastructure necessary to move the troops and equipment.
    We have the funding need and we need to be able to ensure that we can get that vessel traffic through when it is necessary.
    Mr. BORSKI. Thank you.
    Mr. Conrad, let me ask you a question. I am concerned about the environmental effects of lightering. If we are not maintaining these ports at proper depths, we are doing more lightering, and I know in Philadelphia we have a particular deepening project that would help us tremendously in not lightering what we need to do today. Is that an environmental impact that we ought to be looking at?
    Mr. CONRAD. Well, I am not as familiar as I probably should be with all of the problems associated with lightering. I am aware that there are sometimes more environmental problems associated just with the transfers, but I don't know exactly what has happened in the Delaware River on that. But I would be glad to get back to you with a response on that.
 Page 31       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    Mr. BORSKI. If you could. That is one of the benefits to going deeper there. We are currently lightering, and I think that causes additional risks to the environment.
    Mr. CONRAD. It is a trade-off, like so many things, because the dredging itself could also have an impact.
    Mr. BORSKI. Thank you. Thank you, Mr. Chairman.
    Mr. BOEHLERT. We have a vote in progress, but it is the Chair's intention to continue on without inconveniencing you or anyone else. The Vice Chairman is en route back from voting and as soon as he gets back he will take over the Chair and continue, and the Chair and others will go vote. So we want to keep on going.
    Dr. Horn, you are next.
    Mr. HORN. Thank you very much, Mr. Chairman. I think there are several factors that are very important and one was listed, and that is our ports have a major role in terms of backing up our military.
    The reality is very clear. The Gulf War would not have been won by this country if it had not had 6 months where Congress debated it. The fact was that logistics was going through the ports of America to get to the Middle East. The Air Mobility Command have funded a study and models with the Center for the Transportation of Commercial Technologies and it is based on the agile port and the agile ship, and that is exactly what it ought to be based on.
    When you look at what the ports contribute to the American economy, in California, California alone is responsible for one-third of all United States cargo throughout, and when you look at the jobs involved in the State from the ports, just the two in San Pedro Bay, which are monster ports, if you will, and the many little ones, add up also to thousands of jobs throughout the State, going from San Diego to the Oregon border.
    As a result, California's interdependent seaport and harbor system, as Mr. Steinke mentioned, whose testimony I put in the record, they annually contribute $41 billion to the gross domestic product. Then when you look at the Customs throughout the Nation, the official budget position here this year on Federal receipts, page 47, is that Customs duties as reported, 18.3 billion. This year they estimated 17.7 and over a 5-year period, you ended up with roughly $25 billion in Customs duties.
 Page 32       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    Now, it seems to me that the Customs pot, if you will, ought to be the one that does a lot of these things that have a Federal interest.
    The navigational buoys, be it the dredging, be it helping build agile ports around the country, all of that money ought to come out of the Customs. You don't need a new user tax, a lot of paperwork and everything else. The Customs money is there, and there is no reason why we can't say part of that ought to go to build the infrastructure of ports in the Gulf, in the East Coast, in the St. Lawrence Seaway, in the West Coast; and I would hope, Mr. Chairman, that is the approach that is taken here.
    I wonder what the panel thinks of just relying on Customs.
    Mr. ANDERSON. As I have indicated before, I think that is a viable option that needs to be pursued. A precedent that has been established there, and strong argument for doing this could be made. Prior to the Harbor Maintenance Trust Fund being established, waterway projects were funded out of the general fund anyway. You already do have a mechanism of collections in place, and that is something to be looked at.
    The only downside, of course, is that you are taking funds away from the general fund, which means other discretionary programs have a smaller pot of money to compete for; but you face that in a number of instances anyway.
    Mr. HORN. [Presiding.] Mr. Conrad?
    Mr. CONRAD. Thank you, Congressman.
    I think one of the assumptions in your question is how to deal with harbor maintenance. We would make a distinction between harbor maintenance and new-capacity funding because of a number of the concerns that we raised about having a user fee concept, and certainly a cost sharing, which was the other issue that we talked about.
    I think if harbor maintenance was funded from Customs, it would have a certain set of effects, but it would be a little bit different if it was also being used for new construction.
 Page 33       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    It would certainly affect the decisionmaking process.
    Mr. HORN. I suspect, of course, you have strong feelings, as I do and Mr. Boehlert does, about the environment, and I think these two ports have handled it very well in terms of boxing up the dredge that comes down the Los Angeles River and brings everything from your friendly sofa in the living room to cars.
    Ms. Borrone, how do you feel about this?
    Ms. BORRONE. As I indicated, Mr. Horn, we certainly think that this is a potential source of further opportunities, especially looking at growth.
    I want to point out that tariff rates are going down, but total revenues are expected to increase because of higher trade volumes, and I would like to use a number that we have developed through some economic forecasts. U.S. exports and imports are projected to increase in value from $454 billion in 1990 to $1.6 trillion in 2010.
    That is a significant growth opportunity for us to perhaps take a share of that growth without jeopardizing the programs which are already funded through these resources, even including inflation, and I think that is a scenario that the committee needs to look at.
    Mr. HORN. Mr. Mayeux, I am going to have to give you a minute because I have 4 minutes to get to the vote.
    Mr. MAYEUX. We are not real particular about where the money comes from, but we would like to see a dedicated source with a hard formula that we could plan on. Thank you.
    Mr. HORN. I think we would all agree to that. We are in recess now until the Vice Chairman or the Chairman returns. I shall return, but not soon.
    [Recess.]
    Mr. BOEHLERT. Well, with the best-laid plans I thought we could work this so that no one would have to be delayed.
 Page 34       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    I think we have completed the testimony and the questioning of this panel, so I would thank all of you for serving as resources to the committee. I would expect that we might have some questions that we will submit to you in writing; and, if we do, we would appreciate a timely response.
    But, once again, thank you very much, and we will move on with the hearing.
    Our next panel consists of Mr. William Whitlock with the Inland Waterways Users Board, and I would like to compliment him for bringing some members of the board here to be with us. I understand you are having your annual meeting, and board members are here seeing how this strange instrument called Congress works.
    Mr. Barry Palmer, from DINAMO, the Executive Director, and DINAMO is, for those who don't know, the Association for the Development of Inland Navigation in America's Ohio Valley. This is DINAMO.
    Mr. Christopher Brescia, President of MARC 2000.
    Mr. Stephen Lucas, the Vice President of Export Operations for Louis Dreyfus Corporation. He is with the National Grain and Feed Association, a spokesperson.
    And from the Environmental Defense Fund, Mr. Timothy Searchinger, Senior Attorney.
    We will go in the order announced—Mr. Whitlock, followed by Mr. Palmer, Mr. Brescia, Mr. Lucas, and Mr. Searchinger will be the cleanup batter.
    We would ask that all of you be cognizant of the fact that your entire statement will be in the record at this juncture, and we would appreciate if you could try to summarize your statement in 5 minutes or less out of consideration for the panel members.
TESTIMONY OF NORBERT WHITLOCK, CHAIRMAN, INLAND WATERWAYS USERS BOARD; R. BARRY PALMER, EXECUTIVE DIRECTOR, DINAMO; CHRISTOPHER J. BRESCIA, PRESIDENT, MIDWEST AREA RIVER COALITION 2000; J. STEPHEN LUCAS, VICE PRESIDENT, EXPORT OPERATIONS, LOUIS DREYFUS CORPORATION, ON BEHALF OF THE NATIONAL GRAIN & FEED ASSOCIATION; AND TIMOTHY D. SEARCHINGER, SENIOR ATTORNEY, ENVIRONMENTAL DEFENSE FUND
 Page 35       PREV PAGE       TOP OF DOC    Segment 2 Of 2  

    Mr. BOEHLERT. Let us start first with Mr. Whitlock.
    Mr. WHITLOCK. Chairman Boehlert, members of the subcommittee, I am Norb Whitlock, Senior Vice President of the American Commercial Barge Line LLC, and I am Chairman of the Inland Waterways Users Board. I am here today testifying on behalf of the members of the Board.
    I would like to summarize my written statement which discusses the following five general topics: the Board's involvement in the inland waterway transportation system; the nature of the Board's industry-government partnership; repeal of the 4.3 cents deficit reduction fuel tax; less than full utilization of revenues deposited in the Inland Waterways Trust Fund and the lack of general treasury contributions to match those dollars; and the prioritization of navigation replacement, construction and major rehabilitation projects.
    The U.S. Army Corps of Engineers Civil Works program which the Corps is responsible for this Nation's water resource is an enormous responsibility. This includes the responsibility for the expenditure of congressional Civil Works appropriations for the design, construction, operation and maintenance of waterways, ports and harbor infrastructure which exists for the primary purpose of facilitating foreign and domestic commerce.
    WRDA in 1986 established the Inland Waterways Users Board. It also established the 20 cent per gallon inland waterway fuel tax. This year the tax will contribute over $100 million in revenue to the Inland Waterways Trust Fund, where it funds 50 percent of the cost of inland navigation projects each year. Additionally, the industry pays a deficit reduction fuel tax of 4.3 cents per gallon that is deposited in the general treasury.
    Congress created the Board as a means of ensuring that the commercial users have a stronger role in managing the expenditures made from the Inland Waterways Trust Fund. The Board embodies the concept developed during WRDA 1986 debates of users pay, users say, giving the industry the ability to participate in establishing infrastructure and investment priorities.
 Page 36       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    From a partnership standpoint, the Board consists of 11 members, representing shippers and carriers. The current board is represented by six barge lines, two coal shippers, two grain shippers and one sand and gravel shipper. Board members are appointed by the Secretary of the Army, with each member serving a 2-year term beginning in January of the year of appointment.
    Unfortunately, the appointment process has increasingly frustrated the Board's critical mission. In 1999, appointments were not made until October, some 10 months late, and we had our first and only meeting in 1999 earlier this afternoon. We feel that the Board should not be idle for this length of time as we deliberate and make recommendations to the Corps and to the Congress and Administration on funding priorities.
    As to the fuel tax repeal, the Board notes that the House and the Senate have passed a repeal of the 4.3 cent deficit reduction fuel tax. Although vetoed by the President as a provision in the larger tax package, the Board continues to support the eventual repeal of this tax. In the coming years, if the tax is not repealed, the Board would recommend that the deficit reduction fuel tax be reallocated as a contribution to the Inland Waterways Trust Fund but only after repeal had failed.
    The role of the Inland Waterways Users Board as an advisory committee is a critical juncture. The Board has two serious concerns in the industry government partnership. First, the taxes deposited in the Trust Fund have not been fully utilized for navigation infrastructure improvements. Second, the lack of general treasury funds to match the Trust Fund revenues generated for navigation infrastructure improvements has not been forthcoming either. Budget authority over the last 5 years has only amounted to about $150 million per year.
    Taxes generated by commercial users have been greatly underutilized. The Federal Government, as was deliberated in 1986, has an obligation to match the fuel tax revenues of providing 50 percent for the cost of lock and dam projects. The Inland Waterways Trust Fund, with a current balance of approximately $370 million, has adequate dollars to meet the production construction rehabilitation requirements of the system over the next several years. The Board firmly believes that future balances and our future economic competitiveness will be built upon our Nation's infrastructure, of which the inland waterways are a significant key component. We need to spend the Trust Fund surplus on navigation and infrastructure.
 Page 37       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    The principal responsibility of the Board is to recommend to Congress, the Secretary of the Army and the Corps of Engineers the prioritization of navigation replacement, construction and major rehabilitation projects from a national perspective. The Board uses a prioritization format to objectively identify differences between the proposed projects. This ranking tool consists of eight factors: condition of the structures, capacity, future demand, costs, operating considerations, traffic delays, environmental concerns, timing, and public and political support for the projects.
    The Board has ranked new and replacement construction projects, continuing construction, major rehabilitation and studies and future projects. I will not take time to reiterate the priority, but that is included in my testimony.
    In conclusion, the United States' ability to compete and grow in the global economy is contingent upon our ability to efficiently transport raw goods, commodities and finished products throughout the U.S. for export. In the future, our economic competitiveness will be built upon our national infrastructure of which inland waterways are key.
    We currently have the best and most efficient waterways system in the world, one that is emulated by both industrial and developing countries around the globe. We cannot, however, maintain our world-class system without immediate attention to much-needed projects and the effective use of realistic tools and models in studying projects for future funding.
    In this regard, the Board strongly believes that funds spent to maintain and improve the inland waterway infrastructure yield an overwhelming benefit-to-cost ratio that will have a positive impact on the Nation's economy for decades and generations to come.
    The Board also believes that spending limitations anticipated to affect the Army Corps of Engineers' Civil Works program will significantly affect all projects and studies. So, while Congress supports the inland navigation system, at this time it appears that adequate Federal funding may not be available to start new projects or to complete continuing construction on time or on budget. The continuing challenge will be to properly allocate and expend those Inland Waterways Trust Fund moneys currently available.
 Page 38       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    Let me say that the agribusiness industry, the electric utility industry and the manufacturing industry of this Nation are very competitive in this global economy and in large part because of the efficient transportation systems. In order to sustain this global competitiveness, funding authority for inland waterway infrastructure improvements needs to be in the range of $300 million, as opposed to $150 million, over the next decade, of which 50 percent would come from the Inland Waterways Trust Fund, and the Trust Fund would remain solvent during that period of time.
    Mr. Chairman, I would be pleased to answer any questions.
    Mr. BOEHLERT. Thank you very much.
    Mr. Palmer.
    Mr. PALMER. Thank you, Mr. Chairman.
    I am Barry Palmer, Executive Director of DINAMO, which is the Association for the Development of Inland Navigation in America's Ohio Valley. We are a coalition of private sector, State government and labor leaders in the Ohio valley.
    We have made much progress over the last 18 years, Mr. Chairman, largely with the help and leadership of this committee. Fifteen lock and dam structures on the Ohio River Navigation System are under construction or complete.
    First of all, for lock and dam modernization projects already authorized and under construction, we would urge that the currently scheduled diesel fuel user tax revenues, as well as surplus of moneys in the Inland Waterways Trust Fund, be drawn down to complete all lock and dam construction projects in a timely manner. In the Ohio Valley, about $250 million annually is needed to do this, half of the money coming from the Trust Fund and the other half from the general treasury.
    The projects like we have, we have the Marmet project here, 2, 3 and 4 on the Monongahela River; McAlpine down in Louisville; the Olmsted Locks and Dam, which is a billion dollar project; and also the Kentucky Lock Addition project which we are going to break ground on in 2 weeks. Those are the five projects. They can all be completed by 2008 or earlier if they just allocate adequate resources for this.
 Page 39       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    I have some slides I want to show you.
    There are 1,000 manufacturing facilities, power plants, terminals and docks on the Ohio River Navigation System, Mr. Chairman. In 1997, the system moved about 275 million tons of commodities, and they had a value of $31.3 billion. We estimate that about 650,000 jobs are directly, indirectly and induced and tied to the river. We have got about 58 million tons of commodities going out of the system and about 38 million tons coming into the system.
    This is a profile map of the electric power utility plants in the region. The Ohio River Basin is the major coal producing and power generating area. In 1997, coal shipments on the waterways of the region totaled just over 158 million tons, and of this amount 122 million tons were destined for coal-fired power plants. In 1997, this coal moved to 47 power plants along the Ohio River and its tributaries and also to 19 power plants in eight States outside of the basin.
    There is a profile of some of our chemical facilities. We have 226 waterside chemical plants, docks and terminals in the basin which shipped or received chemical commodities by barge in 1997, and we have about 132 waterside grain elevators. Grain shipments on the basin's waterway totaled just less than 15 million tons in 1997.
    I wanted to give you a profile of the system. There are 16 locks and dams on the Ohio River Navigation System. The older locks date back to the 1930's. There are 20 of them at over 60 years of age, and we have 26 between 30 and 60 years of age. There is an increasing likelihood of structural failure, which means decreasing reliability. Of course, the repair, maintenance costs and closure times we expect will increase as this system deteriorates and gets older, and these increasing delay costs will mean a diversion of some traffic to other modes.
    Now, this is the pattern of growth on the Ohio River. Traffic doubled between 1950 and 1965, at 15 years, had doubled again between 1965 and 1990. In the last 15 years, traffic on the Ohio River grew 60 percent between 1983 and 1997 to about 275 million tons.
 Page 40       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    This is a profile of historic and projected traffic growth. We expect that traffic is going to grow to about 385 million tons by 2020 and to 500 million tons by 2050. So we need an infrastructure that is going to handle all of this stuff.
    Now, we have been engaged in an Ohio River main stem study which is from a committee resolution by Chairman Shuster in 1982, and we have been studying lock and dam modernization projects in this regard. And this study that we have been engaged in with the Corps of Engineers over the last 5 to 6 years is intended to be an authorization document for the near term, the next 15 years.
    What you see here popped out in terms of what the costs are to industry, closure costs and normal Federal Government costs, when they get to be in excess of 11, $12 million at each lock site, then you can see where the costs are associated with congestion and delay. And because of old age and other factors of these pop-outs, we are going to be back before you several times in the next decade, Mr. Chairman, asking for help.
    What we want today is your support for construction authorization for additional capacity at two locks and dams, the John T. Myers Lock and Dam on the Ohio River and also the Greenup Lock and Dam, and I will talk about that in a minute.
    This is a picture of the Greenup Lock and Dam down on the Ohio-Kentucky border. What we are talking about here is increasing the capacity or extending—this main lock is 1,200 feet long, 110 by 1,200 feet. This is 600 by 110. And what the authorization would do with these interim feasibility reports would be to add another 600 feet here, making twin 1,200 foot lock chambers. The cost of projects at Greenup and Myers are at about $175 million. Here at the Greenup Lock and Dam the BC ratio is about 2.8.
    There is a picture of John T. Myers Lock and Dam. Traffic at Greenup is about 73 million tons right now, and at Myers it is 78 million tons. The main locks are at the end of their practical capacity. So what we are working with the Corps and recommending is that we not build a third lock and dam but we extend the current auxiliary chambers before we pass that window of opportunity. So we see this as a lower cost alternative.
 Page 41       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    In 1989, traffic was delayed because of the closure of the main lock. It cost industry $15 million. Fewer delays mean reduced air emissions, and with the John T. Myers lock extension, over the life of the project it is estimated that 6.8 million tons fewer gallons of fuel will be burned, which means a lot less carbon monoxide and dioxide in the air, less nitrogen oxide, hydrocarbons in particular. Tremendous environmental benefits from these projects.
    That is basically what I want to say.
    I have a picture of Greenup Lock and Dam, and only for Mr. Rahall, Mr. Wise's benefit, they know this, most of the tonnage that goes through Greenup Lock and Dam is coming out of West Virginia, some 25 million tons, and most of it is coming out of Mr. Rahall's district, and it is coal. So I do that to give some relevancy to this committee.
    But thank you for the opportunity. We think there is adequate funds. We need to get the projects built that are already there, and we need to get these projects authorized and get them on line. Thank you, sir.
    Mr. BOEHLERT. Thank you very much, Mr. Palmer.
    Mr. Brescia.
    Mr. BRESCIA. Mr. Chairman, members of the committee, my name is Chris Brescia, and I am President of MARC 2000 based out of St. Louis, Missouri. I would like to thank you for the opportunity to be here today to offer our views on the important issue of infrastructure modernization.
    MARC 2000 represents members who function in 24 States, primarily in the Midwest. They employ or self-employ around 175,000 individuals. They reach from Minnesota to Louisiana on the Mississippi, Chicago to St. Louis on the Illinois, and Sioux City to St. Louis on the Missouri River.
    Mr. Chairman, in addition to having my full written text in the record, I would like to submit additional testimony from the National Corn Growers Association, one of the leaders in our coalition, if I might.
 Page 42       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    Mr. BOEHLERT. Without objection, so ordered.
    Mr. BRESCIA. Thank you.
    And there is an additional sheet that did not follow my testimony which I would also like to have included.
    Mr. BOEHLERT. Fine, fine.
    Mr. BRESCIA. Thank you, sir.
    Mr. Chairman, the waterway system is critical to the Midwest and to the Upper Mississippi Basin. Over 60 percent of U.S. grain exports reach world markets, transiting the Upper Mississippi system to the Gulf. That is an average of about $18 billion added to our balance of trade which is also fundamental to supporting farmer income.
    We are talking about a system that supports over 400,000 full and part-time jobs, including 90,000 manufacturing jobs, and these jobs generate over 4 billion in income and between 11 and 15 billion in business revenue. We are talking about a transportation system that historically has saved about $1.5 billion a year to the U.S. economy, of which 671 million of that accrues to the farmers in the Midwest. However, those savings are eroding rapidly as the infrastructure ages and efficiencies decline.
    Modernization is critical to the Upper Mississippi, Mr. Chairman. Traffic growth has created choke points on the system largely due to the fact that 600-foot locks are the main means through which commodities transit on the Mississippi River. This congestion is costing millions of dollars per year. A study conducted by Texas A&M indicates that Midwestern farmers will lose $364 million per year by the year 2020 if lock capacity improvements are not made in the Upper Mississippi.
    Public meetings throughout the basin have confirmed broad support for the construction of seven 1,200 foot chambers, five on the Upper Mississippi and two on the Illinois River, along with a series of guidewall extensions and buoys. The Corps of Engineers estimates that this total system project will run somewhere between 1.2 and $1.5 billion.
 Page 43       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    The time is now for Congress to act, Mr. Chairman. Last year, in WRDA 1999, this committee addressed three key concerns from the Upper Mississippi: Reauthorization of the environmental management program was an issue that had broad support and we supported; providing guidance to move into design work was also provided for; and beginning a comprehensive flood control protection feasibility study.
    The upcoming water resources bill in 2000 will be a critical time for infrastructure modernization to be given its due.
    According to USDA Assistant Secretary Mike Dunn, U.S. farmers are losing ground to South American competition largely because our transportation system has eroded. If Congress does not address this critical issue in a timely fashion, the depths of farm community depression will be accentuated.
    We have a funding mechanism to make this happen, the Inland Waterways Trust Fund, and you have heard about how the fund works and the current surplus that it has. According to an analysis done for the Corps of Engineers by the Tennessee Valley Authority, Upper Mississippi traffic that either originates or terminates in the basin contributes 40 percent into that Trust Fund and only about 10 to 15 percent has come back to the region.
    A high percentage of the existing surplus can be traced back to contributions from our part of the country. If you will, we have been a major donor region to the Trust Fund. In WRDA 2000 we will be asking Congress for authority to begin investing accumulated dollars to modernize the inland system in the Upper Mississippi and the Illinois River through a series of new lock constructions.
    Mr. Chairman, we applaud efforts that been made to expend tax dollars for the purposes for which they were collected. We offer some following observations on the issue of taking the Trust Fund off budget.
    First, the Inland Waterways Trust Fund is different from the Highway or Aviation Trust Funds. The latter tap broad consumer-based sources for the funding stream and billions of dollars. The Inland Waterways Trust Fund has a narrower user tax base which directly impacts the competitiveness of the industries and the producers in the region, especially our agricultural exports, and any increase in that can jeopardize a domestic base.
 Page 44       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    Critics of the proposal suggest that if this happens to the Inland Waterways Trust Fund then the existing 50/50 cost share formula will be eliminated and all costs associated with modernization and operation maintenance will have to come out of the Trust Fund. Such action will send the Midwest agricultural economy into a downward spiral based on the increased tax that would be required to meet optimal construction and operation timetables.
    In summing up, Mr. Chairman, we are concerned that this concept treats the surplus of the trust fund as it might the Highway Trust Fund balance and the promise made by Congress to the taxpayers in our region will have been broken.
    In order to meet global competition and market opportunities, the upper Mississippi modernization program requires as much as 90 to $100 million a year over a period of 12 years at the same time that authorized projects throughout the country may need twice as much as that, as has already been mentioned.
    This subcommittee I know is well aware of the benefits that accrue to the Nation because of our waterways system. We simply urge caution in proceeding with changes that will adversely affect the region's tenuous agricultural base and send the wrong message to the Nation and to our competitors. A message, a disinvestment message could lead to loss of markets and U.S. jobs.
    Thank you for the opportunity, Mr. Chairman.
    Mr. BOEHLERT. Thank you very much, Mr. Brescia.
    As you and I will acknowledge, this subcommittee has been very responsive to the needs. It is those other guys that don't get the message sometimes.
    We have 6 minutes and 20 seconds before we can go vote. So rather than have you start, Mr. Lucas, and have you pause midway, I am just sort of jockeying for time. I was hoping that Mr. Sherwood would be back in time to continue and I could go vote, but it looks like he is not going to make it in time. So why don't we just pause in our deliberations, and I will get back as soon as I can, or if someone gets back before me they can resume the hearing. It is one of the crazy ways Congress works, but it is the system.
 Page 45       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    Mr. HORN. Can we ask a few questions at this point? I am going to stay till five of.
    Mr. BOEHLERT. We have got 42 seconds, and we haven't heard the rest of the testimony from Mr. Lucas or Mr. Searchinger. Do you want to ask a question?
    Mr. HORN. Well, I think most of you were here when I asked Panel I about the use of customs fees and that the needs are clear in terms of military ports that can move rapidly and agilely. In your case, to what extent do we know the needs along the international waterways?
    You had a very good exhibit as I walked in in terms of some of the locks that need expansion in an environmentally sound way, and I just wonder where you think the money might best come from, either in a national pool or in one that is all around the waterways with the fuel tax and getting that dedicated. Is there anything else that we already do that we just have to focus it a little? What can you tell me on the proportion of the fuel tax that would meet the needs in that area?
    Mr. WHITLOCK. Congressman Horn, let me respond to that.
    My testimony contains the projects that are authorized for construction. They are prioritized for funding purposes. There is surplus in the Inland Waterways Trust Fund. The current funding level for the past 5 years has averaged about $150 million. The Trust Fund currently has a balance of about $370 million. We are inputting into the Trust Fund this year nearly 120, counting the receipts and the interest on the money that is surplus, and we really need to be appropriating somewhere in the range of about $300 million a year. We need to double the budget authority in order to advance the projects that are currently authorized.
    Mr. BOEHLERT. Dr. Horn, we have 3 minutes and 30 seconds, so we will have to recess.
    Mr. HORN. Fine.
 Page 46       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    Mr. BOEHLERT. We will be back as soon as possible.
    [Recess.]
    Mr. SHERWOOD. [Presiding.] With your indulgence, we will continue the hearing.
    Mr. Stephen Lucas from the National Grain and Feed Association, welcome.
    Mr. LUCAS. Thank you, Mr. Chairman.
    I am Steve Lucas. I am Vice President of Export Operations for Louis Dreyfus Corporation in Wilton, Connecticut, and Chairman of the National Grain and Feed Association's Waterborne Commerce Committee, as well as a former member of the Inland Waterways Users Board.
    The National Grain and Feed Association, as you know, is a trade association of over 1,000 grain feed and processing and grain-related companies that comprise over 5,000 facilities in the United States that handle more than two-thirds of all of the U.S. grains and oil seeds. We include all sectors of the ag industry and also include 35 State and regional associations and two international affiliated associations.
    In addition to my written testimony, Mr. Chairman, I want to talk just a moment about the importance of the inland waterways to agriculture. We have heard some earlier allusions to that. Thirty-one percent of all of the wheat exported in this country, approximately a billion bushels, moves by water; 58 percent of the corn, almost a total of 2 billion bushels, moves by water; 66 percent of all the soybeans exported from this country move by water; over half of the total exported grains from this country move by water. And in particular, the Upper Mississippi and Illinois River carry 54 percent of those totals of corn and 40 percent of the total soybean exports.
    The Upper Mississippi and Illinois River system are vital to America's agriculture, and they are vital to more States than just Illinois and Missouri. They are vital to the agriculture as far west as Kansas, as far east as Ohio, as far north as Minnesota and as far south as Louisiana.
 Page 47       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    On the verge of the 21st century, Mr. Chairman, we have to remain competitive in American agriculture. We have to maintain our competitive edge in transportation and handling and marketing.
    Our price advantages in the world market are not in production. There was a study a few years ago at Purdue University that showed that the U.S. is not the least-cost agricultural producer in the world. In fact, we are a higher cost. But our net advantage comes from our efficiencies in transportation and marketing.
    And where do those come from? Those come from systems like the inland waterway transportation system. Other Nations know this, too. Mr. Whitlock alluded to it today at the user board meeting. Places like Argentina, Brazil, Chile, Paraguay are all looking to modernize their river systems on the U.S. model.
    But where are we in the U.S.? On the upper Miss and the Illinois River system, the newest lock was built in the Kennedy Administration. I was in high school then. The oldest lock in that system was built in the Hoover Administration. That gives you some idea of the historical perspective we are working with there. These are small, antiquated locks handling huge volumes of grain and other commodities.
    Because they are small, the lockage times are increased more than double that you would expect for making two lockages. There is always time lost, and that has direct environmental impacts in terms of more fuel usage, more chance of bad things happening as tows lock back and forth, through, and that is not a state of efficiency that we can hardly tolerate anymore in this competitive world.
    But how do we go about increasing that efficiency? Number one, we need to enlarge the locks. Great idea. And the Corps of Engineers is conducting a survey of the area to determine the best options for that. That is a great idea. We say, let us increase those lock sizes. We will be more efficient.
 Page 48       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    How do we do that? We have got to fund it. We have got to pay for it. There is a quick and easy way to pay for some of it, and that is to take the 4.3 cents that is now used for deficit reduction in fuel taxes and put them into the Inland Waterways Trust Fund. That is quick and easy. It is not a huge amount of money, but it is some.
    What else do we do? We use the money that is in the Trust Fund. The Trust Fund balance at the end of this year will be approximately $375 million. That is $375 million that taxpayers in the United States have paid into a Trust Fund, and I might say, harkening back to the earlier panel, the same for the Harbor Maintenance Trust Fund, that people have paid in for a specific purpose for which they have received zero value to this point. That is unacceptable. We have to put those funds to work for the purpose that they were intended.
    We also need to return the Inland Waterways Board to its position as a full partner in the process of determining the priorities for the inland waterway system. In 1986, the Board was established as the trade-off for the fuel tax, and the idea was that if the industry was going to pay the tax and pay for these projects the users of the system needed a say in how those dollars were spent. Ultimately, obviously, that authority rests with Congress, and we were willing to take that gamble, but the User Board would recommend to the Congress and the Congress would heed those recommendations as best they could.
    However, in the past few years, spending from the Trust Fund has declined; and, in fact, the Inland Waterways Users Board went a year without a quorum because vacancies were not filled. And what happens then? No report is issued to Congress about the Board's recommendations in a timely fashion. That is unacceptable to the people who have put in at the end of this year $375 million that is not being used. It is unacceptable for it not to be used, and it is unacceptable not to have a say. So we need to bring that Board back into the full partnership.
    Also, we need to keep the funding system to its original intent, where the users would pay 50 percent and the Federal Government would pay 50 percent. There is talk of taking the Trust Fund off budget. Unless you have that deal already made in legislation, it amounts to the same thing as a 100 percent increase in taxes to the users of the waterway system, and, again, that would be unacceptable.
 Page 49       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    I appreciate your time. I would take any comments you might have.
    Mr. SHERWOOD. Thank you very much, Mr. Lucas.
    I think that I will be the sole commenter right now.
    Give me a little thumbnail sketch. You said that we need to improve our locks and that they are 600 foot and they need to be 1,200. Give us an order of magnitude. How would that project happen? In other words, you would start downstream and work upstream? How many do you have to do? This is quite a deal.
    Mr. LUCAS. It is an extremely large process, especially up on the Upper Miss where you have a series of locks. You have to be very careful about which ones you do first, because, if you are not, all you do is transfer the congestion and problems from the one above to the one below, and in fact, we have seen that happen on the Illinois or the Ohio River with those projects.
    You are correct. You would probably start downstream first. It is a terribly long process. There are concerns about how you do that and still maintain traffic at its present levels while you are doing that. There are a lot of technical considerations, but the Corps of Engineers, I have to say, I have every confidence in, can solve those technical problems if the funding is there.
    Mr. SHERWOOD. Thank you very much.
    Mr. Searchinger from the Environmental Defense Fund.
    Mr. SEARCHINGER. Thank you, Mr. Chairman.
    I am Tim Searchinger, Senior Attorney at the Environmental Defense Fund, and we very much appreciate the opportunity to testify here.
    I think our central message is that inland waterway navigation is quite different from the other transportation systems that you deal with here in that it is a very large net recipient of funds. It is the most heavily subsidized form of transportation in the United States, and that it has a very important, productive core, but that the funds that are now being spent and devoted to this system, too much of them go to unproductive uses, and that the real expense of that, from a fiscal standpoint, is it takes money away from other projects of the Army Corps of Engineers which crews construction account is now down to less than a billion dollars a year, despite the fact it has about $27 billion in backlog.
 Page 50       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    So let me just comment on the basic facts.
    It is true that the Inland Waterway Users Fund is in surplus. The reason it is in surplus is that it doesn't count the $493 million spent on operation and maintenance which are 100 percent funded by general Federal taxpayers, unlike virtually every other transportation system, and because even of new construction projects, for which the Trust Fund is supposed to pay about 50 percent, many of those projects are grandfathered in or otherwise exempt. And by our analysis of 300 million actually spent on new construction for inland waterway projects in 1999, only $68 million of that was actually taken from the Trust Fund.
    So, all in all, we have a system that you can divide these projects up in various way, but you are talking about something—about 7/8ths or so of the cost of inland waterway navigation are paid by the general taxpayer.
    Now, of that there is this very highly productive core. You hear these large numbers. The inland waterway system is in essence a Mississippi River and tributaries project, and 90 percent of the commerce by ton miles on the inland waterway system moves on the Mississippi River, the Ohio River, the Illinois River or the Gulf Intercoastal Waterway. That is only a small number of segments of the system. Seventeen of the 29 segments of the system carry only 2.6 percent of the traffic and yet use 30 percent of the O&M dollars, $146 million put into parts of the system that carry 2.6 percent of the traffic.
    Now, when you add new construction dollars, which again can be calculated in different ways, by our account is something like 40 or 45 percent of the total dollars of the system go into essentially segments that move about 3.5 percent. So we don't think the dollars are being used wisely.
    The issue isn't what to support, how much dollars to put into transportation, but it is where to put that funding. And we think that the funds should be primarily devoted to maintaining the existing system and reducing the cost to taxpayers so that more of the taxpayer funds can be spent on the other projects that are of importance to this committee.
 Page 51       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    Now, why is it that, in essence, the commercially successful part of the inland system is limited to those three big waterways? Well, there are a number of reasons that I think are obvious when you think about it.
    Inland navigation is efficient only if you want to go from one point on a river to another point on the river. It is good for the export market. It is good for moving coal around the Ohio and Mississippi Rivers, but it is not going to be an increasing part of the future economy. The future economy has industry located in all kinds of places, not just near the rivers. They need to be able to move products in a wide range of destinations. The inland navigation can't serve that.
    In addition, inland navigation actually is not that much cheaper than railroads. Unless you have a system of a really large river like the Ohio or the Lower Mississippi, railroads can outcompete inland navigation, and they are increasingly snagging more and more portions even of the grain export market. More grain nowadays is being moved to the West coast by rail, by unit trains and less going down the river, even for exports to the Asian market.
    It is slow. Its second largest commodity I believe is coal, mostly high sulfur coal. Obviously, if the economy moves forward, the amount of high sulfur coal is going to be used less.
    So my point here is that it is a very, very important part of one part of the economy, but it is not a growing part and it is not an efficient part for most of the segments on which you have inland waterway navigation.
    Now, what are the implications of that? One of the implications is when you are putting in your new dollars, we think you should be very suspicious of proposals for new construction. For example, the Red River was the most recent project to receive new construction authorization. It was projected by now to carry 3.7 million tons. In fact, it carries 20 to 50,000 tons, and none of those tons are any of the major products—the 10 major products which were projected to be carried on the Red River. Despite that fact, there is a study to authorize expanding Red River navigation.
 Page 52       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    Now, the White River has incredibly slow traffic. The Missouri River was projected to be up to 12 to 20 million tons by the Corps analysis. It has declined from a high of about 3.5 million tons to 1.5 million tons. So the kind of east-west rivers never reached their capacity or their projections, and they are declining. And yet their proposals are to expand these riverways, the Red River, the White River, which has probably the largest remaining important ecosystem of bottomland hardwood slumps, the largest source of waterfowl wintering in the United States.
    And, just briefly, a comment on the environmental implications of further expansion of navigation projects.
    While navigation is tremendously important where there are lot of barges, there is probably nothing worse you can do to a river than to make it navigable, and you can understand it, I think, fairly simply. Rivers meander. Rivers have shallow water. They have sand bars. They have islands. They are very unruly things, and all of that unruliness is what creates life on the river. It is those shallow waters, those multiple channels. When you make a river navigable, you have to narrow it and make it deeper, and you get rid of essentially all of those sandbars, all of those islands, all of those side channels.
    So as in the environmental community we don't mind when that sacrifice is made for something that truly produces economic benefits, but we are concerned when it is made for reasons of incorrect projections and pork barrel politics.
    And the last thing I would just say, our recommendations are as follows: First, when you are getting new construction projects, we would recommend that you look for peer review of the economics. I have mentioned these projects for which the projections have turned out to be false. I want to talk a little bit about the Upper Mississippi project.
    The Upper Mississippi project had, it was a 6-year study, and as of June of last year its principal economist had concluded that the benefits did not exceed the cost. In June of last year, the principal economist was removed from the study 3 months before the recommendation was supposed to be made on what the preferred alternative was. It was then given to a panel of economists. As far as we could tell, the panel of economists agreed.
 Page 53       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    There was a key question. The question was, as the costs on the river go up or as congestion go up, to what extent can railroads take that grain elsewhere? So, for example, a simple thing, if the costs of congestion on the Upper Mississippi go up, more Iowa grain can go to ethynyl plants or pork plants in Illinois and more Missouri grain that may now go to Illinois can go on the river at St. Louis and go down. There are lots of different alternatives.
    And the question was, how many alternatives are there? How good are those alternatives? And after the internal panels had concluded that it didn't meet cost-benefit analysis, the Corps hired an external economist, Mark Burton, who is with TVA, and he is very empathetic to the navigation industry, and he concluded that, in fact, the alternatives were better than even the internal Corps people had concluded, and his study was put on the web as of winter of last year, all of which would show that the projects did not pass cost-benefit analysis.
    And then, in July of this year, the Corps announced that in fact they had determined that the project passed cost-benefit analysis. The alternatives that had been suggested by the Corps, they didn't say do nothing, but the original studies just said some very small scale measures were cost justified, things like mooring buoys and guidewall extensions.
    So one of our recommendations is have peer review for new studies that recommend further expansion.
    A second recommendation is try to shift the resources from these underperforming sections to maintaining the high volume rivers which really do provide very important economic benefits, but, in doing so, you can free up funds that you need to spend on many of the priorities of this committee.
    And, finally, we would say try to impose additional cost sharing on new construction. It is very easy. Why do we have this kind of peer pressure, this pressure on Corps economists? If the users aren't going to pay for the cost of new construction, then they have every reason to support it, regardless of its permits.
 Page 54       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    So, again, we think there is basically a multi-hundred million dollar deficit in terms of users paying for this system, completely unlike all the other transportation systems you deal with. We think if you try to reduce that deficit you can do so without sacrificing the very important economic benefits that the system now provides.
    Thank you.
    Mr. SHERWOOD. Thank you very much, Mr. Searchinger.
    Would any of the other members of the panel care to comment on some of his thoughts? Sir.
    Mr. BRESCIA. Mr. Chairman, thank you. Yes, I would.
    I think if the committee is going to get the story on the Upper Miss initiative, the study, the analysis, what is there, what is not there, they need to bring the Corps of Engineers in here to get from them what the story is and what happens. The life according to Tim Searchinger is not necessarily the way the rest of the world views it and certainly not the way we have seen it. We have been engaged in this dialogue with the Corps of Engineers for the last 7 years in a very intimate way and trying to help bring data to the table for them to evaluate and for critiquing when we think that the data has not been evaluated or used in an appropriate fashion.
    The statements that Mr. Searchinger have made are not accurate, are misleading. We have in the Upper Mississippi Basin tremendous justification for a modernization program. That will, I presume, be released by the Corps of Engineers in an initial fashion this November, and when all of the data is out on the table, we will all have an opportunity to evaluate it.
    There is a lot of analysis that goes into this. We have never done a system study before. The Corps has never done one of this magnitude. This is a system that has justified itself and has returned to the taxpayers incredible savings on an ongoing basis and will continue to do so.
 Page 55       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    The problem is that congestion is occurring. Sixty percent of our exports are in jeopardy. These are some of the key points. You go talk to any of the major grain companies, and they will tell you that 60 to 70 percent of all the grain goes out the Mississippi River and a percentage goes out to the Pacific Northwest and that carries about 2, 3, 4 percent every year, but it always comes back to the main point and that is that that is the most cost-effective way of moving grain out, will continue to be, and the traffic projections will bear that out.
    Thank you, sir.
    Mr. SEARCHINGER. If I could say, just to clarify, I certainly agree that the other people need to take a hard look at these issues. We were really trying to suggest that you can look at the prior studies and their projections and you can find that river after river has failed to come remotely close to those projections. And so the question is—this panel obviously has wonderful staff but with a great deal to do, and it has only a limited capacity to get into the details and the merits of each of the Corps studies. So the question for us, when we thought about this, was wouldn't it be appropriate if part of the process would be to have a peer review of independent economists to actually review that and to offer their recommendations so that when this committee gets around to considering which of the many different competing projects it needs to fund with limited dollars, it has that kind of analysis as well?
    I am not asking you by any means to accept the story and the economics according to Searchinger or EDF, but we think you should have some reason for doubt based on the prior track record and look for some independent support.
    Mr. SHERWOOD. Well, this committee certainly needs to have the correct and accurate information about the economic impact of the inland waterway system, and we would very much like to get that information, and you are all free to send us your written views, backed up with as much statistics as possible.
 Page 56       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    Mr. Palmer.
    Mr. PALMER. I have been involved in lock and dam modernization issues on the Ohio River Navigation System for 18 years, and I have said many, many times we are only as good as the U.S. Army Corps of Engineers. We work very, very closely with them.
    I said earlier in my testimony, we have 275 million tons of commodities moving on the river system. It is an economic generator. It has provided a good-quality life and a lot of jobs for a lot of people in the Ohio Valley. If you didn't have that river system there to move those commodities, you wouldn't have people living there. You wouldn't have jobs there.
    It is like Australia. You have no development in the middle of the continent of Australia, and everything's around the coast. We have got a lot of people living around the coast in the United States, but the reason we have all of this tremendous growth and development in the interior part of the country is because of these rivers and the development of these rivers.
    So I would say at least in our region—and certainly in our region we have a lot of confidence in the economic evaluation of the Corps. There is a lot of peer review. I think the Corps would tell you that they do have a lot of peer review, both on economics and on engineering, and we meet with them regularly.
    I have been working with Mr. Brescia and have questioned privately evaluations, the economics, and Mr. Whitlock has been part of that. We are trying to work with the Corps to be a part of the solution to problems. We don't want to support any project that doesn't have economic merit and economic value, and it is pretty clear to us that in the Upper Mississippi River valley and in the Ohio Valley we need a first-class, world-class, as the chairman said when he started this, a world-class waterways infrastructure so that this Nation competes in the world marketplace. And to do that, we need a first-class infrastructure on the Ohio River Navigation System and we need a first-class waterway infrastructure system on the Upper Mississippi and Illinois Rivers, both of them.
 Page 57       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    Mr. PALMER. The only way we can do that is to work with environmental interests and the Corps of Engineers and all others to get at those kinds of things. Sometimes it takes a little longer than those of us who have worked in the private sector, but we are in it for the long run and I thank you for an opportunity to make that statement, Mr. Sherwood.
    Mr. SHERWOOD. After 30 years in the private sector, everything in Washington takes longer than we would like.
    Chairman Boehlert.
    Mr. BOEHLERT. Let me apologize to the panelists the way that the floor schedule was this afternoon. We have absolutely no control over that.
    This is a very important panel with very important input, and I appreciate the different perspectives provided. All of you are considered valued resources for us. I had every intention of dashing right back after the last vote until the Speaker of the House grabbed me and said, I want to talk to you about something. I said, Mr. Sherwood, the Vice Chairman is in the chair, he will take good care of that, and I talked to the Speaker.
    Let me stress to you, this is the way that the system should work. We have some disagreements and some contrary opinions, and we value all of the opinions, and it is up to us to sort of shift and weigh.
    How can you oppose peer review? Is peer review really existing? Is the Ohio River like the White and the Red river? Maybe not. So there are a lot of things that we have to take into consideration.
    Let me say to you once again, I apologize for the way that it worked out. No fault of this committee. I thank you for what you have done, and I thank you for your willingness to continue to be resources to this committee.
    Thank you very much.
 Page 58       PREV PAGE       TOP OF DOC    Segment 2 Of 2  
    Mr. SHERWOOD. And I personally am delighted to hear the environmental community talk about cost-benefit analysis. That is something that we ask them for once in awhile and don't receive.
    Without objection, the statements of Harry N. Cook of the National Waterways Conference and a statement of the American Farm Bureau Federation will be inserted into the record.
    And also, without objection, the statement of Mr. Menendez and any other subcommittee member will be made a part of the record.
    Mr. SEARCHINGER. Mr. Sherwood, I would like to assure you that on these issues, the environmental community is very strongly in favor of a market-based solution and having as many free market principles incorporated into this as possible.
    Mr. SHERWOOD. And we would like to see that analysis carried over into many of the other initiatives that we are working on every day.
    Thank you very much. I appreciate the effort. The meeting will come to a close.
    [Whereupon, at 5:35 p.m., the subcommittee was adjourned.]

    [insert here]