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Wednesday, January 19, 2011

Can Marine Highways Deliver?

John Frittelli
Specialist in Transportation Policy

Policymakers have been discussing the potential for shifting some freight traffic from roads to river and coastal waterways as a means of mitigating highway congestion. While waterways carry substantial amounts of bulk commodities (e.g., grain and coal), seldom are they used to transport containerized cargo (typically finished goods and manufactured parts) between points within the contiguous United States. Trucks, which carry most of this cargo, and railroads, which carry some of it in combination with trucks, offer much faster transit. Yet, at a time when many urban highways are congested, a parallel river or coastal waterway may be little used.

With passage of the Energy Independence and Security Act of 2007 (P.L. 110-140) and the National Defense Authorization Act for FY2010 (P.L. 111-84), Congress moved this idea forward by requiring the Department of Transportation (DOT) to identify waterways that could potentially serve as “marine highways” and providing grant funding for their development. DOT has selected several marine highways for grant funding totaling about $80 million. To be eligible, a marine highway must be an alternative to a congested highway or railroad and be financially viable in a reasonable time frame.

The prevailing perception is that coastal and river navigation is too slow to attract shippers that utilize trucks and that the additional cargo handling costs at ports negate any potential savings from using waterborne transport. While there are other significant obstacles as well, under highly specific circumstances, marine highways might attract truck freight. Freight corridors characterized by an imbalance in the directional flow of container equipment; shippers with low value, heavy cargoes, and waterside production facilities; and connections with coastal hub ports over medium distances may be suitable for container-on-barge (COB) or coastal shipping services. It also appears that marine highways are more suitable to international rather than domestic shippers because the former have lower service expectations.

A review of the successes and failures of the few marine highway services currently operating in the contiguous United States, as well as those that have failed in the past, indicates that the potential market is limited. In many instances, marine highways have succeeded in capturing only a negligible share of container shipments along a given route. One can question, therefore, whether marine highways will divert enough trucks to provide public benefits commensurate with their costs. Congress may also consider repealing a port use charge, the harbor maintenance tax, for containerized domestic shipments as a means of spurring marine highway development. Repealing the tax raises equity issues because waterway users already benefit from reduced federal user charges compared to trucks, and their other competitor, the railroads, are largely selffinanced. The Jones Act is arguably another potential statutory hindrance to marine highway development, particularly coastal highways. This act requires that all domestic shipping be carried in U.S. built ships. Critics claim the act raises the cost of domestic shipping to such a degree that it cannot compete with truck and rail.

Date of Report: January 14, 2011
Number of Pages: 15
Order Number: R41590
Price: $29.95

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