Issues > Water > Printer Version
Bargeload of Subsidies
Inland Waterway Operation & Maintenance
$700 million

"Reducing subsidies to water transportation should improve resource allocation by inducing shippers to choose the most efficient transportation route, rather than the most heavily subsidized one." 1997 Congressional Budget Office Report

The 11,000-mile federal inland waterway system is by far the nation's most heavily subsidized commercial freight transportation mode, according to the Congressional Budget Office (CBO). A December 2002 National Academy of Sciences report placed the barge industry's contribution far behind those of other forms of transportation, with the federal government recovering less than 8% of overall infrastructure costs while contributing nothing to the $600 million maintenance costs in 2001. In addition to the cost, the operation and maintenance of these waterways involves dredging and dumping 50 million tons of river bottom annually, destroying wetlands and aquatic habitat. This Army Corps of Engineers (Corps) program primarily benefits large barge companies and shippers, yet they pay less than eight percent of the cost, at the expense of the nation's taxpayers and the environment.

Green Scissors Proposal
Reduce federal general fund expenditures for inland waterways by 50 percent and require waterway users to pay a portion of operation and maintenance (O&M) costs for the inland waterway system. Congress should authorize funds from the Inland Waterways Trust Fund to be made available on a matching basis to pay for O&M as well as new construction and rehabilitation. A 50 percent reduction in the federal O&M subsidy would save taxpayers $700 million over five years. Inland waterway users could prioritize the spending of the remaining taxpayer funds through the existing Inland Waterway Users Board.

Current Status

In 1986, a tax on diesel fuel used for barge transportation was phased in order to cover a portion of inland waterway project construction costs. These revenues now pay for 50 percent of new construction and major renovation costs. In the 1992 Budget Reconciliation legislation, the House of Representatives passed a measure to increase diesel fuel tax for barges to cover half of O&M costs. However, the measure ultimately failed. Taxpayers continue to pay 100 percent of inland waterway O&M costs, and about 90 percent of all other inland waterways costs (including the 50 percent of construction) spending nearly $600 million dollars in 2001.
In fiscal year 2004, the administration proposes using $124 million from the existing Inland Water Trust Fund reserves (from diesel fuel taxes) to pay for deferred maintenance costs

Project Hurts Taxpayers

The highly subsidized waterway system misallocates resources and creates inefficiencies. The Corps fails to prioritize spending decisions and thus spends inordinate amounts of money on very underutilized waterway routes.

The inland waterway system is by far the nation's most heavily subsidized commercial freight transportation mode, according to the Congressional Budget Office.

A small group of wealthy barge companies, bulk commodity shippers, and merchants are the primary beneficiaries. For example, 20 companies (many among the world's largest commodity firms) own 82 percent of the barges that operate on the gulf intercoastal and extended Mississippi River system - the vast bulk of the U.S. inland waterway system.

Beneficiaries should take over the costs of the mature waterway system. Taxpayers paid to build the waterway system, let the users maintain it.

Project Hurts the Environment

Inland waterway dredging and dumping destroys wetlands, damages fish and wildlife, degrades water quality and increases stream bank and shoreline erosion. The Army Corps of Engineers dredges and dumps more than 50 million cubic yards of river bottom to construct and maintain these waterways each year.

The program threatens fish and wildlife reproduction, by regulating river flows, thus eliminating flow variations that help fish and wildlife reproduce and feed.


Contacts

• David Conrad, National Wildlife Federation, (202) 797-6697;
• Steve Ellis, Taxpayers for Common Sense, (202) 546-8500 x126.