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Marine Freight


  • [ Barrels of Oil Equivalent Saved: ]

    346M
  • [ Jobs Impact: ]

    • Low
    • Medium
    • High
  • [ Budget Impact:]

    • Low
    • Medium
    • High
  • [ Conventional Pollutants Reduced: ]

    NOx
    95,376 tons
  • [ Megatons of GHG Reduced: ]

    11

Overview

U.S. highways already suffer from traffic issues, with 23% of urban congestion resulting from trucking.1 This problem will likely worsen, as freight transportation is projected to grow 50% by 2040.2 Heavy trucks are also responsible for roughly 19% of GHG emissions3 and 17% of energy use associated with the entire transportation sector.4 Other modes of freight transportation, like marine shipping, could absorb excess truck traffic while using less fuel and how roducing less pollution. However, given that trucking receives seven times more public subsidy per ton-mile,5 marine shipping is unlikely to increase its 5% share of the freight market6 without substantial changes in federal policy.

Analysis

In addition to its ability to reduce highway congestion, the greatest benefits of marine freight transportation over trucking are energy efficiency, pollution reduction, and safety. Maritime shipping requires one-tenth of the energy needed for trucking,7 and every billion ton-miles of freight moved on waterways instead of highways reduces emissions of NOx by 2,550 tons and CO2 equivalent by 212 megatons. It also avoids an average of 2.5 fatalities and 60 injuries related to highway transportation.8

Despite the benefits that marine shipping provides, it makes up a very small portion of total freight transportation in the U.S. This is due in part to slower speeds and reduced geographic access associated with marine shipping. But low utilization of waterways for freight transport can also be attributed to a strong bias in public subsidization toward trucking and the highways that it depends upon. Fuel taxes have fallen billions of dollars short of total highway infrastructure costs in recent years, leaving taxpayers to take up the slack. These infrastructure costs, along with costs from pollution, congestion, and safety, require the American public to pick up a $127 billion tab for trucking every year.9

Marine freight gets about 3% as much public support as trucking.10 In fact, a recent government analysis determined that every billion ton-miles of freight moved by waterways instead of highways actually reduces costs to society by up to $57.5 million.11 Though trucking will always play a vital role in servicing the “last mile” of the transportation chain, the U.S. could benefit both economically and environmentally by utilizing more efficient modes like marine shipping wherever possible.

Implementation

The federal government has several planning, financing, and regulatory tools it could use to encourage freight transportation on the nation’s waterways.

Include Waterways in Freight Transportation Planning

Instead of making America’s waterways an afterthought, Congress and the Department of Transportation (DOT) should include marine options in national freight planning and research, especially in the next surface transportation authorization.12 DOT also should provide the states with a basic model for economic analysis to encourage evaluation of various modal options for meeting freight transportation needs, not simply the expansion of highways. DOT can provide additional technical assistance to state and local transportation planners to help them take advantage of economic analysis tools.13

Release Money from the Harbor Maintenance Trust Fund

To carry out needed dredging and maintenance projects, Congress should mandate that the full amount of annual receipts into the Harbor Maintenance Trust Fund (HMTF) be appropriated for these purposes each year. By appropriating far less from this account than it takes in each year from user fees, Congress has been able to offset unrelated spending elsewhere in the budget. Thanks to this accounting gimmick, the HMTF will have accumulated a balance of $8 billion, despite an immense backlog of maintenance needs at U.S. harbors.14 Releasing the full amount of revenues each year (as proposed in the bipartisan RAMP Act)15 would reduce the amount of shipments that are affected by inadequate harbor depths, help meet America’s goals for increased exports,16 and make marine transport more attractive to shippers.17

Give Ports Equal Access to Transportation Financing

Congress should adjust the Transportation Infrastructure Finance and Innovation Act (TIFIA) program, enjoyed mostly by highway projects, to make it more accessible to port operators. Lawmakers should reduce the minimum project cost for TIFIA eligibility so that lower-cost port projects can take part.18 Finally, Congress should adjust the current TIFIA statute to make investments in equipment that would improve cargo handling and enable liquefied natural gas fueling of vessels at ports eligible for this financing assistance.19

Temporarily Lift Barriers to Domestic Shipping

Congress should allow a temporary suspension of certain provisions of the Jones Act, which requires all vessels transporting goods between two ports in the U.S. to have been manufactured domestically. This law was designed in 1920 to protect the domestic ship-building industry and ensure that our military had the vessels it needed. Today, however, it can inhibit the establishment of certain domestic shipping routes. Congress should allow a foreign-built vessel, crewed by American seamen, to service these routes during a temporary Jones Act suspension, as long as the service operator commits to building a corresponding vessel in the United States. This would encourage domestic shipping routes while also bringing work to America’s struggling ship-building industry.20

Form a Partnership Between the Navy and Commercial Operators

The U.S. Navy should provide a credit subsidy to lower the cost of constructing a small fleet of commercial vessels that it would have access to when needed. Though the domestic freight shipping fleet is aging,21 building an entirely new fleet of ships is unlikely due to the large upfront cost and high cost of capital this would involve. At the same time, the Navy spends roughly $400 million each year to maintain a reserve fleet that it uses very infrequently. By subsidizing the construction of commercial vessels instead, the Navy would save millions of dollars in maintenance costs each year, while creating jobs in the ship-building industry and lowering the cost of shipping cargo on America’s waterways.22

Use Tax Incentives to Drive the Marine Shipping Market

Congress should provide a temporary tax credit to vessel operators on a ton-mile basis in order to lower the cost of marine freight shipping compared to highway shipping. This model has been used successfully at the state level, but on a very limited basis.23 A federal tax credit would allow these examples to be replicated across the country.

Endnotes
  1. David Schrank, Bill Eisele and, Tim Lomax, "2012 Urban Mobility Report," Report, Texas A&M Transportation Institute, 2012, p. 9. Accessed April 15, 2013. Available at: http://mobility.tamu.edu/ums/report/.
  2. John Porcari, Speech, Revitalizing the Maritime Industry Forum, Linthicum, MD, May 7, 2012. Accessed April 15, 2013, Video. Available at: http://www.maritime-executive.com/pages/videos.
  3. United States, Department of Transportation, “Transportation’s Role in Reducing Greenhouse Gas Emissions,” Report, pp. 2-7, April 2010. Available at: http://www.trb.org/Main/Blurbs/163439.aspx.
  4. United States, Department of Energy, Energy Efficiency and Renewable Energy, "Transportation Energy Data Book," Table 2.6, July 31, 2012. Accessed April 15, 2013. Available at: http://cta.ornl.gov/data/chapter2.shtml.
  5. United States, Government Accountability Office, "A Comparison of the Costs of Road, Rail, and Waterways Freight Shipments That Are Not Passed on to Consumers," Report, pp. 22, 32, January 2011. Accessed April 15, 2013. Available at: http://www.gao.gov/products/GAO-11-134.
  6. United States, Department of Transportation, Bureau of Transportation Statistics, "Shipment Characteristics by Mode of Transportation for the United States: Percent of Total for 2007 and 2002," Table 2.1, Commodity Flow Survey, December 2009. Accessed April 15 2013. Available at: http://www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/publications/commodity_flow_survey/final_tables_december_2009/html/table_01b.html.
  7. National Academy of Sciences, “Real Prospects for Energy Efficiency in the United States,” pp. 166-167, 2010. Accessed April 15 2013. Available at: http://www.nap.edu/catalog.php?record_id=12621.
  8. Government Accountability Office, p. 27.
  9. Government Accountability Office, pp. 4, 23, 32.
  10. lbid
  11. Analysis based on information provided by the United States Government Accountability Office and the United States Interagency Working Group on Social Cost of Carbon. See United States, Government Accountability Office, pp. 22, 23, 27; See also United States, Interagency Working Group on Social Cost of Carbon, "Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866," Report, p. 33, February 2010. Accessed April 15, 2013. Available at: www.epa.gov/oms/climate/regulations/scc-tsd.pdf.
  12. The need for a multi-modal plan to manage freight transportation was expressed by a diverse group of stakeholders in a May 23, 2012 letter to conferees on the surface transportation authorization bill. See Kevin M. Burke, Fred Abousleman, Kurt J. Nagle, et. al. "Surface Transportation Reauthorization Platform," Letter to House and Senate Conferees on Surface Transportation Authorization, May 23, 2012, Freight Stakeholders Coalition. Accessed April 15, 2013. Available at: http://www.uschamber.com/issues/letters/2012/freight-stakeholders-coalition-letter-house-and-senate-transportation-bill-confe. The bill passed by Congress in July of 2012 (MAP-21) did call for a study of freight congestion in the U.S. with the expectation that the most congested areas of the country would receive targeted funding for improvement. But the scope of that study is limited to congestion on 27,000 miles of highway, and makes very limited provisions for congestion to be resolved through better utilization of alternatives to roads, like rail and shipping.
  13. Most state DOTs have a disproportionate level of focus on and expertise in highway construction and maintenance in comparison to freight alternatives. See United States, Department of Transportation, Federal Highway Administration, "Analysis of Statewide Transportation Plans," Report, Multi-Modal Planning Section, December 3, 2005. Accessed April 15, 2013. Available at: http://www.fhwa.dot.gov/planning/processes/statewide/practices/anaswplans.cfm. Existing programs through the federal government and non-profit organizations have been successful in providing regional and state planners with the tools they need to make better use of alternatives to trucking, thereby reducing congestion on highways. See United States, Department of Transportation, Maritime Administration, "America’s Marine Highway," Report, pp. 49-51, April 2011. Accessed April 15, 2013. Available at:http://www.marad.dot.gov/documents/MARAD_AMH_Report_to_Congress.pdf.
  14. “Sens. Brown, Portman Call on Obama Administration to Tap Harbor Maintenance Trust Fund to Immediately Begin Repairs on Ohio’s Lake Erie Harbors,” Press Release, The Office of Senator Sherrod Brown. Accessed April 15, 2013. Available at: http://www.brown.senate.gov/newsroom/press/release/sens-brown-portman-call-on-obama-administration-to-tap-harbor-maintenance-trust-fund-to-immediately-begin-repairs-on-ohios-lake-erie-harbors.
  15. United States, Congress, House of Representatives, "H.R.104 : RAMP Act," 112th Congress, 1st Session, January 5, 2011. Accessed April 15, 2013. Available at: http://thomas.loc.gov/cgi-bin/query/z?c112:H.R.104:.
  16. W. James McNerney, Jr., "Transportation Infrastructure," March 11, 2011. The President's Export Council. Accessed April 15, 2013. Available at: http://trade.gov/pec/.
  17. The Harbor Maintenance Trust Fund is supplied by a tax on the value of imports and domestic cargo that moves through U.S. ports. In 2007, it collected $1.4 billion. See United States, Government Accountability Office, "Federal User Fees," Report, p. 26, February 2008. Accessed April 15, 2013. Available at: www.gao.gov/new.items/d08321.pdf). The fund is used for maintenance activities like dredging. Congress releases far less from the trust fund than it collects each year, using the unspent funds as an offset for unrelated spending, and consequently creating an $8 billion accumulation of funds. Meanwhile, the U.S. Army Corps of Engineers has said that nearly 30% of commercial vessel calls at U.S. ports are affected by inadequate channel depths. See Mike Leone, "U.S. Port Crisis," Op-Ed, The Maritime Executive, March 23, 2010. Accessed April 15, 2013. Available at: http://www.maritime-executive.com/article/us-port-crisis/. The full area of port channels is available only a third of the time. See United States, Congressional Research Service, "Harbor Maintenance Trust Fund Expenditures," Report, p. 1, January 10, 2011. Accessed April 15, 2013. Available at: www.fas.org/sgp/crs/misc/R41042.pdf. A bipartisan coalition in the House of Representatives unsuccessfully attempted to include a full-spend mandate in the surface transportation bill which passed that chamber in July of 2012. Future appropriations bills will provide more promising opportunities for increasing the amount of funds released from the Trust Fund. See Paul Quinlan, "It's now up to appropriators, administration to better fund harbor maintenance ¬¬— Levin," Environment and Energy News, July 11, 2012. Accessed April 15, 2013. Available at: http://www.eenews.net/EEDaily/2012/07/11/12. However, unless additional funds are appropriated for the Army Corps of Engineers, requiring additional expenditures from the Trust Fund could very well result in reduced appropriations for other waterways maintenance activities.
  18. TIFIA funds are used to provide discounted financing for surface transportation projects that have national or regional significance. To qualify for TIFIA financing, a project must have a total cost of at least $50 million ($25 million for a rural project), which excludes the majority of improvement projects needed by ports. An investment of $25 million appropriated through TIFIA could leverage up to $750 million for port improvement projects. See United States, Department of Transportation, Federal Highway Administration, "TIFIA,” Accessed April 15, 2013. Available at: http://www.fhwa.dot.gov/ipd/tifia/.
  19. Large cargo vessels fueled by liquefied natural gas (LNG) are rare in the United States, though one U.S. operator recently ordered two new LNG-fueled ships and committed to retrofitting two others to run on LNG. Other operators are considering a shift toward LNG, both to take advantage of lower natural gas prices and as a means of complying with new pollution standards affecting shipping vessels. In addition to financing assistance, a certain amount of regulatory groundwork will have to be laid before LNG distribution and fueling can become more widespread. See Interview with Paul H. Bea, Jr. of PHB Public Affairs; See also “World’s First and Largest LNG-Powered Containerships To Serve Puerto Rico For TOTE, Inc.,” Press Release, Totem Ocean Trailer Express, Inc., December 4, 2012. Accessed April 15, 2013. Available at: http://www.totemocean.com/press-releases/2012/12/04/world%E2%80%99s-first-and-largest-lng-powered-containerships-serve-puerto-rico-0.
  20. Congress passed the Jones Act in 1920, requiring that any ship carrying cargo from one U.S. port to another be constructed and registered in the U.S. and crewed by Americans. Its purpose was to ensure that the U.S. would always have shipbuilding and merchant marine capacity to meet defense and commercial needs. Many claim that the higher cost of ship-building in the U.S. compared to other countries has inhibited growth of domestic marine shipping, as these fixed costs for vessels must be incorporated into the prices that cargo owners are charged to ship their freight. However, legislation could be passed to allow vessels that are registered (or “flagged”) outside of the U.S. and crewed by American seamen to carry domestic freight for a limited period of time, but require that these vessel owners commit to building one ship in the U.S. for every one ship that they are allowed to operate under a Jones Act suspension. The suspension for each ship should last no more than five years, which would provide sufficient time for construction of the additional ship in the U.S. The suspension program should sunset in its entirety after a period of time not to exceed ten years. Legislation could specify penalties for shippers who take advantage of a Jones Act suspension but fail to construct a ship in the United States, such as a monetary fine or loss of port privileges.
  21. July 13, 2012 Interview with Jonathan Kaskin, United States Navy Logistics Office: Ships age at 50 years. Much of our existing fleet was built before 1972.
  22. The Navy is required to maintain a reserve fleet of ships for defense purposes. A National Security directive required the use of commercial vessels whenever possible for the reserve fleet. The alternative would be “organic acquisition”, requiring the Navy to pay for the full cost of construction and maintenance of a fleet of reserve ships, a tremendous expense. The Navy currently spends roughly $400 million each year to maintain the reserve fleet. Maintenance and construction costs could be greatly reduced if the Navy created a program that provided assistance to commercial vessel owners to build new ships that the Navy could call upon when necessary (usually less frequently than once each decade). Vessel owners would have to agree to build vessels to navy specifications, many of which would increase energy efficiency and lower the cost of marine freight shipping. If the Navy supplied a credit subsidy to vessel owners, financing costs could be reduced. Building 10 ships in this fashion would cost the Navy $737 million upfront, but would save them $1.5 billion over 20 years. See interview with Jonathan Kaskin; See also Paul Bea Jr., “What’s Taking So Long?” Blog Post, Sustainable Shipping, February 2, 2012. Accessed April 15, 2013. Available at: http://www.sustainableshipping.com/forum/blogs/15/110341/Paul-H-Bea-Jr/What-s-taking-so-long.
  23. Philip Newswanger, "Not everyone eligible for port tax credits," Inside Business, February 18, 2011. Accessed April 15, 2013. Available at: http://insidebiz.com/news/not-everyone-eligible-port-tax-credits.