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Thoughts on Transportation BCA - Linking Water and Roads Bruce Lambert.

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1 Thoughts on Transportation BCA - Linking Water and Roads Bruce Lambert

2 Good morning…

3 Why examine linkages across modes?  More State DOT’s have a navigation role  All states have other waterway resource considerations  General concerns over future of transportation activities and infrastructure demands  Will a national dialogue on all public investment in infrastructure emerge?

4 How Can One Look At Freight?  Inventory Functions – physical characteristics, numbers of facilities, labor, equipment  Engineering – structural integrity, deterioration  Operational Reliability – delay, closures  Economical and Financial – Cost/Benefit Analysis, capital and financial resources  Traffic volumes and flows  Safety and Security  Sharing resources with non-freight users and goals

5

6 Does Modes/Markets Matter? (Southeastern Average, 2007 tonnage)

7 Share of State Exports through a Port, 2011

8 Share of State GDP Exported through a Port, 2011

9 “Hinterlands Matter”

10 How is Navigation a Part of Freight System?  Balance with existing international/ coastal flows  Emissions and Environmental accountability  Determine ways to encourage private sector investment in equipment, services  Recognize regulatory obstacles  Federal and State Multiagency planning, data, analysis

11 Maritime Needs

12 U.S. Public Port Projected Capital Expenditures by Expenditure Category for (AAPA and Marad)

13 Projected National Truck Flow Changes with Collapse of Bridge at Webbers Falls. s

14 We all recognize…  Need better data and analytical tools  Need more guidance/support on non-traditional analysis  Need to help others see the big picture

15 Summary Need to consider Maritime System as part of a national system Maritime assets support commerce and exports

16 What Does the Corps Do?

17 Federal Role in U.S. Waterway Transport  1824 – authority to clear snags and make improvements  Canal building era to mid-1800s (states)  Post Civil War – suction dredging, jetties  1885: 1 st of 46 locks and dams on Ohio  1930s: Present system of locks constructed on Upper Miss, Illinois, Tennessee, other waterways  1950s: Construction starts on present-day higher lift locks on Ohio  1960s-70s: Navigation improvements to Columbia-Snake, Arkansas River  1985: Tenn-Tom Waterway completed  1994 – Present: Upper Mississippi River & Illinois Waterway Navigation Study National Development Context 1824 – 1936: Nation Building Era of primarily Single Purpose Navigation Projects 1936 – 1986: Era of Economic Efficiency focusing on Multi-Purpose Projects 1969 – 1986: Era of Environmental Enlightenment, focusing on Multi-Objective Planning 1986 – Present: Beneficiary Pays Era, evolving towards Integrated Water Resources Management

18 U.S. Army Corps of Engineers Activities – Water Resource Missions  Primary  Navigation  Flood Control & Shore Protection  Ecosystem Restoration  Disaster Response & Recovery  Allied Purposes  Hydropower  Environmental Stewardship  Water Supply  Recreation  Regulatory Programs

19 Maritime Infrastructure Conditions and Concerns  25,000 miles of waterway and harbor channels handle 2.4 billion tons of cargo vital to economy  Half of locks exceed 50-year design life and lock maintenance downtime has doubled  Maintenance backlog continues to increase  Single year appropriations  Harbor improvements are needed to handle new larger vessels  Lock Construction Projects underway continue to be delayed by funding shortfalls

20 Role of Dredging in U.S.  40,000 km of Waterways  400 Major Ports -130 of 150 Largest Cities  Dredged Material Placement  Inland waters and Confined Disposal Facilities M m3  Ocean waters - 50 M m3  Types of Dredging  CAPITAL DREDGING  MAINTENANCE DREDGING  CLEAN UP DREDGING

21 Six Step Planning Process for Dredging (Construction)  Step 1Problem Perception  local community  Step 2Requires for Federal Action  local community with Corps  Step 3Study Problem and Report Preparation  local community, Corps and Congressional request for Reconnaissance report  Step 4Report Review and Approval  Corps District, other Federal Agencies  Step 5Congressional Authorization  Corps Headquarters and Congress  Step 6Project Implementation  President, Corps HQ and Congress, Local sponsor, WRDA

22 Dredging Program in U.S. Navigation Channels  When a project completed, federal interest remains into future  How financed? Cost sharing is critical  Prior to 1986:  Federal dredging was funded from general revenues  No Cost Sharing  After 1986  Local sponsors to partially fund some of the project  a sign of commitment  spread federal dollars across multiple projects.

23 Summary Corps has long work history in maritime Clear planning and policy guidance Navigation is one, but largest, focus

24 How does the Corps plan for navigation projects?

25 Challenges – Deep Sea Navigation and Inland Waterways  All navigable waters in U.S. are responsibility of U.S. Government  Once a navigation project is deemed to be a federal responsibility, that responsibility remains with the federal government in perpetuity  Excludes private terminals or channels  Increased demands for deeper and/or wider channels  Dredge management and disposal options  25,000 Miles of Waterways  400 Major Ports  $900M Annual Dredging Program

26 Capital Improvements

27 Cost Justification Required For Projects  Benefit-Cost Analysis  Without Project costs and benefits  With Project costs and benefits  Life Cycle Analysis  50 years into the future  Implies forecasting  Risk and Uncertainty

28 Figure Flow Chart of Deep Draft - Navigation Benefit Evaluation Procedures Source: Principles and Guidelines

29 What is a Navigation Project?  Channel Cut Schematic  Multiuse project evaluation becoming more common Cut-B MC AR Cut-D Cut-C Cut-A UTE MTE MTW UTW PS LTE LTW

30 Transportation Benefits Reductions In Transportation Costs  Origin to Destination  Waterborne Transport  Landside Transport  Other ?  Cargo Handling, Port or Terminal Throughput, etc.  Examples for Reduction in Transportation Costs for Waterborne Transport or Vessel Operations:  Increased Waterway Depth  Increased Loading for a Given Vessel  Increased Vessel Size  Reduction Delay for Tidal Windows  Combination Thereof  Lower unit costs for transportation or delivery…..

31 Basic Transportation Benefit - Cost Analysis; General Data Requirements  Vessel or Fleet Physical Characteristics  Vessel Cargo Traffic & Transit Information  Waterway System Physical Specifications & Costs

32 Data Requirements - Vessel or Fleet Physical Characteristics  a.) Vessel Type and Mode of Service (Bulk Carrier; Tanker, etc..)  b.) Deadweight (DWT)\GRT\NRT Class  c.) Dimensions (LOA, LBP, Breadth, Max. SLLD, Speed, etc.)  d.) Relative Capacities (Volumetric vs. Weight, Immersion etc.)  e.) Parameters for Management & Operation (Costs, Logistics & scheduling, Underkeel Clearance, etc.)

33 Data Requirements - Vessel Cargo & Transit Information a.) Type & Mode of Cargo Transport b.) Port & Facility\Terminal(s) Served c.) Vessel Cargo Onload\Discharge (Tonnage, TEUs, etc.) d.) Origin-Destination\Itinerary, Waterborne Transit Distances & Time at Sea or In-Transit; Time In-Port e.) Parameters for Management & Operation (Costs, Logistics & Scheduling, Underkeel Clearance, etc.)

34 Data File Development for U.S. Naval Vessels  Vessel Draft Clearance Requirements  Physical Stationing  General Operating Characteristics (?)  In cooperation with  U.S. NSWC Command  U.S. NAVSEA Carderoc  U.S. NAFAC  U.S. Naval Academy (USNA)

35 Data Requirements - Waterway System Specifications & Costs  Estimated Costs of O&M Over Time  Periodic vs. Average Annual Equivalent (AAEQ)  Incrementally Evaluated According to  Navigation Feature, Reach or Channel Segment,  Depth (horizontal and vertical dimensions of plan formulation)

36 Deep-Draft Work Initiatives Under Navigation Analysis (OTN & NETS)  Vessel Load Factor Analysis\Variable Immersion  Vessel Powering Analysis (Speed and Hydraulic Confinement)  Container\Carriage Cost Analysis  Automated Worldwide Distance Tables  Vessel Fleet & Characteristic Forecasts over corresponding time periods

37 One Framework for Waterborne Navigation O&M Assessment Vessel Fleet Physical Characteristics Vessel & Cargo Transit Information Waterway System Specifications & Costs Vessel Characteristic Data Sources Lloyd’s Register & Clarkson’s Register U.S. Coast Guard & U.S. MARAD USACE NDC Vessel Owner-Operators Vessel Characteristic Data Sources Lloyd’s Register & Clarkson’s Register U.S. Coast Guard & U.S. MARAD USACE NDC Vessel Owner-Operators Vessel Transit Cargo Data Sources USACE NDC U.S. Customs & Bureau of Census Lloyd’s Sea Searcher & Sea Web Trade-Published Shipcards\Schedules Vessel Owner-Operators Port\Terminal Operators Vessel Transit Cargo Data Sources USACE NDC U.S. Customs & Bureau of Census Lloyd’s Sea Searcher & Sea Web Trade-Published Shipcards\Schedules Vessel Owner-Operators Port\Terminal Operators Water System Specifications & Costs USACE – HQUSACE & Districts U.S Coast Guard (ATON) Waterway Users & Non-Federal Sponsors Water System Specifications & Costs USACE – HQUSACE & Districts U.S Coast Guard (ATON) Waterway Users & Non-Federal Sponsors Transportation Cost Differentials Vessel Operational Characteristics by Port; Relative to Cargo Service and Itinerary Served; Subject to (Varying) Waterway Specifications or Limitations (Depths, etc.) Transportation Cost Differentials Vessel Operational Characteristics by Port; Relative to Cargo Service and Itinerary Served; Subject to (Varying) Waterway Specifications or Limitations (Depths, etc.) Comparison of Benefits to Costs (B\C ratios; Incrementalized) Comparison of Benefits to Costs (B\C ratios; Incrementalized)

38 Deep Draft Navigation Analysis – NED Steps in With Statements  Cost reduction benefits – same commodities, mode, O/D efficiencies.  Shift of mode benefits for commodities and O/D  Shift in O/D benefits from new O/D or transportation flows  New movement benefits - additional movements in a commodity or there are new commodities  Induced movement benefits – new flows from lower costs

39 Which would you choose?

40 Constrained Containership Calls by Coastal Region with and without Planned Corps Projects: Year 2000 and constrained calls (thousands) Atlantic CoastPacific CoastGulf CoastGreat Lakes Year 2000 Year 2020 with planned projects Year 2020 without planned projects Source: National Dredging Needs Study, USACE

41 Asset Management

42 Asset Management Process at USACE  Districts determine projects based on HQ criteria, mostly Remaining Benefit/Cost Ratios  Information supplied to HQ and sorted into various groups based on B/C and other factors  Determinations based on actual budgets for upcoming year

43 Asset Management Initiative “Short list” 1000 Coastal Structures 600 Dams 2500 Recreational Areas 250 Locks 75 Hydropower Tracts of land Buildings 7 Laboratories VALUE: $200 BILLION+ Lifecycle Infrastructure Management: Campaign Goal 3c- The Right Business Practices Executive order Right-sizing inventory It's the RIGHT thing to do! CORPS OWNS IT CORPS MANAGES IT

44 Project Economic Analysis  General Context of Economic Benefits vs. Economic Costs  Life-Cycle Evaluation  Costs  Relative to Requirements for:  Initial Placement or Construction  Operations & Maintenance  Benefits  Reductions in Transportation Costs  (Transportation\Cargo Handling Efficiencies)

45 Life-Cycle Evaluation – Current Corps Guidance on Navigation Projects  Typical Requirements for Study & Analysis of New or Proposed Improvements  50 Years into the Future (Involves Forecasting or Extrapolation of Trends)  Constant Price Levels Relative to a Designated Base Year or Period (i.e., Future Valuations Discounted)

46 The Corps is Examining Performance Measures for O&M Budgeting  Previous work on engineering based measures developed and initially deployed  Developing new measures use and economic measures to balance issues of scale, geography, and use  Seeking comparability with other USACE business lines:  Flood Damage Reduction  Hydropower  Environmental Stewardship (Natural Resources)  Recreation

47 Does it Matter? Navigation Delays Result in Costs to Great Lakes Region

48 Asset Management Needs to be Formulated Based on Direct Questions  Can USACE develop a practical & consistent method of answering longstanding question(s) from the Office of Management & Budget (OMB):  If USACE were given some specified level of marginal or extra funding could the agency determine which projects would be most appropriate for funding to maximize marginal benefits……….(or alternatively, if the agency were to undergo a reduction in funding could it determine where to impose corresponding reductions in funding to minimize negative impact or “loss” of benefits)……….  Could USACE determine what level of maintenance for each project across the navigation program would be applicable to maximize total benefits program-wide………

49 What are the Key Accountability Elements? Assuming request from OMB is feasible:  Could supporting methods or systems be developed that are:  Analytically Credible  Cost Effective & Expeditious (to both develop & maintain)  Quantitatively Transparent & Consistent Across Program at the National Level  Reasonably Comparable to Efforts Conducted by Skilled Analysts in the Field and;  Could methods of optimization be ultimately applied to  Initial Placement or Construction  Operations & Maintenance (O&M)

50 Highway Asset Management  Focus – strategic assessment of economic tradeoffs between alternative infrastructure investments  Recognizing:  Increased demand on system  “Mature” network of roads and bridges  Increased competition for funding and support  Non-traditional players in decision process  More focus on maintenance and meeting user expectations

51 Evolution in Highway Asset Management  Began with engineering criteria  Structures were gauged on risk of structural “failure” or condition  Decision makers were not financially constrained to make tough “economic” trade-off analysis  In 60’s/70s, began linking economic concepts to “optimize” roadway investment  Most Asset Management models developed from legacy systems

52 Limitations on Applying HERS type methodology  Induced Demand in the original design, but no post plan review  Background traffic concept different  Stronger seasonality changing peak/off peak design considerations  Waterway studies are justified on travel savings  Network effects stronger  No functional class structure in U.S. databases  Waterways more prone to discrete changes  No national forecasts of water activities  Differences of links (highways) vs. Nodes (waterways)

53 A Quick Comparison Corps DOT’s  Study is requested  Network effects are more important  Corps does not routinely study regional issues  Planning has more project elements than in traditional highway studies  Robust Data and Models to capture universe, share among Corps divisions/districts  With a focus on engineering economics, maintain project level information  Limited by Federal Guidance (P&G)  Statewide plan is done to identify needs, not in response to study  Less network effects  Projects are planned and programmed in separate processes  Little data sharing across regions

54 Summary Corps does not routinely study regional issues but rivers or ports Will do single project evaluation for new projects, but broader studies for O&M Can share Data and Models

55 How do we think about freight while inside the box?

56 Some Cross or Corridor Modal Studies Externalities Are Discussed  Black Warrior Tenn-Tom Waterway System  Minnesota Bridge Collapse  Business Realignment Estimates - FHWA  (NCHRP) Report 586: Rail Freight Solutions to Roadway Congestion  Lock and Dam Closures  Chickamauga Locks  Emsworth, Dashields, and Montgomery  Marine Highway Program

57 M-5 M-95 M-10 M-90 M-70 M-55 M-5 (AK) M-71/77 M-65 M-40 M-49 M-87 M-64 M-A1 M-75 M-84 M-580 Potential Marine Highway Services M-2 LEGEND MH Corridor MH Connector MH Crossing U.S. Interstate M-55 M-70 M-95 M-5 M-90 M-90

58 Challenges Facing Domestic Waterway Development  No clear political voice - ownership  “Invisible part” of system  Maintenance not properly developed or conducted  Geography of decision maker differs  Tie to economic growth not understood

59 Challenges Facing Port Development  Ports are land development agencies  City-Port challenges  More considerations for navigation planning  Balancing system operations  Financing challenges

60 How do we move from data into analysis while providing useful information? Can we rely upon old approaches to answer new questions?…

61 Multiport and Multimodal Analysis Must Understand and Account For:  The relationship between Ports  The relationship of hinterlands to Port Activities  The tradeoff between modes that service Port regions  Challenge?  Corps Navigation programs becoming increasingly intermodal or have intermodal implications  Infrastructure related to freight mobility and economic recognized in current policy discussions (SAEFTEA)  Corps has little data on other modes or corridor traffic.

62 Some Considerations in Developing a Multiport Model  What metrics are consistent with other measures used elsewhere?  Can we provide a balanced, accurate picture?  Can data be collected consistently over time?  Will the selection of performance measures affect the outcome?  What combinations of inputs are important to decision making?  Can the report be well understood, explainable and defensible?

63 Implementation Challenges?  Projects have multiple uses  No framework to determine and track user expectations  Competing and changing commercial interests  Determining or guaranteeing a minimum standards  Planning and defining current and future needs  Data integration – GIS and data warehousing  Can process transparency be developed?  Education  No long term strategic view of transportation needs  Public-Private Partnerships?

64 Every agency operates under specific guidance  FHWA – DOT: Map-21  Section 1117 and Section 1118  Corps: WRDA, P&G  States: Federal and State law

65 Corps Economic Analysis Criticized  Too Rigid, not flexible to account for other project elements  National and no local effects  Hard to compare projects on a BC ratio as study objectives, and staff skill, can influence results

66 Some thoughts to broadly improve Transportation BC Approaches  A clear federal standard for qualified benefits that focuses exclusively on all efficiency gains, including externalities, and which carefully excludes economic outcomes that simply reflect transfers of economic well-being;  A set of analytical methods that are not restricted to transportation activities, but which capture the whole of the supply chain benefits and costs that are attributable to transportation infrastructure improvements;  The development of analytical techniques that clearly recognize that capacity deficiencies can actually choke off activity by causing system patrons to abandon planned trips or shipments they would, otherwise undertake;  The reconciliation of long-standing differences in the determination of planning horizons, discount rates, and other financial parameters; and  A steadfast commitment to the development and ongoing support of the data resources needed to engage in defensible project evaluations.

67 Summary Need to consider as part of a national system Maritime Assets Support commerce and exports

68 We Want People To Make Better Decisions Everyone is surrounded by reports, studies, consultants, models, but…

69 Problem Statement  Can we effectively make statements on broad benefits and externalities related to multimodal projects?  Do we have the right tools (data, model, etc.) to develop these tools?  Does the right guidance exist to allow for these benefits to be considered?

70 Example - Investment In Corridor A-C A C B b Choice - Mode, Route, Operational Patterns, Risk, System Preservation, Pricing, Safety, Environment, Security, National Defense, … project

71 What Effects Are Considered?  First Order Effects - Improved Operations (no change in equipment or routing, but per movement costs decline and\or reliability improves), Noise, Dust  Second Order Effects - Change in Routings (realignment of services with existing equipment already in trade),  Third Order Effects –  Change in the Capacity and Economies or Scale of Services (larger vessels, trucks, etc.)  Induced Service or Calls (new equipment enters service),  Social Political Effects – non monetary  Reduce emissions, environmental restoration, health risks and exposure, risk management/ mitigation, etc. Degree of Double Counting

72 Some Potential Effects of Inland River Closures  Reliability - Closure Impact Avoidance  Plant Closure/Idling  Jobs/Earnings  Lost Output  Water Supply Disruption  Industrial/Hydropower  Municipal  Road Closures  Recreational Losses  Environmental Losses  NETS (IWR-USACE)  Greenup 2003 Closure (52 days)- $42 Million  Hannibal Locks 2005 Closure (5 days)-$5 Million  Lock 27 Closures  (August 2007)-$3.9 Million  (Oct 2005-Feb 2006)- $2.7 Million  McAlpine (August 2004)-$6.3 million  2008 Flooding in Upper Miss?  GLOBAL Insight – Upper Miss 90 Day Closure  $118.6 million for Waterway freight  $482.8 million by rail  $1.50 billion by truck

73 Traditional B/C Ratio Formula  Shaped by demands to compare projects within a given budget (mode) or geography  Differ by agency regarding what can be considered  Public Benefits and Costs  Externalities – treated and calculated  Forecasting and Scenario profiles  Project justification/review are coming under criticism  Certainty of answers often exceed analytical capacity  Network effects not included  No pre – post study analysis done on routine basis

74 Challenges  No analytical framework to do cross modal comparisons with existing traffic models  Modal diversion  Stepwise facility increases, etc.  No clear federal role regarding freight  What are first principles?  Institutional and Legal Inflexibility  State and local role fragmented  Staffing, funding constraints, legislative directions

75 Some Research Ideas?  Are some externalities only negative, or can they be viewed in a different context as positive, ie., can rationalize second order benefits in a study?  What data, modeling gaps exists?  Do we need this approach or some other optimal strategy for network improvements?  Do we want some framework for developing a systems perspective for corridor investment?  What is the balance between local, regional, national participation in project planning and operations?  Spatial markets and realignment in response to transportation projects  Externalities related to non-monetary public goals (risks, health, etc.)

76 U.S. is Largest Freight Transportation User in World

77 Summary USACE and State DOTs look very much alike: political pressures, constrained budgets, and project justification needs. There is a rich analytical underpinning to Corps programs. Federal, and not state, focus complicates guidance and flexibility More model and data integration will help, but will take time

78 Bruce Lambert Executive Director Institute for Trade and Transportation Studies


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