CHANNEL SILTATION AND NATIONAL ECONOMIC DEVELOPMENT BENEFITS OF MAINTAINING AUTHORIZED DEPTHS IN TEXAS

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1 CHANNEL SILTATION AND NATIONAL ECONOMIC DEVELOPMENT BENEFITS OF MAINTAINING AUTHORIZED DEPTHS IN TEXAS C. J. Kruse 1 ABSTRACT This analysis of the economic effects of a lack of maintenance dredging focuses primarily on the cost of transporting commodities between two end points on the Marine Transportation System. In analyzing the cost of transporting commodities, the researchers used the inverse of the concept of National Economic Development (NED) Benefit, as defined by the US Army Corps of Engineers (USACE). This concept is typically applied to the potential benefits of deepening or widening a channel (USACE 2000). However, in this study, the focus is on the increased costs that will be incurred if a channel becomes shallower. For purposes of this analysis, it is assumed that the volume of cargo moved will be held constant--industry will attempt to maintain the same level of economic activity. The channels analyzed in this study consist of (1) selected deep draft channels connecting port facilities with the Gulf of Mexico, and (2) the Gulf Intracoastal Waterway, along with certain tributary channels. The channels analyzed in depth are: 1. Gulf Intracoastal Waterway (for all of Texas and in three separate reaches) 2. Chocolate Bayou 3. Arroyo Colorado (Port of Harlingen) 4. Channel to Victoria 5. Port of Brownsville 6. Port of Corpus Christi 7. Port of Port Lavaca 8. Port of Galveston 9. Port of Texas City (also analyzed by Martin & Associates) The approach used in the shallow draft analysis is to examine the effect of allowing the channel to silt in to the point where barges are limited to a maximum draft of 2.4 meter (8 feet). The analysis for deep draft channels uses the maximum sailing draft reported by the port (or pilots) as the baseline draft and then subtracts five feet from the baseline draft to measure the economic effect of siltation. The shipping cost penalty that would be incurred due to siltation of the four selected deep draft channels (excluding Texas City) is estimated at $13 million annually (in US dollars); for the GIWW the figure is $103 million annually (in US dollars). Keywords: GIWW, economic penalty, maintenance, shallow draft, deep draft INTRODUCTION The analysis of the economic effects of a lack of maintenance dredging focused on two cost components: (1) cost of dredging, and (2) cost of transporting commodities between two end points. In any real world situation in which severe draft restrictions are implemented, other economic consequences may (and probably) will accrue. Such possible effects include (but are not limited to): Industrial relocations Reduction in consumption or sales Diversion of cargo to other ports Loss of ability to compete for subsistence areas Effects on national security Potential rise in vessel chartering costs due to increased demand for smaller vessels 1 Director, Center for Ports & Waterways, Texas Transportation Institute, 701 N. Post Oak, Suite 430, Houston, Texas 77024, USA, T: , Fax: , j-kruse@ttimail.tamu.edu. 225

2 Increased possibilities for a collision, oil spill, fire, or other adverse environmental consequences to occur due to an increase in the number of lightering operations It is possible that deepening a channel (or optimizing its dimensions) might significantly increase the deeper draft traffic. However, this analysis focuses on each channel as it was at the end of In analyzing the cost of transporting commodities, the researchers used the inverse of the concept of National Economic Development (NED) Benefit, as defined by the US Army Corps of Engineers (USACE). The NED Benefit is defined as the reduction in the value of resources required to transport commodities. This concept is typically applied to the potential benefits of deepening or widening a channel. However, in this study, the focus is on the increased costs that will be incurred if a channel becomes shallower or narrower. In other words, by maintaining channels at their authorized depth, the federal government reduces the cost of transporting commodities; failure to dredge increases the cost. When channels are not maintained, transportation costs increase in two ways: 1. Vessels must be light loaded (loaded to less than capacity) in order for the draft of the vessel to be reduced to the point where it can safely navigate the channel. This increases the cost per ton (or barrel) to transport the commodity now loaded onto this vessel. 2. The amount that was removed from these vessels must still be transported in order to maintain the same level of economic activity. Additional vessel transits will be required, and 100% of these voyage costs are additional transportation costs that would not be incurred if the channel were maintained at its authorized depth. For purposes of this analysis, it is assumed that the volume of cargo moved will be held constant. In other words, industry will attempt to maintain the same level of economic activity. The point at which this assumption might break down is beyond the scope of this analysis. The channels analyzed in this study consist of (1) deep draft channels connecting port facilities with the Gulf of Mexico, and (2) the Gulf Intracoastal Waterway, along with certain tributary channels. Several Texas ports were able to provide similar analyses done by the consulting firm of Martin Associates ( Martin ). The results of these studies are included in this study without further analysis. The channels analyzed in depth by the study team are: 1. Gulf Intracoastal Waterway (for all of Texas and in three separate reaches) 2. Chocolate Bayou 3. Arroyo Colorado (Port of Harlingen) 4. Channel to Victoria 5. Port of Brownsville 6. Port of Corpus Christi 7. Port of Port Lavaca 8. Port of Galveston 9. Port of Texas City (used to compare with Martin s approach) The data sources and methodology for the deep draft channels versus the shallow draft channel are substantially different and are explained in two sections below. SHALLOW DRAFT CHANNELS There are no data available to the public on individual barge tows. Therefore, in order to gain an understanding of tow sizes, drafts, and loads, detailed data were collected from the Colorado River Lockmaster for Calendar Year According to the Executive Director of the Gulf Intracoastal Canal Association, this information is a reasonable representation of all traffic along the Texas coast. Because of the large volume of data, four months were randomly selected for analysis January, April, September, and December. Furthermore, the analysis segregated liquid cargo transport from dry cargo transport. The main assumption regarding shoaling is that the GIWW will be allowed to shoal to the point that barge drafts must be limited to 8 feet. All barge and fleet characteristics are based on the Colorado Lock data extract. 226

3 Table 1. 4-month composite lock statistics. Tanker Dry Wtd Avg Draft (ft) Wtd Avg Tons/barge Wtd Avg Tons/ft of draft The Locks figures indicate a ratio of 2.4 barges per tow for dry barges, and 1.6 barges per tow for liquid barges. Both figures are for drafts greater than 2.4 meter (8 feet). Table 2. Barges per tow (loaded). Dry Liquid Month Number Avg. barges Number Avg. barges of tows per tow of tows per tow January April September December Wtd. Avg. Barges/tow The approach used in the analysis was to examine the effect of allowing the channel to silt in to the point where barges are limited to a maximum draft of 8 feet. This draft was chosen after conversations with Kirby Marine and the Executive Director of the Gulf Intracoastal Canal Association, which indicated that this was the minimum draft that could be encountered before towboats would have to light load their fuel and water and reduce the time between refuelings issues which are outside the scope of this study. For liquid and for dry cargoes, the following were calculated: Average draft for barges with greater than 2.4 meter (8 feet) of draft Average empty draft Weighted average tons per barge for barges with greater than 2.4 meter (8 feet) of draft Tons of cargo per foot of draft Average number of barges per tow when barges draft more than 2.4 meter (8 feet) These data were then used to analyze the effect on transportation costs of limiting barge drafts to 8 feet. In order to be consistent across all shallow draft channels, the analysis used the latest cargo and trip information available from the Corps of Engineers as reported in its WATERBORNE COMMERCE OF THE UNITED STATES, Calendar Year 2004, Part 2 Waterways and Harbors, Gulf Coast, Mississippi River System and Antilles (USACE 2004). Cost figures for operating towboats and barges were taken from USACE s Economic Guidance Memorandum 05-06, which provides Shallow Draft Vessels Operating Costs for 2003 (USACE EGM ). An adjustment was made to fuel cost for this analysis due to the dramatic increases in fuel costs since The other operating costs reported by USACE were inflated using the Inland Waterways Towing Transportation Producer Price Index (BLS 2008). The towboat horsepower used for this analysis is the HP category. A speed of 5 mph was assumed. For tank barges, costs were used for a x 54 x 12 tank barge without coils. For dry cargo, the 195 x covered hopper was used. Using USACE data, the average trip length was computed for trips reported on the channel being analyzed. The average trip duration was then determined by dividing the trip length by 5 mph. Using the USACE cost data and trip duration, the average trip costs for tank barge tows and hopper barge tows were computed. The rest of the analysis was performed separately for hopper barges and tank barges. For each waterway or channel, the steps consisted of the numbered paragraphs below. 1. Use USACE data to determine the number of barges drafting more than 2.4 m (8 ft) in Divide this number by the average number of barges per tow (as determined from lock data), thus deriving the number of trips involved that had barges drafting more than 2.4 m (8 ft) 227

4 3. Multiply the number of trips times the calculated trip cost (cost of average number of barges per tow plus cost of towboat for trip distance) 4. Estimate the actual tonnage carried on these barges by multiplying the weighted average tons per barge for barges drafting more than 2.4 m (8 ft) (from lock data) times the number of barges drafting greater than 2.4 meter (8 feet) 5. Determine the average cost per ton by dividing the total trip costs by the actual tonnage At this point, we have the average cost per ton for cargo that was transported during Calendar Year Now the effect of reduced draft can be analyzed. The difference in cost per ton is calculated as follows: 6. Calculate the difference between the weighted average draft of these barges and 2.4 meter (8 feet) 7. Using the tons/ft derived from the Colorado Lock Data, determine how much tonnage would have to be removed from the average barge to make it draft 2.4 meter (8 feet) 8. Multiply the adjusted tonnage per barge times the number of barges obtained in Step 1 We now know how much tonnage the barges drafting more than 8 ft would have been able to carry with a reduced draft. The trip cost is almost exactly the same regardless of the tonnage moved. Therefore, barge operators would now be moving less cargo for the same amount of money. This means that the cost per ton of cargo must rise. 9. Divide the total trip cost by this new (reduced) tonnage amount to obtain the adjusted cost per ton We know what the cost per ton was during 2004 for barges drafting more than 2.4 m (8 ft), and we know what the cost per ton would have been if they had been restricted to 2.4 m (8 ft). We can now compute the total effect of the rise in cost per ton for these barges. 10. Multiply the tonnage that would be transported under the reduced draft scenario by the difference in the two cost-per-ton calculations Figure 1 provides as graphical illustration of what this calculation represents. Effect 0 Current Draft Cargo to be Reallocated Draft of Each Vessel Call Increased Cost Per Ton Silted Draft 5 0 Figure 1. Cost per ton effect of shallower draft (barge shipments). The cargo that had to be removed from the barges to keep them from drafting more than 2.4 meter (8 feet) must still be transported to maintain the same level of economic activity. This means shippers would have to book more shipments using the draft-restricted barges or find a way to load more into barges that drafted less than 2.4 m (8 ft) in However, the latter approach would require changes in the timing of shipments. The more likely approach 228

5 is that more shipments will be required at least for the short to medium term. Figure 2 provides a graphical illustration of these additional shipments. Effect New Shipments 0 Current Draft Draft of Each Vessel Call Silted Draft 5 0 Figure 2. New shipments necessitated by shallower draft (barge shipments). 11. As in Step 2 above, take the total amount that would have to be removed from barges that originally drafted more than 2.4 m (8 ft) and divide it by the average barges per tow calculated previously to determine the number of additional trips required 12. Multiply the number of additional trips times the average trip cost (cost of average number of barges per tow plus cost of towboat for trip distance) Adding the cost calculated in step 10 to the cost calculated in step 12 provides the total additional transportation costs incurred when barge drafts must be restricted to 2.4 meter (8 feet). The calculations for the Texas Reach of the GIWW can be summarized as follows. CALCULATIONS FOR TEXAS REACH OF GIWW Assumptions and Base Data The main assumption regarding shoaling is that the GIWW will be allowed to shoal to the point that barge drafts must be limited to 2.4 meter (8 feet). Towboats are assumed to draft one foot more than barges. All barge and fleet characteristics are based on a sample of Colorado Locks data for (These data indicate an average of 2.4 barges per tow for dry barges, and 1.6 barges per tow for liquid barges.) Cost figures for operating towboats and barges were taken from USACE s Economic Guidance Memorandum 05-06, which provides Shallow Draft Vessels Operating Costs for 2003 (USACE EGM ). An adjustment was made to fuel cost for this analysis based on historical prices due to the dramatic increases in fuel costs since This draft was chosen after conversations with Kirby Marine and the Executive Director of the Gulf Intracoastal Canal Association, which indicated that this was the minimum draft that could be encountered before towboats would have to light load their fuel and water and reduce the time between refuelings issues which are outside the scope of this study. The other operating costs reported by USACE were inflated using the Inland Waterways Towing Transportation Producer Price Index (U.S. Department of Labor). This caused a 12.7% increase to the costs provided in the memorandum. 229

6 The towboat HP used for this analysis is the HP category. A speed of 5 mph was assumed. For liquid barges, the x 54 barge without coils was used. For dry cargo barges, the 195 x 35 covered hopper barge was used. Using USACE data, the average trip length for this reach is 431 (total trip ton-miles divided by total tons). The average trip duration is 431 miles 5 mph = 86 hours or 3.6 days. Towboat cost per trip: ($5,418.59/day USACE + $1, fuel adjustment) x 3.6 = $25,314 Tanker barge cost per trip: $ * 3.6 = $2,424 Dry barge cost per trip: $ * 3.6 = $438 Tanker trip cost: $25,314 + ($2,424 x 1.6) = $29,192 Dry cargo trip cost: $25,314 + ($438 x 2.4) = $26,365 Liquid Cargo Analysis Per USACE, the number of tanker barges drafting > 8 ft in 2004 was 19,478. This equals 12,174 trips (19, ). The cost of these trips = 12,174 x $29,192 or $355,383,408. Tons actually transported on these barges: 19,478 barges x 2,612 (avg/barge from Colorado Lock Data) = 50,876,536 Cost/ton under as is scenario = $6.985 With Reduced Draft: Current weighted average draft is Required cargo reduction per barge: 0.86 x (tons/ft derived from Colorado Lock Data) = 320 tons Adjusted tons transported (amount that could be moved in the same number of trips with maximum draft of 8 ft): 19,478 x (2, ) = 44,643,576 (2,292) Adjusted cost/ton = $7.960 Increase in cost based on current number of trips with maximum draft of 8 ft: ($7.960 $6.985) x 44,643,576 = $43,527,487 However, this leaves 6,232,960 tons stranded. To move this cargo will require additional trips. The additional trips required with a maximum draft of 8 ft = (50,876,536 44,643,576) (1.6 x 2,292) = 1,700 Cost of additional trips is 1,700 x $29,192 = $49,626,400 Total Increase for Tanker Traffic: $93,153,887 Dry Cargo Analysis Per USACE, the number of barges drafting > 8 ft in 2004 was 4,022. This equals 1,676 trips (4, ). The cost of these trips = 1,676 x $26,365 or $44,187,740. Tons actually transported on these barges: 4,022 barges x 1,887 (avg/barge) = 7,589,514 Cost/ton under as is scenario = $

7 With Reduced Draft: Current weighted average draft is Required cargo reduction per barge: 0.70 x = 195 tons Adjusted tons transported (amount that could be moved in the same number of trips with maximum draft of 8 ft): 4,022 x (1, ) = 6,805,224 (1,692) Adjusted cost/ton = $6.493 Increase in cost based on current number of trips: ($6.493 $5.822) x 6,805,224 = $4,566,305 However, this leaves 784,290 tons stranded. To move this cargo will require additional trips. The additional trips required maximum draft of 8 ft = (7,589,514 6,805,224) (2.4 x 1,692) = 194 Cost of additional trips is 194 x $26,365 = $5,114,810 Total Increase for Dry Cargo Traffic: $9,681,115 Total increase in cost for Texas Segment of GIWW: $102,835,002 POTENTIAL COST SAVINGS FOR FEDERAL GOVERNMENT (SHALLOW DRAFT) The annual O&M cost incurred by Corps of Engineers for the Texas Reach of the GIWW was calculated according to the following table: Table 3. Corps of Engineers O&M costs GIWW. (In US Dollars) FY Original Cost Price Adjusted Cost Cubic Yards ,373,188 5,560,805 2,085, ,393,672 19,356,286 10,040, ,242,438 20,905,531 10,521, ,771,467 27,648,737 7,885, ,012,873 24,706,351 9,564, ,403,850 17,514,007 8,455, ,348,604 13,573,855 6,104, ,405,599 10,405,599 4,327,086 Average 14,618,961 17,458,896 Shallow Draft Dredging Costs The analysis also looked at how much USACE is spending for maintenance dredging of the selected channels. USACE does not compute the cost savings of not performing maintenance dredging. Therefore, this analysis simply takes the average of what USACE spent on maintenance dredging (i.e., contracts issued to dredging contractors) for a given channel from 1998 through 2005 as the potential cost savings. In reality, these figures are probably somewhat low, since most of the channels along the Texas coast have suffered from lack of maintenance dredging in recent years. The figures used were taken from the Fiscal Year Annual Report of the Secretary of the Army on Civil Works Activities Extract, Galveston District for FY (USACE ). The costs were then adjusted to 2005 price levels using the Price Index for Other Heavy Construction (U.S. Department of Labor). The costs that were included were costs related to contracts for dredging and dredging-related work. The all-in cost figure which includes USACE overhead and internal allocations is NOT used; it is assumed that USACE will not experience a reduction in force or significantly alter its internal cost structure under any of the analyzed scenarios. 231

8 Note: Although the Producer Price Index was used to adjust the dredging cost figures from each year to 2005 price levels, it should be noted that dredging costs are more influenced by the actual demand for dredges than by general economic trends. When major storms occur or a large number of ports initiate channel improvement projects, dredging costs may soar, even if the economy is stagnant. There is a limited supply of dredging equipment, which makes the cost of dredging very volatile. It is important to note that the savings from not dredging are only realized up to the point where the targeted reduced channel depth occurs; then dredging must resume or the channel will silt even further. However, the economic penalties begin to accrue immediately and continue forever unless the Corps decides to dredge down to the original channel depth. In other words, the savings from not dredging are a one-time event, whereas the additional transportation costs are permanent. The results of the analysis are summarized in Table 4. It is important to note that it is not possible to simply add the three Texas reaches of the Gulf Intracoastal Waterway (GIWW) to obtain the economic effect for the whole Texas coast as a unit. This is because many trips span two or more reaches of the coast. Within each reach they are counted as a separate trip. To simply add the reaches would double- or triple-count many trips; the trips must be consolidated first. The results for GIWW: Texas reflect a consolidation of the data to eliminate double- or triplecounting. 232

9 Table 4. Summary of effect on Texas shallow draft channels. (8 ft draft restriction for barges) Liquid Dry Channel Savings Due to Savings Due to Total Ratio of Avg Trip Annual Cost Barges Maintenance Barges Maintenance Savings Due Savings from Length of Dredging Affected Dredging Affected Dredging to Dredging Dredging to (Miles) (US $) (US $) (US $) (US $) Cost of Dredging Chocolate Bayou 256 1,247 3,482, ,488 3,482, GIWW: Sabine to ,286 83,520,732 4,179 12,282,006 3,263,228 95,802, Galveston GIWW: 394 7,941 34,816,170 1,382 3,059,810 11,506,266 37,875, Galveston to Corpus Christi GIWW: Corpus ,929, ,156 2,822,352 3,447, Christi to Brownsville GIWW: Texas ,478 93,153,887 4,022 9,681,115 17,458, ,835, Arroyo Colorado , , , , (Harlingen) Channel to Victoria ,614, ,198 1,402,393 2,837,

10 It is also important to note that towboats would be expected to draft at least 0.3 meter (1 foot) more than their associated barges. This is because there is typically considerable sloughing that takes place along the sides of the GIWW. To avoid grounding a barge, operators tend to use 0.61 meter (2 feet) of clearance in determining their barge loads. However, because the towboats are not as wide as the barge tow and tend to stay near the center of the channel, they can be allowed to run with 0.3 m (1 foot) less of clearance. The following table shows the potential effect of a restricted draft on the ability of towboats to operate at maximum efficiency when barges are forced to not exceed 2.4 meter (8 feet) of draft. Waterway Table 5. Effect of draft restriction on towboats. (Based on USACE Waterborne Commerce Statistics) Tow Trips Reported in 2004 Tow Trips Affected by 9-ft Draft Restriction Percent Affected Chocolate Bayou 2, % GIWW: Sabine to 25,576 4, % Galveston GIWW: Galveston to Corpus Christi 18, % GIWW: Corpus Christi to Brownsville 2, % GIWW: Texas 40,126 4, % Arroyo Colorado % (Harlingen) Channel to Victoria 2, % Table 5 is based on the drafts reported for towboats in the USACE Waterborne Commerce Statistics for 2004 (USACE 2004). If the restricted draft scenario were compared to what the boats would draft with a full load of fuel and water (as reported by USACE), approximately 28% could be draft-restricted. Therefore, for the GIWW and the Channel to Victoria it is possible that anywhere from 8% to 28% of the towboats working these channels could find themselves incapable of taking on a full store of fuel and water, thereby reducing their efficiency or causing them to be redeployed elsewhere. This effect on towboat utilization is not quantified in this analysis, but is presented as an item that could easily cause the calculated effects to rise significantly. DEEP DRAFT CHANNELS The data used for the deep draft channel data are data for Calendar Year A number of data sources were used to develop these analyses: 1. Port authorities provided vessel traffic information with varying degrees of detail. 2. For Texas City and Galveston, the pilots also provided vessel traffic information. 3. The Coast Guard provided information on arrivals (used to identify origins/destinations of domestic cargo). 4. The Journal of Commerce s PIERS database was accessed to determine vessel tonnages and last/next ports of call. 5. Lloyd s Register provided the following vessel-specific information: a. Vessel Type b. Flag of Registry c. Maximum Draft d. Deadweight Tonnage e. Tons/per Centimeter Immersion (TCI) In a significant number of cases, the TCI was not available. In those cases, the TCI was computed using equations developed by USACE, as provided in Economic Guidance Memorandum 02-06, Deep Draft Vessel Operating Costs--EGM (USACE 2002). In a very limited number of 234

11 cases, the maximum draft was not available. Calculations contained in EGM were also used in those instances. 6. Lloyd s Register Ports & Terminals Guide 2005 was used to determine distances between ports. 7. USACE s EGM was used to compute the following for each vessel (the data are organized by vessel type and Deadweight Tonnage (DWT), which is the maximum weight including cargo, ballast, and stores that can be loaded into a vessel). a. Service Speed b. Daily Cost at Sea c. Cargo Capacity Factor (used to adjust DWT to actual cargo carrying capacity). 8. Cargo capacity factors were obtained from USACE s National Economic Development Procedures Manual: Deep Draft Navigation, IWR Report 91-R-13 (USACE 1991). The analysis used the maximum sailing draft reported by the port (or pilots) as the baseline draft rather than using the official project draft reported by USACE. Actual sailing drafts are a better indicator of the condition of a channel than the design features. Five feet were subtracted from the baseline draft to measure the effect of siltation- -an approach that is consistent with what Martin & Associates did. Vessels with a maximum draft less than or equal to this reduced draft were eliminated from further analysis. The remaining vessels were examined on an individual basis. For vessels that arrived or departed with a draft greater than the adjusted draft (baseline minus 5 ft) the distance from the port to the relevant port of last call or next call was obtained using Lloyd s Register Ports & Terminals Guide For each vessel transit at greater than the reduced draft calculated above, the following elements were computed: Days at sea: Distance to/from port divided by service speed for vessel type and DWT Cost of voyage: The days at sea multiplied by the daily cost at sea (per USACE) Required draft reduction: The difference between the actual sailing draft and the calculated reduced draft Required tonnage reduction: The required draft reduction multiplied by the tons/per centimeter immersion factor Some ports had a significant number of selected vessels that discharged less than their full load or loaded cargo in addition to cargo already on board. Since the ports only report the cargo discharged or loaded at that particular port of call, it was necessary to calculate the total tonnage on board in order to calculate the cost per ton for the voyage. To do this, cargo capacity factors supplied by the Corps in IWR Report 91-R-13 were multiplied by the DWT. This provided the actual cargo carrying capacity for each vessel type (in effect excluding fuel, ballast, stores, etc.) The difference between the maximum draft and actual sailing draft was multiplied by the tons/per centimeter immersion factor (which can also be converted to tons/inch when performing calculations in SI units) and this result was subtracted from the cargo capacity computed earlier to obtain the total cargo carried on the voyage. The difference between the reported sailing draft and the calculated reduced channel depth was multiplied by the tons/per centimeter immersion factor to calculate the amount of tonnage that would have to be removed from the vessel. This number was subtracted from the cargo tonnage used to calculate the original cost per ton for the voyage, and the cost per ton was recomputed. As with the barges, we now know how much tonnage the vessels drafting more than the adjusted draft would have been able to carry with a reduced draft. The trip cost is almost exactly the same regardless of the tonnage moved. Therefore, vessel operators would now be moving less cargo for the same amount of money. This means that the cost per ton of cargo must rise. This difference (penalty) in cost per ton was then multiplied by the tonnage the selected vessels would have been able to carry with a shallower draft. By adding this amount for each of the selected voyages, we can now estimate the total effect of reducing the cargo loads on the selected vessels. These calculations are represented graphically in Figure

12 Effect 0 Current Draft Cargo to be Reallocated Draft of Each Vessel Call Increased Cost Per Ton Silted Draft 5 0 Figure 3. Cost per ton effect of shallower draft (deep sea shipments). Next it is necessary to compute the cost of transporting the cargo that was producing the excess draft calculated above, keeping in mind that these additional voyages will be subject to a reduced channel depth as well. The average adjusted total tonnage (total tonnage with new draft restriction) per vessel type (tanker, bulker, and general) was calculated. Then the excess tonnage attributable to that vessel type was divided by the average adjusted total tonnage per vessel for that type to calculate how many additional trips would be required to move the excess tonnage. This excess tonnage is represented graphically in Figure 4. Effect New Shipments 0 Current Draft Draft of Each Vessel Call Silted Draft 5 0 Figure 4. New shipments necessitated by shallower draft (deep sea shipments). 236

13 The result was then rounded under the assumption that cargo equal to less than half a vessel load could probably be distributed among other shipments, and cargo greater than half an average vessel load would probably result in an additional voyage. At this point the weighted cost per voyage for each vessel type was calculated. The number of required additional trips for each vessel type was multiplied by the cost per voyage for that type. This product was then added to the cost-per-ton penalty computed earlier to obtain the total additional transportation cost incurred by not dredging the channel. CALCULATIONS FOR THE PORT OF BROWNSVILLE The data supplied for vessel transits into and out of the Port of Brownsville in 2005 included the following statistics: Inbound Transits Number of voyages where sailing draft exceeded the computed reduced channel depth Tonnage handled at this port on these voyages Required tonnage reduction on all inbound voyages ( excess tonnage ) 43 1,016,772 mt 128,307 mt Inbound Cost Calculation Total cost-per-ton differential: Sum of adjusted tons handled at this port (tons handled at this port minus the required tonnage reduction due to reduced channel depth) x cost per ton differential per voyage $ 476,378 Cost of excess tonnage: Average total tons per voyage with new draft restriction: Bulk Carriers 1,002,928/26 = 38,574 Tankers: 514,593/16 = 32,162 General Cargo: 36,367/1 = 36,367 Number of additional voyages required: Excess tonnage / average tons per voyage Bulk Carriers: 82,743/38,574 = 2.1 voyages Tankers: 41,493/32,162 = 1.3 voyages General Cargo: 4,071/36,367 = 0.1 voyages Weighted average cost per voyage: Sum of (Adjusted total tonnage per voyage x cost per voyage)/total adj. tonnage Bulk Carriers: 365,328,475,080/1,002,928 = 364,262 Tankers: 126,806,098,747/514,593 = 246,420 General Cargo 23,672,293,606/36,367 = 650,928 Cost of additional voyages: No. of voyages x weighted average cost per voyage: Bulk Carriers: 2 * 364,262 = 728,524 Tankers: 1 * 246,420 = 246,420 General Cargo: none Total: $974,

14 Total increased cost for inbound traffic = $974,944+ $476,378= $1,451,322 Outbound Transits Number of voyages where sailing draft exceeded the computed reduced channel depth Tonnage handled on these voyages Required tonnage reduction on all outbound voyages 6 75,029 mt 21,338 mt Outbound Cost Calculations Total cost-per-ton differential: Sum of adjusted tons handled at this port (tons handled at this port minus the required tonnage reduction due to reduced channel depth) x cost per ton differential per voyage) $51,518 Cost of excess tonnage: Average total tons per voyage with new draft restriction = Bulk Carriers: 35,548/1 = 35,548 Tankers: 135,207/4 = 33,802 General Cargo: 29,416/1 = 29,416 Number of additional voyages required: Excess tonnage / average tons per voyage Bulk Carriers: 5,003/35,548 = 0.1 voyages Tankers: 10,207/33,802 = 0.3 voyages General Cargo: 6,128/29,416 = 0.2 voyages Weighted average cost per voyage: Sum of (Adjusted total tonnage per voyage x cost per voyage)/total adj. tonnage Bulk Carriers: 20,752,038,627/35,548 = 583,775 Tankers: 6,464,583,861/135,207 = 47,812 General Cargo 24,648,626,576/29,416 = 837,933 Cost of additional voyages: No. of voyages x weighted average cost per voyage: Bulk Carriers: none Tankers: none General Cargo: none Total: $-0- Total increased cost for outbound traffic $0 + $51,518 = $51,

15 Total Annual Cost Due to Decreased Channel Depth Inbound $1,451,322 Outbound $ 51,518 TOTAL $1,502,840 POTENTIAL COST SAVINGS FOR FEDERAL GOVERNMENT (DEEP DRAFT) Annual O&M cost incurred by Corps of Engineers: Table 6. Corps of Engineers O&M Costs Brownsville. (In US Dollars) FY Original Cost Price Adjusted Cost Cubic Yards ,739,623 2,318,917 1,593, ,990,594 4,031, , ,000 69, ,229,643 5,904,582 2,569, ,000,000 2,746, , ,796,432 3,898, , ,264,181 1,949, , ,377,432 2,334, ,997 Average 2,055,988 2,475,626 Deep Draft Dredging Costs As with the shallow draft channels, data on the cost of maintenance dredging for these channels from 1998 through 2005 was acquired from USACE. USACE also provided channel surveys from late 1998 through early A brief examination of the data was undertaken for the deep sea channels analyzed by the project team. The data indicate that absent major hurricanes, the time it would take for a segment of a given ship channel to silt in 1.5 meter (5 feet) would probably range anywhere from 15 to 30 months. In an active hurricane season, this could happen in a time period of 2 to 6 months. Table 7 summarizes the results of the analysis for deep draft channels. 239

16 Channel Base Draft (ft) Adj. Draft (ft) Affected Voyages [In ---- Out] Table 7. Summary of effect on Texas deep draft channels. (Base draft minus 5 feet) Total Voyages 2 [In ---- Out] % Affected [In ---- Out] Add l Voyages Required [In ---- Out] Tonnage Reduction (metric tons) [In ---- Out] Savings in USD Due to Maint. Dredging [In ---- Out] Annual Cost of Dredging (US $) Total Savings Due to Dredging (US $) Ratio of Savings from Dredging to Cost of Dredging Study: Brownsville % 3 128,307 1,451,322 2,475,626 1,502, % -0-21,338 51,518 Corpus Christi % ,602 5,229,181 4,209,320 5,812, % 1 72, , 397 Galveston % -0-11,332 22,672 3,299,245 2,136, % 3 120,505 2,114,105 Port Lavaca % 7 179,010 1,212,607 2,758,767 3,197, % 3 1,984,616 Martin: Texas City ,218,496 27,900, Freeport ,625,471 7,572, Sabine-Neches ,670, ,524, (Beaumont-Pt Arthur) Houston 3 N/A -5 6,690, ,403, Voyages with cargo to/from this port, including oceangoing barges 3 The methodology assumes that every vessel will be affected by a change in draft; that is, if the draft reduces one foot, then every vessel will have to lighten its load enough to reduce its draft by one foot. 240

17 CONCLUSIONS The data show that relatively small changes in draft can create significant cost penalties for the waterborne leg of freight shipments. This is only one specific effect of allowing siltation. Even with this narrow focus, the data show a cost to the economy of at least $103 million annually (in US dollars) from only nine to ten inches of siltation in the GIWW. Deep draft channels show similar effects. The four channels analyzed in the study that were not analyzed by Martin Associates showed an annual effect of almost $13 million (in US dollars) from reducing drafts by five feet from 2005 levels. If the Martin figures for the four waterways they analyzed are included, the total effect is $829 million annually (in US dollars) for deep draft navigation. These costs alone without considering the other costs mentioned in the study that could also be analyzed illustrate the importance to the national economy of keeping ship channels and waterways dredged to their project depths. REFERENCES Martin, J.C. (2005). The Economic Benefits of the Continued Maintenance Dredging of Port Freeport Shipping Channel. Lancaster, PA: Martin Associates. Martin, J.C. (2005). The Economic Impacts of the Port of Port Lavaca-Point Comfort and the Matagorda Ship Channel: Lancaster, PA: Martin Associates. Martin, J.C. (2006). Economic Impact of the Sabine-Neches Waterway and Economic Benefits of Maintenance Dredging of the Waterway. Lancaster, PA: Martin Associates. Martin, J.C. (2006). Texas City Channel Addendum Report. Lancaster, PA: Martin Associates. Martin J.C. (2007). The Local and Regional Economic Impacts of the Port of Houston, Lancaster, PA: Martin Associates. U.S. Army Corps of Engineers (USACE) (1991). National Economic Development Procedures Manual: Deep Draft Navigation. IWR Report 91-R-13. Washington, DC:USACE. U.S. Army Corps of Engineers (USACE) ( ). Fiscal Year Annual Report of the Secretary of the Army on Civil Works Activities Extract, Galveston District. Galveston, TX: USACE. U.S. Army Corps of Engineers (USACE) (2000). Planning Guidance Notebook. ER Washington, DC:USACE. U.S. Army Corps of Engineers (USACE) (2002). FY 2002 Deep Draft Vessel Operating Cost, Economic Guidance Memorandum Washington, DC: USACE. U.S. Army Corps of Engineers (USACE) (2004). Shallow Draft Vessels Operating Costs. Economic Guidance Memorandum Washington, DC:USACE. U.S. Army Corps of Engineers (USACE) (2004). Waterborne Commerce Of The United States, Calendar Year 2004, Part 2 Waterways and Harbors, Gulf Coast, Mississippi River System and Antilles. Washington, DC:USACE. U.S. Department of Labor, Bureau of Labor Statistics (BLS) (2008). Producer Price Index Program, Industry Washington, DC:USDOL. U.S. Department of Labor, Bureau of Labor Statistics (BLS) (2008). Producer Price Index Program, Industry BHVY. Washington, DC:USDOL. 241

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