Remarks of Lynn M. Muench Vice President-Midcontinent Office of The American Waterways Operators 801 North Quincy Street, Suite 200 Arlington, VA 22203 (703) 841-9300 to the Governors Ethanol Coalition Omaha, Nebraska July 17, 2002 Good morning. Thank you for inviting AWO to participate in the Governors Ethanol Coalition Annual Conference to provide the perspective of the tugboat, towboat and barge industry. The American Waterways Operators (AWO) represents 375 member companies that include owners and operators of tugboats, towboats and barges that move dry, liquid, containerized and specialty cargoes on the inland river systems, the Atlantic, Pacific, and Gulf coasts, and the Great Lakes. AWO's members also operate the tugboats that provide shipdocking, bunkering, and tanker escort services in our nation's ports and harbors. AWO is particularly pleased to participate at this meeting because the transportation of ethanol conforms to the industry's mission to provide safe, efficient and environmentally responsible transportation services. I would like to talk with you today about our industry, the transportation services it provides, and the role barge transportation might play in the expanding national need for ethanol as a renewable fuel. Before I talk about the transportation of ethanol by barge, let me tell you some general facts about the vital role barge transportation plays in America's transportation system. Barges safely and efficiently move fully 15 percent of our nation's freight for less than 2 percent of its total freight bill. The industry consists of more than 5,000 tugboats and towboats and 30,000 barges of all types, operating throughout the entire United States. We move more than 800 million tons of cargo each year. More than 60 percent of U.S. grain exports shipped each year to world markets begin their
journey on river barges on the Mississippi, Illinois, Missouri and other inland river systems. The cost-efficiency of barge transportation helps American exports stay competitive in global markets. For example one 15-barge tow can move the same amount of cargo as 2.25 100-car unit trains or 870 large semi trucks. Barge transportation is an increasingly important link in America's intermodal transportation network. Numerous examples exist of barge transportation linking with rail and trucks to facilitate the movement of important cargoes. Energy is the lifeblood of the American economy, and barge transportation keeps vital energy sources flowing efficiently and economically. More than 30 percent of the oil and petroleum products used each year to fuel our industrial base and new hightech economy moves by barge. Barges move 20 percent of the coal that warms our homes and keeps the lights on for business and commercial customers. In terms of the transportation of petroleum, which is most like the transportation of ethanol, there are 3,950 U.S. tank barges that move 68.9 billion gallons oil in U.S. waters annually. Of this number, 630 are coastal tank barges and the remainder are inland tank barges. Of the 68.9 billion gallons of oil transported in tank barges, 99.9998% of that oil moved by barge reached its destination safely in 2000, the last year for which statistics are available. This represents a 92% reduction of oil spilled from tank barges since 1990, the year the Oil Pollution Act was passed. It s critical to underscore AWO's important role as a leader in safety and environmental protection. AWO and the tug and barge industry it represents is the only national transportation group to require, as a condition of membership, a commitment to participate in a thirdparty audited, U.S. Coast Guard-recognized safety regime --- the AWO Responsible Carrier Program. Additionally, in 1995, AWO and the Coast Guard formed a Safety Partnership to cooperatively achieve real solutions for improving marine safety and environmental protection. This unique, first-of-its-kind partnership between industry and the Coast Guard has addressed crew alertness, crew fatalities, tank barge spills and other important areas of mutual concern.
A key question facing the ethanol industry is how to move this important renewable fuel from its production centers in the Midwest to expanding markets in California and other West Coast destinations as well as markets on the Atlantic Coast. The barge industry has an important role to play here. In fact, the inland tank barge industry is already transporting significant quantities of ethanol. It has been estimated that inland barges have transported as much as 25 million gallons of ethanol annually. Smaller quantities of ethanol have been transported by coastal barges. I do not have a precise number, but it is about 10 million gallons of ethanol. While the number of coastal moves of ethanol has been small because of market need, coastal tank barges move very large quantities of petrochemicals, attesting to their capacity to move products such as ethanol. There have been instances when rail-barge intermodal connections have been made in the transportation of ethanol. A recent example of this occurred when Reinauer Transportation Company picked up a load of ethanol that had been shipped by rail to Philadelphia and transported it by tank barge to New York. AWO President Tom Allegretti, in a letter of July 16, 2001, assured the Renewable Fuels Association that [quote] "the tugboat, towboat, and barge industry has the capability and capacity to move this important product (ethanol) from its production areas to its consumption areas." [unquote] He went on to point out that there are currently more than 2,300 double-hulled tank barges operating on the inland waterways systems. As mentioned, these barges are already transporting large quantities of ethanol. In this letter, Mr. Allegretti also pointed out that ethanol can be transported by rail or truck from land-locked production facilities to the inland waterways systems where it could be transferred to barges for movement to New Orleans. Similarly, ethanol could also move by barge to many ports on the inland waterways system, then join up with rail network, where product transfers can be made for rail delivery to California, as an example. The coastal tank barge industry is more than capable of expanding the transportation of ethanol to east and west coast destinations based on market need. There are a significant number of large coastal barges and newly constructed, articulated tug-barge units
(ATBs) with capacities of 5.8 million to 8.4 million gallons, which could serve the need of transporting greater volumes of ethanol. As mentioned above, there also exists significant opportunity for barges and railroads to continue to work together to deliver ethanol to both east and west coast destinations. Such intermodal links could prove highly efficient, both in terms of rail-to-barge or barge-to-rail movements. The problems of rail congestion in urban areas can sometimes be mitigated by barge transportation and lock delays can sometimes be mitigated by rail. Why not optimize the freight mobility of ethanol by utilizing intermodal rail-barge or barge rail links where appropriate? The recently released Department of Energy report Infrastructure Requirements for an Expanded Fuel Ethanol Industry confirmed that the barge industry is well positioned to support the transportation needs for an expanded ethanol industry. My message is that the barge industry is an invaluable transportation resource for the ethanol industry's inevitable expansion and growth. Our member companies have the experience and the capability to provide the safe, efficient and environmentally responsible transportation services that will be required for the ethanol industry's expansion. The tugboat, towboat and barge industry, either by itself or in cooperation with other transportation modes, stands ready to deliver this important product to the expanding markets. Missouri River Holding this seminar in Omaha, makes it impossible to not discuss a controversial yet important subject that will influence the ability of the Midwest to get ethanol to its markets --- the reliability of the towing industry on the inland waterways system, particularly the Missouri River. I d like to discuss a short history of the Master Manual and why the outcome is of utmost importance to the towing industry, its customers on all inland waterways and states that rely on an agricultural tax base. Missouri River: History of the Missouri River Master Control Manual Authorized by Congress in 1944, the Pick-Sloan Act provided flood control, hydroelectric generation, irrigation, navigation, recreation, preservation, and enhancement of wildlife. The wild waters of the
Missouri had caused enormous damage to the basin during spring flooding and made navigation treacherous to impossible. With the construction of dams to hold back floodwaters in the largest manmade reservoir system ever, those reservoirs became a source for flows needed for navigation in the late summer and early fall. For a few years the vision of our forefathers was realized with effective flood control, allowing cities and farmers to thrive. It also allowed for the development of the towing industry to reliably bring sand, petroleum, petroleum products, fertilizers, corn and other ag products to and from Missouri, Kansas, Nebraska, Iowa, and South Dakota. Missouri River: Why its flows are important. The Missouri River is part of the inland waterways system. Let me try to illustrate the how Midwest rivers will predict our economic future. The National Corn Growers Association (NCGA) recently published an economic analysis of what will happen to the Midwest if the locks on the Mississippi are not modernized to 1200-foot locks by 2020. This study and its impacts can be directly correlated to the future of the Missouri River and the Midwest. Since over 60% of the water in the middle Mississippi River is Missouri River water, it is safe to say that the reliability of Missouri River flows is essential to the reliability of the Mississippi River. The Missouri Department of Natural Resources (MODNR) estimates that if flows are restricted during the late summer months, the Mississippi River will be unreliable in up to 30 years. If the flows in the middle Mississippi are not reliable, modernizing the locks on the upper Mississippi and Illinois Rivers is a moot point. The NCGA evaluation says the following things about the future of the Midwest, including Nebraska, Kansas, and South Dakota, if the locks are not modernized or, one assumes, the middle Mississippi becomes unreliable: 1. The cost of transporting corn on the Mississippi River would increase an average of 17-cents. 2. The export price of corn at Gulf ports would rise 13-cents per bushel, while the amount that corn growers would receive would decline 3.6-cents per bushel.
3. As a result of that price increase, corn exports would decline by 68 million bushels per year and soybeans would decrease by approximately 10 million. 4. The increase in Mississippi River barge rates would also boost the cost of rail freight rates for grain and feedstuffs shipped out of state. The loss of farm income from decreased exports and lower prices for corn and soybeans is estimated at $562 million in 2020. 5. The decline in farm income would reduce employment in corngrowing states by an estimated 10,945 jobs, while state and local tax receipts would decline by $185 million. Since virtually all state and local governments must balance their budgets each year, taxes would be raised by that amount, hence reducing disposable income further and cutting employment by an additional 3,605. 6. At the national level, the increase in food prices would reduce disposable income and employment in non-farm states by an additional 5,625 jobs. Thus the total decline in employment would exceed 20,000 even without taking into account any negative impact of a reduced federal budget surplus or increased deficit. As you can see, the economic strength of the Midwest does rely on our rivers. And reliability of navigation on those rivers does have an impact on cost-effective transportation of ethanol from the Midwest. For the full report visit the NCGA web site www.ncga.com, select Transportation under Key Issues and then select "The Evans Study" or http://www.ncga.com/transportation/pdfs/evansstudy_march2002. pdf I d be happy to answer any questions on the waterways industry. Thank you very much.