Port Of Pittsburgh Economic Impact Study Includes Challenges, Opportunities

A recent analysis by the Port of Pittsburgh Commission shows the port is directly or indirectly responsible for labor income of $5.5 billion.

The economic impact study, titled, “The Port of Pittsburgh: Impact, Opportunities and Challenges,” also found it was directly or indirectly responsible for 76,500 jobs and local tax revenues of $1.1 billion.

The final study report is dated February 17 and was published in March on the port commission’s website at portpitt.com.

The report was prepared by the Center for Ports and Waterways at the Texas A&M Transportation Institute in Houston, Texas.

The study relies on IMPLAN, an input/output model, using employment statistics from the Pittsburgh Prospector Business Database, which is supported by the Pittsburgh Regional Alliance, as well as waterborne commodity shipment data from the Corps of Engineers.

“In the case of the analysis performed for this report, the findings are limited to what can be definitively proven to be related to shipments on the waterways,” the authors said in the study.

A note in the study indicates, “At the time this report went to press, the nation was dealing with the coronavirus pandemic and a global oil glut, which obviously affect some of the findings in this report, especially in the energy sector. However, it is the opinion of the authors that the main effect is one of timing rather than the direction events will follow over time. For instance, the Shell ethane cracker under construction in Beaver County shut down for one month, but then resumed full construction activities. Some effects—such as the impact on the commercial real estate industry if enough people continue to telework or the effect on refinery/gasoline production if vehicle miles traveled do not rebound—may linger. Potential effects such as these are beyond the scope of this report.”

To see how sensitive the model is to fluctuations in business activity, the researchers looked at two scenarios. The first, modeling a 5 percent increase in economic activity, showed it would create an additional 704 jobs and $52 million in labor income, a projected added value of $118 million to the region.

The second scenario showed the anticipated effects of a 5 percent increase in metallurgical coal shipments. That would increase employment by 193 jobs, add $15 million in labor income and add value of $34 million.

Seventeen locks and dams in southwestern Pennsylvania make navigation possible on three major rivers: the Monongahela, Allegheny and Ohio.

“Should any of these lock and dam sites fail and cause a shutdown of the river system (especially those structures on the Ohio and Lower Monongahela rivers), the effect on the nation’s economy will be very noticeable,” the study said. “Steel, coal, power generation, and all related industries will experience severe detrimental effects if a lock that affects their shipments fails. In a recent study, it was noted that as many as 80 percent of industries that would be cut off from the water would either relocate or shut down.”

The study noted several infrastructure-related difficulties, some of which are already being addressed.

 “The restrictive size of many of the lock chambers creates inefficiencies in barge operations,” it said. “Several lock and dam sites include a main chamber and a smaller auxiliary chamber. The auxiliary chambers are intended to serve as a backup when the main chamber is closed, but they are used frequently for recreational vessels and towboats without barges. Most waterway structures in the region are 70 to 80 years old. A significant national backlog of repairs and modifications to navigation locks and dams is pending appropriations by Congress.”

Mechanical components at these sites are breaking down with increasing frequency, resulting in difficult and expensive maintenance, the study found. Many replacement parts are no longer manufactured.

Additionally, the lock facilities on the Ohio River in Pennsylvania—Emsworth, Dashields and Montgomery—are the only conduit between the Ohio River system and other Pittsburgh area rivers. 

“Unfortunately, they are the oldest and smallest on the Ohio River mainstem,” the study said. “Their capacity at full operation is approximately one-third the capacity of the other locks on the Ohio River.”

Construction of the new lock chambers was approved by Congress in 2016, with some funding for pre-construction and design activities beginning in 2017. However, funding remained limited. In January, Congress passed an appropriations package that allowed the project to receive $22 million in work plan funding to carry out more in-depth design analysis, acquisition of necessary real estate and the ability to solicit for and award the first small construction contract at the Montgomery Locks, with plans for auxiliary lock chamber replacement at all three facilities.

The analysis quotes a Corps study when referring to the conditions on the Allegheny River, saying, “All projects except Lock and Dam 5 operate with a net negative economic impact, and trends show that Lock and Dam 5’s economic positive impact is declining. … [Systems] are rated as failed or failing for one or more component systems at each project.”

The Corps is in the process of replacing the structures at Monongahela River locks and dams 2, 3 and 4, also known as Bradock, Elizabeth and Charleroi, respectively, with two modern, high-capacity locks and dams.

“All existing structures were classified as ‘critically near failure,’ with the dam at Elizabeth classified as an ‘active failure,’” according to the analysis. The project should be completed in 2023.

Challenges And Opportunities

The study indicated trends and developing issues that may become obstacles to further development of industry depending on the waterways should be factored into strategic plans for the Port of Pittsburgh.

Those challenges include: a significant drop in waterborne coal shipments over the past 15 years causing total tonnage to trend downward significantly for the port; a construction schedule for locks and dams that has lagged far behind appropriations for inland waterway modernization projects; zoning issues; problems with benefit-cost analysis methodology for major rehabilitation and new construction projects; and the trade war between the United States and China.
Opportunities that could affect the volume or types of commodities handled on area waterways, leading to the potential for the port to increase its traffic and expand commodity handling also exist.

The study authors say major opportunities include: fossil fuel demand expected to remain strong for decades to come, including fast-growing natural gas and petrochemical use and hydraulic fracturing (fracking), with Pennsylvania having one of the larger shale plays in the United States; Shell’s ethane cracker plant, the largest private investment in the history of Pennsylvania and the first major U.S. project of its type built outside the Gulf Coast region in 20 years; helpful changes to Water Resources Development Act provisions; Energy and Water Development Act appropriations; infrastructure construction legislation; improvement in marine transportation options, including design and technology improvements that will reduce towboat emissions; and markets for metallurgical coal, including both new markets and U.S. Steel’s Clairton works on the lower Monongahela River, the largest coke plant in the country. Coke is used as a fuel and reactant in blast furnaces producing steel.