Sutton: Low Water Hampers Industry Productivity

Inland Rivers, Ports and Terminals Inc. (IRPT) presented speakers who examined current conditions and evaluated the foreseeable future as part of its annual conference September 19-21 in Louisville, Ky.

State Of The Industry

Patrick Sutton, chief operating officer of American Commercial Barge Line (ACBL), discussed the state of the inland navigation industry.

ACBL operates 130 to 180 boats ranging from 1,500 hp. to 11,100 hp. and roughly 4,300 barges along the 12,000-mile inland river system. Sutton explained the company’s model as a hub and spoke design, with the Lower Mississippi being the hub and various tributaries being spokes. It can also be thought of as a heart pumping blood to outlying veins and arteries, he said.

Along the main hub of the Lower Mississippi, ACBL might run as many as 46 barges in a southbound tow and 56 northbound, but far fewer barges can make up tows upriver and in smaller tributaries.

Because of the interconnectedness of the system, “A small bump in production can be a ripple effect in the whole system, and you saw that last year with the low-water crisis,” Sutton said.

Sutton addressed three major areas considering the state of the industry. He said what is needed are “the right people, the right equipment and a stable and sustainable network.”

Aging Infrastructure

He began by talking about that network and its infrastructure, noting that infrastructure is more than just locks and dams but also includes dikes and revetment, some of which are under the water’s surface so may not be thought about as often.

“The Corps has done a great job over the decades of building a system so that it flushes itself,” he said. “That’s in normal conditions.”

There are 155 facilities on the inland river system, including 185 lock chambers, and more than half are at least 50 years old, Sutton said.

“That’s pretty scary because, like I said, that whole network has to function together, all through that heartbeat,” he said. “If you get stopped at one area, you now slow the system up, and what happens to costs? Costs go up, and efficiency goes down.”

The river industry is unique in that competitors have a long history of working together for the greater good of the network so that priorities set drive the efficiency of the entire system, Sutton said.

One infrastructure concern Sutton sees is how long it takes to build infrastructure and how much costs inflate during the interim. The example he gave was the construction of a new lock chamber at Montgomery Locks and Dam, part of the Upper Ohio Navigation Project.

When approved, the project was expected to take 10 to 12 years and cost $837 million, Sutton said. As of this year, it is now expected to cost $1.4 million to fund it to completion. While projects under construction will eventually be funded through other bills, those increased costs mean the next chamber to be built, the proposed 1,200-foot chamber at LaGrange Lock and Dam on the Illinois Waterway that is part of the Navigation and Ecosystem Sustainability Program (NESP), could easily be pushed back by a decade, he said.

“That’s going to continue to compound,” Sutton said of construction delays. “This problem is going to catch up with us if we can’t speed this up.”

He said it was important not to blame the Corps of Engineers or any other single entity for those delays, “But this is a problem that has to be addressed, and it affects all of us. I encourage everyone to stay engaged in that.”

Low-River Conditions

In looking at river conditions, Sutton also expressed concern about low water.

While the Lower Mississippi gauge at Memphis reached a record low last year, it has nearly done so again this year, but a month earlier.

However, at this stage last year, the river had between 75 and 80 days of closures, including three events that closed the river for a week at a time, Sutton said. This year, he said, one event had closed the river three days so far.

“Industry is working extremely well, working on priority dredging,” he said.

Still, he estimated, “We’re probably working at 40 percent of our productivity level.”

Towing companies must reduce the size of their tows because of the shrinking channel, he said, noting that a 25-barge maximum on the Lower Mississippi was not uncommon. Additionally, they can’t load barges as fully with a maximum draft now that is 9 feet or 9feet, 6 inches in some reaches.

“Even in the midst of what I would consider a worse condition this year than we had in our record condition last year, we’re in much, much better shape due to not having so many closures, so thanks to the Corps and the Coast Guard for working with us on those priorities,” Sutton said.

Aged Equipment

Sutton also addressed the aging barge fleet. About 22,000 barges run in the system, of which about 4,000 are liquid barges and the rest are open or covered hopper barges, with covered hopper barges driving the system, he said.

Most barges have about a 30-year lifespan, he said.

“You’ve got thousands of barges that are going to retire in the next three- to five-year time period, probably more of the five-year mark,” he said.

At the same time, he said, steel prices have greatly increased, especially for sheet steel, which is what barges are typically made from.

“Just 10 years ago we were selling barges for half the price that they cost today, so we’re all faced with a pretty strong problem to solve in that the investment in these barges is fairly significant, and you’re not getting double the life,” he said. “You’re just paying twice as much per barge.”

Some companies are now implementing strategies to increase the lifespan of barges instead of replacing them, he said. That includes replating the hulls and adding new covers, “doing things that will give you another five to 10 years out of a barge that you typically wouldn’t do.”

Sutton said he doesn’t believe the price of steel is going to be coming down much.

“I think that is something the industry has to be aware of,” he said.

However, he said he believes the demand for barge use is going to remain strong.

“We think the demand is going to be there,” he said. “We just have to figure out how to replace the fleet.”

Recruitment And Retention

Of all the issues addressed, Sutton said his biggest concern is attracting and retaining its workforce.

“You’ve got to have great people to run this business,” he said.

Following the worldwide COVID pandemic, ACBL determined its greatest workforce loss was among experienced deckhands. Routinely, he said, companies are running while 20 to 25 percent short on staffing.

However, he said, those in the workforce already are making up much of that gap.

“People are working over,” he said.

“They’re working more hours. You’re doing more with less, and over time people are getting hired.”

Increasing the number of available employees isn’t solved by just increasing wages, as competitors will just do the same, Sutton said. Instead, he said; it requires training and a culture shift based on understanding.

“The industry is pretty concerned about the safety and wellbeing of our teammates,” Sutton said. “We’re spending a lot more time thinking about their wellbeing on the boat, their mental wellbeing, things we wouldn’t be thinking about in the past.”

ACBL now has 70 to 80 people full-time in training programs, being paid for their training time. Primarily, he said, those are deckhands who are moving up to mates.

“We’ve got to get people there faster,” he said of promoting deckhands beyond that entry-level position. “It used to be that it would take four or five years to get to that level. We have to have somebody at that level in two years. The only way you’re going to do that is you have to train them, and you have to support them.”

While some people complain that those entering the workforce today don’t have the same priorities of previous generations, complaining doesn’t solve the problem, Sutton said.

Instead, he said, ACBL is doing what it can to make the job a better fit for the available workforce. In general, the company has learned, if it can retain deckhands for three, 30-day hitches, they are likely to stay with the company.

“But getting them over the hump of that first hitch, that second hitch, that being away from home, that’s tough,” Sutton said. “It’s a different lifestyle, so we’ve had to really think about that new generation.”

Along with that thinking comes making changes, he said.

“We have to embrace the new generation,” he said. “We have to understand what makes them tick. We’ve got to adjust, and we’ve got to focus on how do we make them feel better about what they’re doing. We want to see them happy. So that’s all right in line with our training program. You want to see your path. We want to provide the path. We want those two to come together, and we’ll retain you, and we’ll build the next generation.”

The industry must also do a better job in telling its story, Sutton said, noting that six years after coming aboard as a deckhand, employees could be in the wheelhouse, making six figures while working just six months out of the year.

“I just think we’ve got to do a better job promoting that,” he said. “Within the culture, most people don’t even know the river exists, let alone that there are these great opportunities.”

Move Toward Sustainability

Additionally, Sutton said, he sees another big culture shift when it comes to the industry beginning to take more of an interest in efforts to be environmentally friendly.

While more harbor vessels are electrifying, “The big challenge on the mainline is how to recharge boats that never stop, and how do you do that and provide enough propulsion to move the tonnage that we move up and down river,” Sutton said.

Initial efforts seem to be focusing primarily on the liquid side of the market, he said, as that business tends to be more centralized near Houston and the coastal canals.

“It’s coming, and I think we have to embrace it,” Sutton said of sustainability efforts. “For those who do embrace it, it’s going to pay off long-term. … But it’s not cheap, and it’s not easy. It’s something we have to invest in continually and work on together.”

Political Impacts

Brett Richards, a Washington, D.C.-based special counsel for Jones Walker LLP, and Chloe Cantor, the Tennessee Valley Authority’s Washington representative handling government relations for TVA’s west district, looked toward how changing politics could affect the industry’s future.

Grant Programs

Richards discussed the aftermath of the infrastructure package, saying that really, it’s more like the industry is right in the middle of it.

Two major legislative investments, the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA), have transformed the landscape and opportunities for federal investments on a wide range of projects for inland ports, Richards said.

“The bottom line is there is a lot of money that’s been invested by Congress into infrastructure, including port-related upgrades and things of that nature,” he said.
IIJA was signed into law in November 2021, providing $1.2 trillion in federal spending between fiscal year 2022 and fiscal year 2026, including $17 billion for port infrastructure.

The IRA, signed in August 2022, directs nearly $400 billion in new federal spending toward reducing carbon emissions.

The main federal grant program of use to ports is the U.S. Maritime Administration’s Port Infrastructure Development Program (PIDP). The first round of grants went out in 2019, and 11 of the 41 ports receiving funding were inland ports, or about 25 percent, Richards said. The average award was $12 million.

The PIDP program received $2.25 billion in $450 million installments through FY 2026. An additional $212,203,512 was then made available to the program under the FY 2023 Consolidated Appropriations Act, resulting in a total of $662,203,512 in FY 2023 grant funding.

The second round of funding under the enhanced PIDP program could be released in October, as that is when funding was announced last year, Richards said.

“It’s important to point out that there are only three years left of this enhanced funding,” he said.

Notices of Funding Opportunity for the program are typically released in January or February with application deadlines set for late April or May.

Additional federal grant programs that could benefit ports include the Consolidated Rail and Safety Infrastructure (CRISI) Program, which is mainly focused on railroads but includes eligibility for ports ($1 billion allocated per year through FY 2026); the Nationally Significant Multimodal Freight and Highway Projects (INFRA) Program ($1.6 billion allocated per year through FY 2026); the National Infrastructure Project Assistance (MEGA) Program ($1 billion per year through FY 2026); and the updated United States Marine Highway Program. Additionally, the Environmental Protection Agency offers funding through the Clean Ports Program and the Diesel Emissions Reductions Act (DERA).

The application for DERA is currently open, with a deadline of December 1 and anticipated notification of award selection in March 2024 with award disbursement in summer 2024.

The Federal Highway Administration also has its own Low-Carbon Transportation Materials Grants, Richards said.

WRDA 2024

Cantor addressed what to expect in the Water Resources Development Act of 2024, noting that the bill has had wide bipartisan support in the most recent years.
However, in both 2020 and 2022, WRDA was ultimately attached to other legislation to ensure its passage before the end of the year.

In 2022, the final, conferenced version of WRDA was attached to the National Defense Authorization Act, or NDAA, which is a must-pass bill. The final vote tallies for the combined bills were 83-11 in the Senate and 350-80 in the House.

“In a time of divided government, I think we’re going to see this again,” Cantor said of attaching the bill to other legislation.

The Senate Committee on Environment and Public Works officially kicked off the WRDA 2024 cycle in July with a hearing to consider non-federal stakeholder perspectives. The House is expected to begin its process soon, Cantor said.

She told those in attendance that it is never too early to share their projects and priorities with congressional offices, most of which will work with the various committees as well as Corps of Engineers districts, divisions and headquarters to vet requests. The more time staff have for this process, the better, she said.

“Even if your idea isn’t fully baked, get it on the radar,” Cantor said.

She added that it should be expected that WRDA 2024 will not be completed on time, however, saying that it is typical for WRDA bills to be delayed during presidential election years.

Additionally, Cantor said one of the main themes of the 118th Congress has been spending cuts, and the 2022 WRDA cost more, in part due to the return of earmarked authorizations. This could lead the House and Senate to pursue a WRDA that has a lower overall cost this time.

How it could go about doing so isn’t fully known, but Congress previously authorized the Corps to provide loans or loan guarantees for nonfederal dam safety projects. Congress could consider expanding the types of projects the Corps can fund, she said.

Finally, Cantor cautioned, WRDA 2024 could deauthorize previously authorized projects that have not received funding. She urged those in attendance to stay engaged in the process, especially if there are concerns about project deauthorization.