New thinking on deep US digs
Some of the dredging problems plaguing US ports are being sorted out, but the issue of protectionism could hamper a turnaround, reports Martin Rushmere.
In line with the protectionist mood sweeping through politics and commerce in the US, dredging has been caught up in the arguments. The only facts that everyone agrees on are that the industry is sheltered from foreign competition by both the Jones Act and the Foreign Dredge Act of 1906. However, even the word “sheltered” can elicit accusations of bias.
Neither law has stood the test of time when it comes to world economic changes. Legal interpretations of the Jones Act have allowed for some of the steel used in hulls to come from foreign, primarily Southeast Asia, yards — provided the final fabrication is done in a domestic yard. Also, foreign vessels are given temporary permission to bring in goods for specialised industries such as offshore oil production.
The dredging law originally stipulated that the whole vessel had to be made in the US but this was diluted in 1992 to apply only to the hull. However, as with the Jones Act, the crews have to be US citizens. Companies and operators still have to be US-owned.
A bureaucratic layer built on top of this is the continuing involvement of the United States Army Corps of Engineers (USACE). This has to be the overall leader and the overseer of projects. Through no fault of its own, the USACE became the punch bag of politicians twanging their braces by complaining about government inefficiency.
According to international trade analyst Gary Busch, it could take as long as 16 years for a dredging proposal for a new port project (as opposed to maintenance work such as silt removal) to receive approval. Much of the blame for this was due to the USACE having to get authorisation from various agencies in government and submit hundreds of pages of reports about minor details.
Complaints reached a crescendo about six years ago and in 2014 Congress passed a law that limited studies for navigation channel improvements to a maximum of three years.
Federal politicians have acknowledged their guilt in scooping up money from the Harbour Maintenance Tax — the primary source of revenue for channel improvement and deepening in ports and inland waterways — for use in other federal programmes. To atone for this, they are increasing the amount of the tax that is going to its intended purpose. About $10bn is outstanding.
Says Sean Duffy, executive director of the Big River Coalition, the voice of Mississippi River and tributaries users and industries: “Going back 10 years, it has been estimated that 59% of the major waterways are only at 35% of their authorised draft levels. This is just not acceptable. If the Harbour Maintenance Tax had a zero balance (all the money being used for maintenance), those channels would not have a problem. There has been progress — 10 years ago only 50% of the tax was being allocated and now it is 80%-90%.
“When I first went to deal with Washington," says Mr Duffy, "nobody knew what I was talking about. Now the Harbour Maintenance Tax is a buzzword.”
True cost of works
The Association of American Port Authorities (AAPA) says that $28bn is needed over the next 10 years to fully maintain deep-draft navigation channels and $6bn to modernise the channels. “Additionally, the United States must establish a sustainable system for funding channel maintenance over the long term,” it adds.
For 2018, the total USACE budget for specified construction programmes is $1bn while navigation channel work gets $946m.
As with so much in the US, sources of financing often cause intense debate — another reason for the delay in projects — with politicians joining in. The rule which prevailed until the last 10-15 years whereby government money paid for harbour deepening has now been changed to allow private and non-federal developers to pay for initial costs.
Huge credit for this has to go to Savannah, Georgia, which became fed up with the deadlock on its harbour expansion and sought outside financing. Seattle has gone down the same route for deepening its harbour to 57 feet, making it the deepest in the country. USACE approved the chief engineer’s proposal in June — more than three years after the feasibility study started — and a “detailed design phase” will now begin.
Now, the AAPA notes that confidence in the industry is increasing. Jim Walker, director of Navigation Policy and Legislation at AAPA, says: "Funding for navigation channel improvements and maintenance has been increasing. This has given dredging companies confidence in the US market leading to capital investments in new equipment.” Two new large hopper dredges have begun operations this year — the Ellis Island, owned by Great Lakes Dredge and Dock, and the Magdelan, owned by Weeks Marine.
Inevitably, comparisons with international operators come up. Popular opinion is that foreign companies, particularly the Dutch, are significantly more efficient for dredging operations.
Mr Busch says the largest European companies could complete US projects for less than half the project costs and in about a third of the time, and in the past 10 years, European companies have invested $15bn in new dredgers, compared with only $1bn in the US.
Mr Duffy has a different perspective. “Other countries do not have the same regulations and concerns as us regarding material disposal and disposal sites. Size is not the only answer. A 35,000 cubic yard capacity of a dredger is too big for a disposal site with 30-foot depth. The question I ask of dredgers is how big their draft is.”
He says project dredging in the US is overly complicated because of a lack of federal funding. “Recent success stories show that states and port authorities are paying for the front-end cost, hoping to recoup some of the cost later from the federal government. Channel maintenance is under the same limitations, but I don’t believe we have hit the level where some of the corps districts are limited by the budget.”
Mr Duffy points out that lack of funding is one of the main reasons for the mismatch between supply and demand of equipment. “It’s hard for a company to convince its board of directors to buy a new dredger costing between $100m and $150m when funding might not be available for a project.”
One port executive, speaking privately, says: “I regularly hear Dutch claims of being able to do twice the production at half the cost of US dredging. The US market is highly competitive, and if these technology claims were true, domestic companies would install the equipment.”
Mr Walker takes an upbeat view of the future of US dredging. “This year there are six navigation channel deepening projects underway — the most in over a decade. Navigation channel maintenance is increasing, enabling progress towards proper depth and widths for safe and efficient freight movement. Congress and the USACE continue to pursue opportunities to streamline processes while protecting the environment. These efforts demonstrate good attention to ports and freight movement. “
But there is an element of nervousness in the industry over the White House’s policies — or lack thereof — for dredging and the environment. Says one port executive: “It’s a somewhat tricky situation and people are a little more hesitant. Nothing has really stalled but everyone is waiting and is on edge about what will happen.”
For dredging companies, the future is built around protection. Says Bill Doyle, executive director of the Dredging Contractors of America: “The industry is an integral part of the 500,000 jobs supported by the maritime industry. Investment decisions are reliant on the perceived permanence of the Jones Act — the single, most fundamental domestic maritime law that has enabled the overall US maritime industry to generate $100bn in annual economic output, $30bn in annual employee compensation, $11bn in annual tax revenues, and $46bn in value added.
“I am a big supporter of a strong and vibrant US Merchant Marine,” says Mr Doyle, “of which the US-flag dredging industry plays a vital role. I believe in my companies and their business models of building ships and vessels in US shipyards, registering their vessels in the United States and staffing them with American officers and crew.”
And yet in April, the Wall Street Journal published a scathing editorial opinion that said dredging in the US has become inefficient and behind the times because of protectionism. It seems the sediment is shifting.
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