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Amid budget cutbacks, U.S. shipping sector seeks more federal funds

The Panama registered Mol Explorer cargo ship is pictured at the Port of Long Beach, California December 4, 2012. REUTERS/Mario Anzuoni
The Panama registered Mol Explorer cargo ship is pictured at the Port of Long Beach, California December 4, 2012. REUTERS/Mario Anzuoni

By Andy Sullivan

WASHINGTON (Reuters) - As Congress imposes deep spending cuts on everything from national defense to child care, shipping industry executives are urging lawmakers to spend hundreds of millions of dollars more on a river network that accounts for a declining share of the nation's domestic freight.

During a lobbying blitz in the past month, roughly 130 tugboat and barge operators fanned across Capitol Hill, meeting with lawmakers and congressional staffers.

The shipping executives argued that the U.S. government should spend $150 million more each year to upgrade the Depression-era locks and dams that enable them to ship soybeans, coal and other commodities down the nation's major rivers. In return, the shippers said, they would pay more in fuel taxes.

For an industry that already is subsidized heavily by the U.S. government - and whose growth in moving domestic freight is being outpaced by rail and interstate trucking - pushing such an argument at a time of budget cutbacks is navigating upstream.

But barge operators have cultivated a bipartisan group of river-state lawmakers, including Republican Senator Lamar Alexander of Tennessee and Democratic Senator Bob Casey of Pennsylvania, who appear ready to fight for the industry's interests when the Senate takes up the issue this week.

The "Battle of the Barges" may not command the public's attention the way that the debates over gun control and immigration have. But the outcome could signal whether the traditional way of doing business on Capitol Hill - coalition-building, campaign donations and face-to-face lobbying - can still get results in an era when partisan conflicts have made it hard to advance legislation of nearly all types.

Barge executives leading the lobbying effort include Peter Stephaich of Campbell Transportation Co in Pennsylvania.

"It does seem to be unusual these days to have both sides come together and support something like this," Stephaich said last month, as he wrapped up a meeting with Alaska Democratic Senator Mark Begich and headed to a fundraiser for Republican Representative Bill Shuster of Pennsylvania.

Begich and Shuster have not announced their positions on the shipping industry's call for more government funding.

Opposition to the industry's push hasn't become public in the Senate, but that is likely to change soon. Taxpayer watchdogs and environmental groups see the industry's current subsidies as overly generous, and vow to fight any increase.

"The idea of expanding a subsidy to the most subsidized form of transportation this side of space travel is not going to happen," said Steve Ellis of Taxpayers for Common Sense. "It's really beyond the pale."

Conservative groups such as the Club for Growth also are signaling they could join the shipping industry's opponents - a move that would get the attention of Republicans wary of facing a challenge from the right when they run for re-election.

The shipping industry has a long history of support in Congress, dating to the early days of the country when rivers were the most reliable form of cargo transportation.

In recent decades, freight rail and interstate trucking have eclipsed the shipping industry. In 1980, 27 percent of domestic freight moved by water; by 2009 that figure had dropped to 11 percent, according to the U.S. Department of Transportation.

Waterborne transportation still plays a key role in moving grain, coal and other bulk commodities from the nation's interior states down the Mississippi River to Louisiana, where they are sent around the world.

Through a fuel tax, the industry pays about 10 percent of the $800 million or so spent each year to keep the nation's rivers open for navigation. The government covers the rest.

By contrast, a fuel tax on car and truck drivers covers about 80 percent of the cost of maintaining the nation's highway system. Freight rail operators cover all of their costs.

The barge fuel tax is supposed to cover half the costs of new construction, but it has not increased since 1994 and does not generate enough revenue to build new locks and dams in a timely manner. At the current pace, some planned projects won't be completed for 77 years, according to an industry trade group.

Industry officials also say they need more help to repair existing structures - a problem they say was vividly illustrated in 2011, when a 280-foot section of canal south of Chicago collapsed, disrupting commercial traffic.

A WORTHY INVESTMENT?

Some analysts question whether a massive new spending push would yield the benefits that the shipping industry claims.

Decaying locks and dams can contribute to delays in shipping, but the system's reliability is affected much more by droughts, floods and other weather events that largely are beyond human control, said Don Sweeney, a transportation specialist at the University of Missouri-St. Louis.

"Are these expenditures likely to yield the kind of economic benefits that would make them good expenditures?" he asked. "I'm not convinced at all."

The shipping industry's proposal would boost its contribution by 30 to 45 percent, to about $110 million a year. In return, the government would more than double its annual contribution to $270 million, on top of the $500 million to $600 million it spends each year on dredging and other waterway maintenance. The government would pay for any cost overruns.

The industry aims to insert the proposal into a broad water-resources bill that the Senate will take up next week.

To push the plan, the Waterways Council, an industry trade group, boosted its spending on lobbyists to $315,000 in the first three months of this year, much more than past year.

The industry's lobbyists include John Breaux, a former Democratic senator from Louisiana, and Bob Livingston, a former Louisiana Republican who oversaw spending issues as chairman of the House Appropriations Committee during the 1990s.

SUPPORT FROM RIVER STATES

The shipping industry's backing in Congress dates to at least 1848, when Congressman Abraham Lincoln fought President James Polk's push to make the industry pay its own way.

More recently, Congress turned back efforts by presidents Bill Clinton, George W. Bush and Barack Obama to get users to pick up a greater share of their costs.

Republican lawmakers often are skeptical about increasing domestic spending, but those from states with significant river traffic have joined Democrats in expanding funds for the U.S. Army Corps of Engineers, which maintains commercial waterways.

That pattern is apparent in the Democrat-led Senate, where Alexander and Casey back the industry's plan.

In the Republican-led House, a similar bill is supported by Democratic and Republican lawmakers from states such as Alabama and Illinois that see a large amount of barge traffic. The bill's lead sponsor, Ed Whitfield of Kentucky, represents a district that borders the Ohio and Mississippi rivers.

While outside groups like Club for Growth use the threat of a primary challenge to wield influence over lawmakers, the shipping industry has taken the opposite approach. Industry employees donated $28,000 to Whitfield last year.

This year, the industry has sent donations to other lawmakers who could prove influential in the debate - including Shuster, who will draft his own water-resources bill as head of the House Transportation and Infrastructure Committee.

American Waterways Operators, an industry trade group, gave $2,500 to Shuster in February and hosted a fundraising dinner in April. The amount raised is not yet public.

A Shuster spokesman said the congressman had not decided whether to back the shipping industry's plan. Stephaich, the industry executive, sounded confident of Shuster's support.

"We've got a desire, a will on both Congressman Shuster's side and in the Senate, with the help of Senator Casey, to hopefully have all of this come together," Stephaich said.

(This story has been refiled to change 5th paragraph reference from "next week" to "this week")

(Editing by David Lindsey and Lisa Shumaker)

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