The great drought of 2012 was the worst disaster to hit the Mississippi River in 50 years. Will it turn into an even bigger mess for taxpayers?
On a brilliant March day aboard the towboat John R Ingram, Rick Calhoun, head of Cargill’s American barge business, was avidly pointing out the sights as we eased down the Mississippi River toward New Orleans at 11mph. There was a lot to see. As a bald eagle floated overhead, the crane operator of a giant Mumbai-bound ship gobbled coal from a Cargill barge. In front of our boat was a vast array of barges, a row of five lashed together with another five, then another five—25 in all, stretching out 1,000 feet, filled with 45,000 tonnes of coal and grain.
Industry surrounds us. Dow Chemical, Nucor Steel, Exxon Mobil, Archer Daniels Midland, Bunge and many more industrial giants operate massive complexes on the Mississippi. Taken together, the 150-mile stretch of the river from the Gulf of Mexico up to Baton Rouge is the busiest port in the Western Hemisphere, moving some 400 million tonnes of cargo a year. Cargill alone moves more than 90 commodities on the river and operates 1,300 barges. Ingram Barge Co, which owns the towboat I rode, has roughly quadruple that number. In all, 16 percent of America’s coal, 20 percent of petroleum products and nearly all the fertiliser consumed here are shipped on the Mississippi. The action here is so thick that the crew of the Ingram calls this “suicide alley”.
There’s actually a better name for it: Corporate welfare. Once the thriving centrepiece of 19th- and early-20th-century logistics, and despite the massive profits rung up by companies like Cargill and Ingram, the river barge business has become a ward of government largesse. Washington picks up more of the cost of riverborne shipping than any other type of logistics enterprise in the US except, perhaps, resupplying the International Space Station. And yet, despite the efforts of both the Bush and Obama administrations and the growing brawl over shrinking federal dollars, the Mississippi’s river of subsidies stands little chance of shrinking.
In fact, those who profit from this subsidy are working mightily to increase it, using the oldest maxim in government intrusion: Never let a crisis go to waste. The crisis, in this instance, is the historic drought conditions in the Midwest that have squeezed water levels on the Mississippi. With navigation theoretically threatened, the river barge industry is now clamouring for billions of additional dollars for new reconstruction projects with the backing of some powerful heartland politicians. Their threat: Inaction will lead to strangulation of America’s great water highway, with dire economic consequences. “There’s no contingency plan for the river shutting down,” says Calhoun. “We don’t just have railcars and trucks sitting around.”
That may or may not be true. But one thing is certain: Trains and trucks largely pay their own way. Barges don’t. The US Army Corps of Engineers spends roughly $800 million a year building, operating and maintaining locks, dams and channels on the river system. Of this, the barge operators pay a minuscule share, a diesel tax of 20 cents per gallon that goes into something called the Inland Waterways Trust Fund. Last year, the shippers’ part amounted to just $80 million, barely 10 percent of the annual spend on construction and maintenance. The barge operators don’t pay any kind of toll or fee to move their cargos through the 200-plus locks on the river system. The trust fund is nearly broke.
Compare that with railroads, which got a lot of land gifts a century ago but now cover all the costs of construction and maintenance along their rights of way—amounting to $20 billion in 2011. Federal highway outlays were $40 billion last year, though $30 billion of that came from fuel taxes and other fees. Both rail and road move far more cargo than rivers do.
Still, in recent months, Calhoun and his colleagues have bellied up to the federal trough, taking advantage of the 2012 drought, to bend politicians’ ears and press their case for even bigger handouts. “Cargill is agnostic about transportation,” Calhoun says of his employer. “We use rail, and we load thousands of trucks a day, but the waterways are extremely important to our customers. Farmers need the waterways to get their product to customers.”
But somewhat surprisingly, given that Obama’s home state of Illinois is tied inextricably to the river, no such declaration was made nor did the Missouri water come. Traffic was slowed and operators were forced to push ‘tows’ of just 15 barges instead of 25 or 40. And although the Corps of Engineers agrees that the drought was as bad or worse than any in 50 years, they made sure that even around St Louis they maintained a navigation channel at least 9 feet deep and 300 feet wide, and spent $10 million (all taxpayer dollars) blasting a series of rock pinnacles around Thebes, Illinois that had been a longtime source of navigation headaches.
(This story appears in the 03 May, 2013 issue of Forbes India. To visit our Archives, click here.)