Progress on America’s Marine Highway

For the United States to compete in the global market it is imperative that it have dependable, efficient, and current infrastructure for the transport of goods.  Infrastructure for that transport needs to be overhauled so that it is in keeping with a larger populace leading to heavier use, and with the sustainable principles of lesser dependence on fossil fuels.  Transportation must be made more efficient and impose fewer external costs.                

For more than a decade, Europe and the United States have been seeing highway traffic congestion from transport of goods by trucks stagger their economies.  Europe moves roughly 40% of it freight through container and roll on/roll off transport.  The United States needs a federal program to encourage using ocean coastal waters to help address this problem here.  In the U.S., short sea shipping has yet to be utilized to the extent it is in Europe.  However, there has been a start, but there are still some hurdles to implementation here.

Implementation of America’s Marine Highway

In part to address this concern, in 2007 the Bush Administration passed the Energy Independence and Security Act,(1)(“Energy Act”) which included an initiative to develop America’s Marine Highway (“AMH”) specifically addressing waterborne movement of passengers and non-bulk freight between origins and destinations that would otherwise be served by roads and highways. (Also known as Short Sea Shipping(2), and Trucking by Water(3)).

As required by the Energy Act, the U.S. Department of Transportation, Maritime Administration (“MARAD”) has released its Report to Congress in consultation with the Environmental Protection Agency, dated April 2011.  Although this report is long overdue,(4) it cites many possible positive outcomes from this project.  It shows a tentative start to this program that will have long-term positive effects, and demonstrates the need for government action and refunding.(5)

AMH specifically addresses routes that MARAD has designated marine corridors along the Northeast, Atlantic, Gulf, Pacific, Mississippi River and St. Lawrence waterway.(6) These corridors correspond with some of the most congested highways in this country, particularly the I-95 corridor on the east coast, and I-5 corridor on the west coast.  Without waterborne transport, these highways will become progressively more congested over time.

Improved cost-effectiveness

1 gallon of fuel is burned to move 1 ton of cargo 70 miles by truck vs. 420 miles by rail vs. 575 miles by barge.  All of these forms of transport should interconnect and be used to maximum efficiency.  Fuel efficiency is being improved for all forms of transportation, including that which will reduce marine engine sulfur, carbon and particulate emissions.(7)  Regulations require that the fuel efficiency of marine vehicles must improve.(8)  The MARAD report cites The Environmental Protection Agency, in “Nonroad Engines, Equipment and Vehicles: Diesel Boats and Ships"(9) regarding the Clean Air Nonroad Diesel Rule requirements to decrease allowable levels of sulfur in fuel used in marine vessel by 99 percent compared to levels allowed before the effective date of 2007.  Further developments have required still better fuel efficiency and reduction of green house gas emissions.  Addressing these external costs is rightfully the role of government, because external costs are not necessarily within the purview of private business.(10) Marine transport is the most efficient means, yet it is not used to its optimum capacity.(11)

Costs of Not Increasing Marine Transport

The costs of not fully implementing a marine highway have been documented in many articles and informational sources for over a decade, and are addressed in the MARAD report.  Pollution, reliance on foreign oil, lost time/productivity due to highway congestion, stress, effects on populations that live near highways, waste, national security vulnerability and exposure during crises are all products of the transportation system as it functions today, and have been for some time.

MARAD reports on studies regarding the cost-effectiveness of specific Marine Highway services.  For example, the Institute for Global Maritime Studies found that “medium-sized, uncongested ports could be inexpensively modified to handle ro/ro ships at an investment of about $5 million each."(12) Compare $5 million per port modification with the cost of infrastructure maintenance to keep the same system in place.  The I-95 Corridor Coalition estimates that the investment along Interstate Highway 95 on the length of the United States east coast would be a whopping $47 billion per year to respond to the expected increase in activity.(13)

Federal Funding

 Part of the initiative of the Energy Act was the extension of Capital Construction Funds to owners to create incentive to build vessels for containers and ro/ro shipping through tax deferrals.  Another incentive was the authorization of $2 billion for MARAD’s Title XI loan guarantee program(14)

MARAD’s April 2011 report concludes that “the full range of public benefits of Marine Highways services will not be realized based solely on market-driven transportation choices."(15) The funding was intended to address this problem.  The external costs and benefits make the involvement of government necessary and vital.  Financing multiple vessels in order to be able to service actual transportation needs will almost certainly require federal assistance.  However, the final version of the Act does not provide additional Title XI authorization.(16)  This 25-year term debt is too important to lose.  The use of CCF funding works in collaboration with the Title XI program. As for the FY 2012 Budget, $54.1 million of the $76.6 million of the existing Title XI authority is slated for cancellation because of the state of the economy.(17) Without adequate funding, the Marine Highway idea is just that, a good idea.  In a bad economy, long-term investments that bring the kind of return which will be realized by AMH are essential. The budget cuts to this program demonstrate a shortsightedness that is disheartening at best. 

Other Obstacles

Jones Act

The Merchant Marine Act of 1920 (the Jones Act) regulates maritime commerce in U.S. waters.  It requires that all goods transported by water between U.S. ports be carried by U.S. flagged ships constructed in the U.S., and that ownership of those ships be at least 75% by U.S. citizens.  

Opponents of the Jones Act believe that it is protectionist, and pro-union.  They would like to see shipowners allowed to choose where their vessel will be built.(18)

Those who believe the Jones Act should be maintained point out that one of the purposes of AMH is to create jobs.  Requiring ships be built in the U.S. will create those jobs here.  Having shipbuilding capacity and maintaining a strong U.S. merchant marine is a vital factor for the nation’s sealift capability, national security, emergencies, and the economy.(19)

Harbor Maintenance Tax

The Harbor Maintenance Tax (“HMT”) is a tax on cargo transported via ships.  It does not apply to truck or rail cargo.  Its stated purpose is to pay for dredging and other maintenance of ports.  The tax is applied to cargo transported by vessel regardless of the number of times it is paid.  A feeder service between, for example, Halifax, Nova Scotia and New England ports would have to pay at every port.  When the cargo is loaded onto another vessel, tax would have to be paid again.  This drives up costs of shipping, making AMH less competitive with rail and truck transport.  Given these tax redundancies, and the external costs that AMH attempts to address, some tax relief was advocated by the Chamber of Shipping in America’s President Joseph J. Cox when he testified before the Subcommittee on Coast Guard and Maritime Transportation, June 14, 2011.(20)            

These do not seem to be insurmountable problems.  The question to be asked is:  When the economy begins growing again in a meaningful way, to what extent can we position our maritime transportation sector with America’s Marine Highway to take advantage of that growth thereby creating jobs, and improving the means by which we transport goods?

Nancy E. Zimmer graduated from Smith College (B.A., cum laude, 1998), and City University of New York School of Law, (J.D., 2001).  She is admitted to the U.S. District Court for the District of Massachusetts, and the First Circuit Court of Appeals, and is a trained mediator.  She is also a former commercial fisherman and commercial fishing boat owner.  She is a member of the Maritime Law Association of the United States.  Nancy can be contacted on +1 508 432-2121 or by email at zimmer@sealaw.org