Great Lakes-St. Lawrence Seaway: Assessing Risks and Measuring Performance Could Improve Maritime Transportation
Released: 2018-09-05T00:00:00

Letter

Background

The Great Lakes-Seaway system’s commercial shipping has traditionally been dominated by vessels carrying bulk commodities such as grain, coal, and iron ore, although there are differences between the shipping on the Great Lakes versus the St. Lawrence Seaway portions of the system. On the Great Lakes side, U.S.-flag (meaning registered in the United States) vessels are primarily “lakers”—meaning they stay on the Great Lakes and generally do not enter the St. Lawrence Seaway. This domestic Great Lakes traffic primarily consists of iron ore, limestone, and coal that are transported to serve the U.S. steelmaking industry. For example, U.S. lakers transport iron ore, mined in northern Minnesota, from Duluth to steel manufacturers at ports such as Burns Harbor, Indiana, and Toledo, Ohio, in the lower Great Lakes. U.S. law requires that maritime transport of cargo between U.S. ports be carried by U.S.- flag vessels.

In contrast to the Great Lakes, the St. Lawrence Seaway is used primarily by Canadian- or foreign-flag vessels that carry cargo between and among U.S., Canadian, and overseas ports. For example, in 2015, 40 percent of St. Lawrence Seaway traffic, as measured by tonnage moved, consisted of cargos shipped between Canadian ports. Another 34 percent of 2015 Seaway traffic consisted of cross-border trade between U.S. and Canadian ports. Only 10 percent of Seaway traffic in 2015 was between overseas and U.S. ports. This trade is generally characterized as “steel in/ grain out”—with imported iron and steel products entering the system destined for U.S. ports and U.S. grain leaving the system destined for overseas ports. For example, foreign vessels transport fabricated steel through the Seaway to manufacturing facilities in the Great Lakes region and then carry grain from the region back through the Seaway to overseas destinations such as Europe.

The Great Lakes and St. Lawrence Seaway portions of the system also differ in how they are managed. On the St. Lawrence Seaway, which opened in 1959, the U.S. Seaway Corporation manages the Snell and Eisenhower locks, which are located in Massena, New York. Like all locks on the St. Lawrence Seaway, the Snell and Eisenhower are single locks without parallel locks for redundancy and are the same dimensions— about 766 feet long and 80 feet wide. On the Great Lakes, the Army Corps manages the Soo locks, which consist of two parallel locks: the larger Poe lock, completed in 1968 (1,200 feet long and 110 feet wide) and the smaller MacArthur lock, completed in 1943 (800 feet long and 80 feet wide). Many U.S.-flag laker vessels are restricted to using the Poe lock, as they are too large to fit in the MacArthur lock.

The construction of a second Poe-sized lock at the Soo locks is currently under consideration. In 1986, Congress authorized the construction of a second Poe-sized lock, but funds sufficient to begin construction were never appropriated. In 2005, the Army Corps calculated a benefit-cost ratio of 0.73 associated with the construction of a second Poe-sized lock, which was not high enough to request funding. In January 2016, the Army Corps initiated an economic reevaluation of the project’s benefit- cost ratio to update assumptions of the 2005 study. In July 2018, the Army Corps released its reevaluation study, which estimated the cost of constructing a new Poe-sized lock to be approximately $922 million with an updated benefit-cost ratio of 2.42. According to the Army Corps, the project will compete with other construction projects throughout the country through the agency’s budgeting process. The decision to fund the new lock also involves review by the Office of Management and Budget for inclusion in the President’s budget, and Congress will need to appropriate funds.

The U.S. Seaway Corporation and Army Corps also differ in their size and role, for example:

The U.S. Seaway Corporation. In addition to managing the two U.S.- operated locks on the St. Lawrence Seaway, the U.S. Seaway Corporation has a role in enhancing utilization of the entire Great Lakes- Seaway system. Its stated mission is to improve the operation and maintenance of a safe, reliable, and efficient waterway and to perform economic and trade development activities with the aim of enhancing utilization. In doing so, the Corporation works closely with its Canadian counterpart (the Canadian Seaway Corporation) to manage the binational St. Lawrence Seaway and provide information on the system to potential users. The U.S. Seaway Corporation is located within the U.S. Department of Transportation and has approximately 140 employees.

The Army Corps. The Army Corps, located within the Department of Defense, maintains a wide range of water resources projects across the country—including the Soo locks—under its Civil Works Program. These projects include over 200 inland waterway locks, such as those along the Mississippi river and its tributaries. The Army Corps’ Civil Works Program is supported by approximately 22,000 civilian employees and is organized into three tiers: a national headquarters in Washington, D.C., eight regional divisions, and 38 local district offices. The Detroit District, which is responsible for the day-to-day maintenance and operation of the Soo locks, falls under the Great Lakes and Ohio River Division.

Following the 2007 joint U.S.-Canadian study, the Army Corps and the U.S. Seaway Corporation developed asset renewal plans, which were originally intended to cover approximately 10 years and which focused on replacing or rehabilitating existing lock components to avoid unexpected lock closures. Both agencies complete routine maintenance and capital improvements on the locks during the 2–3 winter months the locks are closed to navigation every year due to weather conditions.

Congress appropriates funding for both Army Corps’ and U.S. Seaway Corporation’s lock operations and maintenance from the Harbor Maintenance Trust Fund (trust fund). The trust fund is supported through collections of the Harbor Maintenance Tax (also sometimes called a fee), which is charged to vessels carrying U.S. domestic or imported cargo or passengers, primarily at coastal and Great Lakes ports. Congress also appropriates funds from the trust fund for other Great Lakes-Seaway purposes, including dredging (underwater debris removal) to maintain the depth of ports and channels for navigation. In the U.S. portions of the Great Lakes-Seaway, including ports and channels, dredging is primarily conducted by the Army Corps and to a lesser extent the U.S. Seaway Corporation. As of July 2013, the trust fund built up a balance of $8.5 billion. In 2014, Congress authorized targets to annually increase appropriations from the fund to reduce the balance, and required the Army Corps to allocate annually a minimum amount of funds for the Great Lakes-Seaway system.

Two federal agencies within the Department of Homeland Security also have roles in the Great Lakes-Seaway. The U.S. Coast Guard ensures safety in various ways, including by ensuring a sufficient supply of certified U.S. pilots who board foreign vessels to ensure safe navigation. Specifically, the Coast Guard is responsible for annually setting the rates U.S. pilots on the Great Lakes-Seaway charge carriers (referred to as pilotage rates for the remainder of this report). In addition, the Coast Guard is also required by law to maintain heavy icebreaking capability on the Great Lakes to assist in keeping channels and ports open to navigation. Meanwhile U.S. Customs and Border Protection is responsible for screening cargo and passengers entering the United States at ports of entry, including Great Lakes ports.

Great Lakes-Seaway Cargo Levels Have Decreased since 1980 due to Various Economic Factors but Selected Stakeholders Report Recent Increased Diversity of Uses

Stakeholders Identified a Variety of Economic Factors Associated with Decreased Cargo Levels on the Great Lakes- Seaway since 1980

The amount of cargo transported annually on the Great Lakes-Seaway— specifically for U.S. Great Lakes domestic and Seaway cargo—has generally declined since 1980 (see fig. 3). The Great Lakes U.S. domestic “laker” cargo traffic declined from about 115 million tons in 1980 to about 78 million tons in 2016—a decline of 32 percent—according to data from the Army Corps’ Waterborne Commerce Statistics Center. As noted in figure 3, the trend includes many noticeable year-to-year changes over this time period, which may be in response to broader economic factors, as discussed below. Meanwhile, cargo traffic on the St. Lawrence Seaway, which as described earlier is primarily transported by Canadian and foreign vessels, declined by 48 percent over the same time period, from about 74 million tons in 1980 to about 39 million tons in 2016, according to Seaway Traffic Data.

Between 2001 and 2016, domestic Great Lakes cargo traffic levels were driven primarily by iron ore, limestone, and coal—three commodities that are closely tied to the steel industry (see fig. 4). Specifically, these three commodities accounted for 90 percent of the total of about 78 million tons in domestic Great Lakes traffic in 2016—iron ore alone comprised 50 percent. Great Lakes domestic tonnage declined by about 22 million tons overall from 2001 to 2016, with declines in iron ore, limestone, and coal totaling about 21 million tons. Army Corps officials noted that other commodities such as wheat also have a presence on the Great Lakes, with over 5 million tons of wheat traveling on the Great Lakes in 2017 according to these officials.

In contrast to the domestic Great Lakes cargo traffic, the top five commodities on the St. Lawrence Seaway, which comprised 70 percent of total cargo traffic in 2016, show a more varied picture of the types of commodities and trends from 2001 to 2016 (see fig. 5). Grain, the top commodity transported on the St. Lawrence Seaway, comprised nearly a third of total Seaway traffic in 2016. Like the domestic Great Lakes traffic, iron ore and coal have a significant presence on the St. Lawrence Seaway, together comprising 24 percent of cargo traffic in 2016. In contrast to domestic Great Lakes traffic, iron and steel constitute key commodities on the St. Lawrence Seaway, declining from about 3.2 million tons in 2001 to about 2.4 million tons in 2016. Nearly all such iron and steel transports are imports destined for U.S. or Canadian ports. For example, some specialty steel used to package food in cans is manufactured in Europe and imported for use in the United States. Several stakeholders we interviewed told us that a balance between inbound iron and steel shipments and outbound grain exports are important in providing shipping capacity in both directions.

Stakeholders identified various economic factors that have affected Great Lakes-Seaway cargo traffic levels since the 1980s:

Global economic factors. Many stakeholders noted that year-to-year trends in global prices for commodities such as grain, iron ore, and steel affect Great Lakes-Seaway cargo traffic levels. For example, two stakeholders told us that U.S. iron ore is exported through the St. Lawrence Seaway when global iron ore prices are high, allowing producers to cover the costs of shipping while also being price competitive internationally. Further, some stakeholders reported that the increase in globalization since 1980 has resulted in greater foreign competition to U.S. and Canadian commodities exported via the Great Lakes-Seaway. For example, one stakeholder noted that countries that were grain importers in the 1980s, such as Russia, have since become grain exporters, competing with U.S. and Canadian grain internationally. Grain traffic on the St. Lawrence Seaway fell by over 60 percent from about 32 million tons in 1980 to about 12 million tons in 2016, with nearly the entire decline occurring prior to 2001.

Domestic economic factors. Several stakeholders told us that Great Lakes-Seaway cargo traffic rises and falls in conjunction with general economic conditions and trends, such as a sharp decline during the recession in 2009 (see fig. 3 above). For example, one stakeholder reported that a trend in the U.S. economy toward a more service- based rather than manufacturing-based economy has affected Great Lakes-Seaway traffic, reducing demand for manufacturing inputs such as iron ore. As we reported in 2013, manufacturing has accounted for a decreasing share of U.S. employment and economic output over the last several decades.

Industry-specific changes. Changes in industries that have relied on the Great Lakes-Seaway for the transportation of input materials have affected cargo trends, according to several stakeholders. For example, demand for iron ore has been affected by the U.S. steel industry’s move towards smaller manufacturing plants, which are located away from the Great Lakes and which use recycled metal and do not require iron ore. Between 2001 and 2016, domestic Great Lakes tonnage of iron ore declined by 14 percent, from about 45 million to about 39 million tons (see fig. 4 above). Several stakeholders also told us that changes in the power generation industry have reduced shipments of coal. For example, environmental concerns and competitive natural gas prices have led some utilities in Canada and the United States to close coal-fired facilities. St. Lawrence Seaway coal tonnage from 2001 to 2016 declined by 53 percent, from about 5.3 million to about 2.5 million tons (see fig. 5 above).

Greater competition among modes. Several stakeholders said that certain other transportation modes have become more competitive with the Great Lakes-Seaway. For example, several told us that the use of shipping containers—which enable easy intermodal transfer between waterways, highway, and rail—has grown dramatically worldwide in the past several decades with implications for modal competition and the Great Lakes-Seaway. As we previously reported, the largest container vessels in 2016 could carry nearly 18,000 standard 20-foot shipping containers, roughly twice as many as in 2005. However, most modern containerships are too large to use the Great Lakes-Seaway locks and container service on the system is limited. Three stakeholders that sometimes use the Great Lakes- Seaway to import cargo reported that they can also import cargo to the Midwest via coastal ports, where containers can be transferred from container ship to truck or rail for inland delivery. While traffic on the Great Lakes-Seaway has generally declined since 1980, according to data published by the U.S. Bureau of Transportation Statistics, U.S. railroad freight nearly doubled from 1980 to 2015, from 932,000 to 1.7 million ton-miles.

Stakeholders Report Recent Increased Diversity in Uses of the Great Lakes-Seaway

Stakeholders reported a recent increase in the diversity in the use of the Great Lakes-Seaway, although bulk commodities continue to constitute the majority of the 78 million and 39 million tons of domestic Great Lakes and St. Lawrence Seaway cargo traffic in 2016, respectively. The reported increase in the diversity of uses includes:

Project cargo. Some stakeholders told us shipments of project cargo—specialty items that may be difficult to move by rail or truck due to width or weight limits, such as windmill blades, beer fermentation tanks, and mining equipment—have increased in recent years. The tonnage of St. Lawrence Seaway traffic comprised of machinery and other manufactured products, which encompass project cargo, grew from about 657,000 tons in 2001 to about 1.1 million tons in 2016. Project cargos are typically chartered on an as- needed basis. One stakeholder said that carriers would need to offer more ships capable of carrying project cargo as a prerequisite for any large future increases in project cargo.

Containers. Although containers continue to represent a small fraction of total cargos on the St. Lawrence Seaway, container traffic on the Seaway more than tripled from 18,156 tons in 2001 to 64,984 tons in 2016. The only regular container service on the system began in 2014 and operates between ports in Cleveland and Antwerp, Belgium. The service is offered through a partnership between the Port of Cleveland, where officials told us they view the service as a way to attract traffic, and a Dutch carrier, whose representatives view it as a way to educate U.S. manufacturers on the advantages of maritime transportation. Representatives from the carrier said that the service offers 44 sailings annually.

Cruises. Several stakeholders said that there is recent growth of small passenger cruises on the Great Lakes-Seaway with the potential for further growth. Some of those stakeholders said that the region affords advantages including a variety of scenic destinations. A typical cruise may begin and end in Chicago and Toronto, both of which have air connections for arriving and departing passengers. An official from the U.S. Seaway Corporation said that the number of cruise ships operating on the system grew from 5 to 8 and the number of voyages offered grew from 54 to 92 between 2014 and 2018. The official said that additional ships and voyages are expected in the future.

Selected Stakeholders Identified Various Challenges to Using the Great Lakes- Seaway, but the U.S. Seaway Corporation Has Not Fully Assessed Risks

Traditional and Emerging Great-Lakes Seaway Uses Face a Range of Challenges, according to Stakeholders

Stakeholders we met with identified a range of challenges to using the Great Lakes-Seaway and noted that these challenges pose risks to the future use of the system. Although many of the challenges that stakeholders identified—such as the annual winter closure—affect all users of the system, some challenges may impact the system’s various users differently. Specifically, some challenges directly affect the “traditional use” of the system—including the transport of bulk cargos such as iron ore, grain, and steel—while other challenges primarily affect “emerging use” of the system, such as the cruise industry and container market, as discussed below. The cumulative effect of all the challenges represents costs and system reliability risks to shippers that can erode the advantages that the system has traditionally offered over other transportation modes. For example, a representative from one shipping company told us the company frequently compares the cost of using the Great Lakes-Seaway to other modes and noted that the margin favoring the Great Lakes-Seaway is becoming narrower due to the system’s various challenges.

Challenges to Traditional System Use

Stakeholders identified several challenges that affect traditional uses of the Great Lakes-Seaway, including transport of dry bulk commodities and imported steel.

Recent Increase of Pilotage Rates: The majority of stakeholders we interviewed reported that recent rate increases in the costs of securing pilots, who are intended to ensure safe navigation, have significantly increased costs for foreign ocean going vessels operating in the Great Lakes-Seaway. Federal law requires that certified pilots board foreign vessels while in the Great Lakes-Seaway. A pilot may be on board for multiple days on a single voyage, given the size of the system. As part of its responsibility to set rates that pilots charge carriers for the Great Lakes-Seaway, the U.S. Coast Guard revised the methodology used to calculate the rates in 2016. Coast Guard officials told us the methodology had not changed since the mid- 1990s and changes were needed to bring rates up to a sufficient level to attract and retain pilots. Specifically, according to the Coast Guard the number of pilots in the region decreased from 44 in 2007 to 36 in 2014, resulting in pilot shortages and traffic delays. In response, the Coast Guard raised rates. For example, in the St. Lawrence River portion of the system, pilotage rates increased 23 percent between 2014 and 2016. According to one carrier association we interviewed, pilotage is one of the single largest cost items for foreign vessels entering the system. Similarly, representatives from a carrier association told us pilotage rates are a primary challenge affecting the cost competitiveness of the system compared to truck and rail. The methodology used to calculate rates was revised further in 2017 and 2018 and Coast Guard officials report that the recent updates have accounted for factors, such as eliminating a weighting factor based on the size of the vessel. According to Coast Guard officials, these changes corrected factors that were not properly accounted for in previous years and effectively lowered rates compared with 2016. The Coast Guard also authorized an increase in the number of registered pilots, from 36 in 2014 to 45 in 2017.

Condition of the Poe-lock Infrastructure: Several stakeholders that operate on the Great Lakes told us that they are concerned about the condition of the Poe lock (see fig. 6). One Great Lakes shipper representative told us that they believe the Poe lock is at critical risk of lock failure that could result in an unplanned outage and disrupt the U.S. steel industry, which has limited alternatives (rail or truck) to move large amounts of iron ore from Minnesota and Michigan’s Upper Peninsula to steel manufacturing plants in the lower Great Lakes. As mentioned previously, many U.S. laker vessels can only fit in the larger Poe lock at the Soo locks due to vessel size. For example, the Army Corps estimated that 85 percent of the tons of cargo travelling through the Soo locks in 2017 were restricted to using the Poe lock. A representative from a Great Lakes carrier told us that a closure of the Poe lock for repairs during the shipping season could pose further challenges to using the system, since there is currently no redundant Poe-sized lock to which traffic could be diverted. As discussed below, Army Corps officials note they currently lack the means to replace the Poe lock’s upper miter gate—which was identified as critical in 2007—without disrupting navigation. The Army Corps’ asset renewal efforts to improve lock condition, including the Poe lock, are discussed in greater detail below.

Regulatory Complexity Related to Ballast Water: Several agencies are involved in regulating ballast water in the Great Lakes-Seaway, and several stakeholders reported that the complexity of the regulatory environment poses a challenge to using the system. Ballast water is taken up or discharged in a vessel’s tanks to improve stability during voyages and when cargo is loaded or unloaded. Ballast water regulations are aimed at preventing the introduction of invasive species collected in foreign waters from transoceanic vessels and discharging them into the Great Lakes. These regulations involve joint U.S.-Canadian Seaway regulations as well as requirements from the U.S. Coast Guard, U.S. Environmental Protection Agency (EPA), and some states. Specifically, under the current framework, all oceanic vessels bound for the Great Lakes-Seaway are tested to meet the ballast water discharge standards established by the U.S. Coast Guard and the EPA. Most lakers, which are confined to the Great Lakes and unlikely to introduce new aquatic invasive species from outside the Lakes, are not subject to the Coast Guard and EPA requirements. In addition, states are authorized to establish their own vessel discharge control measures, and according to an industry association, several Great Lakes states have their own ballast water requirements. One carrier association representative told us that the various ballast water regulations can cause confusion over how the regulations apply across the system.

U.S. Seaway Corporation officials said they are aware of these issues and since 2007, the U.S. and Canadian Seaway Corporations have been operating under harmonized, joint ballast water regulations intended to eliminate confusion among users of the system. In addition, both Corporations participate in the Great Lakes Seaway Ballast Water Working Group, which is comprised of representatives from the U.S. Coast Guard and others. The group’s mission is to coordinate regulatory, compliance, and research efforts to reduce the introduction of aquatic invasive species via ballast water. The working group reported in 2018 that such coordination will help minimize the creation of a patchwork of inconsistent regulations.

Effect of insufficient dredging: Several stakeholders we met with said that insufficient dredging—removal of sediment and debris from the bottom of ports to maintain water levels for maximum vessel load— can pose a challenge to using the Great Lakes-Seaway. In particular, a stakeholder noted the Army Corps, which is responsible for dredging the major U.S. ports on the Great Lakes, has limited capacity to keep up with all ports’ dredging needs, and that this situation can lead to vessels having to engage in “light loading”— filling to a lower capacity to reduce vessel weight—to access affected ports. The Army Corps reported in 2018 that its dredging backlog has decreased to 13.5 million cubic yards from a high of 18 million in 2013. One stakeholder that uses the Great-Lakes Seaway to ship iron ore told us that light loading causes steel mills to operate at lower capacity when they do not receive the required amount of iron ore. Army Corps officials told us that high water levels in recent years have allowed vessels to carry more tons of cargo. However, because water levels fluctuate over time, those conditions could change and affect load efficiency.

Challenges to Emerging System Use

Stakeholders also identified challenges that particularly affect emerging uses of the Great Lakes-Seaway, such as the cruise industry and container market.

Winter closure: The majority of stakeholders we interviewed told us the annual winter closure hurts the system’s competitiveness because shippers must either stockpile their cargo or find alternative modes of transport during the winter months. While winter closure has been a long-standing feature of the system, it poses a particular challenge for the emerging container market since, as a stakeholder from a carrier association noted, containerized cargo is often time-sensitive and cannot be stockpiled. Securing an alternative transportation mode during the winter closure may be challenging because railroads, for example, prefer to sign year-round contracts for shipping rather than shorter-term winter arrangements. Additionally, some stakeholders told us lack of icebreaking during the start and end of the season, particularly during severe winters, has caused vessel delays. The U.S. Coast Guard’s icebreaking fleet consists of nine vessels on the Great Lakes. In 2016, a U.S. Coast Guard report identified some ice breaking issues that led to 3- and 6-week delays in 2010. The report detailed actions the U.S. Coast Guard took to mitigate future delays, including moving an icebreaking vessel’s home port to a Great Lakes port, but also noted that procuring an additional heavy icebreaker is not cost-effective. An example of potential delays caused by ice was demonstrated in January 2018 when a vessel became frozen in the U.S. Seaway Corporation’s Snell lock during extreme weather conditions, delaying five vessels and necessitating the system’s closure for 11 days. Efforts to free the vessel included ice melting equipment and tug boats.

Limited U.S. Customs and Border Protection resources for clearing passengers and container cargo: Several stakeholders we interviewed told us that the limited capacity of U.S. Customs and Border Protection’s processing of container cargo and passengers poses a challenge for emerging system uses. U.S. Customs and Border Protection is responsible for inspecting travelers and imported cargo that enters the U.S., including at the ports of entry in the Great Lakes regions. U.S. Customs and Border Protection officials told us that their procedures for processing containers and passengers are more involved than traditional bulk cargos and that processes differ by port. For example at the Port of Detroit, cruise passengers are transported by bus to facilities a few miles away for processing. According to a representative from a cruise industry association, this processing creates delays and poses a challenge to the developing cruise industry. Officials from U.S. Customs Border and Protection offices in the Great Lakes region told us that their resources for processing passengers and cargos are located at main ports of entry (such as airports) and that at the Great Lakes ports are lacking appropriate facilities, tools, technology, equipment, and personnel. These same officials said that if the Great Lakes ports were to handle increasing numbers of passengers and containers, U.S. Customs and Border Protection would need sufficient time and budget to add inspection equipment, but that port operators would need to bear the costs of upgrading their facilities.

Inadequate portside infrastructure: Some stakeholders told us that many of the ports along the Great Lakes-Seaway were developed to support bulk commodities—such as iron ore, coal, and grain—and are not equipped to easily handle containers. Bulk commodities do not require portside equipment at destination ports since they are transported by self-unloading vessels and are often delivered straight to private docks, such as iron ore delivered to a steel manufacturing facility. As such, Great Lakes ports generally lack multimodal connections that enable transfer of containers from vessel to truck and rail routes. A representative from a company that ships containers on the Great Lakes-Seaway told us that the port nearest its location does not have cranes to handle containers. Instead, the company uses a different port that is further away because it has the infrastructure necessary to ship containers. Port representatives told us that financing options exist to make upgrades to port infrastructure but consistent and sustainable traffic levels are needed in order to justify investments. For example, an official from the Port of Cleveland told us they have access to their own financing and have added infrastructure to create their container business, including cranes, storage warehouses, and right-of-way for rail connections using revenue bonds issued by the board that oversees the port. An official from the Port of Indiana told us that the port lacks infrastructure to handle containers, but it would find the financing to make investments in container equipment if there were a consistent stream of business.

The U.S. Seaway Corporation Has Not Fully Assessed the Risks That Challenges Pose to System Utilization

Although U.S Seaway Corporation officials told us they are aware of system challenges cited by stakeholders, the Corporation has not fully assessed the extent to which the challenges pose risks to the use of the Great Lakes-Seaway. As previously noted, the U.S. Seaway Corporation’s stated mission is to improve the operation and maintenance of a safe, reliable, and efficient waterway and to improve regional economic and trade development by enhancing utilization of the entire Great Lakes Seaway system. To achieve this mission, the U.S. Seaway Corporation’s strategic plan includes several goals, such as increasing the volume and value of commercial trade through the Great Lakes Seaway System, while promoting cost-effective competition for all users. To achieve these goals, the plan lists several actions, including developing initiatives to improve capacity of the system, and working with carriers, ports, pilots, and other stakeholders to contain costs and foster increased trade in the region. For example, the U.S. Seaway Corporation has taken steps to improve the condition of lock infrastructure—as discussed in greater detail below—and in 2015, hired a full-time employee, stationed in Cleveland, Ohio, who is responsible for advancing the Corporation’s trade and economic development activities in the Great Lakes region. However, the Corporation has not taken steps to identify, analyze and monitor challenges that affect use of the system, such as those identified by the stakeholders we interviewed.

The Standards for Internal Control in the Federal Government states that assessing risks and monitoring changes are key to achieving objectives. Specifically, management should analyze identified risks to estimate their significance, which provides a basis for responding to the risks, and design responses to the analyzed risks so that risks are within the defined risk tolerance for the defined objective. The standards also note that monitoring is key to ensuring that the process used by management to help achieve its objectives remains aligned with changing environments, laws, and resources. The importance of understanding risks to system use in the Great Lakes Seaway was also emphasized by the Conference of Great Lakes and St. Lawrence Governors and Premiers. This conference, made up of Governors and Premiers of the eight states and two Canadian provinces along the Great Lakes-Seaway, developed a 2016 strategy that delineated system challenges and called for an analysis of the total costs of moving cargo through the system and how this compares to other modes. U.S. Seaway Corporation officials told us they are supportive of the Conference’s strategy but are not working to implement this analysis or other elements of the strategy.

Although some actions have been taken to address challenges, officials from the U.S. Seaway Corporation told us that the Corporation has not fully assessed risks to Great Lakes-Seaway use, in part because the Corporation does not have a formal or standing process to monitor risks over time. The U.S. Seaway Corporation has worked closely with other federal agencies over the years, including the Army Corps and Coast Guard, to address challenges. For example, in 2007, it played a role in the joint U.S.-Canadian study that focused attention on the system’s infrastructure, and the Corporation has worked with the Coast Guard and others in the Great Lakes Seaway Ballast Water Working Group. In addition, although U.S. Seaway Corporation officials told us that they have a limited role in addressing challenges involving other agencies, the U.S. Seaway Corporation has some experience assessing system risks that could be useful in better understanding and addressing challenges facing system users. For example, in 2012, the U.S. Seaway Corporation was involved in a study led by the Canadian Seaway Corporation that examined the cost-competitiveness of the Great Lakes-Seaway and included a discussion of risks. These efforts could be useful in developing a process to track risks and monitor how they evolve over time and in relation to current shipping trends so that further actions could be taken to address challenges faced by traditional and emerging users of the system.

Establishing a process to assess and monitor system risks would provide the U.S. Seaway Corporation with greater assurance that the actions taken by the Corporation, including those listed in its strategic plan, and by other stakeholders are working to improve future utilization and ensure efficient use of the system. Without a formal assessment of risks, the U.S. Seaway Corporation lacks information on the cumulative effect of the challenges faced by users of the system, limiting its ability to inform its future actions to help address those challenges.

The U.S. Seaway Corporation and the Army Corps Have Made Progress on Lock Asset Renewal Efforts, but the Army Corps Lacks Associated Goals and Measures

Both Agencies Have Made Progress on Lock Asset Renewal Efforts, but the Army Corps Has Yet to Start Work on a Project Identified as Critical in 2007

The Army Corps and the U.S. Seaway Corporation developed asset renewal plans, in fiscal year 2007 and 2009 respectively, which were originally intended to cover approximately 10 years and focused on modernizing, rehabilitating, or replacing existing lock components to avoid unexpected lock closures. Within a lock there are a number of structural, mechanical, and electrical components that must work together (see fig. 7). Key lock components included in the agencies’ asset renewal plans include:

Approach walls—Help guide the vessel as it approaches the lock chamber and provides a place for the vessel to tie up to wait to enter the lock chamber.

Lock chamber—Concrete structure with rock or concrete floors that contain the vessel while water flows to empty or fill the chamber. The lock structure houses the culvert valves, which fill and empty the lock.

Miter gates—Steel structures that first function as a dam to prevent free flow of water through a lock, then open and close to allow vessels to transit through the lock. The end of the gates are mitered (angled) and use the difference in water levels to provide the force necessary to achieve a nearly water-tight seal.

Embedded anchorages—The connection point between the miter gates and lock walls, which transfers the load from the gate to the lock wall during the opening and closing of the gates.

Over the past decade since beginning these efforts, the Army Corps and U.S. Seaway Corporation have made progress on asset renewal efforts. The Army Corps’ asset renewal efforts have a total estimated cost of about $310 million for work through 2035. Meanwhile the U.S. Seaway Corporation’s asset renewal efforts have a total estimated cost of $189 million for work through 2023 (see fig. 8). (See appendix II for a complete list of both agencies’ asset renewal projects.) According to the Army Corps’ most recent asset renewal plan from 2016 and updates provided by Army Corps officials in May 2018, to date, the Army Corps has spent about $53 million on 18 completed projects out of the about $86 million it has received since 2008 (see below for more information on funding received per year for both agencies). The U.S. Seaway Corporation estimates it has spent $45 million on 16 completed projects of the about $137 million it has received since 2009. According to the Army Corps’ estimates, it has about $257 million in remaining and ongoing work through 2035. Meanwhile, the U.S. Seaway Corporation estimates it has almost $144 million in remaining and ongoing work through 2023. Officials from both agencies stated that asset renewal plans will transition to ongoing capital investment programs that will continue into the foreseeable future. Army Corps Detroit District Officials also emphasized that the list of asset renewal projects frequently changes to account for new information such as results of facility inspections. These officials also noted that a project’s inclusion in the asset renewal plan does not obligate future funds on behalf of the Army Corps, since all projects must compete for funding as part of the annual budget process. Furthermore, these Army Corps officials noted that the total cost estimate could decrease if a second Poe-sized lock is constructed, since traffic could be diverted to the new lock, allowing the current lock to be taken out of service for repairs.

Both agencies have also made progress addressing critical projects identified in the 2007 study, but the Army Corps faces obstacles in finishing key projects without disrupting traffic through the Poe Lock. In the 2007 study, the U.S. Seaway Corporation and the Army Corps identified several critical projects to improve the condition of their respective locks (see table 1). The U.S. Seaway Corporation has completed its rehabilitation of the downstream miter gates on both locks and started work on a long-term project to rehabilitate concrete on the Eisenhower lock. Of the three key Army Corps projects identified in the 2007 study, one is complete, one is ongoing, and the other is remaining. Specifically, the Army Corps has not started work to replace the Poe lock’s upper miter gate because Army Corps officials say they lack the means to replace the gate without disrupting navigation. In the short term, Army Corps officials say they now plan to repair the gate and have requested $2 million in appropriated funds in fiscal year 2019 for the first phase of this work. Army Corps officials also noted they have ongoing work to reinforce the West Center Pier, which has eroded over time and which forms the approach channel for both the Poe and MacArthur locks. However, these officials reported that the cost to complete the work differs greatly ($82.6 million versus $7.5 million) depending on whether a second Poe-sized lock is constructed, since more expensive construction methods are currently needed to avoid disrupting traffic.

In addition to addressing key projects from the 2007 report, over the past decade the Army Corps and U.S. Seaway Corporation have undertaken projects to address emergent issues and make operational improvements to lock infrastructure. For example, in late July 2015, the Army Corps identified the MacArthur lock’s embedded gate anchorages as a critical issue requiring immediate attention. It closed the MacArthur lock for 19 days during the navigation season in August 2015 in order to address the issue at a project cost of $5.8 million. Meanwhile, the U.S. Seaway Corporation is working to install “hands-free mooring” at both of its locks, which is intended to improve the efficiency of lock operations. Hands-free mooring was developed by the Canadian Seaway Corporation, is being deployed on all Seaway locks, and eliminates the need for conventional lines to secure a vessel during the lockage process—instead, arms along the side of the locks extend and secure the vessel using vacuum pads. Once fully implemented, the system is expected to produce benefits such as improved workplace safety and reducing the time to transit a Seaway lock by approximately 7–10 minutes each direction. The U.S. Seaway Corporation expects to have the system completed by the end of the 2019 shipping season, at a total cost of about $18 million, about $7 million of which had been spent through 2016.

The Army Corps and the U.S. Seaway Corporation differ in the level of funding they have received for asset renewal efforts in the past decade, which may have influenced the agencies’ pace of asset renewal efforts. Through fiscal year 2017, the Army Corps received about $86 million (starting in fiscal year 2008) and the U.S. Seaway Corporation received about $137 million (starting in fiscal year 2009) (see fig. 9). Army Corps officials noted they received an increase in funds in 2009 due to the American Recovery and Reinvestment Act of 2009 as well as more stable recent funding due to the Water Resources and Development Act of 2014 which, as mentioned earlier, required the Army Corps to allocate annually a minimum amount of funds for the Great Lakes- Seaway. However, individual Soo Lock asset renewal projects must compete for funding with other Army Corps projects across the country at the district, division, and headquarters level, based in part on a project’s risk rating. In contrast, the U.S. Seaway Corporation is a much smaller organization and directly allocates its funding to projects based on its own condition assessments.

The U.S. Seaway Corporation Has Established Goals and Measures for Asset Renewal Efforts but the Army Corps Lacks Goals and Measures for the Soo Locks

The U.S. Seaway Corporation has a lock performance goal and measure that officials use to monitor its asset renewal efforts, in accordance with government internal control standards, but the Army Corps does not have such a goal specific to the Soo locks. Standards for Internal Control in the Federal Government states that agencies should define objectives clearly and in measurable terms so that performance toward achieving those objectives can be assessed. Similarly, Leading Practices in Capital Decision-Making states that organizational goals should be integrated into the capital decision-making process and that agencies should use performance measures to evaluate results of capital projects to determine if goals have been met. As part of the Department of Transportation’s annual performance reports, the U.S. Seaway Corporation reports its annual progress toward its goal of maintaining 99 percent system availability of the U.S. portion of the Seaway during the navigation season. This measure includes times the system is unavailable for three key reasons: vessel incidents, weather, and lock outages. Of these reasons, the U.S. Seaway Corporation has the most direct control over lock outages. U.S. Seaway Corporation officials told us they use this information, particularly on lock outages, to assess the effect of its asset renewal efforts on lock performance, as part of its agency goal to reduce the risk of delays due to lock equipment failure.

The Army Corps has not established specific operational goals or metrics for the Soo locks that can be used to evaluate the outcomes of its asset renewal efforts. In its annual financial report, the Army Corps Civil Works program has a nationwide strategic goal to facilitate the transportation of commerce goods on the nation’s coastal channels and inland waterways and a corresponding goal and measure for the number of instances where mechanically-driven failure at locks resulted in delays of more than a day or week. This national measure aggregates Army Corps locks across the country, including over 200 in the inland waterways such as the Mississippi River. However, this national goal and measure does not provide information on the operational performance of individual locks, including the Soo locks.

Detroit District Army Corps officials told us that they have not established operational goals or measures specific to the Soo Locks because the Army Corps’ project approval process involves prioritization based on risk rather than operational performance. Specifically, these officials noted that asset renewal efforts are measured by improved risk scores, which indicate higher reliability and less likelihood of unscheduled outages. While this process allows the Army Corps to prioritize individual investment decisions according to risk, it does not define a specific measurable goal for the operational performance of the Soo Locks. As a result, the Army Corps lacks a key tool to assess whether the investments made in the locks have resulted in improved lock performance, such as reductions in outages and delays to its users. Furthermore, the Detroit District has access to information that could be used to develop measure performances for the Soo Locks—specifically the Lock Performance Monitoring System, which contains lock operations data such as scheduled and unscheduled outages. According to Detroit District officials, these data are used for the Army Corps’ nationwide lock performance measure.

The Army Corps has previously noted the need for local lock performance goals and measures to improve asset management. In December 2006, the Great Lakes and Ohio River Division, which has the Soo locks in its jurisdiction, recommended in a 5-year plan the development of specific goals for the Great Lakes navigation system for use in prioritizing investments, but the plan has not been updated since then. Furthermore, a 2013 Army Corps commissioned report on best practices in asset management recommended the development of key performance indicator target values to monitor the effectiveness of asset management. Likewise a senior official in the Army Corps’ Asset Management Program Office—which shares leading asset management practices across the Corps— stated that local and regional offices have the ability to develop local lock performance goals and measures to assess the local results. This official also noted the goals and measures to evaluate the progress of asset renewal efforts and lock performance would allow for greater transparency to stakeholders. Without goals and associated measures for the Soo locks, the Army Corps cannot link its asset renewal efforts to improved lock performance and cannot demonstrate the effect of these efforts to stakeholders.

Conclusion

The Great Lakes-Seaway serves as an essential transportation route linking U.S. manufacturing, agricultural, and other industries in the nation’s interior to the global economy. Yet, this system faces various challenges that, according to stakeholders, pose risks to traditional and emerging uses that could limit the system’s ability to enhance the region’s economy. The U.S. Seaway Corporation’s mission to improve the system’s utilization and reliability provides it with a unique vantage point for assessing the cumulative risks that these challenges pose on the system’s current and future utilization. Establishing a process for identifying, analyzing, and monitoring the system’s risks would better enable the U.S. Seaway Corporation to design future actions that it, and other stakeholders, could take to address those risks. Similarly, the Army Corps’ efforts to rehabilitate the Soo locks are critical to U.S. manufacturing and trade in the Great Lakes region. Regardless of the outcome of the decision on whether to build another Soo lock, the importance of the Poe lock remains, as indicated by the concerns raised by stakeholders regarding its condition. Given the criticality of the Poe lock and the more stable funding for asset renewal since 2014, it is important that the Army Corps assess these funds’ potential effect on the Soo locks’ performance. Without establishing goals and measures for the Soo locks, the Army Corps is not able to demonstrate whether the substantial investments made so far and planned in the future will improve the Soo locks’ performance and by extension, the reliability of the Great Lakes navigation infrastructure.

Recommendations for Executive Action

We are making the following two recommendations: The Administrator of the U.S. Seaway Corporation should establish a process to identify, analyze, and monitor risks to the system’s use to inform future actions to address those risks. (Recommendation 1)

The Army Corps Director of Civil Works should, in coordination with the Commanders of the Great Lakes and Ohio River Division and the Detroit District, develop and adopt goals and measures to assess the performance of the Soo Locks and assess outcomes of asset renewal efforts. (Recommendation 2)

Agency Comments

We provided a draft of this product to the Departments of Defense, Transportation, and Homeland Security for comment. In comments, reproduced in appendixes III and IV, the Departments of Transportation and Defense concurred with our recommendations. All three departments also provided technical comments, which we incorporated as appropriate.

We are sending copies of this report to the appropriate congressional committees, the Secretary of Transportation, the Secretary of Defense, the Secretary of Homeland Security, and other interested parties. In addition, this report is available at no charge on our website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact me at (202) 512-2834 or flemings@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V.

Appendix I: Objectives, Scope, and Methodology

This report examines (1) how Great Lakes-St. Lawrence Seaway (Great Lakes-Seaway) shipping trends have changed since 1980 and what factors have shaped recent trends, (2) selected stakeholders’ perspectives on challenges to using the Great Lakes-Seaway, and (3) to what extent the U.S. Army Corps of Engineers (Army Corps) and the Saint Lawrence Seaway Development Corporation (U.S. Seaway Corporation) have made progress on lock infrastructure renewal efforts and how the agencies measure performance of these efforts.

To understand shipping trends, we analyzed cargo traffic by tonnage for both the St. Lawrence Seaway (published jointly by Canada’s St. Lawrence Seaway Management Corporation and the U.S. Seaway Corporation) and for domestic Great Lakes cargo traffic (from the Army Corps’ Waterborne Commerce Statistics Center) from 1980 to 2016. Although the Seaway data represents all cargo traffic that travels on the St. Lawrence Seaway, we analyzed the Army Corps’ domestic data, which accounts exclusively for traffic between U.S. ports on the Great Lakes system. As a result, some cargos that travel on the Great Lakes— such as between U.S. and Canadian ports or between Canadian ports— are not included, although such movements would be captured in the Seaway data to the extent they enter the Seaway. Although the Army Corps’ data include information on Canadian and foreign cargo, we did not analyze or report this information because (1) of the limitation, which we confirmed with Army Corps officials, that the data exclude Great Lakes cargo movements between Canadian ports and (2) including this information would potentially double-count trips that also entered the St. Lawrence Seaway. We selected the 1980 to 2016 timeframe because it provides a sufficient timeframe to describe long-term trends using consistently collected data from both sources and 2016 is the most recent year for which both sources have published data. We also analyzed cargo trends for the top five commodities by tonnage from 2001 to 2016 for domestic Great Lakes and St. Lawrence Seaway traffic. We selected the years 2001 to 2016 to capture trends over the past approximately 15 years. The selected commodities represent the majority of cargo traffic for both sources. Specifically, the top five domestic Great Lakes commodities made up 96 percent of total cargo tonnage from 2001 to 2016, while the five commodities for the St. Lawrence Seaway represented 71 percent of total St. Lawrence Seaway cargo tonnage for the same time period. We assessed the reliability of the data by reviewing documentation and interviewing Army Corps and U.S. and Canadian Seaway Corporation officials and determined these data were sufficiently reliable for our purpose of describing trends. To describe factors that have shaped recent trends, we reviewed available government and industry reports, such as the 2007 Great Lakes-Seaway study, the 2013 U.S. Department of Transportation Maritime Administration’s Status of the U.S.-Flag Great Lakes Water Transportation Industry, and the 2016 Conference of Great Lakes and St. Lawrence Governors and Premiers’ Strategy for the Great Lakes-St. Lawrence River Maritime Transportation System.

To understand factors affecting recent trends and challenges to using the system, we interviewed 24 stakeholders representing a range of traditional and emerging system users and experts. We interviewed representatives from three carriers that transport goods on the system and three associations that represent current U.S., Canadian, and foreign vessel traffic: Interlake Steamship Company, FedNav, Spliethoff, Lake Carriers Association, Chamber of Marine Commerce, and the Shipping Federation of Canada. We interviewed four Great Lake ports stakeholders, including three ports that represent a range of cargo levels and mix of cargos—Port of Duluth, Port of Cleveland, and Port of Indiana, Burns Harbor—and their association, the American Great Lake Ports Association. We interviewed six stakeholders that represent traditional or emerging shipping uses (e.g., cruises and containers) on the system: Cleveland-Cliffs Inc.; Tata Steel; CHS Inc.; General Motors; American Iron and Steel Institute; and the Great Lakes Cruising Coalition. We interviewed two maritime experts and a freight forwarder which helps arrange shipping logistics: Dr. Walter Kemmsies, Martin Associates, and Midwest Transatlantic Lines. Lastly, we interviewed representatives from five Great-Lakes Seaway region and maritime stakeholder groups: Conference of Great Lakes and St. Lawrence Governors and Premiers, Great Lakes Commission, Council of the Great Lakes Region, Committee on the Marine Transportation System, and the American Pilots’ Association. We grouped the challenges identified by stakeholders based on whether challenges affect traditional use of the system or emerging use of the system. Although the results are non-generalizable, stakeholders were selected to represent a range of known perspectives. To better understand the context of these challenges, we interviewed officials from the Army Corps, U.S. Seaway Corporation, U.S. Coast Guard, and Customs and Border Protection.

To understand the agencies’ progress on asset renewal efforts and how they measure performance of these efforts, we analyzed available information on projects, status, and estimated cost from both agencies. To assess the agencies’ asset renewal progress we reviewed the Army Corps’ most recent asset renewal plan from 2016 with updates provided by the Army Corps in May 2018. Likewise, we analyzed information provided by U.S. Seaway Corporation officials in March 2018 on project- by-project expenditures from 2009 to 2016 and cost estimates from 2017 to 2023. Although we describe the agencies’ cost estimates for their asset renewal efforts, it was beyond the scope of this engagement to check these cost estimates for accuracy and completeness. Likewise, although we describe the agencies’ processes for selecting projects for funding, we did not verify these processes by, for example, selecting projects and ensuring the selection met the agencies’ established procedures for selection. We reviewed U.S. Seaway Corporation and Army Corps relevant reports, available asset renewal plans, and documentation related to program goals and performance measures, such as annual financial and performance reports, from 2007 through 2018. We also visited the Soo locks at Sault Ste. Marie, Michigan, and the Seaway locks at Massena, New York, in summer 2017 and interviewed officials from both agencies. For example, within the Army Corps we interviewed officials from the Detroit District, headquarters’ navigation and Asset Management Program offices, the Inland Navigation Design Center, and the Institute for Water Resources. We compared agencies’ efforts to GAO’s Standards for Internal Control in the Federal Government and to Leading Practices in Capital Decision-Making. Although the Great Lakes- Seaway system is binational, we are not evaluating the Canadian agencies, although we did interview officials from the Canadian St. Lawrence Seaway Management Corporation to understand their process for asset renewal.

Appendix II: List of Asset Renewal Projects

The Army Corps information below is based on the most recent asset renewal plan report from 2016 for the Soo locks, with updates provided by the Army Corps in May 2018. The U.S. Seaway Corporation information includes project-by-project expenditures for fiscal years 2009 through 2016 and cost estimates for work from fiscal years 2017 through 2023 provided by U.S. Seaway Corporation officials in March 2018. To align projects between the two agencies, we removed from the U.S. Seaway Corporation list: a dredging project (since the Army Corps information does not include dredging), one Seaway International Bridge project that lacked an associated cost estimate, and discontinued projects. It was beyond the scope of this review to check these cost estimates for accuracy and completeness.

Replace lock utility lines and steam system, used for de-icing Fabrication of second set of stoplogs to allow for full dewatering of the lock Poe Replacement of quoin and miter blocks that help transfer load from the gate to the lock wall Replace gate latches to protect the miter gates Replace bevel gears that help move the miter gates Replace protective relays for power plant Replace switchgear assembly B, to assist with de-watering Replace sluice gate valves for Poe and Davis pump well which are used to dewater the locks Repair west center pier, which forms the north wall of the approach channel (outer portion of the wall)

Modernize steamplant, which supports de-icing Repair west center pier, which forms the north wall of the approach channel (inner portion of wall closest to lock chamber)

Rehabilitation of Davis pump well which is used to dewater locks for winter maintenance Rehabilitate ship arrestor booms that are designed to protect miter gates from vessel impact Gate 1 coating/ weld repairs (upstream end of lock)

New miter gate replacement (spare) for upstream end Rehabilitation of Poe pump well used to dewater Poe lock for winter maintenance Fabrication of replacement stoplogs (replacement for originals from initial Poe Lock construction)

Rehabilitate ship arrestor booms that are designed to protect miter gates Rehabilitate lock fill/ empty valve machinery Rehabilitate gate skin plate and replace gate coating Repair southwest pier, which serves as south upstream approach wall Reinforce piers mooring bollards along approach wall (Southwest Pier)

Project

Project

Appendix III: Comments from the Department of Transportation

Appendix IV: Comments from the Department of Defense

Appendix V: GAO Contact and Staff Acknowledgments

GAO Contacts

Staff Acknowledgments

In addition to the contact named above, Matt Barranca (Assistant Director), Emily Larson (Analyst in Charge), Amy Abramowitz, Melissa Bodeau, Michelle Everett, Aaron Gluck, David Hooper, Alyssa Hundrup, SaraAnn Moessbauer, Joshua Ormond, and Shane Spencer made key contributions to this report.