Proposed 2017 Budget Includes Cuts for Ports, USCG and Navy

On Tuesday, the Obama administration released its proposed federal budget for FY2017, and several provisions have already generated heated debate. 

First, in a preview announcement last Thursday, the president proposed the imposition of a $10.25-per-barrel oil tax to fund transportation initiatives, projected to raise about $320 billion over a decade. Phase-in would be completed by late 2021.

The tax would apply to all crude oil used for domestic consumption; exports would be exempt. Details on collection of the proposed tax were not immediately available. With Brent trading at $30 per barrel, the tax would represent roughly a 30 percent rise in the domestic price of crude oil.

Republicans in Congress have already said that the tax will go nowhere. “President Obama’s proposed $10 per barrel tax on oil is dead on arrival in the House," said House Majority Whip Steve Scalise (R-LA).

The American Petroleum Institute (API) criticized the tax in no uncertain terms in a release Tuesday. API President and CEO Jack Gerard said that the fee was intended to “choke off America’s energy renaissance and keep fossil fuels in the ground at the expense of consumers . . . Lower-income and middle class Americans, for whom essentials like transportation and grocery bills consume a greater percentage of their income, would be harmed the most by these outrageous tax proposals.”

Second, the president's transportation budget provides significant funding for land and intermodal programs, but allocates less to port and harbor initiatives than in the FY2016 budget. The $950 million requested by the president for maintaining harbors is about 20 percent less than the amount appropriated by Congress for this year.

Kurt Nagle, president and CEO of the American Association of Port Authorities, expressed the ports' dissatisfaction with the administration’s allocation of funds. “We’re pleased to see and support the increased funding requested for surface transportation infrastructure, but deeply troubled by a grossly imbalanced budget that would cut funding for maintenance and modernization of federal navigation channels, the critical waterside infrastructure that connect our ports and nation to the world marketplace.”

Additionally, the proposed budget includes just $4.6 billion for the U.S. Army Corps of Engineers’ Civil Works program, a 30 percent cut from this year's appropriation; $1.1 billion for the Corps' Construction account, down 40 percent; and $2.7 billion for the Corps’ Operations and Maintenance account, down about 15 percent.

“Our nation’s waterways . . . are critical to the transportation supply chain and to world competition for shippers, yet we continue to see slashed funding,” said Michael J. Toohey, president and CEO of industry group Waterways Council Inc. (WCI).  “Congress has consistently demonstrated its understanding of the importance of infrastructure investment.  WCI will work vigorously to reverse the Administration’s recommendations in the halls of Congress.”

The president’s proposed budget also included reductions for the maritime service branches of the armed forces.

The budget for the U.S. Coast Guard includes about 40 percent less for vessel acquisition, construction and improvements (AC&I) this year, and about 10 percent less than the 2016 budget overall. The AC&I budget includes $150 million for design work on a new heavy icebreaker and $100 million for design and analysis for the new Offshore Patrol Cutter, both major acquisition priorities for the USCG. At present the USCG has only one active heavy icebreaker.

The budget proposal for the Navy makes cuts of $7 billion to its baseline funding, in part through an accelerated cruiser modernization program and the formal shuttering of an inactive carrier air wing, bringing the total number of air wings down to nine – a number the Navy says is sufficient to meet deployment needs on its current aircraft carriers.