Barge Music

us marine high way map

By Jack O'Connell 2015-11-26 16:53:44

(Article originally published in July/Aug 2015 edition.)

They move silently downriver, silhouetted against the evening sky, six or nine or fifteen to a tow, transporting everything from North Dakota wheat and shale oil to Indiana corn or Kentucky coal or Illinois soybeans or propane and heating oil and chemicals with unpronounceable names from nearby refineries. 

But unless you live on or near a river you’ve probably never seen them. Yet they put the gas in your car, the diesel in your truck, the propane in your tank, the food on your plate, the clothes on your back, and the roof over your head.

Their towboats toot their whistles once in a while, ranging from long and plaintive notes in heavy fog to short, high-pitched sounds that send a warning to oncoming traffic or signal that the tow is approaching a lock or canal. But for the most part they are silent, like the river itself, moving slowly and inexorably toward their destinations. 

As a youngster growing up in New York City I would watch them moving on the Hudson River and passing under the George Washington Bridge. They were majestic in their silence, and the tugs had names like the Emma Moran or Peggy McAllister with distinctive lettering and colors emblazoned on their stacks. The barges just had numbers on them. A couple of the fathers in the neighborhood worked on the tugs, and they reportedly made good money. They still do. 

Delivering the Goods

Barges are big business. At last count there were nearly 30,000 of them plying the 28,000 navigable miles of America’s inland and coastal waterways. Most are hopper barges used to transport grains and aggregates, sand and salt, cement and coal. The rest are mainly tank barges that carry petroleum products like heating oil, asphalt, gasoline and distillates. They can be covered or uncovered, single- or double-hull. They’re pushed or pulled by 4,000 tugs, which averages out to about seven barges per tow. 

Barges come in all shapes and sizes, but a typical river barge is 200 by 40 feet and can carry up to 1,500 tons of product or 10,000 barrels of liquid. A single covered hopper barge can transport about 60,000 bushels of wheat, the equivalent of 16 rail cars. Sixty percent of America’s grain exports travel by barge, either down the Ohio and Illinois and Mississippi rivers to New Orleans or via the Columbia River to Portland, Oregon. Twenty percent of America’s coal travels by barge. 

But the single biggest commodity – by both volume and value – is petroleum, a category that includes everything from crude oil to petrochemicals. And the fastest-growing segment of that is shale oil. Crude-by-barge is now three years old, and it plays a vital role in moving both Bakken oil from North Dakota and Eagle Ford oil from Texas to refineries along the Gulf Coast, where roughly half the nation’s refining capacity is located. 

According to a new report (“Crude by Barge: An Evolving Industry”) from my friend Kevin Sterling at BB&T Capital Markets, a barge a day was added to the nation’s fleet in both 2013 and 2014 to meet the growing demand for crude-by-barge services. That has slowed to about half that rate today following the precipitous decline in oil prices. But on any given day there are upwards of half a million barrels of crude traveling by barge on the nation’s waterways.

Growing almost as fast are shipments of chemicals used in everything from plastics to tires to textiles. Shale gas is now so abundant and cheap that foreign manufacturers are setting up shop in the States as fast as they can. Meanwhile, domestic producers like Dow and DuPont and Marathon are rapidly expanding their own facilities. 

The rule of thumb is one barge = 15 rail cars = 60 trucks. So one 15-barge tow can take 900 trucks off the road. Or two unit trains off the tracks. Think of the savings in terms of pollution and noise and the benefits to public health, not to mention the reduction in wear and tear on the nation’s highways and bridges and tunnels. And that’s just the beginning. Barges are cheaper, much cheaper. They’re also safer. And they’re just as reliable. 

When it comes to moving shale oil, a typical 30,000-barrel tank barge can carry the equivalent of three standard barges or 45 rail tank cars at about one-third the cost. Compared to a pipeline, barges are cheaper by 20-35 percent, depending on the route. And amazingly, barges are sometimes just as fast. BB&T’s Sterling says it can take up to 40 days for Bakken crude to reach the Gulf Coast by pipeline. Rail averages five to seven days. Barging from St. Louis to New Orleans takes three or four days with one or two days of loading and offloading time.

America’s Marine Highways

Given all these advantages, why are America’s inland waterways – and barges in particular – so underutilized? The head of the Maritime Administration (MARAD), Chip Jaenichen, laments that the U.S. moves just five percent of domestic freight shipments by water compared to more than 40 percent in the European Union. Compounding the problem is the fact that 80 percent of the nation’s goods move on just ten percent of its landside corridors (think I-95).
 
Confronting the problem head-on, Jaenichen and others have called for the expansion of America’s Marine Highway System as part of an overall National Maritime Strategy, which is expected later this summer. It makes a lot of sense and would take a lot of trucks off the road and help relieve congestion on the rails, plus it has congressional approval.

The idea is to link waterborne routes with surface routes (either rail or road). So, for example, the recently approved M-55/M-35 Container-on-Barge Marine Highway Project would connect Minneapolis and Chicago to the north with St. Louis, Memphis and New Orleans to the south via the Mississippi River. It would take containers off the highways and rails and put them on barges. The “M-55/M-35” designation indicates the route would parallel I-55 and I-35, major north-south Interstate highways. 

On the East Coast, the M-95 Marine Highway would parallel I-95, the nation’s most heavily travelled Interstate, in moving containers from Miami to Boston and even Portland, Maine. A similar initiative on the West Coast, the M-5 Marine Highway, would run parallel to the I-5 and connect San Diego to the south with San Francisco, Seattle and even Anchorage, Alaska to the north.

The Marine Highway System currently consists of 22 Marine Highway Routes (those already in operation) and 11 Marine Highway Projects (works in progress). Marine Highway Routes include corridors, connectors and crossings. Corridors are long, multistate routes that parallel major national highways. Connectors are shorter routes that serve as feeders to the corridors. Crossings are even shorter routes that transit harbors or waterways and offer an alternative to congested and often lengthier landside routes. 

In Virginia, the M-64 Marine Highway Connector provides container-on-barge service between Richmond and Hampton Roads and links to the M-95 Marine Highway Corridor. Farther north in New York Harbor, the Trans-Hudson Freight Connector Project would expand an already existing railcar-on-barge service from one to two barges a day. That’s right, railcars on barges. It’s an idea that’s been around for a long time and was a dominant mode of short-term transit in the late 19th and early 20th centuries. Each barge can carry up to 18 railcars, and each railcar takes four trucks off the road.

Show Me the Money

There are challenges, of course. The main one is lack of infrastructure. New terminals and offloading facilities are needed to handle the transfer of containers from rail or truck to barge and vice-versa. Equally challenging is the dilapidated condition of much of America’s inland waterways system – the network of canals, dams and locks that hold it all together and make navigation possible, half of which is over 50 years old.  To bring the system back to optimal working condition would take tens of billions of dollars and years of ongoing construction. 

And just where would the money come from? The Inland Waterways Trust Fund pays half the cost of any repairs and is funded by a fuel tax on users, but it’s essentially broke. The federal government pays the other half and, despite the Administration’s pleas for new infrastructure investment, Congress seems uninterested. 

The “Fourth R”

It’s not all doom-and-gloom, however. The Marine Highways System has legs, and in June MARAD’s Jaenichen joined New York City Mayor Bill de Blasio in announcing the latest initiative – the reactivation of the South Brooklyn Marine Terminal as a working container facility. South Brooklyn will link with the nearby Red Hook Container Terminal as part of America’s Marine Highway.

There was a time, some of you may remember, when the Brooklyn waterfront, along with its more famous Manhattan neighbor, was a center of maritime activity. But with the advent of containerization in the 1950s and 1960s the focus shifted to Newark and Bayonne and Jersey City, which made for a shorter transit in and out of New York Harbor. Now, to relieve congestion at the New Jersey ports and reduce the number of trucks crossing the city’s bridges, the South Brooklyn Terminal will once again be open for business while Red Hook will expand its container-on-barge service. 

The Waterways Council, a well-respected industry lobbying group, likes to talk about the “fourth R,” meaning rivers and their aging navigational infrastructure. While roads, rails and runways get all the attention, rivers are largely overlooked. But they are equally vital to the flow of goods and the nation’s economic health. And hope is on the way. 

Last year President Obama signed the 2014 Water Resources Reform Development Act (WRRDA) into law, which authorizes the U.S. Army Corps of Engineers to perform essential water-related infrastructure projects. More importantly, WRRDA provides the funding for such projects – subject, however, to congressional appropriations, which can be slow in coming. 

Investor Perspective

If you’re looking for a way to play all this, there are a number of companies that stand to benefit. On the infrastructure side, there’s Fluor Corp. and Jacobs Engineering, two big players when it comes to locks and dams and terminals. For barges, there’s Trinity Industries, which has the added benefit of making railroad tank cars. And on the marine side, there’s Kirby Corp., the biggest operator of inland tank barges and a major player in coastal barges as well, and SEACOR Holdings, which has multiple interests in hopper barges, terminal facilities and Jones Act tankers. Meanwhile, listen to the music! 

The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.