2017: The WJ’s Annual Review Of Waterway Events

Continued low barge rates, crumbling locks, natural disasters and political uncertainty marked the year 2017 on the inland waterways.

The river cruise industry was revived by a series of significant investments. Another record crop year was marred by repeated unscheduled lock closures at the height of harvest season, although the approaching activation of Olmsted Lock and Dam on the lower Ohio River gives reason for optimism. President Donald Trump appointed strong maritime advocates to key cabinet positions, yet key parts of his infrastructure and trade agendas remain unfulfilled and contested. “America’s Energy Coast” weathered a series of hammer-blows from nature to continue its growth and expansion.

Finally, the towing and barge industry continued to prepare for Subchapter M’s final deadline date of July 20, 2018.

Continued Low Rates

For the barge industry, the dominant story of the past year has been continued low barge rates. The plunge in freight rates is a consequence of many factors converging into what one observer called a “perfect storm” for barge owners.

Coal cargoes on the rivers have collapsed as hundreds of aging coal plants were closed and natural gas rapidly replaced coal.

As oil and gas wells have gotten more efficient, they are using less heavy drilling equipment and frac sand to produce a barrel of oil, slowing growth in those barge cargoes.

Rapid pipeline growth, with some pipeline projects accelerated under a new pipeline-friendly administration, has increasingly absorbed liquid cargoes being generated by the fracking boom.

But the main cause has been overbuilding of barges over the past few years. “Somewhere between 1,000 to 1,500 barges need to be retired to create tightness in the market,” Ken Eriksen, senior vice president-energy and transportation at Informa Economics IEG, told The Waterways Journal. “For every new barge built, at least one needs to be retired, maybe two.”

The result of the overcapacity has been a 40 percent decline in revenues and a sobering 71 percent average decline in operating income, according to industrial tax specialist John Woolard. The downturn does not appear to be approaching levels of the early 1980s, when a similar overbuilding, then driven by outside investment, depressed barge rates for years.

So far barge companies are absorbing the pain. In January, Mark Knoy, president and CEO of American Commercial Barge Line, told The Waterways Journal that with a higher percentage of today’s barge fleet concentrated in larger, more integrated companies, the industry is more disciplined and better positioned to weather the next few years.

Infrastructure Agenda?

As 2017 closes, the extent to which the urgent needs of America’s infrastructure—especially its aging and crumbling lock and dam system—will be addressed remains uncertain.

Trump made infrastructure a key talking point during his campaign. His stated agenda was to spend $1 trillion on infrastructure, with 20 percent being direct federal spending coming from Congress and 80 percent, or about $800 million, being raised privately or through public private partnerships (P3s). Many experts and economists have been skeptical that P3 financing could raise the amounts necessary to address lock and dam and other infrastructure needs.

A June 7 visit by Trump to Cincinnati focused unprecedented media attention on locks and dams. In preparation for that visit, the White House website said, “America’s infrastructure has fallen to 12th in the world and that is unacceptable. Every American depends on our roads, rails, ports and airports, and the president is committed to fixing this problem, not just pushing more liabilities onto future generations.” The visit included a gesture by the president to a passing towboat on the river behind him.

The Waterways Council Inc. praised the visit and the attention it generated, saying, “Our country has not seen this kind of leadership on infrastructure since President Franklin D. Roosevelt’s 1930s New Deal to build our locks and dams, or since the 1950s by President Dwight D. Eisenhower to construct the National Defense and Interstate Highway system. … As President Trump said, the nation will rebuild rivers, along with roadways, runways and railways.”

But so far, the hopes raised by the president’s infrastructure promises remain unrealized.

At the beginning of 2017, Mike Toohey, president and CEO of Waterways Council Inc., pointed out in these pages that Trump’s top two priorities were the repeal and replacement of the Affordable Care Act (ACA) and tax reform. Those two issues took up most of the political “oxygen” in Congress during the past year, with bitter and divisive fights both between Republicans and Democrats and among different factions of Republicans, resulting in failure to repeal the ACA.

At this writing, Trump’s administration plans to roll out its long-delayed infrastructure plan, with full details, in January. The Wall Street Journal predicted a “rough road” for it in Congress.

Strong Appointments

Several of Trump’s top cabinet picks brought strong connections to the maritime industry.

On January 23, Trump appointed Michael Khouri, a Republican, to head the Federal Maritime Commission (FMC). Khouri is a 45-year veteran of the inland marine industry, beginning as a deckhand for Crounse Corporation and working his way up to senior executive positions with American Commercial Barge Line and MERS/Economy Boat. He has served as an FMC commissioner since the end of 2009.

The Senate unanimously confirmed Elaine Chao as secretary of transportation on January 31. Chao’s family ran a shipping business, and she became widely respected during previous tenures as secretary of labor throughout both terms of President George W. Bush, and as deputy secretary of transportation under President George H.W. Bush. Like Trump, Chao is a strong supporter of public-private partnerships to build infrastructure projects.

On August 17, retired Navy Rear Adm. Mark H. Buzby was sworn in as the new head of the federal Maritime Administration. A former commander of the Military Sealift Command (MSC), Buzby ran MSC and its network of 120 ships supplying Department of Defense needs worldwide from October 2009 to March 2013. After retirement, he served as president of the National Defense Transportation Association, a global association of transportation and logistics professionals.

“Our maritime industry is facing unprecedented challenges in our increasingly globalized world,” Secretary Chao said in a statement announcing Buzby’s arrival. “Administrator Buzby’s extensive naval and maritime background will serve as a tremendous asset to the Maritime Administration.”

Divisive Tax Reform Items

The failure of Republicans in Congress to repeal the ACA made the stakes in tax reform even higher, with many GOP leaders warning that failure to enact tax reform would doom the party in the next round of elections.

The tax reform plan is in the final stages of being hammered out at this writing. Some of its provisions have proven almost as contentious as those of the ACA, including among some of those who support other parts of Trump’s agenda.

The American Association of Port Authorities (AAPA) has raised alarms about two provisions that would seriously impair the ability of ports to raise money in the bond market.

In a December 2 press release, the AAPA said, “The historic ‘Tax Cuts and Jobs Act’ legislation approved December 2 in the U.S. Senate and a somewhat different version approved on November 16 in the House of Representatives each contain provisions that would reduce or curtail much-needed tax support for investments in America’s infrastructure, including seaports. … Provisions to (1) eliminate tax-exempt status for Private Activity Bonds (PABs) and (2) repeal the tax exemption for advanced refunding of bonds would seriously impair two important tools used to fund U.S. port infrastructure, which is a high priority for AAPA. The Senate bill also includes repealing the tax exemption for advanced refunding of bonds, affecting the ability of issuers to refinance those bonds at lower rates.”

These provisions run directly counter to Trump’s stated plan to raise up to $800 billion in private financing through public-private partnerships (P3s). Experts point out that P3s often prefer to raise money through precisely the types of bonds whose current tax advantages the tax bill would remove.

Trade Policy Divides Trump Backers

One of President Trump’s most controversial stances, including among his supporters, is his trade policy. Trump campaigned on opposition to the kinds of multilateral trade agreements that most business leaders favor. Trump even called the North American Free Trade Agreement (NAFTA) the “worst deal in history” for America. Many voters who felt left behind by globalization and trade cheered these pronouncements.

But business organizations, farmers and trade groups worry that leaving agreements like NAFTA would end up hurting American exporters and consumers if the international trade order breaks down and other countries retaliate with tariffs against American products.

American farmers, especially, remain strongly in favor of a trade regime that has seen exports of American agricultural products—much of it moved on barges—increase dramatically over the past few years, especially to China and other Asian countries. Trump carried most farm states, yet farmers are anxious about the possible effects of his trade policies on them.

On his third day in office, Trump withdrew from the Trans-Pacific Partnership (TPP), a multi-lateral trade pact with Pacific nations, before it became final. The American Farm Bureau estimated that the TPP would have raised net farm income by $4.4 billion per year and added more than 40,000 jobs, mostly in rural areas.

Conflicts between different trade factions have played out in the White House. In April, anti-NAFTA efforts by one of Trump’s officials sparked rumors that a NAFTA pullout was imminent. That resulted in personal calls from the presidents of Canada and Mexico not to abandon NAFTA. Trump reportedly backed down. Several attempts to pull out of NAFTA have allegedly been thwarted since then, according to media reports.

WOTUS 180

Among the welcome changes brought in by the Trump administration was a complete reversal of stance on the hugely unpopular Environmental Protection Agency regulation known as “waters of the United States” (WOTUS). Opposition to WOTUS was another talking point during Trump’s campaign.

Enacted by the EPA under President Barack Obama, the WOTUS rule was sued by dozens of farm, trade and manufacturing groups and 38 states. Opponents claimed the “redefinition” of the phrase “Waters of the United States” was in reality an unconstitutional set of new laws, enacted by the federal branch without Congress, that would vastly expand the scope of the federal government’s control over farm and other private lands under the guise of protecting water supplies.

The WOTUS rule was suspended by a judge shortly after its publication in June 2015, although it remains technically in effect until revoked. There was debate on Trump’s team about the best way to do that. One of the charges against it was that Obama’s EPA had overreached its authority. Could Trump revoke it the same way, or was it best to let Congress settle the matter by passing a bill? An administrative repeal of the rule—one option discussed—would be treated like a new rulemaking, with a new comment period required.

In February, Trump’s pick to head the EPA, former Oklahoma Attorney General Scott Pruitt, was confirmed by the Republican-dominated Senate. That same month, Trump directed the EPA to re-examine the 2015 WOTUS rule and consider whether to repeal or revise it. The order also directed the Justice Department to cease defending the rule in court

The WOTUS issue remains contentious at the close of the year. A number of matters regarding WOTUS, including jurisdictional issues, remain before the Eleventh Circuit and Sixth Circuit. In November, the Corps and EPA announced a further delay of two years for the WOTUS rule to take effect while the courts consider these issues and the administration itself decides what, if any, further action to take. The delay gives more time for comments.

Carp Barrier Issue Flares Up

In late January 2017, the Chicago Engineer District performed inspection and maintenance on portions of the electric fish barriers on the Chicago Sanitary and Ship Canal (CSSC), the Electric Dispersal Barrier System consisting of four barriers at Romeoville, Ill.

According to all the evidence, the barriers been doing a bang-up job at keeping Asian carp from spreading north. The nearest population of Asian carp is still reported to be within the Dresden Island Pool, about 10 river miles and two locks and dams downstream from the Electric Dispersal Barrier System.

Yet throughout the year, critics would repeatedly call for another set of electric barriers along with other carp counter-measures at Brandon Road Lock and Dam, an option identified by the Corps in a study as one possible alternative. The American Waterways Operators believes these proposed new measures are not only unnecessary and burdensome but unconstitutional, and the state of Illinois is balking at the cost of its proposed share.

Heeding the objections of the barge industry, the Corps of Engineers scheduled an additional listening session at the end of the year in New Orleans for “downstream” navigation interests that would be adversely affected by the proposed measures, and whose voices had been left out of earlier sessions.

On the final day of the extended comment period, 26 members of Congress sent the Corps a letter demanding “more aggressive” action on the Brandon Road measures and saying that to wait until 2025 was unacceptable.

Hurricane Triple Slam

After enjoying several years of declining hurricane frequency, the U.S. suffered three major destructive storms in quick succession in 2017. From June 1, ten hurricanes formed in the Atlantic Ocean, of which six were Category 3 or stronger. That made 2017 the most turbulent year since 2005, which produced Katrina, Rita and Wilma.

Two of these hurricanes, Harvey and Irma, proved especially destructive to the Gulf Coast, while one, Maria, amounted to the worst disaster experienced by Puerto Rico since it became a U.S. commonwealth.

Taken together, these storms added tens of billions of dollars to the burden on the Corps of Engineers and other federal agencies. Many of the Corps’ reconstruction duties will be ongoing for months or years.

Harvey Hits Houston

On August 25, Hurricane Harvey hit the coasts of Texas and Louisiana. Over the next six days, it made three separate landfalls. The first and most devastating landed in Houston, bringing massive rainfall to south Texas and parts of Louisiana. Port Aransas in Texas was near the epicenter of Harvey’s impact.

Unprecedented rainfall quickly overwhelmed Houston’s inadequate flood-control and storm-water systems. Although Harvey packed winds of up to 140 mph., most of the devastation to Houston and the Gulf Coast came from the flooding, which killed 82 people, displaced hundreds of thousands of people from their homes and resulted in an estimated $180 billion worth of damage.

At the storm’s peak, one-third of Houston was underwater. More than 200,000 homes were damaged in the Houston area alone. About 738,000 people registered for assistance with the Federal Emergency Management Agency (FEMA), which has so far paid out more than $378 million. At this writing, as many as 60,000 people are still displaced.

Mariners Respond

Early in the Harvey crisis, Federal Emergency Management Administrator Brock Long said the hurricane and related flooding in Texas had overwhelmed the government’s response. He called on citizen volunteers to join rescue and relief efforts. Aiding the 31,000 federal responders, a number of private boats rescued flood victims from rooftops and flooded areas.

Many of these were manned by mariners. Louisiana mariners, some calling themselves the “Cajun Navy,” rescued hundreds; the total number may never be known. On August 26, a group of Marquette Transportation personnel—including Houston Port Captain Joshua Bott, Vice-President-Operations Frank Bumgarden, and Port Engineers Walter Hayes and Les Mage—took 18-foot Marquette aluminum response boats into flooded Houston neighborhoods to look for flood victims. They ferried about 50 people to safety before night fell.

Corps, FEMA Mobilize

Harvey proved to be perhaps the single most destructive storm ever to hit the Texas coast. Virtually the entire town of Port Arthur was underwater at one point. Recovery for the hundreds of thousands of affected homeowners could take years.

Yet within days, ports and terminals were recovering and turning around cargoes.

The Corps of Engineers provided volunteers from all other Corps districts across the country who worked closely with the Federal Emergency Management Agency (FEMA) to clear debris, open roads, and provide temporary housing for displaced flood victims. The Temporary Power Planning and Response Team, which includes members from the Pittsburgh District, the 249th Engineer Battalion and ACI Contractors, conducted assessments and installed generators.

Corps vessels provided emergency dredging to the Houston Ship Channel and other affected waterways. Among other relief efforts, the Corps delivered six pumps to the Beaumont Water Treatment Station to serve as backups in support of the City of Beaumont’s efforts to restore potable water to impacted residents.

Irma Rakes Caribbean, Gulf

Right behind Harvey came Hurricane Irma, which had formed August 30 near the Cape Verde Islands. Irma had the most destructive effect as a Category 5 storm in the Caribbean on the islands of Barbuda, Saint Barthélemy, Saint Martin, Anguilla, and the Virgin Islands.

While its direct effects to waterways and port infrastructure were less than Harvey’s, it did cause extensive damage in the Florida Keys and brought severe rainfall to already-saturated areas in the South before traveling up the Atlantic Coast and dissipating in New England.

In Florida, Irma’s winds and flooding led to a power outage that affected more than 90 percent of Florida residents in the coastal region.

Texas Ports Bounce Back

Despite Harvey’s and Irma’s impacts, September container activity at Port Houston’s Barbours Cut and Bayport facilities increased 22 percent, Executive Director Roger Guenther reported on October 23. Port Houston facilities had handled 28.8 million tons of cargo year to that point, a 9 percent increase over the first three quarters of 2016. Container volume alone recorded an 11 percent increase versus the previous year, and in September surpassed the 1.8 million twenty-foot equivalent unit mark.

“We anticipated that we would receive most of the cargo that was initially diverted following the storm…and we did,” said Guenther. General cargo facilities handled nearly 400,000 tons of steel, “which is a large volume as we caught up for the week or more of time lost due to the storm. Port Houston’s results remain strong overall for the year,” he said.

Attacks On Jones Act

Finally, Hurricane Maria took aim at Puerto Rico. On September 4, Maria slammed into the island commonwealth as a Category 4 storm, lashing it with wind and rain for 30 hours. It was the most destructive storm the island had experienced in 85 years.

Experts classified it as a “catastrophic event” rather than merely a natural disaster because of widespread infrastructure destruction. Virtually all of Puerto Rico’s electrical grid was knocked out. Many roads were rendered impassable by debris. Hundreds of bridges and perhaps tens of thousands of dwellings were destroyed or made unlivable.

Puerto Rico, along with other island territories of the U.S., has long challenged the Jones Act as an unfair requirement that it claimed raised living costs on the island. The island was among interests that had paid for an anti-Jones Act study in March by the Mercatus Center of George Mason University. In January 2016, Sen. John McCain (R-Ariz.), long a Jones Act critic, had tried to amend another bill to waive Jones Act requirements for oil and gasoline tankers. On July 13, he introduced his latest bill attempting to repeal it.

After Hurricane Katrina, a temporary exemption of the Jones Act had been granted by the administration of President Barack Obama. That waiver was later strongly criticized by maritime interests, who said it proved not to have been necessary and was taken advantage of by oil interests with rigs in the Gulf.

After Maria, maritime interests initially made their voices heard within the White House. On September 21, Trump publicly said that a Jones Act waiver was not necessary for relief vessels.

Although it turned out to be true, the statement unleashed a media firestorm of criticism of Trump in which many long- time enemies of the Jones Act joined in. Many of the charges were false, such as a widely-repeated claim that the Jones Act prevented even foreign-flag vessels originating in foreign ports from landing in Puerto Rico.

Finally, on September 28, acting Homeland Security Secretary Elaine Duke reversed course and approved a temporary waiver of the Jones Act for relief vessels.

The controversy began to abate only when news outlets published pictures—including some taken by Crowley Marine personnel—showing dozens of response ships in harbor, and docks clogged with hundreds of containers full of relief goods. It soon became clear that there was no shortage of Jones Act relief vessels to Puerto Rico. The pressing issue was moving goods from dock to the interior over ruined roads and crumbled bridges. One news source described the effort to move supplies inland as “pushing a bowling ball through a straw.”

The episode showed how long-standing bipartisan policies like the Jones Act could become vulnerable to social-media viral storms.

In a talk at the Workboat Show in New Orleans on November 30, Adm. Buzby criticized the media coverage: “There were so many positive stories to recount about how our U.S.-flag merchant fleet performed during those hurricanes, providing relief and recovery capabilities—food, water, shelter, communications and expertise—to every area hit by the hurricanes. Yet we still took some big hits in the media, which targeted, really as never before, one of our industry’s pillars, the Jones Act. … After Hurricane Maria devastated Puerto Rico, the vital contribution of U.S. flag Jones Act shipping was obliterated by a barrage of false narratives and uninformed reporting.”

Energy Coast Expansion

The year before last, a four-decade-old ban on America exporting oil and gas (except to Canada) was lifted. The expected move triggered massive infrastructure investments along the Energy Coast in Texas and Louisiana, as facilities more suited to heavier imported oil began retooling to match America’s new position as an exporter.

The cost to build and operate wells in oil-rich U.S. shale basins has decreased by millions of dollars over the past few years, according to oil industry analysts. Forbes magazine put it succinctly: U.S. producers can make money at lower oil and gas prices, while OPEC producers cannot. That is why, despite low oil prices, the U.S. increased rig counts during 2017. In May, they upped production to 9.33 million barrels of oil per day. During 2017, the U.S. averaged more than 900,000 barrels per day of crude oil exports, even while continuing to import an average of 8.1 million barrels per day. In fact, it exported more oil and gas than four OPEC nations, to more than 30 destinations.

In September, Magellan Midstream Partners L.P and Valero Energy corporation announced the expansion and development of a marine storage facility currently under construction along the Houston Ship Channel in Pasadena, Texas.

In October, Contanda Terminals LLC, a provider of bulk liquid storage and logistics services, announced a multi-year commercial agreement with the Port of Houston Authority for 339 acres of prime deep-water access property on the Houston Ship Channel. Contanda said its state-of-the-art automated terminal will be built in phases to provide access to onsite processing, multiple ship and barge docks, and tank truck and railcar accessibility.

October also saw the delivery to Port Houston of three more super-post-Panamax wharf cranes, bringing to seven the total number of cranes with this size and capacity operating at Barbours Cut. The cranes are part of a $700 million modernization program underway at the terminal to increase its cargo handling efficiency and capacity.

The Port of Beaumont (Texas) is in the midst of 10 capital projects worth more than $168 million. On November 7, the port passed an $85 million bond referendum to fund a portion of three major projects aimed at expanding port facilities, increasing capacity and improving efficiency. The next step in the process will be to continue the planning phase of the most significant project, the rebuilding of Docks 2, 3 and 4, which will be renamed “Main Street Terminal 1.”

The Port of Beaumont reported that fiscal year 2016-17 was the strongest in its history, with more than 380 vessels, 17,000 railcars and 5,000 trucks moving 3.3 million tons of cargo.

A Series Of Unfortunate Events

This year saw a series of closures and delays at key choke points on the inland waterways at the peak of harvest season.

In September, a series of groundings of vessels led the Coast Guard to close the Illinois River at Mile 77-78 due to shoaling and low water. The Corps of Engineers Dredge Goetz performed emergency dredging beginning September 21, along with the Dredge Potter.

On October 2, a hydraulic system used to open and close lock gates at Lock and Dam 53 on the Ohio river failed, closing that river.

Lock 52 experienced a total of four unscheduled closures from September through December. Temporary measures helped manage failure and allow limited transits during high water until the two locks and dams can be removed following the coming online of Olmsted Lock and Dam next year.

In mid-September, a temporary rock dike was built extending from the lock wall into the navigation pass. It allowed repairs to wickets 53 through 57 once the dam goes down.

A second dike was built in early October in front of a failed bear trap. This dike blocks flow through the bear trap and allows more water to be held. It does not impact navigation and will remain in place until the locks are replaced and demolished.

In total, hundreds of barges were stranded for varying lengths of time, and tens of millions of dollars’ worth of cargoes were rerouted to more expensive transport modes.

The closures focused national and worldwide attention from trading partners and agricultural competitors.

While U.S. soybeans experienced another record harvest year and corn came close to a record, the delays and disruptions on the rivers re-routed agricultural cargoes and dented America’s export competitiveness with other competitors, especially Brazil, which has improved its port and infrastructure network and had a good crop this past year.

The closures were bad news for shippers and farmers, but were less dire for barge companies because they caused temporary spikes in barge rates. In December, the St. Louis Post-Dispatch quoted a Metropolis, Ill., farmer saying, “Being near the river used to be an advantage, but now having to wait on dams and infrastructure is more of a liability to farmers.”

Barge Industry Deals Shifted Assets

In the last week of January, Savage Inland Marine in Orange, Texas—a subsidiary of Midvale, Utah-based Savage Companies—announced an agreement to acquire assets related to Settoon Towing’s liquid bulk division, totaling some 35 towboats and 63 liquid tank barges with a total capacity of close to 2 million barrels. Settoon Towing, with headquarters in Pierre Part, La., said it would continue operating its Gathering & Storage and Logistics & Vessel Management divisions, which are not included in the sale.

On May 15, Campbell Transportation Company Inc., announced it had signed an agreement with American Commercial Barge Line LLC to acquire certain freight contracts along with 155 barges and four towboats that it will operate on the Ohio River system. Some of the barges were bought outright, while Campbell assumed leases on others. All except 10 are open hopper barges, according to Peter Stephaich, chairman and CEO of Campbell.

With the acquisition completed, Campbell Transportation Company now owns or manages more than 1,100 barges and 50 towboats on the inland waterways, along with four shipyard facilities and a marine construction company.

All four boats were 2,800 hp. boats (upgraded to 3,000 hp.) built in 1995 and formerly operated by AEP River Operations before it was acquired by ACBL. They are all sister vessels to the 124- by 34-foot Tommy H, which Campbell previously bought and which was formerly named the Norman L. Snodgrass.

Passenger Industry Revives

After almost disappearing in the wake of the last recession, the passenger cruise industry on the rivers continued to revive, with several companies announcing major investments. Viking is pushing ahead with plans for European-style narrowboat cruise vessels in the Mississippi River despite Jones Act obstacles.

American Cruise Lines, which claims to be the largest cruise operator in the U.S., announced in March that it was building the first of a new class of five riverboats for the American river cruises, “the first to combine the modern styling of the European riverboats with the premium comfort for which American Cruise Lines is known.” The first in the series is scheduled to begin passenger service in 2018 and will carry 200 guests. ACL says the new riverboats will feature the largest staterooms in the United States, with private balconies and hotel-size bathrooms.

The passenger vessel revival is not without its drama.

On April 3, the U.S. Senate passed a long-awaited restoration of the exemption for the Delta Queen from provisions of a 1966 safety law intended for blue-water passenger vessels. The restoration of the Delta Queen continues under the leadership of Cornel Martin, president, CEO and owner of The Delta Queen Steamboat Company.

Supporters of the historic vessel are still waiting for the House to pass its version. In previous years, the House had no trouble passing the exemption. So why does the bill remain stalled in the House at this writing?

In July, Martin publicly charged that American Cruise Lines was working through lobbyists in Congress to keep the exemption bill bottled up, presumably in order to suppress competition. Martin told The Waterways Journal he doesn’t understand why any other cruise line would feel the need to prevent the Delta Queen from sailing, saying, “We think there’s plenty of cruise demand for all types of vessels on the rivers. The Delta Queen has only 176 beds, and doesn’t have some of the modern amenities that some newer boats have.”

In August, American Queen christened the new paddlewheel vessel American Duchess in New Orleans. Billed as the first “all-suite” paddle-wheeler on America’s rivers, the Duchess was built on the hull of the former casino boat Bettendorf Capri.

Sub M Deadline Approaches

Subchapter M became final July 20, 2016, but some of its requirements are being phased-in in stages. During 2017, the towing industry and the Coast Guard both continued to prepare for the Subchapter M deadline of July 2018, when certain key provisions take final effect.

In January, the Towing Vessel Inspection Bureau (TVIB) was certified by the Coast Guard’s Towing Vessel National Center of Expertise as a third-party organization (TPO) in accordance with 46 CFR Part 139, for purposes of Subchapter M auditing. That same month, TVIB announced that it had purchased Quality Auditing LLC.

Rear Adm. Paul Thomas, assistant commandant for prevention policy, has repeatedly said that Subchapter M is a “paradigm shift” because TPOs will be doing risk assessment and risk management on behalf of the Coast Guard. On May 24, the U.S. Coast Guard issued a policy letter (17-02) stating that approved TPOs may issue Towing Safety Management System (TSMS) certificates to vessel operators on the basis of external management audits of Coast Guard-accepted existing safety management systems conducted within the past three years—including the Responsible Carrier Program (RCP).

June was a busy month for Sub M preparations. In a June 8 letter sent to its members after it got clarification on the May 24 letter, The American Waterways Operators said, “For AWO member companies, this [letter] means that if you have successfully completed an RCP management audit within the past three years, a TPO may issue you a TSMS certificate on the basis of that audit.” The TPO may ask for additional documentation if it concludes it is needed to assure full compliance with Subchapter M.

That same month, AWO released a “TSMS Option Compliance Guide” for its members. Also in June, TVIB issued its first TSMS (Towing Safety Management System) Certificate to Crounse Corporation.

On June 14, the U.S. Coast Guard issued another policy letter—17-03—clarifying that officers in charge of marine inspection (OCMIs) can issue certificates of inspection (COIs) to marine vessels that use the TSM option. The letter came in response to the realization that some operators may want to obtain COIs for multiple vessels at once, and that it is possible that not all vessels will have COIs by the required phase-in date of July 20, 2018.

On June 27, ABS announced that it had been awarded a TPO contract by the Cooper Group to support Sub M compliance activities.

The Coast Guard authorized OCMIs to issue COIs, on a case-by-case basis, to “vessel owners and managing operators who elected to use the TSMS option to obtain a COI earlier for their vessels” so that they “may reduce potential disruption to their operations and costs as well as accelerate the verification that towing vessels are in compliance with applicable regulations.”

The next few years will be busy ones for TPOs performing Sub M certification, and for drydocks and shipyards certifying vessels. According to the phased-in Sub M schedule, fleets of more than one vessel must have 25 percent of their boats certified by July 22, 2019; 50 percent by July 22, 2020; 75 percent by July 19, 2021; and 100 percent by July 19, 2022.

Opportunities Ahead

The long-awaited opening of Olmsted Lock and Dam in 2018 should bring some unscheduled lock closures to an end and go some way toward restoring the “transportation advantage” that U.S. export crops enjoy against competitors.

The Memphis-Baton-Rouge-New Orleans container-on-barge regular weekly service begun in June 2016 by Seacor has been expanding, aided by New Orleans’ $25 million dedicated container terminal that opened in April 2016. The service, which began backhauling empties to Memphis, is now hauling tires and agricultural products from New Orleans to Memphis, the leg of the trip to retrieve containers.

Seacor, which ran a similar COB service on the Tennessee-Tombigbee Waterway that lasted six months, calls this latest route a “good beginning.” It has been growing as other containerized cargoes piggyback on regular routes serving the dominant cargoes of containerized plastic resins, a cargo for which demand is soaring worldwide and for which the U.S. is now the world’s cheapest supplier, thanks to fracking.