The Great Lakes-St. Lawrence Seaway Navigation System: Options for Growth

Summary

Congress faces infrastructure funding decisions that would support shipping on the Great Lakes and St. Lawrence Seaway (GLSLS). In the Water Resources Development Act of 2016 (H.R. 5303, S. 2848), Congress may decide whether to permanently allocate 10% of certain harbor maintenance funds both to small ports and to Great Lakes ports. On the horizon are debates over construction of a second lock at Sault Ste. Marie, MI, and a second Great Lakes heavy icebreaker vessel. These projects would likely cost several hundred million dollars and take several years to complete.

These funding decisions come at a time when the GLSLS’s traffic base is eroding. There are reasons to think this trend will continue. It is largely the result of technological changes in manufacturing and transportation, as well as the globalization of production—factors unrelated to Great Lakes infrastructure funding:

Most steel is now manufactured from scrap metal, which is moved by truck and railroad, rather than from iron ore shipped by vessel in the Great Lakes region.

Dedicated single-cargo “unit” trains have helped the railroads compete with vessels in carrying dry bulk goods such as grain and coal. Shippers of high-value goods (including containerized cargo) are deterred from using the GLSLS by winter closure and locks that slow transit.

Export demand for North American grain now comes mainly from Asia. The grain moves to Pacific or Gulf Coast ports rather than through the GLSLS.

The boom in domestic production of unconventional oil and gas has increased demand for vessel transport on certain U.S. waterways, but the GLSLS has been unaffected.

These developments are major obstacles to efforts by the St. Lawrence Seaway Development Corporation, the U.S. government agency that shares responsibility for administering the seaway, to increase traffic on the GLSLS system.

Operation and maintenance of the system’s locks and the dredging necessary to maintain the mandated 27-foot channel depth at Great Lakes ports are funded from the Harbor Maintenance Tax, which is predominantly paid by shippers using coastal ports, not Great Lakes ports. Coastal ports, especially those experiencing steady increases in cargo volume, wish to retain more of the cargo taxes they generate for their own infrastructure needs, raising questions about the future source of federal support for the GLSLS.

Congress could return to funding the GLSLS system with lock tolls instead of annual appropriations as was the case prior to 1986, but Congress expressed no interest when this was last proposed in 2006. It is too early to tell whether public-private partnership provisions enacted in the Water Resources Reform and Development Act of 2014 might be pursued with respect to the GLSLS. The most promising strategy for attracting shippers to the GLSLS is to reduce users’ costs relative to the costs of shipping by truck, rail, or pipeline.