Coal Age

FEB 2012

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inland waterways continued Using the Corps and AEP's data, in three years—by 2015—the main chambers of five dams, which currently lock through a com- bined 72.2 million tons per year (tpy), will fail (Hannibal L&D, 17.4 million tpy; Willow Island L&D, 17 million tpy; Belleville L&D, 16.5 million tpy; Lock 52, 17.9 million tpy; and Lock 53 3.4 million tpy). In fact, by 2020, both the main and auxiliary locks will have failed on four dams along with the mains on four others. Millions of tons would be displaced. Essentially, that amount of cascading lock and dam failures would clog up the river, perhaps rendering it uneco- nomical compared to competing modes as dwell times and costs rise precipitously. some of the oldest in the nation are on the upper Mississippi. But, in terms of cargo, it's really a grain river as is the Illinois. "If you really want to talk about a coal river, we're talking about the Ohio," Darling said. With almost 40 locks and dams throughout a system comprising both the Monongahela and Allegheny rivers as well as the Ohio River, Darling explained, more coal flows over these waters than any where else in the nation. For hundreds of miles from Pittsburgh, Pa., to Cairo, Ill., where it meets the Mississippi, the Ohio River valley is dotted by factories, chemical plants, power plants and other industrial facilities. Over the course of a year more than 200 million tons of cargo move through its locks and dams, and no cargo is more plentiful than coal. Lock Outages on the Ohio As the Inland River system ages, Darling likened the situation to a form of Russian roulette, pulling the trigger each time the system locks another tow, and hoping there's no bullet in that chamber. Most of the dams' "design life were exceeded 50 years ago and it's heroic to keep those structures operating. As they get older and we don't do proper maintenance and we don't modernize them, their reliability has become challenged," said Michael Toohey, president and CEO of the Waterways Council, the primary industry group asso- ciated with protecting that viability. As compiled by AEP and the Army Corps of Engineers, since 2000, more locks are closing for repair or maintenance every year. And as the system continues to fatigue, the amount of time locks are out for repairs grows each year as well. "Lock outages have increased three- fold in a 10-year period. Throughout 2009, there was a lock out some- where on the Ohio River roughly 25% of the year," said Darling. Over the next 20 years lock gate failures will continue steadily. "Lock gate failures will occur at increasing rates over the next couple decades. Indeed by the year 2020, the Corps predicts that all 40 lock gates on the Ohio will fail at some point in time. That's the Corps' pre- diction. And amazingly they've been about 100% at predicting lock failures," Darling said. Those lock failures have major impacts to the traffic on the Ohio River. When a main chamber on the Ohio River fails, all traffic must use an auxiliary lock chamber instead. Generally the auxiliary cham- bers are only half the size of the main chambers, forcing barge lines to break tows in half and move a tow through in two or more pieces. "This adds time and it creates queues. Locks you typically drive up to and lock directly through, you'll sit at for two, three, even four days while waiting for your turn to move through. And, time is money," said Darling. The extra costs the shippers bear generally translate into higher costs per delivered ton and increased costs for ratepayers. All of this translates to higher costs for coal, which only prices it further out when compared to natural gas. 38 www.coalage.com Too much hyperbole? Perhaps. But Darling and AEP believe that even today, one key installation failure could have tremendous reper- cussions. In his presentation, Darling discussed the ramifications of a hypothetical lock failure at the Belleville lock and dam, located at milepost 203.9 on the Ohio River. A team at AEP studied what the sys- tem-wide ramifications would be if a gate failure occurred at Belleville, essentially in middle of the Ohio River system. Belleville is one of six dams (out of 40) that has earned a "D" condition rating by the Corps. It is expected to fail sometime between today and 2015— along with four others. When, not if, Belleville fails, roughly 16.5 million tons of through- put could be affected, causing a displacement of well more than 1.3 million tons. That failure alone could "add about 6.8 cents per kilo- watt-hour to the average customer. And the average customer uses about 100 kilowatts per day. Though $6.80 per day doesn't sound like a lot, in a month that's about $204 more that every electric utility cus- tomer of AEP would have to pay. And AEP is only one of many utilities along the Ohio River," said Darling. Of course, any increased transportation costs will be further heaped upon the mountain of other costs from a whole slew of expen- sive environmental regulations and other burdens conspiring to drive up the cost of coal-fired generated electricity. How the Corps of Engineers Spends Its Funds So why are America's dams failing and how well has Congress pre- pared the country by allocating the resources to prevent this looming systems failure? Not well. Think "neglect." But, Darling cautioned, this long-term neglect "didn't happen under this recession. It didn't happen under Obama. This has been occurring over decades. Congress is not funding lock and dams," he said. So what you have is a system constructed for a 50-year life that, through neglect, has seen its life expectancy actually decrease. However, industry will continue to use these same locks and dams longer than those planned 50 years. "It's a situation that we can't sustain without some investment," Darling said. Currently maintenance of the Inland Waterways system comes from both funds allocated by Congress and from a variety of user fees administered by the Inland Waterways Trust Fund (IWTF). Currently the barge industry pays a $0.20/gallon diesel fuel tax into the IWTF. That adds up. AEP alone paid more than $10.2 million into the fund in 2010. A cost-sharing formula was established in 1986 so that half the lock and dam construction costs are paid out of the IWTF and the bal- ance from general revenues. This includes construction and major rehabilitation initiatives. The Inland Waterways Users Board was also established in 1986 to advise Congress and the Secretary of the Army about inland water- ways system priorities and spending levels. Currently the Trust Fund generates roughly $70-$90 million annually, far less than what is nec- essary. The modernization needs of the system, as projected by both AEP and the Corps, far exceeds the annual IWTF revenues. And cur- February 2012

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