1. BUILDING STRONG ® 1 US Army Corps of Engineers BUILDING STRONG ® National Waterways Conference 2012 Legislative Summit Bob Pietrowsky, Director USACE Institute for Water Resources Keith Hofseth, Program Manager 27 March 2012 Madison Hotel NW, Washington, DC US Army Corps of Engineers BUILDING STRONG ® U.S. Port and Inland Waterway Modernization Strategy

2. BUILDING STRONG ® U.S. Port and Inland Waterways Modernization Strategy As directed by Congress : Within the funds provided, the Institute for Water Resources is directed to submit to the Senate and House Committees on Appropriations within 180 days of enactment of this Act, a report on how the Congress should address the critical need for additional port and inland waterway modernization to accommodate post-Panamax vessels. This study will not impede nor delay port or inland waterway projects already authorized by Congress. Factors for consideration should include costs associated with deepening and widening deep-draft harbors; the ability of the waterways and ports to enhance the nation's export initiatives benefitting the agricultural and manufacturing sectors; the current and projected population trends that distinguish regional ports and ports that are immediately adjacent to population centers; the availability of inland intermodal access; and the environmental impacts resulting from the modernization of inland waterways and deep-draft ports. Conference Report on the Consolidated Appropriations Act fro Fiscal Year 2012 2

3. BUILDING STRONG ® Source: Panama Canal Authority (ACP)

4. BUILDING STRONG ®  Maersk’s “Triple E Class” is a family of large, fuel efficient containerships designed as successors to the Maersk E-class  In Feb 2011, Maersk awarded Daewoo Shipbuilding (South Korea) a US $ 1.9 billion contract to build 10 “E3” ships, with options for more  These will be the most efficient containerships in the world, per TEU.  Name “Triple E” is derived from the class’s three design principles: (1) Economy of Scale (2) Energy Efficient, and (3) Environmentally Improved And….. Larger Vessels are Already on Order Maersk E3 Class  18,000 TEU capacity  Design draft of 48 feet 4

5. BUILDING STRONG ® U.S. Port and Inland Waterways Modernization Strategy Focus: How Congress should address critical need for additional port and inland waterway modernization to accommodate post- Panamax vessels. Factors to address: Costs associated with deepening and widening deep-draft harbors; Ability of waterways and ports to enhance export initiatives benefitting the agricultural and manufacturing sectors; Current and projected population trends that distinguish regional ports and ports that are immediately adjacent to population centers; Inland intermodal access; Environmental impacts resulting from modernization of inland waterways and deep-draft ports. 5

6. BUILDING STRONG ® Study Team The team draws from both navigation PCXs, IWR, EDRC, multiple districts and the private sector, with intensive HQ oversight and public outreach: IWR DD NAV PCX Inland Nav PCX HQ Oversight via CECW CECTX ERDC Mobile District Jacksonville District Private Sector 6

7. BUILDING STRONG ® Schedule Selected Milestones: PDT formed, PMP, report outline, input from PCX’s – completed Website, fact sheet, talking points – completed with goal being transparency, no surprises, elicit info to ensure we don’t miss things Stakeholder Engagement & Public Communications – ongoing  Listening Sessions SWG Ports – 8 Mar Environmental Interests – 13 Mar ITTS - 14 Mar; Nav Industry Mtg - 15 Mar; AAPA - 16 Mar Ongoing Coordination with MARAD, others ongoing 80% draft report – 1 April (Stakeholder Engagement Continues) PDT, IWR, USACE & EPR Review, Report Revision, and Final Draft to HQUSACE – 1 May Concurrent EPR, HQ, OASA (& OMB? - TBD) Review – 22 May Report Revision, Completion, OMB & Interagency Review – 1 June Transmit Final Report to Congress – June 20 7

8. BUILDING STRONG ® BLUF: Implications & Preliminary Findings Thus Far 1)The U.S. is a maritime Nation & the U.S. MTS is absolutely foundational to Nation’s Economy. Growth in trade and increasing size of vessels likely calling at U.S. ports presents challenges & opportunities for both inland waterways & coastal ports. 2) Role of inland waterways should not be overlooked – particularly with regard to Canal expansion stimulating increased export traffic in Gulf. Inland Waterways, New Orleans (Port of Southern Louisiana) and other Gulf and South Atlantic ports have potential to be affected by expansion of the Panama Canal not just by container trade, but also by vessels transporting bulk commodities. 3) Cascading effect of the deployment of new, larger Post-Panamax vessels which will gradually displace the current fleet of “large” vessels to next most efficient service/trade routes to/from U.S. points to impacts beyond largest U.S. ports 4)Larger post-Panamax vessels are significantly wider and longer – wider channels and more robust channel radii & larger turning basins may be among more critical needs at U.S. ports with expanded Canal. 5) Financing critically needed maintenance & capital projects will be a huge challenge under current constrained Federal budget 8

9. BUILDING STRONG ® Forecast Total World Container Trade 2000 - 2015 Source: IHS Global Insight, Inc. Dec 09 Slight Decline Decline from Previous forecast 9

10. BUILDING STRONG ® Forecast: U.S. Trade More Than Doubles 2008 - 2028 February 2012IHS Global Insight World Trade Service 10

11. BUILDING STRONG ® An Economic Game-Changer! Post-Panamax Transport Capabilities  Expanded canal will be an alternative to intermodal transport of imports via U.S. West Coast to East land bridge, and to Midwest to Columbia-Snake for grain & other bulk exports  The Inland Waterways play key role in the cost efficient transport of grains, oilseeds, fertilizers, petroleum products and coal. Gulf ports play key roles in the transport of these commodities, such as with New Orleans as the dominant port for the export of grains in the U.S.  Inland Navigation on the Mississippi River system will be affected by expansion of the Panama Canal - With an expanded dimension Canal, Panamax vessels can be loaded to full capacity at New Orleans Smaller Capesize vessels that can fit through the expanded Canal can be accommodated by drafts of Mississippi River ports  World demand for grain may cause grain traffic to increase on all routes, including the Mississippi River and Columbia-Snake River systems  In addition, U.S. ethanol subsidies are scheduled to expire next year. 11

12. BUILDING STRONG ® Agricultural Areas Proximity to Waterways - Exports 12 Forecasts indicate that larger bulk vessels through the Canal have potential to significantly reduce the delivery cost of U.S. grains to China – some say by as much as $0.35 per bushel. Grain Exports – Over 70 million tons annually – 50% of grain, soybean and prepared feed exports move by barge

13. BUILDING STRONG ® Ready for Panama Canal Expansion? Key U.S. Harbors 45’ or Greater * WEST COAST Seattle/Tacoma (>50’) Oakland (50’) LA/LB (>50’) San Diego GULF COAST Mobile New Orleans Houston/Galveston/Texas City Corpus Christi Freeport EAST COAST NY/NJ (50’ underway) Baltimore (50’) Hampton Roads (50’) Charleston Morehead City OTHER PORTS Miami (44’) Tampa (43’) Savannah (42’, w/study recommending 47’ Wilmington (42’) Jacksonville (40’) Boston (40’) * Current Main Channel Depths 13

14. BUILDING STRONG ®  Not Just Deeper Channels Larger post-Panamax vessels are significantly wider and longer – wider channels and more robust channel radii & larger turning basins may be among more critical needs at U.S. ports with expanded Canal. In addition, for U.S. Ports to accommodate larger container vessels they will need to expand capacity in berthing areas at the dock and to intermodal access. Underlines the need for synchronizing intermodal freight strategies on land and water sides. Implications & Preliminary Findings Thus Far (Continued) 14

15. BUILDING STRONG ® Financial Implications  The report will highlight opportunities presented by increased use of post-Panamax vessels & the range of costs needed to take advantage of the opportunity.  Given current Federal Budget Constraints Report will present a range of options for meeting critical needs – at two ends of the spectrum there is either an increased Federal role (increase in spending) or a change in the dynamics between the traditional USACE role & that of non-Federal sponsors. Between these extremes there is a range of options in form of alternative financing possibilities; PPP’s, Infrastructure Banks, etc.  The ports and industry will need a clear direction from the Congress on where the U.S. is headed along that spectrum  Food-for thought - "what's next?” - How will USACE, Congress and industry utilize report upon completion? 15

16. BUILDING STRONG ® Rail Industry Investments in Class I Railroad Track, Equipment & Capability to Compete for Cargo 16 Class I Railroad capital expenditures Source: The United States Department of Transportation; Study of Rural Transportation Issues; Published April 2010.

17. BUILDING STRONG ® Implications for vessel re-routings stimulated by the Canal expansion? Rate of overall growth of global economy? Future trade growth rate – competition between the U.S. land bridge vs. the Panama Canal? Use of Tran-shipment Hubs – Bahamas? Other Caribbean locations? Future funding levels may be constrained by growing federal deficit Uncertainties Impacting Harbor & Waterway Investment Decisions These uncertainties imply that an adaptive approach to capacity expansion will be required Future vessel fleet – on what trade routes will future vessels be deployed? – and at what ports will they call? 17

18. BUILDING STRONG ® Thank You! Questions? U.S. Port and Inland Waterway Modernization Strategy 18