As 2020 came to a close, a $2.3 trillion "Consolidated Appropriations Act of 2021" (H.R. 133) was finally signed into law by President Trump on Dec. 27, including a few provisions that will enhance the supply chain farmers and agriculture rely upon.
The Water Resources Development Act (WRDA) of 2020 included a priority for the agricultural and barge industry by adjusting the cost share for lock and dam construction and major rehabilitation projects along the nation's river system. The cost share for such projects went from 50% federal government and 50% Inland Waterways Trust Fund to 65% federal government and 35% Inland Waterways Trust Fund with the passage of WRDA 2020. This cost-share adjustment will apply to projects that have construction starts between fiscal year 2021 and 2031.
Mike Steenhoek, Executive Director Soy Transportation Coalition, noted in an email to DTN that, "The Inland Waterways Trust Fund was established to help underwrite the costs of construction and major rehabilitation of the nation's inland waterway system. Funds are generated via the Inland Waterways Tax; a 29 cent per gallon assessment on diesel fuel used on 27 stretches of the country's inland waterway system. The 12,000 miles of fuel taxed waters include most of the nation's largest rivers: the Mississippi, Ohio, Illinois, the lower Missouri, and the Gulf and Atlantic Intracoastal waterways."
Steenhoek added that the fund annually generates approximately $110 million to $120 million per year via the Inland Waterways Tax. "These funds are, in turn, combined with revenue from the U.S. Treasury. The total is directed toward construction and major rehabilitation projects. The U.S. Treasury assumes 100% of the costs of operations and maintenance."
In a press release on Dec. 22, 2020, the National Grain and Feed Association (NGFA) commended Congress for including key inland waterways and port provisions in the fiscal year 2021 spending package.
"An efficient waterborne transportation system is crucial for growing the American economy and maintaining and creating U.S. jobs, and is vitally important to the continuing competitiveness of U.S. agricultural exports and their positive contribution to the U.S. balance of trade," said Bobby Frederick, NGFA's vice president of legislative affairs and public policy. "Since 2014, each Congress has passed a WRDA into law, and NGFA has viewed each bill as an opportunity to enhance U.S. inland waterways and port infrastructure. WRDA 2020 ensures continued investment in U.S. waterways infrastructure, helps bring U.S. waterways infrastructure into the 21st century and will help maintain American agriculture's competitive transportation advantage against other countries. NGFA commends House and Senate lawmakers for bringing this bipartisan legislation to the point of enactment."
The Mississippi River system is America's primary inland waterways system. It comprises the Mississippi, Arkansas, Illinois, Ohio and Tennessee Rivers, and Gulf Intracoastal Waterway. "This extensive waterway system feeds exports from grain elevators from Baton Rouge through New Orleans, to Myrtle Grove, Louisiana. This region handles 57% of U.S. corn exports in volume (valued at $4.8 billion) and 59% of U.S. soybean exports ($12.4 billion), as well as 55% of soybean meal exports and 72% of distiller's dried grains exports," said USDA in an August 2019 study.
That study noted that without "consistent, predictable funding, the grain and soybean export draw area around the waterways system could shrink from an average of 150 miles, currently, to as little as 75 miles under a constrained scenario, as the cost to ship on the river increases." For corn, delays on the Mississippi River could have up to a 24 cent per bushel impact, while impact to soybeans could be up to 25 cents per bushel.
The river's infrastructure continues to deteriorate, and major flood events -- most recently the destructive one in 2019 -- put even more stress on locks and dams. Most of the locks and dams were built in the 1930s with a life expectancy of maybe 50 years. This past summer, the United States Army Corps of Engineers (USACE) Rock Island district completed simultaneous upgrades and repairs to six of the eight locks and dams on the Illinois River that began on July 1 and ended Oct. 29, 2020.
Lock and dam failures have occurred due to barges striking them during flooding or heavy ice events, but also due to structural failures due to of old age. The USACE has been relentless in making repairs at all locks and dams on top of normal maintenance, but eventually that may not be enough to keep those locks and dam functional and may require full replacement.
SHORT LINE RAILROAD TAX CREDIT MADE PERMANENT
The short line railroad tax credit (i.e. the 45G Tax Credit) is a federal income tax credit for qualified track maintenance owned by short line and regional railroads.
"Previously, a short line or regional railroad will receive 50 cents for every dollar of track maintenance expense with a cap of $3,500 per mile of track. The tax credit, along with numerous others, would often be allowed to expire and have to be temporarily extended by Congress. With the passage of the Consolidated Appropriations Act, the short line railroad tax credit has been made permanent with no expiration date," said Steenhoek.
"The rate of the credit will remain at the current 50% until 2022. It will then adjust to 40% in 2023. This provides greater predictability for the nation's short line and regional railroads as they meet the needs of their customers, including those in agriculture. According to the American Short Line and Regional Railroad Association, 603 short line and regional railroads operate in the United States over 47,500 miles. Short line and regional railroads often serve as the critical connection at points of origin and destination for soybeans and other agricultural products," added Steenhoek.
"Inland waterways and freight railroads, including short lines, are integral to the efficiency of the agricultural supply chain. We are pleased that the passage and signing of this legislation will help enable U.S. soybean farmers to compete in a global marketplace," concluded Steenhoek.
Mary Kennedy can be reached at email@example.com
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